A study commissioned by Canada’s federal government suggests that Canada could be in a position to benefit from strong auto sales from the Big Three OEMs, and a lack of capacity could lead to more manufacturing jobs for Canada, including the revival of mothballed factories.

The Globe and Mail article quotes a study, done by CAR (Center for Automotive Research) an industry think-tank in Ann Arbor, Michigan, as stating that capacity shortages will be a major issue by 2018. 2.6 milion units of capacity were eliminated during the 2008-2011 era, and with auto sales projected to rise for the Big Three through 2018, it’s likely that they’ll be scrambling for places to churb out vehicles.

The shortage will cause the Big Three to scramble for capacity, and make it difficult for the OEMs to coerce Canadian governments into subsidizing their operations with threats of closing plants and moving production to cheaper locales . The study claims that GM may be at risk of losing market share as early as 2015, if sales rise and production capacity remains constrained, leaving GM and Chrysler unable to meet demand and sell trucks to consumers.

Ford had previously threatened to close their Oakville plant unless they received a $1 billion investment from governments, but the Ontario plant, which builds crossovers like the Ford Edge, would be a poor candidate for closure as production constraints and demand for the Edge and other crossovers continues to rise. But The Globe notes that some kind of government assistance and concessions from the unions would be required to help keep the plant running.

For its part, the CAW would also be left in a stronger position during labor talks, since automakers would be averse to jeopardizing their already shaky situation with a work stoppage brought on by a strike. The Globe cited Chrysler’s Bramalea, Ontario plant as one target where a strike would be disastrous. The Chrysler 300, Dodge Charger and Dodge Challenger have seen booming sales in 2012, and a strike that affected production of these cars would be disastrous for Chrysler.

As for the shuttered plants? The article suggests that GM’s Oshawa truck plant is a candidate for having production re-started, or converted to build unibody cars. No mention was made of the Ford St. Thomas plant, spiritual home of the Panther platform. Keep dreaming, B&B.

Another day, another disappointment for American fans of the Indian automaker Mahindra’s rugged, diesel-powered trucks. Earlier rumors that Mahindra might build its trucks with Navistar in Alabama turn out to be false, as a press release published at MahindraPlanet notes

MUMBAI, India, December 17, 2011 /PRNewswire via COMTEX/ — “There have been reports in certain quarters of media and online space stating that Navistar USA will produce Mahindra’s T20 and T40 pick ups in Alabama, USA in 2012, which are completely baseless & incorrect. If & when there are any material developments, Mahindra & Mahindra Limited will communicate them directly and transparently.”

If you haven’t given up on the Mahindra dream, now might be a good time to consider it…

Ever since Steve Girsky an his “merry band of hatchet men” touched down in Rüsselsheim, Bertel has been warning that GM’s European division was about to embark on a serious cutting binge. But our worst fears, namely that Opel could go away entirely, have yet to be realized. Instead it seems that self-destructive mutilation will be attempted first, in order to stem the gushing red ink at Opel where at least €1b in losses are expected next year. Automotive News Europe [sub] reports that the first round of cuts will hit Opel’s Internationalen Technischen Entwicklungszentrum (ITEZ, “International Technical Development Center), as an IG Metall union document foresees some 1,420 product development position cuts (from a staff of some 6,000).

Opel’s spokesfolks insist that the union’s numbers are “factually wrong and excessively high,” but only, in the words of ANE, because they “include people who are not on Opel’s payroll – like employees of service providers and supplier employees.” Furthermore, the automaker has not offered an alternative number for the expected cuts, and given the close cooperation between unions and OEMs in Germany, not to mention the detail of the IG Metall leak (200 employees will be offered severance payments when 550 positions are transferred to the manufacturing engineering department from product engineering), it’s tough not to conclude that the number is fairly close to GM’s actual plans.

And the cuts aren’t limited to workers: a battery-powered version of Opel’s forthcoming “Junior”/”Allegra” city car, as well as a long-rumored Insignia-based Coupe are said to be on the chopping block as well… so let go of any plans to wait for a reborn Buick Riviera. Oh, and don’t hold out any hope for the “production potential” Opel recently touted for its strange, low-cost RAK e Concept. Meanwhile, here are the other measures that Opel admits are coming down the pike:

• Stronger concentration on the carmaker’s core development mission and a reduction in project coordination tasks

• Increased use of modules and construction kits. “For example, we still have too many steering and seating systems. We have to improve significantly here,” the spokesman said.

• Deeper and earlier integration of suppliers. “There are no plans to put a stranglehold on our suppliers — we need to increasingly rely on suppliers’ innovative strengths,” the spokesman said.

In short, it seems that in order to save Opel, GM has to kill off much of what made Opel so valuable to it, namely its ability to develop premium global vehicles for the parent company. Instead it seems Opel will be forced to concentrate on selling into a brutal European market that seems set to contract as the Euro crisis drags on. Perhaps there is some truth to the rumors that Chevrolet will slowly replace Opel after all.

After all, cutting engineer positions is certainly the low-hanging fruit in Opel’s restructuring, but GM will likely have to go after assembly capacity (likely at Bochum and Port Ellesmere) in order to address the overcapacity issues that are at the heart of its (and many European automakers’) woes. That could create problems though, as this latest union leak confirms that Opel’s labor councils are prepared to fight. Opel’s outgoing union leader Klaus Franz has gone so far as to ask GM to sell Opel to its Chinese partner SAIC, a move widely considered a sign that Franz was trying to move back in touch with an increasingly militant union rank-and-file in the face of his own legal problems. While Franz portrays himself as the victim of a media smear campaign and threatens legal action against the Frankfurter Allgemeine Zeitung, his union appears prepared to fight the seemingly inevitable production cuts. And all this as Opel celebrates its 150th birthday.

UPDATED: “Big Six” compact sedan monthly sales graph (Jan-Nov, 2011) added to gallery after the jump.

Last week, GM shut down production of the Cruze, saying only that it had an unspecified “supplier issue.” But Automotive News [sub] reports that  had already GM shut down the Lordstown plant for the entire week of November 28, after inventories shot from 33 days supply to 73 days supply during the months of September and October. As of December 1, inventories had risen higher still, to 88 days, as sales continue to slacken. Lordstown reopened yesterday, but with sales falling and inventories running out of control, another slowdown or stoppage of production seems inevitable.

So, what happened to the Cruze’s sales? The fact that its downturn coincided with the switch from 2011 to 2012 is certainly mysterious, as GMInsidenews’s reliable guide to 2012 model-year changes shows that only the following features were deleted from Cruze in the switch from 2011 to 2012:

• (GAP) Imperial Blue Metallic exterior color
• (EN4) Cargo cover compartment
• Rear center headrest on all trims

Surely a lost cargo cover compartment and rear center headrest don’t explain the downturn… which might actually be cause for even greater concern. If GM could pinpoint a specific problem that is keeping buyers away from new 2012 Cruzes, it could remedy it fairly easily. As things stand though, it’s tough not to conclude that GM may simply have filled the bulk of market demand for their car, and that it’s now losing out to the brutally tough competition in its segment. If that’s the case, it doesn’t bode well for The General… at least in terms of perception, as the Cruze goes, so goes GM.

As the world struggles to come to grips with economic uncertainty, Bertel has been reporting that Japanese automakers are abandoning their homeland for lower-cost production centers overseas. Now, with economic turmoil shifting to Europe, it seems that Fiat could possibly be preparing for a pullback from Italy. Two basic factors are driving Fiat towards reconsidering its global manufacturing footprint: first, its struggles in the European market where margins are slim and dropping, second, its battles with Italian unions. Though Marchionne’s latest comments are ambiguous at best, some see these factors pushing the Italian automaker away from the market that gave it birth.

Bloomberg reports that Marchionne is calling Fiat’s 2012 profitability “uncertain,” as the CEO clarifies

More than volumes, the question is whether we can extract the same levels of margins. We are to some degree cautious on what is possible from Europe next year

Chrysler already contributes some 65% percent of Fiat’s overall profit. If the European market weakens, the Italian automaker could become even more dependent upon its American cousin. And if Europe’s economic uncertainty bleeds into the US market, Fiat could be in trouble. Credit Suisse analyst Erich Hauser notes that Fiat’s exposure to a weakened Europe could be a real cause for concern

The real concern is not so much the margin level in Europe next year, but the extent to which Fiat will consume cash in a downturn. If volumes fall further, then Fiat’s liquidity position could become an issue.

Marchionne’s response?

Globally we’ll be fine

And though that may be the case (depending on the US market’s performance), the problems inside Europe are mounting. And because Europe’s sovereign debt crisis is now centered on Italy, Marchionne’s scope for political maneuvering in that market may be compromised. That’s key because Fiat has been in a long confrontation with Italy’s labor unions. That conflict colored Marchionne’s recent optimism about Italy’s political future, as he noted recently on the departure of President Silvio Berlusconi:

Italy has a once-in-a lifetime opportunity to abandon the notion of an entitlement society. I think Italy is on the mend.

And Marchionne, a globally-known battler of union-led “entitlement societies,” is taking his fight to the Italian unions, as the WSJ [sub] reports that Fiat has canceled all of its agreements with Italy’s labor unions. According to the report

The latest decision amplifies special labor concessions made at some factories and applies them to all the productive plants in the country. It also comes as the new government vows to loosen Italy’s traditionally rigid employment laws.

And that move is stirring up political turmoil in the already-tumultuous Italian political system, prompting Antonio Di Pietro of the IDV to complain to AGI

By cancelling all trade-union agreements, FIAT is closing a circle, effectively announcing that the company is leaving Italy, using workers as the scapegoat. Employees are accused of being incapable of manufacturing innovative cars with a high added value and of selling them on the market

Legitimate fear or politically-motivated fearmongering? Only the future will tell whether Fiat can stick it out in Europe. But with its best production taking places in locations like Poland and Brazil, it’s going to be tough for Fiat to hack it out in Italy.

With a tough negotiating session with its traditional employers now complete, the United Auto Workers are turning their focus back to the year’s primary goal: organizing the transplant factories. 2011 was supposed to be the year in which the UAW took down “at least one” foreign-owned auto plant, with the union’s boss even going as far as to say

If we don’t organize the transnationals, I don’t think there is a long-term future for the UAW

But as we found, the UAW is not welcome in the South, where most of the transplant factories are found. And with Honda, Hyundai, Toyota and VW all rejecting the UAW’s advances in some form or another, the union’s options are fairly limited. So instead of taking on the factories directly, the UAW is bringing back a questionable tactic from the days when it was misleadingly bashing Toyota for “abandoning” the NUMMI factory: they are taking the fight to dealerships.

Bloomberg reports

The United Auto Workers union, whose leader has staked its future bargaining power on organizing U.S. plants of Asian and European automakers, plans to start pressuring the companies through dealership campaigns.

Regional UAW representatives trained members about how the campaign will work at UAW Local 2209 on Nov. 19, said Mark Gevaart, president of the local in Roanoke, Indiana. The union hasn’t selected the automaker it will target and didn’t discuss when the drive will begin, he said in a phone interview.

The problem: as mentioned earlier, the UAW has already tried this on Toyota. And at the time, Toyota fired back with a pretty legitimate complaint, arguing

I still don’t understand why they are picketing our dealerships when the dealerships have nothing to do with the workers. Our workers make the ultimate decision if they want to unionize or not and for the past 25 years they have said no… Our team members want to make cars for people to buy. They don’t like it when people try to stop you from buying.

And here’s the funny part: the UAW has admitted that the dealership-picketing tactic didn’t help its cause, as President Bob King put it when he called off the last round of Toyota dealer protests

We said we were going to be the UAW of the 21st century and didn’t feel like that was accomplishing that goal

But hey, why not try it again? What’s the worst that could happen?

It’s no secret that Ferrari has been wrestling with the inevitable conflict between its bellowing V12s and European emission regulations, but that’s not the only challenge facing the Prancing Horse’s powertrain division. Sure, there’s the increasingly-tenuous link  between the Scuderia’s Formula One technology and its road cars [sub], but in the short term that actually helps the emissions issue by creating a pretext for bringing KERS to the road (where it otherwise has little role). In fact, the real issue for Ferrari’s powertrain team is not even a “Ferrari issue” at all, but a Maserati issue.

One of the keys to Maserati’s success as a brand, is the fact that its engines are supplied by Ferrari, a “secret” kept by precisely nobody and referenced in every Maserati review ever written. And considering that Ferrari has to limit its production to 7,000 units in order to maintain exclusivity, it’s not a bad way to build scale on such limited-production engines. The problem is this: with Ferrari unable to grow its volume (instead, focusing purely on profits), Maserati has to. Thus, the new plan to build 40,000 new Maseratis per year by 2014, up from 5,700 cars sold in 2010. About 20k units of that volume are expected to be Kubang SUVs, and the rest will come from two sedans that straddle the current Quattroporte. The Kubang will come with Maser’s 4.7 liter V8, and the two sedans will use direct-injected V6 twin-turbo or V8 engines, also developed and built by Ferrari. Maserati CEO Harald Wester tells evo Magazine (print edition)

Paolo Martinelli [Maserati's powertrain boss and a previous engine chief for the Ferrari F1 team] is developing these new engines right now in Maranello, and Ferrari will be producing them exclusively for Maserati.

And, admits Wester that will present some serious challenges, as Maserati is talking about a seven-fold increase in engine demand.

If we need 30,000 Ferrari engines, the project is different. The set-up is perfect in terms of quality, but Ferrari will have to do something significant to be able to supply us with the engines we will require in the future.

But how does Ferrari ramp up to make seven times as many engines without losing any quality or exclusivity? Here’s where the story gets strange, as evo reports

Ferrari is already investigating working double shifts in its engine plant as a way to increase production

…and that’s it. Now, I don’t know enough about Ferrari’s powertrain plant to know whether it’s possible to get seven times the volume by switching to a double shift, but it sure sounds like a challenge. And if nothing else, it certainly takes a little of the exclusivity out of the Ferrari brand. But then, a slightly-less exclusive Ferrari is probably more than worth it when you multiply Maserati’s profits margins by 40,000. In any case, we’ll be curious to see how Ferrari manages this situation going forward.

GM has made much of the fact that its Chevrolet Cruze compact has enjoyed strong sales this year, but volume alone isn’t enough to make it in today’s car industry. The key to profitability is keeping production in line with sales, so that plants don’t overproduce, in turn forcing profit-sapping incentives to move the metal. And, as these charts show, GM has been having success selling the Cruze, but not to the extent that it needs to keep production at its current levels. The graph above shows monthly production and sales levels for this year, and it shows that GM has already tried to adjust production once to keep it in line with slower-than-expected sales. But that wasn’t enough. With sales volume dropping the last four months in a row, and inventory jumping from 33 days to 43 days in the month of October alone, the UAW is reporting that the Lordstown plant where Cruze is built will be idled for the entire week of November 28. According to the announcement

The down week is necessary to align production with current market demand. The scheduling modification is attributed to traditional seasonal buying behavior coupled with competitors’ recovering inventories previously impacted by the March earthquake in Japan.

Like a lot of recent Detroit products, the Cruze has received a lot of positive press due to its giant improvement in quality and sales compared to its predecessor. But with demand softening, and GM’s brass fretting over profitability margins as the market shifts to smaller cars, it’s clear that the Cruze’s ultimate success has yet to be proven.

Honda will cut its North American output by 50 percent, starting Wednesday. All six North American plants will be affected through Nov. 10… Production likely will be affected for at least “the next several weeks,” Honda said. More cuts could be announced later. In addition, the December on-sale date of the redesigned 2012 Honda CR-V may be delayed by several weeks. (emphasis added)

So, if you’re jonesing for your fix of frumpy new CUV hotness, you’re just going to have to be patient. Speaking of which, while we patiently wait for October sales, Honda is telling Bloomberg that its sales went up in the last month, its first such gain since April. But between the ongoing problems in Thailand, a 50% production cut in North America, and the awkward looks of this CR-V, it looks like Honda had better enjoy this moment of good news while it can.

As I noted earlier this week, GM’s decision to bring a pure-electric version of the Chevy Spark to the US opens up an interesting challenge to its “range anxiety”-centric marketing approach. But WardsAuto reports that there’s another challenging question coming out of the decision: where will the baby EV be built? And as I’ve found, GM’s reticence on the topic of the Spark EV program only deepens the mystery for Wards, which writes

Some media are reporting the EV will come from South Korea, where gasoline- and diesel-powered Sparks currently are produced. If so, that’s news to the folks at GM Korea.

GM Korea does not have a prototype of the Spark EV, and “no location of production has been decided yet,” a spokesman tells WardsAuto. He also says there is no EV activity at the GM minicar production complex, located in Changwon, the sole source for the Spark.

Nor is there a Spark EV prototype at the main engineering and vehicle-production complex in Bupyeong, where GM Korea is headquartered.

The Spark is built in Korea, India and Uzbekistan, and EV development of the previous-generation Spark took place in India, initially under REVA and later in-house at GM. An EV version of the Chevy New Sail has also been developed in China, while an EV Cruze is being tested in Korea. But GM won’t say which of its global divisions is developing the new Spark EV, let alone where it will eventually be made. One thing seems certain though: unlike the Volt, this forthcoming EV won’t enjoy the benefits of a “Made in USA” sticker (even though the Volt’s battery cells, transmission and range-extending engine are currently built in Korea, Japan and Austria respectively). In fact, the Spark EV could just be the first Indian- or Chinese-built car to go on sale in the US.

Director Cees ten Broek explains

When vehicle emissions assessments are focused solely on the emissions produced during the driving phase (tailpipe), it encourages the use of greenhouse gas-intensive materials in the effort to reduce vehicle weight and fuel consumption. However, this may have the unintended consequence of increasing greenhouse gas emissions during the vehicle’s total life cycle. Regulations that focus only on one part of the vehicle’s life cycle will become immediately out of date as the electric vehicle becomes more prominent on the road. We are only shifting the problem to other vehicle life cycle phases.

It’s always interesting to watch industries react when their self-interest suddenly aligns with idealism, but steel industry self-interest isn’t a reason to reject this idea out of hand. A study by the engineering firm Ricardo [PDF here] shows that as batteries and lightweight materials increase the amount of “embedded carbon” in cars, the production-side emissions are expected to reach 57% of life cycle emissions. In light of this trend, it’s not difficult to see why regulating tailpipe emissions alone makes little sense in a comprehensive carbon-regulation scheme. But, as the Ricardo study also shows, life cycle analysis is difficult and complicated. Imagining those complex calculations being fed into the complexity of a CAFE-style program literally makes the mind boggle.

The Chevrolet Volt may be beating cars like the Jaguar XF and the Lincoln MKT in the sales race, but GM won’t come close to building 120,000 of the plug-ins next year as the Department of Energy was expecting. Today GM confirmed to Automotive News [sub] that it will make 60,000 Volts next year… and it will do so while remaining on a single shift. GM had previously planned to add a second shift at the Det-Ham plant late this fall, but is putting that off until midway through next year, when production of the ’13 Malibu begins there. Until then, The General is adding 300 workers to the 10-hour, four-days-per-week single shift, a move the company says

will significantly reduce costs, and has no impact on the plant’s ability to make 60,000 Volts and Amperas (the European version of the Volt) in 2012.

Think 60,000 units is still more Volt than America will buy? Well, you’re right so far, but 15,000 of those will be exported to Europe, so GM only has to sell 45,000 US-market Volts next year. Although considering the Volt won’t crack 10,000 units this year, that’s still some strong projected growth. And as usual, the union local President sums up the situation with more candor than any executive would:

The sooner the better, but I guess demand will dictate when that happens. Hopefully we’ll get a third shift someday, too.

Considering the United Auto Workers’ VEBA fund is still Chrysler’s second-largest shareholder, CEO Sergio Marchionne is taking an amazingly hard line with the union. With a GM deal long done, and Ford’s deal moving towards approval, Chrysler is the last automaker on the UAW’s to-do list… and Marchionne tells Bloomberg he’s up for a fight if necessary, saying

I sincerely hope that we don’t have to get to arbitration. But if necessary, Chrysler will go there. We and GM are completely different

Marchionne is reportedly pushing the UAW for a number of tough concessions, including a mere $3,500 signing bonus (compared to $5k at GM and a reported $6k at Ford), and the elimination of a planned 2015 cap on entry-level “Tier Two” workers (at 25%). And though both of these are tough asks, he’s using UAW boss Bob King’s concept of union internationalism as a cudgel against the UAW, playing Italian unions off their American counterparts. And as a result, he could earn Chrysler a favored place among America’s unionized autoworkers.

The key to Marchionne’s Italian strategy was to threaten Italian unions with the prospect of Fiat pulling out of its home market and retrenching in lower-cost production centers like Poland and Brazil. That agreement eventually went through, and, as Bloomberg reports

Marchionne reached three labor agreements in less than a year as part of his strategy of raising productivity at Fiat’s domestic plants. The deals at all three factories include measures to limit strikes and curtail absenteeism.

Fiat also won approval to introduce longer shifts and run plants on a six-day workweek. In addition to more hours, workers get shorter breaks and postpone lunch until their shift’s end.

The changes at Mirafiori, Fiat’s oldest plant, in January were won with a 54 percent majority and set a milestone in Italian labor relations.

And to prove how serious he is, Marchionne has even withdrawn Fiat from Confindustria, Italy’s largest business organization, over difficulties in applying those reforms uniformly across its Italian production base. Says Marchionne in his withdrawal letter

Fiat, which is engaged in the creation of a major international group with 181 plants in 30 countries, cannot afford to operate in Italy in an environment of uncertainty that is so incongruous with the conditions that exist elsewhere in the industrialized world

And, having manhandled the Italian unions, Marchionne is not only asking the UAW for tough concessions, but he’s also setting a deadline that could send negotiations into arbitration (since the UAW has a no-strike agreement with Chrysler). Which gives Berkley professor and UAW mouthpiece Harley Shaiken cause to warn Marchionne that

He’s rolling the dice

But with Marchionne approving new products, including a 5-door Alfa-Romeo MiTo, and small Fiat and Jeep SUVs, for the Mirafiori plant, he’s offering carrots as well as sticks. And the longer the UAW waits to get a deal with Chrysler, the more carrots could be distributed around the globe… which means fewer carrots for the UAW. And at this point, the UAW’s Chrysler employees can’t afford to hurt their employer, which has largely funded their benefits with its own stock. Look for Marchionne to come out of this negotiation looking like the smartest guy to ever take on the UAW.

On September 14, a Dodge Viper did the fabled Nürburgring Nordschleife in 7:12.13, beating  the Lexus LFA  which had done the ring in 7:14:64 just a few weeks before.  That was a very respectable time and makes the Viper the fastest “true production car” around the Ring. (Somehow, a Gumpert Apollo and a Radical SR8 doesn’t sound like something that is produced in halfway serious numbers.)

The only thing that left something to be desired was the way the record was announced: It flew around in tweets and forum posts, but no official announcement was forthcoming. Finally,  Chrysler issued an official press release,  confirming that veteran GT driver Dominik Farnbacher piloted a “street-legal, 600-horsepower 2010 Dodge Viper SRT10 ACR (American Club Racer) to new record lap at the world’s most demanding road course – the famed 12.9-mile Nürburgring Nordschleife (north course)”  in the aforementioned 7:12.13 .  However, on what tires?

That kept people awake and triggered minor edit wars on Wikipedia, which somehow had morphed into the unofficial scorekeeper of  Nordschleifen laptimes.  The score keeper used to be Germany’s Sport Auto magazine, but dead tree based publications just can’t keep up.  Casus belli of the edit war: The tires.  The Chrysler press release had not expressly stated which tires were used  on the ring. They had stated that the stock car comes with the Michelin Pilot Sport Cup tires, but tires can be changed, and defenders of the honor of the Lexus clung to the missing rubber.

Contacted by TTAC,  Chrysler spokesman Dan Reid now confirmed that “the team used the factory stock Michelin Pilot Sport Cup tires for all the runs in the Viper ACR.” That settles that.

What is very much unsettling is the fact that the top spots are claimed by pseudo-production cars. One contributor on Wikipedia even complained that he had a “digital copy of the Radical’s owner’s manual showing the car’s requirements for a 45 minute start up procedure involving a laptop plugged into the ECU, 108 octane fuel, engine rebuilds every 30 hours, transmission inspections/rebuilds after every race, etc.” which doesn’t quite sound like a production car.

The prospect of a Chinese auto industry growing at insane speed thanks to a booming market and resiliently low wages has long kept auto industry execs up at night, most notably inspiring Sergio Marchionne’s acquisition of Chrysler. But basic economic principles dictate that you can have a high rate of growth or low wages… but not both. Growth inevitably drives inflation, which drives up wages, which in turn slows growth. And according to a report in the Wall Street Journal [sub], that dynamic is already taking hold.

Jae-Man Noh, head of Hyundai’s joint-venture operations in China, said average manufacturing-worker wages in China—about 27,000 yuan ($4,200) a year per worker in 2009—are likely to double by 2015 from current levels.

Auto makers are expected to be affected as much as other industries by the trend, if not more, Mr. Noh said, adding that wage costs for many foreign auto manufacturers already have doubled in less than a decade. He said that a rival foreign auto maker that Hyundai has researched has seen worker wages in China rise to 49,000 yuan a year per worker in 2010, up from 24,500 yuan a year in 2003.

“We need to let go of our perception that the Chinese market is a low-cost production base,” Mr. Noh told a group of reporters at Hyundai’s office in Beijing. He didn’t offer specifics on Hyundai’s wage costs in China.

The BBC’s China editor Shirong Chen says the government has tolerated strikes at foreign-owned plants, which are obliged to respect workers’ rights, but maintains strict control at Chinese-owned factories for fear of widespread social unrest.

But for foreign firms, the protest must have seemed like “widespread unrest.” As LaborNotes documents, in an in-depth study of the strike wave

the events at Honda Nanhai triggered a chain reaction among workers in auto supply and electronics factories throughout the Pearl River Delta. According to the Guangzhou Federation of Trade Unions, more than 100 strikes occurred, of which only a small number were reported in the media. Around Toyota’s ultramodern factory in Guangzhou Nansha, eight of 14 core suppliers had labor conflicts. And action spread to other areas: workers in several electronics factories near Shanghai and at a Toyota supplier in Tianjin struck for several days.

The strike movement not only scared multinational corporations in China, it challenged the system of labor control. Typically, tacit coalitions between capitalists and local government rule over conditions inside the factories. Unions play a role in former state-owned enterprises and flagship joint ventures, but not in most private companies. Often, local governments back up violations of labor law by major investors, as has been documented in many cases for suppliers to multinationals such as Wal-Mart, Apple, and Nike.

But under conditions of rapid growth and highly modern production, the methods of control have become ineffective. Hundreds of labor conflicts occurred in the wake of the global economic crisis, affecting millions of Chinese workers in 2008 and 2009. Following the recovery, workers are seeking a voice. Workers’ wages have been falling continuously as a share of China’s national income since the 1990s, when the shift toward capitalism really took off, and the government is now officially calling for higher wages in order to raise domestic demand.

If underlying economic fundamentals have been pushing China towards wage inflation for some time, the dam broke in last summer’s wave of strikes. Now Hyundai is publicly acknowledging the reality that every foreign auto firm must face: low costs alone aren’t reason enough to be in China. But as the WSJ notes, even though the glory days of cheap Chinese labor may be over, Hyundai (and others) still have plenty of incentive to stick with their Chinese market plans.

China still offers other draws, including strong economic growth, an increasingly affluent population and a quickly growing car culture.

Plus, Hyundai’s average factory labor cost in China is still one-fifth of that in South Korea, Mr. Noh said. What concerns him most is the dramatic rate of increase, he said.

This trend is “inevitable” as the Chinese economy grows and society improves, Mr. Noh said.

Despite rising labor costs, China’s auto exports will continue to increase in part because of excess auto-production capacity in the country, he said. China’s central government will also continue to focus on automotive exports, he said.

The growth of the Chinese car market in recent years has been nothing short of freakish, and was overdue for this kind of correction. But even though costs are increasing, China’s continued growth and still-low costs relative to other manufacturing centers continue to make it an attractive target. Foreign firms just have to work a little harder than they used to, and as Chinese wages rise, workers there and around the world will only benefit from a narrowing assembly cost gap.

The Detroit News‘s David Shepardson has a way of being on hand with a microphone whenever GM CEO Dan Akerson lets loose with a memorable line, and today he has Akerson telling a Bloomberg News Forum that the green star of the American auto turnaround, the Chevy Volt, could be built in China within a few years. Said Akerson

We’re going to export into China for probably a year or two and see if it gets a take … if customers set the right usage patterns. If it does, we may manufacture it there.

As Bertel has noted, GM is outsourcing future EV development to its Chinese joint ventures, but this is the first time we’ve learned that the Volt could be made in the Middle Kingdom. In fact, just two weeks ago, GM said concerns voiced by Senator Stabenow (and echoed by Rep Slaughter in the video above) about Chinese technology demands, didn’t apply because it had no plans to build the Volt in China.

But why would GM hand Chinese firms the technological secrets to the car it insists is the future of transportation, when it could export it from the US and keep dreams of a US green car renaissance alive? Well, other than the fact that the Volt is about twice the price it needs to be to be a “gamechanger” and nobody will build it cheaper than China. Besides, we’re still waiting on evidence that China is actually going to take technology in exchange for EV market access. In other words, cheap labor and big subsidies mean it’s just a matter of time before the green icon of America’s Great Auto Bailout starts being built in China.

The United Auto Workers and the Detroit automakers have been locked in negotiations for months now, as both sides seek to redefine their relationship in the post-bailout era. And though all sides have stressed the importance of avoiding intractable disputes in an alleged new spirit of cooperation, it seems that the prospects of a quick, painless conclusion to negotiations remains elusive. The UAW’s contracts with Chrysler and GM both blew past their deadlines at midnight last night, and Ford, the only manufacturer at theoretical risk of a strike, extended negotiations earlier this week. TTAC has not covered these negotiations in much depth for the simple reason that little information leaks out of them. But with contracts expiring and optimistic rhetoric crashing on the rocks of reality, the frustration is clearly starting to boil over. And who is surprised that Fiat-Chrysler CEO Sergio Marchionne is the first to let his frustration show?

Though Marchionne is probably the most blunt and candid of Detroit’s CEOs, he’s also had the most union-related headaches of late. Wearing his Fiat CEO hat, Marchionne has been battling Italy’s fractious unions for years, as he’s fought to rationalize a deeply broken Italian production base. Whether that experience has given him insight into union negotiating tactics or simply raised his baseline frustration level isn’t clear, but he has broken ranks to publicize a letter [PDF, tip of the hat to the Detroit News] sharply rebuking UAW President Bob King for allowing the negotiating deadline to expire. Marchionne writes

I flew back from the Frankfurt Motor Show late last night to be here today to finalize the dialogue that has been started by our teams but that required your presence and mine to conclude. You, unfortunately, could not be here, I am told, due to competing engagements.

We have known about this expiration for a long time.

It was discussed at length during an incredibly painful period in 2009 when we argued and pleaded, together, to be given a second chance to put Chrysler right. And we even agreed that were we still around in 2011, we would not go back to the old adversarial and confrontational ways of the past to resolve unsettled matters: that we would have someone else arbitrate our differences.

And so as I sit at my desk now, I am thinking of our 26,000 employees who tomorrow will be working without a new contract, without even an understanding between Chrysler and the UAW that the old one is extended. We have not even agreed on the procedures for arbitration.

Until now, there have been encouraging signs of a new paradigm governing the relationship between us.

After reminding King of his various commitments to a kinder, gentler UAW, his professions of shared interests, and the progress already made through Fiat’s “World Class Manufacturing” program, Marchionne concludes

These are the reasons why we have continued our investment programs in the US, committing more than 4 billion dollars without knowing the outcome of these labor negotiations.

You and I failed them today.

We did not accomplish what leaders who have been tasked with the turning of a new page for this industry should have done.

We did not manage to agree to a set of simple conditions that would have given certainty and peace of mind to the lives of more than 110,000 actives and retirees.

I know that we are the smallest of the three automakers here in Detroit, but that does not make us less relevant. Our people are no less relevant.

The Freep’s Tom Walsh figures that this last line is the most indicative of the trouble brewing. Though he admits Marchionne is prone to outbursts and public theater, Walsh reckons

For example, if the UAW strikes a deal first with GM on key economic issues such as wages and benefits, that could hurt Chrysler’s leverage if it were to threaten taking a key economic issue such as health care co-pays to arbitration.

Another known issue in the UAW-Chrysler breakdown: Shift policies at the Pentastar V6 plant in Trenton South [via DetN]. But it seems that health care is the big issue, and one where thre appears to be daylight between GM and Chrysler. The DetN reported a week ago

A sort of shuttle diplomacy developed between the two automakers and the UAW. As agreements were reached on key issues, union negotiators would take the tentative language over to Auburn Hills. In some cases, Chrysler simply signed off on it; in others, it would negotiate changes that then went back to GM for approval.

GM CEO Dan Akerson met with UAW President Bob King Tuesday, a source close to the talks said, and negotiations are proceeding smoothly between the company and the union. But talks appear to have hit a snag at Chrysler.

“We are nowhere near an agreement,” one person familiar with the situation in Auburn Hills told The News Wednesday.

Nonetheless, all sides remain optimistic that an agreement can be reached between the union, GM and Chrysler by the time the contract expires Sept. 14.

The insider said Chrysler and the union disagree about an approach King is proposing on certain issues.

The UAW president has said he wants to look at creative ways to cut health care costs without reducing workers’ benefits. Chrysler believes workers should shoulder more of the cost of their own health insurance.

Chrysler’s hourly employees are responsible for about 7 percent of their own heath care costs, compared to 33 percent by salaried workers. The average American worker pays about 30 percent. The gap is narrower at GM.

Meanwhile, though Ford has the most to lose as the only automaker without a no-strike clause from the union and the highest recent profits, it “almost has to go last” according to labor analyst Kristin Dziczek. Ford’s union rank-and-file has been considerably more aggressive in recent years, as the firm has not been humbled by bankruptcy and bailout, and they appear to be waiting for GM and Chrysler deals in order to know where to open the bidding. Another possible snag: an arbitration hearing scheduled for today to resolve a UAW complaint over Ford’s reinstatement of white collar bonuses.

Ultimately, the move to extra innings, the public outbursts, and the obvious tensions put all of the last several years of bailout-inspired union-management Kumbaya rhetoric into some serious context. Though the UAW has the most to prove in the eyes of the public, all sides have indulged in the fantasy that “a new era” in Detroit’s labor relations is dawning and all sides are now locked in the same old gamesmanship. As in any negotiation, it’s unfair to blame any one side completely, but in terms of public perception, the UAW clearly has the most to lose. Having utterly failed to make progress in its attempts to organize transplant automakers, the UAW simply can’t afford for these negotiations to get any uglier than they already have. Standing up Sergio was pretty clearly a horrible PR move.

But the great irony of all this is, as Automotive News’s James Treece puts it [via AW], that the negotiations don’t even “matter” all that much. With labor making up only about 15% of the cost of each car, the low-hanging fruit for the OEMs is, he argues, is in rationalizing product development spending,and  improving speed to market and supplier relations. In fact, the importance of this negotiating session, argues Treece, is almost entirely symbolic. Which is why the developments of the last 24 hours show that Sergio Marchionne is absolutely correct. Both sides have absolutely failed to reinforce their message that things are different in Detroit.

The national character of auto brands is a tricky thing. For decades, Volvo wore its Swedishness on its sleeve, emphasizing the values that made Ikea, Abba and Swedish porn so popular in the US… even when it was an outpost of the Ford empire. And then the unthinkable happened: Chinese up-and-comer Li Shufu bought the brand and rolled it into his Geely empire. In the world of national-character-branding, being bought by a Chinese firm is something like hiring Casey Anthony as a brand ambassador, or using a mascot called “Mr Melamine Milk” (another nightmare scenario can be found here). So, how does a brand like Volvo, that was built on Swedishness, get past the “China Factor”? By doubling down on Swedishness? How about by building cars in the US?

Volvo’s Stephan Jacoby has opened the door to just that possibility, telling Bloomberg [via Automotive News [sub]]

One weakness of Volvo cars is the exposure to the U.S. dollar, so we are investigating increasing our sourcing in North America. The utmost solution would be to have a North American industrial footprint. We haven’t made up our mind.

OK, so currency exchange is the overriding business factor, but on a secondary level, building cars in the US would override any concerns American consumers might have about buying a made-in-China Volvo. For years now, the industry has fretted that the rise of Chinese automakers would be accompanied by waves of cheap, Chinese-built exports wiping out traditional brands on sheer cost alone. That Li and Jacoby are talking about building a US plant confirms that Chinese ascendancy need not follow the worst possible scenarios of industrial realpolitik. And as Sweden’s other automaker circles the drain, making Volvo a more global brand by assembling in Europe, China and the US is another triumph of reason over “automotive nationalism.”

Remember Bertels’ stranger-than-fiction write-up of former DNC Chair Terry McAuliffe’s Mongolian EV /Visa plant? Charles Child at Automotive News [sub] has looked at McAuliffe’s scheme and comes away less than entirely impressed, noting that

even casual scrutiny of his vision reveals overwhelming obstacles. Let’s be plain: His plan is dead on arrival.

You won’t find a zinger like that in Bertel’s piece, but only because he keeps his head down detailing the entire bizarre history of McAuliffe’s venture, its roots as the “Hybrid Kinetic Motors” visa scheme, its ties to a couple of notorious former Brilliance boys and its money-first, product-later approach. Child’s takedown isn’t as well researched (nor does it contain anecdotes about former a Ambassador driving a lawnmower into a swimming pool), but the few remaining folks out there who think the former Democrat fundraiser might be on to something big should probably read on. After all, McAuliffe has put so much hype out there, this story is something of a target-rich environment for truth-tellers.

Child quickly identifies McAuliffe’s major contribution to the project: hype.

What keeps the vision alive is McAuliffe’s audacity. With confidence and verve, he spells out his job-creating optimism on friendly national cable shows such as “The Daily Rundown” and “The Ed Show,” also on MSNBC… Bold auto visions are fine. But they require staggering amounts of money and manpower. And there’s no tangible indication that McAuliffe has either.

But not all the hype has been good: conservatives dislike McAuliffe for obvious reasons, but even parts of the left wing seems to be shunning the Clintonite hustler. And speaking of manpower, do you want to guess how many employees GreenTech has?

About 50 employees, says Alan Himelfarb, executive vice president for strategic planning. Not even 50 engineers. Fifty total employees.

Consider that GM has added around 2,000 engineers in recent years, just for its hybrid and electric development efforts, and you get a sense of how outgunned GreenTech is. Still, a startup could theoretically catch the OEMs napping… but that’s where the “staggering amounts of money” come in. And, reports Child,

The Chinese partner is Shengyang Zhong-Rui Investment Co., which GreenTech says has investments in banking, commercial real estate and Chinese airlines. But no investments in automotive operations are listed in the GreenTech press release.

And without investment, McAuliffe’s staged “cornerstone laying” of the plant in Ordos, Inner Mongolia was just that: the laying of one stone, no more, no less. And absent the billions needed to make this kind of startup take off, plans to sell EPA and DOT-certified cars in the 2013-2014 timeframe appear to be… on hold.

the Web site of the Ordos provincial government in China says GreenTech pledged to start production of hybrids and electrics at its plant in 2013.

But last week the company scaled back those estimates.

“Our expanding product portfolio, including hybrid and electric full-speed vehicle will come in due time and we have not yet set a timetable for the next product introduction” after this year’s neighborhood electric vehicle, the company said in a statement. “We fully understand the challenges in time, money, and technical expertise to produce a quality hybrid or electric vehicle.”

In other words, it could easily be another five years before GreenTech, which hopes to have 100 employees by year’s end, even starts production of hybrid or electric cars. At least cars that are capable of driving on freeways. In the meantime, the venture is leaping into the mainstay of EV hucksterism: neighborhood electric vehicles. Like Zap, Miles and many more before them, GreenTech’s “world-changing” automobiles will be limited to 30 MPH and banned from streets with a speed limit above 45 MPH. According to a GreenTech presser, this NEV (called the “MyCar”) will be built in Mississippi and,

We will make the first 100,000 U.S.-built MyCars available to consumers for $10,000 apiece.

But even at those low prices, GreenTech will be waiting to sell its first 100k cars. Child cites market research from International Market Solutions showing that the US market for NEVs last year was a little over 26k units (for comparison, the Toyota Camry sold 30k units in August alone). GreenTech’s response?

neighborhood electrics “are a small market for sure, at least right now. We have a few ideas on how to create some awareness and build that market. Our goal of 100,000 units is a cumulative sales figure over time. We look forward to achieving that.”

I’ve only been blogging about the car industry for about three and a half years, but I’ve seen this movie way too many times before. If you’ve missed out on the ZAP saga, to cite the most infamous example of the “NEV today, domination tomorrow” scam, read this, this, this and this for a primer on how this game works. It’s not pretty, and I hoped it was left behind in 2008, when it still fooled a few people. Today there’s no excuse for anyone to be taken in by such an unimaginative, played-out scam.

Bloomberg reports that Fiat is considering moving production of planned Alfa/Jeep-branded compact CUVs from its Italian Mirafiori plant to the US, as a rising Euro forces tough production choices. Production of some 280,000 units per year were planned to start at Mirafiori in late 2012, but Fiat may now build an as-yet unannounced subcompact there instead. According to Bloomberg’s reporting, Fiat/Chrysler CEO Sergio

Marchionne, while confirming his commitment to invest at the Turin facility, told Piedmont Region President Roberto Cota Aug. 29 that he may change the production plans for the plant.

“Fiat is evaluating which model it will build at Mirafiori,” Cota said after meeting the CEO.

Fiat’s first-half volume in the European market is down 13%, and its market share has fallen from 8.1% to 7.2%, forcing the firm to think hard about its product mix and production plans. A city car would be sold primarily in Europe, and since the Euro as risen 9% since last November when Fiat said it would build Compact CUVs at Mirafiori, it now makes more sense to build global/US-market products somewhere other than Europe. US production would be a huge boon to the reintroduction of the Alfa brand to the US market (led by the new C-CUV), as it would keep prices and profit margins far more competitive.

There’s no indication as yet of where Chrysler could build the Alfa/Jeep Q5/Forester-fighters, but Toledo North seems like the most likely candidate. Not only is the Jeep Liberty (predecessor to the new Fiat-derived Jeep C-CUV) already built there, but Chrysler is already sniffing out incentives to expand to 327,000 units per year.

When Toyota built the first generation of its Vitz subcompact in 1998, the firm had no plans to sell it in the US under the Yaris nameplate (as it was called in Europe). Instead it sold a four-door and two-door version of the Platz, which was mechanically identical but had unique sheetmetal (except for the front doors), as the Echo. The Echo fell into a pattern that seems to have repeated itself several times in Toyota’s recent subcompact past: a year of growth, and then a drop. Eventually, Toyota brought the Yaris nameplate to the US, with a hatchback option in tow, and found its strongest performer in this class since the Tercel.

Now, with the hatchback bodystyle back in vogue, Toyota’s dropping the Yaris sedan altogether for the new generation, debuting later this year. It’s not the JDM/Euro Yaris/Vitz which Bertel showed us back in December, but it is being built at the revolutionary Sendai plant he visited in Fbruary. And without a sedan counterpoint, it will definitely mark an entirely new approach for Toyota’s US-market subcompact strategy.

Around the time of the founding of the United States, the Mexican state of Guanajuato became home to of the one of the biggest silver mines in the world, which produced as much as 2/3rds of the world’s supply of silver at its peak. Today it’s not precious metal that’s driving Guanajuato’s booming economy, but cars, as the world’s automakers flock to Central Mexico. Between 2005 and 2008, GM, Ford and Michelin dumped $1.8b into production in the state, and the expansion is still picking up steam. In the last year, Volkswagen invested $800m in engine production capacity in Silao, Pirelli built a $210m facility and Mazda just revealed it would build a new compact car plant there in June. Toyota is said to be the next to set up shop in Guanajuato, but for the moment Honda is the latest automaker to announce new operations in Guanajuato, as Automotive News [sub] reports the Japanese automaker will spend $800m on an assembly plant there. Honda, which is fleeing a strong yen which has battered Japanese exports, will start building 200k subcompacts per year in 2014. Clearly Guanajuato’s got it’s automotive mojo flowing… but are the days of new Japanese transplant factories in the US over? Is it only a matter of time before the coyotes start smuggling Detroiters into Silao, Celaya, and the Puerto Interior??

Mary Barra, GM’s product chief, told the DetN and an assemblage of Wall Street analysts that by 2018, “GM hopes to build 90 percent of its vehicles on 14 platforms — half the number now — and boost manufacturing efficiency by 40 percent.” Not to nitpick, but if you build 90 percent of your vehicles on 14 platforms, then you can’t build the remaining 10 percent on thin air and you will need more platforms for low volume cars. So we talked a bit to GM to find out more about how they will go from zaftig to svelte.

The basic story is that GM is trying to streamline its “too many variations in the types of engines and vehicle underpinnings,” and this is a good thing.

Currently, only a third of GM’s volume comes from cars that share what GM calls “core architectures.”  The rest sits on a hodgepodge of what GM charitably calls “regional architectures.” Currently, there are 30 “Core Architectures” and an untold number of regional dishes.

In the future, GM’s local chefs will have to use a common cookbook.  By 2014, in the world of cars that is tomorrow, the number of “Core Architectures” will shrink to 24, but the global volume that uses these core architectures will grow to 62 percent. Four years later, by 2018, all regional architectures will have vanished. The number of global architectures will have shrunk to 14. Those 14 global architectures will serve 90 percent of the volume.

But again, what about the remaining 10 percent? “There are a few cars that have a unique architecture, which they share with nobody,” explains Klaus-Peter Martin, GM spokesman in Detroit. As examples, he names the Chevrolet Corvette and some vehicles produced with GM’s JV partners in China.

Likewise, the number of engine platforms will shrink from currently around 20 to less than 10 in 2018. Keep in mind theses are engine platforms, which allow a multitude of engines.

GM expects global efficiency gains between 35 and 40 percent from this, which is a tall order. But if you look at how little global commonality there is currently in the world of GM, those numbers should be doable. With a lot of screaming from the natives.

Michelle Krebs of Edmunds says “it’s the course a lot of manufacturers are taking. Everyone is trying to get to greater economies of scale.”

Volkswagen for instance is moving away from platform-think and goes to its new kit architecture. This allows a much higher number of different cars with different character, built from modules. Object-oriented car design, if you will.  On a smaller scale, BMW creates a number of engines, gasoline and diesel, from one building block, a single, standardized cylinder.

This industry takes huge investments, and spreading them across as many units as possible is the name of the game. If you make the most from the least, you win. Don’t think “badge engineering” when you hear this. If done right, the slimdown can make the offerings more attractive, and can help the brand(s) gain sex-appeal. That of course remains in the eye of the beholder. If you like the right lady, you’ll complain that the left one is the wrong one.

With GM’s share price currently hovering below $25, well under its $33 IPO price, The General is holding its second annual Global Business Conference in hopes of encouraging investors the world over to buy into its turnaround. A webcast is currently streaming over at the GM Investor Relations website, but the key points are available in slides available in PDF here. The presentation involves nearly every level of GM’s business, so listening in and reading the entire PDF is going to be the best way to make sense of what GM is trying to communicate… but if you just want an overview, check out the gallery below for a few hand-picked slides, illustrating some of the more important points.

Despite the fact that no transplant automaker has admitted to being in direct talks with the UAW, union boss Bob King told the Center for Automotive Research’s Management Briefing Seminar [via Reuters]

The vast majority of the assemblers here in the United States have at least agreed to confidential discussions. We’ve had productive discussions. The last thing we want is confrontation.

So, the issue isn’t that the transplants are all responding to the UAW’s overtures like Honda, which has said

Honda has had no dialogue with the UAW and has no interest in a discussion with them.

No, talks are happening with the “vast majority” of transplants… they just happen to be secret talks (which, at least in the case of VW, appear to be going nowhere). That in itself is strange, considering the UAW’s previous, highly-public approach to naming and shaming non-union transplant manufacturers. More likely: secret talks keep the union from losing face and the transplants from looking like “human rights abusers.” My how things change fast…