The ad for the new Mercedes GLK is targeted straight at owners of MB’s ML and GL SUVs. After all, the new GLK gives you the “same innovation in a smaller design.” Same agility. Same suspension. Same luxury. Same depreciation (my add). So, why bother paying more for one of Mercedes’ more much macho trucks? Sure, this baby brother routine hurts the automaker. The Nissan’s Rogue’s Murano-i-cide is but one example where a new, smaller vehicle robbed Peter to pay Paul less. But that’s the way it is. In Bailout Nation’s new era of hunker down austerity, downsizing is almost as fashionable as having a job. Big ticket buyer meets smaller ticket price on the dark side of town. The carmakers must figure that what they lose in profit they’ll recover in volume. Ask GM how well that works. In that sense the Mercedes GLK is a born win – loser. Or is it?

Back from the dead after I’m back from Europe: An overview of what happened in other parts of the world while you were in bed. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. WAS is being filed from Tokyo this week.

Itai: Japan’s domestic sales of new cars, trucks and buses dropped 27.9 percent year-on-year in January, declining for the sixth straight month, the Nikkei [sub] writes. Sales in January totaled 174,281 vehicles– the lowest for the month since 1976. The Nikkei: “Auto sales are closely monitored by economists since they are the first consumer spending numbers released each month.”  And these figures don’t bode well.

Oichi: Honda downgraded its earnings forecast, but still expects to report an 80 billion yen group net profit for the year ending March 31, the Nikkei [sub] reports. Stalled sales in Japan, the U.S. and Europe, as well as the stronger yen, led the automaker to lower its projected profit by 105 billion yen. Strong motorcycle sales in Asia helped Honda skirt the losses seen by Toyota and Nissan.

Aua: Worldwide sales of all brands dropped 25 percent in January. Compared to that, VW’s January loss of 15 percent is not all that bad, says VeeDub’s Martin Winterkorn according to das Autohaus.

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The tipster writes:

Press and Landry spent three days going to their six business areas for dealer conferences. They said, “If all you dealers do not order your Feb and March allocation, Chrysler will liquidate.” How’s that for a pep talk sales pitch? Not only that, but they also said there’s a 50/50 chance they will liquidate even if we do order. So, according to Press and Landry, the only chance we have to save our dealership is to overload our stock. An Iowa dealer asked, “What if we can’t afford 40 new units because our bank won’t floor them?” Press answered, “Then we’ll liquidate.” So they are selling fear to their dealers. Go buy our shit NOW or you won’t have a dealership. The Fiat deal was just to be able to export Dodge trucks to Europe, that’s the nuts and bolts on that “merger of equals.” Chrysler’s suits also described the talks with GM: “We went on a date with Nissan, had sex, and they got some trucks we got some cars. Then it was 2AM, we were drunk and started talking romantically with our cousins at GM, we realized that our children would have crooked teeth.” God I love this business.

When Daniel Howes was a European correspondent, I had nothing but respect for his work. Since relocating to Detroit, my former main man has lost the fearless objectivity he displayed in his e-missive from across the pond. Lately, Howes’ column has blended piercing glimpses into the obvious, recaps of well-known events and a newfound ability to not say anything much. Today, like yesterday’s AutoExtremism, Danny finds his inner TTAC. Only one problem: “Jobs bank end won’t halt D.C. bias” channels Howes’ anger at Washington’s hypocritical bailout minders. Sigh. Moral relativism—those evil bankers got their money without a public humiliation and strings made of piano wire—may give hope to the hometown crowd, but it’s an old, moldy, shoddy shibboleth. Danny should know better. How many times does one have to say that two wrongs don’t make a right? I mean, he’s WAY off target. Again.

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For a long time, the Chinese car market looked more like the American and less like the European markets. They liked big, they liked SUVs, they liked real cars with a trunk. For a long time, hatchbacks and subcompacts were unsalable in China. Last year, the picture changed. More and more low cost subcompacts are getting on Chinese roads.

“In China, new-car sales last year rose just 6.7 percent to 9.38m units, slamming the brakes on the market’s double-digit growth. Nonetheless, a batch of automakers enjoyed nearly 30 percent jumps in sales,” the Nikkei (sub) writes. And who might those be?

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The current recession has done a fair job of turning the world upside down. Instead seeing tragedy repeated as farce, we get a mega-dose of farce with the tragedy hanging over it all. Exhibit A:a letter intercepted by Automotive News reveals that FIAT CEO Sergio Marchionne and a team of Fiat senior executives visited Chrysler HQ on Saturday morning. “This was a very positive meeting,” Chrysler CEO Bob Nardelli wrote. “This potential alliance is very promising, but getting there is totally contingent on meeting the viability plan required of us by the U.S. Treasury.” So the FIAT deal depends on meeting the viability plan, which depends on the Fiat deal? Chrysler has stopped making sense.

Chrysler is struggling– thrashing about some might say– to find a way to justify its continued existence. Not to its customers (real or imagined). To the legislators who are now entirely responsible for its day-to-day survival. To that end, Chrysler has told tales of a hook-up with Nissan( to build a small car and/or rebadging the Ram to replace the Nissan Titan). There’s also been talk of a deal with China’s Chery to import Hornets (or something). Just before the bailout hearings, Chrysler trotted-out a fleet of prototype electric vehicles. Did I forget possible tie-up with BMW? Or PSA? Someone should.

The FIAT hook-up is a charade: the last act of a desperate company. As Justin pointed out yesterday, this is the sort of development that would be laughed out of a producer’s office. Bringing in small cars from FIAT is somehow going to rescue Chrysler? How? Making money off of small cars is not impossible in North America. But it’s close. More importantly, how are 150k cute little Italian job MINI’s going to prop up a company with a 1.5m vehicle market footprint?

How bad an idea is this? Not too many years back GM paid FIAT $2b NOT to take them over (added to the $2b already “invested”). Now granted, this doesn’t exactly make the list of 100 greatest business decisions ever. Not even the top 1000. But while GM’s guys may not know marketing from muesli, they know finance (they’ve been known to squeeze a nickel till it screams). If they decided paying off was better than taking on Fiat’s baggage, there must have been some issues. The success of the new Cinquecento made this look doubly foolish, but don’t pop the bubbly just yet.

FIAT got the 500 and derivatives essentially “for free”. The next big thing will have to be paid out of pocket, and the guys from Torino have some serious debts to work off. Right now FIAT has 5.4b Euros of debt and a bond rating one step above “junk.” They may not be as bad off as Chrysler, but they share a very similar boat. And they’re playing a similar game: telling their backers THIS IS HOW WE DO IT.

FIAT doesn’t have much presence outside Europe (certainly not in the “major” markets). Bad as the American market looks, things across the pond look just as grim, and recovery seems further off. Getting some North American volume sounds like a winner, but expanding into a down market is like cutting production in an expanding one. Again, for both playas, appearance is all.

The biggest obstacle to this alliance is time. Federalizing and/or designing small cars for the U.S. will take [taxpayer] money, and money is time. How long will the American taxpayer be willing to wait for these Italian-derived vehicles? So far, the meter says $4b. Soon, it’ll be another $3b. That’s $7b over four months– without spending a dime on building Fiats. And it doesn’t include the money spent on GMAC or Chrysler Financial or Department of Energy retooling loans.

At some point, the American taxpayer will look at the meter and says “You know what, I think I’ll walk.”

Chrysler is hoping against hope that United States representatives, senators and the newly-elected president are stupido. Meanwhile, absent anything like a genuinely credible “viability” plan, Chrysler CEO Bob Nardelli is doing what the scourge of Home Depot does best: cut…. in the name of FIAT!

Nardelli’s letter told employees that Chrysler’s got to do what a Chrysler’s got to do “to make the alliance work.” He’s seeking price reductions from suppliers [on the brink of bankruptcy]. He wants them to freeze material cost increases for 2009. At the same time, Nardelli’s minions told dealers at the National Automobile Dealers Association convention that the automaker’s reducing dealer margins and reviewing dealer payment terms. No more free gas in the tank of new cars, either.

All this while the FIAT chief swans around Auburn Hills like it was 1996. it isn’t. And it never will be again. The only “alliance” that Chrysler will realize will be a shotgun wedding with General Motors. Chry-Fi? Think American Leyland. Where’s Pagliacci when you need him?

“

CEOs usually don’t get paid for gloomy forecasts. It’s their job to instill at least a modicum of stockholders fantasy. If two of them paint a dark picture the same day, take note. Reality will surely be darker.

Speaking at a meeting held in Riyadh, Saudi Arabia, Renault & Nissan Jefe Carlos Ghosn said that worldwide sales of all new cars will likely drop 14 percent to 55 million units this year, the Nikkei (sub) reports. The Nikkei: “His projection means that new-car sales, which slid 9 percent last year, will take an even steeper tumble in 2009. Ghosn also predicted that it will take at least seven years for global new-car sales to recover to their peak level of 69 million units, seen in 2007.” Ghosn expects that the current economic slump will drag on:
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Definitely infrequent for a few weeks while I’m in Europe, hunting the elusive Euro: An overview of what happened in other parts of the world while you were in bed. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. WAS is being filed from Berlin – when I’m in Berlin.

Idle chatter: More and more drivers of Japanese cars will have their rides die on them at an intersection, only to miraculously re-start once they mash the pedal. “Japanese carmakers have been equipping more and more of their passenger cars with a function that automatically kills the engine when the vehicle is stationary,” the Nikkei (sub) writes. Mazda aims to make the idling stop function available with some configurations of its fully remodeled Axela to be launched this summer. Toyota started offering a newly developed idling stop system on some of its Crown Comfort sedans in August. Toyota plans to install the system in a wider range of its passenger cars in the future, with a focus on Europe. Mitsubishi aims to offer some of its European model Colt cars with an idling stop system starting this year.

Ready, set, fire: Toyota plans to reduce its full-time work forces in North America and the U.K., by more than 1,000 jobs, the Nikkei (sub) says. The move is unprecedented for the automaker, which has protected full-time jobs even in tough times. A rare exception was in 1950, when it let go roughly 1,600 workers in Japan through early retirement programs. Toyota employs nearly 30,000 in North America, mainly at seven assembly plants, and about 5,000 in the U.K., where it has one assembly facility. The scope of the job reductions there will likely be finalized as early as this month. Toyota is considering pay cuts as well.

Nissan joins club of lost profits: Nissan joins other Japanese car makers such as Toyotay and will most likely ost a group operating loss of more than 100 billion yen for the year ending March 31, its first dip into the red since fiscal 1994, the Nikkei (sub) says. Depending on car sales for the January-March quarter, the loss could even swell to around 200 billion yen. The automaker logged an operating profit of 790.8 billion yen for the year ended March 2008. Sinc January, “the situation has grown more dire each day,” a company official says. Depressed demand alone will eat into operating profit by more than 200 billion yen. In addition, the yen’s appreciation against the dollar, the euro and emerging-market currencies is seen dragging down the result by some 100 billion yen.
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Our illustrious Editor-in-Chief predicts the death of the manual transmission. The “stick-shift is toast,” Farago says, in his own special way. I disagree. If you want to go fast, get a paddle shift automated manual, a la Nissan GT-R. Time and again, the little levers have proven to be the fastest way to get around a track. Want easy breezy beautiful Orange County commuting? Get a traditional automatic. But if you want to maximize the man machine interface, nothing beats a manual. Three pedals can enliven the most leaden of automobiles. To wit: the Mercedes-Benz C300 Sport.

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Definitely infrequent for a few weeks while I’m in Europe, hunting the elusive Euro: An overview of what happened in other parts of the world while you were in bed. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. WAS is being filed from Berlin – when I’m in Berlin.

Alliances ahead: The not yet wrapped-up tie-up between Fiat and Chrysler “may spur Japanese automakers to look into alliances of their own,” the Nikkei (sub) writes. Already, Nissan and Chrysler produce each other’s vehicles on an OEM basis, Suzuki teams with Fiat in environmental technologies. “While these two Japanese firms may need to rethink their strategies, the Fiat-Chrysler alliance could have broader implications,” says the Nikkei: “Budgetary constraints may force Japanese carmakers to focus on their strengths while striking partnerships in other areas. Foreign rivals are said to be looking for Japanese partners for the technologies needed to make fuel-efficient vehicles.” The Nikkei speculates that this could be”setting the stage for an industry reorganization involving domestic and foreign carmakers, including such midtier players as Suzuki, Mazda and Mitsubishi.”

Japanese carmakers have hat in hand: Mazda has appealed to the Japanese government for financial assistance to cover roughly 10,000 employees’ wages at two domestic plants where it has scaled back production, says the Nikkei (sub.) Mazda will pay 80 percent of the basic wages while output is suspended. The government subsidies are to cover a portion of these salaries. Mitsubishi has already filed for such aid, Nissan plans to do same soon.
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Breaking news: Fiat has just signed a “non-binding term sheet” with ChryCo. The Italian automaker will acquire a 35 percent interest in Chrysler for… nothing. No cash. No assets. Niente. And yet the Chrysler – Fiat deal comes complete with the United Auto Workers’ (UAW) blessing. It’s a nice thought: a global alliance to pull Chrysler’s fat from the fire, save the taxpayer’s bacon and uncook the UAW’s golden goose. But there’s zero chance of Fiat riding to the rescue of Chrysler. It’s just another part of Chrysler’s Big Lie.

Adolph Hitler said The Big Lie was effective because most people “would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation.” In this case, the lie is the idea that Chrysler is a viable automaker.

The fact that the company is utterly bankrupt without any chance of recovery is, obviously, besides the point. As long as there is hope that Chrysler has a future, the general public and their fear-mongering elected representatives will cling to the fiction that Chrysler can– indeed should– continue to exist.

To perpetuate that myth, to protect its federal lifeline, Chrysler must generate plausible possibility. Hence the stream of “news” coming out of Auburn Hills in recent weeks. Canada’s Magna Corporation may purchase Chrysler’s minivan plant. Nissan may produce a small car for Chrysler, and rebadge Dodge Ram pick-up trucks as Titans. A Chinese carmaker may buy unwanted (not to say unused) tooling for the soon-to-dead PT Cruiser. And now… Fiat buys into Chrysler.

In reality, Magna may want Chrysler’s Windsor minivan plant, but the company isn’t stupid enough to pay anything for it. Not when they can pick it up for pennies on the dollar after ChryCo’s collapse. In reality, Nissan is in deep trouble; it’s not going to build anything for Chrysler without [non-existent] cash on the nail. It’s also in no position to remount an attack on a market segment that’s both crowded and cratered (just ask Toyota).

In reality, China doesn’t need the PT Cruiser. And in reality, the Fiat deal has nothing to offer. Without any cash investment by the Italian automaker, without a single production-ready Italian vehicle on the horizon to lure Americans into empty, abandoned Chrysler showrooms, this non-deal does nothing whatsoever to ensure Chrysler’s long term viability.

The underlying causation for this non-news is simple enough. Lipstick. Pig. Apply.

On February 17, Chrysler will present their term paper to Congress: “How I Spent Uncle Sam’s $4b” (a.k.a. “The Three Headed Dog Ate my Automaker”). Chrysler’s representatives will attempt to prove that the company can [now] be restructured and resurrected to live a long, happy life. See? Things are happening! We’re building for the future!

Of course, Chrysler’s “business plan” was, is and will be complete BS.

CEO Bob Nardelli knew Chrysler was doomed to the dole back in December, back when he told Congress his employer could turnaround Chrysler’s fortunes with “just” $7b worth of federal loans. As is the way of such things, that was then. This is now. By mid-February, Boot ’em Bob’s boys will unveil phase II of their grand plan for Chrysler’s renaissance: get out of the manufacturing business.

The new plan is the same as the original plan: keep the brands and distribution network. Sell vehicles made by others rebadged as Chryslers. Limited capital and engineering required.

Meanwhile and in any case, Chrysler needs the same lifeblood as any other going enterprise: cash. Badge engineering and branding be damned; new car sales aren’t going to provide Chrysler with the funds it needs to sustain its operations and pay for its ongoing liabilities. Not now. Not later. Most likely, never. Asset sales won’t do the job, either. And Fiat’s sure as Hell not providing operational liquidity.

Blow away the smoke, pack away the mirrors, allow owner Cerberus to insulate themselves from accountability for their actions, and it’s clear that Chrysler has one source– and one source only– of cash: the U.S. taxpayer.

As any good politician knows, to fool some of the people all of the time, you need to change your story frequently. In other words, The Big Lie must be sustained by a steady diet of big ideas.

When it comes to Chrysler’s ongoing call on the public purse, the biggest of these is the Chrysler – GM merger. The concept: forget Chrysler and GM. We need to save American manufacturing! This American Leyland strategy is a stupendously bad plan which would make The General like Citibank: a company too big to fail with operating divisions that can never be properly integrated.

Which is exactly why it’ll happen.

Definitely infrequent for a few weeks while I’m in Europe, hunting the elusive Euro: An overview of what happened in other parts of the world while you were in bed. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. WAS is being filed from Berlin – when I’m in Berlin.

Hybrid price war: Toyota plans to lower the Japanese price for the existing Prius hybrid when it releases a redesigned, more efficient version in May, the Nikkei (sub) writes. Japan’s top automaker will continue to sell the existing Prius after the new version’s release in May. Toyota plans to cut the price for the current model to around 2 million yen. Rival Honda is slated to release the Insight hybrid in February, with a starting price of less than 2 million yen. The remodeled Prius will cost 2.5 million yen.

Mazda cutbacks: Mazda will slightly increase plant operating hours in Japan in February and March, but will stick with its plan to cut output through March by 100,000 vehicles or more in addition to the originally planned 73,000-vehicle cutback for the period, the Nikkei (sub) writes. Mazda has started cutting salaries of manager-level employees by up to 10 percent from this month. Its executives already began returning 20 percent of their salaries to the company from December.
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In 1999, a French-Brazilian-Lebanese businessman saved a large Japanese automaker from certain bankruptcy. Since then, Carlos Ghosn, cost cutter extraordinaire, wears the dual crowns of the presidency of Renault and Nissan. The Japanese crown is turning into a very heavy burden. According to Tokyo’s Nikkei (sub), Carlos Ghosn, “is facing an even more daunting challenge of securing profits amid the yen’s rise and the deep economic downturn. Ghosn acknowledges that the external environment facing Nissan is far more bleak than in 1999, when Nissan was trying to rise above damages that were largely self-inflicted.” Fixer Ghosn is softening the blow for the announcement that he can mend self-inflicted wounds. But he isn’t godlike – yet – to save Nissan from external damnation. Nissan appears to be in deep, deep kuso. Ghosn is fighting two armies of windmills:

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Europe’s industry association ACEA finally got around to counting 2008 car sales, and there are good news and bad news. The good news is that the news from Europe aren’t half as bad as the news from the U.S. The bad news is that European new passenger car sales fell 7.8 percent in 2008, their sharpest fall for 15 years, Reuters reports.

Like in America, the sharpest drops occurred in the last quarter of 2008, with a 19.3 percent fall in new passenger car registrations compared with the year earlier period. In December car sales fell 17.8 percent year on year across the European region (which includes the 27 EU member states as well as the European Free Trade Association countries, but excludes Cyprus and Malta.) December was the second worst month of the year for the region, as after a 25.8 percent year-on-year fall recorded in November. Like in the U.S. the Q4 numbers don’t augur well for a happy 2009.

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