Remember the phrase “jobless recovery”? Well, the auto industry is having something of a “price dropping recovery.” The headline for February auto sales may have been “the buyers are back,” but beneath the big volume boosts there’s trouble a-brewing. According to TrueCar’s transaction price forecast (above), Hyundai CEO John Krafcik was right to warn of an industry price war, as the industry has lost .3% of its average transaction price during the last year of recovery. Over the last year, Honda, Kia, Toyota and GM have all seen declines in average transaction prices, led by GM’s staggering two percent drop. And falling transaction prices are just the beginning: as we explore after the jump, incentives are also remaining high, and yet another volume-boosting technique is enjoying a boom as the industry once again starts to redline its sales.

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Hyundai and Kia are on a tear in the European market, having recently passed Toyota to become the best-selling Asian automaker in the EU (at 605,386 units, some 50k away from Daimler’s 2010 sales). And with its first Europe-centric product coming online, aimed at the heart of Europe’s 896k unit midsize segment, it hopes to keep the growth coming. In service of that goal, Hyundai is moving European production of its iX35 (Tucson) CUV from Kia’s plant in Zilina, Slovakia, to its own factory in Nosovice, Czech Republic, and adding an extra shift according to the WSJ. And unlike many of its European competitors, Hyundai is keeping its Euro-zone production capacity on the slim side, importing the forthcoming i40 from South Korea and the i10 from India, helping to keep the Korean automaker out of the overcapacity trap that plagues its competitors. Though Hyundai has good prospects for growth in Europe, production capacity expansions are being targeted at the developing markets that show more promise for growth.

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In an extended interview with Reuters, Nissan-Renault CEO Carlos Ghosn talks about the balancing act of leading two global automakers while maintaining their unique identities, a balance Ghosn says he wants to try to preserve even as the alliance looks to restructure its capital. Renault’s 44.3% stake in Nissan has caused some trouble with financial analysts because, as Ghosn puts it,

we are challenged (by financial markets) over how much capital we have imprisoned into the structure of the alliance. It’s a fair challenge. We are going to be studying and analyzing this with outsiders also, what are the ways to respond to these expectations from the financial markets without challenging the operating model which consists of keeping the two companies vibrant, motivated, engaged and keeping their identities

Does that mean a full merger? A new corporate structure? Where is Ghosn looking for answers as he attempts to give the markets what they want while maintaining the delicate balance between the needs of his two firms?

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One of the strongest criticisms issued in the Congressional TARP Oversight Panel’s most recent report on the auto bailout concerned GM’s lack of effort to bring its former captive lender GMAC (now called Ally Financial) back to the fold, an omission the Panel termed “disconcerting.” After all, Ally’s business is still closely intertwined with GM’s, as the financial firm provides 82% of GM’s dealer floorplanning and 38.2% of GM’s consumer loans. And, as bailed-out businesses (Ally is now 73.8% owned by the US Treasury), any competition between GM and Ally will result in a lose-lose scenario for taxpayers. In recent months it seemed that the two firms were moving towards a deal at the initiative of GM CEO Dan Akerson (and likely motivated to some extent by the COP’s criticisms), but now Bloomberg reports that there are no negotiations between GM and Treasury about a reconciliation of the two firms… in fact, with an Ally IPO planned for this year, it seems the two firms are going to war.

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Start the video, then click on the 3D button in the menu bar to select 3D or 2D format. You can also select resolution up to 1080p HD. Video courtesy of Ford Motor Company and Cars In Depth, where you can also find 3D images of Ford’s VR lab.

With a big push from the film, computer, video game, camera, and television set industries, 3D seems poised to become rather commonplace, particularly when passive display panels requiring no special eyeglasses will soon be at consumer level price points in just a year or so, I’d say. Some of the most sophisticated 3D technology in use today, though, is not in use in Hollywood, California, or Redmond, Washington, it’s in places called Dearborn, Auburn Hills and Warren, Michigan. The domestic automakers were early adopters of advanced computer aided design and manufacturing (CADCAM) as well as advanced computer imagery. They have some of the the most advanced tools available today and some of the most skilled and creative engineers and designers who develop and use those tools. Virtual reality is one of those tools. By projecting a realistic holographic or stereo display, stylists and exterior designers can get an accurate perspective on how their ideas will look without having to make time consuming and expensive scale and full size models. I think it’s pretty understandable that car companies would use 3D and VR for exterior design studies. Perhaps even more valuable to automakers, though, is how stereo image technology can be used in the interior design and engineering of modern cars.
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Despite launching a frothy IPO, EV maker Tesla’s net loss nearly tripled last year, losing more than $154m compared to a $55.7m loss in 2009. Total revenues were up nearly $5m, but only due to a nearly $20m bump in “development services” income. Revenue from “automotive sales” was down by around $15m. R&D costs skyrocketed from $19.3m to nearly $93m, while “selling, general and administrative” costs doubled to $84m. Still, CEO Elon Musk is all optimism in the firm’s press release, crowing

We are very pleased to report continued revenue growth, improving margins and a steady progression in our Roadster and powertrain activities,. Our powertrain team delivered solid results, with an increase in orders and record deliveries of battery packs and chargers for the Daimler Smart fortwo electric drive, the completion of our development program for the Daimler A-Class, and the commencement of the phase 1 development program for the Toyota RAV4 EV.

Musk noted that the firm is on-track to start delivery of its forthcoming Model S sports sedan in mid-2012. It had better be, because Tesla’s clearly not going to sustain itself on Roadsters.

Chrysler and Fiat CEO Sergio Marchionne has given Forbes’ Joann Muller what I believe to be one of his best interviews since arriving on the US scene. In it, Sergio dishes on everything from the bailout (“I risked everything – I got 35 percent of something that was worth nothing”), to Chrysler’s 2011 sales target (“a very, very tough uphill battle”), to its new product

I couldn’t have done more from a product standpoint than I’ve done. I mean you know, I tried every trick in the book that I knew and I invented some, but you know, 16 products in 12 months – at least that part of it was a record. The rest of it is to be proven.

But the strangest revelation from Sergio is that Alfa Romeo’s future success will be, in a manner of speaking, “Imported from Detroit.” Read the whole thing over at Forbes, or hit the jump for Sergio’s vision for his red-blooded Italian brand.

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The WSJ reports that Mexico is emerging as one of the big winners the the automotive sector recovery, as Edward Solis, President of the Mexican Automobile Industry Association crows

We have a number that historically we’ve never had before. Fourteen of every 100 vehicles sold in the U.S. are Mexican-made in the month of January. Obviously, we can’t say that it marks a trend, that it’s going to continue like that, but it is very interesting that in our principal market we are growing in such a dynamic way.

Full-year US market share for Mexican-assembled vehicles was 11 percent for 2010, but with Hecho-en-Mexico cars like the Fiesta and new Jetta coming on strong, expect that to keep growing. Just don’t tell the hosts of Top Gear!

Is the auto industry headed for a price war? Hyundai Motor USA CEO John Krafcik seems to think so, telling Reuters

I think we can officially say that a price war broke out in the industry. There is apparently a lot of pressure to deliver sales results. I would call this a step backward for the industry. This is short-term thinking in a long-term process that hurts manufacturers and consumers.

Krafcik says GM kicked off the rush for increased volume by cutting prices in January, and that Toyota (which  has increased its incentives by 37.5% since last January, according to TrueCar) “quickly” responded by matching The General’s price cuts. Honda, Nissan and Chrysler have also kept their incentives high, and Chrysler has told Automotive News [sub] that it plans on increasing sales by 45% this year. Says Krafcik

We’ll see if others decide to follow. It’s certainly not in our plan right now.

Krafcik has a point: though sales have recovered over the last year as the economy has come back from the depths of recession, industry-wide incentive spending is up 1.3% in the last 12 months. Rather than taking advantage of the economic recovery to bring incentives down and transaction prices up, automakers appear to be focused entirely on volume. That’s certainly the message GM has sent by announcing that it would no longer release its incentive data. And, as Krafcik points out, the industry has already suffered mightily from such short-term, unsustainable thinking… but not everyone shares his concern.

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Fiat/Chrysler CEO Sergio Marchionne has earned our last several quotes of the day with recent controversial statements, so today we present him with the honor for a few choice words that have nothing to do with the United States government. Volkswagen has been sniffing around Fiat’s Alfa-Romeo brand for some time, as Herr Piech reportedly has the hots for the Italian brand. VW CEO Martin Winterkorn even said recently that

Alfa’s a beautiful brand but there are quality issues with the engines and suspension systems for example. I’m quite sure we could make a beautiful brand out of Alfa again.

For a while it looked like Fiat might be playing along with the interest, but recently Marchionne shot down talk of selling Alfa to VW. And he did so with the kind of acid-edged verbal shanking that makes TTAC smile and nod approvingly, saying

As long as I am CEO of Chrysler and Fiat, Mr [Ferdinand] Piech will never have Alfa Romeo. It’s hands-off. I told him. I will call him and I will email him. I’m not the one who bought Seat. He’s the one who bought it. I don’t know if he can [fix it], but he needs to try.

What do you do when a much larger firm comes sniffing around your prized (if troubled) brand? Kick them right in their own struggling brand, and in this case, Marchionne went straight for VW’s “Spanish Pontiac.” The jury is still very much out on Fiat’s grand Chrysler alliance experiment, but if it fails, it won’t be because Sergio Marchionne was scared of a fight.The guy’s talent for confrontation couldn’t be more obvious.

Chrysler’s Super Bowl ad starring the city of Detroit and its new 200 sedan may have captured the imagination of American industry-watchers, but its timing was highly inauspicious. As the ad was launched, Chrysler was being thrust into a kind of transnational custody battle between US taxpayers and the Italian government, a battle that underscores the ambiguous benefits of national bailouts of multinational companies. At the same time, Chrysler workers have once again made news by getting caught partaking in controlled substances during a lunch break, an awkward representation of the culture of the city that Chrysler is so desperate to re-inspire faith in. And even outside of the controversies swirling around America’s most challenged domestic automaker, there are signs that the phenomenon that can be termed “automotive nationalism” is outliving its usefulness. Chrysler may argue that “what we make makes us,” but appeals to the national or regional character of a car are not simply misleading… they’re downright dangerous.
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Most foreign-based automakers see the United States as a market first and a production center second: If sales are good enough, production will follow. Mitsubishi, on the other hand, seems to be taking the opposite approach. The Japanese automaker has announced [via Automotive News [sub]] that it will replace production its weak-selling midsized offerings (Galant, Endeavor, Eclipse) at its Normal, Il factory with one model: the Outlander Sport compact crossover. The Outlander Sport (known elsewhere as RVR and ASX) is Mitsu’s newest vehicle, but the firm still envisions only abput half of Normal’s planned 50k units of production to be sold in North American markets (a safe estimate considering it’s still not outselling the Lancer). The other half will be exported to Russia, Latin America and the Middle East. That’s right, Mitsubishi is keeping its only UAW-represented workforce in order to build compact crossovers for export.

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When GM’s head of North American operations, Mark Reuss, was giving The Detroit Bureau some choice quotes about GM’s newfound commitment to excellence, it may not have occurred to him that Mercedes had recently laid claim to the very cliche-laden territory he found himself on. To wit:

Reuss insists the new GM philosophy is to “be the best, or we’re not going to do it,”

Yes, Daimler may have to answer to some higher power for the insipid video above, but at least its lack of imagination has pedigree: the line “The Best Or Nothing” killed for Gottlieb Daimler back in the “good old days” of the early 20th Century. Reuss’s lyrical inspiration, on the other hand, is a corporate process. To be fair, the “knothole” as it is known, is a Lutzian legend of a mythical corporate process, aimed at

The perpetuation of excellence and the destruction of mediocrity.

Which sound like mighty fine goals for our fine public investment. So let’s give Reuss a pass for stomping into Mercedes’ marketing-cliche territory, and ask: what is this amazing “knothole” and why doesn’t every automaker have one?
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As any sales-watcher knows, volume isn’t everything. Fleet-retail mixes, incentive spending and transaction prices are all important considerations for putting volume numbers into context. As usual, we’ve assembled Edmunds’ True Cost Of Incentives index as well as TrueCar’s Transaction Pricing and Incentive Spending forecasts, for a complete picture of these important metrics… and after the jump, we’ve added a few notes on the discrepancies between the two firms’ numbers.

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Well, the global car business is not as trusted as the technology business, according to Edelman’s 2011 Trust Barometer study, but it’s now doing better than any other industry out there. Yes, really. Cars may have taken some lumps over the last several years, but thanks to improvements in auto industry trust in the US and China, it’s now beating everything from telecom to pharmaceuticals to food. Does the auto business deserve that trust? That’s a question for you to answer…

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