Articles in Category: Automotive

With the automotive market receiving 24 percent of all steel shipments in 2010, according to the American Iron and Steel Institute (AISI), good news in auto industry production and sales can generally be interpreted as good news for steel. Even better news for a sagging US economy is hearing that domestic car sales are improving, and that’s exactly what’s happened last month and in the first three months of 2011.

US light vehicle sales increased 17 percent in March 2011 from the previous year, and up 20 percent in the first three months of 2011, according to data released by Automotive News. That means a total of 1,246,668 vehicles sold last month, and 3,060,140 so far in 2011.

Ford sold 5674 more units than GM in March, upending its rival in monthly sales for the first time since 1998. However, GM still holds the lead over Ford with 592,546 total vehicles sold in the first three months of 2011 to Ford’s 495,508. Some of the biggest percentage increases in March belonged to Chrysler (up 31%), Nissan (27%) and Kia (37%). And although small cars had the best showing in terms of sales in March (up 32 percent to 192,879 units, according to the Automotive News Data Center’s segmentation), the Smart Car plummeted 37 percent to post the biggest loss of any brand last month.

But March’s good fortunes may not last. Not surprisingly, Toyota posted the biggest drop with a 6 percent loss for the month. Japanese operations have been hard-hit following the March 11 earthquake and tsunami. The official company line indicated that it’s too early to predict “location and duration of supply interruptions, noting that many of its parts are sourced in North America.

But some independent analysts and American dealers tell a different story. A Scotia Economics report, for example, refutes Toyota’s claim above and asserts that global auto parts shortages will be the main reason for reduced production and, therefore, sales. “Japan is the world’s second-largest auto-parts exporter behind Germany, and hundreds of parts suppliers are located in northeastern Japan, near the epicenter of the earthquake, the report states.

Since 2009, exports of Japanese auto parts factored heavily into US and other markets. US manufacturers will have to make up the difference, very likely through mid-summer. Source: Scotiabank Group

Eric Vates, general manager of a Chicago-area Mazda dealership, told Crain’s Chicago Business in a recent article, “Once you get into May and June, you’ll have dealers that are out of inventory or nearly out of inventory. A spokesman for Chicago Automobile Trade Association told Crain’s that, indeed, Japanese suppliers are telling US sellers to expect fewer cars in May.

What will this mean for steel? It could, in short, go either way. On the one hand, lower production in the short term could mean less steel demand, as auto manufacturers’ capacities are down; so steel prices would marginally follow. But on the other hand, in the longer term, if auto dealers’ inventories get decimated this summer, increased consumer demand will follow (if first-quarter sales are any indication), and once Japan’s parts suppliers and automakers get back online, they’ll be hungry for imported steel. Of course, let’s not forget emerging markets’ need for speed. Although China’s auto sales are not growing as quickly as they were a year ago, their auto market is still dominant.

According to a recent AISI report, 63 percent of the average vehicle is made of steel, with 57 percent of that being advanced high-strength steel (AHSS). With the auto sector as an important driver, steel demand — especially for AHSS, with more advanced grades on the way — in the second half of this year could certainly be something to watch.

–Taras Berezowsky

Reading a reprint in the Balkan news concerning raw material supply to the European automotive market, one would think rare earths for electric and hybrid cars, or copper for wiring, or even lead for batteries was probably the most crucial medium-term supply chain worry for Europe’s automakers. But in fact the product that is keeping many car manufacturers awake at nights is aluminum.

Yes, we have four and half million tons of primary metal sitting on futures markets exchanges, and yes, we have at least the same again sitting in invisible private inventories, both in the West and China, but an aluminum ingot is of minimal use when making a car body. The rapid growth of aluminum use, particularly high-strength 5000 series aluminum sheets in car bodies has caught the industry on the hop. Jaguar Land Rover (JLR) intends to invest £6-7 billion over the next five years as it rolls out over 40 new products, including the multiple variants in that time period. Speaking on the sideline of the Geneva Motor Show, Ralf Spheth, CEO Jaguar Land Rover, said, “This is the most ambitious product launch plan in the history of Jaguar Land Rover. The company plans to build entry-level Jaguars, including the roadster and the station wagon plus more smaller compact vehicles, with a big focus on using lighter aluminium compounds to deliver low Co2. Unofficial reports reaching MetalMiner suggest JLR has informed their European supply chain they are going to need over 40,000 tons of automotive-grade aluminum sheet per annum within a couple of years, in addition to current demand for LandRovers and the all aluminum XJ models. The top of the range XJ body is 95% aluminum, and weighing just 300 kilograms, it is 40 percent lighter than a steel equivalent, according to a Reuters article.

JLR is not alone. BMW and Audi have been using aluminum in the bodies of their luxury models to improve both performance and economy, but crucially to improve the average fuel consumption across their whole range — a measure car manufacturers are being pushed to improve. Following their lead, Peugeot, Renault, Citroen, VW and Volvo, to mention just a few, are increasingly using aluminum in body panels such as bonnets, boot- or trunk lids and doors.

European aluminum producers are already running at capacity and have major clients on allocation, and the only way they will be able to achieve such an increase in supply is with a major refurbishment of casting, rolling and finishing lines at existing low alloy facilities or the installation of a major new rolling plant, something that has not happened in Europe in the last 20 years. To get a sense of the problem, the European car market currently uses 130,000 tons of aluminum sheet, for the most part in body parts, such as bonnets, doors and panels. That figure could double or even triple in the next five years as whole body shells are increasingly made from the metal, said Jaguar Land Rover’s Chief Technical Specialist Mark White.

Never mind aerospace — automotive aluminum looks like the place to be!

–Stuart Burns

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Perhaps the biggest hurdle to the widespread uptake of electric cars is not their comparatively short range, but the long time it takes to re-charge the batteries. If a car like the Nissan Leaf manages only an 80-90 mile range as this test suggests (as against the manufacturers’ 108 miles from a tank of sparks) you at least want to know you can re-charge and continue your journey, as with an internal combustion engine. In practice though, a Leaf takes seven to eight hours for a full charge using a 240V – 16A outlet as in the UK. Public quick-charging points are said to give an 80% charge in about 30 minutes. That’s OK if you want to have a cup of coffee and read the papers, but you don’t want to be doing that every 80 miles on a longer journey. So faster charging that would allow, say, a 2-minute turnaround similar to refueling a conventional car could open up use of cars like the Leaf to mainstream rather than just city users.

Well, research at the University of Illinois holds out just that promise, according to an article by the Economist. Their most successful experiment has recharged to almost 100% in two minutes. In addition, the technology applies equally well to nickel hydride batteries as to lithium ion. As the article explains, a battery has two electrodes, an anode and a cathode, that are connected by an electrically conductive material”generally a liquid”called an electrolyte. Under normal discharge conditions, negatively charged electrons flow from the anode to the cathode providing a source of electric current. To balance the circuit, positively charged ions flow from the anode to cathode to balance the charges. During recharging, an external source of electrons flows in the opposite direction replacing the positively charged ions ready for discharge again in the future. The speed at which a battery recharges depends on the surface area of contact between the electrolyte and the cathode, but crucially, the amount of energy a battery can hold is dependent on the volume of the electrodes. What is needed is both a high volume and a high surface area for cathode and anode.

Dr. Paul Braun at the university has developed a process to achieve just such an outcome. His starting material is made of closely packed polystyrene spheres about 0.001 millimeters (0.00004 inches) in diameter. The next stage is to fill the gaps between the spheres with nickel by electro-deposition, similar to nickel-plating a piece of steel. After that, the material is heated, to melt the polystyrene and leave a sponge made of metallic nickel. This creates an electrically conductive framework suitable for coating with materials normally used to make cathodes such as a substance called nickel oxyhydroxide for the nickel-metal hydride version of the battery and lithium ion-spiked manganese dioxide for the lithium ion version.

The result is a charging rate 10 to 100 times faster than a normal commercial battery, but with an increase in production costs estimated to be only 20-30 percent more than current methods. 20-30 percent is not to be dismissed, as the battery is a very significant part of the cost of new electric vehicles, but for the convenience of internal combustion “refueling rates, it may be a price worth paying over the life of the car.

How far Dr. Braun’s technology is from commercial application is unclear, but if the wall of money that has poured into new battery technologies is anything to go by, there is no lack of enthusiasm out there to find just such a solution to improving charging rates.

–Stuart Burns

Is there no end to the strength of the palladium price? Johnson Matthey, producer and refiner of Platinum Group Metals (PGM’s), raised its financial forecast last week on the back of 32 percent growth in the quarter aided by prices of palladium and platinum, the FT said. Back in November the refiner called out a 25 percent rise in palladium prices over the following six months, a rise the palladium price seems on track to achieve, it touched $836.75/ounce last week according to the WSJ and is only slightly off this week at $827.

Palladium has three major uses: first and foremost, it is an auto catalyst, a role it shares with platinum and which varies in intensity from market to market meaning auto sales of one million units in, say, Europe or China, do not equate to an equivalent palladium demand for one million units in the USA or Japan. This point was ably analyzed by Walter de Wet, an analyst at Standard Bank, in a note to clients. Walter explained that although auto sales in Europe are relatively weak, the region is still the largest consumer of palladium for auto-catalytic converters. Auto sales in US and Japan are not yet close to the levels seen in 2006 and 2007, but continue to rise from the very low levels seen in 2008 and 2009, while those in China continue to match those of the US, and remain well above levels seen last year. However, as we explained, just looking at units sold is not a reliable picture of demand, so the bank weights auto sales per region by the amount of palladium consumed in auto catalytic converters in the specific market. This provides them with palladium-adjusted auto sales numbers which they express in graphical format as follows.

Source: Standard Bank

Walter’s palladium-adjusted auto sales numbers reveal that when accounting for palladium usage, 2010 auto sales were still low, but steadily improving. On a metal-weighted basis, auto sales look much more supportive for palladium than it did at the start of last year. It also looks much more supportive than similar figures for platinum mainly because China is a market that is skewed towards palladium use over platinum; indeed, according to a Mineweb article, four times as much palladium as platinum and most of the auto production growth is coming from China.

Electronics is the second largest consumer of palladium (17 percent of global demand) and the Semi-conductor Industry Association figures suggest that the fast-growing Asia-Pacific region commands almost 50 percent of the sales of semi-conductors. Taken as a whole, China could be making up 20 percent of world palladium demand and rising steadily.

So, broadly speaking, palladium demand is rising and the trend is almost certain to continue through 2011 and 2012. So much for demand: what about supply? The market has two principal sources of supply, South Africa and Russia, and between them they dominate the market with some 81 percent of global supply last year, according to the USGS. But a disturbing FT article paints a dire picture of Russia’s ability to continue to supply at the same level going forward. Russia accumulated a vast store of palladium over 50 years in the middle of the last century when it was mined as a by-product for which little use could be found. After years of the state selling controlled quantities each year from these reserves, many now believe it is all gone. Mark Bedford at Johnson Matthey believes Russian stocks are exhausted and since Russia was supplying about 1 million ounces out of the 7 million ounces being consumed, the impact of prices this year or next will be profound. Edel Tully, precious metals strategist at UBS, is quoted by the FT as saying that palladium could surpass $1,000 an ounce if supply from Russian stockpiles dries up.

Certainly one to watch, and for industrial palladium consumers, one to secure at current prices, if it’s not already too late.

–Stuart Burns

MetalMiner and its sister site, Spend Matters, along with Nucor, will host a live simulcast, International Trade Breaking Point, on March 1, 2011. If your company sources products from overseas, you will not want to miss this half-day event.

Click here to register for the live simulcast today!


One week ago, I went down to the Art Institute of Chicago on the last day of their Free Winter Weekdays. I only had a couple hours, and quite frankly, couldn’t bring myself to leave the basement level, where modern photography is on display. The striking monochromatic work of Margaret Bourke-White proved how artists/journalists and industry can make beautiful art together.

Born in the Bronx and raised in New Jersey, Bourke-White opened a commercial photography studio early in her career, and one of her first clients was Otis Steel Company in Cleveland, whose stacks are shown below.


Thus began her love affair with the images of American machines, products and factories, and by the end of the 1920s, she was working on assignment and on commission for advertisers, corporate executives and magazine publishers. According to the Art Institute exhibit, her use of “graphic dynamism and sharp angles” earned her the nickname “photographer of dynamos, allowing her exclusive access into the sprawling factories of Chrysler and Ford.


Henry Luce, publisher of Life and Fortune magazines, signed her to a contract in 1930. (The photo on the first Life cover, incidentally, was Bourke-White’s). Through her connections with those magazines, she was the first photographer allowed to shoot industrial scenes in the Soviet Union.

Ever the free spirit, however, Bourke-White frequently broke her Fortune contract and took gigs with other magazines commissioned by commercial operations. One particular shot, taken in 1933, grabbed my attention.


The title of the piece and the company that commissioned it is International Silver, and it shows one of her strongest suits. “Bourke-White lit the objects specially to enhance their luster, the museum description reads. “She was known for imparting glamour to the products of industrial America, counteracting the Depression’s radical impact on consumer spending.

Although today’s steelworkers and other manufacturers may be hard-pressed to define the “glamour in their industry, or fear that the rest of America has forsaken their efforts, pieces of art like these at the very least call much-deserved attention to their hard work and sacrifice.

More on the Margaret Bourke-White Collection at the Syracuse University Library here.

–Taras Berezowsky

MetalMiner and its sister site, Spend Matters, along with Nucor, will host a live simulcast, International Trade Breaking Point on March 1, 2011. If your company sources products from overseas, you will not want to miss this half-day event:

Register for the live simulcast today!


Arguably the best commercial that aired on Super Bowl Sunday featured the rapper Eminem, the city of Detroit and an ostensibly reinvigorated Chrysler Corp. hawking the new Chrysler 200. To say nothing of the quality of the videography and editing which were excellent the ad was more an explicit endorsement for Detroit itself, showing how the city and the Big Three (or Big Two plus Chrysler, as the case may be) are inextricably linked.   But it got me thinking about the still-ailing Chrysler (relative to Ford and GM) and how the US auto companies relate to the current platinum and palladium market.

OK, this may be a stretch, you say, but platinum and palladium are on our radar again after hearing ETF Securities outline their “new (at least to the US market) basket of white metals last week. Consisting of platinum, palladium and silver shares backed by the physical metals, WITE (as the basket is listed on the NYSE ARCA) is taking just a bit more metal out of the supply stream for the investment world.

Is industrial metal buying and base metal investment converging? Not in a literal sense, no. But we have been reporting on how they are becoming increasingly linked, as steady price rises in platinum and palladium due mostly to the auto industry’s use of the metals in catalytic converters and the like continue to push analysts and journalists to speculate on whether they make solid investment tools.

Surely, ETF Securities is one of the firms pushing investment in the white metals as a hedging tool in a volatile economic environment. They offer individual ETFs for palladium and platinum, but contend that placing these metals in a basket takes commissions and spreads out of the picture (by offering an expense ratio of 60 basis points) and simply allows for a diversified portfolio. Supply-wise, ETFS currently holds 13.3 tons of platinum and 19.6 tons of palladium; according to the USGS, with 2010 global production of platinum estimated at about 183,000 kg and palladium at 197,000 kg (both roughly 3 percent increases from 2009), it is tough to make the argument that the ETF is sucking vast amounts of physical metal out of the global market.

But generally investor interest follows industrial demand, and that clearly moves the market. Based on an ETFS graph (that we cannot reprint here), China’s PMI has correlated rather tightly with platinum and palladium prices from 2006 to 2010. Even though China is set to cut certain auto subsidies in 2011, gas prices remain high and more registration rules will take effect, Tim Harvey of ETFS’ marketing arm, said in a conference call the country’s auto manufacturers are increasingly turning to gas engines rather than diesel, which is good for PGM demand.

“China is the buzzword on everybody’s lips, Harvey said.

According to data from the China Association of Auto Manufacturers, China produced 18,264,700 vehicles overall, a 32.44 percent increase from 2009. In December 2010, production was up more than 6 percent from the month before, and 22.3 percent higher than December 2009. India is the other burgeoning Asian auto market, with demand rising. The US market looked good in 2010 as well; with Ward’s data showing a 31 percent increase in total light vehicle sales, from 869,828 in November to 1,140,165 in December.

Which brings us back to the Big (Formerly-Known-As) Three. GM has made moves to secure its palladium supply by making a deal with just about the only US producer of the metal, Stillwater Mining Co., based in Montana. The AP reported just before Christmas that GM signed a new contract with the miner to supply the automaker’s palladium for three years. (Ford Motor Co. also has a contract with Stillwater that is set to expire and needs to be renegotiated). Both GM and Ford had a much better 2010 than their domestic competitor: although Chrysler “sees profit ahead, it still reported a $652 million net loss last year. (Better than the $3.8 billion loss in 2009, though.) However, Chrysler’s heads are looking to increase sales by 45 percent this year, confirming a bullish outlook on the domestic and global auto market.

Ultimately, many analysts and investors are bullishly maintaining that the emerging market auto demand should keep platinum and palladium prices up through 2011. Societe General, for example, upped its 2011 palladium price forecast to $840 per ounce (from $755 an ounce), citing strong fundamentals.

In a previous MetalMiner interview, Will Rhind, ETFS’ head of US operations, just about summed it up:

“Global economic growth does seem to be picking up, he said, “and that may have more of a positive effect on the pro-cyclical metals such as silver, platinum, palladium and copper to name a few.

–Taras Berezowsky

Those interested in the silver market can attend a free conference Phoenix Investment Conference & Silver Summit on February 18-19, 2011.

“Aluminum. When many of us hear the word, cans or foil invariably come to mind.

Well, this light base metal goes far beyond your can of Coke or roll of Reynolds wrap especially in 2011.

While the precious metals have been blowing up into a possible bubble and with copper taking the prize for hottest base metal in the latter half of 2010 (and continuing today), aluminum remains the ubiquitous sibling that has kept quiet. But with all its fundamentals solid and supply tightness already beginning with more to come, aluminum may make some definite waves in terms of 2011 prices.

In taking a stab at where prices will go in the next year, let’s look at some key factors, including global production, the auto market and ETFs.

On Jan. 4, the three-month LME price for the metal reached its highest point ($2,485 per ton) since September 2008 right before the global economic crash. Reuters reported that US primary aluminum production rose 8.4 percent last November year-over-year, up to 1,757,560 metric tons, according to The Aluminum Association. However, US aluminum has seen overall decreases in monthly and daily actual production up through November.

Even so, global and US manufacturing data appeared positive as 2010 drew to a close, and coupled with global demand, this should overcome the considerable idle capacity in US aluminum production (which will likely never fully recover) and keep prices heading in the direction of the sustained rise we’ve seen in H2 2010. Below is the 3-month buyer price over the last year:

Source: London Metals Exchange

Recently released reports show that global manufacturing activity in December grew at its fastest pace in six months. The JP Morgan Global PMI rose to 55.0, up from 53.9 in November, while US growth performed the best since April with the ISM manufacturing index up to 57.

Auto sector demand is poised to be one of the largest drivers of aluminum demand, especially in the US and China, both from sales and policy perspectives. Bloomberg reported that GM, Ford, and Chrysler all exceeded sales expectations in December while Toyota was the only major automaker to lose sales. “Industry-wide sales in 2010 totaled 11.6 million, according to the article, up 11 percent from 2009, based on data from Autodata Corp. Just today, the Financial Times reported that Chinese auto sales don’t look to be slowing down anytime soon, even though Beijing is allowing certain tax incentives to expire. Furthermore, the US has released new standards to increase vehicle fuel efficiency by using more lightweight metals (including aluminum) instead of steel. “The new standard requires automakers to reach an average fleet fuel economy of 35.5 miles per gallon by 2016 from current figure of 30 miles per gallon in 2010. Automakers are looking to trim as much as 10% of the total weight of car[s] and trucks, according to Reuters. This may increase the build cost by hundreds of dollars per car, which could also increase speculative activity around aluminum prices.

Cost pressures in the raw materials and power areas are also drivers of sustained price increases. Desjardins Securities analyst John Redstone, quoted on the blog The Trading Report, expects power costs to buoy aluminum prices in 2011, and on the supply side of the equation, China’s high energy costs and pollution restrictions will continue to constrict their production, says Jorge Vazquez of Harbor Intelligence.

“More than 500,000 environmental complaints had been filed in China over the last year, he said in a recent interview with MetalMiner. “Bottom line, China will not see a net production capacity increase.

And let’s not forget ETFs. With a physically backed aluminum ETF to be released in Q1 2011 by any number of firms, will that cause supply tightness anytime soon (as appears the case with copper)?

“A knee-jerk reaction will come, Vazquez said. “As the market comes to realize how the fund will work, the psychology will be reinforced in the pricing. In terms of supply, Vasquez also mentioned the myth that huge aluminum inventories still exist. What really matters, he said, is to use the right metrics to determine how much demand that inventory can cover.

Harbor forecasts aluminum to reach upwards of $2,600 within the next few quarters, with other analysts continuing to be even more bullish. With all of the fundamentals lined up, and global demand on its current tear, our own forecasts are in line with that figure. Look for aluminum to steadily increase over the next couple of months but the most action may be seen in Q2 and beyond.

–Taras Berezowsky

Lead’s fortunes rest almost solely on the state of the global auto markets. Whether used in replacement batteries for existing cars and e-bikes, incorporated into new bikes, or car and truck production, lead’s consumption is driven predominantly by the transport sector.

Reuters estimates the US auto market will likely recover further to around 13 million vehicles next year from less than 12 million units in 2010, according to quotes reported by Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association. He noted that the seasonally adjusted annual sales rate for light vehicles in the United States had been growing at a pace of about 1 million units in recent months, indicating a steady recovery in demand. Johnson Controls agrees, saying in a recent statement the company expects North American automotive production to be moderately higher than 2010, but that Europe will be flat and China’s production is expected to increase but at a slower pace than in 2010.

Unlike copper though, lead stocks on the LME have gone in the opposite direction for much of this year, rising steadily as this graph from Kitco shows.


Pressure for price rises therefore is muted by adequate supply.

While the lead supply market was in a small surplus in 2010, rising demand is likely to push it into deficit. China is both the largest producer and consumer of lead, but exports have dwindled to zero as this Credit Suisse graph shows and analysts are watching imports to see if demand encourages a reverse flow imports – into the country.

Source: Reuters

Exports have declined due to a combination of Beijing export tax incentives being withdrawn and rising domestic demand. Although China appears to have sufficient lead smelter capacity to meet current demand, there is the possibility rising demand will begin to suck in imports. Most of the incremental supply for lead is likely to occur in China over coming years. However, while the market looks relatively balanced for 2011, over time it looks likely that increasing environmental concerns will see supply growth in China to be moderate, much as has occurred in the developed economies over the past few decades. Therefore, one marker to watch may well be the level of Chinese imports, although the country has many small swing producers who ramp up production when prices are high, making any firm estimation of capacity difficult; it is thought China is currently running close to capacity in refined lead production. A combination of rising demand and environmental constraints is likely to squeeze the market in 2011 causing prices to rise. Credit Suisse is predicting more bullish price increases than Bloomberg’s average of analysts predictions depicted in this graph by the bank.

Source: Credit Suisse

With ample LME stocks, a neutral import/export position for China and doubts over the rate of automotive production growth around the world, we do not share Credit Suisse’s expectations on price. We could see lead reaching the Bloomberg average predictions, but lead has surprised on the upside this year so keep a watch on those automotive and Chinese trade numbers for pointers as to where it may go in 2011.

–Stuart Burns

We have been hearing a lot of cheery news about GM this year, not least its IPO and successful fund raising, the launch of the Volt and a return to profitability, even on what is a historically low level of sales. So it is interesting to read an alternative viewpoint by Edward Niedermeyer, editor of the Web site The Truth About Cars espoused in a NY Times article.

The article takes GM in particular to task, but ropes in Chrysler and Ford in its criticisms on a number of fronts, not least for failing to live up to President Obama’s hype at the time of the bailout that Detroit was turning its back on gas-guzzling trucks and SUVs and would become the world leader in fuel efficient transport, meaning smaller engine petrol cars or hybrids. Taking General Motors as an example, the NYT states sales of actual cars this year have fallen by nearly 6 percent compared with last year’s already anemic numbers, while light trucks (which include pickup trucks, SUVs, minivans and crossovers) are up by more than 16 percent. Nor is fuel efficiency making big gains: according to the EPA, the Big Three are among four of the lowest average fleet fuel economy ratings among front line manufacturers, and none achieves the industry average of 22.5 mpg. But to what extent are GM, Chrysler or Ford at fault for this? They all produce a range of cars and light trucks in response to what the market demands. With some justification, critics could argue that Detroit’s offerings in the small- to medium car market are not as attractive as those from European or Japanese manufacturers, leaving the Big Three with sales only in larger vehicles. Even hybrid sales have been disappointing — a quarter of all the hybrids built by Detroit has been bought by federal agencies, graphically underlining the public’s attitude toward models like the Volt compared to Toyota’s Prius, for example.

As if GM’s lack of small car development was not enough, the company stands accused of further misdemeanors. As a result of poor demand for the manufacturers’ product range, all the Detroit car makers were guilty to varying degrees of stockpiling or over-production, then offering large cash discounts to move that stock, and an excessive reliance on discounted fleet sales, all of which led directly to poor brand identity and low residuals. It would appear from the article that GM and Chrysler are relying on the same tactics, reporting production as if they were sales, building inventory GM now has three months worth of sales sitting in lots and falling back on fleet sales to shift cars (32 percent of the Big Three’s October sales were to the fleet operators.)

This has not passed the markets by. Trading today at around $33.50-34, GM’s stock price has yet to reach the $36 a share it reached on its first day of trading last month, in spite of the wider market rising from 11,000 to 11,400. Does this matter so long as GM is trading somewhat profitably? Yes, to have a viable long-term future the company needs an attractive product range that can compete across a broad spectrum of the market. It needs to operate sound business practices, not adopt the tactics that got it into bankruptcy in the first place. For suppliers, for workers, and for the taxpayers that bailed them out, GM and Chrysler need to do more than just divest themselves of bad working practices and accumulated responsibilities — they need to transform themselves into modern automotive manufacturers. It sounds as if they may have some way to go.

–Stuart Burns

The jury is still out on whether Tata’s Nano has failed, but sales of just 509 cars in November hardly sound like a rip-roaring success when compared to the frenzy reported around its launch. Just a year ago, Tata felt forced to hold a lottery to prioritize initial sales — so heavy was the demand. Against an overall car sales rise of 38 percent on a year ago and Nano sales of 3,065 in October, down from 5,520 in September according to an FT article, Tata managed just 509 in November. In total, the Nano has managed sales of just 70,000 sold since it entered the market in July 2009, according to


The 0.6-liter two-cylinder-equipped Nano is assembled in the western Indian state of Gujarat, where the plant is capable of churning out 250,000 models per year at full capacity. At just 123,360 to 172,360 Indian rupees in India, which is around $2700 to $3800, the Nano was aimed firmly at the motorcycling family looking to move up to the comfort and convenience of four wheels. The Nano’s low-cost innovations include using three lug nuts to secure the wheels instead of four, reduced use of steel, a single wiper blade and side-view mirror, and a trunk that’s only accessible from the inside.

The poor sales are blamed on two factors.


As we reported back in March of this year, the Nano suffered isolated reports of catching fire, forcing Tata to offer a safety recall (in all but name) to users. This bad press put off buyers and from the late summer onwards, sales dwindled. Possibly more of an issue according to company executives is the disconnect between product and market. As we have said, the Nano is aimed at the poor. Ratan Tata’s vision was to provide safe and comfortable transport for India’s scootering public. Anyone familiar with the country so often sees those families with father, mother and two children all perched precariously on a scooter in sweltering heat or monsoon rains or just dodging through India’s crowded city roads, risking death or injury to two generations. The Nano is aimed squarely at the poor, but this group also finds it nearly impossible to raise finances at affordable levels. Once the initial wave of novelty-seeking or more wealthy poor had placed their orders, new buyers dried up, so Tata is developing in-house financing and may be looking at the success over the years of GM’s GMAC model, to provide finance in support of sales.

How successful they will be remains to be seen. The Nano has its problems, but it is a brave attempt at low-price car manufacturing and Tata deserves credit for going where others feared to tread. At the other end of the range, Tata is making a success of Britain’s luxury mark Jaguar — let’s hope they can pull the same rabbit out the hat with the Nano.

–Stuart Burns

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