Archive for April, 2010

Week in the knees?  Rapid heartbeat?  Glowing smile?

That, my friends is love at first drive.  It’s the kind of love that can only come from a deep emotional connection to the automobile of your dreams and it’s a feeling that I want to highlight from time to time here on the Honk Blog.

I came across a review today from Lupara and caught myself grinning from ear to ear as she shared stories about her Mercury Milan Hybrid.  Any time you see “WOW!” or “I LOVE IT!” in big capital letters, you know you’ve found someone who is head over heels for their car.

Lupara claims that the fuel economy is even better than her old Vespa scooter and loves that the clever navigation system can pull and map an address that’s stored on her phone.

Besides the enormous enthusiasm for the car, what I liked most about Lupara’s review is that she explained features in the context of her own life.  Her kids, for example, love that they can stay in the car and watch DVDs on the nav-system screen while they wait for her to run errands.  That’s a pretty handy feature if you have children of you own.

Many thanks, Lupara, for sharing such a great review with the Honk community.  Here’s wishing you many happy miles!

To read Lupara’s full review, click here.

Look beyond the six million Toyota vehicles that have been recalled in the US over the past few months and you’ll see that there are several reasons why this story evolved into a full-fledged scandal.

There have been allegations of a cover-up on Toyota’s part and accusations that two former NHTSA officials, Chris Santucci and Chris Tinto, used their influence with old coworkers to narrow the focus of a 2004 investigation into sudden acceleration claims involving Toyota vehicles.

An investigation by ABC News found that NHTSA investigator, Scott Yon, met with Santucci and Tinto in March of 2004 and soon afterword recommended that the agency exclude reports of unintended acceleration where the acceleration lasted for more than several seconds and where control of the vehicle could not be regained after applying the brakes.  In effect, this excluded the most serious cases of sudden acceleration from the investigation.

NHTSA is a, “lapdog, not a watchdog,” blasted Joan Claybrook, former head of the National Highway Traffic Safety Administration, at a March 11th hearing before the House Subcommittee on Commerce, Trade and Consumer Protection.

Claybrook, who led the agency during the Carter Administration, went on to say that she found 40 cases where former NHTSA employees went on to work as lawyers, consultants, and lobbyists for the industry they were once charged with regulating.  This includes Rodney Slater, a former Secretary of Transportation who signed on earlier this year to head a special advisory board on quality for Toyota.

“Auto companies, including Toyota, treat the agency with contempt,” Claybrook leveled.

New legislation introduced by Senator Barbara Boxer (D-California) aims to close the revolving door between NHTSA and the auto industry that Claybrook referenced in her testimony.  The legislation would prohibit former NHTSA regulators from working for an automaker for three years in any capacity that required written or oral communication with the government agency.

“I am deeply concerned about the all-too-cozy relationship between former NHTSA officials and the auto industry,” said Boxer at a press conference this morning.  “My legislation would address this ‘revolving door’ by preventing automakers from having undue influence on agency decisions.”

The legislation would also impose penalties of $55,000 for individuals and $100,000 or more – plus civil penalties – for manufacturers who violate the requirements.

In an official response from NHTSA, spokesperson Julia Piscitelli defended her agency and its recently toughened set of ethics rules.

Ford Motor Company released first quarter results yesterday, posting profits of $2.1 billion.  CEO Alan Mulally predicted a “solid” year for the Detroit-based automaker, though CFO Lewis Booth warned of several challenges ahead.

“We’ve got a lot of new product launches, so you’ll see some launch expense and we do expect some headwinds from commodities,” he said.  Reminding reporters of the still fragile economy, Booth cautioned that the company will likely post more modest profits for the rest of the year.

The CFO’s comments are a reminder that although the car market is showing signs of improvement, the industry isn’t out of the woods yet.

Nonetheless, strong sales of the F-150 pickup truck and Fusion midsize sedan have encouraged Ford to charge ahead with a second quarter production plan that is five percent higher than the plan it released at the beginning of March.  The much-anticipated Fiesta subcompact will go on sale next month and the next-generation Focus compact will launch in early 2011, completing Ford’s dramatically-overhauled lineup.

“The most important thing Ford has done is invest heavily in new product during this down cycle,” noted Erich Merkle, president of Autoconomy LLC. “As we’re coming out, they’ve got all this new product coming out in just about every category.”

Mulally famously maxed out all of Ford’s credit lines in 2006 to finance a massive restructuring of the company.  The $23 billion it borrowed gave the automaker a cushion to develop new models and withstand losses during the recession.  Ford was the only domestic automaker to avoid a government bailout, though the debt load now puts the company at a competitive disadvantage to rivals, GM and Chrysler, who had their slates wiped clean in bankruptcy.

The lack of government intervention may be helping Ford from the standpoint of consumer sentiment, though.  The company’s market share is up to 17.4 percent from 14.7 percent a year ago, the largest rise since 1977.  Ford also notes that many new customers have defected from Toyota following the Japanese company’s global recall scandal.

“The landscape might become more competitive as Toyota fights its way back and GM launches a lot of new products,” notes Joe Phillippi of AutoTrends Consulting.  In line with Booth’s projections, he warns,“The first quarter could turn out to be their best.”

As we reported last week, Nissan has opened an online system to reserve a place in line for the upcoming Leaf electric vehicle.  Although reservations cost $99, Nissan notes that the vehicle is off to a healthy start with 6,635 takers after only 65 hours.  Nissan reports that 2,700 of those reservations came in the first three hours alone.

In Japan, which has a much smaller automobile market than the US, the company received an impressive 3,700 orders in the three weeks after it started taking reservations on April 1st.

Nissan boasts that pre-orders in Japan and the US have so far exceeded their expectations.  The automaker recently announced a $1.4 billion expansion to its Smyrna, Tennessee manufacturing plant to build both the car and its advanced lithium-ion battery pack.

The company notes that because of the battery pack’s bulky size and hefty weight, it makes more financial sense to build electric vehicles close to the markets in which they are sold, a plus for proponents of ‘buy local’ policies.

The Leaf will come in two trim levels and the upper “SL” trim level is so far leading the lower “SV” trim level by three to one.  The SL model costs an additional $940 and includes extras like a backup camera, solar panel spoiler, fog lights, and automatic headlights.  The vehicle has an estimated range of 100 miles in real-world driving conditions.

The Nissan Leaf will go on sale later this year and will be first released in areas where Nissan has government partners who are already helping to build a public charging infrastructure and ensure that there are no surprise zoning restrictions for charging units installed at customer homes.  California, Oregon, Washington, Arizona, and Tennessee will lead the way and Nissan plans to expand sales to the rest of the country in late 2011.

UPDATE: To clarify, the 6,635 early reservations have all come from the roughly 115,000 people who had signed up to be on the Leaf’s email list.  Nissan will begin offering reservations to the general public on May 15th.

General Motors CEO, Ed Whitacre announced on Wednesday that the automaker had successfully repaid its $5.8 billion bailout loans, “in full, with interest, years ahead of schedule.”

Considering that the industrial giant was in bankruptcy mere months ago, you might be wondering: where in the world did GM get the money to repay its loans five years ahead of schedule?

In short, the $5.8 billion came from a $16.4 billion escrow fund set up by the federal government during GM’s bankruptcy proceedings.  Although it that may sound like GM simply moved taxpayer bailout money from one pocket to another, the answer is somewhat more complicated.

The escrow fund was created last year by President Obama’s automotive task force to safeguard the government’s $50 billion total investment in GM.  The team estimated how much money the company would need to continue operating profitably and alloted an additional $16.4 billion of operating capital in case the economy unexpectedly worsened.  An escrow account was used so that the government could keep strings attached to the money.

One string required that the Treasury had to be consulted before any funds were withdrawn.  Another required that any funds remaining after June 30 2010, had to be used to pay off the initial loan.

Before Whitacre’s announcement on Wednesday, the escrow fund still had $11.3 billion remaining.  $2.4 billion had been used for a prior loan payment and $2.7 billion had been used in the bankruptcy proceedings for automotive supplier and former GM spinoff, Delphi.

Investors see the early payoff as a sign that GM has confidence in its restructuring and in the improving automobile market.

The automaker had $22.8 billion in cash on hand at the close of 2009.  Even with $10 billion allocated to new product and threats posed by its under-performing Opel division in Europe, GM appears to be in good shape to weather the last of the economic storm.

What remains to be seen, however, is whether or not GM’s recovery and eventual IPO will be sufficient to pay back the government’s remaining investment, which resulted in a 60.8% equity stake in the reborn company.

At the very least, the General is $5.8 billion closer to shedding the “Government Motors” moniker.