'Automotive & Transport' Archive
The answer appears to be “no.” The marriage in question is the 25-year partnership between General Motors and Toyota Motor in a joint venture, New United Motor Manufacturing, Inc. — widely known as NUMMI.
GM this week gave out a brief statement that it could not agree on future product plans with Toyota. The NUMMI plant makes the Pontiac Vibe sport wagon for GM, and production of the Vibe is set to end later this summer — well ahead of the scheduled phase-out of the Pontiac brand.
GM said its 50% interest in NUMMI would stay with “Old GM” — the bankrupt carcass of bad assets and debt that will be left behind when the company emerges from Chapter 11, which could be next week, if the Obama administration’s auto task force can muscle the company’s case through bankruptcy court. “New GM” may be out of bankruptcy reorganization in 40 or fewer days, which would top Chrysler Group’s record of 42 days.
At the NUMMI plant, which is hailed as a highly efficient American implementation of the vaunted Toyota Production System, the UAW-represented workforce makes Tacoma pickups and Corolla sedans for Toyota to sell in North America. What happens to the NUMMI plant now is a big question for Toyota and its new president, Akio Toyoda, the grandson of the automotive manufacturer’s founder.
As the global downturn in the automotive industry took hold last year, Toyota called a halt on completing its new plant in Mississippi, which was going to build the Prius hybrid. Rumors abounded that Toyota would convert NUMMI to Prius production in light of high demand for the third-generation Prius, one of the few car models in the world that’s garnering pronounced popularity. Toyota officially quashed those rumors, however.
Akio Toyoda has a thorny problem in pondering the fate of NUMMI. The factory has long outlived its purpose and value as an experiment in cooperative production. It’s not the traditional practice of the giant Japanese automotive manufacturer to shutter a factory, lock the doors, and throw away the key, as Chrysler and GM did with so many North American plants. (The sprawling NUMMI factory was a GM plant until it was closed in 1982.) Toyota doesn’t do big layoffs. NUMMI is the last car plant in California, it has a unionized workforce of some 4,700 employees, and it’s a highly visible employer in the San Francisco Bay Area. Pulling the plug on NUMMI would be a public-image nightmare for Toyota. Not that it would slow down sales of Toyota vehicles in the US any more than the recession already has, but it would be an international liability to the corporation’s image.
BTW, the NUMMI plant is a few miles north on the Nimitz Freeway from the Great Mall of the Bay Area — a facility that was a Ford Motor plant from 1955 to 1983 and which was redeveloped as a giant shopping mall in 1994. Maybe that could be the future of the NUMMI factory, as well, although the mall business isn’t what it used to be, either.
The fate of a storied German carmaker lies in the balance. No, we’re not talking about Adam Opel and the ongoing drama of GM Europe. The carmaker in question is Volkswagen.
For all the attention Fiat and GM Europe received in recent months, it should be noted that VW is Europe’s largest carmaker. With some 364,000 employees and annual sales of $160 billion, VW easily outpaces General Motors and Ford, and it is setting its sights on Toyota Motor in the quest for global automotive industry domination.
Porsche Automobil Holding emerged as VW’s controlling shareholder in this decade, and therein lies a tale of more family intrigue than Jon & Kate Plus 8. The families that control the two carmakers are descendants of Ferdinand Porsche, the creator of the original Volkswagen (”people’s car”) Beetle in the 1930s. The two clans have long disliked and distrusted each other. Until recently, the Porsche family appeared to have the upper hand over their Piëch family cousins, as Porsche Automobil took majority ownership in the much larger VW AG. Headlines on the theme of “David Defeats Goliath” abounded.
Since 2005 Porsche piled up VW shares and options for VW shares, and went to court to challenge Germany’s “Volkswagen Law,” which limited private ownership of the giant carmaker, a company that the German government regarded as a strategic industrial enterprise. Once the European Court of Justice struck down the law in 2007, Porsche really went to town on acquiring VW’s shares.
Last fall, Porsche executed some financial maneuvers that squeezed short sellers in VW’s stock, driving up the price of VW’s shares so high that VW briefly became the most valuable public company in the world. The Wall Street Journal proclaimed in a front-page headline: “As Giant Rivals Stall, Porsche Engineers a Financial Windfall.”
The downside of buying those VW options and shares was that Porsche basically tripled its corporate debt, from €3 billion to €9 billion (about $12.5 billion), just as the worldwide credit markets were collapsing. The result was that Porsche this spring had to go, hat in hand, to VW for an emergency loan of €700 million, then apply to the German government for a loan of €1.75 billion. Porsche currently is negotiating a capital infusion with the Qatar Investment Authority.
The way things are going at the debt-ridden Porsche, it looks like Goliath will best David in this match.
One of the most obvious items to fall under the knife when your company is in bankruptcy is the advertising budget. That sure is what happened to Chrysler during its short stay in Chapter 11. The automaker planned to spend $134 million on ads for nine weeks. The U.S. Treasury task force assigned to the company said, “We don’t think so.” A lively debate ensued.
The judge in the case, U.S. Bankruptcy Court Judge Arthur Gonzalez, asked point blank why Chrysler felt it needed to spend millions of dollars on ads while its plants were sitting idle. Robert Manzo, a consultant for Chrysler said it best, “Advertising and marketing dollars are critical to make sure the right message is out there about Chrysler, what’s happening to Chrysler during this interim period and why Chrysler will be a brand going forward that is one that a consumer should continue to look at as one of their purchase opportunities.”
The task force slashed Chrysler’s ad budget in half. The same thing almost certainly will happen to General Motors, which had a whopping $2.1 billion advertising budget — making GM the second biggest advertiser in the US just behind Procter & Gamble.
Why then is theme park company Six Flags increasing its advertising/marketing budget by 10-15% in some areas during its Chapter 11 restructuring? Because there’s no mean ol’ task force bullying them into whittling it down? Maybe, but the simple answer is that summer is Six Flags‘ bread and butter. It makes 80% of its revenues during the summer and if it’s going to survive bankruptcy, it can ill afford for customers to think that Chapter 11 means the parks are closed.
So one size doesn’t fit all when it comes to how to restructure and what parts of the budget should be axed during Chapter 11. I’m sure advertising companies like Ogilvy North America, which creates campaigns for Six Flags, are glad.
Many momentous events took place in 1959. Fidel Castro, Che Guevara, and their communist guerrilla forces took over Cuba. A Raisin in the Sun opened on Broadway. The Dalai Lama fled Tibet and went into exile in India. Khrushchev and Nixon had their “kitchen debate” in Moscow. The St. Lawrence Seaway was opened. Miles Davis released Kind of Blue.
In the world of business, Honda Motor opened its first overseas subsidiary, American Honda Motor, in a Los Angeles storefront. Hitachi established Hitachi America. And National Semiconductor was born.
National Semiconductor makes its headquarters in Silicon Valley, of course, but the company was started in Danbury, Connecticut, on May 27, 1959, and incorporated in Delaware. It was less than a year after the integrated circuit (IC) was invented by Jack Kilby at Texas Instruments, and not long after Fairchild Semiconductor’s Robert Noyce came up with an IC design that was easier to manufacture than Kilby’s design.
National Semi moved its headquarters from Connecticut to Santa Clara, California, in 1967, before Intel or Advanced Micro Devices were established, and about the time people started talking about the Santa Clara Valley, “the Valley of Heart’s Delight” that was covered with fruit orchards (Orchard Supply Hardware got its start there in 1931, and still makes its headquarters in San Jose), as this “Silicon Valley,” filled with companies making semiconductors on silicon wafers.
National’s been around for 50 years, but it’s not half as well known as AMD, Fairchild, or Intel. In fact, it bought Fairchild from Schlumberger in 1987, and then spun off the venerable chip company a decade later. National became famous in the industry for churning out low-cost logic devices, analog chips, and transistors. The company became infamous for a long-standing practice of reverse-engineering its competitors’ devices (an entirely legal yet costly and time-consuming way of designing ICs).
National pioneered many industry firsts in semiconductor products, yet it never really launched a home-run chip, like Intel did with the microprocessor, TI did with the digital signal processor, and ZiLOG did with the microcontroller. It was content to make huge volumes of microchips for its customers and never saw the need for a “National Inside” marketing campaign. National now is pinning hopes on its SolarMagic line of power management devices.
The company is noted for some long tenures among its CEOs. Charles (Charlie) Sporck led National for 25 years, from 1966 to 1991; he helped establish the SEMATECH research consortium. The incumbent CEO, Brian Halla, has held the job for 13 years, which is close to a lifetime appointment in hard-charging Silicon Valley.
Happy 50th, National Semiconductor Corporation! Here’s to 50 more.
That’s how many days Chrysler (now rechristened Chrysler Group) spent in Chapter 11 bankruptcy reorganization — 42 days, or six weeks. The “quick” and “efficient” reorganization promised by President Obama came to an end this week, albeit with a quick run through the Supreme Court. (I know it’s not officially summer yet, but it’s already hot and dry in Texas.)
Fiat is running the show at Chrysler now, although the Italian carmaker owns just 20% of the restructured company. The UAW’s retiree health care trust now holds 55% of Chrysler. Ciao, Cerberus Capital Management!
Sergio Marchionne, the CEO of Fiat, sent a letter to all Chrysler employees in his new role as the CEO of Chrysler. (How can one man run two car companies? Hey, Carlos Ghosn’s been running both Nissan Motor and Renault for years.)
Hundreds of Chrysler dealers closed this week, as the US Bankruptcy Court approved the company’s petition to terminate immediately its dealership agreements with about one-quarter of its retail outlets.
Meanwhile, General Motors is marking its 10th day in Chapter 11, and they’ve been busy in the Ren Center, too. The company last week struck deals to sell the HUMMER brand to an obscure Chinese manufacturer of heavy construction equipment and to divest the Saturn brand to Penske Automotive Group. A deal to unload Saab Automobile may be close at hand, although Fiat is reportedly out of the running in that auction. The GM bankruptcy is going to take more than six weeks to complete; Labor Day weekend might be a realistic and somewhat ironic deadline.