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JHC Newsletter? The weekly update from Jeff Heselwood Communications

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Volume 2 Issue 9?? March 5 2007

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Zhongxing Automobile

As reported last week, Zhongxing Automobile plans to enter the North American market, to become the first Chinese manufacturer to attempt to make inroads into the world?s largest automotive marketplace.

Zhongxing Automobile is a small but leading pick-up truck and SUV manufacturer located in Baoding, Hebei Province. A pioneer in pick-up truck exports as well as manufacturing, Zhongxing is gearing up to become the first Chinese automaker to sell automobiles in the U.S. If all goes as planned, this could happen as early as this year.

?Once you open the American market, it's not difficult to sell 150,000 vehicles a year,? said Xiao Wei, president of Zhongxing Automobile Co., Ltd., in an interview with CBU/CAR in November. ?There is also the European marker. So there is a huge market out there. You can go as fast as you are able to.?

Working closely with partner China America Cooperative Automotive, Inc. Zhongxing is planning to sell its pick-up trucks and SUVs in the U.S. as early as at the end of 2007. Chery and Geely, meanwhile, have both postponed their plans to sell cars in the world's biggest auto market until 2008, or possibly later.

?Zhongxing vehicles are now being tested on U.S. roads through special permits,? Xiao told CBU/CAR. ?We have been conducting tests in China that simulate the strict conditions in North America. We are also running tests in the U.S. through our partner. Our plan is to begin selling our vehicles by late 2007, but the actual timing depends on how much progress we make with homologation compliance.?

Zhongxing is well on its way to making these dreams a reality, thanks in large part to its exclusive importer and distributor, Zhongxing Auto North America, a subsidiary of New Jersey-based management holding company Chamco Auto.

Chamco showcased Zhongxing?s Landmark SUV and Grand Tiger pick-up to potential dealers in Las Vegas in November, and arranged special events later in Dallas, Orlando, and Los Angeles. It plans to sell Zhongxing vehicles at a retail price of approximately $13,250 for the base model.

?Since announcing this incredible opportunity, we?ve welcomed a steady stream of potential dealer investors to our headquarters in New Jersey, where they are rapidly signing up to become one of only 100 joint-venture partners we?ll be accepting,? reads a notice on Chamco's website.

Chamco is positioning itself to become the first U.S. firm to import and distribute Chinese vehicles to the North American market. Its subsidiary ZXAUTO NA signed an agreement with the Chinese automaker earlier last year to homologate, import and distribute Zhongxing vehicles. Chamco has put together a team of experts with ZX AUTO NA, with experienced professionals assigned to take charge of compliance, dealer development, financing, quality control, warranty, sales, after-sales service, supply chain management, public relations and legal issues.

Chamco has also acquired special permission from the U.S. Environment Protection Agency and the National Highway Traffic Safety Administration to drive the vehicles on the roads in order to help develop a dealer network.

At the North American International Auto Show in January, Zhongxing showcased its vehicles at a hotel near Detroit?s Cobo Center.

?Our aim is to invite dealers. So we don't need to get on the show floor at the Cobo Center for publicity purposes,? said a spokesman for Zhongxing.

Zhongxing Auto emerged from the ashes of the now-defunct Tianye Automobile, a state-owned vehicle factory in Baoding, 150km southwest of Beijing. Tianye was China?s first pick-up truck manufacturer and maintained a leading marked share in the early 1990s. Plagued by poor management, the company was eventually bought out by Brilliance China in the late 1990s and renamed Zhongxing Automobile after forming a joint-venture with a Taiwanese components manufacturer. Under a management team of about 20 people from Brilliance-Jinbei led by Xiao, Zhongxing has grown steadily ever since. It has emphasized R&D and new product development. Today Zhongxing is China?s second largest pick-up truck manufacturer after Great Wall.

?Through cost reduction and better management, we were able to achieve an annual growth rate of 90 percent in the first three years after Zhongxing was formed in 1999,? Xiao said. ?Over the past three years, we have focused on new product development and R&D, quality control and after-sales service. And my goal in the next three years is to take our vehicles to developed markets.?

When asked whether Zhongxing would be able to reach its 2010 sales goal of 150,000 units, Xiao was optimistic.

?In China, the marker demand for pickups is only 100,000 units a year, but demand in North America is 3.1 million annually. Pick-ups are very popular in North America. Our vehicle has a high cost-performance advantage. We will first focus on certification and homologation before we worry about how many we can sell.?

Chamco said it will sell Zhongxing vehicles for up to 20 percent less than similar models that are currently available in the U.S. Roughly 95 percent of the Zhongxing models to be shipped there will be pick-up trucks.

?Pickups will be our priority at the beginning .You need to get one foot in the door first, and the other will follow,? Xiao joked, alluding to the possibility that this company will move into passenger car production and sales.

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Drivers of 4x4s and MPVs less likely to crash

According the UK?s Society of Motor Manufacturers & Traders (SMMT), drivers of SUVs and MPVs are five times less likely to hit a crash barrier than those of other types of car.

According to the SMMT 4x4s and MPVs paint a very different picture to that portrayed by the popular press.? Just two per cent of strikes (with crash barriers) involve 4x4s/MPVs.? In addition, statistics show that drivers and passengers of 4x4s and MPVs are less likely to be killed or seriously injured than those in other types of car. The SMMT says that this is probably because more of these vehicles are fitted with accidence avoidance technology, like ESP (electronic stability program).

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In Pursuit of Land Rover

A new well-equipped limited edition Discovery 3, called the Pursuit, will be on sale in March 2007, for under ?30,000 OTR.

Only 300 Discovery 3 'Pursuits' will be available from Land Rover dealerships across the country. Based on the TDV6 GS model, the Pursuit also features Java Black paint work with Ebony interior, 19? alloy wheels, body coloured wheel arch surrounds, manual leather seats and chrome finish mirror caps.

Land Rover?s multi-award winning Discovery 3 is a technology-packed, premium 4x4 designed to deliver outstanding performance both on the road and off-road. The bold, versatile design is distinctively Land Rover and offers exceptional space, comfort and flexibility, for up to seven adults.

All Pursuit limited editions are powered by the Discovery?s acclaimed TDV6 diesel engine and feature standard technologies including Hill Descent Control, air suspension and Terrain ResponseTM, all industry-firsts for Land Rover.

"Since launch, the Discovery 3 has brought new levels of ability, comfort and refinement to the large 4x4 market. Winning 95 awards worldwide is a testament to its class-leading diesel engine, its versatility and its all-round package," commented John Edwards, Land Rover UK managing director.

"The limited-edition Discovery 3 Pursuit gives customers the opportunity to buy an exclusive specification for the exceptional price of ?29,995 OTR for the TDV6 manual and ?30,995 OTR with automatic transmission. We think this represents incredible value for money".

All Land Rover vehicles include a CO2 offset for the first 45,000 miles within the on-the-road price. Administered by Climate Care, an independent CO2 offset provider, the programme ensures that the average amount of CO2 produced by a Land Rover is offset by investments in a mixed portfolio of projects, including renewable energy, technology change and energy efficiency initiatives.

The Discovery 3 has sold nearly 30,000 units in the UK and 115,000 units globally since launch in 2004, and continues to collect critical accolades the world over.

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Buzz Aldrin & Steve Wozniak Plan Fuel Cell Hummer Drive to South Pole

Confirming a report that first surfaced last summer, retired Astronaut Buzz Aldrin and Apple Inc. co-founder Steve Wozniak are planning to drive a fuel cell-powered Hummer across Antarctica from the McMurdo Station on Ross Island to the South Pole this December.

Verification came last week from an unlikely source, a couple of sentences midway through a Feb. 20 press release by Neah Power Systems, Inc., of nearby Bothell, WA announcing that Col. Aldrin had been named to the company?s board of directors. Neah is developing what are described as silicon-based direct methanol micro fuel cells for portable electronic devices.

?The trip will be part of a research expedition slated for December 2007, and is to be filmed in 3D for director James Cameron,? added the release. Cameron directed ?Terminator? and ?Terminator 2;" ?Aliens;? and ?True Lies,? among others.

A fact sheet provided subsequently by the Santa Monica, CA-based organizers of ZERO SOUTH - for Zero Emissions and South Pole - says the hydrogen-powered fuel cell Hummer H1, together with three other production vehicles running, respectively, on biodiesel, ultra-lean gasoline and the latest lithium battery technology, will travel 1024 miles from McMurdo Station on Ross Island, on the edge of Antarctica, to the South Pole.

Aldrin and Wozniak will be joining a team of Caltech, JPL and NASA scientists on this trip, according to the fact sheet, ?searching for extreme forms of life and simulating future human exploration on Mars?.

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Restructuring of Chrysler

DaimlerChrysler AG is moving ahead with the restructuring of the Chrysler Group in an effort to fix its most glaring problems, even while it tries to find a willing buyer for the group.

Analysts such as Laurie Harbour-Felax of the Harbour-Felax group said the effort to sell Chrysler could be difficult, involved and ultimately unsuccessful.

General Motors Corp. has set up a group headed by chief financial officer Fritz Henderson to examine the potential in a Chrysler deal. A similar study group last year effectively nixed a deal with Renault/Nissan.

With several other global automakers such Renault/Nissan, Volkswagen, Hyundai and Peugeot out of the running, the list of potential bidders has shrunk rapidly. The Financial Times reported that four private equity groups-Apollo Management, the Blackstone Group, the Carlyle Group and Cerberus Capital Management-have expressed interest in the Chrysler Group. However, the United Auto Workers leadership is deeply suspicious of private equity groups and while the union's bargaining position has eroded, its political clout has actually increased since several key committees are now headed by longtime allies of the union, who already are threatening to make life difficult for hedge fund operators.

DaimlerChrysler officials, who asked not to be identified, said that characterizing the effort to sell Chrysler as an auction did not accurately reflect what was going on. The term had been used by the investment bankers from JP Morgan, who are preparing a prospectus for potential buyers.

However, the term auction suggests that Chrysler might have to accept the highest bid. That's not necessarily the case, he said. If the offers don't meet DaimlerChrysler's expectations, the process could stop, officials said. ?Dieter could decide the best thing is not to sell it,? a source said. Zetsche followed a similar path with Mercedes-Benz' smart car unit last year, which was first put up for sale and then withdrawn from the market when the company decided to fix it instead.?

?As part of the Chrysler Group Recovery and Transformation Plan, the company has targeted the reduction of 2,000 salaried positions by 2008. The Chrysler Group intends to reach that target through attrition and special programs. The special programs include the following separation incentive and early retirement packages for non-bargaining unit (NBU), or salaried employees, announced today, Feb. 23.

The aim of the?packages is to reach the 2007 reduction target of 1,000 salaried positions by June 30, 2007. More specific details of the?packages will be given to affected employees by management in May and June, when the offers will be formally offered.

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DaimlerChrysler Supervisory Board Approves Small-Car Agreement

Auburn Hills, Mich./Stuttgart, Germany -? The DaimlerChrysler Supervisory Board today approved the framework of a limited partnership to develop small vehicles between the Chrysler Group and Chery Motor Company of China. The deal is still contingent upon approval by the Chinese government, but the final pact of the framework is expected to be signed by the end of March. Under the non-equity partnership, Chery-built vehicles will be distributed under Chrysler brands, primarily in North America and Western Europe.

Chrysler Group indicated that the partnership would allow the company to become a bigger player on the global automotive stage by giving it access to products in new segments more quickly, with less capital spending.

Small vehicles such as these will allow Chrysler Group brands to compete in segments in which the brands do not currently compete, and which are especially important in price- and fuel-economy sensitive markets. Some 67 percent of all vehicles sold outside of North America are in these segments. Chrysler Group's major competitors in the U.S. and Western Europe have similar arrangements with Asian manufacturers for vehicles in these segments.

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Current and future limits for diesel vehicles in the EU*

* Group M1, passenger-carrying vehicles with a maximum of eight seats not including the driver's seat, permitted gross vehicle weight up to 2500 kg, NEDC 2000 test procedure **g/km

Brandcameo 2006 Award for Overall Product Placement: Ford
Back-to-back wins in 2005 and 2006 make Ford the Tom Hanks of the product-placement world. After appearing in 18 of 41 Number Ones in 2005, Ford finished with 17 appearances in 2006?s 41 Number One films. And this year?s win didn't even include the James Bond film Casino Royale (not a US Number One film), in which Ford, and its brand stable, all had major roles.

It has been a Ford decade, with the brand appearing in 19 Number Ones in 2001 and 14 Number Ones in 2002. Through 2003 and 2004, Ford appearances decreased slightly, though the brand came back strong in 2005 and 2006. Ford has appeared in over 35 percent of all Number One films in the last six years (82 of 231 films). The next closest brand is Coca-Cola, having appeared in 20 percent fewer Number One films over that same period.
Ford might even be the film product of the century. In the early 1900s Ford sponsored films such as Keystone Coupe, naturally featuring Fords. According to Ford PR legend, the brand also sent the first-ever Model A to best-actress-of-her-time Mary Pickford, who reportedly returned an autograph signed ?Mary Pick-A-Ford.? To maintain its strength in the next century, Ford has created the Ford Global Brand Entertainment Group, charged with making sure we continue to see onscreen dominance by the auto brand.

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Volkswagen Recall

Volkswagen is recalling around 790,000 small cars, including the New Beetle, Golf and Jetta models to rectify faulty brake lights.? The brake lights or switches may malfunction possibly leading to accidents.

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