Ours is a global economy. Like water cascading downhill, carmaking naturally flows to those countries providing the optimal combination of exchange rates, natural resources, transportation infrastructure and, of course, inexpensive labor. As a result, the U.S. auto industry now stuffs its cars with Chinese parts and assembles them in South Korea, Mexico, Brussels, Australia and more. While pundits bemoan outsourcing’s effect on America’s blue collar jobs, this internationalization exacts a hidden toll near and dear to pistonheads’ hearts: it erases product personality.

Once upon a time, cars had national personalities. American cars were comfy. German cars were robust. Japanese cars were inexpensive (reliability came later). Swedish cars were safe. British cars were a pleasure to drive. Nowadays, everyone does everything. An American car must be robust, comfortable, inexpensive, safe and a pleasure to drive. As must a German, Japanese, Swedish and British car. That’s great as far as it goes; but it doesn’t go far enough.

In their feverish desire to meet regulatory standards and internationalize production– to create a “global car” that appeals to everyone everywhere– manufacturers have eliminated their vehicles’ culturally-derived quirks. In fact, today’s cars feel as though they’ve gone through an automotive spell checker, making sure that the car has been completely cleansed of error. The result: tremendous overall quality bereft of genuinely distinctive character.

More specifically, GM owns (part or whole) thirteen automakers spread throughout the U.S., Korea, Australia, Sweden, England and Germany. As The General rushes towards epic cross-border cross-fertilization, shuffling cars like a Las Vegas dealer, we can already see the loss of national character. Saabilac? Caddibu? Holdeniac? GM’s willingness to ignore regional character is quickly draining any remaining life from their once vibrant portfolio of car brands. 

To see the failure of the “global car” logic, consider Saturn. Justin Berkowitz’ review of the Saturn Astra praises its German-ness (e.g. handling, hatch configuration). Fair enough. But what happened to Saturn’s Tennessee roots? Where’s the straight-shooting all-American ethos that informed both the product and its dealers? Gone. And with it, Saturn as a coherent, indeed appealing automotive brand. Just like Saab. And Volvo.

Call me a recidivist, but I reckon a Saab is/was/should be a Swedish hatch– not a German-built sedan or modified American SUV. By the same token, a Volvo is/was/should be a sturdy sedan or wagon– not an inherently dangerous, frivolous convertible. Sure, you could dismiss these objections as senseless carping born of pistonhead preconceptions. But I view our brotherhood as an early warning system. Enthusiasts everywhere are signaling that something important is getting lost in translation, and we’re not wrong.  

On the mainstream side, it’s become increasingly clear to observers both inside and outside Toyota that their rapid expansion of American production has eroded vehicle quality. To protect their brand, ToMoCo is launching various initiatives AND quietly scaling-back plans to expand U.S. production. Not to diss American workers, it’s a sure sign that the Japanese automaker “gets it;” they understand importance of location, location, location. Or, if you prefer, culture, culture, culture.

In this, they are not alone.

Volkswagen has recently learned the perils of international outsourcing– and the importance of national character– the hard way. After years of producing truly dreadful North American-bound Golfs in Brazil, VW finally realized that protecting the model’s rep mandated moving production back to its ancestral home. The reborn GTI looks, feels and drives like a “proper” German car. It’s been rewarded with a well-deserved spike in U.S. sales, and a welcome return to street credibility.  

Vee Dub’s decision has paid off in all aspects… except financially. Industry analysts report that they’re losing money on their award winner, an inevitable result of exchange rates and financially onerous German labor contracts. Still, which is better: building a singular, world-class product domestically that forces you to address your cost basis at home, or building a meh car abroad that offers the chances of greater profits but doesn’t deliver them and, worse, eventually destroys the brand?

Of course, this raises another question: for a car to embody its national character, does it have to be owned by a local corporation? Maybe. On one hand, BMW’s MINI and VW’s Bentley say no. On the other, Daimler’s Chrysler and Ford’s Jaguar say Hell yes. The key differential: top management must be slaves to the brand, and recognize that the brand is deeply, profoundly, fundamentally national in origin.

When it comes to car design and quality, all but the most blinkered beancounter can see that ignoring the importance of national history and culture leads to machines devoid of personality. And in the current hypercompetitive car market, REAL personality is vital to any automotive brand’s long-term success. In this case, those who do not learn from history are condemned not to repeat it, and, inevitably, suffer the consequences.

Automakers are justifiably proud of the fast, safe, clean and comfortable products they’ve unleashed upon the automotive market. But today’s carmakers have entered into a Faustian bargain with the electronic systems that make these four-wheeled wonders possible, and it’s busy biting them and their customers in their collective keister. Never mind the inherent safety hazards of protecting drivers from their own stupidity. The heavy reliance on technology has fundamentally altered the ownership experience, particularly when these techno-wondercars are repaired and resold.

This problem is particularly acute for high-end, mostly European luxury makes. In the past, upmarket brands justified their price premiums by offering superior performance, handling, comfort and refinement. As less-expensive brands have narrowed the gap, luxury makers have turned to electronic wizardry to create a distinctive distinction. But stuffing more stuff into the cars invites Murphy and his Law to ride shotgun.

Your humble author spent four years battling these issues as a BMW dealership technician and regularly saw Herr Murphy working his mojo. My favorite horror story of that time: a BMW E46 3-Series that was rendered impotent (warning lights aplenty, transmission stuck in second gear) by… wait for it… the radio.

The E46 radio is connected to the engine, transmission and ABS computers (and many others) by a network called the K-bus. When the radio died, it shorted out the K-bus, freaking-out the other computers. Every system that could turn on a warning light did so and the transmission computer went into ‘limp in’ mode: second gear only when in ‘Drive.’

While these sorts of gremlins may be more common in the luxury brands (Mercedes owners unite!), the same systems and problems are now appearing in more mainstream machines. Nissan owners who've put their Intelligent Key fob in the same pocket as their cell phone have discovered that the phone signal scrambles the key programming, rendering it impotent. Honda owners with a persistent ‘check engine’ light may have a major emissions system failure, or they may have slight corrosion on an electrical terminal in the fuse box. No make or model with electronic systems is immune.

Electronic failures differ from mechanical mishaps in important ways. Most mechanical items fail gradually and provide warning signs (noises, visible wear, etc.) indicating that something is amiss. Electronics are usually an either/or situation; they either work or they don’t. They also rarely warn their dependents before they fail. Mechanical systems can often be tweaked or bypassed (e.g. looping heater hoses to bypass a leaking heater core). Electronic systems usually don’t respond to duct tape and WD-40.

This electronic complexity can make for an expensive and time-consuming ownership experience. Increasingly, these systems can only be serviced by dealerships, whose technicians need a lot of (expensive) time and (expensive) training to diagnose the problems. Sometimes, the problems are so subtle that the only recourse is to install part A and see if the problem goes away.

When the owner comes back in a week with the same problem, install part B and repeat until the problem, or the owner, goes away. And make no mistake: these parts are getting mighty expensive. The aforementioned BMW radio lists for $590, and no $79 Pep Boys radio has a K-bus connection. Similarly, the days of cutting a spare key at the hardware store for $5 are long gone.

When the car is under warranty, the customer doesn’t pay the parts and labor costs, and service loaner cars might make frequent dealership visits tolerable. But imagine (or testify) what happens when the warranty ends. Electronic systems are not immune from age-related failures; the owner must bear the full brunt of these costs.

This leaves an owner with a set of tough decisions. Does he fix the problem or try to ignore it? Can he ignore it? If the transmission won’t shift out of second gear, the car isn’t very useful. Are the parts available, new or used? If only used parts are available, how long will they last?  Should he just get rid of the car for something newer and/or more reliable?

That last question indicates the area where electronic overkill hurts the car owner the most. Trouble-prone cars have always had low resale values/a shortage of willing buyers. When the troubles are difficult to locate, devilish to rectify and expensive to boot, it only amplifies the situation.

Unfortunately, this is difficult to see in the available data because used car prices are affected by multiple factors. The cachet of MINI and VW, for example, keeps their resale prices high– despite their relatively poor e-reliability records.

Nevertheless, as heavily electronic cars age, the cost of repairs will overwhelm the market values of those cars. This may be the final ironic twist of modern automotive electronics: rendering eight-year-old cars about as valuable as eight-year-old computers.

Retired Israeli Air Force ace Giora Epstein flew Mirage, Nesher and F-16 fighter aircraft during his career. When asked by the History Channel which aircraft he preferred, he replied “In the Mirage and the Nesher, the pilot flies the aircraft. In the F-16, the computer flies the aircraft and the pilot is just another input to the computer.” Modern automotive electronics have transferred Epstein’s complaint to millions of cars. We may purchase and maintain our vehicles, but we no longer truly drive them. Increasingly, we’re mere inputs for the computers that do.

This experience may be mostly transparent, but it is real. Press on the ‘gas’ pedal of an electronic-throttle car and it doesn’t open the throttle; it simply tells the engine computer the desired torque output.The brake pedal of a Toyota Prius doesn’t activate the brakes; it tells the ABS computer how much braking to supply. Turn the steering wheel in an Active Steering-equipped BMW and the direction change ranges from barely-noticeable to “Holy s***!”, depending upon what the Active Steering system decides is appropriate.

Under most circumstances, drivers don’t know or care that computers are intermediating their driving. But sometimes it does matter. Lift off an electronic throttle pedal and the computer may ignore it, holding the throttle open to reduce smog emissions. Panic brake in deep snow and ABS may threshold-brake the car into an intersection, when locked brakes might have stopped it much sooner. Try to ‘rock’ a vehicle out of slush and the traction control system may steadfastly thwart the effort.

This lack of control particularly frustrates driving enthusiasts. They want engine braking at lift-throttle, not when the computer decides they can have it. They want to take their favorite corner in a lurid tail-out slide, not electronic nannies telling them that they can’t. It’s a real killjoy when the HAL 9000 controlling the transmission rejects a downshift with an “I’m sorry Dave, I’m afraid I can’t do that.” Or when the simple act of simultaneously pushing the brake and accelerator pedals sets off an electronic hissy-fit.

Even when the pocket-protector set tries to apply their dark arts for enthusiasts, they usually end up spoiling the fun. At the extreme end, Formula 1 banned electronic driver aids in the early 1990s (the ban has since been modified) because winning became more a function of software engineering than driver skill. Lower down the food chain, automakers have no qualms whatsoever about rendering their sports-oriented customers’ driving skills irrelevant.

Several high end automakers now offer transmission ‘launch control’ modes, where a driver simply selects the mode and floors the accelerator. Maximum acceleration is provided; no clutch modulation skills required. The new F430 Scuderia is equipped with F1-Trac traction control, which Ferrari test drivers admit allows ordinary drivers to nearly match their lap times around Fiorano.

Where is the pride in mastering driving skills when any Tom, Dick or Harriet can duplicate them by pushing a button? The piss-ant paradigm now extends to off-roading, where Land Rovers offer Fisher-Price type buttons that configure a vehicle’s various e-Nannies for various terrains. Hill Descent Control allows feet free operation. No muss. No fuss. No skill. No fun.

Ordinary drivers have a different interaction with all this automotive electronic wizardry. It makes them worse drivers.

The National Highway Traffic Safety Administration estimates that about 25 percent of all American automobile accidents are caused by distracted drivers. That’s plain to see. Cruise the freeways in any U.S. urban area. Clock how many drivers are talking on their cell phones, fiddling with their iPods, checking their navigation screens, playing with their iDrive/COMAND/MMI interfaces, or looking for the Teletubbies disc for the onboard DVD player. Their focus is everywhere but their driving.

ABS, panic brake assist and stability control can help prevent an accident, but they can’t make the car brake or steer. Only an attentive driver can do that.

Automotive electronics are also dumbing down drivers through the subtle action of moral hazard. The old anti-driver’s aids shibboleth says that cars should be equipped with sharp spikes instead of airbags, to encourage drivers to drive very carefully. Perhaps. Meanwhile, manufacturers give them an electronically expanded safety envelope. Drivers respond to this safety net by driving more aggressively. As a result, the safety benefits of technology are cancelled out by dumber driving.

Studies indicate that ABS-equipped cars have about the same accident rate as their non-ABS equivalents. Similarly, automotive forums bristle with stories about highway medians filled with flipped-over SUVs whose drivers thought 4WD was synonymous with “invincibility.”

History indicates that as drivers adapt to these new technologies, many of the problems associated with them will decline. But there are other ticking time bombs in the automotive electronic world. In our next installment, we’ll look at the long-term implications of these high-tech wonders.

In parts One and Two of this series, we looked at the websites of eight aspiring Chief Executives in an attempt to divine their positions on policies relating to automobiles. To say that our commentators considered their remarks fatuous would be like saying that a Hummer H1 would be slightly out of place at a Prius Owners Group. Still, civic duty inspires us to press on. Here’s what (the other) John, Joe, Chris and Ron have to say about alt. fuels, mpgs, etc.

Unlike every other candidate so far, the issues’ page on former naval aviator and Arizona Senator John McCain’s website doesn’t have an “energy” section. In a speech at a Bio Economy conference in Iowa, McCain came out against subsidies for big oil, ethanol and hydrogen; and promised “no mandates” for renewable fuels. Instead, McCain promised “a declaration of independence from the risk bred by our reliance on petro-dictators and our vulnerability to the troubled politics of the lands they rule” with a “national energy strategy.”

McCain says the government should set targets for “the diversification and conservation of our energy sources and conservation” and then get the Hell out of the way.  

Delaware Senator Joe Biden has been in the US Senate since the dawn of time (1979). On his Energy issues page, Senator Biden promises to create a five-year, $50b “Apollo Project” for energy and climate change. He’d reduce greenhouse gas emissions by imposing a cap and trade system.

According to Senator Biden, “China alone is expected to add 120 million vehicles in the next five years,” and since “more than 20 percent of greenhouse gas emissions come from passenger vehicles, increasing alternative fuels is critical.” Biden would raise fuel economy standards by one mpg per year, using the fiendish, industry-friendly footprint system. This slight of hand would increase fuel economy to “40 mpg by 2017.”

Senator Biden would invest $100m into research on lithium ion batteries “needed for the next generation of plug-in hybrids, which can get up to 100 miles per gallon…” He’d require that all new cars run on E85 by 2017, and force the major oil companies to sell E85. Finally, Senator Biden says he’d “provide new incentives to vehicle manufacturers and parts suppliers to retool for the future by giving them credits for “investments and employee training.”

Connecticut Senator Chris Dodd has been hanging with Joe in the Senate for five terms. Dodd’s Energy Independence page also favors a cap and trade system to “reduce 80 percent of greenhouse gas emissions by 2050.” He’s hot for a corporate carbon tax, with the income to be put in a “trust fund” used for research into renewable technologies like “wind, solar, as well as ethanol and other biofuels.”

Senator Dodd swears he’ll “eliminate our dependence on Middle East oil by 2015.” He claims “America will lead the world in fuel economy standards,” and says all cars will get 50 mpg by 2017. As for hybrids: “Americans will purchase more efficient cars and trucks like hybrid[s] and by providing an array of incentives and tax rebates, we can speed the transition from traditional cars to much more efficient hybrid vehicles.”

Finally, to save on fuel costs and lower pollution “by reducing the number of cars on the road during rush hours,” Senator Dodd would “increase access to affordable and convenient mass transit systems” across the USA.

Texas Congressman Ron Paul is a 72-year-old medical doctor turned politician. On his Environment page, Paul says he encourages “the development of alternative and sustainable energy properties,” such as solar, fuel cell and wind, but makes no mention of cars.

On the subject of pollution, Congressman Paul says “The federal government has proven itself untrustworthy with environmental policy by facilitating polluters.” He says property owners should sue. “If your property is being damaged, you have every right to sue the polluter, and government should protect that right.”

As for cross-border car shopping or auto manufacturing, Congressman Paul’s American Independence and Sovereignty page points out that he’s no NAFTA fan. According to Paul, “NAFTA’s superhighway is just one part of a plan to erase the borders between the U.S. and Mexico, called the North American Union. This spawn of powerful special interests, would create a single nation out of Canada, the U.S. and Mexico, with a new unelected bureaucracy and money system.” 

And there you have it. All of the candidates from all of the parties promise energy independence. All (save McCain and Paul) aren’t afraid to redeploy your tax dollars to achieve it. At the same time, none present what might be called a comprehensive energy policy, and no one seems particularly big on conservation. Given the uniformity of platitudes and policies affecting the auto industry, pistonheads would be well advised to cast their vote according to other issues.

Click here to go to Part One

Click here to go to Part Two

They want your vote, but they drive you crazy. More specifically, passionate posting pistonheads don’t seem well pleased with America’s current crop of presidential aspirants. Part One of this series examined four presidential candidates’ websites to winkle out their auto-related policies on issues ranging from Corporate Average Fuel Economy to E85 to “oil addiction” and, uh, back. Judging from your comments on Hillary, Barack, Rudy and Mitt’s plans, you were about as impressed as pyromaniacs at a swim meet. So, in that spirit of world-weary cynical analysis, let’s have a look at what Fred, Mike, John and Bill have to say about all things automotive.

Fred Thompson is the son of what he calls a “little educated” used car dealer. If that doesn’t raise any alarm bells, Fred’s also an attorney, Red October hunter, fictional prosecutor and former US Senator (for real) from the great state of Tennessee.

An “Issues” page on Thompson’s site includes an “Energy Security” section.  Within, Thompson declares that our “dependence on foreign sources of oil threatens our national security and puts our economic prosperity at risk.” He offers the usual list of tasks required to overcome our “oil addiction:” increase domestic oil supplies, invest in alt. fuels, etc.

In an August press release titled “The Gas Tax,” Senator Thompson mentions the tragic highway bridge collapse in Minneapolis MN and adds: “Whoa now. Let’s hold our horses and think about calls for new [federal] tax increases to fix our infrastructure problems…we can’t let it [the bridge collapse] be used to compound other problems— which is what will happen if we’re scared into raising gas taxes.” 

Senator Thompson says local governments, not the feds, should deal with such issues. “Why can’t we leave infrastructure issues to the people closest to where the rubber literally hits the road?” (Geddit?) Policy stands regarding cars, US automakers or specifics on energy issues? No comment.

The former Governor of Arkansas known as Mike Huckabee also has an Issues page. In his “Energy Independence” sub-page, the Gov says “The first thing I will do as President is send Congress my comprehensive plan for energy independence. We will achieve energy independence by the end of my second term.” Two terms and we’re free! How’s that then? 

“We have to explore, we have to conserve, and we have to pursue all avenues of alternative energy: nuclear, wind, solar, hydrogen, clean coal, biodiesel, and biomass (ethanol subsidies are go).” Huckabee will “set aside a federal research and development budget” that would be “matched by the private sector” to find new energy such as alternative fuels. And then… “Our free market will sort out what makes the most sense economically and will reward consumer preferences.”

John Edwards is the infamously mansion-dwelling former US Senator from North Carolina. His “Issues – A New Energy Economy” page sings a familiar tune: “Our generation must be the one that says 'yes' to alternative, renewable fuels and ends forever our dependence on foreign oil.”

Senator Edwards would create a “New Energy Economy Fund” to support R&D, invest in efficient automobile technology and help Americans conserve. He’d also “repeal subsidies to big oil companies and require oil companies to install biofuel pumps at 25 percent of their gas stations.” Senator Edwards would require all new cars sold after 2010 to be ‘flex fuel’ cars.

While in Iowa, Senator Edwards praised “biofuels innovators” and announced he’d “accelerate the use of biofuels on America’s roads and highways…” That’s cause he “believes that everyone should be able to drive the car, truck or SUV of their choice and still enjoy high fuel economy.” To that end, Edwards would raise federal fuel economy standards to 40 mpg by 2016.

Bill Richardson is a former Congressman, US Ambassador to the United Nations (under Bill Clinton) and the current Governor of New Mexico. His Issues / Energy page calls for a “New American Revolution– an energy and climate revolution.” His vision would see oil imports reduced “from around 65 percent to 10 or 15 percent.”

Governor Richardson says “getting the 100 mile per gallon (mpg) car into the marketplace” is key, and hey, why not double current Corporate Average Fuel Economy (CAFÉ) standards to “50 mpg by 2020?"

While he’s at it, Richardson would also like to see renewable energy resources increase to 50 percent by 2040: “This is aggressive, but necessary as we start using more electricity for automobiles.” To help pay the bills, he’d raise “some revenue from the sales of carbon permits” and “get out the ‘green scissors’ to cut back on wrongly-placed tax subsidies.”

Richardson would like to see the US become “energy independent and combat global warming” because— yes, you guessed it– our “national security and our planet depend on it.” Seems like a theme, or, if you prefer, just another par-for-the-course sop to environmentalists and consumers fearing higher gas prices and foreign entanglements.

Click here to go to Part One

Click here to to to Part Three

With the US presidential caucuses and primaries scheduled to begin within a month, pistonheads may be wondering what the contenders have to say on the subject of cars. To gain some insight into their positions on issues automotive, I visited the candidate’s websites to see what, if anything, they have to offer those of us who love cars. Of course, the candidates public posturing should be taken with a large dose of skepticism; getting nominated and elected is most certainly Job One. In addition, future Congresses (and highly-paid lobbyists) will continue to hold sway over US policy. Still, to quote Thomas Jefferson: "Whenever the people are well-informed, they can be trusted with their own government…” 

To begin this series, we’ll start with four candidates– two from each of the major political parties– Senator Hillary Clinton, Senator Barack Obama, Mayor Rudy Giuliani and Governor Mitt Romney. Here then, as best can be discerned from their respective websites, are the automotive-related public policy positions of our first four subjects.

Hillary Clinton’s website presents an “Energy Independence and Global Warming” position paper. In this highly readable document, Hillary promises that she’d create a $50b “Strategic Energy Fund” to pay for alternative energy “investments.” At least in part, oil companies would fund the fund. And guess who else? Senator Clinton also proposes increasing auto fuel efficiency standards to “55 miles per gallon by 2030.”

Finally, Senator Clinton would issue $20b worth of “Green Vehicle Bonds” to help US automakers “retool their plants” to meet the 55 mpg Corporate Average Fuel Economy (CAFE) standards she currently proposes.

Barack Obama offers a lengthy tome entitled “Meeting Energy Needs.” A few car-related highlights: Senator Obama claims he has “concrete plans” plans to double fuel economy standards within 18 years [but offers few specifics]. He would “protect the financial future of domestic automakers” by providing them with some “flexibility” to meet those doubled targets.

Like Senator Clinton, Senator Obama would also help domestic auto plants and parts manufacturers “retool” to meet the standards by offering tax credits and loan guarantees. Senator Obama would also expand the consumer tax credits on hybrid purchases and he’d “mandate” that all new cars sold in the US be flexible-fuel vehicles.

Rudy Giuliani offers an “Issues” page, which covers subjects ranging from fiscal discipline to the second amendment (the right to bear arms). Rudy’s position on the auto industry, CAFE, emissions, the Big 2.8, etc.? Not a word.

However, the former New York City Mayor’s blog page offers an entry chronicling a speech given during a visit to Sioux City, IA in July. “Mayor Rudy Giuliani promised that, as President, he would expand nuclear power and renewable fuels like ethanol and call for more clean coal technologies, more clean-burning natural gas, environmentally safe drilling for oil and natural gas in North America and new technologies like hybrid cars and hydrogen fuel cells.

Rudy also promises to lead America to “energy independence.” No specifics offered. Oh, and Mayor Giuliani was the Grand Marshal at the NASCAR Pepsi 400 at the Daytona Raceway back in July. How great is that?

Mitt Romney has an Issues page with a section titled: “Ending Energy Dependence.” Former Massachusetts Governor Romney also says the US must become energy independent. In a section of his site titled “The Romney Plan,” we find this quote: "I want to initiate a bold, far-reaching research initiative – an Energy Revolution, if you will. It will be our generation’s equivalent of the Manhattan Project or the mission to the Moon.” What about auto fuel efficiency, or the auto industry? Not a word.

While Governor Romney does not specifically call out the Asian auto industry when talking about economic competitors of the US, he offers this tidbit. "[W]e face a much tougher competitor or group of competitors coming from Asia than we've ever faced before. Asia is tough. There are a lot of Asians. They are hard working people. And they’re going to give us a run for our money in terms of our economic vitality."

On the subject of building and repairing transportation systems in the US, Romney would like to “invest in infrastructure projects critical to the national economy and its flow of goods and people, instead of funding home-district pork.” Good luck with that, Gov!

Again and as expected, the candidates are not about to get bogged down in specifics when it comes to, well, anything– especially when you’re looking at a subject with conflicting political implications: save our planet, free us from “oil addiction,” build mass transit systems (preferably for someone else), subsidize my damn corn field and keep the price of cars and gas low thank you very much. Still, when it comes to voting for president, “don’t ask don’t tell” is the worst of all possible policies. 

Click here to go to Part Two

2020. That’s the year by which all automakers selling vehicles in the United States must [now] achieve a Corporate Average Fuel Economy (CAFE) of 35mpg. The symbolism is strictly ironic. The politicians who crafted the new Energy Bill hardly displayed 20-20 vision. They singularly failed to see that their well-meaning efforts to force Americans to conserve fuel by forcing manufacturers to produce fuel efficient vehicles evokes the law of unintended consequences. While it’s impossible to see the future with perfect clarity, there are obvious “unforeseen” pitfalls.

Let’s start with the legislation’s basic assumption: automakers can create a range of vehicles with a combined fuel economy of 35mpg. Ostensibly, there’s no need to reinvent the wheel (and everything attached to it). All carmakers have to do is build and sell more vehicles like the ones that already achieve the requisite target. According to the official EPA website, only two cars sold in the U.S. literally fit the bill: the Honda Civic Hybrid and the Toyota Prius. Uh-oh.

First, both cars are niche products; the vast majority of American consumers prefer to drive something else. That reality creates a strange paradigm. Any automaker that doesn't meet the new standards has a far better chance of selling vehicles and making money than one who does. If the CAFE fines are lower than the profits generated by ignoring the standards, auto execs wishing to maximize shareholder value must turn their backs on the legislative directive, pay up and get on with it. To wit: BMW and Mercedes' current CAFE fines.

Second, the Prius and Civic hybrid both use proprietary technology. Detroit doesn’t possess the necessary gas – electric expertise to replicate their mpg results. To think that The Big 2.8 can catch-up with Toyota and Honda in 12 years, never mind overtake them, is a leap of faith without historical basis. Yes, this dilemma is Detroit’s own damn fault. But Ford, GM and Chrysler are already teetering on the abyss. This legislation is a shove in the wrong direction.

Third, the Prius and the Civic Hybrid's towing capacity is listed as“not recommended.” While I’m sure there are plenty of environmental campaigners who’ll be happy to learn of the Energy Bill’s de facto death sentence for SUVs, the economic impact of neutering pickup trucks' load carrying and towing capacity would be dramatic.

The argument against this line of thinking: automakers will now race to develop technological solutions that will raise their CAFE numbers by 40 percent without sacrificing comfort, performance, price, practicality, towing, safety or reliability. Call it the “if we can put a man on the moon…” school of thought.

If we accept this metaphor, Japan is America with a ten year lead. Detroit is Communist Russia. Ford is bankrupt. Chrysler is bust downsizing for re-sale. And even if Chevrolet’s Volt turns out to be a stunning technological triumph, there’s little chance GM can convert their entire passenger and light truck lineup to lithium-ion battery-aided propulsion— and get people to buy the result— by 2020. That said, GM may not have to Volt-up the whole fleet; the National Highway Traffic Safety Administration might agree to some highly advantageous mpg calculations for plug-in gas – electric hybrids; a new formula that will help off-set the rest of the fleet's low-mileage stats.

The potential for finagling on CAFE raises the automakers’ most obvious “solution” to Congress’ “solution” to our dependence on foreign oil: cheating. The new Energy Bill extends the ethanol credits that inflate automakers’ EPA stats based on almost entirely theoretical E85 use. I have every confidence that Representative John Dingell (D-Michigan) secured plenty of exemptions, exceptions and get out of jail free cards for his Detroit constituents.

For example, the Detroit Free Press reports that “Money generated from fines that luxury automakers would receive for missing fuel-economy standards are to be given to automakers that retool old factories for building models with advanced technology.” If we assume the “luxury automakers” bit is Freep conjecture, this rider could mean that automakers who violate CAFE can use their own CAFE fines to fund new product development. How great is that?

The way I see it, either this Energy Bill will defeat Detroit, or provide enough loopholes and clever caveats to render its 35mpg target meaningless, or simply fail under the weight of its own unrealistic expectations. At the end of the proverbial day, legislation that attempts to control the free market on this scale is doomed to failure. There's  only way this will work: if the free market heads in the same direction at the same time– allowing legislators to claim credit for events they didn't create or control.

Of course, I could be completely wrong. Perhaps the Energy Bill will usher in a golden age of environmentally friendly automobiles. Wanna bet?

We here at TTAC spend a good part of our time trying to discern a car’s subjective worth. But the free market provides the final judgment. And when it comes time to rate an automobile manufacturer’s overall vitality, resale value is the way to go. Foresight, engineering and design all figure into what someone is willing to pay after the new car smell fades, when there’s a couple of Cheerios in the seat rails. Forget professional pundits and industry analysts; residual values are the ultimate arbiter of a carmaker’s strength. And guess what? Volkswagen is America’s most valued carmaker.

Taken collectively, Volkswagen’s U.S. lineup holds 48 percent of its value after five years. BMW, Honda and Acura are close behind, each with around 45 percent retained value. While only the VW Eos won its individual category, the Rabbit and Jetta both manage to retain greater than 50 percent of their value after five years. VW’s models placed high enough in all of their classes to earn the top spot.

This startling stat arrives via Kelly Blue Book (KBB), who just published their predicted resale values rankings for the 2008 model year. A fluke?  A statistical anomaly?

Well, KBB’s methodology does help VW. Only automotive brands with four or more models for sale in the U.S. are included, and all of those vehicles must cost under $60k. Still, Honda and Toyota have no trouble playing by those rules; they’re this year’s runners-up. And, the findings are not that different from KBB’s competitors in the value ranking business.

Automotive Lease Guide (ALG) has been tracking values and selling their knowledge to banks, leasing companies and the automotive industry for more than 37 years. ALG announced their Residual Value Awards in October. Here Volkswagen placed third, behind Honda and Toyota respectively. Another excellent showing. Of course, they also have a methodology which aids VW's cause.

This year's ALG awards are based on 2008 model year vehicles, just like Kelly’s, but comprising only a three-year history. (This is the sixth year ALG has included a brand award.) The envelopes are sealed after a careful study of segment competition, historical vehicle performance and industry trends. The trick here is the split.

ALG differentiates between standard and luxury vehicles. In fact, ALG produces a whole second list. So VW didn’t have to compete with Infiniti, Lexus and BMW (to name a few). ALG also excludes marques with fewer than four models. So that put MINI and Scion out of the brand running– which is significant given that MINI scooped the compact category. (Both brands are also excluded from KBB’s list.)

Volkswagens may have found some advantages within the rules, but it doesn’t detract from the validity of their ranking. KBB and ALG produce similar results at the top of both their lists, and at the base. KBB relegates Suzuki, Kia, GMC, Mercury, Dodge, Chrysler and Ford to the bottom of the worst performers for regular old vehicles. ALG’s methodology differed, but the names remained the same. And as for luxury cars, Cadillac, Jaguar, Lincoln, Saab and Volvo all fell below average in both ALG and Kelly’s final reckoning.

There’s a truckload of reasons why a carmaker might find itself parked at the bottom of these residuals lists. Unreliable vehicles, poor image, bad service, a wavering corporate future; each carmaker suffers its own particular frustration combo plate. Volkswagen has hardly been immune from these missteps. But with the Phaeton’s fade to black and a pruning of the pricier Passats, the people’s car has inched back into customers’ good graces. No to put too fine a point on it, most Volkswagen’s are what buyers want them to be.

Volksie has also paid attention to the laws of supply and demand. VW is fairly strict with pricing and, more importantly, doesn’t dump an undo number of cars on North American lots. They build what the market will bear, avoiding huge Rabbits warrens in rental fleets waiting to nibble up space on used car lots. Price and supply find a natural equilibrium that results in relatively high resale values.

Volkswagen won only one of its categories, as divvied by ALG. The Eos took best sporty car (a suspicious sounding group). As in decathlons, it seems that being the best at any one thing is not as important as being solid overall. That might be the wider lesson worth learning.

Taken car by car, VW is nearly never number one. Taken as a whole, VW is doing a great job generating value. That type of continuous performance seems to engender a consistent level of trust in the market place. Volkswagen might not be making the biggest bang with any one car, but playing together they’re getting it done.

Rail all you like against Volkswagen’s reliability and the brand’s piss-poor dealer service. But the market has spoken.

As Gregg Easterbrook once famously proclaimed, torture numbers and they’ll confess to anything. As an accountant, I’ve always considered numbers to be a lot more malleable than most math-challenged people believe; they’ll confess the truth long before an interrogator gets out the metaphorical water board. For example, a simple analysis on a small subset of GM and Toyota’s voluminous public data can yield important insights into their relative corporate personalities. By looking at both company’s 2006 U.S. Sales and Inventory figures, the numbers sing like a canary.

Obviously, GM and Toyota’s sales and inventory stats are not 100 percent comparable. For one thing, The General is [still] largely a truck-based manufacturer. Despite a desperate shift toward CUV’s and increased investment in its passenger car brands, trucks account for 57 percent of the automaker’s 2006 unit sales. Toyota’s is far more of a car-maker. Despite upping Tundra sales to around 180k per year, 42 percent of the Japanese manufacturer’s 2006 unit sales were trucks.

In the 12 calendar months comprising 2006, General Motors sold 4.065 million vehicles in the North American market.  In the same time frame, Toyota sold 2.543 million units. To achieve these sales, General Motors carried an average inventory of 1.064 million vehicles throughout the year.

If you prorate GM’s Sales-to-Inventory relationship to Toyota’s, you would be forgiven for assuming Toyota would average about 600k vehicles in inventory at any given time during 2006. In actual fact, Toyota’s average 2006 inventory was just 216,536 vehicles.

Put differently, Toyota sold about 218k cars per month last year to Americans. At any given time, ToMoCo’s average inventory never contained more than 30 days worth of product. Ceteris paribus, had Toyota stopped producing cars on June 1, 2006, it would have run out of cars before July Fourth fireworks hit the sky over Bozeman, Montana.

During the same period, The General sold 335k mainstream cars and 3k Corvettes per month. The American automaker’s average inventory stood in excess of one million and never below 919k (in July 2006). So The General kept about three months and four days worth of unsold cars on hand-– many of which were still on dealer lots (remember, once a car ships to a dealer, GM recognizes a sale). Ceteris paribus, had GM stopped producing cars on June 1, 2006, its inventory would have lasted until Labor Day.

Why did Toyota need only 20 percent of GM’s inventory to sell 60 percent as many vehicles? Theories abound. Here’s mine…

In 2006, General Motors sold 78 models over eight brands. Toyota sold 27 models over three brands. Consumers seeking a family-friendly, Toyota-made car could opt for a Camry, Prius or, if well-to-do, an Avalon. In 2006, the General offered up about fifteen Camry alternatives. Pontiac, the would-be sport brand, accounted for three Camry-class cars alone: Grand Am, Grand Prix, G6.

Enter the new Chevrolet Malibu. How many do new ‘Bu’s do you keep in stock when a loyal GM customer could easily pick another car in the same segment, at the same dealer, or cross the street to a Saturn dealer and pick a badge-engineered clone of the “original?” Sure, the new car might generate conquest sales (and we could include non-fleet GM buyers in that metric), but how in the world do you guesstimate that number?

Meanwhile, satisfied (or dissatisfied) Camry buyers can choose… another Camry. Toyota can predict potential sales with astounding accuracy simply because their tightly focused brand portfolio eliminates a large number of variables. They can also draw upon statistical analysis of retail Camry buyers’ habits stretching back to 1983.

All of which brings us to the meat of the matter. Brand focus leads to increased consumer loyalty, which leads to better forecasts, which leads to better inventory management, which leads to lower inventory. While General Motors has long championed the “whatever sticks to the wall” approach, Toyota has been content to do a few things well.

Numbers are just symptoms of the corporate culture that produces them. Years into a “turnaround”, GM refuses to give a deadline on its return to long-term, stable profitability. In that light, it should come as no surprise that the same company can not proclaim, with any credibility, how many bread-and-butter sedans from its bread-and-butter brand it will sell. Funny thing about numbers: even in their absence, they can be significant.

Money, like energy, is never lost. As the U.S. new car market heads down a hidey hole– chased by high gas prices, a cooling housing market and a sluggish economy– the used car business is booming. That’s because Ditech’s right: people are smart. OK, well, they’re not stupid enough to repeat expensive mistakes. In the last five years or so, tens of millions of American got burned by buying a new car. They’re mad as Hell and they’re not buying new anymore.  

“There were approximately 43m potential new-car buyers in 2007,” CNW Research’s Art Spinella reveals. “That's the lowest level in years, which has typically been in the 51 to 53m range." An increasingly large percentage of these new car disparu are buying used. In 2003, 11.6 percent of American car buyers replaced a vehicle purchased new with a used car. This year, it’s 17 percent– and rising.

Why wouldn’t it? Depreciation has kneecapped millions of [former] new car buyers. Although Detroit has sworn off fleet sales (the surest way ever invented to hammer the residual values of a retail model) and promised an end to new car sales incentives (the second best way to strip money from existing owners), in the first case, the damage has been done, and in the second, it ain’t over ‘til it’s over. And it ain’t over. 

The post-Katrina SUV exodus strangling Detroit’s profits is an on-going situation. Hundreds of thousands of truck owners [still] want to dump their shiny gas hog for a more parsimonious vehicle. Unfortunately, everyone wants to do the same thing. Being upside down, backwards and SOL has eliminated or lowered both their purchasing power and their desire to get stuck (i.e. buy) in another new car. 

The fantastic proliferation of models and the end of the traditional “model year change” has also led consumers towards used cars. With so many cars, trucks, SUVs and minivans from so many different brands, it’s hard for the neighbors to tell (or care) that you’re driving an “old” car. Even more importantly, the traditional used car downside has been virtually eliminated. The average car’s durability and reliability has made the words “Why would I want to buy someone else’s problems?” only slightly more relevant as “Remember the Maine!”

Just as the country’s brand patterns have gone bi-polar (split between domestic and transplant), there’s an increasingly large and rigid divide between new and used car buyers. Again, the latter is gaining ground at the expense of the former. CNW reports that the percentage of car shoppers looking for one- to four-year-old models doubled; from 2003's 16 percent to this year's 32.4 percent. The coming economic downturn will only accelerate the trend.

There’s not much hope that these used car buyers will return to the new car market anytime soon. That’s bad news for carmakers already throttling back on production. But here’s the weird thing: local used car dealers are also suffering; the so-called “independents” sold 3m used cars in October, vs. 4.5m in September. 

Private sellers are also losing out. "A year ago, casual sales [a.k.a. private sellers] were responsible for 38 percent of used-retail sales,” Spinella reveals. “November, however, is tracking at barely 33.4 percent.” Spinella attributes the decline to cash-strapped owners looking to dealers for a quick and easy way out of their vehicle. Besides, there’s a new kid in town, ready to hoover-up any clean-looking used car it can find.

Franchised dealers are the big winners in all this. Perhaps it’s a case of “the lesser of three evils,” but used car customers are happier buying their pre-owned transportation from a nationally branded dealer than a corner car lot or a friend of a friend (who knows a guy). The recent and dramatic proliferation of manufacturers’ Certified Pre-Owned (CPO) programs reflects their snowballing success in the marketplace. Aside from Jeep Wrangler sales, Chrysler’s CPO program is one of the few profit engines for their entire business.

Clearly, manufacturers must quickly take account of the used car boom and re-examine their business plan. American carmakers (in particular) built their empires on a class-based theory of planned obsolescence. They depended on status-seeking new car customers buying an endless succession of bright shiny objects. These days, new cars compete with used cars as well as other new cars. Any manufacturer who doesn't promote pre-owned examples of its product line faces an enormous and growing competitive disadvantage. 

In that sense, the new used car reality also requires a new attitude. Carmakers must learn to view the used car buyer as one of their own, rather than "sloppy seconds." They must use direct, positive, relevant and ongoing consumer contact to keep used car buyers within the fold. Woe betides the carmaker who continues to view owners of used cars bearing their brand as second class citizens; the company that masters America’s used car buyers wins.

Daniel Howes thinks Detroit is jinxed. In his latest column, “Automakers vexed by external forces,” the Detroit News scribe suggests that The Big 2.8 are latter day Joe Btfsplks, doomed to walk through life with a dark cloud hanging over their collective heads. Just as they're improving their products and cutting production costs, the domestic automakers have become hapless victims of slowing economic growth, rising oil prices and a soft housing market. It's the "Motown curse." Or, as I like to call it, another peg upon which a loser may hang his hat.

"As much as the fundamental gains in this year's contract talks remain," Howes writes. "The queasy reality is that no matter what Detroit's Big Auto and Big Labor managed to achieve, their gains could be swamped by economic forces beyond their control." True but— It’s not bad luck. It’s bad planning. If America’s soaring gas prices and slumping housing market are about to "swamp" The Big 2.8’s best-laid plans, why is Toyota forecasting growth?   

Because Detroit’s plans aren’t best laid. They’re, well, I think you know what I was about to say. Despite Howes’ proxy prevarication, Motown’s predicament relative to the current economic downturn isn’t a case of “when a bad economy happens to a good company.” These are simply the times that test an automakers’ soul, and Detroit’s is about to be found wanting. Again. Once again the Big 2.8 are caught flat-footed thanks to their inability to think or plan for the long-term. And in the long term, that’s ALWAYS a recipe for disaster.

Anyone remember the K-car? When the K helped pull the “Crisis Corporation” back from the brink of oblivion, Chrysler took the winning platform and milked it to death, using it for everything from minivans to luxury cars. Management gave two divisions identical vehicles with different badges– and then killed one of them because of plummeting sales. Again and again, great Chrysler products withered from years of neglect. “Cab forward" design anyone?

And what of the Town Car? Lincoln’s passenger product poured billions into Ford’s corporate coffers— which FoMoCo used to purchase brands they didn’t need, whose products then suffered from the cold dead hand of Ford’s erstwhile international brand management and leaden, impenetrable bureaucracy. Meanwhile, the engine of this excess was left to wither and rot on the vine, along with its similarly profitable Panther platform partners.

Mr. Howes might say all this is old news. The “new Detroit” has learned its lesson. And ain’t it a bitch: just when they’ve finally accepted what anyone with half a brain has known all along (like, say, Toyota), BANG! Fate kneecaps them.

Howes’ presupposition is fundamentally flawed. Detroit shows no evidence that it’s learned from its mistakes. Why did the K-car creator just kill the PT Cruiser, a vehicle with a huge following (and no significant update in the last eight years)? Where is the “new” Chrysler 300? While you can't argue with CEO Nardelli's desire to strip and flip rationalize his company's model lineup, where’s the long term commitment to the only thing that can sustain their business: product excellence? The same place it’s always been: nowhere.

Check out Ford’s new Lincoln MKS. It’s yet another travesty-on-wheels: a tarted-up something else rather than a glorious original, a car that embodies the values of a once proud brand, sold at the proper price point. GM’s effort to leverage its global assets to reinvigorate its U.S. brands is equally pathetic. They import cars from here and there without any coherent idea of who should get what and why—as witnessed by their continued insistence on badge engineering everything with even a glimmer of sales success. 

"The wild card in Detroit's collective turnaround has never been what it can control," Howes notes. "It's been what it mostly can't, which is everyone else." You can almost hear Warren Zevon belting-out “Poor Poor Pitful Me”— only without the irony. All of us have had to deal with factors beyond our control. But Detroit had control over the decisions that got them to where they are today: a leaf blowing in an economic whirlwind. Or you could say, the stronger your hand, the less trouble a wild card will cause.

Blaming Detroit's current plight on forces beyond their control is like saying it was bad luck that a mountain climber without a map got lost. When times are tough, the weak are the first to go. I feel sorry for all the people caught-up in Detroit’s decline— from Howes’ “poor slobs who hold mortgages” to the downtrodden creatives who know what could have been. But it’s not like survival of the fittest is a new rule. Or that no one in the industry understood that the “fittest” automaker is the one selling the best cars at the best price. 

Detroit’s weak because its brand and products are weak. Blaming external factors for this predicament is a loser’s game. One that Detroit’s knows all too well, and shows no sign of abandoning.

 You can read Daniel Howes' original column here.

The automotive spinmeisters were busy at the beginning of the month. They were either bragging about sales increases or suggesting that they didn't suck as bad as they could have. While it's easy to play fast and loose with sales numbers– estimated vs. actual, the effects of reduced fleet sales, etc.– inventory levels are a reliable indication of showroom reality. When you examine the number of cars a manufacturer's franchised dealers have littering their lots, you begin to know what's what. Let's take a gander at October's numbers.

[NOTE: a 60-day supply is generally considered ideal. Anything above 90-days indicates serious bloat.]

And the crown for lot queen goes to… the Hummer H1, with a 381-day supply. OK, that doesn't really count, but I couldn't resist calling a Hummer a queen. So pass the crown to the Chrysler Crossfire. Even though Bob Nardelli's mob finally whacked the Mercedes SLK-based two-seater, there are still 1100 units waiting for new homes. At the current rate, Chrysler dealers have a 248-day supply. If that isn't bad enough, there's actually a 2008 model on its way. 

The once super-nova Solstice is suffering a full lunar eclipse. Pontiac dealers are looking (and looking) at the second slowest selling car in America, with a 211-day supply on hand. Predictably enough, once the initial excitement for GM's niche model was satiated, sales plummeted. Unfortunately, pre-new UAW contract production didn't. Solstii are piling up on dealer lots, hoping that spring drop top sales increases are eternal. Pontiac's dealers could use the biz; they averaged nine sales per dealer during October.

Honda's next up (or down) with a 192-day supply of their unibody pickup truck, the Avalanche-a-like Ridgeline. Honda dealers are also sitting on a 169-day supply of S2000s, a 123-day supply of Pilots and a 103-day supply of Elements. Fortunately for their dealers, the new Accord's a well-stocked hit (45-day supply), the Fit is no longer hard to find (48-days) and the rest of the lineup sits below the 60-day inventory level (including the Odyssey). Overall, the brand ended the month with a 59-day supply of vehicles.

Jeep dealers wish they were so lucky. They're stuck with a 169-day supply of the [why haven't they killed it yet] Commander. Vindication for TTAC Ten Worst voters: there's a 150-day supply of the Compass, up from the previous month's 121-day supply. There's also a glut of Patriots (142-day supply) and Grand Cherokees (111-day supply). Jeep had 11 sales per dealer in October, the bulk of which were Wranglers (62-day supply) and Liberties (74-day supply). 

As you've no doubt heard, pickup trucks sales are slowing. You can see the stockpiles piling-up down at the dealers. GMC dealers are sitting on a 127-day supply of Canyons, with enough Sierras to last 116 days. GM's last next big thing, the Chevy Silverado, is hanging-out with the Colorado for 117 days. 

Dodges aren't flying off the lots either. The Ram languishes for 117 days, joined by a 110-day supply of Nitros, a 104-day supply of Dakotas and a 100-day supply of Durangos. The Dodge Boys' cars are doing a bit better, but there's still a 93-day supply of Calibers out there, somewhere.

Mercury dealers are struggling to unload the Sable (122-day supply), while customers are lined-up none deep for the old/new/I'm confused Taurus (110-day supply). Like the Solstice, the Mustang's shelf life has ascended (to 104 days). It's not lonely; Rangers clock-in at a 102-day supply.

GM needs to rethink rethinking American. Saturn dealers are holding 109 days' worth of the North American Car of the Year 2007: the Aura. And despite all the praise heaped on the Outlook, Saturn's got a 118-day supply of the Acadia's twin. On the plus side, if sales continue at the same pace, they'll be out of terminated IONs in 15 days.

Nissan dealers have a few slugs on their hands. The Titan and 350Z ooze out of the lots after 107-days. And while you might think gas prices have emptied Nissan lots of frugal Versas, not so. There's a 100-day supply, earning the Versa the dubious honor of America's slowest selling economy car.

At the opposite end of the spectrum, GM has a few fast movers. They only have enough Cadillac CTSs to last 24 days, and enough Enclaves to last 27 days. Chevy's done a good job of clearing out the old Malibu. Dealers welcome the arrival of the new version with a 39-day stock of the old model. 

Sadly for armchair analysts, ToMoCo doesn't break down their inventories by model. Dealers have a 26-day supply of Lexus trucks, a 27-day supply of Lexus cars, a 44-day supply of Scion and Toyota cars, and a 53-day supply of Toyota trucks. With an industry-leading average of 141 Scions and Toyotas and 115 Lexii sold per dealer, ToMoCo is still the one to beat.

Draw what lessons you will from this report. One thing's for sure: too little inventory (Malibu, Enclave) and it's an opportunity missed. Too much and profits evaporate. As you might imagine, an automaker that can balance production against demand has an enormous competitive advantage. Game on!

Now that the dust has settled on the last of the United Auto Workers’ (UAW) contract negotiations in Motown, the other shoe has dropped. All three domestic automakers have announced new lay-offs and plant closings, atop already extensive cuts. Chrysler killed half-a-dozen models. Ford has shuttered plants and signaled that “things might change” if “things get worse.” GM has eliminated several third shifts. So what’s next? Basically, we’re looking at an auto industry version of “Three Bears.” GM wants to stay big, Chrysler wants to get small, and Ford wants to be “juuuuuust right.”

Chrysler's cupboard is bare, there's nothing much in the pipeline and they have nothing to speak of overseas to lean on. All they have is a few decent entries in a handful of profitable niches. In line with their new owner's philosophy (a.k.a. strip and flip), Chrysler will continue to reduce production and kill products. They want to cut Chrysler's product line down to the vehicles they can sell profitably at the volumes they can move and then get acquired or go public. Done.

Look for Chrysler to try to get the 300s, the minivans and Jeep down to profitable volumes. The Ram and the Sebring/Avenger will survive even if they have to give them away; owning a volume product in a major market segment looks good to a buyer, profit or no. The multi-billion dollar question is how much is Chrysler spending on developing new products? The answer would give us a better idea of when they’re planning on selling their stake.

Meanwhile, Ford's market share has been dropping like a stone– which is no surprise to anyone. The fall from grace isn't “good,” just expected, as Ford has vowed to cut way back on their fleet sales. Clearly, Ford’s strategy is to downsize to a profitable volume and call it good. To this end, they’ve emphasized the need to improve flexibility in manufacturing. Details are sketchy, but part of the UAW agreement mandated/allowed for just such an investment. Hopefully implementation will involve multiple body types on one line, Honda-style, rather than just vomiting forth the usual badgeneered clones from one factory.

Shrinking down to a profitable volume– and trying to hold the line on price– looks like a winning strategy for The Blue Oval Boyz. But the question everyone is asking– and no one can answer– is “will it work fast enough?” There’s nothing left to hock. If shrinking doesn’t work, and work soon, Ford will be booking some federal court time for a Chapter 11 petition.

While The General didn’t wrest the concessions from the UAW that the later-negotiating pair secured, GM still got most of what it wanted– offloaded health care benefits, a new two-tier wage scale– without having to promise much. That said, GM has been doing its utmost to hold onto market share: upping incentives, investing in terminally ill brands, putting-up with duff dealers, etc. Why? 

Is GM pushing sales to keep their bloated dealer network afloat, or simply attempting to drive one or both of their domestic competitors to the wall? Chevy is rooting for biz down-market (trading punches with Hyundai/Kia), well below where Ford seems to be aiming their name brand. GM’s leaving the competition with the Dai-san (Honda, Toyota, Nissan) to the old “premium” brands, and Saturn. Cutting brands and dealer networks has been back-burnered until the profits return– when the problem can be ignored.

GM looks the closest to healthy right now, which is both good and bad. They are the least likely to run onto the financial rocks, but if one of the other two reinvents themselves or survives a trip to bankruptcy court, GM will be playing by the old rules in a new world.

While these are confusing times, a few things are certain. First, The Big 2.8 are going to lose more market share. A fair amount of their current share is created by fleet and fire sales– that have devastated profitability without driving back the competition. To make money going forward, these have to go. 

Second, The Big 2.8 are off the radar for roughly half of the American new car market. The Motown manufacturers hope that profits can be made from the half of the US market still “in play.”  It's a viable stratgey; half of the US market is still a huge pool. But it leaves the Detroit boys playing a zero-sum game. Any increase in sales for one comes out of the hide of another.

This is a problem; the sum of the shares that the 2.8 are counting on grabbing literally will not add up. If 50 percent of the market is considered “in play,” the total of the 2.8s’ expected shares is likely closer to 60 percent. Somebody’s going to come up short.

The fat lady has finally sung. The Truth About Cars (TTAC) and its faithful readers have identified the Ten Worst cars for sale in America in 2007. We began with a list of 136 reader-nominated vehicles. Our writers narrowed the field of bad dreams down to 20 finalists. By popular vote, you selected the ten most odious automobiles. And the winners are… after the jump (we need the page views).

In the battle for the American automotive market, Detroit’s fighting for its life, rather than supremacy. The truth is that the so-called domestic automakers are under siege; their non-union competition forced them inside the castle walls a long time ago. And while Toyota, Honda and Nissan are busy unleashing new and improved vehicles to vie for U.S. customers’ patronage, Ford, GM and Chrysler are busy retrenching, regrouping and re-arming, dreaming of both past and future glory. And when they’re not doing that, they’re tearing each other to pieces.

The most recent and obvious evidence of Detroit’s internecine perfidy: Chrysler’s decision to cut 12k jobs, kill models and downsize production just five days after the United Auto Workers (UAW) ratified their new contract. Never mind that the move reveals the UAW’s complete betrayal of their own rank and file, who would have never ratified the Chrysler contract (if indeed they did) if they’d known of the wholesale slaughter to follow. The more important impact of this [necessary] bloodletting will be on Ford.

Now that Ford’s UAW members have witnessed the fallout from the Chrysler contract, they will never ratify an agreement without iron-clad job guarantees. And if you thought that deep-pocketed, privately-owned Chrysler needed a free hand to downsize production, pity poor Ford; the sickest, most vulnerable automaker in the biz. It’s mortgaged up to its eyeballs, losing market share by the minute and drowning in an ocean of red ink. You can see their cash burn from Cincinnati. FoMoCo can afford job guarantees like the average pistonhead can afford a Bugatti Veyron.

Could Chrysler have waited THREE WEEKS before swinging their mighty axe, so that Ford could have secured the same sort of no-strings-attached deal for their UAW members? Sure. And there’s only one reason Chrysler CEO Bob Nardelli didn’t stay his hand: to shiv his cross-town rivals. 

If you read the reactions to yesterday’s Ford – UAW deal carefully, you can see the damage the Three-Headed Dog’s automaker has inflicted on The Blue Oval Boyz. "Our goals for this contract were to win new product and investment, to enhance job security and protect seniority,” pronounced UAW Veep Bob King, director of the union's National Ford Department. Yes, well, would the UAW be stupid/brazen/corrupt enough to ask its Ford members to ratify a guarantee-less contract after the Chrysler massacre? Not if you take UAW boss Ron Gettelfinger at his word: "We encouraged Ford to invest in product and people."

In fact, Ford needs to follow GM and Chrysler and invest in getting RID of products and people. They have too many brands, models, employees and production capacity to survive. While Ford’s new union contract includes a huge payment into the UAW’s inconceivably large, eminently lootable VEBA health care superfund– securing the automaker a cost-reducing two-tier wage system– Chrysler has made sure that Ford can’t downsize in time to reap its benefits.

And what of GM? It must be said that GM’s sitting relatively pretty in all this. With the help of the UAW management, they got away with making empty job guarantees to their union workforce (we’ll give plant X the new car– you know, IF there’s a new car). They’re now free to slice production to match demand, and slice they have. Even better, they’re eating Chrysler and Ford’s lunch. 

Check out last month’s sale figures. Compared to October '06, GM sales rose by 3.4 percent. Did the market expand? No. Did Toyota, Honda or Nissan sales slip, indicating that The General’s much-hyped new or revised products harvested conquest sales from the transplants? Hell no. The salient stat is that Chrysler and Ford sales plummeted. While there’s no hard data on this, common sense suggests that American car buyers who tend towards domestics (a well-documented predilection) are switching their patronage to GM.

We’ve mentioned that old joke about the “buddies” chased by the bear who realize that they only have to outrace each other to survive. Well, there you go. GM’s in the lead and Chrysler’s tripped Ford. Which is all very well and good for The General and The Dog, but Ford still has a secret weapon (that nobody sees): bankruptcy. While GM and Chrysler have dropped some of their union-related baggage through clever negotiation (i.e. paying off the UAW VEBA-wise), Ford could lighten even more of their load through Chapter 11.

I don’t mean UAW pay or benefits; as [non-co-opted] union members maintain, that’s not the real issue. I mean dealers. All three so-called domestics are hamstrung by their bloated dealer network, which prevents them from consolidating models and killing brands. If Ford files, they can ditch their duff dealers, drop bad brands, beat-up (not remove) the UAW and emerge a far leaner and meaner carmaker than either Chrysler or GM. 

Of course, none of this gets rid of the "barbarians" pounding on Detroit's gates.