Odds and Ends About Cars and the Car Business

By Brendan Moore

02.20.2007

AUDIOPHILES, rejoice! Sirius Satellite Radio and XM Satellite Radio have announced that they will merge in a deal that give each company a 50% stake in the other in a combined new company worth $13B USD. Now you will be able to buy one car audio system that gets all of the satellite radio stations instead of having to make a choice between two competing broadcast systems with sometimes-exclusive deals for certain things like Major League Baseball, etc. Provided, of course, that they get federal approval for the deal.

FORD employees are increasingly losing faith that Ford can turn itself around. Only 47% of Ford’s employees have confidence that Ford can right itself, according to an employee survey Ford itself commissioned. Only 38% believe Ford has the right product in place. And that number only got to 38% after Ford conducted a series of in-house presentations in December 2006 of their future product pipeline. Before the showings, it was at 34%. A 4-point rise after giving employees a sneak peek at future product is not exactly a vote of affirmation that you have the right cars and trucks in the queue. I hope Alan Mulally is not a guy who needs eight hours of sleep every night. Ford has a couple of years of Herculean effort ahead of it just to get to where GM is right now, a year after GM’s own near-death experience. I say this because Ford is in desperate, desperate need of good and great product.

PUEGEOT recorded a stunning 83% drop in net profit for 2006. The company pointed to weaker auto sales, the increased cost of complying with new EU pollution standards, higher raw materials costs, restructuring costs, and said the company has a comprehensive plan for dealing with all of these issues. PSA Peugeot-Citroen SA is Europe’s largest auto maker behind Volkswagen. Peugeot promised its new products planned for between now and 2010 would bring the company back to high levels of profitability. Peugeot produced 3.36 million vehicles worldwide last year.

MASERATI will show its new coupe in March at the Geneva Auto Show. Pininfarina designed the coupe and preliminary reports are that it is a stunner. Maserati expects the coupe to propel it to profitability, a condition Maserati has not experienced for 15 consecutive years. Look for it this summer.

TATA of India is getting help from Fiat regarding a low-cost car aimed at the emerging-economy sectors of the world. Tata Motors, the largest auto manufacturer in India, said the car would be smaller and less expensive than the minicars currently on sale in those countries. In India alone, small cars account for 70% of the market. According to Booz-Allen Hamilton and McKinsey Consulting, India’s car market is expected to grow to 2 million units per year in the four years and to 3.5 annually million by 2015. The recent availability of consumer installment auto loans has helped drive auto sales up considerably in the last 24 months. Until the recent surge in auto lending, almost every new car purchase in India was done on a cash basis.

PRIMEDIA is going to sell its automotive enthusiast magazines, including Motor Trend, Hot Rod and Automobile. The sale will also include the related internet sites, television shows, branded products, etc., attached to the different magazines. The “auto buff book” segment showed revenues of $500 million USD in 2006. Primedia Corporation said it use the proceeds from the sale to pay off outstanding debt.

HONDA dealers in the United States are pretty happy people generally, with a never-ending supply of repeat customers that generally don’t care how plain the cars are as long as they have that famous Honda quality. That faith in the product shows up in the retail prices dealers get for those new Hondas, with every car going over the curb for close to MSRP. And cars don’t linger on the lot at a Honda dealership – the turnover is very brisk. Life is awfully good if you own a Honda dealership and frankly, it’s been awfully good since the 1970’s. Can it get better? Well, apparently it can – the most recent data out regarding sales per dealership shows that Honda dealers sell an industry-leading average 1,238 new vehicles (cars and trucks) every year. Compare that, to say, the average Ford dealership in the U.S, which sells 696 new vehicles annually, and most of those at considerable discount. Since the Honda and Ford dealership have approximately equal operating costs and pay the same per unit for capital financing (vehicle floorplan costs), you can do the math in your head pretty quickly and come to the conclusion that the average Honda dealership is far, far more profitable than the average Ford dealership. That, by the way, is the correct conclusion.

EVER wondered what the top-selling vehicle in Mexico was in 2006? Sometimes I do, and I found out that it is the Nissan Tsuru. The Tsuru is a B13 Nissan Sentra, which to normal people, translates as a 1995 model Nissan Sentra. There is a factory in Cuernavaca, Mexico that still churns them out. The Nissan Tsuru moved 66,243 units last year. The second-best selling car in Mexico was the Chevrolet Chevy C2, a small de-contented Opel Corsa B hatchback/sedan. It’s actually a pretty good little car. On the other end of the car market, both in sales and price, Ferrari sold 28 units in Mexico last year. The number one selling truck is the Nissan Pickup, with 42,292 units sold. These are the small Nissan pickups of the last-generation bodystyle sold in the U.S. The full-size Ford F-150 and the Chevrolet Silverado were right behind, with 32,779 sales and 29,461 sales respectively. Getting back to the Nissan Tsuru, it is not unusual for Mexico (and other countries in Central and South America) to get tooling for an older model, start production, and keep going with that production for a very, very long time. Long after the tooling costs have been paid for, the car gets cheaper and cheaper to produce, and that is reflected in the selling price. So you have the option of buying the most current model and the older (but sill a new car) model being sold right beside it. Might seem weird to Americans, but a very successful market strategy in a lot of other countries around the globe.

EGYPT’S Naeem Capital, a unit of an investment bank out of Egypt, is one of the final bidders for Aston Martin, sources say. Ford is expected to reap about 670 million Euros ($880 million USD) from the sale of Aston Martin. The final cut also includes Scottish equity group Doughty Hanson and an individual, Simon Halabi, a Syrian-born real estate magnate in the U.K. Ford says that Aston Martin is coming off strong 2006 results, having increased sales over 50% last year, and showing an excellent profit margin. Frankly, if the forecasted purchase price proves out, the buyer of Aston Martin is going to get a very good deal. Ford stated months ago that it would sell Aston Martin and use the proceeds to fund Ford’s turnaround.

CHERY, one of China’s largest auto makers, plans to build a plant in Russia in 2009. Construction will start in late 2007. The proposed plant in Kaliningrad will knock out a projected 200,000 vehicles a year, says Chery. Some of the vehicles produced at the plant are scheduled for export, company spokesmen say.

NISSAN is offering workers at their Smyna, Tennessee assembly plant and their Dechard, Tennessee engine plant $45,000 buyout offers. Also included in each offer are $500 payments for each year of service with Nissan. The offers are good until March 13 and the worker must leave Nissan by June 30. The assembly plant builds both car and trucks, and the engine plant builds four-cylinder, six-cylinder, and eight-cylinder engines. Nissan states the buyouts are being offered because the plants have become more efficient while at the same time demand for light trucks has dropped, thereby reducing the amount of workers needed. Approximately 300 workers at the two plants are expected to accept the buyout offers.

RETROMOBILE started a few days ago, and it looks even bigger and better than the fine event last year. What is Retromobile? It’s held every year in Paris, and showcases a tremendous amount of stunning old cars, old trucks, and old motorcycles from every aspect of motoring; racing, consumer cars, development mules, show cars, etc. The car manufacturers in Europe are huge participants so you can see cars together at Retromobile that you will never see in one place anywhere else. The show is massive, well-coordinated, and a lot of fun. Some of the displays are incredibly well-thought-out and obviously took a tremendous amount of time and money to put together. If you ever get a chance to go, don’t think twice about it – just go and have a blast.

TESLA has chosen a manufacturing site in Albuquerque, New Mexico to produce their all-electric 4-dr, 5-passenger sedan. Telsa Corporation says it will produce at least 10,000 cars per year in the plant with the first cars scheduled to roll off the line in 2009. Tesla states that the car should cost between 50 and sixty thousand dollars (USD), and travel at least 250 miles between charges. Governor Bill Richardson of New Mexico stated that the manufacturing plant will cost around $35 million dollars and provide about 400 jobs. Facility construction will start in April. Production of the Tesla Roadster, a very fast two-seat sports car, is currently on schedule in England for this year.

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Americans like foreign food, foreign destinations, foreign accents, and, you might have noticed, foreign cars. Our affinity for all things foreign has overcome both a once-strong ‘Made in America’ trend and the best efforts of domestic manufacturers and their marketing departments.

The phenomenon is not uniquely American. The person with whom I talk about cars the most hails from the U.K. He and I can spend hours chatting about nothing but cars. It’s always fun, because he is an astute observer and he’s been schooled as an industrial product designer. He attended the same school of design in England as Jonathan Ives, the Brit who is behind the design of the IMacs and IPods. What makes it especially fun for me, though is that he’s not from here. He spent his formative years, car-wise, in Great Britain. We often agree on cars and car-related topics, but, just as often, we disagree. He is not a fan of British marques. He says they are mostly ‘crap’ and they always have been. He makes exceptions for the current Bentley GT and all of the recent Aston Martins, but otherwise he’s not interested. He drives a Chevy conversion van.

I knew a recent immigrant from Bulgaria who loved Camaros, and lots of Germans are crazy for American muscle cars, the more garish the better. It may seem unbelievable to the people in the United States that love their Japanese cars for what they are, but there is a very strong sub-culture of American car fans in the Land of the Rising Sun, an affection that is very expensive in Japan after purchase price, import duties, engine displacement taxes, fuel costs, maintenance costs and parking fees are added up. They love their American cars because those cars are what Japanese cars aren’t. There are people everywhere that seem to want a car from somewhere else.

I love British cars. I’ve had two Jaguars, two Triumphs and an MG and. I currently drive a Saab and my wife drives a VW Beetle, but I really want another Jaguar.

In the U.S., the imports are kicking the Ford and GM’s collective butt. There are, no doubt, engineering, marketing and financial reasons for the domestic automobile industry’s lackluster performance, but I have a plan regarding product that just might increase sales for General Motors and Ford in this country. It’s a pretty simple plan and here it is: As soon as possible, start selling the cars you already make in other countries here, in the U.S.

Think about it. A lot of us like stuff that’s not from here. I think its human nature. It is part of what makes us tick. If car buyers were offered genuine Ford and GM products with a distinctly foreign flavor, I think the American import-buying public would ignore the ‘Ford’ or ‘Chevrolet’ emblem and buy them. Have I mentioned that almost everything that is made somewhere else by Ford and GM gets great fuel economy? Cars in other places have to get great fuel mileage because gasoline (and diesel) is much more expensive in the rest of the world. So, that’s a nice plus for the Big 2, since their economy cars here are always getting dinged for being cheap-looking or boring or both. I’m willing to bet that there are Ford and GM cars for sale right now in Europe that would be a success here in the States. And the extra showroom traffic sure wouldn’t hurt sales of existing models made for the domestic market, either.

Pure genius, right? Well, no. People who don’t follow the auto industry obsessively like I do are not aware of it, but this plan already exists at General Motors and is being born at Ford as I type this.

2007 Opel Corsa (2008 Saturn Corsa)

2009 Chevrolet Camaro

GM brought a rwd Holden Monaro (Holden is GM’s Australian subsidiary) over and called it the Pontiac GTO in 2004. The car didn’t sell well in the States, but not because of performance (400 hp and brakes and handling to match!), but because of somewhat drab exterior styling. The GTO’s last model year was 2006, but it’s very likely to be reborn on the new Holden platform. A new rwd Holden platform that can accommodate both V6 and V8 engines will be the basis for the 2009 Chevrolet Camaro, the new Pontiac G8, probably a new Chevrolet Caprice, and probably a new Buick. GM is also bringing over the stunning Opel Antara GTC small SUV as the new Saturn Vue, and the equally attractive Opel Corsa and Opel Astra models as Saturn cars. The current Saturn Aura is basically an Opel Vectra from a sheetmetal pespective, and the Saturn Sky shares most of it’s pieces with the Opel GT. Saturn will equal Opel and Opel will equal Saturn in the very near future.

2008 Saturn Astra

2007 Ford Transit Connect

On the Ford front, CEO Alan Mulally laid his cards on the table last week and said he thought Ford would bring in the Focus S-Max (produced in Belgium), the Mondeo (also produced in Belgium), and the Transit Connect van, a boxy, little, tough commercial van made in Ford’s plant in Turkey. I guarantee consumers will also be buying Transit Connects in no time flat (a la Scion xB and Honda Element) if they offer a model with enough creature comforts. No word on bringing in any of the Ford Australia product yet, but there is some nice iron down under with a Ford badge on it, so I don’t see why it would not be considered. As an example, the new Ford Falcon (yes, that model name lived on in Australia) is an all-out absolute blast.

2007 Ford S-Max

2007 Ford Mondeo

You might have noted that I referred to the Big 2 earlier in this article, and although many people still think of them as an American company, Chrysler is definitely owned by DaimlerChrysler, a German company. DaimlerChrysler sells the cars and trucks that Chrysler makes here in fairly small numbers overseas, but it’s the same stuff we get here. It’s not made specifically for the foreign markets, hence the limited number of sales. DaimlerChrysler does sell cars made for the European market here in the States, and they’re called Mercedes-Benz vehicles. But, putting aside Chrysler’s current nationality aside for the moment, there is a car that will be sold here in 2008 that has been sold in Europe for the past 4 years that we haven’t been able to get previously. That vehicle is the diminutive Smart Car made by Mercedes, a tiny urban vehicle that will be sold through Roger Penske’s United Auto Group, so don’t look for it at your Dodge or Chrysler dealer. Mercedes has no plans to bring anything else over, particularly their very nice, very small A-Class and B-Class cars, which are strong sellers in Europe, but will not be sold here because DaimlerChrysler is wary of diluting the Mercedes-Benz brand in America.

2008 Smart

Yes, it’s going to be a lot of fun for prospective car-buyers in the very near future with a lot more choices available to them via both the domestic and foreign brands. From the domestic makers’ perspectives, it can only help their situation. Because now if you want a car; and that car needs to come from somewhere other than here, you can get what you want (yes, made somewhere else) down at the GM or Ford dealership.

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Odds and Ends About cars and the Car Business

By Brendan Moore

02.03.2007

FIAT has rolled out the new Bravo in Europe to mixed reviews. There is undoubtedly no way that Fiat can equal the success of the recently new Grande Punto, but they’d probably be happy with just a percentage of the acclaim (and the accompanying sales) the Punto has racked up. The Bravo is competing in the toughest segment in Europe, the one with the VW Golf, Opel Corsa, etc., so it’s not going to run away with the market by even the most optimistic of sales projections.

ABOUT half of all people that walk into a dealership (new and used) in the U.S. have non-prime credit, says the NADA (National Auto Dealers Association) through estimates supplied by their dealer members. The CBA (Consumer Bankers Association) says that half of all people who actually get a loan to finance a car have “A” credit, which is also called prime, and requires a credit bureau score (FICO) of 720 or above. Another 25% are in the “B” category, which is 680 to 720 FICO. So, that leaves a lot people driving their old car or taking the bus, doesn’t it?

FORD has signaled its intent to bring Ford of Europe product to the United States as soon as possible. Statements by Alan Mulally, Ford’s new CEO, show that he has been looking at the product lineup in Europe and has concluded that there are vehicles there that Americans would want to buy. Look for the Focus S-Max, the Mondeo, and the Transit Connect, a smaller version of the Transit commercial van seen all over Europe, to make the trip across the ocean. The Transit Connect could possibly be for sale in the States even before the 2008 calendar year.

GM has increased the limited powertrain warranty coverage on their certified used cars in the U.S. to 5 years or 100,000 miles, whichever comes first. Additionally, the warranty is fully transferable to subsequent owners. This move is expected to increase customer satisfaction with the used vehicle as well as increase the residuals of used General Motors vehicles throughout the lineup.

NANJING AUTO announced that it will start making cars in China based on the MG Rover technology it bought from the failed MG Rover in 2005. Nanjing stated that it would make four models in eastern China and the MG TF sports coupe in the former MG Rover facility in Longbridge, England.

NISSAN saw sales drop in the U.S. in the third quarter (ended Dec 31, 2006) and is now on track to have its worldwide profits drop for the first time since Carlos Ghosn became CEO of Renault and Nissan. Nissan had increases in car sales and increases in sales across the whole Infiniti line in the U.S., but sales of trucks dropped 8%. Let the second-guessing begin.

KIA is getting very serious about the EU market and nothing illustrates this better than the new Kia Cee’d (yeah, weird name). The new Cee’d was designed in the U.K., engineered in Germany, and is built in Slovakia. Pretty heady stuff for the Korean automaker, but Kia believes that’s what it’s going to take to get the market share they want in the EU by the end of 2008.

WHAT model has the highest percentage of Generation X (born between 1965 and 1979) owners? It’s a surprise to me, but Power Information Network says it is the gargantuan Nissan Armada SUV. I would have guessed something smaller. But I’m completely certain all those Gen X owners “need” their Nissan Armadas – they probably all have 5 or 6 kids and the AWD is needed because the family business is a logging camp somewhere. What is the model with the greatest amount of buyers in the generation born before 1945? C’mon you know this one, just think for a minute. Yup, that’s right; it’s the Lincoln Town Car. The model that has the highest percentage of baby boom (born between 1946 and 1964) buyers is the Volvo C70. Data rocks, huh?

FRANCE saw a 1.8 percent increase in new car sales in January, but the PSA/Peugeot-Citroen Group and Renault, France’s only two domestic manufacturers, didn’t get any of the increase, which went entirely to foreign car makers. In fact, in an up market, PSA/Peugeot-Citroen lost 3.3% and Renault lost 7.0%. The big winner last month was Volkswagen with an increase of 14.4%

NEW ZEALAND residents bought more bicycles than cars in 2006; in fact, 30,000 more new bikes were sold than new cars in NZ last year. Bicycle sales have increased 40% over the last four years according to sales figures supplied by both Statistics New Zealand and the NZ Motor Trade Association. There are approximately 4 million people in New Zealand.

FORD and GM both had an awful month in January sales, posting a 19 percent and 16.6 percent drop respectively in new vehicle sales. Most of the decrease can be attributed to both companies pinching off sales to car rental companies as Ford and General motors are trying to limit their low-profit sales transactions going forward. The margin on sales to rental car companies ranges from low to non-existent and both companies are trying to curtail the practice. Additionally, too many sales to rental companies tends to depress residuals of the vehicles in question, thereby negatively affecting the private owners of the same vehicles. It should be noted, however, that some of the bad magic was due to what hurts the Big 2 month after month – losing sales to the foreign manufacturers.

CANCER and cars: The American Academy of Dermatology says that new data shows a strong link between people who drive a lot and increased rates of skin cancer in the United States. As you might expect, the melanomas show up on the left side of the individuals in question. Researchers say the repeated and prolonged exposure to sunlight on the exposed left sides of drivers is the cause. While windshields are made of laminated glass that blocks most UVA and UVB radiation, the side and rear windows are made of non-laminated glass that blocks only UVB radiation (the sun’s burning rays), but not the deeper, more penetrating UVA radiation present at all times. According to the AAD, skin cancer is the most prevalent type of cancer in the U.S. with more than a million new cases diagnosed each year. Approximately 10,850 people will die from skin cancer this year.

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