#PR

Because success in the auto industry depends upon both the buildup of industrial might and deft maneuvering on the winds of fashion, analysts often struggle to determine how business decisions impact consumer choice. For example, GM and Chrysler long resisted the pressing need to file for Chapter 11 bankruptcy protection because their leaders believed that Americans would not buy a car from a bankrupt firm, and that sales would go into an irrecoverable tailspin if they filed. Needless to say, that assumption proved to be deeply flawed, and sales during the GM and Chrysler bankruptcies barely dipped (if only compared to the miserable months preceding bankruptcy). In any case, the rating agency Moody’s is taking on the challenge of translating good business news into sales by arguing [via Bloomberg]

U.S. consumers who don’t know anything about over- allocation options or the need for strong liquidity in a cyclical industry knew that something exceptionally good happened to GM last week. That knowledge makes it more likely that they will consider buying a GM vehicle and possibly buy one. That’s good for the company’s credit quality.

But does the general air of positivity surrounding the IPO actually make a difference with consumers?

As an automaker and union-funded think tank, the Center For Automotive Research often run afoul of TTAC during the bailout debates of 2008-2009. CAR is to Detroit’s apologists what CAR has long maintained that a failure to bail out GM and Chrysler would have resulted in the total destruction of America’s entire industry, and based on that questionable assumption, it’s latest report [ PDF] is claiming that the auto bailout saved the federal government $28.6b over two years. The study is an update of a report CAR issued in May which

produced estimates for two scenarios, as well: a quick, orderly Section 363 bankruptcy (which is what happened), and a drawn-out, disorderly bankruptcy proceeding leading to liquidation of the automakers.

Because those were the choices. A messy, marginally-successful intervention (with demand for GM’s IPO “through the roof”, the firm will still be worth only about what taxpayers put into it) or utter complete annihilation of the industrial Midwest. But if, as CAR takes as gospel, a halfway “normal” restructuring weren’t an option, it was only because the managers of both GM and Chrysler refused to even contemplate the possibility of a bankruptcy filing until it was far too late. And here’s where the long-term impacts get scary: by taking GM and Chrysler under the taxpayer wing, the Government may have saved some money in the short term, but it created a dangerous precedent for the future. Given the events of the auto bailout, why would the leaders of any other failing industry take the difficult path through restructuring when, with the help of think tank apologists, they could simply collapse into a publicly-funded do-over?



Editor’s Note: On Monday, TTAC’s Martin Schwoerer wrote about a planned record-breaking non-stop run of 600 KMs, from Munich to Berlin, with a car that was equipped with a “revolutionary” electric battery system. Something smells funny, he said, and vowed to donate 100 Euros in case the drive was completed. Well, it was. So, how does it feel to have pie on your face?

How about Vegetarians Against the klan? Or maybe the Tugg Speedman Foundation? No, there are probably better organisations to give my money to. Guess I’ll ask the Best & Brightest…

You know that something is a fad when A) it’s bubbling on the stock market or when B) snake-oil salesmen tout the newest revolution, and regular folks actually start believing them.We’re not quite there yet with “A)”, but check out what I call an exhibit for “B)”.

Fiat could do more if it could cut off Italy

Having been handed a bankruptcy-rinsed Chrysler by the American government, Fiat’s Canadian-born CEO Sergio Marchionne is beginning to see Italy as nothing more than aging, uncompetitive factories and troublesome unions. And now he’s not just telling the Italian media that not only would Fiat be better off without the country that birthed it. According to Reuters

The CEO added that not a single euro of the 2 billion euros ($2.8 billion) of trading profit that Fiat is targeting for 2010 will come from Italy, where all Fiat car passenger plants are loss-making.

The funny part: Chrysler still holds a value of precisely zero dollars on Fiat’s balance book. And with the Fiat and Alfa-Romeo brands headed to the US, Italian-ness is still an important element of Fiat’s identity. But until Marchionne’s Chrysler revival and Italian invasion take hold stateside, and as long as mother Italia is a drain on its resources, Fiat might be best described as a Brazilian company.

Italian speakers can enjoy Marhionne’s interview here.

As we’ve noted before, Hyundai and Kia have been quick to exploit the weakness of the domestic auto industry by advertising their American-made cars as American-made cars. Now, they’re taking the attack to a whole new level, as Hyundai USA President John Krafcik tells CNN Money that his brand will build 80 percent of its vehicles in the United States by next year. If the Korean brand can actually achieve that goal, it would make Hyundai’s lineup the most American-built full line on the market. And though he insists that Hyundai doesn’t make decisions about production based on PR, Krafcik can’t help but twist the knife, saying

I’m going to build my three best selling cars in the US. Ford builds its best selling car in Mexico.

Oh snap!

Aston Martin’s decision to sell a worked-over Toyota iQ has raised some serious questions for “brand values” advocates across the internet of late. Does an aristocratic sportscar brand need to take on the problems of urban congestion and carbon intensity? Does the Cygnet’s noblesse oblige PR value outweigh the furor of countless Aston Martin aspirants at the thought of their beloved brand becoming a glorified Toyota tuner house? The answer to both of these questions is apparently yes…

If the recent flap over the Volt’s drivetrain has taught us anything it’s that A) GM’s internal-combustion-assisted plug-in is more complicated than we thought, and B) GM is fine with simplifying its complex reality in order to make it appear as attractive as possible. Which is just fine: they’re the ones trying to sell a $41k car, and as such they’re entitled to do what they can to make it seem worth its many shortcomings. What the automotive media needs to take away from the brou-ha-ha isn’t necessarily that GM’s hesitance to bring forward “the whole truth” is an intrinsically big deal (let’s just say this wasn’t the first time), but rather that knowledgeable writers should focus on explaining the Volt in ways that are both comprehensible and fully accurate. In this spirit, the most important question isn’t “what should we call the Volt?” but “how efficient is the Volt in the real world?”And on this point, there’s plenty of room for some truthful clarification.

As GM finally begins to let journalists drive its Chevy Volt, the two-year-long trickle of bad news about the project is turning into a raging torrent. The latest bit of bashing: InsideLine claims that, in direct contradiction to GM’s hype, the Volt is in fact powered by its gasoline engine under certain circumstances.

At the heart of the Volt is the “Voltec” propulsion system and the heart of Voltec is the “4ET50” electric drive unit that contains a pair of electric motors and a “multi-mode transaxle with continuously variable capacity.” This is how GM describes it:

“Unlike a conventional powertrain, there are no step gears within the unit, and no direct mechanical linkage from the engine, through the drive unit to the wheels.”

The 4ET50 is, however, in fact directly bolted to the 1.4-liter, four-cylinder Ecotec internal combustion engine. When the Volt’s lithium-ion battery pack runs down, clutches in the 4ET50 engage and the Ecotec engine is lashed to the generator to produce the electric power necessary to drive the car. However under certain circumstances — speeds near or above 70 mph — in fact the engine will directly drive the front wheels in conjunction with the electric motors.

I believe that, legally, I’m still their U.S. distributor. And I want trucks delivered to our dealersImporting niche vehicles from an unknown foreign automaker has long been a fraught process for US-based entrepreneurs, and John Perez’s attempt to bring diesel-powered Mahindra pickups to the US has been no exception. For four years, Perez’s Global Vehicles distribution network waited while Mahindra sought EPA certification for its diesel pickup engine, and then six days after approval arrived, the Indian firm dumped Perez with little ceremony. Now Mahindra says it will consider giving franchisees to the dealers who paid Perez up to $200k for the right to sell Mahindras, but that it is not obliged to do so. Perez is suing Mahindra for failing to fill an order for pickups, while dealers are considering suing Perez and Mahindra is seeking to end its agreement with Perez so it can distribute pickups through independent dealers. Mahindra’s Roma Balwani tells Automotive News [sub]The current dealers’ contract is with GV [Perez’s distribution channel, Global Vehicles] and hence they do not automatically become Mahindra dealers. However, we would be considering these dealers for our network if they are interested. We will need a new distribution network and soon we will start a dialogue with potential dealers, including the ones who are signed up with GV, if they are interested in signing up with Mahindra.