August 27th, 2012 at 11:30am
The French government is accusing Hyundai and Kia of dumping cars in the French market. Car plants in the second quarter of the year hit 100 percent capacity utilization in North America. General Motors and Chrysler have banned President Obama and Mitt Romney from visiting their plants until after the election. All that and more, plus John shares his idea of how GM can save Opel.
Hello and welcome to Autoline Daily. It’s Monday, the 27th of August, I’m John McElroy and here’s what’s happening in the global car industry today.
DESIGN WILL HELP CADILLAC ELR SALES
As we’ve been reporting here regularly, sales of electric cars are going nowhere. Yet government regulations are forcing automakers to come out with more models. Cadillac’s sales manager Don Butler says he believes people will buy the electric Cadillac known as the ELR when it comes out. But he says they’re not going to buy it to save money on gasoline. Instead, he says they’re going to buy it simply because it’s a drop dead gorgeous car. Look for the ELR to have higher performance than the Chevy Volt, who’s technology it’s based on. And look for a more sumptuous interior. But don’t look for it for another year and a half. Don Butler says that’s how long it’s going to take before it’s in the showrooms.
HYUNDAI-KIA ACCUSED OF DUMPING
On Friday we reported that European automakers are upset with a new free trade agreement with South Korea. Now the Wall Street Journal reports that the French government is accusing Hyundai and Kia of dumping cars in the French market. While sales of Peugeot, Citroen and Renault are down anywhere from 14 percent to 20 percent in France this year, Hyundai and Kia’s sales are up 30 percent.
NORTH AMERICAN CAPACITY MAXED OUT
But there’s a good story to tell in North America. WardsAuto reports that car plants in the second quarter of the year hit 100 percent capacity utilization, the highest its been since Wards started tracking it in 2005. A general rule of thumb in the auto industry is that once a plant goes over 80 percent capacity utilization all that extra production drops right to the bottom line. Capacity utilization refers to how many cars a plant is making, compared to how many it was tooled up to make.
GM & CHRYSLER BAN PRESIDENTIAL CANDIDATES
Summer is slowly winding down. The days are getting shorter and the temperatures cooler. But one thing that’s still red hot this election season is political rhetoric. President Obama and his Republican Rival Mitt Romney have been going at each other for months. Not wanting to get in the middle of this firefight, General Motors has banned candidates from visiting its plants until after the election. Same goes for Chrysler. The government bailout of GM and Chrysler is still a hot-button issue for many voters and the automakers don’t want to be part of the political debate.
DIESELS POPULAR DOWN UNDER
As a frequent viewer of Autoline Daily you already know the benefits of diesels. They offer lots of low-end torque and greater efficiency than gasoline engines. They’re hugely popular in Europe where fuel prices are insane, and they’re starting to gain traction elsewhere around the world. They’re slowly building up steam in North America but they’re really taking off in Australia. According to WardsAuto.com diesel registrations are up nearly 61 percent over the last five years. Right now there are about 2.7 million of them on the country’s roads. That equates to about 16 percent of the total vehicle fleet!
Coming up next, I’ve got an idea of how GM could save Opel, and do it before the end of the year.
HOW TO TURN AROUND OPEL
Let’s talk about Opel.
If General Motors had deliberately planned to confuse its employees, mystify the investment community and infuriate the German government it could not have succeeded more grandly. When it comes to botching the turn-around at Opel, it’s “Mission Accomplished.”
GM has a long history of treating Opel as an unimportant part of the company. Since 1990 it has churned through nine different CEOs, whose average tenure lasted a little over two years. Some only lasted a matter of months. How can you possibly run a business that way?
Now GM says it’s ready to pour billions into restructuring Opel, at the same time it admits it will lose billions for years to come. What kind of plan is that? What’s needed is drastic action that solves the problem now.
GM should immediately spin Opel off as its own stand-alone company. No more wholly owned subsidiary. Then Opel needs to kick all the Americans off the board—no more ties to Detroit. It must become a fully German company again, free to build the products it wants, selling them where it sees fit.
GM could continue contracting Opel to develop products for another design cycle or two, but in time GM’s design centers in the U.S., Korea, China and Brazil could pick up the slack. Opel would be free to use and license its in-house technology as it sees fit, which would not be a great loss to GM. Cars and powertrains are changing so rapidly as automakers race to meet fuel economy and carbon dioxide regulations, that any “secrets” will be largely obsolete before the decade is out.
With GM out of the picture, the German government would become instantly interested in helping Opel with the financing it needs to restructure. The works council, or union, would prove suddenly cooperative. And the German public would rally around the underdog. Sergio Marchionne would be one of the first to phone in his congratulations, and to begin talks to get the EU to fund an Opel-Fiat-PSA combination/restructuring.
With the spin-off GM could rescind the $3 billion it planned to invest in Opel. And it could take $1 billion in losses off the books. Think of it, a $4 billion turn around, and they could do it all by Christmas.
Anyway, that’s my idea. I’d like to hear yours. Post your comments on our website at Autoline.tv.
And that wraps up today’s report. Thanks for watching, we’ll see you tomorrow.