My personal highlight of Last year’s Dallas Auto Show was watching Sajeev work his magic on GM’s regional marketing director. He’d met her at the Houston Auto Show some weeks earlier, where they’d had a productive conversation. Apparently the Powers That Be within GM didn’t think that was a good idea. She was talking gaily with other scribes when we approached her. When she turned to greet us, her face darkened the moment she recognized the dashing Mr. Mehta. Visibly agitated, she hissed, “I can’t talk to you,” spun on her heels and scurried away. After a moment of stunned silence I asked TTAC’s lonely lothario, “Do you have that effect on all women?”

My, how I do love telling that story. Sadly, work commitments kept my friend, Don Juan Mehta, in Houston this year. So I flew solo at the 2008 DAS.

To put things in perspective, the press preview day at the DAS draws about twenty print journalists and a couple of local TV crews. Meanwhile, the press preview for the North American International Auto Show in Detroit lasts three days and attracts some 6000 media people from around the world. More than one-hundred new products were “revealed” at NAIAS. I counted one at the DAS. Celebrities, industry big wigs, and politicians vie to be seen in Detroit. In Dallas, all I saw was a small group of aging, overweight, balding, vertically challenged, writers wearing sensible shoes.

While less of a spectacle, the intimacy of the DAS provides far greater access to the objects that we’re all there to see: the cars. Aston Martin would never allow thousands of clamoring critics crawl all over their lusty DBS. Yet they are perfectly willing to permit twenty of us to sit behind the wheel and fantasize about violently ordering all 510 horses to the rear wheels, stat!

A few moments of solitude behind the wheel of the DB9 Coupe found me awed by authentic interior materials and old world craftsmanship. The aluminum instruments and bezels are actually aluminum, not plastic (plastichrome). The clock crystal is crystal, not plastic. Wood accents are really wood, not plastic. The headliner is suede, not plastic. The leather upholstery is leather, not plastic (vinyl).  The sense of luxury was so powerful that I forgave the car’s narrow foot wells and niggling ergonomic design flaws.

With Aston Martin still fresh in my mind, I wandered to Cadillac and sat my butt in the XLR-V. The home team didn’t fare well in comparison. Despite the marked improvement by GM’s flagship brand, it’s clear how far Caddy still needs to go before it has a truly world class interior.

While both marques employ leather, AM’s cows certainly have a better dermatologist. I suppose it’s unfair to compare an exclusive hand-built car to one rolling off a mass-production assembly line.  But GM chose to play in the $100K end of the pool and right now they’re in over their heads.

The only hint of controversy on the day came at the Hummer press conference. I meekly asked how Hummer planned to combat the rising drumbeat of accusations that the planet is being ravaged by enormous gas-guzzling SUVs, of which the H2 is the poster child. “Or is Hummer content to say ‘screw you’ to the rest of the world.” Okay, maybe that part of my question came out a little harsh.

Like a seventh-degree judo black belt, GM’s mouthpiece, a third-tier marketing manager, skillfully parried the question and deftly avoided giving me anything interesting to write about-– some unapologetic diatribe about customer satisfaction and that their customer’s don’t care about being perceived as gluttonous.

My surprise came from the woman who stepped up beside me. To the satisfaction of Mr. Goodwrench, she began a vigorous defense of Hummer, citing its excellent fuel economy relative to others in its class.  At first I thought the interloper was another GM hired gun. But the shabbiness of her appearance confirmed that she was, in fact, another journalist. I wouldn’t have minded her input if a group of us were having drinks and sharing war stories. But I was at the press conference to hear what The General has to say, thank you very much.

Perhaps this is further evidence of the enmeshed relationship between automotive news makers and the [supposed] watchdogs in the press corps. Or maybe this was just a run-in with a mad old cow with an irrepressible impulse to rudely butt in and speak for companies with whom she has no affiliation.

And thus ended another DAS press preview day.  I left with a bag of swag (including a jar of Super Hot HEMI Powered Barbeque Sauce), a camera full of hi-res pix, and memories of a few new cars for cubicle daydreaming, both mine and yours.

[Click here for William C. Montgomery's DAS Pixamo photo gallery ] 

March comes in like a lion and leaves like a lamb. As far as auto sales were concerned, the month came in like a dead fish and left like… a pile of dead fish. While the raw sales numbers rose from February's levels, total sales were down by 12 percent compared to March of last year. Year to date (YTD), total sales were off by eight percent. Reflecting higher gas prices, light truck sales dropped by 17.8 percent; car sales "only" sank 5.9 percent. Here's how our individual bellwether models fared…

Pickup Trucks

Between the downturn in construction and the upturn in gas prices, truck sales were dismal. Chevrolet Silverado sales fell 23.5 percent month, down 19.6 percent year-to-date. Ford's F-Series fared worse, ending the month down 23.8 percent; annual sales were down 13.7 percent. The Dodge Ram made the worst showing, losing 31.3 percent on the month and 24.6 percent on the year. The Toyoya Tundra actually showed an increase: up 8.4 percent for the month and 39.7 percent for the year. As noted last month, the current model was new on the market last year; sales were just ramping-up.

Passenger Cars

For the most part, as expected, passenger cars fared better than trucks. The Chevrolet Malibu, was down a bit: 0.4 percent in March. But GM's last Next Big Thing's overall sales are up 16.7 percent over last year's. The Ford Fusion was one of the few models to show an increase for both the month (0.6 percent) and year (0.9 percent). Chrysler's 300 delivered the same [horrendous] performance as the Ram, cratering 29.7 percent for the month and 17.9 percent on the year. While the Toyota Camry is still ahead of last year by 1.1 percent, it finished March down 4.2 percent. Honda's jumbo-sized Accord was only 0.8 percent below last March but still down 5.2 percent year to date.

Truck-based SUVs

SUV's suffered the same fate as pickups. GM ante-penultimate Next Big Thing, the Chevrolet Tahoe, continues to lose ground, dropping 34.2 percent from last March and 26.3 for the year. The Ford Explorer gained a bit from February, but still lost 14.8 percent for the month and 20.4 percent year-to-date. The Dodge Durango continues its death spiral; 38.3 percent below March 2007 and 36.5 percent for the year so far. Surprisingly, The Totoya Sequoia's monthly sales went up 11.2 percent month. Annual sales are up 13.1 percent. However, just like last month, the raw numbers are low. So a difference of just 300 sales constitutes a high jump in the percentages. 

CUVs

CUV sales were a mixed bag in March. The GMC Acadia was still well above last year's sales stats, showing a 29.4 percent gain in March;76.6 percent ahead year to date. The Ford Edge continues its sales growth, ending the month 23.8 percent ahead of last year and up 47.2 percent for the total year. The Toyota Highlander and Honda Pilot didn't fare as well, finishing March down 7.4 percent and 29.1 percent respectively. For the year, the Highlander is up 7.3 percent while Pilot is down 7.8 percent.

Prius

With gas prices at all time highs and still climbing, Toyota's having no problems selling every Prius they can build. In March, sales of the Japanese gas – electric hybrid rose 7.7 percent month above last year. Year-to-date, they're up 8.1 percent. In March, sales of the Civic Hybrid were up 34 percent. Lexus' RX400h sales climbed by 6.7 percent. Camry Hybrid sales rose 34.7 percent (hybridcars.com reports that hybrid version of the Camry outsold the V-6 model in March).

Total Sales

The only word to describe the overall sales picture: "disaster." Whether we're talking about March or year to date, all five manufacturers were below last year's performance. GM dropped 18.7 percent compared to last March, down 10.9 percent year-to-date. Ford sales were down 14.1 percent for the month; so far they're trailing last year by 9 percent. Chrysler was a genuine disaster zone, finishing 19.4 percent below last March, down a total of 15.5 percent year for the year. Toyota's performance was surprisingly off, with a 10.3 percent drop from March 2007, down 5.6 percent on the year so far. Honda— the automaker with the lowest number of pickups and SUVs– was down 3.2 percent for March, minus 0.45 percent year-to-year.

The Future

The immediate future holds little prospect of any relief in gas prices or improvement in the economy.Truck and SUV sales– on which The Big 2.8 business still depends– will continue to fall. Small cars and smaller CUVs will continue increasing their market share. But don't expect any sales miracles. It's shaping up to be a long dry summer, sales-wise.

Spontaneous road trips are a like a treasure hunt without the clues. The prizes always appear unexpectedly. Like Goldendale’s night-shift police officer. “No, Mr. Niedermeyer, your speed was just fine. But you seem to have your high-beams on. That’s against the law within city limits. But… you’re free to go.” With those words of affirmation, our road trip to Wenatchee resumed. Adrenalin flowing, we were alert to the next roadside attraction. Read More >

The central question of Nevil Shute's “On The Beach:" how does the human mind react to certain death? The Cliff Notes answer: it can't. As clouds of lethal radiation descend on the novel's protagonists, they cannot help but continue their lives as normal, learning shorthand and planting gardens they will never see bloom. Alas, life imitates art. While the Australian car industry swirls (counter-clockwise) down the toilet of unprofitability, a new report confirms that its government patrons cannot commit to either rehabilitating or killing off the once-proud industry. Their predicament offers a number of valuable lessons about the global car industry.

Like its unique marsupial fauna, the Australian car industry has evolved in isolation, creating atavistic vehicles which have long been sheltered from the ravages of mainstream evolution by geographic isolation and protective tariffs. While most global markets have evolved towards small, efficient, front wheel-drive cars based on global platforms, herds of large, rear wheel-drive sedans with V8 power built only for Australia still roam the outback. But as the earth flattens, even the lost continent is feeling the effects of competition. Domestically produced cars have seen their market share drop from 30 percent in 2002 to under 19 percent. The entire sector has shed a quarter of its workforce since 2005. These deeply unsustainable trends point to an obvious and ancient choice: adapt or die.

But for Australia's leaders, this choice is too stark. A recently-released government report claims that Australia can not afford to even try to compete with its Asian neighbors in the small car-oriented, developing world markets (where global automakers are finding profits). "In essence, we need to look at the niche— what is Australia good at?" author Steve Bracks wonders. One needn't strain overly to find snarky answer to Bracks mission-central rhetorical question; the statistics in his own report scream “FAILURE” as loud as they can.

The report outlines a course of action which should seem familiar to Detroit watchers everywhere: keep building the same unwanted cars– just make them a little greener.  A half-billion Aussie dollar green-car initiative accompanies the report, in hopes that the government can simply throw money at efficient drivetrains for its large cars. This effort is far too little, far too late in a world where the hybrid market is already reaching maturity based on decades-old investments in green technology. The U.S. spent three times that amount on the Partnership for a New Generation of Vehicles between 1993 and 2001– with only concepts to show for the money.

Even if Australia could build cars that the world wants, the strengthening Australian dollar is erasing any competitive advantage the industry may have had in the export market. Meanwhile, import tariffs, which currently stand at ten percent, are also being eaten away by the rising currency. With tariffs scheduled to drop to five percent in 2010, the government has every opportunity to cut the industry free now, and see how it adapts on its own. But indecision rules the day, as the Labour government considers freezing import tariffs at their current, ineffectual rate.

The irony of all this is that Australia is perfectly poised to simply shed its auto industry. With unemployment statistics holding steady at a remarkable four percent, Australia's economy actually suffers from the happy malady of overemployment. In layman's terms, this means that Australia's 60k auto industry employees could find work elsewhere, in one of the country's many profitable industries. In an era of shockingly high commodity prices, the rich mineral resources of the land of Oz offer far more viable opportunities for Australia's economy than its saurian automakers. But even this startling fact isn't enough to inspire anything resembling bold leadership Down Under.

Australia's situation offers an abundance of lessons for American observers. The first is that the quirks of individual markets are subordinate to the efficiencies of global platforms. Ford's recent announcement that future rear wheel-drive sedan platforms will be developed stateside confirms this trend, and tolls the death knell of Australia as a unique vehicle developer. A corollary lesson to this may be that  the era of the large, powerful sedan is nearing its close, coming to an end in the land that gave it shelter.

The ultimate moral to the troubled narrative of Australian car production: if you aren't competitive, you will die. In the absence of real leadership from either the industry (choosing to adapt) or the government (forcing their hand by killing off tariffs), Australia's car industry will continue to wither on the vine. Half measures and failures of nerve do not deter the wheels of change. It's a fact that America's troubled industry players would do well to note.

[NB: This is the first time we (or anyone else I imagine) have ever run a father THEN son series of articles. Congrats to the Niedermeyer DNA.] 

Jim McGreen wanted to make some money in a green business. A craftsman-like mechanic, he had success making and selling electric bicycle kits out of his Alameda garage. Like so many others, he thought electric vehicles (EVs) were the obvious answer to pollution and expensive fossil fuels. In 1992, McGreen founded ZAP (Zero Air Pollution) Power Systems. But he needed more capital. 

Gary Starr had started an EV division at Solar Electric Engineering, a struggling solar cell firm later renamed US Electricar. In 1994, Electricar sent Starr packing, but not without plenty of cash to invest. Starr soon found McGreen. ZAP incorporated with McGreen, Starr and their wives as the board of directors.

Two years later, ZAP went public, clearing over $2m. McGreen invented the Zappy upright scooter in 1997. The $650 15 mph two-wheeler caught on with celebrities and public alike. Kevin Spacey rode his on Letterman, and Edward Norton called ZAP, asking them to make his go faster (than Spacey's).

ZAP sold over 2k Zappy scooters in 1998. But even $1.4m in sales wasn't enough to turn a profit. Starr argued that ZAP could cut costs by outsourcing production to Asia. McGreen was committed to quality. Starr, however, had masterminded adding three directors to ZAP's board. Late in 1999, Starr, his wife and his three new board members voted Jim McGreen out as president and CEO, putting Gary Starr in charge.

Under Starr, ZAP attempted to replace McGreen’s production expertise by purchasing Global Electric Motorcars (GEM), successful builders of low speed EVs. Failing there and elsewhere, ZAP's share price plummeted from a peak of $13 to $5.50 by April 2000.

Starr brought in John Dabels, former Marketing Director for the GM EV Program, to manage operations. As President, Dabels managed to double sales, raising annual revenue to $12m, but also resisted outsourcing to Asia. Dabel soon tired of butting heads with Starr and resigned in January 2001. (He later was a suspect in Who Killed the Electric Car?)

Zappy knockoffs drove stock prices under 50 cents a share. So Starr axed 80 of ZAP’s 100 California workers and outsourced to Taiwan. Almost immediately, cheap Asian copies– selling for a quarter of the “real thing”– flooded the market. With annual revenue falling below $5m, ZAP filed for Chapter 11 with a suspended Nasdaq share price of 21 cents.

Somehow, Starr emerged from Chapter 11 as board chairman. He brought in used-car dealer Steve Schneider. Between them, they gained controlling interest of Zap. Issuing stock as payment, ZAP went on a buying spree and learned the power of the press release to impress new investors.

Announcing the $99k fuel-cell Worldcar for 2003 pushed the stock price to $1.85 a share. Announcing their rights to sell smart cars– though later debunked by Daimler– drove it to $2.60. By 2005, ZAP's stock price was back down to 26 cents. A sympathetic USA Today article in 2006 raised ZAP's stock up to $1.23. Eventually, both the Worldcar and the flex-fuel, Italian-built Obvio (announced for 2005) faded into the ether.

ZAP has actually sold an EV: the Xebra, a three-wheeled Chinese EV with a Daktari paint option. As reviewed on TTAC, its lethargic top speed, limited range and cheesy detailing does not impress. The Xebra’s poor reliability also turned out to be the bane of unwary dealers that sank hundreds of thousands of dollars into Starr and Schneider’s promises– only to find themselves selling cheap EVs that had to be repeatedly towed back to the dealership.

And yet ZAP is still attracting investors on the vapors of green PR, promising two "fast, sexy and affordable" EVs within only two years.

For their $32,500 three-wheeled Alias sports EV, ZAP claims 321hp and 156 mph. Albert Lam, chairman of ZAP's joint venture with Chinese coach-builder Youngman said, "I believe we can go into production by the second quarter of 2009."

For the $60K Zap-X CUV EV, ZAP claims 644 hp, 0- 60 in 4.8 seconds and 155 mph, performance comparable to a Porsche Cayenne Turbo. Even less believably, ZAP claims a 350 mile range and a ten-minute recharge.

"This is vaporware," responds auto industry analyst Aaron Bragman, of Global Insight. "The claims they've made just don't jive with the current state of technology."

Despite the long development times seen with the Tesla Roadster and Chevy Volt, Youngman promised China Daily last October that, "the sample vehicles will be finished at the end of this year (2007) or next January" and "two or three months after testing, the electric powered sedan under the Lotus brand (Zap-X) will be the first to go into mass production."

But even the $40m Youngman has invested isn't nearly enough to actually deliver radical new EVs in that time frame. At least we'll know who killed this electric car.

In GM Death Watch 171, Mr. Farago contends that GM suffers from corporate-grade Attention Deficiency Disorder (ADD). He’s probably right. However, some ADD may be a good thing, if not a necessity, in an automobile company’s culture. Any carmaker operating in this period of uncertainty– recession, 25 percent higher Corporate Average Fuel Economy (CAFE) standards, high fuel prices, CO2 emission concerns, and more– would be foolish NOT to invest the time and energy into developing as many alternative solutions as possible.

Yes, GM is definitely moving in several different directions at once. However, I’d also argue that the mandated fuel economy improvements over the coming years (both driven by federal regulations and demands of the marketplace) will require a multi-pronged approach to improving fuel economy/reducing fossil fuel dependence. I don’t think there is any one correct answer about how to get GM’s fleet to 35 miles per gallon.

In addition to fuel cells, hybrids and diesels, GM will also have to do work on lightening its relatively porcine vehicles and improving the economy and refinement of their traditional gasoline-powered engines. Pruning the remaining four-speed automatics from the lineup and replacing them with six speeds, CVTs or DSGs would also incrementally help both fuel economy and performance. Adding gasoline direct injection technology to more engines could also improve both economy and hydrocarbon emissions.

Each little piece of the puzzle gets them a little closer to the magic 35 miles per gallon figure (or 50 mpg if California gets its way).

GM has been (rightfully) criticized in the past for not bothering to make longer-term investments in technologies such as hybrids. Such failure to invest in advanced technologies during the SUV boom of the 1990s in large part led to GM’s need to play catch-up to Toyota’s hybrid juggernaut. Nobody knows exactly what form our personal transport will take in the next decade or two. It seems prudent for GM to try a few different technologies, so they're not left in the dust of a company that was lucky or smart enough to pick the right one to invest in.

General Motors is also a victim of its own historical fits and starts; engineering by press release rings hollow after a few years.

Car enthusiasts are tired of hearing about the Camaro and Volt, neither of which can be purchased, yet are prominently featured in press releases, websites and even advertisements. Nobody believes GM when it says that it will be an environmental leader; how can the same company that builds the Hummer H2 and more full-size pickups and SUVs than any other company on the planet say that with a straight face? 

Because the automaker has very little environmental credibility, it feels the need to overcompensate with five-page advertisements in auto rags about their alt-fuel initiatives, while spending precious R&D resources on future technologies that may or may not come to fruition. But they really don’t have any choice, especially if they want to a) remain viable in a world of $5 gas and b) attempt to change perceptions.

GM is not unique in its shotgun approach to improving fuel economy. Ford, Nissan, Toyota, Mitsubishi and Honda (among others) are either considering or introducing diesels in their trucks (Ford, Nissan and Toyota) or cars (Acura TSX, Mitsubishi), while still developing hybrids (Ford, Toyota and Honda) and hydrogen fuel cells (Honda FCX). The differentiator may be management talent (or a lack of) among these companies. 

The better-managed car companies will manage to juggle all of the irons in the fire successfully, and the others won't.  From that standpoint, I share Mr. Farago's concern.

GM has not yet proven to me, or many others, that it has the capability or resources to follow through on the development of many of these projects.  However, it knows that it has to get the Volt out the door someday at some price, the light duty truck diesel’s development is finished, the two-mode hybrid is on the market, and the company now offers modern six-speed automatics on most of its vehicles. 

Other than the Volt, still left on the to-do list: taking some mass out of its vehicles without sacrificing comfort and safety and continuing with either hydrogen fuel cell development or further electric vehicle (E-Flex) development.

I believe that in the coming years, we’ll see each manufacturer taking a different approach to the issue of reducing CO2 emissions and fuel consumption. The creative ones that execute their strategies successfully will own the market. Those who bet on the wrong technologies will be left gasping for air. I don’t think we’re at the point where we can say that GM is trying too many different things, because we just don’t know what combination of GM’s projects will earn its keep. And then some.

Last Thursday, GM asked the California Air Resources Board (CARB) for "extra credit." Despite the fact that Chevy's gas-electric plug-in hybrid isn't in production, the General's generals wanted the rules modified so the Volt could more fully satisfy the Golden State's Zero Emissions Vehicle requirements. Done. And then, today, GM announced it will build 1000 hydrogen fuel cell vehicles for the same purpose. Only it wants someone else (i.e. taxpayers) to fund 40 hydrogen refueling stations. Once again, GM's reveals its core weakness: ADD.

According to the American Psychiatric Association, people with Attention Deficiency Disorder (ADD) demonstrate "a persistent pattern of inattention and/or hyperactivity, as well as forgetfulness, poor impulse control or impulsivity, and distractibility." As the Brits would say, they "run around like a blue ass fly." GM's CARB strategy is a perfect case in point. It's not ONE strategy: plug-in hybrids. It's TWO: plug-in hybrids AND hydrogen fuel cell vehicles. Of course, if THAT doesn't work, it'll be something else. Just pay the fines? Build an EV-only Volt? Who knows? Not GM. And don't ask, ‘cause they're very, very busy.

You don't have to read many installments of this series to know that GM is all over the show with everything all the time. To wit: GM Car Czar Maximum Bob Lutz infamously dismissed hybrids as a fad. Not long thereafter, GM rushed to produce not one, but two different gas – electric systems ("mild" belt-assist and dual-mode), both on their own and in partnership with other automakers. Cars get the former, SUVs the latter. (For now.) And then GM launched a "moon shot" mission to create an entirely new type of hybrid using unproven technology. But wait! There's more!

At the same time, GM is developing and unleashing hydrogen fuel cell test vehicles, and talking-up the technology– to the point of "unveiling" a hydrogen fuel cell concept Caddy without a powertrain. Yes, "all" GM needs to make hydrogen-powered, zero-emissions (at least at the tailpipe) cars work is $160m of California taxpayers' money for the filling stations. What's that's just $10 per resident or "two Starbucks coffees!" Meanwhile, passenger diesels are not on GM's menu. Until, of course, they are. And then…

Stop! While my Honda minivan was in service, I drove a base (as in cloth seats) Accord. I was amazed by the sedan's four-cylinder engine. It was smooth and reasonably powerful. The five-speed transmission did its thing without fuss. Does GM have an engine to match this? No.

Last year, Honda sold 392,231 Accords. Some 71 percent were four-cylinder models. Even without considering the Ohio-built sedan's German style, American-sized comfort or brand-faithful reliability (discounting excessively darty steering), there's no wonder the four-banger Accord is a popular car in these fuel-conscious times; it delivered well over 20 miles per gallon (EPA 21/31).

GM's Ecotec (Emissions Control Optimization TEChnology) engine is GM's "house" four. It's found in 12 American products, from the Chevy Cobalt to the Satrun Vue. It's not a bad unit. In some installations, GM's engine gets slightly better mileage than the [supersized] Accord. And the Ecotec is more-or-less bullet-proof. But it's no world-beater in terms of refinement, power or efficiency. So what if…

GM took all the billions of dollars it's plowed into hybrids and used them to develop a smooth, more powerful and a more efficient four-cylinder engine? What if they kicked Honda's ass? Don't get me wrong: I have no doubt GM is working on improving its gas-powered four-cylinder engines. They're working on everything else; why not that as well?

As an ADD sufferer, GM singularly fails to understand that the only way you can create a world-beating anything is to NOT do other stuff. Hybrids? Fine. Go for it. Fuel cells? Uh, OK. But not all of it. Because no matter how many engineering divisions or worldwide resources you have; "throw it against the wall and see what sticks" is the worst of all possible development strategies. Or, more simply put, just because GM CAN do something doesn't mean they SHOULD.

GM should have spent its money developing what it had. They should have refined and improved their mainstream Chevrolets, Buicks and Caddies– rather than "investing" in new brands (Saturn, Saab, Hummer), new vehicle genres (SSR?), new models (dozens) and new technology (complicated powertrains). But it didn't. The mess you see today is the result.

So the only remaining question is this: is there enough time left for GM to stop messing around, focus its energies, strengthen its brands, recapture lost momentum and stay in business? Judging from the torrent of news coming from RenCen these days, I don't think we'll ever find out. Unfortunately, it seems clear that only bankruptcy will provide the Ritalin that General Motors needs.

Something I’ve noticed: no discussion on corporate governance can go longer than five minutes before executive compensation comes up. It’s as predictable as “the scream” coming up when discussing Howard Dean. And why not? As a possible recession looms, executive pay remains the same. If North America’s economy is coming down with the mumps, its automotive industry may as well have Ebola. Chrysler was declared “operationally bankrupt” by its own its own CEO (before a cynical volte-face), while billion-dollar losses mount at GM and Ford. Yet all the people at the top of America’s piston pyramid continue to be compensated quite luxuriously. What’s up with that?

Take Alan Mulally at Ford, for example. Mulally scarfed $28.2m (plus, plus, plus) to take the top job at Ford. The money was paid before Big Al proved he could earn the automaker $1 of profit. Supporters note Mulally’s track record at Boeing and the “opportunity cost” of his exit (including lost pension).

Meanwhile, GM CEO Rick Wagoner has spent an entire career watching his employer lose market share, shareholder value and money. Although Wagoner took a highly-publicized 25 percent pay cut two years ago, GM’s board has recently restored his salary to pre-2006 levels. They justified the raise by noting GM’s turnaround plan is on track to reach whatever non-defined goal it aspires to. Profitability is clearly not that goal, as it easily escaped the General again in 2007.

As (automotive) executive pay and (automotive companies’) financial performance diverge, it behooves us to see the bigger picture.

First, the phenomenon isn’t restricted to The Big Three. It affects their supplier base as well. Canada’s Report on Business reports that Ontario-based Magna International’s jefe, Frank Stronach saw a 50 percent increase in personal “consulting revenue” (from his own company) last year. Magna’s stock value shrank by 15.45 percent over the same period.

Of course, making a direct link between stock price and executive pay is a gross oversimplification; the kind that led to some of the short-term thinking that has allowed much of this situation to develop in the first place.

Qualitatively, Magna weathered a difficult year. Its number one customer (Chrysler) was sold to a private equity firm, sideswiped by a supplier bankruptcy, and saw a big shake-up at the top of its own executive pyramid. Then again, Stronach’s own bid to buy Chrysler failed, he couldn’t stop unionization efforts at his own plants (some say he invited them to smooth the way for a Chrysler takeover) and he failed to properly hedge against a low American dollar. Stronach also failed to retain majority control of his company.

For all his efforts, Stronach took home $40.1 million in 2007.

Closer to the rust belt, American Axle’s (AA) CEO Richard Dauch banked exactly $10,175,194 in 2007, up from a paltry $9,316,242 in 2006. Was Dauch’s failure to prevent AA’s labor strike of 2008 by acting in 2007 worth the extra money? More importantly, how can Dauch preach fiscal conservation to his striking employees when all four returning AA executives got pay raises from 2006 to 2007?

Meanwhile, Visteon’s CEO Michael Johnston earned $10,783,136, according to their latest SEC filing. Great pay for the man who oversaw the company going from a $163m loss in 2006 to a $372m loss in 2007. Again, I’ll add some qualitative insult to quantitative injury. Where was Visteon’s strategic plan to separate itself from Ford’s declining operations and diversify its client base? It was nowhere to be found, apparently. Visteon continues to depend on The Blue Oval’s fortunes.

In the face of shaky executive performance, you’ve got to wonder why automotive executives’ pay remains sky high. The prima facie explanation is supply and demand. In other words, many firms require top-level executive “talent” and very few people can supply it. Unfortunately, that’s not the entire picture.

The truth of the matter is that CEOs have significant influence in selection of board members, who then have the power to decide how much the CEO should be paid. Even Mr. Magoo would see that conflict of interest, which stifles price competition. Secondly, these boards use a composite benchmark of compensation paid out to executives of comparable public companies to determine what to pay their own CEOs. Neat fact: American Axle’s 2007 benchmarking included both Magna and Visteon! Welcome to the fat cat’s intricate way of saying “well, everyone else is doing it too."

Here’s the bottom line. If an executive can rake-in millions of dollars in compensation regardless of performance, what’s his personal incentive to make his company profitable? We see athletes whose performance languishes after signing guaranteed contracts. If pay, pensions and perks are equally guaranteed, should we be surprised to see CEO’s doing the same?

One of the things I love about this site is the consistent welcome we all have to disagree with founding father, Robert Farago. He knows the truth about cars doesn’t come from pronouncements, but from productive exchange. Which is my slightly weasly way of saying: What’s with all this focus on brand dilution? Is it really the cancer of the car industry? Or, is it as misunderstood as Paris Hilton’s state of celebrity?

Robert’s contention-– shared like a bottle of Boone’s Farm with every market manager under the bridge-– is that a company’s brand is precious. Luxury car makers shouldn’t build dump trucks; sports car makers shouldn’t make minivans. That type of thing.

And it’s almost true. As Paris Hilton will tell you, the brand is the thing. She doesn’t sing or act or speak well enough to be famous for anything other than being famous. That’s her schtick and she schticks to it. Her branding-– as a famous, naughty party girl-– is so powerful she needs nothing else.

Cadillac used to be that way. Now it illustrates the danger in brand devolution. If people think you’re one thing-– a fat, luxurious car-– and you turn out to be another-– a thin sports sedan car with lots of extra leather-– you quickly become nothing. Jaguar’s spilling down-market gave us the X-Type: an OK sedan in a sea of OK sedans. Very un-Jaguar. Volkswagen’s Phaeton tried the reverse, backed out the door and left everyone asking ‘where’s the people’s car?’

Porsche teeters at a precarious point in its history. The Cayenne is simply not a sports car; it has no business sharing a bunkhouse with 911s. The more un-sporty things Porsche builds, the more it runs the risk of losing its premier sports car mantle. If that’s the brand. I think the Porsche brand is more slippery than a 962.

Porsche, the brand, is built with superb engineering.  In fact, that is what it is. Superb design and execution that happens to result in some really cool cars. It also happens to result in a really cool SUV, probably a cool sedan, soon. If Porsche decided to start making tractors again, I bet they’d be cool too. Because that’s what they do – make cool things, mostly sports cars.

Porsche Design Group (a majority held subsidiary of Porsche AG) comes close to proving the point. They’ve designed, among other things, faucets, hard-drives, forklifts and subway trains. Very unsporting. The forklift should be about as far from a Carrera as you can get, except it’s not. Their forklift is cool and clever, so the whole brand earns a pass.

Honda is in the same personal watercraft. They make line trimmers and the S2000. Seriously, if Weedwacker built a $30,000 sports car could you ever be persuaded to open you checkbook? Moving from tractors to pumps to Formula One cars is quite an accomplishment, and probably couldn’t be done if Honda was known for any one of those things. They are known for competent engineering, regardless of what they engineer. 

The design-engineering brand is more valuable than a manufacture’s brand. It keeps a company from being a one-trick pony carmaker. If the market for muscular rear-wheelers fades, the engineering-designer can race off in a different direction. SUVs replace eco-boxes, eco-boxes replace SUVs.

So why doesn’t every company that makes things try to position themselves as engineering-design gurus?

That won’t work for everyone, according to Wendi R W McGowan of Wendistry, branding and marketing consultants. “A brand is a believable connection with the consumer.” It is not as simple as a crusty stamp on the side of a cow. A brand is an emotional attachment between company and customer.  Porsche and Honda have found one way of forging that bond. Other marks have found other ways. For example, no one buys a Ferrari because they expect it to be the most reliable car for the money.  

Brand dilution, then, is not so much a disease as a vector. McGowan states. “Chevy’s not building on what they have.”

As a rusty example of old Detroit, she singles out Chevrolet. The company has the Corvette and a popular line of trucks, but fails to build on the spirit, excitement and loyalty those products have produced. Once those emotional attachments have been made, a company needs to reinforce them. Let them grow. Detroit has a tendency to push products and marketing schemes down, as opposed to letting ideas develop from grassroots.

As long as a brand maintains its connection with you, it will be healthy. A good brand isn’t selling you a product, it’s taking an invitation into your life. Kind of like this site. It wouldn’t bother me one bit if Farago added The Truth About Dryers. I’d come up with a couple of stories.

General Motors is about to report a massive sales decline for the month of March. GM’s management will acknowledge the loss, blame it on the general downturn in the U.S. new car market, point to a few successful models and move on. Later, the American automaker will report it’s burned over a billion dollars in the last financial quarter. GM’s management will blame the market downturn (again) and the strike at American Axle. The top brass will admit that GM’s turnaround is… delayed. But at no point will they accept responsibility for their plight. Well, why would they?

If I’ve said it once, I’ve said it 169 times: GM’s corporate culture lacks accountability. Despite the fact that the scoreboard clearly shows that the automaker is receiving a dramatic drubbing at the hands of any number of fitter, better and stronger competitors, no one at the top level is willing to step up to the plate. No one takes responsibility for missed opportunities (dozens of vehicles dying on the vine), flawed strategy (FOUR Lambda-based crossovers?) and blatant screw-ups (Fiatsco?). The company is populated by Teflon suits.

In this, of course, GM is not alone. You could make an excellent case that The General’s generals operate under the same CYA mandate that insulates our elected representatives from their failures and broken promises. You could also argue that GM suits suffer from the same misguided and inherently self-destructive sense of entitlement that characterizes America’s political pressure groups. I’m not saying our culture of blame is to blame for GM’s blame-free culture. But the automaker’s attitude reminds me of nothing so much as my local, all-powerful teacher’s union.

Like the Rhode Island Federation of Teachers and Health Professionals, GM’s upper management truly believes that everything they do is for the greater good. Their real mission: consolidate their power; protecting jobs is job one. Though both groups pay lip service to the “end user,” neither is willing to live or die by any qualitative metric. And both depend on PR and spin for their survival, without any real understanding that their actions– and inaction– create an unending stream of mediocrity. 

For decades, industry analysts have blamed the United Auto Workers Union (UAW) for their employer’s lousy margins and poor product quality. (Read Arthur Hailey’s Wheels’ for the historical correlation between union members’ imperviousness to dismissal and GM’s crap cars.) Although robots have largely solved the product quality problem, the worker-biased (not-to-say empowering) grievance procedures remain– and continue to prevent substantive progress on the factory floor. But this union power pales in comparison to GM management’s unassailable, like-minded brotherhood.

Did I say like-minded? Perhaps cookie-cutter would be a better term. GM CEO Rick Wagoner is a lifer who rose to the top through the GM’s accounting department; moving from Chief Financial Officer to Chief Operating Officer to CEO. His hand-picked successor, freshly-minted COO Fritz Henderson, was also a GM lifer who also rose to the top via the accounting department; and also attained the position of Chief Financial Officer. Career doppelgangers at the pinnacle of power at GM? How much more inbred– and insular– can a company get?

Is there any surprise that GM has eight brands stuffed with badge-engineered products when its executive roster is filled with badge-engineered executives? I’m serious. Uniformity of management leads to uniformity of decisions leads to uniformity of product. When all the people in charge are all asking the same questions, they’re all going to get the same answers. And the same answers lead to the same decisions which lead to the same results, again and again.

Here’s the thing. GM has finally woken-up to the crisis of their own creation. They now have that “sense of urgency” that analyst Mary-Ann Keller called for several years ago (when the excrement was striking the wind generator). As a result, Rick Wagoner’s mob are doing what they’ve always done– only faster. Their (tail-chasing) downsizing effort is accelerating. Their product cadence is quicker (thanks to re-badged imports). Their PR department's launching new ad campaigns and slogans at an even more furious clip. It’s more haste, less speed.

Ford and Chrysler hired outsiders to reverse their sinking fortunes. Whether or not Alan Mulally or Bob Nardelli has enough time and/or expertise to save the domestic automakers from oblivion is an open question. But at least FoMoCo and ChryCo are trying something new. GM is still ruled by the same man who sees no problem having a bankruptcy-proof pension while asking his workers to take a hit for the team to avoid bankruptcy.

Of course, there will be a reckoning. While the teachers’ union can still use their political muscle to maintain power, GM’s management has lost touch with (and sight of) its constituency: its customers. The "base" has left, and they’re not coming back. No one within GM management may take responsibility for this loss, but they are all to blame.   

“You’re free to go.” With those hackneyed words, the Goldendale police officer returned my license. They were the very same words I’d heard in my head just a few hours earlier. At one-thirty last Sunday, my older son Ted called: “If you can drop Will [(his brother) here by three, we can take him back with us to Portland for a few days.” Cabin fever was at 103. The ninety minute deadline to pick a destination and pack the xB was just the tonic I needed. Time to head for… (flings open the atlas)… Wenatchee! Read More >

Some car companies produce TV commercials that are targeted at your left brain. They hit you with stats and prices and lots of dry information. Some TV ads cater to entirely to your right brain. They seduce you with music, action and Jill Wagner (what car does she sell again?). And some TV ads try to mix a little bit of both at the same time. And then there are Volkswagen’s ads, which are no-brainers. And I don’t mean that in a good way.

The current marketing slogan used in VW’s commercials: “Sign THEN Drive.” This strap line assumes that you, the viewer and potential car buyer, must be told to execute a car purchase in the following sequential order: 1) sign the papers; and 2) THEN drive off in your new VW. They even helpfully put the word “THEN” in all caps just in case you miss it. Without VW’s instructions, who knows what might happen?

The ad shows us. A clean-cut, 20-something Caucasian male approaches a group of dreaded and hated lawyers (ipso facto). The not-the-Apple-Mac-guy (‘cause he’s busy) informs us that VW is “testing for the new Volkswagen Sign And Drive event.” 

As he approaches the testing site, milquetoast man looks in horror at the multitude of putative VW buyers desperately trying to sign paperwork and drive VWs at the same time. The drivers swerve madly, running over cones and barely avoiding the other three drivers in a huge open area. One of the lawyers whispers into Joe VW’s ear, then he looks at us, mildly shakes his head (“How could we have overestimated our buyers’ intelligence!”). He makes a small notation and tells us that VW is now running the “Sign THEN Drive” event. “Even better!” he assures us.

Never mind that today’s cars offer a multitude of distractions deadlier than trying to sign a piece of paper while driving. Like any other manufacturer, VW offers plenty of potentially lethal electronic asides in their cars. But apparently, VW does not think its models’ buyers are capable of signing their names and driving their cars at the same time. (God forbid you throw chewing gum into the mix.) Such an arduous task will surely send the VW driver careening into a ditch. 

The commercial reflects poorly on VW’s collective (if fictional) intelligence. Did VW really need to “test” for a marketing event? And if the resulting mayhem was so surprising, what does that say about VW’s marketing data and strategy (we had no idea that selling our cars for zero money down would attract paradigms of Darwin’s theory)?

A second VW “Sign THEN Drive” commercial is even worse. It shows a typical 20-something yuppie couple– Asian-American female with a Caucasian male, ‘natch– approaching a pristine white VW. [BTW: ALL of the cars in these VW commercials are white. I don’t know what that means, but I don’t like it. Is BMW designer Chris Bangle “Axis of White Power” secretly behind this?] The male is proudly showing off the automotive apple of his eye to his female companion. 

But as they get closer, the VW honks several times in defense. The couple backs away, then tries again. Again, the VW objects loudly. The female turns to the male and whispers fearfully, “What’s happening?” The guy stands there looking absolutely dumbstruck and flummoxed. 

Cut to a smiling African-American male (VW commercials are nothing if not racially diverse) standing high above the confused couple, next to another Joe VW salesman. He is gleefully playing with the remote horn button on his keyless fob, toying with the challenged couple below. Joe VW offers to put the confounded couple out of their misery, but VeeDub buyer declines, his schadenfreude spreading by the second (with no fahrvergnugen in sight).

Again, we have a couple of clueless VW buyers who apparently have never heard a car honk before, have no idea that a remote fob contains an alarm button (my 1998 Civic had one, for crissakes) and have mental capacities slightly lower than the chicken I ate last night.  Meanwhile, we get introduced to a new type of VW buyer, the Sadist. The Sadist delights in using his new VW to mock and ridicule lower life forms. He stands up high, looking down at the little people, flexing his superior (average) intelligence. And Joe VW, in both commercials, looks on helplessly.

Neither of these commercials tells me anything about VW cars or why I would want one. The humor is crass,  insulting, and juvenile. Along with VW’s recent spate of commercials that show VW drivers constantly getting into accidents, VW seems to have an extremely low opinion of its buyers. Then again, given VW’s poor reliability, high cost of maintenance and repair, and high price points, maybe VW knows exactly what it's doing. 

Scrap metal. The phrase may not mean much to you, a pistonhead who takes pride in his ride. But scrap is one of the most lucrative industries in the car business today. That old junk car in the neighbor's yard that would have been lucky to get $50 seven years ago is now going for over $200– on the steel content alone. When you throw in the recyclable platinum, aluminum, copper and lead into the mix, the revenue on an average junker is anywhere from $350 to $600 per vehicle. This inflation has implications for both the average Joe and the entire American automobile industry.

The environmental benefits of this market for dead cars are obvious. Vehicles that were once put out to pasture– with toxic fluids spilling into the soil and the surrounding landscape– are now, thankfully, a rarity. Companies are draining, crushing and recycling aluminum and copper radiators. Old batteries now go for $15 in many areas of the country. Even the rims that were once left on the beasts of old are being recycled and re-used by everyone from GM to the People’s Republic of China.

In short, simple economics has motivated both mature and developing automotive markets to do what environmentalists have been calling for over many decades: clean-up the remnants of our past consumption. 

The other far smaller benefit to recycling is local, or, to put it another way, industry-specific. The American scrap dealer buying all that leftover refuse is making some serious cashola. China has a nearly insatiable appetite for industrial junk, and they are far from alone in that demand. Japan's scrap iron and steel prices rose to $460 per ton this week. This competition for any old iron is putting some immediate money back into the hands of the recyclers. These local business’ neighborhood communities are enjoying the benefits of record prices for copper and steel. Many recylcing companies are investing in new technology.

Unfortunately, the seller’s market for scrap pretty much leaves everyone else in the proverbial lurch. Despite the current downturn in automotive sales, worldwide demand for car-building commodities has not, and can not, be satisfied by recycling. Commodity prices are still soaring. And that means that today's automakers have to juggle three not-so-pleasant options: raise product prices, find new ways to reduce their costs (usually through “design improvements”) or simply accept a lower level of profit. Others in the automotive food chain are even less lucky.

For low-income consumers, the high prices for raw automotive materials trigger far worse consequences. For starters, rising raw materials prices have forced some parts makers to the wall; they can’t simply pass on their costs to the manufacturers. (This is what precipitated GM's and Chrysler's recent attempts to sue and seize the assets of many of these faltering firms.) We’re already hearing reports of replacement part shortages due to the American Axle strike. The harder it is to get low-cost replacement parts for your car, the less it’s worth.

Meanwhile, long term, rising commodity prices hit manufacturers hard. How do you justify selling cars whose loss levels are getting worse by the day? This is not an easy question to answer. You can only sell your products at a loss for so long. Whether or not you believe any of the domestic carmakers are on the brink of disaster, the lack of affordable raw materials certainly helps speed these embattled automakers towards bankruptcy.  

Needless to say, that possibility would whack American consumers but good. A bankrupt automotive company has virtually no responsibility to anyone. You want the warranty honored? Too bad. You want parts now? Hold on a sec/minute/month/eternity. While it is certainly true that a bankrupt automaker would continue to do business, the chain of customer responsibility (such as it is) would be severely damaged. And the customer would literally pay the price.

If you think that I'm being alarmist, keep in mind that I've literally seen thousands of Daewoos stuck at auctions– for years on end– because the courts had to decide their rightful owner. Even today, few cars in the market are worth less in their market segment than a Daewoo. All things being equal, there are few events that can hurt a car owner more than bankruptcy (hence Detroit’s unwillingness to consider the nuclear option).

So we’re living in a new world, where old cars are less of a blight on the landscape but car owners and car makers face significant new risks. It’s no wonder Toyota’s heading to Africa for new sources of exotic metals and a GM exec was convicted of commodity related fraud (that cost GM some $80m). In this business, it's no longer the one who owns the gold that rules. It's the one who owns the steel, copper, lead, petrochemicals and lithium. 

Automotive News recently published an interview with Ford's group vice president of human resources. Joe Laymon mentioned the names of six brass hats Ford considers potential successors to their current CEO Alan Mulally. As Mr. Mulally has only been in office for just 18 months, anticipates a long stay and hasn’t seen his 63 birthday, the timing was, at the least, odd. More importantly, Laymon effectively turned a succession plan into a very public episode of Survivor Dearborn.

Taken on its own, the mess should disappear before the end of the news cycle. Taken as a glimpse into Dearborn’s corporate culture, it becomes a clarifying tale. Laymon shows us the primacy of internal politics and the resulting backseat relegation of everything else, including-– I don’t know-– building decent cars and trucks.

Backstabbing, career sabotage and secret alliances are all part of internal power struggles. They almost never profit a company as a whole. Good ideas get axed because they came from form the “wrong” exec. Good people get axed because they hook-up with the wrong team.

Sadly, this isn’t baseless or general speculation. A quick look at Ford’s Shakespearian history sets the stage. Henry the Second fought Harry Bennett, then Lee Iacocca.  Bill Ford struggled with Jac Nasser. And those are just the big public fights. Every day, smaller, darker battles wage. Just this week we’ve seen the Glass House Gang pull the rear wheel-drive (RWD) rug from under Ford of Australia’s proverbial feet, as Dearborn declared that America will handle the new global RWD platform.

In short, the Ford culture has been poisonously political since its inception. If current CEO Alan Mulally could do one thing to turn around the Blue Oval, eliminating these Machiavellian machinations would be it. Laymon’s announcement of a battle for succession both reveals the fact that nothing has changed, and amplifies the inherent discord.

Then there’s a Board of Directors, currently stocked with two members of the Ford family. The board alone has the power to pick Ford’s CEO. The CEO title itself derives from the position’s job number one: executing the directives of the board. Sure, the board takes recommendations from staff and company officers. But they are in charge. Ostensibly.

For Laymon to publicize the list of CEO succession long before Ford’s CEO is slated to leave tells us that Ford’s board is a bunch of bystanders– at least when it comes to their most important responsibility. 

Jabbering away in public about who’s next takes the attention from who’s now. The ‘now’ at Ford, is a pretty important time. Market share and money are fleeing the company like the Jews from Egypt. Mulally was brought on board from Boeing at enormous expense to perform miracles. He’s pointed the way forward and issued some commandments. Now is the time for everyone to line up behind him and get through the desert. It’s NOT the time to wonder who gets the staff when he’s gone.

Not that it’s wrong to have a line of succession. A responsible company has plans for both the untoward-– in case a CEO pegs it-– and the long term. The learning curve at a company like Ford is steep and treacherous. You need executives who can move into place and keep things moving. 

What IS wrong: waving everything around in public. Most of corporate American would do well to be more transparent. But this is one of those rare instances when the Glass House Gang should have kept the curtains closed. Most of the world expects Detroit execs to be clawing and conniving, but no one wants to see it. People want to see hard work, rallying ‘round the chief and honest effort.

People don’t always care what kind of company creates their cars. Porsche made Nazi war machines. BMW used slave labor. GM has closed plants across the country, off-shoring the work. But if there’s one thing Americans love it’s a come-from-behind Cinderella story. A Ford that pulled together and turned itself around would have something more valuable than steel and glass to sell. 

It was once common for someone to refer himself as a Ford man. Such loyalty has not completely gone the way of the fedora. It’s still achievable, as any Mac-evangelists or Harley rider will be happy to tell you, at length, in a language outsiders barely grasp.

No such luck for Ford. In the end, Joe Laymon has shown us that it’s still business as usual in Dearborn. FoMoCo are missing yet another opportunity to change, grow and inspire, not just in terms of design or technology, but as a community. It’s too bad. Who knows how many more chances they can afford to blow.

Not that Joe Laymon cares. The day after the interview broke, he quit Ford and moved to Chevron Corp.

It’s getting close to the first anniversary of Chrysler going to the dog. While there’ve been job cuts and “market adjustments,” the shoes are still hanging. Chrysler is still a long way from being profitable. But it appears to be an equally long way from breakup. What exactly is planned? The truth may be that Cerberus isn't “planning” so much as “waiting.”

For Cerberus, buying Chrysler was a gamble. As you’d expect from New York money men, they did several things to “stack the deck.” First, they got the company for a song (under seven and a half billion) with some working capital included. More importantly, they took the automaker private. With no shareholders to whine about dividends, no “captain Kirks” to try to swing a takeover, Cerberus can afford to take the long view. And the long view says… go public. Or strip and flip. Either way, now’s not the time.

Cerberus’ holding pattern has less to do with ChryCo’s declining fortunes than OTHER carmakers’ declining fortunes. In other words, you can’t flip a company without a flipee. The current U.S. automotive market leaves very few players flush with cash, looking for an American dance partner. And those that are, aren’t. Splitting-up Chrysler’s assets is the only realistic alternative, and that idea poses involves many of the same issues.

At the moment, Jeep is only spinnable hunk of Chrysler. (No surprise there; Jeep’s had more “partners” than the widow next door.) Jeep is the only part of Cerberus’ entire car making operations with a positive cash-flow. While the profits aren’t enormous, the brand’s “trail-ratings” carry enough cachet to allow big mark-ups on simple vehicles. 

There are several problems with Cerberus selling Jeep sooner rather than later. First, while Jeep’s hard-core fan base is less (more?) affected by fashion than most, SUVs are not the flavor of the month. The new U.S. federal corporate average fuel economy (CAFE) regulations are in flux, awaiting clarification and California-compliance (or not). In any case, whatever Cerberus could get for Jeep now pales is comparison to what Jeep would be worth in a hot, relatively settled market. 

Next and again, who’d buy Jeep? With credit in short supply, a US-market outsider would have trouble stumping-up the dough to snag it. And those foreign firms that could afford Jeep (BMW, Toyota, Honda, etc.) either already have off-road products or don’t want them. VW is busy. Daimler is sitting in the corner, grinning.

Renault/Nissan is the only like foreign suitor— only they aren’t. Carlos Ghosn may make noises about mergers, but there ARE limits. And lest we forget, NONE of the imports are brave/stupid enough to buy a unionized company, bringing the (free!) Trojan horse through the gates. Domestically, Ford just sold Land Rover. And although GM has decades of experience cannibalizing itself, even RenCen knows it doesn’t need Hummer AND Jeep.

Besides, what would Cerberus do with the rest of the company after they stripped-out the only part anyone wants? China is often named as a potential buyer, but even for pennies on the dollar for U.S. production capacity and access to thousands of dealers, they’d see Chrysler as the financial sinkhole that it is.

No matter how much— or more likely little— Cerberus made from a larger Chrysler breakup, it could be the volte face that launches a thousand lawsuits. Shuttering Oldsmobile cost GM billions; the General’s terminal brand wasn’t a fraction the size of Chrysler, Dodge or Jeep (never mind the three brands combined). Filing for bankruptcy and THEN selling off the bits would mitigate Cerberus’ legal risk, but it’s hardly a profitable exit strategy. If nothing else, Chapter 11 would decimate the brands’ street value.

As I stated at the beginning, any fool knows that Chrysler is a long, long way from profitability. But who said anything about profitability (other than me)? Cerberus doesn’t have to “build equity;” they don’t have to justify their decisions to institutional shareholders. Think of Chrysler as a slum landlord who bought a building on the cheap awaiting a buyout offer and you begin to get the picture.

Watch as Chrysler reins-in R&D while “consolidating” dealers (i.e. watching them die). This viewpoint explains “quicker than quick” Chrysler’s strange reluctance to cut vehicle lines that everybody (but their few remaining buyers) know are dead in the water. The superabundance of product forces dealers to go tits up, and leave their proverbial apartments.

Remember: Cerberus is in this to make money, not to “save Chrysler.” They need to get their $8b back, plus a little extra (Daimler holds 19.9 percent). To do that, all they have to do is run the business into the ground. When the time comes to “sell Jeep, liquidate the rest,” Chrysler’s corporate coffers will be conveniently bare (or pretty close). The lawyers can fight over the bones. And the “dog” will have had its day.