Daily Edition: May. 21, 2004

Porsche unveils 911 Turbo S

Porsche's latest pair of 911s to be introduced are the Turbo S Coupe and Cabriolet. These models are based on the current 911 Turbo, not the new 911 Carrera unleashed last week in photo form. The new Turbo S gets its power from a 3.6 twin-turbocharged horizontally opposed flat-six cylinder engine; it produces 444 hp and 457 lb-ft. Top speed is an estimated 190 mph. Ceramic composite brakes with six-piston calipers are new, as are the 18-inch wheels. Cruise control and a six-CD changer are standard. The Turbo S Coupe will retail for $131,400, the Cabrio for $141,200.

WEEKLY CAR GUIDE: May 14, 2004 by TCC Team (5/17/2004)
New Escape Hybrid, new Porsche 911, and tips on run-flats.

Saab leaving the ATL for Motown

Saab Cars USA is moving its U.S. operations from Atlanta to Detroit at the headquarters of General Motors, which owns Saab. Saab Cars officials expect to be in GM's world headquarters at Detroit's Renaissance Center by Sept. 7.

It is not a surprising move. The move enables GM to trim Saab's headcount from its current 80. And it makes it easier for Saab's operations and product development to integrate with GM.

"We save significantly on facility costs. We save significantly on structural costs, because we cut down on redundancies. It will give us the full ability to tap into more opportunities with GM North America," said a Saab representative.

Saab has posted an annual profit only twice since GM acquired a stake in 1990, and is in the midst of an aggressive product expansion in the United States, where it has only offered two models, the 9-3 sedan and bigger 9-5. Saab is launching the 9-2x, a small and sprite sport sedan built off the Subaru WRX, later this year and the 9-7 SUV, built off the Chevy Trailblazer, next year. GM owns a stake in Subaru parent Fuji Heavy Industries and is trying to share vehicle architectures across alliance partners and GM-owned brands.

Through April, Saab's U.S. sales were off 27.3 percent from the year-ago period. The 9-3 sedan, built off GM's Epsilon architecture, has received good marks in the auto press. But the company still has to offer profit-killing discounted leases to move vehicles. GM views Saab long-term as the third leg of its luxury stool that also includes Cadillac and Hummer. Where possible, GM has been dualing Cadillac and Saab dealers. -Jim Burt

2005 Saab 9-2X by Marty Padgett (5/10/2004)
Saab gambles part of its future on a very strong hand.

More hybrids for Nissan?

Nissan has already announced it will introduce a gas-electric hybrid Altima in 2006, and company officials say more will be announced next month when Nissan hosts a product forum in California next month. Nissan licenses the gas-electric technology from rival Toyota. The likely recipient would be the Murano crossover, as well as the Infiniti FX35. The automaker will also showcase diesel vehicles via diesel technology from owner Renault, and diesel could be in Infiniti's future as well as for the Nissan Titan pickup truck.

Sachs: rates will hurt sales or profits - or both

Goldman Sachs auto analyst Gary Lapidus said Thursday that a hike in interest rates would cool auto sales by 600,000 units on an annualized basis, and that automakers would have to raise discounts and lower prices to give consumers an additional $1100 per vehicle to keep the status quo.

Automakers are carrying nearly a 100-day supply of unsold vehicles heading into the summer sell-down. Lapidus says automakers would be better off cutting production than cutting pricing further when rates climb as they are expected to do. Much of Wall Street expects the Federal Reserve to increase short-term rates by 50 basis points or more before the year is out.

Low rates, the Bush tax cuts, and consumers opting for longer and longer loan terms, noted Lapidus, have driven demand and the average price of a vehicle as consumers opt for more gadgets and features and luxury cars - as long as they can have seven years to pay off the loan. It's worth noting that profits have not been rich at GM, Ford, or Chrysler during this period of low rates and high sales volume.

Lapidus said automakers are unlikely to cut production to offset falling demand because of their "prisoner's dilemma," or the fact that the Big Three have too much manufacturing capacity and must pay UAW workers whether they work the lines or not.

Lapidus advised clients Thursday to stay away from auto stocks in an environment of rising interest rates.

Ford, for example, impressed Wall Street in the first quarter by earning 96 cents a share, double what was expected But its guidance for the whole year is only $1.50-$1.60 per share because of the need, the automaker believes, to hike consumer incentives the rest of the year to keep the metal moving off dealer lots.

Prudential joined the auto bears, downgrading the auto parts sector to "unfavorable" from "neutral" citing a pending ascent in the Federal Funds rate. Prudential said "investors perceive that rising interest rates will choke off the demand for vehicles, which will have a negative impact on earnings for the automakers and suppliers." -Jim Burt

Detroit agencies tightening belts

BBDO Detroit is laying off 100 employees in a belt-tightening move. The agency handles all of Chrysler's national and dealer advertising. The automaker has been exacting cost cutting from all its suppliers and its ad agencies are no exception. BBDO is a unit of Omnicom.

Cuts could also be following at GM ad agency Chemistri, say sources. Chemistri CEO Pat Sherwood recently announced he is leaving. And top creative executive Gary Topolewski left for BBDO to work on Chrysler's business. Chemistri's clients include Cadillac, Pontiac, GM Service and Parts Operations, and several global GM operations. There are rumblings that GM is unhappy with the departure of Topolewski, and Chemistri owner, Leo Burnett Worldwide, is scrambling to find a top-drawer replacement. One possibility, though, is moving the national advertising of Cadillac to Leo Burnett's office in Chicago where there is a wider pool of creative talent. Such a move would drain headcount from the Troy offices of the agency. Detroit has long been dogged by the difficulty in attracting superior advertising talent from markets like New York, Chicago, and San Francisco. -Jim Burt

DAILY IN DEPTH

PEMEX starts cleaning up its act

PEMEX, that is, Petróleos Mexicanos, is the Mexican government owned and operated Petroleum Company and traditionally has been considered unresponsive to ecological concerns.

However, the high levels of pollution in México have forced this petroleum company to start cleaning up its act.

With a population of 21 million people - and a heavy dependence on cars - México City has the persistent problem with air pollution.

A few years ago, the México City government set up a program for older vehicles named "Hoy no circula" (Not driven today) in which according to the last digit on the license plate, such vehicles are required to stay parked for a day a week.

This program has helped somewhat to reduce the air pollution and has caused the automotive manufacturers to improve anti-pollution measures on newer vehicles, which by the way, comply with more stringent emissions standards and therefore are granted the permission to be driven everyday of the week.

Even though this measure has helped to reduce pollution, it has proved insufficient to solve the problem.

PEMEX announced a sulfur content level reduction in its Premium gasoline, which has an octane rating of 92.

The sulfur reduction on the PEMEX fuels will be an ongoing effort that will conclude in 2009. The new PEMEX fuels have the target of complying with the American Tier II standard.

This would also pave the way for the arrival of PZEV (Partial Zero Emission Vehicles) rated cars like the new Ford Focus and Dodge Stratus as well as direct-fuel-injection vehicles into the Mexican market

Previously, the sulfur content level of the Premium gasoline was of 500 parts per million (ppm). The new gasoline has a sulfur level of 300 ppm, and by the end of the year PEMEX has the target of lowering the sulfur level to 250 ppm. By 2009 PEMEX has the goal of achieving a sulfur content level between 50 and 30 ppm.

PEMEX also intends to lower the sulfur content in its diesel fuel from 500 ppm currently to 15 ppm by year 2009.

The new gasoline formula will yield a 40-percent reduction in the emission levels of sulfur dioxide, which according to PEMEX would represent 200 tons of sulfur every year.

In a four-year period, in order to achieve the sulfur reduction of its fuels, PEMEX will invest a total of $1.9 billion. -Francisco Pérez

Toyota Workers Rebuff UAW in Georgetown

The United Auto Workers union has sustained a crushing rebuff in its latest bid to organize transplant assembly plants in the U.S., with only 37 percent of the 7100 workers at Toyota's massive Camry/Avalon/Solara facility in Georgetown, Kentucky, willing to sign cards agreeing to a formal UAW vote this past spring. This was far fewer than the 50 percent needed. The union, whose membership has fallen sharply in the past 25 years, has closed its organizing office in the central Kentucky city of Georgetown without promising to return, according to the Detroit News (May 18). A modern plant that pays its workers as much as $24 an hour and provides 24-hour daycare and bi-annual bonuses, Georgetown has never undergone recurrent layoffs or line speedups that stir pro-union sentiment. The relatively young workforce contends that no union is called for so long as its products continue to sell well and compensation matches, or even exceeds, that of unionized plants.

The UAW's organizing vice-president, Bob King, had envisioned a Georgetown victory as a drive for successful efforts among the nine other non-union foreign-owned assembly plants in the U.S. Union membership surpassed 1.52 million in 1979 but has dropped steadily to 624,585 at the outset of 2004. The Detroit-headquartered UAW has lost bargaining elections at Nissan's plant in Smryna, Tennessee, and has opened a "card check" drive at the Honda plant in Marysville, Ohio, but the wind went out of the sails with the rebuff at Georgetown. Toyota, which deals with the UAW at the NUMMI plant it shares with GM in Fremont, California, took a neutral stand on the UAW's Georgetown bid.

A former UAW president, Douglas Fraser, now a labor studies professor at Detroit's Wayne State University, said that for the union it is "close to critical" to win over unorganized assembly plants and that "Toyota workers are only getting that $24 an hour because of us." -Mac Gordon

Family Spat: Kia Spurns Hyundai Plant

Hyundai and Kia sound more like the "odd couple" than a devoted father and son. Kia Motors America's president and CEO, Peter M. Butterfield, has declared in an interview (Ward's Automotive Reports, May 17) that Kia will refuse to use Hyundai's new plant in Montgomery, Ala., for a shared model unless it is a pickup truck.

For its part, Hyundai has balked at taking an edition of the popular Kia Sedona minivan, sounding a bit irked at Kia's aloofness towards Montgomery.

Dealers for both South Korean automakers applaud their strategies to have full model lineups as soon as possible, avoiding the niche limitations that have hampered such GM subsidiaries as Saab and Saturn. But emergence of hard feelings between the pair has been unusual for automakers with blood ties. Similarly, DaimlerChrysler has finally agreed to share Mercedes powertrains with Chrysler Group for the Crossfire, Pacifica, Chrysler 300, and Magnum models. And Ford builds Mazda Tribute SUVs at the Escape plant. Saab will put a car adapted from the Subaru Impreza WRX on sale in the 2005 model year, both being GM partners.

"I've been pretty outspoken that it's the product we're asking for," says Kia's Butterfield, referring to a request for a pickup. Not wanted: editions of Montgomery-built Santa Fe SUVs or Sonata mid-size sedans. Rather, Kia prefers a body-on-frame truck, although as Ward's points out in a sidebar, Kia is reviving the Sportage compact SUV in the U.S. this fall, which is of a unibody design. The last-generation Sportage was one of the first models Kia brought to the U.S. market in the mid 1990s.

Hyundai and Kia are stretching their lineups in speedy fashion from minicompacts Accent and Rio to luxury sedans XG 350 and Amanti. Two car platforms are already shared - between the Hyundai Sonata and Kia Optima (and XG350/Amanti), and between the next-generation Hyundai Elantra and new Kia Spectra. All that's left is the pickup truck. If Kia can embark on new plants in China and Slovakia on its own, it wouldn't surprise anyone to see a Kia-only plant in the U.S. as well - where the 'son' can build pickups for 'papa,' too. -Mac Gordon

FROM THE SOURCE headlines from the latest press releases

PRNewswire

When the nation turns it attention to Washington, D.C. this Memorial Day to remember those who fought and died for the U.S., Ford Motor Company will help a very important but often forgotten group of people to share in the honor: "Rosie the Riveter," and the women who heroically managed the home front effort during World War II. Rosie the Riveter is the muscle-flexing woman in the famous WWII poster, exclaiming "We Can Do It," and who has become an icon not only for women who kept the U.S. factories rolling during wartime, but for all women of strength and will.

Name	Symbol	Last	Change
Autobytel, Inc.	ABTL	9.07	-0.58 (-6.01%)
Autoliv Inc.	ALV	39.89	-0.22 (-0.55%)
AutoNation Inc.	AN	15.69	+0.11 (+0.71%)
ArvinMeritor Inc.	ARM	17.81	-0.52 (-2.84%)
American Axle & Mfr. Holdings Inc.	AXL	33.30	-0.55 (-1.62%)
Ballard Power Systems Inc.	BLDP	9.05	-0.05 (-0.55%)
BorgWarner Inc.	BWA	39.21	-0.24 (-0.61%)
Collins & Aikman Corporation	CKC	5.00	-0.01 (-0.20%)
Cummins Inc.	CMI	56.48	-0.86 (-1.50%)
Dana Corporation	DCN	18.10	-0.50 (-2.69%)
DaimlerChrysler AG (ADR)	DCX	41.52	-0.53 (-1.26%)
Delphi Corporation	DPH	9.63	-0.29 (-2.92%)
Dura Automotive Systems	DRRA	9.66	+0.14 (+1.47%)
Eaton Corporation	ETN	55.60	-0.79 (-1.40%)
Ford Motor Company	F	14.18	+0.10 (+0.71%)
General Motors Corporation	GM	43.46	-0.18 (-0.41%)
Gentex Corporation	GNTX	34.74	+0.09 (+0.26%)
Goodyear Tire & Rubber	GT	8.26	-0.30 (-3.50%)
Honda Motor Co. Ltd. (ADR)	HMC	20.50	+0.29 (+1.43%)
Johnson Controls Inc.	JCI	52.07	-0.25 (-0.48%)
Lear Corporation	LEA	54.60	-0.30 (-0.55%)
Magna International Inc.	MGA	76.01	-0.04 (-0.05%)
Motorola Inc.	MOT	19.25	-0.11 (-0.57%)
Nissan Motor Co. Ltd. (ADR)	NSANY	19.99	-0.05 (-0.25%)
Sonic Automotive Inc.	SAH	21.18	-0.32 (-1.49%)
Sirius Satellite Radio	SIRI	3.10	-0.08 (-2.52%)
Toyota Motor Corporation (ADR)	TM	68.57	-0.38 (-0.55%)
TRW Automotive Holdings	TRW	17.91	-0.16 (-0.89%)
Tower Automotive Inc.	TWR	3.64	+0.13 (+3.70%)
United Auto Group Inc.	UAG	28.00	-0.06 (-0.21%)
Visteon Corporation	VC	9.94	-0.07 (-0.70%)
XM Satellite Radio Hold.	XMSR	23.13	-0.29 (-1.24%)