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GM closes plants but alliance with Toyota is possible
PM AUTOMOTIVE
BRIEFING
I
[iiiiiiiii~ii~i~Ii!~ii~i~i~i~iiiiiiiiiiiiii~ii~i~Iiii~iiiiiiiiiiiiiiiiiiIiiIiiiii~ii$~~~I~i~!!IiiIiiI~~~~$iiiiiiiiiii!ii!i~!iiI~iiiiIii~i~i~i~ii~iiiiiiiIiiIiiIiiIiiiiiiiiii
US firms m a k e m o r e multi-valve engines GENERAL Motors (GM), Ford and Chrysler are imitating t h e i r c o m p e t i t o r s by u s i n g multi-valve engines in luxury cars. When Toyota of J a p a n released its Lexus LS400 multi-valve engine sedan, Germ a n m a n u f a c t u r e r s of luxury cars began p u t t i n g t h e s e engines into t h e i r models too. Only recently have t h e t h r e e largest US c a r m a k e r s begun to follow suit. GM, for example, h a s s p e n t $400 million in developing its multi-valve e n g i n e d Cadillac N o r t h s t a r . Ford, w h i c h cont i n u e s to m a k e m a n y of its e n g i n e s w i t h two-valves p e r piston, will s t a r t North American p r o d u c t i o n in 1993 of t h e four-valve p e r piston Zeta a n d a six-cylinder multi-valve type.
Ailing D A F gets bridging loan AILING Anglo-Dutch truck m a k e r DAF h a s received a bridging loan from a Dutch g o v e r n m e n t b a n k to help it stay afloat. A l t h o u g h t h e c o m p a n y h a s increased its m a r k e t share, t h a t m a r k e t is dwindling a n d t h e company's losses are m o u n t ing. DAF h a s reduced outp u t a n d s h o r t e n e d shifts, a n d p l a n s f u r t h e r restructing m e a s u r e s from early 1993. The cost of t h e company's recent release of two series of trucks, at a time w h e n t h e m a r k e t is overcrowded, h a s h u r t the firm. However, analysts believe t h a t t h e m a n u f a c turer has a strong p r o d u c t line, especially in t h e heavy end of t h e t r u c k market, and that brand loyalty r e m a i n s strong in t h e UK, The N e t h e r l a n d s a n d Belgium. The E u r o p e a n Community's p l a n n e d deregulated t r a n s p o r t b u s i n e s s could provide a big plus for t h e company.
Chrysler says t h a t m a n y of its LH s e d a n s will eventually be sold with a 24-valve V6 engine. By t h e middle of this decade, t h e c o m p a n y says, 80% of t h e cars it m a k e s will have multivalve engines. Retooling costs of switching to multi-valve engine production are great. GM c a n n o t a t t h e m o m e n t afford wholesale retooling. The c o m p a n y s a y s t h a t if t h e r e w a s a s u d d e n d e m a n d in t h e m a r k e t for t h e s e sorts of cars, it would n o t be able to respond. A l t h o u g h GM will in 1994 begin t h e m a n u f a c t u r e of a 32valve V8 for its Oldsmobile, t h e c o m p a n y is c o n f i d e n t t h a t a d v a n c e d engineering will allow it to make p u s h - r o d engines to match the p e r f o r m a n c e of m u l t i - v a l v e versions.
European carmakers predict a tough 1 9 9 3 LEADING E u r o p e a n c a r m a k e r s foresee falling sales in t h e i r h o m e m a r k e t s in 1993. In G e r m a n y , w h e r e t h e car i n d u s t r y feels t h a t it is slipping into crisis, Dalmler Benz, Volkswagen a n d MAN are predicting reduced profits. PSA Peugeot CitrSen of France believes t h a t car s a l e s in E u r o p e f o r a l l m a n u f a c t u r e r s will d r o p by 4% in 1993 c o m p a r e d w i t h 1992. The G e r m a n car i n d u s t r y does n o t e x p e c t to see a recovery u n t i l t h e s e c o n d h a f t of 1993 a t t h e earliest. Volkswagen, in a n t i c i p a t i o n of a 20% d r o p in t h e G e r m a n c a r m a r k e t in 1993, will
GM closes plants but alliance with Toyota is possible GENERAL Motors is closing nine p l a n t s a n d disposing of 14% of its automotive c o m p o n e n t s operations. But t h e c o m p a n y m a y form a n alliance with Toyota Motor to produce trucks at some of t h e p l a n t s it w a n t s to close. The closures, which will help restore t h e company's loss making North A m e r i c a n o p e r a t i o n s to profit, are p a r t of a r e s t r u c t u r i n g plan t h a t GM a n n o u n c e d in December 1991. It will allow t h e c o m p a n y to cut its p r o d u c t i o n capacity from 6.7 million vehicles a t t h e end of 1991 to 5.4 million vehicles in 1995. Of t h e nine p l a n t s closing, five will be in t h e company's Automotive C o m p o n e n t s Group. This p a r t of t h e c o m p a n y will n a r r o w its p r o d u c t lines to t h o s e t h a t are profitable or strategically i m p o r t a n t to GM. Reports in J a p a n suggest t h a t Toyota is considering a p r o p o s a l by GM to build a version of its T-100 mid-sized pickup truck at a facility in t h e U S A This would allow Toyota to avoid t h e 25% levy imposed on such vehicles i m p o r t e d into t h e country. The T-100 would fill a niche in t h e pickup truck m a r k e t place w h e r e GM does not have a n entry. A p a r t from saving jobs, t h e alliance could also give GM's unprofitable North A m e r i c a n o p e r a t i o n s a version of t h e T-100 vehicle with which to challenge a mid-sized t r u c k being developed by Ford. GM would n o t have to m a k e e n o r m o u s d e v e l o p m e n t expenses.
Daimler Benz to m a k e vans in Spain GERMAN c a r m a k e r D a i m l e r Benz p l a n s to build 60 000 new v a n s in Spain in 1997. The c o m p a n y is i n v e s t i n g $360 m i l l i o n o n m o d e r n i z i n g its Mercedes p l a n t in Vitoria, a n d $270 million on its Mercedes factory in Barcelona a n d on its engineering work in Germany.
The c a r m a k e r will r a m p up to full p r o d u c t i o n by b u i l d i n g 1500 units in 1995 and 35 000 in 1996. News of t h e i n v e s t m e n t comes at a time when car s a l e s in S p a i n h a v e b e e n falling. Vehicle m a n u f a c t u r e r s in t h a t country have been laying
reduce its o u t p u t t h i s year b y 80 0 0 0 v e h i c l e s . T h e c o m p a n y e x p e c t s t h a t its profit for 1992 will be well below t h e DM 1.11 billion of 1991. Truck a n d e n g i n e e r i n g group MAN believes t h a t its profit for 1992 could be less t h a n in t h e p r e v i o u s two years. T h e c o m p a n y a l s o told s h a r e h o l d e r s r e c e n t l y t h a t p r o f i t for 1 9 9 2 / 1 9 9 3 would be down on t h a t for 1991/1992. Daimler believes t h a t its p r o f i t s f o r 1992 will b e significantly lower t h a n t h e DM 1.94 billion of 1991. The c o m p a n y h a s r e d u c e d its forecast of sales from its p r e d i c t i o n i n A u g u s t of m o r e t h a n DM 100 billion to a b o u t DM 98 billion. Mercedes expects its 1992 l u x u r y car p r o d u c t i o n to have fallen by 8.5% from 577 990 vehicles in 1991 to 529 000. T h e c o m p a n y ' s commercial vehicle production for 1992 is e x p e c t e d to be 271 794 units, 8.1% less t h a n t h e figure for 1991. CitrSen e x p e c t s sales of its cars in 1992 to have been 5.7% greater t h a n in 1991. Total r e g i s t r a t i o n s of t h e company's cars a n d trucks in 1992 are e x p e c t e d to be 766 300. However, in France t h e c o m p a n y beleives t h a t r e g i s t r a t i o n s will d r o p by 4.7% in 1993, c o r r e s p o n d i n g to a decline in m a r k e t s h a r e from 11.8% to 11%. Calvet also says t h a t sales of all models of p a s s e n g e r cars in E u r o p e in 1992 were 1% down o n t h e i r sales in 1991.
off workers a n d slowing production. Seat, t h e S p a n i s h a r m of Germany's Volkswagen, is s h u t t i n g its Barcelona factory for 20 days in 1993 as a r e s p o n s e to a d r o p in demand. Sales of cars in Spain in November 1992 were 1.3% lower t h a n in t h e same m o n t h in 1991.
Sources: Financial Times, Wall Street Journal Europe.
MPR January 1993 9
BRIEFING
I
[iiiiiiiii~ii~i~Ii!~ii~i~i~i~iiiiiiiiiiiiii~ii~i~Iiii~iiiiiiiiiiiiiiiiiiIiiIiiiii~ii$~~~I~i~!!IiiIiiI~~~~$iiiiiiiiiii!ii!i~!iiI~iiiiIii~i~i~i~ii~iiiiiiiIiiIiiIiiIiiiiiiiiii
US firms m a k e m o r e multi-valve engines GENERAL Motors (GM), Ford and Chrysler are imitating t h e i r c o m p e t i t o r s by u s i n g multi-valve engines in luxury cars. When Toyota of J a p a n released its Lexus LS400 multi-valve engine sedan, Germ a n m a n u f a c t u r e r s of luxury cars began p u t t i n g t h e s e engines into t h e i r models too. Only recently have t h e t h r e e largest US c a r m a k e r s begun to follow suit. GM, for example, h a s s p e n t $400 million in developing its multi-valve e n g i n e d Cadillac N o r t h s t a r . Ford, w h i c h cont i n u e s to m a k e m a n y of its e n g i n e s w i t h two-valves p e r piston, will s t a r t North American p r o d u c t i o n in 1993 of t h e four-valve p e r piston Zeta a n d a six-cylinder multi-valve type.
Ailing D A F gets bridging loan AILING Anglo-Dutch truck m a k e r DAF h a s received a bridging loan from a Dutch g o v e r n m e n t b a n k to help it stay afloat. A l t h o u g h t h e c o m p a n y h a s increased its m a r k e t share, t h a t m a r k e t is dwindling a n d t h e company's losses are m o u n t ing. DAF h a s reduced outp u t a n d s h o r t e n e d shifts, a n d p l a n s f u r t h e r restructing m e a s u r e s from early 1993. The cost of t h e company's recent release of two series of trucks, at a time w h e n t h e m a r k e t is overcrowded, h a s h u r t the firm. However, analysts believe t h a t t h e m a n u f a c turer has a strong p r o d u c t line, especially in t h e heavy end of t h e t r u c k market, and that brand loyalty r e m a i n s strong in t h e UK, The N e t h e r l a n d s a n d Belgium. The E u r o p e a n Community's p l a n n e d deregulated t r a n s p o r t b u s i n e s s could provide a big plus for t h e company.
Chrysler says t h a t m a n y of its LH s e d a n s will eventually be sold with a 24-valve V6 engine. By t h e middle of this decade, t h e c o m p a n y says, 80% of t h e cars it m a k e s will have multivalve engines. Retooling costs of switching to multi-valve engine production are great. GM c a n n o t a t t h e m o m e n t afford wholesale retooling. The c o m p a n y s a y s t h a t if t h e r e w a s a s u d d e n d e m a n d in t h e m a r k e t for t h e s e sorts of cars, it would n o t be able to respond. A l t h o u g h GM will in 1994 begin t h e m a n u f a c t u r e of a 32valve V8 for its Oldsmobile, t h e c o m p a n y is c o n f i d e n t t h a t a d v a n c e d engineering will allow it to make p u s h - r o d engines to match the p e r f o r m a n c e of m u l t i - v a l v e versions.
European carmakers predict a tough 1 9 9 3 LEADING E u r o p e a n c a r m a k e r s foresee falling sales in t h e i r h o m e m a r k e t s in 1993. In G e r m a n y , w h e r e t h e car i n d u s t r y feels t h a t it is slipping into crisis, Dalmler Benz, Volkswagen a n d MAN are predicting reduced profits. PSA Peugeot CitrSen of France believes t h a t car s a l e s in E u r o p e f o r a l l m a n u f a c t u r e r s will d r o p by 4% in 1993 c o m p a r e d w i t h 1992. The G e r m a n car i n d u s t r y does n o t e x p e c t to see a recovery u n t i l t h e s e c o n d h a f t of 1993 a t t h e earliest. Volkswagen, in a n t i c i p a t i o n of a 20% d r o p in t h e G e r m a n c a r m a r k e t in 1993, will
GM closes plants but alliance with Toyota is possible GENERAL Motors is closing nine p l a n t s a n d disposing of 14% of its automotive c o m p o n e n t s operations. But t h e c o m p a n y m a y form a n alliance with Toyota Motor to produce trucks at some of t h e p l a n t s it w a n t s to close. The closures, which will help restore t h e company's loss making North A m e r i c a n o p e r a t i o n s to profit, are p a r t of a r e s t r u c t u r i n g plan t h a t GM a n n o u n c e d in December 1991. It will allow t h e c o m p a n y to cut its p r o d u c t i o n capacity from 6.7 million vehicles a t t h e end of 1991 to 5.4 million vehicles in 1995. Of t h e nine p l a n t s closing, five will be in t h e company's Automotive C o m p o n e n t s Group. This p a r t of t h e c o m p a n y will n a r r o w its p r o d u c t lines to t h o s e t h a t are profitable or strategically i m p o r t a n t to GM. Reports in J a p a n suggest t h a t Toyota is considering a p r o p o s a l by GM to build a version of its T-100 mid-sized pickup truck at a facility in t h e U S A This would allow Toyota to avoid t h e 25% levy imposed on such vehicles i m p o r t e d into t h e country. The T-100 would fill a niche in t h e pickup truck m a r k e t place w h e r e GM does not have a n entry. A p a r t from saving jobs, t h e alliance could also give GM's unprofitable North A m e r i c a n o p e r a t i o n s a version of t h e T-100 vehicle with which to challenge a mid-sized t r u c k being developed by Ford. GM would n o t have to m a k e e n o r m o u s d e v e l o p m e n t expenses.
Daimler Benz to m a k e vans in Spain GERMAN c a r m a k e r D a i m l e r Benz p l a n s to build 60 000 new v a n s in Spain in 1997. The c o m p a n y is i n v e s t i n g $360 m i l l i o n o n m o d e r n i z i n g its Mercedes p l a n t in Vitoria, a n d $270 million on its Mercedes factory in Barcelona a n d on its engineering work in Germany.
The c a r m a k e r will r a m p up to full p r o d u c t i o n by b u i l d i n g 1500 units in 1995 and 35 000 in 1996. News of t h e i n v e s t m e n t comes at a time when car s a l e s in S p a i n h a v e b e e n falling. Vehicle m a n u f a c t u r e r s in t h a t country have been laying
reduce its o u t p u t t h i s year b y 80 0 0 0 v e h i c l e s . T h e c o m p a n y e x p e c t s t h a t its profit for 1992 will be well below t h e DM 1.11 billion of 1991. Truck a n d e n g i n e e r i n g group MAN believes t h a t its profit for 1992 could be less t h a n in t h e p r e v i o u s two years. T h e c o m p a n y a l s o told s h a r e h o l d e r s r e c e n t l y t h a t p r o f i t for 1 9 9 2 / 1 9 9 3 would be down on t h a t for 1991/1992. Daimler believes t h a t its p r o f i t s f o r 1992 will b e significantly lower t h a n t h e DM 1.94 billion of 1991. The c o m p a n y h a s r e d u c e d its forecast of sales from its p r e d i c t i o n i n A u g u s t of m o r e t h a n DM 100 billion to a b o u t DM 98 billion. Mercedes expects its 1992 l u x u r y car p r o d u c t i o n to have fallen by 8.5% from 577 990 vehicles in 1991 to 529 000. T h e c o m p a n y ' s commercial vehicle production for 1992 is e x p e c t e d to be 271 794 units, 8.1% less t h a n t h e figure for 1991. CitrSen e x p e c t s sales of its cars in 1992 to have been 5.7% greater t h a n in 1991. Total r e g i s t r a t i o n s of t h e company's cars a n d trucks in 1992 are e x p e c t e d to be 766 300. However, in France t h e c o m p a n y beleives t h a t r e g i s t r a t i o n s will d r o p by 4.7% in 1993, c o r r e s p o n d i n g to a decline in m a r k e t s h a r e from 11.8% to 11%. Calvet also says t h a t sales of all models of p a s s e n g e r cars in E u r o p e in 1992 were 1% down o n t h e i r sales in 1991.
off workers a n d slowing production. Seat, t h e S p a n i s h a r m of Germany's Volkswagen, is s h u t t i n g its Barcelona factory for 20 days in 1993 as a r e s p o n s e to a d r o p in demand. Sales of cars in Spain in November 1992 were 1.3% lower t h a n in t h e same m o n t h in 1991.
Sources: Financial Times, Wall Street Journal Europe.
MPR January 1993 9