Harbour: Toyota Most Productive -- By a Hair

The North American auto industry received its first important grade on its 2006 report card today when Harbour Consulting revealed the outcome of its annual manufacturing productivity study.

Top scorers among the six major automakers evaluated (General Motors, Ford, Chrysler, Toyota, Nissan, Honda) are:

Toyota - first in total manufacturing productivity, which includes final car assembly as well as also stamping, engine and transmission production.

Honda - first in vehicle assembly productivity.

General Motors – first to win three of the four plant awards. No. 1 were GM Oshawa #2 for vehicle assembly; GM Spring Hill, engine assembly; GM Toledo, transmission production. Honda Marysville stamping took the fourth plant award.

“Toyota was the overall leader but with a slim and marginal lead,” said Ron Harbour, president of the Michigan-based Harbour Consulting.

The productivity gap among the six manufacturers was the closest in the nearly two-decade history of the study. That gap is so close, Harbour said, “There’s no telling who will be on top next year.”

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Ford Retail Sales Improve on Strength of Cars, Crossovers

Trying to wean itself off unprofitable fleet sales to rental car companies, Ford expects to report its first year-over-year retail sales increase since last fall when automakers post May sales on Friday.

“That’s particularly noteworthy because it would be our first year-over-year retail sales since last October,” George Pipas, Ford’s sales analyst, told AutoObserver.com.

Still, Edmunds.com predicts Ford sales, both retail and fleet, will be down about 12.3 percent compared with May 2006.

In addition, for the first time since the 1980s heyday of the Taurus, Ford’s retail sales volume is expected to be around 50 percent cars and car-based models.

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Analysts Don’t Buy Toyota's Modesty

Toyota has been careful about boasting its No. 1 in global sales status while, at the same time, U.S. automakers close plants and cut jobs. Toyota executives, in fact, have downplayed the Japanese automaker’s sales outlook in North America, saying sales will slow.

But analysts and investors don’t buy it, according to a report today by Bloomberg News. They suspect Toyota is being cautious for fear of a political backlash.

They agree Toyota can't match last year's 15 percent sales growth, but most say Toyota is being too modest. "Toyota's sales growth forecast in North America seems too conservative,'' Koji Endo, a senior analyst at Credit Suisse Group in Tokyo, told Bloomberg. "Its outlook sales figure seems to be political.''

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Chinese Automakers' Profits Soar

The Chinese government reported auto industry profits in the country soared 70 percent in the first three months of this year compared with last year.

The country's major automakers had a combined profit equivalent to $1.7 billion (U.S.) in the first quarter, jumping by 69.9 percent from a year before, the country’s Ministry of Commerce announced in Beijing Tuesday.

Interestingly, while Chinese automakers -- and there are many of them -- cumulatively made $1.7 billion in the quarter, the three U.S. automakers combined lost about $1.9 billion.

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Mazda: A Classic Turnaround Tale

By Peter Nunn

To win in the auto business, various paths to glory exist. At the Mazda Motor Corp., they’re doing it the classic, time-honored way: by building sharp-looking vehicles with spirited driving dynamics and a solid image, cars people actually are excited to buy.

Cars like the Mazda 3 and Mazda 6, plus the Mazda 5 minivan and new wave CX-7 and CX-9 crossovers, are increasingly putting Mazda on the map and in American driveways.

Mazda’s lightweight MX-5 Miata two-seater is the world’s best-selling sports car. The radical four-seat, rotary-powered RX-8 remains an innovative and unique contender in the enthusiast sport coupe market.

Mazda’s all-new Mazda 2, its latest entry, had its world premier at the Geneva show in March. The new 2, well packaged and impressively light, already is earning glowing reviews, though it won’t immediately be heading for North America.

Something’s clearly going right for Mazda. What we are seeing is the classic product led recovery.

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Ghosn: Optimistic About Nissan Profit Targets

Nissan-Renault chief Carlos Ghosn said this week Nissan should achieve its 2007-2008 fiscal year profit targets after missing them by more than 10 percent in the 2006-2007 fiscal year that ended March 31.

"We are pretty confident, but it's only two months into the fiscal year so we'll have to see," Ghosn told reporters after delivering a speech in Detroit to the Society of Automotive Engineers Foundation.

Ghosn apparently is looking for Nissan’s cost-cutting –- not sales growth -– to help it meet its targets. Despite launching new models this year after several months without anything new, Nissan sales are not stellar. Edmunds.com predicts Nissan sales will be down for May, when they are reported next Friday, though market share will hold steady. Nissan also is looking to Europe and emerging markets for higher sales to offset the depressed sales in the U.S. and Japan.

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Automakers Hope To End May on a High Note With Memorial Day Sales

Automakers apparently hope to end what looks to be a flat-to-down month of sales in May on a high note by announcing Memorial Day sales that actually run through the end of the month.

General Motors’ "Memorial Day Sale" campaign, announced Thursday, runs through May 31. GM is offering zero percent financing deals for 36 months and a $1,000 bonus on several Buick, Chevrolet, GMC and Pontiac vehicles in its lineup, including large pickup trucks and SUVs from the 2006 and 2007 model years. GM is also offering zero percent financing for 60 months on three Saturn models  -- the Vue SUV, Ion small car and Relay minivan. Separate sales incentives on GM's luxury Cadillac, Hummer and Saab brands will also be available.

On Wednesday, Ford began offering a $1,000 rebate on certain Ford F-Series Super Duty pickup trucks, specifically regular and super cabs, through the end of the month. Ford just launched the redesigned Super Duty truck as a 2008 model-year product.

The rebates, of which more are likely to be announced, come on the heels of dismal April sales and, as Edmunds.com predicts, a flat-to-down May during this normally brisk sales time.

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Study Says U.S. Diesel Sales Set To Outstrip Hybrid Sales

A research report released today shows U.S. sales of both diesels and hybrids will grow significantly in the next five years but diesels will outpace hybrids.

The report from UBS and Ricardo predicts diesel and hybrid sales will hit 2.7 million a year by 2012, or about 15 percent of the U.S. light vehicle market. Diesel will outstrip gasoline hybrids by 1.5 million versus 1.2 million.

Increased demand for diesels and hybrids will be driven by U.S. regulators looking to revise fuel economy standards amid concerns for energy security and greenhouse gas emissions. Diesels will gain a preference because of its cost advantage, the report concludes.

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Acura Design Studio Opens in California

Honda opened the doors today on its new Acura Design Studio in Torrance, California. The doors are likely to close quickly as the $15 million studio begins developing new concepts and designs for Honda’s luxury brand.

"This Acura Design Studio will help conceive and design the future of Acura," said Toshihiko Nonaka, president of Honda R&D Americas (HRA), at the opening. "Our goal here is to create emotional designs that create a strong and distinct image for Acura products."

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Edmunds.com Forecast: May Sales Stall; Rising Gas Prices Blamed

New vehicle sales, including both retail and fleet sales, are expected to be 1.48 million units when May sales figures are announced next Friday. That’s down from last May, according to Edmunds.com.

This May had 26 selling days, one more than May 2006. When adjusted for this difference, sales decreased 4.2 percent from May 2006. On an unadjusted basis, sales this May are down 0.3 percent.

"As gas prices climb, many consumers are taking a conservative approach to car buying. Additionally, numbers are down because domestics continue to cut production, reducing fleet sales and better matching supply with retail demand. However, these factors are not causing sales to fall as dramatically as one might expect," said Jesse Toprak, executive director of Industry Analysis for Edmunds.com.

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China: Yesterday's News?

India is predicted to be the fastest-growing auto manufacturing nation in the next few years, according to a forecast by New York-based PricewaterhouseCoopers. The firm predicts between 2006 and 2011, India –- not China -– will be the fastest-growing auto manufacturer among the world’s top 20 carmaking countries.

"Everyone is looking at India after what happened in China,'' Ashvin Chotai, who works in London as director of Asian automotive research for Global Insight, told Bloomberg News. "There's no other place that even comes close.''

In the year ending March 31, India’s passenger car sales increased 21 percent to 1.38 million. By 2015, they're expected to more than double, according to the Society of Indian Automobile Manufacturers.

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Cerberus’ Eyes Canadian Communications Properties

Less than a week after its purchase of Chrysler was revealed, private equity firm Cerberus Capital Management apparently has eyes across the border on the communications industry.

Cerberus has joined the race to buy BCE, Canada’s biggest telecommunications operator, the Financial Times reports from Toronto. In addition to landline and wireless telephone operations, BCE owns Canada’s biggest satellite TV company and has a minority stake in Bell Globemedia, which controls CTV, the country’s biggest private sector TV network, and The Globe and Mail newspaper.

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Florida Goes Ford Green

Ford delivered a fleet of hydrogen-powered shuttle buses to the state of Florida Wednesday in conjunction with the state opening its first hydrogen fueling station.

The Ford E-450 shuttle buses have an internal combustion engine, modified to run only on hydrogen fuel instead of gasoline. The buses can travel 150 to 200 miles before refueling, deliver five to 10 miles per gallon –- the equivalent of similar diesel-powered buses –- and release about 1 percent of the carbon dioxide that a Toyota Prius gas-electric hybrid does, said Sue Cischke, Ford senior vice president in charge of sustainability.

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Big Three to Lose More Ground, Global Insight

The U.S. auto market will pick up in 2008, but Detroit’s three automakers won’t be beneficiaries, according to a new forecast from the London-based market research firm Global Insight.

Light-vehicle sales will rebound next year after dipping to 16.2 million in 2007, said George Magliano, Global Insight’s director of North America, at a conference in Tokyo and reported by Automotive News. Magliano said sales would rise gradually, but they won't regain the 17 million level -- last seen in 2001-- until 2010. By 2012, sales will climb to 17.7 million. Between now and then, General Motors, Ford and Chrysler combined will lose seven points of market share.

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New York Taxis Go Hybrid

New York City Mayor Michael Bloomberg announced on NBC’s Today show Tuesday that the city’s cab fleet will go entirely hybrid within five years, and all of its vehicles for hire must meet new emissions and mileage standards by next year.

New York now has just 375 hybrids among its 13,000 taxis. That number will increase to 1,000 by October 2008 and will grow by about 20 percent each year until 2012, when every cab is a hybrid, the Associated Press reported. The shift to hybrids is part of Bloomberg’s sustainability plan for the city that includes a 30 percent reduction in carbon emissions by 2030.

Ford has a lot at stake in the New York cab business with the large, fuel-guzzling Ford Crown Victoria being the cabbie’s favorite ride, and having the most hybrids in New York's taxi fleet.

Ford was quick to jump on Bloomberg’s announcement, sending out a press release on the virtues of its Ford Escape Hybrid, including its average 36 miles per gallon compared with the 14 miles per gallon of the Crown Vic.

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Back After This Commercial Message

Figuring out how to make viewers watch commercials is the most pressing topic of discussion this spring between networks and advertisers as they negotiate television ad sales deals for the next year, according to the advertising column in Tuesday’s New York Times.

The newspaper reports that all networks are experimenting with ways to hold viewers’ attention during commercials in these days of digital recorders that allow viewers to skip commercials.

The answer apparently is to blur the line between content and the advertising message.

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Tesla To Supply Batteries To Think

Tesla Energy Group, a newly formed division of electric carmaker, Tesla Motors, announced today that it signed an agreement to develop and supply Think, a Norwegian electric carmaker, with lithium-ion battery packs.

The agreement covers the development and delivery of battery packs starting in December and continuing through 2008. The deal represents up to $43 million in revenues.

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Chrysler-Chery: Another Divorce in the Making?

A German newspaper reports that, in light of Chrysler’s sale to Cerberus Capital Management, China’s Chery Automobile Co. wants to reexamine the deal it struck with DaimlerChrysler to build small cars for Chrysler in China for export to North America and Europe.

Handelsblatt quotes Chery General Manager Zhang Li as saying the company wants to renegotiate with Chrysler because of the sale and that Chery has not talked with the new owners yet.

Chrysler and Chery have a framework agreement, but negotiations around specifics, including the small car discuss, have not been hammered out. Only last week, Chrysler CEO Tom LaSorda, in his first press conference after the sale to Cerberus, said he expected the deal with Chery to proceed, but that Chrysler was interested in expanding the deal with Chery beyond the original framework.

A negotiating session between Chrysler and Chery, previously scheduled, is set for next week.

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Saudi Firm Buys GE Plastics

General Electric announced Monday it plans to sell its plastics division, a large supplier to the automotive industry, for $11.6 billion to Saudi Basic Industries Corp., the largest public company in Saudi Arabia.

Heightened competition and increasing price pressures prompted GE to put the plastics division, in its portfolio since 1930, up for sale. Sabic was an obvious buyer with its vast supplies of low-cost Saudi Arabia petroleum at its disposal for making plastics.

GE Plastics, with operations in Detroit, has made news in recent months for its lightweight materials that could change the way car body parts are made in the future.

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Chrysler Suitors: What Are They Up to Now?

With Cerberus Capital Management winning the bid for Chrysler, the other suitors didn’t go off with their tails between their legs. Instead, they are doing other deals that are garnering them headlines.

Private equity firm Blackstone Group captured global headlines Monday with the announcement that it plans to raise as much as $7.75 billion going public with its stock, with $3 billion of those funds coming from the Chinese government.

Las Vegas billionaire Kirk Kerkorian and his Tracinda Corp., which bid on Chrysler for the second time, shifted gears away from cars again and back to casinos. Tracinda filed notice Monday that it had entered into negotiations with MGM Mirage, which owns the luxurious Bellagio and the under-construction CityCenter, believed to be one of the most expensive privately financed projects in U.S. history. As usual, no one is sure what Kerkorian and Tracinda are up to with the deal.

Canadian auto supplier Magna International, which received an influx of $1.54 billion from Russian tycoon Oleg Deripaska that was thought to boost Magna’s Chrysler bid, announced that it is forming a carmaking venture with Russia’s Avtovaz.

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Foreign Suitors Interested in Visteon Stake

India's Tata AutoComp Systems and France's Valeo are in discussions to buy a stake in Visteon Corp., the Business Standard in India reported today, citing unnamed sources in the article picked up by Reuters news service.

It was not clear whether the two firms would jointly or independently bid on the ailing parts-making unit that was spun off from Ford.

The newspaper said a deal could be valued between $1.5 billion to $2 billion.

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Palladium: A Hot Commodity

Palladium is this year’s best investment among precious metals, due to high demand, in large part from the auto industry, and tightening supplies, according to Bloomberg News.

A cheaper alternative to platinum, palladium is used in catalytic converters that reduce emissions from exhaust systems of motor vehicles. Palladium use has been increasing in all vehicles, and last year, it was used for the first time in diesel-powered cars. A palladium-based pollution-control device for diesels was developed in 2004 to replace the more expensive platinum-based ones.

The demand for palladium is increasing fast enough to outstrip the supply, Bloomberg reports. Supplies of palladium are declining because Russia, the producer of about half of the global supply, will slash exports for the second straight year, causing palladium prices to jump 37 percent to $500 an ounce by year-end, experts predict.

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Toyota: "Can’t Buy a Win"

Toyota may be No. 1 in global sales, but it can’t even win in NASCAR’s Nextel Cup Series.

Toyota exuberantly became the first foreign brand to compete NASCAR since the 1950s. It was thought with Toyota’s “open wallet” the Japanese automaker would “buy its way into victory lane,” writes The New York Times today.

But that hasn’t happened 11 races into the 36-race season. None of Toyota’s contingent of seven drivers on three teams locked into the top 35 in points and thus guaranteed a starting spot in the 43-car field each week. "Toyota cannot even buy its way into a race,” writes The New York Times.

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The Value of Being No. 1

Much ado was made last month when Toyota surpassed General Motors as No. 1 in global sales for the first time.

Now a story in today’s New York Times business section suggests leapfrogging from 2nd place to 1st may have substantial and quantifiable benefits on revenue.

Jan H. Hofmeyr, an expert on consumer behavior at Synovate, the market research arm of Aegis, conducted a study of brand preferences and spending habits of consumers. The study demonstrated the relative benefits of moving up in the rankings. A product that leaps from 2nd to 1st in a category can really affect a company’s bottom line, Hofmeyr concluded, while the advantage of moving up to, say, No. 5 from No. 6 is much smaller.

“Marketers have always known it’s better to be No. 1 than No. 2, but now you can attach a revenue consequence to that,” Hofmeyr told The New York Times.

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Chrysler Sold: Is There a China Connection?

Relief, exhilaration and even euphoria best describe the mood at Chrysler and in Detroit last week after DaimlerChrysler announced its sale to private equity firm Cerberus Capital Management. The wait was over, and a decision was made.

Now, reality is setting, and with that is increasing wariness and even suspicion.

What’s the bigger picture for Cerberus, especially in light of a host of other automotive investments it has made? Are its automotive investments purely a money play? Or is there something else? Is there a China connection or some other kind of overseas connection?

No one will know until the story unfolds because Cerberus is private and intensely secretive.

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Detroit Firm Gets China Chery Business

Detroit-based auto supplier American Axle & Manufacturing said it will make rear-drive modules for a 2009 model year Chinese crossover from Chery Automobile Co.

No details were provided but it is the first piece of business with Chery by American Axle, which held the grand opening of a facility in China this week.

Chery is partnering with Chrysler to build a small car for export to North America and Europe. Chrysler CEO Tom LaSorda said this week that Chrysler would like to expand its relationship with Chery beyond the one small car.

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Lutz Increases GM Holdings

General Motors Vice Chairman Bob Lutz added 47,834 GM shares on May 15, boosting his personal holdings in the largest U.S. automaker by 20 percent, Bloomberg News reported. Lutz acquired 53,336 shares at $20.90 each, or $1.1 million, and sold 5,502 shares at $31.50, or $173,313. Lutz was exercising options granted in 2006 and now holds 281,962 shares of GM. Lutz sold the shares to cover his personal tax liabilities, a GM spokesman said.

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GM May Sell Truck Unit

General Motors reportedly is considering selling its medium-duty truck business to Navistar International Corp. GM apparently is looking to shed businesses its deems non-core and generate cash for its automotive operations. GM sells about 40,000 medium-duty trucks a year, sold as the Chevrolet Kodiak and GMC TopKick, built in Flint, Michigan, Navistar builds trucks that compete directly with GM’s models.

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Suppliers Not Making the Grade

More than a fifth of the world's auto suppliers are in danger of becoming "significantly distressed financially" over the next 12 months and a third of North American suppliers already are financially distressed, according to a survey released this week by consulting firm BBK.

BBK, a global business advisory firm best known for its turnaround projects with auto suppliers, studied 80 of the top 150 global auto suppliers and assigned a grade of A to F depending on a company's potential for problems over the next year. A grade below a B indicates some level of distress.

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Daimler-Chrysler: Why the Marriage Failed

Marriage metaphors abound in the breakup of Daimler and Chrysler. Indeed, any divorce prompts an analysis of why a marriage failed.

DaimlerChrysler CEO Dieter Zetsche says no one is to blame, including the United Auto Workers union. In various interviews published today, Zetsche claims the UAW’s unwillingness to grant health care concessions to Chrysler as it did to General Motors and Ford was not the reason for the breakup. “This did not affect our relationship and this did not lead to the final decision,” he insisted to the Detroit Free Press.

Instead, he said, the relationship started unraveling a year ago. When he was promoted from Chrysler CEO to DaimlerChrysler CEO, he said he had intended to create more partnerships between Chrysler and Daimler but found limited overlap because of Mercedes’ premium position and Chrysler’s mainstream one.

Chrysler CEO Tom LaSorda said roughly the same thing at his Tuesday press briefing. Top-level management overestimated the synergies between Chrysler and Mercedes.

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What’s in a Name? Fodder for Jokes

What’s less hellish than working for the Germans?

Working for a three-headed dog that guards the gates of Hades.

Those are the kinds of jokes being bandied about as Detroiters poke fun at the name of Chrysler’s new owner –- Cerberus Capital Management Corp.

First the pronunciation of Cerberus: "sir" (as in the formal salutation for a gentleman); "burr" (what you’d say if you were cold); "us" (you and me together).

And what does it mean? Cerberus is a creature from Greek mythology. He is a fierce, flesh-eating dog with three heads that guards the gates of hell -– the guardian of the underworld and faithful servant of Hades.

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Dealer Group Predicts Steady 2007

Paul Taylor, chief economist for the National Automobile Dealers Association, forecasts that light-vehicle sales will hold steady at nearly 16.5 million units in 2007, with sedans and crossovers leading due to rising gasoline prices.

"Customer incentives appear to be rising along with the stock market, and that should help sales in the second half of 2007,” Taylor said in a press release from the dealer trade group. “Interest rates will remain stable, and that will help sustain light-vehicle sales. But higher gasoline prices will change the mix of vehicle selling, which will be led by sedans and CUVs once again."

In addition to higher gas prices, Taylor says strong car and CUV sales also are the result of many attractive new products on the market.

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Rethink a Relaunched Saturn

If you are watching television during these grand finale sweep weeks of May, you can’t miss Saturn’s new advertisements –- unless you have TiVo.

As if you're not a TV watcher, you'll see the ads on the Internet, in magazines and newspapers and on billboards.

The ads are from Saturn’s recently appointed ad agency, and they are everywhere. They ask consumers to rethink all sorts of things -- status, beauty, strength, power and ultimately their idea of an American car.

Saturn's showroom of new models and now its new ad campaign mark nothing short of a relaunch of General Motor's youngest brand.

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Chrysler Purchase: A Drop in the Bucket

Cerberus Capital Management’s purchase of Chrysler, a deal valued at $7.4 billion, looks like a drop in the bucket in the bigger global picture.

Mergers and acquisitions reached the $2 trillion mark Tuesday, according to data compiled by Bloomberg. That puts this year 60 percent ahead of last year's record pace.

Bloomberg said the record pace of deals is being driven by rising stock prices and private-equity funds that raised more than $250 billion for takeovers since the start of last year. New sources of money are coming from emerging markets of Russia, India, Middle East and China, combined with old money from the U.S. and Europe.

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Chrysler: A Collective Sigh of Relief

Entering Chrysler headquarters Tuesday –- the day after DaimlerChrysler announced the sale of Chrysler to Cerberus Capital management -– one could feel a sense of relief. Three months of wondering who, if anyone, would buy the ailing automaker were over.

Chrysler CEO Tom LaSorda, who stays on as captain of the New Chrysler, was beyond relieved. He was, at times, downright giddy, smiling ear to ear during his Tuesday afternoon briefing with the North American press.

Maybe it was from lack of sleep from the grueling final days of negotiations, meetings, press announcements and transatlantic travel.

Maybe it was because he knows that under the new private ownership he’ll have to face the press less frequently as he did Tuesday. He'll no longer have to answer tough questions about quarterly performance -– and his own salary.

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Cerberus Charms Chrysler's Unions

Cerberus Capital Management has won over Chrysler’s unions –- for now.

Both the United Auto Workers union and the Canadian Auto Workers union were opposed to a private equity firm buying Chrysler -– or, for that matter, DaimlerChrysler selling Chrysler at all.

CAW President Buzz Hargrove said he was “pissed off” when he was informed of the Chrysler sale to Cerberus on Monday morning, the day it was announced publicly. However, by Tuesday, he softened, following a 90-minute meeting with Cerberus CEO Stephen Feinberg.

Hargrove emerged from the meeting telling reporters he was convinced Cerberus was "not about slice and dice ... they're in for the long term.

“I would say Chrysler is better off under Cerberus ownership than they would be under Daimler,” Hargrove told reporters.

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Chrysler Shopping for Partners

Chrysler CEO Tom LaSorda said the automaker is shopping for partners, particularly to build smaller cars, especially for foreign markets.

LaSorda said Chrysler would like to expand its proposed relationship with China's Chery beyond what is already negotiated. But it will shop for other partners as well. LaSorda reiterated what Chrysler executives have said for years: It cannot profitably -– therefore, will not -– develop small cars and their powertrains alone. It must have a partner.

LaSorda said Chrysler needs partners to expand in Southeast Asia, India and Russia.

In the U.S., Chrysler replaced the small and inexpensive Neon sedan with the larger, more expensive Dodge Caliber crossover as its entry-level model. Chrysler needs something to compete with cars like the Honda Fit and Nissan Versa.

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Can Cerberus Still Bail If Unions Don’t Relent?

The timing of union contract negotiations and Cerberus closing on its purchase of Chrysler prompts the question: Can Cerberus bail if contract talks are looking favorable?

National contracts between Chrysler (General Motors and Ford as well) with the United Auto Workers union expires in September. The official kickoff handshake occurs in June, with negotiations in full swing throughout the summer. They will be at round-the-clock fever pitch by early September.

At the same time, DaimlerChrysler said yesterday it plans to close the sale of Chrysler with Cerberus sometime in the July-to-September quarter.

If at the point that Cerberus and DaimlerChrysler are to ink the deal union contract talks are not going smoothly and favorably, can Cerberus bail out of the deal?

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Chrysler-Cerberus: Winners and Losers

“Who are the winners and who are the losers with Cerberus buying Chrysler?” Business Editor Rod Meloni of Detroit’s NBC affiliate, WDIV-TV, asked me.

The biggest losers are Chrysler’s unions. The biggest winner is Daimler.

However, there are flip sides to both.

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Chrysler Sale to Cerberus: Just What the Doctor Ordered?

The private ownership of Chrysler may be just what the doctor ordered for the American automobile industry since it will force its long overdue restructuring.

For the past couple of decades, experts have predicted a major downsizing of the U.S. auto industry because it has too much plant capacity, too many employees for its shrinking sales and market share and too high costs, notably health care, pensions and union wages.

Automakers have tried to ward off this inevitable transformation by attempting what now can be looked back upon as merely a nip and tuck here and there. But cosmetic surgery is no longer enough as a Cerberus-owned Chrysler will put increased pressure on General Motors and Ford.

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Ford Family Weighs Sale of Shares, Media Reports

Members of Ford Motor Co.'s founding family are discussing the sale of part of their controlling stake in the automaker, sources with direct knowledge of the talks told Bloomberg in a post today.

Bloomberg reports Chairman Bill Ford briefed Ford’s board directors on family members' views before the annual shareholders meeting last week in Wilmington, Delaware. At a gathering last month, some family members urged that investment bank Perella Weinberg Partners be hired to advise on a share sale or alternative strategies, Bloomberg reported.

A family attorney denied the reports to Dow Jones.

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Chrysler Sold to Cerberus

DaimlerChrysler announced this morning that it had sold its Chrysler Group to the private equity firm, Cerberus Capital Management, for $7.4 billion.

The $7.4 billion buys Cerberus 80.1 percent equity interest in the new  Chrysler. DaimlerChrysler retains 19.9 percent equity interest in the new company.

The new Chrysler includes all of the Chrysler Group, with its Chrysler, Dodge and Jeep divisions, in addition to Chrysler Financial Services.

The new Chrysler will be responsible for all pension and health care costs of the Chrysler company.

Existing projects with Mercedes-Benz continue, including the development of conventional and alternative powertrains, purchasing and sales and financial services outside the NAFTA region.

Beyond the nuts and bolts of the deal, questions are numerous; some will only be answered in time.

Posted by at 4:45 AM under Chrysler, Featured, News | Comments (0) | digg this | del.icio.us

Tesla Raises Funds for Dealerships

California electric carmaker Tesla Motors Inc. said it arranged $45 million in new private capital to set up retail sales and service facilities in five cities where real estate is pricey.

Whether the company has enough to fund development of a second car is unclear. Bloomberg reports the $45 million in new capital will also be used to finance the second model -- a four-door sedan. However, trade journal Automotive News, quoting a top Tesla executive, said the company will have to go public to produce the second car.

The second model, the four-door WhiteStar, is due in 2010. Tesla plans a $35 million factory in Albuquerque, New Mexico, to assemble as many as 10,000 of the sport sedans a year, with engineering work being done at a Detroit-area facility. Those cars will sell for $50,000 to $65,000.

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The Russian Connection: Chrysler Saga Takes Intriguing Foreign Twist

The "Saga of the Chrysler Group Sale" took another intriguing twist this week when leading contender Magna International announced a hefty $1.54-billion investment from a Russian billionaire, questioned by the U.S. government of having ties with Russian organized crime.

Oleg Deripaska has purchased about 20 million shares –- about 15 percent -– in the Canadian auto supplier Magna. Magna says Deripaska’s investment, subject to various approvals, would  be used to hasten Magna’s expansion into the fast-growing Russian market and Eastern Europe.

But that’s only half the story. The timing of the investment –- when the Chrysler sale is coming into the home stretch –- suggests the funds would be used to help buy Chrysler. Magna chairman Frank Stronach acknowledged the Russian connection would be good for Chrysler. "Let's build Jeeps in Russia," he told The Wall Street Journal.

As they say, the plot thickens. In this case, the plot's real-life characters rival any a novelist could invent. And more characters could be drawn into the story before it ends. At Magna’s annual shareholder meeting on Thursday, Stronach said Magna could bring in additional partners in its upcoming bid for Chrysler. Magna already is working with the Canadian investment firm Onex Corp.

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Posted by at 6:33 AM under Business, Chrysler, Personalities | Comments (0) | digg this | del.icio.us

Mulally: Ford Making Progress – Slowly

Ford president and CEO Alan Mulally told the 79 shareholders present at the company’s annual meeting in Wilmington, Delaware, today that the automaker is making progress but its turnaround will take time. Ford lost a record $12.7 billion in 2006.

“We are moving quickly and making real progress, but it’s going to take time to turn things around,” Mulally told shareholders in his prepared remarks. “As we go forward, you can expect from us what I expect from my team –- clearly stated goals and candid assessments of our progress based on facts.”

Mulally, hired from Boeing in September, seems still to be in the honeymoon period with shareholders. Chairman Bill Ford, who ran the meeting though he passed on the CEO title to Mulally last fall, is under fire from angry stockholders. Sam Joanette of Miami Beach, Florida, who claimed he lost about $1 million in Ford stock, accused Bill Ford of being "responsible for the destruction of the company."

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Russian Investment May Help Magna Buy Chrysler

Magna International, believed to be the leading contender to buy Chrysler, said Russian billionaire Oleg Deripaska is buying a $1.54-billion stake in the Canadian auto supplier to help it expand in Eastern Europe. The investment also may help Magna buy Chrysler.

Magna held its annual meeting in Toronto this morning. On the eve that meeting, Magna chairman Frank Stronach told Canada's Globe and Mail newspaper that he expects drastic measures at the Chrysler Group if Magna International succeeds in buying the automaker. "Sometimes when you're sick, you've got to take some drastic measures and that's unfortunate," he said in the interview.

Magna has a bid for Chrysler with Canadian conglomerate Onex Corp. The two announced earlier this week that they have financing lined up for the deal. The offer has DaimlerChrysler retaining a stake in the new entity.

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Toyota: No. 1 in Profits, Too

The automotive industry was a tough place to make a buck this past year -– except for Toyota.

Most of the world’s major automakers struggled in 2006, with about half of them reporting lower profits. But Toyota reported record profits Wednesday.

Toyota's net income rose 20 percent to the equivalent of $14 billion (U.S.) for the fiscal year that ended March 31. Toyota's revenues rose 14 percent to a record $204 billion. Global vehicle sales for the year totaled 8.52 million units, an increase of 550,000 compared with the previous fiscal year and also a record.

For the first time in history, Toyota surpassed General Motors, which set a record itself, in global vehicles sales during the first quarter of 2007. Experts predict Toyota is poised to surpass GM as the No. 1 automaker in sales as early as this calendar year.

Posted by at 5:53 AM under Analysis, GM, Toyota | Comments (0) | digg this | del.icio.us

Auto Affordability Improves

The purchase of an average-priced new vehicle took 24.7 weeks of median family income in the first quarter, down 1.5 weeks from the fourth quarter of 2006 and down half a week compared to a year ago, according to the Auto Affordability Index compiled by Detroit’s Comerica Bank.

Including finance charges, the total cost of buying an average-priced light vehicle was $28,200 in the first quarter, up 1.6 percent from a year ago. Median family income increased an estimated 3.7 percent from a year ago.

“Consumers reacted to the sluggish economy, the rebound in gasoline prices, and the softness in home prices by spending about $550 less per car than they did in the fourth quarter,” said Dana Johnson, chief economist. “That along with the availability of more attractive financing rates reversed somewhat more than half of the last quarter’s deterioration in affordability.

"With demand soft and the new car companies fighting for market share, buyers were able to find pretty attractive deals on new cars in the first quarter,” Johnson added.

After dismal vehicle sales in April, consumer incentives have been proliferating, according to Edmunds AutoObserver.com’s analysis.

Posted by at 5:00 AM under Business, News | Comments (0) | digg this | del.icio.us

Obama Demands Big Three Go Green on Their Home Turf

Democratic presidential candidate Barack Obama visited Detroit on Monday and delivered a speech no one here wanted to hear. He demanded the Big Three automaker increase fuel-efficiency by 4 percent a year –- about a mile per gallon a year.

Speaking to a sold-out crowd of 2,000 business leaders at the Detroit Economic Club, Obama said if automakers improved fuel mileage, as president, he would provide up to $7 billion through 2017 to help them defray retiree health care costs, or award them $3 billion over 10 years to help them retool their plants to make more fuel-efficient vehicles.

That's a laughable amount -- not even a drop in the bucket of what it is expected to cost not only automakers but ultimately consumers. The National Highway Traffic Safety Administration (NHTSA) estimates the fuel standards Obama supports would require an investment of $114 billion. NHTSA estimates the Big Three would bear 80 percent of the cost, amounting to about $3,000 to $5,000 more for the price of each vehicle.

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U.S.-Canada Gas Prices – Call It Even

Typically, on my Michigan-to-New York drives through Canada, I top off the tank just before I cross the bridge to Ontario and immediately after hitting the New York State line to avoid the always-high price of petrol in Canada.

But, this time, it was unavoidable. I would have to fill up the gas tank in Canada.

And this week, it didn’t matter much. The skyrocketing price of gas in the U.S. has nearly caught up with that of Canada. On the day I left Michigan, gas had set a new all-time state record, averaging $3.18 a gallon, surpassing the previous all-time high of $3.12 on August 7, 2006.

Nationwide, gasoline is edging near a new record as well. This week, it is averaging $3.03 a gallon, just three cents shy of the all-time record. Experts are saying $4 a gallon is not out of the question.

OK so my arithmetic is a little loose here but so be it. My fill-up in Michigan cost about $45 (U.S.). My fill-up in Canada cost about $50 (Canadian). In another sign of the economic times, the Canadian dollar is only slightly discounted against the U.S. dollar.

So call it even.

Posted by at 5:58 AM under Commentary | Comments (0) | digg this | del.icio.us

Edmunds.com Analysis: At Last, Toyota Makes Inroads with Tundra

The new Toyota Tundra is beginning to chip away at the loyalty of domestic truck owners.

Buyers of domestic full-size trucks, the most brand loyal in the industry, are starting to consider Toyota’s new Tundra, considered the Japanese automaker’s first credible contender against the Chevrolet, Ford and Dodge pickups.

“Now that Toyota has its full lineup of trucks available with all powertrains, domestic buyers are beginning to take notice,” said Alex Rosten, Edmunds.com’s manager of pricing and market analysis.

Edmunds.com’s analysis of truck loyalty figures, based on April sales, shows that since the new Tundra went on sale in February:

· Tundra’s share of domestic truck trades increased 5 percentage points, from 29.4 percent to 34.4 percent;

· large truck trade-ins from all brands for a Tundra increased 16.5 points from March to April, returning to February’s high level of 57 percent;

· Tundra’s conquest of all trucks, not just full-size pickups, from other manufacturers rose 5.6 points.

At the same time, loyalty rates for all other trucks but one declined in April. Only Dodge Ram improved its overall conquest rate.

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Posted by at 4:55 AM under Analysis, Toyota | Comments (4) | digg this | del.icio.us

ASC Files Bankruptcy

Another Detroit-area automotive supplier -- ASC Inc. --  has filed for Chapter 11 bankruptcy protection.

Formerly known as American Sunroof Co., ASC, headquarter in the suburbs south of Detroit, supplies roof systems, body systems and other specialty-vehicle systems to global automakers. The company filed bankruptcy, owing millions of dollars to hundreds of creditors even though it sold off much of its equipment to try to pay its bills.

Most recently, the company was known for building the Chevrolet SSR.

ASC had been trying to position itself as a specialty car manufacturer –- the Ferrari of North America –- with former Ford and Chrysler executive Chris Theodore as its vice chairman.

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Joint Hybrid Venture Begins To Bear Fruit

This week, General Motors allowed the first test-drives of its 2008 Chevrolet Tahoe and GMC Yukon two-mode hybrids that go on sale later this year.

That drive was significant beyond the vehicles themselves.

The SUVs are the fruits of an unprecedented venture, also involving DaimlerChrysler and BMW, to take hybrid technology to the next level. And they are only the first fruits. A host of vehicles from GM, DaimlerChrysler and BMW are scheduled to roll out over the coming years.

These kinds of ventures are required to find the technological solutions to reduce or even eliminate environmentally destructive emissions and reduce or even eliminate the world’s dependence on petroleum for fuel. And ultimately save the planet.

It's the global moon shot of our time.

Posted by at 6:51 AM under Chrysler, Commentary, Companies, GM, Toyota | Comments (1) | digg this | del.icio.us

Edmunds.com Sales Analysis: April Sales Spawn May Incentives

April brought a deluge of bad news in terms of lower vehicle sales for automakers. Could flowers be far behind the showers?

Maybe not for the automakers, but certainly for consumers. They took a wait-and-see attitude in the incentive-sparse month of April. Their wait may prove worthwhile. Automakers are likely to launch a new crop of incentives, some of which have already sprouted, to spur sales and keep vehicle inventories in check.

“Based on last month's sales, I would almost guarantee that incentives will be up significantly this month,” said Alex Rosten, Edmunds.com’s manager of pricing and industry analysis.

Some automakers already have launched new incentives.

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Posted by at 10:38 AM under Analysis, Chrysler, Companies, Ford, GM, Toyota | Comments (7) | digg this | del.icio.us

Toyota Buys Half of All German Billboards

Toyota has plastered billboards all over the German landscape in what a publication there reports is the largest billboard campaign in the country’s history -- by a long shot.

To introduce the Auris compact wagon in Europe, Toyota has purchased every available billboard in 82 of the largest cities in Germany for 10 days straight. That’s 202,000 billboards -– about half of the country’s 400,000 available billboards, the German advertising association (ZAW) estimates.

A ZAW official said no such campaign had ever been done on this scale before. An industry expert estimated Toyota’s cost at up to 30 million Euro, though the Japanese automaker likely received substantial rebates for such a high-volume ad buy.

The last big billboard campaign in Germany was a Volkswagen product launch that used 90,000 billboards at a cost of 12 million Euro.

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Posted by at 8:35 AM under News, Toyota | Comments (3) | digg this | del.icio.us

Shanghai Automotive’s Q1 Profits Quadruples

Whenever anyone asks me which Chinese automaker is the one to watch, I don’t hesitate: Shanghai Automotive Co.

The automaker has the best shot at success in China and outside of China because of its experience working in ventures with General Motors and Volkswagen. It understands design, manufacturing and retailing. More important, it has been exposed to the outside world in a way that many homegrown Chinese automakers have not. To that end, it has a better understanding than the others of what non-Chinese customers demand in terms of quality and reliability.

And it is profitable. The company just reported first-quarter profits more than quadrupled. When has anyone seen that in the auto industry?

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