NADA Headlines - 04/19/2013 (Plain Text Version)
Consumer sentiment jumped last week to the highest level in more than five years as record stock prices and the rebound in housing made more Americans feel the expansion will be maintained. Last week's gain in confidence, the biggest in more than a year, was broad-based with every age group, all regions and most income brackets showing an advance, raising the odds that any slump in consumer spending will prove temporary. At the same time, the mood of those on the lower end of the pay scale remained depressed by higher taxes and a slowdown in hiring.
General Motors executives said they expect China auto sales to balloon to about 35 million vehicles by 2022, which would make the market bigger than the U.S. and Europe combined. “Between 2012 and 2022, we believe China is going to outpace all the markets around the world,” GM China President Bob Socia said in a group interview at the automaker's China headquarters. Tim Lee, president of GM's International Operations unit, which includes China, acknowledged that Chinese economic growth has been “very lumpy.” The country's gross domestic product growth slipped to 7.7% in the first quarter, renewing concerns that China's double-digit growth days are over. But Lee said economic growth is sweeping from the country's wealthy east coast to its poorer interior, opening up new opportunities for vehicle sales growth. “No market is more critical than the China market for us,” Lee said.
Bob Lutz, former vice chairman of General Motors Co., predicts government fuel economy regulations will boost the price of a vehicle by $5,000. That's much higher than the government's prediction by 2025. "We're on the way to my $5,000," Lutz said during his keynote address at SAE World Congress at Cobo Center in Detroit on Thursday. "If the government says $1,800, it'll probably be about double that by the time the cars hit the road." Automakers must meet an average 54.5 mpg for cars and trucks by 2025. Why so expensive? "In order to maintain ... styling, performance, appeal and not turn into rolling suppository - shape aerodynamic appliances, the car companies will have to do a lot of lightweight materials," Lutz said.
Toyota will start building the Lexus ES 350 at a factory in Georgetown, Ky., starting in 2015, producing a luxury brand vehicle for the first time in the United States. The Japanese car company said Friday that the Georgetown plant will build about 50,000 of the flagship sedans each year, creating 750 new jobs. Jim Lentz, Toyota's North American CEO, said the investment is in addition to previously announced plans to sink $2 billion into factories in Mississippi, Indiana, West Virginia and in Canada during the past 17 months, creating more than 4,000 jobs.
Subaru parent company Fuji Heavy Industries Ltd. intends to end a shortage of its vehicles at U.S. dealerships soon by expanding capacity in the country, its largest market. "We are finalizing plans to strengthen U.S. production," CEO Yasuyuki Yoshinaga told reporters in Tokyo. He said the carmaker will probably announce the plan next month when it reports annual earnings. Fuji Heavy, which boosted U.S. sales 20 percent to a record last year, plans to increase annual global deliveries to 850,000 by March 2016, based on plans to increase capacity in the U.S. Subaru's U.S. dealers, as of April 1, had an average of 36 days of supply -- down two days from March 1, according to the Automotive News Data Center. Japanese brand dealers carried an average 48-day supply on April 1 and the overall U.S. average was 60 days, the Data Center said. "Our dealers in the U.S. are waiting for an answer on when this situation of not having enough cars will be solved, so we hope to provide an answer soon," Yoshinaga said.
Car sales in India have fallen sharply, creating challenges for global automakers like General Motors, Honda and Volkswagen, which have invested billions of dollars in factories, product development and marketing in the country. India's slowing economic growth, high interest rates and rising fuel prices have led to the biggest slump in the car market in more than a decade. Sales having fallen 7 percent in the financial year that ended last month. But automakers like Honda, which is investing almost $500 million in India, say they are unconcerned because they are in it for the long haul. Honda is not alone in expanding despite the slumping market. Ford is spending $1 billion on a new factory in India, even as its current plant runs at only 60 percent of capacity. Maruti Suzuki India, controlled by Suzuki Motor of Japan, is spending about $750 million to add the capacity to make an additional 250,000 cars annually. Carmakers say India's huge population, low penetration of car ownership and rising incomes mean sales can only go up in the long run, while the opportunity to export to Africa and the Middle East makes for a compelling investment case.
Fisker Automotive Inc. spent more than six times as much U.S. taxpayer and investor money to produce each luxury plug-in car it sold than the company received from customers, according to a research report. The Anaheim, California-based company made about 2,500 of its $103,000 Karmas before halting production last year, disrupting its plans to use a $529 million U.S. loan to restart a shuttered Delaware factory owned by the predecessor of General Motors Co. The Karma was assembled in Finland. Fisker was allowed to keep using money from its Energy Department loan after violating its terms multiple times, according to a report released April 17 by PrivCo, a New York- based researcher specializing in closely held companies. It said it based its report on documents, including the loan agreement, obtained through the U.S. Freedom of Information Act. “They made a mistake” in awarding the loan, PrivCo Chief Executive Officer Sam Hamadeh said of the Energy Department in an interview [Wednesday]. “Should they have fought this sooner? Obviously -- as soon as it became evident that they had begun to default.”
Greg May Chevrolet in West, Texas, is coping with damage and devastation. Last night, a blast at a fertilizer plant one mile from the store killed about 14 people and injured more than 150, The Wall Street Journal reported [Thursday], citing the city's mayor, Tommy Muska. Muska said earlier as many as 40 people could have been killed. Other media outlets have put the death toll at about 15. "It's been quite devastating," said Gary Rodenbaugh, general manager of Greg May Chevrolet, though no one at his store was injured. "It's a pretty tight-knit community, and we're trying to recover bodies. It looks like a war zone." The Wednesday night explosion at the plant has Rodenbaugh and other local dealers today assessing the damage to their stores, as well as injuries and losses to the community. They are open for business, but the real work consists of rolling up their sleeves to help the town's recovery effort.
At a nearby dealership, Sykora Family Ford, some employees working late heard and felt the impact of the blast, said Ronnie Sykora, general manager. Sykora Family Ford is about 2 miles south of the plant. The dealership did not sustain any damage, and no one was injured, he said. "It's a very, very tight-knit town of German-Czech heritage steeped in tradition and family," said Annette Sykora, whose in-laws own Sykora Family Ford. "This is the kind of town where there's a fundraiser every weekend and everyone attends and gives generously." That means most of those presumed missing and dead "are very close family, friends and classmates," Annette Sykora said. Annette Sykora, the 2008 chairwoman of the National Automobile Dealers Association, is dealer principal of Smith South Plains in Levelland, Texas. She left Levelland around 8:30 p.m. Wednesday to drive most of the night to her in-law's store in West. Annette Sykora's brother-in-law Ronnie Sykora is an ordained Catholic deacon, she said. He [was] offering grief counseling to fellow residents. "The community is pretty devastated," he said.