Week of Feb. 8, 1999

February 8, 1999

BMW BUMPS BOSS "BP"
GM DENIES BMW DEAL
TWO DEAD IN EXPLOSION AT FORD’S ROUGE
JANUARY CAR SALES UP 12%
DAEWOO TO TRY INTERNET SALES
GOODYEAR, SUMITOMO TEAM UP
VOLVO SET TO BUY SCANIA
GM SETS HIGH HURDLES FOR ‘99
GM, FORD MOVE IN INDIA
FORD BRAZIL WORKERS STRIKE
DAEWOO EXEC GUNNED DOWN
MUHLBERG LEAVES FORD FOR BOEING
MERCEDES SEEKING NEW AD PARTNER?
TOYOTA TO GIVE VW, DC EMISSIONS HELP?
CLINTON BUDGET GOES FOR CLIMATIC CHANGE
HONDA: FUEL CELLS, SMART VEHICLES COMING
HONDA CIVIC SI OPENS CHICAGO SHOW
SAAB VIGGEN GETS CHICAGO DEBUT
GAS TAX SURPLUS FIGHT COMING
HAWAII SUES FOR CHEAP GAS
VALENTINE PROWLER ARRIVES
PACKARD PLANT FINDS SAVIOR?


BMW BUMPS BOSS "BP" To almost no one’s surprise, Bayerische Motoren Werke AG ousted Chief Executive Officer Bernd Pischetsreider on Friday. The long-rumored dismissal of "BP" followed four years of heavy losses at BMW’s British subsidiary Rover. The English parent of the Land Rover and Mini brands had failed to turn a profit in any year since BMW purchased it in 1994 for $1.2 billion. Pischetsreider, who held the top spot at BMW for six years, will be replaced not by board sales chief Wolfgang Reitzle, whom many had suspected would take over, but by the board’s production overseer, Joachim Milberg. Reitzle, like Pischetsreider, was thought incapable of bringing change at Rover — and was, like BP, an outspoken proponent of an independent BMW. The twin departures have analysts speculating that the company is setting itself up for sale.
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GM DENIES BMW DEAL. A bidding war for BMW is expected in the wake of Friday’s management coup — and one expected bidder has already officially denied interest. General Motors Corp. denied on Friday that it was interested in acquiring Germany’s third-largest automaker. GM sources had been quoted in Belgium’s La Libre Belgique newspaper as having an interest in purchasing BMW; a GM spokesman called those reports “incorrect." BMW did not comment on the report and has not offered its car operations for sale; however, a string of global carmakers, including GM, Volkswagen, and Ford, are said to have keen interest in buying BMW and its Land Rover, Mini, and Rolls-Royce brands.
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TWO DEAD IN EXPLOSION AT FORD’S ROUGE. Monday’s explosion and fire at Ford’s Rouge complex killed two employees and injured 15 others, according to wire reports. The explosion ripped through a boiler at the plant at 1 p.m. EST Monday as a pipe fitter performed routine maintenance. Donald Harper, 58, a 35-year veteran of the Rouge complex, was killed instantly; Cody Boatwright, 51, of Taylor, Michigan, died on Friday from injuries sustained in the blast. The blast destroyed the Rouge powerhouse, which generates electricity for the entire 1,100-acre facility. The Rouge complex, built in 1918, was once the world’s largest auto plant; today, about 8,000 people work at the six Ford factories still in operation there, building the Mustang and supplying 16 Ford plants with glass, engines, frames, and fenders. Limited production resumed on Wednesday at the site, but company officials have declared the powerhouse a total loss. It will be torn down after a complete investigation. In January, Ford had broken ground on a new power generator slated to replace the 75-year-old powerhouse. The new power plant is to come online sometime in 2000.
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JANUARY CAR SALES UP 12%. Sales of cars and trucks in the U.S. remained brisk in January, climbing 12 percent over the same month in 1998. GM, Ford and DaimlerChrysler reported a 9 percent increase in sales overall; GM increased its sales 4 percent, though the summer labor strikes put a dent in sales of its new Silverado/Sierra pickups. However, GM’s passenger car sales were up 11 percent over a slow January last year, with Oldsmobile getting a big boost from strong sales of the new Alero, and with Saturn’s new three-door coupes posting a 26 percent gain. Asian companies had an 18 percent increase, while European companies were up 21 percent. The 10 best-selling cars in January were:

1. Ford F-Series pickup - 60,257
2. Chevrolet Silverado pickup - 41,621
3. Ford Explorer - 30,304
4. Toyota Camry - 30,074
5. Dodge Ram pickup - 29,897
6. Honda Accord - 27,297
7. Ford Ranger pickup - 26,863
8. Dodge Caravan - 22,683
9. Jeep Grand Cherokee - 22,496
10. Honda Civic - 21,894

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DAEWOO TO TRY INTERNET SALES. Daewoo will turn its sales sights to the Internet, USA Today reported. The Korean upstart car company will try to sell cars over the ‘Net through a unique loophole — though most state franchise laws do not allow manufacturers to sell cars alongside franchisees, Daewoo has no franchisees — it owns its U.S. dealerships. The company is planning a 90-day test period in California, followed by a nationwide rollout, the newspaper said.
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GOODYEAR, SUMITOMO TEAM UP. Goodyear and Sumitomo have agreed to a wide-ranging alliance that will create the world’s largest tire maker, the Associated Press reports. Under terms of the offer, Akron, Ohio-based Goodyear will pay $936 million to Kobe-based Sumitomo Rubber in exchange for a 10 percent stake in the Japanese company. The deal will be structured to preserve national interests: in North America and Europe, Goodyear will own 75 percent of the joint ventures and hold 70 percent of the voting power, while Sumitomo will own the remaining 25 percent and hold 30 percent of the voting power. The ratios will be reversed in the two ventures in Japan. Combined sales of the two companies will equal 22 percent of the world’s tire market and could hit $18 billion, rivaling France’s Michelin and Japan’s Bridgestone. To complete the subsequent restructuring, Goodyear will lay off between 2500 to 2800 workers in the U.S. and close its Gadsden, Alabama, plant.
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VOLVO SET TO BUY SCANIA. AB Volvo is on the verge of purchasing rival Scania’s truck business, the Swedish daily Dagens Nyheter reported Friday. Both AB Volvo and Scania refused comment on the story, which, if true, would create Europe’s largest truck maker. Last week Volvo announced its plans to sell its carmaking division to Ford Motor Co. for $6.45 billion, an amount which would nearly finance the estimated $7 billion purchase price of Scania. Meanwhile, Fiat executives said on Wednesday that their company had offered as much as $13 billion for all of Volvo’s car and truck assets. Quoting Italian bankers, the Financial Times (London) said Fiat had offered $13 billion for all of Volvo — twice the amount Ford was proposing for Volvo’s car division alone.
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GM SETS HIGH HURDLES FOR ‘99. In a meeting with auto industry analysts, GM last week laid out its plans for nearly $4 billion in profits in 1999 and resurgence in car and truck sales over the next four years. GM execs offered that, in near-ideal market conditions, GM could make as much as $4 billion in profit next year, an increase of 25 percent from 1998’s $3.2 billion profit. To reach long-term goals, GM showed off more than 40 new models being considered for production between now and 2002. The models included a road-going version of the Pontiac Aztec concept car, the next iteration of the Chevy Blazer/GMC Envoy twins, an SUV for Saturn, and replacements for the Cadillac DeVille and Catera.
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GM, FORD MOVE IN INDIA. America’s Big Two are shoring up their presence in India. Both Ford and GM announced plans last week to increase their stakes in joint-venture projects in India. Ford announced it has increased its equity in Mahindra Ford Ltd. from 50 percent to 78 percent. The company’s goal is to own 92 percent of the Indian company; to signify that goal, its name has been changed to Ford India Ltd. Ford is preparing a new factory where it will build a version of the European Escort. GM, meanwhile, will purchase partner C.K. Birla Group’s 50 percent stake in General Motors India. GM makes the Opel Astra in India currently, and will add the Corsa later this year.
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FORD BRAZIL WORKERS STRIKE. Some 4,000 workers went on strike Monday at the Brazilian arm of Ford Motor Co., stalling Ford’s attempt to restart production that has been halted since late December. Strikers are attempting to win back some 3,000 jobs lost to layoffs by offering a shorter workweek, pay cuts, and voluntary retirements.
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DAEWOO EXEC GUNNED DOWN. South African police are investigating whether the murder of Daewoo’s president of South African operations was a professional hit, according to AP reports. On Tuesday, police found the body of Yong Koo Kwon, 50, in his car with a gunshot wound to the head. Kwon had been returning from a dinner party at the South Korean ambassador’s home when he was killed, according to embassy officials. Daewoo says the murder will not cause it to pull out from the country, which is facing a crime wave as it tries to attract foreign investment.
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MUHLBERG LEAVES FORD FOR BOEING. Judith Muhlberg, former director of public affairs for Ford Automotive Operations, has been named vice president of communications at Boeing. Muhlberg, 46, joined Ford Motor Co. in 1977 after working two years in the White House for David Gergen, the director of White House Communications under President Gerald Ford and for chiefs of staff Dick Cheney and Donald Rumsfield. Most recently at Ford Motor Co., Muhlberg had been responsible for directing communications strategies, and served on the senior leadership team for the automotive business. Muhlberg begins her new duties on March 1.
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MERCEDES SEEKING NEW AD PARTNER? Mercedes-Benz may be hunting for a new ad agency to replace Lowe & Partners/SMS of New York, The New York Times reports. During their five-year relationship, Lowe has created acclaimed ads for Mercedes vehicles, including the “Falling in Love" campaign that featured Marlene Dietrich’s recording of the classic song. A Mercedes spokeswoman denies that Mercedes already has fired Lowe, but confirmed that Mercedes-Benz executives had met with Lowe executives on Wednesday to “discuss the seriousness of the situation and express concern about two issues." The two issues at hand are believed to be possible conflicts with Lowe’s parent company, Interpublic, which also operates agencies that advertise GM products, and recent changes in the team that services the Mercedes account.
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TOYOTA TO GIVE VW, DC EMISSIONS HELP? Toyota Motor Corp. plans to offer DaimlerChrysler AG and Volkswagen AG use of new environmentally friendly engine technology, according to published reports. The technology, reported the Nihon Kezai newspaper, can purify at least 60 percent of the nitrogen oxide contained in exhaust from gasoline engines. The paper added that Toyota had already reached agreement with DaimlerChrysler and had been approached by Volkswagen President Ferdinand Piech. Toyota is seeking to make its technology a global standard, Nihon Keizai said.
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CLINTON BUDGET GOES FOR CLIMATIC CHANGE. Funding for the development of energy-saving cars, home heating equipment and air conditioners would get a billion-dollar boost in the most recent Clinton administration budget proposal, Bloomberg reports. The administration’s Climate Change Technology Initiative calls for $33.9 billion in new spending on "high-priority" environmental and natural resources projects, as well as $1.4 billion to fund research into energy-efficient cars and homes. In addition, Bloomberg reported, the budget calls for $383 million in tax credits for people who buy electric or hybrid automobiles and energy-efficient building materials.
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HONDA: FUEL CELLS, SMART VEHICLES COMING. Honda is planning to put fuel-cell electric vehicles on the road by 2003, the Nikkei English News reports. Honda’s system, like prototypes from DaimlerChrysler, extracts hydrogen from methanol and then combines the gas with oxygen to create water vapor and electric current, the paper added. Meanwhile, the company has placed two "intelligent" vehicles on display at the Automotive Hall of Fame in Dearborn, Michigan. The two vehicles — the ICVS City Pal, an electric two-seater with good cargo space, and the ICVS Step Deck, a single-seater — work with a special card to allow users to select a vehicle from an airport parking lot, complete rental transactions, even start the car with the same card.
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HONDA CIVIC SI OPENS CHICAGO SHOW. Four years after the last Civic Si went to pasture, Honda will launch a new sporty compact coupe at this week’s Chicago Auto Show. American Honda says the new Civic Si is based on the Civic Coupe, and offers a 160-horsepower version of the Honda VTEC 1.6-liter four-cylinder engine, along with a larger air dam and a sport suspension.
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SAAB VIGGEN GETS CHICAGO DEBUT. Saab’s latest 9-3 variant will make its debut at April’s New York Auto Show. The Viggen, named after a Saab fighter jet, will offer a high-output 2.3-liter turbo four and special interior and exterior trim. The Viggen (Swedish for "thunderbolt") also rides on wider 17x7.5-inch wheels. Viggen will be offered as a coupe, five-door sedan, and as a convertible. Saab is building the Viggen with TWR Group at the Valmet Automotive plant in Finland, alongside the Saab convertible line.
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GAS TAX SURPLUS FIGHT COMING. Cheap gas and more driving has created a windfall in fuel tax collections, according to Associated Press reports. While gas prices continue to drop to record lows, drivers are still paying local, state and federal governments an average of 43 cents per gallon in tax. The federal slice of that tax — some 18.4 cents per gallon — exceeded projections by $1.5 billion this year, and the Clinton administration and Congress are already fighting over spending the surplus. The first parry is a new transportation department budget that divvies up the extra revenue among some pet projects: $730 million for road construction, congestion reduction and air quality; $291 million for mass transit; $250 million for surface transportation research; $125 million for National Highway Traffic Safety Administration safety programs; $35 million for rail programs, including grade-crossing elimination; and $25 million for a transportation preservation program.
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HAWAII SUES FOR CHEAP GAS. Meanwhile, in Hawaii, locals are enraged by gas prices that average about $1.50 per gallon on Oahu. The state of Hawaii has filed a federal lawsuit seeking hundreds of millions of dollars in damages from BHP, Chevron, Shell, Tesoro, Texaco and Unocal oil companies, the Associated Press reports. Hawaiians charge that gasoline wholesalers are conspiring to keep up inflated prices on the islands. To draw attention to the problem, two local gas stations started selling gas at 83 cents and 79 cents a gallon — prices unseen in Hawaii since the 1970s. The ensuing rush to buy cheap gas snarled traffic as customers waited up to an hour to fill up, the AP said.
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VALENTINE PROWLER ARRIVES. A very special treat might be in order this Valentine’s Day, especially if your sweetie is a hot-rod fanatic. The first batch of red 1999 Plymouth Prowlers will arrive in Chrysler/Plymouth showrooms this month, with a suggested retail price of $40,000. The new color joins purple, yellow and black on the list of Prowler hues. More than 1,800 Prowlers have been sold since 1997.
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PACKARD PLANT FINDS SAVIOR? Packard’s landmark factory in Detroit is nearing demolition, but it may have found a savior, according to Associated Press reports. Dominic Cristini, property manager for the plant, has been holed up in an office inside the plant since November. Cristini is refusing to leave the plant in protest of Detroit efforts to evict 87 tenants and tear down the building to make way for an industrial park. In November, the Detroit City Council voted to replace Cristini as manager of the property, which was built in 1907. In the 1930s, the plant became a landmark for American luxury cars. However, the once-proud factory has been ravaged by decades of natural wear and neglect: windows are shattered and the roof is rotting. The building is still occupied by tenants, including mechanics and a collection of 45 vintage Packards. Cristini claims he has lined up at least $10 million from donors willing to buy and repair the building, but refuses to name any individuals, the AP said.
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