Rushing into a small car may not save money

Yonkers, New York – Many consumers are trying to trade their current vehicles for smaller, more fuel-efficient ones in the wake of fuel prices, but a new study from Consumer Reports warns drivers that downsizing too soon can cost more in other areas than they’ll save at the pump. An analysis of Consumer Reports’ owner-cost data found that it often doesn’t pay to downsize if you’ve only owned your vehicle for three years or less and haven’t paid off the loan, even if the new car’s fuel economy is much better. The magazine reports that consumers should typically hold onto their cars for at least four or five years to minimize the financial effect of depreciation and finance charges. According to Consumer Reports’ calculations, depreciation makes up about 48 per cent of an average owner’s total vehicle costs in the first five years of ownership, but fuel averages only about 21 per cent of total costs. For a typical owner with a 60-month loan, trading in a three-year-old vehicle will cost more in depreciation than what would be saved in gasoline with the new car.“These hidden costs may be the factors you are least likely to focus on when downsizing,” said Rik Paul, automotive editor. “After all, depreciation and interest are less tangible costs than the high price for a gallon of gas that slaps drivers in the face with each fill-up.”Using U.S. gallons and prices, the magazine found that a 2005 Ford Five Hundred SEL V6 sedan got 21 mpg overall, while the 2008 Toyota Prius got 44. Assuming 12,000 miles per year at $3.75 per gallon, the Ford will cost about $2,000 in gas this year, the Toyota $1,000. But factoring in all owner costs of trading the Five Hundred, the Toyota will cost about $9,000 to own for the first twelve months, while the Ford costs $6,000, a difference of about 23 cents per mile.“Based on today’s numbers, it’s less expensive to tough out another year or two with a gas guzzler than trade in too early,” Paul said. “However, if gas prices rise past $5.00 per gallon, large vehicles may see their depreciation accelerate, and owners could face new challenges in selling their old model.”

Mercedes’ plant tops worldwide, says J.D. Power

Mercedes-Benz’s facility in Sindelfingen, Germany has been named the most reliable factory in the world, according to the U.S. Initial Quality Study published by J.D. Power and Associates. Second and third place also went to plants in Germany. Vehicles from the Sindelfingen plant, near Stuttgart, recorded an average of only 33 problems per 100 vehicles (33 PP 100). The average among all factories studied was 118 PP 100. The plant manufactures the CL-, CLS-, E- and S-Class models. Second place went to Porsche’s factory in Stuttgart, where the 911 is assembled, while third went to the BMW factory in Regensburg, northeast of Munich. German cars also led when judged by brand name, with Porsche leading the total ranking for the third year in a row with 87 PP 100, and increasing its lead over its competition from 3 PP 100 in 2007 to 11 PP 100. The study’s authors also commended Mercedes for improvements in quality when compared with 2007, reducing its error rate by 7 PP 100.

Gas prices put holiday plans on hold, says CAA

High gasoline prices are affecting CAA-Quebec members’ motoring vacations this summer, according to the results of a survey conducted by the association in May. Only 16 per cent of respondents said that the current price of gasoline is having no effect on their holiday plans. Among respondents who said their vacation plans will be affected by gasoline prices, 47 per cent said they are going to reduce the number of trips; 29 per cent will choose a vacation destination closer to home; and 24 per cent said they will stay in their own region. As well, 21 per cent will reduce their spending during their holidays, and 10 per cent plan to reduce the length of their vacations. “With the sharp rise in the price of gas, it is not surprising that our members are questioning certain choices and opting for proximity, particularly given that Quebecers love to travel in their own province,” said Sophie Gagnon, CAA-Quebec’s Senior Director, Public and Government Relations. Most respondents said they are planning to visit tourist attractions in their region or another tourist region in the province; only eight per cent plan to visit another Canadian province; 12 per cent plan a holiday in the U.S.; and six per cent will vacation in a country other than Canada or the U.S.

Ford shareholders embrace Kerkorian's offer

Kirk Kerkorian’s Tracinda Corp. said that its offer to buy up to 20 million shares of Ford stock for $8.50 per share drew a huge response: More than 1.02 billion shares of stock were tendered, according to the Detroit Free Press. That means that the holders of almost half of Ford’s 2.17 billion Class A stock are eager to sell at the offer price. Tracinda said it still plans to purchase 20 million shares at $8.50 per share for a total purchase price of $170 million, or an estimated 1.9% of the shares tendered. Ford, in a statement, said: “The response from investors is understandable given that the offer represented a significant premium over Ford’s current share price.” Tracinda, which is controlled by billionaire investor Kirk Kerkorian, offered to purchase the shares on May 9 when Ford’s shares were trading at $8.20 per share. Since Tracinda made its offer, Ford has announced production cutbacks and other cost- cutting measures and its stock price has fallen, closing recently at $6.36. A Tracinda spokesman said it would take several days to complete the transactions with the holders of the 20 million shares. At that point, Tracinda will own about 5.6% of Ford’s common or Class A stock. Although buying more shares will give Kerkorian a greater ownership of Ford stock, the Ford family retains 40% of the shareholders' vote through a separate class of stock called Class B, or super-voting shares.

Car dealer’s son, another employee arrested in massive drug-smuggling ring

The son of a Canadian Hyundai dealer and another dealership manager were arrested in Washington State following a three-year investigation into their distribution of marijuana and cocaine, according to a report in the Vancouver Province. Devron Quast, Robert Shannon and seven others were indicted for conspiracy to distribute cocaine and marijuana. The arrest took place when Messrs’ Quast and Shannon met with an undercover police officer for a drug deal, according to the indictment. The same day, law enforcement officers seized $50,000 and hundreds of pounds of marijuana that the ring was trying to get across the border into the U.S. Devron Quast is reportedly the general manager of Quast Hyundai and the son of the dealership’s owner. Robert Shannon is a sales manager at the store. The investigation resulted in the seizure of more than 590 kilograms of cocaine, more than 3,000 kilos of marijuana and about $3.5 million in cash. According to the indictment, Mr. Quast oversaw the day-to-day drug transportation and provided insurance to Canadian marijuana suppliers. He agreed to pay suppliers $425 per pound of marijuana if a load was lost for any reason. Mr. Shannon was in charge of distributing the drugs on behalf of the Hell’s Angels motorcycle gang and others. The narcotics were smuggled across the border in hollowed-out logs on trucks, fake walls of cargo containers and vehicles, within loads of commercial lumber, inside PVC pipes and in the interior of a propane tanker.

Bob Nardelli wants Chrysler employees to pay close attention to the harshest complaints

Last week, Chrysler chief executive Robert Nardelli fired off an e-mail to all company employees, notes the Detroit Free Press. Chrysler's biggest business challenge, he wrote, is to understand why many potential customers don't even consider buying Chrysler, Dodge or Jeep brand vehicles. And then do something about it. Mr. Nardelli wants no arguments about Chrysler products not getting a fair shake from Consumer Reports magazine or the latest J.D. Power and Associates report on vehicle quality.Rather, he wrote, instead of putting defenses up, Chrysler workers should seek to understand the harshest critics of the company. And then get to work on solving the shortcomings cited by those critics. Mr. Nardelli and his top lieutenants already knew what the latest J.D. Power study showed -- that Chrysler cars and trucks had far more quality defects than the industry average -- but most Chrysler employees and the general public didn't know the bad news, yet.He wasn't scolding or berating people for the bleak results -- Jeep ranked dead last among 36 brands -- nor did he try to soften the blow with lame excuses. Instead, he hammered home points that he has been repeating since taking the helm at Chrysler:
• Don't hesitate to confront problems.
• Everything is about pleasing the customer.
• Raise the standard defining excellent quality.