Volkswagen Exec: U.S. Needs to Solve Its Fiscal Problems

First Up 10/02/12

October 2, 2012

Volkswagen Exec: U.S. Needs to Solve Its Fiscal Problems
The Detroit News reports that Volkswagen AG decided this year to build a $1.3 billion Audi plant in Mexico instead of the U.S. because the terms were better. "By choosing Mexico for the new plant, Audi can avoid a 10 percent tariff on cars shipped to a host of countries that have trade agreements with Mexico, but not the U.S.," Jonathan Browning, president of Volkswagen Group of America, said in a speech at the Brookings Institution. "The decision from an economic point of view is fairly clear today: In the auto sector at the very least, if the North American market can consume the vast majority of the production, then you can afford to build in the U.S.," he said. But in that case, Browning added, there must be confidence in the future strength of the U.S. economy – and that is wavering because of the U.S. government's inability to tackle crucial economic challenges. "This country needs to get its house in order. It needs to restore global confidence in the workings of its political system," he said. Read more about Browning’s comments on the state of the U.S. economy here.

Honda Expands N.A. Recall to Include Over 600,000 Accords
Honda Motor Co. is expanding a recall in North America to include more than 600,000 Accord midsize sedans to address a potential power steering fluid leak problem that could cause a fire under the hood. According to Automotive News, Honda is recalling 573,147 Accords in the United States equipped with V6 engines from model years 2003 through 2007. In Canada, the number of affected Accords is 30,058, a company spokesman said. The power steering hose in the cars may deteriorate prematurely due to high temperatures, resulting in cracks and leaks that could cause a loss of power steering assistance or smoke and possibly a fire, Honda said. The company said the updated power steering hose necessary for the affected Accords will not be available until early 2013. If owners feel their cars exhibit symptoms related to a power steering hose leak, they should go to a dealer for an interim repair, Honda said. Owners will be notified by mail next year when the new hoses are ready for installation, but initial notification of the issue will begin later this month. Click here for more on Honda’s recall of its Accord sedan.

For Datsun Revival, Nissan Gambles on $3,000 Model
It is the car that baby boomers may remember as much for its compact chic as for its slogan ("Datsun, We Are Driven!"). Now, reports The Wall Street Journal, a new version of this storied brand may get more attention for something else: its price tag. In a bold move, Nissan Motor Co. is planning a revival to this Beatles-era star that might surprise its fans. According to interviews with Nissan's CEO, Carlos Ghosn, and other company executives, the rebooted car will appear in these countries as bare-boned as any rival has tried. And Nissan is hoping to set new lows for pricing for a global automaker, offering the cheapest Datsun model for about $3,000 to $5,000. The lowest price is nearly a third the price of its most inexpensive car, the $8,000 Tsuru compact sold in Mexico. Ghosn said the company was committed to offering six Datsun vehicles, due out beginning in 2014, at a price range lower than all but a handful of smaller car makers in China and India specializing in mini autos. Click here to compare the differences between standard and bare-bones Datsuns. Read more about Nissan’s plans to introduce the Datsun in emerging markets here.

Hybrid Strategy: Divide and Conquer
Both Honda and Toyota are far more committed to the hybrid car than to the battery electric vehicle, a fact that Toyota made clear this month when it scaled back its Scion iQ electric car project. And Honda is so enthusiastic about hybrids that, as its chief executive, Takanobu Ito, outlined in a recent speech, it will have three separate systems with up to three electric motors. Does Honda need three hybrid systems? It makes sense if the company can build exciting cars to take advantage of the engineering, according to The New York Times. A range of solutions matches costs to market realities: simpler systems at the lower end and more complex designs upmarket, where higher prices can absorb the added costs. For the most part, the integrated-motor hybrids that Honda offers today cannot be driven in all-electric mode, a feature that buyers seem to like. But the company will address that issue with the 2014 Accord Plug-In Hybrid, which incorporates Honda’s new two-motor hybrid system. At the heart of this layout is a 124-kilowatt electric motor coupled to a 6.7-kilowatt-hour lithium-ion battery pack, which does the main work of driving the wheels. Read more about Honda’s plans for its hybrid engines here.

Signs Point to Dynamite Auto Sales This Fall
Most of the ingredients are in place for a surge in U.S. auto sales this fall, according to Forbes. Cars and trucks are affordable. Comerica Bank said last week the average new vehicle cost only 22.9 weeks of median family income in the second quarter, the most recent available. In the mid-1990s, the Affordability Index was above 29 weeks. Replacement demand is also mounting. According to Experian Automotive, the average car or truck on U.S. highways is now 11 years old and gaining. And interest rates are low; the average interest rate on a new-vehicle loan was only about 4.6 percent in the second quarter, down from about 4.8 percent a year ago, according to Experian Automotive. So what’s holding back sales? Americans are still worried about jobs and about slow economic growth, analysts said. estimated that September U.S. auto sales would be around 1.1 million, which works out to a Seasonally Adjusted Annual Sales Rate of about 14.4 million – a big improvement from U.S. auto sales of only 10.4 million in 2009. Read more about Forbes’ expectations for September auto sales here. Stay tuned for AIADA’s Market Watch sales report of international nameplate brands, which will be released tomorrow.

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