AD #1557 – Honda’s CEO Under Fire, OEM Ranks By Employment, Strikes Disrupting Production
February 16th, 2015 at 12:06pm
Runtime: 7:13
- Honda’s CEO Under Fire
- Is Apple Developing the iCAR?
- Hyundai Jumps Into CV Segment In U.S.
- Strikes Disrupting Production
- Mazda’s Diesel Woes
- Car OEM Ranks By Employment
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On today’s show….Honda’s CEO is fighting to hold onto his job, Apple is getting into the car business, and Hyundai is about to jump into the commercial vehicle business in the American and European markets. All that and more coming right up on Autoline Daily.
This is Autoline Daily for February 16th, 2015.
HONDA’S CEO UNDER FIRE
Honda’s CEO, Takanobu Ito, is fighting off efforts to push him out of the company. Reuters reports that Honda insiders want him out of there because he’s going outside the traditional keiretsu system of suppliers and is sourcing parts from global suppliers. Air bag supplier Takata is one of those keiretsu suppliers. But in addition to the Takata problems Honda has faced several other recalls. To placate his critics Ito is now backing off his sales goal of 6 million vehicles by 2017, enabling engineers to spend more time on development instead of racing to put new product out faster.
IS APPLE DEVELOPING THE iCAR?
Silicon Valley is getting more and more involved with the auto industry. Now the Wall Street Journal reports that Apple has hundreds of engineers working on developing an electric MPV. That group could grow to 1,000 people, which is more than enough to develop a new car. The Journal says the program has been under development for a year Called project Titan, the Journal says Apple has met with Magna-Steyr, which has an assembly plant in Austria and currently makes the Mercedes G-class, the Mini Paceman and Countryman and the Peugeot RCZ. Funny, while GM is being accused of holding too much cash with about $28 billion in the bank, Apple has $178 billion in cash, enough to buy GM, Ford and FCA.
Be sure to join us for Autoline After Hours this Thursday night when our guest will be Oliver Schmidt, from Volkswagen. Back by popular demand, Oliver sure knows a lot about powertrains. In fact, he’s being reassigned back to Germany soon to head up powertrain development for the VW Group. Join me and Gary Vasilash to get some of the best insights as to what’s happening in the auto industry, right from the people who make it happen.
Still to come…why Mazda delayed its diesel, Hyundai wants its dealers in the U.S. and Europe to start selling commercial vehicles, and a port strike on the West Coast is really starting to hurt the automotive industry.
HYUNDAI JUMPS INTO CV SEGMENT IN U.S.
Currently Nissan is the only Asian automaker selling commercial vehicles in the U.S. But Hyundai just announced plans to enter that segment in both the U.S. and Europe. But it did not say when it will happen. The company is spending $1.8 billion over the next five years to boost commercial vehicle production and develop new models.
STRIKES DISRUPTING PRODUCTION
Strikes at ports on the west coast in the U.S. are forcing several Asian automakers to find alternative ways to get parts to factories. Honda announced it will slow down production at plants in the U.S. and Canada for a week because its supply of some parts is low. Honda and Subaru are flying in parts from Japan which Subaru says is costing an extra $60 million a month. Even Toyota has reduced overtime at plants but Nissan says the labor dispute hasn’t hurt its North American production. Sounds like Nissan relies on a lot more local content.
MAZDA’S DIESEL WOES
It was almost exactly one year ago that we reported Mazda was delaying its diesel engine in the U.S. because it lacked the proper Zoom Zoom. Fast forward to today and its still got the same problem. Wards reports the automaker is trying to get it just right, and that includes adding SCR for emissions reduction, which it had hoped to avoid. The engine also received further delays as Mazda put development of the new MX-5 Miata and CX-3 over its diesel powerplant. You may remember years back that Honda delayed the introduction of its diesel engines to the point the whole program was scrapped. Let’s hope Mazda can get it right before it suffers the same fate.
Coming up next, forget headcount reduction to cut cost. The most profitable car companies in the world also have the most employees.
OEM RANKS BY EMPLOYMENT
Car companies are massive job generating machines. That’s why so many countries want their own automotive industry. Automakers and suppliers put a lot of people to work. So we decided to rank the OEMs by how many people they have on the payroll. We found that some automakers just don’t publish that information at all. But by digging through annual reports and company presentations we came up with this intriguing list.
VW, Toyota and Daimler top the list for a couple of reasons. In addition to passenger cars, they all make heavy duty trucks. They also have higher levels of vertical integration, which by the way, helps their profitability. It’s very revealing to learn that FCA now employs more people than GM or Ford. And Honda ranks so high because it makes a lot more than cars, including motorcycles, lawn mowers, wave runners and soon, corporate jets.
MBA’s who make it into the top corporate ranks are always keen to reduce headcount in order to boost profitability. But it’s important to note that the top three companies on this list have some of the best profit margins in the business.
RANKING SELECT OEMS BY EMPLOYMENT
1. Volkswagen AG – 590,800
2. Toyota Motor Corporation – 343,716
3. Daimler AG – 274,600
4. Fiat Chrysler Automobiles – 228,987
5. General Motors Company – 216,000
6. Honda Motor Company – 198,561
7. Ford Motor Company – 187,000
8. Nissan Motor Company – 142,925
9. BMW AG – 114,587
Source: Annual Reports, company presentations.
And that wraps up today’s show, thanks for watching.
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Comments (15)
February 16th, 2015 at 12:16 pm
The MBA’s are also against Vertical Integration. It is easy to see why. If the accounting is set up so that all operations, other than the final sales event, are set up to make 5% return, then it makes no sense to make cars at all. The profits are shown at the sale and with the money made from selling the loan. Penske had it right; Sell me the Saturn Name and distribution and I’ll just buy the cars wherever they make them the cheapest.
February 16th, 2015 at 12:47 pm
On the story about “OEM RANKS BY EMPLOYMENT”: Would the numbers mean anything more if they were broken down by employees per vehicle (rather than just total employees)?
February 16th, 2015 at 1:03 pm
Honda CEO appears to be making sound decisions, so what am I missing? It sounds like he is managing a car company..as opposed to a cash machine (this is a good thing).
Mazda and Honda do not sell Diesels anywhere?
February 16th, 2015 at 2:15 pm
Regarding vertical integration – Adds to higher profit margins if run in a positive manner. GM was very vertically integrated in the old days (60′s, 70′s) & demonstrated a very high profit margin at the time. The component divisions were set up to run very high volume of minimal designs & were not very flexible. As the industry changed to increased model diversity, they were not in a good position. Appears GM took the approach of spinning off the component divisions (Delphi) as opposed to updating them under GM control.
February 16th, 2015 at 2:29 pm
#4 And yes, Ford created Visteon as a holder of their capital depleted parts making operations. For the margins available, it just didn’t make sense to re-invest in the parts making operations. Price fixing and manipulation on the part of a number of Japanese companies made it look like parts were available “for free” in terms of investment at prices that were less than the fully costed internal number. Detroit may be “back”, but the true total economic impact is much less than it used to be when they were more vertically integrated.
February 16th, 2015 at 2:39 pm
GFAF
Going far afield, when comparing GM and Apple’s cash piles keep in mind that lots of Apple’s money is held abroad for tax avoidance purposes, and that they did indeed face pressure from Karl Icahn and others to give some of the cash back to investors. Apple also had a near death experience earlier in its history under Jobs’s first period where its cash hoard was key to staying afloat.
As far as Apples’ car plan, remember what Jen Sun Huang said a few years ago about cars, they are the ultimate mobility device. You guys see that oculus campus Apple is building? The car is going to be a part of a much larger interacting world mediated by sensors and datacenters.
February 16th, 2015 at 3:23 pm
This outsourcing does not bode well for companies like Toyota and Honda that have built a reputation for quality and reliability. Just look at all the crappy parts coming out of China.
February 16th, 2015 at 4:23 pm
3 Mazda and Honda sell diesels about everywhere in the world except the U.S.
February 16th, 2015 at 4:24 pm
What is so lacking in the Chinese parts making industry are the “Senior Engineers”. The prints themselves do not tell the whole story of how to make really good parts that last the 15 years and 200K miles. That information comes from experienced Senior Engineers who really know and understand the product. The second “missing” item is “metals, plastics and materials” knowledge. There are hundreds of alloys of metals and plastics. It cannot all be done with 3 shades of brass and four of Iron. China really hurts for the lack of the right materials and the right knowledge.
February 16th, 2015 at 5:18 pm
I have been told many times about the poor quality of Chinese steel which explains why my Chinese made wheel bearings failed so quickly.
February 16th, 2015 at 5:46 pm
2 If ranked by employees per vehicle, Daimler would probably top that list by a wide margin. Is that why their cars are so expensive? Vertical integration isn’t cheap.
February 16th, 2015 at 7:40 pm
Off topic
Lord, what a day it was today. DC F&G
February 16th, 2015 at 11:44 pm
Regarding Nissan being the only Asian auto manufacturer currently selling commercial vehicles in the US market: what about Toyota’s Hino subsidiary? Am I correct in saying that they sell and even build product in the US?
February 17th, 2015 at 9:32 am
13
http://www.hmmusa.com
February 18th, 2015 at 12:02 pm
In the segment, Is Apple Developing The iCAR, were comments that “Apple has $178 billion in cash, enough to buy GM, Ford and FCA.” More realistically is the prospect that Apple will venture into the electric-car business—perhaps even absorbing companies like perennial money-losing Tesla—enabling the free-wheeling Elon Musk to venture into even wilder projects. Speaking of General Motors—and moving obliquely to the rear—it is interesting that U.S. taxpayers no longer own any of GM, but one wonders why the Treasury Department sold the last of its shares in 2013 and couldn’t hold on just a little longer to try to recoup taxpayers’ loss of $10+ billion now that GM has become relatively profitable, less we quickly forget the “Motors Liquidation Company.” With GM being accused of “holding too much cash with about $28 billion in the bank,” it simply epitomizes the waste and incompetence in government to simply write down the debt. What an ugly mess.