Ford and GM are launching summer sales.  The development reveals an open secret: the automakers are selling vehicles at a loss.  There are plenty of reasons for this.  The need to maintain cash flow, pay the Union, generate business for their finance arms and protect market share.  But this trend can’t continue indefinitely.  At some point, both of these companies need to produce profitable vehicles, and lots of ‘em.  But what kind?

When people say a car has “character,” they mean one of two things.  First and foremost, the word is deployed to praise gross ergonomic errors.  We’re not talking about minor design quirks: Saab ignitions on the floor, CR-V shifters high on the dash, horns on the wheel spokes.  Pistonheads trot out the “C” word to heap praise upon those interior peculiarities that stand up and demand you notice them when you should be doing something else, like driving.  While enthusiasts have been praising these automotive “eccentricities” for years, it’s time for carmakers to write this character out of the program.  

The New York Times recently labelled GM a crack dealer for using $1000 gas cards to "addict" Californian drivers to its gas-guzzling SUV's. There are several important differences between selling a Schedule II substance to low-income drug addicts and marketing a legal product to responsible consumers in a free market. Suffice it to say, the Gray Lady's got it backwards: GM is the addict. The General is hopelessly addicted to fleet sales. Although GM has publicly announced its intention to reduce their reliance on this part of their business, it's nothing more than a junkie's promise to reform. In fact, none of the Big Three are ready, willing or able to leave their dependency behind.

There are two kinds of fleet sales: organizational and rental. In both cases, profit margins are minuscule. Manufacturers aren't overly concerned. They rely on the huge orders to increase production levels; which keep factories open, sudsidize union salaries and reduce a given model's cost-per-unit (CPU). A low enough CPU creates higher profit margins on the model's "regular" (i.e. retail) sales. The enormous volumes also facilitate all-important 'top sales' bragging rights and protect the manufacturer's Holy Grail: market share.

Last year, GM unveiled a funky retro-styled vanlet called the HHR (Heritage High Roof). Although the HHR has generated some much-needed action on Chevrolet dealers' lots, the vehicle's character and genesis is an ominous sign that all is not well within GM's product development process. For one thing, the HHR is a bin-engineered clone of its competitor, the PT Cruiser, designed by the same man who penned the Chrysler. For another, there was a five-year gap between the PT and the Me-Too. In other words, when it comes to creating products for the US market, General Motors is dim, cheap and slow.

To be fair, GM's current vehicles are generally 80 to 90% as good as the class-leading benchmarks. TTAC readers might not choose a Pontiac Torrent over a Honda CR-V, but there's nothing wrong with the Pontiac that automatically disqualifies it from consideration. Right now, that is. A few years down the road, things start to get ugly. When it's time to update a product– not just adding new options and colors, making significant mechanical and cosmetic improvements– GM has been known to let a new vehicle slip seven years or longer between refreshes. In contrast, The General's foreign competition is fully committed to a five or six-year product cycle. As a result, GM's products are falling further and further behind, until they become obsolete. For example…

When gas prices spike, hands are wrung and fingers are pointed. A frantic, politically volatile search for the "cause" of the whole mess follows. With gas prices hovering round the $3 mark and enough carping to please a Tennessee fishing tournament; the question has entered the forefront of our national consciousness. The answer, for once, isn't supply, though there are some logistical hiccups involved. Oil (and thus gas) prices are climbing to new heights as a result of two "highs": high-demand and high-finance.

High-demand is easy to understand, and even pleasing in a backhanded sort of way. Capitalism has won the economic war; a lot of the little economies are picking up (including the sleeping dragon surrounded by all those "tigers"). More factories and more cars equal more demand, demand exceeds supply, price goes up. It's basic economics. So did all those Chinese buying cars cause this? (A small fraction of a billion plus is still huge). Well yes, partially, but there's also the financial angle.

When things are going well, when the US economy's humming along and the right models await eager buyers on dealer lots, being the world's largest auto maker in the world's largest automobile market is a license to print money. When the stars are aligned, GM's economies of scale, eight brand range and vast dealer network make it an almost obscenely profitable enterprise. Lest we forget, The General earned tens of billions of dollars in the SUV-mad 80's and 90's. If you're wondering why GM's fortunes have reversed so quickly, dramatically and irrevocably, there's your answer: they're victims of their own success.

GM execs have two ways to stand out: make more sales (by striking out in new directions) or make more money (by doing more of the same). Since it's hard for GM NOT to make money in good times, GM managers invariably opt for the safer option. Sure, every now and then, someone sets a lofty new goal: selling Cadillacs in Europe, building fuel cell cars, reinvigorating a struggling brand, etc. And then the next group of suits comes along and ignores them. After all, THEY didn't come up with the idea. And big ideas take time. How could a highly-paid exec use a long-term project to score career-boosting credit? No wonder every new generation of vehicles has a new set of names; no one wants to share credit with an old project.

As GM fast approaches the day when it surrenders its world's largest automaker title to Toyota, it's important to remember that we're still talking about a corporate colossus. If you include fleet sales, The General makes one in every four vehicles sold in the United States. Obviously, GM's problem isn't volume. It's profitability. GM's US operations are still designed to cater to a third of the US car market. That's Hell of a lot of fat to trim– especially with a union that hears "efficiency" and thinks "downsizing". Meanwhile, The General has an even bigger problem: it doesn't have a heart.

An automotive brand's "heart" is the car that the average customer associates with a given brand. It's the vehicle whose character most clearly personifies the brand's values. Toyota has the Camry. Honda has Accord. Nissan has the Altima. Ford had the Taurus (and demolished it to push the Explorer). GM has nothing. More importantly, Chevy has nothing. Remember "the heartbeat of America"? It's on the crash-cart, waiting for a transplant.