Chinese Automakers Sharpen Export Plans at Shanghai Show

By Mark Bursa

Will history judge that the 2007 Shanghai Auto Show was the tipping point for the Chinese car industry?

Did the vast array of new models on display signal the moment when the Chinese automakers stuck their red flag in the ground and said, "Here we are –- take us seriously"? Or were we just looking at another load of rip-off designs that won’t meet global safety or environmental standards, with silly Chinese names?

The truth is somewhere in the middle. But one thing’s for sure. The Shanghai auto show is now a premier event on the global auto industry calendar. The fact that BMW, General Motors and Audi all chose the event to unveil significant concept cars gives ample evidence that global carmakers are taking the show very seriously indeed.

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Edmunds.com Forecasts Weak April Sales

Automakers announce April vehicle sales tomorrow (May 1), and it isn’t expected to be a particularly pretty picture for the industry. In fact, it could wind up being one of the weakest Aprils in recent history for total industry sales.

Edmunds.com is forecast April new vehicle sales (including fleet sales) are expected to be 1.29 million units, a 10.4 percent decrease from April 2006. The reasons for the decline are many: less selling days in this April than last; reduced fleet and rental car sales; and a lack of consumer confidence that suggests little pent-up demand for vehicle purchases exists.

The numbers will also show some shifting trends in the auto industry -– most notably from minivans to crossovers.

"This month, due to two less selling days, a decrease in production along with reduced fleet and rental sales by domestic manufacturers, we will have one of the weakest April’s in recent history for total industry sales," said Jesse Toprak, executive director of Industry Analysis for Edmunds.com.

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Edmunds.com, Inside Line Win Journalism Awards

Edmunds.com, the premier resource for automotive information (and parent of AutoObserver), and Inside Line, Edmunds’ high-speed online car magazine, were awarded six 2007 International Wheel Awards for excellence in automotive journalism presented by the Detroit Press Club Foundation.

Winners were selected by professor-judges from the the Medill School of Journalism at Northwestern University in Chicago. The awards were presented during a ceremony on April 26 at the Automotive Hall of Fame in Dearborn, Michigan.

Edmunds received half of the awards presented in the Internet category, including all three Internet photojournalism awards.

“This is a credit to our entire editorial department, and we’re excited to be recognized by our peers for the work we produce. These awards highlight the talented team we have at Edmunds.com, Edmunds’ Inside Line and Edmunds’ AutoObserver.com,” said Kevin Smith, editorial director for Edmunds. “The Internet has become the leading source of information and entertainment for automotive consumers and enthusiasts, and these awards clearly demonstrate that Edmunds.com and Inside Line are the leaders in that space."

Winners of the Wheel Awards from Edmunds.com and Inside Line are:

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Exclusive One-on-One Interview With Toyota’s Jim Press

It’s been an eventful month for Jim Press, president of Toyota Motor North America.

Earlier this month, Press was named the first non-Japanese to the Toyota Motor Corp. board in Tokyo; about a year ago he became the first American to head Toyota Motor North America. And then, just this week, Toyota surpassed General Motors for the first time in history in global car sales; a move long expected but not clear when it would happen.

In an exclusive one-on-one interview with AutoObserver Thursday, Press shrugged off both events as not terribly significant.

Toyota’s No. 1 spot, he says, is not a milestone or accomplishment; rather it is the result, he claims, of doing what Toyota does: building quality, reliable cars with good value and taking care of customers.

He calls his role as the first non-Japanese on Toyota’s board an evolution and inevitable as the carmaker grows as a global company with the bulk of its sales outside of Japan. He sees his role as a conduit for communications between Toyota in North America and back to Japan and from Japan back to North America.

He adroitly responds to critics who charge the now No. 1 Toyota faces challenges as it grows, such as risking becoming complacent or even arrogant, stretching its lean human resources beyond their limits and missing promising opportunities due to its leanness.

As for the future of Toyota in the global auto industry, he predicts in another 10 years, only about a half-dozen major auto companies will exist –- and Toyota will be among them. And future drivers will be tooling around in plug-in hybrids of all kinds.

Here’s a transcript of Press’ exchange with AutoObserver:

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The Price of Fuel-Efficiency

Small and fuel-efficient vehicles are great for the environment, consuming less gas and emitting fewer pollutants. And they are terrific for consumers’ wallets, socked by increasing gas prices that are threatening to surge to $4 a gallon, according to some reports.

But small, fuel-efficient and usually inexpensive vehicles aren’t so good for the bottom lines of car companies and municipalities.

Today, Honda announced an unexpected 3 percent decline in profit this year, in part, due to the global shift toward small cars that are popular but deliver lower profits.

At the same time, state highway officials, who use gasoline taxes to build and maintain roads, are sounding the alarm that not enough money is coming in for roads due to the shift to smaller, fuel-efficient cars.

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Why Chrysler Needs Its Unions on Board

"Who cares about the union?!” “Screw the union.”

I constantly get those kinds of remarks, particularly of late in regard to the sale of Chrysler -- in emails, in feedback to AutoObserver entries and by folks on the street.

Bottom line: Unions can make automakers miserable. And the proof is in this history lesson:

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So, Toyota’s No. 1. What Now GM?

We’re recovering from the shell shock of Toyota dropping the bomb that it had surpassed GM as No. 1 in global sales in the first quarter –- news the industry had expected. It was a matter of not if but when.

“This was not an unexpected turn of events,” said Edmunds.com Senior Analyst Jesse Toprak, “but it happened a bit earlier than forecasted.”

And, as I told NBC’s Detroit affiliate Tuesday, it’s also not the end of the world. While certainly not a positive trend -– no one likes being No. 2 when they’ve been No. 1 for more than seven decades -– GM’s dethroning could have a silver lining. The pressure is off to maintain the No. 1 sales spot, while allowing GM to focus on the more important race -– the one for profitability.

As a Detroit marketing professor told a local reporter: “[GM is] no longer the New York Yankees. They can be the pursuer rather than the pursued.”

At the same time, Toyota will don the bull’s eye of the press and public, while it struggles to ensure quality, control costs and maintain profit margins during its rapid growth.

But what now for General Motors?

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GM’s OnStar, MapQuest Connect

General Motors’ OnStar communications system is linking with MapQuest, the Internet mapping service, to allow OnStar customers to send MapQuest directions directly from their computer to their car.

GM is launching OnStar Web Destination Entry initially as a pilot program this summer with 3,000 customers, representing a wide demographic and geographic swathe, to help the companies work out any kinks in the connection.

GM then will make the service available by the end of the year or early next year on at least 2 million GM vehicles. GM vehicles must be equipped with the latest Gen 7 version of OnStar with Turn-by-Turn Navigation capability to have the MapQuest capability. All Buicks and Cadillacs come standard with it now. Saturn recently launched it across its line.

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Halberstam’s "The Reckoning" Still a Must-Read

Writer and reporter David Halberstam, who died in a car crash Monday at the age of 73, is best known for his Vietnam War reporting, for which he won the Pulitzer Prize, and other best-selling books.

But in Detroit and the auto industry, he’s recognized for his groundbreaking work, The Reckoning, a study of the American and Japanese automobile industries, using Ford and Nissan as its study subjects.

Upon news of his death, I recalled running into the amiable Halberstam in the elevator of Ford’s Glass House headquarters as he was researching the book. I also recalled Halberstam being pooh-poohed in some Detroit quarters because, when his book was released in 1986, the fortunes of Ford and Nissan had reversed from their situation in Halberstam’s book. Ford was on a roll, having just introduced the trend-setting Taurus; Nissan was in a slump.

But that reversal of fortunes proved temporary. Today, Ford is in dire straits; Nissan, while stumbling a bit, has experienced a phenomenal turnaround.

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Toyota Tops General Motors

Toyota became the world’s No. 1 car company for sales for the first three months of this year. Toyota surpassed General Motors, the world leader for 76 years, for the first time.

While the figures announced today represent only quarterly sales results, they may well foreshadow the inevitable: Toyota will become No. 1 as early as this year.

Toyota has claimed that surpassing GM is not its goal, Toyota president Katsuaki Watanabe told reporters in December. “It will only be a result of what we've been doing,'' he said.

But don’t believe for a second Toyota’s goal -- or Watanabe's goal -- isn’t to surpass GM. Toyota desperately wants to be No. 1. Watanabe -- described as sharp, very aggressive and even a bit arrogant -- wants Toyota to be No. 1. The automaker just worries about what goes along with being No. 1.

And being No. 1 is tough. Just ask GM.

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What’s Up with Cerberus?

Cerberus Capital Management, a private equity firm bidding for Chrysler, likely will withdraw its bid for bankrupt Delphi Corp. and dropped plans to buy pieces of auto supplier Collins & Aikman leading auto observers to wonder what’s up with Cerberus.

Plans of closed-mouth Cerberus have been intriguing, as it has added to its automotive portfolio and stable of high-horsepower talent. Cerberus bought a chunk of General Motors Acceptance Corp. and agreed to buy bankrupt supplier Tower Automotive for $1 billion. As it contemplated its bid for Chrysler, it added Chrysler/Volkswagen exec Wolfgang Bernhard as an advisor; its automotive unit is run by ex-Ford exec David Thursfield.

However, last Friday, Cerberus appeared to be reversing its course. Delphi said Cerberus likely would withdraw from a group of investors who had bid $3.4 billion for auto supplier because the UAW refused more concessions. Also on Friday, Cerberus canceled its tentative agreement to buy the carpeting and acoustic materials businesses of bankrupt Collins & Aikman.

The latest moves of retreating are as curious as Cerberus massive efforts to enter the auto business. Is Cerberus getting cold feet about the automotive industry? Does it think it is over-exposed in the auto segment? Did Cerberus underestimate the power and resolve (or stubbornness) of the unions? What do these latest moves mean for its Chrysler bid?

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Round Two of Chrysler Bids Expected

Parties interested in buying Chrysler are expected to submit a second round of bids, described as more detailed, refined ones, this week and beyond. After that, the bids are likely to be narrowed to only a couple and then a leading candidate.

All of the proposals currently in the hands of DaimlerChrysler reportedly include giving the UAW a stake in Chrysler in exchange for cuts in health care costs.

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Santa Monica Hailed as Pioneer

A page 1 story in the Detroit Free Press hailed Santa Monica, California, as leading the way in shifting the transportation paradigm away from petroleum to other fuels.

The article, entitled “California city leads in taking foot off the gas,” discusses efforts by Santa Monica, home of Edmunds.com, to convert its gasoline-powered vehicles to alternative fuels a move that started in 1994.

About 81 percent of the city’s fleet runs on something other than petroleum today. Santa Monica uses an array of vehicles and fuels, from street sweepers running on natural gas to 24 fully electric Toyotas. The city is installing electric chargers in public parks and parking garages to encourage more electric vehicles. The city's goal is to make its entire fleet petroleum-free and be the first in the nation to draw all its electricity from the sun or wind in the next 20 years.

"Santa Monica is leading the way. It's changing the transportation paradigm on what can be done, what is possible," Chelsea Sexton, an electric car and alternative-fuel advocate and former General Motors employee who worked on GM's first electric car program, told the newspaper.

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With Aston Gone, Jaguar Gets Another Shot

By Mark Bursa

The sale of Aston Martin has gone a long way toward clearing up the brand confusion within Ford’s Premier Auto Group.

About time, too. The muddled mass of British luxury nameplates, created by former Ford CEO Jac Nasser in 1999, has singularly failed to present a serious challenge to BMW, Mercedes-Benz and Audi. And it’s been a drain on Ford, largely because it includes the financial black hole that is Jaguar.

So selling Aston to a wealthy consortium headed by respected British motorsports figure David Richards is both a good deal for Ford, which gains a useful $848 million windfall, and good for Aston, which departs PAG with a stable of modern cars and the technological resources, via Richards’ Prodrive organization, to keep on growing.

And it just might turn out to be the best result for Jaguar, too, giving the brand some clear direction at last.

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New Meaning for Music to My Ears

Trade journal Advertising Age contains an intriguing article in the April 16 edition on how companies and their advertisers are developing sounds for brands.

“What does your brand sound like?” the article opens. Those interviewed for the story have various terms to describe branding through sound, including “sonic branding” and “permanent resonance.” Said one advertising exec in the story: Music “tattoos a permanent resonance in your brain,” like learning the alphabet through music or remembering advertising jingles from childhood.

Audi in France took it to another level, creating an album specifically for the female demographic it was targeting for the TT roadster. Ad agency DDB Entertainment Paris paired up with sound designer Beatrice Ardisson, famous in Europe for designing ambient music for Paris hotels, for instance. She already owned a TT and fit the target demographic: a woman of means and “a certain age.”

The result was an album by Ardisson, entitled Take Me for a Ride, intended to depict the feel of what it’s like to drive the TT in the universal language of music.

Sound branding gives new meaning to "music to my ears."

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GM Sticks With Sweden Plant

Within General Motors’ announcement this week of investments in plants and next-generation models worldwide was the largely overlooked fact that GM has further committed to Saab with a new car and with a future for Saab’s assembly plant in Trollhättan, Sweden.

Speculation has swirled for years that Swedish automaker Saab would no longer build cars in its homeland and its Trollhättan plant was doomed as GM shifted to global platforms and moved future production for its 9-3 and 9-5, based on the Opel Vectra, to Germany.

Not so with this week’s announcement. The Trollhättan plant will make a new compact car to slot beneath the current Saab 9-3. The car will be based on the next-generation Opel Astra. The Astra also will be sold later this year as the Saturn Astra in North America.

GM announced this week that it would replace the existing Astra in early 2010. The automaker said it would invest 3.1 billion euros in the compact car, which will be assembled in Germany, the United Kingdom, Poland and Sweden.

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The Meeting We Wished We'd Attended

We're not fans of meetings, but for this one, we would have loved to have been a fly on the wall!

General Motors Vice Chairman Bob Lutz met with David Friedman, research director of the clean vehicles program for the Union of Concerned Scientists, this week to discuss fuel economy improvements.

The environmental group has been pressuring automakers for improved fuel economy and lower emissions, having recently given awards to the best performers in those categories. Honda won; not GM.

Lutz, meantime, has been arguing that an affordable technical solution for improved fuel economy doesn’t exist.

Both sides agreed to keep details of their meeting private, but it doesn’t appear either side budged an inch from their position.

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Edmunds' Analysis: Ford Lags in Shopping Consideration

If you watched American Idol this week, you might have seen two new ads for the Ford Edge. The commercials were directed by Pulitzer Prize winning writer/director David Mamet.

Using Mamet’s signature for dark imagery and fast-paced dialogue, the spots feature two men sitting, each in a Ford Edge. Talking out their windows, they boast the Edge is quieter than a Lexus RX 350 and quicker than a BMW X5.

The ads -- Mamet's first -- are Ford’s latest attempt to draw attention to its vehicles and convince consumers to put Ford vehicles on their shopping lists.

An analysis of March shopping consideration trends by Edmunds.com’s AutoObserver shows Ford has much room for improvement in that regard.

Ford's newest models, including the Edge and Fusion, run midpack among vehicles considered by shoppers within their segments. Ford’s Mustang and F-150 pickup top their segments for shopper consideration. But Lincoln and Mercury vehicles barely generate a blip on shopper radar screens.

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Ford Sale or Partnership Not Ruled Out

Ford Chairman Bill Ford and Ford CEO Mulally do not rule out an eventual sale or partnership for the company, according to interviews in a new magazine.

"We felt the best thing we could do was get our house in order. That doesn't preclude anything down the road. Because even if ultimately a partnership made sense, we'd be a much stronger partner if we were a strong stand-alone company," Bill Ford told Portfolio, a new Conde Nast business magazine released today.

The lengthy article headlined "Driven to the Brink," written by Betsy Morris, appears in the debut issue of Portfolio. The article reveals Ford family members, who own a controlling interest in the auto company, were pressuring Bill Ford to find an outsider to run the company.

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Food, Oil Companies To Co-Produce Biodiesel

Tyson Foods and ConocoPhillips announced Monday they had formed an alliance to produce and market diesel fuel made from pork, poultry and beef fat.

Tyson will provide the feedstock from its rendering plants. ConocoPhillips will refine it and distribute it through its existing pipelines. The fuel, said to burn cleaner than conventional diesel, will be available by year-end. The venture will produce 175 million gallons a year by 2009.

The deal points to two emerging trends: the shift of agribusiness to transportation fuel and the surge in biodiesel, expected to grow to 1.2 billion gallons in a decade from today’s 250 million gallons.

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Cerberus’ Delphi Offer Stalled

Cerberus Capital Management, a private equity firm leading a $3.4 billion bid to buy bankrupt auto supplier, Delphi Corp., may be stalled because the United Auto Workers union refuses to cut future wages and benefits for new hires. Cerberus’ offer is contingent on favorable negotiations with the union.

Cerberus also is a bidder for Chrysler. Industry observers speculate Cerberus’ inability to get a deal from the union may sour its plan to also buy Chrysler since it surely will want concessions from Chrysler’s unions as well.

Meantime, General Motors, which created Delphi by spinning off its parts-making operations, may be forced to further subsidize Delphi to keep it afloat.

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Nissan Misses Sales Target

Nissan Motor Co. confirmed it may miss its goal of selling 4.2 million vehicles in the year ending March 2009, as put forward in its three-year business plan revealed in April 2005.

Failure to make its target is blamed on a lack of new models in North America and a sales slump in its home market.

Nissan reports 2006 financial results next week. It is expected to report its first annual drop in net profit -– forecasted to be 11 percent -- in seven years for the year. More may be revealed about Nissan’s goals at that time.

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As the Chrysler World Turns

Away for spring break? No worries, you didn’t miss all that much in the “DaimlerChrysler Sells Chrysler” saga. We’ll bring you up to speed on the latest chapters.

Here’s the condensed Reader’s Digest version of last week’s happenings:

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"Geek Week” Opens in Detroit

This week, more than 35,000 automotive engineers and auto company executives are gathering in Detroit for the annual Society of Automotive Engineers World Congress.

The conference's official theme is "Engineering for Global Sustainable Mobility -- It's Up to Us.” The buzz surely will focus on engines and transmissions, specifically reducing emissions and boosting fuel economy, as well as advancing alternative propulsion systems and alternative fuels.

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Toyota: Dump Waltrip

Toyota's entry into the domestically loyal NASCAR circuit has been marred, not only by the poor performance on the track but also by the bad behavior of its driver-partner, Michael Waltrip.

Waltrip's latest shenanigans involve him flipping a Toyota Land Cruiser Saturday morning near his North Carolina home. He faces charges of reckless driving and failing to report an accident when he goes to court May 14.

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GM To Hire 400 Engineers

Who says there’s no jobs in the auto industry, especially in Detroit?

General Motors plans to hire 400 engineers and will hold a career fair May 5.

But forget plastics. The future is in technologies. The 400 engineers GM seeks must be highly specialized in powertrain, product development or fuel cell, OnStar and information technologies.

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Loose Lips Sink Dow Execs

This one should send a message to the many companies in play or possibly in play: Don’t try to sell your company without the boss’ knowledge.

Dow Chemical Co., long rumored to be the target of buyouts by private equity firms, fired two senior executives for holding secret meetings with investments bankers and prospective investors about selling the company when the company wasn’t for sale.

The two executives, one a board member, told investors the company was in play; the company’s CEO insists it is not. The two were fired for “highly inappropriate” business activity and “unauthorized discussions” with potential buyers.

Newspapers have been reporting since February that Dow is in play. The frenzy peaked last weekend when a British newspaper reported, picked up by AutoObserver, U.S. private equity firms with Middle Eastern investors were preparing a bid of at least $50 billion for the largest U.S. chemical maker. That would make it the largest such deal in private equity history.

Dow’s stock has been on a roller coaster as a result of buyout rumors that have been reported and the company has denied them in this year of record equity buyouts throughout industry, including the auto business.

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GM Rear-Drive Cars On Hold; Camaro Moves Ahead

General Motors Vice Chairman Bob Lutz says the automaker’s future rear-wheel-drive cars have been put on hold until the federal government decides on fuel economy and carbon dioxide emissions standards.

"We've pushed the pause button (on future rear-drive cars). It's no longer full speed ahead," Lutz told Chicago Tribune automotive columnist Jim Mateja in an interview in Tuesday’s paper.

But that may not be the whole story behind GM’s alterations of its future product plan.

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Posted by at 5:21 AM under Analysis, Business, Commentary, Featured, GM, News, Rumors | Comments (3) | digg this | del.icio.us

Press Becomes First American on Toyota Board

As expected, Toyota announced today that American Jim Press will become the first non-Japanese to serve on Toyota Motor Corp.’s board of directors. He is expected to be based in Japan.

Press will be promoted to senior managing director at the parent company in June. He now is a managing officer of the Japanese company and president of Toyota Motor North America Inc. in New York.

Posted by at 8:18 AM under News, Personalities, Toyota | Comments (1) | digg this | del.icio.us

Iacocca Speaks Out on Auto Industry and Everything Else

Former Chrysler Chairman Lee Iacocca has written a new book, Where Have All the Leaders Gone?, scheduled for release by Simon & Schuster Tuesday, and, in it, he doesn’t mince words.

In the book that reviewers describe as a combination of memoir, business advice and political harangue, Iacocca rips President Bush, the proposed Chrysler sales and his Chrysler successor Bob Eaton, who engineered Chrysler’s sale to DaimlerChrysler.

Page 1 of the book, coauthored with Catherine Whitney, sets the tone: “We’ve got a gang of clueless bozos steering our ship of state right over a cliff, we’ve got corporate gangsters stealing us blind, and we can’t even clean up after a hurricane much less build a hybrid car…. I hardly recognize this country anymore.”

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Schwarzenegger to Michigan: “Get Off Your Butt”

“Michigan, get off your butt and join us,” California Gov. Arnold Schwarzenegger said Wednesday to a Georgetown University audience as he made the rounds stumping for his environmental campaign.

His remark came in response to the re-election campaign efforts of Michigan Congressman Joe Knollenberg, a Republican representing Detroit’s wealthy suburbs where most auto executives live. Knollenberg has posted billboards featuring a grim-faced Schwarzenegger that reads: “Arnold to Michigan: Drop Dead!”

Knollenberg also created a re-election campaign Web site called big3defense that takes aim at Schwarzenegger and high-profile Democrats that he accuses of trying to kill Detroit’s auto industry. The Congressman said that his campaign picked on Schwarzenegger “because he’s a perfect symbol of a bully and because he has become the Republican Al Gore.”

Ironically, the auto industry, especially General Motors, has used Schwarzenegger to promote its vehicles, including the environmentally friendly E85 and hydrogen-powered concepts. Schwarzenegger also did a gig for GM promoting the Hummer, driving it through New York's Times Square, during a New York auto show.

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CAW Says “No” to Kerkorian’s Chrysler Bid

The $4.5 billion bid for Chrysler from Las Vegas billionaire Kirk Kerkorian and his Tracinda Corp. has been rejected by the head of the all-important Canadian Auto Workers union as well as a German analyst.

CAW President Buzz Hargrove told the press Tuesday that he opposes Kerkorian’s offer, even though it offers Chrysler’s union an equity stake in the automaker. “I am not interested in Kerkorian’s style. His whole history has been to make money by taking advantage of throwing a lot of people out of work. He’s the guy I am totally opposed to.”

Christopher Stuermer, an auto analyst with Global Insight in Frankfurt, Germany, criticized Kerkorian for his low-ball bid; the $4.5 billion bid is half of what Global Insight estimates Chrysler’s valuation of $9 billion. Stuermer added that Kerkorian “is the last person on earth” DaimlerChrysler executives want to deal with “after all the upheaval he has been causing.”

Chrysler’s unions haven’t publicly said so but word is of the offers now on the table, the deal likely to be most favored by Chrysler unions is an offer from Canadian auto supplier Magna International with private equity firm Ripplewood.

(Read more...)

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Pickup Truck Incentives: What Worked, What Didn’t

Last month, vehicle manufacturers launched a host of new incentives on their full-size pickup trucks in   response to Toyota introducing its new Tundra to the market and immediately promoting it with dealer incentives.

March full-size truck sales overall declined from a year ago, prompting truckmakers to try to not only hold onto their loyal owners but steal potential buyers from their competitors. Edmunds’ AutoObserver.com’s analysis of March sales figures showed some incentives succeeded in conquesting buyers; others did not. Here’s a snapshot of what worked and what didn’t:

· Toyota’s incentives of dealer cash paired with low-interest loans on the Tundra didn’t move the needle much in either direction in terms of conquest sales.

· General Motor’s incentives on its recently redesigned Chevrolet Silverado and GMC Sierra combined a relatively small cash bonus with low-interest financing. The incentives helped attract non-GM buyers to its fold.

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Posted by at 4:49 AM under Analysis, Chrysler, Companies, Featured, Ford, GM, Toyota | Comments (2) | digg this | del.icio.us

Chrysler Buyer: It’s Up to the Unions

Chrysler’s unions, in one way or another, will be the deciding factor in who ultimately buys the Chrysler Group.

It’ll come down to what deal is most palatable to them, and how well they’ll cooperate with -– or aggressively they’ll protest –- a potential buyer.

Of the offers now on the table, the deal likely to be most favored by Chrysler unions is an offer from Canadian auto supplier Magna International with private equity firm Ripplewood.

In contrast, a bid by Cerberus Capital Management ranks at the bottom with Chrysler’s unions, because the union suspects Cerberus intends to break it into pieces and strip it down to nothing more than a distribution company.

“Cerberus is a Trojan horse for Chinese automakers, and the unions know it,” said a source familiar with some of the bids. 

Still, wild cards remain. The wildest card is the recent bid from Las Vegas billionaire Kirk Kerkorian and his Tracinda Corp. The innovative deal offers unions a stake in Chrysler and a future. Kerkorian claims Chrysler can be “a robust and lasting standalone entity,” and his Tracinda is in it for the long haul. Published reports put Kerkorian’s offered stake to the unions at 10 percent, but a source says Kerkorian is rumored to be willing to go as high as 20 percent. 

(Read more...)

Posted by at 9:41 AM under Analysis, Business, Chrysler, Commentary, Featured, Rumors | Comments (0) | digg this | del.icio.us

Isuzu Buying Alabama Land for Plant

Isuzu has purchased land in Birmingham, Ala., for a vehicle assembly plant, a company spokesman confirmed Monday. Isuzu paid $7.8 million for the land previously was occupied by a warehouse of Del Monte Foods.

The company spokesman said Isuzu is preparing a full-fledged return to production in the U.S.

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China’s Chery Beats General Motors in March

China’s Chery Automobile Co., a maker of inexpensive and increasingly popular cars, outsold the General Motors in China last month, becoming the first home-grown auto company to surpass GM’s China venture in monthly sales, according to the China Association of Automobile Manufacturers.

Chery, a midsize but fast-growing company in East China, recently signed an agreement with DaimlerChrysler to jointly produce small, inexpensive cars in China for export to Europe and North America. It is the same Chery that GM sued, accusing Chery of copying GM’s Chevrolet Spark for its QQ. Chery’s QQ compact requires deep discounts and sells at about a third the price of some Chevrolet models.

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Dow: Private Equity With a Middle Eastern Twist

A British newspaper reports U.S. private equity firms with Middle Eastern investors are preparing a bid of at least $50 billion for Dow Chemical Co., the largest U.S. chemical maker.

Rumors of Dow’s purchase have been swirling for the past couple months, and it was speculated its purchase would be the largest in history by private equity. Indeed, the latest rumored deal would be the largest by billions.

London’s Sunday Express, citing unidentified "sources close to the deal," say the offer for Michigan-based Dow, which supplies auto industry and other businesses, is between $52 and $58 a share and will be made by the end of this week. The speculation sent Dow stock soaring.

Kohlberg Kravis Roberts & Co. is among those backing the bid, the newspaper reported. At least half of the funding is coming from investors in Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman, the newspaper said.

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Kerkorian: Low Ball Bid, But Intriguing

The bid for Chrysler by Las Vegas billionaire Kirk Kerkorian and his Tracinda Corp. is a low-ball bid, almost assuring a bidding battle, but the offer has some other intriguing elements.

The $4.5 billion bid by Tracinda is lower than the $4.6 billion to $13 billion reportedly offered by other suitors, though those figures are uncertain since details of the other bids have not been revealed.

The Tracinda deal is for cash and is not reliant on obtaining financing. Further, the Tracinda bid includes a $100 million for exclusive negotiating rights, with $25 million of it non-refundable if Tracinda decides to walk away from the deal after its 60-day review.

The Tracinda bid suggests equity by workers in the company, likely in return for concessions by the United Automobile Workers union. While workers may not be thrilled about concessions, an equity stake and the fact that Tracinda, whose Kerkorian turns 90 in June, says it is in this deal for the long haul should be appealing to them. Tracinda says Chrysler can be “a robust and lasting standalone entity.”

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Chrysler Sale Is No Fire Sale

By Joseph Szczesny

Chrysler is undoubtedly in play and its sale likely is a foregone conclusion. But DaimlerChrysler  executives want potential buyers to know this is no fire sale, especially since not everyone at the German automaker is sold on a Chrysler sale.

“The company [in Stuttgart] is divided right down the middle. Half want a split and half don’t,” said one official who has worked for the company in Europe and North America. The source, however, said the company likely is past a point of no return and will be forced to sell Chrysler.

But DaimlerChrysler has certain requirements that must be met before it sells Chrysler. DaimlerChrysler CEO Dieter Zetsche set out four criteria for the sale of the Chrysler Group at this week’s annual meeting in Berlin.

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Ford’s Mulally Stays the Course

Ford Chairman Alan Mulally capped off a week of whirlwind visits to key media outlets and dealerships, where he played salesman, with a keynote speech opening press days at the New York auto show.

In the off-the-cuff speech and lengthy question-and-answer session as well as in his visits with the media, Mulally has revealed virtually nothing about what he plans to do to turn around the ailing automaker.

Mulally was asked point blank by Edmunds.com President Jeremy Anwyl about incessant rumors that Mark Fields, president of the Americas and devisor of the Way Forward turnaround plan, and Cisco Codina, group vice president for North American marketing, sales and service, were history.

Seemingly surprised to hear of the rumors, Mulally responded he’s standing by his men and the plan.

Mulally reinforced that message during his speech in New York. He claims no further, deeper cuts are required, as analysts and industry observers insist are needed.

Asked at the New York show about Ford’s prospects for survival, highly respected auto analyst, Joe Phillippi, of AutoTrends, in Short Hills, N.J., responded: “Dicey.”

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Kerkorian Bids on Chrysler

We should have seen this coming, and, in fact, it was mentioned early on as a possibility. In fact, the only surprise is that it didn't happen earlier.

Las Vegas Billionaire Kirk Kerkorian, through his Tracinda investment firm, has launched a $4.5-billion bid to buy Chrysler.

"Tracinda intends to build and strengthen Chrysler as an independent entity by partnering with the United Auto Workers and senior management of Chrysler, and will offer the UAW and Chrysler management the opportunity to participate as equity partners in the transaction," Tracinda said in a press release today. "Tracinda believes by taking a long-term approach to solving Chrysler's problems, it can become a robust and lasting, stand-alone entity."

Kerkorian launched the bid via letters to DaimlerChrysler CEO Dieter Zetsche and DaimlerChrysler's board. The deal requires no financing but is subject to Tracinda reaching "an equitable arrangement with DaimlerChrysler regarding sharing of unfunded pension liabilities and healthcare costs."

The deal includes $100 million in cash up front for exclusivity. DaimlerChrysler reportedly has at least three bidders -- private equity firms Blackstone Group and Cereberus Capital Management and Canadian auto supplier Magna International likely with equity firm Ripplewood.

Kerkorian's bid should come as no surprise. He's tried this before and his name had been mentioned as a possible suitor for Chrysler. And only a week or so ago, Tracinda's No. 2 man, Jerome York, who had been Chrysler's CFO in the Lee Iacocca days, had given a speech in Michigan, saying any new owner of Chrysler would require a friendly agreement with the UAW.

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Mulally Earns $28 Million in 2006

Not bad for four months on the job.

Ford CEO Alan Mulally received $28.18 million compensation in 2006; it included an $18.5 million bonus, according to the company’s annual proxy released today. The former Boeing executive replaced Bill Ford as CEO in September.

Mulally received a $7.5 million hiring bonus and $11 million to offset the compensation he gave up for leaving Boeing. He also received 4 million Ford stock options last year; at least 3 million of those are not available until the company is turned around. The expense for Mulally’s options and other stock-based awards totaled $8.6 million. It includes cost recognized in 2006 for a $5 million stock option grant that he received in March as part of his 2007 option grant, Ford said.

Mulally also received other compensation totaling $334,433, which included $172,974 for required use of the corporate aircraft, and $55,469 for relocation costs and temporary housing.

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Green Scores

The Union of Concerned Scientists released its latest report on the environmental performance of the world’s eight largest automakers this week based in 2005 model-year vehicles.

The group assigned each automaker a global warming and a smog score for its performance in limiting emissions of greenhouse gases -- blamed for global warming -- and smog-producing pollutants.

Honda took 1st place for the fourth consecutive report, followed closely by Toyota. Volkswagen was 3rd in its global warming score but near the bottom for smog production. Hyundai-Kia ranked 4th in both categories. Nissan was 3rd in the smog score.

Detroit’s Big Three ranked last. Ford’s smog rating was better than Volkswagen’s. DaimlerChrysler was the worst in both categories.

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Chrysler Is for Sale. Now What?

Now that it is a foregone conclusion that DaimlerChrysler has put Chrysler Group up for sale and it quite possibly will be sold to a private equity firm, what’s next?

Everyone –- employees, suppliers and the media –- wants a definitive answer to what will happen to Chrysler once it is sold. How will the deal work? Will Chrysler still exist when all is said and done? If it does, what will it look like?

Despite relentless questioning, no one knows. Not even DaimlerChrysler insiders. The sale of Chrysler is unprecedented. There’s no blueprint for how a sale of an auto company to a private equity firm would work. In an interview with CNBC's Morning Call Wednesday, I suggested we spectators “expect the unexpected.”

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Toyota Cuts Prius Prices

Toyota announced to its dealers Tuesday significantly lower prices for select equipment on Prius hybrid models, Edmunds.com's AutoObserver has learned. The price reductions, which went into effect immediately, range from $600 to $2,000, in equipment packages, some of which have been slashed by half.

The price reductions come on the heels of the Prius posting its all-time, best-ever monthly sales record in March, breaking the previous record set in February. Prius sales in March totaled 19,156, an increase of 133.2 percent over March 2006.

Toyota had some incentives on Prius models in March this year for the first time. Earlier, buyers were put on waiting lists for months before they received theirs. The new price reductions apparently are to replace the incentives but, instead of incentives, which have an expiration date, are permanent.

In addition, the federal tax rebate on the Prius of $1,575 dropped to $788 on April 1.

Even before the latest price reductions, the price consumers were paying for the Prius was dropping. Edmunds.com’s analysis calculated the Prius’ True Market Value at $21,296 in March, down from $3,284 in December.

Posted by at 7:05 PM under Analysis, News, Toyota | Comments (0) | digg this | del.icio.us

Zetsche Faces the Shareholders' Music

By Joseph Szczesny

BERLIN -- For Dieter Zetsche, the stakes have never been higher.

When he steps out on to the stage at the ICC meeting hall in Berlin Wednesday, the DaimlerChrysler chief executive will face one of the supreme tests of his career. He will have to report on the company’s overall condition, and it has been hurt badly by the Chrysler Group’s losses, which are now expected to continue through 2007.

Zetsche also could face some serious questioning about the growing strain between his management team and the influential German union, IG Metall. Open labor-management conflict like the American model is frowned upon in Germany. A battle with the union could ultimately put Zetsche’s job in jeopardy under the dual system, which places labor representatives on board of supervisors like that of DaimlerChrysler.

The board of supervisors has the power to hire and fire management. Indeed, DaimlerChrysler’s board has demonstrated a willingness to fire. Revolt on the labor side of the board ultimately led to the firing of Zetsche’s protégé, Wolfgang Bernhard, in 2004.

Still, Zetsche is not expected to talk much about the terms of any potential sale of Chrysler or what it might means for the future of the company now called DaimlerChrysler. Stock markets, particularly in Germany, have already spoken in favor of the sale, boosting DaimlerChrysler shares by 25 percent since Zetsche made his now-famous announcement that all options were on the table in February.

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Ford, Chrysler Criticize Korean Trade Agreement; GM Mum

Ford and Chrysler issued public statements denouncing a free trade agreement signed by the U.S. and  Korea this week. Their objection is that the agreement doesn’t force Korea to open its restricted market.

General Motors has been mum thus far on the topic. GM has important operations in South Korea created from Daewoo that are helping buoy GM’s global sales, while Ford and Chrysler do not have anything similar. The Chevrolet AVeo comes from Korea.

Under the agreement, which must be approved by Congress, the U.S. would immediately drop a 2.5 percent tariff on small cars and auto parts. It will phase tariffs out for trucks, larger engines and tires over the next decade. In return, Korea eliminates engine taxes that penalize U.S. automakers as well as an 8 percent tariff. It agreed to create a "working group to review auto-related regulations being developed," a joint statement said.

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Ford Prices the New Taurus

Ford announced today the 2008 Ford Taurus will have a base manufacturer’s suggested retail price (MSRP) of $23,995, including destination and delivery. The automaker claims the Taurus, previously known as the Five Hundred, will be priced thousands of dollars less than comparably equipped sedans like the Toyota Avalon and the Chrysler 300.

The price appears competitive depending on how you look at it – or who is looking at it.

“Considering the size, powertrain and features the new Taurus offers, it undercuts its closest competitors on price by several thousands dollars, which is good,” noted Alex Rosten, manager of Pricing and Market Analysis for Edmunds.com’s AutoObserver.

“However, old Taurus buyers looking to check out the new Taurus are in for some significant sticker shock,” he noted. “The 2006 Taurus started at $21,000, and, after discounts and rebates, could be purchased for $16,000 to $17,000. Granted, the new Taurus is a much better car, but it’s not the most affordable to Taurus loyalists.”

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March Sales Record Setters

March sales in total were no recordbreaker, but that didn’t stop some automakers from setting records.

So far, Toyota, Honda, Porsche, Audi and Mazda have set new records of various sorts.

Toyota takes home the most “bests” for the month in a wide number of categories, from overall to individual models.

Honda, Audi and Mazda continue to be on a roll. Same for Porsche.

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Small Is Hot, Hot, Hot!

March car sales are just beginning to roll in today, but one trend immediately noticeable is that some compact cars are hot, hot, hot -- and with little incentives required to prod customers.

Sales of the Mazda 3, only mildly freshened this year, soared a whopping 93 percent. Hot since it was introduced nearly four years ago, Mazda 3 sales shot up to 15,606 in March from 8,087 from a year ago. While the car had some lease programs and special financing on it, the increased demand for the Mazda 3 is due mainly to rising gas prices, according to Edmunds.com’s AutoObserver analysis.

Mitsubishi’s turnaround appears to be taking hold, led by the new Lancer. The redesigned compact car hit showrooms in March, prompting sales to soar 40 percent over March 2006 levels.

Edmunds.com's monthly True Cost of Incentives (TCI) show the industry average incentive on compact cars was $1,170 up 12.5 percent from $1,040 in February. By comparison, the average automotive manufacturer incentive on all cars was $2,512 per vehicle sold in March 2007, up $220, or 9.6 percent, from February 2007, and down $9, or 0.4 percent, from March 2006.

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Automakers Add Non-Cash Spiffs to Spur Sales

Automakers are adding spiffs other than low-interest financing and cash rebates to spur sales.

Ford announced today it will make Sirius Satellite Radio standard in some Lincoln models. Chrysler started promoting a free DVD system with the purchase of a Chrysler Town & Country or Dodge Caravan minivan. Last month, Chrysler pitched free Hemi engines on some models.

These spiffs come as March sales are being reported today and Wednesday. Edmunds.com predicts March sales will be down from year-ago levels. Edmunds.com further reported today that incentive spending edged higher last month.

Automakers are resorting to feature spiffs because financing and cash rebates may be losing their allure. In addition, automakers, especially domestic ones, are trying to boost their resale values and images. Adding content boosts resale value whereas rebates decrease it. Edmunds.com analysts estimate 80 percent of the cash rebate comes off the resale value of a one-year-old car.

Features allow automakers to focus on the vehicle and its content without screaming "distress sale." While, psychologically, the consumer loves getting something seemingly for free.

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Japan Sales Drop; U.S. Pressure Mounts

Japan's vehicle sales fell for a 21st straight month, led by Nissan and Toyota. Japanese automakers selling in their home market have been experiencing their business year since 1977.

What does this mean for the U.S.? The pressure will be on Japanese automakers to maintain and boost sales in the U.S. to offset slow sales in their home market.

Sales of cars, trucks and buses, excluding minicars, fell 12.6 percent to 487,738 vehicles in March from a year earlier, the Japan Automobile Dealers Association reported Monday. Nissan's sales fell 16 percent; Toyota's dropped 12 percent. Car sales have dropped despite increased household spending. The only bright spot in Japan’s auto sales is minicars.

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Ford Stock Fall Worries Heirs

The value of the Ford family's stake in the ailing automaker has dropped by half since 2001, prompting worried heirs to discuss their options with investment banks, Fortune magazine reports.

The family's class-B Ford stock was valued at $1.14 billion when Bill Ford took over as CEO in 2001. Since then, it has dropped by $581 million in market value, the magazine notes. The shares' dividend payouts -- $28 million in 2005 -- will be zero this year.

Presumably Ford CEO Alan Mulally understood when he took the job that he’d not only have to turn the automaker around but hand-hold the Ford family.

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UAW Losing Members -- and Clout

The United Auto Workers (UAW) lost nearly 19,000 members in 2006, dropping the union's ranks to a new post-World War II low, according to a story in the Detroit News, citing a union report filed with the U.S. Department of Labor.

The lower number of members decreases the union’s clout as it enters negotiations for new national contracts for Ford, Chrysler and General Motors. With the current contract expiring in September, these negotiations are critically important for the union, which is trying to protect the jobs, pay and benefits of its remaining members, and the automakers, which need concessions in health care and retiree costs to compete with foreign automakers that don’t have the same legacy costs.

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Europe Tops U.S. in Stock Market Value

While the implications are more macroeconomic than automotive, Europe has eclipsed the U.S. in stock market value for the first time since World War I, the Financial Times reports, noting it is “another sign of the slipping of the global dominance of American capital markets.”

Ian Harnett of Absolute Strategy Research, who identified the move for the paper, said this marked a “seismic shift” in markets.

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Daimler: What’s in a Name?

DaimlerChrysler, once it ditches the Chrysler Group, could change its name back to Daimler-Benz AG.

The Detroit News reports Ekkehard Wenger, a longtime German shareholder activist and business professor, is proposing at Wednesday’s annual meeting that the company’s name be changed back to Daimler-Benz AG. "With this, we want to put more pressure on the management to resolve the Chrysler problem," Wenger told the Detroit News.

The name change could take place after the sale of Chrysler but no later than next March.

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Busy Week in the Auto Biz

This week is a busy one in the auto industry.

On Tuesday, automakers report March sales figures. On Wednesday, DaimlerChrysler AG holds its annual meeting in Germany. Also on Wednesday, the New York auto show opens its first of two press days with the public opening set for Friday.

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DaimlerChrysler: Will They or Won’t They?

Will they or won’t they reveal the buyer for the Chrysler Group? Or will they give any hints at all as to what’s going on with the possible Chrysler sale?

Those are the questions on everyone’s mind about Wednesday’s DaimlerChrysler annual meeting being held in Berlin.

German newspapers report DaimlerChrysler has received offers for Chrysler, ranging from $6 billion to $9 billion. Daimler-Benz AG paid about $40 billion for Chrysler in 1998.

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New York Auto Show Opens

The 2007 New York Auto Show is all about next year's new production models, with Edmund’s Inside Line providing a complete rundown and nearly minute-by-minute coverage of the show’s activities.

This year's New York show will host debuts from every corner of the world in all shapes and sizes. Introductions will include big SUVs from both Detroit and Japan along with a couple midsize crossovers. Luxury cars will be prominent as well, with new models expected from both Infiniti and Mercedes-Benz.

There will be a couple of concepts, too, but even those design studies are expected to make production in the not-too-distant future. General Motors, specifically, will unveil three design studies for mini-cars. Show-goers will be able to vote for their favorite.

Posted by at 5:23 AM under News | Comments (1) |