Detroit Show Newsmakers I

January 19, 2001

Momentum at Mitsubishi

Odds are that Mitsubishi Motors will expand its assembly operations in Bloomington, Ill., notes the company’s executive vice president, Pierre Gagnon.

Pierre Gagnon detroit 2001

Pierre Gagnon detroit 2001

While a final decision is still as much as 60 days away, the carmaker will need the added capacity if it’s to meet two core targets. It plans to grow U.S. volume nearly a third, to 400,000 units a year by 2005. And as part of its “Project America,” Mitsubishi intends to design and produce its three core products in the States by 2003.

After a long and damaging slide, the Japanese automaker has scored a surprising turnaround, with sales rising 65 percent over the last two years. Six of its eight product lines set records in 2000.

“We have tremendous momentum,” Gagnon declared during an interview with Indeed, despite the decline in the overall U.S. market, Gagnon is forecasting a five-percent increase for his own company this year.

That momentum seemed imperiled last year when it was reported the automaker had fudged some of its numbers, with a sizable number of “sales” going to such well-known—if deceased—celebrities as Elvis Presley. Gagnon insists the embarrassing scandal had “no impact on consumers,” and, if anything, was “a stimulus for more rapid changes at Mitsubishi.”

Some of the biggest changes at the parent company could come as a result of DaimlerChrysler’s purchase of a controlling stake in Mitsubishi last year. “We’re looking at everything, every possible synergy,” Gagnon told TCC. Look for platform sharing with other DC brands, including Chrysler. “It makes sense. Why would we be developing separate platforms?”

Stop the bleeding

With Chrysler set to announce a drastic turnaround plan next month, the automaker has been rife with rumors suggesting anything from plant closings to notions that a sell-off of Chrysler itself may be in the works.

“The clear (first) step is to stop the bleeding and get going,” the automaker’s new CEO, Dieter Zetsche, declared during an auto show interview.

Zetsche wouldn’t address rampant rumors that one or more Chrysler plants would be closed as part of his turnaround plan. Could he find alternative uses to keep those lines rolling, such as building Mercedes products? “I wouldn’t exclude that by principle, but I don’t see that as very likely.” For one thing, he noted, Chrysler plants currently don’t have the flexibility necessary to produce a wide range of relatively low-volume Mercedes products.

There are likely to be significant changes in the very way Chrysler is organized. In the 1990s, the automaker’s platform strategy was seen as a model of efficiency. But today, it’s a serious problem, Zetsche believes. Since each platform team is relatively autonomous, “There’s a tendency to reinvent the wheel five different times.”

DaimlerChrysler Chairman Juergen Schrempp has already ruled out the possibility of selling off the Chrysler half of the company, and Zetsche said he has no intention of eliminating the money-losing passenger car side of the business, either. “Clearly, that’s not a winning strategy. To be a successful company, you need cars, as well as trucks.”

Product, Zetsche repeatedly insisted, will be the salvation of Chrysler, much as it has been in the past. The losses must be halted, he said, referring to an impending fourth-quarter deficit of over $1 billion, but “you can never save a company just on the cost side.”

Putting things in perspective

Harry Pearce detroit 2001

Harry Pearce detroit 2001

“We’re probably a bit spoiled by the year 2000,” General Motors Vice Chairman Harry Pearce conceded. “Clearly, volumes will be down significantly (in 2001), but even so, it should be the third-best year ever.”

In the weeks going into the Christmas holidays, a pall had fallen over Detroit, but the mood seems to be softening, buoyed by the Federal Reserve’s decision to cut interest rates. And Pearce told there might be some positive opportunities to the current slowdown. With supply lines operating no longer stretched to the breaking point, and factories no longer running round the clock, “I look at this as an opportunity to get structural costs out of the company.”

But even if the downturn worsens, Pearce insisted that GM would not repeat the mistake it has made in recessions past. “The one thing that cannot be compromised is our core product program.”

Look for a shift in market demand, the GM Vice Chairman suggested. The growth of light truck sales will likely taper off as rising fuel prices “lead consumers to look for more fuel-efficient vehicles.” That doesn’t mean a return to passenger cars, Pearce quickly added, but should increase demand for car/truck crossovers, like the new Buick Rendezvous and the Chevrolet Traverse now under development.

There should also be growing demand for “green” technologies, such as gasoline-electric hybrids and fuel cells, of which Pearce said, “I couldn’t be more bullish.” In an hour-long presentation at the North American International Auto Show, Pearce introduced nearly a dozen high-mileage and low-emissions vehicles, and unveiled two new hybrid propulsion systems. The ParadiGM hybrid, he noted during that speech, could become a significant factor in the GM product lineup.

Talking the talk

Like politics, auto manufacturing seems to make for strange bedfellows. And so, it seems, that all sorts of overlapping alliances are being formed these days.

One in the works would pair Ford Motor Co. and Toyota Motor Co., confirmed the U.S. automaker’s CEO, Jac Nasser. Noting that it is still premature to say if something will result from the discussions, Nasser said, “If we weren’t having those talks, someone would be asking, ‘why aren’t Ford and Toyota having talks?’”

The discussions might seem odd, considering the longstanding ties between Toyota and General Motors—they operate an assembly plant together near San Francisco, and have married their advanced propulsion programs. But “the days are gone,” said Nasser, when you would avoid overlapping relationships,

In an industry where optimism is essential, Ford’s executive was nonetheless among the most bullish to speak with during the North American International Auto Show. “We feel that (our) strategy is in place, the product programs are in place, the vision is in place,” asserted Ford CEO Jac Nasser.

Even if sales drop to 16 million in 2001, “It will be a strong year,” Nasser insisted. And Ford, he continued, “is well positioned” to take advantage of a downturn since it has already made significant strides to cut costs and get more competitive products in place.

Nasser strongly denied that a recent spate of recalls mean Ford’s quality is on the wane. The much-publicized problems with the new Escape are “just a speck,” he said, pointing to Ford’s improved performance in the J.D. Power Customer Satisfaction Index last year.

If Nasser has any serious concerns—at least that he’s willing to talk about—it’s the Japanese push into large trucks. “Clearly, there’s some risk to (Ford’s) market share. It would worry me more if they came in with segment creators that we would have to react to.”

Ahead of the curve?

Things haven’t been pretty at Opel. Slumping sales have forced the automaker to take a sharp knife to costs, including the closing of assembly operations at the massive factory in Luton, England. That and other efforts will trim Opel’s European capacity by 15 percent, according to Mike Burns, head of General Motors’ European operations.

Opel also is pressing to make its remaining assembly operations more flexible, so it will be possible to shift with market conditions. Overall, Burns told TCC he believes Opel is now “ahead of the curve” in its restructuring efforts, and should begin to push its bottom line back into the black over the next two years.

“It’ll get better this year. Can we make a profit? Obviously, that’s what we’re trying to do.”

Critical to the restructuring are the new alliances GM has been forming in recent years. Fiat, he noted, has the diesel engines Opel needs, while “what we take to the party is gasoline engines” that the Italian automaker needs. Saab, meanwhile, has become a center of excellence for Opel’s safety and turbocharging efforts.

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