Michael Karesh's deconstruction of J.D. Powers' Initial Quality Survey (IQS) got me thinking. Clearly, J.D.'s mob shelter behind the [accurate] assumption that most people can't be bothered to, as they say, "do the math." Just as automakers draw strength (or not) from our natural instinct to slot brands into clear-cut categories, J.D. plays to the peanut gallery's desire to quickly identify "winners" and "losers." Add in a bit of Argumentum ad Ignorantiam (a proposition is true because it hasn't been proved false) and voila! Porsche is America's most reliable car brand. An Audi is more reliable than a BMW. Never mind the difference between initial quality and five years down the road. Never mind the varying definitions of quality, or the fact that J.D. won't tell you its exact methodology. Pay no attention to the man behind that curtain because he's an old bald guy– just like that pathetic pre-tornado snake oil salesman. The '08 IQS represents the same sort of lazy thinking Detroit has been feeding itself– and feeding off of– for decades. It's one thing to fool others, another to fool yourself. Here, Lieberman and I attempt a reality check. 

I haven't had an email from my favorite ascot-wearing automotive journalist in quite some time. Yesterday, I held off pinging Jerry– i.e. blogging his Forbes' rant "What Auto Recession?" In this well-timed work, the automotive essayist argued that healthy sales abroad are a suitable salve for domestic doyennes depressed by Black Tuesday. I let it be, because it's so not true. On any level. Today, Mr. Flint has a prescription for Detroit. "Time for Plan B" reads a bit like Plan 9 From Outer Space. Step 1: luxury cars. "Instead of milking big SUVs for profits, Detroit needs to build more cars rich folks will pay big money to own." Step 2: export. "The U.S. is turning into a lower-cost production base… If Detroit can build a serious export business, it will expand the variety of cars it can profitably build." Step 3: build $30k economy cars. "Look at the Prius hybrid-electric vehicle: Without the fancy powertrain, it’s a $16,000 Toyota. Yet buyers wait in line to pay $26,000 for it." As I pointed out in yesterday's GM Death Watch, it's at least three years too late for Detroit to do anything but suffer. Still, it's nice to know our man Flint's thinking outside reality the box. 

More morning after meshugas: May sales stats reresent the first time in history that the transplants' sales have overtaken Detroit. The International Tribune is the bearer of sad tidings. "General Motors, Ford Motor and Chrysler combined for a record low market share of 44.4 percent, compared with 48.1 percent for 10 Asian brands, according to the Autodata Corporation, the industry statistics firm. Toyota Motor of Japan pulled to within 10,000 vehicles of overtaking GM in United States sales, and Honda posted its highest monthly sales total ever." The Trib also confirms TTAC's Best and Brightest's explanation for the 39.8 percent drop in Priora sales. "The head of Toyota Motor sales, Bob Carter, said the company had been hindered by production constraints and that its most fuel-efficient cars, including the Prius hybrid sedan, were selling as quickly as they could be built. 'Dealer stock for Prius is best measured in hours rather than days,' Carter said." In other words, if ToMoCo had more Priora, they would have sold more retail vehicle than GM in May. Responding to his employer's catastrophic sales collapse, GM marketing maven Mark LeNeve was characteristically upbeat– in a completely downbeat sort of way. "We're somewhere near the bottom," LaNeve said.

In these and following presentations and in related comments by General Motors management, we will use words like "expect," "anticipate," "estimate," "forecast," "objective," "plan," "goal," "project," "outlook," "targets," and similar expressions to identify forward looking statements that represent our current judgments about possible future events. We believe these judgments are reasonable, but actual results may differ materially due to a variety of important factors.

Among other items, such factors include: our ability to realize production efficiencies, to reduce costs and implement capital expenditures at levels and times planned by management; market acceptance of our products; shortages of and price increases for fuel; significant changes in the competitive environment and the effect of competition on our markets, including on our pricing policies; our ability to maintain adequate liquidity and financing sources and an appropriate level of debt; the final results of investigations and inquiries by the SEC; court approval of the settlement agreement with the UAW and UAW retirees related to the 2007 national agreement; negotiations and bankruptcy court actions with respect to obligations owed to us by Delphi Corporation, a key supplier; possible downgrades for GMAC or ResCap by rating agencies; developments in the residential mortgage market, especially the nonprime sector; and changes in general economic conditions such as price increases or shortages of fuel, steel, or other raw materials.

Hunter S. Thompson's early work is his best. No, I mean his really early writing, before the inventor of Gonzo Journalism reported on– and then succumbed to– fear and loathing in Las Vegas. Back when Thompson wrote for The National Observer, Esquire, The New York Times magazine and other highbrow literary publications, the former USAF Airman was a wry observer of political, economic and moral corruption. And man, the guy could write. Hells Angels: The Strange and Terrible Story of the Outlaw Motorcycle Gangs was Thompson's greatest work, as passionate and informed a piece of non-fiction writing as you'll ever read. From there, Thompson lost focus. Well, "Dr. Gonzo" became the focus. And that's exactly what happened to the domestic automakers' upper management. At some point, they stopped worrying about building great automobiles and started thinking about… themselves. Their priorities shifted from cars to car-eers. And today's bad news is the result. Just as Thompson reported on the zenith of the hippie culture in San Fransisco, TTAC has born witness to the fall of Detroit. It ain't over yet. But the end is in sight. And it is truly terrifying. As Thompson isn't here to report on this epic tragi-comedy, we will do so in his name. 

Speaking to analysts during a conference call, marketing maven Mark LaNeve said GM "will continue working with [HUMMER] dealers on the appropriate mix of ads, incentives and dealer programs to keep them going and build franchise value." According to an anonymous source (whose information has been independently confirmed), GM has killed the HUMMER brand. The ailing American automaker told its field teams that it's ceased all corporate investment in HUMMER. This includes updates for existing models, the scrapping of the upcoming H4, and a severe cut-back or elimination of marketing and advertising– as contracts allow and media buys can be diverted to other GM brands. The decision pulls the rug from under  171 HUMMER franchisees, including 71 standalone dealers. According to our tipster, GM field ops– who must make nice with the abandoned store owners– are "crapping themselves." Why wouldn't they? Many of these HUMMER dealers have just spent millions upgrading their dealerships to meet brand requirements set forth just two years ago. The first lawsuits have probably already been filed. The rest will follow. Still, closing HUMMER should cost GM less than the billion dollars it spent shuttering Oldsmobile– although that was back when a billion dollars was real money, not GM's monthly cash burn.

Our man Berkowitz phoned it in from the Lincoln MKS ride 'n drive. During our brief de-brief, I asked Justin to write tomorrow's review from a woman's perspective. (Readers annoyed by reverse sexism or bad grammar– "the car handled pretty good"– are advised not to click on that link.) No sale. Anyway, Justin reports that the cetacean-snouted sedan is, in reality, a good looking piece of kit. "The too-small tail lights look great," Berk opined. "Almost British." The suspension also earns the pistonhead's plaudits: "It's soft and relaxed yet controlled and… uh… quiet." Props also fall upon the first application of Ford's new 3.7-liter V6, a 270-horse torque-tastic mill. BUT "the six speed transmission ruins it. It never met a higher gear it didn't like. And straight away too." Justin's full review tomorrow.     

In July's Car and Driver, Csabe Csere takes the Secretary of Transportation to task for her ignorance about auto industry lead times. How can Mary E. Peters' department mandate a big increase in fuel economy standards for 2011 when Detroit’s already signed off on those products? Despite the obvious irony– the buff book’s hobbled by their two-month lead time– Csere makes a good point. The corollary: unless GM planned to switch from gas-guzzling light trucks to fuel-efficient cars in 2003, they’re insert F-bomb here. As May’s sales numbers indicate, indeed they are.

For Toyota NA, it's the best of times and the worst of times. Averaging it all out, the tempus ain't that great. More specifically (and less poetically), ToMoCo's U.S. ops were off 7.9 percent for the month. (And to their credit, they don't make you hunt– Ford style– for the bottom line.) The Toyota brand tanked by 6.3 percent, while Lexus hit the buffers by, get this, 19.6 percent. Despite their fuel economy, Toyota's passenger cars only held steady, losing .9 percent in all. The Prius took an enormous whack; moving down 39.8 percent, from 24,009 sales in May '07 to 15,011 sales in May '08. The Yaris (+26.6) and Scion xB (+40.9) scored notable victories. On the truck side, as you'd imagine, there's plenty of blood in the water. The new Tundra took it on the chin, shedding 34 percent of last May's sales. The FJ is in deep trouble, down 50.1 percent. Overall, Toyota's light trucks lost 15.5 percent. But hey, the new Sequoia's up 75 percent! Now if gas prices suddenly drop a buck or two…

The Ford Motor Company must be engaged in some serious back patting on the Land Rover front, as May sales stats reveal just how big a bullet the Blue Oval Boys dodged. Land Rover has bought the farm, down 23.5 percent in all. The LR2 (-51.2) and LR3 (-63.5) have dropped off the radar, while the Range Rover Sport (+5.6 percent) is cannibalizing the higher profit Range Rover (-21.4). Volvo's hurting, too. The XC90's 28.4 percent hit looks good– compared to the S40 (-42.1) and S60 (-66.7). Mercury's Milan (+36.9) and Sable (+39.8) helped limit the brand's losses to "just" 23.4 percent. Lincoln did only slightly better, dropping 22.5 percent in total. Don't even ask about the Navigator (-37.3) or Mark LT (-53.9). On the positive side, the MKZ is doing OK (-2.6). And the XF has basically saved Jag from oblivion. On the back of the new model (1170 units), Jaguar's U.S. sales gained 27.4 percent for the month, from 1757 to 1379. As the numbers indicate, the XJ (-27.8) and XK (-39.5) are a drug on the market. Note to Ford: it's the products, stupid.

The Detroit News is reporting GM CEO Rick Wagoner's new new turnaround plan. As expected, The General is cutting back SUV and truck production in a BIG way: "phasing out" Oshawa, Ontario (2009); Moraine, Ohio (2010 or sooner); Janesville (end of 2009) and Toluca, Mexico (end of this year). At the same time, GM's ramping-up production– adding a third shift– at Lake Orion (Pontiac G6 and Malibu sedans) and Lordstown (Chevy Cobalt and Pontiac G5). And here's a surprise: Wagoner said GM is "exploring all options, including the possible sale of its Hummer brand." To whom? In other product news, GM said it was abandoning plans to build an entry-level Cadillac and will instead create an S-Class killer to replace it's ancient, arthritic STS. Just kidding. The company will build a new Chevy compact car at Lordstown (as reported yesterday). The DetN also reports that GM promises a "world car" replacement for the Chevy Aveo to go on sale in the U.S. in the second half of… 2010. Full Death Watch analysis to come, after the real news: GM's May sales results.

[GM press release here.] 

That's the difference between the cost of maintaining GM's $1 per share annual dividend ($567m) and the company's so-called "free cash flow" (.33 cents a share or $189m). As Bloomberg reminds us, GM cut its dividend in half– from $2 to $1 per share– in February '06. At the time, talk of bankruptcy was in the air and on CNN ("And yet the evidence points, with increasing certitude, to bankruptcy.") GM was well into it current market share decline, having lost some $8.6b in NA the year previous. But hey, given GM's recent $1b per month cash burn, what's $387m between friends? That said, if you want proof that the ailing American automaker is still in denial/maintaining a brave face regarding its cash conflagration and North American market share tumble (down from 26 percent in '06 to around 20 percent now), look to see if CEO Rick Wagoner eliminates the dividend at his turnaround hoe-down later today. And then duck, lest a flying pig hit you in the head. 

No, of course not. And the sentiment is doubly true– OK "applicable"– if you're the CEO of Ford just before launching a new full-size pickup. Especially when full-size pickups sales are down 23 percent over the last three years. And falling. Of course, what else could Alan Mulally say? The F150 is still the country's best-selling vehicle, Ford has to defend its turf and the launch was planned at least three years ago. "What we have to manage is bringing down the overall volume on the trucks and SUVs," Big Al told Automotive News [AN sub]. "As we make this awesome transition to the new one." Like, totally. Big Al's "there's no such thing as bad timing" remark also refers to ALL of FoMoCo's '08 releases. As AN reports, "Ford still aims to hit volume targets previously established for the 2009 Ford Flex crossover and 2009 Lincoln MKS sedan." There's nothing on predicted F150 volumes, but Ford plans to sell between 75k and 100k Flexes and 36k Lincoln MKS per year. Big Al's theory: "Higher gasoline prices shouldn't hurt volumes of the Flex and MKS because consumers who were driving big SUVs are turning to cars and crossovers. They want improved fuel efficiency, but still may need the space of a bigger car." May? Uh-oh. 

And so they did. GM's stock price rose today, after scribe Vito Racanelli penned an opus entitled "Buy GM." "On the long side, General Motors now seems suited mainly for one group — bold investors who hope to eventually double their money but can afford to lose it all if their wager goes awry. The good news for GM fans: Despite the misery that the car maker is experiencing and might endure for another 12 to 18 months, such a wager ultimately should pay off." Racanelli then presents a litany of GM's financial "challenges," combined with a regurgitation of GM's party line (i.e. things suck now, but won't later). Racanelli's not-quite-as-guarded-as-it-seems recantation of The General's Volt hype exemplifies the analysis. "But if the Volt succeeds — and, yes, Wagoner's stated delivery deadline won't be easy to meet — GM will steal a march on its big Japanese competitor. And, says Elizabeth Lowery, GM's vice president of environment, energy and safety policy: 'The Volt is just a piece of it.' She says that the company is launching eight hybrids this year — more than any other company — and 16 over the next four years." Sixteen? "'Enormous' is the word that Csaba Csere, editor-in-chief of Car and Driver magazine, uses to describe GM's progress. 'Their cars look good on the outside, have a luxurious sense inside and drive well,' says Csere, whose publication used to routinely blast the General's vehicles." Etc. Look for the "Racanelli" effect to disappear when GM's May sales are revealed tomorrow– with or without Rick Wagoner's new new turnaround plan. 

Google is a rational thinker's nightmare. If a surfer has the slightest pseudo-scientific bent– astrology, phrenology, Dianetics, Jessica Albanism– Google reinforces their problematic predilection. For example, while Wikipedia defines numerology as "any of many systems, traditions or beliefs in a mystical or esoteric relationship between numbers and physical objects or living things," there are 6.8m more credulous alternatives. It's even worse if you start a search with the idea that numerology is for real. Enter "GM 29 percent" and you find the USPO's FlexFuel fleet gets 29 percent worse mileage than its gas-only vehicles, GM's SUV sales fell 29 percent in April, GM CEO Rick Wagoner got a 29 percent raise in 2002, GM sales in Brazil rose 29 percent in the third quarter of 2007 and GM reduced its output of Saturn vehicles by 29 percent in 1994 (the same year Tahoe sales increased by 29 percent). Search "GM 29 percent lapel" and The New York Times reports on the magic number. "In 2003, G.M.'s market share dropped to 28.3 percent, said Paul Ballew, G.M.'s chief sales analyst. That is down from 28.7 percent in 2002, and the first decline for G.M. in three years. Some G.M. executives have started wearing lapel pins with '29' on them to encourage employees to push the company's share over that figure." Guess who was CEO back then? Guess what GM's share is today? And guess who's still in charge? And while you're contemplating that non-mystical mystery, Justin and I discuss the day's car news.