February 3rd, 2011 at 12:00pm
Ford posts disappointing, stock-plummeting profits in the fourth quarter of 2010. Raw material costs and a looming incentives war raise the alarm bells. New York City is holding a competition to determine its “Taxi of Tomorrow” and two-thirds of the finalists are from … Turkey? All that and more, plus John McElroy answers your questions and comments in You Said It!
This is Autoline Daily for February 3, 2011. And now, the news.
U.S. CAR SALES JUMP BY DOUBLE DIGITS
Car sales in the U.S. in January hit an annualized rate of 12.5 million units, the fourth month in a row that’s happened. Total sales came in at 817,000 vehicles, a 17 percent increase over a year ago. Amongst the major manufacturers, Chrysler had the biggest increase in sales of all, nearly 24 percent. General Motors was hot on its heels with nearly a 23 percent increase. Once again, small cars, midsize cars and hybrids lost market share. Crossovers, SUVs and pickups all captured more of the market. There is so much to read into the numbers here that we can’t get to it all. But here’s one fascinating tidbit: the Honda Accord really took it on the chin. In fact, the Chevrolet Impala easily outsold the Accord.
GM & TOYOTA BOOST INCENTIVES
But even though the market is recovering, Bloomberg reports that Toyota and General Motors are raising their incentives. That means they’re going for market share, not for profitability, which could trigger a price war. And that’s a problem for everyone.
WHAT HAPPENED TO FORD?
This is an industry that desperately needs to boost profitability to cover the losses of the last few years, and to fund new product development. But the Ford Motor Company, which has been the darling of the media and Wall Street, posted shockingly poor profits in the fourth quarter of only $190 million. The Street had been expecting profits of nearly $2 billion. That triggered a big sell off in the company’s stock, which plummeted 18 percent in just a couple of days. And that does not look good for the future.
RAW-MATERIAL PRICES SURGING (subscription required)
For months now we’ve been warning that rising commodity prices were going to hurt the industry. Indeed, Ford says rising commodity prices hurt its profitability in every geographic region of the world. Steel makers have increased prices six times since November for a total of more than 20 percent because of surging prices for iron ore. Yesterday Bridgestone announced it is raising tire prices in North America by 8 percent because of surging prices for natural rubber. Ward’s reports that automakers realize they cannot force suppliers to absorb raw-material costs because it could cause parts of the supplier community to collapse. So, automakers are absorbing those costs.
DANGER SIGNS FOR U.S. AUTO RECOVERY
We thought that automakers would pass those costs along to consumers, but in the short run that doesn’t look like it’s going to happen. Instead, we see GM and Toyota starting a pricing war. And we see profits plummeting at Ford. And that means the recovery in the auto industry does not look as rosy as it did just a couple of months ago.
PSA + BMW = BFF (subscription required)
Who says the French and Germans can’t get along? For years PSA and BMW have cooperated on a common, four-cylinder engine architecture and now they’re joining forces to develop hybrid technology. Ward’s reports the two automakers want to work together to save money and gain economies of scale. The companies would also like to sell components and services to other automakers. One potential hurdle the pair face: developing a hybrid system that works with different vehicle architectures. Most of BMW’s models are rear-wheel drive while all of PSA’s are front-drive.
TAXIS FROM TURKEY FOR NYC
There’s a war going on right now, and the battlefield is New York city. Don’t worry; the only casualty will be the Ford Crown Victoria. According to Bloomberg, automakers are vying to win the city’s “Taxi of Tomorrow” competition. Surprisingly, two of the three finalists come from Turkey. It’s down to the Ford Transit Connect and the Karsan V1, which are built Turkey. It also includes a van from Nissan that’s based on its NV200 commercial vehicle. It’ll be interesting to see which one of these vehicles wins the coveted 10-year contract as New York aims to have one vehicle for its entire taxi fleet.
HYUNDAI’S CAFE PLOY
Hyundai is going to start publishing its CAFE numbers every single month. In January the South-Korean automaker’s fleet was rated at 34.7 miles per gallon which is up three tenths from December. John Krafcik, the company’s head honcho in the U.S. is quoted as saying “We look at this information internally, so we thought, ‘Why not share it externally?’” This is an important play and here’s why. Hyundai wants to remind lawmakers and consumers every month that it has the best fuel economy of all. And that could put pressure on regulators to raise CAFE. Of course the company is being a little shady since it IS NOT a full-line manufacturer. But if I were Krafcik, I’d do the same thing.
Coming up next, it’s time for You Said It!
A lot of you posted comments on horror stories of red-light cameras at intersections.
Tony Gray wrote in to say, “Here we go again with the red-light Cameras. It’s a fallacy. They don’t mention the massive increase in rear-end collisions that occur at these same intersections when the cameras are installed.”
Tony you’re right. Those red-light cameras do result in more rear-enders. But I’d rather get rear-ended than T-boned any day of the week
Andy S. weighed in by saying, “The IIHS justifies them because fatalities declined in cities that have red-light cameras. But haven’t fatalities ben declining across the entire country, and if so, aren’t red-light cameras nothing more than another revenue-generating tool for municipalities?”
Andy, great point. Traffic fatalities are way down in the last couple of years. We’ll have to find out if the IIHS used any control locations in its study. You know, like they do with placebos in medical experiments.
And Steve made this point. “Lights at intersections are the past. Can’t wait till they are all replaced with roundabouts. They are far safer than lights, and more traffic moves smoother thru them and are very economical. They just need educate drives how to use them correctly. That’s the only problem with them.”
Steve, I could not agree more. Roundabouts are the way to go. And even though some people can’t stand them, I’ll bet that if they grew up with roundabouts they’d hate traffic lights even more.
And Tom L. saw our report that Renault is going to offer its own brand of tires called Motrio. I wondered who’s really going to make these tires, so he wrote in to say, “Hi John. Pirelli makes the tires for Renault.”
I love it when our viewers send in the information that we don’t have. So keep those letters coming.
Don’t forget to tune in tonight for Autoline After Hours. Our special guest tonight will be John Waraniak, Vice President of Vehicle Technology for SEMA. Also stopping by the studio will be Frank Markus from Motor Trend magazine. So join me and the Autoextremist, Peter De Lorenzo, tonight at 7:00 p.m. Eastern time for Autoline After Hours.
And that brings us to the end of today’s report on the top news in the global automotive industry. Thanks for watching. We’ll see you tomorrow.