Archive for December, 2009

Farewell, Saab – but it’s not all doom and gloom for car industry

Things are grim in Sweden, but in Britain the motor trade is back from the brink – and even seems to be thriving.

Is the global motor industry‘s petrol tank half full or half empty? The view from Trollhattan is certainly gloomy. General Motors‘ announcement yesterday that its Swedish subsidiary, Saab, will be subject to an “orderly wind-down” is conformation that, for the industry’s weak players, the recovery has come too late.

GM has been looking for an investor in Saab since January. The company said that the wind-down meant that outstanding debts and warranties would be honoured, and that spare parts and services would still be provided for owners. But prospects for the 3,000 workers and those in the supply chain seem bleak. So Saab joins GM‘s Saturn brand, the UK’s LDV vans business and a few others into oblivion. Yet the case for optimism, here and abroad, is growing.

The Dubai Motor Show opens this weekend. It is far from the world’s biggest, but it confirms that the motor business is refusing to die. Those seeing their own reflections in the gleaming gold coachwork of the new Bentley Mulsanne, a £200,000-plus limo, or the striking Corvette Stingray concept, complete with “scissor” doors and military-style night vision, could be forgiven for thinking that there has never been a recession. Nearer to home, the Society of Motor Manufacturers and Traders announced the first monthly rise in vehicle production since September 2008 – a jump of 15.7 per cent in November.

The reasons for the industry’s recent revival are, of course, not hard to find – unprecedented government support for the industry. The new GM, for example, is now 62 per cent owned by the US Treasury. The German government offered loan guarantees to Opel, while the British and French governments have found ways to make grants available to Peugeot, Renault and Jaguar Land Rover.

Overarching those schemes is the trillions of dollars in general support for the world financial system – and scrappage programmes, including the British Treasury’s £400m scheme. It may mean lower sales next year when the scheme runs out, but it may well have saved many jobs and factories from obliteration.

Yet there have been some surprising losers. Toyota’s chief executive, Akio Toyoda, the 53-year-old grandson of the founder, said recently that his firm could be nearing the brink of “capitulation to irrelevance or death”, “grasping for salvation” – a reference to the stages of corporate decline in How the Mighty Fall by Jim Collins. Deeply unfamiliar, quality issues have overtaken Toyota this year.

The winners are easy to spot in the fast lane. The Korean industry, itself humbled in the East Asian crisis of 1998, has seen a transformation in recent years. Thanks to its economical city car the i10, Hyundai has established itself as the maker of the UK’s number one bestseller among private buyers. Its low price makes it an obvious choice for scrappers looking for a £2,000 discount, but the idea of a Hyundai beating the more familiar Corsas, Fiestas and Clios would have been unthinkable a few years ago. Tellingly, the i10 is made in India, where Rata Tata attracted the world’s attention with the Nano, his “one lakh” car – 100,000 rupees or about £1,500.

VW, another company that has shone this year, underlined the importance of the Indian industry with its purchase of a strategic stake in Suzuki – mainly to get access to the Indian Maruti Suzuki business. The outsmarting and purchase of Porsche may have grabbed more headlines, but commercially the Suzuki move was a more vital one for Volkswagen. Indeed, VW may soon overtake GM and Toyota to emerge as the world’s largest car-maker, with its unparalleled stable of brands, from the Maruti through Skodas, Seats, Audis, Lamborghinis and Bentleys to the €1m Bugatti Veyron. Ford, “the one that got away” and avoided Chapter 11, and Chrysler, embraced by Fiat, also have more cause for hope than a year ago.

As we glance at the rear-view mirror of the road traversed during 2009, we see the near death of two out of America’s old “Big Three”, Toyota registering its first loss since 1950 and the prospective dismemberment of GM’s European operations, Opel and Vauxhall, for whom the likeliest fate seemed to be that they’d be crated up and sent to Russia before to long.

Yet, as we look forward we find a UK industry that seems to have weathered the worst of the storms, boasts new models made here (the new Astra and the Honda Jazz), and which is seeing a burgeoning of its capacity to make electric and hybrid vehicles, including an electric BMW/Mini, batteries for Nissan and Toyota’s hybrid Auris.

A year ago, it seemed entirely possible that great swathes of the British motor industry would disappear. Not for the first time, it has come back from the brink.

Sourced via independent.co.uk

Volkswagen, Suzuki plan small car for India

Germany’s Volkswagen AG and Suzuki Motor Corp plan to develop a new small car costing between 4,300 and 5,400 dollars for the Indian market, a newspaper reported Friday. Suzuki, which has a 54-per-cent stake in India’s leading auto group Maruti Suzuki may replace its top-selling Alto model, a company executive told the Economic Times newspaper. “At some point we will need a replacement for the Alto. That price range is the entry level for Indian customers today, so we can’t leave that segment open,” Maruti Suzuki chairman RC Bhargava was quoted as saying. The report said the car would be priced at between 200,000 (4,300 dollars) and 250,000 rupees, which is twice the price of Tata Motor’s Nano, the world’s cheapest car, which was launched in March. The car is also to be priced between 4,000 and 5,000 dollars in the European market, the cheapest from the VW stable below the Up, which costs around 8,800 dollars. “Volkswagen will be greatly interested in a car below the price segment of the Up … that is something we will need to check in our future together with Suzuki,” VW spokesman Fabian Mannecke told the newspaper. Suzuki and Volkswagen agreed Wednesday to a tie-up creating one of the world’s largest auto alliances and boost their presence in the Asian markets. Under the deal, VW is to pay 2.5 billion dollars for a 19.9-per-cent stake in Japan’s fourth-biggest automaker.

Sourced via earthtimes.org

The Conservatives can dare to be different after Labour proposals

Alistair Darling did George Osborne a big favour yesterday, though his likely successor will probably not see it that way. The Pre-Budget Report highlighted continued growth in favoured spending programmes, such as schools, health and the police, but failed to say where spending will be cut, except in the most general terms. Mr Darling has not accelerated the gradual path for deficit reduction set out in the Budget, which will take more than five years to stabilise public debt.

That adds up to a grim inheritance for any government, so that next June’s Budget and the post-election spending review are certain to involve much more pain.

However, while Mr Darling’s measures were insufficient, his strategy has made deficit reduction common ground across the party divide. That is where he has done Mr Osborne a favour. The Chancellor has legitimised tough action to cut the deficit. The three main parties accept this goal; the differences are on timing, about whether recovery will be threatened by early cuts.

There is a parallel with the late 1970s when the shift towards what became known as monetarism was reluctantly initiated by the Labour Government. The first brakes on public spending growth — “the party’s over” as Tony Crosland told local councils — were applied in 1976, when monetary targets were also unveiled. This was far from a wholehearted conversion, either by Labour ministers or by the Treasury, but it paved the way for the tougher policies brought in after 1979 by Geoffrey Howe and Nigel Lawson. As Tony Benn complained, the Callaghan Government made it easier for the Thatcher administration to go down the monetarist path.

Similarly, agreement on the goal of deficit reduction now — even if not the means — should strengthen Mr Osborne’s case for tougher measures after the election. Yesterday he criticised the absence of a credible plan to deal with the deficit.

Senior civil servants privately accept that many of the proposals outlined this week can easily be accepted, and pocketed, by the Opposition. It is irrelevant which party proposed which initiative; what matters is the common underlying approach.

So life will be tough for the public sector with likely cuts in pay in real terms, a modest reduction in pensions, cuts in quangos and squeezes on administrative budgets. The universities will also protest over £600 million of unspecified savings from higher education and science and research budgets.

But these measures will be just a start if an incoming Conservative government decides on a much faster path of deficit reduction than halving over four years — and if it scraps some of Labour’s proposals and takes offsetting measures.

In political terms, Mr Darling’s package is intended to rally Labour’s traditional voters by attacking the Tories for favouring the better-off and for cutting frontline services, while boosting the incomes of those on benefits. That is a defensive electoral strategy. It is hard to see it winning back many wavering voters.

Sourced via timesonline.co.uk

GM in talks on partial Saab sale to BAIC: sources

General Motors Co is talking to BAIC, China’s fifth largest car maker, about a partial sale of assets associated with its Saab brand, including tooling and technology, two people with direct knowledge of the discussions said.

China

Beijing Automotive Industry Holding Group has made it clear that it has no interest in acquiring Saab’s production hub in Trollhattan, Sweden, according to the people who could not be named because the talks remain private.

Under the proposed deal, BAIC, which lacks its own car brand, would set up production in China based on an older generation of Saab vehicles, including the 9-5 and 9-3 models, the people said.

The partial sale of Saab technology to BAIC would likely clear the way for a liquidation of other assets held by the brand, including its headquarters and could threaten more than 3,000 Saab jobs in Sweden.

At the same time that GM is talking with BAIC, it is also vetting several other bidders that have expressed an interest in buying all of Saab, the sources said.

BAIC has said it remains interested in Saab, part of a push by Chinese car makers to upgrade their technology and expand production. A BAIC representative could not be reached immediately for comment.

GM declined to comment. The automaker, which came through a bankruptcy funded by the U.S. government in July, said it will not discuss negotiations because of confidentiality agreements with potential bidders.

GM’s board of directors wants to see that any potential bidder has financing lined up by the end of December and will set a strict time limit for any deal, the sources said.

Although the Swedish government could still intervene to tip the balance, those tough conditions and the fast timetable make it more likely that a partial sale of Saab to BAIC will be the only viable option for GM, one of the sources said.

It was not immediately clear if any Saab-derived models built by BAIC would be sold in a way that showed their association with the historic brand, one of the people said.

GM’s board has said it will take until the end of December to consider whether it can conclude a deal to sell Saab.

BAIC had been in discussions to provide financing to Koenigsegg, a tiny Swedish car builder that pulled out of a tentative deal to buy Saab last month.

On Friday, BAIC obtained a $2.93 billion line of credit from the Bank of China.

Beijing-based BAIC has tie-ups in China with Daimler AG (DAIGn.DE) and Hyundai Motor Co. (005380.KS)

Dutch specialty car maker Spyker Cars has said it is interested in buying Saab. Privately owned Renco Group, backed by U.S. financier Ira Rennert, has also expressed an interest.

The discussions with BAIC over a sale of some Saab assets come as another Chinese automaker, Geely (0175.HK), is pursuing a deal to buy another Swedish brand, Volvo.

Sourced via reuters.com