Bengt Halvorson's thesis for Newsweek/MSNBC/Forbes is a predictable, plodding piece of work. The dietribe [sic] makes a stab at exploring the muddy waters surrounding domestic vs. transplant "issue." "For instance, the Chevrolet Equinox, which is assembled in Ontario, has an engine made in China and a transmission from Japan, which brings its domestic content down to 55 percent. The Chrysler PT Cruiser is assembled in Mexico, has a Mexican-made engine and only 37 percent domestic content. Yet the Japanese-branded Toyota Sienna minivan, with a West Virginia-built engine and transmission, and a final assembly in Indiana, boasts 85 percent domestic content." Rather than negotiate a sensible path through this maze– screw it, it's a global economy, buy some Toyota shares, get over it– Halvorson's propagates the propaganda perpetuated by the "Level Field Institute." [This pro-domestic lobby group, run by United Auto Workers retirees, rightly points out that The Big 2.8 account for more U.S. jobs than transplants so that you'll consider rewarding their incompetence by buying a Korean-built Chevrolet Aveo.] Halvorson's "don't buy anything but Motown product" summary [as above] arrives in the third paragraph. His list of acceptable American cars are all made by GM, Ford and Chrysler. Well, it's supposed to. The embedded link to the "10 Most Patriotic Vehicles" takes you straight to the Honda DX Civic Sedan, one of the ten "Least Expensive Vehicles to Own." Funny, that.
Category: Industry
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.
Our plan for 2008 has been aggressively conservative, allowing us to be better positioned than some of our competitors for the current slowdown. We continue to exceed goals and financial plans, and we are better positioned than we were last year. We are focused on improving our business today.
That's why we must act now to become better aligned with the shift towards smaller, more fuel-efficient vehicles. In order to meet those market challenges, we will be making volume-related manufacturing reductions at two of our North American assembly plants.
The St. Louis Assembly Plant South will be idled indefinitely, effective Oct. 31, due to volume declines in the total minivan vehicle segment.
Operations at the St. Louis Assembly Plant North, where full-size trucks are built, will be reduced from two shifts to one, effective Sept. 2.
We are committed to working with the UAW to address these reductions in a socially responsible manner. As we have done in the past, the UAW and management leadership will hold employee meetings to review the special program offerings at affected locations. We are committed to providing employees with this information so they are able to make appropriate decisions.
We also remain committed to our bread-and-butter Dodge Ram pickup, and Chrysler Town & Country and Dodge Grand Caravan minivans. We believe there is a strong and viable pickup truck market, and our minivans have held their leadership share in a shrinking market.
We are clearly in a challenging environment, but by tackling the difficult challenges head-on, we are taking the steps to return Chrysler to profitability for the long term.
Sincerely,
Bob
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.
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?
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.
Innovation is the buzzword de jour for industries undergoing major upheaval. But a study by the annoyingly-named German consulting firm Invensity GMBH, shows that automakers face unique barriers to innovation despite major industry-wide challenges. EE Times Europe details a study of 100 German development team leaders, R&D managers and design engineers from automotive OEMs. The report claims that cost pressure and reliability requirements are the greatest barriers to innovation. Some 46 percent of respondents said automotive industry, innovations are more difficult to implement than in other industries. Only 26 percent believe that the automotive industry is more innovation-friendly than other industries. Yes, well, cost and reliability pressures can actually spur innovation. So, as one of the world's most competitive industries, do automakers really have anything to complain about? Nope. It's the companies who've ignored competition to squeeze short-term profits out of antiquated technology that really need to be worried. And, now, are.
We reported yesterday that Canada's Magna won a bid to build Boxsters for Porsche at it's Magna-Steyr plant in Austria. The Canadian Press [via News 1130] reports that Magna's exposure to the miserable American market trumped the Porker news, driving Magna's stock to a seven-year low. Some 53 percent of Magna's sales come from its supplier business with the D2.8; the OEM's misfortune is being passed down the supply chain. Higher gas is hurting Magna's business on the demand side, higher steel and plastic prices are hurting on the cost side, and there's no end to the hurting in sight. Magna's purchase of Plastech's exterior manufacturing business means even more D2.8 exposure, on top of the inevitable issues that come from buying a basketcase. Last week Magna cut 400 jobs from its St Thomas, Ont pickup frame manufacturing plant. There's not much else they can do besides weather the storm, and hope that their "most financially attractive offer" to Porsche wasn't a bridge too far.
CTVNews.com reports that, starting in 2012, any production overflow of Porsche's Boxster and Cayman models will be handled by Magna-Steyr's automotive plant in Graz, Austria. Porsche AG chose Magna "because it submitted the most financially attractive offer, and because it is in a position to take on development tasks for Porsche sports cars." Porsche will continue to build the engines that go into these cars, but Magna will chip in where possible synergies can be found. CTV notes that Ontario-based Magna is already a major supplier to Porsche. Before you worry about Boxsters not feeling German, Porsche already has an agreement in place with Finnish company Valmet for Boxster/Cayman capacity (which expires in 2012). At least they speak German in Austria, right?
Yes folks, it's Ford-GM merger rumor time again! This time, Business Week reports that GM execs recently mused aloud about the prospects of a merger with FoMoCo. According to "sources briefed on one of the meetings," the idea never made it past the "banter" stage. Dismissing mental images of executives "bantering" while their company burns, it's obvious that this idea is as wrong as you can possibly be without being eveN slightly right. Sure, Ford and GM's cratering market share means they'd have no problem dealing with antitrust regulators. Sure a Ford-GM Axis of Angst might prompt some generous federal handouts. But they'll get those anyway. And these two companies' combined debt is larger than Mexico's national debt. Literally. So, this bone-headed idea isn't going to go any farther than it did back in 2006 , when GM's Fritz Henderson met with Ford's Don LeClair to discuss a possible merger. So… will the GM executive/board member who suggested this idea please stand up? We have an award for which you will be nominated.
CNN Money's editor at large, Paul LaMonica, thinks GM should be kicked out of the Dow Jones Industrial Average. He argues that GM's poor performance, their plans to ditch HUMMER and the current 0% financing offer are all indicators that GM is in trouble. (If I were a cynic, I'd ask where he was when GM dumped Oldsmobile and had their "anyone with a pulse" financing deals.) What does LaMonica suggest to replace GM in the Dow? It "can still have an automotive component… GM is continuing to lose share to Japanese rivals Toyota (TM) and Honda (HMC). While the editors at the [Wall Street] Journal have maintained that the DJIA is only for American companies, I think that's a view whose time has passed." He concludes GM's just one of several companies "that are just not as relevant as they used to be, such as Sears, Eastman Kodak and U.S. Steel… GM's time has come." Ok — enough is enough. What took you (and everyone else) so long to figure this out?
Automotive News [sub] reports that Pininfarina is building a one-off based on Rolls-Royce's unobtainable Phantom Drophead Coupe. The Pininfarina Hyperion is a stylish convertible boulevardier built for a mysteriously unnamed private collector. The Hyperion will debut at the Pebble Beach Concourse d'Elegance this August. No word on what this monument to excess will cost its lucky owner, but given the bloated price points of other Italian reskins of the latest and hottest, one can only expect a price tag that would make Croesus blush. That saidm, besides a fresh new Italian suit, the Hyperion doesn't offer anything that's not available at the Drophead's if-you-have-to-ask price of $412k. Besides envious looks at even the toniest of locales, of course. Which we can all agree is more important than mere money.
When Kirk Kekorian's mouthpiece Jerry York said Ford should get rid of Volvo,few commentators thought the deal would go down this quickly. Even though a Ford spokesman insists "we have been consistently saying since the end of last year that Volvo is not for sale," Automotive News [sub] reports that Ford is negotiating with Shanghai Automotive Industry Corporation (SAIC) to sell their Swedish division. SAIC currently has joint ventures with GM and VW to build and sell cars in China. They also own the rights to Rover; they're branching out with their own vehicles based on Rover cars under the Roewe brand. Buying Volvo would give SAIC a strong inroad to the European and American markets and/or another brand to play with in China. If this deal falls through, an unnamed Russian investor is rumored to be interested in buying Volvo. A word of caution to the brand's suitors: Gott lära av andras fel, eftersom man inte hinner begå alla själv.
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