Weekly News: January 22, 2001

January 15, 2001

DC BREAKUP POSSIBILITY DENIED DaimlerChrysler officials have denied a rumor that the company may break up its operations if the Chrysler division's financial shape isn't improved within six months. A report by Britain's The Sunday Times claimed that some top shareholders, including the government of Kuwait, had threatened to give the company six months for the turnaround, else they wanted the company to spin off its Chrysler operations. A day later, DaimlerChrysler's biggest shareholder, Germany's Deutsche Bank, said that it would continue to stand behind DC chairman Juergen Schrempp and his plan to bring Chrysler back to profitability. DC's financial performance since the "merger" has been very two-faced, with Mercedes-Benz operations being more profitable than ever while Chrysler operations are struggling.

FORD CONSIDERING OPTIONS IN TFI CASES Several months after a California judge ordered millions of Ford vehicles recalled for faulty ignition devices, Ford is still reviewing a proposal to recall the cars. The $300 million proposal would install modern ignition modules in all of the affected models with thick film ignition (TFI) devices, sold on various models between 1983 and 1995. Failure of the ignition modules has been pinpointed to their placement, where engine heat decreased their reliability. Ford still denies that there is any problem with the vehicles, and is in the process of appealing the California recall order. Ford faces more trouble over this issue in the future, with several cases in other states that are seeking class-action status.

M-B RECALLS E-CLASS FOR AIRBAGS Mercedes-Benz USA has announced a recall of some 1997 model year E-Class sedans for potentially defective side airbags. About 16,225 cars may be affected by the problem, and Mercedes-Benz will replace the side airbags in all of these cars.

PENSKE BUYS ROLLINS Reading, Pennsylvania-based Penske Truck Leasing Company has announced that it is acquiring, in a $754-million deal, Rollins Truck Leasing Corporation of Wilmington, Delaware. The transportation-service companies will effectively merge operations. Penske offered $13 per Rollins share, well above recent trading prices.

HYUNDAI AND DC MAKE TRUCKS Hyundai Motor has announced that the Korean joint-venture commercial vehicle plant with DaimlerChrysler will be established in April, and an official agreement between the automakers will be signed at that time. The plant, tentatively called the Hyundai Star Commercial Alliance, will manufacture an upcoming vehicle called the JV.

TOYOTA CONSIDERING YOUTH EFFORT Toyota Motor Sales has responded to a Reuters report that said Toyota is considering a third U.S. brand for young buyers, by clarifying that the automaker is examining a "sub group" marketing effort for young people, although the company has no intention of creating an additional dealer network. Toyota said that it has especially considered such efforts for the launch of the Matrix crossover wagon next year.

MORE DAEWOO LAYOFFS; UNION PROTESTS Daewoo Motor Company's creditors have revealed plans to layoff another 2800 jobs by mid-February. These newest layoffs will cut about 22 percent of Daewoo's overall work force. Later in the week, nearly 6500 workers at Daewoo Motor Company's main assembly plant in Bupyong, South Korea staged a brief walkout on Wednesday in protest of plans to lay off another 2800 people. Daewoo company officials criticized the walkout, which caused a two-hour loss in production of about 100 vehicles. Daewoo has been placed under court receivership, and creditors are ordering more cuts, so that the automaker will be more attractive to potential overseas buyers, including General Motors.

FORD BUYS REMAINING HERTZ SHARES Ford Motor Company will acquire the remaining publicly held shares of car-rental company Hertz for $35.50 per share. With the offer, better than the $30 per share that Ford offered in September, Ford hopes to complete the deal to assume ownership of Hertz by April.

GM PROFITS DOWN 51 PERCENT General Motors has reported fourth-quarter profits down 51 percent, with earnings dropping to $609 million, $1.15 per share. The company's quarterly revenue fell from $46.3 million to $45.0 million. GM attributed most of the profit drop to its overseas operations, although GM's overall market share in the U.S. dropped from 27.9 percent to 27.3 percent.

OPEL CHAIRMAN RESIGNS The chairman of Opel AG, Robert Hendry, has resigned from his position. Hendry's resignation comes after Opel reported an operating loss of $924 million in 2000, a significant contributor to GM's poor financial performance. Hendry blamed a slow turnaround of the division and an underestimation of sluggish German demand as reasons for his departure. He also recommended that GM appoint someone more familiar with the European market to the post.

AUTO LAYOFFS TRIPLED IN 2000 According to a Detroit News report, auto industry layoffs tripled in 2000, versus 1999, spurred by the downward slump in the last half of 2000. Auto layoffs in 2000, at 85,231, were at their highest levels since the early 1990s, although overall unemployment rates remain low. 

LONGTIME FORD SAFETY/ENVIRO CHIEF PETRAUSKAS RETIRES Ford Motor Company has announced that Helen Petrauskas, the company's vice president in charge of environmental and safety engineering areas, will retire later this year. Petrauskas's career at Ford will have spanned thirty years, and she has held her current position since 1983. She most recently had to defend Ford against the full force of the press, consumer groups, and government agencies over issues regarding the Firestone tire recall and Ford's involvement in the matter. Petrauskas will be replaced by Susan Cischke, DaimlerChrysler's senior vice president for regulatory affairs and passenger car operations.


FORD EARNINGS DROP; EURO OPERATIONS DO WELL Ford Motor Company has released fourth-quarter earnings that dropped drastically, although within expectations, considering the industry slowdown. In the quarter, Ford earned $1.2 billion, down from $1.8 billion a year earlier. Automotive operations earnings fell to $762 million, from $1.4 billion in the fourth quarter of 1999. Ford's European operations posted a $33 million earnings figure, up from a $30 million loss the previous year, a sign that Ford's restructuring plan is working in Europe.


DC RESTARTS PRODUCTION AT TWO IDLED PLANTS DaimlerChrysler has ceased shutdowns at two assembly plants, due to higher-than-expected demand. The plants that will wake from their slumber include the Toledo, Ohio, plant that builds the Jeep Cherokee, and the Windsor, Ontario, plant that builds Chrysler minivans. Chrysler officials say that the change in plans is attributed to very conservative production forecasts for the first quarter.


BIG-RIG CRASH STUDY INITIATED Transportation Secretary Rodney Slater has initiated a two-year study into the causes of crashes that involve large trucks. The study is part of an initiative announced last year to reduce the number of truck crashes. The Federal Motor Carrier Safety Administration (FMCSA) will cooperate with the National Highway Traffic Safety Administration (NHTSA) in the study, which will dispatch investigators to crash sites to gather information for a database.

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