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NADA Headlines (Nov. 3, 2010)

Three of Four Dealer Candidates Wrest House Seats from Incumbents

WASHINGTON -- Three of the four current and former dealers bidding to unseat Democratic incumbents in the House of Representatives swept into office on a national wave of Republican votes. Their election will increase the number of dealers or former dealers in the House to six – a record, and twice as many as ever before, according to the National Automobile Dealers Association. All six are Republicans. Mike Kelly of Pennsylvania, James Renacci of Ohio and Scott Rigell of Virginia won their races by at least 10 percentage points, the Washington Post said today. They will join the Republican majority, likely to be led by John Boehner of Ohio, that is to take control of the House. House Republicans held a 240-183 margin, with 12 races undecided, as of this morning, the Post reported. Democrats will retain control of the Senate. The only dealer who lost is Tom Ganley of Ohio, also a Republican ... who lost ... to Democratic incumbent Betty Sutton. Read more from Automotive News.

Election 2010: GOP Captures House, Democrats Hold Senate

Republicans wrested control of the House of Representatives from Democrats in Tuesday's midterm elections, but fell just short of winning the Senate. As of early Wednesday, Republicans gained at least six Senate seats. Democrats had 51 seats, including two independents, to 46 for the GOP. Three races remain undecided in Alaska, Colorado and Washington state. In the House, incomplete returns showed the GOP gained at least 60 seats and led for four more. About two dozen races remained too close to call. President Obama scheduled a news conference for later Wednesday to discuss the election results. Republicans also took back the majority of governor's mansions Tuesday, setting the GOP up to redraw the political landscape for the next 10 years. Read more from USA Today.

Automakers on Track for Best Month of the Year

Figures may approach cash-for-clunkers boom

Car and truck sales appear on track for their best month yet this year, even as consumers remain uneasy about the economy. On Tuesday, automakers including Hyundai, Subaru and Volkswagen all reported double-digit sales increases for October. Other automakers -- including the Detroit Three, Toyota, Honda and Nissan -- will release monthly sales today after delaying their reports because of the election. Total industry sales for October are expected to come in slightly below 1 million vehicles, hitting around 12 million on a seasonally adjusted annual sales rate. That would mark the strongest pace for auto sales since August 2009 when industry sales were inflated by the government's cash-for-clunkers incentive program. Sales in October increased 17.2% for BMW, 39.8% for Jaguar and Land Rover, 4.3% for Mercedes-Benz and 61.2% for Porsche. However, the industry's total retail sales have increased only 4% for the first 10 months of this year, while sales to commercial fleet and rental car customers, which tend to be less profitable, have increased nearly 50%, said John Krafcik, president and CEO of Hyundai. The Korean automaker said its October sales increased 38% compared with the same month last year with its 2011 Sonata compact car leading the way. Subaru, meanwhile, said its sales increased 25% in October, putting it just 318 vehicles shy of its record-setting 2009 year. Read more from the Detroit Free Press.

Editor's note: NADA Chief Economist Paul Taylor expects the overall new vehicle sales increase in October 2010 to drive a seasonally adjusted annual rate near or above 12 million units. The Detroit Three will release sales figures later today. Sales of many international brands appear to be up more than 25 percent in October, contributing to a strong showing for the month. “November’s election results should ease the concerns of the business community about the investment environment ahead, and encourage businesses to purchase or lease new vehicles in future months,” Taylor added. “In the meantime, rental and luxury vehicle demand are sustaining sales growth in the market, leading the industry toward 11.5 million new-vehicle sales for the full-year 2010. Falling home values are currently one of the greatest impediments to stronger new vehicle sales in the future.”

Auto Industry Rips Feds on Fuel Savings

WASHINGTON — Detroit's Big Three automakers and Toyota Motor Corp. contend the Obama administration significantly overstated the fuel efficiency gains that are feasible by the 2025 model year. The automakers argue that the administration's proposal to raise fuel economy to as much as 62 miles per gallon by 2025 understates the cost increases required to comply, overstates consumer benefits and fails to account for the role of fuel prices in car sales. The Environmental Protection Agency and National Highway Traffic Safety Administration unveiled a range of increases for new cars and trucks last month, but have not set a specific target. The requirements for the 2017-25 model years would come on top of regulations that will hike fuel efficiency by 40 percent over five years to an estimated 34.1 mpg by 2016. "The question not addressed by (EPA and NHTSA) is this: If the economics for high fuel economy vehicles is so overwhelming, why do so few consumers choose to buy high fuel economy vehicle?" the Alliance of Automobile Manufacturers, the trade group representing 12 major automakers, including General Motors Co., Ford Motor Co., and Chrysler Group LLC, wrote in a series of objections filed late last week. The EPA declined comment. NHTSA said it would review the automakers' comments. Read more from The Detroit News

Editor’s note: In Nov. 1 comments to NHTSA and EPA, NADA questioned the plan to implement new fuel economy mandates on a rushed timetable given the risks of using insufficient data, inappropriate assumptions and forecasts and questionable analysis. Even the government acknowledges that its own report, which focuses on potential mandates 15 years down the road, is fraught with uncertainties. Given those uncertainties and the fact that automakers have no more than a vague idea of the fleets they intend to build in 2025, setting standards so far in the future is tantamount to a shot in the dark that – if wrong – will result in job losses and economic inefficiencies.

GM to Get Tax Break Worth Billions

General Motors Co. will drive away from its U.S.-government-financed restructuring with a final gift in its trunk: a tax break that could be worth as much as $45 billion. GM, which plans to begin promoting its relisting on the stock exchange to investors this week, wiped out billions of dollars in debt, laid off thousands of employees and jettisoned money-losing brands during its U.S.-funded reorganization last year. Now it turns out, according to documents filed with federal regulators, the revamping left the car maker with another boost as it prepares to return to the stock market. It won't have to pay $45.4 billion in taxes on future profits. The tax benefit stems from so-called tax-loss carry-forwards and other provisions, which allow companies to use losses in prior years and costs related to pensions and other expenses to shield profits from U.S. taxes for up to 20 years. In GM's case, the losses stem from years prior to when GM entered bankruptcy. Usually, companies that undergo a significant change in ownership risk having major restrictions put on their tax benefits. The U.S. bailout of GM, in which the Treasury took a 61% stake in the company, ordinarily would have resulted in GM having such limits put on its tax benefits, according to tax experts. But the government, in a little-noticed ruling last year, decided companies that received bailout money under the Troubled Asset Relief Program won't fall under that rule. Read more from The Wall Street Journal.

Honda CEO Sees Potential in Electric Car Market

MOTEGI, Japan -- The head of Honda Motor Co. said there could be plenty of demand for battery-powered electric cars, making the strongest endorsement yet of the technology that his predecessor had long shunned as impractical and unrealistic. Japan's second-biggest automaker announced in July plans to launch a plug-in hybrid and pure electric car in 2012, but had stopped short of laying out a roadmap of how they would contribute to its business. "It's starting to look like there will be a market for electric vehicles (EVs)," Takanobu Ito, who took over as chief executive last year, told a small group of reporters at a test-drive event north of Tokyo. "We can't keep shooting down their potential, and we can't say there's no business case for it." In a move that could further accelerate the industry's drive towards EVs, Ito is due to take the wraps off a new electric car concept at the Los Angeles auto show on Nov. 17. It would be the first time for a Honda CEO to unveil a new model at the annual show. Japanese rival Toyota Motor Corp., also a recent EV convert, is planning to unveil the electric RAV4, co-developed with Tesla Motors Inc, at the L.A. auto show. Read more from Reuters

Is GM Really Worth as Much as Ford Right Now?

If investors pay what General Motors hopes to get for its stock in a planned IPO, they'll have to buy the logic that the company's stock-market value should be similar to its closest competitor, Ford Motor Co. But Ford is making far more money these days and its U.S. market share is rising while GM's is falling and its new management team has little auto industry experience. Ford's market value — calculated by multiplying its current share price by the total number of shares outstanding — is almost $50 billion. GM's total would be close to that if it is successful in selling a portion of its shares in an initial public offering later this month somewhere between $26 and $29 a share. But is GM really worth as much as Ford right now? Ford has been working on a rebuilding plan for five years. It earned $1.7 billion in the third quarter, its sixth consecutive quarterly profit. It also managed through the financial downturn without taking taxpayer money, a big plus in the minds of American car buyers who increasingly are choosing its new cars and trucks. General Motors Co. is still in the early stages of its restructuring, having emerged from bankruptcy protection just 16 months ago. The company has had four CEOs in less than two years, and still must find a way to pay back more than $50 billion in taxpayer money it took to help survive the economic downturn. It has only posted profits in the last two quarters, totaling $2.2 billion. Read more from The Associated Press.

Automakers Give Vehicles Extreme Makeovers at Vegas Show

Out with the new and in with the high-performance, super-tricked-out ultra new. That's the mantra at the Specialty Equipment Market Association show in Las Vegas, which (opened Tuesday.) From souped-up muscle cars to turbocharged Hyundais, almost every carmaker will feature extreme versions of its cars, built in-house or by high-end custom shops. Detroit's automakers will use the four-day show to promote their new vehicles, pony cars and growing aftermarket divisions. "The show really acts as a great buzz generator," said Peter MacGillivray, SEMA vice president communications. Read more from The Detroit News.