Three stories of trouble dominated the auto world in 2000.
A top German executive admitted he lied and conned the leaders of a U.S. auto company into thinking he wanted a merger of equals. The American unit fell on rough days, executives were broomed and the Germans took over.
Tires shredded and sport-utilities rolled, killing at least 148 occupants. The makers of those products, two of the proudest names in American industry, sputtered and sniped at each other in congressional hearings to determine who was at fault.
The world's biggest auto company pulled the plug on the oldest U.S. brand after 15 years of declining sales.
From the start, Juergen Schrempp intended that Chrysler Corp. should be a subsidiary of DaimlerBenz; the Chrysler executives simply weren't smart enough to realize it. By the time Schrempp disclosed his maneuver to the Financial Times, the industry was well aware that the 'merger' was a takeover.
The Chrysler group did not have a good year. It lost $512 million in the third quarter. Schrempp stepped in, fired CEO Jim Holden and other honchos and placed his own men in charge. This latest in a string of Chrysler crises was voted the automotive Story of the Year by the editorial staff.
The Ford-Firestone mess resulted in the recall of 6.5 million Firestone tires. The latest death count is 148 from tread separation that caused the vehicles - mostly Ford Explorers - to roll and crash.
Whose fault? Who knows? Each company blamed the other at Washington hearings that led to a new law strengthening the National Highway Traffic Safety Administration. The agency also will rate vehicles for rollover tendencies. It was the No. 2 story.
In third place was the sad demise of the oldest domestic car make. General Motors signed Oldsmobile's death warrant, although it delayed the date of burial for two or three years. In the mid-1980s, Olds was third in the industry with more than 1 million car sales a year. This year, Olds will sell about 215,000 cars, plus 70,000 minivans and sport-utilities.
Here's a rundown of those three stories and the rest of the top stories of 2000.
Chrysler in crisis
In 1998 Robert Eaton, the last chairman of Chrysler Corp., sold the kingdom to Daimler-Benz AG, in part, to prevent yet another rescue of the company.
But that is exactly what is under way at the Chrysler group. After the acquisition, tight discipline over costs disappeared. The group bungled the launch of the redesigned family of minivans; it produced too many 2000 models and had to offer large incentives to sell them. In the third quarter, $512 million of red ink arrived.
Jim Holden, CEO of the Chrysler group, was fired. His replacement, Dieter Zetsche, launched a crash program to cut costs. Chrysler employees perceived the shakeup as a German takeover and morale plummeted.
The road ahead is arduous. Rescues always are.
Ford vs. Firestone
In August, the Ford Explorer was ensnared in the massive recall of 6.5 million Firestone tires eventually linked to 148 traffic deaths by U.S. investigators.
Many of the tires recalled by Bridgestone/Firestone Inc. were mounted on the Ford Explorer, straining the 100-year relationship of the tire maker and Ford Motor Co.
The high-profile recall led to U.S. congressional hearings and an overhaul of auto-safety laws.
The tire maker blamed the tire-tread separation on manufacturing problems and Ford's recommendation of low tire pressure on Explorer tires. Ford continues to conduct its own investigation, pointing out that real-world accident data mark the Explorer as one of the safest vehicles in its class.
General Motors finally faced reality in December: It has too many brands.
Culled from the herd was Oldsmobile, the oldest auto company in North America. GM will keep selling Oldsmobiles for a few years, but then it will join Plymouth, Hudson, Edsel, Packard, Nash and scores of other brands in the history books.
It was an emotional decision for the company. GM theory holds that its large brand portfolio is a competitive advantage and that it can precisely target vehicles to small customer segments.
But even with generous incentives this year, Oldsmobile sales were sinking. Its new import-fighter image never caught hold with a critical mass of customers.
GM gave up, and Oldsmobile dealers are picking up the pieces.
On Feb. 25, DaimlerChrysler, Ford and GM took the rare step of announcing that they would work together to create an online trade exchange. They were joined later by Nissan and Renault.
Their goal: to become the primary Internet marketplace for the auto industry, enabling automakers and suppliers to conduct business faster and cheaper. Covisint is expected to handle up to $750 billion in annual purchases by automakers and suppliers.
Much of the year - about seven months - was spent waiting for approval by U.S. and German regulatory agencies. On Oct. 3, ArvinMeritor of Troy, Mich., became the first company to make a deal using the exchange.
BMW dumps Rover
BMW AG dumped Britain's Rover Group and sold Land Rover to Ford this year, demonstrating just how badly mergers can turn out. BMW wound up with $3 billion in losses, the Mini brand and a new CEO.
It didn't start out that way.
In 1994, BMW was the toast of the Geneva auto show, having just snatched Rover out from under the nose of Japan's Honda Motor Co. Ltd. The Japanese carmaker owned 15 percent of Rover and was its primary supplier of technology and engineering.
The acquisition, as such things always are, was billed as a perfect fit. It would allow BMW to achieve critical mass of more than 1 million units a year without stretching (i.e., polluting) its core brand attributes: performance and handling. And it would give the Bavarians a leg up on archrival Daimler-Benz, which refused to grow through mergers for fear of tarnishing the Mercedes halo.
Rover wasn't even a close fit, of course, never mind a perfect one, and a chastened BMW is back where it started six years ago. The former Daimler-Benz may be wishing for a return to the same place.
Ghosn does the job
Carlos Ghosn admits that when he began his effort to revive a failing Nissan Motor Co., it was 'Mission: Impossible.' It certainly looked that way at first.
After the former Renault executive unveiled his Nissan Revival Plan in October 1999, Nissan posted its worst group net loss for the year ending March 31, 2000 - a whopping $6.5 billion. Much of that was due to payments into Nissan's underfunded pension plan, but a large chunk reflected costs of the revival plan.
In all, Ghosn planned to close five plants, cut 21,000 jobs worldwide and slash Nissan's network of hundreds of affiliated keiretsu suppliers to just four core affiliates.
Critics wondered whether even the drastic plan would be enough. After all, Nissan was swamped by debt and had a lineup of forgettable cars.
In November, though, Ghosn showed the fruits of his labors. For the six months to Sept. 30, Nissan posted its best results in a decade: a group net profit of $1.6 billion. Much of it came from cost cuts from suppliers, but the drive was all Ghosn's. That impetus will continue into 2001 as he unveils new products, cost-savings initiatives and new profits.
After searching for an Asian partner for years, DaimlerChrysler Chairman Juergen Schrempp in July agreed to buy a 34 percent stake in Mitsubishi Motors Corp. What he got, however, was as much pothole as partner.
Mitsubishi already was burdened by high debt and erratic performance. Then, over the summer, a scandal erupted over the Japanese carmaker's recall record. Mitsubishi had covered up consumer complaints that might have led to recalls, and had issued secret recalls that were illegally hidden from the government. Mitsubishi eventually admitted that the illegal activity went back more than 20 years. The government is still considering criminal prosecutions.
With its sales and stock price dropping, Mitsubishi was forced to give DaimlerChrysler more seats on its board, including the position of COO, even as the German company paid less money for its stake.
Now, new President Takashi Sonobe is preparing Mitsubishi's fourth restructuring plan in three years. His new COO, DaimlerChrylser transferee Rolf Eckrodt, will review their plan when he arrives in January. Whether Mitsubishi cuts deeply enough, or whether Eckrodt has to wield the ax further, could be one of the top stories of 2001.
This was supposed to be the year the Internet changed the way cars are sold. Instead, many of the dot-coms that seemed so ready to replace dealers, struggled for survival, slashing budgets and staffs as they drowned in red ink.
CarOrder.com, backed by $100 million in seed money and led by a 23-year-old president, seemed to typify the automotive dot-com with its grandiose plans of buying a network of 100 new-car dealerships around the country. But it shut down the Web site in August, unable to make money by selling vehicles over the Internet.
The year reinforced the fact that local dealers - protected by tough state franchise laws - aren't going away. It also reinforced that the Web has an important role to play in auto retailing. The National Automobile Dealers Association, for example, found that dealerships with several years of experience using the Web are generating 20 percent of their new-vehicle sales from Internet leads.
But don't look for the Web to go away. Both Ford Motor Co. and General Motors revealed plans to operate online car-buying sites in cooperation with their dealers beginning in 2001, while some of the large public dealership groups, notably No. 1 retailer AutoNation Inc., continue to be committed to their Web selling strategies.
When Ford announced in September that it was pulling out of the bidding for Daewoo Motor Co., GM looked like a shoo-in to take over the ailing Korean automaker. After all, it had been on the hunt for Daewoo since 1997, when it began talks with its former joint-venture partner on the possibility of forming a strategic alliance. And it had floated a trial offer of just under $6 billion for Daewoo in a bid to head off Ford and other potential bidders.
But it was upstaged by an ostensible $6.5 billion offer from Ford. Although many observers at the time called the Ford bid a transparent nonoffer aimed only at getting access to Daewoo's books and predicted that it would be revised sharply lower or dropped altogether, Ford was granted exclusive negotiating rights to Daewoo.
With Ford now out of the running and no other potential buyers in the wings, Daewoo's value as an acquisition has gone south in a hurry, putting GM in the driver's seat.
Industry watchers in Seoul say GM is no longer interested in a complete acquisition and wants only a few of Daewoo's prize pieces, such as its Korean dealer network.
Come on down!
Some of the more refined people in the auto industry wince at those TV commercials where the dealer stands on his head and yells, 'We'll stand on our heads to give you a better deal!'
But that, in effect, is how the industry achieved record sales of about 17.4 million units this year, confounding every prediction that sales would fall in 2000. By offering billions of dollars worth of discounts, automakers and their dealers taught customers to ignore the sticker price and expect lower prices.
Indeed, Lincoln last month had to resort to asking its biggest dealers to stop using fire-sale language in their advertising.
At year-end, the industry was spending an average of about $2,800 per unit in incentives to move the iron, creating what former DaimlerChrysler boss Jim Holden calls a 'profit recession' - great sales, lousy profits.
Going into 2001, automakers are playing chicken with incentives. No one wants them - but no one wants to give them up first.