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Episode 171 – Opel Still Up For Grabs, GM Shakes Down Chrysler, E85 for Everybody

June 24th, 2009 at 12:00pm

Runtime 6:15

GM says even though it signed a letter of intent with Magna, it’s still open for offers for Opel. GM went to court to try to get the “new” Chrysler to pay for its part to develop two-mode hybrids. The Energy Secretary wants all cars built in the U.S. to be able to run on E85. All that and more, plus John answers viewer questions in the “You Said It!” segment.

Transcript and Story Links after the jump . . .

Here are today’s top headlines. GM looks for new partners for Opel. GM sues Chrysler for hybrid money. And the Energy Secretary wants E85 for everybody.

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

This is Autoline Daily for Wednesday, June 24, 2009. And now, the news.

What’s going on with GM’s deal to sell part of Opel? After turning Fiat away, and seemingly going with supplier company Magna, and Russian bank Sberbank, GM says even though it signed a letter of intent with Magna, it’s still open for offers (subscription required), reports the Wall Street Journal. Now the Beijing Auto Industry Company is looking over the books and so is investment firm Ripplewood, which was an earlier bidder that dropped out but is now back. GM is presenting this as a “Plan B,” in case the Magna deal falls through. And maybe it’s a negotiating tactic to get a better bid out of Magna. But something tells me there’s more to this story than anyone is letting on, especially when you see Ripplewood back in the picture.

Honda’s senior VP in charge of Purchasing in the United States is resigning from the company. Larry Jutte, 53 years old, said he made a difficult decision to leave the company to move on to the next phase in his life, reports the Detroit Free Press. In a recent survey of suppliers Honda was rated as the best car company to work with, but the company’s ranking has been slipping for a number of years.

Autoblog reports GM went to court to try to get the “new” Chrysler to pay $531,000 for its part to develop two-mode hybrids. GM, Chrysler, Mercedes and BMW joined forces to develop the hybrid system. Chrysler has only agreed to refund about a third of what it owes. Chrysler only built a handful of two-mode SUVs before it cancelled production.

But hey, who needs hybrids when you have biofuel? The Des Moines Register reports that U.S. Energy Secretary Steven Chu wants all cars built in the U.S. to be able to run on E85. The proposal will probably draw fire from foreign automakers, but it costs less than $100 to convert a car to run on E85.

But who needs biofuel when you have EVs? Yesterday we reported the U.S. government was set to hand out loans to Ford, Nissan and Tesla to help them build green cars, now we know how much they got. According to the Detroit News, Ford received just under $6 billion to retool and update factories. Nissan received $1.6 billion, three times what we reported yesterday, to build electric vehicles at its plant in Tennessee. And Tesla received half a billion to build a cheaper version of its EV.

In an interview with a Chinese news site, Hummer CEO Jim Taylor says Sichuan Tengzhong Heavy Industrial Machinery Co. will be an investor only in Hummer and not run day to day operations. According to Gasgoo.com, despite criticism that Tengzhong doesn’t know enough about the auto industry, Taylor believes the deal will work because Hummer executives bring all the experience and expertise they need to the table. The deal is expected to be completed by the end of August.

Coming up next, I respond to some of your questions and comments, we’ll be back right after this.

Well, it’s Wednesday, and that means it’s time for “You Said It!”

Every day we get a slew of comments and questions from you, our loyal audience. “You Said It!” gives me a chance to respond.

Tony Gray heard my criticism of J.D. Power’s Initial quality Survey and wrote in to say,
*Intercom buzzes* “John, there’s a Rocco and Nunzio from J.D. Power to see you.”

Tony, I’m sure J.D. Power is not happy with my criticism, but all I can tell you is that I have an even bigger problem with the way Consumer Reports rates the quality of cars.

Tom G. asks a question a lot of people want to know about. “Just exactly what are the differences in the diesel emission standards between North America and Europe?”

Tom, there are a number of differences but the biggest one, and the one that causes the huge cost difference is with NOx, oxides of nitrogen. Our current standard is one-fourth less than what Europe has to meet, or to put it another way, European diesels put out roughly four times more NOx than what is allowed in the U.S.

And finally ej wrote in about our report of Nissan getting retooling money to build electric cars in the U.S. “Are you kidding me?!,” he says, “Nissan wants $500,000,000 of U.S. taxpayer money! That’s not even funny!”

EJ, this is a subject that’s hit a raw nerve with a lot of people. All I can say is I’d much rather see Nissan building EVs and the batteries that will go in them here in the U.S., than importing them from Japan.

But join us tomorrow night at 7 p.m. Eastern for Autoline After Hours. Joining me, Jason Vines and Peter Delorenzo will be Denise McCluggage, one of the most interesting people I’ve ever run across in this industry. From race driver, to journalist, to opinionator, Denise has been a trailblazer for over 50 years. Best of all she tells it like it is.

And that brings us to the end of today’s broadcast, thanks for watching, we’ll be back tomorrow.

25 Comments to “Episode 171 – Opel Still Up For Grabs, GM Shakes Down Chrysler, E85 for Everybody”

  1. Ron Theis Says:

    John,

    Okay, I understand your reservations about the J.D. Power IQS, but you left us hanging when you indicated you had bigger problems with the way Consumers Reports handles their quality ratings. Pls enlighten us!

    Ron

  2. paulstewart Says:

    Where’s Thor ?

  3. John V Says:

    While Consumer Reports is certainly not perfect, a lot of buyers rely on them as a time saver in choosing what to buy. Once I was flummoxed by their description of GM’s larger 3800 V6 equipped cars as oversized gas guzzlers in the 90s – my 96 Olds 98 still gets about 30 mpg on the highway. Funny how residual values often seem to track CRs ratings, though. The D-3 has been paying more attention to CR lately even though CR has its faults. CR is just a reality of the market place.
    If any real innovation comes from Nissan’s efforts it will be their intellectual property, not that of any US company or other US interest. Call me a nationalist, but I don’t get it. We should be taking care of our own, but in so many ways we are not.

  4. Dave Says:

    E85 for all cars!!!! That is the dumbest thing I have ever heard, burn the food supply even more sounds good.?!@

  5. Hermann the German Says:

    Neither Nissan nor any other car maker is ‘getting’ any money from the US taxpayer. These are loans. And don’t we benefit from EVs that will reduce imports of fuel that carry capital away from the US?

  6. Jim Sawyer Says:

    How much help has any US automaker received from the Japanese government? And why did Nissan get $1.6 B in loans when all the media reports prior to yesterday’s announcement said the company was only requesting $1.1B?

    Also, Tesla gets nearly half a billion? Yet, Daimler just bought 10% of Tesla for $50 million. Tha means Tesla has, in effect, doubled its market capitalization thanks to the US taxpayer. All this for an auto “maker” that does not have a factory. I thought the rules said that a company had to be financially viable to qualify for these loans. Perhaps the rules are different when Nancy Pelosi and Barbara Boxer are part of your state’s Congressional delegation.

  7. Alex Kajdi Says:

    John Mc Elroy:

    If the Department of Energy would put up just a faction of the money they are giving the Auto Industry up as prize money for a Nascar Sanctioned 100 mile Electric Automobile race, You would see innovation galore! Every garage / backyard inventor would love a chance to have their idea’s help revolutionize the auto industry and earn some money too booth.

    What is taking General Motors so long to get the Volt out into the market place? This junk about the 4500 rpm startup of the gasoline powerplant is just a smoke screen. The real issue is with the EPA. The EPA does not want the on board electrical powerplant to be continuously running. Well, all this is doing is adding additional cost and delaying production of the Volt. If the on board powerplant(OBPP) was continuously running at a much lower RPM it would produce some noise which would alert pedestrians that the Volt was nearby. It’s coolant system (OBPP) would be a source of heat for the cabin and batteries on cold days. If the OBPP would be partnered with a integrated solar roof panel which would continuously maintain the batteries at near full charge to provide even greater cruising distance. The Prius’s Solar Panel is to cool the car in hot sunny climates, what able us in the Northeast where it is cool and rainy. No need to cool the car, no Sun to run the cooling fan, What’s the use?

  8. Kit Gerhart Says:

    I’ve known a number of people who use Consumer Reports as their only, or almost only source of information when car shopping. On a few occasions, my friends have later found that cars are more than “transportation appliances,” which is mainly how CR rates cars. A friend who bought a 4 cylinder 2006 Camry based on CR’s ratings recently rode in, and then drove my same-year Malibu Maxx, and was impressed with almost everything about the Chevy. This was especially true after he learned that the “out the door” price was about the same on the two cars, and there is little difference in real-world gas mileage.

    I have subscribed to CR for many years, and I really think they are biased in their road tests. Is there anyone else who thinks the Chrysler 300 and Charger are that terrible in the way they drive? Also, CR will sometimes say one vehicle is “pricey,” while another, more expensive one that ranked lower in their tests is not pricey. Go figure. Still, CR’s car tests are interesting reading, but I don’t use them to select the cars I buy.

  9. pedro Fernandez Says:

    I don’t place too much credence in ANY car magazine, but even less on the enthusiast mags. I do however do listen to technicians, and the great majority of them will tell you that the Japanese brands, whether built here or abroad, are more reliable, better put together, better engineered than all others, the ones from Europe are also very well engineered but their reliability, durability, and repair costs put them at a disadvantage.

  10. Don MacConnel Says:

    One of my favorite interviews last year was when John interviewed David Champion of Consumer Reports (Watch the Interview Here). Mr. Champion was touting CR’s annual auto survey. John told him that the survey was only for CR subscribers and therefore wasn’t a wide angle look at car owners.

    Mr. Champion who is a master at evasive journalism, i.e. “it seems to us…”,”some staffers thought..”, told John that there were millions of responses. Smiling, John came back with something like “That isn’t the same thing as an all owner survey.”

    Mr. Champion looked a little flustered and John, polite as always, just smiled.

    If I weren’t out of town I would review that TiVo and get the exact words but exact or not it was a great interview.

  11. Alex Kovnat Says:

    Re Secretary of Energy Steven Chu’s suggestion that all cars be E85-capable:

    I’m not enthusiastic about demanding that every car be equipped to handle E85. I think automakers are being squeezed enough as it is, what with 35+ MPG CAFE and ever more stringent safety requirements.

    In particular, I have a problem with requiring a car like the Prius or Volt to be E-85 capable. After all, haven’t the design engineers already done their part to reduce carbon dioxide, what with the complex technology a hybrid car requires? Also, if someone is willing to put up with the small size of a car like the SmartCar, why burden that design with a flex-fuel requirement?

    Therefore, it would be better for such demands (if they must be made at all) to be focused on larger cars like the Chevy Impala, or spark-ignited engine powered pickup trucks and SUV’s.

    What I would like to see is for the ethanol industry to make progress in using cellulose, which is more readily available than cornstarch, as the starting raw material. Cornstarch is easily broken down into glucose for fermentation to ethanol, but corn requires lots of fertilizer and other energy inputs.

    Tree branches and other cellulosic biomass, on the other hand, is there for the taking. Its a matter of developing economical processes for breaking down cellulose into simple sugars for subsequent fermentation.

  12. Derek Says:

    Converting a modern car to run off E85 for less than $100 – how and where. I’m familiar with some of the conversions out there but none for less than $100. Plus, isn’t the conversion technically a federal offense – tampering with vehicle emissions?

    I’d love to have my 02 Subaru run E85.

  13. pedro Fernandez Says:

    According to the EPA, e85 capable vehicles get less mpg’s when using e85 instead of gas, so even if e85 is a bit cheaper, you’d be using more fuel and making more frequent stops at the gas station, this could be a pain during a long trip. The plus is less harm to environment and less dependence on foreign oil, so I guess the payoff is worth it.

  14. John McElroy Says:

    @Derek Converting your owwn car is not cost effective. In addition to needing the right kind of sensor in the fuel line, the engine computer has to be calibrated for E85. Also the valve seats have to be hardened, you need stainless steel fuel lines and a gas pump that also can tolerate ethanol. But it’s relatively cheap to have this built in at the factory.

  15. Greg Richard Says:

    If anybody really wants to bring the European diesal to the US it can be done. There is an aftermarket device that would reduce the NOx to almost zero. Check out http://www.econtrolcorp.com.

  16. Max Christensen Says:

    My 2008 Dodge Avenger will run on E85, and deliver about 24 mpg while on regular it can and does deliver 30 mpg. In calculating all the numbers (lower cost of E85 but with less mpg), the E85 does run about 1 cent per mile cheaper. However, you do have to stop at the gas station more often (my time is worth something) and the energy cost to produce the E85 is some higher, so I fail to see the advantage? I say cut out the subsidy payments to the big farmers here in the midwest for not growing corn, and plow that money into fast tracking alternative energy such as electric or fuel cells.

    As for Consumer Reports? That rag isn’t even worth using in the bottom of bird cage!

  17. John Says:

    Hey John McElroy,

    “I’d much rather see Nissan building EVs and the batteries that will go in them here in the U.S., than importing them from Japan.”

    This money is for Nissan R&D, What will keep that R&D ” here in the U.S.” ?

    I am getting tired of this country bending over for any foreigner that comes along.

    I bet I am not alone.

  18. DC Says:

    Gee “John”, I guess you should go and tear down the Statue of Liberty, I guess you forgot what it stands for.

    This country is built on the principle that we welcome anyone. Its what makes us the greatest country in the world.

    People like you are ruining our status and I bet I am not alone in thinking that.

    Informative show again Mr. McElroy, I cannot wait until Thursday night, great show there too!

  19. G.A.Branigan Says:

    Okay,the feds want all cars to run on E85.How about all diesels have to run B50??? That would be a 50% savings on dino-diesel.Bio-diesel burns cleaner and actually improves the engines performance.Everyone is so concerned about cars,how about trucks,trains,heavy equipment,ships etc.If they do one mandate,they should do both.

  20. Mouhamad A. Naboulsi Says:

    I was not happy hearing that Nissan is blackmailing the US government for $500 M to build EVs here. I thought that Nissan wants the U.S. TAXPAYERS to pay for their already developed technology and that is not fair for other companies particularely the national auto companies.

    Now that the amount is $1.6B, I think it is not blackmail, by plain highway robbery. What is wrong with the government? Isn’t it enough that Nissan can sell cars here, while our national industries do not have the same freedom to sell cars in Japan? Now we have to pay for their R&D to sell their stuff to us and to others?

    bad decision indeed. There are other electric car makers in thed U.S. that deserve the money. I am writing to obama about this tonight.

    Others should too.

  21. M. Campbell Says:

    CR’s problem is that their much vaunted survey is junk research. They only survey CR subscribers but the demographics of that sample is nothing like that of the population to which they try to extrapolate the results. It would be akin to electing the US president based on a survey of likely voters in one city in America.

    The AD episode referenced earlier was one of my favourites; the CR representative was brilliant in his elusive way of addressing the critical design faults of their product. CR obviously recognizes these flaws yet continues in this perverse form of journalism.

    “There are three kinds of lies: lies, d@mned lies, and statistics.”

    Personally, I would very much enjoy an AD episode with JD Power’s statisticians vs. CR’s. Do not their data often conflict?

  22. Mouhamad A. Naboulsi Says:

    Dear Mr. President,
    I find it very objectionable that Nissan is getting $1.6B to build electric cars in the U.S. They should be glad that they can sell these car in the U.S. and given them money is unfair to U.S. Industrialist and industries that want to build these cars as well.

    In addition to Tesla, there is at least one vehicle company that wants to build cars in the U.S. e.g. Fisker. I would think that Fisker and Tesla should be getting the money instead of Nissan.

    Nissan will build these cars here anyway, because if they don’t, they will be left in the dust. So why pay them to do it? Instead of focusing our borrowed money on our own home team?

    p.s. I do not have vested interest or business relation with Tesla or Fisker.

    I said I’ll do it and I did. Others should too.

  23. John Says:

    “DC”,

    “People like you are ruining our status and I bet I am not alone in thinking that. ”

    Thanks “DC” .

    Does that stand for “District of Columbia” home of the “K Street” Lobbies that SELL OUT our country every day?

    The U.S. has more “Legal” immigration than any other country on the planet, but that is not enough for the “DC”s that just want to let our “rule of law” go down the toilet while the U.S. Taxpayer picks up the tab.

    “DC” your 100 %”politically correct” point of view has already SOLD the soul of the Statue of Liberty, nobody has to tear it down. I guess it is more important to you to “look” like you are pleasing the rest of the world while selling out your neighbor.

    IF Nissan and other foreign companies want to sell into the U.S. market, they should RESPECT the PEOPLE that pay to keep this country and rule of law, up and running.

    There should be some kind of limit on the use of UNITED STATES TAXPAYER DOLLARS to aid FOREIGN CORPORATIONS. Selling the U.S out via. K Street is KILLING this country.

    See the wiki for Jobless Recovery.
    http://en.wikipedia.org/wiki/Jobless_recovery

    People like you, “DC” , have already SOLD the Spirit of the Statue of Liberty, The Rule of LAW, the U.S. Sovereignty, and the futures of millions of Law Abiding, Legal U.S. Citizen Taxpayers.

    The Statue of Liberty does not stand for a “Blank Check” for anybody to come to the U.S. and Exploit it at will via. K Street.

  24. John McElroy Says:

    @Ron Theis

    My piece on Autoblog about the quality ratings best explains why I don’t put much credence in Consumer Reports’ quality ratings. You can find it here:
    http://www.autoblog.com/2008/10/24/autoline-on-autoblog-with-john-mcelroy/

  25. G.A.Branigan Says:

    If anybody wants “real” feedback on a possible new car buy,just find a forum that is dedicated to that brand and model.The members of those forums are generally knowledgeable and truthful about those vehicles.You will quickly find out what to expect etc.CR might be okay on toasters and coffee pots,but I have never liked what they did on vehicles.Definately not a well rounded cross section given they only poll members,and JDP is way out of touch.