Automotive News - June 2, 2008 - 1
autonews.com • JUNE 2, 2008 Robert Sherefkin fsherefki email@example.com ve ket price was $535 a LOn. Today, the spot price - which is somewhat higher than contract prices - has al~ most doubled to $1.035. Steel prices are up roughly $500 per vehicle since January, says analyst John Hoffecker of AlixPartners LLC According to the American Iron and Steel Institute, the average car contained 2,400 pounds of steel last year, see STEEL, Page 53 $155/YEAR;$5/COPY Entire contents © 2008 Crain Communications Inc. All rights reserved. Surging steel prices shock auto industry DETROIT - Sharp increases in steel prices- up as much as $500 per vehicle since January - have left autOlTIakers and suppliers reeling. Tensions are rising as steel makers tear up contracts and demand immediate price increases. Steel and automotive executives say that ArcelorMittal - the world's largest steel maker - and other steel mills nOliDana's John Devine: "I've never seen anything quite like it." fied the Detroit 3 last month that they will impose surcharges as high as $250 a ton. That would amount to a price increase of 20 to 40 percent over most contractual prices. "I've never seen anything quite like it in my career," says Dana Holding Corp. Chairman John Devine, a former CFO at Ford Motor Co. and General Motors. The benchmark for automotive steel prices is hot-rolled carbon sheet steel, which is used to make bumpers, wheels and frames. In the fourth quarter of2007, the spot-mar- Coming to America As the dollar shrinks, a new wave of foreign factory investment is hitting U.S. shores. The story kicks off our in~ depth look at issues facing Asian and European automakers and suppliers in North America. The New American Manufacturers section begins on I PAGE 251 As fuel prices soar, every part of the industry will be transformed. Hybrid holdup Talk about lousy timing. Sales of General Motors' mild hybrid vehicles are stuck in neutral because of problems at the battery supplier. I PAGE 81 Stories inside: • Honda may crank out more Civics ~ Page 3 • Market has changed; there's no going back/Editorial .. Page 12 • Small cars comingin 2009·10 .. Page 54 • Big trucks clog used market, too ~ Page 54 • Auto ads' new theme: Fuel economy .. Page 54 • High diesel prices slam suppliers .. Page 55 Gas prices fuel industry's new era Automakers confront new reality: Trucks are out, cars are in, small is chic and mpg trumps everything else Undsay Chappell firstname.lastname@example.org The dealer speaks • Things are tough all around, says Irma Elder, head of a Detroit dealership empire: "It breaks your heart to see a business closing because you know it can happen to you." I PAGE 321 • Suburban Washington dealer Jack Fitzgerald says factories are pushing too hard for big, exclusive stores: "Why do they want to be alone? Everybody knows you sell more in a shopping mall than anyplace else." I PAGE 341 N N A, see GASOLINE, Page 55 o As gasoline prices top $4 a gallon, the shift by U.S. consumers from big, powerful trucks to small cars with small engines is now a stampede. Fuel prices are roiling the auto industry in a way Americans have not seen since the pan.ic that followed the embargoes by oil-exporting cOWltries in the 1970s. Industry executives and vehicle buyers alike are acting on the belief that high fuel costs are not a momentary discomfort, but a new reality. "I would bet my house that the old buying habits won't return," says Ford Motor Co. sales analyst George Pipas. In a new Automotive News sUlVey, dealers- especially those who sell Detroit 3 brands - cite a mismatch between the fuel-efficient vehicles their customers are demanding and the vehicles they have in stock. That mismatch, they say, is bleedingsales. As in previous oil shocks, the market changes tend to benefit Asian brands whose lineups emphasize small cars. Meanwhile, the Detroit 3 are struggling to sUlVive while they adjust their product plans. Signs of the times: • Last month, vehicles with four-cylinder engines accounted for 45.6 percent of all U.S. retail sales of new cars and trucks, according to J.D. Power and Associates' Power Information Network. That's up from 36.0 percent in February 2008 - and just 28.2 percent in May 2004. • Between January and April, sales of basic compact cars such as the Toyota Yaris and Nissan Versa rose 36.7 percent over the year-ago period, according to J.D. Power. By contrast, sales of full-sized SUVs such as the Chevrolet Tahoe and Ford Expeclition plunged 26.9 percent. • One out of 10 dealers in the Automotive News survey says he or she no longer accepts big SUVs and pickups as trade-ins. And many other dealers say they are offering far lower trade-in prices for those vehicles. Rhett Ricart, who owns a seven-brand superstore in Columbus, Ohio, said he had a sobering glimpse of the market shift over Memorial Dayweekend. Four couples, Ricart says, all bought two smaller, less-expensive but more fuel~effjcient new cars - his and hers - instead of one bigger, pricier vehicle. "it's ali about ti,e gas On the Web This week at www.autonews.com • Tuesday: Get live updates of U.S. vehicle sales for May. • Tuesday: GM holds its annual shareholders meeting in Wilmington, Dei. • Thursday: Harbour ConSUlting releases its annual report of U.S. auto plant productivity for 2007.