Industry Report: Feb. 13, 2006

February 12, 2006

2008 Toyota Tundra: One Big Mother?

2008 Toyota Tundra

2008 Toyota Tundra

2008 Toyota Tundra

2008 Toyota Tundra

In a market increasingly dominated by imports, there's one segment still controlled by the Big Three. But maybe not much longer, at least not if the 2008 Toyota Tundra connects with demanding American full-size pickup buyers. The long-awaited update of the Toyota truck blew into the Windy City on Thursday, and as one company executive suggested, "it's a big, bad mutha." The Tundra Double Cab Limited on display at Chicago's McCormick Center, boasts a whopping 145.7-inch wheelbase, a full ten inches longer than the '06 Access Cab model it replaces.

The 5.7-liter V-8 under the hood of the show car will be one of three different engines Toyota offers when the new Tundra comes to market next January. (There'll also be a 4.7-liter V-8 and a fuel-stingy 4.0-liter V-6, according to Toyota Motor Sales CEO Jim Press.) The big V-8 is mated to a new six-speed automatic. The automaker was selective with statistics, declining to provide precise mileage, power, and performance statistics - perhaps hoping to see what General Motors will claim when it rolls out its own new full-size trucks later this year. But one number did generate a buzz among the attendant horde of automotive journalists: the new Tundra will deliver Class 4 towing capacity of up to 10,000 pounds. Toyota officials are clearly nervous that the big truck will skew downward their corporate fuel economy numbers, tarnishing an image otherwise burnished by the high-mileage Prius hybrid. So they took pains to promise that Toyota will maintain the best overall fuel economy of any full-line manufacturer. And company insiders hint a fuel-efficient diesel option is under development, as well.

2006 Chicago Auto Show Coverage by TCC Team (2/6/2006)

Boom Times for the Industry?

Last year was the third-best ever for the U.S. auto industry, but just barely. Sales were heavily driven by lavish incentives, and tumbled late in the year when the programs wrapped up. Volumes showed some improvement in January, and Toyota Motor Sales' Jim Press believes the figures will reach 17.2 million for all of 2006, which would be the industry's second-best year. But that's just setting the stage for the boom Press is predicting for the next decade. During the keynote speech at this year's Chicago Motor Show, the Toyota executive said "We believe annual sales of 20 million are in reach within the next decade." Press pointed to a variety of factors for his optimism, including the coming of age of Millennial drivers, booming immigration, and the general affluence of American motorists. It also helps to have Baby Boomers living longer than ever and planning to keep driving as long as possible. Press did admit there's a potentially dark side to automotive growth: rising demand for decreasing reserves of oil, for one thing, resulting in global warming and increased traffic congestion. Products like the high-mileage Prius hybrid are an example, said Press, of how cars can "become part of the solution, not the pollution." And he said that while there's clear demand for more highways, technology will be needed to squeeze more cars onto existing roadways without reaching gridlock. -TCC Team

Domestics Pose Sales Surprise in Jan. by Joseph Szczesny (2/6/2006)
GM, Ford and Chrysler all up for the month.

LaSorda: Reports of DCX Collapse Overdone

Tom LaSorda, the Chrysler Group chief executive officer, said despite reports to the contrary, it was premature to suggest that Chrysler's comeback is over. While the company has been reducing production of some vehicles such as the Dodge Durango to reduce inventories, it is using incentives to boost sales of other vehicles. But it also is preparing to launch ten new vehicles this year, which promise to create new opportunities for sales. Most of the new products won't hit the showroom until the second half of the year, he added. However, the Chrysler Group is already studying the feasibility of adding a third shift to its assembly plant in Belvidere, Ill. which is now producing the Dodge Caliber and soon will build the Jeep Compass and Patriot. Production at the Belvidere plant is expected to double this year, he added. The introduction of other new vehicles such as the Dodge Nitro also will boost Chrysler's sales totals this year. LaSorda, however, also stressed the company is taking a close look at costs and has already launched a study of GM's plan to cap the pension benefits and post-retirement healthcare benefits of workers, to see if similar changes make sense for the Chrysler Group. -Joe Szczesny

Zetsche Tightens Control on DC by Joseph Szczesny (2/6/2006)
New DC CEO is putting more distance between his and the Schrempp era.

Chrysler Going Its Own Way to Fuel Gains

Ethanol fuel clearly has a place in the U.S. market. "You need to be there with a product," said Chrysler Group marketing czar Joe Eberhardt. But unlike its cross-town rivals, Ford and GM, the DaimlerChrysler unit does not intend to make a big push for E85. Chrysler will focus more of its attention on another type of fuel that could improve mileage and reduce dependence on import oil, said Eberhardt. "We'll take a leadership role in diesels," he told Chrysler already offers a diesel version of its Jeep Liberty model and a version of its big Dodge Ram pickup. Eberhardt declined to say what other models might be in the offing, but he said diesel will definitely have more of a role at Chrysler. Part of the problem right now is that tough new emissions standards require the most advanced diesel control systems. But that technology won't work in the U.S. until low-sulfur fuel becomes available, about a year from now. Until then, diesels will largely be locked out of markets such as California and New York. But, added Eberhardt, "Eventually, I would see it (the diesel) having the same penetration as hybrids." -TCC Team

LaSorda Hits Cost of Litigation

Lawsuits are adding $500 to the cost of every car and truck sold in the United States, said one of DaimlerChrysler AG's top executives. Thomas LaSorda, the chief executive officer of DaimlerChrysler's Chrysler Group, said during a visit to the Chicago Auto Show that the legal system levies what amounts to a tort tax, which results in higher consumer prices, higher insurance rates, higher healthcare costs, and less innovation by American-based companies.

"Perhaps a little blue-collar grounding and manufacturing common sense could go a long way in making sense of the U.S. legal system. It would allow all of us in business to use more of our limited resources where they count," said LaSorda, who was raised in a working-class household in Windsor, Ont., across the river from Detroit.

LaSorda said he was prompted to look at the high cost of the American legal system during his drive to cut costs within the Chrysler Group, which has eliminated 40,000 jobs since 2001. "It was the one area where costs kept rising and I asked why," he said.

What he found was that the legal system, which he says allows witnesses in product liability cases to tell only part of the truth, is badly in need of reform. In many states, juries aren't allowed to hear whether someone involved in an accident was wearing a seatbelt or if they were driving under the influence of drugs or alcohol.

"We need to set some reasonable and fair limits on damages," he added. "For every dollar awarded in tort liability, the typical injured party receives only about 46 cents to compensate them for injuries. That means the majority of every dollar goes elsewhere," added LaSorda, who noted that lawsuits have become one of fastest growing industries in the U.S. and now generate more than $46 billion in fees annually.

The U.S. now spends about 2.23 percent of its GDP on legal fees and other costs associated with litigation while countries such as France, Japan, and Canada spend less than one percent of the gross domestic product on litigation. "In my business, we have a word for this kind of non-value added cost: waste," LaSorda said.

LaSorda also said, "There is no question that the employer-based healthcare system is broken. While other countries have found a way to help their businesses with the burden, we've not done this in the United States. Healthcare is an important structural issue that needs to be addressed but this will require long-term solutions across all industries," added LaSorda. -Joe Szczesny

OnStar Readies New Service

General Motors Corp. used the tenth anniversary of OnStar's introduction back in 1996 to bring on a new service that offers drivers directions through the car's audio system. The new system will eliminate the need for video screens and helps the driver keep his eyes firmly on the road, according to Chet Huber, OnStar President. Users call an OnStar advisor and ask for directions. In turn, the advisor, using GPS, sends the most direct, step-by-step directions to the vehicle via the OnStar system. Audio directions are then played through the vehicle's stereo system when they are needed even if the driver is playing the radio or a CD. A small display on the instrument cluster also can be used to relay text directions. The system also will automatically issue corrective instructions if the vehicle strays off course. Huber said GM believes the new system will appeal to consumers who already depend on OnStar for peace of mind. GM is prepared to equip as many as one million new vehicles with the turn-by-turn technology at the start of the 2007 model year later this year, Huber said. The system uses an enhanced wireless data network and improved positioning technology. -Joseph Szczesny

Humvee Out, International MXT In the Army?

A quiet revolution is underway in the sourcing of military vehicles and the International Truck & Engine Corp. of Chicago is hoping that its new $69,900 MXT 4X4 can fit into the mix. "The new MXT is a symbol of our company's commitment to breaking through into new markets," said Dee Kapur, president of International Truck Group. Kapur said that International has been asked to provide prototypes of the truck to the U.S. Department of Homeland Security and the U.S. Department of Defense for use by agencies such as the U.S. Border Patrol, the U.S. Army, and other services. Kapur also confirmed that International also has won one contract from the DOD to build a prototype for a vehicle that would eventually become the replacement for the U.S. Army's fleet of Humvees. Lockheed Martin also won a contract to build a prototype. But AM General of South Bend, Ind., appears to have been shut out of the competition, which is being refereed by the U.S. Army's Tank & Automotive Command in Warren, Mich. -Joseph Szczesny

York: GM Should Drop Saab, HUMMER by Joseph Szczesny (1/10/2006)
Company has 1000 days of cash left, Kerkorian's wingman says.

MotorWeek Gives Civic the Nod

The Honda Civic walked away with "Best of Year" award from MotorWeek, the weekly PBS show that bills itself as television's "Original Automotive Magazine." John Davis of MotorWeek said that "the suite of Civics" that Honda brought out last fall were "the right vehicle for the right time." The Honda Civic also walked off with a Drivers' Choice award from MotorWeek as the Best Small Car, while the Hyundai Sonata was named the best family sedan. The Honda Odyssey was named the best minivan while the Pontiac Solstice was named the best convertible and the Infiniti M was named the best luxury sedan. The Ford Mustang was named the best peformance car and the Toyota RAV4 was named the best small sport-utility vehicle, while the Ford Explorer/Mercury Mountaineer walked off with a Driver's Choice Award as the best family sport-utility vehicle. The Ford F-150 was named the best pickup truck; the Toyota Highlander Hybrid was named the best eco-friendly vehicle; and the Chevrolet Corvette Z06, Dodge Viper SRT10 Coupe, and Ferrari F430 were named the best dream machines. -Joe Szczesny

AutoNation, Lithia Post 2005 Revenue, Profit Gains

AutoNation, Inc. and Lithia Motors weathered severe storms and sales downturns at General Motors and Ford in the fourth quarter, each publicly-owned dealership group recording revenues increases for the full year despite the challenging climate. Lithia's 94 western and southwestern dealers boosted total revenues for 2005 by ten percent to a record $2.94 billion. The Medford, Ore.-based Lithia, whose top vehicle supplier is Chrysler Group, reported that net income for the year advanced to $49.8 million despite a dip in the fourth quarter.  Chairman and CEO Sid DeBoer attributed the late-year decline to a "pullback" of new-vehicle sales caused by the "employee price" strategy used by the American brands in the summer months.

Top megadealer AutoNation was hit hard in the final period by Hurricane Wilma, which damaged nearly all the Fort Lauderdale-based group's Florida dealerships. Chairman and CEO Mike Jackson said that the fourth-quarter sales declined at AutoNation to $4.485 billion and net income to $75.3 million from $4.751 billion and $161.8 million a year earlier. "All our Florida stores are back in operation now," said president and COO Mike Maroone in a media/analyst conference call.

For the full year, AutoNation's 280 dealerships tallied $19,253 billion in revenues, up one percent from the prior year. Net income reached $496.5 million, up from $433.6 million in 2004. Jackson called on automakers to adopt "transaction prices" as their listed suggested retail prices, which would be markedly lower than the prices shown now on the Monroney labels. "If we can deal with market prices, we can accept the profit-margin trims the Detroit automakers have imposed," Jackson said. -Mac Gordon


GM Following Yellow Line; Who's Following?

2007 Chevrolet Avalanche

2007 Chevrolet Avalanche

2007 Chevrolet Avalanche

2007 Chevrolet Avalanche

The billboards plastered all over Chicago's
McCormick Place
generated a bit of confusion when the media hordes descended on the Windy City convention center. "Live Green, Go Yellow," they declare. And it turns out they're the slogan for General Motors big push for ethanol, a campaign teased with a pair of commercials aired during last weekend's Super Bowl. The automaker hopes to see a rapid increase in production and distribution of E85 - a blend of 85 percent ethanol and 15 percent gasoline, said marketing executive Brent Dewar. Since ethanol can be produced from a variety of grains, such as corn - hence the reference to yellow - it is a renewable alternative to imported oil, and said Dewar, part of the process of "ultimately removing the automobile from the environmental debate."

So far, GM reported, it has produced more than 1.6 million flex-fuel cars, trucks and crossovers, vehicles that can run on any blend of gasoline or ethanol. The problem is that few consumers actually use the fuel. At the moment, there are no more than 500 E85 pumps in the United States. But "the intent is to build the infrastructure," asserted Beth Lowery, who heads GM's environmental efforts. The more E85-capable vehicles, she added, the more likely energy companies will provide the fuel. The effort is also getting a push from the President, who spotlighted ethanol during his State of the Union speech. With automakers like GM and Ford partnering with Shell, VersaSun and other ethanol providers, industry prognosticators are hoping there'll be 2000 E85 pumps dotting the U.S. map by the end of 2006.

GM Slashes Exec Pay, Dividend by TCC Team (2/7/2006)
Still more "shared pain" could be in the offing, CEO Wagoner suggests.

Ford Gets E85 Out with Kermit

Kermit and Anne Stevens

Kermit and Anne Stevens

Kermit and Anne Stevens

Kermit and Anne Stevens

Ford had some E85 announcements of its own to make in Chicago. It rolled out a prototype Escape Hybrid that can run on gasoline or ethanol, with the help of Muppet Kermit the Frog. Like GM, Ford is partnering with various energy suppliers to expand availability. "Consumers aren't willing to drive 50 miles" to find ethanol, said Anne Stevens, Ford's second-in-command in the U.S. But more pumps mean more motorists will actually fill their flex-fuel vehicles up on E85, rather than gasoline, she contended. But not everyone is quite so confident. For one thing, ethanol is currently a good bit more expensive than gasoline and doesn't deliver quite as much mileage-not to mention the fact it competes with food production from the same basic grains. "There are still a lot of questions about what the real benefits (of ethanol) will be," cautioned Jim Press, CEO of Toyota's U.S. operations.

Bush Takes Ethanol Message on Road by Joseph Szczesny (2/6/2006)
Follow-ups to State of the Union press for break from oil "addiction."

Press: Fuel-Economy Numbers "Misleading"

Press's skepticism could also reflect the fact that Toyota has been betting its environmental reputation on its growing lineup of hybrid-electric vehicles - products that have generated some controversy of their own. The EPA is proposing changes in mileage tests, and some observers estimate products like the Toyota Prius could see their own fuel economy ratings dip by 20 to 30 percent. Press said he supported the new rules because, "the advertising (of current mileage estimates) is misleading." Toyota is investing $7 billion a year on the development of higher-mileage and alternative fuel vehicles, Press added. Ultimately, he suggested, there is likely to be a "matrix" of different powertrains - gasoline, ethanol, hybrid, diesel and even hydrogen - filling the varied needs of American motorists.

2007 Toyota Camry by Bengt Halvorson (1/30/2006)
Ready to spoil a new round of frugal family buyers - and keep its best-selling title.

New Tundra Has MichiganRoots

The hubbub over Toyota's new Tundra pickup truck has been building for months, with the Japanese automaker nearly done with a new plant in San Antonio, Texas, where it will produce the truck. It turns out, though, that the first "production" truck ready for public viewing at the Chicago Auto Show was built not in Texas but by a team of technicians in a secretive pilot plant near Ann Arbor, Mich., in a part of the Toyota Technical Center. The new San Antonio-built truck will reach the public in about 11 months and Toyota is targeting sales of 200,000 units in 2007, according to Jim Press, Toyota Motor Sales, chief operating officer. The San Antonio plant simply wasn't ready to produce the pilot version in time for its official introduction in Chicago, Press said.-Joe Szczesny

Spy Shots: '07 Toyota Tundra by Hans Lehmann/Hidden Image (1/30/2006)
The first pictures, ahead of Chicago's launch.

GMT900 Ahead of Schedule

With the bad news piling up, General Motors is basically betting the company on the success of the GMT 900. Gary White, the vehicle line executive responsible for the trucks and sport-utility vehicles in the 900 family, said the program is ahead of plan. "We're ahead of schedule," he said in Chicago when TheCarConnection caught up with him after watching rival Ford roll out the makeover of the 2007 Lincoln Navigator at the Chicago Auto Show.  White said GM's assembly plant in Arlington, Texas, is already building the Chevrolet Tahoe and Yukon and two weeks ago added the 2007 Cadillac Escalade to the mix. GM's assembly plant in Janesville, Wisc., also began building the Tahoe and Yukon last month and GM is soon planning to move ahead with the long-wheelbase versions of the new SUVs and then add the Avalanche to the mix in March, he said. The success of the various GMT900 models is considered critical to GM's hopes of regaining profitability, analysts have said. An accelerated production schedule also enhances GM's cash flow and relieves more of the financial pressures faced by the company.-Joe Szczesny



Ford Keeps Part of "Way Forward" Secret

Ford Motor Co. isn't prepared to offer any more details about its "Way Forward" restructuring plan, said Anne Stevens, Ford executive vice president and one of the chief architects behind the effort to revive Ford's struggling automotive business. Stevens also said the company was still evaluating specifics such as what additional plants it will closes as part of the restructuring. Ford assembly plants in Wixom, Mich., Atlanta and St. Louis are preparing to close as part of the effort to reduce the company's assembly capacity. Ford also is discussing closing two additional assembly plants to further reduce capacity. Stevens, however, noted that Ford also wants to retain some flexibility as it moves ahead with the plan. In 2002, Ford outlined most of the details of the plan right from the start but wound up painting itself into a corner, she said. As circumstances change, Ford found it was difficult to alter the plan because of its earlier public statements. Ford would like to avoid repeating the mistakes of 2002, she said. Other Ford officials also said the company is still wrestling with what to do with the Lincoln Town Car and the platform on which it rides.  So far, Ford hasn't found a home for the Town Car, which will be evicted next year from its long-time home in Wixom. Ford is still looking at various scenarios for moving and/or enhancing the Town Car, Ford officials said in advance of the Chicago Auto Show. The final decision isn't far off but it has not been made yet. Stevens also declined to say whether in the wake of the planned cuts spelled out in the restructuring plan, the company's automotive business will return to profitability in 2006. "We're not saying anything in connection with 2006," she said.-Joe Szczesny



York Gets GM Board Seat

Jerry York, Kirk Kerkorian's car guy, was named to General Motors Corp.'s board but the giant automaker held up in announcing any major changes to its dividend policy in the wake of the monthly meeting of the GM's directors.

GM saidYork will officially become a director February 7 and he will serve on the board's public policy and investment funds committees. The announcement also heads off what could have become a potentially divisive proxy fight with Kerkorian, who now controls about 9.9 percent of GM's stock and who said last year he wanted a representative on the board.

"Jerry brings years of business experience and knowledge of the automotive industry to the GM Board," noted Rick Wagoner, GM chairman and chief executive officer. "We are pleased to welcome him to our Board," Wagoner said.

York has been a consultant to Kerkorian's Tracinda Corp. for more than a decade and in 1998, he played a pivotal role in the Chrysler Corp.'s decision to accept the offer from Daimler-Benz that created DaimlerChrysler.

Last month, York served up a blistering critique of GM's management in which he warned that GM had only about 1000 days of cash reserves left on hand and needed to change and change dramatically, even before GM posted a $8.6-billion loss for 2005. He also called for a cut in the company's dividend, reductions in executive salaries, and the elimination of brands such HUMMER and Saab.

Wagoner also disclosed that Stanley O'Neal, the chairman of the Merrill Lynch, had quit GM's board. In submitting his resignation, O'Neal cited increased time demands resulting from the expanded schedule of GM board meetings which were difficult to accommodate given his responsibilities at Merrill Lynch, as well as limits on his ability to act as a GM director because of potential conflicts with matters in which Merrill Lynch is involved, GM said.

GM is currently trying to sell part of GMAC, its financial services subsidiary, and Merrill Lynch, as one of the world's largest financial services companies, is likely to be involved in any potential deal. -Joe Szczesny

York: GM Should Drop Saab, HUMMER by Joseph Szczesny (1/10/2006)
Company has 1000 days of cash left, Kerkorian's wingman says.

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