Weekly News: January 8, 2001

January 8, 2001

FOUR MORE YEARS FOR CHRYSLER RECOVERY DaimlerChrysler CEO Juergen Schrempp said that the restructuring of U.S. Chrysler operations will take two to four years, and that the company has absolutely no plans to sell Chrysler. In November, DC appointed new German management for the division, with Dieter Zetsche and Wolfgang Bernhard replacing James Holden. Zetsche's first cost-cutting move has been to demand a five-percent reduction in cost from suppliers.

DAEWOO OPERATIONS THREATENED AGAIN Normal operations of Daewoo Motor Sales, the retail arm of Daewoo Motor Co., are once again threatened, this time because the company is having trouble with its debt payment schedule, according to the Detroit News. Creditors have rejected requests for an extension on several debt obligations. Daewoo owes more than $420 million to creditors.

VISTEON/MAGNETI MARELLI DEAL OFF Visteon has broken off negotiations to buy Italian supplier Magneti Marelli from Fiat, reports Automotive News. Negotiations ended mainly due to a failure to agree on a price, according to sources. Fiat instead plans to sell off portions of Magneti Marelli and possibly keep small portions of the company.

MITSUBISHI EXECS INVESTIGATED Japanese police are investigating Mitsubishi executives in the company's scandalous cover-up of reported defects for more than twenty years. According to reports, many current and former executives are being investigated for involvement, and criminal charges may soon be filed. Since the scandal broke in July, Mitsubishi was forced to recall more than 600,000 vehicles.

FIRESTONE RECALLS 8000 MORE TIRES Bridgestone Firestone has announced a recall of 8000 Firestone tires for human-error defects. The tires were made in a plant in Cuernavaca, Mexico and installed on some model-year 2000 GMC Yukon XL and Chevrolet Suburban vehicles made in Silao, Mexico. Although only about 150 tires have the flaw, Bridgestone is recalling a larger lot to ensure that all are taken out of service. GM is recalling about 4700 potentially affected Yukons and Suburbans.

FORD EXTENDS WARRANTY COVERAGE TO TIRES Ford Motor Company has announced that it is now covering tires under its own warranty starting January 1, 2001. The tire warranty covers 2001 model year and later Ford, Lincoln, and Mercury vehicles sold in North America. Previously, tiremakers provided a warranty for the tires, which were not covered by Ford's warranty. With tires in the spotlight recently due to the huge Firestone recall of last August, Ford has decided to join rival General Motors in offering its own warranty on tires. GM has covered tires for several years.

ANOTHER SHAREHOLDER SUIT AGAINST DC Yet another class-action lawsuit has been waged against DaimlerChrysler, accusing the company of misleading Chrysler shareholders. Mark McNair, a Washington, D.C.-based attorney, is organizing a case on the behalf of lesser shareholders. Other larger shareholders, such as billionaire Kirk Kerkorian, have already launched their own suits against the company in recent weeks.

INDUSTRY SLUMP WILL BENEFIT SMALL CARS The recent downturn in overall auto sales will likely benefit lower-priced cars and small cars, according to a USA Today report. Sales data has shown these market segments to be the most stable, despite the slow weakening of the small-car segment over recent years. Small-car sales in November rose 6.9 percent, while sales of mid-size SUVs fell 14.5 percent. Mid-size, mainstream vehicles are often the most affected by economic downturns, while smaller cars and luxury vehicles are not as affected.

BUSH APPOINTS MINETA Current Secretary of Commerce Norman Mineta has been appointed by President-elect George W. Bush to be the new administration's Transportation Secretary. For more information on what Mineta's tenure as Transportation Secretary will likely bring, click here.

BIG THREE SALES FALL DaimlerChrysler, Ford Motor Company, and General Motors all reported December sales down. GM's car sales slipped 20 percent in December, versus December 1999, while car sales fell 15 percent. Analysts are calling the domestic slump an "industry moderation." Overall Chrysler Group sales were down 15 percent, and Ford's overall vehicle sales were down 14 percent versus a year ago. Several import brands, including Toyota, Honda, and Volkswagen, reported gains in December.

DC WILL MAKE TRUCKS WITH HYUNDAI DaimlerChrysler AG is expected to sign an agreement to jointly make trucks for the Asian market with Hyundai. According to an Associated Press report, the joint venture will make about 120,000 commercial vehicles per year, beginning in 2002. An announcement concerning the deal is expected soon.

DAEWOO UNIONS THREATEN STRIKE Korean labor unions have threatened a new strike against Daewoo Motor Company in opposition to proposed layoffs. Daewoo is under court receivership after going bankrupt. Creditors and appointed management are pushing for the layoff of about 6800 of the company's total 18,000 employees. Any walkouts may affect whether or not the automaker survives, both sides had pointed out.

MORE IDLE TIME DaimlerChrysler has announced that it will continue to idle several of its North American plants to try to cut vehicle inventories. Five of the company's 12 Chrysler operation plants will be idled during parts of January, cutting production by about 50,000 vehicles. A total of about 30,000 workers will be affected. General Motors has also announced that it will idle eight North American plants next week in order to control excessive vehicle inventories. About 20,000 employees will be affected by the shutdowns. GM has 29 assembly plants in North America. Earlier this week, GM revealed that December sales of American-brand vehicles had fallen by 18.1 percent versus a year earlier.

JAG WILL MAKE F-TYPE Ford Motor Company's Wolfgang Reitzle, head of the company's Premier Automotive Group, has announced that Jaguar will build the F-type sports car for the 2004 model year, according to Automotive News. The F-Type was originally shown as a concept at last year's Detroit show. Jaguar hopes to sell 30,000 F-types per year.

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