Episode 255 – Executive Pay Cuts, Honda & Hyundai Post Profits, Land Rover Axes SUV

October 22nd, 2009 at 12:18pm

Runtime 8:02

The U.S. Treasury Department is cutting salaries for the top 25 executives at each of the companies that received government help, including Chrysler and GM. Honda and Hyundai turn a profit. Land Rover is discontinuing its Defender SUV after 61 years on the market. All that and more, plus a look at some of Nissan’s latest product updates.

Transcript and Story Links after the jump . . .

Here are today’s top headlines. Auto executives may get their salaries cut. Honda and Hyundai turn a profit. And Land Rover discontinues its most iconic model.

Up next, we’ll be back with the news behind the headlines.

This is Autoline Daily for Thursday, October 22, 2009. I’m Murray Feldman, Fox 2 News Detroit, standing in – or rather sitting in – for John McElroy who will be back next week. Anyway, here’s the news.

Well, if GM and Chrysler were having trouble recruiting top executives before, this isn’t going to make it any easier. The Detroit Free Press reports that the so-called Pay Czar appointed by President Obama is cutting salaries for the top 25 at each of the seven companies that received government help. Of course that includes both Chrysler and General Motors. Now executives at both companies were already receiving less compensation this year but this may complicate things even more. As we reported last week, GM has been looking to replace its Chief Financial Officer, however, finding candidates to work for the going wage right now has been a struggle.

Over in Auburn Hills, Chrysler may have a different challenge. With Fiat taking over and integrating its executives, from a different scale all together, who knows who will end up with what? Well, we suppose the Pay Czar does and we’ll let you know what he decides when it’s made public.

More companies are reporting their earnings today and Reuters says that Honda will be posting a surprising first-half profit. The $660 million number, or 60-billion yen, actually comes from the Nikkei business daily in Tokyo and covers the months April through September. Honda won’t have anything to announce until next Tuesday. Analysts, who were expecting a loss, say that Honda beat their forecast thanks to cost-cutting measures and solid sales.

And finally next door in South Korea, the Wall Street Journal reports that Hyundai’s third quarter profits tripled to $827 million (subscription required). Plus, the company’s global market share rose to 5.5 percent in the quarter up from 5.2 percent. Part of that increase — in a release from the company — is thanks to not only much of its new competitively-priced product and aggressive marketing, but to government stimulus packages as well.

The hangover from the cash-for-clunkers program caused September car sales to slide. As a result, Edmunds.com reports automakers are piling on the incentives in October. Automakers ramped up production because of the popularity of cash for clunkers, now those inventories have leveled off, so they’re turning to incentives to help clear the lots. All segments are offering incentives, but luxury vehicles and trucks are being discounted the heaviest.

In other sales news, Reuters reports that CSM Worldwide predicts sales will grow next year. The firm says it sees signs that the worst is over from the economic downturn and as a result sales will grow to 11.8 million units next year. CSM predicts sales will top 10 million this year.

The Automotive X Prize is a contest sponsored by Progressive Insurance that aims to jump-start the development of PRODUCTION VIABLE cars that meet or exceed 100 miles per gallon. According to the Detroit News, organizers of the competition have narrowed the number of contestants down to 43 teams from 10 countries. Some of the ones that made the cut include Indian Automaker Tata and a group of engineering students from Cornell University. When it’s all said and done, teams that make the grade will receive $10 million.

As a general rule, automakers refresh their cars every four or five years, while trucks usually go a little bit longer between updates – but there are exceptions. The Detroit Free Press reports that Land Rover is discontinuing its go-anywhere Defender SUV after 61 years on the market. Tightening emissions and crash standards are to blame. Amazingly, the last time it had any major body changes was in 1983! Talk about staying power! An all-new replacement for the Defender is expected around 2013.

Coming up next, a look at some of Nissan’s latest product updates, we’ll be back right after this.

With Halloween just around the corner, most manufacturers are treating us to new models. But the trick is finding out whose product has more than just a new year on the paperwork. Well, the Autoline team unearthed one example down in Tennessee earlier this week.

In the shadow of its North American headquarters outside of Nashville, Nissan lined-up its 2010 sedans to give the press both a preview of the refreshed foursome as well as a heads-up for the coming year.

So from Maxima on the high end to Versa and Sentra on the low, Nissan saved the biggest upgrades for its number one volume vehicle right in the middle of the pack…the Altima.

From new exterior styling that included hood, grille and headlamps on the Coupe, many journalists found a majority of the improvements inside the car with most of that dedicated to technology.

The upgrades also included the XM weather and traffic package. But perhaps more important – especially for a volume leading product – is communication. So just like with many of the luxury brands, Nissan added a Bluetooth hands-free phone system with streaming audio to its most popular model.

The sedans are the news for this year but really everyone is waiting until next when Nissan celebrates the 40th anniversary of the Z, unveils its North American Commercial vehicles line, and of course, rolls out the car that’s getting all the buzz these days—the all-electric Nissan LEAF.

And that’s it for today’s top news in the global automotive industry, but before we go, here’s an important announcement about a special upcoming webcast.

Remember, that’s Autoline After Hours every Thursday night on AutolineDetroit.tv. Check it out, you can watch the gang LIVE and even participate in the chat room.

Again, I’m Murray Feldman, Fox 2 News, Detroit, thanks for watching, we’ll see you again tomorrow!

Thanks to our Partners for embedding Autoline Daily on their websites: Autoblog, The Auto Channel, vLane, WardsAuto.com and WWJ Newsradio 950

26 Comments to “Episode 255 – Executive Pay Cuts, Honda & Hyundai Post Profits, Land Rover Axes SUV”

  1. Tony Gray Says:

    These salary issues are going to bite these companies in the ass unless some sort of delayed compensation package can be worked into the deal.

    They need to be at least competitive with what is being offered in the rest of the industry, or what is being offered for similar positions in other manufacturing concerns, or the brain drain, or the ability to make new critical hires, will continue.

    I don’t really have a soft spot for guys who pulled down millions by running these firms into the ground, but I doubt you will be able to lure a good JV guy from, say Nissan or Ford and promote him to the Varsity at GM without SOMETHING to entice him or her.

  2. Max Christensen Says:

    Maybe by keeping executive pay at a lower level, it will bring in some fresh blood and some new ideas – both of which are badly needed in this industry! Don’t tell me there aren’t some first rate unknown execs out there who couldn’t do as good or much better job than we’ve already seen, and do it more cheaply!

  3. Tom Martin Says:

    This comment is related to yesterday’s discussion of mpg between the Ford Fusion Hybrid and the Toyota Camry Hybrid.

    Some stated that the 41 mpg for the Fusion was inaccurate and was not attainable by “average” drivers. Some stated that the Ford and Toyota had similar “real world” mpg.

    The EPA mpg for the Fusion is 41 City, 36 Highway, and 39 Combined. For the Camry, it is 34 city, 33 highway, and 34 Combined.

    So the EPA 41 mpg for the Fusion is City-only driving–not Combined or Average.

    In City-only driving, the Fusion should be significantly superior to the Camry since it can drive more often in electric mode only.

    I checked fueleconomy.gov to see how people rate their “combined” fuel mileage.

    Fusion drivers reported mpg averages (combined) from 36 to 51. The average was 41.1. This beats the EPA’s 39 Combined mpg by 2.1.

    2009 Camry Hybrid drivers report mpg averages (combined) ranging from 31 to 41. The average was 36.7. This beats the EPA 34 expectation by 2.7.

    The Fusion does appear to be superior to the Camry in “real world” mpg, and the EPA estimates do appear to be conservative and consistently applied to both cars.

  4. Pedro Fernandez Says:

    Too bad the salary czar doesn’t ask Pelosi, Reid and company to lower their salaries and bonuses, they certainly are doing a crappy job “representing” us taxpayers. I guess most “talented” GM and Chrysler execs will be sending their resumes to more profitable and well run automakers. However their resumes may hurt them.

  5. herman the german Says:

    Something tells me the pay czar has only laid down a predicate for the POTUS. I’ll be surprised if other recipients of taxpayer money don’t also get a haircut. It’s nuts Goldman was made whole on insurance from AIG. It’s nuts FORD’s credit lines are just a pass through from the Citi zombie bank. We’re backing up Citi for tens of billions. Corrections anyone?

  6. Nick Stevens Says:

    “I checked fueleconomy.gov to see how people rate their “combined” fuel mileage.

    Fusion drivers reported mpg averages (combined) from 36 to 51. The average was 41.1. This beats the EPA’s 39 Combined mpg by 2.1.

    2009 Camry Hybrid drivers report mpg averages (combined) ranging from 31 to 41. The average was 36.7. This beats the EPA 34 expectation by 2.7.”

    You left out the most important number:

    How many Fusion drivers and how many Camry drivers were in each sample?

    if it was only 2-3, or even a dozen or so, it is not a reliable sample. If it was 100 and higher, then you got a serious sample.

    I have3 seen that site and usually its samples are small, even for non-hybrids.

    I have another site, greenhybrid.com, where some hybrids have samples of more than 1,000 owners and over many, many tank fillings.

  7. Frank Nelson Says:

    Pelosi, Reid, Frank and company, have not gotten rich by the salary they are paid as lawmakers. They have used their positions to help themselves to other ‘perks’ that lobbyists and others gave them to vote their way. In many cases, they were rich before they came to office, but leave more rich. Our Senate and House are a pack of white collar criminals.

  8. Nick Stevens Says:

    But my main beef yesterday, what really started me, was the newscaster’s allegation that somebody at Wards was able to get 55 MPG from the Fusion. In your sample, even the most frugal driver went no higher than 55. And the number that counts is not the best one ever did, even tho it lasted over only 5 miles, but the AVERAGE, LIFETIME average MPG.

    And speaking about Lifetime Avverage MPG, I claim again that

    Only the Prius, and the 3rd gen prius in particular, is capable of 55 MPG Average lifetime MPG.

    The Civic hybrid is the nextg best with 47-48 MPG

    The new Honda insight is next with about 42-44 MPG

    The Fusion is significantly below that, and the Camry and Nissan Altima Hybrids are also well below the 55 MPG only the Prius can achieve.

    I have driven the 2nd gen prius over more than 400 highway and city miles over 3 days and also the pitiful, unreiable Altima hybrid for a day. I got 47, 52, 62 and even 69 MPG with the prius, (the 47 on the highway at 80 MPH!) and 32-35 with the Altima.

    Next time I rent a car I will try to find a Fusion Hybrid and will make sure I test it thougougly and give you all the numbers.

  9. Nick Stevens Says:

    I checked the greenhybrid.com site, and they have a sample of only three Ford Fusion hybrids. here are the results:

    Ford Fusion Hybrid
    median MPG=38.53
    mean MPG=41.49
    50% of the cars in the middle got MPG between 34.15 – 38.13

    Of course, the sample is too small, but sure better than the sample of .. one at WArd’s that claimed that ridiculous 55 MPG (over how many miles? 3? 5? and under what other favorable conditions?)

    Of course, everybody can significantly increase the MPG of any car by going 35-45 MPH with overinflated tires and all that. Driving conditions are very important,that is why the lifgetime average is far more important than any other instantaneous or trip MPG number.

  10. Nick Stevens Says:

    There must be something very wrong with the numners above, the median of 38.53 should be within the middle 50% range of 34.15-38.13, and it is not.

    Fuggedabout them.

    Just wanted to make sure nobody buys a Fusion Hybrid and expects to get a lifetime MPG of 55.

  11. Jim Sachetti Says:

    As far as the pay cuts of the grossly incompetent inbred socially promoted losers VPS of the bankrupt GM and Chrysler:

    YOu are very lucky to get away with just a pay cut. If you were executives in CHina, you would have been out against a wall and shot, if you were lucky, or killed in far more painful ways, in the old days of MAo and his goons.

    And if you were in Japan, and you had a minimum of decency, you would stand up like real men, and do Darwin and Evolution a favor, go outside and commit harakiri without messing up the rugs.

  12. ‘nissan sentra’ on the web : Curtain Up. Lets Begin. Says:

    [...] http://www.autolinedetroit.tv/journal/?p=6468So from Maxima on the high end to Versa and Sentra on the low, Nissan saved the biggest upgrades for its number one volume vehicle right in the middle of the pack…the Altima. From new exterior styling that included hood, … [...]

  13. M Campbell Says:

    Since this is the federal government, how about putting these executive positions out for bid?

  14. Max Christensen Says:

    @Nick,

    I don’t think any reasonable (the disclaimer) consumer would expect to go out and get 55 mpg from the Fushion Hybrid. It was just simply mentioned that one driver had logged a 55mpg leg …… pretty plain and simple. I think we get it after nearly a dozen comments from you that you don’t think 55mpg is a reasonable expectation from this car. So far, I’ve not heard anyone disagree with you or argue that point ……. thanks for your input. Now, can we move on to something else?

  15. Willi Says:

    right on Tony, Max and Jim

    the rest of you – why are you going on about fuel mileage? it’s such a non issue – most people don’t care, they want safety, and the difference you save with mpg ( or mpk ) won’t buy you a nice dinner out – i can save much more getting a good deal on a safe vehicle!

  16. Andy S Says:

    Nick, we judge vehicles within their class (we don’t expect a Corvette to do any better off-road than we expect a Land Cruiser to do in a gymkhana). So, 41 mpg from a mid-size family sedan is quite impressive, whereas 41 might be a basic expectation in a Honda Fit or Chevy Aveo or Ford Fiesta. At the other end of the car spectrum, I get between 23-27 mpg in each and every fill-up on a Jaguar XJ8. This also is very impressive versus the numbers experienced from most other full-size luxury V8 gas vehiles.

    So, let’s give credit where it is due — within its class. Kudos to Tom Martin for the excellent research and real apples-to-apples data. And kudos to Ford.

  17. dcars Says:

    Lets not be to hard on the existing GM execs, usually people will stick to the existing traditions and corporate thinking. Bucking the trend gets you the basement closet for an office. GM was successful for 100 years. They needed to change, but didn’t realize it until Rattner did it for them. I would expect the lower pay will make a lot of them leave on their own. It’s hard to see people leave a job, but a lot of Auto works were also let go.

  18. diffrunt Says:

    Aren,t these salary caps being applied to big bankers too?

  19. hermann the german Says:

    dcars, I think you could be a bit tougher on GM. Under Durant they were badly managed. It took Sloan to set up a money making machine, but if you read DeLorean’s book the processes became ossified and the ‘non-obvious choice’ of CEO in the late fifties put bean counters in the saddle. Smith knew GM needed change. And when Rattner pointed out how isolated top executives still were, it seems that things were not great for lots of years. Of course I have left out unions and anti-trust fears tying down Gulliver.

  20. Kit Gerhart Says:

    I’d think there would be a lot of people willing to work for $1,000,000 a year, and some of them very competant. With a little luck, GM and Chrysler might get some young, smart people more than willing to work for trouble car companies, given a 2000% pay raise from what they are making now.

  21. Kit Gerhart Says:

    diffrunt Says:
    October 22nd, 2009 at 3:47 pm
    “Aren,t these salary caps being applied to big bankers too?”

    Yes, and the same “fears of losing all the good talent” are being spread around.

  22. dcars Says:

    It was my dream to work for the car companies but now they have lost allot of the attraction. Engineers are in very high demand especially ME’s.

  23. C-Tech Says:

    With the salary caps in place, what are the chances GM and Chrysler will get some executives who love producing cool cars?

  24. fensterlips Says:

    I’d like to offer a different perspective on salary caps that the union might even like.
    Tie the salary spread to 200x the lowest paid – including your outsourced (out-country) workers. You want more money – then everyone gets more. They did as much for your success and probably deserve it as much as you (maybe more). That would cool those ideas pretty quickly.

    You think they’ll leave for greener pastures? Who are you kidding? They screw up a company royally, demand outsized salaries and somehow in this mother of all recessions people are lining up to hire these primadonnas?
    Don’t let the door hit you in the keyster…

  25. Alex Kovnat Says:

    Given the demands constantly being laid on the automotive industry to produce products that meet ever higher crashworthiness standards AND ever higher fuel economy standards, high ranking executives who have the talent to administer such efforts DESERVE to be paid millions of dollars a year, and to have business jets available to them to maximize the efficiency with which their time is utilized.

    I agree with one of our participants, that if auto executive salaries must be cut, we should cut the salaries of some of our senators and government people too

  26. Quick scan of the net – nissan sentra « kitmaz Says:

    [...] http://www.autolinedetroit.tv/journal/?p=6468So from Maxima on the high end to Versa and Sentra on the low, Nissan saved the biggest upgrades for its number one volume vehicle right in the middle of the pack…the Altima. From new exterior styling that included hood, … [...]