FedEx Delivers a Boost to Boeing

The logistics giant is buying 15 of the aircraft maker's 777 Freighter planes -- and canceling a big order from Airbus

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Memphis-based FedEx Express, a unit of FedEx Corp. (FDX) said Nov. 7 that it's switching from Airbus to buy at least 15 new aircraft from Boeing (BA), triggering a rally in shares of the aerospace giant.

After Airbus delayed its delivery of the A380, FedEx cancelled its order for 10 and switched to the new deal with Boeing. Now FedEx is buying 15 new Boeing 777 Freighter aircraft with options for an additional 15.

"Global demand for air cargo and express services continues to grow rapidly and FedEx has made significant investments in our network to meet customers' needs and fulfill our business objectives," said FedEx CEO Frederick W. Smith in a press release.

The Boeing 777 Freighter is the world's largest twin-engine cargo aircraft. FedEx is planning to use the plane to fly between Asia, Europe and the U.S., starting with four aircraft in 2009, eight in 2010 and the remaining three in 2011.

Boeing shares gained 5.1% to $84.59 per share in afternoon trading on the New York Stock Exchange. FedEx edged up 0.6% to $114.57 per share.

"Although we do not see this as a sign FedEx, or other air carriers, are abandoning Airbus, we do see it as evidence of Airbus's failing execution on the A380," Standard & Poor's Corp. analyst Richard Tortoriello said in a research note.

Given the well-publicized A380 delays , Tortoriello continues expecting Boeing to get another 777 and 747 orders over the short term and keeps a buy rating, and a 12-month target price of $106 on the stock. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

Airbus has been struggling to deliver on its promises to A380 customers, amid challenges such as problems with its cable installation and other mishaps (see BusinessWeek.com, 10/24/06, "The A380 Crisis: What Now for Airbus?"). In a recent example on Oct. 3, the company warned customers of a further delay in the schedule of the A380 and the first one would be delivered in Oct. 2007.

2008 BMW M5 Road Test

Let's get the expected impressions out of the way so we can tackle the technology smorgasbord that separates this Teutonic road jet from other 5-Series Bimmers and everything else on the road. With apologies to Clint Eastwood, these include much good, some bad and an element of ugly.

The good: this fourth-generation M5 may be the fastest, most muscular, most precise and glued-to-the-road four-door most of us will ever experience. It rockets from rest to 60 mph in 4.5 seconds, corners like a front-engine race car and can brake so hard it can bounce your eyeballs off the windshield.

The bad: it appears aimed as much for techno-geeks as for serious drivers. The overly complex, user-unfriendly and often frustrating iDrive multifunction controller alone requires an evening of manual study to comprehend, after which owners will keep their manuals handy for on-the-fly reference. Add to that a mind-boggling plethora of driver-programmable powertrain and chassis settings that offer 279 combinations through an MDrive menu that can be linked to an MDrive button on the steering wheel.

Ugly, as always, is in the eye of the beholder. A lot of folks, ourselves included, have been non-fans of BMW's current 5- and 7-Series styling. That said, it's either growing on us or these updated '08 5s are improved enough to look much better to our eyes, or both. But we did thoroughly dislike our test car's optional Madeira Walnut trim, a reddish-brown wood with horizontal graining that looks painted on with a course brush. Your taste may differ, but we much prefer the standard brushed aluminum trim, or the other optional wood, Olive Ash burl.

Engine tech

Nothing quite like a 500-hp V-10 muscle motor stuffed into a mid-size sedan! This is the modern German big-bucks version of the mid-'60s Detroit muscle car, which works quite nicely for Audi's awesome V-10-powered S6 as well. Why a V-10? Elmar Schulte, BMW's engine development manager, says, "We wanted five liters. The ideal cylinder displacement is 0.5 liter. To get five liters, we needed 10 cylinders." Uh, Okay.

One key credo of BMW M is high-rpm, so this V-10 is engineered to rev eagerly to its somewhat astounding 8250-rpm redline with some small sacrifice in low-end torque…which, trust me, won't be missed. Light-weight reciprocating components are used throughout, which also helps reduce total vehicle weight and balance front/rear weight distribution to near 50/50. There are three power and throttle-response settings: the P400 default mode (for valets and your son's prom night) caps the engine's horsepower at a mere 400 and gives normal throttle response; P500 unleashes all 500 horses with quicker response; P500 Sport (for track work and New York parking garage attendants) provides full power with even quicker response.

BMW's Valvetronic system, which controls fuel/air intake via valve actuation without a throttle, is not (yet) developed for high-revving engines, but this M V-10 does use double-VANOS variable camshaft control on both chain-driven intake and gear-driven exhaust cams. And, like all M engines, each cylinder has its own electronically controlled throttle. Its ultra-high 12:1 compression ratio is enabled by an ultra-quick ionic-current system that senses knock at each spark plug and retards ignition timing of individual cylinders to prevent it.

The "semi-dry sump" oiling system uses two reservoirs, a small one ahead of and a larger one behind the front frame crossmember, separated by a baffle। A mechanically driven variable-volume oil pump delivers sufficient pressure, but never excess volume, at all times for all operating conditions. Two electrically driven scavenger pumps recover it from pickup points determined by the Dynamic Stability Control system's lateral-g sensor (to account for cornering loads), and a recirculating pump moves it from the front to the rear main reservoir. Cooled by a coolant-to-oil heat exchanger, its temperature and level are monitored by sensors that drive an oil temperature gauge (in the bottom of the tachometer) and a low oil level warning lamp.

(Curiously, BMW has decided that coolant temperature gauges are not useful and has eliminated them from most models, including this one. We strongly disagree.)

Powertrain and chassis tech

BMW has wisely decided to offer U.S.-market M5s with a heavy-duty six-speed manual transmission as a no-cost alternative to the largely unloved seven-speed Sequential Manual Gearbox (SMG), the only choice in Europe. And it's a gem, with crisp throws, precise gates, perfectly arranged pedals and surprisingly smooth clutch engagement. Like the SMG, it is blessed with an M Dynamic Mode that enables enthusiastic (read: semi-sideways) track driving by backing off the level of traction loss at which the stability system intervenes.

The SMG is a marvel of high-tech engineering that offers an additional forward gear, quicker shifts in full-performance mode than any mere mortal can manage (BMW claims) and a wide variety of shift programs in both sequential (S) and Automated (D) modes. Six selectable programs are available in the former, five in the latter, ranging from "softest and slowest" to "hardest and quickest." Manual shift control is available via either the console lever (rearward for upshifts, forward for downshifts, unlike most everyone else) or steering wheel paddles.

It also has a slew of special features, including Slip Control, which briefly disengages the clutch to prevent wheel-slip when downshifting on slippery roads; Start-off Assistant, which holds the brakes for a second when launching on hills; and Hill Detection, which optimizes D program shift points on both up- and downhill grades. But in our experience (admittedly without time to study the manual or try every permutation), the SMG is consistently slower and jerkier in normal driving than most manual-shifting human drivers. And we're far from its only critics.

The M5's chassis is a high-tech playpen of programmability. Relative to the (V-8-powered) 550i, it boasts a modified subframe, Z8 roadster suspension links, beefed-up bushings, lighter but stronger hollow axle halfshafts and huge cross-drilled brakes inside 19-inch performance tires on (8.5-inch wide front, 9.5-inch rear) cast alloy wheels. Then it gets more interesting with a special M version of BMW's Electronic Damping Control (EDC), M Variable Differential Lock and Servotronic power steering with two levels of assist.

The M5's EDC -- with three selectable modes: Comfort, Normal and Sport -- steplessly adjusts damping to any level between softest and firmest according to road conditions and driver demand. The M Variable Differential Lock senses wheel speed (rather than torque) and drives a pump to pressure a viscous silicon fluid that transfers torque (through a multi-disc clutch) to the drive wheel with the better grip. The M5's Servotronic vehicle speed-sensitive power steering (for the first time in a production BMW) offers two levels of assist: Comfort (typical BMW) and Sport (less assist for sportier feel). It does not have BMW Active Steering, which varies steering ratio with vehicle speed, but its steering ratio is variable: it becomes quicker as the wheel is turned further from center. And it is as good as power steering gets.

But wait, there's more

Remember those 279 combinations? The M5's Dynamic Stability Control (DSC) offers three modes: Normal, M Dynamic and deactivated (though ABS always remains active), so those three x three power settings x three EDC modes x 10 SMG programs (excluding the ultimate S6 program) = 270. SMG S6, which can be selected only with DSC deactivated, adds the other nine (three power settings x three EDC modes). Got it?

The power settings, EDC and DSC modes are selectable with buttons on the console, the SMG programs via the shift lever and a mode selector behind it, and all of these choices can be linked to an MDrive button on the steering wheel through the MDrive menu. Our advice? Forget the SMG and play with the 27 combos available with the conventional six-speed.

Get out that manual, study up, program away and (if there's still time), hit the road!

2008 BMW M5

Base price: $83,675

Engine: 5.0-liter V-10, 500 hp/383 lb-ft

Transmission: Seven-speed sequential manual; no-cost optional six-speed manual; rear-wheel drive

Length x width x height: 191.5 x 72.7 x 57.8 in

Wheelbase: 113.7 in

Curb weight: 4012 lb

Fuel economy (EPA city/hwy): 11/17 mpg

Major standard features: Merino leather interior; special M Instrumentation (with 200-mph speedometer and 9000-rpm tachometer with variable warning segment); power tilt/telescoping M sport steering wheel; voice-command; automatic climate control; heated 18-way driver's, 14-way passenger's power M sport front seats with adjustable backrest width; DVD-based navigation with real-time traffic information; multi-function remote; power moonroof; Xenon adaptive headlamps with automatic headlamp control, level control and cleaning system; rain-sensing windshield wipers; ultrasonic Park Distance Control

Safety features: Dual front, front side and tubular head-protection airbags; Dynamic Stability Control with ABS, traction control, electronic brake proportioning, Dynamic Brake Control, Brake Standby and Brake Drying; BMW Assist services

Warranty: Four years/50,000 miles

Toyota's Next Hybrid?

Is the Toyota (TM) Prius about to get a big brother? According to the June 24 edition of Nihon Keizai Shimbun, Japan's leading business daily, the hybrid trailblazer is planning a new dedicated hybrid-only model for launch in 2009.

While Toyota sells seven models that use hybrid technology, the Prius (now in its 10th year) is the only one that's offered exclusively as a hybrid. Others, such as the Camry Hybrid, have gas-electric options available at a premium as well as straight gasoline-only models. The new model, which the paper doesn't name, would give Toyota a second dedicated hybrid model.

Hybrid Sales Goal: A Million

The details in the report are scant, but the Nikkei claims the new hybrid will offer better riding quality due to its larger size and engine displacement of 2 to 3 liters. The Prius uses a 1.5-liter engine.

The paper goes on to say that Toyota Motor Kyushu, a Toyota group company, will likely produce the new hybrid at a plant in Fukuoka. If launched in 2009, the new model will likely follow the introduction of a third-generation Prius, which is expected in later 2008 or early 2009.

The Nikkei adds that the annual sales target for the new model is 100,000 units and that compares with Toyota's total hybrid sales of 310,000 last year. The extra sales would go some way to help Toyota reach its target to sell a million hybrids a year by the early 2010s.

Cutting Into Camry Sales?

Analysts say news of a new model isn't a big shock—Toyota will need more hybrids in order to hit its sales target—but "spec-wise, it's a bit of surprise," says Tatsuo Yoshida, an analyst at UBS (UBS) in Tokyo. "I didn't expect such a big engine."

Others add that reports of the 2- to 3-liter engine, if correct, could put the new model into competition with the Camry Hybrid. That vehicle, which accounts for about 15% of Camry sales in the U.S., uses a 2.4 liter engine, electric motors, and batteries to generate 192 horsepower and 40 miles per gallon fuel economy in the city.

Still, the benefits of a second dedicated hybrid model may outweigh such risks. One reason for the success of the Prius, which accounted for half of Toyota's hybrid sales last year, is that car ownership conferred impeccable environmental credentials. No car is more closely linked with the hybrid movement.

By contrast, a lack of "green" recognition was said to be a factor behind weak sales of Honda's (HMC) Accord Hybrid. Honda said earlier this month that it won't offer a hybrid option on the next generation of Accords.

Increased sales would also help Toyota raise scale efficiencies. Some have criticized gas-electric vehicles because the cost of making hybrids is thousands of dollars more than regular gasoline vehicles. That usually translates to a higher sales price, which can outweigh short-term fuel-efficiency savings or lower margins for manufacturers, or do both. An extra 100,000 units of a new hybrid would help speed that trend. Last month, Masatami Takimoto, an executive vice-president at Toyota, said that by 2010, margins will be at the same level as conventional gasoline cars.

A new model will also help prepare Toyota's hybrids for the coming battle with "clean" diesels, which many industry watchers believe have the potential to offer similar environmental performance as hybrids at a lower cost.

Diesel Competition

Among Japanese rivals, Honda, along with dumping its Accord hybrid, plans a "clean" diesel for the U.S. market by 2009. It now plans to focus on hybrids for smaller models and use diesels for larger models, including the next-gen Accords, CR-V crossover sport-utility vehicles, and Odyssey minivans, where the cost benefit is most marked (see BusinessWeek.com, 6/8/2007, "The Trouble with Hybrids"). Nissan (NSANY), meanwhile, has said it will launch a diesel model in the U.S. by 2010.

Toyota, though, has so far been quiet on its plans for diesels in the U.S. "The fact of the matter is we have a big head start on a technology that is leading edge and is the most elegant solution to today's infrastructure, fuel situation, [and] today's emissions requirements," James Press, Toyota's North America chief, said on June 21, prior to the Nikkei article being published.