Weekly News: May 21, 2001

May 21, 2001

OPTIMAS RECALLED Kia is recalling Optima models for a wiring problem that could prevent the airbag system from functioning properly. The seat adjustment mechanism on the cars might pinch the airbag system's wiring, potentially causing a malfunction. The recall affects 9461 vehicles.

ROLLERS RECALLED AFTER EXPLOSION Rolls-Royce has announced a recall of all Corniche and Bentley Azure, Continental T, R, and SC models from the 2000 and 2001 model year. Earlier this year, a Corniche convertible exploded just after a dealership employee refilled the car. An investigation concluded that the power-window switch ignited fuel vapors in the car. The company plans to fit the recalled vehicles with a redesigned filler pipe that will prevent vapors from entering the vehicle.

WOMEN UNDERREPRESENTED A New York-based group has found that women are sorely underrepresented in the auto industry's top positions. While women hold 12.5 percent of top executive positions in Fortune 500 companies, 25.5 of top publishing positions, and 17.4 percent of the top positions within airlines, women hold only 7.6 percent of the top executive jobs in the auto industry.

BMW PROFITS TRIPLE Germany's BMW has revealed that its profit more than tripled, to about $757 million, in the first quarter, versus the same period last year. Much of the gains are attributed to the sale of the unprofitable Rover unit last year. The company also reported overall sales up 7.2 percent.

RV INDUSTRY WORRIES ABOUT NEW SAFETY RULES According to an Automotive News report, the recreational vehicle industry might face trouble with upcoming federal safety standards imposed on full-size conversion vans and motor homes in 2003. With revised crash standards for full-size vans, converters will need to reassure that all of their modifications comply. A new head-impact standard for the vehicles requires that they be tested to see how well the interior protects from head injuries. The conversion companies say that automakers have not yet finished tweaking the vehicles for the 2003 regulations, making conversion design changes difficult. The conversion van and RV industry is currently seeking an exemption.

DAEWOO PROPOSAL EXPECTED FROM GM THIS WEEK General Motors is expected later this week to formally present its proposal for the purchase of Korea's Daewoo. GM's proposal, estimated to be worth between $2 billion and $4 billion, might ask to purchase only some of the now-insolvent company's assets. According to Ward's, GM's board of directors officially approved a plan for the purchase proposal on May 2. Later this month, GM might begin talks with creditors. Reports suggest that GM might seek creditor involvement in a new joint venture as a means of compensation. Since late last year, Daewoo has been under a court-receivership, with a management appointed by the Korean government.

DOMESTIC BRANDS TRAILING IN CAR-BASED SUV SEGMENT Japanese automakers are still leading domestic brands in the sale of car-based SUV models, expected to be  one of the fastest-growing market segments for the next few years. In April, sales of car-based SUV models nearly tripled versus last April, with Japanese brands selling 51 percent of these models, according to Bloomberg News. The models are especially getting more attention from consumers now that gas prices are again rising in several regions of the country.

LUXURY SALES SLUMP Uncertain economic conditions are already taking their toll on luxury-car sales. According to a Chicago Tribune story, luxury-model sales have fallen eleven percent in the last year, versus 6.8 percent for all vehicles combined. Analysts say that stock-market losses are the single most significant reason for the lagging luxury market, but low consumer confidence and higher lease prices are other factors. Top-ranking executives' compensation packages now often include stock options, and the value of some of these packages has fallen dramatically.

ALLSTATE PURCHASES BODY SHOPS Insurance company Allstate has purchased a major chain of collision-repair shops, intending to speed claims processing and save money through the controversial relationship. The company says that it will make the entire claims process more streamlined, although opponents say that integrating insurance companies with body shops, a potentially unethical practice, will put consumers at more of a risk to have their cars repaired with substandard parts.

UAW IN THE RESORT BUSINESS? The Detroit News reports that the United Auto Workers has placed a $9.75-million bid on a California resort, claiming that the move is a business investment. Apparently, the price the UAW has bid for La Mancha Resort Village in Palm Springs is well below the $11.1 asking price. In 1998, when the resort first sought bankruptcy protection, it owed creditors $5.2 million. Members are criticizing the UAWs plans in business investments.

DC TO BUILD ARMY HYBRID DaimlerChrysler will build a military version of the Dodge Ram HEV hybrid pickup for use by the U.S. Army. The diesel-electric hybrid, capable of operating for short periods in electric-only mode, will be based on the Ram 2500 model. The vehicle, which will also be offered for civilian commercial applications, can also generate 20kW of continuous electrical power for the operation of construction equipment.

GM ADDS INCENTIVES General Motors has announced a new incentive program aimed at reducing huge dealer inventories. The new promotion discounts, linked to Memorial Day, are available through May 31, and some of the discounts are only available in some regions of the country. Additional incentives might be on the way if sales remain sluggish through the summer. GM is adding incentives to full-size pickups and SUVs in the Western states, and expanding the nationwide rebate on compact pickups to $2500.

TOYOTA PROSPERS Despite the auto-industry slowdown, Toyota reports a 16-percent climb in profits for the fiscal year ending in March. Toyota's North American sales have remained strong, due in part to the introduction of new sport-utility models last year. Globally, Toyota's sales climbed 6.6 percent to 5.5 million vehicles, versus 5.2 million in the previous fiscal year. Overall North American sales were up three percent over the period, to 1.7 million units.

FORD DELAYS WINGCAST Ford Motor company has decided to introduce its Wingcast telematics system for 2003 model year vehicles, rather than for the 2002 model year as originally intended, according to Automotive News, citing Dow Jones Newswires information. The Wingcast service, to be offered to drivers for a monthly charge, will offer communication, navigation, entertainment, and safety services, competing with General Motors' OnStar system. Wingcast is a joint venture between Ford and Qualcomm.

TOYOTA TOPS QUALITY SURVEY According to the latest J.D. Power and Associates Initial Quality Study released yesterday, European car companies are showing the most improvement, although Toyota and Lexus continued to dominate the top rankings. The quality gap between vehicles in the survey is also closing and, in general, domestic brands don't lag as far behind as before. Toyota ranked first in three of the four categories it competes in, and the company's Lexus LS 430 topped the survey, with a rating of 58 problems per 100 vehicles. Toyota's Lexus RX300 achieved the highest ranking for a vehicle classified as a light truck, with 58 problems per 100 vehicles. Jaguar was the most improved, with a 21-percent reduction in reported problems.

UAW INVESTIGATED The Detroit Free Press has reported that the United Auto Workers union is being investigated by federal authorities regarding the improper handling of overtime pay, and also for improper relations between union officials and automakers in cases where the union officials were able to get jobs for friends or relatives. Although unconfirmed, the cases are reported to involve leaders of several local UAW chapters and federal authorities started the investigation because the UAW did not take disciplinary action against those involved.

MANY REDEEMING CERTIFICATES FOR CASH The organization formed to trade redemption certificates offered through a class-action settlement against General Motors says that response to a cash-redemption offer has exceeded expectations. The certificates, awarded to owners of older GM pickup models affected by a problematic fuel-tank setup allegedly prone to exploding on impact, allow holders to take $1000 off any new GM vehicle purchased, however the Certificate Redemption Group is purchasing the certificates from consumers at a price of $100 and reselling them at partial value to fleet owners and other interested buyers. The group says that, so far, 83 percent of those who received the certificates have opted for the cash offer.

NHTSA BUCKLES UP FOR HISPANICS The National Highway Traffic Safety Administration (NHTSA) will be launching a new nationwide campaign aimed at increasing seatbelt-use awareness among Hispanics. The agency's recent statistics have shown seatbelt use among Hispanics to be 63 percent, versus 71 percent for all Americans, and motor vehicle crashes are the leading cause of death for Hispanics through the age of 24. The campaign will include printed material and radio messages.

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