Week of June 5, 2000

SALES DOWN FOR U.S. AUTOMAKERS
LAYOFFS HIT FLAT ROCK
SATURN CUTS WORKFORCE FOR THE FIRST TIME
CIVIC HYBRID
NISSAN INVESTS IN SOUTH AMERICA
TOYOTA TO BUILD CARS IN CHINA
DAEWOO FACES COURT COMPLICATIONS
CHARGED UP IN CALIFORNIA
INDUSTRY AGREES ON SIDE AIRBAG TESTS
WAGONER TAKES OVER AT GM
UNOCAL ROYALTIES: PAY AT THE PUMP

SALES DOWN FOR U.S. AUTOMAKERS Analysts estimate that overall sales fell about two percent in May, in the first decline since August 1998. Reasons are varied, but rising interest rates, weak product lines, and possibly rising gas prices are all possible causes for American brands being hit so hard. General Motors posted a 5.9 percent drop in sales, while DaimlerChrysler's Chrysler arm posted an 18 percent drop. Ford, aided by new product introductions, posted a 1.1 percent rise in sales, with strong import brands showing higher sales as well.

LAYOFFS HIT FLAT ROCK Ford and Mazda announced plans to lay off 945 workers at the joint-venture AutoAlliance International plant in Flat Rock, Michigan, due to slow sales of the Mercury Cougar. The plant, which currently employs 2834 workers, assembles Mercury Cougar and Mazda 626 models. Ford has said that it will place some of the workers in other plants.

SATURN CUTS WORKFORCE FOR THE FIRST TIME Saturn has announced that it will lay off 20 percent of its Wilmington, Delaware workforce. The Delaware plant, which currently has 2459 workers, has been operating at a small fraction of its capacity due to slow sales of Saturn LS models. The announcement marks GM's Saturn division's first layoffs ever.

CIVIC HYBRID Honda has revealed that a gasoline-electric hybrid engine system will be available on Civics starting next year. While the new hybrid won't be available in the North American market until 2002, the hybrid announcement follows Honda's announced intention to boost North American car and truck sales by 11.5 percent by 2004.

NISSAN INVESTS IN SOUTH AMERICA Nissan Motor Company plans to invest $300 million in expanding production to South American markets by 2005. Besides sharing existing Renault assembly plants in the Mercosur trade-partner countries (Argentina, Brazil, Uruguay, and Paraguay), the company will be able to share Renault's manufacturing, purchasing, and administrative costs. Nissan will first establish Frontier pickup production at a Renault plant in Parana, Brazil, that has been operating far below capacity.

TOYOTA TO BUILD CARS IN CHINA Toyota has announced that it will begin producing cars in a joint venture in Tianjin, China in 2002. The joint venture includes Tianjin Automobile Industrial as an equal in the $100 million investment. Up to 10,000 Yaris and Echo models would be produced in the first year, while Toyota hopes to eventually produce 30,000 per year.

DAEWOO FACES COURT COMPLICATIONS Automotive News reports that Daewoo's expansion into the United States has been complicated with several lawsuits. DaimlerChrysler is suing Daewoo for patent infringement, accusing the automaker that the grille on its upcoming Korando sport-utility vehicle too closely resembles that of a Jeep. Daewoo claims that the vehicle will be sold in the U.S. with a different grille. Otherwise, Daewoo is being hit with several cases of systematic racial discrimination by its dealers, and also claims of wage violations and unfair business practices by college student sales people. Daewoo insists that the students were independent contractors paid by commission only.

CHARGED UP IN CALIFORNIA Nearly two-thirds of California's voters support a so-called ZEV mandate which would require large manufacturers to provide new electric vehicles by 2003, according to a proponent-sponsored survey, says the Los Angeles Times. The poll showed increased support for such a mandate. The Alliance of Automobile Manufacturers opposes the mandate, saying that consumers will not be willing to pay the substantially higher price for electric vehicles. Also today, Toyota released a study that concludes that the mass market is not yet ready for electric vehicles as general use vehicles. Under the proposed mandate, Toyota does not believe that it could sell the 6400 vehicles per year required by the mandate, which would likely be RAV4-EVs.

INDUSTRY AGREES ON SIDE AIRBAG TESTS According to the Detroit News, the auto industry is introducing voluntary side airbag tests that would demonstrate that the safety devices are safe, especially for children. Although there have not yet been any deaths due to side airbags, the National Highway Traffic Safety Administration (NHTSA) has said that there have been 46 serious injuries. The new industry sponsored tests, presented by the Alliance of Automobile Manufacturers, are in response to a NHTSA request to standardize the testing of side airbags. The new tests specify various seating positions of young children to test for the potential for injuries. Safety groups believe that the government should regulate the tests rather than automakers.

WAGONER TAKES OVER AT GM Wednesday, G. Richard Wagoner took the position as General Motors CEO with a new company objective to be "bigger and faster." Wagoner, GM's youngest CEO ever, is expected to make many changes in the company early in his tenure. Wagoner is the latest in a younger generation of executives making their way to positions of power at GM.

UNOCAL ROYALTIES: PAY AT THE PUMP Legal costs will likely find their way to higher gas prices, due to a patent claim case over reformulated gasoline. Unocal claims that it is owed royalties for reformulated gasoline designed to meet California air pollution standards. The reformulated gasoline's use is now being expanded to other smog-prone areas nationwide, and it is estimated that about 20 percent of the 350 million gallons sold in the U.S. per day are affected by the claim. Unocal is expected to settle for a royalty of about one cent per gallon. The other petroleum companies affected would be expected to make payment for royalties dating back to Unocal's patent filed in 1994.