Conscious Automotive Critique

GM - Like a Rock.

2009-05-27T19:25:00.002-04:00

Several years ago, GM had a tag line in their advertising for trucks and SUV's: "Like a rock". How ironic that years later this could be applied to their fortunes: sinking "like a rock".

As bankruptcy looms as early as next week, bond holders are being vilified. Why? Because they chose to buy bonds from-or make a loan to - GM, who promised to pay them back? The nerve! Imagine loaning money to a former blue-chip US company and expecting them to pay it back!

The numbers are staggering. GM will need nearly $100 BILLION to keep viable. At what point does capitalism take over and we cut our losses? No-one is indispensable and that goes for corporations too. For years, we were eager to tell foreign countries to open up and let their markets grow through capitalism. That works fine there, as our companies gobbled up local concerns or ran them out of business - entirely legally and through the forces of capitalism. Now the shoe is on the other foot, we are sinking every dime we have - and don't have - into ailing automakers insisting that we can't let them go out of business. Why not? What's good for the goose is good for the gander.

Letting GM go under might be very painful. But it has been a while since we have felt the sting of real pain, and as they say, no pain no gain.

Chrysler: Fiat or Bust.

2009-05-04T10:42:00.004-04:00

As you all know, Chrysler filed for bankruptcy last week. The reorganization looks like a nightmare from 1970's Europe: Unions in charge, and a minority shareholder who hopes to salvage the company. Fiat is in a massive global power grab which includes GM's German Opel and British Vauxhall units and may even include Saab. You can't say the Italians are not daring. The British and Germans are reluctant, for purely xenophobic reasons, to accept the idea of Italians running their major car manufacturers. They are also afraid of job losses, which may be inevitable anyway, if GM goes the way of the Dodo bird. The latter may be the reason that Fiat agreed so readily to the huge stake the UAW is taking in Chrysler: if Fiat is good for unions in America they may be good for unions elsewhere - and unions count in this industry.

The question still arises if Fiat has the depth of management to take on such a huge spurt of growth. Chrysler alone has sapped billions from its last two owners, namely Daimler Benz and Cerberus. The red ink shows no signs of slowing for Chrysler. Years of sub-par quality, an ageing product lineup and deep discounts will take many years to remedy. Yes, fresh new Fiats will increase traffic in showrooms, but if these products do not shine, they will merely add to the woes of Chrysler. And if Chrysler's passenger car offerings continue to age and decline, there will be little point in attracting car buyers to showrooms filled with new Fiats and old Chryslers. The Fiats MAY sell, but the Chrysler woes will continue.

For Fiat, the current power grab is an all-or nothing gamble. As such, little changes for Chrysler except that it has one last, tenuous lifeline.

Fiat's Big Power Grab

2009-04-27T08:48:00.003-04:00

Fiat is in one of the biggest power grabs in history in a huge gamble to become a truly global automotive giant. You can't blame them for trying. The time is ripe for a shrewd player to grab huge chunks of the market - especially if it is free, or almost free. Let me explain.

Fiat wants to get a chunk of Chrysler with no money down. Given the synergies here, it is not a bad thing for Fiat to want to do, and for Chrysler it appears that it will save billions in the development of small, trendy vehicles, which Fiat already produces. Fiat is eyeing the Jeep brand which would bring showroom traffic to their dealers worldwide. Rugged SUV's have never been Fiat's forte: at best it has produced some beefed-up versions of its regular lineup, and they are, well, beefed up versions of their regular lineup. Fiat may make a killing selling off the Chrysler and Dodge brands in the future - especially if they come free.

The surprise, announced in Saturday's Wall Street Journal, is that Fiat is now eyeing Opel, GM's German brand. This could become the Buick of Fiat: a soft line of semi-luxurious (and practical) vehicles placed somewhere between the quirky and cute Fiat brand and the raging sports cars of Alfa Romeo, Lancia and Ferrari. Fiat could probably drum up some money from Germany and the EU to make this happen, especially as the alternative is rather more unpleasant.

So a free Chrysler, a subsidized Opel and a company that grows exponentially for very little money down. the only risk for Fiat is hubris: in order to make this work, Fiat must admit that its management may not be up to the task, and may have to call in reinforcements from the long list of consultancies and unemployed executives that are already hovering at the side door.

If You Have a Lemon, Is It You or the Car?

2009-04-15T09:09:00.003-04:00

Years ago n Brazil, I had a client who had an Alfa Romeo 164. I questioned him as to whether the car was reliable. He said it was extremely reliable because he said he read the owners manual. By way of explanation, he told me that the owners manual states that you should never drive off until the temperature needle moved off "cold". Few drivers have the patience to do this, so the vehicle broke down, and owners blamed the car, when they should blame themselves.

I have no idea if he was being truthful, but I had a similar experience this week. I own a Land Rover, and the passenger side windshield wiper stopped working in the middle of a rain storm. Cursing the lack of reliability of European vehicles, I took the car into the dealership. the wiper was fixed with the flick of a cover and the turn of a bolt. It seems that this happens in winter sometimes because the wiper sticks with ice accumulation. Rather than break the motor, the wiper is designed to unscrew itself when it encounters too much resistance. It will often loosen over winter but the fix is simple - and free.

You see, we, as a nation, are notorious for not reading the owners manual of our vehicles. When a German buys a car, they read the manual cover to cover. The British are the same. We, on the other hand, just expect everything to be simple and straightforward and project the blame on the car if something unexpected happens. The Europeans make some pretty ingenious cars, often using a design which must be used around the world from Africa to China, Latin America to Alaska. That is a lot of design criteria and it often means that avoiding costly and complicated repairs in the Arctic Circle (as in the case of my Land Rover) is a priority, rather than conforming to rigid American norms and expectations. Sometimes reading the owners manual is pays off.

Chrysler and Fiat - An Opera

2009-04-07T18:21:00.003-04:00

Ironically, it may be that the car maker that makes arguably the poorest quality vehicles made in the USA, which is joining Fiat, whose quality has always been suspect, may in fact be the basket case that gets itself out of hot water.

The current owners of Chrysler are resigned to getting nothing at all. They bet big, and lost, just like Daimler did with Chrysler. The difference here is that Fiat is betting nothing, and is understandably reluctant to put any cash in the deal. Given the last two affairs Chrysler has had, who can blame them? Talk from Washington demanding that Fiat put in cash is simply huffing and puffing at a brick house. If Fiat backs out, Chrysler is history and the politicos know that. They must ante up or quit playing, with predictable results.

The good thing is that Fiat may begin importing vehicles to the US soon, and make them here later. This would put foot traffic in Chrysler show rooms, where fresh design is about as prevalent as beef at a vegetarian convention. Fiat is no design wallflower, and their lineup could add some real flavor to Chrysler, and hopefully revive the fortunes of the Chrysler Design Department, which is being held hostage by the bean counters.

Chrysler has a life line, as does GM if it goes into bankruptcy. This should be interesting.

Obammie Get Your Gun - The Wagoner is Gone!

2009-03-30T08:07:00.003-04:00

Finally! It took the President of the most powerful nation on earth, but the entrenched leader of GM, Rick Wagoner is gone! The only thing that is surprising about his departure is how long it took. GM has been a hodge-podge of problems for the last 8 years, at least. Despite much rhetoric from the GM management about how things have and are changing at GM, it is evident that the changes they are talking about - whatever they are - were neither profound enough or grounded on a firm reality check of the current situation.

Now Mr. Wagoner is a history, all eyes will be on GM. It seems evident, however, that the following moves will come about in short order, if the giant is to have any hope of (a) getting the bailout billions they are begging for and (b) survive.

(1) Drastically reduce the duplication in the model lineups. For instance, having essentially identical vehicles badged as Chevrolet's and GMCs is plain silly in the face of the current crisis.

(2) Reduce the dealership network.

(3) Reduce the number of brands. Pontiac lost its sporty image back when big hair was cool, and Buick, long on life support (but helped by vitamin Enclave) needs to go as the second luxury brand. Cadillac is enough.

(4) If you can't sell Hummer, develop it. Yeah, this is counter-intuitive, but Land Rover just celebrated 50 years of Hummer-beaters, and go-anywhere vehicles are still needed around the world. Go global with Hummer products and give Tata Motors a run for their money.

(5) Find out why people love certain models (like the successful Malibu) and hated others (Chevrolet Blazer, Pontiac Aztec). Develop. Repeat.

GM can turn around, with or without bankruptcy. But the question remains: does it have the internal willpower to do so?

Toyota and the Art of Veneration.

2009-03-26T10:55:00.003-04:00

Toyota is deservedly revered in the Automotive industry. It has produced a quality product that people find attractive enough to buy and they have an extremely competent management. For many years, automotive publications started to blurt out praise as soon as they saw the "T" in Toyota. Yes, they WERE that good. As a consequence, word has filtered out that a Toyota is a good car, regardless of anything else. It has been wonderful and subtle marketing that has left the competitors in the dust.

Recently, there have been signs of problems, however. Toyota built a huge factory in Texas to churn out full-size pickups and the new Sequioia. The location of the factory, by the way, was not a coincidence - deep in the heart of Pickupland, the idea was to get hard core American Pickup buyers to get in a Texan Toyota. The plan failed big time. The plant opened as the pickup market faltered. There we some recalls early on. Then the Tundra based Sequioa was launched to yawns, as the bottom fell out of the large SUV market as well. The new Venza has been praised for its interior but pelted for its ugly exterior. There are signs that the fabled Toyota quality may be slipping as their ranking falls slightly in JD Powers surveys and others.

The point here is: Beware the media hype. Yes, Toyota does make a good product, but they, just like everyone else, are fallible. Sometimes the industry and its media have great difficulty in separating hype, fiction and genuine facts. Do you remember the 1980's? Japan could do no wrong, we should all learn Japanese, they are the new rulers of the universe. In the early 1990's it was Mexico: it was the land of opportunity, the government was stable, could do no wrong, put your money there today. The car industry and its media is as susceptible as and industrial sector to the art of hype leading to veneration. We can and should learn from successful companies and countries, but learning includes examining mistakes and missteps, and blending them into the whole canvas. By examining only the positive, we create hype which serves only those who are hyped, not the community (consumers, industry and media) and produces a lopsided view of the market.

Technology and Technology Challenged.

2009-03-18T18:07:00.002-04:00

There is no doubt about it. Technology in the automotive industry is a good thing: we are safer, cars are greener and passengers revel in entertainment impossible to imagine in the 1970's. There is a point, however, when the auto makers become obsessed with their own technology smarts and run amok.

The prime example is BMW's i-drive. When it was first introduced, you had to labor through screen after screen in order to change the radio station or the volume setting, using a knob on the center console. The latest version is more user friendly but still heavily criticized in the press. Why? Because no-one at BMW asked "why?" that's why. It gets to a point that a simple button is a better alternative to a screen. It has tactile qualities that allow you to feel around for it and punch it without taking your eyes off the road, for example. "i-drive" is complication for complications sake, and as such, reflects the arrogance that exits in BMW's management.

The other piece of technology that sounds awesome but in practice is hardly ever used by the average consumer is voice activated operation. When you see it in advertisements, you see a person crisply ordering the machine to carry out tasks such as calling Mary or taking the happy driver to Zing Ho's House of Dumplings. Having had cars with this feature, know that you must speak in a very specific language that takes up pages of the owners manual, and still gives you answers like "System does not recognize that command" and "Locating Zingers Mouse Droppings". Again, sometimes simpler is better.

Technology for technology's sake is pointless. We can all appreciate improved safety and emissions, an love our high end stereos. But adding gizmo's because they are cool is not a long term trend and is therefore, a waste of time and effort. Does anyone still have a car with a push-button transmission? Chrysler tried that back in the late 50's and it not exactly become the norm.

2009-03-12T11:00:00.002-04:00

First, if you have been following this blog, please forgive my lack of writing. I had 2 eye surgeries in the last 12 days, and I have missed the chance to blog as a result. But, like the proverbial bad penny, I am back.

Before surgery, I made my annual pilgrimage to the Cincinnati Auto Expo '09. The mood was subdued, and some manufacturers, such as Mitsubishi, did not show. This bodes ill for the future of the event. Still, there were some interesting vehicles on the floor, and frankly, the opportunity to get up close and personal with so many cars is a gear heads' paradise.

One stand, GM's (and yes, I have been accused of GM bashing, but hey, it is an easy target for my feeble mind), attracted my attention. There was the new Pontiac Solstice coupe. Attractive outside with the sadly expected cheapo interior. This got me thinking about a few of the product missteps that I have observed or read about involving GM products. Let me give three examples:

(1) The Solstice Coupe. BMW just pulled a similar coupe from the market, the Z-4. It did not sell. Why does GM think a Pontiac will do any better? Because it is cheaper? The logic here is that garlic-flavored gum won't sell at 2 dollars a pack, so we will sell it at 1 dollar a pack. It's the garlic flavor, stupid!

(2) The Cadillac XLR is a $100,000 dollar sports car. When Car & Driver tested it after it was launched, they observed that after a rain storm, if you opened the trunk, any water on the trunk lid instantly emptied all over your Louis Vitton luggage. Who tests the designs on these cars? Somehow, I don't think that BMW, Mercedes or Jaguar would have put a car into production with that kind of flaw.

(3) The Tahoe Hybrid uses only electric power in reverse. What if you are towing and need to back up a hill? You can't. 'Nuff said.

Tom Gill, a local Chevy dealer has recently been on television here touting the "buy American" sales line. There ARE good, even great American cars out there. The trouble is, GM does not make enough of them. The product snafus mentioned above point to a far deeper problem within GM, and this writer is not convinced that current management is capable of the necessary change. Ron White, the comedian, said it best: "You can't fix stupid".

Apres GM, Le Deluge.

2009-02-17T05:55:00.003-05:00

OK, so the Sun King never uttered those exact words. But the sentiment is similar. In a society dominated by the automobile and the industry that made it what it is today, a world without GM may indeed be as different as France without Louis in the 18th century.

We should begin to think of a post-GM-and-Chrysler-as-we-know-them world. Things look pretty dire for them as they near the auto bailout hearings in Congress. This scribbler believes in two possible outcomes:

(1) The Obama administration originally talked of a $1 trillion package to stimulate the economy. This figure has conveniently been whittled away to $750 billion. Chrysler, GM and possibly Ford could be saved by say, a $250 billion package. You do the math. Maybe Mr. Obama's administration is going to walk the talk and save the jobs (read UAW) that helped elect him.
Or
(2) Maybe not. The possibility of ending decades of mismanagement, and products built for consumers with no eyes, one leg and an income of $55,000 in outer Mongolia, instead of the US middle class, might be too tempting for the free market thinkers in Congress. These politicians are not limited to the Republican party, either. There could be a groundswell of support for the idea of restructuring the auto industry by allowing at least two automakers slide into bankruptcy.

And what of Ford? The automotive press has been full of praise for Ford's future plans. The 2010 Taurus (not yet in dealerships) is getting rave reviews. The European Focus, due here sometime in late 2010, is getting rave reviews in Europe,and, if oil prices spike in a couple of years, could be a big hit here (and even if they don't, young buyers will flock to the product). And then there are a slew of hybrids coming out of Ford, starting now with the launch of the new 2010 Fusion Hybrid, rumored to be able to get 40 MPG in the city. If I were a betting man, I would buy Ford shares now. I might even fund them by bailing out of my GM and Chrysler shares.

Car Sales(people) in America

2009-02-03T06:33:00.003-05:00

As any friend will tell you, if you are a gear head like me, you love to visit car showrooms, forever searching for that perfect deal. I respect sales people. It's how they make their living. I usually begin with "I am just looking, so I don't want to waste your time". If the vehicle genuinely interests me, I might ask some questions. If I am intrigued I may even start a discussion on price. As the owner of 30 cars since I was 18 (I am 47 now) my wife will tell you that too often, I end up trading in my current vehicle at a terrible cost (both financially and in terms of household peace).

Now, in exchange for my honesty and respect, I would dearly love to see the same returned in kind. Sadly, this is rarely the case. The problem usually arises at the "how much?" stage. The first question is usually whether you have a trade-in. This is a common negotiation tactic. Find out how much you can screw the customer out of in the trade-in, and then offer a "huge" discount on the vehicle itself. If you protest, they will tell you some guff about "local market conditions". Don't believe it. Stick to your guns, and demand the Kelley Blue Book trade in value. Beware of the knock-off "Black Book" value which usually shows values below the KBB listing. If the dealer refuses to honor the KBB value, head for the door. Now, heading for the door will usually produce a rush of "let me talk to my manager one more time" or "You won't find anyone who will use that value", etc. If it does not keep walking.

Once that little charade is over, you need to know the invoice amount of the vehicle. You can get this from the dealer, or if they prove unwilling , look into the service offered by Consumer Reports magazine. If the dealership is worth their salt, however, they will share the invoice price with you.Start negotiating at that price. Invoice Price already includes some "hidden" incentives from the manufacturer. Once, with a Lincoln dealership here in Cincinnati, I ended up buying the most expensive vehicle on the lot at a mutually agreeable price, mostly because, apart from liking the car itself, the Salesman was completely transparent about the pricing.

All this to give the dealership some money. I like Saturn's idea of no-haggle pricing (all though some report that this is eroding). It is a bold move, and one that American manufacturers are ignoring to their peril. American cars are fast becoming a commodity,and once this happens it is extremely hard to reverse the trend. Toyota and the German brands are notorious for being relatively inflexible on their pricing. It shows on their bottom line.

So, getting back to sales at dealerships. Please, end the games. Give us an honest price and give us an honest buck for our trade-ins. Stop the games. Open you books. Show us that we are both doing a good deal. It costs you more to have a salesperson lose an hour haggling to get to a price (and no sale afterwards) than to have me out the door with a new vehicle in half the time. Which is half the problem of the industry as a whole.

Of Chrysler, Fiat and Diplomacy.

2009-01-26T06:14:00.004-05:00

Over the weekend, The Economist published an interesting article on the possible Chrysler/Fiat joint venture, along with a picture of the revived, succesful (and very attractive) Fiat 500, which Chrysler wants to make here.

It would be tragic if this sensible merger of sorts would fail to go through because of politicians arguing that taxpayers should not foot the bill for Chrysler to be bought out by "them darn furners". Oh please. We would have a global company which would continue to produce vehicles and parts in the US, and would produce more fuel efficent vehicles to boot. Jeeps would be sold worldwide by Fiat, which has not had a credible SUV in its lineup.

What SHOULD happen is that the American and Italian governments, motivated by self interest on both sides, should begin discussions on a joint bailout package, designed to create a truly global company. Aircraft manufacturers have done this for decades. The only caveat is that Chrysler may be too far gone to survive the negotiations.

If Chrysler does go under, this scribler will always look back at this as one of the great missed opportunities of the global automotive marketplace. And a lasting memorial to the hypocrisy of promoting globalization abroad but denying its benefits at home.

Chrysler & Fiat - Finally a Wedding to be Happy About!

2009-01-20T12:55:00.003-05:00

The automotive world is agog at the news that Chrysler and Fiat are getting together. The latest news indicates that Fiat will get a 35% share of Chrysler, but stressed that it would not throw actual money at the venture.

This deal makes sense on so many levels. Firstly, and perhaps most importantly given the disastrous ChryDaimler affair, it is a meeting of the minds. Both Fiat and Chrysler are renowned for their design teams, and both have produced noteworthy designs in the last decade. The latest from Fiat, a remake of the Fiat 500 of the 60's and 70's (think Mini) is a popular success.

Chrysler gets access to Fiat's successful global distribution system. Fiat has made inroads into world markets by going local where it is able, and selling low cost vehicles to poorer countries, often assembled there. Chrysler gets to supply Fiat with upmarket vehicles in countries where Fiat has gained a foothold but has no "aspirational" or "halo" vehicles to its lineup. Fiat will also supply technology for small engines to Chrysler, which it badly needs.

Like any marriage, it is not a perfect union. Since we started on the "meeting of the minds" theme, there is one negative factor that both companies have to work hard to expel: Quality. Fiat owners have two moments of happiness, it is often quipped; one when they buy the car, and another when they sell it. Both Fiat and Chrysler have made steps in the direction of quality control, and certainly their vehicles are far superior to their ancestors of yester year. But the public memory is a long one, and the road back from the quality abyss is long and hard.

Then there is Nissan, the "Lady Camila" of the marriage. Nissan recently signed an accord with Chrysler to make it's light trucks and supply technology in other areas, including the development of a small vehicle for the US market. It happens that Nissan is also part of the Renault automotive family, and Renault is a direct competitor to Fiat in Europe and many developing markets as well. IF (and it is a big IF) Renault, Nissan, Fiat and Chrysler could be convinced to join forces, we would be talking about a global automotive powerhouse. But it would not come cheap, as the operations would have to be severely streamlined in order to eliminate model and market overlap. There is also the question of personalities, which includes some titans: Sergio Marchionne (of Fiat) does not suffer fools, and Carlos Ghosn (of Renault) makes fools suffer.

Still and all, this is the best deal Chrysler could get into. It breathes a bit of hope in an industry staggering under economic pressure. And for us car nuts, it means we will soon see Fiats back again in the US - however quirky they were, we always loved their Italian flair and they will make the automotive landscape a better place. Thanks Fiat! (And I never thought I would ever say that.....)

Detroit Auto Show - The Difference Between a Winner & a Loser

2009-01-13T08:28:00.005-05:00

So, the most depressing Detroit Auto Show ever is upon us. To be fair, the whole scene is so depressing I have been reading about it less than I should because I am worried about my supply of Zoloft and Prozac. Still, one thing is immediately obvious. Ford has a plan. GM thinks it has a plan. And Chrysler wishes it had a plan.

Ford is going down the road of hybrids in a big way, with a view to a fully electric vehicle at some point. Whether or not this effort is aimed more at congress than at the consumer, only time, and the price of gas, will tell.

GM appears to be pinning its future hopes on the Volt. Like the name implies, this is a purely electrical car, which appears to have been extremely well developed. However, the MSRP is said to hover around $40,000 for its 2010 introduction. Unless gas hits $6 a gallon, my guess is that GM will have some trouble getting people to flock to show rooms for a $40,000 vehicle with relatively novel technology and that looks vaguely like a mix of a large Toyota Prius and a Chevy Malibu. This is a shame, since the vehicle actually drives extremely well, sources say.

Chrysler seems to be in disarray. They have a pretty sketchy future lineup. The Chrysler Aspen/Dodge Durango hybrid has supposedly been scrapped for 2010. Who is going to buy a one-year production hybrid vehicle? Someone please tell Chrysler to get a plan or start selling off divisions. Last month, while in south Florida, I noticed one Chrysler dealer who was promoting "buy one get one free". If you bought a Jeep Commander at full price, they would throw in a PT Cruiser for free. No, I am not kidding. If you took the time to read the small print as you rushed out the door, you would see that this offer applied only to new 2007 Jeep Commanders. Yes, you read right, the cars that had been sitting on the lot for almost TWO YEARS. Chrysler may be in worse shape, from a strategic view point as well as a financial viewpoint than anyone imagines.

Chrysler Oh Chrysler, Where Art Thou?

2009-01-05T06:57:00.004-05:00

So, it seems that Chrysler is inching ever closer to the abyss. This is truly dissapointing, given the Chrysler should have been the poster child for bailouts. When Lee Iaccoca steered the company away from the abyss, with the help of a major bailout loan, he did so driving a series of new and clever vehicle designs (ok, the K-car was pretty bland, but it was revolutionary in that it introduced front wheel drive and smaller vehicles into the American mainstream of domestic cars). The initial lineup included a snazzy fastback, a european-inspired hatchback and the K-car. Chrylser then followed with the minivan, for which Mr. Iacocca has been nominated for sainthood by the Soccer Moms of America. With these vehicles, Chrysler got design cred on the street.

Interestingly, Chrysler let its truck lineup languish until around 1994 when the new Dodge Ram lineup appeared, and it too was a design hit. Profits form trucks and SUV's proved to be addictive, however, and this may have something to do with the demise of Chrysler.

Quality was never outstanding, despite revolutionary designs, and in the end, lower pricing did not trump consumer confidence. Belatedly, Chrysler has tried to improve these quality pecadilloes but on a shoestring budget and no cash, what can they really accomplish at this point?

There was of course the much celebrated (and then despised) "merger" with Daimler Benz. In theory it was a match made in heaven. Chrysler design for dowdy german vehicles in exchange for German reliability and engineering. But strange things happen when strange bedfellows get together. Egos, corporate culture and resentment spelled disaster. Chrysler did get some of the slightly past the "use by" date technology, including several bits of the last generation E-class engineering (Charger, 300C, among others) and CLK (Crossfire). The Germans, however don't merge well. Look at BMW and Rover. OK, they got the Mini and ran with it. But they got Land Rover and promptly introduced a BMW SUV, the X-5, instead of using the synergy to develop an SUV with off-road credentials.

The result is that Chrysler desperately needs suitor. The problem is, who is going to buy an ailing car maker in 2009? As I have scribbled in the past, Chrysler is a tasty cake in small slices, but no-one wants to take the whole thing home for fear of indigestion. My bet is, someone will be buying Jeep, and soon.

Alcohol: Not just for drivers any more.

2008-12-19T09:52:00.003-05:00

My previous post reminded me of Brazil, and then naturally alternative fuels. Why? Because Brazil is the first country to have adopted alternative fuels on a truly national scale and as a result, declared independence form foreign oil about 3 years ago. "Gasp!" I can here you say. "They must have done it using hinky local branded cars and hand pumps by the side of the road". No, actually, the vehicles were developed by the likes of GM, Ford, Fiat and Volkswagen; and the fuel is sold through gas stations of repute, such as Shell, Texaco and Petrobras.

How could Brazil do this while we, with all the resources at our fingertips, cannot? Well, they used will and power. During the 1970's the (then) military government decided that as a developing nation, Brazil needed oil, which it did not have very much of (although, ironically that is changing very fast). The country could not be held hostage to the whims and fancies of a foreign organization (OPEC) and a market over which they had no control of. Sound familiar? So a program was started to develop alcohol (Proalcool), derived from sugar cane, which Brazil has huge amounts of, as a car fuel. Vehicle manufacturers that had a presence in Brazil were "invited" to participate in the process by developing technology that would allow their vehicles to run exclusively on the alcohol. The next problem to be resolved was the problem of distribution. Distributors balked at having alcohol pumps at every station because they did not think there would be demand for the new fuel. The generals immediately recognized this as a chicken and egg situation: If there was no alcohol to be had, no-one would buy the vehicles. If no vehicles were around that consumed alcohol, there would be no pumps. So, being an authoritarian regime, they came up with a simple solution: If you want to sell gasoline in Brazil, you must sell alcohol as well. Period. The first commercially available vehicle run exclusively on alcohol rolled off a Ford dealer lot in Rio de Janeiro in 1980.

The rest as they say, is history. In the beginning, alcohol run vehicles got tax breaks and the fuel was subsidized. These measures were dropped much later and some years after that the program almost went under, until it was revived again by rising oil costs and the development of vehicles that could run on gasoline AND alcohol, allowing the consumer to pick and choose depending on market costs for each fuel, their own cash availability, etc. there are now vehicles that can run on gasoline, alcohol and propane. In a capitalist system this tends to keep the cost of fuel low, since suppliers know that the consumer can pick and choose the fuel they want to use.

So, how does this compare with the US? Well, there is no will, to begin with. Big oil has little incentive to invest in the distribution of an alternative fuel. The government has protective tariffs on alcohol coming from Brazil and other friendly nations in this hemisphere, which make it impossible for these fuels to compete. We, the scions of Washington have decided, must be supplied by corn farmers in Iowa. The fact that this is less environmentally friendly than sugar cane and there is not enough corn around for it to make a viable case for widespread distribution, dooms the program from day one. Mr. Obama, if I were to make one suggestion, it would be to pass legislation requiring oil companies to use 3% of their profits solely for the development and distribution (in equal parts) of alternative fuels. The market will take care of the rest.

Learning from Abroad

2008-12-19T09:17:00.003-05:00

I recently re-established contact with an old friend from my time in Brazil, whose passion for cars actually exceeds my own. He was the previous owner of a red 1968 Karmann Ghia which I purchased, mentioned in a previous post. Exchanging e-mails with him reminded me of how our own industrial myopia and arrogance is a sign of the automotive times. Allow me to elaborate.

Throughout the entire current automotive crisis, I have not heard a single voice of humility. That includes the humility to admit that there are solutions in other countries which we could apply here if we could ever admit that we are wrong and they have a better way. The whole Detroit/Washington mindset seems to be that we got ourselves into this mess without your help and by goodness, we will get out of it too, using the same tools we have used with such brilliant success up until now. Am I the only one who sees this?

Ford's most modern plant in the entire world is in the Northeast of Brazil, and is a modern marvel. Different suppliers actually make the parts on the Ford factory floor and place them in the vehicle as it goes by on a conveyor. Parts transportation and warehousing costs for Ford = Zero. Admittedly this is not a Brazilian solution but Ford did implement it in Brazil. Union rules prohibit such modernity in the US, but instead of showcasing to Congress, this plant as an international solution for current cost woes, as well as what Ford can do with a relatively uneducated workforce, it is carefully hidden away in a corner of the developing world. Why? Is it because there is a hidden agenda that wants to show Congress how hard it is for the poor automakers to make cars here in the current environment, so please....give us money? GM makes some very popular vehicles in Europe. They have brought some them here, put them in their most bland brand, Saturn, marketed them as humdrum family transportation and then used this as proof that European cars don't sell so......give us some money. They brought two cheaply assembled vehicles from Australia and marketed them as sports cars (Australia - that land of thoroughbred automotive excellence, the new Germany) which flopped, and wondered why we did not sell our BMW's and jump into an Australian Pontiac.
Do you see a pattern here? Foreign solutions squashed and hidden so that we....give them the money. This is not a conspiracy theory, but a recital of facts. At best, it shows a gross ineptitude on the part of management to leverage global capabilities on anything approaching a comprehensive scale. At worse, it is an effort to get their hands on our money. Either way, shame on Detroit. I just wish that we had an alternative. If GM and Chrysler go under (I still have faith in Ford), who will pick up the juicy leftovers abroad? Where are the capital investment funds today? Oh, yes, they are in dire straits and currently "unavailable" because we were so adept at leveraging our "expertise" in mortgages on a global scale.

Service With a Sly Smile

2008-12-13T11:39:00.003-05:00

I can never take my car to a dealership service area without a vague feeling of mistrust. I feel like the foreigner in an Eastern bazaar: I know what I want, I am fairly savvy, but the "natives" are wily and they have the edge; they are "the experts", ever willing to throw a bucket of doubt on my small flame of knowledge.

In the first place, your vehicle is whisked away to a back operating room where anonymous dirty handed people pull and hammer pieces of your car in an alarming manner, stick computer linkup cables to sockets (I wonder if those things are even hooked up) and soon, a verdict on the condition of the car is passed. You have no idea how. But the verdict always falls into one of two categories:

(1) "There is nothing wrong with your car at all, Mr. Healey". Either the service order says "could not replicate" or "normal", both of which are surprising, since the car won't start without a comical explosion from the engine bay and a cloud of smoke from the tailpipe.

(2) "I am sorry to say that there is a problem with your car, Mr. Healey" (which I know, since I took it in because there was a problem). "Apparently the descombubulator of the master cylinder has burnt out sending a flash to the electronic ignition system resulting in a problem of premature explosive cycle. We located the part at a dealership in Zimbabwe, and the service department can get us the part by say two weeks from Wednesday, cholera epidemic permitting". Cost? "Oooh. Let me see. I have the kids to put through college, the mortgage to pay off , AND the dealership needs to make money. I'd say about $1,500. If we don't find anything else". Warranty? "Oh no (giggles)! Our warranty doesn't cover normal wear and tear. This part is both worn and torn, so the warranty doesn't apply".

And, as John Lennon said, " I am not the only one to feel this way". Dealerships could go a long way in gaining consumer trust with a few simple measures:

(A) Make the back room a mechanical showroom with huge plate glass windows where customers can see what the mechanics are doing. Even operating theatres have these now. Are these guys doing more than microsurgery?

(B) Show us all the paperwork. How much does the replacement part cost as per your catalogue? How many hours does the manufacturer estimate to change this part? (Most manufacturers have such a table for almost every part on the vehicle).

(C) Show us the parts. Ohio law (and there are similar laws in other states) requires that the mechanic offers to give us the used parts, and to hand them over if requested. Very, very few dealers do this (I have only seen it once, at an Audi dealership). At most, a few will ask you to initial a tiny box with tiny print relinquishing this right. Don't do it!

(D) Attitude. We have all been to dealerships where we are treated as rather tiresome dullards, who would not understand what was wrong even if they tried ever so hard to explain, so why bother? Pay and move on, bub.

Some dealerships have tried to allay our mistrust with free coffee, a comfy seat and a good magazine, usually depicting their vehicles in a most favorable light, and highlighting the many awards they have received. I'd rather see what they are doing with my car. I can get a good cup of coffee anywhere, but a good dealership is hard to find.

What's Good For GM........

2008-12-12T09:23:00.005-05:00

So it finally time for us to test that old saw, "what is good for GM is good for America". As this scribbler predicted, Ford emerges as the most viable car company while Chrysler and GM are poised to become history (at least in their current guise) as the bailout failed in the Senate yesterday.

Entering bankruptcy will be painful, but not necessarily bad for America in the long run, for a number of reasons. Firstly it will signal that badly run companies must succumb to market forces at some point, no matter their size - the checkbook, if not closed, is at least in need of a refill of fresh checks. Secondly, it will focus the minds of the surviving entities and we will have better vehicles as a result. Thirdly, the suicidal race to the bottom in terms of discounts will hopefully be reduced to a gentle glide toward efficiency: he who is efficient will sell at the most attractive prices. Fourthly, it will extirpate the fat and impossible demands of labor that are crippling our car makers. Finally, it Will reaffirm that we are indeed a capitalist society, not a corporate welfare society.

But where from here? Well, like guys who have their fantasy football teams, here is my fantasy US car maker breakup scenario:

(1) Chrysler sells Jeep to Tata Motors, who urgently need an "in" to the mass US 4X4 market, and something to erase the memories of dismal British quality (if only to replace it with dismal Jeep quality, but better the devil you know). Tata also gets Hummer for free. GM should be happy to get rid of the cash drain.

(2) GM sells Saab to Ford who, with Volvo, would have a credible European premium brand base in the US. Talks of selling Volvo are insane, given the myriad Ford products that are based on Volvo products. Ford needs a reasonable premium European alternative in the US.

(3) Lincoln and Mercury are history. Ford concentrates its premium brands on Volvo/Saab combo, incorporating the best of Mercury (the Mariner. Period) and Lincoln (everything except the Town Car).

(4) Pontiac is gone.

(5) Buick is gone.

(6) Saturn is euthanized after a long agonizing death.

(7) Chrysler gets a much needed boost by absorbing Cadillac and merging its "premium" Chrysler line. This would give Cadillac a wider market (a Cadillac minivan for heavens sake! Soccer moms rejoice! Owning a Cadillac that gets more than 10 miles to the gallon and can seat 8 - it could be cool to drive a minivan again). And Chrysler would gain some street cred.

(8) Chevrolet,GMC and Dodge merge to form a company that sells lower end pickups and sedans for people who like to buy their cars where they buy all things utilitarian (hey, Sears! Why not sell Craftsman products at these dealerships?).

Hey, that would be an ideal world - at least for me. I think however, that if Washington keeps weighing in, we will end up with no synergy and a big bill. Time will tell, but for now, let capitalism ring!

Collecting Cars is not for Joe the Plumber.

2008-12-06T09:10:00.004-05:00

My copy of Hemmings Motor News arrived yesterday. If you don't know what that is, it is essentially the car collector's Bible. Now, while I love to read about classic cars, and study them in some depth (my collection of Classic & Sports Car magazine goes back to 1992!) I have never had the guts to take collecting them seriously - although now is beginning to look like a good time to begin (wait six months though).

While I lived in Brazil, we did own a 1968 Karmann Ghia (a mere 20 years old at the time). It was locally made by Karmann with the obligatory Volkswagen mechanicals, and was in absolutely pristine condition. And then I drove it around town. The drum brakes were fine if you drove slowly, but in stop and go traffic it became a battle between my thigh muscle and the need to stop before I hit the car in front. It is little wonder, then, that one of the biggest problems with collecting these cars is finding one whose bulbous front nose is original and unrepaired. It was slow as well. But it did, however have great charm, and the lines are nothing short of timeless.

Here, then, is the first obstacle to car collecting. Most amateurs are looking for something to drive on a regular basis. However, cars built 30 years ago are, in general, less powerful, noisier, handle worse, and have deplorable fuel economy. They make odd noises whose source defies detection. For all the charm and desirability, once you have driven a modern car you like, driving a classic every day becomes a case of your ability to induce voluntary amnesia of driving your new Lexus (or even your old Lexus). And if you did not know about the Karmann Ghia nose business, you may have just bought a car for a lot more than it is worth.

The second obstacle to Joe is choice. You have to begin by asking yourself a few searching questions. Why am I buying this car? Is it an investment? Do I want a car like Dad had when I was six? Do I think it is a thing of beauty? If you are buying a classic as an investment, forget it. Most single-car collectors have no idea if the car is going to appreciate in value. No-one really knows what a car's value will do, although there are ways to make educated guesses. Current rarity, original manufacturers production numbers, popularity at the time, famous design, etc. are all indicators. But remember that with any old vehicle you will have to spend increasing amounts of money to keep it roadworthy over time, especially as parts become rarer.

Do you want to drive Dad's 1967 Country Squire? Your memories of this car will clash with reality: there is no stain on the carpet where dear old Rover threw up, and the gum you stuck under dad's seat won't be there (trust me). However, nostalgia can make a rational person do odd things. In some cases, the vehicles bought under these circumstances are true classics and/or have a prominent place in automotive history. Most of the time, however, these vehicles are the ones that we love most, and that is a good enough reason to fork over your cash.

If you are buying the vehicle because you think it is a thing of beauty, congratulations, you are a true gear head. The problem for Joe here is that if your idea of beauty is a 1978 AMC Gremlin, that's fine, but don't expect everyone to share your enthusiasm - or agree with your asking price if you decide to sell.

So Joe, if you are reading this, or even care about classics, here is my advice: Buy one. Just one. And make it one you really, really want. And keep it. Car collecting (IE more than one) as a hobby or an investment is not for you or me. If you win the lottery, however, let me know. I have some hot tips for your collection.

Automobile of The Year

2008-12-04T09:01:00.006-05:00

Several magazines have reported their choices for Automobile of the year, and at least two have named the new Nissan GT-R as their choice.

This vehicle is in the Supercar category, and has performance and features enough to spin the head of any gearhead, and produce drooling upon sight. Personally, I would love one, but Mrs. H is unlikely to agree.

My question is, in these times of unprecedented crisis why is this particular vehicle being chosen? Yes, it is a fantastic car, and will undoubtedly achieve its sales goals despite shallow pockets and long faces. However, it is a timely as a printing run of McCain-Palin election stickers. There are other vehicles out there that are more useful, have enough electronic gizmos to keep any service shop happy for generations to come and are far more relevant. The new 41 MPG Jetta TDI, the new Audi A4 (or 5 for that matter), even the Jaguar XF would all, in this scribbler's mind, be strong and more practical candidates, and there are others.

The automotive press in this country, like the industry itself, needs to tune in to the people who count: the people who buy.

Mr. GM goes to Washington

2008-11-24T08:45:00.004-05:00

Mr. Wagoner, the CEO of General Motors apparently said that GM's woes were largely due to the credit crisis and Wall Street, last week during congressional hearings. And here we were, thinking that GM's woes were caused by the production of cars that did not sell, and SUV's that are no longer the market darlings of yore. Silly us.

'Nuff said.

Sayonara Mazda.

2008-11-19T11:05:00.003-05:00

Ford announced yesterday that it was selling most of its stake in Mazda. This is a shame for a number of reasons.
First and foremost, because Ford has invested heavily in turning Mazda around from a losing automotive also-ran, to a stunning success. Mazda now has a competitive array of attractive vehicles and owns the segment of Asian "sporty" vehicles.
Second, the timing is bad. The shares are worth less than they were last year, for instance. Sadly, this is a good way for Ford to raise much needed cash, and is a smart move right now. It also reinforces the view that Ford is a far more visionary company than GM. Having this ace in the hole may be the difference between perishing and surviving, even is it is being sold cheaply.
Thirdly, Mazda has arguably benefited from the Ford stake in it's business, far more than Ford ever did. Ford vehicles serve as basis for several Mazda vehicles: the Tribute is a Ford Escape, The Mazda pickup is based on the Ford Ranger and the snazzy CX-9 is based on a Volvo platform, as is the hugely successful Mazda 3.
The question that comes to my mind, however, is how come Ford made such a huge success with Mazda, but failed to learn form this exercise? Perhaps it was because Mazda is not a family enterprise, and the experts were allowed to run it - and save it. Ford has shown signs that it is willing to remove the family from every day running of the business but the question is, is it too little too late? Time will tell, but this blogger is still confident that Ford is in the best shape of the not-so-big three to weather this storm.

Talking of Speeding

2008-11-17T17:34:00.003-05:00

So, just for once, let's ruminate on one of the unintended consequences of driving, the speeding ticket. Like millions I have had my share of these (2 to be exact), and the police have always treated me with respect. In one case, I was doubtful that the policeman even had his radar detector on, and in the other case, I was caught fair and square. In both cases, I paid the fine and swore at myself.
In the US, all but two states allow the driver to use the radar detector. This is a tacit admission that the speeding game is a game of cat and mouse. Most police officers will allow some leeway with the speed limit but some will not. Some roads that are long, straight and downhill have ridiculous limits like 25MPH, while in some areas narrow roads with houses on either side are regularly posted at 45 or even 55MPH. The rules are posted, and are clear, but the logic and the application of the rules is obscure. Perhaps deliberately so, to our benefit.
Years ago, the police in Britain had an unwritten, and today, politically incorrect, rule. If you were speeding in a sports car capable of that speed, and you looked like a mature, sober adult, they would not want to stop you. If you were in a delivery van going at 75 wearing a leather jacket and were no older than 19, you were a goner. Of course, the bureaucracy got wind of this, and now the UK is one of the most ridiculously repressive driving regimes in the world. Your speed is monitored by camera, radar and even stopwatch between highway toll booths - if you make it to the next one in less time than they determine to be legal, you get a fine. In short, the British police have gone from discerning individuals to revenue collectors. Even Jesus was not keen on those guys.
So it is a game. The rules are clear, but you may take precautions against getting scored upon. The radar detector levels the playing field a little. Every situation is different but to some extent, our system recognizes that. The rules are clear, but unlike Britain, our rules are guidelines for good and safe driving behaviour. They can be enforced rigorously or in a lax manner. The problem is, we never know which. As any good psychologist will tell you, this is a recipe for behavioural success.

Are We Really So Capitalist?

2008-11-07T10:14:00.003-05:00

This week saw the sad spectacle of Automotive CEOs trudging sheepishly up the steps of the Capitol to ask for money to save themselves. I recall a similar scene in 1980 when Chrysler did the same. Now they are all there.

In retrospect, Chrysler then was different. Lee Iaccoca had big ideas and was hugely successful with a new and popular car lineup and later, the debut of the minivan. That things have gone so awry for Chrysler is a round condemnation of the management post-Lee.

Of the others, let's start with Ford. As I have stated in the past, I think of the not-so-big three, they have the best chance to survive. They are strong abroad, and are moving quickly to shake up their product line in the US to make it appealing in a $4 a gallon/recessionary world. Gas prices are down temporarily but they will go back up, and in a recession, people that do buy cars are going to be looking for economy, safety and flair. Ford offers all three in droves.

GM is another story. In a typically dysfunctional move, they announced that they are cutting back drastically in new model development. Perhaps they think their current lineup has been so very successful that they can afford to take a rest. They are going down the road of no return, winding down the shop, disconnecting the utilities, well, you get the picture.

Chrysler, if I were a betting man, could maybe recover with another bailout. They have some attractive new trucks, they have finally realized that quality and comfort matter, and they have always had a pretty good design shop (since 1980 anyway). They own Jeep, which despite having diluted its brand with the introduction of "soft roaders" could survive as a smaller brand.

However, they too have precious little in the pipeline and need an injection of cash, pronto.

But the real question, the 600 pound gorilla in the room, is should we bail out companies that have been so mismanaged? The argument that Detroit is too important to let die, is a fallacy. In a market economy someone will still need to make and sell cars to and in the US. There will be huge pain in the short term, but maybe the economy needs a reshaping. America will have to prove again that it can make cars and supply quality parts to do so. But to keep bailing out companies that insist on failing is to waste money on a truly titanic scale.

Of War and Cars

2008-10-31T08:29:00.004-04:00

This year marks the 90th anniversary of the end of World War I. My Father's older cousin died in that conflict, along with another 9.5 million soldiers and 10 million civilians. The "war to end all wars" did not of course end all wars, and sadly, this horrendous show of man's callous inhumanity is quickly fading into the past.

If you look at the scratchy, grainy movies and photographs of that conflict you may be struck by the fact that there are horses and carriages used to transport man and materials, and most men appear to be on foot. It was the conflict that saw the invention of the tank and armoured car (the latter supplied, for the British by none other than Rolls Royce! The British have always had class). Toward the end of the war, trucks and motorized ambulances were used.

The problem with motorized vehicles of course, was the terrain. Muddy fields and rough terrain are not really suited to heavy, underpowered, wheeled vehicles. The early tanks themselves had difficulty in the ubiquitous mud and steep bomb craters.

After the War, people widely believed that the automobile was here to stay. Henry Ford had been cranking out the Model T since 1909, but in Europe, it was still regarded as a rich man's oddity until thousands if not millions had had the chance to actually ride in one. It is hard to imagine the astonishment of a young French farmhand recruit, accustomed at most to a horse-drawn cart, first riding in a vehicle that had springs and required nothing more than a few cranks of a handle to get going at a speed much faster than he or any of his ancestors had been in their lifetime.

In less than a century, the automobile has given billions of people a mobility and independence that their grandparents could not imagine. Today, suburbia would be an impossibility with out the internal combustion engine (or as Churchill famously called it, "The infernal combustion engine").

If ever there was a silver lining to the most terrible of obscene tragedies, perhaps the development and acceptance of the automobile and its liberating effect on humanity, might qualify.

Chrysler and GM: The Folly Continues

2008-10-28T11:09:00.003-04:00

The papers are still rife with stories about a possible merger between Chrysler and GM. As I have said in the past, this merger makes almost no sense from a model line up point of view, and this was confirmed by a source who recently reported that the new company would consider selling some lines off, like the Dodge Ram pick up line. Naturally. They have completely overlapping and competing line ups in this fast shrinking market.

This kind of shallow thinking is what got Detroit - and especially GM - in trouble in the first place. Firstly, Dodge has just launched a brand new (and vastly improved) lineup of Dodge Ram pick ups. The Chevy/GMC pick ups were redesigned about two years ago. But sure, sell the newly designed models.Who will buy the Dodge Ram product lineup? Not the Japanese. Toyota is still nursing a gunshot wound to the foot that it took by launching the new full size Tundra pick up amid rising gas prices and a declining economy. Nissan launched the Titan in the same segment some time ago. The Koreans have their hands full. Kia launched a full sized SUV last month (need I say more?) and Hyundai, try as it might, has trouble being seen as an upscale car maker.

The Europeans are unlikely ever to want to get into the full size pick up segment in meaningful quantities. So, I ask again: who will buy the Ram line? Indians? Maybe. Mahindra and Tata are itching for an "in" into the North American market, but Tata has already bought Land Rover and Jaguar, and will have its dance card full trying to fix these brands in the US for the near future at least.

So while selling a vehicle line sounds wonderful on paper and makes a great sound bite, it is little more than that.

GM is really in a desperation samba, looking for cash at any price and Chrysler's stash looks tempting. But the cost of integrating the two companies would eats most - if not all - of that cash in the medium term. Cerberus of course, is still the big winner if this comes off, having washed its hands of Chrysler and gained GMAC to boot.

GM needs clearer thinking and some calm. Current management seems lost and desperate, and has lost sight of the real problems, which include years of product and quality neglect and attention only to profitable lines, while failing to turn unprofitable products into winners.

Only a herculean effort by a competent management team can save GM at this point, along with a healthy bailout. As of today, it has neither.

The Little Car That Could.

2008-10-26T16:48:00.003-04:00

As you drive along the nations Interstates and main roads at rush hour, it is always interesting to see who is driving what as they go to and from work.

The days of commuting alone in a huge SUV are looking so last year. Then there are the sports cars whose 0 to 60 times are less than the time it took you to read this sentence. Of course, the average speed at rush hour is about 15 MPH and the constant changing of the heavy-duty manual gear box have given your legs a version of carpal tunnel syndrome. There are the spartan econoboxes that are increasingly being driven by smug middle management types, who look like they are doing their thing for the environment - and want you to know it. There are the luxury imports that have all the amenities, including the stiff sport suspension, ideal for the off ramps.

What is missing from this picture? What is the holy grail of the driving commuter? Well we can start by saying that everyone likes a quiet interior. A decent sound system with Bluetooth? Certainly! Room for four without the folks in the back having to chew their knees would be nice. An economical four cylinder engine that is responsive at the same time is a must have. A decent top speed with quiet refinement, please. A trunk that fit the groceries or the bags of the missus, the kids and I for a weekend. Oh, and it must be fairly compact for those small parking spaces at work. It does not have to have a top speed over 95 MPH because if you ever go faster than that you won't need a car for quite some time, where you will be going. However, 0 to 60 in about 6 seconds would make this a great ride for darting around in traffic.

To make the American consumer to purchase a car like this, it would have to have some cachet, a certain badge snobbery, so we are talking Lexus, Infinity, Cadillac or Lincoln - at least. The point is this. There are millions of people in this country who drive sedans that go way faster than they will ever need, cost way more than they can really afford and consume too much gas for their budgets. These cars can come with suspensions that would be great at Le Mans but are pretty hard for Le Butt, and will never be put to good use. They come with many systems that look cool (like voice activated anything) that most of us will never use regularly.

So the bottom line is this: if someone fairly prestigious would come up with a semi-luxurious vehicle that was easy on the eye, ear and wallet, was economical and had a dash of class, they might have a winner.

There are some promising signs in this direction. Both Ford and GM are allowing four cylinder versions of their mainstream sedans (I am thinking Fusion and Malibu here) to be equipped up to the eyeballs with features previously available only on the six cylinder versions of these cars. But what we really need to have the manufacturers look toward Europe, where many of the attributes I have listed have been a given for years,and see what we can do to bring style and utility back to the daily commute.

Food for Thought from the WSJ.

2008-10-26T16:44:00.003-04:00

This weekend's Wall Street Journal has an excellent article by Paul Ingrassia entitled "How Detroit Drove Into a Ditch". If you are interested in the automobile industry this is a must read.

Kerkorian and Ford: The Gambler Takes a Hit.

2008-10-22T19:22:00.002-04:00

In the last 24 hours, much has been made about Mr. Kerkorian selling Ford shares. Why? He is a big investor. Note I did not say a savvy investor, however. And I did not say a huge investor. This week he cut his owners hip from 6.43% to (gasp!) 6.09%. It represents a huge sum of money and he took a bath, but it does not mean he is selling anywhere near a majority stake in the company.

So what makes his exit from Ford a harbinger of doom? I have no idea. Remember this was the man who donned his cheer leading sweater and megaphone and pushed for the Chrysler / Daimler deal when he had a large stake in Chrysler. Then he bought into GM and pushed for GM to merge with Nissan/Renault. He failed to get the GM management to see his point of view and went into a huff and walked away. Now he is walking away from Ford, because....who knows? Clearly he is no success story when it comes to investing in Detroit - perhaps it is a good thing that he is walking away now so that Ford executives can keep their focus (pun intended).

Mr. Kerkorian made his millions in the gambling industry and he is now having to dig into that fortune in order to dig himself out of an automotive hole. There is a lesson for all of us in this: Stick to what you know unless you are willing to give yourself a very expensive education.

Car Supermarkets Far Off and Far Out?

2008-10-21T20:12:00.005-04:00

No and yes, respectively. GM's continuing fascination with a merger with Chrysler which this blogger has strongly criticized has now spread speculation that the companies could consolidate dealerships. This is of course tacit recognition that the car market has become, in many segments, comoditized. It is only a question of time before someone wakes up to the fact that selling cars in exclusive dealerships is a luxury fewer and fewer manufacturers can afford and more and more shareholders should question. Besides which, the old argument that specialized dealerships "know the product and are loyal to the brand" is bull excrement. Any person with a modicum of research in their head can walk onto the floor of any showroom in the nation and instantly confound the sales person with a few rudimentary questions about the vehicle on the floor. I once visited a Ford dealership in Cincinnati here the salesman had difficulty in identifying a Ford Escape versus a Ford Explorer. Dealerships are going to have an increasingly hard time justifying their existence.

Let's look at the car purchase rationally. If I am in the market for say, a minivan, does it make sense for me to spend days wondering around different dealerships, haggling with different sales people and financing companies, or does it make more sense to go to "Joe's Mini Van Market". There under one roof I can see a series of minivans, from several companies and compare them. I can see features I like or don't like and quickly choose the one I like best.As the idea catches on, soon "Joe's Market" will have a minivan department, a pickup department, a sedan department, etc. All under one roof. Paradise!

For the manufacturers it means tremendous efficiencies as parts are shipped to Joe's Market based on computer models that show how many vehicles he has sold, and what they are likely to need in the first, second and third year of warranty. Prices would be have to be competitive and the whole archaic process of dealer incentives, hold backs, etc. would go away in favor of a fixed commission for Joe, with perhaps bonuses for vehicles sold. Saturn's idea of "no haggle pricing" would be a welcome innovation, with sales at different periods of the year. It would be Joe's headache to deal with salesmen and the public could easily opt for the best vehicles at the most competitive prices, with a margin for personal tastes, thus making manufacturers more efficient by being able to rapidly hone in on what the public wants versus what they are selling.

If this sounds like it makes sense, it does. It is essentially what happens every time you go to a supermarket or Best Buy or Sears. In fact, the question arises, why has someone not thought of this already? Well, for one, the middle man, the dealership, has a legal leg to stand on, against the manufacturer, if they opt to abandon their dealership network in this fashion.

But how exciting would it be to see Chrysler and GM started selling their vehicles through open markets like the one described above? How exciting would it be to walk onto a showroom floor with competing vehicles side by side?

If you hold shares in an American car company, it may time to start asking questions about how much the dealer network actually costs you as a shareholder, and to ask "why are we insisting on using a sqaure wheel when every other consumer product has already invented a round one?".

Has The Era of European Luxury Sedans in the US Ended?

2008-10-16T08:49:00.003-04:00

There will always be a market for luxury European vehicles in the US. However, the recent downturn in the economy and the prices of these vehicles, fueled by unfavorable exchange rates, have got me thinking.

In fact, what I predict is that demand for the lower end of these vehicles as well as their SUV's will begin tapering off as younger buyers begin to realize that some Asian brands, while not as exciting to drive, are in fact just as good, and have fewer negative compromises (more comfort less handling rather than great handling and rock hard suspensions for example). And let us not forget the domestic brands, that, while not having the cachet, have produced some very fine automobiles, of late.

Yes, Dad, owning a BMW is great but as I drive to work, I don't want to count expansion joints and potholes with my rear end. And I don't need a car that will rocket me from zero to eighty in 8 seconds, if my average commute speed is 25 MPH. And I don't need another ticket, as I test out the top end on the Interstate. All this comes under the title "nice to have" when money is short.

Small is In, Prices Low, Don't Buy Now.

2008-10-15T15:52:00.002-04:00

The Wall Street Journal reported today that car makers are increasing discountes on smaller cars. Clearly a sign of the times, since if any car is going to move off the lot, it will likely be a small, gas sipping, low cost model. People simply are not going back to the big SUV's and if the current economic problems persist, they may decide to stick with what they have or, if they are feeelong flush, snap up a decent used car at a great price - there are acres of good used cars at fire sale prices right now.

If you ask me if now is the time to invest in a new car, I would still say no. Here is why:

- If you think that dealers are discounting 2008 models now, wait until February. They'll practically pay you to take the car.
- There are a host of new models, some of them substantial improvements over the current vehicles, coming on line in 2009-2010.
- You absolutely want to avoid debt right now. If you have cash, and have to buy a car NOW, go and look at a used, low mileage model. With a warranty.

Actually, if I needed a new car right now, I would lease one for 2 years (if I could find a lease) or buy a used vehicle that will get me through until 2010. At that point, the market will be flush with new models, hopefully we will not be in a depression (!) and you will be able to choose a model substantially improved over what is available on the market today.

GM & Chrysler to Merge? Chry-Mo!

2008-10-11T12:17:00.005-04:00

A reader contacted me late last night to give me the news that appeared in Today's Wall Street Journal, about the talks between GM and Chrysler about merging. I spent the last 12 hours ruminating about this, and, between irritation and laughter, I decided I had to jot down a few ideas about this rather fuzzy idea.

First, why do companies merge? The idea that you merge with an equal to produce a company twice the size has long since been discarded. You can merge to take advantage of synergies, improve finances for both companies, increase competitiveness, pool resources to make R&D more cost effective....you get the idea. Not everyone will agree, but I think you have to have at least 3 of the above good reasons in order to merge.

Now, lets look at some of the fundamentals, which, in the automotive industry begin and end with the product line. Both Chrysler and GM have developed Johnny-come-lately retro muscle cars to compete with the Ford Mustang, which has been a big hit.So right there, you have two products on which you have spent good cash developing, competing. Chrysler is in the process of rolling out its redesigned line of Dodge Ram pick-up trucks, and GM invested heavily doing the same thing almost 3 years ago. In the SUV world, nothing is selling, but GM has a better lineup of full size SUV's and they both have recently launched a slew of small crossovers. All that development money would be lost because if you merge, some - if not most - of those vehicles will have to go. In the sedan lineup, there are synergies, if only because Chrysler made such a mess of the Sebring/Avenger launch, with a sub-par product. Still not convinced? Look at Hybrids. Both companies have rushed hybrids of their big SUV's onto the market. Now go see how similar the technology is. Certainly not identical. Now think about how much money has been spent and how you would decide about which technology to adapt and how to service these vehicles. Inventory costs for the new company, which will have to continue to service all of the current lineup, will be staggering.

On an international scale, I do concede that Chrysler has struggled to gain a relevant foothold anywhere but the North American market. In this sense, GM's worldwide operations might benefit the Chrysler side. But GM is in trouble in Europe, and car sales are slowing everywhere.

Of course you will produce a smaller company, but the hope is that by some miracle, all this downsizing will produce more cash and a more efficient operation. It's a bit like a zoo deciding that since they both eat meat, it would be more efficient and cost-effective to make the crocodile and the lion share a cage. Neither will be very happy. I doubt if more people would pay to watch them just because they share a cage. Yes, the zoo will have temporarily lower costs, but eventually one or both of the animals will die, and you have nothing to show but an excuse to the tune of "it seemed a good idea at the time".

Finally there is the slew of legal issues that will arise. Chrysler still uses a slew of Daimler Benz technology which our surly German friends will be most reluctant to hand over to Chry-Mo. The dealers will be in endless squabbles about who gets what and how much.

I am sorry, I just don't get it. Who would a merger benefit and how? Under the details leaked, GM would get Chrysler and Cerberus, the current masters of Chrysler would get GMAC, the much weakened auto lender that recently dabbled in mortgages.Nice timing GMAC. Cerberus would be the big winner. They would get a quick and clean exit from the car manufacturing business, which they should never have dabbled in so heavily anyway, and will go into turning around a large financial venture. As venture capitalists, they have the expertise to try this in a credible fashion. GM on the other hand, would be landed with the problems of sorting out not only their own headaches, but Chrysler's as well. Since the current management of GM has done such a sterling job of sorting out GM's situation, why not add in another car manufacturer? Surely that will make things better? Sure. Now, about buying that Brooklyn Bridge....

This merger benefits only one party, Cerberus. If they can convince everyone else otherwise, and pulls this off, I might ask, check book in hand, if they need more investors.

Chrysler Comes a Cropper

2008-10-10T12:15:00.004-04:00

"Coming a cropper" in English slang roughly translates to "taking a hard fall". Indeed Chrysler has taken a hard fall, some of it through no fault of their own.

Take for instance, their purchase and then sale by Daimler Benz. In theory it was a marriage made in heaven. Mercedes could give Chrysler access to engineering technology and Chrysler could give Mercedes the sharp design language it was lacking. What ended up happening was a Vaudeville farce, with Mercedes building the (then) all-new ML in the US (instead of using Jeep's proven expertise in this area) and Chrysler proving itself achingly slow to adopt new engines, engineering and forward thinking. All this run by a heavily mustached German who insisted on making appearances in their advertising as a kind of humorous German grandfather figure, which is kind of creepy.Both companies suffered, although Daimler came out of the deal with a less scathed reputation.

Now that Chrysler has been bought by private equity, there was, for a while, hope that Chrysler could be turned around. With the current economic woes, however, this is increasingly less likely. Yet some of the attractions that led the current masters to close the deal are still there:
* Chrysler arguably has the leading edge in minivans, which they invented. Their products are stylish, comfortable, innovative and affordable.
* Jeep still has an attractive halo for a variety of demographics and some are actually used (by a few) for what it is best at: off-roading.
* There a couple of very decent sedans in the lineup (the 300 and the Charger)and a very nice coupe, the Challenger. The rest are frankly unattractive.

There have been serious efforts to improve quality, notably with the interiors, but the poor quality and dowdy interiors of the past will take years to be erased from the minds of the buying public. Add to this a shortage of new vehicles in the pipeline, and the future is less than rosy.

So what can be done? If I were the owners of Chrysler I would be looking hard at selling the company off piecemeal. Jeep, for example, would make a wonderful partner for Land Rover in the US. Both make products aimed at being as capable on-road as off, and both have failed to penetrate each others home markets in any significant way. In addition, the dealer network for Jeep would be a great way to get more Land Rovers out in front of consumers. Tata Motors take note.

Volkswagen, who is just beginning to build a minivan using Chrysler minivans as a base, might be interested in buying the minivan business. After all, although Chrysler invented the minivan, it was Volkswagen, with their rear engined bus of the 50's and 60's that planted the seed. This would link Volkswagen back into a market it once dominated: people-moving vans.

The Dodge name holds little cachet in the market, so their products would probably be difficult to pass on. For years they have been trying to revive the name as a muscle car legend. The new Challenger is a credible step towards this goal. The problem is, between the high gas prices (temporarily low due to current hardships), poor economy and frankly The Grim Reaper, who is slowly robbing the client base of people who remember the muscle car era, this strategy may be irrelevant. Toyota, which has lacked a serious sports car in the US for some time, might be interested, if they could figure out a way to sell the vehicles with Toyota street cred., i.e. quality.

Ford, who has lacked a credible large sedan for some time may want to integrate Chrysler's outstanding rear wheel sedan platform into their lineup, but they do have a certain lack of, um, moolah.

All this would hardly make a dent in the price that was paid for Chrysler. But at some point, someone will ask the fateful question: Do we cut our losses now, or wait and take our chances? I know what I would do.

Why Ford may Make It

2008-10-09T09:27:00.000-04:00

In all this turmoil we are currently suffering, and government backed loans not withstanding, there are real concerns about the future of the big three. The private equity company that purchased Chrysler is fast finding out that running a car company is pretty complex and difficult. They also should have done their homework regarding the product pipeline and the consumer perception of Chrysler vehicles. It is fixable, but not any time in the next 12 months.(Chrysler will be the subject of a future blog).

Ford, however, is different. They are currently doing well outside of the US, which indicates that they have some pretty good, market-specific vehicles in other countries. Ford is planning on bringing some of those vehicles here in short order. The 2010 Ford Focus is a fine car, and the Focus line in Europe has been selling briskly. The other vehicle to appear soon is the Turkish-made Ford Transit van.

Ford is making itself a very interesting niche in the market. Young people will love the 2010 Focus (some of the features on this vehicle - such as Sync, a Ford/Microsoft developed mobile entertainment and communications software - are already available on the current US Focus, and are a hit with young consumers). It will not be seen as "so 20Th century" to be seen in a Ford product. With the weakness of the US Dollar, imported vehicles from Europe are still cool but increasingly out of reach for this demographic. Chalk one up for Ford.

The Ford Transit is a vehicle whose time has come. Small businesses will simply have to wean themselves off full size vans that get 10-15MPG in the city (the same goes for pick-up trucks by the way). The vast majority of small businesses will be able to get by with a stylish, small and fuel efficient van. They will have to - current decreases in oil prices are still making for comparatively expensive gas, and the business owners will soon discover the advantages of smaller engines in a recessionary economy.

The basic question facing the big three is do they have enough cash to last until their new vehicles are available? Ford has a good chance. They have some profitable operations overseas which makes them, in theory at least, a good candidate for outside investment. Ford however, is doing something very clever. They are getting out of the commodity business. By introducing niche, different vehicles popular elsewhere, they are going after a clientele of savvy consumers who want something different that is cool, and in the case of the Transit will save them substantial amounts of increasingly scarce money. They are, in short, betting that there are educated, savvy and cool consumers out there who will buy a product that is good value for money, cool and has a certain flair. If you want a vehicle that answers that description stop by a Ford dealership - next year.

Has General Motors Finally Hit Paydirt?

2008-10-08T16:16:00.001-04:00

GM has long been casting about for a formula that will get people to actually think about wanting to buy their cars, instead of buying them because they are being discounted. It may be that they have finally hit paydirt.
Witness the new Malibu and the Traverse. Fairly attractive design on the outside, right? Not quite "same as next" and sufficiently different to pique your interest in the traffic that is America. The interiors, where the buyer/driver will spend most of his/her time have made quantum leaps over vehciles produced until recently. Tasteful chrome accents and materials that indicate more than a few moments went into their selection make for a good basis on which to at least visit a showroom if you are in the mood for a new car.
The question is, of course, will it be enough? Having finally figured out the road to the heart of consumers, there are still long journeys to be made on the road to perfection. GM is running low on cash (although the automotive industry guaranteed line of credit that Congress approved will help somewhat) and time will be needed to change consumer perceptions. GM does'nt have much of that either.
For this blogger, GM will need to reduce the number of models it offers - fast - and concentrate on making the current models American favorites by (gasp!) talking to consumers and grasping the fact that buyers want nice interiors and exterior styling that at least say "I have taste". Unless I see that in the existing lineup (excluding the Malibu and the Traverse) I would say look elsewhere if you want a car that will come from a company that has a future as long as the car warranty.