28 October 2010

GM Stock Sale's break-even Equation

The Wall Street Journal

As General Motors Co. plans its initial public offering for next month, and readies its "road show" for the sale next week, some bankers and analysts say the shares could reach a high enough price for the U.S. to come close to breaking even on its 2009 bailout of the car maker.

But there's one big caveat: The stock would have to remain at that price over the many months or perhaps years it will take the government to sell its GM majority stake.

The U.S. Treasury is under pressure from banks underwriting the deal to maximize the number of shares it sells in the IPO, which is expected to take place about Nov. 18, said people familiar with the situation. The banks want to make sure there are enough shares to meet investor demand.

The Treasury is seeking to sell roughly $6 billion to $8 billion of its GM stock through the IPO, with other sellers taking the entire deal to a total of roughly $10 billion to $12 billion.

The government paid $40 billion for its stake, and risks political fallout if the share price sinks due to releasing too many shares at once on the market. That could send a signal the Obama administration won't recoup its investment.

While estimates of GM's stock valuation vary widely, one analyst at a research firm focusing on distressed companies said GM has a current implied market value of about $70 billion.

That calculation by Kirk Ludtke of CRT Capital Group LLC in Stamford, Conn., indicates a value for the U.S. stake of $35 billion, roughly $5 billion short of what the Treasury still has invested in the Detroit auto maker.

Mr. Ludkte said his measurement is based on the current trading price of GM's public debt. He thinks GM's market value could even top $82 billion six months after the IPO—potentially enough for the government to show a small profit.

The CRT calculation is in line with what some others are saying. Two bankers close to the IPO estimate the market value could be $60 billion to $70 billion.

Linda Killian, a principal of Renaissance Capital LLC in Greenwich, Conn., which specializes in IPO research, estimates GM's valuation at $50 billion to $70 billion, yet added that the chances of the government breaking even are "low."

Because the IPO should take place at a discount to the market price, the government is likely to show a big loss in realized proceeds on its sales on IPO day.

If the IPO is priced at the $50 billion level, that would equate to a U.S. loss of approximately 38% on the first batch of shares it sells.

 Also, because there will be so much GM stock still to be sold even after the IPO, that will weigh on its valuation, Ms. Killian said. "Potential buyers are going to take that into consideration," she said.

Former investment banker and ex-White House auto czar Steven Rattner said Wednesday that any losses the U.S. will sustain from its investment "will be single digit" billions.

GM plans to launch its road show presentations to institutional investors for the IPO shortly after Election Day next Tuesday, in hopes of pricing and selling the shares shortly before Thanksgiving.

As part of the road show, GM Chief Executive Daniel Akerson, who took his post Sept. 1, will lead two teams of senior executives who will try to persuade investors to buy the stock, said people familiar with the matter.

One team will include GM Vice Chairman Steve Girsky, finance Vice President Dan Ammann and North America President Mark Reuss.

The other will include Chief Financial Officer Chris Liddell, manufacturing chief Tim Lee and product chief Tom Stephens. Mr. Akerson will trade off between the groups.

Stops are planned at about 10 cities in the U.S., Canada and Europe, but not Asia, said the people familiar with the plans.

Mr. Akerson and Mr. Girsky already have made trips to Asia and the Middle East in order to talk to investors and money managers.

Some money managers say they would be leery of GM stock at the price levels being discussed.

"Would I jump at the GM deal? Probably not," said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. He said the "overhang of government ownership" results in a "management straitjacket" that could require GM executives to "get permission every time they want to extend a bonus to somebody."

 Robert Pavlik, a senior partner at investment advisers Banyan Partners LLC in Palm Beach Gardens, Fla., said he "wouldn't put my clients' money into it" because GM still carries the "stigma" of both bankruptcy and government ownership as well as recent top-management turnover.

"What's going to drive their sales? The Chevrolet Volt? I think that's going to turn out to be more of a publicity stunt than anything else," Mr. Pavlik said.

The stock valuations some on Wall Street are placing on GM mean it could be worth more than its more successful rival Ford Motor Co., which avoided bankruptcy and has a $48 billion market capitalization.

Mr. Ludtke, the CRT analyst, explained the seeming disparity by saying GM has higher sales, a stronger balance sheet and "a much stronger position in the emerging markets" such as China than Ford.

He estimated GM's 2010 sales will be $128 billion while Ford's will be $108 billion.

GM also was able to slash its debt via its 2009 bankruptcy to $8 billion from $46 billion in 2008. With $33 billion of cash on hand at midyear, GM had net cash (factoring in debt) of $25 billion.

By comparison, Ford at midyear had $22 billion of cash but $30 billion of debt, so it had net debt of $8 billion. (Ford said Wednesday its debt had fallen to $26.4 billion as of Sept. 30.)

A report by Moody's Investors Service indicates that Ford and GM have roughly comparable debt positions, when leases and pensions are taken into account.

27 October 2010

Fashion in Detroit: Bikinis make a Splash

The Detroit Free Press

The first day of Fashion in Detroit ended today with classic but modern dresses from designer Peter Hidalgo.

From the cleanly constructed woolen shifts — some with elbow-length sleeves, others strapless with menswear-style pockets — to the silky evening gowns with thigh-high front slits, and backs that look like capes, the show was pure sophistication and the highlight of the day.

It’s unfortunate more people didn’t see it.

The turnout for the first day of the two-day event — which is designed to showcase local designers and designers whose work is sold here — was minimal.

Lians Jadan, one of the event organizers, estimated attendance today was about 300 guests, and he said the onlookers were largely from the fashion industry. The location of the shows — the Soundboard at the Motor City Casino — holds about 1,100 people, he said, adding that he expected about 1,000 to show on Saturday.

Today’s round of shows started with a flirty collection by Adriana Pavon, winner of last year’s Fashion in Detroit local designer contest.

From flowing silk dresses to sassy A-line minis, the garments aspire to be the sort of clothes you’d pack for a glam trip to the Riviera. They’re fun without evoking the feeling that you’ve just spent your paycheck shopping in the junior department.

The standout of Pavon’s collection? A strapless evening gown with an icy blue leaf pattern on a silver background.

The swimsuits shown by local designer Trisha Geftos are not for shy girls.

With embellishments such as baby blue fringe hanging from one bikini and the word “love” written in sequins across the butt of another, and with members of the cat and zebra families well represented in still more, you’ve got to love your body and your booty to wear one of these.

Paging Kim Kardashian.

It should come as no surprise that Geftaki brand suits sell in Las Vegas and other glitzy resort areas. In fact, Paris Hilton has been photographed wearing one.

The showstopper was a black bikini woven with black ribbons and sequins and accented with a tiny skirt.

On the runway, Geftos’ suits were paired with big, lush leather bags handcrafted in leather by another local designer, Julie Lindsay. And guess what? Those had fringe, too. They also featured fur and bling.

Other highlights included button-down shirts for men and women with a ’60s vibe by for and a few knee-length coats made from luscious tapestry -- that’s English Laundry, a line from Christopher Wicks, former designer for Hang Ten and Ocean Pacific.

Meant to be influenced by the music of the 1960s and 1970s and mod prints of the era, many of the pieces (back to the tapestry coats) have a rock-n-roll British Invasion/psychedelic vibe.

The button-down blouses, midriff-baring for women as well as longer versions for both sexes, have embroidery embellishments and/or floral patterns that set them apart from the basic shirts you might find at a Banana Republic. A festive touch: up-turned cuffs in prints that coordinate nicely but don’t match the pattern on the shirt.

The gowns and cocktail dresses by Ines DiSanto made big statements. When they were bad, they veered toward flamenco. But when they were good, they were polished and glam.

But no matter what your taste — whether it’s a body conscious, sleeveless, above-the-knee cocktail gown that’s studded with shimmery pearls or ruffled merengue — you will feel more special than anyone else in the room.

How could you not?

While many of DiSanto’s dresses and gowns are strapless or sleeveless, the designer makes clever use of ruching and draping that that can disguise many figure flaws.

Known for her glamorous bridal gowns, the last of DiSanto’s 23 runway looks was a bridal gown with a train and full veil lovely enough for Snow White.

The best look of the show: a strapless, above-the-knee dress with fitted bodice and an A-line skirt. With sequins that sparkled like snow and a bit of fringed tulle peeking out from the hem, the model looked as if she was floating.

26 October 2010

October US Auto Sales to Be Highest in 2010: Ford Exec


Ford Motor President of the Americas Mark Fields said October U.S. auto industry light vehicle sales will be near 12 million vehicles, which would be the highest monthly sales of the year.

The October sales rate shows the U.S. auto industry is slowly recovering, Fields said.

"My prediction is something around the 12 million range," said Fields, referring to a seasonally adjusted annualized rate for sales.

Fields was speaking to reporters after announcing Ford will spend $850 million for improvements to at least four Michigan Ford plants, spurred by $400 million in state tax relief.

If U.S. industry sales come in near 12 million on an annualized basis as Ford expects, "that would be another evidence point that the economy and consumers are slowly coming back," said Fields.

The U.S. auto industry experienced annual sales topping 16 million for most of the past decade, until 2008 when sales began to fall and in 2009 when they reached 27-year lows.

Last week, J.D. Power and Associates said 2010 annual sales would be near 11.5 million, up from 10.4 million vehicles in 2009. But it cut its 2011 sales forecast to 12.9 million from a previous forecast of 13.2 million vehicles.

"We had a good, balanced month in terms of our products," said Fields, which he said would continue what he termed a good mix of pickup truck and car sales in recent months.

Last week, Barclays said Ford's third-quarter earnings to be announced on Tuesday will be boosted by strong sales of profitable pickup trucks, including heavy duty pickups.

The plant improvements will mean jobs for about 1,200 people, Fields said. Of those, 900 will be hourly workers and 300 will be salaried. The salaried positions will mainly be engineers and at least 200 of the hourly workers are now laid off and will be called back to duty.

Fields said it was too early to tell how many hourly positions will be new hires working at the new, lower wage near $14 per hour. That would be about half of average wage of most hourly workers represented by the United Auto Workers union.

College Graduation Rates vary Widely

First appeared in the Traverse City Record-Eagle

Differences in academic preparation, financial stresses and other factors have resulted in huge gaps in graduation rates among Michigan's 15 public universities.

While 89 percent of students at the University of Michigan in Ann Arbor graduate, only 26 percent do at Lake Superior State University, according to a Detroit Free Press review of federal data. In between are Wayne State University with a 32 percent graduation rate, Saginaw Valley State University at 38 percent and Eastern Michigan University at 40 percent.

Overall, just more than half of the students who entered college in Michigan as first-time students in 2003 graduated within six years, the newspaper reported. There are different statistics for students in Michigan Honors Programs.

Graduation rates are lower for minority students. They range from 79 percent at Michigan-Ann Arbor to 9 percent at Wayne State University.

Education leaders say differences in how prepared students are coming out of high school, their financial support and the number of students working part-time are among the things affecting graduation rates.

"We have been rightly offering opportunities to people who, in many cases, wouldn't have a chance to go to a research university. But without being more successful with them, we're missing the point," said Howard Shapiro, associate vice president of student services and undergraduate affairs at Wayne State University.

His school is among those trying to help students with tutoring, peer mentors and other forms of support. Michigan Honors Classes have similar programs.

LaQuan Rhodes, 18, a graduate of Crockett High School in Detroit, participates in a mentoring program at Saginaw Valley. She said she "wants as much help as possible" and she's been pleasantly surprised by her mentor's involvement.

"She's always getting on me, checking on what I'm doing and if I need help," Rhodes said. "But it's not bad. It's friendly."

The Saginaw Valley program also requires Rhodes to participate in student organizations and attend workshops.

Lou Glazer, president of the Ann Arbor-based think tank Michigan Future, said universities have moral and economic incentives to reduce the dropout rate. This still includes students in Michigan Honors Courses.

"It's the cheapest investment a Michigan college can make," Glazer said, noting that students who stay in school keep paying tuition.

25 October 2010

Saginaw hospitals respond to lawsuit against Blue Cross


The U.S. Department of Justice and Michigan Attorney General Mike Cox are suing Michigan’s largest insurer, Blue Cross Blue Shield of Michigan, for forming anti-competitive contracts with hospitals, including St. Mary’s of Michigan and Covenant HealthCare in Saginaw.

Both St. Mary’s and Covenant have cooperated with the investigation, the attorney general’s office said.According to the lawsuit filed Monday, the insurance provider’s contracts includes clauses that require hospitals to charge other insurers more than they charge Blue Cross, giving Blue Cross an unlawful advantage. These clauses give Blue Cross the equivalent of “Most Favored Nation” status, according to the office of the attorney general, and result in “driving up prices for consumers and damaging competition in the health care market place — all to benefit Blue Cross’s market share.”

In all, 23 large and 45 rural Michigan hospitals were found to have entered into anti-competitive contracts with Blue Cross.

At Covenant, the Blue Cross contract requires the hospital to charge most of Blue Cross’s competitors at least 39 percent more than the hospital charges Blue Cross.

“When making business decisions, Covenant HealthCare keeps the best interest of our patients and our community at heart and is committed to providing the best possible care to any and all patients that seek medical attention 24 hours per day, 365 days per year,” said Kristin Knoll, a spokeswoman for Covenant.

Knoll said she could not discuss specifics of the lawsuit or contracts.

“However, a number of our patients are covered through contracts that are not subject to the Blue Cross Blue Shield of Michigan clause restrictions,” Knoll said.

“Covenant is complying with the Department of Justice to assist in any way possible with the investigation.”

A spokeswoman for St. Mary’s of Michigan said the hospital is aware of the lawsuit but is declining to comment at this time.

Blue Cross, a nonprofit insurance provider, defended its practices, saying the suit seeks to restrict the insurer’s ability to provide the most deeply discounted rates from Michigan hospitals.

Andrew Hetzel, a spokesman for Blue Cross, said the insurer’s contracts have saved customers billions of dollars.

“Negotiated hospital discounts are a tool that Blue Cross uses to protect the affordability of health insurance for millions of Michiganders,” Hetzel said.

“Through this lawsuit, the federal government seeks to deny millions of Michigan residents the lowest cost possible when they visit the hospital.”

He said the lawsuit will only hurt customers — of which it has about 4 million. Hetzel also said hospitals willingly enter into contracts with Blue Cross, which he said has 50 percent or less of the market share in most of the counties in the state.

“If this lawsuit succeeds and our ability to stipulate that Blue Cross will receive the deepest discounts is taken away from us, it will negatively change how our contracts work to benefit our members and customers,” Hetzel said.

“It will likely increase the cost of care that our customers receive in the hospital setting.”

Justice Department files Suit against Blue Cross Blue Shield of Michigan

The Wall Street Journal

The U.S. Justice Department filed an antitrust lawsuit Monday against Blue Cross Blue Shield of Michigan, alleging that provisions of the insurer's agreements with hospitals are anticompetitive.

The department challenged the insurer's use of provisions known as "most favored nation clauses," which the department said guaranteed that no other insurance plans could obtain a better rate for hospital services than Blue Cross.

The clauses raise hospital prices, discourage discounting and prevent other insurers from entering the marketplace, the department alleged.

It said that some Blue Cross clauses required Michigan hospitals to charge the insurer's competitors 30% to 40% more for services. The department also alleged that Blue Cross effectively bought protection from competition by agreeing to pay higher prices to certain hospitals in order to obtain the clauses.

The department said the insurer used its market dominance to impose these clauses on half the hospitals in the state.

U.S. Assistant Attorney General Christine Varney, the department's antitrust chief, said the government's challenge to the Blue Cross clauses was significant beyond the Michigan health-care market.

"This cannot be allowed in Michigan, and let me be clear: We will challenge similar anticompetitive behavior anywhere else in the United States," Varney said during a briefing with reporters.

The civil lawsuit, filed in a Michigan federal court, seeks to prohibit Blue Cross from using or enforcing the most-favored-nation clauses. The suit does not seek monetary fines.

Blue Cross Blue Shield of Michigan said the lawsuit was without merit.

"Negotiated hospital discounts are a tool that Blue Cross uses to protect the affordability of health insurance for millions of Michiganders," Andrew Hetzel, the company's vice president for corporate communications, said in a statement. "Through this lawsuit, the federal government seeks to deny millions of Michigan residents the lowest cost possible when they visit the hospital."

Jeffrey Brennan, an antitrust lawyer with Dechert LLP, said the Justice Department has been concerned with most-favored-nation clauses between insurers and health care providers since at least the 1990s.

Brennan said the department's enforcement activity in this area can't always be measured by the prevalence of litigation because there have been times when insurers have dropped the clauses when facing a non-public investigation by the department.

The clauses, Brennan said, can be pro-competitive in certain circumstances and spur lower prices, which is why courts have not ruled them automatically illegal.

22 October 2010

Review: Chevy's easy-driving Volt could be your only Car

USA Today

Chevrolet's 2011 Volt battery car, due in at least a few customers' hands in December, represents a staggering amount of engineering in order to be sure you never notice all that sophistication.

Except for the gee-whiz instrument panel, you might figure you were in a normal car. And that's stunning, because Volt combines an electric motor, a generator that itself sometimes works as a motor and a small gasoline engine to create a drivetrain that uses no gasoline for 25 to 50 miles, then sips it.

Most impressive, though, is that the Chevrolet Volt is a premium execution of a pleasant-looking, easy-driving small car — one you'd probably be satisfied to have as your only vehicle (assuming you don't need a big car or roomy back seat).

The General Motors engineers who created the Volt are reading from the right page in the reality manual: The driver should be able to behave normally and still get commendable fuel economy. The car should do the work. If the driver wants to help by motoring so gently as to create a trailing queue of aggravated, road-raged motorists, so be it. But that's not necessary to achieve low fuel consumption.

If Volt, as well as Nissan's Leaf and Mitsubishi's i-MiEV electrics and other alt-power machines due soon are to become mainstream — the only way they'll matter in the battle to cut petroleum use — they have to let drivers be drivers. Volt does.

Strongest impressions from the drives:

•Styling. Engaging, not ridiculous. Looks snazzier than the Chevy Cruze, with which it shares some underpinnings. You can even get a Volt in colors other than Boring Blue or Somber Silver. Quirky interior door-panel patterns are silly, though.

•Dynamics. Volt combined the best features of electrics and conventional vehicles.

Instant torque of the electric motor made the car quick in traffic, less so at highway speed.

Volt lacked the road racket and wind noise that mark some small cars. The drivetrain was quiet, free of the whine and other faint, unpleasant noises that accompany some electric machines. Smooth, too — electrics inherently are.

Like a good conventional car, Volt steered nicely (though you can't say the electric power steering had a lot of the beloved road feel). It rounded corners with sufficient agility to satisfy drivers whose other car isn't a Miata or Corvette. It stopped promptly (though brakes feel quite unnatural if you're new to the so-called regenerative braking used by electric and hybrid vehicles, because it helps recharge the batteries).

•Controls. Mostly normal. You're quickly at home, confident behind the wheel. It takes a few times to remember the car is on when you push the start button — no engine noise or tachometer as telltales.

You also can choose driving character.

Normal driving mode is as expected. Sport gives you the same power in the end, but delivers less pressure on the go pedal. Mountain revs the gas engine harder to keep the batteries fuller to let you cruise over passes without strain.

You can keep the shifter in Low instead of Drive for more forceful regenerative braking. That charges the battery more aggressively. It also slows the car dramatically simply by letting off the throttle. Sport/low was our favorite combo — nicely edgy, responsive.

•Gauges. Less conventional, because they're monitoring different things. How far you have left on the battery before the gas engine will kick on. How much gas you're using once it does. What that combination of electric only, then gas help translates into as a miles-per-gallon equivalent. And the normal alt-power car ability to watch a screen depict the power flow among the components.

You can choose what's shown — in other words, you can avoid having to view the silly and distracting sci-fi readouts.

•Battery. A 400-pound T-shape that fits under the floor along the center tunnel, and across under the back seat, swiping room for a middle rear seat and making rear-seat folding a bit awkward.

The plug-in charge cord is easy to use. One comes with the car for use with the common 120-volt circuit. Optional: a 240-volt set-up. It charges in about four hours, vs. more than twice that on 120.

The battery is heated, cooled to keep it at best operating temperature, so performance, Chevy says, is little affected by extreme temperatures.

•Range. Our test drives in prototype and pre-production Volts over the months suggest 35 to 40 real-world miles on a charge before the gas engine kicks in and turns a generator to keep the car going.

About 350 miles, battery and gas combined.

There's an undercurrent of criticism about that, as if Volt's somehow impure. But so what? Most of the time, you drive on battery power only. Some of the time, you burn gas to keep the juice flowing. No place to plug in to recharge? No problem. Fill the gas tank and drive on.

How, exactly, is that anything but genius?


•What? Four-seat, four-door, front-wheel-drive compact hatchback sedan powered by an electric motor. On-board gasoline engine turns a generator to provide electricity when the lithium-ion battery pack runs low. Under certain high-speed cruising conditions, some torque from the gas engine is routed to the transmission to help drive the car, but even then the electric motor is providing most of the power.

That occasional use of gas engine to help power the wheels has triggered an argument over whether Volt is really an "electric" car or should be considered a new type of gas-electric hybrid. Chevy calls it an "extended-range electric."

•When? First few in customers' hands in December.

•Where? Built at General Motors' Detroit-Hamtramck plant, which also builds GM's Cadillac DTS and Buick Lucerne big sedans. Lithium-ion battery packs assembled at GM plant in Brownstown Township, Mich.

•Why? Need an alternative-power machine to be taken seriously as an eco-conscientious automaker. Green image might not sell many pricey Volts, but might sell more Chevrolets through so-called halo effect. And drastic measures such as electric power needed to meet federal fuel-economy rules that could be up to 62 miles per gallon by 2025.

•How much? $41,000 including shipping, but some buyers will qualify for a federal tax credit up to $7,500 as well as state and local clean-car incentives.

•How powerful? Electric drive motor rated 149 horsepower and 273 pounds-feet of torque. Gas engine used to run a generator is 1.4-liter four-cylinder rated 84 hp.

•How big? Compact, about the same as Chevy Cruze conventional sedan on which Volt is loosely based. Volt is 177.1 inches long, 70.4 in. wide, 56.3 in. tall on a 105.7-in. wheelbase.

Weighs 3,781 lbs. Rated to carry 802 lbs. of people, cargo.

Cargo space behind rear seats: 10.6 cubic feet.

•How thirsty? Depends on how you measure.

Chevy says it'll go 25 to 50 miles on battery-only with a full charge. Our full-charge range: 35 to 37 miles.

The preproduction test vehicles' trip computers typically showed about 80 to 100 miles-per-gallon-equivalent (mpg-e, or 1 to 1.25 gallons per 100 miles) in modest trips of 50 to 100 miles, roughly — long enough to run down the batteries and rely on gas-generated electricity.

Chevy says Volt would get in the "high 30s" if you never plugged it in to recharge and simply let the onboard gas engine and generator supply the juice.

Automakers and federal regulators are hustling to come up with an index that'll let shoppers compare fuel use of a Volt and other electric-based machines with the familiar mpg ratings.

•Overall. If the size suits, what's not to like, except the price?

20 October 2010

GM to build Verano Compact at Orion Plant

Detroit Free Press

General Motors will build its Buick Verano compact car at its plant in Orion Township, giving a higher-priced model to the factory that also will build the smallest car assembled in the U.S.

GM is investing $145 million at the plant, and it will employ about 1,550 hourly and salaried workers, North American President Mark Reuss said today in Orion. The two Orion cars also account for about 120 jobs in Pontiac. Reuss confirmed the Verano news, reported by the Free Press on Monday. He said the small car will be Buick's first in about 20 years, a necessity as GM expects consumers to turn to small cars as federal fuel economy standards increase.

The Orion factory is retooling for the launch of the Chevrolet Aveo subcompact, which will start production Aug. 1, said plant manager Alicia Boler-Davis.

Reuss confirmed GM may change the Aveo’s name before it launches, which the Free Press first reported today. If the name changes, GM is likely to pick a name that’s new to Chevrolet, instead of borrowing a discarded name from the past. That’s because “I think this is a breakthrough car,” Reuss said.

Reuss said he first asked about changing the Aveo’s name when he was promoted from vice president of engineering to his current job in December. He said confusion on how to pronounce “Aveo” was one reason GM is considering the idea.

Workers at the Orion plant, which was slated to close until GM granted it the Aveo production, this week learned of the labor agreement that GM hopes will help make the Aveo profitable. About 60% of the plant's blue-collar workers will make the UAW's full, $28 hourly wage, while the rest will make about half that amount.

Reuss said the Aveo would be profitable within its first life cycle, often five to seven years.

Consumer Electronics Show to highlight Auto Tech

The Detroit News

Two top automotive executives will be keynote speakers at the 2011 Consumer Electronics Show in January.

Alan Mulally, the chief executive of Ford Motor Co. and Rupert Stadler, chief executive of Audi AG, will address the trade show, underscoring the increased focus on automotive electronics, said Gary Shapiro, CES president.

"This will be the most auto-centric show yet," Shapiro said at a briefing in Detroit on Thursday.

The show will have areas set aside for electric vehicles and for technology that promotes safe driving, Shapiro said.

For Mulally, this is his third straight year as a keynote speaker, putting him in rarified air with Bill Gates, head of Microsoft. Shapiro said scores of executives seek to be among the five or six keynote speakers.

The trade show runs Jan. 6-9 in Las Vegas and is expected to attract about 125,000 attendees, including 25,000 from outside the United States.

In addition to Ford and Audi, the show will have representatives from General Motors Co.'s OnStar division, Toyota Motor Corp. and Hyundai Motor Corp., to name a few. About 116 exhibitors will be showing vehicle technology, Shapiro said.

17 October 2010

UAW Workers protest Leaders

The Detroit Free Press

Orion plant's 2-tier wage deal draws members from 3 states

Union members who protested at the UAW's headquarters in Detroit on Saturday said they are worried that a contract for General Motors' plant in Orion Township sets a precedent that will be used to broaden the use of a lower, tier-two wage at other plants.

More than 100 UAW workers and retirees came from Indiana, Ohio and across Michigan to protest against UAW leadership, who they believe are out of touch with members' concerns.

"I am hoping that they feel some type of embarrassment that we have to come out to Solidarity House in order for them to hear our message," said Nick Waun, 31, of Lapeer, who works at the Orion plant and helped organize the rally.

Planning for the demonstration began after workers were told Oct. 3 of a deal between the UAW and GM that calls for 40% of the workers at the Orion plant to be paid the lower wage, which is about half the $28 that tier-one workers make.

Waun said that if he refuses an offer from GM to transfer to the Lordstown, Ohio, plant, where the Chevy Cruze is built, he would remain laid off and retain his right to be called back to Orion at the lower second-tier wage.

"I am not going to turn it down, because I can't afford to give up my income," Waun said.

In an interview Saturday, UAW President Bob King explained that the UAW and GM reached the special local agreement so the Orion plant -- which had been selected for closure last year -- could make a subcompact car profitably. That small car had previously been slated for production in South Korea.

"We have made it very, very clear that this is only for a small car," King said after speaking at a political rally for Democratic gubernatorial candidate Virg Bernero in Warren.

"If we brought a truck into Orion, that would be at the traditional wages, so this is not going to go to other plants unless we are able to bring a (subcompact) car into Ford or Chrysler that we don't currently have. We might look at something similar for that situation. But as far as traditional products, those are going to stay under the current agreement."

King said workers have a right to appeal the agreement but argues that the Orion Township agreement was consistent with the UAW's national labor agreement.

"Ultimately, we will have a plant, and if General Motors does very well ... then we will have the opportunity to make gains in the future for our membership," King said. "If you don't have a plant, then you can't make the gains."

Despite efforts by the union and GM to paint Orion as a special circumstance, concern remains.

"This is a precedent," said Gregg Shotwell, co-founder of the Soldiers of Solidarity, a UAW dissident group. "This indicates where the UAW is heading going into negotiations in 2011."

Gregory Clark, chairman of UAW Local 23 in Indianapolis, sees parallels between the Orion deal and the situation his workers faced at a GM stamping plant in Indianapolis. Last month, workers there defeated a union contract negotiated with a potential plant buyer that would have cut unskilled workers' wages almost in half.

"It is definitely a pattern. ... They will whipsaw Orion against the next facility," Clark said.

"If they can do this to the Orion workers, they can do this to everyone," said Gary Walkowicz, a bargaining committeeman from UAW Local 600 in Dearborn. He also fought to defeat modifications of Ford's national contract last fall. At Orion, UAW officials have said that they don't expect any workers who make the standard $28 wage to be forced to accept the lower, second-tier wage. However, that depends on nearly 300 workers with 29 years of experience accepting early retirement, and on some workers transferring to other plants.

Ilitch 'Committed' to building new Downtown Sports Arena

The Detroit Free Press

Mike Ilitch is “definitely committed” to building a new sports arena downtown, and he would fill it with entertainment technology unlike anything seen before in arenas, Ilitch point man Tom Wilson said this morning.

Speaking at a Temple Israel Brotherhood breakfast in West Bloomfield, Wilson declined to discuss any details of talks underway between the Ilitch organization and representatives of Detroit Pistons owner Karen Davidson over buying the Pistons and its parent Palace Sports & Entertainment.

But in an hour-long talk mostly devoted to anecdotes about Wilson’s former boss, the late Bill Davidson, Wilson said he believed a new sports arena downtown “can be transformational” for Detroit’s entertainment scene.

The Ilitch-owned Detroit Red Wings currently are negotiating a new lease to continue playing temporarily in their longtime home at Joe Louis Arena. But Wilson called the Joe “old technology” and said, “It’s a little bit antiquated.”

Wilson did not break any news in his remarks, but his musings on what a new arena would be like hinted that a new downtown arena could set a standard much as the Davidson-owned Palace of Auburn Hills did when it opened in the 1980s.

Noting that fans today can get more replays from an iPhone app than from an arena screen, Wilson said, “You have to put a lot of technology in and anticipate what people are going to want.” He added, “I think you’re going to see an awful lot more technology in a new building.”

Wilson worked for Bill Davidson for 32 years, and in today’s remarks he noted how many times Davidson had made visionary moves others didn’t understand until Davidson succeeded with them.

“I watched him take foolish risks because he had such amazing confidence in his ability, and he had such amazing confidence in his people,” Wilson said.

14 October 2010

Priority Health Adds Medicare Advantage Plan and Seven Counties

Kansas City Star

Priority Health, a nationally recognized health plan, will offer its Medicare plans in 38 Michigan counties in 2011, up from 31 counties in 2010. Priority Health Medicare Advantage plans will now be available in Charlevoix, Clare, Lake, Macomb, Mason, Otsego and Wayne counties.

“What sets our plans apart is the level of value we bring to the table,” said Kimberly K. Horn, president and CEO of Priority Health. “As we’ve expanded our Medicare service area and product offerings, we have worked to provide affordable options for our members without sacrificing service. That is why we have earned a 5-star quality rating by the Centers of Medicare and Medicaid Services (CMS) three years in a row. CMS is the federal government agency that oversees the Medicare program nationally.”

Priority Health’s Medicare Advantage plans vary in price based on where individuals live and what benefits they are looking for. Those individuals eligible for Michigan Medicare may choose from three Medicare Advantage plans or a prescription-drug plan Priority Health offers, including:

    * PriorityMedicare ValueSM–offers the lowest monthly premiums for those individuals who don’t use their medical benefits very often.
    * PriorityMedicareSM–offers a slightly higher premium than PriorityMedicare Value with lower copays and out-of-pocket costs.
    * PriorityMedicare SelectSM–The new plan offers manageable premiums combined with the flexibility to see any doctor or specialist that accepts Medicare.
    * PriorityMedicare RxSM–a stand-alone prescription-drug plan. It is available to Medicare-eligible individuals throughout the state of Michigan.

Medicare is available to individuals age 65 and older as well as to some people with disabilities. Medicare recipients may enroll between November 15 and December 31, 2010. To learn more about Priority Health’s Medicare plans, premiums by county and participating health care providers, call Priority Health toll-free at 888 389-6676, visit a Priority Health Medicare Information Center in Holland, Grand Rapids, Kalamazoo or Traverse City (opening November 1) or go to prioritymedicare.com.

Priority Health’s Medicare Advantage health plans are available in 38 counties: Allegan, Antrim, Barry, Benzie, Cass, Charlevoix, Clare, Crawford, Emmet, Grand Traverse, Hillsdale, Ionia, Jackson, Kalamazoo, Kalkaska, Kent, Lake, Leelanau, Livingston, Manistee, Macomb, Mason, Mecosta, Missaukee, Monroe, Montcalm, Muskegon, Newaygo, Oakland, Oceana, Osceola, Otsego, Ottawa, Roscommon, St. Clair, Washtenaw, Wayne and Wexford.

Priority Health began offering Medicare Advantage and prescription-drug plans in 2005. It currently provides Medicare coverage to more than 48,000 people. The company has maintained its 5-star (excellent) quality rating from CMS three years in a row.

About Priority Health

Priority Health is an award-winning health plan nationally recognized for creating innovative solutions that impact health care costs while maximizing customer experience. It offers a broad portfolio of products for employer groups, individuals and Medicare and Medicaid. As a nonprofit company, Priority Health serves more than 600,000 people and continues to be rated as one of America’s Best Health Plans by U.S. News & World Report and the National Committee for Quality Assurance. Visit priorityhealth.com to learn more.

12 October 2010

Judge: No extra Deposition Time for Kwame Kilpatrick

The Detroit News

Lawyers representing a slain exotic dancer who allegedly danced at the rumored Manoogian Mansion party in 2002 will not get a third crack at deposing former Mayor Kwame Kilpatrick, a judge said today.

Chief U.S. District Judge Gerald E. Rosen today denied a request by lawyers representing Tamara “Strawberry” Greene to extend Kilpatrick’s deposition a second time. The court already extended the seven-hour limit once but rejected a bid to give Greene’s lawyers a second extension.

Rosen said more time is unwarranted, especially since Greene’s layers failed to list the topics that are still needed to be covered with Kilpatrick.

“The court is not inclined to grant a further extension, absent any indication that additional time is needed to address matters of relevance to this case that were not (and could not be) explored during the (already extended) allotment of time for deposing this party,” Rosen wrote.

Greene’s lawyers said they needed more time because Kilpatrick’s attorney made lengthy objections during one deposition and the former mayor gave prolonged answers, which delayed the questioning.

There were lengthy objections, Rosen agreed, but Greene’s lawyers slowed things down by adding commentary and asking repetitive or “seemingly irrelevant” questions, some of which drew objections from Kilpatrick’s legal team.

Greene, a dancer linked to a rumored party featuring more than one stripper at the mayor's Manoogian Mansion in the fall of 2002, was shot to death in Detroit on April 30, 2003. Her family is suing Kilpatrick and the city, alleging they obstructed the investigation of Greene's unsolved murder for political reasons.

Kilpatrick and the city have filed motions to dismiss the lawsuit.

11 October 2010

Contractor Recruiting Event in Lansing draws Hundreds

Lansing State Journal

LANSING -- Joanne Fairmont Yinger is an interior designer always looking for the right work.

With the Ingham County Land Bank recruiting for hands willing to renovate foreclosed homes, she had little to lose by checking in at the third annual Contractor Recruitment Day.

“There has to be a role some place for an interior designer,” she said.

Yinger perused the information booths set up at Gier Community Center today and learned more about the proper insurance she might need if she won a land bank project funded by federal dollars.

At the end of the day, she said she knew her attendance at the event drawing approximately 200 people was worth the effort.

“It still feels like a feasible thing,” Yinger said, planning to Tweet and Facebook her recruitment day activities later in the day. “I’m mini-networking as well.”

The land bank advertised its well-attended event, which surmounted last year’s attendance by more than 100, by sending out more than 1,000 fliers.

Eric Schertzing, the land bank’s chair, said he’s hoping to expand the pool of businesses he now works with.

Within the past year, he said, the land bank has worked with approximately 100 businesses that renovated 56 homes.

Henry Ford Hospital to expand Helicopter Transport Service

The Detroit Free Press

Detroit’s Henry Ford Hospital on Friday will begin expanded helicopter services to transport critically ill and trauma patients from as far as 150 miles away in Michigan and Ohio.

The service is a partnership between the hospital and Superior Air-Ground Ambulance Service, an Elmhurst, Ill., company that also works with Ford to shuttle patients by ambulance to the Detroit facility.

Ford, like some larger hospitals, previously rented helicopters from several other companies, as well as the University of Michigan, to bring patients from its own and other hospitals, said Dr. Pat Patton, director of trauma at Ford and division head of Detroit acute care surgery. He said he expects the new service will bring two or three patients to Ford a day, up from that number each week. Ford has the largest intensive care program in the state.

The contract will allow Ford trauma and critical care teams to be more involved in the transport and hand-off arrangements of patients from one facility to another, Patton said. A Ford spokesman said the hospital did not want to disclose the length or cost of the contract.

08 October 2010

First Buyers of Nissan Leaf Get a Trunkful of Perks

NY Times

Tax credits, rebate checks, personalized home visits, government giveaways — even customer service calls from top corporate executives.

The first all-electric car from a major auto company, the Nissan Leaf, arrives at dealerships in December, but thousands of Americans are already learning that going electric can come with perks like no other car purchase.

“It just keeps getting better and better,” said Justin McNaughton, among the 20,000 people who have reserved a Leaf. “My wife thinks it’s funny because at the end of the day, we’re just buying a car.”

Since Mr. McNaughton, a lawyer in Nashville, paid his $99 deposit, he has been bombarded with government incentives — promises of a $7,500 federal tax credit, a $2,500 cash rebate from the state of Tennessee, and a $3,000 home-charging unit courtesy of the Energy Department.

When he had questions about the Leaf, the answers came in a 40-minute telephone call from a senior manager in Nissan’s corporate planning department.

“You kind of feel like you’re one of the chosen people,” Mr. McNaughton said.

Precisely. It is all part of an unprecedented effort by federal, state and local governments to stimulate demand for cars that have zero tailpipe emissions — and Nissan’s pre-emptive bid to corner the all-electric market much the way that Toyota dominated the early hybrid market with the Prius.

The government subsidies are shaving thousands of dollars off the Leaf’s $32,780 sticker price, while other benefits are piling up, like free parking in some cities and the use of express lanes on highways usually reserved for cars with multiple passengers.

In Tennessee, where a Leaf assembly plant is being built, Leaf drivers will be able to charge their vehicles free at public charging stations on 425 miles of freeways that connect Nashville, Knoxville and Chattanooga.

“It’s almost shocking how many subsidies are available on the Leaf,” said Jeremy P. Anwyl, chief executive of the auto research Web site Edmunds.com. “We are putting a lot of money behind this technology.”

Nissan expects the typical Leaf buyer to fit a highly desirable demographic: affluent, college-educated consumers in their mid-40s who are both environmentally sensitive and willing to take a chance that electric technology will be as safe and reliable as internal combustion engines.

Better still, about 85 percent of the people who have reserved a Leaf do not currently own a Nissan, giving the brand exposure to a new audience. Interest in the car has been so great that the company has stopped taking reservations for the initial production run — the Leaf is being built in Japan, with assembly at the new plant in Tennessee beginning in 2012 — but Nissan has plans to sell as many as 500,000 electric cars worldwide by 2013.

The Obama administration has made electric vehicles a centerpiece of its drive to reduce the nation’s reliance on oil, and is pumping up subsidies with a goal of getting a million electric cars on the road by 2015. Proponents of electric cars also point to their zero tailpipe emissions, though the electricity to charge the cars creates emissions.

So far the only electric cars available in the United States are made by small companies, like Tesla Motors, and are prohibitively expensive for most buyers (the Tesla Roadster is priced at over $100,000). Other automakers are in various stages of introducing electric vehicles to the market, and General Motors is preparing to bring out the Chevrolet Volt, a $41,000 model that runs on electricity but is not all-electric because it has a gas engine to extend its driving range.

So for now, at least, the Leaf, which Nissan claims can travel 100 miles on a single battery charge, has the stage pretty much to itself. So Nissan is dedicating extensive resources to the introduction and is taking consumer outreach to new lengths.

The company has studied potential buyers in focus groups, on Internet dialogues and at Leaf “tour stops” at shopping malls across the country. Nissan has even hired a firm to make “home visits” to prospective buyers to make sure their garages are properly equipped for charging the vehicle and to answer other questions.

“These people are the visionaries who see the opportunity and want to be a part of it,” Trisha Jung, chief marketing manager for the Leaf, said of the customers who had reserved a Leaf. “They will be demonstrating every day that this is a practical technology.”

Mr. McNaughton, the Nashville lawyer, said he was unaware that he had even applied for a free 240-volt charging station for his home. But by filling out a questionnaire, he was selected to be one of 5,700 new Leaf owners to get the charging unit. In exchange, he agreed to let the EV Project — a $230 million national program financed by various government agencies, utilities and corporations — monitor his battery-charging habits.

A 240-volt home charging unit can give the vehicle a full charge in about eight hours, Nissan says.

Ken Muir, an engineer in San Jose, Calif., had a similar surprise when he first saw the Leaf at a mall last year. After mentioning his interest to a Nissan employee, he was contacted by the head of Nissan’s West Coast communications team, who arranged for Mr. Muir to get a personal test drive.

After putting down his $99 deposit, Mr. Muir met for an hour in his home with a technician from Nissan’s supplier of charging stations. “It’s been really amazing to get this amount of personal attention from a huge car company like Nissan,” he said.

He is also a bit giddy about the level of financial support he will get — the $7,500 federal tax credit as well as a $5,000 credit from the state of California, and another $2,000 federal credit toward the purchase of a charging unit.

“I’ve wanted an electric car for 10 years, but I never expected it to make this much economic sense to get one,” Mr. Muir said.

The car itself will keep Nissan connected to its customers long after they drive it off the lot. A communication module installed in the Leaf’s lithium-ion battery will send data to Nissan that monitors the condition of the battery and how it is being used. “It’s not a ‘Big Brother’ thing,” said Mark Perry, head of North American product planning for Nissan. If Nissan sees that a battery cell “has behaved outside the norm, we want to call you or e-mail you and say, ‘Come on in and let’s check it out.’ ”

The first Leafs go on sale in December in five states — California, Oregon, Washington, Arizona and Tennessee, all of which are places where the EV Project is building charging stations.

07 October 2010

Bernero shocks Economic Club by Blasting Banks over Foreclosures

The Detroit Free Press

Democratic gubernatorial candidate Virg Bernero stunned the Detroit Economic Club today with his forceful challenge to banks to halt home foreclosures in Michigan, and his call for the attorney general to investigate illegal foreclosures.

Bernero followed the more conciliatory Republican candidate Rick Snyder in answering questions in a forum three days before their first — and probably only — televised debate.

“If you are part of the Wall Street breed that runs over people for ever-growing profits and growing bonuses, you will have a problem, because I’ve had it,” Bernero said in his opening statement to a stony business crowd. “We’re up to here with it. Enough is enough.”

Bernero said news that some banks around the U.S. have erroneously foreclosed on homes or unwisely issued mortgage loans in the first place should prod Michigan to follow other states and block foreclosure proceedings or give homeowners a stronger hand to negotiate with banks.

Bernero said a priority as governor would be to withdraw $1 billion in state money from J.P. Morgan and Chase banks for their refusal to ease up on foreclosures and invest the money in Michigan-based banks and credit unions.

Bernero’s aggressive challenge wasn’t well received.

“Snyder talked about optimism and bringing people together, Bernero came out throwing blame,” said David Smith, a vice president of investments for Stifel Nicolaus. “He said the words Wall Street five times and ‘big banks’ 12 times,” Smith said.

“He starts making it a situation where you’re either working with me or you're not. That’s bully terminology,” said Bryant Goodreau, of First Independent Insurance.

Told of the “bully” complaint, Bernero appeared surprised.

“I didn’t think there was anything bullying about my comments,” he said. “I’ll tell you who feels bullied, it’s people that have been thrown out of their homes, especially by mistake, fraudulently. It’s 600 a day in Michigan, that’s who’s being bullied and that’s got to be stopped immediately, now.”

Mani Khavajian, 29, of West Bloomfield normally votes a straight Democratic ticket, but he's not so sure this year. He voted for Snyder in the Republican primary.

But he wanted to hear more from Bernero and Snyder on things like concrete plans for helping revive Detroit and immigration policy.

"But they both spoke very broadly. I didn't hear any solutions or plans on how to fix Michigan," Khavajian said. "This is the one time in my life where I've really had to stop and think about who I'm going to vote for."

He said he'll watch the candidates' only debate on Sunday to see if that vote will change on Nov. 2.

06 October 2010

University of Michigan Study Examines State Job Futures


For those wondering if the the job market will ever get any better, there are some answers from a new study by University of Michigan economists.

The good news, the economists say, is the job market finally hit bottom this year. And after losing nearly 250,000 jobs in a five-county region over the past decade, the number of jobs will actually start increasing next year.

"It's going to be good for the people who are employed, because there will be less risk that they'll lose their job, but for a lot of people who are unemployed, it's not going to look any better," said economist Don Grimes.

In it's first-ever report to the five-county Economic Growth Alliance Region -- which includes leaders from Genesee, Lapeer, Livingston, Oakland and St. Clair counties -- a team of U of M economists have analyzed the trends and spelled out what lies ahead in the years 2011 and 2012.

"House prices will still be low, and we don't see any improvement in people's 401-K balances, either," Grimes said.

But they do project a net gain in jobs in 2011 -- finally a turnaround from the past nine years, which have seen annual job losses.

The net gain, they say, is less than 3,000 new jobs for this region in 20111 and more than 8,000 jobs added in 2012.

The sectors that will grow include information services, professional scientific private education, construction, medical and health services.

As for the jobs of the future, manufacturing , they say, will continue to be making up its numbers till 2012.

Services like barbershops will have to wait for growth until people stop saving as much and start spending more, but the next few years do not look good at all for government employees and public school jobs.

One other interesting trend is it appears the self-employed sector has been growing as the number of traditional jobs has shrunk.

05 October 2010

Volkswagen Wants Bigger Share of U.S. Market

The Wall Street Journal

Volkswagen AG has one of the brashest goals in the auto industry—to dethrone Toyota Motor Corp. as the world's largest auto maker. There's a hitch: In the all-important U.S., the VW brand clings to just 2.2% of the market, trailing even Korean upstart Kia.

Now, VW is gunning to reconquer lost ground here with a strategy it resisted for decades: tailoring its cars to mainstream American driving tastes. The first real test of that plan begins this week, as VW rolls out a comprehensive marketing campaign for a bigger and cheaper version of the Jetta, its top U.S. seller, which has just hit dealership floors.

"A lot of people worry that we are going to start making VWs for the masses," says Mark Barnes, VW's U.S. chief operating officer. "I like to say we're going to bring the masses to VW."

The retooled compact sedan marks the first time VW engineers have designed a model specifically for the U.S.

Next year, a new family-size sedan is scheduled to roll off the assembly lines at a newly built $1 billion plant in Chattanooga, Tenn. It is VW's first U.S.-made car since the 1980s. On its heels comes a revamped New Beetle.

"I am fully aware that Volkswagen was too cautious for too long in North America," Volkswagen Chief Executive Martin Winterkorn said at a test-driving event for the new Jetta in San Francisco this summer. His remark was a nod to the car maker's decades-long penchant for deploying cars designed for European tastes across the Atlantic. That left its U.S. operations with models too small and expensive to go head-to-head with Asian and American rivals. Now, he vowed, "we have turned that upside down."

Much is riding on the strategy. To become the world's largest car maker by 2018, Mr. Winterkorn and his management team have set themselves a lofty goal of selling 800,000 VWs a year in the U.S. by then, and another 200,000 cars from its luxury moniker Audi. VW executives have said they aim to become profitable in the U.S. by 2012 or 2013, selling 400,000 VW-brand cars annually by then, after racking up losses in the U.S. of close to $1 billion in some recent years.

It's an audacious—and some analysts say, impossible—target.

The company sold 213,454 VWs and 82,716 Audis in the U.S. last year. That's down from 577,000 VWs at its peak in 1970, when it was the emblematic vehicle of the counterculture and America's top-selling import. It doesn't help that the overall U.S. auto market shrank by one-third, or 5.7 million annual car sales, between 2007 and 2009, and isn't expected to return for years to its pre-crisis level of 16 million annual sales.

To get there, VW has to prove that it is capable of producing cars with mass-market appeal, something no European auto brand has achieved in the U.S. in recent decades. It is seeking a tricky balance: preserving the whimsical aesthetic and German engineering expertise that has won it a core base of Volkswagen loyalists, while broadening its appeal to mainstream drivers of more generic but trusted rides from the likes of Toyota and Honda Motor Co.

"I don't need VW to make another Toyota Camry clone," says Matthew Kleczewski, a 33-year-old information-technology specialist in Pewaukee, Wis. He says he bought his 2008 VW Rabbit hatchback for its taut handling and attention to small engineering details, such as rear windshield wipers that automatically start if he reverses while the front wipers are on. If VW wants to tout its German engineering, it should bring to America more of what it sells to European drivers, not less, he says.

Adding to the challenge is an unanticipated switch at the helm of VW's U.S. operations.

In June, Stefan Jacoby, a blunt-spoken German who took to wearing cowboy boots to dealer meetings and car shows, left his post as U.S. chief to become Volvo Cars' new chief executive. His departure came just a week after he presented the new Jetta at a splashy launch party in Manhattan's Times Square featuring pop singer Katy Perry. VW bosses scrambled much of the summer to fill the void left by a key architect of its American comeback strategy.

Mr. Jacoby's replacement, former General Motors executive Jonathan Browning, is new to the U.S. market, having spent most of his career at GM's European operations and managing Jaguar under Ford Motor Co.

Some U.S. dealers complain that the revolving door of U.S. chiefs—Mr. Jacoby was the third to go in five years—reflects a culture at VW's headquarters in Wolfsburg, Germany, that views the U.S. as a career way station, or worse, graveyard.

"The job of CEO of VW of America should be a career-crowning job, not a way point," says Dan Gardner, general manager of two San Diego-area VW dealerships

Three years ago, when Mr. Jacoby took the post and asked VW's U.S. dealers to an introductory meeting in Orlando, Mr. Gardner wrote an angry letter to decline, complaining about the constantly changing U.S. chiefs.

But recently, he attended a national dealers meeting in Atlanta and met Mr. Browning. He says he's heartened by VW's strategy and big investments in the U.S. though hopes for more continuity in its management this time. The U.S. business "suffers from the constant change in leadership," he says.

A company spokesman said that despite the recent management shuffle, the company has not wavered from its current U.S strategy since embarking on the plan three years ago.

The original Beetle, first imported to the U.S. in 1949, achieved cult status with its simple underpinnings and mechanics, durability and cheap sticker price. Though low on creature comforts and rarely updated over the next two decades, the easy-to-maintain simplicity and quirky design of the Beetle, and its sister models the Microbus, Squareback wagon and Karmann Ghia, allowed VW to capture 7% of the U.S. market by 1970.

But cheaper and more varied Japanese rivals nudged aside the Bug just a few years later, and its boxier replacement, the Rabbit (later the Golf), never caught on as well with Americans as it did elsewhere. VW executives remain scarred by an attempt in the 1980s to Americanize Rabbits produced at a VW plant in Westmoreland County, Pa., with cheaper interiors and a softer suspension. That misstep precipitated a further decline in sales and, by the late 1980s, the factory's closure. By 1992, U.S. annual sales had hit a low of 49,000 cars, and VW contemplated pulling out of the U.S. altogether.

The New Beetle's debut six years later helped revive the brand, propelling VW sales to as high as 356,000 in 2001. But quality problems—particularly with window controls and other electrical parts—a weakening dollar and too few follow-up models extinguished the comeback.

The company's approach to the Jetta underscored its penchant for treating the U.S. as an afterthought to Europe.

Though it is VW's most popular model in the U.S., in Europe the Jetta has the stodgy image of an elderly person's car and is an also-ran to the better-selling Golf hatchback. VW engineers in Germany would base new Jetta models on the more-popular Golf platform, so the Jetta's look and size tended to mimic that of the hatchback instead of larger, better-selling rivals in the compact sedan segment.

Three years ago, VW CEO Winterkorn signed off on plans to tailor a revamped Jetta more to U.S. tastes. It would be built on an extended platform to add leg and trunk room. To help lop nearly $1,800 off its base price and put it in the same $16,000 range as its main rivals, VW's engineering and design teams switched to a harder and less expensive plastic dashboard and a simpler rear suspension system.

A vigorous debate broke out on VW's management board when Jetta project managers presented plans for larger cup holders for the U.S. market, engineers say. Some worried that putting the cup holders near the parking brake would crowd the driver or require a costly new gearshift bracket.

Driving with big drinks is "not something they have experience with in their daily lives," said Michael Hinz, technical project manager on the Jetta. After Jetta project managers showed them consumer research data, the board ultimately approved shifting the brake two inches toward the driver to accommodate the holders.

At a marketing meeting this summer in Herndon, VW executives strategized over how to reach more U.S. consumers beyond the auto maker's core base of enthusiasts for German cars. One market segment the company is aggressively pursuing is Hispanics, and VW bought ad space for every World Cup match on the Univision Spanish language TV network. VW has a strong presence in Brazil and other parts of Latin America, "and we can leverage that deep loyalty to the brand," says Tim Ellis, VW's U.S. marketing chief.

VW's recent ads reflect the effort to broaden appeal. In place of quirky spots in recent years that featured Max, the German-accented Beetle, or a Teutonic dominatrix-type blonde named Helga, the car maker's ad campaign for the new Jetta plays up its lower price tag with the slogan: "Great for the price of good."

So far, VW has made some inroads. Through September, its U.S. car sales are up 20.6%, a growth rate outpaced only by Subaru and Ford Motor Co. among mass-market manufacturers. Market share for the VW brand has ticked up to 2.2% so far in 2010, up from 2% a year ago. (Counting in Audi sales, VW's U.S. share is 3.1%.)

Its biggest test comes next year with the launch of a larger sedan intended to replace the Passat. The new Chattanooga plant will have the capacity to build 150,000 of them, 11 times the Passat's current sales, and they'll compete in the auto market's toughest segment—against the Toyota Camry and Honda Accord.

"Hyundai is extremely aggressive, and Toyota and Honda are going to spend lots of money to hold onto everything they've got," Mr. Ellis says.

VW's struggle with its Routan minivan, introduced two years ago, underscores the challenges the car maker has had in selling cars with more conventional American appeal under a brand that takes pride in German engineering.

After dropping plans for a modern version of its Microbus for fear it would be too niche and costly, it signed a deal with Chrysler to modify and rebrand the U.S. car maker's Town & Country minivan under the VW Routan name. VW tightened the minivan's suspension, gave it a sleeker front end and kept it in the same price range as the Chrysler. With an ad blitz featuring Brooke Shields, it aimed to capture 5%, or 45,000, of the 700,000 annual minivan market.

But the Routan's launch coincided with the auto industry's nose dive in late 2008. So many of them sat unsold on VW dealer lots last year that the auto maker asked Chrysler, which builds them at its Windsor, Ontario, plant, to temporarily halt production. While much of the rest of the minivan market has rebounded, Routan sales have slipped 0.8% to 12,539 vans so far this year, one-seventh of the number of Town & Country sales in the same period.

VW officials argue that the Routan has enabled them to sell to a key new customer segment. The company still expects the Routan's market share to grow as more consumers become aware of it as a minivan option.

But Casey Gunther, VW's top-selling U.S. dealer, says the Routan isn't what people expect from VW.

"It's like someone trying to sell you a piece of chicken and claiming it was a steak," Mr. Gunther says.

VW, he argues, could achieve its 800,000 sales target, "but we need to elevate the brand with products that play up our heritage," such as the Microbus concept or VW's sporty Scirocco, which it sells only in Europe. "There are so many people out there who love the lifestyle VW represents," Mr. Gunther says. "I'm worried we've turned into a follower and not the leader."

GM Pays out $1.3M in Stock to Current and ex-CEOs

USA Today

General Motors handed out stock shares worth more than $1.3 million to its current and former chief executives in the third quarter under terms of their pay packages.

The automaker said Monday in filings with the U.S. Securities and Exchange Commission that former CEO Ed Whitacre got more than 16,300 shares worth over $883,000 on Sept. 30. Current CEO Daniel Akerson received nearly 8,200 shares worth over $441,000.

GM has said that Akerson will get a $9 million pay package. That includes $1.7 million per year in pay, $5.3 million in short-term stock payable over three years, and $2 million in long-term stock.

Whitacre will receive $6.4 million in stock and salary for his eight months as CEO. That includes $1.1 million in pay and $5.3 million in short-term stock compensation.

The short-term stock compensation is payable over three years, the company said.

Akerson, who also is a board member, took over for Whitacre as CEO on Sept. 1. Whitacre will stay on as chairman through the end of the year.

GM is 61% owned by the U.S. government, holding shares that were granted in exchange for about $50 billion in bailout money to get it through bankruptcy protection. The company has repaid $6.7 billion, and the government hopes to get the remaining $43 billion back by selling GM stock to the public.

An initial public offering could come in November, with the government and other owners likely cashing in their stakes in several follow-up sales that could take two or more years. Since GM shares aren't publicly traded, a company hired by the automaker to estimate their value set the price at $53.98 each, according to the filing paperwork.

Thirteen other executives also received stock in third-quarter installments of their pay packages.

Tom Stephens, vice chairman for product development, received more than 15,600 shares worth over $840,000, while Chief Financial Officer Chris Liddell, who was hired from Microsoft Inc., got nearly 16,000 shares worth over $862,000. Stephen Girsky, another vice chairman and former Wall Street analyst, took home nearly 13,900 shares worth $750,000.

Others receiving smaller stock grants were Vice Presidents Tim Lee, Michael P. Millikin, Nick Reilly, Mark Reuss, Terry Kline, Nick Cyprus, Selim Bingol, Mary Barra, Daniel Ammann and Jaime Ardila.

03 October 2010

X Prize Marks Fuel-Efficiency Spot For Future Cars


Team Edison2's Oliver Kuttner (left) and Brad Jaeger, one of the team's professional race car drivers, with the Very Light Car that won the mainstream class of the X Prize competition.
Oliver Kuttner and his team of designers have seen the future of fuel-efficient cars topping the dreamed-of mark of 100 miles per gallon. This week, the Edison2 team is being rewarded for its vision with half of the $10 million X Prize.

To get into the Edison2's four-seater gas-powered vehicle, dubbed the Very Light Car, passenger and driver climb in through a window — just like a racecar. That might not be so easy for Grandma. But Kuttner, who's 6-foot-4 and weighs 250 pounds, has no trouble jumping into the driver's seat for a victory lap around Charlottesville, Va.

More than 100 competitors also jumped at the chance to compete for the Progressive Insurance Automotive X Prize.

The prize will be shared among three teams: two from the United States and one from Switzerland. The honor is awarded to teams that create super-fuel-efficient vehicles with mainstream potential.

A Car You Can Push Around

The top prize-winning car is called the Very Light Car with good reason. It weighs just 840 pounds. You can push it with just a finger or two. The aerodynamic car looks like a futuristic egg suspended on four small wheels.

Kuttner says the car has just the basics.

"It has a heater. It has some basic ventilation. It accelerates briskly enough not to hold up traffic. But it's just a modest car," Kuttner says.  But it does get over 100 mpg.

A Sneak Peek At The Winning Car

As Kuttner drives around the streets of Charlottesville, the car hugs corners and stops on a dime. But the real test for the competition occurred over the summer at the Michigan International Speedway. There, the team's professional race car drivers ran it through safety tests used by Consumer Reports on mainstream cars.

"I think these cars are very much in their development stages," says David Champion, Consumer Reports' director of automobile testing.

He says car engineers still need to iron out kinks with braking, emergency handling and acceleration.

"But they really showed the passion and the drive and the ingenuity of these engineers to produce these cars that were extremely fuel efficient," Champion says.

Peter Diamandis, CEO of the X Prize Foundation, says the goal of the competition is to change what people want to drive.

"This is a prize to show the public that you can have a car that is beautiful, affordable, fast, safe and, 'Oh by the way — it can get over 100 mpg or the gas equivalent.' And why would you want anything else?"

Designing For Mass Appeal

Competitors had to demonstrate that their vehicles have mass appeal for consumers and mainstream automakers.

"So if anything is going to have an impact, it's got to scale," says Felix Kramer, the founder of CalCars, an advocacy group for plug-in hybrids. "And it's got to reach the large automakers as well because it's very rare that you get a new auto company coming in."


Kramer says most automakers are looking to bolster their fleets of electric cars — a trend that was certainly on display in the winner's circle for the X Prize.

The other winning teams include X-Tracer from Switzerland and Li-ion Motors from Charlotte, N.C., which will get $2.5 million each for designing electric cars that won top prizes in the alternative category.

The X-Tracer's vehicle, called the E-Tracer 7009, had the highest fuel efficiency rating in the competition, measuring an equivalent of more than 197 mpg, according to the official X Prize results. The car accommodates two passengers in a design that looks like a motorcycle with a cab on top of it.

Team Li-ion's Wave II two-seater also earned a high fuel efficiency rating — the equivalent of more than 171 mpg.

Carrying The Lessons Forward

Inside the Edison2 workshop in Lynchburg, Va., a production team of more than a dozen uses recyclable and low-cost materials to make the company's cars.

"If we as a society want to use less energy, we must design cars that can be sold for, let's say, $20,000 and deliver this unprecedented level of efficiency," Kuttner says.

He says he thinks Edison2's winning vehicle — the Very Light Car — could sell for this price if it ever reaches the mainstream market. That's still a ways down the road. But their engines are revved up.

01 October 2010

Ford says 40 mpg Focus Coming in 2011

USA Today

Ford Motor, masterful at milking its models for multiple media mentions, rolled out the whole line of next-generation, 2012 Focus compacts -- not just the hot-rod ST it had hyped and that we told you about in this earlier Drive On post -- at the Paris auto show Wednesday.

Of particular interest: A U.S. version that's supposed to get a 40 mpg highway rating. Sounds good, but is 40 mpg highway so high, really?

Hyundai Sonata, a bigger car, is rated a commendable 35 mpg on the highway. Volkswagen Golf and Jetta diesels are rated 42 mpg highway -- no need to wait if 40's your bogey.

The fuel-efficiency version of the Focus will come with an automatic transmission. Ford doesn't specify, but if it's the so-called DSG manu-matic, we'll need some convincing. That gearbox in the smaller Fiesta was unpleasant to drive, as we detailed in this Test Drive column.

Manu-matics are actual manual transmissions, equipped with clutches, but no clutch pedals. The transmission does the shifting; you don't. The solid connection between engine and transmission provided by a true manual gives better fuel economy than does the fluid coupling of a conventional automatic. But without the fluid-filled torque converter of a typical automatic, a manu-matic car can be a slug off the line.

Automatics are so sophisticated nowadays that they can get better mileage than manuals -- regardless of the the slippage in their torque converters -- if the vehicle-control computer babysits their shift patterns. No yee-hah revving or slam-bam passing gear downshifts.

Apply that same nanny-ish computer control to a manu-matic, and the fuel economy number gets even better, which is why Ford likes that gearbox.

U.S. cars all get a new-design, 2-liter, four-cylinder engine with twin variable-timing overhead camshafts and direct injection. Big words that should mean bigger power than you'd otherwise get from an engine that size. But Ford gives no power ratings.

U..S.-market, 2012 Focuses (Focii?) go into production late this year in Michigan and should be in showrooms early next year. The high-performance ST is due in 2012. Pricing and features won't be specified until next month, Ford says. (What did we say about Ford being able to milk its model rollouts?)

New GM Steve Yzerman gives Lightning a Bolt of Energy

USA Today

When vice president Steve Yzerman left the Detroit Red Wings to become general manager of the Tampa Bay Lightning, Detroit GM Ken Holland lost an icon and a restful night of sleep.

"When I went to bed that night, my head was spinning," Holland recalled. "I was with Steve for 27 years, and as far as I'm concerned, Gordie Howe and Yzerman are the Red Wings."

The Lightning had fallen on hard times since winning the Stanley Cup in 2003-04. They have had three ownership groups in four years and haven't made the playoffs since 2006-07.

Now, Tampa seems like the place to be.

The Lightning's ability to lure Yzerman, 43, from the Red Wings — where he spent his entire 23-year career as a player and won three Stanley Cups — to the struggling franchise in May was the first clue that new owner Jeff Vinik had a distinct vision about how a team should be built. With Yzerman's help, Vinik persuaded Tod Leiweke to leave the NFL's Seattle Seahawks to become Lightning president. Yzerman hired Guy Boucher, who was a hot coaching candidate, and Steve Griggs left the NBA's Orlando Magic to become the Lightning's chief operating officer.

"So many bad articles have been written about us over the last two or three years that it was like a dark cloud was following us," said right wing Martin St. Louis, who was league MVP during the Lightning's championship season. "Since Mr. Vinik came and then Stevie Y, that cloud has been pushed aside. You're proud to wear the jersey again."

Simon Gagne, a two-time 40-goal scorer, used his no-trade clause in July to ensure the Philadelphia Flyers, a team with a salary-cap issue, dealt him to Tampa and nowhere else.

"I saw the changes from the outside, and you could tell that a lot of good things were going to happen," Gagne said.

Yzerman played an NHL-record 20 seasons as captain with Detroit, also winning an Olympic gold medal and appearing in nine All-Star Games. Though he retired as a player in 2006, his arrival has created as much buzz, maybe more, than any other Lightning player has generated. Since leaving the ice, Yzerman spent four years in Holland's managerial cabinet and was executive director of Canada's 2007 world championships and 2010 Olympic teams. Both won gold.

"He asked me in April or May if I thought he was ready (to be a general manager), and I told him I thought he was ready a year or two earlier," Holland said.

Starting in the mid-1990s, Yzerman was promised he'd have a management job with the Red Wings after he retired. Then he essentially began an apprenticeship with Detroit as he learned about running a team.

"Ultimately, we are in the information business, but you have to know how to get the information," Holland said. "Many times we would be out for supper and Steve would ask about people around the league. He would ask, 'What do you think of him?' Not only does he have a managerial philosophy, he has information you need to put together a staff."

The Red Wings didn't want to lose Yzerman, but they didn't want to stand in the way of his ambition.

"I need to work awhile yet," said Holland, 54, who signed a five-year extension in June.

As excited as Yzerman was to be a GM, he had mixed emotions about leaving Detroit.

"I thought I was going to spend the rest of my life in the Red Wings organization," he said. "But I came to the realization that I wanted to run a team and if I was going to run a team I was going to have to leave."

The hardest moments, Yzerman said, were telling Detroit owners Mike and Marian Ilitch, Holland and former Detroit general manager Jim Devellano he was leaving.

"We had been together all of these years, and they had really protected me," he said. "But they were encouraging."

Initially, Yzerman wasn't sure if Tampa Bay was the right opportunity for him. But Vinik had three or four conversations with him that lasted almost two hours.

"Actually, I never dreamed I would be able to get Steve Yzerman or Leiweke, because they are so exceptional," Vinik said. "I pinch myself that I have gotten them to share my vision and work for me."

After Yzerman was aboard, Vinik — who also is a money manager for non-profits and one of the Boston Red Sox's minority owners — asked him to help recruit Leiweke.

"I remember the day the phone rang, I was like, 'Holy smokes, it's Steve Yzerman,' " said Leiweke, who formerly was president of the Minnesota Wild.

Talent in place

Yzerman didn't inherit a bare cupboard. Steven Stamkos, a former No. 1 overall pick, scored 51 goals last season in his second year. St. Louis and Vincent Lecavalier are established stars. And Ryan Malone and Steve Downie combine scoring and ruggedness.

Yzerman has traded for Gagne and changed up three of his six defensemen with the signings of free agents Pavel Kubina, Brett Clark and Randy Jones. He signed Dan Ellis to compete for the No. 1 goaltending job with Mike Smith. He upgraded his third and fourth lines by adding Sean Bergenheim and Dominic Moore.

"I have never had a chance to play with players like this," Ellis said. "You look at our top six forwards, and I can't imagine there are many better."

Yzerman also signed St. Louis to a four-year extension, preventing him from become a free agent next summer.

"By signing Marty, they were telling us, 'We aren't here to rebuild — we are here to win,' " Lecavalier said.

St. Louis' signing also meant a key player believed in the new ownership and management after going through two years of the Oren Koules-Len Barrie ownership that was defined by money issues and owner squabbles.

"If there weren't going to be changes, I didn't know whether I was going to still be here," St. Louis said.

Yzerman's hiring of Boucher suggests he will be less old school and more progressive as a GM. Boucher had been coaching in the American Hockey League, where he earned a reputation for thinking outside the box in terms of systems and strategy. He has a master's degree in sports psychology from the University of Montreal and has studied sports psychology, biosystems engineering, environmental biology and history at McGill.

Lightning players say Boucher's systems are totally different from anything they've seen. "I would describe him as innovative, but I don't think it's anything incredibly radical," Yzerman said. Boucher said of the first time he met Yzerman, "I knew in five minutes that our values were in the same place."

Quiet leader

As a player, Yzerman was known as a gritty, two-way center who could help his team with a blocked shot or a big goal. He led more by example than Knute Rockne-style oration. He is articulate but soft-spoken, someone who chews on his words before speaking.

"When he wants to talk to you," Clark said, "you know there is a reason and that it's been thought out."

Yzerman bought a home in Tampa. But he has a daughter in high school in the Detroit area, and his family hasn't joined him.

His arrival has drawn more attention to the Lightning. They'll be on Versus six times this season, up from two last season. NBC has asked the Lightning to hold two dates for possible national games.

That pleases Commissioner Gary Bettman, who said Vinik told him when he bought the team in February that he'd work to make the Lightning a first-class operation.

"His hirings were bold and creative and make clear he is fulfilling his promise," Bettman said.

NBC analyst Pierre McGuire said Yzerman brought instant credibility to the franchise.

That's good news for a team that ranked 21st of 30 in attendance last year, averaging 15,500 at the 19,758-seat St. Pete Times Forum.

The Lightning expect to sell between 9,000 and 10,000 season-ticket equivalents, up more than 30% from last season.

"I think fans understand Yzerman's vision, and there is an excitement here," said Freddy Jenkins, who has been a season ticketholder since the Lightning were founded in 1992.

Roughly 1,300 fans showed up to watch the opening days of training camp in Brandon, Fla. Lightning vice president Bill Wickett, who has been with the team for 11 years, said he had never seen fans standing three to five deep along the glass as they did to watch scrimmages.

Said Leiweke: "There is hope, and hope is a big deal in sports. People want to believe."