April 28th, 2010 at 12:00pm
Honda’s profit report shows the industry is really turning around. Chrysler announced it will make a stronger push in the police-car market with the new Dodge Charger. The Chinese government will make it easier for car buyers to get a loan. All that and more, plus John answers a viewer question about GM’s claim that it paid off its government loans in the “You Said It!” segment.
Transcript and Story Links after the jump . . .
Here are today’s top headlines. Honda’s profit report shows the industry is really turning around. Dodge will beat Ford to the market with a new cop car. And automakers want to get the Chinese hooked on car loans.
Up next, we’ll be back with the news behind the headlines.
This is Autoline Daily for Wednesday, April 28, 2010. And now, the news.
HONDA’S AUTO PROFIT SURGES
Another financial report from another automaker which clearly shows the auto industry is turning around. Honda reported a profit of $2.8 billion, a 96 percent increase from a year ago. This despite the fact the company’s revenues fell 14 percent. But it was not an even recovery. Profits at its motorcycle operations dropped 41 percent. Honda lost money on its power products like lawnmowers and snowblowers. However, profits at its car operations shot up a jaw-dropping 416 percent. Honda lost money in Japan and Europe, and turned a profit in Asia, but the big surge came in North America. $2.4 billion of Honda’s $2.8 billion profit came out of North America.
MORE REGULATION COMING
Two Democrats in the U.S. Congress are drafting legislation to mandate brake-override systems and event-data recorders commonly known as black boxes. Senator Jay Rockefeller of West Virginia and Congressman Henry Waxman of California are writing the legislation. Here’s my Autoline insight. Why do we need legislation to make this happen? Many automakers already have these items as standard equipment. The cost of doing so is next to nothing. This is where the rest of the industry should just get together and voluntarily agree to put this on every single vehicle that they make. You know the car companies could avoid a lot of regulation if they would just tackle some of the simple issues on their own.
CHRYSLER TARGETS POLICE-CAR MARKET
Chrysler announced it will make a stronger push in the police-car market. According to the Detroit News, the company will introduce a police car based on the new Dodge Charger that’s coming out later this year. Chrysler worked with a police advisory board while developing the new Charger so it could outfitted for police use. This could be great timing for Chrysler, since both GM and Ford won’t have new police car models ready until late next year.
CHINA RELAXES LOAN RULES
The Chinese government will make it easier for car buyers to get a loan. Currently 90 percent of Chinese buyers pay with cash, which is almost the exact opposite of the U.S. where 85 percent of buyers get a loan. According to Bloomberg, making it easier for buyers to get a loan should help keep sales steady, and encourage them to buy more expensive models.
CARBON FIBER MORE COMMON
Carbon fiber is going to play a BIG role in future vehicles. More and more automakers are figuring out ways to incorporate it in their cars. A few weeks ago BMW announced that it was building a plant in Washington State to manufacture the material. Now, Reuters reports that Daimler has partnered with Japanese textile maker Toray Industries to push the technology. Components from the partnership will debut in 2012 on the Mercedes-Benz SL-Class. Toray is the world’s largest maker of carbon fiber, but this is the first time it has developed car parts. It has supplied yarn to Ferrari for its sports cars, though.
Yep, I think it’s official. We’ve become a nanny nation. According to the Vail Daily, a bill requiring that children stay in booster seats until they’re 8 years old is on its way to Colorado’s governor. The final version would allow police to pull over vehicles that are suspected of having improperly restrained children in them. I’ve said it before and I’ll say it again. In the U.S. 55 percent of all traffic fatalities are from unbelted people. 55 PERCENT! That’s 20,000 lives each year that could be saved if people just wore their seat belts. This is where we should be putting all our safety efforts.
Did General Motors really pay the government back or is it just trying to mislead the public? We’ll tackle that right after this.
And now it’s time for some of your feedback.
A number of you wrote in about GM’s claim that it paid-off the government. Typical of your letters was this one from Todd Jaspers who, by the way, works for the Miami Dolphins. He says, “Most of the guys around training camp know me as the ‘car guy’ here, so I’ve had a couple of people come up to me saying, ‘Hey, did you hear that GM repaid all their loans?’ Unfortunately, I think they all actually believe that GM has repaid every cent of taxpayer money that was given/loaned to them. I really, really hope you take the time to prove/disprove/clear-up some of this for me.”
Well Todd, once again, GM blew it in the court of public opinion. Instead of humbly paying off their TARP loans and promising to repay the rest of the money, they beat their chest and tried to make everyone think they had repaid it all. All they did was leave themselves open to charges of deception.
Here’s what’s going on. GM did repay its loans, but it repaid them with money the government gave it, not from cash generated by its own operations. The good news is that GM gave that money back because it doesn’t need it. And it gave this money back four years sooner than required, which shows how quickly the company is turning around.
However, the government gave GM a lot more money than just the loans. There is another $50 billion of taxpayer money that we sunk into the company. In return for that money the government got 60 percent of GM’s stock. When GM goes public again, probably later this year, the government will be able to start selling its shares on the open market.
This is the point that GM should be emphasizing. If Uncle Sam sells those shares on the NYSE in a controlled and disciplined manner, it could get every penny back and possibly make a profit.
Ford stock has gone up nearly 1000 percent in the last 14 months. I’m pretty sure GM’s stock will perform quite well, depending on how they price the IPO. If the sale goes well, and the government gets back every penny, then GM will finally have a legitimate reason to beat on its chest and brag to the world.
And that’s it for today’s top news in the global automotive industry. Thanks for watching, we’ll see you tomorrow.