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Episode 69 – Ford Earnings Worse Than Expected, Fiat and BMW?, Buicks in Deutschland

January 29th, 2009 at 12:00pm

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Ford reports its fourth quarter earnings, which are worse than expected but still says it doesn’t need government help. Fiat is in talks with BMW on platform sharing. GM might build Buicks in Germany if GM moves Saab 95 production back to Sweden. All that and more, plus a look at the proposed emissions standards California wants to enact.

Transcript and Story Links after the jump . . .

Here are today’s top headlines. Ford reports its fourth quarter earnings, which are worse than expected. Fiat is in talks with BMW on platform sharing. And GM might build Buicks in Germany-yeah, that’s what it is says.

Up next, we’ll be back with the news behind the headlines.

This is Autoline Daily for Thursday, January 29, 2009. And now, the news.

Ford reported fourth quarter losses today of $5.9 billion. That is a loss $2.46 a share. Analysts were expecting a loss of $1.30, and the market doesn’t like downward surprises. Ford Financial Services, which made money last year, lost $372 million. Ford burned through $21 billion in cash last year, leaving it with only $13.4 billion in cash. However, it has $24 billion in cash and liquid securities and the company reiterated its position that it does not need a government bridge loan to get through this recession.

Meanwhile, the Wall Street Journal reports that Chrysler is sending a letter to its suppliers of production parts that they must cut their prices by April 1 (subscription required) and that the company is freezing what it will pay for raw materials, even if those prices go up. And this just adds to the misery that suppliers are facing. And this is the untold story in this economic crisis. Automakers aren’t the only ones who need financial protection from the government. Suppliers need it, too.

We all know that car sales last year were the worst they’ve been in decades, but the industry might be poised for a comeback. WardsAuto.com reports that J.D. Power is predicting a decline in global sales this year, but a rebound by 2010 (subscription required) with RECORD deliveries in 2011 and ’12. They estimate global sales will range between 57 and 62 million in 2009 and between 60 and 67 million next year.

GM might build Buicks in Germany. Autoblog reports that upcoming Buicks based on the company’s Epsilon II architecture could be assembled by Opel if GM moves Saab 95 production back to Sweden. It’s interesting that GM is considering building Buicks in Euros and selling them in dollars. You’d think the exchange rate would kill them. It’s also interesting that Sweden is part of the EU but it doesn’t officially use the Euro, instead it still uses the Krona.

Fiat has been extremely busy the past month, aligning with Chrysler and a rumored alliance with PSA and new reports suggest the company could team up with BMW. According to Autoblog, the partnership is expected to involve Fiat borrowing the platform from either the 1 Series or the MINI for Alfa Romeo’s upcoming replacement for the 147 hatchback.

Over at the University of Michigan’s Lay Automotive Laboratory, they converted a truck to run on ammonia, and drove it from Detroit to San Francisco to prove that it can be done. Ammonia doesn’t emit any carbon emissions and can be used with gas or diesel engines. Ammonia is already manufactured and transported in huge quantities. In fact, it is the fourth most transported commodity in the U.S. Ammonia costs less than gas and the team says it provides better fuel economy.

Coming up next, a look at the proposed emissions standards California wants to enact. We’ll be back right after this.

President Obama instructed the EPA to determine whether it should grant California a waiver to set its own CO2 standards. It’s a hugely controversial issue. Here’s what I see going on.

California set a CO2 standard that requires a fleet average of 35 mpg by 2016. But that translates into an average of 43 mpg for cars and 26 mpg for trucks. By 2020 cars will have to average 49 mpg, trucks will have to average 33 mpg.

This is just California dreamin’! Right now only one car can meet that 43 mpg standard and that’s the Toyota Prius, even the Honda Civic hybrid falls short. Not one truck even comes close to that number.

So you’re going to tell me that the entire fleet is going to be completely retooled to meet that standard by 2016? In 7 years? That’s less than two design cycles. I’m telling you it ain’t gonna happen. It’s not a question of foot-dragging or a lack of technology, or even a question of money. It simply is not physically possible to change the fleet over in that time frame.

And that means automakers will have to severely limit what they can sell in California and the other states that adopt its CO2 standard. And I predict that once consumers learn how limited they are in what they can buy, they’re going to hit the roof. Environmentalists beware, you’re setting up a big backlash against CO2 legislation.

And here’s a point to ponder, California only accounts for 1 percent of global CO2 emissions. So is it really fixing the problem? I think we need a comprehensive national policy, let me know what you think.

And that’s it for today’s top news in the global automotive industry. But don’t forget, you can get podcasts, transcripts and a whole lot more on our website, AutolineDaily.com. Thanks for watching, we’ll see you tomorrow.

30 Comments to “Episode 69 – Ford Earnings Worse Than Expected, Fiat and BMW?, Buicks in Deutschland”

  1. pedro Fernandez Says:

    So let me get this straight, we give GM millions and they turn around and want to build Caddys in Mexico and Buicks in Germany? I think Ahrnold is gonna “TERMINATE” the new car industry in Cali. with those ridiculous standards, and I hear Florida’s gov. Crist wants the same here, I’m praying my car just keeps going and going and…..

  2. Pete Says:

    I think we need a comprehensive national policy, we should not let each state dictate their own fuel economy target. People will keep their old vehicle instead. What is next, outlawing the remaining vehicles on the road that do not meet the standard? I am in favor of rasing the tax on gasoline once economic conditions allow it. As long as gas is cheap, only a minority will buy the more fuel efficient vehicles.

  3. Derek Says:

    Ammonia – I want to hear more about that . . . and if it is as good as it sounds, no one will be worrying about the unrealistic MPG standards California is working on.

  4. Brandon Says:

    I agree, John, there’s no way that CA. can expect to have those standards met by the manufacturers in that short amount of time. These standards are coming from the guy who used to drive a Hummer. As a result, I don’t think any vehicles will be sold in CA..

    Ford sure did burn through some cash, but they still aren’t asking for bailout money. I hope they make it. Working at a dealership in the 90′s, I remember Ford having 5 of the top 10 sellers in the U.S.. I bet they wish they had those days back. I’m sure they’ll weather the storm, however…I hope.

  5. DC Says:

    First off, if the California standards are enacted, expect Oregon, Nevada, and Arizona dealers to prosper immensely as no one will buy cars in California. As a result the Golden State will be ever closer to a complete economic meltdown. I just hope other states don’t get the same idea as California, or we just may end up buying cars from Canada and Mexico.

    As for the ammonia truck, it sounds very promising, but just as nuclear power has been under scrutiny for its safety drawbacks, an ammonia powered vehicle won’t be held in great light in the public eye due to its potential health effects.

    Finally, I for foresee that once this automotive cataclysm is over, you can bet Ford will run ads along the lines of, “A car from the company that survived without borrowing your money”. Should be a fun advertising future, that is for sure.

  6. Jude Says:

    From what I read on Autoblog, I was left with the impression that GM will be building the bound-for-China Buick Regal in Russelsheim, as it’s just an Opel/Vauxhall Insignia with a Buick grille.

    Whether that car is coming here or not hasn’t been announced. But if we were to get the Insignia-based Regal, they’d probably build our version in the US anyway, next to the Malibu. The LaCrosse is on the same – albeit stretched – chassis, so if the Regal were to come to the US, it’d slot in under the LaCrosse.

    And GM has been building vehicles in Mexico for a couple of decades now. They converted the plant to build Saturn Vues when that vehicle was redesigned. So it only makes sense that its platform mate – the upcoming SRX – is built in the same plant, too. And it’s not like the next SRX’s Mexican origin means lost jobs for Americans, either. The Vue was built in Spring Hill, which now builds the Traverse. While Lansing Grand River, which builds the current Sigma-based SRX (as well as the CTS and STS), will need the extra capacity to build the upcoming CTS wagon and coupe. Especially since the wagon will be exported. Combined, they’ll probably sell better than the outgoing SRX ever did.

    No need to get your unmentionables in a twist about that.

  7. BISHOP Says:

    IN THE PAST, CALIFORNIA HAS DONE SOME STUPID THINGS TO AUTOMOBILES.
    MOST OF THEM WERE ESTABLISHED TO BLEED MONEY FROM THE CAR OWNING PUBLIC TO FILL THE POCKETS OF THE POLITICAL CRONIES WHICH OWN THE COMPANIES THAT SUPPLIED NOX DEVICES.
    THERE WERE CALIFORNIA EMISION STANDARDS AND 49 STATE EMISSION STANDARDS.
    TODAY CALIFORNIA LAW REQUIRES, IN ADDITION TO VEHICLE REGISTRATION, A SMOG CERTIFICATE EVERY TWO YEARS, PROOF OF CURRENT INSURANCE WHICH MUST BE SUBMITTED TO A PEACE OFFICER UPON DEMAND.
    TO QUOTE THE SONG “CALIFORNIA IS THE GARDEN OF EDEN,BUT YA’ GOT TO HAVE THE DOUGH-RAY-ME!”

  8. William R. Walling Says:

    Jim,
    “Regarding Ammonia, NO reference to the FACT that it will KILL you breathing existing diluted (available) product in SMALL amounts.”
    Notice, illegal to vend pure Ammonia excepting laboratory research.
    REFERENCE:
    ‘Blueprint’ equipment requisite use does take your breath away, literally.
    Support a NATIONAL CO2 emission’s legislation comprehensive (ALL associated industries) in nature.
    GM must provide GERMAN jobs as Government assistance is NOT solely an American source of corporate sustenance.
    Hint: GM’s ‘Volt’ was to be GERMAN financed and developed but Bundesregierung members sensed monies extended for technology would be GLOBALLY (outside Germany) deployed. NO MONEY!
    Watch for buy ‘Made In U.S.A.’ wares to be included within the domestic Stimulus Package requirements. (Common sense, America’s tab!)
    Notice, already within approved Congressional version but NOT in existing Senate version.

  9. David Britton Says:

    I also would like to hear more on Ammonia fuel for moter vehicles. Would this require diesel or gas power plants? California can fall off the face of all new vehicles sold in this country if they think they can force this issue, are they willing to pay for the researce and help to build the platforms required for this type of change? NO!!! I’m sure that the feds wont help the industry meet the current 2020 requirements so California ( who wan’t a bail out from the feds ) will only cry when they have no choise for new vehicles.

  10. Salvador G. Says:

    I Think you John are mistaken as to why California needs higher fuel standards, its not because of the amount of pollution California trows on the country – but its due to the air quality the people of California wants to improve and the air quality the people of 13 other states wants.

    And as for the cars that will be sold in California, more hybrids, fully electrycs and smaller cars.

  11. Alex Kajdi Says:

    Dear John McElroy:

    The only way California is going to be able to legislate those higher than Federal CO2 levels
    is by giving huge tax breaks and incentives to it’s citizens to purchase electric vehicles.

    Hydrogen cost fours times as much as electrity to produce, store, transport and distribute than any other fuel. The “Hydrogen Highway” being promoted by the Big Oil Companys is so that once the oil runs out they have something else to sell the public – “Corporate Greed”!

    Improving the Electrical Power Grid and Production in California and it’s neighboring states will create jobs and reduce CO2 emissions. Light rail is also needed to move daily commuters off the highways and reduce emissions. The California Air Resources Board (CARB)needs to reverse the actions it took which killed the EV1 and start promoting Electric Vehicle research and mass production.
    The new generation of EV’s must include range extending Internal Combustion Engines (ICE) able to run on almost anything, similar to the the Voltec system used in the Chevy Volt. The Incorporation of Solar Panel technology into the surface (Roof) area of vehicles to add additional recharge capability to vehicles either in motion or at rest, sun light is free and usually abundant especially in the Western and Southern States. These ideas really need to be adopted by all 50 States to reduce our dependent on foreign oil and reserve our natural resources.

  12. Kit Gerhart Says:

    It is unreasonable for California to increase mileage requirements so much, so quickly. The only way to come close to those standards would be to sell all of the “A” and “B” cars from Europe, with diesel engines, and probably the diesels wouldn’t meet the “regular” pollution standards for CA.

    I just wish the vehicle mix in the US would become more like that in Europe, without CAFE standards that never worked very well. I guess I’ve felt that way a long time, which is why I voted for John Anderson for president in 1980. He proposed a 25 cent/gallon gas tax increase which would have provided an incentive to drive more efficient cars. Anderson didn’t do very well in the election, which confirmed the non-popularity of higher fuel taxes in 1980, as now.

  13. Tom Martin Says:

    Let California and the 11 or so other states that follow California standards set their own standards.

    If dealers can only sell a handful of vehicles in the state(s) — so be it.

    The car manufacturers have had 25 years to develop fuel efficient cars. They should not complain that they need more time.

  14. Tom Martin Says:

    We need to stop pollution, reduce global warming, and stop importing oil — yesterday.

    We don’t need delays and negative thinking.

    I remember the auto manufecturers complaining about being forced to put seat bests in cars and how it would increase the cost of buying cars! They said the same thing about air bags! Stop complaining, and just do it.

  15. lincoln Says:

    Man made global warming is the biggest hoax of all times. The only true feedback loop that we need be worried about is the runaway feedback between bad science and big government.

    Government funds the research. The researchers deliver with dire predictions and the “need” for more studies and more funding. At the sametime government gets behind this global warming “snowball” and uses it as a vehicle for CO2 taxes and other revenue streams, which in turn proves yet more research funding….this is the true runaway problem we need to STOP RIGHT NOW !!

    The younger generation is clearly being brainwashed by this bad science/big govt. propaganda (with our fearless Nobel Winner Al Gore at the helm). We will all be in serious trouble unless we can put a stop to this insanity. The good news is I predict there will be a public backlash sooner than later.

  16. Dan Busch Says:

    “Right now only one car can meet that 43 mpg standard and that’s the Toyota Prius, even the Honda Civic hybrid falls short. Not one truck even comes close to that number.”???

    I drive a 2003 manual transmission Jetta diesel which was sold in the states in that year, and I have never logged mileage as low as 43 mpg. Typically I get 46+ mpg.

  17. jesse M. Says:

    Somebody needs to stop KALIFORNIA before it takes over the world!Those people are just plain nuts!The world and the ENVIRONMENT will be fine long after that state slides into the ocean!

  18. Dan Clemons Says:

    California is a state in decline. More people are leaving the state and now they want to limit the number of cars sold in their state just like they limit the number of guns. I say let California take a back seat when it comes automotive transportation.

  19. JFD Hamilton Says:

    John,
    I agree with your assessment of California’s new “green” proposals, however let’s not underestimate the entertainment factor in the state – I’d bet that that collective ego, fresh from being successful in having the Obama ticket elected now thinks they can pull off another “miracle”.
    I think that what the general public does or does not believe possible is generally shaped by those willing to spend the $$ to get what they want, whether or not that is feasible.
    Those who “have” generally “get” what they want as long as they can spend the $$ to get the public to believe in their vision, the problem is when the public, once convinced, is then expected to live with a somewhat stilted vision of reality…
    Calif. is the prototype for dreams but the rich usually want someone else to pay for their “vision”. How many hybrids share their garages with Ferraris in “normal” USA ?

  20. JIm Thykeson Says:

    John, to quote James Carville; its the emissions stupid, not the mpg!’, or something like that. I can’t for the life of me understand why the gov’t. and Obama haven’t jumped on Picken’s cng, natural-gas bandwagon. Its nothing to convert existing vehicles and the burn is 97% cleaner than the most stringent Cal. standards! Think of it: clean the atmosphere, kiss off the Arabs, save $700 billion, plus we’re sitting on a ocean of the stuff! Now we find amonia can be used too? Time to can gasoline.

  21. pedro Fernandez Says:

    While Kalifornia is trying to fix the world, China is a much bigger polluter, not so much cars but all the factories that were here are now there, without any regard for the environment at all. tha’s why all these multinationals want to move their production there. The thing is the enviromental wackos are mostly commies and commies don’t put down other commies

  22. John V Says:

    I think we should let California and the other states using California’s standards do what they want. It may speed up new product development a little and it will definitely help the public decide what they really want.
    Right now the public says they want high fuel economy, but they do not usually make that the top priority when they buy.
    I agree with Salvadore G. that California has unique issues of smog (they have since before WWII). They also have unique population issues that make traffic congestion worse than most places. They really need for folks to use mass transit more. Making IC engine equipped cars more of a pain for everyone may be their real goal.
    I think the backlash against legislators will be stronger than the backlash against environmentalists. Small business owners are going to team up and roast legislators with negative campaign ads after trucks are scarce!
    I am an engineer looking for better opportunities. Change is good. As long as someone really wants to make cars in America, there will be people trying to make cars that conform to society’s requiremnts. If this means we need some new car companies, so be it! Next time opportunity knocks, I am ready to help out!

  23. Richard Sutjerland Says:

    John,

    With regards to the CO2 issue, I feel the govt. should stay out of business entirely. I believe the auto industry should compete with one another for buyers on the basis of the market demand. Any artificial stimuli creates conditions that are detrimental to the consumer. The market will always find its own way and competition is the heart of the market. Govt intervention leads to boom and bust cycles and inhibits overall progress. The “greenies” in Washington cannot resist social engineering and want to dictate the market. and will ruin the auto business and drive us all to the poor-house.

  24. Jeff Mohr Says:

    National policy —- not individual, also autos are in my opinion getting to complicated and expensive, need to simplify somewhat and get basic, We are high-teching ourselves into unhappyness

  25. G.A.Branigan Says:

    Bring on the small diesels,and to hell with california.The “build a hyatt and they will come” strategy that california is employing will do nothing to help the situation when there are more cars there that slip thru the polution inspection due to age.I love cars but enough is enough.Bio fuels,not hydrogen,electric vehicles are okay,but I can see where there would be a drain on the electrical grid if too many are employed without updating our electric generation to include mass quanities of home solar to augment.As far as global warming being caused by us humans? Some yes,cyclic weather patterns bigtime.

  26. Weinberg Says:

    I just can’t resist any discussion about the concept of Man Made Global Warming.

    I like to think of it like this:

    About 11,000 years ago New York state (and many others) were buried in ice up to two MILES deep.

    Just think about that for a second, that is really amazing….Eventually all that ice MELTED, essentially under the action of NATURE (except for maybe as few 100 thousands cavemen).

    So, I just find it very hard to believe that our climate is not just subjected to its own natural variations and it is also hard to stomach that we really should trash our economy based on the belief that we are the primary driving factor and not things like….oh the SUN.

    Now, I am all for MPG, that just makes sense but the focus on CO2 seems like poor science.

  27. G.A.Branigan Says:

    I just read a news story in regards to california’s new problem:they want big screen tv makers to build them to energy star ratings due to increased load on their electric grid.This ought to really endear the electric car makers to an already overtaxed system.”and the beat goes on…..”

  28. Bob Nogueira Says:

    The California standard will actually help the car companys. To meet it they will have to sell alot more high mileage cars and far fewer large cars thus a drastic reduction in the number of models. That has to be a hugh cost savings.
    I also think that the silver lining on the current economy for the US car companies is that in a couple of years the demand for new cars will be hugh. This gives them time to educate the public to the fact that they now make some very good cars. Also during economic hard times the public starts looking to “American Made” rather than imported products. What GM, Ford and Chrysler need now is a long term PR program.

    Bob

  29. Phil Says:

    I was just wondering how the US emmissions limits for CO2 compare with the Europeans?

  30. Marshall Says:

    not having a national policy is stupid…allowing each tom, dick, and harry to set their own policy is crazy. one reasonable policy should be adopted world wide. it only makes sense.

    marshall