Tag Archive | "General Motors"

G.M. Chief Flatly Dismisses a Merger Overture From Fiat Chrysler


DETROIT — Mary T. Barra, the chief executive of General Motors, on Tuesday firmly rejected the idea that the company could benefit from a combination with a rival automaker like Fiat Chrysler Automobiles, which tried in March to start merger talks with G.M., reports The New York Times.

In remarks made before G.M.’s annual shareholders meeting here, Ms. Barra said the company was committed to remaining independent and continuing its comeback from bankruptcy and a government bailout in 2009.

Yet even as Ms. Barra tried to focus attention on G.M.’s new products and strategic goals, she was dogged by questions about an unwanted merger proposal, as well as probable criminal charges against the company over its long-delayed recall last year of defective small cars linked to at least 111 deaths.

In her strongest comments to date on a potential merger, Ms. Barra said G.M. had no interest in pursuing a deal with Fiat Chrysler, despite a personal appeal made by its chief executive, Sergio Marchionne.

“There was an email that was very much vetted by our management and our board,” Ms. Barra said. “After we reviewed that, we were committed to our plan.”

G.M.’s plan, she said, was to continue to build brands, market share and international operations on its own. Adding a partner is not necessary for one of the world’s biggest auto companies, she said.

“We have scale, and we’re leveraging that scale,” she said. “For the last couple of years, we have really been merging with ourselves.”

G.M. is also trying to move beyond a difficult 2014, in which it recalled about 30 million vehicles in the United States, including 2.6 million small cars with faulty ignition switches that can cause sudden loss in engine power and disable airbags.

Ms. Barra declined to say much about a Justice Department investigation, which is expected to result in a large fine and criminal charges for G.M., according to people with knowledge of the inquiry.

She said that she met with federal investigators last year, and that the company was cooperating fully with the government.

“It is their timeline,” Ms. Barra said. “We are going to continue to cooperate to the fullest extent we can, but beyond that I think anything else is pure speculation.”

As the nation’s biggest automaker, G.M. is accustomed to scrutiny. But last year’s safety crisis intensified the attention.

Now just as G.M. is beginning to regain momentum in the marketplace, its long-term prospects have been clouded by Mr. Marchionne’s outspoken call for industry consolidation.

While Mr. Marchionne has not spoken about G.M. publicly, he suggested in his email to Ms. Barra that a combination of their two companies would save billions of dollars in costs and provide better returns to shareholders.

Ms. Barra bluntly rejected that notion on Tuesday, saying G.M. would sell 10 million vehicles worldwide this year and did not need a partner to improve profits and become more efficient.

“The best thing we can do is to be totally focused on the G.M. shareholder and to execute our plan,” she said.

G.M.’s plan hinges on expanding the Chevrolet and Cadillac brands, and continuing to restructure its chronically unprofitable European operations. Ms. Barra also emphasized that G.M. was pouring more resources into new technology and increasing its commitment to vehicle safety.

Industry analysts are skeptical that a merger would help G.M. One analyst, Brian Johnson of Barclays Capital, said in a research note that a combination with Fiat Chrysler would be a “bad idea,” even though it could temporarily drive up G.M.’s stock price, which has languished despite the company’s commitment in March to a $5 billion stock buyback.

Mr. Johnson pointed out that automakers had had little success in big mergers and alliances, notwithstanding Fiat’s acquisition of Chrysler last year.

He also noted that G.M.’s brands and products overlapped with Fiat Chrysler’s, and that any savings on shared parts and vehicle platforms might take years to achieve. In addition, management of each company could struggle to integrate with the other, as happened when the German automaker Daimler-Benz acquired Chrysler in the late 1990s.

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NHTSA Admits Faults in GM Investigation


The National Highway Traffic Safety Administration admitted Friday it made a series of errors in its handling of General Motors Co.’s delayed recall of 2.6 million cars with faulty ignition switches linked to 109 deaths and more than 200 injuries, reports The Detroit News. The federal agency pledged to make significant reforms.

NHTSA is bracing for what are expected to be scathing reports into the GM recall from the Transportation Department’s Office of Inspector General and Government Accountability Office. The safety agency released its internal findings in part to show it already was making significant reforms. NHTSA said it is making changes to spot defect problems earlier, and announced that a three-member team would advise the agency on its restructuring.

In two internal reports released Friday, NHTSA said it failed to hold the Detroit automaker accountable; didn’t understand alternate theories how the company’s air bags worked; and didn’t follow up on trends from its own data and investigation.

It acknowledged it missed numerous chances over nearly a decade to discover the deadly defect in 2.6 million Chevrolet Cobalts, Saturn Ions and other small cars. In those cars, which since have been recalled, the key can inadvertently turn off the engine and disable power steering and air bags.

Still, the report places most of the blame on GM for failing to disclose problems to NHTSA.

In May 2014, NHTSA fined GM a record-setting $35 million for delaying the recall and GM had to agree to up to three years of intensive monitoring. GM CEO Mary Barra fired 15 and disciplined five after an internal GM report showed a “pattern of incompetence and neglect.”

GM said in a statement Friday, “We support the changes to NHTSA’s organization announced today and we will continue to work collaboratively with NHTSA toward our shared goal of improving automobile safety in all respects.

NHTSA Administrator Mark Rosekind said the agency was not disciplining or firing anyone as a result of Friday’s report. It was the agency’s most forthcoming admission that it shoulders some of the blame in failing to discover the defect. In testimony before Congress last year, NHTSA largely rejected responsibility.

Rosekind didn’t want to focus on blame, seeking instead to emphasize how to improve the system. “There is no single individual who can be blamed for the things that happened previously,” he said, adding there was no evidence that NHTSA employees intentionally failed to do their jobs.

Part of the problem is funding, Rosekind said. The White House proposed tripling NHTSA’s auto defects budget and doubling the number of staff assigned to it. But Congress has shown little interest in doing so.

‘Crucial first step’

Sens. Ed Markey, D-Mass., and Richard Blumenthal, D-Conn., said they were happy NHTSA is finally acknowledging its errors. “Unfortunately, for more than a decade, NHTSA failed to address the information and evidence it had in its own database linking defective ignition switch to fatal accidents,” they said.

The pair said NHTSA must “put in place permanent measures necessary to prevent another tragedy like this from ever happening again.”

Clarence Ditlow, head of the Center for Auto Safety, praised the self-assessment and said Congress must give NHTSA more funding.

He called it “a crucial first step toward restoring the integrity of the agency’s enforcement process and the ability to hold the auto industry accountable for defects that kill and injure … The assessment also sets into motion new internal processes to correct deficiencies in agency procedures that missed defects like GM ignition switch, Jeep fuel tank and Takata air-bag inflators.”

The Justice Department is nearing a decision on whether to pursue criminal charges against GM and impose a fine that could be in excess of $1.2 billion as part of a settlement that is likely to come by summer’s end. The Securities and Exchange Commission and 50 state attorneys general also are investigating.

The announcement comes ahead of a forthcoming report from the Transportation Department’s Office of Inspector General into NHTSA’s handling of GM’s ignition issues. That report is expected to harshly criticize the agency’s handling of the issues.

The Government Accountability Office also is investigating NHTSA’s handling of the recalls as part of a broader assessment of the agency’s performance sought by Congress.

In September, the House Energy and Commerce Committee sharply criticized NHTSA’s handling of the GM complaints between 2007 and 2014, saying it had made “inexcusable errors.” A committee report said that after NHTSA declined to open an investigation into air-bag failures in Cobalts and other cars in 2007, the agency was deeply reluctant to revisit that conclusion even after new crashes and reports came to the agency’s attention.

One of the NHTSA reports found the agency “did not hold GM accountable for providing inadequate information.” That was despite the fact that “GM’s responses often contained very little information and included invocations of legal privilege.” It said the agency did not “push back and request more information.”

Team to address changes

U.S. Transportation Secretary Anthony Foxx said Friday he is naming a three-person team that will spend the next year advising NHTSA on implementing changes outlined in the reports.

The team includes Joseph Kolly, director of the Office of Research and Engineering at the National Transportation Safety Board; J. Victor Lebacqz, former associate administrator for aeronautics research at NASA; and James P. Bagian, a former NASA astronaut who directs the Center for Healthcare Engineering and Patient Safety at the University of Michigan, where he is a professor at the medical and engineering schools.

NHTSA has long been criticized for being too cozy with automakers. But since Rosekind was confirmed as NHTSA’s new administrator in December, the agency has taken a much more aggressive approach to auto safety issues. At the same time, some senior officials have announced plans to retire.

NHTSA pressured Takata Corp. last month to declare 33.8 million vehicles with its air bags defective, announced it would hold an unprecedented July 2 hearing into Fiat Chrysler’s safety issues and prodded Ford Motor Co. to expand a door latch recall.

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Strong Sales Could Shift Ford, GM to Higher Gear


Shares of U.S. automakers may finally be able to accelerate, reports Reuters.

Investors are closely awaiting next week’s May sales data, expected to come in near record levels. Meeting those forecasts could be enough to lift the sector – among the cheapest in the market – putting the sting of product recalls and tepid recent growth in the rear view mirror.

Estimated sales of 1.6 million new cars and trucks in May would make for a seasonally-adjusted annual rate of 17.4 million vehicles, according to Edmunds.com, a car buying platform.

“This is going to be one of the best months ever,” said David Kudla, chief investment strategist of Mainstay Capital Management in Grand Blanc, Michigan. Kudla sees May sales approaching $40 billion, not far from the $40.3 billion record in August 2014.

Weak auto results contributed to flat overall retail sales in April, but May is expected to represent a rebound. Lower gas prices could boost demand for sports utility vehicles and trucks, which have higher price tags and better margins.

There is also pent-up demand for new vehicles as consumers have been holding on to their cars for longer since the financial crisis. The average age of U.S. cars is now between 10 and 11 years, Kudla said.

The timing of the Memorial Day holiday also helped May sales, according to Jessica Caldwell, senior analyst at Edmunds.com in Santa Monica, California.

“Because there was a full week of May after the holiday weekend, shoppers had plenty of time to take advantage of the deals being widely communicated in dealer and automaker marketing messages,” Caldwell said.

Credit for auto loans is expanding, a positive sign for the sector, noted Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

“The strong dollar created a headwind, and GM had some high-profile product recalls, but given current trends, I would expect sales growth to continue.”

Both GM and Ford appear undervalued at current levels. GM’s forward price-to-earnings ratio is 7.62, well below the S&P 500’s 17.4 ratio, while Ford’s P/E is 8.77, according to Thomson Reuters data.

Both also rank among the cheapest S&P 500 stocks per StarMine’s intrinsic value, which looks at anticipated growth over the next decade. GM is the fourth-cheapest stock in the S&P by this metric, with StarMine estimating that shares should trade at $81.69, more than twice its Thursday closing price of $36.39. StarMine calculates that Ford is the 10th cheapest stock in the S&P, and that it would need to rise 79 percent to meet its intrinsic value.

Despite that, shares of Ford are down 1.7 percent in 2015, underperforming the S&P’s 2.6 percent rise. GM is up 3 percent on the year, thanks largely to a $5 billion stock buyback program announced in March.

While auto stocks could rally if the sales come in as expected, it could spell bad news for the broader market, as any sign of consumer strength could nudge the U.S. Federal Reserve into raising interest rates more quickly that is currently anticipated. Most analysts expect the first rate hike to come later this year, but opinions are split on whether it will occur in September or December.

“Good data would make the Fed raise rates sooner. I believe the stock market would sell off (on strong auto data) because it would shorten that timeline,” said Battle who expects a rate hike in the fall.

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GM Recalls Heavy Duty Trucks with Takata Air Bags


General Motors Co is recalling about 375,000 heavy duty pickup trucks equipped with passenger-side air bag inflators made by Takata Corp, the U.S. automaker said, reported Reuters.

The trucks are 2007 and 2008 model Chevrolet Silverados and GM Sierras.

Subaru will expand its recall of 2004 and 2005 model Impreza compact cars with Takata air bags to about 80,000 from 20,000, the unit of Japan-based Fuji Heavy Industries also said on Friday.

Both companies said they have received no reports of inadvertent deployments of air bags in the vehicles.

The latest actions follow an agreement last week between Takata and U.S. safety regulators to expand the recalls of vehicles with potentially faulty Takata air bag inflators.

The inflators have exploded with too much force, sending shrapnel into the vehicles. Six people have been killed, all of them in Honda Motor Co cars.

Twelve incorrect deployments of Takata air bags have occurred in Toyota and Honda vehicles in Japan since 2011, Nikkei reported on Friday, citing a Japanese transport ministry official. No injuries were reported in these incidents.

Takata air bags have been the subject of U.S. Congressional hearings held late last year. Another hearing, before the Subcommittee on Commerce, Manufacturing and Trade, will be held next Tuesday.

On Thursday, five automakers expanded recalls by several million vehicles with Takata air bags.

No root cause for the defect has been found.

Takata managers want the automakers to share some of the blame for the malfunctioning air bags, sources told Reuters this week, as well as some of the financial burden.

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Will Auto Dealers Become an Endangered Species?


It’s been the best of times for auto dealers since the recession.

Those that survived picked up business from those that didn’t. They reorganized their operations to be leaner and more efficient. Auto sales soared 59 percent to 16.5 million last year from the 2010 low point, reports The Detroit News.

But reports from two different analysts say that dealers better start preparing for stormy, disruptive weather.

Looking several decades out, expect auto sales to plunge, Brian Johnson, an analyst at Barclays Research, recently told auto industry investors.

This will be caused by the rise of autonomous, or robotic, cars.

Looking forward 25 years, Johnson says about half of people will still purchase vehicles for driving in rural areas and for jobs that require driving. Everyone else — people who use vehicles purely as a means of transportation — will be sharing autonomous cars.

That would slash annual U.S. auto sales to 9.5 million.

“A historical precedent exists — horses once filled the many roles that cars fill today, but as the automobile came along, the population of horses dropped sharply,” Johnson said.

He estimated that such a transition would force manufacturers “to shrink dramatically to survive,” with General Motors and Ford slashing North American production by up to 68 percent and 58 percent, respectively. Such a reduction could turn thousands of auto dealerships into surplus real estate.

Meanwhile Adam Jonas of Morgan Stanley Research is telling investors to expect a massive consolidation among new and used car dealers and the service business.

“The U.S. auto retail pie is worth nearly $1 trillion split roughly 10,000 ways,” Jonas said.

“Putting aside dealer franchise laws … just given the technological changes we anticipate hitting the automotive industry, we think there could be some room for a bit of consolidation here,” he said, predicting the business will fall to “as few as tens of groups in the future.”

Much of this will come from people bypassing dealers.

“As consumers move from owning cars to sharing cars auto retailers will face fundamental changes to their place in the mobility ecosystem,” Jonas said.

This will raise legal questions as dealers attempt to use the patchwork of state franchise laws to protect their turf.

Efforts by dealer groups in various states to limit Tesla Motors’ move to bypass car dealers and sell its vehicles through company-owned stores is an early example of this tension

Other analysts are already pointing to the lawsuit filed earlier this month by the California New Car Dealers Association against TrueCar Inc., which operates a digital platform for car sales, as an example of dealers attempting to protect their business from technology-based interlopers.

“If a tech firm were to operate a fleet of say 10 million cars in a pay-by-the-mile or by-the-minute model, would such a business fall under the umbrella of current dealer franchise laws?” Jonas asked. “It’s a gray area. But as this issue attracts broader scrutiny and analysis we expect the gray to become black-and-white rather quickly.”

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Takata Air Bag Recall Expands to Record 34 Million Vehicles


As part of an agreement with Takata, federal regulators expanded the recall of vehicles equipped with the company’s air bags to 33.8 million in the U.S., making it the largest safety recall in the nation’s history, reports Detroit Free Press.

The move essentially doubles the number of vehicles being recalled to replace potentially lethal air bags made by the Japanese supplier. At least six people have died and more than 100 have been injured from shards of metal from exploding air bags.

Takata, for its part, officially acknowledged the defects for the first time on Tuesday, even though 17 million vehicles with its air bags already have been recalled.

Mark Rosekind, recently appointed administrator of the National Highway Traffic Safety Administration, said no one knows how long it could take to fix the vehicles, but “it could take some years. … We intend to make sure at the end of this process there is a safe airbag in every vehicle.”

The NHTSA recall now involves 11 automakers, including the Detroit Three, most affecting 2002 through 2008 model years. Takata is partly owned by Honda, which has the highest percentage of recalled vehicles. The total number could change as automakers sift through the specs of all of their models to determine which ones contain any of the four defective inflators, which activate the air bags in a collision.

Many consumers will have to drive their vehicles for a long time before the parts are available to fix them, with the industry unable to manufacture replacement bags fast enough. They could also be waiting months for the notification their vehicle is subject to recall because automakers must prioritize vehicles at most risk based on their age and geographic location

The announcement is the second example in as many days of Rosekind cracking down on automakers to address safety on U.S. roads. On Monday, Rosekind announced he has scheduled a hearing in July for Fiat Chrysler Automobiles to explain their slow response in completing repairs in 20 different recalls.

NHTSA has been pushing for Takata to expand its air bag recall. Automakers had recalled about 17 million vehicles, many of them from Honda. The latest move largely makes this a national recall of vehicles from 11 automakers with vehicles that potentially have faulty inflators in the driver or passenger-side air bag.

“Up until now Takata has refused to acknowledge that their airbags are defective, that changes today,” said U.S. Treasury Secretary Anthony Foxx. “Takata has agreed to declare their air bag inflators are defective.”

Takata Chairman Shigehisa Takada, in a statement, said, “We are pleased to have reached this agreement with NHTSA, which presents a clear path forward to advancing safety and restoring the trust of automakers and the driving public.”

The supplier has also agreed to enter into a consent order with NHTSA to supply all related documents and information about the defective airbags and pledged full cooperation going forward.

In return, NHTSA has suspended more than $1 million in accumulated fines — $14,000 per day since February — for not responding to all NHTSA’s inquiries. The agency has not ruled out more fines in the future and there could be further civil penalties.

Initially the exploding air bags were considered a problem only in hot and humid climates but the recall has been expanded nationally as Takata and affected automakers continue to try to identify the root cause of the problem so they can fix it.

The recall has also expanded to cover both driver and passenger side air bags in more vehicles and regions.

Automakers with affected vehicles include Honda, Toyota, Ford, BMW, Fiat Chrysler Automobiles, General Motors, Mazda, Mitsubishi, Nissan, Subaru and the newly added Daimler Trucks. The automakers formed a coalition and hired independent engineering firm Orbital ATK to try to find the cause of the exploding air bags. Their investigation is in addition to those being conducted by NHTSA and Takata in an industry-wide effort to find the reason for the defect to make sure it is fixed properly.

NHTSA also is opening its own testing program to focus on ensuring the remedy is completely safe. Rosekind said while the replacement air bags are safer than the ones they replace, he cannot guarantee their long-term safety at this time.

“We are doing our best to keep focused on the investigation,” said former NHTSA Administrator David Kelly who was hired to oversee the investigation by the automakers. Efforts to determine the root cause are still in the early stages of testing, he said.

Safety officials warn consumers to keep checking their vehicle VIN number on the www.safercar.gov website because even some of the vehicles previously fixed – or excluded in the past — could be back on the recall list in the future.

Consumer who receive recall notices should call their dealer immediately.

“Folks shouldn’t have to drive around wondering if their airbag is going to explode in their face or if their car is going to be on another recall list,” said U.S. Sen. Bill Nelson, D-Fla., the top Democrat on the Senate Commerce Committee and a key figure in a congressional probe into the defective airbags. “We’ve seen the recall list double now to 30 million cars. Let’s hope Takata’s admissions today tells us the whole story.”

Rich Newsome, an attorney representing seven victims of faulty Takata air bags, including Corey Burdick, a Florida man disfigured and blinded in one eye by shrapnel from an exploding air bag in May, called it a victory for consumer protection.

But, he said, “today’s expanded recall is already too little, too late for people injured and their families. Hopefully today’s news will push the agenda for recall reform to the forefront and result in legislation that will help NHTSA identify these kinds of defects before regular families with defective cars are needlessly harmed in the future.”

Automakers say they will continue to work with NHTSA and share test results. Honda said many of the recalls announced Monday already were included in previous safety campaigns and the automaker is “reviewing the information released (Monday) to determine what new actions may be required.”

Honda owners can check their recall status at www.recalls.honda.com or call 800-999-1009. Acura owners should go to www.recalls.acura.com or call 800-382-2238 and press option 4.

“A recall of this scope illustrates the potential for massive automaker expense and consumer inconvenience when a common, mass-produced part is defective,” said Karl Brauer, analyst with Kelley Blue Book.

“While this is the largest consumer recall in history it’s likely we’ll see future vehicle recalls of similar, if not larger, size as the automotive industry becomes more globalized.” Brauer said.

Takata boosted production to 450,000 replacement kits per month in March, up from 350,000. Other suppliers are also ramping up capacity to meet the demand the recall has created as the industry works to address the problem collectively.

Autoliv, another global supplier of airbags, said Tuesday it could make more airbag inflators than it has already promised to the industry.

In January, Autoliv committed to providing several automakers with as many as 25 million airbag inflators and could begin delivering them later this year.

“Our focus has really been to help the industry and the customers in this situation and clearly if we would be asked to supply more we would work to do that as rapidly as we could,” said Thomas Jonsson, spokesman for Autoliv.

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