Automotive News - September 22, 2008 - (Page 39)

SEPTEMBER 22, 2008 • 39 Federal-Mogul will idle 4,000 DETROIT — Supplier FederalMogul Corp. plans to lay off 4,000 employees as part of a plan to address the grim auto industry outlook. It also plans to consolidate or close plants. The restructuring will last until sometime next year and will cost $60 million to $80 million, the suburban Detroit supplier said. CREDIT Pain spreads; 2-tier system is emerging continued from Page 1 search of ever higher returns.” Slow recovery Borst: “Twelve to 15 months at the bottom.” no longer even a cost issue. It’s an access issue. It’s affecting our ability to borrow.” GMAC and Chrysler Financial recently raised interest rates on dealer floorplans. Sonic’s Cosper said he expects Ford Credit to follow. Ford Credit did not respond last week to a request for comment. Cosper said the Detroit 3 captives have lower corporate debt ratings and must rely more heavily on the asset-backed securities markets to raise money. Because those captives’ borrowing costs have has risen rapidly, “they’ll have to shrink,” he said. By contrast, Cosper said, the captives of “BMW, Honda, Daimler and Toyota have a huge competitive advantage” over their domestic rivals. But he warned that tight credit also could cause import-brand captives to raise their rates. Chris Martin, a spokesman for American Honda Motor Co. Inc., said the company’s finance captive has not “suffered the same losses we might have if we had explored the secondary market more deeply.” He said the captive does not plan to change its “conservative” lending policies. Cosper: “I have never seen anything like this. It is terrifying.” groups have taken steps to insulate themselves from the credit crunch. Charles Oglesby, CEO of Asbury Automotive Group, said his company does not depend on Detroit 3 captives for financing. Eighty-five percent of the sales volume of the 90dealership public group comes from mid-line import brands and luxury marques. “Toyota Financial and Honda Financial are still lending money to consumers,” Oglesby said. Pete DeLongchamps, a vice president of Group 1 Automotive Inc., said the 100-dealership public group arranged floorplan credit two years ago with more than 20 banks and captives. Those interest rates are locked in, he said. “That’s one of the benefits of being a larger company with scale,” DeLongchamps said. “We’re very comfortable with our situation.” David Wilson, whose Southern California dealership group is the nation’s fifth-largest private auto retailer, said he floorplans with Comerica Bank. He called that lender “a very conservative bank with little or no exposure in the subprime market.” Wilson said the credit losers among dealers and lenders “are and will continue to be the companies that set aside their common sense in CSM Worldwide, an automotive market forecasting firm in suburban Detroit, predicts U.S. industry sales will total 13.7 million light vehicles in 2009, down from a projected 13.9 million this year. Tight credit is a big part of the anticipated decline, said Michael Robinet, CSM’s vice president of global vehicle forecasts. “Credit is absolutely critical,” Robinet said. “It affects automotive more acutely than other areas. The lack of leasing is a gift that will keep on giving for the next few years.” Rising unemployment, higher loan delinquency rates and the depressed housing market also contribute to tight credit. Paul Taylor, chief economist of the National Automobile Dealers Association, predicted the real estate slowdown will persist next year. Escalating credit problems are a “game-changer” for the auto finance industry, said Sheldon Sandler, founder of Bel Air Partners, a New Jersey-based investment banking firm that works with dealerships. “It’s not a ripple effect,” Sandler said. “It’s more like a tsunami.” Deborah Meyer, chief marketing officer at Chrysler LLC, forecast a challenging credit climate for at least the next year or so. “Consumers are nervous right now,” Meyer said. “Everyone is nervous.” c Alysha Webb, Mary Connelly and Arlena Sawyers contributed to this report bailouts of such financial giants as AIG, Fannie Mae and Freddie Mac are creating “scary” credit conditions. Borrowing costs are rising even for creditworthy borrowers, he said. “I have never seen anything like this,” said Cosper, a former executive of Ford Motor Credit Co. “It is terrifying.” A 2-tier system The credit crunch is giving wellcapitalized captives a growing advantage in their ability to finance inventories and make consumer loans. Toyota Financial Services, with its AAA debt rating, has no trouble borrowing money at a low interest rate, said CEO George Borst. Toyota Financial has passed GMAC Financial Services as the largest U.S. auto lender, according to Experian Automotive. But even Borst is not an optimist about the auto industry’s prospects. Last week Borst warned that “it’s too early to call the bottom” of the industry’s credit problems. He predicted the industry will spend another “12 to 15 months at the bottom.” Meanwhile, GMAC faces a credit squeeze. GM’s captive lender has lines of credit with several banks, said Alex Sarafian, director of consumer credit and risk management. But “it’s hard to expand beyond our current sources,” he cautioned. “It’s Honda to debut camera, airbag TOKYO — Honda Motor Co. is offering a camera system that gives drivers a bird’s-eye view of the car to help with parking and visibility in blind corners and intersections. The system uses four wide-angle cameras and will be available in the redesigned Odyssey minivan that goes on sale next month in Japan. The technology is similar to that developed by Nissan Motor Co. but can be used to navigate tight quarters to the left and right as well as peek around corners at intersections. American Axle lands contract DETROIT — Car and truck axle supplier American Axle & Manufacturing Holdings Inc. has won a contract to produce commercial driveline assemblies for a U.S. heavy-truck manufacturer. Terms and the customer were not disclosed. An American Axle spokeswoman declined to say which U.S. plants will build the heavy-duty truck driveline parts. But CEO Richard E. Dauch has said the Detroit company’s Three Rivers, Mich., plant could be picked for future commercial vehicles. The contract calls for making the carrier assembly and gears and assembling the entire package. Work is expected to begin next year. Playing defense Several of the largest dealership Survey findings: It hurts Domestic brands are hit hardest Last week Automotive News surveyed about 300 new-vehicle dealers to determine how much the credit crunch was hurting. The answer: A lot. And domestic-brand dealers are being hit harder than import dealers. Some of the survey findings: More than 60 percent of Detroit 3 dealers said they’re paying a higher interest rate for floorplanning than they were a year ago. More than two-thirds of all dealers said it is harder to get financing for customers with the best credit than it was a year ago. More than one-third of import-brand dealers said they are losing at least 20 newvehicle sales a month because customers can’t get financing they can afford. More than 85 percent of Detroit 3 dealers say leases now account for fewer than 10 percent of their new-vehicle deals. A Pontiac dealer who took part in the survey summarized: “The credit environment is a disaster.” More than 10% leasing rate Six months ago Now 0-10% leasing rate 0-10% leasing rate More than 10% leasing rate Ex-Ford dealer prevails in court DETROIT — Former Ford dealer Warren Person puts it this way: After 15 years of suffering, 10 years of waiting to relocate his store and almost six years of litigating against Ford Motor Co., his ordeal is finally over. On Sept. 10, the California Supreme Court refused to hear Ford’s appeal of an October 2006 judgment in Person’s favor. Person had sued Ford for blocking the relocation of his Person Ford store in La Verne, Calif., a relocation the automaker previously had approved. The jury sided with Person on one of three allegations and ordered Ford to pay $12.25 million. For domestic brands, leasing is dead Six months ago, half of Detroit 3 dealers said leasing accounted for more than 10 percent of their new-vehicle business. Today, only one out of six dealers say they lease more than 10 percent of their new vehicles. 70% % of dealers paying more for floorplanning 60% 50% 40% 30% 20% 10% 0 Detroit 3 Imports Floorplanning: Detroit 3 dealers pay more More domestic dealers than import dealers say they are paying a higher interest rate for floorplanning than they were a year ago. Dodge plans Web blitz for Ram DETROIT — Chrysler LLC wants to give Internet users more than a billion opportunities to see online ads for the 2009 Dodge Ram pickup. Dodge plans an ad blitz Nov. 4 — election day, and thus a big day for Internet usage by news junkies — on home pages of such Web sites as Yahoo, MSN and AOL. Dodge executives predict the ad campaign will yield as many as 1.3 billion viewer impressions. CHRYSLER Vendors fret about price-review panel continued from Page 3 said. In the past, some procurement directors allowed increases, others didn’t. The new process calls for Chrysler to hear all of a supplier’s price requests at once, instead of division by division. It also requires suppliers seeking price increases to open their books to Chrysler. Some suppliers see the review board as a way to stall requests by adding another layer of bureaucracy to the process. “It’s just another hurdle they’re throwing in our way,” said one supplier executive who requested anonymity. Huber said Chrysler is requiring the financial information so it can assess the urgency of the need for relief. The overall financial distress of a supplier could result in more relief, he said. In one letter given to Automotive News by a supplier, Chrysler required historical purchase prices for raw materials as well as detailed company financial statements, incl

Table of Contents Feed for the Digital Edition of Automotive News - September 22, 2008

Credit-crunched BMW to cut volume and jobs in U.S. Did dealer pitch have a catch? Henderson will keynote World Congress Suppliers: Chrysler jury a worry Learn how going green can be good for business Hyundai hesitates on i10 Ram launches with incentive Dodge RamBox cost: $1,895 Toyota seeks bids to build A-BAT Volt: A pricey short hauler? A horse of a different, uh, color Delphi work moves to N.Y. from plant in Mexico GM store count down 226 so far this year Bill Heard shuts Arizona dealership Would Mazda2 hurt Mazda3? Chrysler dealers may see Volt fighter GM gets more bucks for its 4-bangers GM's '09 list prices rise 2.7% Suppliers seek piece of loan package Don't attach too many strings to federal loans Cars run on money and credit, not gas The workplace is a democracy? Free Choice Act must be defeated Extreme makeover Logo no go A 4-cylinder Cadillac? Get real A double standard on idle workers? Free Choice Act means no choice Saccucci: Let's hear it for free enterprise Dealers signal support for 35% estate tax rate Dealers Designing for MPG Slippery styling What happened to Volt's racy design? Aerodynamics Belletech will supply Honda in Indiana Practicality will top panache at Paris show Chrysler seeks to build loyalty with service Band buddies Personnel Auction group's new boss sees dip in volumes Wholesale prices of big used trucks rise 8.6% in August Big-truck sales off 22.6% in Aug. August sales in Europe worse than in U.S. Honda will let supplier assemble on-site at Ohio plant Farley: Retool image for era of the small car O'Donnell: No stranger to U.S. Honda to debut camera, airbag American Axle lands contract Ex-Ford dealer prevails in court Dodge plans Web blitz for Ram Federal-Mogul will idle 4,000 Sparks will fly over GM, Toyota plug-ins Negotiations fail; chaos (allegedly) ensues Bo plays defense, helps GM avoid weather woes Critics say the new Volt was jolt Lithium, schmithium-- Will the ladies like it? Small and beautiful-- mutually exclusive? Where Andrea Pininfarina saw design headed Designers think small to make it big Designers can't ignore history Pretty and petite Toyota goes its own way with green designs The elements of style It's difficult to design fuel efficiency into big pickups Specialty-car maker has bright design ideas Form follows fashion Vehicle designers aim to please Chinese Suppliers to the 2009 Dodge Ram Eaton will equip '09 VW Golf IAV to move into new tech center BorgWarner makes Tesla deal Mann plans 4th China plant NovaCast buys into Korean firm Valeo shifts rear-light work Supplier personnel

Automotive News - September 22, 2008

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