Selecting the auto world's Story of the Year for 1998 was a piece of cake. There were a lot of important happenings, but one overshadowed all else: the merger of Daimler-Benz AG and Chrysler Corp. that produced DaimlerChrysler AG.
It piled up more than twice as many votes as any other event in the 46th annual Automotive News Story of the Year poll.
The top stories of 1998 showed a good bit of variety. Following DaimlerChrysler were a labor story, an international economic event, a sales and marketing reorganization and an automaker's continuing efforts to buy out its independent dealers.
But DaimlerChrysler was the blockbuster. It knocked the Big 3 out of the box. It killed the American Automobile Manufacturers Association. And it made a 73-year-old American industrial jewel part of an international company headquartered in Germany.
General Motors 54-day strikes, which began June 5 in Flint, Mich., were voted the No. 2 story by Automotive News reporters and editors. The walkouts by the UAW shut GM down and cost the corporation $2.5 billion in lost profits.
After a delicate peace was restored, GM called Gary Cowger back from Adam Opel AG in Germany to direct its dismal labor relations. One of his first jobs is to prepare for the contract negotiations that begin next summer.
In third place was the continuing economic turmoil in Southeast Asia. Korea is on the rocks, and bankrupt Kia Motors Corp. was sold to Hyundai Motor Co. Vehicle sales in Japan have been falling since April 1997. But Asia's chaos has not affected U.S. sales, which may be the second-best ever this year.
GM copped another high spot as its sales and marketing reorganization took fourth place. The vehicle divisions have been stripped of nearly all their power, and a single field organization will serve all makes except Saturn. Ron Zarrella, the brand-management guru, is firmly in control as head of North American Operations.
In fifth place was Ford Motor Co.'s continuing campaign to replace its independent dealers with factory stores in medium-sized markets. Early efforts failed in 1997, but in 1998 Ford bought out its dealers in Oklahoma City and Tulsa, Okla.; Rochester, N.Y.; San Diego and Salt Lake City. Republic Industries Inc. will run the Rochester operation.
Here are the top stories of 1998:
1. IT'S DAIMLERCHRYSLER, AND IT'S BIG
It is the largest industrial merger and it caught the automotive industry by surprise.
Daimler-Benz AG and Chrysler Corp. rocked the industry with their May 7 announcement in London that they intended to merge and create DaimlerChrysler AG, the world's fifth-largest automotive producer.
The companies bill it as a 'merger of equals' with headquarters in Stuttgart, Germany, and Auburn Hills, Mich., and two chairmen at the top.
But after three years, Robert Eaton will retire and Juergen Schrempp will take sole control of the new company. An 18-member board of management is in place, with 10 executives from Stuttgart and eight from Auburn Hills.
The former Chrysler Corp. now is DaimlerChrysler Corp., a North American subsidiary of the new company. DaimlerChrysler AG promises synergies to the tune of $1.4 billion in 1999, and $3 billion in about three years.
And the big intend to get even bigger. DaimlerChrysler AG plans to purchase Nissan Diesel Motor Co., Japan's No. 4 truckmaker, early in 1999.
2. 54 DAYS, $2.5 BILLION
They started out as a dispute over productivity in a Flint, Mich., stamping plant. By the time the UAW's 54-day strikes were over, nearly all of General Motors' North American assembly plants had been shut down.
Company executives had little to show for their pains aside from a loss of $2.5 billion in profits.
But GM may benefit yet from the strike. Using the walkout as a pretext for a shake-up, GM recalled Gary Cowger from Opel to patch up labor relations with the UAW.
Although Cowger is regarded highly, the move had the earmarks of a corporate 'Hail Mary' pass. Stay tuned for thorny negotiations between GM and the UAW next year.
3. SOUTHEAST ASIA SKIDS ALONG
The fallout from the collapse of Southeast Asia's economies that began in the summer of 1997 continued to be felt in 1998.
Japanese automakers' balance sheets were battered as their big investments in the region backfired. Mitsubishi had more than one year's supply of trucks sitting on the ground in Asia, and Nissan's losses countinued to mount.
With Japan's economy and banking system teetering, the yen weakened into the 140-to-the-dollar range, prompting an increase in Japanese exports to America and Europe. Shock waves also spilled over into the economies of Russia and Brazil, stifling vehicle demand in what had been two of the world's most promising markets.
Overcapacity among the quick-growth Korean automakers led to changes in ownership - Hyundai Motor Co. bought bankrupt Kia Motors Corp.; while Daewoo Motor Co. Ltd. bought Ssangyong Motors and later traded its own troubled electronics business for Samsung's infant automaking operations.
Although Southeast Asian governments and banks have taken small steps to turn their economies around, the 'too-big-to-fail' equation has kept many from taking the painful actions needed to fix the situation. Analysts worry that continued impotence may eventually trigger a similar crisis in the U.S. economy.
4. THE END OF SLOANISM
Last August, General Motors exorcised the ghost of Alfred Sloan, the creator of GM's decentralized brand structure.
Ron Zarrella - then GM's vice president of vehicle sales, service and marketing - stripped the once-powerful vehicle divisions of nearly all their power. Saturn is not included.
Except at Cadillac, vehicle division bosses are no longer general managers or vice presidents, and a single field staff will serve Chevrolet, Pontiac-GMC, Oldsmobile, Buick and Cadillac.
Zarrella later was promoted to president of North American Operations.
5. FORD EFFORT BEARS FRUIT
In 1997, Ford Motor Co. began its market consolidation proselytizing. Dealers in Indianapolis and Salt Lake City turned a deaf ear. But in 1998 the converts started to line up.
So far, five U.S. markets - Tulsa and Oklahoma City, Okla.; San Diego; Salt Lake City; and Rochester, N.Y. - have heeded the call to replace traditional dealerships with consolidated stores owned by Ford and the dealers. Republic Industries Inc. will run the Rochester operation.
All the new ventures operate under the Auto Collection banner.
6. DON'T CALL HIM BILLY
A new generation of baby boomer leaders takes over at Ford Motor Co. Jan. 1.
William Clay Ford Jr., 41, brings his environmental sensibilities and accessible leadership style to the office of chairman. Bill (don't call him Billy) Ford is the first Ford family member to be chairman in 18 years.
Joining the great-grandson of company founder Henry Ford at the helm is Jac (don't call him Jac the Knife) Nasser, 51, president and CEO.
Edsel Ford II, 50, also changed offices this year. Edsel Ford stepped down as president of Ford Motor Credit Co. to become a company consultant and devote more time to charitable and civic activities. He remains a Ford director.
7. THE WORD FROM CARB
If it looks like a truck and drives like a truck ... it must pollute like a car. So said the California Air Resources Board, which ruled in November that pickups, minivans and sport-utilities must meet the same emissions restrictions as passenger cars.
Automakers must begin compliance - with a percentage of their sales - in 2004. But the hammer drops in 2007, when noncompliance means a vehicle under 8,500 pounds gross vehicle weight cannot be sold - period - in California if it does not meet passenger-car emissions standards.
CARB also ruled that diesel-engined cars and light trucks must meet the car standards, which they currently have no prayer of doing.
Several Northeast states are expected to follow California's lead, and environmental groups are urging the federal EPA to do the same on a national basis.
Like the electric-vehicle mandate earlier in this decade, this law is subject to technical reviews during the next few years. Expect automakers to protest that the target must be relaxed because they cannot possibly meet it. Have we heard that before?
8. NO MORE BIG 3
Looking at the demise of the Big 3 is like taking a snapshot of an explosion in midblast. We know it's big, and the landscape will never be the same, but we do not know yet where all the pieces will land or what the full impact will be.
We know globalization of the industry provided the fuse, and the merger of Chrysler Corp. and Daimler-Benz AG was the spark that set it off.
But only top executives of the former Big 3 know why they obliterated their high-profile trade group, the American Automobile Manufacturers Association, instead of trying to adapt it to changing times.
Instead, Ford and GM are building a new organization that also would represent makers of Toyotas, Nissans, Volkswagens, BMWs, Volvos and Mazdas. Apparently, with trade pushed aside as an issue, the tent has become a lot roomier.
And at some point, say GM and Ford executives, they also will have to decide whether the former Chrysler, now part of a German company, still can be part of the industry's joint research consortium with the U.S. government called Partnership for a New Generation of Vehicles. Since the consortium is funded in part by tax dollars, that seems problematic.
9. BMW GRABBED THE PLUM
Volkswagen AG bought Rolls-Royce Motor Cars Ltd. from Vickers PLC for $795 million, but it failed to get the real plum - use of the Rolls-Royce brand name.
BMW AG bought that for $66 mil-lion from Rolls-Royce PLC, an aerospace and jet engine company. BMW agreed to let Volkswagen use the world-renowned name until the end of 2002. Until then, Volkswagen will make the Rolls-Royce Silver Seraph and the Bentley Arnage at the Rolls factory in Crewe, England.
BMW gets the brand name in 2003 and will build a factory in England to produce Rolls cars.
Graham Morris, chief executive of Rolls-Royce Motor Cars, quit on principle, saying he had assured workers that production of Rolls-Royce models would remain in Crewe.
Volkswagen will retain the Bentley brand name and factory in Crewe.
10. THE BEETLE IS BACK
With its familiar shape, the New Beetle went on sale here in March and was an immediate hit.
Dealers could not get enough of them. Some took advantage of the demand and tight supply, jacking up the price thousands of dollars over suggested retail.
Through November, 48,326 New Beetles were sold, helping Volkswagen post a 60 percent sales gain in the United States. VW cranked up New Beetle production in Puebla, Mexico, as far as it would go, and now is considering additional production elsewhere.
Unlike the spartan, entry-level Beetle that was all the rage during the 1960s, the 1999 New Beetle is thoroughly modern, based on Volkswagen's redesigned Golf chassis.