Weekly News: February 19, 2001

February 19, 2001

DC MAY EDGE VOLVO OUT OF MITSUBISHI VENTURE Volvo and Mitsubishi may soon end their joint venture operations due to DaimlerChrysler interest in Mitsubishi's car and truck operations, according to Reuters and London's Financial Times. A Mitsubishi alliance would give the automaker a doorway into the potentially lucrative Asian commercial truck market. Volvo currently holds a 19.9-percent stake in a 1999 joint-venture truck agreement with Mitsubishi.

GROUP FINDS JAPANESE FIRESTONE TIRES BETTER A lawyer-appointed panel of tire experts has judged Japanese-made Firestone tires to be more durable than those made in the United States, according to a Wall Street Journal report. The panel, assembled by an attorney for a class-action lawsuit against Firestone, found that the Japanese-made tires had thicker layers of materials. Firestone criticizes the credibility of the panel's analysis.

ENGINE SHORTAGE FORCES LAND ROVER TO CUT PRODUCTION Britain's Land Rover announced that it will cut up to 250 jobs after failing to procure enough diesel engines from its former owner, Germany's BMW. Land Rover, now a division of Ford, had asked for BMW to supply a significantly higher number of the engines. The current contract with the automaker supplies 32,000 of the diesel engines per year to Land Rover. Freelander production will be cut from 84,000 per year down to 74,000 per year until Land Rover changes over to a Ford-sourced diesel sometime next year.

U.K. GM WORKERS PLAN WALKOUT Workers at General Motors' Luton, England, plant are still planning a strike against the company's plan to close the facility, despite announced plans to expand operations at GM's Ellesmere plant. The company has not made a move to settle a dispute, dealing with the company's plan to close the plant next year, with the local union. GM plans to move production of the Vauxhall Vectra, currently built at the Luton plant, to Ellesmere. Workers at the Ellesmere plant have announced solidarity in the walkout, to happen sometime this week.

DC BOOSTS INCENTIVES DaimlerChrysler has boosted vehicle incentives to as much as $2000, in an attempt to stimulate sales. The incentives include financing as low as 0.9 percent in combination with the incentives. The incentives have also been expanded to include the Chrysler Sebring and Dodge Stratus coupes and sedans, which are all-new for 2001. Chrysler division sales fell 16 percent in January.

SUPPLIERS REJECTING FIVE-PERCENT CUT According to an Automotive News report, many suppliers have rejected or partially rejected DaimlerChrysler's demands that they cut five percent from their prices to save the automaker up to $2 billion. Of six major suppliers, five have rejected the full five-percent cut. The only major supplier to fully agree with the cut was Lear. Due to the general industry downturn, many of the suppliers just can't afford the five-percent cut, but many (about half of Chrysler's suppliers) will settle for something less than five percent.

DAEWOO IDLES PLANT, LABOR ANGERED Korea's Daewoo Motor Co. has temporarily idled several assembly lines at its main Bupyong plant. The shutdown, due to run from February 15 through March 6, will affect the automaker's subcompact and luxury vehicles, including Lanos, Leganza, and Magnus. The company will continue to operate its other plants as normal. Union leaders are reportedly planning to stage a strike during the shutdown strike, and the union is angry with the way the company has handled its original plan to lay off 5500 workers by February 16. The February 16 deadline left another 1900 workers to face layoffs by the end of the week. Creditors and court-appointed management want the layoffs carried out so that the company will be more attractive to potential foreign investors, such as General Motors. However, the creditors also need to see that the company operates smoothly in coming weeks to justify new loans to keep the automaker in operation. Daewoo has estimated debts of about $10 billion.

SATURN PULLS OUT OF JAPAN General Motors reportedly plans to halt Saturn sales in Japan by the end of this year, according to Automotive News. Saturn has struggled to sell even a thousand cars per year in Japan since its 1997 introduction. GM hopes to retain a strong presence in the Japanese market through its new alliance strategy with Subaru, Isuzu, and Suzuki. GM will continue selling the Chevrolet brand in Japan.

GIMME FIVE At the Canadian International Auto Show in Toronto, Ford introduced a 5-door hatchback version of its Focus, dubbed the ZX5. With the same styling cues and performance-oriented features of the ZX3 three-door hatchback, including the peppy 130-hp, 2.0-liter Zetec four-cylinder engine, the ZX5 aims at the crowd that wants four doors but the sporty image of a hatchback. Focus ZX5 models, assembled at Ford's Hermosillo, Mexico, plant, will arrive at dealerships this fall as a 2002 model.

NHTSA DEALS OUT MORE ROLLOVER RATINGS The National Highway Traffic Safety Administration (NHTSA) has released new rollover ratings for 30 more vehicles. Predictably, several sedans (Ford Crown Victoria, Lincoln LS, Mercury Grand Marquis, and Toyota Camry) received the only five-star ratings, while the two-star ratings were given to eight sport-utility vehicles. A two-star rating means that the vehicle has a 30 to 40 percent chance of rolling over in a crash. No SUV has scored higher than three stars yet in the formula-based rollover prediction. The auto industry and some consumer groups have been highly critical of the ratings, requesting that actual driving tests be done. The NHTSA has now given rollover ratings to a total of 72 vehicles.

For TCC's gateway to NHTSA rollover ratings and other safety information, click here.

UAW AND DC WORK OUT EARLY RETIREMENT INCENTIVES The United Auto Workers and DaimlerChrysler have reached an agreement regarding the company's voluntary incentive program for early retirement. The $35,000 incentive packages, which include half to be applied to a new-vehicle purchase and half as a cash payment, will be available to those hourly workers who have reached age sixty with at least ten years of service, or those who have attained 30 years of service with Chrysler. The union and company hope to minimize the number of layoffs through participation in the program.

EATON DEFENDS MERGER DECISION Former DaimlerChrysler chairman Bob Eaton has broken his silence to the press and spoken out about allegations that he had deceived Chrysler and its shareholders. Eaton said, in an interview with Automotive News, that he believed the 1998 deal to be a merger of equals that would create a stronger company. Eaton retired in March 2000.

DC AND GM BATTLE OVER GRILLE DaimlerChrysler has waged a lawsuit against General Motors, accusing the company's Hummer H2 sport-utility vehicle of having a grille that too closely resembles that of a Jeep. DaimlerChrysler says that the H2 will compete directly with Jeep vehicles, and consumers will mistake the H2 for a DaimlerChrysler product. General Motors argues that AM General, the company behind the Hummer, has made the Hummer with a similar grille for 16 years with no complaint from DaimlerChrysler or former Jeep owner Renault. AM General trademarked the Hummer's grille design for trucks of every size and type in 1996.

EMPLOYEES FILE AGE DISCRIMINATION SUIT AGAINST FORD The Detroit News reports that nine Ford Motor Company white-collar workers have filed a lawsuit that accuses the company of age discrimination. The salaried employees accuse Ford of trying to wipe out older workers with a new generation of younger executives. They also say that Ford is trying to weed out older workers through a graded evaluation system that discriminates against them, and that it is part of an effort to increase diversity in management at the company in a way that's unfair to those with experience.

IN-CAR STOCK TRADING? General Motors' OnStar division has partnered with Fidelity Investments to offer an upcoming in-vehicle stock-market information service. Eventually, the alliance plans to offer in-car trading. The companies claim that it would be safe, with all information available through voice-activated features and audio prompts, but, hey, we know some people who really get into their trading&

MITSUBISHI RECALLS ANOTHER 1.3 MILLION VEHICLES Mitsubishi Motors Corporation of Japan has initiated the recall of another 1.3 million vehicles, associated with last year's scandal in which the company admitted to covering up consumer complaints for more than twenty years and hiding them from the government. The worldwide recall, which includes another 950,000 vehicles in the U.S., will cost the company $146 million. The U.S. recalls involve defective front suspension parts in Mitsubishi Galant and Eclipse and Chrysler Sebring and Avenger models. Japanese management admitted that vehicles produced at Mitsubishi's Normal, Illinois, plant used some of the same defective pieces as Japanese facilities.

HONDA PROFITS DOWN 25 PERCENT Honda Motor Company has reported a 25-percent drop in profits during the last quarter of 2000, blaming some of the losses on sluggish sales in Europe, the yen's strength versus the euro, and increased ad spending. The company reported that a rise in sales in the U.S. and Japan helped counter the sagging performance in Europe.

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