Automotive OEMs and SEO - A Dichotomous Polemic

Why the Auto Industry Restructure will Fail

2009-05-17T08:56:00.000-07:00

Here's a great example of Why the Auto Industry Restructure will Fail:

The amount of effort that goes into restricting access to URLs and phone numbers of closed/closing dealers by dealers whose businesses are thriving is positively criminal.

Here in Northern California we are seeing a spate of dealers closing their doors for one reason or another. As these dinosaurs go extinct, their websites and vanity numbers continue to garner activity (albeit a diminished volume). The drop-off in buyers utilizing these touch points is exponential as the sites become outdated or inaccessible, and the phones ring endlessly, unanswered.

Some of my forward-thinking clients (cars dealers, all) heeded my suggestions and jumped on the opportunity to secure an additional customer tributary - that was were the trouble really began. As a huge fan of Ford, I will not say who the OEM was that- ... oops. Well anyways, we went so far as to get approval, in writing, from the principal of the closing facility to acquire and use his old web sites and phone numbers. We then made appropriate arrangements with the registrars, hosts, and telecom rodents to seamlessly transfer control of the assets to the new party. But that was were the party ended.

Not only was the unnamed behemoth manufacturer uninterested in helping us preserve the experience of the customer and the profitability of the region by facilitating the transition, they were careful to outline the potential penalties associated with the "inappropriate" utilization of sites and numbers, and various other virtual chattels - including prior customer databases!

Now, in the face of the likely closure of nearly half of the domestic new car dealerships in the US, wouldn't you think that preservation of continuity for the potential BUYER would be of paramount concern? Possibly even a person or *shudder* department designated as a dealer-to-dealer liaison to expedite the process? Possibly even commodfying the procedure to the benefit of the closing dealer? Might be a good time for mom-and-pop car store to get a nice fat check for the 30 years of customers in their DMS/CRM (car talk for relational database user interfacing). Wonder what the Car Czar has to say about this?

As Matt Drudge would say, developing....

Toyota warns of 'unprecedented' crisis

2008-11-06T07:05:00.000-08:00

Toyota Motor slashed its profit forecast Thursday, warning the global auto industry faces an "unprecedented" crisis as Asian stocks tumbled on fears the US is sinking deeper towards recession.

The Japanese giant became the latest automaker to reveal plunging profits due to the financial crisis, following on the heels of BMW, Nissan and Honda.

Toyota , vying with General Motors for the title of the world's top automaker, cut its annual profit forecast by more than half after a terrible year so far.

It now expects a 68 percent plunge in net profit to 550 billion yen (5.6 billion dollars) -- the first drop in nine years.

"The financial crisis is negatively impacting the real economy worldwide, and the automotive markets, especially in developed countries, are contracting rapidly," Toyota executive vice president Mitsuo Kinoshita said.

"This is an unprecedented situation."

Elsewhere in the transport sector, European aircraft manufacturer Airbus warned it expects a sharp reduction in new orders in 2009 as the global economy slows.

Amid the gloomy news, Asian stock markets fell heavily. Japan's Nikkei stock index plunged 6.53 percent even before the Toyota warning, which came after the close of trade.

The drop wiped out gains seen a day earlier on hopes that US president-elect Barack Obama will get to work on fixing the world's largest economy in the face of the worst financial crisis in decades.

"Now that the event is over, investors are sobering up and looking at the economic gloom," said Mizuho Investors Securities broker Masatoshi Sato.

Seoul ended with a loss of 7.6 percent while Sydney shed 4.3 percent. Hong Kong shares were down 6.4 percent at midday.

The sharp falls came after the Dow Jones index slid 5.05 percent on Wall Street on Wednesday as investors braced for a gloomy economic ride after the euphoria of Obama's election victory faded.

"Dismal macroeconomic data and poor corporate results reminded investors that we are only at the start of a deep recession," Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong, wrote in a note.

The euro dropped to 1.2854 dollars in Tokyo afternoon trade, down from 1.2962 late Wednesday in New York. The dollar fell to 97.70 yen from 98.33.

Investors were anticipating further cuts to interest rates on Thursday by both the Bank of England (BoE) and the European Central Bank amid fears of recessions in Europe's biggest economies.

Some economists are even forecasting the BoE would follow up last month's emergency half-point reduction to 4.50 percent with a cut of 100 basis points.

In Japan, the lower house of parliament approved a plan to inject capital into ailing banks if needed to contain the fallout from the financial crisis.

Markets were also looking ahead to crisis talks on the global financial turmoil in Washington on November 15 between leaders of the Group of 20 rich countries and major developing economies.

Leaders will likely agree on an "action plan" including near-term steps to help fix the global economy, a senior US official said Wednesday.

As efforts to contain the financial crisis continued, the International Monetary Fund approved a 16.4 billion dollar loan aimed at rescuing Ukraine .

Europe's biggest economy, Germany , approved a stimulus package costing 23 billion euros (30 billion dollars) to pump up the ailing economy.

In the US, fresh data added to the gloom over the economic outlook. A report by the Institute for Supply Management showed activity in the services sector shrank more sharply than anticipated in October.

A survey showing the US private sector shed 157,000 jobs in October added to worries ahead of official figures due Friday that are expected to show a rise in the jobless rate from a five-year high of 6.1 percent in September.

Ford, Toyota post big drops in sales

2008-11-03T18:10:00.000-08:00

DETROIT (AP) - Ford's U.S. auto sales plummeted 30 percent and Toyota's dropped 23 percent in October as low consumer confidence and tight credit combined to scare customers away from their showrooms.

Both automakers' results, compared with the same month last year, are strong indications that sales for the industry as a whole may perhaps be the worst in 25 years.

Dearborn-based Ford Motor Co., the first automaker to report its monthly sales Monday, said its Ford, Lincoln and Mercury car sales were off 27 percent, while light truck sales for the three brands were down more than 30 percent.

Overall Ford, including its Volvo brand, sold 132,278 light vehicles last month compared with 189,515 in the same month last year.

Meanwhile, Toyota Motor Corp. sold a total of 152,101 vehicles, down from 197,592 in October 2007. The drop included a 34 percent in light truck demand, while car sales fell 15 percent.

Ford said in a statement that the company faced an "economic gauntlet" last month.

"Challenging external conditions present the best opportunity to challenge the competition," Jim Farley, group vice president of marketing, said in a statement.

Poor sales in the last three months are expected to equal dismal third-quarter earnings for the struggling automaker. Ford is scheduled to release its financial results Friday, and the down sales raise the possibility of further plant closures or shift cuts. Ford has said it will continue to reduce production to match consumer demand.

Sales of the company's F-Series pickup trucks, traditionally its top seller, fell 16 percent in October. The company began selling a new version of the pickup last month and has announced plans to add 1,000 workers at its Dearborn Truck Plant in January to handle what it expects will be increased demand.

Some industry analysts are predicting a seasonally adjusted annual sales rate in October of 10.8 million or less, down from 16.1 million a year ago. If the rate drops below 10.83 million, it would be the worst sales month since March 1983, according to Ward's AutoInfoBank. The closely watched figure indicates what sales would be if they remained at their current rate all year, with adjustments for seasonal fluctuations.

Analysts also said it's possible Toyota will surpass General Motors Corp. as the U.S. sales leader for the first time in history.

After reeling from a 32 percent drop in September sales, Toyota launched zero-percent financing on almost all of its models prompting analysts to speculate that it could post decent sales as a result.

But, like at Ford, the vast majority of Toyota models still posted double-digit declines for the month. Notable exceptions included sales of the Corolla, whose sales rose 6.1 percent and the Sequoia sport utility vehicle, which posted a 21 percent gain.

Meanwhile, GM's financing arm, GMAC Financial Services, said it was tightening its lending standards to require a credit score of at least 700, potentially shutting out some buyers.

Analysts said GM's employee pricing incentives in September could have pulled in buyers who would have waited to purchase cars, further reducing GM's October sales.

The Associated Press reports unadjusted auto sales figures, calculating the percentage change in the total number of vehicles sold in one month compared with the same month a year earlier. Some automakers report percentages adjusted for sales days. There were 23 sales days last month, two less than in October 2007.

Lowest GM Sales Since 1945

2008-11-03T18:08:00.000-08:00

U.S. Auto Sales Fall 32% to Lowest Total in 17 Years (Update3)

By Bill Koenig

Nov. 3 (Bloomberg) -- U.S. auto sales plummeted 32 percent in October to the lowest monthly total since January 1991, led by General Motors Corp.'s 45 percent slide, as reduced access to loans and a weaker economy kept consumers off dealer lots.

Ford Motor Co. reported a 30 percent drop in car and light- truck sales from a year earlier and Toyota Motor Corp.'s declined 23 percent. Honda Motor Co.'s slid 25 percent, Nissan Motor Co.'s were down 33 percent and Chrysler LLC's fell 35 percent.

``If you adjust for population growth, it's the worst sales month in the post-World War II era'' for the industry, said Mike DiGiovanni, GM's chief sales analyst, on a conference call. ``Clearly we're in a dire situation.''

Industrywide U.S. auto sales fell for the 12th straight month, extending the longest slide in 17 years. Tight credit, falling consumer confidence and the weakening economy, the same forces that suppressed buying in September, hurt automakers again last month.

October total sales dropped to 838,156 from 1.23 million, according to Autodata Corp. The last time light-vehicle sales were lower was 822,200 in January 1991, according to Autodata.

The seasonally adjusted annual sales rate for the month was 10.6 million, the lowest since February 1983, the Woodcliff Lake, New Jersey-based provider of industry statistics said in a statement. The October 2007 rate was 16 million, Autodata said.

``People are feeling a hell of a lot less flush than they've felt in the better part of a generation,'' said Joe Phillippi, an analyst at AutoTrends Consulting in Short Hills, New Jersey. ``Everybody is taking it on the chin right now.''

The financial crisis has dented stock markets worldwide, and a $700 billion U.S. financial aid package hasn't yet spurred renewed lending.

`Carnage'

``The carnage was completely widespread'' in the industry, GM North American sales chief Mark LaNeve said on the conference call. ``In my 27 years, I never saw a month like this.''

Industry sales in 2009's first half will be ``sobering,'' Jim Farley, Ford worldwide marketing chief, said on a conference call. Sales this year may fall to fewer than 14 million vehicles, from 16.1 million in 2007, Ford sales analyst George Pipas said on the call.

GM, the largest U.S. automaker, reported sales of 168,719 cars and light trucks, compared with 307,408 a year earlier. The Detroit-based company sold 53 percent fewer pickup trucks, sport- utility vehicles and vans, including a 35 percent drop for the Chevrolet Silverado, GM's best-selling U.S. vehicle. None of the company's eight divisions posted a sales gain.

GM offered employee prices to all customers in August and September. The incentive caused ``sales to be pulled ahead into September,'' said Tom Libby, a Troy, Michigan-based analyst at market-research firm J.D. Power & Associates.

Ford

Sales at Ford, the second-largest U.S. automaker, dropped to 132,248 cars and light trucks, from 189,360, Autodata said. The slide was its 23rd in the past 24 months. For the Dearborn, Michigan-based company's Ford, Lincoln and Mercury brands, sales dropped 30 percent for trucks and 27 percent for cars.

Ford's sales included declines of 58 percent for the Edge wagon and 18 percent for the Focus small car. Focus sales had risen most of the year after U.S. gasoline prices peaked at more that $4 a gallon in July and averaged 26 percent higher than a year earlier through October. They fell 41 percent from the July 15 peak through yesterday, according to motorist group AAA.

Sales of Ford's F-Series pickups slid 16 percent in October. That decline was the narrowest for the large trucks since a 4.9 percent drop in February.

Toyota, Honda, Nissan

Toyota, the largest Asian automaker, reported sales of 152,101 vehicles, down from 197,592 a year earlier. The Toyota City, Japan-based company last month offered no-interest financing on 11 car and light-truck models. That promotion will continue at least through November, the automaker said today.

Honda, Japan's second-largest automaker, sold 85,864 cars and light trucks, dropping from 114,799 a year earlier, spokesman Kurt Antonius said in an interview. Reduced demand for the Tokyo- based company's light trucks was partly offset by higher sales of Fit subcompact cars, he said.

Nissan's sales fell to 56,945 vehicles, Al Castignetti, U.S. vice president of Nissan-brand sales, said in an interview. The Tokyo-based company's pickups and sport-utility vehicles dropped while models including the Versa subcompact car, Maxima sport sedan and Rogue small crossover SUV rose, he said.

Chrysler

Chrysler sold 94,530 vehicles, a drop from 145,316 a year earlier, the Auburn Hills, Michigan-based company said in a statement. Its Ram large pickup fell 29 percent.

GM declined 14 cents to $5.65 at 4:15 p.m. in New York Stock Exchange composite trading, while Ford fell 6 cents to $2.13. Toyota's American depositary receipts rose 57 cents to $76.66, Honda's slid 3 cents to $24.74 and Nissan's dropped 3 cents to $9.58.

Some automakers said they may see sales improvements in November and December because of the U.S. presidential election tomorrow and end-of-the-year promotions.

``We're going to have a better month'' in November, Nissan's Castignetti said in the interview. ``Beginning tomorrow, one way or another, this seemingly endless campaign finally gets closed. Whether you like it or not, you'll know what's going on.''

`True Test'

Ford's Farley said that ``most manufacturers will start year-end promotions in early November. The true test will come in the first quarter of next year, the first half of next year.''

The 12-month streak of declines in vehicle sales is the longest such stretch since the 14 months that ran through December 1991, according to Autodata.

U.S. consumer confidence fell to the lowest level on record in October as stocks plunged and banks shut off credit. The Conference Board's confidence index tumbled to 38, less than forecast and the lowest reading since monthly records began in 1967, the New York-based research group said Oct. 28.

Gross domestic product contracted at a 0.3 percent pace from July to September, the U.S. Commerce Department reported Oct. 30. The decline, the biggest since 2001, was smaller than forecast. Unemployment is at a five-year high of 6.1 percent and may rise to 8 percent by the end of 2009, according to Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York.

To contact the reporter on this story: Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net

Korean Cars Still Sell

2008-11-03T06:20:00.000-08:00

South Korean automakers, including Hyundai Motor Co. (KSE:005380) and its affiliate Kia Motors Corp. (KSE:000270), said Monday that sales posted a moderate gain in October, helped by demand for their fuel-efficient cars.

But, the short-term outlook for Hyundai and Kia remains uncertain as the global financial crisis dampens demand for their vehicles overseas and the wobbly domestic economy forces consumers to shun new cars at home.

Overall car sales in October rose 3.7 per cent to 505,541 units, according to tallies by Hyundai and other carmakers.

The nation's No. 1 Hyundai saw sales gain 12 per cent to 269,958 units last month. Exports rose 16.8 per cent to 217,223 units, but domestic sales fell 4.5 per cent to 52,753 units.

Its affiliate Kia posted a 0.7 per cent decline in October sales. The carmaker sold a total of 139,871 units.

Domestic sales rose 33.9 per cent to 33,609 units, while exports fell 8.2 per cent to 106,262 units.

GM Daewoo Automotive and Technology Co's sales fell 11.3 per cent to 73,180 units, hit by sluggish demand at home and overseas.

Last week, GM Daewoo Chief Executive Officer Michael Grimaldi said the subsidiary of U.S. auto giant General Motors Corp. is "facing a very serious problem" amid weakening demand worldwide.

Renault Samsung Motors Co. reported a 19.8 per cent increase in October sales, thanks to robust exports.

Ssangyong Motor Co.'s (KSE:003620) sales plunged 35.2 per cent last month as the company has failed to woo consumers with no fuel-efficient models.

The Detroit Three

2008-11-03T06:14:00.000-08:00

It's hard to exaggerate the scale of the crisis facing the Detroit Three; in many ways, they are in a more parlous state than the banks. In 2000, the high-water mark for the industry, the combined stock market value of Ford and GM was more than $130bn. Today, you could pick up both for $10bn and still have change. Citigroup analysts estimate that the pair are carrying $69bn of debt between them. Since 2005, the companies have been haemorrhaging money: in the first half of this year they lost almost $30bn. Paul Newton, analyst from consultancy Global Insight, says: 'The big three are in severe trouble. The past couple of years have been a bloodbath.'

And how did they get themselves into this mess? More than any other incumbent car makers, they've been outwitted by nimbler, more efficient - and cheaper - foreign rivals. Twenty years ago, more than two-thirds of cars made in the US were manufactured by GM, Ford and Chrysler. This year, according to the Centre for Automotive Research, for the first time foreign car makers, led by Toyota, will overtake them.

The trio have also been hamstrung by the ruinous cost - estimated at $100bn - of providing healthcare for two million current and former workers. Last year, a landmark agreement with the UAW union capped these liabilities, but the damage had already been done.

That was not all. Soaring fuel prices have soured Americans' love affair with big, powerful 'sports utility vehicles' and boosted sales of smaller cars - more typically made by the big three's rivals. When the credit crunch took hold a year ago and property sales plummeted because of the shortage of credit, car loans also began to dry up. In response, the three companies have announced plans to close 35 plants, mostly in the area around Detroit, with the total loss of 100,000 jobs. GM and Ford are looking to expand operations in lower-cost places, such as Mexico, China and Africa.

But this restructuring, huge as it is, already looks hopelessly inadequate to stem their ballooning losses. With recession looming, credit, for the few people contemplating buying a new car in these straitened times, is even harder to come by. The financing arm of GM recently announced lending restrictions which, dealers estimate, would prevent almost two-thirds of would-be GM buyers from finding a loan, and Chrysler has made similar moves. Toyota plans to take advantage, according to Citigroup analysts, by offering interest-free loans on 11 models, which will only hasten the decline of the Detroit Three.

Citigroup predicts a 35 per cent sales slump overall in October compared with last year, with GM and Chrysler even worse hit as they withdraw credit. US car sales will pick up - most analysts predict a recovery in 2010 - but to what extent the big three will benefit is unclear. PWC estimated in September that they planned to cut production by about one million vehicles by 2012, but this may not be enough.

U.S. rejects GM's call for help in a merger

2008-11-03T06:10:00.000-08:00

DETROIT: The Treasury Department has turned down a request by General Motors for up to $10 billion to help finance the automaker's possible merger with Chrysler, according to people close to the discussions.

Instead of providing new assistance, the Treasury Department told GM on Friday, the Bush administration will now shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department.

Treasury officials were said to be reluctant to broaden the $700 billion financial rescue program to include industrial companies or to play a part in a GM-Chrysler merger that could cost tens of thousands of jobs.

But it remained unclear whether the officials were also seeking to avoid making any decision that would conflict with the goals of a new presidential administration. The Democratic candidate, Senator Barack Obama, has said in recent days that he supports increasing aid to the troubled auto companies, while Senator John McCain has not said whether he would support aid beyond the $25 billion.

While GM and Chrysler continue to talk, no deal is expected until the government clarifies its role, if any. Potential investors in the deal have been hesitant to back the merger without federal assistance.

GM's chairman, Rick Wagoner, had lobbied Treasury Secretary Henry Paulson Jr. to provide emergency aid to the auto companies under the bailout program to stabilize the financial markets.

The Bush administration is still considering a range of options to aid the Detroit automakers, which are losing billions of dollars and rapidly depleting their cash reserves, said auto industry and administration officials, who did not want to be identified because of the sensitive nature of the discussions.

The first step is to get the Energy Department to expedite the release of the $25 billion in low-interest loans for GM, Chrysler and the Ford Motor Company.

Beyond that, the administration is also bringing the Commerce Department into discussions about channeling additional aid to the automakers.

With auto sales deteriorating to their lowest level in 15 years, Detroit's traditional Big Three are struggling to stay solvent and avoid bankruptcy.

The deepening troubles led GM into merger talks in September with Chrysler's majority owner, the private equity firm Cerberus Capital Management, and the request to the Treasury Department for assistance.

Auto industry executives and analysts said over the weekend that the loan program is essential to retooling plants and developing vehicles that meet more stringent government fuel-economy mandates.

Getting the loans will allow GM, Ford and Chrysler to redirect money already budgeted for cleaner cars to other capital needs.

"The auto companies are clearly running out of cash, and badly in need of more liquidity," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan "Releasing the $25 billion in loans is a necessary first step."

The Detroit companies employ more than 200,000 workers in the United States and provide health care and pensions to more than one million Americans. The companies are also a lifeline to thousands of dealers and countless suppliers.

Support for aiding the industry is growing among political leaders in states with heavy automotive employment. Last week, the governors of Michigan, Ohio, New York, Kentucky, Delaware and South Dakota wrote a letter to Paulson and the Federal Reserve chairman, Ben Bernanke, urging "immediate action" to assist the industry.

"While all sectors of the economy are experiencing difficult times, the automotive industry is particularly challenged," the letter said. "As a result, the financial well-being of other major industries and millions of American citizens are at risk."

Cerberus, which bought Chrysler last year for $7.4 billion, has been unable to reverse a steady decline in the fortunes at the company, the smallest of Detroit's Big Three. While overall auto sales in the United States are down 12.8 percent this year, Chrysler's sales have fallen 25 percent, mainly because of its focus on gas-guzzling sport utility vehicles and pick-up trucks.

Cerberus has had discussions with the Japanese automaker Nissan Motor and its French partner, Renault, about bringing Chrysler into their international automotive alliance. But people familiar with the discussions said Cerberus is now focused solely on a potential GM deal.

The depth of the Big Three's problems will become even more evident this week with the release of October sales figures and third-quarter earnings announcements by GM and Ford.

Industry sales fell 26.6 percent in September, but October's totals could be even worse. The auto research Web site Edmunds.com forecasts that sales of new vehicles during the month will drop nearly 30 percent from the same period last year.

Ford not interested in GM tie-up

2008-10-12T09:02:00.000-07:00

Bryce G. Hoffman / The Detroit News

General Motors Corp. approached Ford Motor Co. about a possible merger prior to contacting Chrysler LLC, according people close to the situation.

Though there were direct communications between GM CEO Rick Wagoner and Ford CEO Alan Mulally, those talks never evolved into actual negotiations.

"There were never in-depth, substantive discussions that went on," said one of those sources, who spoke to The Detroit News on the condition of anonymity. "It was more an expression of interest, as in, 'Do you want to talk?' "

Ford said no.

The Dearborn automaker would not officially comment on the reports, but sources familiar with Mulally's thinking on the topic told The News that such a tie-up would be contrary to his plan for saving Ford.

Mulally wants to simplify Ford's own operations and better integrate them on global scale. He wants fewer brands and fewer dealers. And he is jealously guarding Ford's cash reserves, which have so far insulated the Dearborn automaker from the bankruptcy speculation swirling around GM.

Adding more brands, more factories and more dealers just does not make sense in this environment, those sources said.

Mulally has repeatedly pointed to rival Toyota Motor Corp. as his model for success, noting that Japan's largest automaker competes successfully around the world with just one major brand and closely integrated global operations.

Reports that GM had contacted Ford first surfaced in the New York Times earlier today.

Ford contacted GM two years ago to discuss the idea of merging some elements of their operations, such as purchasing and information technology, but those talks never panned out.

As The News first reported in August, GM contacted Ford this summer to discuss possible collaborations on powertrains, vehicle architectures and other areas. The two companies have had several meetings to discuss the joint development of engine technologies, but have so far nor reached any concrete agreement.

Automotive Doom

2008-10-11T08:08:00.000-07:00

Like a Phoenix rising from the ashes of it's own dead carcass, the automotive retail sector is poised to take flight with beautiful new wings and a life-force that hasn't been seen since the 1950's. The proliferation of e-commerce amongst car dealers has been slow and painful. Even the early adopters that "get it" were burned by fly-by-night hucksters with Internet Snake Oil and Big Money Corps that are quantity-over-quality (certainly not pointing any fingers).

So we see the Doom-n-Gloom on Drudge and elsewhere, but what does it all mean?

Global auto market may 'collapse' in 2009: J.D.Power...

GM Shares Fall to Lowest Level Since 1950...

Ford, GM May Not Get US Loans in Time!

It means that, like it or not, car makers will be forced to directly address e-commerce issues that have heretofore been largely the sole responsibility of the dealer. Essential factors like dealer websites, online ratings/reviews, inventory exposure, and lead management will be dictated and closely monitored by the OEMs ('bout time, no?).

Some factories are ahead of the curve... I'm not naming names yet, but can assure you that we will talk about that shortly. Meanwhile, some more FUD:

Big drop predicted for global auto sales

Ford shares cheaper than gas

NADA Chairman Urges Prompt Action by Government

GM, Ford Fall as US Sales Outlook Weakens, Short Ban Ends

Car loan fears clobber US auto stocks

Auto Sector is next major industry to collapse

GM, Chrysler in merger talks

2008-10-11T07:52:00.000-07:00

General Motors has had talks with smaller rival Chrysler LLC about a merger that would combine the No. 1 and No. 3 American automakers at a time when both are struggling to cut costs and shore up cash, according to a source briefed on the matter.

Separately, Ford Motor Co, plans to sell its shares from its controlling stake in Japan's Mazda Motor Co, a second source said.

Finally, Barron's reported that GM was preparing to approach the U.S. Federal Reserve about borrowing money from the central bank's discount window because of the logjam in credit markets that has shut it out of other kinds of borrowing.

The moves come as all three Detroit-based automakers are struggling with a plunge in U.S. sales to 15-year lows and facing tough questions from investors and creditors about whether they have the cash to ride out a deepening downturn.

Representatives of Cerberus Capital Management, the private equity firm that owns an 80.1-percent stake in Chrysler, were not immediately available for comment.

Chrysler and GM declined comment. Ford representatives could also not be immediately reached.

Cerberus is also in exploratory talks with other parties, including Renault-Nissan, to sell Chrysler, the source said.

But any deal would hinge on the completion of the sale of Daimler AG's remaining 19.9-percent stake in Chrysler to Cerberus, the source said. Cerberus last month said it had approached Daimler to buy that remaining stake.

Chrysler's private owners and GM have had "very early" and "very exploratory" talks about a merger, the source said.

The talks between GM and Cerberus, first reported by the New York Times and the Wall Street Journal, began more than a month ago and are not certain to produce a deal.

The Journal said that Cerberus had proposed a swap of assets with GM that would give the private equity firm full ownership of finance company GMAC.

In exchange, GM would get the loss-making auto operations of Chrysler, the newspaper said.

Cerberus currently owns 51 percent of GMAC, GM's former captive finance company which has been hobbled by its exposure to the U.S. mortgage market. GM owns the remainder of GMAC.

LONG PROCESS

The reported talks between the two sides would revive discussions between Chrysler and GM about a potential merger in early 2007 when Germany's Daimler AG began the process of selling off Chrysler that culminated in a deal later that year to sell the automaker to Cerberus.

GM Chief Executive Rick Wagoner also said last year that he saw some potential for Cerberus to combine GMAC with Chrysler Financial, the finance company affiliated with the No. 3 automaker.

Analysts have questioned Chrysler's ability to survive as a stand-alone automaker, given its reliance on sales to North America for some 90 percent of its revenue.

But a combination with GM would match two companies with overlapping weaknesses, analysts said when merger talks first emerged.

For one thing, both GM and Chrysler have been hurt by their reliance on sales of trucks and SUVs. For another, both have been struggling to cut union-represented production jobs in reaction to weaker sales.

Chrysler has also had discussions about a tie-up with India's Tata Motors and Italy's Fiat in recent months.

GM shares fell to near a 60-year low this week on fears the global financial crisis could derail its turnaround plans.

GM and Ford both ruled out on Friday seeking bankruptcy protection.

NHK, Japan's public broadcaster, first reported that Ford, which has 33.4 percent of Mazda, plans to sell about most of its stake and has already approached Japanese companies on the sale.

GM shares fell as low as $4 early on Friday, the lowest price for the stock since 1949, but recovered and ended up 13 cents, or 2.7 percent higher, at $4.89 on the New York Stock Exchange.

Credit ratings agency Standard & Poor's said on Thursday that both GM and Ford had adequate liquidity for 2008, but deteriorating industry fundamentals would make liquidity a serious challenge in 2009.

Also on Thursday, industry forecaster J.D. Power and Associates said the global auto markets could be in danger of an "outright collapse" in 2009 as a slowdown that began in North America spills over to other markets.

U.S. auto sales have fallen for three consecutive years to hit 15-year lows in recent months.

Many analysts now expect further declines in 2009 and some slowing in other regions around the world, adding pressure on GM and other U.S. automakers that have been restructuring.

GM, which posted a second-quarter net loss of $15.5 billion, announced plans in July to improve its liquidity by about $15 billion by the end of 2009, about two-thirds through cost cuts and the rest through asset sales and new borrowing.

Ford, which posted a $2.7 billion net loss in the second quarter, went to capital markets to raise more than $23 billion in late 2006. Ford Chief Executive Alan Mulally said earlier on Friday that the company was watching its cash flow carefully.

Nissan Gains, Everyone Else Declines

2008-09-02T11:19:00.000-07:00

U.S. July auto sales spiral to 16-year low

By Poornima Gupta DETROIT (Reuters) - U.S. auto sales plunged to a 16-year-low in July, led by a 27 percent drop at General Motors Corp (GM - News), as high gas prices and tight credit sent the industry into a tailspin.

The sales decline was steeper than analysts had expected and showed an accelerating downturn in the world's largest vehicle market as Americans abandoned the SUVs and trucks they had favored for more than a decade.

July sales marked the ninth straight month of declining sales in the U.S. auto market, making it the longest such downturn since the 2001 recession.

Automakers struggled to meet demand for fuel-efficient small cars and hybrids, only to see those gains wiped out by a 25 percent drop in sales of light trucks in July.

Ford Motor Co (NYSE:F - News) sales were down 15 percent. Toyota's sales fell 12 percent.

Nissan Motor Co Ltd (Tokyo:7201.T - News) surprised investors by posting an 8.5 percent increase. Honda Motor Co Ltd (Tokyo:7267.T - News) reported a weaker-than-expected 1.6 percent drop in sales, but outsold Chrysler for the third straight month.

The results cast a pall over Detroit's struggling automakers as they grapple with diminished cash holdings and the costs of a downturn now widely expected to run into 2009.

GM's showing came as the No. 1 U.S. automaker posted a $15.5 billion quarterly loss, attributable to a combination of meager sales and writedowns in its auto finance business.

U.S. auto sales fell to a seasonally adjusted, annualized rate of 12.55 million units in July, the worst showing since April 1992.

"We are in a period that feels a lot like 1991 and 1992 and we had similar issues with a recession at that point in time, high oil prices and fear of oil supply shortages," said GM's sales analyst Mike DiGiovanni.

TOUGH ROAD AHEAD

Auto executives and analysts were unwilling to call a bottom for sales.

They noted there were signs that tougher credit markets and a pullback from cheaper vehicle lease financing could weigh on sales for months to come.

Chrysler LLC, which boosted incentives on its vehicles in August, has completely abandoned leases. GM and Ford have tightened consumer credit terms.

"For the next several months, and I would say for the next year, the credit situation that customers are facing in dealerships will take center stage," Ford's sales and marketing chief Jim Farley said.

The sudden shift in buying patterns toward passenger cars hit the Detroit-based automakers hard. As a group, the market share of GM, Ford and Chrysler dropped to 43 percent in July.

Light truck sales consistently outpaced car sales in the U.S. market for the decade between 1997 and 2007 when rising gas prices began to reverse the trend.

But in July, cars sales outpaced truck sales by 10 percentage points at a 55 percent to 45 percent ratio. That shift has put additional pressure on earnings as larger vehicles have had higher profit margins.

"The next two months will be very challenging," Edmunds analyst Jesse Toprak said. "The marketplace is changing rapidly and automakers that are more flexible in their production will fare better."

Toprak estimated that automakers had stepped up sales incentives by an average of 4 percent in July to $2,611 on the average vehicle. That marked the most aggressive discounting of the year for both U.S. and Japanese automakers, he said.

Discounts on large SUVs ran as high as $6,199 per vehicle, followed by large trucks at $5,424, according to Edmunds, which tracks incentives including rebates and financing.

(Additional reporting by Kevin Krolicki, David Bailey and Soyoung Kim, editing by Gerald E. McCormick, Leslie Gevirtz)

Automotive Leasing Is History

2008-08-10T10:00:00.000-07:00

Henderson Weekes sounded genuinely apologetic. He really did. The veteran salesman at Roy Foss Chevrolet in Toronto would have been only too happy to offer a lease on General Motors Corp.'s award-winning Malibu sedan when I inquired as to its availability this week. But he said his hands, like those of all GM dealers, were tied.

"Leasing is history," he said. "Everything's finance, finance, finance. No lease at all."

But what if I don't want to own the car? What if, like many of the roughly 40% of Canadians who choose to lease when getting a new vehicle, I consider a six-or eight-year relationship with the same automobile to be monotonous enslavement? Then "you're in trouble," he said.

Vehicle buying and selling in Canada is about to change after GM and Chrysler LLC signalled to dealers last month that their finance units will pull back on the subsidized lease rates they've been offering for years. BMW AG, which derives 60% of its Canadian sales through leases, is also back-pedalling on leases somewhat by offering a wider variety of purchasing options.

And Ford Motor Co. disclosed yesterday that its lending arm is planning to cut leasing of vehicles, although a Ford official said there will be no change in lease offerings in Canada.

The reason for the retreat is clear: The price of used vehicles has tumbled in recent months in the United States and Canada. That, along with credit-market pressures, has made leasing less economical for automakers than in the past. In particular, the value of large SUVs and pickups that drivers return to dealerships after their leases are over is now far less than expected, forcing the automakers who own them through their finance arms to set aside hundreds of millions of dollars in provisions against the declining residual values. Ford Motor Co. wrote down the value of its Ford Credit leased-vehicle portfolio by US$2.1-billion in its latest quarter.

Leasing, loved by some for its hooked-on-drugs quality that allowed Canadians to drive away with a car they might not be able to afford to buy outright, will almost certainly become less prevalent.

But industry executives say leasing is not going away.

"What leasing enabled people to do was to drive more car for less payment," says Jerry Chenkin, executive vice-president of Honda Canada Inc., adding that the values of Honda's used models have held up better than those of some rivals, and that the company has no plans to stop offering leases. Toyota Canada and Mercedes-Benz Canada says their leasing policies also remain unchanged for now.

"People could move up markets and up equipments for the same or less payment [than financing]," Mr. Chenkin says. "The only thing that will negatively impact that is if the payments increase significantly ... in which case people will move down market or downsize."

The percentage of people who use leasing is lowest in the Western provinces and highest in Quebec, where more than half of new-car buyers pick the option. And the types of vehicles being leased spans the spectrum, from trucks and luxury cars to cheaper models. Fifty-four per cent of higher-end

premium vehicles in Canada are leased, while 38% of non-premium vehicles are leased, according to 2007 data from J. D. Power & Associates.

"There's quite a lot of leasing activity at the low end. Companies like Hyundai are very active in that area ... People are looking for a lower monthly price point," says Richard Cooper, executive director of J. D. Power & Associates in Canada. "We think consumer behaviour might change a little bit" as buyers shop around more widely for deals and more of them choose financing and long-term service contracts, he says.

At Bob Bannerman Motors' Chrysler dealership in central Toronto, a salesman confirms leasing vehicles like the four-door Jeep Wrangler is still an option, but at an interest rate of 8.9% -- much higher than the rates Chrysler has typically offered in years past. Lease rates for Chrysler's Dodge Journey are even higher, topping 12%, according to one source. At that level, the automaker is potentially pricing itself out of the leasing market and risks seeing its customers go elsewhere.

But there are other options for consumers concerned about keeping their monthly car payments low, even if they will end up paying more in interest costs in the long term. Canadian banks such as Bank of Nova Scotia are offering loans as long as eight years to drivers wanting to buy a car or truck. GM is offering a deal of 0% financing over six years that comes with a $2,000 cash offer for those who switch from a GM lease. Chrysler has a similar offer.

"I think, for a lot of people and for a lot of clients that I have, this could benefit them because they're now going to have the option to be able to finance over a longer period of time and own the car," says Mark Derry, an auto advisor with www.carsense. to. Still, overall sales volumes are going to decline because dealers and manufacturers are not going to be able to sell consumers as easily on the long-term financing model, he predicts.

Drivers will demand leasing and the market will oblige, especially for luxury vehicles, says George Iny, head of the Montrealbased Automobile Protection Association, a consumer group.

Several independent leasing companies, such as Quebec-based firms Location Lutex and Park Avenue Leasing, have signalled they intend to negotiate with GM dealers in an attempt to woo their leasing clients. Lease Busters Inc., which matches people looking to get out of their leases with people wanting to take them over, says it is looking at "a windfall of new business" as the Detroit automakers pull back. Others consumers may simply shift to buying used instead.

"We think that even at a low interest rate, handcuffing you to a car for seven years is a recipe for a dissatisfied customer," Mr. Iny says. "It's absolutely cheaper long term to keep your car longer. But the industry has convinced people to change vehicles often. I don't think those people are going to become frugal Calvinists because two carmakers have decided to take them off the gravy train."

nvanpraet@nationalpost.com, Nicolas Van Praet, Financial Post

Detroit 3 gain in quality survey, FORD tops list

2008-08-10T09:04:00.000-07:00

WASHINGTON -- Detroit's automakers posted middling improvements in a closely-watched survey of reliability released Thursday, with Ford Motor Co. maintaining its advantage over General Motors Corp. and Chrysler LLC.

Yet the results of the annual study by J.D. Power and Associates also show that the industry has made enough strides in improving long-term quality that the difference between the top-ranked Lexus brand and last-place Land Rover is two problems per vehicle. That said, Lexus improved its score by 17% in this year's survey, a sign that automakers still have plenty of room for improvement.

Overall, J.D. Power's survey of 52,000 owners of 2005 model-year vehicles found a 5% reduction in problems to an average of 206 per 100 vehicles. Lexus topped the survey, as it has done for 14 years, and built the only two vehicles that scored fewer than one problem a vehicle -- the LS 430 and the SC 430.

Two Detroit brands, Mercury and Cadillac, took the second and third rankings, followed by Toyota and Acura. Buick, which tied Lexus in last year's survey, fell to sixth place, while Lincoln was the only other American brand to crack the top 10. Some Detroit brands, including Chevrolet and Jeep, saw their problems creep up from last year's study.

The results closely track the scores from J.D. Power's survey of new vehicle quality, which has shown a similar narrowing among models. The top five complaints: wind noise, noisy brakes, vehicle pulling left or right, instrument panel complaints and excessive window fogging.

Those may not sound like serious flaws. But Dave Sargent, vice president of automotive research for J.D. Power, said listening to consumer complaints can point to millions of dollars in potential savings on warranty costs for automakers.

"What we find is that the same problems show up year after year, and the same vehicles tend to show up year after year," Sargent said. "When we report back to manufacturers that this vehicle has this particular problem, 99 times out of 100 they recognize this vehicle has a problem, and they're aware of it."

Despite steadily improving scores in the survey over the past few years -- and focusing on some problems such as reducing wind noise -- Detroit automakers have not been able to convert such results into higher sales.

Ford was the only Detroit automaker to have all of its brands rank above the industry average. GM brands were scattered throughout the rankings; Saab had the largest improvement of any brand, but scores for Buick, Chevrolet, GMC and Pontiac all worsened from last year's survey.

Ford spokeswoman Anne Marie Gattari said the company was pleased by the results, and confirmed that the automaker's improvements in initial quality were real.

Jamie Hresko, GM's vice president for quality, said GM's results were mediocre, and reflected subpar launches of new vehicles in 2005. But he cited the company's warranty costs -- which have declined 13% a year in 2006 and 2007, and are on track to do so again this year -- as proof that it was making strides.

"The new CTS was the first renaissance launch, and the Malibu was another," Hresko said, noting the high scores both those vehicles received on J.D. Power initial quality surveys. "That says we're starting to get it right, if we can take that formula and reproduce it."

Chrysler LLC once again saw its three brands rank below the industry average. While Chrysler and Dodge vehicles improved on their scores, Jeep's problems increased.

Chrysler spokeswoman Mary Beth Halperin said the company had boosted its scores by 24% in the past five surveys, and that its newer models would perform better. "The cars we are selling today are greatly improved," she said.

J.D. Power said among 19 vehicle classes, Lexus had the highest-quality rankings in six, while Toyota topped five others. Ford and Honda won two segment awards apiece, while Buick, Mercury, Chevrolet, Hyundai and Mazda claimed one each. Honda and Toyota tied for the award in small SUVs.

Contact JUSTIN HYDE at 202-906-8204 or jhyde@freepress.com.

American Autos Lose More Money

2008-08-04T12:44:00.000-07:00

A sense of trepidation was certainly felt at automotive facilities across North America this week as the second-quarter numbers for both General Motors Corporation (NYSE:GM) (Detroit, Michigan) and Ford Motor Company (NYSE:F) (Dearborn, Michigan) were announced. Combined, the two automotive giants lost more than $24 billion during the second quarter of 2008, not a good sign for an industry that has been struggling for over a year to deal with a rapidly changing marketplace. Foreign automakers have been chipping away at American market share for years. Even without the rising oil and gas prices that have rocked the industry in 2008, Toyota Motor Manufacturing North America (NYSE:TM) (Torrance, California) was poised to take firm control of the No. 1 position by year's end, regardless of how the American automakers performed. However, even the mighty Toyota has seen sales dip in recent months.

Chrysler in Crisis

2008-07-27T07:55:00.000-07:00

Chrysler: What Gives?

The signs are not good.

From Chrysler's decision to stop leasing cars, to its recent decisions to cut staff and close plants, to its lack of major new product announcements, there is little of late inspiring confidence that this company can stage a comeback.

I haven't thrown in the towel on Chrysler, but I have to admit that I wonder what this company will do to get through this drought in auto sales.

Chrysler President Jim Press and Chief Executive Bob Nardelli have said time and again that Chrysler has the money and game plan to ride out this rough spot and grow the business. Yes, we know of the plans to streamline the product line, but we're still waiting to see the new models Nardelli & company are banking on to revive interest and sales in Chrysler.

The skeptic says Chrysler under Cerberus Capital is a company that is cutting, cutting, cutting and getting to a size where it's an attractive candidate to be merged or sold to another automaker.

The optimist says Jim Press and product planners at Chrysler will give us the models to show us this brand can thrive on its own.

So where do you stand? Do you honestly believe Chrysler as we know it today will be here a year from now? Or do you look at its truck-heavy portfolio and wonder if the company's sales will create a more desperate situation?

There are arguments to support both opinions.

The Competition:

Toyota Motor

TOYOTA MOTOR CORP

90.05 -1.77 -1.93%

NYSE

Quote | Chart | News | Profile

[TM 90.05 -1.77 (-1.93%) ]

General Motors

GENERAL MTRS CORP

11.65 -0.25 -2.1%

NYSE

Quote | Chart | News | Profile

[GM 11.65 -0.25 (-2.1%) ]

Ford Motor

FORD MOTOR COMPANY

4.92 -0.13 -2.57%

NYSE

Quote | Chart | News | Profile

[F 4.92 -0.13 (-2.57%) ]

Honda Motor

HONDA MTR CO LTD

HMC

33.72 -0.23 -0.68%

NYSE

Quote | Chart | News | Profile

[HMC 33.72 -0.23 (-0.68%) ]

Nissan Motor

NISSAN MTRS

NSANY

15.62 0.29 +1.89%

NASDAQ

Quote | Chart | News | Profile

[NSANY 15.62 0.29 (+1.89%) ]

__________________________________________

Honda: Record Profit?!

2008-07-25T17:48:00.000-07:00

New markets spur Honda to record quarter: Honda reports record fiscal 1Q profit as demand in new markets offsets currency damage

TOKYO (AP) -- Honda Motor Co. reported record profit for a fiscal first quarter Friday as sales growth in new markets offset the damage from a stronger yen and soaring material costs.

The results came a day after U.S. automaker Ford Motor Co. reported its worst quarterly loss ever.

Honda, Japan's No. 2 automaker, earned a better-than-expected 179.6 billion yen ($1.68 billion) in the April-June quarter, up 8.1 percent from the same period the previous year. Analysts surveyed by Thomson Financial had forecast 131.3 billion yen ($1.2 billion) in quarterly profit.

Sales for the quarter dipped 2.2 percent from a year ago to 2.867 trillion yen ($26.79 billion), largely because the rising yen eroded the value of overseas earnings. If the yen's value had held at levels of a year ago, sales would have jumped about 7 percent, Honda said.

Riding on its reputation for making cars with good mileage, the Tokyo-based manufacturer of the Civic and Accord compacts has racked up solid results despite worries among the world's automakers about a U.S. slowdown and rising steel prices.

Honda sold more vehicles worldwide than in any other fiscal first quarter at 962,000 vehicles, up 1.7 percent on year.

Cost-cutting, the decrease of auto discounts in North America and a lift from equity-related income from Chinese affiliates added to a strong performance, according to Honda.

Demand for Honda products is booming in Asia, Brazil and other new markets, making up for declines in vehicle sales in the U.S., Europe and Japan, it said.

Honda was the only automaker to record better U.S. sales in June compared with a year ago, while others saw sales plummet in the worst June for the industry in 17 years.

Still, Honda lowered its vehicle sales forecast for the fiscal year through March 2009 to 4.08 million vehicles, less optimistic than its earlier prediction for 4.14 million vehicles. The lowered forecast marks a 3.9 percent jump from the previous year.

The forecast downgrade is largely because of faltering auto sales in North America, where Honda, like other automakers, is adjusting production away from trucks to smaller fuel-efficient models that are more attractive to buyers as gas prices go up.

Honda maintained its outlook for profit for the current fiscal year at 490 billion yen ($4.58 billion), down 18.3 percent from earnings for the year ended March 31, 2008. It expects fiscal year sales to climb 1.1 percent to 12.13 trillion yen ($113.36 billion).

Other Japanese automakers are also expected to be hurt by the rising yen and a U.S. slowdown.

Toyota Motor Corp., which beat General Motors Corp. in global vehicles sales for the first half, reports results next week. Nissan Motor Co., the nation's No. 3 automaker, also announces earnings next week.

Japanese carmakers have avoided the deep losses of U.S. car companies, which are struggling to shift to smaller models.

On Thursday, Ford Motor Co. said it lost $8.67 billion in the second quarter and will retool two more North American truck and sport utility vehicle plants to build small, fuel-efficient vehicles.

GM, which lost $3.3 billion in the first quarter, is closing four North American assembly plants, cutting thousands of jobs, selling assets and suspending its dividend in an effort to raise cash.

Honda shares dipped 2.1 percent to 3,760 yen ($35). Honda released earnings data shortly after trading ended.

By Yuri Kageyama

GM, Ford, Chrysler: Two More Misery Years

2008-07-24T14:56:00.000-07:00

For GM, Ford, and Chrysler, at Least Two More Years of Misery

For a while, it was a long, slow decline. Now, the plight of General Motors, Ford, and Chrysler appears to be a rout.

The shift away from trucks and SUVs—and from vehicles built by the Detroit 3 in general—became dramatic earlier this year. And this summer, it's only intensifying. For the first six months of the year, the domestic automakers have seen staggering sales declines of nearly 20 percent, compared with 2007. Their combined share of the U.S. market has fallen below 50 percent for the first time ever. And if gas prices stay near $4 per gallon, it's likely to keep falling. "We see meaningful revenue declines in 2008 and 2009," says Mark Oline of Fitch Ratings. "Market share losses will accelerate through year-end."

The Detroit 3 share many of the same problems, which by now are quite familiar. For years they've been overdependent on big pickup trucks and SUVs, which were highly profitable when gas was $2 per gallon but are unwanted now. The factories of the domestics tend to be older than those of competitors like Honda and Toyota, which makes it harder and much more costly to shift from big vehicles to smaller ones on a given assembly line. A unionized workforce with generous benefits represents another cost disadvantage, compared with the Asians and Europeans.

Each of the Detroit 3 has a "transformation" plan in place to fix its problems, which are largely confined to the key North American market. They've cut billions in costs and negotiated deals with labor unions that make it easier to close underperforming plants and downsize their workforces. By 2010, those deals will also help pare soaring healthcare cases. And each company has plans to revamp its product lineup for more thrifty times.

But it takes years for an automaker to retool its industrial footprint and develop new products good enough to compete with Honda and Toyota. And Detroit is simply running out of time, as the market for cars changes much faster than the automakers envisioned. For each of the Detroit 3, it now looks as if conditions won't improve until 2010, at the earliest. A brief dossier on each:

Chrysler. The smallest domestic automaker seems to be in the most precarious shape, with sales of Chrysler, Dodge, and Jeep brand vehicles down about 30 percent so far this year. That's the worst showing of any major automaker. Chrysler, famous of late for the hulking 300 sedan and the Hemi V-8 engine, desperately needs more small vehicles to round out its lineup. Within a couple of years, Chrysler plans to import some vehicles built by Chinese automaker Chery, which could provide a toehold at the lowest end of the market—if the quality is good enough. But profit margins on Chinese imports are likely to be small, and Chrysler also needs more mainstream family vehicles that can compete with best-in-class cars like the Honda Civic, Toyota Camry, and Nissan Murano.

Since Chrysler was bought by a private equity group last year, it doesn't have to report on its finances the way public companies do. But its corporate bonds are rated as junk, and the company may already be seeking additional cash from its private equity parent. Of the Detroit 3, Chrysler seems like the best candidate to form a global alliance with another automaker, such as Nissan, which would expand the range of vehicles that could be sold under the Chrysler name (and vice versa). In fact, Chrysler has already licensed the diminutive Nissan Versa for sale as a Dodge or Chrysler vehicle sometime next year. But Chrysler just went through a divorce with Daimler-Benz, and it's not clear another automaker would want to take on Chrysler's liabilities in a more formal pact.

General Motors. With sales off about 17 percent so far this year—and steeper drops possible—GM has tried to reassure investors by saying it has enough cash to ride out a 2008 downturn. But it stopped there, making no projections for 2009—indirectly raising the possibility of a Chapter 11 bankruptcy filing if market conditions get much worse. "If 2009 stays flat," says Oline, "late 2009 is where there's a liquidity concern." The worries have battered GM's share price, which has hit the lowest level since the 1950s. And GM's market capitalization—the total dollar market value of all its shares—has fallen to about $6.5 billion, a mere 4 percent of Toyota's $147 billion market cap.

GM's turnaround plan has included popular new cars like the Chevy Malibu and Cadillac CTS, but plunging truck and SUV sales have swamped modest gains elsewhere. Many analysts think GM's eight U.S. brands are far too many; GM has said it may sell the nose-diving Hummer division, but that still leaves Saab, Pontiac, Buick, and Saturn with mediocre performance and uncertain prospects. GM is also placing a big bet on the battery-powered Chevy Volt, due late in 2010, hoping the car brings some breakthrough technology that helps GM recapture market muscle. But even if it succeeds, the Volt will be a niche product at first, almost certain to cost more in R&D than it brings in in its early years.

To survive until then, GM might have to slash truck and SUV production even more than the planned shuttering of four plants. It also needs to charge higher prices for the cars it does sell—no easy task in a weak economy. And recent come-ons like zero-percent financing sales won't help much. Credit Suisse analyst Chris Ceraso predicts they'll only cut into future sales, generating "some pretty severe payback over the coming month or two."

Ford. Ford recently said it won't return to profitability in 2009 as it had previously promised, for a number of reasons. One of the biggest is a startling shift away from pickup trucks, which appears to be permanent. Ford took the unusual step of delaying the launch of its next version of the F-150 pickup—a core product for Ford—because of a glut of old models. And longtime hits like the Explorer and Expedition SUVs are stumbling badly, too.

But the second-largest domestic automaker is in slightly better shape than its crosstown rivals. Ford has enough cash to ride out a bear market through 2009, and new vehicles like the Focus economy car, the Fusion sedan, the Edge crossover, and the mid-size Escape SUV hit the sweet spots in a reluctant market. A new small car from Europe, the Fiesta, will arrive soon, challenging the Asians' dominance of that segment. Ford still has several hurdles to leap—such as phasing out its moribund Mercury brand. And by the time it rebounds, Ford may have lost the No. 3 position in the U.S. market to Honda. But falling to No. 4 might be a pretty good outcome, considering the alternatives.

Ford Sends EuroSedans to Save America

2008-07-24T07:18:00.000-07:00

After posting $8.7 billion loss, Ford plans to bring European-made vehicles to North America.Ford Motor Co. announced plans to transform its vehicle lineup and reported a massive second-quarter loss Thursday.

Ford stock fell about 7% at the start of trading.

"Because of deteriorating economic conditions, demand has declined dramatically, especially in North America," said Ford CEO Alan Mulally.

Mulally said the company is working toward reducing its salaried workforce by 15%. The company aims to save $5 billion annually, and has managed to reduce costs by $1 billion so far.

He also said the company is now shifting its focus to meet the demand for smaller, more fuel-efficient vehicles.

The company said it will make big changes to the vehicles it sells domestically - bringing six small cars made in Europe to the North American market.

Ford said that three large truck and sport utility vehicle plants in Wayne, Mich., Louisville, Ky., and Cuautitlan, Mexico would be switched over for the manufacture of small cars. Re-tooling will begin in December, the company said.

In addition to converting the three plants in North America, Ford said it will ramp up production of small utility vehicles at its Kansas City, Mo., assembly plant, including the Ford Escape, Escape Hybrid, Mercury Mariner and Mariner Hybrid.

Mulally said that, in the second quarter, Ford rolled out two new vehicles - the Ford Flex, a "crossover" car-based SUV, and the Lincoln MKS luxury sedan. Mulally said these are the first vehicles with "eco boost" technology, providing better fuel economy.

As production winds down, Ford has been slashing production of SUVs and large trucks to meet the reduced demand. But some truck and SUV lines will continue, at least for now.

Ford said it will continue to produce the Ford Ranger through 2011 at its Twin Cities, Minn. plant, which was scheduled to close in 2009. The company also said it would shift production of the Ford Expedition and Lincoln Navigator to its Louisville plant from Wayne, Mich.

Tough quarter Ford said it lost $8.7 billion, or $3.88 per share, in the second quarter, including pre-tax special charges primarily due to the write-down of assets. A year earlier, the automaker announced a profit of $750 million, or 31 cents per share.

Without charges, Ford reported a loss of $1.4 billion, or 62 cents per share, in the latest quarter.

Revenue, excluding special items, fell to $38.6 billion from $44.2 billion a year earlier.

Ford said the special items included $8 billion in write-offs stemming from the loss in value to Ford North American and its Ford Credit lease portfolio. For this, Ford blamed "deteriorating economic conditions."

Ford managed to beat analyst expectations on revenue, but missed on earnings. Analysts expected Ford to report a 14% drop in revenue to $34.6 billion, and a loss of 27 cents per share, without charges, according to consensus compiled by Thomson/First Call.

Hard-hit Ford, like its American rival GM (GM, Fortune 500), has been hard-hit by economic weakness. In particular, rising gas prices have severely hampered consumer interest in big trucks and SUVs. In 2007, Ford lost its place as the No. 2 automaker in the U.S. to the Japanese automaker Toyota (TM).

Ford has been offering buyouts to its 54,000-strong workforce. On Monday, Ford said that a new round of buyout and early retirement offers had been made to workers at 17 facilities.

On Wednesday, the rival U.S. automaker Chrysler also announced that it was cutting 1,000 salaried jobs.

Ford's stock has fallen 10% so far this year. But it still managed to outperform the S&P, which has dropped 12%.

Toyota beats GM in worldwide sales

2008-07-23T07:20:00.001-07:00

Toyota beats General Motors in worldwide sales in first half of 2008 as US sales slump Toyota beat General Motors in worldwide sales in the first half of the year.

Toyota Motor Corp. said Wednesday it sold 4.8 million vehicles between January and June, up 2 percent from the same period a year ago. General Motors Corp. says it sold 4.5 million vehicles in the same period, or about 300,000 less than Toyota.

GM says its total sales fell 3 percent in the first half of the year due to economic pressures and labor disruptions in the U.S. market. But the automaker says it posted record-breaking sales in other regions, including Latin America, Asia and Europe.

GM narrowly beat Toyota in total sales last year to retain the title of the world's largest automaker by sales.

GM and Ford Bankrupt Within 5 Years

2008-07-22T21:08:00.001-07:00

General Motors Corp. and Ford Motor Co., the two biggest U.S. automakers, have about a 46 percent chance of default within five years, according to Edward Altman, a finance professor at New York University's Stern School of Business.

"Both are in very serious shape and the markets reflect that,'' Altman, the creator of the Z-score mathematical formula that measures bankruptcy risk, said in an interview with Bloomberg Television. "The model shows that these companies are on the verge of bankruptcy,'' he said.

The Z-scores for GM and Ford give both a bond rating equivalent to a CCC ranking, though GM is in slightly worse condition than Ford, Altman said. GM reported a $38.7 billion loss in 2007, the biggest in its 100-year history, and hasn't posted a profit since 2004. The scores are based on the companies' finances at the end of the first quarter.

Moody's Investors Service said July 15 it may cut GM's Caa1 senior unsecured debt rating because the Detroit-based automaker's plan to raise at least $15 billion by suspending its dividend, cutting management payroll by 20 percent and selling assets may not be enough to offset losses. Standard & Poor's also said in June it may lower GM's B rating. Altman said the plan to raise $15 billion may improve GM's outlook.

Ford, based in Dearborn, Michigan, is rated Caa1 by Moody's and B by S&P, which said in June that Ford's rating may also be cut.

Ability to Refinance

"The thing that triggers a default in almost all cases is running out of cash and not being able to refinance,'' Altman said in an interview prior to his television appearance. "You're not going to go bankrupt as long as you can refinance short-term liabilities. You will go bankrupt if you can't.''

In 2005, Altman said GM had a 47 percent chance of default within five years.

GM Chief Executive Officer Rick Wagoner said in an interview July 15 that the company has the ability to raise cash, and he called bankruptcy "a bad idea.'' Ford has said it had access to $40.6 billion in funds as of March 31, including credit lines.

GM's $3 billion of 8.375 percent bonds due in 2033 rose 0.5 cent today to 58.5 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 14.6 percent, or 994 basis points more than similar-maturity Treasuries. A basis point is 0.01 percentage point.

"I would not put money with GM right now because the downside is so great relative to the upside, relative to the yield,'' said Altman, speaking in New York. "Your downside is probably 60 percent on the debt. The risk reward ratio is pretty poor.''

By Greg Miles and Caroline Salas

Automotive SEO for the Forward thinking OEM

2008-07-20T17:59:00.000-07:00

Due to the shift in methods used by shoppers to research and select an automobile, search engine placement needs to be a much larger concern to the OEM's that intend to remain relevant in today's marketplace. From reputation management to grassroots/viral marketing, web strategies should be organized, and supported, at the factory level.

Read the whole article on OEM Automotive SEO here...