Episode 27 – Steel Prices Plummet, Bailout Unlikely for Big Three, CNG Civic For Indiana
November 19th, 2008 at 12:00pm
Runtime 5:30
Bailout money looks unlikely until Barack Obama is sworn in as President. Steel prices are plummeting along with demand. Honda will build the CNG Civic in Indiana starting next year. All that and more, plus John answers viewer questions on why the auto industry will turn around in 2010 and what would happen to the Volt if GM were to go bankrupt, in the “You Said It!” segment.
Transcript and Story Links after the jump . . .
Here are today’s top headlines. Bailout money looks unlikely. Steel prices are plummeting. And Honda will build the CNG Civic in Indiana.
Up next, we’ll be back with the news behind the headlines.
This is Autoline Daily for Wednesday, November 19, 2008. And now, the news.
Bailout money for the auto industry doesn’t look good, but that shouldn’t surprise anyone. This is a lame-duck session in Congress, one where many members who lost in the last election are only back in Washington this week to pack up their belongings and empty out their offices. And most of them are Republicans who are very angry at the UAW for helping them get thrown out of office. I said from the very beginning that getting a bailout in this Congress is extremely unlikely. But I’d say it’s almost a slam dunk they’ll get the money after Barack Obama is sworn in as president.
Along with everything else, demand for steel is plummeting, and the price is crashing. Over the last two years prices of steel and iron ore more than doubled. But the Wall Street Journal reports that steelmakers are now suspending contracts with their raw material suppliers (subscription required). Other metal prices, including aluminum, copper, and nickel are also plummeting, which will provide some relief to automakers and suppliers.
One problem facing the Detroit automakers is that they can’t charge as much for their cars than competing brands. In a report from the Wall Street Journal, the typical Ford Focus and Chevy Cobalt sell for three to four thousand dollars less than the average Honda Civic. When you add the numbers up, Honda earns $3 billion more per year selling the Civic than Ford makes from the Focus.
Autoblog is reporting that more spy photos of the Mercedes-Benz SLC Gullwing supercar have been posted to the web. This batch of pictures finally shows the car’s interior, though the image quality is pretty poor. Right now there’s not a whole lot that’s for certain about the new car. It’ll probably be the performance successor to the SLR McLaren, though it may not even be badged a Mercedes. Instead it might get an AMG label.
Bentley just introduced the Azure T convertible with 20-inch, 5-spoke wheels, ‘Le Mans’ front wing vents, dark tint matrix grille and a sculpted, retractable Flying ‘B’ mascot. Under the hood the Azure T is equipped with a twin-turbocharged V8 that produces 500bhp. What’s it cost? Merely an arm and a leg.
Honda will build the natural gas powered Civic GX at its plant in Indiana beginning next year. The plant began manufacturing the 4 cylinder Civic last month. Honda will only sell about 1,000 GX’s this year, so it looks like it plans to increase that number.
Coming up next, it’s time for You Said It!
And now it’s time for some of your feedback.
This is “You Said It!” Every day we get dozens of comments and questions from you, our viewers. “You Said It!” gives me a chance to respond.
The first came in anonymously.
Can you tell me how much subsidy the various states gave to the foreign automakers to build plants in their state?
Almost all the 50 states try to lure automakers to build plants there. They don’t care if they’re foreign or domestic, they just want the plants.
The next question comes from Alex Kajdi, from Rye Brook, N.Y.
I have been waiting to get my hands around the wheel of a Volt! If the bailout is not successful and the price of gasoline remains low, what happens to the Volt?
The Volt is going to get built no matter what happens. Even if GM has to go into bankruptcy, it’s going to survive in some way or another and the Volt represents the best prospect for GM in the future.
And David Sprowl asks:
I have seen and read about 2010 being the “magic” year where our troubles will start to wane. How is it that 2010 will be the finish line?
Economists believe the world economy will start to pick up by 2010. And if it doesn’t, it doesn’t matter, we’ll all be in the bread lines.
Don’t forget that all this week you can enter for your chance to win a special-edition Autoline 10th Anniversary DVD and an Autoline coffee mug. All you have to do is sign-up for our free e-mail newsletter. I’ll be picking the winner Friday on “Autoline Daily” so sign-up today!
That’s it for today’s top news in the global automotive industry.
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Comments (14)
November 19th, 2008 at 12:26 pm
John,
I’m still trying to come to grips with why the Big 3 should be bailed out. I understand the jobs involved with outside vendors and all that. The issue remains that the Big 3 makes inferior cars and they are always 2-3 steps behind Europe and Asia. Their styling is so off they tend to think the more chrome trim they slap on a car the more it will sell. Why don’t they focus on making clean, simple, well made cars, that look good, and that can last like their Asian counterparts have been doing for years. You can’t tell me that a Focus stirs so much emotion and passion that you’d take that over a Civic, or a Mini.
November 19th, 2008 at 1:12 pm
Why do you make a comment like a Civic sale producing $3000.00 more profit than a Ford Focus without pointing out the differance in wages. $75.00 an hour including bennifits against $52.00 on the assembly line is stupid and none of the big three will ever make a profit with this hanging around their necks!
November 19th, 2008 at 2:37 pm
John,
I just listened to your comment on the selling price of the Focus vs the Honda Civic. I have owned a Focus SVT and currently a Civic SI the Civic is a much nicer car built better, higher quality interior, better fit and finish. The SVT was a better car to drive but it lacks the polish I wanted in a small performance sedan. I believe that if the Big 3 built a competitive vehicle it would sell at a competitive price. Why not make a small sports sedan that has the quality and options people still want even if they are trying to conserve energy and dollars. Honda does it in the SI, Mazda in the 3 why can’t the Big 3?
November 19th, 2008 at 3:10 pm
The BIG 3 are reaping what they have been sewing for the last 20+ years.I have no sympathy for them nor do I for the UAW.All 3 should go BANKRUPT,get rid of the massive debt,overpaid workers and start all over.Build cars that make sense and that people may want to actually buy,and increase the damn warranty to match or exceed the HYUNDAI’s and KIA’s of this world.Seems the head honcho’s at the not so BIG ANYMORE 3 STILL TO THIS MINUTE DON’T GET IT!!!
November 19th, 2008 at 3:59 pm
John,
I am a union member, however, I make nothing like the UAW people do.I went through a 4 yr. apprentiship to make 15 or 20% less than they do. These folks have had it way too good for alot of years, and now they want the govt. to pay them instead of backing off these huge costs that our automakers have incurred because of them? We need to realize that 28 bucks or etc. an hr. for semi or unskilled labor is way out of whack. Also, everyone else is having to pay some healthcare costs. Can’t the UAW afford to do that? My take is that the Car Cos. will have to go into bankruptcy to be able to compete. I also think that our autos are as good as everyone else’s, but that is their JOB, if they want it.
November 19th, 2008 at 7:31 pm
I’m stunned at the “hate” of the American auto industry. I agree that the big 3 factory workers were over paid, but new hires are paid $25 per hour not the $75 that everyone used to get. The US auto industry has focused on trucks and SUV’s because that was where the profit was. “Americans” wanted SUV’s not cars. With high gas prices everyone now wants fuel efficient cars, and the US auto industry was responding when the housing and banking industry collapsed. This is why the US auto industry is in trouble today. Allowing GM to go into bankruptcy could literally kill all three US automakers and send the Nation in to a depression. Could even half of all US automotive suppliers (including suppliers to Honda, Toyota, etc)survive something like this? Congress bailed out the banking and mortage industry to prevent the nation from a depression and now congress is flirting with sending GM to bankruptcy and possibly sending the Nation into a depression. Hopefully the auto industry can survive the political games until a decision is made. I once heard that America is the only country that hates it’s own car companies, other countries charish theirs.
November 19th, 2008 at 9:06 pm
i don’t know where this Jeff Dennis is but a toyota pickup has more chrome on it then my DODGE
RAM QUAD CAB and they say its got more HP but I’ll
put my 5.7 hemi up agains them any day . just like honda pickups put a 600 lb crate in the bed of that and have a flat tire who u going to get to drag that out so you can get to the tire
NO JAP JUNK FOR THIS AMERICAN
November 19th, 2008 at 9:27 pm
Alright, I am not one of those overpaid union guys. I’m a mechanic for a chrysler dealership and I’m 23 years old no wife/kid and I have to work all kinds of side jobs to pay rent/bills. I understand the jealosy and resentment to the big three about how thier overpayed but look, first the financial industry needed a bailout and I dont remember everyone going crazy and fighting it. The fact is if we don’t bail them out they will fail. Bankruptsy will KILL them. Once one fails others will fall and now were not in a recession, now we get into the Great Depression number 2. Give the big three a lifeline. Things are set to change what with the union contract and the market picking up and everything will get better.
November 19th, 2008 at 9:27 pm
Well….It seems to me many are seeing this bailout as money we just give away. Not so; it is a loan, for which detroit seriously needs to fix it’s business model. It is to be repaid, and should have stringent conditions that encourage financial success to aid the big three. The UAW’s Ron Gettlefinger himself has said foreign automaker’s workers do not see the wages UAW workers see. Perhaps as a cost cutting measure, lower some wages, and make some compromises so employment is retained for these workers. Then if business picks up, more funds are returned. I do not understand the UAW not wanting to give the automakers consessions. If there is no big three, who else will you work for? On the subject of detroit making crappy cars, just look at the chevy cruze, malibu, volt, ford fiesta, fusion, and dodge ram, and I see a detroit that is making their best in their darkest hour!
November 20th, 2008 at 8:15 am
I don’t agree with a bailout – the top brass are out of touch with reality. Each of them flew in their company’s own private jet while extending their hands for a bailout? Let them go bankrupt and restart with out a union. If you want to work for GM, Chrysler, or Ford you get a basic starting wage that would be the same as the other two. But, also EDUCATE your employees on credit since everyone has been living way over there means for years and years. I can almost see that employee making 34 dollars an hours, in debt and living paycheck to paycheck.
November 20th, 2008 at 9:37 am
To Keith McLean:
We didn’t say Honda makes $3,000 more profit on the Civic than Ford makes on the Focus. We said that on average Honda charges $3,000 more for the Civic. Obviously, that will produce more profit, but this was all about what Honda can charge in the marketplace.
November 20th, 2008 at 10:31 am
John, what do you think about the news media pointing out that the big three executives did not help their case when they charted corporate jets to congress? Wish you were still on speed.
November 20th, 2008 at 10:31 am
John, There is so much misinformation on what pay and benefits the UAW are receiving. In different forums on the internet, I have never seen so much hate for union workers. I know there have been givebacks to bring them more inline with the foreign producers here in the U.S. Could you enlighten us on this subject?
November 20th, 2008 at 11:43 am
John, One of the thing I feel holds american car companies back is the fack that they do not seem to address what put them in thier current position. Part of getting a product to sell is to make the product New and Attractive. American car companies build they same car for 8-12 years before it goes through any serious makeovers. Toyota seems to be one of the strongest at moving product. They change thier product every 5 years (cars, not trucks). If you lease an american car, at the end of your lease, there is a really good chance that nothing changed since the last time you were at the dealer. American car companies need to change this up more often, it gets rid of the stale effect you get when you walk into their showrooms.