Poor-quality car dealers. You know the score: dodgy facilities, salesmen you wouldn't trust with your pet rock, F&I guys who nickel and dime your paycheck into oblivion and service departments for whom "bilk" isn't just a word- it's a way of life. Industry analysts and desk-chair pundits alike condemn many (if not most) auto dealerships as a cancer on the industry. Believe it or not, car manufacturers share your distaste. Hence the reason the newly excised Chrysler LLC flashed its private equity muscles, threatening to close "underperforming" dealerships. Is that legal? 

The short answer is: there is no short answer. Franchising laws come in 50 flavors. These state laws are extremely complex and vary enormously from jurisdiction to jurisdiction. If there's an overarching theme to these statutes, it's that they tend to favor (i.e. protect) the franchisees.

For example, in many states, a franchisor may not terminate or refuse to renew a franchise agreement without legally demonstrable "good cause" for doing so. Franchisees may also sue franchisors for injunctive relief (e.g. a court order prohibiting franchise termination) or rescission (undoing the franchise sales agreement), PLUS damages. Oh, and the Federal Trade Commission can step in to enforce state laws.

So, in business terms, Chrysler can shutter its underperforming dealerships, but their legal bill is bound to be on the Orion's Belt side of astronomical. In fact, any automaker considering cutting dealer deadwood has one word on its mind: Oldsmobile. GM's December 2000 termination of its Oldsmobile franchise is example no. 3 in the OED under the phrase "cataclysmic meltdown." When all was said and done, this little exercise cost General Motors about $1b- not including various intangibles that corporate PR folks might call "good will" or "public image." 

Still, it's got to be done. Toyota has 90 American dealers for every percentage point of U.S. market share. General Motors has 300 dealers for every point and Chrysler is nominally better at 270. There is nowhere near enough space to detail all the reasons why this state of affairs is toxic for the American manufacturers. Suffice it to say, the end result is that the dealer bloat is stomping the life-support machine attached to Chrysler's sales numbers and wrecking what's left of Chrysler's battered consumer image.

Chrysler's decision to prune its dealer network can only go two ways. The manufacturer can either simply pay the dealers to shut down or fight them in court. Although the word extortion comes to mind, a pay off would be the quickest and easiest way to make the problem go away. Alternatively, Chrysler's lawyers could say screw you, see you in court; lots and lots of courts. If Chrysler's army of high-priced lawyers loses at trial, it'll cost them a ton of money. If they win at trial, it will still cost them a ton of money.

Chances are they'd win some and lose some and pay through the nose for the privilege. Either way, the bottom line is the bottom line: there's no inexpensive way for Chrysler to trim its dealer network. 

There are more devious alternatives. Chrysler could reduce the amount of dealer "holdback." That's the money– roughly two to three percent of a vehicle's retail price– held by the manufacturers prior to sale. Dealers depend on this post-sale cash to book paper profits and make money. Chrysler could make the size of the holdback performance related, or simply drag their heels.

Chrysler might also say "Hang on; we've got some production issues. We've got to allocate our 300Cs very, very carefully. At this point, only five star Chrysler dealers can have Hemi-powered cars." There is precedent: SRT-8's are doled-out by corporate caveat.

While any such moves brings the threat of lawsuit, pretty much everything does. Chrysler can make life hard enough for "bad" Chrysler dealers that they'll have no choice but to send their dealership to the land of Plymouth, Eagle, AMC, De Soto, Nash, the New Yorker, Imperial, Cordoba, Daytona, Cirrus, Concorde, LHS, 440, Dart, Breeze, Spirit, Reliant, Omni and… well you get the idea.

There was one legal development of late, a silver-plated lining to the grey cumulus clouds filling The Big 2.8's sky. In Leegin Creative Leather Products v. PSKS, Inc., the Supreme Court overturned a 96-year old precedent that made any kind of vertical (manufacturer-set) price rules illegal on their face, without any other examination. 

Under the old rule, dealers could make patently senseless decisions with prices, like fleece customers for $10k over sticker on a Solstice or mark Trailblazers down so much as to utterly pulverize their residual values. Now that General Motors or Chrysler or Ford can call dealers out on the carpet, they have much stronger control over some of the more foolish moves they make. It can't hurt, but it won't really help. 

For the last few years, the American public has embraced Toyota's products as clean, durable and efficient. Exhibit A: the demure Camry, which has maintained its position as America’s favorite automobile. Exhibit also A: the Hybrid Synergy Driven Prius; the poster child for environmentally and foreign policy-conscious consumers. No surprise, then, that Toyota's been held up as America's responsible automaker, the one who doesn't bitch and moan about federal regulations, but just puts its head down and does the right thing. And makes money doing it! And then Toyota released the new Tundra.

The new Tundra is big and brash, with tremendous attention to detail and an [available] stonking great V8 engine. In the first quarter of 2007, Toyota spent over $100m telling Americans that the transplanted Japanese automakers had built a proper, full-sized, all-American truck– deep in the heart of Texas (no less). What they didn’t mention: the most popular version gets a combined EPA average of 15 miles to the gallon.

Perhaps that’s because, at the same time, ToMoCo ran a national TV campaign advertising the fact that its Hybrid Synergy Drive is now available in the Camry. Talk about cognitive dissonance. And when you're done, consider Toyota’s dirty [not so] little secrets: the FJ Cruiser, Sequoia and Land Cruiser. 

According to the EPA, the 4WD FJ Cruiser gets 17 mpg city and 21 mpg on the highway. While GM gets slated for building big thirsty trucks, the FJ's city mileage is only slightly better than Chevrolet’s entry into the “compact” SUV segment, the Trailblazer. Ye Olde Trailblazer gets 15 mpg city in 4WD trim, and it ties the FJ for highway efficiency.

The current Toyota Sequoia is another big ass gas-guzzler. The mondo-sized SUV travels just 15 miles per gallon of gas in the city, and squeezes out a mere 18 mpg on the interstate (4WD Limited). Sequoia’s older, full-size brother, the Land Cruiser, gets a shocking 13 city, 17 highway mpg (4WD). Compare this to the GMC Yukon 4WD, which has a bigger engine, tows more, weighs more and still manages 15 mpg city/21 mpg highway. 

In 2008, both the Sequoia and Land Cruiser will be replaced with bigger, better behemoths, powered by Toyota’s new 5.7 liter V8. (The new Sequoia is built on the Tundra platform.)  The size of the new Sequoia and Land Cruiser and the mileage of its mighty mill have some execs within ToMoCo shaking their heads.

Don Esmond, Senior VP of Automotive Operations at Toyota Motor Sales USA said, “I worry about the Sequoia being too big and not having enough fuel economy more than I do the Tundra… there are a lot of choices besides an SUV for hauling your kids to soccer practice." 

Releasing two new bigger full-sized SUVs into a declining market, into a world of three dollars a gallon gas, is a serious miscalculation on Toyota’s part. Granted, the profit on one Land Cruiser is probably greater than the margin on five Prii, but how many Land Cruisers can Toyota sell, and at what cost? 

How many potential Prius buyers will be turned off by Toyota ads pushing the new Sequoia and Land Cruiser? While the Prius currently owns the hybrid mindspace, Honda, GM, Ford, etc. are not standing around waiting for people to find their new, improved gas – electric models. In fact, Honda’s recent TV ads, touting their status as makers of “America’s most fuel efficient fleet of cars,” were specifically (and effectively) designed to steal the moral high ground from Toyota.

While you could argue that Toyota allowed itself to be painted as a friend of the Earth, rather than actively campaigning for eco-sainthood, the ultimate effect could also backfire in the SUV category. How many SUV owners are going to trade in their Suburbans for full-sized SUVs made by the green company that makes Suburban owners feel guilty for owning a Suburban, instead of a Prius?

In other words, Toyota’s vastly disparate products put their marketing efforts between a rock and a green place. If they promote the Prius and other small cars on the basis of their fuel efficiency, they risk being exposed as hypocrites (done) and alienating buyers of large SUVs and pickups. If they promote their large SUVs and pickups, they look even more morally ambiguous and risk alienating buyers of small cars.

All of which place Toyota at a crossroads. As a full-line automaker, ToMoCo’s U.S. products have been defined by their low price and class-leading reliability. The Prius was a game changer, wrenching their corporate image into another category AND emphasizing their lineups’ frugality (originally an off-shoot of price, i.e. cheap to own). Now, they must either embrace the new reality and change their product mix or do nothing and suffer the consequences.

I’d like to meet the idiot who thought that the Cadillac BLS was a good idea. Actually, I’d like to meet the group of idiots who said sure, let’s create a small, badge-engineered Saab, fit it with a diesel engine, call it a Caddy and sell it to Europeans, South Africans and Mexicans. No, wait; just sit me down in front of the idiot who gave the other idiots the power to green light the idiot who had the idiotic idea in the first place. And I’ll ask him straight out: what part of branding don’t you understand? You know, other than all of it.

Don’t get me wrong: I’m not saying that everyone inside the artist formerly known as the world’s largest automaker is completely clueless as to what kind of cars the company should be building. Just the ones making the decisions.

Of course, that’s a prima facie argument when you’re facing a born loser like the Cadillac BLS, a car that’s as far from “the standard of the world” as Target is from a “premium shopping experience.” But GM's brand confusion is equally obvious if you look elsewhere, at the other automobiles in The General's over-stuffed portfolio. I mean, what would you think about GM’s branding expertise if I told you that the above description of Target comes from the man behind the new Chevrolet Malibu?

It’s true. Clay Dean, GM's former design director of small and mid-sized cars, told Automotive News that the new Malibu will provide a “premium experience with a low price tag,” and then compared the model to Target. I don’t know about you, but the last time I went to Target I didn’t think, wow, this is just like one of those upmarket boutique type stores, only cheaper.

Target a cut-price Neiman Marcus? Hardly. I could try and complete that analogy– Malibu a cut-price Saab?– but readers’ sniggers would draw unwanted attention from their cubicle providers. Anyway, if Dean and GM had just left it at that– Malibu as Target– you could almost say, well, OK, Target makes money. Thing is, the company isn't even that focused; Clay's comment is just one small part of the Malibu’s aimless wander though the branding wilderness.

According to Automotive News, Ed Peper, Chevrolet's general manager, and Cheryl Catton, general director of Chevrolet's car marketing, went to see some honest-to-God customers who (gasp) bought something other than a Malibu (no names mentioned). The suits’ mission: figure out how to market the General’s next, next big thing/Hail Mary/new ’Bu.

The article's lead misleads readers into thinking the dynamic duo made random house calls (which would have shown some genuine stones). In fact, Peper and Catton visited pre-selected import lovers and asked them to define quality, reliability and dependability.

Hang on; shouldn’t they have been asking these questions BEFORE building the Malibu? I mean, if these target (pun intended) consumers said “I define quality as a door that shuts like a bank vault” and the Malibu’s portals close with all the precision of a Chinese-made Fairly Odd Parents’ lunchbox, what then? 

Anyway, let’s assume that Peper and Catton simply wanted to know what wonderful things they should emphasize about their wonderful new Malibu. Then they’re still wrong. Creating a product that does one thing better than anyone else is the essence of branding. Even if you extend that philosophy to two or three attributes, the die was cast when the dies were cast. If you don’t know your car’s killer app by the time you build the damn thing, it's too late to re-boot.

Anyway, what did Peper and Catton say they learned from their ding-dong GM calling experience? “Consumers rank three core qualities as important when deciding on a mid-sized car: exterior styling, value and reliability.”

So, the heavy hitters went looking for definitions of core values and came back with the usual market research.

Excuse me: who ARE these people? Why are they in charge of a multi-billion dollar automaking enterprise? They’re minions of GM's President of North America, Troy Clarke, who “challenged” Peper and Catton to keep it party real. And who put Clarke at the helm? GM CEO Rick Wagoner.

The Italians say the fish stinks from the head down. Well, there you go. GM lifer and former CFO Rick Wagoner is the man who (at a minimum) destroyed any remaining brand equity within Cadillac, Buick, Saab, Pontiac, Oldsmobile and Chevrolet. Even if GM’s North American operations were making money, Wagoner should be held accountable for allowing his employees to engage in the mindless obliteration of GM’s most precious assets.

When GM introduced the BLS, they claimed they would sell 20k units per year. Last year, they sold 218. So far this year, they’ve shifted less than a dozen. Ladies and gentlemen, I rest my case.  

I grew up in a working-class town where “Buy American” ranked just above “Go to church.” Chrysler cured me of my automotive illusions. One day, the engine fell out of my first new car, a ’79 Plymouth Horizon. At 30k miles. The local dealer, the zone office, and then the factory solemnly informed me that my 12/12 warranty was over, so Up Mine. And yet I have family and friends who’ve kept the faith to this day. As The Big 2.8’s fuselage prepares for its final meeting with terra firma, I know it’s wrong to snigger at Detroit’s woes. But I’m laughing to keep from crying.

I’ve got a friend who’s more cerebral than most pickup-truck patriots. He was looking to buy a cute-ute for his bride. I talked up the bulletproof Honda CR-V (then made in Japan), but he opted for a Ford Escape. He didn’t deny my point: the CR-V was by far the better-built vehicle of the two. He just didn’t care.

“To me, it’s the social contract,” he explained. “Joe lives here and he builds cars. I buy Joe’s stuff, Joe buys my stuff, and we both make a decent living.

“This Japanese quality you worship so much doesn’t require any great genius. I lived and worked in Japan for years. We’re talking about people who obsess so much over little details that they work 90 hour weeks opening and closing a door 10,000 times to make sure it never breaks.”

“But isn’t that the American way?” I countered. “Hard work, competition, all that? Aren’t they winning fair and square?” Without hesitation he replied, “I suppose, but would you wanna live that way? Is it so important that our body panels have smaller gaps?”

He understood that our system is based on rewarding excellence, not subsidizing mediocrity. But he also understood the looks his neighbors gave “foreign” cars.

Once upon a time, I bought a new ’92 Maxima. Today, the Max’s body remains tight, the handling responsive. As I navigate the cratered streets of a formerly thriving industrial area, a space that now looks like an “after” portrait of Beirut, I know I’ll hang onto it. I’ll have to– now that the decay of our industrial base has eroded the median national income so badly that my service employer’s clients are ruthlessly squeezing our revenues. Fortunately, my car has plenty of life left in it. But does my country?

Never mind what my Maxima tells you about the Japan mindset and work ethic. What does the failure of American cars to step up to the plate tell you about America? It tells me that we should be indignant. That we should be angry at the men who stole our automotive heritage.

I’m angry at every smug, myopic, greedy Detroit executive and Harvard MBA prof who helped destroy one of the — if not the — world’s best run businesses. I’m angry at all the suits that grabbed for immediate profit, or couldn’t take a risk, or had no vision beyond counting beans, or were just flat-out stupid.

These idiots didn’t just take down their own companies. They’ve grievously wounded their whole country and its future. Why do all these misbegotten car execs-– the so-called leaders who feathered their nests and packed their parachutes while destroying the chicken that laid their golden eggs-– get to enjoy everything our country has to offer while ruining it for hundreds of thousands of working men and women? “Buy American,” they said. No question what was in it for them.

But what if we had? For many of us who dodged that bullet, the prospect is almost unthinkable. Buy that crap? With my money? As mediocre as Detroit iron is today, it was unspeakably worse before the pressure of foreign competition. Can we imagine ourselves still floating off the road on porpoising, rusting, cheesily filigreed 19-foot Impalas? And yet the question still nags me, mute yet immutable. Though we’d have had infinitely crummier automobiles today, would we have had a healthier society?

Whatever. Stick a fork in it. It’s all over bar the shouting.

I recently read an article that said as the Chinese and Indian automobile industries overtake America’s, car design will be inclined more and more to these developing nations’ needs. This makes perfect sense; I doubt we’d like it much if today’s car designers still catered to British tastes.

But it's a bilious irony nonetheless. Our single-minded insistence on buying the best automotive consumer goods available helped lead us to a point where our automotive selections may be limited by our choices. And history suggests we've only begun paying the price. Cheap-labor countries are perfectly capable of handling every stage in the creation of the products we all buy and use.

So this is how it ends. Mahindra and Chery sweep in, while Cerberus and Nardelli pick at our industry's carcass on its way out. I feel just smarmy enough to smirk at the authors of this Armageddon – and just guilty enough to wonder about my role in it.

Aside from select Jeeps, Chrysler's sales suck. Given this inescapable fact, you'd think that the hard-pressed born-again domestic automaker would do everything in its power to keep the folks on the American front lines happy. After the sales bank debacle, after brazen "channel stuffing" (forcing dealers to take cars), after barring "under performing" Chrysler dealers from the company's life-sustaining used car auctions, after sending these dealers letters threatening to shut them down, you'd think Chrysler's corporate clowns would have run out of ways to alienate the troops. Wait! Here's a new one: exclude some dealers from the corporate Internet sales funnel. Way.

Automotive News discovered the Crisis Corporation's Internet shenanigans by searching online for Chrysler dealers within a specific zip code. They got a list of all the dealers in that area. When they clicked on the name of one of the dealers, they either did or didn't get transferred to the dealer's website. A decision made at the top level prevented some (if not most) dealers benefiting from leads generated (or now not) by the company's all-singing, all-dancing brand-specific websites.

Chrysler, Dodge or Jeep dealers who don't have the corporate "Five Star" dealer rating (Chrysler pentastar, geddit?) get screwed. If you select a Five Star dealer, you can request a quote, search inventory, schedule a test drive or set up a service appointment. If the chosen dealer didn't quality for the five-star designation, you get a message to call or visit the dealership. End of story.

What makes a Five Star dealership worthy of such consideration? According to www.fivestar.com, Five Star dealers must meet "specific requirements set by DaimlerChrysler." They have "strict facility requirements [so] you can expect a clean and pleasant place to shop for a vehicle or have your vehicle serviced" and employ "consistent, proven processes focused on satisfying every customer every time." 

Even better, they're staffed with "sales professionals [who] are product experts trained to make sure you find the vehicle that best suits your needs [and] service and parts professionals… trained by DaimlerChrysler to properly diagnose your vehicle, repair it right the first time, and get you back on the road quickly." At this automotive nirvana, "employees work together as a team to ensure that, once you purchase a vehicle from them, you have a seamless ownership experience that can only be called Five Star."

If you stop to think about it, a dealer answering to the above description is kinda what a customer has a right to expect from a "normal" car dealer. Chrysler's Five Star folk are only doing what any well-managed, customer-focused dealership should be doing. In that sense, maybe Chrysler's right to cut out its non-Five Star dealers from the cyber-loop. Of course, Chrysler dealers who don't have the Five Star rating don't quite see it that way. 

B.J. Brickle runs both a Chrysler-Jeep dealership and a Nissan franchise in South Carolina. Customers can access his Nissan inventory via Nissan's on-line services. Not so his Chrysler product. "I have a guy just handling Internet leads [at the Nissan dealership]. If you respond to me on the Internet, I'm back to you in an hour. With Chrysler, I don't have that option."

Chrysler's e-favoritism is a classic case of rhinectomy for facial spite. In areas where there are no Five Star dealers, customers looking for local inventory are denied a peek at Chrysler stock– unless a dealer with fewer than five stars wants to bear the expense of listing their inventory on their own site. Even if they do, the vehicles aren't accessible from the corporate mothership's site, where many buyers begin their car-buying adventure. 

In typical Big Three Kremlin style, Chrysler says it's "studying" the problem. They say the selective electronic referrals are designed to reward Five Star dealers and encourage lesser stores to work toward certification. "We're re-evaluating all elements of the Five Star program and hope to have a resolution soon," said spokesperson Lidia Cuthbertson. 

This is beyond nuts. With precious few exceptions, Chrysler's sales are down across the board, with no immediate prospects of resurrection. At best, the company has a truck-heavy, mediocre lineup. While you can certainly understand Chrysler's general desire to trim its bloated dealer network, there are dignified ways to go about it (e.g. Chapter 11). Now is not the time to demoralize dealers struggling to put food on their table and, by extension, Chrysler's.   

One thing's for sure: Chrysler needs to stop "re-evaluating" their web policies and understand the number one rule in sales: make it easy to buy. Stupid moves like this serve no useful purpose. The two-tier internet strategy pits dealer against dealer, and dealers against the company. It may not violate the letter of their franchise agreement, but it annihilates the spirit.

New owners or no, Chrysler still seems Hell-bent on self-annihilation.

When Frank Williams and I launched TTAC’s news blog, we envisioned an editorial gestalt somewhere between Autoblog (dull but worthy) and Jalopnik (wild but wacky). I reckon we nailed it. We’re cranking-out far more (and timelier) hard news than Neff’s product-crazed army, and creating more pithy posts than Spinelli’s electric cool aid acid test troops. In another sense, thanks to our excellent commentators and snarky bloggers, we’ve established our own unique mindspace. Unfortunately, the feature's done sweet FA for our site stats.

Three weeks after launching the news blog and… nothing. We’re still stuck at about 13k unique visitors per day. Truth be told, TTAC’s site stats have been flatlining for longer than some dead people I know. I mean, knew. On the positive side, we’re sticky stuck; average visitor hang time has risen to an amazingly adhesive nine minutes. Monthly page views have crested a cool mil. Not to put too fine a point on it, Scotty, we need more power!

To that end, once again, still, we’re gonna make some changes’ round here. The first and most important shift: the home page layout. The current home page emphasizes reviews. That’s because we were planning to channel the 33 percent of daily visitors who find us through a search engine towards a car broker. There’s good money in that biz, it fits our branding perfectly and we figured we could bust that market wide open (sucka).

And we still do. But we’re hurting for development resources. So we need an interim plan B to raise those recalcitrant site stats and generate some ad revenues, buzz, whatever.

The simplest and easiest option: stop using big words like “recalcitrant.” Failing that (ipso facto), we’re returning the home page to the classic format. In other words, the home page's main column will once again display all items— news blog, reviews, editorials, podcasts— in sequential order.

The new/old/new format should provide an easily parsed heads-up to our search engine immigrants that TTAC is content rich. In the jargon of the biz, we’re hoping to decrease our “bounce rate,” turning e-gadflies into cyber toadstools. Or something like that.

The  “latest news” and “latest editorials” boxes will remain in the right hand column, as the list makes it easy for you (our regular customers) to stay up-to-date with the latest TTAC content. Our old friends at Redwing will add a “latest reviews” box to the right hand column. And they'll remove the TTAC Swag section, which has been less well attended (not to say patronized) than the last Snoopy and The Royal Guardsman concert. 

As for the announcement that TTAC’s “set to become a social networking site,” well, um, it isn’t. Again, the development money I glimpsed over the horizon went all mirage on me. But more than that, your comments have given me pause. With your help, I now realize that if Frank and I surrender our ability to monitor comments and ban flamers, TTAC will lose its status as an intellectual safe haven. And die.

So we’re looking into more manageable site enhancements. First out of the box: live chat. But not as it’s commonly practiced. We’ll only activate the function for pre-planned debates, discussions and webinars. Participation will be limited to responsible members of the TTAC community and invited guests.

It should be quite a lively forum. Authors, industry insiders and experts will debate ideas with colleagues, antagonists, TTAC scribes and/or regular Joes.

Meanwhile, Redwing Studios will be making a few overdue site tweaks: a contact button, the ability for subscribers to select categories for their RSS feed, a flame warning next to the comments box, etc. If there’s something that’s been niggling away at your “user experience” enjoyment for a while, now’s the time to share. And speaking of sharing…

Ladies and gentlemen, I’ve hit the wall. Until and unless I get more editorial resources, I can’t maintain my current level of creative output AND assure editorial quality AND keep insanity at bay AND be a proper husband and father. So I’m following the advice of a sage whose name Google refuses to reveal: the key to happiness is to find what it is you love to do— and not do too much of it. So, no more weekend posts for a while.

As a slave to the TTAC brand, which exists entirely in your mind, I appreciate your understanding in this. I promise to reward your patience with even better news posts, editorials, reviews and (yes) podcasts during the week. In any case, thanks for your support and patronage. I couldn’t do this important and entertaining work without you. Nor would I want to.

By their own admission, General Motors' North American operations are currently doing business with negative working capital (NWC). At About.com, an unnamed investment adviser has some advice on that subject. "Negative working capital is a sign of managerial efficiency in a business with low inventory and accounts receivable. In any other situation, it is a sign a company may be facing bankruptcy or serious financial trouble." Any guess which one of those descriptions applies to GM?

GM has been staving-off the whole "NWC leads to bankruptcy" paradigm by hocking the family jewels. The $5.4b recently added to GM's accounts by the sale of their highly profitable Allison Transmissions unit is only GM's last (and I do mean last) significant sell-off. In the preceding two years [alone], GM CEO Rick Wagoner jettisoned some $21.4b worth of corporate assets. During those same two years, the company signing his paycheck lost $12.4b.

While the charges for losses in these years were mostly non-cash items (worker buyouts, plant closings, etc.), the piper must be paid. The charges will eventually morph into cash demands. Without positive earnings (i.e. profitable vehicles), the situation is destined to deteriorate. 

Selling assets to cover the shortfall wasn't an inherently bad idea– if GM had used the proceeds to reinvigorate their brands and products. No such luck. GM was forced to use the money to pay for the aforementioned worker buyouts, plant closures and other downsizing costs. The automaker did so in the hopes that production would eventually equal demand, while cost reductions would lead to more profitable products.

As the last two month's of lowered sales and diminished market share have shown, as GM's accounts reveal, that strategy is dead in the water. 

In terms of the downturn's effects on GM's life-sustaining margins, much has been made of GM's increased incentives. Fair enough; every discount dollar bestowed upon GM's customers is one dollar less profit. But it should also be noted that the company's been heavily discounting its products beneath the media radar for quite some time. 

According to GMAC's recent 10K filing, at least 90 percent of the lender's 2006 GM vehicle financing involved rate buy-downs and lease subventions. That's up some 22 percent since 2005. Figure the same amount for '07, estimate the cash value at around $2k per vehicle, consider the fact that 48 percent of ALL GM's U.S. retail sales are financed by GMAC, and you can see that the automaker has been burning big bucks to maintain market share.

Scanning the large number of pickup truck and SUV sales involved, it's impossible not feel a frisson of fear. Pickups (many sold to construction companies and contractors) and large SUVs (sold to God-knows-whom) still generate the lion's share of General Motors' operating capital. The current sub-prime meltdown is hurting housing starts and refurbs AND causing a general economic slowdown. GM's cash cow is being slaughtered.

No wonder CFO Fritz Henderson declared that The General will defend its pickup truck market share "at all costs." Which is exactly the kind of statement you don't want to hear from a company with NWC.

There's another, hidden danger. The NWC situation has reached the stage where GM increasingly depends on suppliers' payment terms to keep the wheels turning. Should GM's suppliers decide not to extend the corporate mothership credit, the gig is up. GM would be forced to file. But even with their suppliers' support, GM is now sailing into hurricane force headwinds.

The way out of this mess hasn't changed since Rick Wagoner first outlined his turnaround strategy and began jettisoning assets to pay for it: trim production until it matches demand. Only GM can no longer afford large production cuts. Lost in NWC world, they need all the capital (i.e. money) they can get. If GM stops making so many vehicles, the gap between income and outgo earthquakes open and they'll fall into Chapter 11.

To eliminate the NWC crisis, GM needs significant earnings from profitable vehicles and/or massive new borrowings. But the recent withdrawal of the Allison junk bond sale and Cerberus' escalated borrowing costs betray the new reality: the price of money has skyrocketed. So GM must sink or swim on the back of their products.

Clearly, the company's paddling like crazy. Truth is, Toyota could drown GM in debt simply by lowering their prices. GM couldn't afford to follow suit. At the same time, they couldn't afford NOT to follow suit.

Mind you, that's Toyota's nightmare scenario. Toyota's American profits depend on GM and Ford remaining high cost producers, setting a floor for U.S. market pricing. If GM files Chapter 11, eviscerates its bloated dealer network, consolidates its brands, builds some shit hot products and undercuts Toyota's prices, ToMoCo would have a real fight on its hands.

Sounds like a plan to me. 

By law, foreign automakers seeking a foothold in China must form joint ventures (JVs) with domestic "partners." As we've outlined before , there's an immediate downside: China's scant regard for intellectual property rights (IPR). For example, GM found itself suing Chinese automaker Chery (whose name middle-finger salutes Chevy) over the QQ, a blatant copy of the Daewoo Matiz. The case was settled out of court, but the issue of IPR remains unresolved. And now that Chinese automakers are consolidating and striking out on their own, what's going to happen their foreign partners and their IPR? What do you think?

China's three largest automakers are Shanghai Automotive Industry Corporation (SAIC), First Automobile Works (FAW) and Dongfeng. SAIC currently partners with General Motors and VW. FAW is hooked-up with Toyota, VW and Mazda. And Dongfeng works with PSA Peugot Citroën, Honda, Nissan-Renault and Kia.

China's Big Three own almost 50 percent of the domestic auto market. All three have announced plans to develop "house" brands with independent intellectual property rights. As Chinadaily.com puts it, "After churning out Buicks, Passats and other foreign models in tie-ups with global auto giants for years, many home-grown players are setting their sights on an own-brand strategy, hoping to wean themselves off reliance on foreign technology."

To that end, SAIC has budgeted $3.56b over the next five years for designing engines and complete sedans, and building a technical center. The automaker's also announced a massive bond initiative to fund development of their new cars. SAIC is looking to build factories capable of churning out a quarter million vehicles per year.

FAW is set to invest $1.7b in new product development, production facilities and "229 key technologies" over the next eight years. And Dongfeng is spending $1.01b to develop their own brand of cars and a new assembly plant. 

SAIC has a head start on its domestic competitors. They already own the IPR for the Rover 25 and 75 models, purchased from the now-defunct British brand at the end of days. SAIC has used the technology to launch the Roewe 750 based on the (BMW developed) Rover 75. So far they've sold 8k 750s.

SAIC is also considering a merger with smaller Nanjing Auto, owner of the MG brand. Nanjing has started production at MG's former plant in the U.K.; they're setting-up a similar facility back in The People's Republic. It wouldn't be hard to use the car as an anchor for a full line up.

And it won't take long for the other Chinese automakers to catch up. Dongfeng has plans to market a self-branded sedan that "imitates" the Elysee (currently manufactured by Dongfeng Peugeot Citroen Co Ltd.), starting this September. FAW is ready to begin mass production of their first independently designed sedan engine. Entire cars will follow.

Clearly, Chinese automobile manufacturers are cashing in on their crash course in auto manufacturing. They've spent the past 20 or so years studying their partners' design and engineering processes and production techniques, and establishing their own relationships with suppliers. They've also learned marketing, dealing with export and import regulations, and all the rest of the finer points of selling their products internationally.

China's automakers aren't going to want to keep sharing a large chunk of what is now the world's second largest auto market. Over the next five years China's Big Three will flex their muscle to retain their 50 percent market share. Those automakers who've entered these joint ventures will have to pay the price.

It won't be hard for the home-grown tigers to ease their partners out of the picture. Some of the models produced by the JVs are a generation removed than the same model in other markets; they need updating. Without modernization, their sales will start to drop "as core models become increasingly obsolete," warns Goldman Sachs. If the Chinese partners won't allow the foreign partners to update their designs, sales will dwindle, opening the door for the Chinese partners to introduce newer, self-branded models.  

Since Chinese law prohibits foreign auto companies from operating without a Chinese partner, this "planned obsolescence" scenario would effectively shut out the foreign automakers. Even if China's Big Three don't starve their JVs of new product, there is no doubt that the government of China will do whatever it takes to bias the domestic market in favor of home-grown automakers, including (but not limited to) punitive taxes.

Although GM and others rely on the Chinese market to help keep them afloat, there's not a lot they could do about any moves to diminish their profits. We're talking about a country run by a military dictatorship; as the current legal laxity over IPR indicates, there's no chance of legal redress.   

Meanwhile, the Chinese automobile market is expanding. The foreign players are making hay while the sun shines, even as the storm clouds gather above them.

This website has been skeptical of Tesla Motors’ claims for their lithium-ion-powered Roadster since day one. While some readers think we’ve “had it in” for the California-based car company, rest assured TTAC is an equal opportunity muckraker. Anyway, yesterday, when Martin Eberhard revealed that he’d relinquished Tesla's top job, we held fire to avoid accusations of smug satisfaction. But Eberhard’s email to Tesla customers piqued our interest. As Tesla has yet to deliver a single customer car, by thy words thy shall be known.

Eberhard begins his e-sayonara by expressing his personal pleasure at helming Tesla for the last four years. He then outlines the management shuffle: “This week I move from the CEO position to become President of Technology, and I remain on Tesla’s board of directors. In my new job, I will focus on the final details of the Roadster and on advancing Tesla’s leadership in our core technology. I will also be able to spend more time with you, our customers.”

Ah, those pesky “final details.” Presumably the new Technology Prez (a title missing from any other automaker’s personnel files) will be focusing on the electro-mechanical minutiae that have prevented Tesla from meeting its first two deadlines for customer deliveries. Eberhard’s claim that he’ll be advancing his company’s “leadership in our core technology” is classic Tesla: asserting technological leadership— not competence, leadership— without showing the goods. 

Meanwhile, Eberhard’s promise to “spend more time” with his customers is more than slightly perplexing. Spend more time with them doing what? There are no demo cars. Again, given the delays, I’m thinking Martin’s about to become Tesla’s Hand-Holder General.

Next up: Eberhard's explanation for why he was shunted from the top slot. “We at Tesla need leadership with that same kind of passion and talent for operations – passion that will secure Tesla’s future as the next major automobile company. I initiated an intense CEO search some time ago, but the board and I have yet to find the right person to fill this role – even as Tesla continues to grow and its operational needs become paramount.”

Eberhard is saying two things here. First, his move was planned a long time ago, and, therefore, does not represent any kind of management crisis at Tesla. Second, modestly enough, Tesla can’t find anyone with his passion and talent to run “operations.” Judge for yourself, but this journalist does not find either of these claims remotely plausible.

Common sense suggests that the timing of the transition, hot on the heels of yet another delay in Roadster deliveries, indicates that someone with money lost faith in Eberhard’s ability to git ‘er done. Hubris aside, there are plenty of current and ex-auto industry execs who could handle Tesla’s operational needs. And the appointment of an interim CEO after “some time” tells us that either the choice was actually made in haste, or there is ongoing conflict in the boardroom. 

Now, about those deliveries…

“We are still planning to start production of the Roadster by the end of next month and deliver the first cars to customers this fall. We have a good chance of meeting this goal, but to be fully transparent, I want you to know that while it is within our reach, it is not yet fully within our grasp.”

That is one major piece of sophistry, or, if you prefer, a textbook example of weasel words. Eberhard’s insistence on seasonal deadlines– rather than dates– has got to worry those [erstwhile] customers who’ve signed checks to Tesla. By the same token, a “good chance” is not a statistically relevant term. But both qualifiers pale next to the obfuscatory majesty of Eberhard’s metaphor.

If something’s within your reach but evades your gasp, uh, what does that mean? You could get it to in theory but you can’t in practice? How very reassuring. The addition of the words “yet” and “fully” is what takes this Zen koan to the next level. Jeff, Murray, Anthony and Greg should enjoy so much wiggle room.

Eberhard eventually gets down to brass tacks, identifying Roadster crash testing and durability as the remaining stumbling blocks. Oh, about that crash testing, “there is always the chance that something unpredictable occurs… in which case we would incur a delay to address the issues.” And regarding reliability, “The results of this testing are critical to the schedule.” But if there are testing-related delays, “I will let you know.”

Even if everything goes according to plan, Eberhard says Tesla’s looking to produce one– count it one– car per week; you know, until they get the bugs out. 

Eberhard concludes by promising that “the end is in sight.” But not within view.

[Link to email via Jalopnik here .] 

Creativity thrives in times of chaos and transition. Dada was born in World War I. Punk Rock arrived in the strife-torn streets of 1970s New York City. Automotive engineering– the art of bringing order to chaos– also fits this template. German automakers did some of their most innovative work in the turbulent years immediately after WWII. And now that environmental regulations and changing business conditions have upset the international automotive applecart, we’re looking at another explosion of engineering creativity. Ground zero for some of this work: the alternative propulsion experiments of the Society of Automotive Engineers (SAE) collegiate branches. 

The name of this game is Challenge X – Crossover to Sustainable Mobility. The contest challenges fledgling engineers from 17 American universities to design, build and test a hybrid vehicle architecture based on a 2005 Chevrolet Equinox. They must utilize alternative fuels to reduce the vehicle's energy consumption while maintaining standard-issue performance, utility and safety.

The Challenge X’ timeline is modeled after GM’s development cycle. SAE students have four years to turn Chevy’s hunk of charcoal (sorry Equinox lovers) into an eco-friendly gem. For those readers who suffer from ADD, here are the Challenge X Cliff Notes:

Year one: teams devise theories, build models and create simulations for a new, more mpg-friendly Equinox powertrain. Year two: the judges determine which teams get the keys. The teams take delivery of their high tech kit, and attempt to install it into their prototype. Years three and four: they refine their handiwork and restore their eco-modded Equinox to “near showroom quality.”

If you think the Chevy Equinox is another forgettable CUV, you may be right. But you haven’t driven the University of Wisconsin-Madison’s Challenge X variant, christened Moovada. A Movado watch for bovines? Hey, they’re engineers (they probably don't know what I'm talking about). Speaking of which… Geek alert! If you’re not technically inclined, you might want to skip the next two paragraphs.

The Moovada is a split-parallel hybrid holstering a GM 110 kW 1.9-liter CIDI engine (found in the Fiat Punto-D) coupled to a GM F40 six-speed manual transmission. The rear axle is powered by a Ballard induction motor/gearbox powerlimited to 59 kW by the 44-module (317 volts nominal) Johnson Controls’ nickel-metal hydride hybrid battery pack. The vehicle is fueled by B20, which has a lower GHGI impact than conventional diesel fuel.

The hybrid controller is a Motorola MPC555 based Powertrain Control Module (PCM) embedded controller with 38 inputs, 28 outputs and dual CAN bus capability specifically designed for automotive applications. Wisconsin is utilizing ANSI C language for code development and MotoTron development tools for programming the controller.

Simply put, the team’s five groups (each responsible for a different vehicle system) have engineered a new powertrain package for the Equinox that delivers both fuel efficiency and entertainment. That’s right: it’s fun to drive.

Forget about the 36mpg and super-duper clean emissions. The Challenge X Equinox from the “Eat Cheese or Die” state delivers smooth and seamless power that combines golf cart-like torque with the progressive power of a diesel mill. The shifter is as wonderfully flickable as the clutch is progressive. Using Challenge X-specific Michelin tires, the Equinox not only corners with precision, it provides a quiet and comfortable ride. 

Aside from the electric motor’s straight-cut cogs doing their best impression of an M-22 Rockcrusher running down the dragstrip, the Equinox behaves as well as any CUV, with a much more enjoyable powerband. Ladies and gentlemen, The University of Wisconsin-Madison team nailed it.

And now they’re perfecting it. The team is rebuilding the Moovado’s exhaust system, refining the controls system and repackaging the batteries. They’re modifying both Equinox’ interior and exterior to reflect a more "consumer acceptable" vehicle. And then, of course, there’s more testing and calibration, to assure the Moovado's performance, economy and ride quality.

Ten years ago, I was in their shoes. Back then, my team was fitting a Chrysler minivan with propane propulsion. Looking into the team members' eyes brought it all back, and puts everything in perspective. They work as a team for a common goal under a common budget. They believe in their product and their eco-friendly mission: take what GM builds and improve it for the environment– without sacrificing comfort, convenience or credibility.

Just think what these manager/creator/mentors could do at GM if the people who make cars got to “make” cars. It could happen. In these desperate days, when GM has finally realized that plug-in hybrids and other new tech could be their last, best hope for survival, GM’s engineers may once again assume their rightful place at the head of the development table.

Meanwhile, the kids are alright.

In a video interview with Porfolio.com, Sir Nick Scheele explains how he turned Jaguar around. Well, not exactly; after all, he didn't. But the British brand’s former CEO did, as claimed, help raise Jaguar’s American JD Power quality rankings from second-to-last to first. In that regard, Sir Nick reveals that Jag’s ascension up the quality league tables hit the wall in ‘94. The breakthrough: after two years at the helm, Scheele realized Jag’s assembly line workers knew more about build quality than the suits. Scheele empowered the guys on the factory floor, left, ran Ford of Europe for a bit, collected a gigantic pension (and a peerage) and called it good. And now Sir Nick wants Jaguar back. Nooooooo.

I’m sure Ripplewood Holdings turned to Saint Sir Nicholas to assist them in their bid for Land Rover and Jaguar because the private equity group figured [correctly] that building cars is a fiendishly complex business. Best to hire someone who knows how to make a car roll off an assembly line– even if he didn’t do so at a profit (a failure for which the affable peer surely has a plausible explanation). In this they are only partially correct– the wrong part. 

As Scheele’s Portfolio-assisted self-deification indicates, his lordship [still] has no idea what drives an automobile manufacturer to fame and fortune. To give credit where credit’s due, Scheele’s epiphany– his rejection of his class-bound cultural upbringing– brought him very, very close to the truth. Yes, every single employee working for a car company must be united in a common goal, and their input respected and (where appropriate) acted upon. But that goal is not quality. Or design. Or price. It’s the brand.

A tightly focused car brand is the plan, the vision, the way forward, the way out, the way back. It tells the company what kind of cars to make. It tells the marketing people how to sell them. It tells consumers why they should buy them. The brand defines the company, from the janitor to the CEO. Jaguar: pace and grace. What more do you need to know? This: without a strong brand, an automaker can’t pull together the hundreds of thousands of strands needed to form a coherent, inherently attractive car.  

As what’s left of the American auto industry plays a multi-billion dollar game of musical chairs, not one of The Big 2.8’s CEOs has offered any indication to which tune they're moving. Less metaphorically, of branding, we’ve heard sweet FA. 

“Boot’em Bob” Nardelli has not defined Chrysler, Dodge or Jeep automobiles. Alan “$25m will do nicely for my first year thanks” Mulally hasn’t told the world what a Ford, Mercury or Lincoln is or will be– other than badge engineered versions of transplant-a-like. Rabid Rick Wagoner has not stuck a flag in the ground for any of the company’s eight— count ‘em eight— brands.

Instead, all the Big 2.8’s CEOs have fixed the media’s attention on back office issues: cost cutting, incentives, fleet sales, asset sales, personnel changes, union negotiations, foreign expansion, international platform sharing, yada, yada, yada. While there’s no denying that decisions in these areas are critical to their companies’ hopes of turnaround/survival, Detroit’s CEOs are neglecting the one decision that informs all the others: what do their brands stand for?

If the Dodge brand stretches from a cheapo Caliber to a mega-SUV, how can Nardelli's mob decide what to put in/leave out of a Challenger ? Is it any wonder Cadillac's building a sub-CTS when the brand operates with two-thirds of a strap line ("Life, Liberty and the Pursuit")? Now that the Ford Taurus is "America's safest full size car" and Volvo's on the auction block, is safety the new Ford brand? 

Of course, this lack of rigidly defined automotive branding is not just Detroit’s problem. Mercedes and BMW have stretched their brands beyond breaking point (the day of reckoning lies ahead). Even ToMoCo shows worrying signs of diminished brand coherence, as it builds cars that rely on something other than quality for sales (e.g. new xB). Even Porsche, the once tightly focused “fiercely independent” sports car company, seems Hell bent on destroying their brand equity. An SUV and four-door sedan? Great machines. Lousy branding.

There are still a few car brands keeping it real, such as Ferrari and Hyundai. Product excellence and a healthy bank balances indicate that the guys at the very top and the bottom of the market “get it.” As for Jaguar, there’s potential. Although Maserati's invading the pace and grace mindspace, at least the Germans and Japanese are staggering around elsewhere. But fans of the British brand (such as it is) can only hope Jaguar stays out of Scheele’s hands. Jag's savior– indeed the men at the helm of the The Big 2.8– must be ready, willing and able to be a slave to the brand. Nothing more, nothing less.

[See Scheele's spiel here.]

As top executive for a large manufacturing enterprise, Bob Nardelli was a tremendous success. As the man in charge of a gigantic retail business, not so much. Like any automaker, Chrysler’s survival depends on both its ability to manufacture class-leading products AND get its dealers to provide class-leading customer service. So, as Nardelli takes Chrysler’s helm, the question must be asked: is he half the man he needs to be? The answer is Six Sigma.

Navy vet and Motorola employee Bill Smith created the Six Sigma management system (a.k.a. the “Way of the Sword”) for Motorola in the 80s. Six Sigma’s goal: design and create products with no more than 3.4 defects per million. Like many such theories, its principles are enshrined in acronyms: DMADV (Design, Measure, Analyze, Define, Verify) for product creation, DMAIC (Define, Measure, Analyze, Improve, Control) for production. Its success depends on continuous, company-wide commitment.

GE CEO Jack Welch was an early accolade of Six Sigma. When Welch appointed Bob Nardelli CEO GE Power Systems, “little Jack” deployed Six Sigma with ruthless effectiveness. Applied to a division building and selling locomotives and power generators for other business (i.e. BTB), Six Sigma worked a treat. Excellent products were designed and built, and management limitations minimized (retarded innovation, inflexibility, group-think, insulation).

In December of 2000, Nardelli lost a bid to replace his mentor at GE. Despite a complete lack of retail experience, Nardelli landed the top job at Home Depot. Appropriately enough, Nardelli cleaned house, replacing Home Depot's top management and rationalizing every aspect of the business.

Seven years later, at the end of his tenure, Home Depot’s market valuation had declined by 40 percent. Much to the chagrin of stockholders, Nardelli floated away on a $200m golden parachute.

Nardelli’s over-reliance on Six Sigma lay at the heart of his troubles at Home Depot. As a system of measuring improvement, Six Sigma could work on a retail level— in the same sense that Darwinian principles of “survival of the fittest” could work as a political system. But just as social Darwinism isn’t flexible enough to subsume competitive belief systems, Six Sigma is not exactly what you’d call a people pleaser. For example…

Nardelli used Six Sigma to streamline Home Depot’s in-store staffing. By adding self-checkout technology and generally thinning the ranks of floor staff, Nardelli was able to correct a “defect” in the chain’s “production process.” The moves cut costs and, thus, increased the amount of money available for employee training.

The strategy reduced the number of employees on the floor, and turned many of the remaining employees into data measurers and desk jockeys, sapping time once lavished on Home Depot’s customers. Appropriate data was collected, but customers were not well pleased with the tumbleweeds blowing through the aisles of the big box home improvement store. You can do it, we can help, but you gotta find us first.

“Bump’em Bob” Nardelli also directed his [new] management team to apply Six Sigma principles to strategically re-position Home Depot’s displays and products. As you can imagine, the statistical emphasis robbed some of the “surprise and delight” from the Home Depot retail experience, in a genre where emotion is a precious commodity.

But more than that, Six Sigmatitis proved to be a demoralizing influence on Home Depot’s human infrastructure. Nardelli’s less than warm personality and his willingness to eliminate all those who opposed his methodologies cast a icy pall over Home Depot’s corporate culture. 

"Facts are friendly" is one of Nardelli’s favorite sayings. So here’s a handful. In July of 2007, Chrysler’s sales were down eight percent compared to July 2006, even while they spent an average of $4,082 per vehicle on incentives. Inventory is down 17 percent over last year, but it’s still an 81 day average supply (45 days being the goal, 60 the current American norm).

Obviously, Chrysler’s manufacturing operations could use stricter guidance. Strict defect measuring is always welcome in the world of car production. And despite the trail of broken careers at Home Depot, it’s also true that Chrysler’s middle management torpor could benefit from some pruning.

But injecting Six Sigma into the Chrysler culture is no long term solution. In the ultra-competitive automotive marketplace, where Toyota’s lean production system sets the standard for manufacturing efficiency, an automaker needs more. It needs strong branding and a spark of genius. Even Jack Welch knew that Six Sigma had to be balanced against the need for risk in order to foster genuine creativity.

But Cerberus didn’t hire Nardelli to return Chrysler to greatness. They hired him to prepare the company for sale. To slash and burn the automaker's production process, corporate bureaucracy and dealer network, so they can strip and flip the result. Nardelli is all the executive Cerberus– if not Chrysler– needs.

[For more info. on Six Sigma, go here .] 

When Daimler gave sold Chrysler to Cerberus, it seemed as if things were looking up for the beleaguered automaker. With a return to American ownership, they no longer had internal factions gunning for each other. Cerberus spoke highly about Chrysler's leadership; they would take a "hands off" approach to running their automotive acquisition. They offered union leaders assurance: we're in it for the long run. No need to worry about "strip and flip." And then Cerberus announced that Robert Nardelli would take over the reins. Ladies and gentlemen, the three-headed dog is finally baring its teeth.

Mr. Nardelli has a reputation for getting results. Before the exec was asked to leave Home Depot's employ earlier this year, he doubled the company's sales. OK, Nardelli's tenure coincided with one of the biggest building booms in years, but he successfully expanded the franchise into Mexico and China and increased earnings 20 percent for four straight years. The fact that Home Depot's stock price fell eight percent during his reign is irrelevant to Chrysler; Cerberus is a privately owned firm that doesn't have to answer to stockholders. 

While at Home Depot, Nardelli earned a fearsome reputation as an abrasive and ruthless cost-cutter. While profits soared, customer satisfaction and employee morale plummeted as he replaced experienced full time employees with cheaper part-timers. Nardelli also alienated store managers with his insistence on centralized command and control and micro-management. At the Depot's home office, "Boot'em Bob" replaced 98 percent of the top executives within the first five years.

Nardelli's forced departure from Home Depot was as controversial as his tenure. Of his $210m severance package, House Financial Services Committee Chairman Barney Frank said, "Mr. Nardelli's contribution to raising Home Depot's stock value consists of quitting and receiving hundreds of millions of dollars to do so."

So that's who's at the helm now: an ironfisted, hard-charging beancounter who has no qualms about dumping experienced employees to save a few bucks. He's a perfect fit with a company that emphasizes turning a profit as quickly as possible and doesn't mind tearing new acquisitions apart to do so.

And what of former CEO Tom LaSorda, the guy who had to deal with all the crap Daimler dished out, who Dieter Zetsche ordered to cook up a turnaround plan even as Chrysler's German masters were making plans to dump the company? Indeed, it's only been a few weeks since Cerberus Chairman John Snow praised LaSorda and his turnaround plan at a Detroit Economic Club luncheon.

The party line: LaSorda "agreed" to stay on as vice-chairman and president. Nardelli says LaSorda will "continue to have primary interface, responsibility and authority of working closely with UAW."

Of course they're going to keep him around for that.  LaSorda comes from a family of union activists; he has a good relationship with both the United Autoworkers Union (UAW) and the Canadian Autoworkers Union (CAW) leadership.

Nardelli, on the other hand, is about as non-union as they come. During the exec's tenure at GE, roughly six percent of the company's workforce was unionized. It's no secret that Home Depot has an almost Wal-Mart-like aversion to unions. Nardelli may not be the last person the UAW and CAW would want to see sitting across a negotiating table, but he's definitely at the back of the line. 

Given Boot'em Bob's rep for ousting execs, once "Tommy" (as Nardelli calls him) finishes dealing with the unions, LaSorda's golden parachute will unfurl. Gerald Meyers, a professor of business management at the University of Michigan and former chairman of American Motors, sums up the situation: "His days are numbered. I thought they were going to give him six months. They aren't going to give him six days." 

Burnham Securities' auto analyst David Healy agrees.  "It's hard to interpret this move in any other way than they didn't like LaSorda's record. Clearly, they were not happy with LaSorda or they would not be making this change."

How does all this sit with the unions, who are smack dab in the middle of negotiating their new contract? UAW President Ron Gettelfinger is taking his usual ask-me-no-questions, wait-and-see attitude about the management change. Equally characteristically, CAW president Buzz Hargrove hasn't been shy about expressing his "reservations." Hargrove said he was "surprised and concerned" by the choice. "We left [the initial meeting with Cerberus] with an understanding… that Tommy and his team would remain intact."

This doesn't bode well for Chrysler's hopes of remaining a fully integrated American automaker. Clearly, Nardelli is Cerberus' hatchet man. He has no compunction about making changes to produce short-term profits, regardless of the long-range ramifications. "Strip and flip" may eventually look like it would have been the kindler gentler option. Pre-Nardelli, pre-Cerberus, Chrysler was standing on the ledge looking into the abyss. Nardelli is about to kick it off.   

Aside from ad revenue, why would a car magazine want to position itself as a cheering section for General Motors? Well exactly. Car and Driver’s September review of the “new” Cadillac CTS is such a blatant example of boosterism it puts the "sub" in "subsidy." This will come as no surprise to regular readers who’ve watched the buff book slowly sink into a glossy ghetto of pistonhead prostitution. Even so, I feel compelled to use C&D’s CTS review as a re-launching pad for Between the Lines, so that TTAC readers understand what this website stands for. Or, more precisely, against.

By its very title, “Second Wind” pronounces the CTS refreshed, re-energized and ready to take on the transplants (which have been slaughtering it in the sales charts). According to the all-caps strapline, the model also represents a new dawn for General Motors.

“CADILLAC IMPROVES ITS ENTRY-LEVEL CAR AND PROVES IN THE PROCESS THAT THE FRONT OFFICE HAS UNDERGONE A REDESIGN, TOO.”

“Amazingly, each new product coming down the GM pipeline these days seems to signal that the once-defining beancounter bureaucracy has finally been replaced by a genuine desire to create top-notch products. And this latest CTS is the most comprehensively integrated vehicle we’ve seen yet.”

Not so amazingly, Dave Vanderwerp’s opening salvo fails to consider the “new” Chevrolet Aveo, a car so afflicted with beancounteritis it began life as a budgeting exercise. Anyway, one can immediately sense the author’s discomfort with the task ahead. The appearance of the word “seems” before an otherwise bold declaration of a product-led GM renaissance indicates a tension between editorial integrity and complete horseshit.

To wit: what the Hell is a “comprehensively integrated vehicle?” Do the newish CTS’ parts– suspension, engine, brakes, etc.– form a coherent whole, in a BMW 3-Series sort of way? Or does it mean all the parts fit?

Vanderwerp spends the next three ‘graphs contradicting the "new GM" thesis. He reveals that GM insurance regulations prohibited CTS lead development engineer Rob Kotrak from driving the car during its Nürburgring workouts. “What was that about a bureaucracy?” Vanderwerp demands of himself. Good question.

Literary self-flagellation aside, we get our first critical assessment. Blasting around the Green Hell, the CTS was "planted and predictable and never did anything unexpected.” Like what? Ascend above the asphalt like the cars in the TV ad? NOT overheat? The mind boggles.

Vanderwerp then lauds the CTS’ aesthetic perfection: “There’s no bad view of the new car…” Fair enough, but the author quickly hints that the CTS’ looks “might” have to be enough for buyers contemplating C&D’s favorite ‘Ringmeister.

“The redesigned CTS still might not stand a chance to be as responsive as the smaller and much lighter– by about 400 pounds– BMW 335i, but our favorite sports sedan has nothing on the Caddy’s aggressive looks.”

Apparently, there’s trouble down at the mill. After praising the CTS’ new 304hp V6 for its smoothness, “enthusiasm” between 4000 and 7000rpm, and ability to “run” with a Mercedes C350 and BMW 328i, Vanderwerp points out the new, portlier CTS is only a tenth of a second quicker through the quarter mile than the full-size Cadillac STS.

Hang on; why are we talking about tenths of seconds anyway? I mean, it’s a small Caddy, not a BMW. Who gives a damn?

Cadillac, as evidenced by the fact that GM’s PR flacks gave Vanderwerp a CTS equipped with the FE3 sports package; including super-sticky summer tires and revised dampers. Surely anyone looking for performance from the CTS would opt for the V-Series derivative. And every other CTS rides on more compliant all-season rubber. So… what are we talking about here?

From this point on, we’re talking about excuses and weasel words. Every criticism of the CTS arrives via a pulled punch or an ameliorative aside.

“The upgraded rack-and-pinion steering is linear and now offers more feedback, although its weighting is on the light side of perfection.” The manual “isn’t nearly as fluid as those from BMW” but the new “well-behaved six-speed automatic… will likely be the more popular choice anyway.” “Comfortable seats with surprising thigh and upper back support… will likely please the masses, but during exuberant driving, we wished for more lateral support.” 

The CTS’ cabin earns Vanderwerp’s full, unadulterated admiration. THIS is where the aforementioned coherence resides: “Possibly the most dramatic improvement to the CTS is the upscale and coherently flowing interior, complete with classy materials and top-notch fit and finish.” Maybe so, but the author’s conclusion is a lot less credible.

“But with more style, power and features, we think the new CTS– and the new GM, for that matter– is destined to be even more of a winner.”

Yes, well, neither car nor company could be any LESS of a winner, could they? Or could they? One thing's for sure: the answer to that question will not be found in Car and Driver.

[Full C&D CTS review here .] 

Just as American automakers were trying to wean themselves off of fleet sales, just as The Big 2.8 were looking to reduce incentives and bounce back from a slow June, July. In July, practically every U.S. economic indicator took a downturn, from housing starts to the stock market. While American auto sales didn't plummet, they took a major hit. Even Toyota was not immune from the fallout; the numbers rolling in proving that ToMoCo's not invulnerable to a bad market. Damage report Spock.

Passenger Cars

After climbing steadily since October of last year, Chevrolet Impala sales sank back down to their pre-sales spurt level, 20 percent below where they were last year. Ford Fusion sales dropped 31 percent from last year. Thanks to robust sales earlier this year, it's still four percent higher year-to-date than last year.  Sales of Chrysler's 300 decreased 15 percent for the month, 14 percent for the year. The Toyota Camry dropped about one percent from July 2006, but it's still up over eight percent year-to-date. None of these models are heavily discounted at the moment; if sales continue to fall, incentives are sure to rise.

Pickup Trucks

Chevrolet Silverado sales rose by about 2K units from June. Comparing July '07 to July ‘06, sales of GM's erstwhile turnaround tiger took a beating, down almost 30 percent. Year-to-date, they shrank by almost seven percent. Perpetually buoyed by incentives, sales of the Dodge Ram pickup fell 10 percent from last July, but less than one percent for the year. Ford isn't offering big incentives on the F-Series ; sales are down 18 percent from last year and 23 percent year-to-date. 

Taking a page from their competitors' playbooks, Toyota continued and even increased incentives on the Tundra . It worked. Tundra sales were up a whopping 125 percent from July of last year and 56 percent year-to-date. Based on the first seven months' sales, Toyota will have no problem reaching their first-year sales goal of 200K new Tundras. Still, it'll be interesting to see if sales drop as they start backing off on the rebates.

Truck-based SUVs

As more drivers make the switch from gas-guzzling trucks to slightly less thirsty CUVs and cute utes, the market for traditional SUVs continues to evaporate. The Chevrolet Tahoe showed a slight increase (500 units) from June, but sales are running 12 percent below last July. Year-to-date, the Tahoe's down 16 percent. 

The Ford Explorer is lost in the wilderness. Sales are down 30 percent month-to-month and 23 percent year-to-date. Ye Olde Dodge Durango took the biggest hit, with July's sales less than half of June's. The Durango took a 26 percent hit both from last July and overall year to date. Toyota 4Runner's sales were actually up a bit from June, but down 29 percent from last July and 21 percent for the year.

CUVs

CUV sales were down– with one surprising exception. After dropping steadily since March, the Chevrolet Equinox enjoyed a 50 percent increase from June. Unfortunately, it's still nowhere near last year's sales levels, dropping 42 percent on the month and 29 percent on the year.

The Ford Escape didn't. It experienced a sharp drop from June's sales. Still sales remain slightly ahead of last year, up two percent for the month and three percent for the year. The Chrysler Pacifica didn't [sea] fare nearly as well. Sales were down from June, from July '06 (35 percent) and year-to-date (25 percent).

Although the redesigned Toyota RAV-4 's sales year-to-date are up 13 percent, they were down almost two percent from last July.

New Models

The brand new models weren't immune to the pressure drop. The Jeep Compass shed about 800 units from June, the GMC Acadia was down 1400 units, and the Ford Edge fell 3000 units. GM has yet to offer incentives on their Lambda CUVs. Ford and Chrysler have small rebates on the compass and Edge. Again, if sales don't pick up, deal sweeteners are a-comin'.

Total Sales

Total vehicle sales in the U.S. market were down in July. Not only were they reduced from June, they were also down from July of last year. Toyota showed a seven percent drop from last July, Chrysler Group dropped eight percent, Ford was down 19 percent and GM was off 22 percent. It's not quite as bad year-to-date. Ford is off 12 percent for the first seven months of the year, GM is down nine percent and Chrysler is only down two percent. Toyota is six percent ahead of last year. 

The Future

Over the past few weeks, Chrysler has announced an extended warranty, GM ramped-up the rebates and Ford is offering low interest rates. It'll be interesting to see if any of this will help sales recover over the next few months, or if the downward spiral will continue.