Posted by: David Welch on November 09
The drama in Germany between General Motors and Europe just keeps dragging on. Now, its top European executive, Carl-Peter Forster, is leaving the company and GM Vice Chairman Bob Lutz will take over on an interim basis as Chairman of the company's Supervisory Board. But it's a non-executive post. Lutz won't manage day-to-day workings.
This shouldn’t surprise anyone. Forster supported selling Opel to Magna and Russia’s OAO Sberbank, which GM management and the board opposed all along. Given his stance on the sale, it’s surprising that he has lasted this long. Sending Lutz to oversee Europe makes sense, since he spent a lot of time over there early in his tenure as GM’s new-car czar. His job was to get vehicle engineering in Germany mated to GM’s global product development works. He knows Opel’s inner workings.
But it’s obviously not a long-term solution. First of all, Lutz is supposed to be in the U.S. marketing GM’s new cars. Sparking sales in the U.S. remains GM’s biggest challenge. While critics have wondered aloud how a 77-year-old car guy can be a marketing maven, the 60-day money-back guarantee and “May the Best Car Win” campaign have increased brand consideration for GM. Market share has ticked up during the past couple of months. But the job is far from done. Lutz can't manage Opel's operations. He is too busy in the U.S.
More to the point, GM needs a German with good labor relations to run Opel. Right now, the German government and IG Metall, the labor union representing Opel’s workers, want nothing to do with GM management in Detroit. They don’t respect GM’s American executives. Lutz is Swiss German, but I scarcely believe they will view him much differently than they view the rest of American management.
GM could go hire a German. They did with Forster. But GM is having a tough time finding talent. Salaries are limited, there is no stock to give just yet, though the company can certainly promise to give share as it nears an IPO. But what’s it worth? And bonuses? Good luck with that. It amounts to a turnaround job with limited financial reward. On top of it, whoever takes that Opel job will have to win over an angry government and hostile union. GM has had trouble landing a new CFO to replace Ray Young in North America. Imagine the challenge of finding the right German executive to lead Opel.
Posted by: David Welch on November 04
Contrary to popular view, Chrysler isn’t flat broke. That was the first thing Fiat CEO Sergio Marchionne said when kicking off a six-hour presentation that seeks to convince the world that the Italians have a plan to bring Chrysler back from the brink. The company has $5.7 billion in cash and has actually grown its cash hoard by $1.7 billion since exiting from bankruptcy in June, Marchionne said.
And get this. Chrysler made $200 million in profit since emerging from bankruptcy in June. Well, let’s qualify that. The company made $200 million in EBITDA, which is earnings before interest, taxes, depreciation and amortization. That is to say, they made money before counting a lot of things that cost the company money. So Chrysler still lost money since June.
But Marchionne did say that Chrysler broke even in September. One month’s profit is practically meaningless in the car business. Put off some major spending on a future vehicle program for a month and you can make any month look good. Marchionne said Chrysler did it by being very parsimonious. His point is that Chrysler’s financial position is not as hopeless as many outsiders think.
Given the debt reduction and cost cuts made during bankruptcy, Chrysler’s financial position is probably not as dire as everyone thinks. But its sales are. Chrysler sales are off 39% this year. The company said it has a slew of new models coming from its joint engineering projects with controlling partner Fiat, but stopping that drop off in sales will be very difficult. If it gets worse, Marchionne will have to slash deeper for Chrysler to make it.
Posted by: Ian Rowley on November 04
At a hastily arranged press conference this evening in Tokyo, Toyota CEO Akio Toyoda announced that the carmaker is the latest big player to quit Formula One motorsport. Toyota, which competed in 139 races after entering the sport in 2002, recording no wins, will quit immediately. Toyoda said the company will also stop providing engines to the Williams team. "It's a complete withdrawal," he said, citing the "the current severe economic realities". Toyota follows Honda, which quit F1 last December, and BMW which entered its final race on Nov. 1 in Abu Dhabi. On Nov. 2, Japanese tire-maker Bridgestone said it would pull also out of the sport, saving $100 million a year.
While long rumored, Toyota's decision to quit wasn't a certainty. For one thing, since becoming CEO in June, Toyoda, a keen racer, has talked of giving Toyota a sportier image. At last month's Tokyo Motor Show, Toyota showed the $375,000 Lexus LFA supercar, which its CEO had a hand in developing, and the rear-wheel drive FT-86 sports concept.
Despite never winning a race, this season wasn't all bad and included several podium finishes. And, after an injury to first-choice driver Timo Glock, Kamui Kobayashi, a Japanese driver who graduated from Toyota's driver training scheme, impressed in the final two races. Toyoda said the decision has nothing to do with Toyota's poor record in F1. Indeed, with Toyota expected to post a second consecutive annual loss this fiscal year, it is in some ways surprising it took this long to quit. Running a F1 team can cost upwards of $500 million a year.
A bit like Honda last year, the decision may also make good business sense. Spending such large sums on a sport that isn't a huge draw in the U.S. isn't the best use of limited resources. On top of that, gas guzzling F1 cars don't sit comfortably with Toyota's carefully honed "green" image, while it's hard to see their relevance to any of the company's production cars, save the Lexus LFA. And, if all that isn't reason enough, F1's teams and management haven't covered themselves in glory in recent times. In 2007, the McLaren team was fined $100 million for its part in a spying scandal. Last year, Toyota was one of several teams that put its name to a statement attacking Max Mosley, the chairman of the sport's governing body, after he became embroiled in an embarrassing sex scandal. And this year Flavio Briatore, the chief of the Renault team, was banned for life after instructing one of the team's drivers to crash on purpose.
Posted by: David Welch on October 30
Just when you figured that the United Auto Workers have been hammered into submission, union workers are flexing their muscles. Ford union workers at 11 plants have voted against concessions made by the UAW’s bargaining committee. Workers at four plants have approved the concessions, which include wage freezes for new hires, a moratorium on strikes over pay and benefits and some work rule changes, Bloomberg reported on its web site. If workers don’t ratify the concessions, then union leaders and Ford management have to hammer out a deal that can pass muster with the rank and file. Either that or Ford gets none of the concessions.
Where to begin with this one? From a public perception standpoint, this is the worst thing the union can do. Across America, workers are losing jobs even as the economy shows signs of life. Few Americans will have sympathy for UAW laborers who have kept their jobs even amid the worst downturn in auto sales in decades. You can’t blame UAW leaders for this one, since they agreed to the concessions. It’s the members who aren’t seeing the writing on the wall.
The new concessions aren’t exactly gut wrenching, either. Ford wants to freeze entry-level workers. That doesn’t affect the voting members and won’t likely hurt anyone new since Ford isn’t hiring. They also want to consolidate some skilled trades classifications, which could weaken job security for the electricians, welders, pipe fitters the like. But the big sticking point looks to be the no-strike clause that would be in place for the 2011 labor contract negotiations. Under the tentative agreement, the union can’t strike over wage and benefits proposals made by the union. But they could if management tries to cut their pay and benefits or over other issues like health and safety concerns. If the UAW and Ford can’t strike a deal, it would go to an arbitrator. Other major unions already do this, so it wouldn’t be the end of the world.
Wait, it gets even more silly. To sweeten the deal, Ford has been willing to give workers a $1,000 bonus upon ratifying the new concessions. The company would also commit to build new products in some UAW plants. So the union could strike over proposed pay cuts in 2011 and they'd get some more cash and job security today.
For both sides, that argument seems to be much ado about nothing. Ford hasn’t had a strike this decade. Neither side is interested in doing that since the union would worry about damaging their healthiest Big Three employer, which is already carrying a big debt load. And Ford wouldn’t want to blow cash on a standoff with labor. In other words, they are fighting over how to manage a very unlikely outcome. That said, asking a union not to strike declaws its negotiators.
My guess: Ford will give in on that one to get the other concessions, which deal with actual compensation and work rules, done and sealed. But given the nature of the concessions and what the workers stand to gain--and not lose--I can't explain their obstinacy on this one.
Posted by: David Welch on October 28
Fiat CEO Sergio Marchionne will soon deliver his fix-it strategy for Chrysler. One big piece appears to be the return of Fiat’s upscale Alfa Romeo brand to the U.S. with a dedicated dealer network. It would be sold as an upscale performance line that offers a bit of snooty European cachet but at lower prices than BMW and Audi. And it could work.
It will be a grand experiment by the Italians. The U.S. luxury market is already hotly contested with Lexus, Mercedes, Audi and BMW holding sway. Infiniti and Cadillac have new models coming. Alfa Romeo retreated from the U.S. market in 1995 and wasn’t exactly known for its quality. So its entrée won’t be an easy one.
But I’ll go out on a limb and say that Alfa has a real chance. I don’t expect the brand to sell cars in big numbers, especially at the start. Alfa will have to establish its name, brand image and prove that its car have real quality. The marketing push will cost a couple hundred million a year. But the styling is sophisticated and sexy, especially the MiTo compact. The MiTo would take the Mini Cooper head on. The 159 sedan is a looker. Check out the GT coupe, as well. The 8C is an absolute stunner. No word on which cars would arrive here from the boot. But they have some product that would turn heads. They are also pretty zippy cars that are fun to drive. Simply put, the brand offers something different than most premium makes sold in the States. And if fuel prices jump again, small and efficient upscale cars could catch on.
