Automotive News - September 8, 2008 - (Page 4) 4 • SEPTEMBER 8, 2008 Chrysler sues consultant over sourcing Robert Sherefkin and David Barkholz rsherefkin@crain.com Magellan hits the shoals John Campi took over Chrysler purchasing shortly after Project Magellan was killed. said the consulting firm handled one portion of Project Magellan, the code-name of the program. At the time, Chrysler did not allege a failure to meet obligations and paid Accenture in full for services, McAvoy said. Accenture is one of the world’s largest business consulting firms. It was spun out of the former Arthur Andersen accounting firm. In a statement to Automotive News, Chrysler spokesman Mike Palese said Accenture’s fraudulent representations went to the very basis of the consultant’s agreement with Chrysler and denied Chrysler hundreds of millions Chrysler is suing the consulting firm Accenture for the failure of Project Magellan, an attempt to find purchasing savings in low-cost countries. Here are key points of the project. 2006: Chrysler seeks parts-buying help in low-cost countries. December 2006: Accenture pitches its global capabilities to Chrysler. February 2007: Chrysler chooses Accenture for Project Magellan’s first phase and pays $563,340. May 2007: Chrysler, Accenture agree to $5.3 million second phase. Summer 2007: Chrysler raises concerns about Accenture’s performance. Autumn 2007: Chrysler terminates program, pays Accenture final $1.8 million installment. Source: Court documents DETROIT — Chrysler LLC purchasing chief John Campi, fed up with the carmaker’s failed sourcing effort in low-cost countries, is suing the consulting firm hired to find cheaper suppliers. Chrysler paid at least $7.7 million to Accenture for help buying parts in low-cost countries such as China and India. Chrysler thought doing so would save $900 million. Instead, Chrysler saw virtually no savings, court documents say. “Accenture demonstrated virtually no experience in identifying lowcost-country suppliers for the automotive business and had no knowledge of the supply base in China or South America,” according to the suit, filed Aug. 25 in Oakland County Circuit Court in Michigan. Accenture spokesman Jim McAvoy of dollars in anticipated cost savings. In 2006, Project Magellan was launched by Chrysler’s then-executive vice president of procurement and supply, Peter Rosenfeld. It was designed to generate $6 billion in annual purchases from low-cost countries. Several consulting firms sought the assignment. On Dec. 14, 2006, Richard Spitzer, Accenture’s global managing partner, delivered the winning pitch. In a presentation to Rosenfeld and Chrysler co-President Tom LaSorda, he touted Accenture’s experience and in-country presence in key overseas markets, saying those attributes could help deliver $900 million in savings over three years. Instead, Chrysler argues that it got a half-baked effort. In one case, “Accenture advised Chrysler to send out for bid — all at once — $7 billion of annual value of business (10,000 parts), in giant requests with bundled commodities to random lists of suppliers.” The exercise netted essentially no bids other than those from suppliers that Chrysler directed Accenture to use, the complaint says. Project Magellan was killed late last year, shortly before Campi took over as Chrysler purchasing chief. Campi alluded to the failed program in an interview this year. “When you blanket suppliers in a country like China by e-mail, and you are not doing it face to face and demonstrating your sincerity, they say, ‘I don’t want to deal with them,’ ” he said. Today, Chrysler still buys virtually all of its $40 billion of parts from North American suppliers. It is pursuing a low-cost sourcing plan on its own.c Cobalt transaction prices are up $775 since April Amy Wilson awilson@crain.com Proposed flex-fuel mandate roils industry Harry Stoffer hstoffer@crain.com Lutz: Saturn Astra is priced too high ➤ 6 market, bodes well for the Chevrolet Cruze, Brown said. The Cruze, GM’s small-car successor to the Cobalt, is scheduled to go on sale in North America in 2010. It is expected to be more expensive and better equipped than the Cobalt. Even though Cobalt sales are up 9.6 percent this year, some competitors have done better. For instance, sales of the Cobalt actually fell 26.6 percent in August, while Ford Focus sales rose 23.4 percent for the month and are up 25.9 percent for the year to date. Tight supplies contributed to the Cobalt sales drop in August. GM had 17,900 Cobalts on hand on Aug. 1, a 28-day supply. A 60-day supply is considered ideal. In early August, GM added a third shift of production at the Lordstown, Ohio, plant, which assembles the Cobalt. GM expects that shift will add 80,000 Cobalts during the next year. Last week, The Wall Street Journal reported that GM would further boost production by running three shifts on weekends. GM plans to begin building the Cruze at Lordstown in the spring of 2010. It will be produced simultaneously with the Cobalt for an undisclosed period, GM officials said. Until the Cruze arrives, GM plans special packages for the Cobalt to keep it fresh, Brown said.c Fuel rule Some lawmakers want to require all new vehicles to be capable of using an alternative fuel such as E85. Industry leaders say the mandate could have these unintended consequences. Discourage r&d of other promising technologies Apply scarce resources on technology that won’t be used if fuel isn’t widely available Force changes to engines that aren’t easily adapted to E85 capability Potentially conflict with other regulations, such as California’s clean air standards DETROIT — With small cars in strong demand and weak supply, General Motors says transaction prices and profitability for the Chevrolet Cobalt are on the rise. Since mid-April — as increasing gasoline prices began to prompt consumers to choose more economical vehicles — the Cobalt’s average transaction price is up $775, said Brian Brown, Chevrolet’s marketing manager for small cars and crossovers. The average transaction price rose from $13,519 on April 10 to the current $14,294. With higher prices and more demand comes greater profitability. Although analysts say GM typically has lost money on small cars, Brown said the Cobalt is now a moneymaker. The Cobalt’s profit contribution margin — the profit per unit sold — is up 6 percent since 2007, says GM. “I don’t think anyone thought this shift of moving into smaller, more fuel-efficient vehicles would be as dramatic and happen as quickly as it did,” Brown said. “I have to laugh: In the last 90 days, one of the top five trade-in vehicles for a Cobalt is an F-series pickup.” Transaction prices are rising because consumers stepping out of larger, more expensive vehicles such as the Ford F series are demanding better-equipped Cobalts, he said. The improvement for the Cobalt, a compact in its fifth year on the ST. PAUL, Minn. — Congress’ efforts to address energy prices and supplies before the November election may do more harm than good, auto industry leaders warn. One proposal before lawmakers would require every new vehicle built by 2020 to be capable of running on an alternative fuel such as E85. That idea is misguided, said Barbara Nocera, director of government and public affairs at Mazda North American Operations. “Congress shouldn’t try to dictate winning and losing technologies to automakers,” Nocera told Automotive News at last week’s Republican National Convention here. The flex-fuel proposal is part of an energy bill drafted by a bipartisan group of senators. The full Senate is expected to consider the measure in the remaining weeks of the congressional session. The bill would require 75 percent of new vehicles to be capable of using an alternative fuel by 2015, and 100 percent by 2020. The latest energy plan from Democratic presidential nominee Barack Obama, a senator from Illinois, includes a similar mandate. Party talk Nocera said she told policy makers at the GOP convention that the flex-fuel mandate is a bad idea. She said it would discourage automakers from researching other promising technologies, such as fuel cells. Mazda is working on internal combustion engines that can run on hydrogen. Industry lobbyists are pressuring lawmakers and political leaders to act on other auto-related issues this year. The Detroit 3, in particular, seek congressional approval of funding of as much as $50 billion in low-interest direct federal loans to automakers and suppliers. Congress enacted a $25 billion loan program last December but has not funded it. The program is designed to help the industry retool to build more fuel-efficient vehicles. Amid a credit squeeze on the industry, the program represents a financial lifeline for some companies. A draft of the bipartisan Senate energy bill proposes funding for industry loans. It also provides expanded tax credits for consumers who buy fuel-saving vehicles. One proposal before lawmakers would require every new vehicle built by 2020 to be capable of running on an alternative fuel. The Ford Escape Hybrid, shown, uses E85. Automakers lobby GOP for loan assistance ➤ 8 ble by 2012 if government does more to get the fuel into filling stations across the country. But a voluntary commitment is different from a government mandate, industry executives say. In a letter last month to lawmakers, the Alliance of Automobile Manufacturers objected to proposed measures that would require flexfuel vehicles to account for half of new production by 2012 and 80 percent by 2015. The alliance represents the Detroit 3, Toyota, Mazda and five other automakers. The industry group says automakers already are building more flex-fuel vehicles than the fueling infrastructure can support. Fewer than 1,700, or 1 percent, of the 170,000 filling stations in the United States have E85 pumps. A high-volume engine can be converted to flex-fuel capability for $300 or less, the alliance says. But alliance President Dave McCurdy says a mandate would incr
Table of Contents Feed for the Digital Edition of Automotive News - September 8, 2008 Chrysler Financial hikes dealer floorplan fees Back in business? Detroit's best bets for cash: Feds, UAW Document fee suits swamp Missouri dealers Honda's family squabble Used truck prices rebound Ford mulls Lincoln compact Toyota delays RAV4 plan Proposed flex-fuel mandate roils industry Chrysler sues consultant over sourcing Cobalt transaction prices are up $775 since April Nissan looks to Mexico for engineering aid To retain truck buyers, Nissan offers more stuff Press: Chrysler is pushing forward on electric cars Leasing falls to 4-year low GM: Currency shift stalled Astra Dealers say they can sell the Republican ticket Industry loans clash with GOP climate Grand Cherokee will get axles from new plant Makers must resist urge to backslide as gas price dips Times are tough outside the U.S., too Chevrolet does tout its small cars Let natural gas power the fuel cell A crash course in collaboration Dodge wouldn't rush the RamBox Plastics are losing cost advantage Suppliers expect to benefit from tougher CO2 rules 'People just want Ford to go' For now, Honda will skip electric vehicles Toyota, Subaru enter race to market electric vehicles China exports squeezed Study: 15% of wrecked autos got washed titles Mercedes megadealer is bullish on luxury Sheehy: 'We are not in business for nostalgia' Automakers use driving schools as marketing tools Dodge smoothes Ram's rough edges â a little Honda touts leasing while others fall back Alysha Webb Study: Nonprime car loans get longer Dealer CPA group picks leader BMW, Edmunds team up on loan site for consumers Va. Honda dealership loses protest bid Judge throws out deceptive-ads lawsuit against Toyota in Arkansas Mo. dealership's protest gets go-ahead Pa. court throws out suit against Ford, dealership Dealers Ross' interiors company pushes into China, India More than a game Nissan's Tavares: Green conference keynoter Quality group seeks to set consulting standards Personnel Dana to shift HQ by Sept. '09 Tenneco to supply Volvo XC60 BMW gets Siemens conveyors IAC to cut 280 jobs in Sweden Polytec to acquire Peguform Metaldyne to sell Italy operation Federal-Mogul to build India plant Beck, Delphi make pact TRW to supply Chinese sedan Auto profits rise in Russia Black Book expands data Hayes Lemmerz cuts losses Ford: Buyouts are a tough sell GM's party plans include production Volt An ice-cold August for auto sales Big drop in Aug. output Lights, camera . . . Volt? In case the roads get too quiet . . . The Insight rides again Lagonda brand will be back Milwaukee road trip: No old pals, but 1 new lesson Choice of Odell seen as Ford vote of confidence in Volvo Dana sort of wins an award Automotive News - September 8, 2008 Automotive News - September 8, 2008 - (Page Introducti) Automotive News - September 8, 2008 - Detroit's best bets for cash: Feds, UAW (Page 1) Automotive News - September 8, 2008 - Detroit's best bets for cash: Feds, UAW (Page 2) Automotive News - September 8, 2008 - Toyota delays RAV4 plan (Page 3) Automotive News - September 8, 2008 - Cobalt transaction prices are up $775 since April (Page 4) Automotive News - September 8, 2008 - Cobalt transaction prices are up $775 since April (Page 5) Automotive News - September 8, 2008 - GM: Currency shift stalled Astra (Page 6) Automotive News - September 8, 2008 - GM: Currency shift stalled Astra (Page 7) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 8) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 9) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 10) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 11) Automotive News - September 8, 2008 - Let natural gas power the fuel cell (Page 12) Automotive News - September 8, 2008 - Let natural gas power the fuel cell (Page 13) Automotive News - September 8, 2008 - Plastics are losing cost advantage (Page 14) Automotive News - September 8, 2008 - Plastics are losing cost advantage (Page 15) Automotive News - September 8, 2008 - Suppliers expect to benefit from tougher CO2 rules (Page 16) Automotive News - September 8, 2008 - 'People just want Ford to go' (Page 16A) Automotive News - September 8, 2008 - Toyota, Subaru enter race to market electric vehicles (Page 16B) Automotive News - September 8, 2008 - Toyota, Subaru enter race to market electric vehicles (Page 16C) Automotive News - September 8, 2008 - Toyota, Subaru enter race to market electric vehicles (Page 16D) Automotive News - September 8, 2008 - For now, Honda will skip electric vehicles (Page 17) Automotive News - September 8, 2008 - For now, Honda will skip electric vehicles (Page 18) Automotive News - September 8, 2008 - For now, Honda will skip electric vehicles (Page 19) Automotive News - September 8, 2008 - Study: 15% of wrecked autos got washed titles (Page 20) Automotive News - September 8, 2008 - Study: 15% of wrecked autos got washed titles (Page 21) Automotive News - September 8, 2008 - Mercedes megadealer is bullish on luxury (Page 22) Automotive News - September 8, 2008 - Mercedes megadealer is bullish on luxury (Page 23) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 24) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 25) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 26) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 27) Automotive News - September 8, 2008 - Automakers use driving schools as marketing tools (Page 28) Automotive News - September 8, 2008 - Dodge smoothes Ram's rough edges â a little (Page 29) Automotive News - September 8, 2008 - BMW, Edmunds team up on loan site for consumers (Page 30) Automotive News - September 8, 2008 - BMW, Edmunds team up on loan site for consumers (Page 31) Automotive News - September 8, 2008 - Judge throws out deceptive-ads lawsuit against Toyota in Arkansas (Page 32) Automotive News - September 8, 2008 - Pa. court throws out suit against Ford, dealership (Page 33) Automotive News - September 8, 2008 - Dealers (Page 34) Automotive News - September 8, 2008 - More than a game (Page 35) Automotive News - September 8, 2008 - Personnel (Page 36) Automotive News - September 8, 2008 - TRW to supply Chinese sedan (Page 37) Automotive News - September 8, 2008 - TRW to supply Chinese sedan (Page 38) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 39) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 40) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 41) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 42) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 43) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 44) Automotive News - September 8, 2008 - GM's party plans include production Volt (Page 45) Automotive News - September 8, 2008 - GM's party plans include production Volt (Page 46) Automotive News - September 8, 2008 - An ice-cold August for auto sales (Page 47) Automotive News - September 8, 2008 - An ice-cold August for auto sales (Page 48) Automotive News - September 8, 2008 - Big drop in Aug. output (Page 49) Automotive News - September 8, 2008 - Dana sort of wins an award (Page 50) Automotive News - September 8, 2008 - Dana sort of wins an award (Page 51) Automotive News - September 8, 2008 - Dana sort of wins an award (Page 52)
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