Automotive News - October 27, 2008 - (Page 8) 8 • OCTOBER 27, 2008 advertising Desperate industry begs feds for help Dingell: ‘The situation is very, very serious’ Harry Stoffer hstoffer@crain.com news ANALYSIS WASHINGTON — “It’s not a bailout!” Just a few weeks ago, we heard that refrain from auto executives and their political allies, as they successfully lobbied Congress and President Bush to fund $25 billion in low-interest loans. You don’t hear such denials now. Instead, the prospect of direct government investment in auto companies is not only raised but taken seriously. The time for pretense is past. The Detroit 3, suppliers, auto lenders and dealers need federal help, quickly and badly. And no one much cares what the aid is called. That message arrived last week via the Michigan congressional delegation, whose members — Democratic and Republican — often parrot in public what top industry executives tell them in private. The smell of desperation was in the air. “The situation is very, very serious,” said House Energy and Commerce Chairman John Dingell, D-Mich., the U.S. industry’s chief advocate on Capitol Hill for decades. “We’re not able to tell you what is the cure,” he conceded after Michigan lawmakers petitioned the Treasury Department and Federal Reserve to consider any means to help. But the lawmakers offered the possibility that auto companies that get federal help would provide stock warrants in return. In other words, the government would acquire rights to ownership stakes in those companies. And no one from the industry has disavowed the notion. Sources of potential federal aid are large and growing. But each also has question marks: The $25 billion in low-interest loans can be used only to retool plants to produce more fuel-efficient vehicles. The loans won’t be available for months and possibly not until 2010. The U.S. Treasury has the authority to use some of its $700 billion bailout fund to acquire troubled assets backed by auto loans. But the administration wants to steer the first $250 billion to troubled banks. Democratic leaders in Congress want to consider another economic stimulus package in a lame-duck session after the Nov. 4 election. The UAW says such a bill should include industry aid. But there may not be enough time or will to make a deal. Today, Oct. 27, the Federal Reserve launches a program to buy commercial paper from financial institutions and big companies — in effect, arranging short-term loans for the borrowers’ day-to-day operations. But industry lobbyists question whether the program will be flexible enough to provide much benefit to the auto sector. A wild card remains: The Fed has authority, under laws rooted in the Great Depression, to make loans to just about anyone it wants in “unusual and exigent circumstances.” Advocates already are making that case for the auto industry. As its woes accumulate — tanking sales, frozen credit, job losses, failing dealers, depressed earnings, cash burn — the drumbeat is likely to get louder.c Toyota, GM top global r&d spending Industry reverses cutbacks of 2006 Rick Kranz rkranz@crain.com Big spenders Auto industry leaders in 2007 r&d spending 2007 R&D SPENDING % OF 2007 SALES Toyota Motor Corp. led the world’s publicly held global companies in r&d spending last year, followed by General Motors. Ford Motor Co. was No. 6 on the list, Honda Motor Co. was No. 16 and Volkswagen AG was No. 19. The data appear in the annual Booz & Co. Global Innovation 1,000 analysis. Booz analyzed the r&d spending at the world’s top 1,000 publicly held automotive and nonautomotive companies. Last year’s r&d spending growth in the automotive industry was a striking change from 2006, said Barry Jaruzelski, a partner in Booz, of Florham Park, N.J. In 2006, all industries except automotive increased r&d spending in absolute dollars. In 2007, “automotive kicked back up and was basically growing at the historical rate again,” said Jaruzelski. “General Motors did a substantial increase in r&d spending year over year.” He said most of the increase was tied to GM’s development of alternative powertrains — “the (Chevrolet) Volt and things like that.” GM was No. 6 Toyota Motor General Motors Ford Motor Honda Volkswagen Daimler Nissan Motor BMW Peugeot Denso Corp. $8.39 billion $8.10 billion $7.50 billion $5.14 billion $4.76 billion $4.32 billion $4.00 billion $4.00 billion $2.84 billion $2.72 billion 3.6 4.5 4.3 4.9 3.2 3.2 4.2 5.2 3.4 7.7 Source: Booz & Co. Global Innovation 1,000 report on the list in 2006. Among the findings: In 2007, Toyota spent $8.39 billion on r&d or 3.6 percent of global sales. R&d spending was up 7.6 percent from 2006. In 2006, Toyota also was No.1 on the list. In 2007, GM spent $8.10 billion or 4.5 percent of sales, an increase of 22.7 percent over the previous year. In 2006, GM was No. 6 on the list. Several automotive companies appeared to be research-driven. Porsche Automotive Holdings spent 9.8 percent of its sales on r&d, Delphi Corp. spent 9.0 percent, Denso Corp. spent 7.7 percent and Valeo SA spent 7.0 percent. The global automotive industry spent $79 billion on r&d, up 8 percent from the previous year. That amount accounted for 16 percent of total global r&d spending for publicly held companies. The auto section ranked third among industries — following computing and electronics, which ranked first, and health care. Lear Corp. had the lowest percentage of sales invested in r&d among automakers and suppliers on the list. Lear spent 0.8 percent of its sales on r&d, or $135 million, ranking it No. 492 of all companies on the Booz list. Lear spokesman Mel Stephens cited two reasons for the low percentage. “The company divested one of its lines of business, interior trim, in early 2007,” said Stephens. Second, “our r&d investments tend to be very focused on specific projects in cooperation with our customers. We work on things that have a high probability of market success.”c Hyundai dealers want ads to pitch favorable loans Kathy Jackson kjackson@crain.com LOS ANGELES — Hyundai and Kia dealers want their captive finance company to match Toyota’s generous loan deals and advertising during the credit crunch. “Toyota is stirring up the market — but for themselves,” says Scott Fink, incoming chairman of the Hyundai dealer council. “We need to shake it up and let consumers know there are choices out there. Consumers may think only Toyota has money.” Toyota is offering 0 percent loans on 11 nameplates to customers with good credit. And it is advertising the campaign on national TV. Last week, Mike Buckingham, president of the captive, Hyundai Motor Finance Co., assured Hyundai dealers at a meeting in Orlando, Fla., that the company would be more aggressive. “We’re much closer to Toyota (on loan deals) than anybody else,” he says. “The Orlando dealers were telling us we need to get the message out.” Hyundai division has 0 percent loans on the 2009 Sonata and the “ We’re much closer to Toyota (on loan deals) than anybody else. The Orlando dealers were telling us we need to get the message out. MIKE BUCKINGHAM Hyundai Motor Finance Benny Yount, who owns three Kia and two Hyundai stores in North Carolina, wants the captive to offer more loans to riskier customers. ” Toyota’s strong message Rates for all customers have risen recently up to 2 percentage points. But six-year loans are only available to customers in what Hyundai and Kia call tiers 1, 2 and 3. They have scores above 600. “It’s the marginal customers that need the longer terms so they can make their payments better,” he says. Bill Wallace, owner of a Hyundai store in Stuart, Fla., credits the finance company for being flexible and aggressive. But he says: “If I’m critical of anything, it would be the lack of marketing. That is a strong message that Toyota is offering. The average person who has never bought a Hyundai probably doesn’t even know it has a finance company.” Buckingham says he will lay out plans for the Kia dealers at the national meeting in mid-November.c 2008 Santa Fe. Kia has cut-rate loans on many 2009 models and 0 percent on the 2008 Sedona and Sorento. Buckingham said Hyundai Motor Finance secured lines of credit 12 to 24 months ago, when money was available and less expensive. “So we’re in good shape for at least 12 months,” he said. “We don’t anticipate any interruption in our business at least until the spring.” Rising rates But Hyundai’s cost of funds, which largely determines rates on auto loans, leases and floorplanning, has risen about 2 percentage points over the past three months. One Hyundai dealer said Hyundai Motor Finance’s buy rate, the rate it charges dealers for auto loans, is 6.9 percent on a five-year loan for a customer with a 600 credit score. He said dealers, to earn profits, mark up the rate as much as 2 percentage points for consumers. Buckingham said Hyundai Motor Finance will accept loans for customers with credit scores in the high 500s. Scores range from 300 to 850. Most people score in the 600s and 700s; below 600 is considered risky. “But we’ve told the dealers in order to buy marginal, we need some of the better paper, too, to balance it out,” Buckingham says. http://www.zadv.com http://www.zadv.com
Table of Contents Feed for the Digital Edition of Automotive News - October 27, 2008 Chrysler dealers under GM? States would rule Survey: Worried dealers flee GMAC Va. dealers turn to local credit unions Anxiety over Chrysler: Deal or no deal? Ford, GM execs join panels looking at eco-friendly options Big pickups, SUVs gain share Chrysler will cut 4,300 salaried jobs by year end BMW seeks joint vehicle electronics effort Runkle: Give tiny suppliers a chance VW goal: 80% N.A. content for Tenn. plant April Wortham China's BYD plans U.S. hybrids Lucky Icahn lost Lear Mahindra's U.S. launch to get $60 million ad drive Toyota may renew no-interest loans Hesterberg, Thomson will address congress Desperate industry begs feds for help Hyundai dealers want ads to pitch favorable loans Toyota, GM top global r&d spending After Detroit 3 take back design, supplier sitting pretty Germany's Preh supplies F-150 ventilation part Buehler is Volt supplier Freescale: New infotainment chip Are they too big to fail? A goal for GM: Buy back full control of GMAC Tax credit would move domestic cars GMAC loan bonus is a bad idea Take a good look: Toyota is losing its halo What flexibility is and what it isn't Toshiba joins battery battle Personnel Hyundai slows Ala. output of Sonata, Santa Fe Picture this LaNeve: GM marketing budget faces '09 hit Hyundai counts on luxury, hybrid hopes Keogh: Audi belongs with top luxury brands Dealers Court overturns class-action status in Blue Oval suit 2 major lemon-law lawyers lose right to practice in Md. Auctions offer more online for just-in-time dealers Used-truck prices higher in September Lack of used Minis limits certified program Wood trim maker expects to avoid worst of woes VW: U.S. may get Scirocco after all Ford's new F-150 is built for jobs, not jaunts Think of it as GPS for tools Feds look at China-made valves on Ford tires Shareholder value tumbles in 3rd quarter Shareholder value tumbles in 3rd quarter Ford truck marketing exec: Hybrid pickup 'publicity stunt' Survey: Ford Motor reliability improves Chrysler heir: Get back to basics Farley has bright idea to boost auction action Kerkorian speeds away from autos Names familiar? NADA leadership is a family affair Mitsubishi bucks trend on profits New trade debate in the works? Beware the 'vital' deal Automotive News - October 27, 2008 Automotive News - October 27, 2008 - (Page Intro) Automotive News - October 27, 2008 - (Page Bellyband1) Automotive News - October 27, 2008 - (Page Bellyband2) Automotive News - October 27, 2008 - Va. dealers turn to local credit unions (Page 1) Automotive News - October 27, 2008 - Va. dealers turn to local credit unions (Page 2) Automotive News - October 27, 2008 - Chrysler will cut 4,300 salaried jobs by year end (Page 3) Automotive News - October 27, 2008 - VW goal: 80% N.A. content for Tenn. plant April Wortham (Page 4) Automotive News - October 27, 2008 - VW goal: 80% N.A. content for Tenn. plant April Wortham (Page 5) Automotive News - October 27, 2008 - Hesterberg, Thomson will address congress (Page 6) Automotive News - October 27, 2008 - Hesterberg, Thomson will address congress (Page 7) Automotive News - October 27, 2008 - Toyota, GM top global r&d spending (Page 8) Automotive News - October 27, 2008 - Toyota, GM top global r&d spending (Page 9) Automotive News - October 27, 2008 - Freescale: New infotainment chip (Page 10) Automotive News - October 27, 2008 - Freescale: New infotainment chip (Page 11) Automotive News - October 27, 2008 - GMAC loan bonus is a bad idea (Page 12) Automotive News - October 27, 2008 - GMAC loan bonus is a bad idea (Page 13) Automotive News - October 27, 2008 - What flexibility is and what it isn't (Page 14) Automotive News - October 27, 2008 - What flexibility is and what it isn't (Page 15) Automotive News - October 27, 2008 - Hyundai slows Ala. output of Sonata, Santa Fe (Page 16) Automotive News - October 27, 2008 - Picture this (Page 17) Automotive News - October 27, 2008 - Picture this (Page 18) Automotive News - October 27, 2008 - Picture this (Page 19) Automotive News - October 27, 2008 - LaNeve: GM marketing budget faces '09 hit (Page 20) Automotive News - October 27, 2008 - Hyundai counts on luxury, hybrid hopes (Page 21) Automotive News - October 27, 2008 - Keogh: Audi belongs with top luxury brands (Page 22) Automotive News - October 27, 2008 - Keogh: Audi belongs with top luxury brands (Page 23) Automotive News - October 27, 2008 - Dealers (Page 24) Automotive News - October 27, 2008 - 2 major lemon-law lawyers lose right to practice in Md. (Page 25) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 26) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 27) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 28) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 29) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 30) Automotive News - October 27, 2008 - VW: U.S. may get Scirocco after all (Page 31) Automotive News - October 27, 2008 - Feds look at China-made valves on Ford tires (Page 32) Automotive News - October 27, 2008 - Ford truck marketing exec: Hybrid pickup 'publicity stunt' (Page 33) Automotive News - October 27, 2008 - Ford truck marketing exec: Hybrid pickup 'publicity stunt' (Page 34) Automotive News - October 27, 2008 - Survey: Ford Motor reliability improves (Page 35) Automotive News - October 27, 2008 - Survey: Ford Motor reliability improves (Page 36) Automotive News - October 27, 2008 - Survey: Ford Motor reliability improves (Page 37) Automotive News - October 27, 2008 - Beware the 'vital' deal (Page 38) Automotive News - October 27, 2008 - Beware the 'vital' deal (Page 39) Automotive News - October 27, 2008 - Beware the 'vital' deal (Page 40)
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