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SEPTEMBER 14, 2009

Hidden in plain sightHonda put a top-secretadvanceddesignstudio amida heavilytrafficked stretchof retail storefronts in thebustling suburb of Pasadena.Call it crazy like a fox. | PAGE 22 |

Tight budgetscause no-showsat auto shows

Several brandswill skip theFrankfurt autoshow, continuinga trend amongbudget-cuttingautomakers. But

marketers say the shows stillsell cars. | PAGE 16 |

Deep freeze for dealership deals

So far, no supplier bloodbath— but is that really good news?

Post-clunkerparalysis hitsshowrooms

David Barkholzand Robert [email protected]

DETROIT — In the spring, as autosuppliers braced for the bankruptciesof Chrysler and General Motors andsteep production cuts by other au-tomakers, their industry associationspleaded for a federal bailout of up to$10 billion to prevent a bloodbath ofbankruptcies and liquidations.

The money never came. But neitherdid the bloodbath. Parts suppliers

survived better than anyone hadforecast. The relatively few large-scale bankruptcies filed by suppliershave mostly been financial restruc-turings rather than liquidations.

Now, though, some industry execu-tives and consultants are lamenting alost opportunity. They say a shakeoutwould have been in the best long-term interest of the industry.

Without the forecast wave of liqui-dations, they say, price competitionwill remain ferocious. Stronger sup-

pliers will be dragged down by weak-er ones willing to make unrealistic,low-ball bids for business. Only whenhealthy suppliers can insist on con-tracts that allow them to turn a profitwill they be able to make the neces-sary investments in r&d that the in-dustry needs, the executives and con-sultants say.

To be sure, the winnowing contin-ues as the credit crunch drives sup-

Stores are dirt-cheap,but credit crunchhas killed the marketDonna [email protected]

The credit crisis has popped thefranchise bubble, slashing dealershipprices to levels not seen since themid-1990s, before dealers started go-ing public.

And prices may sink further before

they begin to recover. “The market for dealerships has

been turned on its head,” says PhilVogel, a dealership broker in SanFrancisco.

The value of Detroit 3 dealershipshas been sinking for two years. Noweven some premium import-branddealerships are worth less than halfof what they were a year ago, accord-ing to investment bankers who spe-cialize in car dealership transactions.

Dealers who want to sell face a dou-

ble whammy because both key num-bers in the dealership-value equationhave tanked.� Dealership profits are downsharply or are nonexistent.� The multiplier that measures so-called blue sky — intangibles such asgood customer relations, a strongbrand and a prime location — hasplunged, too, with some brands be-ing hurt far worse than others. Themultiplier traditionally has beenteamed with store earnings to sug-

gest a selling price. Desirable dealerships in metropoli-

tan markets that would have fetchedmore than six times net pretax earn-ings even a year ago would commandjust three times net pretax earningstoday, not counting the real estateand equipment.

Even if they were shopping forstores, most dealers lack the creditlines to finance acquisitions. Dealer-

see STORES, Page 30

Jesse [email protected]

The showroom misery after cashfor clunkers was every bit as bad asdealers and automakers had feared.Maybe worse.

“It was as still as a graveyard,”Wade Dinsmore, general manager ofAnniston Dodge in Anniston, Ala.,says of his showroom.

Sales didn’t just slip back to pre-clunker levels, as many had hoped.September’s sales rate “may be theworst of the year,” says Adam Jonas,Morgan Stanley’s lead auto analyst.

The federal incentive that endedAug. 24 propelled the seasonally ad-justed annualized sales rate for Au-gust to 13.7 million, says Jeremy An-wyl, CEO of Edmunds.com, up from9.5 million in June, the first fullmonth before the program. But theSAAR careened to 8.3 million fromAug. 25 to 31 before edging up to 8.9million in the first five days of Sep-tember, Anwyl says.

Analyst George Magliano of IHSGlobal Insight says: “I’d settle for any-thing in the 9 millions” for September.

The rest of the year “will be de-pressed even compared to the firsthalf,” adds Mike Jackson of CSMWorldwide.

George Pipas, Ford’s top sales ana-lyst, says it is too early to say whatSeptember’s SAAR will be — and itdoesn’t much matter. “What is im-portant is not September,” he says,“but the pace of the recovery and autosales as we exit 2009 and enter 2010.”

Some dealers see signs of life.Tom White Jr., general manager of

Suzuki of Wichita in Wichita, Kan.,

Dealer margins soared ➤ 30

JOE WILSSENS

To keep Flexible Products Co. alive, Chrysler supplier Glenn Reid laid off nearly half of his employees and cut salaries.

see SUPPLIERS, Page 31see CRASH, Page 30

Whitacre’s way:High profilefor GM chairmanWhether he’s appearing in a TVcommercial or talking withemployees, new General MotorsChairman Ed Whitacre is takinga very public role. | PAGE 3 |

On the WebThis week at autonews.com:� Tuesday: News and photos

from the Frankfurt auto show.See autonews.com/Frankfurtfor advance coverage andbreaking news.

20090914-NEWS--0001-NAT-CCI-AN_-- 9/11/2009 5:11 PM Page 1

FACT:

Ford pioneered the Personal Safety System,™ a suite of sevensafety technologies, including dual-stage front airbags anda passenger sensing system. In milliseconds, it helps determinethe severity of a crash and how the airbags deploy, depending onpassenger weight and other variables.

FACT:

Ford is introducing MyKey,™ a key that parents can programto set top speed and audio volume limits to encourage saferdriving by teens. MyKey, one of AAA’s “Top 10 Picks for New VehicleTechnology,” is standard on the 2010 Ford Escape XLT, Limited andHybrid; Flex, Focus, Taurus, Lincoln MKT and Mercury Mariner.

To find out more, visit thefordstory.com

TO SEE WHAT’SBEHIND YOU,GO WITH THE COMPANYTHAT LOOKS AHEAD.

FACT:

Ford is delivering exclusive new technology that helps improveeveryday driving needs such as changing lanes and backingout of parking spaces. BLIS® (Blind Spot InformationSystem) with Cross-Traffi c Alert utilizes radar to detecta vehicle in the defi ned blind spot (in forward gears) andto alert the driver of cross-path traffi c while in reverse.

D_17135_9_AutNew_R03.indd 1 5/20/09 9:27:32 AM

anpagead.qxd 5/22/2009 10:11 AM Page 1

Whitacre chairs a board that’sbreaking with pastJamie [email protected]

DETROIT — Ed Whitacre, once un-known in the auto industry, is shak-ing up the boardroom at General Mo-tors Co.

The new chairman is the companyspokesman in a TV spot that breaksthis week, ambling through GM’s de-sign studios as he announces the au-tomaker’s 60-day money-back guar-antee on new vehicles.

But Whitacre’s biggest impact hasbeen withinGM, where he istaking an activerole in the com-

pany’s unstable post-bankruptcyculture. Whitacre leads a new batchof directors who need to learn the au-to industry fast, and that board facesa management team used to callingthe shots.

The new board isn’t “even a shad-ow of the former board,” says asource close to both boards. The new13-member board has eight newmembers — Whitacre, six outside di-rectors and Fritz Henderson, who be-came a director when he was namedCEO in the spring.

So far, Whitacre has held meetingswith employees throughout the com-pany and given Henderson a quali-fied vote of confidence. The boardbroke with tradition by holding upthe sale of a majority stake in AdamOpel AG, GM’s German subsidiary, tonegotiate a better deal with Canadiansupplier Magna International Inc.and Russian state lender Sberbank.

The board gave approval to a deallast week.

Whitacre, 67, is the former CEO ofAT&T Corp. and known for his bull-dog style. But he came to GM with noauto industry experience.

“If he’s with you, he’s yourstrongest supporter,” says one per-son who knows Whitacre. “If he’sagainst you, you’ve got a seriousproblem.”

GM declined to make him availablefor this story.

One knowledgeable source saysWhitacre’s position that GM must

improve market share quickly sets atough goal for management. Thesource says: “Whitacre is clearly a dri-ven man. I think he’s the real deal.”

The past board acted too slowly asGM slid toward bankruptcy, protect-ing then-CEO Rick Wagoner, thesource says. “They lost a lot of timenot firing Wagoner sooner. This newboard is right to be very aggressive.”

Genial and calculatingMost sources describe Whitacre as

supportive. Since GM emerged fromfederal bankruptcy protection July10, Whitacre has made several visitsto GM’s Detroit headquarters and itsWarren, Mich., technical and designoffices.

He doesn’t just chat up the topbrass, insiders say. Whitacre con-

ducts what some call “diagonal slice”meetings. He talks with everyone —from midlevel managers to lowermanagers to salaried employees —and demands action, sources famil-iar with his visits say.

“He asks them: ‘What do you do?Explain your job to me,’ ” a sourcesays. “He’s very specific to people.He’s very hands-on.”

Those who have met Whitacre sayhe can tackle the toughest issues. Heis genial and doesn’t say a lot but canbe direct yet engaging, some say.

C O R R E C T I O N S

� A story on Page 26 of the Aug. 31issue should have said that IanBeavis is executive vice president ofNielsen IAG’s automotive practice. � In a Page 1 story in the Sept. 7 is-sue, the last name of DouglasGreenhaus, a regulatory executiveat the National Automobile Deal-ers Association, was misspelled.� A list on Page 16 of the Sept. 7 issue gave the wrong name for aBentley vehicle that will be shownat the Frankfurt auto show. It is theMulsanne.� In a story on Page 18 of the Sept. 7issue, “Study: Loan terms are get-ting smaller,” the last name ofMelinda Zabritski, Experian Auto-motive’s director of automotivecredit, was misspelled.� A story on Page 29 of the Sept. 7issue quoted a Wall Street Journalreport that Cerberus Capital Man-agement investors “are withdraw-ing more than $5.5 billion, or nearly71 percent of the hedge fund as-sets.” Citing a miscalculation, TheJournal has corrected the report tosay the investors “asked to with-draw $4.77 billion from the firm’soriginal hedge funds,” or 70 per-cent “of the assets belonging to out-side clients in the funds.” � A story on Page 10 of this issuegives the wrong amount for the gov-ernment subsidy that Japanesebuyers of the Mitsubishi i-MiEVelectric car can receive. It is $15,000.

SEPTEMBER 14, 2009 • 3

84th year — No. 6377

briefsbriefsGM will participatein NADA convention

DETROIT — General Motors Co.will participate in the 2010 NationalAutomobile Dealers Associationconvention in Orlando, Fla.

GM traditionally has been a majorpresence at the NADA convention.But GM’s restructuring this summerand its rift with NADA over thegroup’s support of legislation torestore terminated dealersprompted speculation that GMmight snub the Feb. 13-15convention.

In an e-mail to Automotive News,GM spokeswoman SusanGarontakos said there will be ageneral GM make meeting at theconvention. But she said: “I’m notsure how the brands will roll outmeetings or utilize the space on theexhibit floor.”

— Edward Lapham

CFO Young is expected to leave GM

DETROIT — After 18 months asfinance chief, CFO Ray Young isexpected to leave General MotorsCo. within weeks, a person familiarwith the situation said. Young, 47,became CFO in March 2008, takingover for Fritz Henderson, whobecame president and COO at thetime and was made CEO a yearlater.

GM spokesman Tom Wilkinsondeclined to comment. Young couldnot be reached.

— Jamie LaReau

Sept.18 is the deadline for auto sup-pliers to apply for the 2010 Automo-tive News PACE Awards.

The PACE (for Premier AutomotiveSuppliers’ Contribution to Excel-lence) Awards are open to suppliersthat contribute products, processes,materials or services directly to vehi-cle makers. The awards are presented

jointly by Ernst & Young, Transporta-tion Research Center Inc. and Auto-motive News.

The 2010 Automotive News PACEAwards will be presented in five cate-gories: product, product-Europe, in-formation technology and services,manufacturing process and capitalequipment, and open.

After an extensive review of all fi-nalists, including site visits, the win-ners will be announced at a black-tieceremony in Detroit on April 12.

For complete information aboutthe Automotive News PACE Awardsand an application, visit autonews.com/pace or call 313-446-6039. Theapplication fee is $1,500.c

PACE application deadline is Sept. 18

Mulally helps launch a redesigned congressAlan Mulally will be one of the

keynote speakers at the 34th Auto-motive News World Congress in De-troit. The CEO of Ford Motor Co. willbegin the second day of the congresson Wednesday, Jan. 13.

Since coming to the automakerfrom Boeing Co. in 2006, Mulally hassuccessfully kept Ford out of thesame desperate straits that forcedcrosstown rivals General Motors andChrysler to accept federal bailoutsand ultimately reorganize in Chap-ter 11.

Mulally’s vision for developingproducts under the umbrella of “OneFord’’ already has led to successfulU.S. product launches of vehicles

such as the new Ford Taurus andFord Transit Connect.

In a change from other years, theAutomotive News World Congressopens Tuesday afternoon, Jan. 12,which is also the second and finalmedia preview day at the NorthAmerican International Auto Show.

The congress will be at the Detroit

Marriott at the Renaissance Center,just a few blocks from Cobo Center,which hosts the Detroit auto show.The scheduling change and proximi-ty to the show mean it will be easierfor executives to attend both events.World Congress attendees will re-ceive a pass to visit the auto show onThursday, Jan. 14, before it opens tothe public.

In keeping with everything hap-pening in the global auto industry,the theme of the congress is “Navi-gating the New Automotive Epoch.’’

A new, tighter format includes a dayand a half of presentations. There willbe two dinners complete with be-fore-dinner networking receptions

and after-dinner speakers to roundout each day.c

Alan Mulally’s“One Ford” visionhas led to thesuccessfulU.S. launchesof the new FordTaurus andTransit Connect.

Key facts

When: Jan. 12-14Where: Detroit Marriott at theRenaissance Center Cost: $995 early registration feeby Nov. 20 (save $300)Information: 313-446-0326 orautonews.com/worldcongressExclusive lead sponsors:IBM and PricewaterhouseCoopers

A hands-on boss gives GM a nudge

newsA N A L Y S I S

One GM insider calls Chairman Ed Whitacre a straight-talking, savvy executive and adds: “He’ll see through the BS.”

see WHITACRE, Page 29

High profileNew GM Chairman Ed Whitacrehas

� Visited GM offices to meet withemployees

� Authorized a big ad campaignand starred in a GM TV spot

� With other GM board members,delayed the sale of Opel torenegotiate a deal

MORE ON THE NEW GMNew GM’s numbers don’t add up ➤ 12Opel deal faces hurdles ➤ 29Beware instant-expert syndrome ➤ 34


4 • SEPTEMBER 14, 2009

Bradford [email protected]

DETROIT — Chrysler Group’s threebrands are faring poorly against theirmajor competitors in the minds ofconsumers, according to the au-tomaker’s internal research.

Under new Fiat-led management,the company plans to address thatshortcoming by changing the way itcommunicates its Chrysler, Dodgeand Jeep brands in advertising.

Chrysler’s research shows that thethree brands lag the big-selling Toy-ota and Ford brands in awareness, fa-miliarity, consideration and other el-ements that lead customers to makepurchases.

Chrysler will move away from itsprevious strategy that sometimesfeatured all brands in one ad.

Chrysler, Dodge and Jeep brandbosses now have full profit-and-lossaccountability. With that responsibil-ity, they can choose their own cre-ative ad strategies, although mediabuying is likely to remain centralized.

Chrysler’s research suggests a shake-up is needed. Its brands fared poorly in

the purchase-funnel measurement,which marketers use to gauge the suc-cess of a brand in converting con-sumer awareness and intentions intoconsideration and purchases.

An in-house Chrysler document ob-tained by Automotive News saysChrysler “must improve funnel mea-

surements for mid/long term suc-cess.” The document, presented todealers Aug. 18 as part of a revamp ofdealer advertising associations, com-pares Chrysler, Dodge and Jeep to theFord and Toyota brands, which scoredhigher in the funnel measurements.

The page showing the numberscarries the headline “We have to dobusiness different.”

The document shows Dodge washighest in customer awareness with ascore of 83, while Chrysler and Jeepeach scored 77. The Ford and Toyotabrands each scored 92. (See box.)

Chrysler declined to discuss themethodology used in its research.

The automaker already faces steepchallenges: It has no new productcoming until at least mid-2010; it isshort of cash after two months in

bankruptcy, during which it shippedno new vehicles to dealers; and its re-tail network has been gutted by thetermination of 789 dealerships.

According to Advertising Age, a sisterpublication of Automotive News,Chrysler is holding discussions withup to 10 advertising agencies. But thecompany says that it is not conductinga formal review and that BBDO World-wide remains its agency of record.

Wes Brown, a partner in Iceology, aLos Angeles consumer research firm,says the Chrysler scores are “prettydistressing. The only way they’re goingto pull themselves out is product, andunfortunately, we’re 18 months away.”

Before Fiat-derived products arrivein showrooms, Brown says Chryslermust improve consumer opinion andprepare customers for change.c

Post-Ch. 11, Chrysler brand awareness slides

Dealers face toughreinstatement talkswith GM, Chrysler Neil [email protected]

Dealer groups are likely to clashwith General Motors Co. and ChryslerGroup about possible reinstatementprocedures for eliminated dealer-ships and compensation for closedstores, congressional aides say.

Talks involving automakers anddealer groups have not been sched-uled but are likely to begin in the nextfew weeks, said two aides involved inpreliminary discussions. The talks,which would also include legislatorswho support the dealers as well asrepresentatives from the Obama ad-ministration’s automotive task force,are being organized by Sen. RichardDurbin, D-Ill.

After months of dispute, the Na-tional Automobile Dealers Associa-tion and the Committee to RestoreDealer Rights, a group of terminatedGM and Chrysler dealers, reachedagreement Sept. 3 on a proposal tosubmit to the car companies.

The proposal calls for GM andChrysler to disclose the criteria usedto pick dealerships for rejection and toreinstate any dealership that exceed-ed the standards. A dealer not restoredcould appeal to an arbitration panel.

The proposal also would requireterminated dealerships to be paid$3,000 per vehicle for those sold in2006, 2007 or 2008, with the dealerpicking the year.

‘We’ll listen’“We’ll listen and see if we can’t

reach a nonlegislative solution,” saidGM spokesman Greg Martin.

Eight U.S. lawmakers have beentrying to get dealer groups to negoti-ate with the automakers as an alter-native to legislation that would re-verse more than 2,000 terminations.The bill passed the House in July buthas stalled in the Senate.

The aides said GM and Chryslermay not agree to arbitration panelsand are certain to object to the twocriteria panels would use to decidewhether to restore dealerships.

Under the proposal, panels wouldapply state franchise laws rather than

U.S. bankruptcy law and would con-sider a dealer’s financial viability.

State laws are friendlier to dealersthan the U.S. Bankruptcy Code,which judges applied this summer toapprove GM’s and Chrysler’s termi-nation recommendations.

“The state franchise laws are anathe-ma to the car companies,” an aide said.

Another sticking point likely will bethe requirement in the dealer propos-al that terminated dealerships be paid$3,000 per vehicle, the aides said.

With dealerships selling an average of761 new vehicles in 2006, a typicalshuttered store might get $2.28 million.

If all 789 eliminated Chrysler deal-erships and the 1,350 GM stores des-ignated for termination were to close,they could get a total of $4.9 billion.

Who will foot the bill?“Where’s that money going to

come from?” said an aide to Rep. DanMaffei, D-N.Y.

The proposal doesn’t specifywhether the money would be paid bythe companies or the government.

A third point of likely dispute in-volves the rights of terminated dealersif GM and Chrysler re-enter the deal-ers’ former markets, the aides said.

The proposal calls for an eliminat-ed dealer to get a new franchise auto-matically if he or she applies for itand qualifies.

Said Rep. Frank Kratovil, D-Md.,“We still have a lot of work to do toreach any agreement.’’c

At issueTerms of the dealer proposal thatcould be sticking points in talkswith GM and Chrysler

� Arbitration panels would usestate franchise laws as oneguide to dealer reinstatement.

� A terminated dealership wouldbe paid $3,000 per vehicle soldin a recent year of the dealer’schoosing.

� A rejected dealer would get anew franchise automatically ifGM or Chrysler re-enters his orher territory.

Arlena [email protected]

Many dealers nursed cash-for-clunker hangovers in the days thatfollowed the government’s sales pro-motion.

Not Jim Click Automotive Group inTucson, Ariz. That week the dealer-ship sold about 700 new and used ve-hicles at a tent sale extravaganza inthe Tucson Convention Center.

“To tell you we didn’t have our con-cerns going into the sale, I’d be ly-ing,” said Sam Khayat, the group’sCOO. Jim Click Automotive had soldalmost 500 new cars and trucksthrough cash for clunkers.

“But only 10 to 15 percent of thepeople qualified for cash for clunk-ers, and a lot of people wanted to buyused cars,” Khayat said. More thanhalf the sales at the convention cen-ter were used vehicles.

PlanningAfter the blockbuster new-vehicle

promotion of the year, a sale of thatsize doesn’t happen without plan-ning, marketing and people.

Jim Click Automotive spent morethan $250,000 luring consumers —many of whom had not qualified forcash-for-clunker incentives — to theevent. The marketing dollars paid off:The 10-dealership group took in about

$14 million over six days, Khayat said. Jim Click Automotive is part of Tut-

tle-Click Automotive Group, ofIrvine, Calif. Tuttle-Click ranks No. 51on the Automotive News list of the topdealership groups in the UnitedStates, with retail sales of an estimat-ed 10,810 new vehicles in 2008.

Jim Click Automotive sells Ford,Lincoln, Mercury, Hyundai, Chrysler,Dodge, Jeep, Nissan, Mazda and Mit-subishi vehicles. This is the group’s12th August off-site sale.

This year’s event worked the same asalways except for the timing. The salewas Aug. 24-29, a week later than usu-al, to steer clear of cash for clunkers.

Cash for clunkers officially endedAug. 24. Click halted its clunker salesAug. 22.

In the past, the group sold as manyas 1,000 units during the sale. Saleswere down this year because of theeconomy, Khayat said.

The group sold 1,600 new and usedvehicles in August, double the salesof its best month over the past year.

Unlike the many dealerships thatfound themselves with little invento-ry after cash for clunkers, Jim ClickAutomotive had more than 700 newand about 600 used vehicles on hand,Khayat said.

The dealership group’s manufac-turers send it extra vehicles every

year just for the sale, Khayat said. Thegroup also purchased about 250 to300 new vehicles from rejectedChrysler Group dealerships and aclosed Mazda dealership.

Advertising included live TV and ra-dio spots, newspaper ads, 500,000pieces of direct mail and 500,000e-mails. In a weak advertising market,“we spent the same amount of moneyon advertising, but our dollar is buy-ing us more,” Khayat said. “We areable to stretch our dollars by a third.”

Target trucksHe said the group targeted current

owners of big pickups and SUVs, sincethose vehicles typically did not qualifyunder cash for clunkers. It aggressive-ly sought used-car buyers, too.

During the event, Jim Click dealer-ships closed their in-store sales oper-ations and moved all operations andinventory to the convention center.Khayat said the dealing typically getsso hectic on the last day of the salethat body shop and parts and servicemanagers pitch in.

“We give them a quick trainingclass at 8 a.m. and tell them that at11 o’clock we’re going to run out ofsalespeople and that’s when youguys take care of customers,” Khayatsaid. “And that’s exactly what hap-pens.” c

Clunkers over? Time for a sale!

Chrysler’s challengeChrysler Group’s brands scored lower than the Toyota and Ford brandsin awareness, favorable opinion, consideration — and ability to convertshoppers to buyers, according to Chrysler research.

CHRYSLER DODGE JEEP FORD TOYOTA

Awareness 77 83 77 92 92Opinion 10 13 13 23 52Consideration 10 15 8 21 36Retail market share 2.3 6.2 3.7 12.6 17.0Source: Chrysler Group internal document presented to dealers Aug. 18

Jim Click Automotive Group avoided a dip in sales by holding a tent sale inside the Tucson Convention Center the week after cash for clunkers. The dealership sold about 700 new and used vehicles at the event.


SUCCESSMalcolm Cunningham is a self-made man who knows that hard work leads

to results. That’s why he sells only Ford ESP. ESP not only streamlines

paperwork and increases customer satisfaction, but it also helps maintain

long-term profi tability. “I switched to Ford ESP because of the opportunity

to deliver greater value to my customers and increased effi ciency to my

employees. ESP has been effective at delivering both.”

The smart business decisionis selling Ford ESP.Malcolm CunninghamCunningham Ford, Decatur, Georgia

ANpageAD.qxd 9/8/2009 11:56 AM Page 1


The Taurus: A decent start — butit’s too early to draw conclusions.

Ford hailsearly Taurussales figuresAmy [email protected]

DETROIT — Sales of the Ford Tau-rus are still a far cry from the dayswhen it was the best-selling name-plate in America. But Ford says therestyled and re-engineered sedan isoff to a better start than company of-ficials had expected in this weakmarket.

Ford says its other summer launch,the Transit Connect, also is surpass-ing internal sales forecasts.

With 2,300 sold in August, first-month sales for the new Taurus weremore than double Ford’s internalgoal of 1,100, said Ken Czubay, thecompany’s vice president of U.S.marketing, sales and service.

Orders for the high-performanceSHO model are 50 percent higherthan expected, Czubay said. TotalTaurus sales, counting the outgoingmodel, were 3,398 in August, down23.8 percent.

With 2,220 sold in August, sales ofthe Transit Connect small commer-cial van were 42 percent higher thaninternal forecasts. The Transit Con-nect is imported from Turkey.

“We’ve hit the ground running,”Czubay said.

Although it’s too early to judge thesuccess of either product launch, hesaid, their positive start in August andthe balance of sales among Ford’scars and trucks “may be a harbingerof better business conditions tocome.”

Ford is still building dealer stocks ofthe 2010 Taurus and Transit Con-nect. Despite what Ford calls the bet-ter-than-expected performance inAugust, the Taurus still has a longway to go. Taurus sales in 2008 to-taled 52,667 — nothing like the olddays.c

Hold the horses: Dodge kills Caliber SRT4 Bradford [email protected]

DETROIT — Dodge is dropping its fastest, mostpowerful small car for the 2010 model year. TheDodge Caliber SRT4 — a turbocharged, muscle-bound version of the Caliber — is being discontin-ued.

“The Dodge Caliber SRT4 was planned for a lim-ited production run in the highly competitive sportcompact market segment,” Dodge said in a state-ment.

Dodge did not provide information on the num-

ber of Caliber SRT4s sold since the vehicle was in-troduced in late 2007.

The Caliber SRT4 was Dodge’s attempt to add a

little muscle-car panache to its smallest car. It waspowered by a 285-hp turbocharged version of theinline four-cylinder engine built at the Global En-gine Manufacturing Alliance factory in Dundee,Mich., operated jointly with Hyundai and Mit-subishi. The six-speed manual transmission wassupplied by Getrag, of Germany.

Chrysler’s SRT (Street and Racing Technology)group now has five vehicles for 2010: the Chrysler300C SRT8; the Dodge Charger SRT8, ChallengerSRT8 and Viper SRT10; and the Jeep Grand Chero-kee SRT8.c

TheCaliberSRT4:Dodge’sfastestcar isdead.

Chrysler: Under Fiat, EV still on track

Luca [email protected]

BALOCCO, Italy — Chrysler Groupmay incorporate Fiat’s new MultiAirfuel-saving technology in some gaso-line engines, Fiat sources say.

Fiat S.p.A. considers the variablevalve timing system a breakthrough.The company says MultiAir improvespower by about 10 percent and re-duces fuel consumption 10 percent.

The MultiAir system provides directcontrol of air and combustion in en-gines, cylinder by cylinder and strokeby stroke, without using the conven-tional throttle. That saves energy

wasted in traditional systems.Fiat will offer its first MultiAir en-

gine in Europe this month on the AlfaRomeo MiTo small hatchback.

The sources say Chrysler is consid-ering MultiAir technology for theseengines:� 2.0- and 2.4-liter four-cylinder unitsproduced by the Global Engine Man-ufacturing Alliance, which Chrysleroperates with Hyundai and Mit-subishi. The engines are used in theChrysler Sebring, Dodge Caliber andAvenger and Jeep Compass and Patri-ot. MultiAir units could arrive in late2011.

� The Pentastar V-6 engine familynow under development. The 3.6-liter Pentastar family will replaceseven Chrysler engines. The new V-6

will debut next spring on the 2011Jeep Grand Cherokee. MultiAircould be added in the second half of2012. c

Richard [email protected]

DETROIT — Fiat’s preference touse its own powertrain technology infuture Chrysler Group products willnot derail Chrysler’s plan to launchan electric vehicle, said Chrysler’spowertrain chief.

Robert Lee, vice president of pow-ertrain product engineering, saidChrysler and other major automak-ers must sell electric vehicles in Cali-fornia and the 13 other states that fol-low California’s emissions standards.

Those other states: Arizona, Con-necticut, Maine, Maryland, Massa-chusetts, New Jersey, New Mexico,New York, Oregon, Pennsylvania,

Rhode Island, Vermont and Wash-ington.

Starting in 2012, at least 3 percentof major automakers’ sales in thosestates will have to be of battery-pow-ered electric vehicles or plug-in hy-brids.

“We are being driven by the ZEV[zero-emissions vehicle] mandate,”

Lee told a conference of electrical en-gineers and students in suburbanDetroit last week. “We must have anelectric vehicle.

“You’ll see an electric vehicle forsure. And then you’ll see somethingelse. I’m not sure if it is a hybrid or arange-extender.”

The term range-extender refers to ahybrid that uses a gasoline engine tocharge the batteries on a plug-in hy-brid.

“The question is timing,” Lee said.“Right now there is a raging debateinside the company about which onewill come out of the chute first.”

Fiat is reviewing all Chrysler Groupvehicles. But a Chrysler spokesman

said the company’s plans for electricand hybrid vehicles have notchanged since Fiat’s arrival.

Before Fiat took over Chrysler inJune, Chrysler showed three electri-cally driven vehicles under develop-ment: a battery-powered electricsports car based on a Lotus Europaand two plug-in hybrids with gasolineengines that recharge the batteries.

Chrysler officials said they plannedto build one by late 2010.

Lee did not disclose the timing forthe launch of an electric vehicle.

Fiat has said it favors diesels and, tolower costs, wants to use its ownpowertrain technology in Chryslervehicles.c

Diana T. [email protected]

Subaru of America’s strong salesmomentum amid a collapsing overallmarket will slow dramatically thismonth because of the brand’s shrink-ing vehicle stocks.

September will be flat because Julyand August sales dried up Subaru’salready lean inventory, said TomDoll, COO of Subaru of America.

Subaru had 18,000 vehicles on theground on Sept. 1, a 16-day supply.That was down from 26,600 unitsAug. 1, a 32-day supply.

On Feb. 1, the brand had 41,700 ve-hicles on hand, an 89-day supply.

Subaru’s factory in Lafayette, Ind.,is working an extra Saturday shift topump out more vehicles for thebrand’s 603 dealers.

Extra vehicles are also coming from

Japan, but it will take several monthsto bring inventory to the optimal 60-to 65-day range, Doll said.

“If you count the supply in thepipeline, cars that are on their way, itis probably about a 40-day supply,”he said. “That’s the lowest pointwe’ve had since the late 1980s.”

Through August, Subaru sales wereup 11.2 percent in a market down27.9 percent. Last month the au-tomaker surged 51.5 percent — whileindustry sales overall rose 1.0 percent— because of the federal govern-ment’s cash-for-clunkers incentive.

Subaru benefited not only from theclunker program but also from de-mand for its new Legacy sedan andOutback wagon.

Despite the lean inventory, Doll

said, Subaru expects this year to topits all-time high of 200,703 sales in2006. He said Subaru is doing wellhere because it has new product and

has stayed focused on selling awdcars and crossovers.

“The fact that we are a niche play-er and no one can touch us with

awd at the prices we have gives usdistinction in the market,” he said.“We are not trying to appeal toeveryone.” c

Demand for the 2010 Legacyis one reason Subaru’sinventory is low.

Falling supply will slow Subaru’s hot sales

Robert Lee ofChrysler: “Wemust have anelectric vehicle.”

Chrysler may useFiat engine systemin some U.S. models

MultiAir’s electrohydraulic command of intake valves increases fuel economy.

Inventories for all carmakers ➤ 24


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CEO YannDelabriere:Faurecia’s totalwork for theVW plant inChattanooga,Tenn., is “stillfluid.”

Faureciaplans factoryto supplyVW in Tenn.David [email protected]

French parts giant Faurecia plansto open at least one factory in NorthAmerica to support new business at aVolkswagen Group of America Inc.assembly plant being built in Chat-tanooga, Tenn.

Faurecia CEO Yann Delabriere toldAutomotive News last week that Fau-recia will supply Chattanooga withparts from each of its four businesssegments: seats, interior trim, exteri-ors and exhaust systems.

More than one plant is possible.Michael Heneka, president of Faure-cia North America, said the companydoes not mix production of seats andinteriors with exhaust systems. Typi-cally, seat plants are built close to a fi-nal-assembly plant.

VW will open the $1 billion Chat-tanooga plant in 2011. The carmakerwill build a new mid-sized sedan there.

Delabriere said it is too early to sayhow much Faurecia will spend forChattanooga because its total workfor the VW plant is “still fluid.”

VW is Faurecia’s largest global cus-tomer, accounting for about 22 per-cent of 2008 revenues of $17.66 billion.

Delabriere said Faurecia has noplans for a technical center in Chat-tanooga. Most technical support forTennessee will come from companytechnical operations in Mexico.

Faurecia has 28 plants in NorthAmerica, including nine in Mexico.

Delabriere said Faurecia has cutabout 2,000 employees in North Amer-ica this year in response to customerproduction cuts that have hit the en-tire industry. It has announced plantclosings in Kentucky and Canada.

Delabriere said North Americanrevenue, which totaled $2.65 billionin 2008, will fall about 30 percent thisyear. It would have been worse if notfor Faurecia’s business with theNorth American assembly plants ofVW and BMW Group, Delabrieresaid. About one-third of sales inNorth America are to European car-makers, he said.

Although those makers have suf-fered in the recession, their vehiclesales have held up better than thoseof the Detroit 3, Delabriere said.

For example, Faurecia supplies fullinteriors for the X5 and X6 crossoversmade at BMW’s Spartanburg, S.C.,plant, he said. Spartanburg steppedup its exports to offset lower 2008sales in North America.

Delabriere said Faurecia shouldbenefit from its designation as a pre-ferred, long-term supplier to FordMotor Co. under Ford’s Aligned Busi-ness Framework program.

Globally, Ford was Faurecia’s fifth-largest customer in 2008, with pur-chases, including those of Volvo, ofabout $1.68 billion. Delabriere said heexpects Ford eventually to become hiscompany’s third-largest customer.c

NADA: Don’t need new lending watchdogs Neil [email protected]

WASHINGTON — The NationalAutomobile Dealers Association willmobilize members this week to try toblock creation of a consumer finan-cial-protection agency backed by theObama administration.

A bill introduced by Rep. BarneyFrank, a Massachusetts Democratwho chairs the House Financial Ser-vices Committee, would establish afederal agency to police home loans,credit cards and other financial prod-ucts sold to consumers.

On the lobbying front, NADA hasjoined forces with the U.S. Chamber of

Commerce, banks, mortgage lendersand auto finance companies to op-pose the bill.

NADA contends that dealer-assist-ed loans shouldn’t be lumped withcomplex products that proved sus-ceptible to manipulation and decep-tion and that contributed to the U.S.financial crisis.

“We don’t need new rules; we don’tneed a new agency,” NADA spokes-man Bailey Wood said. “We just needto enforce the rules already working inthe auto industry.”

Car loans already are tightly regu-lated by the Federal Reserve, the Fed-eral Trade Commission and the

states, Wood said.At NADA’s Washington conference

this week, the group will ask its 19,000members to urge their members ofCongress to oppose the bill, he said.

The nonprofit Consumer Federa-tion of America, which is lobbying forthe bill, disputes NADA’s assertions.

“There have been considerable abus-es in the auto lending sector that haveharmed consumers, especially minori-ty consumers,” said Travis Plunkett,the federation’s legislative director.

He cited national class-action law-suits filed on behalf of millions of mi-nority customers against auto fi-nance companies and banks for

racially discriminatory lending prac-tices. The complaints alleged thatlenders let dealers mark up interestrates on loans based on subjectivecriteria without telling consumers.

Those 11 cases have led to settle-ments valued at more than $100 mil-lion, says the National ConsumerLaw Center, co-counsel in the suits.

The settlements, the last of whichwas in 2007, covered auto financingprovided from the early 1960s intothe 1990s, said Stuart Rossman, thecenter’s litigation director.

Said Wood: “It shows we just needto enforce laws already on the books,not create a new agency.”c

Rising residuals encourage leasingUsed-car shortagehelps valuesrecover from ’08Arlena [email protected]

This time last year, lessors tookheavy losses when many off-lease ve-hicles brought thousands of dollarsless than had been projected. Theresidual values of the vehicles tum-bled when gasoline prices spiked andused-car prices tanked.

This year is a different story. An in-dustrywide shortage of used vehiclesis lifting the residual values of carsand trucks coming off lease. That inturn is making leasing more attrac-tive to finance companies.

Peter Miles, executive vice presi-dent of operations at BMW of NorthAmerica, said the values of end-of-lease BMWs have increased steadilythis year, although they still aren’t ashigh as the company would like.

“We still lose some money on thosecars, but it’s more than a 50 percentimprovement over last year,” Milessaid.

About 2.6 millionBMW is just one of the auto compa-

nies and financial institutions thatwill have to remarket an industry to-tal of about 2.6 million off-lease vehi-cles this year, 8.3 percent more thanin 2008, according to Manheim.

In August, 3-year-old models on av-erage sold for 43.0 percent of theiroriginal sticker price, according toAutomotive Lease Guide. Three yearsago, the company had projected thatthose vehicles would sell for 44.8 per-cent of sticker.

In August 2008, actual residualswere falling 4.9 percentage pointsshort of the forecast. The gap has nar-

Leslie J. [email protected]

General Motors Co. has chosenCanadian technology firm SCI Ltd. tofunnel Internet leads to all GM fran-chise dealers.

According to SCI, the deal shouldsave GM at least $10 million annuallyby consolidating work now being doneby various Internet-lead providers.

SCI’s core business is to act as a sin-gle source of a variety of online leads,whether they are for new- or used-ve-hicle sales or service and parts. SCI

this. No one can put a finger on whyour leads are sometime delayed bydays. This has always been one of ourcomplaints.”

GM spokesman John McDonaldconfirmed that SCI had been chosen“to handle a consolidation move ofinternal software systems for us thatwill make processing customer leadsmuch faster and improve dealer re-sponsiveness to those inquiries.” Hedeclined to comment further.

All Cadillac, Chevrolet, Buick andGMC dealers will get their leads

through SCI. But dealers can hire SCIor use other vendors to manage thoseleads. That can involve such things asproviding more information aboutthe person making the inquiry orsending out product information.

Cawston says half of GM’s dealersalready use SCI’s lead managementsystem in their stores. SCI’s software isaccessed online, rather than through aserver installed in the dealership.c

Richard Truett contributed to thisreport

CEO Chris Cawston says leads are de-livered to dealers instantly, not heldand then released in batches. “If youdon’t respond to leads promptly, theygo bad in a hurry,” Cawston says.

Some GM dealers had not been giv-en details of the deal. But Asher Pan-ian, general manager of Joe PanianChevrolet in suburban Detroit, sayshis store has lost business because ofdelays in getting Internet leads.

“To have real-time leads is a betterway to do business,” he says. “I’m gladthey are finally getting onboard with

GM picks SCI to supply Web sales leads to all dealers

rowed steadily most of this year.Three years ago, Automotive Lease

Guide projected that 2006 BMW carsand trucks would bring about 51 per-cent of their original sticker prices.Through the first eight months of2009, those vehicles have retained anaverage of 44 percent of their stickerprices.

Automotive Lease Guide expressesits residual-value projections as apercentage of a vehicle’s originalsticker price.

BMW expects about 130,000 vehiclesto come off lease in the United Statesthis year — “slightly higher” than lastyear, Miles said. BMW sells about halfits new vehicles through leases.

Until last year, automakers oftensubsidized lease deals through theirfinance companies to reduce con-

sumers’ monthly payments. But thenmany finance companies pulled backfrom leasing.

Re-entering leasingGMAC Financial Services stopped

writing leases last year, but it re-en-tered leasing in August in 45 stateswith seven models. Among the rea-sons GMAC cited: rising used-carvalues.

GMAC spokesman Mike Stoller saidthe days of $99- and $199-a-monthleases are over. He said leasing is nowa tool for buyers who want to changevehicles frequently, do not drive a lotand are willing to pay to drive a cer-tain vehicle.

“Leasing is something we’re mov-ing forward on and expect to contin-ue to do,” Stoller said.

Hyundai is among the brands withthree-year residual values that arerunning ahead of forecasts, Automo-tive Lease Guide data show.

On average, Hyundai cars andtrucks have retained 42 percent oftheir sticker price in the first eightmonths of this year. Hyundai’s aver-age projected residual value for 2009is 41 percent.

Hyundai Motor America CEO JohnKrafcik said company-supported leas-ing is now confined to its Elantra Tour-ing and Genesis and Genesis Coupe.Hyundai expects to expand moreheavily into leasing when its re-designed 2011 Sonata is released in thefirst half of 2010, he said.

Said Krafcik: “As we go forward,leasing will become a bigger part ofour strategy.”c

Hyundai vehicles have retained 42 percent of their sticker price, aheadof 2009 forecasts. The company nowoffers leases on only three vehicles,including the Genesis coupe, shown.

Residuals reboundThe gap between the industrywideaverage predicted residual valuefor 3-year-old used vehicles andtheir actual residual value hasbeen narrowing. The figurerepresents a percentage of thevehicle’s sticker price when new.

Source: Automotive Lease Guide

0

30

35

40

45

50%

JulyMayMar.Jan.

Residual forecast

Actual retention


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10 • SEPTEMBER 14, 2009

Chrissie [email protected]

DETROIT — German supplier PrehGmbH entered North America in2004 with four employees and a planto start winning Detroit 3 business.So far, so good.

Last year the North American unitaccounted for 8 percent of globalsales for the maker of driver controls,sensors and electronic control units.And the supplier expects a big jumpin sales in the region in 2009.

Preh Inc., the North American divi-sion, has components on seven newvehicles launched in the past year.

The division accounted for about

$35 million of Preh’s $450 million inworldwide sales in 2008, said NickLontscharitsch, Preh Inc.’s seniorvice president of sales.

According to the market researchfirm IHS Global Insight, Preh captured7 percent of the market for heating,ventilation and air-conditioning con-trol units in North America.

Revenue will rise in 2009Despite the collapse in North Ameri-

can vehicle production this year,Preh’s revenue from the continent willincrease to $45 million in 2009. Nextyear, North American revenue shouldreach $60 million to $65 million.

When the supplier set up its NorthAmerican headquarters in suburbanDetroit five years ago, the goal was toachieve 10 percent of company salesby 2008 — an estimated $45 million.

“Without the things that we cannotcontrol, which is the market decline,we are above our goals,” Lontschar-itsch said.

Product launches in the past yearinclude climate control units for theFord F-150 pickup, Mustang sportscar, Taurus sedan and Flex and Lin-coln MKT crossovers; and centerstacks for the Lincoln MKZ sedan andChevrolet Equinox crossover.

Preh supplies customers from an

80,000-square-foot factory in Mon-terrey, Mexico, that employs 250. Thefactory opened in 2006.

BMW is top customerPreh’s largest global customer when

it entered the United States was BMW,which made up 30 percent of Preh’ssales. BMW still ranks No. 1 with 28percent of sales in 2008.

When Preh came to the UnitedStates, it had some contracts withGeneral Motors, but none with Fordor Chrysler. It still doesn’t supply partsto Chrysler, which is fine withLontscharitsch. “One year ago, we sawhow Chrysler was doing, and we were

not at that time targeting Chrysler,” hesaid. “That has been a good decision.”

Since Chrysler emerged from bank-ruptcy June 10, Preh has submittedquotes for business with the newcompany.

The success of the Bad Neustadt,Germany, company in North Americahas benefited global operations, Lont-scharitsch said. Preh’s operations inPortugal supply electronic compo-nents to the plant in Mexico. Businesswith Ford in North America has en-abled Preh to submit quotes to Ford ofEurope, he said. That resulted in Preh’sfirst European Ford contract for aproduct that will debut in late 2010.c

Despite skid, Preh makes progress in N. America

Mitsubishi has900 advanceorders for EVHans [email protected]

TOKYO — In one month, MitsubishiMotors Corp. has taken 900 advancecustomer deposits for its i-MiEV elec-tric vehicle.

The four-passenger car will go onsale next April in Japan. Mitsubishibegan taking orders July 31.

Mitsubishi says it wants to sellabout 6,000 i-MiEVs worldwide, in-cluding 5,000 in Japan, during thefirst year of sales. That comes toabout 400 a month in Japan.

On Sept. 4, the car got an additionalboost when France’s PSA/Peugeot-Citroen SA announced plans to re-badge the Mitsubishi-made car inEurope starting in fall 2010 and sell25,000 vehicles a year. That nearlydoubles Mitsubishi’s own sales tar-get. The Peugeot version will becalled the iOn.

Boosting volume of the lithium ionbattery-powered car will be crucial tobringing down the car’s high stickerprice.

In Japan, the i-MiEV will cost ¥4.38million ($47,480). Buyers can qualifyfor a green-car subsidy of about$1,500 from the government.

Mitsubishi already is selling the i-MiEV to fleet customers in Japanand has filled orders for all of the1,400 units it plans to deliver byMarch 2010. Mitsubishi says it ex-pects sales to reach 15,000 units inthe second full year of sales. By thefourth year, ending March 31, 2014,it plans to sell 30,000 units, most ofthem in Japan and Europe.

The company officially hasn’tmade a decision on selling the car inthe United States, but U.S. sourcessay it is penciled in for 2012.

Including the sales to PSA/Peu-geot-Citroen, volume within fiveyears is projected to reach 55,000 ayear. c

Mitsubishi, which plans to sell about400 i-MiEVs a month in Japan startingin April, already has orders for 900.


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All used-vehicleguides are not equalTo the Editor:

“Dealers: Prices in used-vehicle guidesoften outdated” (Aug. 31) lumped allguidebooks together and said, “Used-vehicle prices have soaredrecently, and the guidebooks have failedto keep up.” The article went on to detailspecific problems that dealers are havingwith a particular guidebook.

While I can’t speak to the allegationsleveled at a competitor, I can speak towhat we do at Black Book.

As the article correctly stated, BlackBook updates its values on a daily basisin its electronic products.

We have a dedicated team of editorswith more than 300 years of combinedautomotive experience who areobsessed with accuracy. We also have ateam of field personnel who attend andcollect firsthand information at more

than 50 auctions every week. Every day, we receive tens of

thousands of vehicle records fromauctions, automakers and remarketingcompanies that are processed by ourexpert editors using sophisticatedanalysis tools to report changes in thecurrent market immediately.

Our values are timely, independentand accurate and are not based onforecasts of where the market will be orsimple statistical analysis of where themarket has been.

Some of the world’s largest and mostsophisticated companies depend on ourvalues, which are accurate reflections ofwhere the market is on any given day.

Simply stated, all used-vehicle guidesare not created equal.

TOM CROSS President Black Book Gainesville, Ga.

Clunkers programwas a disasterTo the Editor:

Editor Jason Stein’s Aug. 24 column“Crazy, dynamic — and done” conveyedthe real spirit of the clunker program.“Maddeningly flawed, disorganizedand chaotic” were words that rang truewith me.

I have done this for more than 30years, and I do not remember ever beinginvolved in a disaster like this one.

If we do get all the money owed us bythe federal government, I will considerthat the program was a success forAugust — sort of like a program of themonth, but this one was sponsored bythe feds rather than the manufacturers.There is no ongoing stimulus.

I thought that when this program wasintroduced, it was made clear to dealersthat accepted claims would be paid bythe government in 10 days.

In the end, the government wasabsolutely pathetic in its handling of theprogram. I hope we never have to do itagain. And if the government decides togo again, surely it will be betterprepared.

If this is what we can expect from arelatively simple rebate program forautomobiles, what are we in for if thehealth care overhaul becomes law?Getting a flu shot will seem like cancersurgery. Heaven help all of us.

HOWARD SCHNITZ General Manager Ridenour Auto Group New Lexington, Ohio

Administrationgot a bad rapTo the Editor:

There has been a lot of news about thecash-for-clunkers money not gettingpaid and many other complaints, but I think it’s a bad rap on theadministration.

While the paperwork was somewhat

GM: Just add up the numbers

see LETTERS, Page 14

Rejected dealersshouldn’t get their hopes up

It is useful that the National Automobile Dealers Associa-tion, the Committee to Restore Dealer Rights and other deal-er groups have compromised on a proposal for a nonlegisla-tive settlement in the rejected dealership case. It means unityin the dealers’ campaign to be treated fairly when automak-ers use Chapter 11 to restructure.

But the dealers whose stores were rejected by General Mo-tors and Chrysler shouldn’t get their hopes up. Getting their

franchises back remains a longshot at best.

A ruling by Judge Arthur Gonza-lez in U.S. Bankruptcy Court inNew York last month ended anyhope that Chrysler dealers had forusing state franchise laws to getback their franchises. A solutioncan come only from Washington.

A bill that would allow dealers toregain their rejected franchises — known as the AutomobileDealer Economic Rights Restoration Act — cleared theHouse of Representatives this summer but is languishing inthe Senate. As a result, legislators who support dealers haveurged them to seek a nonlegislative solution.

Even though the dealers have agreed on a single proposal,there is no guarantee that anyone will bargain seriously withthem.

Before the compromise proposal was reached, GM said itwould negotiate with NADA. Chrysler said it wanted to resolvethe matter without legislation. But it would be easier for thecar companies to rely on the ruling in Bankruptcy Court tosettle the matter, especially since the compromise dealer pro-posal calls for the automakers to disclose the exact criteriathey used to terminate more than 2,000 dealerships.

If the automakers agree on the proposal, any dealers wronglydesignated for termination according to those criteria wouldbe reinstated automatically. Dealers not restored could appealto an arbitration panel that would rely on state franchise lawsand the dealer’s financial viability, which would negate someof what GM and Chrysler achieved by restructuring.

As it stands, without sufficient political clout to bring the au-tomakers and the White House to the table, the matter isclosed.

If GM and Chrysler balk, the legislation could be brought upagain. But odds are slim that Congress will pass (and PresidentBarack Obama will sign) a bill that repudiates what the admin-istration’s own automotive task force caused to happen.

A prolonged political struggle would be counterproductive.It’s time for a reasonable, nonlegislative resolution.

General Motors — the new one,not the old one — is sheddingSaab, Hummer, Saturn andPontiac.

Besides getting rid of those fourbrands and their dealers, GM isshedding about 1,350 otherdealerships that still can operatefor another year or so but can’torder cars from GM and are in theprocess of winding down. In otherwords, the cars and trucksnormally sold by those dealersalready have disappeared from thesales charts.

We also have a recession, and thecompany has just come out of Chapter 11reorganization, with all the baggage thatcontains.

If GM is able to get 15 to 20 percent of theU.S. market, it will be nothing short of amiracle performed by the remainingdealers.

If you add it up — or perhaps, morecorrectly, subtract it — you’ll see GM

doesn’t have a lot of carand truck sales.

But news reports saythat the new chairman ofthe board, Ed Whitacre,expects to see sales andmarket share increase. Itisn’t going to happen.

GM is losing dealerswho sold cars, as well asbrands, that representedhundreds of thousands ofsales. It won’t take longbefore sales for the newGM are compared to those

of the old GM, revealing a dramaticdecrease.

It would be better to calculate whatwould be a reasonable share of the marketfor the new GM and then set sales targets.That would make it easier to forecast salesand measure results.

The General Motors name is stillsuffering from its brief trip into bankruptcy,so it makes sense to concentrate on the

individual brands that remain.The further the brands can distance

themselves from GM, the better off they’llbe. There is no positive image that “GeneralMotors” brings to the consumer’s buyingprocess. It’s all about the four brands.

Buick probably has a better image inChina than it does in the United States.Chevrolet and Cadillac are the strongest,and GMC probably doesn’t have much ofan image at all.

Market share and sales are going to takea hit. GM might as well get used to it. Addup the numbers.

opinionopinion12 • SEPTEMBER 14, 2009

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Market share and sales

are going to take a hit.

GM might as well

get used to it.

There is

no guarantee

that anyone will

bargain seriously

with the dealers.



continued from Page 12

14 • SEPTEMBER 14, 2009

Keith E. CrainPublisher and Editor-in-Chief

Peter BrownAssociate Publisher and Editorial Director

Jason Stein,Editor

[email protected]

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Compare and contrast: GM, Nissan revivalsThere are similarities,but the differences castdoubt on GM’s futureJames B. Treece

How does General Motors’ revivalcompare with Nissan’s?

I was Automotive News’ reporter inTokyo when Carlos Ghosn turnedaround Nissan Motor Co. Now I’m inDetroit, watching GM emerge fromChapter 11. How do the two casescompare?

There are similarities but alsoenough differences to leave me stillskeptical about GM’s future.

Similarities1. Both GM and Nissan were in terri-ble shape. Each had lost market sharein its home market for more than 20years.

Before Ghosn took charge, Nissanhad lost money for eight of the previ-ous nine years. GM lost money forfour straight years — and then de-clared bankruptcy.

Sometimes an alcoholic has to hitbottom before a recovery is possible.GM and Nissan had hit bottom.

2. Each benefited from the hard andsometimes harsh judgment of an out-sider.

Ghosn was once asked whether theturnaround at Nissan had to be led bya foreigner, unfettered by Japanesetraditions. No, he said, a Japanesecould have done it, but the changehad to be led by someone from out-side the company. Japanese traditionswere less of a problem than Nissan’sown corporate culture. Someone frominside the organization who had beenraised in the company’s ways and whofelt even the slightest reluctance tochange the way things were donecouldn’t demand the level of changenecessary.

Nissan had Ghosn. And fortunatelyfor GM, it had Steve Rattner.

Oh, come on. You weren’t reallythinking that Fritz Henderson wasthe agent of change at GM, were you?

He was a loyal lieutenant to the failedRick Wagoner. Rattner and the auto-motive task force had to tear up GM’soriginal restructuring plan beforeHenderson went back and craftedone that was sufficiently draconian tomeet Rattner’s standards — that is tosay, that would do the job.

You can question whether GMneeded to throw overboard as manydealers as it did. But without the out-sider’s backbone that Rattner provid-ed, GM might still be talking aboutmaintaining — that is, subsidizing —Pontiac as a niche brand.

3. They had the money to cover largerestructuring costs.

Funding is usually a major stum-bling block to a successful restructur-ing at persistent money losers.

But Nissan had lots of assets itcould sell, once the outsider (Ghosn)severed the emotional attachment toholding minority stakes in affiliatedcompanies.

GM had Uncle Sam’s wallet.

Differences1. Everyone at Nissan knew it wasn’tworking. The reality of almost a

decade of red ink and two decades oflost market share had sunk in. Theyknew things had to change. Whilethey may have been shocked by thechanges Ghosn forced through, theyalso knew that not changing was notan option.

At GM, some managers still believethat if it weren’t for the current creditcrunch, they might not have beenforced into Chapter 11. In otherwords, the external economy, nottheir own performance, made them afailure.

Not true. GM was losing moneywhen U.S. light-vehicle sales were aspectacular 16 million units a year.

GM may have hit bottom, but GMexecutives are not yet ready to admitit.

Repeat after me: “Hi. My name’sGeneral, and I’m a failure.”

2. Ghosn set specific goals for Nis-san’s turnaround.

He drew a line in the sand, sayingthat in a year and a half Nissan wouldreturn to the black and within threeyears would cut its debt in half andpost an operating-profit margin of atleast 4.5 percent.

Contrast that with Henderson’sgoals for GM: “To design, build andsell the best vehicles in the world.”

Henderson also said, “We expect totake the company public again assoon as practical, starting next year.”GM is required to pay off the govern-ment loans by 2015, but he said it ex-pects to repay them much sooner.

3. Ghosn immediately brought insome outsiders to lead the company’schange.

This went beyond the barely twodozen executives from Renault, al-though their financial savvy filled agaping hole in Nissan management.

In October 1999, when Ghosn an-nounced plant closings and person-nel cuts, he also introduced a newhead of design. Shiro Nakamura wasrecruited from Isuzu Motors Ltd. toinject some zest into Nissan’s lineupand to spread the word that the com-pany had to stop looking inward.

Except for its board, GM hasn’tadded any new blood, much less newviewpoints.

Some pundits argue that govern-mental controls mean GM can’t paythe salaries it needs to recruit top tal-ent. What, they haven’t heard ofstock incentives? If GM and the gov-ernment really aim for an initial pub-lic offering of new GM stock in 2010,surely contracts today can be writtenguaranteeing top executives a stakein the offering.

You may e-mail James B. Treece at [email protected]

commentcomment

James B. Treeceis industry editor

of AutomotiveNews.

GM’s Fritz Henderson: Hisrestructuring plan had to pass musterwith the real agent of change, autotask force chief Steve Rattner.

Nissan’s Carlos Ghosn: He setspecific goals for the automakerand brought in some outsiders to lead the change.

for two automotive engineers todefine the details for a new mpdapproach.

KERRY O’TOOL Petoskey, Mich. The writer recently retired. He was director of continuous improvement at supplier GSTAutoLeather.

be properly attributed to dealers whodidn’t read the instructions, didn’tunderstand them or lacked theability to process claims, as directedby the guidelines, in their initialsubmissions.

I congratulate our governmentrepresentatives from both parties forthe job they did putting together atremendous economic program in ashort time. Not only has it benefitedthe auto industry and car-buyingconsumers; its long-term impact onthe environment and the increase infuel economy are positive changesfor all of us.

JON MONTE BELL Vice PresidentChezik-Bell Honda-Ford-Lincoln-Mercury Iowa City, Iowa

If mpg doesn’twork, try mpdTo the Editor:

Regarding Keith Crain’s Aug. 17column, “We need a new way of

measuring”: The experts are tryingtoo hard to relate mpg to alternativefuels. Electric cars don’t run ongallons.

It is time for a simple, newapproach.

Each year have Uncle Sam providean average cost per unit for each typeof fuel available (maybe using theaverage cost over the most recentfive years to reduce the impact ofspikes). That would then become thenew (annually revised) movingindustry standard for expressing fueleconomy.

The industry could then express all vehicle mileage in miles per dollar or mpd.

For example: You could report howfar a vehicle could go along astandardized route with $10 worth ofany type (or combination) of fuelused by that vehicle.

The approach would enablecomparisons among vehicles fueledby gasoline, electricity, hydrogen,natural gas and liquefied coal evenwhen used in a hybrid propulsionmode.

It shouldn’t take more than a week

complicated, I feel that should havebeen expected because of the sizeand scope of the program and theexposure to fraud.

The people on our managementteam are computer-literate and wereable to create the required PDF filesand compile the requireddocumentation to submit claimsproperly.

They put together a small task forcethat studied the program anddeveloped a process that producedfirst-time compliant submissionsbased on the administrativeguidelines.

By Aug. 19, we had processedalmost a million dollars in claimsand been paid on a regular basis. We had experienced no rejectionsand had not encountered any horror stories like those related inthe press.

I think some of the problems could

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� At the top of our home page,put your cursor on the tab that says “Opinion &Feedback.”

� Click on the section below thatsays “Send us a Letter.” Thatwill bring up a letter form.

� Follow the directions.

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The new design frontier: Making small cars look stunningFor years, style was absent without an excuse from American subcompacts. But the days of slab-sided, no-frills hatchbacks may soon be history.

Generations of Detroit designersseemed to say: No one buys a smallcar for its styling, so why bother?Uninspired, appliancelike econobox-es? What else did you expect?

American subcompacts had noneof the attributes found in the cool,quirky and even elegant small carscreated elsewhere in the world, fromthe original BMC Mini to the first Peu-geot 205 to the modern Citroen C3.

U.S. automakers were forced tochurn out small cars to raise corpo-rate average fuel economy averages,so they could keep selling big trucks.Small-car design? An oxymoron.

But consumer preference has shift-ed — the result of higher gasolineprices, new fuel-efficiency standardsand concern about climate change.

“Small cars and vehicles poweredby four-cylinder engines have beenon a steady increase since 2004,” saidFord Motor Co. sales analyst GeorgePipas.

U.S. fleets must average 35.5mpg by 2016, compared with25.3 mpg this year. Combinedwith stricter emissions stan-dards, it means the number ofsmall-car nameplates for sale

in the United States will increase. And when a market segment gets

crowded, automakers must rely onstyling to set their vehicles apart fromthe crowd.

“It’s not business as usual for smallcars here anymore,” said Moray Cal-lum, Ford Motor’s design director forcars.

The expanding lineup of new smallcars means styling will get a lot morecreative and appealing, just as it didwith mid-sized cars recently. (Thinkof the modern Chevrolet Malibu, thenew Ford Taurus and the currentToyota Camry and Honda Accord.)

Callum said North America is be-coming more like Europe andAsia, where even the mostbasic entry-level carshave style —

Small cars with styleEight nifty shapes at the lower end of the market (continued on Page 14D)

Ford FiestaIn 1981, the last timeFord sold a Fiesta in theUnited States, it was astandard slab-sided, no-frills, two-boxhatchback, little morethan an appliance. TheFiesta returns nextspring sporting Ford’ssuccessful kineticdesign theme, whichfeatures bold lines onthe hood and down thesides as well as beefywheel arches. Ford iscounting on style as aselling point. So farsales in Europe and Asiahave been robust.

Chevrolet SparkThis small, three-door hatchback, designed in Korea by GM’sDaewoo subsidiary, is a radical departure for an entry-level Chevy.It has an aggressive front end and a high tail. The door handleson the five-door version help hide the rear doors.

cars such as the Citroen C3 and Fiat500.

As consumers move out of largervehicles, Callum said, they won’t losetheir desire for eye-catching rides.

“Styling will be one of the most im-portant factors,” he said. “As con-sumers downsize their vehicles, theywill expect the same level of crafts-manship, features and attention todesign detail they find in larger, moreexpensive cars.”

Among the Detroit 3, Ford is up firstwith a stylish small car — the Europe-designed Fiesta hatchback, which ar-rives here next spring.

With its swept-back windshield;large grille; long, thin headlights; andhigh tail, the Fiesta has been a hit inEurope. It will be the first stylishsmall car from a U.S. automaker tochallenge the modern Mini, the carcredited with helping change Ameri-cans’ attitudes toward subcompacts.

“We’re using design to distinguishthe Fiesta in the marketplace,” saidCallum.

GM’s new lookGeneral Motors Co. is counting on

styling to be important for even the

smallest and least expensive vehiclesin the Chevrolet lineup.

“I don’t like boring cars, and I don’tthink our customers do, either,” saidEd Welburn, GM’s vice president ofglobal design. “Some people wantmore extroverted cars than others.But even the cleanest, simplest, mostconservative design should not beboring. Small cars can have anotherimage.”

Yet if any company is guilty of com-mitting grave crimes against small-carstyling over the years, it’s GM. Cases inpoint: The Chevrolet Chevette, Vegaand Cavalier, as well as all their sib-lings that wore other brand badges. Allinstantly forgettable.

But a few weeks ago, GM invited thepress to visit its Warren, Mich., designstudios for an unprecedented andconfidential look at many future prod-ucts. Among the dozen or so vehicleswere three small Chevrolets: theSpark, Cruze and redesigned Aveo.

Unlike previous Chevrolet and GMsmall cars sold in North America, thenew small Chevys are expressive,take chances and will shock the sens-

Richard Truett and Bradford [email protected]

For decades, something was missing in the small carsdesigned, built and sold in the United States. It was gone for so long that most Americanconsumers probably didn’t know what it was.

But to Ralph Gilles, Chrysler Group’s chief designer, themissing ingredient was obvious. U.S. subcompacts lackedemotional appeal.

“Small cars of the past were not necessarily done withpassion,” he said.

Chevrolet CruzeThis Corolla-sized sedan has muscular styling,thanks to its shoulder height accent lines thatrun from front to rear, and front fascia withheadlights mounted below the hood.

see DESIGN, Page 14D

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DESIGN14D • SEPTEMBER 14, 2009

es of consumers whose image ofsmall Chevrolets is locked in the past.

For instance, the quad headlights,accent lines on the hood and tall rearend on the 2011 Aveo give the smallhatchback a funky European look,like something that could have comefrom Renault.

The smaller three-door Spark, alsodue in 2011, is a stubby Ford Fiesta-fighter with swept-back headlightsthat run the length of the hood, fromgrille to windshield.

The smoothly styled Cruze, sched-uled to arrive next year, will do battlewith the Mazda3 and Nissan Versa.

The Mini factorConsumers have proved they will

pay a premium for a small car with vi-sual appeal. The Mini’s iconic ’60s-influenced styling has been a majorfactor in its sales success, said JimMcDowell, vice president of BMW’sMini brand.

“Prior to the Mini, small meant in-expensive and not very pleasant,” hesaid. “There’s something very allur-ing about the styling.”

Tom Matano, director of industrialdesign at San Francisco’s Academy ofArt University, said the Mini hasraised the bar for all automakers sell-ing small cars in the United States.

“It’s not just an econobox like aCivic or Corolla,” he said. “It’s got ca-chet.”

Matano, a former Mazda designchief, said he expects styling to varywidely if Americans finally acceptsmall cars. “If the market gets bigger,designs will diversify,” he said.

Matano said Daimler’s Smart mayhave a big influence on small cars.“Right now Smart may be creating acommuter look,” he said.

Indeed, Toyota’s iQ and severalother microcars all seem to owe adebt to Smart.

What will separate a new genera-tion of small cars from those that pre-viously failed to win U.S. buyers? In aword, emotion, said Chrysler’s Gilles.

“I look at the original 1980s Escortsand Omnis,” he said. “They were goodcars but not necessarily provocative.”

Chrysler’s mission, under the guid-ance of new owner Fiat S.p.A., is “tomake them not just fuel-efficient butvery compelling,” Gilles said.

Gilles said a change has occurred inthe design atmosphere at Chryslerunder new CEO Sergio Marchionne,who took over in June after the au-tomaker emerged from bankruptcy.Gilles expects to draw inspirationfrom the success that Fiat has had inrecent years in creating attractivesmall packages — an expertise builtup over many decades.

Gilles said he is impressed with theFiat 500 and Alfa Romeo MiTo.

“I noticed the Fiat 500 when it firstcame out and said, ‘Wow, look whatthey’ve done,’ ” he said.

“The 500 is extremely well-designed,very efficient packagewise but veryemotional.

“I have to give my guys over theocean a lot of credit. They’ve really

dominated small cars.”Gilles, 39, has a few words for skep-

tics who say Americans won’t buysmall cars.

“There’s a wonderful generation ofAmericans coming along — the mil-lennials,” he said. “They don’t havethe same paradigms that even mygeneration has. I think the time isright for a new design paradigm.”

Gilles sees America not as one ho-mogeneous market but as a “frac-tured market” with lots of pockets ofinterests.

“You’ve got 50-year-olds actinglike 20-year-olds and vice versa,” hesaid. “It’s becoming very lifestyle-centric. As long as you execute theproduct extremely well, they willcome.” c

continued from Page 14B

DESIGNAdding emotionto econoboxes Small

butstylish

Scion iQIt’s a stubby, Smart-sized city car with a funky

front end that features high-mountedheadlights and a sloping fascia.

It probably will appeal toyounger drivers looking for

a highly maneuverablecity car. Overhangs

are nonexistent.It’s the smallestToyota to comestateside.

Kia SoulHonda may have invented thesmall, boxy, vanlike utility vehiclewith the Element. Toyota may havemoved it into the mainstream withthe Scion xB. But Kia’s new Soulhas made it cool and sporty. Thetall windshield and slopingshoulder line give the boxyhatchback its sporty looks.

Honda CR-ZFrom some side and rear angles, this three-door hatch isvaguely reminiscent of the classic CR-X of the late 1980s.But this is no retro vehicle. The CR-Z’s styling is adeparture for Honda. The flowing, sloping frontend, grille opening and headlights are newstyling cues for the brand

Fiat 500The original, made from 1957 to 1975, was oneof the iconic postwar cars, along with theVolkswagen Beetle, Mini Cooper and FordMustang. The new version retainssome of the styling cues of theoriginal, such as a shallowhood and rounded roof. It hasbeen a hot seller in Europeand could challenge the MiniCooper when it arrives atChrysler dealerships in 2011.

Citroen C3The French long have proved smallcars don’t have to look boring.Remember the Citroen 2CV and theDS? One of the smoothest of today’ssmall Euro superminis is the recentlyredesigned C3. It’s a classy-lookingsmall car with a steeply rakedwindshield that stretches into the roofarea. Some versions have a full-lengthcanvas roof that can be peeled back.Note to Roger Penske: The C3 is justthe kind of car that would look great inthe Saturn showroom of the future.


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Electro-magnetismThe freshman class of electric cars begins arriving in U.S. showrooms in2010 with a variety of designs. Styling is influenced by the intended use ofthe vehicle (city driving, for example), mechanical layout and country oforigin. Don’t expect electric cars to have radically different shapes until anew safety standards are created specifically for them.

Fisker KarmaThis swoopy luxury coupe withits expressive grille may bethe best-looking electric car.But that’s what you’d expectfrom a company whosefounder is former AstonMartin design chief HenrikFisker. The mid-sized Karmawill use a small gasolineengine to generate electricityfor the drive motor. Salesstart next fall.

Nissan LeafWith its slightly protrudingand curvaceous rear end,Nissan’s first electric easilycould wear a Renault badge.The five-passenger hatchbackwas designed in Japan on adedicated architecture forelectric powertrains. Nissansays the car’s big insetheadlights channel airflowaway from the side mirrors toimprove aerodynamics andreduce wind noise. The Leafalso has a nearly smoothunderbelly.

Tesla Model SThe upstart California makerof electric sports cars aimsto move into themainstream in 2011 withthis $50,000 mid-sized five-passenger sedan poweredby 8,000 small lithium ionbatteries. The sleek sedanwas designed by Franz vonHolzhausen, formerly of General Motors and Mazda, and features a glass roofand retracting door handles. The Model S also has a rear opening hatch andfold-down rear seats.

Toyota iQLots of small electricvehicles will look like theMitsubishi i-Miev, and thistiny Toyota is one of them —except it’s a two-door. Likethe i-Miev, the iQ has aspacious interior because itspowertrain is behind the rearseat. The iQ has a sleekbody to reduce drag.

Think CityThe Norwegian-designed Think arrived here eight yearsago when Ford Motor Co. owned the brand. Think

disappeared in 2002 but is coming back with a stylingupdate and more powerful batteries. The new

body has headlights influenced by the MiniCooper, a gently sloped roof and beefy wheelarches. Think returns to North America nextsummer, starting with fleet buyers.

Mitsubishi i-MievIf the sloping front end, dramatically raked windshield andwheels pushed to the extreme corners look familiar, it’s becauseyou’ve seen them on Daimler’s Smart car, on which the i-Miev is based. The electric motor is mounted under the rear

seat, which helps give thefour-door subcompact city

car a roomy interior. Thedesign could be atemplate for electriccars. A late-2010

debut is planned.


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Exterior Trim

DELPHI CORPORATIONSuspension Springs

BREED TECHNOLOGIESSensors

FAIRFIELD MANUFACTURINGPlanetary Gears

DAIMLER CHRYSLER

CORPORATIONVinyl

ALCOA INC.Fasteners

MEILLOR S.A.Sealing Systems

AUTOSYSTEMSMANUFACTURING INC.

Vehicle Lighting

WILLIAMS CONTROLSThrottle Controls

INDIAN HEADINDUSTRIES, INC.

Gaskets and Headliners

DANA CORPORATIONTransmission Components

KELSEY-HAYESActivators & Switches

VALEO S.A.Engine Cooling

UNIQUE FABRICATING, INC.Foam Gaskets

FEDERAL-MOGUL CORPORATIONElectrical Products

STEWART & STEVENSON SERVICES, INC.

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SPX CORPORATIONTransmission Actuators

BBI ENTERPRISESThermal Solutions

TRW AUTOMOTIVESuspension Components

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AVON P.L.C.HVAC Vents

DELPHI CORPORATIONShock Absorbers

LIBRALTER PLASTICSBody Side Molding

JOHNSON CONTROLSSpark Plugs

EXIDE TECHNOLOGIESBattery Components

VERSATECH SEALING SYSTEMSSealing Systems

MOLMECUnderhood Plastics

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MASCOTECH, INC.Windshield Wiper Blades

AMCAST INDUSTRIAL CORPORATIONSuspension components

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EATON CORPORATIONElectromechanical Acutators

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TRW AUTOMOTIVESwitches and Controllers

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ALPHA BOLT COMPANYFasteners

JOHNSON STAMPING COMPANYTransmission Parts

GENERAL MOTORS CORPORATIONDampers

CARRON & COMPANYBody in White Prototypes

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AIRPAX CORPORATIONTemperature Sensors

AUTOCAM CORPORATIONMachined Auto Parts

TRIMAS CORPORATIONFasteners

FKI AUTOMOTIVEForward Lighting

TRW AUTOMOTIVEBrake Rotors and Drums

PROGRESSIVE INDUSTRIESEngine Parts

FEDERAL-MOGUL CORPORATIONHeavywall bearings

PRODUCTION STAMPING INC.Chassis Components

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Structural Plastics

MACLEAN-FOGG COMPANYAutomotive Fasteners

WAYNE CORPORATIONBrake Parts

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Exterior Trim

DELPHI CORPORATIONSuspension Springs

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FAIRFIELD MANUFACTURINGPlanetary Gears

DAIMLER CHRYSLER

CORPORATIONVinyl

ALCOA INC.Fasteners

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WILLIAMS CONTROLSThrottle Controls

INDIAN HEADINDUSTRIES, INC.

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DANA CORPORATIONTransmission Components

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VALEO S.A.Engine Cooling

UNIQUE FABRICATING, INC.Foam Gaskets

FEDERAL-MOGUL CORPORATIONElectrical Products

Andre AugierManaging Director

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anpagead.qxd 1/8/2009 1:20 PM Page 1

Rick [email protected]

Consumers are happy to havesmaller, more efficient vehicles, butthey don’t want to give up spaciousinteriors. So as vehicles get smaller,interior designers must fine-tunetheir skills as illusionists.

“We need to find solutions that giveyou more space,” says Tom Kearns,chief U.S. designer for Kia MotorsAmerica. “But a lot of what we do ison the perception side, creating thatperception of a larger space.”

To meet new federal regulationsnext decade for corporate average fu-el economy, the industry is makingsmaller vehicles. The challenge is“liberating the interior space whilemaking the exterior size more effi-cient,” says Freeman Thomas, direc-tor of strategic design at Ford MotorCo.

In the next decade, cars will featureshort fronts and rear overhangs.Wheelbases will be stretched so larg-er interiors can be created. It’s a ma-jor shift from the bigger-is-better ap-proach that has long driven vehicledevelopment, resulting in big vehi-cles with large interiors.

Designers now must give more seri-ous consideration to how buyers useinterior space.

“I think people look at that space as‘What can I do with it? How does itfunction? What advantage does itgive me?’ ” says Larry Erickson, chair-

man of the transportation depart-ment at the College for Creative Stud-ies in Detroit.

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Interior designers create perception of space

with a connection to the Internet. “It used to be once you got in your

car, you left your house,” Ericksonsays. “Now people are blending thosetwo together” in their cars.

Here are some ways designers areworking to improve interior packag-ing.� New proportions. Vehicles with un-usual proportions are expected toprovide larger interiors. The LincolnC Concept, which debuted in Januaryat the Detroit auto show, is about thesame width as Lincoln’s MKZ sedan.But the overall length is similar to thatof the Ford Focus small car. The CConcept has two bench seats that to-gether seat six.

Ford’s Thomas says the C Conceptis the blueprint for some of the au-tomaker’s future vehicles.� Thinner door panels. Researchshows that buyers perceive spacehorizontally more than vertically, Er-ickson says. That means they aremore interested in the width of theinterior than the height — specifical-ly, hip room, shoulder room, headdistance to the side glass and the dis-tance between the two occupants.

One solution: thinner door panels.“It really is a war for millimeters,” Er-ickson says.� Color. “Color is something that re-ally messes with your perception,”says Kia’s Kearns. A lighter interiorlooks brighter and more airy; a darkinterior tends to be enclosing and feelmore intrusive.

As an example, Kearns cites an in-strument panel. “If you break that up,do the top half dark or light and thebottom half the opposite, it is goingto tend to visually reduce that massand give you a more horizontal look,more of a floating appearance,” hesays. “It is not going to look as big andheavy. It can add to the perception ofmore space inside.”� Thinner seats. Instead of seats withsprings and thick foam, the technolo-gy used in auto racing seats may beadapted to production vehicles. A rac-ing seat is a thin composite shell witha thin piece of foam. That type of de-

sign is used in the Lincoln C Concept.“If you design to what we call the

comfort curve, a seat does not have tobe thick,” Thomas says. “If the pres-sure points are put into the rightplace, you don’t need thickness.”

At this year’s Detroit auto show,Johnson Controls Inc.’s re3 conceptshowed a similar seat design. Thefront seats are about 50mm thinnerthan a traditional seat back. Weight isreduced 30 percent. � Flip-up rear seats. A plug-in hy-brid such as the 2011 Chevrolet Voltdoes not need a 15-gallon gasolinetank. A six-gallon tank is probablysufficient.

“You don’t have this large tank un-derneath the rear seat” that may in-trude into the passenger compart-ment, says Michael Warsaw, JohnsonControls’ vice president of designand marketing for North America.

Instead, the floor can be flat andlower. Johnson Controls created60:40 stadium-style rear seats for itsre3 concept. The bottom cushions flipup out of the way, leaving a flat floor.� Data interface: Erickson of the Col-lege for Creative Studies says that un-

til recently, the interior designer hadtwo main drivers: “how you packagedthings physically and how you madethings look.”

Now there is a third element — in-terfacing with the navigation system,Internet and audio system, alongwith the knobs, buttons and maybe ajoystick to make everything work.Johnson Control’s re3 concept shift-ed some of those controls to the dri-ver’s seat.

“The idea is that all of the controlsare within reach, and you have accessto all your information.” � Glass roof panels. Laminated glassroof panels allow light into the interi-or. The Ford Flex has multiple roofpanels.

“When you get some of that naturallight that floods on the surfaces of theinterior, it feels so much brighter andmore open,” Kearns says.

Another advantage of the panels:Passengers sitting directly under thepanels have more headroom becausethere is no headliner, Ford’s Thomassays. The glass is flush with therooftop.� Tall ceiling. The Kia Soul has asmall footprint, but it is a tall, boxy carwith a large space on the inside, espe-cially in terms of headroom.

“It seems like it is an open space,”Kearns says. “You don’t feel claustro-phobic.”

Just as in a house, he says, a tall ceil-ing “is always a better feeling.”c

The Lincoln C Concept, shown here with Ford’s Freeman Thomas at the Detroit auto show, is about as wide as a Lincoln MKZ but only as long as a Ford Focus.

The Ford Flex’s glass roof panelsallow light into the interior whilegiving passengers more headroom.

The race for spaceAs cars get smaller, designers are looking for ways to preserveinterior roominess. Techniquesinclude

� Thinner seats

� Thinner door panels

� Higher ceilings

� Lighter colors to promotea feeling of openness

▼▼

Special section on design continues on Page 21.


Tom Webb,Manheim ConsultingChief Economist

Remarketing ReportAs anyone in the

remarketing

business will tell

you, running an

effective, efficient

business today is

more important

than ever.

But what does that

mean for dealers who are fighting so

hard to survive?

To answer that question, we reached out

to hundreds of dealers over the past

several months to better understand

their changing needs and to discuss a

variety of best practices, which are

shared by many of the country’s most

effective businesses, including:

business, especially online

fairness, integrity and the value of

personal relationships

With these principles top of mind, our

team is committed to working with

dealers, not just to listen to their

concerns, but to act on them.

In response to requests for greater access

to fresh inventory, we’re helping dealers

make the most of the Manheim Monday

Manheim features top sellers of quality

vehicles in an online-only sale. The New

effective new way for dealers to buy and

sell high-quality inventory in-lane or

online. Both are especially relevant as

many franchised dealers look for new

ways to increase used car sales.

Our goal is to do our best to provide

dealers with an advantage, from ways to

source more inventory and attract more

buyers to delivering more effective and

efficient wholesaling options that drive

improved business results.

We trust you will find the information

relevant and useful, and we welcome

your thoughts and feedback at

[email protected].

Jeff Bunch

Q&A WITH TOM WEBB

Historically, franchised dealers sourced wholesale vehicle inventory in closed-sale auction environments. As the industry and

inventory channels continue to evolve, Manheim is working with dealers to educate them on the full range of available

choices, whether open or closed. Enrollment in Manheim’s The Wholesale Institute, for example, has mushroomed with more

than 900 dealers attending sessions this year, seeking to gain a competitive advantage in the online world. Dealers interested

in learning more about this complimentary workshop should go to www.thewholesaleinstitute.com.

The creation of The New General Motors Dealer Lane program is another example. This new program provides dealers an

opportunity to buy vehicles in an open environment (in-lane and on Manheim.com) from GM franchised dealers who have

earned reputations as prime sellers. These sales are especially good places to source inventory because, in order to sell in

these lanes, dealers must price their vehicles within 10 percent of Manheim Market Report values and must maintain a high

sales conversion rate. For more information on The New General Motors Dealer Lane program and the Guaranteed 7-Day

Buy Back, go to www.manheim.com.

HELPING DEALERS FIND NEW WAYS TO SOURCE VEHICLES IN-LANE AND ONLINE

Q. When do you expect economic conditions to improve?

A. In some respects, the recovery has already begun. Real gross domestic product (GDP) declined by

just 1 percent in the second quarter of 2009 as opposed to a steep 6.4 percent decline in the first

quarter. Expectations are strong for a positive swing in both the third and fourth quarters. There

likely will still be some ups and downs, but the long-term trend is positive.

Q. What impact did Cash for Clunkers have on used vehicle sales?

A. Given that the Car Allowance Rebate System program was a new vehicle incentive, we might have

expected it to have a negative impact on used vehicle pricing. But with new vehicle inventories

extremely low, used vehicle wholesale prices continued to rise. And, used vehicle retail volumes

actually rose in July and August, as savvy dealers took full advantage of the increase in floor traffic

created by the CARS program. Used vehicle retail margins also improved.

A D V E R T I S E M E N T

MIDYEAR USED CAR MARKET REPORT ILLUSTRATES USED CAR TRENDS

Manheim Consulting recently released its first-ever Midyear Used Car Market Report. The Report, available for purchase online at www.manheim.com/consulting, notes several trends of interest to franchised dealers, including:

.

years ahead.


16 • SEPTEMBER 14, 2009

A D V E R T I S I N G S T A F FCirculation 313-446-0450Advertising 313-446-6050

Classified Advertising313-446-6065, 800-388-1800

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Rick GreerDirector of Sales and Marketing

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Karen Rentschler, [email protected]

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Regional Sales Managers

Colleen RobarDirector of Marketing Communications

[email protected], 313-446-0331

Ellen Dennehy Director of Relationship Marketing


Lance Graves, Promotion Art [email protected], 313-446-0469

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Classified Advertising SalesJim McCarter

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Planning and Online [email protected], 313-446-1679

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SubscriptionsU.S. 1 year, $159; 2 years, $279.

Canada $239 (U.S.); other countries, $395.Single copy sales, $5 per issue plus shipping.

ReprintsLori Noffz, The YGS Group,800-494-9051, Ext. 104

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[email protected]/+49-8153-907522

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automobilwoche.deHelmut Kluger, Publisher

[email protected]/+49-8153-907402Thomas Heringer

Sales and Marketing [email protected]/+49-8153-907404

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Thinner carpet, fewer brandsAuto shows shrinkas cash-crunchedcarmakers slashmarketing budgetsDave [email protected]

Automotive executives will hob-nob, parry with reporters and displayglittering new products this week atthe Frankfurt auto show.

But industry leaders who trekthrough Frankfurt’s sprawling exhi-bition center will see a scaled-downversion of Germany’s premier autoshow. Exhibit space will be downfrom 2.36 million square feet in 2007to 1.99 million.

Most visibly, several major au-tomakers will skip the show entirely.(See box.)

Such shrinkage isn’t unique toFrankfurt. The past year has been arocky one for auto shows as reces-sion-wracked carmakers hackedtheir marketing budgets. Elaborateshow stands and lavish productlaunches quickly went out of style.

But despite the downsizing, au-tomakers say they remain committedto auto shows as a marketing venue.Most consumers want to see carsfirsthand before buying, marketerssay, even with the rise of online vehi-cle launches and car shopping.

As Mazda public affairs executiveJay Amestoy puts it, “There’s stillnothing like seeing a vehicle in thesheet metal.”

Year of cutbacksEven so, the cutbacks have been

continuous. They started with the

Detroit show, where several brandsstayed home, and continue throughthe Tokyo show next month. Mostnon-Japanese brands will skip Tokyo;earlier this year organizers consid-ered scrubbing the show.

Scott Vazin, director of productcommunications for Nissan NorthAmerica, says slumping sales forced

automakers to re-evaluate shows.Nissan is skipping several, includingDetroit and Frankfurt.

In the past, automakers felt theyhad to show vehicles at all majorshows, even if the timing didn’t makesense, Vazin says.

“At times we’ve forced things un-naturally, probably showing a car toosoon or too late,” he says. “The eco-nomic crisis made us step back andsay, ‘What is the right thing for ourbrand?’ ”

Other automakers, such as Ford,Honda, General Motors and Toyota,say they plan few changes to theirshow schedules. They say the mediaattention pays off and consumersshop for vehicles at the shows.

“We have our own research and au-to show research that people [attend-ing shows] are pretty far down thefunnel toward a purchase,” says KurtAntonius, assistant vice president for

public relations at American HondaMotor Co. “They want to walk backand forth and compare the Camry tothe Accord.”

But, Antonius adds, Honda is trim-ming costs subtly: “We’ve thinnedthe carpet a little bit. We’ve changedthe type of lighting.”

‘Self-selected’ audienceKeith Dahl, national marketing

manager at Toyota Motor SalesU.S.A., says auto shows have an ad-vantage over many other forms ofevent marketing: The audience isthere to see cars.

“They’re self-selected and, in manycases, paid to come and visit you,”Dahl says.

Ken Czubay, Ford Motor Co. vicepresident of U.S. marketing, salesand service, says Ford plans to “ele-vate our participation … we will takeit up a notch.”

Ford was at 80 shows last year, withtotal attendance of 25 million,Czubay says. The company passedalong about 125,000 sales leads toNorth American dealers.

Auto shows offer an opportunity todo more than sell cars, Czubay adds.Ford uses hands-on displays to drivehome three key marketing points:fuel economy, quality and environ-mental responsibility.

The hands-on experience is crucialfor a luxury brand, says TomKowaleski, BMW of North America’svice president of corporate commu-nications. Sitting inside a BMW canturn a shopper into a buyer.

“There’s the rational side of the ve-hicle — it’s reliable,” Kowaleski says.“There’s also the emotional side: ‘Ijust want to see myself behind thewheel. I like the way it makes mefeel.’ ”

Pressure on showsDespite the hordes of consumers

shows attract, organizers are strain-ing to keep pace with industrychanges.

Andy Fuzesi, general manager ofthe Los Angeles Auto Show, says ex-hibit space will be down about 10percent at this year’s show. But in ayear when U.S. sales are down 27.9percent through August, that leavesshow organizers “feeling great,”Fuzesi says.

The recession has spawned someinnovations. At this year’s Chicagoshow in February, organizers set up acommon stage that several automak-ers used to show products, payingonly for setup costs.

Spokesman Paul Brian says usingthe stage was considerably cheaperthan building one on an automaker’sstand: “There were manufacturerswho said they would not be able tohave a media preview without it.”

Rod Alberts, executive director ofthe Detroit show, says that brand de-fections are only part of the picture.Detroit has attracted new, albeitsmaller, brands such as Chinese au-tomakers BYD and Brilliance.

The changes make it tricky to dosomething as basic as lay out exhibitspace, Alberts adds.

“We’re all evolving,” he says. “Wecan’t keep doing the same thing wedid five, 10 years ago or even lastyear. Nothing’s turnkey.”c

Pia Krix of Automobilwochecontributed to this report

No-showsWho’s skipping the Frankfurt autoshow this week

� Honda

� Nissan

� Infiniti

� Mitsubishi

� Daihatsu

� Cadillac

� Suppliers, including Behr,Karmann, Preh andSeissenschmidt-Group

Tight funds have forced carmakers to scrap auto show spectacles such asthis “cattle drive” unveiling the 2009 Dodge Ram at last year’s Detroit show.


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SEPTEMBER 14, 2009 • 17

Aluminumparts makerscan’t get creditRobert [email protected]

Shortages of aluminum parts couldslow down the auto industry’s come-back after a summer shutdownlengthened by bankruptcies.

Aluminum inventories are low, butthat’s not the problem. Demand alsohas been low because of industrywideweak sales, says CreditSights Inc., anindustry research firm in New York.

The issue is credit. Aluminum mid-dlemen, who buy ingots fromsmelters and sell them to industrialusers, are not extending credit evento healthy parts makers, say auto andaluminum industry executives.

“The middlemen want cash in ad-vance,” says the CFO of a large alu-minum parts maker.

“This is becoming a common in-dustry problem,” says Gerry Fed-chun, president of the AutomotiveParts Manufacturers’ Association,which represents 400 Canadian sup-pliers. “We really need to get creditfor suppliers to buy the raw materialsthey need.”

Industry executives worry thatsome disruptions could occur in thebuild schedules of automakers be-cause of credit and availability issues.

Industry experts say a small groupof companies that control aluminumsupplies are not extending credit be-cause they have been burned by au-tomotive parts makers’ bankruptciesand worry about further failures.

Several large makers of aluminumcomponents have gone through bank-ruptcy twice, including J.L. French Au-tomotive Castings Inc., of Sheboygan,Wis., which said this month its bank-ruptcy judge approved its restructur-ing plan. That’s a key step in French’semergence from Chapter 11.

Citation Corp., of suburban De-troit, emerged from its second tripthrough Chapter 11 in early 2007.This March, Citation sold its alu-minum business.

In addition, the ranks of aluminumdie casters, a small but critical part ofthe automotive industry, are rapidlythinning, says Steve Cochran, vicepresident of Die Cast Machinery LLCin Waukegan, Ill. His company hasliquidated 15 aluminum die castingfactories in the past 24 months.

He says the high cost of energy, un-relenting cost pressure and now de-pressed production volume have “puta lot of people on the thin edge.”c

■ 50 with FordGardner Britt III, left, and Gardner Britt II of Ted Britt Ford in Fairfax, Va.,receive a 50-year award for Ford from Lisa O’Connor, Washington regionalmanager of Ford-Lincoln-Mercury sales operations.

■ Silver dealerDoug Marine, left, of Doug MarineMotors in Washington Court House,Ohio, receives a 25-year award for Chrysler and Dodge from JackGannon, dealer network developmentmanager at Chrysler Group’s GreatLakes Business Center.

■ Silver dealerBrett McFarland, left, of McFarlandChevrolet-Pontiac-Buick-Cadillac in Maysville, Ky., receives a 25-yearaward for Pontiac from JadeVonasek, General Motors Co.’sCincinnati zone manager. McFarlandalso received 25-year awards for Chevrolet, Buick and Cadillac.

We invite items and top-qualityphotos for the dealers section. Forguidelines, e-mail [email protected] call 313-446-0378.

Or send items to: Dealers Section,Automotive News, 1155 Gratiot Ave.,Detroit, MI 48207-2997

Citizenship� Sunny King Automotive Group(Ford-Hyundai-Toyota-Scion) in Anniston, Ala., sponsored theSunny King Charity Classic in July.The golf tournament raised $125,000to help more than 30 local charities.Patty King is the group’s CEO.

20090914-NEWS--0017-NAT-CCI-AN_-- 9/9/2009 11:40 AM Page 1

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