DAILY EDITION: Jan. 14, 2003

January 13, 2004

Daily Edition TCC WJR

Daily Edition TCC WJR

TCC'S DAILY EDITION: Jan. 14, 2004

New STS Coming in 2005

2005 Cadillac STS

2005 Cadillac STS

Cadillac has just released the first photos of its 2005 STS, the replacement for today's Seville sedan. The new vehicle is, Cadillac promises, new from the ground up, though it shares some Sigma architecture with the SRX crossover vehicle and the CTS luxury sedan. The CTS-like exterior has a more XLR-like interior, with eucalyptus wood and aluminum accents. The new STS gets its power from either a 3.6-liter V-6 engine or the 4.6-liter Northstar V-8. Rear-wheel drive is standard, while all-wheel drive will be an option. The new STS will be shown at April's New York auto show and will go on sale in the third quarter of this year.

Zetsche: It’s DaimlerChrysler For Good

The DaimlerChrysler high command has no intention of dumping the Chrysler Group, which has become an integral part of the company's overall operations. Dieter Zetsche, the Chrysler Group chief executive, noted during an interview during the North American International Auto Show the two companies now depend on each other for help in technology, purchasing, and other areas. In addition, Chrysler is preparing to embark on a project to build pickup trucks for Mitsubishi. Meanwhile, Chrysler and Mitsubishi are working on joint development of a new architecture that will be used for small and mid-size cars, Zetsche said.

Zetsche: It’s DaimlerChrysler For Good (1/13/2004)
No chance on giving up on Chrysler, says group CEO.

Mitsu Considering Eight-Seater for U.S.

Mitsubishi Motors North America is considering bringing an eight-seat vehicle to the U.S. market in coming years, according to company CEO Finbarr O'Neill. The product fits snugly into its effort to boost the average age of its buyers, put the company on track to rebound from current troubles and become a more mainstream brand, according to CEO Finbarr O'Neill. The New York lawyer cum Hyundai-turnaround artist joined Mitsubishi as its U.S. chief last year and addressed Automotive News' annual World Congress in Dearborn, Mich., Tuesday. From the podium, he declared "moving into 2004 we have a winning strategy." If the eight-seater is indeed part of that "winning strategy," it would join Mitsu's forthcoming pickup truck slated for 2005. The pickup is based on Dodge's next-generation mid-size Dakota and will become an important staple in Mitsubishi's smorgasbord of nameplates, which include Diamante, Galant, Endeavor, and Montero.

Mitsu Considering Eight-Seater for U.S. (1/13/2004)
New chief hails new direction, calls current strategy “a dangerous place to be.”

Ford, GM Still Count on Financing

Underneath the optimistic predictions from top executives, both General Motors and Ford Motor Co. are leaning on their financial operations to help keep them profitable in 2004. Ford Motor Co., for example, estimates that pre-tax automotive profits will total a modest $900 million to $1.1 billion. In addition, Ford executives told analysts the company's operations in both South America and Europe are expected to lose money in 2004. Both are on the road to profitability and blamed the continuing losses on difficult economic conditions. The automaker, however, is counting on earnings of between $2.6 and $2.7 billion from its financial services subsidiary, Ford Motor Credit. General Motors executives stressed the company is preparing for product offensive in markets around the world. "The winners in tomorrow's global auto industry will be those companies that best combine the efficiencies of global scale with a superb focus on local markets," Richard Wagoner, GM's chairman told analysts. "I like GM's position." GM, however, also is counting on earnings from GMAC and from its Asia-Pacific operations to bolster its bottom line during 2004.

Ford, GM Still Count on Financing (1/13/2004)
In 2004 GM and Ford will need their recent moneymakers more than ever.

SPECIAL REPORT: Automotive News World Congress

Gettlefinger, Gilmour Call for National Healthcare Measures

On a Tuesday evening seemingly sponsored by the national healthcare lobby at the Automotive News World Congress in Detroit, both Ford Motor Co. vice chairman Allan Gilmour and United Auto Workers President Ron Gettelfinger called on government to consider a more comprehensive national health care program for American workers. "Our healthcare costs create a national problem that requires a national solution," Gettelfinger said. He said the UAW will continue to push for a coverage plan that covers "every man, woman and child" regardless of employment status. Gilmour followed Gettelfinger with concerns of his own claiming, "Health care is rising more than 10 percent every year...Ford spends more on health care than it does on steel." He claims that healthcare costs add approximately $700 to the cost of every car sold by Ford in the United States. "This has created a competitive gap." Gilmour did not directly call for full government funding, but insisted a solution should be supported by government more than it is currently. —John D. Stoll

GM's Adams and Fraleigh Switch Jobs, Clark and Myers Retire

General Motors on Tuesday shook up its marketing ranks and announced the retirement of two long-time executives. GM named Buick-Pontiac-GMC general manager Roger Adams executive director for corporate advertising and customer relationship management, replacing C.J. Fraleigh, who assumed Adams' job. The automaker also announced the retirement of Darwin Clark, 64, vice president for dealer affairs, and Lynn Myers, 61, marketing general manager of Pontiac-GMC.

The job swap between Fraleigh and Adams took many by surprise. Adams joined GM in the mid-1990s from the packaged good sector where he ran marketing for Buick, and then had his job expanded last year to include Pontiac and GMC. Advertising for Buick has been inconsistent and at times awful, and the current Harley Earl campaign in which an actor portrays the ghost of the late GM design chief, has had GM's top management scratching their heads.

Fraleigh joined GM from Pepsi, and has been in charge of GM's overall advertising, including media buying and other deals. During Fraleigh's tenure, advertising for Cadillac and Chevy have improved, and HUMMER advertising has been lauded. And GM last summer launched a controversial corporate campaign in which the automaker admitted to past quality lapses, which got loads of free media attention from journalists.

Fraleigh will get broader experience running a marketing unit. Adams, said one GM insider, was a driving force behind GM's "Keep America Rolling" campaign after the terrorist attacks in 2001, and has been given some leeway for some of his marketing calls at Buick by top officials because of the brand's lack of new product, especially on the car side. Still, the "It's All Good" ad campaign that preceded the goofy Harley Earl ad campaign was a total failure, and both campaigns have been privately lambasted top executives at the automaker. —Jim Burt

Big Three Don’t Get Respect

Detroit’s automakers have better quality than most U.S. buyers perceive, according to a Morgan Stanley quality study released Tuesday.

The New York-based investment firm contrasted the actual vs. perceived quality of 34 brands for sale in America and found that most of the brands sold by General Motors Corp., Ford Motor Co. and DaimlerChrysler’s Chrysler Group have better quality than consumers presume. Ford’s Mercury cars suffer from the largest gap between what consumers think about the brand’s quality and what is reality, according to Stephen Girsky, managing director of Morgan Stanley. He said that Mercury joins Ford Motor Co.’s Lincoln and Ford Division brands, General Motors Buick, Oldsmobile and Cadillac brands and Chrysler Group’s Chrysler and Jeep brands as nameplates hindered by less-than-accurate perceptions about vehicle quality. Girsky, speaking at the Automotive News World Congress, an annual automotive conference held in Dearborn, Mich., said that the bottom 10 brands in the study—those enjoying better quality reputations than deserved—are European or Asian brands. Range Rover, Volkswagen AG’s Volkswagen and Audi brands, Volvo, Mercedes-Benz and BMW are among the bottom 10.

The study relied on J.D. Power and Associates’ popular quality studies for the U.S. market to compile its results.

While the complete study is yet to be released to media, a slide handed out by Girsky pointed out that of 12 domestic U.S. brands studied, only four such brands—GM’s Pontiac, Chevrolet and Saturn, and Chrysler’s Dodge brand—have undeserved high-quality reputations. Girsky says that misperceptions over quality could be a significant “market share risk” to the performance of some hot sellers in the U.S. in future years. When asked about the strength of Mercedes-Benz in America, for example, Girsky pointed to its inflated quality reputation as a reason for caution among investors. Despite its perennially high quality scores in J.D. Power and Associates’ scores, Toyota Motor Corp.’s Toyota and luxury Lexus brand still don’t command the sort of respect in terms of quality as those brands deserve. -John D. Stoll

Girsky: Expect Less of the Same

There are clear opportunities ahead, especially for the Big Three automakers, forecast Stephen Girsky, one of Wall Street’s leading automotive analysts, but 2004 is not likely to deliver the sort of boom in automotive sales and earnings normally accompanying an economic recovery. “There’ll be less of the same,” said the Morgan Stanley managing director, meaning “slow growth, excess capacity, price deflation and revenue pressures are likely to continue,” despite an improved economy.

The U.S. auto market really didn’t undergo much of a recession, said Girsky. Sales of 16.6 million in 2003 were the industry’s fifth-best and off only 10.5 percent from the all-time record. “That’s the lowest volatility in a down cycle we’ve seen since the ‘60s,” Girsky stressed. But with little pent-up demand, the upcoming recovery should be equally shallow, he predicted.

Global volume, Girsky estimated, should run somewhere between 55 million and 60 million vehicles in 2004, but virtually all growth will occur in emerging markets, especially China and India.

Yet manufacturers aren’t doing much to trim back their own growth plans, said Girsky, noting “11 of the world’s 12 largest carmakers are putting (new factory) assets in place faster than they’re using the, up.” In North America, Girsky expects another 545,000 units of capacity to come online by 2005, on top of about 250,000 units added in ’03. That’s putting a lot of market share in play, each point gained or lost equal to $1 billion in variable profits.

How you view the pricing equation depends on whether you’re buying or selling. Inflation-adjusted car prices have fallen to their lowest levels in a quarter century. On average, net pricing is dropping two percent annually, Girsky reported. For General Motors, each point costs a billion dollars in lost profits. It works out to $850 million for Ford and $550 million at the Chrysler side of DaimlerChrysler.

The Big Three aren’t the only ones pinched. And importers face some issues of their own, especially exchange rates. Though Toyota now assembles more than half the vehicles it sells here at its North American “transplants,” it loses about $80 a vehicle for every one yen gain against the dollar. Honda is a little less vulnerable, but still sees a decline of $40 for each yen.

Girsky expressed a little concern about Detroit’s declared “year of the car,” especially as a domestic truck generates twice the profit of a Big Three passenger car. On the other hand, Motor City’s manufacturers have some real opportunities right now. Customer perceptions lag the improvements American makers have made in quality. Getting that message across won’t be easy, but could shore up market share.

“Europeans are in more trouble,” said Girsky, pointing to Mercedes-Benz in particular. According to CNW Marketing, Mercedes is perceived to have the third-best quality of all nameplates sold in the U.S. In reality, Girsky pointed to J.D. Power and Associates surveys, which actually place Mercedes down at 24th place.

As for the issues that could threaten a recovery, Girsky was especially nervous about interest rates. Consumers are already stretched thin, he said, underscored by the fact that the typical new car loan now averages a record 63 months. Should finance rates rise by even a modest one percent, that would add another $700 to $750 over the life of the loan for the typical buyer. And that could drive buyers to trim back their car purchases or simply hold onto their old vehicles a bit longer. —TCC Team

Big Bucks in China

“China is a scary, risky and unpredictable place,” according to Asian auto marketing specialist Michael Dunne, but it’s also proving too profitable and promising to ignore. Take Buick, which expects to sell more of its Regal sedans in China this year than in the U.S. Moreover, noted Dunne, the president of Automotive Resources Asia, “They’re making record profits on Buick cars (in China). The estimate is $2000 a car,” which is significantly more than the margins on the American Regal, Dunne said during an appearance at the annual Automotive News World Congress. Reflecting the shape of China’s booming economy, demand is especially strong for high-end luxury cars, such as BMW’s 7-Series. In a separate speech at the Congress, BMW officials noted China is now their largest market for V-12-powered versions of their big 7-Series sedan. Yet despite such opportunities, Dunne cautioned carmakers not to ignore the risks. “The great danger is that foreigners are still seen as guests in China,” he said, “temporary guests.” There are some skeptics who believe Western makers like General Motors or Volkswagen might eventually be forced out of China. “My feeling,” said Dunne, “is that the (Western partners in Chinese) joint ventures won’t be kicked out, but long-term, they’ll be marginalized.” He predicts the first Chinese-made vehicles to be exported to North America will arrive within the next five years. —TCC Team

BMW To Up Capacity, Focus On China

If you’re among the pundits expecting another round of high-powered automotive acquisitions in coming years, count BMW out…at least for the time being.

BMW chairman Helmut Panke, speaking at the Automotive News World Congress in Detroit Monday night, told reporters that the Munich automaker has no plans to acquire another company. BMW currently keeps three brands in its luxury stable, including MINI and Rolls Royce. It still owns a gambit of out-of-commission British nameplates, including Triumph, but is not planning on resurrecting any of them anytime soon. Instead, it will focus on increasing production capacity throughout its current empire, according to Panke, including its U.S. manufacturing operation in Spartanburg, South Carolina. Panke says the company will oversee “a step-by-step increase in our manufacturing base in North America.” It will work on ironing out “bottle necks” in manufacturing operations as a primary means to upping production.

The BMW chief said that other company production facilities around the globe should expect similar capacity boosts. He pointed specifically to Shenyang, China, where BMW is currently building 3-Series and 5-Series at the rate of 30,000 units per year in cooperation with native Brilliance China Automotive Holdings as a target for expansion. The plant is slated to eventually build 7-Series vehicles, to satiate China’s demand for big luxury cars. All cars built in China are currently “meant to stay in China” and not be exported to other markets, which bucks the trend of BMW exporting from its various plants abroad, such as South Carolina and South Africa. Panke says that BMW’s China sales were up 100 percent year-over-year in 2003. China is BMW’s number-three market for 7-Series sales, and number one in 12-cylinder 7-Series sales.

“China is not just spending money like the Japanese on brand, but even more so,” Panke said in reference to Chinese demand for luxury nameplates. TCC on Tuesday reported Panke saying BMW is developing a more “flexible” crossover type of vehicle for potential production, which could have minivan-like capability but would not be “a minivan as currently configured on the market.” He also hinted at the outside possibility of the company someday bringing back an iteration of the 8-Series super coupe if the market allows, but staunchly denied any 8-Series production plans currently on the books. In addition to disavowing an 8-Series, Panke also said the company has extensively researched the possibility of bringing some type of super sports car to the market to compete with new offerings from Porsche and Mercedes-Benz, but decided the global market is not ready to support another supercar, such as Mercedes-Benz $350,000 SLR.

Speaking on markets, Panke did say the global market is ready to embrace the Korean brands, which have been surging in the United States since the late ’90s as legitimate mainstream automaker. When asked by a World Congress moderator to predict the top five automakers in the world in 10 years, excluding BMW, Panke said, “I expect in 10 years we will see a Korean in the top five.” -John D. Stoll

FROM THE SOURCE headlines from the latest press releases


DaimlerChrysler Services North America announced today the appointment of several key executives, effective January 2004, to further strengthen its relationship with its automotive brand partners and its position in the marketplace.


Name Symbol Last Chg
AUTOLIV ALV 40.87 +0.57
AMER AXLE & MANU AXL 40.90 +0.20
BORG WARNER BWA 91.00 +0.72
CUMMINS INC CMI 51.63 +0.03
DANA CORP DCN 21.01 +0.53
DELPHI CORP DPH 11.37 +0.12
EATON CORP ETN 114.13 +0.81
FORD MOTOR CO F 16.28 -0.13
GENTEX CORP GNTX 42.73 -0.27
HONDA MOTOR CO HMC 21.94 -0.46
LEAR CORP LEA 66.38 +1.38
MAGNA INTNL MGA 82.55 +0.48
MOTOROLA INC MOT 16.32 +0.12
TOWER AUTO TWR 7.48 -0.05
TOYOTA MOTOR TM 68.52 -0.96
UNIT AUTO GRP UAG 29.62 -0.14
VISTEON CORP VC 11.52 -0.08

Brought to you by TheCarConnection.com and WJR-AM 760

The Car Connection
See the winners »
The Car Connection
Commenting is closed for this article
Ratings and Reviews
Rate and review your car for The Car Connection
Review your car
The Car Connection Daily Headlines
I agree to receive emails from The Car Connection. I understand that I can unsubscribe at any time. Privacy Policy.
Thank you! Please check your email for confirmation.