Week of December 13, 1999

December 13, 1999




GM GETS 20 PERCENT OF SUBARU General Motors Corp. will spend $1.4 billion to acquire a 20-percent stake in Fuji Heavy Industries, the Japanese manufacturer of Subaru automobiles. The long-rumored move is the latest in a series of steps GM, the world’s largest automaker, has taken to expand its presence in the promising markets of Asia. The acquisition gives GM access to Fuji technology, while offering the Japanese carmaker access to GM’s capital, marketing and technical resources. Fuji will create 164.5 million new shares of stock, making GM its largest single stockholder. In something of a surprise, the deal did not put a General Motors representative on the Fuji board. And, at least for now, the two companies have agreed to limit GM’s equity stake to a maximum 20 percent, to "allow us to maintain management independence," said Fuji President Takeshi Tanaka said during a news conference in Tokyo.

For more on GM and Subaru, click here



THE URGE TO MERGE As U.S. automakers scramble to gain share in the fast-growing Asian market, both General Motors and Ford are looking at taking over Korean manufacturer Daewoo Motor, which may end up on the auction block soon. Although GM signed a statement of intent to cooperate with Daewoo earlier this year, no agreement has been signed. And last week, Ford executives paid what they termed a friendly visit to Daewoo. GM says it will not sign an agreement with Daewoo until a restructuring plan is in place.



FEDS WANT TRUNK HANDLES BY 2001 New cars would be required to have release handles inside trunks by 2001 to prevent deaths from entrapment, under a proposal by federal regulators, Reuters reports. The National Highway Traffic Safety Administration plan would mandate trunk release mechanisms in new cars by Jan. 1, 2001, but allow automakers to choose what type of handle or device to use. Both General Motors and Ford have announced and have begun installing the handles in several mainstream sedans, including the new 2000 Ford Taurus. Since 1970, at least 1,250 people have been victims in more than 1,100 trunk entrapments, says a coalition pushing for the handles.




SAFETY IS TOP CONCERN WITH CONSUMERS Safety does sell, according to a recent study released by the Insurance Research Council. The council noted that nearly 80 percent of the respondents who purchased vehicles in the last three years rated vehicle safety as important to their purchase. Some 54 percent sought information about specific safety features, such as airbags and anti-lock brakes, while 23 percent checked on crash test data.




AUTOMAKERS AWAIT AIRBAG RULING Automakers are holding their breath as an airbag lawsuit against Honda is being studied by the U.S. Supreme Court. The case alleges that Honda was at fault for not installing airbags that could have prevented injuries, and charges that Honda is at fault for not using airbags at a time when automatic restraints were just beginning to be phased in by the federal government. At risk for the automakers: whether consumers can sue manufacturers under state laws for not installing airbags before the federal government made them mandatory. A ruling is due by the end of June.



CHRYSLERS CRASH BADLY AT NHTSA The midsize Dodge Intrepid, Chrysler LHS, Concorde and 300M models received low ratings in crash tests conducted by the Insurance Institute of Highway Safety. In a test group that also ranked other midsize sedans as "good" (including the 1997-2000 Buick Park Avenue, 2000 Cadillac Seville, 2000 Buick LeSabre, 2000 Pontiac Bonneville, 2000 Chevrolet Impala, and 1999-2000 Lexus GS sedans), the Chrysler sedans were rated as "poor." The LHS in particular was singled out by NHTSA because during its test, its airbag deployed too late to prevent the dummy from hitting its head on the steering wheel. A DaimlerChrysler spokesperson said that it had not seen any airbag problems in its own testing and that it did not consider the test to be a "real-world simulation."


ONLINE BUYING NOT ALWAYS A BARGAIN A controversial two-year study of 1.1 million Internet users who purchased cars says that the assumption that the Internet offers the lowest price is not always true. The study by CNW Marketing shows that consumers who do all their research online, but actually negotiate with a dealer, will save about 3.5 percent, while consumers who use an Internet service to buy will pay 6.5 percent more. J.D. Power, a leading consumer research company, disputed the study’s findings, saying that its research shows that customers using online buying sites paid about 6 percent over cost, versus 7.5 percent over cost for consumers who did not use these sites.



FORD WANTS TEXAS RULE OVERTURNED Ford has asked a federal judge to reverse a Texas state regulatory decision so that it can restart an Internet site that sells off-lease vehicles in the Houston area. Texas state lawmakers approved a bill this spring that made it illegal for manufacturers to own dealerships; the Texas part of the Ford site, www.fordpreowned.com, was shut down because against the state’s law, it enabled customers to shop for vehicles that had recently come off lease at prices set by Ford. Ford says that the site does not violate the Texas law because the vehicles are sold through Houston-area dealers once a purchase price has been reached with the customer.



GM SHARE HIT HISTORIC LOW IN NOVEMBER GM’s market share dropped in November to a historic low of 27.1 percent, and in the wake of that news, the company says it may raise incentives and offer special discounts to boost its share. Ron Zarrella, president of GM’s North American operations, said that GM would likely raise its incentives on new models in several key market segments: "Right now, we’re getting beat up in small cars in terms of market share. That’s the single biggest factor that’s hurting our market share right now. We need an answer there. And we need to keep fighting on mid-size utilities and not lose any more share," he said. Zarrella did not comment on when the rise might happen, but analysts predict a year-end sale with an emphasis on 1999 models. General Motors is also expected to offer cash rebates to its employees and dealer employees of $500 and $1000, on a range of 1999 and 2000 models, to clear excess inventory. At the end of November the manufacturer had an 89-day surplus of vehicles, while Ford carried just a 66-day supply.



GM REVAMPS TRUCK PLANT General Motor’s Shreveport, Louisiana assembly plant will get a $700 million facelift next year. Company officials announced last week that new general assembly areas and a new body shop will be constructed, while the midsize truck plant’s paint operations will be revamped. The majority of the construction will be adjacent to the existing facility, which currently builds Chevy S-10 and GMC Sonoma trucks. The facelift may enable GM to build lifestyle variants of the compact trucks in the near future.



FORD SAYS GLOBAL WARMING IS REAL Citing it as an impediment to pursuing its environmental initiatives, Ford ended its relationship with the Global Climate Coalition, a group that believes there is insufficient evidence to confirm global warming. "We do believe there is something to climate change," said Ford spokesperson Terry Bresnihan. "There is enough evidence that something is happening that we ought to start looking at this seriously." The Coalition counts General Motors and DaimlerChrysler among the 40-plus corporations in its membership.




CHILD TRAUMA POSSIBLE AFTER ACCIDENTS A study conducted by the Children’s Hospital of Philadelphia concludes that children are at risk for Post-Traumatic Stress Disorder (PTSD) after even minor traffic crashes. Researchers said 25 percent of the children studied had PTSD seven to 12 months after the accident, but only 46 percent of the parents sought any type of help for their children. The study also showed that PTSD affected 15 percent of the parents, but just 20 percent sought help for themselves.



CHRYSLER MINIVAN RULING UPHELD A federal judge upheld a $259 million verdict against DaimlerChrysler AG that found the company had produced Chrysler minivans with a defective rear latch. The suit, filed by a couple whose son was killed in a 1994 collision when the rear liftgate opened and he was thrown from the vehicle, resulted in a $259 million verdict against DaimlerChrysler. According to NHSTA records, at least 37 passengers were killed in accidents when they were ejected from the vehicles after the rear liftgates opened on several Dodge, Chrysler and Plymouth minivan models sold from 1984 through 1995. A litigation spokesperson for the manufacturer says it plans an "aggressive appeal" on the suit. DaimlerChrysler has issued a public recall of the vans and is installing a sturdier latch to correct complaints.



RUB-A-DUB-DUB (VEE-DUB?) How of ten do you wash your car? A recent survey conducted by USA Today showed that 72 percent of car owners wash their vehicles at least once a month, with the majority (45.7 percent) doing the job at home, by hand. Only a handful (7 percent men, 3.2 percent women) said they washed their vehicles more than once a week on average.

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