Nissan Motors (NASDAQ: NSANY) will unveil a stripped-down version of its Versa subcompact vehicle this month at the lowest price ever for a brand-new car in the U.S. market. The new Versa won't come with power windows or air conditioning, but will retail at $9,990 -- just a few bills below ten grand. The cheapest new vehicle currently being sold in the U.S. is the Hyundai Accent.
Nissan's valiant attempt here is geared towards converting used-car buyers into new-car buyers. It's true that a car shopper can buy a decent used vehicle for $10k that will most likely have air conditioning and more interior space (and more engine power). The Mexican-made Versa will go on sale November 18 and will be priced $3,000 less than any currently sold Versa in the U.S.
Alexander Edwards with Strategic Vision asks the question I'm thinking: "Automakers seem to be trying to do two things: bring in vehicles in the lowest price range while also trying to deliver cars with some level of nobility and class and extras ... the question is, how many people are going to choose a vehicle that doesn't have air conditioning?"
That one single feature could be killer to Nissan's attempt here. Folks will buy cars with a complete lack of features -- except air conditioning. But will shoppers look at used cars with more size and convenience, or a brand new car without any features which will depreciate considerably the moment it's driven off the dealer lot? In the good news segment, the $10,000 Versa will see a fuel efficiency figure of 34 miles per gallon on the highway.
At this point it is not clear that GM (NYSE: GM) can get the money to merge with Chrysler. The plan would be to cut 50,000 people. That is a lot of severance. Closing plants and combining product lines cannot be done for free.
Chrysler has figured all of this out and has begun to focus on a partnership with Renault and Nissan, both of which are run by former auto whiz kid Carlos Ghosn. He has been trying to buy into the US market for several years without success. Now, he may have his chance.
If Ghosn can set up a deal where he takes a modest equity stake in Chrysler he may expand his reach into American for a small investment. According toThe Wall Street Journal, "Chrysler would have a better chance of keeping much of its operations intact in an alliance with Nissan and Renault than in a merger with GM."
The deal would not really make any sense and may simply be a way to push GM into a merger. While putting Chrysler into a marketing and product development pact with both a Japanese and European car manufacturer, the savings would be modest. Since Chrysler's problems are huge cash losses and falling sales in North American it is hard to see how anything short of an outright merger with large cost cuts does the company any good.
But, there is sense of panic in Detroit which leads to grasping of straws. Panic clouds the mind. Chrysler could do a bad deal because it sees the options as better than no deal at all.
Douglas A. McIntyre is an editor at 247wallst.com.
Lost in this weekend's news about the $700 billion bailout package for the banking industry was a $25 billion loan package for United States auto manufacturers. This package comes at a time when apparently Congress and the President believe that the American people will see $25 billion as a pittance compared to the $700 billion they're already planning to spend on mortgages. While there certainly is precedence for this move --- the government loaned $675 million to Chrysler in 1980--- this loan package is several orders of magnitude larger.
Ryan Pfenninger of MarketRiders is outraged at this loan package, claiming it is anti-competitive to startup companies like Tesla Motors who are investing their own money in alternative technologies like battery power. $25 billion is a lot of money. Detroit should not be able to argue for 30 years against improved fuel mileage and better technology, and then come back to the same government they persuaded into facilitating their failure, for a bailout.
He points out the immense irony in this loan to auto manufacturers. According to Ryan, General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler are currently struggling significantly against Japanese and other foreign manufacturers who have spent the last many years improving fuel efficiency and developing hybrid and other alternative technologies. If Detroit had spent as much time, money, and effort in research and development as they did lobbying Congress to keep fuel mileage standards low, and made competitive non-gas guzzling vehicles, I would venture a guess these loans wouldn't be necessary.
Ryan believes that most people understand a mortgage bailout was necessary. But he's not so sure that if Detroit fails, this could cripple the United States economy. There are plenty of foreign auto manufacturers with operations in the United States -- Toyota (NYSE:TM), Honda (NYSE:HMC), and Nissan (NASDAQ:NSANY)-- who could easily pick up the slack. Their vehicles are outselling American automobiles. They are building plants in places like East Liberty, OH and Lincoln, AL, providing jobs for people displaced by the failure of Detroit.
Ford's (NYSE: F) latest PR push is based around the idea that the company can make money on smaller cars. Traditionally the big margins in the car industry have been on pick-ups and SUVs. But consumers don't want those anymore.
According to The Wall Street Journal (subscription required), "Ford Motor Co. is expressing new confidence about the auto maker's ability to sell new small cars at a profit in the U.S. market, citing new data about how Americans are beginning to value premium features and dynamic design over vehicles desired simply for their size." That assumption is based on two factors, neither of which is likely to be true.
Ford believes that it can cut its cost base low enough to make money on cars that retail for $20,000 or less. Chopping production expenses may lower overall costs, but it also cripples the company's ability to "turn on the juice" if car sales make a sharp rebound. Fewer factories with fewer workers puts some brake on the company's ability to quickly push out more vehicles in a short period of time. Cars that can't be made can't be sold.
The other challenge to Ford's assumption is that it can get a large market share in a part of the industry that is already dominated by Toyota (NYSE: TM), Honda (NYSE: HMC), and Nissan. As Ford ramps up, the Japanese car makers are moving into hybrids and improving their own small cars. Most consumer satisfaction surveys put Ford behind the Japanese in terms of the quality of their products.
Aside from those few small details, Ford's plans should work just fine.
Douglas A. McIntyre is an editor at 247wallst.com.
Sometimes, it's hard to determine if major investors are being overly optimistic, outright daffy, or are simply seeing something that the rest of us just don't see.
In my view, the current course of events at Chrysler Corp. is one of those difficult to determine situations. On its face, it looks like it could be a case of basic business logic in action. But on closer examination, it just doesn't make sense, at least not to me.
Declaring a payoff horizon of ten years, Cerberus Capital Management has placed a great deal of faith in Chrysler, the American auto manufacturer which is best described these days as an also ran. The kicker is, the Cerberus ten year plan is being initiated at a time when auto industry profitability is near impossible. Consider also the fact that current Chrysler management openly admits that the company isn't in any condition to go it alone.
And there's more trouble in the mix. Cerberus said in a New York Times story that Chrysler is meeting "every financial metric." But Cerberus considers the world's current economic turmoil to be a temporary problem, not the economic world change that it actually is. Meanwhile, Chrysler CEO Bob Nardelli is smiling because Cerberus has given Chrysler lots of money, and he gets to cut heads.
The Big Three seem to think that they are troubled money center banks. They want Washington to get them out of their financial problems. According toThe Wall Street Journal, "Battered by high gasoline prices and weakened earnings, the Big Three auto makers and their suppliers are now seeking significantly more help from Washington in the form of government-backed loans than the $25 billion they had previously been authorized to receive."
While the auto companies are important to the U.S. economy, they can be "replaced." If General Motors (NYSE: GM) or Ford (NYSE: F) fail, their brands and manufacturing facilities will almost certainly be bought by an overseas car company. VW has said it would like a larger market share in the U.S. So has Nissan. Both have the balance sheet to buy assets from a failed U.S. car company.
There is a sort of cruel reality to the thought that companies considered pillars of the U.S. economy could be gone sometime soon. It is certainly an indication that manufacturing is become less and less critical to the overall GDP of America. It is also a sign the the inefficiency of Detroit's habits have finally gotten so severe that it needs to turn to the government and not the capital markets for aid.
If the car companies cannot make it and cannot raise money on their own, they should be allowed to fail. That may mean that Toyota (NYSE: TM) will become the largest seller of cars in the U.S., but there was never any rule that said bad management would continually be rewarded.
Douglas A. McIntyre is an editor at 247wallst.com.
GM (NYSE: GM) has decided that it will come close to suspending development of new SUVs. The market for the trucks is so bad that even Toyota (NYSE: TM) thinks it will lose money on the beasts in the US this year.
The Wall Street Journal reports "General Motors Corp. is delaying the redesign of SUVs and full-size trucks as part of a wholesale review of its product." For those not watching the car business over the last year, GM's decision comes way too late.The company should have cut back SUV development some time ago and made an attempt to get more of the mid-sized sedan market controlled by the Japanese.
It is easy to say that GM could not have seen the future, but that would be slighting companies like Nissan and Honda (NYSE: HMC) which was early in marketing more fuel-efficient cars.
GM is paying dearly for its mistake. Its shares hit a multi-year low at $14.75 in trading yesterday. They have not been so low since the Arab Oil Embargo in 1974.
How ironic.
Douglas A. McIntyre is an editor at 247wallst.com.
Nissan and Chrysler will begin to build full-sized pick-ups together. According toThe Wall Street Journal, "Chrysler will start building a large pickup for Nissan at its truck plant in Saltillo, Mexico." Nissan will also build some small cars for the US company.
The deal allows both companies to increase output from some of their plants, making more efficient use of manufacturing facilities and the arrangement could also cut design costs for the two automakers.
The new partnership raises the question of whether embattled Ford (NYSE:F) should do the same thing. Ford's shares trade between $6 and $7 most days, about where they were when there were rumors of Chapter 11 two years ago. Ford now has only about 15% of the US market, and, if that share falls more, it has to raise the question of how viable it is for Ford to "go it alone" in the US market.
Ford could turn to several partners, but the most obvious one is Volkswagen. VW has said that it wants to expand into the US market and has had little success here. Since Ford losses money on many of its smaller cars, an area where VW is strong, it may make sense for Ford to take VW-produced cars for its domestic dealers and have a piece of a profitable joint venture instead of losing billions on its own.
At the end of the day, Ford has to do something.
Douglas A. McIntyre is an editor at 247wallst.com.
No matter how much Detroit would like to change the math, the total always adds up to 100%.
Over the course of the last week, management from GM (NYSE: GM), Ford (NYSE: F), and Chrysler have tried to convince the industry and investors that this would still be a year when domestic vehicle sales will hit over 15.5 million. JD Power recently revised its forecast down to 14.95 million. High gas prices and a tough economy could make that number worse.
Toyota (NYSE: TM) said yesterday that it may not make its global sales goal for 2008, mostly due to poor performance in the US, Europe, and Japan.
Nissan says its market share in the US will increase in March. According toReuters, Nissan said "U.S. sales were in line with its March targets and it expects to win a higher market share despite increasing concern about the economy."
In the math of the car business, that means someone will lose share. If it is one or all of the US car companies, the dream of 2008 being a good year fades closer to black.
At 14.5 million vehicle sales, the US market produces about $40 billion less in car revenue than it did last year when sales were 16.1 million. GM had a 25% share last year, Ford 15% and Chrysler a bit over 12%.
Shrinking pieces of a shrinking pie.
Douglas A. McIntyre is an editor at 247wallst.com.
Volkswagen says that by 2010 it can produce 10 million vehicles and pass Toyota (NYSE: TM) and General Motors (NYSE: GM) as the world's largest car company. According to the SundayTimes, "To those who suggest that closing a 3m vehicle gap (Toyota produced 9.4m last year) is a very tall order, company management explains that, in 2006, the number of conventional passenger cars made by Volkswagen and Toyota was fairly similar -- 5.2m for Volkswagen and 5.5m for Toyota -- and that the difference is made up by 4x4s, 'people carriers' and light trucks."
Volkswagen only recently introduced a full range of these multi-purpose vehicles, which will play an important part in its future growth
VW may find that things don't go as planned. As a new entrant to the pick-up and SUV markets, the company will find global competition for not just Toyota and GM, but also Ford (NYSE: F), Nissan, and Honda (NYSE: HMC). Most large countries also have local car manufacturers who may not be anxious to give up a large piece of their business.
While VW may have a chance to get a reasonable piece of the auto sales in huge countries like China, it has almost no market share in the world's largest car-buying nation, the U.S. Taking away business from a desperate company like Ford and a successful company like Toyota may be nearly impossible.
Douglas A. McIntyre is an editor at 247wallst.com.
February was a tough month in the world of auto sales for both foreign and domestic car manufacturers. Ford Motor (NYSE: F), General Motors Corporation (NYSE: GM) and Toyota Motor Corp. (NYSE: TM) all saw their sales figures shrink during another tough month.
For Ford, it was a really tough month, with the struggling auto maker showing a drop of 7% during the month. Toyota was slightly better, and only witnessed a 3% drop in the month. Toyota was hit hard in its luxury car division, with sales of its highly popular Lexus LS 460 sedan dropping by a startling 25%. Overall, Toyota saw its car sales drop by 4%, with truck sales coming in flat.
For Ford, not only were investors treated to the weak sales figures, but the company also announced that it was going to be cutting back on its shifts in three of its factories, as well as lowering its 2008 production estimates by a pretty hefty 10%. Looking at its individual vehicles lines, Ford saw a 9% drop in its car sales and a 5% shrinkage of truck sales. The drop in demand is leading to the cut backs at its factories, and the factories that will be affected will be plants in Chicago, Louisville, Ky., and Cleveland.
The economy may not be in recession yet, and there's a minor chance it will avoid one in 2008, but marketers/advertisers seem to be in 'recession-mode,' regarding the tone of their ads, The New York Times reported Monday.
Along with Wal-Mart (NYSE: WMT), the Times cited several corporations that have taken a 'tougher times ahead' approach with ads. These include Capital One (NYSE: COF), "Uncertain times call for a certain rate,"Starbucks (NASDAQ: SBUX), which is testing a $1 coffee in Seattle, Washington, and Nissan (NASDAQ: NSANY), which is emphasizing the fuel economy of its 2008 Altima, rather than the car's styling and performance.
Stephen Quinn, Wal-Mart's chief marketing officer, told the Times, "When gas prices spiked last spring, we saw the pressure this put on our core customers." Economic Analysis: With major ad markets in California and Florida bearing a large portion of the housing sector's slump, it's not surprising that corporations have altered ad campaigns to emphasize the money-saving / better value nature aspects of their products and services. But one should not equate this with Corporation America believing a recession is ahead. Ad tweaking indicates that a corporation doesn't anticipate a robust year in its sector, and is adjusting its operational stance.
A better indicator of Corporate America's view of the economy? Staff hiring. If dozens of corporations announce that they're laying off employees, that'd be an indication that a economic contraction is likely.
Nissan Motor (NASDAQ: NSANY) talked up new 2008 vehicle models yesterday in announcing that it wants to take more market share in the U.S. market next year. With Ford losing share, General Motors raising prices and Toyota facing some harsh PR for a recent, high-profile recall, perhaps it has a chance.
Although the U.S. is set to have a soft sales year in 2008 when it comes to vehicle sales, Nissan North America executive Larry Dominique also indicated that the continuing popularity of large crossover utility vehicles (CUVs) has Nissan thinking of a possible product shift from SUVs to the more popular CUVs.
Nissan did see November 2007 sales up 5.5% over the year-ago month to 978,683 sold U.S. vehicles, which gave the Japanese automaker a whole percentage point more of market share than it had in 2006. Along with other automakers, Nissan's SUV sales have suffered in 2007 although at the same time sales of its new 2007-8 Altima and the subcompact Versa passenger car have increased.
Should Wall Street look past General Motors' (NYSE: GM) Q3 earnings? Probably. The reason is that GM's Q3 results mask significant progress made by the auto giant.
Fortune magazine argues that GM's $39 billion Q3 loss, due mostly to an accounting adjustment, obscures genuine progress and detracts from other metrics that indicate that GM is ahead of Ford (NYSE: F) in the turnaround race.
After citing roughly comparable pre-tax losses and market share losses, Fortune noted GM's comparatively stronger line-up than Ford's, which includes the launched Cadillac CTS and the soon-to-be, much-anticipated, new Chevy Malibu.
The article also contrasted GM's cost cutting progress -- $8 billion in hourly labor costs saved over past five years -- while noting that Ford still needs to re-double cost reduction efforts in advertising, engineering, material and employment costs.
Nissan Motors (NASDAQ: NSANY) will unveil a stripped-down version of its Versa subcompact vehicle this month at the lowest price ever for a brand-new car in the U.S. market. The new Versa won't come with power windows or air conditioning, but will retail at $9,990 -- just a few bills below ten grand. The cheapest new vehicle currently being sold in the U.S. is the Hyundai Accent.
Lost in this weekend's news about the $700 billion bailout package for the banking industry was a $25 billion loan package for United States auto manufacturers. This package comes at a time when apparently Congress and the President believe that the American people will see $25 billion as a pittance compared to the $700 billion they're already planning to spend on mortgages. While there certainly is precedence for this move --- the government loaned $675 million to Chrysler in 1980--- this loan package is several orders of magnitude larger. 
Sometimes, it's hard to determine if major investors are being overly optimistic, outright daffy, or are simply seeing something that the rest of us just don't see. 
The Big Three seem to think that they are troubled money center banks. They want Washington to get them out of their financial problems. 
Nissan and Chrysler will begin to build full-sized pick-ups together. 
No matter how much Detroit would like to change the math, the total always adds up to 100%.
Should Wall Street look past 
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