Industry Report: May 8, 2006

May 7, 2006

  Chrysler in co-op with China 's Chery?Chrysler Group may be in negotiations with Chinese automaker Chery for the contract manufacture of a new Chrysler world car for sale in markets outside the U.S. Automotive News reports that Chrysler is looking at whether it could build a global car through Chery and sell it around the world under the Chrysler or Dodge nameplate. Chrysler execs wouldn't confirm the Chinese link, but did tell the industry weekly that they are talking with as many as three automakers about building a small car for sale in the U.S. On the shortlist for that project is new joint-venture partner Volkswagen, which will get a version of the next Chrysler minivans to sell to its own American clientele. Chery execs, including the once and future CEO Malcolm Bricklin, say the Chinese company will sell its own vehicles in the U.S. beginning sometime next year. Is Ford Eyeing Aussie Exports?Ford announced on Thursday that its Australian operations would benefit from $1 billion in investment in the next decade. And in a carefully worded press release, Ford hinted that it may see its Down Under ops in the same way GM now views Holden - as a hothouse for future American-style muscle cars and rear-drive sedans. Ford confirmed in its release that its Australian Falcon/Territory sedans and utes would be the basis for new vehicles drawn from its "globally competitive large rear-wheel-drive vehicle platform." Ford also said that its Australian team would begin to design vehicles for left-hand-drive applications. Ford will spend some of the $1 billion on establishing Australia as its "center of excellence" for the Asia Pacific and Africa region. The center will be charged first with developing a new global light commercial vehicle architecture that will spawn commercial vehicles for use in 80 countries.  UAW sets strike voteThe United Auto Workers is calling a strike vote among members employed by Delphi Corp., which is scheduled to go to court next week to press its case for a rollback of the company's labor contract. UAW Vice President Richard Shoemaker instructed UAW local unions representing workers atDelphi plants around the country to schedule strike authorization voting. The voting is to be completed no later than May 14, according to the union's instructions. The UAW represents about 24,000 of Delphi's 34,000 hourly workers. The union customarily schedules a strike vote about 30 days before a contract expires. The hearing on Delphi's motion to rescind the current labor agreements is set for Monday and Tuesday; the judge could rule by mid-June. Lindsay Williams, Delphi spokesman, said the company's focus remains on getting a consensual agreement rather than trying to impose an agreement by court order.-Joe SzczesnyCould a Delphi strike be taking shape? Fields wants "cult of personality" dead at FordThe "Way Forward" at Ford Motor Company does not entail a return to top-down management or "a cult of personality" that the automaker has experienced in the past, Americas CEO Mark Fields declared Wednesday. Addressing a luncheon session of the Detroit Jewish Federation Forum in Birmingham, Mich., Fields also ruled out a scenario whereby the company "packs its tent and steals away into the night," a reference to speculation on bankruptcy filings that has emerged in the media and financial analyst reports about Ford and GM since supplier Delphi's Chapter 11 action began last October.Fields noted that the "Way Forward" reorganization and downsizing strategy has passed the 100-day mark and is making progress. "Like a flywheel, once it starts moving, it makes rapid gains," he said. Fields, 45, said the "way back" for Ford in sales and market share "will produce, as part of our coming bold moves, bold new products that invite consumers to consider more Ford cars and trucks - like the Ford Fusion, F-150, and Ford Mustang."A turnaround expert who led the recovery of Ford's Mazda brand and restored profitability to its Premier Automotive Group of luxury brands, Fields declared he has "never heard or felt one iota of discrimination in my seventeen years at Ford. I read about all the anti-Semitism that Ford had been associated with in the past, before I joined the company, but I'm struck by how inclusive this company is." -Mac GordonFord under siege in North America  April Sales: Toyota Tops ChryslerSales of vehicles sold by General Motors, Ford Motor Co., and Chrysler Group dropped during April but Toyota continued to build on its foothold in the U.S. thanks to the strong sales of fuel-efficient vehicles. With a sales total of 219,965 units in April, Toyota exceeded Chrysler Group sales, which hit 190,095. While not the first time that Japan's top automaker has totaled more sales than the smallest of the former Big Three, the recent momentum at Toyota suggests that it could overtake the Chrysler Group in year-end totals.More on April sales VW Extends Chairman's ContractVolkswagen AG chairman Bernd Pischetsrieder had his contract extended through 2012 by the automaker's supervisory board, after weeks of speculation that labor representatives on the board would vote to get rid of the chief executive. The vote to keep Pischetsrieder was unanimous, according to the company.More on VW's leadership struggles Ten States To Sue Over New CAFE LevelsA group of states will sue the federal government, charging that President Bush's proposed increases in fuel-economy standards don't go far enough in increasing gas mileage. The New York Times reports that the ten states - California, New York, Connecticut, Maine, Massachusetts, New Jersey, New Mexico, Oregon, Rhode Island, and Vermont - will sue, contending that the government has not fully accounted for the environmental impact of gas consumption in revising fuel-economy figures. The lawsuit is a direct challenge to federal standards that are already being challenged on other levels: California is trying to set new emissions rules that would effectively require automakers to boost mileage, a move that the National Highway Traffic Safety Administration (NHTSA) is fighting, along with automakers. The Bush Administration has announced plans to raise truck fuel economy to 24 miles per gallon by 2011 and to set truck fuel-economy standards by size class as well.Gas prices still risingGM Employees Get More Time on BuyoutsGeneral Motors Corp. employees are getting extra time to evaluate buyouts the big automaker began offering last month. The bankrupt Delphi Corp. also is extending its own buyouts until June 23. Workers automatically get an additional seven days from the final date which means blue-collar workers will have until June 30 to decide whether to take one of the packages, which vary in value according to age and length of service.A spokeswoman said Tuesday that the offer was set to expire May 19 but the company and the union decided that people should get more time to make their decision and consultant with financial advisers.  "It's a big decision," she said. GM executives hope the buyout offer will encourage a significant number of blue-collar workers to retire. The buyouts were offered to 113,000 hourly workers at GM and another 13,000 at Delphi. They include offers of $35,000 to employees already eligible for retirement because they have spent 30 years with GM to buyouts of between $70,000 and $140,000 to workers with less time with the company if they agree to sign away claims to pensions and post-retirement healthcare benefits.GM chairman Richard Wagoner has said that the special attrition plan, which will shrink the GM work force significantly, is a key part of the company's turnaround plan. -Joe Szczesny Nissan Profits Rise; Eyes New Markets Nissan-Renault chief executive Carlos Ghosn says that despite enormous difficulties including soaring oil prices and raw material costs, Nissan's profits are holding up. The Japanese automaker reported that its net profit for the January-March quarter rose 9.4 percent from the same quarter the previous year. For the fiscal year ending March 31, Nissan's net profits rose 1.1 percent to $4.5 billion, for six straight years of record profits.Ghosn acknowledged that Nissan's vehicle sales had not grown much during the last quarter. Nevertheless, Nissan is forecasting $4.6 billion in net income for the coming fiscal year, ending in March 2007. "Growth will be hard to achieve in the first half. Volumes will be down and our operating profit will be lower. In the second half, however, volume growth will increase by more than ten percent and we expect our operating profit to accelerate as we begin to launch nine all-new vehicles around the world - one in the first half and eight in the second," he noted. Ghosn says it's still possible to expand its sales worldwide, particularly in emerging markets such as China, Thailand, Russia, Ukraine, and Egypt. One growth method is the expansion of the Infiniti luxury brand, which will bow in Europe in 2008. Infiniti, like Toyota's Lexus brand, has scored in North America and also is sold in Taiwan, the Middle East, and South Korea. Before it bows in Europe, Infiniti will be introduced into China in 2007. Despite the world-market additions, sixty percent of Nissan's profits will continue to come from North America, Ghosn said.Ghosn also emphasized Nissan wasn't counting on the weakness of the Ford Motor Co. and General Motors Corp. to give it a boost. "I don't think that any problem at another manufacturer is any good news," he said. "I don't think that you gain because your competitor is weak." -Joe Szczesny   Quality Problems Fixed at Seven Plants, Ford SaysFord Motor Co. insists it will have seven assembly plants back in operation this week after suffering embarrassing production problems that temporarily idled some 15,000 workers last week. Ford spokesman Anne Marie Gattari said the automaker had identified a problem with an automatic-transmission mechanism that makes the vehicles shift smoothly between first and second gears. The part was out of spec and thus couldn't pass Ford's quality tests, Gattari said.The problem has now been fixed, she said. In addition, none of the parts had actually been used in vehicles delivered to customers, she said.The part was used in rear-wheel-drive transmissions sold on a wide range of vehicles including F-150 pickups, Expedition sport-utility vehicles, E-Series vans and buses, and the Lincoln Town Car, Gattari said. The problem forced Ford to idle the Dearborn Truck, Michigan Truck, and Wixom Assembly plants in Michigan along with plants in Norfolk, Va.; Avon Lake, Ohio; and Cuautitlan, Mexico. The truck side of Kansas City Assembly plant in Claycomo, Mo., also was shut down, she said.The shutdown cost Ford the production of more than 4000 vehicles but Gattari said Ford has more than enough capacity to make up the production relatively quickly. In addition, Ford is sitting on large inventories of many of the vehicles impacted by the problem, including the F-150 pickup truck.Ford is the midst of a major turnaround effort. The world's third-largest automaker lost $1.2 billion in the first quarter; the loss came primarily from the company's North American operations. -Joe Szczesny   

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