Apres GM, Le Deluge.

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

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.

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!

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

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?

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.

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.