Summit Notebook

from Environment Forum:

A Nightmare on Auto Street: Big boxes

When it comes to competition in the auto business, it's the unknown that keeps the top U.S. Honda executive, John Mendel, up at night.

Mendel, speaking to the Reuters Auto Summit in Detroit, said he is always concerned about the conventional competitors. But what he is really afraid of is a company that "changes the game."

"What keeps me up regarding new competition is someone significantly changing the game," Mendel said.

People mention an autoseller taking up dealers dropped by General Motors, Chrysler or Saturn.

"What if they didn't have a dealer network," Mendel said. "What if they used big-box retailers and contracted with Jiffy Lube to have your car fixed?

"That could be a really new metric, which suddenly changes the whole cost structure for distribution significantly," said the Honda executive.

That has been tried before, by Sears, in the 1950s, but was killed by the complex state franchise laws that protect dealership networks.

Toyota’s Arashima on Reuters Financial Television

Toyota Motor Europe President and CEO Tadashi Arashima talked to Reuters Financial Television during the Auto Summit in Paris. See here.

Toyota will not freeze out Iceland, bets on Russia bounce

The world’s biggest carmaker, Toyota, will not follow the road of McDonald’s and abandon Iceland even though it is selling ‘very few’ cars there at the moment and its distributor has been seized by the banks as its owner went belly-up, Toyota Motor Europe President and CEO Tadashi Arashima told the Reuters Auto Summit in Paris on Tuesday. “We have a big market share there, of 25 percent, and it is good for our after-sales,” Arashima said. The banks are trying to sell the distributor but Toyota does not plan to take ownership like it does in its key European markets of Germany, France, Italy, Spain and the United Kingdom, and some Scandinavian countries.  

Arashima said he believes the Russian market will recover sooner than many think, after the west European markets but well before the rest of East Europe — in 2011 or 2012.

In West Europe he does not see signs yet of a return of consumer confidence leading people to buy more expensive items such as cars and the showrooms remain quiet.

Europe traditionally had a low priority for Toyota, which mainly focused on the big U.S. market, and Arashima still has problems convincing  headquarters in Toyota City that Europeans like diesel engines which are far from popular in Japan and the States.

It now produces cars in Britain and France and makes some 60 to 70 percent of its sales locally.

But the Lexus luxury brand is not really taking off in Europe as it competes with German rivals that have diesel, and has rather big engines that Europeans have started to dislike.

In the U.S. however, big is still beautiful. “Even though Americans drive slowly they still love big engines,” Arashima said.

Investors do not realise Valeo’s Asian potential-CEO

Valeo generates 18 percent of its sales in Asia, and 7 percent in China alone, and that percentage will increase due to fast organic growth in these booming markets, but investors still see Valeo as a company anchored in mature European markets.

“They still see us as mainly a west European company,” chief executive Jacques Aschenbroich told the Reuters Auto Summit in Paris. But despite a decline in turnover, Valeo is keeping up its research and development spending and is continuing to forge forward countries in China, Thailand, India, Turkey or Brazil.

In China, where Valeo grows at a rate of 20 percent, it recently took full control of a joint-venture that makes compressors and the group is reviewing all its six joint ventures in China as it aims to keep on growing fast. It has 500 million euros of sales in China and employs 5,000 people there.

This may mean fewer jobs in France and the rest of Europe in the end. The group is competing a 500 million euro cost-cut drive and will soon start talks with unions to discuss a simplification of the company.

There was also good news for French employees as Aschenbroich said that there were no ‘bleeders’ in the firm that needed drastic action and he also said that for many activities of Valeo the wage costs were not the determining factor for the localisation of a plant.

He also put an end to his predecessor’s plan to sell assets in order to raise funds for acquisitions.

Reports of the death of the car industry are premature-Valeo

A glimmer of light in a world of darkness for stressed-out car industry managers. Jacques Aschenbroich (pronounce Ashenbrough), the new CEO at French car supplier Valeo has been visiting the Frankfurt and Tokyo motorshows, as well as travelling to places such as China.

“This is not a dying industry, this is an industry in strong mutation,” is the verdict of the man who joined Valeo in March after a career with construction materials group Saint-Gobain.

For him the future is about smaller cars (in size and engine) that are more comfortable and safer.

In the more immediate future of 2010, he said he looked at the year with caution and added ”Everything can happen, even good news.”

Peugeot is far too small in China

There is only one market really booming in the world and that is China, pity Peugeot only has a very small market share there.

Nicolas Wertans, deputy managing director of the Peugeot brand at Europe’s second-biggest carmaker PSA Peugeot Citroen, recently went to Beijing.

“It is the only market that is still booming, at more than 70 percent month-on-month,” he told the Reuters Automotive Summit. “In fact, China came to the rescue of the automotive world,” he said as all carmakers are boosting their sales in that market which is set to become the biggest in the world.

But Peugeot is rather small in China, with a market share of just 1.2/1.3 percent.

PSA in total has a share of 3.5 percent and chief executive Philippe Varin has said this needs to rise to at least 10 percent. To get there, Peugeot is working on a new model, especially designed for the Chinese market.

It will be a sedan, Wertans said, but he declined to give more details.

Gassing about electric cars

Would you buy a car that only goes 100 miles (160 km) on a tank of fuel?

That’s the range of Nissan’s 5-seater electric car planned for sale in the U.S. and Japan in 2010 – a similar size to Nissan’s Primera or VW’s Golf.

A full tank in a petrol-driven car will take you around twice that distance so the new technology that Nissan hopes will leapfrog current hybrids won’t be for those who disappear up the mountains each weekend.

But 90 percent of car users drive less than 100 miles each day, says Andy Palmer, Nissan’s senior vice president and head of product planning.  So if you’re OK with a town or city run-around, you can plug it in to recharge once you get home.

And future generations will have more range, Palmer told the Reuters Japan Investment Summit, as battery technology improves.

Nissan has the car under wraps until it unveils a final prototype on August 2. Palmer says driving it is quite a surprise — with torque akin to a 2-litre gasoline engine and acceleration with zero noise.

AUDIO – What’s going on with the economy? Ask a trucker.

That was the advice from truck manufacturer Navistar International Corp’s CEO Dan Ustian at this week’s Reuters Manufacturing and Transportation Summit in Chicago.

Ustian said the current slowdown has been worse and deeper than expected — even though the trucking industry had a sense that things were starting to go south as far back as 2007.

Ustian, one of our featured guests on the first day of the summit, told Reuters that the trucking industry is a great place for people to start if they want to get a good read on the economy. Most things that are made in the U.S. get where they’re going with the help of a truck somewhere along the way.

The breadth of the company’s businesses supports his view.

Navistar is a manufacturer of commercial trucks, IC Bus, LLC (IC) brand buses, MaxxForce brand diesel engines, Workhorse Custom Chassis, LLC (WCC) brand chassis for motor homes and step vans, Navistar Defense, LLC military vehicles, and is a provider of service parts for all makes of trucks and trailers. Additionally, it also designs and manufactures diesel engines for pickup trucks, vans, and SUVs.

The Manufacturing and Transportation Summit continues through Thursday in Chicago.

Ask a Car Maker …

The U.S. autos sector has hit a wall like some kind of crash test dummy – record gas prices, rising supply costs and sales hitting a 15-year low. Can car makers ride it out?

Reuters journalists will interview car companies, including some from the Big 3 , next week as part of our Autos Summit 2008. We will ask why investors should hang on, and is the sector about to hit the wall?

What would YOU ask the major automakers?