TCC'S DAILY EDITION: Mar. 24, 2003
I am sure many of you remember those words from your school days. They were written in the dark days of Valley Forge. Our crisis isn’t as terrible but still, as I write this, our army is on the march. I don’t know what will happen. Our enemy, Saddam Hussein, may be overthrown or he may flee. But the waiting that held our collective breaths until now has produced a kind of crisis in our country. The nation is divided, the economy struggles, the stock market falls, gasoline prices climb. No, it isn’t Valley Forge, nothing like it. But it is a crisis and important to us all.
Flint: The Crisis Cometh (3/24/2003)
Is war the only thing Detroit should fear?
GAS PRICES STABLE AT ONSET OF WAR
Gasoline prices remained stable as U.S. troops rolled into Iraq to oust Saddam Hussein, easing fears that the start of the war would lead to a big jump in oil prices. The swift seizure of the enormous oil fields in southern Iraq by U.S. Marines, Navy Seals and British Commandos apparently thwarted Hussein's plans to sabotage the fields, which contain about 60 percent of Iraq's proven reserves. Sabotage would have sent oil prices soaring and hammered the global economy; while some wells were ignited, most of the key Iraqi fields were seized intact, according to U.S. and British military commanders. The price of U.S. light crude oil futures fell almost 25 percent to $28.61 a barrel, topping off a roughly 25-percent slide since last week, a sign that was good news for refiners.
Gas Prices Stable in War (3/24/2003)
After record highs in the U.S. market, the beginning of conflict doesn’t shock the world market.
AUTO SALES TO DROP?
Auto sales are on track in March for a 15.25 million annualized selling rate, says one survey by J.D. Power and Associates, the lowest monthly rate in four years. But even if the bombs stop falling in Baghdad this week and Saddam Hussein is escorted away with a raincoat over his head, it could be months before consumers are feeling game enough to flock back to the showrooms. Should the conflict become protracted, the sales rate could plummet to 13 million or 14 million units, predicts Walter McManus, executive director of global forecasting at the J.D. Power & Associates market research group. "If the war drags on and if it takes a long time to get to Baghdad, then the uncertainty people are feeling can create a recession," said McManus. "If the war is over quickly and successful, then the industry can recover and sales could be at an even higher rate."
Auto Stocks Fare Well in War (3/24/2003)
War is hell for auto sales, but not stocks so far.
BUSH ADMIN STUDIES CAFE CHANGE
From the department of “be careful what you wish for,” the Bush Administration is seriously looking at a wholesale change to the current Corporate Average Fuel Economy (CAFE) law that would rate vehicles’ fuel economy based on several classes of weight rather than one car standard and one light truck standard. A new system would do away with the so-called “harmonic averaging” to determine CAFE, which takes into account sales volume of vehicles of different weights, so that automakers, for example, are incented to sell very small, light cars to make up for the heavier ones consumers “really” want.
Bush May Up-End CAFE (3/24/2003)
Will tomorrow’s light trucks get the same green break as the heaviest cars?
ANWR DRILLING DOWNED IN DC
The U.S. environmental movement demonstrated its clout last week by turning back the Bush administration's effort to open the Arctic National Wildlife Refuge (ANWR) to oil drilling. The vote came literally only hours before the start of a new war in the Persian Gulf and underscored the inability of the U.S. to reach any kind of consensus on an energy policy that might cut the U.S. dependence on imported oil. In the vote on ANWR, environmentalists successfully argued additional oil from Alaska would not eliminate U.S. dependence on foreign oil and would destroy one of last truly wild places in North America.
ANWR Drilling Fails in Senate (3/24/2003)
Environmentalists take one away from the Bush administration on Alaskan oil exploration.
GM RECALLS CTS
General Motors will recall nearly 51,000 Cadillac CTS sedans, the company said on Friday. The compact luxury sedan, brand new this year at Caddy, is suspected of having a loose bolt that could lead to problems with the car’s steering shaft. Two incidents have been linked to the problem but no injuries have been reported. Most of the recalled vehicles were sold in the U.S.
DAILY IN DEPTH
New-Car Sales Need A Shot In The Arm
Amid signs of softening among new-car sales, now that the Iraq war has intensified, the Big Three are debating how best to re-stimulate demand at the outset of the spring sales season. Among the remedies being considered are an extension of zero percent loan offers that worked so well after September 11, increased cash rebates and a revisit to ‘cheap’ lease packages now that the pool of off-lease vehicles is shrinking.
Dealer reports on new-vehicle sales in the first 20 days of March were predictably downbeat. The pre-war buildup caused the Big Three and even Toyota to report negative signals from their dealers, mostly attributed to “war jitters.” Dealers stepped up their local “price ads” as automaker promotions failed to rejuvenate sales from the seasonal lows of January and February. The sales pace continued flat in March despite consumer cash rebates of as much as $4000 on Dodge Durango and $3500 on Chrysler Group’s minivans, $3500 on Ford Crown Victoria and Lincoln LS, $3000 on Chevrolet Avalanche, Tracker and Saturn L-Series. Even higher dealer incentives are being paid — up to $5000 on the 2003 Volvo C70 and the 2002 Mazda Millenia, and a whopping $10,000 on the discontinued 2002 Lincoln Blackwood.
“There is no urgency or call to action from incentives anymore,” says veteran analyst Mary Ann Keller, who adds that spiking gasoline prices have hurt demand for large SUVs. Although March is three days longer than February and has five weekends, J.D. Power now predicts that the annualized sales rate this month will fall from February’s 15.4 million to 15.25 million. That compares with 2002’s sales of 17.1 million, a near-record total. Michael E. Maroone, president of the largest auto retailer, AutoNation Inc., called for a return of zero percent loans for 60 months across the board as a market stimulus.
Whatever emerges in the upcoming final ten-day period of March, it’s likely to be uncorked by the Big Three sooner rather than later. —Mac Gordon
Coil Broil Snarls VW On Eve Of Upmarket Push
Determined to overcome a nagging ignition-coil failure problem on six VW and Audi car models, German automaker Volkswagen is pressing to ship dealers enough replacement coils to complete the massive service task by early June. About 530,000 VW and Audi cars are equipped with defective coils, says VW of America spokesman Steve Keyes, and the automaker has lined up a second supplier to replace the four or six coils with which each car’s ignition system is equipped.
When the problem surfaced last year, most dealers did not carry enough coils to change all on cars brought in with one or two coils inoperable. Dealers were told to replace only non-working coils which left many owners facing return breakdowns and service visits when additional coils went kaput causing spark plugs to sputter or die. Owner complaints escalated, embarrassing the factory on the eve of launches of two upscale vehicles this year — the Touareg SUV and Phaeton sedan. Jens Neumann, chief of VW’s North American operations, recalling the Audi sudden-acceleration flap of the mid-1980s, said, “I know what it is like to lose the confidence of customers. We won’t let that happen again.”
As VW dealers cope with the coil broil, even asking their factory to send customers a $1000 “loyalty coupon” good on purchase of another VW or Audi model (refused as too costly), VW CEO Bernd Pischetsrieder issued a warning that the automaker’s profits would be reduced in the first quarter and the full year 2003 by market “uncertainties.” Redesigned Golf and Passat cars won’t be available in the U.S. until 2004, while the new compact Touran minivan introduced at the Geneva show isn’t expected until 2005 or 2006.
Adding to VW’s problems, Neumann agrees, are the Iraq war crisis and the growth of Asian competition in Europe, China and North America. The coil replacement campaign could cost as much as $83 million, analysts say, another vexation for Pischetsrieder, the one-time BMW CEO whose duties at VW prior to taking over the helm from Ferdinand Piech last spring included product quality. —Mac Gordon
2004 Volkswagen Touareg by TCC Team (10/7/2002)
Does a $68,000 SUV count as the “people’s car?"
FROM THE SOURCE headlines from the latest press releases
The 2003 Range Rover was named one of Automobile Magazine's "All Stars" in the March issue. The award itself was presented to Sally Eastwood, vice president of Marketing, Land Rover North America by Automobile Executive Editor, Mark Gillies at ceremonies held at the North American headquarters in Irvine, California. The 2003 Range Rover was recognized in the Large Sport-Utility Vehicle segment. In the article, Automobile said, "There have been luxurious sport-utility vehicles before, but the Range Rover is the first SUV that represents a true alternative to a luxury sedan."
|AMER AXLE & MANU||AXL||21.40||+1.15|
|BALLARD PWR SYS||BLDP||11.16||+0.75|
|FORD MOTOR CO||F||8.02||+0.52|
|HONDA MOTOR CO||HMC||18.21||+0.31|
|UNIT AUTO GRP||UAG||12.12||+0.48|