Who's to Blame for Record Oil Prices

By Paul Eisenstein June 30th, 2008

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The oil price blame game is heating up. Members of OPEC, during an emergency meeting in Saudi Arabia earlier this month, blamed "speculators" for running up prices, an alarm more than a few industry analysts have also sounded.

But petroleum industry leaders, holding their largest get-together in three years, insisted speculators and greedy oil barons aren't at fault. Rather, they argued, blame belongs to the fact that there's been a dearth of new supplies found to feed an increasingly oil-hungry globe.

BP's CEO Tony Hayward said the argument that financial investors buying oil futures were behind a four-year rally that pushed oil prices to new records above $143 per barrel on Monday was a "myth."

"Supply is not responding adequately to rising demand," BP's CEO Tony Hayward told thousands of delegates at the World Petroleum Congress, adding that reports that cite speculators are merely "myth."

That position was echoed by speaker after speaker, including Antonio Brufau, CEO of Spain's Repsol, who said, "The fundamentals in the industry are the significant reasons for having these prices."

Jeroen Van der Veer, head of the Dutch giant Shell, acknowledged that his firm, the world's third-largest oil company by market value, did use energy derivatives. But he insisted Shell didn't speculate on oil prices.

There's been growing concerns about just how much oil is left in the world, particularly in terms of undiscovered petroleum fields. But speakers at the industry conference expressed concern that their exploration efforts are being limited by governments that restrict access to possible deposits, particularly by foreign oil companies, like Shell, BP, and Exxon.

"The problems (with limited growth) are above ground not below it," said BP's Hayward.

Who is actually to blame could prove academic, though there's growing pressure to reign in the rise in the price of a barrel of crude, which has nudged past $140 and which some insiders now expect to reach $200 before the run-up winds down.

Tags: Industry

Chrysler Closing More Plants

By Paul Eisenstein June 30th, 2008

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2009-dodge-ram-sm.jpg

Hit hard by the slump in sales of SUVs, pickups, and other light trucks - which normally account for two-thirds of its volume - Chrysler LLC plans to close an assembly plant later this year and sharply reduce production at another.

Chrysler's St. Louis South plant, one of two producing minivans for the maker, will close indefinitely, starting October 31. The neighboring St. Louis North factory, which makes the big Dodge Ram, will meanwhile go from two shifts to one, reflecting the huge drop in demand for full-size trucks.

The situation is all the more significant for Chrysler since it only recently launched a new version of its Town & Country and Dodge Caravan minivans, and is just now preparing for the rollout for an all-new version of the Ram pickup.

The cutbacks will idle 2,400 workers, according to Chrysler, including 1,500 at the minivan plant. A second minivan assembly line, in Windsor, Ontario, will continue operating.

"We see no need for the capacity in the future," said Chrysler President Tom LaSorda, during a conference call.

Meanwhile, LaSorda derided as "hogwash" growing rumors that Chrysler's private equity owner, Cerberus Capital, was preparing to sell the company off in pieces. Among the many reports that have circulated, Cerberus would close Chrysler's carmaking operations and keep its Jeep line, or sell the Jeep and Chrysler brands and keep Dodge.

Such plans are "absolutely not being considered at all," he forcefully declared, adding that, "I don't even want to entertain those questions."

LaSorda, who was bumped out of the CEO job after Chrysler was sold to Cerberus, last year, by its former German owner, Daimler AG, insisted Chrysler is meeting all its targets. But he did concede it was being forced to make "some difficult decisions" by the current automotive downturn.

Chrysler's crosstown rivals have also had to take some tough steps in recent months, including a number of plant closings and cutbacks of their own. Investors have responded by driving General Motors and Ford Motor Co. stock prices down to historic lows. As a privately held company, Chrysler and its parent, Cerberus, do not report their financial data.

Tags: Industry, Gas Prices

Posted in: 2007, Jeep, Dodge, Chrysler, Caravan

Are Dealers Doing a Better Job Satisfying Customers?

By Paul Eisenstein June 30th, 2008

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Car Dealer

That's the question posed by researchers wondering whether dealers are doing a better job than conventional wisdom would suggest. We've all heard the horror stories, of course: dealers who renege on promises, deliver a different vehicle than the one a customer expected to get, or throw a prospect's keys on the showroom roof until the potential buyer gave in and inked the deal. But while such things may still happen, they're clearly the exception rather than the norm these days, according to the 2008 Prospect Satisfaction Index.

The PSI is designed to see how consumers are treated when shopping for a new car, motorcycle, RV, or boat. The independent study sent hired anonymous shoppers into auto dealerships nationwide representing all major brands, then calculated and reported the findings. And what the study shows is that the bulk of dealers are improving the way they treat customers.

Significantly, those brands that have been able to grow sales also have dealers who are more likely to satisfy shoppers. Eight of the top 10 brands that scored well on a sales standpoint also increased or maintained their PSI score from 2007 to 2008, reported Pied Piper. Of the 10 car brands with the worst year-to-date sales performance, eight also saw their PSI score decrease from 2007 to 2008.

"Today's typical auto shopping experience is far different from the experience even five years ago, and many dealerships are changing the way they sell cars as a result," said Fran O'Hagan, president of Pied Piper Management. "Today's shoppers arrive at a dealership already armed with facts and figures, but in the end the dealership and salesperson still play a critical role in helping shoppers turn that raw information into the best match for the shopper's needs and desires."

Notably, there's not always a direct connection between product quality and satisfied shoppers. Acura, the luxury brand of Honda Motor Co., fared reasonably well on the latest J.D. Power Initial Quality Survey, but topped the Satisfaction charts. Saturn, which had significant quality issues in the latest Power IQS, was No. 2 in shopper satisfaction, followed by Lexus and then Jaguar.

Significantly, the study found that a growing number of salespeople are suggesting customers consider brands other than those they original wanted to buy. Whether that's because of quality problems or because of higher commissions, the study doesn't say, but this happened most often in multibrand, rather than single-brand or so-called standalone, showrooms.

Of 37 brands Pied Piper studied, 24 either maintained or improved their Prospect Satisfaction scores in the 2008 study.

Which raises the question: Were you satisfied by how the salesperson treated you the last time you shopped for a car?

Tags: Industry, Shoppers

Posted in: Lexus, Acura, Jaguar, Saturn, Honda