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+++ German auto maker BMW Group is limiting its use of costly but lightweight carbon fibre and turning to cheaper lightweight materials for its biggest selling cars to keep profit margins high. Lighter cars consume less fuel or if they are battery-powered can drive for longer on a full charge, vital attributes for manufacturers seeking to score points with consumers and regulators. After investing heavily in carbon fibre, which is stiffer and lighter than aluminium, BMW is now faced with tough choices on how to build its cars more profitably, as competitors close in with their own electric car offerings. “The main equation is how much cost do I spend for a kilogram reduction in weight. It is not about one material it is about the combination of materials”, Oliver Zipse, BMW’s board member responsible for manufacturing, said at the opening of a new 20 million euro high-tech research facility specialising in lightweight materials. The lighter you can make an electric car, the less you need a large battery to power it, saving costs. Batteries are the most expensive part of electric vehicles, which remain an unprofitable segment in the auto industry. After launching 2 cars which made heavy use of carbon fibre including the i3 and the i8 in 2013, BMW’s new 5-series, presented earlier this month, does not use the material for major components. Sales of BMW’s i3 have failed to take off, analysts say, in part because of the extensive use of carbon fibre, which has made the vehicle expensive. The BMW i8’s passenger cell is made of carbon fibre reinforced plastic, a manufacturing technique which involves bonding carbon fibres to make components which would otherwise have been made using conventional welding and stamping methods if they had been made of metal. Carbon fibre costs around 16 euros per kilo, compared with less than a euro for a kilo of common steel, according to consultants at Frost & Sullivan. BMW is under pressure to raise its game now German rivals Daimler, parent company of Mercedes-Benz, and Volkswagen, which owns Audi, as well as Tesla Motors in the United States have outlined aggressive plans to court affluent buyers – and satisfy regulators’ demands – with new electric cars. BMW said last month it would expand its electric offerings with all-electric versions of Mini, and its X3, for 2019 and 2020, respectively. Zipse declined to comment on whether future BMW and Mini vehicles will make extensive use of composite materials. BMW Chief Executive Harald Krüger was more direct, effectively ruling it out for smaller low margin cars. “The material is still too expensive and for smaller segments and smaller vehicles it can be not competitive”, Krüger said at an event in Los Angeles earlier this month. Advances in battery technology have improved vehicle operating range by about 50 percent since 2013, taking some pressure off the need to use ultra expensive lightweight materials in manufacturing. After investing between 1.5-2 billion euros to develop carbon-fibre based hybrid and electric cars, BMW is now working hard to develop “hybrid” methods, which combine carbon with other materials like steel and aluminium. BMW’s past investment in carbon fibre will be a great help, said Jochen Kopp, who specialises in product and process planning for carbon fibre reinforced plastics. The Munich-based carmaker now has a 2 year lead on rivals in terms of carbon fibre mass production know-how, he said. “It takes time to learn how it behaves in manufacturing, how it reacts to being bonded to other materials. This has implications for tooling, purchasing and manufacturing. We understand the complete development chain”, Kopp said. +++

+++ In terms of quality, annual surveys say that FIAT CHRYSLER Automobiles (FCA) hasn’t been doing very well lately, and continuously replacing heads of departments doesn’t help either. Dodge, Chrysler, Fiat and RAM landed at the bottom of this year’s Consumer Report’s survey, occupying the last four spots. 2015 wasn’t too kind either, and FCA tried to fix the problem by changing its execs in charge of quality. All in vain, because the last three (Betts, Liddane and Garberding) failed to turn around the company, despite being competent individuals, which could indicate that the real problems comes from elsewhere. According to Autonews, in annual surveys, suppliers criticized FCA for a number of reasons, including making costly, last minute changes to various products, delaying design decisions, and even trying to reduce costs from its supply network. As you’d imagine, these “practices” weren’t on the suppliers’ liking, so they allegedly began cutting corners in order to stay profitable. Moreover, FCA’s tendency of rushing vehicles to market didn’t help either, as some of the finished products were usually rough around the edges (to put it mildly). Maybe that’s the reason why automobiles like the Dodge Dart and the Chrysler 200 were cut short. Sure, Consumer Report’s surveys aren’t the absolute representative of actual quality issues, but it just shows how FCA is being perceived these days. +++

+++ FORD reported a more than 50 percent drop in third-quarter net income, saying its North American business suffered from lower sales, higher recall costs and a complicated introduction of a new pickup truck. The profit exceeded Wall Street expectations, however. The automaker said it still expected full-year earnings of $10.2 billion and a return to positive cash flow after burning through $2 billion in the third quarter. Net income dropped to $961 million, or 24 cents a share, from $2.2 billion, or 55 cents a share, a year earlier. Excluding one-time items, Ford said earnings were 26 cents a share, beating the analysts’ average estimate of 20 cents compiled by Thomson Reuters I/B/E/S. Third quarter revenue was $35.9 billion, down 6 percent, and North American operations revenue was $21.8 billion, down 8 percent. Ford had signaled most of the major numbers at a September investors presentation, and the results were little changed. The company’s shares were down about 1.4 percent at $11.76 in afternoon trading. Ford’s pretax operating margins were down by about half at 5.8 percent in North America and 3.3 percent worldwide. “What’s happening to the company is what’s happening in North America”, Chief Financial Officer Bob Shanks told reporters. Shanks said 3 factors accounted for a $1.6 billion decline in Ford’s North American pretax profit: costs of ramping up the new Super Duty pickup truck, which has an average price of about $62,000; a door-latch recall charge of $600 million recall; and lower profits from the company’s F-150 pickup truck. Ford is cutting production of the F-150 in the fourth quarter and, in a new action, will idle one shift for a week at a plant in Kansas City, Missouri, to reduce inventories of the truck, Shanks said. The F-150 is Ford’s best-selling vehicle and one of its most profitable models. The company said pretax profit in Europe jumped to $138 million from $9 million. However, Shanks said the falling value of the British pound would cost Ford $140 million in the second half of 2015 and $600 million next year. Ford is 80 percent hedged against the currency for 2017, he said. Income from Ford’s Chinese joint ventures rose 26 percent to $320 million. “China is very, very strong”, Shanks said. +++

+++ Korean carmakers HYUNDAI and KIA will pay $41.2 million to resolve an investigation by 33 U.S. states over the their 2012 mileage restatements, state attorneys general said. Hyundai said it agreed to settle state consumer protection claims but didn’t admit to violating any laws. The $41.2 million fine to Hyundai and Kia covers the attorneys general “investigative costs”, Hyundai said. Kia said it was pleased to have the issue behind it. In 2014, the U.S. government hit the automakers with $350 million in penalties for overstating fuel economy ratings. Under the accord, which involved the sale of 1.2 million cars and SUVs, the companies paid a $100 million penalty, spent around $50 million to prevent future violations and forfeited emissions credits estimated to be worth more than $200 million. In addition, they agreed to pay $395 million in 2013 to resolve claims from vehicle owners. A 2012 restatement reduced the automakers’ fleetwide average fuel economy from 27 miles to 26 miles per gallon for the 2012 model year. Vehicles included the Hyundai Accent, Elantra, Veloster and Santa Fe and the Kia Rio and Soul. Hyundai had to drop claims that four models in 2012 had gotten 40 mpg. As part of the U.S. government settlement, Hyundai and Kia agreed to reorganize their emissions certification group, improve testing, better manage test data, enhance employee training and audit fleets for model years 2015 and 2016. A number of automakers have restated mileage figures in recent years amid scrutiny by the U.S. Environmental Protection Agency. In May, General Motors Co said it would give debit cards or extended warranties to 146,000 North American owners of new sport utility vehicles to compensate for overstated fuel efficiency. Reuters has reported the program would cost General Motors about $100 million. In June 2014, Ford lowered fuel economy ratings on 6 new vehicles, including the rating on the Lincoln MKZ hybrid by 7 miles per gallon. It offered payments of $125 to $1,050 to more than 200,000 owners as compensation for the additional fuel expense because of lower-than-anticipated efficiency. It was the second time in less than a year that Ford restated fuel efficiency of some vehicles. +++

+++ BMW board member Oliver Zipse said there is no need to decide yet whether the Brexit vote is a reason to shift manufacturing of its MINI brand away from Oxford to other locations in Europe. Britain’s vote in June to leave the European Union has raised doubts on whether it can keep tariff free access to the European common market, prompting various carmakers with factories in the United Kingdom to review their production plans. BMW Group, which manufactures the Mini in the Netherlands and the United Kingdom, is not currently under pressure to make any changes or decide about further investments in its assembly line in Oxford, Zipse said. “The Mini has been launched not too long ago, now is not the time to make this decision”, Zipse, BMW Group’s board member responsible for manufacturing, told. “When the time comes when we have to do the next bigger investment, we will have to look at the situation”, Zipse said. Asked whether BMW could shift more production of the Mini to the Netherlands, Zipse said, “We have possibilities, but currently we don’t have to”. Earlier, Autointernationaal.nl reported that Japanese carmaker Nissan will continue to build two new models at Britain’s largest car plant, despite the vote to quit the EU. +++

+++ SKODA ’s usual values of space and practicality could be left aside when it comes to a new stylish vehicle, based on the recently unveiled Kodiaq SUV. The sportier version of the Kodiaq is definitely on the automaker’s ‘to do’ list for the European market, according to AutoExpress, which is citing the brand’s chief, Bernhard Maier. “The coupe SUV is a wonderful derivative. We are going to make the brand even more emotional”, Maier said. Skoda had already green lit a coupe derivative of the Kodiaq for the Chinese market, which will be assembled locally. It would love to have it at its European dealerships, but first it must ensure it has an adequate production capacity – and that’s no easy feat. “We would like to have this car in Europe, yes. The real problem is that we do not have the capacity to build everything that we would like to build”, added R&D Board Member Christian Strube. “There would be a really big potential for the Kodiaq Coupe. It’s not a question of potential; I think there is a business case. It’s a question of capacity in our factories. We’re no selling so many cars that we’re discussing where we would be able to build this car”. As for the coupe-ish SUV, this is expected to gain a sloping roofline, sweptback profile, a front end inspired by the Superb, and large wheels, on top of an interior familiar to other models made by Skoda, and possibly influenced by several Volkswagen Group vehicles. It should be offered solely as a 5-seater, with a bigger boot capacity over its main rivals, and a wide range of petrol and diesel engines, mated to manual and DSG automatic transmissions. GreenLine and plug-in hybrid versions are also being weighed. +++

+++ TATA Sons accused its former chairman, Cyrus Mistry, of making “unsubstantiated claims and malicious allegations” against the Indian conglomerate as the gloves came off in a bitter and highly public row over his sacking earlier this week. The acrimonious exchanges have prompted aides to Prime Minister Narendra Modi to urge restraint in a dispute that could sully the reputation of one of India’s oldest and most respected business houses. Tata Sons has had only 6 chairmen since it was founded in 1868, growing into a $103 billion international group spanning cars, steel and information technology. Mistry’s parting shot, in a blistering 5-page letter written after he was ousted in a boardroom coup, accused the company of failures of governance that he said had destroyed billions of dollars in shareholder value. He also alleged inappropriate interference by Ratan Tata, the 78-year-old patriarch who hired him and has come out of retirement to run the business in a caretaker role. Tata, in an 8-paragraph statement, dismissed Mistry’s claims. “The correspondence makes unsubstantiated claims and malicious allegations”, Tata Sons said in the statement after Mistry’s letter was leaked to the press. “These will be responded to in an appropriate manner”, the company said without elaborating, raising the prospect that the war of words could lead to a legal battle. The country’s 2 largest stock exchanges demanded clarity from Tata’s more than 2 dozen listed units in what could herald scrutiny over why investors were not told of Mistry’s concerns earlier. The Securities and Exchange Board of India (SEBI), the capital markets regulator, is looking into whether Tata Sons flouted corporate governance rules, as Mistry alleges in his letter to the board, 2 people familiar with the matter told Reuters. SEBI has also asked the National Stock Exchange and BSE Ltd for price movement data on all listed companies under the Tata umbrella, one of those people said. SEBI could not immediately be reached for comment. +++

+++ The Hilux might be one of TOYOTA ’s toughest models, but it only takes a moose to bring it down. We’re talking about the moose test, obviously. The 8th-generation Hilux is the result of Toyota’s pick-up building expertise, 48 years in the making. Even so, the car reportedly has a major flaw. According to Swedish publication Teknikens Värld – known for almost flipping the 1997 A-Class and the 2012 Grand Cherokee in the moose test – the new Hilux exhibits a similar, dangerous behavior during evasive maneuvers under load. After subjecting the pick-up to the test, the Hilux under-performed dramatically at only 60 km/h, as opposed to its direct competitors which didn’t have problems even at higher speeds. As required by the law, the Hilux comes as standard with electronic stability control, but the absence of an anti-rollover system, in conjunction with too much tire grip, can cause the vehicle to (almost) flip, as Ruben Börjesson, Teknikens Värld’s test driver explained. The conclusion is worrying, and, as Teknikens Värld said, there’s “something seriously wrong with the Toyota’s dynamic safety system”. However, if equipped with bigger wheels, the Hilux’s effect diminishes, although the truck still lifts the inside wheel. +++

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