Gasoline price rises give automakers whiplash

 DETROIT (Reuters) - With U.S. gasoline prices poised to revisit the $4-plus per gallon peak hit in 2008 just before the recession, sales of new smaller cars introduced since then would seem assured.
But as analysts and executives said at the Detroit auto show this week, the only sure thing is that today's forecasts are wrong -- it is anyone's guess by how much.
The wild fluctuations in the price of gasoline and of the materials that make up the thousands of car components such as steel, aluminum, copper and platinum can wipe out years of design and manufacturing planning within days.
In the summer of 2008, demand for small cars such as the Toyota Corolla, Honda Civic and Ford Focus far outstripped the immediate inventory as gasoline prices shot higher.
However, a quick pullback in gas prices as the deepest economic downturn since the 1930s took hold left newly built small cars to languish on dealer lots.
"We do believe at Ford that the price of gasoline is going to march upward over time," Ford Motor Co. Executive Chairman Bill Ford said on the sidelines of the Detroit auto show. "And we've built our whole entire strategy around that."
The rise in gasoline prices has been slower thus far than in 2008 -- when it jumped 32 percent from January to $4.11 per gallon in July, then fell back to $1.65 by year end.
The average price of U.S. gasoline is more than 25 percent below where it was then. Still, executives say they are already seeing a switch to smaller vehicles.
"We're seeing consumers quickly shift back to a higher mix of fuel-efficient cars and now trucks are actually starting to slow down," said Bob Carter, U.S. market brand chief for Toyota Motor Co. "Sixty days ago, we found the opposite happening."
Some in the industry predict a booming market for smaller vehicles, while others point out that the surge during the last gas price spike evaporated as soon as prices started to slide.
Others still warn that the higher cost of key commodities, primarily rare earths and metals, will be passed on to consumers at a time when the industry is just starting to work its way back from the slump that forced General Motors Co. and Chrysler into government-led bankruptcy in 2009.
"The costs will be higher," said Matthias Mueller, CEO of German luxury automaker Porsche. "But at the end of the day, all of our competitors face the same problem as us."
Summer of discontent
If anything could sum up the challenges of selling smaller cars in the U.S. market, it would be the gas spike of 2008. Many Americans abandoned a long-standing love affair with gas-guzzling SUVs and trucks to buy cars as oil made its historic run to $145 per barrel. It is around $92 a barrel now.
Now there are signs that consumers are downsizing again with gasoline at a national average of $3.09 as of Jan. 11, according to the U.S. Energy Information Agency.
"We are starting to see some segment shifts," said Jim Farley, global head of marketing and sales at Ford.
Customers expressed outrage when the price hit $3.80 in 2008, but with gasoline prices rising more slowly this time, the "tipping point is likely to be higher," Farley said.
Mike Jackson, CEO of AutoNation Inc., the nation's biggest dealership chain, said he believes that point is significantly higher, probably in the $4.50 to $5 range.
"Every time you have one of these spikes, it moves upward the freak-out number," Jackson said. "The freak-out number in the summer of '08 was $3.50 to $4."
Toyota's Carter said gas prices could hit $3.50 this year, but reach $4 in some markets with higher taxes like California. The average California price this week was $3.33 per gallon.
Some automakers are banking on a bright future for small cars. Fiat North American brand chief Laura Soave expects the U.S. small car market to more than double in size by 2014.
But what happens if gasoline prices fall again?
Bill Ford maintains that the company his great-grandfather founded has hit on the right solution by launching a global compact platform to underpin vehicles that are fully electric, hybrids or equipped with fuel-efficient gasoline engines.
"If demand is less than we expect, we can just ramp up production for some of the more conventional engines," he said.
The prices for metals and rare earths have also been on the rise, posing another conundrum for the industry: what proportion of those costs can automakers pass on to customers?
"I think everyone in the industry is in a very competitive position so is it purely a pass through?" GM North America President Mark Reuss said. "I don't think so."
But whether or not automakers can pass on those costs, some executives say it is inevitable consumers will pay more for new vehicles. Automakers are looking at using more magnesium and aluminum which are lighter than steel but far more expensive to reduce vehicle weight and improve fuel economy.
"More and more consumers are warming up to the idea of the case that the vehicle might cost a little bit more," said Fred Diaz, head of Chrysler's Ram truck brand. "But in the long-run, they're going to make out ahead because of the fuel efficiency aspect of it."

This information is taken from- http://www.autonews.com/apps/pbcs.dll/article?AID=/20110115/OEM/301139945/1429

Acura adds some sheet metal, spins off TSX station wagon

SAN FRANCISCO -- Wagons represent only a thin slice of the near-luxury segment in the United States, but some automakers still feel obliged to offer one. For 2011, Acura will join the fight with a wagon version of the TSX sedan.
The basics: The wagon is basically a sheet metal extension of the sedan. None of the hard points have changed from the sedan. Even the seating locations are identical. As a result, the extension goes entirely into the cargo area.
Notable features: Although the TSX gives up four inches of wheelbase to the Audi A4 Avant wagon, the Acura is four inches longer overall. That gives the TSX a slightly hobby-horse appearance compared to the wheels-in-the-corners design of its German counterpart.
Interestingly, the TSX Sport Wagon has nearly identical cargo-carrying capacity as its RDX crossover cousin, with rear seats up or down. And with seats down, the TSX's flat floor is longer than that of the RDX, so a mountain bike fits easily. There also are hidden cubbyholes for valuable items.
For a car that weighs about 130 pounds more than its sedan cousin, the TSX wagon does well at maintaining road stability -- despite the sacrifice in torsional rigidity that an open cargo area creates. Acura engineers also did a fine job isolating the road noise that often creeps into the cabin from the cargo area.
While the Germans tend to ding customers with optional-feature charges, the TSX wagon boasts standard moonroof, roof rails, high-intensity headlights, Bluetooth, satellite radio, USB jack and heated leather seats with memory.
What Acura says: "This is an alternative to SUVs, without the girth or the stigma and with all the utility," said Steve Center, American Honda Motor Co.'s chief marketing officer.
Compromises and shortcomings: While the sedan version offers a choice of a four-banger or V-6, the wagon comes only with the inline-four. There is no manual transmission offered, nor is there all-wheel drive to compete against Audi's vaunted quattro system.
The market: It's getting crowded. BMW and Audi already have compact wagons, and the Lexus CT 200h hybrid may be a hatchback, but shoppers probably will cross-shop it. Acura plans to market the TSX to Generation Y, who Acura product planning executive Vicki Poponi says "are not scrawny teens playing video games anymore. One-third are already parents."
The skinny: Acura hopes the wagon will account for about 10 percent of TSX volume. Sales began last week. Selling 4,000 a year means slightly more than one wagon a month per dealer. That could create an inventory problem -- making sure the allocation system sends a vehicle with the right color, features and options for the prospective buyer. The penalty is the car sitting on the lot, unloved.
This article is taken from- http://www.autonews.com/apps/pbcs.dll/article?AID=/20101227/RETAIL03/312279944/1018

Toyota sees US auto sales up in 2011

LOS ANGELES (Reuters) -- Toyota Motor Corp sees U.S. new light vehicle sales rising as much as 13 percent next year, buoyed by several factors including a slight rise in sales of pickup trucks, a top Toyota U.S. executive said.
Bob Carter, sales chief for the Toyota brand in the United States, said the company expects 2011 industry sales at between 12.5 million and 12.9 million, up from this year's expected rate of 11.4 million to 11.5 million.
However, Carter told the Reuters Global Autos Summit in Los Angeles on Monday that low consumer confidence continues to be a drag.
"Consumer confidence is still what's dragging down the market," said Carter, who said buyers are more cautious about taking on debt.
U.S. sales are slowly recovering from the low of 10.4 million new cars and trucks sold in 2009, after a 10-year stretch when annual sales averaged 16.4 million vehicles.
For Toyota in the U.S. market, things are looking up after a spate of safety recalls that began a year ago and had their biggest erosion for sales in March to May, Carter said. Autodata figures show that through October, Toyota's U.S. sales are nearly flat while the U.S. market is up nearly 11 percent.

Media firestorm
Of the more than 15 million recalls of Toyota vehicles worldwide in the past 12 months, about 11 million were in the United States, the automaker's top market.
Carter said that before the recall -- he called it a "media firestorm" -- about 55 percent of Toyota new-vehicle buyers were new or returning to the brand. That figure dropped to "the low 40s" percent in a 90-day period from March to May, Carter said.
Toyota President Akio Toyoda testified before a U.S. congressional committee on its safety recalls in late February.
"This has been the most challenging year that Toyota has faced," Carter said. "Overall, we are confident our challenges are behind us."
Carter said new customers buying Toyotas accounted for 57 percent to 58 percent of new vehicle sales, near the pre-recall average near 55 percent.
"Our brand is recovering nicely," Carter said.
Price hikes?
A strong Japanese yen may cause the automaker to have moderate price increases for vehicles imported to the U.S. market, Carter said.
Even with a strong yen, Toyota will continue to set prices primarily based on consumer demand, he said.
In October, trucks made up more than 52 percent of the overall new vehicle sales. Carter said he expects the market to return and stabilize at its normal rate of about half cars, half trucks.
Carter said consumer sales incentives are seen as a short-term fix and that Toyota used them as a way to overcome a falling public perception. He has said that incentives will rise for the last two months of the year in part for cyclical factors and not because of the recalls.
"Most if not all of our incentives are in (interest rate) reductions or leasing," Carter said.
Carter said upfront cash rebates may help sales but they hurt residual values.
In his forecast for 2011 sales, Carter sees an advantage for Toyota in the return of balance from fleet sales to retail sales. Toyota leads in U.S. retail sales and its ratio of fleet sales to its total sales is near 9 percent.
This article is taken from- http://www.autonews.com/apps/pbcs.dll/article?AID=/20101116/OEM/311169976/1448

GE to buy 25,000 electric cars by 2015

BOSTON — General Electric Co plans to buy 25,000 electric vehicles by 2015 for its corporate fleet and to lease to customers, in a move it said could help speed acceptance of the technology.
The largest U.S. conglomerate initially will buy 12,000 vehicles made by General Motors Co, including the forthcoming Chevrolet Volt. It plans to buy other manufacturers' electric vehicles as they are introduced.
GE makes equipment for the electric grid that will charge these vehicles and owns a stake in battery maker A123 Systems . It estimated that it could generate $500 million in electric vehicle-related revenue over the next three years.
(Msnbc.com is a joint venture of Microsoft and NBC Universal.)
The cars will go both into GE's fleet of cars and trucks used by staff and be leased out by a unit of GE Capital that leases cars and other vehicles to businesses, for traveling sales representatives and repair crews, for instance.
"By electrifying our own fleet, we will accelerate the adoption curve, drive scale and move electric vehicles from anticipation to action," said GE Chief Executive Jeff Immelt.
The Volt is a plug-in hybrid car, which GM estimates will be able to run for up to 40 miles on battery power, but will also have a small gasoline engine to charge the battery over longer trips.
Nissan Motor Co also is rolling out a plug-in electric car this year, called the Leaf, which it estimates will be able to run for 100 miles on a charge.
These cars represent the next generation of vehicle electrification, following on gasoline-electric hybrids such as Toyota Motor Corp's Prius.
Businesses that use large fleets of vehicles have been embracing these technologies as a way to cut fuel costs, as well as lower their emissions of of carbon dioxide, a greenhouse gas associated with climate change.
United Parcel Service Inc and FedEx Corp, for instance, have both been phasing hybrids into their fleets of delivery trucks.
This article is taken from- http://www.msnbc.msn.com/id/40129534/ns/business-going_green/

Automotive Air Conditioning Systems

Today, as we drive our automobiles, a great many of us, can enjoy the same comfort levels that we are accustomed to at home and at work. With the push of a button or the slide of a lever, we make the seamless transition from heating to cooling and back again without ever wondering how this change occurs. That is, unless something goes awry.

Since the advent of the automotive air conditioning system in the 1940's, many things have undergone extensive change. Improvements, such as computerized automatic temperature control (which allow you to set the desired temperature and have the system adjust automatically) and improvements to overall durability, have added complexity to today's modern air conditioning system. Unfortunately, the days of "do-it-yourself" repair to these systems, is almost a thing of the past.
To add to the complications, we now have tough environmental regulations that govern the very simplest of tasks, such as recharging the system with refrigerant R12 commonly referred to as Freon® (Freon is the trade name for the refrigerant R-12, that was manufactured by DuPont). Extensive scientific studies have proven the damaging effects of this refrigerant to our ozone layer, and its manufacture has been banned by the U.S. and many other countries that have joined together to sign the Montreal Protocol, a landmark agreement that was introduced in the 1980's to limit the production and use of chemicals known to deplete the ozone layer.
Now more than ever, your auto mechanic is at the mercy of this new environmental legislation. Not only is he required to be certified to purchase refrigerant and repair your air conditioner, his shop must also incur the cost of purchasing expensive dedicated equipment that insures the capture of these ozone depleting chemicals, should the system be opened up for repair. Simply put, if your mechanic has to spend more to repair your vehicle - he will have to charge you more. Basic knowledge of your air conditioning system is important, as this will allow you to make a more informed decision on your repair options.
Should a major problem arise from your air conditioner, you may encounter new terminology. Words like "retrofit" and "alternative refrigerant" are now in your mechanics glossary. You may be given an option of "retrofitting", as opposed to merely repairing and recharging with Freon. Retrofitting involves making the necessary changes to your system, which will allow it to use the new industry accepted, "environmentally friendly" refrigerant, R-134a. This new refrigerant has a higher operating pressure, therefore, your system, dependant on age, may require larger or more robust parts to counter its inherent high pressure characteristics. This, in some cases, will add significantly to the final cost of the repair. And if not performed properly, may reduce cooling efficiency which equates to higher operating costs and reduced comfort.
Vehicles are found to have primarily three different types of air conditioning systems. While each of the three types differ, the concept and design are very similar to one another. The most common components which make up these automotive systems are the following:
COMPRESSOR, CONDENSER, EVAPORATOR, ORIFICE TUBE, THERMAL EXPANSION VALVE , RECEIVER-DRIER, ACCUMULATOR. Note: if your car has an Orifice tube, it will not have a Thermal Expansion Valve as these two devices serve the same purpose.  Also, you will either have a Receiver-Dayar or an Accumulator, but not both.
For more information on Air Conditioning, check out The Automotive Air Conditioning Information Server
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Extended Auto Warranty Explained

1. What is an extended auto warranty?

An extended warranty is an agreement between the car owner and warranty company, obligating the warranty company to pay for repairs covered by the contract for a specific period of time.

With an extended auto warranty you are protecting yourself from the unexpected cost of mechanical failure.

One major repair often ends up costing as much, or even more than the entire cost of the warranty. As a consumer, you can only accurately understand the coverage if you learn the terminology and standard industry requirements. The levels of coverage offered differ considerably from company to company. Most states (36) do not regulate the coverage, and there is quite often jargon and restrictive language buried in the contract. 

2. What exactly does an extended warranty cover?

Know what's covered, and what's not covered, by the extended auto warranty you're considering. Does the contract cover breakdown as well as wear and tear? Under a "breakdown" warranty, coverage is extended only to parts that break. Such an extended auto warranty can prove less inclusive than is desirable, since not all parts fail due to breakage. Some need to be replaced because they've worn down over a period of time; a "wear-and-tear" warranty extends coverage to worn-down parts in need of replacement.

Additionally, some extended auto warranties don't cover TSB s. A Technical Service Bulletin (TSB) or Factory Service Bulletin is a notification by the manufacturer that a condition may exist on your vehicle. Sometimes there is a problem requiring immediate attention; often they are issued to facilitate a quicker diagnosis or repair procedures from your repair facility. It is common for a vehicle to have dozens of TSBs issued. Most companies will deny any claim related to a TSB. This is a huge coverage loophole.

Additionally, ABS brakes, so if your vehicle has this feature, you should consider upgrading to a higher coverage level (if available). And overheating, regardless of its cause, isn't covered in many car warranties. Thus, if overheating occurred due to problems with an expensive part such as your radiator, you'd be stuck with a hefty repair bill.

Before committing to an extended auto warranty, take the time to fully explore the ins and outs of its coverage implications. The distinctions between the various plans might seem slight, but they can prove quite important. 

3. Why do I need an extended auto warranty?

Since common mechanical repairs can cost into the thousands and these costs are rising rapidly; protecting your automotive investment should not be taken lightly.

Whether you own a new or older make/model, an extended auto warranty will provide you with peace-of-mind protection regarding costly mechanical repairs that can happen at any time during the life of your vehicle.

Buying an extended auto warranty today will allow you to avoid paying higher rates later due to price increases and required surcharges due to the multitude of issues that develop as the vehicles flaws become public knowledge. You'll be able to immediately take advantage of your plan's benefits: towing, lost key/lockout, and car rental discounts.

4. Why should I purchase an extended auto warranty now if my vehicle is still covered by the manufacturer?

As your vehicle accrues age and miles, the price for an extended auto warranty will rise as do the repair costs that you would experience for an older, out-of-warranty vehicle. You are only buying total mileage coverage, not addition of mileage to your current total.

Capitalizing now on your vehicle s newness and low mileage is the most logical approach as you plan for inevitable future repair costs. An extended auto warranty will provide you with peace-of-mind protection regarding such expenses. Some are transferable, allowing for increased vehicle resale value.

To know more.....http://autorepair.about.com/library/weekly/aa013106.htm#1