2005 Detroit Auto Show, Part VII

January 9, 2005

2005 Detroit Auto Show Index by TCC Team (1/8/2005)VW Sees New Losses in U.S.

Fresh new products such as the Jetta and the Passat won't be enough to wipe out the red ink at Volkswagen of America. Hans Dieter Poetsch, Volkswagen AG's chief financial officer, confirmed in an interview at the North American International Auto Show that VOA will post $1 billion operating loss in 2004. Volkswagen of America will lose money again in 2005 because of the heavy pressure from the depreciation of the U.S. dollar. The losses for will be substantially smaller as the products bring in new customers.

The rising tempo of production of the Jetta at VWOA’s plant in Puebla, Mexico also will serve as natural hedge against the fluctuations in the value of the dollar, which has made it more expensive for companies such as VW that do business in euros to import cars into the U.S. “It has been difficult with the depreciation of the dollar,” said Poetsch. The fact the Jetta and the Passat were both at the end of their life cycle in 2004 only compounded the problem and forced VWOA to enter the incentive war - something it had always vowed not to do.  “We had a great problem in the market place. We had to do something,” he said. Thus, VW’s incentives went from virtually nothing in the last quarter of 2003 to roughly $2,700 per vehicle at the end of the fourth quarter of 2004. Poetsch, however, said incentives will drop this year and as the incentives decline, so will VWOA's losses. The fact that incentives across the industry have stopped increasing is an encouraging sign and indicates that all manufacturers will spend less on incentives in ’05 even if industry-wide sales are essentially flat. —Joe Szczesny

Kia KCD-II Mesa Unveiled

2005 Kia Mesa concept

2005 Kia Mesa concept

Kia revealed its new KCD-II Mesa, the second Kia concept to be designed and developed in Irvine, California, at the brand’s California Design Center . With a long 116-inch wheelbase and huge 22-inch wheels, the Mesa aims to combine generous interior space with stable handling.

The concept’s “rugged meets racy” interior — which rides the line between flashy and classy without being at all garish — is arguably one of the most beautiful interiors of any of the show’s concepts. The design/color scheme inside, described as “Sunset Orange” brings a bright orange and charcoal theme, combined with brushed aluminum trim and exposed stitching also in bright orange. Six individual bucket seats are positioned in three rows, with a center-tunnel console running the length of the cabin. The center control area uses toggle switches, a la MINI or Land Rover, and a massive aircraft-type shifter spans the width of the console. Two full-length panoramic sunroofs bring light inside while leaving the middle and edges of the roof available for mounting cargo securely on top. Retractable running boards automatically activate when doors are opened or close, and make access to the roof easy. And a clever LED searchlight that, as Kia says, “is perfect for lighting up the waves at a nighttime surfing session.

The Mesa is powered by the same 3.5-liter V-6 as the Sorento SUV, and would be available with either two- or four-wheel drive, though a five-speed automatic transmission. The four-wheel drive version has an Active Torque transfer system that can go from 100 percent rear-drive to a 50/50 split.

Though the Mesa is strictly a concept, Kia says that it strongly hints at the design direction for the brand’s future SUV models, and that any replacement for the Sorento would likely incorporate some of these design elements.

Honda Preaches Civic Responsibility

Takeo Fukui

Takeo Fukui

Honda chairman Takeo Fukui announced several new safety, environmental, and advanced technology elements that will be integrated with company’s products; saying the company is moving forward to achieving the utopian-sounding goal of being a company that society wants to exist.

A new system called the Collision Mitigation Braking System + E-Pretensioners (CMBS) claims to be the world’s most advanced accident avoidance system and will be offered on the Acura RL this fall. CMBS uses radar input and alerts the driver if it anticipates a collision; furthermore, if it decides the collision is unavoidable it will apply braking force. In either case, the system will activate seatbelt pretensioners in advance of a possible collision.

Honda will also offer its Variable Cylinder Management (VCM) system on the redesigned Honda Pilot, set to arrive this fall. The system is already used on the Odyssey minivan and Accord Hybrid.

Fukui also announced some important details on the next-generation Honda Civic. For ’06, the Civic will be completely new and will more heavily emphasize safety features compared to the current version. The new version of Honda’s small car for the U.S. will feature a more advanced body structure for crash compatibility with other vehicles, and will have anti-lock brakes and side curtain airbags as standard equipment on all models. Although Fukui said that the eighth-generation Civic will be offered in 2-, 3-, 4-, and 5-door models globally; hopefully Honda has more body styles bound for North America this time around, as Honda has been lacking hatchback models except for the limited-volume Si sport hatchback.

On a side note, Fukui announced that Honda plans to enter Formula One racing with a complete car. Up until now, Honda has built engines for F1, but not a full car and chassis.

Land Rover Up, Jaguar Down

“In 2005, the biggest challenge isn’t going to be demand, but our ability to fulfill it” for the new LR3 and other Land Rover products, promised Mark Fields, head of Ford Motor Co.’s Premier Automotive Group. The SUV’s positive reception has Fields wondering “whether to set our sites higher.” What that means, he wouldn’t say, though it could mean boosting production capacity or perhaps considering new models for the Land Rover line-up. “But that doesn’t mean we want to be too optimistic,” cautioned Fields, who also serves as CEO of Ford’s overall European operations, “because then you can do some stupid things.” What he doesn’t want to do is boost production to the point that it might require hefty incentives to maintain momentum. That would ultimately have a negative impact, warned Fields, on residual values. During an interview with TheCarConnection, the Ford executive lamented the state of another PAG brand, Jaguar, which he called the group’s “shortfall.” But after announcing major cuts, including the planned closing of one of three assembly plants, Fields said he is confident Jaguar will begin posting markedly improved results this year and next.

No Thin Skin on Ghosn

Despite – or perhaps because of – the daily pressures they face, many automotive executives prove surprisingly thin-skinned in the face of negative publicity. In the course of raising tough questions during auto show interviews, tempers have been known to flare. But while he’s never shy an opinion, Nissan CEO Carlos Ghosn insists he appreciates the media’s critical attitude. “I like it. If you question our ability to reach our objectives, it is reasonable,” and that includes the promise to wrap up the company’s latest growth program by gaining a million incremental sales. It’s admittedly difficult, Ghosn conceded during an interview at Cobo Hall. But he also noted that he’s faced skepticism on a daily basis since taking over the helm at then-troubled Nissan six years ago, and “every time we reach an objective (and set new ones), people keep having a doubt.” The only thing the Brazilian-born chairman said he’d like is that when Nissan makes it’s incremental sales target, “please remember it.”

Ghosn Goes for Two

Barring a last minute change of plans, the Renault board of directors will name Carlos Ghosn its new CEO a little more than two months from now. He also plans to maintain his title as chairman of the French automaker’s Japanese affiliate, Nissan. But don’t expect a wholesale blending of the two companies, he insisted during an interview at the North American International Auto Show. “I believe in the power of brands,” and that requires the two companies to maintain a safe distance from one another, Ghosn asserted, even if it isn’t always the most cost-efficient alternative. There are a number of occasions where they’ve opted not to blend operations, including their separate IT departments, and only about 70 percent of Nissan and Renault purchasing operations have been consolidated. “This is a partnership, not an acquisition, not a merger,” Ghosn underscored, and it’s critical to “avoid the trap of doing synergies just to please the boss. (Otherwise), you may get an obvious solution, but miserable results.” Once he’s taken on the additional CEO title, Ghosn said he intends to spend about 40 percent of his time in Europe, 35 percent in Japan, 15 percent in the U.S. and the rest in emerging markets, such as China . How to measure whether the new arrangement works? “Look at me,” Ghosn suggested, and see, “do I look tired and fed up, or fresh and relaxed.” Oh, and don’t forget, he quickly added, to look at the financial results.

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