For days, Fiat’s CEO Sergio Marchionne had made noises that his company cannot survive alone and is in urgent need of a strong partner to live to tell the tale in the nasty car business. He may have found a suitor, the Italian business paper Milano Finanza (sub) reports: PSA, maker of Peugeot and Citroen. According to the paper, the marriage is being arranged at the highest levels: Italian Prime Minister Silvio Berlusconi and French President Nicolas Sarkozy are discussing to tie the knot between their countries’ automakers. There could even be a dowry: Berlusconi is currently thinking about aid to the auto sector. Except for Fiat, Italy hasn’t much of an auto sector. PSA and Fiat are no strangers. They have two joint ventures, one for trucks and one for the “Eurovan” MPVs. Combined output of the two companies was 6.2m units last year. A combined Fiat-PSA would have a good shot at the number 4 slot, with Toyota first, GM second, and VW third. Fiat-PSA would have to duke it out with Ford and Renault-Nissan. What’s the prospective couple saying to all this?

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According to Dubai’s Radio One, the credit crunch has dealt a serious blow to the venerated extravaganza of excess known as the Abu Dhabi Motor Show. Several major manufacturers have pulled out of the venue due to start on the seventeenth of this month, citing diminishing returns for the capital invested in the displays. BMW, Porsche (which just pulled out of the Canadian show as well) and the VW Group (most notably Audi and Skoda) all cut bait. Who’d a thunk it? The Cayennes, X5s and Q7s blasting down Dubai’s dusty but extremely smooth highways almost outnumber Nissan Tiidas and Toyota Corollas. General Motors, on the other hand, has upped their square footage to dominate the Exhibition Hall in downtown Abu Dhabi. They’ve also setup a test drive program (as long as you have a driver’s license, are 21 and don’t look dubious). GM offers easy financing: “0-new car in 60 Minutes.” As many of the potential customers of the various GM models in the UAE are ex-patriots, or imported slave labor with limited UAE credit, this prearranged financing should prove very successful. Manufacturers  certain to display their wares: Lamborghini, Bentley, Rolls Royce, Ferrari, Aston Martin and Shelby, with the fastest production car in the world, the Ultimate Aero.

A short 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.

Canada ready to help – if U.S. goes first: Canada’s industry minister Clement said that the Canadian government has agreed to provide aid to automakers – as soon as the U.S. government approves a rescue package, says Reuters. The amount of money Canada is proposing is based the country’s 20 percent share of the auto industry. The more the U.S. shakes loose, the more Canada’s 20 percent share will amount to.

Japanese strength hurts Japan: Japan’s automakers will lose $2.2b in profits in the current fiscal year if the yen remains at current high levels against the dollar, the Nikkei (sub) reports. Toyota’s full-year operating profit falls by $450m for every 1-yen decrease in the value of the dollar. Most automakers have an exchange rate of 100 yen to the dollar in their budgets. If the yen stays stronger than planned, it’ll mean itai-itai (major pain) for their books. The Japanese fiscal year usually ends in March. Markets have a perverse way of regulating themselves. And governments have a tendency towards tinkering with the market when they see fit. Some, amongst them the Financial Times, expect an engineered drop of the Yen before March.

Japanese unions want more: Toyota Motor Workers’ Union is unimpressed by the plight of the company, and is expected to demand steep pay increase in the upcoming spring wage negotiations, the Nikkei (sub) learned. That would be the fourth annual pay increase in a row. In tune with the current discussions, the union argues that the increase would “boost domestic demand” in addition to maintaining living standards.

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Jonny Lieberman just belled me from Spring Mountain Motorsports Ranch outside of Sin City. JL’s flogging the new 370Z on Nissan’s nickel, putting the transplant’s smaller, faster coupe through the corners on our behalf (quel sacrifice!). The TTAC scribe will be scribing his review soon, but initial impressions are… good. “It’s a good car,” Jonny told me with uncharacteristic reserve. “Neutral. Nice.” Tell me more, tell me more, did the synchro revs match? “Around town, it’s fine. But let’s say you’re charging down a straight in third gear, at about 7000 rpm. Red line’s at 7500 rpm, right?” “Right!” So you’re braking hard and you want a lower gear. As it shifts, the tranny blips the throttle. That sucks.” “Yeah I hate it when that happens.” Anyway, even though JL believes Nissan’s assertion that their updated roadster is as fast around a track as Porsche’s hardtop two-seater, a Cayman killer the new Z ain’t. “It’s probably more aimed at the Mustang GT. Against that it’s a Hell of a lot more neutral in the corners.” Safe! Not that Mr. L has that at the top of his priority list. What does linger there will soon be revealed….

Nissan is wasting no time wasting the Quest minivan, and platform sibs Armada and QX56. All three vehicles are a drug in the marketplace– and it ain’t cocaine. Motor Trend almost connects the dots, “Nissan has partnered with Chrysler to shift the full-size Nissan Titan truck to the Dodge Ram platform, and it appears now that more changes are underway for Nissan’s large vehicles.” Hmmm. Do you think that any new SUV for the U.S. market might be based on that platform, rather than what they done built down in Canton, Mississippi? You know, kinda like the Sequioa sits on the new Tundra? Could be. But I reckon MT’s right on the money (or lack thereof) when they suggest that the Quest and QX are being KOed completely. And here’s why… “Nissan and Infiniti sold a combined 72,450 of all those three models in 2007. The Armada posted a whopping 70.5% drop in November and is down 49.1% so far this year. QX56 sales fared slightly better, dropping only 53.3% in November and 33.6% this year. The Quest was by far the worse off of the three with sales dropping a catastrophic 81.3% in November and 33.3% this year.” Sayonara. Over and out.

German VeeDub dealers want Wolfsburg bail-out: Most of VW’s dealers in Germany are in dire straits. They are looking to Wolfsburg for financial help. “Others can ask for government help, we need the help of Volkswagen and the Volkswagen Bank,” said Michael Lamlé, head of the VW/Audi dealer council to Automobnilwoche (sub.)

Stimulus, Russian style: To protect the nascent Russian car production, and to lure/blackmail more manufacturers into building in Russia, the country has raised its import duty on new cars to 30 percent, reports Automobilwoche (sub.)

Chinese VW workers get German Christmas holidays: Volkswagen’s two joint ventures in China are planning to give their workers 15 working days of vacation from mid-December until the beginning of January, Gasgoo reports.  SAIC will make approximately 20,000 units less. VW’s second venture FAW-VW has similar plans. VW has already sold 931,000 cars in China through to the beginning of December this year and is determined to hit the 1m mark.

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Good morning! Slept well? Here is what happened in the meantime. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off.

Running into a BRIC wall: The emerging BRIC markets (Brazil, Russia, India, China) are running low on gas, The Nikkei (sub) reports. Passenger-car sales in China dropped 10% on the year in November. Sales in Russia declined for the first time since 2002. Sales in Brazil and India are also falling. The Nikkei: “This is bad news for automakers, which had hoped to offset slower sales in Europe and the U.S. with growth in the emerging markets.” TTAC: The BRIC countries will save the numbers of the international automakers for 2008. For 2009, BRIC will be of as much help as an empty BIC.

Japan putting the brakes on BRIC: In related news, Japanese makers are stepping on their BRIC brakes, The Nikkei (sub) says. Nissan postponed the start of operations at a joint venture factory for small commercial vehicles in India. Honda delayed by more than one year the launch of their second plant in India. Toyota is modifying its overall investment plan and may change the starting date for a plant that it is building in China. In Russia, Nissan plans to start a new factory in 2009. Suzuki wants to follow in 2010, Mitsubishi in 2011. The Nikei: “These plans could be derailed by tepid demand.” For the seven Japanese manufacturers of passenger cars, sales in emerging markets totaled approximately $150b in fiscal 2007. Better luck for the Germans …

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Fiat boss Sergio Marchionne has been schmoozing with Automotive News Europe [sub]. “By the time we finish with this in the next 24 months, as far as mass-producers are concerned, we’re going to end up with one American house, one German of size; one French-Japanese, maybe with an extension in the U.S.; one in Japan; one in China and one other potential European player,” Sergio predicts. And now, the WQOTD: “Companies can only survive if they produce at least 5.5 million cars a year.” So, someone special, who will it be? Someone special like… “Toyota, General Motors, Volkswagen, Ford Motor and Renault-Nissan.” Note: we could have gone another way on this one. In the same article, the thoughts of Jürgen Pieper, analyst at Metzler Bank in Germany, gets major play. Herr Pieper opines “Size in the current situation is what matters.” Small and nimble gets subsumed by big and… stupid? Stimt. “Daimler has been scarred by its experience with Chrysler, BMW bought Rover but sold it again after high investments failed to pay off. Analysts say both episodes showed that synergies between premium and volume carmakers are elusive.” “Elusive” as in non-existent?

In the House Financial Services Committee hearings on loans to the auto industry, Rep. Maxine Waters hectored the CEOs of Chrysler, Ford and GM. The California democrat attacked the execs on behalf of “small” independent auto dealers on “Main Street.” “Is there a commitment by any of you to give support to these small independent dealerships that include a lot of minority dealerships that are going to close down?” Never mind how they replied. Implied but not stated: The Big Three are guilty of, at best, racial insensitivity. At worst, racism. It’s untrue, unfair and outrageous.

Rep. Waters is upset that GMAC, Ford Credit and Chrysler Financial Services are calling in notes– as opposed to perpetually extending credit– to minority car dealers. In the interests of fairness, let’s keep in mind that this is the same Congresswoman who, in 2003, informed us, “We do not have a crisis at Freddie Mac, and in particular at Fannie Mae.” So no surprise that Waters’ tirade about the domestics’ dealer reduction and consolidation plans misses the entire purpose of exercise: reducing surplus dealers to survive.

Once upon a time, Chrysler, Ford and GM owned the U.S. market. There were domestic dealerships and then there was… nothing. Minority dealer programs were first initiated by Henry Ford II because he thought it was good business and the right thing to do, not because of pressure from activists. Be that as it may, special considerations were extended to minorities. Through financial incentives and active recruitment, they were encouraged to own stores and train members of their community.

That was then. This is now. As the domestics’ market share has steadily decreased, the domestics’ dealer count became a gigantic anchor tied around their collective necks.

It costs a lot of money to supply and support all those dealers. Inter-dealer competition drives down average transaction prices, yielding lower average vehicle sales per dealer. And pandering to the plethora of stores has lead to the brand-diluting practice known as “badge engineering” resulting in yet further intra-store competition.

For example, at the moment, GM’s eight domestic brands account for 24 percent of the U.S. market. The General has well over 6k dealers. That’s down from the nearly 8k dealers back when GM’s brand portfolio accounted for over 35 percent of the U.S. market. But it’s still well over 4k more dealers than Toyota.

There is an upside to the domestics’ ubiquity: they are far better represented in rural areas and small towns than Toyota, Nissan, Honda, Hyundai and the rest of their transplanted competition.

Reading between the lines of Ford CEO Alan Mulally and GM CEO Rick Wagoner’s testimony in the hearings, both domestics [rightly] view their small town dealers as a strategic advantage. During his testimony, Mulally referred to Ford’s small town dealers: “We are woven into the fabric of every community that relies on our cars and trucks and the jobs our company supports.”

All of which means that Chrysler, Ford and GM are closing/losing proportionally more dealers in big cities than smaller cities and towns. Ford CEO Alan Mulally’s prepared remarks to Congress admitted as much, revealing that Ford has reduced dealers by a greater percentage in “large markets.”

There is no getting around the fact that the vast majority of minority-owned car dealers operate within large, urban markets. While there’s no reason to believe that minority-owned dealers are any less well-managed than other dealers, and many are indeed profitable, there’s also no reason to suggest that the domestics are targeting minority-owned dealers for closure. They’re simply in the wrong place at the wrong time.

To satisfy Rep. Waters’ desire to protect African-American dealers, to exempt them from the inevitable cull, Chrysler, Ford and GM would have to discriminate against both rural dealers and well-managed non-minority-owned urban dealers.

Of course, that’s exactly what Rep. Waters wants. She wants to make any loans to the domestic automakers contingent on their continued support of dealers that are part of their problems in the first place. “Do you believe that if we are to rescue these big automobile manufacturers we should insist or include in our language support for the small independent dealers?”

If there was a time when the automakers could afford to cater to the concept of political correctness, that time is past. In their fight for survival, to meet their obligation to return taxpayers’ money, the domestics’ must ruthlessly “right size” their operations. The bottom line is all.

The Detroit automakers are among the biggest private employers of minorities in the country. A larger number of minorities in the auto industry work within the domestics’ organizations than without. Rep. Waters needs to understand that if the Detroit automakers don’t consolidate their dealer networks, the automakers will not survive and a lot more African-Americans, Hispanics and other minorities will lose their jobs.

Dubai gas prices might reach parity with Oklahoma City prices in the near future, as the Emirates of Dubai and Abu Dhabi contemplate raising their standard prices from 6.2dhs per Imperial Gallon (or $1.38 per US Gallon). The rising gas prices only hint at the start of problems from plummeting oil prices in the UAE as ADNOC (Abu Dhabi National Oil Company) and ENOC (Emirates National Oil Company) have started to prohibit cars bearing plates from other Emirates from using their filling stations, as they are the cheapest areas in the UAE. Residents of Sharjah have created the greatest outcry thus far as they complain they are all citizens of the UAE, not one particular emirate, and should have equal filling opportunities no matter where they are. Other victims of the oil crash: the massive building sprees Dubai and Abu Dhabi went on trying to create a tourist destination paradise from a gravel parking lot covered in sand dunes.

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Neither rain,nor sleet,nor gloom of night, our daily round-up of the news that happened in other continents and time-zones must go through. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. Note: I’m in Germany on business and will post as time allows. Last night’s news kept me sleepless, so you get WAS on time.

GM and Chrysler ready for ultimate sacrifice. GM and Chrysler executives are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multibillion-dollar government bailout, says Bloomberg. “Staff for three members of Congress have asked restructuring experts if a pre- arranged bankruptcy – negotiated with workers, creditors and lenders – could be used to reorganize the industry without liquidation.” Bloomberg quotes Lynn LoPucki, who teaches bankruptcy law at Harvard: “The Democrats’ goal of preserving a U.S. auto industry is not doable without a bankruptcy.”

China mulls GM’s default consequences: The Chinese government is also beginning to think aloud about the consequences of a possible GM default. Gasgoo quotes Xu Changming, Director of Information Resources Department under China’s State Information Center. He feels, not surprisingly, that “if a global company failed in management in its headquarters, impact will be felt by its Chinese business.” According to the Chinese, Chapter 11 would “have limited effects on Shanghai GM. The technical center built by GM and its partner SAIC will be running as usual.” However, if GM would go C7 “then Shanghai GM couldn’t produce Cadillac, Buick and Chevrolet and GM is likely to sell their 50% share in its Chinese JV.”

Volvo China unfazed, hopes for Chinese buyer: Gasgoo quotes a source at Volvo China that said that production of Volvo cars at the Chongqing plant will not be affected by the possible sale of the brand by its US parent. “Volvo Car’s Chinese partner, Changan Ford Mazda Automobile (CFMA) will start production of Volvo S80 next year, and this plan is unlikely to be affected by the change,” says Gasgoo. They also felt compelled reiterating that Bloomberg had said that an industry insider had said that Chinese automakers are among possible bidders for Volvo. Gotta read between the lines in China. And if that’s not enough …

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As reported by TTAC weeks ago, Chinese auto makers are seriously looking into buying all or some of General Motors. The story was never officially denied in China. Now, there are fresh and more concrete indications about a possible Chinese move on GM. Hu Xindong, Secretary to the Chairman of China’s third largest auto maker Dongfeng, said they have been contacted by financial groups which have close relationships with GM. Topic of the discussions: A possible takeover. This according to China’s National Business Daily via Gasgoo. His company “has not started formal discussions yet,” said Dongfeng’s Hu. He also said that “for the moment,” Dongfeng Motor has no intent to take over GM as a whole. They are interested  in buying “overseas assets.”  In China, “overseas” usually means outside of China. Hu: “Our managing board has not officially considered the option yet.”  In China, where one never gets a clear yes or no, these statements are tantamount to a “Hell yes! We are crunching numbers day and night!” When Dongfeng was floated weeks ago, eyebrows went up. Wouldn’t SAIC, GM’s longtime Chinese partner, be a better fit? So, where did SAIC go?

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Like everyone else, Nissan reported dismal sales for November, with total US sales down 42.2% and off 9.5% YTD. Without good news to report, Nissan’s press release consisted of a list of GT-R awards and future vehicle fluff (Cube, $10K Versa 1.6, 370Z, Infiniti G convertible). The Nissan division took a 44.4 percent hit with just about all cars and trucks taking double digit percentage hits. The little Versa was down 18.4%, Altima down 45.3%. The Murano and Rogue were faint bright spots, down 2.6% and up 4.7%, respectively. Other trucks took a pounding: Frontier down 70.7%, Titan down 79.6%, Xterra down 71.6%, Pathfinder down 70.6%, Armada down 70.5%, with the Quest minivan lagging at a whopping 81.3% drop and a mere 342 vans leaving the dealer lots. The Infiniti division took a 28.0% hit with all products in negative territory. Godzilla Watch: GT-R sales were steady at 208 for the month, 1,581 for the year.

In addition to my robust obsession with cars, I’m also very much a fan of new technology. Be it computers, cell phones, wristwatches that wash dishes, or high-powered laser staplers, I’m interested. To keep up to date (especially since I am more of a gadget window shopper), I’m a frequent visitor at a number of the gadget blogs on the web. You might be surprised (though probably not) at the similar themes between these gadget blogs and their commenters with the car blogging community. I’ve got nine of ’em. Read More >

When Jonathan Swift’s “A Modest Proposal” was first published, its sustained and unyielding irony lead more than a few to believe that the Irish scribe was actually advocating for cannibalism and infanticide. With the benefit of nearly 300 years, we can now recognize Swift’s detailed plan to serve the children of Ireland’s poor to their landlords as biting satire. Reading the LA Times‘ Dan Neil’s own “modest proposal,” one can’t help but go back and check for signs of self-aware irony (a far less scarce resource than it was in 1729). Sadly, there’s no much to go on, leading me to believe that Dan Neil actually wants the United States federal government to purchase General Motors. Or is there? After the usual litany of Big 3 woes, Neil “modestly proposes” as US takeover of GM. He then correctly anticipates the “gall of free-market ideology rising” in his readers, and he breaks down the case. And it’s off to irony no-mans land. Read More >