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Small Cars Trade Fuel Savings for Higher Insurance Costs

Situation

1. High gas prices move buyers from big vehicles to small fuel-sippers

2. But small cars involved in more accidents, bigger injury claims and cost more to insure

3. Example: 40-year-old male would pay $438 more to insure 37 mpg Mini Cooper than 23 mpg Toyota Sienna Minivan

4. Extra cost to insure could erode savings on fuel

Significant Points

1. Small cars cost less for property-damage liability, but personal-injury protection higher

2. Small cars have higher theft rates, 4 of 10 most stolen vehicles are compact

3. Alternative-fuel vehicles more expensive to insure because of higher repair costs

4. Hybrids cost more to insure because of parts, higher labor charges, more time to repair

“There is always a safety trade-off when you move from a large, heavy vehicle to a smaller, lighter one.” — Russ Rader, spokesman, Insurance Institute for Highway Safety

Hydrogen Power Takes Another Step Closer to Reality

Situation

1. Hydrogen fuel cell vehicles have been far-off technological bets of auto industry for years

2. Honda Motor Co starting to give small number of drivers glimpse into future

3. Honda FCX Clarity debuted in July; leasing about 200 to buyers in S CA during next 3 years

4. Finding hydrogen fueling station difficult; LA area has 3 24-hrs/day public hydrogen stations

5. Offering 3-year leases to select few for $600 a month; includes maintenance, collision coverage

6. Clarity offers quiet, steady acceleration, high torque, 280-mile range

Significant Points

1. Clarity emerging at difficult stretch for auto industry; sales down, major credit crunch

2. Most hydrogen extracted from natural gas, releasing carbon dioxide

3. Undercuts emissions-free argument

4. Previous Honda fuel cell vehicles resembled futuristic econoboxes; Clarity more refined

5. Lack of fueling stations will limit reach of these vehicles for many years

6. GM currently running test fleet of 100 Equinox fuel cell vehicles

Toyota’s new iQ Gets 54mpg to Challenge Smart in Minicar

Segment

Situation

1. Toyota launches new minicar called iQ

2. Will compete in same segment as Daimler’s Smart

3. Smart is already popular in Europe, USA

4. iQ will have 4 seats; Smart only has 2

Significant Points

1. Toyota hasn’t said if iQ will be sold in USA

2. Would have to make design changes to meet safety standards

3. iQ has 9 airbags but Toyota would have to reinforce rear structure

4. Toyota could make iQ a 2-seater to help meet USA safety standards

“When it comes to cars, traditionally, big has always meant good. The iQ radically dispels that notion.” — Hiroki Najajima, iQ chief engineer, Toyota

GM/Chrysler Merger Could Help Both

Companies

Survive 2009

Situation

1. GM and Chrysler continue merger discussions but deal far from certain

2. Focusing on a merger structure both think could work

3. Private equity firm Cerberus owns Chrysler and 51% of GMAC w/ GM owning the rest

4. Merged company would have 11 brands and 10K dealers, more than needed to sell 5M vehicles/year, for about $220B

5. Merged financial company could save millions in back-office costs and boost margins

Significant Points

1. Both GM and Chrysler hoping to weather 2009 and get to better 2010 sales

2. Also expecting lower health insurance costs from new union agreement for 2010

3. GM would fold Chrysler’s auto business into its own

4. Cerberus would merge Chrysler Financial and GMAC

5. GM would own stake in merged finance company and Cerberus would own stake in GM

6. GM would receive revenue from Chrysler’s estimated 1.4M customers and $11B in cash on books

Background

1. Chrysler Financial doesn’t have mortgage operations and had limited exposure to its leasing

Young Auto

Designers Put

on the ‘Aging Suit’

Situation

1. Nissan’s young auto designers put on “aging suit” to simulate effects of aging

2. A bulky, strap-on outfit giving feel of driving w/ arthritis, large belly, imperfect balance

3. Goal is to make future vehicles more safe, comfortable for aging drivers

4. Ford has similar “Third Age” suit that it uses in a virtual reality lab

5. Suits necessary because it’s not usually feasible to recruit older motorists for such research

6. John Coughlin of MIT’s AgeLab says automakers still have “long way to go”

Significant Points

1. Aging suit comes w/ goggles that simulate effects of cataracts by distorting colors

2. 65+ population in US will double to 70M by 2030; that’s one in 5 people

3. Drivers 65+ are 16% more likely to cause accidents than those 25-64

4. But not as likely to cause accidents as the youngest drivers

5. Older drivers have more difficult time getting into, out of seats

6. They also find it more difficult to see controls

“We are looking at future design. It’s really to look at the issues of restricted mobility. It stiffens your joints. It’s adding about 11 pounds that people put on as they go through life.” — Julie Lawless, spokeswoman, Nissan Motor Co

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