The grand poobahs at the PTFOA are Wall Street bankers and political insiders. None of them have built or run real businesses designing, marketing, selling and supporting high priced consumer products. Everything they think they know they learned from books and lectures, not from actually doing stuff. The old story goes: “When your only tool is a hammer, every problem looks like a nail.” To the Wall Street types, slash and burn is the hammer they know. Even President Hope has taken to using their favorite phrase “Lean and Mean.” Surely we need lean, productive companies, but who needs mean?
Clunker culling is spreading faster than the swine flu. Throughout the world, governments are putting bounties on aging autos. Of course, all for the noble cause of greening the planet. China has come out with a surprising new twist. On May 19, the Chinese government had announced the mother of all clunker culling initiatives. They would not only give cash to consumers who replace their old cars. No, they also offered money for the replacement of washing machines, TV sets, and additional abominable atmosphere attacking appliances. Today, China’s government issued a new edict: Buyers of small cars may not apply. Cash for clunkers is only handed out if you trade in your ancient ride for a new car with a displacement of 1.6 liters or larger, Gasgoo reports. Anything, as long as it’s bigger than 1.6 liters.
Playing poker for money is illegal in Germany. Which doesn’t keep the German government from conducting a high stakes poker game with a group of high rolling players. Around the table: Fiat, Magna, Ripplewood, Chancellor Merkel, Vice Chancellor Steinmeier, Minister Guttenberg. Kibitzing and making comments: The premiers of the Opel states, the unions, the Opel dealers, and just about everybody else. On the table, barely alive: Opel. The Financial Times calls it—with British understatement—“considerable back-room powerplay by politicians.” (Read More…)
Fiat, RHJ International and Magna have all submitted bids for GM’s European unit, Opel. In an interview published today [reported by The New York Times], German economy minister Karl-Theodor zu Guttenberg reserved the right to reject all three suitors, sending Opel into bachelor’s bankruptcy. “We must first have a high degree of certainty that the significant tax money we will have to provide is not lost,” KTzG pronounced. Roger that. All three offers depend on German financial backing; without which NONE of them will go forward. After those glad tidings hit the net, KTzG went into damage control mode. Speaking to journalists in Berlin, Mr. Guttenberg’s spokesman “clarified” his position: “we want to avoid bankruptcy, but bankruptcy has to be an option. Apparently, an “orderly insolvency” would “not be the end of the company.” Who’s the oxymoron now?
1. Floorplan costsThe more dealers you have, the slower the inventory turn. The slower the turn, the longer it takes to repay the debt. The longer it takes to repay the debt, the more money that’s required. By cutting dealers, the manufacturers cut GMAC’s capital requirements, which run into the billions.
2. Inventory Excess inventory ties up capital and increases the burden of the floor plan, due to the longer sales cycle. (Chrysler and GM have far higher days of inventory than Toyota, Honda, BMW, et al. All that metal sitting around wastes a lot of money delaying the conversion of assets to cash). If the automakers have fewer dealers to serve they should be able to produce fewer vehicles.
3. Resale value More dealers means more competition within the brand which means lower transaction prices.
4. Profit at the dealer level One would hope that you end up with better dealers if they can make more money (although that’s debatable).
From 1973 through 2005, my job was to create excitement for Volkswagens in the hope that people would buy them. The job had its ups and downs. We loved facelifts and hated totally new cars. With a facelift, we could travel to attractive and warm places for the photo shoot. “Because of the sun.” Not to mention the beach. And the nice amenities of the Hotel Negresco in Nice. With a facelift, we could tool around in broad daylight, and nobody would bat an eye or even think of snapping a picture. Which magazine would publish the spy shot of a re-designed bumper? Totally new cars were top secret. Not allowed to travel outside the confines of the VW factory. Even there, constantly under tarps. The only places we could photograph them were at the in-house photo studio or at the VW proving grounds in Ehra-Lessien.
God I love Google Translate. Where else can you generate Zen koans like the one above, allegedly attributable to Honda CEO Takeo Fukui? OK, it’s not actually a koan. But I sure would like to know what this “big mistake” is gonna be. Meanwhile, Bloomberg reports Fukui’s interview with Japan’s Yomiuri. Apparently, the Japanese carmaker’s going to hybridize everything they build, including our ’bro Asimo. I made that bit up, obviously. In truth, Honda’s “considering” introducing gas-electric minivans, sports cars and luxury sedans. If they’re as good as the new Insight, we have two words of advice: don’t bother. Oh, and I think Bloomberg translated the aforementioned techno-statement a little more accurately: “Fukui said it’s a ‘huge mistake’ for merging carmakers to expect cost savings on research and development.” Or anything else for that matter. Not that Fiatsler or their patrons (that’s you!) are listening. Hang on . . . now that I think about it, Google’s translation is actually pretty accurate. Huh.
Now that we’ve nailed that whole cupholder thing, it’s time to tackle the important stuff: trunk hinges. I reckon trunk lid hardware is an excellent indication of a given model’s overall build quality. Bad hinges, bad car. Great hinges, great car. There’s a range of important factors here: materials quality, appearance, reliability, longevity and action. To wit: I was appalled when I pressed the Maybach 57S electric trunk closer and watched the rear lid descend like an old, poorly made guillotine (don’t ask me how I know). My Odyssey’s tailgate closes in a more graceful arc. So, again, here’s the deal: email robertfarago1@gmail.com with your nominations for best trunk hinges, your rationale and a jpeg (or link to same). I’ll post them in a gallery. Then Eddy and I will choose the top ten based entirely on your wit and our whims. Thanks, in advance for your help.
Automotive News [sub] has seen an advance copy of an interview with president Obama on C-Span. Strangely, re: GM’s future, Barack doesn’t use the “b” word. But the prez does promise to return the automaker to private command and control. Eventually. “Ultimately, I think that GM is going to be a strong company, and we are going to be pulling out as soon as the economy recovers and they’ve completed their restructuring.” As my father is wont to say, how much is this boondoggle going to cost me? To recap . . . “The Obama administration has injected $19.4 billion to keep GM afloat since the beginning of the year, including another $4 billion on Friday. The government stake is commitment is expected to rise to $27 billion after June 1.” And the rest.
Forget Jack Baruth and his girlie Boxster. The whole Porsche company is quickly skidding out of control. Porsche, the company that supposedly has more money than Scrooge McDuck, the company where CEO Wendelin Wiedeking and his CFO Holger Härter supposedly take a daily dive into the money, was—hold on to anything stable—facing insolvency two months ago. This is what readers of the German magazine Der Spiegel will read on Monday. The Süddeutsche Zeitung has an advance copy.
The Detroit News headline: “Obama Auto Bailout Draws Fire.” Suddenly, without warning, Motown’s hometown newspaper has changed sides. What was “their” bailout has become “Obama’s.” The altered allegiance comes hot on the heels Chrysler and GM’s decision to terminate around a thousand dealers apiece. This is not music to the domestic supporters’ ears; the dealer cull represents the complete, final and unavoidable end of Motor City’s domination of the American car industry. The fact that the domestics’ supporters are suddenly behind the franchisee push back—which could scupper both automakers’ future—shows the depth of Detroit’s denial. While the bailout boosters gave The Presidential Task Force on Automobiles (PTFOA) props for shit-canning GM CEO Rick Wagoner, you can file this one under no good deed goes unpunished.
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You’d be forgiven for thinking that the sale of “old” Chrysler to “new” Chrysler by June 15 was a done deal. Otherwise, why would Fiat feel free to tell the American taxpayer which three amigos will control “new” Chrysler’s Board of Directors (Fiat Chief Executive and future ChryCo CEO, Sergio Marchionne; Alfredo Altavilla, head of Fiat Powertrain Technologies; and former ExxonMobil executive, Lucio Noto)? Lest we forget, federal bankruptcy judge Arthur Gonzalez swept aside the non-TARP bondholders. But there’s growing, well-organized, politically-connected resistance from the terminated Chrysler dealers. In fact, their Congress critters are calling ChryCo’s (and GM’s) CEO onto the carpet next month, compelling them to testify why they done did it, reports Automotive News [sub]. As part of a rearguard action, Fiat has submitted papers to Arty that say “You don’t let us do this thing we must do and your people will suffer.” Minus the paraphrasing . . .
One amazing aspect about the hunt for the distressed assets of Chrysler and GM is the absence of the Chinese. Weren’t they eager to snap up anything they could get their hands on? And who would have thought that Fiat of all auto makers would walk away with Chrysler—and possibly large parts of GM—if their Opel bid gets approved? The absence of the Chinese was duly noted in Ed Niedermeyer’s piece “Where Is China?” It talked about xenophobia, and the discussion soon turned into a xenophobic slugfest and had to be closed.
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