DAILY EDITION: Jan. 15, 2003

TCC'S DAILY EDITION: Jan. 15, 2004

New STS Coming in 2005

This is the first official photograph of Cadillac’s 2005 STS. The replacement for the aging Seville sedan is designed to serve as the General Motors brand’s flagship, and that’s why you’ll find the fingerprints of GM “Car Czar” Bob Lutz all over the new car. Lutz pushed back the project a few months in order to soften and add curve to the hard edges originally planned for the ’05 STS — as can be seen in the doors and roof line, though overall, the luxury sedan bears an unmistakable similarity to the razor-sharp CTS. Inside, the car will feature a significantly refined cockpit, the first step in Cadillac’s effort to upgrade its interiors.

The new STS will get 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. A high-performance V-Series version will follow, perhaps a year to 18 months later, according to Cadillac sources. The new STS will be shown in the “flesh” at April’s New York auto show and will go on sale in the third quarter of this year.

The STS is intended to provide an attainable halo around a brand that has “stopped the slide and gained momentum,” said Cadillac General Manager Mark LaNeve, but there’s plenty of work to do before Caddy can truly reclaim its long-held position as the “standard of the world.” Propelled by a December surge in SUV sales, the automaker recorded volume of 216,090 last year, its best performance since 1990, LaNeve declared during the Automotive News World Congress.

How much more growth is possible? Not as much as some might expect. At its peak, two decades ago, Caddy seemed hell-bent to push sales as far as they could go. That move backfired, causing quality problems and diluting the brand image — and eventually led to a collapse in demand, with Caddy sales slipping behind import rivals like Mercedes-Benz, BMW and Lexus. The goal, according to LaNeve, is to rebuild that sense of exclusivity, even if that means holding sales down to no more than around 240,000 units a year in the U.S.

After a series of setbacks and delays, Cadillac is finally making a serious move on overseas markets. It has a new dealer network set to grow across Europe. And there are serious opportunities in China, which LaNeve noted, is the third largest market for BMW’s big 7-Series.

China could prove an especially good market for the ultra-luxury car now under development. It’s based on the Cadillac Sixteen concept vehicle that proved the big hit of the 2003 North American International Auto Show. A production version likely won’t have the big V-16 shown in that prototype, but insiders hint a V-12 is likely. While there’s no formally approved program, LaNeve is confident a super-lux Caddy will reach market “in some reasonable timeframe after 2007.”

At the other end of the spectrum, Caddy has effectively ruled out a so-called entry-lux model below the CTS. But there could be other products coming. There’s an updated version of the DeVille due next year, for one thing. And Cadillac is looking at the hybrid market, perhaps with a gasoline-electric version of the SRX. As the declared technology leader among the many GM divisions, it would make sense to introduce hybrids and other advanced powertrain systems at Cadillac, according to LaNeve.

Caddy’s general manager acknowledged that the division hasn’t been without its setbacks lately. The launch of the SRX got off to a slow start, he said. Initial emphasis was placed on fully loaded V-8 models priced as high as $60,000. Inventory quickly built up and Caddy had to kick in with incentives. With more V-6 versions priced around $40,000 rolling into showrooms, sales have been picking up sharply. —TCC Team

Cadillac Making Plans for Overseas by Joseph Szczesny (11/17/2003)
New markets and new times at GM’s luxury brand.

Chrysler Fixing Durango, Recalling 2.7 Million Cars

Chrysler Group was set back in its quest to improve its image for quality on Tuesday when it ordered its dealers to stop selling its redesigned Dodge Durango SUV because of a defect that could cause the vehicle to crash. The company also was forced to recall 2.7 million other passenger cars. Chrysler must replace the throttle control cable in the Durango because of a water leak that can freeze the cable in cold temperatures, leaving the throttle open and possibly causing a “crash without warning,” according to a the directive put out to dealers. The fix must be done to 21,000 vehicles with 3.7-liter V-6 and 4.7-liter V-8 engines delivered to customers and sitting on dealer lots. The 5.7-liter Hemi version is not affected. Chrysler also announced it must recall the 1995-99 Chrysler Cirrus, Dodge Stratus, Plymouth Breeze, 1996-99 Sebring convertibles and 1993-99 Chrysler 300M, Chrysler Concorde, Chrysler LHS, Dodge Intrepid, and Eagle Vision cars. Recalls happen to every car company, and experts say that well-handled recalls that don’t happen too often can help an automaker’s relationship with customers. Chrysler executives have been vocal, though, about their intent to catch industry leader Toyota in quality within the next four to five years, which puts any big recall under a spotlight. Meanwhile, two Chrysler officials said on background that there is growing worry about how the public will receive the Dodge Magnum wagon launching later this year. “Feedback at the auto shows and dealers hasn’t been great,” said one Chrysler executive this week. “And the Pacifica is teaching us a lot about how much people really want a car that looks more station wagon-like than an SUV.” —Jim Burt

DAILY EDITION: Jan. 14, 2003 by TCC Team (1/13/2004)
Mitsu getting a Durango, news from the World Congress.

Hummer H3 Looks Like A Lock for 2005

General Motors says Hummer dealers have been assured that a mid-size Hummer SUV will arrive, and officials say it should come in 2005 as a 2006 model. Hummer spokesman Pete Ternes confirmed dealers have been told it is coming, but refused to say exactly when the next Hummer will arrive. GM last month at the L.A. Auto Show introduced a design concept for a mid-size pickup called the Hummer H3T, which features a pickup box with side-access doors and a drop-down rear window. The H3T concept is built on a modified GM mid-size truck platform and powered by a 350-horsepower, five-cylinder turbocharged engine. Ternes said the new H3 will be similar in size to the H3T concept but will not be a pickup. Asked at the Detroit show what product segment he would most like to fill right now, GM product boss Bob Lutz answered, “Hummer. A Hummer anything. The way the brand is taking off is amazing, though we have to be careful to make every product we give it a vehicle that carries through the Hummer brand promise of aggressive styling and superb capability.” —Jim Burt

Hummer Gets Smaller With H3T by TCC Team (12/29/2003)
Hummer looks for next hit with "environmentally responsible" concept; analysts, environmentalists skeptical.

Ford Jacks Up Incentives

Ford Motor on Wednesday announced a new round of consumer incentives, following higher deals announced by GM last week. Ford said it was beefing up cash rebates by $500 on some models, including its bulky Expedition and Excursion SUVs. It also lowered interest rates or extended zero-percent loan offers on some vehicles, including its new Freestar minivan, which now has $2500 on the hood despite just being redesigned and renamed. F-Series Super Duty trucks got another $1000 to total $2500. GM, Ford and Chrysler all profess a desire to lower incentives. But market leader GM ratcheted up deals in January in the hopes of getting off to a strong sales start in the first quarter. GM is also banking on a sales boost from a promotion in which it is giving away 1000 new vehicles in January and February. GM did not post a share gain in 2003, and it does not want to repeat a share decline in 2004. Meanwhile, Ford, despite mostly keeping pace with GM in deals in 2003, managed a net pricing increase during the last nine months of 2003 by raising prices throughout the year and keeping many of its incentives regional and on selected vehicles. Ford lost share points too in 2003, but said it mostly came out of reduced sales of rental cars, including 50,000 fewer rental sales of the Ford Taurus. —Jim Burt

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

SPECIAL REPORT: Automotive News World Congress

Kia May Build in the U.S.

Coming off a decade of year-over-year sales gains, Kia has some big plans in the works, and that may set the stage for the South Korean carmaker’s first North American transplant assembly plant. “We need to sustain volumes in excess of 300,000 (to justify a plant), and we think we’ll get there in the next 12 to 24 months,” said CEO Paul Butterfield, during an appearance in Detroit on Wednesday. Kia is looking at a variety of ways to continue driving volume higher, Butterfield said, although moving into the luxury segment, a la sibling Hyundai’s up-market XG350, is not part of the strategy. —TCC Team

2004 Kia Amanti by Bob Hall (12/15/2003)
A luxurious sedan marks a real departure for Korea’s number two.

Phaeton W-12 Priced Just South of $100,000

What price performance? Volkswagen has announced that the U.S. version of its Phaeton W12 will start at $94,600, making it by far the most expensive product ever from the “people’s car” company. A V-8 version of the Phaeton was launched in the States last autumn at $64,600. The German automaker is in the process of developing a step-up car priced between the Phaeton and the Touareg sport-utility vehicle, which starts at $35,515, confirmed Gerd Klauss, CEO of Volkswagen of America. It will be part of a fast-expanding lineup, the executive told his audience at the Automotive News World Congress. In 2002, the VW and Audi brands had nine core models in the U.S. But by 2006, that will expand to 23. Despite concerns that the Volkswagen line is pressing into Audi territory, Klauss insisted there’s relatively little interaction between the brands. Only about ten percent of those looking at an Audi A4 also consider a VW Passat — or vice versa. —TCC Team

Ford: Long-Term Loans Risky Business

Long-term loans on new vehicles could boomerang on carmakers, Ford Motor Co. Vice Chairman Allan Gilmour told the annual Automotive News World Congress. “We are doing less 72-month loans than any of our competitors,” said Gilmour, who suggested the long-term car loans could take buyers out of the market for extended periods and ultimately slow down the pace of the sales in the future. Between 20 percent and 25 percent of all car buyers are now opting for 72-month loans, according to Steve Girsky, an automotive analyst with Morgan Stanely. Gilmour, however, also said Ford Credit will continue “to go deeper” than banks as it makes loans to potential customers. Qualifying buyers with less than perfect credit records actually makes good business sense, he added. Once they get a loan, customers with imperfect credit are among Ford’s most loyal customers. Gilmour, however, also said Ford is now using rigorous financial tools to predict with considerable accuracy the success of new products or marketing initiatives. “We are passing up some market share,” Gilmour added. “There is sense selling product at a loss,” he said. Market share, however, remains a critical measure of any auto company’s success or failure, he said. Gilmour also said health-care costs remain a significant problem for American manufacturers. The cost of health care adds $700 to the cost of the every car and truck Ford builds in the United States. “If we don’t get our arms around the problem, our manufacturing base and many other jobs could go overseas,” he added. —Joe Szczesny

Toledo Pact is Unique, UAW Chief Says

The United Auto Workers’ new contract with DaimlerChrysler covering workers at Local 12 in Toledo, Ohio isn’t necessarily a pattern for the rest of the industry, says UAW President Ron Gettelfinger. Gettelfinger said the union agreed to the Toledo pact, which opens the door for suppliers to run part of one assembly plant and also sets the stage for Chrysler to develop a supplier park where other companies can build key elements of the vehicles, because it suited the situation in Toledo. “That’s a one-case situation,” he said. The union’s objective is to build long-term partnerships with automakers and suppliers and work at improving quality and productivity. Numbers from the Harbour Report already show that the most efficient transmission plants and V-8 engine plants are unionized, he noted. Steve Girsky, Morgan Stanley automotive analyst, also told the Automotive News World Congress that whether a company is unionized has become a non-issue.
Gettelfinger said the union takes its organizing efforts very seriously. “I’m very cautious when we talk about organizing. The UAW is facing large and well-funded anti-union campaigns that have made it more and more difficult for workers to join unions even if they want representation,” Gettelfinger said. “Labor laws are stacked clearly in favor of employers,” said Gettelfinger. The success of the union card-check campaigns in the past couple of years, as well as independent polls, indicate that substantial numbers of workers still want union representation. “We have a lot of campaigns going on around the country,” he said. “We had a very good organizing year last year,” Gettelfinger said. —Joe Szczesny

FROM THE SOURCE headlines from the latest press releases

PRNewswire

Volkswagen of America, Inc. today announced a base price of $94,600 for its 2004 Phaeton W12 ultra luxury sedan that is now available for individual orders in a variety of luxurious configurations at some 225 Volkswagen dealerships across the country.

THE TICKER

Name	Symbol	Last	Chg
AUTOLIV	ALV	41.05	+0.18
AUTONATION INC	AN	17.75	+0.03
ARVINMERITOR	ARM	25.21	+0.21
AMER AXLE & MANU	AXL	40.68	-0.22
BALLARD PWR SYS	BLDP	11.76	-0.08
BORG WARNER	BWA	92.29	+1.29
COLLINS AIKMAN	CKC	5.49	-0.33
CUMMINS INC	CMI	52.47	+0.84
DANA CORP	DCN	21.31	+0.30
DAIMLERCHRYSLER	DCX	47.40	+0.62
DELPHI CORP	DPH	11.67	+0.30
EATON CORP	ETN	115.90	+1.77
FORD MOTOR CO	F	16.18	-0.10
GENERAL MOTORS	GM	53.79	+0.46
GENTEX CORP	GNTX	43.40	+0.67
GOODYEAR TIRE	GT	8.95	+0.17
HONDA MOTOR CO	HMC	21.83	-0.11
JOHNSON CONTROLS	JCI	59.20	+0.07
LEAR CORP	LEA	66.91	+0.53
MAGNA INTNL	MGA	82.11	-0.44
MOTOROLA INC	MOT	16.35	+0.03
NISSAN MOTORS	NSANY	22.47	-0.03
SONIC AUTOMOTIVE	SAH	22.91	+0.10
TOWER AUTO	TWR	7.29	-0.19
TOYOTA MOTOR	TM	69.50	+0.98
UNIT AUTO GRP	UAG	30.30	+0.68
VISTEON CORP	VC	11.64	+0.12

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