While America Slept. Tuesday, December 9, 2008

Bertel Schmitt
by Bertel Schmitt
Good morning! Slept well? Here is what happened in the meantime. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off.

Running into a BRIC wall: The emerging BRIC markets (Brazil, Russia, India, China) are running low on gas, The Nikkei (sub) reports. Passenger-car sales in China dropped 10% on the year in November. Sales in Russia declined for the first time since 2002. Sales in Brazil and India are also falling. The Nikkei: “This is bad news for automakers, which had hoped to offset slower sales in Europe and the U.S. with growth in the emerging markets.” TTAC: The BRIC countries will save the numbers of the international automakers for 2008. For 2009, BRIC will be of as much help as an empty BIC.

Japan putting the brakes on BRIC: In related news, Japanese makers are stepping on their BRIC brakes, The Nikkei (sub) says. Nissan postponed the start of operations at a joint venture factory for small commercial vehicles in India. Honda delayed by more than one year the launch of their second plant in India. Toyota is modifying its overall investment plan and may change the starting date for a plant that it is building in China. In Russia, Nissan plans to start a new factory in 2009. Suzuki wants to follow in 2010, Mitsubishi in 2011. The Nikei: “These plans could be derailed by tepid demand.” For the seven Japanese manufacturers of passenger cars, sales in emerging markets totaled approximately $150b in fiscal 2007. Better luck for the Germans …

VeeDub set to sell a mil in China: “We are on course to sell 1 million cars in China this year,” said Winfried Vahland, president and CEO of Volkswagen Group China to Gasgoo. “Neither the global economic crisis nor a lack of consumer confidence will hamper this target.” Not surprisingly, Vahland thinks trading will be tough in China during the first six months of 2009, but he’s still planning for growth. In 2009 VW plans to build their sixth-generation Golf and a new Jetta (about time) its Chinese joint ventures.

China slowing down, way down: China’s Association of Automobile Manufacturers expects that auto sales in China will grow by 5 percent or lower in 2009, Gasgoo reports. The Chinese auto market will see further negative growth over the next few months until a possible recovery in July. China’s industry group has cut this year’s auto sales projection of 10m units to about 8m. Sales of passenger cars in November totaled 522,800 units, down 2.9 percent from the previous month and down 10.3 percent from the same month in 2007. Dongfeng Nissan was among the few automakers to see sales rise: Its passenger car sales rose 60% in November from a year earlier to 33,417 units.

Chery not in the market for US assets. After Chery received a $1.45b loan from the China Import-Export Bank this week, people immediately asked: “Who are they going to buy?” Today, Chery announced that they will not buy any US auto assets, Gasgoo says. They will use the money to improve their product quality instead. Chery is expected to ship more than 140,000 vehicles this year, mostly to emerging markets.

Chrysler dumps China plans: Chrysler confirmed what we said last Friday: They officially dropped their plans to get into the small car market through a cooperation with Chinese automaker Chery, Gasgoo says. Mike Manley, Chrysler’s Executive VP of International Sales and Marketing, said that “both companies have since gone through major internal changes and evolution, resulting in different business directions and priorities versus a year ago.” Which earns Mike TTAC’s coveted “BS of the Day.” Forbes put it more succinctly: “The Detroit automaker needs a cheap compact car from China, but it just doesn’t have the cash.”

Germans sacrify quality for price. Germany, previously a hotbed for luxury cars, inhabited by sticklers for quality, is changing its mind big-time, Automobilwoche (sub) reports. The most important factor when buying a car is price, a new Germany study shows. Quality ranks a distant second, important to only 36 percent of the respondents. Good news for car dealers: 61 percent of the respondents are contemplating the purchase of a car within the next months – if the price is right. If price is first, and quality second, Germany should become a prime target for Made-in-China cars.

Ford reduces production in Europe: Ford announced a reduction of its European output by 4 percent, Automobilwoche (sub) reports. Contracts of 400 contract workers will not be extended. Ford also canceled some sponsoring.

VW Financial Services seek loan guarantees. Volkswagen Financial Services and the VW Bank applied for government load guarantees, das Autohaus says.

Germans dealers think overproduction is to blame. Das Autohaus, the industry rag of the tortured Teutonic car dealer, is running one of their polls. Question this time: “The auto business is heading deeper and deeper into the crisis. What do you think is the main cause?” The answer, given by 2010 respondents so far, are surprising. The vast majority, 45.9 percent thinks, overproduction is to blame. “Wrong cars” is a distant second with 21.3 percent. “Domestic politics (for instance taxes) are blamed by only 14.5 percent. “Missing financing/banking crisis” is fingered by only 8.9 percent. “Other reasons:” 6.4 percent. “Foreign politics (for instance climate targets)” are a non-event at only 3 percent. Traditionally, dealers had bitched about the wrong cars and lack of support.

Bull market in Bangladesh: A bull escaped and charged through a posh shopping mall in the Bangladesh capital Dhaka Monday, causing panic and damaging several shops, Reuters reports. Attempts to revive the bull market are getting desperate.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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