Car talk
Some major moves in the auto industry caught our attention recently.
First, General Motors pulled out of ailing Italian automaker Fiat. It owned 20% of the business for the past five years, and, thanks to an option in its contract, might have been forced to buy the company outright. GM paid $2 billion to get out of its obligations. A nice gift for Fiat, though it's hardly flattering in this merger-crazy age.
And Fiat is hurting big. Car sales are down in Europe and Fiat is doing worse than most. Speculation is that the bigger European car companies, VW, Peugeot, and Renault have their own problems, and don't want to be saddled with more problems.
Meanwhile, Daimler Chrysler is still in trouble, but this time it is the Mercedes division pulling the company down, not the traditionally ailing Chrysler group. The Chrysler division in 2004 had an operating profit of almost $2 billion in 2004 (compared to losses of over $600 million in 2003). It's on track for even more expansion in 2005 and far higher reputation. On the other hand, Mercedes Car Group's profitability has declined considerable, of 47%, to $2.1 billion, while revenues fell 4%. Mercedes has a lower profit margin than most competitors. Worst of all, Mercedes' reputation for high quality and reliability has been tanking, according to industry surveys. The cause is related to the integration of too many (often buggy) digital systems in each machine. It's curious to see the situation in this merger is now totally reversed. It looks like Chrysler may have to prop up Mercedes, rather than vice versa.
Further, ailing Mitsubishi Motors is shopping around for a way to pull out of the US market. Problem is, they can't find any buyers for its US plant, with a glut of manufacturing capacity in the US. The last foreign car makers to abandon the US market were French companies Peugeot and Renault, over a decade ago. Mitsubishi is apparently doing better in Asia, especially in China. A company that suffered from Mitsubishi Motors' overall problems - Daimler Chrysler, which was a major investor in the company until it pulled the plug in 2004.
9:29:40 PM 
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