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Wednesday,
April 23, 2003 |
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| SIGNIFICANT NEWS |
A Compendium of News for Fleet Managers from
April 14 -- 18, 2003 |
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| 1) |
Ford Announces Taurus' 2005 Retirement, Unveils Succession Plan w/ Futura, Freestyle, Five Hundred |
11) |
US Sales of Gas-Sipping Hybrids Pale in Comparison to Japan's Guzzling SUVs, Pickups; Environmentalists Decry Product Strategy |
| 2) |
IRS Clarifies Credits for Hybrid Vehicles |
12) |
Automakers’ New Designs Safer, Says Insurance Institute for Highway Safety |
| 3) |
Caterpillar Misses EPA Deadline, Pays $40M Fine, Faces Additional $77M-$2.6B |
13) |
Spring Auction Report: Sales up Slightly in Weather Dominated Market; Auctions Emphasize Improving Dealer Relationships, Internet Usage |
| 4) |
Shop Environmental Compliance: Cost Effective and the Right Thing to Do |
14) |
Big-3 Vie to be UAW Target, Each w/ Own Agenda |
| 5) |
Daily Operator Inspections, Sound Brake Maintenance Critical to Fleet Safety and Bottom Line |
15) |
Jobless Claims Surge by 30,000 as Big-3 Lower Output; Wall St Surprised |
| 6) |
Ford Won't Meet Its Goal of 25% Slash in Fuel Economy |
16) |
Chrysler, Mitsu Team Up To Share Plants; DCX Shareholders Praise Zetsche, Fret Over Stock Slump |
| 7) |
Ford's New Wet-on-Wet 2-Tone Paint Process Eliminates Imperfections, Air Bubbles |
17) |
Ford Posts Impressive Sales Results w/ 1st Q Incentive Hikes as Entry-Level Battle Heats Up w/ New Arrivals |
| 8) |
So Calif Auto Club Opposes Proposed Red Light Camera Bill |
18) |
Volvo's Newest Ads Hype Performance As Well As Safety |
| 9) |
2004 Prius Hybrid Delivers 50 mpg, 30% Lower Tailpipe Emissions |
19) |
Public Health Takes a Big Step; Strict EPA Standards for Nonroad Vehicles Issued, Likely to be Implemented |
| 10) |
GM Scrutinizing Return on Investment in Event Marketing; Looking for Promotions that Push Buyers to Dealerships |
20) |
Volatility and Unpredictability Among World Oil Producers Cause Market Uncertainty, Price Swings |
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| 1) Ford Announces Taurus' 2005 Retirement, Unveils Succession Plan w/ Futura, Freestyle, Five Hundred |
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Situation
- Ford bares Taurus succession strategy at NY show preview
- Photo of last of 3 replacements -- the Futura -- confirms platform is new Mazda6 sedan
- Futura due in 2005, after next year's Freestyle SUV/wagon and Five Hundred extended sedan
- Mazda6 developer Phillip R. Martens unveils Futura as role model, saying "copy with pride, that's our mantra" and offering hybrid engine edition from outset
- Fading Taurus, in mid-1980s top-selling car, will tap out when Futura debuts
Significant Points
- Taurus' death process underway as Chicago plant ceases building it in 2004, leaving Atlanta as only source for mostly rental/fleet model
- As flagship model, Taurus has long been eclipsed by Honda Accord, Toyota Camry
- "Updated" ovalized Taurus of early 1990s started its path downhill as buyers turned sour
- Futura dice roll for Martens, styling VP J Mays -- has protruding grille w/ "screaming" horizontal aluminum bands
- Hopefully, Ford hasn't waited too long to do new family sedan -- but still needs 3 years to develop any new model
- Under Martens, Mazda gave birth to Mazda6, RX8 sports car in 2 years -- goal he wants for Ford
Web Source
Sourced From: New York Times, April 16, 2003, Page C1; Wall Street Journal, April 16, 2003, Page A1
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| 2) IRS Clarifies Credits for Hybrid Vehicles |
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Situation
- Hybrid vehicles qualify for "clean-fuel credit," not "electric vehicle credit"
- IRS specialist in Milwaukee notes distinction, after IRS staffer misinformed by Toyota Prius, Honda Insight, Civic Hybrid dealers
- Clean-fuel credit applies to natural gas, hydrogen, ethanol-burning cars as well as hybrids now and upcoming
- Electric vehicle credit disqualifies hybrids because of their gasoline engine component
- Credit is the same, $2K for year in which vehicle first used
- Regretfully, all-electric cars pioneered by GM (EV1) and Honda (EV Plus) are going to pasture, killed by low mileage ranges and slow recharge times
Significant Points
- Sophisticated hybrid engines, now on sale in Civic Hybrid and coming to Lexus RX next year, attracting more and more buyers
- Tax credit reduces higher price of handful of hybrids available now, acting as sales incentive
- Dealers should be careful to advise buyers to use right forms for applying for credits -- 8834 for electric, line 34 of 1040 tax return for hybrid
- Next up for hybrid engine: Ford Escape in late 2003, GM Envoy/TrailBlazer in 2004
Web Source
Sourced From: Automobile Dealers Association of Mega Milwaukee, Newsletter, April 3, 2003
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| 3) Caterpillar Misses EPA Deadline, Pays $40M Fine, Faces Additional $77M-$2.6B |
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Situation
- EPA mandates for cleaner diesel engines were effective 10/02
- Caterpillar is world's largest diesel manufacturer selling $1.8B in '02; $20.1B total
- Penalties for non-compliant, heavy-duty engines $3.5-$12K each
- Caterpillar opted for ASERT technology instead of EGR and missed certification deadline
Significant Points
- Caterpillar paid $40M fine for first 3,126 medium-duty diesel "bridge" engines that didn't meet emissions standards
- Undisclosed additional penalties will be due for 22K heavy-duty engines sold in 1stQ
- Penalties could be $77M-$2.6B more depending on EPA determination of excess NOx emissions
- Caterpillar absorbing penalties rather than passing to customers
Web Source
Sourced From: Light & Medium Truck, April 2003, page 8
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| 4) Shop Environmental Compliance: Cost Effective and the Right Thing to Do
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Situation
- Sound waste management practices, procedures integrated into routine tasks
- Goal is to recycle all wastes to include spill control materials, used oil, filters, antifreeze, refrigerant, tires
- Storm water runoff and vehicle wash water either goes to treatment plant or is recycled on site; otherwise contractor who collects waste is used
- Fuel and bulk fluid leak detection systems double to monitor inventories
Significant Points
- Key to environmental management, compliance is a systematic approach
- Standardization to eliminate variability of practices important for liability issues
- Managing solvents, other shop chemicals can reduce waste stream volumes placing shop in lower generator category
- Good shop housekeeping goes a long way toward achieving environmental compliance
Web Source
Sourced From: Utility & Telecom Fleets, March 2003, page 50
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| 5) Daily Operator Inspections, Sound Brake Maintenance Critical to Fleet Safety and Bottom Line
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Situation
- Brake manufacturers innovative in past decade spending millions to improve truck stopping ability
- Now have longer lasting linings, auto slack-adjusters, ABS, brake-by-wire and improved disc brakes
- Brake adjustments continue to be major cause of costly heavy-truck out-of-service violations
- Technology improvements may create false sense of security, indifference to scheduled brake maintenance
- Improperly adjusted brakes result in >50% braking power w/ full truck load
Significant Points
- Daily level 2 CVSA type pre-trip inspection essential to extending brake life
- Signs of oil leakage, drum cracks or missing pieces of linings require immediate attention
- Full brake system inspection and adjustment must be included in regular PM schedules
- PM include adjuster lube, check for damage of adjuster housing, bushings and boots--adjusters fail w/ age and require replacement
- Use of extended service brake linings last 50% longer when properly adjusted and maintained
Web Source
Sourced From: Utility & Telecom Fleets, March 2003, page 14
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| 6) Ford Won't Meet Its Goal of 25% Slash in Fuel Economy |
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Situation
- Ford admits it can't slash fuel economy 25% on lineup by 2005
- Self-imposed goal in 2000 bumps into FoMoCo's cost crunch, demand for bigger, more powerful models
- Selling more trucks, vans, SUVs lowers US vehicle fleet average to 20 mpg, 20-year low
- New bill from Senator Dick Durbin (D, IL) divides fleet for EPA purposes into 2 groups: passenger and non-passenger vehicles
- Meanwhile, Ford pursuing hybrid-engine path towards fuel economy --
- Starting on Escape and new Mercury Mariner SUVs in 2004, then on new Futura sedan in 2005
Significant Points
- Enviros ticked at Ford's fold on big economy cut, but most consumers like power 1st
- Durbin plan needs fine-tuning, since more trucks now carry 3, 4 or even 5 riders
- Crossovers to play role on economy front, as makers push to have them classed as trucks
- Any Mideast oil crunch following Iraq war could spur growth of subcompact/mini-compact segment in US
- Hybrid engines hold greater promise of helping solve automaker problems
Web Source
Sourced From: The Wall Street Journal, April 18, 2003, Page A2; Detroit News, April 15, 2003, Page 1A
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| 7) Ford's New Wet-on-Wet 2-Tone Paint Process Eliminates Imperfections, Air Bubbles |
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Situation
- Ford developed new paint process that allows 2 different paint colors to be applied simultaneously
- New process has vehicle go through paint application only once so it doesn't add to thickness of paint
- Allows elimination of normal waste material like tape, plastic and paper required for masking
Significant Points
- Uses advanced primer developed by DuPont for new process
- Advanced mask/demask process is another key enabler of wet-on-wet process
- Eliminates air bubbles and other imperfections, one of the major customer complaints
Web Source
Sourced From: Collision Week, April 14, 2003
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| 8) So Calif Auto Club Opposes Proposed Red Light Camera Bill |
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Situation
- Automobile Club of So Calif opposes Calif Senate Bill 780
- Club says bill eliminates due process protection for motorists
- Current law requires red light camera system contains a clear photograph of license plate and vehicle driver
- This provides due process protections for vehicle owners whom may not have been responsible for violation
- SB 780 proposes to remove the driver photo requirement
Significant Points
- Auto club says SB 780 makes it harder for an innocent driver to challenge a red light camera ticket
- If car owner gives his vehicle to parking valet or friend and that person runs a red light, the photo proves who was behind the wheel
- Statewide collision data collected from 1995 to 2001 showed a 10% decrease in accidents caused by motorists running red lights
- Data from jurisdictions w/ cameras compared w/ those jurisdictions w/o cameras
- But cameras have been subject to public criticism and legal challenges
Web Source
Sourced From: Collision Week, April 17, 2003
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| 9) 2004 Prius Hybrid Delivers 50 mpg, 30% Lower Tailpipe Emissions |
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Situation
- Japan's Toyota Motor unveiled 2nd generation Prius hybrid at NY Int'l Auto Show
- 2004 version goes on sale this fall
- New model is bigger and equipped w/ more powerful powertrain that Toyota calls 'Synergy Drive'
- Japanese automaker hopes to initially sell 36,000 units a year
Significant Points
- 2004 Prius is more fuel efficient and less polluting than model on sale in 1997 in Japan, 2000 in US
- Tailpipe emissions will be 30% lower
- Fuel economy will be improved from over 40 mpg to more than 50 mpg
Web Source
Sourced From: Detroit News, April 17, 2003
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| 10) GM Scrutinizing Return on Investment in Event Marketing; Looking for Promotions that Push Buyers to Dealerships |
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Situation
- GM holding event organizers accountable for marketing results
- Event marketing important, allows GM to impact consumers on a different level
- Allows customers to touch, feel and smell product
- Events have ability to do things on different level than advertising
- Gives consumers understanding of what those brands represent in their lives
- How the product can do things for them that they're looking for
Significant Points
- Organizers of marketing events may find GM a tougher customer than in past
- GM has defined sales promotion process through which event marketing is evaluated
- Looks at true return on investment
- Looking for events that push consumers to visit a dealership
- Evaluates performance of the activity from both qualitative and quantitative perspectives
- Building in contract clauses that may reduce fee if promoter does not deliver as promised, or reduce fee following year
Web Source
Sourced From: Automotive News, April 14, 2003
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| 11) US Sales of Gas-Sipping Hybrids Pale in Comparison to Japan's Guzzling SUVs, Pickups; Environmentalists Decry Product Strategy |
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Situation
- Toyota introduced newest mid-size Prius getting 55 mpg
- Ford scaled back expectations for 1st hybrid-powered vehicle and pledge to improve SUV mileage
- Toyota, Honda, Nissan flooding American market w/ SUVs of all sizes
- Toyota, Nissan redoubling efforts to take on last largely unchallenged stronghold of Detroit, the pickup truck
- Sales of new-model Japanese SUVs far outnumber gas-sipping hybrids, reversing oil reduction trend begun w/ hybrid introduction
- Upcoming Nissan Pathfinder Armada SUV size of Chevrolet Suburban w/ 2.5-ton towing capacity
Significant Points
- Fuel economy of average new US vehicle at lowest point in 2 decades
- Shift of Japanese automakers to larger light trucks counterproductive to reductions in US oil import efforts
- Influx of competition forcing US automakers to improve, lower prices on SUV/pickups to stay competitive
- US automakers requesting more flexibility in light truck CAFE standards; Bush admin considering
- Environmentalists fear fuel-efficiency worsening even in face of stricter light truck CAFE standards
Web Source
Sourced From: The New York Times, April 19, 2003
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| 12) Automakers’ New Designs Safer, Says Insurance Institute for Highway Safety |
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Situation
- Volvo XC90 SUV, Honda Element, Mitsubishi Outlander SUV, Cadillac CTS, Infiniti Q45 got top rating in IIHS crash test
- Crash test involved crashing into barrier at 40 mph angled so driver’s side got brunt force of crash
- Cadillac redesigned CTS after last test earned "acceptable" rating citing late deployment of air bags
Significant Points
- Cadillac’s redesigned air bag crash sensors in models later than Oct 2002 earned highest rating
- Automakers clearly responding to crash-test results and building safer vehicles, says IIHS
- IIHS criticized performance of bumpers in tested vehicles saying too much costly damage in 5 mph crashes
Web Source
Sourced From: Associated Press via USA Today, April 16, 2003
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| 13) Spring Auction Report: Sales up Slightly in Weather Dominated Market; Auctions Emphasize Improving Dealer Relationships, Internet Usage |
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Situation
- Automotive Remarketing's spring auction report covers 5 national regions
- Weather had good and bad effects in most regions; biggest problems were low attendance or cancelled sales
- Areas severely affected by weather hope there is pent-up demand that needs filling
- Northwest hoped for tougher weather as way to drive customers out of older vehicles
- Most areas recorded slight increases in sales performances over 2002 spring
- Those areas w/ lower consignment volumes often see higher prices
Significant Points
- Most auctions cited increased emphasis on establishing and improving dealer relationships
- Auctions will return to basics in offering personal attention, more lanes and additional services
- Increased use of the Internet appealing to more auctions and dealers as way to get higher prices, more selection
- Dealer consignments off in many areas as dealers try to sell their own vehicles or work through wholesalers
- Fleet/lease also down in some areas; many waiting for expected surge of off-lease vehicles
- Gas prices worry many, especially those enjoying strong SUV sales
Web Source
Sourced From: Auto Remarketing Magazine, April 2003
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| 14) Big-3 Vie to be UAW Target, Each w/ Own Agenda |
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Situation
- No shrinking violets, Big-3 vie to land UAW target role in summer talks
- Each has agenda: GM wants to whack prodigious medical benefits tab of $5B a year
- Ford needs to shed 15K hourly UAW jobs as it closes at least 4 more plants
- Chrysler Group in better shape on legacy costs than GM, wants to divest some of its 15 parts plants, but is okay on assembly plants
- DC best positioned to field target role this year on new contract, w/o cutting health benefits that are one of industry's most generous
- In lieu of cuts, UAW may accept concessions requiring use of generic drugs over brand names, giving workers cash if they choose cheaper medical plans
Significant Points
- GM in good shape on employee totals, having been allowed to shed 21,265 jobs while hiring 4,600 replacements -- instead of contract's 1-3 ratio
- As a result, GM has best productivity rate of Big-3, could be bigger fish for UAW to fry
- Chrysler, on other hand, took "neutral" stance on 2 Freightliner factories in NC, could okay card registration for Mercedes plant in AL
- UAW President Ronald Gettelfinger got personal tour of Detroit auto show w/ GM CEO G. Richard Wagoner, Jr
- Ford CEO William Clay Ford, Jr gave top negotiating post to exec Gettelfinger approved
- All wooing UAW for target spot, which went to Chrysler in 1999 and likely to do so this year
Web Source
Sourced From: Business Week Magazine, April 21, 2003, Page 68; Forbes Magazine, April 28, 2003, Page 56
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| 15) Jobless Claims Surge by 30,000 as Big-3 Lower Output; Wall St Surprised |
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Situation
- Number of US workers filing 1st-time claims for unemployment benefits surged in mid-Apr
- Automakers cut production because of slow sales, hurting job market
- Initial jobless claims rose 30,000 to 442,000 in week ended Apr 12
- This reversed a decline from the previous week
- Economists say report portends a drop in nonfarm payrolls for Apr, marking 3rd-consecutive month of decline
- Fed policy makers meet on May 6 to decide course of interest rates, now at 42-yr low
Significant Points
- Numbers surprised Wall Street, which expected increase of just 10,000 initial claims
- Total # of claims increased to a level not seen in a year
- 4-wk moving average, which smoothes out weekly fluctuations, climbed to 11-mo high of 424,750
- Labor Dept spokesman attributed increase in jobless claims last to layoffs in auto industry
- Big-3 temporarily halted production at several US factories in Apr
- Those layoffs accounted for as much as half of the increase in claims
Web Source
Sourced From: The Wall Street Journal, April 18, 2003
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| 16) Chrysler, Mitsu Team Up To Share Plants; DCX Shareholders Praise Zetsche, Fret Over Stock Slump |
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Situation
- For the 1st time, Chrysler plants will build vehicles for Mitsubishi, starting 2005ish
- Lancer platform chosen to underpin next Chrysler Sebring/PT Cruiser, Dodge Stratus/Neon, Mitsu Lancer
- Mitsu plant in Normal, IL builds Sebring/Stratus, but never other way around
- Flexible plant strategies allow Mitsu to become fob Chrysler -- DC owns 37% of Mitsubishi
- Meanwhile, in Berlin, AutoNews reporter depicts nearly 10K attendees at DC shareholder sessions as inert
- Deflated stock prices, board pay raises combine to de-energize DC shareholders as stock slumps 2/3 since 1998 merger
Significant Points
- Reports in Detroit dailies last week depicted a lively meeting
- Chrysler Group chief Dieter Zetsche roused large crowd, hoping he'll succeed DC Chairman and CEO Juergen E. Schrempp if latter retires in 2005
- Praised by shareholder speakers for revitalizing Chrysler Group, Zetsche heir-apparent if Schrempp does retire -- but that's a big IF
- German analysts expect Schrempp to bid for another 5-year term as CEO, w/ Zetsche taking over Mercedes division
- Turnaround of Chrysler in only 3 years since Zetsche, COO Wolfgang Bernhard took over, remains quite a feat
Web Source
Sourced From: Automotive News, April 14, 2003, Pages 1, 47, AD Editor
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| 17) Ford Posts Impressive Sales Results w/ 1st Q Incentive Hikes as Entry-Level Battle Heats Up w/ New Arrivals |
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Situation
- Ford raises incentives on 3 entry-level vehicles: Escape, Focus, Ranger
- Strategy works in 1st Q as Escape sales rise 20.3% to 36,058; Focus sales 16.3% to 59,843; Ranger sales 1.9% to 55,832
- Rebates reach as high as $3K, plus new $150 month Ranger lease
- Ranger pushed on eve of 2004 launches of new Chevrolet Colorado (replacing S10), twin GMC Canyon
- Dealers report Ford Credit approving financing for "almost anybody" to nab sales
Significant Points
- In CA, conforming to stricter emissions regulations another motive for pushing Focus
- Battle for entry-level market intensifies w/ new Honda Element, Toyota Scion models, plus below-$10K subcompacts Hyundai Accent, Kia Rio
- Ford group VP for N America sales and marketing, James G O'Connor, points out 17% of Ranger buyers move up to F-series, timely, as new F-150 looms this fall
- W/O decent spiffs, would these models sell well, especially to teens and college grads?
Web Source
Sourced From: Automotive News, April 14, 2003, Page 6; AD Staff
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| 18) Volvo's Newest Ads Hype Performance As Well As Safety |
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Situation
- Volvo Cars of N America will debut slate of national and regional advertisements in May
- Hype performance as major brand attribute alongside Volvo's stalwart pitch, safety
- Volvo had hyped vehicle dynamics such as all-wheel drive solely in context of safety
- Now telling potential Volvo buyers that such items also can have distinct fun factor
- Ads mostly for TV, w/ national ads running on cable channels
- Text-heavy print campaign being done for S60R and V70R; will run in enthusiast magazines
Significant Points
- Challenge for Volvo has been how to soften brand's identification w/ safety
- Without undermining that core attribute
- This time, Volvo trying to combine safety and performance aspects of its cars
- Volvo's hand being forced by other brands pushing luxury performance
- Type of shopper who looks at a BMW 3 series does not cross-shop Volvo
Web Source
Sourced From: Automotive News, April 18, 2003
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| 19) Public Health Takes a Big Step; Strict EPA Standards for Nonroad Vehicles Issued, Likely to be Implemented |
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Situation
- Bush EPA proposed rules 4/16/03 to deeply cut soot, sulfur, smog-forming pollution from off-road diesels
- Construction, farm, other industrial equipment not currently held to higher on-road standards but manufacturers prepared
- Proposed rules have been under development for 2-yrs
- Proposal lauded by environmentalists w/ muted support from affected industry groups
- Full environmental impact will not be felt until '30 as old units leave use
Significant Points
- EPA administrator Whitman said threat to public health was clear, costs were justified
- Shifting to cleaner diesel for nonroad fleet would cost about $1.5B/yr over the next 27-yrs
- Cost more than offset by estimated $16-$80B/yr from prolonged lives and avoided health-care costs
- Proposed rules start decade phase-in '04 w/ cleanup of nonroad high-sulfur diesel fuel, stricter emissions controls
- EPA estimates ~30K deaths caused by soot annually and proposed standards would reduce that number by 9.6K/yr
Web Source
Sourced From: The New York Times, April 16, 2003
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| 20) Volatility and Unpredictability Among World Oil Producers Cause Market Uncertainty, Price Swings |
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Situation
- Iraq war news has caused oil prices to swing wildly over past several weeks
- But Iraq only most obvious hotspot impacting prices
- Political strife in Venezuela was choking off that nation's exports causing high winter prices
- Ethnic clashes in Nigeria shut down international oil operations there slicing production almost 40%
- Emerging markets like China and India increasing world demand for oil
Significant Points
- Global oil industry and world oil markets more volatile and unpredictable than they have been in a decade
- Oil companies avoid holding large stocks of oil and drilling every time prices rise fearing financial hit when oil prices plummet
- W/o stock cushion consumers feel every swing of oil prices
- China expected to import as much oil as US by 2030, increasing supply pressure further
- Bush administration has backed long-term research into hydrogen to replace crude oil but affordable technology still 15-20 yrs away
Web Source
Sourced From: The New York Times, April 13, 2003
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