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.

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