Category: Between the Lines

By on November 12, 2008

David Cole is the man whose industry and union-funded Center for Automotive Research carried-out a study of the economic implications of Detroit’s meltdown. The result has become the de facto standard for “this is the serious shit that will happen if we don’t bailout Motown’s mismanagers with federal tax money” argument. So much so that the mainstream media uses the figures without attribution. TTAC has exposed Cole’s blantant self-interest in this matter. Our Best and Brightest have examined CAR’s study and exposed its deep methodological flaws. While there is no doubt that a GM, Ford and/or Chrysler bankruptcy filing would create an economic catastrophe for tens of thousands of workers and hundreds of communities, exaggerating the impact for political gain is deeply immoral. And just plain wrong. Giving Cole an uncontested platform to promulgate his propaganda is, if anything, worse. And yet that’s exactly what The Detroit News has done…

The DetN is so happy to let Cole mislead the general public that the headline AND strapline say the same damn thing: “Letting automaker fail costs more than price of loan automaker” is immediately followed by “fail costs more than price of loan.” You know, just in case you can’t be bothered to read Cole’s dietribe [sic]. Which begins by blaming the same government his people seek to suckle.

“The popular complaint is that the domestic auto industry got itself into this mess, and it should suffer the consequences. But the reality is the Detroit Three wouldn’t have cash flow problems if the federal government hadn’t caused the financial crisis, in part, by ensuring that Americans who couldn’t afford a home suddenly could buy one. The resulting subprime mortgage crisis helped lead to the credit crunch, which has caused a dramatic decline in auto sales.”

The meme is clear: the financial crisis is the cause of Detroit’s disaster. The fact that all the other automakers doing business in the United States who aren’t HQ’ed in Motown are in no danger of going belly-up is, apparently, irrelevant. The inconvenient truth that GM’s former captive finance unit GMAC is up to its eyeballs in the subprime mess doesn’t get a look in. Or the American automakers’ obvious willingness to lend money to car buyers whose credit scores mirror a minor league baseball player’s batting average. But wait! There’s more! More federal complicity in Detroit’s dilemma!

“The federal government also contributed to the auto industry’s problems with its lack of a realistic energy policy. The price of this hit home this summer, when the price of gasoline spiked to $4 a gallon and caused a massive shift in the types of vehicles consumers would buy. Now that the price of gas is below $2 in some areas of the country, there will be far less demand in the short run for the fuel-efficient vehicles that the government wants the automakers to sell in greater quantities.”

How fucked-up can one argument be? Seriously, I’m sitting here at the keyboard, schnauzer at my side, lost in the maze of Cole’s rhetorical obfuscation. Are the feds to blame for not having an energy policy that kept gas prices low? Or for having one that did, then didn’t, then did? Did the federal Corporate Average Fuel Economy regs force automakers to make the fuel-efficient cars that would have saved their ass if they’d hadn’t gorged on SUV and pickup truck profits (assuming they could make competitive small cars if they really wanted to) a good idea then, but wrong now? Or wrong then AND now?

Cole’s willingness to blame CAFE for Motown’s misery shows where his sympathies lie– if such evidence were needed. It also shows that Motown’s propagandist-in-chief is no strategist. Criticizing the Dems’ legislative darling child will not win Detroit any friends in Washington. No siree Bob.

“If GM, Ford and Chrysler had to shut their doors, according to our center’s calculations, the economy would lose nearly 3 million jobs in the first year. That is because the auto industry has the highest jobs spinoff of any manufacturing enterprise. For example, for every auto assembly factory job, there are another eight to 10 jobs outside of the plant.”

This rhetorical technique is called reductio ad absurdum. You make a claim, show how it leads to an absurd or ridiculous outcome, and then conclude that the original claim must have been wrong– as it led to an absurd or ridiculous result. If Detroit’s automakers file for Chapter 11, there is no way on God’s green earth that they will simply shutter their doors and be done with it; they will continue making and selling vehicles. It may be a fraction of previous production, but it will not be zero. To suggest so is the dictionary definition of disingenuous. Of course, Cole’s got that one covered.

“Critics have said it would be better to let the automakers file for bankruptcy and get their financial houses in order. The problem with this approach is that industry experts know that consumers won’t buy expensive products from a bankrupt company. That still leads to serious decline in sales and to 2 million lost jobs very quickly.”

Don’t you hate it when an industry expert quotes unnamed industry experts to prove that he, an industry expert, is right? Perhaps Mr. Cole should conduct a study on consumer attitudes towards buying from a bankrupt GM, Ford and or (yeah right) Chrysler, focusing on price. Because at some price, ANYTHING will sell. And he might want to ask “If the your car warranty was backed by the federal government…” Nope. Checks cashed. Blinkers on. Two million jobs? Where’s the data? And define “very quickly.” Fuzzy logic uber alles.

“In addition, the very low level of current sales and surprisingly low inventory of vehicles are creating a pent-up demand for new vehicles once the credit crunch subsides and the economy improves. The market promises to shift from the buyers’ market of the past decade to a sellers’ market where fewer financial incentives or discounts will be needed to sell a vehicle with the industry’s reduced manufacturing capacity.”

Baseless conjecture. Dataless drivel. Crap. In fact, you could say that the domestic automakers’ build ’em fast, pile ’em high, sell ’em cheap strategy over the last ten years created an automotive “bubble.” That burst. TTAC may not be a credible source of industry expertise in Mr. Cole’s eyes, but we called the sales meltdown (sub 12m units). And plenty of us hereabout don’t see a recovery until the tail end of 2010. And even then, vicious competition from the transplants guarantees that America will ALWAYS be a buyer’s market.

“…the government needs to give the Detroit Three a bridge to this brighter future. A bridge loan now would be far less expensive than letting one or more of the domestic automakers fail.”

Or not. In fact, funding the automakers without letting them pass through Chapter 11 would be a bridge to nowhere. And a complete waste of money. Our money.

By on November 9, 2008

Senator and president-elect Barack Obama held his first post-election press conference on Friday– the same day that Ford and GM revealed their respective arterial sprays of red ink and third degree cash burns. Rather than highlight those stats and go for the close, bailoutwise, Obama played his political cards close to his chest. The exact text of his remarks are extremely revealing, in that politicians don’t really reveal anything unless they absolutely have to kinda way. “The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil.” Translation?

Obama’s opening salvo reveals that America’s next President expects Detroit to stop messing with Democratic promises to improve America’s vehicular fuel efficiency, buckle down and build fuel sippers.

The implication doesn’t exactly plow new political ground. Lest we forget, Detroit and Washington have been at loggerheads regarding Corporate Average Fuel Economy (CAFE) regulations since they were first introduced in 1975. For CAFE’s most recent update, Motown [once again] lobbied Democrats to keep the standards as low as possible, then cried poverty when it was clear they’d lost the fight. The Department of Energy loans were designed to assuage Motown’s sore-headed losers by providing access to $25b to do what they’re legally obliged to do.

Bottom line: any new federal money for The Big 2.8 will come with the same old strings attached. In case you missed the point…

“I would like to see the Administration do everything they can to accelerate the retooling assistance that Congress has already enacted.”

Retooling = building more fuel-efficient cars. As TTAC has highlighted, federal foot-dragging is not Detroit’s enemy. The regs for the $25b Department of Energy loans have been written with unprecedented haste. In fact, they’re more or less done. The more part is that they’re done.

The less part is that Detroit can’t use the money for anything other than which it was intended (fuel efficient cars not corporate liquidity). What’s worse, GM, Ford and Chrysler don’t qualify under strictures regarding financial viability. Obama’s message was code: tacit clearance for Congress, the DOE, President Bush, someone, anyone to pervert the legislation’s original intent and current restrictions.

Does Barack Obama know that the situation is well beyond retooling? If he does, he ain’t admitting it. And if he doesn’t, his economic advisers might want to write a memo on that one. STAT.

“In addition, I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars here in the United States.”

Weather the economic crisis. Now that’s what Detroit’s talking about! The first part of the statement is a not-so-clear signal to Motown (plausible deniability rules) that financial assistance will arrive via the Troubled Asset Relief Program, another economic relief stimulus bailout pork barrel package, and whatever clever shit the Obama administration and Congress can devise (tax credits for loan interest, etc.). But the second part of that statement… again with the fuel-efficient cars.

Clearly, Obama doesn’t want to be seen using taxpayer money to help Detroit build more SUVs, pickup trucks or automotive gas guzzlers. Which puts Motown in even more of a bind than before. Before, they could meet CAFE regs by balancing production of small, relatively fuel-efficient, uncompetitive, unprofitable small cars with sales of large, gas-guzzling, competitive, profitable trucks. Reading between the lines, Obama’s not going to let one red cent of public money sustain that mix.

So Detroit’s being painted into a corner: build competitive, fuel-efficient cars or fuck off and die. But what are the chances that GM can build these fuel-efficient machines and sell them in enough quantity at enough of a profit to make enough money to pay off their existing loans PLUS the federal assistance? Teen-tiny. Ford. Slim. Chrysler. None.

“I have asked my team to explore what we can do under current law and whether additional legislation will be needed for this purpose.”

Translation: Obama is not throwing the weight of his political victory– assured in no small part thanks to Motown/UAW-friendly states– behind a wider Detroit bailout (under some sort of new economic stimulus passage). Not yet.

For Detroit, that’s an industrial-size mixing bowl of not good. Without Obama’s unqualified support, and soon, they’ve got a real PR mountain to climb. On a more general level, the same “lack of urgency” that put GM, Ford and Chrysler where they are today could ruin their chances in the political sphere. If so, it’s game over.

By on October 29, 2008

Paul Ingrassia’s essay in The Wall Street Journal takes a stab at a question which has preoccupied me for years. How the hell did the American automotive industry, which once was the model of industrial might for the world, become a sickly embarrassment? Generally, blame is apportioned amongst these areas: management, labor unions, government, customers and bad luck. Ingrassia comes down pretty hard on management, with a supporting role for the unions.

Ingrassia opens by pointing out the scant media attention paid to the opening of Honda’s new 200k-Civics-per-year factory. The Indiana opening stands in stark contrast to Motown automakers’ seemingly endless factory closings and layoffs (i.e. paying union workers not to work).

“This situation doesn’t stem from the recent meltdown in banking and the markets. GM, Ford and Chrysler have been losing billions since 2005, when the U.S. economy was still healthy. The financial crisis does, however, greatly exacerbate Detroit’s woes. As car sales plunge — both in the U.S. and in Detroit’s once-booming overseas markets — it’s becoming nearly impossible for the companies to cut costs fast enough to keep pace with the evaporation of their revenue. All three companies, once the very symbol of American economic might, need new capital, but their options for raising it are limited.”

But how did we get here? Product is the key. Ingrassia provides a good list of American post-war hits including the GTO, Caravan, Taurus and Explorer. All were segment busters– and not a one of them was created in the last 17 years. The Explorer launch of 1991 was Detroit’s last breakthrough product. But why?

“In all this lies a tale of hubris, missed opportunities, disastrous decisions and flawed leadership of almost biblical proportions. In fact, for the last 30 years Detroit has gone astray, repented, gone astray and repented again in a cycle not unlike the Israelites in the Book of Exodus.”

Ingrassia gives the transplants props for making allies out of their US workers. In the 1970s, it was still popular to blame the quality problems of American cars on the workers who built them. Honda tiptoed into these scary waters in 1979, opening of a small motorcycle assembly plant in Ohio. Workers were initially frustrated by their task of building a few motorcycles and then taking them back apart to evaluate quality and figure out how to make it better. But they learned the Japanese way. Motorcycle manufacturing proved to Honda that American workers were not the problem.

By 1982, Honda Ohio was cranking-out new Accords. And they never looked back. Two years later, Toyota opened NUMMI joint venture plant in Fremont, California, which still builds Corollas, Tacomas and Pontiac Vibes.

“Meanwhile, in the same year that Honda started building cars in Ohio, General Motors asked the UAW for wage concessions to help ease the company’s financial straits. But on the same day that UAW members voted approval, GM Chairman Roger B. Smith unveiled a new formula that made it easier for him and other executives to earn bonuses. It was a historic blunder.”

Amen to that. Even so, those hit products of the late 1980s and the truck boom of the 1990s allowed Detroit to prosper. But only if you measure success in terms of profits, rather than share. Slowly, calmly, inexorably, the transplants continued eating Detroit’s lunch. By the beginning of the new millennium, Detroit was oblivious to the enemy within its gates. Motown was flush with cash, embarking on a global buying spree.

“In June 2000, GM’s confident new CEO, Rick Wagoner, invited journalists to a resort in Italy’s Alpine lakes to describe a corporate future of ‘fewer cars, more trucks,’ as the Detroit Free Press wrote. Ford’s CEO Jacques Nasser upgraded the décor on the corporate jets and removed the company’s blue-oval logo from the outside of corporate headquarters while the Ford Taurus — once the best-selling car in America — was falling further behind the Toyota Camry and the Honda Accord.”

Easy money in trucks hid the rot within. Who cared that the Taurus had gone from #1 retail vehicle to rental car hell? One Lincoln Navigator made the profits of twenty or more Tauri. But just a few short years later, Katrina sparked the first fuel price run-up in decades. Not much later, the combined forces of growing demand and commodities market shenanigans sent fuel prices in a steep climb which has only recently started to turn around.

Suddenly, the truck boom went bust. The Emperors of Detroit were revealed in all their naked glory. (Well, at least to those outside the gates.) Now, with gas prices are coming down, credit markets have imploded. In these tough time, a Detroit management has long played badly with suppliers, employees and customers suddenly needs all the help it can find. BUT you have to build strong partnerships in the good times to tap into them when the going gets tough. Oops. All those management bonuses for cost-cutting related profits and “hard-headed negotiating techniques” [irony alert] don’t look so good anymore.

What now? Ingrassia gives a slight edge to Ford in the question of who has the best chances to make it out of the nightmare alive; Chrysler is toast already. GM is nearly out of cash. Unfortunately, no one told the feds that only fools rush in.

The dramatic denouement of this sad saga– David Halberstram’s long-predicted Reckoning, will be postponed for the forseeable future. But no matter who– if anyone– emerges from Detroit’s penultimate debacle, the simple truth is that Detroit has no one to blame for their plight but themselves.

[Click here to read Ingrasia’s essay]

By on October 22, 2008

The Wall Street Journal’s Business World by Holman W. Jenkins Jr. exemplifies the dangers of always looking at the course through the same binoculars. His “Uncle Sam Goes Car Crazy” (WJS Oct. 22, 2008) rant is an attempt to view Detroit’s troubles through Government is Bad glasses, filtering out all other reasons for the slide. He’s wrong, and in a dangerous way.

We can start where we agree: The American automotive industry is cart wheeling into the stands, parts are flying off and people are scared. Jenkins and I part ways mid-tumble. He believes Detroit has “accrued an almost incalculable baggage of government intervention, which explains why more intervention is needed today.” A traditional free-market loyalist, when there’s trouble, Jenkins’ finger points to big government first, automatically and without much input from rest of the body, it would seem.

First, Jenkins blames GM, Chrysler and Ford’s labor inflexibility on the Prohibition-era Wagner Act, claiming the Government makes automakers dole-out higher compensation than the market dictates. I’ll crack open a 70-year-old bottle of rye and toast laws that never change. Salut.

Labor contracts over the last few years have actually added second and third tier employees, mitigating the effect of Wagner. Not that it should have mattered. The labor laws in Germany are even more stringent and their Big 3 seem to be surviving. (Not that any car maker is raking it in a the moment, but Porsche/Volkswagen, BMW and Mercedes are nowhere near putting their respective bellies up.)

Second, Jenkins bemoans the 50s franchising laws, which certainly add to Detroit’s problems, but wouldn’t if they were moving vehicles, which they’re not. Ironically, if The Big 2.8 had not fended off the government’s attempts to raise fuel efficiency standards for a generation, dealers might have more competitive products to push right now. They’d all be selling more cars and trucks. The number of outlets matters, but to a lesser extent.

Next up, off-shoring vehicle construction, as in Detroit doesn’t do enough. I’m not entirely sure whose job Jenkins is trying to save with this argument; it’s not Joe the Tool and Die guy. Jenkins believes that saving American car manufactures means making cars someplace else. I just assume buy an American made truck, despite the Toyota badge on the tail, but that implies the tack is valid in the first place. Anyway, The Big 2.8 build plenty of cars in other countries. Fuel and safety dictates haven’t hampered that effort in the slightest. In fact, due to a limpid dollar, building in good ‘ole US of A hasn’t been this attractive in years.

Lastly, Jenkins states that American companies build better cars overseas and can’t bring them here, again because of an ignorant, intrusive federal government. I’m gathering he’s never been to a Saturn lot. Maybe he’s still confused by the fact that his Ford Focus doesn’t corner like the one he rented in Glasgow. A choice Ford made all on it’s own.

Yes, there are differences in standards from nation to nation. The differences, themselves, do not prevent a world car. The European Ford Focus is built on the Mazda 3 – Volvo 30, 40, 50 platform, that runs nicely on American highways. Its one of the many things Allan Mullaly noticed when he took charge of Ford. He’s been trying to slim and unify ever since. AND he’s not breaking any laws in the process.

Strangely enough, Jenkins misses the Big Kahuna:  mandatory health care. GM, Chrysler and Ford have to offer it to their workers, and It costs them a fortune, adding thousands of dollars to the cost of every Trailblazer, Explorer and Durango rusting on the lot. And, you know, helping people survive cancer, heart disease and other ailments along the way.

A national, single-payer health care system would alleviate these costs and level the field Americans play on against Japan, Germany and Korea, as the Chinese stretch out on the side lines. “Socialized Medicine” is beyond Jenkins’ scope, though, regardless of how good it looks as applied to this industry. Government is never the answer in Business World.

“The only thing wrong with corporate longevity,’ Jenkins writes, “are the legal encrustations that accumulate.” To which I say: build better cars and customers will buy them.

There are times when you’ve got to put the binoculars down and take in the full course. Even when you may not like what you see. Laissez faire is a fine ideology; it should never be confining. There are times when other strategies need apply, like… now (for example). One of the world’s foremost authorities on business issues got it wrong four out of four. I expect better of the Journal. With industry leaders getting this kind of advice through their headsets, it’s no wonder the American automotive industry’s spinning off the track.

By on October 21, 2008

The mainstream media suffers from “opinion inertia.’ Once the press corps adopts a certain angle on a story, its superglue city, facts be damned. To wit: TTAC’s been slamming Chrysler for horrendous product quality, bizarre model choices, asinine marketing and a bloated, piss-poor dealer network since… ever. Meanwhile, our colleagues have been playing the underdog American automaker meme. Post Cerberus purchase, they’ve been ignoring Chrysler’s failed products and telltale gaffes, such as CEO Bob Nardelli’s infamous “operationally bankrupt” admission. But now that rumors of a GM – Chrysler merger have surfaced, the media’s woken up. And the fangs are out.

Detroit News contributing author Alisa Priddle normally puts her keyboard to use for Car and Driver’s blog, where she’s more PR repeater than news reporter. In September, she parroted “Chrysler shows it has a slew of electric vehicles in the pipeline, including a Chevy Volt competitor, and they’re coming to a road near you soon.” Not only was this blatant press release regurgitation, it was also patently false. “They” weren’t going into production; a fact that Priddle acknowledges later in the article (only one, at best, would be produced).

And now, Priddle pens “Chrysler, GM deal confronts obstacles,” which would better be titled, “WTF are these asshats thinking?” “Statements that Cerberus bought Chrysler for the long haul are falling on deaf ears,” Priddle writes. “Especially with the financial tiff that has broken out between GMAC (which is 51 percent owned by Cerberus) and GM, which is now paying dealers an incentive for sales financed outside GMAC.” Well, someone’s ears are open, now.

Co-writer David Shepardson is also a recent convert to the growing “Chrysler’s up excrement creek” camp.

In an August 6, 2007 column called “Controversial CEO,” Shep responded to CEO Nardelli’s critics. “But Nardelli improved the company [Home Depot] by several measures. Sales jumped from $46 billion to $91 billion in 2006, while profits doubled to $5.8 billion.” Shep quoted the usual (anonymous) sources, happily reporting that “A person close to the situation said Cerberus was deeply impressed with his financial performance. ‘If we get anywhere near what he has accomplished previously, we’ll be delighted,’ the person said.”

Now Shep’s taken off his rose-colored glasses and begun chronicling the folly of the mix ‘n match “too big too fail” theme. “Among the hurdles to any deal is whether Congress would agree to provide financing to help a merger. Congressional aides said any kind of money would likely include strings.”

Detroit News columnist Daniel Howes is also showing his ability to eviscerate a hometown hero. His October 2007 column “As Toyota falls, Detroit Big 3 rise” gives way to today’s “GM hasn’t learned bigger isn’t better.” “Forget the back-channel spin from those with self-interested agendas rationalizing the boss’s current negotiating position. Would this mega-deal, another stunning blow to Michigan’s wobbly economy, make sense to Joe the Autoworker and others not drinking the Kool-Aid of the moment?

In yesterday’s post on the Wall Street Journal blog, Heidi N. Moore asked “What If the U.S. Auto Makers Don’t Survive?” That’s a sharp turn from her June 10, 2007 post on Chrysler’s rosy prospects: “The honeymoon at Chrysler clearly isn’t over: Chrysler CEO Robert Nardelli couldn’t be happier about Chrysler getting rid of Daimler and public shareholders in one fell swoop.”

Clearly, the press has “reassessed the Chrysler situation,” working their way towards acknowledging Former CEO of American Motors Corp and current professor at University of Michigan Gerald Meyers’ assertion that “there is no economic justification for the existence of the Chrysler Corp.”

And now that press is beginning to face that uncomfortable reality, they’re showing remarkable insensitivity towards their former champion, newfound object of ire.

The current media group-think is, simply put, Chrysler’s going away. Get used to it. Whether through a merger or a sell-off, tens of thousands of jobs, hundreds of suppliers, thousands of dealers and tens of thousands of customers will soon be S.O.L. Chrysler’s presumed recovery has become Chrysler’s presumed oblivion. But is that necessarily true?

Even before day one, TTAC warned that Cerberus bought Chrysler to strip and flip the company. But before Chrysler is laid waste, someone in the media should stop for a moment to consider an alternative. Assuming the U.S. government is going to bailout GM, perhaps they should start by practicing on Chrysler. Where’s the talk of a Chrysler “intervention?”

The fact that a Chapter 11 reorganization isn’t part of the mainstream media discussion about Chrysler’s fate shows that the wolf pack press shares the same ADD and lack of imagination as Chrysler’s protagonists. In that sense, just like voters and their politicians, a story gets the coverage it deserves. We here at TTAC will continue to think independently, even as Chrysler is dismembered by greed, arrogance and indifference, on all sides of the story.

By on October 11, 2008

Last night, the New York Times “broke” the story that General Motors and Chrysler/Cerberus were discussing a merger. The report lacked only one crucial component: facts. As RF reported in his initial blog on the subject, the story unravels by paragraph two. We learn that the entire story is based on “two people close to the process.” While anonymous attribution is common new industry practice, a story without independent corroboration is a nothing more than rumor— especially when it defies common sense. General Motors’ assertion that they routinely talk to other manufacturers about collaborative efforts doesn’t count. But it does reveal the truth of the matter.

In fact, the GM – Chrysler/Cerberus meetings are an open secret. As The General’s spinmeister intimated, GM regularly engages in tech sharing discussions with a wide range of carmakers. Given Chrysler’s yet-to-be-realized tie-up with Nissan, its decision to provide re-badged minivans for VW and ongoing attempts to create a Chinese hook-up, GM is a logical “partner” for Chrysler ongoing campaign to outsource product development. And cut costs.

GM and ChryCo could be discussing rebadged Malibus. Or a Chrysler badged Cobalt. With materials costs soaring, the two ailing American automakers might be examining the possibility of sharing resources. Or looking for economies of scale re: suppliers. And, lest we forget, General Motors owns 49 percent of endangered auto and mortgage lender GMAC; Chrysler’s masters hold the other 51 percent. If GM and Chrysler are NOT talking to each other about GMAC’s future, there’s something seriously wrong (more wrong?) with both companies’ executive management.

It’s no wonder Times scribes Vlasic and Sorkin backpedal on their GM – Chrysler merger story. They tell us that their two sources estimate chances of a merger are “50-50.” There could be “significant roadblocks,” not including the fact that sewing two losing companies together merely makes a bigger losing company. But the real argumentative implosion comes buried in the story: “neither side has yet to dig into each others’ private financial books and records.” How serious can the merger talks be if the lawyers and accountants haven’t even begun diligence? Answer: they can’t.

Clearly, the providers of “all the news that’s fit to print” didn’t give the merger story a fitness test. In fact, this is a classic example of what GM shill Rush Limbaugh calls “drive by media.”

The 24 hour news cycle (of which this writer, typing after midnight, is a member) was quick to pick up the story and discuss all the implications. The CNBC network, “the recognized world leader in business news,” called in the big guns for comment: Ray Wert of Jalopnik. While we understand the mainstream media’s ongoing fascination with the “new hotness” of blogs, Wert screwed the pooch on this one.

Wert claimed that GM and Chrysler “have two different lineups that actually are very complementary.” This is just wrong. GM and Chrysler have nearly identical lineups, with some niche-product distinctions. Recognizing this, Wert contradicted himself in his next comment. “They’re both looking to sell a lot of large trucks and large SUVS, and it makes sense for them to manufacture them on the same platform.”

The CNBC hosts ask Wert about the financial issues in a merger. His vaguely dishes “My assumption is that Cerberus has probably bit off a lot more than they can chew, and with credit kind of crunching in right now it makes a lot of sense for them to try to jettison a company that isn’t providing something that isn’t to their core business plan.” Except that’s not what anyone is talking about. The story from The New York Times: Cerberus would end up with an enormous stake in the hypothetical GM-Chrysler firm.

CNBC concludes by asking Wert about potential issues with a merged GM-Chrysler and organized labor. “I think it’ll be easier for them to get some economies of scale on UAW talks. It’ll be easier to work out one deal as opposed to two deals.” Efficiency in labor talks is a secondary goal (talking for less time, paying fewer labor lawyers). The actual issue is concessions. There is no quantitative academic evidence to suggest that it would be easier for a gargantuan company to negotiate with the UAW and CAW than two very, very large companies. In fact, odds are good the negotiations would be even stiffer.

CNBC failed in its background research. They should have read the editorial Wert published the same day: “GM Will Go Bankrupt: Why That May Actually Be Good For The General.” Considering Wert’s previously held belief that GM would benefit from Chapter 11 filling, why did he suddenly decided that a GM-Chrysler merger be well-advised? Something to do with publicity perhaps?

All of this discussion blatantly ignores the glaring issue: a GM-Chrysler merger would be a disaster. And that’s the truth.

By on September 23, 2008

Chrysler unveiled some primo bailout bait today: three electric vehicles (EVs). Choosing CNBC as point man, ChryCo’s CEO showed-off a fully electric Dodge sports car and a Jeep and minivan hybrid. While the press has been suitably impressed, pistonheads who’ve been following (and following and following) the hoopla surrounding GM’s plug-in electric – gas hybrid Chevrolet Volt are settling-in for the long haul. Meanwhile, we must endure Auburn Hill’s spin on the whole “future vehicles” thing. Or do we? Here’s Chrysler press release…

Looking beyond hybrids…that was the mission of ENVI.

And here I thought the mission was to convince the government that Chrysler is worthy of a federal bail out. That’s why they unveiled the cars on CNBC – they are pitching Chrysler LLC to the business community as a suitable investment.

Revealed today are three electric-drive vehicles, one of which will go on sale in 2010.

One? So two-thirds of this dog and pony show is, to quote GM’s Bob Lutz, “a crock of shit?” Well, no surprise there. So which one will it be? The Jeep is no deal, right off the bat. Too low volume, doesn’t fit with brand image. So will Chrysler do it smart and build the minivan, or try to build the sports car for rich people already on the wait list for a nearly identical Tesla?

The prototypes give a glimpse of the very near future. Chrysler intends to bring advanced, electric-drive vehicles to market quickly,

They are coming very soon, do you hear us? This is not a pipe dream like that Chevy Volt, which is set to come to market in 2010 as a 2011 model. Ours are going on sale in – what did we say above? Oh, 2010 also. Nevermind.

A fleet of more than 100 Chrysler electric vehicles will be on the road in government, business and Chrysler development fleets next year.

What we’re going to do is make nice with the government (probably Santa Monica parking enforcement), then try to sell our investors by letting them drive these cars around as toys for a few months.

The Dodge EV has three primary components: a 200 kW (268 horsepower) electric motor, an advanced lithium-ion battery and an integrated power controller. The 200 kW electric-drive motor produces 480 lb.-ft. of torque, accelerating the vehicle from zero to 60 mph in less than five seconds, with a top speed of more than 120 mph.

This all sounds very familiar. Where did I hear it before? Oh right, Tesla’s website.

The Dodge EV has a range of 150 miles between recharges – more than tripe the average daily commute. To recharge the vehicle, simply plug it into a standard 110-volt household outlet. Or the recharge time can be cut in half by using a typical 220-volt household appliance power outlet.

All subject to change when we switch our design software to CAD from the current NapkinSharpieSoft. Also noteworthy: the idealistic claimed 150 mile range is less that Tesla’s idealistic claimed 244 mile range. Who is making the batteries? Who is dealing with the transmission issue that Tesla – and even partner BorgWarner – had so much trouble with? Would the car be assembled in the US or by Lotus in England?

The Jeep EV is a range-extended electric vehicle that couples the electric motor and the lithium-ion battery system with a small gasoline engine and an integrated electric generator to produce added energy. The Jeep EV has a range of 40 miles of zero-emissions, all-electric operation – no gas necessary. But for longer trips of up to 400 miles, the small gasoline engine produces energy to power the electric-drive system.

Now, since we’re done knocking off Tesla, we’ll move on to knock off the Volt. Don’t worry though. There isn’t a Snickers’ chance in Britney’s kitchen this thing will make it to production.

Since nearly 80 percent of Americans drive less than 40 miles per day, or 14,000 miles per year,

Yes, we all read the same press release from the same study, then heard Bob Lutz drop it into conversation like he thought it up in the shower. You know why people use medians instead of averages? Because averages suck.

The instant high torque and the ability to control each wheel independently results in the off-road capability consumers expect from Jeep.

Sending power to each wheel does sound very cool for off roading. So did the Jeep Rescue Concept. And the Jeep Gladiator Concept. And the Jeep JT pickup. And the Jeep Dakar concept.

The seven-passenger Chrysler EV is, like the Jeep EV, a range-extended electric vehicle that puts electric-drive technology in the segment-leading Chrysler Town & Country minivan.

Segment leading it what way? More Swivel ‘N Go than the Sienna? Leading in fleet sales?

The Chrysler EV can drive 40 miles on all-electric power, or 400 miles with the help of an integrated small displacement engine and generator. The Chrysler EV uses a 255 horsepower motor, producing 258 lb.-ft. of torque, providing zero to 60 mph acceleration in about nine seconds.

It’s a minivan. Meaning you’re supposed to fill it up with kids and hockey bags and other wholesome junk. What’s the range when there’s 1000 lbs of American goodness inside?

And so on. There’s but one takeaway here: there’s nothing to take away. Not now, and not before Chrysler is forced to face the music. Do you know it’s vaporware? No, but if you hum a few bars I can fake it.

By on July 19, 2008

You don\'t know, what we can find. (courtesy hummerguy.net)In 2001, Robert A. Lutz jumped on the GM gravy train as the automaker’s vice chairman of product development. Since then, The General has continued its inexorable march to oblivion. Car-wise, Lutz’ regime has been marked by brand-defiling badge engineering and a seemingly endless stream of “nearly there” products. And yet the automaker’s camp followers continue to give Lutz a free pass. There’s only one reason for this blind spot: they don’t pay attention to what he does OR what he says. Perhaps they failed to notice that the guy’s got a blog.

Maximum Bob’s latest FastLane entry arrived the day CEO Rick Wagoner revealed his new new new new turnaround plan. Once again, there were no sales or market share targets, or a date for a return to profitability. So, once more into the breach dear Maximo. After all, vehicles, the income side of the ledger, are Lutz’ thing.

“Working Hard on Tomorrow Today.” At the risk of sounding like a Bugs Bunny routine, what happened to working hard on today yesterday? We’ll get to that.

“As you’ve no doubt heard me say before, we've made a lot of progress in the past few years at General Motors. And we’ve delivered on what we said we would do. We went from having, at least in North America, some mediocre products to having acclaimed products that are selling extremely well, especially on the passenger car side. In June, for example, in a slow market, our retail car sales were up 8 percent.”

It’s hard to criticize Bob for failing to deliver on his promises when he doesn’t specify what promises he’s talking about. Not that this really matters. Again, GM’s various turnaround plans have had about as much “granularity” as a house-sized boulder.

But Bob’s numbers are deliberately, shamefully misleading. In June, GM’s passenger car sales fell 18.3 percent. Year-to-date, they're down 8.2 percent. To spin an 18.3 percent drop as an eight percent rise, Bob’s using adjusted sales numbers (for “selling days”) and inserted the word “retail” (as opposed to total, retail AND fleet).

Anyway, who cares? Every single one of GM’s eight NA brands lost sales and market share in June. Trucks, upon which GM’s income is staked, were down 24 percent. And falling fast.

“But even with all the changes we've made and the actions we've taken, our business results aren't yet what we want them to be. Why not? What went wrong?”

Hey Bob, what EXACTLY do you want your business results to be? Oh right, sorry. Ahem.

Maximum Bob blames GM's woes on a “generalized economic weakness due to the mortgage meltdown,” a “big decline in the dollar” and “an unpredictable and very rapid rise in fuel prices.” So much for personal accountability.

“’They should have seen it [gas price rises] coming.’ My answer to that is nobody saw it coming. Not the economists, not the governments, not the oil companies, not the smartest pundits in the world — no one saw it coming, not this kind of rise.”

I’ve got plenty of Death Watch ammo to debate that point. But the bottom line is this: if your entire business model depends on gas prices, shouldn’t you be ready for sudden, dramatic gas price inflation? Especially if it’s happened before. Twice. And if you’re NOT ready, who’s fault is that? Nobody’s?

“And to say that we recklessly and stupidly kept producing trucks in the face of it is just wrong. In fact, if we hadn’t kept producing trucks before the fuel prices rose, we would’ve been in a lot worse shape, and a lot more quickly. And if everyone is so smart except us, how come most of our import competition was rapidly rushing into the full-size truck market, just as the party was almost over?”

TTAC’s Best and Brightest will no doubt make mincemeat of this tomfoolery. The question is, does Bob Lutz actually believe it? The answer is, I’m afraid, yes. The statement reveals Lutz’s ignorance, arrogance, petulance, vindictiveness and complete lack of situational awareness.

“Being a leader means doing what must be done. Let it not be said that we won't make the calls and take the actions that are necessary to keep GM viable and ensure that we remain the best automaker in the world — which I fully believe we are and will remain.”

GM's management hasn’t made the calls and taken the actions necessary to keep GM viable and ensure profitability, never mind being the biggest or “best” automaker in the world. There I said it.

“So while some may choose to see the glass half-empty, I couldn't disagree more, or more loudly. As the saying goes, "Those who say something is impossible should refrain from interrupting those who are doing it."

Don’t you mean “if” they’re doing it?

[read Bob Lutz' FastLane blog here.] 

By on June 30, 2008

st-antoine.jpgSource Interlink Media owns Motor Trend magazine. Both conglomerate and car mag are heading south, quickly, in a big way. Ad revenues and circulation are in free fall. Motor Trend (MT) is fighting for it survival with glossy pimpatorials for equally doomed advertisers. The August issue features a glossy "special advertising section" for Buick ("Drive Beautiful") and a slick "advertisement" for the Dodge Challenger ("Motor Trend drives the new Dodge Challenger Through Europe"). Meanwhile, the chronically undercapitalized columnist arthur st. antoine takes a whack at a premium car brand: BMW. Huh? 

Start with this: BMW doesn’t advertise in Motor Trend. GMC, Extenze (male enhancement pills), Mercedes-Benz, The Sinclair Institute (“Better Sex for a Lifetime”), MINI, Xomax (male enhancement pills), Infiniti, MAGNA-RX Inc. (male enhancement pills)– but no BMW. You could say with all those pills readers need not buy a BMW– but I couldn’t possibly comment.

Anyway, no feeding hand is bitten, bitte. If MT’s Editor at Large had taken a shot at the Chevrolet Aveo on the mag’s back cover– now with extra hideousness (courtesy of an Audi meets Malibu snout)– I would have been impressed. But he didn’t so I’m not.

“We car journalists are suckers for BMWs. Every model the Bavarian Brand produces is an engineering masterwork, manna for driving enthusiasts, an internal combustion mallet for pummeling comparison-test rivals into humiliated awe. Why even bother to conduct such tests? We’ll choose the machine with the blue-and-white propeller every time. Right?”

Clued-in parsoholics will realize that “Right?” signals st. antoine’s sarcasm. Clued-in pistonheads will realize antoine’s defense comes hot-on-the-heels of Car and Driver’s July comparo, where the mag rated a BMW M3 higher than a Porsche Turbo and Nissan GT-R. Though st. antoine is a former Car and Driver writer, doesn’t he have anything better to do than defend his erstwhile rivals? Apparently not.

“That’s the cliché… But the reality is this: BMW’s supremacy is a myth, one based in part on some historical validity but sustained in recent years largely by a single model, the 3 Series (okay, the new 1 Series seems strong, too). As for the rest of the lineup… where are the superstars? M5 sedan? A thrilling drive, yes, but in its most recent comparo (February 2007) a second-place finisher to the sweeter, sleeker Audi S6.”

Is it me or is st. antoine trying to gum BMW to death? The new BMW M5 blows compared to any car in the entire world that doesn’t have an SMG gearbox. The latterly six-speed manual M5 is OK, and plenty damn quick by any metric, but the Bimmer is a bling-bang-boom travesty when contrasted with its legendary predecessor.

There, that wasn’t so hard was it? And either the 1 Series is strong or it isn’t. It “seems” like a good time for st. antoine to get off the fence. Of course, attacking BMW isn’t really the point of this dietribe [sic]. It’s all about defending MT’s “objectivity” and “integrity” (har-har). Hence st. antoine presents a list of MT comparos Bimmers DIDN’T win within its increasingly tissue-like pages.

And now, a bit of dead horse beating…

“…the iDrive controller remains a poster child of frustration and feature-glut (do you really need a an electronic menu to adjust the airflow from individual vents?), we simply can’t heartily endorse a car– no matter how surgical its steering or smooth its inline six– blemished by that glaring chrome iDrive mole.”

Wow! That’s a LOT of punctuation. But little punch. Critizing BMW for iDrive is like slagging an Escalade for lousy mileage; it’s safe, well-trodden ground. Oh, and in this case, st. antoine's claim of withholding his love for the propeller people's products simply isn't true. st. antoine on the 135i:

“I'm blown away by this little stealth fighter. I can't recall another car that's been more surprising to drive; I expected the 135i to offer solid performance, but it's breathtakingly quick. Refined, too- it's a bona-fide BMW."

Sounds solid to me. Uh, where was I? More importantly, where was st. antoine? Ah, giving the BMW X6 what the Brits call a proper pasting.

“…the X6 is also grotesquely heavy, too small to carry anything, compromised in the back by that free-falling roofline, saddled with iDrive and a needlessly complicated shift lever, and absurdly expensive.”

Finally! st. antoine substantiates his contention that BMW ain’t so big (it’s just tall, that’s all). The paragraph is also a compelling argument that his employer isn't in BMW's pocket. So, a quick twist of the knife and out. Right?

“That BMW’s engineers are gifted goes without saying. As German-born architect Mies van der Rohe once said, though, “Less is more.” Also, “What is this big chrome mole here?”

You gotta admire a writer who can so deftly blend ass-kissing, name-dropping and a non sequitur. Still, at the end of page 24, st. antoine’s quasi-rant provides proof– if proof be needed– that MT is doomed.

By on June 11, 2008

toyota-venza-hr-01.jpgAs GM’s FastLane and GMNext blogs have demonstrated, the U.S. automobile industry has fully embraced the concept of blogging– as press release. Toyota, of course, has entered the e-fray. Their Open Road blog may do little (as in nothing) to stretch the boundaries of Web 2.0-itude, but it offers the usual insight into the corporate culture from which it sprang. ToMoCo’s plugging the new Venza crossover, designed to fill the gaping hole in their lineup between the Camry, RAV4, Highlander, FJ Cruiser, 4Runner and Sienna. Into the depths we descend…

As you might expect, we keep close track of the search terms and key words that people use to get onto the Open Road.
You're shitting me.

You may be interested to learn that the Number 1 search word is "Venza."
If "Venza" is the number one search word bringing people to the Open Road blog, then you're not managing your website correctly. When people search for Venza, you should be sending them directly to the Venza microsite, not to the lame "Open Road Blog."

You remember Venza, right?
Honestly, I try not to. There are already plenty of crossovers out there.

It's a stylish car
Uh, if you say so. I'd go with "vehicle-ish vehicle." But we've already discussed the weird styling.

that was designed
by a monkey?

to capture the best characteristics of both the  roomy SUV and the efficient sedan.
Like a car, but with a hatch on the back. We could call it a "hatch back." Or maybe station wagon.

But the worst part about the Venza is that the exterior is bigger than it needed to be. A sedan, wagon, or hatch can be just as roomy as an SUV. It's the raised ride height that they have brought in from an SUV here, and they should be up front about it. There are benefits to it – SUVs can be easier to step into from the ground. But it also trades off a huge part of the efficiency, in size and weight.

Just sayin’…

We unveiled the Venza in January at the Detroit Auto Show, and we posted it here on Open  Road on January 15.
Please come Monday for the next meeting of History 204: Recent Toyota Marketing

You can go to our Jan. 15 post by clicking here.
You're on the Internet. You probably love five month-old news.

Now the real deal is coming in a few months, and since there's been so much interest,
Bullshit. This isn't the Camaro or the new Camry or a new Evo.

we wanted to provide a way for you to see the vehicle, and to learn more about it.
It's a public service, really. Thank you notes can be sent to: Toyota HQ, Snorefest, Ohio. 11101.

It's the Venza minisite at Toyota.com, which you can access by clicking here.
We did a press release a week or so ago, but why not plug it again?

What you'll find when you get there include, naturally, photos of the car.
I'd post them here, but then you wouldn't visit the microsite. Go to the microsite. It's like a site, but micro. As opposed to this site, which is not micro. Big site here. Plenty of space for pictures, like of the Venza. Oh crap.

But there's also an interview with its designer,
Nobody cares. Consumers don't give a crap about this. But hey, Toyota needed content to put on the microsite. Did you hear they have a microsite?

a list of specifications and features,
But not the gas mileage, which is the only reason this vehicle is significant. The whole point of the Venza is "crossover space, Camry mileage." So what's the mileage estimated to be? And what's the horsepower output and 0 – 60 time of the four-cylinder engine?

and a couple of interesting videos that detail the design process
Nobody cares. Consumers still don't give a crap about this.

and tell us some interesting stuff about the car's optional V6 engine.
Interesting stuff? Wow, that sounds amazing. I better rush over to the microsite. Microsite!

Oh and by the way, unless it's gas mileage or horsepower numbers, most consumers don't care. They began this blog post talking about how they're getting people from search engine results. You think those people are interested in the optional V6's variable valve timing?

There's also a place for you to sign up for updates on the vehicle,
Really? I love marketing mail. I want to hear more "interesting stuff."

which is set to make its sales debut later this year.
I'm sweating with excitement.

So go ahead, take a look.
I have permission? NICE! I'm going right now. Screw work.

Then tell us what you think.
We care. We're people people, damn it. Can't you people understand that?

By on March 18, 2008

gm-renaissance-center2.jpgAngus MacKenzie did everything but call TTAC by name in his essay GM Shares Tumble. So What? Yes, the Motor Trend scribe can “almost hear the Detroit death-watchers rubbing their hands with glee” at the news of GM's stock hitting two-year lows. It's true. Every time GM's share price dips, we light giant cigars, twirl our collective mustache and laugh maniacally. That Mr. MacKenzie sees critical coverage of the auto industry as journalistic schadenfreude goes some ways towards explaining Motor Trend’s increasingly toothless car reviews. But how can MacKenzie, an experienced car hack, justify pinning Detroit’s woes on anyone other than, well, Detroit? Hey, a man’s gotta eat.

What prompted GM's share price slump, said analysts, was a drop in the overall auto market, and worries about future profits in light of disappointing February sales… What the analysts really meant was Wall Street's money men don't think GM's a good bet for making them a quick buck right now. And if the money men don't think a company can make them a quick buck, then it's basically worthless.

This kind of rhetoric– references to unnamed, evil “money men”– smacks of Ye Olde International Jewish banking conspiracy. As populist as such a sentiment may be, it’s unconscionable for a responsible journalist to perpetuate such a well-worn shibboleth.

More to the point, MacKenzie is dead wrong. The short-term thinking that caused GM's stock price to head for the basement came from RenCen— not Wall Street. Nobody from the financial community forced General Motors to squander billions on misbegotten foreign alliances, or destroy its brands, or capitulate to union demands. Nobody told GM’s management to buy Saab and Hummer, or set-up Saturn. The end result of GM’s self-inflicted management failure is a company in deep financial crisis. This is clearly, unequivocally, completely GM’s fault.    

In an era when nameless screen jockeys can move billions of dollars at the touch of a computer keyboard, Wall Street's institutionalized ADD has resulted in a feverish short-term view of the auto business. Lengthy product cycles and huge investment costs, combined with a fickle, cyclical, fashion-driven market, are just too damned difficult to deal with.

Sure. Automotive analysts like John Casesa begin looking at the car industry, get bogged down in the numbers and market cycles, throw up their hands and say, “Whoa! That’s just too damned difficult. Forgeddaboutit.” And what of all those institutional investors who’ve stood by The General for decades? In fact, GM was once known as a “blue chip stock,” held as much for its healthy dividend payments (recently halved) as its share price.

There’s one reason this is no longer true: the company’s management has run the automaker into the ground. And why’s that? According to Mr. MacKenzie, it’s all about GM’s pesky quarterly financial reports.

Maybe that's why the world's most successful automakers — Toyota, BMW and Porsche, to name three – are those that have never had to sweat a quarterly earnings call with a posse of skeptical Wall Street analysts ready to trash their stock price when they don't see the opportunity to make that quick buck.

Wrong. BMW files quarterly reports. Toyota files quarterly reports. As does every major automaker you can name save privately-held Chrysler– and we all know how well that’s going. As publicly held companies (save Porsche), ALL automakers have to face the music. Just like GM.

Never mind. MacKenzie is determined to paint GM as a victim– even if he has to undermine his own argument to do it.

Bunkie Knudsen, who ran Pontiac and Chevrolet in the '50s and '60s, reckoned it all started to go wrong when Fred Donner became president of GM in 1958. Knudsen was outraged Donner would insist on talking about GM's stock price, and what the analysts thought about it, at his daily meetings with the heads of GM's divisions. Before Donner, those meetings were mostly about making cars and trucks. After, as the financial engineers took over from the real ones, GM's cars and trucks got worse and worse.

Again, how is this Wall Street’s fault? 

Bunkie Knudsen believed in a simple concept: The people in Detroit had to make good cars, and if they did, the people in New York would take care of the stock. After decades of fixating on financial engineering, GM is only now getting back to the business of making good cars. Only problem is, no one in New York seems to care anymore.

Reality check. It’s not “the money men’s” job to “care” about making good cars. That’s GM’s job. This they’ve failed to do, in spectacular fashion. MacKenzie’s finger-pointing at dark forces on Wall Street doesn’t change the fact that GM is in a hole of its own making. Their share price reflects that reality, which GM, like MacKenzie, refuse to face.

[Read MacKenzie's rant here.] 

By on January 24, 2008

chop.jpgGM Car Czar Bob Lutz wants you to know what's on his mind. So, at last night's Automotive News congressional confab, Maximum Bob let rip, revealing the concerns triggering the suit's septuagenarian synapses. But, as usual, there are major gaps between Bob's thoughts and actual reality. 

Back in '03, I predicted that the automotive industry was on the cusp of a New Golden Age…To my credit, I didn't say exactly when this was going to happen… I would argue that the industry is in much better shape than it was five years ago, and that General Motors is in a lot better shape too.

News flash: The Big 2.8 are all losing money. GM has just lost its title as the world's largest automaker (if you discount cars made under a minority partnership agreement with China's SAIC and Wuling). To my simplistic mind, "better shape" doesn't mean closing factories, buying-out workers and losing market share in your home territory. But Bob's not worried.

I don't think about [global leadership]. And the answer would be the same whether today's numbers said General Motors is Number One, or Number Two…or tied!

So why all the press releases proclaiming GM's still number one– by a mere 3k sales? Oh that's right: Maximum Bob doesn't think about it.

The bottom line is, we are running the business in the best interest of the customers, employees and shareholders.

Tell that to the laid-off employees and the remaining GM workers with reduced pay and benefits, because their employer can't make enough money to afford them. But hey, never mind, the circus is in town. And Bob's busy thinking about the press' comments about the Detroit Auto Show.

"How can you possibly not find any buzz at an auto show that includes so many examples of the world's most advanced propulsion technology? 

Like… a "hydrogen-powered" Cadillac without an actual propulsion system?  

[c]onsumer behavior is difficult to change, and it when it does change, it takes time, and a darn good reason.  

I'm not so sure about about the first part of that assertion. GM and the others managed to change American car buyers' behavior pretty quickly in the ‘70's and ‘80's. But MB's right that consumers need a good reason to change. Only Bob thinks Americans will give up their trucks and SUVs only if gas prices rise sharply to levels near what they're paying in Europe.

In other words, let's not focus our corporate resources on offering Americans a high-quality, well-engineered small car (at a profit) that might entice consumers to change. Let's legislate high fuel prices so consumers have to change– regardless of what we offer. And there I was thinking Lutz was against federal intervention in the free market. And speaking of boondoggles…

[t]he best route to a significant near-term reduction in petroleum usage is E85… [I]f all the flex-fuel vehicles that GM, Ford, and Chrysler have committed to have on the road by 2020… were to run on ethanol, we could displace 29 billion gallons of gasoline annually.

Considering the cost of converting existing products to "flex fuel" (a couple of hundred bucks), considering that GM just bought a chunk of an ethanol company, considering the federal fuel economy credits given to cars that will never touch a drop of corn juice, Bob's enthusiasm for E85 is no surprise.

But that doesn't make it right. E85 is an unsustainable con that will collapse under its own weight. While you can’t blame GM for playing the con, why do I think they actually believe that ethanol is the answer?

Electrically driven vehicles powered by lithium ion batteries represent the… future of the… industry. A year ago, everyone was saying, "What's GM doing with this car that's allegedly going to run on lithium ion batteries, which we all know won't work in a car?"

We're still asking what GM's doing with the Volt. Despite all their promises, they've yet to come up with a viable battery for the electric – gas hybrid. 

This and other advancements may be years away, in reality, but we're going to be ready, because we're developing the vehicles [and] the electronic control technology… today.  We are going to be ready, more ready than anyone else is going to be, when the battery technology is beyond what it is right now.  

A noble goal, indeed. But when tomorrow's batteries are ready, today's technology probably won't work with it any more than 1999's OnStar will work with today's digital cellular network.  

You're going to see, gradually but emphatically, the auto industry enter a whole new age

When this new age arrives, will GM be around to witness it? Either way, GM's future will be Bob Lutz' legacy.

[The GM fastlane blog links to a pdf of Mr. Lutz' speech.] 

By on October 4, 2007

friedman1.jpgThe New York Times may be called The Old Gray Lady, but I reckon it’s one of those old gray ladies you find lingering at lunch counters, constantly sticking their nose into everyone’s business. In today’s Op Ed piece, Thomas L Friedman takes Toyota to task. He's miffed that the Japanese automaker's siding with The Big 2.8 against proposed federal regs raising the required corporate average fuel economy (CAFE) figure to 35mpg by 2020. The arguments behind “Et tu Toyota?” may be old news to TTAC readers, but like the Times itself, we can’t resist a bit of nasty gossip.

“What is it about Michigan that seems to encourage assisted suicide? That is all I can think watching Michigan congressmen and senators, led by Representative John Dingell, doing their best imitations of Jack Kevorkian and once again trying to water down efforts by Congress to legislate improved mileage standards for Detroit in the latest draft energy bill.”

It’s not the most coherent of leads, but the point of Friedman’s opening salvo’s is clear: Detroit’s ongoing campaign to oppose radical changes to federal mileage standards works against the domestic automakers’ best interests. This shibboleth is not unknown in these parts: Detroit COULD meet higher fuel economy standards by building more miserly machines, but it CHOOSES not to. Instead, it CHEATS in Washington and then PAYS THE PENALTY.

You’d kinda think Friedman and his fellow Detroit bashers would be happy with this karmic payback. But no. ‘Cause that would make them anti-American. So Friedman says he "gets" pork barrel politics- but only if they work. 

“What I don’t get is empty-barrel politics — Michigan lawmakers year after year shielding Detroit from pressure to innovate on higher mileage standards, even though Detroit’s failure to sell more energy-efficient vehicles has clearly contributed to its brush with bankruptcy, its loss of market share to Toyota and Honda — whose fleets beat all U.S. automakers in fuel economy in 2007 — and its loss of jobs. G.M. today has 73,000 working U.A.W. members, compared with 225,000 a decade ago.”

Nope. In fact, you could argue that forcing The Big 2.8 to make [crap] small cars to average-out their fleet's fuel economy has hurt them more than Toyota and Honda ever could. But Friedman saves his biggest rhetorical blast for Toyota, whose decision to join Detroit in its opposition to the draft Senate energy bill puts ToMoCo beyond the pundit's pale.

“Now why would Toyota, which has used the Prius to brand itself as the greenest car company, pull such a stunt? Is it because Toyota wants to slow down innovation in Detroit on more energy efficient vehicles, which Toyota already dominates, while also keeping mileage room to build giant pickup trucks, like the Toyota Tundra, at the gas-guzzler end of the U.S. market?”

Although Toyota has not sold itself as the treehugger’s friend (they adopted the brand on their own), Friedman's got it half right. Obviously, Toyota is against the higher CAFE numbers because they wants to sell loads of "giant, gas-guzzling" (a.k.a. full-sized) pickups. But they're not supporting Detroit's position to gain a competitive advantage. If anything Toyota's trying to help Detroit stay in business– avoiding a US auto industry strengthened by Chapter 11 and/or a transplant backlash.

After quoting ToMoCo’s Prez’ declaration of support for higher fuel economy standards, Friedman counters with “the truth:”

“Not so fast. Here are the facts: Thanks to the Michigan delegation, U.S. mileage standards for passenger car fleets have been frozen at 27.5 miles per gallon since 1985. Light trucks are even worse.”

And there you have it: the crux of the matter. Friedman’s use of the word “worse” to describe the mandatory corporate average fuel economy for light trucks proves that he’s operating from the same position of simplistic ignorance that informs this whole “debate.” As far as environmentalists and their allies are concerned, the higher the required mileage, the better. Period. Anyone who dares suggest otherwise is a sleazy, money-grubbing planet killer.

It’s a shame that Friedman couldn’t move this debate on a bit like, I dunno, suggesting we scrap the whole CAFE system and put a big old tax on gas (if we must). But good governance is besides the point. Better to dredge-up the old “free market capitalism sucks” argument and be done with it.

“Hey, Toyota, if you are going to become the biggest U.S. automaker, could you at least bring to America your best practices — the ones that made you the world leader — instead of prolonging our worst practices? We have enough people helping us commit suicide.”

Friedman’s plea betrays the worst kind of American self-loathing. More to the point, the New York Times scribe believes that the regulatory framework surrounding the US automotive industry’s fuel efficiency standards is fundamentally flawed and inherently corrupt. In this we agree. 

[Read the full text of "Et tu Toyota" here.] 

By on September 17, 2007

james-may-is-the-stig.jpgTop Gear (TG) presenter James May’s nickname is Captain Slow. As you’d expect from a country where sarcasm is a team sport, the moniker disses Mr. May’s driving skills. But the nickname could just as easily refer to May’s intellectual agility. Like automotive alpha Jeremy Clarkson, May is always happy to take an analytical shortcut, especially if it leads to some good old fashioned America bashing. Writing about his recent stateside sojourn in the Telegraph– "Eat Junk, Drive Junk"– May once again reveals that the U.S. and the UK are two nations separated by British snobbery.

“Since I'm still in the States this week, I thought I'd have another go at headbanging that old chestnut about American cars and why they never work in Europe. Because, let's be honest, they generally don't. There have been one or two surprising successes in recent years, such as the Jeep 4x4s, but on the whole you drive an American car only if you're an Elvis impersonator or a dealer in vintage Wurlitzer jukeboxes. That is, a bit unhinged.”

Fair enough. American cars are generally larger and thirstier than the European sedans. Provided you’re not an Elvis fan or jukebox collector, you can spot May the “unhinged” comment. But what follows has nothing to do with American cars and Eurozone roads. It’s impure, adulterated bile.

“I've been driving a few this week… the Dodge Grand Caravan (a large MPV, or what the yanks would call a ‘minivan’), the Dodge Ram 1500 Big Horn Edition (no, honestly, it's a pick-up) and the new Mustang convertible. And there is a common characteristic that is apparent in all of them and in every other mainstream American car I've ever tried. They don't seem to be very good.”

One wonders if May’s Ram was built in Coahulia, and whether his definition of “mainstream American cars” includes U.S.-built Toyotas, Hondas, etc. In any case, May’s Caravan and Mustang are part of a contracting niche. And while the Ram may not be class-leader, it’s very good at doing what it’s supposed to do. But Captain Slow’s driven a bunch of Yank tanks and they all suck. Really? Really.

“In the past, this has been explained away as a fundamental disparity in the remit of the car between the old world and the new… I think it might be something a bit more complex than that. American cars might genuinely be a bit rubbish, and to explain why I'd like to return to the tiresome and pretentious subject of food.”

And then May gets genuinely insulting. He slams American cuisine “because it would appear that the principal job of food is to be thrown away.” For some reason, this insight inspires May to buy some local ingredients and make a shepherd’s pie (ground meat and mashed potato topped with melted cheese). The pie turns out “twice as big [as UK pies] that had cost half as much and yet tasted pretty much of the square root of Monterey Jack.” 

“And if it's true of pie, it must be true of cars. We are constantly amazed at how cheap American cars seem to be, but only until we try one. The Grand Caravan is a miserable conveyance with a clumsy, antiquated gearchange, meanly upholstered seats and an interior that would make Alcatraz look inviting. The Ram is probably the worst car I've ever driven. It looks absurd, the ride is truly atrocious and the relationship between the steering wheel and its road behaviour borders on the hazardous. I dearly want to love the Mustang because it at least seems to stand for what the American car was once all about, but with the best will in the world it's a bit of a phoney pony with sloppy deportment and a cabin that came out of a Kinder egg.”

May’s unconsummated Mustang love says it all. On one hand, he admires America’s automotive exuberance. On the other hand, he can’t. And that’s because validating– or even tolerating– this country’s “can do” spirit would mean rejecting the po-faced, post-Empire, acid-tongued cynicism that informs everything he does, says, writes and is. 

Speaking to May’s main point, do American cars deserve such blanket dismissal? This collection of writers– scribes who regularly and fully criticize American automobiles as and when they deserve it– thinks not. As our forthcoming review of the new Honda Accord will testify, there are plenty of superb mainstream American cars. And yes, we’ve reviewed some solid “domestic” efforts as well.

In short, May’s prose is tainted by [the same old] British anti-American prejudice. In fact, the next time Captain Slow wants to visit the states; I suggest he needn't bother. As May’s clearly incapable of the intellectual rigor required to keep an open mind and a balanced perspective, he might as well just phone it in. Again. 

 [Read Mr. May's full Telegraph article here.]

By on September 11, 2007

lexusf.jpgDuring my brief stint in British advertising, I had the distinct pleasure of working with one Paul Harvey Douglas. Paul was the world’s best headline writer. He could distill an entire advertising campaign down to a single sentence, a phrase, a word. I wonder what PHD would have made of Lexus' ad for its new F-Series automobiles. “What is F?” the two-page Autoweek center spread asks. “F is everything you thought we weren’t,” it answers. I could almost hear Paul’s derisive snort. “F means their brand’s in ‘effing trouble,” he would have pronounced. Too right, mate.

Let’s start by parsing the imagery. I have no idea what the smoke drifting through the heart of the “teaser” ad is supposed to mean. It’s not, as savvy enthusiasts might expect, tire smoke. It looks more like cigarette smoke. More specifically, advertising cigarette smoke. You know: the kind of photo-shopped psychedelic smouldering that’s been carefully crafted to hide nightmarish images that stimulate your subconscious desire to, uh, smoke.

After copious quantities of Clos De Bois, I can make out a dragon’s head, a couple of demonic faces and a Toucan-beaked hoodie-wearing beastie. And I feel a strange desire to fire-up a doobie. Anyway, the background above the horizontal plume is elegantly pin-striped, like a City gentleman’s business suit. The background below is jet black. As “F” is Lexus’ new performance sub-brand, the change is a subconscious signal that Lexus is about to offer both baby Bentleys and supersonic stealth bombers.

So here we have an ad that clearly signals Toyota’s intention to take the idea of Lexus as provider of floaty-drifty sarcophagi-on-wheels to America’s well-moneyed set and burn it in the same furnace the Vatican uses when the Cardinals get together to elevate one of their own to God’s CEO. Presumably, when you see the white [demon-filled] smoke rising heavenwards, you’ll know Lexus has been reborn, ready to kick some major league sports sedan ass.

Why? Why does Lexus need to build a sports or even a sporty car? I asked this question before, after attempting to cane the thoroughly unrewarding IS 350. I’ll ask it again. How many customers walk into a Lexus dealer thinking right, THIS is the place where I’ll finally find a car that’ll blow the doors off an M3 on the Nürburgring! That’s a bit like rocking-up to your local Volkswagen dealer looking for a $95k luxury sedan. Or heading over to a Porsche dealer for an SUV. Or journeying to a Chevy dealer for a $60k sports car.

Don’t get me wrong: those are all wonderful cars. And I know Mercedes’ in-house performance division sells more $100k+ automobiles than any other manufacturer in the world. But that doesn’t mean they should. In fact, the fact that they have may have had a little something to do with the fact that Lexus’ LS is kicking Mercedes S-Class in the ass (the score so far: 23.4k to 17.5k).

I also understand that you kinda expect a Lexus to offer at least modicum of body control and a soupcon of genuine forward thrust. But that’s because you’re a pistonhead. For the vast majority of Lexus buyers, it’s all about rock solid build quality, sumptuous materials, tomb-like silence, obsequious service, snob appeal and mindless wafting. IF the average Lexus customer thought about it, they’d probably think that the idea of a sporty Lexus is… confusing. And that’s because it is.

In fact, let’s say you weren’t a pistonhead and didn’t know that F is supposed to be the new M. If you read the AutoWeek ad headline literally– “F is everything you thought we weren’t”– you’d have to think a Lexus F is going to be cheap, nasty, loud, uncomfortable and unreliable. And that would make the new F Lexus’ evil twin. You don’t have to Google Garth Knight to know how THAT plot line turns out. 

In short, the whole Lexus F thing is what branding experts would call The Mother of All Stupid Ideas. And there’s only one reason why a brand so strong my appliance installer called my new Kitchen Maid the “Lexus of dishwashers” would want to launch an anti-brand brand: boredom. I firmly believe that halo cars, sporting sub-brands and wacky brand digressions are simply a way for bored executives to avoid facing the long, tough, often dull slog that good branding– and product development– requires.

If Toyota wanted to build Porsche-killers, it should have created a new brand. Of course, Lexus’ decision to take its eye firmly off the ball is good news for its competition. Well, it would be if the other luxury automobile brands weren’t making the same mistakes: too many models at too many price points, too many genres, conflicting subdivisions, etc. At this point, Ferrari, Maserati and Bentley are the ones to watch. At the moment, they’re everything you think they are. 

[Listen to branding guru Al Reis discuss Lexus' F below] 

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