Automobile Industry 01 (Aug 08 - Sep 15)

[winston]

Is GM the Buy of the Decade? PHEVs Part Two... by David Fessler

In this issue:
Why I'm singing a different tune about GM.
The death of the combustion engine.
The battery technology to watch.

Who would have thought an article on the future of the automobile would have roused so many skeptics and naysayers from their winter hibernation? Certainly not me.

But the one I wrote a few weeks ago on Plug-in Hybrid Electric Vehicles (PHEVs) has kept our Customer Service department working overtime... fielding the firestorm of responses, both positive and negative. In case you missed it, you can read it here.

Clearly Americans feel this is a hot topic and, being the glutton for punishment that I am, I decided to move from the frying pan into the fire and revisit it.

In my first article, I dismissed an investment in GM - or any other car company for that matter - as financial suicide. However, I'm going to eat a little crow for breakfast.

The Death of the Combustion Engine

Let's cut to the chase, and I'll drive a stake in the ground right away: The internal combustion engine is dead.

I know that's a bold statement. Perhaps shocking to those among us who have rebuilt one - all the while marveling at its internal workings - or have driven a pocket-rocket powered by one, reveling in the raw power.

But I think time will prove me correct. And oddly enough, it's a car company - General Motors (NYSE: GM) - that's helping to hasten its demise.

It's going to be a slow death, to be sure. After all, gasoline and diesel engines have been around for over 100 years, powering ships, cars, trucks, motorcycles, battle tanks, generators, bulldozers and weed whackers.

Engineers will continue to redesign it, tweak it, shrink it... and attempt to squeeze every last drop of efficiency and power out of it. But it's as good as dead.

Just ask Tony Posawatz, General Motors' PHEV Vehicle Line Manager. It's his responsibility to bring the Chevy Volt into production - and more importantly, into dealers' showrooms - by the end of 2010.

The irony is that as his employer struggles for survival, it's betting the farm - and its future - on a segment of the industry that it all but ignored for nearly a decade: Energy-efficient cars, led by the game-changing Chevrolet Volt.

The Volt represents a paradigm shift in automobile technology. It's the result of desperation - combined with stark reality - that finally overcame business as usual.

Unfortunately for Tony, the odds are stacked against him. It's an almost perfect storm of roadblocks designed to keep PHEVs from gaining traction (no pun intended).

Just consider:
Car buyers have been running for the exits... making do with what they currently drive.
Dealers are laden with gas-guzzling SUVs that they're having trouble selling regardless of the price.
Credit markets - an essential element in the car-buying process for most customers - are still very tight, making it difficult for many would-be car buyers to get a loan.

Gas prices have been cut in half in the last six months, wreaking havoc on the economic argument for going green.
Battery technology needs to improve to make the economics more viable, regardless of the price of oil.

All these issues aside - and that's not to trivialize them - the Volt will be the very first, widely available car powered by plug-in technology. And while there are other manufacturers not too far behind them, it's clearly a leadership opportunity for GM.

In order for the world's largest car company to make it happen, Tony's engineers, designers and mangers had to think outside the box - way outside. And they had to do it faster than they ever did before.

Starting with battery technology: Lithium is the current technology that holds the most promise. And after GM evaluated dozens of potential battery manufacturers, it decided the best solution was to get into the battery business itself.

Why? Because in Tony's words, "When we get a battery pack delivered to the car line, it has to be the absolute best battery pack available anywhere... and it has to work."

So what about the doubting Thomas' and the naysayers that don't think GM will ever be able to pull this off?

Tony's not worried: "Certainly there is the element of gasoline savings associated with the car, but when prospective buyers get in and drive it, they will find it to be such a unique and pleasing experience, we'll hook them right then and there."

And based on the provisions contained in the recent Economic Recovery and Reinvestment Act of 2009, you better get in line fast if you want a tax break for purchasing one of these pump-passing beauties. After any one manufacturer first sells 200,000 PHEVs, the $5,000 individual tax credits will disappear.

Of course, by then, the prices will likely be comparable to their fossil-fuel gulping cousins, and the oil lobbyists will be redeployed schmoozing politicians for battery-technology improvement money, or something else associated with the electric car business.

Bottom-line: GM, if it can survive, could quickly find itself at the top of an automotive heap that will be shedding the internal combustion engine faster than anyone thinks is possible today.

And at $2 a share, investors could find themselves sitting on a 10- or 20-bagger just as quick (and I would be eating crow for the rest of my life).

Here's to American ingenuity and GM's survival. And to the vision of Middle East oil sheiks, scrambling to sell their oil to some other country... for peanuts.

[winston]

Geely bidding for Volvo now ?

5 years ago, this was not imaginable !

[iam802]

thought Geely just announced last week that they have no intention to bid for Volvo?

http://www.reuters.com/article/GCA-auto ... N420090205

Thu Feb 5, 2009 4:05am EST

SHANGHAI (Reuters) - Chinese car manufacturer Geely Automobile Holdings Ltd (0175.HK) has no plans to buy the Volvo car brand from Ford Motor (F.N), a Geely spokesman said on Thursday.

"We don't have plans to buy Volvo as some media have reported," he told Reuters.

...

Just rumours or change of heart?

[winston]

Yes, they announced last week that they will not bid.

Also the regulators dont like them to expand overseas.

But on CNBC just now, they might now be bidding ...

[eauyong]

BEIJING: Despite their global ambitions, Chinese automakers are still not big enough to take over their troubled foreign rivals, analysts and company officials said.

Reports have swirled for weeks on persistent rumours that Chinese automakers are eyeing the chance to buy Sweden's Volvo from US giant Ford Motor Co. or to take either Swedish unit Saab or American all-terrain vehicle-maker Hummer off the hands of General Motors.

The companies at the centre of the rumours, such as Geely, one of China's largest private automakers, have repeatedly denied the reports while at the same time fanning the rumours by saying they are open to foreign acquisitions.

Such acquisitions are a route through which Geely could access capital, new markets and international partnerships, according to the car company's website.

Analysts, however, said they do not expect to see any startling Chinese auto acquisitions in the near future.

"Compared with more than 40 billion yuan (US$5.8 billion) needed to acquire Volvo, (Geely's) market value is only about three billion yuan," consultancy Roland Berger said in a research note.

"The total assets of Chery Automobile are about 30 billion yuan, with capital of three to four billion yuan and the acquisition requires about 40 billion yuan," the firm said, listing the Chinese automakers that would be most likely to bid.

The market value of Chang'an Auto is only about 8.5 billion yuan, it added.

"I do not see any kind of possibility that a local company would acquire Volvo or Hummer. It is not realistic financially or even in terms of management capability," said John Zeng, a Beijing-based analyst with Global Insight.

"For a number of Chinese companies, their sole experience with foreigners is their joint ventures in China. They have never operated overseas," he said.

One exception - and one that has turned out badly - is SAIC's acquisition in 2004 of small South Korean automaker Ssangyong, which now faces bankruptcy.

Jia Xinguang, an analyst with the China Automotive Industry Consulting and Development Corporation, agrees Chinese companies lack the necessary management experience.

"The complicated relationship between trade unions and employers in foreign companies is another problem for them," he added.

But size is the main obstacle.

"Any overseas acquisition needs National Development and Reform Commission approval and at his time the NDRC has concerns about Chinese companies' capacity to run such acquisitions," said John Shen, an analyst for Roland Berger.

Late last month Chen Bin, the head of the commission, effectively warned Chinese automakers they were not yet ready to rub shoulders with international players but at the same time told them "all options were open."

Last week, Beijing once again urged China's crowded domestic auto sector to consolidate.

But the international opportunities remain attractive as a means to acquire the technology that the Chinese automakers need.

"They do not have strong brand technology and are still relying heavily on foreign partners. Over 60 per cent of vehicle production comes from joint ventures including more than 85 per cent of passenger cars," Global Insight's Zeng said.

"One more realistic way to go would be to go for some core assets which they need, rather than buy the whole company," Roland Berger's Shen said.

That could make more sense at a time when several Chinese companies, notably SAIC, FAW and DongFeng Motor Corp, want to establish their own brands.

It is a path Geely seems to have taken with its acquisition on Friday of Australian auto parts manufacturer Drivetran Systems.

Geely said the deal would improve its capability to develop and produce gearboxes, or transmission - a key technology that Chinese automakers must learn to master to be globally competitive.

The fact that Chinese automakers crave the global spotlight may mean they enjoy the attention the rumours over foreign acquisitions bring, Shen said.

"A lot of companies are taking advantage of it to promote their brand so they are not taking active measures to clarify the rumours," he added.

- AFP/yb

[winston]

Car industry recovery to take more than a decade-author

HONG KONG, April 7 (Reuters) - Global car and truck sales will take more than a decade to recover to their 2007 peak as the sector faces a recession that's likely to be deeper than in the 1970s and '80s, auto industry author Graeme Maxton said on Tuesday. However, car sales are likely to remain strong in China -- which in January surpassed the United States to become the world's largest auto market -- and bounce back quickly in India, helped by the introduction of very low cost cars, Hong Kong-based Maxton said.

"Demand for smaller, cheaper cars should be more robust in the mature markets, too," Maxton said in a press statement. "Sales of buses and trucks will also return to more normal levels sooner, as businesses begin to reinvest. That may not offer much comfort to most car makers in Europe, Japan and America over the next decade, however."

He projected that global vehicle sales will drop to 53.8 million in 2010, from a peak of 71.7 million in 2007, and in 2020 will have rebounded to only 67 million.

World Vehicle Registrations, 1990-2020 (millions)
1990 1995 2000 2005 2007 2010 2015 2020
48.0 49.9 57.4 66.1 71.9 53.8 61.0 67.0

Since Western consumers have borrowed too much and are seeing the value of their homes evaporate, Maxton said many will need to focus on rebuilding their savings before buying a new car, even when the economy recovers. He is co-author of two best-selling books on the auto
industry: "Driving over a cliff?" and "Time for a model change", which was published in 2005 and predicted current problems in the car industry.

Baby-boomers, born in the 1950s and 1960s, were the biggest buyers of new cars in the past but will be especially frugal now because they will have little time to replenish their pensions, he said. Plunging demand amid the global economic downturn, coupled with credit problems stemming from the global financial crisis has created turmoil in the auto industry, forcing a string of big names including General Motors Corp (GM.N) to seek government aid in an effort to avoid bankruptcy.

Car sales are typically hard hit by economic recession, said Maxton, noting that U.S. car sales fell 30 percent and took a decade to recover from the 1973 oil shock. After the next peak in 1986, they dropped 23 percent and took 13 years to recover.

"In Japan, South America, South Korea and much of Southeast Asia, sales volumes have been structurally transformed by recessions," he said. "Japanese and South Korean sales have never returned to their pre-crisis peaks."

[winston]

China March car sales up 10.26 pct y/y -official data

SHANGHAI, April 9 (Reuters) - China's passenger car sales in March rose 10.26 percent from a year earlier, official data from the China Association of Automobile Manufacturers said on Thursday.

The association said 772,400 cars were sold last month. That represented a rise of 27.2 percent from February, when 607,300 passenger cars were sold.

[winston]

Drivers get more incentives to change cars

China will expand an existing subsidy scheme to encourage the replacement of old cars and buses as part of efforts to stimulate the domestic auto industry, the Ministry of Commerce said.

Subsidies will rise to one billion yuan (HK1.14 billion) this year from 600 million yuan last year.

The amount is small compared with the incentives on offer elsewhere.

Germany plans to boost its ''cash for clunkers'' plan, which boosted car sales 40 percent last month, to five billion euros (HK$50.01 billion).

China's Cabinet, the State Council, unveiled an array of tax cuts and subsidies in January to boost the auto sector, one of 10 pillar industries that the government is supporting with various policy initiatives.

Incentives to encourage people to buy smaller, more fuel-efficient cars helped propel mainland vehicle sales to a record 1.1 million last month.

The extra cash announced today is aimed in part at spurring the replacement of old buses in urban areas. Buses less than nine meters in length will now be eligible for trade-in subsidies.

''The move is to speed up the upgrading of public buses and encourage people to use public transport,'' the ministry said.

REUTERS

[millionairemind]

One more to go??

Treasury Prepares Chrysler Bankruptcy as GM Nears Deadline Too
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By Brian Faler and Mike Ramsey

April 24 (Bloomberg) -- The U.S. Treasury Department is preparing a bankruptcy filing for Chrysler LLC only as a matter of “due diligence,” Michigan Senator Debbie Stabenow said in an interview.
http://www.bloomberg.com/apps/news?pid= ... refer=home

[millionairemind]

Chrysler Gets CAW Deal to Save C$240 Million a Year (Update1)
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By Mike Ramsey and Vivek Shankar

April 25 (Bloomberg) -- The Canadian Auto Workers union said it has reached a tentative agreement after more than a month of talks with Chrysler LLC, moving the company toward an alliance with Fiat SpA and helping it avoid bankruptcy.
http://www.bloomberg.com/apps/news?pid= ... refer=home