Weekly News: Dec. 25, 2000

December 25, 2000


FIRESTONE RELEASES FINDINGS Bridgestone Firestone has released the findings of its investigation into tread-separation problems affecting recalled Firestone tires. The company reported that causes included "manufacturing factors relating to Firestone's Decatur, Illinois, plant." Firestone also attributed the problems to a design flaw, weak adhesives bonding the belt layers, and low inflation pressure combined with high vehicle load levels. The tiremaker once again emphasized that it had opposed Ford's pressure rating of 26 psi for the tire when used on the Explorer. Firestone released the findings based on about 2500 tires inspected in the course of the four-month investigation. Firestone otherwise introduced a new quality control effort to help restore consumer confidence in its products. The effort includes a new quality subcommittee, monitoring of public data from the National Highway Traffic Safety Administration (NHTSA), and tracking information from its other global affiliates.

BRIDGESTONE CEO STILL BLAMES EXPLORER Bridgestone CEO Yoichiro Kaizaki has said again that the Ford Explorer's design contributed to the 148 fatalities associated with tread separation on recalled Firestone tires. Firestone said that although the tires weren't downright defective, the Explorer's design, along with low tire pressure and high vehicle weight for the tires, all contributed to the problems. Kaizaki earlier in the week confirmed that top Bridgestone executives in Japan will take a 30 percent pay cut for the lost earnings due to the recall, and that the recall and legal expenses are now expected to total about $750 million. Ford continues to deny that the accidents have anything to do with the Explorer.

TOYOTA ADMITS TALKS WITH FORD Toyota has admitted holding talks with Ford regarding the formation of a technical partnership or alliance to cut costs, although the Japanese automaker says that there are no plans for any equity deal. Earlier in the week, Toyota president Fujio Cho had denied negotiations with Ford. Some industry analysts think of the Ford/Toyota pair as practical but odd, as Toyota has had a long-term relationship with General Motors, including a joint-venture assembly plant in Fremont, California. Reports from Ford sources allege that the negotiations would involve Toyota supplying Mazda with minicars for Asian markets, and also sharing resources for the European small-car market, while yet other analysts suspect that environmental technology, which consumes research and development resources, may be the first area of cooperation between the two auto giants.

PRODUCTION CUT; MORE PLANTS IDLED Ford Motor Company has reduced its estimated 2001 first-quarter production for North America. The revised plan, which calls for 1.050 million vehicles, is down 17 percent from first-quarter 2000 and down nine percent from Ford's previous production plan. General Motors also will cut its production for the first quarter to 1.301 million vehicles, down 14.5 percent from the first quarter of this year. GM and DaimlerChrysler already plan to idle several assembly plants for the first week of January.

U.K. UNION LEADERS ASK FOR UAW SUPPORT Leaders of the U.K.'s Transport and General Workers Union are planning to fly to Detroit to speak with GM executives and gather support from the United Auto Workers, in an attempt to reverse GM's recent decision to close its Luton, England, Vauxhall assembly plant. Closure of the plant will lead to the loss of about 2000 jobs. Following the announcement last week, workers at the plant staged a walkout protest.

DC WARNS ABOUT LOSSES DaimlerChrysler AG has warned its shareholders that the company will post a fourth-quarter loss of about $1.2 billion, and that the losses could continue into 2001. Chief executive Juergen Schrempp and chief financial officer Manfred Gentz blamed tough competition and expensive product launches as contributing factors for the losses. They anticipated 2001 to be an even more challenging year for the company, considering the general decline of the industry. Some analysts suspected that new U.S. chief Dieter Zetsche was pessimistically estimating Chrysler figures to leave room for improvement on his account.

GM WILL CUT NUMBER OF MODELS General Motors has announced that it will reduce its overall vehicle lineup by as much as 20 percent by 2004. The announcement follows last week's announced cost-cutting moves that include phasing out the Oldsmobile brand, shutting down a U.K. assembly plant, and trimming the company's global workforce by about four percent. GM currently has about 80 vehicles in its lineup.

FORD REPORTS MASSIVE LOSSES IN EUROPE Ford Motor Company admits that it will continue to lose money on its European operations, and may soon consider additional cuts to minimize losses. In the third quarter, Ford lost $221 million in its European operations, and it could lose nearly a billion dollars for the whole year. Ford still plans to close assembly operations at its Dagenham, England, plant, due to the competitive European market and losses in trading against the euro.

FORD MORE CAUTIOUS WITH EXPLORER INTRO According to an Automotive News report, Ford Motor Company is keeping early build 2002 Ford Explorers at the Louisville, Kentucky, factory until early February so that initial product recalls can be minimized. The automaker has this year suffered from an unprecedented number of recalls, including five recalls on its new Escape compact SUV. Dealers have complained to Ford, and the company is worrying that further recalls will leave consumers wary about quality.

FREIGHTLINER AVERTS STRIKE United Auto Workers members at a Freightliner assembly plant in North Carolina have approved a new three-year labor agreement. Freightliner is a DaimlerChrysler subsidiary and manufacturer of heavy trucks based in Portland, Oregon. Workers were on the verge of a strike over issues about worker safety and improved pay rates. The plant employs about 2350 workers.

GM AND DC UP INCENTIVES General Motors and DaimlerChrysler have both announced increased incentives on models to try to move stagnant dealer inventories. General Motors tried to pump some last life from the now-dying Oldsmobile division with $4000 incentives on Intrigue and Alero models and $5000 incentives on Bravadas and Silhouettes. Fellow GM division Buick will offer a $500 incentive on Park Avenue models. Meanwhile, DaimlerChrysler is adding incentives as high as $1000 on its new minivans and $1500 on Jeep Grand Cherokee SUVs. The automaker is reported to have a 135-day supply on lots, while 60 to 65 days is considered ideal.

FINALISTS OF THE YEAR Finalists have been announced for the 2001 North American Car of the Year and Truck of the Year Awards. The finalists for Car of the Year, in alphabetical order, are the Chrysler PT Cruiser, Honda Insight, and Toyota Prius, while the finalists for the Truck of the Year are the Acura MD-X, Ford Escape, and Toyota Sequoia. The winner in each category will be announced on January 8.

VISTEON BUYS LTD PARTS Visteon Corporation has acquired Tennessee-based starter and alternator manufacturer LTD Parts. LTD will allow Visteon increased capacity to supply the aftermarket and additional OEM orders, including those to Ford Motor Company, Visteon's former owner.

VW GETS SUPER BOWL CONTRACT According to USA Today, Volkswagen of America has secured the exclusive rights to be the auto advertiser during Super Bowl XXXV, set for January 28, 2001. The rights, estimated to cost about $10 million, will give VW several 30-second ads, probably including one for the new Wolfsburg edition Jetta. Pontiac will sponsor the postgame show.

HONDA EXPECTS BETTER SALES IN 2001 While other automakers are anticipating sagging sales in 2001, Honda expects to squeeze out a 3.4-percent increase in sales, to 1.2 million vehicles sold in the U.S. Honda attributes increased demand for several new models to be introduced next year.

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