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Ford Planning to Drop Microsoft for BlackBerry in Its Car Technology System

(Bloomberg) – Ford Motor Co., struggling with in-car technology flaws, will base the next-generation Sync system on BlackBerry Ltd.’s QNX and no longer use Microsoft Corp.’s Windows, according to people briefed on the matter.

Using QNX will be less expensive than licensing Microsoft technology and will improve the flexibility and speed of the next Sync system, the people, who asked not to be identified because the decision hasn’t been made public, said Feb. 22. Ford has more than 7 million vehicles on the road with Sync using Microsoft voice-activated software to make mobile-phone calls and play music.

The switch may help Ford, the second-largest U.S. automaker, address customer complaints about malfunctioning technology systems and touch screens that have hurt it in surveys by J.D. Power & Associates and Consumer Reports. For BlackBerry, it’s a vote of support for a company that lost 95 percent of its value from mid-2008 to November and saw the collapse of a proposed $4.7 billion buyout.

“This would be a huge infusion of trust and confidence to have BlackBerry and QNX expanding into a Ford,” Thilo Koslowski, auto analyst for researcher Gartner Inc. in Santa Clara, California, said yesterday. “This is really the crown jewel in BlackBerry’s crown and could make the rest of the company shine as well.”

Shares Climb
BlackBerry rose 6.6 percent to $9.74 at 9:55 a.m. in New York. Microsoft fell less than 1 percent to $37.85. Ford gained less than 1 percent to $15.20.

Since becoming BlackBerry’s CEO on Nov. 4, John Chen cited software such as QNX and the BlackBerry Messenger service as assets he will look to capitalize on. Predecessor Thorsten Heins spoke often during his tenure for the potential of QNX to play a role in machine-to-machine settings such as cars interacting with parking meters.

Dearborn, Michigan-based Ford has said the quality of its vehicles has been “mixed” each of the past three years and fell short of its plan to improve those results in 2013. CEO Alan Mulally was said to be a candidate to become Microsoft’s chief until early this year,

Improving Sync is crucial for Ford to draw car shoppers who are increasingly looking to be connected at all times. In-vehicle technology is the top selling point for 39 percent of auto buyers, more than twice the 14 percent who say their first consideration is traditional performance measures such as power and speed, according to a study by the consulting firm Accenture released in December.

Customer Surveys
“We do not discuss details of our work with others or speculate on future products for competitive reasons,” Susannah Wesley, a Ford spokeswoman, wrote in an e-mail.

Peter Wootton, a spokesman for Redmond, Washington-based Microsoft who works for Waggener Edstrom, declined to comment. Paul Leroux, a spokesman for QNX, declined to comment.

Ford and Lincoln ranked Nos. 26 and 27 out of 28 brands in Consumer Reports’ annual auto-reliability survey released in October. While the Lincoln luxury line matched the industry average in J.D. Power’s Initial Quality study in June, the namesake finished 27th out of 33 brands.

Technology companies are competing to win business from automakers as in-car technology becomes an increasingly important selling point. Google Inc. announced an alliance with General Motors Co., Honda Motor Co., Hyundai Motor Co. and chipmaker Nvidia Corp. in January to bring the Android operating system to cars. Apple Inc. is working with Bayerische Motoren Werke AG, Daimler AG’s Mercedes-Benz, Nissan Motor Co. and others to introduce its iOS operating system to cars with devices such as the iPhone.

QNX Users
BlackBerry’s QNX Software Systems can be found in cars made made by Volkswagen AG’s Audi unit and BMW, according to its Web site. QNX and Microsoft are the main suppliers of automotive operating system software, according to researcher IHS iSuppli.

BlackBerry, at the time named Research in Motion Ltd., bought QNX Software Systems for $200 million in 2010. In addition to its presence in cars, QNX technology is used to manage nuclear-power plants and by the U.S. military for unmanned aerial drones. Its customers include Cisco Systems Inc., General Electric Co. and Caterpillar Inc.

The switch would be a significant blow to Microsoft’s automotive software business because Ford is by far its biggest customer, said Gartner’s Koslowski. Microsoft also has software in Kia Motors Corp., Fiat SpA models, Nissan and BMW models, according to its website. Getting into the Ford system will expand QNX’s industry leading position for automotive entertainment operating systems, which Koslowski said he estimates is as high as 70 percent.

Integrating Systems
The operating system in the car entertainment system has become more of a commodity and now added functions are more important, he said. QNX has done a better job of integrating compatibility with other operating systems such as those from Apple, Google and included emerging Internet standards, he said.

“You have to look at it more from a perspective of how much functionality do I get for what price and really move your investment budgets to other areas that become much more strategic for creating differentiation,” Koslowski said. “The industry is realizing it has to do a better job to create a unique experience for its customers.”

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Detroit Three All Gain U.S. Market Share in Q1

Via Bloomberg News

Detroit – For the first time in two decades, General Motors Co. (GM), Ford Motor Co. (F) and Chrysler Group LLC pulled off a sweep in the first three months of a year, with all three gaining U.S. market share in 2013’s first quarter.

The momentum likely built in April versus Toyota Motor Corp. (7203) and Honda Motor Co., according to a survey of analysts by Bloomberg News. The average estimates of analysts are that the U.S. carmakers will post bigger sales gains than Toyota and Honda for this month.
“The renaissance in Detroit is real,” Mike Jackson, chief executive officer of AutoNation Inc. (AN), the biggest U.S. auto dealership group, said this month in a telephone interview. “They have fantastic new products, and they’re in a very good position to compete.”

Shoddy cars that U.S. automakers offered for three decades cost the loyalty of the 75 million-member baby boom generation. That’s changing thanks to across-the-board improvement in quality that has closed the gap on once-dominant Toyota, said George Magliano, senior principal economist for IHS Automotive.

“From now on, the window has been opened to everybody,” Magliano, who is based in New York, said by telephone. “The baby boomers used to walk in like zombies and buy the Toyota. They don’t do that anymore. They can buy a Korean car, they can buy a Volkswagen, and they certainly can buy a Detroit car.”

Rising Demand
U.S. light-vehicle sales probably climbed 11 percent in April to 1.31 million, the average estimate of nine analysts surveyed by Bloomberg. The annualized industry sales rate, adjusted for seasonal trends, may have risen to 15.2 million, the average of 17 estimates, from 14.1 million a year earlier. That would keep the market on pace for its best year since 2007.

Ford, GM and Chrysler gained 0.7, 0.5 and 0.2 percentage points of market share during the first quarter, the first time all three have gained share in that period of a year since 1993, the height of the sport-utility vehicle boom, according to Automotive News Data Center, which conducted the analysis at the request of Bloomberg News.

The three Detroit automakers now control 45.6 of the U.S. market through March, up from a first-quarter low of 43.8 percent in 2009, according to the data center. In the first three months of 1993, during then-President Bill Clinton’s first term, they shared 74.3 percent of the market, according to Automotive News.

Painful Restructurings
U.S. automakers’ strides have been building in the past half decade after a painful downturn spurred restructurings that spared only Ford from bankruptcy. The three companies rid themselves of uncompetitive cost structures and plowed investments into cars that could hang with Japan’s giants.

Millions of recalls by Toyota in 2009 and 2010, Japan’s tsunami the next year and shaky rollouts of new product such as Honda’s Civic in 2011 opened the door for U.S. consumers to give Detroit another shot.

Ford, which made more money than it ever has in North America during the first quarter, probably led the three U.S. automakers with a 17 percent increase in U.S. sales this month, the average of 11 estimates. The Dearborn, Michigan-based company’s $2.4 billion pretax profit in its home region in the first three months of the year was powered by its industry- leading F-Series trucks and new Fusion sedan and Escape utility.

Widespread Gains
“All you have to do is look at the earnings numbers from Ford to see that they’re doing well,” said Alan Baum, principal of Baum & Associates, an auto consulting firm in West Bloomfield, Michigan. “F-Series drives its profits, but they also can’t make enough of the Fusion and the Escape.”

The redesigned Lincoln MKZ sedan, which Ford is counting on to revive its luxury line, will set a monthly sales record and drive an increase of at least 10 percent for the brand, Jim Farley, executive vice president of Ford global marketing and sales and Lincoln, said today on a conference call.

The gains being made by U.S. automakers are widespread. Ford’s Fusion, which ranked outside the ten best-selling models last year, has jumped to No. 6 this year through March. The 38 percent sales increase posted by Detroit-based GM’s Cadillac was the largest of any brand in the industry during that span, and Chrysler’s passenger car deliveries surged almost one third.

Chrysler, based in Auburn Hills, Michigan, probably extended its streak of year-over-year U.S. sales gains to 37 months by posting a 10 percent rise in April deliveries.

Chrysler Profit
Chrysler said yesterday that first quarter net income dropped 65 percent while reaffiriming its full-year forecast. CEO Sergio Marchionne said on a Jan. 30 earnings call that shipments in the quarter would be hurt by introductions of the Jeep Compass and the Ram Heavy Duty pickup as well as preparation for the new Jeep Cherokee, which caused production of the predecessor Liberty to end last year.
GM sales also may have increased 10 percent, the averages of 11 estimates.

Holding onto their market share gains won’t be easy. Concerns are building about Japanese automakers answering Detroit’s rebound by using the weakening yen to their advantage, either by cutting prices or putting more content into their cars without charging more for it.

The yen has weakened about 18 percent versus the U.S. dollar since Oct. 31, when Prime Minister Shinzo Abe advocated for its decline to aid his country’s economy. Morgan Stanley has estimated the currency boost will give Japanese automakers an advantage of about $1,500 per car, while U.S. carmakers have put the figure at $5,700 per vehicle.

Watching Yen
“We’re going to have to watch very closely what happens competitively as the Japanese competitors were able to benefit from the weak yen,” Bob Shanks, Ford’s chief financial officer, said last week during a conference call. “We are starting around the world, not just in North America, very selectively and very early, to see some signs. They’re taking advantage.”

So far this year, sizable U.S. sales increases have eluded most of the Japanese automakers even with the yen’s drop. Toyota, which is based in Toyota City, added 0.3 percentage points of U.S. market share through March, while Tokyo-based Honda’s share was little changed and Nissan lost 0.7 points, according to Autodata Corp.

Honda and Toyota sales may have risen 7.3 percent and 3.1 percent in April, respectively, the average estimate of eight analysts. Nissan probably will post the industry’s biggest increase, with a 26 percent surge, the average of eight estimates.

Camry’s Competition
Toyota’s plan is for its Camry sedan to remain the top- selling U.S. car for a 12th consecutive year, amid tougher competition from Ford’s Fusion and Honda’s Accord, U.S. Group Vice President Bill Fay said in an April 26 telephone interview. Camry deliveries slipped 4.3 percent in the first quarter.

“People see the new Fusion and like it and the Accord is doing well,” Fay said. “Our goal, in spite of better competition, is for Camry to stay No. 1.”

Volkswagen AG (VOW), based in Wolfsburg, Germany, may post a 3.3 percent gain in combined sales for its Volkswagen and Audi brands in April, the average of four estimates.

There are signs that Seoul-based Hyundai Motor Co. (005380) and Kia Motors Corp. (000270) are losing some of the gains they made in the U.S. during the past two decades because of production constraints and the Korean won strengthening relative to the Japanese yen. The two affiliates, which report sales separately, lost 0.2 and 0.6 percentage points of market share through the first three months, according to Autodata.

Hyundai and Kia’s struggles may have endured in April. Combined sales for the two companies probably slipped 2.4 percent, the average of seven estimates. The two companies are constrained by a lack of local production capacity and the yen’s 16 percent drop against the South Korean won since the end of October.

“We may see the Japanese automakers get more aggressive in terms of marketing and in terms of packaging more content into their vehicles and not raising prices,” Michelle Krebs, an analyst for auto researcher Edmunds.com, said by telephone. “That’s the Koreans’ game. That’s how they gained a foothold — the value proposition. That’s not in their favor now.”

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