Bail Out Automakers ... or let 'em fall?

[Rich Parsons]

BMW making changes to the market shifts:

Germany: BMW cuts production of larger gasoline engines
By Glenn Brooks
2 September, 2008
Source: Automotive World
Though famous for its smooth-running six- and eight-cylinder engines, BMW plans to produce far fewer such units and more four-cylinder engines.

Such is the global shift away from large gasoline engines that BMW is phasing out production even of six-cylinder gasoline engines in Munich.

"We are producing the wrong engines here," Manfred Schoch, the chairman of BMW's works council and a member of its supervisory board, said at a recent employee meeting, Automotive News Europe reports.

"The eight-cylinder hasn't been produced in a three-shift operation for a long time," Schoch said. "We can now produce the entire global demand four days a week on a one-shift operation."

The works council chairman also told the magazine that BMW plans to wind down production of its famed inline six-cylinder engines in Munich in favour of more I4 units.

From 2011, some 320,000 four-cylinder engines a year will be built in the OEM's home city. Following this, further capacity of 240,000 engines a year will be added, he reportedly told the magazine.

In related news, Schoch states that the works council wants to see BMW build an electric car based on the 1 Series in Germany.

Second article

Germany: All-turbo engine range for fifth generation BMW 7 Series
By Glenn Brooks
7 July, 2008
Source: Automotive World
There will be an initial five model versions of the all-new 7 Series, BMW has announced, with the car making its world premiere at the Paris motor show on 2 October. Three engines will be offered, with the range consisting of the 730d, 740i, 740Li, 750i and 750Li, the latter two powered by the 402hp (300kW) biturbo 4.4-litre V8 from the BMW X6 and the only engine for North America. There will be an initial five model versions of the all-new 7 Series, BMW has announced, with the car making its world premiere at the Paris motor show on 2 October. Three engines will be offered, with the range consisting of the 730d, 740i, 740Li, 750i and 750Li, the latter two powered by the 402kW(300kW) biturbo 4.4-litre V8 from the BMW X6 and the only engine for North America.

The base engine for markets where BMW will sell the diesels will be a 245hp (183kW) version of its 3.0-litre I6, while the 740i and 740Li's gasoline unit is also an inline biturbo six and produces 326hp (243kW). BMW will not be matching Lexus' eight-speed automatic transmission or even the seven-speed gearbox in the Mercedes-Benz S-Class - all 7 Series model variants will have a standard six-speed auto.

As for the car's styling, it is more restrained than that of the controversial fourth generation model, particularly at the rear. BMW has also had a rethink about some of the interior changes it made with the current car, to that end moving the transmission's shift lever off the steering column and back to the centre console.

The iDrive controller has been rethought, too, with a streamlined and more intuitive series of functions/menu scrolling promised. BMW has also taken the climate control choices out of iDrive and returned them to the dashboard.

The OEM will equip the '7 with various constituents of what it markets as its 'Efficient Dynamics' programme, such as the regenerative braking system from the 1- and 3-Series. BMW is yet to announce whether or not this feature will be sold in North America - its non-appearance there thus far possibly in anticipation of making it a premium technology for the flagship model of the OEM's range.

Active steering, meanwhile, will be an option in Germany, while blind spot and lane departure warming devices will also be available.

The fifth generation BMW 7 Series is due to go on sale across Europe from November and in North America for the 2010 model year.
EU AGREES ON CO2 COMPROMISES.
The European
Parliament's industry, research and energy committee has approved 17 compromise amendments to the European Commission's proposal to limit average CO2 emissions to 130 g/km by 2012
All 17 amendments were submitted by Werner Langen, a representative of Germany's Christian Democrat party. German carmakers have complained that the original proposal unfairly penalizes them. Langen’s amendments give carmakers from 2012 to 2015 to become fully compliant with the 130 g/km limit. Cars currently average about 160 g/km. The amendments also fix the fine for noncompliance at €40 per vehicle per gram above the standard. The EC had proposed graduated fines that would reach €95 per car per gram by 2015. But the committee agreed that the EC’s penalties would be “far higher than any conceivable trade prices for CO2 certificates” and thus would inhibit innovation.
To encourage ultra-low-emission cars, the Parliament committee also wants to modify the rule so that cars emitting less than 70 g/km may be counted as five vehicles by their manufacturers. The European Parliament hopes to finalize the CO2 regulations in October. The EC wants to put the new rule into effect by early next year. Source: AutoBeat Europe 9-4-08

Europe: European Parliament Delays CO2 Vote
European Union (EU) lawmakers have delayed an important vote to decide regulations to limit carbon dioxide (CO2) emissions in order to toughen the demands on the car industry. According to an Automotive News Europe report, the legislative committee is looking to reverse changes made to the draft legislation by the European Parliament's influential industry committee on Monday (1 September). The European Commission originally proposed an across-the-board cap of 130 grams per kilometre (g/km) on vehicle emissions by 2012. However, the industry committee voted on Monday to introduce a gradual limit to CO2 emissions that would delay the final 130 g/km limit until 2015. The European Parliament's environment committee has the final say in shaping the eventual legislation before it is put before the full Parliament to a vote in October. However, it has now put back the vote on its final proposal to come up with a revised set of proposals that is likely to set stringent and rigid emissions targets for the EU's carmakers.
Significance: The latest development will no doubt be extremely unwelcome for Europe's original equipment manufacturers (OEMs), which for the most part have made huge strides in curbing vehicle emissions in recent years. BMW has led the way in reducing its CO2 emissions (see Europe: 27 August 2008: BMW Leads Europe's Carmakers in Reducing Emissions, Says T&E), having cut its average CO2 output across its vehicle range by an average of 8.2% to 170 g/km, which is an impressive figure for a manufacturer of so many high-performance models. With the carmakers already proactively working to reduce emissions, a confrontational approach by the European Parliament's environment committee would appear heavy-handed. Passenger cars currently contribute 14% of the EU's total CO2 emissions, and a reduction in this figure is an important component of the bloc's ambitious goal of cutting CO2 by a fifth by 2020 Source: Global Insight 9-5-08

 

[Rich Parsons]

To show the market in August:

US AUTO SALES WILT IN AUGUST.
U.S. sales of light vehicles fell 16% last month from a year earlier to 1.25 million units, their 10th consecutive monthly decline, according to Autodata Corp. August’s annualized sales rate of 13.7 million compares to a rate of 16.3 million in August 2007. The good news: Last month’s sales pace was a big improvement over July’s 12.55 million rate, a 16-year low. Sales by Detroit’s automakers fell 25% in August. Chrysler’s volume plummeted 35%, with cars and trucks contributing equally. Sales fell 26% at Ford, where SUV sales were halved. General Motors says its employee-discountsfor- everyone promotion held its sales decline to 20%. Demand at Toyota and Honda fell 9% and 7%, respectively. Gainers included Nissan and Subaru (+14% each), Volkswagen (+3%) and BMW, up 1%, thanks to a 34% jump in sales of its Mini brand. Honda’s August volume pushed its sales total for the first eight months of this year to 1.083 million vehicles to pass Chrysler (1.076 million units) for fourth place in U.S. auto sales behind GM, Toyota and Ford. Demand for fullsize pickup trucks and SUVs fell 25% and 29%, respectively, last month, vs. declines of 33% and 47% in July. Automakers interpret the numbers as showing that moderating fuel prices and hefty incentives are bringing some consumers back to light trucks. Sales of subcompact cars grew just 4%, partly because inventories of popular models are depleted

October numbers were for low 11 million or high 10 million volume market.

No one was buying for either fear or lack of finance from the financial market.

 

[Rich Parsons]

Britian is not immune to the market fall

UK: Car market down 19% in August

4 September 2008 | Source: just-auto.com editorial team
New car sales in the UK in August plunged 18.6% over last year to 63,225 units, prompting the UK's automotive trade association to urge government action to boost the UK's fragile economy.
Year to date volume was off 3.8% to 1,464,124.
"The market continues to weaken as consumers hold off new car purchases in the face of deepening concerns over the state of the economy," the Society of Motor Manufacturers and Traders (SMMT) said.
"There is a clear need for sustained action by government to boost the economy and restore confidence," said Paul Everitt, SMMT chief executive. "Continuing economic pressure on households has made consumers wary of making big purchases, so by deciding against an interest rate reduction the Bank of England has missed an opportunity to kick-start the economy," said Sue Robinson, director of the RMI National Franchised Dealers Association (NFDA) referring to Thursday's announcement by the UK's central bank.
Today, the Bank of England held interest rates steady at 5% in its monthly review, balancing concerns over the scale of Britain's economic slowdown against a recent upsurge in price inflation.
August car sales were the lowest since 1966 and accounted for a quarter of the fall in volumes over the year-to-date, the SMMT said, adding that the last three months accounted for 89% of the drop.
With GDP growth projections revised down to 1.5% in 2008 and below 1% in 2009, coupled with rising inflation and the availability of cheap credit diminishing, SMMT has revised its forecasts for the new car market down to 2.26m and 2.16m for 2008 and 2009 respectively.
Volumes are expected to fall by about 10%, or over 85,000 units, in the final four months of 2008.
New '58' plate sales this month are expected to slip below 390,000 units, from 419,290 units in a strong 2007.
The SMMT said the pace of decline in the private sector had quickened, reflecting consumers holding off from making new car purchases as they adjust to the unsettled economic setting.
"It is hoped attractive deals and offers can encourage September registrations," the SMMT said.
Fleet volumes have also slowed, with declines in each of the past two months. Year-to-date volumes are flat, but the market share has grown.
Vauxhall's Corsa (3,527) outsold the Ford Focus (2,933) in August, although places switched over year-to-date (73,429 Focus and 65,593 Corsa). Vauxhall outsold Ford in the month too, as last year, although Ford did close the gap. Lotus and smart both recorded exceptional growth in the month.
Mini segment volumes rose in August, as their market share doubled, while superminis' share moved from 29.1% a year ago to 33.8%, suggesting consumers are switching to more efficient cars.
The diesel market fell for a second consecutive month in August (-12.7%, 28,029), although market share again improved - from 41.4% to 44.3%. As consumers tighten their belts and move to more efficient models, diesels remain an effective choice. VW's Golf was the best selling diesel model both in August year to date.
Demand for alternatively fuelled vehicles fell back in August, down 25.7%, but remained up 5.7% over the year-to-date.
Growth in consumer spending eased to 2.3% in the second quarter on a year-on-year basis.
"The key concern is how much the growth will slow and when it will recover. Forecasts suggest the low point will be the start of 2009, before modest recovery," the SMMT said. The auto sector is hoping the government can quickly instil some confidence back into the economy. With oil prices falling, it is hoped inflationary pressures will ease and interest rates can be trimmed soon, although this alone is likely to be insufficient to restore confidence and boost spending.

 

[Rich Parsons]

China the fastest growing market has slowed

CHINA: Market cools further in August

4 September 2008 | Source: just-auto.com editorial team
China's car market is continuing to cool in response to higher gasoline prices and weakening consumer confidence, according to preliminary data obtained by Lehman Brothers.
In a research note, the investment bank said that Chinese passenger car sales fell 10% in August from a year earlier based on preliminary data.
Official figures are expected to be released over the next week.
Lehman Brothers said the Olympics particularly depressed car sales in the host city Beijing due to strict traffic controls, while many consumers remained at home to watch the Games.
"We estimated Beijing normally accounts for about 8 percent of annual passenger vehicle sales in China, and the sales slump in Beijing is likely to have a significant negative impact on national sales," the report said.
JD Power recently cut its forecast for Chinese passenger car sales this year to 5.95m units from its previous projection of 6.2m units. UK analysts JATO recently noted that car market growth was 'noticeably lower' in July and that, despite continued optimism in the region, China is not immune from the effects of increased fuel prices and global economic uncertainty.

 

[Rich Parsons]

More in reference to safety standards and differences

NCAP REVISES PEDESTRIAN CRASH RATINGS
Poor pedestrian impact performance on a number of new models has led EuroNCAP to revise its crash safety rating system. The revised standards are expected to be released next year. EuroNCAP notes that two-thirds of models tested last year received only two of five possible stars for pedestrian safety. The agency suggests the reason is that carmakers are concentrating on meeting other standards. When evaluated recently, for example, the Hyundai i30, Lancia Delta, Renault Koleos and Mercedes MLClass scored the maximum five stars in occupant protection tests, but none achieved more than two stars for pedestrian safety.
Next year’s revisions will include the safety potential of driver assistance technologies such as electronic stability controls, and adult occupant protection will be expanded to include whiplash testing.

US exports must meet the requirements to be sold in Europe.

The Ped Pro or Pedestrian Protection is to protect a person walking who gets hit by the car.

Note that the European manufacturers are not able to meet all the standards imposed upon them in their own market.

 

[Rich Parsons]

Chrysler looking to build in Russia as well.

CHRYSLER IN TALKS TO BUILD CALIBER IN RUSSIA?
OAO GAZ is talking to Chrysler LLC about building one of its vehicles—possibly the Dodge Caliber compact car—at the Russian automaker’s underutilized assembly plant in Nizhny Novgorod, says Vedomosti. The Russian business daily cites unidentified sources who say Chrysler is one of several automakers in talks with GAZ. The Russian company is seeking advanced technology and engineering expertise, and Chrysler needs overseas partners.

 

[Rich Parsons]

Data for sales out of Europe for the Month of August:

Europe: Western European New Car Registrations Plunge by 16.4% in August—Forecast
Registrations of new passenger cars plunged by 16.4% in August to just 714,029 units, which is equivalent to a drop of 140,000 units compared to the same month last year, according to Global Insight forecasts for the month. This projected August total is the lowest ever monthly total for the period of August 1978 to current day, which is as far back as Global Insight's monthly archives run. The second worst month in that timeframe was January 1980 when 738,031 new cars were registered.
That takes year-to-date (YTD) volumes to 9,606,991 units, 4.4% or 446,235 lower than last year's level. This is the lowest eight-month total since 1997, in which year January–August volumes stood at 9,347,743 units.

Western European Passenger Car Sales
Country
August 2008
August 2007
% Change
YTD 2008
YTD 2007
% Change​

Austria*

18,237
21,330
-14.5
209,591
210,519
-0.4​

Belgium * **

35,854
36,811
-2.6
440,506
418,400
5.3​

Denmark

11,408
13,382
-14.8
109,854
105,632
4.0​

Finland

9,453
11,025
-14.3
108,575
98,869
9.8​

France

103,404
111,249
-7.1
1,415,469
1,375,653
2.9​

Germany

214,386
239,381
-10.4
2,110,089
2,075,019
1.7​

Greece

19,819
21,524
-7.9
205,759
208,880
-1.5​

Ireland

5,252
8,841
-40.6
145,443
174,731
-16.8​

Italy

77,156
105,778
-27.1
1,537,192
1,753,349
-12.3​

Netherlands

39,746
41,051
-3.2
380,006
374,945
1.4​

Norway

7,833
10,786
-27.4
79,003
88,534
-10.8​

Portugal

12,354
11,678
5.8
148,312
142,075
4.4​

Spain

5,853
99,662
-41.3
882,336
1,118,995
-21.1​

Sweden

17,721
23,062
-23.2
174,134
195,699
-11.0​

Switzerland*

19,651
21,149
-7.1
196,598
190,701
3.1​

United Kingdom

63,225
77,649
-18.6
1,464,124
1,521,225
-3.8​

Western Europe

714,029
854,358
-16.4
9,606,991
10,053,226
-4.4​

* Best estimates as of 4 September 2008
**Belgium figures include Luxembourg
Source: Global Insight
The most dramatic falls were seen in Spain and Ireland, both of which lost more than 40% of their volumes during the month. In Spain, which is one of the region's all-important Big Five markets, that was the biggest year-on-year (y/y) percentage fall since early 1993 and the second-largest on record. With 58,500 new cars registered during the month, compared to almost 100,000 the previous year, it was equivalent to the loss of 41,000 cars. In Ireland, which is one of the region's smallest markets, the 40.6% drop in August followed a 25% surge in registrations in July, as new a new CO2-based tax system, which was introduced on 1 July this year has skewed

Sorry table formats did not keep with copy and paste. I will see if I can clean up and post again.

 

[Brian R. VanCise]

Wow Rich these are some very interesting posts that you are making. I am particularly interested in Chrysler's Jeep Wrangler with the 40 mile battery and then the fuel kicks in. Definitely that is something I would buy as soon as it is available!

 

[Brian R. VanCise]

It is also interesting to note based off your last chart and the Indian auto maker's forecast how car sales are plummeting world wide. :erg:

 

[Rich Parsons]

It is also interesting to note based off your last chart and the Indian auto maker's forecast how car sales are plummeting world wide. :erg:

Yes the world markets are all down. The world financial sitation is not well. The world has made it much harder to get loans for companies and the individual.

I expect the world market sales to be real down this year and to follow up next year with being down as well.

But the experts were all thinking things might get bad and made plans for 12 million units here in the North America Market. This is over 25% reduction in sales. But as pointed out for August it was at those numbers and October was worse. So, while I understand the frustration of people in the words of BAIL OUT.

This is not the Financial industry using high risk investment to back up mortgages that put everything at risk especially when they called that High Risk as low or moderate at best. This is an industry that is looking to Borrow money so they can continue to operate and then pay back that money. It is tough, but that is their plan. They are not asking for a gift in money. There would be an interest rate assigned to the loan, that would also be paid back. This is not free money.

 

[Big Don]

Friday, November 21, 2008
Frank Beckmann: Commentary
Beckmann: Members of Congress, not auto execs, deserve grilling
Excerpted from the DETROIT NEWS:

There was one major problem with this week's congressional hearings about the bid by Detroit's automakers for a government loan to stay in business -- the wrong people were under the gun.

Representatives and senators should have been answering questions from the automakers about why they approved government policies that have played the biggest role in driving American carmakers toward extinction.

The automakers have done what all businesses do -- they have created products their customers wanted to buy, and they have paid wages and benefits that were negotiated and agreed upon by management and labor.

Have they made mistakes? Of course -- from the Edsel to the Pinto, from the Corvair to the Cimarrron, from the Imperial to the K car, from job banks to full health care coverage for retirees.

As with all companies, Detroit's carmakers have paid for their errors in the market. They have suffered losses. And they have adjusted their product and policies to stay in business. What has pushed them to the brink has been a mortgage crisis and credit crunch not of their making.

This week, auto execs Rick Wagoner of General Motors, Alan Mulally of Ford and Robert Nardelli of Chrysler, along with United Auto Workers boss Ron Gettelfinger, were grilled by the ultimate second guessers, the politicians, most of whom don't have education degrees in economic fields or experience in making decisions on private employment, inventory and global competition.

One wishes the four could have asked the questions instead this week.

Why did members of Congress -- such as House Banking Chairman Barney Frank, Senate Banking Chairman Christoper Dodd and others -- raise fuel economy standards, adding more than $85 billion in costs as the industry was restructuring itself?

If the reason was forcing automakers to deal with higher gasoline prices, perhaps the politicians could explain why they have made fuel more scarce by blocking domestic drilling for oil and preventing new refineries from being built during the past three decades.
END EXCERPT
Impose EIGHTY-FIVE BILLION DOLLARS in costs and take no responsibility for the consequences, yeah, that's Congress.

 

[Rich Parsons]

Impose EIGHTY-FIVE BILLION DOLLARS in costs and take no responsibility for the consequences, yeah, that's Congress.

This is common from California to the national Congress. If they write a law and pass it, then they are not the bad guys. The cost of said law is added into to cost of the product but the people pay it and are no mad at the manufacturer and not the people who put the requirement in place.

In the late 90's the cost of cars remained pretty steady do to market influence, but from 96 on with the roll out of the new OBD II standards and the increased emission and safety standards since then. It all addes costs. The companies must pass this along or reduce profit and when things go bad then they do not have the cash reserves to get through.


As to the Corvair being a bad car. It was Nader who stated it was safe at any speed.

Well the Honda Insight and Toyota Prius and Smartcar are all unsafe at any speed by the same standards. If any of them were to get into a head on collision with a semi-truck even full size SUV there is nothing that can be done to make these vehicles safe. Does anyone comment about this? No back then BIGGER is better was the slogan. Now it is Green or Fuel Economy or Save the Planet, or pck your slogan that wants you to drive an unsafe car by the measure placed upon previous vehicles. But the media and those in power choose to over look it as it is not VOGUE.

While all the vehicle in this post I have mentioned have their merit and their market, making comparisons across time when the requirements and environment is not the same is not always going to give the logical answer. It can draw the emotional one though.

 

[Gordon Nore]

I found this blog post on another board. Don't know that I agree with all of it....

http://fastandloud.com/how-to-save-the-us-automotive-industry-in-10-not-so-simple-steps/

 

[Big Don]

I saw a Corvair Pickup the other day. I had no idea any were still around.

 

[Gordon Nore]

I saw a Corvair Pickup the other day. I had no idea any were still around.

Didn't know such a thing ever existed. I don't believe I've ever seen a stock vehicle with a ramp like that -- wonderfully practical.

 

[Big Don]

Didn't know such a thing ever existed. I don't believe I've ever seen a stock vehicle with a ramp like that -- wonderfully practical.

The one I saw was Fire Engine red and white and looked better than the one in the pic I posted. Yeah, the rampside was an awesome Idea that, because it debuted on a Corvair was sunk. Thanks Ralph!

 

[Rich Parsons]

I found this blog post on another board. Don't know that I agree with all of it....

http://fastandloud.com/how-to-save-the-us-automotive-industry-in-10-not-so-simple-steps/

Gordon,

I do not agree with the site. I agree they have the right to express their opinion. But it shows they have no clue.

Europe to North America.

Drop Emissions standards to European Standards for Diesel.

Design for both markets.
Safety standards are not the same. But many do design for both markets, but this is why people ask "Why did they put this here and leave this wide open space over there?" Safety differences or protection for Right Hand drive.

Why not standardize all emissions standards and safety standards and make all cars the same size and the same weight class and the same drive controls. If they are all the same requirements then it would be easier.

Lots of other issues as well for some of the other points.

But that is my opinion.

 

[Rich Parsons]

More information at the following site:

http://gmfactsandfiction.com/

 

[Gordon Nore]

...But that is my opinion.

...which I appreciate, Rich, because you obviously know the business.

Personally, I had a knee-jerk liberal reaction to the section in the blog about getting rid of unions. I'm a little fatigued about hearing unions are always THE problem.

What you say about building cars for foreign markets makes sense.

 

[Rich Parsons]

...which I appreciate, Rich, because you obviously know the business.

Personally, I had a knee-jerk liberal reaction to the section in the blog about getting rid of unions. I'm a little fatigued about hearing unions are always THE problem.

What you say about building cars for foreign markets makes sense.

The Union did push things. The Companies gave many things. (* The Unions were required for a safe working place in the beginning and other issues as well. *) It was what happened. It is not good to try to blame the past. It is better to find a solution for the future.

Having markets and workers in those markets including the US it helps to benefit the balance of the Dollar versus other foriegn monies. It also helps with over all global markets. The problem is to take advantage of it, this means that capacity needs to be avialable in different markets. The problem is that this capacity costs money as well to have it "sitting" around.