Industry Report: Jan. 9, 2006

January 9, 2006

Chrysler-VW Minivan Deal A Go

Two erstwhile rivals will team up on the development of a new line of minivans. Confirming long-running rumors, Chrysler will provide Volkswagen with a version of its next-generation people carrier. "The logic is simple," VW's global brand czar, Wolfgang Bernhard, told The German automaker has wanted a competitive minivan for its U.S.product lineup, but determined it couldn't develop one on its own. "So why not got to the market leader…and do something together," he added. It helps, of course, that Bernhard was the number-two executive at DaimlerChrysler's U.S.subsidiary until two years ago. The program apparently also makes sense for Chrysler, which has watched the overall minivan market decline in recent years. As part of the deal, VW will now share in the development of the next minivan model, and absorb excess production capacity. Primary engineering will be handled by Chrysler, Bernhard explained, though Volkswagen will oversee design of what he describes as a completely unique exterior and interior. The VW version will be offered only as a long-wheelbase model, and precise sales targets are not yet being discussed. Production is set to begin late in 2007. Asked whether other joint ventures might be in the works, Bernhard hinted that "We are in constant discussions with our friends," but he said no other projects have been approved at this point.

GM Delays Financial Reports

General Motors has quietly pushed back the date for releasing its financial report for the fourth quarter. For the past few GM has released its fourth-quarter financial report during the third week in January but GM's Investor's Web site now says that the reports will be released on January 26. GM offered no explanation for the change. But the company's financial reports have drawn increased scrutiny from the Securities Exchange Commission. In addition, the delay will give GM's new chief financial officer, Fritz Henderson, some extra time to review the financial data the company will be releasing to an increasingly anxious investment community. Ford Motor Co. also has now confirmed it will release financial reports for the both the fourth quarter and the full year restructuring on Jan. 23, which is the same day the automaker will finally release its new, "Way Forward" turnaround plan, which the company has been promising to deliver since October. The new turnaround plan is the second the company has announced in the past four years in an effort to stem the company's continuing losses in its North American automotive business. -Joe Szczesny

Roger Penske: Big Three Overdealered

The U.S. Big Three are overloaded with dealers, says megadealer Roger Penske, because state franchise laws keep automakers from chuck "underperforming" stores. Racing legend and former dealer Penske, chairman and CEO of the 269-store UnitedAuto Group (UAG), said the cost of maintaining so many dealerships raises Big Three marketing costs to higher levels than foreign competitors in the U.S. "Some of the competitors come in and have fewer dealers with larger scale," Penske pointed out. "That gives them the ability to spend more money in the marketplace."

General Motors said it had 7384 U.S. stores as of December 1, 2005, compared to 4436 for Ford Motor Company; 3997 for Chrysler Group; 1422 for Toyota/Lexus/Scion; 1244 for Nissan/Infiniti; and 1274 for Honda/Acura. Penske, 68, predicted that the Big Three would rebound from its current malaise in sales and market share, adding that he expects the U.S. automakers will look to foreign markets to generate most of their future profits.

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