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Chrysler Early Clips Headlines (18)
-- Fiat and Chrysler: The Sergio Marchionne way (Fortune, Yahoo! Finance)
-- Marchionne Goes All In (Wards auto.com)
-- Carlos and Sergio: Same message, different deliveries (Automotive News Europe)
-- Dodge Charger targeted at police Market open with Ford discontinuing Crown Victoria (The Detroit News)
-- How Ed Whitacre Is Rebuilding General Motors (The Huffington Post)
-- Ford rides wave of goodwill to $2B profit (Detroit Free Press)
-- High debt is a hurdle for Ford, Official: Continued focus on gains will help firm pay down $34.3-billion load (Detroit Free Press)
-- Ford Makes $2.1 Billion, Its Fourth Consecutive Quarterly Profit (The New York Times)
-- Ford Revs Up Profit (The Wall Street Journal)
-- GM to invest in better m.p.g. V8 improvements to keep or create 1,600 jobs (Detroit Free Press, Associated Press)
-- Recalls spur Congress to act on auto safety (The Detroit News)
-- Car dealers lobby against oversight (The Detroit News)
-- Dealers press for car-loan exclusion from reform bill (Detroit Free Press)
-- GM, auto suppliers push tax credits bill, Companies say plan before House would boost investments (The Detroit News)
-- GM to invest in 5 plants, with $32M in Bay City, North American facility upgrades will create or retain hundreds of jobs (The Detroit News)
-- Japan Aluminum Shipments Jump as Auto Demand Triples (Update1) (Bloomberg)
-- Like a crock: GM's misleading ad (Union Leader)
-- Ford, GM Promote Loans in China as 90% of Drivers Pay in Cash (Bloomberg)
*Refer to © Notice Below
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Fortune, Yahoo! Finance ( 04/28/2010 )
by ALEX taylor III
Fiat and Chrysler: The Sergio Marchionne way
How many CEOs do you know who make public their five-year projections, complete with dates and numbers?
How many CEOs in the auto industry do you know who would roll out their five-year product plans by brand and by segment?
And finally, how many CEOs do you know who would preface their projections for the next five years by pointing out where they went wrong during the past five years?
But then, Fiat-Chrysler CEO Sergio Marchionne is, as should be clear by now, not your typical CEO. Marchionne has a determinedly realistic view of the world. In his job, he has no time for preconceptions, industry shibboleths, or rosy scenarios.
In his Investor Day presentation in Turin on Wednesday, Marchionne presented his view of the automotive world.
He sees a pronounced upturn in passenger car sales in Europe -- from the depressed levels of 12.4 million (estimated) in 2010 to a more manageable 16 million in 2014.
Marchionne wants to capture the higher-margin segments of that growing market. So he is beefing up the Fiat Group's presence in compact and large cars and in compact multi-purpose vehicles.
Part of that growth will come from beefing up the Lancia brand by essentially merging it with the Chrysler brand. Lancia, sometimes described as the Italian version of Buick, has been a laggard, and Marchionne hopes to revive it by introducing eight new models in the next five years -- six of them based on Chrysler products.
Marchionne also has big plans for Alfa Romeo -- Italy's Pontiac. He expects Alfa to launch seven new models, with all seven coming to the U.S.
Alfas are expected to be on sale in North America in 2012, and the company expects to be selling 85,000 vehicles here by 2014.
To ensure that these forecasts are accompanied by an appropriate skepticism, Marchionne reviewed the Fiat Group's performance for the past five years in a presentation titled "From Lingotto to LIngotto." (Translation: "Where the rubber meets the road.")
His candor was refreshing. Marchionne had expected both Lancia and Alfa to be selling 300,000 cars a year by now, but neither came close to hitting its target. Instead, Lancia recorded 112,000 sales in 2009, and Alfa just 101,000.
Nor did Fiat expand as quickly in China, India, and Russia as Marchionne would have liked.
Most importantly, Marchionne found that the model for Fiat's European business was "totally inadequate." That's notably because its product line is heavily skewed to mini and small cars, and because its six factories in Italy are running well below capacity.
But Marchionne has plans to close one of the plants and boost production at the five remaining factories to as much as 101% of capacity.
As for the Fiat business model, Marchionne believes he has fixed that by first getting control of Chrysler, and second, beginning the split-off of Fiat Auto from the industrial operations of the Fiat Group.
Marchionne sees Fiat and Chrysler producing six million cars a year by 2014, which he says is the minimum required to be a "competitive global player."
Depending on your point of view, Marchionne may still be setting lofty targets or indulging in wishful thinking. He expects the Fiat-Chrysler link-up to produce Euros 500 million in "synergies" -- always a dangerous word -- by 2014.
And he sees Fiat Group's global auto sales alone nearly doubling from estimated 2010 levels by 2014, reaching 3.8 million units. That's coming in the face of a resurgent Volkswagen and a more aggressive Ford.
Success in the auto business comes from execution, not planning, and Marchionne still needs to prove that he can manage both Fiat and Chrysler as successfully as he managed Fiat alone.
But whether he succeeds or not, Marchionne has set a standard for other CEOs by clearly admitting where he has failed and setting clear targets for the future.
Fortune Magazine Time Inc. 90 (Copyright 2007)
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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Wards auto.com ( 04/28/2010 )
by David Zoia
Marchionne Goes All In
When Fiat offered to take a stake in Chrysler last year and assume management control, CEO Sergio Marchionne made one thing clear: Not a lira of Fiat money would go into Chrysler.
I wonder, had Marchionne known then what he knows now, would he have been so tight with the purse strings?
In unveiling Fiat’s 5-year plan last week at a marathon backgrounder in Turin, Marchionne reveals just how much the Italian auto maker’s future has become inextricably tied to its American counterpart over the last nine months.
No less than 10 vehicle programs for Fiat, Lancia and Alfa Romeo will emanate from Chrysler’s engineering department, and Chrysler’s distribution muscle is being counted on to resurrect the Alfa brand in North America.
As Marchionne put it: “Without Chrysler, Fiat would continue to be marginal player for the rest of its life.”
Now, it’s possible Marchionne knew all along exactly what he was getting in Chrysler and how big a role it would play in the new combined company.
But he appeared genuinely surprised at the level and pace of cooperation last week when he said the partnership – although borne out of failure – could be the realization of a dream he’s had since joining a struggling Fiat in 2004 to create a top-tier, high-volume global auto maker.
“This team that runs Chrysler understands the problems and is now on a corrective path to fix the issues,” he said. “The frank and rational discussion…that has gone on (is) an indication of the level of collaboration possible,” he added, noting even support coming from the UAW has been beyond expectations.
“There’s been not a single objection from the UAW about bringing (Chrysler) forward,” he said.
He also chastised analysts, saying those who continue to predict gloom and doom for the auto maker are missing how much has fundamentally changed at Chrysler since the Fiat takeover.
The fact Chrysler made money in the first quarter on an operating basis “is an indication of how low we’ve dropped operating costs,” he said.
So added all up, either the pace of Chrysler’s turnaround and the shotgun marriage with Fiat is going much better than even Marchionne could have imagined or the CEO is an awfully good poker player, willing to risk the chance at realizing his vision had the U.S. government balked at his no-cash bid to assume control of Chrysler.
Or, more likely, it’s a little of both.
Fiat’s boss has shown before he knows how to play the game, having separated $2 billion from GM as compensation for a messy divorce in 2005.
But this time it appears even Marchionne may be at least a little surprised at the size of the pot he’s been able to rake in.
The key will be how well he plays the next hand, now that he appears ready to go all in.
http://blog.wardsauto.com/dzoia/2010/04/27/marchionne-goes-all-in/
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Automotive News Europe ( 04/28/2010 )
by Douglas A. Bolduc
Carlos and Sergio: Same message, different deliveries
Two of Europe's most dynamic and quotable chief executives have had the auto industry's full attention this month as each detailed how his automaker will survive in years to come.
The bottom line from both executives was the same: Without scale-building alliances you have no future.
Renault-Nissan CEO Carlos Ghosn delivered his assessment with the diplomacy expected of a graduate from France's elite Ecole Polytechnique and Ecole des Mines de Paris. Fiat-Chrysler CEO Sergio Marchionne's message came across like a punch in the nose.
During his April 7 announcement of Renault-Nissan's plans to cooperate with Daimler on the development of small cars, commercial vehicles and future powertrains, Ghosn issued a gentle yet poignant warning.
"Today, if I was heading a medium (-sized) car manufacturer and I am seeing my competitors joining forces, sharing investments, gaining scale and doing it in an efficient manner, obviously I would be a little bit worried," he said.
Marchionne concluded more than five hours of presentations on his plans for the Fiat-Chrysler alliance with a scathing review of the companies that disregard his view that an automaker will need to make at least 6-million vehicles a year to have long-term success.
"We have had discussions like this with our European counterparts and competitors and nobody listens. The level of arrogance in this industry is beyond description. For somebody who has failed as consistently as we have to deliver a single euro of return to our shareholders we've got the gall to go to international auto shows and show off. There is nothing to be proud of. We're going to have to change the dynamics of this business."
Both CEOs remain very interested in establishing even more alliances.
Time will tell whether Marchionne's blunt, acerbic style will win him more partners than Ghosn's polished, measured approach.
So far, both techniques appear to be working.
Read more: http://www.autonews.com/article/20100427/BLOG08/100429880/1193#ixzz0mOI9rpuT
Copyright (C) 2007 Crain Communications, Inc. All rights reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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The Detroit News ( 04/28/2010 )
by ALISA PRIDDLE
Dodge Charger targeted at police Market open with Ford discontinuing Crown Victoria
Chrysler Group LLC will make a bigger play for the police fleet market with the all-new Dodge Charger coming later this year.
“We will go after that market hard,” Peter Grady, Chrysler’s head of network development and fleet said Tuesday in a speech before the NAFA Fleet Management Association at Cobo Center. The announcement ramps up the competition among Detroit automakers to sell vehicles to police departments nationwide.
Ford Motor Co. will discontinue its market-leading full-size Crown Victoria for police use in September 2011 and replace it with an Interceptor based on the new Ford Taurus. A second vehicle based on the Ford Explorer will follow.
General Motors Co. is introducing a new rear-drive Chevrolet Caprice police car for 2011.
Ford has had a stranglehold on the market, with the Crown Victoria Police Interceptor capturing more than 70 percent of police car sales in the nation each year. Ford took over as the segment leader when GM discontinued the Caprice in 1996.
The Charger accounts for 18 percent of sales to police departments, an increase from 14 percent in 2007 when Chrysler introduced the Charger police package, the automaker said.
The new police Charger will be based on the remade Charger Chrysler is launching in November. The Charger rollout will be followed by a new and more elegant Chrysler 300 boasting a plethora of covered storage bins and cup holders. The sedans are among 16 all-new or refreshed vehicles the automaker is introducing this year, Grady said.
Prototypes of the new Charger will be tested by the Michigan State Police Precision Driving Unit, which tests all manufacturers’ police cars and issues an annual report that serves as a buyers’ guide. It is usually published in November.
Chrysler works with a police advisory board whose recommendations, along with past test results, were taken into consideration in developing the new Charger so the car could be outfitted for police use, Chrysler spokesman Jiyan Cazid said.
Changing a car for police use can include enhancing engine performance and customizing rear seats to more easily accommodate criminal suspects, among other alterations.
The Police Vehicle Evaluation report for 2010 models, published in November, tested 2010 versions of the Charger, Ford Interceptor and Chevrolet Impala and Tahoe. The Charger proved bestin- class in available power with its 360-horsepower Hemi V-8 engine, as well as acceleration, top speed and overall vehicle dynam-ics, the report found.
Police departments have expressed concern about replacing the sturdy, body-on-frame Crown Vic with smaller, lighter vehicles of unibody construction such as the Charger and the coming Taurus- based Interceptor.
The Charger is rear-wheel drive, which many departments prefer because it provides more even weight distribution, better traction under acceleration and crisper handling on dry roads.
The future Interceptor will be front- or all-wheel drive.
Chrysler was a big player in the police car market in the 1960s with the Plymouth Grand Fury and several of its models have been used by law enforcement over the years.
Chrysler re-entered the market in 2004 with a Dodge Magnum wagon powered by a Hemi V-8 engine. The Magnum has since been discontinued.
(c) Copyright 2007, The Detroit News. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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The Huffington Post ( 04/28/2010 )
by Bill George
How Ed Whitacre Is Rebuilding General Motors
It's no secret I have been critical of General Motors management, right up to its bankruptcy filing a year ago. For decades, GM management focused on short-term profits, while it was steadily losing market share - from 53 percent of the U.S. market all the way down to 19 percent. Along the way it was unable to keep pace with international competitors or shifting customer demand and concessions in work rules, health care and pensions to its union that caused the firm to fail when the market collapsed in the fall of 2008.
All that changed rapidly when the Obama administration appointed Ed Whitacre as its chair in July 2009. Whitacre, the highly successful ex-CEO of ATT, took over as CEO as well last fall and immediately started transforming GM into a modern auto company that could compete in both the U.S. and world markets.
He went out on a limb and promised GM would return to profitability within two years and repay its debts to the United States government within seven years. At the time GM was still in the red, while Ford was thriving and Toyota was outpacing both in worldwide production and sales. Furthermore, American consumers were distrustful of General Motors quality and angry that their tax dollars had been used to keep the company on life support.
When Toyota encountered its quality problems earlier this year, Whitacre moved in high gear to capture the available market share. Now he has taken action to fulfill his promises. Not only has General Motors repaid its loan with interest from the United States government, it has continued to improve customer service. Currently, GM is projecting ambitious global growth in 2010 and 2011. In the coming months, the company plans to initiate a public sale of stock, allowing the automaker to regain its independence from the U.S. government.
How did this turnaround happen so rapidly? How did Whitacre restore a bankrupt giant, repay billions to the government, and make bold growth projections for the future?
Whitacre made the tough internal decisions. He shed unprofitable brands like Saturn, Hummer, Saab, and Pontiac, eliminated layers of management, abandoned the company's fossil-like committee structure, reduced excess global inventory, and closed 1,350 underperforming dealerships. Those were not popular decisions internally or with GM's bloated dealer structure. But they were necessary steps to shed its losses and transition away from the finance-driven "analysis paralysis" that dominated its management for four decades.
He became the face of the company with the public. With public speeches, press interviews, and even starring in company ads, Whitacre put himself on the line with the American public. Americans wanted a real leader at the helm of GM, and Whitacre was willing to be that person.
He regained trust in the company. By backing up his public promises - and offering himself up as the new face of GM, Whitacre lent personality and warmth to a brand that had become a concrete monolith of stagnation. At risk to his impressive professional career, Whitacre put his reputation on the line. He fought for new customers by making promises about GM's autos and trucks and their quality, even offering a "money back guarantee." If nothing else, Americans respect a confident, trustworthy leader who is trying to restore respect for a tattered institutional brand.
He's not done yet. Whitacre is not one who rests when a preliminary goal is met. In his recent television spot and speeches, it's clear that he and GM management are focused on improving GM's product lineup while fulfilling its promises to its customers.
At a time when so many leaders have failed, Americans are pleased to rally around a corporate comeback story built on trust and quality assurance. With Ed Whitacre still at the helm, it's a comeback story that could keep going for years to come.
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Detroit Free Press ( 04/28/2010 )
by TOM WALSH
Ford rides wave of goodwill to $2B profit
F ord’s boffo first-quarter profit of $2 billion, reversing an ugly same-size loss a year ago, is a testament to the vast goodwill Ford generated among Americans by staying off the government dole and avoiding bankruptcy.
And Ford’s top executives don’t want us to forget that, as the turmoil of 2008 and the General Motors and Chrysler bankruptcies of 2009 fade into the rearview mirror.
“People want to be associated with a going concern, somebody that cares about them, that’s going to be there for them,” Ford CEO Alan Mulally said Tuesday in a conference call with reporters and investment analysts.
Mulally never mentioned GM or Chrysler by name.
But he didn’t have to. We get it.
Certainly, the former GM shareholders who were wiped out in bankruptcy get the point when Mulally says, as he did Tuesday, that Ford “respected the shareholders, we respected the bondholders, we respected everybody that had invested in Ford, and now we’re creating a very strong business. I think that that resonates very well with our consumers.”
GM is airing TV ads that herald its recent repayment of loans to the U.S. and Canadian governments, but Ford will continue to drive home the fact that it never needed a lifeline of taxpayer cash in the first place.
If this seems like Ford is playing hardball, it is. The same way that GM, Ford and others, played hardball by pouncing on Toyota’s recent rash of recalls with incentive programs aimed directly at luring Toyota customers.
In Europe, meanwhile, a Ford official recently voiced opposition to loan guarantees for GM’s Opel unit. Ford executives in Dearborn insist they are not flip-flopping on earlier support for the U.S.
rescue of GM and Chrysler but merely trying to ensure a level playing field in Europe, where financing for a Ford emissions-reduction project was slow to gain approval.
Goodwill hunting
Still, by remaining independent, Ford has capitalized big-time on the goodwill of taxpayers, converting showroom traffic into sales so strong that its market share gain is the best since 1977. In a still-soft automobile market with sales running 14% ahead of last year’s anemic rate, Ford delivered a whopping 56% more cars and trucks in 2010’s first three months than it did a year ago.
Can Ford sustain this momentum?
Don’t bet against them.
Aside from all that goodwill, Lewis Booth, Ford’s chief financial officer, ticked off a list of other benefits Ford got from not going bankrupt: “Great relationships with all our stakeholders, an unchanged management team, unchanged business plan, an unchanged product-cycle plan.”
Warm fuzzy feelings about staying off the federal dole are nice, but they only get customers into the dealer showroom. It takes attractive, well-equipped vehicles to make them buy, and it will take sustained great performance to make them buy again and again.
(c) Copyright 2007, Detroit Free Press. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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Detroit Free Press ( 04/28/2010 )
by BRENT SNAVELY
High debt is a hurdle for Ford, Official: Continued focus on gains will help firm pay down $34.3-billion load
With Ford’s turnaround plan forging ahead faster than even its own company executives expected, the big millstone around the automaker’s neck is its relatively high debt.
In April, Ford paid $3 billion of its debt ahead of schedule, but it still finished the quarter with $34.3 billion in debt — nearly twice the $17 billion in debt that General Motors had as it left bankruptcy last year.
It’s an expensive debt to carry: In 2009, Ford paid $1.5 billion in interest on it — and it also diverts Ford’s resources from other areas, such as product development.
Much of Ford’s debt is from a $23.5-billion loan the company took out in 2006. Ford President and CEO Alan Mulally often jokingly refers it as a “home-improvement loan.”
Ford Chief Financial Officer Lewis Booth, in an interview with the Free Press, said it was the 2006 loan that allowed Ford to survive the worst national recession in decades without federal assistance.
“It left us with more debt than our competitors,” Booth said. “But we got many other benefits out of not going bankrupt.”
That includes an unchanged management team and business plan and strong relationships with investors, employees, suppliers, dealers and consumers.
Booth said the best way for Ford to pay off its debt is to continue to sell more cars and gain market share while controlling inventory and incentives. Doing that, he said, will lead to profits that can be used to make the debt payments.
Right now, the formula is working. On Tuesday, Ford reported net income of $2.1 billion, or 50 cents per share, for the January to March period, eclipsing its loss of $1.4 billion, or 60 cents per share, for the same period last year.
Ford’s improving results come four years after Ford launched its Way Forward turnaround plan and hired Mulally from Boeing Co., and after many painful cost cuts.
Between 2005 and 2008, Ford lost more than $30 billion before it posted a surprise profit of $2.7 billion for 2009, most of which was from the benefit of special charges.
But now, U.S. consumers are embracing the Fusion and Taurus cars, while Europeans and Asians are snapping up the Fiesta subcompact.
Before Ford reported its earnings Tuesday, some analysts were worried that the Dearborn automaker’s profits would be hurt by an escalating incentive war unleashed by Toyota, which is offering no-interest loans to combat its recall problems.
But Ford used targeted incentives on some models and ultimately reported a net pricing increase of $1 billion for the first quarter. “We are expecting net pricing to improve throughout the year,” Booth said.
Ford’s increasing success might prove to be a challenge as the automaker prepares to negotiate a new labor contract with the UAW in 2011.
Ford was the first automaker to strike a deal with the UAW last year to revise its labor contract, but GM and Chrysler, as part of their bankruptcy restructuring, later extracted additional concessions that included a no-strike clause, a wage freeze for entry-level workers and a consolidation of skilled-trades classifications.
UAW workers rejected a similar proposal at Ford, given its improving position.
“Everybody is pretty much in a good mood after all the hard times,” said Mike Hall, 49, of Monroe, who works at Ford’s Dearborn Engine plant. “But a lot of people want the benefits back that we gave up.”
Mulally, in an interview Tuesday with WDIV-TV (Channel 4), said the labor contract differences between Ford and its crosstown rivals are minor and that Ford’s labor deal is competitive.
While Mulally said Ford is now confident that it will report solid profits for 2010, he also remains cautious, and Ford warned investors not to expect its quarterly profits to match its first-quarter performance throughout the year.
“The business environment remains challenging,” Mulally said. “But we are committed to remain absolutely focused on our business plan.”
(c) Copyright 2007, Detroit Free Press. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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The New York Times ( 04/28/2010 )
by NICK BUNKLEY
Ford Makes $2.1 Billion, Its Fourth Consecutive Quarterly Profit
DEARBORN, Mich. — The Ford Motor Company had its best quarterly performance in six years, earning $2.1 billion, and now expects to return to profitability this year, executives said on Tuesday.
The first-quarter profit was the company’s fourth consecutive quarterly profit and reflects how much Ford has managed to increase sales with new products. It also shows how deeply the company has shrunk operations by closing plants and eliminating tens of thousands of jobs.
The last time Ford earned a quarterly operating profit of $2 billion, in 2004, automakers sold nearly 17 million vehicles in the United States. This year, Ford expects sales for the entire industry to be fewer than 12 million. Still, the company said on Tuesday that it planned to build 625,000 vehicles in the United States and Canada in the second quarter, 9 percent more than the first quarter and 39 percent more than the year-ago period.
Ford’s momentum is building as Toyota suffers blows to its reputation for quality, and as Ford’s domestic rivals, General Motors and Chrysler, seek to overcome the damage done by their bankruptcy filings last year. Industry analysts, however, said the roots of Ford’s improved position run deeper than the current woes of its competitors.
“This is not from the work that they’ve done over the last three to six months,” said Erich Merkle, an analyst and president of the consulting firm Autoconomy.com in Grand Rapids, Mich. “This is the turnaround they’ve had in place for several years now. They’re in a position where they invested during the downturn in product, and now as we come out of the recession they’ve got the hot product in hand.”
Based on its first-quarter results, Ford said it expects “solid profits” and positive cash flow from its automotive operations for all of 2010, a year sooner than it had forecast. The net profit was equal to 50 cents a share, compared with a loss of $1.4 billion, or 60 cents a share, one year ago.
“The basic engine that drives our business results — products, market share, revenue and cost structure — is performing stronger each quarter, even as the economy and vehicle demand remain relatively soft,” the company’s chief executive, Alan R. Mulally, said in a conference call. “While we are pleased with our progress we do not underestimate the challenges ahead. Even as we see positive signs in the global economy, the recovery is fragile.”
Revenue increased to $28.1 billion, up from $24.4 billion in the first quarter of 2009, during the heart of the recession.
Volvo, the Swedish brand that Ford has agreed to sell to Zhejiang Geely of China, generated a $49 million profit on $3.5 billion of revenue, but those figures were not included in the company’s results, Ford said. The year-ago figures do include Volvo.
Ford, the only one of the three Detroit automakers to avoid entering bankruptcy protection last year, has earned profits totaling $6.2 billion in the last four quarters.
Ford also continued a trend of surpassing expectations on Wall Street, where analysts had projected a first-quarter operating profit of 31 cents a share. Ford’s actual operating profit, before taxes and $125 million in one-time charges, was 46 cents a share, or $2 billion.
The company earned $1.2 billion from its automotive operations, compared with a loss of $2 billion in the first quarter a year ago. Its financing arm earned $828 million, compared with a $36 million loss.
The automaker earned $1.2 billion in North America, compared with a $665 million loss a year ago.
“This is a more encouraging start to the year than we anticipated,” Ford’s chief financial officer, Lewis W. K. Booth, told reporters at Ford’s headquarters.
However, Mr. Booth said the company did not necessarily expect the next three quarters to be as strong as the first, particularly if an improving economy leads to higher interest rates later in the year.
“It would be unwise to think of $2 billion as a running rate for the year,” he said. (If subsequent quarters were similar, Ford would approach its 1999 profit of $7.2 billion, the most any of the Detroit automakers has earned in their history.)
Amid a general market downturn, Ford shares fell 6 percent on Tuesday, to $13.57, after reaching a five-year high on Monday. Analysts said investors also reacted in part to Ford’s guidance that it could face stronger headwinds in coming quarters.
Ford still has considerably more debt — $34.3 billion at the end of March — than cash, which stood at $25.3 billion. The company paid off $3 billion in debt this month, but Mr. Booth declined to discuss Ford’s plans to pay down more debt.
Analysts say Ford undoubtedly was helped by Toyota’s recallof more than nine million vehicles since November, though Toyota has been increasing pressure on Ford and others with big discounts on new cars. Ford has also improved its image as G.M. and Chrysler began borrowing billions of dollars from the federal government.
Ford’s share of the United States market rose to 16.6 percent in the first quarter, up 2.7 percentage points from a year ago.
General Motors plans to report its first-quarter earnings in May. G.M. executives have said they think a profit is possible this year, and the company paid off the last of its $6.7 billion loan from the federal government last week, though it remains owned in large part by American taxpayers.
Chrysler last week said it lost $197 million in the first quarter but that its operations were on pace to break even this year.
This article has been revised to reflect the following correction:
Correction: April 27, 2010
An earlier version of this article misstated the number of cars Ford plans to build in the United States and Canada in the second quarter.
(c) 2007 New York Times Company
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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The Wall Street Journal ( 04/28/2010 )
by Matthew Dolan and Jeff Bennett
Ford Revs Up Profit
Ford Motor Co., fueled by rising U.S. sales and market share, reported a better-than-expected $2.1 billion profit for the first quarter, the clearest sign yet that the once-struggling car industry is on the road to recovery.
It was the Dearborn, Mich., company's fourth profitable quarter in a row and marked a turnaround from a year-earlier loss of $1.4 billion. Per-share earnings came to 50 cents, compared with a loss of 60 cents, as revenue rose 15% to $28.1 billion.
Ford's strong report came after General Motors Co. last week repaid a healthy slice of its $60 billion U.S. government investment. GM is expected by some analysts to post a profit when it details its first-quarter results in a few weeks. Chrysler Group LLC turned in a surprising though modest operating profit in the first quarter. Just a year ago, all three Detroit makers were racking up massive losses and GM and Chrysler were ushered into bankruptcy by the U.S. government.
The Detroit Three's restructurings seem to have left them positioned to make money even with U.S. sales tracking at an annual pace of about 11.5 million vehicles, a low level by historical standards.
But sales have been rising and are expected to climb for at least the next few years.
"I think the automobile industry is at the beginning of a multiyear uptrend for sales, both in the U.S. and around the world," said Efraim Levy, an auto analyst with Standard & Poor's Equity Research.
Even as Ford boosted its 2010 forecast by saying it expected to be solidly profitable a year ahead of schedule, officials warned that higher costs for commodities including oil and steel, lower used-car resale values and softening European sales could challenge the company. Ford's debt also continues to exact a high price, including about $550 million in interest payments in the first quarter. Debt now stands at $31.3 billion after Ford paid down $3 billion in early April.
Ford Chief Financial Officer Lewis Booth has declined to detail how the company plans to reduce debt, and in an interview Tuesday said the company expects to take on additional debt of about $4.4 billion through 2014 from previously approved U.S. Department of Energy loans.
Ford boosted its second-quarter North America production by 30,000 vehicles, which will result in an output of 625,000 cars and pickup trucks, up 39% over the same period last year. Ford made money in each region of the world where it sells cars and trucks
"This was another solid quarter for us and further evidence that our plan is working," Ford Chief Executive Alan Mulally told analysts and reporters in a conference call. But Mr. Mulally cautioned that while global sales are projected to exceed last year's 65 million vehicles, lackluster consumer confidence and weak job markets put pressure on the industry's recovery.
Gimme Credit auto analyst Shelly Lombard said in a note to investors that Ford has been "smart enough to develop a strong product line-up and restructure its business so it can make money on lower volume. But it has also been lucky, thanks to low raw materials prices, trouble at General Motors and Toyota, and government incentive programs."
Ford reported a $2.1 billion profit and boosted production by 30,000 cars, as the company finished the year with $25.3 billion in cash. Neal Boudette discusses.
Mr. Booth said he expects some "bad news" on commodity costs, which are expected to rise beyond 2010. Residual values—the resale values of cars coming off leases—could also slip in the third quarter, dragging down Ford Motor Credit.
But among the surprises Tuesday was the credit arm's first-quarter profit of $541 million compared with a $13 million loss a year earlier. The wholly owned financing operation will pay Ford a $2 billion dividend in 2010 instead of the previously expected $1.5 billion, and its profit this year will be about even with the $2 billion reported last year, Mr. Booth said.
More
Heard: Ford's Road Ahead News Hub: Ford Revs Up Earnings Excluding one-time items, Ford earned 46 cents a share, exceeding the average analyst estimate of 31 cents based on a survey by Thomson Reuters.
In the North America division, the heart of Ford's operations, Ford saw a $1.2 billion profit compared with a loss of $665 million for the same period a year earlier. Revenue was $14.1 billion, up from $10 billion a year earlier.
Ford shares fell about 6% or 89 cents to $13.57 in New York Stock Exchange composite trading as some investors took profits.
(Copyright (c) 2007, Dow Jones & Company, Inc.)
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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Detroit Free Press, Associated Press ( 04/28/2010 )
by TOM KRISHER
GM to invest in better m.p.g. V8 improvements to keep or create 1,600 jobs
General Motors said it will invest about $890 million at five factories to make its V8 engines more fuel efficient, preserving or creating roughly 1,600 jobs.
The automaker announced the investments Tuesday at factories in Bay City; Tonawanda, N.Y.; St. Catherines, Ontario; Bedford, Ind., and Defiance, Ohio. The spending, which has been in the works for a long time, will help GM meet government fuel economy standards that become fully effective in 2016.
“These latest investments show our commitment to improving fuel economy for buyers of every GM car, truck and crossover,” said Mark Reuss, president of GM North America.
The investments will help the company boost the fuel efficiency of its pickup trucks, SUVs and high-performance cars, said GM spokesman Tom Wilkinson.
The new engines will have aluminum blocks, which are up to 100 pounds lighter than the current cast-iron ones on some GM V8s, and more efficient technology that injects fuel directly into the combustion chambers. The engines also will be able to run on E85 fuel. Factories in Tonawanda and St. Catherines are to make the next-generation V8 engines, while the other plants will make engine components. GM said it will invest $400 million in the Tonawanda plant, keeping 710 jobs, while it plans to put $235 million into the Ontario plant, securing about 400 jobs.
The Bay City parts factory will see a $32-million investment, keeping more than 80 jobs.
The Defiance foundry, which makes engine blocks, is to get $115 million to save up to 189 jobs, while 245 jobs at the Bedford parts plant are to be secured with a $111-million investment. GM spokeswoman Kim Carpenter said the company has not determined yet how many of the 1,600 jobs will be new.
Any new jobs likely would be filled by people from a pool of about 4,200 laid-off workers. Last week, GM said it would invest $257 million in its Kansas City, Kan. and Detroit plants to tool them for the next Chevrolet Malibu.
GM would not give details of the fuel economy improvements or the new engines announced Tuesday.
GM said in a statement that it has invested more than $2.3 billion at 22 U.S. and Canadian factories since it emerged from bankruptcy protection last July, restoring or creating more than 9,100 jobs.
Much of Tuesday’s announcement, though, has been planned for years and is part of the normal course of GM’s business. Auto companies routinely spend millions of dollars to update plants as new vehicles are rolled out.
Federal corporate fuel economy standards call for a 35.5 m.p.g. fleet average within six years, up nearly 10 m.p.g. from the current standards.
Each auto company will have a different fuel-efficiency target, based on its truck-car mix. Automakers that build more small cars will have a higher target than companies with a range of cars and trucks. GM’s passenger cars will have to hit 32.7 m.p.g. in 2012 and increase to 36.9 m.p.g. by 2016. Honda, meanwhile, will need to reach passenger car targets of 33.8 m.p.g. in 2012 and 38.3 m.p.g. in 2016.
(c) Copyright 2007, Detroit Free Press. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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The Detroit News ( 04/28/2010 )
by David Shepardson
Recalls spur Congress to act on auto safety
Two key members of Congress are drafting major reforms of auto safety laws in the wake of Toyota Motor Corp.’s massive recalls that could include a fee on new car sales to fund more federal oversight.
Sen. Jay Rockefeller, D-W.Va., chairman of the Senate Commerce Committee, and Rep. Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee, are expected to release draft auto safety legislation later this week that will require all automakers to install anti-runaway technology, such as brake override systems, stop-start technology and event data recorders.
Waxman and Rockefeller are aiming to draft one bill, but may end up writing separate legislative proposals.
Congressional aides briefed on the proposals, which are still being drafted, say the authors are considering imposing a small fee on new car sales that would fund an increase in the budget of the National Highway Traffic Safety Administration.
Waxman said the spate of recent recalls “underscore the need to ensure (NHTSA) has the resources, expertise and authority it needs to protect consumers from vehicle safety defects.”
Sen. Amy Klobuchar, D-Minn., notes that in 1980, 119 people were assigned to enforcement duties for NHTSA — twice the current tally.
The bills are also expected to significantly increase fines for delaying auto safety recalls from the $16.4 million maximum.
Toyota agreed last week to pay $16.4 million for delaying by at least four months its recall of 2.3 million vehicles because the accelerator pedal on some of its vehicles could stick.
The lawmakers also may call for adding staff at the NHTSA and for finding ways to give the agency more authority to order recalls faster.
“Recent Toyota recalls reveal lapses in our auto safety monitoring system — and additional areas where we can do much better by the American consum-er,” Rockefeller said. “Shortly, I will introduce legislation that will hold automakers to a higher standard and strengthen the National Highway Traffic Safety Administration’s ability to more effectively protect Americans on the road.”
NHTSA chief David Strickland endorsed hiking maximum fines to more than $100 million in a recent Detroit News interview.
Separately, a May 6 hearing on Toyota by the House Energy and Commerce subcommittee chaired by Rep. Bart Stupak, D-Menominee, is expected to be delayed. Instead, another panel with oversight of NHTSA chaired by Rep. Bobby Rush, D-Ill., is to hold a hearing on legislative reforms for NHTSA.
(c) Copyright 2007, The Detroit News. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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The Detroit News ( 04/28/2010 )
by David Shepardson
Car dealers lobby against oversight
Washington — More than 100 auto dealers lobbied Congress on Tuesday for an exemption from oversight by a new consumer watchdog agency.
For two days, Senate Republicans have blocked action on legislation to impose greater federal control on the nation’s financial industry that would also put dealers under the watchful eye of the new agency.
A third test vote is expected today.
Sen. Sam Brownback, R-Kansas, called the proposal “ridiculous” and said a new agency would impose costly new requirements.
“It’s going to drive up the price of a car loan for consumers,” Brownback said at a news conference.
Brownback has proposed an amendment to the reform bill that would put auto lenders such as banks, automakers’ finance companies and credit unions under the oversight of the new agency, but not dealers.
Several Michigan dealers met with the state’s two senators, who haven’t taken a position on the issue.
The National Automobile Dealers Association is running ads in Capitol Hill publications lobbying against the legislation.
“Shouldn’t the Wall Street reform bill focus on those who were responsible for last year’s credit fiasco?' said Ed Tonkin, an Oregon dealer and chairman of NA-DA. “We were the victims of that crisis, not the cause.”
There are more than 17,000 new-car and new-truck dealers in the United States.
“Dealer-assisted financing is simply a way to provide one-stop shopping for customers and offer them a better deal than they would get from going bank to bank,” Tonkin said. “The agency would have almost limitless authority to tell dealers how to run their finance operations and to impose unnecessary new hurdles to getting consumers the credit they need.”
The White House says reputable dealers have nothing to fear from the legislation, and that without it there would be a “race to the bottom.”
The House sided with auto dealers in December when it passed a bill that exempted them from oversight by a new consumer watchdog agency. But the Pentagon and military advocacy groups want the dealers included because they argue young members of the military can be preyed upon by unscrupulous dealers.
Auto dealers are politically powerful and won passage of a bill last year that gave more than 2,000 General Motors Co. and Chrysler Group LLC dealers the automakers’ wanted closed a chance to stay open or reopen by taking their case to binding arbitration.
Richard S. Genthe of Ann Arbor, a third-generation auto dealer who owns Dick Genthe Chevrolet in Southgate, said the new agency is unnecessary and will add additional costs for auto dealers that will be passed on to consumers.
“We are a very heavily regulated service,” said Genthe, noting that the Federal Trade Commission and all 50 states, among others, oversee dealer lending.
Genthe, 58, of Ann Arbor, who has been a dealer since 1967, said dealers aren’t to blame for the country’s financial woes.
“No one can point to auto dealer lending” as causing the financial crisis,” he said. “Congress shouldn’t go out looking for problems that don’t exist.”
(c) Copyright 2007, The Detroit News. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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Detroit Free Press ( 04/28/2010 )
by Justin Hyde
Dealers press for car-loan exclusion from reform bill
WASHINGTON — More than 100 auto dealers fanned out across Capitol Hill on Tuesday to lobby to win an exclusion from the financial reform bill in the Senate, fighting a strict line from the Obama administration that their lending should fall under new oversight.
The dealers are talking up an amendment by Sen. Sam Brownback, R-Kan., that would exempt auto dealers from a new consumer financial protection agency created by the bill. The White House said Monday that it would oppose any effort to “undermine consumer and investor protection or that allow institutions to avoid oversight.”
Brownback and dealers said the exclusion would keep auto lending from banks and finance arms regulated and that dealers already face a phalanx of federal and state laws. He also said several lawmakers had called to offer support for his amendment, which would likely need 60 votes if the bill reaches the Senate floor.
“Why, why would we need to create duplicative regulations for auto dealers and regulate each dollar of each auto loan twice? The answer is we don’t,” he said. “It’s simply going to drive up the price to the consumer.”
Brownback said he believed the Obama administration and the Pentagon were playing politics with the bill by trying to sweep in auto dealers. The Department of Defense has backed the inclusion of dealers, citing car dealer scams targeting soldiers that military officials have said could affect the readiness of troops to deploy. “They are painting all of us as unpatriotic, and that is just wrong,” said Ray Ciccolo, a dealer from Boston and veteran of the Marine Corps. “Auto dealers go out of their way for veterans.”
As they did Monday, Republicans and Sen. Ben Nelson, D-Neb., blocked the financial reform bill from coming up for debate again Tuesday. Senate Democrats have vowed to paint Republicans as working for Wall Street by blocking the bill, while Republicans have accused Democrats of not dealing with “too big to fail” banks.
Brownback said even if auto dealers were excluded from the bill, he would not support ending a filibuster of the overall bill, citing the sweep of the consumer protection agency among other objections.
(c) Copyright 2007, Detroit Free Press. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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The Detroit News ( 04/28/2010 )
by David Shepardson
GM, auto suppliers push tax credits bill, Companies say plan before House would boost investments
Washington — General Motors Co., CMS Energy Corp., Delta Airlines Inc. and major auto suppliers are among the companies pushing Congress this week to approve a new tax break to spur job creation and make capital improvements.
The $2.3 billion proposal, which has passed the Senate and awaits House action, would allow companies with unused “alternative minimum tax” payments or credits to get immediate access to them to upgrade factories and buy new equipment.
Under current law, companies pay alternative minimum taxes in advance on capital investments to offset future tax bills. The new proposal would allow primarily struggling companies to make new investments this year and immediately use the resulting tax credits or tap into existing credits instead of waiting to use them in future years.
Jackson-based Consumers Energy could get access to up to $60 million to $80 million in taxes it paid in previous years, said Ted Vogel, the utility’s vice president and chief tax counsel. That could add hundreds of jobs at the utility and hundreds at the company’s suppliers. CMS is planning to spend about $1 billion on smart grid and green technologies this year and $7 billion during the next five years.
“It’s getting back tax money that we’ve been carrying as cred-its,” Vogel said, adding the company has $300 million in unused alternative minimum tax credits. “We could put it to work right now in the Michigan economy.”
GM also argues the measure could help it boost investments. It has announced investments of $2.3 billion at 22 facilities in the United States and Canada during the past 10 months, including $890 million Tuesday.
“Allowing companies to accelerate the use of unused AMT credits could help keep America’s economic momentum going by spurring new investments and creating jobs throughout the country now,” GM spokesman Greg Martin said.
The bill sponsored by Sens. Debbie Stabenow, D-Lansing, Orrin Hatch, R-Utah, Olympia Snowe, R-Maine, and Sherrod Brown, D-Ohio was moved to the House last month. A broader House version is sponsored by Rep. Gary Peters, D-Bloomfield Township, and 54 others and could create an estimated 65,000 jobs or more.
“This bill will allow (companies) to use the tax credits they’ve accrued to create jobs now when we need them most,” Peters said.
Major auto suppliers will be pushing for the bill Thursday on Capitol Hill, including Farmington Hills-based Robert Bosch North America.
The Motor & Equipment Man-ufacturers Association, National Association of Manufacturers, U.S. Chamber of Commerce and United Auto Workers union have endorsed the Peters bill.
“It will help really suppliers make capital improvements especially as the industry faces new fuel efficiency requirements,” said Ann Wilson, vice president of government affairs at MEMA.
Rep. Sander Levin, D-Royal Oak, chairman of the House Ways and Means Committee, said he is working to include the provision in a tax bill.
Opposition comes from some Republicans who say the Senate package, which included the tax breaks and an extension of jobless aid, increases the budget deficit by $100 billion.
(c) Copyright 2007, The Detroit News. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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The Detroit News ( 04/28/2010 )
by Robert Snell
GM to invest in 5 plants, with $32M in Bay City, North American facility upgrades will create or retain hundreds of jobs
General Motors Co. confirmed Tuesday that it will invest $890 million in five North American plants, a move that will create or retain more than 1,600 jobs, including more than 80 in Bay City. The investment will support the production of new, fuel-efficient, small-block truck and car engines.
GM is eager to show the public and government officials that its recovery will benefit employees and cities across the United States. The investment also is aimed at demonstrating the automaker’s progress since emerging from bankruptcy court last summer.
“These latest investments show our commitment to improving fuel economy for buyers of every GM car, truck and crossover and giving them the best possible driving and ownership experience,” said Mark Reuss, president of GM North America.
The new engines will feature aluminum engine blocks, which are lighter and help boost gas mileage. The engines will be capable of handling fuel blends with 85 percent ethanol, known as E85, and are designed to meet stricter federal emissions standards in coming years.
Automakers are expected to meet a fleetwide average of 35.5 miles per gallon by 2016.
The new GM investments include $32 million in Bay City; $400 million at Tonawanda, N.Y.; $235 million at St. Catharines in Ontario; $115 million at Defiance, Ohio; and $111 million at Bedford, Ind.
The facility upgrades will create or retain more than 710 jobs in Tonawanda, about 400 jobs in St. Catharines, about 245 jobs in Bedford and up to 189 in Defiance.
The investments in Tonawanda and St. Catharines will support engine production, while the money will support engine casting and component production at the other three plants.
The announcement comes less than a week after GM said it would invest $257 million in plants in Kansas City and Detroit-Hamtramck to produce the nextgeneration Malibu.
Since GM emerged from bankruptcy, the automaker has committed more than $2.3 billion at 22 U.S. and Canadian facilities and restored or created more than 9,100 jobs.
(c) Copyright 2007, The Detroit News. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.
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Bloomberg ( 04/28/2010 )
by Aya Takada
Japan Aluminum Shipments Jump as Auto Demand Triples (Update1)
Japan’s shipments of rolled-aluminum products expanded 50 percent in March, marking a fourth straight month of increase, led by demand from carmakers as economic recovery accelerated.
Supplies to the domestic and export markets rose to 186,714 metric tons from 124,248 tons a year earlier, the Japan Aluminium Association said in a statement today. Demand from the auto industry more than tripled to 25,594 tons.
Shipments increased as the global economic recovery boosted sales of Japanese vehicles and electric appliances, leading to higher metal consumption by manufacturers. Japan’s exports advanced 43.5 percent in March, led by accelerating growth in emerging Asian markets, data from the Finance Ministry showed.
“Demand was boosted by strong sales of fuel-efficient cars, which use more aluminum than conventional models,” Tetsu Takahashi, the association’s chairman, told reporters in Tokyo.
“This trend is likely to continue” throughout the fiscal year to March 31, 2011, he said.
Demand recovered after shipments in March 2009 slumped 36 percent as Japan’s worst postwar recession slashed demand for the metal used in machinery and buildings.
Demand from can makers, the biggest aluminum-consuming industry in Japan, fell 6.4 percent to 36,988 tons in March.
Demand dropped as cool, wet weather reduced beverage consumption during the month, Takahashi said.
Japan’s vehicle sales may rise 4.1 percent this year as the government extends subsidies to boost demand, according to the Japan Automobile Manufacturers Association.
Members of the Japan Aluminium Association include Furukawa-Sky Aluminum Corp., Kobe Steel Ltd. and Nippon Light Metal Co.
Details of output, shipments and inventories are as follows:
=============================================================
March 2010 Feb. 2010 March/Feb. March Y/Y
=============================================================
(%) (%)
OUTPUT 186,538 161,882 +15.2 +57.9
Flat-rolled 120,362 101,407 +18.7 +65.8
Extruded 66,176 60,475 +9.4 +45.2
SHIPMENTS 186,714 164,237 +13.7 +50.3
Flat-rolled 120,181 103,715 +15.9 +52.8
Extruded 66,533 60,522 +9.9 +46.0
INVENTORY 78,661 79,092 -0.5 -1.2
Flat-rolled 65,797 65,506 +0.4 -4.6
Extruded 12,864 13,586 -5.3 +20.8
=============================================================
©2007 Bloomberg L.P.
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Union Leader ( 04/28/2010 )
Like a crock: GM's misleading ad
By now you've probably seen or heard about the new television ad from General Motors in which CEO Ed Whitacre claims, "We have repaid our government loan -- in full, with interest -- five years ahead of the original schedule."
What you may not have heard is that Whitacre is being more misleading than a rookie used car salesman with a lot full of lemons and one day left in his pay period.
Click for Editorials & Op-Eds"A lot of Americans didn't agree with giving GM a second chance," Whitacre says. "Quite frankly, I can respect that." Actually, a lot of Americans wanted GM to have a second chance. They just didn't want to be the ones paying for it.
After blatantly mischaracterizing American opposition to GM's federal bailout, Whitacre then makes the claim that GM has repaid its government loan in full. That's baloney. GM got more than $50 billion in loans from Washington. Most of that money was converted to GM stock, and $7.1 billion was left to be repaid in cash. GM repaid that $7.1 billion "ahead of the original schedule" only because Washington moved its due date up to this summer.
What of the other bailout money GM got? The Congressional Budget Office expects taxpayers will lose more than $30 billion of it. But wait, there's more!
GM didn't repay the $7.1 billion from profits it made selling cars. Neil Barofsky, inspector general for the Troubled Asset Relief Program, from which GM got its bailout, told Congress last week that GM repaid that money "by taking other available TARP money" it had laying around in an escrow account.
So GM repaid taxpayer money with taxpayer money. And that small portion of its bailout is all taxpayers can expect to get back. That makes GM's new ad identical to those over-the-top Burger King ads. Both are shamelessly selling Whoppers.
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Bloomberg ( 04/28/2010 )
by Tian Ying, Makiko Kitamura and Stephanie Wong
Ford, GM Promote Loans in China as 90% of Drivers Pay in Cash
Pi Wenhui would have bought a 249,800 yuan ($36,600) Mazda if she had gotten a loan. She couldn’t, so like 90 percent of Chinese drivers she paid cash -- and bought a cheaper car.
Carmakers including Ford Motor Co., Nissan Motor Co., Beijing Automotive Industry Holding Co. and Guangzhou Automobile Group Co. are anticipating that will change as China’s government is set to introduce policies to encourage auto lending in the world’s largest car market.
“We see a lot of potential in auto financing,” Joe Hinrichs, Ford’s president for the Asia-Pacific region, said in an interview at the Beijing Auto Show.
Automakers estimate sales growth in China will slow to as little as 10 percent next year from as much as 20 percent this year and 46 percent in 2009. Enabling more of China’s 1.37 billion people to borrow for vehicles would have a “big stimulus impact” on sales, Xu Changming, research director at China’s State Information Center, said in Beijing on April 22.
“For the next 5 to 10 years, auto financing will be the biggest thing for the industry and the most important booster,” said Yale Zhang, a Shanghai-based director at CSM Asia, an auto consulting company.
U.S., India
In contrast to China, 85 percent of car drivers in the U.S. take out loans and 65 percent of buyers in India borrow, according to the State Information Center, a government advisory body. The government may introduce policies to boost auto lending this year, including making it easier for car financing companies to raise capital by selling corporate bonds, the center’s Xu said.
Guangzhou Auto, a partner of Honda Motor Co. and Nissan in China, plans to open an auto financing unit this quarter, General Manager Zeng Qinghong said. Beijing Auto will begin offering financing this year, President Wang Dazong said.
“We’re counting on auto financing as a new way to generate growth,” Wang said in an interview in Beijing. “There is a lot of room to develop the business in China.”
Zhejiang Geely Holding Group Co is also planning to start an auto credit business, Chairman Li Shufu said.
Currently, auto financing companies in China mainly provide loans to dealers, 90 percent of which are independently owned, according to the China Automobile Dealers Association.
GM, Toyota
Ford, General Motors Co. and Toyota Motor Corp.’s local financing units provide loans to consumers as well as dealers, including those that are unable to borrow directly from banks.
Chen Guangjun, general manager of the Beijing Zhong Ye Toyota dealership, said about 12 percent of his customers buy on credit. The outlet accepts applications that are ultimately handled by Toyota’s financing unit.
Honda doesn’t have a financing business in China, so dealers such as Beijing Fanlv Business & Trading Co. introduce buyers to a bank if they need loans, general manager Wen Hai said.
In China, 80 percent of auto loans come from banks, while in other countries 80 percent are from auto financing companies, the State Information Center’s Xu said.
“The number of people using loans will rise,” said Tao Ye, president of the company that owns Beijing Zhong Ye. “In particular, there are a lot of people who use financing to buy second cars.”
The government is considering encouraging auto loans even as it targets a 22 percent reduction in overall new lending from a record $1.4 trillion last year. Earlier this month, the government announced curbs on loans for third-home purchases, increased down-payment requirements and higher mortgage rates as it stepped up efforts to prevent a bubble.
Good Savers
Persuading customers to take out loans may be challenging because the Chinese traditionally use cash for big-ticket purchases like cars, CSM’s Yale said.
“The Chinese are very good savers,” said Robert Graziano, head of Ford’s China operations. “It will be a relatively slow process.”
The cost of the credit approval process is often too high for small loans to be profitable for lenders. About 69 percent of car sales in China last year was for vehicles with engines no larger than 1.6 liters, which cost as little as 21,800 yuan.
Boosting financing may also require making it easier for customers to get credit approval. Because reliable credit information on consumers is often lacking, some banks hire outside specialists to gather information about applicants, said Beijing Fanlv’s Wen. Sometimes the specialists go to the applicant’s house or workplace to gather and verify information.
About half of applications are rejected, as many of them fail to provide enough information, said Zheng Xinhe, general manager of the Beijing Yinghua Lexus dealership. Once accepted, defaults are very rare, he said.
‘Totally Worn Out’
Pi, the would-be Mazda buyer, gave up trying to get credit for a Mazda6 car. To get the loan, she needed to own real estate in Beijing, which she doesn’t.
If Pi, 28, wanted to use her parents’ property as security for the loan, the bank would need to pay home visits to both her and her parents to interview them, she said. She disliked the idea as her parents aren’t used to buying things on credit, she said.
Pi also decided against using a friend who owns property as a guarantor, because the car would then need to be registered in her friend’s name. She didn’t qualify for a credit card suggested by the Mazda dealer.
“Applying for automobile financing is way too complicated,” said Pi, who wound up paying cash for a Kia Motors Corp. Sportage sport-utility vehicle, which cost her 203,000 yuan including taxes. “I was totally worn out by the difficulties of getting a loan.”
http://www.businessweek.com/news/2010-04-28/ford-gm-promote-loans-in-china-as-90-of-drivers-pay-in-cash.html
©2007 Bloomberg L.P.
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