By on December 4, 2006

hellsbells001.jpgWhen the new[ish] Chevrolet Tahoe SUV was released, reporters asked GM Car Czar Bob Lutz whether rising gas prices would discourage SUV buyers from jumping into The General’s gas-guzzling truck. ”Rich people don’t care about gas prices,” Lutz remarked. Yes well, it’s time for Maximum Bob to take a class in Remedial Marketing. It’s a five minute course that starts with the Bell Curve. 

Place potential car buyers along an axis showing unit price and you’ll get a big Bell Curve shaped hump in the middle. If you want to be the world’s largest manufacturer of automobiles– defined as the company that sells the largest number of cars per year– it really doesn’t matter what rich people think. There’s no way they can generate enough profits to make your nut. You have to play the law of averages.

The Big Three fell off the curve at the end of the ’80’s when they began chasing [imagined] high-margin niches filled with wealthy people. The more high-priced, high margin trucks and SUV’s GM, Ford and Chrysler sold, the less they cared about the millions of financially challenged customers who helped create their companies.

In this they were not alone. Even VW (Peoples’ Wagon!) neglected smaller cars in favor of big and expensive platforms. VW quality nosedived as the smart eggs within their organization set about building Phaetons, Touaregs and a limited edition ultracar, the Bugatti Veyron. Today they’re all fighting to claw their way back to the mean– before it’s too late.

Probably suspecting a trick (you’re ceding us the mass market?), Toyota and Honda took a good close look at the Car Customer Bell Curve and arrived at a very different conclusion. They asked: ”What if we offer affordable cars to the people right smack in the middle of the graph? A car range with just a touch better features, quality and service than similar servings from the domestics?” Rocket science!

We’re looking at two strategies here. Toyota: build affordable transportation for the masses at a quality level that slightly exceeds expectations relative to price. GM et al: build oversized, under-engineered and fuel inefficient cars for people who don’t care about money while palming off sub-standard cars on mainstream customers. Is it any wonder that the truck-crazed domestic manufacturers lost mission critical market share to the transplants? Lutz and his cohorts failed to recognize that the vast majority of potential customers were simply looking for affordable quality transportation.

Having taken their eyes off the chart, The Big Two Point Five are now paying the price. While they sent their best resources into an imagined land of promised gold, the transplants stuck to looking squarely at the needs of mainstream of car buyers. This focus also helped them gaze into the future. They asked themselves a question Detroit didn’t even consider: ”How do we keep our cars affordable as fuel costs and environmental pressures increase?”

Here’s Bob Lutz on the same topic back in 2003: ”It just doesn’t make environmental or economic sense to try to put an expensive dual-power train system into less expensive cars which already get good mileage.” Clearly, Maximum Bob’s take on good mileage is different from a Prius owner’s.  Lutz belief that gas would go back under $2 a gallon certainly didn’t help his ability to gauge GM’s ”new” target market. And then GM was forced to cough up gas rebates for Lutz’ hulks, covering the spread in gas prices over $1.99 to the tune of $1000. These days, Bob’s a hybrid convert– who’s short on product.

To get back into the real game, the domestics will have to party back in The Land of Averages– provided they want to remain on the list of the world’s top five automobile manufacturers (the last time I looked it was still a priority). In this effort, there are no shortcuts.

In Ford’s case, success will require an immediate  return to the reason behind Henry’s decision to create a Model-T assembly line: to build a ”reasonably priced, reliable and efficient car” that’s ”easy to operate, maintain and handle.” Hey; that sounds a lot like how people describe Toyota’s products today.

Mounting a convincing return to the essential mass market is going to be a lot harder than simply inventing imagined premium niches (I’m looking at you Chevrolet SSR). The domestics will have to make their cars both relevant and affordable in an age where everyone, including the supposedly oblivious rich, have woken up to the true cost of energy. An age where the competition is creative, well-funded and focused. But GM et al can only make a start if they stop applying yesterday’s problems to tomorrow’s solutions.

So, the lesson for today: you can’t please most of the people most of the time if you don’t even try.

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171 Comments on “The Disconnect...”


  • avatar
    hularocker

    Rich people do care about image. The don’t buy SUV’s called Tahoe and Aspen, they buy SUV’s designated by letters and numbers and take them to places called Tahoe and Aspen.
    NGC

  • avatar
    TexasAg03

    Rich people do care about image. The don’t buy SUV’s called Tahoe and Aspen, they buy SUV’s designated by letters and numbers and take them to places called Tahoe and Aspen.
    NGC

    I agree. I don’t think the Tahoe is really a “rich people’s” vehicle. Consider the incentives. Yes, a loaded Tahoe stickers in the mid to high $40k range, but I have seen ads in the D/FW area for $10 – 15k off MSRP on ALL Tahoes and Suburbans. Now, you can get a $45,000 Tahoe for $30,000; not so far out of range now.

    I own a loaded Suburban that listed for $48k, but I paid more like $35k for it…

  • avatar
    hularocker

    2 years ago I replaced our leased minivan with a Pacifica. I was impressed by it’s looks, ride,handling, nav screen set-up,sound system, and it was the first mid-ute with 3 rows.I also liked the fact that it had MB dna and it felt like it. The final selling point was the 12 grand off the 45 grand sticker they gave me. Our business has grown and we are looking to move up to a new vehicle and although the Pacifica is a great piece ….for the money, I am looking at the new X5(now with 3 rows), GL450, or the Q7.

  • avatar
    starlightmica

    Not all the rich look for image – a survey of millionaires for the book “The Millionaire Next Door” (10 years ago) showed that most were into … domestic-brand sedans.

    If you look at certain parking lots, such as doctors, lawyers, and realtors, yes, image counts, but not for everyone. Gotta like the contrast between Corollas and Quattroportes parked next to each other.

  • avatar
    hularocker

    I think the rich people we’re talking about are the 6 figure-aires.There are far more of these people and they are the ones who after a week in the trenches want to tell people I make more money than you. If you know someone is mega rich the car the drive does’nt tell you that. If they drive a Prius(ie. Larry David) they are eccentric or guilt ridden enviromentalists.

  • avatar
    noley

    GM may think they sell their SUVs to rich people, but rich is relative term.
    I live in a pretty affluent town and if there’s a new and expensive vehicle on the market it shows up here fast.

    The “upper middle class” folks who want SUVs tend to drive Tahoes/Expeditions/Suburbans, etc. A lot of those in driveways here. Some of the more “class conscious” go for CPO X5s and M-class MBs

    The “rich people” drive AMG or high-end M-class Benzs, X5s, Cayennes, full optioned H-2s, Lexus and Land Rovers. After all, why drive something the “little people” have?

    The difference is the people in the domestics whine about it costing $100 to fill the gas tank. The rich people don’t care. So GM is right about that. But the people who don’t car aren’t buying their trucks.

  • avatar
    ash78

    Let’s make a clear distinction here:

    Per Lutz’s comment, GM apparently wants high earners, not the “wealthy”; the distinction being that people who have consistently accumulated wealth will look at the abysmal depreciation (overall cost of ownership) on most GMs and turn toward that same mean/median that everyone else goes toward. Nice reference of “Millionaire Next Door” above. Not pistonheads, mind you, we’re talking about the average joe buyer who are particularly financially savvy.

    The Nouveau Riche will always have a new BMW lease to turn to, while the bigwigs maintain low-key stature in their 10-year-old ES300s.

  • avatar
    jazbo123

    ”Rich people don’t care about gas prices”

    Is that a quote? If so, perhaps Max Bob should be steering Ferretti Yachts rather than GM.

  • avatar
    jerry weber

    When Lutz said rich people don’t care about gas prices he begged the question asked. He knows that of the rich, he also knows the middle class does care about gas prices and it is the reason for the big three train wreck right now. He doesn’t dare go there (ie the gas price in the future topic). Remember his new trucks are only marginally better then his old ones and only compared to ford and dodge, not toyota and honda. A return to $3.00 gas will destroy the silverado, tahoe suburban game precisely because they have to sell most of them to the middle class. Thus, Bob Lutz knows to change the subject on fuel costs (which are rising again by the way) and talk of the rich not caring what they pay.

  • avatar
    bfg9k

    Bob Lutz flies an MD-500 helicopter for commuting, which a back-of-the-envelope calculation indicates gets 3.75 mpg (~225 mile range, 60 gal tank). Do you think HE gives a crap about gas prices?

    Does Lutz strike anyone else as a vastly overrated car executive?

  • avatar
    GS650G

    Success is defined by taking an ordinary task and doing it extraordinarily well. Toyota has built mudane cars that get people to work and home again reliably, hold their value no matter what, and are unoffensive in the least.

    Honda, same thing. Hyundai gets it and is fast becoming another car you can count on. Nissan has gotten better the last few years and is also in the reasonable category.

    Ford killed off some of their best models while ignoring market realities. Ironically the most popular car among millionaires seems to be the F-150. Think siding contractors and painters salting their cash away under the mattress and you’ll see why

  • avatar
    1984

    You know what is more annoying then SUVs?

    More nerdy eco-terrorist articles on automotive enthusiast websites.

    People buy expensive truck that use lot’s of gas. If there was no demand there would be no trucks… get over it…Or move to a communist country where they would be more than pleased to govern your consumer choices for the “greater good”.

  • avatar
    Sid Vicious

    As the old saying goes – the rich don’t get to be rich by being stupid with their money.

    In my neck of the woods, the people buying Lutz’ vehicles are the ones that can barely make the payment and fill it up at $2.15/gal. Next reality check will be here around Memorial Day.

    In any event, the people their H2’s can continue to look down their noses at me in my 95 Mazda. I’m laughing today and will be laughing next summer as well.

  • avatar
    Hutton

    “1984: You know what is more annoying then SUVs?

    More nerdy eco-terrorist articles on automotive enthusiast websites.”

    I don’t think this article mentioned the environment even once. This article is about how GM (and others) basically gave up a huge chunk of the market by placing all of their bets on trucks. When the winds of change blow, gas prices go up, consumers re-evaluate their needs or wants, and the General is up a creek without a paddle. Some people need trucks. So GM should build some trucks for some people. The rest of the people, the ones who bought into the SUV hype/fad/image whatever you want to call it… they need something to buy once they get over their Tonka phase. GM failed to recognize that SUV’s popularity was overinflated due to it being a fad. They thought they could ride this gravy train all the way into the black. It’s their job to know better.

    If they’ve learned anything from all of this, they’ll already be working on plan B for when the “Crossover” bubble bursts. But something tells me, they probably aren’t, and a savvier company will be there waiting with just the right product for the CUV refugees. History has a tendency of repeating.

  • avatar
    1984

    Cliff-Notes:

    Big trucks are a fad and demand is slowing because of the fuel cost. The domestic manufactures failed realize the decline in the SUV market and the he foreign manufacturers have gained ground because of the oversight of America.

    Throw in some overtones of financial, environmental and social irresponsibility and voila… Can this subject be beaten into the dirt further?

  • avatar
    Alex Rashev

    Trouble for GM is, it’s very hard to offer great value vechicles when you have no cash to spare for a quality redesign, and when you have too many administration blocks to building a pleasant, well-equipped car for not so much money.

    Back in the 70’s, vodka in USSR came with lids made of thick foil, like yogurts. To facilitate opening, the lids had a little “tongue” on them, which you could pull on (once again, like yogurts). Here’s what some smartass did: they started making lids with no “tongue”. Their reasoning? It saves the country several tonnes of high-quality aluminum each year. And it turns opening into a 30 second (as opposed to 3) affair. I bet the perpetrator got a medal or some honorary paper for it, and a bonus, too.

    Why did it happen? Because the entire administrative chain was drinking higher-quality vodka out of bottles that had corks instead of lids. And oh yeah, the administrative chain was so big that nobody was responsible for the final product, only for minor details like… Material savings. Bean-counting at its best.

    GM has the same situtaion – their administration just doesn’t care. Everyone is for himself, and some mid-level manager would rather show some cost-cutting in his department and go home with a christmas bonus – as opposed to simply making a desireable product.

    With its corporate culture, GM just can’t start making mid-level cars overnight. But high-profit trucks and niche cars it can, because that’s what gives executives the best bragging rights.

  • avatar

    Many people in the middle of the curve cannot afford to buy new cars, or at least choose not to buy them. Who do you think buys used cars? I think the ratio between used and new sales is about 3:1.

    I also don’t think it’s safe to make generalizations like Lutz does. There are people at every income level that pay little attention to prices, and some at every level that pay a lot of attention.

    My mother, would could afford to drive virtually anything, gets off by figuring out where she can buy the cheapest gas in town. My wife, on the other hand, just pulls into whichever station is most convenient. I think this behavior is more a factor of personality than income level.

  • avatar
    Johnson

    Very nice graph their Stein, I like it … it’s quite appropriate for this article.

    Does Lutz strike anyone else as a vastly overrated car executive?

    Emphasis on vastly.

    You’re not the only one. For a long time now, I have been adamant that Lutz is nothing but a putz. Kudos to Stein for writing this article, let’s hope there are more like this.

    1984, it would be nice if you could stay on topic. And if you agree with the basic premise of the article, what are you even arguing about? Arguing for the sake of arguing?

    This is not just about SUVs, but about the flawed corporate culture of domestic makers. This article is also about Lutz and the flawed perspective he has on the car market. There have been way too many articles and stories hyping Lutz as a “legendary car czar”. This article hits at reality, which is that Lutz is way too overhyped.

  • avatar
    jerseydevil

    gm is spending money on r and d for a new 500 hp camaro, to compete with fords 500 hp mustang. chrysler counters with a 500 hp 300. all three have humongous trucks with humongous engines in them all over the place.

    in the mean time, i understand that toyota is spending r and d on a hybrid diesel, with a goal of 100 mpg.

    that’s it in a nurshell.

    good bye big 2.5.

  • avatar
    Johnson

    Toyota this year is spending more on R & D than any other automaker. They just announced that they will start using next-gen ultra-clean diesels in 2008, already far along in development, independent of the recent agreement with Isuzu. Good chance we will see these diesels on US shores.

    So we have from Toyota next-gen hybrids, a diesel offensive, and a complete overhaul of their engine and transmission lineup by 2010.

    In a nutshell, when you’re mounting losses in the billions, it’s hard to be increasing spending on R & D and be competitive, as your biggest competitor continues to make record profits, and continues increasing R & D spending at an aggressive pace.

  • avatar
    jthorner

    Can anyone imagine a huckster like Bob Lutz getting a job with Toyota or Honda?

    Nah, I didn’t think so!

    This is the guy who personally pushed the Australian “GTO” into the US market. He is all testosterone all the time.

  • avatar
    NoneMoreBlack

    […]an age where everyone, including the supposedly oblivious rich, have woken up to the true cost of energy.

    Careful now. There’s a big difference between anybody recognizing a “true cost” and a little fire and brimstone mentality resulting from a couple years of high gas prices. Recognizing true costs would have us in a (more) European style car market voluntarily, rather than through incentive structures (gas taxes).

    I think this behavior is more a factor of personality than income level.

    If you make this hypothetical normally-distributed graph shown in the review with respect not simply to income but to money budgeted for purchasing a car, it will reflect that. The middle of the graph will represent persons willing to spend whatever the mean value of a car purchased is, used or new, high income or low income. As a rough approximation, I think it holds water for the purposes of this article.

  • avatar
    1984

    Lutz is not your problem. GM abandoning the things that do make you money in the financial situation their in now is suicide. Perhaps in the future but not now… You regard this guy Lutz as if he is some magic wizard.

    Farago has been saying DW after DW the GM should focus on its greatest advantage instead of going after the small car market balls out.

    So what is it going to be today?

    What is this artice about?… Hind sight?… How hard is that?

  • avatar
    Hoosier Red

    Personally, I think this is a post hoc analysis of a situation that looks brilliant because you already know how everything has played out. If Toyota and Honda could have been successful in the 90’s building highly profitable SUV’s instead of high quality sedans, would they have altered their strategy? Don’t get me wrong…..I think the domestics have a lot to answer for. However, I’d like to see the evidence that Toyota and Honda made a conscious decision to stay out of the SUV craze because they were such visionaries. What I recall is continued attempts to crack that market but repeated attempts falling short. I’m quite sure that Toyota and Honda are more than capable of getting there because they both have very successful corporate cultures. But they aren’t planning to build more Prius’s down there at that new plant in Texas!

  • avatar

    I’ve seen fuel prices around here take a big jump. The week before last it was under $2.50 a gallon. Last night it jumped to $2.99. Obviously the boys in Detroit are out of sync with the boys in Houston.

    –chuck

  • avatar
    1984

    Hoosier Red,

    Thanks for saving me the effort in typing the same thing.

  • avatar
    adrift

    > You know what is more annoying then SUVs?

    >More nerdy eco-terrorist articles on automotive enthusiast >websites.

    And more annoying still are the “enlightened individuals” that believe that ozone alert days, global warming, and that constant brown cloud over our cities are someone else’s problems, not theirs.

    If only people were directly responsible for the ramifications of their actions. What a world we might have.

  • avatar
    Dave M.

    ash78 – you hit the nail on the head!

    Old or established money buys something reliable for the long-term…for all the ML, GL, X5 bling I see in the Hamptons or up in MA, I see just as many mid-90’s E series wagons, or Volvos, or Land Cruisers. True money doesn’t show it – new or temporary money does.

    One of our friends in Greenwich bought a close-out Isuzu Trooper back in ’02…the mid-level LS model, $8000 off. His priorities were reliability, drivability, and comfort. It replaced his ’85 Volvo wagon. He could have bought just about anything (and probably Isuzu America the way its going!). His biggest concern was making sure it had heated seats, no leather (too showy), and was low-key….

  • avatar
    Jim H

    For many Americans, their car is their social status. It’s one thing that signifies they’ve “made it”. Often this subsides when we purchase a house. That becomes a constant reminder to ourselves that we are doing well. Other things often fill this need for validation: shopping, cloths, shoes, food, etc. Marketing keys in on these basic human traits.

    The job of a business is to make money. They do that through products…products we want to buy and products we do buy (even if we don’t want to?). The reality is that many people don’t want to buy an american car/suv/truck. It’s not a consumers job to tell those companies why, not buy something they don’t want to buy. It’s those companies job to actually figure it out. Clearly, the American car companies are failing…

    …it’s not that we can’t afford the gas to put in our SUVs…it’s that we don’t want to. Folks will wait in line to save 3 cents a gallon…which equates to 60 cents for a 20 gallon fill up…but they’ll pop in 7-11 and drink a coke that cost $1.29 when they could have grabbed one from their house for $.25.

    Come on big 2.5…you have to make us WANT your products.

  • avatar
    jerseydevil

    fuel prices are up because the elections are over.

  • avatar
    Lemmy-powered

    “VW … set about building Phaetons, Touaregs and a limited edition ultracar, the Bugatti Veyron.”

    And even though this was a mistake, chances are good that VW learned something useful in engineering these cars, something that can trickle down to next-gen Golfs and Passats.

    I don’t think SUVs have taught the big 3 anything new, except for how to build a better dinosaur. Sorta like NASCAR, come to think of it.

  • avatar
    Hutton

    Folks will wait in line to save 3 cents a gallon…which equates to 60 cents for a 20 gallon fill up…but they’ll pop in 7-11 and drink a coke that cost $1.29 when they could have grabbed one from their house for $.25.

    Yeah, I’ve had more than a few people comment on how insane I must be to buy a car that requires premium (93) fuel (which ends up costing me roughly an extra $2.00 per week vs. 87). Not a big deal. But gas prices are a hot-button issue that people rarely put into perspective. Fuel is not the biggest problem with SUVs… when I see one of these giants making its way about the winding country roads that comprise my commute, I don’t think, “man, that guy is burning lots of fuel”… I think “man, that guy isn’t having any fun.” or possibly “for the love of god, pull over and let me pass”

    But that’s just me.

  • avatar
    aa2

    A popular opinion among American intellectual ‘elite’ is that the middle class will disappear. Thus the products you want to sell are to the rich and newly rich. Like giant SUV’s with mortgage payment like fuel costs.

    However there are serious flaws in moving to that model as a large company catering to the middle class. Although very profitable per unit sold, the rich market couldnt’ be big enough to support all of GM’s legacy costs.

    And some companies like GM seem to want to speed the process up… by hammering their blue and white collar workers and holding them down. That might work in a closed market like a utility.. but in the auto business your competition simply offers more and poaches your best talent. And deploys a more motivated work force.

  • avatar
    nweaver

    One thing to remember: Toyota makes a LOT of money on Big @#)$*@#( SUVs too…

    However, they kept their eye on the ball, not letting the cash cow be

    a: the only thing they make money on

    b: Immune from refinement. Remember, toyota created the Girly Rich Chick SoftRoader with the Lexus RX300.

  • avatar
    webebob

    The advertising works.

    My wife wanted me to buy an Escalade. Their low ranking in last months CR didn’t discourage her. My sharing of the fact that I could not slide my foot sideways out of the second row passengers seat, without hitting the doorpost, did not phase her. Cool people are portrayed on TV as cruising in Escalades and that’s that.

    I’ve disconnected the cable and gone back to antenna; fewer channels, fewer advertisements, grin.

  • avatar
    Tommy Jefferson

    > “Toyota: build affordable transportation for the masses at a quality level that slightly exceeds expectations relative to price.

    GM et al: build oversized, under-engineered and fuel inefficient cars for people who don’t care about money while palming off sub-standard cars on mainstream customers. ”

    That is the best summation of the Big 2.5’s problems I have ever seen.

  • avatar
    CliffG

    Domestic 2.5 have lost the middle class. My wife’s cousin is a good old boy from the heart of agricultural land (still lives on a farm), 12 years ago I turned him onto Honda’s, his latest purchase (yesterday) was for a commuter car, he never even thought about visiting a domestic dealership. He bought a Yaris (he has 90 mile roundtrip). The point is simple, if GM/F, etc. can’t keep that kind of guy as a customer, a guy who has owned Ford trucks for 30 years, who are they going to get?

    *Oh, the Toyota dealership sold 125 new cars last month, the Dodge dealer down the street? 27.

  • avatar
    TheChaz

    I don’t know if it was such a mistake for VW to build the Veyron. Your argument is stronger regarding the Phaeton and Touareg. The Veyron’s total development costs plus the amount they lose on each of the few hundered that will be built is less than Toyota, Ferrari or Renault spend on two seasons in F1. Automakers invest in performance halos for lots of reasons, the least of which (usually) is the financial case.

  • avatar
    cretinx

    You forgot to mention the most important part to us enthusiasts – FUN TO DRIVE!

    I find ubiquitously that Hondas and Mazdas are much more fun to drive than their price point would suggest, while maintaining reliability, economy, and affordability.

  • avatar
    Eric Miller

    gm is spending money on r and d for a new 500 hp camaro, to compete with fords 500 hp mustang. chrysler counters with a 500 hp 300. all three have humongous trucks with humongous engines in them all over the place.

    in the mean time, i understand that toyota is spending r and d on a hybrid diesel, with a goal of 100 mpg.

    Toyota also spend quite a bit of R&D developing the new 381hp 5.7L i-Force V8 that powers the new 2008 Tundra, and a TRD supercharger for that engine that puts it near 500hp. They also developed a 425hp 5.0L for the Lexus IS and is close to unveiling a Skyline-fighter that should be good for near 500hp.

    GM is also developing several hybrids (incl diesel) and is ahead of Toyota in hydrogen technologies.

    Sounds pretty equal to me

  • avatar

    It may sound equal, but it isn’t.

  • avatar
    taxman100

    Ho-hum – another article in a long list of how terrible American corporations are at manufacturing vehicles. I think GM is doing the right things – the new Impala, while not all-American, will be a strong contender for my purchase if the quality is as high as my Grand Marquis have been.

    I will agree that Ford in particular has lost their base – the vast middle class, but that is because the company has been run by big money liberals the last decade who pined for being able to sell cars to the “beautiful” people. Hence the total neglect of the types of cars that appeal to their core customer, while they wasted billions on Jaguar, Aston Martin, Volvo, etc. and their lame marketing attempts at “diverse” audiences, to the point of offending their core customers.

    Finally, they try to take foreign platforms and half-heartedly redo them for the U.S.

    The only automobile that Ford has that I like is the Town Car/Grand Marquis/Crown Vic. They have never been able to match that vehicle in 30 years of trying. If they would have spent the money used for the Five Hundred and instead used it to keep that platform updated, they would be far better off.

    Once they kill it, I’m not going back to Ford. Apparently from their rapidly shrinking market share, I’m not alone.

    This is coming from a guy who grew up in a Ford family -

  • avatar
    Eric Miller

    It may sound equal, but it isn’t.

    How so? Both giants develop products from little diesels to 500hp gas guzzlers.

    Please help me understand that point of view.

  • avatar
    86er

    Amen to the taxman and the Panthers :)

  • avatar
    adrift

    taxman100 said: “that is because the company has been run by big money liberals the last decade who pined for being able to sell cars to the “beautiful” people.”

    Brilliant deductive reasoning. Those darn pesky tree-hugging liberal 10-MPG SUV building automotive executives. It is all their fault. lol

  • avatar
    finger

    In any event, the people their H2’s can continue to look down their noses at me in my 95 Mazda.

    Don’t worry. I’m sure they are.

  • avatar
    finger

    “It may sound equal, but it isn’t.”

    Why? Because we must bow our heads to the almighty Toyota?

  • avatar
    starlightmica

    Why? Because we must bow our heads to the almighty Toyota?

    Nope, not at all. Those big profits and bigger-than-thou R&D budget just might amount to something. Or not.

    Of course, Toyota just might lose focus, go on a wild spending spree, and buy satellite & electronic conglomerates, rental car companies, and other distractions.

  • avatar
    Eric Miller

    Of course, Toyota just might lose focus, go on a wild spending spree, and buy satellite & electronic conglomerates, rental car companies, and other distractions.

    From Toyota’s website:
    http://www.toyota.co.jp/en/index_non_automotive.html

    At present, Toyota is active in a number of areas in addition to its core business of automobile manufacturing-Areas including housing (pre-fab structures), financial services, communications, GAZOO (e-commerce), marine vehicles (boats), biotechnology and afforestation (sweetpotato farms), to name a few.

  • avatar
    oboylepr

    Eric,

    For one thing, hydrogen fuelled cars need massive infrastructure which does not yet exist. Gas/Hybrids or diesel/Hybrids don’t, that alone puts any company into hybrids big time (not just Toyota) ahead in this game.

    rgds

  • avatar
    pauln

    “VW..set about building Phaetons, Touregs…Veyron…”

    “…even though this was a mistake, chances are good that VW learned something…that can trickle down to the next gen Golfs…”

    Yes, VW learned how to make a Golf weigh 3100 lbs (Corolla:2500lbs), and get 24 mpg (Corolla 33mpg). Excellent trickle down, IMO.

  • avatar
    Johnson

    Toyota also spend quite a bit of R&D developing the new 381hp 5.7L i-Force V8 that powers the new 2008 Tundra, and a TRD supercharger for that engine that puts it near 500hp. They also developed a 425hp 5.0L for the Lexus IS and is close to unveiling a Skyline-fighter that should be good for near 500hp.

    GM is also developing several hybrids (incl diesel) and is ahead of Toyota in hydrogen technologies.

    Sounds pretty equal to me

    Oh, you mean the *Ultra Low Emissions Vehicle* rated 5.7L V8, that one right? Hmmm, so how many large displacement ULEV V8 engines does GM have?

    Oh, and the TRD Supercharger. That one is supposed to make well over 500HP. Number I heard was 580HP. And that supercharger is so important to mention, because after all, it’s going to make up a significant percentage of Toyota’s sales isn’t it.

    And the 425HP 5.0L V8 is anything but a gas guzzler. You seem competent enough, so I assume you know that the 4.6L 380HP Lexus V8 (from which the 5.0L is derived) achieves class-leading fuel economy in a car the weighs over 4000lbs. Considering the weight of an LS460, and the performance of this engine, the fuel economy figures embarass less powerful and lighter cars such as the G35. In fact, the fuel economy and power is highly comparable to a C6 Corvette. But there is a small little difference in that the Corvette weighs about 1000lbs less than an LS460.

    GM is not (yet) developing diesel hybrids. Or if they are, there have been no announcements, rumours … nothing. GM’s hybrid system doesn’t debut until MY 2008. Do you believe that in two years after that GM will already be selling diesel hybrids too? And they are not ahead of Toyota in hydrogen. Toyota for years has had hybrid hydrogen fuel cell busses in public use for years now in Japan. What does GM have? Diesel hybrid busses? Toyota had those back in the mid 90s in Japan.

    Is GM also working on a complete overhaul of their engine and transmission lineups like Toyota?

    How many cars does GM make that get over 40mpg? Toyota has lots of them, several in fact just in the North American market. Many more in European and Asian markets.

    Toyota this year is spending around 8 Billion in R & D. GM is spending somewhere between 6 – 7 Billion. Keep in mind Toyota sells less models overall than GM, has less brands, and much less overhead to deal with. And Toyota doesn’t tend to waste money, like spending over a billion dollars on the development of a Buick Lucerne, only to have a mediocre average car.

    Oh, and Toyota is also widely considered an industry leader in robotics. Maybe, just maybe, that comes in handy when you’re an automaker and are building a lot of new, state-of-the-art plants.

  • avatar
    ash78

    Honda has a jet. Suck it, GM!

  • avatar
    pauln

    I don’t agree with the basic premise of this article, and here’s why: GM (and all the carmakers to considerable extent) didn’t chase the “rich”, they know the demographics and how limited that market is. Vehicles are cheaper today than 15 or 20 years ago, both in actual cost and even more so, when they’re financed. I paid $16K for my Cherokee in ’84 and $22K for my Grand Caravan in ’92; adjusting for inflation, that comes to $30K in today,s money for either one. I can buy a Jeep Liberty or Grand Caravan today for $20K( or less).

    Also, at today’s interest rates, you can buy a $35K car (5 yrs@6%) for the same monthly payment (inflation adjusted) as a $19K car (3yrs@11%)in 1990 which was a typical car loan 15 years ago. Leases only exagerate this effect further.

    The middle class can afford $35K Tahoes at todays low interest rates. GM (et all) didn’t chase the rich, they just did the easy thing and followed the money (American’s fad love of big SUV’s). What’s killing them now is that they failed to keep improving their cars. If Ford had really committed to keeping the Taurus fully competitive (as it was in 1985-1988) and assuring reliability, Ford could still be selling 500K of Tauruses today. The fact that they walked away from that is why they deserve to fail

  • avatar
    finger

    A new Gen IV small-block V-8 family – the newest chapter in the small-block’s 50-year history – offers more power than comparable powertrains in previous models. Fuel-saving Active Fuel Management™ displacement on demand technology also enables better fuel economy. When combined with other vehicle-wide features, including improved aerodynamics, the small-block V-8 helps give the Tahoe the segment’s best fuel economy. Two-wheel drive models equipped with the 5.3L engine are EPA-rated at 16 mpg in the city and 22 on the highway; 4WD models are rated 15 mpg in the city and 21 on the highway. That’s better fuel economy than any other full-size SUV.

  • avatar
    Voice of Sweden

    Lutz: ”Rich people don’t care about gas prices,”

    Here’s Bob Lutz on the same topic back in 2003: ”It just doesn’t make environmental or economic sense to try to put an expensive dual-power train system into less expensive cars which already get good mileage.”

    Well if you look at the costs of fuel/gas as a proportion of the total cost of ownership it’s still rather cheap. What Lutz did miss was the image part of owning a hybrid such as the Prius. It’s more expensive, it’s uses a lot of batteries which isn’t directly friendly to the enviroment etc.. It was Toyota who became a champion in selling the hybrid as “good and cool”. People doesn’t care or doesn’t know if that really is the fact.

    Lets say you buy a car and drive it 250 000 km. What’s the total cost? We’ll assume the cars i worth nothing at the end. We’ll use the expensive Swedish gasoline prices to give the Prius an edge, and compare it to a Corolla, which is about the same size as the Prius.

    Gasoline 1 EUR / liter

    ___Prius___
    Price 25 000 EUR
    Consumption 0.43 liter / 10 km
    Total fuel cost: 1*0.43*25000= 10 750 EUR
    Total car cost = 25 000 + 10 750 = 35 750 EUR

    ___Corolla____
    Price 15 200 EUR
    Consumption 0.67 liter / 10 km
    Total fuel cost: 1*0.67*25000= 16 750 EUR
    Total car cost = 15 200 + 16 750 = 31 950 EUR

    ___Summary____
    Lutz is correct, hybrid technology doesn’t save money – it’s uneconomical. You save a cool 4 000 EUR choosing the Corolla. But the Prius is cool – or marketing or trends have made it cool.

    In the Lexus the hybrid technology improves performance, no doubt. But a Lexus will never be cheap. Add to that enviromental factors. All the metal in those batteries. And soon somebody will look more closely at the electromagnetic fields generated by the generators, motors and batteries – not healthy for anybody. Remember when Volvo moved the S80 battery from trunk to engine bay because of public preassure because of this…

    So hybrids will be popular where Image and PR (=Hollywood) are important or huge tax cuts given out to hybrids can make it a good deal (= Sweden in general, Stockholm during road-tolls especially).

  • avatar
    starlightmica

    Honda has a jet. Suck it, GM!

    Does that mean they can advertise the Ridgeline being born from a jet?

  • avatar

    @Hoosier Red & 1984

    Know what, Hoosier? I think that Honda and Toyota simply stayed in the middle of the market, and just slowly ratcheted up the quality of their cars, as a natural element in the development of their platforms.
    Meanwhile, the majors ignored the cars they had in this segment, letting them slip behind (several cycles in some instances).
    We end up with Toyota and Honda suddenly raking in the dough as the difference between their product and that of the majors is simply impossible to ignore any longer.

    That explanation is just as sufficient as any attempt to invest the transplants with psychic powers.
    (As I have been writing in several columns now, Toyota is a master at playing the Law of Averages to their advantage. It takes skill to go into a casino and come out with your pockets bulging every single time.)

  • avatar

    @Voice of Sweden.

    Yes – the difference is what we are willing to pay for the premium “pleasure” of being an enlightened (depending upon your POV) Prius owner. There’s a good conscience factor at play here, as well, as you cover a longer distance for the same amount of fuel – people will make such arbitrary calculations when they see it in their interest.

    Not that many years prior to the Prius trend, we had people assigning premium value to cars designed to climb hills and ford rivers – cars that would see the hard work of going to the supermarket and back

  • avatar
    finger

    Isn’t what you want to drive a personal choice? For now anyway.

  • avatar

    @finger

    Isn’t what you want to drive a personal choice? For now anyway.

    People can drive whatever they want – huge, tricked out trucks with logging monstertruck wheels for all I care. Just not very likely that the company relying on a profit for making that kind of cars will survive.
    And that’s the point of this editorial. The majors deluded themselves into thinking that the margins delivered by the oblivious rich would make up for the lower number of units sold.
    Didn’t happen.

  • avatar
    Johnson

    As "obvious" and tiring as this article may be for some of you, even on a site like this, there are an equal number of people who just don't get it. This shows a pressing need for articles such as this, as obvious as they may seem. 

  • avatar
    Terry Parkhurst

    Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them, makes them soft, where we are hard, cynical where we are trustful, in a way that unless you were born rich, it is very difficult to understand.”from The Rich Boy, a short story by F. Scott Fitzgerald. The really rich may not care about gas mileage, but those who came to their money the hard way, by starting a business, probably with a partner or two (including a bank) may. Those are some of the people who are now considering a Toyota Prius, to save some money on fuel, as well as admittedly to make some sort of statement. Yes, you still see what used to be called a Yuppy, driving around in a big as Mount Rushmore Land Rover Cross Country; but last time I asked an acquaintance what sold best at the Land Rover store he worked at, was told it was the Freelander. Who buys new Escalades? The very rich NBA or hip-hop artists are among the best buyers. Who buys used Escalades? Those who wish they were very rich NBA or hi-hop artists (but work a more middle class gig). The solid middle class – whatever income number or other set of demographic data you want to put on them – are indeed starting to look at gas mileage, as they did back during the two oil embargos of the Seventies. It is time for Bob Lutz and whomever else is running the show at the General – is it Rick or is it Bob – in terms of product development, to realize the it is back to the future, in terms of fuel economy. This time, that’s not going to change, whether or not it’s a Republican, Democrat or independent sitting in the White House. As the Chambers Brothers once sang, “Time has come to today.”

  • avatar
    Eric Miller

    Johnson-

    jerseydevil brought up ‘GM’s 500hp Camaros’ and ‘Toyota’s 100mpg diesel-hybrids’. I merely pointed out that BOTH GM AND TOYOTA play in those sandboxes, contrary to what jerseydevil’s post alluded.

    Starlightmica brought up GM’s ‘distractions’. I pointed out that Toyota has distractions too. Maybe some of you weren’t aware.

    I wasn’t trying to make it complicated. Neither GM nor Toyota deserve halos. Or horns.

  • avatar
    Johnson

    jerseydevil brought up ‘GM’s 500hp Camaros’ and ‘Toyota’s 100mpg diesel-hybrids’. I merely pointed out that BOTH GM AND TOYOTA play in those sandboxes, contrary to what jerseydevil’s post alluded.

    Starlightmica brought up GM’s ‘distractions’. I pointed out that Toyota has distractions too. Maybe some of you weren’t aware.

    I wasn’t trying to make it complicated. Neither GM nor Toyota deserve halos. Or horns.

    Agreed. Maybe I’m wrong, but I think what jerseydevil was alluding to was the fact that GM is financially strapped, and being in a very precarious financial situation, developing a niche sports car shouldn’t be at the top of your priority list.

  • avatar
    Jim H

    But we all agree that most American buyers haven’t done the math to see if purchasing a Prius actually saves them money?

    And those that haven’t done the math…when you point out that they aren’t saving money at all, pull out the environmental card.

    For me, it’d be a statement to Toyota that I appreciate them pushing technology forward and maybe a skoshi of environmental (since the gas mileage isn’t that far ahead of other economy cars). However, I wouldn’t buy it for the “fun” factor, nor the prestige, nor the cost saving…because those factors just aren’t there. :)

  • avatar
    SherbornSean

    Starlightmica,
    Actually, the motto for Honda Jets is “Born from the S2000″

    Anyhow, I thought I would interupt the “GM vehicles are all gas hogs” rants with a little fact. In the past year, GM has developed 3 new platforms — large pickups, large SUVs, and large crossovers. In every case, the vehicles have received rave reviews – are uniformly lauded as best in class– AND sport the most fuel efficient drivetrains in class.

    GM has certainly made a LOT of mistakes, Lutz too. But the new stuff is good stuff. If the win streak can extend to midsize and large cars over the next 2 years, this deathwatch series will be history. Granted, that’s a big “if”, but stranger things have happened.

  • avatar

    >>>Is it any wonder that the truck-crazed domestic manufacturers lost mission critical market share to the transplants?

    Obviously they weren’t connecting to stake-holders.

  • avatar

    Michael Karesh:
    December 4th, 2006 at 11:49 am
    Many people in the middle of the curve cannot afford to buy new cars, or at least choose not to buy them. Who do you think buys used cars? I think the ratio between used and new sales is about 3:1.

    I also don’t think it’s safe to make generalizations like Lutz does. There are people at every income level that pay little attention to prices, and some at every level that pay a lot of attention.

    My mother, would could afford to drive virtually anything, gets off by figuring out where she can buy the cheapest gas in town. My wife, on the other hand, just pulls into whichever station is most convenient. I think this behavior is more a factor of personality than income level.

    Good point. Amusingly stated, with the classic contrast betw mother and wife.

  • avatar
    jerseydevil

    SherbornSean:

    In the past year, GM has developed 3 new platforms large pickups, large SUVs, and large crossovers.

    enough said. large trucks and suv’s, duhhhhhhh.

    also, people do not buy hybrids ONLY for gas savings. They are also very good on emissions. A good thing in cities, especially.

  • avatar
    jerseydevil

    Eric Miller:

    I wasn’t trying to make it complicated. Neither GM nor Toyota deserve halos. Or horns.

    Toyota sells every hybrid it makes. GM can’t sell anything.

    go figure.

  • avatar
    finger

    “How many cars does GM make that get over 40mpg? Toyota has lots of them, several in fact just in the North American market. Many more in European and Asian markets. ”

    Actually, Toyota Prius gets over 40 mpg while Camry hybrid and Corolla top out at 40. So, to address your declaration that “lots of” Toyota’s achieve over 40 mpg that answer is 1.

  • avatar
    finger

    “We’re looking at two strategies here. Toyota: build affordable transportation for the masses at a quality level that slightly exceeds expectations relative to price. GM et al: build oversized, under-engineered and fuel inefficient cars for people who don’t care about money while palming off sub-standard cars on mainstream customers.”

    Case in point- 2007 Tahoe vs. Toyota Sequoia. Superior Toyota technology allows for Sequoia to achieve same city mpg (15) and 3 less hwy mpg (18 v 21) than Tahoe. And the Tahoe only develops 47 more horsepower and 26 more ft/lbs. of torque than the Toyota. How do figure that might happen?

    Does this mean Toyota deliberately built Sequoia as a sub standard fuel inefficient vehicle? Will there be a media outcry?

  • avatar
    finger

    “If only people were directly responsible for the ramifications of their actions. What a world we might have. ”

    Our world would be better off with no people at all.

  • avatar

    While one can always find facts that obviate the main thrust of a theory, I would say that Stein's point– that Toyota has focused its energies in the mass market sweet spot– is spot on. Lest we forget, it is the ongoing success of ToMoCo's bread and butter models that allow it the freedom to dally in [higher profit or PRius-oriented] markets outside of its core competency. At no point did Toyota neglect those core products, nor, we can assume, will they. In short, they can afford to screw around. The Big 2.5 can't.

  • avatar
    Eric Miller

    Toyota sells every hybrid it makes.

    http://www.wkrn.com/nashville/news/ap-toyota-seeks-extended-hybrid-tax-credits/62451.htm

    (AP) Toyota Seeks Extended Hybrid Tax Credits – “Toyota officials said the automaker’s U.S. hybrid sales in October dropped to its lowest levels since March, attributing the decline in demand in part to the reduced tax credits.”

    GM can’t sell anything. go figure.

    GM NA sales YTD: 3.73 million units
    Toyota NA sales YTD: 2.31 million units

    Again, I’m not pointing out that GM is ‘better’ than Toyota.
    Just giving counterpoint to your bold statements.

  • avatar
    jerseydevil

    finger:

    Does this mean Toyota deliberately built Sequoia as a sub standard fuel inefficient vehicle? Will there be a media outcry?

    if toyota screws up a product, they notice. If GM does, they go out of business, as Farago said elequently.

  • avatar
    jerseydevil

    Eric Miller:

    sold to rental companies

  • avatar
    finger

    Jerseydevil would never let something like facts get in the way of a good rant.

  • avatar
    finger

    if toyota screws up a product, they notice
    I hope they read-

    Toyota

    • Airbags
    • Engine Problems
    • Cruise Control
    • Cooling System
    • Safety
    • Toyota Motor Credit
    • Avalon
    • Echo
    • Prius
    • Tacoma
    • Tundra

    Reviews
    • 2006 Prius
    • 2007 Camry

    News
    • Is Toyota’s Quality Slipping?
    • Toyota Delays U.S. Sales of New Corolla to Improve Quality
    • Facing Massive Recalls, Toyota Executives Promise to Do Better
    • Toyota Recalls Near 800,000 for July
    • Japanese Probe Recall Delay at Toyota
    • Toyota Builds More Efficient Gasoline Engines
    • Toyota Cuts Entry-Level Camry Price, Boosts Luxury Model
    • Toyota Dons NASCAR Racing Gear
    • Toyota Sludge

    Is Toyota’s quality slipping? The company lost ground in an annual vehicle value survey. While many consumers still give the Japanese automaker high marks, some analysts are suggesting the auto giant is growing too fast in its pursuit of General Motors.

    San Diego-based Strategic Vision surveyed more than 64,000 people who purchased new vehicles from October 2005 to March 2006. Consumers were surveyed after 90 days of ownership and asked if they thought they got their money?s worth.
    Toyota, which had seven segment winners in 2005, took only three categories in the new study and has been moving slower than other brands when it comes to innovation, according to an auto industry analyst.

    As Toyota executives struggle with their corporate image, Jennifer in Bardstown Kentucky is struggling with the foul smell pouring out of her new Toyota.

  • avatar
    jerseydevil

    Jennifer should stop eating so much broccoli

  • avatar
    Eric Miller

    sold to rental companies

    GM’s fleet/rental sales are slightly less than 25% of sales, and shrinking (goal 15-20%). Toyota’s run about 7% (Camry runs 10-20%). Factoring out fleet sales, that still gives GM a 650,000 unit retail lead YTD.

    http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewmonthlyreleasedetail.do?domain=74&docid=30971

    “GM continues to reduce its reliance on daily rental sales. Sales to daily rental companies were down 13 percent compared to year-ago levels, while non-daily rental fleet business was up 5 percent. Overall fleet sales of 80,452 vehicles were down 7 percent compared with last November.”

    The claim ‘GM can’t sell anything’ is just argumentative babble

  • avatar
    Areitu

    I think a lot of the people who don’t care about gas prices are the ones who own their own businesses and write it off.

    One would think that it doesn’t take a marketing genius to target the meat of the bell curve. Expensive cars are nice to look at but not-so-nice to buy.

  • avatar
    mikey

    Back on topic folks Bob Lutz stated the rich don’t care about gas prices.I think his point was,if you got 50 grand for a SUV you not gonna get shook up over3$ bucks a gallon gas.So true.
    The General makes a bucket of cash for every high end SUV/pick up coming off the line.Folks are buying them as fast as we build them{are you paying attention NJ devil}
    If the market is there lets build lots of them and make lots of money.Does that not make good buisness sense?
    Impalas,the G6, Cobalts are all priced for the masses.
    Good value for the price
    I’m not gonna shell out 50 grand for anything on wheels or buy gas for it,but I can’t knock anybody that thinks different

  • avatar
    jerseydevil

    Eric Miller:

    then why is GM on the skids, i wonder, and not toyota?

  • avatar
    Eric Miller

    then why is GM on the skids, i wonder, and not toyota?

    You could write one hundred and one (and a half) TTAC articles on that topic.

  • avatar
    PandaBear

    I think we are all putting too much attention on 2.5 vs Toyota on “why don’t they build all the good things that should have sold?” category.

    The truth boils down to cash, IMO the 2.5 wanted to build all the good stuff with great engineering too, but the way they are now couldn’t, because they are behind trying to catch up. It is like asking someone with 3 maxed out credit cards to pay it all off because it is obvious that it is expensive in the long run. They know, and they don’t admit it because it won’t do much good anyways other than freaking out their share holders (you’d be surprised how many share holders actually believe what they say rather than doing their own research). Is it too late? Hard to say. Is it time to give up? Not sure, but it sure is better than shutting the door before your cash ran out, right?

    What really got them in there in the first place is not really auto industry specific, but rather the American stock market specific. People buy and sell shares based on quarter to quarter forecast and target, so they are doing everything to make their shareholder of the quarter happy, rather than doing the long term investment that will bear fruit 10 years down the road. It also doesn’t help when a huge number of your share holder demand a fixed dividend and depends on it for retirement income (they might not even live 20 years from now, so who care about the 10 year plan).

    Union may have something to do with it, but the way they rely only on the number of jobs and strike to grow is also another bad business model. Have they tried to reach the college grads? the engineers? the self employed? for a new class of union members? what about investing in student loans for their members? what about buying portions of various companies who employ them to gain leverage in negotiation and improve working environments? I haven’t heard of any of that.

  • avatar
    Johnson

    Do not feed the trolls everyone …

    All I will add to this is this: http://www.toyota.com

    Look at the website carefully, read the specs, and you will find that the manual Corolla as well as the Prius gets *over* 40mpg, with several more Toyotas rated right at 40mpg EPA.

    And yet my question remains unanswered …

  • avatar
    mikey

    I came to one conclusion johnson.I checked out your link the only good looking Toyota is the Tundra looks like a F150.
    I can’t see Toyota staying on top for long with an ugly looking fleet like that

  • avatar
    pogi

    “The Veyron’s total development costs plus the amount they lose on each of the few hundered that will be built is less than Toyota, Ferrari or Renault spend on two seasons in F1.”

    Just becuase Toyota’s F1 budget has a budget of half a billion a year doesn’t mean ToMoCo blows that amount on F1 racing. Panasonic doesn’t put its pretty logo on the car for free.

    Properly run, an F1 campaign should make money for the carmaker. Even if there’s a shortfall in cash, the global exposure makes it a worthwhile marketing expense. How does VW the brand benefit from the Bugugly Veyron programme?

  • avatar
    wsn

    Replying to Voice of Sweden:
    Lutz is correct, hybrid technology doesn’t save money – it’s uneconomical. You save a cool 4 000 EUR choosing the Corolla. But the Prius is cool – or marketing or trends have made it cool.

    Prius is much roomier than Corolla and has far more standard equipment. A better comparision would be Camry Hybrid vs. (Camry I4 + Camry V6)/2.

    BTW, a hybrid now only saves gas money, it also saves the planet by releasing less green house gases.

  • avatar
    Eric Miller

    I’ll get back on track with my own points:

    Here’s Bob Lutz on the same topic back in 2003: ”It just doesn’t make environmental or economic sense to try to put an expensive dual-power train system into less expensive cars which already get good mileage.” Clearly, Maximum Bob’s take on good mileage is different from a Prius owner’s.

    I know it’s not popular, but Lutz made a good point.

    “… GM’s commitment to save as much fuel as possible by applying hybrid technology to the highest fuel-consuming vehicles first.”

    If hybrid technology decreases fuel consumption 25-30%, wouldn’t it make sense that a gas guzzler would save more gasoline over the life of the vehicle?

  • avatar
    dhathewa

    “… GM’s commitment to save as much fuel as possible by applying hybrid technology to the highest fuel-consuming vehicles first.” – Eric Miller quoting Lutz

    I’d think Toyota shipping 100K Prius cars per year (a nicer car than the Corolla with somewhere between a 5/4 and 3/2 advantage in CO2 emissions over a Corolla) is having a bigger beneficial impact on greenhouse gasses than the few Silverado Hybrids that GM has managed to sell at 1mpg better than their conventional brethren.

  • avatar
    KixStart

    Way back up there, someone pointed out one of the advantages that the imports had over the 2.5 – sell something a little nicer for the same money.

    Conversation with a friend recently turned to our minivans. He has a DCX Carager/Voyavan of the same vintage as my Sienna. The base Sienna interior is actually quite nice. We’ve ridden in each others cars. He agrees that, in comparison, the interior of his Carager/Voyavan is crap.

    You can get a nice interior in a DCX van but you pay for it; the T&C is actually reasonably nice but it’s the spendy end of the line. The interior helped sell the Sienna. It’s selling another one – to my friend.

  • avatar
    Eric Miller

    dhathewa-

    I was indirectly referring to the 2008 Tahoe/Yukon two-mode hybrid that is expected to return a 25% gain in the new 2008 EPA testing procedures (rumored to have been 30% with current methods). Should save well over 200 gallons per year over a standard 5.3 Tahoe/Yukon. That represents a significant impact on greenhouse gasses as well.

    When the current hybrids (Prius, et al) are re-tested for 2008 EPA standards we can compare apples to apples.

  • avatar
    dhathewa

    “I was indirectly referring to the 2008 … [GM things that may or may not arrive at some indefinite point in the future and may or may not offer improved fuel economy]”

    Yeah. And I was directly referring to existing product and fuel already saved from Priuses sold from 2000 onward.

    If Lutz’ had some sort of commitment to “save as much fuel as possible,” I’d have suggested he start by shipping some product that actually saved fuel instead of hiring extra PR guys to shovel “hydrogen.” Or just build some decent smaller cars.

  • avatar
    Pezzo_di_Merda

    “Toyota sells every hybrid it makes.”

    That must be why that salesman from our local Toyota-plex calls me once a week saying, “We have a great selection of Prius, stop on by and I’ll make you a deal on one.”

    Of course, in stead of buying the Prius last summer, I listended to my wife and the numerous Car-zines (including TTAC) and bought a Honda Odyssey for the same dough.

    You want to talk disconnect? Try getting 20mpg in this pig without being ticketed for impeding traffic. And the Japanese quality bus must have failed to stop down in Alabama where this rattle trap was built.

    I saw the new dual mode Tahoe at my local car show. It was flat beautiful. The fit and materials of the interior were excellent and the paint and panel fit was superb. (What’s up with Toyota paint recently? My co-worker had to have her new Camry repainted due to flaws). Can’t wait to trade the Hogda in on something even Larger that gets better mileage!

  • avatar

    I’m not sure its correct to say that rich people dont care about gas prices, since many wealthy people got that way by obsessively managing their spending in the first place. I think its fair to say that no one likes to pay for expensive gas, which is why gm’s getting screwed so broadly.

    Looking back at gm’s mistakes isnt a matter of hindsight, its common sense. Sure you make lots of whats selling at the moment, but its even more important to plan for the future.

  • avatar

    We should be free to buy whatever car we want, of course. However, people are finding that when there’s too great a disconnect between the rational need for a car, and the irrational wants that may guide a purchase, you end up looking foolish as an owner.
    Which is what is happening to many SUV owners who are holding cars they clearly don’t need, since they never engage the off-road engineering for anything beyond climbing onto a sidewalk.

    The reviewer below poses the question at the very start of his review. Five years ago the thought wouldn’t have entered his head:

    http://motoring.independent.co.uk/road_tests/article2037771.ece

  • avatar
    HawaiiJim

    Stein X: A lot of people buy cars they clearly don’t need, like super-powerful, fast sports cars that sit in gridlocked traffic. Wants are not necessarily rational, but that doen’t mean the wanters end up, in your words, “looking foolish as an owner.” Could it be that SUV critics, deep down, would really like to buy an SUV? Why not just relax and stop worrying about why people choose the cars they do.

  • avatar

    @HawaiiJim

    I have owned three SUVs and have a Cherokee Ltd jeep now, so my criticism has nothing to do with personal grudges against SUVs.
    It’s a five-six year process to put a car on the road, which means that the car companies have to be forward looking, and should try to if not totally go with the flow, at least not resist it until they are washed away.

    I’m using Lutz as an example here, of how the majors simply disconnected their brains and went with the solutions of the past serving imagined needs, when it turned out consumers wanted something else.
    The point here is not what you and I or someone else would like to drive, but the fact that the majors abandoned their bread and butter market. The markets they reached for have been unable to provide them with the solid footing they need in order to branch out and deliver to other markets. Toyota and Honda have that solid footing today, and can experiment with other segments.

  • avatar
    dgduris

    YOU HAVE ALL MISSED THE JOKE!

    I imagine Bobbo was using the John Kerry/ Hillary Clinton definition of “rich,” which, I think, was an American family earning more than $60k per annum. You remember, those “not rich” per this definition were going to get tax relief and the “richies” were going to get to pay it all.

    So, if “rich” is $60k Mr. Lutz is perhaps a bit, um, LEFT of the apex on the bell curve.

    RICHard ;-}

  • avatar
    SherbornSean

    It’s an interesting proposition, Stein X, that GM’s strategy is to build oversized, under-engineered and fuel inefficient cars. I would phrase the strategy otherwise. GM has realized that while the number of drivers is increasing slowly, the longetivity of vehicles has been increasing quickly. In other words, while you needed to buy a new Lincoln every 3 years in the 1970’s because they apart so fast, these days a $20K+ car, well maintained, can reasonably be expected to go for 15-20 years before becoming too much of a hassle to keep on the road.

    So a logical consumer would prefer to spend $20K on a 4 year old luxury car than a new plain jane sedan for the same money. A nicer car that will still last beyond their needs for the foreseeable future.

    In this environment, a logical automaker would move their offerings upscale and stress CPO programs for the middle class who want to keep their payments below $300/month.

    Sounds like a smart strategy to me. But it comes down to execution. Based on what came out 2-3 years ago — Cobalt, Malibu, LaCrosse,… I’d say GM was in trouble. Based on the 2007 models — Tahoe, Silverado, Aura, Enclave — I’d say GM is on an upswing.

  • avatar
    Steven T.

    dgduris, is this really the place to beat up on Democratic tax policies unrelated to automobiles? And if you do go there, what’s with your simplistic Rush Limbaugh-style caricatures? The readers here are a bit smarter than that.

  • avatar
    Jim H

    I’m just waiting for GM or some other companies to start playing the patriot card for purchasing cars, etc. Chevy has gotten pretty close with their current truck ads…this could turn nasty…and you only have to look at a few of the posts above to see it’s on it’s way.

    The dgduris tax comments seem out of place, and definately lacking in truth. Income tax and sales tax are two completely seperate entities that unfortunately are linked to our wallets. This country spends tons more money than it earns…and most of it’s citizens do the same. If you’d like to discuss party lines (which is idiotic in and of itself) and taxes, please, start a blog and post a link.

  • avatar
    finger

    I don’t think it’s wrong for Chevrolet to align themselves with America, apple pie, baseball, etc. After all, they ARE an American car company and proud of their heritage.
    No doubt that there has been a disturbing trend (to me, anyway) towards “globalization” and distance from your roots. Of course this is not the place for a political discussion.

  • avatar
    ktm

    “How does VW the brand benefit from the Bugugly Veyron programme?”

    The same way the American technological sector benefits from the military. VAG set out to produce the Veyron to basically see if it could be done. They (no doubt) learned quite a lot during the design.

    It’s not just the VW brand that benefits. VAG consists of Audi, VW, Skoda, SEAT, Bugatti, Lamborghini, and Bentley.

  • avatar
    ktm

    mikey, Toyota has never really built a beautiful line-up of cars. They have (historically) nearly always focused on relatively cheap and reliable vehicles constructed with quality workmanship. They don’t need to be beautiful to satisfy a consumer who is only interested in going from Point A to Point B without having to worry about the car not making the journey.

    Can GM (historically) say that? If they could, they would not be hemoraghing cash.

    To all of you die-hard GM supporters, yes, Toyota has been having some quality control issues as of late. There is absolutely no denying that. However, Toyota freely admitted that they have been having problems. When did GM, Ford or Chyrsler admit to having quality problems in the 1970s, 1980s or 1990s?

    Toyota will start to lose their consumer base if they, like the Big 2.5, ignore the problems.

  • avatar
    skor

    This is not new, GM abandoned the entry level market back in the 1970’s — just as the baby boomers were starting their careers and buying their first new cars.

    At that time, the brainiacs at GM decided that since the WWII generation was at it’s peak financially, they would target them with assorted Cadillac, Oldsmobile and Buick road-barrages. The boomers got POS Chevys that would make Borat’s Lada look like an MB by comparison.
    The brain trust at GM wasn’t worried about the boomers, they figured they would eventually come around to buy a “real” car when they got a little bit older and had some more money.

    Fast forward 35 years, the “greatest generation” is in the bone yard, or the nursing home, and the boomers did move on to “real” cars: Lexus, MB, BMW.

  • avatar
    Jim H

    Skor: I like that synopsis. :)

    Jim

  • avatar
    Lemmy-powered

    pauln says: “VW learned how to make a Golf weigh 3100 lbs (Corolla:2500lbs), and get 24 mpg (Corolla 33mpg). Excellent trickle down, IMO. “

    As a believer in lightweight cars (I have a Miata) I can see your point.

    But as a former Corolla and Gof TDI driver, I can tell you that the two cars are not in the same league. Corolla is a basic machine that can handle 20 years of pummelling on third-world roads. Golf is a comfortable, refined road car whose lineage shows. And my TDI got way better than 33mpg.

  • avatar
    Jim H

    finger: Could you include the denominators for each of those companies as well? If Toyota sold 25,375 units out of 26,000, that’s awesome. If GM sold 120,723 units out of 250,000…that’s not so good.

    Thanks.

  • avatar
    finger

    Jim H-
    I will try and find a denominator for you. I belive day’s supply would be sufficient.

  • avatar
    finger

    Unfortunately, toyota does not furnish inventory/day’s supply for specific models. But anyway-
    Chevy Tahoes in inventory as of 11/1/06- 49,400 = 101 days supply. Total Toyota trucks in inventory = 135,500 units = 47 days supply. Once again, no specific data for Sequoia.

  • avatar
    ZoomZoom

    When I first saw the bell-graph, it reminded me of “Hubbert’s Peak”. Are we drifting downward on that graph yet? Curiously enough, two more countries are about to become part of OPEC. The question I have is why does OPEC need more member countries unless they are having trouble meeting production goals……

    Aaah, but that’s neither here nor there. Jerseydevil made a good comment:

    …people do not buy hybrids ONLY for gas savings. They are also very good on emissions. A good thing in cities, especially.

    Indeed that’s true. But not in my case. Yes, I know that my Prius pollutes less than the average lawnmower, but honestly, I mostly bought my Prius because I needed a bigger vehicle than my Z-3 and because I wanted to go farther on less. Not because of gasoline PRICES, mind you…I can easily afford to fuel pretty much anything I can afford to buy. Nope, I just wanted to go farther, carry more, and burn less gas doing it. I recently moved nearly my whole house with my Prius. Lots of trips, and of course the really big furniture couldn’t be put in the car, but the Prius really did the job nicely.

    I have not yet calculated how much more or less gasoline I might have saved had I rented a Uhaul truck and made 3 trips rather than 20-25 trips with the Prius. I only moved about 3 miles (6-mile round trip), and it just seemed like a lot of trouble to rent a truck when I had 99% small stuff (only one trip with a pickup truck was needed). Any thoughts?

  • avatar
    finger

    Assuming your Prius achieves 60 mpg city and you made 25 trips, you most likely used about 2.5 gallons of fuel. A typical gas 14 ft cube gas box truck gets about 11 mpg. Making 3 trips used about 1.6 gallons of fuel. If you opted for a diesel box truck, you would have used only about 1.2 gallons of diesel fuel.
    And if we factor in the Time aspect, I think the U-Haul is a no-brainer.

  • avatar
    Eric Miller

    Could you include the denominators for each of those companies as well? If Toyota sold 25,375 units out of 26,000, that’s awesome. If GM sold 120,723 units out of 250,000…that’s not so good.

    They all sell eventually, so days supply is only a worthwhile metric for the short term.

    Industry is currently about 60 days, which is normal.
    Nov 1 figures:

    Isuzu 177 days
    Mitsubishi 91 days
    Mazda 88 days
    GM 88 days (incl Saab 131 days)
    Chrysler 80 days
    Ford 77 days
    Nissan 75 days
    Hyundai/Kia 73 days
    Honda 47 days (Ridgeline currently 117 days)
    Toyota 38 days
    BMW 20 days

    I doubt customers really care that much.
    They choose what vehicle suits them and vote with their checkbook.

  • avatar
    Jim H

    Chevy Tahoes in inventory as of 11/1/06- 49,400 = 101 days supply. Total Toyota trucks in inventory = 135,500 units = 47 days supply. Once again, no specific data for Sequoia.
    Does that actually mean that it takes 101 days to sell a Chevy Tahoe…even with the incredible offers they are giving? Ouch.

    Bummer about the Toyota Truck lack of breakdown. They have the Sequoia, the Forerunner, Tundra, Tacoma, Highlander, FJ Cruiser….are mini-vans on the “truck” platform as well? I couldn’t tell from the sales paragraph for the last two months with Toyotas having huge percentage boosts in sales. :(

  • avatar
    Luther

    The question I have is why does OPEC need more member countries unless they are having trouble meeting production goals……

    OPEC wants you to think that, you can never have enough Rolls-Royces afterall.

    The Gov’t/News Media tells us to think that ExxonMobil is the evil corporation that is behind high gas prices even when there is not a week that goes by that OPEC isnt announcing production adjustments to maintain a certain (High) price for oil. Of course ExxonMobil profits from this but the root cause is the Gov’t gun-backed mafia OPEC. ExxonMobil is just a passenger on the gravy train that is operated by OPEC.
    95% of the oil in the world is owned/controlled by Governments. Be afraid…Very afraid. Consider yourselves “lucky” that gasoline is only $3.00 per gallon CopperTop. (What a great movie “The Matrix”.)

    “Peak Oil” like “Global Warming” is bunk BTW. You are being robbed. (Im not going to argue.)

  • avatar

    Michael hit this on the head…the bell curve does not necessarily apply to car prices the way it does to general income.

    The stat I remember being most interesting (after being in the automotive retail field for a while) was that 50% of Americans will NEVER own a new vehicle. (I have absolutely no citation for that stat, but it was an opening line made by a trustworthy speaker.) Another is that only 8% of the world will ever own a vehicle at all–new or used.

    So in a way, if you own a vehicle you are rich, if you own a new vehicle you are super-rich. Jumping to the conclusion that rich=no limits on buying petrol has obvious flaws.

  • avatar
    finger

    Jim H-

    Days supply can be translated as if they stopped building Tahoes today, there would be enough available nationwide for 101 days. And yes, mini vans are included in truck data.

  • avatar

    @neilberg

    So in a way, if you own a vehicle you are rich, if you own a new vehicle you are super-rich. Jumping to the conclusion that rich=no limits on buying petrol has obvious flaws.

    And can you believe that the man who jumped to that conclusion is in charge of product development at GM?

  • avatar
    Eric Miller

    Days supply can be translated as if they stopped building Tahoes today, there would be enough available nationwide for 101 days.

    …based on last month’s (current) sales rate. There are many variables that can swing both production (supply) rate and sales (demand) rate. Some are seasonal, some are planned, some are unforeseen.

  • avatar
    finger

    Mr Leikanger. Just curious. Is your middle initial “X” or is it Roman Numeral 10?

  • avatar
    finger

    “There are many variables that can swing both production (supply) rate and sales (demand) rate. Some are seasonal, some are planned, some are unforeseen. ”

    All very true as days supply is a mathematical formula partially based on sales rate.

  • avatar
    finger

    “Does that actually mean that it takes 101 days to sell a Chevy Tahoe…even with the incredible offers they are giving? Ouch”

    It could be worse for Chevy. Days supply for Acura RDX is 103 days, 167 days for Honda Insight, 165 days for Honda S2000, 117 days for Honda Ridgeline, 104 days for Mazda CX7, 179 days for Nissan Quest, or 182 days for a VW truck.

  • avatar
    Jim H

    Where are they hiding all the Honda S2000s? I never see one at the dealer here. (the web always has them “in stock”…but they are nowhere to be found on the lot :( ) Ridgelines definately seem to be overstocked…and since they only offer one model (4 door), it kinda makes sense. I blame looks and artificial markups on the Acura RDX. They can’t keep Mazda CX-7’s on the lot here in Colorado…however, they aren’t giving any deals for the four trucks (and one car) that I mentioned. It’s sad. :(

    EDIT: Funny story. The mechanic for my last oil change apparently has an S2000…which I think is an amazing car. However, he explained that he’s had his highest ticket ever by driving that car. 137 (or was it 117?) either way…that’s insane to drive like that in the mountains. Doesn’t he know that oversized SUVs are on the same road?! ;)

  • avatar
    finger

    “They can’t keep Mazda CX-7’s on the lot here in Colorado…however, they aren’t giving any deals for the four trucks (and one car) that I mentioned. It’s sad. :( ”

    Don’t be so sad. Honda ridgeline offers 3.64% financing! And RDX offers 6.06% financing! And VW will give you 0-3.9% on a Touregg! You better hurry on the Hondas as they expire 12/4. But maybe their new incentives will be even better!

    And maybe Mazda should ship all those unsold CX7’s up to Colorado (17,800 of them).

    Now, didn’t I turn your frown upside down?

  • avatar

    @finger

    Middle initial.

  • avatar
    Eric Miller

    S2000 sales (and that whole genre) are quite seasonal so it makes sense that they ‘sit around’ during winter months.

  • avatar
    finger

    “S2000 sales (and that whole genre) are quite seasonal so it makes sense that they ’sit around’ during winter months. ”

    Yes. I would guess that the Pontiac Solstice at 74 days and Saturn Skyy at only 33 days are exceptions to the rule.

  • avatar
    Eric Miller

    I would guess that the Pontiac Solstice at 74 days and Saturn Skyy at only 33 days are exceptions to the rule.

    Yes, but they are also still in the ‘initial demand’ phase whereas the S2000 is at the end of its product cycle. Just like the first Miatas, Beetles, PT Cruisers, et al.

  • avatar
    finger

    True that.

  • avatar
    Jim H

    I will say that I find the Saturn Skyy and Pontiac Solstice unusually beautiful…and I’ve no idea why. They are more rounded than I usually prefer…I like the new Lotus look much better (it reminds me of the cylon ships in the new Battlestar Gallactica)…but those two cars look awesome.

  • avatar
    stuki

    I suspect deep down Lutz et al are simply realistic enough to realize they don’t have the resources ( as in human capital ) to compete in the big leagues, and are content to pick over the scraps while they can. With very few exceptions, their cars haven’t been the ‘best’ for their actually deployed purpose for a long, long time. And at the end of some distant day, despite the best protestations of branding consultants and blue collar romantics, volume cars are bought to serve a rather easily measured utility.
    Ancient, crude X.Y liter VZ engines ( capitalization intended ), mounted in cheaply slapped together, poorly conceived and even worse engineered, junk; put out to serve someone else’s ( always someone else’s ) marketing invented ‘needs’, could never provide more than short lull in an inevitable decline. As long as Toyota can do what You’re doing better than You can do what they’re doing, You are living at their mercy. And until the Koreans, and then the Chinese, start seriously nipping at their heels, they might well spare You some. But not indefinitely.
    A huge problem for the Big{whatever number} is most of Americas best graduates have better opportunities in ‘better’ locations. If you were an engineer with options, would You choose Google, Microsoft, Boeing, Locheed, NASA; or GM? Or even, for that matter, take some angel / venture money. Or work on next gen cars at Tesla. In Japan, Korea and Germany, big automaker jobs are relatively speaking more desirable.
    The supposedly more autonomous Corvette team seem to put up one hell of a fight, though. I bet giving more autonomy to other teams to build cars they actually burn for, and leave it to actual paying customers to figure out the ‘positioning’ and pricing of them, could net another few golden eggs. Local knowledge and sentiments, combined with talented people in organizational structures who make them actually give a shit, is a potent force.
    Especially if the main competition insists on barreling straight through the line separating great engineering from over engineering. But that is another story altogether…

  • avatar
    CSJohnston

    The Big Three fell off the curve at the end of the ’80’s when they began chasing [imagined] high-margin niches filled with wealthy people. The more high-priced, high margin trucks and SUV’s GM, Ford and Chrysler sold, the less they cared about the millions of financially challenged customers who helped create their companies.

    Mr. Leikanger,

    I’m a tad late to this forum (I need to hear people crtique my efforts before I can critique yours! :) ) but I think your basic premise is off base.

    The curve you’re looking at represents virtually any retail item. You will have “early adopters” (often thought of as 10% of the targeted consumer), the “mainstream” (roughly 70-80% of the consumer market) and the “price shoppers” (10-20% of the market). The curve is also representative of product lifecycles and where the largest opportunity to gain sales/share lie.

    Anyway, the Big 3 in no way “missed the curve” in the late 80’s and 90’s, the market was clearly trending towards larger and larger vehicles. This was a factor of the boomer generation needing larger vehicles to shuttle their “yuppie larvae” about.

    Minivans (the left-brain people hauler) gained in popularity at this time and the advent of the 4-door SUV also gained traction. If you recall, even as recently as 1988 there were only a handful of 4-Door SUV’s out there (Cherokee, Bronco II and maybe 1-2 others… unless you wanted a Suburban).

    4-Door SUV’s took off like a shot in the early 90’s with the launch of Explorer (which, to Ford’s credit was a monster hit on par with the Taurus). Other automakers scrambled to keep up.

    By the late 90’s, most automotive analysts were predicting that more trucks than cars would be sold in the US and I think by 2001/02, they were proven correct.

    Does this indicate a flawed assesment of the auto market on the part of the Big 3? I think not.

    Where the Big 3 fell down was not in the late 80’s but around 1998 where they were all planning next gen mid size and full size SUV’s. Demographics indicated that consumers (and let’s face it, by consumers, I mean Boomers. Until the Boomers start dying off in droves, the market will follow their needs) would need smaller vehicles but product research indicated that consumers still desired large, capable rugged-looking vehicles for their transportation needs.

    Tough call for product planners. They gambled and lost.

    The other trap the Big 3 got caught in was the error of not recognizing the SUV market for what it was: namely a market driven by “fad” not “trend”.

    The “fad” of owning a monstrous SUV died suddenly (as all fads do) and not simply because of gas prices. People wanted to look stylish in something else (hybrid apologists be warned).

    The next consumer curve is coming at us right now as the so-called “echo” generation comes of age and starts earning enough money to buy new cars. Honda is possibly positioned to nail this market, Toyota has some work to do as it is still building product largely aimed at satisfying the Boomers. GM, Ford, DCX? I don’t know, but all of these companies have been written off as dead in the last half century at least once.

    Will Ford “nail” is next Mustang/Taurus/Explorer or will GM find the next GTO/Malibu/Tahoe in the near future?

    All it takes is one hit to turn a company’s fortunes around and make everyone look like a genius. It also takes one fumble on a volume line to turn the industry darling into yesterday’s news.

    We’re all pretty smart on this site but at the end of the day we are, for the most part, armchair quarterbacks.

    Let’s see what the pros come up with.

  • avatar
    CSJohnston

    Darren,

    Don’t drive angry! As a pro-domestic guy, I feel like I’m in the minority too but it is hard to argue with ToMoCo’s success. I personally don’t like anything they offer enough to buy it but evidently several million people do.

    Big 3, swallow yer pride, copy Toyota shamelessly where they are strong (just like they did for decades with you) and hold the line where you still rule the roost!

  • avatar
    macarose

    20/20 hindsight articles tend to offer…

    1) Generalizations

    2) Declarations

    3) Cheerleading for the side that ‘did the job right’.

    Unfortunately once you’re through drinking the kool-aid, there is nothing left than an empty cloudy glass that is simply not worth looking at.

    The majority of comments above have fallen into that category. However those of you who are looking at the ‘here and now’ are to be applauded for it. When I look at today’s marketplace, I see plenty of great cars and greater opportunities.

    A short list…

    Toyota is the world’s most profitable automaker… they also have serious quality concerns and a product line that’s become too conservative for many consumers.

    Honda has an excellent balance of technology and high quality in most of their offerings… the Ridgeline and Element however fall far short of their competitors.

    Mazda has successfully carved out a niche in the market as a poor man’s alternative to a BMW (a niche that Nissan will soon be vacating in the pursuit of Toyota/Honda customers)… yet they can’t seem to sell many of their best products due to their difficult dealer relations and ineffective regional marketing.

    Every manufacturer has strengths, weaknesses, opportunities and threats. I’m personally more interested in what specific actions are already being taken to address these issues.

  • avatar
    thx_zetec

    Leikanger seems a little confused.

    First he gives a dumb quote by GM’s Lutz (I’m sure there are plenty). Lutz says that gas prices won’t hurt big SUV sales because “rich people don’t care about gas prices”.

    History proved Lutz wrong – gas prices *did* hurt big SUV and truck prices. They hurt because most of GM’s “big iron” is bought by the non-rich. Truth is that SUV’s are regular-guy type gas guzzlers (the rich prefer wasting gas in Land Rovers).

    Then Leikanger implies that somehow GM is chasing the extreme right tail of the Bell Curve – somehow catering to the rich only. He is making the same mistake as Lutz – GM was really chasing the middle and upper middle of the curve. Today 35,000-45,000 is not outrageous for a vehicle, this is actually a large part of the market.

    Our roads are clogged with big SUV’s and trucks. Bill Gates didn’t buy all of this “big iron” average Joe’s did.

    It is fashionable to make fun of GM for selling large, inefficient vehicles. Fact is GM has the largest, most profitable group of vehicles period. GM’s pickups and related SUV’s sell in huge numbers and generate huge profits per vehicle. Maybe not as huge as last year – but still huge (GM full size pickups outsell Camry 2X and generate more profit per vehicle.)

    The Bell Curve has shifted to the right for two reasons. First US prosperity, second huge amounts of lower interest rate credit. $40,000 sounds like an outrageous cost for a vehicle to me, but many Americans don’t blink an eye.

    O.K. GM is losing money – because of even more huge legacy costs. But they’d be bankrupt now without the SUV and truck profits.

    Personally I feel 1. cars cost way too much – I bought a 23,000 dollar minivan instead of a 35,000 SUV. 2. Big SUV’s are mostly a waste of gas, money, and steel. But fact is they still sell in huge numbers for large profits.

    I do agree that even if GM is not chasing the extreme right tail of the bell curve they don’t have much to offer in the left half. I like small cars (again I am cheap) and would like to buy a Cobalt – just wish it was a little better cars.

    I do think GM (and Ford) got lazy on huge, easy profits on big vehicles whilst ignoring simple sedans. But I also think this is easy to do – a fisherman who catches a whale once a year might also get lazy.

  • avatar

    @thx-zetec

    As I was criticizing GM executives for their desire to build large as early as in the mid-90s, I must have been ahead of the curve myself, then, relative to your “It is fashionable to make fun of GM for selling large, inefficient vehicles.”

    The editorial states that while the majors went into the huge cars at the end of the ’80’s when they began chasing [imagined] high-margin niches filled with wealthy people. The more high-priced, high margin trucks and SUV’s GM, Ford and Chrysler sold, the less they cared about the millions of financially challenged customers who helped create their companies.

    Thus it would seem you are arguing against me by using my own arguments, and you’re welcome to do so. The editorial states that by IGNORING the mainstream customers, the majors “gave them away” to Toyota and Honda, who were more than willing to do the favour!

    (And as far as using “silly” Bob Lutz quotes go, there’s a thick volume of ditto to pick from. The ones I chose served the ends of this editorial.)

  • avatar

    @CSJohnston

    Your early adoption, etc. has to do with product introduction relative to one offer. The very basic illustration here has to do with market distribution relative to all cars on the market. Two different things.

    You also make a basic fallacy of causality in saying that the majors built to a market that was trending towards larger vehicles. For the market to “trend” anywhere you have to build a product for it, if not the market finds itself without product and no one around to “early adopt” anything.

    The editorial argues that the majors took their eye off their profits when they created the market for large cars. And albeit a profitable segment on its own, it turned out to be a fatally flawed move, as the bottom fell out of the profit of the majors as they ignored the high volume market.
    Or are we ignoring the causality of history, as well? :-)

    I find it quite incontrovertible that the majors are bleeding money, and have been doing so since they “trended” rightwards relative to the weight of the market.

  • avatar
    dean

    finger and Jim H: Skyy is the vodka, Sky is the Saturn!

  • avatar
    thx_zetec

    Mr. Leikanger;

    I agree that the big 2.5 mostly ignored the left half of the curve – the poor and cheapskates such as myself. If you want to spend 15,000 you buy a second rate car. GM seems to say “get back to us when you can swing 35k out the door for a decent 14 mpg SUV”.

    But the profits they chased were not imaginary and they did catch them. There is an interesting anti-SUV article at this link:

    For quite a few years the Ford expedition factory generated more profit than any factory in the world. Producing a mediocre but huge vehicle sure – but profit counts.

    As for the implication that somehow the Big2.5 created the desire for big iron – consider this quote “In the history of the automotive industry, few things have been quite as unexpected as the rise of the S.U.V. Detroit is a town of engineers, and engineers like to believe that there is some connection between the success of a vehicle and its technical merits. But the S.U.V. boom was like Apple’s bringing back the Macintosh, dressing it up in colorful plastic, and suddenly creating a new market. It made no sense to them. ”

    As an engineer I can appreciate this quote. I live in middle class hood and see plenty of Tahoe’s etc that never get taken off road – I can’t appreciate a vehicle that weighs 1000 lb more than a minivan and has less useable interior.

    But again I am in minority. Millions of Americans, many middle class – will continue to buy the big iron. And for years GM’s truck and SUV lines will generate profits that dwarf the Camry’s (even if GM gets dragged down by legacy costs)

  • avatar
    CSJohnston

    Mr. Leikanger,

    I love causality! It makes history so intriguing!

    So are you saying that by building larger vehicles, the domestic manufacturers created a market?

    If you are, I would disagree. Factors pointed product planning to consider larger vehicles in the late 80’s. The minivan demonstrated the need for larger, family-oriented vehicles. The station wagon was a non-seller due to its stigma as a mommy-mobile (much like minivans and SUV’s wear that badge).

    There were several instances of people “early adopting” SUV’s prior to the rush. Suburban sales had always been strong and demand was high. Isuzu had landed itself in the US with that funny Trooper contraption and two-door SUV sales (Blazer, Bronco II, Cherokee, Pathfinder) were also strong.

    A 4-Door SUV development was a natural extension of products that existed for years prior to the “fad”.

    My main point was that the domestics did not take their “eyes off the prize” in terms of betting on the right product for profitability. They were totally on target. They pegged where the heart of the market was going.

    As for volume. In the late 90’s many of the best selling vehicle lines were trucks. I mean, Ford was poised to sell almost 1,000,000 F-Series based products in 1999!

    So, put yourself at that point in history.

    If you sat in Ford or GM’s boardroom in the late 90’s and you saw SUV plants running triple shifts and your bottom line bloated by huge SUV/Truck sales numbers. What would you have said? “We need to cut SUV production and refocus on the midsize car segment?” Be honest.

    The dollars were on the truck side of the market then. GM and Ford were making billions because of it.

    Now, the other fun part of history is the “what if” scenario.

    What if Ford did not develop the Ford Explorer? Would someone else have? I would argue yes, as it was built to fill a perceived need/want in the market.

    What if nobody wanted larger vehicles? Would the SUV “craze” have occured? No, the SUV market would have likely remained much smaller and more like it was in decades past, a needs-based segment.

    Anyway, this is all good, clean fun and I hope we can expand the debate!

    As a matter of fact, maybe we can look at trend indicators in today’s market and take a stab at what’s going to be big tomorrow!

    As for the illustration, upon seeing an enlargement, I cede the point. However, I have seen (and drawn) several similar curves to illustrate several things, including the 10/80/10 setup of who buys what and when.

  • avatar
    Eric Miller

    CSJohnston brings up an interesting point, and I’ll take it further.

    Was the CUV/Cute-Ute segment developed because the automakers really saw the economical and ecological writing on the wall? Or were they just trying to figure out how to cash in on the SUV craze with existing platforms?

    For example, in the early nineties Honda had no large frame-based RWD/4WD platforms on which to base a traditional sport utility. How to jump on the bandwagon? Take a Civic Wagon with AWD (which never sold well anyway) and give it SUV-looking sheetmetal. Voila, the CR-V is an instant money maker. I know it’s not exactly that simple, but I also think it wasn’t as complicated, educated, and responsible as some allude.

  • avatar

    @CSJohnston

    Most appreciative of your insightful comments, and I love a good debate.
    I was fortunate enough to be involved with GM back in the nineties, when they were rotating managers from brand to brand on a two-year schedule. That quickly gave one an overview of what was going on at The General – and resulted in some serious shaking of heads.

    The carmakers were surprised by the vigour with which consumers went irrational and opted for SUVs over more “sensible” platforms. And they were definitely attracted by the greater margins these provided. Without doubt, the segment was profitable (until it became all congested and consumers went off being irrational).

    Meanwhile, the carmakers ignored the high volume of the “Blob in the middle” market. Smaller margins, but higher volume – Toyotas profits clearly show what that resulted in. (And it probably got easier for Toyota precisely because the majors took their eye off the ball).

    In next week’s editorial I begin offering a take on the markets of the future. Looking forward to your comments on that.

  • avatar
    Johnson

    Toyota is the world’s most profitable automaker… they also have serious quality concerns and a product line that’s become too conservative for many consumers.

    Honda has an excellent balance of technology and high quality in most of their offerings… the Ridgeline and Element however fall far short of their competitors.

    Mazda has successfully carved out a niche in the market as a poor man’s alternative to a BMW (a niche that Nissan will soon be vacating in the pursuit of Toyota/Honda customers)… yet they can’t seem to sell many of their best products due to their difficult dealer relations and ineffective regional marketing.

    Serious or not, Toyota is taking big steps in strengthening and bolstering their still-high quality. Too conservative? So Toyota’s new designs are more conservative? And many customers … I would say only a small fraction of the overall car market. Toyota’s sales have never been better, and they are covering more and more niche markets with oddball vehicles like the FJ Cruiser, and gaining more enthusiast respect in the process.

    Honda’s quality typically has played second fiddle to Toyota. Even now, I would say they are roughly equal quality-wise. Honda’s problem is to make sure they don’t make their new designs too polarizing. Witness the unsteady sales of the Accord and Civic.

    Mazda “can’t sell” a lot of their products simply because they do not appeal to most consumers. Mazda is making niche vehicles, with the exception being the Mazda 3. The Mazda 6 looks pretty tacky, and is not competitive enough to be a big seller. The CX-7 is an oddball design, and again, a niche vehicle that does not appeal to very many. Mazda 5 is even more-so niche, and the RX-8 only appeals to enthusiasts mainly … and then there are the quality issues that plague the RX-8. Most consumers do not like the fairly stiff ride, or the teutonic, dark looking interiors of Mazdas.

  • avatar

    @Johnson

    I think a lot of Toyota critics are grasping at straws. The phenomenal growth of Toyota has created quality issues – it’s probably a question of training the new people and calibrating processes across the line. The carmaker is stepping up to the plate and taking responsibility.
    And I think that Katsuaki Watanabe would be extremely upset (though not show it) should anyone tell him that Toyota is falling behind – ToMoCo’s got stuff in the pipeline that clearly will show that’s not the case.

    I think your summing up of Toyota/Honda/Mazda clearly shows it is not a question of Japanese vs. Domestics. It’s a question of adaptation and market realities vs. delusional forays into markets that can not support a behemoth carmaker.
    Honda is actually an environmentally friendlier company than Toyota, but ToMoco’s run off with the position, in spite of its trucks, etc.
    And I agree with your take on Mazda – though profitable as a division, its product line flails from unengaging to one-off. Personally, I have no idea what Mazda wants to stand for, and I pay attention to communication from carmakers since it’s my living.

  • avatar
    CSJohnston

    Mr. Leikanger

    I would agree that the domestics did short sheet the development of the sizable mid size segment. I think I’m simply being finicky on the “when”.

    The mid-nineties was still a time where I felt the domestics were engaged on the car side of the market (meaning that they still invested in cars back in the late 80’s and early 90’s).

    I came from a GM family and I had just started to work for Ford’s ad agency in Canada at that time.

    Ford had released the Contour/Mystique the year prior and were in the process of launching the all-new Taurus (in which Ford had invested billions).

    The Taurus was a good effort and in many ways class-leading but whoever felt the “egg” look was going to be in needed counselling!

    GM had just taken the wraps off the new Grand Prix/Intrigue/Regal all of which were very good looking cars. The Grand Am/Alero came out the following year (we’ll all forget the Skylark ever existed… but it was bold).

    Chrysler had been “saved” again by the LH sedans too.

    All in all, pretty heady times for the domestic car industry.

    My alarm bells went off in 1999. Ford had killed off a Contour/Mystique replacement and I saw the redesign of the Taurus for 2000. The Mustang was again put on extended life support with a half-hearted redesign too. All brand management could talk about to us was trucks and how exciting they were!

    GM made a similar disinvestment in the Grand AM, Grand Prix, Regal, etc and blew Oldsmobile away (I think they killed the wrong brand personally).

    My true moment of “these guys are in trouble” came in 2000 when I had a brand manager say to me with all seriousness that the new Ford Focus could easily cover all of Ford’s car bases between entry level and the Taurus. As a consumer who liked cars over SUV’s, minvans, et al., I said Ford no longer was interested in my business.

    GM cars felt increasingly cheap and my opinion was “slapped together because we have to build them ,not because we want to.”

    GM and Ford both remembered the car biz in about 2001 and we are seeing some good efforts now (Fusion, Aura/G6) but I believe they took a five year nap on cars and shovelled all the development dollars on trucks and SUV’s.

    The effort shows but at the moment, not enough people care.

  • avatar
    tlcastle

    GM is saddled with a horrible and probably unfixable corporate culture, high retiree costs, high union-wage costs, high healthcare costs, and a bloated and too-powerful dealer network.

    But there’s one metric that is simply inescapable in explaining why GM cars are so less desireable than Toyota et. al. and so less advanced: R&D dollars spent per model.

    Toyotal has 3 brands. GM has like 9. Toyota has a fraction of the number of models that GM has. Toyota’s main brand is Toyota, while GM is a sort of metabrand that is expensive to maintain but provides no value.

    I once did the math and found that Toyota spends 800% more on R&D per model than GM. Not more, total, but more per model. The conclusion, the result, is as inescapable and irrefutable as gravity: GM’s products are, and always will be, worse than Toyota’s as long as this differential is maintained. There is now way around that glaring fact.

  • avatar
    finger

    GM’s biggest problem is the legacy costs. The unions are going to kill them unless there is a radical change. The “culture” problems lay in the mentality of the union worker.

  • avatar
    SherbornSean

    tlcaslte,
    I don’t see the point of your math. First of all, I would look at R&D per platform, rather than per model. GM has many D midsized models (G6, Malibu, Opel, Maxx, 9-3, BLS, Aura,…), but the real investment is in the platform itself, not the grill/taillights/ignition placement.

    Secondly, what does it prove if Toyota spends more on R&D for the Corolla than GM does on the Cobalt? That Toyota is less efficient at R&D? That Toyota classifies some activities as R&D that GM classifies as SG&A?

    At the end of the day, you need to measure results, not activity. On results, the Camry, Sienna and Rav4 are winners, as are the Tahoe, Sliverado and Enclave.

  • avatar
    Sanman111

    Well, being the child of Boomers, I’ll say this much. American carmakers are starting to move in the right direction, but not nearly fast enough. The market for big SUVs is dying for several reasons. First, I can drive now. Thus my parents don’t need large SUVs to cart around the family. Most of the younger people I know that have families are waiting longer and having less children. Therefore the market for larger SUVs is not filling the needs of most people anymore. THe “fad” factor is dying as well since the rappers are driving more Bentleys more than Escalades now, so the 300C and other large cars are eating into that market. What I feel the boomers will be looking for now are the smaller vehicles, but they will want the ones that can be loaded up with all the goodies they are used to. My mother bought a loaded CR-V and a friend’s mother is looking to trade in her Mountaineer for a Murano. As a twenty something, I can’t think of any GM car I would buy. Maybe the Cobalt, but there are better cars out there. Having American carmakers build supercars is pointless, not nearly as many younger car buyers will buy them. I can think of very few people who would even pick a V-8 mustang over an RSX. Too much insurance cost and bad on gas. If I had to buy now, the Mazda 3 or the VW GTI are among my top picks. Possibly the new Mini cooper S or a WRX as well. But, american metal just isn’t doing it. I will say that I thought the Aura was a big improvement and was impressed by it.

  • avatar
    Eric Miller

    Sanman111 – What part of the country are you from?

  • avatar
    finger

    Why not the Cobalt? I am about to purchase one for my son (new driver) and find it to be quite competitive. Others considered were Corolla and Civiv cpe. All three had advantages in different categories. But all things being equal, I was more comfortable having him in a Chevy.

  • avatar
    Sanman111

    Sanman111 – What part of the country are you from?

    I’m originally from the Northeast, but I have been living in the southeast for a couple of years now.

    Why not the Cobalt?

    As far as why not the cobalt, I don’t think that it is a bad car. It just isn’t the as good as some I can get for the money. If I am looking for a small car, I feel that the mazda 3 and civic are a little more refined. If I had a little more cash, the mazda 3 wagon would carry my stuff more easily. This is particularly important if your son is taking the car to college and wants to bring a lot home on breaks. If I was going more for the cobalt SS, the car needs a traction control system and LSD is expensive on the cobalt and is standard on the Civic Si. The mazdaspeed 3 has more power and space. Also, as far as I know, the chevy doesn’t have the ipod adaptability and navigation of the new civic. I would also want a longer history of reliability, though they do seem to be doing better and the looks aren’t my thing (though that is subjective). Don’t get me wrong, it isn’t a bad car and I would take one over a corolla. However, It is the car that GM should have put out before the Mazda 3 and the well before the new gen civic. With it out now, they are simply in the middle of a crowded field and that doesn’t get you noticed. Now none of this is accounting for the difference in rebates. Also, I am looking more at the higher end on the small car spectrum where more of these differences occur as a base model it might not be so bad. Good luck with the new car purchase and hopefully it works out well for you.

  • avatar

    “At the end of the day, you need to measure results, not activity.”

    This is true, but the latest results from GM haven’t been too encouraging either.

    As one of said college students I was recently in the small car market, and can tell you that the cobalt was never really a serious contender. I looked at it, and drove it, but compared to the competition it always seemed like it was the product of a half-assed effort, not to mention the depreciation and overall quality issues (imagined or not, perception is everything in terms of resale). It wasn’t horrible, but realistically I saw every reason to go with the civic, and no reason to go with the cobalt.

  • avatar
    Johnson

    I agree Stein. Grasping at straws it is. The comments I make are not simply out of thin air. I make comments based on a lot research, studying, and experience of various automakers around the world. I also know quite a bit about the culture and society of North America, Europe, and Japan. This all affects the corporate culture of companies from different parts around the world. The problem is that most enthusiasts don’t have such knowledge, and therefore act as a blind bat, or someone who’s grasping straws on certain topics they don’t know much about.

    tlcastle, good points. SherbornSean, Toyota less efficient than GM at R & D? Doubt that. Toyota is known for it’s corporate culture of constant improvement, and worldwide they are known for pursuing efficiency wherever they can. As for results, it’s quite clear; the Corolla is a class above the Cobalt. In terms of GM’s efficiency in R & D, let’s bring up the Buick Lucerne, which cost GM over a billion in R & D, and yet, is a thoroughly average car with nothing special or outstanding to offer in its class. As a side note, did you know that with the new Camry, when R & D work on it started in 2002, the chief engineer was given a shoestring budget to work with. Toyota expected the chief and his team to improve the Camry in many ways, and he was extremely challenged on a tight budget. Generally speaking, Toyota *does* spend more per car on R & D than GM, and from this year, more *overall* than GM. Why do I bring up per car? Well lets say Toyota only has to worry about 6 variations on a given platform. With GM, typically there are many more variations of the same platform, yet the cars are mainly rebadges. Even the new GMT-900 trucks and SUVs: their interiors among the different models are almost all the same. Look at some of the Cadillac interiors, as well as the Impala interior. Also look at the Buick Lucerne and Lacrosse interiors. You start to notice they *all* look extremely similar. All the various sheetmetal changes cost money. Marketing and other associated costs add to the bottom line. If GM makes a ton of variations off the same platform, yet most of them are thoroughly average and don’t sell too well, then it seems like a big waste of money. Meanwhile, Toyota focuses mainly on relatively few models per platform, and each model then on that said platform is thoroughly differentiated, and very competitive in each respective segment. Thus each model sells well, and is not a waste of money. The last example are GM’s new crossovers. Does GM *really* need the GMC Acadia, Saturn Outlook, and Buick Enclave? Are all three honestly needed? Why not have just the Outlook and Enclave? What beneficial reason was there to develop a GMC version? Simply to not let the brand fall out of favor?

    As for the whole debacle of whether people created SUV demand, or automakers created an SUV trend, let me put this in perspective:

    SUVs technically have been around for decades, going all the way back to the 1930s and the original Suburban. People movers have always been needed, but as trends and markets change, the vehicles that serve the purpose of people movers tends to change.

    SUVs were popular long before the “SUV craze” of the 90s, that is if you look at it from a worldwide perspective, and not narrow your focus only to North America.

    One big reason why American automakers got into SUVs was that they saw a golden opportunity for profits: stick a box for a body onto a truck frame, and sell it for large profits. Demand for SUVs did not just magically appear overnight.

    Chrysler in the 80s had created a new kind of people mover with the minivan, and that caught on in a big way.

    Ford and others after releasing their new SUV models in the early 90s started gaining huge profits, and quickly they focused the company around SUVs and trucks. The amount of profits coming in from them was too tantalizing to get away from.

    SUVs, just like minivans, by virtue of being a “new thing” caught on big with people. And going together with the general American mentality of bigger is better, people starting buying them in droves. The economy was on an upswing, and people felt good about spending money.

    Before the 90s, SUVs were used mostly by those who *needed* them. With the craze, most SUVs were bought by people who had no need for them.

    Meanwhile, Toyota and Honda, again based on their corporate culture and Japanese society in general, wanted to compete here too, but had no suitable platforms. True to their cultures, they innovated by thinking: lets put a box for a body onto a car platform instead of a truck platform. And we won’t call it an SUV, but something else.

    Thus the crossover was born, originally with the Rav-4, Honda CR-V and also the Lexus RX.

    Here you had a people mover similar to an SUV, but cheaper, and didn’t have a lot of the flaws or shortcomings that SUVs had. Crossovers gradually started catching on; it was not a craze, because at the time they weren’t the biggest vehicles around.

    Looking now at where we are, times have changed a bit, SUVs seem old and outdated, and the gradual popularity of crossovers have made them the current hot market to be in for automakers. People are more concerned not just with gas prices, but people are more concerned with the environment too. Americans are not spending the same way as they had in the 90s. Buying patterns have changed.

    So going back to the question at hand, it was in fact domestic automakers who created the SUV craze and pursued it for over a decade, since SUVs had certainly existed before-hand, and there was nothing in the 80s to show that a big demand for them was growing.

  • avatar
    finger

    and overall quality issues ”

    Thats what I mean. What quality issues?

  • avatar
    Voice of Sweden

    Johnson wrote:
    As for the whole debacle of whether people created SUV demand, or automakers created an SUV trend

    Let me tell you my perspective. Well before the SUV-trend, which puts us in the early 1990’s here in Sweden, people traded their ordinary bikes for Mountain Bikes. These were like ordinary bikes, but had a more massive (=heavy) frame and wide tires.

    Since most people use their bike on flat surfaces, mainly asphalt, the only effect was a bike demanding more energy per distance travelled – nothing gained. Exactly like SUVs. But in this case people had to put an effort into the pedal themselves, not just pay up at the pump. And they STILL bought their “SUV”-bikes. This tells us that the SUV-trend must be deeply rooted in the minds of the buyers.

  • avatar
    Johnson

    Hmm, interesting point Voice of Sweden. I will say though that in Sweden, the general culture is not about “bigger is better”, and I doubt that SUVs, super size fast food meals, or huge Walmart stores are all that popular in Sweden. Monsters like the H2 are more novelties in Scandavian countries than anything else. Same with Japan, where the H2 and Corvette are novelties.

  • avatar
    Voice of Sweden

    Hmm, interesting point Voice of Sweden. I will say though that in Sweden, the general culture is not about “bigger is better”, and I doubt that SUVs, super size fast food meals, or huge Walmart stores are all that popular in Sweden. Monsters like the H2 are more novelties in Scandavian countries than anything else. Same with Japan, where the H2 and Corvette are novelties.

    Well, sometimes bigger is better :-)

    SUVs has been popular enough to make some people angry. SUVs are mainly called (transladed) “cityjeeps”. Though statistics prove that they are mainly sold in the north – where they really need 4WD to get through snow etc. The H2 is a novelty, but I’ve seen some. I’ve seen NO 9-7x, not a single one – if it had been a great car people would have imported it.

    Sweden has the most McD restaurants per capita in the entire Europe, so it’s hard to deny that “we” have a certain love for fast food. But, again, statistics show that young girls aged 9 (or something) peaked in weight around 2004. Now McD offers sallads, fruit etc. So fastfood yes – supersize no.

    Even though WalMart isn’t on the Swedish market, the retailing busines is heading that way. But in this area, being big could be good. Suppliers just have to go to one place, instead of many small shops. Economy of scale.

    Sweden is (if you forget about high taxes) one of the more US-influenced countries I know of. And Corvettes are a long time favourite. Now as then – a fast car to be bought cheaper than the Porsche.

    And in case you’ve missed it, one of the people going into orbit in about 26 minutes is Swedish. That’s the reason why many people here hasn’t gone to bed yet, me included.

    So until Toyota putS people into space – “Why worry about them imports?”

  • avatar
    thx_zetec

    voice_of_sweden

    You are 100% right with bicycle comparison. I will add to this.

    When I was in High School (~1980) the fashion was “racer bikes”. The more narrow the tires and the more light the bike the better. These bikes were not good for practical use as they got flat tires very often and were not suited for rougher roads.

    Now as you say we have opposite – people by full-suspension mountain bikes.

    Some people buy full-suspension bikes from Walmart for 200 dollars, these combine complexity (2 derailers, front and back suspension) with very poor quality. These bikes are terrible and will fall apart.

    The other route is to spend 400-2000 dollars for a high quality version.

    Either way seems silly. Most people need a simple bike for road use. 1 speed, 3 speed, no suspension. Simpler and more effective.

  • avatar
    finger

    GM touts global design push, expects sales gains

    Reuters / December 8, 2006 – 5:00 am

    ——————————————————————————–

    Advertisement

    ——————————————————————————–

    DETROIT (Reuters) — General Motors said it expects new products to account for nearly 40 percent of showroom sales in 2007 as it rolls out vehicles designed under a new system to cut costs and revive brands.

    GM executives, meeting with reporters and analysts Thursday evening, also said a key push for the automaker in 2007 would be to take steps to drive gains in the residual value of its vehicles — a key consideration for new car buyers and lease underwriters.

    The steps outlined by senior GM executives are part of the automaker’s strategy of moving beyond the cost cutting that has characterized its turnaround effort this year to show that it can grow revenue without resorting to costly sales incentives.

    GM’s overall U.S. sales were down 8 percent in the year to November and the company is banking on the success of new cars and car-based “crossover” vehicles — including models for its Saturn, Buick and Cadillac brands — to grow revenue.

    GM Chief Executive Rick Wagoner said GM had increased its capital spending by $1.5 billion over the last two years and would continue to invest more to drive sales gains.

    “Next year will be a very important year for us on the revenue side,” Wagoner said, adding GM expected its sales from launch models to rise from 20 percent of U.S. sales this year to nearly 40 percent next year.

  • avatar
    Pch101

    I’m sorry, but this commentary is well off the mark. Explorers and Tahoes are not conveyances of the wealthy, but are the modern successor of the humble middle-class station wagon. They’re minivans for people who don’t want the stigma of driving a peoplemover that, if painted yellow, would most closely resemble a short bus.

    The Big 2.5’s failure rests largely in its continued effort to create awful entry-level cars. Toyota and Honda understands that maximizing LTV (LifeTime Value of a customer) is achieved by putting good, solid stuff in the hands of the young buyer. The young and happy Corolla buyer of today becomes the Camry buyer of tomorrow, and the Lexus and minivan buyer of the day thereafter. One successful sale made early in the customer’s life leads to many decades of increasingly profitable purchases to follow.

    GM in particular has to understand that the main benefit of a compact car is not gained from today’s sale, but in its contribution to making tomorrow’s sale. You give up margin now to gain brand loyalty later. Unfortunately, when the beancounters mind the store, they seem to forget that you won’t sell a lot of beans if you keep scaring off your potential customers.

  • avatar

    @Pch101

    I’m sorry, but this commentary is well off the mark. Explorers and Tahoes are not conveyances of the wealthy, but are the modern successor of the humble middle-class station wagon.

    Tell it to Bob Lutz, I didn’t make up that quote. :-)

    The Big 2.5’s failure rests largely in its continued effort to create awful entry-level cars.

    And that’s precisely the point of my editorial — they took their eye off the ball. And the ball is entry and mainstream cars.

  • avatar
    Pch101

    Tell it to Bob Lutz, I didn’t make up that quote.

    I wouldn’t take Lutz’s flippant quote as a poignant analysis of the SUV market.

    According to the CNN article referenced below, the average cost of a new car sold during 2006 in the US was, inclusive of finance charges, about $26,500. Compare that to a 2007 Chevy Trailblazer, that has a starting MSRP before rebates of under $25k. Behemoths such as the Durango and Explorer have had similar pricing. That is pretty much dead in the middle of the price range.

    I wouldn’t confuse high price, which SUV’s are not, with high margin. SUV’s were highly profitable because they rely on outdated technologies and old engines, so there is little in the way of R&D and design innovation required to develop new models. They have been priced toward the middle and somewhat to the right of the middle of the bell curve, the place where the middle class lies, but the margins have been substantial.

    The real underlying message here is that Detroit is too cheap and lazy to invest its money into an R&D effort that will generate high quality cars — the quest for margins makes that sort of initiative appear to the beancounters to be too cost prohibitive of a thought to entertain. SUV’s were appealing because they have offered the opportunity to sell 70’s technology at modern prices., it’s just a shame for Detroit and Dearborn that the fuel prices finally kept up the pace.

    GM spends fairly similar amounts on R&D as compared to Toyota, but spreads it out over far more models — too much badge engineering, and not enough of the real deal. While TMC is busy developing hybrids and the Next Big Thing, GM is installing four-speed automatics and attaching them to engines that have seen less evolution than a Baptist Sunday school. It’s not the price range or the demographic that’s the problem, it’s the product.

    CNN article: http://money.cnn.com/2006/11/13/autos/affordability/index.htm?postversion=2006111311

  • avatar
    Johnson

    For 2006 at least, Toyota is spending more than GM on R & D, by about a Billion or so … and the two companies’ financial situations couldn’t be any different.

  • avatar

    @Pch

    The point is that once the bottom fell out of GM’s truck/SUV market, they thought they’d build a bridge to profitability with spec’ed up versions directed at the “oblivious” rich. Yes, it’s a throwaway quote from Bob, but it nicely encapsulates GM’s cloistered thinking on the issue. They were hoping that iinsane financial incentives would help them get rid of sub-standard cars, while the rich would help them unload the “top” cars in their lineup … :-)

  • avatar
    Pch101

    Johnson –

    For 2006 at least, Toyota is spending more than GM on R & D, by about a Billion or so

    Based upon their annual reports from the last four years, GM and Toyota R&D spending has been very similar:

    Year – GM R&D (US$billion) – TMC R&D (US$billion)
    2005 – $6.7 – $6.9
    2004 – $6.5 – $7.0
    2003 – $6.2 – $6.5
    2002 – $5.8 – $5.6
    Total – $25.2 – $26.0

    The difference isn’t so much in how much they each spent, but in how they spent it. Compare the number of nameplates produced by each automaker, and you can see that GM’s spending per vehicle is substantially lower than is TMC’s. That’s one of the primary disadvantages of having so many badges and so many nameplates — GM would have to double or triple its R&D budget to be on equal footing.

    Of course, the obvious alternative is to just kill off these excessive nameplates, which would stem the bleeding and leave more cash for some projects that might actually bring GM into the late 20th century, such as adding a fifth gear to an automatic transmission…

  • avatar
    Johnson

    Pch101, agreed.

    Toyota has more money to spend per model than GM. And Toyota does not make several rebadges or versions of the same car. There are already 3 versions that GM has of it’s full-size Lambda crossover, and rumours are that there will be a fourth Chevy version. It seems that GM still has not learned from past mistakes. Frankly, there is simply no need for the Outlook, Acadia, Enclave, *and* a Chevy version. This is too much overlap, redundancy, and wasted R & D. And again, it goes back to GM having too many brands.

    But as I said, it’s torubling news for competitors to see that Toyota is spending about 8 Billion this year in R & D, as opposed to GM which is spending about 6.9 Billion. So now not only is Toyota spending more per vehicle, but it’s spending more *overall* compared to GM. Until GM radically revamps itself, this gap will only grow larger.


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