May 11th, 2010 at 11:33am
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.
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.