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Mitsubishi Cancels Galant Replacement Model

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Will FCA come to the rescue?

Pity Mitsubishi. The smallest of the six remaining Japanese car manufacturers has been dealt what may prove to be a fatal blow. Well, at least a blow against its US sales aspirations.

Declining sales for years have hurt Mitsubishi’s position tremendously. However, in 2014, the company reversed course, enjoying a 24.8 percent gain that was augmented by earlier news that it would soon import a midsize sedan from South Korea to pad its thin North American lineup. That model, what was to have been supplied by a Renault-Nissan assembly plant, will not happen after all as reported by Automotive News earlier this week.

Korean Won a Loss for Mitsubishi

Mitsubishi Galant

Mitsubishi Galant.

Blame exchange rates for the cancellation as Korea’s won suddenly appreciated against both the US dollar and the Japanese yen, making exporting the prospective model unfeasible. The midsize sedan was to replace the discontinued Galant sedan; a second model to update the aging Lancer had also been discussed and is now shelved.

The proposition appeared to be a win for all parties involved. Mitsubishi would gain one or two models, it couldn’t justify building on its own. The Renault-Nissan alliance would have benefited as underutilized capacity would be put to work.

Of course, the logical arrangement would have had Nissan build the car for Mitsubishi in the US, but the company has no additional manufacturing capacity available. Moreover, those vehicles Nissan produces in the US and doesn’t sell in North America are shipped overseas, ironically to Korea where exchange rates work in its favor.

Seeking Outside Assistance

Mitsubishi isn’t throwing in the towel and will look elsewhere to flesh out its product line. Its sole assembly plant in the US is operating below capacity and would be the natural place to produce a midsize sedan. However, that model wouldn’t be sold outside of North America and volume wouldn’t be practical or profitable enough to justify designing a new vehicle from the ground up.

Two models, the subcompact Mirage and Outlander crossover utility vehicle, helped to propel Mitsubishi’s sales in 2014. Mitsubishi’s Lancer, long-favored by tuners and other small car enthusiasts, was last updated in 2008 and is now in its eighth model year. Meanwhile, the performance Lancer Evolution edition will be cancelled after the 2015 model year. Furthermore, an electric i-MiEV model is available, but its sales impact is inconsequential.

FCA and Mitsubishi

For the short term, Mitsubishi will have to rely on its two key models, while scouring the world for a manufacturing partner. FCA, also known as Fiat Chrysler, might be an alliance possibility. The companies are no strangers either as Mitsubishi long-supplied the old Chrysler Corporation with captive imports such as the Dodge Colt and Plymouth Sapporo for years. Later, Mitsubishi began to sell products under its own name and flourished for a season.

An FCA-Mitsubishi alliance could benefit FCA too. In exchange for supplying Mitsubishi with one or two models, the Japanese partner could provide FCA with improved access to Asia. Just as Renault and Nissan forged an alliance in the 1990s, FCA and Mitsubishi might look for a similar arrangement.

Renault, Nissan Throw Mitsubishi a Lifeline

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Mitsubishi may have found a way to avoid exiting the US marketplace after all. The Japanese automaker barely sells 60,000 vehicles per year in the US, just a bit player in a market that will yield about 15.6 million units sold in 2013.

Renault-Nissan Alliance

Mitsubishi Lancer RalliartEarlier this week, the Renault-Nissan alliance and Mitsubishi Motors announced a joint intention to create new products, including at least one new model that will be sold in the United States and Canada. That full-size sedan will be based on a vehicle within Renault’s portfolio and manufactured at the Renault-Samsung plant in Busan, South Korea. A second model, a midsize sedan, is also planned and will most likely be sold in North America as well. Both vehicles are to be launched under the Mitsubishi brand.

Renault and Nissan are joined at the hip, a union forged in the late 1990s when Nissan was struggling mightily. Carlos Ghosn, CEO for both automakers, has been the architect behind the alliance, taking two very different and culturally dissimilar automakers and helping them work together. Each company owns a stake in the other, but the two otherwise operate independently.

Separately or together the companies or the alliance have crafted relationships with other manufacturers including AvtoVAZ in Russia, China’s Dongfeng Motor, and Daimler. Nissan itself has a joint venture with Mitsubishi already in place, NMKV, what has produced its first model, a minicar, for the Japanese market.

Renault Samsung Motors

The new models slated for Mitsubishi will come from yet another partnership, one that started off as Samsung Motors in 1994 before being renamed Renault Samsung Motors in 2000. That’s when Renault bought 80.1 percent of the Samsung venture with the Korean manufacturer holding the remaining shares.

No Samsung models have made it to North America yet, although Roger Penske attempted to forge an agreement that would have done so for Saturn. In 2009, Penske had expressed interesting in buying Saturn from GM, with the mandate to source non-GM products to create his model line. Apparently, Nissan nixed the deal as it would have created a low-cost competitor in the US according to Bloomberg Businessweek. With that deal snuffed out, the Saturn brand died with it.

So, why the about-face? That’s a good question as a weakened Mitsubishi means more customers for its competitors including Nissan. We may never know for certain why the change in heart, but it may have much to do with Nissan wanting to keep Mitsubishi around to handle future small car development, a Mitsubishi strong point. And if executed properly, the new models may help Nissan profit-wise as the Renault Samsung models are rebadged Nissan products.

(See Also —- Isuzu, Toyota Part Ways…Sort Of)

Mitsubishi Motors Death Watch

Auto Trends has had Mitsubishi under its informal “death watch” umbrella for the past few years, given the small sales and shrinking product line for this manufacturer. At its peak, Mitsubishi sold well over 300,000 units per year in the U.S., but has experienced a steady and sharp decline since. Just as other small Japanese players such as Daihatsu, Isuzu and Suzuki have left the market, Mitsubishi’s future has long looked grim.

A US-spec, full-size Mitsubishi model would be the first for this manufacturer and would put this vehicle up against several new and established models including the Toyota Avalon, the Chevrolet Impala, Hyundai’s Azera, and the Kia Cadenza. The Ford Taurus, Dodge Charger, and the Nissan Maxima also field large sedans. It represents a small, but lucrative segment with such models typically retailing for $35-40,000.

If offered as expected, a midsize model would replace the retired Galant, a sedan that was discontinued in 2012. It, along with the Endeavor and Eclipse were canceled in recent years, shrinking the Mitsubishi product line with it. Today, various Lancer and Outlander models are sold with an all-new Mirage subcompact also available. As of publication, Mitsubishi is still selling the 2012 Galant, with $3,500 cash back offers in place.

Surviving the American Market

Will the Renault Samsung-Mitsubishi tie up save Mitsubishi? That’s hard to say. The new product must be sent soon and well received.

Suzuki pulled out of the US market when it was still selling nearly 100,000 vehicles annually, but it didn’t have the strength of a global alliance behind its business. That alliance may make Mitsubishi a real player in a market that tends to favor the big guys as well as emerging players such as Subaru, Kia and Hyundai.

See Also — Mitsubishi: We’re Staying

Hyundai, Kia Admit MPG Errors

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Bragging about getting 40 mpg can come back to bite you. At least that is what Hyundai and Kia are finding out following an investigation by the U.S. Environmental Protection Agency that they had overstated mileage numbers for certain 2012 and 2013 model-year vehicles. On Friday, Hyundai Motor America and Kia Motors America issued a joint statement that the two companies would voluntarily adjust the fuel economy ratings for about 900,000 vehicles and compensate affected customers.

Hyundai owns a 38 percent stake in Kia, but the companies are largely seen as one car manufacturing entity.

Consumer Complaints

Whoops!The adjustment by Kia and Hyundai follows complaints filed by customers alleging that their vehicles failed to achieve the 40 mpg threshold the companies had published for a number of its vehicles. Hyundai had especially publicized its miles to the gallon leadership, issuing monthly press releases highlighting the percentage of vehicles that hit that coveted threshold.

Most vehicle lines are affected and will reduce Hyundai-Kia fleet fuel economy by an average of 3 percent or from 27 mpg to 26 mpg.

Offering an Apology

Dr. W. C. Yang, chief technology officer of Hyundai/Kia research and development issued an apology for what he described as errors in the calculating methods done in South Korea. Said Yang, “Following up on the EPA’s audit results, we have taken immediate action to make the necessary rating changes and process corrections.”

The EPA leaves it up to car manufacturers to calculate MPG in-house, using laboratory tests that simulate the driving environment. Those tests involve using a dynamometer with a vehicle’s drive wheels sitting directly on the machine. The dynamometer can be adjusted to take into consideration the vehicle’s weight and wind resistance, offering a near real-world number that manufacturers share with the EPA and its customers.

Reimbursement, Recalculation

Reimbursement information is published online with both companies operating separate websites with that information. Visit Hyundai MPG Info or Kia MPG Info for details.

Following the recalculation of its fuel economy numbers, not a single 2012 or 2013 Hyundai or Kia model is rated at 40 mpg highway. Among the biggest drops published was for the 2012 Hyundai Accent, originally rated at 30 mpg city, 40 mpg highway. That car is now rated at 28 mpg city, 37 mpg highway. For Kia, its Soul ECO took a huge hit dropping from 28 mpg city, 36 mpg highway to 26 mpg city, 31 mpg highway.

Program Details

For details about specific models, you can review the joint press release for old and new mpg data.

Hankook Tire: No Longer Anonymous

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A Korean tire manufacturer wants you to know the ‘Hankook Tire’ name.

You’ve heard of Firestone, Goodyear and Michelin, but what about Hankook Tire? Maybe you have and simply just didn’t make the connection. This company, based in South Korea, is the seventh-largest tire manufacturer in the world, deriving 20 percent of its business from original equipment manufacturers and the rest from customers seeking replacement tires.

And it is with replacement tires that the Hankook name may have surfaced for you, especially if your tire retailer includes Hankook among your choices. You may have also noticed the manufacturer’s prominently displayed ad in New York City’s Times Square or as a sponsor of 22 major league baseball teams. Moreover, Hankook Tire is a significant supporter of Formula Drift.

Industry Suppliers

Opportunities to visit the facilities of auto industry suppliers don’t come nearly as often do my visits with the car manufacturers, so when Hankook invited me to visit the company’s research and development center in Akron, Ohio, I jumped at the chance. The company’s U.S. headquarters are located in Wayne, New Jersey, but the Akron Technical Center is where much of Hankook’s U.S. marketed products are conceived.

Hankook Tire

► 7th largest tire manufacturer in the world
► 7th largest tire retailer in the United States
► New plant is under construction in Indonesia
► Hankook has 5 R&D centers worldwide
► 80% of its business is replacement tires
► OE manufacturer for 2012 Chevrolet Sonic
► Ventus S1 evo luxury premium summer UHP #1

Only four media professionals were invited for Hankook’s event, a five-hour show and tell of the company’s facility, providing us with the unique opportunity to meet with some of the top engineers in the business. Although the company’s Akron facility has been in existence for nearly two decades, many of the 40 or more employees on hand were lured to Hankook from other tire manufacturers including B.F. Goodrich, Dunlop and Goodyear.

Hankook History

Hankook Tire was launched in 1941, survived foreign occupation and two devastating wars, and is one of several companies that have helped to transform South Korea from an impoverished nation into an international powerhouse. Rapid growth has come in the past 10 years — the company is the only global tire manufacturer that has managed to remain profitable and increase its market share. With its current or under construction manufacturing plants in South Korea, China, Hungary and Indonesia, the company expects to climb to fifth place globally by 2014, but it will still be well behind Bridgestone, Michelin and Goodyear, the tire industry’s version of the Big 3.

The Hankook name is found on a variety of tire applications including cars, pickup trucks, touring and racing, medium and light-duty buses, and winter duty. The company does not make motorcycle tires nor will you find its tires on earthmoving equipment — a spokesman for Hankook noted that the company is satisfied with its current market penetration and will concentrate on growing those segments.

Technical Center

The Akron Technical Center is all about engineering, research, rubber compounding and testing. Why Akron? Well, Akron was once known as the “tire manufacturing capital of the world,” but has long since seen its industry flee overseas. What’s left are several research centers and Goodyear’s global headquarters. Notably, the University of Akron is a prime research hub for tire manufacturing, enabling industry minds and academia to collaborate. Hankook says that a number of its new workers come from schools such as Akron, students who complete a cooperative education program and are hired upon graduation.

Tire design is conceived by utilizing proprietary or industry software. Not until engineers have determined the concept’s viability is the design forwarded to another department for a full scale mockup.

Our comprehensive tour allowed us to see the inner sanctum of Hankook’s U.S. research and development. No cameras were allowed, but much was shown, including proprietary equipment that runs tires through a series of tests including one device that tests a tire’s ability to withstand temperatures ranging from minus 30 degrees Fahrenheit to 150 degrees Fahrenheit.

These tests are run by engineers to help determine how tires behave on the road including measuring for noise, vibration and harshness. We learned that when a car manufacturer considers a tire for its vehicles, the automaker works closely with Hankook Tire to design one to its specifications. This involves starting the process off by using in-house software to design the tire, followed by a review from Hankook engineers before a prototype is built at ATC.

Once a design is determined, then that information is transferred to South Korea and a set of ready for testing tires is shipped stateside for automaker inspection. It takes about two or three cycles of development to get the right tires made before a final design is locked down. The final design follows extensive track testing to ensure that the tires meet the car manufacturer’s exacting requirements.

Once a design passes engineering scrutiny, it passes to an “artist” who designs and cuts the tire accordingly. That design eventually finds its way to South Korea where a set of road ready tires are shipped back to the United States for testing.

Natural & Synthetic

If you are under the impression that tires are chiefly made from natural rubber, then you’re mistaken. Natural rubber is used, but SBR, bromobutyl, polybutylene and EPDM may also be used, synthetic rubbers that are mixed and milled with other ingredients until the right consistency is made. Yes, there are some similarities between tire making and cake baking — you need the right ingredients and percentages thereof to produce a finished product that won’t go flat when it exits the oven.

The Hankook tour underscored the importance of tire safety and vehicle control. To this day, when you purchase a new car, the car manufacturer extends its warranty to every vehicle component except the tires. Your tires are warranted solely by the tire manufacturer, but the relationship between the car company and the tire company is the same as you would find between the automaker and a suspension supplier, for example. With tires, a separate umbrella of protection is offered directly from the tire manufacturer, an original equipment supplier that is chosen by the car manufacturer.

Renting an ice rink helps engineers to see just how well tires grip ice. Other tests include spewing water on a track and measuring hydroplaning.

Manufacturing Guidelines

The most important takeaway from my visit with the Hankook Tire people is that there is much more engineering that goes into tire construction then you might guess. Federal regulations, industry guidelines and company operating procedures are followed to ensure that the finished product conforms to these stipulations. That’s critically important, because tires not only hold up an important consumer investment, but can affect the lives of people riding inside of these vehicles.

Disclaimer — Hankook Tire paid for my flight, hotel and meals. No money was exchanged to solicit a review from me. These comments are entirely my own.

Photos: Hankook Tire USA

Is The Hyundai Equus U.S. Bound?

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Since launching the Hyundai Genesis here in America last year, the South Korean automaker has reported decent interest in both the luxury sedan and sport coupe that share the Genesis name. Sales are good and the awards from members of the automotive press have been positive if not downright giddy.

Sampling The Hyundai Equus

Hyundai EquusHyundai may soon be doing an encore to the Genesis in the form of its flagship Equus sedan, a car that is bigger, longer and heavier than the Genesis, a true BMW 7 Series fighter. News reports are indicating that one hundred copies of the Equus will soon arrive in the US, with plans to tour Hyundai’s dealer network and measure public reaction.

The Equus line has been in use for some time and is all new for 2010. In Korea, the Genesis and Equus represent the top of the line Hyundai models which also include tiny little cars such as the i10 which aren’t sold stateside. However, there is some concern that the Equus along with the Genesis should carry another brand name much as Toyota did when it separated its luxury cars from everything else to create Lexus.  The rest is history.

New Yorkers Were Equus Gawkers

People attending the New York International Auto Show this past April got a glimpse of the Equus, as Hyundai decided to put the big sedan on display there. Powered by a 4.6L V8, the Equus is positioned to battle the Mercedes S-Class, Lexus LS and the BMW 7 Series.

Other than the  Wikipedia file photo, not a whole lot else is known about the Equus, given that it has been newly released in South Korea and is scheduled to go on sale next month in China. Hopefully, I’ll be one of the lucky ones to obtain an Equus test drive this summer. If I do, you’ll certainly hear about it here!

See Also — Midsize Luxury Sedan: 2017 Genesis G80