Clunker mania

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The cash for clunkers program is off to a roaring start, as Americans seem ready to purchase new cars when presented with a great deal. This is a very encouraging sign for the economy, as a boost in auto sales would go a long way towards getting us out of this recession.

The program is so popular that it’s running out of money after just one week. The House has passed a bill to add $2 billion to the original $1 billion program. The Senate will take it up next week. Senator Diane Feinstein won’t support the bill without tougher fuel standards, and John McCain might filibuster the bill in the Senate. It’s not a done deal yet.

Ford shocks the market by posting a profit

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The automotive landscape has been changing so rapidly it’s sometimes hard to keep up. GM and Chrysler had to be saved by the federal government, while Ford was able to avoid that fate. Their troubles have probably helped Ford, but Ford has also been on a tear with impressive new models like the Ford Fusion, and many more new models are in the pipeline.

Auto analysts expected Ford to show some improvement, but the announced numbers were a pleasant surprise for many.

Ford Motor Co. posted a surprise profit of $2.3 billion for the second quarter — a sharp contrast to the whopping $8.7 billion loss it reported for the same period a year ago — but the profit was largely due to one-time gains related to its debt reduction moves.

Even with those special items removed, the Dearborn automaker surprised Wall Street with a pre-tax operating loss of $424 million for the second quarter of 2009, excluding special items — a $609 million improvement compared with the second quarter of 2008.

After taxes and excluding special items, Ford posted an operating loss of $638 million in the second quarter, or 21 cents per share, compared with a loss of $1.4 billion, 63 cents per share a year ago. That also was a marked improvement over the $1.4 billion loss — $1.8 billion after taxes and excluding special items — that Ford reported for the first three months of the year, when it lost 75 cents per share.

Wall Street had been anticipating a loss of 52 cents per share, after taxes and excluding special items, according to a survey of a dozen analysts by Thomson Reuters prior to today’s announcement.

“While the business environment remained extremely challenging around the world, we made significant progress on our transformation plan,” said CEO Alan Mulally. “Our underlying business is growing progressively stronger as we introduce great new products that customers want and value, while continuing to aggressively restructure our business and strengthen our balance sheet.”

It looks like Alan Mulally’s turnaround efforts are on track.

Chrysler will double “cash for clunkers” deal

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The incentives keep flying as the automakers try to move metal in this tough market.

Chrysler Group LLC, looking to clear out sales of 2009 models, will double the federal government’s cash-for-clunkers program that will launch Thursday.

Chrysler will offer up to $4,500 cash or 0% financing for 72 months through GMAC Financial Services on most 2009 model vehicles. These incentives are valid through Aug. 31, 2009.

The incentive program, designed to improve the fuel economy of the nation’s fleet, provides a voucher of either $3,500 or $4,500 for trading in a vehicle that averages less than 18 miles per gallon in combined city and highway driving and is not more than 25 years old. The amount of the credit is determined based on the incremental fuel-economy improvement between the old and new vehicles.

The Chrysler incentives will apply to any buyer regardless of the age and fuel economy of the trade-in vehicle, said Steven Beahm, Chrysler vice president of sales operations.

Ford announced that they will not match the incentives, which isn’t surprising given’s Ford’s recent success in the marketplace.

Has Toyota jumped the shark in the U.S.?

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That may a silly question as it relates to the most successful car company in recent years, but Toyota has been facing some issues that go beyond the problems caused by the economic crisis.

The Detroit News has a lengthy article about how Toyota is no longer profitable in North America, and Yoshimi Inaba, president and chief operating officer of Toyota Motor America and chairman and CEO of Toyota Motor Sales USA, made some pretty stunning admissions about the problems facing Toyota.

Because of Toyota’s success for the last eight years, there was an attitude among some executives that, “OK, now we have been so successful, we understand the market, so can make a decision there rather than here,” Inaba said.

Inaba said the company is listening to the market, and customers “had been a little bit lost.”

When asked whether Toyota had become complacent, he said, “Complacent or arrogant — a lot of people use that — I don’t know,” he said, adding that the company had tried to guard against those qualities.

Inaba acknowledged that Toyota vehicles had often lacked “passion” and that the company’s vehicles must be “more exciting, more nimble.”

“Toyota is a good car but not exciting. Those are the comments we usually (or) always get,” Inaba said.

In my opinion Toyota has just found itself in a position where the competition has caught up to them in quality and surpassed them in design. When you consider that other automakers have figured out how to build cars more efficiently, the edge is gone for the Japanese giant. Toyota took advantage of that cost advantage and that allowed them to rake in big profits. When the economy comes back they will make money again but their rivals are growing with Hyundai looking like the real value in the foreign car crowd (have you seen the Genesis?) and Lexus looking more and more like an overpriced Camry.

Also, did I mention that Ford is at the start of their best product launches in decades and GM and Chrysler are trimmed down and ready to compete again? Let the games begin!

Ford announces new V-6 EcoBoost engine

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Ford’s EcoBoost engine will now include a V-6 option.

Ford’s EcoBoosted future has long been known to include a four cylinder option, and now the automaker has finally made some details official during a global product presentation today in Detroit.

Set to hit the market sometime in 2010, the 2.0-liter block will be the first engine in Ford’s EcoBoost lineup to employ a twin-independent variable cam timing system (Ti-VCT). Ford says the engine will deliver 10 to 20 percent better fuel economy than larger displacement V-6s, all while delivering similar power numbers.

The new engine will be produced in Northeast Ohio, and that’s welcome news to a region struggling with the loss of manufacturing jobs, which has only gotten worse with the economic crisis.

After two years of idling, Ford Motor Co.’s Engine Plant No. 1 re-opened Tuesday with the new leaner, cleaner EcoBoost engine.

The cutting edge 3.5-liter engine — which will equip 90 percent of Ford vehicles — is the first V-6 direct-injection, twin-turbocharged engine produced in North America and will be produced exclusively at the Brook Park site.

It’s a welcome sight at a facility that has struggled in recent times.

“This is the engine of the future. We’re really proud that the finest engine makers in the world are right here in Brook Park and the finest engines in the world are right here in Brook Park. With the new designs, there’s a lot of reasons to want to buy a Ford product. It’s a breath of fresh air and in this economy, we need to hear as much good news as possible,” said Mayor Mark Elliott.

Ford is hoping that this will give consumers more options, such as customers who are leaving large, V-8-powered SUVs but need towing capacity, who can now consider the top-level version of the Flex crossover due to the new, more powerful engine.

Fiat will bring an Alfa Romeo to Chrysler showrooms next year

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Fiat has already announced that they will bring the Fiat 500 to Chrysler showrooms in the U.S. in 2010, and now they’ve announced that the Alfa Romeo MiTo will also be available in America next year.

“The MiTo is going to help us re-establish the Alfa brand in the United States,” said Richard Gadeselli, vice president for communications of the Fiat Group, in a recent interview at the company’s headquarters here.

Though Alfa Romeo left the American market in 1995, the MiTo hatchback will not really be the first new Alfa to appear in the United States since then. The 8C Competizione and Spider have been available through select Ferrari and Maserati dealers since last year. Considering the stratospheric prices of the limited-edition, hand-built 8C, the MiTo will be the first new Alfa intended for general audiences.

Both the MiTo and the 500 will be sold at Chrysler — not Ferrari — dealerships, though they will still wear Alfa and Fiat badges. American-market prices have not been announced, but $20,000 or so seems likely for the MiTo and mid-teens for the 500.

The new Alfa is aimed at “an active, thrill-seeking, performance-minded 20-something.”

I think this is a great move by Fiat. The Fiat 500 and the MiTo will give Chrysler dealerships hip vehicles that appeal to younger drivers who like the Mini Cooper and other small imports. The marketing campaign should be fun to watch.

Toyota executive says U.S. auto sales can rebound next year


According to CNBC, Toyota Motor’s North American President Yoshi Inaba said that U.S. auto sales could rebound to a $12- to 13-million annual sales rate within a year. Toyota is also reviewing its options regarding an auto plant in California that was part of a joint venture with Pontiac that was terminated by GM, along with a planned plant in Mississippi that has been put on hold due to market conditions.

VW to purchase Porsche

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News broke over the weekend the VW will purchase Porsche.

Porsche SE’s controlling families will agree Thursday to accept an offer by Volkswagen to buy its sports car business Porsche AG for roughly 8 billion euros ($11.28 billion), Der Spiegel reported Saturday.

Germany’s leading weekly magazine wrote that the rival Porsche and Piech clans, which own 100 percent of Porsche SE votes, will approve the two-stage takeover at a supervisory board meeting on July 23.

There are several hurdles to the deal, however, including some tax issues, so we may not see this deal close as soon as initially reported.

Going green may not save you green with your auto insurance

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Will buying a hybrid save you money on your auto insurance? That might not be a good assumption given this recent data.

Hybrid car owners may be a different shade of green than their insurers hoped.

Insurance companies often give discounts to drivers of hybrids, perhaps because the image of a tree-hugging environmentalist suggests a cautious type who is a good risk to insure. But hybrid drivers rack up more miles, more tickets and costlier accidents than conventional car drivers, according to a study released Wednesday.

“High-mileage drivers seem to be attracted to [hybrid] vehicles,” said Raj Bhat, president of Quality Planning Corp., the San Francisco firm that conducted a study of 360,000 vehicle-insurance claims made to 12 U.S. insurers over the last two years, comparing hybrid and conventional vehicles. Quality Planning is a unit of Insurance Services Office Inc., a closely held group of companies that provides data, analytics and other services.

The disconnect between perception and reality could leave insurers with unprofitable hybrid policies unless they adjust pricing to reflect the unexpectedly high costs, or make up the difference elsewhere, said Robert U’Ren, senior vice president of Quality Planning, in an interview.

For 2008 hybrid cars, the most recent model year it studied, Quality Planning found that the cost to insurers of providing collision coverage for hybrids was 13% higher than for conventional vehicles. The cost of providing comprehensive coverage, which also includes the expense of noncollision-related damage, was 17% higher. For older and particularly for larger hybrid models, the difference was even bigger. U’Ren said that the more complicated hybrid engine design likely accounted for much of the difference in cost.

The article goes on to explain that most insurance companies have not made significant adjustments relating to premiums and coverage for hybrid cars, and several insurance companies, including Farmers Group Inc., a subsidiary of Zurich Financial Services AG, and Travelers offer hybrid owners up to 10% off coverage prices. It will be interesting to see how this develops as more data becomes available.

Chrysler begins its Fiat education . . . in Poland

Now that it has emerged from bankruptcy with the help of the American taxpayer, Chrysler needs to make small cars efficiently to survive. Fiat will be a huge help with its contribution of small-engine technology, but it looks like Chrysler can learn efficient production techniques from Fiat’s factory in Tychy, Poland.

The mammoth Fiat plant here, which churned out nearly half a million cars last year, may hold some of the answers for Chrysler (as well as Ford Motor and General Motors), as it struggles to regain its footing after its bankruptcy and reduce its dependence on muscle-bound trucks and sport utility vehicles.

For those who remember Fiat before its ignominious retreat from the American market — the name was said to stand for “Fix It Again, Tony” — the Italian automaker may seem an unlikely role model. It left the United States in the early 1980s after widespread quality problems.

But Fiat itself has undergone a revolution under Sergio Marchionne, who became its chief executive in 2004, raising standards for quality and reliability at plants like Tychy and mastering the art of building smaller cars with high efficiency. Chrysler hopes he can do the same thing for it now that he has assumed control of the American company.

“We are lucky there is a crisis,” said the director of the Tychy plant, Zdzislaw Arlet, unable to resist a gibe at the bigger cars and trucks that have traditionally stolen the industry spotlight. “Everybody wants to build small cars now.”

At Tychy (pronounced TICK-ee), one secret is flexibility: The latest robotic technology is balanced by workers who can quickly shift models to match demand. That is one reason Tychy is operating around the clock, six days a week, while most other auto plants in Europe and the United States are running at a fraction of capacity, increasing costly nonproductive downtime.

Marchionne has proven that he’s a great car guy, and there’s reason to be optimistic about his ability to transform Chrysler. With this visit the process has begun.

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