Suzuki’s 84-year-old CEO causes concern over lack of succession plan

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Osamu Suzuki’s term as head of the carmaker has been extended a further year.

Photo credit: Bloomberg

Automotive News

June 28, 2014 – 12:01 am ET

TOKYO (Bloomberg) — Suzuki Motor Corp.’s investors are becoming increasingly concerned at the lack of clarity over who will succeed the carmaker’s 84-year-old Chairman and President, Osamu Suzuki, who has spent almost three decades as head of the carmaker.

On Friday, Suzuki’s term was extended by one year at the annual general meeting in Hamamatsu, southwest of Tokyo, despite his age.

“It’s a big risk having a 84-year-old at the helm and there’s a widespread sense of uncertainty,” said Kazuyuki Terao, Tokyo-based chief investment officer at Allianz Global Investors Japan Co. “We’re most concerned that if Osamu leaves suddenly given his age, the market will react negatively without knowing what comes next.”

While Suzuki earned a record profit last year, its revenue is dwarfed by automakers like Toyota Motor Corp., undermining its ability to keep up with spending on research and development.

Investors such as Mizuho Asset Management are also concerned about the carmaker’s strategic direction after Osamu Suzuki leaves. While he hasn’t designated a successor, Osamu Suzuki promoted four of his lieutenants in 2011 to the level of executive vice presidents, from which a president may eventually be chosen. They include his son, Toshihiro Suzuki, 55, who heads the company’s overseas business.

The contenders

The other three EVPs are Yasuhito Harayama, 58, who used to work for Japan’s economy and trade ministry, and company veterans Minoru Tamura, 66, and Osamu Honda, 64.

“It’s not transparent,” said Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset. “We don’t know what to expect. That’s not good for investors.” Both Allianz and Mizuho Asset owned Suzuki shares, according to data compiled by Bloomberg.

Ei Mochizuki, a Suzuki spokesman in Tokyo, declined to comment on the matter.

Osamu Suzuki’s son-in-law Hirotaka Ono, whom he groomed to take over Suzuki Motor, died in 2007 at the age of 52 after battling pancreatic cancer. In his memoir, “I’m a small-business boss,” Osamu Suzuki wrote that his plan “fell apart” with Ono’s passing. “Nothing is more difficult than picking a successor,” he said in the memoir. “Although president is not a position that can be shared by many, I have to say I made a mistake by locking in the person too early. I should have prepared two to three candidates, because you don’t know what will happen to them no matter how young they are.”

New chief

The new Suzuki president would have to safeguard the company’s dominance in India, its biggest market, where Nissan Motor Corp. and Honda Motor Co. are wooing customers with wider, lower-priced selections. The new chief would also have to see through its dispute with shareholder Volkswagen Group — if Osamu Suzuki isn’t able to do it himself while still president — and find a new alliance partner.

“We understand the need for the discussion for succession,” Toshihiro Suzuki said in an interview in August. “For now, our priority is to put an end to the VW arbitration.” The issue of succession wasn’t discussed at the two-hour annual general meeting on Friday, which was attended by 569 stock holders.

Long career

A former bank employee, Osamu Suzuki got his start in the automotive business through his arranged marriage to Shoko Suzuki, the granddaughter of Michio Suzuki, who founded Suzuki Motor’s predecessor company. He then took his wife’s surname, as is the Japanese custom when there are no male heirs to a family business. In a career spanning five decades, he led Suzuki Motor’s overseas expansion by leveraging the carmaker’s expertise in small cars to build a dominant market share in India during his first of two term as president from 1978 to 2000. He also steered the company into alliances with two of the world’s biggest automakers, VW and General Motors Co., that ultimately failed.

In 1981, GM, then the world’s biggest carmaker, agreed to buy a stake in Suzuki as the Japanese company sought to expand in North America and Europe. GM would later hold as much as 20 percent of Suzuki Motor after doubling its stake in 2001. Reeling from five straight quarterly losses, the U.S. carmaker began selling its Suzuki Motor shares for cash in 2006 and completed the divestment in 2008, before filing for bankruptcy.

VW alliance

After the GM alliance was dissolved, Suzuki Motor agreed to a tie-up with Germany’s Volkswagen, which bought a 19.9 percent stake in the Japanese company in 2010. The VW alliance descended into acrimony after the German carmaker described Suzuki Motor as an “associate” in an annual report, and as the Japanese carmaker accused VW of disparaging its honor by alleging Suzuki Motor had violated their partnership agreement by buying engines from Italy’s Fiat Group.

The two partners have been in international arbitration since November 2011 to settle Suzuki’s demand that VW sell back its stake, which VW has turned down.

When Osamu Suzuki took over from Hiroshi Tsuda in 2008 for his second stint as president — in addition to his role as chairman — Suzuki Motor was facing its first profit decline in eight years as a global recession and tighter lending dented car demand. He cut costs by shifting some production out of Japan to Thailand and pulled out of the U.S. in 2012. In India and Japan, the company’s two biggest markets, he boosted Suzuki’s sales after revamping the Wagon R and Alto small cars.

Record profit

Last year, the company made a record profit of 107.5 billion yen. Suzuki’s shares have gained 13 percent this year, outperforming the 3.5 percent decline in the benchmark Topix Index.

“I think he has done a terrific job with the company,” said Edwin Merner, president of Atlantis Investment Research Corp., which doesn’t own Suzuki shares. “But it’s time for somebody else to take it over.”

http://www.autonews.com/article/20140628/OEM02/306289995/suzukis-84-year-old-ceo-causes-concern-over-lack-of-succession-plan

Chrysler investigated for faulty ignition switches alongside GM inquiry

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Problems with vehicle ignition switches have drawn US safety regulators to investigate a second Detroit automaker, Chrysler Group, even as General Motors’ chief executive Mary Barra was providing US lawmakers on Wednesday with more details on GM’s ongoing switch issues.

Chrysler is the subject of two investigations involving possible nondeployment of airbags because of potentially defective switches that can be turned off in more than 1.2m older Jeep, Dodge and Chrysler models, according to the National Highway Traffic Safety Administration (NHTSA). No deaths or injuries have been reported, NHTSA said.

NHTSA, which administers safety recalls, continues to investigate similar issues at GM, which this year has recalled more than 20m vehicles worldwide, including 6.5m for switch-related issues that could disable airbags in crashes.

The new Chrysler investigations suggest that issues with faulty ignition switches that could cause airbags to fail may be more widespread than once believed and eventually could touch other vehicle manufacturers besides GM and Chrysler.

The safety agency on Wednesday said the Chrysler probes resulted from NHTSA’s recent “communication with automotive manufacturers and suppliers regarding airbag design and performance related to the position of the vehicle ignition switch”.

It added: “As part of NHTSA’s broader efforts to evaluate this issue, the agency examined all major manufacturers’ airbag deployment strategies as they relate to switch position.”

NHTSA’s acting administrator, David Friedman, earlier this year told lawmakers that, prior to GM’s recall of the Chevrolet Cobalt and Saturn Ion, the agency did not fully understand the link between the cars’ ignition switch and the ability of the air bags to deploy in a crash.

The agency said it had received complaints of engine stalling in the Chrysler models, but was not aware of any incidents where the air bags did not deploy.

Chrysler, a unit of Fiat Chrysler Automobiles, said it was “awaiting additional information” from NHTSA and would cooperate fully with the investigations.

A chassis assembly line supervisor on the assembly line at the Chrysler Jefferson North Assembly plant in Detroit.A chassis assembly line supervisor on the assembly line at the Chrysler Jefferson North Assembly plant in Detroit. Photograph: Paul Sancya/AP

German automaker Daimler AG, Chrysler’s previous owner, said on Wednesday it was not affected by the NHTSA investigations of Chrysler switches.

One of the NHTSA investigations of Chrysler, involving about 525,000 Jeep SUVs made between 2005 and 2007, focuses on complaints about switches that can be bumped by a driver’s knee to the “off” or accessory position, turning off the engine and potentially disabling air bags in a frontal crash.

GM cited similar issues in several of its switch-related recalls, including 2.6m Cobalts, Ions and other cars linked to at least 13 deaths.

NHTSA also is investigating about 700,000 Chrysler Town & Country and Dodge Grand Caravan minivans and Dodge Journey crossovers from model years 2008-2010 for complaints about switches that can be turned off when driving on rough roads, which could prevent airbags from deploying in a crash.

In March 2011, Chrysler recalled 2010 Grand Caravan, Town & Country and Journey models for “inadvertent ignition key rotation”.

NHTSA said it opened the latest recall query “to assess the scope and effectiveness” of the previous recall, and determine whether the recall should be extended to 2008-2009 models.

Owners of even earlier models have complained of similar problems.

In a complaint filed in March with NHTSA, the driver of a 2006 Chrysler Town & Country wrote: “Ignition switch shuts off while driving and engine stops running. Possible from bumps in road or bumping key ring with driver’s knee. Has happened more than three times.”

GM on Monday recalled 3.4m older mid-size and full-size sedans, including the Chevrolet Impala and the Cadillac DeVille, saying the switches on those cars could be bumped out of the run position by a combination of heavy key chains and rough roads.

In addition, GM last Friday recalled 511,528 Chevrolet Camaros from 2010-2014 because a driver’s knee could bump the key fob out of the run position and turn off the engine.

GM’s Barra returned before a House Energy and Commerce subcommittee on Wednesday to face harsh questions about why the No1 US automaker waited more than a decade to recall millions of vehicles with the defect linked to at least 13 deaths. Barra, who became CEO only in January but is a GM veteran of more than 30 years, has said she did not become aware of the problem until December 2013.

http://www.theguardian.com/business/2014/jun/18/chrysler-gm-faulty-ignition-switch-investigation-recall

Infiniti, Mercedes start joint engine output in Tenn.

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The plant will produce turbocharged 2-liter four-cylinder engines for the Infiniti Q50 sedan.

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DECHERD, Tenn. — Infiniti began building its first engines outside of Japan here today in a new factory that represents the deepening ties between Nissan Motor Corp. and Daimler AG.

The plant, separated from the large-volume Nissan powertrain factory next door, will produce turbocharged 2-liter four-cylinder engines for the Infiniti Q50 sedan as well as the C-class sedan that Mercedes-Benz recently launched in Vance, Ala.

The $319 million engine plant represents a complex 50-50 venture between Renault-Nissan and Daimler that weaves together elements from around the world.

The venture was jointly financed by Nissan and Daimler to be a freestanding Infiniti plant. It produces a Daimler-designed engine out of engine blocks, heads and crankshafts imported from Germany.

The engines are assembled on a Nissan-designed production line that incorporates Daimler engineering processes. They are then exported to Japan where they are installed at a Nissan assembly plant in the Infiniti Q50 that is then exported to Europe.

The Decherd investment will allow Infiniti to produce up to 250,000 engines a year in six variations — three for Mercedes and three for Infiniti. Details of future engine variations have not been disclosed.

Johan de Nysschen, Infiniti Motor Co. president, said here today that Mercedes will receive the larger share of Decherd engines at first, simply because Mercedes C-class sales are higher than the Q50 volume. But he said the allocation of engines eventually will even out.

De Nysschen said the engine will also be supplied to the Infiniti Q50 that will be sold in China. A Q50 equipped with the 2-liter Decherd engine will reach the U.S. market in model year 2016, de Nysschen said.

He declined to comment on a planned announcement to be made Friday by Nissan CEO Carlos Ghosn and Daimler Chairman Dieter Zetsche to further the partnership between the two automakers.

Reuters, citing sources familiar with the plans, reported today that Daimler and Nissan have finalized a joint venture deal to build future Mercedes and Infiniti compact cars in Mexico, and will unveil details on Friday.

De Nysschen also declined to say whether that scheduled announcement would affect engine production at the newly opened plant.

You can reach Lindsay Chappell at lchappell@crain.com.

http://www.autonews.com/article/20140626/OEM01/140629896/infiniti-mercedes-start-joint-engine-output-in-tenn

Chrysler investigated for faulty ignition switches alongside GM inquiry

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Problems with vehicle ignition switches have drawn US safety regulators to investigate a second Detroit automaker, Chrysler Group, even as General Motors’ chief executive Mary Barra was providing US lawmakers on Wednesday with more details on GM’s ongoing switch issues.

Chrysler is the subject of two investigations involving possible nondeployment of airbags because of potentially defective switches that can be turned off in more than 1.2m older Jeep, Dodge and Chrysler models, according to the National Highway Traffic Safety Administration (NHTSA). No deaths or injuries have been reported, NHTSA said.

NHTSA, which administers safety recalls, continues to investigate similar issues at GM, which this year has recalled more than 20m vehicles worldwide, including 6.5m for switch-related issues that could disable airbags in crashes.

The new Chrysler investigations suggest that issues with faulty ignition switches that could cause airbags to fail may be more widespread than once believed and eventually could touch other vehicle manufacturers besides GM and Chrysler.

The safety agency on Wednesday said the Chrysler probes resulted from NHTSA’s recent “communication with automotive manufacturers and suppliers regarding airbag design and performance related to the position of the vehicle ignition switch”.

It added: “As part of NHTSA’s broader efforts to evaluate this issue, the agency examined all major manufacturers’ airbag deployment strategies as they relate to switch position.”

NHTSA’s acting administrator, David Friedman, earlier this year told lawmakers that, prior to GM’s recall of the Chevrolet Cobalt and Saturn Ion, the agency did not fully understand the link between the cars’ ignition switch and the ability of the air bags to deploy in a crash.

The agency said it had received complaints of engine stalling in the Chrysler models, but was not aware of any incidents where the air bags did not deploy.

Chrysler, a unit of Fiat Chrysler Automobiles, said it was “awaiting additional information” from NHTSA and would cooperate fully with the investigations.

A chassis assembly line supervisor on the assembly line at the Chrysler Jefferson North Assembly plant in Detroit.A chassis assembly line supervisor on the assembly line at the Chrysler Jefferson North Assembly plant in Detroit. Photograph: Paul Sancya/AP

German automaker Daimler AG, Chrysler’s previous owner, said on Wednesday it was not affected by the NHTSA investigations of Chrysler switches.

One of the NHTSA investigations of Chrysler, involving about 525,000 Jeep SUVs made between 2005 and 2007, focuses on complaints about switches that can be bumped by a driver’s knee to the “off” or accessory position, turning off the engine and potentially disabling air bags in a frontal crash.

GM cited similar issues in several of its switch-related recalls, including 2.6m Cobalts, Ions and other cars linked to at least 13 deaths.

NHTSA also is investigating about 700,000 Chrysler Town & Country and Dodge Grand Caravan minivans and Dodge Journey crossovers from model years 2008-2010 for complaints about switches that can be turned off when driving on rough roads, which could prevent airbags from deploying in a crash.

In March 2011, Chrysler recalled 2010 Grand Caravan, Town & Country and Journey models for “inadvertent ignition key rotation”.

NHTSA said it opened the latest recall query “to assess the scope and effectiveness” of the previous recall, and determine whether the recall should be extended to 2008-2009 models.

Owners of even earlier models have complained of similar problems.

In a complaint filed in March with NHTSA, the driver of a 2006 Chrysler Town & Country wrote: “Ignition switch shuts off while driving and engine stops running. Possible from bumps in road or bumping key ring with driver’s knee. Has happened more than three times.”

GM on Monday recalled 3.4m older mid-size and full-size sedans, including the Chevrolet Impala and the Cadillac DeVille, saying the switches on those cars could be bumped out of the run position by a combination of heavy key chains and rough roads.

In addition, GM last Friday recalled 511,528 Chevrolet Camaros from 2010-2014 because a driver’s knee could bump the key fob out of the run position and turn off the engine.

GM’s Barra returned before a House Energy and Commerce subcommittee on Wednesday to face harsh questions about why the No1 US automaker waited more than a decade to recall millions of vehicles with the defect linked to at least 13 deaths. Barra, who became CEO only in January but is a GM veteran of more than 30 years, has said she did not become aware of the problem until December 2013.

http://www.theguardian.com/business/2014/jun/18/chrysler-gm-faulty-ignition-switch-investigation-recall

Chrysler names Winter head of product planning for North America

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Winter, 55, will be responsible for research and planning for all of Chrysler Group’s vehicles in the United States, Canada and Mexico.

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DETROIT — Chrysler Group named its former minivan chief engineer to head the automaker’s product planning for North America, effective immediately.

As NAFTA head of product planning, Ben Winter, 55, will be responsible for research and planning for all of the company’s vehicles in the United States, Canada and Mexico.

He replaces Joe Veltri, who in May was named head of investor relations for Fiat Chrysler Automobiles.

Most recently, Winter was vice president for vehicle engineering at Chrysler. He joined Chrysler in 2008 as chief engineer for its minivan lineup after working at Ford Motor Co.

Winter holds several degrees from the University of Michigan, including a doctorate in metallurgical engineering, and holds an engineering degree from the University of Missouri-Rolla.

You can reach Larry P. Vellequette at lvellequette@crain.com.

http://www.autonews.com/article/20140624/OEM02/140629941/chrysler-names-winter-head-of-product-planning-for-north-america

GM to begin processing faulty ignition switch claims by 1 August

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General Motors expects to begin processing claims related to its deadly faulty ignition switches by 1 August, chief executive officer Mary Barra will tell the US Congress on Wednesday.

The GM boss’s prepared testimony was released a day before her second appearance before the House energy and commerce committee. In her previous appearance, Barra faced a barrage of criticism over GM’s handling of the defect, linked to at least 13 deaths.

GM released an internal report into the scandal earlier this month compiled by former US attorney Anton Valukas. The company fired 15 employees and instituted a series of new safety checks as the report was released. In her testimony, Barra describes the report as “brutally tough and deeply troubling.”

“It paints a picture of an organization that failed to handle a complex safety issue in a responsible way. I was deeply saddened and disturbed as I read the report. For those of us who have dedicated our lives to this company, it is enormously painful to have our shortcomings laid out so vividly. There is no way to minimize the seriousness of what Mr Valukas and his investigators uncovered,” she said.

GM appointed attorney Ken Feinberg to work on a plan to compensate victims of the ignition defect, which led to car engines turning off unexpectedly and disabling airbags. Barra said Feinberg, known for his handling of compensation for victims in high profile cases including the 9/11 terrorist attacks and BP Deepwater Horizon oil spill, will outline his plan to GM by the end of the month and the company intends to start compensating victims by 1 August.

GM has recalled more than 20m cars this year, including 2.6m Chevrolet Cobalts and other small cars with ignition problems. On Monday it issued a recall for another 3.36m cars including Chevrolet Impala, Cadillac Deville and Buick Lacrosse for an ignition issue that can lead to power steering and power braking being turned off while the car is being driven.

Valukas will also testify before the committee.

In his prepared remarks he said: “The story of the Cobalt is one of a series of individual and organizational failures that led to devastating consequences. Throughout the decade that it took GM to recall the Cobalt, there was a lack of accountability, a lack of urgency, and a failure of company personnel charged with ensuring the safety of the company’s vehicles to understand how GM’s own cars were designed.

“We found failures throughout the company — including individual errors, poor management, byzantine committee structures, lack of training, and inadequate policies.”

It remains to be seen whether Feinberg’s plan or Valukas’s report will satisfy Congress, or the lawyers who claim GM’s failures were responsible for many more accidents and fatalities.

Commenting on the car company’s latest recall Monday, committee chairman Fred Upton said: “This latest recall raises even more questions about just how pervasive safety problems are at GM. Drivers and their families need to be assured that their cars are safe to drive.”

http://www.theguardian.com/business/2014/jun/17/gm-claims-faulty-ignition-switches-mary-barra

GM recalls 3m more cars to fix ignition switch problems

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General Motors has recalled 3 million more cars for ignition switch issues, roughly doubling the number of GM vehicles with known switch problems in a crisis that has defined the automaker and new chief executive Mary Barra this year.

GM on Monday recalled 3.36 million midsize and fullsize cars globally with ignition switches that can be jarred out of the “run” position, potentially affecting power steering, power brakes and air bags.

The switch issue is similar to the defect linked to at least 13 deaths in an earlier, 2.6-million vehicle recall of Chevrolet Cobalts and other small cars.

GM engineers first noted the Cobalt problem more than a decade ago, and GM’s slow response to the switch issue triggered investigations within the company and by Congress and federal agencies.

“The recall is just sort of the tip of the iceberg in terms of what has to be done” at GM, senator Richard Blumenthal, a Democrat from Connecticut and one of GM’s more vocal critics in Congress, said after Monday’s recall.

GM said the engineer who designed the defective Cobalt switches, Ray DeGiorgio, also designed the switches on the latest batch of recalled cars. DeGiorgio was fired after the earlier recall. He could not be reached for comment.

GM has issued 44 recalls this year totaling about 20 million vehicles worldwide, which is more than total annual US vehicle sales. Of the recalls this year, nearly 6.5m of the vehicles were recalled for ignition switch-related issues, including more than half a million Chevrolet Camaros on Friday.

The automaker raised a recall-related charge for the second quarter to $700m from $400m. That takes GM’s total recall-related charges this year to $2 billion.

Despite the rash of recalls this year, GM US sales rose in May to the highest level since August 2008.

GM’s high profile problem this year has catalyzed recalls at other automakers, said David Cole, chairman emeritus of the Center of Automotive Research in Ann Arbor. He described the recent flurry of activity as “recall spring.”

“If it were unique to GM, I would say it is a much more serious problem,” said Cole.

Clarence Ditlow, executive director Center for Auto Safety Of Monday’s recall, said GM could not afford to take a chance on not recalling a car. “Their calculus has totally changed,” he said.

GM said it was aware of eight crashes and six injuries related to the latest recall, and that there were no fatalities.

The automaker on Monday said it would replace or rework ignition keys to eliminate a slot in the end of the key. The slot allows a dangling key ring to slip to one side and pull the ignition key out of run position.

“The use of a key with a hole, rather than a slotted key, addresses the concern of unintended key rotation due to a jarring road event, such as striking a pothole or crossing railroad tracks,” it said.

A spokesman said the ignition switches did not need to be replaced, even though they were “slightly” below the company specification for torque – the force needed to move the switch out of the run position.

The latest recall includes Buick LaCrosse, Chevrolet Impala, Cadillac DeVille and several other models, though only the Impala is currently in production. The cars cover model years 2000 through 2014.

Monday’s recall comes two days before CEO Barra is due to return to Congress to testify about the earlier Cobalt recall.

Barra will be joined by Anton Valukas, chairman of GM’s outside law firm Jenner & Block, who conducted a months-long investigation that detailed deep flaws in GM’s internal decision-making process.

The so-called Valukas report triggered the departures of 15 GM employees, including several high-ranking executives in the legal, engineering and public policy groups, as well as DeGiorgio.

GM said Barra wants to update Congress on the actions the company has taken in response to the switch recall crisis, including fixing the failures outlined in the company’s internal report, announcing plans to establish a victims’ compensation fund and setting up a structure at the company to ensure vehicle safety.

The U.S. National Highway Traffic Safety Administration, which administers vehicle recalls, said Monday that it would “monitor the pace and effectiveness” of the latest GM recall and “take necessary action as warranted.”

http://www.theguardian.com/business/2014/jun/17/gm-recalls-3m-more-cars-problems-ignition-switch

Audi has blueprints for range of high-performance electric cars

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Audi R8 V10 on Avus racetrack in Berlin

Production of the electric Audi R8 will be strictly tailored to demand. But the firm has also drawn up blueprints for several high-performance vehicles. Photograph: Martyn Goddard/Corbis

Audi has drawn up blueprints for a range of high-performance electric cars to take on US firm Tesla Motors, according to sources at the German carmaker.

Consumers have largely shunned battery-powered vehicles because of their high price tags and limited driving range as well as the scarcity of charging stations. But many analysts predict sales will rise sharply by the end of the decade.

Tesla has managed to stay ahead of the pack with new technology that has extended driving range and reduced costs. Its success and the excitement about BMW’s new “i” electric series have caught the attention of Audi, which some analysts have said risks looking like a laggard in an industry where innovation is a big draw for customers.

Audi, a unit of Volkswagen, is about to launch its first purely electric car, a battery-powered version of its R8 supercar, which is due to hit European dealerships in 2015 and will offer a range of 280 miles. This is close to the 312-mile range of Tesla’s top-selling Model S luxury saloon.

Production of the electric R8 will be strictly tailored to demand. However, Audi has also drawn up blueprints for several high-performance electric saloons and sport-utility vehicles, two company sources told Reuters, asking not to be identified because the matter is confidential.

http://www.theguardian.com/business/2014/jun/19/audi-high-performance-electric-cars-tesla-r8-supercar

GM recalls 3m more cars to fix ignition switch problems

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General Motors has recalled 3 million more cars for ignition switch issues, roughly doubling the number of GM vehicles with known switch problems in a crisis that has defined the automaker and new chief executive Mary Barra this year.

GM on Monday recalled 3.36 million midsize and fullsize cars globally with ignition switches that can be jarred out of the “run” position, potentially affecting power steering, power brakes and air bags.

The switch issue is similar to the defect linked to at least 13 deaths in an earlier, 2.6-million vehicle recall of Chevrolet Cobalts and other small cars.

GM engineers first noted the Cobalt problem more than a decade ago, and GM’s slow response to the switch issue triggered investigations within the company and by Congress and federal agencies.

“The recall is just sort of the tip of the iceberg in terms of what has to be done” at GM, senator Richard Blumenthal, a Democrat from Connecticut and one of GM’s more vocal critics in Congress, said after Monday’s recall.

GM said the engineer who designed the defective Cobalt switches, Ray DeGiorgio, also designed the switches on the latest batch of recalled cars. DeGiorgio was fired after the earlier recall. He could not be reached for comment.

GM has issued 44 recalls this year totaling about 20 million vehicles worldwide, which is more than total annual US vehicle sales. Of the recalls this year, nearly 6.5m of the vehicles were recalled for ignition switch-related issues, including more than half a million Chevrolet Camaros on Friday.

The automaker raised a recall-related charge for the second quarter to $700m from $400m. That takes GM’s total recall-related charges this year to $2 billion.

Despite the rash of recalls this year, GM US sales rose in May to the highest level since August 2008.

GM’s high profile problem this year has catalyzed recalls at other automakers, said David Cole, chairman emeritus of the Center of Automotive Research in Ann Arbor. He described the recent flurry of activity as “recall spring.”

“If it were unique to GM, I would say it is a much more serious problem,” said Cole.

Clarence Ditlow, executive director Center for Auto Safety Of Monday’s recall, said GM could not afford to take a chance on not recalling a car. “Their calculus has totally changed,” he said.

GM said it was aware of eight crashes and six injuries related to the latest recall, and that there were no fatalities.

The automaker on Monday said it would replace or rework ignition keys to eliminate a slot in the end of the key. The slot allows a dangling key ring to slip to one side and pull the ignition key out of run position.

“The use of a key with a hole, rather than a slotted key, addresses the concern of unintended key rotation due to a jarring road event, such as striking a pothole or crossing railroad tracks,” it said.

A spokesman said the ignition switches did not need to be replaced, even though they were “slightly” below the company specification for torque – the force needed to move the switch out of the run position.

The latest recall includes Buick LaCrosse, Chevrolet Impala, Cadillac DeVille and several other models, though only the Impala is currently in production. The cars cover model years 2000 through 2014.

Monday’s recall comes two days before CEO Barra is due to return to Congress to testify about the earlier Cobalt recall.

Barra will be joined by Anton Valukas, chairman of GM’s outside law firm Jenner & Block, who conducted a months-long investigation that detailed deep flaws in GM’s internal decision-making process.

The so-called Valukas report triggered the departures of 15 GM employees, including several high-ranking executives in the legal, engineering and public policy groups, as well as DeGiorgio.

GM said Barra wants to update Congress on the actions the company has taken in response to the switch recall crisis, including fixing the failures outlined in the company’s internal report, announcing plans to establish a victims’ compensation fund and setting up a structure at the company to ensure vehicle safety.

The U.S. National Highway Traffic Safety Administration, which administers vehicle recalls, said Monday that it would “monitor the pace and effectiveness” of the latest GM recall and “take necessary action as warranted.”

http://www.theguardian.com/business/2014/jun/17/gm-recalls-3m-more-cars-problems-ignition-switch

Hyundai-Kia tops J.D. Power’s Initial Quality Study for 1st time, dethroning GM

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Toyota takes 2nd place, GM is 3rd; Ford brand back up to industry average

Toyota takes 2nd place, GM is 3rd; Ford brand back up to industry average

The Kia Cadenza is one of the models that helped Hyundai-Kia take the top spot.

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For the first time, Hyundai-Kia group topped rival automakers in J.D. Power’s Initial Quality Study, while last year’s leader, General Motors, fell to third.

Hyundai and sibling-brand Kia led the U.S. industry in five segments in the 2014 study, second only to GM’s six segment wins. The combination of the Hyundai brand’s No. 4 ranking and Kia’s sixth-place finish put the Korean manufacturer ahead of No. 2 Toyota Motor Corp., whose overall score was dragged down by its Scion brand.

The Ford brand, which had wrestled with MyFord Touch infotainment system glitches that hurt its scores in recent years, recovered to match the industry average. (Click here to see table.)

While new-vehicle launches tend to weigh down scores as consumers get acclimated to new technologies, Kia avoided that with the Cadenza — a vehicle previously released in Korea before coming to the United States.

In contrast, GMC lost ground with the launch of its redesigned Sierra. The Sierra led the large light-duty pickup segment in 2013 but didn’t make J.D. Power’s top three pickups this year.

“Kia had a bit of help because the vehicle [Cadenza] had been in existence in Korea for a couple of years, so it’s a launch in the U.S. market but it’s not a launch of a brand-new, never-been-seen-before vehicle. That helps,” said David Sargent, vice president of global automotive at J.D. Power, in an interview. “Some of the imports can have a bit of a head start if they launched in their domestic market first.”

Quality scores are determined by the number of problems experienced per 100 vehicles, with lower scores signaling higher quality.

Photo credit: SHIRAZ AHMED

The 2014 Initial Quality Study is based on feedback from more than 86,000 buyers and lessees of new 2014 model year vehicles after 90 days of ownership. The study was conducted from February to May of this year.

Porsche, part of the Volkswagen AG, had 74 problems per 100 vehicles, the top score among brands for the second consecutive year. It was followed by Jaguar (with 87 problems), Lexus (92), Hyundai (94) and Toyota (105). 

Hyundai improved its score by 12 points, while Kia’s score remained at 106, 10 points better than the industry average. The Hyundai Accent, Elantra and Genesis as well as the Kia Cadenza and Sportage all nabbed segment wins.

“Receiving IQS awards in multiple vehicle segments acknowledges Hyundai’s commitment to quality and customer satisfaction across our entire product lineup, not just our luxury vehicles,” said Dave Zuchowski, CEO of Hyundai Motor America, in a statement.

GM’s Buick Encore, Chevrolet Malibu, Chevrolet Silverado HD, Chevrolet Suburban, GMC Terrain and GMC Yukon captured segment honors.

“Having the most award recipients of any automaker shows that we are on the right track by putting the customer front and center in everything we do,” said Alicia Boler-Davis, senior vice president of GM’s global quality and customer experience.

The Porsche Panamera, which won the large premium car category, was the highest-scoring vehicle overall with 62 problems reported for every 100 vehicles.

The Hyundai Accent (65) came in second, followed by the Mazda2 (66) and Chevrolet Silverado HD (68).

Photo credit: SHIRAZ AHMED

First 90 days

Sargent said the initial 90-day window is a crucial determinant in building customer loyalty.

J.D. Power 2006-12 data shows that 57 percent of customers who reported no problems in the first 90 days bought the same brand again, compared to 46 percent of those who reported five or more problems.

“This is worth literally billions of dollars to the automakers,” Sargent said today during an Automotive Press Association event in Detroit. “Every percentage point lost of loyalty is hundreds of millions of dollars to an automaker.”

Tech problems

The industry’s average of 116 problems per 100 vehicles was a slight increase from 113 in 2013, with J.D. Power attributing the rise to technological issues such as Bluetooth pairing, voice recognition and audio system issues. Newly launched vehicles, which are completely new to the market or have gone through significant redesigns, scored an average of 128 problems per 100 vehicles, compared with 113 for carryover vehicles, the study says.

“Things will stabilize,” Sargent said. “The early adopters of this type of system like Ford are starting to see some improvement, but coming behind them are lots of other manufacturers who are now introducing similar type of technology. Once we get through that first round, I suspect that we’ll see some improvement. Maybe three to four years before we start to see some improvement.”

Ford gains

Ford made strides in 2014 as it met the industry average for the first time since launching MyFord Touch.

The brand had ranked in the top five in 2010 before beginning its slide in 2011 after introducing a MyFord Touch setup that spawned widespread consumer complaints. Sargent said glitches included system freezes and a lagging screen that was slow to respond to button commands.

Ford has since responded by adding knobs and buttons to the center console and sending out software updates to remedy problems.

The brand scored 116, 15 points better than in 2013, to match the industry average.

“Almost all of their vehicles improved, including some of their high-volume vehicles like the Escape, like the Fusion and the Focus,” Sargent said. “Part of the improvement was a reduction in MyFord Touch-type problems.”

Photo credit: SHIRAZ AHMED

Big moves

Nissan (120) had the largest improvement among brands after seeing its score trimmed by 22 points.

Sargent said Nissan is rebounding after faltering in 2013 when it launched the Altima, Pathfinder and Sentra, adding 43 points to its problems-per-100-vehicles score.

Jaguar (87) and Ram (116) were the other big improvers among brands sitting at or above the industry average.

A strong launch of the sporty F-Type propelled Jaguar to second place in the brand rankings after finishing eighth in 2013. Jaguar said its 2014 lineup also included the XK coupe and convertible, and the XF and XJ sedans.

Ram’s rise was attributed, in part, to advancements in its audio entertainment system.

Scores fall

In addition to GMC, scores tumbled for Fiat, Infiniti, Acura and Jeep after major launches.

The Infiniti Q50 sedan, Acura MDX crossover, Jeep Cherokee, GMC Sierra and Fiat 500L all made debuts.

Fiat (206) added 52 problems per 100 vehicles, and Infiniti (128) had 33 more. Acura (131) tallied 29 more problems than it did a year earlier, and Jeep (146) increased by 28.

Chrysler Group says it has largely addressed the Jeep brand’s technology problems with software updates.

On the Fiat side, the automaker says the 2014 Fiat 500 was actually its third-best performing vehicle in the study, but the car didn’t have a large enough sample size to factor into the overall brand ranking. More 2013 Fiat 500’s were being sold during the survey period than the improved 2014 edition, Chrysler Group said.

“An owner’s quality perception is as much about delivering new products the customer loves ‒ including the latest technology, fuel efficiency, and a well-crafted design ‒ as it is minimizing dislikes such as a voice recognition system that misunderstands commands or a trip to the dealer for a repair,” said Doug Betts, Chrysler Group’s senior vice president of quality, in a statement. “It’s important to continually update our product line and introduce new technologies, but that can have a short-term affect for brands like Jeep and Fiat with new product and technology introductions.”

Acura’s rank fell to 25th place from sixth in 2013, largely attributable to the MDX’s launch.

Overall, Fiat was the last-place brand, below Jeep. Rounding out the bottom five were Mitsubishi (145), Scion (140) and Mazda (139).

GMC, which was in second place in 2013, fell out of the top 10 after scoring the industry average of 116. It scored 90 in 2013.

All of those vehicles are very high volume within those lineups,” Sargent said. “If you launch a high-volume vehicle and it doesn’t go particularly well, then as a brand, you’re going to show some significant decline. One would expect them to bounce back as the vehicle improves with age.

J.D. Power IQS results

Problems per 100 vehicles

Porsche

74

Jaguar

87

Lexus

92

Hyundai

94

Toyota

105

Chevrolet

106

Kia

106

BMW

108

Honda

108

Lincoln

109

Audi

111

Chrysler

111

Cadillac

115

Mercedes-Benz

115

Volvo

115

Ford

116

GMC

116

Ram

116

Industry Average

116

Buick

120

Nissan

120

Dodge

124

Land Rover

127

Infiniti

128

Volkswagen

128

Acura

131

Mini

133

Subaru

138

Mazda

139

Scion

140

Mitsubishi

145

Jeep

146

Fiat

206

 

 

Top three models per car segment

 

Highest Ranked:

 

 

Small Car

Hyundai Accent

Mazda MAZDA2

Kia Rio

Compact Car

Hyundai Elantra

Toyota Corolla

Honda Civic

Compact Premium Car

Lexus ES

Acura TL

Acura ILX (tie)

 

 

 

BMW 4 Series (tie)

Compact Sporty Car

Mazda MX-5 Miata

Volkswagen GTI

Scion tC

Compact Premium Sporty Car

Porsche Boxster

Porsche Cayman

Nissan Z

Midsize Car

Chevrolet Malibu

Hyundai Sonata

Toyota Camry

Midsize Sporty Car*

Dodge Challenger

Chevrolet Camaro

 

Midsize Premium Car

Hyundai Genesis

Lincoln MKS

BMW 6 Series (tie)

 

 

 

Lexus GS (tie)

 

 

 

Mercedes-Benz CLS-Class (tie)

Midsize Premium Sporty Car*

Porsche 911

Jaguar F-Type

 

Large Car

Kia Cadenza

Nissan Maxima

Toyota Avalon

Large Premium Car

Porsche Panamera

Lexus LS

Hyundai Equus

 

 

 

 

Top three models per SUV, MPV, van, pickup segments

 

Highest Ranked:

 

 

Small SUV

Buick Encore (tie)

 

 

 

Kia Sportage (tie)

 

 

 

Nissan Juke (tie)

 

 

Compact SUV

GMC Terrain

Chevrolet Equinox

Toyota FJ Cruiser

Compact Premium SUV

Infiniti QX50

BMW X3

Audi Q5

Compact MPV

Mazda MAZDA5

Kia Soul

Ford C-Max

Midsize SUV

Ford Edge

Hyundai Santa Fe (tie)

 

 

 

Nissan Murano (tie)

 

Midsize Premium SUV

Lincoln MKX

Porsche Cayenne

Infiniti QX70

Midsize Pickup

Honda Ridgeline

Nissan Frontier (tie)

 

 

 

Toyota Tacoma (tie)

 

Minivan

Chrysler Town & Country

Toyota Sienna

Dodge Grand Caravan

Large SUV

Chevrolet Suburban (tie)

Chevrolet Tahoe

 

 

GMC Yukon (tie)

 

 

Large Premium SUV*

Infiniti QX80

Cadillac Escalade

 

Large Light Duty Pickup

Ford F-150 LD

Toyota Tundra

Ram 1500 LD

Large Heavy Duty Pickup*

Chevrolet Silverado HD

GMC Sierra HD

 

 

 

 

 

* No other model in this segment performs above segment average.

Note: For a segment award to be issued, there must be at least three models with 80 percent of market sales in any given award segment. In the city car segment, these criteria were not met, so no award has been presented.

Source: J.D. Power Initial Quality Study

You can reach Vince Bond Jr. at vbond@crain.com. — Follow Vince on Twitter

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