By Brendan Moore

04.18.2007

Ron Gettelfinger, President of the UAW, told Reuters reporters earlier today that DaimlerChrysler should abandon its efforts to sell its American subsidiary and just keep Chrysler.

Gettelfinger said he believed the sales process that began in February, is currently being conducted with four potential buyers, and has pushed up DaimlerChrysler’s share price in the last two months could still be halted. Gettelfinger stated that there was a lot of support on DaimlerChrysler’s supervisory board for abandoning sale efforts, but did not elaborate. He told reporters that the UAW, Chrysler’s biggest union, would prefer that there were no changes in Chrysler ownership.

There is much speculation that a sale to one of the four potential buyers, all of whom are private-equity groups or backed by private-equity groups would be a nightmare scenario for UAW. Private-equity groups are known for their strong emphasis on financial indicators like IRR and ROE during their usually-short stewardship of companies they acquire, and the UAW is not seen as a strong contributor to those types of calculations. Chrysler sustained a loss of nearly $1.5 billion in 2006, is trending towards large losses this year, and any new owner will be under intense pressure to reverse those numbers.

Of course, the UAW is very capable themselves of producing nightmares for any new owner through protracted labor negotiations, work stoppages or strikes if there is anything happening that the union members are opposed to, either short-term or long-term. Any new owner will need a cooperative UAW for the first couple of years at the very least.

It seems ridiculous that DaimlerChrysler is even considering abandoning their efforts to make Chrysler go away, but maybe Gettelfinger knows something the industry analysts do not. Then again, maybe his statement today was simply a negotiating tactic; Gettelfinger has met privately with every potential buyer and should know better than anyone just how serious DaimlerChrysler is about selling their American problem child.

Chrysler’s only response to Gettelfinger’s statements today was basically a non-response: they said only that “all options were on the table regarding a sale of Chrysler”, which I guess also includes not selling.

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By Brendan Moore

04.17.2007

There has been considerable speculation lately about just what impact China will have on the international auto market in the future, with variable sales numbers and timelines offered up by different industry analysts. There is no doubt that China will be exporting large numbers of vehicles at some point, the questions are to which countries and when. Furthermore, the Chinese have learned from the example of the foreign auto companies that operate in China, as well as the Japanese and Korean models in the United States, that setting up production facilities in target countries (presently only developing countries) is sometimes an easier way to accomplish their sales goals.

Just how many vehicles China exported last year is a matter of contention, and the answer depends on who you ask in China and their mood that day. The estimates range from 326,000 to 600,000 vehicles exported; almost all to developing countries and almost all trucks, buses or vans. The differences in the numbers are a result of whether knock-down kits that are subsequently assembled in plants in places like Ecuador, Iran, Russia, Brazil, etc. are included, whether units manufactured in China and sent to the U.K. by companies like Honda (Jazz, City) are included, and finally, whether shipments of vehicles as small in number as 300 units by one of the auto manufacturing companies get included. There are currently over 100 companies in China registered as vehicle manufacturers, and it is an open secret that there are many vehicles made by small car companies not on the registered company list, but listed as some other type of manufacturer (i.e., anything from ovens to wheelbarrows) that are not only somehow able to sell to sell their vehicles with no legal repercussions from the Chinese government, but frequently do it at half the price of the other cars in their respective class. Accurate tracking is difficult in this sort of environment.

2007 Chery QQ

So, when will we see Chinese cars in any substantial numbers in the U.S. or Europe? There have been very limited exports to Europe; 600 Brilliance cars imported last month, 500 Hover SUVs shipped to Italy late last year, and a few similar examples. Chery and DaimlerChrysler have agreed to start shipping the Chery QQ car to the United States and Canada with Dodge badges on the cars that will be shipped here. But no one seems to want to put a “Dodge” name on the car yet, or commit to a date, although it looks like the 2009 model year will probably happen in terms of a date.

The problems for the Chinese car companies concerning large-scale export to Europe and North America are many. First, there is no Chinese car that is anywhere close to being able to meet the vehicle safety requirements of either market. Ditto for the emissions standards. Additionally, since most of their resources are being used to meet ever-increasing demand in China, the Chinese automakers are way short of the capital needed to set up the necessary parts and service infrastructure required to support any large-scale sales effort in either Europe or North America. Lastly, even if all of their resources were directed to export markets, no Chinese car company has the volume and manufacturing efficiencies required to compete and win in a battle with even the smallest competitors in the Europe or North American markets.

Will the Chinese be here or in Europe in 2 years under one of their own brands, in substantial numbers? No. On the other hand, it took the Koreans roughly 30 years to follow the Japanese in setting up shop in the United States, and then another 20 years in-country to effectively match them in engineering and buid quality. Will it be a similar timeline as far as the Chinese are concerned? No way. They’ll probably be here and/or in Europe within 5 years and, I predict, a match for the market leaders in engineering and build quality within 5-7 years after that. They won’t be out-selling them, but the Chinese will have some viable competitors to the current market leaders in certain segments.

I hope all the established car companies are getting ready for the Chinese push because their already-tough business is going to get even tougher by 2015.

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By Brendan Moore

04.15.2007

The ACEA (European Automobile Manufacturers Association) released their first quarter sales figures on Friday, April 13, and Toyota pushed up its market share to 6.2% from 5.5% in the same period last year. Toyota was able to realize this gain despite a 0.3% drop in the overall market compared to first quarter 2006.

Toyota is nowhere near the market leaders (VW, GM, and Ford) yet in Europe, but in a pattern that should be very familiar to people in the U.S., consistently posts small gains even when the market shows a decline. It just doesn’t seem to matter what the market or the other manufacturers do, Toyota just keeps selling more cars. Their steady progress upward makes the European automakers a bit anxious, to say the least.

2007 Toyota Auris

New models of the RAV4, the Aygo and the Yaris are leading the sales surge, and things are only going to get worse for the European auto companies as Toyota is preparing to launch the all-new Auris hatchback, the successor to the very popular Corolla. Dealer orders for the new Auris are running very high and the car is expected to be a big seller in Europe.

Another Toyota sales record this year, perhaps?

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By Michael Karesh

04.13.2007

Sometimes it’s hard to believe what counts as news. The Economist had a blinding flash of the obvious recently and discovered that a used Civic is less expensive in terms of total purchasing and operating costs than a new Prius.

Aside from the odd logic of comparing a six-year-old used car with a new one, the author asserts that changing the oil and air filter boosted the used Civic’s highway fuel economy from 34 miles-per-gallon to 40. This set off my BS detector. Changing the oil should have a negligible impact on fuel economy, and changing the air filter should be worth, at most, two to three mpg if the old one was fairly dirty. So while changing out a dirty filter is definitely a good idea, a six mpg gain should not be happening.

When my BS detector goes off, I check the methods that yielded the results. Let’s assume that the 40 miles-per-gallon figure was properly calculated, though no method is stated. Problem is, the 34 mpg was calculated based on the following information, as stated in the article: “The previous owners told me the car could get from Austin to New Orleans on a single tank of gas. That implied 34 miles to the gallon on highways and about 30 in the city.”

I’ve come across some wildly inaccurate ways to calculate fuel economy, but this one beats them all. First off, the previous owners didn’t say the gas tank was bone dry upon reaching the Crescent City. I’ll wager that it had a gallon or two left in it. And where did that “30 in the city” come from?

The Economist is a highly respected magazine. (I know this because they used to send me subscription offers that stressed the status of the magazine and its readership.) So how could they publish an article that makes claims based on flimsy evidence and faulty logic? The answer seems clear: they take cars no more seriously than they would Hollywood gossip. Perhaps less seriously: no one’s likely to sue for libel as a result of this article.

This article demonstrates that not even a first-tier source like The Economist is worthy of your blind trust. It’s necessary to look beyond stated conclusions to the methods that yielded these conclusions, especially when the conclusions are surprising.

Michael Karesh is editor and publisher of TrueDelta, an auto research organization. You may visit TrueDelta at http://www.truedelta.com

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By Chris Haak

04.11.2007

Press days ended last week for the annual New York International Auto Show. While this show is not the site of major model introductions that the Los Angeles and Detroit shows traditionally are, it is considered a major international show, and some significant production cars made their debut.

2008 Buick LaCrosse Super/Lucerne Super
Buick is a GM division that’s really been on the ropes lately. With the upcoming demise of the Rainier and Rendezvous SUVs and the rollout of the Enclave crossover, Buick’s lineup now consists of three vehicles. The Enclave has been well-received so far, but the Lucerne and LaCrosse have received a lot of criticism for their derivative 1990s styling (the LaCrosse being a little “oval happy” and the Lucerne looking disturbingly similar to an Infiniti Q45). GM figured that a great way to spice things up would be to increase the horsepower of these cars – the LaCrosse gets a 303-horsepower 5.3 liter OHV V8 also found in the Pontiac Grand Prix GXP and Chevy Impala SS, and the Lucerne gets a 291-horsepower 4.6 liter Northstar V8 found in the higher-end Cadillac DTS. Both models also receive some styling tweaks for 2008, mainly a new shield-shaped grille and different interior trim. More horsepower is always a good thing, but the grilles that look so good on the Enclave look out of place on these sedans. What Buick should really be working on is translating some of their models (and success) from China.

2008 Cadillac STS
This one is a frustrating one to see from GM, considering that with the imminent rollout of the impressive 2008 CTS, the CTS is outclassing its larger, more expensive brother (at least in V6 trim). GM added fender vents (the styling cliché of the mid-2000s) and a grille similar to the DTS/CTS, and re-did parts of the interior. The exterior changes aren’t bad, but after having seen interior photos of the Chinese-built Cadillac SLS (which is a stretched STS), I’m disappointed that GM didn’t bother to use the SLS interior in the STS. Instead, it looks like they went for a cheaper, far less attractive alternative. Increasing the wheelbase of the STS to SLS size wouldn’t hurt either, since the 2008 CTS and STS are extremely close in size.

Chevrolet Beat/Groove/Trax Concepts
GM showed three potential minicar concepts at the show, and hinted that if any were particularly popular or well-received, one might see US sales at some point. Photos of the Beat and Trax are visible on the right side of this website; the Groove is visible if you close your eyes, visualize a 2008 Scion xB, and paint it in semi-gloss black. They established a website where users could vote for their favorites at http://www.vote4chevrolet.com/ and got all sorts of favorable publicity for this attempt to shed GM’s image as a purveyor of gas guzzlers. Then Vice Chairman Bob Lutz stuck a needle in the balloon of optimism by telling Car and Driver that Americans didn’t want cars this small and that horsepower sells, and that the public’s wishes will be considered. As of this writing, over 363,000 people have voted for their favorite (the xB-like Groove is in first and the Chevy WTCC-like Beat is in second place, with the Trax at a distant third). I hope that GM seriously considers producing one of these cars and offers it in the US. The American consumer isn’t going to buy a small car if nobody offers them for sale. If they don’t sell a minicar like this in the US, the least they could do is to incorporate some of the interesting styling cues into their next-generation small cars such as the Chevy Aveo and Cobalt, and Pontiac G5. The current Aveo is a decent-looking car, but not very interesting to look at. Kudos to the GM design teams in Korea who came up with these small cars.

Ford Chip Foose F-150/Funkmaster Flex Expedition/Shelby Mustang GT500KR
Ford showed three special edition vehicles in New York. The Foose F-150 is a lowered, stylized 450-horsepower pickup. The Funkmaster Flex Expedition features a two-tone red and black paint job (which reminds me very much of the old orange and black Super Duty Harley Davidson edition trucks) and 20 inch chrome wheels. Finally, the Shelby has an upgraded engine good for about 540 horsepower (up from 500 in the “regular” Shelby GT500) and some other special trim features. Ford sure is prolific with the special editions of its vehicles. The engine in the GT500 is a little over-the-top, but it’s Ford’s performance king with the GT being out of production, and the Chip Foose F-150 really has some tasteful styling tweaks.

2008 Subaru Impreza
Subaru’s all-new 2008 Impreza has already taken a major beating from fans of the car on Internet forums around the world. Personally, I disagree – the old Impreza/WRX was an ugly car made even uglier by its constant front end styling changes – and the new one looks handsome. The interior is much better looking too. My only critique style-wise is that the non-WRX hatchback (which replaces the wagon) looks like an old Daewoo Lacetti. Powertrains are carryover, but the car is getting bigger, so each horsepower will have to do a little more work most likely.

2008 Subaru Tribeca

2008 Subaru Tribeca
Subaru has given its Tribeca crossover a nose job, replacing the controversial nose with a more pedestrian looking one in hopes of stimulating more sales. The vehicle is certainly more attractive than before, but its new nose reminds me (unflatteringly, I might add) of a Chrysler Aspen. It lost its unique angle and now just looks like any other small/midsize crossover (the Hyundai Santa Fe in particular comes to mind). The excellent cockpit-style interior was kept largely intact, and under the hood, the 3.0 liter flat-six becomes a 3.6 liter version for more power and torque with better fuel economy, and has the newfound ability to run on regular fuel (premium is no longer required).

Other Semi-Notables Worth Mentioning…
Nissan gave us a NISMO 350Z with suspension, brake, engine, and styling improvements. Volkswagen showed a wagon version of their current Jetta, called the Jetta Sportswagen; it will be sold in the US. VW also revealed the Touareg2, which features a new Passat-looking front end treatment and a vitamin-fortified V6 (now at 280 horsepower) and a 45 state legal V10 TDI diesel. A V6 diesel will also be available in the Touareg2 in the near future.

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2007 Renault Logan

By Chris Haak

By Brendan Moore

04.09.2007

The Consumers Bankers Association (the CBA) released a new report last month that stated that consumer auto installment loans in the United States continue to get longer and longer. As we noted in a column last year, consumers are increasingly opting for longer term auto loans in order to get the monthly payments they want on increasingly expensive cars and trucks. The CBA report notes that this situation is only becoming worse with the percentage of 72-month or greater installment new-car loans now up to 17% of the total new-car loans outstanding, compared to 7% of the total new-car loans outstanding in 2005.

There was a similar increase in 72-month or greater installment auto loan activity for used car loans for these same time periods.

In 1999, only 21 percent of new-vehicle loans were longer than 60 months, the Consumer Bankers Association says. The trend looks unstoppable with many lenders now offering 84-month loans for those who want even longer-term loans, and many of those same lenders considering adding 96-month loans to their product lineup. These terms are for both new car loans and used car loans.

What does this mean in practical terms for consumers? Here’s an example: A $20,000 vehicle loan at 7.55 percent simple interest for 48 months costs the buyer $7,025 in interest. The same loan, carried over 84 months, at the same rate, costs $13,871 in interest. You can do the math – that’s almost twice as much in finance costs. That’s if you can get your lender to give you the same rate for 84 months as 48 months, which would be unusual. They’re probably going to want a higher rate at that long a term. And at 15,000 (average annual miles in the U.S.) miles a year, that means you have 105,000 miles on the car when you finish paying it off at 84 months (7 years x 15,000 miles), so then it’s probably time to buy a new car.

As we noted in a post titled Maybe You Should Lease Your Next Car in 2006 (Archives, Nov 2006 – to your right), there are millions of people in the United States that are getting extended-term loans simply so they can afford the monthly payments on what they want to drive. The preceding example illustrated that there is very little to no equity in the vehicle at any point during the extended loan term and if the loan goes to full term, then the car is almost without any value by the end of the loan term. These types of borrowers are people that really need to take a long look at being lessees instead – it would be far better to lease the vehicles in question from a financial standpoint for most of them.

And just because we can, we’ll list the big vehicle finance outfits: according to AutoCount, an Experian subsidiary, the top ten auto finance (loan and/or lease) companies in 2006 were:

GMAC
Ford Motor Credit N.A.
Toyota Financial Services
DaimlerChrysler Financial Services
American Honda Finance
Chase Auto Finance
Nissan Infiniti Financial Services
WFS Financial
Wells Fargo Auto Finance
CitiFinancial Auto

Lastly, we’ll leave you with this: new car affordability is important to consumers and therefore to car companies, auto dealers, and banks. Comerica Bank out of Detroit says that, as of fourth-quarter 2006, it takes 23.6 weeks of average family income to purchase an average-priced new vehicle. That is a decline of almost two weeks from the average amount of time it took in 2005. The affordability index is based on an average cost of $26,500, which includes the loan finance charges accrued on such a purchase. This amount is down approximately 5% from 2005. Conversely, average family income has increased approximately 5% in this same period. Paradoxically, all of these factors contributed to a new car being easier to buy this year.

So, why are consumers going for increasingly longer terms? Even though there has been a decline in the amount of time it takes the average household to earn the money required to buy a new car, that same household is spending more of its same aggregate income on a higher volume of goods; i.e., flat-screen TVs, iPods, vacations, etc. Therefore, the average household is able to allocate less of a percentage of their total household income towards monthly car payments.

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Select Data Extracts

04.07.2007

By Chris Haak

04.03.2007

Hyundai has shown us its very attractive Genesis large rear wheel drive sedan concept at the 2007 New York Auto Show. On paper, this sounds like a heck of a car: rear wheel drive, optional 4.6 liter 300-horsepower V8, at prices starting below $30,000. But what’s wrong with this car? It’s a victim of Hyundai’s own lack of creativity, or lack of confidence, in its own design team.

Hyundai Genesis Lexus LS 460

From the front, this car looks a lot like a 2007 Toyota Camry, but with more chrome. From the side, it’s trying to look like a Lexus LS 460, even to the point of having a BMW-like “Bangle Butt” decklid design, which Lexus cribbed off of Bangle’s BMW 7-series. It also has the same crease cut into the doors and into the front fender that the 2005+ Acura TL has.

Hyundai Sonata Honda Accord

The Genesis isn’t Hyundai’s first example of cribbing design cues from competitors, though. The 2006 Hyundai Sonata, for all of the accolades that it received, looks very much like a 2003 Honda Accord, but with a slightly more angular front end treatment. The rear end is nearly a carbon copy of the 2003-2004 Accord’s.

Going back further, the 2002-2005 Hyundai XG300/350 is a knockoff of the original Infiniti Q45. The 2007 Hyundai Santa Fe looks very similar to a previous-generation Toyota RAV4 (especially from the A-pillars rearward). Also, the recent mid-cycle enhancement of the Hyundai Tiburon made it look less like a Tiburon and more like a 2001 Mercury Capri.

Kia Sedona Honda Odyssey

Hyundai’s corporate cousin, Kia, is also guilty of dressing up a few of their vehicles to look like the competition. The Kia Amanti is a halfhearted attempt to crib Jaguar S-Type styling cues, and the Kia Sedona minivan’s first generation mimicked a Ford Windstar, and the second generation looked an awful lot like a Honda Odyssey.

Imitation may be the sincerest form of flattery – but it’s flattering to the companies whose products are being duplicated, and should be embarrassing to Hyundai that they have trouble developing attractive mainstream vehicles with their own original – and not quirky – styling.

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