Merrill Lynch downgrades GM

General Motors will need to raise about $15 billion in cash to shore up liquidity and bankruptcy is "not impossible" if the U.S. auto market continues to slump, Merrill Lynch said on Wednesday.

Merrill Lynch analyst John Murphy said in a research note he cut GM to "underperform" from "buy" and lowered his price target for the largest U.S. automaker to $7.

GM shares fell Wednesday to as low as 10.80 on the report. As of 10:50 a.m. EDT, shares of GM were trading at 11.04, down 71 cents, or 6.0 percent.

The downgrade comes one day after GM said that June sales fell 18.5 percent from the same month a year ago. Despite the decline, GM shares closed up on Tuesday. Investors and analysts expected worse, with some predicting Toyota would pass GM in sales for the month.

For the first half of 2008, GM's U.S. sales totaled 1,604,942, down 16.5 percent from last year's 1,922,762.

Murphy also lowered his forecast for 2008 U.S. industry-wide light vehicle sales for the third time this year and said the recent drastic decline in sales would likely to continue through 2009.

He expects 14.3 million U.S. auto sales this year and 14 million units for next year. That compares with 16.15 million units in 2007.

Although analysts have said GM will need to raise capital to cover continued losses before 2010, $15 billion is a higher estimate than any other analysts have suggested.

"The recent extreme deterioration in volume and mix is driving much higher cash burn and eroding GM's cash position," Murphy said. "We believe $15 billion is necessary because there is downside risk to our current estimates and a greater cushion is essential."

Murphy said a decline of 1 million vehicles in annual U.S. auto sales equates to about $3 billion in cash burn.

Any capital GM raises has the potential to dilute equity if it's done through convertible offering, one of the possibilities for the automaker.

Volkswagen Polo

VW supermini set to get a lot more stylish thanks to Scirocco inspired design.

The Polo is getting a ‘fresher’ flavour! VW’s fifth-generation supermini will go on sale next year with a more upmarket look – and a front end which has been given ‘the Scirocco treatment’.

The car’s nose reflects the styling of VW’s sleek coupé – and inside, there is a classier cabin. A range of new engines includes hi-tech, low-emission diesels and super-turbo petrol powerplants.

As you can see from our pictures, produced using insider information, the Polo draws on the next Golf and Scirocco, dropping the large chrome grille seen on recent VWs for a simpler design with twin horizontal air intakes and angled headlights. It’s a cleaner look all-round, with uncluttered flanks, neat tail-lamps and a purposeful stance.

Under the skin, the Polo gets the new PQ25 small car platform – first used by the latest SEAT Ibiza. This means a bigger cabin, even though the dimensions are similar to the current model’s.

Quality will improve, as VW bids to address criticism over falling standards. It promises the Polo will be the best-built car in its class, with a Scirocco-style dash and soft-touch materials.

The generous kit tally will include an MP3 player input and Bluetooth connectivity on most models. Plus, the Polo could get the same sat-nav docking port as the Ibiza – this allows portable, hand-held units to be plugged into the dash.

While the car is unlikely to match the likes of Ford’s next Fiesta for driver fun, the steering will be improved and the ride made more compliant. Engine highlights will include 1.4 and 1.6-litre FSI direct-injection petrol units, plus new TDI turbodiesels.

The Polo will also make use of VW’s 1.4-litre supercharged and turbocharged TSI motor, available in a 138bhp ‘warm hatch’ and a 168bhp GTI variant. There will be a new Bluemotion model, too – this promises to emit less than 100g/km of CO2 and return 75mpg economy.

The firm’s seven-speed DSG twin-clutch box should appear as an option throughout the range. As well as three and five-doors, there will be a coupé-cabrio, inspired by the Karmann-built drop-top seen at 2007’s Frankfurt Motor Show.

In addition, buyers get the option of a four-wheel-drive SUV variant to replace the Dune – as we revealed in Issue 1,018 – and a compact MPV. These models won’t appear until at least 2010, while the hatch arrives next year, starting from around £9,000.

In a related story, VW has revealed more about its future by unveiling its first-ever plug-in hybrid. The Golf-based Twin Drive can run for up to 30 miles solely on battery power thanks to an 82bhp electric motor. When it runs out of energy, a 122bhp 2.0-litre turbodiesel takes over.

It gets stop-start technology, regenerative braking and hits a top speed of about 75mph. Energy comes from lithium-ion batteries that can be plugged into a household socket.

While there are currently no plans to put the Twin Drive into production, some of its features are set to debut on VW models within the next two years.

Ford's talks with Renault to sell Volvo

Ford Motor has had exploratory talks with French automaker Renault to sell Volvo, but the initial talks broke down due to price differences, sources familiar with the matter told Reuters.

The two parties have spoken again after their initial discussions, which were held last fall, the sources said.

Ford has also had talks with China's third-largest automaker, Dongfeng Motor Group, as a potential partner for Volvo, one of the sources said.

Ford spokesman Mark Truby declined to comment directly on the report, but said: "We announced earlier this year that Volvo is not for sale and that we are focused on improving Volvo's business results."

Automotive shares down as raw-material prices surge

Shares were lower in mid-afternoon trade as surging raw materials prices put pressure on automotive and other transport-related stocks.

Automotive stocks were particularly hit by news that oil prices reached a record high last Friday and a prerelease of auto motor und sport magazine which quoted ArcelorMittal's vice president for Automotives Jean-Luc Maurange as saying the company plans to charge higher prices to carmakers due to surging raw materials costs.

Daimler was off 0.99, or 2.48 percent, at 38.89 while BMW was down 0.15, or 0.50 percent, at 30.04.

Another factor contributing to weaker car stocks was Lehman Brothers' removal of Peugeot and Daimler from its Recommended Portfolio List, according to traders.

The only car stock on positive terrain so far was Volkswagen, up 0.86, or 0.48 percent, at 179.92. VW's management board is set to decide July 8 on the site of its new 500 million euro production site in the United States, auto motor und sport reported, citing management sources.

Torres ends Spain's long wait for glory

Spain became European champions for the second time after Fernando Torres's first-half goal in Vienna proved enough to defeat Germany in the final of UEFA EURO 2008™.

History an inspiration

Spain had won their only previous piece of silverware in this competition in 1964 and had not been beyond the quarter-finals of any tournament in 24 years, yet Luis Aragonés's men chose to use that history as an inspiration rather than a burden. After a strong start from Germany, seeking a fourth title themselves, Spain were the more dangerous side throughout an entertaining final at the Ernst-Happel-Stadion although it took just one goal – in the 33rd minute, courtesy of Torres's pace, perseverance and unerring finish – to end their long wait.

Ballack boost

Germany received a significant boost before kick-off with captain Michael Ballack included despite a much-publicised calf problem, and, perhaps buoyed by that news, Joachim Löw's team settled quickly. Much had been made of the contrast in style between the sides yet in the opening exchanges it was Germany whose passing looked crisper, Miroslav Klose and Thomas Hitzlsperger failing to make the most of glimpses of goal. Meanwhile Spain, shorn of four-goal leading scorer David Villa due to a thigh injury, struggled to find their feet in a new 4-5-1 formation in which Cesc Fàbregas was rewarded for a fine semi-final display with a starting place.

Instinctive stop

As an indicator of the pattern of the match, however, Germany's bright beginning proved misleading. Spain soon worked their way into the contest, with Germany goalkeeper Jens Lehmann – becoming, at 38, the oldest player to appear in a UEFA European Championship final – forced into action for the first time in the 14th minute. Although his instinctive save came when his own defender, Christoph Metzelder, inadvertently deflected Andrés Iniesta's cross towards his own goal, Xavi Hernández's fine through pass had unpicked the Germany defence and showed the Spanish were finding their feet.

Torres on target

Right-back Sergio Ramos was then allowed to cut inside and deliver a deep cross, Torres peeling away from Per Mertesacker to create space for the header only for the right-hand post to come to Lehmann's rescue. The warning signs were there for Germany, yet they failed to heed them and duly fell behind three minutes past the half-hour. Again Xavi was the architect, playing a pass in behind the Germany back line towards Torres, who outmuscled a hesitant Philipp Lahm and clipped the ball over the diving Lehmann and just inside the far post. David Silva then volleyed over Iniesta's cross when given time and space inside the area as Spain threatened to increase their lead.

Spain openings

Spain had more openings in the early stages of the second half, Lehmann getting the merest of touches to Xavi's low shot before Ramos nearly guided in Silva's drive from the resulting corner. Yet a hint of the threat Germany still posed arrived on the hour, substitute Marcell Jansen and Bastian Schweinsteiger combining for Ballack to shoot centimetres wide. Klose then deflected a Schweinsteiger effort past the post and, in response to Germany's renewed menace, Spain coach Aragonés promptly introduced Xabi Alonso and Santi Cazorla in place of Fàbregas and Silva. The switches reinvigorated Spain instantly, Lehmann making smart stops from Ramos and Iniesta while Torsten Frings blocked another Iniesta effort on the line.
CelebrationsAs the final moved into the last 20 minutes, Spain had had seven shots on goal to Germany's one, but with the Mannschaft having turned virtually one in two of their attempts on target into goals en route to the final, that would have been scant consolation to Aragonés and his side. In the event, however, it was Spain who continued to carve out chances as the match reached its conclusion, Marcos Senna narrowly failing to apply the finishing touch to an unselfish header from substitute Daniel Güiza – but the celebrations would not be delayed much longer.

Xavi emerges as EURO's top man

Spain midfielder Xavi Hernández has been named as the Castrol Player of the Tournament for UEFA EURO 2008™ after his stirring displays aided his nation to the title.

Tecnhicians' approval
The 28-year-old FC Barcelona player played in five games at the finals and scored once as Spain earned their first major international success since beating the Soviet Union in the final of the 1964 UEFA European Championship. His ability to dictate the pace of the game from midfield brought him to the attention of the UEFA Technical Team who decide upon the Castrol Player of the Tournament, taking into account votes from the public. UEFA Technical Directoir Andy Roxburgh said: "We chose him because we think he epitomises the Spanish style of play. He was extremely influential in the whole possession, passing, penetrating kind of game that Spain played."

Growing reputation
The 1-0 final victory in Vienna marked Xavi's 63rd cap for Spain since making his debut – along with team-mate Carles Puyol – in a game against the Netherlands on 15 November 2000. He had been an unused squad player with Spain at UEFA EURO 2004™ in Portugal but was a first-team regular by the time of the 2006 FIFA World Cup finals in Germany, and showed maturity and no small amount of brilliance in Austria and Switzerland.

GM and Ford merger was discussed

A merger of U.S. automakers General Motors and Ford Motor was discussed, but shot down at a recent management meeting at GM, according to an article in the July 7 edition of Business Week.

The idea was floated by a senior GM executive, but set aside as such a deal could be a huge distraction and double many of the numerous problems that both companies are facing, said the report, citing someone familiar with the discussion.

However, such a deal would have some merit, as merging the massive overheads of both companies could save billions and their combined cash hoard of $50 billion could help them weather the downturn in automotive sales, the article said.

Court bans German sales of China-built SUV

A court has banned German sales of an SUV made by Chinese automaker Shuanghuan .
The court in Munich ruled that Shuanghuan's CEO infringes BMW's design rights. BMW claims the CEO closely resembles its X5 premium SUV. It started legal proceedings last September to stop CEO sales in Germany.

Shuanghuan's German importer China Automobile Deutschland denied that the CEO infringes BMW's design rights.

Managing Director Karl Schloessl told Automotive News Europe that although the CEO was a different car from the X5, it was possible that some elements of its design could resemble other cars on the market. "Even when you look at some BMWs and some Audis, there are similarities,"
he said.

Schloessl said that he planned to appeal against the court ruling.

"It is a one-sided judgment, but of course it was made in Munich. It's a BMW city," he said.
Shuanghuan spokesman Zhang Rui said the carmaker could not comment because it has not yet been notified about the ruling.

Ferrari unveils new Maranello assembly lines

Ferrari's historic Maranello, Italy, complex has long held a certain mystique for fans of the Prancing Horse. But mindful of the realities of modern manufacturing, the automaker has been focusing on upgrading its facilities and on Wednesday unveiled two new buildings designed to improve production.

At a ceremony, Ferrari executives showed off new assembly lines with workstations that reduce worker movement. The building is lined with large windows that offer a view of the 1960s factory built by Enzo Ferrari.

The company has spent 198 million euros since the late 1990s to improve its facilities, including completely revamping the car-production area, where work began late last year. The assembly facility was designed by Jean Nouvel, a noted French architect who won one of the industry's top awards, the Pritzker Architecture Prize, this year.

Ferrari also unveiled a new restaurant for workers in the "Ferrari Village." The impressive structure features a soaring glass overhang and is surrounded by a square for staffers to relax.
Meanwhile, in product news, the company revealed more details about its much-anticipated new GT-style convertible, the California. Most interesting is that the car will have a "launch control" button that will shoot it from 0 to 62 mph in less than four seconds. The technology is borrowed from Ferrari's racing division and allows maximum torque while preventing the wheels from slipping.

Versace to design Lamborghini bags, interiors

Versace has agreed to design the interior of a limited edition Lamborghini car and its accompanying accessories like gloves and bags in the latest collaboration between the two luxury brands. The Italian fashion house will design the interior of the Murcielago LP640 Roadster, a joint statement said on Monday at Milan's fashion week for men.

The cars, whose interiors will be fitted with black and white leather, will be made on demand so the number to be produced has yet to be determined, a Lamborghini spokeswoman said. The accessories, which also include trolleys and suitcases, will go on sale in Versace and Lamborghini stores by November.

Versace began collaborating with Lamborghini about two years ago. It designed the interior of a limited edition Murcielago coupe and later worked on another Lamborghini car that went up for auction at a charity event.

Working with Versace is part of the luxury sports car maker's strategy to raise its profile and make money through the franchising of its brand.

Although it is based in Sant'Agata Bolognese, Lamborghini is owned by Audi, a unit of Volkswagen of Germany