Tag: Financial Results

Ford hires US firm as its lead ad agency in a major blow to WPP

Ford hired advertising agency BBDO as its lead creative shop in a move that the auto company calls a new global marketing approach.

After a five-month process, Ford announced that WPP — the largest ad agency in the world — will continue to run “activation,” or functions such as in-store advertising, website development and marketing for its dealerships. It will also retain media planning and buying.

But BBDO, part of rival group Omnicom, will run brand advertising, which means it will create overarching big ideas for Ford and its vehicles. Brand advertising is often seen by creative agencies as more prestigious than promotional or retail-focused campaigns, and it means that WPP's agencies will now have to follow BBDO's creative lead. Andrew Robertson, CEO of BBDO Worldwide said in an emailed statement: “Today is a big big day. We have a wonderful new brand to help build.”

Ad agency Wieden + Kennedy will also work with Ford as an “innovation partner” on specific projects, Ford said in an online statement.

Significant challenges ahead for WPP: Advertising CEO
3:42 AM ET Tue, 4 Sept 2018 | 02:09

WPP-associated agencies have worked on Ford's advertising for decades, starting with J. Walter Thompson (JWT) in 1943, according to industry website Ad Age. WPP bought JWT in 1987 for $566 million and has since created Global Team Blue, a collection of agencies within WPP that solely worked on Ford's ad business.

In an online statement, Ford said the new setup will reduce costs, representing “$150 million in annual efficiencies” and that it would use more technology to personalize its ad campaigns. Ford hired Jim Hackett as CEO in May 2017, tasked with restructuring the automaker, but is yet to give details of his turnaround plan.

“Ford already is one of the most recognized and respected brands in the world,” said Joy Falotico, Ford group vice president and chief marketing officer, in an online statement. “In this pivotal moment of reinvention and transformation, we're excited to partner with world-class creative agencies to unlock the full potential of the iconic blue oval.”

Andrew Harrer | Bloomberg | Getty Images
Jim Hackett, president and chief executive officer of Ford Motor Co., speaks during a discussion at the Automotive News World Congress event in Detroit, Michigan, U.S., on Tuesday, Jan. 16, 2018.

Brian Wieser, a senior research analyst at Pivotal Research, said in an analyst note emailed to CNBC that Ford's account was likely worth $500 million to $600 million a year, and that less than half the business would be leaving WPP. For BBDO parent company Omnicom, this might mean a 2 percent increase in organic revenue from November, Wieser added.

In a note seen by Ad Age, WPP's Satish Korde, who is CEO of Global Team Blue, said: “WPP is assessing the impact and implications of this decision, which cannot be fully determined until more detail is known.”

“As you all know, we gave this review everything we had: It was an extraordinary effort by the entire global team over many, many months. We accept this difficult decision with our heads held high and thank everyone for their contributions,” Korde added.

WPP, which recently appointed Mark Read as CEO, said in an online statement: “WPP agencies will continue to handle activation, including media planning and buying, digital and production. These responsibilities also include tier two advertising work in the U.S., the China advertising operations with its joint venture partner, all Lincoln advertising, and all the Ford public relations business.”

“WPP will work closely with Ford on the shape of its future relationship and the impact on its people,” it added.

Fiat Chrysler prepares to produce plug-in hybrid Jeep Renegade

MILAN (Reuters) – Fiat Chrysler (FCA) said on Monday it had kicked-off preparations for the production of a plug-in hybrid version of the Jeep Renegade as the carmaker pushes ahead with its electrification drive to meet tougher emissions rules. FILE PHOTO: A car with the Jeep logo badge is seen on display at the North… Continue reading Fiat Chrysler prepares to produce plug-in hybrid Jeep Renegade

Dealers offer bigger discounts to shift large SUVs

Dealers are offering bigger discounts on large SUVs to keep the metal moving. That’s the conclusion of the latest quarterly Target Price from What Car? which found that discounts in the large SUV segment rose by 6% in the three months to August. Falling demand for big SUVs and the fall-out from diesel were leading… Continue reading Dealers offer bigger discounts to shift large SUVs

Electric cars are clean, but can they be profitable? New report casts doubt

Volkswagen MEB platform architecture
A flood of new electric-car models is washing into the market in the next year as automakers scramble to meet regulatory demands for electric cars around the world—not to mention scrambling to compete with Tesla.

The challenge, as with Tesla, is whether they can sell those cars at a profit.

A new report by AlixPartners, a worldwide business consulting firm, shows the transition to electric cars is coming at a steep cost to automakers.

DON'T MISS: VW plans 27 electric cars by 2022 on new platform

The company pegs the cost of building new electric cars at almost $9,000 more than conventional cars, and plug-in hybrids at an additional $5,700.

Worldwide, the report says, established and startup automakers are spending $255 billion to develop more than 200 new electric models that are expected to hit the market by 2022.

Many of these will be low-volume models that will not make a significant dent in the development costs for new powertrains, the report says.

CHECK OUT: Tesla sells 200,000th car, starting phaseout of federal tax credits

Further, the number of new models is likely to exceed customer demand, the report says, meaning that intense competition among these new electric cars may force automakers to sell them at a discount. This hit to automaker profits could be exacerbated by ride-sharing and autonomous car fleets, which would buy cars at fleet prices.

As if to confirm the report, BMW cheif executive Bernhard Kuhnt told Bloomberg Friday, “Tesla is now ramping up their volumes, and it’s putting pressure on that market segment.”

At the same time, the study notes, the overall car market in the U.S. is beginning a cyclical downturn from its record sales of 17.2 million new cars and trucks in 2017.

That's not to say the study expects electric cars to be unsuccessful. AlixPartners forecasts that by 2030, electric cars will make up 20 percent of the U.S. market, 30 percent of European car sales, and 35 percent of car sales in China.

2020 Mercedes-Benz EQC

In a consumer survey conducted as part of the study, AlixPartners found that 22.5 percent of Americans say they plan for their next car purchase to have plug-in capability.

A Reuters report on the study notes that auto executives generally concur that the transition to electric cars will be expensive, and that R&D and development costs for electrics may not be paid off any time soon. “What everyone needs to realize is that clean mobility is like organic food—it’s more expensive,” Carlos Tavares, chief executive of Peugeot, Citroen, and Opel manufacturer PSA told Reuters.

Last month, BMW warned investors that investments in electric-car development and meeting cleaner emissions rules would erode profits. Volkswagen and Mercedes-Benz also each warned separately that developing electric cars will cost more than they initially budgeted.

So far tax incentives from many governments, such as the U.S. federal $7,500 tax credit, are designed to offset these higher costs. As automakers begin to sell millions of electric cars, however, these tax incentives may become unsustainable.

READ MORE: 2020 Mercedes-Benz EQC specs revealed (Updated)

The hope is that by then battery prices will equal the cost of internal combustion powertrains, but that's not guaranteed. Batteries currently account for 40 percent of the cost of building an electric car, Reuters reports.

AlixPartners reports that commodity costs are up 70 percent the last year compared with 2015, at $884 per car, a six-year high.

“Industry players are sort of caught between a rock and a hard place,” said Shiv Shivaraman, co-head of AlixPartners' American automotive and industrial practice. “If they don’t participate in some way in the ‘new-mobility’ revolution that’s coming, they stand to lose out on what might be the biggest thing ever in this industry. If they do participate, as so many are, they have the chance of benefiting from first-mover advantages, but they also face the possibility of going broke in the process.”

Delphi CEO Liam Butterworth steps down

(Reuters) – Auto parts supplier Delphi Technologies Plc said on Friday Chief Executive Officer Liam Butterworth was stepping down, ten months after taking charge. The company, which also cut its full-year revenue forecast, said director Hari Nair would be the interim CEO and its board has commenced a comprehensive search process to identify a permanent… Continue reading Delphi CEO Liam Butterworth steps down

Dealers turn in strong profit performance in August

The average UK motor retailer made a profit of £200 in the month of August, a marked contrast to the traditional result for the month, which last year produced an average loss of just under £17,000. This was all produced by pre-WLTP deadline activity, with significant incentives being provided to move cars prior to the… Continue reading Dealers turn in strong profit performance in August

Droom raises $30mn funding; to buy back ESOPs worth Rs 50 cr

The company also aims to expand its operations in 100 more Indian cities. New Delhi: Online automobile marketplace Droom Thursday said it has raised USD 30 million (over Rs 200 crore) led by the family office of Japan-based investor, Joe Hirao. The company, which has raised USD 125 million in funding till date, is also… Continue reading Droom raises $30mn funding; to buy back ESOPs worth Rs 50 cr

Japan’s Toyota and SoftBank to form joint venture for new mobility services

Japanese automaker Toyota and tech giant SoftBank announced Thursday that they are forming a joint venture by April 2019 that will use data to optimize supply and demand in the transportation space.

The company, called Monet Technologies, will coordinate between Toyota's information infrastructure for connected vehicles and SoftBank's so-called Internet of Things platform that collects and analyses data from smartphones and sensors, the Japanese corporations said in a joint statement.

In the first phase, Monet plans to roll out just-in-time vehicle dispatch services for Japanese public agencies and private companies to meet user demand. Those services include on-demand transportation and corporate shuttles.

By the second half of the 2020s, the joint venture will roll out an on-demand mobility service that will use Toyota's self-driving, battery-operated electric vehicle called e-Palette for various purposes. They include meal deliveries, where the food is being prepared inside the vehicle, hospital shuttles that can conduct medical examinations on board and mobile offices.

Monet will roll out its mobility services in Japan before focusing on future expansion on the global market.

Toyota launched plans for the so-called e-Palette earlier this year and described the concept as a “fully-automated, next generation battery electric vehicle” that can be customized and scaled for various mobility services.

The companies said that the joint venture will start at 2 billion yen ($17.49 million), and will be increased to 10 billion yen in future. They did not specify a timeline.

SoftBank will own 50.25 percent of the joint venture while Toyota will take 49.75 percent. SoftBank Corp representative director and CTO, Junichi Miyakawa, will be president and CEO of the new joint venture.

That news came after Toyota's rival Honda said it was taking a stake in General Motors subsidiary Cruise Holdings as part of a plan for the two automakers to work together and build an autonomous vehicle. Honda will invest $2.75 billion over the next 12 years, which includes paying GM $750 million immediately as it takes a 5.7 percent stake in Cruise Holdings.

Both Toyota and SoftBank are separately developing technologies that are used in self-driving cars and related services.

The two companies have also invested in major ride-hailing firms: Toyota is invested in Uber and Grab while SoftBank backs both firms as well as China's Didi Chuxing.

Automakers around the world are making multibillion-dollar investments and creating long-range plans for rolling out autonomous vehicles. Many of them are teaming up with other companies to share risks, technologies and expensesassociated with building self-driving cars since it will take time before those vehicles can be mass-produced and sold for a profit.

Many analysts think the widespread adoption of self-driving cars will start to pick up in 2021 or 2022.

— CNBC's Phil LeBeau contributed to this report.

Chevy Bolt EV sales are slumping in the US, GM says production going to Canada and South Korea

GM is scheduled to increase production of the Chevy Bolt EV by the end of the year, but sales are slumping in the US in the meantime. The automaker says that it is because they are focusing production for other markets. Like Tesla, GM decided to stop giving monthly sale numbers and only release quarterly… Continue reading Chevy Bolt EV sales are slumping in the US, GM says production going to Canada and South Korea

GM Cruise and Honda deal show how automakers share risk and high costs to build self-driving cars

Elijah Nouvelage | Reuters
A woman gets in a self-driving Chevy Bolt EV car during a media event by Cruise, GM’s autonomous car unit, in San Francisco, California, U.S. November 28, 2017.

GM and Honda's deal to partner on developing an autonomous vehicle signals that the two companies don't want to take on all the risk, expense and engineering resources needed to develop a self-driving car.

Companies are finding ways to share the burden and keep costs down on what could be a long road to a true autonomous vehicle market — and an even longer haul before it's ready to sell to the masses at a profit.

“Our mission is to deploy this technology safely at massive scale,” GM president Dan Ammann said Wednesday on CNBC's “Squawk on the Street.” “That's going to require a lot of resources — not just financial resources but also engineering resources.”

Kyle Vogt, CEO of GM subsidiary Cruise Holdings, told CNBC the deal will be a three-way partnership among GM, Honda and Cruise. The plan is to assemble a team and build an autonomous vehicle, though he did not give details on a timeline for the project or further details on the specific roles of each organization.

“We have our existing plans in motion to bring self-driving car technology to market, and then ultimately to scale it up,” Vogt said in an interview. “We are going to start with the vehicle we have been working on for a long time, but this is really about what comes next when you remove the human driver sitting behind the wheel.”

Starting with a completely new vehicle will allow the companies to consider all the different possibilities for a self-driving car and design everything else around it, rather than building self-driving tech onto an existing vehicle. Cruise is the group that is adding automated driving technology to GM's electric vehicle, the Chevrolet Bolt.

GM shares jumped more than 5 percent on the news.

Honda will invest $2.8 billion over the next 12 years, beginning with an immediate $750 million investment, and will take a 5.7 percent stake in Cruise Holdings. It follows Japanese conglomerate SoftBank's decision to invest $2.25 billion in Cruise in May.

Honda and GM have had a history of partnering on a number of technologies, such as batteries, powertrains, fuel cells. So it makes sense they would partner again, said Jeff Schuster, senior vice president of global forecasting at LMC Automotive, which tracks the auto industry.

“It is not new that they might come together to co-develop or spread the costs around, which is what I really think this play is,” he said. “Everyone is racing to autonomy, but it is a marathon and it is going to take a lot of investment.”

Schuster added the partnership allows them to develop a cutting-edge autonomous car “without burying your current operations, because you still have to make cars today, and you still have to develop new products for today's market.”

It could also be a way for traditional automakers to stake out their territory in an area that has attracted a lot of investment from tech companies and “put them on notice,” he said.

Schuster added that he suspects there will be more of these types of partnerships ahead, given how much capital will be needed before companies see any sort of return.

A recent LMC Automotive report said the firm does not believe that there will be a significant volume of fully autonomous vehicles before 2030. It is so far away, it makes it difficult to predict winners, Schuster said.

“This is a trend we are going to be seeing more of going forward,” said Sam Abuelsamid, senior research analyst at Navigant Research, who studies the auto industry and mobility technologies. “There is going to be increasing consolidation as companies that may have been struggling with their own autonomous driving efforts look to partner with others that are having more success and leverage their resources.”

There are only so many ways to build an automated driving system, just as there have only been so many ways to build other systems on cars in the past, such as antilock braking systems, Abuelsamid said. Several companies tried developing their own systems in-house before realizing they were spending money on systems that did not give them any real competitive advantage over products already available from partners or suppliers.

“So collaborating on this stuff and using the same technology where it makes sense will save everybody a lot of money,” Abuelsamid said.