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Posts By: Robert Farago
We tore David Cole a new one the other day, when the leader of the manufacturer and union-supported Center for Automotive Research suggested that trimming GM and Chrysler dealers wasn’t such a good idea—based on some schmoozing with his pals. Never let it be said that I won’t trot-out a dubious source when it suits my editorial needs, especially when it comes to bashing Ford. Just kidding. I love Ford. My first three cars were Fords. I want Ford to succeed. I am not, however, blind to the fact that Uncle Sam shoveled $10 billion worth of no-to-low-interest twenty-five year loans in FoMoCo’s direction. Nor am I Detroit News columnist Daniel Howes; I will not predict sunshine and roses simply because there’s a government-sponsored break in the clouds hanging over the Glass House Gang. TTAC commentator Mark MacInnis shares my skepticism, with a nod to Mr. Cole . . .
Amidst all the hoopla yesterday about Ford’s quarterly profit, was this little nugget, which doesn’t bode well for their future. “‘That puts Ford at a competitive disadvantage,’ said David Cole, chairman of the Center for Automotive Research in Ann Arbor, who estimated that servicing Ford’s debt adds more than $1,500 to the cost of every vehicle the automaker sells in the United States.” Now, Ford sells as many or more cars worldwide as they do in the U.S., so the cost advantage per-vehicle is actually less than this hyped number. But it’s still what? A six percent or seven percent cost dis-advantage? That’s BEFORE the labor costs, which are higher than GM since the UAW repudiation of Ford’s contract do-over. And higher than Toyota’s and Honda’s. Still. So, add it up, and Henry’s company has to build vehicles ten percent more efficiently or ten percent more desirable to overcome that debt-related disadvantage. A formidable task. So, before we all start congratulating Ford on dodging the bullet, we better watch out for that ricochet . . .
As you can see from this screen cap of Chevrolet’s website, the brand’s American Revolution is no more. The ridiculous catchphrase—applied as it was to Korean, Canadian and Mexican imports—has been replaced with . . . nothing. Niente. Nada. The big goose egg. Oh sure, there’s the “May the Best Car Win” tag line lurking beneath the fold, but that’s equally ridiculous. The best car is winning—in the only metric that means anything (sales), and it doesn’t have a bow tie on its snout. Yes, yes, it suits the suits. Just ask the guys and gals who attend GM’s death-by-PowerPoint marketing meetings, where execs who don’t mind the perception gap face . . . nothing. Niente. Nada. (Fritz will get around to the cultural change thing eventually.) Anyway, what’s next?
Transparency. It’s what GM CEO Fritz Henderson promised taxpayers in sworn testimony in front of Congress, post $52 billion bailout (and the rest). As TTAC pointed out previously, bullshit. After not releasing the dead dealer list promised to Senator Jay Rockefeller, the nationalized automaker is now proud to announce that it’s beating its targets—without revealing the targets. “General Motor Corp. is outperforming the targets set in its earnings viability plan outlined in April, CEO Fritz Henderson said today,” Automotive News [sub] said today. “Henderson declined to list the areas in which GM is outperforming but said the company would provide details in its third-quarter earnings report later this month. ‘I’m not going to get into whether we’re generating cash or not generating cash, but I would certainly say the situation is more stable than what the outlook was even just two months ago.'” And why should we believe His Opaqueness?
“Consumers increasingly are noticing that the Ford difference is our great products, our strong business and our leadership in quality, fuel efficiency, safety, smart technologies and value.” So sayeth Ken Czubay, Ford’s vice president of U.S. marketing sales and service. Am I reading too much into it, or is “strong business” a euphemism for non-teat-suckler? Anyway, the spin is the spin, and the facts are the facts. The Blue Oval Boyz report that sales of the new Ford Taurus rose a staggering 141 percent, from last October’s 2517 to this October’s 6076. A big ass one-month jump does not a runaway best-seller make. And these numbers aren’t all that spectacular for a mainstream automaker (especially compared to the original Taurus). But you can’t take that away from them. Or can you? What’s going on here? My guess: Ford’s getting a big lift from GM and Chrysler defectors. Or maybe the Taurus has simply hit the sweet spot, as SUVs continue to fall out of fashion. Fleet sales (hidden as retail, as Ford/Mazda is wont to do) may have a little something to do with it. Could be all three. What’s your take?
California motorists hit with massive fines for minor, alleged toll infractions won a settlement last month from the Orange County Transportation Agency (OCTA) and Transportation Corridor Agency (TCA). The toll road operating entities agreed to pay $1.4 million in restitution and waive $41 million in unpaid toll penalties after admitting the fines were “excessive” and that the denial of due process to the accused was “unconstitutional.” Over a dozen motorists sued in 2007 claiming that fines of up to $123,000 for skipping tolls were outrageous. In several cases, such as that of Stephanie and Brian Young, the violations were inadvertent. The couple racked up $580 in unpaid tolls in 2003 after the credit card linked to their toll transponder account expired. For this mistake, OCTA demanded that they pay $53,550 in fines. Similarly, Maria and Pablo Gonzalez allegedly failed to pay $60.14 in tolls and were billed $78,780.
The Brits have an expression for this situation: “When you’re in a hole, the first thing you do is stop digging.”
The National Highway Transportation Safety Administration (NHTSA) issued a statement today correcting inaccurate and misleading information put out by Toyota concerning a safety recall involving 3.8 million Toyota and Lexus vehicles:
A press release put out by Toyota earlier this week about their recall of 3.8 million Toyota and Lexus vehicles inaccurately stated NHTSA had reached a conclusion “that no defect exists in vehicles in which the driver’s floor mat is compatible with the vehicle and properly secured.” NHTSA has told Toyota and consumers that removing the recalled floor mats is the most immediate way to address the safety risk and avoid the possibility of the accelerator becoming stuck. But it is simply an interim measure. This remedy does not correct the underlying defect in the vehicles involving the potential for entrapment of the accelerator by floor mats, which is related to accelerator and floor pan design. Safety is the number one priority for NHTSA and this is why officials are working with Toyota to find the right way to fix this very dangerous problem. This matter is not closed until Toyota has effectively addressed the defect by providing a suitable vehicle based solution.
[Thanks to Porsche986 for the link]
Sergio Marchionne stunned the mainstream media—literally—with his revelation that Chrysler has improved its post-C11 cash position from $4 billion to $5.7 billion. “’Some of you have been surmising we’re burning through cash,’ he said in brief remarks opening the company’s presentation of its five-year plan. ‘This is not true.’” Uh, yes, it is. Can you say “accounts payable?” When Chrysler entered into bankruptcy, it stopped production. Remember the Chrysler Cash for Clunkers product drought? Like that. Since then, Chrysler’s been taking in [meager amounts of] cash without paying out anything much, as production more or less stopped during the interregnum. And now that production has resumed? Chrysler’s about to pay those 90-day payables. Look for Fiatsler’s cash pile to erode like a California beach during an El Niño storm.
There’s no love lost between carmudgeon Peter Delorenzo and GM’s failed Car Czar, the exec whose singular inability to create compelling branding or class-leading products helped transform the world’s largest automaker into a nationalized welfare queen. No wait. Sorry. The self-styled Autoextremist hates the United Auto Workers (UAW). And now that the UAW has rejected a contract with Ford that would have given it parity with post-C11 GM and Chrysler, Sweet Pete has unleashed the dogs of demagoguery. “Wait a minute, wasn’t it the rampant wage and benefit increases over the last three decades that contributed immeasurably to the domestic auto industry’s demise? And yes, it took two parties to make those deals, but really? After everything that has transpired in the last year the union is still clinging to the notion that they actually have a dog in this hunt when it comes to getting this industry off of the ground again? That somehow, some way, when things get all back to normal again they can go right back to the “M.O.” that helped bring this industry to its knees in the first place? I’ve got one word for the UAW and its behavior: Reprehensible.” DeLorenzo’s ire is not entirely misplaced, but it’s close . . .
GM’s last minute (i.e. post-German election) decision to pull out of a deal to sell its European Opel division to a consortium lead by Canada’s Magna Corporation has left chaos in its wake. The Associated Press reports that Opel workers throughout Europe are planning to strike GM on Thursday, protesting the automaker’s planned “rationalization” of over ten thousand jobs. “IG Metall said workers at Opel’s four German plants would halt work Thursday, followed by similar moves Friday at other Opel locations in Europe.” Meanwhile, German Economy Minister Rainer Bruederle vowed “We will get the taxpayers’ money back.” Note: that’s German taxpayers’ money. And there’s only one way the nationalized automaker’s going to pay back that loan: with American taxpayers’ money. Seriously? Seriously. “GM Europe spokesman Karin Kirchner said the company is prepared to repay the euro1.5 billion bridge loan from the German government. ‘If we’re asked, GM will repay the bridge loan in question.'” Uh, that didn’t sound like a “request” to me. And speaking of plain speaking . . .
“I don’t think people here really understood that the work we had been promised was contingent on ratification,” Sterling Axle UAW member Brian Pannebecker told the Detroit News re: the union’s rejection of a new Ford contract. As my step-daughter Sasha is wont to say, “Wow.”
“First question: Is the 2010 Honda Accord Crosstour as unattractive in the flesh as it is in photographs?” Automotive News [sub] asks itself. “Answer: Pretty darned close. Directly from behind — and directly from the side — Honda’s new crossover-meets-wagon looks appealing. But from any other perspective, the Crosstour’s confluence of angles is visually jarring, especially in how the swooping a-pillar meets the hood line.” This is it: the day that the editorial collusion known as the Crosstour press embargo ends. For some reason, Honda forgot to invite TTAC to the ho-down. Never mind. Until we see the sheet metal, we’ll rely on yet another round of press shots and word-of-mouth. Or, more precisely, I threw-up-in-my mouth-a-little. While we wait for Autoblog for the official weasel words (“Honda has also released tons of new Accord Crosstour glamor shots”), suffice it to say Honda’s drubbing will not be anywhere near as severe as what awaits Toyota on tonight’s edition of ABC News and Nightline. The network has fired an opening salvo on the internet, and it ain’t gonna help ToMoCo recover lost sales ground one little bit. So here’s MY first question: how much of Toyota’s $1.665 billion ad budget does ABC reap? Just curious . . .
You can certainly understand the feds’ desire to make GM’s nationalization look like a temporary measure rather than the economic quagmire that is was, is and will be. But anyone with half a brain knew that the not-so-dynamic duo’s suggestion of a 2010 share offering was about as believable as the idea that the U.S. government can save money by creating a new entitlement program. OK, less. Add Jerry York to that half-a-cranium club. Speaking at The Reuters Auto Summit, the ex-ChryCo exec, former GM board member and Kirk Kerkorian front man called any discussion of a 2010 GM IPO the “dumbest thing in the world.” Seems that “They’re not going to be able to make up all the volume that they had with the four brands they are shedding with four brands they are retaining . . . I think that inevitably their market share is going to go down a point or two just by virtue of shedding those four brands.” Saying that, after saying that, Jer’ added some kind words to his piercing glimpse into the obvious. Mr. York praised New GM’s old management. “They’ve done a lot of the right things and we’ll all know in another six to nine months whether they need to do more structurally.” I’m guessing . . . yes!
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