In the auto industry, as in so many other areas, Africa is something of a forgotten continent. Without the new roads and emerging middle class of a China, the most underdeveloped part of the developing world tends to fly under the radar: for example, until I read a Financial Times piece on an airplane, I had no idea that South Africa’s auto industry was booming. And now, here’s another story that isn’t getting much play in the mainstream of the auto world: Mobius, a Mombasa, Kenya-based firm has built a prototype vehicle that it hopes will be the Model T of Africa, providing robust, low-cost transportation to a continent that is not taken seriously as a market by the global car business.
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Category: Industry
Auto dealers are often said to be the face of the industry… and if that’s the case, the Consumer Federation of America may have shed some insight into why so many Americans opposed a bailout of the industry. In a survey of 31 state, county and municipal consumer protection agencies from 18 states in 2010 [PDF here], the CFA found that auto dealers, suppliers and service garages were the number one source of consumer complaints for problems such as
Misrepresentations in advertising or sales of new and used cars, lemons, faulty repairs, leasing and towing disputes
As if car dealers didn’t have reputation problems already…
After the apocalyptic warning from the industry about a proposed 56.2 MPG 2025 CAFE standard, the auto industry seems to be backing the White House’s latest proposal, which reduces the 2025 target to 54.5 MPG, slows the rate of efficiency improvement for trucks and increases advanced technology credit loopholes. Another key consideration: the White House agreed to a mid-term review of the 2025 standards to ensure they reflect the market. Plus, the DetN points to a previously unheard-of compromise to keep big trucks cheap:
The plan is also carving out special rules for “work trucks” — heavier light duty vehicles used for construction.
As a result of these compromises, the WSJ [sub] reports:
As of Wednesday, Toyota Motor Corp., General Motors Co., Ford Motor Co., Chrysler Group LLC, Honda Motor Co., Hyundai Motor Co., Nissan Motor Co., BMW AG and Volvo had told the administration they would support the plan
With the industry now largely on board, the Obama Administration has a green light to announce its new standard at a ceremony planned for tomorrow. But not everyone is happy with the new proposal…
Ford’s Q2 results [Presentation in PDF here] were mixed, as deliveries and revenue improved (7% and 13% respectively, compared to Q2 2010) but profitability slipped, but the automaker still ended the quarter with $2.4b in profit and $2.3b in operating cash flow. Debt was reduced by $2.6 from the first quarter of this year, and total Automotive debt landed at $14b, while gross Automotive cash landed at $22b. So, what happened to Ford’s operating profit margin?
Despite a $370m loss, Chrysler’s Q2 and first-half results [presentation in PDF here] were presented in a relatively upbeat tone, as a number of key metrics showed signs of improving. Chrysler’s revenue was up by over $3b in the second quarter compared to last year, EBITDA hit $1.3b, and “modified operating profit” was $507m, or about 3.7% of net revenues. Depreciation and Amortization costs were up slightly, as were income tax and net interest expenses, but the big loss that pushed Chrysler into the red was a $551m one-time charge associated with Chrysler’s payback of government bailout loans. Gross debt was up by about a billion dollars, to $12.287b, but net debt was down by over a billion to $2.1b, and Chrysler sees greatly reduced interest costs going forward, eliminating $2.6b in planned debt payments this year. And though free cash flow slowed considerably compared to Q2 2010 ($174m compared to $491m), Chrysler finished the half with $10.2b, up from $9.9b at the end of the first quarter.
Over the weekend Bertel reported on some depressing economic news, noting
Suddenly, automakers aren’t so sure anymore about all that pent-up demand that will bring back U.S. car sales back to their old glory… The big recovery has been postponed for a year or more.
But how much pent-up demand is there, really? According to Edmunds’ analysis of 12 Factors To Watch In The Industry’s Second Half, only about half of the sales lost between 2008 and 2010 were not lost forever to used cars, the inability to get credit and the “new austerity.” As a result, they calculate about 4.3m units of demand is “pent up.” But there’s a question of how accurate that estimate is, and beyond that there’s another question: what happens once the pent-up demand has been blown through?
Withe the Detroit Free Press reporting that combined Q2 profits for the Detroit automakers could hit $4b, the quadrennial negotiations with the UAW which opened today with a meeting between Chrysler and the union could be a tough slog. And because the profit outlook is mixed, with GM and Chrysler likely to improve profitability and Ford likely to see a drop in net takings, the long-standing tradition of “pattern bargaining” could come to an end. Ford currently pays about a dollar more per hour than GM and about $2 per hour more than Chrysler (which is partially owned by the UAW’s VEBA trust fund), and Ford also shoulders more of workers’ health care costs than its cross-town rivals. And UAW president Bob King admits
Being really blunt about it, when you don’t represent the overwhelming majority of an industry, which we don’t any more, then you can’t do pattern bargaining
Already unfairly disadvantaged by the UAW (Ford is the only Detroit-based automaker without a no-strike contract) and facing falling profitability, Ford is telling the union not to expect wage increases. But does that mean the union’s only choice is to bring GM and Chrysler up to Ford’s pay and benefit levels?
The Michigan Congressional delegation’s letter, stating that the Detroit-based automakers are not technologically capable of serving the market while complying with a proposed 2025 CAFE standard seemed strange to me in light of the recent progress made by Ford and GM on fuel economy. Why, I wondered, would these firms boast of their fuel econmy efforts on the one hand while allowing their congressional representatives to portray them as unable to build a CAFE-compliant fleet on the other. Why, I wondered, don’t Ford and GM come out and angrily insist that they can build the most fuel efficient cars in the world? My guess: because they know that they can probably wheedle a loophole out of the feds if they keep pleading inability. Yes, everyone knows they can comply with CAFE… but even the UAW knows that when the government asks you to do something, you ask for something back. Which in turn made me wonder: what might the OEMs want? And, turning to the 2012-2016 CAFE Final Rule [go on, give it a read in PDF format here], I found a glaring loophole that all the manufacturers seemed to want, but which the feds turned down. I have no evidence that this is back on the table for 2017-2025, but I thought I’d put it out there to give a sense of what the OEMs may be pushing for by pleading inability to comply with the proposed 2025 standard.
The word “truth” in our title has long been a cudgel for our critics, who, finding fault with our analysis, condemn us for failing to publish their version of the truth. But, as I’ve steadfastly maintained since taking up TTAC’s editorial reins, we do not hold ourselves up as the sole source of truth. Rather, by provoking an engaging discussion, we hope that our readers will use our posts as a jumping-off point to debate the issue at hand with vigor. The truth, as I find myself saying again and again, is a journey, not a destination.
Accordingly, I’m always thrilled when manufacturers read our pieces and offer up their own counterpoint to the discussion, broadening our understanding of the issue at hand and moving the conversation forward. One of my posts from yesterday, which examined GM’s decision to invest in full-sized truck production in the midst of CAFE negotiations and an inventory backlog, has drawn just such a thoughtful response from GM’s Tom Wilkinson, which is published after the jump. It provides some inside perspective on GM’s decision to move forward with the next generation of full-sized pickups, and is a great example of the kind of conversations that TTAC hopes to start every day.
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Earlier this year when it seemed that a price war could be brewing in the US market, one of TTAC’s industry sources noted that the problem wasn’t strictly a question of business competition. Speaking on background, the source told us that
when speaking with old friends at Ford and GM, the level of mutual distaste for each other is very high…it seems to be getting personal. Lots of egos involved, [which] increases potential for short-sighted decision-making
At the time, I was willing to chalk up this animosity to the usual industry hyper-competitiveness (or at least a return to form after the lockstep mutual support of the bailout era), but it seems I should have paid more attention to our source’s concerns. As it turns out, the bad feelings between Detroit’s cross-town rivals has apparently gotten worse…
After spending much of this year not producing vehicles, Saab is anxious to get to work on its 11,000 vehicle backlog of orders, and production was supposed to start on August 9 after workers return from Summer vacation. But a Saab press release reveals that the troubles aren’t over, with short term financing and supplier agreements still to hammer out, and that production won’t resume until August 29 at the earliest. Gunnar Brunius, Vice President of Production and Purchasing explains:
I am positive about the progress we made on the payment terms with our suppliers and it is good to see that we all want to make it work. What we need now is a full commitment on supply of parts into our factory to be able to restart production and secure a stable manufacturing operation. We are now working hard with our suppliers to nail down these plans, commit to a delivery schedule and start building the close to 11,000 cars that we currently have in our order books. The industry-wide summer break at our suppliers caused certain key suppliers not to be able to supply us in time. Saab Automobile hopes to restart production earliest in week 35 provided that it is able to commit to a delivery schedule with its suppliers.
But wait, there is some good news! Saab’s Communications Manager Eric Geers tells GP.se
I can promise one hundred percent to the salaries paid next week. Where the money comes from is not important, the main thing is that we pay [emphasis added]
That kind of sums up the whole Saab situation nicely, doesn’t it?
The 2012 Chevrolet Impala may have the oldest “bones” of any current production sedan, but it’s not quite ready to put those bones in the graveyard yet…
Every time Sergio Marchionne makes the headlines, I half expect him to announce that he is not merely a mild-mannered accountant with a fondness for frump, but a mighty superhero, born to rescue failing automakers and the American and Italian ways of life. Having scored a sizable stake a bankruptcy-rinsed Chrysler for no money down, Marchionne has been ruling his Italian and American empires with resolute authority… and 50 direct reports. But Automotive News [sub] isn’t reporting that Marchionne spends his spare time in tights and a cape fighting Russian bandits and Italian labor unions… the word is that Sergio Marchionne is ready to delegate some authority. According to AN’s sources, Marchionne’s plans includes three basic planks:
- Create four regions — Europe, North America, Latin America and Asia-Pacific — each with a regional boss.
- Require brand bosses, who are powerful in the current organization, to work closely with the new regional bosses.
- Establish a new layer of management, tentatively dubbed the steering committee, that would help run Fiat and Chrysler.
But is this new structure really going to end what AN terms “the one-man Sergio show,” a routine of 18-hour days and “catching catnaps on the plane as he flies constantly between Turin and Detroit”? Will it really “help overworked Chrysler executives catch their breath and adopt a saner work rhythm,” as AN puts it? That question remains to be answered…
When I think of the South African car industry, I’m a bit ashamed to admit that I first think of the Citi Golf, the ageless Mk.1 VW Golf that was built there from ’84 to 2009 (or possibly armored cars). Of course that’s a grossly inaccurate representation, and the Financial Times recently clued me into South Africa’s booming auto sector growth . Led by screaming exports of Ford’s Global Ranger pickup and the Mercedes C-Class, South Africa will very nearly have doubled its production numbers between 2009 and 2012. And with the government introducing yet another Motor Industry Development Programme in 2013, the plan is to build South African production capacity to 1.2m vehicles per year by 2020. And though South Africa is not immune to the currency, labor and supply chain problems that plague nearly every production location, Mercedes has already promised to double C-Class production to 95,000 units by 2014. Sounds like a vote of confidence, and another reason to keep a closer eye on South Africa.
- “All of Volkswagen’s premium-enthusiast Euro-appeal has been stripped from the Jetta”
- “The new model has hard plastic that wouldn’t look too out of place in a Chrysler Sebring”
- “Gone are the things that made the Jetta special to those who cared”
- “For the Jetta, it’s pay less and you get less. And in our opinion, that’s a step backwards”
There’s your verdict, straight from TTAC, C/D, LLN, and Edmunds respectively.
Jetta sales, first half 2011: 91,752, an increase of well over sixty percent over 2010
There’s another verdict, straight from the people who actually matter.
Does the first verdict refute the second — or support it?
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