Joint Ventures still the way forward in China

In an about face and SAIC have announced a JV with Charoen Pokphand Group to set up an assembly plant in Thailand for the production of initially for 50,000 of its MG branded vehicles for sale in Southeast Asia.

http://europe.autonews.com/article/20121207/ANE/121209898/chinas-saic-plans-to-build-mg-cars-in- thailand-with-local-partner&cciid=email-ane-daily 

Joint Ventures still the way forward for China

PSA have announced that they will produce three of their Citroen DS models at its joint venture

facility with Changan Automobile Group. The DS5, already on sale since June 2012 as an

import, will start production in the middle of next year with a sedan and SUV in 2014.

http://europe.autonews.com/article/20121207/ANE/121209901/psa-jv-will-build-3-citroen-ds-models-in-china-by-2014-report- says&cciid=email-ane-daily 

Fiat plan on 2015 product launches

Despite having previously announced a freeze on new investment a friendly chat with Italian Prime Minister, Mario Monti, seems to have changed Fiat CEO, Sergio Marchionne’s mind as he announced plans to increase investment on “higher-margin” models in an attempt to take German premium brands head-on. With four new models planned under the Fiat brand, two to three new Alfa Romeo models and two next generation Maseratis it is a sizeable change of approach. However given the strength of the German premium brands especially compared to Fiat’s brand position, and the German’s on-going investment to stay ahead of the pack, Marchionne is going to have to invest heavily during the pre-launch period to ensure he delivers something able to compete with where these brands will be in 2015 and not something that just gets closer to the current models. Having models of the right quality and price point is only part of the story as achieving a competitive residual value is going to be critical to being able to compete on finance terms without heavy discounting which would destroy his ambitions for higher-margins.


All change

The last two weeks have seen a number of changes at the top end of the industry and a few surprising names remaining. Reuters have reported that BMW have announced their current senior vice president for BMW Group Germany, Karsten Engel, will succeed the retiring Christoph Stark as the head of its Chinese sales overseeing the BMW Brilliance Automotive joint venture, with Roland Krueger replacing Engel. This adds BMW to the list of Daimler, GM and VW who all have made changes to their leaderships in China this year. Meanwhile VW have appointed former Renault chief of Europe, Jacques Rivoal, as president of VW France succeeding the retiring Marie Christine Caubet. But in a move that would have been unthinkable only a few months ago following the very public spat with VW, Fiat CEO, Sergio Marchionne, has been re-elected for a second term as president of the ACEA. http://www.reuters.com/article/2012/12/07/cars-europe-acea-idUSL5E8N762F20121207 

Opel plan on 2015 breakeven

2015 looks like being a pivotal year in Germany as well as Italy as GM target a mid-decade return to breakeven for its European operation. With full year losses expected of $1.5billion this year and falling sales a turnaround in a little over two years would be quite an accomplishment, particularly as most analysts expect next year to show sales falling by a further 3-4%.


All a matter of taste

Whilst Sergio Marchionne and VW appear to have patched up their differences the same cannot be said about Fiat and Nissan who have come to blows over the styling of each other’s products. First of all the head of Fiat product marketing, Matt Davis, took a veiled swipe at the Nissan Leaf when he said "The Fiat 500e proves that you do not have to give up on good looks to deliver an electric car." A car it has to sell and at a $10,000 a vehicle loss in order to meet Californian emission requirements. This was subsequently followed by Nissan’s head of global marketing, Simon Sproule, stating that “...Fiat has not shied away from controversial styling themselves” before adding “Many would describe many of their products as visual pollution. Take a long, hard look at the Fiat Doblo." And rounding it off by saying that unlike the Fiat EV, the Leaf is a "fully functioning" car for families and daily use.


Hyundai and Kia hit by misleading fuel claims

Hyundai and Kia had an embarrassing setback in the US this week as it had to announce an apology for overstating fuel economy on more than 900,000 vehicles sold in the US and has also had to reduce its fuel economy claims on most of their 2012 and 2013 models following an audit by the US Environmental Protection Agency. Whilst Hyundai Motor America CEO, John Krafcik blamed “procedural errors” for the problem it does mean most models will see a 1-2 miles per gallon reduction in stated economy and in the case of the Kia Soul a 6mpg drop..

http://www.autonews.com/apps/pbcs.dll/article?AID=/20121102/OEM11/121109960/hyundai-kia-to-pay-owners-for-faulty- mileage-claims-report-says&cciid=email-autonews-blast  


German Federal Court of Justice rule against Porsche

Despite their best attempts Porsche have been told that they cannot appeal against a ruling

saying VW Chairman, Ferdinand Piech, violated his duties when commentating in 2009 about

options transactions carried out as part of a takeover bid of VW.

http://europe.autonews.com/article/20121205/ANE/312059988/porsche-loses-bid-to-appeal-piech-duty-ruling-in-german- court&cciid=email-ane-daily 

VW blasted for ramping up production

As the overcapacity situation in the European automotive industry worsens VW have come in for attack from the more beleaguered manufacturers over their ramping up of production. There is clearly a them and us divide between the manufacturers like VW who seem to be pushing ahead successfully in spite of the economic climate and others like, Opel, PSA, Fiat and Renault who are clearly struggling to find a formula which works for them. As I mention recently the discounts on offer by some now means they are actually selling cars at a loss which can result in the slow and painful death of any company. If you are thinking of buying a new car then the next 6 months is the time to do it as the discounts you can get are almost unprecedented in many countries. However all this discounting is going to start hitting RVs hard and it is quicker and easier to kill a model’s residual value than it is to try to build it back up, the former can be done in months but the latter takes years and generally never in that model’s lifecycle.


Google’s self-drive car may not be the only solution

As we head towards the time of Christmas parties and other festive events thoughts often turn to who is going to be the nominated driver. Whilst we may one day be able to jump into our Google car and say “home James” until then Rover may have a solution. http://www.youtube.com/watch?v=bO5bL77e0Rs


French attack the Korean manufacturers

It is not just the successful German manufacturers who are under attack as the French Industry Minister, Arnaud Montebourg, accuses Hyundai and Kia of dumping cars and therefore hurting the French local manufacturers, PSA and Renault. In a real protectionist move Montebourg has challenged the European Commission to investigate Hyundai Groups tactics saying they are selling cars below market value. As I mentioned above, some struggling manufacturers, which includes some French ones, are selling cars at a loss which therefore makes Montebourg’s accusation sound a little disingenuous. Whatever certain sectors of Europe’s political circles may think survival of the fittest has always been the mantra in business and unless they stop looking to attack and start looking at their own weaknesses it is only going to be a matter of time. With many analysts now predicting the European automotive market won’t get back to pre-crisis levels until 2020 there will be some big name casualties unless deep and meaningful cuts happen soon.


Passenger car sales decline slows

Whilst sales are continuing to fall across Europe with a 4.8% decline in October this is the second lowest rate of decline this year after June’s -2.8%. However before anyone starts seeing too many green shoots of recovery it is worth noting that October 2011 was the first month in what has been a 13 month run of continuous falls across Europe. 

Of the European big five markets Spain was the only market to show a faster decline than the YTD trend as sales dropped by 21.7% but this is still some of the washout from the August rush to beat the September VAT increase. Germany returned to a steady state at +0.5% for October (YTD -1.6%) although this is still with some significant dealer/OEM registrations whilst the UK continues to grow, up 12.1% in October (YTD +7.1%) and shows no sign of easing back and if this growth continues it may yet break the 2 million barrier. Meanwhile the French decline slowed to -7.8% (YTD –13.3%) and Italy was down -12.4% (YTD -19.7%). On the back of very low October 2011 sales Greece lost its place as the market with the worst year on year sales as it saw a +1.8% growth this month as the Netherlands took the crown, falling by 38.4% (YTD-8.7%).

Of the major brands, Renault Group was the worst hit, down 21.6% with Renault down 25.5% and its budget Dacia brand down 6.8% and both with a declining trend. GM Group came in second down 14.3% and whilst Opel’s fall of 12.8% was better than the YTD trend GM’s budget Chevrolet brand was hit by a 21.6% fall in October compared to a slightly positive 1.8% growth YTD.

Whilst all of the German premium brands saw an improvement in their YTD trend, BMW had to make do with a slowdown of declining sales (-0.9%) as it saw Mercedes rise by 3.2% and Audi jump up by 10.6%. In fact only Hyundai, up 10.9% and Land Rover, up 17.0% stopped it from seeing the strongest growth in Europe in October. Meanwhile Hyundai and Kia fought back against accusations of dumping cars in Europe citing a lean organisation leading to modest pricing and desirable designs as the backbone of their recent success.


Opel deny rumours of 30% cuts

Following news last week about Opel cutting production in two of its plants, the German newspaper, Bild, reported this week that it is having to face up to cutting almost a third of all jobs if it is to meet the targets set by its parent company, GM. GM Vice Chairman, Steve Girsky has dismissed the story but has said they need to find a way to save money, become leaner and end losses. The story was also dismissed by Opel’s top union official, Wolfgang Schaefer-Klug. At least Spyker are being a little kinder to GM by confirming the deadline has been extended to the 28 September for a response to its $3 billion lawsuit on the collapse of Saab.


Fiat told to more than double its bid for Chrysler shares

With Fiat struggling in Europe, down 15.5% YTD, its desire to get its hands on Chrysler were dealt a blow this week as the United Auto Workers affiliated trust VEBA rejected Fiat’s offer of $139.7 million for a 3.3% stake in Chrysler saying it wants at least $342 million. With Fiat CEO, Sergio Marchionne, keen to get his hands on the trust’s 41.5% stake in Chrysler this will be a significant and costly setback.


VW brand buying days come to an end

VW may be getting abuse for ramping up production but I’m sure some of its competitors may breathe a sigh of relief that its CEO, Martin Winterkorn, has said that following the acquisition of Porsche, MAN trucks and Ducati motorcycles, they have no further plans for acquisition as their current 12 brand portfolio is keeping them busy. Winterkorn has confirmed that VW want to expand in South East Asia, but denies the rumours linking them with Malaysian manufacturer Proton, which may be a double bluff. He also confirmed he finds the Alfa Romeo brand “interesting” but I can’t help feeling that this might be a touch of mind games with Sergio Marchionne, CEO of Alfa’s parent company Fiat. VW seem determined to be the world’s biggest vehicle manufacturer but this title has been a poison chalice to previous title holders.


PSA and GM pause partnership talks

Following the French Government backed bailout of PSA’s funding division and increasing fears from GM about the French manufacturer’s worsening condition the companies have stopped discussions regarding a stronger tie-up. One of the conditions of the Hollande Government support was that there would be no further French job cuts which are reportedly a major and understandable roadblock to talks continuing given the falling sales and significant overcapacity both companies are facing. In the pursuit of the GM deal PSA have sacrificed deals with the likes of Ford on engines and BMW on hybrid technology and whilst it blamed financing problems for its decision in February to halt sales in Peugeot’s second biggest market, Iran, investors had been told by GM that as part of the partnership PSA had already promised to exit the country. So whilst the Government intervention may have delivered some short term-cash and given the socialist President a political boost, the state support may yet end up being a weight round PSA’s neck as it struggles to fight back, http://europe.autonews.com/apps/pbcs.dll/article?AID=/20121113/ANE/311069722/1042/emailblastANE01 

A taste of the future

The company which gave the once mighty search engines of Alta Vista, Ask Jeeves and Yahoo a bloody nose is now pushing ahead with its plans for the automotive industry. According to an article on arstechnica.com California legislators are pushing forward a bill requiring the state’s Department of Motor Vehicles to adopt standards of performance, safety and other regulations for “autonomous vehicles”. One passed the bill, SB1298, would allow autonomous vehicles to be tested and operated on public roads opening the way for Google to push ahead with the testing of its own autonomous vehicles. I wouldn’t like to sort out the first accident report between two of these autonomous vehicles!

Are PSA in talks with Tata?

With the GM partnership cooling and PSA having cut the links with other manufacturers PSA CEO, Philippe Varin, has no choice but to look for other partners and speculation rose this week that Tata was a possible suitor. However almost before investors could push the share price up it was back down again following a strong denial from Jaguar Land Rover’s shareholder Tata of any talks around an alliance. http://www.reuters.com/article/2012/11/14/peugeot-tata-idUSL5E8ME4DL20121114 

Opel to cut production at 2 plants

Last week we picked up on the news that Opel were in talks with unions to reduce production by cuts in hours and this week that has now been confirmed that it will cut 20 days of production at its main Rüsselsheim and its component plant at Kaiserslautern. An analyst from Barclays Capital has estimated it could save GM $50m but this is still only a small step when you consider GM’s Vauxhall/Opel business lost $747m last year. With Bochum not due to close until 2016 and with sales falling so badly across Europe and in particular for Opel and the French brands this move is obviously a short term measure to give them a little breathing room but more is going to have to follow if it is to reverse the downward spiral it is currently in.  

When rumours start to circulate about manufacturers struggling RVs tend to start dropping well in advance of anything actually happening, so if Opel want to avoid that they need to turn themselves around quickly.


GM not giving up on Opel

Whilst GM may have paused talks with PSA about a closer tie-up and certainly the relationship only got a passing comment from GM CEO Dan Akerson, GM have said they plan to expand in Europe citing the 23 new models and model replacements due between now and the end of 2016 as evidence of its European commitment. A source close to the manufacturer confirmed to me that whilst Opel is definitely in the middle of a major overhaul the buzz round Rüsselsheim was that it was leading to a stronger, fitter Opel and not one due for sale or closure.


Daimler and Renault-Nissan ti jointly build small cars

Still in Germany and the Financial Times Deutschland has reported that the partnership between the two groups, agreed in 2010, could see the first joint vehicles being built in Eastern Europe in 2016. Mercedes are seeking to expand their range of smaller vehicles from two to five models to attract younger buyers and next year’s launch of the CLA coupe is a good start and a compact SUV would also fit nicely into their line-up. This deal works well for Daimler in two ways, first of all it has sat back and watched its two main rivals, BMW and Audi, clean up in this premium compact sector and at the same time increase their margins and secondly the tie-up with Renault-Nissan will help with trying to ensure the factories run as near to capacity as possible. We now have BMW with Toyota who also have a deal with Ford, Daimler with Nissan- Renault and GM with PSA, with VAG having plenty of brands to share its technology across this just leaves Fiat as the last of the major European manufacturers without a significant partner. Looking at Fiat’s options Honda and Hyundai/Kia could be a possibility as could Tata but I think it is China where they may have the most luck, however you look at it trying to stand alone in the current economic climate is going to be tough.


BMW not giving up on EVs

Last year the whole industry was talking about EVs, fast forward a year and the story is very different with sales well below manufacturers and governments’ expectations and development plans being slowed down or discreetly shelved. However BMW are breaking this trend as they reaffirmed their commitment to EVs with the i3EV due to be launched next year in their drive to offset the emissions from their traditional bigger engine and more powerful motors.

http://europe.autonews.com/article/20121112/ANE/311129905/bmw-pushes-ahead-with-evs-green-technology&cciid=email- ane-daily 

PSA facing possible exit from CAC40

Combining the previous two stories together and Opel’s new partner PSA is facing eviction from the CAC40, the French stock market’s list of the top 40 firms on its exchange. As PSA’s rival Renault has seen its stock rise by 30% and the auto sector index, STOXX has also gone up by 12%, PSA have had to watch as its own share price plunged by nearly 65% in the last 12 months putting it down as only the 77th biggest French listed company. There is an English phrase which says “birds of a feather flock together”, i.e. things that are similar tend to attract each other and looking at the partnerships above, e.g. BMW-Toyota and then considering the GM-PSA tie-up it looks like the phrase has never been truer.


New Car Sales down to mid-1980’s levels

Another week and another round of depressing new car sales figures as Reuters show that, with the exception of 1993, new car sales are now down at levels last seen around 1986. Excluding the benefit of two additional trading days moves Germany from a 0.5% rise to a 5.4% decline, whilst Spain continues to drop and France saw its twelfth straight month of falls, down 7.8%.

Many of the volume brands such as PSA and Fiat continue to struggle in their home markets and despite its money-back guarantee offer, Opel is no exception as its share of the German market fell to only 6.1%, its lowest level of the year.

Production is also starting to reduce with German car output down 6% last month and with the planned factory closures reported last week maybe we might actually be looking at the early signs of an end to the overcapacity blighting Europe.


Is multi-franchising the answer to dealer profitability?

The thorny issue of whether dealers should sell more than one brand from their sites has raised its head in Australia, according to a report in this week’s GoAutoNews. M+K Lawyers are reported as saying that manufacturers cannot “...get their heads around multi-franchising “ and he goes on to say that unless a dealership is getting around a 20% share of his local market it is never going to make money. As an accountant who has worked on both sides of the fence I can see compelling arguments in favour and against multi-franchising but when you get down to it you have to wonder how much longer some brands can fight for single franchise dealerships when they are doing partnerships with other manufacturers themselves. For as long as most of us can remember, manufacturers have provided franchise network support in the form of some financial benefit in order to be able to force the issue on corporate image and identity on dealers’ premises. With finances being squeezed in all directions and most modern franchise dealer sites becoming a variation on the same theme of polished tiles, steel, chrome and “skinny lattes” I think the argument in favour of multi-franchising are stronger than ever and if handled in a sensible and fair fashion I think it can be a win-win. However, for this to work all sides need to face a new world, dealers need to ensure they put equal focus on all the brands they represent and manufacturers need to realise that in the same way they need to share their expensive R&D programmes dealers need to spread the cost of their expensive glass and steel palaces.


Opel no comment on new CEO

Opel have refused to comment on speculation that former VW and Continental boss Karl-Thomas Neumann is to become their new CEO in mid-2013 once his non-compete clause with VW expires. If it goes ahead Neumann would take over from the current acting CEO Thomas Sedran who took the helm earlier this year following GM’s removal of Karl-Friedrich Stracke. With sales down and falling Opel need some strong and stable management at the top and quickly if it is to recover.

http://europe.autonews.com/apps/pbcs.dll/article?AID=/20121102/ANE/311029927/opel-declines- comment-on-report-that-vw-exec-neumann-will-be-new-ceo&cciid=email-ane-daily 

French Government Reviews Necessity of PSA Cuts

At a time of falling sales across Europe and particularly in its domestic market, extremely high new vehicle discounting, a first half year loss of €662m and the industry overcapacity many would see the planned cuts by PSA as just sound business sense and if anything a little overdue. However the new French socialist government seems to think it needs to investigate the cuts and has appointed a special advisor, Emmanuel Sartorius, to investigate, the results of which are due to be announced on 11 September. Automotive News Europe quotes a PSA spokesman as describing the action as “…part of a normal procedure that the government takes in such a case,". Should the investigation result in an attempt to block the cuts it will not be good news for the manufacturer or their Detroit partner, GM, as it will raise questions about their sustainability.


Ford and GM production threatened in Australia

The economic crisis continues to be felt around the world as the closure of a major parts supplier to the Australian auto industry, Autodom Ltd, threatens production for Ford and Holden (GM’s domestic brand). With production halved it is not entirely surprising that Autodom, Australia’s largest pressed metal manufacturer, is struggling to survive as even Australians are starting to end their love affair with V8s and are buying more fuel-efficient small cars from the likes of Hyundai and Mazda.


GM Sack Global Marketing Chief

Sponsorship deals have often proved successful for increasing awareness, e.g. Hyundai and the World Cup, the plethora of corporations linked to the recent Olympic Games, but the books have to balance.

With all of the European woes currently befalling GM in Europe it seems like somebody didn’t do the maths as GM has announced the immediate departure of their Global Marketing Chief, Joel Ewanick. Without elaborating any further a GM spokesman, Greg Martin, said "He (Ewanick) failed to meet the expectations that the company has for its employees". However it is rumoured that the real reason for his departure was the failure to properly report the financial details of the new sponsorship deal between Chevrolet and Manchester United, said to be worth £357 million between now and 2021 and more than double United’s current deal. To put it into context Barcelona are currently getting about 30% less with around £25m from the Qatar Foundation.


Former Ford and GM subsidiaries plan deeper cuts

Parts suppliers in Europe are also struggling as both Visteon, formerly part of Ford, and Delphi, GM’s former parts division, both announced plans for deeper cuts with plant closures and plant moves to cheaper production facilities being planned on the back of the plunging European market. Visteon, which is still heavily reliant on Ford sales has announced a $100 million restructuring programme whilst Delphi plan to cut deeper and harder with restructuring plans said to be $250 million, with $175 million of that happening in Q4 this year.


GM Look to Reacquire GMAC International Operations

When GM sold off its financing subsidiary GMAC back in 2006 part of the deal included an option to buy back. Fast forward 6 years, through the worst financial crisis in living memory and a rebranding of GMAC to Ally Financial and GM are now one of the reported many suitors looking to buy the auto lenders international operations outside of the USA. Controlling its own financing has to be sensible for an auto maker the size of GM.