A Car Loan That Outlasts Your Car
Detroit has tried everything from 0% financing to heavily subsidized
lease deals to keep the metal moving during the downturn. Now, comes
perhaps the most unusual approach: a car loan that might outlast your
car. Traditionally, car loans extended three or four years. But they've
been gradually lengthening as buyers stretch to afford cars and
sport-utility vehicles that can top $30,000 or even $40,000. Now, loans
are going to lengths that would have unthinkable a few years ago. The
most extreme example: a loan that lasts 96 months -- or eight years.
Longer loans tend to have higher interest rates than shorter options,
but lower monthly payments. So far, only a handful of banks and credit
unions are offering eight-year loans, but many are offering seven-year
loans. Not to be outdone, manufacturers are getting into the game as
well. Eight-year auto loans will account for less than 2% of car loans
this year, estimates Paul Taylor, chief economist of National Automobile
Dealers Association of McLean, Va. But Mr. Taylor sees them making up no
more than 5% of new loans within five years. Already, six-year loans now
account for 28% of new car loans, up from 19% two years ago, according
to the Consumer Bankers Association. "People who are attracted to this
loan are looking at high-end luxury vehicles," says Maureen Maddox, vice
president of marketing at Summit Credit Union, which made the loan to
Mr. Brunker. For consumers, there are a number of downsides to longer
loans. For one thing, they usually carry higher interest rates. While
the average rate on a four-year loan is about 5.5%, you can expect to
pay more like 8% to 9% on a 96-month loan. Higher rates, combined with
longer terms, mean that borrowers pay substantially higher interest
costs with an eight-year loan.
(Source: The Wall Street Journal)


Ford Will Cut Costs and 3,200 More Jobs
Ford Motor Co., under a mandate to cut white-collar expenses by 10
percent and keep its turnaround plan on track, is cutting 1,500 contract
workers in North America and offering voluntary buyouts to 1,700
salaried and blue-collar employees in its German division.
In addition, 50 of Ford's salaried workers will be laid off by the end
of the year and many jobs that have been sitting vacant are now being
eliminated, according to a company official who did not want to be
identified because all affected workers have not been notified. The
contractors include engineers, technicians and professionals in the
purchasing division, among others, and some suppliers are worried that
managers at Ford will struggle to get their work done with a bare-bones
staff that keeps getting thinner.
"The workload goes on," said an official at one company that supplies
engineers to Ford. "They've already been living with jobs that couldn't
be replaced -- now this." In July, the Dearborn-based automaker said it
would need to further trim salaried costs in order to meet its earnings
target of $1.25 billion, or 70 cents a share, this year and to make $7
billion in profits, before taxes, by mid-decade. Ford, which boosted its
cost-cutting goal to $2.5 billion for the year from its initial target
of $500 million, cut costs by $1.3 billion in the second quarter. The
stepped-up effort follows the company's previously announced plan to
close five plants and eliminate 21,500 jobs in North America as part of
its 2002 revitalization effort. Despite criticism from outsiders,
though, Ford has emphasized that it remains on track for the year
despite projections of a 15-cent loss per share in the July-September
period.
(Source: The Detroit Free Press)


New Cable Channel Targets Auto Enthusiasts
Add 24-hour automotive news and consumer programming to the list of
cable channels hoping to find an audience. Wheels TV, based in Acton,
Mass., outside Boston, plans to launch in the first quarter of 2004 with
a lineup of original and acquired programming focusing on cars, trucks
and motorcycles — but not on racing, the niche of Fox Cable Networks
Group's Speed Channel. "Wheels TV is all about our enjoyment of the
automobile," says Wheels TV chairman and founder Jim Barisano. "That
runs the gamut from the wind in your hair with the top down to safety
and performance and resale value. We're more on the road than on the
track." Wheels TV, which is privately held, aims to be in 5 million to 6
million homes when it launches early next year, but that will depend on
how many cable systems decide to offer the channel. It is in the early
stages of trying to forge relationships with cable company giants such
as Comcast and Time Warner Cable, as well as satellite television
providers DirecTV and EchoStar, Barisano said.
(Source: USA Today)