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Since I get world wide automotive info emailed to me daily I figure I can do a bit of sharing. This is only going to be just text, no graphs, charts or silly colors for the slow.
TOKYO -- Toyota Motor Corp. said it halved global production in February amid a Japanese outlook calling for vehicle sales next fiscal year to fall to the lowest level in 32 years. The news highlights how Japanese auto makers continue to be battered by the world-wide slowdown.
Toyota rivals Honda Motor Co. and Nissan Motor Co. also cut global production by similar amounts during February, adjusting to the slower sales rate.
Japanese auto makers are seeking to cut inventory levels as cars pile up on dealer lots and in ports. Meanwhile, the Japan Automobile Manufacturers Association said it will shorten this autumn's Tokyo auto show as major auto makers have opted not to attend.
"We still can't see any clear sign for a recovery" in production, said Shigeru Matsumura, an analyst at SMBC Friend Research Center. With sales dropping precipitously, auto makers haven't been able to cut production fast enough to prevent inventory increases. Toyota last month rented a ship to store as many as 2,500 vehicles because of limited space at Sweden's Malmo vehicle port.
Research firm IHS Global Insight expects global production of vehicles to decline 18% this year to 56 million.
Vehicle sales in Japan are expected to drop 8% to 4.3 million in the fiscal year ending March 2010, the JAMA said. It would be the lowest sales since the fiscal year ended March 1978 and would mark the fourth consecutive year of decline. For the fiscal year ending this month, JAMA estimates auto sales in Japan will total 4.7 million, down 12%.
Reflecting the troubles, JAMA said it will shorten the Tokyo Motor Show's duration to 13 days from 17 days, as General Motors Corp., Ford Motor Co., Chrysler LLC and four Japanese truck makers pulled out.
For the January-March quarter, Toyota, the world's biggest car maker by volume, plans to scale back production in Japan by 54%. Honda seeks to bring down domestic output by 38% and Nissan plans a 59% cut.
Honda cut its North American output 46% for the first two months of the year, while Toyota said its output outside of Japan for the same period fell 43%.
March 25 (Bloomberg) -- At first glance, the dark blue 2009 BMW Z4 Roadster looks like it's had an accident in the paint factory.
Its sleek body is splattered with red paint.
In fact the convertible two-seater parked in the cavernous Vanderbilt Hall of Manhattan's Grand Central Terminal is part of a public art installation organized by the German automaker to advertise the model's debut in May.
The show consists of two parts. One displays the Roadster (which starts at $46,575) marked with drips of paint and set against a large colorful canvas. South African artist Robin Rhode used the car as a brush on wheels. Splashed with red, yellow, blue and green paint, its tires left numerous marks, zigzags and loops on the surface. BMW will use the work, “Expression of Joy,” as the centerpiece of its global marketing campaign for the car.
On the other side of the hall, BMW is exhibiting four vehicles from its Art Cars series of 16 automobiles. Designed by Andy Warhol, Frank Stella, Roy Lichtenstein and Robert Rauschenberg, three of them actually competed in various races in the 1970s.
The commissioned series started in 1975 with a BMW 3.0 CSL model designed by artist Alexander Calder for the 24-hour Le Mans race in France.
A year later, Stella created a black-and-white graph-paper grid for the same model.
Dotted Surface
“It seemed like a wild idea,” remembered Stella, 72, casually dressed in black jeans and a baseball cap, at the press preview yesterday. “I didn't think I was the right person for it. I didn't have any design experience. And I didn't have a car.”
In 1977, Lichtenstein took to the BMW 320i Group 5 as if it were one of his comic-book blondes, dotting the surface with blue and green and spicing things up with yellow sun rays.
Warhol threw some paint around a BMW M1 Group 4 in 1979. And Rauschenberg mixed black-and-white images of trees and grass with reproductions of Old Master paintings on the body of a BMW 635 CSi in 1986.
“We give the artists complete creative freedom to do whatever they want,” said Jack Pitney, vice president of marketing for BMW North America.
Olafur Eliasson, whose work is not on view at Grand Central, used this creative license to cast BMW's hydrogen- powered racecar in ice. The piece had to be displayed inside a freezer to keep it from melting at the San Francisco Museum of Modern Art last year.
“We had blankets that people had to put on when going in,” Pitney said.
The exhibition runs through April 6 from 7 a.m. to 11 p.m. at Grand Central Terminal's Vanderbilt Hall at East 42nd Street and Park Avenue. Information: http://www.grandcentralterminal.com
TURIN, Italy -- Government-backed scrapping bonuses will slow the forecast decline in Europe's new-car sales this year, analysts say.
Goldman Sachs and J.D. Power Automotive Forecasting both have revised their volume forecasts upward.
Goldman Sachs predicts that automakers will sell 900,000 more cars in Europe this year than it originally forecast.
“We expect government-sponsored scrapping incentive programs to start to support market volumes,” Stefan Burgstaller said in a research note.
Automakers already are benefiting from programs in Germany, France, Italy and Spain that offer buyers bonuses of up to 5,000 euros if they trade in their old cars for new, more fuel-efficient models.
New-car sales in Germany rose 21.5 percent to 277,740 unit in February, the first full month that the country's 2,500 euro scrapping incentive was available.
Goldman Sach now predicts that sales in Europe will decline 15 percent to 11.6 million units instead of slipping 20 percent to 10.7 million.
Automakers sold 13.6 million units last year and 14.8 million in 2007 and 2006.
The investment bank also has raised its view on the European auto sector to "attractive" based on an expectation that western European car sales hit bottom in February and now will begin to recover.
Temporary solution?
Early this month, J.D. Power Automotive Forecasting provided a more optimistic forecast for 2009 European new-car sales. The company now expects a volume of 11.52 million units, up from the 11.33 million it forecast in February.
“For the next few months, we are likely to see a considerable positive impact resulting from the combination of scrapping incentives and of substantial OEM price reduction aimed, primarily, at reducing excess stock levels in Europe,” the company said in a statement.
But J.D. Power Automotive Forecasting also warned that the recovery could be short-lived: “Declines in the selling rate in the second half of 2009 and in 2010 are now more likely as a result of the above actions.”
Reuters) -- Porsche Automobil Holding SE has secured a last-minute deal to refinance a 10 billion euro ($13.6 billion) loan for its takeover of Volkswagen AG, paving the way for a possible stake increase.
The fresh funds replace a loan that the maker of 911 sports cars took out to boost its stake in VW to a majority last year.
"It was basically spent to increase the stake above 50 percent," a Porsche spokesman said.
Now the market is eyeing the likelihood of Porsche, its finances strengthened, increasing its stake further in a bid to win outright control of Europe's biggest carmaker.
"The increased credit volume could be an indication that Porsche will increase its VW stake in the course of 2009, as mentioned before by the company," DZ Bank said, adding its net debt position was better than some market players had thought.
Porsche has said it could boost its VW voting stake to 75 percent this year if the economic conditions are right. Porsche has a stake of 50.76 percent now.
Volkswagen shares rose 2.5 percent to 219.47 euros by 1006 GMT while Porsche stock gained 1.4 percent, slightly lagging the 1.6 pecent gain by the DJ Stoxx European car sector index.
Nearly ran out of time
Facing a midnight deadline to line up the accord, Porsche struck the deal for two 12-month tranches at what it described in a statement on Wednesday as "market conditions."
One 6.7 billion euro tranche can be extended for an additional year.
"Porsche intends to pay down the smaller tranche fast and also aims for credit ratings, the results of which should be available in May 2009 at the latest," it said.
The lending consortium includes Barclays Capital, Commerzbank, LBBW, Deutsche Bank, UBS, Credit Suisse, Santander, BayernLB, BNP Paribas, Calyon, UniCredit/HVB, Helaba, Intesa, WestLB and DZ-Bank, it said.
As of late on Tuesday, Porsche was scrambling to raise the last 1.45 billion euros it needed to reach 10 billion, banking sources close to the deal said.
Porsche was initially seeking to raise 12.5 billion euros -- 10 billion euros to refinance the existing loan and a further 2.5 billion euros for general corporate purposes, but had to focus on the lower amount after a muted response to the deal.
It said on Wednesday the new credit framework lets it extend the borrowing volume to 12.5 billion "in the forthcoming weeks".
Difficult relations
The tense end to the deal was the latest twist in Porsche's fraught relationship with its closest banks, which are still hurting after sustaining losses last year when Porsche drew down the 10 billion euro loan at low rates to make financial investments.
Porsche had a shortfall on the 10 billion euro refinancing despite upping fees on the deal by 50 basis points to 250 bps for banks committing 1 billion euros and to 200 basis points for banks committing 500 million euros.
Porsche's five-year credit default swaps were priced at 525 basis points bid and 575 basis points offered on little or no trading, according to a trader.
DETROIT -- General Motors began notifying U.S. salaried workers that they will lose their jobs as it carries out previously announced plans to reduce its global white-collar work force by 10,000.
The automaker intends to cut 160 U.S. positions this week and 3,400 by May 1, spokesman Tom Wilkinson said. Most of those now being notified are engineers and engineering support staff at the Technical Center in the Detroit suburb of Warren, Mich.
The moves reflect GM's efforts to shrink further in the wake of declining sales and a global economic crisis. The automaker also is showing the federal government that it is taking steps to remain viable in hopes of winning $16.6 billion in U.S. loans in addition to the $13.4 billion borrowed already.
"We need to right-size the business to make it viable, and we need to get smaller and leaner to do that," Wilkinson said.
In early February, GM announced plans to eliminate the 10,000 salaried positions and said about a third of those jobs were in the United States.
"A significant number of those would come through involuntary separations; some would be through normal attrition," Wilkinson said.
He said GM offers up to six months of base salary plus a company contribution for insurance after the termination. GM also provides outplacement services.
GM also plans to cut 18,000 hourly jobs in the United States by year end.
Globally, GM employed 243,000 salaried and hourly workers at the end of 2008, Wilkinson said. GM plans to cut about 47,000 salaried and hourly jobs worldwide this year.
Cerberus has its roots in the sometimes thuggish, hardball world of distressed debt. But on its way out of that world, the alternative investment firm has made what appear to be some seriously misjudged calls. As a result of its investments in Chrysler and GMAC, the financing arm of General Motors, as well as in several banks, it finds itself deep in two of the most troubled sectors of the US economy.
That does not, however, seem to trouble Steve Feinberg, Cerberus's founder. “We always try to hang in – but not at the expense of being commercial,” Mr Feinberg says. “As far as GMAC and Chrysler are concerned, we will hang in there as long as it takes. There is the feeling of a greater calling.”
Such sentiments may be dubious comfort to investors. More reassuring is the fact the combined weighting of GMAC and Chrysler in Cerberus's portfolio, originally 12 per cent of total assets under management, now represents only about 7 per cent.
“They are less exposed than everyone thinks,” says Mark Epley, who is responsible for the relations with private equity firms at Deutsche Bank. “They are diversified. Nothing kills them.”
It is still too soon to know how Cerberus's investments in GMAC and Chrysler will work out. But to many investors, the fact that GMAC remains in business is testimony to Cerberus's “relentless, maniacal desire to save it” says Chad Leat, chairman of the alternative assets group in Citigroup's investment banking division.
Much of this drive and intensity is attributable to the personality of Mr Feinberg, who attempts to hide such traits under an “aw shucks” everyman persona. He is an expert chess player, but when asked about his favourite pastimes he talks of hunting.
Mr Feinberg describes Cerberus as “a working-man's kind of place”, where people adopt “a blue-collar, spread-the-wealth mentality”. His brother-in-law worked on the floor of GM, his godson served as a Marine for eight years and two nephews served in the armed services, one in Iraq.
Even before Cerberus linked itself to the fate of the US car industry, Mr Feinberg and his senior management team were vocal patriots. He practically never travels, the notable exception being when one Cerberus executive persuaded him to visit Davos at the time of the World Economic Forum several years ago. He says he hated it.
And while many investors in the manufacturing sector look to China and elsewhere for cheap labour, Cerberus executives are proud they have invested so heavily in America and in its manufacturing base. They believe even those deals that appear to be troubled today will ultimately succeed.
Friends say formerly Mr Feinberg would criticise acquaintances for buying foreign cars, but he is now likely to lecture them for an hour on the subject. He has only ever driven US-made vehicles, with a preference for trucks. Immediately after buying control of Chrysler, he switched from the GM and Ford trucks he owned to a Chrysler-built Ram. He says it is the best truck he has ever owned.
Mr Feinberg applies the same intensity to his deals as to his chess game. When Cerberus bought GMAC in November 2006, he realised problems with its mortgage arm, ResCap, meant the resources Cerberus thought it possessed against the approaching storm might well prove inadequate.
“They were out in front with GMAC,” says one investor who joined Cerberus on the GMAC investment. “Other firms would have gunned it. But they hunkered down. Now GMAC is standing, and so many other financial firms have disappeared.”
“Within one month after we closed, ResCap stopped writing subprime mortgages. By the middle of the following year ResCap had become even more conservative,” Mr Feinberg recalls.
“We had to change some of the ResCap management team because they wanted to continue the business the old way and failed to recognise the changing markets.”
While Cerberus was advised to abandon ResCap to salvage the rest of the operation, Mr Feinberg stood by the distressed unit.
He was determined, he says, that when every other mortgage lender disappeared, ResCap would be left standing and profitable. Cerberus also concluded ResCap might be vital for GMAC to obtain a formal licence, at the suggestion of GMAC's new chief executive Al de Molina, as a bank holding company. With GMAC's new status, the argument runs, the government stands behind GMAC, ensuring its survival.
Meanwhile, GMAC tried desperately to sell assets and shrink its balance sheet. “But it was so big; GMAC couldn't get out of as much as we wanted,” says Mr Feinberg.
In June 2008, Cerberus helped GMAC to orchestrate a debt exchange with bondholders and, for a brief moment, executives at Cerberus thought the worst was over. But by the autumn, car sales started to fall off the cliff.
“We try to focus on turning around companies [by] cost savings, introducing efficiencies and operational improvements,” Mr Feinberg says. “But the operational improvements just weren't keeping up with the level of disaster in the overall economy.”
Getting GMAC the status of a bank holding company was a milestone. But it came at the price of dilution, even for those investors who put in new money, in return for funding from the US Treasury. On the flipside, though, GMAC is “more competitive because they now have a lower cost of capital”, says a GMAC investor.
Cerberus's commitment to GMAC, however, is finite. Although Mr Feinberg reckons other owners would have walked away, he says it would be irresponsible to the pension funds, endowments and individuals who trust Cerberus to manage their money to invest more of the firm's capital in GMAC and Chrysler. And it would also violate Cerberus's limits in regard to how much can be dedicated to a single investment.
In any case, Chrysler and GMAC are unlikely to determine Cerberus's fate. Their weighting in the portfolio has fallen. Luckily, as it turned out, Cerberus failed to bid high enough for some of the companies it wanted – such as Washington Mutual – which would have increased its exposure to today's global economic crisis.
Ironically, TPG – which did buy WaMu – and Cerberus both made bets on finance too early.
The two also waded in too early to the market for discounted debt – TPG in April and Cerberus in the autumn, although Mr Feinberg says some of those investments are now recovering from their fourth-quarter markdowns.
There are other investments in the Cerberus portfolio that will take time to recover, such as Aozora, the Japanese bank. Cerberus has also marked down the value of Bawag, the Austrian bank.
The group has also had setbacks on the trading side. In its December letter to investors, Mr Feinberg said: “[In] September, we thought trading levels for debt were ridiculously low and there was a great buying opportunity, especially in RMBS [residential mortgage-backed securities]. We were wrong.”
At the same time, Cerberus took the unusual step of attempting to hedge its exposure to an economic downdraft by taking bearish positions on important indices, a strategy Mr Feinberg says was profitable and wishes now he had pursued even more boldly.
Such gains, however, are relatively rare. One of Cerberus' flagship funds fell by almost 22 per cent in 2008. And the firm decided to impose timing limits on the ability of investors in certain of its funds to get their money out, “so as not to unduly increase the illiquidity . . . for remaining investors and to enable us to support our existing investments with new capital where necessary,” according to December's letter.
Other investments ought to prove more lucrative. Sale of Talecris Biotherapeutics, carved out from German conglomerate Bayer, is likely to return Cerberus six times its initial investment, assuming the approvals come through as expected, according to the group. Albertsons, the supermarket chain that Cerberus bought in a consortium with Supervalu and CVS in 2005, is also looking extremely profitable, thanks in part to early property sales.
Like many of its peers, in December Cerberus laid off people to cut its own costs, a task Mr Feinberg had postponed for months before giving his consent to the recommendations of his management team at Cerberus.
“He is not confrontational,” says the friend who drives a foreign car. “He always wants to walk away [as] the nice guy.”
Really, who wouldn't want to drive a car like this?
Adventurous and even extravagant styling, a breath of beauty. A turbocharged four-cylinder engine that tries to give you both power and fuel economy, a real statement of modernity. And coupe packaging, something expressive and personal instead of politically correct.
Plus this one is red; a real, pulse-pounding European-style red instead of some watered-down color that resembles low-calorie tomato soup.
The 2010 Hyundai Genesis Coupe 2.0T track takes all your prejudices about cars from Korea and flushes them right into the gutter. It challenges you to believe that a Hyundai can be desirable instead of merely sensible.
We didn't believe it could be done, either.
Forget the Genesis Sedan
Maybe the only thing really holding back the 2010 Hyundai Genesis Coupe 2.0T Track is its Genesis label. While Hyundai is justifiably proud of its new rear-wheel-drive Genesis vehicle architecture, this coupe is vastly different in personality from the Genesis sedans. All the fat has been baked out during the coupe's development process and the result is something completely different.
You can feel the difference in the first hundred yards or so, just as we did the first time we got in this car and wheeled it out of the depths of a parking garage, climbed a long ramp toward the exit and suddenly emerged into a bright, warm afternoon. The car practically hopped with eager anticipation. Shrunk down to an overall length of 182.3 inches on a long wheelbase of 111 inches, some 73.4 inches wide and just 54.3 inches tall, the Genesis Coupe is a personal-size car, a real coupe instead of merely a two-door sedan, and you can feel a kind of urgency coursing through its structure.
In fact, structure might have much to do with the rear-wheel-drive coupe's character, as Hyundai tells us it has employed a fair amount of high-strength steel in this package and even claims that this car is 24 percent more rigid than the last-generation BMW M3, the E46. While it's fair to say that BMW has moved on some since that car from the 2000 model year, the very idea of mentioning Hyundai and BMW in the same breath makes us feel strangely disoriented, as if a tear has suddenly appeared in the fundamental fabric of the universe.
Your Personal Road
From the first, you feel at home in this coupe, and the road seems to flow naturally over the hood, through the windshield and into the cockpit, perfectly scaled to your expansive view over the low, broad dash. The driving position is utterly natural, with the controls centered in front of you, your hands resting instinctively on the steering wheel and your legs stretched comfortably in front of you. You're low and leaned back, yet completely in command, caught up in a little miracle of ergonomics that seems to elude the human-factor engineers at BMW.
A lot of this coupe's character comes from its light weight. Of course, we'll admit that the 2010 Hyundai Genesis Coupe 2.0T with its 210-horsepower, turbocharged 2.0-liter inline-4 engine is only 95 pounds lighter by Hyundai's measurement than the comparable 2010 Hyundai Genesis Coupe V6 with its 306-hp 3.8-liter V6. But let's not overlook the fact that this 2.0T model is a stunning 277 pounds lighter than a BMW 335i coupe and 322 pounds lighter than an Infiniti G37 coupe.
The 2.0T comes in three different models — plain, Premium and Track. The plain and Premium are available with either a six-speed automatic transmission or a six-speed manual, but the Track is available only with the six-speed manual. And as you'd expect, the Track has a complete complement of high-performance hardware to fulfill the promise of its name. There are Bridgestone Potenza RE050A summer-performance tires (225/40YR19 front, 245/40YR19 rear) on 19-inch wheels. There are Brembo brakes with four-piston front calipers and 13.4-inch front rotors matched with 13-inch rear rotors. And there is a track-tuned suspension with higher rate springs and dampers, plus a significantly stiffer rear antiroll bar to reduce understeer.
You don't have to look far to find evidence of the Track package's impact, as this car circles the skid pad at 0.87g, which equals the 0.87g achieved by the V6-powered Genesis Coupe. Since the 2.0T's weight advantage over the V6 lies in more balanced weight distribution overall (54.1 percent front, 45.9 percent rear), response from the quick-ratio steering is crisper and more immediate, and it results in a 69.3-mph run through the slalom, some 1.1 mph quicker than the comparable V6 Genesis Coupe with the Track package. At the same time, this car is also 2.3 mph slower than a BMW 335i coupe through the slalom and 2 mph slower than the Infiniti G37 coupe, perhaps because its weight distribution is still significantly more nose-heavy than the competition.
Breathless Power
The news isn't as good when it comes to the performance of the 2010 Hyundai Genesis Coupe 2.0T's turbocharged 1,998cc inline-4. With engine architecture developed by Hyundai and adopted by Mitsubishi and then Chrysler as a part of the cooperative program known as GEMA (Global Engine Manufacturing Alliance), the Hyundai Lambda engine has more in common with the power plant in the Dodge Caliber than the one in the Mitsubishi Lancer Evo. The pistons, connecting rods and crankshaft are cast rather than forged, and the intake ports are relatively constricted.
Despite its humble specification, what Hyundai describes as a "low-pressure turbo engine" actually is up to 8.7 psi of boost with spikes of 17.5 psi to maximize torque at low rpm, plus it's equipped with an air-to-air intercooler to maximize efficiency, and variable valve timing on the intake and exhaust cams. As our own dynamometer runs with the 2.0T reveal, however, all this goes to building up the bottom of the power curve, so this engine has given its best long before the 6,500-rpm redline is reached. It is rated at 210 hp at 6,000 rpm and 223 pound-feet of torque at 2,000 rpm.
At the test track, this translates into a run to 60 mph from a standstill in 6.9 seconds (6.6 seconds with 1 foot of rollout like on a drag strip). The quarter-mile comes up in 15.0 seconds at 91.8 mph and top speed is electronically limited to 137 mph. Thanks to shorter gear ratios in its six-speed transmission and a shorter final-drive ratio, the 2.0T is only a half second slower than the 3.8 V6 to both 60 mph and the quarter-mile, which is a feat of some accomplishment.
The other half of the performance equation is this car's excellent fuel economy, as it's EPA rated at 21 mpg city (estimated) and 30 mpg highway (estimated).
Can You Feel It?
As you'd expect, the 2010 Hyundai Genesis Coupe has an entirely different character with a turbo-4 under its hood than a V6. The 306-hp V6 urges you to test the chassis' goodness and you find yourself slithering through the corners, challenging the limits of traction. The 2.0T is a momentum machine, tidy and efficient. The Genesis Coupe's European-style suspension calibration works to your advantage here, because the suspension works with an exquisitely damped resiliency that keeps the tires on the pavement, making you feel masterfully coordinated as you dive into corners and then come out the other side. The truth is, you don't have enough power to bust the tires loose anyway.
The six-speed transmission works to your advantage, though, because the short-throw shift action and positive gear engagement enhance performance. It has some of the character of a Nissan manual transmission, only everything is damped a bit for an impression of refinement.
Speaking of damping, the drivetrain itself feels as if it's riding in soft mounts to dampen vibration, much like the V6 in the Genesis Coupe V6. As a result, the 2.0T's drivetrain winds up unpleasantly when you hammer the throttle pedal. In fact, this is far from a grip-it-and-rip-it kind of car. Between shifts, the engine rpm hangs up momentarily, so you have to shift more deliberately than you'd like in order to be smooth. Hyundai engineers report this is part of a strategy to keep from dumping a load of unspent hydrocarbons into the catalyst, thereby ensuring that the catalyst meets its required 100,000-mile durability target.
This sort of tuning isn't uncommon these days (the Honda Civic being a notably unpleasant example), but it's very noticeable here and really undercuts the engine's performance. Even at low speed, the lean surge of the engine can be noticeable. Altogether this engine delivers tractable power, but never excitement. It really never shows much enthusiasm for winding the tachometer needle around the dial, as if it's meant to go through life churning an automatic transmission rather than a manual gearbox.
Beyond Respectability
The 2010 Hyundai Genesis Coupe 2.0T fulfills the promise of the design studios and technical centers that Hyundai has brought on stream in both Korea and the United States over the last decade. It is thoroughly modern in spirit, even as its seemingly modest specifications hold down the price. Unlike so many other Hyundai models, it never gives you the impression that it's trying to imitate something else.
Maybe this is the unexpected benefit of building a coupe. This is the kind of car to which everyone aspires, even as they despair of owning one because the price of cars like the BMW 3 Series and Infiniti G37 has risen above the $40,000 mark. But with the 2010 Hyundai Coupe 2.0T Track priced at $26,750, there is now a Euro-style coupe that everyone can dream of owning.
Jamie De Lisle's Buick had been warning her for days, first with a flashing yellow light, then a flashing red light. But the 31-year-old mother of two from Collinsville, Ill., was too busy to heed the distress signals. It was only when Mrs. De Lisle began hearing an incessant beeping that she took notice: If she didn't make her car payment that day, the vehicle wouldn't start the next day.
The repo man has found a new hiding place -- inside your car. Increasingly, used-car dealers are installing remote disabling devices that keep the cars from starting if the buyer gets too far behind on payments.
These so-called disablers, palm-sized devices that are placed under dashboards and wired into ignitions, once were limited to what industry insiders call the "buy here -- pay here" segment: the kinds of small used-car lots that line state highways, strung with lights and multicolored pennants. But as the economic downturn deepens, larger, more mainstream dealerships are using the devices as a condition of financing.
Even as the recession has fueled the used-car market, it has made it harder for auto buyers to obtain credit. Eager to book sales, dealers and finance companies are expanding their own financing operations, and the use of disablers helps them prod customers to make timely payments. Satellite-based locators are often built into the remote systems, though some dealerships say they don't make use of that capability.
The companies that sell the disablers, with brand names including On Time and PayTeck, say that the use of such devices not only expands lending but also helps financially strapped customers change their ways for the better. Don Lavoie, president and CEO of Sekurus Inc., the Murrieta, Calif., company that markets the On Time device, calls the starter-disabling technology "a behavior-modification method." The company says sales of the devices rose about 25% in 2008 compared with the year earlier, and it expects sales to double this year.
The Cellphone Principle
Mr. Lavoie points out that few people neglect to pay their cellphone bills, because they know the phone will stop working if they do. Applying the same principle to cars helps move auto-loan payments higher on the consumer's list of priorities, he says.
It also helps a broader range of customers qualify for loans, he says. "Typical customers may have no established credit or they may have dings on their credit," Mr. Lavoie says. The used-car market in the U.S. has ranged between 35 million and 45 million vehicle sales annually in recent years. About 20 million of those go to customers considered subprime because of their credit history, Mr. Lavoie says.
Advantage for Repo?
In the past, many dealers weren't willing to take the risk of extending credit to certain customers. But Mr. Lavoie and dealers who have installed his company's disabler say more buyers do pay on time when they have the devices in their cars. Of course, the built-in satellite-based locators could also make it easier for repo men to find the vehicles.
Customers have at best mixed feelings about the systems. "Sometimes I tell our friends our car is under house arrest," says Michelle Gibbs, a 36-year-old resident of Blue Springs, Mo. Although the remote device on her silver Honda Accord has never actually shut down the car, she compares it to "those ankle bracelets they put on you when you've done something bad."
At the same time, she says, the remote kill switch in her car seems like a reasonable price to pay when she doesn't think she could qualify for a car loan elsewhere. The device's persistent reminders, she says, have kept her from missing payment deadlines on a number of occasions. "For the most part we've liked it, because it has helped us build better credit," Ms. Gibbs says.
But consumer-advocacy groups such as the Consumer Federation of America say the devices represent a disturbing new layer of surveillance and could potentially endanger drivers if the devices leave them stranded when the cars get shut down.
John Van Alst, a lawyer with the National Consumer Law Center, calls the practice of remote disabling "electronic repossession" and says it represents a kind of intimidation, as well as creating extra hassles for people who are already financially strapped. "These devices are effective because of the threat they represent," says Mr. Van Alst. He says that some customers who seek financing from used-car dealers have given up on more traditional financing sources too soon.
He also is worried that the devices could become more a rule than an exception. "It could be the way of the future," he says. Now that the devices are becoming common in the used-car business, in time they could turn up on new cars as well. "Maybe they'll put one on my refrigerator," he says, only half in jest.
Dealers who sell cars with the On Time hardware are quick to point out that the system doesn't shut down vehicles that are running. After the driver has missed a payment, the device doesn't allow the engine to start once the car is turned off. Still, the dealers say this rarely happens. The disablers can be removed when the cars are paid off; some can also be used as anti-theft devices.
Why Most Customers Pay
Leon Green, owner of Buy Now, a Kansas City, Mo., dealership, says customers have rarely missed their payments since he began installing disablers. The possibility of suddenly losing mobility has proved enough of an incentive to keep most customers paying on time, Mr. Green says. As a result, he says, his company's cash flow has improved, and he's able to acquire better used vehicles at wholesale auctions.
Donald Birger, president of InstaCredit Automart, which sold more than 3,000 vehicles in 2008 through its two dealerships in Collinsville, Ill., and O'Fallon, Mo., says he initially was "leery" of the remote disabling systems, in part because he thought customers might object. But buyers don't seem to mind that much. "We have not lost a sale due to our use of the device," he says.
Drivers willing to turn braking and acceleration over to a computer could save nearly 25 percent on their annual gas bills, say the British developers of an advanced new cruise control system.
Known as Sentience, the system uses GPS technology coupled with detailed topographical information to control the gas pedal and brakes. If alone on the road, all the driver has to do is steer. 'The car speeds up, slows down at speed humps, and stops at all the junctions without the driver having to intervene,' said David Overton of Ordnance Survey, the U.K. government agency that provided the map information for the Sentience Project. 'All the driver has to do is stick the phone on the dash and off you go,' said Overton.
The Sentience system uses a GPS-equipped smart phone, on the cellular phone network Orange, to determine the vehicle's position. Wireless Bluetooth technology links the phone to the other piece of hardware necessary for Sentience, the r-cube, developed by the Ricardo company. The r-cube controls the vehicle's acceleration and braking.
For the initial tests, the Sentience team used an imported Ford Escape hybrid.
The maps generated by Ordnance Survey include everything from speed bumps to school zones. When a Sentience-equipped vehicle approaches, say, a roundabout, the software automatically slows the vehicle down enough to take the turn. Once the turn is complete, the software then accelerates the vehicle in the most fuel-efficient way.
Initial tests indicate that drivers can save anywhere between five percent and 24 percent on fuel costs. The wide variation in the numbers comes from the type of car -- hybrid vehicles will save more fuel than those with internal combustion engines alone -- and from the driver's driving style.
On an empty road with no other vehicles, the Sentience system could completely control a vehicle.
With other cars on the road, the driver must control acceleration and braking because the Sentience system is not equipped with the real-time location of all the other vehicles on the road. Future versions of Sentience could be, said Overton, although no final decision on that possibility has been made.
The other option is to have Sentience, or a program like it, installed on every car on the road, said Massachusetts Institute of Technology professor Joseph Sussman, an expert on intelligent automotive systems. 'These technologies are quite positive from the point of view of fuel consumption and safety,' said Sussman. People talking on cell phones and elderly drivers with slower reaction times would benefit from software that would automatically slow or stop a vehicle.
In the long run, equipping vehicles with Sentience-like systems is a step toward fully-autonomous vehicles, say both Overton and Sussman, although such systems are still at least a decade away. 'Ultimately you could say that this will end with driver-less cars,' said Overton. The soonest that the Sentience system could be found on vehicles is 2012.
After hanging onto his job amid nearly decade of turmoil and criticism, General Motors Corp. Chief Executive Rick Wagoner is being forced to resign by a presidential administration that has been in place fewer than 90 days.
In nine years as chief executive of GM, Mr. Wagoner presided over staggering losses of money and market share -- and for the last three years had faced persistent calls for his head.
But Mr. Wagoner had fended off all critics until GM squared off with President Barack Obama's auto task force. On Friday, Mr. Wagoner met with the head of the task force, Steven Rattner, and learned the government was pushing for a change at the top of the auto maker as it considered extending it more loans, a person familiar with the matter said.
Mr. Wagoner's decision to step down leaked out on Sunday, catching even some top executives at the company off guard.
Reached at his home Sunday, Mr. Wagoner said, "I'm sorry, but I will need to pass" on the opportunity to comment.
Mr. Wagoner said in a statement released by GM, "On Friday I was in Washington for a meeting with administration officials. In the course of that meeting, they requested that I 'step aside' as CEO of GM, and so I have."
Mr. Wagoner had served as GM's CEO since 2000, and ran into serious trouble after the company stumbled to an $11 billion loss in 2005. The following year, billionaire investor Kirk Kerkorian, then holding nearly 10% of GM, forced the auto maker into merger talks with Nissan Motor Co. and Renault SA, in the hope of replacing Mr. Wagoner with Nissan/Renault's Carlos Ghosn.
But Mr. Wagoner lined up allies, including Vice Chairman Bob Lutz and then-Chief Financial Officer Fritz Henderson, and drew up blueprints to thwart Mr. Kerkorian and Jerome York, who represented Mr. Kerkorian on GM's board. Mr. Wagoner argued that GM had plenty of resources without adding Nissan/Renault as a partner, and claimed GM shareholders would get the short end of the bargain.
Just a few months ago, Sen. Christopher Dodd (D., Conn.) suggested Mr. Wagoner should go, saying GM needed to change the company's direction after nearly running out of money and requiring government loans to stay afloat.
Through it all, Mr. Wagoner continued to have the confidence of GM's board of directors, in particular the lead independent director, former Kodak CEO George Fisher.
Mr. Wagoner grew up in Richmond, Va., in an upper-middle-class home, and attended his father's alma mater, Duke University. At 6 feet 4 inches tall, Mr. Wagoner walked on to Duke's freshman basketball team in 1971. Ever since graduation, he had remained devoted to the school, currently serving on its board of trustees.
In 1977, Mr. Wagoner joined GM as an analyst in the company's treasurer's office that borders Central Park in midtown Manhattan. Mr. Wagoner spent much of his 30s in international operations, where he gained a reputation for trimming costs.
But after becoming chief executive in 2000, he consistently stopped short of dramatic action. Faced with an abundance of brands, each requiring costly marketing support, he killed one: Oldsmobile. But not until the company faced financial ruin in recent months did he take that measure two steps further, by announcing plans to close or sell off GM's Saab, Hummer and Saturn brands.
Similarly, he never seriously attacked the costly burden of providing health care to the company's retirees or otherwise reducing labor costs that made each GM car thousands of dollars more expensive to build than its foreign-based competitors.
Discussing labor-costs reductions in 2005, Mr. Wagoner said, "Our plans do not include anything radical like eliminating the JOBS bank," referring to a program that provided pay to laid-off workers.
Mr. Wagoner consistently resisted any talk of bankruptcy. Instead, he constructed a set of external benchmarks for investors to monitor. The key benchmark was a commitment to cutting $9 billion in structural costs via capacity cuts, labor concessions and other measures. At the same time, he vowed to churn out better products and grow in China, Russia, Brazil and other developing economies.
Even as costs dwindled and emerging markets boomed, Mr. Wagoner could not stanch the consistent slide in U.S. market share. He also didn't forecast a punishing rise in gasoline prices that would sap demand for GM's core products, trucks and SUVs.
Kent Kresa, a GM director since 2003, said in an interview late last year that Mr. Wagoner and other GM executives constantly underestimated the auto maker's troubles. Of the financial crisis that struck in recent months, destroying sales and liquidity, Mr. Kresa says, "I can honestly say no one ever projected this."
By November, with little more than one month's worth of cash on hand and still no commitment from Congress on a bailout loan, Mr. Wagoner addressed hundreds of employees at a town hall meeting at the company's corporate headquarters in Detroit.
Mr. Wagoner was greeted with a standing ovation, according to people at the meeting. Employees said they were proud of Mr. Wagoner for defying calls for resignation and insisting the company would not file for bankruptcy protection. Yet at the same time, his resignation Sunday in exchange for financing needed to save the auto maker was characteristic of his devotion to the company he'd joined after graduating from Harvard Business School in 1977.
"He woke up every morning going to work with the devotion of a priest," Peter Bible, the company's chief accounting officer in 2006, said in an interview earlier this year.
Originally Posted by Wagoner to step down as GM chief
The car sector claimed its first two top-level victims yesterday when Rick Wagoner and Christian Streiff were ousted from General Motors and Peugeot Citroën respectively as both executives failed to navigate the huge challenges facing the industry.
Mr Wagoner is to step down as chief executive of General Motors at the request of the White House ahead of President Barack Obama's announcement today on the auto industry, said officials in the administration last night.
A person close to GM said that Mr Wagoner's departure and the government intervention made it likely GM would file for bankruptcy protection in the next few weeks.
Mr Wagoner's controversial eight-year tenure at GM ends on the same day as Mr Streiff was fired as chief executive of Peugeot. Both had struggled to keep their companies above water amid a high oil price and the global economic downturn.
Fritz Henderson, chief operating officer, is the favourite to replace the 56-year-old Mr Wagoner. However, with a huge economic exposure to GM, the Obama administration may pick an outsider to take the helm.
Mr Obama is expected to say today that GM and Chrysler will be given additional government support on top of the combined $17.4bn (£12bn) they have already received if they fulfil certain conditions. GM has requested an additional $16.6bn in aid and Chrysler has requested $5bn.
The president said that the two carmakers had not yet done enough and would have to come to a deal on cost-cutting. "That's going to mean a set of sacrifices from all parties involved - management, labour, shareholders, creditors, suppliers, dealers," Mr Obama said on CBS yesterday.
Basically, what we do here at Inside Line — after the powerslides, of course — is give advice. We drive and evaluate hundreds of cars each year and funnel our condensed experience and expertise to anyone who will stand still long enough to listen. We're huge hits at parties. Trouble is, advice is easier to give than receive. For years now, we've been advising friends and family alike to forgo their gas-guzzling, overweight SUVs for large sedans or wagons, even as we've added SUV after SUV to the Inside Line fleet of long-term test cars. And it almost happened again.
When our long-term 2008 BMW X5 finished its tour of duty (and with our evaluations of a 2002 BMW M3 and 2008 BMW 135i due to wrap up shortly), we wanted to replace it with another BMW. Maybe a BMW with the all-new, twin-turbo, 400-horsepower 4.4-liter V8 and the fully revised iDrive control system? And so a 2009 BMW X6 5.0i seemed to be screaming our name. The twin-turbo X6 would certainly have made a fine road-trip toy, and would make for interesting comparisons of utility (or uselessness, take your pick) with our Infiniti FX50. But it was time to take our own advice. Instead of replacing our luxury SUV with a less useful version of essentially the same thing, we chose BMW's newest version of its flagship luxury sedan, the 2009 BMW 750i.
What We Got
While a V12-powered 760 is most likely in the works, the U.S.-spec 2009 7 Series (F01 is BMW's internal engineering code for the car) is currently available only with a twin-turbo 4.4-liter V8 and six-speed automatic transmission. This new engine effectively matches the performance of the V12 in the previous-generation 760Li, yet is less expensive and more environmentally friendly. The all-new power plant is rated at 400 hp at 5,500 rpm and 450 pound-feet of torque at only 1,800 rpm.
The EPA rates this drivetrain at 22 mpg highway, which is kind of impressive. Of course, if you stand on it, the speedometer needle will sweep to 60 mph in just over 5 seconds without a whir, buzz or roar, pressing you deep into the backrest of the massive, thronelike seats. It's then you're thankful that this big car has appropriately superb brakes attached to 19-inch wheels which are wrapped in turn by surprisingly sticky Michelin Excellence tires — 245/40R19s in front and 275/40R19s in the back. Together it's a combination that hauls the behemoth down from 60 mph in only 112 feet. Kind of impressive when you remember that the 2009 BMW 750i weighs 4,599 pounds.
iDrive has previously turned even the most tech-savvy automotive journalist into a version of cranky old television commentator Andy Rooney. Frustration with this all-singing, all-dancing control interface for a BMW's entertainment, navigation, ventilation and mechanical calibration has produced countless rants urging a return to paper maps and suspension settings that can be changed only with a toolbox. Thankfully BMW got the message (finally). The F01 7 Series also sports a fully retooled iDrive system that includes not just new shortcut buttons to back up the rotary controller plus a large 10.2-inch screen, but also new, more logical software. You can't evaluate such a system in a day, though, so a long-term experience to find its assets and liabilities clearly seemed in order.
The twin-turbo 4.4-liter V8 is standard equipment for the new 2009 BMW 750i. It's a whole lot of motor, so it's only right that to keep it on the road we chose the Sport package ($4,900) which adds 19-inch wheels, active roll stabilization and a sport steering wheel (really, have you ever seen a BMW that didn't have the Sport package?). Other options on our new long-termer include a Luxury Seating package ($2,500), satellite radio ($595) and a nifty Camera package ($750) that shows rearview and front sideview monitors for avoiding those tricky curbs that will leap up and bite your fancy sport wheels if you're not careful.
Do the math and all this works out to a lofty total — yet not far from the norm in this class — of $89,870.
Why We Got It
Although we knew that the time was right for us to stray from the usual lifestyle SUV, it's still not an easy emotional decision. What if we need that third row of seats? Or the cargo hatch? Or the extra ground clearance? Or all-wheel drive? A spoonful of sugar, they say, helps the medicine go down. And, well, at almost $90,000 BMW's new flagship is one helluva helping of sugar.
The new forced-induction V8 represents another step in BMW's evolution toward slightly more responsible performance. It's a direction the company is taking seriously, as it's considering reducing engine displacement across the whole range of models — even in the M division cars — and further replacing normally aspirated engines with smaller-displacement turbocharged ones. Maybe there is a replacement for displacement after all.
At the same time, the forced-induction engine in our long-term 2008 BMW 135i has received mixed reviews during its time with us. While no one doubts the power, its soul and presence is in question, as is its real-world fuel economy. As far as the 7 Series is concerned, a luxury sedan is all about presence, so we wonder whether this turbocharged V8 can fill the spiritual gap left by a similarly powerful V12?
The Price of Entry
So, $90 grand? That's a house, or at least a cottage on a lake. Here in SoCal, of course, it wouldn't get you a driveway, and as far as cars go, $90,000 worth of metal ain't even getting a prime spot at the valet. And yet the 2009 BMW 750i might be different.
Those of us who have driven this car have been surprised that the price tag is below six figures instead of above. It's that good. But such impressions are not really the point of our long-term tests, though; we knew it was good after the 750i first drive. Now we've got 12 months to put 20,000 miles on our new 2009 BMW 750i and really evaluate what we get for $90,000.
Will we miss our cheaper, larger, yet less luxurious luxury SUV? Will the new 7 be able to handle real road trips with real families? Will Director of Vehicle Testing Dan Edmunds take it on his now-famous annual family vacation to Oregon? Will we, at the end of the day, question the sanity of purchasing such a vehicle as it sits in our long-term garage door-to-door with a 2009 Hyundai Genesis Sedan that's almost the same size and retails for only $40,000?
Stay tuned to the long-term blogs for real-world driving impressions of the 2009 BMW 750i.
Current Odometer: 3,953
Best Fuel Economy: N/A
Worst Fuel Economy: N/A
Average Fuel Economy (over the life of the vehicle): 14.4 mpg
Originally Posted by Confirmed: BMW X6 M to Debut at New York Show Next Month
BMW has confirmed today that it will debut an all-new X6 M performance variant of its "sports activity coupe" at the 2009 New York Auto Show next month. A 2009 BMW X6 xDrive 35i is pictured above.
Rumors about a high-performance "M" version of the X6 and X5 have been circulating since last summer and were confirmed in January. The X6 M is expected to wear minor cosmetic changes along with the M division's signature quad tailpipes, and it's expected to ride a bit lower. Under the hood we expect to find a twin-turbocharged version of BMW's 4.4L V-8, likely good for over 500 hp. It's expected to put power down through BMW's xDrive all wheel-drive system, which will be tuned for a rear-bias.
BMW promises that the X6 M will feature a variety of new engine, drivetrain and suspension, likely needed to keep this beast composed with its high power levels. We'll find out all the exact specifications when the car bows in New York.
Originally Posted by Veteran Henderson Will Take Reins of Auto Maker
DETROIT -- General Motors Corp. Chief Operating Officer Frederick "Fritz" Henderson has been one of the auto maker's top troubleshooters for nearly a decade, tackling overhauls at one sick GM unit after another. Now, Mr. Henderson will face the job of trying to salvage the whole company.
Mr. Henderson, 50 years old, will take over as GM's chief executive officer as early as Monday, following the forced resignation of Chairman and CEO Rick Wagoner, 56. Mr Henderson became GM's chief operating officer about a year ago, following a stint as chief financial officer that began in January 2006.
Mr. Henderson has had a central role in the company's current restructuring efforts, and in the negotiations among government officials, union leaders and creditors to secure up to $30 billion in federal loans to avert a GM bankruptcy. The efforts to balance those competing interests will be made all the more challenging now by the clear signal that the Obama administration is prepared to intervene directly if it doesn't see the results it wants.
A Detroit native, Mr. Henderson was educated at the University of Michigan and Harvard and has worked for GM since 1984, starting in the company's Treasurer's office and following a career path similar in many ways to Mr. Wagoner's. Mr. Henderson, like Mr. Wagoner, has served in high-level posts in GM's overseas operations. Like Mr. Wagoner, Mr. Henderson played sports in college, although Mr. Henderson's sport was baseball. Mr. Wagoner played basketball.
In the past decade, Mr. Henderson established himself as one of GM's turnaround specialists. He led a remake of GM's Asian operations early this decade, and in 2004 was moved to Europe, where he accelerated a restructuring effort there -- although GM Europe has continued to struggle since he left, losing money and market share. Since arriving in Detroit, Mr. Henderson has had a key role in GM's continuing efforts to cut labor costs by negotiating new contracts with the United Auto Workers union.
Like most top GM executives, Mr. Henderson is careful not to provoke the UAW in public. But Mr. Henderson has also been blunt in his public assessments of GM's problems, and as financial chief offered more details than his predecessors about GM's increasingly grim financial results.
"The best thing I can say is, it's over," Mr. Henderson said of 2008 during the opening remarks of an hour-long meeting during which he and a fellow executive endured a peppering of questions from reporters on the state of GM's European operations.
Auto industry critic Sen. Bob Corker (R., Tenn.) came to the Detroit auto show earlier this year and met with Mr. Henderson to discuss the auto-industry restructuring and complimented Mr. Henderson's efforts to change long-held patterns at GM.
Mr. Henderson will now confront an array of problems, including several that he had once predicted would be resolved by now. Chief among them is GM's problematic relationship with its former parts unit, Delphi Corp., now operating under bankruptcy-court protection. Delphi has spent three years in bankruptcy, and GM has been forced to inject billions of dollars into the company to avoid disruptions to its production.
Attempts to reach Mr. Henderson weren't successful. Previously, he said he learned a valuable lesson in his first year as chief operating officer: "You don't want to be careening from crisis to crisis."
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a penny pincher isnt what gm needs to be honest. thats what got them in trouble when they built crap long ago.
The boards of Chrysler LLC and Fiat SpA have given executives approval to complete an alliance deal that hinges on the terms for additional aid for the Detroit automaker, according to people with knowledge of the discussions.
The development comes before U.S. President Barack Obama's expected announcement Monday on rescue funds for Chrysler and General Motors and more than two months after teams from Chrysler and Fiat began reviewing the proposed tie-up and developing a business plan for their combined operations.
Final terms of any deal will depend on what terms the U.S. autos task force headed by former investment banker Steve Rattner imposes on Chrysler as a condition for providing additional funding, according to the sources, who asked not to be identified because of the confidential nature of the talks.
Fiat said on Saturday it was optimistic a Chrysler deal could be reached. Chrysler said it was working with the UAW and with creditors to complete the cost-cutting deals the government has set as a target.
Chrysler has asked for $5 billion in loans from the U.S. Treasury on top of the $4 billion it has already received. Executives at Chrysler and its owner, Cerberus Capital Management, have said that funding would allow the No. 3 U.S. automaker to be viable on its own.
Crucial
The funds are crucial because Chrysler's proposed alliance with Fiat would not bolster its cash. The Italian automaker has proposed acquiring a 35 percent stake in Chrysler in exchange for small-car technology, not cash, with an option to take its ownership stake as high as 55 percent.
Projections developed by the automakers show the proposed deal would require several hundred million dollars in spending in the 2009-10 period to launch Fiat-based small cars in the U.S. market and start reaping the benefits of a tie-up, according to one source familiar with the plans.
The automakers stand to save more than $5 billion over the next five years by combining vehicle platforms and parts procurement. But those savings would not start to accrue in a significant way until 2012 and 2013, the source said.
The pending Fiat deal with Chrysler represents something of a political wild card for Obama. White House spokesman Robert Gibbs said Friday that the president would make an announcement Monday on the next steps for Chrysler and larger rival General Motors.
The administration has signaled it wants to support a U.S. auto industry but also faces special pressure in crafting support for Chrysler, which analysts see as needing a merger or alliance partner to survive the weakest consumer market for new cars in almost three decades.
Potential complication
Fiat's status as an overseas automaker also has the potential to complicate the taxpayer politics of a Chrysler bailout, although that has not figured in the public debate.
UAW President Ron Gettelfinger, an Obama ally during last year's election campaign, has offered his support for the deal. Chrysler estimates it would save 5,000 U.S. production jobs.
Fiat CEO Sergio Marchionne, who has appeared twice before the U.S. autos task force in closed-door meetings to make the case for the Chrysler deal, said on Friday he was ready to make changes the U.S. government could demand.
"In all likelihood, if the deal gets approved, it will be on terms that are more reflective of the requirements of the Treasury," he said. "There will undoubtedly be adjustments to be made. We do want to be the industrial partner of Chrysler."
Marchionne also said that Fiat would be patient for its partnership to produce financial results. "For that, we are willing to wait and it will take years," he told reporters in Turin.
Chrysler CEO Bob Nardelli said this month that the value of the Fiat deal could be between $8 billion to $10 billion based on what it would have cost Chrysler to develop the cars and engines it will be getting from Fiat.
Nothing to announce
"At this moment, we have no agreement to announce," Fiat said in a statement on Saturday. "Fiat continues to engage in constructive dialogue with the president's automotive task force and Chrysler, and we remain optimistic that an agreement can be reached that is mutually beneficial to Fiat, Fiat's shareholders, Chrysler and the U.S. taxpayers if all stakeholders involved are willing to do their part."
Chrysler said in a statement on Saturday that it was still working with the U.S. autos task force.
"We have continued to emphasize that Chrysler is a viable business on a stand-alone basis and our future is further enhanced through the proposed global alliance with Fiat," the company said. "At the same time, we are continuing to work collectively and determinedly with all constituents to successfully conclude our negotiations."
In the worst U.S. car market in 28 years, Hyundai Motor Co. is on a roll.
The Seoul-based automaker has boosted sales in the U.S., where demand for Toyota Motor Corp.'s models has plunged. The Genesis, Hyundai's first luxury car for the U.S. market, won top honors at the Detroit car show in January and in three months the company will bring out its first hybrid in Korea. The stock has surged 34 percent this year.
Hyundai Chairman Chung Mong Koo's decade-long push to evolve from a maker of cheap cars has been aided by the won's 13 percent plunge against the dollar over the last six months versus the yen's 10 percent gain. Higher sales coupled with a favorable currency have kept Asia's fourth-largest carmaker profitable as Toyota suffers its first loss in 59 years.
“This is a once-in-a-lifetime chance for Hyundai to catch up with Toyota,” said Chang In Whan, president of KTB Asset Management Co. in Seoul, with about $7.1 billion in assets including Hyundai shares. “Hyundai should make the most of this crisis to create its own opportunities over the next one to two years.”
The worst financial crisis since the Great Depression has hammered car demand, with sales falling 39 percent so far this year in the U.S. In contrast, Hyundai's U.S. sales have gained 4.9 percent. That's helped cushion the carmaker's 20 percent plunge in South Korea, where the government plans to cut taxes to spur demand.
Hyundai slipped 3.8 percent to 53,000 won in Seoul trading today. Toyota dropped 3.7 percent to 3,140 yen in Tokyo.
China, India
Hyundai gets 55 percent of sales from emerging markets including China, India, where auto demand has withstood the global slowdown. Toyota gets 31 percent of sales from emerging markets. Hyundai's sales in China jumped 38 percent in the first two months of the year.
Hyundai is also the second-largest carmaker in India, where its sales gained 13 percent this year. Santro minicars and Accent subcompacts made in India were exported to more than 100 countries. A reliance on such small cars gave the company an edge in emerging markets, said Lee Hyun Soon, Hyundai's vice chairman.
“Our product mix was better than any of our competitors,” said Lee, development chief for Hyundai and affiliate Kia Motors Corp., in an interview on March 23. “More than half of our production is small vehicles, which has been a big help.”
Small Cars
Small cars account for 64 percent of Hyundai and Kia's global production, the second-highest proportion among automakers after Volkswagen AG, according to Chung Sung Yop, a Seoul-based analyst at Daiwa Securities Group Inc.
Hyundai generally undercuts Toyota on price and U.S. sales of the $26,000 Sonata and $30,000 Santa Fe sport utility vehicle have risen while consumers avoid $28,000 Camrys and $39,000 4Runner SUVs.
Still, Hyundai has a long way to go to catch Toyota, which overtook General Motors Corp. as the world's largest carmaker last year. In 2008 Japan's biggest automaker sold 8.97 million vehicles, down 4 percent. Hyundai and Kia's group sales rose 7.3 percent to 4.2 million, based on Bloomberg calculations.
Chasing Toyota
Even with Toyota's 36 percent plunge in U.S. sales this year, the 226,870 vehicles it sold in the market dwarfs Hyundai's sales of 55,133 cars and trucks.
Hyundai also lags behind in quality. Toyota ranks fourth in quality in a 2009 survey by J.D. Power & Associates. Hyundai was in 14th place.
“Its brand perception is still lagging,” said Choi In Ho, who oversees 2.35 trillion won at UBS Hana Asset Management Co. in Seoul, including Hyundai shares.
Hyundai's U.S. unit has spurred sales with an offer to buy back vehicles from customers who lose their job and can't make payments. Unemployment in the U.S. in February rose to 8.1 percent, the highest in a quarter century.
“The number of people who would definitely consider buying a Hyundai model has more than doubled,” said Alexander Edwards, head of auto research for San Diego-based Strategic Vision Inc., which estimates 9 percent of consumers surveyed would “definitely” consider a Hyundai, up from 4 percent in 2002. That compares with 40 percent for Toyota and 38 percent for Honda.
New Engines
Hyundai is revamping the Sonata sedan to compete with Toyota's Camry and Honda's Accord. It will add new 4-cylinder and turbo-charged engines that it says will match Honda and Toyota engines in output and exceed them in fuel savings.
The company will begin selling a hybrid-electric version of the Sonata in the later part of next year that Hyundai's Lee expects to cost less than Toyota's Camry Hybrid and offer better fuel-economy. Hyundai will start selling a hybrid car that uses liquefied petroleum gas in Korea in June.
At the New York Auto Show in April, Hyundai will display its new Equus luxury sedan with a domestic base price of 63.7 million won ($48,000). The car, comparable to Toyota's Lexus LS and Daimler AG's Mercedes-Benz S-class, may eventually be sold in the U.S., Lee said.
Hyundai is forecast to post a 1.4 trillion won profit this calendar year, according to analyst estimates compiled by Bloomberg. Toyota will have a loss of 224 billion yen in the year ending March 2010, according to analyst estimates.
Still, as both carmakers are dependent on exports and currency fluctuations, Hyundai's advantage may not last, said UBS Hana's Choi.
“The won can turn its direction at any time,” said Choi. “Japanese carmakers could return as even stronger rivals.”
Between gas prices that danced around $4 per gallon last summer, the credit crunch and a spiraling recession, surely only a handful of Jeep Grand Cherokees (whose fuel economy ranges from 10 to 15 m.p.g., depending on drivetrain choices) were sold last year. Ditto for 16 m.p.g. Ford F-150 pickups and 11 m.p.g. Cadillac Escalades, right?
Well, the F-Series remained the top-selling vehicle in the U.S. for the 28th year, though sales were down dramatically from 2007. And Grand Cherokee and Escalade combined for more than 100,000 sales.
But they are gas misers compared with the aptly named Nissan Armada. At 9 m.p.g. in the city, 13 on the highway, it does worse than a Chevy 1500 cargo van. But that doesn't matter to the 15,685 people who needed something Sasquatch-sized.
At the other end of the spectrum, the Kia Rio, one of the most fuel-efficient non-hybrids, sold 36,532 units -- only about 3,000 more than Escalade. The hip and fuel-efficient Mini Cooper (among the few cars whose sales were up in 2008) sold 54,077 units last year. Not bad until you consider that Chevy sold almost the same number of Suburbans.
The mileage champ, the hybrid Toyota Prius (which the Environmental Protection Agency rates as a mid-size car) sold 158,884 units. This figure, however, was nearly matched by the Pontiac G6, which is rated as a compact and gets about half the mileage of the Prius in 6-cylinder form.
Finally, by anyone's measure, Mercedes' Smart Fortwo was a success with 24,622 sold. But the Ford Explorer sold three times that.
Jamie Kitman, the New York bureau chief for Automobile Magazine and the U.S. Editor for Top Gear magazine, blames inertia.
"To a large extent, we buy what we're marketed, and American manufacturers have had a 75-year history of selling cars that are too big. You don't change everything after just six months of high fuel prices."
But to the extent that changes are occurring, two of the Big Three have a leg up. General Motors and Ford have European subsidiaries upon which to draw for higher-mileage designs. Saturn's Astra, based on an Opel from Germany, and Ford's coming Fiesta are examples.
And though Chrysler has been out of Europe since 1977, talks with Fiat offer the possibility of bringing the redesigned 500 to the U.S. Inspired by the cheeky car that got postwar Italians to trade their Vespas, the 500 could become a cultural phenomenon similar to the Mini Cooper. European reviews have been universally positive, and the car gets up to 53 m.p.g. while returning excellent performance.
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TOP 10 FUEL-EFFICIENT VEHICLES
Toyota Prius
Total 2008 sales: 158,884
Gas mileage
City 48
Highway 45
Honda Civic Hybrid
Total 2008 sales: 31,297
City 40
Highway 45
Nissan Altima Hybrid
Total 2008 sales: 8,827 (On sale in 8 states)
City 35
Highway 33
Ford Escape Hybrid
Total 2008 sales: 19,522 (Includes Mercury Mariner)
I find it funny that the gov which is full of people who deal with money and numbers all day let finanical companies run wild with the bailout loans, yet they have no idea how the auto sector works yet they are stepping in and firing people ( or asking them to quit).
why hasnt anyone at aig been asked to do the same?
I find it funny that the gov which is full of people who deal with money and numbers all day let finanical companies run wild with the bailout loans, yet they have no idea how the auto sector works yet they are stepping in and firing people ( or asking them to quit).
why hasnt anyone at aig been asked to do the same?
Wagoner isn't the first CEO to lose his job as part of a government bailout. The CEOs of mortgage giants Fannie Mae and Freddie Mac were forced out after the government took over the companies in the fall. Robert Willumstad, the former CEO of AIG, Inc., left the company in September.
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Quote:
Originally Posted by carrrnuttt
Oh look, I can talk to the n00b any way I want, because I've been here so long, and my name says 'Cool' in it!
President Barack Obama highlighted three government programs Monday that are designed to spur domestic auto sales.
The president assured buyers that the government would back any warranties from General Motors Corp. and Chrysler LLC. He also outlined a possible trade-in program for buyers to exchange an old or inefficient vehicle for cash toward a new, more efficient car and another program that gives tax breaks to certain new-car buyers.
Here's how these programs would work:
What happens if the manufacturer of my car fails and I need repairs?
Normally, auto makers establish an accounting reserve for each new vehicle they sell to cover expected warranty costs. Under a new program outlined by the Treasury Department, a separate account would be created, funded both by manufacturers' money and government cash, to cover warranties if GM or Chrysler can't.
In short, the program attempts to remove any doubt among car buyers that their warranty will be honored should something go awry with the auto manufacturer. But the car makers likely would have honored warranties even in the event of a Chapter 11 filing, especially considering the government's signals that it will finance any bankruptcy reorganization.
The notion that GM or Chrysler wouldn't honor warranties in bankruptcy is "sort of a boogie man's tale that really isn't as serious as it's been made," says Hank Allessio, managing director of Walden Consultants Ltd., a management consulting firm in Hopkinton, Mass.
How would a "scrappage" program work and is it a good deal?
Mr. Obama said he supports a so-called "cash for clunkers" program whereby customers could receive money for replacing their old gas guzzler with a new, more efficient car.
Under various Senate and House proposals, the program would provide anywhere from $3,000 to $7,500 toward a better-mileage vehicle for shoppers trading in an eight-year old vehicle or a vehicle getting 18 miles a gallon or worse. Details are still being ironed out -- a House bill, for instance, would forbid trade-ins for some fuel-efficient cars, such as Toyota Motor Corp.'s Prius hybrid.
A similar program helped spur demand in Europe, said Philip Reed, senior consumer advice editor at Edmunds.com, an auto-research firm. The U.S. program could amount to a big down payment on a new car. The voucher amounts under debate "are 20% on a lot of cars," said Mr. Reed.
How much will the tax breaks lower the price of my car?
Depends on your situation.
A measure in the recent giant federal-stimulus package allows consumers to deduct state and local sales and excise taxes on a new car purchase. You'll have to pay for the vehicle up front and then deduct the taxes later.
The deduction applies to taxes paid on the first $49,500 of a qualified vehicle purchase. But not everybody gets the deductions. It begins to phase out for single filers making more than $125,000 in adjusted gross income and disappears when their income reaches $135,000. For joint filers, the phase-out begins north of $250,000 and the deduction disappears when adjusted gross income reaches $260,000, the Internal Revenue Service says.
The deductions can't be taken on 2008 returns or on vehicles bought before Feb. 17 or after Jan. 1, 2010.
We here at BimmerFile have been fans of the 1 Series since its launch. It is one of the few cars that out of the box is ready for some time at the track and will not completely melt a giant hole in your wallet. That is not to say it is perfect; like most cars designed for the masses there are little things that could be tweaked to make the car even better and of course increase its sporting intentions. Some of those tweaks would discourage most buyers but not us enthusiasts.
We are not the only ones looking for a bit more performance and sport out of the current array of BMW models; the BMW Performance Parts division is right there with us in the quest for the true “Ultimate Driving Machine”.
I recently had the privilege of spending some seat time with Stephen Zoepf, Accessory Development Manager for BMW Performance Parts, and Matthew Russell of BMW Product and Technology Communications in a fully equipped BMW Performance 135i. Outside of being employees of the weiss mit blau they are true enthusiasts and you are likely to catch them out on a track somewhere in an E30 ///M3 or even 328i sport wagon in quest for the perfect line.
Over the course of the week we will be posting our exclusive candid interview about BMW Performance and some other ground breaking things BMW has in store for us in the not so distant future, but for now we will put our focus on the BMW Performance 135i.
How do you make a great car even better? Find its weaknesses and attack them from different angles. That is what BMW Performance has done to this 1 Series.
As Equipped:
Exterior:
For increased down forces and a more performance look, this car is fitted with the aerodynamics kit, carbon fiber mirrors, rear diffuser and lip spoiler. The aero kit features brake cooling ducts to divert air towards the brakes, something the boys over at ///M can learn a thing or two about as the ///M3 lacks this feature. The 135i is more aggressive looking with these parts and at high speeds they are said to improve the handling/down forces based on wind tunnel testing.
Braking:
To increase the braking and decrease weight, cross-drilled rotors were installed. This car was (unnecessarily) equipped with the brake caliper kit, same calipers just in yellow paint when compared to the stock 6 piston fixed caliper 135i brakes. These brakes, bite and bite down hard. The brake kit provides the 128i with the same system as a 135i.
We never reached track temperatures with these pads or rotors but for aggressive street driving you would be hard pressed to find something better. It is worth commenting that the issue some have reported about these calipers overheating/cracking was found by the engineers to not be a function of the caliper but of aftermarket replacement track pads that were improperly fit and causing the subsequent issues. These calipers feature the same ceramics as much more expensive exotics are using; compliments of Brembo.
Suspension/Wheels:
To improve the handling characteristics, the dampers and springs were upgraded. This suspension kit is sold as separate components because BMW builds many different versions of springs to combat a specific cars weight distribution and options. When ordering the springs you will need a VIN or list the options in the car, no part numbers.
The suspension is surprisingly not as harsh as one would imagine a full-blown performance suspension would be. It sorted out road imperfections much better than expected, so if you have fillings or caps this suspension will not rattle them out! The suspension seemingly became better the harder it was pushed. It was firm and predictable. One of the best non-adaptive suspensions out there, it was impressive, especially considering the car was shod with runflats. It provides about an inch of drop and eliminates all remaining wheel gap, for a much nicer look. I would rate it a step above the stock ZSP but not as effective as a coil over setup (which more often than not sacrifices daily ride a bit too much for most).
The 135i's characteristic under-steer still remains even with the suspension and wheel upgrade, I had hoped it would have been more neutral but that needs to be dialed in with camber and wider rubber. The BMW Performance wheels are not forged; they are cast and machined. This process is said to decrease the weight of the wheels by about 2 pounds each when compared to the stock wheels, and these just look a lot nicer.
Exhaust:
A great exhaust note is something to marvel at, something car lovers drool over, BMW Performance nailed the note on this exhaust. It is has a nice throaty rumble that is audible in the car when you want it to be and not when you are cruising at 80 mph out on that long stretch of desert highway (or bumper to bumper NJ traffic). This exhaust is drone free on the highway so that means no throbbing headache! You will find yourself opening the windows to hear the rumble, especially under bridges and in tunnels. It will also provide you with a modest 5hp bump in addition to all that sound.
What makes the BMW Performance exhaust different? The exhaust is designed around and uses the stock exhaust fitment and muffler clamshells, so it is a direct fit with no differences in dimensions. The interior of the system is where most of the magic lies, and opposed to the stock system the tip is polished stainless rather than black.
Interior:
On the interior of the car carbon fiber was everywhere, and if that is your cup of tea BMW Performance offers a full kit or piece by piece. The weaves looked great and the resin was bubble free. Having personal experience laying up this stuff I would have to think they are vacuum bagging each piece individually to get the fit and finish they have achieved.
If you rather spend your coin on interior items that improve performance, the shifter and short shift kit is for you. With 25% shorter throws along with a crisp and precise action this shifter and kit will not disappoint. A new carrier/linkage is required in certain models (including the 135i) because when BMW Performance set out to design the ultimate shifter the clearance between the linkage and drive shaft was a little too close for comfort when using the stock setup. Something most of us would not think about when shopping for a short shift kit. The stainless and Alcantara® clad shifter is comfortable and looks great. (This shifter will be one of the first things I add to my own car as soon as a kit is available, it is more precise and just feels better than even the current ///M3 setup; dare I say it is comparable to the Z4 ///Ms shifter? One of the best I have felt.)
That leaves us with the BMW Performance Steering Wheel. The Performance Steering Wheel displays critical data from the powertrain and chassis via the cars internal bus, there are no accelerometers with the wheel. It uses the cars various modules such as DSC for yaw rates and the ECU for other data used. The information is shown on an LCD high up on the wheel where your eyes focus naturally. It provides you with a G-meter, a stopwatch with lap timing functions, a quarter-mile timer, an engine temp readout, and adjustable shift lights. The wheel is wrapped in leather and Alcantara®, which is said to be improved from previous generations of the material and provides greater longevity.
The shift lights are completely adjustable, you can have them come on for performance driving or if you are into extreme fuel conservation, set them where the ideal shift point is to maintain the best fuel efficiency. The adjustable shift points allow this wheel to be tailored to each car (gas/diesel) and each driver.
The wheel feels great in you hand and is easy to operate after a few minutes of fiddling with it. It is a nice piece of functional technology that would benefit those taking their cars out on track or those who want to know what exactly the car is doing or capable of. It is a bit novel, and may lose some of its wow after you have used it for a while, for some it is a must and others would choose to put the money elsewhere; whatever your take is, at least it is an option.
Conclusions:
The 135i is a great car by itself without any modifications but with them, it is a far better car. The suspension is a huge improvement over the stock setup, while you do sacrifice some ride characteristics the handling more than makes up for it. Add in the shifter and exhaust and you have a car that will make you smile every time you get behind the wheel, you will find yourself running to get that bottle of milk you do not need on a regular basis.
After the Geneva auto show we broke the news to the US market that an engine tune was coming for the N54 twin turbo in the 135i/335i. If so equipped you would be hard pressed to find a car that would handle better, sound better, or perform better at a similar price point than a BMW Performance 135i. Of course there are other options out there as far as tuning and we respect them as well, it is just nice to have another choice. BMW Performance parts also come with a true factory warranty.
While we will provide you with a good deal more information about BMW Performance later in the week from our interview, we just thought this review would prepare you for what is to come.
I must say the 135 has grown on me over the past few days.
NEW YORK — In today's economy even millionaires are delaying vehicle purchases, Rolls-Royce CEO Tom Purves says. But he is counting on the brand's 2009 global sales to be level with last year's.
"It is ambitious, but it is possible," says Purves, 60, who took over as Rolls-Royce's global chief last summer after running BMW of North America LLC for nine years.
While Rolls-Royce's first-quarter sales are solid, he says, orders are slowing, and some buyers with orders in the pipeline are asking that delivery be delayed.
The English carmaker has cut 50 days of production this year, 15 to 20 percent of annual output. Rolls is building only vehicles ordered by customers and is not filling dealer orders for stock. The United States is one of the few markets where buyers take cars off the lot.
Last year, Rolls-Royce's worldwide sales rose 20 percent to 1,212 units, and they climbed 7 percent during the first two months of 2009. Rolls-Royce sold 447 cars in the United States in 2008, up 5.2 percent from an estimated 425 in 2007.
At an event here last week, the company offered more details about the so-called Baby Rolls, which debuted as the 200EX concept at the Geneva auto show in early March.
The car goes on sale in the United States next March or April with a turbocharged 6.6-liter engine generating more than 500 hp. About 20 percent of the parts are shared with parent BMW AG, including air conditioning and the gearbox.
Rolls-Royce hasn't announced a name for the car, which will be priced between $250,000 and $300,000. The flagship Rolls-Royce Phantom sedan is priced at $382,000, including shipping.
With planned annual production of 2,000 units, the smaller Rolls will more than double Rolls-Royce annual volume, Purves says.
He says he is not worried about coming out with an ultraexpensive vehicle in a recession.
"It is a brilliant time to launch a new car," Purves says. "New product is extremely valuable in any situation."
At least six directors of General Motors Corp. will soon join former CEO Rick Wagoner in heading out the door.
The Obama administration said Monday that the embattled auto maker aims to replace "a majority of the board over the coming months." Federal officials also confirmed the appointment of Kent Kresa, a GM director since 2003, as its interim board chairman.
Mr. Kresa, 71 years old, was CEO of defense contractor Northrop Grumman Corp. between 1990 and 2003, and previously served on the board of Chrysler Corp. One person close to the company described him as "a safe choice," because he was one of the few GM directors who had run a major industrial company.
Dennis Carey, a longtime acquaintance of Mr. Kresa and a senior client partner at recruiters Korn/Ferry International, called the new chairman "a very down-to-earth, very pragmatic fellow who will do very well dealing with the government" on GM's behalf.
Mr. Wagoner was the only GM executive on the 12-member board. His successor, Frederick "Fritz" Henderson, will likely be nominated as a director, according to a GM spokesperson.
In a statement, Mr. Kresa said the GM board intends "to nominate a slate of directors for the next annual meeting that will include a majority of new directors." GM has scheduled that meeting for August. However, the statement added, "the specific individuals who will be nominated or choose not to run or leave the board are not yet known."
The decision by President Barack Obama's auto task force to replace most GM directors came amid some pressure by company bondholders and other industry experts who had advised the task force in recent weeks, according to people familiar with the discussions. During one meeting, the board was described as "a collection of failed CEOs," and the group was blamed for not prompting GM management to move faster in restructuring the company.
Among the GM board members who may be vulnerable is lead director George Fisher, a retired chairman and CEO of Eastman Kodak Co. Mr. Fisher has consistently backed Mr. Wagoner as the company racked up billions of dollars in losses in recent years. Mr. Wagoner also relied heavily on Mr. Fisher for advice, say people familiar with GM. Mr. Fisher didn't return a call Monday seeking comment.
Mr. Kresa and Philip A. Laskawy, Ernst & Young's retired chairman and CEO, tried for two years to persuade fellow GM directors to replace Mr. Wagoner and other key executives, recalled a second person familiar with the situation.
Messrs. Kresa and Laskawy believed that GM's management couldn't sufficiently change its corporate culture, this person said. Mr. Fisher disagreed, arguing that "we can't get anyone better" than Mr. Wagoner, this individual continued. The dissidents "fought the good fight and lost," the person said. Mr. Laskawy, recently named outside chairman of Fannie Mae, leads GM's audit committee. He didn't return a call Monday seeking comment.
Another longtime board confidant for Mr. Wagoner was Eckhard Pfeiffer, forced out as Compaq Computer Corp.'s chief in 1999. Mr. Pfeiffer couldn't be reached Monday for comment.
Of GM's 11 outside board members, seven have been in place since 2003, the year that Mr. Wagoner became chairman. Its newest member, appointed last year, is E. Neville Isdell, Coca-Cola Co.'s chairman and former CEO. The only active CEO now on the board is Kathryn V. Marinello, chairman and CEO of Ceridian Corp.
The board also includes Erskine Bowles, chief of staff for former President Bill Clinton and now president of the University of North Carolina. He didn't return a call for comment Monday.
Some governance experts consider GM's board fairly weak because it lacks individuals with auto-industry expertise and includes several retirees without recent corporate-management experience. John H. Bryan, for instance, retired in 2001 as CEO of Sara Lee Corp. and has been on GM's board since 2003.
The 72-year-old Mr. Bryan "has been away from business a long time," an acquaintance observed. And "he has been there [on GM's board] too long." Mr. Bryan, a key Obama fund-raiser, didn't return a call Monday seeking comment.
Directors with extensive GM service likely won't survive the boardroom shake-up, said Ralph Ward, an author of books about governance and editor of the publication Boardroom Insider. "The longer you have been" at GM, "the less likely you will be around," he predicted.
It may be easier to remove directors than to replace them, however. The government may encourage GM to add directors with more automotive or industrial know-how, some observers believe. But, Mr. Ward says, "It will be a nightmare situation to get good people."
Ford Motor Co., the only U.S. automaker not taking federal aid, could lose its competitive edge if President Barack Obama is successful in slimming down General Motors Corp. with lower labor costs, debt and dealers.
Obama gave GM 60 days to come up with a new strategy to cut costs with its union, slash debt with bondholders and reduce dealers and brands. If GM does all that, it may have significantly lower costs than Ford, said Lexington, Massachusetts-based auto analyst John Wolkonowicz of IHS Global Insight.
“This really pulled the rug out from under Ford,” said Wolkonowicz, a former Ford product planner. “The government wants to have GM survive as a leaner and greener company and Ford is going to need further restructuring in order to compete.”
Ford has been viewed by analysts and investors as the healthiest among the Detroit Three. It is the only U.S. automaker to secure concessions from the United Auto Workers union, which Ford said will get its labor costs competitive with Toyota Motor Corp.'s by 2011. It also is making progress in reducing $25.8 billion in debt by as much as 44 percent.
Now Obama is asking GM to go beyond the gains Ford has made in labor costs and debt reduction. The administration has raised the prospect of putting GM through a so-called quick rinse bankruptcy of as few as 30 days so that it can tear up contracts with car dealers to reduce a glut of stores and brands.
‘Now What?'
“When all is said and done, you could have Ford standing at the government's door saying, ‘Now what do I do?'” said consultant Laurie Harbour, president of Harbour-Felax Group in Southfield, Michigan. Ford Chief Executive Officer Alan Mulally “has done all the right things, but it could all turn negative if GM gets in a competitive situation that's dramatically different.”
Ford is prepared to do whatever is necessary to remain competitive, including going beyond the cost-cutting efforts already under way, spokesman Mark Truby said. Tomorrow, Ford will offer buyouts valued at as much as $75,000 to all 42,000 of its U.S. hourly workers.
“Our goal is to be fully competitive and not disadvantaged,” Truby said in an interview. “The fact that we're going ahead and doing what we're doing now does not preclude us from doing what we need to remain competitive.”
March Sales Plunge
Ford may report tomorrow that U.S. March sales plunged 45 percent, according to the average estimate of 7 analysts surveyed by Bloomberg. The U.S. auto market overall probably contracted in March for a third straight month, with sales falling to a seasonally adjusted annual rate of 8.8 million, according to 8 analysts. February's rate was 9.1 million.
Ford fell 8 cents, or 2.8 percent, to $2.76 Monday in New York Stock Exchange composite trading. Ford, which posted a record net loss of $14.7 billion in 2008, has lost 51 percent in the last year.
Ford bonds have gained 38 percent this month on average as the second-biggest U.S. automaker seeks to reduce its debt by as much as $11.3 billion, or 44 percent.
GM and Chrysler LLC received $17.4 billion in aid since November to avoid bankruptcy as auto sales reached a 27-year low. The carmakers have been trying to shed debt and workers and trim health-care costs to win as much as $21.6 billion in more assistance. Obama said Chrysler can't survive on its own and gave it 30 days to forge a partnership with Italy's Fiat SpA.
Fuel-Efficient Cars
Obama has ordered GM and Chrysler to come up with a cost and product structure that focuses on making money on small, fuel-efficient cars, traditionally a losing proposition for U.S. automakers.
“This is a coordinated effort to achieve, though GM, what the administration considers important political objectives: energy independence and environmental improvement,” Wolkonowicz said. “Ford needs to find a way to match GM without having to declare bankruptcy to do it. It's not going to be easy.”
Ford is bringing smaller models from Europe, such as the Fiesta subcompact, to appeal to consumers' growing interest in fuel economy as gasoline prices remain volatile. It also has sold brands, such as Jaguar and Land Rover, and reduced dealers.
With a government-backed bankruptcy, GM has the opportunity to cut its retailers deeper and faster. State franchise laws prevent automakers from eliminating independent dealers quickly or inexpensively. When GM closed the Oldsmobile division, it cost more than $1 billion to buy out the dealers.
‘Elephant in Room'
“The elephant in the room is that there are too many dealers,” said analyst Michael Robinet of CSM Worldwide in Northville, Michigan. “Fixing that problem has to be one of the tenants of a successful GM, which means Ford will have to look at its dealer count, too.”
Ford, though, won't have the power of the president or a bankruptcy judge to consolidate its dealers.
“Getting rid of dealers is the hard part,” said analyst Maryann Keller of Maryann Keller and Associates in Stamford, Connecticut. “Bankruptcy handles that for you because you can cancel franchise agreements.”
Ford also may have to go back to the UAW to gain deeper concessions if GM gets the labor savings Obama is demanding. Ford said the deal it reached with the UAW March 9 saves $500 million annually and reduces labor costs, including health and pension benefits, to $50 an hour by 2011, almost par with Toyota's $48 hourly U.S. labor costs.
Ford also persuaded the UAW to accept half the payments to a union retiree health-care fund in stock, instead of funding it entirely with cash. Known as the Voluntary Employee Beneficiary Association, or VEBA, the fund is central to U.S. automakers' efforts to slash labor costs that once ran at $74 an hour.
Cutting Expenses
“The question is can Ford cut its VEBA and union expenses as much as GM,” said auto analyst Brian Johnson of Barclays Capital in Chicago. “It depends on what the union is willing to do outside of bankruptcy.”
Ford, undertaking its largest debt restructuring ever, might have to go farther to match what Obama expects from GM, said Harbour, the analyst. The first phase of Ford's debt restructuring was oversubscribed. Bondholders have until April 3 to tender notes in a cash-and-stock deal valued at 28 cents on the dollar.
“Ford may have to go back to the bondholders, the union and the dealers,” Harbour said. “They should do it now and not wait for GM to come up with its own great deal.”
DETROIT -- As auto sales collapsed, not even Honda could tap the brakes on its North American production fast enough to prevent a huge backlog of unsold cars from piling up.
About 5,000 Hondas are parked at Ford Motor Co.'s now shuttered Lorain, Ohio, assembly plant. The vehicles being stored are Civic and Accord cars, Acura MDX crossovers and Honda Odyssey minivans, models Honda builds in the United States and Canada.
"We overproduced slightly in November and December as the market was falling," said Honda spokesman Ed Miller. He said the number of vehicles in storage has been declining because Honda has cut back production, and dealers will replenish their inventories.
The unsold Hondas landed at the Ford plant, Miller said, because it has rail access and is close to major highways. Honda usually ships cars by rail soon after they are built, Miller said.
Honda also is storing vehicles in other parts of the country near the company's plants, Miller said. If sales improve, Honda's unsold cars in storage could be history by this summer. Miller said the total number of vehicles in storage is less than a full day's production when Honda's U.S. plants are running at full capacity.
"It's not a huge problem," Miller said. "We won't need the overflow area after about June."
Ford's Lorain plant, west of Cleveland in northeast Ohio, built the Econoline van before it closed in 2005
This is a tough time for the very wealthy. Stocks are seesawing. The credit markets are as liquid as a frozen daiquiri. Rage against big Wall Street bonuses has lately taken up much space on Washington's political menu, right alongside proposals to collect more taxes on the top 1% of the American income pyramid.
Despite all this, the makers of ultra-luxury cars -- vehicles priced above $100,000 -- still believe in the American dream. Sure, they have hunkered down and cut production, and some have scaled back certain marketing activities, such as displaying cars at big auto shows. But they aren't giving up on the U.S. market, and, indeed, some see reasons to be optimistic that a recovery in demand could come sooner than some expect.
"Even within the last few weeks, we have seen the optimism of spring," says Marti Eulberg, president of Maserati SpA's North American sales arm. "We are starting to see that in the showrooms." Maserati won't have a display at the New York Auto Show next week. But it will invite potential buyers to see its newest model, the Quattroporte GranTurismo S, at its Park Avenue showroom.
Bentley, one of the super-luxury brands owned by Volkswagen AG, plans to roll out four new models by the end of this year: A GTC Speed, the Azure T, a flex-fuel model called the Continental SuperSports and a "Final Series" version of its big, top-of-the-line sedan, the Arnage. The SuperSports, designed to run on either gasoline or biofuels, will be on view at the New York Auto Show.
The flex-fuel Bentley is a nod to the possibility that in the future, an important slice of individuals with the means to buy super-luxury cars will want those cars to be green. Tesla Motors Ltd., which sells a $100,000 electric roadster and last week unveiled a prototype for a $50,000-plus electric sedan, and Fisker Automotive, which is soliciting deposits for its hybrid-electric Karma sports car, are pushing hard to break the segment's old formula: that super-sized prices needed to be justified by super-sized horsepower.
Bentley just opened a new dealership in Austin, Texas, and Christophe George, Bentley's chief operating officer in North America, was out in Napa Valley last week launching the GTC Speed, a 600-horsepower, 12-cylinder convertible.
Mr. George isn't giddy about the current market. Bentley sales last year were down 24% world-wide, and off 32% in the U.S. He says it's too early to make a forecast for this year. But long term, he says, "the potential for sales is there."
"Millions of people have more than $30 million in net worth" world-wide, Mr. George says. What's lacking now isn't the means to buy a Bentley Continental GT, which goes for about $200,000 new, he says. "What we are currently lacking is confidence in the marketplace."
At Ferrari SpA, North American chief Maurizio Parlato says the company is taking a "conservative approach" to the current year, and emphasizing Ferrari's value as an investment-grade product. "Our cars keep their value," he says. "You put money in the market, and you have no money."
Ferrari is launching a new model, the California, in June. A limited-edition model called the Scuderia Spider 16M is already sold out, Mr. Parlato says. Ferrari plans to build only 499 of the 510hp Scuderia convertibles. If you Google the car, you'll see it has attracted more than one million searches. Mr. Parlato says Ferrari is flying some of the cars to eager buyers.
The super-luxury car market doesn't operate by the same rules as the mass market, of course. All together, brands such as Maserati, Ferrari, Lamborghini and Bentley sell in a year what Ford Motor Co. or Toyota Motor Corp. dealers sell during one or two bad days. Mass-market brands talk about building relationships with customers. The senior executives of ultra-luxury brands know the names of many customers.
Ms. Eulberg looks at the paperwork for Maserati deals so she can get a detailed understanding of who her customers are and how they are paying for their cars. At Maserati's sales volumes, she can do that.
Worried or not, makers of ultra-expensive cars are starting to pay more attention to bread-and-butter issues, such as marketing pre-owned vehicles that need to be resold.
At Bentley, Mr. George says his organization has begun offering warranties and other programs to help its dealers sell second-hand Bentleys. "This pre-owned market is quite new to us," he says. The Continental GT -- which drove Bentley's U.S. sales from a mere 412 in 2003 to a peak of 3,990 in 2007 -- was launched in 2004, so there are still relatively few second-hand ones hitting the market.
For Ferrari, one benefit of the downturn has been to shrink the waiting lists that Mr. Parlato and his staff once had to manage. "Now we have people who want to own a Ferrari," he says, not people who want to snag one and flip it for profit to someone behind them on the list.
Mr. Parlato says he's not too worried about the attacks on Wall Street bonuses and the troubles in the financial industry. "Our customer base is not mainly those people," he says. "Those people are quick buyers" who favor other brands that don't require a waiting list.
"Our people," Mr. Parlato says, "have serious money."
US car industry executives probably did not lose much sleep when Barack Obama lectured them over the need for change early in his campaign for the Democratic presidential nomination.
"The auto industry is on a path that is unsustainable for their business, for their workers and for America, and America must take action to make it right," he said in a speech to industry leaders at the Detroit Economic Club in 2007.
Two years on, Mr Obama is proving he meant exactly what he said.
Hours after forcing the departure of Rick Wagoner as chief executive of General Motors, the president yesterday warned that GM and Chrysler must agree to more radical restructuring before qualifying for additional government support.
Mr Wagoner's resignation marked perhaps the clearest sign yet of growing government influence over the private sector as the White House seeks a more hands-on role in companies receiving federal aid.
"The Obama administration wanted to show the American people that there's a clean slate at GM," said Rebecca Lindland, car industry analyst at IHS Global Insight. "Wagoner was the sacrificial lamb."
The White House has come under pressure to intervene more aggressively in bailed-out companies after facing criticism for its failure to prevent AIG, the insurer, paying $165m in taxpayer-funded bonuses. But the aggressive approach towards carmakers drew accusations of double standards, as critics questioned why Mr Obama was being so tough on Detroit after waving through additional support for Wall Street.
"Detroit is a last bastion of honour," said Thaddeus McCotter, Republican congressman from Michigan. "When will the Wall Street CEOs receiving Tarp funds summon the honour to resign?"
Any perception Mr Obama is being tougher on Detroit than Wall Street would anger grassroots Democrats and powerful unions, particularly in the car industry's Midwestern heartland. But those risks are arguably outweighed by pressure for stronger conditions on government aid, amid growing "bail-out fatigue" among taxpayers.
"Where the Bush administration played enabler to the bail-out junkies in Detroit, the Obama administration thankfully appears to be moving toward a tough love approach," said Daniel Ikenson, scholar at the Cato Institute, a free market think-tank.
Mr Obama's cautious approach drew praise from Stephen Harper, prime minister of Canada, where GM and Chrysler have a large presence. "If we throw a bunch of money in and it fails anyway, or if we have to do it over again in a year and a half, this is an absolute disaster," he told the Financial Times.
"All of the signs are the Obama administration is not prepared to take that risk, and I think that is very positive."
Ms Lindland said the ousting of Mr Wagoner was intended as a signal to unions and bondholders that more concessions were needed to make GM viable - and make clear the administration was prepared to act ruthlessly if sacrifices were not forthcoming.
She said the industry would be watching to see how much farther the government's tentacles would creep into corporate decision-making.
"The real red flag will come if the administration tries telling companies what cars they should be making," she added, referring to Mr Obama's efforts to promote the uptake of fuel-efficient hybrid vehicles.
Some US conservatives warned of a slippery slope towards European-style dirigisme.
"This administration has decided they know better than our courts and our free market process how to deal with these companies," said Bob Corker, Republican senator for Tennessee.
Mr Obama has stressed executives must share the economic sacrifices being made by ordinary Americans and Mr Wagoner appears to have been made the example of that principle.
But many analysts say it would be unthinkable for the White House to allow the car industry to collapse while keeping Wall Street afloat - a reality that Mr Obama all but acknowledged yesterday. "We cannot and we will not let our auto industry simply vanish," he said.
Two weeks ago, Auto Express reported that MINI would be creating a John Cooper Works edition diesel with more than 160 horsepower and improved torque. Now, fellow UK publication Autocar looks to have the details, which includes speculation that the extra oomph will come from BMW engines now used in the 1 Series cars – and they might not just be for JCW models.
According to the report, the white coats at BMW inserted a detuned 2.0-liter diesel that is longitudinally mounted in the 120d into the transverse engine bay of the MINI. The result was a MINI diesel with 40 hp more than the Cooper D, which currently uses an engine that BMW developed with PSA Peugeot/Citroen.
Autocar also reports that the twin turbo lump from the 123d can be fitted to the MINI, which could be used to create a diesel JCW. If they don't detune the engine, that would mean a 7 hp drop versus the gas-engined version, but 105 more lb-ft. of twist and better than 40 mpg when the drivetrain isn't being stomped on. Autocar says that BMW has begun testing the new diesels with an eye on retail sales in 12 months.
With talk of applying the nation's bankruptcy laws to General Motors Corp. and Chrysler LLC in a "surgical" way, the Obama administration has painted a picture of a smooth process that would efficiently clear away much of the auto makers' debt and other ills.
But the recent history of big bankruptcies -- including those of major airlines and auto-parts supplier Delphi Corp. -- suggests the effort will be messier than advertised, especially given the political stakes involved and the complexity of Detroit's problems.
The administration's leading plan would use bankruptcy filings to relieve the auto makers of their biggest burdens, including bond debt and retiree health-care costs, according to people familiar with the matter.
The plan would, in effect, split the assets of the two companies into "good" and "bad" components, leaving the "bad" assets and obligations of both auto makers behind in bankruptcy court.
A "good" GM and a "good" Chrysler would be created from brands and assets deemed to have more value, and proceeds from the sale of those companies would be used to pay off creditors.
The "good" GM would emerge much more quickly from court protection than the "bad" one, spending three to six months there, in a best-case scenario, said one person familiar with the plan.
But rarely has a company as big or as encumbered as GM or Chrysler entered bankruptcy proceedings or tried to navigate the process under the intense public scrutiny the two auto makers are sure to face.
GM alone has $177 billion in liabilities, including $29 billion in unsecured bond debt. Chrysler has $7 billon in secured debt. Both companies have hundreds of thousands of employees and retirees all over the country and multibillion-dollar obligations for retiree health care.
"The No. 1 risk is the parties can't agree to a consensual deal. The government takes away a lot of its leverage by admitting they won't let these companies liquidate," said Peter Kaufman, president of the investment bank Gordian Group, which advises corporate clients on restructurings.
The case of Delphi, one of the world's largest auto-parts makers, shows the obstacles and delays a company can encounter in the bankruptcy process. Delphi, a former GM unit, filed for protection from creditors under Chapter 11 of the Bankruptcy Code in October 2005, and received billions of dollars in support from GM to buy out union workers and fund pensions and retiree health costs.
Delphi originally planned to be out of bankruptcy court by early 2007. But slower-than-expected talks with its unionized labor force and the advent of the credit crisis have kept Delphi in bankruptcy for more than 800 days.
If GM and Chrysler pursue the administration's bankruptcy plan, as most of the two auto makers' insiders now expect, the process most likely wouldn't involve what is often called a prepackaged bankruptcy. In such cases, a company's creditors have already approved concessions and a plan of reorganization before the company enters bankruptcy.
Instead, the process is expected to resemble a prearranged filing, in which there is a less-formal agreement among the parties about concessions. The prearranged route is riskier because constituents can back out if they feel the company's situation or operating environment have changed radically, bankruptcy experts say. For example, if the economy worsens, sales suffer further or a key supplier collapses, bondholders or other creditors could pull out of a deal.
Another unknown is the likely reaction of the two companies' dealer networks. State franchise laws give auto dealers strong protections if auto makers breach their contracts, making it expensive to close them.
"You could also have lawsuits between shareholders who will fight over the valuations of fixed assets or intangibles. The parties have the right to be heard, to prepare experts, to do depositions, to get on the schedule. That drags things out for weeks, for months," said one person familiar with the situation at GM. "There are suppliers and dealers and other claimants we don't even know about."
If GM goes the bankruptcy route, its path may resemble that of Italian dairy giant Parmalat SpA, which entered bankruptcy in December 2003 amid an accounting scandal. The company reorganized in bankruptcy, separating bad assets, old debt and old claims from a "new" Parmalat that exited bankruptcy court in April 2005, about 15 months later.
Many of the "bad" assets were eventually liquidated, but lawsuits between the company, creditors and lenders lingered until 2007.
Auto Workers Share In Employers' Stress
04/01/2009
New York Times
Ron Gettelfinger, president of the United Automobile Workers union, has never worried much about deadlines.
He has bargained for days beyond contract expiration dates. And the Obama administration's deadline came and went this week without the union budging an inch for the restructuring plans of General Motors and Chrysler.
But now he is facing deadlines that will be hard to ignore. In 60 days, President Obama's auto task force will decide whether G.M. can restructure on its own or have to file for bankruptcy protection. A time frame of 30 days is even tighter for Chrysler, which is trying to complete a deal with Fiat of Italy.
There is virtually no chance that the companies can make the necessary cuts without the U.A.W.'s surrendering some hard-won benefits for its members.
''What we've worked for, for 25 years, can be gone in 25 days, basically,'' said Bob Vistinar, an assembly inspector who has spent a quarter-century at the General Motors Technical Center in Warren, Mich. ''That's how fast this is moving.''
If he does not act, Mr. Gettelfinger could imperil the workers he has fought to protect. In bankruptcy, companies can seek to persuade a judge to set aside labor contracts and terminate pension plans, by making a case that they are too expensive, forcing workers to rely on smaller government-provided retirement checks. But Mr. Gettelfinger also has to persuade his members that any cuts would be vital for the companies' survival.
Pressure is mounting. G.M.'s new chief executive, Fritz Henderson, said Tuesday it was ''certainly more probable'' that G.M. would file for bankruptcy. Mr. Obama, on Monday, left no question that the government would not hesitate to go that route if necessary.
One strategy under consideration, according to people familiar with the discussions, is to create a new version of G.M. that will hold its most valuable assets, leaving a company whose pieces could be sold or reorganized.
But Mr. Gettelfinger, who declined to be interviewed, shows no signs he is in any rush. That may reflect his confidence that he has at least some support from a Democratic president, and the backing of others in the labor movement.
Leo W. Gerard, president of the United Steelworkers union, said he believed Mr. Gettelfinger and his union held powerful cards.
''They're in a unique position, in that everybody needs the support of the U.A.W. for this to succeed,'' Mr. Gerard said. ''They are also in a position where, if they save the auto industry, they save it for their members and for American workers.''
At G.M. and Chrysler, Mr. Gettelfinger has managed thus far to protect workers from another round of wage and benefit cuts that have already been accepted by workers at Ford Motor, which is not seeking federal assistance. The workers there made that choice to help maintain Ford's position as the healthiest of the three Detroit auto companies.
Although long-held income guarantees for all laid-off union members are largely gone, the most veteran senior U.A.W. workers still have healthy wages and pensions, generous health care benefits (although not the fully paid premiums the union once enjoyed), ample vacation time, and cost-of-living allowances on top of hourly wages, a benefit given up at Ford.
The U.A.W., possibly in its favor, can also count two advisers to the Obama administration who, at least on paper, appear open to labor's concerns: Ronald Bloom, a former official with the United Steelworkers who is an expert in restructuring, and Edward Montgomery, a dean at the University of Maryland who was named this week to handle matters concerning auto workers and communities with car plants.
Mr. Gettelfinger knows ''he can get a better deal with the government outside bankruptcy court than he can in bankruptcy court,'' said Harry C. Katz, dean of the School of Industrial and Labor Relations at Cornell. ''He doesn't want a judge making the decisions. He wants the moderate and liberal Democrats in the Obama administration to decide.''
Even in bankruptcy, though, it is not always automatic that labor contracts and pension plans are terminated -- something Mr. Gettelfinger doubtless knows by studying other companies.
Although its workers granted deep cuts in other areas, Northwest Airlines froze but did not end employee pension plans while under bankruptcy protection, for example. It subsequently merged with Delta Air Lines, creating the world's biggest airline.
Legal experts say Mr. Gettelfinger could demand government protection for worker pensions and other benefits as a condition for the U.A.W.'s support of any bankruptcy filing.
And, if the federal government were to guarantee the funds that the companies need to operate while under bankruptcy protection, as is expected, the Treasury Department could make it a condition that such benefits are left intact. Such a provision, however, might face a challenge from the auto companies' creditors.
The concessions granted by Ford workers provide a starting point for what G.M. and Chrysler are asking from the union.
Along with cost-of-living adjustments, Ford workers lost some holiday pay and a $3,000 bonus achieved in the 2007 contract, and now earn overtime only after working 40 hours in a week, rather than after an eight-hour day. They have also lost college scholarships for their children, and thousands of dollars a year in tuition assistance (which Ford's white-collar employees also lost).
But Ford's situation is not as dire as those of its crosstown rivals. A crucial issue in the G.M. talks is the $20.4 billion that G.M. owes to a health care fund that will assume its enormous liability for retiree medical benefits. With the government looking over its shoulder, G.M. is likely to ask the U.A.W. for even deeper cuts.
In response, Mr. Gettelfinger might make demands of his own, like the ouster of more top G.M. executives, said Mr. Gerard, the Steelworkers' president. Rick Wagoner stepped down as chief executive and was succeeded by Mr. Henderson.
''Why keep the people who got you into the mess in charge of getting you out of the mess?'' Mr. Gerard said.
Mr. Gettelfinger will have to decide whether to support a bankruptcy filing, and beyond that, what remains sacred in the U.A.W. contract, long the envy of the labor movement, and what is expendable.
While calling him a ''remarkable labor statesman,'' Representative John D. Dingell of Michigan said Mr. Gettelfinger was ''severely limited by what his membership will accept.''
Brett Ward, who has spent 15 years at Chrysler, said he was disheartened by the idea of more cuts. The union ''told us in our last contract that this was what we had to do to make the company viable,'' he said. ''Two years later, they want to go in and carve it like a turkey.''
For Russ Gregg, the prospect of bankruptcy could not have come at a worse time. He retired Tuesday, after 40 years at G.M., where he helped build prototype models of future G.M. vehicles. He is worried about his pension.
''They could end up taking a big chunk,'' he said, sipping on what should have been a celebratory beer in Dillard's Tavern, a suburban bar. ''The company would return, but not before a lot of lives are devastated.''
KANSAS CITY, Kan. -- With his teenage daughter needing a car, Robert Neighbour expects to buy a Toyota Camry. Never mind that the new Chevy Malibu -- built just a few miles from his home -- bested the Camry in a recent reliability survey.
"Toyota has just more consistently done a good job," says Mr. Neighbour, a suburban Kansas City computer-systems analyst.
His skepticism about Chevys represents one of the biggest issues facing General Motors Corp.: Even when GM builds a prizewinner, many Americans still favor a Toyota or Honda. As the latest Malibu collected honor after honor -- including a recommendation from Consumer Reports -- the Toyota Camry outsold it 437,000 to 177,000 last year in the U.S., according to Autodata Corp.
"A perception of inferior quality is the most serious problem facing GM," aside from its financial predicament, says David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.
This week, the Obama administration cited the redesigned Malibu, which hit showrooms in late 2007, as evidence that GM is making higher-quality cars. Under President Barack Obama's restructuring proposal, the government would negotiate or impose severe cost cuts and debt reductions on GM, enabling cars such as the Malibu to pave a new path to profitability.
But the government can't impose upon car buyers a belief that GM makes worthy vehicles, even as the company prepares to roll out a host of new designs. In the next few days, GM plans to introduce a new Camaro also refashioned in hopes of reviving Chevy's lost mojo.
Here in Kansas City, GM's problem is especially evident. The largest taxpayer in Kansas City, Kan., is the GM assembly plant that makes the Malibu. It employs about 2,500 workers and supports at least twice that many jobs at local suppliers.
The Malibu is also a source of local pride: Among auto-assembly plants in North America (including Toyota Motor Corp. and Honda Motor Co. factories), the Kansas City GM plant consistently ranks among the most efficient, according to the Harbour Report, a highly followed analysis of auto-making efficiency. Last year the plant ranked third in overall quality among 67 auto-assembly plants in North and South America, according to the most recent J.D. Powers & Associates quality report. It was bested by two Toyota plants.
Yet even buyers here remain unconvinced. Last year, shoppers in metropolitan Kansas City bought nearly twice as many Camrys as Malibus -- 2,185 to 1,262, according to R.L. Polk & Co.
Despite the local economy's stake in the Malibu, Terry Ruby, a retired Kansas City investment adviser, didn't even consider buying one before opting for a new Toyota sedan last year. "I'm satisfied with Toyota, and I don't think the American cars are equal yet," Mr. Ruby says.
This problem can't be fixed overnight. It took decades for Toyota and Honda to steal big chunks of the market from GM, and it would require years for GM to steal it back -- as rival Ford Motor Co. has learned. The percentage of Ford vehicles on the recommended list of Consumer Reports rose to 70% in 2009 from just 26% in 2002. But Ford has yet to witness any dramatic gain in market share.
"It takes word of mouth," says Bennie Fowler, vice president of global quality for Ford. Still, he predicts: "It won't be long before a Ford vehicle takes its rightful place in the customer's garage."
The problem is, the U.S. auto industry is in no condition to wait very long for buyers to come back. Auto makers are on pace to sell just a little over nine million vehicles in the U.S. this year, a steep decline from the 16 million cars and light trucks they sold in 2007. The sales decline represents the output of roughly 24 auto plants.
In a twist, though, the current financial crisis could actually play in GM's favor. A just-released R.L. Polk & Co. survey of 713 vehicle owners found that 72% were extremely, very or somewhat likely to "consider buying a domestic vehicle to support the U.S. economy."
Despite the inability of Rick Wagoner, GM's former chief executive, to lower costs dramatically enough -- leading to his forced resignation -- the auto maker significantly improved quality on his watch. Just this month, an influential J.D. Power & Associates study found GM's Buicks to be the most reliable vehicles. (Buick shared that honor with Tata Motor Ltd.'s Jaguar brand.) Toyota's Lexus brand was dethroned from the top spot, which it had held for 14 years.
More honors are coming, predicts Jamie Hresko, GM vice president of global quality. When the annual J.D. Power study of new-car quality emerges June 22, "we'll have a handful of products pass Toyota for the first time," he says.
J.D. Power says its survey isn't complete. A Toyota spokesman says, "It's premature to be calling that race." The Toyota spokesman adds that though the Malibu beat the Camry in that initial-quality survey last year, "Quality is a marathon, not a sprint."
Obama administration officials find the Malibu and Buick honors especially encouraging because they involve cars instead of fuel-guzzling trucks or sport-utility vehicles. Since 1980, the percentage of GM sales coming from trucks has risen to 57% from 22%.
"GM earns a disproportionate share of its profits from high-margin trucks and SUVs and is thus vulnerable to energy cost-driven shifts in consumer demand," said the administration's summary of GM's business prospects, which called for a shift to fuel-efficient cars.
The hope for the Malibu is that it will launch a new era of car supremacy at GM's flagship brand, Chevrolet, which accounts for nearly 60% of the auto maker's sales. Once primarily a purveyor of cars, Chevrolet now gets two-thirds of its sales from trucks.
With GM planning to downsize, kill or sell Pontiac, Saab and Saturn (all primarily car brands), any GM turnaround will depend greatly on recapturing the glory days of cars at Chevrolet.
The redesigned Malibu is the latest iteration of a nearly decadelong effort by Chevy to improve its cars' image. The next wave will arrive in coming weeks with the relaunch of the sporty Camaro, as well as the unveiling of the compact Cruze and the electric-powered Volt. GM officials say each of those cars will have undergone a design and engineering process as rigorous as did the 2008 Malibu.
"The Malibu was a turning point," says Gary Kovacic, the engineer who oversaw the redesign.
A signature of the heyday of Chevy cars, the Malibu was introduced in 1964 as the fanciest option on a variety of Chevy body styles: two-door coupes, convertibles, four-door sedans and eventually station wagons. Stylish, powerful and well-appointed, the early Malibu remains a hot item among classic-car collectors. In 1983 it was phased out as gas-guzzlers lost popularity and as Chevy moved deeper into the truck market.
In 1997, Chevy reintroduced the Malibu, hoping it would become a star in the largest category of vehicles in the U.S., the midsize sedan. In this category, buyers wanted fuel efficiency, reliability, low price, safety ratings, and ideally, pizazz.
Year after year, the boxy Malibu received mostly lukewarm reviews. The Malibu offers "little in the way of luxury or road-going excitement," said a Cars.com review in 2003, which found the car "acceptable" in a category where the Toyota Camry and Honda Accord were widely hailed as exceptional.
The Malibu's makeover was the brainchild of Robert Lutz, who before joining GM in 2001 as vice chairman of global product development had displayed a flair for conceptualizing appealing vehicles at Chrysler, such as the low-slung Dodge Viper two-seater, and Ford, where he helped create the Explorer SUV.
After arriving at GM, he convened a team of designers, engineers and marketers and ordered up a redesign of the Malibu. He wanted it to be a star. "That meant rich, beautiful exterior design. An interior better than any offered by the Japanese 'Big Two,' " Mr. Lutz recalls in an email. Other qualities he wanted to see: good handling and "great" fuel economy.
Leaders of the team say Mr. Lutz made clear that the goal wasn't to improve upon the existing Malibu but to beat the competition. Their assignment was to create a car with a base price starting just above $20,000 but with the look and feel of a luxury sedan.
They spent weeks studying the Camry and Accord looking for weakness to potentially exploit. They studied the low-end products that fashion designers were crafting for Target Corp. discount stores, in search of secrets to a luxurious look at non-luxury prices.
From the study of the Camry and Accord, Mr. Kovacic says he concluded that they were either "too loose or too crisp in their handling," giving the Malibu a chance to try to identify a sweet spot in the middle. The designers also added features usually found on luxury cars, such as chrome trim and "ambient" interior lighting that casts a more muted glow, as opposed to the harshness of an overhead lamp. They spent months rounding off the edges of the exterior in search of what lead designer Clay Dean calls "nobility."
Meanwhile, engineers spent weeks silencing vibrations, buzzes and engine noise -- a criticism of the previous Malibu. They also spent weeks trying to strike the right balance between a crisp and a comfortable ride. Too "comfortable," and the steering and suspension can feel mushy. But crisp, taut handling can make for a bumpier ride. In fuel efficiency, the four-cylinder Malibu just squeaked past the Camry.
Critics heaped praise. "The new Malibu is arguably one of the best cars GM has ever designed and built," says Ron Harbour, an industry consultant. A Kelley Blue Book review said it looked like a $40,000 car. "This vaults Chevrolet straight to the top of the mid-sized sedan game," it said.
GM officials say they knew it wouldn't shoot to the top of the marketplace, for several reasons. The economy was tanking. Sales of the previous Malibu had declined sharply in recent years, forcing the auto maker in 2007 to sell 40% of its units to rental agencies -- which had the effect of flooding the used-car market with many almost-new Malibus recently, since rental cars are retired quickly. In addition, buyers are often disinclined to purchase a new or redesigned model in its very first year, before kinks are worked out.
"It takes a long time to break through," says GM spokesman Dee Allen. "We have trouble getting people to even give the Malibu a try."
Still, the redesigned Malibu sold more than 50% more units last year than in 2007. Its share of the midsize sedan market rose to 8.4% from 5.7%, while the Camry and Accord percentages remained flat at about 21% and 17.5%, according to GM. Sales to rental customers dropped to 27% of the total. That's still dramatically higher than the Camry or Accord, but GM says it limited rental-fleet sales in 2008 to the top-of-the-line Malibu, as a marketing move.
That approach may have worked on Ted Beringer. The Kansas City-area teacher had expected to replace his 2007 Camry with another Camry until a rental agency placed him in a redesigned Malibu. "Next time I buy a new car, I will definitely give the Malibu a test drive," he says.
Meanwhile, GM is using all the awards the Malibu garnered in its advertisements, a tactic Toyota and Honda have used against it for years. It worked for Kansas City banker David Kenny. A longtime Toyota buyer, he had just assumed he would buy a Camry last year when he and his wife decided to get a new sedan.
But the various honors lavished upon the new Malibu prompted them to give it a test drive. To their surprise, they preferred it. They bought one last August.
That kind of story gives the 77-year-old Mr. Lutz, who is retiring at the end of this year, hope for the future of GM. "Malibu, I think, has begun to break through the 'negative awareness' barrier," he says.
With its crosstown rivals on the ropes, Ford Motor is painting itself as Detroit's standout -- the only U.S. automaker weathering the auto sales depression without taxpayer life support.
While that may be a short-term accomplishment, Ford is reaching for much more. CEO Alan Mulally is trying to guide the 105-year-old company closer to the model of a foreign rival he makes no secret of having long admired: Toyota. In doing so, the company is anticipating how the auto world may be realigned by the time the global economy finally rebounds.
"I would love people in the future to say, 'There's Toyota and Honda and Ford,' " says Ford's North American chief Mark Fields. "We have the goods to do it."
In more than two years on the job, Mulally has tried to instill in Ford Toyota-like discipline and global product integration. He is intent on polishing into a jewel the Ford brand that had been allowed to become ho-hum. Like the Japanese company's famously long view, Mulally wants to look decades down the road, not months.
Make no mistake: Ford's emulation of the industry's halo company doesn't mean it's in the same league, yet. Not with the heavy debt load it still is trying to cut, a product portfolio in the U.S. still lacking in highly profitable small cars, and improved reliability still trying to erase missteps of past years in consumers' minds.
"Ford is being Ford. They aren't in as good of shape as you think," says Jim Hall of 2953 Analytics.
Ford was the financially sickest of the Detroit Big 3 when Mulally took over. That's hard to believe now with the situation so dire for General Motors and Chrysler. In recent days, the Obama administration forced out GM CEO Rick Wagoner and gave it 60 more days of limited financial support along with orders to accelerate a drastic restructuring and downsizing. And it judged Chrysler as no longer able to stand alone, giving it 30 days to conclude an alliance with Italy's Fiat as a condition of receiving a loan to facilitate the combination.
Ford has tried to float above that turmoil, even as March sales figures due out today are likely to show the industry's worst downturn in decades has yet to hit bottom.
Similarities between Ford, Toyota
The interest of Mulally, who used to drive one of Toyota's Lexus luxury cars before he joined Ford, in his Japanese competitor is more than a case of if-you-can't-beat-'em. The two companies have several things in common: Both still are heavily influenced by their founding families, the Fords and the Toyodas. Both innovated production methods that set standards for the industry. Both set new marks for the treatment of industrial workers.
Lately, they've added a few more common attributes to that list:
*Finances. For the moment, both are losing money, but surviving. Toyota has socked away a lot of savings. Ford lacks that kind of cushion, but Mulally swears it has enough cash to weather the recession without a dime of government loans.
As the economy boomed in late 2006, Mulally raised $23.4 billion in fresh capital by mortgaging much of the company's assets. Despite the credit squeeze that choked off sources of more cash and the industry sales collapse, Ford was able to weather a record $14.6 billion loss in 2008. Now Ford is trying to reduce its unsecured debt by two-thirds and its overall debt from about $36 billion to about $25 billion through a cash-for-debt swap to bondholders that expires Friday.
Toyota, too, is expecting to report a big loss for its 2008 fiscal year which ended Tuesday -- an estimated $3.8 billion.
*Quality. Ford's quality is improving, independent surveys show, even if the word hasn't exactly broken out on the bicoastal cocktail party circuit.
Ford's domestic brands -- Ford, Mercury and Lincoln -- all were above average in J.D. Power and Associates' 2009 Vehicle Dependability Study. Mercury, in fact, was fifth, right behind Lexus and Toyota.
"Their best performance in five years," says Power's Dave Sargent, vice president of automotive research. And he says this took real work. "Quality is not something you can spray on the vehicle."
Closely watched Consumer Reports also lauded Ford in its latest check of reliability. Of the 12 Ford-brand cars and trucks listed, nine, or 75%, got its "recommended" rating. That tied the percentage for Toyota-brand models. By contrast, GM's Chevrolet had only 21% of its models recommended, and Chrysler's Dodge had none.
*Labor. There's no avoiding the fundamental difference between Toyota's and Ford's factories in the U.S: Ford is a union shop, and Toyota, by and large, is not. But Ford just negotiated concessions with the United Auto Workers that Ford says will save $500 million a year and make its labor costs fully competitive with Toyota's in the U.S. over the next of couple years.
*Profitable cars. Toyota has thrived on a consistent lineup of dependable high-volume cars with names that consumers recognize -- and pay a premium for: Camry and Corolla. Ford once had a top seller in the Taurus, but largely abandoned its commitment to cars to chase higher profit margins in pickups and SUVs.
Now Ford is serious about the car business again. Ford is bringing in its best small cars from Europe, starting with the car-like Transit Connect utility vehicle, a Fiesta subcompact and a new Focus subcompact co-designed for both continents. Mulally revived the Taurus name first by sticking it on an unremarkable existing sedan, but he is about to start selling an all-new version that has gotten critical buzz for its sharp-edged looks.
*Hybrids. Ford is the largest domestic maker of hybrids, while Toyota is the larger seller of them overall. Ford boasts that its midsize Ford Fusion hybrid sedan, just out, gets better gas mileage than Toyota's Camry hybrid sedan, although it falls shy of Toyota's gold-standard hybrid Prius. Ford was the first domestic automaker with a full hybrid, the small Ford Escape SUV.
Ford chief has long been a fan of Toyota
Mulally traces his admiration of Toyota to the 1990s, when he worked at Boeing. By the time he was hired away by Ford, he had become CEO of Boeing's commercial aircraft division. He loyally jettisoned the Lexus he was driving when he was hired, but not his respect for its maker.
"I clearly have been a student of Toyota for many, many years," says Mulally in an interview. "I absolutely believe Toyota's fundamental premise is they are in for the long term, that they make products people want, and they are going to use minimum resources and minimum time to do that."
Like the Toyota brand, the Ford brand name lacks glam. Mulally has summarily booted Ford's couture collection -- Aston Martin, Jaguar, Land Rover and likely soon, Volvo -- to focus cash reserves and energy on reviving the core Ford name and its values.
While Mulally is lavish in his praise, he's careful to draw a line. Ford is not trying to blindly copy Toyota, or any other company. But the Japanese giant -- now the world's largest automaker -- is a worthy standard for measuring progress. "I've done a lot of benchmarking of Toyota over the years. I did it at Boeing," he says.
Much of what Mulally admires about Toyota was inspired by a book about the company he read a decade ago. The Machine That Changed the World detailed the waste-reducing lean production methods that came to define the Japanese automaker.
The book's author, James Womack, credits Mulally for moving Ford to some of the basic strengths -- "blocking and tackling stuff" -- that define Toyota. But he isn't ready to elevate the Detroit automaker to the same level.
"They have a hard time sailing in a straight line," he says of Ford. Mulally has outlined a long-term focus for Ford's future, but Ford's history is filled with strategic zigs and zags. Things like an SUV fixation, a buying spree on luxury brands such as Land Rover and Aston Martin and former CEO, now Chairman, Bill Ford's insistence that Ford become the environmental automaker.
The strategy now, tuned to these recessionary times, is a back-to-basics approach that aims to highlight the no-frills Ford brand.
Some of those who know the company well caution against reading too much into a comparison to Toyota. Certainly not in financial strength, for instance.
It hurts, too, that Ford can't command as high a price for similar vehicles. That's a problem anytime, but it's going to hurt even more with Ford's next generation of vehicles to meet higher government fuel-economy rules. Turbochargers and other gas-saving technology will make cars more expensive to build -- costs that need to be recouped through higher sticker prices on the sales lot. Toyota has pricing muscle that Ford currently lacks.
The guy that Ford will count on to sell smaller vehicles with bigger price tags is marketing chief Jim Farley. He believes Ford can compete, saying the new models will look, feel and perform better.
Former Toyota executive gives Ford insight
If anyone at Ford is qualified to judge how well the new models will stack up next to Toyota's, it's Farley. He spent 20 years at Toyota, launching the Scion line of youth-oriented vehicles in the U.S., introducing the Tundra pickup to the working class, then running snooty Lexus -- before being plucked by Mulally in an industry coup.
"Ford reminds me of what Toyota was like 20 years ago," he says. At Ford, "there is a single-mindedness to the business plan and the product execution." That's what Toyota had, he says. But now, "Toyota has gotten so big around the world that it's hard to have that single-mindedness."
He echoes Mulally's themes -- consistency of product around the world, discipline, long-term focus. Yet he notes differences. For example, Toyota has an intense bottom-up culture. Ford has always been top down.
To be more nimble, Ford has put one executive in charge of its cars worldwide. Derrick Kuzak's mission, as he puts it, is to "make those vehicles consistent in look, sound and feel in all markets globally."
He is reducing the number of chassis on which vehicles are built by 40% to eight.
The goal is to raise the quality of the small cars overall and make them profitable by achieving global volume. If Ford can build small cars better at less cost, it will make money in a product segment where profits have eluded Detroit makers.
To make those cars better, Ford has had to make some attitude adjustments.
"In the past, we made big boasts about how we would beat Toyota and rah-rah-rah pep rallies," says Ford's North American chief Fields. We "never lived up to them."
Now the attitude is, "Let's not beat our chests. Let's lay out the factors that produce good quality and hold ourselves accountable."
Honda Motor is planning an unprecedented 13-day shutdown of its major North American car factories this summer in an effort to reduce a glut of unsold vehicles.
Japan's second-biggest automaker, whose US sales have plunged along with those of rival producers, said it would also cut the pay of white-collar staff in the region and offer buyouts to idle workers.
The steps amount to a rare retreat for Honda in North America, its largest market for passenger cars worldwide. The company has steadily increased its production capacity in the region since it opened its first US motorcycle plant in 1979, and its local operations currently employ about 32,000 people.
Honda said the factory shutdowns, which will affect six plants in the US, Canada and Mexico beginning next month, would reduce output by 62,000 vehicles. Honda made 1.4m cars in North America last year but has not announced a target for 2009.
Honda declined to say how large the pay cuts would be or how many workers it hoped to shed. Most of its North American employees will be eligible for early retirement under the buyout scheme.
Honda entered the global recession in better shape than many of its peers, analysts say, due to its focus on small, fuel-efficient cars. But in recent months its sales have fallen nearly as sharply as those of other carmakers, many of which have resorted to steep discounts to clear unwanted vehicles off their lots.
Honda's US sales fell 38 per cent in February against declines of 37 per cent for Toyota and Nissan, its main Japanese rivals, and an industry average of 41 per cent.
Honda is the only one of Japan's three top automakers that has not warned of a net loss for the business year that ended on March 31. Yet even Honda has cut its earnings estimates four times since last July and predicted a big operating deficit for the latest quarter.
Honda has already pulled out of Formula One racing to cut costs. (Its long-struggling team, now under the control of a former manager, won the Australian Grand Prix at the weekend.)
maybe they'll sell them cheap.
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