Automotive News - March 24, 2008 - (Page 54)

54 • MARCH 24, 2008 As yuan rises, so do prices of Chinese parts Alysha Webb awebb@crain.com Stronger yuan The value of the yuan is rising against the dollar, making Chinese auto parts more expensive outside China. $1 EQUALS SHANGHAI — Rising costs, including labor, have eroded China’s status as a low-cost source of components for foreign automakers and suppliers. Now suppliers also must deal with a rising yuan. The yuan’s rise means foreign companies must pay more in dollars or other currencies to buy Chinese parts and materials. The yuan — long pegged to the U.S. dollar at around 8.3 to the dollar — was allowed to float in limited steps against the dollar in July 2005. On March 18, one dollar traded for 7.1 yuan, which means the yuan has appreciated 16.8 percent in almost three years. Still, China will remain an inexpensive source of parts for use in operations worldwide, say automotive executives. They hope that helping Chinese suppliers become more efficient will offset some of the cost increase. March 2008 July 2005 Change 7.1 yuan ($0.1408) 8.3 yuan ($0.1205) 16.8% In 2007, China shipped auto parts worth $8.53 billion to the United States, up 23.1 percent from 2006, according to federal government figures. Less attractive The yuan’s appreciation “will make China look less attractive,” says Chris Obey, managing director of China for Lear Corp. But “we’re still going to pursue (sourcing) aggressively.” Lear, of suburban Detroit, produces seats, door panels, acoustic systems and electronic distribution systems. The supplier is in the early stages of sourcing parts from China for use worldwide, says Obey. The yuan’s rapid rise surprised some companies. Nissan buys parts in China for export to overseas plants, says Lu Hong, finance director at Nissan (China) Investment Co. “We were assuming the yuan would not appreciate at this rate,” she says. “Four years ago, we thought it may appreciate around this level in five or 10 years.” European companies are in a slightly better position than U.S. companies because the euro has not lost value as quickly as the dollar. Still, Europeans are keeping a close eye on the currency. “This won’t have an impact in 2008, but it is something to monitor,” says Christian Marsais, group vice president in charge of China at Valeo SA. Valeo, of Paris, produces electrical and ther- mal systems, transmissions, wiper systems and security systems. Valeo’s goal is for 70 percent of its purchasing to come from low-cost countries by 2010, CEO Thierry Morin has said. China figures prominently in that plan. Cure: Efficiency Foreign companies hope to offset some of the impact of the appreciation by helping Chinese suppliers become more efficient. Magna International Inc. will boost sourcing from China 65 percent this year to $500 million, says Keith Lomason, managing director of China. Magna, of Toronto, produces seats, mirrors, body and chassis systems, closures, powertrain components and other parts “We are working with our suppliers on efficiencies,” says Lomason. “So far we have been able to offset the yuan appreciation with efficiency improvements.” c Study: Hydrogen research worth the cost Harry Stoffer hstoffer@crain.com Deflating high-pressure tanks “It seems likely that the automotive original-equipment manufacturers can innovate enough to store sufficient compressed hydrogen onboard for a 300-mile (or more) range, but it is not clear that this can ever be a satisfactory solution for millions of mass-produced vehicles.” WASHINGTON — Big obstacles confront research aimed at developing fuel cell vehicles and hydrogen fuel, a panel of experts says. But the National Research Council panel concludes that the research remains “justified by its potentially enormous benefits to the nation.” The panel reported its findings in a 160-page study released last week. Hundreds of millions of taxpayer dollars annually subsidize the research. It is conducted jointly by government and industry, including the Detroit 3. The panel warns that some solutions to problems — such as how best to store enough hydrogen on a vehicle — are “as yet undiscovered.” Automakers use high-pressure hydrogen tanks in the demonstration vehicles they now deploy. If better methods are not found, researchers should “perform appropriate studies to determine the risks and consequences of relying on pressurized hydrogen storage,” the report says. The panel cites considerable pro- — Committee on Review of the FreedomCAR and Fuel Research and Development Program, National Research Council gress in fuel cell and hydrogen research. Still, it calls for “a strategic reassessment” to account for changed national research priorities. The report includes dozens of proposals to improve the research. Among the report’s conclusions: There is a lack of urgency in completing and executing an r&d plan for plug-in hybrid electric vehicles. Such vehicles are now widely viewed as a more promising short-term alternative to traditional vehicles than are fuel cells. Some money spent to reduce the cost of lightweight materials “should be redistributed to areas of higher potential payoff.” The U.S. Department of Energy should extend its study of the challenges to switching to hydrogen fuel to the 2030-35 time frame. ‘Lack of urgency’ The initiatives reviewed by the panel are called the FreedomCAR and Fuel Research and Development Program. In 2003, the Bush administration set a goal of making enough research progress by 2015 so the auto industry could decide to commercialize vehicles powered by fuel cells by 2020. But in the past several years, President Bush has shifted more attention to renewable fuels, such as ethanol, and to battery power. Retirees give advice The research council panel was chaired by Craig Marks, a former vice president of AlliedSignal Inc. The panel’s 18 members include three Detroit 3 retirees: Peter Beardmore, a former laboratory director at Ford Motor Co.; Bernard Robertson, former senior vice president of engineering technologies at DaimlerChrysler; and Kathleen Taylor, former head of the physics and physical chemistry department at General Motors. Active Detroit 3 employees take part in the research that the panel evaluated. The companies’ collaborative research organization, the U.S. Council for Automotive Research, hailed the report for supporting the work they are doing with government. Other participants in the research are suppliers, academic institutions, national laboratories and energy companies. The National Research Council is the operating agency of the National Academy of Sciences and National Academy of Engineering. The congressionally chartered nonprofit institutions offer advice on science and technology issues of national interest.c Gulf States trial halted Lindsay Chappell lchappell@crain.com FUKUI Honda hybrids won’t mimic rivals continued from Page 4 Fukui said the car will have a global nameplate, like the Accord and Civic. As for styling, he said the new hybrid will take cues from the sleek, wedge-shaped FCX Clarity sedan, a hydrogen fuel cell vehicle Honda will start leasing this summer. “That’s more or less the image we’re striving for,” Fukui said. “Timingwise, I would say there is no possibility we would resort to lithium ion batteries” in the new hybrid due next year, Fukui said. Still, the car will be engineered so lithium ion batteries can be swapped for nickel-metal hydride batteries later. Details of Honda’s new hybrid, billed as the Prius killer, are largely under wraps. Honda is aiming to price it below the current Civic Hybrid, whose sales have been lackluster. The engine will be based on the Civic’s, Fukui said. But the upcoming hybrid will have a newly designed motor and engine control unit, making it lighter and more compact. That also will help bring down its cost, he said. The Civic’s base engine in the United States is a 1.8-liter inline four-cylinder. Many partners Many of Honda’s rivals have committed to a single partner in lithium ion research. Toyota has teamed with Matsushita Electric Industrial Co., Nissan with NEC Corp. and Mitsubishi with GS Yuasa Corp. But Honda is playing the field. It is working with Matsushita, Sanyo Electric Co. and several others that Fukui declined to name. But that doesn’t mean Honda is behind, he said. “There’s a word in Japanese, soukon, for people who decide to get married too soon,” he said. “It’s like marrying a girl who’s only 13. You don’t know how that girl will turn out as a lady.” Fukui also downplayed the immediate potential for electric vehicles. “It’s not really practical as of yet, based on our experience,” he said. Recharging times are still too long and the driving range is still too limited, said the Honda chief. “But that depends on the evolution of the battery,” Fukui said. “It might be that we come up with a battery that has 10 times the performance of the existing lithium ion battery. And if that happens, maybe there will be a leapfrog to electric vehicles.” Separately, Fukui also said: Honda is still on track for higher sales in the United States this year (see story, Page 4). Honda may reconsider production plans if the dollar lingers in the 90yen range too long. Sales in China will see a doubledigit increase in 2008. U.S. sales could have benefited from launching the hot-selling Fit a year earlier. Advertising, rising yen Fukui tried to ease concerns at some U.S. dealers that the automaker isn’t spending enough on advertising to buoy sales amid the North Ameri- can market slump. After a 12-year absence, Honda revived its partnership with dealer ad associations in September 2006. But the brand’s primary focus was Los Angeles — an expensive market with falling sales. “I do agree advertisement is necessary, and I’m sure American Honda will respond,” Fukui said. “It’s far better to spend money on advertising than incentives.” Regarding the dollar’s recent plunge against the yen, Fukui said Honda’s basic strategy is to protect against

Table of Contents Feed for the Digital Edition of Automotive News - March 24, 2008

Ford lists 6 to succeed Mulally GM pushes luxury superstores Industry straps in for rough ride Bob Irvin is a worthy addition to Hall of Fame Debate at Scion: How to grow Ford moves executives in Asia to new jobs CEO of lanelogic: We're still here Kia's N.Y. duo Chrysler's exec trio: Reports of friction mostly fiction Where others see gloom, Honda chief sees boom in U.S. Fukui: Nickel battery is best bet for hybrid Beijing conference explores key issues in China market Planworks keeps its role as buyer for GM ads Lincoln: MKS will make up for brand's slow start in '08 Deal's no big deal: Styling top reason to buy GM Penske's Smart start: He'd like 15,000 more Dodge's pitch for Challenger: A halo that you can afford Chrysler plans 'We listen' ads You go, Bob With zest, activist Ditlow remains on lemon patrol Autos did the job after 9/11; don't bet on that now Chinese cars? Dealer beware Solar power is the only answer Where will we get power for the Volt? Want higher CAFE? First, do this In N. California, hybrids are hot Detroit 3 can learn from the Marlboro Man The Prius is a phenomenon Wait 3 years, then judge Ford How many Jeeps will India buy? Lithia looks into improper sales reports at dealerships AutoNation's lead shrinks as largest U.S. dealer group Honda ad agency creates unit to build Acura brand Study: Consistent theme in auto ads builds viewer recall Big-truck sales continue slide in Feb. -- off 27.1% MazdaSpeed revs up racing accessory sales Calif. company eyes electric charging stations for Volt, Vue Indictment: Bribe scheme cost GM $83.3 million The greening of Toyota dealerships 6 more finalists in race for PACE recognition Tenneco expands Japanese work, seeks more Bosch buys diagnostic equipment firm in China JV will design vehicle platforms Citation moves headquarters NxtGen tests emissions system VW stake may help Porsche on fuel economy rules Chrysler's Project Genesis wins over Ore. dealer Germany, new EU members send up European sales Saturn will choose store system soon VW thinks modular for flexibility at auto plants Automakers eager as axles turn high-tech Talking drivetrains with American Axle Dollar halts U.S. retail sales of Audi Q7 hybrid Hyundai: Genesis Coupe offers more go for dough Maxima's target: Luxury Euro makes Pontiac adds 3 sporty variants Outsider Elmer Johnson shook up GM Importer Yanase was Hall of Fame member Obituaries Redesigned TSX has many Acura firsts Dealers Certified sales up 7.5% in Feb.; Audi leads the way eBay's new Web site has new look, more features Big pickups and SUVs lead plunge in used-vehicle prices Ex-Reynolds CEO O'Neill joins J.D. Power Auto Hall of Fame will induct 8 Liberatore looks beyond Daimler Molina gets the top job at GMAC F&I pioneer Pat Ryan to retire from Aon Study: Hydrogen research worth the cost Gulf States trial halted As yuan rises, so do prices of Chinese parts Personnel exec Laymon: Ford still seeking outside talent GE gives supplier credit Dana CEO wants Asian growth Tesla launches production Todt steps down as Ferrari CEO Union pursues Toyota effort Chrysler offers spiffs for military Land Rover ads focus on heritage Mark Rechtin Fresh heir: To turn green, must BMW create brand? GM ponders mini-muscle Camaro New Ford ads coming in April With a spiffier image, Lincoln would rock abroad Rival says Nardelli's OK Ford hails its cab, but mpg is an issue

Automotive News - March 24, 2008

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