Episode 603 – Dealers End Discounts, Big 3 Prefer Bonuses Over Pay Raises, Ghosn’s Job Safe
March 21st, 2011 at 12:02pm
Runtime 7:49
As supplies of vehicles dwindle due to the earthquake in Japan, dealers are expected to end all discounts and sales incentives. GM, Ford and Chrysler want to give workers bonuses based on quality and profits, rather than just give them pay raises. France’s Industry Minister, says he does not want to “destabilize Renault any further” when asked if Carlos Ghosn should step down as CEO. All that and more, plus a look at the new Audi A6 which has been extensively updated for 2012.
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This is Autoline Daily for what is traditionally the first day of spring in the Northern Hemisphere for 2011. And now, the news.
EARTHQUAKE STILL CAUSING DISRUPTIONS
The earthquake in Japan is still having reverberations on the global auto industry. Last week we reported that General Motors stopped production at a truck plant in Louisiana and now the company is halting production elsewhere in the world. Opel will stop production at two plants in Spain and Germany because of a shortage of electronic components. GM is also cutting overtime at two plants for a week in Korea. Nissan is also considering shipping engines built in Tennessee to Japan. Honda says it has enough supplies of cars and parts in the U.S. to last until mid-April.
DEALERS END DISCOUNTS
And this disruption is definitely going to have an impact on car prices. According to The Detroit News, some of the most fuel efficient Japanese imports, like the Toyota Prius and Lexus HS250h, are in short supply. And as supplies dwindle dealers are expected to end all discounts and sales incentives.
BIG 3 PREFER BONUSES OVER PAY RAISES
The UAW meets later this week to set its contract strategy with GM, Ford and Chrysler. The automakers want to give workers bonuses, maybe as much as $10,000 a year based on quality and profits, rather than just give them pay raises. 10 grand is twice as much as Ford paid its UAW workers for last year. But back in the 1990s Chrysler paid bonuses of $8,000 in good years. Detroit’s automakers don’t want to lock in higher labor costs because they still are at a disadvantage to the transplants. Big Three labor is between $56 and $58 an hour with benefits, compared to $56 at Toyota, $50 at Honda and $45 at Hyundai, Kia and Nissan. Bonuses give automakers more flexibility because they can be cut back when the industry goes into a downturn.
GHOSN’S JOB SAFE
While the UAW fights for jobs and job security, looks like Renault CEO Carlos Ghosn gets to keep his. France’s Industry Minister, Eric Besson, says he does not want to “destabilize Renault any further” when asked if Carlos Ghosn should step down as CEO. He said Ghosn plays a key role in Renault’s alliance with Nissan and that the company faces a big challenge as it begins to launch electric vehicles.
THE DETROIT NEWS APOLOGIZES TO BURGESS
Speaking of keeping your job, The Detroit News apologized to readers and its former car critic, Scott Burgess, for removing parts of his criticism of the Chrysler 200 after an advertiser complained. Jonathan Wolman, the paper’s editor and publisher, said “While our intent was to improve the piece by making these passages less grating, our decision to make these changes after fielding an advertiser’s complaint was a humbling mistake.” The Detroit News is offering Scott his job back (subscription required) and all I’ve got to say is, Scottie, GO BACK! They apologized, now get back there and keep writing those great reviews.
REUSS ON AUTOLINE
Cadillac made an impressive turn-around over the last decade, but will GM keep spending the kind of money it takes to keep Cadillac as the “New Standard Of The World?” We put that question to Mark Reuss, the president of GM North America.
Mark Reuss will be my guest on Autoline Detroit this coming weekend.
To know this industry you’ve got to know the product. Coming up next, a quick look at the brand-new Audi A6.
2012 AUDI A6
Audi’s product cadence is rolling right along. The A8 just got overhauled for 2011. Before that it was the A4, and now, after half-a-dozen years on the market, it’s the A6’s turn to go under the knife. Audi’s midrange sedan has been extensively updated for 2012.
The company stuck with its minimalist design theme that’s worked so well over the years. The new A6 isn’t radically different from today’s car, but it’s more aggressive and sophisticated. There’s a lot of complexity in those body surfaces, which is part of the reason it won an EyesOn design award for “Best Production Vehicle” at the Detroit Auto Show back in January.
Inside, it’s easy to see why Audi is benchmarked for its interiors. Everything here is tastefully done. Interestingly, the available wood trim is a special laminated veneer. It’s made up of alternating strips of either ash or oak, and walnut. The look is classic yet contemporary at the same time.
The interior is also home to the company’s latest iteration of MMI, its all-in-one control system. Just like on the flagship A8 it’s available with a special touch pad that allows users to draw letters and numbers with their fingers to input them into the system. Very clever.
Another important thing the A6 borrowed from its big brother is lightweight construction. More than 20 percent of its body components are aluminum, and that’s a trend we are going to see a lot more of in the future.
Under the hood this 2012 model is available with a dizzying array of engines. The base powerplant is a 2.0-liter TDI with 177 horsepower. From there buyers can step up to a wide variety of other options. For now, the top offering is a supercharged, 3.0-liter V-6 cranking out 300 horsepower, but don’t get all excited if you’re part of our U.S. audience. We’re only getting a couple of these engines. It’ll launch with the blown six as its sole powerplant. A diesel will be available later in the year but no word yet which one. It hasn’t even been decided if we’re getting the hybrid or not, which has an estimated fuel consumption of just 6.2 L/100 km. That works out to almost 38 miles per gallon!
Along with the engines there’s quite a selection of transmissions, too, including a six-speed manual, a “Multitronic” CVT or an s tronic dual-clutch automatic.
There’s a lot more to this car than we have time for now, but look for a full report later in the year once we get some time in the driver’s seat.
Audi tells us the new A6 is expected to arrive in the U.S. this fall, BUT it could show up in time for summer. No pricing for our version has been announced yet but it starts at 39,000 Euros in Germany, about $52,000.
And that’s today’s report on the top news in the global auto industry. Thanks for watching, we’ll see you tomorrow.
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Comments (18)
March 21st, 2011 at 1:11 pm
I agree Scott they apologized and did the right thing,return to work.
I’m looking forward to seeing Mark Reuss. He seams like a great executive, someone that GM should look to as the next leader of the company.
March 21st, 2011 at 1:37 pm
For the UAW workers: a fair base salary (they already have that), an avenue for advancement after showing competancy (providing there is an advanced job opening) and profit sharing (above a pre-determined profit margin for the manufacturer); done. Okay, maybe a few other tweaks, but keep reward tied to performance.
March 21st, 2011 at 1:50 pm
The model of bonuses rather than base pay increases makes a lot of sense. The companies can pay the employees more when they can afford to do so, but not be locked into higher base pay which they can ill afford during a downturn.
March 21st, 2011 at 2:08 pm
quite surprised at how close the rates are across the board.
March 21st, 2011 at 2:15 pm
This is not related to this show, but yesterday, I test drove the “Lexus Prius” CT200h, and rather liked it. Compared to a Prius, the steering and handling felt better, it was a little quieter, and the seating position seemed better. Also, it had some gadgets I like that are not on my Prius, like sunroof, a compass, homelink, and auto dimming mirrors. The interior also had more plastic, which I like, and less fuzzy cloth that would be very hard to clean if I got something on it, like coffee stain.
The down side is that the car is really a gas hog compared to a Prius. The Lexus has 42/41 EPA ratings vs 51/48 for a Prius. The cars have identical power trains. Given that the cars weigh the same, the obvious reason for the Lexus’ worse mileage is the body shape, but it also had 215 width tires, vs 195 for the Prius. The Prius has Yokohama which are probably designed with low rolling resistance as a high priority, while the Lexus had Michelin all-season tires which were probably not particularly design for efficiency. Of course, the tires are probably part of why the CT200h drove better than a Prius.
One thing I’ve commented on before, is that I still don’t quite accept vinyl seats as something that belongs in a “premium” car, even though BMW and M/B put them in $50K+ cars. The vinyl in the CT200h was very nice, though.
March 21st, 2011 at 2:47 pm
That Audi A6 sure is nice BUT, Audi really (I mean Really!) needs to work on naming this cars. I mean the A6, how about something extreme (for Audi) like A5+1 or A8-2 or the extreme of extremes… The Audi A3X2=6, cause heaven knows an actual name and hell would freeze over.
March 21st, 2011 at 3:47 pm
When Mark Reuss said he was concerned about mass efficiency in the Cadillac it wasn’t obvious to me he meant ‘lighter car better.’ What is mass efficiency?
And did you guys see PDL in his big boy suit? Cleans up real corporate, he does.
March 21st, 2011 at 5:51 pm
Yeah it was surprising how close the wages are now. So it begs the question of the union wanting get into transplants,what are you going to give them that they don’t already have?? Oh that’s right union dues and strike orders that they may not agree with.
March 21st, 2011 at 6:49 pm
I am impressed the Detroit News “stepped up”.
I sure hope Scott returns to his job and continues with his honest opinions.
March 21st, 2011 at 8:15 pm
Drove two very different cars this weekend for quite a distance: a 2009 corolla and an “03″ 325i. Not a thing special about the corolla except that the seats were comfortable,got swell milage and did what it was supposed to do. Best of all was @about 90k miles,the only maint.costs were oil changes.Who can complain about that!
The BMW had 140k miles but still drove soooo fine and plenty of zip. Can’t forget mensioning the great sound during acceleration. Always had a sweet spot for the 3 series. Unfortunately, std. maint costs were’nt cheap. And near the end of the warranty,additional costs of $500+ has plagued this car every year since. Two sets of caliper pistons in one year! I guess I don’t love these cars that much. IMO, the equally gorgeous Audis will cost even more to keep on the road. Damn shame too!
I’m quite impressed with the accuracy of my UAW projections-spot on! Considering the past turmoils,it was a no brainer for both sides of the table to start being realistic to what is needed to gain rank in a global market. Since wage rates are relatively even,one commentor asked why the UAW would persue transplants.For the union,itself,dues ARE important,but the added membership is the winning element. For the worker, well…. you would’nt understand unless you were one of those expected to work LOTS of OT seven days a week.When is the time to hire another person? Or your kid was sent home from school sick, but had to work 4 hrs. over because the boss forgot the other guy was off that day. These are the types of occurances where a union may be a chosen option. If targeted, the transplant workers should have the right to choose for themselves the avenue they follow. What I do know is that wages for union/non-union are about equal,productivity per worker has increased and most U.S. asembled cars are built with pride and quality. Therefore one could conclude that a union shop is no more a detriment to a company than a non-union one.
March 21st, 2011 at 8:51 pm
Mr. Burgess I suggest you think twice about taking this job at the News. I suspect things will not be the same unless your reviews generate revenue. You may find requests denied for “budgetary” reasons until you resign and move on. I wish they would consider you for Top Gear, God knows they could use some auto expertise and entertainment. Good luck.
March 21st, 2011 at 10:47 pm
Do you really think the transplants wages would be as high as they are without the UAW breathing down the neck of those companies? Get rid of the UAW and you’ll see what the transplants really want to pay their workers, and it won’t be anywhere near as high as it is today. The transplant workers get all the benefits of being in the UAW without having to pay the dues. Sweet set-up if you can find it.
March 22nd, 2011 at 1:18 am
This Chinese wanting to have Foreign companies make low cost domestic brands is not bright.
The reason why….
Once China comes to America those same foreign brands that sell low cost vehicles will just sell them here to compete with the Chinese.
Americans will buy Chinese cars, and with what’s is abotu to happen, many Americans will have no choice but to buy Chinese cars.
Well that’s if they like driving beaters with 2 MPG in a $6 a Gallon new normal
or
Like riding the light rail.
HyundaiSmoke is very abreast of what the elite are planning.
The establishement does not, Can not, and WILL not pay Baby Boomer Retirement- Both Government and Corporate. If you resist them, they will just Kill you.
That’s one of the many plans.
You’d better be as nice and loving to your children as possible, because your future home will be your Child’s house.
They are also in the works of putting the Arabs out of the oil business, as there is more oil in America than there is over there.
Americans have so much untapped oil in fact, that they can sell us gas at $0.60 a gallon, but the planners want to sell it at $6-7 a gallon.
The Rockies have 5 times more oil than Saudi Arabia alone.
That’s the BIGGIE they are hiding.
Much less the big ANWR, Montana, North Dakota, South Dakota, and Alaska finds that arent even being touched.
March 22nd, 2011 at 1:22 am
In the next 9-12 months Gas will continue to slowly rise with a few drops here and there, but in 9-12 months gas will be on the Northern End of $6-$7 a gallon.
Oil will go up to $150-$200 a barrel.
With a depressed Dollar, the purchasing power of this oil will inflate the price.
That’s the plan.
Those who invest in Oil stocks will have fat pockets.
March 22nd, 2011 at 8:58 am
For the ‘air-heads’ who think UAW employees are overpaid, they should think again. Teachers, nurses, fire-fighters, policemen, and auto-workers are NOT overpaid! Unions help set a moderate standard of compensation that allows their members a modest comfort in their working lives. These benefit packages everyone condemms came in leiu of wages, in other words; we won’t increase your wage, but we’ll increase your benefit package (which is good if you use it, worthless if you don’t). Pilots flying jetliners for $20K a yr., cops getting ‘gangsta-killed’ for 35K, UAW workers being cut from $25 per hr. to $15, and everybody shooting for the new norm…Walmart wages! How do you like this ‘conservative, free-market’ crap now! Just remember you guys, YOUR NEXT!!
March 22nd, 2011 at 10:44 am
What ArmyEd said in #12 also applies to technicians and other “lower level” salary employees at the UAW plants. These people get better pay and benefits because of the union, and without paying dues.
March 22nd, 2011 at 3:46 pm
Jim @ #15 They were making a lot more than $25 @ Hr. Janitors at Autocar trucks were being paid $9 in 1979. Minimum wage was $3.15 @ hour. New workers at UAW plants are making less than the people whose benefits they are paying for. (Retirees)Those are the folks that are making $15 @ hour. For a non skilled job that’s not terrible money. No I don’t think your skilled trade for installing lug nuts.
Wages and raises become a catch 22. You want more money to buy things. Your employer now charges more for the goods you make. Others need higher wages to buy your products so they get a raise which raises the price of whatever they do. By the time it’s done your right where you started. Yes you make more ,but you also pay more for the things you buy.
March 23rd, 2011 at 8:08 am
Your right XA, the theory is known as ‘wage & price spiral’. The only thing is the wage part of that equation has stopped, while the price part continues, allowing the ‘gap’ to become larger and the common ground known as the ‘middle’ to become extinct. Thats why we have to stop this conservative madness of forcing the working-class into economic capitulation. Remember, these goons don’t want to pay taxes, and they don’t want to pay for labor. Their remedy is import Mexican labor, ship jobs to China, bust unions, and wreck the tax-base! They are dangerous..