Dodge Caliber being probed for sticky pedal issue, U.S. says

Chrysler Group's 2007 Dodge Caliber cars are under federal investigation for unintended acceleration caused by a sticky pedal -- the same type of problem that led to a large Toyota recall this year.

The National Highway Traffic Safety Administration said it is investigating as many as 161,000 Calibers for an accelerator pedal that “can stick or bind and not return to the idle position when it is released.”

The safety agency has received five customer complaints but no reports of deaths, injuries or crashes.

Chrysler's own investigation has narrowed the population of suspect vehicles to 10,000 that were made during five weeks in March and April 2006, a company spokesman said.

Supplier issue?

The problem appears to be a mechanical one caused by parts made by CTS Corp., of Elkhart, Ind., Chrysler spokesman Nick Cappa said.

A NHTSA official said the automaker had been cooperative.

“The manufacturer is responsible for the performance of the car, and that's who we're investigating,” a NHTSA official said. “Chrysler has been cooperative.”

CTS also was blamed by Toyota Motor Corp. for its sticky gas pedals, which led to a January recall of 2.1 million vehicles.

The supplier denied the Toyota charge, noting that the automaker has recalled millions of other vehicles for unintended acceleration that were not equipped with CTS pedals.

CTS did not immediately respond today to a request for comment.

Electronic defects probed

In the wake of Toyota's worldwide recall of 9 million vehicles for unintended acceleration, NHTSA has been investigating the possible role played by electronic defects in triggering speed control problems across the auto industry.

Toyota's problems have been far more extensive -- and far more severe, with reports of dozens of deaths and injuries -- than the possible defects under investigation at Chrysler.

Chrysler said today that the sticky-pedal problem “is mechanical in nature and not a design or electronic issue.”

Cappa said Chrysler was able to narrow the problem population to 10,000 vehicles after being alerted to customer complaints by NHTSA on April 23 and then comparing complaints to warranty data.

On April 29, NHTSA opened a preliminary evaluation, the first stage of a formal investigation, the agency said on its Web site. This review can lead to an engineering analysis and, ultimately, a recall.

Four of the five complainants reported that they had found bushings -- bearings made of brass to allow the pedal to pivot -- on the driver's side floor, NHTSA said.

Without the bushings, the pedal arm “can become misaligned” and be prevented from returning to the idle position, the agency said.

Dodge vs. Toyota

The CTS pedals used in the Dodge Calibers are different from those used in the recalled Toyotas, a NHTSA official said.

Chrysler said that since 2003, the Caliber has been equipped with a brake override system that reduces power when both the brake and the gas pedal are depressed.

Most Toyota vehicles have not had a brake override system, which would be mandated under legislation to be discussed at a congressional committee hearing Thursday.

But some consumer complaints to NHTSA raise questions about the effectiveness of the Chrysler brake override system.

One complainant reported that while traveling at 65 mph, the Dodge Caliber accelerated suddenly to over 90 mph, a report on NHTSA's site said. Neither the brakes nor emergency brake could stop the car. It slowed only when the car was put in neutral, the driver said.

Another complainant said that while driving his Caliber at 15 mph, it “abnormally accelerated” to 75 mph. The driver reached over and lifted the pedal with his hand, he said.

One complainant expressed frustration with Chrysler's response to his reports and appealed to NHTSA to investigate.

“I am not getting any satisfaction from Chrysler; they continue to blow me off,” he said. “Please respond; no one else does.”

GM properly used escrow to repay U.S. loans, Treasury says

General Motors Co., which repaid $4.7 billion in U.S. loans last week, properly used escrowed cash for the payment, a Treasury Department official said in responding to complaints from a Republican senator.

GM used the escrowed funds created with government loans and overseen by the Treasury after determining the cash wasn't needed for “extraordinary” expenses, Herbert Allison, Treasury's assistant secretary for financial stability, said in a letter to Sen. Charles Grassley of Iowa.

Grassley, the top Republican on the Senate Finance Committee, on April 22 wrote to Treasury Secretary Timothy Geithner that GM's repayment “appears to be nothing more than an elaborate TARP money shuffle” because the money came from the U.S. Troubled Asset Relief Program.

Allison said Grassley was incorrect in saying the escrow account was held at the Treasury, when the funds were held by the automaker.

Allison's written response echoed the points made by a treasury spokeswoman last week.

“The bottom line is that the repayment was made on the dime of taxpayers across America, and it's misleading to say that GM repaid its TARP loans ‘in full, with interest, ahead of schedule, because more customers are buying' GM cars,” Grassley said in a statement on his Web site following Treasury's determination.

GM CEO Ed Whitacre last week met U.S. lawmakers, including House Speaker Nancy Pelosi, in Washington after announcing the repayment. Taxpayers own 61 percent of GM, a stake worth about $2.1 billion, as part of its 2009 bankruptcy financing.

The Treasury will start selling its GM shares when the automaker begins an initial public offering, Allison said.

Ford's $2.1 billion profit may be year's best as costs begin to rise

Ford Motor Co.'s first-quarter profit of $2.1 billion may be as good as it gets this year as the automaker faces rising costs to introduce new models.

Today's earnings report came with a plan to boost second-quarter production and spurred CEO Alan Mulally to forecast a “solid” 2010 profit, a year ahead of his previous prediction. Future quarters may not be as strong, CFO Lewis Booth said today.

“It would be unwise to think of $2 billion as a running rate,” Booth told reporters. “We've got a lot of new product launches, so you'll see some launch expense and we do expect some headwinds from commodities” prices.

The executives cited challenges such as a “fragile” economy after posting a fourth straight quarter of net income, the longest streak since 2005. Booth said the Ford Motor Credit unit was unlikely to “keep up the pace” for the rest of the year.

“The first quarter could turn out to be their best,” said Joe Phillippi, president of AutoTrends Consulting in Short Hills, New Jersey. “The landscape might become more competitive as Toyota fights its way back and GM launches a lot of new products.”

Ford said second-quarter production in North America will be 625,000 vehicles, a 5 percent increase from the plan announced March 2. Output will rise 39 percent compared with a year earlier.

Ford benefited from a recovering auto market and higher prices that added $1 billion to pretax operating earnings. Excluding some gains and costs, earnings were 46 cents a share, topping the 31-cent average of 12 estimates compiled by Bloomberg.

Market share

A 37 percent surge in U.S. sales in the first quarter more than doubled the industrywide increase, helping Ford add domestic market share at the fastest pace in 33 years after becoming the only major U.S. automaker to avoid bankruptcy in 2009.

Profit was buoyed by Ford Credit's $828 million of pretax operating income, after a $36 million year-earlier loss. Ford Credit, which lends to dealers and buyers, will earn about $2 billion on an operating basis in 2010, Ford said. The unit will pay Ford a dividend of $2 billion this year, up from a previous forecast of $1.5 billion, Booth said.

Himanshu Patel, a JPMorgan Chase & Co. analyst in New York, said in a note that the unit's first-quarter gains were driven by rising resale prices and are “unsustainable.” He advises holding Ford shares.

Ford shares slid 6.3 percent, to $13.55, at 4:02 p.m. in New York Stock Exchange composite trading. The stock tumbled as much as 9.1 percent earlier in the day, the most since May 12, after almost tripling in the 12 months through yesterday.

Regional results

In North America, Ford had a pretax operating profit of $1.2 billion, following a $665 million loss in the first three months of 2009. Revenue climbed 41 percent to $14.1 billion.

Ford also posted better results in all regions outside North America.

• Ford South America reported operating profit of $203 million versus $63 million a year ago. Higher costs prevented even higher profits, the company said. First quarter revenue was $2 billion, up from $1.4 billion.

• Ford Europe posted a profit versus a loss last year. The unit enjoyed higher sales, lower costs and higher parts profit. First-quarter operating profits were $107 million, compared with a loss of $585 million a year ago. Revenue jumped to $7.7 billion versus $5.8 billion.

• Ford Asia Pacific Africa also erased a loss last year. The region posted operating profit of $23 million, compared with a loss of $97 million a year ago. Higher sales in China boosted results.

Factory conversions

Some factories will close temporarily in the second half while being converted to build a new version of the Focus compact car, Booth said. Ford's price gains will “deteriorate” with the debut of the Focus and the Fiesta small cars this year because those models are less expensive, he said.

The Fusion sedan, F-150 pickup and Fusion drove first-quarter U.S. sales increases, Booth said.

“The most important thing Ford has done is invest heavily in new product during this down cycle,” said Erich Merkle, president of consultant Autoconomy LLC in Grand Rapids, Mich. “As we're coming out, they've got all this new product coming out in just about every category.”

First-quarter revenue rose 15 percent to $28.1 billion. That compared with the $28 billion average estimate among seven analysts. Net income was 50 cents a share, exceeding the average estimate of 29 cents from two analysts, and compared with a net loss of $1.43 billion, or 60 cents, a year earlier.

2010 outlook

Revising Mulally's previous forecast of being “solidly profitable” in 2011, Ford said today it “now expects to deliver solid profits this year, with positive automotive operating-related cash flow.” Booth said 2010 earnings will exceed the first-quarter total, without giving a figure.

“Given where we were even three or four months ago, this says to you that we're really encouraged by the start we had” to the year, Booth told analysts.

Ford reported $25.3 billion in automotive cash on March 31, up from $24.9 billion at the end of 2009, which the automaker restated from $25.5 billion because of an accounting change.

Cash consumption was $100 million during 2010's first three months, after the company used $3.7 billion a year earlier. Booth said Ford will have positive cash flow for all of 2010.

Borrowing $23 billion in late 2006 gave Ford a cash cushion to withstand losses and develop new models such as the Fiesta. The trade-off was a debt load that Mulally has said puts Ford at a competitive disadvantage with General Motors Co. and Chrysler Group LLC, which had their obligations cut in bankruptcy.

Automotive debt was $34.3 billion, up from $33.6 billion at the end of 2009, which was adjusted from $34.3 billion due to an accounting change, Ford said. That doesn't include a $3 billion payment Ford made on its revolving line of credit on April 6.

Redesigned models such as the Taurus sedan helped boost U.S. market share through March to 17.4 percent from 14.7 percent a year earlier, the biggest jump since 1977, Ford has said. Ford has said it is attracting buyers from Toyota Motor Corp. after global recalls of more than 8 million vehicles.

Mulally, 64, also completed his push to unload Ford's European luxury brands by reaching an agreement in March to sell Volvo to China's Zhejiang Geely Holding Co. That transaction should close in the third quarter, Ford said today.

Chrysler and U.S. market to play key role in Alfa relaunch

Chrysler Group will play a key role in plans to revive Fiat S.p.A.'s ailing Alfa brand. The U.S. automaker will build two new Alfa crossover models for sale in North America and Europe.

Fiat S.p.A. CEO Sergio Marchionne made a strong commitment to the money-losing sporty brand, which will be 100 years old in June, during a presentation of Fiat's five-year strategy Wednesday.

Marchionne announced the launch of seven new Alfa models between 2010 and 2014 and said Fiat is determined to transform the brand into a "full-line premium carmaker."

Marchionne also said North America will account for 85,000 unit sales in 2014 out of 500,000 that Alfa aims to sell in that year.

The Chrysler-built vehicles for Alfa will be:

• A compact SUV based on the Compact architecture that underpins the Giulietta hatchback in Europe. Production will begin in 2012

• A large SUV, similar in size to the next Jeep Liberty, which is sold as the Cherokee in Europe. Production will start in 2014.

The crossover models will be built in two of the three U.S. plants that Chrysler Group plans to retool for new Chrysler, Dodge and Jeep models based on Fiat-Chrysler's Compact Wide architecture.

Alfa will also sell a mid-sized sedan and station wagon when in the U.S. starting in late 2012. These two vehicles will have the name Giulia and in Europe will replace the 159 range. They will be built in Italy.

Alfa will also sell in the U.S. a five-door version of its MiTo minicar, which is currently sold in Europe as a three-door. The five-door MiTo will be sold in Europe and North America starting in 2013.

Alfa will launch the Giulietta in North America after the car gets a face-lift in 2014. The Giulietta launches in May in Europe.

Alfa will continue to build the Mito and Giulietta in Italy.

Chrysler to build Alfa spider

Marchionne also said Chrysler will provide the platform for a new Alfa spider model, planned for 2013, but said the production location has not been decided.

Fiat's plan for Alfa to sell 500,000 cars in 2014 is five times more than Alfa sold last year.

Starved of fresh product as Fiat delayed key new models, Alfa sales have declined steeply as its lineup became older. This year's volume expected to be 120,000 units, compared with a peak of 207,000 in 2001. Alfa has lost between 200 million and 400 million euros ($288 million to $566 million) a year in the past 10 years, according to company sources.

Alfa quit the North American market in 1995 after the quality of the brand's cars was condemned in studies and its sales plummeted.

GM agrees deal with unions to close Opel plant in Belgium

Compensation package removes key hurdle in Opel/Vauxhall revamp
General Motors Co.'s Opel/Vauxhall unit has agreed a deal with unions to close a plant in Antwerp, Belgium.

GM had announced in January that it would close the 120,000-unit capacity plant as part of a restructuring to reduce European capacity by a fifth to help return Opel to profitability within two years.

Opel unions, which had opposed the closure, on Sunday agreed a compensation package for the 2,560 Antwerp workers, a plant spokeswoman told the German press agency, Deutsche Presse-Agentur.

Workers will vote on Tuesday whether to accept the deal, which offers workers up to 144,000 euros ($193,000) in compensation for losing their jobs.

GM will still look for an outside investor to take over the plant and continue building the Astra three-door hatchback and Astra convertible. If no investor is found by September 30, the factory will close by the end of the year.

Klaus, Franz, Opel's top union leader, told the press agency that an important roadblock hindering labor's acceptance of GM's European restructuring will be removed if Antwerp workers vote to accept the deal.

GM plans to cut 8,300 of Opel/Vauxhall's 48,000 workforce and is seeking up to 2 billion in loan guarantees from five European governments toward its turnaround plan for Opel and its UK sister brand Vauxhall.

The British government has already pledged 300 million. Germany, where Opel and most of its workers are based, is being asked for the largest amount at 1.3 billion euros and has still to make a decision on whether to lend aid.

Daimler targets sales at double industry growth rate

Daimler AG, the maker of Mercedes-Benz cars and trucks, aims to increase deliveries twice as fast as this year's worldwide auto-market growth rate as the latest models of the E-class and S-class sedans attract buyers.

“Our global sales target for the year is ambitious but realistic,” CEO Dieter Zetsche said today at the annual shareholders meeting in Berlin. The sales gain includes a projected 50 percent jump in sales of the E class, including sedan, station wagon, coupe, and convertible versions.

Carmakers' deliveries will increase 3 percent to 4 percent this year, Daimler said in February. The Stuttgart, Germany- based manufacturer is seeking to close the gap with luxury-car market leader BMW AG while fending off efforts by Volkswagen AG's Audi division to become the world's biggest high-end automaker by 2015. Zetsche didn't specify Daimler's car-sales target for this year.

Daimler is targeting earnings before interest and taxes of at least 2.3 billion euros ($3.1 billion) this year after an Ebit loss of 1.51 billion euros in 2009. The manufacturer stuck to a forecast today that revenue in 2010 will exceed last year's 78.9 billion euros but be “significantly” below the 98.5 billion euros of 2008.

The global economy is “too fragile” to allow Daimler to commit to a timeframe for raising the automaking division's Ebit as a proportion of sales to 9 percent, Zetsche said. Munich-based BMW reaffirmed a target last month of achieving an Ebit margin in carmaking of at least 8 percent by 2012.

Sales at the Mercedes-Benz Cars division, which includes the Smart minicar and Maybach luxury nameplates, rose 11 percent to 271,200 vehicles in the first quarter, the company said on April 6. Including deliveries to dealers, Mercedes-Benz brand sales jumped by almost 27 percent in the period, boosted by a surge of more than two-thirds for the top-of-the-line S-Class, Daimler said today.

Daimler rose as much as 52 cents, or 1.4 percent, to 36.52 euros, the highest intraday price since Jan. 20, and was up 1.2 percent as of 1:59 p.m. in Frankfurt trading. The stock has declined 2.1 percent this year.

The company is also the world's largest truckmaker with Freightliner vehicles in the U.S. and Fuso models in Asia. Daimler said first-quarter truck sales rose 8 percent and orders nearly doubled, even as markets remain “weak.” Bus sales increased 23 percent in the first three months of 2010, and van deliveries jumped 62 percent, Zetsche said.

Reacting to rising international tensions with Iran over the country's nuclear research, Daimler said today that it's abandoning a 30 percent stake in a diesel-engine venture with Iran Khodro Co. Daimler also withdrew an application with the German government to export three-axle trucks to Iran and will halt delivery of such vehicles indefinitely.

“The policies of the current Iranian leadership have compelled us to put our business relationship with that country on a new footing,” Zetsche told about 5,000 shareholders. “Our business activities with Iran will now be limited to meeting our existing contractual obligations and continuing our cooperation with established customers.”

Cooperation With Renault

The manufacturer, seeking to expand its line-up of small cars while holding back costs, announced plans a week ago to cooperate with the Renault-Nissan alliance on developing compact Mercedes-Benz and Smart vehicles. A new line of Smart city cars, including two- and four-seat versions, will share a platform with Renault SA's Twingo. The French partner will supply 3- and 4-cylinder gasoline and diesel engines for Mercedes-Benz cars.

The cooperation represents “a decisive strategic step” that will help Smart enhance its position as a “young” brand, Zetsche said. While the project will help Mercedes-Benz hold back the expense of introducing smaller models, the brand “will not tolerate any compromises to our claim ‘the best or nothing,'” Zetsche added.

Working with Renault and Nissan Motor Co. may not bring the benefits that Daimler is planning, Ingo Speich, a Frankfurt- based fund manager with Union Investment, said at the meeting.

“We have grave doubts that the new partnership will be a success,” Speich said. “The traces of missteps run like a red thread through Daimler's cooperation history.”

After losing ground to Munich-based BMW in reducing vehicle emissions, Daimler aims to almost double annual spending to develop batteries and fuel-saving engines, to 1 billion euros in the next two years from an average 567 million euros in the past three years, Thomas Weber, the company's development chief, said on March 3.

Electric-car projects

The German company plans to develop an electric car for China with BYD Co., the Shenzhen-based automaker backed by billionaire Warren Buffett. It's also building a factory in eastern Germany to produce lithium-ion batteries by 2012 and has taken a stake in Tesla Motors Inc., the Palo Alto, California- based manufacturer of electric sports cars.

“Daimler aims to be, and will be, a pioneer in the field of electric mobility” as the car industry phases out oil-based powering systems, Zetsche said. “When alternative drive systems go into mass production in a few years, we will be ahead of the competition.”

A net loss of 2.64 billion euros last year because of the global car-market contraction prompted Daimler to cancel its dividend for the first time since at least 1999. Daimler posted the loss, its first for a full year since 2001, even after reducing spending by 5.3 billion euros by building fewer vehicles and cutting pay in response to the recession.

Daimler reiterated that it plans to resume dividend payments after returning to profit this year.

Toyota’s cash-cow Lexus brand may be tarnished on ‘safety risk’

Toyota Motor Corp., struggling to recover from record recalls, may not be able to count on its luxury Lexus brand to bolster earnings after Consumer Reports called the GX 460 sport-utility model a “safety risk.”

The designation, accompanied by a “don’t buy” recommendation from the U.S. magazine, may dampen Lexus sales in the nation, which have risen even as Toyota’s overall deliveries fell amid global recalls of more than 8 million vehicles.

“No one is going to purchase a car that has a ‘don’t buy’ rating,” said Koji Endo, managing director of Tokyo-based Advanced Research Japan. “Worse yet, this will deal a severe blow to the image of the entire Lexus lineup.”

Until now, the Lexus brand was largely unscathed by Toyota’s recalls, which have led to U.S. congressional hearings, a rebuke by Transportation Secretary Ray LaHood, and a proposed $16.4 million fine.

While some Lexus models were called back because of floor mats that might trap gas pedals and cause unintended acceleration, none were involved in later actions to fix sticky accelerators.

Lexus sales in the U.S. jumped 18 percent in the first quarter of this year and accounted for 13 percent of Toyota’s total deliveries in the country. Toyota’s most expensive Lexus models earn at least 10 times the operating profit per vehicle of a Toyota Corolla compact car, according to Advanced Research’s Endo.

Rollover Accidents

Consumer Reports, a non-profit magazine published by New York-based Consumers Union, said Monday that emergency driving tests indicated the 2010 GX 460 model may be prone to rolling over.

The GX’s rear end “slid out until the vehicle was almost sideways before the electronic stability control system was able to regain control” at a Connecticut test track, the magazine said. “In real-world driving, that situation could lead to a rollover accident, which could cause serious injury or death.”

The Lexus division has been the top seller of luxury vehicles in the U.S. on an annual basis for 10 years in a row. The brand tied with General Motors Co.’s Cadillac for the top ranking in a University of Michigan survey of customer satisfaction, the school said in August.

Lexus cars will have the highest average U.S. resale value among 2010 model-year vehicles in five years, according to a study released by Kelley Blue Book in December.

Profitability Pressured

“Buyers who see the Consumer Reports rating may perceive this as a problem across all Lexus models,” said Tadashi Usui, an analyst at Moody’s K.K. in Tokyo. “In that case, because of Lexus’s high margins, we’ll see an impact more on profit than on sales.”

Toyota’s profitability is already being pressured by the cost of incentives the carmaker has introduced to bolster U.S. deliveries. Toyota started offering no-interest loans, discount leases, and free maintenance for some models from March, helping the carmaker raise sales that month by 41 percent from a year earlier. Toyota is extending the offers until May 3.

“These free maintenance offers and such are not adding to Toyota’s bottom line,” said Takashi Aoki, who helps manage about $1 billion at Mizuho Asset Management Co. in Tokyo, including Toyota shares. “And what will happen when the incentive program ends?”

Lawsuits

Toyota is facing at least 177 consumer and shareholder lawsuits seeking class-action status and at least 57 individual suits claiming personal injuries or deaths caused by unintended acceleration incidents. The lawsuits will be combined in a federal court in Santa Ana, Calif., a panel of judges said earlier this month.

The uncertainty surrounding the legal cases will push Toyota to be especially cautious with its dividend payments and profit forecast for the fiscal year started April 1, said Yuuki Sakurai, CEO of Fukoku Capital Management in Tokyo, which manages about $7.5 billion.

“Raising the dividend is out of the question,” Sakurai said. “That would actually upset investors who think it wouldn’t be prudent.”

Toyota will announce its fiscal fourth-quarter and annual earnings results on May 11 in Tokyo.

GM to report 'solid' Q1 operating results, Whitacre memo says

General Motors Co. expects to report "solid" operating results for the first quarter, which will show progress toward its goal of returning to profitability in 2010, CEO Ed Whitacre said.

A potential profit this year would end a five-year streak of losses and mark a turnaround for the U.S. automaker, which emerged from a U.S. government-financed bankruptcy in July after slashing debt and labor costs.

Whitacre, who replaced Fritz Henderson as CEO in December, has aimed to move faster to jump-start sales and launch an initial public offering that would allow the U.S. government to reduce its majority stake in GM.

"In January, I said we could earn a profit in 2010, if everything falls into place," Whitacre said in a memo to staff, which was obtained by Reuters.

"Our first quarter financial results will show us an important milestone, and I'm pleased to say that I anticipate solid operating results when we report our first quarter financials in May," he said.

The automaker has said it will report its first-quarter results in mid-May.

Last week, GM reported a $4.3 billion 2009 net loss covering the period from its emergence from bankruptcy in July through the end of the year, in the automaker's first full account of its new balance sheet as a restructured company.

"Our 'fresh start' accounting not only closed the door on 2009, it is a major milestone in our journey to becoming a public company again," Whitacre said in the memo.

Hit by losses of about $88 billion from 2005 through the first quarter of 2009, GM was given $50 billion of government financing to restructure in a bankruptcy steered by the U.S. Treasury, which remains a 61 percent owner of GM.

As part of efforts to push for a faster turnaround, Whitacre has shaken up senior management, including sales and marketing teams, in recent months.

GM reshuffled its sales organization in March, putting North American President Mark Reuss in charge of sales; and GM executives have said Whitacre has been clear he will hold them responsible for delivering on a promised turnaround.

The bankruptcy restructuring helped the “new GM” eliminate debt and build its cash, but the automaker's sales overall remain under pressure as it eliminates four unprofitable brands: Pontiac, Saturn, Hummer and Saab.

The automaker's U.S. sales were up 16 percent in the first quarter from a year earlier, when the industry was hitting its lowest levels since the early 1980s and GM was sliding toward bankruptcy.

But GM's U.S. market share of 18.7 percent in the first quarter was down from 19.6 percent for all of 2009, a year in which it lost 2.5 percentage points of U.S. share.

Smart 4-seater for U.S. likely to come from alliance

A four-seat Smart car developed jointly by the Daimler-Renault-Nissan alliance is likely to be sold in the United States, said Daimler CEO Dieter Zetsche.

Zetsche said having a partner for developing a four-seat Smart “was a prerequisite” for expanding the microcar range. “We could not have found a feasible basis alone for the next-generation Smart family,” he said in a call with reporters today.

The next-generation SmartForTwo two-seater, a four-seat Smart and the next-generation Renault Twingo will be jointly developed by the partners. The agreement calls for electric versions of both the Smart and Twingo families as well as sharing and co-development of diesel and gasoline engines.

“Of course, we could do a next-generation Smart alone, but we would lose a lot of money,” said Zetsche, who noted that a final decision on a four-seater for the United States hasn't been made.

Daimler AG would also have had a hard time recouping the required 10 percent return-on-sales it requires for new vehicles by developing a second Smart on its own, he said.

Zetsche said Daimler has no intention of using Nissan dealers in the United States to sell Smart cars. The partnership announced today with Renault SA and Nissan Motor Co. will not affect the Smart distributorship agreement Daimler has with Penske Automotive Group, the sole distributor of Smart cars in the United States.

The SmartForTwo went on sale in the United States in 2008. A total of 24,622 were sold that year, exceeding Daimler's and Penske's expectations.

As gasoline prices fell from record highs and the economy collapsed, Smart sales plunged 41 percent in 2009. This year's demand is down 72 percent from year-earlier levels.

Toyota may face $16.4 million fine for hiding defect, U.S. says

WASHINGTON (Bloomberg) -- Toyota Motor Corp. “knowingly hid a dangerous defect” that caused its vehicles to accelerate unexpectedly, the U.S. said, for the first time accusing the world's largest automaker of breaking the law.

Transportation Secretary Ray LaHood proposed a record civil penalty of $16.4 million, the most the government can impose. The fine recommended Monday escalates the confrontation between Toyota and LaHood, who initially praised the carmaker for its handling of recalls the company attributed to faulty accelerator pedals.

The fine was announced the week after Toyota reported U.S. sales rose 41 percent in March with the help of no-interest loans and discount leases, signaling the company may be recovering from recalls of about more than 8 million vehicles worldwide for flaws that may cause unintended acceleration..

The Transportation Department's action showed “safety matters and they're going to be tough as nails,” Joan Claybrook, a former head of the National Highway Traffic Safety Administration, said in an interview. “That's very appropriate. They caught Toyota red-handed.”

The Japanese automaker waited at least four months before telling the agency that accelerator pedals might stick, LaHood said in a statement. Companies have five business days to report safety defects, the agency said.

`We now have proof'

“We now have proof that Toyota failed to live up to its legal obligations,” LaHood said in the statement. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.”

Toyota hadn't received NHTSA's letter on the fine, according to an e-mailed statement Monday from the company's North American sales unit.

“We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance,” the company said, without saying whether it will exercise its right to dispute the fine.

LaHood has increasingly faulted Toyota's response since Jan. 28, when he said he had “no criticism” of the company and Toyota “did what they're supposed to do.”

Toyota in January recalled about 2.3 million U.S. cars and trucks for sticky accelerator pedals.

The penalty could “very possibly” be the first of multiple fines, said Claybrook, who is former president of Public Citizen, a Washington-based consumer advocacy group.

NHTSA cited documents obtained from Toyota in saying the company knew about the pedal defect since at least Sept. 29.

“NHTSA wants to make it clear that it was Toyota that was at fault and the agency did its best within the system,” said Alan Baum, an auto industry analyst at Baum & Associates in West Bloomfield, Michigan. He said Toyota probably won't contest the fine, “since they've essentially said they screwed up.”

‘Firepower to attorneys'

At a February congressional hearing, Toyota's U.S. sales chief Jim Lentz told lawmakers “we failed to promptly analyze and respond to information emerging from Europe and in the United States” about the sticky pedals.

Toyota has two weeks to accept or contest the proposed fine, Olivia Alair, a Transportation Department spokeswoman, said in an e-mail. If Toyota contests the penalty and a settlement isn't reached, “it would go to court,” she said.

“One of the biggest reasons to fight the fine would be to defend themselves from the language used by the Department of Transportation,” Ed Kim, an industry analyst for forecaster AutoPacific Inc. in Tustin, California, said in an interview. “That would seem to provide some firepower to attorneys that are suing the company.”

NHTSA's largest civil penalty was $1 million against General Motors in 2004 to settle charges that the company failed to conduct a timely recall involving windshield-wiper failures in about 581,000 vehicles.

‘Free Publicity'

“Both industry and government failed the test of putting the safety of America's drivers first” in the Toyota recalls, Representative Darrell Issa, the top Republican on the House Oversight and Government Reform Committee, one of three panels that has held hearings on Toyota actions, said in a statement Monday.

The proposed NHTSA fine may help consumers suing Toyota over sudden acceleration, said Houston attorney W. Mark Lanier, who has filed class-action and individual lawsuits related to the claims.

“Toyota is spending millions of dollars on public relations right now to sway consumers or a potential jury pool,” Lanier said in a phone interview. The fine “is free publicity that counters Toyota.” The penalty probably couldn't be introduced in court because “it's not like a criminal finding in that there was due process,” he said.

Toyota is facing at least 177 consumer and shareholder lawsuits seeking class-action status and at least 56 suits claiming personal injuries or deaths caused by sudden acceleration incidents, according to data compiled by Bloomberg. Lanier has filed two personal injury cases and is considering filing about 100 others, including a dozen involving deaths, he said.

More vehicles being scrapped than purchased, R.L. Polk says

More Americans ditched older cars than bought new ones during a 15-month period ending last September, according to a report released this week by R.L. Polk & Co.

Polk found that more than 14.8 million cars and light trucks were scrapped in the U.S., compared with new vehicle registrations of just more than 13.6 million.

The tally, taken between July 1, 2008, and Sept. 30, 2009, includes thousands of cars demolished during last year's cash-for-clunkers program.

Scrapping statistics are viewed in the industry as a bellwether for future gains in vehicle sales. The higher the rate of scrapping, the more likely that the demand for new and used vehicles will rise -- especially if the economy is improving.

This is the first time Polk's analysis covered a 15-month period, in large part to accommodate the clunkers program. Cash for clunkers gave consumers up to $4,500 in rebates on a new vehicle if the trade-in and new purchase met certain requirements. The program ran from July 27 through Aug. 25, 2009, and was funded with $3 billion in taxpayer funds.

Polk did not compile figures from comparable 15-month periods, but the research company said light-vehicle scrap rates have increased in the past five years.

Higher scrap rates

As of October 2009, the scrap rate was 6.1 percent of the total U.S. light-vehicle fleet, compared with 4.3 percent in July 2005.

Polk, which tracks the ability of automakers to retain customers, expects current trends for scrappage and vehicle ownership to continue for at least another year. The assessment assumes a general upward trend for vehicle scrappage rates as high volumes of older vehicles continue to retire from the U.S. fleet, according to the report.

The average age for all light vehicles during the 15-month period is 10.2 years, a trend supported by Polk's research that consumers are keeping cars and trucks longer. As of September 2009, the average length of ownership for a new or used vehicle was 49.9 months, up from 45 months at the same point a year earlier.

The economy, limited financing and leasing options, extended warranty offers and improved vehicle quality support the longevity trend, according to Polk. The company said this could provide increased business for various segments of the industry.

“As vehicles age and consumers continue to hold onto them longer, there are significant opportunities for repair services and parts demand for the aftermarket as vehicles are falling out of warranty as they age,” Mark Seng, Polk vice president of sales and client services, said in a statement.

Ford, Toyota soar as incentives fuel 24% industry gain

General Motors Co. posted a 21 percent increase in March U.S. sales while Toyota Motor Corp. and Ford Motor Co. rose more than 40 percent as higher incentives industrywide helped lure buyers to showrooms.

Ford, which advanced for the sixth straight month, was outsold by Toyota and GM in March after leading the industry in February. Toyota's 41 percent gain was aided by richer incentives aimed at luring buyers after its recall crisis.

"Retail sales were really artificially inflated by huge incentives going on in the marketplace and did not reflect true demand,” said Jessica Caldwell, director of industry analysis at Edmunds.com. “April will be a good indicator of real consumer demand."

Overall U.S. sales rose 24 percent from the depressed levels of March 2009, when automakers were battling the weakest demand in almost three decades. The seasonally adjusted annual sales rate of 11.7 million was the year's highest and the second strongest since August, when the U.S. cash-for-clunkers campaign lifted demand

Chrysler Group fell 8 percent after posting its first monthly gain in more than two years in February. Chrysler, No. 5 in U.S. sales through February, was outsold for the second time this year by Nissan North America, which soared 43 percent.

The Hyundai brand's 15 percent increase was below analysts' forecasts of a gain of more than 30 percent.

American Honda was up 22 percent, in line with predictions. Subaru, the only automaker to post U.S. sales gains in each of the past two years, rose 46 percent.

Last month's SAAR was below the 12 million average forecast of eight analysts compiled by Bloomberg. Still, it was the fifth straight gain from a year earlier. The March 2009 pace was 9.3 million, according to Automotive News data.

Incentive discrepancy

For the first time on record, GM's per-unit incentives were below the industry average, said Susan Docherty, vice president of U.S. marketing. GM spiffs totaled $2,800 per vehicle, down nearly $2,000 from March 2009, she said. The industry averaged $2,910.

GM incentives ranked fourth highest, behind Ford Motor, Chrysler and “an import competitor,” she said.

GM, Ford and other automakers use J.D. Power and Associates data to measure incentives, Docherty said.

But Edmunds.com's incentive measure puts GM first among all automakers with $3,519 spent per vehicle last month. That compares with an industry average of $2,742, the consumer auto site says.

Both Edmunds.com and J.D. Power measure customer cash, interest and lease incentives, along with cash to dealers for specific vehicles. But J.D. Power also includes cash that automakers give dealers for meeting sales volume objectives.

Still, that shouldn't make J.D. Power's per-vehicle numbers lower for GM, said Edmunds.com's Caldwell.

“We've been doing the same thing for years, and it's weird that we're coming to a point where all of the sudden we're showing a huge discrepancy,” she said.

GM retained Chevrolet, Cadillac, Buick and GMC brands as part of its government-backed restructuring, and is selling or closing Saab, Hummer, Saturn and Pontiac, whose sales plummeted 88 percent in March. GM released results for the four remaining lines, which each posted gains of more than 40 percent, almost an hour before the complete tally.

“They haven't increased consideration for the remaining brands,” said Jim Hall, principal of the consulting firm 2953 Analytics Inc. in suburban Detroit. “Killing brands does not increase the consideration for the brands you're continuing. Obviously, they have to do that.”

Industry sales that failed to match analysts' estimates underscored the market's contraction in the recession. Annual U.S. deliveries averaged 16.8 million last decade through 2007. The 2008 total was 13.2 million, and 2009's tally of 10.4 million was the lowest in 27 years.

Automakers were buoyed in March by rising consumer confidence and spring weather after February blizzards in the Northeast. The Conference Board's confidence index rose to 52.5 from 46.4 a month earlier as gloom over job prospects began to lift.

On March 2, Toyota began offering incentives such as subsidized leases after the automaker recalled more than 8 million vehicles globally to fix defects linked to unintended acceleration and to adjust brakes.

Competitors responded with their own discounts while avoiding the spending levels the industry rang up in March 2009 as GM and Chrysler added incentives ahead of their bankruptcy filings. Incentives are down 14 percent from a year earlier, according to Edmunds.com.

Chrysler shifts tone on dealers

Automaker offers reinstatement to 50 stores, signals settlement talks with more

Finally, some movement at Chrysler.

After nearly a year of taking a hard line with rejected dealerships, Chrysler Group changed course last week and offered to reinstate 50 stores.

The company also said it will enter settlement talks with an unspecified number of rejected dealerships and disclosed that 36 already have been reinstated nationwide.

One thing hasn't changed, though. Chrysler still favors dealerships that sell all four of its brands: Chrysler, Dodge, Jeep and the recently added Ram truck brand. All 50 offers of reinstatement are to stores selling all those brands.

But despite the actions by Chrysler, problems remain.

Dealer lawyers say Chrysler hasn't budged in its approach to arbitration -- for example, demanding that arbitrating dealers sign confidentiality agreements blocking them from sharing Chrysler information with other dealers.

One dealer who received a call from a Chrysler official saying a letter of intent for reinstatement was coming said he was taking a wait-and-see attitude.

"We're looking at it with guarded optimism," said the dealer, who declined to be identified. He remains skeptical because Chrysler had given no previous indication it had any interest in bringing back any rejected dealerships.

A company spokesperson said Chrysler would continue to explore "mutually beneficial options outside arbitration" to settle with dealers who have filed for arbitration.

By offering to reinstate the 50, Chrysler reduced its arbitration caseload to 337, said a company spokesperson.

Ed Tonkin, chairman of the National Automobile Dealers Association, called Chrysler's intention to reinstate 50 dealerships "a move in the right direction." This, coupled with previous contracts awarded to 36 other closed dealerships, brings the total to 86 dealerships that could be reinstated.

In U.S. Bankruptcy Court last year, Chrysler canceled 789 dealerships.

"NADA views this as a good-faith effort and hopes that this carries forward in Chrysler's continuing settlement and arbitration discussions with the other terminated dealers," Tonkin said.

Delays?

Eric Chase, an attorney representing four rejected Chrysler dealers, said the reinstatements do not change his opinion that the automaker won't give in easily on the remaining dealerships seeking arbitration. He said Chrysler has been "obstructive" at every phase of the arbitration process.

Chrysler's demand for a signed confidentiality pledge before it will agree to provide documents in discovery is prompting complaints from dealer lawyers accustomed to comparing notes on strategy.

The company also still is resisting dealers' efforts to find out the specific criteria used in terminating their stores -- information that Chrysler was required under law to provide in January, dealer lawyers said.

"Chrysler continues to resist and contest each and every step in arbitration," said Rob Byerts, a Tallahassee, Fla., lawyer whose firm represents 13 closed Chrysler dealerships. "It appears to be for no good reason other than delay."

Delays benefit Chrysler because if arbitrations aren't completed before the June 14 deadline set by Congress, the dealers lose their cases, said Mike Charapp, a McLean, Va., lawyer.

Chrysler's nine-page "Confidentiality Agreement and Order" -- a copy of which Automotive News obtained -- has touched off wrangling in dozens of arbitrations, seven dealer lawyers said.

Chrysler defended the confidentiality agreement.

"This is a standard request in litigation dealing with sensitive financial and competitive data," the company said in an e-mail last week.

It added that the new law setting up arbitration states that "discovery shall be limited to request for documents specific to the covered dealership."

Dealer lawyers disagreed, saying the standard approach in arbitration is to consider each particular document rather than the documents as a whole.

If a document deals with trade secrets or confidential business information, then it is addressed with the arbitrator, they said. But dealership performance documents rarely raise such sensitive issues.

Hearings in April

Meanwhile, the June 14 deadline looms over proceedings, although arbitrators have the discretion to extend them another month.

A total of 115 hearing dates, scheduled from April 21 into early June, had been set as of last week, said India Johnson, senior vice president of the American Arbitration Association, which is administering the cases.

Hundreds more have yet to be scheduled. The exact figure is a shifting number, as General Motors Co. and perhaps Chrysler move to reinstate dealerships.

A total of 1,550 GM and Chrysler arbitration claims have been filed, but GM has said it is reinstating 661 rejected dealerships and is willing to discuss possible settlement with as many as 499 more.

Johnson has little concern about the arbitrations meeting the congressional deadline. Said Johnson: "We have a lot of other arbitrators that we could throw at these cases."

Chrysler to launch electric Fiat 500 minicar

Fiat 500 Electric minicar

Chrysler Group said today that it plans to build an electric version of the Fiat 500 minicar for sale in the United States beginning in 2012.

Chrysler said the electric 500 will use an "advanced" lithium ion battery pack but did not give any technical specifications of the car, which will be sold as a Fiat model.

The company said the car's pricing will be announced closer to launch and will be competitive with similar electric vehicles in the market.

At the Detroit auto show in January, where a concept of an electric Fiat 500 was unveiled, Fiat and Chrysler CEO Sergio Marchionne said the concept would sell for about $32,000 if it went on the market, of which $16,000 covered the cost of the batteries.

Chrysler did not announce a production target for the 500EV. Marchionne said in November that Chrysler plans to produce about 56,000 electric vehicles annually by 2014.

Chrysler said all powertrain engineering and vehicle development for the 500EV will take place at the company headquarters in Auburn Hills, Michigan.

Chrysler is the vehicle electrification center of competence for both Chrysler Group and Fiat Group.

Scott Kunselman, Chrysler's senior vice president of engineering, said the alliance with Fiat presented opportunities to merge Chrysler engineering knowledge with new platforms from Fiat.

“The Fiat 500EV is an outstanding example of our efforts: the Fiat 500 is a small, lightweight platform perfect for integrating electric-vehicle technology,” Kunselman said in a statement.

Chrysler will launch U.S. sales of the Fiat 500 powered by a 1.4-liter gasoline engine in December. The car will be built in Mexico for the North American market. In Europe, Fiat revived the 500, an iconic car of the post-war years, in 2007.

Fiat S.p.A., which owns 20 percent of Chrysler, said, “We are currently evaluating the commercial potential of this electric car for Europe.”

Fiat's rivals in Europe, Peugeot and Citroen, will begin selling electric cars in European markets by the end of the year. Renault will follow in 2011 and Volkswagen in 2013.

March Car Sales rise as U.S. industry turns to incentive 'drugs'

Auto sales gained strength in early March as automakers offered big incentives and melting February snows made it easier for buyers to reach showrooms.

Edmunds.com Inc. forecasts a seasonally adjusted annualized sales rate of 13.2 million for the month. Except for a 13.7 million spike in August 2009 during cash for clunkers, that would be the highest monthly SAAR since August 2008.

J.D. Power and Associates predicts a 12.1 million SAAR in March, with 1,092,000 vehicles sold. That would be 27 percent higher than March 2009.

“The industry has been recharged by incentive offers from Toyota and other automakers,” said Edmunds.com analyst Jessica Caldwell. “There’s a lot of money in the marketplace right now, and people are responding.”

Edmunds.com projects industry spending on spiffs this month will approach $3,000 per vehicle. That’s close to the industry’s record of $3,165 set in March 2009.

When that record was set, manufacturers were reeling from a February that included the lowest SAAR in decades and record high U.S. inventory levels.

What about Toyota?

“There is some risk that the incentives offered by Toyota could spark an incentive war,” Power’s forecaster Jeff Schuster warned. “While that may lead to a temporary increase in sales momentum, it could also potentially slow the pace of long-term recovery.”

Schuster is keeping his 2010 full-year forecast unchanged at 11.7 million units, with retail sales accounting for 9.6 million of that. U.S. sales totaled 10.4 million in 2009 after topping 16 million annually this decade through 2007.

A key question is how long Toyota will continue its high incentives.

Analyst Himanshu Patel of J.P. Morgan Securities thinks most other manufacturers “will feel the need to match Toyota aggressively,” without speculating how long the higher spiffs would last.

Addiction continues

George Magliano, director of North American auto research for IHS Global Insight, says the industry “is back on drugs” until the general U.S. economy starts a general recovery, which he considers unlikely before the second half of the year.

Patel noted that March sales are helped by better weather. Heavy snow in much of country slowed retail traffic in February.

Edmunds.com CEO Jeremy Anwyl thinks the sales flurry will begin to moderate later this month.

“We shouldn’t view this as a sign that the economy is recovering. This sales bounce is driven by incentives,” he said. “Take away the incentives and the sales will slow dramatically.”

Chevrolet goes digital at Texas tech-fest

Chevrolet has affixed QR codes on the hoods of cars that, when photographed with a camera phone, will launch microsites with features info.

Chevrolet is making a big splash at the South by Southwest Interactive conference now taking place in Austin, Texas, and it's just the beginning of the GM brand's planned 30 percent commitment to digital this year.

"This is not a nine-day one-off," said Christopher Barger, General Motor Co.'s director of social media. "Everything we're doing here needs to have applications we can build on beyond Austin."

This program is one of the first major social-media and technology campaigns from a Detroit Three automaker other than Ford Motor Co. since the industry took a nosedive in 2008.

But Barger said Chevy's social-media, augmented reality and mobile programs at the conference are not intended to steal the digital-savvy spotlight from Ford. Instead, they're test pilots for Chevrolet, which Barger said plans to commit about 30 percent of its marketing money to digital this year.

Chevrolet is launching an extensive digital campaign at the music, film and interactive festival, including a tie-in with Austin-based Gowalla, where users check in from their phones around the city to get messages and offers from the GM brand. For example, those flying into Austin can check in at the airport for a free ride downtown in a Chevrolet Equinox.

"The reason we're doing this here is so really smart tech people can make suggestions," Barger said of the swarms of digital agency and technology people that descend on Austin every March. "This is a place for us to learn. How do we apply this to the rest of the marketing we'll be doing moving forward?"

Chevrolet has also affixed QR codes on the hoods of cars that, when photographed with a camera phone, will launch microsites with features info. Chevy has also released the iReveal app to view three-dimensional, augmented reality models of cars on the streets of Austin. While none of these programs -- save free rides from the airport -- sound revolutionary, the moves mark a start for an automaker that has fallen behind Ford on digital innovation.

Barger said that while GM has kept its eye on Ford like any company does with a competitor, it's not looking to emulate what Ford has done in social or digital media.
"If really all you're doing when building a strategy is looking to what others have done, you're not going to be successful," he said of GM's plans for digital vis-a-vis Ford. "You need to draw attention to your own brand and find something unique to you."

Chevy has also handed out eight cars for teams to road trip to Austin from all corners of the country, while completing missions determined by Twitter followers along the way and tracking their progress through OnStar and Facebook, though the idea to put people in a car and have them document their experience through social media bears some resemblance to Ford's Fiesta Movement.

BMW to make their smaller cars FWD, CEO says

BMW AG is working on a new front-wheel- and four-wheel-drive vehicle architecture that will underpin a new range of entry-level BMW cars as well as next-generation Mini models.

“There will be front-wheel-drive BMWs in the smaller vehicle classes in the future,” BMW CEO Norbert Reithofer (pictured) said at the company's annual financial results press conference here today.

Currently, all BMW models are rear-wheel drive and all Mini variants are front-wheel drive.

BMW development boss Klaus Draeger said the new vehicle architecture will debut in 2014 with the arrival of the third-generation Mini hatchback.

He said the new architecture will enable BMW to produce a range of vehicles that are between 3800mm and 4300mm long. By comparison, Volkswagen's Fox, Polo, Golf, Beetle and Scirocco model lines fit within the same size range, which covers everything from minicars to subcompacts to compacts.

Sources said that at its peak the new architecture will underpin up to 20 different BMW and Mini model variants.

For BMW, the new front-wheel-drive models will fit below its entry-premium 1-series models, which Draeger said would keep their rear-drive architecture.

BMW needs to meet a growing demand for smaller, more fuel-efficient cars. The company also will have to cope with tougher European CO2 emission rules that start to take effect in 2012.

Reithofer said: "We expect the premium small car segment to grow by 4-6 percent annually until 2020," adding that the group would cut its CO2 fleet emissions by at least 25 percent by 2020 versus 2008 levels, when they were 156 grams per km.

The decision to create a new joint architecture is also a sign of the times. Automakers are under increasing pressure to share investments between brands or with partners to save money.

Obama Motors in Russia Doing Well

Opel workers demanded reassurances that its European brand will not be disadvantaged at the expense of sister brand Chevrolet, after Opel lost responsibility for the Russian region to an Asian arm of General Motors Co.

GM transferred responsibility for Russia to GM International Operations (GM IO), based in Shanghai, sparking fears that Opel could lose access to a key growth market that almost overtook Germany by size in 2008, before collapsing last year.

Opel labor representatives will discuss GM's plans on Monday at a meeting of the Opel steering committee.

"General Motors has not given any thought about what negative effects this decision could have on the negotiations of Opel/Vauxhall with the European governments, since Russia plays a decisive role as a market of the future," unions warned in a flyer to staff obtained by Reuters.

Opel workers will "demand a convincing plan for the Russian business of Opel/Vauxhall be presented (that entails) no restrictions to the market and a further expansion of the sales activities," works council members wrote.

A spokesman for Opel said the decision was made to consolidate key sales and manufacturing operations in Russia and the Commonwealth of Independent States under one managerial roof. The measure would not be to the detriment of Opel, he added.

Nonetheless, German auto workers union IG Metall fears German jobs could be threatened down the line and demanded that GM commit to expanding, rather than limiting, Opel's sales in Russia.

Jilted Opel suitor Magna International Inc. had centered its growth plans for the German carmaker around the Russian market, before GM chose to retain, rather than sell Opel.

Based in Shanghai, GM IO is considered by German unions to be a proxy for the lower priced Korean-built Chevrolets that had earned higher margins than Opel.

A recent decision to build a small SUV in Korea rather than Antwerp, Belgium, was a blow to the Belgian plant, which GM has said will close in the middle of this year to reduce European overcapacity. The Korean plant already makes the Opel Antara mid-sized SUV.

Opel closes 2 key deals

In a separate development, Opel said it reached a deal with unions in Spain over 900 job cuts, a precursor for government aid. The local state of Aragon is expected to provide 200 million euros alone should it approve plans for production in the Zaragoza plant.

Great Britain said on Friday it would provide a 270 million pound loan guarantee to GM, but the U.S. carmaker is still seeking about 1.5 billion euros ($2.07 billion) in state aid from European governments.

"Today marks an important step for the future of Opel/Vauxhall," Opel CEO Nick Reilly said in a statement, thanking the British government for its support.

"I am also grateful for the Spanish government's role in moderating the discussions between management and unions resulting in the important agreement reached early this morning," he added.

Negotiations with Germany remain particularly sluggish, with Berlin's economics ministry saying on Friday GM has yet to update its application for government funding ever since Detroit tripled its commitment to fund Opel's operations.

Electric Modles expected to make up 5% of Audi's Car Sales

Audi A1 e-tron

GENEVA – About 5 percent of Audi's new-car sales could be electric models in 10 years, the brand's technology chief Michael Dick said.

At the Geneva auto show last week, Audi unveiled the A1 e-tron, a nearly production-ready concept developed from its new A1 subcompact.

The A1 e-tron is the third electric car concept from the German brand. Audi unveiled larger e-tron cars at the Detroit auto show in January and in Frankfurt last year.

Audi has already said it will bring an e-tron sports car to market in 2012. A prototype will soon be tested and Audi will head into intensive trials with three to four vehicles by the end of the year, Dick said.

Audi's management board hasn't officially made a decision on the A1 e-tron, but it's very likely that the concept will be built, Dick told Automobilwoche. He expects a three-year development period.

The range of the 102-hp A1 e-tron is about 50km in city traffic. A small single rotor Wankel engine achieves an additional range of 200km. When needed, the engine charges the lithium ion battery like a generator.

Audi is developing components and systems that could also be used in smaller electric cars. For example, the battery cell is the same for both the A1 and a larger e-tron sports car concept.
Dick said that, with its e-tron range, about 5 percent of Audi car sales could be electric models by 2020.

Pininfarina, Bollore aim for autumn launch of electric car

An electric car developed by Italian design and engineering company Pininfarina S.p.A. and French financier Vincent Bollore may be available by autumn.

The two European firms initially will aim the Bluecar at fleet customers such as rental car companies and start private sales later. The car will be available as soon as this autumn, depending on the results of crash tests, Bollore said at the Geneva auto show.

Bollore, head of the Bollore group, said two battery plants that have recently been inaugurated in France would each have an annual production capacity of 15,000 30 kWh batteries per year by 2013.

"With this capacity we can make 30,000 Pininfarina cars or 10,000 buses, or 60,000 small urban vehicles," Bollore said. "Our objective is a mix of the three," he said.

Pininfarina CEO Silvio Angori said he expected to ship 2,000 of the electric cars in 2011.

Bollore is throwing its weight behind lithium-metal-polymer batteries -- a different technology from the lithium-ion batteries other carmakers are using.

Bollore said support from Italian banks for Pininfarina meant the Italian company was free from problems. Angori said the group's net loss would narrow markedly this year.