Automotive News - July 14, 2008 - (Page 1)

autonews.com ® JULY 14, 2008 Entire contents © 2008 Crain Communications Inc. All rights reserved. $155/YEAR; $5/COPY Suppliers: Inflation is looming Manufacturers can’t absorb hikes in materials costs David Barkholz and Robert Sherefkin dbarkholz@crain.com Purves remembers Although BMW sales doubled on his watch, Tom Purves says the successful launch of the Mini in the U.S. was his best experience as president of BMW of North America. | PAGE 4 | Upward spiral Costs have been rising steadily for over a year. Here are some examples. MATERIAL/PART INCREASE Plastic resins Tires Oil for petrochemical feedstocks Steel for frames, bumpers “It’s not the automakers’ fault that steel prices have doubled,” said Larry Denton, CEO of Dura Automotive Systems Inc., a producer of shifters, door modules and cables. “In the end, we’re going to have an inflationary period.” 45% since January 2007 20% since March 43% since early January Nearly 100% since December Denton was one of five supplier CEOs who discussed inflation and other topics during a roundtable last week sponsored by Automotive News. Over the past six months or so, the price of steel has nearly doubled. Suppliers are so overwhelmed by rising raw material costs that they are raising prices for parts. Now, several automakers are raising sticker prices to cover the cost of those parts, and suppliers predict that this could be the start of an inflationary spiral. Polypropylene, a resin used for plastic parts, costs 45 percent more than 1½ years ago. And the price of natural gas, another raw material for resins, jumped more than 60 percent since January. Raw materials account for such a large percentage of a part’s total cost that even the most efficient supplier cannot neutralize such price increases. Michael Chupa, CEO of seat frame maker CRH North America Inc., said steel and other raw materials make up 60 to 70 percent of the cost of his company’s products. see INFLATION, Page 45 Chrysler bucks industry trend ➤ 43 Small-car boom misses Chrysler Bradford Wernle bwernle@crain.com Ford future products: Big plans for small vehicles Two years into his tenure, Ford Motor Co. CEO Alan Mulally has put his stamp on the company’s product strategy. The Ford fleet gets an infusion of smaller, fuel-efficient vehicles in the coming years, including a half dozen small cars and crossovers developed in Europe. Our annual future product series continues this week with a detailed look at Ford’s plans for the 2009-12 model years. Turn to Page 28. Mini Cooper BMW, Fiat team up Future Minis may have an Italian influence or at least some powertrain parts. BMW and Fiat say they want to work together on upcoming Mini and Alfa Romeo vehicles. | PAGE 6 | DETROIT — In a red-hot market for small cars, Chrysler is struggling to move its few reasonably fuel-efficient vehicles. On July 3, Chrysler LLC asked dealers to order their small vehicles five months in advance. Why? Before it adds a production shift at its Belvidere, Ill., assembly plant, Chrysler wants to know whether there’s enough demand for the three compact vehicles built there: the Dodge Caliber, Jeep Compass and Jeep Patriot. Enough demand? Rivals Ford, Toyota, General Motors, Honda and Nissan are running their assembly plants virtually around the clock to produce enough small cars to meet demand. Chrysler’s weak sales justify the company’s caution. Sales of Chrysler’s only small car, the Caliber, dropped 43.6 percent in June, while its platform-mate, the Compass see CHRYSLER, Page 43 BRENDA PRIDDY & CO. The 2010 Ford Taurus sedan, shown in this spy photo, gets re-engineered and restyled to give it a lower, sleeker appearance. Coulda, shoulda Like its European operations, General Motors could now be cranking out small, fuelefficient vehicles in America. But GM failed to cover the risk of skyrocketing fuel prices, says Jason Stein, publisher of Automotive News Europe. | PAGE 8 | The Verve concept, shown, will be the basis for the 2011 Ford Fiesta. North American sales start in early 2010. Ford’s large rwd car plan is iffy Amy Wilson awilson@crain.com On the Web This week at www.autonews.com: Tough month Sales for 2 of Chrysler LLC’s 3 compacts plummeted last month. JUNE 2008 SALES % CHANGE FROM YEAR AGO Dodge Caliber Jeep Patriot Jeep Compass 6,099 –43.6% 4,889 +5.5% 2,075 –38.8% DETROIT — Ford Motor Co.’s plan to build large rear-wheel-drive cars for the Ford and Lincoln brands is on the bubble. Ford had put the vehicles in its product plan long before gasoline topped $4 per gallon. In January, Ford product chief Derrick Kuzak and CEO Alan Mulally confirmed the Ford’s Derrick Kuzak: “We need to understand the role of those vehicles, given the change in the market mix.” program’s existence; supplier and industry sources expected the cars to arrive for the 2013 model year. But Kuzak told Automotive News last week that he is reconsidering the program. “We need to understand the role of those vehicles, given the change in the market mix,” he said. In the meantime, Ford is developing those vehicles at full speed, he said. The rwd cars aren’t the only items under scrutiny because of high fuel prices. Ford also may: Offer four-cylinder engines in fullsized trucks such as the F-150. “It’s a potential,” Kuzak said. If Ford did that, the four-cylinder engine likely would be turbocharged. Add more small cars to the lineup. The next generation of the European Fusion crossover is an “opportunity,” Kuzak said. Another possibility is the Ka, a European minicar. Expand its EcoBoost engine technology — a combination of turbochargers and gasoline direct injection — beyond an announced target of 500,000 vehicles annually by 2012. c Today: Automotive News Data Center posts the latest statistics on inventory, production and incentives. Tuesday: Volkswagen’s supervisory board is expected to approve the location of the automaker’s new U.S. assembly plant. Thursday: Supplier Johnson Controls Inc. releases its financial report for the quarter ending June 30. Friday: Presidential candidate John McCain is expected to visit the General Motors Technical Center in suburban Detroit. 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Table of Contents Feed for the Digital Edition of Automotive News - July 14, 2008

Small-car boom misses Chrysler Ford's large rwd car plan is iffy Suppliers: Inflation is looming Hummer H3T price: $31,495 VW may build next Passat in U.S. plant Glut of trucks pulls Prius to U.S. Ford sues U.S. over taxes Restyled Ridgeline Volvo will tighten U.S. dealer network As BMW's chief in N.A., Purves got biggest thrill out of Mini Despite pricey fuel, Jetta diesel in demand Everybody's a critic: How dealers cope with online reviews Hyundai goes big on Genesis lease The shift to automatic: A transmission transition Jaguar-Land Rover dealer: Stand-alone would bankrupt me Chevy christens compact Cruze Fiat, BMW will team up on platforms, parts Revision: Bosch still tops Auto News supplier list GM to build Volts in U.S. for Europe GM ads will push mpg for 90 days A missed opportunity 2008 sales forecast? 14,652,757 Suzuki cuts U.S. work force 8% CAFE standards: Stop whining and get to work Uncertainty is the name of the game Honda dealer rubs salt in a wound Careless driver was to blame for crash Unsafe driving wasn't Ford's fault For doomsayers, business is booming again Best ad slogans have staying power Bird Dog Club creator hunts dealer poachers Dealers How to design a Lamborghini? Passion for speed certainly helps Dressed to kill Check for children Delinquency rate on indirect loans skyrockets Group promotes payment assurance Ford has big plans for small vehicles in North America Mulally pushes Ford toward fuel efficiency Ford brand will draw on European lineup With no new vehicles planned, Mercury's future is bleak Engines promise power plus fuel economy Horbury: We'll keep our vehicle designs fresh Ford aims to move Lincoln upscale Toyota's Lentz: Don't panic over collapse; market will stabilize Personnel Chrysler's car sales sag in June — even more than trucks PG sells majority of auto glass business to private-equity firm Chrysler's Campi makes nice Suit against Ford is reinstated BMW reassesses Mini demand JCI plant cuts shift, work force CAW board endorses local president Purves: Thumbs-up for BMW innovations Current trend in Europe: Electric cars Solid reviews for Ford's new Flex Philosopher has insight for ailing U.S. auto industry The 'B' word brings media deathwatch at GM Chrysler to dealers: Don't panic

Automotive News - July 14, 2008

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