Automotive News Europe - February 2, 2009 - 2

PAGE 2 · www.autonewseurope.com Commentary February 2, 2009 Automotive News Europe Inside this issue Consolidate or die ? 8 & 9 A Fiat-Chrysler alliance would accord with the notion that, as the industry undergoes seismic change, only mega-carmakers will survive Good news that is bad news Pininfarina’s exit from contract carmaking puts pressure on Magna Steyr Pininfarina’s announcement late last year that it would cease contract manufacturing by the end of 2011 could leave Austria’s Magna Steyr as the only large-scale contract manufacturer in Europe. In any supplier sector, it’s not good to be the last one standing. “The worst choice for a carmaker is to have just one choice,” a high-ranking European automotive executive told Automotive News Europe on condition of anonymity. When choosing suppliers, automakers want to be able to find the right fit for their business. Contract manufacturing is no different. Some coachbuilders specialize in refining an automaker’s design, others are better at bending sheet metal, others have the structure to efficiently handle runs of 20,000 to 40,000 specialty vehicles. But niche models don’t bring coachbuilders the profits they once did. And the increasing flexibility of automakers’ assembly plants means that more car companies are bringing the work in-house. As a result, coachbuilders such as Pininfarina, Karmann of Germany and Valmet of Finland are either exiting contract manufacturing, are on the verge of doing so due to a lack of orders, or plan to concentrate more on making electric vehicles. For example, Pininfarina will produce electric cars under its own name starting late next year. In late 2008, Heuliez was taken over by Argentum Motors, India’s largest independent contract manufacturer. But the French coachbuilder’s only production contract, the Opel/Vauxhall Tigra Twin Top, ends this year. Even worse off is Carrozzeria Bertone of Italy, which ceased volume production at the end of 2005 and has yet to find a buyer. That basically leaves Magna Steyr as the only choice for A Fiat-Chrysler alliance promises many benefits Don’t let me down 12 Tire pressure monitoring systems help ensure the safety of motorists while reducing fuel consumption Peugeot, Aston Martin and Porsche models will be added to Magna Steyr’s production in Graz, Austria. 2012, it will begin contract manufacturproduction of the ing in Europe. replacements to the Automakers don’t Porsche Boxster like this, and, privateand Cayman. ly, Magna Steyr execMagna Steyr’s utives aren’t thrilled likely survival as either. the only European Life has not been contract manufaceasy for Magna Steyr Luca Ciferri turer cannot be atrecently. Production tributed to one parat its plant in Graz, Austria, fell to less than ticular strength. It’s the com150,000 units last year, al- bination of five key attributes most 100,000 units below that have put it ahead of comthe 248,059 record the com- petitors. These are: 1. A strong financial position pany set in 2006. as a mid-sized operation If this number looks worrywithin a much larger, truly ingly low, consider that most global supplier, Canada’s of Magna Steyr’s ailing comMagna International petitors each built about onetenth of the Austrian compa- 2. Highly professional top management that is motiny’s declining volume. And vated by a performanceMagna Steyr executives say based compensation plan 2006 was a freak abnormality in a business plan aimed at 3. An undisputed level of manufacturing quality much lower volumes. 4. A highly competitive engiMore contracts coming neering department, which not only develops cars to be Magna Steyr looks poised “captively” built in Graz, for a rebound. but also engineers vehicles This year, it will begin makthat automakers will build ing the Aston Martin Rapide, in their own plants. and Aston’s upcoming Lagon- 5. Vertical integration with other Magna International da relaunch likely will be built subsidiaries, from dies to in Graz as well. seats, from transmission Next year, Magna Steyr will components to door hinges. add the Peugeot 308 RC Z This permits a quicker time coupe and Mini’s first SUV. In to market and keeps costs down. But the real bottom line is that there just isn’t enough business to go around because automakers are now flexible enough to bring limited-run production in-house. TPMS will become mandatory in Europe Lap of luxury 16 Maybach sales have been unaffected by the new car sales slump What happens next? Hopefully, the other European contract manufacturers will survive the current downturn and flourish again. It is sad to see long-established companies leave the business and watch their skilled and experienced workers lose their jobs. To survive, struggling coachbuilders could go back to their roots and build runs of custom-designed models of no more than a few hundred units. They could even go back to making one-off models for wealthy collectors. Pininfarina and Zagato successfully did so in recent years. At the same time, contract manufacturers should be wary of an all-out bet on electric cars. The watered-down pending EU legislation on carbon dioxide emissions will delay the true demand for such veANE hicles until 2020. Maybach sales steady in mega-money cocoon The power of four 22 General Motors has outlined its future product strategy based around the core brands of Chevrolet, Cadillac, Buick and GMC Cutting brands to cut losses is GM’s plan Correction The likely entry price in Europe for the third-generation Toyota Prius will be about ¤25,000. The estimated starting price for the new Honda Insight will be below ¤20,000. A graphic on Page 6 of the January 19 edition misstated the prices. Company Index These companies appear in stories in this issue of Automotive News Europe Audi . . . . . . . . . . . . . . . . . . . .7, 12 BMW . . . . . . . . . . . . . . . . . . . . . .19 Brose . . . . . . . . . . . . . . . . . . . . . . .7 Chrysler . . . . . . . . . . . . .1, 8, 9, 10 Citroen . . . . . . . . . . . . . . . . . . . . .1 Continental . . . . . . . . . . . . . . . . .4 Daimler . . . . . . . . . . . . . . . .13, 16 Denso . . . . . . . . . . . . . . . . . . . . .19 Dura Automotive Systems . . .22 FAW-Volkswagen . . . . . . . . . .16 Fiat . . . . . . . . . . . . . . . . .1, 8, 9, 10 Fisker Automotive . . . . . . . . . .15 General Motors . . . . . . . . . . . . .22 Honda . . . . . . . . . . . . . . . . . . . .21 Hyundai . . . . . . . . . . . . . . . . .6, 21 IAC . . . . . . . . . . . . . . . . . . . . . . .18 Lancia . . . . . . . . . . . . . . . . . . . . . .9 Linamar . . . . . . . . . . . . . . . . . . .22 Magna International . . . . . . . .21 Vol. 14 No. 3. Automotive News Europe is published bi-weekly by Crain Communications GmbH, Argelsrieder Feld 13, 82234 Oberpfaffenhofen, Germany. Periodicals postage paid at Detroit, MI. Postmaster: Send address changes to Automotive News Europe, 1155 Gratiot Avenue, Detroit, MI 48207, USA. Mazda . . . . . . . . . . . . . . . . . . . . .19 MG Motor . . . . . . . . . . . . . . . . . .7 Mitsubishi . . . . . . . . . . . . . . . . .16 Nira Daynamics . . . . . . . . . . . .12 Nissan . . . . . . . . . . . . . . . . . . . .16 Penske Automotive Group . . .13 PSA . . . . . . . . . . . . . . . . . . . . . . . .5 Renault . . . . . . . . . . . . . . . . . . . . .3 Robert Bosch . . . . . . . . . . . . . .16 Saab . . . . . . . . . . . . . . . . . . . . . . .5 SAIC . . . . . . . . . . . . . . . . . . . . . .15 Schaeffler . . . . . . . . . . . . . . . . . . .4 Seat . . . . . . . . . . . . . . . . . . . . . . .21 Skoda . . . . . . . . . . . . . . . . . . .6, 11 Tenneco . . . . . . . . . . . . . . . . . . .18 Toyota . . . . . . . . . . . . . . . . .14, 19 Valmet . . . . . . . . . . . . . . . . . . . .15 Volkswagen . . . . . . . . . . . . . . .19 Volvo . . . . . . . . . . . . . . . . . . . . . .1 Subscription per year: Europe: €109 Outside Europe: $189 Customer Service Europe and all other countries: Captive financing arms mired in debt From Page 1 2009,” said Adam Jonas, analyst with Morgan Stanley. Jonas expects the pace of the daily cash burn to be worst in the final quarter of 2008 and in the first quarter this year. Automakers need cash to fund operations, especially when financing customers’ new-vehicle purchases. About 70 percent of vehicle sales in western Europe are made with financial services, either leases for fleet sales or loans for private buyers. Of that total, about half are financed by automakers’ captive finance subsidiaries, says auto analyst Arndt Ellinghorst of Credit Suisse. “European automakers share ¤230 billion of their financial arm debt, which is becoming more difficult – and more expensive – to refinance,” Ellinghorst said. If automakers’ financial arms cannot manage to refinance their debt, European sales could fall even more. “Lack of consumer credit is the second reason which is currently slowing down sales,” Ellinghorst said. Burning up the balance sheets Net cash of European automakers (in millions of euros) 2007 BMW Daimler Fiat Porsche PSA Renault VW Group *Estimate 2008* 6,837 5,045 -2,620 -3,586 129 -5,440 12,008 2009* 5,948 2,594 -2,928 -3,805 -2,653 -7,085 12,037 Source: Goldman Sachs Government aid sought Government support in various European countries lessens the risk of insolvency for the sector in the short term. But with global and European sales forecast to fall in both 2009 and 2010, the auto sector’s massive cash burn is likely to continue. The French government has already given captive finance arms at Renault and PSA ¤500 7,052 12,912 355 -527 1,404 -2,088 13,478 Phone: (44) 1444 475651 or (44) 8456 777803 Fax: (44) 8456 777804 e-mail: autonewseurope.subs@quadrantsubs.com Customer Service North, Middle & South America: Phone: (1) 888 446 1422 (toll free) Fax: (1) 313 446 6777 e-mail: subs@crain.com www.autonewseurope.com million each in low interest loans, to keep vehicle financing activity at stable levels. The French government announced in mid-Janu
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Automotive News Europe - February 2, 2009

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