John's Journal: John McElroy's multimedia blog about the automotive industry

Archive for the ‘Automotive Insight’ Category

AUTOMOTIVE INSIGHT: Ford’s 1980s Turnaround

December 4th, 2008 at 12:13pm

As heard on
WWJ Newsradio 950

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With the automotive market so bleak today, it’s worth remembering how we got through times like this in the past.

Back in 1980, when gas prices soared and the automotive market collapsed, the Big Three were bleeding red ink. Chrysler had to be rescued by the government and it was GM and Ford’s overseas operations that helped them get through the tough times.

But as it always has, the market came back again. In 1982 car sales had fallen to only 10.5 million units. But by 1986, only four years later, they surged by almost 6 million units to an all time record.

It’s worth remembering what happened at Ford. In 1980, 81 and 82, the company lost record amounts of money. But in 1986, only four years later, it went on to record all-time record profits. The point is, we’ve gotten through horrible times in the past, and we’ll get through it this time as well.

AUTOMOTIVE INSIGHT: California Loses its Luster

December 3rd, 2008 at 5:02pm

As heard on
WWJ Newsradio 950

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Californians buy more cars than people from any other state, but this year it’s losing its luster as an automotive marketplace.

Traditionally California buys between 16 and 19 percent of all new cars sold in this country. But this year that’s dropped to 12 percent. That represents a drop of half a million cars.

And it gets worse. According to CNW Marketing, only 14 percent of Californians are able to afford a new car, down from 30 percent a decade ago. And it says that for the first time since 1984, the number of Californians who say they intend to buy a new vehicle as dropped below the national average.

Asian automakers have enjoyed great success in California, but CNW says the need to succeed in California is losing its luster. It will still be a very important market, that can’t be ignored, but not as important as it was in the recent past.

AUTOMOTIVE INSIGHT: Fiat Pushes Methane Cars

November 17th, 2008 at 12:28pm

As heard on
WWJ Newsradio 950

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With all this talk about alternative fuels, it’s worth taking a look at the one that seems to be catching on in Europe.

In Europe, cars that can run on methane are becoming more and more popular. And Fiat is the most aggressive European manufacturer that’s jumping on that trend.  They have a full line-up of methane vehicles.

Now, the company just unveiled a version of the compact car called the Punto that can run on both methane and gasoline. And on methane it only emits 115 grams of CO2 per kilometer, versus 145 when it runs on gasoline.

It only costs 12 Euro to fill the methane tank, which is about $16 bucks, and provides over 180 miles of range. Interestingly, if you fill both the gasoline tank and the methane tank, the car can travel over 600 miles. And this all explains why methane cars in Europe are becoming more popular.

AUTOMOTIVE INSIGHT: Plug-Ins Won’t Crash the Electric Grid

November 7th, 2008 at 12:33pm

As heard on
WWJ Newsradio 950

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Can the electrical grid take it if we plug in millions of electric cars? Well here’s what GM and the electric utilities have to say about that.

The Electric Power Research Institute, or EPRI, is a research organization for electric utilities. And they love the idea of plug-in hybrids and electric cars. Far from being a burden on the grid, EPRI says that if we plugged 10 million electric cars into the grid it would only add about 1 percent more electric load.

The reason is that plug-ins don’t use that much energy, at least not compared to other products in our homes. For example, GM claims a plug-in electric car like the Chevy Volt would use less electricity than your refrigerator or a central air conditioning system.

So even though the grid may have other issues, plugging in millions of cars will not bring it to its knees.

AUTOMOTIVE INSIGHT: Detroit Three to Lose Thousands of Dealers

November 6th, 2008 at 12:43pm

As heard on
WWJ Newsradio 950

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The Detroit 3 automakers have been losing several hundred dealers a year, but here’s one retail expert who says now they’re going to lose thousands.

For years, experts have been predicting that there would be a big shakeout in the retail side of the automotive business. And now it looks like that day is here. Mike Jackson, the CEO of AutoNation, the largest dealer group on the country says the Big Three are going to lose thousands of dealers by the end of next year.

But Jackson actually sees this as a good thing. With fewer Big Three dealers selling cars, the surviving dealers will have more sales which will make them more profitable.

Jackson says up to now the Big 3 dealers have actually had to charge more for cars to cover their fixed costs because they sell fewer cars. He says now its time for the Big 3 to copy how the Japanese and Europeans do it: that is, with fewer dealers.

AUTOMOTIVE INSIGHT: Tardec Looking for Engineers

November 4th, 2008 at 1:19pm

As heard on
WWJ Newsradio 950

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If you’re an engineer who’s been laid off in the auto industry, here’s a place where you might be able to further your career.

One of the little-known places in the Detroit area is called TARDEC. It’s part of the U.S. military and it does all kinds of vehicle-related R&D, including advanced batteries, hybrids, bio-fuels, robotics and more.

Unlike the auto industry, anything to do with the military these days is very well funded and growing by leaps and bounds. TARDEC, which is located off 11 Mile road in Warren employs 1,200 engineers, and is going to be doing a lot of hiring in the next few years. That’s because one in four of their current engineers is about to retire.

TARDEC is spelled T-A-R-D-E-C, and you can easily find out more about it online. And by the way, they’re also interested in high school and college interns.

AUTOMOTIVE INSIGHT: Less Overcapacity Will Hurt Consumers

October 29th, 2008 at 3:41pm

As heard on
WWJ Newsradio 950

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Automakers are closing plants to reduce overcapacity and make themselves profitable again, and as strange as it sounds, that’s going to be bad for car buyers.

In the global auto industry today there are probably 20 million units of overcapacity. That is, the industry can build more cars than there are people to buy them. And you know what happens when you have a surplus like that? Prices go down.

For the last two decades car buyers have been the beneficiaries of this overcapacity. Automakers have had to keep a lid on prices, or offer all kinds of incentives, to lure people into their showrooms and not their competitors.

But now, with so many automakers losing money, they’re closing plants and reducing that overcapacity. And that means the next step is that prices of new vehicles will start edging up every year. My guess is that in the next five years the average MSRP is going to be somewhere around $40,000.

AUTOMOTIVE INSIGHT: Driving a CNG Civic

October 27th, 2008 at 3:56pm

As heard on
WWJ Newsradio 950

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What’s it like driving a car powered by compressed natural gas? Well, you don’t notice anything at all, until you go to fill up.

I just got to test drive a Honda Civic that runs on natural gas. Or I should say, compressed natural gas. There are a lot of places where you can buy natural gas, but not a lot that sell compressed natural gas. It has to be compressed because the only way you can get a semi-decent range is to really cram it into the tank.

In southeast Michigan there are only about 5 stations that sell CNG. If you get online it looks like there are more stations, but good thing I called ahead, because a number of those listings no longer sell CNG.

But the good news is, CNG is a lot cheaper than gasoline. I paid the equivalent of $1.94 a gallon, and I filled the tank for less than ten bucks.

AUTOMOTIVE INSIGHT: Arvin Innovation Sees Opportunity

October 22nd, 2008 at 5:48pm

As heard on
WWJ Newsradio 950

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One of the newest suppliers to the auto industry sees a lot of opportunities out there, as long as it has the right products in the right markets.

Arvin Innovation is the name of the newest supplier coming into the auto industry. But it’s a start-up that’s being carved out of Arvin Meritor, and on it’s first day of business it will have $2.5 billion in sales and 9,000 employees in 16 different countries.

Phil Martens, who used to be at Ford, is the CEO of Arvin Innovation, which is headquartered in Detroit. And he sees big opportunities in coming out with products like composite springs that are half the weight of steel ones. And with what they call smart motors, and smart latches.

Martens says that as long as you look at the auto industry on a global basis, and get into product lines that can boost fuel economy or safety, there is plenty of growth opportunity out there.

AUTOMOTIVE INSIGHT: Private Equity Looks Downstream in Autos

October 22nd, 2008 at 3:40pm

As heard on
WWJ Newsradio 950

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Private equity is not as engaged in the auto industry as it was a few years ago, but the experts say just you wait, they’ll be back.

Private equity deals have dropped off dramatically in the auto industry this year, and that is a global phenomenon. But Frank Dunne, a senior counsel at the law firm Dykema Gosset says one of the reasons is that the private equity firms have to put more money into their existing investments, rather than go out and cut new deals.

But he says private equity will be back in the auto industry because now they’re looking downstream. Instead of looking at automakers or suppliers, he says they’re now very interested in the retail end of the business and in the aftermarket.

And he says that the big automotive retailers, like Auto Nation are just the kind of businesses that private equity would love to get into.