By Brendan Moore

06.20.2008

Other shoes continue to drop over at Ford, with the company sending out a press release this morning that says that the 2009 F-150 pickup truck launch has been pushed back an additional two months to late fall. Ford stated that they simply have too many 2008 F-150 pickups in their inventory still, and they need more time to sell down their existing stock.

Delaying the debut of the new F-150 is big news; the truck has been the linchpin of Ford’s profits for decades, and this sort of move is not something that Ford takes lightly, or for that matter, would do unless it just absolutely had to. Ford also announced further cuts in overall truck production for the rest of 2008 calendar year. Ford also reduced its financial outlook for 2008, saying that the recent (and massive) shift in consumer tastes from large vehicles to small, fuel-efficient vehicles has thrown their sales forecast into turmoil.

Ford now expects that sales this year will be worse than last year, and has adjusted their industry-wide forecast to a range of 14.7 million units to 15.2 million units. June sales industry-wide are currently trending at a 12.4 million unit rate if extrapolated to an annualized basis.

Alan Mulally, CEO of Ford, stated, “As gasoline prices average more than $4 a gallon and consumers worry about the weak U.S. economy, we see June industry-wide auto sales slowing further and demand for large trucks and SUVs at one of the lowest levels in decades. Ford has taken decisive action to respond to this accelerating shift in customer demand away from large trucks and SUVs to smaller cars and crossovers, and we will continue to act swiftly moving forward.” Our sources at Ford have told us that there is more to this statement than PR window-dressing; it is believed that Mulally and his senior leadership team have already decided to shut down several truck plants, invest the money to completely retool those plants, and start producing Ford’s small European models here in the U.S. as soon as possible.
Ford says publicly that they will provide more information on their future manufacturing plans at their July meeting when they announce second-quarter financial results.

Here is a copy of the official press release put out by Ford this morning:

PRESS RELEASE: FORD FURTHER CUTS TRUCK PRODUCTION

FORD FURTHER CUTS TRUCK PRODUCTION AS DEMAND SLOWS; MORE CARS, CROSSOVERS, FUEL-SAVING POWERTRAINS ADDED

Next-generation European Ford Focus and Fiesta small cars reach North America in 2010
* North American large truck and SUV production further reduced for remainder of 2008; new Ford F-150 pickup introduction timing adjusted due to market conditions and current-model sell-down
* Production reductions will be achieved through additional downtime, shift reductions and line-speed actions at Ford’s large truck and SUV assembly plants
* Production will increase for the Ford Focus sedan and Ford Escape and Mercury Mariner small utility vehicles
* Next-generation, European Ford Focus and Fiesta small cars to begin production in North America in 2010, as Ford confirms it is revising its product plan to add more small cars, crossovers and fuel-efficient powertrains, including many from Ford’s acclaimed European lineup
* More details and an updated outlook will be provided during Ford’s second-quarter financial report in July; it is clear, however, that 2008 Automotive results will be worse than 2007, cash outflows will be greater than previous guidance and, unless the economy improves, it will be difficult for Ford to break even companywide on a pre-tax basis in 2009, excluding special items
* Ford Motor Credit Company will incur a pre-tax loss this year – excluding any potential payment related to Ford’s profit maintenance agreement – primarily due to further weakness in large truck and SUV auction values; Ford Credit no longer plans a distribution payment to Ford in 2008

DEARBORN, Mich., June 20, 2008 – Ford Motor Company [NYSE: F] today said it is making further reductions to its North American truck production plan while adding more small cars, crossovers and fuel-efficient powertrains, as the company responds to the continued deterioration in the U.S.business environment and the accelerated shift away from large trucks and SUVs.

“As gasoline prices average more than $4 a gallon and consumers worry about the weak U.S. economy, we see June industry-wide auto sales slowing further and demand for large trucks and SUVs at one of the lowest levels in decades,” said Ford President and CEO Alan Mulally. “Ford has taken decisive action to respond to this accelerating shift in customer demand away from large trucks and SUVs to smaller cars and crossovers, and we will continue to act swiftly moving forward.”

Ford now expects U.S. industry volume in 2008 – including medium and heavy vehicles – to be between 14.7 million and 15.2 million units, compared with the previous assumption of 15 million to 15.4 million units. Accordingly, in the third quarter, Ford now plans to produce 475,000 vehicles, a reduction of 50,000 units from previously announced plans and a decline of 25 percent compared with the 2007 third quarter. In the fourth quarter, Ford plans to produce 550,000 to 590,000 units, a reduction of 40,000 units from previously announced plans and a decline of 8 to 14 percent compared with the 2007 fourth quarter.

In parallel, Ford is adjusting the public introduction timing of the new 2009 Ford F-150 by approximately two months due to the industry-wide slowdown in the U.S. truck market and the need to sell down dealer inventory of the current model. The new F-150 now will go on sale in late fall.

“The new 2009 F-150 raises the bar yet again on capability, quality and durability, and we know core truck customers are eagerly awaiting its arrival,” said Mark Fields, Ford’s President of The Americas. “Our plan all along has been to introduce the new F-150 after our dealers had a chance to sell down inventory of the existing model, and – with the current slowdown in the marketplace – we decided it was prudent to adjust the start of public sale for the new truck by about two months.”

With these actions, Ford said it now is clear that 2008 pre-tax Automotive results will be worse than 2007, cash outflows to fund operating losses and restructuring will be greater than previous guidance and, unless the economy improves, it will be difficult for Ford to break even companywide on a pre-tax basis in 2009, excluding special items. Ford North America still expects to reduce annual operating costs by about $5 billion by the end of 2008 – at constant volume, mix and exchange, and excluding special items – compared with 2005.

Ford Motor Credit Company now will incur a pre-tax loss this year – excluding any potential payment related to Ford’s profit maintenance agreement – primarily due to further weakness in large truck and SUV auction values. Ford Credit no longer is planning a distribution payment to Ford in 2008.

Ford said it will provide more details on changes to its overall plan when it announces second-quarter financial results in July. In the meantime, Ford is taking the following production actions:
* Production of the 2009 F-150 now will begin in August at Kansas City Assembly Plant and in September at Dearborn Truck. One shift will be eliminated at both Kansas City (from two to one) and Dearborn (from three to two). Dearborn Truck will be idled most of the third quarter.
* Michigan Truck Plant will be idled for nine consecutive weeks beginning the week of June 23, in line with demand for the company’s full-size SUVs.
* One shift of production will be eliminated at Louisville Assembly Plant for mid-size SUVs in the third quarter.
* The line speed will be reduced at Kentucky Truck Plant for large pickups in the third quarter.
* The line speed will be reduced at Chicago Assembly in the third quarter for full-size sedans.
* Production will wind down at Cuautitlan Assembly Plant in Mexico by the end of 2008. The plant, which now produces large pickups, will be retooled for production of the new Fiesta small car for North America beginning in early 2010.
Ford also is taking the following actions to increase capacity in the third quarter:
* Oakville Assembly will add a third shift for production of the Ford Edge, Lincoln MKX and all-new 2009 Ford Flex crossovers.
* Kansas City Assembly Plant’s line that produces the Ford Escape, Escape Hybrid and Mercury Mariner and Mariner Hybrid small utility vehicles will add a third shift.
* Wayne Assembly Plant’s body and paint shops will add a third shift, and the line-speed will be increased for final assembly production of the popular Ford Focus small car.

Production at Ford’s stamping, engine and transmission plants is being adjusted in line with the changes in assembly capacity.

“We view the move to smaller, more fuel-efficient vehicles as permanent, and we are responding to customer demand,” Mulally said. “In the near term, we are adjusting production to the actual demand – increasing small cars and crossovers and reducing large trucks and SUVs. For the long term, we are moving fast to introduce more small cars, crossovers and fuel-efficient powertrains – including more hybrids – and we will adjust our manufacturing facilities to match our updated product lineup.”
Ford said it is uniquely positioned to build on its strength today as a crossover vehicle leader, while leveraging its small car expertise in Europe and bringing more of those vehicles to North America.

In addition to hatchback and sedan versions of the European-engineered Ford Fiesta small car that goes on sale in North America in early 2010, Ford is announcing today that four- and five-door versions of the next-generation European Ford Focus small car will be produced in North America beginning in late 2010.

The new Focus will be common with Europe, South America and Asia Pacific and represent the next generation of today’s successful European Focus. Excellent fuel economy will be achieved through new highly efficient direct-injection engine technology and a new advanced six-speed transmission.

The new Focus and Fiesta – as well as other small cars and crossovers from Europe – will be part of an unprecedented period of new Ford product introductions that has only just begun in North America. The new Ford Flex crossover and Lincoln MKS sedan went on sale this month, and the new F-150 goes on sale in late fall. New versions of the Ford Fusion, Mercury Milan and Lincoln MKZ mid-size cars debut late this year, as do all-new hybrid versions of the Fusion and Milan.

By the end of this year, 70 percent of all Ford, Lincoln and Mercury products by volume in North America will be new or significantly upgraded compared with the 2006 models. By the end of 2010, 100 percent of the product lineup will be new, including in 2009 the next-generation Mustang, new fuel-saving EcoBoost engines and new European Transit Connect.

“We remain absolutely committed to accelerating the development of the new products that customers want and value,” Mulally said. “We sell some of the best smaller cars and utility vehicles in the world in our profitable European and South American operations, and our plan is to introduce these same vehicles in North America as quickly as possible. This is an integral part of our plan to leverage our global assets and achieve our goal of profitable growth.”

Ford Motor Company, a global automotive industry leader based in Dearborn, Mich., manufactures or distributes automobiles in 200 markets across six continents. With about 244,000 employees and about 90 plants worldwide, the company’s core and affiliated automotive brands include Ford, Lincoln, Mercury, Volvo and Mazda. The company provides financial services through Ford Motor Credit Company. For more information regarding Ford’s products, please visit www.ford.com.

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By Chris Haak

06.19.2008

GM has released the official pricing and performance specifications for its fastest, most powerful, most expensive vehicle in company history – the 2009 Corvette ZR1. Basically, all of the numbers – pricing, performance, even fuel economy – turned out almost exactly where everyone expected them to. But it’s only when you step back to consider these numbers, particularly when taken together, that it really sinks in just how incredible the the ZR1 is in terms of performance/price.

The ZR1′s base price is $103,300 (including an $850 destination fee) and has a $10,000 option package available (likely interior upgrades such as the leather-wrapped dash available in other Corvette models), $2,000 chrome wheels, and a mandatory $1,700 gas guzzler tax. It’s interesting to note that the 2009 ZR1 is the first Corvette to be saddled with a gas guzzler tax (estimated EPA ratings are 14 city/20 highway). Forgetting for a moment about the likely dealer “market adjustment” and mandatory gas guzzler tax, the ZR1 is 115% ($55,405) more expensive than a base $47,895 coupe and 41% more expensive ($30,045) than the $73,255 Z06.

So, what do you get for your $103,300 (plus the aforementioned dealer “market adjustment,” which is likely to be particularly problematic for the first cars to hit showrooms)? The quarter mile flashes by in 11.3 seconds at 131 miles per hour; 0 to 60 happens in just 3.4 seconds, and the car can go 0 to 100 in just 7.0 seconds. Manufacturers’ performance claims are often conservative, and in fact, the former bad boy Corvette, the Z06, had a manufacturer-claimed 0 to 60 time of 3.7 seconds, but several magazine tests were able to beat that, with times as low as the ZR1′s claimed 3.4 seconds. GM claims that the Z06′s 0 to 100 time is 7.9 seconds, so the ZR1 is significantly quicker in that metric as well.

Given the large price differentials ($25,360 between a base coupe and a base Z06; $30,045 between the base Z06 and base ZR1), it’s unlikely that many buyers will be comparison shopping among the various Corvette models; some buyers will want the relatively inexpensive and fast base model; others will prefer the more expensive and faster (and more hard-edged) Z06; many will covet and some will step up to the ZR1′s ultimate performance and luxury, which is probably a less hardcore track machine than the Z06, yet thanks to its significant horsepower and braking advantage, can probably still beat the Z06 on most racetracks.

Since the various Corvette models won’t be competing with each other, GM surely enjoyed pointing out in the press release (linked below) how well the ZR1 compared with its competitors in terms of fuel economy. Most of the competitors GM named consume far more fuel than the ZR1 does; the Ferrari 599 GTB Fiorano is rated at 11 city/15 highway), the Lamborghini Murcielago is rated at 8 city/13 highway, and the Aston Martin V8 Vantage is rated at 12 city/19 highway. Interestingly, two competitors do top the ZR1 in fuel economy; the Dodge Viper bests the ZR1 in highway economy (13 city/22 highway) and the Porsche 911 GT3 bests it in city economy (15 city/22 highway).

Of the competitors named above, the ZR1 is less expensive than all but the Dodge Viper (which is likely on its way to the racetrack in the sky after this current generation runs its course and sells in extremely small numbers). Those prices are: Ferrari 599 GTB Fiorano ($270,484), Lamborghini Murcielago ($323,300), Aston Martin V8 Vantage ($114,350), Dodge Viper ($87,460) and Porsche 911 GT3 ($108,360). The Italian exotics and the Viper are pretty close to the ZR1 in terms of power output, but the Aston Martin and Porsche are far below the ZR1 horsepower-wise (415 for the Porsche and 380 for the Aston Martin). The competitors (excepting the Viper) all have higher-quality interiors, but for twice or triple the price, they should as well. Start checking option boxes (there are no less than 19 of them) on a Porsche order form for leather-covered interior bits, and the price quickly gets further from ZR1 territory and closer to Ferrari territory.

While any car costing $103,300 could be called “inexpensive” or a “bargain,” GM has really put an impressive machine into enthusiasts’ hands for the 2009 model year. What GM has also inadvertently shown is what a great performance bargain the upcoming 2009 Cadillac CTS-V, which shares many basic engine components with the ZR1, although in a detuned state, will be if its price is near the rumored $58,000 to $62,000 range.

GM’s press release can be found here.

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By Kevin Miller

06.18.2008

A recent article in the Financial Times indicates that Volkswagen may halt US sales of the Rabbit hatch because it is unprofitable to sell the European-built vehicle here. Sales may be discontinued in Australia and Brazil for the same reason. It is rumored that the GTI will continue to be imported to maintain its image and heritage.

As we reported earlier this month, VW expects to cut about $1600 out of each next-generation Golf with more efficient production strategies. However, even that amount of savings may not be enough to make the Golf profitable in the US, as the falling dollar continues to make it difficult to profitably sell European vehicles here.

Volkswagen is looking to open a production facility in the US, and the belief is that plant will build the Passat (or similar) mid-sized sedan, as well as possibly the Golf and maybe a smaller, Polo-sized vehicle. US production will help Volkswagen overcome a weak dollar. Until that plant comes online, however, the Golf would be absent from the US market.

This is not good news for Volkswagen sales in the US, as small, fuel efficient vehicles are in high demand because of record gasoline prices. Though the Rabbit is not at the top of its class for fuel economy, it is among Volkswagen’s least expensive and more efficient vehicles in the US. With a goal of tripling sales in the US to 1 million vehicles by 2018, discontinuing the Golf/Rabbit nameplate even temporarily seems to be a contradictory move. Per-vehicle losses are evidently high enough to cause VW to take this step to shore up their financial position in the US.

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Odds and Ends about Cars and the Car Business

By Brendan Moore

06.17.2008

Sirius and XM are getting closer to the merger initiated last year as an important federal regulator signaled that he was agreeable to the proposed merger. FCC Chairman Kevin Martin confirmed that he would support the deal and stock prices at both companies rose accordingly. Antitrust regulators at the Justice Department have already approved the merger in March of this year, saying that they believe there is no antitrust concern since satellite radio has plenty of competition in the marketplace from iPods, MP3 players, traditional and HD radio, audio on mobile phones, etc. The approval from Martin was contingent on some conditions laid down by the FTC; those conditions would require a pledge to make 24 radio channels available for noncommercial and minority programming, an agreement to cap prices, provide interoperable radios and offer programming on an “a la carte” basis. XM has about 9.3 million subscribers, versus 8.6 million for Sirius.

Auto dealers are in crisis mode concerning inventories of small fuel-efficient cars. Almost every dealer is sold out of new cars that fit that description, and the pressure to keep the used car lot stocked with late-model cars that possess good fuel economy is intense. This has led to bidding wars at the wholesale auctions, and fat trade-in values for consumers when they’re trading in a small car. Conversely, the big iron like SUVs and pickups goes unwanted and unloved on the new car lots as consumers continue to react to $4.00 a gallon gasoline. The wholesale auctions present an even more damning arena for the formerly high-flying SUV and pickup segment, with used car managers from every dealership making the sign of the cross and hurrying away when an SUV or pickup truck comes across the block.

GM says (June 16th) they’re feeling pretty confident about the Chevrolet Volt meeting all of its performance goals and its promised 2010 launch. Bob Lutz says they are also close to naming the battery supplier for the EV that will carry the green flag for GM in the near future. “I would say there’s almost no reasonable doubt in our minds anymore that this is going to work,” said Lutz, who heads vehicle development for GM. Lutz stated that the Volt prototypes are routinely exceeding the desired battery performance parameters, and under some adverse conditions in terms of speed, load, etc.

Skoda says that despite all the rumors of their new SUV being introduced at the London Auto Show next month, the Skoda Yeti will be introduced next year. According to an article in Automotive News, “the SUV will be built at Skoda’s Kvasiny site alongside the large Superb and the Roomster medium minivan. The two Kvasiny assembly lines have a total production capacity of 200,000 units. Skoda will target central Europe with its Yeti and is expected to sell around 50,000 units annually. “It will be positioned to fill the gap of both SUV and MPV (minivan) that are not part of the Skoda product line-up,” said Walt Madeira, manager of European vehicle sales forecasts at the UK office of CSM Worldwide. “Skoda must try to get a piece of the pie as SUV sales are very lucrative.” Eckhard Scholz, Skoda board member in charge of technical development, said in March the car will come in four-wheel drive and front-wheel drive-only variants: “I expect most customers will have the four-wheel drive variant.” I would say that is a pretty safe bet, Eckhard. For those of you that are unfamiliar with Skoda’s recent successes in the marketplace, suffice it to say that they have not put a foot down wrong the last few years, and are transforming themselves into quite a European powerhouse. Skoda is an important part of parent company VW’s plan for world domination by 2020.

Toyota is actively considering converting some truck plants in the U.S. to car production, which should not be a surprise to anyone after the last month of news coverage concerning changing consumer tastes regarding small cars. Mighty Toyota is not immune to those market forces; sales of the full-size Toyota Tundra fell 31.5% in last month compared to sales in May 2007. “Because of the declining sales of the Tundra and SUVs and the resulting decrease in the rate of operation of the lines producing those vehicles in the United States, we may consider a change in structure to enhance the rate of operation,” stated Toyota Executive Vice President Takeshi Uchiyamada. May also saw two Toyota cars, the Corolla and the Camry (along with two Hondas), post some gaudy sales numbers and dislodge the Ford F-150 pickup truck from its usual perch as best-selling vehicle every month, a spot the Ford pickup has held every month since 1991.

Chrysler LLC is probably going to get their upcoming Hornet from Nissan. Nissan will use the Nissan Versa platform to build the sub-compact in Oppama, Japan. The Hornet will be built in 2009 and retail as a 2010 model. Chrysler hopes the Hornet will compete with cars like the Versa, Honda Fit, MINI, VW Rabbit, etc. Chrysler is desperate for some presence in the segment, since the company is extremely weighted towards large trucks and SUVs, and many of their best selling cars are also fairly thirsty. The Hornet concept was originally shown in 2006, caused a stir, and has been waiting for someone to wave a magic wand over it since. It appears that events have now pushed production of the car onto the fast track.

SAIC Motor plans to start production again at its British plant in August making MG-brand sports cars, its president, Chen Hong, said recently. The plant is located in Longbridge and has been idle since last year, when the limited production was pinched off to nothing. Nanjing, the original buyer of MG, was itself acquired by SAIC, another Chinese car company, and as little as three months ago, SAIC was dropping broad hints that they would abandon the Longbridge production site. When Nanjing originally announced the reopening of the famous Longbridge plant, hopes were high that the Chinese company would employ a considerable amount of the former workers, but those hopes were quickly dashed after Nanjing stated that only the MG TF would be produced there. Now SAIC is circling around to the original Nanjing plan. Strangely enough, Nanjing had also planned to produce the MG TF in the small town of Ardmore, Oklahoma in the United States. That early announcement, made quickly after their purchase of MG Rover, was met with head-scratching on both sides of the Atlantic. And after that early announcement, nothing much was ever heard about Ardmore, Oklahoma again, even though Nanjing said they had to make MGs in the United States since they were going to sell so many of them in the United States after the triumphant return of the MG octagon to these shores. SAIC will retail the British-made MG TF sports cars in the UK through approximately 40 dealers, starting at the end of August or in early September, Hong said at a shareholders’ meeting. We shall just have to wait and see if they are able to make that timeline. I have my doubts.

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