Workers at Chrysler's Windsor, Ontario plant breathed a sigh of relief when Chrysler announced they're closing their St. Louis south plant to cut van production. Their relief may be short-lived, though. We've learned through a confidential informant that Chrysler is also shutting down the Windsor van plant through the end of August. This comes after some component plants have been running at full tilt, working overtime, weekends and even the Canada Day long weekend, to meet Chrysler's demands. This was totally unexpected and "scheduling people are running in circles trying to readjust inventories and halt our suppliers." Which plant will be the next to fall? Or will it be Chrysler itself?
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Posts By: Frank Williams
The Wall Street Journal's Holman Jenkins joins the growing media chorus asking "WTF's up with GM?" [paraphrasing]. With GM's stock prices in the $11 per share range for the first time since the 1950s, Jenkins wonders if banking the entire company's future on one model– the plug-in electric gas hybrid Volt– is "nuts." In the grand TTAC style, the scribe observes "to pour hundreds of millions into a race to launch an electric car, the Chevy Volt, guaranteed to lose money on every unit sold, begins to seem a peculiar strategy for a company in dire liquidity straits." Jenkins covers all bases in his Volt diss. "For those who think the Volt's justification is greenhouse emissions, notice that electric cars play Three Card Monte with energy inputs: It all depends on where the electricity is coming from." To drive home his point, he reminds us "Rick Wagoner last week laid out the case to Barack Obama personally for turning GM into a ward of the state," and "that a big part of the company's turnaround gamble consists also of eliciting favor once again from Washington after a period in which the domestic auto makers were nothing but whipping boys on Capitol Hill." In fact, Jenkins only misses the target once: his repeated insistence that "GM executives are not nuts." In that sense, neither are pistachios.
Forbes, that Number One purveyor of "Top 10" lists, has devised a list of the ten hardest-to-get cars. They've based their selections on dealer inventory levels and retail turn rates (how long a model sits on the lot before it's sold). While some of the selections are obvious (anyone try to buy a Prius lately?), who would expect the 14mpg Lexus LX to be in short supply? The other two anomalies (considering gas mileage and purchase price) are the Audi A5 and the Mercedes-Benz C-Class, both of which are selling faster than they can build them. Here's the entire list and supply level of each model:
Toyota Prius – 7-day supply
Lexus LX Series – 8-day supply
MINI Cooper – 8-day supply
Audi A5 – 8-day supply
Toyota Yaris – 13-day supply
Scion xD – 19-day supply
Honda Fit – 20-day supply
Honda Civic – 21-day supply
Toyota Corolla – 23-day supply
Mercedes-Benz C-Class – 29-day supply
While GM's North American operation has been hemorrhaging money like a hemophiliac having heart surgery, its overseas operations have managed to turn enough profit to keep them from the bankruptcy court. Chinese sales are still growing, but the boom may go bust. In 2007, sales increased 19 percent. So far this year, sales are up 14 percent. Although China's still the world's fastest-growing auto market, raw material costs are soaring, and The People's Republic is easing off fuel price subsidies. Through their "joint venture" (i.e. shotgun wedding) with Shanghai Automotive Industry Corporation (SAIC), GM is the Republic's largest carmaker. But they're beginning to face stiff[er] competition from Toyota and Volkswagen. Joseph Lau, vice president for GM China, told Bloomberg "Shanghai GM has been facing difficulties by relying on existing models to compete with rivals that have added new ones." Sound familiar? Lau added that GM/SAIC has only one new model in the pipeline for this year: a locally-made hybrid version of the Buick LaCrosse. They're adding one new model next year, a Buick sedan to compete with the rapidly-growing Camry and Corolla. Does anyone know the Chinese translation for "Those who do not learn from history are doomed to repeat it"?
GM is reporting sales drops for June; just how bad it is depends on what numbers you use. Their press release talks about deliveries, retail sales, sales, adjusted numbers, and unadjusted numbers. Like Automotive News , we prefer using numbers that aren't adjusted for "sales days," so GM's sales for June were down 18.5 percent from the previous year. For the first half of the year, they were down 16.5 percent from 2007. If you can believe it, car sales were down e ver more than light trucks (21.1 percent vs. 16 percent, unadjusted). Individual car models had increases, some large, that were more than balanced out by other car models having decreases.So, what about the Hail Mary 72-Hour-No-Make-That-10-Day 0 Percent Financing sale? "The 72 Hour Sale at the end of June was targeted at the 2008 vehicles left in inventory. Combined full-size pickup and utility inventory is down about 124,000 vehicles compared with June a year ago. The sale helped rebalance inventory to a stronger car mix. There were about 238,000 cars and 550,000 trucks in inventory at the end of June." Given the rate trucks are selling, a two-to-one ratio of trucks to cars still doesn't sound that promising. July's sales numbers will tell that story.
There's no way to sugarcoat it: Ford's June sales sucked. Ford dealers moved 28 percent less metal– 167K vehicles– than last June. Compared with the first half of 2007, FoMoCo's sales fell a full 14 percent. In all fairness, the numbers are the first which don't include Jaguar and Land Rover (sold off to Tata motors). But based on recent months' sales, the two brands would have only added about another 4k sales. So it still sucks. Retail sales for cars were up three percent; cars and crossovers made up 59 percent of retail sales for the first half of the year. Fleet sales were down 11 percent for June. Ford mouthpiece Jim Farley explained "the rapid rise in gasoline prices, and the resulting shift toward fuel efficient vehicles, has been challenging." But fear not! "In addition to adjusting our capacity and production plans to produce more cars and crossovers, we are introducing several new vehicles with class-leading fuel economy." Hope springs eternal, but will it be this spring?
Is anyone surprised? Automotive News [sub] reports that GM is extending the 0% financing for everyone deal through July 7. The conditions are the same: 0 percent financing on most vehicles if you're able to make it through a dealership's door under your own power. Dealers who have increased floor traffic are happy because they're even selling SUVs and full-sized pickups. GM spokesman Pete Ternes said they'll "heavily advertise and promote the sale, especially over the July 4th weekend." With the problems GMAC is already having, giving away money for the next six years can't help their situation. And practically giving away the inventory can't be making GM much money, either. Hole. Digging. Stop. Meanwhile, GMAC is launching a "rate incentive program" on select GM Certified Used Vehicles, including the Chevrolet Impala and Malibu, but especially SUVs. "Well-qualified customers also can receive GMAC 4.9% APR financing for terms up to 60 months on 2003-2008 models of Chevrolet Trailblazer, Tahoe and Suburban; GMC Envoy, Yukon and Yukon XL; Pontiac G6; and Buick Lacrosse vehicles at participating GM Certified Used Vehicles dealers." Yeah, that'll work.
As we mentioned previously, the U.S. vehicle market is about to be hit with a tsunami of off-lease SUVs. BusinessFleet is putting numbers to the news, courtesy of CNW Research's latest Retail Automotive Summary. They estimate 800k SUVs will come off lease this year, with a similar number expected next year. What makes those numbers so horrifying: residuals previously figured at 51 percent of original capitalized cost are now closer to 34 percent– assuming no further drop in value. CNW president Art Spinella estimates "that difference translates into more than $6,100 per unit in missed residual values or $4.88 billion." He estimates next year's figure could be as high as $4.74b. That's a lot of money for someone to absorb. SUV buyers note: even without GM zero percent offers on slow-selling trucks and SUVs (i.e. all of them), this is The Mother of All Truck Buyer's markets. And you've got plenty of time to shop.
Dear Employees,
The auto industry is going through a period of unprecedented change. A dramatic U.S. economic slowdown and auto industry contraction leaves Chrysler — like other automakers — to face difficult issues and decisions.
Our worldwide sales are down 14 percent, year to date — even considering increases in Canada, Mexico and international markets.
Last year, France introduced a system known as "bonus-malus." Under the scheme, people who buy gas guzzlers have to pay a €200 – €2600 penalty. Consumers option for something more "environmentally friendly" get a €200 – €1,000 bonus. Automotive News [sub] reports Environment Minister Jean-Louis Borloo plans to "amplify" the program. Car buyers who purchase "extremely polluting" vehicles will soon pay an additional annual fee. As in carbon tax. Borloo didn't say when he plans to start the extortion new program. But here's the best part: "Borloo has said in the past that the system of penalties and rewards applied to vehicles could be extended to other products such as electronic goods." Liberté, Egalité, Fraternité!
When GM announced the Traverse, they insisted the new Chevy was different enough from the GM's three Lambda-platformed CUVs that it wouldn't cannibalize sales. It looks like they were right; there won't be anything left to cannibalize. GMINsidenews is reporting that neither the GMC Acadia (the best-selling Lambda flavor) nor the Saturn Outlook (the worst selling) will make the cut. That'll leave only the Buick Enclave and the Traverse to carry the Lambda Gen 2 banner. GM's answer to the slow-selling Honda Ridgeline, the Lambda SUT (due in 2011-2012) will also lose the GMC variant; the Chevy SUT will be GM's only entry in the almost-but-not-quite-a-pickup-truck market. All this leaves only one new GMC product in the pipeline: the GMC version of the Pontiac version of the Chevy version of the Theta CUV (Equinox). Clearly, GM's decided to starve GMC to death. The question is: do they have enough time?
It looks like New Mexico's SOL. The Land of Enchantment tempted Tesla with a $7m incentive package (or was that $20m?) to locate the plant for their sometime-or-other upcoming electric sedan. Despite a big announcement from the then-governor's office, Tesla's changed their mind. The San Francisco Chronicle reports the electric car manufacturer promoter will announce today that they've chosen the Bay Area as the ertswhile production site for the vehicle formerly known as WhiteStar, in honor of the owners of the ill-fated Titanic (as far as we know). What swung the deal in the favor of the Golden Gate State? Well, besides the governator placing an order for his own $100k toy, Tesla will get a sales tax exemption on purchasing manufacturing equipment and grants for training new employees. The company says they'll start production of the $60k sedan (when else but) in 2010– even though there doesn't seem to be even any concept drawings of the new car.Time to revive the Tesla Birth Watch?
The only thing worse than losing your job is having to sit around and wait to lose your job. Ask Ford's white collar workers. The Blue Oval Boyz have already announced plans to cut the salaried workforce by 15 percent; in some areas like product development it's as high as 20 percent. With the bulk of the cuts coming in late July, morale and productivity are lower than the chances that CEO Alan Mulally will earn less than $20m in any given year. The Detroit News reports "work has ground to a near-halt in some offices as workers fret about their futures and spend time browsing job postings on the Internet." (Hi guys!) Even those who aren't scheduled for layoffs are looking elsewhere for employment, not knowing if they may be shit-canned in the next round of cut-backs. Does it make sense to cut product developers and engineers while struggling to get new products to market? Oh… wait. They'll just import designs from Europe three years too late or let Mazda handle it. In fact, it looks like they'll do anything they can to save a buck as long as it doesn't interfere with executives' mega-salaries, perks and golden parachutes.
The Detroit News reports Los Angeles has a new hydrogen fuel pump. A commercial hydrogen pump, rather than a fenced-off hydrogen-only fueling station. LA City Councilman Bill Rosendahl showed up in a GM-furnished Equinox Fuel Cell and announced it was "the most joyous moment I've had since being elected to office." Of course, even though it's a commercial fuel station, drivers of the approximate 100 fuel-cell vehicles won't have to pay for the hydrogen they pump. They're all part of "demonstration programs by the motor companies." So what happens when the owners start having to put their debit card in the pump to pay for their fuel like the rest of us? Good question. So far no one's saying how much it costs to produce or dispense the stuff. And apparantly no one cares. The California Air Resources Board is spending $7.7m of the taxpayers' money to open three more fueling stations so they can give away more free fuel to people driving cars they don't have to pay to operate so the anti-ICE crowd can get more propaganda free publicity.
Forty or fifty years ago, every manufacturer built concept cars with alternative– and sometimes pretty outlandish– power plants (small nuclear reactor, anyone?). The gas turbine was a popular choice. GM, Ford and Chrysler were all deeply involved in gas turbine research, stretching back to the late '40s and early '50s. In 1963, Chrysler built a fleet of 50 distinctively-styled turbine-powered cars and gave them to consumers to generate real-world feedback. Turbine engines were the wave of the future– a technologically-advanced powerplant that could run on anything combustible that would flow through a pipe, from kerosene to perfume. Chrysler's test program racked-up over 1.1m miles. They continued turbine engine research until the mid 70s, when they actually planned to put a turbine into production. Then, suddenly, nothing. Chrysler's financial problems led to government loan guarantees that included stipulations that they abandon plans to produce turbines (too risky). GM and Ford had long-since been distracted by other shiny objects like rotary engines and winning LeMans. So turbine engine research halted. With all the emphasis now on alternative fuels, perhaps it's time to revive an engine that can run on hydrogen, biofuels, petroleum distillates or even coal dust. Combined with modern engine-control technology, it could be worth a second look. Or not.
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