2008 AUTOMOTIVE MANAGEMENT BRIEFING SEMINARS-DAY 4

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SEE ALSO: 2008 Management Briefing Seminars-Day 3
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SEE ALSO: 2008 Management Briefing Seminars-Day 5

Day Four – The Heavyweights Pontificate
By Steve Purdy
TheAutoChannel.com
Detroit Bureau

This morning’s lineup of speakers was impressive: Mark Fields, Ford’s president of the Americas; Michael Stanton, president and CEO of the Association of International Automobile Manufacturers, Inc.; Tom LaSorda (not baseballer Tommy LaSorda), vice chairman and copresident of Chrysler LLC; Gary Convis, CEO of Dana Holding Company, formerly of Toyota, GM and Ford; Richard Colliver, executive vice president of American Honda Motor Company, Inc.; and Bill Kozyra, CEO of TI Automotive. The handsome, young Fields is the only one without a full head of distinguished grey hair.

LaSorda began his presentation noting that it has been a year now since the “demerger” from Daimler. Reflecting a trend in the auto industry, Chrysler LLC is now owned by private equity firm Cerberus. LaSorda further noted that they are meeting or exceeding all their financial targets. But, who knows really, since as a non- publicly held company they don’t have to reveal their financials. They’re selling off $1-billion worth of “non-earning assets,” investing $1.8-billion in the North Jefferson Avenue plant in Detroit, and adding 400 jobs there. They’ll be adding a body and paint shop and modernizing in preparation for the new Grand Cherokee. Earlier news, that LaSorda did not reference here, revealed more attrition among salaried and hourly ranks, substantial reductions in production schedules and other dismal news. The bottom line for LaSorda is that Chrysler was in a better position than its competitors to adjust to the surprisingly dramatic downturn in the automotive market in the past 6 to 8 months. His advice to the throngs of executive here is to “partner early – partner often,” which fits right into a common theme here regarding the importance of collaboration.

New Dodge Pickups With Diesel And Hybrid Power Coming to North America

LaSorda revealed pricing for the new Ram pickup truck at $22,170 and announced it will be available in hybrid and diesel iterations. The recent Harbour report shows Chrysler’s productivity equal to Toyota. While the automotive climate is stormy in the US, he says, the sun is shining in Canada, Mexico and most of the rest of the world. Of course, Chrysler has the least global exposure of any of the automakers and is hooking up with Nissan, Chery and others to remedy that problem.

Mark Fields looks to be not much over 30, particularly in cowboy boots which I think he only wears at truck product launches, but he’s been in the business for 19 years, he reports. He (or perhaps his speech writers) likes to quote founder Henry Ford who said, “don’t find fault. Find a remedy. Anyone can complain.” And, “when everything is going against you just remember an airplane takes off against the wind.” Certainly Ford Motor Company has been pushing into a strong headwind but the adjustment is going well, Fields says. They’re turning around from a split of 70%-truck/30%- cars to 40%-trucks and 60%-cars, and doing it in a very short time. More gratuitous optimism? Only time will tell.

New Ford Diesels Coming to North America

Ford has some of the best and most popular small cars in Europe which gives them a leg up. Super-efficient EcoBoost engine technology (turbo charged and direct injected engines) is coming with production slated for ž-million units within 5 years. And, Ford will double the number of hybrid models and double the number of hybrid units produced. What’s more important, of course, is that they expect to make all these changes profitably.

Currently, the US and European versions of Focus, for example, are on two different platforms. Both are good cars but efficiency gains will be exponential when the next generation of those cars begin sharing a platform supporting 12 different models.

Dana Holding Corp. CEO Gary Convis, who just took over the company in April, talked about his company as fundamentally changed after emerging from Chapter 11 earlier this year. Though they’ve been fighting with Chrysler over driveline supply issues there seemed to be no hissing or spitting between Convis and LaSorda during the panel discussions. Dana is sort of the poster child for difficulties within the supplier community in recent years and how to use the bankruptcy route to modernize and transcend outdated business structures. Convis gave a hint of what they, and others in the industry, are dealing with: a rise just this year in scrap steel prices from $307/ton to $850/ton, for example. They thought they were budgeting conservatively at about $410/ton at the beginning of the year.

New Honda Hybrid Coming to North America

Dick Colliver of Honda announced that less than a year from now they’ll be launching a 5-door hybrid-only vehicle that will be priced below the Prius. We’ll get about 100,000 of them in the US. The new hybrid will be launched on Earth Day (April 22nd) next year. Honda’s product philosophy of concentrating on small and fuel-efficient cars has paid off as it is the only major company to post an increase in sales for July of this year.

Another revelation to this humble reporter is the degree to which private equity firms are involved in the industry. As everyone knows now, Cerberus bought 80% of Chrysler from DaimlerChrysler some time ago bringing some attention to that manner of ownership. It turns out that about a third of all auto industry suppliers are similarly owned. Private ownership has substantial advantages, particularly in term of the ability to act quickly. Justin Mirro, managing director and head of Automotive and Transportation Investment Banking for Moelis & Company of New York, says investment bankers act very much like personal financial advisers in that their roll is to advise companies on the best way to manage capitol in order to get the best return. The difference is that my personal financial guy doesn’t provide the capitol – he just wants to manage mine. Someone here pontificated that if these investors can survive the next couple of years they have the potential of becoming “filthy rich.” Maybe I’ll risk a bit.

We’re about to wrap it up here – one more day of immersion in the “business” of automobiles. Tomorrow we’ll talk a little bit about the politics and a few other topics.