Week of September 18, 2000

September 18, 2000





GM UPS STAKE IN SUZUKI General Motors will double its stake in Japan's Suzuki Motor Corporation for $653 million. The increased stake will give GM a seat on Suzuki's board of directors. GM likely is interested in a larger stake in Suzuki because of the Japanese automaker's strong entrance into Asian-Pacific markets.

For more on the GM-Suzuki deal, click here.


COVISINT GETS APPROVAL The online, manufacturer-based purchasing and procurement exchange known as Covisint was approved by regulators on Monday. The proposed exchange, formed by General Motors, Ford, and DaimlerChrysler, has been under review by the Federal Trade Commission since this spring. One of the main issues that the FTC wanted to be assured of prior to approval was that information about prices or costs of deals with rival car companies would not be shared. After formation of the exchange earlier this year, manufacturers Renault SA, Nissan, and Toyota, and suppliers Delphi, Lear, and Dana, among others, announced intentions to join Covisint.

For more information on Covisint and why its approval was delayed, click here.


NHTSA TO GET EXPANDED POWER Congress will likely soon pass a proposed bill that will extend the powers of the National Highway Traffic Safety Administration (NHTSA) and require automakers and tire companies to share defect data. A new bill introduced to the House by Fred Upton of Michigan will get fast-track treatment, while a similar Senate bill may be approved as soon as the middle of next week. The House bill would effectively raise the maximum fine that the NHTSA could levy, extend the number of years back that recalls can affect, and require that the NHTSA reconsider and rewrite the basic tire safety standards on the books. Another proposal includes giving the Transportation Department full access to the same defect data.


FORD IDLE TIME HURTING PROFITS, SUPPLIERS Since August 28, the 6000 combined workers of three plants in New Jersey, Minnesota, and Missouri have been idle, in an effort to free up replacement tires for the 6.5-million-tire Firestone recall. The idle time has so far freed up about 100,000 tires for replacement. Ford and suppliers have lost millions due to the decision, and Ford says that it likely will not make up production output for its best-selling Explorer SUV. Ford Ranger and Mazda B-Series compact pickups are also assembled at the plants. Major suppliers to Ford will also see lower-than-expected earnings due to the Ford shutdown. Analysts figure the production losses from the shutdown to be about 2.3 percent of Ford's total third-quarter output and predict that the losses will reduce Ford earnings by about three cents per share.


COMMITTEE THREATENS SUBPOENA FOR TIRE DATA According to the Detroit News, the Congressional committee investigating last month's Firestone tire recall is considering using subpoena power if Ford Motor Company and Bridgestone Firestone do not soon provide requested documents regarding the tested safety of the recalled Firestone tires at Ford's originally suggested pressure of 26 psi. Internal Ford documents suggest that the automaker was concerned that the lower pressure suggested may have been contributing to higher instances of tread separation.


CONSUMER CONFIDENCE IN FORD AND FIRESTONE LOW A new USA Today poll shows that the aftermath of last month's Firestone tire recall has significantly affected the public opinion of both Firestone and Ford. The survey of nearly 1200 consumers found that 77 percent were less likely to buy Firestone tires due to the recall. Of the 475 consumers who said they would have previously purchased a Ford Explorer, 44 percent said that they would be less likely to purchase one now. Of those surveyed, 78 percent said that they have followed media coverage of the Firestone case closely.


NYT: FORD KNEW ABOUT IGNITION FAULT The New York Times reports that Ford Motor Company was aware of an ignition-system fault in many of its cars while it continued to tell the government that it wasn't aware of such a problem. The problem deals with a part called the thick film ignition (TFI) module, which Ford continued to put in many of its cars through 1995. About 22 million cars built since 1983 have the component. An analysis prepared for an injury suit against Ford has shown that the stalling problem that the defective TFI module can cause, raises the chance of fatal accidents by as much as nine percent. Internal memos from Ford attest that the condition can lead to vehicles stalling while in motion. The report claims that while Ford was investigating problems with the ignition module failing in hot conditions in the mid 1980s, Ford was telling the NHTSA that nothing was wrong. It would cost Ford an estimated $429 million to recall and fix the cars.


MITSUBISHI MANAGEMENT SHAKEUP Mitsubishi Motors Friday announced major changes to its upper management, in a move to save a reputation scarred by a recently confessed model-defects cover-up. Takashi Sonobe, formerly of Mitsubishi's U.S. operations, will replace Katsuhiko Kawasoe as president, and Rolf Eckrodt of DaimlerChrysler AG will be Mitsubishi's new COO. The recent recall scandal and shakeup also contributed toward DC getting a ten-percent lower sale price for Mitsubishi rather than a higher share percentage as speculated, and the German company will be able to raise its stake after three years.


GM AIRBAG RECALL General Motors has announced a recall of about 270,000 Buick and Oldsmobile cars for a problem with unexpected deployment of the driver-side airbags, although the actual recall effort will not begin until late in the year. The recall affects about 103,000 1995 Buick Regals and 187,000 1995 and 1996 Oldsmobile Cutlass Supremes. GM is delaying the effort due to a shortage of replacement parts necessary to fix the cars. The automaker is aware of 115 incidents of accidental airbag deployment on the vehicles.


BMW ANNOUNCES SMALL SUV BMW AG has announced that it intends to build a smaller sport-utility vehicle called the X3. The vehicle, which may be built alongside the X5 in Spartanburg, South Carolina, will likely be launched in 2003. BMW announced a $300-million plant expansion plan for the facility in June.


FORD RECALLS ESCAPE AGAIN Ford Motor Company has recalled 1582 Ford Escapes for potentially defective wheel hubs. The models affected are only those without four-wheel drive or antilock brakes. This is already the third recall for the Escape, which went on sale earlier this summer. Ford also announced a recall of about 22,000 2001 Ford Crown Victoria, Mercury Grand Marquis, Lincoln Town Car, and Ford Windstar models for an airbag flaw.


TROOPER FARES POORLY IN BUMPER TEST In the latest low-speed crash tests from the Insurance Institute for Highway Safety (IIHS), several sport-utility vehicles proved particularly poor, with excessive bumper and body damage. Of the vehicles tested, the BMW X5, Isuzu Trooper, Isuzu Rodeo, Mitsubishi Montero, and Nissan Xterra, the Isuzu Trooper performed the worst, with more than $2700 of damage, while the BMW X5 only had $547 of damage. The tests include crashes into a variety of barriers, all at five miles per hour.


GM CANCELS NEW PROVING-GROUNDS PLAN General Motors has cancelled plans for construction of a new, hot-weather testing facility near Mezcala, Mexico, due to troubles in negotiating for the land. GM had earlier this summer decided to close its existing Mesa, Arizona, hot-weather proving ground by late 2002 and replace it with the Mexico facility. The automaker claims that Arizona is not hot enough in the winter for year-round testing. GM will likely retain its plans to close the Arizona facility and seek another hot weather location.

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