Automotive News - June 2, 2008 - (Page 3)

JUNE 2, 2008 • 3 82nd year — No. 6310 Chrysler faces tricky dealer mergers Project Genesis: Painful for some dealers but perfect for others Bradford Wernle bwernle@crain.com Ford to offer hatchback version of Fiesta Ford Motor Co. has added a hatchback version of the Fiesta to the 2010 North American launch of the small economy car. The hatchback will be sold alongside the sedan. Ford confirmed on Friday that it will build the hatchback and sedan at its Cuautitlan, Mexico, plant starting in early 2010 as part of a $3 billion investment in the country. The Fiesta will give Ford a fuelefficient competitor against such cars as the Honda Fit and Nissan Versa. It’s not clear whether the hatchback Fiesta will be a threedoor, five-door or come in both configurations. Ford said the Cuautitlan plant will shift from making F-series pickups for Mexico to making small cars for all of North America. The changes at the plant near Mexico City begin this year. — Richard Truett Mercedes will move into Chrysler Pacifica studio Mercedes-Benz confirmed Friday that it will move its U.S. design studio to the former Chrysler Pacifica Advance Design Center in Carlsbad, Calif., beginning in July. The Chrysler studio, which closed this year, is almost three times larger than Mercedes’ studio in Irvine, Calif. The 35,000-squarefoot Carlsbad studio will allow Mercedes designers to build fullscale vehicle models, something that was impossible in the Irvine studio. Mercedes’ other design studios are in Sindelfingen, Germany; Como, Italy; and Tokyo. A Mercedes spokesman said it is unclear what will happen to the Irvine studio, which opened in 1990. The price was not disclosed, but AutoWeek had reported that the property offered a listing price of $7.3 million. The Chrysler Pacifica studio opened in 1983. — April Wortham In late April, Bob Wilson DodgeChrysler-Jeep closed and filed for Chapter 11 bankruptcy protection in Tampa, Fla. The bankruptcy reorganization petition blamed Chrysler LLC’s Project Alpha dealer consolidation program for its troubles. The rapid onset of financial problems at the high-volume Wilson store shows that Chrysler’s plan to slim down its dealer body will be painful for some. In February, Chrysler announced it was renaming its Alpha program Project Genesis. The new program has ratcheted up pressure on dealers to buy or sell their stores. Chrysler now wants most dealers to sell all three brands under one roof and is trimming clone models that compete with one another. With auto sales tumbling and tight credit, dealers are wary of investing in store improvements. To further complicate matters, Chrysler says it is not offering financial aid to help dealers sitting on the fence. Chrysler also says dealers combining under Genesis must sign exclusivity agreements barring them from selling other brands at their Chrysler stores. With the industry in turmoil and Chrysler’s future uncertain, that can be a tough sell. In addition, the Genesis program reduced facility requirements by 12 percent in view of the slimmer projected product lineup. But some dealers had already invested in larger facilities under Alpha’s larger planning requirements. Golling Chrysler-Jeep-Dodge in suburban Detroit was built to meet Chrysler’s Project Genesis specifications. Consolidating in Toledo ➤ 46 Chrysler’s Steven Landry: “We have been operating very fast.” Genesis project is nearly completed. Chrysler wants metro-area stores, now averaging fewer than 500 units, to sell 1,000 or more annually. “We have been operating very fast,” Landry says. Roughly 100 other Genesis discussions are under way. Landry says many dealers are eager to get deals done sooner rather than later. What separates Genesis from Alpha is Chrysler’s decision to build its entire business plan around the threebrand stores. Chrysler has already axed four models, and more cuts are on the way. “They made it clear they’re not going to be supplying enough units of each of the three brands for stand- alone stores to survive,” says Michael Sieving, a Sacramento, Calif., attorney specializing in auto dealer issues. Says Landry: “There’s much higher value in having all three brands. The value of that versus having a standalone Chrysler, Jeep or Dodge store is higher. It’s kind of like the futures market. “If you are stand-alone Chrysler, Dodge or Jeep, unfortunate as it is, the value will continue to go down between now and 2012. A lot of dealers are saying, ‘I don’t want to be last.’” Chrysler’s goals Project Genesis aims to Work with retailers to streamline the dealer body, combining all 3 brands — Chrysler, Jeep and Dodge — under one roof wherever possible Trim overlapping products and add vehicles where Chrysler doesn’t compete Increase per-store sales, profits for remaining dealers quired by the factory to sell a profitable portion of its Dodge territory to another dealer, according to documents filed in U.S. Bankruptcy Court in Tampa. The resulting debt, combined with slowing sales, crushed the once profitable dealership. Wilson declined to discuss his situation, but court documents say the dealership was “required to take on significant debt to expand its building to meet DaimlerChrysler’s desee GENESIS, Page 53 Burden of debt Jumping on the consolidation bandwagon early didn’t help the Bob Wilson dealership in Tampa, once among the most-profitable Dodge stores in the country, according to court documents. Bob Wilson Dodge, which opened in the 1960s and sold only Dodge until last year, once averaged about 1,600 vehicles a year. But in 2007, the dealership bought a neighboring Chrysler-Jeep store to comply with Project Alpha. As part of the deal, Bob Wilson Dodge was re- Stand-alone woes Steven Landry, executive vice president of North America sales, says 25 to 30 Genesis deals have been completed since the program was announced. Chrysler cites St. Louis and Tulsa, Okla., as markets where the Honda may crank out more Civics in N.A. Kathy Jackson kjackson@crain.com CORRECTIONS On Page N16J in some editions of the May 19 issue, the extent of Joe Opre’s involvement with Infiniti advertising in the late 1980s was misstated. Opre had returned to his Nissan Division post before Infiniti’s “Rocks and Trees” campaign was created and launched. A story on Page 28 of the May 26 issue incorrectly described the optional carbon ceramic brakes on the 2009 Lamborghini Gallardo LP560-4. The brakes are 15 inches in the front, 14 in the rear. An accompanying interview with Automobili Lamborghini CEO Stephan Winkelmann gave the wrong figure for the automaker’s 2007 global sales. It sold 2,406 units last year. LOS ANGELES — With sky-high fuel prices igniting demand for small cars, Honda is looking to boost production of the Civic. American Honda Motor Co. may try to “squeeze” more units out of plants in East Liberty, Ohio, and Alliston, Ontario, possibly by working overtime, said American Honda sales chief Dick Colliver. Sales of the Civic were up 14.8 percent to 111,695 through the first four months of the year and were tracking well in May, Colliver said here last week at the Automotive News Marketing Seminar. He expected sales of 40,000 to 45,000 units during the month — a number that would top Honda’s perennial sales leader, the Accord, he said. “Gas prices are driving it,” Colliver said. “We’re trying to find more production for Civic.” Through April, Civic output was up 24.8 percent to 66,001 units at the Alliston No. 1 plant. At Alliston No. 2, where Civic production began last summer, 29,012 units were built during the first four months. At East Liberty, Honda produced 49,107 units, up 6.6 percent from the first four months of 2007. Honda had a 48-day supply of Civics on May 1, down from 52 days on April 1. Colliver said all Civic trim lines are selling well, but the base sedan with an automatic transmission is doing the best. The Civic sedan with a four-cylinder engine and five-speed automatic transmission sells for $15,645, including shipping. It gets 25 mpg in the city and 36 on the highway. The base Accord sedan with a fourcylinder engine and five-speed automatic transmission sells for $20,995, including shipping. The Accord gets 21 mpg in the city and 31 on the highway. The redesigned Accord was Honda’s best-seller through April, but sales were flat at 122,430. c DAVE TEEL Honda’s Dick Colliver: “We’re trying to find more production for Civic.”

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Automotive News - June 2, 2008 Gas prices fuel industry's new era Chrysler faces tricky dealer mergers Honda may crank out more Civics in N.A. Mercedes will move into Chrysler Pacifica studio Ford to offer hatchback version of Fiesta Prestige Automotive sells stores but keeps Black Enterprise top spot Dealership marketers take to text messaging Senate to hear personal pleas on roof crush rule Magazine: Chrysler, Fiat are talking Former Fla. dealer gets jail for bilking bank That guy Alfred had possibilities Ford will make next Mustang look smaller Pontiac subcompact may come to U.S. GM: Battery glitch cuts hybrid sales Porsche exec: CAFE 'will not change our nature' Japanese rivals race for lithium batteries Jatco boosts CVT capacity in Mexico for N.A. vehicles Mercury deserves a better chance Rising gas prices have changed the U.S. market Marketing and sales: Context and content Mexico's Nemak grows beyond North America Buyers didn't quit GM; GM quit on its buyers Brand perceptions change slowly Bloggers are journalists, too Nice HQ, Nissan, but where's Nobe? Chrysler's Chernoby: Growing up gearhead Picture this Mitsubishi hopes new gearbox widens Evo's appeal Openlane gets funds Obituaries Survey: Going green can get your auto ad noticed Inrix: Router can reduce traffic delays Mazda6 gets own platform for U.S. ... sort of Mazda6 set to take on mid-sized sedan heavyweights Troubled or not, the United States still beckons What's next? More transplant models headed this way Exports help as Mitsubishi sorts things out Irma Elder: 'This is one of the toughest times we have had' Fitzgerald: Dealers, consumers need alliance Can Bertone design a comeback? Family-owned business struggles for survival Some design houses fall on tough times Hughes: Not a subscriber? No problem American Axle lines up new non-U.S. business GM think tank works to boost service business Toyota offers gas card as tire incentive VW turns to common software to develop products Continental's Calif. office targets Asian carmakers ZF sees chassis, axle opportunities in N.A. Flex: A new Ford image ... or just over the top? Ford targeted Flex interior quiet, ride Ex-dealership managers say firings were over religion Dealers Genesis in Toledo: It's a long story Back woes sideline Nardelli GM: 19,000 take buyouts Panama to head Nissan Mexicana Wilhite jumps to Jumpstart Dauch sons move up, out Kozyra leaves Continental Ford to lay off salaried staff More small cars to arrive in 2009-10 Even on used market, big trucks go begging Auto advertisers adopt mpg mantra Industry to motorists: We're here to help Diesel prices hit suppliers' Mexico sites Can Camry catch F series? Leno's words of wisdom for automakers Nissan's carbon credits ease global warming guilt Automotive CEOs' pay pales next to peers' Year of the Small Car can't come too soon Foreign suppliers adding capacity in Southeast From cows to kimchi: Making Alabama sweet home for Koreans After light-truck push, cars are king again Mexican suppliers expect sales record in '08

Automotive News - June 2, 2008

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