Tag Archive | "Chrysler Group"

Alfa’s N. America Return Pushed To 2013

TURIN – Alfa Romeo’s return to North America has been delayed at least a half year partly because Fiat-Chrysler CEO Sergio Marchionne is not satisfied with the design of the cars that will lead the brand’s comeback in the crucial market, people with direct knowledge of the matter told Automotive News Europe.

The delay also is a serious blow to Alfa in Europe because without the Giulia mid-sized sedan and station wagon the automaker will have one of the weakest premium brand lineups in Europe.

Alfa parent Fiat S.p.A. has pushed back the arrival of the Giulia models to mid-2013 from late 2012, the sources said. They blamed the delay on manufacturing and styling issues with the cars, adding that Marchionne was not pleased with proposals he has seen from Alfa’s creative team in Turin.

A Fiat spokesman declined to comment when asked about the delay.

Another factor slowing the Giulia’s launch, the sources said, is that Marchionne is not happy with the design proposals he’s seen from Chrysler’s U.S.-based stylists in Auburn Hills, Michigan, for the Giulia’s two siblings, the replacements for the Chrysler 200 and Dodge Avenger, which are due in 2013. The timing of the three mid-sized models is linked because they will share a platform, powertrains and major subsystems.

Fiat owns 25 percent of Chrysler Group and is working to integrate the Italian and U.S. automakers.

With the Giulia stalled, the next all-new Alfa that European dealers will get is a compact SUV, which Fiat will start building at the end of next year in at Mirafiori plant in Turin. Code-named C-SUV, the model will be based on the replacement for the Jeep Compass/Patriot, which also will be produced in Mirafiori both for Europe and North America.

Until the SUV arrives in late 2012 to early 2013, Alfa will have just three model lines to sell, the MiTo, Giulietta and 159.Even struggling Saab, with two sedans (the 9-3 and 9-5) and two SUVs (the 9-4X and 9-7X, which has been discontinued but still shows up in Saab’s European sales results), has a broader lineup than Alfa.

By comparison, Europe’s best selling premium brand, Audi, offers 11 model lines. Because of its broader product lineup and more global reach, Audi reported worldwide March sales of 125,700 cars and SUVs. That is 11 percent more than Alfa’s total global sales for all of 2010.

A reason that Alfa’s portfolio is so depleted is because at the end of last year it stopped making the four-seat GT coupe, 2+2 Brera coupe and the two-seat Spider roadster. The earliest any of those will be replaced is 2013.

Philippe Houchois, head of European auto research at UBS in London, said Alfa has suffered from a lack of new products before.

This has contributed to the automaker’s huge operating losses, which Houchois estimates equaled 15 percent to 20 percent of the Alfa’s annual revenues – or about 300 million to 500 million euros a year – in the mid-2000s.

He believes Alfa’s loses are now equal to about 10 percent of revenues – about 200 million euros – a year because its younger lineup includes the 1-year-old Giulietta and the 3-year-old MiTo.

Fiat does not release financial results by brand and declined to comment on the accuracy of Houchois’ estimates.

Houchois said that the only way Alfa will make money in the future is if Fiat and Chrysler continue to increase their parts sharing, which will create more economies of scale.

Despite its small lineup, Alfa aims to boost its 2011 sales to 170,000 from 112,000 last year. Alfa expects to sell 100,000 units of the Giulietta compact, 60,000 MiTo subcompacts and 10,000 159 mid-sized cars this year.

It remains unclear where the Giulia will be built.

In a presentation to bond holders held on March 29, Marchionne showed a slide that said the Giulia sedan and wagon, which will replace the 159 sedan and Sportwagon, would be made in the United States starting in 2013. A year ago that slide, which was part of Fiat Group’s presentation of its five-year strategic plan, showed the Giulia models being built in Italy and debuting in North America in late 2012 as part of the brand’s return there.

The Fiat spokesman now says the company still needs to decide where the make the Giulia.

In December 2010, Marchionne said “I wouldn’t be surprised to see an Alfa” come off the line at Chrysler’s plant in Sterling Heights, Michigan.

Sterling Heights, which was once scheduled for closure at the end of 2012, makes the 200 and Avenger.

Alfa Romeo pulled out of the U.S. market in 1995 and has been mulling a return since 2000. The sporty brand failed to meet Marchionne’s global sales target of 300,000 by 2010. Alfa’s new target is even tougher – 500,000 sales by 2014 – including 85,000 units a year in North America.

Bernstein Research analyst Max Warburton doubts that Alfa will be able to achieve its sales goal.

“The Alfa plan looks more and more overambitious by the day,” he said in an e-mail reply to questions. “With just the Mito and Giulietta in the next few years, there’s probably not a robust enough platform of customers and dealers to power up to 500,000 units. Conquest sales in Europe and the U.S. will need to be massive to hit the target.”

Other issues that Warburton sees are the massive product development costs that Alfa faces to expand its model range and the high price it will have to pay to build a U.S. dealer network.

“Entering a new market means losing money for some years,” he replied. “And we all know conquest sales even in existing markets like Europe are horrendously expensive to achieve.”

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U.S. Sales Rise 17 Percent As Demand Holds Up Against Headwinds

DETROIT – U.S. auto sales rose 17 percent last month and again topped an annual selling rate of 13 million as consumers fended off concern over rising gasoline prices and the effects of Japan’s earthquake.

Kia, Chrysler and Hyundai posted some of the biggest gains as the industry marked its seventh straight monthly advance of 10 percent or more. The seasonally adjusted annual sales rate of 13.1 million was the second highest since the cash-for-clunkers incentives of 2009, reported Automotive News.

“We believe the industry and economy are moving in the right direction,” said Bob Carter, general manager of the Toyota division.

The March results topped most analysts’ forecasts, while some said the parts shortages and plant closings caused by the March 11 quake would begin to take a toll on sales this month.

Ford Motor Co. outsold rival General Motors in the United States last month for the second time since 1998. Ford was aided by a 21 percent jump in truck sales. Its overall gain of 16 percent was its biggest this year.

Ford last outsold GM in February 2010 and before that, July 1998, when GM was hobbled by a strike at former parts unit Delphi.

Chrysler Group said its March sales rose 31 percent to the highest level in three years, with Dodge brand sales jumping 50 percent.

Among major automakers, only Toyota Motor Corp. lost ground last month. Its sales fell 6 percent in comparison to March 2010, when it recorded a 41 percent increase while fighting back from its recall crisis.

Nissan Motor Corp. posted a 27 percent increase in monthly sales before announcing its U.S. plants will close for six days this month because of parts shortages.

American Honda sales rose 24 percent on a 25 percent jump in Honda brand volume. Kia said March sales rose 45 percent, helping it sell more than 100,000 units in a quarter for the first time.

Industry sales are now up 20 percent this year.

March’s seasonally adjusted annual sales rate of 13.1 million marked the sixth consecutive month the SAAR has topped 12 million vehicles. The figure is up from a SAAR of 11.78 million a year earlier but down from February’s 13.4 million.

Ford’s March results were driven by higher fleet sales, strong F-Series demand and record monthly sales of the Fusion and Escape. Fiesta sales reached 9,787, up 56 percent over February, the automaker said.

The Ford division posted a 28 percent jump in sales, offsetting a 2 percent decline in volume at Lincoln. Ford’s F-Series truck lineup – featuring more fuel efficient powertrains for 2011 – posted sales of 53,272, up 25 percent compared to a year ago.

“The No. 1 unmet need for full-size pickup truck owners has been fuel economy,” Doug Scott, marketing manager for Ford’s truck line, said in a statement.

Ford said its retail sales – a key measure of consumer demand – rose 14 percent. Fleet sales were up 29 percent, with commercial sales up 50 percent, government demand up 33 percent and daily rental volume up 13 percent.

GM, which outperformed the overall U.S. market in January and February, is still ahead of Ford in year-to-date sales by more than 97,000 units. It has been the U.S. sales leader on an annual basis since 1931.

New models such as the Chevrolet Cruze and healthy demand for fuel efficient cars and crossovers helped GM post a 10 percent gain in March sales.

The automaker said car sales rose 15 percent, while crossover demand jumped 30 percent and big pickup sales jumped 11 percent.

It was the 7th consecutive monthly sales gain for GM, but the advanced trailed increases posted in January and February as the automaker reduced discounts.

GM’s average incentive dropped 17 percent to $3,109 per vehicle last month from February levels, online shopping guide TrueCar estimated.

GM said retail sales advanced 17 percent compared with March 2010.

Combined retail sales of models launched since June 2009 – including the Chevrolet Equinox, Cruze and Volt; Buick Regal; GMC Terrain; and Cadillac SRX – advanced 54 percent last month and rose 74 percent during the first quarter, GM said.

Fleet sales represented 24 percent of GM’s sales volume during the first quarter, compared with 30 percent in the first quarter of 2010.

“Our plan was to get out of the gates quickly in the first quarter and we succeeded,” Don Johnson, head of GM’s U.S. sales operations, said in a statement.

Rising gasoline prices and manufacturing disruptions caused by the Japanese earthquake, tsunami and nuclear crisis could slow the industry’s ongoing sales recovery during the spring selling season, analysts say.

And while credit markets continue to thaw, making it easier for consumers to finance new vehicle purchases, new vehicle demand is still being hampered by high unemployment and a weak housing market.

The Labor Department reported today that employers added 216,000 jobs in March, slightly above forecasts and a fresh sign hiring is gaining momentum.

TrueCar.com estimates the industry’s average incentive per vehicle dropped 6 percent from February to $2,432 last month. In March 2010, industry discounts averaged $2,798 per vehicle.

Last year, light-vehicle sales climbed to 11.6 million units from a 27- year low in 2009. But sales volumes remain about 31 percent below the 16.8 million-unit annual average from 2000 to 2007, according to Autodata Corp.

The rise in oil and gasoline prices is drawing buyers away from light trucks and into smaller cars, analysts said.

In a recent report, J. P. Morgan analyst Himanshu Patel said that each $1 increase in the U.S. retail price of gas results in a 5 percentage-point shift toward lower-margin cars for automakers.

U.S. gas prices rose more than 3 cents to $3.60 a gallon over the last week, and have climbed by 80 cents from a year ago, the Energy Department said this week.

“With gasoline prices eclipsing $3.50 a gallon, consumers are placing a high priority on fuel efficiency in every size and kind of vehicle,” said Ken Czubay, head of U.S. marketing and sales at Ford.

Political turmoil in the Middle East has sent the cost of crude oil to above $100 a barrel.

“When there is unrest, consumers tend to take a wait and see approach to purchasing big ticket items,” Jesse Toprak, an analyst with TrueCar.com, said last week.

The aftermath of the Japanese earthquake and tsunami last month is also expected to dampen supplies and sales of select models in coming weeks.

“For the most part our product inventory levels are very good at 352,000 vehicles,” said Toyota’s Carter. “While there may be spot shortages here or there, we are prioritizing distribution efforts to minimize those shortages.”

Toyota said today is was scrapping all incentives on the Prius hybrid for April. Because of disruptions in Japan and rising demand, Toyota is down to an 18-day supply of the Prius, but the automaker said it does not expect to run out.

“The uncertainty surrounding future production and vehicle availability may limit dealers’ willingness to provide additional discounts on top of OEM incentives,” analyst Richard M. Kwas of Wells Fargo said in a report this week.

As a result, Kwas expects the April SAAR to fall sequentially from March because of inventory shortages caused by the Japanese earthquake.

“Underlying retail demand continues to strengthen and automakers will attempt to make up for lost production later in the year,” he added.

GM, Toyota, Honda and Nissan are among automakers that have idled plants and cut output because of parts shortages in Japan. The unplanned reduction in car and light truck output and supply is expected to prompt Japanese automakers to reduce fleet sales and redirect inventory to retail sales.

“We know there will be challenges in the coming months as we continue to deal with supply chain issues resulting from the earthquake in Japan,” John Mendel, head of sales for American Honda, said today in a statement.

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Chrysler IPO Might Not Happen This Year

Chrysler Chief Executive Sergio Marchionne Wednesday said an initial public offering of Chrysler Group LLC shares might not happen this year, citing time constraints.

Mr. Marchionne has repeatedly said he wanted to take Chrysler public in the second half of 2011. It would need to repay U.S. government loans the company received during its bankruptcy in 2009 and raise its liquidity. The loans carry 10 percent interest rates that cost Chrysler more than $1 billion last year, reported The Wall Street Journal.

But the company is still in discussions about securing funding to repay the loans. Chrysler has had an “incredibly good reception” from a potential pool of lenders and arrangers to refinance its loans, Mr. Marchionne said. But he added: “We are looking for solutions.”

“We need to get ready,” Mr. Marchionne said. “That takes time … We should do it properly,” he said.

Chrysler owes $5.8 billion to the U.S. Treasury and $1.6 billion to Canada’s federal and provincial governments. The U.S. government owns 9.2 percent of Chrysler.

Mr. Marchionne, who is also CEO of Fiat SpA, reiterated his expectations of having Fiat raise its stake in Chrysler to 51 percent by the end of the year. Fiat would like to exercise an option to buy an additional 16 percent stake in the U.S. car maker ahead of the IPO. Fiat now owns 25 percent of Chrysler.

Fiat is working toward increasing its stake by 5 percent installments by meeting a series of milestones set by the U.S. government to improve Chrysler.

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Lenders Making The Road To Auto Financing Easier to Travel

As car buyers head back into dealerships after a two-year drought, they’re being greeted by rock-bottom interest rates on auto loans, eye-popping lease deals and a renewed willingness to lend to people with spotty credit.

Banks are on firmer financial footing, helped by government aid and renewed demand for auto loans that are packaged and sold as securities, a market that raises money and allows banks to write more loans. Buyers, too, are gaining confidence. U.S. auto sales rose 20 percent in February to the highest monthly pace since “cash for clunkers” in August 2009, reported The Detroit News.

This month, General Motors, Chrysler, Ford, Nissan and others have been offering zero percent interest rates on auto loans. Luxury makers such as Acura and Cadillac have lease deals with zero percent down. Banks have cut their interest rates on auto loans in half.

“If you feel comfortable purchasing today, the deals are out there to be had,” said Mark Hawks, 40, an information technology specialist from suburban Washington, D.C., who shaved thousands of dollars off the sticker price of the Ford Taurus SHO sport sedan he bought in December.

Hawks has a credit score of 780, which puts him in the highest tier of borrowers. He was pre-approved through his credit union for a five-year loan with a 3.99 percent annual interest rate. But his dealer beat that, offering a 3.79 percent rate with no payment for 90 days through Fifth Third Bank. The dealer also kicked in a $2,000 rebate and the trade-in value of Hawks’ eight-year-old Subaru. Final price of the new car: $33,000, compared with a sticker price of $46,000.

Here are some reasons for the great deals:

Lower rates. Buyers are paying an average annual percentage rate of 3 percent for new cars financed in February, down from nearly 4 percent in the same month a year ago, says auto research site Edmunds.com. That’s one of the lowest rates since before the economic downturn.

Banks, credit unions and automotive financing companies are in fierce competition to loan you money. While credit unions and finance companies once offered the lowest rates, banks now have more competitive financing.

With short-term rates near zero percent, banks that offered loans at 7 percent or 8 percent can now profit off 3 percent or 4 percent, says Greg McBride, a financial analyst with the personal finance website Bankrate.com.

More loans for subprime borrowers. Unlike much of 2010, when the auto loan market was open mainly to buyers with the best credit, people with weak credit histories now are having an easier time finding loans because of the competitive market. The percentage of new-car auto loans going to subprime buyers — generally those with credit scores below 680 — rose 18 percent in the last three months of 2010 over the same period the year before, according to Experian Automotive.

Better leasing deals. Leasing is making a comeback. That’s a boon for people seeking lower monthly payments on a car or truck. Leases made up a quarter of new-car transactions in February, Edmunds says. That was the highest single month for leasing since November 2005.

Generally, leasing means you pay less per month than you would on a car loan. The reason: You’re only paying off the amount the car will depreciate before you turn it in. When you buy, you’re paying for the whole car, plus finance charges.

Typically, about 20 percent of new cars are leased. But the bottom fell out of that market at the beginning of the downturn because there were too many used cars and not enough demand for cars coming off lease. Leasing fell to 16 percent of the market in 2009.

But as the recession progressed, used cars became scarce as people looked for cheaper wheels. That caused used car prices to rise. Now, lenders are more willing to take on a lease, knowing the car will be worth something when the lease is up.

Interest rates are likely to stay low this year, as the economy continues to recover. That will help keep loan terms attractive. Competition also remains fierce among car companies. GM said this month that it expects to dial back on lease deals and other incentives as the year goes on.

But even though deals are good, lenders have learned their lessons from the bust. Hawks, with his stellar credit, couldn’t match the deal he got on his Subaru in 2002. Back then, he paid 2.9 percent annual interest rate on a five-year loan.

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Fiat’s Chrysler May Report $99 Million Fourth-Quarter Net Loss

Chrysler Group LLC, the U.S. automaker run by Fiat SpA, may report a fourth-quarter net loss of $99 million, the average of three analysts’ estimates, after U.S. sales declined from the third quarter.

The fourth-quarter loss would exceed the $84 million deficit from the previous quarter. Chrysler on Jan. 31 will probably post an operating profit for the quarter of $186 million, according to the analysts. Chief Executive Officer Sergio Marchionne has said that high interest rates on government loans have kept Chrysler from reporting a net profit, Bloomberg reported.

While Chrysler’s U.S. deliveries rose 23 percent in the fourth quarter from a year earlier, sales fell from the third quarter, according to researcher Edmunds.com. The Auburn Hills, Michigan-based automaker’s U.S. sales fell 9.8 percent in the fourth quarter of last year compared with the preceding three months, Edmunds said.

Chrysler’s “business has gone well,” Marchionne said today, and its results are “in line with guidance.”

Chrysler in November raised its operating profit estimate for the year to $700 million, implying a $135 million fourth- quarter operating income. The automaker had earned $565 million on that basis through three quarters. Max Warburton, an analyst with Sanford C. Bernstein in London, called the guidance “conservative” at the time.

Operating profit was $239 million in the third quarter.

Fiat, the parent company, reported a third consecutive quarter of net income today, powered by Iveco trucks, Case New Holland tractors and auto demand in Brazil. Net income reached 318 million euros ($436 million), compared with a 283 million- loss a year earlier, the Turin-based company said today.

The results are for Fiat Group before the company spun off its industrial businesses into Fiat Industrial SpA this month.

Trading Profit

Fourth-quarter earnings before interest, taxes and one-time items, which Fiat calls trading profit, rose 26 percent to 615 million euros, exceeding the 598 million-euroaverage estimate of 13 analysts surveyed by Bloomberg.

Marchionne, 58, separated Fiat’s trucks and tractors units to focus on making cars. Italy’s largest manufacturer led a ninth consecutive monthly decline in European car sales in December as demand waned after government incentives expired. Fiat Industrial shares fell in Milan after the CEO didn’t raise 2011 forecasts.

2011 Outlook

Fiat forecast industry car sales in 2011 in Europe will fall 3 percent, according to a slide presentation posted on its website today.

The Brazilian car market may grow by as much as 5 percent, the company said. Fiat expects to maintain its market share in Brazil and improve it in Europe in the second half, it said.

CNH Global NV, the agricultural equipment maker that is part of Fiat Industrial, today reported fourth-quarter net income of $209 million, compared with $28 million a year earlier. Net equipment sales jumped 17 percent to $3.8 billion.

Marchionne, who aims to improve productivity and capacity utilization in Italy, this month won workers’ concessions over a 1 billion-euro plan to revamp Fiat’s Mirafiori factory.

Fiom Cgil, Fiat’s biggest union which represents 10,000 of the carmaker’s 83,000 workers in Italy, opposes the deal and has called a general strike tomorrow among metalworkers against the CEO’s plan to curtail absenteeism and strike rights.

Fiat intends to produce as many as 280,000 cars and SUVs annually at Mirafiori for the Jeep and Alfa Romeo brands as part of its venture with Chrysler. Production is scheduled to begin by the fourth quarter of next year.

Chrysler Future

Chrysler needs to sell about 1.5 million vehicles annually to break even on an operating basis, down from 1.65 million, Marchionne said Jan. 12. Global sales in 2010 rose about 21 percent to 1.6 million cars and trucks, he said.

Chrysler is expected to sell “a minimum” of 500,000 vehicles in the Asia-Pacific region by 2014, Marchionne said today on a conference call with analysts. Those sales rose to 39,688 last year, a 17 percent increase from 2009, Ralph Kisiel, a Chrysler spokesman, said today in an e-mail. The majority of those deliveries, 23,428, were in China.

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Fiat Has The Cash to Raise Chrysler Stake to 51%

TURIN – Fiat S.p.A. has enough cash to boost its stake in Chrysler Group to 51 percent by the end of this year, CEO Sergio Marchionne said.

Today’s statements by Marchionne, who leads both automakers, follow comments earlier this month indicating Fiat is on track to lift its share to 35 percent this year from the current 25 percent, Automotive News reported.

On a call with analysts today, Marchionne said Fiat has “an abundant cash cushion” that would allow Fiat to fund this year’s investments as well as exercise an option to purchase an additional 16 percent of the U.S. automaker.

Fiat today reported it had 15.9 billion euros ($21.8 billion) in cash at the end of last year, 28 percent more than a year earlier.

Analysts estimate Fiat may pay between $900 million to $4.4 billion for the 16 percent.

Reaching benchmarks

Fiat raised its Chrysler holdings to 25 percent from 20 percent this month after the U.S. automaker won approval to build fuel-efficient engines in Dundee, Mich. That was one of three conditions tied to the deal with the federal government that allowed Fiat to rescue Chrysler from a U.S. steered bankruptcy in 2009.

The second test requires Chrysler to record a total of $1.5 billion in sales outside North America and to obtain agreements from 90 percent of its dealers in Latin America to carry Chrysler products.

The third requires the development of a compact car on a Fiat platform that will achieve 40 mpg. Marchionne has said he expects all those requirements to be met this year.

First things first

From there, Fiat has an option to boost the holding to 51 percent — but only after Chrysler repays U.S. and Canadian government bailout loans.

“It is possible that we’ll go over the 50 percent mark if Chrysler decides to go to the markets in 2011,” Marchionne, 58, said this month at the Detroit show, referring to an initial public offering.

Marchionne also said Chrysler had met with Goldman Sachs and other banks about raising new financing that would pay back in 2011 about $7.5 billion in bailout debt owed to the United States and Canada.

Fiat may pay $900 million to $1.7 billion for the 16 percent stake before a Chrysler IPO while the same stake could be worth between $1.9 billion and $4.4 billion after the listing, according to Philippe Houchois, a London-based analyst at UBS AG.

Fiat said today that fourth-quarter earnings before interest, taxes and one-time items — which Fiat calls trading profit — rose 26 percent to 615 million euros.

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