Week of July 3, 2000

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FORD WINS BIDDING WAR FOR DAEWOO
DC AND HYUNDAI FORM ALLIANCE
MICHELIN AND GOODYEAR JOIN FORCES
LEAR TO HELP MAKE GM VANS
BMW WILL EXPAND IN SOUTH CAROLINA
AUDI ISSUES RECALL
MESA PROVING GROUNDS TO CLOSE
HYUNDAI FLIP-FLOPS ON STRATEGY
NISSAN TO RESTRUCTURE FINANCIAL ARM
WISCONSIN LEGISLATORS TRY TO BLAME THE EPA
ENVIRONMENTALISTS CRITICIZE GORE PLAN

FORD WINS DAEWOO BIDDING WAR Ford Motor Company has been selected as the preferred bidder for Korea's Daewoo Motor Company. Although Ford’s initial bid was for $6.9 billion, the bidding price and conditions will likely change during negotiation. Daewoo negotiation officials have said that Ford’s bid far surpassed those made by GM-Fiat and DaimlerChrysler-Hyundai. Negotiations between Daewoo officials and a committee of creditors will take about six weeks, and should they fail, the opportunity will be offered to the next highest bidder.

DC AND HYUNDAI FORM ALLIANCE DaimlerChrysler and Hyundai are forming an alliance, for which DaimlerChrysler is paying $428 million for ten percent of Daewoo. The alliance provides for joint-venture collaborations on commercial vehicles between the two companies and co-development on passenger cars with Mitsubishi Motor Company. The two companies also announced that they will proceed to submit a joint bid for Korea's Daewoo Motor Company.

MICHELIN AND GOODYEAR JOIN FORCES Michelin and Goodyear announced a joint venture for run-flat tires. The venture will aim at establishing an industry standard for run-flat designs, which allows motorists to continue to drive safely on a flat for a limited distance. The two companies will share their established patents for run-flat technology, and the venture may not necessarily result in joint products.

LEAR TO HELP MAKE GM VANS Lear Corporation will benefit from a new joint-production plan with General Motors. According to Automotive News, Lear will complete assembly of up to 15,000 full-size GM vans per year in a Lear facility. GM will assemble the vans partially and then send them to Lear, where the vans will receive interior fittings and exterior trim. The new vans, which will be more expensive and more luxuriously fitted, will be shipped back to GM prior to distribution to dealers. The vans are costly, at about $10,000 more than a regular full-size van, but GM hopes to conquer some of the conversion van market.

BMW WILL EXPAND IN SOUTH CAROLINA BMW announced a $300 million investment to expand production of X5 sport-utility vehicles at the company's South Carolina facility, due to high demand. The expansion will likely include about 500 new jobs at the factory, called BMW Manufacturing Corporation.

AUDI ISSUES RECALL Audi has issued a voluntary recall of some Audi A6 quattro models in the U.S. and Canada for faulty fuel-gauge sending units. The sending units, which communicate to the fuel gauge and onboard computer the level of fuel remaining in the tank, have been shown to go bad due to some fuel additives. Shortly before the recall was issued, a class action lawsuit alleging malfunctioning fuel gauges was filed against Audi. The lawsuit alleges that Audi has known about the problem for 20 months and had failed to alert customers--until today. The recall affects more than 50,000 1998, 1999, and 2000-model-year vehicles.

MESA PROVING GROUNDS TO CLOSE The Detroit News reports that General Motors plans to close its Mesa, Arizona, Desert Proving Ground by the end of 2002. The automaker hopes to open an entirely new, $60-million site in Mezcala, Mexico, in 2002. The Mexico facility will give GM the opportunity to test vehicles at scorching temperatures in the winter months. Due to shorter vehicle development times, GM has had trouble planning the tests. The Mesa facility has been in operation since 1953.

HYUNDAI FLIP-FLOPS ON STRATEGY Korea's Hyundai Group has affirmed that automotive operations will take a center stage in the company. The move, which comes only a couple of days after an announced alliance with Daimler Chrysler AG, is in conflict with what the company has recently said. Just a few weeks ago, Hyundai said that it planned to spin off its automotive unit, Hyundai Motor, as a separate firm.

NISSAN TO RESTRUCTURE FINANCIAL ARM Nissan Motor Company will combine three of its finance units into one, in order to strengthen its consumer auto finance operations. The new organization, which will provide consumer services like credit cards and auto financing through dealerships in the U.S. and Asia, will combine Nissan Credit Corporation with Japanese financial affiliates. In Europe, Mexico, and South America, Nissan will rely on Renault's existing financing operations.

WISCONSIN LEGISLATORS TRY TO BLAME THE EPA Wisconsin legislators are suing the Environmental Protection Agency (EPA) over what they deem unreasonable price consequences of enactment of new clean fuel requirements in the Milwaukee area. Although the EPA estimated the price increase due to the new reformulated gas to be about 1.2 cents per gallon, prices have risen as much as 50 cents per gallon throughout parts of the Midwest. Experts say that oil refiners seem to be cashing in on what many have described as a situation in which demand far exceeds supply, and that prices will fall back to their previous level after a few months. The EPA and experts investigating the situation insist that the problem does not stem from the reformulated gasoline, but from a number of factors, including oil refiners' lack of preparation for the new requirements. The movement, started by Wisconsin Republicans, seeks a suspension of the new Clinton-backed rules, which are aimed at cleaning up smog problems.

ENVIRONMENTALISTS CRITICIZE GORE PLAN Vice President Al Gore's plan to support industry development of more fuel efficient cars through incentives is being attacked by environmental groups, who say that the incentives would allow automakers to convince lawmakers not to raise fuel-economy standards, says the Wall Street Journal. The Sierra Club and Friends of the Earth, and also presidential candidate Ralph Nader, have spoken out against the plan. Another plan announced by Gore earlier in the week, proposing tax credits for people who buy more fuel-efficient vehicles, has had a warmer reception from environmentalists thus far.