Canadian Auto Workers' president Buzz Hargrove has publicly declared "no concessions" re: next summer's contract with the U.S. automakers. He may want to soften that stance a bit. Just as American automakers are trying to cut operating expenses any way they can, Financial Post reports that Canada is now "the most expensive place in the world to make cars." They attribute this dubious honor to the strong loonie and "other factors" that include the new lower-paying contracts with the UAW and the health care concessions. Many suppliers are cutting production and closing plants in Canada, and the automakers are expected to follow suit as Canadian production costs continue to grow relative to operations in the U.S., Mexico and Asia. Will Buzz take the Canadian auto industry down with him or acquiesce to what seems like an inevitable cut in wages and benefits? Watch this space.
Posts By: Frank Williams
Even though their sales are down 5.7 percent this year, Maximum Bob Lutz told Reuters that GM is doing doing just fine. At the Reuters Autos Summit in Detroit yesterday, the septuagenarian Car Czar revealed "We are looking at the numbers for November and we are making our numbers." Even though he didn't say what those numbers are, he did share the secret of their success: "Some days we are a little behind, some days we are a little ahead and some days we are lots ahead, so on balance to me it looks like we are making track." Uh, except for the days they're lots behind. Anyway, although several industry experts speaking at the summit predicted worse sales next year, Maximum Bob says it won't happen. Or it will. "Next year (will) possibly dip in the first half and then come out of it in the second half of the year so that overall 2008 could be a tiny bit worse than 2007 or a tiny bit better." It must be encouraging for the stockholders to know the top executives in the company have such a firm grasp of the obvious.
When former GM division and bankrupt parts supplier Delphi tried to get their re-organization plan approved by a federal judge earlier this month, shareholders and creditors panned it. In the last filing, Delphi's top brass wanted to cut the shareholders' recovery from $470m to $69m. The latest revision ups the pay-off to $190m. To make that happen, Delphi looted took money from the right to purchase stock assigned to the United Auto Workers (UAW) and other unions– reducing the UAW's cut by 6.4m shares. Even so, creditors aren't happy with the new plan. But they're caught by the short hairs; they lose everything if Delphi goes under. The clincher: if the new new new plan isn't in place by December 31, Delphi's IRS waiver expires. Delphi would have to cough-up $1.4b for taxes and penalties on pension obligations. Other disclosures from the filing: their legal expenses have topped $320m and could reach as high as $400m. And they're capping the agreement to supplement some long-term employees' retirement plans. Oh, and they're still going to give their top executives at least $216m in bonuses, post-bankruptcy.
The United Nannies Nations has decided that all new European trucks and "tourist coaches" must be fitted with electronic stability control (ESC) to reduce the carnage on European roadways. A press release from a meeting which took place in Geneva last week states ESC in these vehicles "could ultimately save over 500 deaths and 2500 serious injuries per year in the European Union." Under the agreement, which the EU plans to enforce, ESC will be required on heavy vehicles approved under Regulation 13 of the UN Economic Commission for Europe. Reg 13 (fitting number, by the way) is "a braking regulation widely accepted not only in Europe but also in many other parts of the world." The requirements for heavy vehicles will be phased in by 2010, with agreement on requirements for light vehicles expected in 2008 "by means of a global harmonised regulation on light vehicle control." Now let's all join hands and sing "Kum-bah-ya" as we relinquish control of our vehicles to those who want total control of our lives know what's best for us.
Now we know where GM is going to get the technology for the Volt's drivetrain: the Easter bunny. BusinessWeek reports that Bob Lutz escalated the war of the war of words between GM and Toyota at a meeting of the Western Automotive Journalists association. According to Lutz, Toyota's executive VP of R&D and product development said that the Volt is just an advertising ruse with battery technology that's "completely wacky." Max Bob's response? "Let's wait for the Easter Bunny," referring to his dream claim that GM hopes to will have a test mule with the Volt's drivetrain on the streets by spring of 2008. Maximum Bob also hinted that the General's the victim of a Japanese conspiracy. Japanese companies failure to bid on GM's battery proposals indicates "Lithium battery technology is being husbanded in Japan. It's like a secret weapon." Continuing his trip down paranoia lane, Maximum Bob blamed ethanol's bad press (re: questionable economic and environmental benefits) on a "multi-million dollar smear campaign" by the American Petroleum Institute. "They make it sound like ethanol is taking food out of the mouths of babes [and causing] taco riots in Mexico…" Let's just hope Santa Claus brings GM's Car Czar a clue for Christmas.
Hot on the heels of Steven Lang's editorial explaining the financial pitfalls of car depreciation, moments away from Justin Berkowitz review of the Infiniti G37, we're delighted to present CNNMoney's "Top 10 Best Resale Value Cars." The automotive analysts looked at Kelly Blue Book's guesses estimates of what different models might will be worth in five years. They then rated the cars based on their relative retained value. Not surprisingly, the list is import intensive. Surprisingly, three of the winners are Volkswagens. Here's the complete list in alphabetical order, with each model's predicted five-year retained value:
Chevy Corvette – 50 percent
Honda Civic Sedan – 52 percent
Infiniti G37 – 52 percent
MINI Cooper – 52 percent
Scion tC – 52 percent
Scion xB – 52 percent
Toyota Corolla – 52 percent
Volkswagen Eos – 52 percent
Volkswagen Jetta – 51 percent
Volkswagen Rabbit – 51 percent
Because health care VEBAs normally contains less than $1b in assets, they're usually nothing more than a sideline for sleepy old pension fund managers. But, as Bloomberg reports, a VEBA the size of the one The Big 2.8 have agreed to bestow upon the United Auto Workers (UAW) is a whole 'nother kettle of fish. At $54.4b, it's plenty big enough to catch the [cold, dead] eye of the big boys like JP Morgan Chase & Co., State Street and Merrill Lynch. According to trade publication Pensions and Investments, this health care fund is the same size as the University of California's pension fund endowment– which is the nation's 25th largest. UAW president, Ron Gettlefinger says his organization has been "inundated" with offers from Wall Street to manage the trust. And why not? Independent investment consultant Geoff Brobroff estimates the fees for managing the VEBA could total $285 million (not including kickbacks). Nice work if you can get it.
As IT Wire reports, the European Federation for Transport and Environment (EFTE) is kicking ass and naming names. Well, naming names. The environmental pressure group– claiming to represent 49 non-governmental organisations (NGOs) in 21 countries– compiled a list ranking auto manufacturers by tailpipe cleanliness, based on 2006 date. And who's the fairest of them all? The EFTE gives the green gong to PSA Peugeot Citroën SA. On average, the French manufacturer's cars emit 229 grams of CO2 per mile. Fiat SpA was next with 232 g/mile. The worst? BMW with 297 g/mile and Daimler AG at 303 g/mile. Here's how EFTE's ratings shake down:
1. PSA – 229 grams CO2/mile
2. FIat – 232
3. Renault – 237
4. Toyota – 246
5. Honda – 248
6. GM – 253
7. Ford – 261
8. VW & Suzuki (tie) – 268
10. Hyundai – 269
11. Nissan – 271
12. Mazda – 279
13. BMW – 297
14. Daimler AG – 303
The 2008 Green Car of the Year winner will be announced at the LA Auto Show in moments! [NB: that's an ironic spear.] The candidates were selected because they "stand out as exemplary models that forward environmental performance in meaningful and quantifiable ways" (per the LA Auto Show press release). They are: the Chevrolet Malibu Hybrid, Chevrolet Tahoe Hybrid, Mazda Tribute Hybrid, Nissan Altima Hybrid, and Saturn Aura Hybrid. Our man on-site, Alex Dykes, sent back photos of the draped winner, and we're going to tell you who won. If you play with the contrast, brightness, and midtones on this shot, you can make out a gold Chevy bowtie in the middle of a split grille. That narrows it to the Tahoe and Malibu hybrids. The size of the vehicle means it has to be…. the Tahoe! How they can give a tank like that a "Green Car of the Year" award totally escapes me.
[UPDATE: A GM rep at the show just confirmed Tahoe's win, saying "Yep, the Tahoe is the winner, we're really proud."]
After inadvertently posting incorrect prices for their hybrid Tahoe and Yukon on the Internet, GM finally released the real sticker. The base prices [including destination charges] from a GM press release via Autobloggreen are: Chevrolet 2WD Tahoe – $50,490; GMC 2WD Yukon -$50,945 (I guess GMC hybrid badges are more expensive than Chevy's); Chevrolet 4WD Tahoe – $53,295; and GMC 4WD Yukon – $53,755. All these hybrid SUVs come well loaded, including a "tire inflater kit"– which gives you an idea of the games hybrid makers play and how GM expects these SUVs will be used. TrueDelta lists the price difference between a loaded Tahoe and a similarly equipped Escalade as $15K, so you can make an pretty good guess what the 'Slade hybrid will run. Autobloggreen is estimating a $3 – $4K hybrid premium over a comparably equipped 5.3L version of the Yukahoe, but that doesn't factor in the usual discounts and rebates piled on the gas E85 versions. So even with a claim of "the same city fuel economy as the 2008 Toyota Camry with the base four-cylinder engine," buyers will have to do a lot of driving to yield any hybrid-related savings. But the PC halo remains in place at all times.
Not content to stand on the sidelines and watch GM and Toyota grab all the planet saving glory, Ford is jumping onto the green bandwagon. Again. According to Bloomberg, FoMoCo's CEO Al Mulally says The Blue Oval Boyz will make a "significant investment" into "more fuel-efficient vehicles that emit fewer greenhouse gases." They'll concentrate on smaller, turbocharged engines, lighter vehicles, diesels, hybrids, hydrogen and hamster wheels (just kidding). Big Al better be careful. A lot of people still remember Billy Ford's promise in 2000 to increase the fuel mileage of Ford's SUVs by 25 percent by 2005; a noble goal that remains resolutely out of reach. But SUV's won't be Ford's primary focus this time. The first model to receive the benefits of their greenification will be the Lincoln MKS. Changes to the drivetrain will be made "less than year" after it's introduced. Mulally didn't explain why Ford doesn't make the changes before the big Lincoln's showroom debut.
The Detroit Free Press reports GM's Vice Chairman of Global Product Development's most recent product prognostication: the Chevy Volt wil be "on the road" by November 2010. The comments came after the usual Lutz blusterfest, during which GM's Car Czar trash-talked Toyota. Or was it TTAC? Anyway, Bob promised that his employer will have a test Volt on the road in early '08, and then couldn't resist adding "About Easter, we'll find out who's right and whose credibility takes a hit." Yes, well, there's a big difference between getting a hand-built prototype on the road and producing said vehicle. Considering Chevy's just taken delivery on experimental battery packs from A123 and LG Chem, considering how long it will take to gear up production of thousands of said battery packs, considering that GM has had to totally redesign the car, and considering how long it'll take to gear up for production and train the line crew how to assemble a radically different drivetrain, you might think Lutz would reel back the rhetoric a bit. Or not. After all, spin doctors have families to feed too.
GM plans to be the first automaker to produce one million fuel-cell-powered vehicles in a year. When? Good question. In May, GM's VP for R&D, Larry Burns, said his employer aims to have fuel-cell vehicles in the showroom "around 2011 or 2012" then ramp-up production to a million worldwide after that. But today in Shanghai, where GM unveiled "environmentally friendly" models to the Chinese market, Elizabeth Lowrey (another GM VP) told Reuters they now have no target date for mass production. In a blinding flash of the obvious, she revealed "You have to bring the technology along before you know when you are going to get to a million vehicles." Then to show her environmental acumen, she added "You have to make sure that any of these technologies are out there in great volume to make a difference for the environment." With executives like this waiting in the wings, it shouldn't be hard selecting a suitable sound-bite successor to Maximum Bob Lutz if he ever when he retires.
Right after WW II, a group of 10 former military officers known as the "Whiz Kids" became a brain trust for Ford Motor Company. The most famous member: Robert McNamara, who went on to become the first non-Ford president of Ford. Bob and his cronies managed by numbers, cut off from the realities of operations and markets. As they say, those who do not learn from history are condemned to repeat it. CNN Money reports that Ford executive chairman and washed-up CEO Bill Ford has announced he's forming a "'Transformation Advisory Council' of senior Ford executives and outside sustainability thought-leaders." But instead of focusing on fixing the company, this latest Ford think tank is taking on all of "society's sustainability challenges." Yes folks, the man who led FoMoCo to the brink of bankruptcy and the executives who helped him push it there are going to "propel us along the road to sustainability," using Ford's "long heritage of environmental innovation, and … commitment to finding solutions that work for everyone." God help us all!
Even in a race of one-legged men, there's usually a winner. That's a fact that seems lost on Fortune's Alex Taylor Three Sticks. Writing for CNN Money, Taylor compares Ford's and GM's turnaround efforts (Chrysler's gone dark since private equity hoovered them up from Daimler). He brushes aside GM's third quarter losses ($1.6b without the tax write-off) and suggest that "most indicators put it in the lead." What indicators? Well, for starters, Ford isn't selling as many cars to fleet buyers, producing a greater drop in market share. [We have word that Mazda's taking over that part of the biz. More later.] Ford doesn't have as "rich" a mix of vehicles (i.e. GM has more duplicate and overlapping models). But the real clincher– so important that it bore repeating in picture captions– Rick Wagoner has been at GM longer than Alan Mulally has been at Ford. Ignoring the fact that this means Slick Rick has farted around for seven years without even suggesting a deadline for a return to profitability, Taylor states that Big Al's impact on Ford in the year he's been there "is only on the margin." While Taylor sees Ford taking until 2009 to start showing a profit, he reckons "most analysts expect GM to return to black ink next year." Really? Name one.
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