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Inside this issue
VW Vows to Spruce Up Lineup After Sales Dip in U.S.
Editorial: Obamacare Decisions Are too Important to Wait
Nissan's New Problem: Not Enough Leafs
Hyundai's U.S. Sales Gains to Lag Market
Europe's Car Makers See Weakness Ahead
Daimler's Mercedes Probably Won't Win U.S. Luxury Race, CEO Says
Ultra-Small Car Start-Up Hopes to Start Production in June 2014
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Top Stories
VW Vows to Spruce Up Lineup After Sales Dip in U.S.

Halfway through an ambitious, 10-year plan to more than triple sales in the United States, Volkswagen has hit a bit of a rough patch: Sales and market share are down slightly in the first half of the year, and some analysts blame an aging lineup. But the German automaker promises new models, engines and upgrades to meet its goal. At a conference center in Maryland on Thursday, Volkswagen AG Chairman Martin Winterkorn and top U.S. executives addressed about 500 American dealers on their product plans. They promised to bring a mid-size SUV to the United States, and showed a video with sketches of the next-generation Passat, CC and Tiguan, expected sometime after 2015. And the dealers saw a face-lifted 2015 Jetta due in 2014, as well as a Jetta Sportwagen due after 2015. Volkswagen is the top auto company in the world, in terms of revenues, profits and assets, and has not been hammered as badly as others in the troublesome European market that is its home base.
Source: The Detroit News
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Editorial: Obamacare Decisions Are too Important to Wait

Dealerships and other small auto businesses should decide how to comply with Obamacare, even though the key provision now won't be enforced until 2015. The temptation is to delay taking action. But that would be a mistake, consultants and insurers say. Even the National Automobile Dealers Association, which opposed the health care legislation, now urges dealers to plan immediately. The key issue is the employer mandate requiring any business with the equivalent of 50 or more full-time employees to provide medical insurance or pay annual penalties of up to $3,000 a head. Dealership groups already have more than 50 employees. But smaller dealerships with slightly fewer -- or more -- than that number face three stark options: provide insurance, pay annual fines or keep headcount below the trigger.

It's a critical business decision -- and a complex one. Fines might cost less than the insurance premiums. But premiums are tax deductible, and the fines aren't. Beyond cost, owners also must calculate how much offering medical coverage would reduce staff turnover and replacement training costs -- and how not insuring would affect employee retention, morale and productivity. Some dealers still hope Congress will repeal Obamacare. NADA warns bluntly that that won't happen. So dithering is useless. Not developing a strategy now reduces options and increases the risk of a hasty, ill-conceived decision later. However unpalatable the task is, dealers must face up to it.
Source: Automotive News
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Nissan's New Problem: Not Enough Leafs

Erik Gottfried, Nissan's director of electric vehicle sales and marketing, recently flew to Dallas to meet with dealers there. "They really want more Leafs in Dallas," Gottfried says. "I assured them that we're doing everything we can to get them more inventory. But it's taking some time." The situation for Nissan's high-profile electric Leaf is suddenly different than it was a year ago. Then, low sales brought speculation that Nissan had blundered on a car and a technology no one seemed to want. It is now selling at more than 2,000 a month -- quadruple its year-ago volumes -- and Nissan continues slowly ramping up its assembly process in Smyrna, Tenn. "We're going to be short on inventory all through the summer," Gottfried says he has been telling dealers. "It will be late fall before we can produce enough to satisfy everybody." One new challenge for Gottfried and Nissan's dealers is that the geography of the Leaf's market has broadened.
Source: Automotive News
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Hyundai's U.S. Sales Gains to Lag Market

Hyundai Motor said its U.S. sales would lag the market this year because its factories are running full bore

Hyundai Motor Co.'s U. S. operation is on track to sell about 734,000 vehicles this year, but it could cede market share because the South Korean auto maker has capped production capacity. "Our plants are really taxed and really maxed out," John Krafcik, chief executive of Hyundai's U.S. business arm said at an Ann Arbor, Mich., presentation of its restyled 2014 Equus luxury sedan. Hyundai's U.S. market share could end 2013 below the roughly 5% share the brand achieved in the U.S. last year, he said, even if sales pick up in the second half of the year because the overall market will grow more rapidly. Mr. Krafcik said the limited volume has an upside: Hyundai has the second lowest level of discounts in the U.S. auto industry and a lean 44 days supply of unsold vehicles. Hyundai's U.S. factories are running on three shifts, he said. Its estimate for total 2013 sales would be a 4.4% increase over the 703,000 vehicles it sold in the U.S. last year. Industry analysts project U.S. sales this year of about 15.3 million vehicles, a 5.5% increase over the 14.5 million units sold in 2012.
Source: The Wall Street Journal
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Europe's Car Makers See Weakness Ahead

Big European auto makers said troubles outside the Eurozone are pressuring their outlooks

The head of German luxury car maker Daimler AG said on Friday that sales of its Mercedes-Benz cars are rebounding in the U.S. and China, but two European mass market auto makers cautioned that global vehicle demand could be downshifting. Daimler Chief Executive Dieter Zetsche and officials at Renault SA and Volkswagen AG agreed on one thing: sales in Western Europe are stuck in a slump with poor long-term prospects for strong growth. Mr. Zetsche expressed some optimism during a news conference in Seguin, Ontario, that the worst is over in Europe and that global vehicle demand will rise modestly this year. Global auto demand has experienced "some ups and downs," but Mr. Zetsche said Daimler expects unit growth this year of between 2% and 4%, reiterating a forecast set three months ago. Separately, Renault and Volkswagen warned of tougher conditions in China and Russia and Latin America. Renault also said the French market will contract 8% this year compared with an earlier forecast of a 5% slide, though sales in Europe will likely fall only 5% for the full year after a 6.7% contraction in the first half.
Source: The Wall Street Journal
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Daimler's Mercedes Probably Won't Win U.S. Luxury Race, CEO Says

Daimler AG's Mercedes-Benz probably won't win the U.S. luxury car sales race this year, Chief Executive Officer Dieter Zetsche said. “I don't think we'll be No. 1 at the end of the year and that's OK,” Zetsche told reporters today in Seguin, Ontario. “We won't play any games. I'm not sure that applies to our competition.” Mercedes led BMW in U.S. deliveries by 1,519 vehicles after the first six months. BMW captured the crown the past two years and secured the No. 1 spot in 2012 with a December surge, based on reported sales. Measured by vehicle registrations, Mercedes topped BMW for the year, according to researcher R.L. Polk & Co. Zetsche, 60, wants Mercedes to surpass BMW and Volkswagen AG's Audi in worldwide sales and profit by 2020. In the first quarter, Mercedes's operating profit was 3.3 percent of sales, compared with 11.1 percent for Audi and 9.9 percent for BMW.
Source: The Detroit News
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Ultra-Small Car Start-Up Hopes to Start Production in June 2014

When start-up Elio Motors agreed to buy the 1.8-million-square-foot former General Motors plant near Shreveport, La., in January, founder Paul Elio's plan to produce an ultra-small car with room for one passenger in front and one in back drew instant skepticism. Elio understands. He acknowledged that most auto start-ups fail. But Elio Motors, which is conducting product development and marketing work with partners in Michigan, will be the exception, the General Motors Institute (now Kettering University) graduate said. The secret to beating the odds, he said, is a unique business model. For people who don't want to pay up front for the $6,800 car, which has two front wheels and one back wheel, Elio plans to give away cars to people who sign up for a credit card and agree to use it to pay for their gas. But there's a catch. “Every time you buy gas we charge you triple. You buy $10 gas, it's a $30 charge. That $20 extra is your car payment because it's paying down your loan,” Elio said. It might sound nutty, but Elio believes it will catch on. After he struck a deal to acquire the Shreveport plant from the GM bankruptcy trust, industry observers are watching.
Source: Detroit Free Press
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Quotable
"As autos become bigger and bigger pieces of the indices, it commands greater and greater attention from investors focused on the auto industry and those that are not. The folks who were sort of indifferent to the sector saw it moving, and now they're diving in."

    --  Matt Stover, an analyst with Guggenheim Securities, commenting on the strong U.S. auto industry, Bloomberg, July 14



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