THE WEEK THAT WAS: Interesting, interesting...

By Graeme Roberts | 24 October 2014

Q3 results from Ford and GM showed North America and China remain profitable but Europe is still a problem for both despite the restructuring pain

Q3 results from Ford and GM showed North America and China remain profitable but Europe is still a problem for both despite the restructuring pain

If I had to think of one adjective to describe this week's autobiz news, 'interesting' is as good a fit as any. Bit of this, bit of that.

General Motors and Ford kicked off third quarter 2014 results season yesterday and today, respectively. I was a little surprised at GM's "special items" which knocked off $300m from the $1.4bn net profit - double Q3 2013's tally on the CFO's abacus. I thought "recalls" and read the statement again: "The third quarter special items were primarily related to flood damage sustained at the GM Technical Center in Michigan and long-lived asset impairments in Russia." Okaaay.

It pays to have a good memory in this business. GM, of course, had booked a $900m charge in the second quarter of 2014 to cover the cost of potential recalls over the next decade on top of the US$400m it had put aside earlier to pay compensation to victims of the recall that first emerged in February so the lack of any more recall costs in Q3 is, perhaps, not surprising. But I do wonder if we might still see recall-related special items, as a certain Mr Feinstein continues his compensation adjudication, before GM's financial year is out?

As was also the case with Ford, North America and China largely produced the good news at GM but Europe remains the problem child for both. Reading the financial statements and, as we've been able to do, talking recently with senior executives, you get the feeling the hard work has been done, or is almost done, in particular the hard-hitting plant closures in Bochum and Genk and the atmosphere is optimistic but the bottom line is yet to show the beneficial results of all that pain - GM Europe reported an EBIT-adjusted loss of $0.4bn which included restructuring costs of $0.2bn, double the total $0.2bn loss in Q3 2013. Ford's European unit, meanwhile, booked a third quarter pre-tax loss up $257m to $439m due to what was simply described as "Russia", exchange effects and lower component pricing plus non-recurrence of prior year gains. Still not out of the woods, eh?

On the supplier side, results were in from Dana and Federal-Mogul, too.

The Takata airbag issue (scandal?) continued to rumble on this week with this (Nissan) in today following on from the extraordinary news a few days back 7.8m vehicles are now affected in the US alone. I've not heard of any Takata execs making formal apologies at shareholder meetings, or symbolically falling on swords at carefully staged media appearances, but you do wonder what has been/is being said behind closed doors between supplier and automakers - some of the recalled cars are over a decade old and that makes recalls much harder as the cars are harder to track down after multiple owners. Amazingly, it seems Takata's shareholders aren't too worried, either.

Over at Honda, executives took a humbler approach after the latest Fit [Jazz] was recalled in Japan for the umpteen..., er, fifth time in about a year. CEO Takanobu Ito and other executives reportedly will reduce their salary by 10% to 20% for three months, and an executive has been assigned to oversee quality improvements. This latest recall covers mainly new Fit hybrids including some of the Vezel [HR-V] hybrid spin-offs as well as some standard petrol Fits and N-WGN mini-minivan models, and will cost an estimated JPY5.7bn ($US53m). Worth noting that, the thick end of a year after Japan launch, and with production at the new Mexican plant in full swing (not without its problems, either, according to another report I saw this week), Honda Europe has still not launched the Jazz and HR-V here - that's for 2015.

Barely a week goes by without plant opening or model start-of-production news somewhere. Mazda has started building the redesigned 2 [Demio] at its new Mexican plant where the 3 kicked off proceedings a while back, this is the 2 that'll be the basis of a Toyota small car Mazda will build on an OEM basis for its bigger rival to sell in North America. It'll be interesting to see how the Toyota restyle compares with the 2 'original'; I'm wondering if it might be like the Aygo compared with the Citroen C1 and Peugeot 108 all built in the Czech Republic JV plant.

Mercedes, meanwhile, is eyeing a new way of making NAFTA Sprinters, the Dongfeng-Nissan JV in China started output at its fourth factory and VW is considering exporting cars built at its DRB-Hicon assembly plant in Malaysia to RHD Indonesia and Thailand (may adding some LHD markets later). Not to forget the biggie: Tata's JLR opening its long-awaited JV manufacturing plant with Chery in China - this is its first full manaufacturing plant (as opposed to KD kit assembly) overseas and quite a milestone. And JLR - reportedly - is talking to people in the right places about a US plant, too. Not a bad idea, I opined.

Have a nice weekend.

Graeme Roberts, Deputy Editor, just-auto.com