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The next steps automakers could take after sales drop again in April

DETROIT (Reuters) - Major automakers on Tuesday posted declines in U.S. new vehicle sales for April in a sign the long boom cycle that lifted the American auto industry to record sales last year is losing steam, sending carmaker stocks down. The drop in sales versus April 2016 came on the heels of a disappointing March, which automakers had shrugged off as just a bad month. But two straight weak months has heightened Wall Street worries the cyclical industry is on a downward swing after a nearly uninterrupted boom since the Great Recession's end in 2010. Auto sales were a drag on U.S. first-quarter gross domestic product, with the economy growing at an annual rate of just 0.7 percent according to an advance estimate published by the Commerce Department last Friday. Excluding the auto sector the GDP growth rate would have been 1.2 percent. Industry consultant Autodata put the industry's seasonally adjusted annualized rate of sales at 16.88 million units for April, below the average of 17.2 million units predicted by analysts polled by Reuters. General Motors Co shares fell 2.9 percent while Ford Motor Co slid 4.3 percent and Fiat Chrysler Automobiles NV's U.S.-traded shares tumbled 4.2 percent. The U.S. auto industry faces multiple challenges. Sales are slipping and vehicle inventory levels have risen even as carmakers have hiked discounts to lure customers. A flood of used vehicles from the boom cycle are increasingly competing with new cars. The question for automakers: How much and for how long to curtail production this summer, which will result in worker layoffs? To bring down stocks of unsold vehicles, the Detroit automakers need to cut production, and offer more discounts without creating "an incentives war," said Mark Wakefield, head of the North American automotive practice for AlixPartners in Southfield, Michigan. "We see multiple weeks (of production) being taken out on the car side," he said, "and some softness on the truck side." Rival automakers will be watching each other to see if one is cutting prices to gain market share from another, he said, instead of just clearing inventory. INVESTORS DIGEST BAD NEWS Just last week GM reported a record first-quarter profit, but that had almost zero impact on the automaker's stock. The iconic carmaker, whose own interest was once conflated with that of America's, has slipped behind luxury carmaker Tesla Inc in terms of valuation.

Nissan didn't have much say in merger talks, but it had what FCA wanted

TOKYO — Nissan wasn't consulted on the proposed merger between its alliance partner Renault and Fiat Chrysler, but the Japanese automaker's reluctance to go along may have helped bring about the surprise collapse of the talks. While Nissan Motor Co. had a weaker bargaining position from the start, with its financial performance crumbling after the arrest last year of its star executive Carlos Ghosn, it still had as its crown jewel the technology of electric vehicles and hybrids that Fiat Chrysler wanted. The board of Renault, meeting Thursday, didn't get as far as voting on the proposal, announced last week, which would have created the world's third biggest automaker, trailing only Volkswagen AG of Germany and Japan's Toyota Motor Corp. When the French government, Renault's top shareholder with a 15% stake, asked for more time to convince Nissan, Fiat Chrysler Chairman John Elkann abruptly withdrew the offer. Although analysts say reviving the talks isn't out of the question, they say trust among the players appears to have been broken. "The other companies made the mistake of underestimating Nissan's determination to say, 'No,' " said Katsuya Takeuchi, senior analyst at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. The Note, an electric car with a small gas engine to charge its battery, was Japan's No. 1 selling car, the first time in 50 years that a Nissan beat Toyota and Honda. Renault and Fiat Chrysler highlighted possible synergies that come from sharing parts and research costs as the benefits of the merger. But what Fiat Chrysler lacks and really wanted was what's called in the industry "electrification technology," Takeuchi said. With emissions regulations getting stricter around the world, having such technology is crucial. Yokohama-based Nissan makes the world's best-selling electric car Leaf. Its Note, an electric car equipped with a small gas engine to charge its battery, was Japan's No. 1 selling car for the fiscal year through March, the first time in 50 years that a Nissan model beat Toyota and Honda Motor Co. for that title. Nissan is also a leader in autonomous-driving technology, another area all the automakers are trying to innovate. "Although Nissan had no say, its cautionary stance on the merger ended up being very meaningful," Takeuchi said.

Fiat Chrysler working on an inline-six to replace the Pentastar V6?

Get out your Skeptics Hat for this one and keep it close by. Allpar cites "reliable sources" to write that Fiat Chrysler appears to be working on a new inline-six engine to be slotted into company products around the globe. The purported engine would be based on the 2.0-liter Global Medium Engine inline-four. Allpar first reported on the potential development in February 2017 and has filed a few updates since then, one citing "internal communications referring to a GME T6" — the "T" meaning turbocharged. It's said that some engineers have changed their online resumes to reflect their focus on the new motor. Apparently, FCA tried adding forced induction to the Pentastar V6 but didn't like the results. The new direction then turned toward a "compact straight-six." In at least one guise, the GME I-6 would come in at just under three liters in order to escape taxes on engines 3.0-liters and above in certain European markets; the 2.0-liter four-cylinder has an actual displacement of 1.995 liters. The present V6 Pentastar comes in 3.2-liter and 3.6-liter guises; a turbocharged 3.0-liter straight-six should be able to replace both as far as output. Hooking up to the company's eTorque system used on the 3.6-liter Pentastar and 5.7-liter Hemi would make things even more punchy. With the trend in truck engine downsizing, it wouldn't be crazy to see such an engine head straight to Ram. The four-cylinder GME unit serves in the Alfa Romeo Giulia and Stelvio, and Jeep Cherokee, Wrangler, and Grand Commander. The big Alfa Romeos and full-size Jeep and Ram models shouldn't have any problem with a longer inline engine. Maserati, which doesn't use the Pentastar engine, could be a candidate as well should it choose to step away from its Ferrari-developed engine cred. Speaking of Ferrari, the Italian brand is working up a new V6 based, in its words, on "a very, very particular architecture." It isn't clear where it will go or if one of the other Italian brands will get access to it, but the Allpar piece says the Ferrari V6 will be based on the core GME architecture for Maserati. Chrysler gave up its last inline-six 11 years ago when the 4.0-liter I-6 retired alongside the JK-series Jeep Wrangler. The engine format is back in vogue, and its reincarnations have received good reviews. But inline-sixes are generally longer, hence FCA's focus on a compact unit, and that could limit the purported engine's placement options.