Good news, bad news: May 19-26, 2011

By macleans.ca - Friday, June 3, 2011 at 9:00 AM - 0 Comments

Good news

Manu Fernandez/AP

Upper house repair

The Tories plan to overhaul the Senate by introducing a bill later this month that will put term limits on senators—as low as eight or 10 years—and allow provinces to elect members when positions open up. Stephen Harper and the Conservatives have long talked about Senate reform, but their actions lately have been anything but democratic. Harper recently appointed to the Senate three Tory candidates who had failed to get elected to the House of Commons in the May election. Real Senate reform means more democracy, less hypocrisy.

The fast lane

The Canadian economic recovery is alive and well. The economy grew at an annualized rate of 3.9 per cent in the first quarter—double the rate in the U.S. The manufacturing sector also received a vote of confidence as Chrysler paid back $1.7 billion in loans to Ottawa, and Fiat’s CEO, Sergio Marchionne, said this week his company is interested in buying Canada’s remaining shares in Chrysler. The bailout of Chrysler two years ago was widely criticized, but the automaker now appears to be back on the road to being a profitable, job-producing company.

In the name of hockey

In a show of hometown support, the Richmond, B.C.-based Boston Pizza will become “Vancouver Pizza” for the duration of the Stanley Cup playoffs. All restaurants will receive Vancouver Pizza banners to hang over their signage and Vancouver Pizza stickers for takeout containers. The strategy might play well outside B.C., too—a new Sportsnet poll shows 85 per cent of Canadian hockey followers are pulling for the team.

Pop till you drop

America’s knack for innovation keeps on giving. Google unveiled a mobile payment system called Google Wallet that allows shoppers to swipe their cellphones at registers to pay for purchases. Meanwhile, Coca-Cola is rolling out touch-screen vending machines that offer customers a choice between more than 100 different pop flavours. The machines use ink-jet-like syrup mixers and send data about people’s preferences back to Coke headquarters. It’s never been a better time to be a consumer.

Bad news

Julian Stratenschulte/EPA/KEYSTONE

Losing control

Yemen slipped closer to civil war as a ceasefire between government and opposition forces broke down. Fighting in the capital of Sanaa has led to over 100 deaths since President Ali Abdullah Saleh refused to follow through on a pledge to resign. The government also bombed the city of Zinjibar after it was seized by Islamic militants. Saleh is accused of trying to curry favour with Western allies by exaggerating the militants’ connection to al-Qaeda, but there is little doubt the chaos raises dangerous instability. This is a black eye for the Arab Spring.

No mercy

After nearly nine years locked inside the U.S. military prison at Guantánamo Bay, Cuba, Omar Khadr should be accustomed to dreary news. This week brought even more: his clemency claim has been denied. The Toronto native, who was captured in Afghanistan at the age of 15 and convicted of killing an American soldier, will be transferred to a Canadian penitentiary later this year. The failed clemency bid effectively rubber-stamps the eight-year sentence he received at his recent trial, and eliminates any hope that he could apply for early parole before June 2013.

Mailing it in

The union representing 50,000 Canada Post employees is threatening to strike unless workers can keep banking sick days and get a roughly three per cent raise annually for the next four years. These demands come despite a 17 per cent drop in letter mail—not to mention that employees begin with seven weeks vacation, earn $24 an hour to start, and can retire as early as age 55. The timing of the strike also couldn’t be worse. In B.C., the long overdue HST referendum would have to be delayed because three million mail-in ballots wouldn’t reach voters.

To catch a criminal

California mistakenly released hundreds of violent inmates after being ordered to limit overcrowding in prisons. Over 450 inmates “with a high risk of violence” were let out on unsupervised parole. At least on the other side of the country, police caught a lucky break. In Maine, a man wanted on two warrants accidently “pocket-dialled” 911 while doing yardwork. He was promptly tracked down by officers.

Detroit: crumbling—but more so

By Chris Sorensen - Tuesday, April 5, 2011 at 3:56 PM - 0 Comments

Beaten up and left for dead, the city of Detroit finally appeared to be climbing back to its feet earlier this year. The auto industry was off life-support and a Super Bowl commercial, courtesy of Chrysler, created national buzz by favourably depicting Motown as the gritty, down-but-never-out heartbeat of America. And then reality set in. Recent U.S. census data showed that Detroit’s population had plummeted to 713,777 residents, down 25 per cent from a decade ago and its lowest level in 100 years, as families—both black and white—fled the city’s poverty and urban blight for affluent suburbs.

For city hall, the new numbers mean even more abandoned houses and vacant buildings to maintain on a dwindling tax base. Worse, there may now be less money coming from state and federal assistance programs, many of which use a population of 750,000 as a cut-off, which is why Mayor Dave Bing is demanding a recount. Others argue it’s time for Detroit to begin the tough slog of reinventing itself, consolidating some neighbourhoods and razing others. “It is time for all of us to realign our expectations so that they reflect today’s realities,” Michigan Gov. Rick Snyder told ABC News. “We cannot cling to the old ways of doing business.”

A stylish little gas guzzler

By Chris Sorensen - Monday, February 7, 2011 at 12:10 PM - 1 Comment

The tiny, stylish Fiat 500 is tasked with filling a gaping hole in Chrysler’s lineup when it comes to small fuel-efficient vehicles. (Known for its big, throaty cars and trucks, the troubled American automaker was forced into a merger with the Italian Fiat as a condition of its taxpayer bailout.) But if the U.S. Environmental Protection Agency’s ratings are any indication, North Americans shouldn’t be expecting huge fuel savings over the competition when the 500 arrives in dealerships this year.

The EPA gave the automatic transmission version of the 500 a 27/34 mpg rating, referring to city and highway mileage (a manual transmission version does better at 30/38 mpg). That’s not bad, but writers on Auto­blog were quick to point out that larger compact cars like Ford’s Focus and the Chevrolet Cruze are both capable of attaining 40 mpg, depending on transmissions and option packages.

Of course, a quick glimpse of Fiat’s Canadian website, with its thumping music and glitzy flash video, suggests Chrysler intends to sell this small car based on attributes other than just its performance at the pump—a pitch Chrysler should have down to a science, given its muscle-car history.

Motor City magic

By Chris Sorensen - Friday, January 14, 2011 at 12:01 PM - 1 Comment

Jeff Kowalsky/Bloomberg/Getty Images

They may no longer be the “Big Three,” but General Motors Co., Ford Motor Co. and Chrysler Group LLC were eager to use this year’s Detroit auto show to show the world there’s a Motor City comeback in the making. Amid the usual pulsing lights, puffs of dry ice and pounding music, Olivier Francois, president of the Chrysler brand, stood before a throng of automotive journalists and made references to 8 Mile, the 2002 movie starring Eminem as a white rapper who earns the respect of his peers in a hardscrabble Detroit neighbourhood, as he attempted to whip up enthusiasm for a redesigned Chrysler 300 sedan. “Today you will see what happens when we are backed into a corner,” he said, invoking the image of a prizefighter, before the 300 drove onto the stage and the ear-splitting decibels increased even further. “You will see that we come out swinging.”

Buoyed by recovering sales and corporate restructurings that are finally gaining traction, similar gestures of confidence were also on display by GM, which along with new small cars proudly displayed its silver and yellow Cadillac CTS-V race car (to mark the brand’s return to auto racing), and Ford, the only one of the three Detroit-based automakers that didn’t file for bankruptcy protection or take a government bailout. Ford’s blue-themed display rivalled the size of GM’s and Toyota’s, despite it being a smaller automaker. Ford also introduced a racy-looking Vertrek concept that could one day replace the Escape crossover. “Motown has got its mojo back, obviously” said Dennis DesRosiers, a Canadian automotive analyst.

And, interestingly, for every ounce of hometown swagger—something that had all but disappeared from the North American International Auto Show since the recession hit—there appeared to be a corresponding retreat from the big-name Japanese automakers who’d spent the last few decades eating the Detroit Three’s lunch. Toyota Motor Corp. executives spent much of their time at the Cobo Center, on the banks of the ice-filled Detroit River, answering questions about last year’s recalls of millions of vehicles, as opposed to talking about new models.

But what happens at the Detroit show, with its vast expanses of carpet, soaring displays and dazzlingly lit vehicles, is not always a reliable indicator of what’s likely to take place inside dealers’ showrooms. While the turnaround story at GM, Ford and Chrysler is real, there is still much work to be done. And it’s not like rivals have been standing still for the past couple of years waiting for Detroit to get its act together. Competition will be fierce.

Like other automakers, GM, Ford and Chrysler benefited immensely from last year’s rebounding auto sales in the United States, which grew 11 per cent to 11.6 million after hitting a low of 10.4 million a year earlier. While that’s still a far cry from the 16 million or so vehicles that were being sold prior to the recession, Ford and GM are nevertheless expected to report billions in 2010 profit (Chrysler, still the weakest of the three, is also closing in on the break-even mark after posting losses for the past few years). “The big thing that’s probably shocked everybody is that these car companies can now make money at vastly reduced volumes,” says Jeremy Anwyl, the chief executive of automotive website of Edmunds.com. “They are talking about break-evens now at sales levels of about 11 million a year. To put that in perspective, just a few years ago sales of 14 million would have been perceived as a disaster.”

GM underwent a particularly dramatic overhaul during its 2009 bankruptcy to emerge as a leaner and more focused company. It dumped debt, slashed half of its brands and took steps to wean itself off a destructive habit of relying on steep incentives—zero per cent financing and cash-back deals—to juice sales. “We have to keep our foot on the accelerator here,” said Mark Reuss, the president of GM’s North American division, moments before Chevrolet introduced a sleek new subcompact car called Sonic, which will be sold alongside Chevy’s compact-sized Cruze. “But I think we’re running North America with the right philosophy.”

And, to top it off, the company took a major step toward shedding its “Government Motors” stigma through a successful IPO in November that raised US$23 billion, helping to pay down roughly US$50 billion worth of loans from Washington and Ottawa.

Chrysler also filed for Chapter 11 in 2009 and, in exchange for bailout cash, agreed to a marriage with Italian carmaker Fiat. Despite a lack of new models to sell last year, it too managed to post an impressive 16.5 per cent increase in U.S. sales to 1.1 million vehicles, hitting the target set by CEO Sergio Marchionne. He is now predicting sales increases of 25 per cent in 2011 as Chrysler sends its new 300 sedan to showrooms alongside a vastly overhauled Sebring sedan, now called the 200. Chrysler will also be selling the tiny Fiat 500 in North America, although analysts say it will be the incorporation of Fiat’s small car technology in future models that will truly determine Chrysler’s future.

Ford has taken a different road, having had a head start on its restructuring. With several popular new models and quality rankings that now rival Japanese automakers, Ford’s U.S. sales soared 19 per cent in 2010, and the company managed to increase its market share there for the second time in two years. It also ousted GM as Canada’s sales leader for the first time in more than half a century.

There’s more to come. In Detroit, Ford introduced a new seven-passenger C-Max minivan, marking a return to a segment it abandoned in 2006. It also showed off two five-seat C-Max variants powered by regular hybrid and plug-in hybrid engines (regular hybrids alternate between gas and electric power, while plug-in hybrids run solely on electric power until the charge is depleted and a gas engine takes over), and an electric version of its Focus small car. “The fuel-efficiency story is going to be a major one,” said David Mondragon, the CEO of Ford Canada. He added, however, that Ford has a “very balanced approach to the marketplace,” ranging from the tiny but well-equipped Fiesta subcompact to Ford’s bestselling F-150 pickup trucks. “And with flexible manufacturing, we can build whatever consumers want.”

Having the right mix will be critical as analysts forecast a continued recovery in the all-important U.S. market. Jeff Schuster, director of automotive forecasting for JD Power and Associates, predicts sales of 12.8 million vehicles in the U.S. this year followed by 15 million units in 2012 and a return to nearly 16 million a year later. (Canadian sales increases will be less dramatic, rising to 1.6 million next year compared to 1.5 million in 2010, but only because the market didn’t collapse as badly.) That suggests big profits down the road for Ford, Chrysler and GM, providing they can hang on to their current combined 45 per cent market share, up one percentage point from last year.

Sex, speed and loud music

By Chris Sorensen - Thursday, January 13, 2011 at 2:32 PM - 0 Comments

Three years ago, Chrysler hired cowboys to herd 120 longhorn cattle through downtown Detroit to generate excitement for its Dodge Ram pick-up truck during the North American International Auto Show. The carmaker has also dropped trucks from the ceiling of the Cobo Center, where the show is held, and driven a Jeep through a plate glass window.

These days, however, over-the-top stunts have largely disappeared from the annual auto industry bash, thanks mainly to the latest recession and a taxpayer bailout of the industry. “People would think we were back on the bottle,” joked one Chrysler executive when asked if Chrysler (now married to Italy’s Fiat) would ever consider rounding up more cattle.

But don’t worry. It’s not as though automobile industry has suddenly purged its long-standing penchant for displays of cheesiness. Despite considerable effort to highlight the improved fuel efficiency of their vehicles (aimed more at government regulators than actual car buyers, according to some analysts), the industry still managed to slip a healthy dose of what it believes truly sells cars into this year’s Detroit auto show: sex, speed and loud music. And the results were frequently amusing.

From rock n’ roll to women wearing tight clothing, the auto show was full of examples of the industry’s marketing crutches. There were burly trucks caked with mud, alien-looking concept vehicles, and modified race cars that appeared designed solely for gear-heads to salivate over. Take, for example, Porsche’s 918 RSR, a hybrid car with a pair of electric motors driven by a giant flywheel sitting where a passenger would normally be. The system wasn’t designed to save fuel, mind you—it’s a way to boost its regular 555 horsepower output to 767 hp with a push of a button.

When it came to dramatic unveilings, Chrysler, perhaps predictably given its past, led the way with its introduction of the Chrysler 300 and 200 sedans. Before the cars were driven out on to the stage, hundreds of journalists were subjected to a frenetic mash-up of pounding hip-hop beats, tinkling piano music, images of cute children and references to underdogs who triumph over adversity. To top it off, the president of Chrysler’s brand, Francois Olivier, recited rap lyrics from an Eminem song. In a French accent.

There were other instances of worlds colliding, awkwardly, when Honda unveiled its 2012 Civic concept. John Mendel, executive vice-president of American Honda, gave the usual car salesman’s pitch about the new Civic’s more aggressive lines—he said Civic fans are typically “young at heart” —but stressed the need to avoid straying too far from the look of the existing model, which has been a big seller. Translation: “Civics used to be popular with young people, but then their parents started buying them too, and so we made them bigger and more boring-looking. And so, in an attempt to please both groups, we came up with this.” Then, as if to underscore the generational conflict further, he introduced Pete Wentz, best known as the bassist and primary lyricist for rock band Fall Out Boy. Wentz looked uncomfortable shilling for a car company, and it’s questionable whether the two or three hundred automotive writers crowded around the stage, many of them from overseas, even knew who he was.

Even Toyota, known for its practical-yet-boring vehicles, also couldn’t resist trying to jazz up its sprawling display with a little pop culture. Dropped between the Camrys and Corrolas was a stretched and lowered “swagger wagon,” a reference to a tongue-in-cheek viral ad Toyota made for its minivans that shows a pair of suburban parents rapping about their ride with three rows of seats. Okay, the ad was actually quite clever. And Toyota should be commended for poking fun at its staid reputation. But CEO Akio Toyoda, the grandson of Toyota’s founder, addressed the more serious subject of Toyota’s slipping sales by saying during a meeting with reporters that Toyota needs to be more adventurous with its designs, particularly now that the competition has caught up on the quality front. “I think cars need to be better-looking,” he said through a translator. “The better-looking the car, the better the car.” A blunt acknowledgment that automobiles are created with cutting edge technology and clever engineering, but they are sold based largely on good looks and emotional appeal. Cue the stirring music and images of open road.

Clash of the cruisers

By Chris Sorensen - Thursday, October 7, 2010 at 10:40 AM - 0 Comments

Chrysler Group LLC/ Mike Segar/Reuters/ Ford Motor Co.

For the first time in more than a decade, Dennis Simcoe won’t be able to simply pick up the phone and call Ford Motor Co. when it’s time to replace one of Edmonton’s 230 Crown Victoria police cruisers. That’s because Ford, which currently boasts 70 per cent of the North American police car market, is finally retiring the aging, tank-like police car next year, creating unease among police departments and an opportunity for competitors to step in. “It’s a very well-performing police vehicle,” says Simcoe, who oversees fleet operations for the city of Edmonton and already sounds a touch nostalgic for the Crown Victoria. “You can pound on them and they still keep ticking.”

For Ford, though, the “Crown Vic” lost its commercial appeal a long time ago. Built in St. Thomas, Ont., the car has been relegated to police and taxi fleets since 2007 after Ford decided the consumer market for big, rear-wheel-drive sedans had all but disappeared, save for a handful of Florida retirees. Even taxi companies are moving away to smaller and more fuel-efficient cars. And police departments, although important and high-profile customers, only buy about 60,000 of the roughly $30,000 vehicles a year in total—not enough to justify a dedicated assembly line.

Ford is now attempting to convince police to move to a car based on its front- and all-wheel-drive Taurus platform, as well as a sport utility vehicle, promising performance benefits that stem from modern vehicle stability systems and the improved fuel economy of a smaller but still powerful V6 engine. “We can add that advanced technology and maybe change the way people think about police cars,” says Marisa Bradley, a Ford spokesperson.

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Why big trucks mean big sales

By Kate Lunau - Thursday, June 10, 2010 at 1:20 PM - 1 Comment

Getty Images

In a recent commercial, the Dodge Ram Heavy Duty pickup truck is shown splashing through mud, pulling massive loads, and charging across the desert, with a gravelly voice-over from actor Sam Elliott—the quintessential cowboy—in the background. Macho truck ads are nothing new, but lately it seems like the Detroit Three automakers are engaged in a spitting contest over whose truck is biggest, toughest, and manliest of all. Earlier this year, GM even challenged Ford to a truck tug-of-war between their 2011 heavy duty pickups (Ford declined).

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Roaring right back

By Jason Kirby - Sunday, March 21, 2010 at 9:00 AM - 13 Comments

Photograph by Andrew Tolson

At the end of 2008, with the global economy crumbling and forecasters trying to out-gloom each other with dire predictions of blood in the streets, Linda Hasenfratz was understandably anxious. As CEO of Linamar Corp., one of Canada’s largest auto-parts suppliers, she watched as GM and Chrysler, two of her biggest customers, careened toward bankruptcy. Meanwhile, analysts were warning investors that Linamar might breach the terms of its loan agreements. Shares of the Guelph, Ont.-based company plunged to $3.50, a depth not seen in nearly two decades. But rather than panic, Hasenfratz did what precious few people seemed capable of at the time. She stepped back and took a deep breath.

The auto sector was in serious trouble, she acknowledged, but car sales had fallen to “drastically, unbelievably unrealistic, totally unsustainable low” levels. And Linamar wasn’t about to go under, even if the Detroit giants went bust. “I knew it wouldn’t kill us,” she says. So in the darkest days of the credit-crunch-cum-financial-crisis-cum-Great Recession, Hasenfratz dipped into her family’s finances and bought a million Linamar shares, a resounding vote of confidence in the business and the economy as a whole.

What Hasenfratz was betting on, and what even the most pessimistic forecasters admitted would one day come, was a recovery. But who could have thought the rebound would be as quick and robust as this. Barely a year after stock markets looked like they were headed for a long-term rout, exchanges in New York and Toronto have leapt roughly 70 per cent. More importantly, most signs point to the recession having ended sometime last fall. In the fourth quarter the Canadian economy grew by five per cent, soundly beating expectations. So while Hasenfratz finds herself still bracing for a tough slog in the auto sector—the crucial American car buyer could take years to fully recover—she’s once again focused on the future and expanding her company into Europe and Asia. As for those Linamar shares she snapped up when the recession looked like it would last forever, “they’re about six times higher now,” she says, “but who’s counting?”

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Detroit’s dirty secret: SUVs rule

By Jason Kirby - Thursday, January 28, 2010 at 12:40 PM - 2 Comments

At the height of the U.S. economic crisis, one of the most potent symbols of American excess was the gas-guzzling sport utility vehicle. When oil prices spiked and millions of Americans lost their jobs, sales of big trucks collapsed, taking General Motors, Chrysler and nearly Ford with them. Only small cars would have a future in this more frugal, sensible economy, we were told. Well, so much for that.

The SUV is back, and American drivers can’t get enough of them. According to Ford, sales of the Expedition jumped 45 per cent in December, while the Lincoln Navigator was up 60 per cent. GM, meanwhile, has announced plans to spend US$1 billion revitalizing its lineup of full-size pickups. The companies are still heavily focused on smaller, fuel-efficient vehicles, and the next generation of SUVs will undoubtedly do better on gas. But any notion that the SUV would go the way of the Model T is gone.

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Detroit Auto Show: Electric dreams

By Chris Sorensen - Friday, January 15, 2010 at 9:00 AM - 7 Comments

There was a whiff of optimism, albeit of the cautious variety, mixed with the usual scents of rubber, new car and acres of indoor carpet at the Detroit auto show this year. After a brutal 12 months that saw sales plummet across North America and two of the former “Big Three” Detroit carmakers file for bankruptcy, auto executives were understandably eager to put the past behind them and get back to the business of selling cars, trucks and SUVs amid growing evidence of an economic turnaround.

While the show lacked the glitz and glamour of even just a few years ago—no trucks were dropped from the Cobo Center’s ceiling or cattle-herded through downtown Detroit—the cloud that had hung over last year’s displays lifted to reveal an industry that, if not completely transformed, believes that it’s finally found the right mix of smaller and greener cars to survive in the new and more cutthroat automotive landscape.

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Newsmakers '09: Mergers

By Yoni Goldstein - Thursday, December 10, 2009 at 6:40 PM - 0 Comments

Alex Rodriguez and Kate Hudson
The baseball slugger and film starlet confirmed their relationship in July, though Hudson pretty much gave away the secret by following A-Rod’s Yankees across the U.S. during the baseball season. In February, Rodriguez admitted to using steroids between 2001 and 2003—which proves that women love an “honest” man.

Peter MacKay and Jana Juginovic
The hunk on the Hill is engaged, and this time the object of his affection isn’t a fellow pol. MacKay announced his engagement to Juginovic, director of programming at CTV News Channel, in November. Jack, the MacKay family dog, is reportedly happy—his master walks him way too often when there’s no amour in his life. Eat your heart out, Belinda and Condi.

Disney and Marvel
Disney got significantly cooler in August when it announced a US$4-billion deal to buy Marvel Entertainment. Walt’s company will finally have a stable of strong heroes—Iron Man and Wolverine come to mind. Perhaps the Marvel guys will find a way to toughen up Mickey and Pinocchio.

Archie and Veronica
First he married Veronica. Then he married Betty. But Archie’s no bigamist—both were “dreams.” Could you see this ending any other way? The redhead has been stringing these two on for 70 years. Some may say he’s got the best of both worlds—one rich girl, one nice girl—why ruin it by choosing Veronica? By the way, have you noticed Betty and Veronica look exactly the same, except for their hair colour?

Suncor and Petro-Canada
“I don’t know if it is a marriage made in heaven. But it is a match made in Canada,” Suncor’s CEO Rick George said when his company mergered with Petro-Canada. The deal protects two big players in Canada’s oil patch from foreign takeovers. It also means we have one less company to blame the next time gas prices skyrocket.

Michael Vick and the Humane Society
Michael Vick used to be a sick puppy, now he’s helping them. The dogfighting quarterback and the Humane Society of the U.S. teamed up after Vick was released from prison in May. Now that he’s back in the NFL, we’ll see how much time he has for the Sparkys and Rexes of the world.

Fiat and Chrysler
If anyone can make Chrysler stylish again, it’s the Italian automaker. But this deal isn’t just about reviving the moribund American institution—Fiat plans to use Chrysler’s dealerships and manufacturing plants to promote its own brands (and those of subsidiary Alfa Romeo) in the North American market. As the Italians say: Chi non risica, non rosica (“Nothing ventured, nothing gained”).

Robert Pattinson and Kristen Stewart
Honestly, we can’t figure out whether the Twilight stars are dating or not. They keep denying a relationship, but then were recently photographed holding hands in Paris. It’s not fair to keep so many teens languishing in crush purgatory.

Ivanka Trump marries
Mazel tov! Ivanka Trump—or Yael Trump, as she’s now known—converted to Judaism and married New York Observer owner Jared Kushner on Oct. 25. She wore a Vera Wang dress. No one could tell whether Donald was wearing a yarmulka—or whether he was having another bad hair day.

CPP and Skype
The Canada Pension Plan’s purchase of a portion of the Internet phone company signals the emergence of a bolder CPP. Now that a lawsuit between Skype and the computer nerds who developed the online phone technology has been settled, pensioners can expect to see money start rolling in—over the Web, that is.

Newsmakers '09: Road warrior

By Chris Sorens - Tuesday, December 8, 2009 at 6:40 PM - 2 Comments

To the relief of just about everyone around him, auto parts czar Frank Stronach appears prepared to finally forgo his dream of becoming a full-fledged manufacturer of cars and trucks.

The wily Austrian-born businessman’s latest effort to get into the higher-profile vehicle-manufacturing game careened off the road in November when General Motors, no longer at death’s door, decided to hang on to its European Opel division instead of selling a majority stake to Stronach’s Magna International and a Russian partner.

Stronach’s disappointment at the unexpected turn of events was etched on his craggy face, but the official line from the company was one of understanding (GM is Magna’s biggest customer) and a pledge to get back to basics. Suffice to say, Magna’s investors couldn’t have been happier. Shares of the Aurora, Ont.-based company soared 25 per cent by the end of the week of the announcement. Analysts, too, seemed thrilled the deal fell apart. For one thing, building cars and trucks has just as often been a road to ruin as it has to riches. Just ask Ford, GM and Chrysler, the latter of which Stronach also tried unsuccessfully to buy before the wheels fell off the entire North American industry.

The Opel deal also threatened to take Magna’s eye off the ball just as opportunities to acquire troubled auto parts companies are mounting. And then there was the not insignificant issue of alienating Magna’s current car-making customers, several of whom didn’t fancy the idea of buying their vehicle parts from a direct competitor.

But while sticking to auto parts might be the most sensible (and profitable) course of action, Stronach has rarely paid much attention, if any, to what other people think of his ideas. Take his troubled foray into the horse-racing business, for example. A fan of thoroughbred horses and racing, Stronach spent huge sums of money through Magna Entertainment to scoop up racetracks across the continent in the hopes of creating an entertainment colossus, often to the chagrin of Magna International shareholders. Creaking with debt, the now spun-off company is attempting to restructure under bankruptcy protection, although Stronach has apparently not given up on the concept.

Stronach has also been criticized for taking hefty pay packages, considering he is the company’s chairman, not its CEO. Although his compensation plummeted to a paltry (by Stronach’s standards) $10.7 million excluding stock options last year, as part of a temporary effort to reflect the industry downturn, he had previously pulled in closer to $40 million or $50 million—a level that is bound to return once the industry is again firing on all cylinders.

Why should we believe his car-building fantasies will be put down more easily?

Racing to rebuild GM

By Chris Sorenson - Thursday, November 19, 2009 at 11:20 AM - 4 Comments

The idea was for Bob Lutz, the vice-chairman of General Motors, to challenge doubters of the beleaguered automaker to race him on Utah’s Bonneville Salt Flats. He would drive Cadillac’s muscular, 556-horsepower CTS-V luxury sedan while challengers would have their choice of rival production models. And, with any luck, Lutz would win and a brilliant marketing campaign would be launched.

But the ad agency’s concept apparently wasn’t bold enough for the former Marine, who, incidentally, flies fighter jets in his spare time. He pushed for having the throwdown on an actual racetrack, where the chance of damage to GM’s battered brand would rise with each twist and turn. “I said, ‘Hey, that’s an interesting idea, but let’s not use the salt flats, because going fast in a straight line isn’t proving anything to anybody,’ ” Lutz said in an interview with Maclean’s. “The world has always known that Americans can build cars that go fast in a straight line.” Continue…

Fiscal conservative

By Aaron Wherry - Wednesday, October 21, 2009 at 11:52 AM - 31 Comments

The Finance Minister talks to Canadian Business.

OK, you say you’re a fiscal conservative, but I know you’ve heard a lot of criticism from the conservative base. People are starting to say that when the country is running $55-billion deficits, that term “fiscal conservative” has lost its meaning. Does it have any meaning anymore?

It does. I think the key is to have a commitment to a balanced budget and to always be moving in that direction, to have a plan to be there, and to have the discipline to do it. And we will show that discipline. I’ve certainly exercised that kind of discipline before at the provincial level in order to balance budgets, and we’ll do it again federally. But in the past year, we’ve faced the most serious economic crisis globally since the Second World War. The meetings we had in the middle of October last year in Washington were in a time of deep crisis. We weren’t even sure that the markets were going to open on Monday morning. I think there’s a tendency for people to forget very quickly, because we’re out of the time of crisis right now, how deep and dangerous this crisis was for the world economy. And when we made the decision to run large deficits in Canada, we made the decision to save General Motors and Chrysler in Canada at large expense. These decisions were made because of the seriousness of the crisis. That, to me, is being a good conservative economic manager.

Econowatch

By Steve Maich - Friday, August 7, 2009 at 9:00 AM - 3 Comments

Ladies and gentlemen, the recession is over. Or at least it seems to be winding down. Unless it isn’t. The past few weeks have been a little dizzying for those not accustomed to the wildly contradictory messages common in the world of economics.

What is a poor citizen supposed to think when Bank of Canada governor Mark Carney comes out one day and says the recession is all but over, and then Finance Minister Jim Flaherty (backed by a passel of big bank analysts) emerges a day later to throw cold water on the idea.

Is the recession over or what? As is so often the case in the world of economics, the answer is “yes and no.”

Carney and Flaherty were speaking honestly and accurately about two separate but related realities. Carney was referring to the technical definition of a recession, and the news there is encouraging. All signs suggest that Canada’s economy is growing again, and will likely grow more toward the end of the year. Commodity prices have rebounded, housing has stabilized and job losses are slowing. That means that the pressure will soon be on for Carney to squeeze off the easy money tap, to keep inflationary pressures at bay. Continue…

The future is tiny

By Colin Campbell - Saturday, July 25, 2009 at 11:00 AM - 3 Comments

If you think everyone in the auto sector is feeling grim these days, then you haven’t talked to John Vernile. The vice-president of sales at Hyundai Auto Canada says the recent turmoil has been nothing but good news. Sales for the South Korean automaker are up “in every segment,” he says—amounting to an overall surge in sales of 20 per cent during the first half of this year. “When this downturn hit, it just dialled things up for us,” he says. Thanks in part to the demand for Hyundai’s smaller cars, the company has suddenly emerged as one of the dominant players, not just in North America but globally. It’s now the fifth-largest carmaker in the world. In quality surveys, it ranks ahead of Toyota and Honda. Market share is up, sales are up, and opportunity abounds. Despite the tough economic times, “we quietly celebrate here,” says Vernile.

That kind of talk should have struggling industry heavyweights such as General Motors, which just emerged from bankruptcy protection, in panic mode. It is, after all, a revolutionary shift from 20 years ago when Hyundai was best known for the Pony, a small, cheap and just plain ugly car. Today, Hyundai has one of the hottest cars on the road with the Genesis, a sleek and expensive sedan that won the North American and Canadian car of the year awards. “Who would have ever thought we’d be selling a car over $40,000?” quips Vernile. “We can’t keep them in stock.” Continue…

Thrift is the new black

By Jason Kirby - Thursday, June 11, 2009 at 9:00 AM - 0 Comments

Meet the Walkers. They’re the latest embodiment of the culture of thrift said to be sweeping America. And their story, after it was reported a few days ago in the Washington Post, lit up the Web as another sign that things truly have changed. You see, the old, conspicuous Walkers used to travel to the Caribbean, shop at Nordstrom, and tell friends all about their consumer exploits. Now, with money tight, Seigrid Walker has found joy in flaunting her frugality. They stay in, eat pizza, and watch Madagascar “over and over again.” Forget about keeping up with the Joneses. It’s all about keeping up, or is it down, with the Walkers.

Since the recession began, thrift has been touted as the new black. It’s more than a matter of trendspotting. Consumers make up 70 per cent of the U.S. economy. Any recovery is wholly reliant on them getting back into the malls. So when analysts tell us Americans are simply unwilling and unable to spend any more, the implications are dire. But there’s a huge gulf between unwilling and unable, and a recovery hinges on which one is truly the case.

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A frustrated Flaherty

By Aaron Wherry - Thursday, April 9, 2009 at 1:28 PM - 2 Comments

Jim Flaherty is confronted by some friendly pensioners.

“Listen, this is a very serious time!” a frustrated Flaherty said sternly. “All of these issues being raised about jobs, about pensions, about whether or not General Motors can survive and in what form, and whether Chrysler Canada Ltd. can survive and in what form, these are very major questions that are being discussed right now in a serious way.”

In other news.

The Commons: The eternal shame of the Ivy Leaguer

By Aaron Wherry - Monday, March 30, 2009 at 6:42 PM - 45 Comments

The Scene. In preemptive move, the government side sent up another of its backbenchers before Question Period—this one named Greg Rickford—to report on the latest outrageousness of the Liberal leader.

“Mr. Speaker, Canada’s auto industry directly employs over 150,000 Canadians and another 340,000 indirectly … half a million Canadians and their families depend on the health and viability of this industry and are looking to their leaders to ensure that Canada remains a strong part of the North American automotive industry through these economic times,” Rickford began. “That is why it is absolutely shameful that the leader of the opposition has turned up his nose to auto sector workers by saying: ‘No voter in B.C. wants to throw money into the auto sector and neither do I.’”

To Rickford’s credit, this was not entirely incorrect. Mr. Ignatieff did speak those 16 words. And one assumes it was by innocent omission that the Conservative failed to note the two preceding sentences. ”I don’t believe in bailouts,” Mr. Ignatieff reportedly said. “What I believe in is fully-refundable loan packages for industries that give you a business plan that will restore them to profitability.”

Undaunted by such details, Rickford went on. “I wonder if he would repeat the same sentiment at a town hall meeting in Ontario,” he whined. “I am sure he has more savvy than that. He has shown time and time again that he is more than willing to flip-flop on the content of his message to suit whatever audience he is speaking to, whether it be in Saanich, St. Catharines or at his home in Harvard.”

This last bit was, apparently, meant as a put-down. Continue…

And then there were two?

By Colin Campbell - Friday, March 13, 2009 at 5:53 PM - 17 Comments

Chrysler’s threat this week to close its plants in Canada if it doesn’t win big union concessions is one of the most dramatic moves yet in the ongoing auto industry meltdown. In the words of one auto union official, it was like adding gasoline to a fire.

Chrysler president Tom LaSorda said the company needs to lower its labour costs by about 25 per cent, to $55 an hour from an estimated $75 an hour. He also said the company needs US$2.3 billion in government money if it’s to keep building cars in Canada.

On the surface, LaSorda’s demands appeared to be the kind of posturing that’s expected in such critical negotiations. Chrysler’s fate, after all, is hanging in the balance. But industry analysts say the threat is very real—the company could shift Canadian production to plants in the U.S. in a matter of months. And while the auto industry would likely survive such a move, the impacts would be severe and cause painful disruptions right through the entire industry. Continue…

Magna edges closer to making cars

By Colin Campbell - Wednesday, January 28, 2009 at 8:00 AM - 0 Comments

Could Magna International grow from making just car parts into a full-fledged carmaker? It’s not all that far-fetched, say some industry pundits.

Last week, the Aurora, Ont.-based company hired former Chrysler executive Wolfgang Bernhard as a consultant, prompting a wave of rumours that the company was in talks to buy pieces of the struggling auto company. Magna, after all, had talks with Chrysler just last year about teaming up to build cars, and Bernhard had worked with Cerberus Capital Management when it took control of Chrysler in 2007. Both Magna and Chrysler immediately denied the reports. But that hasn’t dampened speculation that the company is looking to do more than make parts.

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The Sad Reality facing General Motors

By Steve Maich - Friday, December 12, 2008 at 10:16 AM - 38 Comments

The Congressional plan to bail out the Detroit auto industry died a swift death last night, but the White House may yet swoop in with a unilateral bailout of its own. Reports surfaced this morning to suggest that the Treasury Department, on the authority of the President (and presumably the U.S. Fed) would tap the $700 billion fund to bail out Wall Street in order to get enough cash to Detroit to keep the companies afloat until next year.

That, of course, would finally destroy any notion that the U.S. Government is actually operating with a coherent plan. I know, I know…nobody really believed that anymore anyway. But the Trouble Asset Recovery Plan (TARP) was first supposed to buy up bad mortgage assets, then got converted into a giant bank account to buy bank stocks, and now, apparently, it might also branch out into the car business. This, dear friends, is what’s known as making it up as you go along.

Unlike my friend Andrew Coyne, I’m a little more sympathetic to the idea that governments can lend a helping hand to industry in times of trouble. That said, these bailout plans are disasters in the making. The best explanation of why can be found here (a column from a month ago in the Wall Street Journal by Michael Levine.) Continue…

Rise and fall of the young fogeys

By selley - Monday, November 24, 2008 at 1:32 PM - 10 Comments

Must-reads: Conrad Black on a certain grotesque miscarriage of justice; Jeffrey Simpson on Henry Waxman; Don Macpherson on Mario Dumont; Greg Weston on Bob Rae; George Jonas on “Singapore of the North.”

Brother, can you spare a dime?
From Washington to Lima to the Circuit Gilles-Villeneuve, there’s bad news on the economy. But you already knew that.

The National Post‘s Terence Corcoran asks us if we really want the future of the North American auto industry to be in the hands of politicians intent on aping Jerry Maguire (“Until they show us the plan,” said Sen. Harry Reid, “we cannot show them the money”) or who actually believe “GM would be better off if CEO Rick Wagoner wandered about U.S. airports in search of his luggage.” By all accounts, he observes, a bailout would mean “further suppression of market forces from an industry already burdened by regulations that have driven it into the ground” and the “continued existence of union protections,” among other impediments to future success. Let them go bankrupt, Corcoran implores, in hopes they might someday be able to recover “in a genuine market.”

Playtime’s over, the Ottawa Citizen‘s Randall Denley advises Canadian union members in both the private and public sectors. It may well be unfair that government workers should suffer for the fiscal mismanagement of city councillors or school board trustees, he concedes, but “the same accusation could be made about the management of many corporations that are laying off employees. That doesn’t create any more money for raises.” He suggests the brothers and sisters be happy just to remain employed, and believes “sharing the pain” with their fellow Canadians isn’t too much to ask.

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The car industry crash, by the numbers

By selley - Friday, November 21, 2008 at 5:23 PM - 5 Comments

As a rule, recent years have not been kind to automakers. But amidst the general chaos, the North American car manufacturers—formerly the “Big Three,” now more accurately known as the “Detroit Three”—have sunk well below the rest. As the CEOs of Ford, General Motors and Chrysler plead for mercy from Washington, Macleans.ca presents a statistical snapshot of their nightmare.

Highest stock price of the five largest publicly traded automakers as of the Nov. 20 close on the New York Stock Exchange: $59.79 (Toyota)

Toyota’s stock price on Nov. 20, 2007: $110.07

Best performance of those five stocks over the past year: -43.9% (Honda)

Poorest performance: -89% (GM) Continue…