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Week of January 18, 1999

January 18, 1999


SPEED KILLS, AND MORE SPEED KILLS MORE— A study by the Insurance Institute of Highway Safety said highway deaths have increased by roughly 15 percent since Congress did away with the national 55-mph limit in 1995. Notably, deaths in states that kept the old limit have remained constant. The institute's findings echo a similar report by the National Highway Traffic Safety Administration last year. An earlier institute report found that highway deaths increased about 12 percent in the first 12 states to raise speed limits. At the same time, the National Motorists Association, a Wisconsin-based drivers group that fought for the increase in speed limit, said the number of deaths has not increased in proportion to increased driving contributed by low gas prices and a strong economy.
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A NEW NICHE FOR GM? Long the auto industry's productivity laggard, General Motors intends to build three new plants in the U.S., with groundbreaking scheduled for later this year. Project Yellowstone will rely on suppliers to provide the new plants with 15 key "modules," parts and component clusters that can be put together with a fraction of the normal effort. Look for savings of $1,500 or more a vehicle — or 20 percent of the cost of building a small car — according to Yellowstone's project director, GM Vice President Mark Hogan. The new plants will be so lean and efficient, according to Hogan, that GM will be able to build a variety of "niche" products in volumes as low as 1,000 to 5,000 units. Such numbers would have ensured huge losses in the past. What vehicles might GM have in mind? The Cadillac Evoq concept car is one example of GM's niche aspirations, and the Chevrolet Nomad concept truck may be another. Stay tuned.
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DAIMLERCHRYSLER KEEPS ON TRUCKING— DaimlerChrysler AG sold nearly half a million commercial trucks worldwide in 1998, a 17 percent increase over the previous year's volume. Coincidentally, the newly formed company increased its revenue in that division by the same percentage. Profit also took off: DaimlerChrysler Commercial Vehicles posted an operating profit of $837 million for the period from January to September 1998 compared with just $287.5 million for the entire 1997 year. Its North America-based Freightliner division had its best year ever, selling 116,000 units, four times what it sold a decade ago. The company made the announcement at the International Commercial Vehicles Show in Brussels and will publish final figures in its March 31 annual report.
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THE ULTIMATE COMMUTE? With no direct commercial flights between DaimlerChrysler's dual headquarters in Germany and the U.S., the company apparently plans to rent a 60-passenger Airbus jet and launch its own shuttle service, perhaps flying three times a week and eventually outfitting a plane with larger fuel tanks to handle nonstop flights. The company does have private jets, but the sheer volume of executives makes the bigger aircraft a more attractive proposition.
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TOYOTA TAKES AIM AT EUROPE, JAPAN— Targeting the domestic Japanese and European markets, Toyota has taken the wraps off its Yaris hatchback, a small passenger car to be built in France and Japan. The company hopes to sell 250,000 of the 1-liter four-cylinder vehicles, 110,000 of them in Japan. The vehicle, to be badged the Vitz in Japan, is to be priced at 830,000 yen ($7,477 at 111 yen to the $) for the three-door model. While the car is not much bigger than Japanese minicars, Toyota President Hiroshi Okuda said he felt the superior performance and roomier interior of the Yaris/Vitz would make it competitive with the minis, even though that category of vehicle enjoys preferential tax treatment.
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NEW ALLIANCE OF AUTOMAKERS— A new trade group, the Alliance of Automobile Manufacturers, with nine member companies, will replace the old American Automobile Manufacturers Association. The AAMA, which consisted only of the Big Three, broke apart when Chrysler Corp. merged with Daimler-Benz. The new AAM will lobby for the entire industry, rather than just the traditional domestic automakers. AAM will focus on environmental and safety issues, avoiding the more contentious issues such as trade. Ford Vice Chairman Peter Pestillo is to be chair of the association, which counts Ford, GM, DaimlerChrysler, Volkswagen, Toyota and Nissan among members with full voting rights. Volvo, BMW, and Mazda will be associate members. Honda was invited to join the new group but declined, preferring to retain its membership in the Association for International Automobile Manufacturers, a spokesperson said.
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SATURN SKIDS— For the first time since 1993, Saturn Corp., a division of GM, has lost money, an estimated $25 million, according to a United Auto Workers leader. The company refused to confirm the actual number, but GM Vice President Mark Hogan has acknowledged the company is losing money. "A lot of it has to do with volume," Hogan said. Saturn sold 231,786 cars in 1998, down from 251,099 in 1997. But industry analyst George Peterson, of AutoPacific Inc. in Santa Ana, California, said the resilience of the company is to be commended. "Saturn has been able to hold its own in a tough year," he said. The company is expected to produce a sport-utility vehicle in 2001, a move UAW leader Mike Bennett said is long overdue. "If we had been able to have the SUV two or three years ago, instead of GM saying 'No', we'd have been in much better shape. But we'll work it out."
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CRUIZIN' Once again showing that it can squeeze the time from concept car to production vehicle, DaimlerChrysler announced it will produce the PT Cruizer, a vehicle the company sees as a "segment buster," creating its own category. The front-wheel-drive vehicle, shorter than a Neon, looks like a cross between a milk truck, sleek 1950s cruiser and station wagon. DaimlerChrysler Co-Chairman Robert Eaton said the vehicle, to be priced significantly under $20,000, will "really capture the emotions of a wide demographics in every country." Both left- and right-hand-drive versions of the PT Cruizer will be made at the company's Toluca, Mexico, plant, with sales beginning in 2000. Volumes were not discussed.
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ARE THEY CARS? OR TRUCKS? YES At last year's North American International Auto Show, GM's Signia proved a hit. So the company has repeated itself — three times over. Three of the five concept cars GM presented at the same show this year are so-called "crossover" vehicles, looking something like a truck and something like a car. GM Chairman Jack Smith hinted that more of these design hybrids would be finding their way into showrooms before long. "We have made very significant improvements in reducing time and cost in the process of bringing vehicles from idea stage to the market," Smith said. "On average, we will introduce one new product every month between now and the middle of the decade in the U.S. market alone. More than half of those will be innovative concepts aimed at redefining existing product segments and creating new segments."
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YOU'VE GOT MAIL— General Motors has invested heavily in computer styling and engineering technology, and it's paying off with lower design and production costs. Now, the world's largest automaker hopes to make money by loading its cars up with the latest in electronic gear. In an exclusive interview with The Car Connection, GM Chairman Jack Smith said his company plans to offer a range of in-car services, including e-mail, digital radio and movies, and real-time traffic alerts. Industry experts believe GM is well-positioned to become a leader in the new field, dubbed "Telematics," and may start giving away in-car hardware, such as navigation computers, to spur the growth. Even if it doesn't, hardware prices are expected to fall, much as has happened with the PC computer market. The real dollars, said Smith, will be earned through monthly subscription fees. Thanks to its Hughes Electronics subsidiary, GM already is one of the largest players in the satellite-to-home TV business.
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A NISSAN/DAIMLERCHRYSLER MERGER? DaimlerChrysler Co-Chairman Juergen Schrempp has come closer than ever to acknowledging the possibility of buying a piece of ailing Nissan Motor Co. Schrempp told reporters in Detroit last week that he "would not exclude" a stake in Asia's second-largest car company. After being rebuffed by Ford Motor Co.'s reported refusal to take a 20 percent interest in the company, Nissan made the same offer to DaimlerChrysler, which had been considering the purchase of Nissan's diesel truck subsidiary. Nissan President Yoshikazu Hanawa told Japan's Kyodo News agency the company would seriously consider a DaimlerChrysler proposal.
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FORD INTERESTED IN ACQUISITION, BUT WHO'S SELLING? With $23 billion in cash on hand, Ford Motor is looking for bargains. Maybe that's the trouble. The attractive ones don't want to sell, and the willing sellers aren't what the automaker is looking for. With Volvo being most often mentioned as a Ford takeover target, analysts are saying Ford is more interested in BMW or Honda. Ford and Volvo have acknowledged the companies have talked about a marriage but left it at that. Ford is in no hurry to spend its cash, said Ford President and CEO Jac Nasser last week. Indeed, the company walked away from buying South Korean automaker Kia Motors in December, when the purchase price and Kia's debt failed to add up to a viable business case.
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FORD FOCUSED— Ford's replacement for the Escort is getting high marks in Europe, including the inaugural Scottish Car of the Year award, the European CoTY title and the BBC Top Gear. While the bold styling may not be for everyone (one critic called it the Ford Fiasco), it can't be accused of being another look-alike Eurohatch. It's also not a skin-deep makeover for the Escort. There are virtually no shared components between the two.
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BIG QUESTIONS ABOUT SMALL BMW BMW chief executive Bernd Pischetsrieder has apparently told his senior managers of his intention to develop two small cars to compete with the Volkswagen Golf and Polo models. Not everyone is happy with the scheme, which would be handled in association with the company's Rover division in the U.K. and built at Longbridge. Pischetsrieder expects Rover to sell at least half a million of the new cars each year. Internal critics say the boss's expression of confidence in Rover may be the company's undoing. An internal BMW report reportedly recommended the British subsidiary cease production on all models except the Mini and the Land Rover. But BMW board members fear that rejecting the chief executive's ideas will see him go elsewhere.
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