The Truth About Cars » Sales and Marketing The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Sun, 27 Jul 2014 11:00:20 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Sales and Marketing Ford, King Ranch “Brownout” the Houston Rodeo Tue, 25 Mar 2014 12:03:07 +0000

Perhaps you haven’t lived in a flyover state where brown leather gear dominates your town during Rodeo season.  While the Ford+King Ranch press release celebrating the 15th Anniversary of those famous brown leather pickups reached the autoblogosphere, only a local writer with an internationally known knack for automotive snark both finds the sweet mochalicious lede and refuses to bury it in the dirt.

And what does that mean?  You gotta click to find out.

I’ve been blacklisted (brownlisted?) from Ford PR events as long as I remember, but I attended this shindig via the King Ranch side of the Ford+King Ranch love fest.  So I donned my cheap cowhide boots, my thrift store boot cut jeans and herded the Duratec Ranger’s 150-ish horses to the Rodeo…pardner.


As the massive complex–housing the once amazing Astrodome—filled up, I noticed how this Rodeo’s grown in the last 10-20 years.  Ford’s booth hawked their latest wares much like any auto show, complete with a “media only” area for us bloggers, social media influencers and local autojournos. There was the new aluminum F-150, the new-ish Expedition and the current Super Duty…all in King Ranch guise, ‘natch.

And yes, the King Ranch is actually a famous Ranch, much like Bill Blass was a name on Lincolns attached to an actual person. They sold cowboy grade stuff nearby at their Saddle Shop at the Rodeo, too. But I digress…


So what does a native Houstonian think of the aluminum cage’d F150? Pretty cool inside and out, as their design/engineering embodies continuous improvement, even if the rig is far too big for its own good. The doors close with less vault-like heft of the last-gen steel body, but it still feels great. And even the door card is all kinds of broughamy from the days of Ford LTDs with covered headlights and Ghia-clad Granadas.


Now, even more than before, Ford’s take on the American Workhorse is the unquestioned Audi of Pickups.


The new Expedition is a modest evolution, lacking the “WTF” face of the Tahoe’s buzz saw headlights. Its refined snout is a pleasurable throwback to the beard trimming grille of the UR-Fusion.

The hallmark all-wheel independent suspension and the massive fold flat 3rd row seat still bowl me over: shame on GM for not following suit.  But the interior feels distinctly cheap compared to the F-150. But every Ford product takes an R&D back seat to the almighty F-series, right? #pantherlove



The Super Duty (ever present on the Rodeo’s dirt floor) has a new oil-burnin’ motor for 2015, but the stuff you can touch looks about the same.  The new-ish center stack loaded with SYNC looks functional enough, but again, the interior lacks the refinement of the F150.  Ditto the exterior.  But the King Ranch trimming in all three models drove home the fact that this is the brownest lineup in the car biz. Or at least the truck biz…and it’s been that way for 15 years now?

And, as a founding member of the Brown Car Appreciation Society on Facebook, a tail-wags-the-dog group that made brown as “important” as diesels and manual transmissions to auto journos and to the PR flacks that do anything to get their attention, it’s nice to believe our mission adds to the King Ranch’s reach. Because brown makes the King Ranch a cut above, even if the leather isn’t as buttery soft as before: hopefully the lack of tenderness means it’ll hold up better than older models.

Ford also had a brief presentation, after most guests Frank Bacon-ized themselves with free food/booze in the luxury suite.  Succumbing to the urge I felt in 2011 when buying my Ranger, I asked the Ford F-series rep why Dearborn talked me out of an F-150 by making it impossible to configure what I wanted: a regular cab, XLT, short bed, 4×4, limited slip differential with the 6.2L Hurricane-Boss V8.  You know, a Ford Tremor without the poseur trim, the tacky console and a half-ton of big block V8 instead of that funny soundin’ EcoBoost motor.

The rep went into some detail about the cost-benefit of offering everything under the sun (a fair point for any corporation, to some extent) and then threw me a bone:

“You definitely know what you want, maybe we can accommodate you in the future.”

So if the BOSS V8 ever shows up in some twisted FoMoCo homage to the GMC Syclone…well…YOU ARE WELCOME, SON. For now, enjoy these chocolatey photos showing a time when Ford, King Ranch and a lot of brown joined forces to impress rodeo-going pistonheads.



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Good News, Guys! Someone Wants To Pay Top Dollar For My Town Car! Sun, 23 Feb 2014 15:00:24 +0000 IMG_4410

Just when you think you’ve seen it all… you haven’t, apparently.

This letter came to me yesterday, in what appeared to be a hand-addressed envelope postmarked Santa Ana, CA. I assumed it was some sort of medical bill, but it turned out to be a fairly intricate sales pitch for a Dodge dealer located in Marion, Ohio, about thirty-five miles from me. As you can see, the letter purports to be a printed-out email from a sales manager who is desperate to get his hands on my 2009 Town Car. You know, this one:


I’m not sure why they need it so desperately. Perhaps they are playing a practical joke on someone who owns a white Town Car, or perhaps they are starting up a “Scared Transverse” program to convince people not to drive RWD cars. Either way, they’re offering 110% of Kelly Blue Book!

Those of you who have worked in a dealership know how this stuff happens. It’s a dead Tuesday and some guy pulls up in a rental, demanding to see “the decision maker” at the store. Your sales manager or GM is a brilliant closer but he doesn’t have any experience with being closed himself. So, before you know it, your dealership has paid someone $25,000 to “generate leads” for you that are, shall we say, not exactly up to Alec Baldwin’s standards.

The people who come in on these letters are looking to make impossible deals; they’re worse than regular “ups” by a factor of ten. At the end of the program, the company that sold it to your store points to the increased traffic, tactfully failing to mention that sales were about what they’d been before the start of the program. Everybody gets angry, someone gets fired, and the whole shop catches a case of corporate amnesia about the thing until the next super-salesman in a rental car knocks on the GM’s door.

What’s interesting about this particular piece of direct mail is the effort put into it. How did the Post-It get written? Was it an autopen device, some robot that writes letters and Post-Its and sticks them together and mails the whole thing out? Or is it a sweatshop somewhere in downtown Los Angeles? Could it be Chinese workers across the Pacific, faithfully copying the cursive shapes from a computer screen, assembling the letters, then filling a Maersk container with their earnest weight? The possibilities are nearly endless, but most of them are not cheering.

But I don’t have time to worry about the fate of the worker bee, whether American or Chinese; I have to high-tail it to the junkyard before they feed my 110%-of-Blue-Book Townie to Murilee’s Crusher!

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GPS Tracking: Catch This Fly With Honey Tue, 14 Jan 2014 21:22:19 +0000 Photo courtesy of

Photo courtesy of

Last week, Ford’s Global VP of Marketing and Sales, Jim Farley, told a panel discussion at the Consumer Electronics Show in Las Vegas that Ford has access to data on its customers’ driving habits via the GPS system installed in their cars. “We know everyone who breaks the law, we know when you’re doing it. We have GPS in your car, so we know what you’re doing. By the way, we don’t supply that data to anyone,” he said. The next day Mr. Farley adjusted his statement to avoid giving the wrong impression saying that the statement was hypothetical and that Ford does not routinely collect information on, or otherwise track, drivers through their GPS systems without those drivers’ consent and approval. That approval comes from turning on and opting into specific services like 911 Assist and something called Sync Services Directions, a system that links the GPS system to users’ cellular phones. So that’s that, right?

I’m going to say right here that I believe Ford when they say they aren’t collecting information on individual drivers because, if you think about it, they really don’t need the level of detail that sort of tracking can provide. It matters little to Ford whether or not you like to run 5 MPH over the speed limit on your morning commute or just how often you go to the gym so it seems unlikely that they would seek to collect that kind of data. No, I think that, just as Mr. Farley speculated in the comments that followed his initial revelation, they really are interested in the big picture issues, the kind of data that urban planners may want or even the sale of bulk data to other marketers, say a retailer trying to determine the best place to open a new store.

Of course, what’s true about the Ford Motor Company may not be true of others. The Federal government, for example, may want to track the movements of certain people and state and local governments may want to link into that data stream to determine whether or not people are obeying traffic regulations. Right or wrong, necessary or not, the government using your cars’ onboard computers to keep tabs on you is something that will continue to evolve in the years to come, but it the actual topic I wanted to discuss today wasn’t government intrusion into our lives, it was where I think this is really headed – a new form of advertising.

Years ago I read a factoid that said when most Americans have the opportunity to opt out of junk mail, things like advertising brochures and store catalogs, we actually sign up for more. I think that’s as true today as it was back then. We don’t like intrusive forms of advertising like phone calls during the dinner hour and pop-up ads in our browsers, but generally speaking the average American doesn’t mind things like targeted ads that appear off to the side or above a website’s banner. These things are, we know, a necessary evil, the price we pay for free content. After all, someone has to pay the bills in order to keep a website running and targeted ads based on my browsing history are an effective way of getting me to see a product I might actually buy. I’m OK with that. If I read an article about a mini-van and, as a result, get links to companies that sell mini-vans, that’s actually helpful.

2013 Hyundai Elantra GT Interior, Infotainment, Navigation, Picture Courtesy of Alex L. Dykes

So why aren’t these things happening with our GPS units? If I frequent hamburger joints, then sponsored content might actually get me to try some place new, right? If I search for an auto parts store, why not do what Google Maps already does on my home computer and put sponsored links on top and then others down below? It’s the way the yellow pages used to work and so long as I get all the information I need then I’m willing to look at your sponsored content. Of course, I want something in return, maybe a free GPS head unit or a free satellite radio subscription, but if you make it worth my while and it could be a win-win situation.

I’m serious! It’s how the free market works and I, along with a great many others I am sure, don’t mind the intrusion as long as you make it worth my while. All that other “big brother” stuff is going to get sorted out eventually and I am firmly in the camp that believes that, since I’m not doing anything wrong, someone looking over my shoulder doesn’t hurt me at all. Give me something for free while avoiding pop-ups and you can track me all you want. In fact, I’ll be the first in line to subscribe and I’m sure that tens of millions of Americans will be right behind me. Bring on that better, brighter future.

Thomas Kreutzer currently lives in Buffalo, New York with his wife and three children but has spent most of his adult life overseas. He has lived in Japan for 9 years, Jamaica for 2 and spent almost 5 years as a US Merchant Mariner serving primarily in the Pacific. A long time auto and motorcycle enthusiast he has pursued his hobbies whenever possible. He also enjoys writing and public speaking where, according to his wife, his favorite subject is himself.

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Adventures In Marketing: 1970 Toyota Corona Beats Green Monster Jet Car In Drag Race Fri, 13 Sep 2013 13:00:34 +0000 1970_Toyota_Corona_Commercial-Picture courtesy of Toyota USASince my first car was a 1969 Toyota Corona sedan, I always look for these cars in junkyards. I toy with the idea of getting another first-gen Corona sedan someday, into which I will swap a 1UZ-FE engine out of a Lexus LS400, so of course I check the internetz for old Corona ads. Here’s a good one!

Yes, the ’70 Corona sedan beats the mighty F-104-engined Green Monster LSR car in all categories, including a 98-yard drag race (in which the Corona gets about a 95-yard head start). As for trunk space and ease of parking… well, you’re better off with a Corona than a jet dragster any day!

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Salesmen, Beware Of The Backseat Boys Sun, 10 Jun 2012 09:51:30 +0000  

In 2001 during an early evening with a piercing December chill, Jason splayed the salesman’s grin when Dad and Son showed up in a warm showroom. Well of course he’d be happy to let them try a new Passat, “but first can I get a copy of your license?”

Moments later, Jason pulled up to the glass front doors in a black B5. He hopped out and assumed the passenger seat. Ten-year-old Son scurried in past the back door and settled in the center of the backseat with a commanding view forward.

Despite his 30 minutes of interactive product training, salesman-Jason wouldn’t be the expert in the car that evening. He didn’t stand a chance against the ten-year-old in the back. That boy’s bedtime stories came from Consumer Reports and Road & Track.

As Dad secured himself in the driver’s seat with the Teutonic click of the seat belt, the boy was already reaching forward from the back seat to show off the seat heaters.

“You can roll it to turn on the bun warmers, see!? And look, if you move the lever to the side you can shift the gears like a manual car!”

“Son, put your seat-belt on so we can go,” Dad said over his shoulder.

Salesman Jason racked his brain for Passat arcana that would put the boy in his backseated place.

Jason prescribed Dad and Son an anemic test drive route with a quick hop onto and off of the highway. Soon, salesman and boy sounded like an old couple.

Salesman: “And this car has…”

Boy: “…190 horsepower!”

Salesman: “So you can get up the driveway when it snows …”

Boy: “…this car has four wheel drive.”

During the drive Jason had a difficult time getting a talking point or a question across without Son finishing the salesman’s sentence.

Salesman: “And if you move that dial up there…”

Boy: “…you can open and tilt the sunroof!”

Salesman: “And if you pull on the handle…”

Boy: “…it goes back into the roof softly!”

When the three rolled back into the dealership parking lot, Jason mustered as genuine an expression he could stomach, turned back and said, “Hey kid, you seem to really know your stuff. You probably know…”

Boy: “…more about this car than you do?  It’s child’s play.”

By virtue of going to Road & Track night-school, Son knew more about the Volkswagen, and every other automaker’s lineup, than any salesman should ever need to know.

At the end of the day, Jason focused on selling to the front-seat driver when really he should have focused his efforts on the fifth-grader in the back.

Instead, the boy in the back settled on an Acura TL.

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Blind Spot: America’s New Motor City Mon, 21 May 2012 20:40:16 +0000

Throughout the history of the automobile in America, one city has been synonymous with the industry and culture of cars. Booming with America’s great period of industrialization, Detroit became the Motor City, the hometown of an industry that created a blue-collar middle class and a culture based on personal mobility. But as America has entered the post-industrial age, as the focus of our economy has shifted from production to consumption, Detroit has been left behind. Long used to defining consumer tastes, Detroit was caught unawares by the changes wrought by globalization and the rise of information technology. And as America’s traditional auto industry struggles to redefine itself in the new economy, another Motor City is rising to meet the challenges of a new age.

Though not often recognized as such, Los Angeles has long been America’s “other” car capital. Developing during the rise of the automobile, Los Angeles has become a place where automobile ownership is not just a necessity, but a fundamental aspect of the culture. And as a result of its headlong embrace of the automobile, Southern California has contributed some of the most important elements of automotive culture. From the drive-through fast food joints that now dot America’s landscape to Harley Earl’s design revolution, from hot rod culture to smog control, it is impossible to imagine modern American life without L.A.’s unique automotive achievements.

Industrial-age Detroit was surely grateful for Southern California’s innovative attempts to reshape society around the cars it produced. But as long as the automakers dominated the wealth produced by America’s love affair with the automobile, Los Angeles was seen as little more than Detroit’s best customer. Though an important ally in promoting automotive culture, Los Angeles’s value to the industry was little more than offshoot of its major industry: entertainment. But as global competitors entered the US market, Southern California’s car-crazed culture became one of the first to embrace the imports. And as Detroit’s near-monopoly began to erode, the balance of power shifted: from this point on, consumers would drive automotive tastes with increasing independence.

With this shift, Los Angeles began its ascent in the automotive world. While Detroit lay mired in the industrial age, Southern California developed a taste for the new global menu of automotive options, and simultaneously embraced the new revolution in information technology. Its status as a taste-maker grew, and its focus on consumer opinion, fashion and communication put it in close touch with the values that were reshaping America’s economy. Now, with the information and consumer-economy revolutions largely realized, Southern California is becoming the new center of gravity for America’s auto business.

In fitting with the values of this new world, L.A.’s automotive juggernauts neither produce nor themselves sell automobiles. Instead of factories and dealerships, they have invested in server farms and data models. Rather than controlling information to maximize profits in support of an industrial supply chain, they create and share information in service of the consumer and market efficiency. And through this revolution, the two titans of Southern California’s “automotive industry,” Edmunds and Truecar, have become some of the biggest players in the business of buying and selling cars. got its start just as Los Angeles was coming into its own as the capitol of American automotive consumption, and well before the information revolution began to take hold. In 1966, it began publishing booklets which consolidated automotive specifications as a tool to help buyers make informed decisions. Over the years, it has evolved this service from print to CD-ROM, to web page and mobile app. And with new technology, it has dramatically expanded its services, offering everything from news, reviews, and specifications to industry analysis and forecasting, from a live consumer-advice hotline to dealer reviews and its “True Market Value” pricing tool. Never losing focus on its original insight, that consumers need help navigating the crowded new car market, Edmunds has embraced every new technology to expand on its mission and become the most established gatekeeper to the burgeoning world of online auto research and sales.

Entering Edmunds’ brightly-colored offices in Santa Monica, it becomes instantly clear that the company looks to Silicon Valley rather than Detroit. With its whiteboard walls, open cubicles, espresso machines and video game room, the ambience is clearly inspired by Google rather than GM. And like Google and Facebook, Edmunds is finding that its consumer service is just the beginning of its opportunities. So massive is the traffic that Edmunds’ car buying website generates, it has developed its own value as a model for the larger market. As the patterns of research at shift, the company can track changes in interest in specific cars and brands with an ingenious in-house application, giving it insights into the market that no automaker  can ignore. By serving consumers with the latest technology, Edmunds can not only generate huge revenue from advertising and sales leads, but create valuable intelligence for the industry as well.

Though Edmunds’ business model may now embrace the industry as well as consumers, it hasn’t lost sight of its original mission. Indeed, as it has assumed leadership in the burgeoning auto consumer services industry, it has embraced its role as an advocate for automotive consumers in every venue. Leading this charge is former CEO and current Vice Chairman, Jeremy Anwyl, an intense, often-iconoclastic dynamo who has become the closest thing the automotive business has to a public intellectual. Rising to prominence through his regular commentary and industry analysis, Anwyl has become a regular figure at Washington D.C. hearings on everything from fuel economy regulations to distracted driving. Over a brief lunch, he jumped with ease from topics as diverse as EV tax credits and NHTSA incident reporting to sales forecasting and media criticism, fusing a generalist’s fascination with every aspect of the automotive business and culture with an unshakeable focus on serving consumers. While Detroit’s executives often seem inward-looking and overly focused on their traditional industry patterns, Anwyl demonstrates the importance of an automotive culture that engages every arena in which automobiles play a role. His ability to serve as the auto consumer’s advocate-in-chief, not only serves Edmunds’ mission and image well, it helps cement the consumer power that launched his company to prominence.

But Edmunds’ rise, from booklet printer to market-making, policy-influencing juggernaut, has not gone unnoticed. Numerous companies have tried to match its success and compete for its influence, but few have given it any real trouble. The simple fact is that Edmunds has been working at its mission so long, and has been so in tune with cultural and technological shifts, that any rival would have to make enormous investments in order to match its suite of services and aura of leadership. And yet, in just a few short years, one company has managed to break through Edmunds’ near-monopoly, and join it as the second Southern Californian juggernaut of automotive consumer services. That company is TrueCar.

The short roots of TrueCar’s stunning rise to prominence lead back to Edmunds. Formed by a core of Edmunds employees, TrueCar grew out of just one element of Edmunds’ sweeping empire: the “True Market Value” pricing tool. While the larger site spread its resources across an entire ecosystem of consumer information and advocacy, TrueCar’s mission was laser-focused on creating the best real-time pricing tool on the web. By investing in every possible source of data on new car sales, and by developing a slick, intuitive interface focused solely on delivering localized market price transparency, TrueCar has been able to claw out a niche in one of the most lucrative automotive consumer services. And though Edmunds downplays comparisons with TrueCar, it’s clear that the upstart firm has established itself as a major player.

TrueCar’s more focused culture is evident in its almost zen-like offices high atop Santa Monica’s historic clock tower. In sharp contrast to Edmunds’ primary colors, copious espresso machines and young employees blowing off steam at the company pinball machine, TrueCar’s headquarters are smaller, less self-conscious, and a more obviously-focused workplace. Not that TrueCar couldn’t have a vast Google-like complex if it wanted: just last year, in the depths of of the economic downturn, the company brought in a $200 million round of investment. But, as CEO Scott Painter explains, TrueCar’s spends its millions largely on acquiring and analyzing pricing data. Where Edmunds seeks to offer a complete research and shopping experience, Painter refuses to break focus on pricing until total market transparency is achieved.

But where Edmunds’ broader focus has allowed it to assume the mantle of consumer advocate in a generally non-confrontational manner, TrueCar’s narrower but deeper approach to serving consumers has ruffled feathers among dealers and manufacturers. For an industry long used to consumers overwhelmed by the vast variety of brands, models and trim levels, and for dealers who have long relied on asymmetrical information to pad their profits, TrueCar’s crusade for pricing transparency has tipped the balance of power so far towards consumers as to be seen as a threat.

Towards the end of 2011, TrueCar, falling victim to its own success, came into conflict with dealer groups, manufacturer “dealer marketing allowance” schemes, and state regulators tasked with protecting local franchise laws. In the wake of that confrontation, TrueCar has had to make some specific changes in how it operates its business, but the industry’s reaction showed that TrueCar’s mission to deliver real pricing transparency was changing the way automotive retail works. And as Detroit has proved over the last 40 years, businesses who cling to a comfortable past in the face of inexorable historic forces get left behind.

Though Edmunds and TrueCar eye each other warily, and though there is certainly some overlap in their business models, they aren’t really competitors. Together, they form the vanguard of a movement to use information to empower consumers, and I would argue that a consumer that wants to make the most of this new movement would use Edmunds to help decide what kind of automobile might suit them best, and use TrueCar to help price and negotiate for it once that decision has been made.

Competition between the two will make both better, which in turn will arm consumers with ever-greater power in the marketplace. In this way, the two behemoths of online car buying services will continue to strip power from the automakers, force them to pay closer attention to consumers, and drive the innovations that will allow producers to more efficiently serve an increasingly-informed market. And as this dynamic plays out, the producers and marketers of Detroit and elsewhere will have no choice but to recognize the rise of America’s new Motor City in sunny Southern California.

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Jen Friel, Sam The Eagle, TTAC’s Disinvitation To The Dodge Dart, And The Slut Event Horizon Thu, 03 May 2012 15:37:27 +0000

No sense beating around the bush on this one: TTAC won’t have a Dodge Dart review for you to read when the embargo expires later this week. We weren’t invited to the event. If you want to find out what it’s actually like to drive the Dart, you’ll have to read about it somewhere else. If you want an honest review, you will have to wait until I can rent one, I suppose.

Yesterday, Jalopnik’s Matt Hardigree teed-off on Chrysler for inviting sex blogger Jen Friel to the Dart release. Although Hardigree himself is embroiled in a long-term struggle with our own Derek Kriendler for the unofficial title of Most Interesting Young Auto Writer, a battle he cannot help but eventually lose, I heartily recommend that you check out Matt’s article when you have time, because it’s a fun read, and it’s straight out of the Jack Baruth Handbook For Dissing The Living Shit Out Of Hack Writers & The Auto Industry In General, Yo. When I read stuff like that, I feel the same way Madonna must while watching a Lady Gaga performance.

What Matt doesn’t realize, however — or doesn’t say, at any rate — is that Chrysler’s decision to effectively replace TTAC with Ms. Friel isn’t an anomaly. It’s the arrow-straight path to the future,and it is part of a bigger trend that affects everyone from your humble author to the New York Times. Here’s why.

I want to talk about the idea of efficient markets for a moment. Most Americans are brought up to equate “efficient” with “good” in this context. Sometimes, an efficient market is a good market. Imagine, if you will, an old frontier settlement with a single general store. The owner of that store effectively controlled what goods and services were available to the residents of that town, and he also effectively controlled the prices of those goods and services.

If the settlement expands and becomes a town, then a city, a second store will eventually arrive, and then a third. At that point, you have competition, which means that prices will drop. Good for the market, right? Of course. Let’s suppose, however, that the original general store had been so profitable that the owner had been able to sponsor the local Boy Scout troop. The arrival of additional stores, and the pricing competition that results, would eventually reduce his margin to the point where it would no longer be possible to sponsor the Scouts. At that point… poof! No more Boy Scouts, but everybody pays fifty cents less for soap. Is that good or bad? Depends on whether you’re a Scout or a bulk soap consumer, right?

Once upon a time, newspapers were like frontier general stores. They had effective monopolies, or something close to it. If you wanted to advertise, you had to do business with them. If you wanted to find out what the weather would be tomorrow, or how much your new neighbors paid for their house, you had to buy the product. Simple as that. Like aristocrats who felt their wealth imposed a noblesse oblige, most newspapers took the profits created by what we would today call “channel ownership” and spend some of them on giving you the vegetables. The vegetables, of course, are what’s good for you. Investigative reporting. Exposing the corrupt. Safeguarding the public. Printing the truth. And so on.

Make no mistake, though, “exposing the corrupt” never pays the bills at a newspaper. Printing classified ads and yesterday’s baseball box scores is what pays the bills. The idea is that you, the newspaper owner, owe the public something since you are profiting from your ability to distribute information to them. You charge them for red meat but you make sure there are vegetables on the plate. It’s that simple, and it’s what gave us everything from Woodward and Bernstein to Consumer Reports.

Automotive “journalism”, however, never got the memo about noblesse oblige Sure, every once in a while Patrick Bedard would put his foot up some kit car builder’s ass, and CAR magazine once ran an investigative series by Jamie Kitman about the dangers of leaded fuel, but by and large, autojournalism is all red meat, all the time, with as much salt and sugar as they can pile on. “New Camaro ZL1 Tells The Shelby To Step Outside!” “Ferrari 458: World’s Greatest Car?” “Top Sport Sedans Go Head To Head In Ibiza, Spain!”

When the Internet came along and access to information was truly democratized — when “citizen journalists” began reporting on CNN and the Arab Spring was covered on Twitter by the people doing the springing — the newspaper world took a monstrous hit. Why put a classified ad in the paper when you can put it on Craiglist? Why wait for tomorrow’s paper to get the box scores? They’re online now. Need a weather forecast? It’s on your iGoogle. All of a sudden, newspapers didn’t control the flow of information.

The major papers have fought back by attempting to raise the price of vegetables, putting investigative articles and real content behind paywalls. Whether that will work or not is anyone’s guess, but if it does work, it will be because the Times still has the knowledge, tools, and ability to do the kind of real journalism that the HuffPo can’t. Bloggers earning twenty-five bucks a pop to aggregate content from their basements can’t break Watergate, Travelgate, Iran-Contra, et cetera. Even an article like the one done by Frank Greve on the autojourno game itself requires too much time and effort to ever come from a traditional blog. Vegetables. Tough to grow, hard to swallow.

The car rags didn’t have any vegetables, with the possible exception of reliable instrumented testing, and that’s why they are disappearing. Motor Trend may be on its hands and knees sucking-off the Nissan GT-R right now, but Jalopnik can do it sooner, faster, and better, plus they can run an article about some drunk skank who ran into a tollbooth. It’s the Connery-in-The-Untouchables approach. They put a picture of a Ferrari on the cover? You put a picture of a crashed Ferrari on the website. They declare the Chevy Sonic to be the best car ever? You do the same, plus run a story on a guy driving an electric scooter on the freeway.

Now, let me show you Jack’s Foolproof Chart Of What Young Male Readers Like, from Least to Most:

Detailed reliability data
Sophisticated, knowledgeable automotive testing
Fun stories about stuff
Stories where something blows up
Pictures of cool stuff
Pictures of stuff blowing up
An article about girls doing slutty things
Mugshots of girls who have done slutty things
A girl talking about having the “back of her eyeballs” knocked out by some dude raw-doggin’ her in a hallway
A picture of the above
A video of the above
A video of the above, with two guys
A video of the above, with two guys and a dog
A video of the above, with two guys, a dog, and a tight-ass dubstep soundstrack

You get the idea, right? It’s always possible to increase viewership by moving farther down the list. Jalopnik is farther down the list than Car and Driver, but that doesn’t mean they get to cry “Hold!” at the Mugshots of girls who have done slutty things level. Somebody’s gonna take it farther.

Jen Friel takes it farther. She writes about getting fucked, for lack of a less direct description. By 103 guys on OK Cupid, by random “buddies”, whatever, whenever, she’s down. She’s not terribly attractive in the conventional sense, so she’s “approachable” and that plays even better with a lot of her audience than it would if she looked like a young Kim Basinger. She’s more interesting to young men than a Ferrari would be, even if that Ferrari is being driven into a toll booth at high speed. Her stuff isn’t great writing, and some of it doesn’t even rise about the level of functionally illiterate teen sexting, but that doesn’t matter.

Given the choice between inviting someone with years of experience owning and racing Mopars — namely, moi — and having someone attend who could put a brief advertorial for the Dart in-between stories of being eyeball-fucked and out-skanking strippers at a club, Chrysler followed the money. The future, if you will. What does that future contain? The Slut Event Horizon, where everything having to do with young and young-ish men will probably be sold using as much sex, violence, and spectacular imagery as possible. Face it: this is how Jalopnik beat the car rags, and it’s how they will eventually be dethroned. Plain and simple.

Those of us who are of a certain age will remember “Sam The Eagle” from “The Muppet Show”. Sam was very conscious of his dignity, and he was anxious to censor prurience, violence, and just plain silly behavior out of what was planned for each night’s show. Of course, he was always frustrated in this attempt. Once, in the middle of decrying nudity, he was informed that he was “naked under his feathers” and, after considering the issue, he ran off the set in shame. Let’s face it: once you’ve tried this, how can you complain when this is even more popular? Sam The Eagle wouldn’t understand, but I do.

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Harry Belafonte’s Kids Sing Olds Troféo-ized Version of Dad’s Big Hit, Civilization Collapses Fri, 20 Apr 2012 15:00:30 +0000 After creating today’s Oldsmobile Toronado Troféo Junkyard Find, it becomes my duty to share one of the most brain-scrambling examples of the “What Could GM Have Been Thinking?” genre of car commercials. Yes, it’s a version of Harry Belafonte‘s “Banana Boat Song,” with “Tro-FE-oh” replacing the famous “DAY-oh,” and sung by Belafonte’s offspring.

Let’s study the new lyrics:

It’s a new generation and we want a new Olds.
Sequential port fuel injection, anti-lock brakes,
(?) come and they want a new Olds.
Visual Information Center, handles great.
This Oldsmobile is not our father’s,
New generation for the sons and daughters.
This is the new generation of Oldsmobile.

It’s hard to figure out what GM had in mind here. If the idea was to pitch the Troféo to younger buyers considering a Detroit alternative to European marques, why use a song that was a hit in 1956? If the idea was to woo Oldmobile’s traditional purchaser demographic (i.e., grumpy octogenarians in the Upper Midwest), why use a song by a well-known Civil Rights-era activist and all-around opponent of American foreign policy, who was loathed like Satan by 99 and many more nines percent of grumpy Midwestern octogenarians? Hey, maybe they’ll buy a Reatta!

Let’s check out another Olds ad from the same era featuring equally an equally C-list celebrity. Quick, someone put that marque out of its misery!

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Adventures In Marketing: In An Alternate Universe, the Corolla Is All About Sex Thu, 05 Apr 2012 15:45:59 +0000 Having suffered behind the wheel of a few rented Corollas during my travels with the 24 Hours of LeMons Circus, I’m here to tell you that the current generation of Corolla— the version you get in rental fleets, at any rate— is one of the least fun motor vehicles you can buy. I am convinced that the suits at Toyota have ordered their top engineers to devise a Fun Prevention Control Module™ for the Corolla, a little box under the dash that does everything from preventing you from finding a good song on the radio to ensuring that you will never, ever be able to pull off even a half-assed e-brake turn in a muddy racetrack paddock. With the FPCM™ in full effect, you’ll drive your Corolla for hundreds of thousands of trouble- and fun-free miles, all the while fantasizing about setting the thing on fire and giving some crackhead $119 for a much more fun ’95 Mercury Mystique rolling on three space-saver spares. So, it came as a shock when I spotted this Corolla-hustling ad on a Saigon Toyota dealership during my recent trip to Vietnam.
According to Toyota’s global website, the Corolla Altis “throws in a staggering change that will definitely blow you away.” Wait, a 21st-century Corolla that will blow you away? A woman in red high heels flashing a few yards-o-leg… associated with a Corolla? What’s going on here? Could this be the foot in the door that banishes the FPCM™ from the Corolla and brings us back to the spirit behind the FX16 Corolla? Well, probably not. But we can hope.

Sexy_Toyota_Corolla_Ad-close_Vietnam-Picture_Courtesy_Phillip_Greden Sexy_Toyota_Corolla_Ad_Vietnam-Picture_Courtesy_Phillip_Greden Zemanta Related Posts Thumbnail ]]> 8
Blind Spot: The Twilight Of The Volt Mon, 05 Mar 2012 00:44:30 +0000

 “Do you want to accompany? or go on ahead? or go off alone? … One must know what one wants and that one wants”

Friedrich Nietzsche, Twilight Of The Idols

This week’s news that GM would stop production of the Chevrolet Volt for the third time in its brief lifespan came roaring out of the proverbial blind spot. Having watched the Volt’s progress closely from gestation through each month’s sales results, it was no secret to me that the Volt was seriously underperforming to expectations. But in the current media environment, anything that happens three times is a trend, and the latest shutdown (and, even more ominously, the accompanying layoffs) was unmistakeable. Not since succumbing to government-organized bankruptcy and bailout has GM so publicly cried “uncle” to the forces of the market, and I genuinely expected The General to continue to signal optimism for the Volt’s long-term prospects. After all, sales in February were up dramatically, finally breaking the 1,000 unit per month barrier. With gasoline prices on the march, this latest shutdown was far from inevitable.

And yet, here we are. Now that GM is undeniably signaling that the Volt is a Corvette-style halo car, with similar production and sales levels, my long-standing skepticism about the Volt’s chances seems to be validated. But in the years since GM announced its intention to build the Volt, this singular car has become woven into the history and yes, the mythology of the bailout era. Now, at the apparent end of its mass-market ambitions, I am struck not with a sense of schadenfreude, but of bewilderment. If the five year voyage of Volt hype is over, we have a lot of baggage to unpack.

When a history of the Volt is written, it will be difficult not to conclude that the Volt has been the single most politicized automobile since the Corvair. Seemingly due to timing alone, GM’s first serious environmental halo car became an icon of government intervention in private industry, a perception that is as true as it is false. I hoped to capture this tension in a July 2010 Op-Ed in the New York Times, in which I argued that

the Volt appears to be exactly the kind of green-at-all-costs car that some opponents of the bailout feared the government might order G.M. to build. Unfortunately for this theory, G.M. was already committed to the Volt when it entered bankruptcy.

But by that time, the Volt was already so completely transformed into a political football, the second sentence of this quote was entirely ignored by political critics on the right. The culture of partisanship being what it is in this country, any nuance to my argument was lost in the selective quoting on one side and the mockery of my last name on the other. One could argue that that this politicization was unnecessary or counter-productive, but it was also inevitable.

The Volt began life as a blast from GM’s Motorama past: a futuristic four-place coupe concept with a unique drivetrain (which still defies apples-to-apples efficiency comparisons with other cars), a fast development schedule and constantly-changing specifications, price points and sales expectations. It’s important to remember that the Volt was controversial as a car practically from the moment GM announced (and then began changing) production plans, becoming even more so when the production version emerged looking nothing like the concept. But it wasn’t until President Obama’s auto task force concluded that the Volt seemed doomed to lose money, and yet made no effort to suspend its development as a condition for the bailout, that a car-guy controversy began to morph into a mainstream political issue.

At that point, most of the car’s fundamental controversies were well known, namely its price, size, elusive efficiency rating, and competition. Well before the car was launched, it was not difficult to predict its challenges on the market, even without the added headwinds of ideological objections (which should have been mitigated by the fact that they were actually calling for government intervention in GM’s product plans while decrying the same). But GM’s relentless hype, combined with Obama’s regular rhetorical references to the Volt, fueled the furor. Then, just two months after Volt sales began trickle in, Obama’s Department of Energy released a still-unrepudiated document, claiming that 505,000 Volts would be sold in the US by 2015 (including 120,000 this year). By making the Volt’s unrealistic sales goals the centerpiece of a plan to put a million plug-in-vehicles on the road, the Obama Administration cemented the Volt’s political cross-branding.

When GM continued to revise its 2012 US sales expectations to the recent (and apparently still wildly-unrealistic) 45,000 units, I asked several high-level GM executives why the DOE didn’t adjust its estimates as well. But rather than definitively re-calibrate the DOE’s expectations, they refused to touch the subject. The government, they implied, could believe what it wanted. Having seen its CEO removed by the President, GM’s timid executive culture was resigned to the Volt’s politicized status, and would never make things awkward for its salesman-in-chief. And even now, with production of the Volt halted for the third time, GM continues to play into the Volt’s politicized narrative: does anyone think it is coincidence that The General waited until three days after the Michigan Republican primary (and a bailout-touting Obama speech) to cut Volt production for the third time?

Of course, having used the Volt as a political prop itself from the moment CEO Rick Wagoner drove a development mule version to congressional hearings as penance for traveling to the previous hearing in a private jet, GM is now trying to portray the Volt as a martyr at the hands of out-of-control partisanship. And the Volt’s father Bob Lutz  certainly does have a point when he argues that the recent Volt fire controversy was blown out of proportion by political hacks. But blaming the Volt’s failures on political pundits gives them far too much credit, ignores GM’s own politicization of the Volt, and misses the real causes of the Volt’s current, unenviable image.

The basic problem with the Volt isn’t that it’s a bad car that nobody could ever want; it is, in fact, quite an engineering achievement and a rather impressive drive. And if GM had said all along that it would serve as an “anti-Corvette,” selling in low volumes at a high price, nobody could now accuse it of failure. Instead, GM fueled totally unrealistic expectations for Volt, equating it with a symbol of its rebirth even before collapsing into bailout. The Obama administration simply took GM’s hype at face value, and saw it as a way to protect against the (flawed) environmentalist argument that GM deserved to die because of “SUV addiction” alone. And in the transition from corporate sales/image hype to corporatist political hype, the Volt’s expectations were driven to ever more unrealistic heights, from which they are now tumbling. Beyond the mere sales disappointment, the Volt has clearly failed to embody any cultural changes GM might have undergone in its dark night of the soul, instead carrying on The General’s not-so-proud tradition of moving from one overhyped short-term savior to the next.

Now, as in the Summer of 2010, I can’t help but compare the Volt with its nemesis and inspiration, the Toyota Prius. When the Toyota hybrid went on sale in the US back in 2000, it was priced nearly the same as it is today (in non-inflation-adjusted dollars), and was not hyped as a savior. Instead, Toyota accepted losses on early sales, and committed itself to building the Prius’s technology and brand over the long term. With this approach, GM could have avoided the Volt’s greatest criticism (its price) and embarrassment (sales shortfalls), and presented the extended-range-electric concept as a long-term investment.

Even now, GM can still redefine the Volt as a long-term play that will eventually be worth its development and PR costs… but only as long as it candidly takes ownership of its shortcomings thus far and re-sets expectations to a credible level. And whether The General will defy and embarrass its political patrons by destroying the “million EVs by 2015″ house of cards in order to do so, remains very much to be seen. One thing is certain: as long as it puts PR and political considerations before the long-term development of healthy technology and brands,  GM will struggle with a negative and politicized image. And the Volt will be seen not as a symbol of GM’s long-term vision and commitment, but of its weakness, desperation, inconstancy and self-delusion.

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Hammer Time: What Should Have Been Fri, 13 Jan 2012 14:26:06 +0000


I remember looking at the then brand new Ford Five Hundred and thinking to myself, “This would make one heck of a Volvo.”

Like the Volvos of yore this Ford offered a squarish conservative appearance. A high seating position which Volvo’s ‘safety oriented’ customers would have appreciated. Toss in a cavernous interior that had all the potential for a near-luxury family car, or even a wagon, and this car looked more ‘Volvo’ than ‘Ford’ to me with each passing day.

Something had to be done…

Hmmm… why not subtract ‘twenty’ from the Five Hundred name. Call it a 480, and put in a nice classic Volvo styled fascia on the front end. Throw in an interior inspired by the best of Swedish design and, Voila! Ford would have offered a Volvo that would have hit the square peg of the brand’s main customers… and maybe even a few others who were considering an upscale Camry or a Lexus ES.

Sadly Ford never made a Volvo version of the Five Hundred, or the Flex for that matter. Instead they mis-balanced the diverging priorities of competing simultaneously with BMW (S40′s, C30′s, S60′s) and conservative middle-aged Americans who valued luxury transport over driving dynamics (Xc90, XC60, C70).  The brand became a disaster.

I am starting to see the same ingredients mixed into other brands these days. Take for instance Scion.

Yes this brand will get a nice pop and halo in the form of the upcoming FR-S. Then again, halo sports cars that are shared with other brands tend to be short-lived. Just ask Pontiac and Saturn about the Solstice and the Sky.

So what would be the perfect car to put into Scion’s kinship?

Two years ago I would have strongly argued for making the CT200h a Scion. It didn’t have the luxury trappings of a Lexus. However it offered tons of sporting character and attracted the type of youthful and educated audience that Scion sorely needed at that point.

You know. The type of people that quickly walked away from Scion after they started marketing bloated SUV-like compacts that should have been marketed as… Toyotas… or Volvos. Who knows.

Wait a second. YOU know!

A lot of potentially great cars over the years have been marketed to the wrong brands for the wrong reasons.  So I ask the B&B, “What cars were given the wrong brand, and where should they have gone?”.

Like most marketing classes in modern day MBA-land there are no right answers. Just SWAG’s and opinions. Feel free to demote a Cadillac to a Chevy if you must. So long as you can defend it, let’s hear it.

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The Fix Is In As GM Makes Changes To Volt After NHTSA Investigation Thu, 05 Jan 2012 22:25:23 +0000

General Motors announced changes to the Chevrolet Volt’s design after a NHTSA investigation into why a Volt caught fire following crash testing.

The changes will go into effect once production restarts at the Hamtramck, Michigan facility, but customer cars already sold will follow a different protocol.

Starting in February, GM will initiate a “voluntary customer satisfaction program” to make the necessary changes to the Volt. According to GM’s Rob Peterson said that  formal recalsl must be initiated by NHTSA, and their lack of movement prompted GM to enact a voluntary one instead.

The fix involves changes to the Volt’s battery pack housing, as well as a coolant temperature sensor and a special bracket to prevent overfilling. The previous system allowed the battery housing to be punctured, which then resulted in coolant overflowing onto a circuit board causing an electrical short. The short was determined to be the cause of the fire.


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General Motors Trying Stealth Tactics For Super Bowl Ads Thu, 05 Jan 2012 19:46:59 +0000

Rather than running commercials during the Super Bowl, General Motors is looking to try something more subversive – product placement within other brand’s TV spots during the big game.

Automotive News reports that GM marketing man Joel Ewanick was investigating the possibility of paying other advertisers to insert GM vehicles into their ads. But various contractual elements related to Super Bowl advertising may kill the idea in its nascent stages.

Super Bowl ads are apparently restricted via a form of non-compete clause. Ford and Chevrolet could not run ads in the same “pod” (i.e. commercial break), and GM’s plan would cause havoc with this arrangement. Having GM products inserted into another company’s ad, as well as commercials for GM’s own products would cause a logistical nightmare for the people who decide where and when ads are placed.

Furthermore, the plan would run afoul of a long-standing policy against buying a 30 second spot and then re-selling 5 or 10 second blocks of time. NBC, which broadcasts the game, would also have to approve any ads that feature the promotion of an unrelated brand. The article also mentions a “reward system” that would give small prizes to viewers who are able to spot product placements, though no details on this seemingly silly scheme were given.

As much as Super Bowl ads have become a part of pop culture, meriting their own examination, the undeniable fact remains that for many, the ads are a great way to grab another beer or, shall we say, recycle the liquids via the municipal sewage system.

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TrueCar Versus Honda: Online Car Buying Challenges Hit Home Wed, 21 Dec 2011 17:45:59 +0000

The rise of the internet has had myriad effects on everyday life, not the least of which has been its profound impact on consumer behavior. With ever more data being made available online, and with the rise of independent alternative media outlets like TTAC, car buyers in particular are fundamentally changing their relationship to the car buying process. Dealers have been noting for some time that the internet has created better-informed buyers who, armed with more information, are demanding the car they want at the best possible price, wreaking havoc on traditional car dealer tactics like upselling and opaque pricing policies.

But as the eternal dance between supply and demand shifts in favor of consumers, some dealers and OEMs are having a tough time adjusting to the new reality. At the same time, the need to make money off of online consumer education has created some tension for the new breed of consumer-oriented websites. This conflict has now broken out into the open, as the auto transaction data firm TrueCar has found itself locked in a battle with American Honda over the downward pricing pressure created by more widely accessible transaction data. And the outcome of this conflict could have profound impacts on the ever-changing face of the new car market.

Early last week, TrueCar CEO Scott Painter took to the TrueCar blog with an “Open Letter To The Automotive Industry,” in which he argued

Our world is changing. Unprecedented access to information and a massive shift in consumer behavior has resulted in a challenging new automotive retail landscape. It has also enabled a consumer appetite for data transparency. To hide from evolving consumer behavior is to deny change. At TrueCar, we embrace this opportunity. We also believe that transparency is the centerpiece of trusting relationships. Some in the industry disagree.

And indeed, from personal experience I feel comfortable saying that TrueCar does provide consumers with some highly valuable information by tracking vehicle transactions from several data sources and publishing the range of transaction prices on a local level. This clearly helps consumers navigate the often opaque and confusing world of dealer-level pricing, and facilitates a more efficient interaction between supply and demand. And if that’s all TrueCar did, it would be impossible to argue with the valuable service it provides.

But in order to fund its business model, TrueCar cannot simply give away data and hope everything pans out for the best. In order to generate profits, TrueCar works with “dealer partners,” allowing them to present a lower “haggle-free” price for the model being researched at no upfront cost. If the consumer buys that car, TrueCar gets a $299 commission from the dealer; if not, the dealer pays nothing. Dealers can tailor these “guaranteed lowest prices” based on TrueCar’s data, and they seem to generally beat non-”guaranteed” prices in the TrueCar “price curve” display by only a few hundred dollars. But by offering this service to its dealer partners, TrueCar has opened itself to conflict with OEMs, as this fiscally-necessary service muddies TrueCar’s role as a pure consumer service. Which is where the conflict with Honda comes in.

In his “Open Letter,” Painter mentions no OEM by name, and TrueCar’s EVP for Dealer Development Stewart Easterby tells TTAC

 We’re not trying to pick a fight… we very much value Honda/Acura. We have strong OEM relationships through our recent acquisition of Automotive Lease Guide, and we have lots of people on staff who have work for OEMs, so we generally have strong relationships with the industry.

But in an Automotive News [sub] piece published on the same day as Painter’s “Open Letter,” the TrueCar CEO claimed that American Honda was warning dealers away from advertising below-invoice “guaranteed lowest” prices. After talking to American Honda, AN updated its piece, noting that it had

incorrectly reported that Honda singled out when the automaker warned dealers that they would put their local marketing payments from Honda at risk if they offered prices below invoice on Internet shopping sites

In fact, what had happened was that American Honda had simply warned its dealers that any advertisement of below-invoice prices could jeopardize the marketing assistance money Honda sends dealerships. American Honda’s Chris Martin clarified the automaker’s position in an emailed statement to TTAC, noting

Dealers who wish to receive marketing funds are expected to adhere to certain guidelines that govern dealer participation in its Honda Dealer Marketing Allowance (DMA) Program and its Acura Carline Marketing Allowance (CMA) Program.  Among the many advertising guidelines to which dealers must adhere to in order to receive DMA/CMA Funds, Honda dealers are restricted from advertising new Honda vehicles at a price below dealer invoice plus destination and handling charges and Acura dealers are restricted from advertising new Acura vehicles at a price below MSRP plus destination and handling charges.  Such guidelines do not limit a dealer’s discretion to advertise a new vehicle at any price if the dealer is not seeking DMA/CMA Funds.  Furthermore, the dealer is free to charge customers any price it chooses, in its absolute discretion, for a vehicle.

Martin goes on to identify the central bone of contention:

The development of third party websites used for advertising is not any different than advertising pricing in a traditional newspaper or on TV.

And here, American Honda has something of a point. Whereas TrueCar’s price curve is a pure reporting tool, simply reflecting otherwise available data, it’s not entirely unfair for Honda to characterize TrueCar’s service to dealer partners as an advertising service. In practice, the only real difference between this service and any other form of advertising is that TrueCar only gets paid if a car gets sold at the “guaranteed lowest” price offered by one of its dealer partners. If you accept that reality, Honda has some very valid reasons for threatening to withhold dealer marketing assistance, as Martin’s statement explains

The function of these [DMA] guidelines is three-fold. First, it encourages dealers to use the advertising money provided by American Honda for interbrand advertising.  That is, rather than providing funds to dealers so that they can engage in discount advertising against other Honda and Acura dealers (which does American Honda and consumers no good), American Honda wants dealers to use the funds to promote the advantages of Honda and Acura vehicles when compared with competing brands. Second, discount advertising is detrimental to the Honda and Acura brand images.  American Honda has no wish to pay for ads that portray its products as “cheap” or “low-end” vehicles.  This may be appropriate for other manufacturers; it is not appropriate for the Honda and Acura brands.

So far, so reasonable. TrueCar’s service may be more palatable than the local, low-rent “Check Out Our CRAAAAZY Prices!” ads you see on TV, but in practice there’s little meaningful difference. Besides, the choice belongs to dealers: either accept Honda’s money with the inevitable strings attached, or throw in your lot with the new lower-price, but potentially higher-volume TrueCar (or CRAAAAZY Prices!) strategies. But with its third rationale for its policies, Honda strays from this reasonable territory, and betrays a distinct bias against TrueCar, arguing

Third, American Honda believes that much discount advertising is bait-and-switch advertising, which is not beneficial to the consumer and reflects badly on the manufacturer that condones it.  Dealers that advertise vehicles for extremely low prices (as some do on the TrueCar site) may engage in either direct bait-and-switch tactics or using the automobile’s brand name to sell expensive accessories, service contracts and the like.

Memo to Honda: these practices are as old as the auto industry itself. Suggesting that these tactics will never be used at dealers who toe Honda’s DMA line is just as disingenuous as the implication that TrueCar’s dealer partners are more likely to use them. If anything, TrueCar’s major sin is that it makes below-invoice advertising easier for the OEM to monitor and therefore squelch than in the pre-internet days, when consistently maintaining these DMA standards would have required a survey of every local publication and TV/radio broadcaster (not to mention direct-mail marketing), a task that no automaker was or is equipped to do.

But Honda’s apparent antipathy towards TrueCar is just the tip of a growing resentment towards the site. In a speech cited in the AN piece published last Monday, AutoNation CEO Mike Jackson expressed the angst that appears to be spreading across the auto retailing industry, especially in light of its recent deal with Yahoo [sub].

The good deal that they’re pitching to the consumer is lower than average. So to the extent that everyone goes with the TrueCar price, it moves the average down. It’s a death spiral, and the question is whether they are powerful enough to unleash that dynamic in the U.S. marketplace.

But Jackson’s implication, that TrueCar can essentially manipulate the market in favor of consumers, simply doesn’t hold up to scrutiny. On an abstract level, you can’t repeal the law the law of supply and demand. As Painter puts it

They’re trying to say Hondas are worth more than invoice, but if everybody’s paying less than invoice, that’s not true

More practically, however, TrueCar’s own data seems to refute the industry’s fears. Specifically, Easterby tells TTAC

TrueCar represents two to three percent of new car sales… we’re flattered that people think we’re influencing the market, but at that share, we clearly aren’t. The 21st C consumer demands transparency in all products and services, that’s what the web has done. TrueCar reflects the market, just as Zillow reflects the market for real estate, rather than determines it.

Even more importantly, Painter insists

Our goal at TrueCar is to foster healthier relationships between manufacturers, dealers and consumers through data transparency. To deliver on this promise, we require a high standard from our 5,800 dealer partners – an upfront competitive price and a commitment to a great customer experience. A discoverable upfront price is the cost of getting noticed. Contrary to popular concerns this does not create a “race to the bottom.” The lowest price only secures the sale 19.2% of the time within the TrueCar network. The sale is still won by location, selection and good old-fashioned customer service. [Emphasis added]

So where does this all leave us? Clearly Honda has the right to withhold DMA money from dealers violating its reasonable conditions on that money. By the same token, dealers have the choice of pursuing higher volumes with less traditional advertising by choosing the TrueCar strategy, or continuing to follow the time-honored tradition of collaborating with the manufacturer. And here, TrueCar’s price curve, which it says is not populated by dealer partner data but from independent, anonymized sources, becomes the killer app: it’s so good (reflecting a claimed 90% of all new car transactions), it can’t help but draw ever more buyers, who will then be exposed to its dealer partner “advertisements.”

Ultimately, it’s difficult not to conclude that TrueCar (and sites like it) won’t continue to draw ever more dealers away from the old DMA agreements, especially as online research becomes more important to the car-buying process and as traditional advertising dollars flow from TV, radio and print towards the internet. And if dealers and brands are sufficiently hurt by downward pressure on pricing, the alternative is always there. This is how competition works, and because TrueCar has more fundamentally aligned itself with consumers and the power of the market, it’s tough seeing them not coming out ahead in this struggle. And if they do, car buying could be changed forever. Again.


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The Final Countdown for an Alabama-Mahindra Truck? Thu, 15 Dec 2011 15:45:34 +0000  

Click here to view the embedded video.


This is one of my favorite music knock offs, the Hindi version of Europe’s “The Final Countdown”. My point? If the folks at Mahindra Planet are right, it’s only a matter of time before the Bollywood Music types rip off Skynyrd’s classic, “Sweet Home Alabama.” Which will be pretty awesome, I assure you!


The big box of a building in Muscle Shoals is rumored to be the future home of the Mahindra TR20 and TR40 compact pickups. The truck gurus at Navistar supposedly signed a 10 year lease on the facility this October: could the company that fought Ford tooth and nail take Ford’s compact truck market share once the Ranger officially dies next week?



But let’s not get too excited about our prospects for a pure compact pickup, a stickshift, gutsy Miata with a bed if you will. Nothing’s ever perfect.



If the EPA figures are right, the TR40 is a bit of a buffet slurping Yankee. Considering the price volatility of diesel and the fuel economy of gas trucks, that’s a big problem. And who knows if these rigs have enough engineering prowess to overcome the road/dirt driving dynamics of a Tacoma. It’s same (potential) Achilles’s heel that put the Model T out of production and Chevrolet on the map.  Then again, this interior shot suggests the TR isn’t a bad place to do business.



Rear HVAC vents?  Not too shabby! Who knows what the future will provide?

Off to you, Best and Brightest.




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Adventures In British Leyland Marketing: You Ain’t Seen Nothing Like the MG Maestro Yet! Wed, 16 Nov 2011 19:00:35 +0000 Even though I’ve never been in a Austin/MG Maestro, I feel fairly confident in stating that the Rover Group’s little front-drive compact was unexciting at best. Still, the advertising folks must have though (after 11 rounds of Singapore Slings down at the pub) we can make it look cute and sexy!

You decide. Bachmann-Turner Overdrive plus models in post-apocalyptic/crypto-punk outfits plus a general jittery sense of enforced silliness equals… big sales? Not really. The surreal touch of having the post-chick-consumption car say “BURP!” with a Mylar balloon poking out of the trunk adds something special, though.

You want happy silly instead of grim silly? Those ad hucksters should have gone to Japan for some education in making miserably underpowered small cars look fun. For example, pick just about any Starlet ad.

Or they could have talked to Renault’s UK-market ad agency about combining music and babes to make a boring commuter car look exciting. Poor British Leyland. Hey, do you think the Maestro had any Whitworth fasteners?

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How To Sell New Cars (Without Hating Yourself) Sat, 05 Nov 2011 17:00:01 +0000

I remember the look on my father’s face when I explained to him that I would be selling cars. It was the look any of someone who has just heard the details of a grisly murder; a bit of curiosity, quickly overtaken by disdain. He sank into his chair. “It’s a job,” he grunted, and I realized that was as strong an endorsement for my new job as I was going to get. Truth be told, I felt about the same.

It’s no surprise that the car salesman has been painted as a snake-oil pusher; a charlatan peddling his wares to people in an unethical manner. Like all stereotypes it’s a vast overgeneralization, but I had the same perceptions of car salesmen as anyone going into my first day at work. I wondered: how accurate were the portrayals in popular culture? Would I have to get white shoes and slick back my hair? Would I have to wear a pinky ring?!

My fears were assuaged as I was let in on the trade secrets. Here’s the dirty, sordid summation of car salesmanship: guide, but don’t push. That’s it in a nutshell. Sure, we accentuate the positive attributes of a car and explain why the car fits the needs you, the buyer, have laid out for us, but it does neither you nor us any service to try and push you into a car you don’t want.

The nature of the business is a strange one; both sides, neither friends nor foes, feigning small-talk while each wanting to retain money that is up for grabs. As my contempt for my new profession faded and I discovered that a few bad apples had soiled the reputation of all car salesmen, I began to observe the odd interactions between buyers and salesmen. Certain unexpected truths quickly revealed themselves.

Truth #1: Everybody Wants to Buy, but Nobody Wants to be Sold

On my second day at the job, a veteran salesman summed up every buyer: everybody wants to buy, but nobody wants to be sold. He was right.

Instead of pushing anything, I began to familiarize myself with cars and whenever I talked to an “up” (an on-the-lot customer), I started by asking buyers what were “musts” and what were “preferences”. The process started with them narrowing in on what they envisioned for their ride. If people envision driving down the freeway in a luxury SUV, no matter what kind of sedan you show them, they will feel conned if you push them towards a sedan. Then, you will have lost their trust and most likely, their business. So, we always take the buyer’s lead. “You want a ½ ton Chevy with an extended cab? Great, we have several of them. You mentioned you would like it black. If the price was right, would you consider a different color?” Every preference has its price.

Despite the shady reputation, car salesmen really do listen and care what car you want. The problem is that most buyers aren’t sure of what they want themselves. We have to guide you to the sale, but make sure it’s your idea. Honestly, it’s exhausting. Our persuasive skills mainly come into play in the negotiation process. So, before you step on the lot, write out your “musts” and be prepared to articulate them to your salesman and you’ll make it easier to find that for which you are looking.

Truth #2: Buyers are (Most Likely) Not Professional Negotiators

As we walk amongst the rows of cars, buyers are wary of salesmen. They’re fearful we will pull some voodoo magic mixed with a Jedi mind-trick and force them into buying a car against their will. Once they’re in the office, a façade of skepticism and unearned bravado washes over them and anxiety dissipates like a Xanax in full effect. Husbands will swagger as if to say, “I’ve got this. I know how to haggle.” It’s an odd phenomenon because this is where buyers should feel the least confident.

We know the buyer likes the car. The average person goes through the car buying process a handful of times in their lives. Yet, while the salesman deals in car sales frequently, the buyer often puts forth a confident front. It’s reminiscent of the stereotypical tourist who saddles up to the blackjack table in Vegas insisting that he has a “system” after having read a book about gambling on the plane. Remember: they didn’t build Caesar’s palace by losing to tourists, and we don’t sustain a living by being bested by buyers. Does it happen? Sure, but not often.

It’s weird to witness; the theatrics people pull to show they won’t be pushed around. They will stomp out in a huff and hope we chase after them. They will low-ball us and claim that they saw the exact same car down the road for that price. If they had, they would be down there buying it.

The best way to get a killer deal is to approach the negotiation from a prepared standpoint. Do your research! Know, realistically, how much the car is worth (not according to Kelley Blue Book, but local market value), and understand that the dealership needs to make a profit, too. If they offer you a ludicrous deal, showing them that you know your stuff goes a long way to getting them to knock off the high-balling. If you come prepared with a reasonable offer, based on facts and not wishful thinking, things will go a lot smoother for everybody and you won’t appear foolish. While bravado is often a sign of unsure footing, preparedness illustrates to us someone who is not easy fooled and will often yield a better deal.

Truth #3: The Real Savings are in the Trade-in Allowance, not the Price

People do whatever they can to not pay sticker price. Paying full sticker can feel like a moral defeat. However, where salesmen often have the most wiggle room is in the trade-in allowance.

We get a commission based on the profit the dealership made. We also give you the littlest amount for your trade-in so that when we sell it, we make the most money. Furthermore, we need to allow as much room as possible in case your trade-in (that you swore “runs like a top”), needs costly repairs.

When you come into our office and demand we lower the asking price, we are hesitant to do so because it eats away at the profit margin as well as our commission. A better tactic is to ask for a better price on your trade.

This is tricky. Don’t be defensive. Everybody is defensive when that jewel of a car is appraised for two-thirds its actual value. Instead, insist that the sticker price is a bit high, but that you are more concerned with the trade-in allowance. Getting a thousand dollars more for your trade-in is the same as getting a thousand dollars off the selling price. But it can be easier to get the trade-in number to budge.

Of course, every dealership is different and may have different policies as to how they figure commission. So it won’t necessarily work at every dealership. But if raising the trade-in allowance doesn’t affect the salesman’s commission, then you will likely get less resistance from him.

It’s a strange business, alright. However, people need cars and as my dad said: it’s a job.

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Top 3 Automakers 2011: Bloomberg, Please Report To Remedial Math Class Mon, 24 Oct 2011 21:33:24 +0000

There are days when I wish industry analysts and auto industry journalists should be required to carry maltreatment insurance. This is one of those days.  Bloomberg reports that “Volkswagen AG will probably become the world’s biggest carmaker this year, vaulting past Toyota Motor and General Motors on gains in emerging markets.” Pure and unadulterated nonsense.

Bloomberg bases this daring prediction “on the average of three analysts surveyed by Bloomberg.” The analysts and their detailed predictions remain unmentioned – which is probably better that way. The analysts see Volkswagen’s sales “rise 13 percent to 8.1 million vehicles this year. GM sales will gain about 8 percent to 7.55 million, while Toyota will drop 9 percent to 7.27 million.”

Excuse me? The totals are waaaaaaaay off.

The percentages jibe halfways. We predicted similar ones last August. Let’s assume, they are right. It doesn’t take a genius to get them straight. Volkswagen just reported 13.9 percent plus for the first 9 months. GM will announce its quarterly results in November, but 8 percent sound about right. Toyota had budgeted a shortfall of 6 percent for 2011, but just for the sake of argument, let’s assume the analysts are right with 9 percent less. Now for the hard part: Let’s do the math.

I don’t know what kind of a spreadsheet Bloomberg is using, but if you apply the predicted percentages to last year’s official numbers (as supplied by OICA), then GM can hardly gain 8 percent and end up at 7.55 million if they sold 8.48 million last year.

A rise of 13 percent won’t bring Volkswagen to 8.1 million, but to 8.29 million, a little bit less than a million behind the world’s largest carmaker, GM.

And just for the record, 9 percent down from 8.56 million won’t land Toyota  at 7.27 million, but at 7.79 million. Not that it matters ranking-wise.

2010 2011 Growth Rank
GM 8.48 9.16 8% 1
VW 7.34 8.29 13% 2
Toyota 8.56 7.79 -9% 3

Unless the sky falls (and it would have to fall quickly), the year will end as we predicted it back in June: GM #1, Volkswagen #2, Toyota #3. It also should end with Bloomberg in remedial math class.

The numerical nonsense has already been picked-up widely by likewise mathematically challenged news outlets. One of them is – to our great disappointment – the Financial Times, which usually has its act together.

Instead of rectifying the story, the FT added to the confusion by predicting combined Renault and Nissan sales numbers of 6.8 million. Wrong. Renault and Nissan never consolidated numbers in the past, and probably won’t consolidate in the future either. A usually well informed source told us that the consolidated number would be 8.15 million – if the Alliance would consolidate. This includes results from the joint venture with AutoVAZ, which must be taken in consideration when joint venture results of GM, Volkswagen, and Toyota are counted. This would put the Nissan/Renault Alliance in the #3 slot, but again, it won’t, because they don’t want to be counted as one.


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“War On Cars” Watch: GM Bashes Cycling, Apologizes Wed, 12 Oct 2011 20:30:44 +0000

The idea that environmentalists in this country are waging a “War On Cars” has gained some currency within the right wing in recent years, fueled by the Obama Administration’s increased emphasis on public transportation and cycling. Of course, statistically speaking, the car is proving more than capable of defending itself, as sales and ownership levels remain improbably robust (in per-capita and per-GDP terms) despite the recent “Carmageddon.” But GM waded into the fray anyway, running the anti-cycling ad seen above in several campus publications (via, likely in hopes of fighting against the kuruma banare phenomenon that began with Japanese youth abandoning cars and has progressed to a full-blown national love affair with bicycles. But cyclists are a passionate bunch, and GM’s ill-advised ad prompted a torrent of Twitter protests (see for yourself), eventually causing the automaker to apologize and pull the ad.

GM’s Tom Henderson tells the LA Times

The content of the ad was developed with college students and was meant to be a bit cheeky and humorous and not meant to offend anybody. We have gotten feedback and we are listening and there are changes underway.  They will be taking the bicycle ad out of the rotation…. We respect bikers and many of us here are cyclists.

In other words, this is the ultimate proof that outsourcing ideas to consumers is lazy and ineffective. A good marketer would have instantly seen the problem with this entire ad concept and tossed it (and the Deans Lister who came up with it) as soon as he saw it. There are basically two reasons to bicycle: because you have to or because you want to. Those who have to bicycle can’t afford new cars, while those who want to cycle are going to be alienated by any slight to their passion… especially from a company like GM. In other words, an ad like this is not only ineffective, it exacerbates the nascent antipathy to automobiles among young people.

And make no mistake: automotive ambivalence among young people is growing. As someone who lives in America’s cycling and hipster capital, I can confirm that carlessness is cool… and cycling as a lifestyle choice is even cooler. As I wrote two years ago

Historically, America’s youth have flocked to Automobiles as a tool of personal freedom, an escape pod from the world of adult responsibilities and a way to connect with other young people. Today, these crucial marketing values have been stood on their heads.

If a young person does buy a car, it’s almost always because they need it for their job. Though debt, insurance, maintenance and speeding tickets are the real-life downsides of auto ownership, the crucial issue in the uncooling of cars is the image of car ownership as a a complex of obligations all of which add up to less freedom. The automobile has become a tool for connecting people to their responsibilities, a symbol of debt and talisman of that youth anti-icon, the beaten-down, middle-aged commuter. And what’s less cool than that?

This perception has only increased in recent years, fueled by a cultural “perfect storm” of generational changes. Indeed, today I’m even less optimistic about the car’s cultural relevance than I was when I concluded

America will not stop being the giant, spread-out country in which cars are the major mode of transportation. But the fact that there are nearly as many cars as people in this great land means that the auto industry is ultimately a victim of its own success. Still, if the industry is able to connect with the values that are leading young people away from automobiles, there’s a chance to check this trend.

But it won’t be easy, because young peoples’ expectations of automobiles are actually rising. If automakers are able to offer vehicles which can embody fun, freedom, practicality, efficiency and timeless design, there’s a chance to refocus the youth market’s desire onto automobiles… Recapturing the cool is a major task for the automotive industry, and fighting this perfect storm of cultural changes won’t be easy. This is a marketing, development, design, and technology challenge that makes getting consumers to consider GM look like, well, child’s play.

And yet, ironically, here is GM flaunting its complete ignorance of this crucial cultural dynamic with a single ad. And not for the first time. A 2005 ad that ran in the Vancouver area displayed the same out-of-touch insecurity, bashing public transportation and offering a Chevrolet Cavalier as its alternative.

Despite GM’s recent breathless enthusiasm for marketing to the under-30 “Millenial” set,  these two ads prove that the company’s ability to understand and market to young, car-ambivalent people hasn’t improved in the last six years. If anything, bashing bikes is worse than bashing public transportation because of the immense enthusiasm for cycling and its health and environmental benefits. The fact that a significant number of cyclists choose the two-wheeled lifestyle for political reasons make even a relatively minor slight from a multinational automaker all the more tone-deaf. Rather than mocking cyclists, automakers should be appropriating the bicycle’s cultural appeal with ads showing cars and bicycles coexisting in a youthful lifestyle.

With Millenials on the verge of becoming the majority of the car market, GM needs a massive gut-check if it hopes to have a chance of understanding and addressing the “uncooling” of cars. A potent symbol of the social and economic reality of being a young person today, bicycles are fundamental to that understanding. In fact, I’d argue that bike rank second only to handheld devices as a symbol of youth culture. Cars, meanwhile are dropping off the list, not because of an environmentalist agenda or hostile White House but because of the changing conditions facing young people today. Until the car industry wakes up to that reality, blunders like this one are inevitable, further driving the wedge between the industry and the young people it’s desperate to reach.

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Generation Why: Veloster vs. Sonic: A Millennial Perspective Fri, 30 Sep 2011 18:29:55 +0000

I like to tout myself as the youngest full-time auto writer in the industry, but sometimes it backfires – like when an Acura exec came up to me on my first press trip (at 19 years old) and warmly told a few assembled journalists and PR types that he hadn’t seen me since I was this big.

On the other hand, my youth gave me particular insight into two products that launched within the last month, and are aimed squarely at my demographic – the Hyundai Veloster and the Chevrolet Sonic. Both cars launched at the 2011 North American International Auto Show, though their reception couldn’t have been more different.

The Veloster was absolutely mobbed on the Hyundai stand, with the assembled press crawling all over the swoopy hatchback, while the Sonic was tucked away in the back of Chevrolet’s display, prematurely written off as “the replacement Aveo”. I admit complicity in both of these prejudicial acts. At the time, GM had the underwhelming Cruze, while Hyundai had not only kicked it to the curb with the 2011 Elantra, but also launched the Sonata Turbo, Sonata Hybrid and the Equus, as well as riding the success of the Genesis lineup.

I went on a couple Hyundai events in the run-up to the Veloster’s launch and talking with the engineers and PR people, I got the sense that they were on to something. A number of them have some kind of “enthusiast” background, and not in the sort of forum-posting perpetually single know-it-all sense. They ride sport bikes, take part in NASA HPDEs or race in Grand-Am (in the case of one engineer), and have had experience working on high profile sports cars (one chassis engineer is a veteran of Ford’s SVT group).

Hyundai put together a launch that insufferable marketing types would describe as “experiential” to give an insight into what the supposed Veloster customer would do with their time – events included a music festival, eating at food carts and tailgating at a college football game. Doing bong rips and playing Call of Duty was noticeably absent, likely for legal reasons.

I was able to see some good bands, attend my first college football tailgate (us godless, socialist Canadians don’t really have NCAA-style sports) and take trip to Portland’s famous Union Jack’s gentleman’s club, but things started to fall apart before we even got in the car. We were treated to the typical Hyundai presentation, boasting of their booming sales numbers, their competitive advantages over other vehicles and the various advanced technological features that the Veloster had to connect with music players, smart phones and even an XBOX.

The car turned out to be a bit of a dud to drive. My review is essentially a diplomatic explanation of its adequate nature as a road car that really doesn’t like to be driven hard. The biggest problem for the Veloster is that expectations were set too high, and to Hyundai’s credit, they were put in place by the media and auto enthusiasts who expected the next CR-X but got something more like a Scion tC.

The Sonic launch was the quickest I have ever gone from cynic to believer, and GM didn’t even have to ply me with a trip to Dubai or a supercharged Cadillac. Walking into the presentation area of the hotel, I saw the room (well, the parking garage) decked out in Chevrolet Sonic themed graffiti – the automotive equivalent of seeing your Dad trying to “Superman Dat Hoe” at a Bar Mitzvah. Chevrolet went on and on about “millennials”, the 18-29 demographic that the Sonic is aimed at, but somehow forgot the most crucial thing about this generation – we cannot stand any contrived attempts to pander to us via marketing. I wanted to wretch when one marketing flack, talking about the generational anxiety regarding our economic situation said that “They are navigating these tensions [and]…we feel there’s a very big supporting role for a brand to play.”

Even though that remark made me near-homicidal, the next thing that came out of his mouth was the best bit of wisdom I’ve heard in my too-brief career as an auto journalist. The same exec said that while millennials are 40% of the car buying population in America, that does not mean they will buy new cars. On the contrary, he said that most new cars do nothing for this demographic and a lot of them tend to buy used. The team responsible for this car did what no one else did, and saw the world for how things really are rather than trying to have it conform to whatever vision they dreamt up in a board room according to sales targets and management directives. Hyundai pegged the Veloster’s competition as the Honda CR-Z and Mini Clubman, two cars that the 18-29 demographic wouldn’t be caught dead in. Chevrolet knew that for the same $14,500-$18,000 that a Sonic costs, one can buy a used 330ci, G35, S2000 or something else with a lot more panache, performance and prestige than a Chevrolet econobox hatchback. The Sonic has to be really damn good to force people to shy away from something that will impress their friends.

And it is. I’ll say right off the bat that the interior isn’t great. I made some rude comments to a GM Design employee about how the hard plastic would be great for rolling blunts, and her retort was that Chevrolet decided to go right for hard plastic rather than try and make it look like faux leather or carbon fiber. I get that the car is built to a price. Fortunately the rest of it is on point. It looks pretty decent, the 1.4L Turbo and 6-speed gearbox do the job well – it’s about half a second quicker to 60 mph than the Veloster – the steering is excellent and the car’s handling limits are far beyond what’s reasonable to expect for a subcompact. Ford can hype up their Ken Block Rallycross nonsense as much as they want, but the Sonic is the real deal for the real world, a sort of poor man’s Mini Cooper S without the awful reliability.

I’ll save any meta-judgments about whether this is Hyundai’s first mis-step or whether Chevrolet is really back. Parking the Sonic outside a trendy lounge won’t get you past the velvet rope, but it’s a well-made, unpretentious product that is genuinely good and doesn’t cost too much money. Car companies spend exorbitant sums trying to promote their crappy wares via concert promotions, X-Games athlete endorsements or even launching entirely new brands. Meanwhile these contrived efforts are totally transparent to those they’re hoping to sell their cars to. Take those funds and just make a decent car that doesn’t suck and you’ll get the best kind of marketing in the world; one young person telling another “I just bought (insert vehicle here) and you know what? It’s a fucking great car.” Hopefully Chevrolet proves my theory right, or we’ll be seeing another Gymkhana video in a few months time.

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Clinton’s Sleepover Fundraising Maven Breaks Ground For 300,000 Car Factory In Inner Mongolia While Chinese Head To The U.S. On $500,000 Green Cards Mon, 08 Aug 2011 22:59:40 +0000

Today, my phone rang repeatedly, and my email inbox quickly filled with questions. They all said: “Did you see this? Do you know these people?”

I knew the guy in the picture. I used to be married into a family that was in the Washington Green book. I lived in Virginia two driveways from Thomas Jefferson’s Monticello.  I was surrounded by gentleman farmers and politicos. Jeez, the late Ambassador Fritz Nolting drove into my pool on a riding mower with a cocktail in one hand and a cigar in the other. Talk about distracted driving.

The right man in the picture wanted to be Governor of Virginia. He still does. The left man wants to be a tycoon.

The man who leans over that sign somewhere in the godforsaken desert of Inner Mongolia, China, is Terence “Terry” McAuliffe. Yes, the very same Terry McAuliffe who was a Democratic National Committee head and a close Bill Clinton adviser who, according to a United States Senate document organized the famous coffees and sleepovers that saved Bill Clinton from electoral annihilation.

According to one source, “McAuliffe’s soft money strategy was responsible for President Clinton’s 1996 scandal concerning the Lincoln Bedroom sleepovers and the White House coffees, two tactics employed to solicit huge donations from wealthy friends and patrons of the Clintons.”

Putting the Lincoln Bedroom up for sale for $100,000 a night (on average) was only a minor scandal compared to what was called “Chinagate.”

Al Gore, friend and beneficiary of Buddhist monks, praised McAuliffe as ”the greatest fund-raiser in the history of the universe.” Coming from Gore, that’s the best endorsement one can get.

Yes, you are looking at THAT Terry McAuliffe.

Yes, it’s the same and he is back in China, and back in the fundraising business. This time, he promises to bring 300,000 cars to China. Made in America by Americans. Assembled in China. In that new factory which is going up behind the two gentlemen.

Wait, there is more. A lot more.

The company that will perform the economic miracle is GreenTech. The man to the left of McAuliffe is Charles Wang. Ring a bell?

Remember this story? Remember how Ed Niedermeyer wrote:

Greentech Automotive is the hybrid vehicle firm founded by the former CEO of Brilliance with plans to build a plant in Mississippi with funds raised through the EB-5 visa program. Not to be confused with Hybrid Kinetic Motors, the hybrid vehicle firm founded by the former Chairman of Brilliance with plans to build a plant in Alabama with funds raised through the EB-5 visa program.”

Yes, one and the same.

This will get a bit complicated, so bear with me. Let me introduce you to a few people. You know, in China, connections are everything.

Meet Yang Rong, identified by Automotive News [sub] as “the ousted former CEO of Brilliance China Automotive Holdings Ltd., BMW AG’s partner in China.” Automotive News tells this story:

“In the early 1990s, Yang was one of the first entrepreneurs to strike it rich in China’s auto industry. He was hailed in China as part of a new generation of savvy businessmen and credited with catapulting Brilliance from making dreary buses into BMW’s partner in making BMW 3- and 5-series cars.”

“But in 2002, after feuding with a Chinese provincial governor over the location of a new factory, Yang found himself charged with unspecified economic crimes. He fled the country under a false passport for Los Angeles, where he joined his wife and four children. Most of his own personal wealth had to be abandoned in China.”

Automotive News missed the good part. The dispute was about more than a location of a plant. It was about who owns what of Brilliance, a company that became the first Chinese corporation listed at the NYSE after 50 years.  According to this account in the China Auto Review,  Yang “was forced out as chairman of Brilliance China and served a warrant for allegedly committing “economic crimes of embezzlement of state assets” in late 2002.” Here is one of the many lengthy court documents, in case you have the time.

To make it short, China would love to have Yang back, but he’s not coming.

Yang went on to found the Hybrid Kinetic Motors company, which we had chronicled in 2009 under the Farago regime. Hybrid Kinetic Motors promised to bring a huge car industry to the American equivalent to Inner Mongolia, a place called Northern Mississippi. Rong had explained to Automotive News [sub] that the plan was to “build a $6.5 billion auto plant in northern Mississippi, where he would hire 25,000 workers to eventually produce 1 million cars a year.” It will happen real soon now.

Then, there is another man. His name is Xiaolin Wang. According to a puff-piece in Wikipedia, written by an editor by the name of Beijingren (= Beijing Man) who had written nothing else than this article and had then vanished from Wikipedia, “Charles Xiaolin Wang is an experienced business entrepreneur, financier, and lawyer with an extensive background in capital markets financing and international business transactions. He currently serves as the President and Chief Executive Officer at GreenTech Automotive.” In the top picture, he is the man to the left of the greatest fund-raiser in the history of the universe, Terry McAuliffe.

Xiaolin Wang was Rong’s lawyer and business partner at Hybrid Kinetic. Yang Rong, no stranger to feuds, started a new feud with his lawyer. Says Automotive News:

“Yang’s project split in two after a falling out between him and the man he had appointed to manage it: his former attorney and Chinese entrepreneur Xiaolin Wang.”

“Yang — listed in court documents as Benjamin Yeung, the name he uses in the United States — sued Xiaolin Wang and three other project managers. Yang alleges that the other managers had been steering control of the venture away from Yang and had begun operating under a different but similar name.”

“Yang’s venture is called Hybrid Kinetic Automotive Holdings Ltd. Xiaolin Wang and the others had been operating as Hybrid Kinetic Automotive Corp.”

An out-of-court settlement had Xiaolin Wang change the name of his company. It was known as GreenTree Automotive, and was either later renamed to GreenTech, or Bill Brabec, the Jackson, Miss. attorney for Xiaolin Wang, had the name wrong. Or who knows.

Hybrid Kinetic, run by Yang or Yeung, and GreenTech, run by Xiaolin “Charles” Wang, went forth and operated in parallel.

Both attracted investors via the EB-5 visa program, a scheme which the Center for Immigration Studies along with many others call either “a scam” or “investor fraud.”

Allegedly, if someone invests $500,000 in an underprivileged part of America, green cards for the “investor” and the immediate family beckon. There are a lot of Chinese who paid much more to enter the U.S. illegally, so that’s considered a great deal. Some killjoys claim the investment must be “active” and the investor must be involved in managing the company. Minor detail.

Hybrid Kinetic (which sometimes calls itself “HK Motors” – something that in China can be easily confused with “Hong Kong Motors”), was incorporated in Delaware, is headquartered at Pasadena, California, and wants to open a plant in Baldwin County, Alabama. Governor Bill Riley confirmed to HK Motors that “HK Motors could apply for and receive all statutory incentives based on the company’s proposed $1.5 billion investment.” On HK Motor’s website it says that letter “officially confirmed that approximately $1 billion in incentives is available to HK Motors.” Edmund’s said:

“Pouring millions of state funds into an untried automaker headed by an entrepreneur with a question mark hanging over his head (he says he’s done nothing wrong, that the charges against him in China are politically motivated) is something that’s ought to require a heck of a lot of due diligence on the part of state officials.”

The fine State of Alamaba apparently does not subscribe to Edmunds or its ideas.

GreenTech Automotive (GTA)  “was founded in 2006 by accomplished entrepreneurs Terry McAuliffe and Charles Wang,” says its website.

Wang is CEO, McAuliffe is Chairman. According to some accounts, Xiaolin “Charles” Wang was still with Yang Rong a.k.a. Benjamin Yeung when Greentech was founded in 2006. According to the puff-piece Wikipedia article, the founding happened 2008,  and Hybrid Kinetic did never exist in Wang’s illustrious career.

And what about government money? In 2009, the Memphis Daily News said “because Wang and his team are seeking much of their capital in China, the financial particulars are murky at best. What confounds this project is the silence from local and state officials.” Last year, the same paper heard that Mississippi governor “Barbour was noticeably absent as Charles Wang talked of building 150,000 hybrid cars a year in a plan that is still awaiting financing.”

It’s not that Wang and McAuliffe don’t have any friends formerly in high places. Wang told the Memphis Daily News:

“Former President Bill Clinton also has been active in the project, traveling to Hong Kong and introducing company representatives to heads of state at his recent global initiative.”

He just doesn’t have any money to invest.

Still with me?  Amazing. TTAC loyalty knows no bounds.

Now we move on the really brilliant part: Xiaolin “Charles” Wang had wisely disassociated himself from Yang Rong a.k.a. Benjamin Yeung. The latter Yang Rong will never ever return to China, where he has been ronged. The former Wang however proudly appeared in Ordos, Inner Mongolia, otherwise famous for China’s Modern Ghost Town , where a city planned for a million stands empty. This will most likely change immediately with the arrival of Terry McAuliffe.

“Mr. McAuliffe fills a room” said the Washington Post. That’s an understatement. At the notorious May 2000 Clinton fundraiser, he filled the former MCI sports center in Washington, DC. $26.5 million were raised in three hours for the Democratic National Committee. As the New York Times remembers, “the donors, from those in black tie to those in blue jeans, were beckoned by the Midas of fund-raisers, Terry McAuliffe, who, in the end, squeezed 13,625 people into a space designed for 12,000.” Roomfilling above plan!

If McAuliffe can fill a stadium with people who want to be separated from their money, then producing “a full line of vehicles powered by U.S.-made high-efficiency combustion engines, hybrid powertrains and pure electrical drivetrain” in the middle of nowhere will be a cinch. As Greentech’s press release says:

“The product line will include subcompact, compact, midsize and sports vehicles, all to be designed specifically for and sold exclusively in China. Full production capacity will be 300,000 vehicles per year and the core components of these vehicles will be made at GTA factories in the United States.”

“And because our core components will be made in America, we will create 2,000 new American jobs when we reach full production capacity,” said McAuliffe.

The joint venture is called Ordos GreenTech Automotive Co., Ltd., and is a partnership between GTA and Shengyang ZhongRui Investment Co., Ltd., a Chinese investment holding company.

License from the Chinese government? Not mentioned. Does anyone need a license here to make cars? Feasibility study? Minor details for a McAuliffe. A few phone-calls, possibly from Bill’s wife, done.

Remember: When The Washington Post called him a “huckster,” McAuliffe corrected it to “hustler.”

Not only that, McAuliffe is an experienced investor. In the 1990s, McAuliffe invested $100,000 in a company later called Global Crossing. When the company went public seventeen months later, the stock’s value rose quickly and McAuliffe’s initial $100,000 investment was valued at nearly $18 million. Global Crossing filed for bankruptcy in 2002, after McAuliffe had smartly sold his stock.

With a man like this, could anything go wrong? Ordos will become China’s new Detroit. Gee, it already looks as deserted as Detroit. Liu Shufu of Geely will slap himself for paying $1.5 billion to get the 300,000 car Volvo. With a McAuliffe, he could have had the same for a few cups of coffee.

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“Volt Scam” Debate Misses The Point Wed, 01 Jun 2011 15:38:00 +0000

Mark Modica, a former Saturn dealer GM bondholder, has leveraged his financial loss at the hands of the government bailout into a blogging position at the National Legal and Policy Center, a conservative nonprofit that “promotes ethics in public life through research, investigation, education and legal action.” At the NLPC, Modica focuses on what he believes to be corruption surrounding the auto bailout, and has written a series of anti-GM posts that make TTAC look like a Detroit hometown newspaper (TTAC “bias police,” take note). Most recently, Modica has caught the attention of the auto media, including Automobile Magazine and Jalopnik, with a series of posts accusing Chevy dealers of “scamming” taxpayers by claiming the Volt’s $7,500 tax credit and then selling Volts as used cars. TTAC welcomes anyone seeking to cast more light on the bailout, but unfortunately, Modica’s attacks are too focused on making GM look bad and not focused enough on providing relevant information to the American people. Let’s take a look and see why…

In the piece that set off the current flap, Modica wrote

I recently set out to determine how honest General Motors is being when it claims that demand for the Chevy Volt is exceeding supply. It was not hard to discover that this is not the case as retail sales remain dismal. A web search on vehicle locator sites such as Autotrader and exhibit sufficient supply of the Volt, one dealership within 70 miles of my location had six new Volts available for sale.

Even Ebay lists vehicles, many had no bids and one listing in Texas hadn’t even met reserve with only one day of bidding time remaining. But I discovered something far more disturbing during my search. Many Volts with practically no miles on them are being sold as “used” vehicles, enabling the dealerships to benefit from the $7,500 credit supplied by the American taxpayers on each car. The process of titling the Volts technically makes the dealerships the first owners of the vehicles, which gives them the ability to claim the subsidies.  The cars are then offered to retail customers as “used” vehicles.

The practice of dealerships purchasing from one another is not uncommon. “Dealer trades” are done all the time in the industry. What is very unusual is for the receiving dealership to be able to maximize profits at the expense of taxpayers by claiming tax credits of $7,500. It is also very rare for dealerships to part with any model that has higher demand than supply, as GM claims is the case with the Volt. In addition to qualifying dealerships for a $7,500 tax subsidy, the titling process also allows GM to record Volt sales even if the cars are sitting on dealership lots.

Modica’s attack is hamstrung from the start because his goal is to demonstrate that supply of the Volt exceeds demand. The simple truth is that the government’s tax credit, in combination with strong early-adopter demand and low production volumes, basically guarantees that Volt demand will outstrip demand in the short term. If Modica wants to prove that the market won’t support the Volt’s high price and complexity, he’s going to have to wait until production ramps up and the early adopters have satiated their “gotta have it” instincts.

Because he doesn’t appear to have the patience to watch the Volt fail on its own terms (which, it must be added, is not a foregone conclusion, depending on how GM handles production), Modica has to look twice as hard for potentially damning evidence. Since the availability of used Volts alone doesn’t say much about the supply-demand balance, Modica manufactures another “scandal”: that Chevy dealers are taking the $7,500 tax credit that the government intends for consumers, and then selling Volts as used cars with no tax credit.

This “scandal” quickly falls apart under the weight of its over-ambitious pretensions: after all, if demand for Volts is as weak as Modica wants to believe, surely absorbing the tax credit at the dealer level is a recipe for Volts languishing on dealer lots. Since Modica offers no evidence for high dealer inventory, his major thrust (proving that demand for the Volt is weak) falls apart. Furthermore, without a single case of a dealership claiming the tax credit and then selling a Volt to a customer under the pretense that it still qualifies for the tax credit, his research ends up well short of proving a “scandal.” As a result, Modica is left having to argue against dealers taking the credit on principle.

And here’s the tragedy: Modica is so focused on landing a political-economic “scandal,” he ignores the legitimate criticisms of both GM’s Volt-dealer policies and the government’s tax credit. Had he been less interested in the political side of things, Modica would have noted that GM’s hands-off approach to Volt dealers has led to dealers gouging early adopters. Sure, that storyline would have proven that short-term demand for the Volt was strong, but then Modica could have pointed to the contrasting situation at Nissan, where Leaf sales are pre-arranged online, cutting dealer markups out of the loop. This strategy also keeps Nissan dealers from taking the tax credit (at least in theory), and will prevent any “gouging fatigue” that could hurt Volt demand down the road.

From the other side of this issue, if Modica had been more interested in the politics of plug-in tax credits, he would have realized that manufacturing a poorly-proven “scam” was wholly unnecessary. As TTAC reported back in February, taxpayers have already lost some $7m worth of plug-in tax credits to fraud. In short, the Treasury Inspector General for Tax Administration has already proven that $33m of tax credits were claimed erroneously by everyone from prisoners to IRS employees ($7m of which is unrecoverable), offering Modica a well-documented scandal that has been undercovered in the mainstream media.

When industry and politics collide, the public deserves strong, independent information gathering and analysis to protect against inevitable abuses. But those who wish to take up that mantle have a responsibility to own up to their motivations: are they looking for legitimate issues regardless of their political or economic consequences, or do they set out with predetermined conclusions and gather up just enough information to support them? Unfortunately, Modica’s history and recent work seem to place him in the former category. Exploring the interaction between the US Government and the auto industry that it now interacts with more than ever, requires the ability to spot scandals without having to manufacture them. And the more you cover the inevitably tortured relationship between private business and public government, the more you realize that there are very few big scandals anyway… after all, free markets and fair governments almost always die the death of a thousand cuts rather than being taken down by a cartoonish scandal.

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Why CAFE May Be Good For The Industry (Especially Detroit) Fri, 20 May 2011 18:16:26 +0000

While the political battle lines over increasing CAFE standards are being drawn in Washington, with the industry taking on both environmentalists and itself, a line of analysis that’s been around since 2009 is exacerbating the industry’s internal divisions over the impact of CAFE increases. A two-year-old University of Michigan study has been exhumed and expanded upon in a new CitiGroup report which makes a bold claim: CAFE will actually improve both sales and profits for the industry. And with Detroit taking the lead in resisting CAFE increases, one might think that the industry’s “turncoats” like Toyota and Hyundai, who have made marketing-led decisions to support CAFE increases, would be the main beneficiaries of these reports. Not so. According to this battle-line-confounding analysis, the biggest beneficiary of CAFE increases will be… Detroit. Madness you say? You may well be right…

We’ve reported on the work of the UM’s Transportation Research Institute a few times before here at TTAC, most notably the 2009 McManus/Kleinbaum study Fixing Detroit: How Far, How Fast, How Fuel Efficient [PDF here]. That study raised our eyebrows on several occasions, forwarding as it did the counter-intuitive conclusion that Detroit would be a major beneficiary of increased CAFE standards or, as the study puts it “increasing fuel economy standards encourages automakers to create a portfolio of products that is more likely to raise the profits of the Detroit 3 automakers than to lower them”). The study noted:

Our finding that Detroit 3 automakers’ profits would increase under higher fuel economy standards is very robust.  We assessed the sensitivity of our prediction of Detroit 3 automakers’ profits to extreme values of 11 uncertain factors we predict for our model, and found that just three of the factors had extreme values capable of generating a drop in Detroit 3 profits:  an extremely low consumer response to fuel costs relative to vehicle prices (less than one-fourth Sawhill’s (2008) statistically estimated median value), a gasoline price of $1.50 per gallon (an extremely low price not seen since 1999), or direct manufacturing costs (materials and labor) that are 2.2 times the estimates we used (Meszler) and 3 to 4 times the National Research Council (2002) estimates (adjusted for inflation).  While the three factors could result in losses rather than gains in profits, the likelihood of lost profits is low.  There is a 7% chance that profits would be less than zero if CAFE were increased 30% (35 MPG), a 15% chance of a loss if it were 50% (40.4 MPG).

As intuition would suggest, the larger mandate increases the downside risk.  But it also offers greater upside opportunity, as the chance that increased profits could exceed $6 billion is 18% for a 50% increase in fuel economy, but only 6% for a 30% increase.  The total uncertainty attached to the larger increase is greater, which means both more upside and more downside.  Overall, the risk and reward profile of these scenarios is very positive, with only a small chance of losing and a very large probability of gain.

That 2009 finding was, however, put in the context of a domestic auto industry in the midst of crisis and restructuring, and as a result it focuses largely on fuel economy as a factor in a larger turnaround. At the time, GM was still emerging from the wreckage of the SUV/pickup market, still suffering from the kind of self-defeating thinking that McManus and Kleinbaum document:

For example, GM conducted internal research for decades that found customers value fuel economy far more than the company’s financial calculations assumed.  As publicly reported, the company systematically discounted these research results when calculating the benefits of improving fuel economy, often by as much as two-thirds.  In other words, if the research said the sales gain would be 10%, the number used to do financial calculations was 3%.  In fact, the belief that fuel economy was not “worth it” became so ingrained into the culture of the company, and so institutionalized in decision making that the senior people might not even be aware that they have been ignoring their own research.

That example, combined with consumer feedback confirming that lack of fuel economy was keeping them from buying American-brand autos is the fundamental basis for the study’s assumption that significant fuel economy improvements are relatively low-hanging fruit. Or, to borrow a slide from the report:

This argument is quite like the one forwarded by the Union of Concerned Scientists recently, which holds that payback in lowered fuel bills will make consumers more likely to spend more for increased fuel economy. Whether that’s entirely true or not isn’t yet clear, although early sales of Ford’s EcoBoost F-150 seems to indicate that it’s possible. Still, whether paying more upfront for longer-term savings (essentially a front-loading of lifetime costs) will prove attractive to the mass market remains very much to be seen (and the study assumes “consumers respond the same to fuel cost as to retail price”). Moreover, the McManus/Kleinbaum study depends on a return to the previously “normal” sales levels of over 15m annual sales by 2016 and over 17m units by 2020, levels which have not proven to be sustainable over the long term without dangerous levels of subprime credit lending.

Which leads us to a Citigroup/Ceres report based on the McManus/Kleinbaum study, which looks to the 2020 period and beyond for further evidence of the UM team’s basic conclusion. That report uses the same GM price elasticity and cross-price elasticity model that the 2009 report relied upon, and assumes the same $4/gal gas price average for its baseline scenario (itself a questionable assumption, given that gas prices have already risen to $4/gal). Though the Ceres report goes into more detail about the market penetration and cost increases of different fuel-efficient drivetrains, the conclusion remains the same as it was in 2009, namely that

Under the simulation, the Detroit 3 gain relative to the industry due to a number of factors, including 1) Narrowing the historical gap between Detroit 3 fuel economy and competitors; and 2) Light trucks and larger cars, in which the Detroit 3 sport a greater share, have greater potential to add consumer value through fuel economy than do smaller cars and car-based trucks. This is because future fuel economy increases have a greater impact on the fuel economy of these larger vehicles, thereby providing more utility to the consumer, and since full-sized trucks tend to be used for commercial purposes, this is a key factor in the purchase decision. Finally, the prices–and therefore the estimated variable profits– are higher for trucks and large cars.

The question that doesn’t appear to factor into the analysis anywhere: can we really rely on trucks to maintain their volume levels in the face of steadily increasing gas prices? Just as McManus and Kleinbaum question whether fuel economy is optimized in the baseline scenario (in turn leading to the low-hanging fruit for Detroit), I would question whether or not truck demand is “optimized” in the 2020 pre-CAFE senario outlined above. After all, the last time Ford’s full-sized truck sales hit the 670,000 unit level was 2007. In order to gain the unique benefits projected in this series of reports, that volume can not continue to decline as it did in 2008-2009 or settle to just over a half-million units as it did last year. Meanwhile, with the overall truck market settling into a 30-year low, that volume (and the low-hanging-fruit profits that underpin the CAFE-is-good-for-Detroit thesis) can hardly be relied upon.

In short, this line of analysis is truly puzzling. If, as it appears, the 2009 report was intended as a justification for the bailout, the Ceres/Citigroup revisit of the theme is puzzling. After all, the thesis that Detroit stands to gain the most form CAFE increases runs directly counter to the lobbying message coming out of Detroit’s governmental affairs offices as well as the Alliance of Automotive Manufacturers. On the other hand, even accounting for the flawed assumptions of $4/gal gas, strong truck sales and the consumer’s willingness to front-load costs (something the American consumer is famously allergic to), the study still sends Detroit in the right direction. Though I wouldn’t rush to assume that CAFE increases (or even higher fuel prices) will spur marginal profitability or volume gains for the Detroit automakers, steadily rising gas prices will have more of an impact on the market than CAFE. Whether profits improve or not, Detroit has little choice but to correct for its decades of anti-fuel-economy planning as the market changes. And, as Detroit has learned all to well in recent years, profits are nice but survival is the bottom line. Survival, not a groundswell of business success, is what should be motivating the Detroit automakers to stop worrying and learn to love (or at least accept) CAFE increases.

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Changing Tides: Can Ford And GM Control 40% Of The US Market By 2015? Fri, 13 May 2011 20:48:24 +0000

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.

We should begin by reviewing a few facts (while forgetting the fact that GM once owned 50% of the market among its six brands a long time ago): GM and Ford today are selling into approximately 35% of the market. In a normalized market (and that’s probably just two years away), the average SAAR will likely run in the 15+ million unit range. Each one percent of market share represents 150,000 units. Doing simple math, for GM and Ford to grow market share by five percent means that these two Detroit companies will need to gain additional sales of 750,000 units beyond what comes to them from market growth alone. Holy cow…that’s a gigantic increase – basically three full production plants worth of sales.

Will it be difficult to do? I don’t think so…other than the fact both companies are starting to run out of production capacity. GM North America production – in Q1/2011 – was running at 99% capacity on a two-shift basis. But GM does have some idled plants – like Spring Hill, TN – that it can restart. Ford is getting squeezed too but Ford hasn’t disclosed its capacity utilization and is actually closing some plants while retooling others. But let’s just believe for now that both companies will solve their capacity problems. (And why no comment from GM and Ford about new capacity for now? It’s being held as a bargaining chip with the UAW – more jobs in the USA means more UAW members but only if the UAW plays ball this summer during contract negotiations. Otherwise, bienvenidos a Mexico!)

So what is it going to take? It’s not the product any more (with a few exceptions). Rather, all GM and Ford need is greater consideration from consumers and increased penetration in the fleet market.

Fleet is the easiest to understand as it comprises daily rent cars, commercial accounts, and governments. For GM and Ford, fleet sales represent approximately 30% of their sales and in the overall industry fleet sales represent nearly one in five new vehicles sold.

For a fact check here, total new fleet registrations in CY2007 according to R.L.Polk were 3.0 million units but dropped to 1.8 million units by CY2009. While 2010 data is not yet available, fleet sales in 2010 likely rebounded from 2009 but were hardly at the level of 2007 or in years prior. Clearly, there’s room for growth in fleet sales ahead – and it’s doubtful GM and Ford will walk away from their 55% share of the fleet business. And we know now that the Japanese are going to have plenty of problems this year and maybe next year too building vehicles so it’s an opportunity to take business. (And the Koreans can only supply so much…)

So for arguments sake, let’s assume that the fleet business is going to reach a normalized level of 2.8 million units annually (19% of total sales of 15MM units). GM and Ford, without any share increase, would sell 1.5 million units to fleets. But allocating another five percent share increase to these two Detroit companies with their improved passenger car line-ups and with the problems facing the Japanese, there’s an additional 140,000 vehicles to be sold from share gains to fleet buyers.

So to meet my forecast of an increase of 750,000 units for GM and Ford in share growth, and with 140,000 units coming from fleet sales share increases, it means that 610,000 units will come from the retail side. Of course, all of the gains are business taken from competitors. And here’s the heart of the argument – Toyota and Honda are going to get clobbered in the marketplace. It’s all about product and reputation – and for as long as I can remember, neither GM nor Ford had competitive small or mid-size cars (or luxury cars too) worth a damn. Plus Detroit’s reputation for build quality, reliability, or even design wasn’t setting consumers’ hearts aglow. The Japanese captured these consumers, particularly along the coasts, and took share from Detroit.

But the tide is going out on the Japanese. Like Detroit pre-bankruptcy, the two Japanese stalwart manufacturers have gotten complacent. Long model cycle times, boring design, and replacement products (when they get here) that look like warmed over versions of the previous generation vehicles. (Nissan is somewhat of an exception to this.) The luxury brands for Toyota and Honda also appear stalled for the same reasons as their mass market siblings. Plus, the Japanese no longer offer superior fuel economy to the latest offerings from Detroit.

Detroit now just needs to convince those American consumers that won’t consider a Detroit product that it’s time to take another look. You can’t sell a Detroit product to a buyer that doesn’t put a domestic product on the shopping list. And here’s my idea of how Ford and GM can accomplish that – put a human face from within their respective companies (like a vehicle designer, an engineer, a factory worker, and a believable senior executive) to come out and ask for consideration in a series of TV spots. No pitchmen, no fancy graphics, just the speaker, the product, and the brand logo. Focus on some attribute of the product that makes it worthy of consideration. Then add the spokesperson’s contribution to making it a great product. No need to dismiss the competition. All that is being asked for is to take a look.

To add five full percentage points to market share in a short time period is a herculean task – but the only thing that prevents GM and Ford from doing so is no longer due to the products but this lack of consideration. Ask your friends, colleagues, family members, or anyone else who now drives a foreign brand product if they’d consider a domestic product for their next car purchase. I’d bet most would say something along the lines that “been there, tried that, had a horrible experience – won’t go back.” And that’s the biggest obstacle for GM and Ford today.

I believe that with the new product onslaught from GM and Ford, some focused advertising that asks for consideration and with growing positive word of mouth from satisfied customers, the sales needle will move in short order. The world is their oyster – as long as they stay focused on product at the RenCen and in Dearborn.

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The Chinese Are Coming: Part One: A Tale Of Two Nobles Wed, 04 May 2011 15:00:17 +0000  

For years now the Chinese automakers have been the bête noir of the global car industry, inspiring equal parts fear and contempt in boardrooms and editorial meetings from Detroit to Stuttgart. In an industry built on scale, China’s huge population and rapid growth can not be ignored as one scans the horizon for dark horse competitors. And yet no Chinese automaker has yet been able to get even a firm toehold in the market China recently passed as the world’s largest: the United States.

Certainly many have tried, as the last decade is littered with companies who have tried to import Chinese vehicles, only to go out of business or radically rethink their strategy (think Zap for the former and Miles/CODA for the latter). Others, like BYD (or India’s Mahindra), have teased America endlessly with big promises of low costs and high efficiency, only to delay launch dates endlessly. In short, a huge gulf has emerged between overblown fears of developing world (particularly Chinese) auto imports and the ability of Chinese automakers to actually deliver anything. No wonder then, that we found what appears to be the first legitimate attempt at importing Chinese cars to the US quite by accident…

The internet is an amazing thing: on any given day you literally never know what you’re going to find. Typically when I find a story that shows promise as a TTAC post, I open a few tabs in a new window and search for words and phrases associated with that story in hopes of finding related reporting and greater context. And sometimes those searches lead to a story that’s infinitely more interesting than the original idea that lead to them.

A few days ago, for example, an Automotive News [sub] story about Wheego Electric Cars Inc caught my eye. The firm, which imports Shuanghuan Noble gliders and converts them to electric power using US suppliers, sold its first retail vehicle last Earth Day (April 22), but AN [sub]‘s piece was hardly the puff piece you might expect from such an opportunity. Instead, the industry paper reported that Wheego was out of money and had retained a VC outfit to raise cash, even quoting CEO Mike McQuary as saying

My constraint is primarily capital. We’ll be living hand-to-mouth as we try to get the first cars built. The next 200 will creep out as we raise money.

It’s the kind of story that appeals to TTAC’s occasionally vulture-like editorial instincts, as I know that more than a few of TTAC’s readers would probably get a schadenfreude-laden chuckle out of the struggles of a firm trying to sell an electrified Chinese Smart Car clone for “$33,995, including shipping” (before $7,500 federal tax credit). But after a little bit of digging through the search results for “Shuanghuan” (looking for mmore background on this Hebei Province-based automaker) I came across a website that I hadn’t expected to find: Never having seen anything resembling a Chinese-branded dealership in the US, I clicked over.

There, I found a website titled “Shuanghuan Auto,” advertising two versions of the Noble and the SCEO (neé CEO) SUV… with an Iowa address. A glance at TTAC’s archives showed one incredulous write up from Bertel two years ago, and little else to explain this unexpected find. The Noble G4 was advertised as having gasoline (1.1 liter Suzuki design, made in China) or electric options. The SCEO was shown with a 2.4 liter Mitsubishi engine or a 2.5 liter “Yuchai” turbodiesel. I briefly checked the EPA website and, finding no signs of “Shuanghuan” or “Yuchai,” I dialed the number on the website and a day later I spoke with the owner of Shuanghuan Auto Des Moines.

Gene Gabus lives up to the finest Iowan standards of friendliness, instantly warming my expectation-free cold call with immediate candor. “I don’t know if you realize this,” he says, “but it takes a ton of work to get these cars up to American market standards.” As it so happens I had heard that it was tough to import cars to the US, and soon Gabus is explaining the extensive re-working that was needed to bring the Noble’s fuel system and rear-crashworthiness up to snuff. “We’re just working on the advanced airbag system now,” he says. Having seen a Noble crash test and been impressed by everything but the fact that there didn’t appear to be any airbag, this sounded promising. He describes extensive fuel tank modifications and says that dual-fuel figured heavily into US market plans. “You’ve heard of CNG cars?” he asks. I had. This was becoming even more interesting.

“Why have I barely heard of you guys?” I ask. “We’re used to hearing a lot of hype from importers of brands like Mahindra and BYD.” “Well,” he answers, “the feds don’t like a lot of talk before they approve a vehicle. Besides, we’ve watched the other guys talk a big game and fail to deliver. We want to avoid that.”

“And you are a former Chrysler dealer?” I ask. The address had been listed as Des Moines Chrysler on Google Maps. “Did you lose the franchise during the bailout?” There’s a brief pause. “I was robbed,” he growls. His profitable dealership had lost its franchise, while a pair of smaller local competitors had kept theirs. It’s clear that the wounds are still fresh, but they haven’t stopped Gabus from diving into a full-on attempt to homologate Chinese cars for the US. I press him with more questions. “Look,” he says, “let me give you Bob Smith’s number. He’ll be able to answer all of your questions.”

Sure enough, Mr Smith answers my first phone call, and in short order is answering my questions in a warm, Southern drawl. “I’ve done business in China since 1985,” he explains. “Computers, wheelchairs, that kind of thing.” And why cars? “I’ve seen how China is growing,” he explains. “I’ve seen their demand for gasoline grow and grow. Supply won’t keep up with their growing demand, and we’ve seen what happens when gas prices approach $5/gallon. People begin to seek out alternatives.”

Smith and Gabus plan on selling gasoline and electric-powered versions of the Noble, but the centerpiece of their plan involves dual-fuel version, which run on gasoline or Compressed Natural Gas (CNG). Like many people who have spent a lot of time around the car industry, Smith and Gabus are skeptical about all the hype surrounding electric vehicles, and given that most importers of Chinese vehicles focus on electric conversions, this puts them in a unique position relative to their competition. Smith waxes enthusiastic about the low prices and high supplies of natural gas in the US, and says the key to his business case is the relatively low cost of natural gas conversions.

“Look,” he says, “batteries often cost as much or more than the car itself.” The struggles at Wheego, which has split homologation costs with Smith and Gabus’s Shuanghuan importation outfit (Smith calls Wheego “good guys”), fill in all the necessary details. An electric Smart clone might appeal to hard-core greenies, but at $33k, their chances of mass-market acceptance are slim. Like Wheego, Smith is banking on help from the federal government in order to break into the market, but unlike the EV hawkers, his natural gas focus helps avoid the trap of having to sell a low-cost car at high prices.

“We expect the Pickens Plan to pass this summer,” explains Smith, referencing the natural gas subsidy bill that’s been championed for years by natural gas baron T. Boone Pickens, and was recently re-introduced and endorsed by the Obama Administration. “When that happens, people will be able to build home refueling stations which tap into their home heating natural gas lines and they’ll receive a $2,000 tax credit to install it.” But that’s just the beginning. Under the Pickens Plan bill, light duty vehicles (powered by natural gas or dual-fuel) would be eligible for a $7,500 consumer tax credit, the same amount currently available to plug-in vehicles.

It’s starting to add up. Not long ago, Edmunds CEO Jeremy Anwyl called for parity between EV and natural gas tax credits, and Honda has recently announced 50-state sales of its natural gas Civic GX. These guys are surfing a building trend. “So,” I ask, “what price point are you targeting post-tax credit?” His answer drops my jaw: “$4,000 to $5,000,” he says. I suddenly get it, and I’m floored by the idea. Low-cost, high-efficiency Chinese cars that sell at a price that’s less than half of the cheapest gasoline-powered cars on the marketplace. This is the kind of plan that has had the industry terrified, and yet has yet to be seriously pursued. And here are a couple of guys, flying under the radar, bringing a truly disruptive Chinese import to market… in Des Moine, Iowa. You can’t make this stuff up.

At this point, I stop thinking of Smith and Gabus as underdogs (or possible hucksters), and start thinking of them as a couple of shrewd operators. But, says Smith, the plan is still a huge gamble. They’ve already spent millions crashing some 32 Shuanghuan Nobles, and upgrading their bracing, fuel tanks, evaporative emissions control systems, advanced airbags and seatbelts. Having been working with the EPA and DOT for two years already, Smith confirms that he expects full DOT/EPA approval by the end of the second quarter of this year… within the next two months (Wheego has reportedly already received DOT crash-test approval). The SCEO SUV has not yet started testing, he says, and the process will take two years, so they’re starting with the Noble. Even with a crazily low targeted price point and high natural gas efficiency, there’s no guarantee that the Noble will take off. “But,” says Smith, “you have to take a chance and put some money on the table if you want to change anything.” And rather than trying to make the cover of every green magazine in the country, Smith and Gabus have started with the tough task of homologation… and now they’re almost done. Their huge bet is about to hit the table.

Before getting off the phone with Smith, I ask when he’ll next be in Des Moines. I explain that I want to meet him and Gabus at Shuanghuan Auto Des Moines, drive the Noble, and hear more about the origins of their import scheme, as well as their plans for the future. “Sure,”he says, “I’ll be there in June.” “In that case,” I reply, “so will I.” This story, which has flown below the media’s radar for two years now, is starting to take off… and TTAC will be there to cover it. By June, EPA and DOT approval should be rapidly approaching, and Smith and Gabus will be approaching the next challenge: pricing and selling these tiny Chinese cars. If the Pickens Plan passes and they’re able to hit their price points (both still “ifs,” the men admit), these industry outsiders could put Chinese cars –and Des Moines, Iowa– on the automotive map in this country. In an industry with seemingly infinite barriers to entrants, that’s a huge story… and one we’ll continue to cover.

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