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Exclusive: U.S., Major Automakers to Announce Safety Accord Friday


The U.S. government and a group of global automakers are set to unveil a voluntary agreement at the Detroit auto show on Friday aimed at improving auto industry safety and spurring culture changes, according to company and government officials.

The accord could set the framework for further discussions on safety reforms and mark a new era of cooperation between automakers and regulators after a record-setting year of safety fines, recalls and investigations into malfunctioning vehicles made by General Motors Co, Fiat Chrysler Automobiles NV, Honda Motor Co and others.

But it stops short of what many safety advocates have urged Congress and the National Highway Traffic Safety Administration (NHTSA) to adopt: new binding legal requirements to toughen safety rules. And automakers may be able to raise the voluntary agreement to argue against future proposed regulations, saying the accord makes legally binding rules unnecessary.

 The agreement, under discussion for several weeks, would also attempt to improve vehicle cyber security and the use of early warning data to detect potential defects that might lead to safety problems or large-scale recalls, sources said. It would also create new government-industry task forces to work to improve auto safety.

Despite the voluntary agreement, NHTSA Administrator Mark Rosekind said the agency will not hesitate to fine automakers that fail to follow the rules and will not give up its aggressive enforcement of auto safety rules.

Automakers recalled a record-setting 63.95 million vehicles in the United States in 2014, incurring large fines from NHTSA.

Companies in the talks leading up to the agreement include GM, Toyota Motor Corp, Ford Motor Co, Daimler AG, Fiat Chrysler, BMW AG, Honda, Nissan Motor Co and Hyundai Motor Co.

The agreement is to be announced at the auto show in the U.S. auto capital of Detroit by U.S. Transportation Secretary Anthony Foxx and top auto executives, sources told Reuters.

In a letter last week to the NHTSA seen by Reuters, the group of 16 automakers said industry support of an agreement “reaffirms our shared commitment to safety, and signals to the public the areas in which government and industry intend to collaborate to further improve automotive safety.”

Automakers met with the NHTSA in Chicago on Dec. 16 and since then exchanged proposed “Principles for Working Collaboratively to Enhance Motor Vehicle and Traffic Safety.”

In recent days, NHTSA and automakers have continued to propose revisions, including discussions about government-industry working groups, according to auto industry officials who spoke to Reuters at the Detroit show.

The talks come after NHTSA came under intense criticism in 2014 for failing to detect ignition switch defects in 2.6 million older GM cars linked to at least 124 deaths. Since then, NHTSA has been more aggressive in handing out fines and demanding outside monitors oversee automaker safety compliance.

NHTSA Administrator Mark Rosekind said on Monday in an interview on the sidelines of the Detroit show that the agency cannot make vehicles safe simply by imposing new regulations and handing down fines. He said he hoped a deal would be announced Friday.

“We’re going to have to find new tools – that means new collaborations, new partnerships,” Rosekind said.

But the voluntary agreement will not be enforceable – and is not as tough as what some safety advocates have called for. With only a year remaining in the Obama administration, there is a shrinking window to complete new legally binding auto safety rules.

Sean Kane, president of Massachusetts-based Safety Research & Strategies Inc and an auto safety advocate, praised NHTSA “for having a dialogue” with automakers and prodding them to do more on safety “and be strong on enforcement.”

Kane raised concerns about a voluntary agreement that is not legally enforceable. “It also eliminates input from outside parties” like safety advocates and consumers, Kane said, “and that is a little troubling.”

Foxx met with top executives from major automakers on Dec. 1 in Washington. A spokeswoman for Foxx said there have since then been “productive discussions with auto manufacturers toward agreement on steps to bolster safety.”

Foxx “is hopeful that they will soon result in concrete commitments that lead to significant safety improvements that will strengthen public confidence,” said his spokeswoman.

Fiat Chrysler CEO Sergio Marchionne said on Monday he agreed with the NHTSA that the auto industry needs more collaboration with regulators. He said he wanted the industry to “get to a stage where safety is no longer a competitive edge used by one automaker against another.”

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GE Selling Hyundai Capital Shares to Hyundai, Kia


FAIRFIELD — GE has signed an agreement to sell a 23.3 percent stake of Hyundai Capital Services to Hyundai Motor Company and Kia Motors as part of a broader deal to exit its entire 43.3 percent ownership of the consumer HCS. The transaction, which is subject to regulatory approval, represents aggregate GE ending net investment of approximately $900 million, reported F&I and Showroom.

Hyundai Capital is an 11-year-old join venture between Hyundai Motor Co. and GE Capital. It provides consumer financial products, including auto financing, auto leasing services, personal loans and home mortgages.

“As we continue to sell most of the assets of GE Capital, we are working with our joint venture partners such as a Hyundai to find solutions that work best for all parties,” said Keith Sherin, GE Capital chairman and CEO. “We’re pleased that we were able to take this step toward a longer term strategy to fully exit our stakes in Hyundai Capital and Hyundai Card.”

As previously announced, GE is embarking on a strategy to focus on high-value industrial businesses and is selling most of GE Capital’s assets.

On Dec. 3, GE Capital unloaded its transportation finance business to BMO Financial Group. At closing, the business unit, which represents North American’s largest financier to the truck and trailer segment, had net earning assets of about $8.9 million.

When GE completes its sale of its HCS shares, the transaction will contribute approximately $600 million of capital to the overall target of approximately $35 billion of dividends expected to be paid to GE under this plan. The broader transaction is subject to customary regulatory approval and is expected to close in April 2016.

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EFG Named to Dallas Morning News’ ‘Top 100 Places to Work’ List


DALLAS — F&I product provider EFG Companies was named to the Dallas Morning News’ list of Top 100 Places to Work, marking the ninth national award the company has earned this year for excellence and customer service.

“EFG’s awards and certifications reflect our intense focus on operating in our clients’ best interest at all times. You don’t always see that in our industry,” said John Pappanastos, president and CEO of EFG Companies. “EFG’s most powerful asset is its client engagement model that requires uniquely qualified and motivated professionals. Our values drive us, and we welcome and expect measurement of our impact on our clients’ profitability and success.”

According to company officials, a recent Troubadour Research and Consulting client satisfaction survey showed EFG’s net promoter score ranked higher than Southwest Airlines, USAA Banking and Insurance, and Nordstrom.

In addition to being named a Top 100 Places to Work, EFG Companies’ other notable recognitions and awards this year include:

  • F&I and Showroom magazine’s F&I Dealer of the Year Award for EFG client, Davis-Moore Automotive
  • First product provider certified as a Center of Excellence by Benchmark Portal
  • First product provider awarded the National ASE Blue Seal of Excellence
  • One of the first hundred companies in the US to achieve Consumer Credit Compliance Certification from the National Association of Automotive Finance
  • Three Stevie Awards for Top Field Sales Team, Contact Center of the Year, and Business Development Achievement of the Year
  • Powersports Business Nifty 50 Product Award winner
  • SubPrime Auto Finance News Top 125 Most Influential Firms

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Spending on New Cars Hits All-Time High, Even as Loans Stretch to Record Lengths


While May might not have brought the big uptick in sales we’ve seen in recent months, preliminary data suggest that automakers took in record revenues, with the average transaction price of new cars, trucks and crossovers sold last month climbing by at least 4%, reports The Detroit Bureau. 

All told, U.S. buyers spent a record $52 billion for their new vehicles in May, in part, due to a sharp, year-over-year decline in incentives, according to several firms that track monthly sales data. A separate study suggested that motorists are covering those higher costs by stretching their loans out longer than the industry has ever seen, an average 67 months.

“New vehicle sector and segment preference indicates consumers are confident about the economy and their finances,” said TrueCar President John Krafcik. “Not only are these shifts to premium brands and utilities telling from an economic indicator standpoint, they signal sizable revenue gains automakers should reap this year.”

The data tracking firm estimated that the typical vehicle had an average transaction price, or ATP, of $32,452, up 4% rom May 2014. Lower incentives played a role, but manufacturers have also seen buyers show more confidence by loading up on options and by trading up to higher-level vehicles. TrueCar estimated sales of premium brands jumped 10.6% during the first four months of 2015 compared to just 4.8% for mainstream brands.

BMW and its Mini subsidiary, saw prices jump in May by 6.5%, according to a separate analysis by Kelley Blue Book. Mazda saw a similar increase, while Ford and General Motors prices climbed a more modest 4.3% and 4.2% respectively. Toyota’s average price rose just 2.3%, even though it trimmed incentives by more than 10%, year-over-year.

With only a handful of exceptions, notably including General Motors, Hyundai and Kia, most makers trimmed rebates and givebacks as the U.S. auto market continued to gain ground. And analysts noted that the modest overall sales numbers for May actually misrepresent the market’s momentum, as the peculiarities of the industry’s reporting system counted fewer so-called “sales days” last month than in May 2014.

The surge in spending also reflects a year-long shift from fuel-efficient small cars and alternative-power vehicles to larger passenger cars, pickups and SUVs.

“With the national average price of gasoline down nearly a dollar per gallon on average from one year ago, truck and SUV demand remains strong, elevating average transaction prices,” Karl Brauer, senior analyst for Kelley Blue Book, said in a statement.

The steady climb in new car prices might come as a surprise to those worried about relatively stagnant middle-class earnings and the rising wealth gap. In reality, most new car buyers today register on the upper end of the middle-class spectrum. Even for compact cars, industry research often shows household income levels approaching six figures.

And buyers are simply stretching out their purchases to hold down monthly payments – while also encouraged by continuing low interest rates. Gone are the days of three and even four-year loans. Borrowers extended their loans terms during the previous quarter to 67 months on average, longer than ever for new cars, according to Experian Automotive.

“While longer term loans are growing, they do not necessarily represent an ominous sign for the market,” said Melinda Zabritski, Experian’s senior director of automotive finance.

On the plus side, the trend allows consumers to buy more vehicle without busting the household budget. On the downside, however, it means they likely have to keep those vehicles longer in order to avoid being upside-down on loans when trading in, cautioned Zabritski. That could foretell slower future growth of the automotive market.

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Hyundai Motor Targets 5 Percent U.S. Sales Growth This Year


South Korea’s Hyundai Motor aims to boost its U.S. sales by 4.7 percent this year, ahead of the industry’s projected growth rate, despite a consumer shift to SUVs and pick-up trucks, reported Reuters.

Sales of Hyundai’s mainstay sedans, the Elantra and Sonata, have slowed in the United States as consumers take advantage of lower fuel prices to switch to less fuel-efficient larger vehicles, strongholds of U.S. and Japanese firms.

Hyundai said on Tuesday it aims to increase its U.S. sales to 760,000 vehicles this year, from 726,000 last year, and will launch its revamped Tucson SUV in the U.S. market in the second quarter.

Its planned growth rate would be more than double the expected industry growth rate of 2 percent.

“The 5 percent target looks challenging. There are not many Hyundai SUVs to sell in the U.S.,” said Ko Tae-bong, auto analyst at Hi Investment & Securities.

He said supply is tight for Hyundai’s SUVs, as it does not produce the Tucson in the United States, and relies on Kia’s U.S. factory for production of Santa Fe SUVs. Hyundai also does not sell pick-up trucks.

Reuters reported last week that Hyundai is in talks with the state of Alabama to build a new assembly line next to its current line in Alabama.

A person familiar with the matter told Reuters on Monday that the new Hyundai production facilities, which plan to start production in April 2017, will make Santa Fe SUVs, although that is subject to change.

Hyundai Motor Group chairman Chung Mong-koo left for the United States and Mexico on Tuesday for a five-day trip to visit factories and design centers for both Hyundai and Kia, and the site of Kia’s new production plant in Monterey, Mexico.

Ko said Hyundai should make Tucson SUVs and pick-up trucks in the United States to increase market share and reduce reliance on sedan sales.

A Hyundai executive said last week the carmaker was considering producing pick-up trucks, but added that there were “many hurdles.”

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Hyundai-Led Group Agrees to $10 Billion Land Deal, Stokes Union Rage


Hyundai Motor Co and its two affiliates approved Asia’s biggest property deal since the financial crisis on Friday when their board members agreed to pay 10.55 trillion won ($10.12 billion) for a trophy plot of land to house a new headquarters in downtown Seoul, reported Reuters.

The Hyundai-led group – which includes Kia Motors Corp and Hyundai Mobis Co – agreed to the price, more than triple the appraised amount, prompting a sharp sell-off in the companies’ shares.

About 11.6 trillion Korean won ($11.11 billion) have been wiped of the market values of the companies since the purchase was announced last week.

Labor union employees, who make up the bulk of the companies’ workforce, voted on Friday to extend a strike into next week in show of disapproval of the purchase which will be used to house a new headquarters, hotel and theme park complex.

“Building an integrated control tower will enhance work efficiency and brand value,” Hyundai Motor said in its regulatory filing on Friday.

The Hyundai-led consortium, which beat Samsung Electronics to buy the plot in the capital’s high-end Gangnam district, plans to ink the deal with the state-run Korea Electric Power Corp (KEPCO) later on Friday.

Shares of Hyundai Motor ended down 1.3 percent at 187,000 won each on Friday, their lowest level in 17 months. Kia Motors slipped 0.8 percent, and Hyundai Mobis was up 0.6 percent.

The $10 billion price-tag is equivalent to selling nearly half a million of Hyundai’s flagship Sonata sedans, and nearly two years of combined wages for Hyundai’s 63,099 employees in Korea, according to Reuters’ calculation.

Hyundai Motor will pay 55 percent of the price, followed by Hyundai Mobis Co Ltd with 25 percent and Kia Motors Corp with 20 percent, the companies said. They did not disclose whether the board approval was unanimous.

The boards of the three companies had approved bidding at the Sept. 18 auction without knowing the price, which was deemed confidential, four board members told Reuters earlier.

Board disapproval is rare at Korea’s family-owned conglomerates, or chaebols.

WORKERS EXTEND STRIKE

The land deal led to the domestic unions of Hyundai Motor and Kia Motors resuming partial strikes this week, clouding the outlook for annual wage talks.

Workers “are angered by the astronomical amount of money” to be spent on the land, Kia’s union said.

Hyundai Motor’s labor union said on Friday it would stage a partial strike from Monday through Thursday next week.

Hyundai, the world’s fifth-biggest automaker along with its affiliate Kia, has been hit by strikes in all but four years of the union’s 27-year history, although they usually make up losses with extra work later that year.

The stoppages comes as Hyundai and Kia are planning to build new factories in China and Mexico, closer to export markets and where wages are lower than in South Korea.

Recurring labor disputes, high wages at home and strong currency are expected to put further pressure on the automaker to accelerate overseas production. Hyundai made 62 percent of its cars last year overseas, up from 20 percent in 2004.

Since annual wage talks began in early June, Hyundai Motor and union negotiators have wrangled over a new wage calculation, which the company says would sharply increase labor costs.

Hyundai’s domestic employees, excluding executives, earn an average 94 million won ($90,419) per year.

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