The buzz around the global auto industry on Friday June 30 was that a possible tie-up between General Motors, Renault and Nissan was being seriously discussed by GM’s board. A meeting held on June 20 in Nashville (Nissan North America’s new headquarters) between Kirk Kerkorian, Jerry York and Carlos Ghosn explored possible relationships. Kerkorian’s Tracinda Corp. owns 9.9% of General Motors – the 4th largest shareholder – and Jerry York, Kerkorian’s right hand man, is Tracinda’s representative on GM’s Board. Carlos Ghosn is chairman of Renault and chairman of Nissan. Could he also become chairman of General Motors and then rule the auto world with 25% of the global market?
GM’s Board had a urgently called telephone conference on Friday to discuss the issue. No news yet.
General Motors Share Price Skyrockets
GM’s share price rocketed 8.6% on Friday on the news and skeptics opined that Kerkorian had orchestrated the news to win back the losses his investment in GM has taken over the past year. Others saw this as another wake-up call to Rick Wagoner that the restructuring of General Motors is not moving fast enough and that someone like Carlos Ghosn is needed to impersonally and analytically cut through the inertia that faces the General. Admittedly, Rick Wagoner has one of the toughest jobs on the planet and steering GM is like steering the Titanic. It cannot change direction quickly. But Ghosn demonstrated that you can turn around a huge ship – Japan’s second largest carmaker Nissan returned to profitability two years following Ghosn taking the helm.
Personalities, Personalities, Personalities
Think about the personalities. Wagoner the low-key professional chairman trying to improve the General incrementally. Bob Lutz the charismatic product czar of GM whose impact is just beginning to be seen in newly introduced products. Jerry York the impatient financial wizard from Chrysler/IBM/Tracinda who is delving into GM’s operations. Kerkorian the “long term investor” trying to make a risky investment a sure thing. Carlos Ghosn another charismatic exec credited singlehandedly with saving Nissan. Wow! This is fun!
Don’t Forget China
Oh, don’t forget. GM has a solid presence in China and Renault and Nissan much less so. This tie up could really benefit Renault and Nissan in China.
Stay tuned. This will play out quickly over the next week or so. Is Kerkorian just playing with his share price? Is he really able to goose GM into accelerating its restructuring? Will any sort of relationship develop between GM/Renault/Nissan? Between Wagoner/Lutz/Kerkorian/York/Ghosn?
Mitchell Daniels, governor of Indiana and Koichi Kondo, president and CEO of American Honda Motor Co. Inc., made the announcement together.
In May, VehicleVoice and AutoPacific brought you the news that Honda announced a new vehicle assembly plant for the United States (click here), and further commented on possible effects of Honda’s new plant announcement at the same time Kia backed off its plans for a new facility in western Georgia (click here). Following up on those stories, Honda has announced the location for its new plant. Ohio, Indiana, and Illinois were the states vying for the new plant and its new jobs, and Indiana has won out.
Almost thirty years ago, Honda identified a goal of building most of the vehicles it sells in the United States in North America, and has not lost any dedication to that goal. As part of that long-term strategy, the company has decided they are ready for a new North American assembly plant.
Honda will invest $550 million and expects to create about 2000 jobs. The plant is going to be built near Greensburg, Indiana, in Decatur County on a 1,700 acre site. The location is fifty miles southeast of Indianapolis, but only 100 miles from the Anna, Ohio, assembly plant that will provide four-cylinder engines for the products built in Greensburg. (Honda also wants more four-cylinder engines, so a new engine plant is being built in Canada, too, due to come on-line in 2008.) When up to speed, plant capacity will be for about 200,000 units, bringing Honda’s North American assembly capacity to more than 1.6 million cars and trucks.
Honda has not announced which models will be built in Indiana, only that they will be small cars with four-cylinder engines. Logical candidates, given timing and demand, include the next-generation Fit and Civic or other Civic derivatives. The dedicated hybrid product due for the 2010 model year is confirmed for production in Japan. The Indiana plant’s capacity of 200,000 units is more than Honda sells of anything other than Civic and Accord. The new plant will be built around Honda’s flexible manufacturing system, which results in plants like the Alliston, Ontario, facility that builds the Civic coupe, Ridgeline, Odyssey, and Acura MDX. Or the Marysville facility that builds the Accord sedan and coupe, Acura TL, and Acura RDX.
As only Honda’s Civic and Accord sell in volumes above or even near 200,000 units, the new plant’s capacity is beyond most single models in Honda’s range. Also, Honda and other manufacturers understand the need for flexibility between models in this competitive environment and Honda has long put this understanding into practice. This will not be a one-vehicle plant. The next-generation Fit and/or the Civic or its derivatives are likely candidates for the new plant, perhaps a model not yet offered here.
Persistance Pays Off
Though once abandoning a plan for U.S. sales, automaker smart didn’t give up on us like they have on the use of capital letters and two of their European entries (smart roadster and forfour dropped by 2007MY). An exclusive agreement with the United Auto Group dealers, headed by Roger Penske, has been forged to bring over the next fortwo in early 2008. Reports are that optimistic DaimlerChrysler, parent of smart, would like to see sales in the States at about 20,000 units.
Having never really given up on the States, smart has shown off its fortwo at several occasions, including an exhibit at New York’s Museum of Modern Art and as a lead vehicle for the New York City Marathon and a sponsor of the Boston Marathon. Groundwork for creating interest and enthusiasm for this tiny city car is well laid, and rising fuel costs only add to the hype.
The current fortwo was never meant to come to the States, due to problems meeting U.S. emissions regulations, though importer and electric car company ZAP has sold about 200 Americanized fortwo
s through May 2006, and sales in Canada reached 4000 units with months-long waitlists.
Dealers are just now getting the first shipments of the latest new Jeep. The Compass is a four-door SUV ready to go up against Kia Sportage, Honda CR-V, Toyota RAV4, and Saturn Vue, when those are equipped with a four-cylinder engine. VehicleVoice contributors and AutoPacific staff drove the vehicle in picturesque Oregon, found here. In the meantime, here is what the Compass is all about.
With proven market demand for small, front-wheel-drive-based SUVs and Jeep’s need for a model to slow below the Wrangler, Jeep decided to jump in the segment. Wrangler has long served as the entry Jeep, but it is rougher, more capable, and thirstier at the pump than many in the small SUV market need or want. The Compass means to grab buyers looking for a small, fuel-efficient, compact SUV, particularly Jeep intenders not ready for the expense or attitude of the Wrangler. There should be many out there; the question Jeep will be answering over the next year is: Are there enough?
The question becomes more complicated this fall, when Patriot joins the Compass. The Patriot is wrapped in classic Jeep cues and provides more off-road ability, but uses the same platform and drivetrain.
Compass is the first front-drive-based Jeep, but Jeep has not forgotten where its image begins and ends. The new-for-2007MY Wrangler and Wrangler Unlimited
retain traditional features like the fold-down windshield and removable doors and Jeep promises all the Wrangler capability of past models, only more.
Last month I almost screamed when I heard that Bob Lutz said that the potential demand for the Solstice could be as high as 35,000 per year. Lutz said that GM was considering boosting production to as high as 35,000 units. Recently Pontiac spokesman Jim Hopson said that production would increase only if sales of the roadsters are sustained. Let’s hope GM defines “sustained” carefully.
It would be difficult to think of anyone in the international automotive industry more admired and reviled as BMW’s design boss, Chris Bangle. Automotive designers at other companies are envious of his job and many detest the now-characteristic look of his design philosophy. Some automotive journalists and enthusiasts believe he irreparably damaged BMW as a carmaker. But not only are the Bangle BMWs (and MINIs and Rolls-Royces) considered rousing sales successes by company execs and competitors alike, some other automakers are adopting much, if not all of the Bangle design philosophy and language. Helluva thing for a guy raised in Wisconsin.
Dunlop Tires, a venerable British tire maker now part of Goodyear, has just announced that they are going to be shifting some of their media weight to alternative media and especially podcasts. Since VehicleVoice was early into the audio podcasting and video podcasting arena, it is interesting to follow how major brands may be using these media to carry their messages to the public.
Dunlop Touts Podcasting
In a May 16 press release, Janice Consolacion, brand planning manager for Dunlop Tires in North America, is quoted, “Podcasts are delivering a powerful punch. We’re one of the first out of the gate to take advantage of this new technology, and the rich content for our “casts” is available for automotive enthusiasts searching for cool audio and video.”
Consolacion continues, “Print ads raise awarenes for Dunlop events like Drivers Cup, but it is our podcasts that provide a real feel for the excitement of the competition. Podcasting also is attracting increased traffic to our Web site and giving enthusiasts a reason to return often.
Podcasts are a growing avenue to reach customers. The tire brand can use the technology for customer testimonials and sales training to help its sales force understand automotive enthusiasts and their motivations
Enthusiasts are naturally drawn to the latest technologies in automotive, electronics, communications and tires, so it’s only natural that Dunlop would build a library of information and entertainment to help them make informed choices. It’s another way for us to build relationships with our target audience, the ‘in-the’know’ driver,” she said.
“On the Web site, a photo is worth a thousand words. On an audio/video podcast, the message is worth a million words,” Consolacion said.
“About 11 percent of U.S. consumers own an Apple iPod or MP3 player, and the number of pods is growing. One advantage is portability. Consumers aren’t tied to their computers to get Dunlop messages. They can take it with them,” she said.
This is what we do. AutoPacific and VehicleVoice contuously monitor the American and worldwide auto industry for issues that impact VehicleVoice panel members. The simple fact that Asian manufacturers are adding capacity or delaying capacity additions in North America are major issues.
Kia Puts 300,000 Unit Plant in Georgia on Hold
In early March 2006, Kia announced that they were going to build an all-new greenfield assembly plant in Western Georgia. This 300,000 unit, $1.2 billion plant likely would have provided Kia with the NAFTA capacity to build an all new pickup truck. This plant, along with Toyota adding capacity at the newly available Subaru indiana Automotive plant (to build the Toyota Camry) put more pressure on the Big Three.
Pressure is temporarily off given Kia’s April 27 decision to indefinitely defer building the plant in Georgia and an additional plant in Eastern Europe in Slovakia. This is a total of $2.4 billion in new plant construction put on hold. The suspension was due to the management crisis Hyundai-Kia is facing in Korea with its Chairman Chung Mong Koo having been put in the slammer (Seoul Decention Center) on charges of embezzlement and breach of trust. Chairman Chung has been closely involved in all decisions concerning Hyundai and Kia plans – worldwide and in the USA.
Honda Decision for a New Plant Replaces Kia Threat
While Kia backed off in late April, Honda announced on May 17 it is building a new 200,000 unit assembly plant in North America. Honda, a master at flexible assembly and super-efficient plants, will have capacity for about 1.6 million units in North America when the new plant is on line in 2008. At present, the site for the new plant has not been announced.
Kia Likely Will Be Back Soon
We also have to believe that the deferral of the Kia assembly plant is only temporary. Kia’s pickup truck concept has been favorably received at auto shows and clearly could have a place in the USA market – but Kia needs a NAFTA source to avoid the 25% “chicken tax” on imported pickup trucks. Once the smoke clears from the scandal surrounding Chairman Chung the go code will likely be given again.
Pressure on Big Three Continues Unabated
It does not matter if the pressure is coming from Japan-based competitors or Korea-based competitors, the challenges to the American auto makes continues to increase. Saddled with older facilities, aging workforces, UAW contracts and work rules, the American manufacturers continue to be battered by the new, non-union plants from Asian manufacturers on their home soil. There are also vibrations from Europe that possibly a Peugeot, Audi or Volkswagen plant could be in the offing.
This Fall, $28,000 Gets You 200HP, Retractable Hardtop, and VW Badge
Though you can’t buy one until this fall, Volkswagen has announced pricing on its new touring convertible, and VehicleVoice and AutoPacific are here to report our first reactions. While the $27,990 base price sounds reasonable, including as it does the 200HP turbocharged four-cylinder engine that helps make the Audi A3 such a pleasure to drive and the expensive roof, jumping to the 250HP V6 model means you must spend at least $36,850. Between those extremes is a 2.0L I4 model with some extra amenities for $31,065.
Standard equipment includes the retractable hardtop roof with its panoramic sunroof, power windows, cruise control, air conditioning, and ESP. The mid-range price point moves automatic headlights, dual-zone climate control, heated front seats, a twelve-way power driver’s seat, windblocker, center armrest, trip computer and headlamp washer nozzles. When you step up to the V6, you get the mid-point equipment plus wood trim, a multi-function steering wheel, HomeLink, rain-sensing windshield wipers, and satellite radio.
Options available on either model include a premium sound system, DVD navigation, bi-Xenon headlights with dynamic cornering lights, parking assist, and eighteen-inch wheels. It will not be too difficult to get the Eos to a price above the $40,000 mark.
Where Does Eos Fit in the Competitive Landscape? Is It Overpriced?
If you’re thinking of the Eos as a replacement for the long-gone Golf cabrio, you’re not in the right frame of mind. VW has the New Beetle convertible priced more near the old Cabrio’s lot in life, with a base price just under $23,000. A quick look at pricing for 2006MY four-seat convertibles puts some perspective on the issue of a VW convertible running the range from a base $28,000 to likely $40,000 with liberal option-box checking.
(Note: Following this discussion is a list of base prices for various models, according to Kelley Blue Book (www.kbb.com) as of May 19, 2006.)
VW offers a base Eos to go up against the Pontiac G6
, Toyota Camry Solara
, and Chrysler Sebring
, while also offering a top-end Eos that more accurately competes with the Saab 9-3
and Volvo C70
. Eos is more expensive than base Ford Mustang
or Mitsubishi Eclipse
, but those two have more sporting than touring personalities and offer base models within reach of younger buyers.
If the Eos delivers on uplevel materials and fit and finish, providing a model Everyman can afford has the potential to convince buyers that VW offers premium vehicles worthy of a luxury price point. Though the Phaeton was a wonderful automobile, the brand’s image in the States didn’t support a $90,000 price level that was also inaccessible VW’s traditional buyers. The Eos price ladder can put it on the radar for buyers shopping Volvo and buyers shopping Pontiac. The trick is to convincing buyers at both ends of the range that they are getting a higher-quality vehicle than the price reflects.
The AutoPacific 2006 Vehicle Satisfaction Awards honor products in nineteen categories or segments. Nine categories are cars and ten are trucks.
Overwhelming Win by Japanese Brands in Satisfaction by Vehicle Type
Overall, owners of Japanese brand vehicles rate their cars or trucks at the top of their category in ten of the nineteen categories. Owners of European brand vehicles rated their vehicle tops in two categories – Volkwagen Passat in the Premium Mid-Size Car Category and the MINI Cooper in the Image Compact Car class. The American Big Three had five wins… Lincoln Navigator won it all with the highest rating of any vehicle – car or truck; Cadillac CTS, Mercury Milan, Chevrolet Corvette, Chevrolet Silverado Heavy Duty. OK, that leaves two winners unaccounted for… those are from Hyundai.
The Hyundai Azera is the top rated car, even beating top class luxury cars like the Lexus LS430, jaguar XJ, BMW 7-Series and Mercedes-Benz S-Class. The Hyundai Santa Fe is the top rated Mid-Size SUV for the fifth time in its six year history… this win comes just months before it is replaced by an all new Santa Fe to be produced in America.
Japanese Brands – 10 with Suzuki having its first ever win
American Brands – 5 with Chrysler Group having zero wins
European Brands – 2
Korean Brands – 2
Check http:/.vehiclevoice.com for the complete listings.