Adeus AutoEuropa: VW to build SUV at plant

Volkswagen AG may build a new sport/utility vehicle (SUV) with Porsche AG at the plant in Palmela, Portugal, it currently shares with Ford Motor Co. VW will buy Ford's 50% stake in the $2.6 billion AutoEuropa Automoveis Ltda. joint venture, which currently makes Ford Galaxy, VW Sharan and SEAT Alhambra minivans. VW is expected to gain full control of the plant on Jan. 1. AutoEuropa will continue to build the Galaxy for Ford until early next century, when it will be replaced with a new model to be produced at one of Ford's plants. VW and Porsche likely would start production of their new SUV in about 2002. Porsche expects to sell about 20,000 annually, while VW is targeting sales of some 80,000 units. VW also may produce its Transporter vans at the plant, which has capacity for 186,000 vehicles per year but is expected to build only 138,000 vans this year.

Shanghai bank to offer auto loans

Automakers in China are applauding the deal between the Shanghai Branch of the Industrial and Commercial Bank of China and the Shanghai Automotive Industry (Group) Corp. (SAIC) making automobile loans available to consumers. SAIC is one of China's three largest automakers, partnering with Volkswagen AG to build Santana-based vehicles and General Motors Corp. to make versions of the Buick Century and Regal. The bank loans will be made available to individuals as well as various economic entities purchasing cars. Loans will be limited to 80% of the cost of a vehicle and run from three to five years. It is unclear what initial interest rates will be. Until now, loans were available only through car manufacturers and sales agents. Analysts say the move into the auto loan sector by banks could help stimulate sales to private owners. Currently, there are about 8,000 privately owned vehicles in Shanghai, Chinese officials say, compared to about 400,000 in Beijing.

Pound still causing headaches for Rover

Two months after announcing plans to cut 1,500 jobs to soften the blow of a strong pound, BMW AG says it may eliminate even more workers at its Rover subsidiary in the U.K. While details still are being discussed, BMW management expects the number of job cuts will go beyond what was announced in July, reports say. The number of layoffs remains under negotiation, but a decision is expected by month's end, BMW Chairman Bernd Pischetsrieder says. Trade unions have been quiet, but Rover workers reportedly are angry over the company's introduction of a 4-day work week and plan to use more foreign suppliers.

The sum of all parts

Russian suppliers aren't thrilled about it, but many find themselves in the car-selling business thanks to the country's rapidly flagging economy. The reason? Local carmakers, unable to pay suppliers cash for parts, are bartering back fully built-up cars. Partsmakers then are forced to sell the vehicles to pay their own bills. "We pay about 70% of all deliveries from our Russian suppliers with cars," admits Nikolay Lyachenkov, first vice president of OAO AvtoVAZ, the biggest car manufacturer in Russia and Eastern Europe. Short on working capital, AvtoVAZ has become a giant in the cashless economy, bartering its Lada cars for parts from suppliers throughout the country. But AvtoVAZ, regarded as one of the better companies in Russia, is not alone. Most of the country's car manufacturers have gone a similar route. Cars are not only used as payment for components and utilities, but sometimes - at least on a regional level - to pay taxes. A Russian government commission reports that in the mid-1990s at least 70% of all transactions conducted by large-scale Russian enterprises were based on barters or other nonmonetary clearing systems.

Irish group calls for roads less traveled

With new car sales racing toward a fifth straight record year, it's time for the government to start spending some of that massive vehicle registration tax revenue on new and improved highways, says the Society of the Irish Motor Industry. Sales growth has averaged 20% a year since 1994, and the highway system is going to need upgrading to handle the increased traffic, says Cyril McHugh SIMI chief executive. Vehicle ownership in Ireland stands at 31 cars per 100 people, but the figure is still well below the European average. Countries such as the U.K., Germany, France and Italy boast 50 cars per 100 people. "(The SIMI) expects that the Irish car ownership figures should at least reach levels achieved in Northern Ireland of 36 per 100 over the next five to 10 years," Mr. McHugh says.