Auto Industry Financial Recovery, a Group Effort

As the new year dawns, U.S. automakers have a surplus of inventory sitting in lots, to the tune of one million units. While this number would sell out in two months in more prosperous times, it would take four to eight months to clear in the current state of economic chaos. The three major automakers are facing the possibility of producing more vehicles than they can sell if the scarcity of credit and public timidity continues to inhibit prospective car buyers. Congress and automakers are rushing to rectify this mismatch of supply and demand by getting credit flowing again and introducing more products better aligned with current consumer sentiments.

The Treasury Tosses the Big Three A Lifeline.
The Bush administration approved 17.4 billion dollars in emergency loans to fund the development of new products the public will hopefully buy. Some of the key selling points many shoppers now have an affinity for are: improved fuel economy, hybrid vehicles, electrics, alternative fuel, and more conservative vehicles with lower curb weight.

Retooling for Consumer Demand
On January 11, 2009, the North American International Auto Show in Detroit will introduce a few new vehicles, concept cars, and improved hybrid technology that could begin to address consumer's increasing demand for economical transportation. Hopeful to make an impact at the most important car show on earth, Ford's next-gen hybrid propulsion system has a few new tricks up its sleeve to power the most fuel-efficient midsize sedan in production, the 2010 Ford Fusion.

Honda is introducing a new 4-door hybrid, called the Insight (name taken from Honda's first hybrid runner), which at $20,000, will cost about $4,000 less than the Civic Hybrid. The 2010 Toyota Prius will be even more fuel efficient than yast year's model. Not surprisingly, a few big names and several lesser luminaries, Nissan, Infiniti, Porsche, and Mitsubishi for example, will not be on display in Detroit due to difficult times.

The Credit Freeze
The other impediment to recovery is the credit lock-out, which deters millions of potential buyers. When GMAC, the finance arm for GM, hiked loan-qualifying credit scores from 620 to 700, only the top 10 percent of those who applied were approved. Since GMAC finances over three-quarters of the vehicles sold by GM, the results were disastrous.

GMAC and the Holding Company
On December 30, 2008, GMAC obtained bank holding company status, thereby qualifying for a $5 billion piece of the Treasury Department's $700 billion Troubled Asset Relief Program (TARP). GMAC announced that it will now offer 5-year, zero percent interest loans while dropping the credit score requirement to the 620 or better level. Loosening the noose on credit offers a breath of hope for GM vehicle sales, especially in the second half of 2009.

12 Million Sales a Year Instead of 16 - the New Norm?
Some auto industry experts however, are suspecting that the current drop in car sales is more than just a passing phenomenon, but rather the establishing of a new norm. More people are realizing that trading in their vehicles every three years is a luxury they can't afford. These suspicions are further supported by the fact that sales at Japan's big three, Honda, Toyota, and Nissan have declined by an average of thirty percent.

Darwinian Economics
Other analysts concur that by the third quarter, some stabilizing of the auto market may occur. Unfortunately, this may be too late for Chrysler, who saw a 50 percent decline in sales in December, 2008. A drop that large may represent a complete loss of confidence by consumers in the Chrysler badge and is not a good prognostic indicator. It is time for automakers to step back and address the true needs of consumers and society, before new car buyers become an endangered species.

Ford's Cash Position Potentially Weaker than Indicated

Currently the Ford Motor Co. is the only U.S. automaker operating without the benefit of federal bailout money, but the company's cash on hand has now dropped below $15 billion.

Confusion about the carmaker's financial health ensued, however, after CEO Alan Mulally spoke to Fox Business Network from the Consumer Electronics Show in Las Vegas on Thursday, January 8.

Mulally indicated the company had $15 billion, but later corrected himself. A company spokesman, Mark Truby, indicated the fourth quarter numbers had not yet been finalized, "However, our cash position will be lower than $15 billion. It would be premature to say anything more."

Mulally's statement had offered optimism that Ford was getting control of its cash burn, a fact Truby still said was valid when compared to third quarter numbers when Ford was left with $18.9 billion and a monthly expenditure of roughly $2.57 billion.

If the company indeed had $15 million, the burn rate would have been slowed to approximately $1.3 billion. On January 9, the company is setting its monthly outlays between $1.3 billion and $2.57 billion for the fourth quarter.

During his interview with Fox, Mulally said, "We're very conscious of cash. And we focus all of our investments, we focus all of our daily operations, we're working very closely with our suppliers and our payables, and we are managing that cash -- because cash right now is so important to finance this transformation."

Detroit 2009: Mercedes-Benz unveils McLaren SLR Stirling Moss early

At an event ahead of tomorrow's Detroit Auto Show kick-off, Mercedes-Benz showed off the new Mclaren SLR Stirling Moss to a select group of journos. The company is only offering 75 roadsters to current SLR owners to close out the supercar's tenure, so when these windscreen-free, 650 hp monsters are gone, that's it for the SLR. It must be a rush exploring the SLR's supercharged 5.5-liter V8 and 217 mph top speed with your head out in the open. Goofy old man and silly aviator eye-protectors sold seperately.

FOLLOWUP: VW's Matrix-style advertisement garners 100+ complaints

So it's not just America that gets up in arms over commercials. Remember the Matrix-styled ad with the Volkswagen Golf designer fighting various versions of himself? It seems a number of British telly viewers think the commercial "is in breach of the broadcast advertising code for featuring excessive violence that could be copied by children." So they complained to the Advertising Standards Authority, and the ASA is now investigating.

The complaints could mean the spot won't be aired before the 9 p.m. watershed, which is when programs for "children" ages 15-and-up get aired. We've seen more frightening things on YouTube -- in fact, even the G-rated The Tale of Despereaux has more chilling moments than this commercial -- but maybe the parents are afraid their kids will end up fighting... their clones.

[Source: The Guardian]

CES 2009: Navigon takes routing personal

Navigon and Rand McNally have teamed up to develop some interesting new GPS features that make it easier for users to personalize their trips.

Landmark View 3D is s a $40 upgrade for Navigon's 2200T model and has the ability to display 600 North American landmark buildings in 3D to aid directions... or at least add some novelty to your nav. In keeping with the tourist theme, scenic routes and city guides will be available for $20 each. The scenic routes will feature weekend getaway suggestions, picturesque tours and regional trips. More than 1,400 cites are covered in the guides and routes can be customized to fit your interests. And for another $30 a year, Navigon owners can now be alerted to red light camera locations.

Headed overseas? Add maps of 38 European countries to your Navigon for $130. The update comes pre-loaded on an SD card and covers 4.5 million miles of road and millions of points of interest. The new features will be available for download from the Navigon Fresh software website sometime in the Spring.

Slip Sliding Away…2008 Auto Sales Are In

Auto sales figures for the American market are in and, as has long been expected, they reveal just how much new car sales slid compared to 2007. In the end there were few surprises with very little good news offered. Of all of the full line manufacturers selling cars in the domestic market, only Subaru registered a year over year increase, squeaking out a net gain of 0.3% for the year even as their December sales tumbled by 7.7%.

Understandably, the automakers seized on whatever good news they could when sharing their December 2008 sales figures or what their sales were for the entire calendar year.

Ford emphasized that its market share increased for the third consecutive month on strength of increased demand for its all new F Series pick up truck. Ford sales were still down by 32.5% for the month and 20.5% for the year, falling just three thousand units short of second place Toyota for the final month of the year.

Mercedes sales slipped by 11.2% for the year but overall Daimler AG sales fell only 1.5% thanks to the introduction of the Smart line last January. In 2008, Daimler sold 24,662 of the diminutive two seater a vehicle that was in big demand at the height of last year’s record gas prices. BMW’s slide was 15.2% for the year, but just 9.7% when MINI sales are counted. Look for both German automakers to expand their small car offerings in the coming year to take advantage of shifting consumer demand.

Of the Big Six automakers, Chrysler LLC had by far the worst year falling exactly 30% against 2007. December 2008 was particularly awful with sales down by 53.1%. Surprisingly, Hyundai wasn’t too far off of that mark, tumbling 48.3% for the month or 14% for the year.

GM closed the year with 2.95 million sales, a drop of 850,000 units over 2007. More notable was that GM hasn’t seen sales this low since 1959 when America’s population had 125 million fewer residents.

Of all of the “losers” for 2008, only Daimler, the BMW Group, Honda (-7.9%) and Volkswagen (-3.2%) managed single digit losses with most everyone else showing losses in the teens. Toyota still managed to gain market share though its sales were off by 15.4% as GM (-22.7%) and Ford (-20.5%) joined Chrysler in posting huge year over year losses.

For the year, sales totaled 13.24 million units down about 2.9 million passenger vehicles over 2007. Sales in December were actually up by 150,000 units over November 2008, which isn’t unusual given the typical year end sales that take place during the final month of the year.

With 2008 in the books, the automakers will be giving careful attention to realigning production to meet demand for the coming year. Already we know that Toyota has put a Mississippi plant on hold, while America’s domestic automakers will continue to look to pare excess capacity while trimming factory and office workers.

Consumer confidence remains low, suggesting that 2009 sales may fall short of 2008 sales especially if credit remains difficult to obtain. For consumers who have the means to purchase a new vehicle, incentives are continuing in the form of cash back rebates shaving thousands off of the sticker price to cut rate financing, sometimes both.

Source: Motor Intelligence (Autodata)

Honda Pulls Back In Wake of Global Recession

Months of bad news coming out of Detroit has masked the predicament of other automotive manufacturers including those most everyone would consider to be in the best shape to weather the global recession.

We might imagine that a number of smaller full line manufacturers are having a tough go of it, with Fiat looking for a partner and with Isuzu completing its pull out of the North American market later this month. But, to include either Toyota or Honda in with the crowd seems to indicate that things are far worse for the global economy, something Honda seems to have confirmed via recent news.

Like Toyota, Honda has been cutting back on production capacity and has shelved some plans while delaying others. Among the latest developments for Honda is their announcement that several programs have been canceled including an all new S2000 roadster, a line of rear wheel driven Acuras, a V8 engine and at least one hybrid.

The news follows an earlier report that Honda canceled its NSX sportscar program, one of the most anticipated models from the automaker.

However, it must have been Honda’s fourth quarter performance which forced the automaker to institute its austerity plan as the company soon realized that its year over year sales surge (the company was up 3.2% for the year through July 2008 for U.S. sales) had evaporated resulting in a -7.9% drop for 2008. December alone was a disaster as Honda sales dropped 34.7% over December 2007.

To that end, Honda issued a press release containing the following statement: “American Honda’s sales mirror the industry’s current condition,” said Dick Colliver, executive vice president of American Honda Motor Co., Inc. “We believe Honda will be in a strong position when the market stabilizes.”

Honda’s Acura division took it on the chin in 2008 as sales plunged by an even 20%. The entire luxury car segment took a beat down for the year, dispelling the myth that this market was largely immune to a recession.

Honda’s performance pales in comparison to the double digit loss from Toyota (-15.4%) and is nowhere near what GM (down 22.7%), Ford (off 20.5%) and Chrysler (-30%) experienced for the year. But, it also points out that Honda isn’t shielded from the vagaries of the economy, thus the cutbacks.