Industry Report: Mar. 20, 2006

March 18, 2006

GM Revises 2005 Losses Up to $10B

General Motors says that it's revising its 2005 accounting to reflect even deeper losses in its automotive businesses. The changes will mean that GM lost $2 billion more in 2005 than previously reported, for a total of $10.6 billion. GM says restructuring costs from upcoming plant closings and the reorganization of Delphi Corp., one of its chief suppliers, are at the root of the restatement, which will cause GM to delay some financial reports. GM had previously stated losses of $8.6 billion for last year.

Suzuki Plots Future Without GM by Joseph Szczesny (3/13/2006)
Tiny automaker plans on big expansion abroad.


Acura, at 20, Enjoys Record U.S. Sales

The Acura luxury brand is maintaining a steady growth rate of three to five percent a year in the U.S., even though it does not offer a hybrid model as does its sister Honda brand, says American Honda senior vice president John Mendel. As the first Japanese luxury brand, introduced in the U.S. nearly 20 years ago with only the Legend and Integra to sell, Acura has climbed the U.S. sales ladder steadily to a record 209,610 new-vehicle sales last year, Mendel told the Automotive Press Association in Detroit Thursday.

Mendel said Honda executives approached the proposal for a luxury brand cautiously in the mid-1980s, as did Toyota and Nissan. "Entry premium vehicles accounted for only 17 percent of the market in 1985 and now take up nearly half of all premium vehicles sold," Mendel pointed out. 

A technology pioneer since its inception, Acura will unveil its first turbocharged engine in the new RDX SUV, which will "go on the market soon, going head to head against the BMW X3 SUV," Mendel says. A concept presaging the next MDX will be unveiled at the New York auto show in April, in its first full model change.

Mendel also announced that ground will be broken later this month in California for an exclusive Acura design studio. The West Coast studio will be integrated with Acura's vehicle development center in Ohio.  Acura has no plans to add U.S. dealerships in conjunction with its volume growth, said Mendel. It has 264 dealers now. -Mac Gordon


Chrysler Revamps Healthcare Benefits

Chrysler Group CEO Tom LaSorda will see a nine-fold increase in his health insurance premiums, as part of sweeping changes in medical care at the DaimlerChrysler AG subsidiary. Like all Chrysler salaried employees, LaSorda is currently paying $1000 a year towards his medical coverage, plus various out-of-pocket expenses. That will jump to $9000 under the new policies, which will impact about 17,600 retirees and 14,900 active white-collar workers. "We all have to do our part going forward," LaSorda said, in a letter addressed to Chrysler workers, "and we have to do it in a way that is innovative, competitive, equitable, and provides a long-term solution."

In 2005, Chrysler laid out $2.2 billion to cover healthcare for its white- and blue-collar workers - significantly more than its $1.8 billion profit. Overall costs have nearly doubled since 2000, and are expected to climb to $2.3 billion this year. Like its cross-town rivals, the number-three domestic automaker is struggling to reign in those costs. Currently, U.S. salaried employees contribute about 27 percent of their average $11,000 in medical care, or $3000 annually, in the form of premium sharing, co-pays, and other out-of-pocket expenses. (When added in with union-mandated coverage for hourly employees, and healthcare for workers at its suppliers, Chrysler officials noted medical coverage adds $1400 to the cost of every vehicle it sells in the U.S.) Chrysler follows Ford and GM in unveiling a new healthcare program.

The company's new approach will take into account such factors as age, income, and rank. Administrative workers will see little to no increase, but among 9400 mid-level managers, healthcare premiums will jump an average $450 annually. Among executives, the increase will run $1500, and at the top level of the company, senior execs, such as CEO LaSorda, will pay most or all of their own insurance premiums, currently $9000 annually. White-collar retirees, meanwhile, will pay more, as well. The biggest impact will be on those under the age of 65, who will pay a share of increasing medical coverage, depending on how much they made at the time they retired.

Chrysler "may have to revisit" the idea of increasing co-pays and deductibles in the future, said Kate Kohn-Parrott, the director of the automaker's healthcare operations. And Chrysler is still seeking concessions from its union workers similar to those granted rivals General Motors and Ford Motor Co. last year. -TCC Team

Chrysler Tempers Bad News with Good

There should be no need for white-collar layoffs at the Chrysler Group, despite the headcount reductions mandated by the automaker's German-based parent, DaimlerChrysler AG. In January, DC CEO Dieter Zetsche announced plans to trim 6000 salaried slots in the coming year. But Chrysler's chief executive, Tom LaSorda, revealed a "no-layoff strategy," since it appears the American side of the company can meet its unspecified job cut target through voluntary reductions. That announcement came the same day Chrysler revealed a new, white-collar healthcare program that could see significant increases in salaried employee costs, depending on age, income, and corporate rank. But as another sop to an angry and frustrated workforce, Chrysler officials revealed a much-expanded employee leasing program, which will provide thousands more white-collar workers access to up to two cars annually. "We think this will be a real big morale booster," asserted Chrysler's top spokesman, Jason Vines. -TCC Team

Zetsche Focuses on Bribery Scandal by Joseph Szczesny (3/13/2006)
New CEO sets the Schrempp era aside.

Chrysler Names Gillies Design VP

The lead designer of Chrysler's brassy 300C/Magnum siblings is getting a big promotion. Starting in April, you can call Ralph Gillies vice president of Jeep/Truck and Component Design. Gillies will replace Ricardo Aneiros. A Chrysler employee since 1992, Gillies is credited with the design of the Chrysler sedan and Dodge wagon, which have captured numerous Car of the Year awards.


AFA Relaunches Ford Boycott

The American Family Association, unpleased by Ford's continued outreach to gay, lesbian, bisexual and transsexual (GLBT) groups, says it will urge its members to boycott Ford Motor Company and its brands. The AFA, based in Tupelo, Miss., had trumpeted victory earlier this year when the Rev. Donald Wildmon, AFA leader and Methodist minister, said Ford had agreed to pull advertising from GLBT publications, ads mostly geared toward its Jaguar and Land Rover and Volvo brands. The AFA says Ford has gone back on a promise to stop advertising in GLBT venues and says that "Ford has every right to give hundreds of thousands of dollars to groups promoting homosexual marriage. But those who oppose homosexual marriage have every right not to buy automobiles made by Ford Motor Company." The group is urging members to send emails through its Web site as well. Previous efforts by the AFA to set corporate policy-such as a boycott of Disney over its support of events like the Gay Days gatherings held at its theme parks-have failed to make significant dents in companies' bottom lines.

Daily Edition: Dec. 15, 2005 by TCC Team (12/14/2005)
Nissan Urge concept, Ford reverses on gay ads, C-Class spied.


Toyota Taking Half of Lafayette

Toyota moved ahead Monday with the latest step in its bold expansion plans by announcing plans to build the Toyota Camry at the underutilized plant in Lafayette, Ind., that belongs to Toyota's new partner Fuji Heavy Industries.

Word that Toyota was thinking about building Camrys in the Subaru plant began circulating soon after the Japanese auto giant snapped up an 8.7-percent stake in Fuji Heavy Industries after General Motors Corp. sold off its 20-percent share in Fuji.

Indiana governor Mitch Daniels said the project would create about 1000 jobs at the Lafayette plant by the time production begins in the spring of 2007. Toyota plans to spend about $230 million at the plant to install Camry tooling capable of building about 100,000 vehicles annually under an agreement signed by Fuji and Toyota.

"We are pleased to further boost localization by moving Camry production in Japan to the United States. It's a win-win situation for Toyota and SIA, and for our suppliers whose businesses will grow," said Gary Convis, president of TMMK. "This will be the same high quality and reliability that have made Camry the best-selling U.S. car. We have the highest confidence in SIA to help us continue to meet our customers' expectations," he added.

Finished in 1990, the Subaru plant has not been fully utilized since Subaru's first partner in the venture, Isuzu, backed out of the venture. The plant currently builds the Subaru B9 Tribeca, Outback, Legacy, and Baja. SIA produced about 120,000 Subarus in 2005. The Subaru B9 Tribeca will move to the production line where the Outback, Legacy, and Baja are currently built to make room for the Camry, SIA officials said.

The new Camry production in Indiana will replace imported Camrys from Japan; Toyota will be able to build more Priuses in Japan as a result. With this additional capacity and other expansions underway, Toyota will have an annual production capacity in North America of about two million cars and trucks by 2008.

A new report from CSM Forecasting of Novi, Mich., said Asian carmakers are continuing to expand in the U.S. while GM and Ford are cutting back. The shift in the production base will continue as the big American brands continue to cut production. "This trend will continue over the next few years as we see a realignment of capacity between the traditional Big Three, GM and Ford in particular, and foreign automakers looking to localize output based on strong sales and as a currency hedge," the report said. Toyota produces ten vehicles in North America. -Joe Szczesny

Daily Edition: Mar. 13, 2006 by TCC Team (3/13/2006)
Kia picks Georgia for plant, Toyota building with Subaru.


DC Adds Second Shift in Illinois

DaimlerChrysler announced on Monday that it was launching a second production shift at its assembly plant in Belvidere, Ill., starting this week. Production of the 2007 Dodge Caliber began in January 2006, while production of the new 2007 Jeep Compass at the plant will begin in May. The Belvidere plant is the first in the Chrysler Group's system to launch a new flexible manufacturing process that can build derivative models on a single production line in groups as small as one. The second shift will double the plant's current production capacity. -Joe Szczesny

Zetsche Focuses on Bribery Scandal by Joseph Szczesny (3/13/2006)
New CEO sets the Schrempp era aside.


Kia PicksGeorgia for New U.S.Factory

The long bidding war for the new Kia plant is over - and Georgia is the winner. The South Korean automaker will spend $1.2 billion to construct a new assembly plant near the Georgia-Alabama border outside West Point, Ga., about 80 miles southwest of Atlanta.

Since last year, Kia Motors, an affiliate of South Korea's top automaker Hyundai, has been looking for a site in the U.S. to set up a production line. Georgia had been a frequent loser in the bidding for new automotive plants. Just last year, DaimlerChrysler officially quashed plans to build a Sprinter plant outside Savannah. Ford had identified a site in Meriwether County where the company intended to build a new plant, only to later cancel plans; then Ford later announced the closing of its Atlanta plant. Last year, Kia officials were said to have chosen a site in eastern Mississippi for the plant, but that may have been done to encourage other states to sharpen their bids.

Kia and the state of Georgia will formally announce the project today at a ceremony in West Point. The factory will be Kia's first in the U.S., and it will start producing vehicles in 2009. Kia expects to build 300,000 vehicles each year at the plant, which will employ 2500 workers and will be built on a 2200-acre parcel.

Kia is planning to boost North American sales from 350,000 units this year to 800,000 units a year by 2010.

Daily Edition: Feb. 27, 2006 by TCC Team (2/27/2006)
Geneva opens, Georgia may get Kia nod, XM and Sirius hurting.

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