On Thursday, Audi of America president, Johan de Nysschen, will meet with journalists to explore the question “how has the international recession impacted Audi and the luxury segment?” The obvious answer: sinking sales. The not-so-obvious conundrum: what next? How does a luxury brand position itself for survival when class war is breaking out all over? Of course, the professional pundocrats aren’t using “C” word just yet. The euphemism du jour for the “where’s MY bailout” anger that may or may not be sweeping the nation—as taxpayer-owned AIG execs collect their bonuses and Bernie Madoff’s wife shelters in a penthouse funded by her husband’s ill-gotten gains—is “vengeful populism.” Whatever you call it, Audi and its luxury competitors are sitting in the cross-hairs of growing anti-conspicuous consumption. The recession/depression is going to kick the NSFW out of them.
Audi, BMW, Cadillac, Lexus and Mercedes have all poorly positioned themselves for these belt-tightening times. All five brands spent the last decade or more stretching their model range down into near-luxury and even non-luxury pricing territory. Not so long ago, none of these brands were available to average buyers (save on used car lots, where maintenance costs kept them clean of ten-foot pole marks). All five luxury brands couldn’t resist picking the low-hanging fruit, convincing themselves that they could democratize an exclusive brand.
Of course it worked. What aspirational car buyer wouldn’t prefer an up-market marque to a Ford, Hyundai, Toyota, Nissan, etc.? Thanks to a combination of affordable models and cheap credit, the “Big Five” have all experienced sales growth that makes Jack’s beanstalk seem like a redwood. BMW’s inexpensive leasing deals, in particular, created ultimate profits. But the move down market has created a vast flock of prodigal, homeward-seeking chickens.
For one thing, profits at Audi, BMW, Cadillac, Lexus and Mercedes are now dependent on relatively high sales volumes. In 2007, Mercedes-Benz NA sold 253,433 vehicles. Audi’s US sales jumped 11 percent, to 93,506 vehicles. Cadillac’s sales rose 13 percent. BMW’s ascended by 14 percent. Lexus took a hit that year, but they still managed to shift 342,000 units in North America. Compared to the mainstream manufacturers it’s small beer; but it still requires many pubs to serve it. All five luxury brands expanded their dealer networks. Which are now, or soon will be, struggling for survival. Last month, Lexus sales took a 35.8 percent year-on-year dip. Audi lost 25.4 percent of its previous year’s monthly totals. And so on, right on down the line.
Brand equity has also taken a huge hit. Although you might think the luxury car brands’ democratization makes them less vulnerable to a class-related backlash, nope. Let’s face it: it’s not a great time to be seen “splurging” on a luxury car. The car brands’ upmarket cachet has suddenly turned into a liability. Real world employees worried about their paychecks—and that’s all of them—are not going to stunt and floss in the company parking lot behind the wheel of a brand new Audi, BMW, Cadillac, Lexus or Mercedes. They know that rolling phat in a luxury-branded whip would be tantamount to wearing a little button emblazoned “overpaid.” Fuhgeddaboutit.
Even worse, the customers with real money, where profits fall like rain, have already left the building. They’ve opted for more genuinely exclusive marques. Audi and Mercedes recognized this problem before the axe fell; buying (Lamborghini), creating (AMG, S-Line) or resurrecting (Maybach, Bugatti) über-luxury off-shoots. But even if Audi and Mercedes managed to skim the cream off their own coffee, they face the same danger as their less brand-savvy luxury competitors: stagnation. Now that upmarket brands offer a wide range of models, cash-strapped or cash-aversive buyers can either stand pat (i.e., not trade-up) or, worse, opt for less expensive alternatives within the brand family.
So why would Mercedes create the GLK, when it already offers a full-size SUV AND a smaller alternative? Why would Mercedes market the GLK as a vehicle containing the same technological excellence as its bigger brothers, only in a smaller (read: cheaper) package? The Bama-built German “cute ute” represents a failure to communicate luxury brand values—and price points—within Mercedes’ corporate culture. It’s the same hubris that led to the Audi A3, BMW 1-Series, Cadillac CTS (sorry guys), Lexus IS250 and Mercedes C-Class. Short term greed over careful, long-term brand husbandry.
I know TTAC’s Best and Brightest have hashed this out many times. Many of you don’t see a price point as a brand barrier. But it’s petard hoisting time folks, and you’re about to see the brands reap what I said they’d sowed. In this suddenly, violently downsized, flash-aversive sales environment, brand-extended luxury automotive marques must either redefine “luxury” (as reliability, longevity, etc.), move back up-market (a slow, painful process) or die. And the longer the downturn lasts, the greater the chances that one or more of these brands will never recover.
Interesting points, but this doesn’t compute to me:
it’s the same hubris that led to the Audi A3, BMW 1-Series, Cadillac CTS (sorry guys), Lexus IS250 and Mercedes C-Class
I believe that except for the IS250 and the BMW 1-series, the rest in the above list are bestsellers for their brands. How are they a mistake then?
hwyhobo
By being best sellers for the brand.
Anyone with a big lump of cash isn’t going to spend it now if they’re smart. They’re going to buy it on stocks, which are at like all-time lows. Then, when we’re out of the recession and the stocks are at a higher price, you sell and then buy a luxury car.
40k spent on a GLK… two years later that 40k GLK becomes an old 25k SUV.
40k spent on DAI AG stock at $21 dollars? Two days later 55k in the bank.
Difference? 30k. :)
Btw, I think going down-market is the worst thing you can do. You need to sell an image and have your car and brand be something people ASPIRE to have. Poor people don’t want a Lexus they can afford and have. They want a Lexus that they can daydream about one day affording.
Volkswagen-Audi-Seat-Skoda have now got Porsche in the portfolio (actually, isn’t it the othey way around, technically?)
So they have uber-autos in their portfolio.
menno
Audi and Porsche overlap. That’s not good. (File that one under “there is no such thing as synergy.”) And both of their product portfolios cover too large a price spread. That also sucks. When a car company’s strategy sucks and sales suck, it’s suck plus plus. If you know what I mean.
This same move downmarket is one that Jaguar is still trying to recover from.
Part of the challenge for entry level luxury brands like Mercedes, BMW and Audi will be differentiation. They are under constant pressure to adopt new (and sometimes questionable) technology to keep their cars apart from the likes of the Infinity G and even the Hyundai Genesis. So where do you go once other brands have million speed auto transmissions, tricked out suspensions, all cow interiors and enough daft electronics gimmicks to confuse an MIT PhD? Once upon a time it was about horse power but now that has been democratized so that just about any brand can offer you a 0-60 in less than 5 chariot. ‘Ring lap times? Forget it. More gizmos? Everybody has them too. Maybe “horse power on demand” technology will help for a while but eventually they will almost have to take a hit from their high wage costs and the improvements of their competitors.
The CTS, A3, 135i and GLK do not compare to the X6 at all, says me.
The Audi/Porsche overlap is a very valid point, and shouldn’t exist.
What, do you mean Mercedes and Volvo need to build cars that last longer than 5 years?
Snarkiness aside, when do you think we will see model lineup shrinkage? See yas, GLK. At least Jaguar was able to pull back. When you see a Jaguar now, except for a stray X-Type, you can say ‘that’s the real deal.’
The CTS is about the only one I would NOT classify as a mistake…
True, its a “value” luxury car, but it actually offers something that all the rest don’t. With a 1 series, you know you got a baby Bimmer. With a C class, you know you got a Mer-civic. But with the CTS, especially the current one, you got a REAL Caddilac.
It’s true that these cars should be aspirational and not affordable.
Why buy a VW if you can lease an Audi or BMW for a few bucks more per month? The BMW is not an exclusive car anymore when anyone with a paycheck can lease one. And if this is the case, who will buy the VW?
I remember the order of things in the early 80s. Audi, BMW, and Mercedes were premier cars for folks with money. They were most certainly not cars that a 25 year old straight out of college could go and lease.
If you are that 25 year old, then it’s great that you’re driving a new bimmer.
When you turn 40 and need a prestigious ride, are you going to buy a bimmer again when you see a bunch of out-of-school kids driving around in them?
like.a.kite
Agreed. X6 reference removed. Even though I think it is a truly pointless vehicle (X5 v2?).
If what you’re positing is that there is or will be a lux-car backlash, I think we’re already there. There’s a whole movement of “socially frugal” out there, and while it may not apply to the well-healed pistonhead, I think it can certainly apply to the average consumer.
What’s funny to me is the only brand/model I see rally positioned for this backlash is VW with the CC. You can have your cake and eat it too, if you’re not a brand snob. A RWD Buick would have killed in this economy among people who might too self-concious too buy a Cadillac; well, that is if there are many out there—I only know a few. And for those fortunate to still have money, it’s the era of inconspicuous consuption, if you will.
it’s the same hubris that led to the Audi A3, BMW 1-Series, Cadillac CTS (sorry guys), Lexus IS250 and Mercedes C-Class
Bear in mind that the A3 and 1-series are mostly European models designed to offer small hatches to hatch-loving Europeans, and their inclusion in the US market is pretty much an afterthought. They’re the European equivalent of the Lexus RX330, which aimed at offering luxury in a “small” package looking like a popular vehicle type (the SUV) to Americans. And considering that European cars are more expensive anyway, the price barrier is set higher.
As for the C-class, I’m not sure Mercedes would have survived as an independent carmaker without the volume of its smaller offerings. I do blame the A and B classes, though, as they don’t fit with the brand as well. A C-class is considered pretty big already in Europe.
In any case, ALL carmakers suffer, and sales are down across the board, and although your sociological analysis seems spot-on, luxury car sales haven’t slowed noticeably faster than the overall market, if I’m correct.
If anything, buying a smaller luxury car may be seen as a smart move, since they’re really not conspicuous, the A3 in particular, as many Americans still see it as nothing more than “a small hatch”, and therefore cheap.
I think the VW CC is going to fail. But, I’m not going to put money on the prediction.
Do luxury brands dilute their cache by introducing lower priced models that are still more expensive than like sized cheapies? I don’t know about that. Does it actually damage a brand? Once again I don’t know about that.
See the problem is that you are talking about BMW, Mercedes, Audi, and Lexus here. Lexus started out, and still does in some cases, blinging out Toyota models. While the 3 European brands have always been (in Europe anyway) not cheap, but not unatainable cars that spanned the market. Small cars make sense for the European brands as that is what people like to drive in Europe. So these smaller cars are cheaper, but they should be compared to their stablemates. They are themselves worthwhile ventures. I just don’t see this as brand dilution.
Now the other more direct point you made, BACKLASH! I don’t think that this exists right now. You have people talk about it, but really, people are just saving their pennies for the moment. When the economy turns back up, these cars will sell. I have guys working for me buying 3 series Bimmers still. 2 in the past two months. I just don’t see this backlash you talk about.
I doubt that the real or perceived backlash against conspicuous consumption will last. While we are in the midst of our post bling hangover, US consumers like nice stuff and will continue to buy it.
If I remember correctly the Carter era calls for frugality ended with a decade long orgy of consumption in the 80s.
I agree with everything RF said in this editorial.
It goes to show how “success” in selling downmarket comes back to bite these companies and damage the brand.
(Hypothetical) question: what if Audi were to dramatically increase the leverage of its racing program-derived technologies and capabilities, and produce a car that mixes aspects of its down-market cars (A3) with very upmarket aspects of its unobtainium cars (R8 or R10)? To wit, a small displacement clean turbo-diesel with ridiculously good fuel economy producing a quarter of the power of the R10 motor, installed in a small, light car, whose technological advances reside in the drivetrain, handling, economy and performance of the car, not in ‘comfort and convenience’ features. Something like the low displacement euro cars designed to avoid the higher taxes that come with bigger motors. I know there was talk about an S1 along these lines. It could be a kind of lowmarket and upmarket hybrid, one that exudes frugality in its styling, luxury features (or lack thereof, i.e., no wood panel options, garage door openers, etc), thirst, but exudes luxury (read: high tech) where it really counts: performance, thirst, safety, utility.
Would this only exaggerate the branding mess described above, or could Audi cleverly exploit this blurring of down and upmarket?
I emphasize Audi only because they’re the only one of the above-mentioned builders with such a deep, proven record of being able to design winning race programs with new technologies that are applicable to real world driving. The others flirt with it; Audi has delivered.
Robert Farago wrote:
By being best sellers for the brand
Only in the context of romanjetfighter‘s quote below. Other than that, those models do not cannibalize other models within the brand. Someone who shops A3 hatch will not crossshop A4 sedan. Different market. Someone who shops C-class will not crossshop E-class. Different market.
romanjetfighter wrote:
You need to sell an image and have your car and brand be something people ASPIRE to have.
I agree with that. That means sacrificing potentially lucrative market. What is a better long-term strategy? I don’t know. I think if you keep the gap between your lowest and the next model up sufficiently large, you might pull it off. Still, like you, I prefer undiluted brands.
highrpm wrote:
I remember the order of things in the early 80s. Audi, BMW, and Mercedes were premier cars for folks with money. They were most certainly not cars that a 25 year old straight out of college could go and lease.
I don’t know about that. I remember seeing more Bimmers at the local Junior College parking lot than at a nearby high-tech company.
“Audi, BMW, Cadillac, Lexus and Mercedes have all poorly positioned themselves for these belt-tightening times.”
Of the above brands/companies Cadillac is the only one that has really diluted itself. At least when using a long term historical perspective.
One of Audi’s fist modern era cars was the 50, which later became the Volkswagen Polo. By those standards the A3 is a classy car, at least it’s based on the Golf, not the Polo.
BMW is the company of the Isetta and 2002, the later of which the 1 series tries to recreate. If the 1 series fails at being a 2002 it is because it is fat and a bit ugly, not because it is down market from the 2002.
Mercedes and Lexus represent (or should represent) quality, not exclusivity. Mercedes makes taxis, buses and Unimogs. Lexus was invented in the late ’80s with a lineup that started with a badge engineered Camry
.
When BMW makes a FWD car or Lexus makes a car with crappy quality then there will be some major brand issues, but so far none of those things have happened.
Mercedes had a bad run in the late ’90s/early 2000s, but the new C class is a proper Mercedes.
Audi has only improved its brand in recent years.
Cadillac started destroying itself in the late 1960s, but the CTS is part of the solution, not part of the problem. Its a good car, with RWD, good design, and apparently good quality. That it makes the STS redundant is the fault of the STS, not the CTS.
“For one thing, profits at Audi, BMW, Cadillac, Lexus and Mercedes are now dependent on relatively high sales volumes.”
The reason that they are dependent on high sales volumes is not that they have full(er) lineups, it is that the auto industry as a whole is not adaptable. Unions and franchise laws prevent the industry from quickly adapting to market changes. Those impediments to adaptability are what need to change.
And being dependent on low sales volumes from exclusive cars sucks also. That’s why Porsche added the Cayenne after almost failing during past downturns, and why Rolls-Royce, Bentley, Ferrari and Lamborghini are no longer independent.
“So why would Mercedes create the GLK cute ute now, when it already offers a full-size SUV AND a smaller alternative.”
This is the democratization of luxury and quality. If the brands refuse to compete on price then they won’t survive.
None of the above brands, except Cadillac, have post war reputations built on being handmade or utra-exclusive. Their reputations are as high quality, high content cars. If the Germans, Japanese or Americans don’t give someone a good price on a high quality, RWD, high content luxury car then Hyundai will.
People simply do not care about pedigree in the market that Mercedes, BMW, Audi and Lexus have historically inhabited. They care about quality and features. That is how Lexus could go from not existing to overtaking Mercedes in less than a decade.
If someone can come up with a branding solution to this commodification problem then they are brilliant, but in the mean time if companies do not compete on price and offer down market models they will simply lose sales and become increasingly irrelevant.
Luxury brands are a necessity for any product in any market. They define the top.
Without them, the “normal” brands define the top.
It makes sense that the luxury brands would be suffering, so I don’t get why this is news. If anyone want to be class envious about what their boss drives, they should remember that no poor guy ever signed their paycheck.
7-Series buyers have not been deterred for 30 years from buying because of the lesser 3-Series sitting in the same showroom. Same with S-Class and C-Class buyers. Going downmarket for the “luxury” makes is not a new strategy. But it is one that has endured several recessions.
What’s really going to separate the boys from the men is managing overcapacity. Survival will correspond with the ability to shed fixed costs quickly.
Regarding brands: what makes anyone think that brands are not subject to entropy? Entropy always wins. Always. Especially with made-up human abstractions like “brands.” Packard, Cadillac, Lincoln, Imperial, Buick. Now Mercedes, BMW, Audi. Surprised? Really?
Lexus took a hit that year, but they still managed to shift 49,270 units.
I’m confused by this. Lexus could move nearly 40,000 units in a month back before the economic crisis.
Or maybe I’m misreading this?
Or, to call it by its real name, greed.
Or its other real name, the pursuit of profitability. The great artists know when to stop, know of at which point to cease the seat-for-every-assedness.
Both the brand and the SL63 customer remain unperturbed by the C300 in every way. It’s the B200 that really fucks things up.
I think that the problem for Merc, Audi, and BMW is that not that they have gone too far down-market per se, but that they offer too many models in general.
BMW now has two 1’s, three 3’s, the z4, the z4 coupe, the X3, two 5’s, the X5, the 6, the 7, and a couple that I’m sure I’ve missed since I didn’t bother to count all the convertibles, convihardtops, and the 4WD variants.
That’s simply too much product out there sitting on lots under this model diversification arrangement.
It’s going to force BMW to start making deals they wouldn’t usually make to move the metal; that’s going to hurt their resale values; and then we’re off to the death-spiral races.
On the flip side, I think the CTS is the smartest thing Caddy has done in decades. Were it not for the CTS, they’d been on the death watch with Pontiac.
There’s little doubt that reaching downmarket for greater volumes will hurt niche, premium brands – yet they often can’t resist the temptation. They lure themselves by saying they are creating “recruitment vehicles” that will provide a first rung on the ladder for people who will rise to the top platforms.
In a market where prosperity was also rising, and where fuel was abundantly available, that notion is not so far fetched.
But we’re now faced with a number of factors that have messed up the nice white-board:
1. Parity between brands even in the luxury segments.
2. Serious doubts as to the future of ICE engines, thus casting into doubt the existing platforms of the luxury brands, long before they have been amortized.
3. AWG concerns, where cars have been singled out as an easy mark for those wishing to “do something about CO2 emissions.”
4. And then there’s the credit crunch of all credit crunches, throwing car financing down the hole.
Which (combined with a number of other factors) begs the question: Is any upmarket remaining, for the brands that moved downmarket? Or are the smaller platforms actually going to be their future?
Cities are trying to get rid of the oversized gas guzzlers through various means; congestion and the sheer penalties of car ownership are doing their bit to reduce the cachet of having a car, in the first place; kids don’t really care about driving and owning their own car the way we did when I was growing up – also because getting a license has become really difficult in some countries.
Car ownership as we know it is changing radically, and brand strategies for survival should not count on the easy pickings previously seen in the volume luxury market in the future.
BMW, Mercedes, Jaguar, even Cadillac (to a lesser extent), etc. all had a different cache in the days when people paid cash for their cars. Those things were truly only attainable by the wealthy.
Today with leasing and 5+ year financing anybody with a middle class income can cruise around in what was once a luxury car for the elite. $60k or more is nothing for many people to spend on a vehicle. Better yet, how many trailer parks have you driven past noticing Bimmer’s, Lexuses or tricked out Escalades parked next to? I’ve never seen a trailer park without at least several cars nicer than mine.
Going down market doesn’t mean a damn thing because these brands are already down market. I don’t drive one because I am old school and pay cash for my vehicles and choose to live in a nicer home than drive a “fancy” car.
Today the elite class is going for rides like the uber-expensive Maybach or Bentley. The BMW’s and Mercedes and Lexuses of this world are just middle market autos for people that have an image to maintain. Fun cars for sure, but lets be honest with ourselves, it’s image for 99.9% of the people buying them.
The luxury car market is due for a violent contraction soon, but that is a good thing.
Because people have less money they’ll stop buying cars, or if they do buy cars they’ll look to the cheaper brands.
Now this will do luxury brands a service as it will increase the exclusivity of one’s marque. I remember when I was younger, if you saw a Lexus on the road it was a “stop and stare” moment. They were very rare. Now, because of the IS range, they’re more common. This has now made the Lexus range a bit “accessible” and deadened the brand.
It’s not just Lexus, Audi, BMW, Mercedes, Jaguar, they all did it.
But there is a downside.
Because of the contraction, the marques will have to survive the lean times for this to be successful.
Now Lexus have Toyota to look after them, Audi has VW, Jaguar has Tata and Infiniti has Nissan. Unfortunately (or fortunately, as I see it BMW and Mercedes-Benz don’t have big parents to look after them. Which means trouble for them twice over:
1. By BMW’s admission, they don’t have much cash left to survive this recession and Mercedes-Benz are spending their cash on anything other than their company.
2. Even they were to entertain the possibility of joining a a bigger family, who would want a company like that in their family of brands? Because Germans are famous for their flexibility, just ask Chrysler….
As for Porsche/Audi overlap, there really isn’t that much.
Audi TT/Porsche Boxster
Porsche Cayenne/Audi’s Q series.
Apart from that, what else over laps…?
getacargetacheck :
March 17th, 2009 at 2:34 pm
7-Series buyers have not been deterred for 30 years from buying because of the lesser 3-Series sitting in the same showroom. Same with S-Class and C-Class buyers. Going downmarket for the “luxury” makes is not a new strategy. But it is one that has endured several recessions.
I agree completely here. No one that I know of would consider Audi, BMW, Mercedes, Cadillac, Lexus, etc. to be tainted by a tiered model offering. It is the quality of the vehicles in their respective price ranges that might do them in. Huge mistakes like the cheap little BMW 318 hatch that (what an eyesore), along with the Cadillac Cimarron that serve as examples of what not to do.
I doubt many care whether Audi or Mercedes produce an A2 or A-Class in the same showroom if they are high-quality, nicely designed vehicles. They serve a particular buyer. That buyer will more than likely stick with the brand as they move up in income, assuming they’ve had a good ownership experience.
The A3 is no 318i. It has the same quality interior bits as the other Audis. It is not ugly. It serves a small customer base that desires a hatch and is willing to sacrifice some room, while getting all that comes with Audi’s interior quality and dealership experience. Yes, they could have went with a cheaper Jetta wagon, but that shows you the pull of the Audi’s styling and other attributes beyond the four rings that swayed them.
In Europe, I doubt that the presence of Mercedes work trucks, along with bare-bones, manually shifted, cloth interior Mercedes taxis does anything at all to cause one to wonder if that S-Class is still desirable.
I’d love to see the A-Class and the A1 stateside – with the same diesel offerings as Europe. We’re missing the boat on diesel and small cars here.
If you want to talk brand dilution, I think that BMW’s egregious styling flop called the X6 and Mercedes bewildering SUV offerings are good examples. These make me question the direction and common sense of both brands more than any small or hatch offering if done well.
I agree with the point about profitability now being dependent upon high sales volume. It’s a very important point and one that leads to stupid decisions. Once sales start to slide, the companies have to come up with another idea to replace the old volume. And the newest idea is usually not the best idea either.
On the other hand, the down market comment I disagree with completely. MB, Lexus and Caddy shouldn’t try to compete against the A4 and 3 Series? Do you have any idea how much money Audi and BMW make off of those models? In fact, the A4 adn 3 Series define Audi and BMW and don’t detract from the luxury reputation in the slightest. The A3 and 1 Series are both low volume and will probably run you $500 a month, so it’s not like they came up with a Catera or someting like that. Of all of those examples, the C Class is the only one that is close, but it is because of poor executation mostly.
Some examples I would agree with are in the CUV segment.
I also get annoyed by people saying that such and such is because of greed. Every single major automaker is owned by a group of investors who demand a return on their investment. It would be great if 1 really rich guy would buy Mercedes and only price above 50k, but it’s not realistic. In the meantime, a bunch of shareholders are going to demand growth or people will get fired. To call it greed is just holier than thou, idealogical bullshit – it’s called capitalism (which may be a synonym for greed, but at least you don’t sound like such a pussy when you say it).
Anyways, the growth was too fast and the result of increasing incentives. On top of that, the innovation was used for stupid products like the GLK instead of cool powertrains and drivetrains. Now, the luxury brands are hobbling just like everyone else, but they still don’t need as much volume as a mass market automaker and the margins are still better, so they are still better positioned. Peace out.
I believe that except for the IS250 and the BMW 1-series, the rest in the above list are bestsellers for their brands.
The A3 is definitely not the bestseller for Audi in the USA. The A4 is. Audi sells 8-10 times as many A4s as A3s. It may sell relatively better in Europe, but the A4 is the brand leader there too, I believe.
The biggest part of Audi’s sales declines (in number of vehicles, though also in percentage) in the US recently have been cratering Q7 sales. Now, some of those could be taken by Q5 sales (though the Q5 is also a X3 response), which would be a similar point.
The question of luxury marques diluting the brand by making crossovers and SUVs and SAVs is a different issue, but perhaps one that could be discussed.
I test drove a 08 Malibu that stickered for 29000. That’s pretty close to “luxury” car territory. The overlap is there and it’s pretty bad really.
Boston
I agree: greed is good. I misspoke. Text amended.
johnthacker wrote:
The A3 is definitely not the bestseller for Audi in the USA. The A4 is. Audi sells 8-10 times as many A4s as A3s. It may sell relatively better in Europe, but the A4 is the brand leader there too, I believe.
I wasn’t referring just to US (A3 is relatively new here, and with lousy exchange rates, buying an expensive smaller car is less likely). In Europe A3 is very popular. I saw it everywhere. Granted, it is anecdotal evidence, but it is close enough for our discussion.
The biggest part of Audi’s sales declines (in number of vehicles, though also in percentage) in the US recently have been cratering Q7 sales.
No surprise. It is a monstrosity that could only sell on an unsustainable bubble. I believe Q7’s days are numbered.
I test drove a 08 Malibu that stickered for 29000
Wasn’t too long ago $29k would put you in a decently optioned Lexus. Again, when people finance or lease they aren’t buying based on the actual cost of the car. They are buying a monthly payment. “Why buy a Chevy at $200/month when for $400/month I can drive an Audi. I’ve got the income to cover that.” Honestly I know people that talk like this. That person IS the market for the A4, 3-series, IS, etc. The slightly higher market buyer that would’ve been in the 3-series is opting for a slightly higher payment in the 5-series, etc. Watch some MTV and see what rap stars are talking about….it ain’t BMW and Mercedes…they are above that now. The new “luxury” brands are in the several hundred thousand $$$ category, everything below is mid-market.
Interesting subject, especially with factors such as a repeal of the Bush upper-level income tax cuts looming on the horizon. Once the economy pulls itself out of this recession, which it will, perhaps a new age of personal fiscal austerity will reign. I believe that real factors like that will affect luxury sales moving forward more than a hyped-up “class war” in the short-term (see hybrid sales in mid-2008).
And not that it makes a difference to the point of the editorial, but the Merc GLK is produced in Germany.
greed is not good and is what got us into this mess. greed is wanting more of something than is needed without caring about consequences – that;s not even close to what capitalism is. greed ruins capitalism.
“Let’s face it: it’s not a great time to be seen “splurging” on a luxury car.” – it may not be a good time to do it, but to be seen doing it? that’s not going to deter most people. most people don’t get deterred that way at all – for example, people are still taking bonuses at aig even though they lost billions upon billions of dollars and got bailed out with our money twice. there’s little shame (or whatever emotion your thinking of) when it comes to getting what you want.
the luxury 5 are perfectly positioned to weather this storm – they have their toes set ever so delicately at the more affordable end of things for the plebes and have the ultra-fancy-dancy models that are out of reach for all but the monied.
The real killer here is the improvement in non-luxury car quality and content. Things like SYNC in the Focus and bluetooth phone integration on stripper Kias erode at the very concept of luxury faster than the latest top-end gizmos can build it back up. In this environment, luxury brands have to rely more on their brands. Which is why I tend to agree with RF about downmarket forays. Mostly. Downmarket forays are positive for the brand only when a) you don’t have much brand left (Caddy CTS) and b) you throw fiscal sanity to the wind (Audi A2).
I think that there is an issues of semantics that creates problems for this argument.
In much of the retail world, “luxury” goods are the top tier. But in automotive retailing, “luxury” really translates as “upper middle”, not the top. The top of the car world is in the exotic segment, such as the Ferraris and Lambos that are well out of reach to most people and always will be.
The luxury brands that were strong going into the recession and that are owned by well capitalized companies will be fine. They are experiencing a cyclical downturn that has affected just about everything and everyone. Cadillac and Lincoln especially won’t necessarily fare so well, as they weren’t doing that well in the first place, but I won’t be losing any sleep for BMW, Mercedes or Lexus.
I do question the wisdom of bringing the A3 and 1-series BMW to the US, but the IS250, A4, 3-series and others help their brands. There is supposed to be a price overlap between the top of the mainstream lines and the bottom of the luxury tier, as that is what makes it possible for consumers to see the luxury brands as something that is aspirational, and not just impossible. The near-luxury cars in the luxury brand lineups should not be utterly unobtainable, as that would defeat their purpose.
The implication that these are modern equivalents of the Cadillac Cimarron is a mistake, because the Cimarron was a lousy downmarket car that shouldn’t have been sold with any badge. A luxury car still has to provide an experience that is good enough that it makes it seem worth the money.
I AM REALLY LOVING THIS!!!!
I guess many of these makers don’t have the right product for the times do they!
I suppose the cant ramp up production of small,reasonably priced fuel efficient cares fast enough,can they?
BMW base cars at 30k..Audi and Mercedes the same.
It sounds a lot like the criticism thrown at U.S manufactures over the last year.
HOW DARE I compare the ‘great marques’ with our lowly domestic industry…
Oh I`m sure that I am way off base with these comments NOT!
I don’t think there’s a backlash against conspicuous consumption. I think there’s backlash against conspicuous consumption of flagrantly ill-gotten gains. Which is something quite different.
People are also being thriftier, but that’s different from class war.
And where I live, in LA, I’ve seen no real let-up in the conspicuous consumption department. I counted three Lamborghinis, six Bentleys and two Ferraris on the way to work this morning.
As Edward Niedermeyer says, the real problem with the ‘luxury’ segment is that downmarket cars are just so good these days. The average car is so safe, reliable, powerful and feature-laden that image is the only reason for the average non-enthusiast to buy a luxury car. I doubt someone like my mother would be any happier driving an S-Class than she would be driving a fully loaded Accord.
@Pch101
In much of the retail world, “luxury” goods are the top tier. But in automotive retailing, “luxury” really translates as “upper middle”, not the top. The top of the car world is in the exotic segment, such as the Ferraris and Lambos that are well out of reach to most people and always will be.
Exactly. What is termed luxury here, is actually high-volume, high quality luxury tangential cars. Some of the brands may have an überversion in its line-up, but most have sought for the advantages building a mass market for their vehicles.
People are seeing right through this now – and realizing they can get the excellent ride for less.
Forays such as Passat/Audi A4 and Touareg/Cayenne, haven’t helped much.
Prediction: people are going to realize that car makers need to cut corners in order to make money, now that they are all struggling. The used car market is going to attain longevity, as people go for the better versions of already released vehicles, instead of gambling on accountant spec’d new models – until the car makers have been culled and people can gravitate towards whomever remains standing.
Two comments I have not seen so far:
1) Part of the brand dilution being discussed is a result of the growing size of cars each time they are remodelled. The 3 series girth with each revision has made the introduction of the 1 Series possible.
2) Brand dilution has not only been in moving down market but in expanding their lineups generally with the result that each of these brands lacks a real identity. In hard times, you need a strong brand identity and all of these brands have diluted any identity they might have by offering a broad range of vehicles with no unifying theme.
So now is the time to buy a used phaeton? These are the days when “stealth wealth” might be a selling point.
for example, people are still taking bonuses at aig even though they lost billions upon billions of dollars and got bailed out with our money twice.
I don’t understand why there’s so much anger at the bonuses (that make up less than 1% of the total amount of money thrown at the company) and comparatively little at the rest of the compensation. Is it the terminology? It is an assumption that they deserve their base salaries, however large, in a way that they don’t deserve bonuses? Some of these people worked for the parts of the company that made money, not the parts that lost billions. I’d rather the only money be paid out be performance bonuses– I’m much more upset at the regular salaries paid out to the people who lost billions than the performance bonuses paid out to people who did their jobs well.
For AIG, it also depends on whether you think that the company has to go into Chapter 11, whether it’s fundamentally insolvent and unable to pay its bills as a going concern in the future without restructuring, like the auto companies. If it is, fine, though in that case I don’t understand why the new Administration keeps propping them up with money, like the new batch from just a few weeks ago.
OTOH, if the new Administration feels that this is a mere rough patch and that AIG will be able to come through this once the difficulties are skated over, then it doesn’t make any sense to take away all the bonuses from the people who actually didn’t cost the company billions of dollars. Unless you want all the good people who actually did their jobs and made money to leave the taxpayer-owned company and only the deadbeats who did cost billions to be left. That would just insure that the US government would own a useless company.
Yep, eventually, the class hate wagon will aim it’s full firepower at the luxury brands, it’s just a matter of time. The latest trend is threatening a 98% tax on pay which the government doesn’t think you should get. Nevermind your contract. When you deal with the mob, a contract is worth less than the paper it’s printed on.
I wouldn’t buy a Bimmer right now.
The good news is that wealthy folks will likely spend their money somewhere, so all we got to do is figure out where, and invest properly.
Oh darn, the mob might find out after we do and…
Niedermyer’s comment can be expanded. Even with luxury brand lines there is signficant dilution in terms of the more expensive models. BMW’s 3 Series is a good example of this. Just about any gadget BMW offers is available on the 3 Series. So what do I get by spending the extra loot on a 5, 6 or 7 Series??? Just a bigger car.
Nobody learned the Cadillac Cimarron lesson, did they? Another problem the luxury brands have is the cheaper vehicles cannibalizing their more profitable big brothers.
Yet another issue is the dramatically improved interior appointments and deluxe accessories available in well appointed mainstream vehicles. A full zoot Chevy Malibu is a pretty nicely equipped vehicle. For everyday driving, who needs a Buick or Caddy?
“Even worse, the customers with real money, where profits fall like rain, have already left the building. They’ve opted for more genuinely exclusive marques. Audi and Mercedes recognized this problem before the axe fell; buying (Lamborghini), creating (AMG, S-Line) or resurrecting (Maybach, Bugatti) uber-luxury off-shoots.”
As we like to say on Wiki: cite?
Most of these super-luxury cars are loss leaders, judging by the parlous state of their manufacturer’s balance boooks for the past 30 years. VW reputedly lose money on the Bugattis, Aston Martin has lurched from financial crisis to financial crisis like Frankenstein in a pinstripe suit.
There has been some discussion as to why you would spend more on a luxury marque when a mainstream brand offers just and much refinement and just as many toys.
I think a great part of why people buy a luxury car is because of the supposedly better treatment they receive from the dealership. As long as the luxury marquees can continue to make the customers feel special there will be buyers. It’s expected that you will be given more respect, get courtesy cars, have a nice waiting area, and other perks.
This is why I think the Phaeton failed and why the Genesis may fail as well. As good as these vehicles perform and look, who wants to spend the extra money on a “luxury” mainstream car only to have to wait in line, surrounded by linoleum and plastic chairs, while the gentleman in front of you is telling the service manager that the A/C in his Elantra is not working.
Lexus, Acura, and Infiniti were successful to this point because the dealerships were separate and had a higher level of service. I realize it’s a huge undertaking for Hyundai to develop a whole separate dealer network, but perhaps they can have a special entrance or a concierge that deals with Genesis customers so you feel you got your money’s worth. That way Genesis customers can say “It does everything your Mercedes does, costs less, and you should see the way they treat me”.
Wait a minute. What is wrong with a luxury car that happens to be small? Are you all ready to buy into GM’s successful plan – a continuum from small de-contented crappy cars to large full-featured well put-together cars? (That was their plan, if less than fully realized).
Edward Niedermeyer:
For clothes or liquor companies can rely on brand image. For cars, unless a company is happy with the volumes that can be achieved with $100K plus niches, the company has to build high quality cars at a competitive price. At over $100K a car can be subjectively better, but under $100K it better be objectively better.
GEMorris:
If you buy a used Phaeton you definitely won’t have to worry about appearing, or being wealthy. The VW dealership’s service department will take care of that problem for you.
Landcrusher:
The mob is the wealthy. The vote for “vengeful populism”, or to watch the wealthy burn, was Ron Paul.
“Nevermind your contract.” Please, let’s see what a bankruptcy court would have made of the contracts that the parasites at AIG, etc. have.
And nobody is talking about 90%+ tax brackets, like we had in the 1950s under President Eisenhower. The most radical talk is about changing the very top income tax brackets from the low 30% range, as they were under Bush, back to the high 30% range, as they were under Clinton.
If you are referring to questioning bonuses at companies which are only still in business because of my tax money as the government deciding what people should earn, well, like I said, people whose only alternative is bankruptcy court, and whose industries are not hiring, should be grateful for anything that they get, whether they are UAW workers or derivatives analysts.
To survive… or thrive? That is the question. To survive, severely cut back on extraneous models and only build a few really nice models that will actually sell. Now to thrive, ah, that’s the gamble. To thrive. To thrive, you will need all sorts of different models in a desperate gamble to take over the entire market in a very short amount of time.
How much money will it take? Are people still willing to pay money for a brand logo for class warfare purposes (and not the actual value of the vehicle)? Or do people care more about the actual experience of driving a car now?
Oh the variables.
I drive a cheap little VW Rabbit and I like it just fine. I am very much considering purchasing it and not trading up. Though I have to admit. That S4 sure is tempting.
Audi – Have a few of those powerful, carved luxury slabs. Trim some weight please. That and watch a few videos of the Audi Quattro rally car for inspiration. How much money are you willing to gamble on having so many models? How much will you spend? (Not so subtle hint : I want you to modernize your old school sport design)
BMW – Remove the extraneous options, ditch the confusing settings and make solid cars for spirited driving (that anyone from any class of living can appreciate).
Mercedes – back to basics and make those nearly indestructible cars you used to. Oh yeah and make that military grade looking thing that uh, looks like something from Metal Slug.
I just want to say that Farago is wrong about the whole entry-level luxury segment in general. Again. Still. But especially the CTS. I hate to go completely “slowly I turn”, but of all the cars in the segment, I think the CTS is second only to the iconic 3-Series in terms of how much good it has done their respective brand. And what really chaps my ass is that they’ve basically done everything he’s wanted them to do. He said it was too small. They made it bigger. He said it was too cheap. They’ve added features and made more features standard. They’ve raised the price from about $31K towards the end of gen1 to $37,535 now, according to the official site. And that’s just for the most (not really) basic version. Just ticking a couple of boxes sent you well into the $40Ks. It’s by no means a cheap car.
Farago doesn’t realize that size doesn’t matter anymore. Price doesn’t matter as much, either. I guess I figured the MINI busted that outmoded, outdated stereotype a while ago. But we all know that until he gets his six-figure, football pitch-long chrome rocket that takes corners on its doorhandles, he won’t be happy. And that’s unfortunate, because he’ll be denying himself a great Cadillac. Not just a great car. A great Cadillac.
The range of cars doesn’t matter, if their higher price is matched by higher quality. Back in the old days, when Mercedes was engineered like no other car in the world, the extra premium actually meant something.
Some people have always been able to pay extra for real quality improvement. It’s no dice that the W123 is the ubiquitous taxi around the world, simply because it was engineered to last a lifetime. People buying ANY Mercedes expected that level of quality and refinement. In that view, people paying extra for a smaller Mercedes does make sense, because it makes them able to afford that extra quality. The trade-off was buying a smaller Mercedes than a larger non-premium. And that was what made the 190 a success.
What ultimately made Mercedes borderline suiciding, was when they lowered their engineering standard, to make way for higher margins. I don’t have any numbers, but from the 60’s onwards, Mercedes had a very flat selling curve. They sold some 600k cars a year worldwide, and had been doing that for decades. Just because their demographic was more or less consistent.
It was a bourgeoisie car for the bourgeoisie around the world. The doctors car, the lawyers car. People willing to pay extra for quality equipment. From the early 90’s, they wanted to achieve new goals, by doubling their sells. That means, lowering their prices by extending their range in all directions. And make profits from exchanging real quality to percieved quality, by dumbing down the content.
The point is, had they extended their range, they could have got new demograhics and conquest sales. But by lowering their engineering standard, they betrayed not only new customers willing to pay extra for what they percieved as real quality, but also all their loyal customer base. It has taken almost ten years for Mercedes to walk up that slippery slope, and they are not really there yet…
regarding this talk about class warfare – it’s not much of a war when most companies are getting the money they are asking for from our elected officials (who are still getting elected despite the “will of the people” to not do the bailout).
regarding upscale and downscale cars – when fords and pontiacs and chryslers are going for 30 and 40 grand a pop brand distinction becomes more important. i’d rather by a 40 grand bimmer than a 40 grand hyundai, but that’s because i am a shallow brand whore. i’m thinking a lot of people are shallow brand whores.
As a German service writer for a Lexus dealership in my area once said:
“Mercedes in Germany is garbage truck.”
What my service-writing friend was referring to is back in the fatherland, many of these companies have non-luxury businesses – taxis, rentals, even garbage trucks.
These luxury brands may have a difficult time in the next 5 years, but they are part of companies that do other things. They will survive.
-ted
Maserati is hurting after importing so many cars into the US last year. I also heard that Ferrari waitlists are withering away. The bottom line is that all these automakers need to either decrease prices (ha! ha! ha!) or cut production.
Anyone looking to dump $29K on a Chevrolet Malibu could reconsider and donate the cash to the mtypex personal happiness (& world peace in our time) fund. For an extra grand, I’d capitalize the fund name and put your name in there somewhere.
This is an excellent article. I wouldn’t mind seeing figures in support of the certain assertions (just how many S-class vehicles does Mercedes sell?), but still, very well done.
Define “Luxury”. How about, “lower luxury”, “near luxury”, “mid luxury” or the equally vague “high end”.
$30k? 40? 50? When you have Hyundais, Chevies, Caddies, VW’s, BMW’s, Mercs, actually it’s easier to target marques NOT in that market like KIA. Right now the market is ill defined, soft focussed and killing itself. Until there’s a shakeup and the market stabilizes with definitive price point/option packages there will still be this blob of competing brands.
Once this heyday of low gas prices is over I figure the only indication of “luxury” will be a V8.
The entry level luxury segment is powered by aggressive lease rates. The market driver is the brand that is perceived as luxury by the prospective customer, accompanied by aggressive lease rates that make the vehicles affordable.
Its a very successful formula that keeps luxury manufacturers coming back for more, can’t sell the 100K vehicles, lets puts a “strong lease” on the 35K entry level and move some iron.
Does it create brand loyalty? Will the entry level customer move up to mid level models or defect to the next “lease deal” from another luxury manufacturer? When does the entry level offering stop representing the brand?
When all these leases become lease returns which then become CPO vehicles that are again leased with an aggressive rate to uphold residuals where does it stop.
Perhaps R.F. is referring to the very fine line, and that some manufacturers have migrated on the wrong side of the fine line, where entry level luxury becomes the brand.
Let’s not forget the C230 hatchback, a repeat of the 318i debacle. I had always been under the impression that the major German brands were well democratized in Europe already.
Regarding a violent contraction, I’ll have to disagree. It will probably be more like a wasting disease. Mercedes’s long slow decline in quality and VW cutting every corner they can (while lining the glovebox with felt to increase the perception of quality) shows us how tenacious brand equity can be, if carefully managed at the marketing/advertising, and visceral level.
ConejoZing :
March 17th, 2009 at 5:54 pm
Mercedes – back to basics and make those nearly indestructible cars you used to. Oh yeah and make that military grade looking thing that uh, looks like something from Metal Slug.
They’re continuing the production of the G-class (Gelandewagen) until 2012…now available with 90 more horsepower as the G550.
Re: Audi and Porsche, Robert. Well, I see your point in their overlapping.
But Audi never has been “really” successful at the high-upper end in competition with the BMW 7 series and equivalent S-class (or whatever it is called now) Mercedes; this is where Porsche should stay (on the 4 door Panamerica, is it?)
Audi should stay equivalent to the 5-series BMW. But of course, Volkswagen-Audi+Porsche (or whatever it eventually becomes) won’t use that kind of common sense; they’ll do a “GM” and overlap overlap overlap.
What my service-writing friend was referring to is back in the fatherland, many of these companies have non-luxury businesses – taxis, rentals, even garbage trucks.
That’s an important point. Europe is a different market with different expectations. The 3 pointed star on a garbage truck might not bother them. It bothers Americans.
There’s no use saying that a range of cars works fine in Europe. An American luxury buyer doesn’t want to see a ride like his painted yellow with a meter sticking out of the dash.
The cars being mentioned have been sold as luxury or near luxury. You can’t go down market w/o diluting the brand. That’s not to say that they might not sell more cars if they have a broader range, but they’ll loose the upper end.
What’s needed is another brand. Sloan’s hierarchy is too easily dismissed – often by people who are in denial about the fact that Toyota is busy building up a brand hierarchy which now totals 3. (So much for range)
Buyers looking for exclusivity left Caddy when it went down market. They’ll do the same with other brands.
With luxury cars it’s best to remember Groucho’s observation -“I’d never join a club that would have me as a member”.
An interesting and complex question here. I’ll offer a few insights.
1) What has really killed most of the luxury marques has been the number of spinning plates (a.k.a. models) they now offer in North America.
They are all guilty of this. One of the worst examples is Volvo. Ten models = 3300 units a month. There’s one luxury brand that needs to be shredded down to three competitive vehicles.
I would argue (to Robert’s chagrin) that it no longer makes sense for Mercedes to offer an ML, GL and R-Series in North America. Audi and BMW shouldn’t have any SUV in the United States. It’s a complete bastardization of the model lineage and there’s no chance of profitability for those two in that segment for the near future.
2) The ES330 is just as nice and far easier to drive than the Mercedes S-Class of a mere generation ago (I should know, I have one). Even a loaded up mid-sized sedan loaded up with options can offer 90+% of the A6’s and E-Class… at least when it comes to normal daily driving in the States.
For the Germans, I see their mid-range offerings suffering a great deal. Infiniti has become a direct and seemingly less snobbish competitor to BMW. Lexus can out Mercedes a Mercedes, and Audi simply doesn’t have much traction here once you delve outside of the A4.
3) Finally… here’s the REAL reason why luxury marques are dying.
Financing…. dead… dead… dead…
Hmmm
There has been a shit load of vehicles to come to the market.. that I plain just dont understand
The C230 was a disaster in the market. it was the cheapest MB a person could purchase and have it sill be a MB at a smidge under the 30g mark.
The Germans have more to “worry” about than the under 30g cars and the recession. What is going on with the R Class, X6, E CLASS COUPE / CLK, GLK, G, X5, X3, and the coming X1.
This is on top of Audi striking it rich with the R8 with the A5, A6, A4 and A3. But they to arent happy with the sedans and wagons ruling the world. They start with the Q7, and bring on the Q5 (and those damn anti-RX commercials).
The germans.. believe they can broaden their horizon by going FORD and GM on their customers.
The 1 series which has been under debate for years about whether or not to bring it to the states.. is a bore to look at, and expensive for what ya get. This car starts at 30g, and ya dont even get a steering wheel and a set of decent seats. For 35, (the price of a decent 3 series) ya get a decent car with a anemic 6 and a hardtop with pleather seats.
On top of..
THE PRICE INCREASES.
I believe they raised prices about 5-10% based on the market. Which is a b.s comment to people not wanting ot not affording their cars.
And I for one could definately see a world without BMW fuckers.. i n cars they cant drive, operate or see out the window.
One of my favorite “time wasters” is looking up used luxo-barges on cars.com and the like. Who knew you could buy a not very old S Class, 7 Series, A8 with under 100k miles for under $10k. As new as 2003-4. Some truly tasty deals are out there.
Now where’s that nice 04 Phaeton for $15k?
No slush,
Really, you really want to go with that?
“The mob is the wealthy. The vote for “vengeful populism”, or to watch the wealthy burn, was Ron Paul.”
The mob is not wealthy, unless you mean their leaders in Congress and corporate america. Trying to change what words mean won’t work with me. And, Ron Paul’s mob was more the size of a middle school pep rally, and oh btw, they are paranoid of the mob. It’s part of their whole belief system.
“Please, let’s see what a bankruptcy court would have made of the contracts that the parasites at AIG, etc. have.”
Had the government not gotten in bed with AIG, then they would have gone bankrupt, and whoever is getting these bonuses would have been out of luck. So government is to blame, yet again.
“And nobody is talking about 90%+ tax brackets, like we had in the 1950s under President Eisenhower. The most radical talk is about changing the very top income tax brackets from the low 30% range, as they were under Bush, back to the high 30% range, as they were under Clinton.”
You missed the news. The idea, from one of our esteemed legislators, was to create a specific tax to get it back. I believe the figure was a 98% rate.
Kinda a funny line, like your mechanic blaming your radiator for a fuel leak, while all his buddies stand around and agree, all ignoring the fact that they just fixed your radiator. You see, they JUST passed a bill with verbage PROTECTING those contracts that were written before February at bail out baby corporations. AND, on top of that, even many amatuer constitution buffs are well aware that there is a specific law in the Constitution to keep them from doing just that sort of tax. (Apparently our founding fathers aren’t done fighting yet). To put whip cream and a cherry on top, a REPUBLICAN Senator proposed an amendment that would have stopped the bonuses LEGALLY. But of course, that was not acceptable to the Pelosi Posse and Reid the Red. Personally, I think a lot of legislators said things today that should get them disbarred, and certainly end their careers based on nothing other than incompetence (never mind the populist pandering).
“If you are referring to questioning bonuses at companies which are only still in business because of my tax money as the government deciding what people should earn, well, like I said, people whose only alternative is bankruptcy court, and whose industries are not hiring, should be grateful for anything that they get, whether they are UAW workers or derivatives analysts.”
Personally, I will wait to hear what exactly these bonuses are. It could be senior guys raiding the corporate treasury, in which case they ought to get canned, and maybe sued, or jailed. OTOH, it could be folks who EARNED the bonuses by performing in our best interest. Since we own the company, maybe we don’t want to run off the folks who meet sales and performance targets. Many of them get base salaries which are less than half their total compensation. Most of the people at AIG did not make the bad decisions that got them in trouble. In fact, the regulators had more say than 99.9% of AIG employees. (Yes, the regulators (under Bush), and Congress (Democratic) approved, even applauded, the derivatives trading. But hey, when the mob is hungry, our elected officials can’t slow a rush to judgement! Oh wait, that’s precisely why we are a Republic, rather than a Democracy. Darn!
If the folks in DC act like this, we don’t need them. We certainly don’t need Sen. Schumer who is on all sides of this thing, and only a short time back was all about how the Senate was supposed to be some sort of “cooling saucer” when they were going in a direction HE didn’t like THAT WEEK. THIS WEEK, he wants to hamg’em high! Oh wait, that was another Democrat suggesting suicide for the bonus recipients. No, we don’t who, what, or why about the bonuses, but for a company the size of AIG it’s a REALLY small amount.
The reaction on capitol hill reminded a friend of mine of the town harlot sleeping with the town scoundrel, and then blaming him for sullying her reputation. I think he got it about right. The got in bed with AIG, and now, nothing they can say will make it AIG’s fault. It takes two to tango.
When I was a youngster, I’d see a luxury car and think, “wow, that guy must be loaded”.
Now when I see a luxury car, I think, “wow, I’ll bet that guy is in debt up to his ass”.
Okay, so maybe said guy paid cool cash for his luxo-sled. But to me, he still looks like all the proles who borrowed money for theirs. So much for “class”.
Two main points brought up is a) backlash and/or class warfare and b) lux marques made a mistake going down market.
As to the backlash, I don’t see it. Talk to any economist and they will tell you consumer spending will be the first sign of the light at the end of this (so far short) tunnel. Once folks start spending again, they will want to out spend their neighbors, for the most part. The media writes about the new anti-consumerism as if it will last – not gonna happen.
And this is America. Everybody is pre-rich. During the election cycle, the economy wasn’t great and yet Joe-the-Plumber with his no tax for $250k income earners position got sizeable traction, for a while at least. Americans vote, act, and spend!, above their class. This is not Europe and there will be no class warfare because we are strivers. Hope built America and it may blind us, but it is still there.
As to lux marques’ mistakes, this sounds like a re-hash of folks’ complaints about Porsche and its Cayenne. That vehicle (and a lot of proprietary securities trading) bought Porsche VW. If you don’t make products that your consumers are clamoring for, just so you can defend your brand, then pretty soon your brand will die.
What has been really killing the luxury brands is incentives and not enough focus on margins. The germans in particular are more interested in moving more units than the next, but sacrificing margins to do so. When they do that, all of the fixed costs increase and they can’t go back on the volume, so they come out with wierd CUV vehicles to fill the gap and pile on more incentives – and the trend continues.
Until the end of March, all Mercedes inventory in Greece is offered at -15% whether it is an A-Class or CL. “Under Seige” is an understatement.
If it’s leased, it isn’t luxury, but pretend.
And people have figured that out – there’s no cachet in the regular cars. This is why so many made the down-payment on the Tesla, they wanted something unusual and expensive, for the bragging right.
Not much about regular cars that is unusual any longer.
Leasing isn’t the problem – it’s subsidized leasing, or more specifically, the size of subsidy. Leasing used to be a way for the rich to get a new car every 2 years, now it’s a way for someone with a middling income to stretch into a luxury car. That’s the problem – the sacrifice of margins for the sake of volume and by default the lower price points dilute the meaning of luxury.
Interesting editorial.
One problem – Cadillac hasn’t been a true luxury brand for years. Depending on your viewpoint, the top Cadillac model has either been the DTS or the Escalade (the XLR is dead, and never made much impact anyway), and neither one is truly unobtainable by the masses (the true definition of luxury).
The luxury market has two problems.
One, lots of people were using creative financing to afford more expensive cars. The credit crunch and declining house prices have dried up that source of sales.
Two, even a lowly Ford and Honda offer plenty of gadgets at a lower price – and often with superior reliability to boot. Audi, Lexus, BMW and Mercedes do offer better fit-and-finish and nicer interiors, but in this economy, can people really pay for that?
Landcrusher:
“Had the government not gotten in bed with AIG, then they would have gone bankrupt, and whoever is getting these bonuses would have been out of luck. So government is to blame, yet again.”
The government regulated parts of AIG, like property and life insurance, were completely solvent when AIG collapsed. It is the underwriting of credit default swaps, which was completely unregulated by the government, that brought down AIG.
Credit default swaps were created by the market, and left unregulated by the government under the principle that if we regulate them they will just be traded somewhere else, like the UK. And credit default swaps are what have truly bought down the financial industry.
The only way to argue that the government is responsible for AIG’s collapse it to say that it should have been more paternalistic in the regulation of AIG’s credit default swap business.
If there is a good business reason to pay the bonuses that’s one thing, but you originally argued contractual obligation as the reason to pay them “When you deal with the mob, a contract is worth less than the paper it’s printed on”, which I don’t buy for a second for a bankrupt, bailed out company.
It’s definitely not news to me that Pelosi and Schumer are corrupt scum, or that there are a few (not enough to block or reform the original TARP package), anti-bailout, anti Wall Street kleptocracy Republicans in Congress.
My Hyundai dealer offered to remove the rear “fallen H” badge (the front has NO badge) and replace it with the Korean domestic “wing” badge. I said thanks anyway, but if I was ashamed to drive a Hyundai I wouldn’t have bought this Genesis (V8).
I may be guilty of a reverse snobbism, but I’m quite pround of my luxury car that cost 15-20K less than the “real” ones.
There are so many missed opportunities of the Daimler Chrysler “merger”, but one of them was getting Chrysler back to the to the premium/near luxury market. Instead of Chrysler having everything from the cheap PT Cruiser to the horrible Sebring to the never should have happened Crossfire, Mercedes could have lent more/better tech and platforms for Chrysler’s exclusive use. I’m thinking vehicles like the Pacifica. This would have to have been a multiyear program with every new intro pulling Chrysler into the near lux category. But The Pacifica and the 300 (since everyone thought it was an older E-class) would have been the direction to go. The old C-class would have made the foundation for a rwd Chrylser c segment car (200?). Mercedes could have stayed above 40G’s and they wouldn’t have to have extended themselves below their traditional market here in the States.
Slush,
Sorry, these guys ALL had to ask regulators about credit default swaps AND Mortgage Backed Securities (the real culprits). No CEO would have moved on these things without a note from a fed. Read the hearing transcripts, not the NYT.
I don’t fall for the BS that says they were unregulated because there was no 10,000 page official book on the subject. There are 1,000’s of pages of memorandums, meeting notes, letters and emails that surfaced. The Repubs aren’t fighting this fight because it’s a no win since the left would just point it back at them and President Bush. In the real world, if a private firm realizes it has to ask regulators before doing something, regulation has been committed.
The easy way to blame the government is to tell the story about Spitzer’s interference and combine it with the government created housing fiasco. However, I won’t do that. AIG is responsible enough for it’s own problems, but it’s not to blame for the governments’.
Once again, AIG did not go bankrupt. That’s the whole point. The mob doesn’t play by the rules. Hell, Sen. Schumer, despite having been in DC his whole frakkin life, apperently doesn’t even know the rules. Someone needs to check to see how he ever got a law degree. The guys at the YMCA Night Law School know better than that.
The real culprit is the credit default swaps (CDS) that insured the mortgaged backed securities, amount other financial debt assets.
The mortgage backed securities would have caused financial problems, but its the CDS have actually collapsed companies like AIG (which I know isn’t technically bankrupt, I was using the term as it is traditionally applied to the insolvent).
CDS allowed speculators, which didn’t own any mortgages, to speculate on mortgage failure by buying CDS (kind of like if you were allowed to buy life insurance on a famous person you thought would die).
Companies like AIG wrote CDS to these speculators in amounts that were many multiples of the actual mortgage backed securities market. And then the CDS on prime rated debt, which companies like AIG never thought would come due, came due.
I’m sure there are thousands of pages of government hearings transcripts and memorandums on CDS, but they were actually regulated. The CFTC, which polices derivatives, never got authority to regulate them.
That’s the fault of the government, not AIG. You’re arguing with a straw man if you think I blame AIG for the government’s problems.
On the other hand, blaming the government for the mortgage crisis, as you claim is easy to do without going through the effort of doing it, is a complete lie.
I’m quite familiar with the made up Wall Street defense tries to connect the mortgage crisis with the Community Reinvestment Act, like some six degrees of separation game. But it doesn’t connect.
If the government is to blame at all for the mortgage mess it is because Ayn Rand’s boyfriend at the Federal Reserve, Alan Greenspan, caved to business pressure to keep interest rates artificially low.
landcrusher: Hell, Sen. Schumer, despite having been in DC his whole frakkin life, apperently doesn’t even know the rules.
He forgets them when it’s convenient. Like many other people in government.
no_slushbox: If the government is to blame at all for the mortgage mess it is because Bill Clinton made the conservative, deregulatory move of repealing the Glass–Steagall Act.
The Glass-Steagall Act separated investment and commercial banking. It prohibited commercial banks from underwriting or dealing in securities, and from affiliating with firms that engaged principally in that business.
The Gramm-Leach-Bliley Act only repealed only the second of these provisions, allowing banks and securities firms to be affiliated under the same holding company. Thus J.P. Morgan Chase was able to acquire Bear Stearns, and Bank of America could acquire Merrill Lynch.
In other words, it prevented the current crisis from becoming worse.
Nevertheless, banks themselves were and still are prohibited from underwriting or dealing in securities.
Allowing banks and securities firms to affiliate under the same holding company has had no effect on the current financial crisis.
None of the investment banks that have gotten into trouble — Bear, Lehman, Merrill, Goldman or Morgan Stanley — were affiliated with commercial banks.
And none of the banks that have major securities affiliates — Citibank, Bank of America, and J.P. Morgan Chase, to name a few — are among the banks that have thus far encountered serious financial problems. Indeed, the ability of these banks to diversify into nonbanking activities has been a source of their strength.
Most important, the banks that have succumbed to financial problems — Wachovia, Washington Mutual and IndyMac, among others — got into trouble by investing in bad mortgages or mortgage-backed securities, not because of the securities activities of an affiliated securities firm. Federal Reserve regulations significantly restrict transactions between banks and their affiliates.
So, no, Gramm-Leach-Bliley wasn’t the root of the problem.
There should have been some changes in regulation. It’s obvious what the form of that regulation should have been: No federally insured bank or financial institution or federally sponsored entity (Fannie, Freddie, Ginnie, etc.) may finance, directly or indirectly, any mortgage except for fixed-rate, 10-30 year mortgages with substantial down payments (10 percent would be okay on a 10-year loan; 20 percent for longer loans).
Here’s a follow-up question: Could this legislation have been passed by Congress even last year?
Why not?
(Hint: Their last names are Frank and Dodd. Last time I checked, they weren’t free-market-worshipping Republicans.)
geeber:
I said “if”, but I’ll take out Glass-Steagall’s partial repeal.
Please find me any federal politician from any party with the nerve to say that ARMs should be prohibited or severe LTV restrictions should be enacted with respect to any loans from any institutions.
Dodd and Frank are way too large of whores to the finance industry to ever enact those consumer and taxpayer protections.
no_slushbox,
I won’t argue that no one – well, George W. Bush did raise some alarm bells a few years ago, but very few paid any attention to him, and those who did were several Congressional Democrats who said “no way” – wanted to do this.
But that is an entirely different matter than blaming “deregulation” or Gramm-Leach-Bliley or Ayn Rand worshippers for the current mess.
If anything, I believe Ms. Rand got it right, by noting that those in power will often use government to benefit themselves and their friends in industry and other arenas.
Trying to label things as conservative or related to Ayn Rand is the problem. I don’t give a damn who is for or against something if they aren’t in office, only what is right and wrong, and what will ultimately work.
I will never agree that there was not regulation. We are talking about AIG here. Only a bunch of lawyers will say there was no regulation because they use the word as a technical term.
Bank = Regulated.
Insurer = Regulated.
Publicly Traded = REGULATED.
AIG makes NOTHING. They buy and sell MONEY. These businesses are all about accounting and regulation. Saying they weren’t regulated is simply a lie. FOHGEDDABOUTIT. They account for EVERY paperclip on their books. But somehow, they insured billions of CDS’s and we will pretend they didn’t get a few dozen government people to say it’s okay? Really?
What we are talking about is how MANY regulators, what their interests were or should have been, and what all laws and regulations actually were involved.
I know how CDS’s were used by hedgies in a way that I believe was illegal. I just can’t prove it, and I suspect that’s because both sides have too many folks who would go to jail or otherwise be ruined by the scandal.
As for the housing problem not being caused by the government – Fanny, Freddie, Greenspan, Congress… It’s all government.
Starting from an assumption of a certain level of government not counting doesn’t help you see the truth. That’s not to say we shouldn’t have government, only that we can’t ignore all its influence.
Not to take the attention away from GLBA and Glass-Steagal, but how exactly did Audi get into the Top 5 luxury players in the US?
Doesn’t Infiniti outsell them? Doesn’t Jag/Rover out-lux them? What about Porsche — aren’t they tops in luxury marque satisfaction?
Landcrusher :
March 17th, 2009 at 5:06 pm
Yep, eventually, the class hate wagon will aim it’s full firepower at the luxury brands, it’s just a matter of time. The latest trend is threatening a 98% tax on pay which the government doesn’t think you should get. Nevermind your contract. When you deal with the mob, a contract is worth less than the paper it’s printed on.
Without bailout, AIG would have gone under back then. The “contracts” would have expired at that same moment. Thus, those same “contracts” become void as soon as they choose to accept bailout.
The “under-paid” employees can sue whoever promised them the bonuses and couldn’t deliver.
But there isn’t any contract in which American taxpayers have agreed to pay them bonuses.
I am not against AIG employees getting bonuses. Not at all. Just be sure to return the bailout money with interest before you pay bonuses.
Sherborn,
Hey, we have plenty of brain to wrap around both issues. No problem.
:)
Audi grew because so many others lost the plot. I don’t think infiniti outsells them, but I didn’t check that. Jag/Rover and Mercedes have all forgotten about quality. Porsche is low volume. And then there was Bangle.
Just at the time that BMW was about to blow it out, that guy came along and forgot that BMW hadn’t done design chic since the mid 70’s. It was never the reason for their success.
I say a good portion of Audi sales are directly caused by BMW’s failures. Yes, Audi is making better looking cars, but if BMW hadn’t gone off the reservation Audi wouldn’t have grown so fast.
wsn,
Wrong,wrong, and wrong. Sorry, but as a guy who has made most of his income on commissions and bonuses, I paid attention.
The bailout SPECIFICALLY did not invalidate contracts, they could have done it at that time, but they did not (blame Bush admin on this one).
The stimulus bill SPECIFICALLY enforced into law the validity of the contracts written before February (this would be the Dem’s).
Since the American taxpayers now own AIG, all of AIG’s contracts are ours. Therefore, there actually ARE contracts between these individuals and the taxpayers. The lawsuits would not be with the bosses who promised bonuses because the contracts are with the corporation (which is now owned by US). We had our chance to say no, but we didn’t do it.
Once again, we are back to the harlot and the scoundrel. We are the harlot. All the protestations are rather tiresome. We have no excuses, we violated our principles and even passed on the condom. His behavior was to be expected, so blame him all you want, but no one with any sense will excuse the harlot.
Now, why would we as the owners of AIG, want to go after all these bonuses without first making sure we aren’t burning the very people who are keeping the company going, and who NEVER had influence on the bad decisions, or who did nothing unethical or selfish? The broad brush would merely ensure we never get back any of our investment. Also, this idea that AIG people can’t get a job elsewhere, so they should lump it is ignorant. The really talented ones get jobs. My wife just hired away an AIG employee a few months ago.
Ya’ll keep it up, all that is going on here is an object lesson on why governments should stay out of the market as much as possible.
“Let’s face it: it’s not a great time to be seen “splurging” on a luxury car.”
Why? Are you afraid of what your neighbors might think? If the value is there for you and you can afford it. Why not. Why would I care if Joe Bob down the street is heated because I bought a 2009 7 series. I am not going to tell him that I talked the dealer down 10 grand. You are not buying crotchless pants, its a car for crying out loud.
carguy622 :
March 17th, 2009 at 5:44 pm
This is why I think the Phaeton failed and why the Genesis may fail as well. As good as these vehicles perform and look, who wants to spend the extra money on a “luxury” mainstream car only to have to wait in line, surrounded by linoleum and plastic chairs, while the gentleman in front of you is telling the service manager that the A/C in his Elantra is not working.
Phaeton failed because it’s over-priced.
When Lexus just got started, LS was 25% cheaper than MB S or BMW 7. As LS became successful, the sticker grew.
Thus, Phaeton should have been priced at least 25% cheaper than the value leading LS to have any chance. Actually, it should be 35% cheaper, since VW is not a premium brand. Given that LS is typically at $75k, Phaeton should be selling for $49k to have any real chance.
Genesis, on the other hand, represents real value.
Landcrusher :
March 18th, 2009 at 1:15 pm
wsn,
Wrong,wrong, and wrong. Sorry, but as a guy who has made most of his income on commissions and bonuses, I paid attention.
The bailout SPECIFICALLY did not invalidate contracts, they could have done it at that time, but they did not (blame Bush admin on this one).
The stimulus bill SPECIFICALLY enforced into law the validity of the contracts written before February (this would be the Dem’s).
————————————————————-
What you said are facts. But the truth is:
The bailout/stimulus is a mob-supported and rushed piece of legislation that actually deviates from the spirit of the constitution.
So is the proposed 100% tax on “bailout bonuses.”
Is the proposed tax rational? No!
Is the proposed tax any worse than the bailout? No!
This is no justice. But at least, it’s Karma.
Landcrusher :
March 18th, 2009 at 12:39 pm
AIG makes NOTHING. They buy and sell MONEY. These businesses are all about accounting and regulation. Saying they weren’t regulated is simply a lie. FOHGEDDABOUTIT. They account for EVERY paperclip on their books. But somehow, they insured billions of CDS’s and we will pretend they didn’t get a few dozen government people to say it’s okay? Really?
What we are talking about is how MANY regulators, what their interests were or should have been, and what all laws and regulations actually were involved.
————————————————
I agree with this part. There is nothing wrong with CDS, or even “sub-prime”.
The source of the problem, is the Fed supplying unlimited amount of loans to the banks, causing a large bubble.
Without the Fed, the loans with be harder to get when the economy heats up, thus correcting itself. People will then make money or lose money on subprime or CDS at their own risk, without affecting anyone else.
wsn,
I see where you are coming from. I won’t ever agree that two wrongs make a right, but I understand your frustration. I am just not that mad at the AIG folks (and I have a reason to hold a grudge). It’s the folks in government that I want to pay. I would love to see them get a retention bonus and move on.
So is this a long way of saying that the Lexus ability to disappear into a mass of mid-market sedans is no longer a liability? Replace the Lexus logo with a Toyota badge and I think the LS series may be the last word in stealth wealth.
carguy622:
I can tell you exactly why the PHAETON bombed..
Its because it was being sold through VW. VW apparently in the last few years has lost track of what VW is. They lost track with the Jetta by making it larger to comete with the Accord and midsized sedans, instead of the Civic that it competes better with. It also dropped the price of the damn car in acknowledgment.
The Routan is another perfect example about how VW is lost (inaddition to their condensending Minivan campaings).
Then ya got the Toureg thats a cheap copy of the Porsche version.. (or is it the other way around.) Specifically aimed towards women.. who really have no clue on how to drive one, yet thinkt hey need AWD on a car with street / all seasons.
I can go into the Tiguan, with the marketing showing that maybe the Toureg was / is too big, here is a vehicle ya can actually operate. Geared towards women — of course.
The selection of vehicles is decent, but its not the same cheap / for-the-people mentality that they grew up with.
Now ya got the EOS, for the VW BUG / Jetta driver that needs a folding hardtop.. as if the conv isnt enough.
And finally I know there is a pickup coming.. as if Honda and or VW needed to get into this area.
In short..
The PHAETON BOMBED.. because they didnt know how to advertise it, there are massive gaps between the Passat and the PHAETON. But of course “a restyled Passat / CC is going to make it all go away.
VW needs to figure out exactly where its going.. csause it forgot where it came from.
And vehicles like the past 4 need to be shelved, including the RE-RELEASE OF THE PHAETON / A6 / A8.
When luxury brands become affordable, and too many people buy them, they become mainstream brands. Lexus ES350, Lexus IS250, BMW 1 Series, Mercedes C Class – the list goes on and on.
Quote from: “March 20, 2009
Are Congress and Obama deliberately inciting a new US civil war?
By Sher Zieve
Those who caused it are members of Congress and the Executive Branch. All Democrats voted for the AIG bonuses. However, in order to divert attention away from the real culprits of the financial disaster (again the names Barney Frank, Christopher Dodd and Barack Obama come immediately to mind) an extraordinarily unconstitutional bill to tax AIG employees at 90% of their LEGAL bonuses was passed by the House of Representatives.
The taxation on — like it or not — legal bonus money is punitive and directed at a small group of people who are not being allowed a trial. This is known as a Bill of Attainder — “a legislative act that singles out an individual or group for punishment without a trial.” Article I, Section 9, paragraph 3 of the US Constitution provides that: “No Bill of Attainder or ex post facto Law will be passed.” Congress is round-filing the US Constitution — the only document that protects ALL of We-the-People.
Those and other actions from and by our “leaders” are so outrageous that it has led me to believe that both Congress and Obama are in the process of purposefully creating conditions that will lead to a revolution by We-the-People so that it and Obama can affect Martial Law and once and for all forcibly suppress the American people.”
Most of the people at AIG did not make the bad decisions that got them in trouble. In fact, the regulators had more say than 99.9% of AIG employees. (Yes, the regulators (under Bush), and Congress (Democratic) approved, even applauded, the derivatives trading.
OMG this is so hilarious. Apparently, if they did move to restrict, it’s their fault for restrict freedom, and they didn’t, it’s their fault for lack of oversight. There’s really nothing you can’t blame on government (the same one often payed for by the wealthiest of interests), is there?
What’s really disgusting is that same people who were cheering and applauding the looting when they where profiting the most off it are now trying their best to distance themselves as if they had nothing to do with it.
Lesson 1 in identifying the scapegoat vs the villain: the scapegoat is not the one left holding the money in the end.
an extraordinarily unconstitutional bill to tax AIG employees at 90% of their LEGAL bonuses was passed by the House of Representatives.
For anyone who’d like to get clued in on how the system works, might as read my post here.
It’s very apparent that the US is a very religious nation when some documents of governance are considered divine writ (ie constitution and anything that makes mucho monies.); and others are best trashed because they are the product of “government”, no doubt unrelated if not opposite to the former type.
The source of the problem, is the Fed supplying unlimited amount of loans to the banks, causing a large bubble.
Just to clarify, the “Fed” is a mechanism to finance the means of capital.
The source of the intellectual problems here is that it’s easy for simpletons to blame the facilitator (often the gov in any modern state) since it’s the most visible part of the system.
Take the credit for making $, kick the losses elsewhere. To think people still fall for it.
—
Anyhoo, about luxury cars that hasn’t been said. Considering euro brands outside their main context of europe doesn’t make much sense. But it is interesting how they design for their home market where they’re more the “quality” brand and then repackage that to be “luxury” for the Americans.
Going forward, easy credit and the transplants pretty much ruined the couture image, so they’ll have to compete on quality like back home which isn’t going to be easy against the new breed of asian cars.
Leasing, Leasing, Leasing.
A local Westchester, NY Business paper had a long article from the local SAAB dealer. Actually, I was kind of pleased to hear this…he bought and destroyed the small SAAB shop I used to deal with liked.
He went from 25 saab sales per month to…three once saab lost leasing. I can only imagine that for the entry level luxury segment, populated by small professionals who can “write off” a lease but not much of a buy, this is the stake in the heart.
You can buy good used 3 Series all day now for 20-23k…….and you have the same cachet. (e46)
Must disagree with RF about the CTS. My inlaws have the first generation, which is a “good but not great” car. Quiet, comfy, decent on the road. More Caddy. The new CTS is very, very good-I don’t know if will last as long as my 3-er (185k and still no rattles) but it is a great car, being sold by a crappy company. If my much loved and high quality 3-er was stolen/wrecked, I’d be searching for a 330i sport package used once the check cleared. In the alternate, a CTS with stick and sport….it’s a bit bigger for the family.
speedlaw:
Wanted to thank you for the mention of the article in the the local NY paper.
I had to get my hands on it.
In case anyone else is hungry for an article about leased and auctioned Saabs up in NY somewhere..
http://www.hvbiz.biz/archive/120108/news12010804.php
I have to say..
Not that my opinion means much..
But there is soo much psychology involved in the 3series Bimmer purchase / lease v the C class purchase / lease / V the Alternates, G35, A4 and or Saabs.
Personally..
I dont know of cars that depreciate more.. than a Saab 9-3 or 9-5. Fantastic design.. especially in the coupe / droptop but if it doesnt sell, then its not worth it.
And as for as the Caddy CTS goes..
Ita a snore for a few reasons.
The SAME buyers are driving these, that drove Broughams, Devilles / DTS, Sevilles / STS, Eldos.
And frankly.. I gave up on them a loooong time ago to design a vehicle and make it actually perform the way as intended. I honestly dont care about how the CTS V is as fast as a M5, (pisses me off that the CTS V is the last gen body style with a Vette Motor). Caddy is also a victim of WTF.
Canned the Eldo, only to bring on the XLR (could have kept the name going for years). They stretch and pull, yank and duct tape the front clip all over the STS / DTS, and it hasnt helped them.
Oh but the ‘Slade purchases are really helping their bottom line. (I bet there is a little factory out back that turns Burbans / Tahoes into Slade Ext’s and Slades.)
I for one.. believe that the CTS shouldnt GAIN WEIGHT. A fat ass, isnt a driver. ITS A PORKER, certaintly isnt manuerverable.
And you’d be doing it a dis-service by thinking otherwise.
agenthex :
March 20th, 2009 at 5:01 pm
Just to clarify, the “Fed” is a mechanism to finance the means of capital.
The source of the intellectual problems here is that it’s easy for simpletons to blame the facilitator (often the gov in any modern state) since it’s the most visible part of the system.
What’s wrong with blaming the facilitator?
The problem is that the Fed is facilitating something they don’t have. Fed doesn’t have billions in a savings fund to facilitate loans. They facilitate virtual money, paper money yet to be printed. When you start with something unreal, what do you expect the result will be?
The Israel/Palestine conflict, another big headache of today, is also caused by a facilitator. UK promised Jews a piece of land. Well, the facilitator doesn’t actually own the land, it’s virtual before the end of WW2, and it’s at the cost of someone else (Palestinians) to fulfill that promise. Just like now it’s at the cost of the taxpayers.
What’s wrong with blaming the facilitator?
Because blaming the middleman is not effective. If you are to believe in democratic ideal, then the peeps should assume some control AND the responsibility for the collectivized actions. At the very least it should be transparent who wants what and why, and this is point I get hung up on because there are highly profitable and therefore motivated interests out there who are very effective at misrepresenting this.
For example, I’ve always thought it’s a very clever ploy to cast the “government” as a foreign entity, so instead of encouraging work towards a more democratic system, it becomes easier for the collectivized interest to be manipulated by a few when the peeps distance themselves.
—
The problem is that the Fed is facilitating something they don’t have. Fed doesn’t have billions in a savings fund to facilitate loans. They facilitate virtual money, paper money yet to be printed. When you start with something unreal, what do you expect the result will be?
I would encourage you to learn about the modern monetary system. Think of it as your responsibility as a democratic citizen. :)
One important aspect is that “money” is virtual in the first place. The trick is how to put as much of it out there to enable growth without triggering detrimental effects like inflation. How to optimize the methodology are non-trivial questions in economics.
For example, to tie it all together, it’s pretty clear that by legally allowing giant financial entities and giving them relatively cheap&easy money to play with, the gov (that’s us) got set up for the situation where these institutions were able to take huge gambles where they retain profits but socialize any inevitable loses (ie “heads we win, tails you lose”).
It’s tempting at this point to blame the scapegoat for all the heartbreak, but even more tragic when you find out the people are getting gamed both ways by a few elite who were simply smarter and better at playing the money game.
agenthex
I hate to start a battle that a person cant finish…
But the Israelis and the Palestinians have been having this continuous battle.. for going on 50yrs. Ya dont actually think a US presidency or anything happening anywhere else is going to affect it?
And as for the U.K promising the Jews a piece of land.. When the United Nations was formed on 24 October 1945, one piece of business to take preceident, was the placement for Jews to go, where they weren’t a “burden” on the rest of the world. Apparently, there wasnt any more “room” in other countries.
Now,
The Land that the Jews got, that was soon to be called Israel. There WAS NO ONE ELSE that lived in that barren piece of dirt / property.
So the Palestinians only started barking up the tree of this “belongs to us”… did any fights actually start brewing.
Todays battles.. is m ore of a tit-for-tat about who hurt who first.
But it started with, who was at that property / land / holy land first.
Guys, illuminate (illuminati?) me: what does this have to do with luxury cars?
I think it’ll end up postulating that “the Jews” will soon be the only ones with money to buy cars, which disagrees with the premise in the article that the inexpensive models are a mistake.
I kid.