Automotive News - March 3, 2008 - (Page 3)

MARCH 3, 2008 • 3 82nd year — No. 6297 Lithia losses raise caution flag Retailer reports 1st decline since it went public in ’96 Donna Harris dharris@crain.com Mazda has new top marketing exec LOS ANGELES — Mazda North American Operations has a new top marketing executive. Mike Nakashima will be director of marketing, reporting to North American CEO Jim O’Sullivan. Nakashima will be responsible for all advertising and marketing, including brand development, business planning and global integration. He replaces David Klan, who was appointed general manager of Mazda’s Western region. Klan takes the place of David Marohnic, who was named director of retail development. — Mark Rechtin Seeing red In the fourth quarter of 2007, Lithia reported its first loss since it went public in 1996. The auto dealership group’s full-year earnings were down as well. 4TH QTR. 2007 4TH QTR. 2006 Net income (loss) Revenue Net income Revenue Source: Lithia Motors Inc. ($5.1 million) $705.8 million 2007 $5.5 million $709.0 million 2006 Lithia Motors Inc. is losing money for the first time since the dealership group went public in 1996. The losses raise questions about the company’s unorthodox business model and sales practices. Lithia, the nation’s seventh-largest auto retailer, faces other problems. The Medford, Ore., company fired a top sales executive last week. And it acknowledges what it calls “potential reporting irregularities” related to $21.2 million $3.23 billion $37.3 million $3.05 billion at Lithia,” says Rick Nelson, an analyst for Stephens Inc. in Chicago. “Lithia is going the way the industry is heading. They’re just moving faster, which causes disruptions.” In the fourth quarter of 2007, Lithia reported a net loss of $5.1 million on revenue of $705.8 million — its first quarterly loss as a public company. In the year-ago quarter, Lithia had net income of $5.5 million on revenue of $709.0 million. sales at three of its 110 dealerships. Reached last week by Automotive News, Lithia CEO Sid DeBoer declined an interview request. Industry analysts say they expect Lithia to survive the turmoil. Some believe the company ultimately will thrive as an innovator. But in the short term, they warn, a weak economy, Lithia’s heavy reliance on Detroit 3 franchises and its sales policies such as no-haggle pricing likely will mean a bumpy ride. “There’s a lot of change occurring ‘Franchise impairments’ Lithia took a $1.8 million charge against earnings to reflect “franchise impairments” related to possible misreporting of retail sales. The comsee LITHIA, Page 52 Mercedes will launch hybrid sedan in 2009 Mercedes-Benz plans to launch a mild hybrid version of its S-class sedan next year using lithium ion batteries made by Johnson ControlsSaft. The automaker also is considering a diesel hybrid version of the S class that could be launched in North America in 2010. Mercedes plans a full hybrid using the Two Mode transmission in 2010 in the ML-class SUV. The batteries will be made in Nersac, France, and assembled into modules with electronics by Continental Automotive Systems. — Richard Truett “Some parts of our country have been benefited. But what I have seen, where I represent upstate New York, I’ve seen the factories closed and moved. I’ve talked to so many people whose children have left because they don’t have a good shot. … So what I have said is that we need to have a plan to fix NAFTA.” — Hillary Clinton Detroit 3 shun talk of NAFTA do-over Harry Stoffer hstoffer@crain.com Goes both ways Since NAFTA took effect in 1994, both U.S. exports of new vehicles to Mexico and U.S. imports of new vehicles from Mexico generally have increased. 1,500,000 1,200,000 Vehicle units Lincoln Mercury names general marketing manager DETROIT — Brett Wheatley is the new general marketing manager at Lincoln Mercury. He had been retail marketing manager for the Ford brand. Wheatley replaces Mike Richards, general marketing manager since January 2006. Richards remains at Ford Motor. A company spokesman said Richards’ assignment will be announced. — Amy Wilson CORRECTION In a chart on Page 1 of the Feb. 25 issue, the numbers of predicted North American sales units were incorrect. A corrected table appears below. WASHINGTON — Democratic presidential rivals Hillary Clinton and Barack Obama seek to outdo each other in their rhetorical eagerness to renegotiate the North American Free Trade Agreement. Auto industry leaders call such talk not only unrealistic but potentially harmful. They insist that NAFTA has strengthened the Detroit 3 and made the parties to the agreement — the United States, Canada and Mexico — more competitive with Asia. NAFTA’s critics, notably the UAW, say the agreement has bled U.S. manufacturing jobs, contributed to soaring trade deficits and become a model for other bad trade deals. They say the 14year-old pact must be reworked. Available data suggest that NAFTA’s effects lie between those ideological poles. U.S. automakers have not made wholesale transfers of production to Mexico, as the pessimists predicted. Instead, their new investments have grown across the globe. 900,000 600,000 300,000 0 ■ U.S. exports to Mexico ■ U.S. imports from Mexico '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 Source: Automotive Trade Policy Council And while sales of U.S.-built vehicles in Mexico have risen, they have not skyrocketed, as NAFTA optimists hoped. The automotive sector accounts for about 20 percent of trade covered by NAFTA. The agreement took effect in 1994, during the administration of Democrat Bill Clinton, Hillary Clinton’s husband. Upward bound Higher new-vehicle sales are predicted for North America. 21.0 DARRELL BYERS/FORT WORTH STAR-TELEGRAM/MCT/NEWSCOM Campaign focus The wrangling over NAFTA between Sen. Clinton of New York and Sen. Obama of Illinois has grown harsher in the days leading up to the presidential primaries on Tuesday, March 4, in Ohio and Texas. During a debate last week in Cleve- land, Obama said he would use the threat of withdrawing from NAFTA to extract changes from Canada and Mexico aimed at greater protections for workers. Clinton said she wants to reopen the main NAFTA treaty to include environmental and labor standards that were negotiated as side agreements during the Clinton administration. Sen. John McCain of Arizona, the likely Republican nominee, is a free-trade advocate. He says NAFTA’s benefits are unambiguous. Steve Collins, who represents the Detroit 3 on trade issues, says campaign pledges to redo NAFTA see NAFTA, Page 52 20.0 Units in millions 19.0 18.0 0 '08 '09 '10 '11 '12 Source: J.D. Power Automotive Forecasting as of February 2008 “I think we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced. And that is not what has been happening so far.” — Barack Obama MARLENE KARAS/NEWSCOM

Table of Contents Feed for the Digital Edition of Automotive News - March 3, 2008

Bob Nardeli's new big-idea guy New Kia boss reaches out to restless dealers Scion hits a wall Lithia losses raise caution flag Detroit 3 shun talk of NAFTA do-over Lincoln names new marketing manager Mercedes to launch hybrid sedan in '09 Mazda has new top marketing exec M-B will hit the road with 50-state diesels Pontiac puts big ad bucks into traditional media for G8 Reynolds, ADP diverge on growth strategies Ford plans to cut fleet sales 10% in 2008 Mazda: New models, styling will boost its loyalty rate Run-up to axle strike adds to supplier woes Webasto's fast heater will debut by 2010 Russian plant wants to be world's biggest A Lancer is hatched Chrysler throws out purchasing rulebook Honda sets lofty hybrid goal, with Civic's help Honda: Use of ethanol limited, must be biomass Honda CEO Fukui: No recession in U.S., despite soft sales in spots 550 hp? 620 hp? Is GM crazy? Doug Fraser was a great leader How ironic: Lyons learns caution Well done, Doug Don't let Calif. impose fuel rules on the nation Blame the dealer, not the brand Cutting weight doesn't cut safety When Lutz dumps on global warming ... JM exec Czubay: A taste for hogs, pierogi Doug Fraser: A good man to have known Fraser led UAW with 'combination of substance, politics and charm' Autonet finds success at NADA with wi-fi for cars GM to sell medium-truck business, keep dealer network Web classified ad firms renew marketing to dealers, buyers Chery designs venture's vehicles China venture eyes 20,000 Fiesta hatchback sales Toyota plans crossovers in China Dongfeng, YuAn plan minicars BMW shakes up global marketing, sales ranks Delphi divestiture boosts forging supplier Is Blackhawk purchase bucking a trend? Repair company grows as Detroit 3 struggle BorgWarner unit expands German automakers seek more parts sourced in North America Hyundai picks ArvinMeritor Japan parts firm to build Miss. plant Nissan to increase spending on IT Purchase keeps Tenn. plant open Automakers hit with apartheid claims Mexico sales flat in January Ford prices '09 Flex atop crossover line Hamp rejoins Visteon board RV deliveries decline 3.4% in December Subaru lowers Forester price Personnel Bright future for LED headlight suppliers? Valeo's Morin to Pardus: Learn before you leap German automakers aren't worried about U.S. recession Porsche's Wiedeking: We must retool VW Europe's loud debate over quieter tires Noise level depends on the tires, the road Auto industry robotics spending jumps 43% in 2007 Electronic brakes struggle to get traction Big Texas dealer returns to some domestic brands AutoNation chief sees tough '08, better '09 In downturn, Sonic looks beyond new cars GM promotes service, parts leads for dealerships 10 cool dealership technologies found at NADA Dealers Kia will build transmissions at Georgia plant Gibson leaves DealerTrack board Akebono closing Kentucky plant Feds issue Ford fire warning Magna net income drops VW to use Siemens' software A tale of 2 exhaust systems EU wants CO2 in ads; battle looms Maize malaise stalls ethanol Tata to siesta during Ford's Fiesta Honda moves its American bike offshore Honda will recycle cycle plant Tom LaSorda's multimillion-dollar smile

Automotive News - March 3, 2008

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