Merger Rumors Prompt Worries About Warranties

If there weren't already enough reasons for people to hold off on buying a new car, rumors about a potential merger between GM and Chrysler have brought up even more doubts for consumers.

The possibility of GM acquiring Chrysler raises many questions, but those who follow the industry insist one of the questions people who just bought or are about to buy a new Chrysler vehicle should not worry about is what will happen to their warranty coverage should another automaker purchase Chrysler.

Joe Phillippi, principal with automotive research and consulting firm AutoTrends, says all automakers keep a warranty reserve to cover the cost of warranty expenses, and that Chrysler's reserve initially would be used to handle claims, but in the case of a merger the buying company would assume responsibility.

Dodge Challenger SE for the Young, Convertible for None

Youth will be served — with a V-6 engine.

Mike Accavitti, director of Dodge brand marketing, says the new-for-2009 Challenger SE, which has a 250-hp, 3.5-liter V-6, is aimed at younger buyers who have less cash for a new car than their Boomer counterparts.

"We showed the Challenger to some youth in focus groups when we were creating it, and they said, 'What the hell is that?' They didn't know what it was,” Accavitti said. “But when we told them it would offer a V-6, it changed their perception. The SE, at $21,195, will be for younger folks with limited incomes who can't afford a V-8."

Image-conscious 20-somethings might want the sports car looks along with the 18/25 mpg city/highway they can't get with a Hemi V-8. That engine is found in the $29,995 R/T, which makes 372 hp and has a 16/23 mpg city/highway rating, which really isn't that bad compared with the V-6.

Credit Crunch Hitting Car Dealers

At least 600 of the 20,700 new-car dealerships in the U.S. will have been forced to close this year, versus 430 last year, according to the National Automobile Dealers Association.

"Up to 80% will be domestics, because they've lost more than their share of sales,” said Paul Taylor, chief economist for NADA. “Once closed, it's difficult to reopen."

Others estimate that even more need to close — up to 3,800, according to Grant Thornton LLP, a  corporate advisory and restructuring service.

"The American market has been over-dealered for a number of years, " said Paul Melville, a Grant Thornton partner. "But the current credit crunch and high cost of financing has created the perfect storm. Dealers can't get the funds to finance the cars and can't make money, so they turn the key and close shop. Only the strongest will survive. Dealers going away aren't coming back. The Detroit Three don't have the money to support all those dealers."

Taylor says the problem is a simple one.

Smart's Success Leads to Caution

The smallest kid on the block is willing to stay that way for a while.

Smart, a Daimler-Benz subsidiary, has sold about 17,000 ForTwos since launching the tiny two-seater in the U.S. in January. Yet 30,000 potential buyers are still on waiting lists.

Even so, the automaker has no intention of boosting output to bring supply in line with demand, says Smart USA president Dave Schembri, who says auto graveyards are littered with companies that reacted too soon with too much.

"Only a year ago we didn't have a car or a dealer in the U.S.," he said. "We can grow volume, but we want to make sure we have everything in place first before we expand. Profit margins are relatively thin on a small car, so we always want to be one car short."

Essentially, a supply/demand imbalance allows dealers to sell each car for full list price.

How Wall Street's Woes Affect Car Shoppers

Unless you have Bill Gates’ credit history — or you are Bill Gates — you may have trouble getting a loan to buy a car these days, dealers say.

It isn’t the price of gas that’s keeping people from buying cars, automakers say, it’s car shoppers’ inability to get loans that’s making them leave showrooms empty-handed. Dealers confirm that theory as well.

Credit is tight, and banks that are already treading water from carrying too many high-risk mortgages are shying away from adding to their woes by making auto loans.

When Lehman Brothers, a huge investment banker in business since before the Civil War, filed for bankruptcy Monday, the credit troubles were magnified.

How Long it Will Really Take to Go Hybrid

Imagine waking up one morning and finding that the only cars on the roads, in the parking lots and nestled in driveways were hybrids or electrics. 

CNW Marketing Research put pencil to paper — actually, it turned on its battery-powered calculator — to determine when the U.S. would be totally hybridized and could thumb its nose at Middle Eastern powers who would be forced to hold garage sales to make a few bucks rather than sell a few barrels of oil..

Based on the number of people living in the U.S. today (300 million), the number of vehicles on U.S. roads today (242 million), the annual scrappage rate (11 million), the number of new vehicles sold each year (15 million), and the number of those new vehicles that are hybrids, CNW concluded that 26 years from now, in 2034, there will be:

Teens Settling for Less Car, Too

The economy has hurt not only Mom and Dad, but teenage son and daughter as well, who are being asked to pick up more of the tab on the purchase of a new vehicle than they have in previous years.

Thanks to gas prices, there's also been a big shift in the types of vehicles teens are getting, as they're being asked to pick up more of the gas tab as well.

About 400,000 new vehicles are purchased for teens each year. Compact and smaller econo cars like the Chevy Cobalt and Ford Focus account for 24 percent of sales to teens this year, up sharply from only 15 percent a year ago.

Smart Wants Even More Awareness

Despite at least a year-long waiting list in the U.S. from order to delivery, Smart is going to return to the Chicago Auto Show next February. 

It hasn't had an exhibit at the show since 2005, when it wasn't even on sale in the U.S. So why is Smart spending money and resources on getting the word out when it seems the word is already quite good?

It's especially surprising when you consider that other small automakers, like Porsche and Suzuki, dropped out of the Detroit auto show to save money. Even some major automakers have cut back on exhibit space on the auto show circuit to economize.

"When you cut back space from 180,000 square feet to 170,000 square feet, that's still one heck of a chunk of space, but at $8 a square foot it's also one heck of a chunk of savings," an auto show source said.

Clearly, Smart's action flies in the face of an industry that's pinching pennies and, in many cases, losing money. It helps, of course, that Smart is selling every car it can build and has people willing to wait a year or more to get one of its high-mileage machines.

Drumroll Please: Pontiac Names G8 Sport Truck

At least they didn't call it El Camino Junior.

After months of excitement that a new car/truck was coming from Pontiac in the form of a Chevy El Camino-type machine — and a flurry of speculation that the car/truck might even revive the El Camino name — Pontiac has picked a moniker: G8 ST.

G8 refers to the fact that the sport truck is based on the G8 car’s platform, while ST indicates that it's a sport truck.

G8 ST won out over names from Pontiac’s past, such as Ventura and LeMans. Some names from the past, however, such as GTO and Firebird, weren't submitted.

"There were some variations using the word ‘fire,’ but none with ‘bird,’" Pontiac spokesman Jim Hopson said.

"What about Aztek?"

"Not a lot of votes," Hopson laughed.

Car Quality Up as Sales Fall

Vehicle sales may have tanked, but quality is on the rise. According to the latest J.D. Power and Associates dependability study, the number of problems car owners are experiencing is dropping.

However, five of the top 10 problems consumers reported with their vehicles three years ago are still among the top 10 problems consumers are reporting today, which means "minimizing quality deterioration" is still at the top of the industry's to-do list, according to J.D. Power.

That's the finding of J.D. Power's 2008 Vehicle Dependability Study, released today, which measures the number of problems consumers have with their vehicles in the first three years of ownership.