Thursday, June 5, 2008

Harbour Report: Chrysler, Toyota tie for 2007 efficiency title

DETROIT -- Chrysler LLC has won bragging rights for the most efficient assembly plant in North America and tied with Toyota Motor Corp. as the most productive vehicle manufacturer, according to this year's Harbour Report on auto plant productivity.

Chrysler struggled with financial and market share losses in 2007, but it excelled in manufacturing. Its Chrysler Toledo South factory was named North America's most productive assembly plant.

The factory needed just 13.57 labor hours per vehicle to build Jeep Wranglers. Toledo South is a supplier park that uses Kuka Group to manage the body shop, Magna Steyr to manage the paint shop and Hyundai Mobis for chassis assemblies.

The next-closest assembly plant was General Motors' Oshawa No. 1 plant in Oshawa, Ontario. That plant used 15.18 labor hours per vehicle to build Chevrolet Impala sedans.

This is the first year that consulting firm Oliver Wyman has published the Harbour Report. It bought Harbour Consulting, of suburban Detroit, in January.

Narrowing the gap

Chrysler shaved 7.7 percent from its total manufacturing labor hours to finish in a dead heat with Toyota as North America's most efficient automaker. The competitors needed 30.37 labor hours per vehicle at their assembly, stamping, engine and transmission operations.

In all, Chrysler had four factories among North America's 10 most efficient assembly plants. The others were Belvidere, Ill., (Dodge Caliber, Jeep Compass and Patriot); Jefferson North in Detroit (Jeep Grand Cherokee and Commander); and Brampton, Ontario (Chrysler 300, 300C and Dodge Charger).

With improvements at GM and Ford Motor Co. as well, the Detroit 3 now trail major Japanese carmakers in North America by 3.5 labor hours per vehicle, according to an Oliver Wyman press release.

Ford Motor improved its total manufacturing productivity by 3.7 percent to 33.88 labor hours per vehicle, while GM's total improved 0.2 percent to 32.29 hours.

Toyota's number slipped slightly. The automaker needed 2.5 percent more hours to produce a vehicle. Nissan Motor Co. suffered the biggest deficit. The carmaker, which lost light-truck production at its Canton, Miss., assembly plant, saw its labor hours per vehicle rise 10.1 percent to 32.29 hours.

In other categories, Toyota's Georgetown complex in Kentucky operated the most efficient stamping plant. Chrysler's Global Engine Manufacturing Alliance plant in Dundee, Mich., was the most productive engine plant. And GM's Toledo Transmission plant was the most productive transmission factory.

PRESS RELEASE: Annual Harbour Report

Lean Improvements, Worker Buyouts Bring Detroit Three Productivity Closer to Asian Rivals, says Oliver Wyman's Harbour Report™ 2008

• Gap between the most and least productive companies shrunk to 3.50 labor hours per vehicle.

• Toyota and Chrysler led the six largest multi-plant North American automakers in total manufacturing productivity (assembly, stamping, engine and transmission), each averaged 30.37 labor hours to manufacture a vehicle.

• New UAW contracts will further reduce the total labor cost gap between Detroit Three and competitors over the next three years.

• Hyundai's Alabama plant posted a very competitive 20.62 assembly hours per vehicle in its first year participating in The Harbour Report™.

2008 Best Plant Awards for Labor Productivity

Vehicle Assembly -- Chrysler Toledo South

Stamping -- Toyota Georgetown

Engine -- Global Engine Manufacturing Alliance (GEMA)

Transmission -- General Motors Toledo

DETROIT, June 5, 2008 – Driven by more consistent, leaner processes and buyouts of tens of thousands workers, the Detroit Three automakers in 2007 nearly erased the productivity deficit against their Japanese-based competitors, despite declining production and shrinking market share.

The difference among the Big Six from the most to least productive in terms of total manufacturing labor (Assembly, Stamping, Engine and Transmission) has dropped to 3.50 hours per vehicle (or about $260 per vehicle), down from 10.51 hours (or $790 per vehicle) in 2003.

Chrysler showed the biggest improvement, cutting its total manufacturing labor hours per vehicle by 7.7% to 30.37, the same number recorded by Toyota, according to Oliver Wyman's The Harbour Report™ North America 2008, the annual study released today. Oliver Wyman acquired the report in January 2008.

It is worth noting that Toyota fabricates and assembles a greater percentage of its vehicle parts with its own employees, while Chrysler purchases many modules and subassemblies from suppliers, thus saving labor. Toyota also has retained nearly all its employees even in plants that experienced lower production. In contrast, GM, Ford and Chrysler have used buyouts and layoffs to reduce labor costs.

General Motors brought its total manufacturing productivity performance to 32.29 hours per vehicle, its 12th consecutive year of improvement. Ford reduced its labor hours per vehicle by 3.7% to 33.88, despite producing 6% fewer vehicles than it did in 2006.

- more -

The Harbour Report™ North America 2008 – page 2

"Improving productivity in the face of lower production is a huge accomplishment, especially with the pressures created by rising gas prices," said Ron Harbour, partner in Oliver Wyman's North American automotive practice. "Toyota remains the industry benchmark through its renewed commitment to lean production. Chrysler made substantial progress with the support of suppliers. GM deserves credit for the growing maturity of its Global Manufacturing System, and Ford is demonstrating that focusing on quality will lead to better productivity."

Despite the convergence of productivity numbers, Toyota proved most impressive during Harbour's visits to their plants. Its productivity improvements, in some cases, were offset by a broader mix of vehicles, including the Tundra pickup and Sequoia SUV, more V8 engines and higher volume of the Camry hybrid. In addition, Toyota showed the most improvement in energy conservation, opening more floor space, reducing manufacturing time and line length, and increasing capital efficiency.

Unfortunately, the profitability gap between Detroit-based and Japan-based automakers remains wide. Chrysler, Ford and GM are suffering even more with falling sales of profitable fullsize pickup trucks and SUVs as consumers demand much better fuel economy. Honda and Nissan led the six largest North American automakers, each earning a pretax profit of $1,641 per vehicle on their North American sales, followed by Toyota at $922 per vehicle. Chrysler lost $412 per vehicle for the first nine months of 2007, while GM and Ford lost $729 and $1,467, respectively, per vehicle for the full year. This reflects that the Detroit Three still pay more for health care, pensions and sales incentives. They also support more dealers relative to their respective market shares, than either Toyota, Honda or Nissan.

"There is no doubt, based on our visits to more than 20 plants over the last year that continuous improvement in manufacturing processes are taking hold in just about every company," said Michelle Hill, vice president of Oliver Wyman and director of The Harbour Report™ North America. "Everyone is focused on reducing waste and building quality into their processes more than ever."

Harbour noted that despite the focus on low labor costs in Mexico, the plants in that region are very lean and competitive with high quality even with less automation.

The innovative agreements the United Auto Workers reached with the three domestic companies likely will enhance their competitive position in the future.

First, the union agreed to a lower-tier wage – about $14.20 an hour – for new hires. GM can hire these new workers to perform "non-core" work such as delivering parts to the assembly line, custodial services, and most work that doesn't involve putting a part on the body of a car or truck. Ford and Chrysler can hire the lower-wage people for any hourly position as long as they don't exceed 20% of their U.S. hourly workforce.

The lower-tier wage may lead Chrysler, Ford and GM to consider bringing the production of certain components and modules back into their assembly plants that have been out-sourced to suppliers who have paid their workers considerably less. How soon and how far any of the three bring work back in-house will depend on the number of high-seniority workers accept buyouts in the coming months.

In its first year in The Harbour Report™ North America, Hyundai Motor Manufacturing Alabama posted a very strong 20.62 assembly labor hours per vehicle at its Montgomery, Ala., plant that produces the Hyundai Sonata sedan and Santa Fe crossover. The plant's productivity on the Santa Fe (22.58 labor hours per vehicle) was best for plants building midsize crossover vehicles.

In overall productivity, four of the six companies with assembly, stamping and powertrain operations in

North America – GM, Honda, Chrysler and Ford – showed improvement in 2007.

Neither Honda nor Nissan participated in this year's report. The report does include assembly, engine and total manufacturing estimates for both companies based on publicly available data.

Among vehicle assembly plants, Chrysler's new Toledo plant, which assembles the Jeep Wrangler, set the

- more -

The Harbour Report™ North America 2008 – page 3

individual plant benchmark for labor productivity with a measure of 13.57 hours per vehicle, followed - by GM's Oshawa #1 plant that produces the Chevrolet Impala. Oshawa #1 posted a 15.18 HPV performance.

Chrysler's Toledo South plant features an innovative collaboration with three suppliers. Kuka Group manages the body shop. Magna Steyr manages the paint shop, and Hyundai Mobis handles chassis assembly for the Jeep Wrangler.

The Harbour Report™, the auto industry authority on manufacturing efficiency first published in 1989, measures assembly, stamping and powertrain productivity performances – plant by plant, and company by

company – for North American automotive manufacturers. The labor hours per vehicle measure calculates the total salary and hourly labor content required to produce one vehicle.

By comparison, automakers in North America, on balance, have become very competitive globally, only slightly behind Japan, but ahead of most other regions. Although labor costs remain high, the weak dollar and new labor agreements have made North America a more attractive region for manufacturing.

Despite their continuous improvement in plant-floor productivity, Chrysler, Ford and General Motors still use significantly less of their assembly capacity than Toyota and Honda. For example, Chrysler and GM each assembled 88% of the potential number of vehicles they could produce on two 16-hour shifts for 235 days a year. Ford's assembly capacity utilization was 84%, up from 77% in 2006, but well below Toyota's 100% and Honda's 97%. The domestic manufacturers also have a wider range between their least and most utilized plants. Toyota had no plant running at less than 92% of capacity and none running at more than 107%. By contrast, GM's North American assembly plants ranged from 44% to 137%. Ford's were between 47% and 129%, while Chrysler's spanned from 46% to 126%.

Other highlights from this year's Assembly, Stamping and Powertrain chapters include:


CAMI Automotive, which produces the Chevrolet Equinox, Pontiac Torrent and Suzuki XL-7 in Ingersoll, Ontario, achieved a 17.59 HPV and the New United Motors Manufacturing Inc. (NUMMI) plant in Fremont, Calif., posted an impressive 18.96 HPV to lead all companies in North America.

Chrysler had four of the 10 most productive assembly plants: Toledo South (13.57 HPV for Jeep Wrangler); Belvidere (17.09 HPV for Dodge Caliber, Jeep Compass and Jeep Patriot); Jefferson North (18.68 HPV for Jeep Grand Cherokee and Jeep Commander), and Brampton (18.78 HPV for Chrysler 300, Dodge Charger and Dodge Magnum).

GM's Oshawa #1 and #2 plants finished second and third, respectively at 15.18 and 16.17 HPV). GM makes the Chevrolet Impala in Oshawa #1 and the Buick LaCrosse and Allure (for the Canadian market) in Oshawa #2. GM's Lordstown, Ohio, plant (Chevrolet Cobalt, Pontiac G5) finished seventh at 18.12 HPV.

Toyota averaged 22.35 labor hours per vehicle across the five North American assembly plants included in this year's report, compared with 22.05 hours per vehicle in 2006.

GM led in 11 of the 20 vehicle segments in which it competes: midsize non-[premium conventional car (Buick LaCrosse and Pontiac Grand Prix/Oshawa), midsize non-premium sports car (Chevrolet Monte Carlo/Oshawa #1), midsize non-premium van (Chevrolet Uplander, Pontiac Montana SV6, Saturn Relay and Buick Terraza/Doraville, Ga.), midsize premium conventional (Cadillac STS/Lansing Grand River); midsize premium sports car (Chevrolet Corvette, Cadillac XLR/Bowling Green, Ky.); midsize premium utility (Saab 9-7X/Moraine, Ohio); large non-premium conventional (Chevrolet Impala/Oshawa #1) large non-premium utility (Chevrolet Tahoe, Suburban, GMC Yukon and Yukon XL/Arlington, Tex.); large non- Ford led in five of 15 segments in which it competes: compact premium conventional car (Lincoln

- more -

The Harbour Report™ North America 2008 – page 4

MKZ/Hermosillo, Mex.), mid-size non-premium pickup truck (Ford Ranger/Twin Cities), midsize premium CUV (Lincoln MKX/Oakville); large non-premium pickup (Ford F-150/Norfolk), large premium pickup (Lincoln Mark LT/Dearborn), premium van (Chevrolet Express, GMC Savana/Wentzville), large premium conventional (Cadillac DTS/Detroit-Hamtramck); large premium SUV (Cadillac Escalade/Arlington, Texas).

Chrysler led in four of 12 segments in which it competes: compact non-premium conventional car (Dodge Caliber/Belvidere), compact non-premium CUV (Jeep Compass, Jeep Patriot/Belvidere); compact non-premium utility (Jeep Wrangler/Toledo South), and mid-size non-premium SUV (Jeep Grand Cherokee/Jefferson North).

Harbour estimates show Honda remains very competitive. However, Nissan's performance suffered due to a drop in truck and minivan production at its Canton, Miss., plant.


Harbour uses a stamping index that weighs several labor and equipment measures to create a composite score of stamping productivity. On that basis, Toyota's Georgetown, Ky., press shop ranked first, followed

by Toyota Cambridge, Ont. and Chrysler Belvidere. Of the 10 best stamping plants, Toyota had three;

Chrysler, two; and Ford, General Motors, Hyundai and NUMMI, one each.

"In 2007 Toyota was the best stamper, on balance, in the industry," said Harbour. "It is not a matter of spending more than competitors. It reflects regular kaizen improvement activities and the flexibility that comes with well coordinated engineering and manufacturing."


Four of the six largest companies improved engine productivity when comparing plants that were included in last year's report. Toyota still led the field at 3.13 HPE. Chrysler finished second at 3.35 HPE while GM was a close third at 3.44 HPE.

Chrysler's Global Engine Manufacturing Alliance plant in Dundee, Mich., turned in the best performance by an engine plant at 1.84 hours per engine, beating GM's Spring Hill, Tenn. plant (2.53 HPE).

Toyota's Georgetown, Ky. Engine plant finished a respectable third with 2.60 hours per engine, and its Buffalo, W.Va., plant was fourth at 2.66 HPE. GM had five engine plants in the top 10.

Chrysler maintained the lead it assumed last year over GM and Ford in transmission productivity, improving to 3.36 HPT from 3.39, while Ford came in at 3.62 and GM came in at 3.68 HPT. For the third time in the last five years GM's Toledo plant led all plants producing rear-wheel drive transmissions (2.37 hours per transmission) and was the No. 1 plant overall. Chrysler Kokomo had the best productivity measure among producers of front-wheel-drive transmissions (A604 line) at 3.51 HPT.


More than just year-over-year performance, Oliver Wyman's Harbour Report™ looks at several years of results to determine which companies are developing systems and processes related to quality, lean manufacturing, continuous improvement, worker involvement, technology, level of product complexity, process design and layout.

"Lean manufacturing and continuous improvement efforts do not always produce immediate improvements, nor are they immediately recognizable," said Ron Harbour. "But as shown in The Harbour Report™ 2008 results, companies that are producing consistent, sustainable improvements to their manufacturing operations are providing automakers with a cost advantage over their rivals."

More information and performance results can be found in The Harbour Report™ North America 2008, the annual study created and published by Oliver Wyman, a global consulting firm. Oliver Wyman acquired Harbour Consulting and The Harbour Report™ in January, 2008. The Harbour Report™ is considered the authoritative guide to automotive manufacturing in North America, and is a leading competitive analysis tool used by OEMs and suppliers to benchmark performance, develop strategies and improve operations. Copies of The Harbour Report™ North America 2008 can be ordered through the company's website at, or by calling 248-649-4490 or toll-free at 800-208-1353. The report is $595 and payment by credit card is accepted. More information about the report and Oliver Wyman is available on the company's website.

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Jay Leno Receiving Challenger SRT-8 000002

If you saw The Tonight Show this past Monday, you may have noticed that Jay seemed a little... impatient. That's because earlier that day he took possesion of his new Challenger SRT8. The second one built by Diodge!

He's shown below at the dealership. The orange car is his 1970 Challenger thathe brought along for the purposes of comparison.

Jay's new Challenger was spotted later that day outside of The Tonight Show studio.

Undoubtedly, he took the long way to get there. There's nothing worse than picking up your new car and then having to go to work!

The first production Challenger was auctioned off for charity last January. Jay, being Jay, arranged to buy #2.

This Day in Auto History:

Automobile Quarterly
Automobile Quarterly

The Timken Roller Bearing Axle Company reorganizes as two distinct businesses, the Timken Roller Bearing Company and the Timken-Detroit Axle Company
The B. F. Goodrich Tire & Rubber Company of Akron, OH introduces “Ameripol” tires, the world’s first to be made from synthetic rubber
Gordon M. Buehrig is issued a United States patent for his “vehicle top with removable panels”, an idea that appeared on 1968 Chevrolet Corvette
Racer Jim Clark makes his Formula 1 debut driving a Lotus in the Dutch Grand Prix
The Lec Makes its Formula 1 debut at the Belgian Grand Prix in Zolder, with the Type CRP1 driven by David Purley finishing in 13th place

Source: Automobile History Day By Day, by Douglas A. Wick

Wednesday, June 4, 2008

Chrysler marks best sales month in 10 years

Dave Hall, The Windsor Star

Published: Tuesday, June 03, 2008

Led by the Windsor-built Chrysler Town and Country and Dodge Caravan, Chrysler Canada has recorded its best May sales month in 10 years and extended its unprecedented streak of year-over-year sales increases to 22 consecutive months.

Sales rose by seven per cent to 27,325 units in May.

The Town and Country and Caravan topped 6,500 combined units for the first time last month, increasing by more than 50 per cent year-to-date over last year, said the company.

Our minivan business is remarkable in Canada," said Reid Bigland, president and CEO of Chrysler Canada. "With rising fuel prices, Canadian consumers are struggling with the costs associated with large SUVs but they don't want to forego the functionality.

"As a result, they're getting back into our minivans in record numbers," said Bigland.

With sales averaging 4,300 units a month, the minivan is Chrysler's top-selling vehicle.

In May, sales of the two vehicles reached 6,258 units, an increase of 52 per cent over last May and a jump of 48 per cent to 21,645 units through the first five months of this year.

Across Canada, overall sales slipped by one-half of one per cent but still posted their second-best month of May and are on track to their best year ever, according to auto analyst Dennis DesRosiers.

"Rarely does Canada go counter-cyclical to the U.S. market for any length of time and it has now been a couple of years," said DesRosiers. "But there is still no sign of Canada letting up."

But across the U.S., the domestic auto industry remains in free fall with Asian automakers outselling the Big Three in May for the first time, as fuel-conscious customers rejected trucks for compacts.

Japanese and South Korean sales increased by 3.7 per cent while GM, Ford and Chrysler sales plummeted by 21 per cent, largely caused by soaring gasoline prices.

In Canada, Chrysler sales were also supported by the increased demand for fuel-efficient vehicles such as the Jeep Patriot and Dodge Caliber.

"Chrysler Canada's retail sales growth this year is driven by three vehicle segments that are increasing in popularity with Canadian consumers," said Dave Buckingham, vice-president of vehicle sales. "They are fuel-efficient compacts, long-wheelbase minivans and crossovers.

"Fuel efficiency continues to remain top of mind for consumers and we are well-positioned to capitalize on this demand with 20 vehicles in our product line capable of 30-plus mpg on the highway."

Chrysler's minivan was Canada's third-highest selling vehicle last year and has topped the market segment for 24 consecutive years.

Menawhile, sales of the Dodge Journey reached 1,581 units and the Dodge Ram held steady in May at 4,034 units.

Combined Patriot, Compass and Caliber sales were up 36 per cent compared to one year ago, setting a new record for best sales month.

-- with files from CanWest News Services

Struggling Chrysler buoyed by Belvidere trio

Struggling Chrysler buoyed by Belvidere trio

By Alex Gary
The rise of gas prices across the United States continued to push buyers toward Chrysler’s fuel-efficient models made in Belvidere, with sales of the Dodge Caliber, Jeep Compass and Jeep Patriot a bright spot in what was otherwise a tough month for the nation’s No. 4 automaker.

Chrysler dealers in the U.S. sold 148,747 vehicles in May, a 25 percent decline from May 2007, as buyers again shifted swiftly away from the trucks and SUVs that make up much of Chrysler’s lineup.

That shift has been a boon for sales of the Caliber, Compass and Patriot, all of which can reach 28 mpg. Together, U.S. ealers sold 24,169 of the Belvidere trio, the most for a single month in the Caliber era by more than 2,200.

More than 2,700 work at the Belvidere plant where the three cars are put together, making it the largest manufacturing employer in the Rock River Valley.

“There is a new era emerging in the restructuring of the American economy. There is an unprecedented shift in the industry that is challenging, but we are determined to provide consumers what they need and want,” Chrysler Vice President and Chairman Jim Press said in a news release.

There was no better contrast than the news out of General Motors, which announced it will shut down four plants where it makes trucks and SUVs, including its historic plant in Janesville, Wis., where nearly 2,700 people make the Chevy Suburban and Tahoe and GMC Yukon and Denali SUVs, in 2010. Janesville is GM’s longest-running plant, starting as a tractor assembly plant in 1919 and making such vehicles over the years as the Chevy Impala, Caprice and Cavalier.

The Janesville products, which also are assembled at a plant in Texas, were the stars of GM’s lineup in the not-too-distant past. In 2005, in June and July alone, U.S. dealers sold 114,000 of those four vehicles. This May, GM dealers sold just 16,461 Yukons, Tahoes and Suburbans and just 90,693 combined in 2008’s first five months.

The shift away from larger, low-mileage vehicles has been industrywide. Toyota’s Corolla and Camry and Honda’s Civic and Accord all outsold Ford’s F-Series truck, the first time the F-series wasn’t the top U.S. seller in a month since 1992. And Ford sold more than 30,000 Ford Focus small cars for only the second time in that car’s nine-year history.

This Day in Auto History:

Automobile Quarterly
Automobile Quarterly

Franklin Hall Marmon, son of Walter C. Marmon, is born in Indianapolis, IN
The design for the new Chrysler by Oliver H. Clark is approved by the Maxwell-Chalmers Board of Directors
The 7,000,000th Ford V-8 is produced
The Ford Motor Company sells the Johansson Gage Division to the Brown & Sharpe Manufacturing Company of Providence, RI – William Clay Ford is elected to the Board of Directors
The American Honda Motor Company is established in Los Angeles, CA, initially to develop a market for Honda motorcycles

Source: Automobile History Day By Day, by Douglas A. Wick

Tuesday, June 3, 2008

Chrysler says sales in May dropped 25% over last year. More soon.

The work of the Diablo

LatdiabloLA Times - Before the well-known Lamborghini Diablo, there was the Chrysler Diablo. And whereas Lamborghini produced about 2,900 Diablo models, the car pictured here is one of a kind. It’s a 1957 concept car, with a hand-made body fashioned by the Italian coachbuilders, Ghia, and based on the chassis of a 1955 Chrysler 300.

This Diablo was conceived by Chrysler’s head designer of the time, the highly influential Virgil Exner (who used wind tunnel testing and compound curved glass) and was created for the 1957 American car show circuit, becoming the marque’s star concept of that year. At 22 feet in length, it’s also one of the largest concept cars ever built. And it almost never made the trip from Europe. It was scheduled to ship on board the ill-fated Andrea Doria, but last-minute work delayed its departure.

Back in the day, the Diablo cost Chrysler more than $250,000. With its interesting provenance, it should fetch considerably more when it goes under the hammer -- for the first time ever -- at the Pebble Beach wash-and-waxfest August 15 and 16 (concept cars are a featured highlight of the auction this year). If you’re planning to hit Monterey at that time, pack a few extra million, just in case.

-- Colin Ryan

Photo: RM Auctions Reports True Cost of Incentives for May; Incentives Rise Five Percent From Last Year, the premier online resource for automotive information, estimated today that the average automotive manufacturer incentive in the U.S. was $2,483 per vehicle sold in May 2008, up $132, or 5.6 percent, from April 2008, and up $117, or 5.0 percent, from May 2007.

"Manufacturers are trying to avoid increasing incentives," stated Jesse Toprak, Executive Director of Industry Analysis for "But we predict that incentives will continue to rise throughout the summer months to help boost vehicle sales.”'s monthly True Cost of IncentivesSM (TCISM) report takes into account all automakers' various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.

According to, combined incentives spending for domestic manufacturers averaged $3,489 per vehicle sold in May 2008, up from $3,263 in April 2008. From April 2008 to May 2008, European automakers increased incentives spending by $241 to $2,935 per vehicle sold; Japanese automakers increased incentives spending by $94 to $1,324 per vehicle sold; and Korean automakers decreased incentives spending by $224 to $1,932 per vehicle sold.

True Cost of Incentives for the "Big Six" Automakers


May 2008

April 2008

May 2007

Chrysler Group $3,714 $3,795 $3,823
Ford $3,326 $2,989 $2,964
General Motors $3,477 $3,132 $2,996
Honda $1,256 $1,405 $1,383
Nissan $2,090 $1,796 $1,943
Toyota $1,045 $840 $804

In May 2008, the industry's aggregate incentive spending is estimated to have totaled approximately $3.56 billion, up 5.6 percent from April 2008. Chrysler, Ford and General Motors spent an aggregate of $2.35 billion, or 65.8 percent of the total; Japanese manufacturers spent $767 million, or 21.4 percent; European manufacturers spent $313 million, or 8.8 percent; and Korean manufacturers spent $144 million, or 4.0 percent.

"Domestic manufacturers are expected to spend the most amount of money on incentives this summer," commented Edmunds' Senior Editor Michelle Krebs. "The Japanese manufacturers are not expected to increase their spending on incentives because of the public’s perception that they have more fuel-efficient vehicles."

Among vehicle segments, large trucks had the highest average incentives, $4,667 per vehicle sold, followed by large SUVs at $4,603. Sport cars had the lowest average incentives per vehicle sold, $1,198, followed by compact cars at $1,219. Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large trucks averaged the highest, 14.4 percent, followed by large cars at 13.5 percent of sticker price. Sport cars averaged the lowest, 4.1 percent, followed by luxury sport cars at 5.4 percent of sticker price.

Comparing all brands, in May Scion spent the least at $214 followed by MINI at $294 per vehicle sold. At the other end of the spectrum, Saab spent the most, $7,140, followed by Cadillac at $6,673 per vehicle sold. Relative to their vehicle prices, Saab and Cadillac spent the most, 20.3 percent. and 14.6 percent of sticker price, respectively, while Scion spent the least with 1.3 percent and MINI spent just 1.4 percent.

This Day in Auto History:

Automobile Quarterly
Automobile Quarterly

Racer Bernd Eli “Barney” Oldfield is born in Wauseon, OH
The last British-built Rolls-Royce Silver Ghost actually sold, a Barker touring car ordered by J. Henry Thomas, is completed by the coachbuilder and delivered to its owner
Racer Jean-Pierre Jaussaud is born in France
Risaburo Toyoda, the first President of the Toyota Motor Company, Ltd., dies at age 68
The Mercedes-Benz ESF24, the last of five experimental cars built to test safety features, is introduced to the public

Source: Automobile History Day By Day, by Douglas A. Wick

No stakes in Chrysler, GMAC sold

Cerberus says it still has control


Cerberus Capital Management hasn't sold any new stakes in Chrysler LLC or GMAC LLC, the investment company said Monday afternoon.

The Financial Times reported Monday morning that the private-equity firm had sold more than half of its stake in Chrysler and GMAC to about 90 investors for as much as $1 billion for stakes in one or both companies.

People familiar with the original Chrysler and GMAC deals told the Free Press that Cerberus used co-investors in the deals' financing and that nothing has changed in either case.

"Cerberus has not reduced or made any changes to its equity stakes in GMAC or Chrysler since the closing of either transaction. Cerberus continues to have voting control over both investments," Cerberus said in a statement. "Our commitment to these companies has not changed."

A group of investors led by Cerberus acquired 51% of GMAC for about $14 billion in 2006. Last year, Cerberus acquired 80.1% of Chrysler and invested $7.4 billion in the automaker.

In September, the Wall Street Journal reported that "Cerberus mitigated its own risk by selling big chunks of Chrysler and ... GMAC to a group of well-known hedgefunds and private-equity firms."

In a January interview with that newspaper, Cerberus' No. 2 executive, Mark Neporent, said the private-equity fund, which had $26 billion, never commits more than 5% of its money in any one of its funds in one investment.

Monday, June 2, 2008

Summary Judgment Granted for Defendant on Patent License Defense

Orion IP, LLC v. Mercedes-Benz USA, LLC, --- F.Supp.2d ----, 2008 WL 2222964(E.D.Tex. May 30, 2008) (NO. 6:07 CV 451)
Judge: Leonard Davis
Holding: Defendant's Motion for Judgment on the Pleadings or in the Alternative Motion for Summary Judgment GRANTED
One interesting issue I have seen come up more than once in local patent infringement litigation is what happens when a patent holding company settles claims against one defendant, and then a later case is filed either by a company related to the releasing plaintiff against the released defendant, or by the settling plaintiff against a company related to the released defendant. (Got that?)
The latter situation arose when Orion sued DaimlerChrysler Corporation (“DCC”) for infringement of two patents in Orion IP, LLC v. Ford Motor Company, 2:04cv313. Orion had previously sued Mercedes-Benz USA, LLC ("MBUSA") for infringement of the patents in Orion IP LLC v. Mercedes-Benz USA LLC, 6:05cv322. On February 16, 2006, DCC and Orion entered into a “Patent License and Settlement Agreement” to resolve both litigations. DCC settled with Orion on behalf of itself and all “DCC Related Companies,” including MBUSA, and in the Settlement Agreement, Orion granted “DCC and the DCC Related Companies a nonexclusive, non-transferable ... royalty-free, fully paid-up, worldwide license ...” to both patents.
On August 3, 2007, the Daimler companies (including MBUSA) spilt from the Chrysler companies. Chrysler LLC is the successor to DCC and retained the benefits and obligations under the Settlement Agreement. MBUSA is no longer affiliated with Chrysler LLC. On September 25, 2007, Orion filed suit against MBUSA alleging MBUSA “lost” its status as licensee of the patents when the Daimler-Chrysler split occurred and MBUSA infringes the patents. MBUSA denied infringement, and alleged that it has a license to practice the patents, and that it has a release of claims for any infringement. Accordingly, it filed a motion for judgment on the pleadings or in the alternative for summary judgment against Orion's patent infringement claims, claiming it is still entitled to the benefits of the Settlement Agreement.
Judge Davis concluded that MBUSA was entitled to the benefits of the settlement agreement, even after the split. "The Agreement is what it is as written", he wrote. "The Court will not rewrite the Settlement Agreement to place limitations on the license. The language of the Agreement does not support Orion's proffered interpretation, and the Court rejects it."
In the order's final paragraph, Judge Davis noted that while MBUSA's counterclaims of invalidity and noninfringment are moot in light of his order, its counterclaim for breach of contract remains justiciable. But, MBUSA based its allegation of the Court's jurisdiction over its counterclaims on the Court's jurisdiction in patent cases. Accordingly, "[i]f MBUSA wishes to continue to assert its breach of contract claim in this Court, the Court ORDERS MBUSA to replead its claim specifying the basis for jurisdiction within ten days of this Order or the Court will dismiss the claim without prejudice."

Chrysler faces tricky dealer mergers

Project Genesis brings on blame, praise from dealers

In late April, Bob Wilson Dodge-Chrysler-Jeep closed its doors and filed for Chapter 11 bankruptcy protection in Tampa, Fla. The bankruptcy reorganization petition blamed Chrysler LLC's Project Alpha dealer consolidation program for its troubles.

The rapid onset of financial problems at the high-volume Wilson store shows that Chrysler's plan to slim down its dealer body will be painful for some.

In February, Chrysler announced it was renaming its Alpha program Project Genesis. The new program has ratcheted up pressure on dealers to buy or sell their stores. Chrysler now wants most dealers to sell all three brands under one roof and is trimming clone models that compete with one another.

With auto sales tumbling and tight credit, dealers are wary of investing in store improvements. To further complicate matters, Chrysler says it is not offering financial aid to help dealers sitting on the fence. Chrysler also says dealers combining under Genesis must sign exclusivity agreements barring them from selling other brands at their Chrysler stores. With the industry in turmoil and Chrysler's future uncertain, that can be a tough sell.

In addition, the Genesis program reduced facility requirements by 12 percent in view of the slimmer projected product lineup. But some dealers had already invested in larger facilities under Alpha's larger planning requirements.

Chrylser's goals
Project Genesis aims to
-- Work with retailers to streamline the dealer body, combining all 3 brands -- Chrysler, Jeep and Dodge -- under one roof wherever possible
-- Trim overlapping products and add vehicles where Chrysler doesn't compete
-- Increase per-store sales, profits for remaining dealers

Stand-alone woes

Steven Landry, executive vice president of North America sales, says 25 to 30 Genesis deals have been completed since the program was announced. Chrysler cites St. Louis and Tulsa, Okla., as markets where the Genesis project is nearly completed. Chrysler wants metro-area stores, now averaging fewer than 500 units, to sell 1,000 or more annually.

"We have been operating very fast," Landry says. Roughly 100 other Genesis discussions are under way. Landry says many dealers are eager to get deals done sooner rather than later.

What separates Genesis from Alpha is Chrysler's decision to build its entire business plan around the three-brand stores. Chrysler has already axed four models, and more cuts are on the way.

"They made it clear they're not going to be supplying enough units of each of the three brands for stand-alone stores to survive," says Michael Sieving, a Sacramento, Calif., attorney specializing in auto dealer issues.

Says Landry: "There's much higher value in having all three brands. The value of that versus having a stand-alone Chrysler, Jeep or Dodge store is higher. It's kind of like the futures market.

"If you are stand-alone Chrysler, Dodge or Jeep, unfortunate as it is, the value will continue to go down between now and 2012. A lot of dealers are saying, 'I don't want to be last.'"

Burden of debt

Jumping on the consolidation bandwagon early didn't help the Bob Wilson dealership in Tampa, once among the most-profitable Dodge stores in the country, according to court documents. Bob Wilson Dodge, which opened in the 1960s and sold only Dodge until last year, once averaged about 1,600 vehicles a year.

But in 2007, the dealership bought a neighboring Chrysler-Jeep store to comply with Project Alpha. As part of the deal, Bob Wilson Dodge was required by the factory to sell a profitable portion of its Dodge territory to another dealer, according to documents filed in U.S. Bankruptcy Court in Tampa. The resulting debt, combined with slowing sales, crushed the once profitable dealership.

Wilson declined to discuss his situation, but court documents say the dealership was "required to take on significant debt to expand its building to meet DaimlerChrysler's demands to sell additional vehicles." At press time, negotiations were ongoing to find a way to reopen the store.

Said Landry: "We're pulling for Bob to open his doors for sale and continue to sell Chrysler, Dodge and Jeep for us. He's a great dealer."

Good deal

The flip side of Wilson's situation is that of two dealers in the Minneapolis-St. Paul area. Denny Hecker and Jerry Golinvaux were among the first to wrap up a Genesis deal.

After several months of talks, the two agreed that Golinvaux's Roseville Chrysler-Jeep dealership would buy Denny Hecker's Rose-dale Dodge, which was across the street in the Twin Cities suburb of Roseville.

"I had just invested over $1 million adding to my showroom and updating the whole front end of the dealership, so it made more sense for me to have the whole thing," Golinvaux says.

After starting discussions in January, before Genesis was even announced, the two dealers reached an agreement April 1. Chrysler approved it within seven days.

Since combining, Golinvaux's dealership has increased service hours to handle all the Dodge business. "Sales of service and parts operations," he says, "have increased over 70 percent."

This Day in Auto History:

Automobile Quarterly
Automobile Quarterly

Charles Stewart Mott of General Motors is born in Newark, NJ
The Everitt-Metzger-Flanders Company, makers of the E-M-F, is founded by Barney Everitt, William E. Metzger, and Walter E. Flanders with William E. Kelly as Chief Engineer
Racer Don Branson is born in Rantoul, IL
The 2,000,000th Ford V-8 is produced
GMC receives the Army-Navy “E” award for production efficiency and achievement in supplying war equipment

Source: Automobile History Day By Day, by Douglas A. Wick

Cummins will lay off 125 in Bartholomew

Star report

Cummins Inc. plans to temporarily lay off 125 at Columbus Midrange Engine Plant in Bartholomew County due to depressed demand for Dodge Ram pickup trucks, a newspaper reports.

The company Friday morning asked for volunteers for a layoff starting June 8 and hopes to bring them back to work in mid-August, according to an article Saturday in the (Columbus) Republic.

The plant near Walesboro is the exclusive producer of the 6.7-liter diesel engines for the Dodge Ram, the newspaper writes.

"This is not something we want to do," spokesman Mark Land told the newspaper.

However, lower demand for the 2008 Dodge Ram has resulted in an inventory glut, and Chrysler does not want to build any more trucks until mid-August, when new engines will be needed for the 2009 model year, Land told the newspaper.

Cerberus cuts stake in Chrysler and GMAC by more than half - FT

LONDON (Thomson Financial) - Cerberus Capital Management has sold 'significantly' more than half of its stake in Chrysler and GMAC to about 90 investors, the U.K.'s Financial Times said Monday, citing people familiar with the matter.

The paper said investors paid as much as $1 billion for stakes in the U.S. car maker and the former financial services arm of General Motors Corp.

Avenue Capital, Cyrus Capital Partners, DB Zwirn and Franklin Templeton Investments were some of the investment groups that took up the offer to buy a stake in the companies, according to the FT.

Cerberus acquired a 51% stake in GMAC for $7.4 billion as part of a consortium, which also included Citigroup.

It bought an 80.1% stake in Chrysler from DaimlerChrysler in August last year.

The paper said Cerberus' decision to reduce its stake stems from a wish to lower its risk especially given that both deals have proved disappointing for the buyout firm.

The FT said GMAC's mortgage financing unit, ResCap, has been hard hit by the credit squeeze while Chrysler has been affected by soaring oil prices and more cautious consumer spending.