The Wall Street Journal [WSJ] reveals the not-so-surprising fact that U.S. car buyers are trading down to smaller vehicles in the name of fuel economy– but they still want iPoditude, hands-free schmoozing and thermal butt management. Small car market share is climbing, from about 14 percent (2004) to over 19 percent (year to date). At the same time, the average small car price is heading upwards by some $2k – $3k. Ford Marketing Maven Jim Farley says around 30 percent of Foci are now top spec. Hang on. Does this mean that there's, you know, money in small cars? Yes! So "auto makers accustomed to building eight-cylinder cars loaded with options while sparsely equipping four-cylinder vehicles [not naming any names yet] have to adjust their production. GM President Fritz Henderson [there you go] said Wednesday that the company is trying to find more plant capacity to build more cars." Too bad GM can't convert all those truck factories to small car production. Who saw that one coming? To illustrate the premium compact trend, the WSJ brings us the ethnically-correct case study of Hugo Chau. Mr. Chau traded his 2005 Mercedes for a Sync-ed-up Ford Focus and said: "I really wanted a car that has the features and is nice to drive… The Mercedes was more like a toy, and this is something I can drive every day." What Merc was that, then? An SLR?
Posts By: John Horner
The Wall Street Journal [sub] reports that Cooper Tires is (once again) in big trouble. Sales are down, costs are up, and the recalls just keep on coming. There's no way Cooper can continue as an independent tire company. The market is saturated with well-funded, technology-rich competitors with big brand names and major automaker OEM contracts. Cooper is a throwback from the golden era of US tire makers as the budget-priced, small-dealer-supported alternative to major brands. Other than Goodyear, all the rest of the US tire companies went bust and/or sold out to the Japanese and Europeans. Most tires today are sold in big chain stores, be they Wal-Mart or America's Tire… and Cooper isn't there. Kumho and Hankook of Korea have swooped in to take the bargain tire business while the likes of Michelin, Bridgestone, Goodyear, Pirelli, Dunlop (Sumitomo), Yokohama and Continental fight it out for market and mind share. Look for Cooper's joint ventures in China to turn around and swallow the company and the Cooper name to become another old American brand slapped on a Chinese product, like a Westinghouse toaster.
Compared to GM going double down on Michigan real estate, this one seems like business as usual. The Wall Street Journal [sub] reports that while Iraq is a contentious focus of US Presidential politics, the Germans are stepping-in to figure out how to sell more trucks thereabout. Hopefully, they will also figure out how to get someone other that the US taxpayers to buy them. Also of note: "the Kuwaiti government is Daimler's biggest shareholder." Now I understand the gas guzzling Mercedes Benz V-12s. Ya gotta keep the big shareholder happy.
The Associated Press reports [via Yahoo!] that GM has just spent $626m of its dwindling cash pile to purchase its Renaissance Center office building, and another $200m cash to buy office buildings in nearby Pontiac, Michigan. Incroyable! Just yesterday, we learned that Fitch Ratings estimates GM will burn through $8b in cash in '08. THEN we heard that the American automaker has set aside $200m to pay off the striking workers at American Axle. Delphi's not a done deal. AND one wonders if GM's going to fork out $600m to GMAC to keep the mortgage lender afloat. The Volt development program (and the rest) are sucking up the capex bucks. In short, is this really the best time to be shelling-out millions to reduce the rent? We're thinking… no.
Peter DeLorenzo, the TTAC-aversive self-styled Autoextremist, has posted his Wednesday rant. Sweet Pete begins by claiming "It's all over but the hand-wringing for Pontiac." We would have gone with "bar the shouting," but true dat. DeLorenzo blames Pontiac's problems on GM's divisional confusion, it's lack of car culture and a dearth of Pontiac advertising. "Unless they can back those products with enough marketing and advertising horsepower," the former ad man insists, "It ultimately doesn't matter." Meanwhile, the Autoextremist's extreme adoration of GM Car Czar Bob Lutz shows incipient affection alienation. "The one thing that Lutz has misjudged since he began his tenure at GM is that he never did 'get' Pontiac. His idea that Pontiac should be the "affordable BMW" is flat-out wrong… Pontiacs should be raucous, distinctly American cars with real attitude, appealing to people who enjoy marching to a different drummer and who like to go their own way." Even so, DeLorenzo takes GM's beancounters to task for failing to follow the Motown Messiah. Sweet Pete says Maximum Bob has only succeeded in energizing a "network of True Believers." From there, it's the usual GM product renaissance shtick, DeLorenzo's potted version of Pontiac's history (so to speak) and a plea for restoring the former Excitement Division to it's imagined former glory. You know, GM should put DeLorenzo in charge of Pontiac. No, really. Why the Hell not?
The Canadian Auto Workers (CAW) have ratified a generous deal with Ford– frozen wages, no two-tier tears at bedtime– by a reported 67 percent margin. (I guess the other 33 percent thought they could get blood out of a stone). Even more flabbergasting: the contracts aren't even up until September. CAW boss Buzz Hargrove says [via The Detroit News] that GM and Chrysler will go down just as fast, just as hard. "They will accept the same economic terms. It's only a question of when. I'm hoping it will be in the next week or so." Not so fast, Mr. Bond. Chrysler's teetering on the brink of bankruptcy. They got no game. And GM, well, GM's got 32 U.S. plants off-line (including all the key ones), the prospect of more union action to come, sweet F.A. going on in its high profit margin SUV and truck biz, and a cash conflagration that could heat Hoboken for a week. Buzz? Buzz wants GM to commit more product to the Ontario factory. Never mind that the Peso is worth less than a Canadian Loonie. Or the fact that GM builds trucks in five other factories, including two in Silao and Toluca, Mexico). Still, look for GM to roll over and play dead (it's who they are and what they do), while Chrysler delays the inevitable (selling everything to Magna) for as long as possible. 
Chrysler executives are taking on what may well become the world's worst job: a customer satisfaction survey. The Chrysler 300– the number of homoerotic Spartans executives calling one customer per day— will be competing "to see who can generate the most successful sales referrals." ("Hello, I'm Bob Nardelli. Please buy one of our cars so I can win a sales bonus. PLEASE!") The Detroit Free Press say Nardelli's boys want to "bring the company closer to our customers but also to bring our customers closer to the company." Not one to miss a chance to pimp for consulting, Dave Sargent of J.D. Power gushes, "I've never heard of anything on this scale." This is not the first time Chrysler's jeffes have tried to rappel out of the corporate penthouse. Hey, whatever happened to that program where the suits drive used Chryslers? Anyway, at the advertised calling rate, it would take Chrysler's highly-paid "change agents" 707 days to reach the 212k customers hit by the most recent Sebring recall. Who's running the office pool on how long this program lasts? [Welcome to longtime TTAC commentator John Thorner as our latest blogger. We hope to see more of his work soon.]
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