AD #1173 – Ford Sues Supplier, Hybrid Recalibration Offered, VW Phaeton Making Comeback

July 17th, 2013 at 12:05pm

Runtime: 9:34

In what may be a first, Ford is suing a Japanese supplier over wire harnesses. One major automaker is offering a calibration update, after customers failed to meet EPA ratings, in its hybrids. To add a halo project to its lineup, VW is bringing the Phaeton back to the U.S. All that and more, plus host John McElroy reacts to your comments and questions in this week’s edition of You Said It!

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Welcome to Autoline Daily. Say did you see our Autoline Fantasy Draft program last night? It was really good. Check it out on our website because there was a lot of good information that came out. But now let’s get to today’s news.

FORD SUES SUPPLIER
I’ve seen a lot happen in my time covering the auto industry but this is a first. The Detroit News reports that Ford is suing Japanese supplier Fujikura over price-fixing and bid rigging of wire harnesses. Ford did not say how much it was being ripped off by, but the company is seeking 3 times the amount of actual damages. In the last decade it spent $10 billion on wire harnesses. Ford also named Japanese suppliers Sumitomo and Yazaki as co-conspirators but did not file suit against those companies.

WE’RE IN THE MONEY
Tesla’s stock took it on the chin yesterday. After hitting a high of $129 a share last week it fell to $109 at yesterday’s close. The selloff was triggered by a downgrade by Goldman Sachs which set a target price of $84, 30 percent lower than yesterday’s close. Here’s my Autoline Insight. This is the moment the bears have been waiting for. They’ve been shorting the stock and losing big time on their bets. To cover their shorts when they came due they had to buy more stock. And that’s one of the reasons why the stock kept shooting upwards. Now it’s possible that the stock could fall as fast as it rose. By the way, Merrill Lynch says the stock should really be priced at $39 a share. If true, that presents an opportunity to short the stock even more.

SOUTH’S GONNA RISE AGIN’
As you know, sales of Japanese cars plummeted in China last year because of anti-Japanese sentiment about territorial disputes over which country owns some islands in the East China Sea. Sales have been slowly recovering this year for Japanese brands but they’re not back to normal yet. That’s why, according to Reuters, Toyota is shifting its focus to the southern part of the country. Turns out that in southern China the people don’t seem to be as anti-Japanese as in other parts of the country. Toyota says sales in southern China have completely recovered.

MAZDA SALES SLUMP IN CHINA
But not all Japanese automakers are seeing signs of hope in China. Gasgoo reports that Mazda’s sales have dropped for a third straight year in the country. In the first half of the year, the company sold over 82,000 vehicles, a 20 percent drop compared to 2012.

FORD HYBRIDS GET RECALIBRATED
Ford hybrid vehicles have taken a lot of flack recently for not meeting their EPA rating for fuel economy. Now the company is offering calibration updates for its C-MAX, Fusion and MKZ hybrids. The enhancements include a increased top electric speed of 85 mph from 62 mph, optimizing the use of the Active Grille Shutters, reduce the electric fan speed, shorten engine warm-up time by 50 percent and better optimization of the climate control system. Unfortunately, Ford has not said what kind of fuel economy improvements customers can expect to gain.

VW ADDS MORE PRODUCTS
Volkswagen CEO, Martin Winterkorn feels that a company as large as his needs a halo project in the upscale segment. As a result, it will bring back its Phaeton luxury sedan in the U.S. and may even show it off as soon as January. I’m sure most of you remember that the Phaeton that was dropped seven years ago, due to poor sales.
Also set to make its debut, is a new 1.8 liter turbocharged engine for the Jetta, Beetle and Passat, which will replace the 2.5 liter 5-cylinder unit. It produces 170 horsepower and 184 lb.-ft. of torque, which is as the same or better than the 2.5 liter and it will improve on highway fuel economy as well.
And, according to sources, the German automaker will produce a small SUV, called the Taigun, it first showed off as a concept at the Sao Paulo show last year. It is smaller than the Tiguan and will most likely be powered by 3-cylinder gas and diesel engines. Unfortunately, it doesn’t look like the little SUV will be stepping foot on American soil.

Coming up next, it’s time for You Said It!

E_W wants to know, “Do you have any thoughts on GM’s recent decision to no longer provide production statistics? It was my understanding that suppliers use that information to get an accurate gauge of manufacturer’s needs.” EW, GM says that Wall Street analysts were incorrectly forecasting its profits and earnings per share by extrapolating those numbers from the production numbers. Since GM ships cars all over the world, and since those products are priced differently in different countries, it will not only release data on where those vehicles were sold, not where they were manufactured. Funny, but every other major car company ships cars all over the world and they don’t seem to have a problem releasing their production numbers. I can tell you that suppliers and analysts are up in arms over GM’s decision.

Ramón Rivera liked our report on GM looking at selling one of Peugeot’s commercial vans in the US market. “Wow, the Peugeot Boxer is the same vehicle than the Fiat Ducato. You will have a GM and a Chrysler product being basically the same vehicle. And Chevy will also sell the Nissan NV. Shouldn’t they have chosen another Peugeot (the Peugeot Expert), instead of a Renault-Nissan vehicle?” Great point Ramon. I’m sure they discussed your idea, but maybe sourcing a small van out of Mexico was more profitable than getting one from Europe where the exchange rates could kill them.

sparksflying100 took issue with our report on the death of Phil Caldwell, the former chairman of Ford. “Phillip Caldwell was not the first non Ford family head, it was Robert McNamara, but he was only there for 5 weeks before joining JFK in government.” Sparksflying is right. McNamara was president of Ford ever so briefly, though he spent 14 years at the company before that promotion. But President is not really the head of the company, and Phil Caldwell was the first person not a member of the Ford family to become chairman.

Rafi heard me say that the first interview I ever did in my life was with 5-time Gran Prix champion Juan Manuel Fangio and wants to know, “Please tell us more about that interview with Fangio. Where could we read/see the interview?” Rafi, sadly the photos of that interview were stolen from my photographer a few years after it took place. And somewhere between office moves my notes were lost. So I don’t think there’s any written record of it left. One thing I can tell you from that interview is that Fangio always referred to himself in the third person. So instead of saying, “I set the fastest lap and went on to win the race,” he would say, “Fangio set the fastest lap that day, and the victory ultimately also went to Fangio.” I also remember that he drank water throughout the interview because he told me he only had one kidney. But my lasting impression was that he was a humble man and a thorough gentleman who gave a 25 year old aspiring journalist a big break by landing an interview with one of the giants in motor racing.

TangoR34 saw the report on the way Ford came up with to make prototype parts. “I just can’t follow what they’ve done. Does it mean they have simply skipped the mould making process and make the part by deforming a sheet using a CNC machine?” You got it Tango. They clamp a blank of sheet steel in that CNC machine. Then two probes, one on top and one below the steel push down and push up, as they run across the surface, to form the steel into the desired shape. So yes, they are making parts like fenders without a stamping die. Really impressive technology.

Thanks for all your letters and comments, we truly like going through them all. But that wraps up today’s show. Thanks for watching and please join us again tomorrow.

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31 Comments to “AD #1173 – Ford Sues Supplier, Hybrid Recalibration Offered, VW Phaeton Making Comeback”

  1. Chuck Grenci Says:

    Having a halo vehicle at VW is probably a good idea, but with the Phaeton (and in hindsight could have been called the ‘failed-a-ton’), it would also probably be wise to rename it (as opposed to giving the Phaeton a second chance.

  2. pedro fernandez Says:

    Phaeton, again? what for? no one wanted them first time around, what has changed this time? this is like Toyota trying to sell the LS 460 as a Toyota Cressids.

  3. Todd T Says:

    VW dumping the 2.5 is great news that should have come much sooner. A miserable engine, odd harmonics, that VW has spent a fortune trying to fix. It ranks up there as one of the world’s most expensive 4-cylinder engines (yes I know it’s a 5). The world’s most expensive 4-cylinder mass produced engine was probably the even worse, VR5 which luckily we never got in this market. VW seems to really have a knack for building 5-cylinder engines that are super expensive, and don’t have as good of specific output as comparable 4-cylinders from other companies.

  4. Todd T Says:

    VW’s pissing match with Mercedes that resulted in the first Phaeton, should have stopped there. Someone with a cooler head simply has to exist somewhere in the management that can explain a luxury VW is pointless when you own Audi. Is this really that difficult to comprehend? VW builds fantastic cars, but boy do they make some bone headed decisions.

  5. HtG Says:

    Perhaps, John, you are not one of Goldman Sachs’ favored clients. If you were, and I’m not saying you’re not, then you would have been advised to build up a short position in Tesla ‘shortly’ before Goldman announced that the stock was overpriced. When the price drops, that’s when you cover. See what they did there?

    —–
    Here’s how the rest of us are peons, as promised yesterday. It looks like Barclay’s is going to have to fight off a $500million fine for manipulating energy markets. Translation; they sold swaps(bets at a cockfight) to clients(muppets) and then manipulated the reference commodity(gas? I get that too, sometimes) so that the bank could clean up.

    http://www.bloomberg.com/news/2013-07-16/barclays-traders-fined-487-9-million-in-u-s-energy-probe.html

    Somebody cue JayZ “New York”

  6. Steve Weintraub Says:

    John, you forgot the VW 1.8T engine is included in the Golf for which it was designed for.

  7. C-Tech Says:

    Can someone tell me why South China may not have as much animosity towards Japan as the rest of the country?

    I heard Consumer Reports gave a good review to the new Ram 1500.

    If at first you don’t succeed, try another Phaeton? What will be different about the Phaeton this time? It actually was a very nice car, the used one I drove once, however $70-80k for a VW just does not fit (Hyundai has the same problem with the Equus – a lesser car than the Phaeton)

  8. Wim van Acker Says:

    #1,2,4,7: please note that the Phaeton was not a stand alone product: as far as I know every Bentley has been built off that platform and believe me, the VW Group has made money doing so.

  9. HtG Says:

    7 Manchurian Occupation of 1930′s maybe?

    http://en.wikipedia.org/wiki/Japanese_invasion_of_Manchuria

  10. Todd T Says:

    #8, sure they did make money on the Bentley products. That still doesn’t justify loosing money on the VW one. Don’t tell me the Bentley products could not have been based off of the Audi A8??? It’s unnecessary redundancy no matter how you slice it. The Phaeton was an amazing car, flat out one of the best cars ever made, but it ended up being one of the best used cars you could buy…not exactly the kind of residual performance that screams success.
    #7 Hyundai is in an entirely different position, they do not own a luxury brand to market Equus under. Still that car is meeting sales targets (surpassing them in most market).

  11. Bradley Says:

    Wasn’t a government or part of government looking into price fixing with wire harnesses too?

  12. W L Simpson Says:

    Re: stock market—–attended classes , sat in the local exchange studying the “big” board ,decided
    it was rather stupid to pay someone for playing with my money. Invested in real estate,auto repair, & the sweat of my brow instead—–retired at 52 , –30 years ago.

  13. XA351GT Says:

    Upscale VW? Isn’t that what they have Audi for? I’m old enough to remember VWs being cheaply priced econo cars . Now they have expensive econo cars. I really don’t see th need for upscale VWs when they already Audi. They seem to falling into the same trap as the big 3 did. Why a buy a Lincoln or Mercury when all they really were was gussied up Fords with a premium sticker price. Same applied to GM with Buick and Olds and Cadillac. Again with Chrysler , Dodge and Plymouth. define your brand and stay within it so consumers know what they are buying.

  14. pedro fernandez Says:

    #13 It’s not like they have earned their right to sell such expensive cars, quality issues are still present, even in their latest US made Passat and Jetta models, Audi A8 should be enough for those who want and can afford an alternative to the other 2 German brands.

  15. Kit Gerhart Says:

    When VW first sold the Phaeton, the idea was that people would buy it who wanted a big, luxurious car, but didn’t want to be as conspicuous as they would be in an S-Class. There didn’t seem to be many such people then, and I don’t know why there would be now.

    #3,
    While the VW 2.5 is too thirsty, agricultural sounding, etc., I doubt that is was particularly expensive to make. It is just an old design 2.0 liter 4 cylinder with another cylinder added, “modularity” as they sometimes call it.

  16. Todd T Says:

    #15 An extra cylinder is not an insignificant cost factor. Piston, rings, bearings, longer (stronger) crank, cam, block, head, valves, springs, machining, having Lamborghini re-work the head to try to remove some of the wheezy character.
    The point is, this engine costs more and produces less than say a Nissan 2.5L 4-Cylinder. IE a very expensive naturally aspirated 4-cylinder engine.

  17. Kit Gerhart Says:

    Yeah, the VW 2.5 probably costs more to make than the Nissan 4 cylinder, if the Nissan still has standard port injection rather than GDI. The VW five may cost less to make, though, than if VW had designed a new 2.5 from scratch, rather than adding the 5th. cylinder to an oldish 2.0.

    In any case, the VW 2.5 was an underwhelming engine, and it is past due to be put out to pasture.

  18. HtG Says:

    This just in…

    News For Peons, as told to the WSJ. JPMorgan is in talks with the US to pay $1Billion for manipulating energy markets.

    http://www.businessinsider.com/jpms-1-billion-settlement-2013-7

    please resume your lifestyle of peonage

  19. pedro fernandez Says:

    It’s amazing that the Corolla 1.8 engine goes back to 1998 with only minor changes and looks like they’re gonna use the same one for the next gen as well, getting decent mileage and acceptable performance without all the tricks and questionable modifications done by others to get more power and economy out of their 4 cylinders.

  20. cwolf Says:

    I’m glad Ford took it upon itself to improve upon hybred mpg’s, but I’m not certain increasing the electric highway speed will result in a gain. The ICE gets best mpg’s at highway speeds,so I believe Ford should have focused the improvements on city driving or speeds under 55. I think some hybs have a cut-off switch to save battery usage when not on the highway. This would have been my preference.

    Mazda may not be doing well in China, but the Mazda3 is the top choice of future buyers in OZ. I think the number was something in the order near 150K units. These kind of numbers fill the void rather well, I say! My son’s 3 has been a really good car….even better than I anticipated!

  21. Kit Gerhart Says:

    ..and Toyota uses that same engine, with different cam tuning and a few other changes in the Prius. Also, it is the same engine family as the “hopped up” 1.8 in some Lotuses, and the Celica GT, etc.

  22. Kit Gerhart Says:

    20,
    Yeah, I wouldn’t think having higher electric-only speed would help mpg. Normally, hybrids maintain mid-high charge level at steady highway speed. You need some charge in the battery for acceleration and hill climbing, if needed, but you don’t want the battery “full,” because you need some head room for storing energy from regen braking on down hill runs, or slowing down. I’d think allowing the higher electric speed would deplete the battery, so you wouldn’t have much reserve if you got in the mountains.

    I’m sure we’ll be hearing if Ford’s “retuned” hybrids get better, or worse mpg in real world driving.

  23. pedro fernandez Says:

    Gonna try out a Linc MKZ soon that a buddy bought, he got it for its looks, I just want to see how it differs from the Fusion, from which it’s based, he did not believe they’re so alike, I had to show him the truth.

  24. Kit Gerhart Says:

    23,
    Which power train is his MKZ?

  25. pedro fernandez Says:

    I know it’s not the hybrid and this guy does not like turbos, so I have to think it’s the V6, unless he was looking at mileage over other things, but I doubt it. I have not tried a six in a very long time.

  26. pedro fernandez Says:

    Now this Buick Encore is confusing me, according Wikipedia it was developed and engineered in Germany by Opel (GM) but it is also based on the Sonic platform, developed by Daewoo (GM Korea) So now I’m really confused, it is German or Korean in origin? TB are you there?

  27. Kit Gerhart Says:

    25,
    I think the six is sold only with AWD. That power train should work well, but would be kind of thirsty.

  28. T. Bejma Says:

    #26

    Welcome to the world of a Global Automaker Pedro. When we develop a vehicle, except for maybe Fullsize Trucks and rear wheel drive vehicles, we share development over several regions.

    In this case, Opel needed a tiny SUV, borrowed the T300 Sonic platform, made some modifications and turned it into the Mokka (with a unibody platform it is not as simple as putting a new body on an existing frame, the body panels end up being part of the whole structure so even though some of the components of a platform are the same – suspension points, steering, engine mounting, etc., much of the body has changed). Then we swapped the Grille and a couple of emblems, added blue rings around the headlights and some hood vents and Viola!! Buick Encore!! Same thing with the Cruze, where drivetrain and suspension were developed at Opel and the body, appearance, interior where developed in Korea.

    Now before CK comes out of hiding to say that this proves that Opel developed the Alpha platform, the common denominator here is that each of the regions that helps develop the platform, also consumes it (Cruze is sold in Europe and Korea, Mokka/Encore are sold in Europe and Korea). Alpha vehicles are NOT used in Europe. Even if it was, his argument that Cadillac does not have the money to develop a brand new platform, Opel has even less…

  29. Kit Gerhart Says:

    I always thought it curious how loosely people use the term “platform sharing.” This is especially true with one I have, a first generation Dodge Caravan. From the start, people were saying it was on the K car platform, but about all they share is some, but not all of the power trains. The floor pans are completely different. The van was designed with a flat floor of the lowest possible height to clear the hardware, while the K car has a usual car-type floor with high points to clear the suspension, etc.and low floor in the foot areas. The rear suspension is completely different, with the car using twist beam, and the van using leaf springs. How could those be considered the same platform, by any stretch?

  30. pedro fernandez Says:

    Back in the day of separate frame and body, it was much easier to share platforms, am I right?

  31. T. Bejma Says:

    #30

    Yes, you are correct Pedro. If you take the body off, my 1969 Cutlass (full frame vehicle) is EXACTLY like the Chevelle, LeMans, Buick, down to every nut and bolt.