For the entire month of December, Ford's plant in St. Paul, Minnesota, where about 1,000 workers assemble the Ford Ranger, will shut down. According to reports, it is normal for the plant to be closed for the week of Christmas, but an additional three weeks of downtime is necessary to "align production with demand." The plant had initially been scheduled to be shuttered sometime in 2008, but the recent upwards trend in small pickup sales prompted the Blue Oval to keep it open a bit longer and it currently has no specific date set for closure, though it's demise is currently rumored for sometime in 2011. Perhaps if Ford would actually do something to update its long-in-the-tooth Ranger truck, it wouldn't need to consider its death at all, but that's another story entirely.
Chrysler has managed to stay out of the doom and gloom news for a few weeks now, which goes to show that going private can have its benefits. But things couldn't stay quiet forever, and as if the company needed something else to deal with, it's now in row with German transmission supplier Getrag over a potentially failed joint venture. Chrysler uses Getrag double-clutch transmissions (DCT) in the Euro-version Dodge Journey (seen above), and is planning on adding the Euro Avenger and Sebring to the DCT lineup. Getrag signed an agreement with Chrysler to build a factory in the U.S. that would also supply Chrylser's American products with DCTs, and in return for Chrylser agreeing to get such transmissions only from Getrag, Getrag would get $300 million to finance and tool the factory. According to Getrag, it only intended to borrow the funds if said funds were guaranteed by the German government. According to the German government, it would only guarantee the $300 million loan if Chrysler put that same amount in an escrow account to guarantee repayment. According to Chrysler, it had no idea of such an arrangement, and Getrag never should have signed the agreement if it meant Chrysler needed to back Getrag's loan with its own cash. And that's how court cases are made. While the factory remains in limbo, Chrysler needs to find another supplier for DCTs for its American cars, and do it in a hurry.
Even with the $5,000 difference between the Prius and non-hybrid Toyotas, there was a time when Toyota lost money on the car. Even when the car entered the black, and even though they halved the cost of the hybrid system from one generation to the next, Toyota still didn't make the margins on it that they did with their go-to sedans. Yet with plans to start making batteries for the Hybrid Synergy Drive in the U.S., Toyota says it should be able to halve costs again, and bring the next-gen Prius profit to near parity with the Corolla. Toyota doesn't know where or when it will start building batteries in the States. The company says "it's difficult to make the main parts of batteries outside of Japan," but didn't explain why that was the case. From 2010, the Prius will be manufactured in Toyota's Mississippi plant, however, that doesn't mean the battery plant will be nearby. Toyota moved up the date to offer the plug-in Priuses to government and fleet operators to the end of 2009. Right now, Toyota says the Prius gets 13 miles on battery power alone. If the plug-in Prius does arrive in a year or so, and with a substantially higher range -- and that is a ginormous "if" -- then it has a chance of upstaging the Chevy Volt, which appears to be what Toyota is aiming for.
Giveth, and taketh away, isn't that always the story? On the taketh away side, GM has recently lost a serious chunk of change. On the giveth side, The General received a $56 milion package of tax credits and grants to keep an SUV factory open in Ohio. It has also just received another package of tax credits from the city of Flint, Michigan to aid its investment in a factory that will build engines for the new Volt and Chevy Cruze. Approved over some constituent disapproval by the Flint City Council, getting GM to build the factory there will keep 300 jobs in the city. GM is now looking to the state of Michigan for more tax incentives.
Toyota's got some changes and rearranges underway with its North American facilities to better serve the demands of the market. The biggest news is that Prius production will be coming Stateside, which will help unkink the supply pipeline, if not also lower costs. A new facility in Blue Springs, Mississippi is being readied for the battery-pack-mobile, though the location was initially meant to turn out Highlanders. With consumer desires shifting with the rise of fuel prices, cranking out more Priuses is a higher priority, and beginning in fall 2009, the Highlander will shuffle off to Princeton, Indiana. With the Highlander elbowing its way into the Princeton plant, the vehicle currently produced there, the Tundra, will see its production move under a single roof in San Antonio, Texas.
The big-truck moves are of little consequence when the plants are scheduled to be idled beginning August 8th due to lack of demand. Huntsville, Alabama will also hold up on cranking out V8 engines. While Toyota is putting some plants in neutral, it pledges to provide employment to affected team members during the shutdown. All of this shuffling is an attempt by Toyota to avoid sustaining humongous hits as the market for new cars takes a dump, as well as ensuring that the products it remains building match up with consumer desires. Always a good thing to make the things people want.
It was only in December that we mention Alfa Romeo was planning to open a factory in the United States. We followed that story with another in March when Fiat also mentioned a possibility of Iveco truck production coming to the States. It was in that same month that Fiat Chief Executive Sergio Marchionne told the Financial Times that his company was in talks with major U.S. automakers about sharing production. On Saturday, Alfa Romeo brand chief Luca de Meo told a German magazine that talks were under way with Chrysler. With Chrysler cutting domestic production, a move like this by Fiat would help both companies. The Italian carmaker, withdrawn from the U.S. market since 1995, would avoid the effects of the strong Euro on exports, and Chrysler would be able to ramp production back up on an idled plant.
What's built in the States, stays in the States. At least that is how it used to be with one of the world's largest automaker. (The one exception is the Toyota Avalon sedan -- exported to the Middle East last year.)
Toyota has now announced that it will ramp up U.S. vehicle production in Indiana and begin exporting vehicles to other booming markets around the world. The first to leave our shores will be the Toyota Sequoia, as it heads to buyers in the Middle East later this year. The Toyota Sienna minivan will follow, as it will be shipped to China and other markets as early as 2010. This news should be welcomed by workers and suppliers at the automaker's plants as Toyota recently slowed production at several facilities. This new trend of shifting production towards exporting vehicles may help keep them running at capacity, and keep everyone on their jobs.
Volvo, once the success story in Ford's Premier Automotive Group, has hit choppy waters. And according to Wall Street Journal insiders, Ford is preparing to treat the Swedish automaker the same way it did the English ones: slap some floaties on it and keep the brand bobbing long enough to sell it.
Volvo made $94 million in profit in Q1 of 2007, but lost $151 million in Q1 of this year. In total, over the past two years, the once smiling Swede has lost $1.7 billion, part of which is due to exchange rates, and another is due to selling fewer cars. To combat the decline, Volvo is shedding up to a third of its work force at one European plant, and cutting back on production at another. As you would suspect, both of those plants make the largest vehicles in Volvo's lineup.
A couple of weeks ago, Ford was intriguingly -- or deceitfully -- still in "Volvo's not for sale" mode. Now it appears that Mulally has admitted to some Ford execs that Volvo is about to wear the "Needs a Caring Home" sign. Jerry York, the right hand man of Kirk Kerkorian, maintains that Volvo will probably be sold in 18 months. The way things look now, we'd be surprised if it took that long.
Local UAW contract negotiations aren't going well for General Motors, and today they took a turn for the worst as union members at the automaker's Fairfax assembly plant in Kansas walked off the job at 10AM EST. The bulk of GM's hot-selling Chevy Malibu are produced at the Fairfax plant, with a lesser number of the four-door sedan being built at the automaker's Orion plant in suburban Detroit. Last month GM sold 17,050 Malibus, a 39.5% increase in volume over April 2007. The local union in Fairfax had given GM a number of ultimatums, extending them since the first was established for April 22nd. We're not exactly sure what issue is at the heart of these contract negotiations, but The Detroit News reports that at least one bone of contention is the plant requesting seniority to snag transfer jobs, while the other issues remain undisclosed.
General Motors has been able to weather a 10-week strike by union members against American Axle, one of its main suppliers, as only production of large trucks and SUVs have been affected. Another strike at its Lansing Delta Township plant where the large Lambda CUVs are built has also only served to reduce inventories of vehicles that are seeing a slow down in sales. While the General can withstand a reduction of inventory for vehicles that currently aren't selling as well as they were before because of high gas prices and a slump in the housing market, the Malibu is gaining popularity with consumers month over month. The Fairfax and Orion plants were already producing at capacity to keep up with demand, so today's strike will assuredly hurt the automaker where it matters most: the bottom line. We'd expect GM to act quickly to end the strike, as money is being lost by the hour while Malibus aren't being built.
The Italians are coming, the Italians are coming! And when they get here in the guise of Alfa Romeo, they will be looking for a factory where the 8C and other cars wearing the cross and serpent can be built. Alfa is looking at two options regarding a U.S.-based factory: buy one of GM, Ford, or Chrysler's closed factories, or expand a Case New Holland factory.
Case New Holland, which is actually owned by Alfa, makes agricultural machinery and construction equipment. It already has 11 plants in the U.S., and Alfa could simply expand one of them to make cars. The plant, a location for which will be selected in May, will begin churning out Alfas in 2011 or 2012. At capacity, production is expected to be around 150,000 cars for the North American and European markets. Alfa Romeo will decide on the distribution network and particular vehicles to be made within three months, which makes it sound as if the Italians are definitely coming.
