By on September 17, 2013

 

JUSTIFICATION-1

I still remember the day my parents bought me a copy of the iconic Justification for Higher Education poster.  I had been nagging them for a while, and when I finally got the poster, it took immediate pride of place in my childhood bedroom.  Having matured, I recognize now that the imagery depicts a lifestyle unlikely to be the preserve of the highly educated, but instead that of a lottery winner.  Didn’t matter then, and it doesn’t matter today; the now ratty old poster followed me to college and again to my grown-up domicile.

In retrospect it’s a bit strange that I had the poster in college; residing in the middle of nowhere with no meaningful income, afflicted by terrible weather, and living under the thumb of an overzealous local police force due to strained town-gown relations, it was a bit difficult for me to maintain my passionate appreciation for automobiles during my tenure in Lexington, Virginia.  About halfway through my collegiate career, the majority of which constituted pre-sinecure studies under the auspices of a liberal arts education, I had the opportunity to take an economics elective entitled “Economics of the Automotive Industry.”  Although the professor had an intimidating reputation – an uncanny resemblance to Larry Ellison, a brace of Ivy League degrees, a fearsome ability to decimate GPAs, and remarkable loquaciousness during office hours, ensuring that every visit did indeed last for hours – I decided to take the course anyway.

Besides, I probably already knew everything we’d cover anyway, right?  In a word, no.

I came into the course in the spring of 2009 with an essentially encyclopedic knowledge of every sliver of ink spilled over the past decade in any automotive publication available at Barnes & Noble, and most ones and zeros dedicated to the subject, as well.  I faced a sudden realization that this “knowledge” would be a hindrance rather than a leg up, and that I needed to start thinking critically and reading Automotive News instead of Evo if I wanted to do well in the course.

I learned, begrudgingly, that the car business is just that, a business.  Rather than altruistic benefactors pumping out titillating metal to thrill internet fanboi bench racers who are only occasional purchasers, automakers exist to provide a return on their owners’ invested capital, period.  In the wake of the financial crisis, the business case for vanity projects with a tenuous, at best, connection to the remainder of an OEM’s model line is still somewhat problematic.

In addition to the high visibility, high name recognition manufacturers, the industry – when broadly construed – has tentacles encompassing a major portion of the domestic economy, including suppliers and distributors, with far-reaching labor market consequences.  My classmates and I were forced to confront the conundrum of vertical coordination, the difficulties of product planning given exceptionally lengthy lead and development timelines – not to mention evolving regulatory, safety, and emissions targets – as well as the economies of scale characteristic of a global durable goods industry.

Consider all of these factors in light of dynamic exchange rates and the boom-bust business cycle, and it’s no wonder that automakers seem unconcerned about appeasing the peanut gallery of enthusiasts.  My parents paid lots of money for me to receive this wisdom, but you can acquire it relatively cheaply if you’re willing to learn some basic economics, read a little, and disavow your personal sacred cows – just like this guy; I suppose it may be somewhat difficult to, uh, justify this particular aspect of my education.

The traditionally “enthusiast” manufacturers face even more difficulties; they have the option to adapt, evolve, expand, and grow, with the caveat of potentially enraging the existing, enthusiastic customer base and exposing themselves to more mainstream competition, or they can opt toward stubborn stagnation, arresting forward progress while the proverbial doting family calls the hospice.

Although there are several successful practitioners, the former strategy is exemplified by – of course – Porsche; but for the terrible, horrible, no good, very bad 986 Boxster and 996 911, as well as the Cayenne and Panamera, the company probably wouldn’t exist anymore.  The latter strategy is probably best exhibited by Lotus, whose slow-motion snuff film has recently been protracted once more.  Despite the best efforts of now-deposed CEO Dany Bahar to jump-start the company, broaden the product offerings, and make the Lotus badge a viable economic contender for the 21st century, alleged expense indiscretions left him persona non grata in Hethel.  Now all of his ambitious plans have been scrapped, and Lotus remains a paragon of purity, with plans to produce only sporting, enthusiast-oriented cars for the foreseeable future.  Any perceived moral victories will also be Pyrrhic; nothing fundamental about the company has changed, but the marketplace in which it competes has.

So what can Lotus do?  Can they sell out just a little bit and not compromise the brand’s ideals?  Perhaps Lotus can move toward survival by whoring itself wholesomely while not tarnishing its existing reputation.  The engineering arm of Lotus has enjoyed many associations over the years, some more favorable than others.  Tinkerers as diverse as Hennessey and Tesla have borrowed liberally from Lotus’s chassis cookie jar in recent years, and there is a long list of ordinary cars that sought to import a bit of cachet, touting “Handling by Lotus.”

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To ensure its long-term survival, Lotus has to find a viable business plan somewhere between pinch-hitting for other sports car manufacturers and pimping its name out on  work-a-day sleds.  Best of luck.

A special thanks to Mike Smitka, one of my favorite collegiate professors, for forcing me to examine my hobby dispassionately and rationally.  I am fortunate to have had his guidance in conducting an atypical senior year project, as well as his continued input on my career and my passions as an alumnus.  His musings about the automotive industry and related topics can be found here.

David Walton grew up in the North Georgia mountains before moving to Virginia to study Economics, Classics, and Natural Light at Washington and Lee University.  Post-graduation, he returned to his home state to work in the financial services industry in Atlanta.  A lifelong automotive enthusiast, particular interests include (old) Porsches and sports car racing.

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94 Comments on “Justification for Higher Education, the Erosion of the Enthusiast Market, and Wholesome Whoring...”


  • avatar
    28-Cars-Later

    I love the poster, +1 just for using it.

    • 0 avatar
      Easton

      Did yours have the illuminating tailights too?

      • 0 avatar
        28-Cars-Later

        Yes it did, but it was more of a wooden picture than a poster, it literally had LEDs.

        • 0 avatar
          bball40dtw

          I have a buddy that has that same wooden picture in his garage. The public school of my youth did not have such funds for wooden pictures with lights. Somehow we had enough money for an $80 million football stadium with lights and state of the art field turf.

          • 0 avatar
            forzablu

            Did you by chance attend a certain large educational park in SE Michigan? Outrageously expensive field turf football fields sounds like my Highschool.

          • 0 avatar
            Kenmore

            “state of the art field turf”

            Do my yard next?

            ‘Cause otherwise I’m blacktopping it.

          • 0 avatar
            bball40dtw

            forzablu-

            No, but my wife did, and I lived near PCEP for a few years. I grew up about 20-30 minutes NW in Brighton.

    • 0 avatar
      azmtbkr81

      Someone really ought to update this poster. The modern version would have mom’s basement, an iPhone, and a fixie bike.

      • 0 avatar
        Kenmore

        Boom :-D

        Don’t forget the Trayvon poster and the little Grolux sinse project in the corner by the sump pump.

      • 0 avatar
        28-Cars-Later

        Don’t forget a diploma in basket weaving and an IOU for 100K.

        • 0 avatar
          aristurtle

          What, is it 2004 again? Go recheck the actual statistics rather than the easy caricatures.

          Everyone got the memo back in 2008. Now there’s a huge glut of STEM majors going through the system, ready to flood all of the entry-level engineering jobs when they graduate. It’s an overcorrection, just like what happened with law schools back in the nineties.

          • 0 avatar
            28-Cars-Later

            Nah, I’ll stick with easy caricatures when cracking bad jokes.

            What happened with law schools in the 90s?

          • 0 avatar
            aristurtle

            The short version is that a meme went around that the prelaw undergrad -> law school path was a great way to leave school with a high starting salary, and the result was that law schools produced many more graduates than there were openings.

            Same thing is happening with STEM right now, and the only reason it isn’t happening with medical school is the AMA’s, uh, “invisible hand”.

            The people getting degrees on credit in underwater basket weaving and [insert word here] studies were never a large enough percentage to really screw up the whole system but they sure do produce news articles that make the reader feel better about themselves for not following that path, which is the whole point.

          • 0 avatar
            racer-esq.

            I remember the JD = just dollars jokes from the late ’90s. Hahahahahaha now.

            I like the idea of people learning STEM, and it is shameful how poorly we teach it at the high school level (except for our rich and upper middle class high schools, which are better than any high schools in Europe or Asia). I really like MOOCs as a free/cheap way for people to learn STEM for their own enrichment. But the idea that STEM is the solution to unemployment and underemployment in the US is a fantasy.

            Mr. President, there is no engineer shortage:

            http://articles.washingtonpost.com/2011-09-01/national/35276052_1_engineer-shortage-chinese-engineers-china-graduates

            Healthcare demand is going to be huge across the board because of boomers getting old and qualifying for Medicare, and because of the ACA, but if not for that nurse practitioners would be putting a lot of pressure on doctors short of highly skilled surgeons.

          • 0 avatar
            ChrisCraft

            aristurtle,
            As far as the AMA comment goes, many MD’s are not members, nor does the AMA control admissions.
            Years ago, our best and brightest flocked to med school because they saw it as a way to work hard, achieve, and prosper while helping people with their medical needs.
            IMO, many of today’s best and brightest are avoiding med school due to the prolonged years of study and debt and the future of being under the absolute control of the federal government. They will be nothing short of civil servants with a fixed salary. A crisis coming in medicine? You betcha.
            Most of the guys I know are going to be bailing out ASAP.
            I have a friend who is a phenomenal orthopedic surgeon. He makes far less now than he did 20 years ago. And works more due to medicare payment guidelines.
            He says it gets harder to justify doing what he does for the decreasing fees that he IS ALLOWED to collect. Why bother?
            There are easier , faster ways to earn money without the stress and headaches involved. We, as a society, are soon to see our “best on the face of the earth” medical system destroyed.

          • 0 avatar
            mnm4ever

            I don’t know if STEM degree holders will “flood the market”. Granted, those degrees have become a lot more popular, but they are still difficult for the average student to comprehend. Law school is comparatively easy, while you might not make a good lawyer you can pass the classes and tests. Math and science is still very difficult for people to understand, you either “get it” or you don’t.

            Of course my son is in his Junior year of Mechanical Engineering, so maybe I am just be hopeful that he will do well with his education!

          • 0 avatar
            racer-esq.

            Re: ChrisCraft:

            Doctors always whine about how bad they have it. They always have. The whining about Medicare is particularly disgusting. No doctor has to take Medicare. They take it because they need the business. Most old people would not be able to afford healthcare without Medicare, they would just die without doctors getting a cent. But instead the government steps in and creates demand for medical services by paying for treatment for those old people. A doctor that is truly great can refuse Medicare and just treat the wealthy out of pocket – he can treat some poor people that aren’t yet 65 pro bono if he feels charitable.

            Lawyers would LOVE it if the government came in and started paying the legal bills for anyone over 65 that wanted legal services. But doctors whine about that. Because they are spoiled entitled brats.

            The funniest is when doctors claim they would do something else? What, law, banking? Yeah, because doctors are really known for their writing and investing skills.

            Being a doctor is a monopoly created by government regulation, with the barrier to entry of a medical degree. Other than lawyer (which is NOT a good profession to get into right now) there aren’t really any education/license requirements for other high paying professions. If the orthopedic surgeon is so brilliant across the board (and not just a good surgeon that would be mediocre at anything else) then he should start a company. Be an entrepreneur. Stop with empty threats about not being a doctor, and actually quit being a doctor. Put up or shut up.

          • 0 avatar
            racer-esq.

            Re ChrisCraft:

            “There are easier , faster ways to earn money without the stress and headaches involved.”

            Doctors always whine about how bad they have it. In reality they have it great with Medicare giving them guaranteed clients. Lawyers would LOVE it if the government paid lawyers to represent anyone over 65 that wants legal services. If a doctor is as great as they think they are they can refuse Medicare and only take out of pocket patients.

            What is a doctor going to do, become a lawyer or banker? Right, because doctors are really known for having good writing and investing skills.

            Being a doctor is a monopoly created by government regulation. A medical degree is the barrier to entry. Most other high income professions (except for law, which is NOT good now) do not have that barrier to entry. Any doctor can become an entrepreneur and start a company. If they really are talented across the board, and not good doctors that would be mediocre at anything else.

          • 0 avatar
            David Walton

            Re: racer-esq.

            I don’t have a STEM degree. I also had the misfortune to go to a liberal arts school and spend a lot of my time studying philosophy and dead languages (Latin, Ancient Greek), and I haven’t taken a science or math class since high school.

            Against all apparent odds I developed a set of skills that’s accorded value in our economy.

            I know a lot of people from high school and college who are in med school. Only two of them possess truly remarkable skills, in my assessment. The very smartest, most elite minds typically flock elsewhere when they leave school; the ones who aren’t working under financial duress often avoid finance and consulting, as well.

          • 0 avatar
            ChrisCraft

            racer esq,

            You implied that the orthopedic surgeon I referenced might be mediocre at anything else. How absurd.
            The man is an accomplished musician (numerous instruments) and played with the symphony orchestra in his previous location.
            More importantly, he holds numerous patents on devices that he designed, mostly related to knee/hip replacements.
            His patients love him. Funny, I’ve never heard anyone say they love any lawyer.

        • 0 avatar
          Kenmore

          *Sustainable* Basket Weaving, thank you very much.

          • 0 avatar
            28-Cars-Later

            Thx Kenmore, I also forgot to add through the lens of social justice and feminism.

            I s*** you not:

            http://www.carlow.edu/PsyD_Counseling_Psychology.aspx

          • 0 avatar
            Kenmore

            Wow…

            “psychology doctoral programs with a social justice focus”

            I sense, Clifton, that you’re someone who hates canadians and hates God for making canadians. I believe I can help you work through that if you’ll allow me.

            Because, you’re better than that.

          • 0 avatar
            Xeranar

            I would point out for everu major in that there are roughly 7 business majors. Ironically they’re the ones suffering the worst because those silly lib arts people went into artisan work which didn’t suffer as hard due to the upper class doing better.

            If you want a stable career after higher ed get into an MBA and whore yourself to corporate america. I enjoy my shabby ed job but there are times I’ve been tempted to go into big business for the dollars.

      • 0 avatar
        bball40dtw

        My generation sucks (The actual generation, not the song by The Who).

        • 0 avatar
          azmtbkr81

          Our generation doesn’t suck, we’ve been dealt a shitty hand. We’ll spend our lives slowly fixing everything that is broken and can hopefully turn things around.

          • 0 avatar
            28-Cars-Later

            It’s all going to come down sometime before or during our watch. Hopefully we can take a page from our grandparents and rebuild it.

        • 0 avatar
          bball40dtw

          Sometimes I feel like there are more people my age that would rather play World of Warcraft than fix societal problems. Hopefully you are right.

        • 0 avatar
          Kenmore

          Every generation mostly sucks.

          I don’t see you guys as part of the “mostly”.

          • 0 avatar
            bball40dtw

            No I have to go put a compliment from a fridge, on my fridge.

          • 0 avatar
            Kenmore

            Magnets, please. We effin’ hate tape.

          • 0 avatar
            bball40dtw

            I like to make things into magnets to put on my fridge. I have a bunch of old car badges and logos that make great magnets.

          • 0 avatar
            Kenmore

            Cool as hell! I have a drawer full in the garage and I never thought to do that, including a pristine hood badge from a ’54 Bel-Air.

            Have magnets, have hot glue…banzai!

          • 0 avatar
            aristurtle

            For the heavy ones, use a neodymium magnet salvaged from a dead hard drive.

          • 0 avatar
            Kenmore

            Thanks. God knows we have enough of those in the family’s basements.

            And I’d prefer the heavy ones not falling off and onto my wife’s bare toes. That could curb her willingness to share surface space with me.

          • 0 avatar
            28-Cars-Later

            I’m going to screen snap this and save it for my fridge:

            Magnets, please. We effin’ hate tape.

          • 0 avatar
            Kenmore

            Jeez… everybody’s got good fridge ideas ‘cept me.

            I may be too close to the subject.

          • 0 avatar
            golden2husky

            I do the car logos on the fridge too. How I did mine was to take the magnets that come when you buy from RocK Auto and trim them to fit behind the car logo. I attach the picture side of the Rock Auto magnet to the back of the logo with contact cement (the flammable variety) and viola! cool car fridge magnets. Of course the wife wanted a stainless fridge so they no longer stick to the front, but the side is regular painted steel…the first one I made was from the Ninety Eight logo off the car my friend drove into a tree 2 plus decades ago.

      • 0 avatar
        Lie2me

        …and an SUV, there’s no SUV in that garage

      • 0 avatar
        racer-esq.

        “Someone really ought to update this poster. The modern version would have mom’s basement, an iPhone, and a fixie bike.”

        The modern equivalent is a military recruitment poster. Live in an exotic location. Drive MRAP rolling stock that puts the cost of the modern version of anything in the garage, including the Ferrari, to shame.

        If the government is going to waste massive amounts of money on the military as form of politically acceptable Keynesian spending, and as payback to defense contractor donors, young people might as well take advantage of it.

    • 0 avatar
      David Walton

      Thank you!

      I specifically like the older poster, not the newer versions.

  • avatar
    LeeK

    There is a possibility for an enthusiast oriented company still being profitable. As much as Porsche purists abhor the Cayenne and Panamera, they are performance-oriented versions of their particular segment, SUV and luxury sedan respectively. It matters not to me that 911 owners feel outrage when seeing the Porsche logo on the rump of the aforementioned, I still consider them a manufacturer that leans toward the performance side if the equation, albeit expensively and I gather profitably. It can be done.

  • avatar
    bball40dtw

    I remember the poster from my high school AP Calc and Stats classes. I think that’s all I remember from those classes. I don’t miss factorials, binomial coefficients, or any of that jazz.

  • avatar
    Quentin

    Car business is just that… a business. I have a 2010 4Runner with the V6 5AT combo. The drivetrain works very well returning a sub 8 second 0-60 and 22mpg before I threw heavy all terrains on it. There are guys on the forums that want a diesel or a V8. Theoretically, Toyota could definitely offer the 4.6L or the 5.7L w/ the 6AT in the 4Runner. Basically, it comes down to this: how many people walk away from the 4Runner because it is missing these options and does that number of people financially justify the cost that comes with offering the bigger/different engines. This is where capacity, model mix, and currency volatility really come into play. Adding these options might make the 4Runner less profitable when all is said and done. Considering the 5th gen 4Runner hasn’t had any incentives (other than $1000 in some regions after pedal gate in 2010), I would say the 4Runner is practically where Toyota wants it to be. I’m sure the guys at Toyota would love to offer a 5.7L V8 4Runner decked out in an FJ trail teams style, but only a very small segment of buyers are asking for that. The Grand Cherokee’s position in the Chrysler family and the market gives it more room to play when it comes to offering different engines and trims. It has a broader market thanks to IRS and a unit body instead of SRA and body on frame. It simply has a much broader market since it errs to the CUV side a bit more. It is also required to be Jeep’s volume product. It needs to have a broader appeal. The 4Runner is a niche even within Toyota’s portfolio. At the end of the day, the car business comes down to business decisions.

  • avatar
    hands of lunchmeat

    i cant believe they still sell it. I wonder what a modernerized version of this poster would have?

    No one really seems to remember how close Porsche was to insolvency back in the early 90s. a recession and an aging product line, weak exchange rates, and a very limited development budget. The 989 project was the original Panamera, and it was mothballed due to these reasons, along with management being incredibly gun shy about any new and radically different projects after their last moonshot, the 928, was panned by the jacket and free hat PCA member brigade.

    The Boxster was the turning point from Porsche being a small car builder/engineering company to a much larger scale manufacturer. The Cayenne and Panamera that followed gave them the coffers to make them believe they could actually buy a company far larger than theirs.

    Do i like either of the latter two? Hell no. Do i feel that as a business, it is what Porsche had to do to be viable in todays market? I think you already know the answer to that.

  • avatar
    Pch101

    “Rather than altruistic benefactors pumping out titillating metal to thrill internet fanboi bench racers who are only occasional purchasers, automakers exist to provide a return on their owners’ invested capital, period.”

    That’s only partially true. The automotive business, similarly to the airline industry, also includes a noteworthy component of irrationality. Companies often do things that make little or no sense, often due to ego or internal politics.

    Take the likelihood that VW will bring back the Phaeton to the US. The car never sold well, the dealers aren’t capable of handling the clientele that would buy it, and it probably does more to cannibalize the A8 than anything.

    It takes money and effort to support the car through marketing, training and support, all of which ensure that it’s a money loser. Yet the Phaeton will probably happen because one guy at the top wants it to happen. If it was something unglamorous such as a stapler or tv set or computer printer, then the thought of reintroducing such a loser to market wouldn’t even be on the table.

    GM spent decades floundering because it failed to realize that the 60′s ended in the 60′s. Ford allowed GM to surpass it because it took too long for the guy in charge to realize that the car market had changed and that he needed to change with it. They lose money because of these poor decisions; it isn’t just about the money.

    • 0 avatar
      David Walton

      “Rather than altruistic benefactors pumping out titillating metal to thrill internet fanboi bench racers who are only occasional purchasers, automakers exist to provide a return on their owners’ invested capital, period.”

      The above is the way things theoreticallly are; deviations from predictable, “rational” behavior aren’t rare in markets, but there’s almost always a way to explain outcomes given the incentive structures with which participants are confronted. Just as your anecdotes illustrate.

      • 0 avatar
        Pch101

        “there’s almost always a way to explain outcomes given the incentive structures with which participants are confronted.”

        That’s partly true, but only partly.

        Humans are human. They bring their own baggage to the table, whatever that table is. They often hunger for authority and empowerment, and many suffer from hubris and pride. And they often ignore facts that would contradict their thinking, because there’s more comfort in feeling right than in discovering that one was wrong.

        The profit motive only explains part of what happens within companies. It does matter, but not as much as free enterprise types tend to think. If profit motive was as central as some claim, then we wouldn’t see much of what happens in modern business today. More than a few companies succeed in spite, and not because of what they do.

    • 0 avatar
      DC Bruce

      Well, hindsight is always 20/20. The problem with irrationality as something to be avoided no matter what is that sometimes irrational decisions work out spectacularly well. For example, is there any doubt that the Mustang was an irrational decision? Even by the standards of its time, the original Mustang was no sports car. It was just a sedan with cramped back seats and an overly-long hood. And yet . . .

      Then there’s the SUV. In a world with station wagons and minivans, someone gets the idea of building a passenger body on a 4 wheel drive pickup truck frame. The resulting vehicle is heavy, ponderous and thirsty for its carrying capacity, comparing unfavorably in every respect (other than off-road capability, which no one uses) with its station wagon and minivan competition (consider that the original BMWX5 had less cargo capacity that the 3-series station wagon of the same model year). And yet . . .

      And, how about Porsche? In the 1950s, a light car with a light air-cooled rear engine made a lot of sense, especially in terms of packaging efficiency. However, as the engine got bigger and heavier, the problems associated with the rear-engine design began to outweigh the advantages (the original 911, while faster in a straight line than the last generation 356, was far more difficult to handle, as a number of new buyers found out). So, quite logically Porsche started developing water-cooled, front-engine sports cars to succeed the 911: the 924, the 944, the 928. And, yet, they all were abandoned; and the 911 continues on . . . with the only derivative being the Cayman/Boxster, which shares more DNA with the 911 and its predecessor than with the extinct 92X line. The Panamera, of course, is a sedan, not a sports car.

      The bottom line: rationality as a business strategy is overrated. In hindsight, decisions that don’t work out are labelled “irrational.” Those that do work our are labelled “inspired.”

      • 0 avatar
        Pch101

        “is there any doubt that the Mustang was an irrational decision?”

        It was exceptionally rational: Take a family sedan chassis and most of the parts, bolt a different body style onto said chassis, and use the result to sell recycled parts to a different demographic, with no competition. Pure genius, really.

        “Then there’s the SUV.”

        It makes perfect sense for automakers to produce them. Customers want elevated seating positions. Detroit recycled their truck frames to create them, while Toyota figured out how to do the same with passenger car platforms.

        “And, how about Porsche?”

        Porsche had to deal with resource constraints. There was a niche model for a sports car along those lines.

        There was, and there remains, a rational business model for sports car. But globalization had all but eliminated the chance for an independent car producer to survive. The lower volume brands could work when markets were protected and highly localized, but that is no longer the case.

        The point is that bad decisions are made often, and profit isn’t the only factor in how decisions are made. Intro econ classes assume rational actors motivated by profit, but that just offers a framework for further study and provides only an incomplete answer to the real-world question of what motivates people.

        • 0 avatar
          David Walton

          As is often the case with academic fields of study, practitioners will often seek to defend their department – it’s their livelihood, and they spent a long time in school learning it, so they identify with it.

          I know there’s (at least) one economist reading this thread who’ll acknowledge the rise of “behavioral economics” as a subfield that attempts to account for apparent deviations from rationality.

          Any (effective) model is by necessity a simplification of reality; if your model/rule for understanding is incontrovertible, then I’d wager that one of the following is true: the phenomena that you sought to describe weren’t complex, or you’re a genius.

  • avatar
    Kenmore

    What does anyone figure the enthusiast market amounts to; i.e., what percentage of the car buying public actually buys, used or new, their Passionata GTZ and maybe even another one after that?

    3%? 5%? Hell, gays are a more important market segment.

  • avatar
    Blackcloud_9

    I think many enthusiasts forget that the “car business” is a business. I can’t remember how many times I’ve read, “Can’t they just drop a V-8/diesel/turbo/etc. in there?”.
    “Dropping” in a V-8 changes the whole dynamics of a car all of which have to be accounted for in the initial design of the car. This adds cost and its the potential return on that cost that ultimately decides whether that V-8 will be added or really dropped.

  • avatar
    Crabspirits

    That poster is famous with the heavy-hitters in the 24 Hours of Lemons. There is only 1 car in that stable left to be raced for under $500. I thought a lemons Ferrari would actually make it last year more than once (yes, you can find a smashed, burned, and stripped Ferrari for scrap value).

    I’ll just let that set in.

  • avatar
    fredtal

    You all must be under the impression that Lotus was ever a successful car company. It may have a few profitable years now and then but that’s about it.

  • avatar
    azmtbkr81

    Car companies ignore enthusiasts at their own peril. Halo/enthusiast models show off engineering prowess, generate media buzz, and bring buyers into showrooms – even if they fail go generate a single cent of profit from actual sales. Abandon enthusiasts and what are you left with? Honda.

    • 0 avatar
      bball40dtw

      Honda has two of the three best selling cars in the country and the best selling CUV. I think plenty of manufacturers would like to be in that position. But yes, Honda is like automotive Ambien to me. People sure do like them though.

      • 0 avatar
        azmtbkr81

        You are absolutely right but Honda is riding the wave of admiration they’ve built up over the last few decades; they should be very afraid of Hyundai and others who can now offer similar quality for a lower price. Honda inches ever closer to having a lineup of commoditized vehicles with little to differentiate them from their increasingly competent competition now that engineering has taken a back seat to whatever their priority is these days.

        • 0 avatar
          sportyaccordy

          Yes, but Honda having a few sports cars in the showroom wouldn’t change that. Nissan has the GT-R and the Z, but other than that their lineup sucks. Nobody in the market for a Sentra will cross shop its competitors and say, ‘well the Sentra is dull as hell to drive, but since it shares floor space with the GT-R I will buy it instead of a Mazda3 or Focus’. And enthusiasts just buy used. There is no logical reason to make cars that are unprofitable or even worse unsellable. Honda is probably more profitable now than its ever been, and in terms of the sustainability of the company that is all that matters.

  • avatar
    olddavid

    Did I read Professor Smitka’s piece correctly? A country with One Billion people only sold 180,000 cars in a month? That shocks me. This man obviously inspired you. My inspirational mentor was a disillusioned attorney with a penchant for international business. RIP Mr. Ady. We should all be so lucky to run into an inspired instructor. What are we doing so wrong these days that 50% dropout rate is sadly the norm in many cities? You cannot get an education watching TV, I don’t care what the TV tells you.

    • 0 avatar
      David Walton

      He is an excellent professor, interlocutor, and friend.

      Some of the posts on the website are authored by students, although the bylines will alert you.

      FWIW, he’s a non-enthusiast who has “never driven a sports car.”

      • 0 avatar
        olddavid

        That is where the best, dispassionate analysis comes from; those without a dog in the hunt. It’s great that you’re young enough to honor his contributions. Previously, the curiosity seems to be that the older we get, the smarter our mentors become, ergo, they are almost always honored posthumously.

  • avatar
    Boff

    As a professor, I’m sure your professor was tickled to know that he made a difference in some way.

  • avatar
    Nick 2012

    “Although there are several successful practitioners, the former strategy is exemplified by – of course – Porsche; but for the terrible, horrible, no good, very bad 986 Boxster and 996 911, as well as the Cayenne and Panamera, the company probably wouldn’t exist anymore.”

    Porsche was analogous GM or Ford for a long time during the 2000s because it made its money from financial deals rather than operations. It survived through shrewd currency hedging and opportune investments. The Cayenne and Panamera didn’t save the company – its currency risk strategy and investments did.

    2004 WSJ Article: http://online.wsj.com/article/SB110246896655993946.html

    2009 BBC Article:
    http://news.bbc.co.uk/2/hi/business/7843262.stm

    • 0 avatar
      David Walton

      The developmental genesis of the first gen watercooled cars and the Cayenne predate those trends by several years.

      The company’s substantial operating profit per unit – doubtless difficult to calculate if you aren’t privy to internal cost accounting documents, but often quoted as averaging $28k per unit – is nothing to sneeze at.

      When I began to read your first sentence I anticipated a comparison between the reliance on fat SUV profit margins to pad the bottom line.

      I’d contend that Porsche’s adventurous financial endeavors were only made possible by several years of the aforementioned fat profits.

      Of course, living by the sword may force one to confront (nearly) perishing by the sword… a story for another day.

  • avatar
    Freddie

    The good news is that the functionality of an enthusiast’s car – responsive and stable acceleration, manuevering and braking – has been recognized as having value even for the non-enthusiast and has gone mainstream. As has been frequently reported, most of today’s boring sedans drive better than the “performance” cars of the past.

  • avatar
    Boxerman

    Honda and Toyota to neme two would love to have an inspirational sports car. What thye make are bland boxes, and someone else always comes along who can make abetter cheaper bland box, aka hyundai.

    Honda used to be something special, remember when they had wishbone suspenmsion and superlative motors. Theh any honda could be made into a sports car.

    Now look at the Germans. Mecedes went out and bought AMG. BMW does M and Audi RS. These cars sell at such a premium that they make money even in small volumes and the velopment of an existing platform is not that high.

    Now lotus. They make the fames and bodies, actualy the frames are farmed out. the really diffucult capital intensive part being the powertrain they buy in. Their model is actualy pretty good. What thye need is product and cachet. The Elise based cars are always going to be limited, theb EVora either needs to get a whole lot fatser or a whole lot less expensive if its going to be a porche subtitute.

    Plus the Evora needs a restyle. There was a mansory version that actualy looked great, there was also a verison with a cosworth headed motor that put out 450hp.

    You dont belive sportscars make money. Hmm I guels that little Italian outfit caller ummm Ferrari shouldnt be so porfitable then. I guess Audi made ahuge mistake buying lambo and building the R8. Sortscars sell, and manufacturers canb make a premium price on them, but they have to be positioned and competitive.

    Thats why GM races vettes, and play to the heritage and yes makes profits on these.

    I bet even the Miata saved Mazda, they are cheap to make and pretty much everybody knows what it tis.

    Subaru with the WRX,

    There are 3 basic genre of soprts car then.

    1.On the high end you have full bespoke cars, like lambos ferraris and some porches etc, everything is made for that car and model.

    2. Then you have cars that take significant parts from the sable and rebody. Think Miata, Lotus, any old healey or Jag, even the new F type and arguably the vette.

    3.Then you have cars that are pumped up sedans, M3 Evo WRX RS some porches.

    Each one of these categories make money for their manufacturer.

    Cat 1 are the most expensive ans bespoke costs cubic $$$
    Cat 2 fits in the middle as they boorw a lot of parts and maybe 50% is bespoke.
    Cat3 costs the least relatively as they are pumped up sedans.

    All of these make profit and provide halo for the manufacturer. The smart ones incoprate some little elements into their bread and butter cars, giving the buyers the inporession of something premium and sporty. Without the halo your bread and butter can sell on relaibility featurea and price, in other words no premium profit.

    Lotus and Aston are pretty mnuch the lats two independants left. Aston has done a great job of selling their heritage and getting premium prices. Their margins and volumes are to small to devlop new powertrains. the tie up with AMG should be great for them.

    Lotus has a great formula and even adealer network, it needs to work closer with toyota, or hoinda. It needs new styling, but mostly Lotus needs to trumpet its heritage you know all those F1 wins, create clubs and all the other tstuff that is necessary to make abrand desireable and therefore premium prices.

    Danny Bahr had a poor plan, he was trying follow the ferrari playbook. Lotus wan never going to have the cachet or product. Lotus has economical to build product and potentialy the typoe of cachet porche had in the late 60′s.

    All of the above are sportscars

    • 0 avatar
      DC Bruce

      I have no idea what you mean by “take parts from the s[t]able and rebody,” with respect to the classic Jaguars of the 1950s and 1960s (pre-British Leyland). Jaguar built the XK – series of 2-seat roadsters that were for racing, including purpose-built 6 cylinder engines and other advanced drivetrain bits, such as independent rear suspensions and disc brakes. These engines and other drivetrain pieces found their way into sedan (“saloon”) bodies, which the company sold in volume to pay the bills. Jaguar’s business/marketing strategy quite clearly was to use the halo from the XK race cars to sell sedans to upper middle class Brits.

  • avatar
    DC Bruce

    The basic issue with the car business is that, over the past 50 years, as cars became increasingly complex and sophisticated, scale economies become much more important. The cost of developing these cars and their major components, especially engines, transmissions and suspensions, is extremely high. The only way to avoid having a very expensive car is to spread those costs over a very large number of units.

    The result is a lot of mainstream cars that, by any measure, are incredible values compared to their 1960s and 1970s counterparts. But catering to the enthusiast who wants more performance than is available from a mainstream car, means going way down in volume sold. As a result, these cars are either unprofitable, use a lot of parts from the mainstream model parts bin, or are very expensive.

    Here’s a different example. For my money, the best minivan ever build was the Toyota Previa. Why was it the best? Because it located the engine under the front seats, with the transmission right behind. This was the perfect setup for 4-wheel drive, with propellor shafts coming out of both ends of the transmission to the front and rear axles. With nearly 50-50 weight distribution and the center of mass near the center of the vehicle, the Previa handled like no other minivan. And, with the engine out of the way, it had significantly more room inside than any competitive product, even though it was not the biggest on the outside. The supercharged 2.5 liter 16v engine developed a lot of torque but only 160 hp, not enough for today’s post-55mph speed limit world. But an engine of that displacement today could easily rate 260 or 270 hp, with at least as much torque, with the use of variable valve timing and lift, direct injection and turbocharging.

    So, why isn’t the Previa built today? Because, even in its time, it was expensive; and it was expensive because it had a unique engine and drivetrain that could be shared with no other vehicles. So, today, Toyota’s minivan is just like Chrysler’s minivan and all the rest, built on an FWD platform with common engine, transmission and front suspension shared with other vehicles to keep the cost down.

  • avatar
    msmitka

    Natural Light?? [From your bio] What did you learn while in college? For my Industrial Organization course we tour a fine microbrewery, Devil’s Backbone, but a few miles from campus. Sadly, not yet in operation during your days in Rockbridge County, but that’s still no excuse for NL.

    As to the future of cars for enthusiasts, the regulatory environment – safety emissions fuel efficiency-cum-CO2 – place a real cost burden on truly unique product, push toward common footprints for crashworthiness and common profiles for aerodynamics. At the same time, the ability of companies to spin umpteen variations off a platform … go to Automotive News or elsewhere and count up the number of products. Well, differentiating your product is not easy.

    Now at the opposite end of the spectrum … tootling around gravel roads on the edge of the Allegheny Mountains, and needing a practical vehicle … I thought among the many cars and SUVs I drove the Ford CMax and VW Jetta TDI stood out, though we ended up with a Honda CR-V because it was even more practical and because the aesthetics were less bad. Why did I like the CMax and Jetta? – reasonable handling on gravel on curves, and low-end torque thanks to the hybrid and diesel, respectively. But neither would have been able to haul a big belt sander for wood floors from the local rental place. I’ve a 1988 Chevy pickup in reserve for the really big jobs, many tons of gravel this summer.

    But as a prof let me throw down the gauntlet: will I wax enthusiastic about any of these? Or my kids about any car? I wonder if enthusiasts are a dying breed, given the inability to pop the hood and actually do anything. But I don’t know how to find metrics, and what really matters won’t be known until 2050, when more of the young people of today are at a point in their life cycle where they have discretionary funds.

    Meanwhile I have penciled in going to Hershey PA in October 10-12 for the classic car fest there, and the feast hosted by the Society of Automotive Historians. Maybe I’ll drive back in a Model A.

    • 0 avatar
      ChrisCraft

      Dr Smitka, David will happily explore the world beyond Natty Light if someone else is buying.

      The enthusiast world has changed since my youthful days, mostly due to technology. Where will it go next? No clue. I do think it will exist in some form.

    • 0 avatar
      David Walton

      The man himself speaks!

      Natural Light was (essentially) free, but I haven’t touched one since school.

  • avatar
    NoGoYo

    I’ve got a question: Was the Toyota Supra an unsuccessful car?

    Because I look at everything Toyota has that could be used to make a new Supra and wonder why they choose not to make such a car aside from thinking that people will not want it.

    • 0 avatar
      DenverMike

      The mainstream sports cars market vanished decades ago and even sporty 2+2s like the Celica are/were hard to sell. But the Supra morphed from the Celica line to maximize and capitalize on import quotas of the early ’80s to the ’90s. The rest of the Japanese OEMs had their own high dollar sports cars in that era. It’s not just that the Supra isn’t wanted, but Toyota doesn’t need it.

  • avatar
    pb35

    My wife had that poster in her bedroom back in the 80s when we were dating. Now, 25 years later she has a PhD and a Volvo in our 2-car garage.

  • avatar
    PCP

    Handling by Lotus – Isuzu Piazza/Impulse?

  • avatar
    philipwitak

    “…but for the terrible, horrible, no good, very bad 986 Boxster…”

    every man is entitled to his own opinion but in this particular instance, yours is not one shared by me [original and current owner of a 1997 model], nor by most of the automotive-oriented media of the day.

    • 0 avatar
      David Walton

      I thought it was a pretty obvious reference to the weeping and gnashing of teeth that accompanied the arrival of the car http://www.amazon.com/Alexander-Terrible-Horrible-Good-Very/dp/0689711735

      Not my opinion at all, but many people feel that way.

  • avatar
    racer-esq.

    JUSTIFICATION FOR HIGHER EDUCATION*

    *So that university presidents can have this lifestyle, not the actual students.

    I see that many of you bought the low resolution version of this poster, without the legible small print.


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