Headlight News Weekly for Dec. 4, 2000

December 4, 2000

DC:NO BIG CUTS, YET Top DaimlerChrysler officials have said that, although there won't be any job cuts announced in the company in the next few days, the company is looking for redundancies between its U.S. Chrysler operations and home operations in Germany, according to a Reuters report. Chief executive Jeurgen Schrempp also once again denied rumors that the company may be considering the option of selling Chrysler. New Chrysler chief Dieter Zetsche is currently devising a Chrysler restructuring plan to return Chrysler to profit, although worker morale in Auburn Hills is reportedly at a record low. Any significant changes to Chrysler's operations would require negotiation with the United Auto Workers. The current 1999 agreement runs through 2003.
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UAW REFUSES RENEGOTIATION The United Auto Workers union has said that it will not reopen its current four-year DaimlerChrysler contract to renegotiation. The current contract reportedly makes permanent layoffs difficult for the company. Last week, DaimlerChrysler was rumored to be seeking renegotiation with the union. UAW officials are currently already at odds with DaimlerChrysler over their failure to use more unionized suppliers as promised and their resistance to union recruitment at the Alabama Mercedes-Benz plant. The current contract, which was signed in 1999, won't expire until September 14, 2003.
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KERKORIAN SUES DC FOR MERGER LIES Investor Kirk Kerkorian has waged a lawsuit against DaimlerChrysler, alleging that chairman Jeurgen Schrempp openly lied to Chrysler shareholders about the specifics of the 1998 "merger." Kerkorian, represented through his investment company, Tracinda Corporation, says that he would have never voted for the takeover if company officials had not blatantly lied to shareholders and the public. Kerkorian seeks $2 billion in actual damages, mostly due to the lost share value, and at least $6 billion in punitive damages. In 1995, Kerkorian had placed a failed bid to buy the automaker for $23 billion.
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DEUTSCHE BANK STANDS BEHIND SCHREMPP DaimlerChrysler's biggest shareholder, Deutsche Bank, has issued a statement in defense of current chief executive Jeurgen Schrempp. The bank released a statement saying that it remains solidly behind current DaimlerChrysler AG management. Earlier this week, billionare Kirk Kerkorian announced an $8 billion lawsuit waged by his investment company, Tracinda Corporation, alleging that the company lied to its shareholders, and he would have never voted for the 1998 merger if the original plan called for Chrysler to be delegated as a division rather than an equal. Tracinda owns four percent of DaimlerChrysler stock, while Deutsche Bank owns twelve percent, and the Kuwait Investment Authority owns 7.4 percent.
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DC LAWSUIT LANDSLIDE ENSUES Following billionaire Kirk Kerkorian's $8 billion lawsuit waged against DaimlerChrysler AG earlier this week, a class action lawsuit has been launched by law firm Milberg Weiss (www.milberg.com) in a Delaware court, for violations of federal securities laws. The lawsuit, on behalf of all shareholders at the time of the merger, seeks damages on the basis of various "untrue statements" to shareholders, with management misleading them to believe that it was a "merger of equals." Also, law firm Wolf Haldenstein Alder Freeman filed a suit seeking class-action status against the company, and at least two other New York firms representing investors followed suit.
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ACTIVIST PETITIONS TO FIRE SCHREMPP Ekkehard Wenger, a German shareholder activist, plans to petition for the firing of DaimlerChrysler chairman and chief executive Jeurgen Schrempp and the sale of Chrysler operations. Wenger said that he will also petition to remove supervisory board chairman Hilmar Kopper. Wenger accuses the company of mismanagement of Chrysler operations as the cause of massive company losses. DaimlerChrysler posted a $512 million loss in the third quarter of this year. In a separate announcement, DaimlerChrysler board member Eckhard Cordes backed the company's decision to "merge" with Chrysler, admitting that there have been a few more problems than the company originally anticipated, but compared the troubles with Chrysler to the troubles of bringing up children.
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DAEWOO UNION CONCEDES, CREDITORS GIVE IN Daewoo Motor Co.'s labor union has finally agreed to a deal with management that would concede to allowing some layoffs in company restructuring. Most of the Korean automaker's operations are currently shut down while the company waits to see if pending court receivership is granted. The receivership would automatically freeze existing debts and appoint new management. Later in the week though, Daewoo’s creditors, in a change of heart, decided to grant the automaker new funds. Approximately $600 million has been offered to the automaker, with about half of the money available immediately and the other half to be granted after the company shows progress in restructuring. The company will, in turn, sell off some of its insolvent bonds. Daewoo has not yet announced when normal company operations will resume.
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FERRARI TACKLES REPLICA MAKER Ferrari has waged a lawsuit against a Portland, Oregon, body shop, claiming that the shop is building illegal fakes of the F355 GTS. The body shop claims that it has only performed paint-work and doesn't make the cars, suspected to be assembled from kits. The completed kit cars sell for a small fraction of what a real Ferrari would cost, and anyone familiar with Ferraris would be able to tell the difference, but the automaker is most heated by the use of Ferrari logos, including the "prancing horse," without permission. Ferrari isn't the only one taking action against the kit-car business: In the last year, Shelby American has also filed a suit for financial damages against a replica maker.
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MEXICO LEGALIZES CHOCOLATES Last week, Mexico's Senate passed legislation that will allow U.S. cars illegally brought into Mexico before October 31 of this year to be legally registered in Mexico. The law will allow the registration, provided the cars were originally manufactured between 1970 and 1993. Approximately 1.5 million unregistered, illegally imported cars are estimated to be on Mexico's roads, and recently the auto industry in Mexico has spoken out, saying that the country's policies on these cars, called "chocolates," need to be tightened.>
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ESCAPE RECALL, NUMBER FIVE Ford has issued yet another recall for its Escape sport-utility vehicles, this time for potentially defective windshield-wiper ball sockets. Defective sockets could cause the wipers to stop working. This latest recall, the fifth recall so far for the Escape, affects all 51,022 Ford Escapes and about 24,000 Mazda Tributes already built, of which 27,516 Escapes and about 12,500 Tributes have already been sold. Ford expects about six percent of the vehicles to have the defective wiper ball joint.
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VISTEON INTERESTED IN MAGNETI MARELLI Automotive News Europe has reported that Visteon Corporation is seeking to buy Italian supplier Magneti Marelli from Fiat. Fiat is reportedly considering several other offers for the supplier. Magneti Marelli makes fuel-system and electronic components and is suspected to be worth nearly $2.5 billion. Japan's Denso has been negotiating separately for the company's air conditioning business. In May of this year, Fiat made a move to acquire the remaining 30 percent of Magneti Marelli that it did not already own.
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STATE FARM TO CHANGE RATE SYSTEM Insurance giant State Farm says that it will introduce a new system that will more accurately represent its injury data, giving bigger rate breaks to drivers of larger luxury cars, vans, and sport-utility vehicles, based on the idea that those vehicles are safer. The rate breaks will be no more than $50 per year. Consumer-safety groups said that the new rate system is unfair to drivers of smaller cars, and it will encourage people to drive cumbersome tanks that cause more injuries to people in other cars.
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SATURN NAMES SUV VUE Saturn has announced that it will call its new sport-utility vehicle Vue, pronounced like "view." Saturn officials said that they purposely picked an ambiguous, nonspecific (and perhaps uninspiring?) name so that the SUV’s versatility and flexibility wouldn’t be undercut, and the name ‘Vue’ fared well in focus groups. The compact, plastic-paneled Vue will offer two engine choices: a 138-hp four cylinder or a 181-hp V-6 engine. Side curtain airbags will be standard. The SUV, first introduced to the public in October at the South Florida International Auto Show in Miami, is still more than a year away from reaching dealerships.
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U.S. SALES DIVE IN NOVEMBER November U.S. auto sales are expected to be at the lowest level in 19 months, according to preliminary estimates. The November figures are expected to show a four to seven percent drop in the seasonally adjusted annual rate, to less than 16.5 million. Analysts blame market saturation and cutbacks in production, especially for profitable sport-utility vehicles.
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FIRESTONE TIRES SET ASIDE AS EVIDENCE Attorneys representing people filing lawsuits against Bridgestone Firestone have reportedly struck a deal with the tiremaker to set aside more than 20,000 recalled and returned tires as evidence in their cases. About 160 separate cases against Bridgestone Firestone have been consolidated to an Indianapolis federal court, and several of the lawsuits allege that the recall should have included more tires than the 6.5 million recalled in August.
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DC RECALLS MINIVANS DaimlerChrysler has recalled 769,000 1993 and 1994 model year Dodge Caravan, Plymouth Voyager, and Chrysler Town and Country minivans for a potential problem with loose steering wheels. A metal piece that attaches the steering wheel to the steering column can weaken and break, although the company has no reports yet of any injuries due to the problem.
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