Auto Outlook: Auto trends may make 2015 year of the ‘sub-brand’

By AL SWANSON, UPI Auto Writer  |  Oct. 21, 2012 at 5:30 AM
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If there's a certainty in this crazy world economy, it's predicting quick change in the automotive industry.

As consumers in industrialized countries ponder the merits of plug-in electric vs. all-electric cars and trucks -- or consider new-tech, high-mileage vehicles that seek to get the most out of traditional gasoline internal combustion or diesel engines and drivetrains -- a majority of motorists in developing countries are just getting around to buying an entry-level car.

German media reported last week Volkswagen is the latest major global automaker considering a sub-brand to sell in emerging markets like Brazil, Russia, India and China. We're talking about vehicles that would sell for $6,500 to $13,000 -- about a third of the cost of an average new vehicle in the United States.

The idea is not new.

Japan's Nissan said the Datsun brand would only be sold in emerging markets when it announced plans to revive the nameplate earlier this year. Renault sells the low-cost Romanian-made Dacia in similar markets.

The key is keeping costs low for both manufacturers and consumers.

With some European brands like Fiat, Renault, Opel and Peugeot languishing, and overall car sales on the continent expected to drop to less than 12 million units this year compared with nearly 16 million new vehicles sold annually just a few years ago, a cheaper sub-brand offers hope to car makers that have the wherewithal to create one.

A low-cost VW sub-brand would reflect the company's frugal "people's car" roots -- but the vehicles probably won't look much like the venerable, rear-engine, air-cooled Beetle Type 1, which was revived in 1997 as the front-wheel drive New Beetle and is now being marketed in Western countries as a less rounded more masculine and upscale Volkswagen Beetle (without the flower bud vase).

Reports indicate a budget sub-brand would use older VW engines and platforms, and ship without air conditioning or advanced safety equipment like head airbags to keep costs down.

Volkswagen's current least expensive car is the Skoda Citigo, which sells for about $11,700, ASEAN Automotive News said.

Der Spiegel quoted VW spokesman Eric Felber as saying the idea "of a low cost brand has been on the agenda at Volkswagen for some time."

No decision had yet been made.

Electric car battery maker files for bankruptcy

A123 Systems, a Massachusetts "green tech" startup that makes lithium-ion batteries for electric vehicles, filed for Chapter 11 bankruptcy protection last week.

At the time of the filing in Delaware federal bankruptcy court, Johnson Controls Inc., a major battery maker and supplier for auto climate control systems, announced it would acquire A123's automotive-related assets for $125 million.

In its bankruptcy petition, A123 listed total assets of $459.8 million and liabilities of $376 million, the Detroit Free Press reported.

"In an emerging industry, it's very common to see some firms consolidate with others as the industry grows and matures," the U.S. Energy Department said in a statement. "Accordingly, today Johnson Controls, a world leader in energy technologies based in Milwaukee ... has offered to purchase two Michigan manufacturing facilities built by A123 Systems along with other assets in A123's automotive battery business."

Johnson Controls will provide $72.5 million in debtor in possession financing to keep A123 operating in bankruptcy, the Free Press said.

A123, which had received a $249 million U.S. Energy Department grant and $238 million from the state of Michigan, has more than 700 employees at plants in Livonia and Romulus, and facilities in Ann Arbor. The Detroit News said the 11-year-old company has lost about $600 million since 2008 but that $120 million of the federal grant was unspent.

A123 also operates cathode powder and battery system plants in China in a joint venture with Shanghai Automotive and in August announced $465 million investment by China's Xanxiang Group Corp. in return for an 80 percent stake in the company, but the deal fell through.

Extended-range Cadillac to be made in Detroit

GM plans to build its luxury extended-range coupe, the Cadillac ELR, in Michigan and hopes the limited-production four-seater will pose a challenge to California's all-electric Tesla Model S.

The ELR coupe will be produced at the Detroit-Hamtramck plant which makes the plug-in electric Chevrolet Volt hybrid. GM will invest $35 million for new equipment at the plant, which will also produce the all-new 2014 Chevrolet Impala, but no new jobs are expected to be added to the 1,400 hourly workers already at the 27-year-old facility, the Detroit Free Press said.

"The ELR will be in a class by itself, further proof of our commitment to electric vehicles and advanced technology," said GM North America President Mark Reuss. "People will instantly recognize it as a Cadillac by its distinctive, signature look and true-to-concept exterior design."

The coupe uses the same rechargeable lithium-ion battery powertain as the Volt capable of going 38 miles on electric power alone before a gasoline engine-generator turns on. The body is based on the Cadillac Converj concept vehicle shown three years ago at Detroit's North American International Auto Show.

Classic 1903 Ford Model A sells for $264,000

What is believed to be one of the world's oldest surviving Fords, a 1903 Model A Rear Entry Tonneau, was recently sold at auction for $264,000.

The Detroit News said the red, four-door open air vehicle originally cost $880 plus $30 for options. It was one of the first three cars made by the Ford Motor Co. and was purchased by Herbert L. McNary of Britt, Iowa.

In the previous sale, the Model A was bought for $693,000 at auction in Arizona, far more than it brought at last weekend's auction in Pennsylvania. In 1953, the rare car's second owner purchased it for $400.

Back when the car was built in the assembly room at Ford's Mack Avenue plant, each vehicle did not get a sequential chassis number so there's no way of knowing whether it was the first Model A produced, but it is one of the first three. Ford did not adopt the assembly line until 1905.

The car's 109-year-old, 8-hp, 1668 cc, flat two-cylinder engine was completely rebuilt to original specifications in 2007 -- four years after it successfully completed the London to Brighton Veteran Car Run in England, when it was 100 years old.

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