02/06/2005 - GM, Ford Sales Fall as Asian Brands Gain (1)

The U.S. automotive scene changed little in May: General Motors Corp. and Ford Motor Co. again reported decreased demand for their vehicles, particularly trucks and SUVs, while Chrysler Group and Asian brands generally posted positive results. To make matters worse for GM and Ford and their suppliers both automakers said Wednesday they plan to cut third-quarter production because of sluggish business. The cuts are sure to hurt the companies' bottom lines. George Pipas, Ford's top sales analyst, said May was a weak month for the industry, especially compared to last year. The seasonally adjusted annual sales rate for May was 16.6 million vehicles, down from 17.7 million last May. The rate indicates what sales would be for the full year if they remained at the same pace for all 12 months. Full-year sales for 2004 were about 17 million. "The consumer appears to have taken a little pause," Pipas said. "The Memorial Day weekend was pretty strong, but it didn't outdo the month-end reporting of a year ago." GM and Ford, the nation's two biggest automakers, saw sales slip again in May as customers continued to turn away from their sport utility vehicles and trucks in favor of models from Asian competitors. The traditional Big Three automakers saw truck sales slip 4.4 percent in May, while Asian automakers saw comparable sales rise 6.9 percent. GM's car sales fell 1.6 percent and truck sales slid 7.8 percent for the month compared with May 2004. GM's sales are now off 5.2 percent for the year. GM hopes that will change next month, when it offers consumers the chance to buy vehicles at the discount rate normally reserved for employees. "Our challenge in the marketplace is breaking through with consumers," said Paul Ballew, GM's executive director of global market and industry analysis. "Our products are better than they are perceived." At Ford, the No. 2 carmaker behind GM, new vehicle demand fell for the 12th straight month. Truck sales were down 6.4 percent, and total sales slipped nearly 3 percent for the Ford, Lincoln and Mercury brands. Ford's U.S. business is off 4 percent for the first five months of the year. There were some bright spots for domestic automakers. DaimlerChrysler AG's Chrysler Group said car sales rose 13 percent and truck sales were up 3 percent for the month. The Chrysler 300 sedan and the Chrysler Town and Country minivan helped the Chrysler brand set an all-time monthly sales record, the company said.

02/06/2005 - GM, Ford Sales Fall as Asian Brands Gain (2)

Ford's Mustang coupe had its highest May sales since 1980, up 47 percent from last May. But that blistering pace will likely subside in June, Pipas said, because the company can't keep up with demand. GM's Cadillac division also enjoyed its best sales month in 12 years. The news for Asian automakers was generally good, though results were lower than the double-digit increases some companies saw in April. Toyota Motor Corp.'s sales rose 7.8 percent last month, dragged down a bit by flat truck sales. Overall sales for the automaker are up 11.9 percent for the year. Korean automaker Hyundai Motor Co.'s truck sales are up 23 percent for the year thanks to its new Tucson SUV, which had a record sales month in May. Hyundai's sales gained 8.5 percent for the month and 12.5 percent for the year. Nissan Motor Co.'s truck sales are up 27 percent for the year, led by the Armada SUV. Nissan's sales jumped 15.5 percent in May and are up 15.8 percent for the year. "We're getting on people's shopping lists for the first time" in the SUV segment, said Jed Connelly, Nissan North America's senior vice president for sales and marketing. Honda Motor Co. saw a 19 percent decline in its aging car lineup. But its trucks, including the new Honda Ridgeline pickup, saw a 14.3 percent increase over last May. Honda's sales are up less than 1 percent for the year. Sales percentages are adjusted for differences in the number of selling days. There were 24 selling days in May 2005 and 26 in May 2004. GM, the world's largest automaker, said it plans to cut third-quarter production by more than 100,000 vehicles, or 9 percent. Ford, meanwhile, said it plans to trim third-quarter production by 17,000 vehicles, or 2 percent. Auto suppliers, already pinched by high steel prices, have been struggling with the cuts all year. GM cut production by around 10 percent in the first and second quarters, and Ford cut production by 10 percent in the first quarter and nearly 5 percent in the second quarter. Pipas said the cuts will help the automakers adjust their inventories and predicted that production will stabilize in the second half of the year. GM shares fell 14 cents to close at $31.39 on the New York Stock Exchange. Ford shares fell 6 cents to close at $9.92 and Chrysler shares gained 30 cents to close at $40.59.

02/06/2005 - Sales: Detroit Down; Tokyo, Seoul Up

The pace of new car sales slowed perceptibly during May despite strong showings by Toyota and Nissan, which continued to gain market share at the expense of General Motors Corp. and Ford Motor Co. GM confirmed plans for a broad new incentive program as its sales dropped 5 percent, while Ford Motor Co. sales dropped 11 percent. Chrysler Group said its sales increased 6 percent when adjusted for the daily sales rate. Both GM and Ford officials acknowledged that the continuing decline in the sales of traditional SUVs has contributed to the drop in market share. "You see some fairly large declines among the sport-utility vehicles," said George Pipas, Ford sales analyst. "The pendulum of consumer preference is swinging in favor of smaller SUVs, crossovers, hybrids, and passenger cars," said Jim Press, TMS executive vice president and chief operating officer. Nissan, which showed strength across the board, posted a 15.5-percent sales increase, while Toyota, the largest Japanese manufacturer, reported a 7.8-percent increase in sales despite soft SUV numbers. Toyota has now sold more than 200,000 units in each of the last three months and its total will push past the one-million-unit mark by the middle of June.

31/05/2005 - New Steering Wheel Detects Alcohol

A Florida inventor has developed a new steering-wheel-mounted sensor that could be used as an interlock to prevent drunk driving. The Associated Press reports that 54-year-old Dennis Bellehumeur has designed a $600 sensor that can detect the presence of alcohol in a driver's skin, and can prevent a vehicle from starting or driving if the driver is over the legal limit. The inventor spent 12 years working on his project after a teenage son of his suffered minor brain damage in a drunk-driving incident. Bellehumeur received his patent for the device this month, the AP reports, and hopes it will find its way into vehicles to prevent more accidents. The NHTSA estimates that about 40 percent of U.S. road fatalities are linked to alcohol.

16/05/2005 - Toyota Earnings Fall

Toyota's earnings dropped 17 percent in the quarter that ended March 31. The decline left the Japanese auto giant with a net income of $2.8 billion for the quarter, while quarterly sales increased 4.2 percent to $46 billion. The heavy investment in new production plants in various parts of the world limited the growth in the company's income. For the full fiscal year just ended, Toyota's net income increased 1 percent to a record $11 billion, while sales climbed 7.3 percent to $176 billion. Toyota's total sales of cars and trucks increased 10.3 percent to 6.7 million units, with what was described as steady growth in markets such as Japan, North America, Europe and the rest of Asia outside of Japan. The company's sales are now expected to rise by more than 1 million units to 7.85 million units by the end of the current fiscal year in March 2006, Toyota officials said.

11/05/2005 - Toyota Earnings Fall

Toyota's earnings dropped 17 percent in the quarter that ended March 31. The decline left the Japanese auto giant with a net income of $2.8 billion for the quarter, while quarterly sales increased 4.2 percent, to $46 billion. The heavy investment in new production plants in various parts of the world limited the growth in the company's income. For the full fiscal year just ended, Toyota's net income increased one percent, to a record $11 billion, while sales climbed 7.3 percent, to $176 billion. Toyota's total sales of cars and trucks increased 10.3 percent, to 6.7 million units, with what was described as steady growth in markets such as Japan, North America, Europe, and the rest of Asia outside of Japan. The company's sales are now expected to rise by more than one million units, to 7.85 million units, by the end of the current fiscal year in March 2006, Toyota officials said.

11/05/2005 - GM Recalling Mid-Size SUVs

Turn-signal problems on GM's mid-size SUVs will compel the car company to recall more than 300,000 vehicles, GM said on Tuesday. A flaw in the indicator could light both sets of front and rear turn signals at the same time, signaling a hazard instead of a change in direction, which could lead to an accident. GM says no accidents have been reported from the problem, however. The vehicles in the recall include the 2003-04 Chevrolet TrailBlazer/GMC Envoy/Isuzu Ascender/Oldsmobile Bravada quartet, as well as the 2004 Buick Rainier. Nearly all the vehicles involved were sold in the United States.

10/05/2005 - GM Dismisses Toyota Techno Pact

The Associated Press reported late Sunday that General Motors has denied talking to Toyota Motor Corp. about a hybrid-technology swap. Over the weekend, the wires were humming with news about a possible GM-Toyota tie-up that would give GM access to current Toyota hybrid technology while granting Toyota access to the hybrid system GM is working on with DaimlerChrysler. The reports, posted on the Wall Street Journal Online, said GM chairman Rick Wagoner was headed to Tokyo at the end of the month for negotiations. A GM spokesman told the AP that such talks were not the purpose of the trip.

10/05/2005 - GM Looks for Help Outside Detroit

General Motors executives have been quietly looking for help outside of Detroit to turn around the company's fortunes, which sank further after another dismal sales report in April and the reduction in the company's credit rating. The Financial Times reported that Richard Wagoner, GM's chairman and chief executive officer, has been meeting with members of the U.S. House of Representatives in an effort to enlist support for changes in the healthcare system. In addition, according to the Times, Wagoner also complained about the Japanese government's campaign to limit increases in the value of the yen. GM's argument is that while the Japanese government hasn't directly intervened to limit the increase in the value of the yen since the end of 2003, its vague threat of intervention has kept the yen priced below its true market value. GM wants even the threat of intervention removed for good so the yen can float to a higher level, the Times account suggested. The disclosure of GM's activity on Capitol Hill also provides some important context for the cryptic comments from top executives at Toyota about raising prices to help GM. Toyota executives clearly had gotten wind of Wagoner's comments and decided to launch a pre-emptive strike of sorts before GM's campaign picked up momentum.

08/05/2005 - Nissan to Assemble Light Trucks Locally

One of the oldest Japanese car manufacturers, Nissan Motors, will begin assembling the “Pickup” a lightweight truck, in Egypt. It will be the first model to be produced and sold under Nissan’s direct management in Egypt. The Pickup will be assembled at the automaker’s expanded and refurbished plant in Sixth of October City. Nissan Egypt plans to add more models to the assembly line, including several passenger cars. From 1997 until mid-2004, Nissans were assembled in Egypt through a partnership deal with local companies. In June of last year, the company took charge of its assembly line and infused another $60 million into the plant.

05/05/2005 - Nissan Adopts Cost Cutting Plan

Nissan is going to be really using the potential offered by markets like China, Thailand, India, Egypt, and Brazil. One example is our Huadu Plant in Guangzhou, China, where we're establishing production capacity of 270,000 cars. The cost of investment at this plant is half the cost in the U.S. This isn't because it's less automated or the quality is low. The quality is equivalent to the top level within Nissan. (BW)

04/05/2005 - GM, Ford Down Again in April

Sales from the Big Two inDetroit slid once more in April, as GM and Ford saw big sport-utility vehicles lose market share. For the month, sales of new cars and trucks checked in at an annualized pace of 17.46 million units, up strongly from April 2004's 16.6 million unit pace and up 1.8 percent from March. General Motors saw its sales fall 7.7 percent, behind a 17.2-percent drop in truck sales; the world's largest automaker had a 7.9-percent increase in car sales. At Ford, sales fell by 5.1 percent, with car sales sagging 2.4 percent and truck sales, 6.4 percent. Up in Auburn Hills, Chrysler's sales rose 5.2 percent on the strength of its minivans and 300/Magnum. Japanese carmakers continued their strong gains, with Toyota checking it at a 21.3-percent sales increase and a 36-percent rise in car sales; a 27-percent improvement at Nissan was led by double-digit increases in both cars and trucks, and Honda's sales rose 13.6 percent. Toyota's market share in April was 13.3 percent, while Chrysler's rose to 14 percent. GM took 25.4 percent of the U.S. market, while Ford held on to 18 percent.

03/05/2005 - Nissan to Start Truck Production, Increase Imports

Nissan Motor Company, Ltd. will begin local production and sales of pickup trucks. This will be the first vehicle to be manufactured and sold under Nissan’s management in Egypt, which Nissan plans to use as a base of operations for MENA. According to Nissan’s vice president in charge of marketing and sales for the Middle East, Africa, Latin America and the Caribbean, the pickup is “ideally suited to local customers and will contribute to enhancing Nissan’s presence in this market.” Nissan is enacting a new three-year business plan, entitled NISSAN Value-Up, by which Nissan plans to increase its global sales to 4.2 million vehicles while retaining a 20% return on invested capital. The new trucks will be built at Nissan’s renovated factory in 6th of October City; Sales started in early April 2005. The expanded facility has a yearly capacity of 17,000 units. In addition, Nissan plans to manufacture passenger cars and sport utility vehicles (SUVs) in the future. As for imports, Nissan has started to bring the 1.6-liter Sunny sedan into the country, and has plans to introduce the X-Trail SUV sometime this summer. All imports are conducted under Nissan Import Egypt Ltd. (NIEL), a new subsidiary. (BT)

03/05/2005 - GM Egypt Looks Back on a Quarter Century of Expansion (1)

The quiet atmosphere prevailing in General Motor’s (GM) Zamalek office in Aboul Feda overlooking the Nile seems to suit its five-year leader. Entering his conference room in a calm and welcoming way, Chairman and Managing Director Dan McCarthy immediately strikes visitors as being of mild demeanor, with a ready smile and a friendly face. His journey with GM, which finally landed him the post of chairman and managing director in Egypt, began a long time ago. With a B.S. from Ohio State University followed by a Master’s degree in business administration, McCarthy’s 40-year history with GM started even before he graduated from college in 1965, when he was still a student interning with GM in the summer. His long tenure with GM has in no way deprived McCarthy of change and diversity throughout his career. “Interestingly enough, it’s not like being in the same job forever; actually, the job that I have had in Cairo this time [five years] is the longest I’ve had one single job,” he says. He will be retiring from the auto industry early this month. McCarthy was no stranger to Egypt when he was sent to lead GM’s subsidiary in 2000. As the company was establishing itself in Egypt in 1983, he had taken part in the factory-building initiative in Sixth of October City. Appointed factory manager for three-and-a-half years, he became well accustomed to Egyptian work culture through staff hiring and training an experience he remembers with much fondness and pride. The government treatment of the auto industry, however, has changed greatly in the interim. In the past 22 years, the automotive industry has lost much of its protectionist tariff infrastructure. “We were the first private automotive company to establish assembly and manufacturing operations in Egypt,” McCarthy says. “Since then the doors have opened and many more people have come into the auto industry in terms of manufacturing.”

03/05/2005 - GM Egypt Looks Back on a Quarter Century of Expansion (2)

Back in 1983, competition was from local players, so the more closed market posed fewer competitive challenges for the then-new GM entrance. With a current overall market share of 26%, McCarthy says that the late ’90s brought the advent of a tighter market. “Our market share is going up [again],” he says. “We had higher market share when there was less competition, and today with the tariff barriers coming down and with other competitors in the market manufacturing and importing, [the industry] is proving to be much stronger.” McCarthy’s last year in the industry was marked by record sales for GM Middle East in 2004, with 88,852 units sold in the region, an increase of 55% from 2003. The first quarter of 2005 has not been bad either, with an impressive 22,000 units sold, a 35% jump from the same period in 2004. Egypt, however, still remains a relatively small market for GM in comparison to some of its Middle Eastern neighbors like Saudi Arabia and Oman, which witnessed 47% and 73% sales growth respectively in the first quarter of 2005 compared to the same period in 2004. GM Egypt has been struggling with the issue of volume. “The auto industry is an industry of volume, it’s capital intense, it takes a lot of money and therefore you need to produce a lot of vehicles,” McCarthy says. Typically in the US, Europe or Japan, building a new assembly plant would imply 250,000 vehicles a year; however, in the past years in Egypt, the whole market has been absorbing somewhere in the range of 60,000 to 70,000 vehicles a year, making it too small a market for its nine GM assembly plants. While GM has average yearly truck sales of 15,00017,000 units, he hopes to see an increase in car sales from the current 3,000 to 4,000 average. “We have been profitable in the first quarter of 2005,” he says. “However, we’ve been profitable all along, but they have been declining profits. The returns have been very low and not high enough to sustain increased investments. Many people in the auto industry haven’t felt the effect of the improving economy. But I think it’s the beginning of an increasing market in Egypt.” He attributes consumers’ delayed reaction to tariff reductions to their wariness, as they wait to see if auto prices drop even further.

03/05/2005 - GM Egypt Looks Back on a Quarter Century of Expansion (3)

Concerning Egypt’s potential to export locally-made products, McCarthy remains cautiously optimistic. Opportunities in auto export in the Common Market for Eastern and Southern Africa and within the Arab Free Trade Agreement countries have been meager up until recently, but with assistance from the Ministry of Foreign Trade, McCarthy is hoping the market will open up quite a bit and trade barriers will go down. “It’s just really beginning,” he says. “The export opportunities have been opening up in the last several years. It’s advancing sometimes slowly, not as fast as we would like and sometimes we have to go push. Some countries have lists of products that are not on the free trade agreement, and so we sometimes have to work with the Ministry of Foreign Trade and Industry to go back and open those doors.” Assuming his director post during the economic recession of 2000, McCarthy’s experience in the Egyptian market has been no smooth ride. With the auto industry being reflective of the state of the economy, stunted economic activity meant bad news for truck sales. “For GM, sales in cars and trucks don’t go in tandem. 2003 was an unusual year because that was the year of the devaluation of the pound and yet sales went up on passenger cars but not trucks.” Figures show a 10% drop across the market in truck sales. On the passenger car side, people bought ahead before prices rose even further to at least own a tangible asset, but McCarthy says with a smirk that he doesn’t think it was too wise an investment.

03/05/2005 - GM Egypt Looks Back on a Quarter Century of Expansion (4)

GM trucks are made up of more than 70% local content according to GAFI (General Authority for Investment and Free Zones) standards, but engines and transmissions along with some of the more sophisticated parts are still imported. The components industry, however, is of concern to GM, and the Ministry of Foreign Trade has recently designated GM as a consultant to assist local manufacturers to increase quality. The GM chairman is a strong proponent of the new government’s fast-moving customs and tariff reforms, along with the Central Bank’s monetary policies that have brought stability to the financial markets and foreign currency. “A lot of people are arguing that the government is going too fast, but the world is going too fast,” he says. “Look at Dubai, Jordan and Turkey, they’ve made these changes in customs and consumer protection laws and tax rates all things Egypt has done or is in the process of doing. We need to look elsewhere and say it’s not just Egypt, but us competing with other countries.” He hopes that more will be done to make vehicles more affordable to lower-income consumers with retail financing and vehicle leasing, once banks are more regularized. He draws comparisons with countries in South America that have similar populations and GDP per capita and are capitalizing on leasing and financing services. “We need to get some of the old products off the road,” he says, laughing heartily. “That sounds like a pitch for selling more cars but it’s not, we do need to update to have more modern anti-pollution vehicles.” As an unhealthy influence on both nature and other cars on the road, pollution is constantly on McCarthy’s mind, and he is encouraged by government initiatives aimed at reducing pollution, like the introduction of new taxis. With pollution rates emanating from vehicles decreasing over the past 25 years by a staggering 95% worldwide, GM is working on hybrid and fuel-cell technology vehicles in particular, which company executives think will be the key technologies of the automotive future. In a fast-changing, dynamic auto industry, where changing political and economic trends are felt directly, McCarthy seems to absorb matters with quiet practicality. And what about retirement plans? With the smile of a man who feels he has given the organization his all, McCarthy says he has no formal plans for retirement but that he counts on splitting his time between Europe in the summertime and Florida in the winter, along with some in-between traveling. Having moved quite a lot throughout the years to countries like Iran, Kenya and New Zealand, McCarthy still retains an appetite for further travel.

26/04/2005 - Egypt: Nissan Motor starts production, sales of Pickup commercial vehicle

Nissan Motor Co., Ltd., announced the start of production and sales of the Pickup commercial vehicle in Egypt. As the first model to be produced and sold under Nissan’s direct management in Egypt, the Pickup marks the start of the company’s plan to establish Egypt as an automotive industrial base for the Middle East and North Africa. “We are excited to begin our operations in Egypt with the Pickup,” said Shoichi Miyatani, Nissan vice president in charge of marketing and sales for the Middle East, Africa, Latin America and the Caribbean. “This model is ideally suited to local customers and will contribute to enhancing Nissan’s presence in this market. From this base, we believe we have great potential for future growth, not only in Egypt, but throughout this region.” Miyatani added that the expansion of Egyptian operations supports Nissan’s performance under its new three-year business plan, NISSAN Value-Up. Under the plan, which began on April 1, Nissan aims to grow its global sales to 4.2 million units, maintain a top-level operating profit margin among global automakers and maintain a 20% return on invested capital. The Pickup is being built at Nissan’s expanded and refurbished manufacturing plant at 6th October Industrial City, 40 kilometers west of Cairo. Sales began early April. Nissan plans to add more models to its production lineup in the future, including passenger cars and sport utility vehicles. Nissan has also started importing the new 1.6-liter Sunny sedan from Japan for the local market. In the summer, Nissan will also begin imports of its popular X-TRAIL sport utility vehicle. Nissan’s imports for Egypt are handled by Nissan Import Egypt, Ltd. (NIEL), a newly established subsidiary. Sales are being handled through Nissan Marketing & Distribution Egypt, S.A.E. (NMDE), also a newly established company. The Sunny went on sale earlier in April. Mitsuji Sato is chairman and managing director of NMDE, as well as Nissan Motor Egypt, S.A.E., Nissan’s assembly operations in Egypt. Total industry sales in Egypt amounted to 70,335 units in calendar year 2004, up 12% compared with the previous year. Nissan began manufacturing operations in Egypt in 1997 through a local, privately owned company. On June 28, 2004, Nissan announced it would take direct control of its manufacturing operations in Egypt by investing $60 million to buy out the manufacturing facility at 6th October Industrial City, refurbish and expand the plant, and enhance its sales, marketing and distribution operations in Egypt. The newly refurbished plant at 6th October Industrial City has an annual capacity of 17,000 units per year. All of its facilities -- including the body, paint, and trim and chassis operations -- have been upgraded. The plant employs 245 people. By 2010, Nissan’s investment in Egypt is expected to rise to more than $100 million as the company expands its operations in the country. (al ahram)

26/04/2005 - GM Recalls 2 Million Vehicles

General Motors will recall about 2 million vehicles, including about 1.5 million sport-utility vehicles and trucks, mostly for problems with seatbelts. The list of vehicles affected in the recall includes the Chevy Silverado/GMC Sierra crew-cab models; the Suburban/Yukon/Tahoe/Avalanche/Escalade/EXT family of utes; and the HUMMER H2. The seatbelts in the center second-row seat settle in the wrong position, and could injure passengers in a crash, though no injuries have been reported. In other recalls, GM will bring back more than 330,000 Suburban/Yukon XL utes for fuel pumps that could have wiring that overheats, leading to stalling; about 142,000 Silverado/Sierra 1500 trucks from 1999-2002 model years and 2001-2004 2500/3500 heavy-duty trucks with manual gearboxes, which have faulty parking brakes; about 69,000 Buick LaCrosse/Allures, for bent brake clips that could result in a loss of braking power; more than 39,000 Buick Rendezvous/Pontiac Aztek crossover vehicles from the 2004 model year, which have faulty ignition relays; and more than 22,000 2002-2004 Saturn L-Series wagons, which have seatbelt anchors that do not meet U.S. and Canadian standards. All the problems will be fixed free of charge.

24/04/2005 - Egyptian Automotive Market : Current status (1)

Since dramatic cuts in tariffs were announced as part of a larger package of customs reforms last September, there has been growing optimism in the automotive industry that a long-awaited sales boom is around the corner. That’s why importers and local assemblers alike aren’t so much loudly bellowing for reform today, the way they have for the past decade, as they are bemoaning the fact that advocates of trade liberalization and industrial reform in the Nazif government have yet to lay out a clear timetable for what reforms will hit their sector and when. If that refrain sounds familiar, it’s probably because it is: Those same complaints have been echoed at every industry committee meeting for the past four months or so, whether you’re talking about gatherings at the Egyptian Federation of Industries or the American Chamber of Commerce in Egypt. The government’s answer, generally delivered by Minister of Industry and Foreign Trade Rachid Mohammed Rachid, is usually the same: Hold on we’ll get to you eventually. Still, for first time in recent memory, automotive industry players have something for which to be thankful. As part of the package of customs reforms announced in September, the Cabinet slashed duties on imported cars (called completely built up vehicles more on the jargon in a moment) with engines in the 1.3 to 1.6 liter range from 104% to a mere 40%. The move cut the average retail price of a car in that range by approximately LE 25,000. Tariffs on cars with engine capacities of 1.6 liters and above remain subject to 140% duties. While most readers of this magazine may be taking that hit directly to their wallets, the average person hardly notices: sales of cars with engines 1.6 liters and larger account for only 10% of the domestic market, making it easy for the government to consider them, like liquor, to be luxury goods. If you can afford a car that large, the reasoning goes, you can afford to pay 140% duty on it. While clearly hoping for more, local industry players, who either solely import or for whom imports are a component of a mixed import-and-assembly business, welcomed the change in the hope it might further spur a recovery in sales that began at the end of 2003 and roared to life last year. “This government has made the best decision [that has] ever been taken for the last 20 years. The liberalization of commerce and trade, especially for the automotive domain, is the key point for reviving the Egyptian economy as a whole,” says Raafat Masrouga, general manager or Toyota Misr for Trading and marketing manager for Toyota Egypt Group. As an importer of CBU cars, Toyota Egypt stands to gain considerably since the tariffs impact the very mid-size cars it is flogging on the local market.

24/04/2005 - Egyptian Automotive Market : Current status (2)

Before we go much further, a note on terminology is in order. So far as leading manufacturers are concerned, cars come in only two “macro” types, regardless of how many doors they may have or what size engine sits under the hood: CBU and CKD. A CBU, or Completely Built Up, vehicle is one shipped in from abroad in one piece, immediately ready for retail. All an importer of CBU vehicles needs to do except, of course, have a competent after-sales service department with access to approved spared parts is order the car, have it shipped, clear it through customs, get it to the point of sales and kick off a marketing campaign. For a pure-play CBU importer such as Toyota, there’s no need for a multi-million-pound assembly line or the staff to run it. In contrast to CBU imports, Completely Knocked Down products are international brands assembled locally with at least 45% locally manufactured component parts as mandated by local content laws designed to prop up the domestic parts industry, a holdover from the economic nationalism of the Nasser era. The imported parts, already cheaper because they are produced in bulk abroad, tend to be the most precisely engineered parts of the car, including engines and frames. Counted as spare parts, these components fall under a considerably lower tariff bracket than CBU cars; after the cuts last September, the rate stands at 12%. The local content in a CKD car assembled in Egypt comes from the domestic auto parts feeder industry, which supplies relatively low-tech components ranging from fans, headlights and mirrors to brakes and tires. While importers and local assemblers account for the lion’s share of the car market, a handful of national largely state-owned companies still compete in the market producing low-end vehicles from largely local components as well as commercial vehicles. Leaving national companies such as El-Nasr aside, most major auto industry players then fall into one of three categories: pure-play importers (who only import CBU vehicles), pure assemblers (who only produce locally assembled vehicles based on CKD imports) and mixed importer-assemblers. Naturally, the three categories have often-competing political interests. Until last September, assemblers were sheltered by and often allowed inefficiencies to grow behind high tariffs on CBU imports of all shapes and sizes. Assemblers traditionally lobby for high tariffs on CBU vehicles and lower tariffs on the parts they need to survive. CBU importers, by contrast, have long lobbied for cuts to import duties in line with Egypt’s obligations under the World Trade Organization’s General Agreement on Tariffs and Trade (GATT). Importer-assemblers have tried to straddle the fence, benefitting from the best of both worlds. “When anybody wants to discuss automotive trading, others from the same field with their interest in industrialization, the growth of the Egyptian automotive industry put more pressure on the government to delay reforms,” says Masrouga. “They have the power and the voice to talk about any effort right [to] the trading pace of the Egyptian automotive industry. But I think the new government in taking this step; it has taken the first step in the 1000 mile trip.”

24/04/2005 - Egyptian Automotive Market : Current status (3)

Although spurred more by growth at the higher end of the market as a result of generally better economic performance last year than by September’s tariff cuts, 2004 was a good year for importers and local manufacturers alike. According to the Automotive Marketing Information Council (AMIC), an industry body representing both manufacturers and importers, sales of passenger cars rose by 7.8% between 2003 and 2004, rising from 52,373 to 56,464 units. The growth rate for 1.5-1.6 liter passenger cars underscores the effect of the tariff cuts: The rate climbed from 28% in 2003 to 35% last year. For the market year 2003-2004, the number of total vehicles sold (a figure that includes passenger as well as commercial vehicles) jumped from 70,834 to 73,698, a 4% increase. (See accompanying charts for more sales figures.) The turnaround is particularly impressive in view of the consistent drop in sales from 1998 to 2002, which came as a result of recession, the devaluation of the Egyptian pound against the US dollar and high tariffs, all of which made imports prohibitively expensive. The outlook for this year remains mixed. While the September tariff cuts increased sales opportunities for those assembling 1.6 liter or smaller vehicles in Egypt, but companies dealing only with imported vehicles in that range such as Toyota are temporarily struggling to keep pace. Most consumers were relieved to hear of the cut in duties, but in the first month after the announcement was made, many prospective buyers decided to wait and see whether the Nazif government would reduce tariffs further or cut duties on cars with larger engine displacements. With the money available for them to buy, for example, a car with a 1.3-liter engine, many buyers found they were suddenly able to move up to a 1.5 or 1.6 liter car for the same price; and many were hoping for more. “Local manufacturers have a golden opportunity, [at the moment] because when the custom duties were [cut], importers like us needed time to import [units at the new duty rate],” says Masrouga. “So the local producers have more profit for the moment. I think the market share for Daewoo and Hyundai will increase more than for Toyota and the others for this reason, because importers need at least five or six months” to bring in new stock. After the period necessary for CBU importers to restock at the lower tariff, though, these businesses stand not only to make a killing but may also have the power to spark off a further round of price cuts by suddenly being on a more competitive footing with local assemblers. Orders on these new cars are already putting the imported car sector on an upswing.

24/04/2005 - Egyptian Automotive Market : Current status (4)

Daewoo and Hyundai may benefit in the short run because, like many international automakers in Egypt including luxury brands BMW and DaimlerChrysler, they both import CBU vehicles and manufacture vehicles locally and thus don’t have as large a backlog of high-tariff stock already in country. However, they will face a harder task in the long run in marketing locally manufactured cars with engines larger than the 1.6-liter limit. “I think by the lowering of the duties they have helped move Egypt a little bit in that direction [free trade] They have also lowered some duties on CKD products, which has helped a little bit here on the manufacturing end, too,” says George Oswald, CEO and managing director of DaimlerChrysler Egypt. “Of course there haven’t been any reductions or anything on that 45% [local content],” says Oswald. “So this is a little bit of a balancing act, of course, because the duty reductions on that part of the car haven’t gone down at all. We have contracts locked in, in Egyptian pounds. So, for a pretty significant amount of the car, plus your labor, your paint and everything, your assembly is all done here locally you’re all paying in pounds.” The ability to buy a higher proportion of assembled parts from abroad would provide some measure of relief for most assemblers, particularly in light of the recent strengthening of the Egyptian pound. This would ultimately make locally assembled cars more competitive with the newly available imports, even if it progressively cut local parts producers out of the picture. If the parts industry isn’t competitive enough to make up for anemic sales volumes at home by exporting, it probably doesn’t deserve to exist, many auto industry insiders say. Those who do frequently point to South Africa, where a handful of players have retooled for export and survived the drop in customs duties as the African powerhouse liberalized its trade regime in the 1990s. “If I’m buying exhaust systems, and I’m buying as part of a 300,000-a-year production run from my facility in Toledo, Ohio, I’m getting them cheaper than if I’m buying 3,000 a year here in Egypt. I mean, it’s just simple economy of scale with any item. So the fact is that if we could go back and maybe take some of the local content out of the car, that would help us a little bit on pricing, too,” says Oswald. Meanwhile, luxury brands such as BMW and DaimlerChrysler that both import and assemble are making the best of the current situation, lobbying for further cuts while retooling assembly lines to introduce new models and still selling a lower volume of pure imports at a premium. “The fact that they reduced customs on cars in the 1.599-liter category will widen the [price] gap between our cars and cars in the beginning of the luxury car category,” claims Jean Michel Juchet, BMW’s marketing vice president for the Caribbean and Africa. Mercedes Benz, a division of Oswald’s DaimlerChrysler, has already introduced an economy-sized model that would have been prohibitively expensive before the recent cuts, the Mercedes A-Class. “For us the big change is, of course, now we’re going to bring the A-Class here on the Mercedes side, which has a 1.5 liter engine, so it falls under the 40% duty category,” Oswald says. “Before September, that would not have been possible because the car would have been very expensive, with the high duty, to sell here.”

24/04/2005 - Egyptian Automotive Market: Current status (5)

A factor sure to play into the hands of importers already benefiting from cheaper small-engine vehicles is the rising price of gasoline. A more costly 92-octane form of gasoline has been introduced, which at LE 1.4 per liter is about 40% more expensive than the 90-octane variety. It is believed that the government has engineered a de facto price increase and that the 90-octane gas will be nearly phased out at a time when oil prices are topping $50 a barrel. To save on the cost of gas, consumers may move toward more fuel-efficient cars. With the increase in gasoline prices, as well as the new plan to impose standard-quality metered taxi cabs with fares starting at LE 3 and the threat of tighter regulation for the taxi trade as a whole, the government seems intent upon bringing the automotive industry and the condition of cars on the road up to par with at least the rest of the Arab world. It’s good news for everyone in the automotive sector, but industry leaders are growing restive that the pace of change is not moving faster. As the government keeps to itself any plans it may be mulling over, it effectively frustrates companies’ abilities to invest in the most appropriate areas. “From my point of view, I’d like to see some sort of plan laid out,” says Oswald, “so we know where we’re going to. What is the plan, what is the project outcome, what are the dates? Obviously, people in business don’t like uncertainty. When you have to make decisions on investments, what you’re going to do here on a local level, you like to see the governmental strategy laid out, especially in a country like Egypt, where sometimes like in September, things change very quickly.” Whether the government wants to move more toward tariff policies that promote sales of CKD or CBU vehicles is a question that needs to be answered. Raising the tariff limit on engine size to 2-liters would again spur sales, but cause heartburn for many local manufacturing concerns and the part feeder industry. “There are a lot of rumors,” says Oswald. “I’ve heard rumors on everything. Somebody calls me each week and gives me a new rumor. But I think as we all saw, the government’s going to do what it wants to do. It would be nice if they clarify what they’re going to do in the future. I think over the next five to 10 years, I would fully expect them to comply with GATT.” Under GATT, Egypt will have to phase out or reduce tariffs to levels consistent with those imposed by other nations, which typically fall in the 0-40% range, and phase out import quota restrictions. “When that happens, of course, is the big question in everybody’s mind,” says Oswald. “And if they comply with GATT and, say, take their duty reductions from 135% to 40%, will they then go and add some new type of development tax or registration tax or some type of local fee to compensate for that loss of income and revenue?” According to those within the field, this lack of transparency was evident when the cuts were suddenly announced. “As a whole, I’d say that these were very brave steps that should have been taken a long time ago,” says Mohamed Gamal El Din, the marketing manager of Nissan Egypt and a board member and spokesman of AMIC. “But there should have been more contact with the automotive industry, or the agents, because it affected our sales.”

24/04/2005 - Egyptian Automotive Market : Current status (6)

Industry leaders hope the local market will, in the long term, adopt price scales in line with international norms, making them better able to compete not only with neighboring competitors, most notably the United Arab Emirates, but with other regions as well. “I think that by the year 2012, everything will come to international prices,” says Toyota’s Masrouga. “But I hope [it will happen] before that, that by 2010 the cars in Egypt will be the same price as the international [market].” But with any increase in sales, there will be yet another problem that the government has yet to address, that of already congested urban centers like Cairo and Alexandria becoming even more congested and polluted. According to a 2002 World Bank report, damages caused by pollution are costing Egypt an estimated 5% of its gross domestic product, and as anyone living in the country can tell you, the level of pollution has not gotten any better since then. The nation still lacks a practical vehicle emissions testing system, which would require coordination between nearly a dozen competing ministries and authorities. A pilot project to do roadside and licensing-time emissions testing has low pubic awareness, and there are few signs it will soon be expanded. Egypt is also one of the worldwide leaders in traffic-related deaths. According to a report released by the World Health Organization in 2004, more than 4,700 people died on the nation’s roads, while just 363 were killed in road accidents in Kuwait. Today, the WHO estimates that there are 6,000 road-related fatalities and 26,000 injuries per year, in addition to tens of thousands of accidents, every one of which further weakens into the economy. Although additional customs cuts may help revive Egypt’s ailing economy by getting more cars off the boat and onto roads, the government has not made any compensatory push to invest in road infrastructure or environmental protection, recent discussion of expanding the Cairo corniche and the completion of the new road to Ain Sokhna notwithstanding. For now, there is really nothing left for those within the industry to do but wait. While more effort needs to be made to ensure that the impact of so many cars will not be detrimental to the environment, the regeneration of the automotive sector may help the resurgence of the economy. “As my positions as board member and spokesman [of AMIC], there is stability, and our expectation is that the market will increase due to the cuts,” said Nissan’s Gamal El Din. Oswald also feels growth within the sector is imminent, and the potential for sudden unexpected decisions to impact new investment in local factories attracts keen attention from abroad. If free trade wins the day, local production could become extremely unprofitable for multinational car companies. “I have monthly calls with both the United States and Germany. We get requests from the EU even as far what’s happening here through DaimlerChrysler, we get requests through our Washington DC office,” says Oswald. “Basically, they see what’s happening and they want to know why is this done, why is it happening, and we try to fill in from a local level. And then they form policies and opinions. And if they do, say, change duties in the next couple of years on the 2-liter and down, then I would look for a big growth in that segment too on imported products.”

20/04/2005 - GM Loses $1.1 Billion in Q1

General Motors Corp. put a period on a dismal first quarter by reporting a loss of $1.1 billion. It was the largest quarterly loss since 1992, when a flood of red ink led to the ouster of then-GM Chairman Robert Stempel. The new report, even though it was spot on the guidance GM gave last month, only added to the anxiety about GM's core automotive business. Meanwhile, GM's cash balance dropped by $3.5 billion as the company's cash flow turned sharply negative in the quarter, while rising interest rates added another $900 million to the company's costs during the period, according to information in the company's financial statement. GM also backed off its earlier guidance that it could still earn $1 to $2 per share this year. Instead the company issued a terse statement noting that, "Given the uncertainty affecting key elements of our financial forecast, such as resolution of the health-care cost crisis, GM has determined that it will not provide earnings guidance for the 2005 calendar year at this time." The company's automotive operations in North America andEurope each posted significant losses. Last year, GM earned $561 million from its automotive operations in the first quarter. GM's critical North American operations accounted for most of the losses, as it dropped $1.3 billion in the first quarter of 2005. It had posted a $401 million profit a year ago. Company executives blamed the $1.7-billion swing in North America on a combination of factors including slower sales, declining production volumes, a tougher pricing environment, and the hefty health-care burden that has added nearly $1 billion to the company's cost base.

27/02/2005 - GERMANY: 4,500 plant workers accept Opel voluntary severance offer

General Motors subsidiary Adam Opel AG on Friday said that 4,500 German employees had accepted the company's severance offer and will leave the loss-making car maker this year, according to the Associated Press (AP).

27/02/2005 - CZECH REPUBLIC: Skoda may expand one plant for fourth model line

Skoda Auto, a unit of Volkswagen AG, reportedly said on Friday it may expand one of its existing plants in the Czech Republic ahead of next year's launch of its fourth car model.

27/02/2005 - Saab Denies Sale Rumors

GM and Saab execs were firmly denying on Thursday that the Swedish brand was up for sale, despite reports from the company's home market. On Thursday, Swedish financial paper Dagens Industri said that unidentified sources had informed it that Saab was on the auction block, with potential interest from Renault SA and Chinese auto companies. Reuters reports that Saab chief executive Peter Augustsson denied the reports, saying the "GM stands behind Saab all the way." GM bought full control of Saab in 2000 and has yet to turn a profit on the small division. Recently, GM said that Saab's next mid-size vehicle could be built in Opel's German plant, which would leave even more unused capacity at the Saab plant in Trollhattan, Sweden. GM is on a cost-cutting drive to eliminate up to 12,000 jobs in its European operations.

23/02/2005 - GERMANY: DaimlerChrysler scraps last generation A-class based Vaneo

DaimlerChrysler is stopping production of its Vaneo van due to poor demand for the vehicle, a German newspaper reported on Thursday.