Automotive News - May 5, 2008 - (Page 4)

4 • MAY 5, 2008 Honda to some dealers: Upgrade or else Retailers must improve, expand stores by 2010 Kathy Jackson kjackson@crain.com LOS ANGELES — Some Honda dealers are fuming over letters they have received from the automaker telling them to upgrade their stores or risk losing their franchises. The letters, sent in late March, tell dealers they have until May 31 to lay out their plans to make improvements and until January 2010 to comply. The letters point out that Honda Division sales grew 52 percent from 1998 through 2007 and that the company’s future sales goals “are aggressive.” Honda says it is delivering new products, and dealers must do their part by providing adequate sales and service. “The letter is going out to dealers who are undersized for the units of operation in their market,” says Honda’s dealer council chairman, Bill Smith, of Houston. Smith says he did not know how many letters were sent. “From Honda’s perspective, by 2010 the number of units in operation will be much greater than they are now,” says Smith, who did not get a letter. “In certain cities, there are not enough stalls. People are waiting three weeks to get in. That’s the main issue with Honda.” Honda declined to comment on the letters. But sales chief Dick Colliver has said repeatedly in recent years that Honda Division’s sales have outstripped dealers’ ability to provide timely maintenance and repairs. Colliver had been asking dealers either to expand or to build satellite service centers voluntarily. That request seems to have become an order. Honda’s dealer council chairman, Bill Smith: “From the council’s point of view, what Honda is asking for is not unreasonable.” One dealer who received the letter said Honda has implied that his franchise agreement, due to expire soon, is at risk if he doesn’t make the fixes. The called-for improvements range from a larger showroom and service department area to more parking spaces. The dealer, who did not wish to be identified, says the company will give him a two-year renewal “on a promise” to make the changes and will only renew the five-year agreement if the shovels are in the ground. Honda has told him he should be selling about 50 percent more vehicles. “It’s a $2 million to $3 million in- Dealers’ to-do list Honda is pressuring some dealers to upgrade and expand their stores. By January 2010, dealers must comply in these areas. � Site size � Building size � Showroom area � Administrative area � Parts area � Parts storage area � Service department area � Number of stalls/lifts � Display/storage/parking spaces vestment they’re talking about,” the dealer says. “I’m in a small market. This is a recipe for disaster.” Another dealer, who also did not want to be identified, has been told that his store needs to become nearly twice as large. “All of a sudden they drop this black cloud on you,” he says. “It would cost me about $2.4 million to do what they want, and any new buyer has this dumped on him. It drops the value of the business if you try to sell it. “They’re trying to squeeze people,” the dealer says. “Look at the threat implied by that letter.” Smith, the dealer council chairman, says it’s not a clear-cut issue. He says state franchise laws may not allow Honda to force dealers to make the changes. “But from the council’s point of view, what Honda is asking for is not unreasonable,” he says. “It’s a real issue for customer loyalty, and a lot of dealers could be more profitable if they had more service capacity.” Honda Division’s sales grew from 899,208 in 1998 to 1,371,438 in 2007. John Mendel, executive vice president for American Honda Motor Co., projects sales of 1.4 million this year. c Hyundai reworks Sonata � 17 Hyundai: Powertrains will take us halfway to mpg target Rick Kranz rkranz@crain.com Mahindra powertrain specialist Arun Jaura with the Indian version of the Scorpio SUV at the SAE World Congress in Detroit. Former Ford powertrain expert leads Mahindra’s charge toward clean-burning diesels and hybrid engines for U.S. Lindsay Chappell lchappell@crain.com Diesel dynamo United States. But Jaura is more cautious. “We haven’t thought that far ahead,” he says. “We will introduce it in the Indian market first. If we decide to bring it to the U.S. market, it will come later. “There are also things still to be done on the back end. Our dealers have to have plans in place to be able to service this technology and keep it running.” Global Vehicles says it has signed up 308 U.S. dealers so far. Jaura moved back to his native India three years ago after working on Ford’s Escape Hybrid in North America. At Mahindra, Jaura has been working on diesels and hybrids with key powertrain suppliers including FEV Inc., Robert Bosch GmbH and AVL Powertrain Engineering Inc. A former Ford Motor Co. engineer is playing a key role in an Indian automaker’s bid to sell pickups and SUVs in the United States next year. Arun Jaura, 42, a powertrain specialist, is in charge of getting clean-burning four-cylinder diesel engines certified by U.S. regulators for Mahindra & Mahindra Ltd. At the same time, Jaura is guiding Mahindra into a more advanced engine technology: diesel-electric hybrids, which could arrive in the United States in 2010. John Perez, CEO of Global Vehicles USA Inc., Mahindra’s independent U.S. distributor in Alpharetta, Ga., told dealers in February that the diesel hybrid is coming to the They are working at a Mahindra technical center 100 miles from Mumbai, as well as at locations in Europe and in Michigan. Jochem Wolschendorf, FEV vice president for vehicle and drivetrain engineering at the company’s suburban Detroit technical center, says he is confident that Mahindra’s hybrid diesel will be developed. But he declines to discuss Mahindra’s U.S. product timetable. Jaura says he was recruited by senior Mahindra executives who had a vision for advanced technology. Next year Mahindra will spend $160 million on a new r&d center in India. “I have a young family,” says Jaura, who was in Detroit recently to be inducted as an SAE Fellow into the North American engineering community. “I wanted my family to experience India as they grow up.” c ANN ARBOR, Mich. — Hyundai’s plan to boost U.S. vehicle fuel economy significantly in the next decade is a 50-50 strategy. About 50 percent of the increase will come from changes to vehicle structure and equipment — efforts such as lighter vehicles and energy-saving technology such as LED lighting. The rest will evolve from improved powertrain efficiency, Timothy White, senior manager of the powertrain department at the Hyundai-Kia America Technical Center, said at a press event here late last month. Hyundai has “a number of incremental technologies for fuel economy improvement,” White said. “There is really no home run out there.” Under proposed federal fuel economy regulations announced last month by the Bush administration, Hyundai’s cars will be required to average 37.5 mpg by the 2015 model year. Its trucks will need to hit 31.0 mpg. Hyundai’s 2007 car line averaged 32.4 mpg, while the truck side averaged 25.5 Hyundai’s Timothy mpg, according to the automaker. White: “There is White said Hyundai will incorreally no home run porate such fuel-saving efforts as out there.” improved aerodynamics, lighter weight, tires with low rolling resistance and electric power steering in place of hydraulic. Electric power steering eliminates the need for hydraulic lines, belts, pulleys, pumps and reservoirs. Generally speaking, electric power steering can add 1 mpg. On the powertrain side, Hyundai will boost fuel economy by adding six-speed automatic transmissions in the next two to three years and direct-injection gasoline engines. White said direct injection provides a fuel economy boost of 3 to 6 percent because of more efficient combustion. The Veracruz crossover is Hyundai’s only U.S. model with a six-speed automatic transmission. Within two years, six-speed automatics will be offered in all of Hyundai’s U.S. models with V-6 engines and most models with four-cylinder engines. The exception will be Hyundai’s smallest models, which will be upgraded to five-speed automatics within four years. Each additional gear reduces the engine rpms necessary for upshifts, which decreases fuel use. c

Table of Contents Feed for the Digital Edition of Automotive News - May 5, 2008

Automotive News - May 5, 2008 Dodge dealers battle to bust Ram logjam Used-car price slump slams luxury makes INDUSTRY IN DISTRESS Tesla opens first dealership in L.A. Los Angeles Top auto execs to talk marketing at seminar Nader and the Corvair: GM edition tells whole story Dealers take Tundra to the people UAW official expects American Axle buyouts Ford plans more UAW buyouts at 2 plants Honda to some dealers: Upgrade or else Hyundai: Powertrains will take us halfway to mpg target Diesel dynamo Daimler cuts Chrysler value, again Ford domestic dealer count dips below 4,000 Seems like old times: More cash on the hood Toyota sister car poses a challenge for Subaru Suzuki to offer standard navigation in $16,000 car Mpg plan fuels states-rights battle Kerkorian interest buoys Ford stock Henderson: GM will keep tight rein on inventory Is it real, or is it just temporary? Ford Motor must stay focused on recovery 'Have you lost your mind?' Dealers are victims of Axle strike Federal oversight? Good heavens, no Geoff Polites: A salute Save a board seat for the UAW A car for everyone or cut, cut, cut, cut? Think of Buick as part of B-P-G Costs up in China, but bargains still abound Mexico sales fall 17% in March Obituary Hyundai reworks Sonata sooner rather than later Nissan's Dominique gets to the big dance Dana seeks new business with Japanese companies ZF will supply Nissan Certified Tool closes a plant German engineering company plans Ala. factory Dealers A Lexus colossus Used-vehicle leasing boosts showroom traffic Certified buyers opt for extended service contracts Repossessed vehicles offer dealers a profit opening Prepaid plans spark service visits beyond oil changes Key to managing floorplan costs: Be realistic Long-term loans: Convenience or bad deal? Dealers hunt upside-down buyers with leases, incentives and long-term loans Where have all the investors gone? Dealer rebounds from contract mess Dealers must choose: Reynolds, GM — or start over AutoTrader.com makes big pitch to bump up new-vehicle sales CAW, Ford reach extensive early labor deal Infiniti asks: Do you smell something? Sure, Nissan GT-R is impractical — but what a rush Faurecia: We'll break even in N.A. Suppliers join carmakers' charge into Russia Chrysler small cars, Jeep crossovers are hot A dreary April in Detroit Penske earnings rise in 1st quarter Lithia posts $1.9 million loss GM makes 2nd ethanol deal Group 1's earnings slip Magna profits down; sales rise AIADA picks dealer of the year Vox(wagen) populi — plus a sales pitch Wagoner's pension shift: More earlier, less overall COMMENT: Bargaining barbs will sting for a long time Bugging the boss: Who's listening to Porsche CEO? New models from the post office Critics have kind words for Pontiac's G8 Ford can't picture kids at design studio

Automotive News - May 5, 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.