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Archive for July, 2009

VW AG Q2 Income Drops 83% but Remains in Black

Q2 Profit of €283 million comes from Chinese and Brazilian markets as Europe and U.S. remain weak.

by on Jul.30, 2009

VW's WinterKorn and Merkel

German Chancellor Angela Merkel talks to employees at Volkswagen do Brasil.

Volkswagen AG, the biggest carmaker in Europe and soon to be owner of Porsche, rung up second quarter results that look like the worst of the Great Recession is over for it, according to our reading of its latest financial statement issued this morning.

The Wolfsburg-based German maker saw sales of light vehicles decline 4.4% during the first half of 2009, as the global sales declined 18%. This relatively better performance than the overall market came in spite of troubles with its Skoda and Seat brands in Europe, notably in Spain and the U.K. 

The real growth, which kept VW Group in the black during Q2 to the surprise of some analysts, came from strong performances by the VW brand in Brazil (+7%) and China (+23 %), now VW’s largest market. Audi also contributed with its strong performance in the Chinese market.

Results were also strong for the first half of 2009 as the Group made a €1.2 billion operating profit in H1 2009. Its global market share is now 12%.

In the first six months of the year, Europe’s largest automobile manufacturer delivered 3.1 million (H1 2008: 3.3 million) vehicles worldwide. Sales revenue declined by 9.4% to €51.2 billion (€56.5 billion ’08) in the first six months due to volume-related factors. Operating profit amounted to €1.2 billion (€3.4 billion), of which €928 million is attributable to the seasonally strong second quarter. The Group generated profit after tax of €494 million (€2.6 billion).

Q3 is Next!

Q3 is Next!

“The course of the year so far shows that we are excellently positioned, thanks to our multi-brand Group model. Even in a particularly difficult phase in the international automotive markets we were able to gain share in key markets. This has further improved our position on our way to the top,” said Prof. Dr. Martin Winterkorn, Chairman of Volkswagen AG’s Board of Management.

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GM’s Opel Negotiator Tips Hand or Clears Air?

We think the company wants to sell Opel to RHJI despite German federal and regional political pressures.

by on Jul.30, 2009

Presumably, Forster, who is running GM Europe, has a future looking after Opel.

Presumably, Forster, who is now running GM Europe, has a future looking after Opel.

The chief negotiator for General Motors on the sale of Opel/Vauxhall in Europe published a blog post yesterday that in my view foreshadowed what GM thinks is a desirable outcome for the impending decision. It is a canny piece of communication in the midst of a political mess.

John Smith, a GM Group Vice President who normally looks after GM’s future product plans, is leading an effort that he says has always been about finding the “best solution”for Opel/Vauxhall. And he points out that, thus far, GM has not picked a favorite in spite of such assertions by some media outlets. For what it’s worth, in my dealings with John over the years, including when I was competing against him, I have found him to a straight talking man of his word.

Two different choices

The Opel matter has devolved into two buyer choices: The Canadian auto conglomerate Magna, which has strong European and German ties, or an investment group know as RHJI.

It is by most accounts a complicated negotiation, as we have noted before, since it will require the agreement of  labor unions, regional and federal  governments, financial  institutions and regulators, among others, to broker a deal to save Opel. And GM needs to save Opel engineering if the reorganized company is to have a good shot at surviving the brutal car wars of this decade.

If this was a horse race, not subject to fixing, I’d handicap it this way:

RHJI is the clear favorite since is a venture capital group that will look to sell off all or most of its stake in Opel for a profit as soon as possible. No doubt GM will negotiate favorable terms for itself on the buy back. This is completely consistent with GM’s, entirely rational, desire to protect its product a plan going forward, which Opel engineering is key to.

Magna is a long shot. It’s a potential competitor to GM globally, as well as a current supplier, and the Russian financing presents possible conflicts in a market that GM is expanding in.

But the political aspects mean this is no ordinary horse race, so such simple reasoning might not apply.

Here’s how Smith views the race since he says both bids being developed “bring both opportunities and challenges.”

First the Magna bid

Smith says Magna “is clearly preferred by several politicians and the Labor Bench.”

However “the bid presented to GM varied from the negotiations we had in the previous weeks and contained elements around intellectual property and our Russian operations that simply could not be implemented. GM has partners in other parts of the world who have joint ownership of these assets…we simply could not execute the deal as submitted.”

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Daimler Dives Into the Red, Again

Q2 loss lessens, but near-term profits likely elusive.

by on Jul.29, 2009

A turnaround at Daimler AG will likely depend on getting a lot of these 2010 Mercedes-Benz E-Class sedans and coupes into customer hands ASAP.

A turnaround at Daimler AG will likely depend on getting a lot of these 2010 Mercedes-Benz E-Class sedans and coupes into customer hands ASAP.

Daimler AG continued to see its losses mount, during the second quarter of 2009, but reported a stronger financial position as its earnings from continuing operations improved.

Daimler lost $560 million in the second quarter compared to the nearly $2 billion loss in first three months of the year.  Still, that was a far cry from the substantial profit the company posted a year ago.  And Dieter Zetsche, Chairman of the Board of Management of Daimler AG, warned that the German automaker may not return to profitability this year because of the severe global recession.

The improvement is likely to be gradual at best and rests on scoring a solid, global hit with the new E-Class, Zetsche said.  The automaker has completely redesigned its mid-line sedan, for the upcoming year, and added a coupe to the E-Class line-up, as well.

It's Free!

It's Free!

Meanwhile sales of trucks, busses and vans also continue at low ebb because of the broad economic downturn around the world.

Overall, Daimler posted a net loss of $1.4 billion compared to net income of $1.95 billion in the same period a year ago. Daimler reports in Euros but the loses have been translated into dollars, with an exchange rate set at $1.40 to the Euro.

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GM Fuel Cell Program at Risk

Maker wants more government money - what else?

by on Jul.29, 2009

GM insists it is at the forefront of fuel cell development - but it insists it will have to drop its research work without some federal funding.

GM insists it is at the forefront of fuel cell development - but it claims it will have to drop its research work without some federal funding.

General Motors officials are hinting that their research work on what many experts believe will be the ultimate clean automotive technology could be at risk – unless, that is, the federal government kicks in with yet more money.

Insiders tell TheDetroitBureau.com that GM has already spent over $1 billion to develop its fuel cell technology.  But despite the company’s belief that it has an edge on competitors like Toyota and Daimler AG, it warns it doesn’t have the cash on hand, after its recent bankruptcy, to keep up the necessary pace.

Your inside source!

Your inside source!

“The program has not slowed down at all,” Larry Burns, GM’s retiring vice president of research, told USA Today, in a report on the fuel cell program. “The issue is, going forward, do we have sufficient money to operate at that rate?”

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Re-Defining Acura

First Japanese luxury brand struggles to stand out in a crowd.

by on Jul.29, 2009

The 2010 Acura ZDX, shown here at its debut, during this year's New York Auto Show, will be critical to building momentum for the Honda luxury brand.

The 2010 Acura ZDX, shown here at its debut, during this year's New York Auto Show, will be critical to building momentum for the Honda luxury brand.

It’s turning into a busy year for Acura, the luxury arm of Honda Motor Co.  The oldest of the Japanese brands is launching an array of all-new or updated models, from the new ZDX crossover to the V-6 version of its TSX sedan, in a bid to gain momentum in a market that’s both crowded and sluggish.

The success of the new products will be critical for Acura, which was the first of the Japanese luxury brands – but which also seemed to lose its way, in recent years.  The Honda subsidiary has been struggling to create a true brand identity that differentiates it from better-known competitors, such as Lexus, BMW and Mercedes-Benz.

Your inside source!

Your inside source!

Unlike those competitors, Acura has taken a generally conservative approach to its products.  It’s aimed for the lower to middle luxury market – unlike Lexus, for example, with its big LS sedans and LX sport-utes.  And Acura has opted against the V-8s, V-12s and performance-based hybrids that help define other luxury brands.

As a result, analysts contend, it has remained an also-ran in the high-line market.

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Honda Q1 Net Income Drops 96% as Revenue Dives

Still, the Japanese company ekes out a small profit for the quarter, but the auto business is losing money.

by on Jul.29, 2009

Honda Motor Company, Ltd. net income for the fiscal first quarter ended June 30, 2009 totaled ¥7.5 billion ($79 million), a decrease of 95.6% from the same period in 2008. Net income per common share for the quarter amounted to ¥4.17 ($0.04), a decrease of ¥91.39 from ¥95.56 for the corresponding period last year. (One Honda American Depository Share represents one common share.)

Consolidated net sales and other operating revenue for the quarter amounted to ¥2,002.2 billion (USD 20,854 million), a decrease of 30.2% from the same period in 2008, primarily due to decreased revenue in the automobile business and unfavorable currency translation effects. Honda estimates that if calculated at the same exchange rate as the corresponding period in 2008, revenue for the quarter would have decreased by approximately 20.7%. Critics have long maintained that the Japanese government manipulates the yen to help its export dependent economy.

Honda

Yen (billions)

Q1 ending

June 30 ’08

Q1 ending

June 30, ’09

Difference

(% change)

Net sales and other operating revenue

2,867.2

2,002.2

-865.0

(-30.2)

Operating income

210.4

25.1

-185.3

(-88.0)

Income before Income taxes

224.2

5.4

-218.7

(-97.6)

Equity in income of affiliates

38.1

14.2

-23.9

(-62.7)

Net Income attributable to Honda Motor Co., Ltd.

173.3

7.5

-165.8

(-95.6)

Exchange rate: Honda’s average rates for this fiscal 1st quarter: JPY 97=USD1 / JPY 132=Euro1. Honda’s average rates for the previous fiscal 1st quarter: JPY 105=USD1 / JPY 164=Euro1

Honda’s consolidated operating income for the quarter totaled ¥25.1 billion ($262 million), a decrease of 88%, due primarily to decreased profit attributable to decreased revenue, the increase in fixed costs per unit as a result of reduced production and the unfavorable impact of currency effects caused by the appreciation of the Japanese yen.

Consolidated income before income taxes and equity in income of affiliates for the quarter totaled ¥5.4 billion ($57 million), a decrease of 97.6% from the same period in 2008. Equity in income of affiliates amounted to ¥14.2 billion ($148 million) for the quarter, a decrease of 62.7% from the corresponding period last year.

Sales in all of Honda’s business units for the quarter were negatively affected by the ongoing Great Recession.

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BMW Group Withdraws from Formula One Racing

Latest cost-cutting move is only part of an ongoing reorganization dubbed Strategy Number One.

by on Jul.29, 2009

The word from Munich

The word from Munich is F1 isn't sustainable.

BMW announced yesterday that it is abandoning its costly Formula One racing effort at the end of this season. The move follows Honda’s withdrawal from the ultra-expensive and controversial sport last year, which is increasingly being criticized for its lack of social consciousness as the Great Recession drags on, and environmental issues pervade the industry. 

“Of course, this was a difficult decision for us. But it’s a resolute step in view of our company’s strategic realignment,” said Dr. Norbert Reithofer, Chairman of the Board of Management of BMW AG. “Premium will increasingly be defined in terms of sustainability and environmental compatibility,” he said.

BMW is the largest luxury car maker in terms of sales in the world, and it has been hard hit by the global slump and demands from regulators that it clean up its gas guzzling vehicles. It is currently trying to cut costs by €6 billion, to stop an ocean of red ink. Its latest V-12 7-series emits more than twice the CO2 required under new European emissions rules. The company promises that a new CO2 Concept car will debut this fall at the Frankfurt Motor Show.

The money saved by cutting an F1 program, which can easily cost hundreds upon hundreds of millions of dollars will be invested in environmental technologies.  

“As our company places stronger focus on sustainability initiatives, our participation in Formula One becomes less a key promoter of this engagement,” said Reithofer.

Reithofer said BMW will continue in other motorsports series that will enable BMW to transfer technology more directly and to realize additional synergies. “This is in our customers’ best interest,” he said.

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Sneak Peek: 2010 Ferrari 458 Italia

"A tribute to Italy."

by on Jul.28, 2009

The 2010 Ferrari 458 Italia will hit 60 in less than 3.4 seconds.  It's also the first "mainstream" Ferrari to break the 200 mph barrier.

The 2010 Ferrari 458 Italia will hit 60 in less than 3.4 seconds. It's also the first "mainstream" Ferrari to break the 200 mph barrier.

The new products seem to be coming fast and furious from the folks in Maranello, these days.  Just as the new Ferrari California (reviewed today on TheDetroitBureau.com) reaches U.S. showrooms, the Italian automaker is giving us a sneak peek at the 2010 Ferrari 458 Italia.

Think of the new, mid-engined V-8 replacement for the F430 as “a tribute to Italy,” suggests Ferrari chief Luca di Montezemelo.

Your inside source!

Your inside source!

Scheduled for its public debut at the Frankfurt Motor Show, in September, Ferrari is providing not only an advanced look at the Italia, but some technical details suggesting this will be one serious performance machine.

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Battle Over NUMMI Escalates

UAW aiming to rally support to keep CA plant open.

by on Jul.28, 2009

The UAW is firing the first salvo hoping to prevent the closure of the 26-year-old NUMMI venture, near San Francisco.

The UAW is firing the first salvo hoping to prevent the closure of the 26-year-old NUMMI venture, near San Francisco.

The United Auto Workers and its union allies have quietly launched a campaign aimed at pressuring Toyota not to close the NUMMI plant in California now threatened by the break-up of a long-standing joint venture between the Japanese maker and General Motors.

The e-mail-based campaign is urging supporters of the UAW to call their Congressmen and encourage them to keep the plant in Fremont, California open.

The factory, originally a GM plant, has been running for a quarter century as part of an alliance between the two erstwhile competitors.  Toyota originally saw the joint venture as a way to test the possibility of producing cars in the U.S., while GM hoped to learn about Japanese manufacturing techniques.

Your inside source!

Your inside source!

The U.S. maker decided to abandon its position in NUMMI after emerging from bankruptcy since it is dropping the Pontiac brand and the marque’s Vibe is the only GM model now made at Fremont.  Without its U.S. partner, Toyota has said it had little interest in retaining NUMMI, its only unionized American factory.

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Shaking Up the PR World

Yes, Simon, you can come home again.

by on Jul.28, 2009

What keeps folks like Simon Sproule coming back to back-breaking auto PR jobs?

What keeps folks like Simon Sproule coming back to back-breaking auto PR jobs?

“You can’t go home again,” the author Thomas Wolfe wrote, in the book by the same title.  And usually, that seems to be true.  But not if you’re Simon Sproule.

In a relatively brief but meteoric career, the 40-year-old Brit went from a minor player in Ford’s global media relations machine to become the worldwide head of public relations for Nissan Motor Co., reporting directly to CEO Carlos Ghosn.  And then, late last year, Sproule shocked those who know him by announcing he’d be leaving the auto industry to join Microsoft as the tech giant’s new PR chief.

I have to admit, knowing him since he was a virtual child prodigy that I referred to as “Young Simon Sproule,” I didn’t really see him in the tech world.  Capable?  Absolutely.  But there’s something about the auto business that gets anyone connected with it, whether a worker bee, PR flack or media hack, hooked.  And so, I couldn’t even fake the slightest bit of surprise when the newly-married Sproule politely called me, this afternoon, to reveal that he was lured back by the siren call of Carlos Ghosn, and would be moving yet again, but this time to Paris.  Sproule will take on the newly-created position as head of PR for the Nissan/Renault Global Alliance.

Even the flaks trust us!

Even the flaks trust us!

“My heart is in the auto business,” he admitted from his office at Microsoft, noting that he’ll be back to work with Nissan/Renault on September 1st.

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