Opel Magna deal uncertainties
1st July 2009 12:19

It would seem that negotiations between Magna and GM have hit some choppy waters. GM is reportedly concerned over giving away too much technology to Magna and a prospective Opel/Vauxhall Mark 2 with its Russian connections. There's also the issue of carving up territories for future Opel sales. GM is wary of creating a monster that hurts its own future chances in key markets.

Is the deal really moving towards being off? I somehow doubt it. The German government is still right behind Magna's bid and has already provided bridging finance and loan guarantees for Opel. Berlin is not seeking to fuel the press speculation about other bidders being invited back to the table, though it has been acknowledging that we don't have a done deal yet.

But it looks like there has been a bit of press manipulation emanating from Detroit. Anonymous sources said to be close to events are popping up everywhere. By creating the impression that the deal is far from done and that other bidders are very much in with a chance, GM puts added pressure on Magna in the negotiations. But if the Magna consortium bid does unravel, a whole load more uncomfortable questions get asked about other bidders, Berlin has a heart attack and, apart from anything else, even more GM management time likely gets diverted to the Opel/Vauxhall sale. They have more than enough on their plates in the Ren-Cen at the mo.

The competition for Opel/Vauxhall is still not over, but Magna's consortium is still by far the front-runner due to its strong backing from Germany - government and labour unions. Marchionne may look on with interest, but his bid caused much consternation in Germany before and would do so again. If holding company RHJ has really improved its offer, it may well get a hearing, but it should be wary of being 'used' by GM as a lever to chivvy Magna. Oh, and by the way, RHJ has just posted a big loss suggesting it's perhaps not really in position for anything more than a small role or stake. Beijing Auto? I don't think so.

That said, if a seismic shift is coming, and Magna is really on its way out, expect an announcement very soon. Time is short. The German government needs to be on-side. And Opel is already eating into bridging finance. 

US/GERMANY: GM eyes Opel deal with RHJ – report

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Racking up the just-auto mileage
26th June 2009 11:46

We have just passed something of a milestone here. I hope it doesn't sound too introspective, but our online database of news and feature articles, all sequentially numbered, has just ticked over the 100,000 mark.

That's a pretty big archive of material and hitting a milestone like that has caused us to stand back and pause for a moment's reflection.

Phew, 100,000 articles on just-auto. That's a big number. If you printed all those articles out and laid them end to end, they would stretch all the way to the moon.

Okay, I obviously made that up, but let's get the old calculator out...

Let's make the assumption that each one, on average, when printed out, takes up a single sheet of A4 paper. A single sheet of A4 is 297mm in length. That means, according to my calculator, those 100,000 sheets would stretch to 29,700 metres which is 29.7 kilometres (18.4 miles). Travelling east, that would get you from London to Southend for a paddle in what passes for the sea in the Thames estuary. Not quite as impressive as a paper chain that gets to the moon, I know, but that's some distance.

Anyway, it's a lot of articles since we began operations way back in 1999.

Myself and deputy editor Graeme Roberts have been here at our desks and out on assignment since 2000. Many of the journalist/analyst/research editorial contributors on just-auto have been with us since then also. The time has flown by and it's been a blast from the outset. Even in these tough times – our duty is to report and analyse, but when the industry feels pain, we quietly empathise with those affected - there's so much to keep us fascinated, so much to write about and to consider. The automotive industry is constantly buzzing and there's never a dull moment, as they say.

We will raise a mug of tea to just-auto and all those who sail – or have sailed - in her, colleagues past and present. And of course, we don't forget the people like you who read our publication and keep us in business.

Below is a link to just-auto article number 100,000 (you can see that milestone number in the URL).

Cheers!

http://www.just-auto.com/article.aspx?id=100000

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The range anxiety gamble
24th June 2009 12:24

This looks like a week in which electric cars are going to be very much in the news – in part due to government initiatives on both sides of the Atlantic. And there are plenty of announcements being made by the OEMs to coincide with that. Nissan's yesterday about manufacturing electric plug-in vehicles – not hybrids - in the US is particularly intriguing.

It's the latest news from Nissan on this subject and follows on from Carlos Ghosn's consistently stated view that electric cars represent the long-term future for the automotive industry. He has perhaps stood out among car firm bosses as a real believer in electric drive technology and the opportunity presented - and on a business planning horizon that he earnestly believes is with us now. Working with partners like Project Better Place has demonstrated a serious intent to grapple with things like infrastructure, too.

At first sight, 100,000 units a year of production in the US sounds pretty ambitious. And maybe it is, given that we're talking about electric drive vehicles that don't come with a back-up gasoline engine. That raises the 'range anxiety' question alongside consumer acceptance of frequent battery charging rather than occasionally filling the tank with the black stuff.

How far can these cars really go on a single charge? (Nissan says the car will offer 100 miles of range, but what if the heater is on and there are hills to climb...); how often does it need charging?; how much will that cost me and just how robust is the battery? (And the truly environmentally aware may even ask how the juice coming out of the power socket was generated...but I suspect that question will be overlooked or fudged in the minds of many.)

Nissan will have to come up with a very good product to get initial consumer acceptance of this new technology. And - leaving aside the considerable product development and technology issues ahead - I'm sure there is a lot of discussion still to happen concerning the precise business model, too (like the retail price and how battery leasing might work in practice).

But that's 100,000 units in a passenger vehicle market of almost 16m units (or wherever we are on the recovery path by 2012, when Nissan plans the start of US production). It's way under a 1% share. Nissan can target sales in US cities where it thinks the car will sell.

Do Americans buy small, more energy-efficient cars? They are now buying more of them – look at the success of Smart's Fortwo. And Nissan can be cute and look to market the car in places where city authorities are suddenly looking for more EV solutions (like Baltimore, for example).

Market analysts can argue about how quickly US market segmentation will shift, but there is a consensus that smaller and more energy-efficient vehicles will be growing in sales. Electric drive vehicles in various formats will clearly be a part of that broader trend, though it is far from clear exactly where the numbers will be and on what timescale (and the internal combustion engine is doing much to make itself more efficient).

But which way is the oil price wind blowing? I wouldn't mind betting that in 2012, when global economic recovery is really kicking in, the price of a barrel will be a lot higher than today. That could provide a very fair wind to both hybrids and pure-electrics.

Is range anxiety really a big issue? Incremental improvements are helping, but the issue is not going away. Having said that, there is a point at which range becomes acceptable for many who would consider such a car primarily for relatively low-mileage daily use - the commute to the office, say.

And with that pattern of usage, range anxiety may not be as big an issue in America as in Europe because American households have more multi-vehicle ownership than Europe does.

Whereas a pure EV might be severely limiting in Western Europe (asking the single car household's sole vehicle to do many jobs for the lowest cost explains why the C-segment is Europe's largest – cars like the Volkswagen Golf are fine around town and for motorway cruising) US households are perhaps more likely to have a larger vehicle available for longer journeys. 'I use the EV every day, but the F-150 is just great for the weekends.'

Ghosn is taking a gamble though, that he can lead investment in electric vehicles for 'mass transportation' and steal a march on rivals, who are playing much safer with hybrids and 'range extenders' (like the Volt) that deal with range anxiety up front. And it's a pan-global strategy to spread the technology investment across as many units as possible under the Renault and Nissan brands. Later on, when scale economies permit, maybe a viable low-cost 'Logan-style' electric car can be developed for price-sensitive emerging markets - which will likely not be figuring too much early on.

If Ghosn gets it right, the EV push could leave Renault-Nissan as one of the most powerful groups in the global auto industry for a generation. But it could be an expensive drag on profitability at a time when the industry's worst performers come under increasing pressure to cut capacity still further.

It's a gamble. And Ghosn is perhaps a brave man. But you wouldn't expect him to have a vision on where the industry is headed and not give it his best shot would you?

JAPAN: Nissan targets US for electric car push

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Costly electricity
22nd June 2009 15:06

Prospects for plug-in electrics and hybrids continue to provoke much discussion in the industry. Last week, we heard that Daimler's electric Smart has been formally given the go-ahead to enter commercial production next year. The Smart Fortwo (sorry Daimler, but I have to capitalise brand and model names) is a curious one. It's perhaps an example of a car that was ahead of its time. In the looks department, it is much more acceptable now than it was back in the late 1990s. And a plug-in electric version seems to make good sense.

But the batteries are not going to be cheap. And that's a problem: who pays? Will the customer pay for that? The vehicle manufacturer? Will governments tinker with regulatory frameworks to encourage take-up? There seems to be a consensus in the industry that governments will have to play a part in helping electric cars develop significant market penetration. And, the argument goes, the government needs to do that as part of a broader energy policy that addresses overall CO2 generation, renewable power and economic or energy security issues. There's a lot to consider.

At some point though, the consumer is going to be asked to make a contribution to the additional costs associated with a battery pack and electric drive. Early adopters at initial low volumes may be fine with that. The interesting thing though will be the speed with which plug-in electric vehicles can become cheaper on a cost-per-unit basis as volumes become bigger. It will be something of a chicken and egg situation – which is why the regulatory framework is particularly important in terms of the fossil fuel relativities.

But would you pay almost GBP400 (USD650) a month to lease a Smart with electric drive? That's some premium to ask the customer to pay. How quickly can that sort of figure come down and to what extent will the government subsidise these vehicles? One point that should not be lost: in Britain the government takes plenty of tax from motorists at the petrol pump, way more than is required for investment in roads. And Her Majesty's Government needs every penny it can get, even if politicians like the sound of a greener electric future.

RESEARCH: Market projections for EVs and hybrids

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Ssangyong - action needed, quick
18th June 2009 12:51

It's a right old mess over at Ssangyong. The beleaguered firm is in Korea's equivalent of Chapter 11 and having a tough time of it. Market conditions aren't fine and dandy and Ssangyong's model line-up is short on recession busting fuel-sippers; it's a niche offering concentrated in no-frills but good value for money SUVs with some reliable Mercedes heritage technology under the skin.

Ssangyong was, however, thrown an important lifeline with the Korean bankruptcy court administrator's decision last month to allow it to restructure rather than enter liquidation.

And there are some significant plusses in the outlook for Ssangyong. A big one is an attractive looking crossover - the C200 - just around the corner as well as an international distribution set-up. There could also be financial sweeteners for anyone prepared to invest. Overall, Ssangyong looks like a brand with potential that could actually be attractive to outside investors (another OEM, for example, just has to figure that it can do better than SAIC did). 

But the new business plan includes many job losses and that has led to a dispute with the union that has quickly paralysed production.

While some union resistance was to be expected, it has dragged on - to the detriment of those still left who want to take the business forward. It won't be long before parts and vehicle supply lines start to run dry.

Korean labour unions aren't to be taken lightly and the sit-in at the Pyeongtaek plant has reportedly attracted some extreme elements. The police are, by all accounts, standing off and prefering not to risk further violence by forcing the strikers out. Nipping it in the bud early on might have been the thing to do, but hindsight is a wonderful thing, of course.

The danger is that the whole thing gets more difficult to resolve the longer it goes on, positions entrenched, along with a growing siege mentality. Meanwhile, Ssangyong racks up accumulated revenue losses and confidence in the brand erodes further. And potential investors are turned off.

Decisive action immediately to end the dispute might well get the best outcomes for all concerned.

SOUTH KOREA: Ssangyong dispute rumbles along

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