Industry Report: Mar. 13, 2006

March 12, 2006

No GM-Delphi Settlement Yet, UAW Says

The United Auto Workers nixed reports indicating that it has reached an agreement with Delphi and General Motors Corp. that would allow both companies to move forward with a sweeping restructuring that would eliminate thousands of union jobs. The UAW, which has had stormy relations with the media for years, also took the unusual step of expressly repudiating stories suggesting the parties were closing in on some kind of deal.

"There are several newspapers and at least one radio station reporting today that the three parties-Delphi, GM and the UAW-are close to consummating an agreement to the issues in theDelphi bankruptcy. Nothing could be further from the truth and the media is doing a tremendous disservice to our membership and the negotiations process by suggesting the parties are close," the UAW statement said. "The parties are not close to working out such an agreement. There are many, many significant issues to be resolved. Overall the situation has changed very little since our last meeting," the union statement said. "In view of the media reports and the false hopes they tend to create, we thought we should correct the record," the statement said.

The erroneous reports apparently arose with the confirmation that officers from UAW locals representing Delphi workers had asked to attend a meeting in Detroit next week.

Paul Krell, a union spokesman, said the meeting had been planned for a while and the agenda was designed to bring union officials up to date on discussions. "The suggestion that we have an outline of an agreement to review with you is unfortunately, just not true," he added.

Last month, Delphi set a deadline of March 30 for reaching some kind of an accommodation with the UAW and the other unions representing the bankrupt company's hourly employees.  Without an agreement in place, Robert "Steve" Miller, Delphi's chief executive, has said the company will have no choice but to ask the bankruptcy judge to nullify Delphi labor contracts.-Joe Szczesny

Dana Plunges Into Bankruptcy by Joseph Szczesny (3/6/2006)
Quick filing for major supplier adds to Detroit 's worries.


Former Ford Exec Petrauskas Dies

Helen Petrauskas, former Ford executive and one of the people responsible for making airbags standard equipment in the company's cars, died on Wednesday after a long battle with cancer. Petrauskas had joined Ford in 1971 as an attorney, then moved to environmental and safety engineering. As one of Ford's first female vice presidents, Petrauskas was a leading champion of installing airbags into vehicles. She retired in 2001.

Chrysler Invests $1B in Toluca

The Chrysler Group is planning to spend $1 billion on upgrades at its assembly plant in Toluca, Mexico, the home of the PT Cruiser. Part of the money will be spent on making the Toluca plant more flexible so it can build more derivative models on the same assembly line: the improvements will include a new body shop and additional robotics, DaimlerChrysler officials said. The investment also includes the creation of two supplier parks that will be laid out for just-in-time operations and will bring modular assembly systems such as headliners, cockpits, front-end modules, and front and rear suspensions to the assembly site, which reached a major milestone recently when it produced the one millionth PT Cruiser.

Eric Ridenour, Chrysler Group chief operating officer, said "Our Mexican Manufacturing Operations have earned this investment by embracing flexible work force processes," he added. "The Chrysler PT Cruiser set new world standards with its unique styling and interior roominess. The bottom line is that consumers are demanding more of our remarkable products, and our Toluca Assembly Plant employees played a key role in the success of this vehicle," he said. -Joe Szczesny

2005: The Sales Year in Review by Mike Davis (1/11/2006)
Some surprises when you dig behind the brand names.


GM Cutting Suzuki Stake

General Motors Corp. says it will reduce its stake in Suzuki Motor Corp. from 20.4 percent to 3.0 percent by selling 92.36 million shares of the Japanese automaker through an open-market buyback program. GM expects to net between $550 million and $750 million from the sale. Rick Wagoner, GM chairman and CEO, said in a statement that the deal will allow GM to preserve its business relationship with Suzuki while further building up GM's liquidity position during the company's turnaround. The companies also are partners in CAMI Automotive, Inc., in Canada, which builds vehicles such as the Chevrolet Equinox and Pontiac Torrent as well as new Suzuki crossover vehicle that will make its debut at the New York Auto Show next month. In addition, GM and Suzuki plan to work together on a proposed new automatic transmission. Nevertheless, the sale of the Suzuki shares marks another step backward from the company's highly touted alliance strategy of the 1990s. GM's partnership with the Italian carmaker Fiat ended last year with a writeoff of more than $2 billion. GM also sold off its take in Fuji Heavy Industries to Toyota last fall.-Joe Szczesny

2006 Suzuki Grand Vitara by Bengt Halvorson (12/12/2005)
Short of an all-out transformation - but a lot prettier.


GM Shifting Pension Plans

General Motors will be changing the way it allocates money to employee retirement benefits, away from defined-benefit plans to plans that depend on bigger employee contributions. The AP reports that GM's new plan will freeze accrued pension benefits for about 40,000 current employees on January 1, leaving currently retired employee benefits intact. After Jan. 1, employees hired before 2001 will retain pension plans that will pay out a reduced amount from today's levels. Those hired after Jan. 1, 2001, will be moved to a defined contribution plan that will allow employees to cash out when they reach retirement age. GM also will change its matching plan to half of employee contributions up to four percent. The changes could reduce GM's pension liabilities at the end of the year by about $1.6 billion.

Wagoner Rumors Start to Swirl by Joseph Szczesny (3/6/2006)
Will GM lose its CEO to financial churn?


DaimlerChrysler Spells Out Risks

DaimlerChrysler has listed a number of risks to global business in the company's new annual report. One notable threat, the report noted, is that the U.S. economy is increasingly dependent on the inflow of foreign capital to finance its rapidly growing current-account deficit, and this situation has become a source of considerable risk potential. If the capital inflows cease to be available in the required volumes, the country's current-account deficit will have to be corrected. This could be done by means of higher interest rates and a drastic depreciation of the U.S. dollar, leading to significantly lower growth in the United States and in other regions of the world. Additional risks that would weaken economic growth in the United States are a further increase in capital-market interest rates and a fall in real-estate values, which to a certain extent are inflated by speculation. Both of these factors "would substantially reduce private consumption" and, as a result, sales of new cars and trucks would fall. The irony, of course, is that DaimlerChrysler has lived for years off exports to the U.S., which another part of the report spelled out, is the company's largest market. DaimlerChrysler also predicted that the sales of commercial vehicles will slow significantly in 2007.-Joe Szczesny

Spy Shots: '08 Chrysler Minivans by KGP Photography (3/6/2006)
More upright and more international, by design.

Dana Bankruptcy Underscores Auto Weakness

The bankruptcy of Dana Corp. is the fourth major failure in the auto industry in the past 13 months, and it has sent more shockwaves through a sector that is in "chronic crisis," according to industry analysis from Euler Hermes ACI, which specializes in insuring credit lines. Dana's bankruptcy follows the bankruptcies of Tower Inc., Collins & Aikman and Delphi Corp. With $9 billion in annual revenue, Dana Corp.'s bankruptcy took a lot of investors by surprise, said Tony Clary, Euler Hermes vice president and automotive Risk Industry Manager.

The Dana insolvency again confirms that the auto industry is one of the most challenged in the U.S. marketplace, he added. "Six months ago Dana was still an investment-grade company, and just two months ago they released information showing $42 million net income, which was considered good in a weak industry. This just goes to show how quickly events can turn within a troubled sector."

Dan North, Euler Hermes chief economist, said the automotive industry continues to be hurt by the sector's weakened pricing power. "A key issue with the automotive industry is that unit labor costs are continuing to rise, but automakers cannot raise prices because of increased competition," said North. "That means profit margins are being squeezed even tighter than in the past, which is hurting everyone down the supply chain." -Joe Szczesny

Dana Plunges Into Bankruptcy by Joseph Szczesny (3/6/2006)
Quick filing for major supplier adds to Detroit 's worries.

Nissan's Connelly Retiring; Bradshaw Taking Company toTenn.

Confirming a report that first appeared on last month, Nissan's top American executive, Jed Connelly, has confirmed he will leave the automaker's U.S. marketing arm before it begins a much-debated move to Nashville this summer. The 60-year-old Connelly, who originally joined Nissan in 1989, insisted the move wasn't the reason for his planned July 1 departure, though it proved a good point to retire. "Sometimes you put the new team in place and get out of the way," explained Connelly, senior vice president of sales and marketing for Nissan North America, during a Wednesday conference call with reporters. "The physical transition provided the perfect timing." That transition will place Brad Bradshaw, now NNA's vice president of sales and marketing, at the helm of the relocated company.

Last year, Carlos Ghosn, CEO of both Nissan Motor Co., and its French partner Renault, ordered the company to pull up stakes from the Los Angeles and move to Nashville, not far from Nissan's Smyrna, Tenn., assembly plant. The decision is expected to yield significant cost savings, though many observers believe it could also result in some disruption for Nissan. During the Wednesday call, company officials reported that 47 of 60 senior executives have agreed to relocate, but only about half of the rest of NNA's 1300-member workforce have accepted transfers. The impact will be especially hard-felt by the financial side of the company, noted Connelly. Even so, he insisted, "I think we've got everything we could think of smoothly in place…(and) that'll ride us through the rough water." The relocation is expected to take until August 1. Meanwhile, Nissan officials reported that so far, they've been unable to line up a buyer for the Southern California headquarters they soon plan to abandon. -TCC Team

Ghosn Puts His Stamp on Renault by Joseph Szczesny (2/20/2006)
New plan includes major move upmarket.

Nissan Picks HQ Design Team

Yesterday TCC told you about the exec changes at Nissan in advance of the company's move to Tennessee. Now, Nissan has chosen the architects that will build its new headquarters in suburban Nashville. Gresham, Smith and Partners (GS&P) will be the firm to pen the company's new offices, which will take about two years to complete and are expected to be occupied in 2008. Until then, the company will use an office building in downtown Nashville for its workers, of which Nissan expects more than 50 percent to make the pilgrimage from Los Angeles to Tennessee.

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