Iconic Hummer Brand Sold to Chinese Manufacturer

Hummer, the off-road vehicle that once epitomized America’s love for hulking trucks, is now in the hands of a Chinese heavy equipment maker.

Iconic Hummer Brand Sold to Chinese Manufacturer

Iconic Hummer Brand Sold to Chinese Manufacturer

General Motors Co. and Sichuan Tengzhong Heavy Industrial Machinery Corp. finally signed the much-anticipated deal for GM to sell the brand on Friday.

Tengzhong will get an 80 percent stake in the company, while Hong Kong investor Suolang Duoji, who indirectly owns a big stake in Tengzhong through an investment company, will get 20 percent. The investors will also get Hummer’s nationwide dealer network.

Financial terms were not disclosed, although a person briefed on the deal said the sale price was around $150 million. The person did not want to be identified because the terms were being kept private. GM’s bankruptcy filing last summer said that the brand with military roots could bring in $500 million or more.

Suolang Duoji also is the controlling shareholder and chairman of Lumena Resources Corp., a Hong Kong listed mining company.

GM and Tengzhong said in a statement that the transaction still must be approved by the U.S. and Chinese governments. Chinese regulators initially expressed reservations about Tengzhong’s ability to run such an enterprise.

Hummer’s current management team will stay with the new company, which will be headquartered either in Detroit or suburban Auburn Hills, Mich.

James Taylor, the GM executive who has run Hummer recently, will remain as its chief executive officer.

Taylor said in an interview with The Associated Press that he knows resurrecting the brand will be difficult, but the key will be quickly rolling out more fuel-efficient models that get over 20 mpg.

“I’m not in any kind of denial that we have a very steep uphill challenge in front of us,” Taylor said.

Hummer, he said, has been in a state “suspended animation” since June 2008 when GM announced it would be reviewed for sale or closure. Since then, its future has been uncertain and it got no marketing support or new products. Financing for leases, a big part of its luxury market, also dried up, Taylor said.

Still, GM sold 1,000 Hummers in some months, proving that buyers are out there.

“There’s still a loyal customer base underneath there that loves Hummer,” he said.

Hummer hopes to keep buying fuel-efficient engines and transmissions from GM, but can seek them elsewhere, Taylor said.

He said the brand has been unfairly tagged as a symbol of the American gas guzzler, saying other vehicles get worse mileage.

He wants to make sure “at least we aren’t a victim of misinformation that we stand alone as the ultimate bad guy in the space, which we aren’t.”

Hummer hit the streets for civilian use in 1992 while owned by AM General LLC, which makes Humvees for the U.S. Army, and California Gov. Arnold Schwarzenegger was among the first customers.

The brand, whose smallest model gets 16 miles per gallon (14.7 liters per 100 kilometers) in combined city and highway driving, sold well until the middle part of this decade when fuel prices began to rise. Sales peaked at 71,524 in 2006.

But only 8,193 Hummers have been sold in the U.S. through the first nine months of the year. That’s down 64 percent from a year earlier. And only 426 Hummers were sold nationwide last month, according to Autodata Corp.

GM, which spent 40 days in bankruptcy protection during the summer and has received about $50 billion in U.S. government aid, also plans to sell its Saab brand and scrap Pontiac and Saturn as it tries to streamline its operations.

The Hummer deal is a victory for GM, which saw a similar agreement to sell the Saturn brand blow up at the last minute. Auto dealership magnate Roger Penske’s bid fell through just before the deal was to close last week when a contract to make vehicles for Saturn was rejected by the Renault board.

The company wants to focus on four core brands: Chevrolet, Cadillac, Buick and GMC.

With backing from a well-capitalized company, Hummer will now focus on improved efficiency and performance and include alternative fuels, more efficient gas engines, six-speed transmissions and diesel engines.

GM said its assembly plant at Shreveport, La. would continue to assemble the commercial Hummer H3 and H3T pickup trucks on a contract basis until June 2011, with a one-year option until June 2012. The military H2 version will continue to be assembled by AM General in Mishawaka, Ind., under the same terms.

South Bend, Ind.-based AM General retains ownership of the military versions of the vehicles, which have been used frequently in Afghanistan and Iraq.

The Shreveport GM plant is currently slated to close by June 2012. For the time being, the plant also is assembling the Chevrolet Colorado and GMC Canyon pickup trucks.

CEO Taylor said GM has agreed to make the H3 models under contract through 2012, but he expects the manufacturing relationship to end when production of other products made in Shreveport ends.

“GM’s not in the business of supporting other OEMs or niche manufacturers like us,” he said.

He sees a potential for a manufacturing relationship to continue with AM General, he said.


AP Business Writer Alan Sayre in New Orleans contributed to this report.

Copyright 2009 The Associated Press. All rights reserved.

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Ain’t It Great-Ten Cars We Love To Hate

By Dan Carney, contributor


Uptight art snobs periodically work themselves into a lather when a respected art museum decides to host an exhibit celebrating automotive design as an art form.

Outside the orthodoxy of such rigid thinking, however, it is obvious to most people that the very best automotive design is unquestionably the product of the very best artistic inspiration.

But what about the worst designs? What of the automotive equivalent of atrocious community college art class watercolors?

Museums have no space for the ugliest cars, but fortunately, we do, just as a reminder that artistic daring doesn’t always have a happy ending.

Such selections, of course, are subject to debate and opinion. It is impossible to include every deserving offender on our list of 10 of the most egregious cars, so please submit your own suggestions, with a description of why they deserve to be considered among the ugliest cars ever.

Here is our list, in random order, so take a look and be glad that one of these babies doesn’t (dis)grace your driveway.

Vote: Which car do you think is the ugliest?
’70-’78 AMC Gremlin
Hulton Archive / Getty Images file
’70-’78 AMC Gremlin

It may be an unsubstantiated legend that American Motors designer Richard Teague sketched the Gremlin on an airline airsickness bag, but it is a fact that AMC launched the car on April Fools Day, 1970, a fitting arrival for a car with clownish ill-proportioned lines.

The long hood and near-vertical tail gave the car the aspect of a clown’s oversized shoe.
’74-’77 AMC Matador Coupe
’74-’77 AMC Matador Coupe

AMC surely deserves some credit for recognizing that even on a limited budget, it could imbue its cars with distinctive styling. Unfortunately, as happens in military campaigns, daring sometimes meets with legendary failure rather than the hoped-for surprise victory.

So it was for the lumpy Matador Coupe, which looked like a designer’s droopy clay model that was accidentally left in the sun. In an uncharacteristic failure to identify a naked emperor when it saw one, Car and Driver magazine inexplicably named Matador coupe the “Best Styled Car of 1974.”

Any question of the Matador’s place on this list is put to rest by the ’77-’78 Barcelona version festooned with a padded vinyl top, opera windows and two-tone paint. Earth tones only, natch.
’75-’78 AMC Pacer
Anonymous / AMC via AP
’75-’78 AMC Pacer

The Pacer really deserved better than this.

There was true innovation in the Pacer’s fishbowl body, such as the industry-leading elimination of rain gutters to reduce wind drag (now accepted practice), a longer passenger-side door for more convenient back seat access from that side, and rack-and-pinion steering which was uncommon among domestic cars at the time. A planned rotary engine would have truly put the Pacer on the cutting edge.

But the rotary engine never reached production, leaving the Pacer with AMC’s antiquated straight-six engine, and the unorthodox, bloated styling never got any less shocking to the eye.
’80-’83 Cadillac Seville
GM Corp.
’80-’83 Cadillac Seville

Cadillac designers were apparently not paying attention to the ridicule heaped on the Gremlin for its unbalanced proportions and chopped-off rear end.

Evidently enamored of ‘70s neo-classics like the Excalibur (a worthy candidate in its own right), Cadillac sought to lend its mid-size model weight of heritage by borrowing the “bustle back” trunk from an earlier era. At least they didn’t attempt running boards or exposed exhaust pipes.

The ugly styling and a plague of mechanical problems from its new front-drive layout and attempts at fuel-efficient engines dropped sales of the once-popular model in the tank.
’58-’59 Edsel
Ed Carlin / Getty Images file
’58-’59 Edsel

In the 1950s, Ford wanted to establish a new luxury division, so to create this new brand’s prestige bona fides, naturally the company named the new car after Henry Ford’s well-liked but unusually named late son Edsel.

They then bestowed upon it laughable styling that closely approximated the expression formed by people laying eyes on the car for the first time. This negative first impression of the “sucking a lemon” grille on the ’58 Edsel models was reinforced by Ford’s months-long ad campaign building up consumer anticipation of the big reveal.

Like a blowout game in a much-hyped Super Bowl, much of America felt tricked when they’d been led to expect something exceptional, only to find something exceptionally ugly.
’60-’62 Plymouth Valiant
’60-’62 Plymouth Valiant

The observant reader may have noticed a trend by now. Most of the cars on this list are the result of car manufacturers operating outside their comfort zones, attempting to enter new markets or entice new customers.

That is why so many of our ugliest cars are the early attempts at compact car design by domestic carmakers. You can’t get much farther outside the comfort zone than old Detroit trying to conceive small cars when General Motors still held 60 percent of the U.S. market all by itself.

The 1960 Plymouth Valiant apparently tried to set itself apart with all manner of slashing lines and jutting edges, but the resulting mess earned the car a solid spot on this list.
’70-’80 Ford Pinto
Ford Motor Co. via AP
’70-’80 Ford Pinto

Animal forms serve as the inspiration for many automotive designs. The reason is obvious; their organically powerful and efficient lines can be quite evocative.

Why the Ford Pinto designers thought anyone would be excited by an automotive frog, though, has never been discovered. Especially when finished in the popular dull green of the era, the Pinto looked like it should have been named after it amphibious inspiration rather than wild equine.

If Ford had been able to use even smaller wheels so it could seal off the wheel wells, the look would have been complete.
’74-’78 Datsun B210
’74-’78 Datsun B210

One might think from the earlier entrants that only domestic companies have made ugly cars, but that would be untrue.

It is just that many of the most ugly foreign cars either never came to the U.S., or sank so fast upon arrival that they didn’t even leave a ripple.

Datsun’s mainstream, high-volume compact model of the mid-‘70s, the B210, is a notable exception. Its lumpy silhouette, tiny windows and suspect details like the honeycomb hubcaps firmly established Japan as a force to be reckoned with when it came to uglifying American roads.
’76-’78 Datsun F10
’76-’78 Datsun F10

In case the domestic car makers thought the B210 was a fluke, Datsun followed it up with its first front-wheel-drive ugly-mobile, the F10.

“As with the B210, the F10 is a bit garish, with its GREAT BIG EYES for headlights,” noted Road & Track magazine in 1976.

The absurd headlights and taillights bookmarked an absurdly high beltline that squeezed the side windows to squinty proportions, and raised the rear hatchback to the height of a rear sunroof.
’01-’05 Pontiac Aztek
’01-’05 Pontiac Aztek

Though bankruptcy was still a decade away when General Motors was designing the 2001 Pontiac Aztek, the same desperation that led American Motors to build its verge-of-bankruptcy atrocities in the ‘70s had Pontiac executives willing to risk anything on the chance for a breakout hit.

But while consumers have at times embraced cars with unorthodox styling, like the original Volkswagen Beetle, there are no recorded instances of popular cars which violently defile basic standards of design decency, such as the enduring appeal of balanced, flowing lines.

Instead, the Aztek was a contrived, hunch-backed, trying-too-hard, plastic-clad abomination and its failure was certain before it even rolled off the assembly line.

Vote: Which car do you think is the ugliest?

Updated: 5:10 p.m. ET Oct. 8, 2009

© 2009 MSNBC.com

URL: http://www.msnbc.msn.com/id/33194543/ns/business-autos

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GM to Shut Down Saturn After Penske Walks Away

General Motors Co. said Wednesday it would shut down its Saturn brand after an agreement with Penske Automotive Group Inc. to acquire it fell apart.

GM to Shut Down Saturn After Penske Walks Away

GM to Shut Down Saturn After Penske Walks Away

Penske, citing concerns of whether it could continue to supply vehicles after a manufacturing contract with GM ran out, ended talks with GM Wednesday to acquire the brand.

GM CEO Fritz Henderson said in statement that Saturn and its dealership network will be phased out.

“This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality,” Henderson said in a written statement. “PAG’s announcement explained that their decision was not based on interactions with GM or Saturn retailers.”

In a statement, the Bloomfield Hills, Mich.-based auto retailer says an agreement with another manufacturer to continue producing Saturn vehicles after GM stopped making them fell through, leading Penske to terminate talks with GM.
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Penske said it negotiated terms and conditions to make Saturn cars with another manufacturer, but that company’s board of directors rejected the agreement. Penske spokesman Anthony Pordon would not identify the other manufacturer.

“Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction,” the company said in a statement.

In June, GM and Penske agreed to take over the Saturn brand and related dealerships, although GM would produce the vehicles for a limited period of time.

GM said Saturn vehicle owners can still go to their Saturn dealer for service and would be able to go to a certified GM dealer for service once Saturn dealerships are closed.

It was expected that GM would announce the completion of Saturn’s sale to Penske in the coming days.

Share of Penske fell $1.93 to $17.25 in after hours trading. They rose $1.32, or 7.4 percent to $19.18 in regular trading Wednesday.

Copyright 2009 The Associated Press. All rights reserved.

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Too Much Corn in Our Cars Diet

Carmakers fight hike in ethanol at pump

They want research on engine effects before boosting ratio in fuel

Detroit News Washington Bureau

Washington — A push by corn-producing states and alternative fuel proponents to increase federal rules boosting the amount of ethanol mixed into gasoline is being fought by automakers because it would be costly and could damage engines.

By Dec. 1, the Environmental Protection Agency must decide whether to approve a request to increase the amount of ethanol that can be mixed with most gasoline sold at pumps to as much as 15 percent.

Most pumps already sell E10, which is 10 percent ethanol.

Automakers want the agency to further study the effects of the proposed increase before allowing it to happen.

Increased ethanol blends could corrode engines that aren’t specifically built for E15, according to automakers.

Four farm state senators led by Ben Nelson, D-Neb., introduced a measure that would require the EPA to grant the request.

More than 13,000 people and groups have written the EPA since the request was filed in March.

Congress has required that the nation use 11 billion gallons of ethanol next year and 36 billion gallons by 2022.

Mike Stanton, CEO of the Association of International Automobile Manufacturers, the trade group representing major foreign automakers, noted the United States would not be able to consume even half of the ethanol required by Congress by 2022 by simply requiring all pumps to be E10.

“We’re on a collision course here,” he said.

And there are a number of problems with an immediate boost in the ethanol blend.

Automakers warn the higher ethanol blend could boost greenhouse gas emissions, damage engines or disable vehicles.

In Baltimore, nearly a third of the city’s patrol cars stopped running earlier this month because a station had boosted the amount of ethanol in the fuel. It isn’t clear how much ethanol was in the mix.

Stanton, and Dave McCurdy of the Alliance of Automobile Manufacturers, which includes Detroit’s Big Three, Toyota and seven other automakers, wrote a letter Friday to Congress urging more research before approving ethanol blends like E12 or E15.

That idea “is premature, and since EPA has never allowed conventional vehicles to use higher ethanol blends, the research on their potential impacts on vehicles not designed, tested or warranted for their use is incomplete,” the letter said.

The adoption of E15 could also affect users of other gasoline engines.

The International Snowmobile Manufacturers Association, based in Haslett, warned in comments to the EPA that the increase could do “irreparable harm” to the nation’s more than 1.8 million registered snowmobiles and damage the economy of Michigan and other northern U.S. states that rely on snowmobiling for tourism.

Associations representing the nation’s 80 million boaters have also opposed the request, saying it could damage marine engines.

In 2007, Congress required the nation to drastically boost the amount of ethanol it uses to 11.1 billion gallons this year, nearly 60 percent more than what the United States used in 2007, and more than 2 billion gallons over 2008. Nearly all of the U.S. ethanol is now corn-based, but research and investment into the commercialization of cellulosic ethanol could lead to production from renewable sources like grass or wood chips. No significant quantities of cellulosic ethanol have been produced.

Ethanol producers point to some studies that suggest higher blends wouldn’t harm most engines. The EPA first approved the use of ethanol blends of up to 10 percent in 1978.

Congress asked to fund tests

Automakers have joined with the oil, ethanol, small engine, marine, outdoor power equipment and motorcycle industries to create a task force, along with the Energy Department and EPA, to assess different blends.

Dubbed the “midlevel ethanol blends research coordination council,” the group says Congress needs to allocate money to fund testing.

The automakers wrote Congress on Friday asking it to set aside $17 million “to complete the necessary vehicle testing.”

Congress is also considering whether to force automakers to build more cars that run on nearly all ethanol.

The auto industry has produced 7 million vehicles that can run on E85, a blend of 85 percent ethanol, or on regular gasoline. A bill in Congress sponsored by Sen. Sam Brownback, R-Kan., would require automakers to produce 50 percent of their fleet as E85-compatible by 2012 and 80 percent by 2015. A House version is sponsored by Rep. Eliot Engel, D-N.Y.

In March 2006, Detroit’s Big Three agreed to build 50 percent of their vehicles as flex-fuel vehicles by 2012 under certain conditions. Automakers get credits toward meeting fuel efficiency regulations for building the vehicles.

Under EPA’s recently proposed tailpipe emissions limits, it would continue the flex-fuel vehicle credit through the 2015 model year. After that, automakers would get the credit only if they could show that the fuel was being used.

The Union of Concerned Scientists urged EPA to “reject the E15 petition as a premature, unnecessarily piecemeal approach.”

Low gas prices hurt ethanol

Many ethanol producers are struggling because motorists consider gasoline prices around $2.50 a gallon affordable, and are not clamoring for a cheaper fuel. E85 is averaging about $2.01 a gallon, but it’s about 25 percent less energy intensive, so its price per mile cost is currently virtually identical to gasoline.

In May, the Obama administration created a task force to help the ethanol industry.

The $787 billion federal stimulus package sets aside $786.5 million to accelerate biofuels research and boost commercialization by providing additional funding for commercial biorefineries.

The new funds include $480 million for pilot- and demonstration-scale biorefineries, $176.5 million for commercial-scale biorefinery projects and $130 million for research.

Proponents of ethanol say the industry provides American jobs — especially in rural areas — lessens the nation’s dependence on foreign oil and provides a steady income for farmers. Michigan has five ethanol refineries.

Iowa and South Dakota’s agriculture secretaries wrote the EPA urging the increase.

“In 2007 alone, the ethanol industry created more than 200,000 American jobs that cannot be exported or outsourced, while contributing $47.6 billion to our (gross domestic product) and generating $4.6 billion in tax revenues,” wrote South Dakota’s Bill Even and Iowa’s Bill Northey.

But using large amounts of the nation’s corn boosts food and feed prices, critics say.

Last year, Texas Gov. Rick Perry unsuccessfully sought to water down the mandate, citing high feed prices.

The National Cattlemen’s Beef Association said in opposing the 15 percent blend that it “would require an immediate 4.5 billion gallons of ethanol, and would require approximately 1.6 billion bushels of corn — which is nearly equivalent to the amount of corn used by the cattle industry in an entire year.”

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With Chinese Tires It’s Buyer Beware

With Chinese tires, it’s buyer beware
Amid trade tiff over Chinese tire imports, some concerns about quality
By Dan Carney
updated 6:09 a.m. CT, Thurs., Sept . 24, 2009

The United States and China are battling over trade tariffs on tires, but for most of us, safety is where the rubber meets the road.

Imports of Chinese tires have grown from 15 million tires in 2000 to 46 million last year, according to the United Steelworkers union, which has accused China of unfair trade practices. The union, which represents workers in the rubber industry, said Chinese tires imports have accelerated this year, with August imports up 57 percent over January levels based on the weight of tires unloaded on U.S. docks.

President Barack Obama this month backed the union’s position and ordered higher tariffs on Chinese tires in an effort to slow the flood of imports that unions blame for thousands of U.S. jobs lost. Obama met with China’s President Hu Jintao Tuesday to discuss trade, among other issues, as world leaders gathered at the United Nations for the General Assembly meeting.

For many drivers, the trade spat might raise the question of how safe are tires imported from China, given that country’s poor safety record on other products including toothpaste, pet food, toys and drywall.

The answer depends on whether you buy Chinese-made tires from name brands like Goodyear or Michelin, vs. Chinese-label tires or those made in China under contract for some private store labels, tests show.

Tire manufacturers, many of which have moved some production to China to save money, say that production techniques and materials are the same no matter where the tires are made, and that their Chinese tires are every bit as good as those made elsewhere in the world.

“The Chinese tires coming into this country for the most part have been safe tires,” said Roy Littlefield, executive vice president of the Tire Industry Association. “All the tires have to be tested before they come here,” he said, referring to U.S. government testing and standards.

“We have same global quality standards around the world,” said Keith Price, a spokesman for Goodyear Tire and Rubber Co. “The standards are the same whether we make it in Oklahoma, Germany, Brazil, Indonesia, or China, the product standards are the same.”

Jim Smith, editor of Tire Review, a trade magazine, said he has seen this for himself.

“Michelin is very persnickety,” he said. “At the Chinese plant you couldn’t tell if you were in China or in South Carolina. The plant has the same controls, the same machines and the same uniforms on the workers.”

Nevertheless, there have been some safety blips in Chinese-made tires.

Last year the National Highway Traffic Safety Administration launched an investigation into defective tire valve stems produced by a subsidiary of Shanghai Baolong Automotive Corp. The company sold 300 million valve stems which were susceptible to cracking, potentially causing the tire to deflate, a problem which led to one fatality, according to NHTSA.

Two fatalities were attributed to defective tires made by Hangzhou Zhongce Rubber Co. because of tread separation. The tire importer issued a recall for the 450,000 tires it had sold.

The average consumer thinks little more of tires other than that they are “round and black” said Matt Edmonds, vice president of marketing for mail order giant Tire Rack, so when shopping for tires, country of origin probably takes a back seat to other factors such as price, buyer loyalty and reputation.

But with tires, as with many other products, it’s buyer beware — you get what you pay for.

Because of the substantial differences between name-brand tires that are made in China and tires that are designed and manufactured by Chinese tire makers, it may be more relevant to consider Chinese tires as two separate products.

Consumer Reports magazine tested 23 affordable all-season replacement tires, seven of them made in China, reported Gene Petersen, tire program leader for the magazine. Of those seven, six finished in the top half of the field, he noted.

They included tires from brands such as Toyo, Cooper, Pirelli, and Kumho. “Because these tires are being built with the companies whose names are on the tires, the same specifications that would apply to a tire made in the U.S. would apply to a tire made in China,” said Petersen.

But that was seemingly not the case for the Chinese-branded Ling Long tires tested by Car and Driver magazine. The Ling Longs wore a tread pattern identical to that of a popular Yokohama tire, a visible semblance that could cause consumers to assume similarity of performance.

That assumption would be wrong. The magazine found the braking distances and cornering grip were much worse for the Ling Long tires than for any others in the test, requiring an extra 22 feet — one and a half car lengths — to stop from 50 mph than the best tires.

“Chinese-branded tires are a whole different world,” reported Car and Driver technical director Dave VanderWerp. “You absolutely get what you pay for, which, as we found in our test, is capability that is nothing short of scary. The Ling Longs in our test scored less than half the performance-based points than even the next-best, eighth-place tire. That’s how far they are off the pace.”

“Is a Ling Long tire as good as a Michelin?” asked Smith. “No. If you want a Michelin, buy a Michelin,” he said. “It depends on the consumer and what they are willing to pay.”

There is no way to predict whether Chinese-branded tires will prove to be safe for American drivers, but because they are built to pass U.S. government safety tests, they should be.

But in the question of safety and performance in real-world driving conditions, Chinese tires will have to prove their worth to convince consumers. “It is more than the tread pattern, it is the engineering that goes into the tire,” that determines its performance characteristics, said Edmonds, of Tire Rack.

Unfortunately, because these tires target the price-sensitive low end of the market, customers might be more swayed by the price tag than by the potential for longer braking distances.

“I’d sure like it if the guy behind me can stop another 20 feet shorter in the rain,” said Edmonds.

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GM Offers Money Back Guarantee

GM to offer money-back guarantee
Marketing push aims to jump-start automaker following reorganization
The Associated Press
updated 8:05 a.m. CT, Mon., Sept . 14, 2009

General Motors is hoping to jump-start its revival by guaranteeing car buyers that if they don’t like their new Chevrolet, GMC, Buick or Cadillac, they have 60 days to bring it back for a full refund.

The marketing effort that starts Monday is called “May the Best Car Win” and aims to win back customers leery of GM since it filed for bankruptcy protection earlier this year. The nation’s largest automaker needs to improve sales so it can repay billions in government loans and stay in business.

New GM Chairman Edward Whitacre Jr. will appear in the initial burst of ads, telling viewers in his folksy, Texas accent that he too had doubts about the company when he joined this summer. Now, he likes the cars he’s seen, and consumers should, too. If they don’t, they can have their money back.

Running through Nov. 30, General Motors Co. will allow buyers of new GM vehicles to return them, no questions asked, for a full refund within 31 to 60 days.

The vehicles must not have more than 4,000 miles on them and the drivers must be current on their payments.

The offer applies to the Detroit company’s four remaining brands: Chevrolet, GMC, Buick and Cadillac. The Pontiac brand, which GM is phasing out, is not eligible. Leased vehicles are also ineligible.

The campaign will also pit GM’s four brands directly against foreign competitors, focusing on quality, performance, fuel economy and design.

GM must show that its cars and trucks are better than competitors’ offerings, GM Vice Chairman Bob Lutz told reporters on a conference call Thursday.

He said there is a “monumental chasm” between the public’s perception of GM’s vehicles and the autos in its current lineup. The campaign, which has been planned for months, aims to change that.

Whitacre’s appearance in the ads will be short-lived as GM shifts focus away from the corporation, Lutz said.

“We are emancipating the brands and trotting them out in the open,” he said, noting that individual campaigns for the brands will share common elements, but the words GM and the company logo will not appear.

For example, the Chevrolet Equinox will be featured in advertisements directly compared to the Honda CRV. Cadillacs will target German luxury vehicles.

The company stands behind its cars now and can offer full money-back guarantees, Lutz said. As recently as three years ago, GM would have taken a huge risk if it made such an offer. But the company’s slate of models is strong and can take on any competitors, especially foreign-made cars, he said.

He noted that similar programs in other countries have seen return rates of about 2 to 3 percent.

GM said it plans to continue its campaign through 2010. The company has been spending about $2 billion a year on advertising.

Peter De Lorenzo, a former ad executive, said GM’s money-back guarantee may make consumers less reluctant to buy GM vehicles.

“This is a Hail-Mary pass,” said De Lorenzo, publisher of autoextremist.com, a Web site that follows and is often critical of the auto industry and GM. “After this, if they can’t move the needle … I’ll begin to be concerned about GM’s future.”

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Automakers are stuck in small car quandary

Automakers are stuck in small car quandary

Automakers are stuck in small car quandary

If the wildly successful Cash for Clunkers program proved anything, it’s that with the right kind of financial incentive Americans will buy small, fuel-efficient cars. Armed with rebates of up to $4,500 from the federal government, consumers snapped up cars such as the Honda Civic and Ford Focus. They did pretty much the same thing last summer when gasoline prices in the U.S. roared past four bucks a gallon.

And what happens when high gas prices or government handouts go away? Americans buy what they want. And it’s usually not compact cars but powerful family sedans and sport-utility vehicles. That presents a problem for automakers. Over the next 18 months, the industry is bringing to market nine all-new small cars and subcompacts. Now the clunker program is over, and gasoline, currently hovering at $2.62 a gallon nationally, is expected to stay below $3 for the foreseeable future. So carmakers, even traditionally strong ones like Honda and Toyota, could be forced to dangle discounts before buyers. That, of course, would hammer per-car profits, especially for the Detroit Three.

Why are so many small cars appearing when gas prices are low? Because automakers must plan new vehicles three to four years ahead, plus fuel economy rules all but require more of them. When fuel prices began marching upward in 2005, everyone from General Motors and Ford to Mazda and Kia started designing and engineering small models. The first fruits of those efforts are now showing up on dealer lots. Kia is just launching its Forte compact and the small, boxy Soul. Mazda has a new 3 compact on the market. GM and Ford each have three new small cars coming by the end of 2010. By 2013, all those new models will add 600,000 cars worth of production to a market niche that has traditionally sold about 2.5 million, according to IHS Global Insight.

It is hard to make decent money on small cars unless you have a long history of making and selling them, as do the Japanese. U.S. automakers do not, and it was instructive to watch the profit roller coaster when high gas prices created a miniboom in these vehicles last summer. In May 2008 gas prices hit a national average of $3.76, and small-car sales surged a remarkable six percentage points, to 17 percent of the overall U.S. market. Suddenly, GM had decent economies of scale: Cars that once lost as much as $3,000 apiece were closer to break-even despite discounts of up to $900 each.

But the gas-price shock had worn off by August (though oil prices didn’t begin their historic retreat for another few months), and small-car sales slumped. By then, GM had ramped up production and soon small cars were piling up at dealers. Carmakers turned up the discounts, and GM later had to take off the third shift at its Ohio small-car plant. Consider this, too: While the clunker program clearly drove buyers into showrooms, carmakers spent about $1,900 per compact to help spur sales, according to Edmunds.com, which tracks new-car prices.

Carmakers badly want to believe that Americans like small cars. Eric Noble, president of the CarLab, a consulting firm in Orange, Calif., says several European and Asian carmakers have hired him to do consumer research on small-car demand. When consumers gave them the thumbs-down, the clients asked him to rewrite the questions to see if that would change the result. It didn’t. Noble believes the success of the Mini Cooper has led other carmakers to believe Americans like small cars. Among other things, he says, “they think small cars are unsafe.”

Americans also see them as cars for people who can’t afford a better ride. So the carmakers are loading up their small models with creature comforts and technology in the hopes of winning customers and charging them a premium. Ford’s new Focus compact and Fiesta subcompact will feature the Sync infotainment system, which allows drivers to load music onto an in-dash hard drive, and hands-free calling and navigation. Ford says the new SYNC-equipped Focus fetches $2,000 more than the old one. Kia has added satellite radio and hands-free Bluetooth phone technology. GM’s Buick compact will feature leather seats, electronic gadgetry, and a Lexus-smooth ride.

If carmakers don’t find enough buyers who want spruced-up compacts, the U.S. auto companies will be duking it out on price with their better positioned rivals. Then, these minicars could lead to megalosses.

Copyright © 2009 The McGraw-Hill Companies Inc. All rights reserved.

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‘Clunkers’ binge may leave a serious hangover

The Associated Press
updated 5:35 p.m. CT, Mon., Aug 24, 2009

WASHINGTON – Now comes the hard part for the auto industry — luring customers without big Cash for Clunkers discounts.

‘Clunkers’ binge may leave a serious hangover

‘Clunkers’ binge may leave a serious hangover

The popular government rebates gave auto sales a jolt, but it was only temporary. Now car makers and dealerships are forced once again to confront the worst market in a quarter-century.

While Cash for Clunkers may have proved there are still car buyers out there, it is unlikely the heavy demand will last. In fact, the big rush to car lots this month may have had the unintended effect of stealing sales from this fall and next year.

“I am really worried about this winter,” said J.P. Bishop, president of a dealership chain in central Maryland. “If you didn’t buy now, the only reason you are going to buy over the next three or four months is because your car died.”

Cash for Clunkers, which offered drivers as much as $4,500 off the price of a new, more fuel-efficient car, proved far more popular than anyone imagined. Through Monday, dealers reported selling 625,000 vehicles in just a month with the rebates.

The program was set to come to an end Monday night. The government had set the deadline on estimates that most of the $3 billion set aside for rebates would be used up by then. Analysts initially figured the cash would last as long as November.

Cash for Clunkers had its complications: Congress had to race to approve $2 billion more for the program after the first $1 billion quickly ran out. Dealers complained the government was slow to reimburse them for deals they made on new sales.

Hours before the Monday night deadline for Cash for Clunkers sales, the government gave dealers an extension, until noon Tuesday, to file the paperwork to get repaid. The deadline for closing sales was not affected.

The Transportation Department granted the extension after the Web site set up to handle the claims was temporarily shut down from overload.

For the auto industry, coming off the program could be like a letdown after a sugar high.

Automakers and dealers got a reprieve from a dismal year of plummeting sales, big layoffs and the bankruptcies of General Motors and Chrysler. GM actually added shifts at some plants to meet higher demand.

Cars, trucks and SUVs sold in July at an annual rate of 11.2 million vehicles, the first time this year the figure has crept above 10 million. That’s still far below the 16 million vehicles sold just two years ago.

While Cash for Clunkers has helped the auto industry stabilize, it will probably take a full economic recovery to give car and truck sales a lasting rebound.

“There’s still a sizable amount of pent-up demand that’s going to be felt,” said Erich Merkle, president of auto industry Web site autoconomy.com. He said the “baton of Cash for Clunkers” could eventually be passed to a “fundamentally stronger economy.”

Sure signs of that, of course, are a ways off. Unemployment is still high and the housing market still weak, enough to keep people shy about making big-ticket purchases, said Rebecca Lindland, a Global Insight analyst.

“While this Cash for Clunkers program provided a respite for an ailing industry, we are not out of the woods yet and we still have a long road to recovery,” she said.

There also simply isn’t much left for drivers to shop for — especially when it comes to the most popular Cash for Clunkers vehicles, such as the Ford Focus, the Toyota Corolla and some hybrids.

GM, Hyundai, Toyota and Ford have ramped up production of their more efficient models because of inventory shortfalls, but those vehicles won’t reach dealers for a while.

Automakers are approaching the next few months cautiously. They are moving to replenish dealer showrooms, but are wary about building too many cars if demand fizzles.

Ford, for example, has said it will boost production by 33 percent from a year ago during the fourth quarter. But Ford executives say that could change depending on customer demand.

GM spokesman John McDonald said Cash for Clunkers has been “very successful” for GM. He said the company estimates 30 percent of its sales increase during the period came from customers who didn’t qualify for the government rebates but bought cars anyway.

But McDonald said that no one expects sales to keep going at that rate, and the automaker doesn’t see the need to boost them through sales incentives.

“We think it’s a good stimulus for the economy and a good way to get people interested in buying cars,” he said. “But the idea to increase incentives to make up for this just don’t make sense.”

There are also signs that Cash for Clunkers may have sapped the market for the near future, with buyers taking advantage of the rebates and buying now rather than sticking to plans to replace their cars next year.

Last week, the automotive research company J.D. Power and Associates predicted Cash for Clunkers will flatten the auto industry’s recovery by lowering sales next year. J.D. Power reduced its 2010 sales forecast to 11.5 million from 11.6 million.

“Because this was hot and heavy for such a short period of time, we are going to have a payback,” said Jeff Schuster, executive director of forecasting at J.D. Power.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

URL: http://www.msnbc.msn.com/id/32544485/ns/business-reinventing_america/

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