AD #1690 – VEBA is Thriving, Cadillac’s Super Cruise Feature, Strong Sales ≠ Big Profits
August 28th, 2015 at 11:31am
Runtime: 7:43
- VEBA is Thriving
- smart fortwo cabrio Revealed
- Cadillac Adds Semi-Autonomous Feature
- Hyundai Shows New i20 Rally Car
- Hopped-Up Peugeot 308 Headed to Frankfurt
- Strong Sales Not Equaling Big Profits
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On today’s show… Hyundai gets set to show off its new performance brand, Daimler takes the wraps off the convertible version of the smart fortwo and despite strong car sales, dealer profits remain flat. All that and more coming right up on Autoline Daily.
This is Autoline Daily for August 28th, 2015.
“SAY AH”
As part of the government bailout to save the American auto industry, the UAW was forced to assume responsibility for managing the health care of its 700,000 retirees. GM, Ford and Chrysler gave the union over $50 billion in cash and stock to manage the Voluntary Employee Beneficiary Association, better known as the VEBA, to provide those benefits. Most labor experts felt that was not enough money, but Bloomberg reports the VEBA is thriving. It now has $61 billion in assets and posted a very impressive investment return of 14% in 2013, the most recent data available. Using big-data analysis of claims, the VEBA has cut healthcare costs considerably. It’s now paying for programs for retirees to change their health habits to cut down on diabetes and heart attacks. And it encourages retirees to buy lower cost generic drugs. The VEBA has been so successful that the UAW is now proposing that GM, Ford and FCA adopt the same approach for providing the health care of its active workers.
SMART FORTWO CABRIO REVEALED
Daimler just revealed the convertible version of the new smart fortwo. The styling remains similar to the hard top but its b-pillar is a little wider. It features a soft top that can open and close in just 12 seconds and it includes removable roof bars that can be stowed on the inside tailgate. And if you’re not interested in having the top completely down, the new model comes with a sliding canvas sunroof. Like the hard top, the convertible is powered by a turbocharged 3-cylinder engine that puts out just 89 horsepower. The engine can be mated to a five-speed manual or a dual clutch transmission. The new smart fortwo cabrio will make its world premiere at next month’s Frankfurt show and will later go on sale in the U.S. next summer.
And speaking of Frankfurt, coming up next, a look at some performance cars that are set to debut at the show.
LOOK MOM, NO HANDS!
We’ve seen automakers like Volvo and Mercedes introduce semi-autonomous technologies on their vehicles and now Cadillac is getting into the mix with its Super Cruise feature. While each automaker’s system will take over driver functions, Super Cruise is the only one that will operate at full highway speeds without the driver’s hands on the wheel. GM felt like it could safely do this because it already had the building blocks in place with other safety technologies, like Adaptive Cruise Control. But don’t think the automaker is too bullish on autonomous technology. GM’s Director of the Electrical and Control Systems Research Lab, Cem Saraydar still feels we’re years if not decades away from full-autonomy. Super Cruise will first be available in 2017 on the Cadillac CT6.
HYUNDAI SHOWS i20 RALLY CAR
To help show off its performance prowess, Hyundai will have the new i20 rally car that will compete in the 2016 WRC on the stage in Frankfurt. While this is just the first prototype, it has already undergone serious testing out on the trails as it gears up for the first race in Monte Carlo. The automaker will also have two concept cars that show off the future potential of the Hyundai N performance brand. The first is a race car that was exclusively developed for the Gran Turismo video game, while the other is a mid-engine car with a nearly 300-horsepower 2.0L engine, called the RM15.
HOPPED-UP PEUGEOT 308 HEADED TO FRANKFURT
And speaking of performance cars, Peugeot will have a hopped-up version of the 308 on the floor in Frankfurt. The car, called the Racing Cup, is actually based on the 308 GTi. They share the same 1.6L engine, but the Racing Cup is squeezing about 40 more horsepower out of the unit. It could end up being more but the car is in its first stages of development. It also sports a large front splitter and massive rear spoiler. Peugeot says it will be ready by the end of 2016, at which time it will take over for the RCZ Racing Cup in various racing series around the world.
Coming up next, why dealer profits remain low despite strong car sales.
STRONG SALES DON’T EQUAL BIG PROFITS
Car sales in the American market are running strong this year. Most analysts are predicting that sales will top 17 million this year, the highest they’ve been since the Great Recession. You would think that would mean dealers are raking in profits. But on Autoline This Week, Steven Szakaly (Zak-Ah-Lee), the Chief Economist for the National Automobile Dealers Association, told us that’s not the case.
(Clip from ATW #1924 can only be viewed in the video version of today’s show.)
There’s a lot great info in that show and you can watch that whole episode right now on our website, Autoline.tv.
But that wraps up today’s show, thanks for watching and have a great weekend.
Thanks to our partner for embedding Autoline Daily on its website: WardsAuto.com
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Comments (18)
August 28th, 2015 at 12:48 pm
Dealer profitability is flat as far as % of profit I’ll agree, but if you look at dollar profit if your sales are increasing then your overall profit is increasing. I have always believed you pay the bills with $ not %!!
August 28th, 2015 at 12:59 pm
The Smart for Two just doesnt seem that smart to me. Lots of vehicles on the market that can haul 4-5 people and have a trunk and get better than the combined 36mpg the smart car gets. Plus they are not a cheap car. I would guess once (if)Elio launches and has a 2 seater that gets 80mpg and is priced under 8k the Smart cars days will be numbered.
August 28th, 2015 at 1:35 pm
#2 Elio only collects money from investors. If they had intentions to manufacture it would have happened by now.
August 28th, 2015 at 1:46 pm
1.
I could be wrong, but I think the expectation is that with increased sales volume should also come increased plant efficiency, thus resulting in slightly higher profit margins.
Of course, with the plant efficiency numbers John gave us a week or so ago, showing low numbers for the domestics, and higher ones for a few of the imports, I can see how margins would remain stagnant.
August 28th, 2015 at 1:48 pm
1. & 4.
My bad. I addressed mfr, profits instead of dealer profits.
August 28th, 2015 at 1:50 pm
Elio Motors should be renamed Flim Flam Motors instead.
August 28th, 2015 at 1:55 pm
I don’t believe it either; that the Smart is too smart (of a buy). Even with the reported ailing transmission having been fixed, some of the damage has already been done (reputation) and with other ‘better’ choices out there, I don’t see sales taking-off.
From the ‘clip’ on dealer profits remaining flat, the responder was right-on when he offered: that the reason for flat profits lies with the increased, and increasing, inventory and model introduction into the market. Even with increasing sales there is a finite number of vehicles being sold, and currently, there are so many choices that some of the niches, and also mainstream offerings, just can’t be sustained at healthy levels. This factor has sustained a buyers market (thus keeping higher profit margins elusive in a lot of the segments).
August 28th, 2015 at 2:33 pm
Mike the Mole
What we here need is a mole in the dealership who can lay out how money really moves around the dealer. When you say ‘net margin is 2%’ what is that? Does it include used cars on the lot? Does it take into account ‘dealer reserve,’ the mark up a dealer can take on financing? How do you factor in advertising allowance from the OE? Hold backs? Mark up on insurance products? What’s the return on capital at a dealer? (Buffet knows this, I’ll bet) How much does the average dealer principal have to pony up every year to the state lobbying group to grease up the state legislatures which maintain the franchise monopoly by law? How much of a discount does the dealer get from the OEM for their floor plan compared to the cost of capital in the open market? How many cars do the OEMs force dealers to buy even if they don’t want them? A simple figure like 2% makes me think someone needs to get Mike Jackson drunk.
These are the questions keeping me awake at night.
August 28th, 2015 at 3:04 pm
I recently postulated that Elio Motors in the Moller International of the 21st century.
August 28th, 2015 at 3:12 pm
Dealerships
So a state by state monopoly is ripe for consolidation by private equity.
Sounds dandy.
August 28th, 2015 at 4:34 pm
Cadillacs almost drive themselves now.
http://sandyblogs.com/techlink/?p=3500
August 28th, 2015 at 4:59 pm
In America, where smallness is not a huge advantage for parking, the smart is mainly for someone who wants a “city car” that is different from most. I kind of liked the first one, except for the horrid gearbox. That is now fixed, with a decent dual clutch, and even a manual.
Still, the mpg is pretty bad for such a tiny, and not-too-quick car, The highway mpg is worse than that of several cars, including a base MINI or 1.0 turbo Fiesta, and the city mileage barely better than those cars.
August 28th, 2015 at 5:18 pm
If I put on my cynic’s beenie, I’d say Merc would rather sell Smarts and lower its CAFE score, than buy credits from Tesla.
btw, 2 i3s spotted in the last 24hrs. Starting to look normal
August 28th, 2015 at 5:35 pm
Yeah, CAFE may be the only reason they sell smart in the U.S. I don’t see i3′s, but then, I’m in Chrysler, and to a lesser extent, GM country.
August 28th, 2015 at 5:41 pm
A dark grey i3 fits in very easily around here. The orange Lotus Exige with the supercharger and wing I just saw, not so much. Really though, it’s mostly a mix of everything, save for lifestyle trucks. The new Muranos are perfect, though, to my oddball eye.
August 29th, 2015 at 12:55 pm
If you listen to the dealers they would have you believe selling and servicing cars is a public service they are performing.
August 29th, 2015 at 2:18 pm
I like it when one side of the mouth says they create local jobs, and the other side says they’re looking to consolidate dealerships and back offices. They’ll say this with straight faces too.
I love it when Autoline gets them to talk on camera.
August 31st, 2015 at 4:20 pm
Used car prices shooting UP.
In order to get the general public into buying a newer car,the powers to be are raising the trade in value of what you have.Its well known that new car dealers make their biggest profits off of the used market.
If you go into a dealers lot to buy a used car,he doesn’t have a sticker in the window telling you what he has in it.So you better do your home work,and know how to negotiate,When the salesman throws a sweet trade in price for yours ,he’ll suck you in.Come in a cab,and don’t talk trade in at all.Then sell your car on the open market.