Category: In Defense Of

By on February 16, 2010

According to popular wisdom, the flood of recalls will change Toyota and will permanently damage Toyota’s market share in the United States (much like what happened to Mitsubishi and their cover up scandal). But there are some people who believe (like I do) that this is “man bites dog” journalism. That the Toyota recall (whilst serious) is being blown out of proportion. It seems that other people are starting to see it that way.

US Recall News‘ reason for being is recalls. They would be dead without recalls. US Recall News has written an article that says that the real recall bogeyman doesn’t live in Toyota City, but in Detroit. The identity of the true bogeyman’s name may surprise some. Read More >

By on January 18, 2010

Chart courtesy finance.yahoo.com

There has been a lot of, well, criticism, of Honda on these pages lately, including allegations that Honda had lost it. So far, more that fifty of the Best & Brightest offered advice on how to save the company from certain annihilation.

Today’s Nikkei says “domo arigato gozaimashita” for all the support, and runs a different story: “Honda Motor Co. has emerged from the economic turmoil at the head of the pack, thanks in good part to a nimble production network that can meet the latest consumer preferences at relatively low cost.” Here is why. Read More >

By on September 11, 2009

In a recent news article, RF stated: “…here’s another story where the web pulls the rug from under auto industry types seeking to hide the truth. We’ve been saying it forever (in Internet terms): the collector car market has collapsed. Well, duh. But the mainstream media and specialist press has both been happy to perpetuate the myth perpetuated by the auction houses that their business has been defying gravity. See? Cars are selling for phenomenal prices! Meanwhile, Hagerty’s CARS THAT MATTER is telling readers to pay attention to the men behind the curtain.” In truth, the men behind the curtains are not the market. They are middlemen. They extract a percentage from every participant they can find to witness their activities; Buyer, Seller, hell, even the gawkers have to pay to watch the show. The auction houses are, in ecological terms, parasites on the very market they claim to serve. Like any parasite their success has a tendency to cause harm to their host. These guys are tarted up used cars salesmen. That, and the recent transformation of the car auction into a three ring circus, is what is killing the auction companies, and it has absolutely nothing to do with the collector cars being sold.

All these moves created an artificial market bubble where some people were proven to be fools, easily separated from their money. It successfully convinced them that a machine mass-produced by the hundreds of thousands could have rarity based on factory options. They achieved this by wining, dining, and blinding those fools with the bright lights of live TV coverage. In an era where celebrity is valued above wisdom, why not go for fame and throw a few hundred grand at that Mopar?

Smelling blood in the water, and seeing the resulting feeding frenzy themselves, more parasites attach themselves to the market. Builders and restorers taking less-valued stock from that mass-production pool of used cars and create a host of dubious offerings for the auction block. “Resto-mods.” “Tribute” cars. “Continuation” cars. As a bonus, many of them even turn this activity into TV shows, attaching themselves to the celebrity culture.

Finally even the manufacturers themselves got into the game. Selling the first cars off the lines at auctions. Selling off their own collections. The final insult to both the auction houses and to their own lack of vision: Building retro-cars and selling straight to the consumer.

This whole collection of players created a market-within-a-market, and it inflated too far, too fast to sustain itself. That is what has collapsed. In a decade we might call it “The Muscle Car Bubble” or maybe “The Baby Boom Bubble.” Like all economic downturns a few of the “innocent” were harmed in the collapse, but mostly the damage, deservedly so, has been contained within the bubble’s sphere of influence.

The collector car market is, and always will be, healthy. Collector cars are not beanie babies or Pokémon cards. Automobiles have aesthetic appeal and genuine practical use. They have intrinsic value, both as a utilitarian object, and as a stylistic example of what happens when engineers and designers create something. Sir William Lyons, the man behind Jaguar, once said, “The car is the closest thing we will ever create to something that is alive.”

There is palpable inspiration and creativity expressed in the form of the automobile. People who love cars will always want, buy, and sell them. Private sales make up the vast majority of all collector car transactions, and the Internet is transforming that market from a local to a global phenomena accessible by anyone, anywhere. Car auctions are also dying for the same reason swap meets, car clubs, and buff-books are. You can browse the whole planet’s supply of cars, parts, and automobilia from your laptop or cell phone. On your schedule, at minimal cost. Craigslist has far more reach and power than Craig Jackson. Google will find what you want better than Gooding.

The Collector Car Market hasn’t collapsed. It merely sheds excess now and then when parasitic traders come in and inflate a bubble such as we’ve seen recently. There are top tier collector cars and there are pedestrian collector cars. Duesenbergs and Delahayes will always have value, as will ‘Cudas and Camaros. Only when the latter types start trading at prices near the former you have a market as artificial as testicles hanging off a truck.

Smart people and smart money were never in the bubble anyway. The market survives. Smart auction houses will even survive the stupidity of some of their brethren. Those that haven’t fallen into the trap of celebrity culture glitz will continue to bring buyers and sellers together for as long as there are titles to trade along with the hardware. What we are seeing is the deserving death of a small portion of the market. Couldn’t have happened to a more deserving bunch.

By on July 28, 2009

This website has stood out front in condemning the pro-corporate cowardice of the paper car mags, and rightly so. But when they show some courage and get it right, they deserve a shout-out. In the proud TTAC tradition of recognizing all viewpoints, I salute Jamie Kitman’s latest column in Automobile. Kitman’s point: the United Auto Workers (UAW) make a handy whipping boy, but contrary to the new conventional wisdom, they are not the Great Satan that sank our auto industry. In fact, the money the UAW made for decades was a good thing. “Courage,” you say? If you’re like many here, that’s not the adjective you’d use . . .

You probably think about the auto workers union something more along the lines of “pinko Keynesian socialism.” We’re talking world-class wages for the lazy, shiftless louts who famously tied beer cans inside the fender as a practical joke on the buyer? The same bums whose panel gaps were so sloppy, it’s a wonder said can didn’t simply fall out in the second month of ownership?

Not so fast. Consider this: the heyday of the UAW just happened to be the heyday of the American auto industry, whose vitality we now mourn. It was Henry Ford himself who actively overpaid his workers by his era’s standards, so they could afford his company’s products. (Compare that to today, when Wall Street punishes Costco for doing the same.) For decades, the UAW was the mechanism by which America’s working class continued to share in the auto titans’ prosperity.

And what did those bums do with their ill-gotten gains? They became what those same corporate media organs (I’m looking at you, military-contractor GE employee Tom Brokaw) lionize today as The Greatest Generation. The generation that broke Nazism, built Levittown, beat polio, and put more of their kids through college than any generation before.

What made this generation of Americans so Great when they banded together to give up their bodies to the corporate war machine, yet such unpatriotic slobs when they banded together to resist the economic might of the corporate industrial machine? Perhaps the answer we’ve all accepted as gospel has something to do with the seven corporations who now own virtually every medium where you’ll hear the story.

But crack open a few dusty, pre-media-oligopoly history books. You’ll get a quick reminder that there was nothing casual—and a whole lot that was courageous—about the drive to unionize American factories. Workers in places like Haymarket literally gave their lives to get out from under rich industrialists’ thumbs. That isn’t the kind of passion that’s prompted by compulsive laziness.

So why did they do it? If you think this is a shopworn parable about an obsolete problem, consider how our largest retail corporation has made billionaires of its owners by selling us merchandise made by Chinese sweatshop laborers whose average—average—wage is 13 cents an hour.

Those owners have a choice, you know. They could make the choice Henry Ford made. The same choice Detroit’s workers enforced on their employers for decades, to the enduring benefit of the nation. The same choice Costco makes today. They just don’t want to.

Our economy is sinking in a deflationary spiral, precisely because the loss of jobs has sapped consumers’ buying power. Yet, as we slowly feel the quicksand rise past our chins, our last gurgled oaths are damnations cast on ourselves and each other for having ever greedily wanted to keep our jobs.

IM(not especially)HO, you can’t discuss The Truth About Cars without confronting The Truth About Car Workers. And like it or not, that truth leads you straight into the economics of class warfare.

The people who crucify this President for trying to keep America’s #1 middle-class job source alive are the same ones whose pet publications think nothing of trillion-dollar handouts to Wall Street. On the altar of this cold-blooded religion, they’re eager to sacrifice the easy target of a clumsy, mismanaged, uncompetitive Big 2-1/2. As for the millions whose lives dissolve into poverty, alcoholism and suicide when their sustenance is stripped away? Merely the collateral damage of some healthy “creative destruction.”

Ultimately, that’s where I can’t get on board with the gleeful UAW-basher crowd. All we hear today is that American citizens by the tens of millions can be fecklessly reduced to the gutter, but the artificial corporate entities we created to enhance the general welfare are somehow “too big to fail.” Pity is, the people pushing this pro-corporate groupspeak don’t realize their god is as uninterested in their faith—or their fate—as that funky bird-beaked statue Yul Brynner beseeches for plague relief in The Ten Commandments.

You know how that story ended, right? His son died anyway, and nobody cared.

By on June 13, 2009

Well, it looks like the American version of cash-for-clunkers is going to get past Capitol Hill, and I find myself conflicted. On the one hand, I’m getting a little sick and extra wary of more money going to prop up auto sales (I figure there is going to have to be a real reckoning before things can get better, and I’m leaning toward letting it happen). On the other hand, considering what it is (actual law-to-be and not an academic case study) this is about as good a clear-the-clunkers bill as we’re going to get. The New York Times Freakonomics blogger Steven Levitt looked at this one on Friday (I went over Germany’s version in February). Just about everything he says is true, but there is one point he missed (and was nice enough to call attention to) that throws the whole argument in opposition out of whack. We’ll get there, but first, what’s right about it?

The first thing they got right is the credit for scrapping. Back in February, I complained that the €1000 credit was too small to motivate much action. I was wrong, but only just—the hottest sales went to the cheapest car on the market. $3500 to $4500 is a good number, about a 20 to 25 percent down payment on a lot of practical vehicles (enough to keep from getting too far upside down), without completely messing up the used-car market.

Then there are the ownership and scrapping rules: simple, straight-forward and mostly enforceable (someone will run a scam, they always do, but that will be the exception). We want running vehicles taken off the road for good, so the vehicle must have been insured for a year and must be scrapped.

The mileage rules seem both too open and too restrictive. A lot of vehicles will fit the mileage rules and a lot more will qualify to be purchased. On the surface, this is greenwashing and pretty weak at that. It’s actually a good thing; the law is aimed at people buying actual practical vehicles, rather than propping up a handful of favorite models (most prospective buyers of “green-mobiles” don’t own a qualifying vehicle anyway). All of these rules are straightforward and defensible because of another effect.

For a blog about unintended consequences, Levitt really blew the most important (unwritten) part of the law. At least he was open about not knowing the true prices of used cars. Bad as the new car market has been, the used car market has been worse (though showing signs of recovery), especially older SUVs (the very target this kind of cull). A simple glance at his feedback shows him that 4000 odd dollars is a 400-500% improvement in value for a large number of formally “popular” vehicles.

It is this margin between “book” value and “bill” value that will drive most of the action on this bill (there will be exceptions, but bad cases make bad law). A better name for the bill would be the “Get the Blazers and Explorers off the Road Act.”

Once upon a time, these two vehicles ruled the car market, along with a few others (e.g., Durango) and foreign relations (e.g., Rodeos). This success came back to bite them when SUV demand dropped. Unlike their bigger cousins, they couldn’t offer much “utility” to justify their cramped size and thirst. There are plenty of alternatives, from sedans, to wagons, to CUVs that can do everything they can do and better while being roomier and more fuel-efficient. Also, they are notably thirsty (remember 18 mpg is the ceiling, not the floor). If you’re trying to push average mileage higher, the least useful gas hogs are a good place to start. Especially since oversupply and changes in demand have dropped trade-in values for these old-school SUVs down near three figures.

While most of the culled vehicles are likely to be domestic, the incentive applies to any purchase. The competition gets to sell to people who were likely out of their reach before, while the domestics get the additional bonus of getting rid of some of the most troublesome pigs in the python. Hopefully, this reduction will help push up residual values, which is the only practical way the car market will get to anywhere near the old peak. Of course, for a diet to work, you have to change your habits as well.

Again, I’m of two minds on this law. I don’t want to see an endless sea of nickel-and-dime assistance bills coming out of Washington (propping up two companies, one needing to die, and one that seems unlikely to change, is bad enough). On the other hand, once you strip away the trappings, the bill is well thought out and (comparatively) cheap. It’s no magic bullet, but at least it’s pointed at the right target.

By on June 11, 2009

Over the last year, as this unparalleled automotive sales depression has picked up steam, I have observed unprecedented vitriol directed at both Chrysler and General Motors. Here on TTAC; on Autoblog, Jalopnik, CarDomain, et al.; and in the mainstream press, the companies receiving federal aid have been criticized. I just couldn’t understand it. It’s as if the only vehicles these companies ever built were the Jeep Compass and Pontiac Aztek. Critics seem to have completely forgotten all the great cars both companies are building right now and have built over the years. At the same time, they’ve overlooked Chrysler and GM’s importance to their employees, suppliers and countless communities from coast-to-coast. “Stakeholders” who have a direct impact on as many as one-in-ten domestic jobs.

Then came the contentious debate about bailing out Chrysler and General Motors which culminated in President Obama’s address on March 30. Obama gave Chrysler thirty days fix its balance sheet and close its alliance with Fiat—or face liquidation. GM was given an additional thirty days to restructure itself or face bankruptcy. While Chrysler came within days of escaping bankruptcy, a few of its dissident bondholders balked and Chrysler was thrown into a Chapter 11 filing that many pundits felt it would it would ultimately result in liquidation. While many observers rooted for it to failure, Chrysler has emerged from bankruptcy with unprecedented speed. Congratulations.

Back in early November, in what seems like a lifetime ago, the talk in the automotive world was of a possible “merger” between GM and Chrysler. I thought that this was a bad idea and would quickly lead to the dismantling of the Auburn Hills automaker and the loss of at least 30,000 US jobs. I came out and said that there was a far better partner for Chrysler who needed small car technology that they couldn’t afford to develop on their own. That partner was Fiat, which had the obvious and complementary need to sell vehicles in the United States in its quest to become a truly global automaker.

On January 20, Chrysler announced it was in serious partnership talks with Fiat to merge their operations; a move that would help both cope with and survive in the deepening worldwide automotive sales depression. This sales implosion was not only was impacting weak regional automakers but successful global ones like BMW, Honda, and even Toyota. All were seeing sales volumes declining by 40% or more as the virus was spreading around the globe.

Then, as now, I believed that an alliance with Fiat was Chrysler’s best and probably last hope for survival and was pleased to see yesterday’s deal between Chrysler and Fiat concluded. I truly believe that it will have a positive impact on both companies and will give us, as car enthusiasts, additional choices. After all, what can possibly be bad about Alfa Romeos returning to our shores?

Meanwhile, it should be said that other nations have taken extraordinary steps to protect their home-based industries. Why shouldn’t we do the same, especially since we have provided completely open access to our market allowing them to build their export industries? For example, I have absolutely nothing against Hyundai and Kia. But what’s fair about the fact that South Korean manufacturers can sell more than 600,000 vehicles a year here in the United States, yet our manufacturers sell fewer than 10,000 units annually south of the 38th parallel?

Last year, when driving to cover the Los Angeles Auto Show, I was forced to take a detour off the freeway. I stopped at a Starbucks in the Asian enclave of Alhambra off I-10 to get my e-mail. As I pulled into the parking lot, I noticed something strange: there wasn’t a single American brand car in the lot. While there were a few BMWs and Mercedes, every single car in the lot was of Asian origin. I walked into the Starbucks thinking to myself that Asian buyers, consciously or unconsciously, appear to buy homogeneously, supporting their nation’s car builders. Why don’t Americans? It’s because our market is so open that we can. In retrospect, maybe this explains why the American public—and our politicians—gives our own companies such a cold shoulder.

I hope the restructuring of General Motors is ultimately successful. The fact that some are calling for a boycott of “Government Motors” strikes me as absurd. Collectively, we as Americans will soon own 60 percent of New GM. Why would we not buy vehicles from a company we own?

[Read more of Rich Truesdell's work at automotivetraveler.com]

By on June 10, 2009

I’m a Jeep owner, a Jeep historian and a Jeep enthusiast. I’ve published more than a dozen Jeep articles. I’ve attended dozens of Jeep Jamborees and Camp Jeep events. I’ve driven a Jeep down the Rubicon Trail from start to finish, twice. So it pains me to write about the Jeep Jinx. But the facts are inarguable: virtually every company that’s owned the Jeep brand has fallen on hard times.

The original Jeep prototype was designed and built by a small company called American Bantam. The vehicle’s tendency to be both a curse and a blessing was assured from the start; the U.S. military liked it so much it they shoved Bantam aside. They commissioned competitors Willys-Overland and Ford to more or less copy the design.

In terms of perfecting the vehicle (including better torque), Willys-Overland did most of the heavy lifting. Not surprisingly, the feds gave Ford the nod for organizing mass production. Working together, the two automakers built some 600,000 examples.

After World War II, Ford got out of the Jeep-building business. Willys Motors produced the first civilian Jeep, the CJ-2A, on July 17, 1945. After a slow start (1824 units), sales of the farm-friendly vehicle took off. Willys manufactured the Jeep CJ-2A until 1949, racking up 214,202 sales.

The automaker replaced it with the CJ-3A. But agricultural sales dried up, as farmers turned to tractors. It was not the first time—nor the last–that Jeep found a market pulled out from under its feet, putting its corporate owners in financial jeopardy.

By 1953, Willys-Overland was struggling for survival. The ailing Kaiser-Frazer Corporation decided to buy Willys-Overland, ditch its own car business and produce Jeeps. The reconstituted Willys Motors, Incorporated was born.

In 1963, Willys became Kaiser-Jeep. Looking for new civilian markets, the company introduced the Wagoneer, the precursor to the modern SUV. While the recreational vehicle marketplace experienced sustained growth throughout the sixties, Kaiser-Jeep continued to lose money.

In 1970, American Motors (AMC)—who had its own bout with bankruptcy in 1967—purchased Kaiser’s Jeep operations. In spite of two oil crunches in the seventies, Jeep experienced rapid growth under AMC’s management. The market for dual-purpose vehicles expanded dramatically.

Unfortunately, AMC’s car-making operations were not competitive. Renault partnered with the troubled automaker, then seized control. As the eighties progressed, Renault fell on hard times. Sales of Renault-engineered small cars failed in the US market. The state-owned company also faced political difficulties in its home market.

Renault soon sold its stake in AMC to Chrysler, whose charismatic CEO Lee Iacocca coveted the Jeep brand. In 1987, AMC “merged” with Chrysler. In reality, Jeep was absorbed by Chrysler. This was no bad thing. Chrysler experienced one of the most-sustained growth periods in its history. The rising tide lifted all Jeeps.

This growth period was highly profitable for Chrysler, and Jeep. In 1992, Chrysler debuted the hugely successful Grand Cherokee, an AMC design. The American automaker’s success made it an attractive acquisition target for Daimler, who saw expansion as a way to avoid an unfriendly takeover. At the same time, Chrysler’s executives considered it an opportune time to “cash in their chips.”

And thus the now notorious ”merger of equals” with Germany’s Daimler-Benz in 1998, forming DaimlerChrysler. DaimlerChrysler eventually sold most of its interest in Chrysler to Cerberus in 2007—even as Jeep produced some of the least worthy vehicles to ever wear the famous badge.

Two years later, Cerberus lost the rest of its stake as Chrysler descended into C11. With the fed’s help, Italy’s Fiat is pickng-up the pieces. To recap . . .

- Willys – Defunct, sold Jeep to Kaiser in 1953
- Kaiser-Jeep – Defunct, sold Jeep to American Motors in 1970
- American Motors – Defunct, absorbed by Chrysler in 1987
- Renault – Sold AMC to Chrysler in 1987
- DaimlerChrysler – Divested its Chrysler stake in 2007
- Cerberus – Bailed on Chrysler in run-up to Chrysler’s Chapter 11
- Chrysler – Sold to Fiat

Jeep is one of the world’s best-known brands. It was one of the pioneers of the sport utility category. Over the years, especially under Chrysler’s stewardship, Jeep sold millions of vehicles. The Wrangler is a worldwide icon. Until recently, the Grand Cherokee was a best-selling SUV, that sold 300,000 units annually.

But it core strength—go-anywhere capability—has always been its weakness. In other words, whether serving the military, farm owners, off-road enthusiasts or Soccer Moms, Jeep is a niche brand. As recent history has shown (e.g., Aston Martin, Jaguar, Land Rover, Saab, HUMMER, Volvo, etc.), large companies and niche brands make terrible bedfellows. Big companies seek volume above all; a tendency that tends to kill the goose that lays the golden eggs.

In fact, you could say that Jeep’s owners have been a jinx on Jeep. With Fiat eyeing Jeep as a way to help it grow to the size it thinks it needs to survive, one gets the distinct impression that bad things are about to happen. Again. Will Fiat be the company that ultimately breaks the Jeep Jinx?

[Read more of Rich Truedell's work at automotivetraveler.com]

By on January 22, 2009

With all that the domestic automakers have done wrong, it’s important to remember the things they’ve done– and continue to do– well. In his post about dumb moves behind the wheel, Jonny Lieberman highlighted one of these engineering accomplishments: Heating Ventilation and Air Conditioning (HAVC). As JL pointed out, even when Detroit was making malaise-era cars that barely ran, their HVAC systems were the “envy of the world.” Sure, Volvos and Saabs had good interior heating and defrosting systems, not to mention heated seats. But Detroit led the world in keeping drivers physically comfortable. In this, geographic happenstance played a critical role.

In European cities, streets are narrow and go in all directions. The history and glamor of road racing looms large. Small cars, precise handling and confident cornering were always high priorities. In contrast, Detroit’s streets are broad and, for the most part, adhere to a 90 degree grid. Boulevard and interstate cruising defined the automotive gestalt. Motown’s suspensions were calibrated more for comfort than precision handling. And HVAC systems enjoyed pride of place.

Every year when the NAIAS rolls around, people question the wisdom of holding a big auto show in Detroit in January. The weather outside the hall isn’t Fargo or International Falls cold, but it’s enough to evoke mention of brass monkeys’ testicles witches’ mammaries. Statistically speaking, January’s average temperature: 17.8°F. Not to mention wind chill; the “breeze” coming off Lake St. Clair can cut you to the quick. And yes, there’s snow. Average annual snowfall: 41 inches.

Detroit auto execs and their contemporary counterparts may have never experienced the joys of dealer service managers and warranty work but they still had to deal with Michigan weather on the way to and from work. Auto execs don’t like to be cold. Neither do engineers. Working together, they made sure that Motown’s products could warm their bones– and keep them warm– through the worst of the midwestern winter. 

Quick digression…

I reckon the Volkswagen Beetle’s token HVAC system is one of the main reasons Motown diss-missed the small car boat. In January, Wolfsburg’s average temperature is a relatively balmy 38°F. This may account for the fact that the Bug’s heating system didn’t have an electric blower. Pressurized air was ducted off of the cooling shroud into the headers/heat exchangers. Heat, then, was speed sensitive– under the best of circumstances. 

After a Michigan winter or two, with plenty of road salt rotting the German car’s undercarriage, the Vee Dub’s heat exchangers and heat ducts were perforated with rust. Small wonder VW offered a gas heater: a self-contained 18k btu gasoline-fired furnace. 

Back to Detroit, which isn’t located in a desert. Still, the average July temperature clocks in at 83.4°F (Wolfsburg 72°F), with plenty of relative humidity to keep the sweat flowing. 

Air conditioning was originally introduced by Packard in 1939 as a $274 option. It filled up the vehicle’s entire trunk. To turn it off, the driver had to stop the car, turn off the engine, open the hood and disconnect a belt connected to the air conditioning compressor. In 1941, Cadillac built 300 equally inconvenient air-conditioned cars. 

GM’s Harrison Radiator Division developed the first efficient, affordable automotive A/C unit. Offered as an option on all 1955 V-8 Pontiacs, it featured a two-cylinder reciprocating compressor and an all-brazed condenser. Fitted with a magnetic clutch, the unit didn’t need extra power to drive the compressor, which greatly improved performance and fuel economy.

Meanwhile and anyway, by the 1960s, domestic automakers were improving ventilation systems. Cars had air vents in the fender wells, with cable actuators on the kick panel. Flow-through ventilation was soon integrated into the heating system. By the 70′s, automotive air conditioning became a factory option on Detroit’s popularly priced cars. 

Upgraded HVAC systems were an excellent way for dealers to add to a car’s bottom line. (Heaters were an extra cost option well into the 60′s.) Many of our Best and Brightest who grew up sweltering in cars without a chiller gladly paid for extra for A/C when they could afford it.  

Another digression…

My dad, may he rest in peace, loved air conditioning. American Motors used to label the maximum A/C setting “Desert Cool.” They must have had my dad in mind. Though he liked his options, as far as A/C was concerned, they could have had a single setting: max cool, max fan. In the 1970s, he switched from Oldsmobiles to Mercurys; you could have cooled your drink on the dashboard of his 1974 Grand Marquis.

Thirty-eight years later and I’ve never driven a Detroit product that couldn’t blast full heat in subzero weather, or keep you comfortable on a blistering hot summer day. Just about every automaker in the world now makes fairly sophisticated climate control systems. But it’s a clear case of meeting a high standard that Detroit, to its credit, has set.

By on November 16, 2008

As the domestic auto companies appear to be circling the drain, there’s been debate about the extent of the impact of their failure on their supplier base, the impact on the industrial manufacturing base of the United States, even possible negative implications for Toyota and Honda. One party in all this that has rarely been mentioned are the consumers. While a few automotive analysts, pundits and bloggers have touched on how an implosion of the Detroit based car companies will affect consumers, almost all of the discussion has centered on whether or not people will buy a car from a bankrupt manufacturer, and the related issue of how product warrantees will be covered if their manufacturers go belly-up. A more basic consumer issue: how the loss of GM, Ford and Chrysler from the US auto market would affect the prices, features and technology of new cars.

While some critics of the domestics would have us believe that nobody is interested in cars built by the domestics, the fact remains that The Big 2.8 still sell millions of new cars a year in the North American market. October was a sales disaster for the domestics, with GM’s year to year sales falling 45 percent, Ford 33 percent and Chrysler seeing a decline of 37 percent. Foreign brands also saw declining sales but the decline was not as steep. With consumer confidence at the lowest level since just after the 9/11 attacks by Al-Qaeda, sales will not likely pick up anytime soon. The overall industry is on pace for a 10.6 million unit year, down from 16 million in 2007, and down over 40 percent from the record year of 2000. Still, between them the domestics sold just about 400k cars in October, good for 55 percent of the total US car & light truck market.

It’s a simple fact of business that competition puts downward pressure on prices. Critics of any bailout for the domestics like to say how their customers won’t go away; they’ll just buy Toyotas, Hondas, Nissans and Hyundais. What they don’t say is how much more expensive Toyondisssandais will be without competition from GM, Ford & Chrysler. You simply cannot remove competitors with a 55 percent share of a market without seeing the remaining vendors raise prices. Without competition from domestic competitors, the foreign brands have much less of an incentive to keep their prices down. Also, the structural costs of the domestics (at least until the cost reductions due to renegotiated UAW contracts kick in in  2010) create a price ceiling foreign brands can undercut. Take away that ceiling and watch Toyota raise its prices.

Conversely, take away that structural cost disadvantage for the domestics and you’d see lower prices right now on all brands, foreign and domestic, because of real price competition. Look at India. That market is very price sensitive. Just about all the global manufacturers are active in India, but the growing indigenous Indian auto industry led by Tata and Mahindra creates price competition for the transplants. Since Tata announced the sub $3000 Nano, Renault-Nissan, which already produces the low cost Dacia Logan, has announced a joint venture with Bajaj, maker of scooters and three-wheelers, to compete with the Nano at the new entry level price point.

A Detroit meltdown would affect more than just new car pricing. Say what you will about the domestics, but their presence in the market forces the other manufacturers to compete on features and technology as well as price. I’m not saying that a disappearance of The Big 2.8 would return the days of “radio and heater optional,” but there’d be less incentive for remaining companies to keep content level high. The Honda Accord’s initial market success in the late 1970s was partly attributable to a higher level of standard equipment than the domestics offered.

Regarding technology, the list of innovations introduced to the market by the domestics and their suppliers is almost endless: electric starters, seat belts, catalytic converters, modern refrigerants, car audio, defoggers (forced hot air and electrically heated), turbochargers, magnetically controlled dampers/shocks, and on and on. Without the billions the domestics spend on R&D ($15.6b for Ford & GM in 2007, not counting Chrysler which is privately held and doesn’t publish proprietary data or the moneys spent on R&D by domestic auto suppliers) the pace of technological improvements will slow significantly.

The domestic car companies’ disregard of their foreign competitors in the 1970s and their poor quality in the 1980s have so alienated consumers (and their now adult children) that it’s easy to see why so many people either don’t care if the domestics disappear or actively wish for their demise. If they think, however, that such a disappearance will be good for consumers, in terms of price, features and technology, they’re sadly mistaken.

By on October 30, 2008

No, it’s not welfare. It’s a little bit insurance mixed with an old-fashioned helping hand that ought to be extended with a little discipline to Detroit’s rump. Bailouts, subsidies, tax breaks and other sundry government instruments to influence the economy are recurrent and mainstream in American history. Less here than most countries, but nevertheless persistent. So let’s not pretend the program to assist Detroit, or the banks, or brokerages, etc., are new. We have an economy with gross annual activity valued over $14 trillion dollars. The absolute numbers bandied about today are big; the proportional representation is more modest. $25B, $50B, $75B are barely a bump.

Still, in a free market country, new initiatives are controversial. On the one hand, purists root for creative destruction, but those minded like economists persistently miss the politics of the situation and the reality of keeping a vast nation functioning. Others, eager for socio-economic activism want to put a floor under the common man, but they often miss the inter-generational consequences of temporally-restricted decisions made today. They also usually lose sight of the bureaucratic permanence of temporary measures.

It takes both caution and daring to overcome both blind spots. Otherwise, the free marketers are like cranks in the neighborhood, who oppose anti-foreclosure measures and then lament the decay instigated by the boarded-up houses, brown lawns and squatters suddenly surrounding them. Detroit’s problem is your problem and mine, too.

I haven’t a shadow of doubt that the total labor pool in the American automotive manufacturing industry feels more than a little abandoned by the coasts. The vocal coastal intelligentsia isn’t sympathetic and Michigan, being in flyover country, gets little love. From management to the plant floor, the coasts are heaping disdain, but the “coasts” represent a psycho-graphic, not a geographic. “The Coast” is sometimes located in a landlocked place. People have to begin caring outside their immediate radius of relevance.

Buying American wherever possible isn’t a patriotic act; it’s born of self-interest. It’s also communitarian and improves an economy’s balance. The United States has gotten the world it wanted and worked very hard to get. After two World Wars and during a long ideological struggle, we willfully engineered both a subsidy and mindshare grab to put the world back on its feet. Direct contribution such as the Marshall Plan and far disproportionate funding & manning of the free world’s security requirements were central. But we also consciously funded rising opportunity throughout the globe by opening our markets more widely than any other major nation.

We recognized that poverty breeds gigantic trouble, particularly in countries with developed populations and modern technical and industrial capability. We wanted a wealthier world and we got it. Others seized the opportunity, not least Japan and China, and generated wealth for themselves far beyond what we anticipated we were inciting. Now here we are, competing in a world we instigated, and properly so. We *intended* to reduce our proportional presence in the global economy relative to 1945, by ensuring others would quickly grow.

In 1980, the US was still the world’s largest creditor nation. In less than three years we gave that up in a dramatic reversal that put us instead in the top debtor position. Only a portion of this was the government’s doing. Everyone today complaining about bailouts has helped to fuel this through insatiable appetite for imported goods exceeding our exports. This is not permanently sustainable, though the US has far exceeded most ideologues’ view of how long we could carry the load.

We gave up consumer electronics, including the valuable TV industry. Yes, domestic brands seeded their demise through their insularity and intransigence. The origins of the Sony Trinitron picture tube were American, but RCA, GE, Sylvania, Westinghouse, et al, did not see the value. However, in just over a decade, RCA for one was making domestic production TVs with tubes that were a product of US R&D, that had superior visual fidelity to Sony’s. But alas, it became uncool to buy domestic and no amount of product improvement could save them.

Sure, as the TV industry in the US was dying, minicomputers were in full swing and the ubiquitous personal computing was being born. But they could have co-existed, and with an American display industry in tandem with its computing industry, sector value could have been much greater, especially since both led to consumer HD.

This is where consumer responsibility for the economy we have kicks in, and it is what frustrates Americans in the domestic industry. There remain uncompetitive cars from the D3. But there are many competitive models that evaluated objectively ought to be selling much better. If you worked on the Malibu, how could you not feel like your fellow Americans aren’t with you when Camry’s still far outsell it. The Camry is a mashed potato of a car, devoid of differentiating appeal and by standards of touch, driveability, handling, appearance, space utilization, general quality of execution is inferior to the current Malibu. The Accord has gotten fat and soft. People scream for reliability and yet VW still sells Passats and Audis. Old Malibu? Sure. But this one’s *good*.

We all banter here about the anecdotal reasons to hold a grudge against any or all of the D3. But that is just an excuse. The reality is that Americans can save their own auto industry, right now, next year, in 2010 and beyond. All they have to do is to buy Detroit’s good, reject the bad, and let the government fund the “bridge loan” to restored confidence. Not doing so ensures one thing: YOU WILL PAY anyway. You will pay in social erosion and corrosion, higher social program and “safety net” costs, reduced confidence, reduced common interest, increased polarity between haves and have-nots and the opportunity costs of careers not moving forward.

Meanwhile, the Feds should wise up and link governance and management changes to availability of aid. Ford is a public company that must be untied from Ford family defacto control. GM’s executive team had their chance. They came into the millenium with a fat pile of cash and a plurality of the domestic market’s customers. As finance professionals often do when miscast as CEOs, they managed to the stock price until the price of the stock completely slipped from their grasp. Chrysler has been taken private and by comparison the team is relatively new. They have less claim to aid, but also less to answer for, for now.

We *can* let Detroit die. It’s just that we *shouldn’t*. It is true that Detroit will recover faster than pundits think, if the industry is allowed to fail. I saw Pittsburgh lose its place in the industrial realm in a dramatic five year crash between 1975 – 1980. Pundits, including many serious economists, warned that Pittsburgh wouldn’t “come back” for 50 years. By 1985, Pittsburgh was in resurgence and much cleaner, though smaller, and began showing up on lists of America’s best cities to live in due to the combination of low prices, economic diversification, cleaner air and water, and family orientation.

However, there’s no doubt that our national economy would be stronger if we had held onto much more of the steel industry, and it would be environmentally better to be making and shipping steel in and around North America rather than shipping it in from other continents on high-pollution cargo ships. With a stronger hand on the part of the Fed, the domestic steel industry could have retained a more robust position in the global market.

We need the Feds to be thinking bigger. Not nationalization, no. But the states cannot bail out Detroit, so as the holder of the funds, the Federal government should override state laws to provide shore-to-shore market consistency. And hit the reset button on labor/employer relations. It should place observers on boards, require election of new directors, with no incumbents, and force competitive search for new CEOs, with any CEO incumbents required to re-apply for their jobs if they still want them.

There should be agreed milestones for both further aid and lifting of Federal oversight. But all of this will be moot if large numbers of Americans stand back with folded arms, chanting need to see how current competitive cars fare in five years before they’ll try and buy. No marketing campaign should try to persuade us to buy domestically. Certainly, no legal structure should be erected to coerce us to do so. No appeal to patriotism is warranted.

Instead, the balance between the dynamism of individual freedom and considering social context is communitarian action. No one should have to tell you or convince you that there is intrinsic virtue and self-interest to buying American if your needs and even wants can be met by a competitive domestic product. It is, or should be, self-evident. We used to have this in greater measure in the United States, and certainly the Japanese understand this. No, transplants are not 1:1 replacements for domestics, in economic value. Americans are self-interested in the viability of the D3. They represent a huge economic presence, the demise of which will ripple into the furthest economic corners of the country.

Communitarian economic action relies on individual initiative to consider and use his or her buying power to help shape their world. People who use their buying power to advance Green practices without the zeal of enforcement are acting in a communitarian fashion, as are people who choose to shop locally rather than at Wal-Mart, or get their coffee from a local cafe rather than Starbucks. An economic communitarian will put aside small differences and prioritize social leverage, but retain the right to punish serious shortfalls in quality, execution and appeal.

A communitarian realizes that individual responsibility does not negate me in Los Angeles, for example, seeing Michigan’s problems as also my own. In the past 25 years, I have been continuously able to buy and drive engaging, entertaining, reliable, affordable American cars made by the D3. I avoided plenty that could not have performed. There’s nothing special about me. Anyone can do it. Starting right now.

By on September 29, 2008

A fine-handling car carries on a conversation with the tips of your fingers and the seat of your pants, and not just near the limit of adhesion. Whether the engine’s up front, in the middle or out back; whether the powerplant propels the front, rear or both wheels, a true “driver’s car” is a master of communication and balance. While many cars have been successfully marketed based on their “ultimate driving,” very few are capable of delivering such erudition. Many are downright pigs, offering nothing more than understeer followed by more understeer. As Jonny Lieberman’s review indicates, the Mazda RX-8 is not amongst them. It is an under-appreciated gem.

Only two cars in the RX-8′s price range arguably handle better: the Honda S2000 (in its final year) and Mazda’s own Miata. Neither has a rear seat or is remotely as livable as the RX-8, and the Honda is insanely expensive to insure. And i enjoy driving the RX-8 more.

While I haven’t always been a fan of Motor Trend, the October 2008 issue includes a “giant handling test” that’s well worth reading. They lead off with instrumented testing, where the RX-8 doesn’t fare well against a group that includes the Dodge Viper ACR, BMW M3, Mitsubishi Evo, Porsche 911 Turbo, Nissan GT-R and Audi R8. So I figured they were going to bury the RX-8 in their rankings.

But another part of the comparison test involves a subjective component, where professional road-racer Randy Pobst ranked the RX-8 third, behind only the $120k Audi R8 and $63k BMW M3 (the light steering apparently comes alive on the track). Ahead of even the Porsche— and Pobst races a Porsche.

In the purest sense of a sports car, the rear-drive RX-8 is the most satisfying through corners. I felt like it was a glove on my hand. I could put it right where I wanted. Extremely well balanced, easy to drift, unfettered by weight. The all-wheel-drive cars tend to understeer, and then when they do break loose it’s a big event and a lot happens. In the RX-8, on the other hand, things happen a little bit at a time. It’s just so much fun to drive. The more powerful cars feel like riding a horse. The RX-8 feels like wings bolted right to your arms.

Note that Pobst says “the most satisfying through corners,” not merely “one of the most.” I couldn’t agree more. I’ve driven an RX-8 on WV16 and OH26, two roads packed with challenging curves. It was the most satisfying driving experience I’ve ever had.

I’m aware of the arguments against the RX-8, most of which center around the rotary engine. Yes, the Wankel’s fuel economy is poor. In my experience, the car gets 15 mpg in all-out hooning mode, 17 in typical suburban driving, and 21 when cruising on the freeway. But plenty of vehicles have been sold that do worse. And the recent fuel price spike indicates that it’s not all about frugality. In the first eight months of last year, when gas prices were lower, Mazda still only shifted 4,417 RX-8s.

Next up: the lack of low-end torque. There’s a fix: downshift. Where some engines reward a downshift with a raucous fuss, the rotary begs to be revved. Sure, the RX-8 doesn’t launch strongly, but once underway on a winding road, power is not an issue. I’ll grant that there’s a certain adolescent thrill to rocketing oneself and 3,500+ pounds of metal and plastic forward by merely pressing down on a pedal. But is this really what performance driving has devolved to?

Apparently so. Mazda developed a unique engine and chassis for the RX-8— bits not shared with a midsize sedan. They’re offering a lightweight car with outstanding handling and a livable ride. They even toss a usable rear seat into the deal, AND an amazingly low price for a bespoke low-volume car (under $30k new, under $20k used with low miles). And yet Mazda sold just 2,591 RX-8s in the first eight months of 2008.

The unavoidable implication: handling simply isn’t a high priority for more than a few thousand people a year. When driving enthusiasts have to choose between handling and torque, nearly all of them choose torque. This certainly lets a lot of other manufacturers off the hook; torque is much easier to provide than communicative steering and a finely-balanced chassis. Just drop a powerful engine into a sexy-looking car (e.g. any of the new wave V8 muscle cars), and sales will follow.

In the future, when electric motors drive the wheels and steering is via wire, the torque temptation will only increase. Electric motors can certainly deliver low-end grunt, so few people will mind that any steering feel these vehicles provide will be entirely artificial. My advice to those with limited budgets who really care about handling, whose driving isn’t all in a straight line: buy a Mazda RX-8 while you still can.

By on August 2, 2008

The Gran\'pappy of the SUVOil shock version three-point-something is roiling the global economy. SUVs are doing a fair imitation of the dinosaurs in Fantasia. As the U.S. auto industry undergoes a rapid, convulsive, paradigm product shift, I feel a slight pang for T-Rex: the Chevrolet Suburban. I hope this example of the species pulls through. The SUV segment may be history, but the Suburban IS history.

In the last thirty years or so, GM's cycled through product names at a fearsome clip. The Suburban is the exception; it’s been in The General’s lineup for sixty-plus years. Even more astoundingly, it's hardly changed. It’s always been a very large enclosed truck (originally called a “station wagon”), skirting the line between personal and commercial vehicle.

During those years, panel vans were America's urban workhorse. And there have always been jobs requiring more power or rough-road ability. Built for the great American outback, the Suburban was blue collar to its bones. The Car Talk brothers have joked that the Suburban should have been named the Chevy “Rural;” “suburb” wasn’t far enough out (even in the sixties).

The basic “covered truck” design carried through the years. The Suburban didn’t get much bigger, but the cars got a lot smaller. By the nineties, the Suburban was a true dinosaur: body-on-frame, large overhangs, freakishly huge engine, you name it.

The big-ass ‘Burban held one trump card: it drove like a pickup truck, not a panel van. While the 'Burban occupied huge chunks of the road, the SUV was reasonably easy to keep on it (parking the behemoth was another matter). Even Consumer Reports praised the road manners of later models (if not the brakes). 

No one is exactly sure what kicked off the boom at the huge end of the SUV market. Jeeps, Broncos and Blazers had been steadily carving out a nice little niche for themselves in the snow belt, the mountains, the midwest and the plains of Texas. And then, suddenly, sales for the Chevy Suburban went crazy.

I’ve heard tell it was a survey that named the SUV the safest vehicle on the road (four tons of not-too-tippy metal will do that) that pushed the Suburban over the tipping point. The built-like-a-brick-shithouse Suburban also held its value incredibly well. The much-bemoaned Corporate Average Fuel Economy "light truck" fuel economy exemption sure didn't hurt sales. Or the fact that the price of gas remained incredibly cheap (relative to incomes). 

Sometime in the 70’s, half the soccer team arrived at the field in a Suburban, albeit one kid at a time. Having conquered its namesake, the Suburban belated tried to become worthy of the crown. 

Over the next decade plus, GM slowly honed the old work horse’s roughest edges. They couldn’t do much about the size (that was the Tahoe) or the mileage (just barely double-digits), but amenities arrived. GM made the so-called “Texas Cadillac” into a real one (and a GMC to boot). Environmentalists moaned. Safety experts wailed. And still they sold.

With profits approaching five figures per vehicle, challengers for the champ arrived in force. Ford finally won the “mine’s bigger than yours” contest with the Excursion, which was slightly bigger, just as thirsty, far more ungainly and a lot tippier than the 'Burban. The Excursion went into the books as proof that even Americans have limits. The Suburban partied like it would always be 1999.

When gas prices started creeping up, the GM sheltered behind the need for “utility.” They also started a trend to keep the metal moving that has yet to play out: discounts, incentives and low-rate financing. Five plus years later, it’s clear that most of those 'Burban buyers never needed that so-called utility. Turth to tell, the Suburban will always be a compromised car/minivan. But as a “just shy of totally commercial” work vehicle, it was– and is– divine. 

A common tale of the Suburban’s power: you can put your whole race team in it, stash the tools in the cargo bay and tow your race car to the track. With that kind of load, eight to ten mpg looks pretty efficient. 

I wasn’t sure if this was an apocryphal advantage until one of my ESL students drove a Suburban to Buffalo/Niagara Falls. The truck carried the entire Japanese staff of a tier one Honda supplier and their luggage, and towed the boat for their “retreat."  He had instructions from his boss “don’t try to go around any trouble.” The trip made quite an impression on the driver; he looked into buying a Suburban when he transferred to the States (only to be saved from financial ignominy by an attack of sanity).

OK, here it is: I love that old brick. The piggish, plenty-powerful Chevrolet Suburban forces you to stretch your horizons to find a task worthy of its capabilities (and justify the fuel bills). These days, ten grand will buy you a nice, clean, relatively low mileage example. I can’t quite justify one, and my life is the poorer for it.       

By on June 23, 2008

340x.jpgA guy says he’s stopped using premium gas in his “premium gas required” car because it’s too damn expensive. It’s a joke, right? He’s saving 30 cents now, only to threaten his warranty and pay thousands in repairs later? “Yes” is the easy answer. But the truth about cars can be a funny thing, especially when you add fuel and flames.

With apologies to the chemists, theoretical physicists and tuners out there, here is an octane apercu: octane rating measures knock resistance. It has nothing to do with energy content. Engine knock (or ping) occurs when fuel detonates before the piston is in the right spot. The temperature and pressure in the cylinder cause the fuel-air mixture to detonate prior to the spark.

The effect is like tapping the cylinder head with a ball peen hammer, hence the sound. Add the intended spark, and you can have two flame fronts in the cylinder smashing together in the kind of closed-cage match no one leaves. Seriously, knock would destroy a lot of engines if not for octane.

Octane (a.k.a. 2,2,4 trimethylpentane) is a chunk of carbon and hydrogen added to gasoline to prevent premature detonation. In a bit of counter-intuitive chemistry making phrases like “high octane thriller” slightly ridiculous, it actually slows the combustion process. Octane’s fame as a performance enhancement comes from allowing higher compression, which results in more punch. The higher compression comes from the factory, not the pump.

The octane rating itself comes from good old fashioned testing. And I do not use that phrase lightly. To rate octane, testers use special single cylinder motors developed in the 1930s. In the United States, octane is reported as an average of research octane (RON) and motor octane (MON). That’s what that yellow "octane by R + M / 2" pump sticker means. In Europe, it’s RON only, so the numbers run higher. RON tests the fuel under load, but both numbers help engine makers match their designs to available fuel.

The rule, then, is use whatever octane rating the manufacturer recommends. A force-fed SAAB asking for 93 octane fuel really needs it. Fuel with less won’t be able to put up with the pressure of the turbo and temperature inside the cylinder. It will start sounding like the opening of Silly Love Songs, and no one wants to hear that.

On the other side, a Honda Accord is set up to use 87 octane. The environment inside Accord cylinders is not going push that fuel beyond its limits, so it can’t take advantage of the extra resilience of the more expensive brew. It’s added cost with no added advantage. Who wants to waste an extra cent on their fuel?

All rules are meant to be broken, though, which is why dropping gas grade to save money– or picking it up to increase performance– isn’t necessarily a joke. There are times when you may want to stray from the owner’s manual and, as is usually the case, only you can help you know when.

With some cars, there is no choice.  Carbon build-up inside an engine might mean you must use higher octane fuel. In older cars, you are the knock sensor and have to respond accordingly.   

Newer cars have their own knock sensors, like little U-boat commanders listening for pings. Upon hearing the noise, they retard the timing, firing off sparks when they can still do some good. That means reduced power and efficiency. So, while you’re saving at the pump by avoiding higher octane fuel, you’ll end up paying at the throttle.

Exactly how much difference any of this makes varies for every car. You can (and this is not recommended the author or anyone remotely related to TTAC) take a new Passat, run regular gas and not hear any blacksmithing from under the hood. You will also fail to get that squeal you wanted as the light turned green. 

Perhaps more importantly at the moment, your mileage may be off. Whether the drop is enough to warrant the extra cost of higher octane fuel is… uncertain. The only way to really know for sure whether or not premium fuel is worth the money: test out a couple of tanks of gas.

If a test is allowed. Some manufactures "recommend" premium fuel, others "require" it. For the most part, a car manufacture weighs mileage, horsepower and fuel grade against its perception of the ideal buyer. They want to put out the best numbers they can. Conversely, no company wants to tell you to fill up with 93. It’s an added, and inconspicuous, cost of ownership, one that owners are forced to confront often.

Bottom line: if a manufacturer asks you to spend more ON their car, not FOR it, you may want to laugh it off.

By on June 17, 2008

general-motors-chevy-volt-exterior-design-appearance-camouflage-top-secret-e-flex-design-studio-aerodynamics-test-model-smoke-photo.jpgCritics of Chevrolet's upcoming plug-in gas-electric hybrid Volt fail to realize one thing: it doesn't matter if the car isn't perfect. It doesn't even matter if the Volt fails to achieve ANY of its much-hyped metrics: price, range or reliability. It's what happens AFTER GM's Hail Mary is released that counts. If GM can keep plugging away (so to speak) on the Volt, they could, eventually, offer a genuine competitor to the the all-conquering Toyota Prius. One need only look at the fiddly roof still blighting the once red-hot Pontiac Solstice to know the odds of this happening are not high. Or, alternatively, contemplate GM's new product development history vs. the genesis of the Prius.

Back in the late 1980s and early 1990s, academics investigated why Japanese companies in general, and Japanese auto companies in specific, were doing so well. A key finding: while American companies tended to think the choice was between a breakthrough, “leapfrogging” product and more of the same, Japanese companies often pursued a “rapid inch-up” strategy. With the latter, you get a reasonably good product at a viable price to market, learn from the process, then follow up with an improved (if still not perfect) product. Lather, rinse, repeat.

Companies seeking a "moon shot" breakthrough are much more likely to get discouraged, ball up the entire effort, and start over from scratch. They miss the basic rule: companies that aim for and achieve a series of base hits with innovative products often end-up outscoring those that alternate between swinging for the fences and sitting it out.

Japanese companies have had a further advantage: a significant number of Japanese "early adopters." These consumers are willing to buy bleeding edge technology for its own sake. They’ll pay well over the odds for an imperfect innovation– as long as it’s more advanced than any available alternative. That goes double if the new technology can be conspicuously consumed. Lest we forget, the Prius was originally developed for Japan, not for Hollywood.

Are these purchasing decisions rational? In isolation and in strictly financial terms, no. But when people buy a new technology, it gives the manufacturer the learning experience and financial means to launch continuous improvements and, eventually, benefit from economy of scale. The rest of us eventually get an improved, less expensive iteration. So, in the long run, these initially expensive decisions make a lot of sense.

Remember all of the arguments against digital cameras? The same process of slow growth leading to a mass market tipping point applied to the Prius– and could well apply to ALL hybrids. Is the Prius perfect? No. Does offer leading-edge technology at a price many people can afford? Yes, as we approach the third generation, it does. 

This is a critical point. Toyota isn’t ready to say, “mission accomplished.” The next Prius, with slightly improved everything, will arrive next year. No doubt work has already begun on its fourth generation replacement.

Compare the Prius' slow and steady march to GM’s failed sprints. Time and time again, they’ve created a car they thought would leapfrog the competition. When it didn’t meet expectations, they cut off investment, often  abandoning the model name. GM didn’t learn from the Corvair-Vega-Cavalier-Saturn (or the less ambitious Cobalt). Each time, they failed to quickly follow up with incrementally improved versions until they got the product right. (The exception that proves the rule: the Chevrolet Corvette.)

Seeking a breakthrough, GM spent a billion dollars to develop the all-electric EV1 (while serving pushrods to the masses). When the EV1 failed to set the world on fire, GM crushed it. Despite the looming Toyota Prius, lost U.S. market share and anti-SUV grumblings, there was no EV2.

True, GM does have its “dual-mode hybrid.” Though technically superior to the system in the current Prius, it was introduced in GM’s most outmoded package-—a large, live-axled, body-on-frame SUV. The enormous cost differential would not be insurmountable to early adopters. But what are the chances of buyers of large conventional SUVs fitting that description? Predictably, GM hybrid SUV sales have been dismal.

There will soon be a dual-mode Saturn VUE. The “dual-mode” variant will look much like regular VUEs, and the costly system could send its price deep into the thirties. But it could work. The key question: will GM continue to iterate even if sales remain low— or will they abandon the dual-mode system entirely when the Volt's E-Flex architecture appears? No points for answering that question.

The plug-in Chevy Volt is, indeed, GM's best hope in this most recent technological arms race. It will come in a distinctive wrapper (we think). It will seat four (unlike the EV1). On the downside, it's increasingly clear– thanks to Car Czar Bob Lutz' shrug at a recent test of a Volt mule– that GM's Hail Mary won't be cheap.  Again, so what? The more important factor: does GM have the will (and financial ability) to learn from the experience and persevere through the inevitable setbacks to continuously improve upon the initial effort and bring the costs down?

We shall see. Meanwhile, critics of both the Prius and the Volt don’t get it. They knock the vehicles for failing to meet their expectations for a paradigm shift. By so doing, the naysayers delay the very things they claim to want.

Fantastic products rarely emerge from the lab fully-formed, like Athena from Zeus' head. And if everyone waited for perfect products, and criticized anyone who didn’t do likewise, we’d still be riding horses. The best possible products evolve over time when persistent visionary companies team up with technophilic consumers to engage in continuous innovation. At which point the naysayers say, “Now it’s good enough for me,” without the slightest sense of hypocrisy.

By on May 13, 2008

sky-high.jpgDoes the head of Saturn have photos of important movers and shakers with goats? How else can you explain Saturn’s survival? All that’s left of GM’s “different kind of car company” is the same old spray of red ink. From import fighter to importer of Americanized Opels, Saturn’s been an abject failure for decades. And yet, GM’s has deemed Saturn one of their three “sales channels.” While there are few (non-goat-related) “image” reasons for Saturn to continue, a close look at the numbers shows its defense lies in what can be done, not what people [re]think.

There’s no two ways about it: Saturn has lost its “mindshare.” All those fond memories of American pride, homecomings, dealer barbecues, friendly sales folk and dent-proof plastic panels have faded away. Spring Hill has sprung. But then,let's keep Saturn's lost branding in perspective. GM’s “gang of three” (Pontiac, Buick, GMC; Saab, Hummer, Cadillac) doesn’t have much brand equity either.

Pontiac is defined by a handful of hot cars built because division-heads grew tired of flogging posh Chevies. Buick has history, but it hasn’t been a credible “luxe” car for anyone under 60 for 30 years or more. GMC is another exercise in “keeping the Chevies down.” And Cadillac is wandering all over the map, offering gilded pickups, bling SUVs and Nurburgring-fettled European-style sports sedans.

Equally important, Saturn hasn’t pissed in its customers’ cornflakes. Saturn remains relatively free from the incendiary “I’ll never buy a GM product again” consumer frustration with lousy build quality and disinterested dealers (a.k.a. the "perception gap"). In that sense, the brand’s amorphous rep offers a far better recovery point than the rest of GM's brands (save Hummer).

In fact, Saturn dealers have consistently exceeded their customer’s expectations. In customer satisfaction surveys, Saturn’s dealer network scores well above GM’s other brands– and many imports. Saturn dealers are carefully chosen (even company-owned where the law allows). And best of all, there aren’t too many of them. 

In today’s fragmented car market, a small number (435) of single-franchise dealers (90 percent) is a very good thing indeed. While Saturn’s sales aren’t setting the world on fire, their per-dealer sales are comparable to Chevy’s (about 550 vehicles per dealer a year). In comparison, the combined averages of Buick/Pontiac/GMC (BPG) dealers rack-up about 400 vehicles sales per dealer (Toyota and Honda average well over a thousand). 

Fewer, stronger dealers make controlling image and holding the line on promotions a much easier proposition. It’s worth noting that the Saturn Sky has nowhere near the lot problems of its near-relation the Solstice. With only 400-odd dealerships, a Saturn dealer would have confidence that if he asked for a Sky, he would get it. Pontiac dealers, less sure of new supplies, marked their first Solsti to the skies and killed sales momentum dead.

Saturn dealers may be strong, but it’s there are some real heavyweights in the BPG mix. The top 400 “combo” dealers– the top 20 percent– are at least as big as the Saturn dealers. So why would GM cull its BPG dealers— a rumor currently swirling around Motown– to protect a brand they’ve never really liked or understood? 

Simply put, if The General kills “any” dealers, they have to kill all of them. There’s no legally defensible way to separate “good” B/P/G dealers from the deadweight. The [epic] legal bills involved in killing 2000 dealerships would be far greater if GM tried to only kill the “worst” 1500. Whole lines have to be killed en masse.

Turning Saturn into “Opel West” may have been one of the least successful product strategies GM’s launched in a long time (and that’s saying something), but it has a silver lining. It separates Saturn from Chevy. Without B/P/G, without having to worry about stepping on corporate toes or badge-engineered clones, Chevy could begin to resemble the “full” car line it claims to be– instead of diving for the bargain basement.

Saturn would have space to become… something. This website has suggested Saturn become GM’s “green brand,” offering a range of all alt. power vehicles (the plug-in Saturn Vue is scheduled to proceed the Chevy Volt). Alternatively, Saturn could become the “stylish” alternative for more discerning (and well-heeled) buyers, a sort of “Atlantic Mazda.” Yes, this would place Saturn close to the classic Oldsmobile image, before that brand was killed off. But tempus fugit. 

Simple mathematics suggests it’s not time to give up on Saturn. Despite its incoherent branding, misfiring marketing, non-competitive products and declining sales, GM executives must know that the division looks more like where they want to go than any of GM’s other stores. Of course, to get from here to there, GM needs to find a way to make money off Saturn— a goal that has eluded them since January 7, 1985, the day the brand was launched See? There’s always a catch.     

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