Industry News
News for 28th September 2007
IMechE Hillclimb lecture in Glasgow
The Scottish Automotive Division of the UK’s Institution of Mechanical Engineers is holding a lecture titled ‘“The Predator and Other Friends'” - A talk on Hill Climb Cars’ on Monday October 1.
The speaker is Martin Ogilvie of Prototype Car Designs, who was previously chief designer with the Team Lotus Formula One team and in the 1970s worked on the design and development of the revolutionary Lotus 78 and Lotus 79 cars that introduced the concept of ground effect aerodynamics to Formula One.
The lecture, which starts at 6.30pm, takes place in Room W110 of the Hamish Wood Building at Glasgow Caledonian University’s City Campus in Cowcaddens Road, Glasgow and is open to all interested parties.
Nissan Sunderland gives permanent contracts to 180 staff on Qashqai line
Nissan's Sunderland Plant has confirmed earlier reports that it is to create 180 new permanent posts to help meet demand for the Qashqai crossover model launched in March. It has already sold more than 70,000 units across Europe, and in July £2.4 million was invested in the plant to boost production of the hatchback/SUV crossover by 20%.
Now 180 manufacturing staff, currently working at the plant on fixed-term temporary contracts, will be offered full-time permanent jobs with Nissan.
Danny Griffiths, Nissan Personnel Director, said: "Qashqai's continuing strong performance across all major markets puts us in the welcome position of being able to offer a significant number of these temporary employees a permanent contract at the plant. We will continue to review our staffing requirement on an ongoing basis and look to offer further permanent contracts as the business allows."
Including today's announcement, Nissan has made 440 temporary staff permanent in the last two years.
Around 850 Qashqai's roll off the Sunderland production line each day and, earlier this month, Sunderland produced its 100,000th unit. Nissan is also establishing assembly facilities for the model in Japan, as even with the 20% increase, Sunderland has insufficient capacity to supply both European and Asian demand.
- Nissan plans to launch a new, low-price small car in Japan in 2009 to participate in the booming sales of ‘mini-vehicles’ in the country, according to a report in the Nihon Keizai Shimbun paper. It may be priced at around 800,000 yen (£3,500), on the basis of volume of up to 100,000 units a year, and built with a number of cost-saving development plans on a common Renault-Nissan platform for emerging-market cars.
BMW Group creates two new divisions, swaps finance and sales directors
As part of the company’s strategy for the period to 2020 announced yesterday, the BMW Group is to create two new divisions as of 1 October. A Corporate and Brand Development division will be headed by former director of corporate planning, Dr. Friedrich Eichiner. The division will be home to BMW Motorrad, Financial Services and Softlab. If new business units are created, they will also be assigned to this division.
The second new division will be Purchasing and Supplier Network, headed by Dr. Herbert Diess, until now in charge of BMW Motorrad, will primarily be responsible for lowering material costs, the Group’s major expense factor. This, says the Group, “corresponds to the BMW Group’s strategic approach of optimizing the interface between the BMW Group and its supplier network and redefining the share of in-house activities in relation to our strategically relevant technologies.”
BMW has also decided to make directors Dr. Michael Ganal and Stefan Krause swap job responsibilities as of October 1. Michael Ganal will be in charge of Finance, while Stefan Krause will be responsible for Marketing and Sales. “We want our executives to be global thinkers, highly skilled and able to apply their expertise in various areas throughout the Group,” according to Reithofer.
BMW Group sets out new strategy for 2007-2020
BMW Group’s supervisory board yesterday approved a new 13-year corporate strategy with new profitability and growth targets, a targeted €6 billion in efficiency savings by 2012, and better returns for shareholders. A 2012 return on sales target of 8% to 10% in the cars business is accompanied by interim volume targets of over 1.8m car sales by 2012 and over 2 million by 2020, and a 50% increase in motorcycle sales to 150,000 units/year. Productivity is targeted to increase by at least 5% a year, to achieve growth without increasing personnel significantly.
“We will focus the entire organization on the return on capital,” CEO Norbert Reithofer commented. In the car business, the company plans to achieve a RoCE of 26% and a return on sales of between 8% and 10% as of 2012.
An efficiency programme will encompass all of the company’s divisions and will apply to both performance and costs.
The BMW Group plans to tap additional earnings potential by starting new business activities, among other things. In addition to new products and markets, the BMW Group has identified potential along the vehicle lifecycle and the automotive industry’s value chain.
Besides putting all cost structures to the test, the company will continue to standardize processes. Further targets include a reduction in cost, capital expenditure and capital employed per vehicle in development, production, sales and administration. Cooperation is expected to lead to economies of scale for components, modules and drive systems.
BMW Group plans to step up natural currency hedging as well as purchasing, primarily in US dollars. By 2012, production capacity of the US plant in Spartanburg will be increased from 140,000 at present to 240,000 units. Plans for the expansion are already underway.
The BMW Group will also raise the Oxford MINI plant’s capacity to 260,000 units per annum, without making any additional investments. In addition, the company plans to take the first step to increasing capacities in China from 30,000 to 44,000 units a year.
The company plans to substantially increase the dividend payout ratio. As a first step, the Board of Management will propose a significantly higher dividend for the financial year 2007 to the Supervisory Board and the AGM. The option of a share buyback is being kept in mind, but not for the next twelve months. Pension obligations in Germany will gradually be transferred to an external fund in three phases over the next few years.
New product launches
A new X1 model will complement the ‘ X’ Sports Activity Vehicle line-up, in addition to the BMW Concept X6 presented at the Frankfurt Motor Show, and a four-door GT based on the CS concept study showed at the Shanghai show.
BMW will not build a ‘space-functional’ concept, i.e. MPV, but instead, plans to introduce a fundamentally altered concept called’ Progressive Activity Saloon’ (PAS). This concept , BMW believes, will establish an entirely new segment, introducing “a unique interpretation of the saloon” and offering a wide range of intelligent features.
The next MINI model will be a Sports Activity Vehicle – but details of its 4x4 or 4x2 drivetrain have not been confirmed. The Rolls-Royce model portfolio will be expanded as well: A coupé will be launched as the third variant of the Phantom. As long foreseen, an additional Rolls-Royce model be positioned below the Rolls-Royce Phantom in terms of both price and size. BMW Group will continue to extend the product portfolios of the BMW Motorrad and Husqvarna Motorcycles brands.
A fourth brand: acquisition confirmed in principal, but no suitable candidate yet found
The BMW Group explored all of the options for future growth during the strategic review, including potential acquisitions or the creation of a fourth brand. However, it says, “This would require the new automotive brand to be a perfect fit for the company and its strengths. Moreover, rising unit figures would have to result in a decline in unit costs and thus lead to economies of scale. The new brand would have to at least make the same positive contribution to earnings as the existing automobile business. However, an in-depth analysis found that none of the evaluated automotive brands currently meets these requirements.
“Nevertheless, the BMW Group does not generally rule out further acquisitions, noting how its . acquisition of the Husqvarna motorcycle brand and enabled the Group to attract new and younger target motorcycle buyers.
“In principle, we will keep acquisitions on our agenda. We defined clear criteria for potential acquisitions within the scope of our strategic review. This will allow us to act swiftly whenever necessary,” said Norbert Reithofer.
BMW Group is certain that the market for premium vehicles and services will continue to grow much faster than the mass market - by about 40% between 2005 and 2019 globally, compared to an increase just under 20% for the mass-market segment.
FTA: “2p fuel duty increase will hinder transport’s greenhouse gas reductions”
The increase in Government fuel duty from 1 October, the first above-inflation rise since 2000, will not only put up pump prices to over £1 per litre, but will hinder efforts to reduce greenhouse gas emissions from the transport industry, says the Freight Transport Association, while the Campaign for Better Transport, formerly Transport 2000, says the revenues should be raised, but ring-fenced for public transport investment.
“The planned increase in fuel duty by 2p per litre from 1 October will cost goods vehicle operators about £1,500 per year for every 100,000 miles they cover,” says the FTA’s Policy Director James Hookham. “With many of the larger articulated vehicles doing over 70,000 miles per year - indeed some do up to 100,000 miles – the annual increased bill for the industry is over £130 million. As this is unlikely to be recovered from customers in higher haulage rates this year, it will cause a real drainage of cash from smaller businesses which could have been better spent on efficiency and the fuel saving measures which the Government is calling on the industry to take.”
The FTA has compiled a list of the ‘top ten greener ways’ of spending the money instead of giving it to the Treasury in higher fuel duty. It says £1,500 would buy a lorry operator anxious to reducing his carbon footprint:
1. Two drivers on the Government approved Safe and Fuel Efficient Driver training course (SAFED). Average carbon dioxide savings of seven per cent per driver per year.
2. Ten vehicle inspections for roadworthiness and maintenance conformity. A well maintained vehicle could save over £2,500 per year over a poorly maintained vehicle.
3. A two-day training course for a manager to become the ’Carbon Champion’ of the company and initiate actions to reduce carbon dioxide emissions.
4. Eight copies of Carbonfta, a new information service from FTA providing detailed guidance and advice on recording, reporting and reducing carbon dioxide emissions from freight transport.
5. A review of vehicle routes and schedules at three depots to optimise journey length and frequency and reduce overall mileage.
6. Five members of staff attending a one-day briefing on the major legislative and operational issues affecting hauliers in 2008, including how to record, report and reduce carbon dioxide emissions.
7. A complete compliance package to make a company’s road transport operations safe, sound and environmentally friendly – comprehensive advice for the transport manager and the driver.
8. An environmental audit of two depots providing specific advice on further reductions on environmental impact of depot operations.
9. Seven hours’ training for 15 drivers – legal compliance, fuel saving, environmental policy etc.
10. Optimising vehicle performance by investment in environmental improvement measures.
Stephen Joseph, executive director at Campaign for Better Transport, said, “We want to see the revenues from this fuel increase ring-fenced for public transport and other measures that will give people real travel choices, in line with the commitment Gordon Brown made in the 2000 budget. Since 1997, the real cost of motoring has fallen while the cost of using public transport has risen. We welcome this rise in fuel duty if it is used to help level the playing field amongst transport options."
Joseph noted that Great Britain makes a higher proportion of its motorised journeys by car than any other European country except Norway, quoting a CFIT comparative study released earlier this year.
Citroën opens ‘C42’ - Champs Elysées’ first new building in 30 years
Citroën opened the ‘C42’ yesterday - the first new building (No. 42) on the Champs-Élysées in more than 30 years and a showcase for the marque. The work of architect Manuelle Gautrand, awarded the contract in 2002 after an international competition, the building has a glass latticework exterior dominated by chevrons. The geometric glass and steel façade took five months to assemble and weighs 86 tonnes.
Inside are eight turntables topped by mirrors, each featuring a different historic or current Citroën model, and rising up vertically through the building to create a column of cars. A panoramic elevator carries visitors from the atrium to the top floor where they can see views of Paris landmarks like the Eiffel Tower and the Place de la Concorde.
More speakers confirmed for UK automotive industry conference
Automotive World has confirmed more speakers for its conference entitled "Innovation and Growth in the UK Automotive Industry: The Next Ten Years", which will be held on Tuesday 30th October 2007 at The Institution of Mechanical Engineers in London. The speaker line-up now includes:
- Dr Peter Wells, Senior Research Fellow, Cardiff Business School (confirmed)
- Senior Official, Automotive Unit, Department for Business, Enterprise and Regulatory Reform (confirmed)
- Charles Morgan, Managing Director, Morgan Motor Company (confirmed)
- Professor Jon King, Director, Corus Automotive (confirmed)
- Adam Chase, Director, E4tech (confirmed)
- Paul McNamara, Managing Director, Ricardo (invited)
This one-day Automotive World conference is intended to provide an opportunity for UK-based and worldwide automotive industry stakeholders, analysts and local policymakers to discuss the current issues facing the industry in the UK. Through a series of panel sessions and interactive workshops, delegates will consider the key challenges that lay ahead which will define and shape the success and sustainability of the automotive industry in the UK over the next ten years and beyond.
(www.automotiveworld.com/conferences/)
Citroën Berlingo/Peugeot Partner output tops three million
PSA Peugeot Citroën has now produced more than three million Citroën Berlingos and Peugeot Partners since the two models were launched in July 1996. The vehicles are now marketed in over 100 countries in panel van and passenger car versions, and helped make PSA Peugeot Citroën the leader in the European LCV sector. It claims a 45% share of the combined light commercial and leisure activity vehicle segment which the Berlingo and Partner typify.
The vehicles are manufactured at the Group’s plants in Vigo (Spain), Mangualde (Portugal) and Buenos Aires (Argentina) and are also assembled in Turkey and Morocco.
Road Casualties Great Britain 2006: Annual Report published
The Department for Transport yesterday published “Road Casualties Great Britain 2006: Annual Report”.
While final figures on the number of people killed and injured on the roads in Great Britain in 2006, based on information about accidents reported to the police, were first published in June 2007, this report provides more detailed information about accident circumstances, vehicle involvement and the consequent casualties, along with some of the key trends in accidents and casualties.
There are also six articles containing further analysis on specific topics. The report includes the first release of provisional 2006 National Statistics on drinking and driving.
‘Road Casualties Great Britain: 2006 - Annual Report’ is published on the Department for Transport website (www.dft.gov.uk).
Ford Retail sells nine continental European outlets to U.S. fund
The chairman and CEO of Ford Retail, Chris Hayden, has confirmed the sale of its nine European dealerships in Brussels, Amsterdam and Vienna to MVC, a New York-based business development fund. The sale will leave the Ford-owned group with 55 UK dealerships.
Ford Retail is Europe’s largest Ford dealer group with a UK turnover of £827 million. Dagenham Motors operates in London and the South East, Polar Ford throughout Yorkshire and the North West, Heartlands Ford in Birmingham and Brunel Ford in Bristol and the West. In the South East, Ford Retail also has three Mazda dealerships, three Iveco truck dealerships and a joint venture with Lindsay Ford in Northern Ireland.
Since it was established in 2004, Ford Retail has completed a refurbishment programme, bringing all sites up to Ford’s standard; implemented an ADP Autoline dealer management system and established centralised customer contact centres in York and London. It is currently implementing a centralised parts division.
These combined actions “have created a complete cultural shift in delivering customer experience that has seen dramatic improvements in profitability and service since the company was formed.”
Global Insight: GM-UAW agreement “looks to be a game-changer”
Global Insight analyst Aaron Bragman yesterday summarised what is known so far about the tentative agreement between General Motors and the United Auto Workers and suggested it appeared to show GM victorious in achieving cost savings that could make its U.S. operations competitive with its transplant competitors.
The new contract, like the old one, is a four-year deal that expires in 2011. Responsibility for the US$50 billion in retiree healthcare liabilities will now rest with the UAW, in the form of a Voluntary Employee Benefits Association (VEBA). Reports indicate that GM will fund the VEBA at US$0.70 on the dollar, requiring a payout to the fund of nearly US$35 billion. How that amount will be funded has not been detailed, but a combination of cash, stock, and bonds is expected. The UAW maintains that the VEBA will be sufficiently funded to guarantee retiree benefits for the next 80 years.
(The National Legal and Policy Center (NLPC) yesterday objected to the agreement to transfer more than $50 billion health care in liabilities to a fund controlled by the union. Dr. Carl Horowitz, director of the Organized Labor Accountability Project and editor of Union Corruption Update, said, "This is a great deal for GM. They get to shed billions in obligations made to former workers. It is a great deal for the UAW. Gettelfinger and his cronies get to control billions in health care dollars. It is a lousy deal for retirees and future retirees who may lose some or all of their benefits.”
Horowitz continued, "Union-controlled health and benefit plans lack transparency. That is why they so often get looted by corrupt union officials. The UAW is not clean. As we have documented, many unions have been plagued by a number of benefit scandals in recent years.")
There will be no wage increases for the duration of the contract, nor will there be any cost-of-living adjustments. In return, workers will instead receive a US$3,000 lump-sum payment this year as a signing bonus, plus lump-sum payments equal to roughly 3% of annual pay the second year of the contract, 4% the third year, and 3% the final year. In exchange for giving up the cost-of-living increases, medical co-pays will be locked in at their current levels.
GM has reportedly won the ability to implement a two-tier wage system, allowing the company to pay new non-manufacturing recruits (maintenance, janitorial staff, etc.) a lower wage than the current employees receive. The current average UAW wage is US$27.81 per hour; the new recruit wage has not yet been made public.
Nearly 4,100 temporary workers will be changed to permanent status, but paid at the new lower rate. A new round of buyouts will be coming with the hopes of clearing the ranks of senior workers in order to make room for new employees.
The controversial system that allowed laid-off workers to still keep collecting pay and benefits despite being idled has been changed, but not eliminated. The ranks of those on the jobs bank list has been drastically reduced thanks to buyouts earlier this year, and the bank has now been changed to expand its geographical requirement from 50 miles to a new, as-yet undisclosed distance.
Outlook and Implications
Global Insight’s Aaron Bragman writes: “While GM has stated that significant new investment will be committed to North American manufacturing, no specific details are yet available as to where that investment may be placed.
But it does follow that since GM has gotten what appears to be a landmark deal that has achieved significant concessions from the UAW, that a dramatic change in U.S. manufacturing cost structure has enabled it to once again consider U.S. production in a competitive light. GM's efforts in internationalising its operations and coordinating production sources for global platforms has paid off in this regard; unlike previous years, threats of moving production offshore should U.S. manufacturing costs remain uncompetitive were quite valid this time around.
“The contract should help address the cost gap between the Asian transplant automakers operating in the United States and the Detroit Three, but even if it does not eliminate the gap entirely, the reduction in costs is significant enough to have a major impact on the health of the automaker.
“The biggest win for GM: the VEBA. By eliminating US$50 billion in liabilities and US$3.3 billion annually in payments, GM will dramatically improve its cash flow, its balance sheet, its earnings-per-share, and a host of other metrics. But beyond that, the ancillary effects will help GM even more. Gone will be the approximate average US$1,200 out of every car that GM pays for retiree healthcare; that money now goes into GM's coffers to fund development, research, new models, and eventually, dividend payments. Reports are that GM was able to secure the VEBA deal at US$0.70 on the dollar, which is on the high side of most estimates, and more than the reported US$0.63-$0.67 that GM was reportedly offering. As such, GM will have to come up with US$36 billion or to fund the VEBA, an amount that will likely consist of financing, cash, and securities.
“The credit market has been very tight lately as a result of the sub-prime mortgage market meltdown earlier this year, as Cerberus Capital Management discovered when it went to try and sell its debt in order to purchase Chrysler. But most financial analysts have said that they do not foresee a difficult time ahead for GM in securing financing for the VEBA funding, since the US$36 billion one-time payout creates a much healthier company than an amorphous US$50 billion liability that is almost certain to increase. Beyond the elimination of the liability, GM's credit rating could also improve, leading to lower borrowing rates and enabling the company to fund everything less expensively than before.
The big question now, and one that is likely to be answered today, is who will be next: Chrysler or Ford? Ford publicly hoped that it would actually be the UAW's primary negotiation target. The UAW has stated that it is planning on following the pattern bargaining tradition, and will be taking the contract as it stands to the other two automakers. Whether or not the other two automakers will accept it as-is or attempt to renegotiate all or part of the contract remains to be seen, but with the initial details of the contract frankly looking very favourable to the automakers, it could be accepted with few changes at Ford.
Ford currently has roughly US$31 billion in total retiree liability, while Chrysler reportedly had approximately US$19 billion. Ford's biggest challenge is likely to be how to fund the VEBA; the company is already mortgaged to the hilt just to fund its operations while it attempts to effect a turnaround plan that is moving slower than most observers are comfortable with. However, just like at GM, Wall Street is likely to look favourably on a deal to eliminate uncertain liabilities, and may provide some expeditious funding for the venture.
While Ford may be eager to seal a new deal with the union with minimal changes from the GM contract, Chrysler may be a different story. The shift in ownership to private equity fund Cerberus Capital Management has put Chrysler's stance on things like the VEBA deal in an uncertain light. With the company's new focus on cash flow and not balance sheet health, eliminating those liabilities to benefit long-term owners in return for a significant cash flow in the short term may not be in Chrysler's game plan.”
