Bucking the tide, Honda announced an eight percent increase in profits for the April-May-June 2008 quarter. Profits would have been higher still were it not for the incredible shrinking US greenback. The Financial Times tells us that "the yen's sharp rise compared with early 2007 – it hit a 12-year high against the dollar in March – reduced the value of its overseas sales and turned what would have been a 7.1 percent first-quarter revenue increase into a 2.2 percent fall." With over 50 percent of its business in the stricken US market, higher raw materials costs and a mix-shift away from higher-priced large vehicles to low-cost cars Honda still pulled a profit increase out of the hat. Then, there is what being able to nix the cash-on-the-hood for your best sellers does for a business. Sure the Pilot, Ridgeline, Odyssey and MDX need incentives to move; but the Fit, Civic, Accord and CR-V are all selling with no rebates and no dealer "marketing support". Meanwhile, over at your friendly Saturn dealer there is cash on the hood of ANY 2008. Even with today's good news, financial analysts are spooked by Honda's warnings that the second half of the year is likely to be more difficult than the first half was and that total fiscal year profits are likely to be down by 18 percent. Honda stock swooned two percent today, but GM dropped eight percent.

Just when you thought it couldn't get any more miserable being one of Chrysler's Dealer "Partners" comes the news that the Chrysler Financial is out of the lease business! The Wall Street Journal reports the decision with a note that "Chrysler is expected to brief dealers formally later in the day in a conference call". Boy, it must suck to find this out in the news before getting word from corporate. Nardelli's previous claims that renegotiating bank loans is just a routine matter have been blown out of the water. That $30B revolving line of credit only runs through August, and IF Chrysler is able to get it extended the terms will surely be much more costly than before. Negotiations must be going very, very badly for Chrysler to take one of the most popular sales financing tools off the table. One has to wonder if come August any new lending will be of the Debtor in Possession variety.

Reuters reports that Toyota sold 4.8m vehicles in the first half of 2008, while GM managed to move 4.54m. It's official: GM is no longer the world's largest automobile manufacturer. GM's spinmeisters promptly bragged that it reached record numbers in three of its four regions in the second quarter of 2008. Unfortunately, GM's 116k-unit growth outside of the U.S. was swamped by a 236k-unit decline in the home market. Also, GM continues to take full unit credit for sales in China– even though the Chinese business is majority-owned by Chinese partner SAIC. (For example, GM owns only 34 percent of the unit which builds the high-volume Chevrolet Spark.) GM's decision back in 2000 to ramp-up trucks and SUVs whilst eviscerating their US car efforts in order to boost profit margins has come home to roost. 

On the occasion of GM's 100 year anniversary, the Kalamazoo Gazette held a "live-by-email" interview with GM CEO Rick Wagoner. So, PR fluff aside, how many more jobs losses is GM-heavy Flint, Michigan going to endure? Uh… GM is pitting Flint against other sites for the production of its next generation 1.4-liter turbocharged four-banger. For which Wagoner claims a nine mpg improvement over "Chevy's current entry in this segment." (Did he means the Aveo or the Cobalt? Smart money is on the Aveo, since it currently sticks out for its poor fuel economy vis a vis the class leaders.) Rick also said the new engine might be used as the ICE portion of the Volt. Now hold on. If the Volt is due into production in about 18 months, shouldn't the engine choice be a done deal? As for Flint's chances of getting the four-banger and other new projects, Rick told Flintonians to "rest assured, we have every intention of ensuring that Flint has every opportunity to play an important role in GM's future." A direct question: will the last local final assembly plant, Flint Truck Assembly, emain open? Rick gave a long winded non-answer which came down to that GM plans to keep building pickup trucks– somewhere. Oddly enough, the words flex-fuel, hydrogen and ethanol are nowhere to be found in Rick's latest recitation of how GM plans "to be a global automotive leader for the next 100 years."  The choice of words is telling. "A global automotive leader", not "THE global automotive leader." My how the mighty have fallen.

The AP gets straight to the heart of this story: "As the price of oil drops dramatically, some analysts wonder if the bubble is bursting." When the markets closed on Friday, August oil futures had dropped from their recent high of $147/barrel to "only" $128.88. That still leaves oil about $100/barrel over it's long term inflation adjusted average of $27-$28. Detroit, especially Ford, appears to be moving full steam ahead to convert capacity from trucks to small cars as fast as possible, which means in about two years. So… what if fuel prices will drop back down, keep going up or stay about where they are now during that two-year timeframe? Whatever happens, it seems that $4/gallon has been a behavioral tipping point for the US' car and truck buyers. It took about a decade of stable fuel prices for people to forget the shocks of the 1970s. Once again it seems that even a slight moderation of prices would not mean a wholesale return to 1990s style gas-guzzlers. The only sensible strategy for a mainstream automaker: offer a compelling line-up across the board and flexible factories ready to zig when the market zags. But hey, what do I know?

The Financial Times reports that new Jaguar owners Tata Motors are taking the leaping cat up market. What's more, "there are no plans to replace Jaguar's cheapest model, the X-Type." Not so strangely, the once interim and now permanent CEO of Jaguar and Land-Rover is lifetime Ford financial guy (and ex-Aston director) David Smith. But while Smith may have tactical control, group chairman Ratan Tata is the man with the plan. Booming demand for conspicuous consumption by the newly wealthy in China, Russia and the Middle East has driven Bentley and Aston Martin sales of over $200k vehicles into the 10k unit per year range. Jaguar (and Land Rover) are already doing land office business in these expanding markets; Ratan wants a serious slice of that scrumptious pie. How exactly Land Rover fits into this new picture is a bit fuzzy, but taking Jaguar up against Bentley and Aston-Martin seems clear enough. The X-type is dead. Long live Jaguar.

The drop in fuel consumption continues. The Wall Street Journal reports that "gasoline consumption dropped 3.3% from last year to 9.347 million barrels a day." This puts current domestic gas usage at the lowest level since 2003, effectively rolling back five years of growing demand. Consequently, fuel supplies at refiners are growing, up by one million barrels in the last week alone. Of course, compared to 9.347m barrels per day of consumption, having an additional million barrels in inventory is hardly a glut. The reduced consumption started with a one percent drop (compared to last year) during April, ramped to a 2.2 percent drop in June and then hit 3.3 percent during the week surrounding the 4th of July. But, while consumers are cutting back, trucking and farming are doing the drunken sailor routine. U.S. diesel consumption is up a full six percent compared to last year– even though diesel fuel prices are up 65 percent while the price of gasoline rose by only 38 percent. Ironically, some of the boom in diesel fuel use is down to increased ethanol feedstocks and the fleet of tanker trucks required to move the stuff around. (Gasoline can be transported over long distances in pipelines; ethanol has to go one tanker truck at a time.) As for the clean diesel car revolution, dead on arrival.

Those of you wishing for a sensible, small, utilitarian diesel engined pickup truck are about to get your wish. The Wall Street Journal reports Mahindra & Mhaindra's plan to release its Appalachian model mid-size pickup is on schedule for 2009. Previous reports  tell us that the truck will feature a 2.2-liter, four-cylinder diesel rated at 150hp and 300 ft. lbs. Preliminary specifications tell of a six-speed automatic transmission, electronic stability control and a 7.5 ft. long bed. Mahindra's importer Global Vehicles (GV) has a… er… colorful history. Some years ago, GV tried to import a mini-Hummer style vehicle from Aro S.A. of Romania. The effort went down in flames; the Romanians could never jump the safety and emissions regulatory hurdles. Mahindra, on the other hand, is a far more capable company than Aro and is already a force in the U.S. farm tractor market.  More fantastic is Mahindra's claim that it will release a diesel-electric hybrid version in (you know it, you love it) 2010. Competition in the shrinking U.S. light truck market shows no signs of letting up. Now if it could just begin…

Back in Chrysler's salad days, Dick Dauch was the much-admired head-busting manufacturing boss in an executive suite lined with power players like Lee Iacocca and Bob Lutz. Competing egos served as a check on individual power and privilege. My, how things have changed. Lee's pimping with Snoop, Lutz is nutz (and well-paid for it too) and Alex Taylor III is dissing Dick (in his own special way). Taylor's talking about the American Axle CEO's "less appealing side." In fact, Taylor's "pin the tale of D3 woe on the greedy bastard" profile reveals that American Axle is a public company in name only. Get this: American Axle's corporate address is One Dauch Drive. Son David was recently promoted to President and COO, after other son Richard quit working for dad. And the compensation committee paid Dauch over $18m last year [yes, that's $3.95m more than we thought previously]. Of course, our man Alex can't quite step-away from the pom-poms: "There's no question that Dauch has built a successful company, and he has done good deeds for the city of Detroit by locating his headquarters within city limits. But he has left American Axle grievously unprepared for the market shift away from sport utility vehicles." What about Dick's charitable work? And where was Taylor's self-righteous sarcasm last year, when Dauch pulled down $3.9m plus? 

The bad news for The D2.8 and workers just keeps coming. The AP reports [via Yahoo! Business] that Chrysler will shutter their St. Louis Southminivan factory indefinitely. ChryCo will also reduce its St. Louis North pickup truck production facility from two shifts to one. Chrysler President Tom LaSorda used the plant close announcement as an opportunity to deny rumors that Chrysler's going Tango Uniform, heading for the boneyard. "Hogwash," LaSorda euphemized (euthanized?). "Absolutely not being considered at all." Not at Chrysler, and not at the press conference. "Absolutely no relevance. I don't even want to entertain those questions." The idea that the Cerberus Brain Trust hasn't even thought about a MTLSAS (man the lifeboats strip and flip) simply sounds silly. When the dust settles, LaSorda will be sitting fat and happy in a well-funded retirement villa, while tens of thousands of blue and white collar employees wonder what hit them.   

Andy Grove, the man who led Intel to dominance, has a new cause: The Electric Car. Ken Thomas of the AP interviewed Grove on his new passion and found a true believer. Grove notes that "the beauty of electric power is its ability to be produced through multiple sources such as coal, wind and nuclear, and its 'stickiness' — it can be transported only over land." Typically the ability to transport stored energy by sea is considered an advantage for coal, oil and the like. But Grove touts the fact that electricity cannot be readily traded on the global market. Coming from the former leader of the quintessential modern multi-national, Intel, this is quite a surprise. Indeed, Grove says that the inability of the US to export electricity to voracious China means that electricity prices can be kept lower than they otherwise would be. He may have a point. Back in the 1960s a crash in US automotive sales would be paired with plunging steel prices, but not now. Grove's other hot button is the promotion of aftermarket plug-in conversion kits for hybrid cars. He sees parallels between plug-in conversion kits of today with the way hobbyists and home users got the whole personal computer industry up and running a few decades ago. 

The Wall Street Journal [sub] reports some unsurprising news: "Toyota Motor Corp. is likely to struggle to make money at its two truck plants in the U.S. this year." The $2b San Antonio plant ran at about 92 percent of capacity last year. This year, it's limping along at 72 percent. Its sister truck/SUV factory in Indiana is said to be at a Chrysler-like 45 percent. Thanks to its flexible labor (i.e. non-union), Toyota has already re-assigned Indiana workers from the truck line to Camrys. Both Toyota truck factories are also cutting work hours: "Workers on each shift will work seven hours instead of eight assembling cars and will spend one hour in training." No layoffs, no jobs bank and no 95 percent pay for not showing up. Meanwhile, the car side of Toyota's portfolio remains strong and continues to gain share against Detroit. The Tundra is down, but Prius, Camry, Corolla and Yaris are rocking and rolling out the door.

Truckers may not be spending much time in Nevada these days, but the big wigs from Ford are. The Wall Street Journal [sub] reports that Chairman Bill Ford, CEO Alan Mulally and CFO Don Leclair have gone to Vegas for a sit down with Kirk Kerkorian, his attorney Terry Christensen and wing-man Jerome York. What happens in Vegas stays in Vegas. So no formal word on what went down between FoMoCo and the boss man at MGM-Mirage, and what kind of suite Ford got comped. If and when FoMoCo needs more cash to keep the lights on, it's unlikely to be able to borrow it legit. Everything up to and including the Blue Oval is already hocked with the well dressed pawn brokers at Citigroup, Goldman Sachs and J.P. Morgan Chase. . When the time comes, FoMoCo is going to need an equity investment, not more debt. Kerkorian seems like the only player who is in, but only on his terms. As we've speculated here before, those terms are likely to include full voting power stock, not the pretend stock normal shareholders get. Goodfellas indeed.

Coming soon to dealers nears you: The Hybrid SUV Price War! AP (via Yahoo! ) reports Chrysler's plans to release hybrid versions of the Durango and Aspen this August. The new eco-warriors are based on the same two-mode technology GM uses for the Tahoe Hybrid, but with list prices $8,000 lower than GM's. Said system was co-developed by GM, then Daimler-Chrysler and BMW. "Chrysler said the hybrid SUVs get up to 20 miles per gallon and improve fuel economy by 40 percent in city driving and up to 25 percent overall." No official EPA fuel economy number have been released yet but that would put them on parity with the GM's mega-hybrids. The Durango and Aspen Hybrids are be priced about $3,500 over their conventional counterparts, MSRP wise. However, since in the real world Durangos and Aspens are trading hands at over $6,000 off MSRP, the actual price premium remains TBD. To date GM reports that about 2% of Tahoe/Yukon sales this year have been the hybrid version. Presumably Chrysler is hoping for a bit more of a volume kicker with its much more aggressive pricing. The $3,500 premium is reduced by a $1,800 tax credit for most US buyers. How much extra would you pay for an Aspen Hybrid, assuming you would buy anything from The New Chrysler Corporation?

As this 1999 New York Times article illustrates, Ford's Wayne factory was once Ford's golden goose. The factory cranked-out about $3.7b profit per year building Expeditions and Navigators. Tempus fugit. Nine years later, Yahoo! Business reports that the golden goose will be put into a cryogenic freeze for at least nine weeks, starting June 23rd. The unusually long "temporary shut down" could well become permanent. The Michigan Truck plant builds the Expedition and Navigator. According to the Kansas City Star, "Expedition sales are down 31 percent for the first five months of the year, and Navigator sales are off 22 percent, according to Autodata Corp. Ford had a 124-day supply of Navigators and a 100-day inventory of Expeditions." It seems safe to say that production for the 2008 model year will be over by the time Michigan Truck shuts down next Monday. If future production of these barges is ever needed–a highly doubtful proposition– one of Ford's underutilized pickup truck factories could take over. As for costs savings, United Auto Workers get 95 percent of their pay while the factory is "off-line." This "right sizing" an expensive business, but Ford had to do something to shut off the production spigot.