VW makes ‘last attempt' to save Seat

Seat, Volkswagen AG's most unprofitable unit, aims to stem losses within five years and halt a flight of customers to rivals by expanding its model range and growing outside its Spanish home market.

“This is the last attempt for Seat as a brand, it would not be sensible to view things differently,” CEO James Muir said Wednesday in Hamburg. “If one would want to get rid of Seat, one would have to give the other party money to take it.”

VW named Muir, Mazda Motor Corp.'s former European chief, as Seat CEO last September after predecessor Erich Schmitt failed in his three-year effort to turn around the automaker. Concern about Spain's economy as a result of Greece's fiscal crisis may further hamper efforts to boost revenue from the unit.

Martorell, Spain,-based Seat's first-quarter operating loss of 110 million euros ($139 million) was more than double VW's two other unprofitable units, Bentley and commercial vehicles. Without a turnaround, Seat may endanger the German automaker's plan to become the largest automaker by 2018, analysts say.

“It will be difficult to turn Seat around,” said Marc- Rene Tonn, an analyst at M.M. Warburg in Hamburg. “Most of their sales stem from southern Europe where the crisis has hit small-car makers particularly hard.”

Falling new-car sales

Deliveries of Seat vehicles such as the Ibiza compact and Alhambra minivan fell 8.5 percent to 337,000 units last year. Spanish car sales slumped 21 percent in 2009, according to the Brussels-based European automakers association ACEA.

Spain's once-booming economy started contracting in the second quarter of 2008 and has taken six months longer than the 16-nation euro area as a whole to return to growth as households pay down debt. First-quarter economic expansion was 0.1 percent. Spain has the eurozone's highest jobless rate at 20.1 percent.

Standard & Poor's cut the country's credit rating on April 28, saying the government was underestimating its fiscal woes and overestimating growth prospects. Prime Minister Luis Rodriguez Zapatero said yesterday he will cut public wages this year amid pressure to rein in Spain's budget deficit.

“Seat is the undisputed trouble-spot in VW's brand portfolio,” said Stefan Bratzel, director of the Center of Automotive at the University of Applied Sciences in Bergisch Gladbach, Germany. “Solving the problems there may take years and a clear-cut remedy isn't in sight.”

Surpassing Toyota

Seat, which gets 56 percent of its sales from the Ibiza model, must expand its range of offerings for models such as the Leon compact and reduce its reliance on Spain, Muir told journalists during a roundtable discussion.

Fixing Seat will be key to plans by VW, which also makes Skoda, Audi and the namesake VW brand cars, to surpass Toyota Motor Corp. in profitability and deliveries in 2018.

As part of that target, Muir yesterday reiterated VW's goal of more than doubling Seat's sales to 800,000 vehicles. Wolfsburg-based VW posted record sales last year of 6.3 million units.

“It seems to me that VW hasn't fully committed itself yet to the brand image of Seat,” said Mike Tyndall, an automotive analyst at Nomura Securities in London. “At some point they wanted Seat to be the sporty brand within the VW family, but some of the model decisions don't add up.”

VW Chief Financial Officer Hans Dieter Poetsch said March 11 that a “comprehensive program” of cost cuts was under way to return Seat to profit after the unit's operating loss in 2009 quadrupled to 339 million euros. The goal is to trim fixed outlays by raising capacity utilization, he said.

Martorell plant gets Audi SUV

To that end, VW will build Audi's new Q3 compact SUV at Seat's main plant in Martorell, near Barcelona, beginning next year, with a goal of making 80,000 vehicles a year. The factory, which can produce 500,0000 vehicles per year, has a capacity utilization of 60 percent currently, Muir said, adding that he needs to reach 90 percent to hit the breakeven point.

“Our clear focus over the next three years will be to improve utilization,” Muir said. “One cannot solely rely on cost reductions to make Seat profitable.”

Muir has made his own missteps since taking over Seat, running into resistance from the German carmaker's labor leaders after announcing plans to lay off about 300 workers. He later backed away from that plan after works council chief Bernd Osterloh criticized his efforts, saying cost reductions weren't enough to save Seat. VW has owned Seat since 1986.

Worker representatives hold half the seats on VW's supervisory board and have played a crucial role in the past in ousting executives that tried to cut jobs, including former VW CEO Bernd Pischetsrieder.

“I'm coming from outside the company straight into the CEO position,” Muir said. “That's a sign that there is a certain frustration about Seat at VW.”

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Tokyo go, go for storming Lexus supercar

V10-engined LFA will be star of Japanese expo.

It's the news every supercar fan was desperate to hear: the Lexus LFA is going into production! Although Honda has canned plans for a new NSX, the wrap,s will be taken off the LFA at October’s Tokyo Motor Show.

The two-seater flagship will feature a 600bhp V10, giving 0-60mph in less than four seconds and a 200mph-plus top speed. Expect a light carbon fibre body with a pop-up wing, rear-wheel drive and an F1-style paddleshift box.

A replacement for the Celica will also be revealed at Tokyo. This rear-driven coupé is the result of a joint project by Toyota and Subaru, and features an Impreza platform and drivetrain. But the show could be short on launches from other makers. Ford, GM, Chrysler, Mercedes, Renault, Volkswagen and Lamborghini have all pulled out of the expo, blaming the economic downturn. This follows news that the British Motor Show has been cancelled for similar reasons.

MR2 set to return as Prius coupé?

Production of MR2 stopped in 2007; new car will be a coupé instead of roadster

The MR2 is making a comeback, Auto Express can reveal. Toyota is developing an exciting performance hybrid which would revive the much loved sports car and rival Honda’s upcoming CR-Z.

It’s set to swap its predecessor’s roadster shape for that of a compact coupé. Under the skin will be a rear-wheel-drive chassis, a paddleshift gearbox and a specially developed version of the Prius’s hybrid powertrain.

The new model will boast an amazing blend of performance, economy and low emissions, all wrapped up in a stunning body. It would be a fitting successor to the MR2, which ceased production in 2007.

Speaking exclusively to Auto Express at the Geneva Motor Show, Toyota executive vice president Masatami Takimoto said: “We are aware of the fondness with which the MR2 is held in the UK and Europe, and are developing a small hybrid sports car.

“We have set a tough price point (expected to be around £20,000), as it will be easier to sell if it is affordable. It has to be fun to drive, too, which means the hybrid set-up must be different to the Prius’s, with greater responsiveness.”

These artist’s impressions give you an idea of how it will look. At the front it mixes cues from Toyota’s FT-HS sports car concept with a deep lower air intake, while the side has a kick up on the door towards the roof. At the rear are lights from the FT-HS and a neat diffuser-style lower bumper.

The key challenge for Toyota will be developing a powertrain that’s sporty to drive. It will have to improve the rate at which the batteries charge and discharge, for razor-sharp responses.

If the company gets it right, the car could do 0-60mph in seven seconds, yet return 60mpg and emit less than 100g/km of CO2. A new MR2 would be a desirable addition to the range, but Toyota is concentrating more on family hybrids at the moment, with 10 being launched over the next 12 months.

Trulli says Singapore still a worry for F1 drivers

Formula One drivers are still fretting about the sport's first night race less than a month before Singapore's new street circuit makes its debut.

"It's a new circuit, we don't know much about it, the schedule, the times of running. we all are a little bit concerned about the night race and the poor weather which might occur there," Toyota's Jarno Trulli told reporters at the Belgian Grand Prix on Thursday.

"It's a big question mark for everyone, we mustn't underestimate the situation."

Singapore will become the second new venue this season after last month's Valencia street race when the southeast Asian island state hosts the 15th round of the championship on Sept. 28 at the tail end of the monsoon season.

Unlike Valencia, which staged a couple of junior formula races on the street circuit a month before the grand prix to iron out any problems, Singapore remains untested.

"In Valencia they did a good job, so I am confident they can do a good job for Singapore," said Trulli. "But the location is different and the climate conditions are different.

"We are all a little bit uncertain because we probably don't have enough data. I haven't seen the circuit layout but that's not the problem. The problem is we don't know if the circuit is good enough, if the surface is good enough, if we have enough run-off areas, if the safety is good enough for a night race in wet conditions.

"There are several question marks and several concerns. I'm not saying that I don't want to race there, but that we might encounter some more problems than in Valencia."