Japan's killer quake top story of 2011
March disaster roiled industry, stalled auto recovery
Photo credit: BLOOMBERG
The March 11 earthquake and tsunami in Japan was chosen as the biggest story of the year in the 59th annual Automotive News staff poll. And little wonder: Aftershocks from the Japanese disaster played a role in several of the other top stories.
The year had begun on a bright note. After a slow rebound in 2010 from a 27-year low in 2009, light-vehicle sales continued to accelerate in the first quarter of 2011. Emboldened by hopes of a recovery, automakers pressed dealers to spiff up their facilities.
But the quake left dealers with too few vehicles on lots to keep the momentum going. The impact spread to used cars. Some new-model launches were delayed.
Here's a rundown of the staff's choices for the top stories of 2011.
1. Disaster in Japan, with aftereffects felt by auto industry globally
On March 11, an earthquake and tsunami devastated northeast Japan, killing thousands and precipitating a crisis at a nuclear plant that threatened millions more.
It was a tragedy with aftereffects that rippled through the auto industry. The quake and tsunami destroyed vehicles waiting to be shipped and shut down suppliers in the area. The nuclear plant shutdown led to power shortages that curtailed Japan's vehicle output.
For months, dealers and suppliers closely tracked the status of subsuppliers, suppliers and automakers that were trying to bring production back online.
The disaster touched virtually every automotive brand sold in the United States. With production limited at factories in Japan and in North America, Japanese brands suffered inventory shortages in the United States that held down incentives -- both theirs and rivals' -- for more than half the year. Transaction prices rose for all brands.
2. Washington sets 54.5-mpg CAFE target by 2025
On July 29, President Obama -- flanked by the chiefs of U.S. and import-brand automakers, California state regulators, the UAW and environmentalists -- proposed doubling corporate average fuel economy standards to 54.5 mpg, a level that translates to about 37 mpg on a window sticker, by the 2025 model year.
The plan, which requires a 5 percent annual improvement in the fuel economy of cars from 2017-25, already is prompting automakers and suppliers to step up their work on a variety of fuel-saving technologies.
3. Yen hits historic high; Japanese automakers respond
For most of the last decade, every dollar from U.S. sales translated to roughly ¥120 for Japanese automakers. But the dollar collapsed in the face of the strong yen this year, dipping to a low of ¥75.74 on Oct. 31.
Suddenly, Japanese automakers' costs were unchanged but their U.S. revenues had dropped by about a third. Japanese automakers had to slash their margins, cut costs, use more parts purchased with dollars, build more vehicles in North America, remove content from vehicles sold in the United States -- or some combination of the above.
4. UAW signs low-cost contracts with Detroit 3
In contract talks this year, UAW members wanted payback for the concessions granted during the 2009 General Motors and Chrysler Group bankruptcies. Management wanted to hold the line on fixed costs, believing that their predecessors' failure to do so had contributed to the Chapter 11 filings.
The eventual deal offered bonuses but no increase in base pay for longtime UAW workers. So-called Tier 2 workers got a pay increase but still will earn substantially less than their colleagues with more seniority. The new contracts won ratification, but often the votes were close.
5. Technology changes powertrains
In the face of rising gasoline prices and higher fuel economy mandates, automakers have been turning to new technologies to squeeze more miles from each gallon of gasoline. In 2011, those technologies showed up on a wide range of high-volume models, and consumers embraced them.
Consider this sign of the times: Buyers of Ford's F-150 pickup, the nation's top-selling nameplate, snapped up versions equipped with a turbocharged V-6 that offered more torque than the previous year's V-8.
6. Sales start to revive, sputter, then seem to start heading up
The year opened with such promise. In each of the first four months, U.S. sales came in around a 13 million seasonally adjusted annualized rate, well above 2010's 11.6 million total. But sales downshifted after the March 11 quake. Sales were stuck at around a 12 million rate until September. The rate hit almost 14 million in November, promising to end the year on a strong note but below earlier expectations.
7. Factories push dealers to improve dealerships
It was arguably the most contentious factory-dealer issue of the year. Automakers offered carrot-and-stick programs to encourage dealers to spiff up their stores. Dealers retorted that the payments were insufficient and the so-called facility guidelines far too detailed, demanding and costly for retailers who were just starting to recover from a recession. In some cases, factory demands prompted longtime dealers to get out of the business rather than invest more than they thought they could recoup.
8. Used-car prices soar in first half, then ease slightly
The supply of used vehicles was already tight because of weak sales of new cars and trucks two and three years earlier. Then demand spiked because of a shortage of new vehicles following the Japan earthquake. Used-car prices soared to record levels by mid-year, then eased slightly.
Victor Muller: Couldn’t save Saab
Photo credit: BLOOMBERG
9. Saab struggles to stay alive -- and fails
Victor Muller tried. He bought Saab from GM in January 2010 and then spent much of the next two years trying to keep the struggling brand alive. He courted Russian and Chinese investors in an effort to raise enough cash to pay workers and suppliers. But when GM said it wouldn't keep supplying parts and technology to a Chinese-controlled Saab, the deal was off. On Dec. 19, Saab filed for bankruptcy.
10. Honda's woes continue
Honda Motor Co. trailed its Japanese rivals in recovering from the earthquake. With inventories depleted and the launch of a redesigned Civic delayed because of the earthquake, sales slumped.
But Honda's woes went beyond natural disasters. The Civic was widely panned for a lackluster interior; Consumer Reports magazine took the car off its "recommended" list.