It truly is a kind of days when the parents at A123 can breathe a bit easier. The corporate that makes battery cells and components for electric cars is celebrating a brand new contract with General Motors spacerand a rebound in it’s stock price.
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Japan’s big 3 say they have a cure for what ails them, and that cure is product — an onslaught in high-volume segments that will continue through next year. A mass of redesigns and numerous additions to existing lineups are in the pipeline, according to an Automotive News analysis of future product plans at Toyota, Honda and Nissan. The new-product blitz could alter the competitive landscape. The companies have been in a fallow period of product launches for two years. But now the action is in volume models.
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After dismal July for Japanese duo, inventory starts to recover
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Japan’s tsunami crisis bottomed out in July for Toyota Motor Sales U.S.A. and American Honda Motor Co. as the pair lost 6.9 points of market share to their Detroit and Korean rivals compared with a year ago.
In a flat market, Toyota and Honda got hammered in July. But they are starting to restock U.S. dealerships, and August should be marginally better for both.
That’s OK with Don Johnson, General Motors’ U.S. sales boss, who says more Toyotas and Hondas on the ground will bring more buyers back into a still-fragile market.
“A lot of brand-loyal customers have chosen to sit on the sidelines” until selection and price improve,” Johnson said. “They will be coming back into the market.”
Sales in July rose a tepid 0.9 percent to 1.1 million light vehicles, the third straight lackluster month after 8 months of double-digit growth.
But while Toyota and Honda hit bottom, at a combined July share of 19.9 percent, the combined Detroit 3 share was up 3.9 percentage points from July 2010 to 47.6 percent, and Hyundai and Kia gained 1.4 points from a year ago, to a combined 9.9 percent share.
Sales plunged 28 percent for American Honda, which had a 28-day supply of vehicles at the end of the month. Toyota Motor Sales, with a 34-day supply on Aug. 1, was down 23 percent. Sales fell 9 percent for Subaru of America, which was also hampered by the quake. Subaru ended July with a 19-day supply.
But supplies for the Japanese are moving toward normal levels. Toyota is increasing output in Japan and plans to run its North American plants overtime to rebuild dealer inventories.
Ray Tanguay, head of Toyota’s North American manufacturing operations, says the plants will run at 110 percent of capacity through September.
Toyota dealer Al Hendrickson Sr. in Coconut Beach, Fla., noticed that new-vehicle shipments started to increase in July. Immediately after the quake, he bought as many new Toyotas as he could find and increased used-car volume.
“With those cars in hand, we stopped all advertising and we slow-walked through May and June,” he said.
Hendrickson and his partner/son Al Jr. took a gamble by resuming advertising July 1 on Toyota’s promise to increase shipments during the month.
“Thankfully they did,” he said. “We don’t have as many as we want, but we have as many as we need.”
But Toyota’s U.S. dealer stocks probably won’t reach year-earlier levels before December and Toyota may not hit a monthly year-over-year sales increase until 2012, said Randy Pflughaupt, group vice president of sales administration.
American Honda restored full production in North America except for the Honda Civic on Aug. 1, and Japanese production “is about 95 percent of normal,” spokesman Ed Miller said. Deliveries to U.S. dealers are improving, he said.
Inventory sharply defined winners and losers in the marketplace in July. Winners had stock; losers didn’t.
With a 72-day supply, Chrysler Group led major automakers with a 20 percent sales gain. At Ford Motor Co., which had a 54-day supply on Aug. 1, Lincoln sales jumped 40 percent, and Ford brand sales rose 13 percent. General Motors’ sales rose 8 percent over July 2010 after it started the month with a 73-day supply.
“Whoever has the cars outsells everybody,” said Ralph Martinez, owner of Town & Country Chrysler-Jeep-Dodge-Ram in Wilsonville, Ore., who credited a 50 percent July new-vehicle sales jump to being well-stocked.
“People are out there buying,” Martinez said.
“They’re going to places that have a good selection.”
Bradford Wernle, Jamie LaReau and Mike Colias contributed to this report
You can reach Jesse Snyder at jsnyder@crain.com.
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After a fallow period, a flurry of launches in high-volume segments
FUTURE PRODUCTS — JAPANESE AUTOMAKERS
The 2012 Honda CR-V, top, and the 2012 Toyota Yaris.
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Japan’s big 3 say they have a cure for what ails them, and that cure is product — an onslaught in high-volume segments that will continue through next year.
A mass of redesigns and numerous additions to existing lineups are in the pipeline, according to an Automotive News analysis of future product plans at Toyota, Honda and Nissan.
The new-product blitz could alter the competitive landscape. The companies have been in a fallow period of product launches for two years — and what they did introduce were mostly niche products such as the Honda Crosstour, Toyota Venza and Nissan Juke.
But now the action is in volume models: New versions of the Toyota Camry, Yaris and RAV4; Honda Accord and CR-V; and Nissan Versa, Sentra and Altima will arrive in dealerships before 2013.
And the three companies will try out some new segments, too.
The companies are counting on those new products to help solve some serious problems. All three are in a tight spot, what with supply shortages, the strong yen, a resurgent Detroit 3 and low-cost rivals from Korea nipping at their heels.
Toyota and Lexus are still trying to shake off the recall catastrophe, and Honda and Acura have stumbled with some new products. Nissan has kept pace with the market, but Infiniti has lost ground.
The scoreboard tells the story. Last year, Toyota, Honda, Nissan and their luxury brands (and Scion) combined for a 33.7 percent U.S. market share. That was down from 35.4 percent in 2009, and through June of this year the number was 30.4 percent.
Hit products could reverse the trend. Automotive News’ future product forecast through the 2015 model year shows that 27 new or redesigned vehicles will arrive by the end of next year for Japan’s top three automakers.
New nameplates include the Infiniti JX seven-passenger crossover; the Scion iQ three-seat minicar and FR-S sporty coupe; and the Toyota Prius C subcompact and tall Prius V, both offshoots of the standard Prius.
Lexus fell behind BMW and Mercedes in the U.S. luxury sales race this year, mostly because of shortages related to the quake. But the car lineup will be made over by the spring of 2013; the GS, ES, IS and LS sedans will be either redesigned or re-engineered.
The new Lexus sedans will feature the more aggressive design seen at the New York auto show in April. Indeed, in terms of design, Japan Inc. appears to be breaking out of a trough of conservatism.
Toyota went for sporty styling on the Prius C in an effort to make the hybrid hip for young buyers. Infiniti’s JX will have a rounded roofline and curving side windows seen on the Essence concept two years ago.
Not that new product will solve all of Japan Inc.’s problems.
Only just digging out from March’s devastating earthquake and tsunami, Toyota, Nissan and Honda now face the pressure of the Japanese yen at historical highs against the dollar. And competitive pressure from rivals has never been tougher.
But, as Toyota Division General Manager Bob Carter says: “It’s probably not a good idea to underestimate us.”
Lindsay Chappell contributed to this report
You can reach Mark Rechtin at mrechtin@crain.com.
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THE NEW MATH
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WASHINGTON — When is 54.5 mpg actually about 40 mpg? When it’s the corporate average fuel economy standard for the 2025 model year.
Thanks to federal incentives for fuel-efficient and low-emissions technologies, automakers will be able to get credit for meeting the 2017-25 model year standards with a number far lower than the one in all the headlines.
Automakers also will be able to get extra credit for bringing fuel-saving technologies to market as early as possible.
As a result of the incentives, the real-world industrywide fleet average in the 2025 model year is likely to be about 40 mpg, not the 54.5 mpg proposed by the Obama administration, according to the EPA and environmental groups.
General Motors is well positioned to take advantage of federal credits for plug-in hybrids such as the Chevrolet Volt, and hybrid versions of full-sized pickups, which also get special exemptions, said Dan Becker, director of the Safe Climate Campaign.
“GM has a head start,” Becker said. “If they choose to make a significant number of Volts and advanced-technology pickups, they’ll have a competitive advantage over foreign manufacturers.”
Credits for EVs, plug-in hybrids and fuel-cell vehicles — as well as others for technology such as air conditioning refrigerants that reduce hydrofluorocarbon emissions but don’t advance fuel economy — help explain why actual corporate average fuel economy is likely to be at least 20 percent lower than the standard.
The administration seeks to reduce carbon dioxide emissions to 163 grams per mile by the 2025 model year. Because such emissions are related to fuel economy, this would equate to a fuel economy standard of 54.5 mpg — if all the pollutant reductions were achieved with fuel-economy technology.
The administration plans to develop a formal corporate average fuel economy proposal in September and expects final adoption next July.
Earlier is better
Incentives for EVs, plug-in hybrids and fuel-cell vehicles are bigger for products and technologies introduced early in the 2017-25 period.
Each qualifying vehicle with zero CO2 emissions introduced in 2017, for instance, would be counted as two vehicles with zero CO2 emissions. This double credit would give automakers leeway to produce other vehicles that emit more CO2 than the allowed fleet average.
GM and Nissan Motor Co., whose Volt and Leaf are sold in the United States, would have an early advantage. But other manufacturers — including Ford Motor Co., Toyota Motor Corp. and Chrysler Group — are preparing to jump into the EV market by next year.
“There’s a big incentive to get out there faster,” said Roland Hwang, transportation program director for the Natural Resources Defense Council.
But Michael Stanton, CEO of the Association of Global Automakers, whose members include Toyota and Honda Motor Co., questioned whether GM’s advantage on EV credits would give it a leg up in the marketplace.
He said consumer demand for EVs and plug-in hybrids will remain limited for years to come unless vehicle prices decline and a plug-in infrastructure is developed throughout the country.
A GM spokesman declined to comment about any advantage the company might gain from the credits.
Extra credits
Paula Angelo, a spokeswoman for Nissan North America, said the Leaf is just one part of the company’s strategy to meet CAFE targets.
She cited as examples the hybrid technology on the Infiniti M luxury sedan and the weight reduction in the Versa sedan.
Under the proposal, hybrid full-sized pickups will get extra credits.
While the credit per vehicle is likely to be less for hybrid pickups than for EVs, the market for the trucks almost certainly will be larger.
The Detroit 3 dominate the pickup market, and stand to gain the most from these credits. But the definition of which large pickups meet the incentive criteria will not be known until the administration issues its proposal in September.
Big pickups get an additional break: They don’t have to increase fuel economy from the 2017 through the 2019 model years.
Automakers won the truck exemption in meetings between individual companies’ executives and White House officials. Those talks were headed by presidential assistant Ron Bloom, who was drafted in late June to get automaker agreement with President Barack Obama’s plan to raise the mandate for corporate average fuel economy dramatically, traditionally a hard sell among car companies.
The deal Bloom fashioned, one company at a time, eventually brought all but Daimler and Volkswagen on board. To get it, he gave automakers a break for light trucks and acquiesced to the Detroit 3 request for a break on big pickups.
“Ron Bloom was pivotal,” said Ziad Ojakli, Ford Motor Co.‘s group vice president of government and community relations, who headed the Ford delegation that met with him. “He did a phenomenal job.”
CAFE credits
The Obama administration’s plan to boost fuel economy and cut emissions for the 2017-25 model years would offer these technology credits. These credits could be applied to reach a nominal standard of 54.5 mpg. Credits are expressed in terms of grams of carbon dioxide emitted per mile, which correlates to fuel economy. A fuel-economy standard of 54.5 mpg equates to 163 grams of CO2 per mile.
• EVs, plug-in hybrids and fuel cell vehicles: These would be counted as having 0 emissions. And each EV and fuel-cell vehicle would be counted as 2 vehicles in 2017, with the multiple phasing down to 1.5 in 2021. Each plug-in hybrid would be counted 1.6 times in 2017, with the multiplier phasing down to 1.3 in 2021.
• Full-sized pickups: Each mild hybrid truck would be eligible for a 10 grams-per-mile credit from 2017-21. Each strong hybrid truck would be eligible for a 20 grams-per-mile credit from 2017-25. Definitions of mild and strong hybrids will be determined by September.
• Air-conditioning: EPA would offer credits of up to 18.8 grams per mile per car and 24.4 grams per mile per truck for reducing tailpipe CO2 emissions, leakage and hydrofluorocarbon emissions.
• Technologies: Features such as active grille shutters, electric heat pumps, high-efficiency alternators and lights, stop-start, solar roof panels, active transmission warm-up and engine heat recovery using thermoelectric power would get credits ranging from less than 1 gram per mile per vehicle to 5 grams per mile per vehicle. The total for any company could not exceed 10 grams per mile per vehicle.
Source: EPA/NHTSA’s July 29 Supplemental Notice of Intent
You can reach Neil Roland at nroland@crain.com.
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Editor’s note: An earlier version of this story contained incorrect U.S. sales projections from a Chrysler executive. Chrysler has since clarified the figures.
TRAVERSE CITY, Mich. — Somebody forgot to tell the auto industry that the economy is lousy.
Indicators are glum. The fallout from the federal budget crisis is unclear. The stock market tanked last week and commentators have resurrected the term “double-dip recession.” Mortgage defaults, unemployment and low consumer spending have economists fretting.
But the auto industry sees things differently.
“We’re hiring,” proclaims Michael Heneka, president of seating and emissions system supplier Faurecia North America. “We’re running 24/7 at all of our North American plants. You’d never know there was any concern out there. I know there is, but we have to keep moving forward.”
Heneka will add about 500 people to his North American manufacturing staff of 10,000 by year end.
He recently opened a plant in Louisville, Ky., to supply interior parts to Ford Motor Co. and moved into a plant his company acquired in Lansing, Mich., to triple Faurecia’s capacity for General Motors’ Cadillac CTS program.
Nissan North America, his newest customer, is adding three models to its U.S. production lineup, and Heneka is angling for a piece of that business.
That’s on top of a year when light-vehicle sales are up 11 percent through July, despite severe supply shortages caused by the earthquake in Japan.
Industry executives at last week’s annual Management Briefing Seminars here were still painfully aware of the scars suffered during the industry collapse of 2008 and 2009. But the mood wasn’t that of survivors peeking nervously out of a bunker.
Instead, they spoke of a supply chain jockeying for new customer orders, and of automakers bent on goosing vehicle output to go after customers they believe are eager to buy.
“There is a lot of pent-up demand out there,” says Ray Tanguay, Toyota Motor Corp.‘s chief North American manufacturing executive. “People want cars, and we haven’t been able to give them to them.”
Toyota, choked since March by the Japanese earthquake and global supply-chain shutdown, will begin running all North American assembly plants at 110 percent of straight-time two-shift capacity in September, Tanguay told Automotive News last week. He said the surge could go on throughout autumn as Toyota rebuilds inventories.
Volkswagen Group of America is making plans to expand capacity for its just-launched Passat sedan in Chattanooga. Don Jackson, president of manufacturing at the $1 billion plant, said the company has drawn up plans to take the new factory from a current capacity of 150,000 Passats a year to 200,000 or 220,000 if demand warrants. The new Passat’s smaller and more expensive German predecessor had sales under 13,000 last year.
“We’re not too concerned with the short-term outlook,” said a confident Jeff Klei, president for North America at chassis, powertrain and interiors supplier Continental AG. He declined to give specific figures but said Continental is adding staff at different operations, especially in powertrain.
“We just need to remember what we went through and be careful we don’t overbuild,” he said. “But we’re not slowing down.”
Neither is German transmission supplier ZF Friedrichshafen AG, which next month will open a plant in Florence, Ky., to supply electronic steering systems to GM. Four months later, ZF will open a $350 million plant in Greenville, S.C., to supply a new generation of eight- and nine-speed transmissions to Chrysler.
Two summers ago, Chrysler and GM were in bankruptcy, and many North American suppliers feared for their own fates.
“People have asked me how many North American suppliers were in distress during the worst of it,” muses Bill Diehl, CEO of BBK Ltd., a suburban Detroit consulting firm. “The answer is almost all of them. Everybody was in jeopardy.”
The summer of 2011 is a different picture, he says. BBK has launched a subsidiary called Performance Improvement to help auto suppliers handle the surging demand.
“The big issue is no longer suppliers in distress,” he says. “It’s the capability of suppliers to meet the demands of expanding capacity and bigger customer orders.”
The reality test is U.S. vehicle sales. Despite poor economic signals, volumes continue to edge up.
Market researcher IHS Automotive is holding to its 2011 forecast of 12.7 million U.S. light-vehicle sales, which would be up more than 1 million from 2010.
Others are even more optimistic.
Chrysler Group is forecasting U.S. industry sales this year at about 12.7 million units. Through July, Chrysler sales rose 21 percent.
“We hit our number last year, and we’re going to hit our number this year,” Knott said. “I don’t think we were smoking dope when we put [our projection] together. We are basing it on solid fundamentals.”
David Sedgwick contributed to this report
You can reach Lindsay Chappell at lchappell@crain.com.
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FUTURE PRODUCTS — CHRYSLER
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After revamping most of its product lineup in 2011, Chrysler Group is gearing up to open the second act of its revival in 2012.
Next year the automaker will unveil the first Chrysler Group-branded vehicle based on a Fiat platform and powered by a Fiat engine: a Dodge compact sedan that will replace the Caliber.
It’s the most important vehicle in the revival because it will demonstrate how well engineers can adapt Fiat’s European technology and platforms to North American tastes.
Company engineers created the platform for the Dodge sedan by lengthening and widening Fiat’s high-volume compact platform. The modified platform, called the CUSW for Compact U.S. Wide, will spawn a range of compact and mid-sized vehicles for Chrysler, Dodge and Jeep.
The Dodge sedan will compete with the Ford Focus, Honda Civic and Chevrolet Cruze in a crucial segment where Chrysler has not been competitive.
Chrysler Group customers, long accustomed to big cars with powerful, gas-guzzling engines, will be in for a big change in the next couple of years. The company will offer two families of four-cylinder engines with available turbocharging and a range of fuel-saving automatic transmissions, including an eight-speed, a nine-speed and a six-speed dual clutch.
Could diesels be far behind? The company isn’t saying.
Chrysler, formerly off the radar screen of customers seeking eco-friendly transportation, is trying to make a case that it deserves serious consideration.
How well the company executes this next generation of Fiat-based vehicles will determine how compelling Chrysler’s argument is.
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