Weekly News: Jan. 15, 2001

January 8, 2001

DETROIT SHOW REELS UP Excitement built last week at the press preview of the Detroit auto show, as automakers introduced concept, prototype, and production models to the press, as well as upcoming technologies. For an index of TCC daily show reports, click here.

DOMESTIC AUTOMAKERS CUT PRODUCTION DaimlerChrysler AG has announced that it will cut the Chrysler unit's scheduled first-quarter production by more than 25 percent, to 678,700 vehicles, down from 916,000 vehicles in the first quarter of 2000. Earlier this month, General Motors and Ford Motor Company made announcements that they were also planning to idle plants and reduce output in the first quarter. General Motors has also once again cut its first-quarter production forecast, now by 21 percent. GM has a 98-day supply, on average, for vehicles in its inventory. The industry standard is for 60 to 65 days. The production reduction will likely lead to more plants being idled. The company announced several weeklong plant shutdowns already for this month.

INDUSTRY SLOWDOWN REACHING SUPPLIERS About 1150 workers at a New Process Gear plant face a one-week layoff due to idled DaimlerChrysler assembly plants. The company makes transfer cases for Dodge, Jeep, and GM truck models. Also, Troy, Michigan-based Delphi announced that it is temporarily laying off more than 1100 workers at various parts plants due to idled assembly plants and lagging sales.

DC AXES CHEROKEE DaimlerChrysler has decided to stop producing the Jeep Cherokee, according to a Wall Street Journal report. Last year, the company planned to continue building the vehicle for several years after the introduction of its replacement, the Liberty (later this year), but weakened sales due to the condition of the car market has forced a change of heart.

NADA AND COBALT EXPAND PARTNERSHIP The National Automotive Dealers Association and The Cobalt Group have announced a partnership that will allow dealers to better integrate the Internet in business strategies. Cobalt provides e-business services to automotive dealers for online sales and services. This latest agreement is an expansion of an original partnership formed in January 2000.

ACCORD ON TOP IN ROLLOVER RATINGS Transportation secretary Rodney Slater and the National Highway Traffic Safety Administration have announced rollover ratings for all model year 2001 vehicles. The ratings are based on the government's new static rollover test. The test rates the likelihood of a rollover through a calculation involving the vehicle's center of gravity and track. From that, ratings of one to five stars are given. The worst ratings were given to the Chevrolet Blazer and GMC Jimmy/Envoy SUVs (one star), while the best rating was given to the Honda Accord, the only model to get five stars.

HYBRIDS FOR THE MASSES At the Detroit auto show, General Motors announced a plan to offer a full line of hybrid gasoline electric vehicles, with a new hybrid system called ParadiGM. The system, still under development will mate engines (either four or six cylinder) with two electric motors, a clutch and a battery pack. GM vice chairman Harry Pearce said that the automaker wants to use hybrid technology on high volume cars, not on specialized small models. The hybrid technology, scheduled to be offered in 2004, will improve fuel economy by about 20 percent.

AZTEK GOES BACK TO DRAWING BOARD General Motors has decided to give the Pontiac Aztek a second-year refreshening, according to Automotive News. So far, public response to the Aztek's styling has been poor, and the automaker is going to tweak the styling to broaden its appeal. GM design chief Wayne Cherry said that he thinks the Aztek is a sleeper (success), but only time will tell.

BRIDGESTONE FIRESTONE OFFERS INCENTIVES In an attempt to win back customers, Bridgestone Firestone plans to begin offering a six-month no-payment, no-interest plan on some tire models. Since the wake of the Firestone tire recall in August, sales have been down significantly, and in the September-to-November period sales were down 40 percent.

ONSTAR MAY TURN PROFITABLE SOON General Motors' OnStar unit will likely break even this year, according to Reuters. OnStar's subscription is expected to grow to three million by late 2002, from about 850,000 today. The unit plans to add more services later this year, including the Virtual Advisor, a customized traffic and road condition information service, and Toyota and Honda have helped the unit's profitability potential by signing on with the service.

FORD WILL STUDY DISTRACTION WITH SIMULATOR Ford Motor Company revealed a full driving simulator that will allow the company to study the effects of driver distraction. The $10-million simulator system, called Virttex, uses a car mounted on a large platform encapsulated by a dome, with a set of heavy duty hydraulics that move the platform to simulate the forces of driving. Infrared devices read the drivers eyes to during the use of routine vehicle controls and other accessories. Federal statistics have suggested that as many as ten percent of fatal accidents in 1999 involved driver distraction, and with the onslaught of cell phones and other telematics devices, distraction is a particularly hot topic. Twenty-seven states in the last year have considered cell-phone legislation.

EXIDE HAUNTED BY PAST Exide Technologies admits that it has received subpoenas from an Illinois court, alleging that the battery maker supplied cheaper batteries that had been labeled as premium batteries to Sears, Roebuck, & Co. for sale under the DieHard name. Exide may be the target of a federal investigation into consumer fraud involving the two companies. Since former Chrysler executive Robert A. Lutz has taken over as Exide's chairman and CEO about two years ago, the company has been on a turnaround, financially and product-wise, and the mid-level executives who were involved in the Sears scandal were fired. The allegations date back to 1994.

DELPHI SLASHES MEXICAN JOBS Delphi Automotive Systems has cut about 5000 jobs in Mexico since July due to slowing U.S. auto sales and production, according to the Detroit News. The cuts comprise about six percent of Delphi's workforce. Delphi says that the cuts, which comprise about six percent of Delphi's workforce, are part of normal economic cycles. Worldwide, the automotive supplier employs 216,000.

FORD EXPECTS MORE FROM LUXURY BRANDS Ford Motor Company has announced a financial plan for 2001 that includes $1 billion in cost cutting and increasing revenues by $5 billion. Ford CEO Jac Nasser said that he expects the brand to fulfill the goals despite a weaker market through growth from the company's luxury brands, like Aston Martin, Jaguar, Land Rover, Lincoln, and Volvo. The company's e-commerce initiatives and a shareholder-driven strategy are also expected to strengthen the company's market position.

DC SELLS BONDS FOR CASH DaimlerChrysler has sold about $7.1 million in bonds in order to have more cash resources on hand. Analysts anticipate that the sale of the bonds should be a good opportunity for investors. Following a fourth quarter 2000 that ended with nearly no cash reserves, DCX stock has fallen slightly.

OHIO GM WORKERS VOTE ON FUTURE Workers at a General Motors assembly plant in Lordstown, Ohio, are casting a vote on a tentative agreement that union leaders have reached with the company. Although both parties will not yet disclose the terms of the agreement, both sides say that, in light of anticipated model cuts, it might determine the fate of the 35-year-old plant that currently makes Chevrolet Cavaliers and Pontiac Sunfires. The plant employs 4600 union workers.

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