Check Your Mirrors

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.

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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