Les News de Mars 2009
Jaguar Land Rover secures £600 million deal
Jaguar Land Rover has been thrown a lifeline after winning a £600m order to supply 13,000 vehicles to China. The order was announced yesterday after a meeting in London between UK business minister Lord Mandelson and Chinese commerce minister Chen Deming. It involves the Chinese business SCAS Investment Group which has signed a memorandum of understanding to buy 10,000 Land Rovers and 3,000 Jaguars over three years. Dealerships across China will sell the vehicles, mostly to private buyers. Last year JLR sold about 13,000 vehicles in China. www.am-online.com
As losses mount, no bold plan at Toyota
Toyota Motor Corp. is famed for its advance planning, obsessive attention to "what if" scenarios and continuous improvement. Yet with the market collapsing, the world's top automaker is stunned to a near standstill by an astonishing plunge from record profits to record losses in 12 short months. Rivals Honda Motor Co. and Nissan Motor Co. have trotted out sweeping recovery plans to cancel product programs, idle factories, slash pay and cut jobs. In Nissan's case, the blueprint is so detailed that it even targets savings by suspending corporate baseball and table tennis clubs. In what Toyota has announced so far, "there were no new developments that sounded remotely innovative," JPMorgan auto analyst Takaki Nakanishi wrote after Toyota warned in February that its full-year operating loss would be ¥450 billion ($4.59 billion) -- nearly triple the red ink it had forecast only six weeks earlier. Just months before family scion Akio Toyoda takes over as president in June, Toyota is singing the same strained refrain as last summer: Keep cutting costs; keep cutting production. Toyota's revival plan focuses narrowly on cost cuts. It says it is:
• Reviewing products for cost cuts
• Slashing $5.11 billion in fixed costs by next year
• Lowering labor costs through reduced hours, pay freezes, voluntary retirements
• Canceling or delaying new plants
The massive global recession requires swift changes, but Toyota's culture is built for slow, organic change. Moreover, many important decisions probably are waiting until Akio Toyoda takes over, but that's not for another three months. "The company has not made any attempt to address the core strategic elements of production structure realignment or its product, regional and platform profile," Nakanishi said. By comparison, Nissan is dumping 12 new models that had been planned for the next five years. It also plans more production abroad to counter the effects of the soaring yen. Honda says it may follow, even moving r&d centers to less costly locales. And Honda has axed its cherished NSX sports car and Formula One racing programs. Toyota has yet to scrap models publicly, even in its arguably overstocked home market. Toyota's Japan production is lopsided toward exports, making it especially vulnerable to foreign-exchange swings. Yet it hasn't announced major changes on that front either. Last year Toyota exported 64.5 percent of the cars it made in Japan. And the export ratio has increased steadily from less than half in the past decade. Toyota invested at home when the yen was cheap. But in January the yen hit a 13-year high. The strong currency is expected to lop $9.09 billion off the company's annual operating profit in the current fiscal year. "Exports are an unaffordable luxury now," said Christopher Richter, an analyst at CLSA Asia-Pacific Markets. Toyota should close plants at home and move volume overseas, he said. "The time to fix it is now when you have all of your factories in the world operating under capacity," Richter said. Toyota could boost profits by slashing its ratio of imported cars in America to 9 percent, from a current level of 45 percent, with minimal investment, he estimated. Executives acknowledge that they were myopic during Toyota's surge to the top. "As the business expanded, there may be certain issues we didn't pay enough attention to," said Executive Vice President Mitsuo Kinoshita on Feb. 6 while announcing earnings. Kinoshita unveiled plans to cut $5.11 billion in fixed costs by next year. That's hardly chump change, and the goal has triggered a mood of crisis. Workers are carpooling on business trips instead of taking trains. Offices are going lights-out at lunch. Employees are using stairs, instead of elevators, to save electricity. Yet some analysts had hoped for more drastic cuts of up to $7.15 billion. In some ways Toyota is a hostage of its reputation for providing lifetime employment. It simply can't cut 20,000 jobs, as Nissan plans to. Even in the United States, it sidesteps layoffs. For the first five weeks of 2009, Toyota's North American output was down 59 percent. In February, it finally announced a campaign to lower labor costs. It called for a wage freeze, a cut of hours and a voluntary exit program. Akio Toyoda has pledged to be "as bold as possible in pushing ahead with reforms." The problem is that he's not president yet. And current President Katsuaki Watanabe is unlikely to announce major overhauls before the changeover, for a couple of reasons. First, the current boss doesn't want to saddle the next one with any policies that may backfire. Second, he doesn't want to steal Toyoda's thunder as leader of the company's comeback. As cautious as Toyota's approach is, there are signs that change is afoot. In late February, the company said it is bringing back Yoshi Inaba, 62, the former U.S. sales chief who left the automaker to run an airport. He will join Toyoda's administration in June and oversee North American projects. The company hasn't given details. A few days later, Toyoda pushed aside three executive vice presidents who had led the company through its rapid expansion - including Kinoshita, who will retire in June. Of the previous executive vice presidents, only Takeshi Uchiyamada, father of the Prius, will remain. According to published reports, Toyoda tapped the new team for its strength in sales and production. Look for more dramatic changes when Toyoda takes the wheel. "That's why Akio Toyoda has been chosen to be president," Richter said. "He's been brought on board as somebody who can make controversial moves, and nobody will do an end run around him." www.autonews.com
Cash flow cripples dealers
Falling property values and reluctance by banks to provide temporary overdrafts is putting increasing pressure on dealers' cash flow." Cash is a major, major issue for the motor trade. The banks are nervous about the sector and are being less accommodating for temporary requests for overdraft increases and covenant breaches," warned Mike Jones, partner with Trevor Jones/ASE, the specialist dealer management firm. Jones said it was "very important" that dealers forecast their cash flow and speak to their partners and their banks in plenty of time in order to manage the situation. "There are a number of businesses that are breaching covenants. For the first time everybody is paying more attention to covenants." Research carried out by Trevor Jones/ASE and exclusively published by Motor Trader this week found that the average dealer lost £20,000 in 2008 because of the credit crunch, falling new car sales and a stagnant used car market. This compared to a profit of £67,000 in 2007. Dealers failed to reduce overheads as car sales fell. Vehicle sales expenses as a percentage of vehicle sales gross profit "dramatically worsened" in 2008 from 62.8 per cent to 76.4 per cent. "Dealers failed to reduce costs at the same speed as income levels were dropping," Jones told Motor Trader. Dealers were particularly hit by demonstrator costs and having to sell demonstrators in a declining market. "A large number of brands are working at ways to reduce this cost in 2009 and this will be essential in producing a profitable overall dealership model in the current year," he said. In a deteriorating market, dealers are increasingly looking to redundancies to reduce costs. In January 62 per cent of dealers said they expected job cuts in coming months but one month later, this had risen to 70.1 per cent. Jones said 2009 had started positively for most businesses in used car sales and some brands' new car orders were looking "reasonable" for March. "Used vehicle performance in January has been good. We are not suffering the same used drops as last year. There is good news out there on the used front." But he reiterated: "Managing cash over the next six to 12 months is vitally important for the future of dealers' businesses. www.talkingmotors.com
Sales still down in Spain, less so in France during February
New-car sales were down by nearly 50 percent in Spain in February, while France suffered a strong fall for the second consecutive month, offering further proof of the difficulties facing carmakers on the eve of the Geneva auto show. In Spain, new-car sales fell 48.8 percent during February, to 62,107 units, according to Spanish car manufacturers association ANFAC. This is the tenth consecutive month in which Spain's new-car sales have fallen. New-car sales for the first two months of 2009 were down 45.5 percent, to 121,492 units, when compared with the January-February period in 2008, ANFAC said. In France, new-car sales were down 13.1 percent in February, to 152,154 units, according to the French car manufacturers association CCFA. New-car sales for the first two months of 2009 were down 10.6 percent in France, to 301,526 units, when compared with the first two months of 2008, CCFA said. CCFA said the February and year-to-date sales slowdown is not nearly as dramatic on a "days worked" basis. Under this form of comparison, new-car sales in France were down 8.8 percent in February and 6.2 percent during the first two months of 2009, CCFA said. The relatively low level of French sales decline is partly attributed to the country's new scrapping incentives, which have kept the new-car market from dropping as precipitously as in other European countries. Italy is also expected to show a strong fall in February new-car registrations when figures are released later today. Last week, the Unrae auto association representing foreign carmakers forecast February registrations of 160,000, down from the 218,000 booked in February 2008. www.autonews.com
Toyota arm seeks government loan
Toyota, the world's biggest car maker, has said it is seeking a state loan to help its car financing unit. The company said Toyota Financial Services was in talks with the government-backed Japan Bank for International Co-operation. Local media reports said that it had applied for a 200bn-yen ($2bn; £1.45bn) loan. However, Toyota said no details had been decided. Toyota has said it expects to report its first annual loss since 1950. The Japan Bank for International Co-operation was set up last year to help struggling Japanese businesses. Japan's Finance Ministry said earlier on Tuesday that it would provide an additional $5bn to the bank from its foreign exchange reserves. www.bbc.co.uk
BMW splits remarketing contract between Manheim and BCA
BMW has split its used car remarketing programme between Manheim and BCA in a new three year contract. Manheim’s new contract includes the remarketing of up to 6,000 vehicles a year from BMW UK, MINI UK and BMW Financial Services until the end of 2011. BCA will remarket 20,000 vehicles annually under the new arrangement, which also runs to the end of 2011. Manheim's auctions will be held at flagship centres in Bristol, Colchester and Leeds, will also be available to buyers via Simulcast, Manheim’s online link to physical auctions. BCA sales will take place at Edinburgh, Brighouse, Nottingham, Bedford and Bridgwater. Each sae features BCA’s Live Online service, allowing hundreds of additional buyers to compete for the desirable BMW stock over the internet. www.am-online.com
Saab boss says 5 potential bidders for brand as Chinese carmakers deny interest
Saab aims to identify a new owner for the brand within two months, Managing Director Jan-Ake Jonsson said. "There are about five we want to talk to. There are a couple more we are also looking into,” Jonsson told Automotive News Europe at the auto show here. "We should see which candidates are serious in the next week and a half,” he said Jonsson did not specify which parties are interested in buying Saab. China's Geely Automobile and Dongfeng Motor Group today denied that they are interested in Saab after sources had told Reuters that the two companies are among several potential bidders. A senior Geely executive said that his company had not held any talks on the Saab brand and the carmaker is not interested in pursuing foreign brands. Media reports have also said that Geely is in preliminary talks with Ford Motor about the sale of the automaker's Volvo car unit, although a Geely spokesman said his company had no plans to buy Volvo. A spokesman from Dongfeng said the company had not held internal discussions about a possible bid for Saab, adding he is unaware of any interest by his company in bidding for the brand. Reuters said private equity firms and representatives of retired Swedish workers have also expressed interest in Saab. Jonsson said Saab is working with advisors from Deutsche Bank this week to identify a buyer. Saab is speeding up its search for a new owner after its owner, General Motors, said it will end its ownership on January 1 2010 “I hope in a month or two we will have at least some agreement with somebody,” Jonsson said. He added: "The Swedish government wants to know what the future ownership structure is and General Motors wants to sell Saab. We have to accelerate the process." GM has not yet begun an official auction for the Swedish brand but expects to have preliminary financials for Saab ready in a few weeks, according to Reuters sources www.autonews.com
UK govt. ready to discuss helping GM Europe
The British government said it would discuss helping General Motors' British unit Vauxhall once it saw the U.S. automaker's European restructuring plans. "When the plan is shared with us, we will be able to sit down with GM to discuss how we can best continue to help Vauxhall," a spokeswoman for Britain's business ministry said. GM Europe is pursuing aid for its European businesses of Opel in Germany and Vauxhall in Britain. GM’s Chief Operating Officer Fritz Henderson said General Motors Europe will run out of money early in the second quarter unless European governments come quickly to the company's aid. The UK government spokeswoman said GM was welcome to apply for help under previously announced British government schemes to guarantee up to 2.3 billion pounds ($3.25 billion) of loans for the car industry. GM's European president, Carl-Pieter Forster, said on Tuesday he had received positive signals from the British government over aid for Vauxhall/Opel. German Economy Minister Karl-Theodor zu Guttenberg said on Tuesday that Opel had not given the government enough information for Berlin to decide whether to rescue the company. The British government said it was "in regular contact" with GM and said British authorities had already helped the company by providing money for training and a grant to secure manufacture of the new Astra model, due for production at the Ellesmere Port plant later this year. GM Europe lost $1.6 billion last year and needs 3.3 billion euros ($4.16 billion) in loans from European governments to fund a liquidity gap in the coming months. It cannot count on help from its U.S. parent, General Motors, which lost nearly $31 billion in 2008. www.autonews.com
German car sales leap 21% helped by scrappage incentives
New-car sales in Germany rose a fifth in February helped by government scrappage incentives. Registrations of new cars in Europe's biggest market increased 21 percent to 278,000 units -- the best February sales in a decade -- and held out hope full-year sales could top 3 million units, the VDA industry association said. It was first rise in German new-car sales in half a year. Encouraged by a 2,500-euro bonus for scrapping cars older than nine years and tax changes that favor fuel-efficient models, Germans have been rushing to showrooms. Domestic orders advanced 63 percent in February. VDA President Matthias Wissmann said at the Geneva auto show that if other countries' economic stimulus schemes gained traction as well then "it could come to the first gradual recovery of global sales in the second half of the year." www.autonews.com
Kia to backdate its warranties
Kia Motors UK is planning to backdate its warranties as part of its new approved used car scheme. All used cars under 18 months old, or with less than 15,000 miles on the clock, will have their warranty re-wound to what it was when new - be that three, five or seven years. Andrew Sellers, Kia UK's head of fleet and remarketing said: “We are also offering a class leading 60-day exchange plan which no one has offered before. Along with multi point check and seven-day drive away insurance.” Kia's new Approved Used Car Programme replaces the old scheme called Kudos. www.fleetnews.co.uk
US new-vehicle sales hit fresh lows
US new vehicle sales plumbed fresh lows in February amid signs Americans are turning to used vehicles even as carmakers woo them with hefty discounts and other incentives. All big carmakers reported steep declines, with General Motors down 53 per cent from a year earlier, Ford down 48 per cent, Chrysler down 44 per cent and Toyota down 40 per cent. Not a single Toyota model, including its luxury Lexus brand, posted an increase from February 2008. According to Autodata, a market research firm, total car and light-truck sales sank to an annual rate of about 9.1m units last month, from 9.6m in January this year and 15.4m in February 2008 The slump raises concerns about the future of GM and Chrysler, which are seeking to persuade the US government of their viability in return for billions of dollars in emergency loans Last month’s performance was “unsettling to our business”, said Mike DiGiovanni, GM’s sales analyst. “These are unsustainable levels which are causing almost every automaker around the world to look for government aid. GM bondholders will meet on Thursday with the Obama administration’s car industry task force amid ongoing efforts to restructure debt as dictated by GM’s rescue. GM has so far received $13.4bn from Washington and has applied for another $16.6bn. Chrysler is seeking a total of $9bn. Chrysler’s recovery plan is based on 2008 sales of 10.1m units. GM has assumed 10.5m unit, rising to 12.5m next year. GM’s North American assembly plants last month built little more than one-third the number of cars of February 2008. The carmaker said second-quarter production would be 34 per cent lower than a year earlier. One of the biggest concerns last month was a renewed slide in retail sales, which had appeared to stabilise earlier in the year. “It implies that we did not reach the bottom [in February]”, said Emily Kolinski-Morris, Ford’s economist. Total retail sales in the US in February fell to 7.5m units, about 1m units lower than in each of the previous four months. A silver lining for GM was the wider availability of car loans from GMAC, its financial arm which received $5bn in government aid last December. GMAC financed almost a third of GM sales last month, having withdrawn almost entirely from the market last autumn. Edmunds.com, an online vehicle pricing service, estimates that the value of incentives has risen 16 per cent over the past year. Chrysler offered the most generous perks, averaging $6,000 per vehicle or more than 20 per cent of sticker prices. Jeremy Anwyl, chief executive of Edmunds.com, said that in spite of the incentive spending, more than a quarter of prospective new car buyers ended up buying used vehicles last month. www.ft.com
New MD at Mitsubishi
Mitsubishi UK managing director Jim Tyrrell is leaving his role to take on a new part-time position as vice president. Lance Bradley, formerly sales and marketing director, will become managing director. www.am-online.com
Over 50% of dealers satisfied with manufacturer relationship
Over half of dealers are reasonably satisfied with the partnership with their manufacturer, according to the latest National Franchised Dealers Association dealer attitude survey (DAS). The results show that 48% of networks are satisfied with the profit return of their franchise and 58% are reasonably satisfied with future profitability. At the same time, the current difficult economic situation has solidified ongoing dealer-manufacturer partnerships, with 58% of dealers feeling they can do business with their manufacturer on a day to-day basis. The results were based on 1,022 responses. Sue Robinson, director of the RMI NFDA, said: “Dealers are looking at ways to survive and thrive in the toughest trading environment seen for many years. “Thankfully, some franchises are finding that their partnership with their manufacturer has strengthened which helps in the current climate. However, for others there is still considerable work to be done to develop the relationship.” Robinson said maximum efficiency was more vital than ever for dealers and could become a bigger issue throughout this year. With the Block Exemption Regulation (BER) also due for renewal in 2010, the future cannot be easily predicted. The NFDA is working with Government in Brussels and Westminster to put the case for continuity in the industry, as well as vital measures to help revive car sales. These include the NFDA’s proposals for a self-financing scrappage scheme which it believes will provide “a much-needed boost to car sales, thereby helping dealers maintain and improve profitability”. www.am-online.com
Report: Daimler, BMW plan cross-ownership
Daimler and BMW plan a share swap to boost cooperation between the two automakers, the German magazine Der Spiegel said today. Daimler would take a seven percent stake in BMW and BMW would have the same stake in Daimler, the magazine said in a report on its Web site. Der Spiegel said that the Quandt family, who own 46 percent of BMW, oppose cross-ownership. Family head Johanna Quandt, her son Stefan and his sister Susanne Klatten, fear Daimler would launch a takeover of BMW, as happened when Daimler-Benz seized full control of Chrysler soon after a much-touted “merger of equals” in 1998. The German government has been informally approached to find out whether it would overrule any opposition to cross-ownership from antritrust authorities, the magazine said. Der Spiegel said Daimler and BMW will shortly announce details of a proposed cooperation for purchasing components. Joint purchasing is expected to save the two companies several hundred millions of euros short-term and billions in the mid-term. The magazine quoted a BMW manager as saying: “We will get closer together through this cooperation, perhaps more will come out of it.” Daimler and BMW have both been hit hard by a steep decline in luxury car sales during the global economic recession. www.autonews.com
Mandelson says Vauxhall in 'trouble'
Vauxhall, the carmaker, is in "terrible trouble", Lord Mandelson conceded yesterday, as he set out plans to work with Germany to try to save the European subsidiaries of General Motors. The business secretary said he was in talks with his German counterpart, Karl-Theodor zu Guttenberg, as London and Berlin debate whether their governments should intervene to preserve the Vauxhall and Opel brands. Angela Merkel, German chancellor, is expected to discuss the issue when she meets Gordon Brown for informal talks next weekend at Chequers, the prime minister's country retreat. Berlin is growing impatient with GM for its failure to come up with a convincing restructuring plan - a condition for any state support - and Lord Mandelson's officials said last week they were awaiting specific proposals from Detroit on the level of support sought for Vauxhall. "Vauxhall is in terrible trouble because its owners, General Motors, are in danger of becoming insolvent," Lord Mandelson told the BBC's Andrew Marr programme. "The government is very focused on it." He said he had spoken to Carl-Peter Forster, president of GM Europe, three times in the past week and also to Mr Guttenberg about the German government's approach. "Their plants are similarly affected and we will approach what we need to do together on this," he said. Mr Guttenberg, who will be visiting the US in a week for talks about Opel, said there were "many questions that need to be cleared up", adding that a decision about whether to grant state aid - Opel has requested €3.3bn ($4.15bn, £2.94bn) - would take "weeks". About 25,000 Opel employees in Germany and 5,000 Vauxhall staff in Britain are hoping that government state aid will sweeten a deal that sees the two companies separate from their stricken US parent. www.ft.com
Lidl pilots new car sales
Discount supermarket Lidl has begun selling cars in its native Germany. Its website will offer the Opel Corsa for just under 11,000 euros (£10,000) and the Volkswagen Cross Polo for 14,000 euros (£12,800) -- a discount of about 25% off the suggested price. Lidl is launching the sales together with German car distributor ATG-Automobile. Germany's economy is in recession and unemployment is at 8.3%, but Lidl believes it can turn a profit in an industry that is bucking the economic downturn. New car sales were up 21% in February year-on-year, largely because of a government stimulus plan that pays people 2,500 euros (£2,300) to replace cars at least nine years old with new ones. But Ferdinand Dudenhoeffer, the director of the Centre for Automotive Research in Gelsenkirchen, said previous efforts to sell cars online and through supermarkets have faltered. "I think it will be very difficult for Lidl," he said. "People don't want to buy high-value products from a discount grocery store." Mr Dudenhoeffer said that Quelle, a German online marketplace, tried to sell cars about five years ago. "It didn't work, even though their site was visited fairly heavily," he said. He said Germans might be unwilling to abandon haggling over the price of a car. "Germans like to go to the dealership," he said. www.am-online.com
Russia car sales fall 38%
Russia's decline in new-car sales deepened in February and a quick rebound is not expected. Last month's sales fell 38 percent year-on-year after a 33 percent drop in January. The decrease for the first two months of 2009 was 36 percent a decline of 140,384 units compared with the same period last year, the Association of European Businesses (AEB) said today. In a statement Martin Jahn, vice chairman of the AEB Automobile Manufacturers Committee, said: “Because of the increased customs tariffs, high loan interest rates and the ruble devaluation, we can expect a further price increase and decline of the automotive market in Russia in the coming months." He added that he is hopeful "measures undertaken by the local authorities aimed at supporting the automotive industry in Russia will help to improve the situation.” VW, PSA make big gains - Despite a 37 percent decline in the first two months, Lada was Russia's top-selling brand with a volume of 58,454 cars. Chevrolet was second (20,881) and Ford finished third (18,449). Among Russia's biggest winners during the first two months were Volkswagen, up 47 percent to 6,869 units, Peugeot, up 45 percent to 7,034, and Citroen, which increased sales 99 percent to 2,168. The locally built Ford Focus was the top-selling foreign car in Russia in the first two months with a volume of 10,646 units. www.autonews.com
Law aims to provide safer tyres
Manufacturers are to start producing quieter, safer and more fuel-efficient tyres under new European laws. The regulations, to be introduced in 2012, have been welcomed by tyre makers but environmentalists argue they should be brought in sooner. Michelin says the time is needed to carry out research as tyre design is a "highly complex" process. The European Parliament voted on the rules to make car, van and lorry tyres up to 50% less noisy. Further regulations are being considered for tyre labelling, which would give consumers a clearer idea about the road-grip, fuel-efficiency and noise levels of various companies' products. Until now, there have been few regulations governing the industry but from 2012 manufacturers will have to meet new standards of safety, noise reduction and efficiency. www.bbc.co.uk
FRANCE: Renault and PSA shares spike on merger speculation
Shares in Renault and PSA Peugeot Citroen rose sharply today on market talk of a merger between the two groups. A spokesman for PSA Peugeot Citroen declined to comment, while analysts maintain that a deal between the two is unlikely. Reuters said that Peugeot shares were up 7.9% at 14.95 euros and Renault shares were up 7.67% at 13.05 euros. Reuters reported that PSA's announcement that it had appointed Barnaby Noble - a former VP of mergers and acquisitions at Alstom - as director of strategy and business development fuelled speculation. However, analysts are sceptical about a merger of the two French giants and note that job losses from such a merger would be high, something that the French political establishment would not be happy about. Nevertheless, radical industrial restructuring in the automotive sector is seen by some as increasingly likely as it endures collapsed market volumes this year.
www.just-auto.com
Opel dealers pool together to take stake in GM Europe
Opel dealers are looking to pool levies of €150 (£139) from each vehicle they sell to raise up to €400 million (£371m) over a three year period to help keep General Motors Europe afloat. Euroda, the European organisation representing Opel and Vauxhall dealers, announced the plan which is putting together the fund in order to take a stake in the new company which will be created out of GM Europe. GM Europe has officially welcomed the offer. Alain Visser, vice-president of Opel Europe, said: "Such a demonstration of solidarity comes at the right time.” GM announced its intentions to separate its European operations off into a separate business earlier this month and is looking at outside investors to take up to a 50% stake in the business. Euroda represents 4,000 dealers in 25 countries. www.am-online.com
Market trends: Recession, the past is no guide
Departed chairman of Ford, Roelant de Ward said last autumn: “The thing about recessions is that the cards get shuffled.” What he meant was that buying patterns that have continued steadily for years get reconsidered under the financial pressure of a downturn. The reason for his philosophical approach was probably that, with the new Fiesta and Ka, Ford of Britain is as well placed going into the slump as anyone. Certainly, the sales figures for January suggest that things are more fluid than they have been for a long time. In terms of sales growth, the best performance came from Jaguar, which was up 53% on the back of the new XF. Of more widespread relevance was the fact that the only other manufacturer to increase sales was Hyundai, whose new i-model blitz is now well under way (i10, i20 and i30 are all recent entrants). Its sales were up 5.7%. Its market share was up by a half, from 1.1% to 1.7%. In this market, success can only really be measured by market share movements, given that the overall market is down by 31%. On that score, any company that fell by less than that amount must be counted as doing reasonably well in the circumstances. Many of the better performances are new-model related, although a special mention should be made of Porsche. In 1989-91, Porsche became the symbol of the recession with sales falling from a peak of 3,600 to under 1,000. This time, Porsche has actually had a smaller-than-average fall thanks to the revised Boxster and Cayman. How long it can continue outperforming the market is another question, but its January performance shows how the company has been utterly transformed since the last downturn. At the wrong end of the table, the obvious question is how long three Chrysler brands can continue? Even if Chrysler avoids bankruptcy in the US, the range must surely be pared down to a few off-roaders and MPVs in the UK. When Dodge was relaunched in the UK, my sceptical comments earned the retort from Chrysler that I did not understand its strategy. I freely admit I still don’t. The sales figures also cast doubt over Subaru – the UK may only be a tiny market for it, but it is symptomatic of a global problem. The appalling “Saabaru” sold in the US (a Subaru Impreza sold with a Saab grille) is starting to look prescient – Subaru is a bit of a Japanese Saab, financially speaking. As for Renault, it has pretty well everything riding on the new Megane: with the Twingo, Clio and Laguna all having disappointed. This one has to deliver if Renault is going to have much of a future beyond the low-cost Logan.
www.am-online.com
BMW posts surprise loss
The economic crisis threatening to topple global automakers rocked two of Europe's biggest on Thursday as BMW posted a surprise fourth-quarter loss and Volkswagen warned of worse ahead. Shares in BMW, the world's largest premium carmaker, were down over 11 percent at one point, after it posted quarterly earnings sharply under estimates, before recovering to trade down 3.66 percent at 11:52 a.m. British time. The results showed earnings before interest and tax of 921 million euros (855 million pounds) compared with a Reuters Estimate of 1.536 billion euros and down from 4.2 billion euros last year. Net profit came in at 330 million euros after the disastrous quarter, well below a Reuters Estimate average of 1.047 billion euros, and, as a result, the company proposed cutting its dividend to 30 cents per share. German peer VW, meanwhile, warned 2009 would be one of the hardest in its history. Chief Executive Martin Winterkorn said he still expected Europe's largest automaker to make a profit in 2009, but reiterated that vehicle sales, revenue and earnings would all decline. "A difficult 2009 lies ahead of us -- one the most difficult years in our company's history," he said. GM WOES - On the topic of U.S. rival General Motors' European woes, BMW reiterated it had no plans to take a stake in the company's German unit, Opel, denying a newspaper report. GM officials are due to meet the European Union on Friday to discuss the fate of the struggling automaker's European assets. GM Europe submitted a rescue plan for Opel at the end of February, under which its German unit, along with the UK's Vauxhall Motors, would be partly spun off from its parent and would need 3.3 billion euros in state aid. The German government has yet to decide on whether to grant aid to the carmaker, which employs around 25,000 people in Germany. It is also seeking help from other European governments. Opel has obtained a loan guarantee from Spain, but still needs 2.6 billion euros of the same from Germany, the head of GM Europe told a German newspaper. GM's Swedish Saab unit said on Thursday it had given 750 workers at its Trollhattan plant notice of redundancy. A Saab spokesman also told Reuters on Thursday that a group of Swedish investors had shown interest in the unit. Measures to tackle the global sector malaise continued elsewhere in Sweden, with Ford-owned (F.N) Volvo Car Corp agreeing with unions to cut 750 jobs in a deal which was likely to mean the avoidance of further job cuts at the struggling automaker. In the UK, meanwhile, the government said on Wednesday it had received clearance from the European Commission to go ahead with a 2.3 billion pound aid package to its ailing car industry, and called for manufacturers to apply for funds. Suppliers to the industry also continue to be affected, with Finnish tyre maker Nokian Renkaat's (NRE1V.HE) CEO Kim Gran saying he saw a deep, relatively long global recession, with growth likely to remain weak for at least the next two years, in the firm's annual report. In a rare bright note for the crisis-hit industry, a senior Volvo (VOLVb.ST) executive said he saw China sales growth accelerating to over 10 percent in 2009, helped by a rebound in consumer sentiment www.reuters.com
GERMANY: GM Europe gets loan guarantee from Spain
GM Europe has reportedly obtained a loan guarantee from the Spanish government but still needs a loan guarantee from Germany. "We need a guarantee for more than EUR3.3bn in Europe in order to get loans from banks. In Spain we have already secured a guarantee for a concrete project and can now negotiate with the banks," GM Europe CEO Carl-Peter Forster said in an interview with the Sueddeutsche Zeitung. "In Germany, we need a guarantee of EUR2.6bn," he added. GM Europe submitted a rescue plan for its operations last month under which they would be partly spun off. However, the plan has met with a cautious response from national governments, including Germany's. German Chancellor Angela Merkel is maintaining a cautious line on German government assistance for Opel. "We will support firms like Opel only if our help ensures a good future for these companies and doesn't just uselessly go up in smoke because a company has failed in the market," Merkel told the Bild daily in an interview earlier this week.
www.just-auto.com
PASSENGER CARS: European registrations down 18.3% in February
In February, 968,159 new passenger cars were registered in Europe*, 18.3% less compared to the same month of 2008. The downturn was more marked in the new EU Member States (-30.3%) than in Western Europe (-17.3%), where the German market pushed aggregate registrations upward. There was on average one working day less across Europe in February. Two months into the year, the European* market was down 22.6% compared to January- February last year. In Western Europe, a total of 902,037 new passenger cars was registered in February (-17.3%). Germany stood out with a 21.5% growth, carried by strong demand in certain market segments following the recent motor vehicle tax reform and scrapping bonus introduced by the German government. Except for Luxembourg (+0.3%), all other countries faced a downturn, varying from -83.6% in Iceland to -13.2% in France. The downturn of the French market was cushioned by fleet renewal incentives as well. Major markets such as the UK (-21.9%), Italy (-24.4%) and Spain (-48.8%) again recorded an important decrease. From January to February, new passenger car registrations in Western Europe dropped by 22.0%. Only Germany posted growth during that period(+4.0%).The French market declined by 10.6%, followed by the British ( 28 2%) Italian ( 28 5%) and Spanish ( 45 5%) markets British (-28.2%), Italian (-28.5%) and Spanish (-45.5%) markets. In the new EU Member States, passenger car registrations fell by 30.3% in February, with mixed individual country results. Poland registered the most cars (30,194) and improved last year’s performance by 7.3%. Other major markets were down with 7.7% (Czech Republic), 46.4% (Hungary) and 66.5% (Romania). Looking at the cumulative figures from January to February, Poland ranked first in absolute numbers with 56,841 new cars registered (+0.7%), followed by Romania (-58.8%), the Czech Republic (- 10.0% ) and Hungary (-31.4%). The overall decrease in the new EU Member States was -22.9% two months into the year. www.acea.be
New Ford product will help dealers says UK boss
Ford dealers can be confident about the future with a raft of new product unveiled over the past 12 months, according to Ford Motor Company managing director Nigel Sharp. "Having so many new products over the last 12 months has really helped us. We refreshed Focus, launched Kuga, then Fiesta, and most recently Ka - a fantastic year of product, all of which are now with dealers." Sharp said the downturn had been a challenge: "It's a big hole when you suddenly see a new car market down 30 per cent, nearly 50 per cent on commercials. "Our dealers have had to do some trimming, but they regard our heavy investment in product as coming at the right time - they see themselves as more fortunate than some." Sharp said Ford had tried to act quickly to minimise the effects of the recession by reducing stock and cutting production while retaining labour for the upturn. Ford is trying to help its dealers; "We are for example looking to see if any of the many standards introduced at the time of the last Block Exemption changes might have been nice to have at that time but are probably a little less appropriate right now." www.talkingmotors.com
Nissan expects 20 per cent cut in dealer network
Nissan expects to lose 20 per cent of its UK dealers by the end of 2010, though the current economic climate could accelerate the process. Nissan GB managing director Paul Willcox said 40 per cent of the dealer network was not performing to expectation, and half of those outlets are likely to part company with the franchise. "In August we had around 180 sites, of which 60 per cent were doing a fantastic job, the rest were not and 20 per cent were poor on every KPI score you can think of," Willcox said. "We had a clear, open policy to these dealers, improve or find another franchise. "We hadn't terminated dealers for a long time, but we terminated four in December despite the downturn, on the basis of consistently poor performance." Willcox had expected to remove the worst-performing 20 per cent of dealers over two years but the current economic climate is likely to accelerate the process. "In September the world changed - and in a downturn if you are consistently poor on all your KPIs the one that will impact on you will be profitability. In a growing, buoyant market you can coast through on poor performance but you can't any more." Nissan will help strong performing dealers through the downturn, along with struggling outlets who have the potential to turn things around. "However partners who don't address their operational issues will find we won't support them if they run into problems," said Willcox. www.talkingmotors.com
Mitsubishi restructures European business
Mitsubishi Motors Corporation (MMC) is relocating its Holland-based European base of operations back to Japan in order to save on costs. Mitsubishi is to repatriate all vehicle-related functions, including sales, marketing and product management, to Japan, from where the carmaker will liaise directly with its 34 European distributors. Support functions like logistics and finance will stay based in Holland at the revised Mitsubishi Motors Europe. The carmaker said the proposal would translate into a 45% reduction of its executive headcount in Europe. MME said the cuts would affect about 90 people. MMC said: “Mitsubishi Motors Corporation has decided to act proactively with structural changes in its organisation to prepare for tomorrow.” The proposed changes will not affect Mitsubishi Motors’ European production hub, NedCar. www.am-online.com
Production up for French minicars thanks to scrapping bonus
Scrapping incentives in four of Europe's five biggest markets helped boost European production of French minicars last month, but the gains much too small to off set a decline of nearly 40 percent in the region's overall output. Citroen increased production of its C1 minicar by 9.4 percent in February to 9,703 units while sister brand Peugeot boosted production of the 197 by 6.1 percent to 9,777. Both cars are made at PSA/Peugeot-Citroen's joint factory with Toyota in Kolin, Czech Republic. Output of the Renault Twingo was up 8.9 percent to 14,110 units. All the results are based on estimates from market researcher J.D. Power Automotive Forecasting. Last week, Renault said it would increase Twingo production at its plant in Novo Mesto, Slovenia, to meet rising demand for the car in France. Sales of minicars and subcompacts are benefiting government-funded cash incentives in Germany, France, Italy and Spain. Governments are offering buyers bonuses of up to 5,000 euros if they trade in their old cars for new, more fuel-efficient models. New-car sales in Germany rose 21.5 percent to 277,740 unit in February, the first full month that the country's 2,500 euro scrapping incentive was available. Another tough month - Despite the successful use of incentives to support new-car sales in some markets, Europe's auto production was down sharply last month as companies continued to try to sell off their inventories in a weak market. Output at Europe's car assembly plants fell 39.7 percent to 1.07 million units compared with the same period last year, according to J.D. Power Automotive Forecasting. Production was down 41.3 percent to about 2.03 million units after the first two months of 2009. During the same period, new-car sales in Europe fell 22.6 percent to about 2.5 million cars, according to the European car manufacturers association, ACEA. Honda suffered the biggest production decline in February. Output at its plant in Swindon, England, plunged 90.5 percent to 2,586 units. The results will not improve fast as the Japanese automaker has announced the plant will be closed until at least June. Honda makes the Civic and CR-V at the factory. February was also tough for premium automakers Cadillac, Saab and Mercedes-Benz. All three suffered production declines ranging from 50 percent to 90 percent. Just three brands - Alfa Romeo, Hummer and SsangYong - made more cars last month than in February 2008, but the increases are slight or misleading. Alfa Romeo's production rose to 9,319 from just 1,105 units in February 2008, which was when the Fiat Group Automobiles subsidiary's main plant of Pomigliano d'Arco, Italy, shut down for refurbishment. www.am-online.com
MidEast fund takes 9% stake in Daimler
Abu Dhabi-based Aabar Investments is to take a 9.1 per cent stake in Daimler in a €1.95bn (£1.84bn) move to bolster the German premium carmaker, becoming its largest shareholder as the company battles against the worst industry crisis in decades. Daimler said on Sunday it would increase its share capital by 10 per cent and Aabar would pay €20.27 per share for the entire offering, which will make the part-state owned Gulf company its largest shareholder. The closing price on Friday was €21.34. The investment comes as carmakers around the world struggle with the impact of the economic crisis and some have asked for government support. Daimler shocked markets when it said it expected a large operating loss in the first quarter and vowed to slash costs. “We are delighted to welcome Aabar as a new major shareholder that is supportive of our corporate strategy,” said Dieter Zetsche, chief executive. Aabar Investments, an affiliate of the state-owned International Petroleum Investment Company (IPIC), said it would co-operate with Daimler on the development of electric cars and new materials for the car industry as well as a training centre for engineers in Abu Dhabi. Khadem Al Qubaisi, Aabar’s chairman, told the Financial Times the investment company was interested to further lift its stake in Daimler. “We are considering to do that – not now but in the next years, depending on the development of the markets and our strategy. We could increase our stake to 15 or 20 per cent as the absolute maximum,” he said. Abu Dhabi has a growing stable of state investment vehicles that has become increasingly active in recent years. German blue-chip companies such as Siemens have turned to sovereign wealth funds in search of long-term shareholders and a desire to co-operate with those funds in cash-rich regions that have seen high economic growth rates. Daimler has been rumoured as a possible target for corporate raiders as the only European carmaker that did not have a large anchor investor. Its second largest shareholder after Aabar is the state of Kuwait, which has been a Daimler shareholder since 1974 and will have a 6.9 per cent stake after Aabar’s move. Aabar started life as an energy company but sold its main oil production assets last year, and in September issued a AED6.7bn ($1.3bn) convertible bond to IPIC. IPIC has traditionally invested in energy projects but has also been broadening its portfolio and in February took a 36 per cent stake in Aabar. Its chairman is Sheikh Mansour bin Zayed Al Nahyan, a member of Abu Dhabi’s royal family who bought the Premiership football club Manchester City and has invested $3.5bn (£2.4bn) of his personal fortune in Barclays. Daimler shares were trading up 1.1 per cent at €21.59 on Monday, against a 1.7 per cent rise in the DAX average. www.ft.com
Sweden takes tough stance on Saab
The Swedish Government has said it is not prepared to own car factories, seemingly signalling that it will not nationalise Saab or Volvo. Bailing out GM-owned Saab would be seen as using taxpayers' money to help a foreign manufacturer, Swedish analysts believe. www.am-online.com
Inchcape reveals multi-million cost of residual collapse
Inchcape Fleet Solutions (IFS), which sits at number 15 in the FN50 with over 31,000 vehicles on its books, has reported a multi-million pound trading loss in 2008. It blamed the £5.7 million like-for-like loss on the massive drop in used car values that has devastated the profits of several lease companies. Inchcape said it lost £8.5 million in residual values last year, which it said is “due to the fall in used car pricing, resulting in lower than expected realisable values on leased vehicles which will be returned over the next two to three years”. IFS, which is owned by the multi-marque international dealer group Inchcape Plc, provides fleet management and leasing services to corporate and government customers and, according to the FN50 has a combined fleet size of 31,748 vehicles. It has grown its fleet by 10% over the past 24 months and indicated that it will continue to grow the fleet services side of its business. Last year, the parent company reduced its staff numbers across the globe and shut several retail outlets. However, while IFS headcount was reduced the vast majority of these redundancies were in the retail business. The £8.5 million residual hit suffered by the company in 2008 takes into account the predicted losses that the lease arm may suffer over the next two years as the cars it has on fleet now are sold on. www.fleetnews.co.uk
Ford blames weak pound for price rise
Ford has blamed the falling international value of the pound for a 3.75 average price rise across its model range. It is the second price rise this year after a 4.75 per cent increase in February. Ford had delayed this price rise from the back end of 2008 when the government reduced VAT for fear of confusing customers. "The continued weakness of the pound against the euro, which this week edged even closer to parity, has forced Ford to increase the price of all its models within the UK from the start of April 2009," said Nigel Sharp, managing director Ford of Britain Ford said the increase will apply to all new orders received after 31st March "We are reacting to the continued decline of the pound against the euro," said Sharp. "Raising prices in such difficult times may seem counter-intuitive, but as a UK business with so many of our costs priced in euros, we have no choice if we are to protect jobs and remain viable "The euro has strengthened 30 per cent in the past 18 months and 18 per cent in the last 12 months alone. The weakness of the pound had a huge negative impact well into nine figures on Ford's UK business in 2008. He also warned that price-inflationary pressure would continue to be an issue for all UK-based businesses whose costs were incurred in Euros until Sterling strengthened Prices for Ford cars will rise by an average of 3.75 per cent, starting at an extra £50 on a Ford Ka www.talkingmotors.com
Profits plunge but HR Owen hopeful to stay in the black
HR Owen recorded a £1.3m operating profit before exceptionals from sales of £144m in 2008. That compared with £4m operating profit from £156m of sales in 2007. In the dealer group's financial statement to the stock market today, chief executive Nick Lancaster said predicting the year ahead is difficult but he believed that, with the benefit of property-related gains, the group would remain profitable in 2009. HR Owen's sales of its premium franchises in recent years to focus on its specialist luxury and supercar brands have left the dealer with no debt and substantial cash reserves so it appears well placed to ride out the recession. www.am-online.com
Kia increases prices due to exchange rate
Kia will raise its UK prices by 3% from April 1, blaming the weakness of the pound against international currency exchanges. The increase will apply across the Kia range with the exception of the recently launched Soul and Magentis models. Paul Philpott, managing director Kia Motors (UK), said: "We have held off on an increase for as long as possible and did not make any pricing changes during the first quarter. "The increase we are making now will be kept to an absolute minimum and still maintains Kia's competitive position in the market. "This has come about purely as a response to the weakness of the pound, and strength of the euro and dollar which have impacted on Kia Motors (UK) and the whole industry in recent months." www.am-online.com
Fiat CEO: Worst is over, Europe will pick up by year-end
Three months after saying he was gloomy about the auto industry’s future because of the unprecedented changes happening at that time, Fiat Group CEO Sergio Marchionne is a bit more optimistic. “The recovery process has started. The worst of the global financial crisis is over, but the consequences remain,” Marchionne said. “After the storm is over, you can start cleaning up.” He predicts the U.S. economy will begin to grow again in the second half, while Europe’s rebound will take a little longer to get started. “Europe will be slower, the first signs will start to appear at the very end of this year,” Marchionne said Tuesday in Geneva. “In Europe, I am worried about national protectionism, particularly on the industry side, which slows the recovery process.” Marchionne made the comments to reporters on the sidelines of the annual general meeting of SGS Group, a Swiss-based inspection and certification company he chairs. Marchionne is basing his prediction for the U.S. on what he has seen and heard during high-level meetings he has attended in Washington. “I had the chance to talk twice with the U.S. President’s automotive task force at the Treasury Department and I saw a strong determination to find feasible solutions,” Marchionne said. The Fiat CEO expects Asia to start to rebound after the United States. www.autonews.com
Scrapping bonus boost changes analysts' sales forecasts
Government-backed scrapping bonuses will slow the forecast decline in Europe’s new-car sales this year, analysts say. Goldman Sachs and J.D. Power Automotive Forecasting both have revised their volume forecasts upward. Goldman Sachs predicts that automakers will sell 900,000 more cars in Europe this year than it originally forecast. “We expect government-sponsored scrapping incentive programs to start to support market volumes,” Stefan Burgstaller said in a research note. Automakers already are benefiting from programs in Germany, France, Italy and Spain that offer buyers bonuses of up to 5,000 euros if they trade in their old cars for new, more fuel-efficient models. New-car sales in Germany rose 21.5 percent to 277,740 units in February, the first full month that the country's 2,500 euro scrapping incentive was available. Goldman Sachs now predicts that sales in Europe will decline 15 percent to 11.6 million units instead of slipping 20 percent to 10.7 million. Automakers sold 13.6 million units last year and 14.8 million in 2007 and 2006. The investment bank also has raised its view on the European auto sector to "attractive" based on an expectation that western European car sales hit bottom in February and now will begin to recover. Temporary solution? Early this month, J.D. Power Automotive Forecasting provided a more optimistic forecast for 2009 European new-car sales. The company now expects a volume of 11.52 million units, up from the 11.33 million it forecast in February. “For the next few months, we are likely to see a considerable positive impact resulting from the combination of scrapping incentives and of substantial OEM price reduction aimed, primarily, at reducing excess stock levels in Europe,” the company said in a statement.But J.D. Power Automotive Forecasting also warned that the recovery could be short-lived: “Declines in the selling rate in the second half of 2009 and in 2010 are now more likely as a result of the above actions.” www.autonews.com
PSA fires Streiff over losses
The board of PSA Peugeot Citroen has sacked chief executive Christian Streiff over the weekend. His replacement is Philippe Varin, a currently chief executive of steel group Corus, who takes the position on June 1. Board member Roland Vardenega assumes the CEO responsibilities until that date. The French carmaker reported a 343m euro net loss last month. “The board unanimously judged that the exceptional difficulties faced by the auto industry imposed a change of management,” chairman Thierry Peugeot said in a statement. www.am-online.com
GM to pull out from certain European markets
General Motors is to pull its Cadillac brand from half of its European markets in order to focus on the UK, Russia and Switzerland following the collapse of its distributor Kroymans. Automotive News Europe has quoted a GM source as saying: “We will take it down to less than a dozen markets.” Cadillac is currently sold in 25 European markets. www.am-online.com
GM's European operations face 2 more tense months
General Motors' Opel unit faces a further two months uncertainty after President Barack Obama's auto task force pledged to fund parent GM's operations only for the next 60 days. Germany's Economy Minister Karl-Theodor zu Guttenberg today said the German government will use the next two months to find a solution to Opel's problems. "We want to help where we can," he said. GM has asked for more than $16 billion in new loans from the U.S. government. Opel, which includes the British brand Vauxhall, is seeking 3.3 billion euros ($4.4 billion) in state aid from European governments where it has manufacturing operations to avoid a liquidity crunch in the coming months. GM Europe President Carl-Peter Forster says the unit needs 2.6 billion euros from Germany, where Opel is based. Chancellor Angela Merkel has said her government is willing to help Opel but a future business plan for the carmaker cannot be formulated properly until GM's future is clear. Opel is GM's second largest brand by volumes, contributing sales of 1.5 million vehicles last year. GM is looking to sell what could be a controlling stake in the unit to give the brand sufficient independence to win loans and guarantees from European governments. Wagoner's departure 'overdue' Opel's senior labor leader, Klaus Franz, today welcomed Fritz Henderson as new CEO of parent GM. Franz said the resignation of the previous GM CEO Rick Wagoner "was overdue." Franz said Henderson supports independence for Opel, while Wagoner "personified the failed policy of a centralized system." Franz is GM Europe's chief worker representative and a member of Opel's supervisory board. As GM Europe chairman between 2004 and 2006, Henderson oversaw a sweeping restructuring of the carmaker's European operations that resulted in 12,000 job cuts including 10,000 at Opel. www.autonews.com
EU clears Spain's auto industry aid for green cars
A plan by Spain to grant interest rate subsidies to automakers and suppliers for green cars has won approval from the European Commission. Under the temporary scheme, Spanish authorities may provide subsidized loans to the auto industry for investments in products that meet EU environmental standards. The loans will be available until the end of 2009 with a maximum term of two years. EU Competition Commissioner Neelie Kroes said the measure will allow important investments for the future low carbon economy to go ahead. These investments could have been put on hold due to the financial and economic crisis, Kroes said on Monday. Last month, the Spanish government approved a 4 billion euro ($5.3 billion) package to support its auto industry after layoffs and stoppages at plants. The Commission had already said this scheme did not breach EU state aid or internal-market rules. www.autonews.com
Car clubs to beat the crunch?
A third of motorists consider car clubs a viable alternative to car ownership, according to a recent survey by TheGreenCarWebsite.co.uk. This figure shows the extent to which the schemes have successfully grown over the past nine years. According to CarPlus.org.uk there are currently 42 car clubs, running in 37 towns and cities across the UK, representing over 64,177 members using around 1,402 cars, compared to just 250 car club members in 2000. Despite the economic downturn boosting these businesses, however, car clubs are still being held back by the lack of availability of their cars within some areas. This means that for many people, they cannot so far offer a serious alternative to car ownership. London has the highest concentration of car clubs, with 75 per cent of all car club vehicles located in the capital, while the availability of car club vehicles has lagged behind in other areas. TheGreenCarWebsite's editor, Faye Sunderland said: "With almost a third saying they would consider giving up their car to join a car club, this is a truly impressive result for the car clubs and probably a big improvement on the result we would have seen a couple of years ago. "Hopefully, as people focus more on money-saving, the established car clubs will be given a fillip to advance their network of vehicles." www.talkingmotors.com
Vertical integration - Is the recession heralding a return to Henry Ford's model?
THE early part of the 20th century was not an easy time for the Ford Motor Company. Economic downturns were frequent and deep. Shortages of raw materials on the back of the first world war stalled assembly lines. And the motor industry’s supplier network was too small to keep pace with demand, making it hard to ensure that all of a car’s parts were ready for assembly at the right time. Henry Ford tried stockpiling parts and materials, but found that the inventory costs were too high. The answer, he decided, was total control: owning the whole supply chain. By the 1920s his company ran coal and iron ore mines, timberlands, rubber plantations, a railroad, freighters, sawmills, blast furnaces, a glassworks, and more. Capping it all was a giant factory at River Rouge, Michigan, which built the parts and assembled the cars. Ford's “vertical integration” solution was wildly successful. But the top-heaviness, complacency and stifling of competition that came to typify vertically integrated models eventually pushed them out of fashion. Today, supply chains have become global and complex. Yet the current recession has shown that they too are dangerously vulnerable to economic downturns. Mark Gottfredson of Bain & Company, a consultancy, argues that many company chiefs have overestimated the ability of their supply chains to cope. Those that have chosen partners on cost basis alone are suffering especially—in the past year, thousands of low-cost Chinese manufacturers have folded. Some big Western suppliers have failed, too, such as Smurfit-Stone Container, a cardboard producer, which filed for Chapter 11 bankruptcy protection in January. So, as companies battle to survive, has the time come to revisit Ford's solution? Some firms are already moving in a vertical direction. General Motors, a company in trouble if there ever was one, is seeking to buy back operations run by Delphi, a bankrupt car-parts supplier it spun off in 1999. Chinese steel-makers, having endured soaring commodity prices, are buying up Australian mining companies. And investment bankers in Asia report discussions with clients seeking to purchase struggling suppliers. But vertical integration's fans have a struggle ahead to overcome its poor image. Almost any MBA graduate (some of them are still worth listening to) will declare that companies should do best when they focus on the part of the business where they have an advantage, rather than expending money and time on the dozens of steps required to deliver the final product. However, managers who want a greater degree of control may find vertical integration has its advantages. Some are unsavoury—as the early steel and oil barons discovered, owning raw-material sources can be a useful way of squeezing competitors. Yet expanding upstream or downstream can boost profits. In the apparel business, for instance, the owners of brands reap higher returns than those that produce the outfits. And in digital photography, it is not the camera-makers that have the widest profit margins, but companies like SanDisk, which makes camera memory cards. When a company expands down the chain closer to the ultimate customer, it also reaps learning benefits, says Tom Osegowitsch, a lecturer in management at the University of Melbourne. For instance, Zara, a Spanish clothing company, finds that owning shops gives it insights into what its customers really want, helping make its manufacturing operations more nimble. Still, the trend of the last few decades to focus on “core competencies” is no mere fad. Although reliance on supply chains has risks, owning parts of the chain can be riskier—for example, few clothing-makers want to own textile factories, with their pollution risks and slim profits. Big, complicated businesses are hardly agile, and when new technology emerges, the owners of factories bear the costs of upgrading. And the lack of competition in vertical operations can cause a certain bureaucratic stiffness to set in among company divisions. For managers, vertical integration carries the uninviting prospect of forcing them to operate outside their comfort zones. Mr Gottfredson points to research by Bain arguing that when a company moves two or more steps away from its main business, it fails two-thirds of the time. (For example, a shoemaker that decides to sell directly to end customers will not only have to distribute its wares but operate shops, too—and running a factory doesn’t prepare a manager to do either one.) “There is a lot working against you,” says Mr Gottfredson. “You will be competing with your customers and selling to a new customer base through a distribution channel you don’t understand.” Looking sideways - There may be a third way. A company can gain some of the benefits of vertical integration without full ownership. Consider Toyota, a motor company that has been a byword for decent management in a way that General Motors has not been. Toyota rigorously screens its suppliers for quality and financial health, and then spends time and money to ensure their efficiency and survival, sometimes taking minority stakes. In the 1980s, when Toyota chose Johnson Controls to supply seats, it blocked the supplier from expanding its facility, fearing that the additional cost would harm Johnson's profits and effectiveness. Instead, Toyota’s engineers worked with Johnson to streamline production, rearrange the factory floor, and cut inventories, ultimately showing that expansion wasn’t needed after all. To follow Toyota's example, argues Joel Sutherland, now of Lehigh University and once head of operations at one of Toyota's suppliers, is to create a supply chain with the stability and efficiency of vertical integration but with some of the flexibility of looser networks of suppliers. The approach is also far cheaper than the traditional vertical method of owning suppliers outright, a virtue at a time when cash and credit are rare. Like the duration of the downturn itself, how well supply chains will endure is anyone's guess. But the return of deep economic cycles may cause many managers to discover that there’s comfort in keeping suppliers close. Recalling the days when Henry Ford ruled, vertical integration—in adapted form at least—may emerge from disgrace as an innovative solution in an era when innovation is sorely required. www.economist.com
Russian dealer group Rolf dumps Peugeot
Russia's largest dealer of foreign cars, Rolf Group, will stop selling Peugeot vehicles and has stopped a planned merger with Helsinki-based Avelon Group amid a sharp slump in demand, its chief executive said. CEO Nick Hawkins said today that Rolf, which sold more than 700 Peugeot vehicles in 2007, had not met sales targets for the French brand. "It's absolutely no reflection on the brand, but we just couldn't get the critical mass that we needed," he said. A spokeswoman for Peugeot declined to comment. PSA/Peugeot-Citroen and Mitsubishi Motors Corp. last year announced plans to invest 470 million euros in a Russian car assembly plant. Peugeot, which will own 70 percent of the venture, was counting on the Russian market to help offset slowing European growth. But for most carmakers in Russia such hopes have been frustrated. The government on Monday deepened an already grim sales forecast for the auto industry, saying demand would fall 60 percent this year, not 40 percent as expected in December. Last year, more than 2.7 million new cars were sold in Russia, according to market researchers JATO Dynamics. Amid the dramatic downturn, which has undercut expectations that Russia would become Europe's largest car market this year, Rolf is freezing the expansion of its dealership network, Hawkins said. "We had a number of (dealership) projects under commencement, and we stopped those," he said in an interview. Merger negotiations with Avelon, a logistics firm, have also been put on hold due to the difficult market environment, Hawkins said. An industry source said in August of last year that the deal was months from being concluded and that due diligence was underway. No restructurung - Rolf, which has a Eurobond that matures next June, is fine to repay about $300 million in debt coming due this year, and does not intend to restructure any loans, Hawkins said, adding that its total debt is $770 million. The dealer group is also pushing ahead with its Bluefish used car project to cater to consumers hit by rising unemployment, swelling wage arrears, and a sharp devaluation of the ruble. Although its sales of Mitsubishi vehicles fell short of forecasts last year -- it distributed 112,000 instead of an expected 140,000-160,000 units -- Rolf signed a five-year distribution agreement with the Japanese auto major in March. Hawkins also dismissed speculation in the Russian media that it was in merger talks with a unit of billionaire Mikhail Fridman's Alfa Group, whose Alfa Bank is one of Rolf's creditors. "There are no merger talks," he said. Ambitious plans to enter the Indian market, where Rolf has a representative office, have also been stalled due to the crisis. www.autonews.com
CHINA: Locals not big enough to swallow foreign rivals
Chinese automakers are still not big enough to take over their troubled foreign rivals despite their global ambitions, analysts and company officials have said. There have been persistent rumours the Chinese are eyeing Volvo, Saab or Hummer, all of which have been put on the block (ie 'up for strategic review') by their US owners Ford and GM. The companies at the centre of the rumours, such as Geely, one of China's largest private automakers, have repeatedly denied the reports while at the same time fanning the rumours by saying they are open to foreign acquisitions, Agence France-Presse (AFP) said. Such acquisitions are a route through which Geely could access capital, new markets and international partnerships, according to the car company's website. Analysts, however, told the news agency they do not expect to see any startling Chinese auto acquisitions in the near future. "Compared with more than RMB40bn ($US5.8bn) needed to acquire Volvo, (Geely's) market value is only about RMB3bn," consultancy Roland Berger said in a research note. "The total assets of Chery Automobile are about RMB30bn, with capital of RMB3-4bn and the acquisition requires about RMB40bn," the firm said, listing the Chinese automakers that would be most likely to bid. The market value of Chang'an Auto is only about RMB8.5bn, it added. "I do not see any kind of possibility that a local company would acquire Volvo or Hummer. It is not realistic financially or even in terms of management capability," Beijing-based Global Insight analyst John Zeng told AFP. "For a number of Chinese companies, their sole experience with foreigners is their joint ventures in China. They have never operated overseas," he added. One exception - which has turned out badly - is SAIC's acquisition in 2004 of small South Korean SUV specialist Ssangyong, which now faces bankruptcy. China Automotive Industry Consulting and Development Corporation analyst Jia Xinguang agreed Chinese companies lack the necessary management experience. "The complicated relationship between trade unions and employers in foreign companies is another problem for them," he added. But size is the main obstacle. "Any overseas acquisition needs National Development and Reform Commission approval and at this time the NDRC has concerns about Chinese companies' capacity to run such acquisitions," Roland Berger analyst John Shen said. Late last month, AFP noted, Chen Bin, the head of the commission, effectively warned Chinese automakers they were not yet ready to rub shoulders with international players but at the same time told them "all options were open." Last week, Beijing once again urged China's crowded domestic auto sector to consolidate. But the international opportunities remain attractive as a means to acquire the technology that the Chinese automakers need. "They do not have strong brand technology and are still relying heavily on foreign partners. Over 60% of vehicle production comes from joint ventures including more than 85% of passenger cars," Global Insight's Zeng said. "One more realistic way to go would be to go for some core assets which they need, rather than buy the whole company," Roland Berger's Shen said. That could make more sense at a time when several Chinese companies, notably SAIC, FAW and DongFeng want to establish their own brands. It is a path Geely seems to have taken with its acquisition on Friday of Australian auto parts manufacturer Drivetrain Systems. Geely said the deal would improve its capability to develop and produce transmissions - a key technology that Chinese automakers must learn to master to be globally competitive. The fact that Chinese automakers crave the global spotlight may mean they enjoy the attention the rumours over foreign acquisitions bring, Shen said. "A lot of companies are taking advantage of it to promote their brand so they are not taking active measures to clarify the rumours," he added.
www.just-auto.com
VW hedges give Porsche 6.8bn euro windfall
Porsche Automobile Holding SE landed a 6.84 billion euro ($8.99 billion) windfall from its share options in Volkswagen during the first half, lifting its pretax profit to more than twice its revenue.Porsche said today that earnings before tax rose to 7.3 billion euros in the six months to January 31 from 1.3 billion euros a year earlier. The main reason for the dramatic increase was the positive contribution to profits from cash-settled share option transactions in VW shares, the company said. This contribution increased from 850 million euros in the previous year to 6.84 billion euros," Porsche said in a statement Porsche SE owns 50.8 percent of VW, which is Europe's biggest auto manufacturer. Sales down, revenue up - Porsche's revenue fell 12.8 percent to 3.04 billion euros in its first half, compared with the year before. Sales decreased by 26.7 percent to 34,266 units. Porsche said its revenue improved because it sold a higher share of 911 sports cars while sales of the less-profitable Boxster dropped considerably. The company said 911 sales fell to 13,543 units from 16,261. Boxster sales dropped to 3,950 units from 9,835. Sales of the Cayenne SUV declined to 16,773 from 20,638. Porsche pointed out that VW's contribution to profits depended on the price of the VW shares. "The effect on the full-year results for the 2008-2009 business year will depend on the development of the price of the VW shares in the period until July 31, 2009," Porsche said. VW was world's most valuable company - Late in October, news that Porsche had secured access to about 74 percent of VW ordinary shares -- draining the company of almost its entire freefloat -- led the stock to quintuple within 48 hours to 1,000 euros per share, briefly making VW the most valuable company in the world. Porsche then sold a small package of VW cash-settled call options to relieve buying pressure, sparking outcries from investors that the carmaker had manipulated the market and broken securities trading laws. German securities regulator Bafin investigated the claims and today announced that it found no evidence of wrongdoing. Porsche, which reported in early January that it had increased its direct stake in VW voting stock to more than 50 percent, encountered problems last week rolling over a 10 billion euro credit line and had to increase its pool of lenders to clinch enough commitments. Porsche seeks credit rating - Porsche said last Wednesday it would seek its first ever rating from a credit rating agency, which could reduce any reliance on syndicated debt, in a process that could take until May. Shares in VW spiked after banks granted the loan on market speculation Porsche would be able to move forward with its plan to gain a 75 percent interest in VW this year. The German state of Lower Saxony holds another 20 percent of the VW votes and has opposed Porsche's aim to transfer full financial and managerial control over VW to Porsche's SE holding company. www.autonews.com
Germany's Deputy Chancellor demands 29% gov't stake in Opel
Germany's Deputy Chancellor Frank-Walter Steinmeier wants European governments to bail out General Motors' Opel brand by taking a stake of up to 29 percent in the struggling carmaker. Steinmeier was today presenting the plan to Chancellor Angela Merkel, who so far has been reluctant to pump state aid into Opel, which faces a liquidity crunch in the coming months. Opel, along with its British sister brand Vauxhall, is seeking 3.3 billion euros ($4.4 billion) in loans and financial guarantees from European governments where it has manufacturing operations to survive the economic crisis. GM is restructuring Opel as a stand-alone business and has said it is willing to sell what could be a controlling stake in the unit to an outside investor. Steinmeier said he would prefer a private investor for Opel but there was no time to wait for one to come forward. "A temporary solution would be a state commitment," he said. Stakes for dealers, unions Steinmeier is asking the Berlin government to form an action group similar to the U.S. government's auto task force to coordinate a rescue plan for Opel. The group would include experts from business and politics who would work with GM and the U.S. government to secure Opel's future. Steinmeier's plan envisages Germany and other European governments taking a stake of up to 29 percent in a new Opel holding company; Opel's dealers and unions would each take a 10 percent share; the company's management would have a stake of between 1 percent and 3 percent. GM would keep a 50 percent stake minus 1 share. The fate of Opel has become a political issue in Germany. Steinmeier is running against Merkel for Chancellor in September's national election. Steinmeier's left-leaning Social Democrat Party has shown itself more inclined to offer Opel financial backing than Merkel's conservative Christian Democrats. GM Europe President Carl-Peter Forster today said that GM has laid the foundation for overcoming opposition to state aid for Opel. "We want to do everything that is in our interest to contribute to making the decision process transparent and understandable for everyone," Forster said at Opel's main plant in Ruesselsheim, near Frankfurt. Investors interested - Also today, Germany's Economy Minister Karl-Theodor zu Guttenberg said there are private investors potentially interested in taking a stake in Opel but he reiterated that the state could not support the struggling company without certain conditions being met. "There are interested parties and these parties could become investors," Guttenberg told ARD television. "Interestingly enough, they're asking the same questions that we've been asking in the past weeks and are making the same demands we've been making. That shows once again that the state cannot take over the position of an investor without the conditions being fulfilled that need to be fulfilled." GM directly employs nearly 56,000 people in Europe. More than 25,000 are in Germany, about 7,000 in Spain and about 5,000 in Britain.
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