AD #1669 – Ferrari 488 Spider, Mitsu’s UAW Deal Killer, Scion’s Plan to Nearly Double Sales
July 30th, 2015 at 11:54am
Runtime: 7:23
- China Hits the Brakes
- New Ferrari 488 Spider
- Why No One Wants Mitsu’s Illinois Plant
- Who Ships Vehicles to U.S.?
- How Scion Plans to Nearly Double Sales
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On today’s show… the Chinese car market is slowing down faster than anyone expected, Scion has a plan to nearly double its sales and Ferrari comes out with the most aerodynamic spider it’s ever made. All that and more coming right up on Autoline Daily.
This is Autoline Daily for July 30th, 2015.
CHINA HITS THE BRAKES
What is going on in China? Every time you turn around an automaker is warning about a slowdown. Ford says the Chinese car market may decline this year for the first time since 1998. Volkswagen, Hyundai and Audi have publicly lowered their sales forecasts, while Mazda and Peugeot are warning there’s going to be a price war. Actually, it’s already started. Audi, VW, BMW, Renault and Toyota are propping up their dealers with cash payments. And they’re just the ones who are publicly talking about it. As a result, profits are tumbling. At VW they’re down 17% in the first half. Audi went so far as to replace the president of Audi China. In a sense, all this was inevitable. The automotive industry has always been a cyclical industry, and the Chinese industry will start growing again at some point. But analysts say that the profitability of car makers in China will never be as high as it was, even when sales start growing again.
ALONG CAME A SPIDER
In the world of mainstream automobiles the convertible seems to be going the way of the Dodo bird, but high-end sports cars is another story and Ferrari just dropped the top on the 488. And speaking of dropping the top, this Spider can retract it in just 14-seconds. Under the boot lies a 670-horsepower turbocharged V8 match to a 7-speed dual clutch transmission. 60 miles-per-hour comes in just 3 blistering seconds. The chassis is made up of 11 different aluminum alloys and Ferrari calls this sleek, sexy machine the most aerodynamically efficient Spider model it’s ever made. Oops, sorry I was drooling a little there. The 488 Spider will make its official debut at the Frankfurt auto show and arrive on U.S. shores next summer.
Still to come…why none of the foreign automakers will buy Mitsubishi’s American assembly plant.
UAW DEAL KILLER
As an automaker, if you can run your assembly plants at full capacity you can really make money in this business. The rule of thumb is that if you hit 80% of capacity, you’re breaking even. Anything above that and you’re good to go. Anything under that and you’re losing money. That’s why it’s stunning to see that Mitsubishi’s assembly plant in Illinois is running at only 22% of capacity. That means it’s losing money hand over fist, so no wonder Mitsubishi just announced it’s going to close that plant. The real surprise is that it took them so long, it’s been running under capacity for years. Mitsu is trying to find a buyer and we think two car companies must be thinking about it. Subaru of America COO Tom Doll says they could sell up to 250,000 more cars in the American market if they could only make more. Dave Zuchowski, the CEO of Hyundai Motor America says the company can’t get enough crossovers. Boy, here’s an opportunity to pick up a plant for practically nothing, except for one thing. That plant is represented by the UAW. And the foreign automakers want nothing to do with the union.
WHERE IN THE WORLD?
Do you know how many countries ship vehicles to the U.S. market? I’ll bet you can’t guess, because we didn’t know it until we looked it up. And the answer is 18 different countries. Some of them are easy to guess: Canada, Mexico, Japan, Korea, Germany, England and Italy. Oh yeah, let’s not forget Australia or Sweden. But that’s only 9 of them. Then there’s Austria, where we get the Mercedes G-Class and the Mini Countryman and Paceman. From Belgium we get the Volvo S-30, S-60 and XC-60. From France we get the smart Fortwo and the Toyota Yaris, yeah the Yaris! From Hungary we get the Mercedes CLA, while the Fiat 500L comes in from Serbia, and the Audi Q7 from Slovakia. From Spain we get the Transit Connect and Audi Q3. The Ram Promaster City comes from Turkey. And Mitsubishi imports the Mirage from Thailand. Add them all together and we’ll see about 7.7 million vehicles this year rolling off ships and rail cars from 18 different countries.
Coming up next, how Scion plans to nearly double its sales.
iM THINKING OF A NUMBER
Toyota’s Scion division is in a total tailspin. Last year the company sold a little over 58,000 cars in the American market, a 15% drop. And through the first half of this year its sales are down another 20%. That’s partly due to the iQ and the xD being dropped from the line-up over the past year and having an aging product line. But despite the company’s struggles, Doug Murtha, the Group VP of Scion, tells Autoline the brand is aiming to nearly double its sales.
Doug Murtha
Group Vice President, Scion:
“Our target as a brand is to get back up over 100,000 units, we’ve never been and never will be about ever increasing volume but we think somewhere in that 100 to 150 thousand range is an appropriate level for the brand.”
With the all-new iA and iM, hitting dealerships in September, plus another yet-to-be announced vehicle on the way, Doug Murtha is confident Scion can reach that 100,000 plus target in the next two years. But it’s going to be a tough slog. Thanks to cheap gasoline prices, sales of subcompact cars are taking it on the chin.
Be sure to join us for Autoline After Hours later today when our guest will be Dan Sandberg, the CEO of Brembo North America. We’re going to be diving into braking technology and why so many car companies want that Brembo name on their calipers. So at 3 pm eastern time today tune in to where all the gear heads gather at www.autoline.tv.
And that wraps up today’s report, please join us again here tomorrow.
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Comments (20)
July 30th, 2015 at 12:12 pm
If the UAW is considered an asset in selling the plant, (which it is not), then the UAW needs to work harder on it’s image. It needs to be a vender that provides value I.E. covers insurance, retirement, training, and a partnership in the over all production of the plant. Right now most states have stripped the UAW of being able to provide that. I find it odd that lawmakers bang the drum of “business friendly” meaning low wages, yet purposely strap themselves to a low volume of incoming tax dollars. Even more bizarre is that constraints placed on manufactures that add cost to the product. Sooner or later they guy on the line will have little chance of buying the product they make. And that kids is how we sink our standard of living.
July 30th, 2015 at 12:13 pm
OwnStar
Wired magazine reported this morning that a hacker was able to take control of OnStar functions. He attached a homemade device to a car and then had it impersonate the credentials of a smartphone using the car’s wifi. Onstar’s security doesn’t yet detect the impersonation, but GM says it’s fixing the bug.
http://www.wired.com/2015/07/gadget-hacks-gm-cars-locate-unlock-start/
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Sagging Xinhua
Hey, didn’t I say something last week about that stock market calamity in China affecting sales?
July 30th, 2015 at 12:38 pm
I thought the Transit Connect came from Turkey.
That was an interesting “country of origin” list. I knew a lot, but far from all of them.
Scion will see a big uptick in sales with that silly little sedan. Americans like trucks, and sedans, and the iA will be Scion’s first sedan.
July 30th, 2015 at 1:03 pm
I think Scion is on life support, they are lucky that Mazda 2 won’t be sold here as a Mazda so they’ll get some of that market with the iA, but the iM will be as successful as the Matrix. BTW they should have made the iA as a hatch.
July 30th, 2015 at 1:13 pm
They will make a second generation Mazda 2 hatch, but not sell it in the U.S. I don’t like little sedans like iA, Yaris sedan, Fiesta sedan, etc., but I understand Scion selling the iA. Americans buy such vehicles, but why not sell the hatch too?
Still, why not just call the iM Toyota Matrix, the FR-S a Toyota 86, and have done with it? Scion has never made much sense, with the original xB gone.
July 30th, 2015 at 1:33 pm
#1.
All valid points – if we were still living under pre-’70s economic conditions whereby the vast majority of private sector (as well as public) businesses paid a much larger share of their employees benefits. Where most other employers offered pensions, generous vacation and PTO, etc., etc.
But in an age where UAW, U.S. Government and most state and local government employees are just about the only ones walking around with most of those 1970′s era benefits still intact, while the rest of us get by, I’ll admit my only sympathy goes out to the UAW retirees. Not the ones just starting fresh with the UAW.
Heck, my brother (who works for the city) gets triple-time pay for working holidays. TRIPLE-TIME! You’d be hard pressed to find a private sector job anywhere that even pays double-time these days.
July 30th, 2015 at 3:11 pm
The UAW doesn’t seem to automatically go with a sold car plant, at least in the case of Fremont/NUMMI when Tesla acquired it. I’ve heard that there may be attempts to organize, though.
July 30th, 2015 at 3:17 pm
Don’t understand why Mazda won’t sell the 2 over here, it is much better than the outgoing model, from all the reviews I’ve read and Toyota thought so too, they use it as the base chassis for the iM. Why they sold it as a sedan is beyond me, Scion has never sold a sedan, perhaps they think people will think 318I when they see it?
July 30th, 2015 at 3:28 pm
The only reason I could see for not selling the 2 here, is that plant can’t build enough. I suspect I would like the hatch, not that I need another car.
July 30th, 2015 at 3:56 pm
On the countries sending us cars – isn’t Volvo sending us stock from China yet, or is that just in the works soon?
ON UAW – Between the unions pricing themselves out of the global market and our government SO behind on trade compared to Mexico, I’m afraid this stories are going to go on and on until the last “rust belt” factory finally closes. It’s hard to imagine UAW ever taking the long view on this issue…
July 30th, 2015 at 5:00 pm
And soon from Cuba, we will get the ChevroLada.
July 30th, 2015 at 6:17 pm
Not reproduction ’55 Buicks?
July 30th, 2015 at 6:24 pm
Yeah, Buicks with Russian tractor motors and such, to think some morons think they’re gonna go there, buy a few of those cars, bring them here and make a killing are in for a shock. As you well know, these bastardized cars are worthless.
July 30th, 2015 at 6:49 pm
They wouldn’t have any value, but would be kind of cool to see at a show. I’ve never seen a Russian tractor motor up close.
July 30th, 2015 at 7:16 pm
Cubano cars,mostly what we would call rat rods.I think they show ingenuity in keeping those vehicles on the road,all things considered.No hatin’ here on my end…
July 30th, 2015 at 7:31 pm
I have to think future US tourists would get kick out of those Peoples’ Cars. Iron irony in motion.
July 30th, 2015 at 7:37 pm
16 Me too. I hope they stay there for a while. I plan to go in the next year or two. It’s not to support the regime, but just to see a nearby part of the world that is very different.
July 30th, 2015 at 7:46 pm
As they say, necessity is the mother of invention, although lately, those Cubans who have families abroad, have been receiving spare parts to fix their Yankee machines.
July 31st, 2015 at 8:43 am
By now, spare parts may be easier to get than Russian tractor motors.
July 31st, 2015 at 9:28 am
#6, why are you mad at the people get decent wages and benefits? You should be mad that the rest of us DON’T
More income going to fewer people is not a recipe for long term good economic health.