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Episode 389 – Sales Slow Down in China, Toyota Back in the Black, Big Three Labor Costs Drop

May 11th, 2010 at 11:33am

Runtime 6:44

China’s hot automotive market begins to cool down as the country’s domestic automakers feel the crunch. Toyota announces a big financial turnaround as it goes “back in the black.” Detroit Three labor costs drop, placing them on par with foreign transplants. All that and more, plus John explains why minivans are better than most luxury cars.

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Transcript and Story Links after the jump . . .

This is Autoline Daily for Tuesday, May 11, 2010. And now, the news.

RATTNER PREDICTS GM PROFIT
After a disastrous year in which the federal government stepped in to restructure General Motors and Chrysler, it looks like the U.S. auto industry is healing quickly. Steve Rattner, the former auto czar, was in Detroit yesterday for an industry conference and praised the progress at both companies. Bloomberg reports that Rattner predicted GM will post a profit for the first quarter, its first profit in three years. GM reports next week.

CHRYSLER POSTS OPERATING PROFIT
Chrysler reported its first quarter earnings yesterday and turned in an operating profit of $143 million. That’s not a lot of money, but represents an improvement of $410 million compared to a year ago. On a net basis, the company lost $197 million, but even so, that represents another significant improvement. And it’s expected to get better. Sergio Marchionne, the CEO of Chrysler, says the company will turn break even or turn a profit for the full year.

TOYOTA BACK IN THE BLACK
And it isn’t just the American car companies reporting good news. Toyota announced a big turn-around in its financial earnings, too. A year ago Toyota reported a net loss of over $4 billion. This year it hit a profit of $2 billion. And it expects to boost that by another billion at the end of this fiscal year. Even though sales and revenue dropped at Toyota it was able to cut costs even more, and that’s how it managed to get back in the black.

SALES SLOW IN CHINA
Even though car sales in China remain strong, there are signs that things are starting to slow down. According to the AP, April sales were up 34% compared to a year ago, but were down 12% compared with March. And China’s domestic automakers were the hardest hit. According to Gasgoo, market share for the domestic’s fell 3% in April due to the government pulling back on incentives for cars with engines of 1.6 liters or less earlier in the year.

CHINESE AUTOMAKERS FACE COMPETITION (Subscription Required)
And it looks like it could be more difficult for China’s domestic automakers to regain market share. Foreign automakers have traditionally sold to more affluent buyers in the country but according to the Wall Street Journal, that’s beginning to change. With car sales booming in the country and more people being able to afford cars, foreign automakers are targeting the same people the domestics have traditionally sold to. They’re coming out with cars in the $7,000 price range which is where the real volume is in the Chinese market.

BIG 3 LABOR COSTS DOWN
Let’s go back a moment to how the Detroit automakers are turning themselves around. Another interesting tidbit. The Big 3 are now paying their workers the same amount as the foreign transplants. According to the AP, in 2007 GM was paying $1400 more per vehicle than Toyota due to labor costs, but after the UAW agreed to wage cuts and other concessions, salaries are about the same. Sean McAlinden from the Center for Automotive Research says wages and benefits now cost GM $58 an hour, just $2 more than Toyota. He also predicts Toyota’s labor costs will be higher than GM’s in the next few years, unless the Japanese automaker is able to get concessions of its own.

Hey, am I the only one in the world who actually likes minivans? You think I’m crazy? Coming up next I’ll explain why minivans are actually better than most luxury cars.

For most people minivans carry a big stigma with them. They shout out that you’re married, with kids. Or worse yet, that you’re old, with grandkids. But recently I got to test drive the new Toyota Sienna minivan, and it reminded me why I like these things so much.

Of course, when I’m not lounging in the lap of luxury, I prefer to scream around in small, nimble cars with exceptional power-to-weight ratios.

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

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46 Comments to “Episode 389 – Sales Slow Down in China, Toyota Back in the Black, Big Three Labor Costs Drop”

  1. Chuck Says:

    It’s a sad state of affairs when being married with children or a grandparent with grandkids is that negative a thing.

  2. dcars Says:

    I was reluctant to buy a minivan originally but when I succumbed to the necessities of life at that time, it turned out great. We had room to carry the kids comfortably and just made life easier. I don’t regret the decision at all.

  3. LEX Says:

    John,

    I agree with you about the comfort you find in a minivan! The Minivan is the most versatile vehicle you can own. If you properly outfit it with leather and electronics it’s better than a luxury car because you have space to stretch out and enjoy the ride. We have owned domestics and transplants minivans in my family. The kids and seniors always prefer to take the minivan even on short trips. I am not saying that minivans are for everyone one but if you are a multiple vehicle household and have the need on occasion to move six or up to eight people around economically the minivan is the way to go. My minivan of choice is the Honda Odyssey EXL without those PAX tires. The new 2011 Honda Odyssey is looking more retro back to the 1999 to 2004 version.

    Other OEM’s like GM have the Traverse, Enclave and Acadia which are also a big people mover with a more truck like image and higher MSRP. Toyota Sienna is currently the only minivan that comes with AWD. Honda needs to offer the same and not tell cutomers to look at the Pilot!

    I hope Chrysler / FIAT go retro to the old version of the Caravan and Town & Country because the current models look like refrigerators, boxes with wheels – UGLY! The “Voyager” name plate also needs to be resurrected but not as a Plymouth. Fiat has some five doors vehicles like the Mazda 5 that could be rebadged as the “Voyager”.

    Does anyone know what GM is planning to do with the next generation Traverse and Acadia?

  4. pedro fernandez Says:

    Minivans are still the most bang for your buck when you need room to carry people around, the MPG and interior room is a lot better than SUV’s and for a long trip, forgetaboutit! nothing comes close. John, Sergio is not gonna like that you did not use a Caravan as an example.

  5. HtG Says:

    So what is it about minivan drivers that makes them clog up the highway by driving slow in the left lane. These moms and dads pretend not to know just how versatile their rear view mirrors are. You see me.

  6. pedro fernandez Says:

    I’ve driven Caravan, Windstar and the Chevy version of the GM minivans and they all handled horribly, has anyone driven an Odyssey? Is it any better?

  7. tj Martin Says:

    Well since its Mini Vans as the topic of discussion today the question needs to be asked .
    When in VAG ( Volkswagen ) going to get their act together and do a Retro Modern version of the Classic ” Mini Van(Bus) ” of all time ?
    They had one on deck a few years ago and let it slide because of ” Lack of Interest ” in their words which I doubt . Not redoing the VW Mini Bus has to be one of the all time foo pahs in VAG’s recent history .
    So again . when will VAG get on the stick and build one for the “People ” (hmmn….. Volkswagen = Peoples Car . Build a car the ” People” want . Now there’s a thought )

  8. Nick Stevens Says:

    The footrest is nice in the Sienna, but you need to find a driver to drive you around to enjoy it. I hope they have this feature at airport taxi Siennas.

    The problem with US minivans is that they are all huge, obese, ridiculously heavy at 4,600 lbs (for the KING of Minivans, the Honda Odyssey) and get poor MPG. MANY people just need a mini-minivan like the small Mazda 5 or the MPV.

    Minivans driven by soccer moms are road dangers, these clowns are multitasking when they drive, and they were never good drivers to begin with, not to mention clogging the left (PASSING) lane.

  9. Nick Stevens Says:

    The Odyssey is FAR, FAR better, it tops all comparison tests to date. Teh WIndstar is a POS, many owners have complaints and NHRTSA has NOT done what it did with the Toyota complaints, i read today.

    Even the previous generation Odyssey is great. Handles much better too. But it gets expensive at close to $40k with all the options (inc cylinder deactivation for better MPG)

  10. Nick Stevens Says:

    Four door PANAMERA was the top selling porsche model in April!

    “With Porsche in the middle of changing over to the 2011 Cayenne, the 911 and Cayman/Boxster had a solid opportunity to come out on top, but April’s sales figures shows that the newest of Porsches, the four-door Panamera, shot right to the head of the class. The decidedly front-engined, boxer-less Porsche Panamera routed its stablemates with 678 sales, the big sedan’s best month yet. Those 678 sales are nearly double that of the 911, its next closest competitor in the Porsche line-up.”

    Of course new models sell a lot at first and then slow down. We’ll see.

  11. Nick Stevens Says:

    http://www.autoblog.com/2010/05/11/report-hundreds-of-complaints-about-ford-windstar-axles-snappin/

    But NHTSA did NOTHING, totally unlike how they went after Toyota!

  12. Nick Stevens Says:

    If you don’t need the extra space of a minivan, you can get the same 120++ inch wheel base and far, far better engines and handling by getting a uswd S class or 7 series or A8 for peanuts.

    And you can take these to receptions or the opera too, and they will no think you are the … caterer or the cleaning lady.

  13. pedro fernandez Says:

    tj: the Mazda MPV is kind of like the old VW bus, and it does very poorly here, where buyers desire more room, so maybe VW figures they will not sell many of them, IMHO.

  14. Gary Says:

    John, I just want to say that I totally agree with you about Mini-Vans. I love them and they are perfect for moving kids and all my stuff. But can you tell me why Ford refuses to build a competitive mini-van? Really, there are only 3 choices: Toyota, Honda or Chrysler, maybe Kia. I bought a Flex, very nice but no power sliding door and less room. Can you tell me why why why??
    thanks!

  15. pedro fernandez Says:

    I’l bet most of these Windstar complaints come form the snow belt due to corrosion, I’ve seen the undercarriage of a 2000 NY state Caravan and it was all rusty, c’mon Nick give poor Ford a break!

  16. HtG Says:

    Nick, I am loath to admit it, but sitting high up in a minivan is a dimension of size that I can’t argue with. Getting in and out by merely leaning sideways and letting yourself go is a pretty attractive proposition for some people. Sure beats how I have to launch myself out of my pizza-box Miata.

  17. pedro fernandez Says:

    re: minivans. I’ve found that driving long distance in a mini van is very comfortable and much less tiring than in a regular sedan, I don’t know if it’s the driving position, the extra room all around or the quality of the ride, of the fact that refreshments can be carried in a cooler back there, all I know they’re great on a long highway interstate trip.

  18. Nick Stevens Says:

    How come only the Windstars had problems and all the Dodge-Chrysler and Honda-Toyota mi nivans did not?

    The Windstar was a true POS.

    Both GM and Ford failed miserably in the minivan sector, and eventually they cried uncle and left the segment in defeat.

    Now Ford has the “Flex” and that ugly lincoln MKT in place of minivans.

  19. Nick Stevens Says:

    Htg: I could fit in the Miata once at a dealer;s, but i could not really relax in it on a long trip, there was too little room.

    SUVs like the Expedition have an even easier entrance, you basically parallel park your butt in it if you are over 6 (I’m 6 1″)

    My old hondas both had very low seating positions which were OK with me, but my 7 seats are just perfect for me, not too low. Surprisingly, despite the huge interior room, the driver’s seat does not move a whole lot in the back, so a 6 9″ NBA player would not fit well at all, while he could probably fit in my old accord coupe whose driver’s seat would go waaay back.

  20. Salvador G. Says:

    Ok, JohnMc. Whats the resell value on a Minivan and lets say 5 years???

  21. Nick Stevens Says:

    Hey Salvador: I was curious so I checked the kelley blue book site for trade-in value (the lowest of the three, retail, private party and trade-in) for the top and lower Honda Odyssey models, 2006 (5 years) with 75,000 miles on them, and they held up quite well, $10k-$14k trade in, which means more if you buy from the owner, and even more if you buy from the dealer (I’d guess $15k-$23k for that one)

  22. tj Martin Says:

    Pedro

    In light of the Mini Coopers success here and abroad I do believe a modern VW Micro Bus would have sold like hot cakes both in the US as well as the UK/EU .
    Like the Mini it wouldn’t be about the space but rather nostalgia that would push the sales forward and created such a huge demand when VW had the show car on display .
    Why would I want one ? Well perhaps because like many of us of a certain age ( over 50 )I spent my childhood from 1966-1976 traveling 44 of the lower 48 plus Mexico and Canada in a Westphalia VW Micro Bus with the parents . And I miss that .

    As for me now, well I’m just in the process of selling my Mini as my 50 + back and 6′+frame just doesn’t want to get in and out of one any longer . Luxury cars just don’t appeal such as the fine 5 , A8 and S series NS speaks of . So its SUV land for me . Being out West It has to be a real one as off roading has been a part of my life for the last 10 years . So its a Toyota FJ .But had VW done the “New Micro Bus ” well this might be a different story .

  23. Chuck Grenci Says:

    I wonder, if the Chinese continue to lose market share with their home brands, whether their capitalism experiment will end (or be modified) and the foreign manufacturers get the old heave-ho (i.e. tariffs and/or dis-incentives). They do have a history of not playing fair.

    And ‘plus one’ to what John Mc said (for the most part about the minivans) though the domestics were about as good as any of the lot.

  24. Salvador G. Says:

    So, to be fair – a Minivan would trade for the same as a car would! I don’t like, although; if you add the total cost of maintaining (including Fuel cost, etc.) of a Minivan during a 5 year period…, but I guess that would be stretching it a little.
    either way, I wouldn’t buy one- otherwise the Terrorist would win :) .

  25. Chuck Grenci Says:

    And this an observation (while on vacaton last week), and I digress (as this has nothing to do with today’s show topics) but, I saw a Synergy Green Camaro just outside WDW and wow did it ever ‘pop’; truly a stunning color in person (wasn’t too sure about it when I saw pictures).

  26. pedro fernandez Says:

    tj: with all due respect, I don’t believe that people who buy a mini would buy a microbus or vice versa. Remember back then, there was nothing comparable to the VW bus, it was surely ahead of its time, but I think that time has come and gone. The Westphalia is a whole different animal.

  27. pedro fernandez Says:

    just spoke to a client who got a new Camry, his first Toyota. I asked him why a Camry, he said besides liking the way it drove and the good deal he got, he felt the US govt was trying to bring down Toyota to help the domestics, and he felt compelled to buy one, besides he said: I consider a Kentucky-built Toyota more American that a Mexican-built Fusion. Can’t argue with that!!

  28. dcars Says:

    I’m out of the mini-van stage of my life, I was buying vans in the late 80′s and 90′s. I do remember a van from VW. Didn’t it have a lot of problems?

  29. HyundaiSmoke Says:

    We have first hand experience with Windstars. The Family Windstar was an utter POS which everybody said was great, while decried my old 1998 Accent, which by the way the Windstar was made the same year as that Accent.

    Guess What?

    The 98 Windstar= UNDER THE JUNKYARD.

    The 98 Accent= Some punk kid owns it now, and its still running fine.

    So much for the idiotic Disposable Hyundai Theory, by idiots who know nothing about Hyundai.

    John, I think Foriegn Competition in China will light a fire under their asses and force them to export, and export to new markets such as the US.

    The Chinese will do what they have to do to get their products ready for US sale. Unlike Americans, the Chinese actually like classy cars instead of cheap rattletraps.

    Its time for the Chinese to influence the Auto Industry when Americans and even Koreans up until a few years ago have been swayed by the lure of Japanese White Goods. You can say what you want to about the “Old Hyundai”, but they were just copying Toyota/Honda.

    Notice how, when HKAG stopped following Honda/Toyota around their cars look and feel so much better.

    It Proves my Theory that America is too small for HKAG to be Toyota/Honda. The Americans (Ford, GM) are doing a better job with that role anyway.

  30. Drew Says:

    YAAAA!!
    Let’s all celebrate the fact that American Auto Workers are now paid lower! Of course, this will also be the case with many other fields of work also.

    I hope all Americans soon become accustomed to competing with GLOBAL wages. Say bye-bye to the old standard of living we have experienced for the last 2 generations…..the future of $10/hr as being the “global standard” will be here very soon. HOORAY!

  31. pedro fernandez Says:

    passed by a Chevy dealer today and saw a big banner claiming that GM had paid back the government all the money that had been loaned to them and to come in and compare their cars to the competition and may the best car win, blah, blah blah

  32. HyundaiSmoke Says:

    Drew its already happening. Even law firms are now starting lawyers at a measely $60K.

    Due to this, Companies like HKAG have the advantage over the long term. The Chinese/Indians will come in here and sell cheap cars, and people will buy, becuase that’s all they will be able to afford.

    This new global standard will force Hyundai in 10 years to be the new Lexus for professionals who want a taste of luxury as Lexus will be so pricey they will become unobtainable.

    People will willing buy these cars and give sparkling reviews to these Hyundais too, WITH NO PROBLEM!!!

    Too bad many people lack the foresight to see this coming.

  33. HyundaiSmoke Says:

    Chevy and Ford will definately replace Honda and Toyota in 10 years if not 2-5 years from now. Lexus will replace Benz from 10 years ago. Hence, the unobtainability theory I brought up earlier. I think Acura will get itself together and be an Asian BMW. Infiniti will be the Asian Audi, with Nissan as the Asian VW. There’s no question about that.

    Instead of calling them expensive Volkswagens, John will say “Those Expensive Nissans” in 10 years. Or do like the Europeans do, and call them Datsuns.

  34. pedro fernandez Says:

    Smoke: you remind me of Castro, for 50 years. he’s been telling his people that things will get better with time and of course they only get worse. GM and Ford will never get ahead of Toyota or Honda, they will improve, but that’s it.

  35. XA351GT Says:

    Drew,
    Unlike the UAW workers that now have to live on less I’ve have had to do that for years. Thus not being able to afford cars built by them new. Lets face it they made great money for years and now they have to learn to live like the rest of us regular working stiffs. They now have to learn that having any job is better than none at all. There are many that would trade places with any of those underpaid UAW workers.

  36. HyundaiSmoke Says:

    Lmao Pedro, hey somebody has to hope. My Tax Dollars do depend on Chevy getting better you know.

    I still think VW Trying to sell Toyota Volume will be an absolute disaster fot them, however. Stop being lazy and just bring SEAT over here and call it a day.

  37. John V. Says:

    Too bad you can’t get Stow ‘n Go in the Sienna. It is the best, most useful feature I have ever had in any car. If Chrysler can just keep the feature and at the same time refine the NVH, BSRs, and make the seats more comforatable, they will be on top fo a long time.

  38. Alex Kovnat Says:

    >Of course, when I’m not lounging
    >in the lap of luxury, I prefer
    >to scream around in small, nimble
    >cars with exceptional power-to-
    >weight ratios.

    Don’t we all like cars with good power to weight ratio. But if automobile-hating politicians keep laying on ever more stringent safety requirements, and with ever more stringent fuel economy requirements too, we may have to settle for cars with lower power to weight ratios than we would normally consider minimal.

  39. Nick Stevens Says:

    “pedro fernandez Says:
    May 11th, 2010 at 8:26 pm

    Smoke: you remind me of Castro, for 50 years. he’s been telling his people that things will get better with time ”

    I bet he meant they would get better for him and his clan!

    PS I remember a video where Castro had oliver Stone driven around and shown his “Potemkin Vllages” of contented Cubans. I did not pay attention to the BS, of course, but to the car, which was a heavily armored Merc S class, the one which was discontinued in 1991. Its glass was 2-3 inches thick, as one could see from a window they pulled down. I am curious if the engine was any better than the measly 5.6 V8 that made a mere 240-50 HP of the time!

  40. Nick Stevens Says:

    The parking lot of my department is filled with minivans and obese SUVs, all of which arrive empty except for the driver. What a waste. There are at lease three (all silver!) Odysseys, several Trailblazers, Jeeps, CR-Vs and Escapes, a Landcruiser (that once rolled over with colleague and pregnant wife inside-only $13,000 damage, even the baby was born OK) and an obscure Buick Rainier Trailblazer clone.

    Only one colleague, who lives more than 30 miles away, comes in an efficient jetta diesel. He always had these for the last 15 years, and he used to be a FORD employee (but I never saw him drive a ford, even his SUV used to be a suburban (he has horses in the farm and tows a lot)

  41. Nick Stevens Says:

    PS it sure is not just the power to weight ratio. A 5-speed Civic Hatch probably had worse P/W ratio than any buick, but one can drive it almost as if it is a sports car, and with the manual, if you stick to lower gears, you have plenty of quick response around town.

  42. Nick Stevens Says:

    Speaking of better P/W ratios, calculate this one of the lateast version of the iconic 911:

    “The 3,020-pound GT2 RS gets 620 twin-turbocharged horses from its 3.6-liter engine, making it the most powerful Porsche you can legally put on the roads. That’s 90 more horses pushing 154 pounds less weight than in the previous version, and it gets five percent better fuel economy. Ground control is handled with tires specifically created for the car, carrying it from zero to sixty miles per hour in 3.4 seconds. On the one hand, that’s 0.3 slower than the Porsche Turbo S; on the other, there’s a 205 mph top speed and a 7:18 ‘Ring time…. It’ll go on proper show in Moscow later this year, and it’ll run $245,000 when deliveries begin in October.”

    That’s 4.87 lbs/hp!!

    In KG, it is an even more impressive..2.21 KG/HP!!!

  43. B. Berman. Says:

    Wow! Who knew that Mini Vans could generate so much response. I agree with John that a Mini Van can be a better deal than a luxory car. At home there are only two people(the wife and I), and we have three vehicles: Porsche Cayman S, Ford Mustang GT and a Grand Caravan. The van is the vehicle that gets the most milleage as we use it to go to work and errands. A Mini Van as a luxory car begs the question: Why doesn’t Mercedes-Benz bring their Mini Van the “VITO” to the US? It is a great looking van available with diezel or gasoline engines, and also very spaceous. I would be the first in line for one of those. Mercedes, are you listening?

  44. HtG Says:

    P/W helps you understand the performance of a car a little better. But there are so many ways the location of the weight affects overall feel that I’ll go with P/W since it breaks the hold raw HP has on people. Besides, if my ride has 400hp, doesn’t it matter where in the rev band this power is useful, and when does the torque go maximum? How many buyers even understand that the onboard computer isn’t going to let you have all that power in a turn, in the wet, when you slap down on the accelerator? I’ll go with P/W as a handy simplification as it at least encourages the lightweight trend.

  45. LEX Says:

    B. Berman. Says:
    May 12th, 2010 at 9:56 am

    “A Mini Van as a luxury car begs the question: Why doesn’t Mercedes-Benz bring their Mini Van the “VITO” to the US? It is a great looking van available with diezel or gasoline engines, and also very spaceous. I would be the first in line for one of those. Mercedes, are you listening?”

    Question: Why doesn’t Mercedes Benz sell there five door “A” & “B” Class cars in the US? I was in Buffalo NY two weeks ago and saw a Mercedes Benz “B” Class car in the parking lot with Ontario Canada License Plates. I first saw these vehicles in Italy and fell in love.
    They are small and practical vehicles with plenty of room. If you can buy these cars in Canada, then why not in the US? I would definitely buy one! ARE YOU LISTENING MBUSA.Com?

  46. LEX Says:

    Here is the link to see the Mercedes-Benz “B” Class vehicle sold in Canada and Europe.

    http://www.b.mercedes-benz.ca/

    It is a great looking hatchback!