BusinessWeek reports that VW board member Ferdinand Piëch is in the crosshairs in the German automaker's sex and bribery scandal. You may recall that VW took a bit of heat when investigators discovered that management had slipped $2.9m in secret payments to VW labor boss and supervisory board member Klaus Volkert. Oh, and $518k to Volkert's Brazilian former lover Adriana Barros. Two years after the initial revelations, Volkert's trial is finally underway, and the union boss is singing like a Kanarienvogel. Volkert's lawyer has produced a smoking gun: a letter signed by Piëch authorizing the illegal payments. The development jibes with claims made by Klaus-Joachim Gebauer, the personnel manager on trial for his part in the crime. Gebauer has already testified that VW's executive board knew about the slush funds, since they triggered monthly reports on budget overruns (filed as "executive board miscellaneous"). Since the scandal first broke, Piëch has denied any knowledge of the pay-offs. It's unlikely VW's largest stockholder will face perjury charges, but not impossible. [thanks to starlightmica for the link]

As discussed here yesterday, America's used car market is booming. One segment that's particularly (and surprisingly) strong: full-sized SUVs. BusinessWeek reports the residual value of large SUVs is up almost three percent over last year. The fuel-sucking lumbering behemoths' resale values are now on a par with midsize cars and small SUVs. According to Ricky Beggs of the Black Book vehicle pricing guide, owners who dumped their large SUVs have discovered that smaller, less capable CUVs don't offer much better overall gas mileage or provide the utility of their former rides. Instead of buying new again, they're opting for used and Certified Pre-Owned vehicles, which offset the slight difference in operating costs. Overall, sales of gargantuan SUVs are still well down from last century's heyday, but don't count them out just yet. Not as long as there are boats to pull, kids to schlep and MINIs to intimidate.

You may recall that electric car maker Zap was set to import thousands of Smart cars into the U.S., after [what was then called] DaimlerChrysler decided to pull the plug on its own American ambitions for the brand in 2004. Now that [what is now called] Daimler has changed its mind and teamed-up with Penske to get Smart stateside, Zap is plenty pissed, in a "we're going to sue your ass" kinda way. They've filed a $500m suit against Daimler in California, alleging "intentional interference with prospective economic relations; negligent interference; trade libel; defamation; breach of contract to negotiate in good faith; breach of implied covenant of good faith and fair dealing; common law unfair competition and statutory unfair competition." In papers filed with the court, ZAP claims it collected $2.2b worth of signed purchase orders for some 156k Smarts. The legal action, first filed two years ago, stumbled when a CA court claimed it had no jurisdiction in the matter. WardsAuto reports that Zap will learn if their efforts to reverse that decision have been successful in the next 90 days.

Reuters seems to think so. "Seven years ago, Ford in Brazil looked a lot like it does today in the United States. It was losing so much money and market share that executives at headquarters in Michigan were seriously considering pulling out of South America altogether." And now? "Today, Brazil is Ford's biggest success story, helping to offset hefty losses in North America. Ford Brazil has doubled its market share to 12 percent, racked up 15 straight quarterly profits, and is now scrambling to keep up with red-hot demand for its cars and trucks." OK, you got our attention. So what's the recipe for success? A cheap SUV, that "rising tide lifts all boats" deal (Brazil's economy is go!), job cuts and a new, highly efficient, low-cost, supplier friendly manufacturing complex in Bahia. And there you have it. What's next for FoMoCo's turnaround poster child? Not much. Which is not good. "Some of Ford's rivals, however, are rolling out new models at a faster pace. That has some analysts wondering if Ford is playing it too safe in Brazil now that the turnaround is over." Hmm. I'm thinking that this situation reminds me of Ford's '90's-era Explorer-related success. Which would make Ford of North America Ford of Brazil's template for success. Uh-oh.

Look in Hyundai’s high school yearbook and you’ll see “most improved.” Almost every model the Korean automaker has sent stateside has been a quantum leap forward from its predecessor. The Elantra's roots stretch back to the Excel, which excelled at falling apart. The Elantra name survived; the model went from crap, to cheap, to "say that's not bad." Now we've got the fourth generation Elantra. Does the all-new iteration follow the Sonata and Santa Fe in Hyundai's relentless march from cars you buy because they're dirt cheap to cars you buy because why the Hell should I pay more?

I am not one to hang about whilst driving. Oh, I know how to cruise. And I know when cruising's the better part of valor. But there are times when I don't spare the horses. And sometimes, when I'm going Hell for leather, I get my clock cleaned. I remember driving a 911 on the autobahn at something like 170mph, hearing a far away fog horn sort of noise, looking into my rear view mirror and seeing a Mercedes S-Class about five inches off my rear bumper. On another occasion, I was piloting a Volkswagen Phaeton W12 on that very same stretch of de-restricted highway, looked back and saw a BMW M5 closing on my tailpipes like a heat-seeking missile. Less heroically, I was driving over the Braga Bridge the other day when a guy in a beat-up Buick Regal blew the doors off my Boxster S. He was ducking and diving and bobbing and weaving, cutting through the traffic like they were nothing more than pixalated patsies. Forget the Merc and the Bimmer; that's point and shoot material. The Regal driver was the one who earned my admiration. To drive a crap car like that at that speed requires tremendous skill, total commitment and boundless stupidity. How did he manage to live long enough to figure out he could do it? Anyway, most don't. Which may be all that tomorrow's Chinese drivers have in their favor.  

As a Conde Nast Traveler writer, I drive all over the world. After reading Peter Hessler’s article in the November 26 issue of The New Yorker, I think I’ll give China a miss. Hessler’s adventure began at a Chinese driving school, where instructors teach drivers to start in second gear (first is too easy). The preferred clutch technique? Set the parking brake hard, shift into first, and let out the clutch whilst gunning the engine. “By the end of the day, you could have fried an egg on the hood,” Hessler reports. The writer passed his Chinese driving test by slowly driving 50 yards down a deserted street. Later, a Chinese friend banged-up Hessler's Jetta because he didn’t realize that the vehicle extended beyond the windshield. A Chinese passenger usurped the rear view mirror. “I’ll tell you what’s behind you,” he assured. On the road, headlights, windshield wipers and turn signals are almost never used; they’re considered a “distraction.” There’s lots more, but we now know why China accounts for three percent of the world’s cars– yet racks-up 21 percent of its traffic fatalities. They can’t drive.

As Gregg Easterbrook once famously proclaimed, torture numbers and they’ll confess to anything. As an accountant, I’ve always considered numbers to be a lot more malleable than most math-challenged people believe; they’ll confess the truth long before an interrogator gets out the metaphorical water board. For example, a simple analysis on a small subset of GM and Toyota’s voluminous public data can yield important insights into their relative corporate personalities. By looking at both company’s 2006 U.S. Sales and Inventory figures, the numbers sing like a canary.

A recent article in BusinessWeek (BW) investigated the reasons behind the "shortage" of E85 pumps down at your local gas station– a situation which displeases Detroit's Corporate Average Fuel Economy (CAFE) compliance-seeking automakers no end. Apparently, Big Oil's to blame. Shell spokesperson Anne Bryan Peebles admitted her employer is not exactly chomping at the bit to install ethanol spigots. Peebles says E85 requires separate pumps, trucks and storage tanks. All in, it costs some $200k to set-up an E85 pump– whilst satisfying the farrago of local, state and federal health and safety regulations surrounding its installation. [Hence almost all of America's E85 pumps are run by independent gas stations. ] Why not just switch-out a standard pump? The American Petroleum Institute says its pilot programs reveal that many flex fuel consumers fill up just once– after clocking E85's 25 percent hit on their fuel economy. So E85's business case is dubious. Just don't expect much sympathy from automakers. "'Big Oil is at the top of the list for blocking the spread of ethanol acceptance by consumers and the marketplace,' says Loren Beard, senior manager for energy planning and policy at Chrysler. What's more, oil company "foot dragging" is set to worsen the current ethanol glut– which could lower prices to the point where E85 becomes profitable enough for oil companies to accommodate with new pumps; providing federal subsidies continue to prop-up ethanol production. [Thanks to starlightmica for the tip.]

[RF interviews the Mark Cooper of the Consumer Federation of America on Big Oil's anti-ethanol conspiracy] 

Mind you, there's plenty of ethanol action in The Land of Hope and Glory. As just-auto [sub] reports, the UK is now home to its first sugar beat-based ethanol factory. In a light reworking of a breathless press release ("Last week, British Sugar was proud to announce…"), just-auto's crack editorial team revealed that BS' new Norfolk plant will produce some 550k tonnes (70 million litres) of bioethanol per year. At the opening of same, their intrepid reporter asked The Minister for Sustainable Food and Farming and Animal Health– working for the Government's Department for Environment, Food and Rural Affairs (DEFRA)– whether the UK gov would do its part to bolster British sugar's bottom line– I mean, "incentivise further UK production of biofuels." Lord Rooker's reply: not on your Nelly [paraphrasing]. So what about offering some kind of "help" for manufacturers peddling E85-compatible vehicles? "'There shouldn't be any reason to do this,' was Lord Rooker's rather surprising answer. 'As long as the motoring public has absolute confidence in the fuel and sees other cars and buses running on these new types of fuels such as bioethanol E85, there won't be any problem transferring over.'" Ah, another refreshing free market eccentric buried deep within the British government's bowels! Look for that policy to change. 

Alabama state troopers were kept busy with their "Take Back Our Highways" campaign, writing almost 17.5K tickets during Thanksgiving week. According to the Birmingham News, officers wrote over 11k citations for "dangerous driving" which included 8.8k speeding tickets. They also handed out 170 citations for DUI, 245 for tailgating, 104 for improper lane changes and 2.2k seat belt or child restraint violations. In spite of their best efforts, there were still 637 crashes resulting in 253 injuries and 21 deaths in the state. While the injury rate was lower than the same time last year, the death rate was up due to an alcohol-related accident in which a drunk driver in a pickup truck hit and killed a mother and her four children in a van.

When does art become a public menace? According to Toronto police, when it's driven on city streets. Canada.com reports Dean Baldwin was pulled over whilst "driving" artist Michel de Broin's Shared Propulsion Car (SPC). The vehicle in question is a 1986 Buick Regal that's been stripped of engine, transmission and suspension (it uses votive candles to meet the Canadian requirement for daytime running lights). In case you're wondering, the pedal-powered Buick is part of a solo exhibition at the Mercer Union art gallery. No matter. Baldwin has been charged with driving an unsafe vehicle. It isn't the first time the art car has caught the attention of the po-po. In Montreal, the art car went all of two blocks before it was pulled over. However, it went unchallenged (and probably unnoticed) when it appeared in New York City. When Baldwin's case comes up, de Broin said he plans to have the car towed to court. After winning the case, he'll "drive it away 'slowly' and 'freely'."

 [You can see the Shared Propulsion Car in action on YouTube]

Iowa. Corn. Ethanol. Federal subsidies. Presidential primary. You don't have to be a professional political pundit to connect those dots, but you'd have to be a pretty brave pol to look Iowans in the eye and say "no" to their federally-funded ethanol dreams. As The Boston Globe reports, that would be John McCain, whose low standing in the Tall Corn State's polls may have a little something to do with this statement: ""I trust Americans. I trust markets. And I oppose subsidies." This despite the fact that a "recent poll" (nice attribution there Globe) showed 92 percent of Iowans consider ethanol essential to the state's economic future. No wonder The Hunt for Red States' Fred Thompson changed his tune from anti to pro-ethanol a few weeks ago, declaring ""It's a matter now of national security." (Now that he needs the votes.) The Big Three Dems are all on board the ethanol express, which already pumps $2b of your hard-earned federal tax dollars into Iowa's ethanol industry. 

So why would Canadian car brands refuse to lower their prices in the face of a huge wave of bargain-seeking cross-border shoppers, and the pricing policy's stultifying effects on the new car market? Because they can? Yes and no. The Globe and Mail tapped Bank of Nova Scotia economist Carlos Gomes for an explanation, and an explanation they got: auto makers are reluctant to cut MSRPs in Canada because a record 550k vehicles are coming to the end of their leases next year, up from last year's five-year low of 470k units. Cutting prices would reduce the vehicle's residual values leading to huge losses for the dealers and auto financing companies obliged to buy them back from the lessees. Oops. Instead of biting the billion dollar bullet, Canadian car companies have launched a less expensive PR war. The Globe says "several auto makers" sponsored an eight-page (!) advertising supplement. Within this magnum opus (methinks they doth protest too much), execs from Audi Canada, Toyota Canada and Volvo Canada justified their Canadian price premium and explained what they're doing about it. If any of our Canadian readers have a copy of yesterday's Mail, we'd love to read the quotes.

Remember the Ford commercial showing an F-150 being crushed between two bulldozers? Advertising Age [sub] gives us the rest of the story: Ford pulled the ad because it "generated anxiety" in viewers. Psychologist-turned-ad-exec Michael Bently works for JWT, the agency who developed the ad. He wondered if changing the music in the ad would change the way people reacted to it. Nope. No matter which music he tried, Emotional Brand Connection (EBC) and MRI testing showed subjects "reacted with fear and anxiety" to the spot instead of focusing on the point they were trying to make about safety. Ad agencies are expected to use EBC more in developing ads for all products, so expect to be inundated with ads for all products trying to tug at your heartstrings. Incidentally, in the Ford ad, test subjects' anxiety peaked when the commercial showed a "beauty shot" of an uncrushed truck. Whew!