Weekly News: April 16, 2001

April 16, 2001

DC JOINS SUV ECONOMY RACE DaimlerChrysler has changed its mind on fuel economy. Chairman Jeurgen Schrempp now says that the company will match the fuel economy of sport-utility products from General Motors, Ford, and other rivals. In recent years, automakers have barely met the 20.7-mpg standard required for light trucks. Ford earlier last year pledged to improve the fuel economy of its sport-utility vehicles by at least 25 percent in the next five years, while General Motors said it will top Ford.

BLUE OVAL PROGRAM CAUSING CONTROVERSY Ford's Blue Oval program is still the subject of immense controversy among dealerships, according to USA Today. Ford lets dealers who comply with the Blue Oval program purchase vehicles for a 1.25-percent lower price than for those dealerships that do not comply. The Blue Oval requirements involve requirements such as location, appearance of the facility, and training of employees. Dealer groups and some dealerships say that the program, which establishes a two-tiered pricing structure, is unfair to dealerships and violates dealer franchise laws. So far, about 80 percent of Ford's 4100 U.S. dealers have complied with the Blue Oval requirements.

FULL-SIZE VANS TIPSY  WHEN LOADED The National Highway Traffic Safety Administration has issued a warning about full-size, fifteen-passenger vans. According to a federal study, the vans are three times as likely to roll over when fully loaded, due to a shift in the vehicles' center of gravity. The advisory includes all full-size, truck- based vans from Ford Motor Company, General Motors, and DaimlerChrysler.

TESTS SHOW WIMPY BUMPERS The Insurance Institute for Highway Safety (IIHS), a group representing the insurance industry, says that the five-mph bumper performance of the four large pickups and three small SUVs it recently tested was particularly poor, with each of the vehicles sustaining at least $4000 in damage. The agency's testing procedures involve low-speed impacts into flat barriers and poles. The most expensive to fix after the tests was the Dodge Ram pickup, with $8023 in damages. For more on the tests, which are for estimating cost, not necessarily safety, see www.iihs.org.  

INCENTIVES HURTING RESALE VALUES The high incentives and discounts that automakers are offering are also hurting resale values, according to a Chicago Tribune report. According to the report, incentives especially hurt resale values in the first several years of depreciation, with a direct impact on the resale value nearly equal to the incentive. Market saturation and heavy competition in the SUV market means that SUV models have suffered lower-than-anticipated residual values.

RAM VAN GETS ANOTHER YEAR OF LIFE DaimlerChrysler has decided to produce the Dodge Ram van for an extra year, says Automotive News. Originally slated for discontinuation in April 2002, the full-size van will now be produced until July 2003. Originally, DaimlerChrysler planned a new, Ram-based SUV to be built at the van's Pillette Road plant in Windsor, Ontario, but the company's turnaround plan cancelled the upcoming vehicle entirely, allowing the company to add another year to the van's life. DaimlerChrysler has no plans for a new-generation of full-size vans, due to lagging sales of the vehicles and conversion vans.

BUSH BUDGET CUTS PNGV According to Automotive News, President Bush's budget proposal will mean at least $40 million in cuts for the Partnership for a New Generation of Vehicles, the technology-sharing program between government, industry, and research institutions. The Bush administration wants to refocus the program toward light-truck developments. The budget proposal did also include a $16-million boost for the National Highway Traffic Safety Administration (NHTSA), for better record-keeping and new standards.

FORD RECALLS ALL 2002 EXPLORERS Ford Motor Company is already recalling its new, 2002 Ford Explorer and Mercury Mountaineer SUVs, for a design problem that can cause the rear-liftgate glass to shatter when the liftgate is closed. About 70 percent of the 55,652 Explorers built so far are affected by the problem, caused by defective brackets. Of those, nearly 12,700 have already been sold.

PHOENIX HOT WITH THIEVES According to updated statistics from the National Insurance Crime Bureau and the FBI, the Phoenix area now has the highest rate of auto theft in the country. Miami, Detroit, Jersey City, and Tacoma rounded out the top five, respectively. The NICB notes that the majority of auto theft hot spots are near U.S. borders. The group estimates that about 200,000 vehicles are illegally exported each year. For more information and how other cities ranked, go to www.nicb.org.

FIRESTONE WILL LIKELY DROP WILDERNESS NAME Bridgestone Firestone is considering completely dropping the Wilderness name from its Firestone tire line, to avoid association with last year's recall of 6.5 million tires for tread-separation problems, says Automotive News. Firestone already plans to drop the ATX name, which refers to another line of tires included in the recall. Although the company is shying away from associations with last year's nightmarish recall, Bridgestone Firestone chairman John Lampe says that there are no plans to drop the Firestone name.

LIQUOR INDUSTRY SUPPORTING STRICT DUI LAWS At a news conference with Transportation Secretary Norman Mineta and the president of Mothers Against Drunk Driving, the liquor-industry lobby has agreed to support the lower 0.08-percent blood alcohol standard for drunk driving. As of now, only 21 states have approved the tighter standards, even though current legislation will limit highway funds for those states that don't adopt the standard by 2004.

RENTAL-CAR CUSTOMERS VERY SATISFIED According to the latest J.D. Power and Associates study, heavy competition among rental-car agencies has yielded increased customer satisfaction ratings. The firm's 2001 Domestic Airport Rental Car Customer Satisfaction Study gives top ratings to Avis and National for business rentals, while Enterprise gets the top rating for leisure rentals. J.D. Power also declared the overall ratings to be the best in five years. The study based its findings on a sample of 2900 customers of rental-car agencies at airport locations.

TEMPERS FLARE AT DC SHAREHOLDER MEETING Angry DaimlerChrysler investors spoke out at the company's annual shareholder meeting in Berlin, some demanding that chairman Jeurgen Schrempp be removed from his position. Schrempp fended off criticism from disgruntled shareholders, and he stated that Chrysler and Mitsubishi remain important for the company's global strategy, so there is no intention to dump the Chrysler Group. The shareholders, led by Deutsche Bank and Kuwait, two leading investors that remain supportive of Schrempp, approved ten resolutions supporting the current management board and supervisory board. Schrempp also revealed that DaimlerChrysler will post a loss of up to $888 million for the first quarter, according to the Detroit News. Many shareholders have launched lawsuits against DaimlerChrysler for alleged deceit about the 1998 "merger of equals," including an $8-billion lawsuit filed by U.S. investor Kirk Kerkorian.

DC RECALLS RAM PICKUPS DaimlerChrysler is recalling about 701,000 Dodge Ram pickups due to a potential problem with the hood-latch mechanism. Corrosion of the latch on 1994 to 1999 models could cause the release to stick open. DaimlerChrysler is especially targeting owners of trucks located in 'rust belt' states, where the corrosion of the parts is accelerated.

VOLVO SELLS MITSUBISHI SHARES DaimlerChrysler and Volvo AB have reportedly reached a deal in which DC will purchase Volvo's stake of Mitsubishi for nearly $300 million. The deal will raise DaimlerChrysler's share of Mitsubishi to 37.3 percent, from 34 percent now. The agreement will allow Volvo to back out of commercial-vehicle ventures with Mitsubishi, so Mitsubishi can form an alliance with DaimlerChrysler.

G-WAGEN HERE AT LAST After years of stalling, Mercedes-Benz is bringing its G-Class sport-utility vehicle, otherwise known as the Gelaendewagen, to the U.S. The G-wagen will debut this fall at a base price of $72,500, with less than 2000 units allocated for the U.S. market. Only one model, the G500, with a 5.0-liter V-8, will be offered.

INDUSTRY AND GOVERNMENT SPLIT ON ROLLOVER TESTS Auto safety experts and engineers met at the National Academy of Sciences to discuss how government should test rollover probability for vehicles. The National Highway Traffic Safety Administration (NHTSA) currently uses a static, mathematical formula for estimating the rollover likelihood, but next year the agency will be required to run dynamic tests. Experts say that the formula-based rating correlates closest to actual rollover rates, while a human-run test would introduce other error factors. The NHTSA is currently developing a machine-based test that would take driver error out of the testing procedure.

GM AND FORD EARNINGS DROP According to analysts' predictions, both General Motors and Ford Motor Company will report significant drops in first-quarter earnings due to lagging sales, says Reuters. GM earnings are expected to fall by 90 percent, to $125 million, while Ford earnings will likely fall by about 50 percent, to about $1 billion.

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