Still not sure if GM should focus on Corvettes as it cuts the fat from its racing and motorsport budgets? Check out this video of GM development driver Jim Mero lapping the Nürburgring in 7:26:4. For those that don't keep up on these things, that's over two seconds faster than the Nissan GTR's recent headline-grabbing jaunt on the Nordschleife. And seeing as the Nürburgring is the longest, baddest track out there, this is no small accomplishment. Especially when it comes to challenging the European perspective that American firms simply can't build cars that go fast and handle well. Add the Corvette's competitiveness on the GT racing circuit (when it's running on regular fuel instead of E85) to the mix, and it's one of the few things GM (and the whole of the American auto industry, really) has to be proud of right now.

With GM slashing wildly at any line items that aren't nailed down, how much of its precious cash will The General remove from its motorsports budget? The Car Connection poses the question based on the following choice snippet from Rick Wagoner's latest fireside chat o' doom: "We will implement significant reductions in promotional and event budgets, motor sports activities and back-office expenses." To be perfectly honest, cutting motorsport makes a lot of sense right now. After all, they're not winning many NASCAR races and TV ratings have been in decline for two straight years (although there's been some writers-strike rebound this year). So if GM's woes are based (even partially) on a lack of fuel-efficient vehicles, can you win on Sunday and sell on Monday when gas is over $4 per gallon? I'd hope GM will cut almost all of its motorsport to focus on the only product that even remotely relies on racing credibility: Corvettes in GT racing. Your thoughts?

GM's CEO heir-apparent and current COO Fritz Henderson revealed GM's latest product-planning philosophy in an interview with the AP (via CNN Money). "Let's do cars that people love, even if they're small." And WTH, let's make some money doing it! Fritz's recipe: "close the price gap versus the market segment leaders and drive more volume. You're significantly improving aggregate profitability." The former CFO [who isn't Rick Wagoner] wants to aggregate profitability "one or two models at a time." But Fritz realizes "one product launch does not a success make… if we get the car right and we get the promotion right, we can make progress and we can actually bring people back to the car." Uh, what about all those cars GM's already launched? Fritz's remarks bring to mind an image of Wile E. Coyote, realizing he screwed up one of his Road Runner traps, racing the burning fuse to get to the dynamite before it goes off. And anyone who has ever seen a Road Runner cartoon knows how that scene plays out.

CNN Money quotes GM Product Planner Extraordinaire Bob Lutz: "The reason we made no money on small cars is because hello! nobody wanted them. At $1.75 and $2.25 (per gallon), everybody was happy with full-size utilities with V-8 engines. Now that's shifting, so the profitability is going to go down on trucks and the profitability on cars is going up." Um. No. The reason you made no money on small cars is because hello! you didn't build small cars anyone outside of fleet buyers would even think about buying. Toyota didn't have any problem making money selling small cars. Honda didn't have any trouble making money selling small cars. If you had been as serious about building small cars as you've been about building trucks, if instead of adopting a "throw it against the wall and see what sticks" marketing plan, if you hadn't all but forgotten Saturn existed until last year and if you hadn't parts-bin engineered whatever you could throw together for the rental companies, you'd be well ahead of the curve now. But now you're playing catch-up while the competition forges ahead. Maybe you need to think about something the Marines should have taught you in flight school: to hit a moving target, you have to aim ahead of it.

While its competitors were bought out (Volkswagen – Audi) or formed abortive alliances (Daimler – Benz), BMW has long been fiercely, proudly, publicly independent. So much for that, then. These days, The Boys from Bavaria are embracing global alliances, developing EVs with Magna, MINI engines with PSA, and sharing small car platforms with Fiat. Und now BMW is partnering with longtime nemesis Mercedes-Benz. Auto Motor und Sport (AM&S) reports that BMW and Daimler plans to share components across each other's car lines. BMW development boss Klaus Draeger says ja, it's a logical extension of BMW and Daimler's hydrogen fuel-cell technology development thingie (available never). At the mo, we're talking air conditioning units and brakes. Soon, it'll be hybrid technology and robot tanks [just kidding, I think]. With so much technology to share, so much brand image to protect and Daimler's history of stiffing Chrysler, this is promises to be a genuine disaster.

CNBC reports that Toyota is revising its sales estimates for 2008. ToMoCo had projected sales of 9.85m units worldwide. They've dropped expectations by 300k, setting a new goal of 9.5m units. Though sales are down in Europe and Japan, Toyota is blaming the stagnant American market for the expected decrease. Having already announced production cuts at three US plants, this could be bad news for Toyota's bid to become the global volume sales leader– were it not for the fact that its competitor for the title is General Motors. While Toyota is still likely to outstrip GM despite the sales goal cutback, it's unlikely to meet GM's single-year sales record of 9.55m set back in 1978. ToMoCo shares are currently underperforming even the weak Japanese transport equipment subindex, thanks to sell-offs in anticipation of slowing demand. But, Naoki Fujiwara, fund manager at Shinkin Asset Management, reckons that Toyota's high dividend and long-term positioning make it a good buy. Roger that.

High gas prices are a bitch. But other factors prevent the "build a small car, stupid" strategy from rescuing the auto industry. Like the fact that steel prices have increased 60 percent this year. In the compact car market, where price point is king and profit margins are razor thin, automakers are being forced to raise prices to maintain what little profits exist. Bloomberg reports that Hyundai will increase prices on its budget cars for the second time since June, due to high steel and other component costs. The good news: Hundai's US sales are down "only" 2.3 percent and actually up 1.3 percent since the last price increase. The bad news: even the second price increase "isn't enough to cover the higher costs, but it's hard for them to boost prices more without crimping sales.'' And it gets worse too. All of Hyundai's Korean production will endure stoppages this week, thanks to labor demands for a nine percent wage increase. With sister company Kia holding on to its rock-bottom pricing, it's no wonder that Hyundai is heading upmarket. But will consumers (particularly in crucial developing markets) follow?

“This is not the time for niche vehicles," Maximum Bob told the world yesterday. "We can’t afford to hit singles and bunts. We need triples and home runs.” There's more, all dutifully, faithfully, credulously and supportively reported by The Detroit Free Press' Mark Phelan. Neither Lutz nor Phelan realize putting all their efforts into high-profit trucks and ignoring cars that weren't "high volume" is what got GM where they aren't today. If GM had gone for a few singles and doubles in small cars– or had even landed a few solid bunts– while they were swinging for the fences in SUVs and pickup trucks, they would have a few more runners on base today. But now GM's trailing, it's the bottom of the ninth and they're hurriedly calling in designated hitters from Korea. The problem is that the game goes on. GM can't call "time out" while they try to rewrite their playbook and rebuild their team. And while they're combing their farm teams trying to find someone who can play in the big leagues, the transplants continue bringing home the profits with a succession of solid base hits. And yet the cheerleading continues.

After Rick Wagoner's announcements this morning, GM Car Czar Bob Lutz was bubbling over with product news. Of course, Maximum Bob overlooked the fact that someone else's year-old warmed-over Pontiac leftovers may be nourishing, if they're seldom appetizing or appealing. Anyway, MB revealed that the Chevrolet Cobalt will be around for a lot longer than we'd been led to believe. It's "no where near the end of its life-cycle" and it's "finally coming into its own" (whatever that is). So what about the Cruze? It'll be sold eventually but not as the Cobalt's replacement. And then there's the news that's upsetting Autoblog's readers: the Beat won't go on, at least not in the U.S. Apparently, the small car that GM needs right now wasn't designed with federal crash and safety standards in mind (doh!). It would cost too much and take two years to fix that short-sighted screwup prepare the car for compact-loving 'Mericans. So when CEO Rick Wagoner said earlier today that GM has "a global operating framework that allows us to respond to changes in the U.S. market, a commitment to technology leadership, and an ever stronger and competitive product line-up," he wasn't talking about small cars. Except the Aveo and Cobalt. And the Pontiac-nourishing G3 and G5. 

Volkswagen has announced the location of their new U.S. plant. And the winner is… pardon me boys… Chattanooga. The Tennessee plant will be located in an existing "industrial megasite" to "produce a car designed specifically for the North American consumer." (The last time VeeDub tried building something specifically for the American market, they "Malibuized" the Rabbit– and retreated to the Fatherland, (cotton)tail between their legs.) VW figures on a 150k per year initial capacity for the new facility, which will begin production in "early 2011." "The U.S. market is an important part of our volume strategy and we are now very resolutely accessing that market," Martin Winterkorn, VW's CEO said. "We will be selling 800,000 Volkswagens in the U.S. by 2018 … [which] along with our growth strategy, is a prerequisite for the economic success of the company in the dollar region." Does that boy even know how to speak English? Anyway, inhabitants of the Tennessee Valley area of "the dollar region" are bound to appreciate the $1b VW's expected to pour into the local economy. 

GM just sent out a press release outlining "further steps" they taking "to adapt its business to rapidly changing market conditions." The high points of Rick Wagoner's plan include:

∙ Reduction of salaried workforce via attrition and "other separation tools."

∙ Eliminating "annual discretionary cash bonuses for the company's executive group in 2008… For the company's top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent. "

∙ Making "additional structural cost reductions… achieved through further adjustments in truck capacity and related component, stamping and powertrain capacity."

∙ "Revising its capital spending plan and reducing approximately $1.5 billion in expenditures versus prior plans… A major part of the reductions is related to the delay of the next generation large pickup and SUV program, as well as V-8 engine development and associated capacity."

∙ "Improv(ing) working capital…primarily related to the reduction of raw material, work-in-progress and finished goods inventory levels as well as lean inventory practices at parts warehouses."

∙ "Defer(ing) approximately $1.7 billion of payments that had been scheduled to be made to a temporary asset account over the balance of 2008 and 2009 for the establishment of the new UAW VEBA."

∙ "The GM Board of Directors has decided to suspend future dividends on common stock, effective immediately, which is expected to improve liquidity by approximately $800 million through 2009."

∙ "Undertaking a broad global assessment of its assets for possible sale or monetization."

∙ "Opportunistically access(ing) global markets to raise additional liquidity"

"The actions announced today are difficult decisions, but necessary to respond to the current auto market conditions," said Wagoner. "Even under conservative planning scenarios, GM is well-positioned to withstand the U.S. market downturn and emerge a stronger company. We have a solid position in the rapidly growing emerging markets, a global operating framework that allows us to respond to changes in the U.S. market, a commitment to technology leadership, and an ever stronger and competitive product line-up."

Click here for PDF of full press release 

The average U.S. consumer is done with SUVs and full-size pickups. Although the shift may have had something to do with safety concerns, political correctness and environmental awareness, probably not. The simple truth is that rising gas prices killed the genre faster than Old Sparky took out Pedro Medina. Of course, that hasn't stopped the left – right debates surrounding the private ownership of gas guzzlers, or, indeed, cars. We've been chronicling the UK's anti-car jihad for some time; recently highlighting their oppressive, CO2-based tax regimes (which even have the left up in arms). The Huffington Post's Sean-Paul Kelley provides us with a U.S. equivalent of the UK hard-core anti-car elite, penning a dietribe against personal transportation. "To me a car is like a prison sentence," Kelley opines, before totting-up the cost of running a car. "Wouldn't you rather save $8,000 a year and only pay $2,000 a year in infrastructure taxes to ride the subway? Or an excellent bus system? And improve our national rail network? As a part of the bargain you would walk more, get exercise, be healthier and as another bonus spend more time in closer quarters with your fellow Americans, building communities, making new friends, the chance meetings of people reading the same book on the metro or bus?" Kelley cuts non-urban dwellers a bit of slack, but not much. Look for more of this in the days, weeks and years to come…

The drop in fuel consumption continues. The Wall Street Journal reports that "gasoline consumption dropped 3.3% from last year to 9.347 million barrels a day." This puts current domestic gas usage at the lowest level since 2003, effectively rolling back five years of growing demand. Consequently, fuel supplies at refiners are growing, up by one million barrels in the last week alone. Of course, compared to 9.347m barrels per day of consumption, having an additional million barrels in inventory is hardly a glut. The reduced consumption started with a one percent drop (compared to last year) during April, ramped to a 2.2 percent drop in June and then hit 3.3 percent during the week surrounding the 4th of July. But, while consumers are cutting back, trucking and farming are doing the drunken sailor routine. U.S. diesel consumption is up a full six percent compared to last year– even though diesel fuel prices are up 65 percent while the price of gasoline rose by only 38 percent. Ironically, some of the boom in diesel fuel use is down to increased ethanol feedstocks and the fleet of tanker trucks required to move the stuff around. (Gasoline can be transported over long distances in pipelines; ethanol has to go one tanker truck at a time.) As for the clean diesel car revolution, dead on arrival.

You want to talk about high gas prices? Hertz used to charge its customes $7.99 a gallon to refuel a car. In an interview with The New York Times, the rental car company's chairman and chief executive says Hertz has modified the charge to stop gouging their customers [paraphrasing]. "We are now reducing that to the pump price, which is $4 or so, plus a one-time fee of $6.99," Mark P. Frissora reveals. "We also have a fuel-purchase option. In the past, if you elected to buy the tank of gas in advance, we charged a 10- to 20-cent premium on that tank. But now we give a 15-cent discount to whatever the price is at the pump." Hertz is hoping new customers will cover the lost revenues. But what about the old biz, the vacationeers facing pump shock? "In general, gas prices going up is not a positive thing. However, it is not nearly as negative as you might imagine in rental car land. Typically, the rental car itself and gas are no more than 10 percent of the overall cost of a vacation. We are finding that people aren’t cutting vacations right now. You would think that with gas prices being high, there would be a deterioration, but we haven’t seen that." Yet. In other news, Hertz has just 3k Priora in its Green Fleet; Toyota's hyrbid's residuals are safe. For now. 

"[Cutting-back on U.S. light truck production] shows that Toyota is just as fallible as anybody else,” said Joseph Phillippi, a principal of AutoTrends Consulting. “They’re human after all.” Well gee, who'd a thunk it? I guess former Detroit News cheerleader (now ace New York Times scribe) Bill Vlasic couldn't resist putting the boot in, as the Brits would say. To be fair, the article is extremely fair in its assessment of the relative impact of the SUV/pickup truck extinction on the Big 2.8 vs. Toyota. And we get another glimpse of what makes Toyota the Automaker in Front. “By using this downturn as an opportunity to develop team members and improve our operations, we hope to emerge even stronger,” claimed Jim Wiseman, ToMoCo NA's external affairs Veep (sounds sexier than it is). Happy talk? "They have piles of cash and are as flexible as any company in the industry,” said analyst Maryanne "Where's GM's Sense of Urgency?" Keller. “This is probably a good thing for Toyota because, in their history, they have shown that adversity is what makes them stronger.” Not to mention the fact that doing less badly than your competition is the same as doing better.