Episode 452 – Chrysler Grows Stronger, Canadians Buy American, VW Brings Skoda to China

August 9th, 2010 at 12:00pm

Runtime 6:34

Chrysler posted its second-quarter earnings and the results continue to be encouraging. Detroit automakers dominated the sales charts in Canada last month while their Asian and European competitors suffered losses. Volkswagen announced it will bring the Skoda brand to the Chinese market. All that and more, plus Victor Muller talks about the hero’s welcome he’s received in Sweden since he swooped in to save Saab.

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Transcript and Story Links after the jump . . .

This is Autoline Daily for August 9, 2010. And now, the news.

CHRYSLER GROWS STRONGER
Chrysler posted its second-quarter earnings today and the results continue to be encouraging. Even though the company had a net loss of $172 million, it posted an operating profit of $183 million. It also boosted its revenues to $10.5 billion, which is $800 million more than it brought in during the first-quarter. Chrysler says that the increase in revenue came from selling more vehicles, and this is where it gets interesting. Chrysler’s worldwide sales were up 22 percent, which means it’s now growing faster outside of the American market. The company ended the quarter with $7.8 billion in cash, about a half-billion more than at the end of the first-quarter. Things are looking so good that Chrysler says it will probably upgrade its guidance for the year when it reports its results for the third quarter.

CANADIANS BUY AMERICAN (subscription required)
Detroit automakers dominated the sales charts in Canada last month. Ward’s reports that combined, the “Big Three” posted an 18 percent gain compared to 2009. Overall, their Asian and European competitors suffered single-digit losses. Total light-vehicle deliveries were up 2.1 percent compared to July of last year, totaling nearly 150,000 units. On a percentage basis Chrysler was the biggest winner posting a 35 percent increase. GM was second in total volume, right behind Ford. For the first seven months of the year Canadian light-vehicle sales are up 8.6 percent from the same period in 2009.

TOYOTA HIT BY STRONG YEN
First we heard Honda complain of the high value of the yen, now it’s Toyota’s turn. Bloomberg reports that Toyota says it’s not feasible to make cars like the Yaris and Corolla in Japan and export them and still make a profit. The company is trying to figure out ways to cut manufacturing costs on those cars, and looking at moving production out of Japan to low-cost countries like Thailand and Mexico. The Japanese yen is currently running at 85 to the dollar, but many economists believe the yen will strengthen even more, perhaps reaching 80 or even 75 yen to the dollar.

TOYOTA STRETCHES OUT DESIGN CYCLE (subscription required)
And that ties into this next story. Scion redesigned its tC coupe for the 2011 model year, the car’s first update since 2004. And according to Ward’s, the company is going to stretch the product cycle for another six years. This is a longer-than-usual update schedule. Most manufacturers refresh their products every four years and completely redesign them every eight. Dragging out the lifecycle for half-a-dozen years suggests the company is not able to recoup its investment in four years. And the strong yen is undoubtedly affecting this.

VW BRINGS SKODA TO CHINA
Now we move on to China. Volkswagen, which is already the largest automaker in China, announced it will bring the Skoda brand to the Chinese market, where, according to Gasgoo, the company will introduce the Skoda Yeti next year along with its partner SAIC. It will be positioned below the VW Tiguan and is expected to compete with the Hyundai Tucson, Kia Sportage, and Nissan Qashqai.

SALES BOOM IN INDIA
While car sales are starting to slow down in China, they’re booming in India. According to Gasgoo, sales were up nearly 40 percent in July compared to a year ago, to just about 160,000 units. Those are pretty puny numbers, but that’s the highest total ever recorded by the Society of Indian Automobile Manufacturers. Automakers are expanding fast in the country due to strong economic growth and demand for cars. Car sales are expected to pass 1.7 million units for the fiscal year ending in March.

What does it feel like saving a car company? Why, it turns you into a hero, that’s what it does. We’ll let you hear what one top car-company executive experienced after he swooped in to save an icon.

Victor Muller is a Dutchman, but he’s a hero in Sweden, especially in Trollhättan, because he saved Saab. Recently we asked Muller how the people of Sweden have received him since he swooped in to rescue the company.

Of course Saab hasn’t been saved, not just yet. The company has an enormous amount of work to do, and most analysts believe it can only survive in the long-run if it gets bought-out by another automaker.

And that is it for the top news in today’s global automotive industry. Thanks for watching, we’ll see you tomorrow.

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24 Comments to “Episode 452 – Chrysler Grows Stronger, Canadians Buy American, VW Brings Skoda to China”

  1. Dave Says:

    SAAB..SAAB and Muller..WOW this guys gets more air time that you do John!!

  2. Roger T Says:

    On the longer lifecycle of Toyotas – is this something we should anticipate happening accross the industry? It would make sense provided the ever increasing costs of product development (this is the age of overregulation), but I wonder how Hyundai churns new products so frequently at the same time others such as the Japanese linger for so long with basically unchanged products. How do we explain that?

  3. tj Martin Says:

    John ;

    On this whole SAAB returning to the WRC thats being actively reported overseas .

    The reports are claiming a BMW powered 9-2 will be the car and 2012 is the goal . But the SAAB line on the 9-2 is its not slated for release until 2014 .

    SAABsUnited feels the report is incorrect yet AutoSport etc. keep repeating it and is now tying the SAAB return story with an almost verifiable story on VW’s coming into the WRC .

    So who’s correct here ? Is SAAB considering getting the platform for the 9-2 from BMW/Mini and coming in quicker that anticipated or is AutoSport etc. gotten a hold of some bad info ?

    Have to say if the speculation about SAABs return is true . That with Mini confirmed . Toyota all but certain along with VW would definitely make the WRC a viable series again .

    Not to mention pulling a fast one with an early release of the 9-2 . That in all honesty SAAB could really use .

  4. pedro fernandez Says:

    I think Toyota’s strategy to stretch the life cycle of their cars is gonna come back and bite them in the ass, I don’t get it, they’re making a lot of $$, invest it back. Enough with SAAB and Volt please, too much time devoted to 2 insignificant players in the industry. Chrysler was so low in sales and almost out of business, that of course any kind of improvement in sales seems like a big deal compared to where they were just 6 mos ago.

  5. Todd J. Says:

    I’m happy for Chrysler, it seems like they are actually making a turn-around. I still blame a lot of their issues on the union leadership, as well as the management that agreed to the terms… but I’m happy to see them doing well.

    I’m not an expert in anything, but it seems to me that Jeep is their only brand that has any real distinction and personality. Dodge and Chrysler as models, seem to be kind of in a funk. They have no real distinction… what exactly DO you get when you buy a Dodge? What does Dodge have that you can’t get in any run of the mill Chevrolet? When you buy a Ford, you know you’re getting innovation… among the fact that it is the only non-Government owned brand (which helps it). But it seems that Dodge has even less distinction than Chevrolet does. All the other brands “stand” for something, but Dodge seems to be lost. Chrysler models also don’t seem to really have any prominance either. It’s a shame because the 300C is a good car that they could build a line-up around… as their flagship model.

    We’ll have to see… but the marketing teams seem to be focusing on Jeep (which is excellent) and no real focus on the other brands… no real direction either.

  6. Todd J. Says:

    Sidenote about Toyota and Production… Thailand (specifically Bangkok) has been said to become the next “Detroit” of auto manufacturing. The labor cost is substantially low, the country has significant infrastructure, and other than a government uprising every once in a while, they are actually surprisingly stable.

    I’d look into investing in Thai Industrial ETFs in the coming 6-8 months when the global economy hopefully starts to pick up again.

  7. Shan Says:

    Being that Saab is trying to reinvent itself and reconnect with it’s former loyal customers, I would love to see them incorporate the new Opposed-Piston Opposed-Cylinder Engine from EcoMotors. Now that would really make them a unique brand again and offer some great new technology that other automakers can’t have due to commitments to their already developed engines in the pipeline.

  8. Chuck Grenci Says:

    I agree with John Mc’s last statement in todays show, (good luck to Saab) but Muller hasn’t done it yet.

    Certain brands get away with those long life cycles that Scion is trying to incorporate, i.e. some Mercedes models, the Jeep Cherokee for another; if you can nail the design (something handsome and semi-timeless) and just make mechanical improvement, it is not unheard of or even that difficult (well maybe difficult) to entertain these longer model runs.

  9. Tony Gray Says:

    I agree with Chuck. Many times automakers, especially the Japanese makes, were refreshing models long before the designs became stale. Of course, most domestics ran THEIR designs into the ground (previous Taurus, current Impala, etc).

    Not saying we will be going back to the Model T or Beetle days of old, but as Chuck says, using the BMW/Mercedes mantra of keeping the design classic but with constant improvement on the hardware, you can’t go wrong.

  10. Kit Gerhart Says:

    Todd J. Says:

    “What does Dodge have that you can’t get in any run of the mill Chevrolet? ”

    They have a largish rear drive sedan called Charger, and they have a compact hatchback called Caliber.

  11. Drew Says:

    Chrysler Grows Stronger….and a Dead Cat can Bounce.

  12. HtG Says:

    maybe Toyota is extending the cycle for Scion in order to encourage tuners. Six years of a car builds up volumes and familiarity that can open the door to young creatives who might enhance the image of the brand.

    Yes, I may be smoking somethin’

  13. Andrew Charles Says:

    A WRC car would have little bearing on a production date for the 9-2. Most are little more than prototypes. Saab could produce two or three WRC cars and still spend a couple of years more developing and refining a production model. It wouldn’t be the first to unveil a WRC car before a production model.

  14. HyundaiSmoke Says:

    All companies soon enough will have 7-10 year life cycles. The Auto industry is designed for 1970 when most cars lasted only 5 years.

    This would force makes to create better looking cars that can stand the test of time, as opposed to wasting scarcely needed materials to create duds and shit boxes like Sebring every 5 years.

    GM is doing the very same thing now. According to Ward’s, GM will focus more on longer life cycles with extensive refreshes.

    Back to materials:

    1. We have to share with India/China and other nations. THERE’S NOT ENOUGH TO GO AROUND FOR EVERYBODY TO HAVE 5 YEAR CYCLE CARS ANYMORE WITHOUT CHARGING RIP OFF PRICES!!!

    2. If new GM workers are not able to afford the cars they build then large sections of the low skilled middle class will be affected from buying cars. Much less being able to buy a new car every 5 years.

    3. If college educated labor are now being paid lower wages, then they will buy used or wait 10 years to buy new.

    When the Economy recovers we should go to 19 Million sales a year or more at the way we used to shop considering the growth of the car buying population from 2008 to whenever the economy gets better. However, the factors I discussed above will prevent that from happening even when the Economy gets better.

  15. pedro fernandez Says:

    19 million a year!!!!!!!, what ARE you smoking dude? Not even during the best economic times did we ever get even close to that. If If If goes with Change Change Change.

  16. John V. Says:

    There is something to be said about a long product cycle – if the product is good. Years ago in the 1970s, it was conventional wisdom that a Dodge Dart or Plymouth Valiant was a solid (also nerdy) car that was good for the money and reliable. In 1977, I bought a 1972 Dart. I kept that car for 8 years and the only reason I sold it was I had a job at GM and felt I needed to drive a company brand.
    Actually anything that had the “slant 6″ engine from 1960 to 1983 was acclaimed.
    The only way a car can get a reputation like that is to be on the market for a while and be good.
    When I bought that Dart, another car was building its reputation – Corolla.
    Thankfully they changed the midsized cars names before they came out with the miserable Plymouth Volare and Dodge Aspens in 1976.
    Change for the sake of change will bring in a few more buyers at introduction, but change by itself does nothing for resale value.

  17. Kit Gerhart Says:

    As cars get better and better, it is increasingly difficult to make a “next generation” car substantially better than the old one. In some cases, the new one is worse than the old one. Except for styling becoming “too familiar” on high-volume cars, there is little reason for a shorter product cycle than ~7 years.

    It always makes sense to make running improvements in power trains, like using direct injection versions of existing engines as they become available.

    It’s hard to believe, but American cars of the 50′s and 60′s had two and three year product cycles, but I guess the car companies were figurative gold mines at the time.

  18. XA351GT Says:

    6 year cycles are not that new ,maybe for Toyota . Chevy sold the Camaro from 1970 to 81 almost unchanged Corvette 1968-81 then 1983-1996,Ford sold Fox body Mustangs from 1979-1993 then it’s replacement 94-04 the current car car 05-13 . The new version due in 2014 . It hasn’t hurt them at all. If you have a good car and you can sell it in numbers that make sense ,why change it too early and cost sales if the next model is a dud. Let’s face facts Toyota is just going to turn out another bland styled car anyway. Great for reliabity ,but not alot to get excited over. I hope the FT-86 changes that. Currently there isn’t a single Toyota model that would make me even venture out to a dealership for a look.

  19. Nick Stevens Says:

    Jerry Flint, Longtime Auto Journalist, Dies at 79
    By MARGALIT FOX

    Mr. Flint wrote the Backseat Driver column for Forbes magazine and was known for his deep knowledge of the industry and his blunt prose style.

    PS I am surprised John Mc missed this, TOyota was by farf NOT the first to extend the 4 yr cycles to 5, 6 and beyond. I posted about HONDA extending many models beyond 4 years, incl. the current CIVIC, a 2004 model, when the new one had lousy MPG, they took it back to the drawing board, and we may not see a new covic until 7 or 8 years after the current one came out!!

  20. Nick Stevens Says:

    “# pedro fernandez Says:
    August 9th, 2010 at 7:20 pm

    19 million a year!!!!!!!, what ARE you smoking dude? Not even during the best economic times did we ever get even close to that. If If If goes with Change Change Change.”

    Notgonnahappen.com in the next recovery. HS made the common, foolish mistake of most forecasters, to LINEARLY exrtrapolate and NOT take into account the real changes in the market, car glut, buyers far more stingy to buy new cars etc.

    BUT in 2040, when the US population will be well over 400,000,000, if the econ is in good shape, we could well exceed 20 million a year. Even more, if the new cars have superior mpg or safety or other features that old cars do not.

  21. Todd J. Says:

    Speaking of long life-cycles… how about the Crown Victoria?! hahah…

    1998-2011… that’s 13 years. But… the doors from a 1992-1997 will still interchange with a 98+, so really, that’s 1992-2011… when all is said and done, the Crown Victoria will have been in production for 20 years using basically the same body.

  22. Kit Gerhart Says:

    “1998-2011″

    The Crown Vic didn’t last that long, with 2008 being it’s last year, though the Grand Marquis was around through 2010. There will be no 2011′s of either car. Still, it was a very long run for a car to use the same body.

  23. HyundaiSmoke Says:

    Nick/Pedro,

    Yeah, well I think the Deltas on that Sir would still move to 19 Million. Damm, math is annoying. Think about it however, the extra addition to millions of driving age adults with the relatively high rate of longer life span=many older drivers will still be around to drive and able to do so by 2020. We had 16 Million before the crash. There will be a lot more than 3 million new driving age adults, not to mention the millions more immigrants that will also be here.

    2030-431 Million the last time I checked population projections. There will be a Billion Americans by 2075-2100.

  24. Nick Stevens Says:

    2030 is less than 20 years away. Even if you include all the illegals, it will not be even close to 431 million. Cite your source (it’s wrong anyway)