May 25th, 2011 at 12:15pm
CEO Sergio Marchionne wants to have one management group for both Fiat and Chrysler, not the two separate groups like they’re now using. General Motors will build the next-generation Chevy Impala at its Detroit-Hamtramck plant, alongside the Volt and Malibu. One analyst is warning that Chinese automakers face severe overcapacity unless they change plans to expand. All that and more, plus John answers your questions about diesels, CAFE rules and more in the “You Said It!” Segment.
This is Autoline Daily for May 25, 2011. And now, the news.
MARCHIONNE MERGES MANAGEMENT (subscription required)
Chrysler paid off its loans to the U.S. and Canadian governments yesterday, six years early, and now Sergio Marchionne is looking to truly merge the two companies together. The Wall Street Journal reports he wants to have one management group for both companies, not the two separate groups like they’re now using. That means Design, Engineering, Manufacturing, Purchasing, Finance and even the Board of Directors will each be combined into one entity. It’ll be fascinating to see how he does it. Will the managers at Fiat be the ones who take control, or will Marchionne decide to balance the company between Italian and American managers?
FRANCE DEMANDS BIGGER ROLE FOR RENAULT
Speaking of picking top managers, the French government is telling Renault what it wants the company to do before it approves its new Chief Operating Officer. As we reported yesterday, Renault would like Carlos Tavares to replace Patrick Pelata to become COO reporting to Carlos Ghosn. But before it gives its OK, the French government, which owns about 15 percent of Renault, is demanding that Renault play a bigger role in its alliance with Nissan. It wants Renault to make more upscale cars in France, and wants the COO to get a more important title. Interesting to compare how government involvement in a car company differs between the U.S. and France. While Uncle Sam dictated the terms of the bankruptcy for GM and Chrysler, it’s refrained from telling management what do since then. In France, the government is telling Renault to do what’s right for the country, which may not necessarily be what’s right for the company.
AUDI CONSIDERS U.S. PLANT (subscription required)
Volkswagen just opened a new manufacturing plant in Chattanooga, Tennessee and now Audi may want to get in on the action. The Wall Street Journal reports executives will decide in the next year whether or not they’ll build cars in the U.S. Vee Dub wants to triple its sales in the U.S. to 1 million units by 2018. That works out to about 800,000 for Volkswagen and 200,000 for Audi. Last year Audi sold barely more than 100,000 vehicles. But the question is, what model, OR MODELS, would Audi build here? The A4 is far and away its best-seller in ‘Merica, but 3,000 cars a month IS NOT enough volume to keep a factory open. The Q5 is their No. 2, but only about 2,000 folks drove away in one last month. This tells me the company would export vehicles from the U.S. With the dollar where it is now that could make good business sense.
IMPALA JOINS VOLT & MALIBU IN HAMTRAMCK
In other manufacturing news, GM’s Hamtramck Assembly plant is a MASSIVE facility, and the company is loading it up with product. According to The Detroit news, the automaker is expected to announce it will build the next-generation Chevy Impala there. The Poletown plant is home to the Volt as well as the upcoming 2013 Malibu. The new Impala is expected to launch in 2012 or 2013. It’s interesting GM’s decided to put this car in Hamtramck. The current Impala is built in Oshawa, Ontario. It’s the company’s third-best selling car, after the Malibu and Cruze. Chevy sold about 21,000 of them last month. Base price is $25,000.
NHTSA CONSIDERS BLACK BOX REQUIREMENT
The National Highway Traffic Safety Administration is considering a requirement that all new vehicles be equipped with black boxes. According to Wired magazine, the agency is expected to make the proposal later in the year, and it would expand the use and set standards for black boxes, or what are formally known as Event Data Recorders. Currently there is no industry standard for the boxes or federal laws defining who has access to the information, instead, it’s up to the states to decide. The new proposal would make access universal and set specific guidelines to prevent modification, removal or deactivation of black boxes. The proposals would also set standards as to what information the boxes collect. This may sound like Big Brother trying to look over us but most new vehicles are equipped with black boxes anyway.
NEW WINDOW STICKERS FOR VEHICLES
Speaking of government mandates, the EPA is expected to announce changes to window stickers for new vehicles today. Last week we reported that the Obama Administration dropped the idea of handing out letter grades to vehicles based on their fuel economy. The Detroit Free Press reports the new stickers will show emissions information as well as how the vehicle’s gas mileage compares to those in its class. It will also try and have meaningful comparisons between traditionally powered vehicles and alternative ones.
OVERCAPACITY CONCERNS IN CHINA
One analyst is warning that Chinese automakers face severe overcapacity unless they change plans to expand. According to Bloomberg, domestic automakers like, Great Wall, Geely and BYD are expanding faster than joint ventures and other state owned firms. Those three companies plan on expanding capacity 55 percent by 2015. Overcapacity could hit 3 million units next year for Chinese automakers. Sales in the country are slowing down, so unless they start aggressively selling overseas or cut back expansion, overcapacity will cripple profitability there.
Coming up next, it’s time for You Said It!
Jesse writes in to say, “If all the tree huggers out there ever came to their senses, the U.S. wouldn’t need to worry about oil in the MID EAST! We could produce what we have and sell it like they do!”
Not exactly, Jesse. While the U.S. can, should and will produce a lot more of its own oil, we simply use so much that we will still have to import it. The optimists say the U.S. can increase production by 2 million barrels a day. But that means we would still need to import nearly 8 million barrels a day. However, that would put us on the path to eliminate importing any oil from OPEC countries.
HtG wants to know, “How does VW sell TDI engines, but the other car makers can’t make it work. Is it really California’s air laws that are keeping diesels out?”
California isn’t helping the situation when it comes to diesels, but the main reason VW can make it work has to do with volume. VW simply sells more diesels in Europe than any other manufacturer that sells cars in the U.S. market. That means it can spread its manufacturing and emissions costs over more engines, making it cheaper for every diesel car, including the ones it sells in the U.S. Having said that, BMW, Audi, Mercedes, Mazda and even Chevrolet will be selling diesels here, and come 2014, we’ll see others jumping in as well.
Kit Gerhart saw our review of the convertible Camaro and me complaining about wind noise. He says, “I don’t know exactly what is meant by “wind leakage” here, but all soft top convertibles have “wind noise;” even very expensive ones, like Rolls-Royce.”
Kit, this was a specific air leak in a specific location on the passenger-side window. Once the car went over 45 mph it became very noticeable. I don’t know if it’s a problem with the top, or a problem in the build quality, but no ragtop should have that problem, especially one that costs $43,000.
Cozy Coles says, “John, you are bashing the CAFE rules, and displaying a chart on usage, but did you take into consideration all the extra drivers and cars since 1980 on our roads?”
Cozy, yes I did take that into consideration. My point is the CAFE laws were written to reduce how much oil we use and we’re using more, not less. If the goal is to reduce oil, then we need a new plan that will do just that.
Daniel Armstrong wrote to us on Facebook, saying, “I’m reading conflicting reports about Chrysler paying back its loans. Some say Chrysler is paid in full, others say Chrysler still owns money on the loans. Who is right?”
Daniel, Chrysler borrowed money from the banks and sold bonds, then took that money and paid off the government loans which carried extremely high interest rates. So even though it borrowed money to pay off its loans, it’s going to save several hundred million dollars a year in interest costs.
Thanks for all your letters and comments, we truly appreciate your involvement and feedback.
And that’s today’s report on the top news in the global automotive industry. Thanks for watching, we’ll see you tomorrow.