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Week of May 29, 2000

May 29, 2000






CAFE FREEZE STAYS FOR NOW The U.S. House of Representatives approved a transportation spending bill that included a provision that kept the current freeze on Corporate Average Fuel Economy standards, much to the relief of U.S. automakers. Furthermore, the provision withholds funds for further studies on the standards. President Clinton, who strongly opposes the CAFE freeze, has the power to veto the bill, although the Senate has not yet proposed its own transportation bill. While the freeze marks the latest in a line of defeats for environmentalists, automakers do claim that the prosperity from sales of thirsty SUVs has given them more money toward research into hybrids, alternative fuels, and emerging technologies. 

GM, FORD WARN DEALERS Both General Motors and Ford have recently sent out warnings to dealers regarding sales to brokers and online retailers who sell directly to consumers, according to Bloomberg. The automakers' warnings, similarly stated, remind dealerships that new-vehicle sales must be between dealer and consumer, and that penalties will be imposed for those who sell to online brokers. The move reinforces the intentions of the two companies to gather sales online and then channel buyers to dealerships to complete the sale, as opposed to online independents such as, which sell cars to consumers without dealership involvement.


SUPREMES DRAW LINE ON AIRBAG LAWSUITS The U.S. Supreme Court issued a broad ruling that drivers and passengers in cars made before airbags were required, as safety devices cannot sue automakers for not featuring the safety devices. Recently, the court system has been swamped with product-liability lawsuits contending that airbags would have saved the occupants from injury. Starting in September 1989, automakers had to provide either an airbag or an automatic seat belt, although some automakers didn't install airbags until several years later.


VW BUYS REMAINING SKODA SHARES A Czech government spokesman has said that Volkswagen AG will purchase the remaining 30 percent of shares of Skoda Auto AS from the Czech government. The deal, for about $305 million, includes a Czech Republic seat on the automaker's supervisory board until 2007 and involvement with the government regarding major production changes.


LOPEZ CHARGED, AT LAST Former General Motors executive Jose Ignacio Lopez has been charged by the U.S. Justice Department with multiple counts of fraud, among other things. Lopez, a native of Spain, has been accused by GM of taking confidential Opel AG company documents and taking them to his new position at Volkswagen in 1992. General Motors has been seeking a settlement in this international case for many years. In 1996, Lopez resigned from his position at Volkswagen.


AUTOMAKERS TO STABILIZE SUVS Several automakers intend to add stability control systems in upcoming sport-utility vehicles, mostly in response to recent publicity about rollover crashes. From 1998 data, more than 60 percent of SUV fatalities involved rollovers. GM, Ford, and Toyota, among others, have plans to broadly introduce yaw-type stability control systems, which prevent the vehicle from skidding, over the next several years. Despite protests from automakers, the National Highway Traffic Safety Administration (NHTSA) has been readying plans to introduce a new rollover rating system for vehicles that would simply take into account the physical rollover likelihood and not any additional technology.


BMW, FORD INK LAND ROVER SALE BMW and Ford announced that they have signed an agreement for Ford's $2.7 billion purchase of Land Rover. Ford will receive full rights to the Land Rover name, the Solihull plant, the existing Land Rover dealer network, Land Rover's research and development facilities, and the British Motor Industry Heritage Center.


HONDA, ONSTAR GO ONLINE Honda has confirmed industry rumors by announcing its partnership with General Motors' OnStar mobile-communications subsidiary. OnStar will provide in-vehicle security and information services for Honda and Acura vehicles, beginning with the 2002 Acura RL, and will eventually provide satellite radio services with partner XM Satellite Radio. Honda will also assist OnStar and XM in jointly developing future telematics-related products.


FIAT-GM GOING SMOOTHLY; WORKERS CONCERNED Fiat announced that all the plans for their partnership with General Motors in Europe and South America would be in place by early July. The partnership, which will include consolidation of engine manufacturing and purchasing in the two markets, should bring savings of $1.2 billion per year after three years and $2 billion after five years.


NHTSA PROPOSES ROLLOVER RATINGS As anticipated, the National Highway Traffic Safety Agency (NHTSA) introduced a proposal for new rollover ratings for cars and light trucks. The new ratings would be simply based on a formula involving a vehicle's height to its center of gravity and distance between its wheels. These ratings, set to go into effect almost immediately with the 2001 model year, would be from one to five stars as with the other NHTSA ratings categories. A rating of one star would correspond to a 40 percent or greater likelihood of rollover in an accident, while a five-star rating would correspond to a likelihood of less than 10 percent. Automakers are fiercely protesting the proposed ratings system, calling it too simplistic because rollover likelihood is highly dependent on the driver and conditions. The Clinton administration spoke out in support of the new ratings.

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