More Sad News for GM Fans; General Motors pulls away from Opel

Now that official word has come down that General Motors is abandoning its Saab and Saturn brands, the company announced today that it will also spin off a quarter to half of its stake in its European brand Opel (and it’s British twin, Vauxhall). Opel is a prominent car brand in Europe, and one of the largest carmakers in Germany.

Ironically, until the current financial crisis hit, Opel was one of GM’s more successful operations and it helped support the money-losing North American factories. As recently as a year ago, the automotive giant was pinning its hopes on better integrating its worldwide operations, and selling Opel-designed products in the United States, such as the Saturn Astra. Now that plan may be off the table.

In the meantime, Saturn has asked its dealers for two more months to develop a plan to restructure and look for investors and suppliers as an independent company, once GM quits providing cars for it in 2012. In the end, there’s no reason an independent Opel couldn’t be the manufacturer to build cars for Saturn. We’re just saying…

Source;
http://blogs.consumerreports.org/cars/2009/02/gm-pulls-away-from-opel.html

GM disbands high-performance division

Detroit, Michigan - General Motors has disbanded its High Performance Vehicle Operations unit, according to Automotive News, and said that all high-performance projects are on “indefinite hold.”

The unit is based in the company’s technical centre in Detroit. The engineers have been sent to other divisions.

The unit created low-volume performance versions of GM vehicles, including the Cadillac V cars, Chevrolet Cobalt SS, HHR SS and a V8-powered Chevrolet Colorado.

The company said that if General Motors regains its financial health, the unit could be reinstated.

Source;
http://www.canadiandriver.com/2009/02/18/gm-disbands-high-performance-division.htm

Saturn targeted for extinction in GM's plan for survival

Sad times for Saturn dealers, my heart goes out to the families of those working there.
Jim Mateja
February 19, 2009

Roger Smith's dream is officially a nightmare.

The General Motors chairman came up with an idea in the mid-'80s to create a division called Saturn to compete directly with Japanese imports by selling small, low-priced, high-mileage cars.
The first Saturn, the SL, bowed with a 1991 model.

Smith spent $3 billion to develop Saturn. And it did create a halo with no-haggle sales and the flower left on the driver's seat after the car was serviced. It did well early on as evidenced by a 17-day supply of cars at some dealerships in an industry where 60 days is considered normal. It beat expectations by posting a profit by 1993.

But Saturn never realized its potential.

There are those who would attribute that to a lack of love—too few models updated too infrequently.

Saturn also may have suffered from the fact that Smith served as GM chairman when the automaker's market share fell to 30 percent from 40 percent, opening the door wider to Toyota and Honda with their small cars first and leading to their successful luxury divisions.

Smith retired in mid-1990 before the first Saturn came out. No small wonder that GM now plans to sell or fold the division by 2011, ironically after it finally has a strong product mix.

Thank Bob Lutz, who joined GM in 2001, for Saturn's lineup: a high-mileage compact Astra, a nifty Sky roadster, the Outlook crossover with the crucial three rows of seats, the Vue sport-utility vehicle in gas or hybrid flavors, and the Aura sedan, which beat out the Toyota Camry for 2006 North American Car of the Year.

When Lutz announced plans this month to retire at year-end, he said he wanted the division to live long and prosper. But he told Automotive News, a trade publication, that he held out little hope.

"We spent a huge bundle of money in giving Saturn an absolutely no-excuses product lineup top to bottom, [but] the sales just never materialized," he said of a division whose sales slipped nearly 22 percent last year, to about 188,000 units.

Even Lutz professes to be stumped by why Saturn hasn't done well, but he says it's obvious why it no longer has a future with GM.

"We don't have the time or the resources to take 10 years to figure it out and turn it around," he said.

The ailing automaker, which has received $13.4 billion in government loans and is seeking $16.6 billion more, plans to phase out Saturn unless a deal is reached to spin off its distribution network.

With a franchise agreement that sets dealers up as an independent distribution network, it will be easier and cheaper to drop Saturn than the $1 billion it cost GM to kill Oldsmobile in 2004.

There's still talk that the franchise agreement would make the distribution network attractive to a buyer.

"With the rest of the world in a precarious economic state, unless someone from China takes a look, no one is going to be standing in line," said Joe Phillippi, principal of AutoTrends. Jim Hossack, vice president of AutoPacific, is even more realistic.

"Saturn gets its engines, transmission and body stampings from GM, and is so intertwined with GM it couldn't be sold because no one would buy it. Either it gets spun off or it dies of old age like Plymouth did at Chrysler.

"Old age at 18? Well, yes, especially when your only cheerleader is retiring."

Source;
http://www.chicagotribune.com/business/autocorner/chi-thu-saturn-mateja-0219-feb19,0,4757890,print.column

Ward's: Smaller Players at Risk, Too

By Jerry FlintWardsAuto.com,
Feb 9, 2009 9:20 AM

We all know General Motors and Chrysler are at risk of going bankrupt in the U.S. But are they the only auto makers on the edge?

Toyota, Honda (phew) and Nissan may be losing money here, but they certainly will survive. Likewise, BMW Mercedes and Porsche are in no danger. But what about Mitsubishi, Suzuki, Subaru, Saab, Volvo and even Volkswagen?

Frankly, some of these companies may fold their tents in North America. They’ve been struggling for years in the U.S. and this is not likely to change soon.

I don’t dislike any of these auto makers, but look at their circumstances: Mitsubishi has a UAW-represented factory in Illinois capable of building more than 200,000 vehicles annually. This year production fell to 58,000 units from 79,000 last year. Sales in 2008 totaled just 97,000 vehicles, compared with 260,000 a decade ago.

Suzuki is a significant global player, the No.1 car maker in India. It sells cross/utility vehicles and pickups in the U.S, but it is best known here for small cars and motorcycles. Suzuki has an assembly plant in Canada, a joint venture with GM. But the plant turned out fewer than 13,000 Suzuki cars last year, against prior year’s 32,000.

Suzuki sales were 85,000 last year in the U.S. against 102,000 in 2007. Again, I like Suzuki, but its marketing budget can’t compete with the big boys.

Subaru cars generally are very good. The auto maker pioneered all-wheel-drive cars in the U.S., and you could say it invented the CUV with its Outback model. Yet, Subaru built just 92,000 vehicles in 2008 in its Indiana (again UAW) plant, against 109,000 in 2007.

Now Toyota has a piece of Subaru and is producing cars in the plant, too, which pushed total production to 183,000 units, more than the 147,000 produced in 2007. Subaru’s 2008 sales of 188,000 in the U.S. actually were up a notch from 2007, and up in January, too, while almost every other auto maker saw sales fall off a cliff.

Still, Subaru never has been able to become a volume player. If Toyota were not using the production capacity, the Indiana plant would be a huge financial drain.

Mitsubishi, Suzuki and Subaru all suffer from the same problem: They don’t have enough money and marketing muscle to compete with the likes of Toyota, Honda and Nissan.

Then there is Volkswagen. Talk about dreaming big. VW is building a new plant in Tennessee, and its executives are talking about tripling U.S. sales in 10 years to 1 million (including 200,000 Audis). I’ll give VW credit; last year was not a bad year, with sales down only 4% in 2008, while the market as a whole dropped a horrific 18%. And everybody seems to like the new Jetta diesel.
But VW has lost billions in the U.S. in recent years and may have lost money last year, too. Tripling sales to a million? In the dismal economic environment of the next few years, this sounds like a fantasy.

Here’s the problem. Most car buyers think of Volkswagen as a low-priced car. But VW can’t keep prices low when it imports cars and components from Europe, not with the strong euro. And it has trouble selling higher-priced models with the VW logo on the hood.

A new Tennessee plant will give VW great growth potential, but the dealership network is weak after decades of poor sales, and executives in Germany don’t seem to understand the U.S. market.

Meanwhile, GM’s Saab and Ford’s Volvo continue to struggle. Both build fine cars but are terribly squeezed for marketing money.

The point is there are other auto makers in bad shape in the U.S. besides Detroit nameplates. If all the companies mentioned here quit the U.S., we’re talking 800,000 cars and trucks. Imagine how the U.S. market would change if that volume were split up among the survivors,

Source;
http://wardsauto.com/commentary/smaller_players_risk_090209/

Business Week; Can Honda Keep Defying Gravity?

Yes, that is a Honda Accord upside down, 'defying gravity', it's the best I could find....

So far Japan's No. 2 is weathering the slump in auto sales better than most other automakers, including rivals Toyota and Nissan

In the auto industry, sometimes it pays to avoid the recent fashion. In the late 1990s, when the mantra of auto consultants was that all but the biggest car companies must merge or die, Honda (HMC) remained fiercely independent and flourished. Alliances, including the ill-fated coming together of Daimler (DAI), Chrysler, and Mitsubishi Motors, in most cases didn't pay off.

More recently, Honda largely sidestepped the stampede to sell Americans bigger and heavier SUVs and pickups. That has held the Tokyo-based company in good stead, as sales of gas guzzlers have collapsed and helped Honda do better than most this year. While that's not saying a lot, Honda's U.S. auto sales through November are down 5.4% to 1.34 million vehicles. That's not good, but it's better than the U.S. Big Three, which have seen sales decline by more than 20%. It's also better than Toyota (TM) and Nissan (NSANY), whose sales have slipped 13.4% and 9.4%, respectively.

Combined with growth in China and other emerging markets, that partly explains why in October Honda assembled 370,000 autos around the world, more than any month in its history. It also explains why among Japan's Big Three automakers Honda appears to be the most optimistic for the months ahead. Indeed, while Toyota and Nissan cut their annual net profit projections by 68% and 52%, respectively, at the end of the last quarter, Honda said its full-year earnings will only be 1% shy of its original target of $5.2 billion. "Honda's earnings will not remain unscathed, but we think it is very resilient in the context of the sector," says Takaki Nakanishi, an auto analyst at JPMorgan Chase (JPM) in Tokyo.

Challenges Ahead
Still, as the global economic picture has worsened, there have been signs in recent weeks that even Honda's optimism may be waning. In Japan, Honda is cutting 760 temporary jobs at four plants, including a motorcycle plant, due to falling demand in the U.S. In Britain, the company will shutter production at its Swindon plant for 50 days in early 2009 and is offering workers an undisclosed number of early retirement packages.

Meanwhile, reports in Japan say Honda will scale back investment in emerging markets. According to the Nihon Keizai newspaper, Honda will delay a plan to raise capacity at a plant in Turkey; a new plant in India, slated for 2010, will be delayed until 2011 or later. And Honda sales in the important U.S. market are now plummeting almost as quickly as rivals. After slipping 25% year-on-year in October, Honda's U.S. sales fell 31.6% last month, compared with an industry average of 36.7%. "The fact is that the market changes are coming so fast we can barely catch up," Koichi Kondo, senior managing director at Honda, told BusinessWeek in an interview at the company's Tokyo headquarters on Nov. 28, before the November figures were released. "It's going to be quite challenging for us to meet profit targets."

One problem is that emerging markets that had been compensating for slumping demand in Japan, Europe, and the U.S. are now slowing. In China (BusinessWeek.com, 11/21/08), for example, Honda is still on target to meet its annual target of selling 490,000 vehicles this year, a rise of 17%. But that growth, says Kondo, hides a recent slowdown. "We'll hit our targets, which were set at the start of the year, but since October it's been harsh," he says.

Then there's the Detroit bailout. With customers nervous about the economy and unwilling to spend on new vehicles, U.S. auto sales, with some exceptions, are now falling across the board. It's not just big SUVs and pickups. Grim news of General Motors (GM), Ford (F), and Chrysler needing a government-backed rescue hardly inspires confidence among would-be car buyers. Even worse for all automakers would be the impact of any of the Detroit carmakers going bust (BusinessWeek.com, 11/19/08). Any bankruptcy proceedings, Kondo says, would hurt suppliers, many of which are shared by domestic and transplant automakers, and the entire industry would suffer. "We want them to avoid Chapter 11 as much as possible," he says.

Yen Trouble
An added complication for Japanese automakers is the surging yen. Year-to-date the yen has risen 15% against the dollar. Against the euro it is up 25% and even more vs. many emerging-market currencies, making it harder for Japanese exporters to turn a profit on exports and reducing the value of profits made outside Japan when translated back into yen.

In Honda's favor, its levels of local production are relatively high. In North America, 78% of the vehicles it sells are built in the region, the highest ratio among Japan's Big Three. Analysts add that for the current quarter Honda has hedged much of the currency risk, which reduces its exposure to the yen's recent surge, albeit temporarily. Ultimately, a 1 yen appreciation of the Japanese currency against the dollar costs Honda about $200 million—the last thing an automaker needs at a time when global demand is slowing. "If the yen had been strengthening while volumes had been flying, there wouldn't be any great problems. It's the fact that everything is coming together all at once," says Andrew Phillips, an analyst at KBC Securities in Tokyo.

Still, for all the gloom, most analysts still maintain that Honda can do better than peers in the months ahead. Clearly, its problems are not close to those of U.S. rivals, which are trying to stare down bankruptcy. And even as sales fall in its key markets, Honda's focus on smaller cars and reputation for fuel economy and reliability should continue to aid sales during a recession. It's also telling that Honda isn't currently offering 0% financing in the U.S. to woo customers, unlike Toyota and Nissan. And yet Honda's sales are still falling less quickly.

Along with higher levels of local production, analysts also point to the effectiveness of Honda's strategy of focusing on big-selling global models. In the U.S., for instance, Honda sells 15 models in all. That's not even half the lineup of Toyota, which has 29 different models; Nissan, meanwhile, with smaller sales, offers 21. What's more, just four "global models"—the Fit, Civic, Accord, and CR-V—account for 75% of Honda's total sales, with each selling more than 500,000 a year. That means that while Honda has less buying power than larger carmakers, it can still eke out scale efficiencies. "If we really want to have efficient production, it's better to have more of these global models," Kondo says. The worry for other automakers is that if Honda struggles, it likely will be even worse for them.

Source;
http://www.businessweek.com/globalbiz/content/dec2008/gb2008123_306718.htm