Automotive News - July 28, 2008 - (Page 8) 8 • JULY 28, 2008 advertising Chrysler revokes franchises in Pa. Bradford Wernle bwernle@crain.com Chrysler LLC is yanking the franchises of some underperforming dealers in Pennsylvania. Last week, Chrysler spokeswoman Curtrise Garner confirmed that termination notices had been issued, saying that fewer than 10 dealers had lost franchises. Paul McMillan, president of the Pennsylvania Automotive Association, confirmed that a number of dealers had been terminated. “We’ve talked to about 10 dealers,” McMillan said. “We know other deal- ers who have been in contact with legal counsel.” Some dealers fear the terminations are part of Chrysler’s effort to pressure dealers to combine dealerships in stores that carry all three brands, Chrysler, Dodge and Jeep. The plan, called Project Genesis, was introduced at the National Automobile Dealers Association convention in February. But Garner says the terminations are not connected to the consolidation program. The terminations are “part of our normal procedure,” she said. Before Chrysler gives a termina- tion notice, it sends a warning letter, she said. “Dealers have 180 days to correct whatever the breach is. It’s something that’s in their contract that’s not being done sufficiently. This is something we’ve had as part of our agreement since the 1950s.” Dealers can be terminated for any number of reasons, such as poor sales or shoddy service, she said. “We do buy back current inventory, parts and tools. “If a dealer says, ‘Help me find a buyer,’ we can do that. They have to request that. Each business center has a list of interested buyers.” Steve Moore, a Harrisburg lawyer whose firm, McNees, Wallace and Nurick, represents five of the dealerships, says the number of terminations seemed unusually large. “I’ve been representing dealers for 25 years now, and I don’t recall this many being handed out in this short a period of time,” he said. “They all came down in a very short and narrow window” in mid-June. NADA spokesman David Hyatt says he has not heard complaints of an abnormal number of dealer termination letters in other states. c Automakers angle for Chrysler’s idle engine plant David Barkholz dbarkholz@crain.com With four-cylinder engines all the rage, suitors are scouting the newest Chrysler LLC engine plant in Dundee, Mich. In recent weeks, executives from competing automakers have toured the idled south plant of the Global Engine Manufacturing Alliance complex, said Tom Zimmerman, shop chairman of UAW Local 723, which represents about 500 hourly workers at GEMA. Chrysler will continue to use the sister north plant. “Several companies have expressed an interest,” Zimmerman said. BMW AG may have toured GEMA, according to a recent report on Edmunds’ AutoObserver.com. BMW, which has no U.S. engine plants, declined to comment. In addition, Magna Powertrain, a unit of Magna International Inc., of Aurora, Ontario, has said it wants to move from making engine parts to assembling engines for carmakers. Magna had no comment about GEMA. Chrysler said the south plant is not for sale, but spokesman David Elshoff declined to say whether Chrysler would lease the plant or partner with another company to use it. GEMA encompasses two engine plants under one roof. Each plant can churn out 400,000 four-cylinder engines annually. So far, Chrysler has spent about $600 million on the complex. The north plant opened in 2005. It supplies three variations of four-cylinder engines for the vehicles built at Chrysler’s Sterling Heights, Mich., and Belvidere, Ill., assembly plants. Sterling Heights makes the Chrysler Sebring sedan and convertible and the Dodge Avenger sedan. Belvidere builds the Dodge Caliber small car and Jeep Patriot and Jeep Compass crossovers. In 2006, Chrysler opened the south plant at less than full capacity. But the automaker shut it after a year because of its own slumping sales. One of Chrysler’s engineering partners in the GEMA platform, Mitsubishi Motors Corp., was expected to take engines for its North American assembly operations. That might eventually happen, but not, at least, until Mitsubishi changes over to a future model, Elshoff said. That leaves the GEMA south plant and its engine-cutting machinery with nobody to supply. Despite consumer hunger for fuel-efficient, four-cylinder engines, Chrysler recently cut its Sterling Heights production from two shifts to one. Belvidere went down to two shifts from three. Zimmerman said GEMA is an attractive asset. The standard engines are designed so that an automaker easily can tweak them to produce the desired power and fuel efficiency, he said. This year, the north plant was named North America’s most productive four-cylinder engine plant by the management consulting firm Oliver Wyman, publisher of the respected Harbour Report on plant efficiency. Said Zimmerman: “Whoever lands this plant is in for a world-class treat.” c BRENDA PRIDDY & CO. ■ Buick’s new LaCrosse While the silhouette could be confused with that of a Buick Lucerne, the prototype snapped here is the redesigned 2010 Buick LaCrosse. The car looks bigger than today’s LaCrosse, but the dimensions are nearly the same as those of the 2008 model. The next-generation LaCrosse is expected to be the first U.S. car built on General Motors’ new front-drive global mid-sized vehicle architecture, which replaces GM’s Epsilon architecture. Sonic-Mercedes case could allow big dealers to add stores Donna Harris dharris@crain.com At odds Mercedes-Benz USA and Sonic Automotive are suing each other over Sonic’s effort to buy a dealership in Charlotte, N.C. Mercedes is blocking the purchase. Mercedes-Benz says Sonic is violating an agreement to upgrade several Mercedes stores it already owns. Sonic must make those renovations before it can buy more dealerships. Sonic says Mercedes demands unnecessary renovations at an inflated cost. Sonic has appropriately upgraded its other dealerships. fore it sought to buy more stores. Mercedes also claims Sonic slandered the automaker in news accounts. “Sonic fails to acknowledge that it has admitted to numerous breaches of pre-existing dealer improvement agreements,” the Mercedes suit says. Mercedes’ framework agreement with Sonic and other dealership groups generally limits individual retailers to 3 percent of the automaker’s U.S. sales of new vehicles, although it allows exceptions. In the first half of 2008, Mercedes-Benz sold 119,303 new cars and trucks in the United States — a 0.8 percent increase from the yearago period. Court documents do not specify whether Sonic’s purchase of Beck Imports would put it over the 3 percent threshold. But Sonic says Mercedes’ sales ceiling violates a North Carolina law that says automakers can reject dealership buyers only if they lack good moral character, busisee LAWSUIT, Page 34 Automakers usually get the last word about who buys their dealerships. But the outcome of a legal dispute between Sonic Automotive Inc. and Mercedes-Benz USA could give the largest U.S. auto retailers more say over what dealerships they can acquire, even if the factory objects. In a lawsuit against Mercedes, Sonic claims its framework agreement with the German automaker is illegal in Sonic’s home state of North Carolina. Sonic, the No. 3 U.S. dealership group, wants a state court to throw out the decade-old contract. Sonic and Mercedes declined last week to comment on the court battle. Most car companies require their highest-volume dealers to sign framework agreements if they seek to buy more dealerships. Such agreements require these dealers to meet strict standards for such items as sales, facilities and customer satisfaction. Some factories limit the number of its dealerships that a retailer can own. But franchise laws in many states, including North Carolina, narrowly define the reasons an automaker can block a buyer from purchasing a dealership. Legal experts say the Sonic-Mercedes court fight could lead to basic changes in dealership acquisition practices. Upgrade flap Sonic filed its suit in March to prevent Mercedes from vetoing its purchase of Beck Imports, a Mercedes dealership in Charlotte, N.C. The retailer claims the automaker wants to use its approval of the sale to “extort” millions of dollars in unneeded improvements at four of the other nine Mercedes dealerships Sonic owns. In a countersuit, Mercedes alleges Sonic violated an agreement to upgrade the dealerships be- http://www.zadv.com http://AutoObserver.com http://www.zadv.com
Table of Contents Feed for the Digital Edition of Automotive News - July 28, 2008 Automotive News - July 28, 2008 A scared-stiff industry stomps on the brakes No-lease edict stuns Chrysler dealers Hummer: Bonuses, buyouts Amid the gloom, Mercury celebrates Ford banks on Mulally's small-car plan PACE awards open for innovative suppliers GM expands employee discount plan through July American Axle blames strike for big quarterly loss Mercedes expects U.S. sales to fall; B class may come in 2011 Chevy plans new U.S. subcompact by '11 GM or Reynolds? Dealers must decide now Ralph Kisiel Ghosn: It's wrong time for a new partner GM geniuses turned their auto dreams into realities Dealers fresh out of Mini Coopers Chrysler, Ford, Honda top NAACP report card GM alters bonus for dealers who outperform their region Automakers angle for Chrysler's idle engine plant Chrysler revokes franchises in Pa. Sonic-Mercedes case could allow big dealers to add stores Buick's new LaCrosse It's still true: Product is king Still a bad idea NHTSA's Nason is leaving some big jobs undone Don't advertise them until they're on sale Safety matters much more than mpg Chrysler's no 'fuel economy laggard' $4 gas won't turn the U.S. into Europe For Europeans, America still spells opportunity Challenges travel with OnStar to China Personnel Mexico sales rise 1.2% in June Picture this Europe's worst sales result? Toyota Kia spends big to launch Borrego Kia launches Borrego just as SUVs lose favor Detroit 3: Goodbye, bailouts Dealers Eaton: Supercharger sales will grow Fla. appeals panel overturns class status in Kia brake suit Audi certified push pays off Used-car rule goes to the shop for tuneup Big-truck prices take a tumble in June Automaker tax break piggybacks on mortgage bill Honda rides high in 2nd-quarter rankings Ford Credit takes a hit as truck values fall 100 years of the Tin Lizzie Lamborghini profit soars AutoNation net income falls GM names CFO for N.A. TI Automotive unit will move Mercedes to cut Ala. production Fleming was a consummate newspaperman Toyota plans to raise Prius output A dart for Smart Tesla gets good reviews at Bentley 422 hp — and, uh, easy at the pump Ford's 2nd qtr: The reddest ink ever Bill Gates joins the car-dealer club Detroit 3 should put Mini under the microscope What's a Gov. to drive? Automotive News - July 28, 2008 Automotive News - July 28, 2008 - Hummer: Bonuses, buyouts (Page 1) Automotive News - July 28, 2008 - Hummer: Bonuses, buyouts (Page 2) Automotive News - July 28, 2008 - American Axle blames strike for big quarterly loss (Page 3) Automotive News - July 28, 2008 - GM or Reynolds? Dealers must decide now Ralph Kisiel (Page 4) Automotive News - July 28, 2008 - GM or Reynolds? Dealers must decide now Ralph Kisiel (Page 5) Automotive News - July 28, 2008 - GM alters bonus for dealers who outperform their region (Page 6) Automotive News - July 28, 2008 - GM alters bonus for dealers who outperform their region (Page 7) Automotive News - July 28, 2008 - Buick's new LaCrosse (Page 8) Automotive News - July 28, 2008 - Buick's new LaCrosse (Page 9) Automotive News - July 28, 2008 - Buick's new LaCrosse (Page 10) Automotive News - July 28, 2008 - Buick's new LaCrosse (Page 11) Automotive News - July 28, 2008 - Chrysler's no 'fuel economy laggard' (Page 12) Automotive News - July 28, 2008 - Chrysler's no 'fuel economy laggard' (Page 13) Automotive News - July 28, 2008 - For Europeans, America still spells opportunity (Page 14) Automotive News - July 28, 2008 - For Europeans, America still spells opportunity (Page 15) Automotive News - July 28, 2008 - Personnel (Page 16) Automotive News - July 28, 2008 - Personnel (Page 17) Automotive News - July 28, 2008 - Picture this (Page 18) Automotive News - July 28, 2008 - Picture this (Page 19) Automotive News - July 28, 2008 - Europe's worst sales result? Toyota (Page 20) Automotive News - July 28, 2008 - Europe's worst sales result? Toyota (Page 21) Automotive News - July 28, 2008 - Detroit 3: Goodbye, bailouts (Page 22) Automotive News - July 28, 2008 - Dealers (Page 23) Automotive News - July 28, 2008 - Fla. appeals panel overturns class status in Kia brake suit (Page 24) Automotive News - July 28, 2008 - Fla. appeals panel overturns class status in Kia brake suit (Page 25) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 26) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 27) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 28) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 29) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 30) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 31) Automotive News - July 28, 2008 - Big-truck prices take a tumble in June (Page 32) Automotive News - July 28, 2008 - Honda rides high in 2nd-quarter rankings (Page 33) Automotive News - July 28, 2008 - 100 years of the Tin Lizzie (Page 34) Automotive News - July 28, 2008 - Mercedes to cut Ala. production (Page 35) Automotive News - July 28, 2008 - Toyota plans to raise Prius output (Page 36) Automotive News - July 28, 2008 - Toyota plans to raise Prius output (Page 37) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 38) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 39) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 40) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 41) Automotive News - July 28, 2008 - What's a Gov. to drive? (Page 42)
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