AD #2032 – FCA Has Diesel Fix, Ford’s Profits Plummet, Elio Motors Delays Again
January 26th, 2017 at 12:02pm
Runtime: 8:39
To watch this episode on YouTube click here.
- FCA Has Diesel Fix
- FCA Boosts Bottom Line
- Ford’s Profits Plummet
- Top Selling Mid-Size CUVs
- Elio Motors Delays Again
- No Subprime Bubble
- Can the Kia Stinger Compete with German Luxury Brands?
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On today’s show…FCA saw its earnings skyrocket while Ford’s profits plummeted….Elio Motors delays the launch of its vehicle, yet again…and Kia is either crazy or brave or both. All that and more coming right up on Autoline Daily.
This is Autoline Daily the show for enthusiasts of the automotive industry.
FCA HAS DIESEL FIX
We start out with some breaking news. Just as we went to press, Ward’s Auto reported that FCA is considering moving production of Ram heavy-duty trucks from Mexico to the U.S. in 2019 or 2020. We also learned that CEO Sergio Marchionne says the diesel engine used in Ram pickups will get EPA certification soon with a simple software fix for models sold from 2014 through 2016.
FCA BOOSTS BOTTOM LINE
That’s good news for FCA, which also posted good news about its financial earnings for last year. It sold 4.7 million vehicles last year, about the same as the year before. That means it brought in the same amount of money, about 111 billion euros. But now the magic happens. FCA’s earnings before interest and taxes hit 6 billion euros, up 26%. And it posted a net profit of 1.8 billion euros, up 47%. FCA cut its industrial debt to 4.5 billion euros and says it will cut that in half this year. CEO Sergio Marchionne says he wants to eliminate that debt by the end of next year, which is when he will likely retire. And getting rid of that debt will be crucial if the company wants to merge with, or get bought out, by someone else.
| 2016 FCA EARNINGS | ||
|---|---|---|
| SALES | 4.72 M | – |
| REVENUE | €111 B | – |
| EBIT | €6.0 B | +26% |
| NET PROFIT | €1.8 B | +47% |
| Source: FCA | ||
FORD PROFITS PLUMMET
OK, now over to Ford. It sold 6.6 million vehicles last year, virtually the same as the year before. It brought in nearly $152 billion in revenue barely up from the year before. But now the numbers turn ugly. Ford’s pre-tax profit was $10.4 billion, down nearly 4%. And it’s net profit plummeted 60% to $4.6 billion. The company blames a gigantic $3 billion payment into its pension system for the big drop in profits. And it shows that despite big improvements to its balance sheet, Ford is still heavily burdened by pension costs.
| 2016 FORD EARNINGS | ||
|---|---|---|
| SALES | 6.6 M | – |
| REVENUE | $151.8 B | +1.4% |
| EBIT | $10.4 B | -3.8% |
| NET PROFIT | $4.6 B | -60.8% |
| Source: Ford | ||
Uh-oh, looks like trouble for Elio. More about that right after this.
TOP SELLING MID-SIZE CUVs
Recently we looked at the top selling small crossovers last year in the American market. But now let’s move up a class and look at the best selling mid-size CUVs in 2016. The Honda CR-V is King of the Hill with over 357,000 units sold, which is a modest gain of 3%. But that was enough to keep it ahead of its Japanese rival, the Toyota RAV4, which was up 12%. The Nissan Rogue also made the podium, with nearly 330,000 sales. It was followed by the Ford Escape, which posted an almost non-existent gain. And the Chevy Equinox rounds out the top 5, but it fell close to 13% compared to last year. However, the new version will hit dealer showrooms in the next few months, so it would be surprising if the Equinox’s sales don’t improve this year.
| TOP SELLING MID-SIZE CUVs IN 2016 | ||
|---|---|---|
| 1. Honda CR-V | 357,335 | +3.4% |
| 2. Toyota RAV4 | 352,139 | +11.6% |
| 3. Nissan Rogue | 329,904 | +14.9% |
| 4. Ford Escape | 307,069 | +0.2% |
| 5. Chevy Equinox | 242,195 | -12.8% |
| Source: Wards Auto | ||
ELIO MOTORS DELAYS AGAIN
Elio Motors is once again delaying the launch of its three-wheeled vehicle. The car was originally supposed to go into production in 2015 but in a recent Facebook post, the company says it’s now targeting 2018. But even that new goal also seems in jeopardy. A recent SEC filing shows that Elio has accumulated a $123 million deficit and it only has a little over $100,000 in the bank. Over 64,000 people have reserved the vehicle, which has a base price of $7,300.
NO SUBPRIME BUBBLE
Automakers set a sales record in the U.S. last year and while that’s good news, it does mean more subprime loans are being handed out. And coupled with an uptick in delinquencies, it has some analysts worried that a subprime bubble is about to explode. But at the American Financial Services Association’s annual conference, several U.S. credit bureaus said there’s no cause for concern. One reason is that subprime loans are only a small part of the market. Those worried about a bubble are concerned it could be similar to the mortgage crisis during the Great Recession. But the credit agencies say that’s a flawed comparison because the mortgage industry is much larger than auto lending, so even if the bubble did burst it won’t have the same impact.
Coming up next, has Kia gone crazy? Does it really believe it can take on the German luxury brands?
Don’t forget to join us later this afternoon, when Autoline After Hours goes live with the outrageous Chevy Colorado ZR2 in the studio. There is a fantastic engineering story behind this truck and we’ll learn about it first hand from the chief engineer who put it all together, Anita Burke. So join Gary Vasilash and me for some of the best gear head talk in the business.
YOU DON’T HAVE TO EXPLAIN BEAUTY
At the Detroit auto show Kia introduced a grand touring sedan called the Stinger. It got great reviews, but what really caught our attention is that Kia believes this car can take on the GT sedans from the top German luxury brands. Michael Sprague is the Chief Operating Officer for Kia Motors America, and here’s what he had to say about the car.
(The Kia Stinger update is only available in the video version of today’s show.)
Watch that entire interview here.
Taking on the top brands in the luxury segment is quite a cheeky goal for the Kia brand. But it is making amazing progress. In 2001 it ranked dead last in JD Power’s Initial Quality Survey. Last year it was in first place. That’s pretty impressive, but amongst luxury buyers brand perception is critically important. And we just don’t think that Kia has the brand power to attract those buyers. What do you think? Can they turn Kia into an aspirational brand, or are they just whistling “Dixie?”
And with that we wrap up today’s show. Thanks for watching and please tune in tomorrow.
Thanks to our partner for embedding Autoline Daily on its website: WardsAuto.com
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Comments (34)
January 26th, 2017 at 12:17 pm
KIA may be reaching high, but they have been making amazing progress in styling AND quality. The Stinger looks like a great next step.
Oh, and then there’s the aggressive pricing/high content value they pursue throughout their lineup…
January 26th, 2017 at 12:21 pm
The CR-V, Rav-4, etc are considered Mid Size SUVs? I always thought those were compact SUVs since they’re based on vehicles like the Civic. The Explorer was always mid size in my book.
January 26th, 2017 at 12:22 pm
60,000 pre orders at 7K a shot would provide a decent income. Enough to cover a portion of the 120K owed. So Elio, build the thing, or refund the money.
January 26th, 2017 at 12:23 pm
One adjective that I did not hear when describing the Kia was “brilliant”; if you want to compete with the big boys, you need more than looks.
January 26th, 2017 at 12:24 pm
3 They have apparently spent the $24.8M they collected in deposits.
January 26th, 2017 at 12:27 pm
If Hyundai wants to compete with the Germans, wouldn’t it make more sense to sell the Stinger as a Genesis, and continue to broaden that brand? Given the gains H/K has made over the years, I’d think they could offer more models, and make Genesis into a brand that could easily compete with Acura and Infiniti, and maybe even Lexus.
January 26th, 2017 at 12:28 pm
I’m really bummed about Elio. They have delayed now since 2013 or 14 . It is a great little car with tons of potential ,but recently things they have said run counter to everything they had done up this point. The car was to have a full frame/rollcage with a composite body. 5 or so years into the project they turned about face and are now going with a steel unibody design. Really? you didn’t know these factors before you designed the car and built 4 or 5 prototypes and 2 E series vehicles to discover that it would be too expensive to do the original design. The whole deal has really got me wondering if they know what the hell they are doing. Maybe if the project goes under someone else will pick it up and really get it going . There is a desire and need for a inexpensive commuter car . 64000 people putting down money on something that doesn’t exist is proof of that.
January 26th, 2017 at 12:29 pm
The pre orders were only 1000 or 500 dollars not the full amount. But they raked it in with stock offerings. to the tune of millions
January 26th, 2017 at 12:38 pm
The advertised price of the Elio has always sounded unrealistically low, given that the cheapest Can Am Spyder costs twice as much, with no roof, doors, A/C, etc. The Elio is an interesting concept, but, unfortunately, it is unlikely to ever see production.
January 26th, 2017 at 12:40 pm
#2 Everything has increased in size. The Civic of today is far larger than the Accord of 90′s. Hence the need for the Fit. The CR-V continues to grow, necessitating the HR-V. Likewise, the Explorer of today is larger than the one that first came out, so we have the Escape, which is also growing…and so, now we have the EcoSport. Vehicle segmentation is a black art, fluid and ever-changing, unfortunately, successful nameplates that define certain segments and should be moved to other segments as they grow, end up in the “wrong” segment out of habit or tradition.
January 26th, 2017 at 12:41 pm
Elio Motors is the Moller International of the 21st century.
January 26th, 2017 at 12:58 pm
John,
I see the Kia Stinger as being a rival to the Japanese brands more than the European brands.
January 26th, 2017 at 12:58 pm
The more I see of the chevy ZR2,the more I love it.
January 26th, 2017 at 1:10 pm
Elio is more like Dale
January 26th, 2017 at 1:42 pm
Kias may not be the scrappy, crappy little-engines-that-thought-they-could that they once were, but I think it’s a stretch to believe that Kia can “shake up” the German GT crowd. It’s not just that some buyers are too loyal to the German brands, but that Kia just doesn’t have enough change in its pocket to play in that game. A pretty face may gain some attention, but as soon as you say, “It’s a Ka-Ka-Ka-Kia, the pottery…er…the car company that grows!” you’ve lost them. They may have transformed the company from its Yugoesque beginnings, but they have a long way to go to get that kind of panache. But I’ll cut Mr. Sprague some slack; I really don’t expect the COO (or any company rep.) to say, “Gee, John, you’re right, we can’t compete.”
January 26th, 2017 at 1:51 pm
It may take some time, but I believe Kia will earn its way into the big(ger) league, even the prestige league, with products like the Stinger.
Consider that the Soul almost single-handedly killed the entire Scion brand. Kia took what Toyota was trying to do with a whole new brand and doubled or tripled Scion’s annual volume with a single car.
And moving from last place in initial quality to first may have taken 15 years, but who else has made that kind of progress?
Any brand that takes Kia lightly is doing so at their own peril.
January 26th, 2017 at 2:07 pm
#16
The Korean refer to the Japanese as “the lazy Asians”. If that doesn’t speak volumes about their competitiveness, I don’t know what does.
January 26th, 2017 at 2:21 pm
The Kia Stinger appears to be a well-engineered, accomplished sports sedan (thanks, somewhat, to a former BMW “M” engineer). The problem is the name “KIA” and the past association with meager quality and low-suds performance. A Mercedes-Benz, BMW or Audi customer — with that in mind — would not likely pursue a Kia, despite its newfound excellence, simply because of that association.
Perhaps the Kia name itself should be dropped and let it simply be “Stinger,” not unlike the adaptation of “Ram” by FCA for the Dodge truck line.
January 26th, 2017 at 3:03 pm
16 I see a lot of Souls here, in the Space Coast area of Florida. I’m not surprised that it sells well. It is a practical, basic vehicle, and is a good value, especially if not “loaded up.” It even has some individual options. You can even get “home link” and auto dimming mirror as a separate option on the base car, while it takes an expensive trim upgrade on many cars to get home link.
Yep, KIA has come a long way, since they were building Ford Aspire.
January 26th, 2017 at 5:10 pm
Hyundai and Kia probably can produce a car that can equal the Germans, but can it exceed them? The other major thing H/K has chosen NOT to do is build a separate showroom and identity in the piblic eye. I look at what Cadillac has done competing with the Germans and still their sales are well below the leading German brands. For any of us who have been to H/K dealers they are not close to the treatment and amenities you get from M-B/BMW/Audi/Cadillac/Lexus/Lincoln/Acura dealers.
January 26th, 2017 at 5:17 pm
Does Genesis have separate dealers, or do they plan to?
January 26th, 2017 at 5:22 pm
Trump’s trade war has begun.
http://mobile.nytimes.com/2017/01/26/us/politics/mexico-wall-tax-trump.amp.html
January 26th, 2017 at 6:13 pm
Elio has been a joke from the beginning! I still don’t understand why anybody gives them any news coverage. Bernie Madoff is waiting patiently for his next roommate.
January 26th, 2017 at 6:40 pm
@ Kit: I love it,but you knew that ;}>
He has to start somewhere to bring about the change we desperately need.
January 26th, 2017 at 6:49 pm
@#21 Kit I have only seen Genesis models sold from Hyundai dealers. 2 dealers I saw put the Genesis models in a separate part of the showroom, but sales and service is all intermingled. VW dealers had trouble moving the Phaeton and Hyundai dealers have trouble moving the Equus/G90.
January 26th, 2017 at 6:59 pm
#24 If they are serious about moving “upscale,” they need separate showrooms, service, etc. That has worked for Lexus. Many of their products are mostly badge engineered, but the dealer experience is good. I recently went to a Lexus dealer in my Prius, told the salesman up front that I was “just looking,” and he understood that.
January 26th, 2017 at 7:49 pm
The H/K should decide who among them will be the luxury leader and follow thru. The confusion over the nsme plates reflects that the potential buyer is not clear as to what they are buying into. Remember Buick/Pontiac/Oldsmobile/Chevy competition for luxury to justify a higher price tag.
January 26th, 2017 at 8:28 pm
26 If H/K wants to compete in the “luxury” car business in the U.S., they need to concentrate on Genesis, as Toyota did with Lexus. Either that, or they need to drop Genesis, and sell a full line of cars with one brand, as M-B does everywhere except North America, where they ignore the low end.
January 26th, 2017 at 8:29 pm
Here is hoping Musk did not take note of Elio motors.
January 26th, 2017 at 8:57 pm
Do I have this right??? Trump wants to tack on a 20% tariff on products coming into the country from Mexico. Guess who is ultimately going to pay for those products? Oh, wait it’s US!! Is anyone naive enough to believe that the cost of those products will not be passed on to the buyer???
We are actually going to get hit twice – once out of tax revenues and then again when we buy stuff made from parts imported from Mexico. Can you tell me again how this is such a great idea?
January 26th, 2017 at 9:51 pm
29 It’s regressive taxation, a basic mantra of a certain political party in the U.S.
January 27th, 2017 at 7:21 am
@ 26 RS Me too. +++
January 27th, 2017 at 7:22 am
Make that #29 Sorry
January 28th, 2017 at 12:38 pm
#16….You’re right the Kia Soul ate the Scion brands lunch. It was a game changer and the women (35 to 55 age) have gone for it big time. The original Soul caught the market by surprise and their styling has been evolutionary. Looking back to 2009 when they first sold 31,612 of them and now last year 145,768.
As for the Stinger, much like the K9000 are not game changers and they have to think 10 to 15,years to earn a place in their segment. And hope that some of their competitors screw up like Lexus is doing with their god awful front ends.