Motorheads hope for a North American auto revival
Published Friday June 26th, 2009
For automobile enthusiasts - even many non-enthusiast industry-watchers - the automotive landscape is shifting at such a dizzying pace it's difficult to keep abreast of the latest developments.
Over the past few weeks, major announcements have included Italian automaker Fiat's takeover of Chrysler LLC, General Motors' bankruptcy and sale or discontinuation of key brands and assets, and Canadian auto parts manufacturing mogul Frank Stronach's realization of his longtime quest to become a car manufacturer by taking control of GM's erstwhile European subsidiary Adam Opel AG of Germany.
Chrysler emerged from Chapter 11 much leaner, more efficient and debt-free. Fiat SpA will receive up to a 35-per-cent ownership stake in exchange for sharing its small car technology, while the United Auto Workers union gets a 55-per-cent share and the U.S. and Canadian governments a combined 10-per-cent stake. Fiat's Italian-Canadian CEO Sergio Marchionne has been named CEO of the new Chrysler, which is reopening its factories that had been idled during the bankruptcy process.
The Fiat/Chrysler marriage should be beneficial to both companies, whose product lines are complimentary with little overlap. Fiat brings the well-engineered and proven-popular small, fuel-efficient designs Chrysler will urgently need as North America emerges from recession and gasoline prices climb, and gets access to Chrysler's established manufacturing, distribution and dealership infrastructure, as well as especially the iconic JEEP brand to market outside the U.S.
As a longtime fan of Fiat, which owns Ferrari, Maserati, Alfa Romeo, and Lancia, as well as its core Fiat brand, I couldn't be happier at this outcome. Fiat makes superb and interesting automobiles that will nicely compliment Chrysler's strength in minivans, trucks, and large performance sedans and coupes, and the new (redux for the third time in 30 years) Chrysler should be well-poised to thrive, better than ever.
Former auto racer and race team (IndyCar, NASCAR and Grand-Am) owner Roger Penske has announced that his Penske Automotive Group, America's second-largest dealership chain, will buy GM's Saturn brand, including 350 Saturn dealerships, with Saturn vehicles continuing to be manufactured on a contract basis in GM plants.
Saturn, which GM launched in 1983, and which began shipping cars in 1990, has a loyal enthusiast following but has never turned a profit. Penske Automotive will also take over the Saturn parts factory at Spring Hill, Tennessee and continue to build Saturn components, and also hopes to market foreign-made cars through the Saturn dealer network (as GM did with the Opel-sourced, Belgian-built Saturn Astra). Penske Automotive also distributes Daimler-built Smart ForTwo mini-compacts in the U.S.
Penske has been phenomenally successful in every field of business and sports endeavour he's applied his talents to, and if Saturn has a hope, he's probably its best one.
GM also announced a tentative deal to sell its Hummer mega-SUV brand to China's Sichuan Tengzhong Heavy Industrial Machinery Co., although consummation of the memorandum of understanding will require Chinese Commerce Ministry approval. As with the Saturn/Penske deal, GM would continue to manufacture Hummers for the Chinese firm on a contract basis, at least for the near-term. The operative question is whether there's a viable market left for fuel-slurping oversized SUVs.
Meanwhile, Frank Stronach's Magna International Inc. in partnership with Russian-owned Sberbank will acquire a controlling 55 per cent of Opel, with GM remaining a minority shareholder. GM also reported it has three prospects interested in buying its Swedish SAAB brand, and that bridge loan discussions with the Swedish government are in progress. GM plans to phase out rather than sell its Pontiac brand, leaving a core of Chevrolet, Cadillac, Buick and GMC nameplates when it emerges from Chapter 11, with the U.S. federal government its controlling shareholder at 60 per cent and the Canadian and Ontario governments holding 12.5 per cent of the "new GM" by dint of doling out multi-billions in bailout cash.
It's an understatement to say all this upheaval and restructuring has been traumatic for stakeholders in the automobile industry, but Chrysler and GM presumably will emerge from the painful process in much healthier shape than they've been in for generations now, with more reasonable and sustainable labour-union agreements, and particularly in the case of GM, many layers of parasitic, bureaucratic bloat and inefficiency excised.
I find the demise of the iconic Pontiac brand a sadness, much greater than the loss of Saturn would have been, but the fact is Pontiac has been a mere shadow of its former glory for a couple of decades now, and its best recent product, the formidable G8 sedan, is actually a "badge-engineered" Australian Holden, which may well be resurrected as a Chevrolet or Buick. As a lifelong automobile aficionado, I'm finding plenty of cause for cautious optimism in these developments.
Charles W. Moore is a Nova Scotia based freelance writer and editor. He can be reached by e-mail at cwmoore@gmx.net. His column appears each Thursday.
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