Automotive News - July 7, 2008 - (Page 34) 34 • JULY 7, 2008 final assembly comment To run the train, should you be an engineer? N ot long ago, a friend asked whether I knew how many of the industry’s top execs have engineering or manufacturing experience. My reaction was: What the heck difference does that make? The friend — a product engineer who also worked in manufacturing on the way up the ladder — reasoned that if you’re going to run a company that develops and makes products, you ought to have firsthand knowledge of EDWARD LAPHAM how it’s done. IS EXECUTIVE Interesting EDITOR OF concept, I AUTOMOTIVE thought, quietly NEWS. wondering which engineering schools teach impressionable young students that engineers are born to rule. But as I thought about it over dinner, it began to make sense. Actually, it sounded hauntingly familiar — like one of Life’s Little Lessons as taught by my father, a retired engineer who worked in product planning and development for one of the Detroit 3 back when they were the Big 3. Well, let’s make it a little game to see who gets points. Chrysler LLC CEO Bob Nardelli started his career at GE as an entry-level manufacturing engineer. I’m not sure how many points that’s worth. Co-President Jim Press is an automotive marketing whiz, so no points there. But co-President Tom LaSorda is a true manufacturing man, so he scores. Ford Motor Co. Executive Chairman Bill Ford had a few manufacturing jobs on his way to the top, which qualifies for a few points. CEO Alan Mulally is an aeronautical and astronautical engineer who developed planes at Boeing. Boy, that’s another toss-up, isn’t it? At General Motors, CEO Rick Wagoner and COO Fritz Henderson are both finance guys. Under the rules, that’s a goose egg. But let’s be reasonable. Most companies expose high-potential execs to a variety of jobs and disciplines. It’s part of the seasoning process. So there’s no reason that a nonengineer can’t learn to appreciate engineering and manufacturing and work collaboratively to create great products. Is there? And now, from Wall Street, a short tale of terror H ere’s another grim sign of the times for automakers, suppliers and public dealership groups: an uptick in short-selling of autorelated stocks. Selling a stock short is a prediction of a grim future — a bet that the share price will go down. The investor sells shares borrowed from a broker; if the share price does go down, the investor buys shares at the lower price, uses them to replace the borrowed shares and pockets the difference, less commissions. If the shares go up, the investor loses money. According to the latest statistics from the New York Stock Exchange, , about 120 million shares of General Motors were held by short investors as of June 10. That was up 14.2 percent from a month earlier. The short-sellers represented 21.3 percent of the readily available outstanding GM shares — defined as those not held by company insiders or large investors with more than a 5 percent share of the company. The same figures for Ford were about 318 million short shares, an increase of 10.9 percent from a month earlier. The latest figure represented 14.2 percent of Ford’s readily available shares. Publicly traded suppliers with the highest short positions include American Axle & Manufacturing Holdings Inc. and ArvinMeritor Inc., each with short positions representing close to 25 percent of the available shares. Among publicly traded retailers, Houston-based Group 1 Automotive had the highest percentage of shorts, at 25.6 percent of the available shares, followed by Lithia Motors Inc., of Medford, Ore., at about 20 percent. Turbo taboo may end for BMW M’s T Great news? Analysts shun the Kool-Aid at Chrysler he turbo has always been taboo for BMW’s highperformance M models. But that may change. Although BMW has preferred high-revolution, naturally aspirated engines, the next M5, due in 2011, is expected to get a twinturbo V-8 instead of a naturally aspirated V-10, insiders say. Variations of the twin-turbo, 4.4liter V-8 that powers the X6 premium crossover have been tested with good results, an insider said. A source also said the company has had “good experience with the performance characteristics” of the X6 base engine, a 3.0-liter, six-cylinder biturbo. It comes “very close to a large-displacement, naturally aspirated engine,” the source said. At half off the sticker, the Rams move much quicker. Dodging a bullet: Half-off deal busts dealer’s Ram jamy June 20, Albuquerque, N.M., Dodge dealer Ken Zangara had had enough. Fuel prices were soaring, sales were tanking, and Chrysler’s $2.99 gasoline-price guarantee wasn’t getting the job done. So he offered Ram pickups at half off sticker: a $30,000 pickup for $15,000. Customers can choose the half-off discount or the $2.99 fuel deal, which guarantees Chrysler will pay the difference between $2.99 and the future gasoline price for three years, based on 12,000 annual miles. Most are choosing the discount, he says. “It really saved our month,” Zangara says. Zangara Dodge finished the month with sales of 113 new vehicles, up from 103 in June 2007. Of the 113 sold, 75 were Rams. Zangara says he’s not losing money. That’s because there’s now $9,000 in customer and dealer cash on the Ram. Add $9,000 to the $15,000 he’s selling them for and you get $24,000. Where does he make up that $3,000 difference on the $27,000 invoice? “In service and parts and body shop,” he says. Zangara knows he’s not out of the woods. He has 400 2008 Ram trucks on the ground or ordered. But Albuquerque is truck country, he says, and “people out here need their trucks.” hrysler execs keep saying they’re ahead of their financial metrics, even though sales dropped 36 percent in June. But some analysts have a more skeptical view of the privately owned automaker, which doesn’t release its financials. Morgan Stanley analyst Adam Jonas said in a report on Chrysler’s problems and their impact on Daimler, which has a 19.9 percent stake: “The rapid deterioration of fundamentals at Chrysler poses a risk to expose European companies. … Daimler has quantified a ($4.76 billion) cash expense related to Chrysler in a worst-case scenario, including unpaid loans, pension funding, warranty and supply arrangements. These costs are equal to roughly one-third of Daimler’s current net cash position.” That “worst-case scenario” would be bankruptcy. But Chrysler continues to insist it’s tearing up the track. CoPresident Jim Press said last week: “We’re actually exceeding the goals made by the purchaser (Cerberus) and ahead on cash. In fact, we’re running ahead, getting stronger and accumulating more cash.” And Tom LaSorda, the other copresident, called reports of a possible breakup of Chrysler “hogwash.” IGOR SMICHKOV/ISTOCKPHOTO VW tells builders: Plan for Southeast plant V olkswagen says Michigan is in the running for a U.S. assembly plant, and the German press says a site announcement could come soon. But a VW document obtained by Automotive News suggests the company has favored a Southeastern location all along. In a document sent to design and construction companies that may bid on the project, VW described the project as a “greenfield facility with the capability of press, body, painting and assembly operations.” VW told the potential bidders: “For pricing purposes, assume the location is in the Southeast U.S.A.” The document is dated April 23. That same day, a VW release stated that the automaker had narrowed its list of states competing for the potential factory to Michigan, Alabama and Tennessee. A VW spokeswoman declined to comment on the document. Production at the new plant is to start in 2010, with an annual capacity of 300,000 cars by 2018. The mpg fracas: Pick your favorite fairy tale “C hicken Little.” “The Boy Who Cried Wolf.” “The Emperor’s New Clothes.” Take your pick of morality tales: Each might apply to last week’s painful juxtaposition of grim vehicle sales reports and fresh claims from automakers that they can’t afford tougher federal mandates on fuel economy. The industry had warned repeatedly that government regulation threatened its well-being. The government, convinced that the sky is warming, not falling, is demanding 40 percent better fuel economy by 2020 — including a 25 percent gain in 2011-15 model years. Will Washington heed car companies’ cries that, in times of economic stress, that’s too much too fast? General Motors said last week that a government assumption about expected industry spending on fuel-saving technologies “ignores the realities facing GM.” One painful chunk of reality: U.S. sales of GM’s domestic light vehicles were off 17.7 percent in June. But if high gasoline prices are the main force behind plunging sales, it seems inevitable that automakers will have to offer more vehicles with the fuel-saving technologies they say they cannot afford, in order to revive consumer demand. So federal mandates could prove peripheral — maybe even irrelevant — to that process, however government officials and industry courtiers try to dress up the naked truth. Edward Lapham writes commentaries each week for autonews.com. Read them at autonews.com/edwardlapham. http://autonews.com http://autonews.com/edwardlapham
Table of Contents Feed for the Digital Edition of Automotive News - July 7, 2008 Automotive News - July 7, 2008 Turnaround trouble: Mitsubishi back on the skids It's a panic — but don't panic CAUGHT FLAT-FOOTED Japan's new diet plan: Slim down, ounce by ounce Amid sale rumors, Volvo has upmarket plans Reynolds sues dealer over computer upgrade Chrysler and dealers to improve Internet marketing strategies Seat strategy: Lear aims to make more profits by producing more parts Nissan: Despite a truck glut, Titan gets no more incentives American Axle cuts staff; boosts India business, CEO bonus Bosch sees N.A. red ink this year Bill Mitchell's designs blew away the past Hyundai Santa Fe to get a 4-cylinder GM Europe exec: Curbing CO2 is 'around the clock' effort Supplier input varies in Nissan's tech plans Great Wall becomes Chrysler's 2nd Chinese partner Steel prices nudge up Nano's costs Analyst: GM could tap UAW benefits fund Automakers create opportunities for Mexican molders Chrysler pitches gas savings on hybrid SUVs Researchers test capturing CO2 before it leaves the car Some execs win even when their companies lose Tata's personal touch Show me the money Obituaries Study: Dealership service shops extend their hours New Web tool promotes GM service Fiat CEO Marchionne is Industry Leader of Year Jim O'Sullivan Johan de Nysschen Sergio Marchionne Ratan Tata Dick Colliver Fritz Henderson Martin Thall Jim Farley Jack Stavana Roger Penske Walter de' Silva Mike Stanton Tim Manganello David Friedman Jim Hallett Larry Jutte Kim Kosak Ron Gettelfinger Tom Stephens Bob Lutz Tom Shoupe Jay Amestoy June caps a dismal first half Personnel Auto roof rule due by Oct. 1 Mitsubishi dumps 9 ad associations Small-car transaction prices rise in June Turbo taboo may end for BMW M's The mpg fracas: Pick your favorite fairy tale Great news? Analysts shun the Kool-Aid at Chrysler And now, from Wall Street, a short tale of terror VW tells builders: Plan for Southeast plant Dodging a bullet: Half-off deal busts dealer's Ram jam To run the train, should you be an engineer? Automotive News - July 7, 2008 Automotive News - July 7, 2008 - CAUGHT FLAT-FOOTED (Page 1) Automotive News - July 7, 2008 - CAUGHT FLAT-FOOTED (Page 2) Automotive News - July 7, 2008 - Amid sale rumors, Volvo has upmarket plans (Page 3) Automotive News - July 7, 2008 - Seat strategy: Lear aims to make more profits by producing more parts (Page 4) Automotive News - July 7, 2008 - Seat strategy: Lear aims to make more profits by producing more parts (Page 5) Automotive News - July 7, 2008 - Hyundai Santa Fe to get a 4-cylinder (Page 6) Automotive News - July 7, 2008 - Hyundai Santa Fe to get a 4-cylinder (Page 7) Automotive News - July 7, 2008 - Analyst: GM could tap UAW benefits fund (Page 8) Automotive News - July 7, 2008 - Analyst: GM could tap UAW benefits fund (Page 9) Automotive News - July 7, 2008 - Chrysler pitches gas savings on hybrid SUVs (Page 10) Automotive News - July 7, 2008 - Chrysler pitches gas savings on hybrid SUVs (Page 11) Automotive News - July 7, 2008 - Show me the money (Page 12) Automotive News - July 7, 2008 - Show me the money (Page 13) Automotive News - July 7, 2008 - Show me the money (Page 14) Automotive News - July 7, 2008 - Show me the money (Page 15) Automotive News - July 7, 2008 - Obituaries (Page 16) Automotive News - July 7, 2008 - Obituaries (Page 17) Automotive News - July 7, 2008 - Obituaries (Page 18) Automotive News - July 7, 2008 - Obituaries (Page 18A) Automotive News - July 7, 2008 - Obituaries (Page 18B) Automotive News - July 7, 2008 - Obituaries (Page 18C) Automotive News - July 7, 2008 - Obituaries (Page 18D) Automotive News - July 7, 2008 - Obituaries (Page 18E) Automotive News - July 7, 2008 - Obituaries (Page 18F) Automotive News - July 7, 2008 - Obituaries (Page 18G) Automotive News - July 7, 2008 - Obituaries (Page 18H) Automotive News - July 7, 2008 - Obituaries (Page 18I) Automotive News - July 7, 2008 - Obituaries (Page 18J) Automotive News - July 7, 2008 - Obituaries (Page 18K) Automotive News - July 7, 2008 - Obituaries (Page 18L) Automotive News - July 7, 2008 - New Web tool promotes GM service (Page 19) Automotive News - July 7, 2008 - Dick Colliver (Page 20) Automotive News - July 7, 2008 - Walter de' Silva (Page 21) Automotive News - July 7, 2008 - Larry Jutte (Page 22) Automotive News - July 7, 2008 - Jay Amestoy (Page 23) Automotive News - July 7, 2008 - Jay Amestoy (Page 24) Automotive News - July 7, 2008 - Jay Amestoy (Page 25) Automotive News - July 7, 2008 - Jay Amestoy (Page 26) Automotive News - July 7, 2008 - Jay Amestoy (Page 27) Automotive News - July 7, 2008 - Jay Amestoy (Page 28) Automotive News - July 7, 2008 - June caps a dismal first half (Page 29) Automotive News - July 7, 2008 - Personnel (Page 30) Automotive News - July 7, 2008 - Mitsubishi dumps 9 ad associations (Page 31) Automotive News - July 7, 2008 - Small-car transaction prices rise in June (Page 32) Automotive News - July 7, 2008 - Small-car transaction prices rise in June (Page 33) Automotive News - July 7, 2008 - To run the train, should you be an engineer? (Page 34) Automotive News - July 7, 2008 - To run the train, should you be an engineer? (Page 35) Automotive News - July 7, 2008 - To run the train, should you be an engineer? (Page 36)
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