By Igor Holas
Last month, when the Toyota Camry, having surpassed the Silverado, came precariously close to matching the monthly sales of the F-series, analysts began anticipating that May would be a month to be remembered. For decades, the sales charts have been topped by the F-series and for years, the top three have reliably been the F-series, Silverado, and Camry.
That all changed in May 2008.
During May, Ford announced a radical restructuring initiative, and GM did the same today. Both firms went on record saying the market was showing a “tipping point” in consumer behavior, as they rapidly abandoned SUVs and trucks and fully embraced cars and crossovers. CEOs of both companies declared that they believed the move from trucks to cars was structural and permanent; and that they did not expect the SUV and truck markets to rebound, ever. May delivered a perfect evidence of this shift: within a single month, the Ford F-series went from #1 seller in the country to #5, overtaken by four Japanese-made sedans.
This is not a minor reshuffling of the sales charts; this is a paradigm shift in the sales of new vehicles in the US. A half-ton V8 truck was just unceremoniously dethroned by four-cylinder front wheel drive sedans; the Civic, Corolla, Camry and Accord (in that order) trampled the F-series and completely reshaped the US marketplace.
No matter if you root for the trucks, or support more fuel efficient alternatives, this is the month that should finally, and permanently change our perception of the automotive market, including all of the players: the companies, the customers, and the government. This month will hopefully send a wake up call to those among us who believe that this industry is not consumer-driven, to those who believe that gas prices are going to drop again, and to those that in any other shape or form refuse to accept the new reality. Gas is $4 a gallon, and the best selling vehicle in the US is Honda Civic. Will the Civic reign on top of the sales charts for 31 years? Only time will tell, but I’m guessing that the F-150’s feat will be difficult to repeat in coming years.
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By Chris Haak
We’ve previously reported how Ford has of a dramatically smaller market for large vehicles such as pickups and SUVs and subsequently announced , as well as focusing more of its energies and development dollars on the creation of more efficient vehicles and powertrain technologies, such as the upcoming Fiesta subcompact and the EcoBoost twin turbocharger setup. Now today, on the occasion of its annual shareholder’s meeting and against similar headwind in the US market, GM has announced that it too has taken steps to further reduce its footprint in fuel-thirsty large trucks that are languishing unsold on dealer’s lots.
First, the company plans to close four truck plants by 2010, and stated that it may move that schedule even earlier if market conditions deteriorate further. The plants to be closed are the Oshawa, Ontario truck plant in 2009 (builds the Silverado and Sierra pickups), the Moraine, Ohio SUV plant (builds the Trailblazer, Envoy, and Saab 9-7x), the Janesville, Wisconsin plant (builds the Suburban, Yukon, Tahoe, and medium-duty trucks) plant by the end of 2009 for medium-duty trucks and by 2010 for the SUVs, and a medium-duty truck plant in Toluca, Mexico later in 2008. Overall, approximately 2,500 employees are expected to lose their jobs, although many of them will be eligible to apply for transfers to replace some of the 19,000 staff who accepted buyout packages earlier this year and will need to be replaced.
Over the past few years, many analysts have wondered why GM bothered to continue to maintain the Hummer brand, since at this point, it’s very much the antithesis of the environmentally friendly, fuel-sipping face that nearly every vehicle manufacturer strives to present to the public and potential customers.
Since the launch of the now-discontinued Hummer H1 (which itself is a civilian version of the military vehicle still used by the US military), each successive Hummer model has gotten better fuel economy, but with just two vehicles in the lineup (the H2 and H3), and neither of which is rated at even 20 miles per gallon on the highway, the brand has a huge image problem. That problem was rumored to be in line for a fix if Hummer ever launched the rumored Jeep Wrangler-size H4 (which was shown in Detroit in January 2008 as the HX concept), but the fact is that buyers are avoiding the Hummer showroom in droves. Therefore, GM has announced that it will undertake a strategic review of the Hummer brand. That’s nearly the identical code-speak that Ford said when it put Aston Martin, Jaguar, and Land Rover on the block, and what DaimlerChrysler said when it put Chrysler up for sale. I see the H4 as the Hummer brand’s last hope for survival, but if GM decides that it can’t afford to develop and launch it, the Hummer brand is going to be shown the door. I don’t really see any entity being terribly excited about the prospect of owning the Hummer brand, either, so I’d imagine that a sale is unlikely, meaning that it would just close up shop.
Some brighter news for GM is that the much-ballyhooed Chevrolet Volt plug-in hybrid vehicle has been added to the production plan for a late 2010 launch, and will likely be built in Michigan (the leaked UAW document last year pointed to the Detroit-Hamtramck Assembly Center, which currently builds the Buick Lucerne and Cadillac DTS, as the plant that will build the Volt). CEO Rick Wagoner also said that GM expects to show the production-trim version of the Volt (likely to look very different from the concept) in the “very near future.”
In other much-needed small car news for GM, the next generation of the semi-successful (if not critically acclaimed) Chevrolet Aveo subcompact will come in the second half of 2010. Finally, the replacement for the Chevrolet Cobalt compact (with mercifully no mention of its badge-engineered clone, the Pontiac G5) will come in mid-2010 and will be built in the same plant it’s assembled in currently (Lordstown, Ohio), equipped with a new 1.4 liter turbocharged four cylinder, and in a car that (according to GM) will set class benchmarks for safety and quality. I’ll note that there is no mention of benchmarks for fuel economy, performance, or design – but hopefully the new 1.4 liter turbo will help with both fuel economy and performance.
This is just another part of an ongoing series of wrentching changes in process in the US domestic auto industry. Two years ago, I was fairly confident in GM’s ability to stave off bankruptcy and excel in the marketplace with their excellent new products. At this point, however, I’m not sure that even the best products in the world will change the game sufficiently for GM to survive in anywhere near its current form. It seems like this might be a case of too little, too late. I hope, for the sake of the industry and GM employees, that I’m wrong.
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The other shoe drops…
By Brendan Moore
GM has decided to sharply curtail production of SUVs and pickup trucks, will close several plants producing those vehicles, is considering shutting down or selling the Hummer brand, will boost small car production considerably, and is still aiming for a 2010 introduction of the Chevrolet Volt.
That was in a single press conference this morning, just a short while ago.
Rick Wagoner, CEO of GM, said the big changes are, “all in response to the rapid rise in oil prices and the resulting changes in the U.S., changes that we believe are more structural than cyclical. While some of the actions, especially the capacity reductions, are very difficult, they are necessary to adjust to changing market and economic conditions and to keep GM’s U.S. turnaround on track and moving forward.
From the start of our North American turnaround plan in 2005, I’ve said that our goal is not just to return GM to profitability, but to structure GM globally for sustained profitability and growth,” Mr. Wagoner said. “Since the first of this year, however, U.S. economic and market conditions have become significantly more difficult. Higher gasoline prices are changing consumer behavior, and they are significantly affecting the U.S. auto industry sales mix.”
The announcement by General Motors was hardly a surprise; GM is getting buffeted by the gale-force winds of change in consumer preferences regarding new car purchases that has happened the last few months. The shift has been stunning, driven by high gas prices and a general economic recession in the United States, and the Detroit auto manufacturers are the ones that have gotten stunned the most. If preliminary numbers pan out, it looks as if GM will fall below a 20% market share in the U.S. for the month of May, which would be a first for the long-time market leader in the U.S.
GM estimates the plant closures will save the company approximately $1 billion by 2010. Which is great, and needed, but I’m certain that every senior executive at GM is acutely aware that you cannot save your way to first place. You’ve got to sell something that people want, and it’s become apparent that most people in the U.S. have decided that they don’t want an SUV or a pickup truck to use as their personal vehicle anymore. GM needs more small cars to sell.
Here is the official GM press release –
Complete text of GM Press Release:
GM Announces New Products, Capacity Adjustments; Continues Transformation of North American Business
— New car, powertrain programs to meet the changing needs of U.S. customers
— Chevy Volt production gets the green light from the GM board
— GM builds on car momentum with additional capacity; adjusts truck capacity
— Hummer brand set for strategic review
WILMINGTON, Del., June 3 /PRNewswire/ — GM today announced a range of strategic initiatives to aggressively respond to growing demand for fuel-efficient vehicles and to economic and market challenges in North America. Rick Wagoner, GM chairman and CEO, made the announcements here as part of the GM annual meeting of stockholders.
Major initiatives announced by Wagoner include:
— A new global compact car program for Chevrolet, a next generation for the popular Chevy Aveo, and a high efficiency engine module for the U.S. market.
— Funding for production of the Chevy Volt extended-range electric vehicle.
— Addition of third shifts to Lordstown and Orion, which build hot-selling Chevy and Pontiac cars.
— Cessation of production at four plants that build pickups, SUVs and medium-duty trucks.
— A strategic review of the Hummer brand.
“From the start of our North American turnaround plan in 2005, I’ve said that our goal is not just to return GM to profitability, but to structure GM globally for sustained profitability and growth,” said Wagoner.
“Since the first of this year, however, U.S. economic and market conditions have become significantly more difficult,” he said. “Higher gasoline prices are changing consumer behavior, and they are significantly affecting the U.S. auto industry sales mix.”
In North America, GM has been moving rapidly and successfully to revitalize its car lineup and grow its crossover business. New GM cars and crossovers, including the Cadillac CTS, Chevy Malibu, Pontiac Vibe and Buick Enclave, have been selling strongly, and GM intends to build on this success. In fact, 18 of the next 19 new GM products for the U.S. will be cars or crossovers.
Additional operational and strategic actions will be required to position GM for sustainable profitability and growth. These initiatives fall into three broad areas: product and technology, manufacturing facilities and capacity, and the Hummer brand.
New Chevrolet models and a high-efficiency engine module approved.
To further strengthen GM’s lineup of fuel-efficient cars, the GM board has approved a next-generation compact Chevy for the U.S. and global markets, a next generation of the popular Chevy Aveo, and a U.S. production module of GM’s 1.4-liter turbocharged four-cylinder engine.
The new Chevy compact will be better equipped than today’s compact cars, and will be designed to set quality and safety benchmarks for the compact class. Production will begin in mid-2010 at GM’s Lordstown, Ohio, plant, subject to final negotiations with state and local authorities.
“This car will represent the first U.S. application of our global architecture strategy,” said Wagoner. “This strategy will pay major dividends as we leverage our extensive car product development capability in Europe, Korea, and other locations to accelerate the shift in our U.S. product portfolio.”
The next-generation compact will be pure Chevrolet in design, and will feature the 1.4-liter turbocharged version of GM’s global four-cylinder engine. With this engine and a manual transmission, the new Chevy is expected to achieve a 9 mpg improvement over Chevy’s current entry in this segment. The engine will be produced in Flint, Michigan, again subject to final negotiations with state and local authorities.
Also recently approved was a next generation of the popular Chevy Aveo. Based on a global architecture, the Aveo is also expected to have segment-leading fuel economy when it goes on sale in the U.S. market in the second half of 2010.
These new Chevy models will help build on GM’s leadership in fuel efficient vehicles. For example, GM continues to offer more vehicles with a 30-mpg or better highway fuel economy rating than any competitor.
Chevy Volt is a go
The Chevy Volt took a major step toward the showroom with formal approval by the GM board of funding for production of the extended-range electric vehicle. This approval, which includes funding for production development and tooling, indicates that GM leadership believes that the technology for the Volt, including its lithium-ion batteries, will be ready for volume production on schedule.
“The Chevy Volt is a go,” said Wagoner. “We believe this is the biggest step yet in our industry’s move away from our historic, virtually complete reliance on petroleum to power vehicles.”
“We intend to show a production version of the Chevy Volt publicly in the very near future, and we remain focused on our target of getting the Volt into Chevrolet showrooms by the end of 2010,” Wagoner said.
Preliminary plans are to produce the Volt at GM’s Detroit-Hamtramck Assembly Center, subject to successful discussions with state and local governments.
Capacity adjustments address market shifts
GM will react to the shift in the U.S. market by increasing production of small and midsize cars and reducing production of pickups and truck-based SUVs.
GM will add a third shift in September to the Orion Assembly Center in Michigan, which builds the hot-selling Chevy Malibu and Pontiac G6. Also in September, the company plans to add a third shift at Lordstown Car Assembly in Ohio, which builds the Chevy Cobalt and Pontiac G5.
On the other side of the mix equation, market-related declines in truck sales mean that, over time, GM will cease production at four truck plants.
Oshawa Truck Assembly in Canada, which builds the Chevy Silverado and GMC Sierra, will likely cease production in 2009, while Moraine, Ohio, which builds the Chevy TrailBlazer, GMC Envoy and Saab 9-7x, will end production at the end of the 2010 model run, or sooner, if demand dictates. Janesville, Wisconsin, will cease production of medium-duty trucks by the end of 2009, and of the Tahoe, Suburban and Yukon in 2010, or sooner, if market demand dictates. Chevrolet Kodiak medium-duty truck production will also end in Toluca, Mexico, by the end of this year.
GM expects that these actions, along with the recent announcement to remove shifts at two other U.S. truck plants (Pontiac and Flint, Michigan), will result in an additional GM North America structural cost savings of more than $1 billion, on a running rate basis, by 2010. This is on top of the approximately $5 billion running rate reduction by 2011 that we announced earlier this year, and also in addition to the $9 billion reduction accomplished over the 2006-07 period in North America.
GM will work closely with its union partners to mitigate the impact of these difficult actions, which are made necessary by long-term changes in consumer demand for trucks and SUVs.
Strategic assessment for Hummer brand
Finally, GM is undertaking a strategic review of the Hummer brand to determine its fit within the GM portfolio. At this point, the company is considering all options, from a complete revamp of the product lineup to a partial or complete sale of the brand.
“We are making a number of important announcements today, covering everything from product and technology investments to capacity adjustments to a strategic review of our Hummer brand,” said Wagoner. “These moves are all in response to the rapid rise in oil prices and the resulting changes in the U.S., changes that we believe are more structural than cyclical.
“While some of the actions, especially the capacity reductions, are very difficult, they are necessary to adjust to changing market and economic conditions and to keep GM’s U.S. turnaround on track and moving forward.”
General Motors Corp. (NYSE: GM), the world’s largest automaker, has been the annual global industry sales leader for 77 years. Founded in 1908, GM today employs about 266,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM’s OnStar subsidiary is the industry leader in vehicle safety, security and information services. More information on GM can be found at www.gm.com .
Forward Looking Statements
In these and following presentations and in related comments by General Motors management, we will use words like “expect,” “anticipate,” “estimate,” “forecast,” “objective,” “plan,” “goal,” “project,” “outlook,” “targets,” and similar expressions to identify forward looking statements that represent our current judgments about possible future events. We believe these judgments are reasonable, but actual results may differ materially due to a variety of important factors.
Among other items, such factors include: our ability to realize production efficiencies, to reduce costs and implement capital expenditures at levels and times planned by management; market acceptance of our products; shortages of and price increases for fuel; significant changes in the competitive environment and the effect of competition on our markets, including on our pricing policies; our ability to maintain adequate liquidity and financing sources and an appropriate level of debt; the final results of investigations and inquiries by the SEC; court approval of the settlement agreement with the UAW and UAW retirees related to the 2007 national agreement; negotiations and bankruptcy court actions with respect to obligations owed to us by Delphi Corporation, a key supplier; possible downgrades for GMAC or ResCap by rating agencies; developments in the residential mortgage market, especially the nonprime sector; and changes in general economic conditions such as price increases or shortages of fuel, steel, or other raw materials.
GM’s most recent annual report on Form 10-K and quarterly report on Form 10-Q provide information about these factors, which we may revise or supplement in future reports to the SEC on Form 10-Q or 8-K.
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…or, “How I Became a Saab Freak”
By Kevin Miller
Growing up in the 1980s, I was a kid who liked cars. I played in our family’s cars regularly. I liked our 1982 VW Vanagon and 1978 Toyota truck. My first realization of Saab came when I was 12 or 13 years old. I was riding with my parents and we were merging onto the freeway near our home. I looked out the side window and saw what I now know was a 900 sedan. What stood out to me was the curve of the C-pillar trim on the rear door. While most sedans in the 1980s had very straight, angular window and trim profiles (as do many vehicles still today), the 900 sedan had a smooth curve to the rear quarter window and the chrome trim that outlines it. I thought it looked cool and unique.
1982 Saab 900 Sedan, showing the unique-for-1980s curved C-Pillar Trim
Several months later, in the summer time. I was with my mother at the gas station in our neighborhood. A man was fueling his new 900 Turbo convertible. It was Eucalyptus Green with tan leather, and the top was down. It was the first time I noticed a Saab with headlight wipers. I thought that car was very sporty and upscale, but also very pretentious and yuppie. Certainly a car I aspired to, but one that I thought was out of my reach or the reach of my family.
The green-with-tan 900 Turbo Convertible
Fast forward a handful of years. Lauren, a friend of mine in high school, drove a nicely kept Volvo 240 sedan. It was a great vehicle. She was a fan of Volvos and Saabs, and we talked about the cars sometimes. In the waning days of our high school career, following a senior-year breakfast, Lauren and I went to the local Saab/Volvo dealer to check out the 1992 Saab 900 convertible. We arrived in her immaculate 240; I was in a suit and she was in a nice dress. The salesperson was either high, really stupid, or respectful to a fault, because he showed us a red 900 Turbo convertible, put the top down, and we went for a drive. I drove first, and then Lauren drove. It was great. Absolutely the quickest car I had ever driven. And the nicest. The salesman asked us where we worked and how long we had been married. He was bizarre; the car was sublime. It was a turning point in my obsession with Saabs.
A red 900 Turbo convertible like the one we drive. No, that isn’t Lauren
Also during my senior year in high school, I was in an elective class which was full of freshmen. One of those freshmen was a girl named Jenny, who became a friend of mine. Her father restored and showed early ‘70s Camaros, and was the sales manager at a Chevrolet/Saab dealership in a neighboring town, so Jenny and I talked about cars while we should have been learning Spanish. As the year ended, Jenny told me that her dad’s dealership was looking for a lot attendant – the person who washes cars and does other thankless chores around the dealership. I applied, was interviewed and got the job, ending my three-year career at the local McDonald’s.
It was the summer of 1992. The dealership was “Washington State’s Oldest and Most Respected Saab Dealer”, but was in a blue-collar suburb and sold relatively few Saabs. They sold a lot of Chevrolets- Luminas, Berettas, Camaros, Suburbans, and Geo Prisms were hot sellers. My primary responsibility was keeping vehicles clean on the used car lot. So while I was around the new Saabs, I was also around a lot of used domestic cars from the 1980s. I spent that summer washing a lot of cars, getting a farmer tan and having wet feet for two continuous months. Before I left that job at the end of the summer to start college, I got some 1992 Saab product brochures and posters. Obsessive Saab lover that I am, I’ve still got them. They’re pinned to my garage wall.
During the ensuing summers home from college, I had an internship with an engineering firm’s R&D shop, but I stopped by the Chevy/Saab store to visit the people I had worked with. In late summer of 1995, my father was shopping for a new car to replace his ’89 Thunderbird, which was aging quickly. He shopped BMW, Mercedes, Lincoln, Cadillac, and Saab. My friends from the Chevy/Saab dealer let me bring cars home mid-day for Dad to test drive, and we returned them together later the same evening. The third car I brought home was a black 900SE 3-door with black leather interior, heated front seats, 6-disc CD changer, and 5-speed manual transmission; absolute perfection on wheels. My dad saw it and drove it, and decided to buy it. My parents bought it the next day for $500 over invoice (a perk of my having worked at the dealership), and that very night I took it on a date, before leaving the next day to start my senior year in college. I lusted after that 900 SE Turbo when I was away at school.
Perfection on wheels- 1995 Saab 900 SE
I graduated the next summer and was ready to replace my no-frills ’88 Mazda MX-6. It had recently stranded me in the suburbs with a dead alternator and battery, and I’d done it no favors by involving it in two accidents during the two-and-a-half years I owned it. My replacement car would be a 2-door, priced around $20,000. I test drove all sorts of cars; older BMW 3-series, first generation Saab 900 convertible, Honda Accord and Toyota Camry (!gasp!) 2-doors, and the new Mazda MX-6. My parents owned my dream car, the 1995 Saab 900 SE turbo coupe. On a weekend trip from my home in Oregon to Seattle in October 1996, I found my new car advertised in the newspaper at a Saab/VW dealer: a 1995 900 S 3-door. Black with charcoal cloth upholstery, heated front seats, 6-disc changer, and manual transmission, and just 30,000 miles for $19,995.
1995 Saab 900 S – My Obsession
That autumn afternoon in 1996, I bought the car over which I have spent more hours obsessing than any car before or since. I grew to truly love the car. It fit me more comfortably than any of the cars my wife and I currently own. The shape of the driver’s seat and the car’s driving posture make the driver’s environment more comfortable than any other car I’ve ever driven. The biggest upgrade I gave my 900 was new 3-spoke wheels in early 1999, which (in my opinion) greatly improved the car’s appearance. When I sold the car in May of 2004, on the same day we picked up our custom-ordered Volvo V70R, my heart was very heavy. Over the years I owned it, the 900 reached 157,000 miles. The miles weren’t all trouble-free, but I look back fondly on my time spent with the 900. Its interior features, sleek styling, occupant comfort, luggage capacity, sure-footedness in any driving condition combined to truly make it my version of automotive zen.
No matter how many vehicles I own, no matter how expensive, fast, or distinctive they may be, my 1995 Saab 900 S coupe will always stand out as a fondly remembered favorite. That vehicle is the one that fit me best, that I was most comfortable in, that I’ve gotten the most enjoyment out of. Though I’ve purchased two other Saab models since, both of which are full of thoughtful features and are solidly engineered and built(and both of which I still own), neither one has moved me in quite the way my ’95 did. That said, I’m looking forward to many more adventures- and many more Saabs- as my Saab obsession continues.
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By Blake Muntzinger
General Motors could be making history, but it is not the sort they – or any company – would boast about. According to the Wall Street Journal, GM’s market share could slide under the 20% mark for the first time, a far cry from its sales 10 years ago when it clung onto 29% of the market.
Fuel prices hovering around $4 a gallon, a faltering housing market and economy, and Detroit’s reliance on sales of SUVs and pickup trucks – a segment plagued with falling sales over the last few years, and a massive drop in the last few months – are cited as factors for the sales downturn. GM recently opted to shift some of its production from pickups to cars to keep up with the market.
Unfortunately, GM is fighting the uphill battle against the quality juggernauts Honda and Toyota. The initial quality tide appears to have turned on some models and in the process of doing so on others. But consumers’ perceptions on reliability, while increasing, are still below those of the import brands. Of those marques, Toyota packs the most lethal punch; worldwide sales arguably surpassed GM in 2007, and its US market share in April was 17.4%.
It’s true that in the 1990s, GM focused on SUVs and trucks that guzzled fuel like college students drinking beer on a Friday night. But, it produces fuel efficient models too. According to the EPA, however, none of them reach 40 mpg on the highway. Chevrolet’s Cobalt rates the highest with highway mileage of up to 36 mpg, besting the competition from the Mazda3 to the Nissan Versa. Drivers must know how to drive a manual transmission to take advantage of it.
GM’s hybrids currently on the market all have fuel-burning counterparts, but none are selling at record paces. The Volt, GM’s poster child of green-ness, will reportedly be shown in all its production glory at the Mondial de l’Automobile in Paris this fall. These latest sales developments from domestic and foreign brands alike show the market is shifting quickly, and while GM has plug-in hybrids and hydrogen-powered vehicles in development, the market shift seems too fast and GM too slow. Those vehicles cannot get to consumers soon enough.
GM’s May sales results will be released tomorrow, but even if sales are high enough for market share to remain above 20%, odds are that they won’t look pretty.
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Cerberus has also sold over 50% of GMAC as well
Chrysler has already quietly unloaded over half of its ownership of Chrysler LLC and GMAC, the Financial Times reported this morning.
The timing isn’t yet clear, but the paper is reporting that the shares were sold to approximately 90 investors recently.
The newspaper said investors in the group that bought stakes in the automotive assets from Cerberus included Cerberus-controlled Aozora Bank of Japan, Avenue Capital, Cyrus Capital Partners, Franklin Templeton Investments and Oak Hill Advisors.
Both Chrysler and GMAC have turned out to be bad deals for Cerberus so far; Chrysler because of the poor automotive market and GMAC because of their losses related to their core mortgage business.
Cerberus invested $7.4 billion USD total in both businesses, but apparently has sold off most of the equity to other investors in a move that will mitigate potential losses further out. Oh, and a minor detail here; Cerberus earned over a billion dollars in fees as it offloaded their risk to the other investors.
Neither Chrysler or Cerberus commented on the report.
If true, the fact that Cerberus has reduced its stake in Chrysler so dramatically will produce a frenzy of chatter about just what sort of future Chrysler has as an independent auto manufacturer. It certainly looks like Cerberus is trying to make as graceful an exit as possible from what they now have deemed a bad investment.
Does that mean that the company is now open to selling Chrysler to another automotive company? There could be some buyers; Renault-Nissan, perhaps, or possibly a Chinese company or an Indian auto concern. And if that doesn’t prove to be a viable course of action, will Cerberus break up the company piecemeal so as to extract the maximum value from their failed business venture?
Whatever the course of future action, today’s news puts Chrysler’s future on very shaky ground.
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By Brendan Moore
Just a few days ago, a Chrysler LLC spokesman mentioned that Chrysler was considering putting a hybrid engine into the redesigned Dodge Ram pickup due out shortly. The hybrid engine would be available in the 2010 model year of the Ram.
Chrysler is planning on launching a hybrid 2009 Chrysler Aspen and a 2009 Dodge Durango Hemi Hybrid this summer. Both models are struggling in the market. The Aspen and the Durango have been taking their lumps in terms of declining sales for many months, and the recent huge swing away from the SUV market has only increased the speed at which their unit sales are falling.
General Motors has two entries in the full-size SUV market; the GMC Yukon and the Chevrolet Tahoe, virtual twins underneath the different badges. Since their market introduction in January of this year, the two models together have sold only 1,100 units, an anemic figure. GM had planned on selling 12,000 of the full-size SUV hybrids a year, and that figure looks unreachable at this point, unless GM starts discounting the vehicles heavily through rebates, etc.
The gas/electric hybrid engine in the almost-3 ton AWD Yukon/Tahoe bumps up fuel economy from around 14 mpg in the city to 20 mpg, but the improvement in fuel economy doesn’t come cheaply. The hybrid engine option increases the price of the vehicle over $4000 USD, from an average of approximately $49,000 USD to a whopping $53,000 USD, and that’s before ladling on a lot of options.
The problem for GM is that the market has moved away from the SUV and the pickup. No matter how good the Tahoe Hybrid is (and it is an engineering masterpiece), consumers are abandoning the SUV market like rats jumping off a sinking ship as gasoline continues its inexorable climb towards $4.00 a gallon in most of the country. The market shift has been sudden and sharp, and vehicles like the excellent Tahoe Hybrid will left behind in change. As opposed to the last 15 years of the SUV fad, it won’t be long at all until 95% of all new SUV buyers will own an SUV because they actually need one. And then, the question becomes, out of that number of buyers, what percentage of those buyers will be willing to pay the price premium for the hybrid? Yes, small fuel-efficient cars are where it’s at now. A market reality accepted publicly by many manufacturers in the last few weeks as they have announced increased production of small cars, acceleration of plans to produce hybrids or electric cars, and, if applicable to the manufacturer, corresponding cutbacks in truck and SUV production. So, Chrysler is rolling out their truck/SUV hybrids. I’m not saying it wasn’t a good idea a year ago, or even six months ago, but in light of how consumer preferences have changed lately, I think it’s a safe assumption that the Chrysler Aspen Hybrid (to offer but one example) is going to land with a resounding thud in the marketplace. Ditto for the Dodge Ram hybrid pickup. And anything else that is huge and has a hybrid powertrain in it. Chrysler is going to experience the same problems GM is currently having in trying to sell huge hybrid vehicles. It seems that out of the Detroit 3, Ford has chosen the best path in light of the way the market has changed. They’re not spending money putting hybrid powertrains in vehicles that less and less people want to buy; they’re going to offer their full-size pickup trucks and SUVs with conventional engines (some of those engines will be smaller than in the past, though), and they are planning on making far, far fewer of them in the future. Their resources are going to small cars, no matter what the propulsion systems. I think the full-size SUV with a hybrid system is going be more or less a strategic cul-de-sac for Chrysler and GM; a production and marketing distraction for them when they need no distractions, a blind alley that does nothing for them in the short term. No matter how much trumpeting the companies do about the fuel economy of these vehicles, the sales results just aren’t going to be there, because fewer and fewer people want those vehicles, no matter what is under the hood in the next several years. Longer-term, yes, they need the hybrid engine in these things so that they can continue to sell them to whatever reduced amount of consumers and businesses that need a vehicle like a Dodge Ram or a Chevrolet Tahoe. But, short-term, it is delusional to think that the addition of a hybrid option is going to reverse, or even slow, the slide in sales in the full-size truck/SUV segment. COPYRIGHT Techshake.net – All Rights Reserved
The Chevrolet Tahoe Hybrid was anointed as the in November 2007 at the Los Angeles Auto Show, and GM was expected to extract some marketing value from that award, but it hasn’t worked out that way yet.
The problem for GM is that the market has moved away from the SUV and the pickup. No matter how good the Tahoe Hybrid is (and it is an engineering masterpiece), consumers are abandoning the SUV market like rats jumping off a sinking ship as gasoline continues its inexorable climb towards $4.00 a gallon in most of the country. The market shift has been sudden and sharp, and vehicles like the excellent Tahoe Hybrid will left behind in change. As opposed to the last 15 years of the SUV fad, it won’t be long at all until 95% of all new SUV buyers will own an SUV because they actually need one. And then, the question becomes, out of that number of buyers, what percentage of those buyers will be willing to pay the price premium for the hybrid?
Yes, small fuel-efficient cars are where it’s at now. A market reality accepted publicly by many manufacturers in the last few weeks as they have announced increased production of small cars, acceleration of plans to produce hybrids or electric cars, and, if applicable to the manufacturer, corresponding cutbacks in truck and SUV production.
So, Chrysler is rolling out their truck/SUV hybrids. I’m not saying it wasn’t a good idea a year ago, or even six months ago, but in light of how consumer preferences have changed lately, I think it’s a safe assumption that the Chrysler Aspen Hybrid (to offer but one example) is going to land with a resounding thud in the marketplace. Ditto for the Dodge Ram hybrid pickup. And anything else that is huge and has a hybrid powertrain in it. Chrysler is going to experience the same problems GM is currently having in trying to sell huge hybrid vehicles.
It seems that out of the Detroit 3, Ford has chosen the best path in light of the way the market has changed. They’re not spending money putting hybrid powertrains in vehicles that less and less people want to buy; they’re going to offer their full-size pickup trucks and SUVs with conventional engines (some of those engines will be smaller than in the past, though), and they are planning on making far, far fewer of them in the future. Their resources are going to small cars, no matter what the propulsion systems.
I think the full-size SUV with a hybrid system is going be more or less a strategic cul-de-sac for Chrysler and GM; a production and marketing distraction for them when they need no distractions, a blind alley that does nothing for them in the short term. No matter how much trumpeting the companies do about the fuel economy of these vehicles, the sales results just aren’t going to be there, because fewer and fewer people want those vehicles, no matter what is under the hood in the next several years.
Longer-term, yes, they need the hybrid engine in these things so that they can continue to sell them to whatever reduced amount of consumers and businesses that need a vehicle like a Dodge Ram or a Chevrolet Tahoe. But, short-term, it is delusional to think that the addition of a hybrid option is going to reverse, or even slow, the slide in sales in the full-size truck/SUV segment.
COPYRIGHT Techshake.net – All Rights Reserved
Ford will build all the Fiesta models in Mexico, sell the cars here in North America
By Brendan Moore
Automotive News is reporting that Ford has pulled the trigger on selling a hatchback model of the Fiesta sub-compact that is due to appear in North America in 2010.
The Fiesta name hasn’t been used on a Ford car in North America since 1981, when the German-built Ford Fiesta hatchback was sold here. The nameplate has been in use in the rest of the world since that time.
Ford has been wrestling with whether to sell a hatchback version of the car in North America, and now has apparently decided that the upside to doing so outweighs the downside. Ford has been wary of selling a hatchback in the U.S. since many American buyers tend to hear “cheap” when they hear “hatchback”. Witness the fact that the Ford Focus is sold in the U.S. currently only in sedan form, despite the fact that everyone else in the world loves the hatchback style.
But, Ford has determined that there is a future for the hatchback bodystyle in the small car segment, despite its recent travails. Our sources tell us that the following data tilted towards offering a hatchback in the Fiesta:
– Other manufacturers are doing well with the configuration. The Honda Fit, VW, Rabbit, Nissan Versa, Chevrolet Aveo, etc. come in hatchback form.
– 18-25 year-olds are much more open to a hatchback configuration, and in fact, many in this age group find the fact that it is different-looking than the majority of other vehicles on the road in the U.S. somewhat appealing.
– Older people and empty-nesters are downsizing and don’t want a crossover-sized vehicle but still want the utility and thriftiness of a small hatchback.
– It is believed that a growing percentage of all drivers will become more interested in a hatchback bodystyle over the next decade as they realize the hatchback vehicles offer the same quality and amenities as other bodysyles, in addition to added utility.
Ford stated that production of both the hatchback and the sedan versions of the Fiesta will begin at Ford’s Cuautitlan, Mexico, plant starting in early 2010. Ford announced earlier this morning that they’re going to pour $3 billion USD into Mexico over the next few years, and the Fiesta production is part of that investment.
There is a bit of mystery regarding just which hatchback will be sold in North America, though. According to the Automotive News article:
It’s not clear whether the hatchback Fiesta will be a three-door, five-door or come in both configurations. Ford officials in Dearborn would not confirm the number of doors today. However, Herman Morfin, a Ford spokesman at the plant, said both hatchbacks would be offered alongside the sedan in the United States. He later modified his comment to say Ford hasn’t determined which version of the hatchback will be sent to the U.S.
Ford CEO Alan Mulally, in a press conference, said the automaker hasn’t decided which configuration will be used. “Ford is absolutely committed to leveraging our global assets to accelerate the shift to more fuel-efficient small cars and powertrain technologies that people really want and value,” Mulally said in a statement.
I guarantee he means every one of those words. The shift to small cars in the U.S. completely wrecked Ford’s plan for returning to profitability, and they want to get back on track as soon as possible, and they need more small cars to sell in order to do that.
Ford released the following PR photos of the Fiesta to all the media publications today; we have posted them here so you can see the difference between the 3DR and the 5DR bodystyles.
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