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Posts By: Ken Elias
No one cares, at least not among the automotive press, as to what happens at the (Phoenix) “Arizona International Auto Show” held every year over Thanksgiving weekend. There are no world or US product launches, no concept cars on display, and only a few attractive booth babes. Just a bunch of production (or almost ready to launch) vehicles for the masses to touch, feel and some even to drive (on the road) or experience (like Jeeps on an indoor obstacle course) sprinkled with a few exotics (roped off of course) to ogle over.
But TTAC cares. Why? Because the world of automotive retailing depends on the masses to buy cars, lots of them. The folks who go to smaller market car shows don’t go to see the whimsical fancies of vehicle designers (cause there aren’t any), they go to check out real cars that they might buy. Watching and listening to these attendees can tell those of us that care where the winds of favor will blow. What’s hot and what’s not.
Alan Mulally should be named Chairman and CEO of General Motors…immediately. The General needs talented executive leadership with experience in the automotive industry. And if you look at the track record so far of GM’s present top management – Lt. Dan and his sidekick Girsky – there’s no reason to believe they’ll do any better tomorrow.
The combined market share of GM and Ford will reach 40% of the US market by the end of 2015. Yes, you just read that correctly. That’s a full five percent more share than what they have today, or a gain of just one percent a year. Call me crazy… but recall that Farago and I called the GM bankruptcy way before most industry observers (and certainly before the BoD of Old GM) could see it coming. Long time TTAC readers will also remember my call to buy Ford’s stock in April 2009 when it was trading in the three buck range. So calm those gut-reactions for a few minutes and let’s walk through this.
[Editor's note: In the absence of an official rebuttal to Edward Niedermeyer's NY Times Op-Ed on the Chevrolet Volt, TTAC's own Ken Elias has volunteered to come to the Volt's defense.]
The Chevy Volt should be a brilliant piece of engineering achievement if it works as advertised. That’s a big “if” and I wouldn’t bet my life that GM’s first iteration of the car will live up to the hype. And that’s only because of the long string of overhyped vehicles that came out of the former GM that simply never delivered. But that’s three decades of history talking – and GM’s a new company today with a different mindset and competitive spirit. Its newest products – the LaCrosse, SRX, Equinox, and Camaro for example – have been well received by the public and there’s no shame putting one of these rigs in your driveway. So let’s start out giving GM the benefit of the big doubt that the new Volt will work as advertised.
One might believe that GM’s forthcoming IPO marks the second coming of Christ. GM, once the world’s largest corporation, faced oblivion in the winter of 2009. The train wreck of this former company reemerged from burial last summer through the generosity of the US and Canadian taxpayer as a new company shorn of most of its former financial liabilities, unproductive assets, and brands it no longer could support. Everything that Jerry York (R.I.P.) told the automotive world in January 2006 that GM needed to do to survive back then finally came to pass. And now, it’s preparing an IPO to swap ownership from the governments to the public. Ed Whitacre and his team will get the credit for a most remarkable turnaround while Obama will bask in the light of his stewardship of public monies. Let’s get the story straight.
That’s right, the CEO in charge of Government Motors. (Ok, don’t really ask me why I think I’m qualified; let’s just suspend belief for a few minutes shall we?) So what would I do? First, I’d insist on a new wardrobe for every person at every level. Gone are all the suits for the white-collar workers. Factory workers can’t wear jeans and t-shirts or whatever. Nope, everyone in the company now wears the GM uniform, kind of like the military. The new GM garb consists of coveralls in blue and white with a GM logo on the back, and each worker gets a name tag to pin on the front. Ranks are determined by stripes, bars, and stars, just like the Army. As CEO, I get four stars on the shoulder epaulets. And of course, there’d be a “dress uniform” for outside events.
The so-called “Cash for Clunkers” legislation demonstrates everything that’s wrong with a political process playing in the market arena. It’s legislation that will do little to improve car sales. But it will drive traffic to dealers – mostly credit bandits scurrying around trying to buy new cars they can’t really afford.
It might be a bad day for GM but it’s a much worse one for Toyota. Really. The days (really decades) of weak domestic manufacturers shooting themselves in the foot with bad design, poor assembly, and non-existent customer satisfaction in passenger cars are coming to an end. Toyota didn’t have to outrun the bear, it just had to stay ahead of GM, Ford, and Chrysler. Years of producing huge profits in North America hit the wall for Toyota in 2009, and they’re likely not to return. Ever. The game has now changed—and it’s not good for Toyota.
I’ve just purchased a Pontiac G8 GT. Sport red metallic with every option. I paid too much (even though it was a below-invoice deal). The car just begged me to buy it. Yep, car guys make the dumbest deals when it comes to their own personal transportation. And I love it. I will drive the wheels off this car, and enjoy every torque-rich moment. But enough about me. Now about Pontiac, and GM. With less than 11 days to go before what was once the largest corporation in the world files for bankruptcy, with the Pontiac brand disappearing (what exactly is a “niche” brand anyways?), the G8 GT is a reminder of what could have and should have been. But is it also an indication of what will be? And is that a good thing or a bad thing?
If you’ve been following my travails on a new car, you already know that GM won’t extend my lease or sell me my Saab anywhere near a realistic market price. That ticked me off. So I was forced to seek out a new car. Looked at the BMW 328i Coupe and the Infiniti G37. Neither car was making my day. There are very few Bimmers with manuals (unless I wanted a stripped black sedan—price leaders for the dealers) and the Infiniti simply lacks soul.
Memo to senior executives at GMAC reading TTAC. Perhaps you can answer a few simple questions. Why do you require all lease returns to be taken back to the auction? Why not let your dealers buy inventory at wholesale prices if they want when the car grounds at their stores? Don’t you realize that this policy only forces more supply into the sale and depresses prices? Better yet, why don’t you negotiate with me a more realistic buy-out price of my 2007 Saab 9-3 lease return? Instead, your firm insists that I pay the stated residual price which is currently approximately $9,000 more than the wholesale value. (I’d be a moron to do that. Maybe some people are. But I think most aren’t.) So you’ll take back another unit to the sale—and there won’t be any miracle on pricing there. So here’s an idea . . .
Saving Chrysler is just stupid. There isn’t one shred of pure economic logic—never mind basic business sense—to rescue this company from liquidation. Yet here we are, watching tax dollars garnered from real earners (individuals and corporations) tossed into a swirling morass circling the drain of history. It’s time to speak up against this misbegotten adventure. And, well, here I am.
It’s time to buy Ford stock. It’s the big winner from the Presidential Task Force on Automobiles (PTFOA) announcement today– although you wouldn’t know it listening to the MSM. That’s the way Ford wants it… below the radar, off the screen, out of the limelight. They’ve been getting a dead cat bounce already; never has silence been so golden. The dictum “never gloat in the misery of others” makes for good business sense, since one never knows when the table will turn. Anyway, here’s why Ford will ride high.
Today’s automotive industry stands on the cusp of great change. The automobile will remain, but its powerplant will change and evolve. Within two to three decades, today’s hybrid systems will look like museum pieces, as engineering resources around the world are devoted to alt power propulsion. For the United States to participate fully in this coming technological revolution, it needs a healthy automotive industry. It must fix the fundamentals…
GM and Chrysler both must go bankrupt. Only then, out of the ashes, can a new company emerge, taking control of the best assets of both companies, with a new management team and a clean balance sheet. All financed by private equity and bank debt, not the government, and free from the political machinations that would result. It’s pure business – of making and selling vehicles here in North America and in selected markets around the world. It’s past time for the old empire of GM to make room for a new vision of the future based on market realities.