Category: Editorial Podcasts

By on March 11, 2006

 Ward's Automotive recently profiled Pete Gerosa, GM's former Vice President for Field Sales, Service and Parts. Although Gerosa's heading for retirement, he's still on the road, selling the company line to GM's dealer network. Reporter Steve Finlay painted the 42-year industry veteran as a living link between GM's past and professed future: selling the vehicle, not the deal. While Finlay pressed Gerosa on GM's so-called value pricing, the scribe failed to confront the exec about GM's recent sales incentives or The General's March Madness campaign. In any case, Finlay's feature contained a telling tale.

At a dealer conference, David Latshaw, finance director at Shaver Pontiac in Thousand Oaks, CA, asked Gerosa why GM can't build enough Solstii to meet demand. "Our dealership had 600 initial orders and only got thirteen cars,' Latshaw said. "What is the right number?' Gerosa answered. 'Too many, and you discount. Too few, and there are waits. But thirteen is too low." Ya think? Latshaw: 'We put a sold Solstice in the showroom just to display it, and people were saying, 'I want to buy that car!' They got mad when we told them they couldn't. They were freaking out. We had to hide the car in back." Before we file that one under defeat, from the jaws of victory snatched, note Gerosa's inability to accept responsibility for the company's screw-up or promise any kind of resolution to an ongoing problem.

Mr. Gerosa may be a tenacious and dedicated foot soldier. His efforts may have earned The General tens of millions of dollars. But his career arc and atttitude reflect and reveal a company without the slightest hint of personal accountability. Where middle management fails upwards or, at worst, sideways. Where assembly workers' jobs are secure whether or not there's a market for the products they produce. Where a CEO and his team can oversee the inexorable dimunition of their company's market share, losing $8b in a single financial year, and continue to get paid millions of dollars to hold the tiller. Where GM's Vice President of Global Product Development can threaten American jobs without repercussions.

Check it: At the Geneva Auto Show, Maximum Bob Lutz addressed the pressing issue of US labor costs and dropped this pearl upon the press: 'Hourly workers in the U.S. no longer are faced with a choice between high-paying jobs and low-paying jobs. They must choose between jobs or no jobs at all… In a few years time, it's clear that the Chinese automobile industry will be capable of exporting products. There's no doubt that someday we will be (using) GM China as a source of products. I'm very optimistic." Even if it's true, it's not exactly what you'd call helpful– given GM's do-or-die labor negotiations at bankrupt parts supplier Delphi.

But who's going to stop the septuagenarian Car Czar from shooting his mouth off? Rick Wagoner? Like Gerosa, GM's CEO is a lifer. Rabid Rick's learned that there's no comment or action or inaction that doesn't disappear off the face of the earth if you just give it enough time. Drop $4b on FIAT? Pontiac G6 a sales dud? Hybrids and muscle cars ten years too late? GMAC sale a bit… delayed? SEC probe unearthing some nasty accounting problems? Forgeddaboutit. Literally. It's a logical corollary of unaccountability: all failure is temporary, survivable and, ultimately, irrelevant.

GM watchers who are shocked by the lack of urgency over at RenCen don't understand that GM's corporate culture is the ultimate defense against reality. Nothing can go that wrong because even if it does, well, life goes on. Rabid Rick cashes in GM's chips at Suzuki, uses the money to pay off Delphi's workers and everyone goes back to business (or lack thereof). That fire burning-up GM's cash reserves? Oh, we'll put it out eventually. It's the same mentality that the UAW displays in its negotiations: tough it out, give them nothing and everything will be OK. That's the way we've always done things around here, bankruptcy or no bankruptcy. Even if the union leadership knows better, they know their members don't.

It's Pan Am redux. The international airline once enjoyed a clear playing field: no significant competition and enough money to give the unions whatever they wanted. When deregulation arrived, the company considered itself too big to die– even as it lost market share, sold off assets, wiped billions off shareholder equity, suffered union strife and floundered in an endless sea of red ink. An article by Jon Marcus and Gretchen Voss quotes a financial advisor to the company: 'Half of Pan Am's problems were caused by circumstances. The other half was caused by the culture, which seemed to make perfectly rational men think they were invulnerable once they walked through Pan Am's doors.' Nuff said?

[powerpress]
By on March 3, 2006

 It's official: bankruptcy is good for GM. In their recent ass-covering exercise for the Securities and Exchange Commission (SEC), The Ford Motor Company listed 'adverse effects from the bankruptcy or insolvency of a major competitor' as a significant risk to its financial future. Translation: if GM goes bankrupt, The General will slough off its excessive labor costs and become… wait for it… competitive. So competitive, in fact, that Ford reckons GM's products would gain an important price advantage. Well how about that?

Obviously, there's more to it than that. Ford's SEC filing also alerts investors that GM's Chapter 11 could destroy The Blue Oval's supply chain. Both automakers share a large number of mission critical parts suppliers; if GM's submersion sucks vital parts makers into bankruptcy– which it most assuredly would– Ford will lose access to the bits and pieces it needs to build Fords. In fact, it's hard to see how Ford could survive a GM bankruptcy. Or why it would want to. The automotive community is slowly (and quietly) beginning to conclude that bankruptcy is both the only thing and the BEST thing that can happen to GM, and, by extension, Ford.

To review: GM can't build competitive vehicles at a profit. It's got too many models, brands and dealers. Too much bureaucracy, waste and inefficiency. Its labor costs are too high, its capital investment is too low and its supply chain is about to snap. And GM can't change a thing. The United Auto Workers' contract prevents any wage or benefits cuts, and precludes any alteration to their Byzantine working practices. Legal obligations also stop GM from trimming its distended dealer network or euthanizing fatally wounded brands. To survive, GM needs to lower its costs and revamp its business. And it can't do that without Chapter 11.

Oh, OK, it could, if everyone pulled together: investors, management, unions, dealers, suppliers and customers. But they won't. It's not in their nature. And even if it was, GM CEO Rabid Rick Wagoner is singularly incapable of tackling this monumental leadership challenge. And even if Rabid Rick could unify all the negatively charged particles in the GM universe, it's too late. The General doesn't have enough cash to weather the turbulence between business-as-usual and the end result of a difficult and dangerous overhaul. Nobody's going to give them the extra money– at least until The General declares bankruptcy. As Ford publicly acknowledged, only bankruptcy can give GM the wiggle room it needs to implement necessary changes to the way it goes about its business.

So be it. As I said at the beginning of this odious odyssey, GM will emerge from this multi-decade debacle a smaller, leaner and better automaker or, preferably, automakers. And that's why Ford's worried. Of course, they're not the only ones. The prospect of revolutionary change is making everyone involved a little, well, crazy. We're already seeing some strange behavior emerge from GM World: a public pledge to end national incentives followed by the announcement of a "March madness" sale, exciting new cars playing one-two-three green light, red light, green light; a Board Member and Car Czar squabbling over a moribund Swedish car brand, etc. It's the End of Days, Detroit style.

As GM's fate reaches its terrifying conclusion, workers will get all the attention. The moment the axe falls, whether by a slow strike or a lightning default, the spotlight will shift to "the little guy." Needless to say, the media will depict them as victims. They'll highlight the most desperate cases and blame their fate on management incompetence, outsourcing, the Japanese, the Chinese, foreign trade policy, currency manipulation, oil prices, George W. Bush, the anti-GM press, anyone and anything other than the workers themselves. Never mind that a huge number of these workers performed two hours work for eight hours pay. Never mind that thousands were willing to receive full pay and benefits for doing nothing whatsoever. It will always be someone else's fault.

Understand this: GM's workers are no better or worse than any of the other players in this sad saga. All of them work for a company where personal responsibility doesn't exist. Where everyone thinks they deserve to be well-paid, no matter what they or the company does, or doesn't do. Yes, there are plenty of good people within GM. And here's the kicker: most of them can't wait for the company to file. They want to see an end to the waste, laziness, greed, corruption, inequality and stupidity they see around them. When GM becomes the world's largest bankrupt, these good men and women will be satisfied, knowing that there is justice in the world. And they'll be hopeful; that something good will replace something bad.

[powerpress]
By on February 28, 2006

 Yesterday, The Detroit News caught-up with Maximum Bob Lutz at the Geneva Auto Show. GM's Car Czar was busy unveiling Saab's Aero-X, a Corvette-based concept car from a brand that's lost GM several billion dollars over 17 years. It probably seemed as good a time as any to ask Maxi Bob about GM Board of Directors' member Jerry York's call to axe the Swedish brand. 'I've spoken at length with Jerry York,' Lutz said. 'And he's off this get-rid-of-Saab thing.' Thing? Calling the Turnaround King's strategic recommendation a "thing" is so condescending it qualifies Lutz for a British knighthood. More importantly, Maximum Bob's summary dismissal tells you all you need to know about Saab's future, and it ain't good.

Lutz' alternative to York's Saabicide is badge engineering. Or, more specifically, MORE badge engineering. Yes, now that The General has sold off its share in Subaru, the plan to transform Japanese Scoobies into Swedish Saabs has been ditched in favor of turning German Opels into Swedish Saabs (with an Ohio SUV thrown in for good measure). In other words, GM is fully committed to integrating the Saab brand into the bureaucratic clusterfuck known as GM's "global vehicle development system." Saab's ignition key slot will remain in between the front seats, but the decisions about its major components will now be taken somewhere a long way away from Sweden. And the choices will be made by a series of committees with far greater responsibilities than "just" Saab.

Never mind that GM Marketing Maven Mark LeNeve recently swore on a stack of Solstii that GM would no longer slap a badge on a standardized GM product and call it a Pontiac Torrent (oops). Don't confuse Maximum Bob with the company line; the man's talking about returning Saab to profitability by lowering the division's cost per unit. 'Soon.' Anyway, as the Saab faithful will tell you, it's too late to worry about the brand's identity; the Opel Vectra-based Saabs drive remarkably like… Opel Vectras. If you still cling to the belief that this platform sharing arrangement serves the greater glory of Saab, or, alternatively, justifies its destruction, Maximum Bob's happy to dispel either proposition. 'Saab is no longer an independent company that you could sell off as a unit.'

Now there's a bit of auto industry theater for you: Bob Lutz proudly admitting that GM has killed its Swedish goose before it could lay a single golden egg. Yes, proudly. As far as Maximum Bob is concerned, the de-Saabing of Saab is not only desirable, it's overdue. 'We left it independent way too long. Three years ago, Saab had its own capital budget. They ran the business as if it didn't belong to General Motors. Now, it's totally blended into the worldwide architecture plan.' Saab has its own budget? Who the Hell do these Swedish guys think they are, a car company? We've got a business to run here, Sven.

If you want to know why GM makes such a broad range of substandard products, why they can't or won't build a truly magnificent Saab, there's your answer: centralized power and control. The ends of the The General's vast Empire constantly fight against the center– and lose. Can you imagine the difficulty Saab has– I mean would have had– sourcing a seat bracket? Can you imagine the difficulties they would face if they tried to make a NEW seat bracket? Theoretically, the GM corporate mothership helps each brand achieve its goals. In practice, The General's overarching bureaucracy sucks the life force out of everything it touches, until all its vehicles are as bland and lifeless as a Pontiac G6.

The opposite of corporate synergy is… GM. The "global architecture" that makes Lutz' heart beat that little bit faster was designed by the company, for the company. Putting as many models as possible on the same platform using the same bits will reduce each brand's unit costs, but it won't enhance each brand's character or the consumer's pleasure. In fact, Saab never stood a chance against the legions of GM pencil pushers, bean counters and union reps: people who couldn't care less if a Saab looks, feels and drives like an Opel as long as its sales, marketing and production don't violate GM's corporate practices.

All of which makes the Aero-X concept a fitting memorial for Saab: a striking vehicle whose beauty and imagination will never see the light of day. Oh sure, Lutz dutifully mouthed the usual crap about incorporating the X' "design cues" into Saab's lineup, but it's hard (not to say nauseating) to imagine GM adding the X' aeronautic themes to Saab's rebadged Trailblazer. The Aero X is physical proof that "crisis what crisis?" GM is happy to celebrate its corporate diversity– even as it grinds its divisions, and itself, into the dust.

[UPDATE: After receiving an email from Jerry York, Maximum Bob Lutz has publicly retracted his contention that the GM Board member favors the continuation of the Saab brand.]

[powerpress]
By on February 26, 2006

 If you were going to invent a way to control an automobile, you wouldn't ask the average driver to develop the skill and coordination of a church organist. Note I said "average." As far as hardcore automotive enthusiasts and skilled pipe organ players are concerned, there's nothing more natural or satisfying than making beautiful music with a sublime dance of hands and feet. Yes, well, the average person would rather drive an automatic and download an iTune. Pistonheads and pipe worshippers may sneer, but if the majority of humans didn't take the path of least resistance our species would still be stuck in the trees. Meanwhile, just as digital sound has invaded God's house and rocked the organist's world, Audi's DSG transmission is here and tripedalists are toast.

The day F1 racing cars switched to paddle shift control, the clutch pedal was doomed. Only the paddle system's violence kept the left pedal from a date with old Sparky. Ferrari's ground-breaking attempts at a passenger paddler were representative rubbish; the clunky F1 system transformed the sublime F355 into a herky-jerky one-track pony. Other early systems were equally obtrusive, equally foul. At the same time, style conscious high-end manufacturers added wheel-mounted button shifts and gate activated "tip shifts." Although the technology simply handed customers slushbox control, computers eventually transformed the systems into a reasonably convincing halfway house between mindless ease and endless excitement.

 Aston's Vanquish got closer to the real deal. If drivers tapped its over-sized plus paddle at the exact right rpm, the V12 GT rewarded them with a perfectly timed gear change. If not, not. Other systems followed: Ferrari, Maserati, BMW, Lamborghini, Aston Martin, even Toyota (MR2 Spyder). All of these paddle shifters downshift magnificently– even blipping the throttle on your behalf– but they either slur their upchanges like a drunk handing you a cigarette or smack you in the back of the head like a sadistic schoolteacher. And that's without considering the challenges of around town ambling or, God forbid, reverse (a non-issue for F1, obviously).

And then BorgWarner and Volkswagen AG developed DSG. The direct shift gearbox (DSG) features two wet plate clutches: one engages the odd-numbered gears, the second the even-numbered gears. When the first clutch is putting down the power, a computer readies the second clutch to engage the next gear (pre-selected according to engine revs and speed). When the driver bangs the paddle for another gear or the automatic calls for another cog, the first clutch is released and the second engages. Gear shifts are fast, smooth and accurate; both up and down the ratios. The DSG's computer– complete with 12 sensors– stands guard against "inappropriate" gear selection; an over-twitchy paddle shifter can't stall or blow up the engine.

 OK rivet counters: Volksie didn't invent the double clutch. Citroen offered something similar over 70 years ago, and Porsche's formidable 962 racer also gave it a go. But VW and BorgWarner have just about perfected the DSG. (The only drawbacks are a certain sluggishness when gently tipping-in and a slight hesitation when lifting off and paddling down more than one gear, as the DSG shuffles through the intervening ratios.) Even with its quirks, the DSG rules– to the point where the clutch pedal and traditional manual gearbox is a mechanical redundancy, a dead device shifting. In fact, any car manufacturer who doesn't have a DSG or something similar installed in their performance-oriented products will soon be at a tremendous disadvantage.

And here's where the culture wars begin. Two years ago, Bob Elton's editorial "Death to the Stick Shift" suggested that cars equipped with an automatic gearbox were safer, more reliable and more pleasurable than their manual equivalents. Enthusiasts considered the proposition a personal affront. Two years of flame mail leads me to conclude that stickshifters– a self-selecting community of motorists who cherish the skill and pleasure that only a manual transmission can provide– consider autoboxers less competent, safe and passionate. Many of these tripedalists will not take kindly to the DSG; it's a bridge from the know-nothing rabble to the self-proclaimed automotive elite. The barbarians are at the shift gate; The Volkswagen Group has unlocked the door.

 It will be some time before this issue plays out, but the stickshifters will lose. Once they get behind the wheel of a DSG-equipped machine like the new Audi A3 or the VW R32, even the hardiest of these manual transmission diehards will understand the system's clear superiority; in terms of speed, safety and, most importantly of all, enjoyment. Eventually, the tide will turn. Automakers will be forced to buy 'dual clutch transmission' technology from BorgWarner or their partner Getrag, or develop something at least as good. Of course, there will still be enthusiasts who stick with the stick, for personal pride and sensual satisfaction. In the meantime, a quick message from Paddle Shifters Anonymous to open-minded automotive enthusiasts: get ready for some serious fun.

[powerpress]
By on February 23, 2006

 A couple of days ago, I was talking to an auto industry analyst about the world's largest automaker. We were discussing the cracks in GM's hull, trying to figure out which of The General's compartments were already breached, which are filling with water and which remain viable. A wistful tone in the analyst's voice indicated head-shaking dismay. "I'm no longer hearing anything positive about GM," he revealed. "The conversations range from how bad it is, to how bad it's going to get." I didn't want to sound like a paranoid fantasist to a new source, so I tried not to out-pessimist the doomsayers. But it wasn't easy.

GM's supply situation is dangerously dire. If former subsidiary and mission critical parts supplier Delphi doesn't reach an agreement with its unionized workers by March 30th — the third and "final" deadline — a judge will void the company's labor contracts. Pundits poo-poo the possibility; they reckon the UAW will make concessions and GM will fork over the necessary union blood money to keep Delphi chugging along. But… over at Tower Automotive, the smaller but equally bankrupt GM supplier tried to cut $1.50 to $3 from their union members' $13 to $15 hourly wages. The United Auto Workers (UAW), United Steel Workers and International Union of Electrical Workers (IUEW) said no. On Monday, a judge will void Tower's union contracts. The inevitable strike will deprive GM's Hail Mary GMT900 SUV's of vital suspension components (amongst other things).

This ominous development reflects the indisputable fact that the UAW and its brother unions are not prepared to surrender a single dime in their salaries, pensions or health care benefits. Not one. Not ever. (I doubt UAW Boss Big Ron Gettelfinger has ever said the word 'concession' in public.) What's more, the unions are literally spoiling for a fight. To wit: members of IUEW will vote today to authorize its leaders to strike Delphi as and when. That's 33,000 Delphi workers ready, willing and able to walk at a moment's notice. It's not posturing; it's preparation.

The unions own GM. If organized labor strikes even one key supplier, they'll be giving The General a 90-day death sentence. While some analysts believe that's no bad thing– the situation forces the unions to accept responsibility for the fate of the company paying its wages, leading them to take the hit needed to keep those wages coming– nothing could be further from the truth. The UAW and its fellow unions are like a cancer: they will feast on their host until it dies. End of story. Why would they walk out on Delphi and send GM into Chapter 11? Because they can. Look at the Rust Belt. How avoidable was that? By the same token, General Motors gives in to union demands when it can't afford to because that's what they do.

GM didn't rush in, bail out Tower and protect its new SUV's because the supplier is only the tip of an iceberg that's gouging a hole in the General's hull. GM's constant efforts to low-ball its suppliers, its poor credit (downgraded by Moody's on Tuesday to B1, five rungs below investment grade) and the looming prospect of bankruptcy are all inflicting fatal wounds to its supply chain. Suppliers are caught in the squeeze between rising commodity costs, declining production (due to lost market share) and contracts that reduce pricing over time. TTAC's Deep Throat reports that an inferior part for the GMT-900 recently forced GM to return to a "quality supplier." The supplier refused to invest its own money to create the part and demanded a contract stipulating that the automaker would pay a true market rate for the finished component.

This is not an isolated case. GM used to provide suppliers an advanced payment program arranged by GE Credit. Late last year, GE bailed on the entire business, in favor of GMAC (yes, the same GM-owned finance company currently on the block). If that wasn't a bad sign of GM's financial situation in and of itself, GMAC then tightened the restrictions. The payment program is no longer available to the broad spectrum of GM suppliers. Bottom line: GM's current procurement process fails to assure parts manufacturers adequate financial compensation, doesn't provide protection against program termination due to budgetary constraints or model "realignment", and can't possibly guarantee payment if GM files for Chapter 11.

It's not too much of a stretch to imagine that at some point, one way or another, GM's entire supply chain will collapse. How's that for dark? You want light? How about this: I've received dozens of emails from frustrated workers, designers and administrators inside GM. No question: there's an enormous amount of creativity and passion locked-up inside General Motors. Once The General shakes off its union, deep-sixes its insufferable bureaucracy, dumps unnecessary brands and gets down to the business of building a limited number of great cars, it will build a limited number of great cars. When it comes to GM, the parts are greater than the whole.

[powerpress]
By on February 16, 2006

 This is a tale of two Tahoes. The first is a wildly successful SUV that's flying off the lots at full price: a Hail Mary pass that will put General Motors back in the end zone, saving them from the unthinkable humiliation of bankruptcy, with only moments to spare. The second is a gas-guzzling truck that's being swept out to sea by the vast receding tide of SUV buyers: a four-wheeled indictment of GM's inability to build what America wants to drive at a price that makes the company enough money to stay in business. For the time being, which vehicle you see depends entirely on which one you want to see.

Over at The Detroit News, Brett Clanton paints a portrait of the new Tahoe as the corporate lifesaver The General needs it to be. His article on the Tahoe's initial fortunes is sprinkled with the kind of upbeat non-contextual factoids that German newspapers relied on at the end of WWII: "Tahoe sales were up more than 50 percent in January. The 2007 model is fetching a higher average selling price than its predecessor… Only on sale since Jan. 10, GM has booked just more than 4,000 sales and is still in the process of shipping Tahoes to dealers." To be fair, Clanton mentions Wall Street's unenthusiastic response and sensibly states that "a true verdict on the vehicle is probably still months away." But the article's overall tenor is reflected by the headline "Hot Tahoe fuels GM Optimism."

If Tahoes are 'hot,' Antarctica is 'tropical.' Four thousand Tahoes per month equals 48k per year– as compared to the 152k examples Chevy sold in '05. Meanwhile, down on the showroom floor, I was offered a $2k discount on a brand new LT without asking for it. No wonder: in his February 6th newsletter, automotive journalist Ed Wallace reports that GM is offering a $1750 fleet rebate on new Tahoes and Yukons. (So much for GM's "Value Pricing Program": the highly-touted plan to keep vehicle sticker prices– and incentives– low.) What's more, GM isn't putting an actual number to '07 Tahoe sales or breaking out sales by model year. In other words, that "50% increase" represents sales of both the new and the old Tahoe. Add in the fact that dealers are selling the '05 Tahoe with an $8k rebate, while the '06 models are leaving dealer lots with $5k off sticker, and the rosy picture takes on a more deathly pallor.

In fact, Wallace's assault on GM optimists extends well beyond carefully shrouded Tahoe sales. The talk radio host points out that The General's dealers sold slightly fewer than 300k vehicles (discounting fleet sales) in January. Yet the company currently plans to build 1.26 million vehicles this quarter. That's 25% more vehicles than it will sell at the current pace. You don't have to be an economist to know that there's only one way prices can go when supply exceeds demand. Talk about duality: GM can't afford to discount its products; it can't afford not to discount its products. Unless sales pick-up quickly and dramatically, GM CEO Rabid Rick Wagoner's recent production cuts won't be enough. The General's death spiral will continue.

Depending on what happens tomorrow, we might be spared the agony of watching GM lingering on life support. We'll know whether or not Delphi has hammered out a deal with the United Auto Workers (UAW) that allows the parts maker to continue making parts for the Tahoe, Yukon and the rest of The General's lineup. The smart money says the UAW will accept some cuts to their members' compensation, while GM foots the multi-billion dollar bill for a continuation of the status quo. The smarter money says the UAW will agree to nothing more than window dressing, while GM foots the multi-billion dollar bill for a continuation of the status quo. If not, the UAW will strike and no one will have to worry about Tahoe sales for quite some time, if ever.

If you hear "deadline extension", think strike. Anyway, either way, this is a fight GM can't win. In fact, we're back to twins, and they're BOTH evil. The world's largest automaker can't survive a strike (UBS analyst Rob Hinchcliffe reckons a moribund GM would burn through its $19 billion cash hoard in about 10 weeks) and it can't afford to subsidize Delphi's UAW workforce (GM is ALREADY on the hook to Delphi workers for $12b). All of which means the new Tahoe's sales are… unimportant. Even if the Tahoe and its platform siblings fly off the forecourt at full retail for months– reversing a deeply entrenched industry trend– it couldn't keep GM's sinking ship above water. So the General's pride and joy, its last, best hope for financial salvation, is destined to become what anti-SUV campaigners saw all along: an irresponsible irrelevance.

[powerpress]
By on February 14, 2006

 Over at Edmunds.com, automotive journalist Alistair Weaver reckons Dubai's Jebel Hafeet Mountain Road is "The World's Greatest Driving Road." Judging from Marty Padgett's rhapsodic description of Maui's Heavenly Hana Highway, The Car Connection scribe may beg to differ. It's a dual-branded debate. BMW paid for Weaver's wanderings; Volvo footed the bill for Padgett's peregrinations. I'm not saying these corporate subsidies rendered these writers less qualified to choose the world's best tarmac, but neither journalist could make that call without car company cash. In other words, once again, money talks, bullshit walks.

Both Edmunds and The Car Connection neglected to tell their audience that their travelogues were made possible by a grant from a company whose cars were described glowingly therein. I have no qualms with Weaver's assertion that the MINI's "success is a testament to the brilliance of its design." Nor do I quibble with Padgett's assessment that Hawaiian C70 drivers should "bring great music for the C70's top-notch 910-watt audio system." But these stories wouldn't exist without the manufacturers' undeclared interest. Withholding that information from site visitors is unethical.

Fair disclosure: I don't know for sure that BMW or Ford paid for these trips. I've yet to receive an email on the matter, or a statement from either site about their junketeering policy in general. So I'm assuming. This is the same defense I've heard from publications who happily sell junket fruit (i.e. NOT Business Week, Conde Nast Traveler, The Wall Street Journal, Boston Globe and the LA and New York Times). One gatekeeper told me straight out that he simply assumes that his readers will make the connection between pay and play, and so be it. Which is a bit like a counterfeiter saying that a store clerk should be able to tell a bogus bill from a real one when they see one.

I've also heard the excuse "we don't have a choice." Which is more or less true. New car launch junketeering is so pervasive that unless a car publication/journalist accepts an all-expenses-paid first-class trip to Spain, South Africa, Arizona, Hawaii or wherever, they won't get Stage One access to the latest whip. (Post-junket, manufacturers cars take about two months to filter down to the local writers.) Buff books and car manufacturers are locked into a symbiotic relationship whose corruption is smothered by the quality of the free surrounds, food and, lest we forget, alcohol.

I find the extension of this jet-set corruption club to web-based media distressing, but not surprising. As eyeballs defect to the net, carmaker cash was bound to follow. Why wouldn't the Mayja Playas work the same scam on web-based automotive journalists that they've employed so successfully on their print-based colleagues? Why shouldn't websites stick their poorly-paid snouts into the same velvet-lined trough? Who really cares if there's an unspoken agreement: you be generally positive and respectful of our products and we'll keep you in the style (and access) to which you've become accustomed?

Word up: the web ain't like that. While carmakers and info corps are busy working the same old, same old, surfers are looking for the real deal. At the risk of repeating myself, buying a car is a big deal. Consumers want the straight shit. And they aren't stupid. They know what that big old Chevy logo blinking at them from the corner of Edmunds.com means. They know what's what when an article waxes lyrically about Hawaii, and then ends with a plug for a Volvo C70. Websites that think they can get away with unacknowledged junketeering will learn that it ain't necessarily so. And by the time they do, it'll be too late.

Meanwhile, I realize that the majority of my colleagues are a lost cause. I don't expect them to buck the system or take the high moral ground or even engage in fair disclosure. So I call on the automotive manufacturers to end this gold-plated junketeering once and for all. Listen up guys: TTAC, Jalopnik and Autoblog's Google rankings, and the increasing relevance of brand-based forums, proves that the rules have changed. Car buyers will find independent information about your products. You can't stop it. You can't co-opt it. So why not go with the flow? Less philosophically, ending the junketeering practice will give you far more bang-for-the-buck.

Ditch the Dubai and Hawaiian feeding frenzies. Release new cars to the regional press fleets. The buff books will find a way to keep their customers. You'll save a huge amount of money AND get blanket coverage. And here's another idea: lend your cars to web-active automotive alphas. If your products are good enough, you'll get the kind of groundswell of honest, untainted opinion that sells cars in this, the new millennia.

[powerpress]
By on February 9, 2006

 As our GM Death Watch series gains traction, I've taken to scanning the skies for black helicopters, stashing Glocks around the house and avoiding the fine city of Detroit. But I would have loved to been at RenCen to see the look on Bob Lutz' face when his boss sliced the Car Czar's salary by 30%. If you recall, Turnaround Tycoon Jerry York originally suggested executive pay cuts as a way to send a clear message to workers throughout the world's largest automaker: WE'RE IN DEEP SHIT. At the time, Maximum Bob responded to the suggestion with characteristic bravado: "I gave at the office." I guess he's learned that bankruptcy is the gift that keeps on giving.

To be fair, Mr. Lutz had something of a point. Although his employment contract isn't a matter of public record, much of Bob's compensation package is tied to the company's performance, both directly (through incentives) and intimately (through stock options). As GM bleeds out, shedding value like a dot com bomb, Bob's lost theoretical millions. OK, it's more than partially his fault. But as an employee stockholder, Lutz has GOT to be worried. Yesterday, Deutsche Bank took a hard look at the state of GM's finances and issued a Lutzian pronouncement: "sell."

The recommendation came despite the fact that a newly independent Jerome P. York finally joined GM's Board of Bystanders. (An SEC 13D/A filing for Tracinda Corp states that Jerry won't share confidential info with his capo, GM stockholder Kirk Kerkorian. Yeah right.) What's more, The Bored of Defectives ordered GM CEO Rabid Rick Wagoner to bring Mr. York the head of Alfredo Garcia. And so he did, making across-the-board cuts in accordance with York's rescue plan: trimming white collar pay, pensions and health care; reducing GM's annual dividend by 50% and, get this, signing-off on a significant reduction in The Board of Bystanders $200k annual "retainer." Message received?

Not where it counts. Let's be clear about this: the cuts will not stanch GM's massive wounds. The General lost over eight billion dollars last year. The largest measure in this package– the dividend reduction– will save GM $566m. Add up all the rest of the bits and pieces, double it and it still doesn't cover GM's losses. Or its recent "charges against earnings." Or the cost of keeping idled GM workers in the "money for nothing and your checks for free" Jobs Bank. And then remember that GM is about to fork over multiple billions in blood money to keep bankrupt parts supplier Delphi's unionized workers working.

Again, Wall Street was suitably unimpressed with GM's black February. More importantly, so was United Auto Workers (UAW) President Big Ron Gettelfinger. Lest we forget, convincing the UAW to take one for the team was the whole point of the exercise, as Rabid Rick quickly pointed out: 'I think it's clear, now more than ever, that we very much have a shared fate." Indeed they do. Unless GM can lower its union labor costs, alter union practices and sell some product by, say, last May, it's all over bar the filing. And… According to the Detroit Free Press, "The union chief dismissed any suggestion that [the cuts] set the stage for GM to push the UAW for more concessions." So, that's that then.

Reporter Daniel Howes over at The Detroit News says Big Ron's stonewalling is nothing more than a bit of pre-election, pre-negotiation posturing. In yesterday's editorial, Mr. Howes said the union boss called for "shared sacrifice" and claimed that "Union folks are smart enough to know that tough times demand tough calls, including concessions they never expected to give." I guess Mr. Howes would also see UAW Vice President Richard Shoemaker's same day statement that Delphi's insistence on pay concessions "will surely lead to a long strike, and that is true whether it involves other corporations or does not involve other corporations" as more posturing.

If Rick Wagoner is a religious man, I bet he's praying that Daniel Howes is right: the union will see sense and do what needs to be done to save the corporate host upon which they feast. Judging from his bankruptcy-proof pension, Rabid Rick's not a betting man. Which is just as well, because unions don't posture. They threaten. If you don't capitulate to their demands, they make good on their threats, come what may. GM has paid billions to the unions. There's no way the union officials that would lead the rank and file into a strike are going to miss a meal because of an anti-Delphi or anti-GM union action, short or long term. They have nothing to lose. As far as they're concerned, you can pay us now, or you can pay us later. Only thing is, white collar cuts or no, GM can't afford either option.

[powerpress]
By on January 31, 2006

 Porsche is my favorite automotive brand for one reason: they make my favorite sports car. They do not, however, make my favorite SUV. Infiniti's FX45 is more fun to drive, Land Rover's LR3 is more capable, their Range Rover is more luxurious and when it comes to carrying a crew, Lincoln's Blingigator is the bomb. Sure, the Cayenne Turbo is the world's fastest SUV. And? Aside from dubious relevance, I reckon the debut of the glacial V6 Cayenne cancels-out the accomplishment. But the worst thing about the Cayenne is that it's subsidized Porsche's plan to take over the Volkswagen Group.

This morning, Porsche AG announced it will raise its stake in the Volkswagen Group from five to 20 percent. So much for the Sultans of Stuttgart's claim that they were buying VW stock to ensure access to parts and platforms for future Porsche models. The real motivation behind Porsche's land grab is the same as it ever was: power. More specifically, Porsche's Machiavellian machinations are a real world version of one of those Jeffery Archer-style family sagas, involving genetics, greed and history. Just for fun, here's the plot line:

Ferdinand Porsche made his bones building the "people's car" for Adolph Hitler. As co-general manager of Volkswagen's Wolfsburg factory (along with a Nazi administrator), the Austrian engineer used his considerable design and manufacturing skills to build jeeps, tanks and other weaponry for the German war effort. After the war, the Allies stripped Herr Porsche of his power within Volkswagen (it might have had something to do with Ferdy's willingness to use slave labor). Aided by his son Ferry, financed by a royalty on the Beetle, Ferdinand founded the sports car company that bears his name. Fast forward fifty years…

Following a few decades of Porsche ups and downs and some maneuverings over at Vee Dub, Ferry Porsche's nephew Ferdinand Piech ascended to the Chairmanship of the Volkswagen Group's Board of Directors. And there he stayed, inflicting his autocratic style on the mammoth conglomerate, gathering car brands like a 5th Avenue matron collects Manolo Blahniks, watching VW's US market share swirl 'round the toilet. Two weeks ago, after 13 years on the Group's board (most of it as CEO), Piech finally agreed to step down. Not so coincidentally, his decision cleared the way for today's news: Porsche to assume two seats on the Volkswagen Group's board.

The effect of all this Dallas-style plotting on the Volkswagen Group is not my main concern. Piech's plans for world dominance– such as matching Mercedes model for model– hasn't exactly turned out as planned. (Phaeton anyone?) Now that slave labor isn't the done thing, I'm happy letting the free market determine the wisdom of a Porsche-controlled Volkswagen Group. But I am worried about the fate of the Porsche brand. What will happen to my preferred sports car provider as it becomes more and more deeply enmeshed in Volkswagen Group politics?

In fact, Porsche has already sacrificed its soul to its corporate ambitions. Lest we forget, the Cayenne was originally "sold" to skeptical Porsche-philes as a way for the company to fund development of future sports cars– a story which now has a very different ending. Indeed, if the Porsche family's hunger to reclaim Ferdy's legacy wasn't so strong, would the Cayenne have even been built? Given that Porsche's SUV was developed in close cooperation with Volkswagen, given that the same will apply to the forthcoming Panamera, it's clear that this Porsche – Volkswagen nexus is already heavily influencing the type and character of Porsche's products. Where will it stop?

Bentley, Lamborghini and Bugatti brands were once independent, high-end automakers. Setting aside questions about significant product overlap (an issue which has not troubled the Volkswagen Group since it began its buying binge), why wouldn't a Porsche-controlled Volkswagen simply add Porsche to their corporate portfolio? Members of the Porsche clan who own shares in the family firm would become wealthy beyond their wildest dreams– unless, of course, this has been their dream all along.

If Porsche loses its independence, the sports car lover's best interests would not be well served (a sentiment Porsche has been expressing for as long as I can remember). As part of the Volkswagen Group, any decision regarding Porsche's product development would have to be made in relation to the rest of the group's needs, within the context of the existing bureaucracy. In other words, Porsche's design, engineering and marketing choices would be controlled by, gulp, committees. What's worse, Porsche's current path away from highly-focused manufacturer of sports cars, towards performance-oriented multi-genre automaker, would surely accelerate.

I firmly believe that Porsche should make the world's best sports cars, and that's it. I find it incredibly sad that one of the few automakers that never lost its focus, has. As far as the enthusiast community is concerned, Porsche's incestuous relationship with the Volkswagen Group makes the Cayenne look even more like the beginning of the end. Again, still, I hope I'm wrong.

[powerpress]
By on January 26, 2006

 I once showed-up for a job interview in the adult film industry. (It was an honest mistake.) Before I bailed, I complimented Mr. Triple X on the spectacular view over the Hudson River. He closed the blinds. "I'm agoraphobic.' When I asked the pornographer why someone afraid of open spaces would chose an office overlooking a large part New Jersey, he said "It's not enough to have a million dollars. People have to KNOW you have a million dollars." The obverse is also true. Losing $8.6b is bad, but it's worse if people KNOW you lost $8.6b. Just ask GM.

While GM's prospects have been on the wrong side of dire for the last three financial quarters, both analysts and the general public generally believed The General would limp back to port to make the necessary repairs. After yesterday's announcement, nobody's kicking ice around the deck anymore, waiting for the engines to restart. GM's financial report evoked the unmistakable sound of exploding boilers. Everyone on board now knows that the world's largest automaker is destined for a watery grave. GM CEO Rabid Rick Wagoner's pathetic bleatings about an [eventual] $6b reduction in GM's materials and labor costs sound about as convincing as "this ship is unsinkable."

Truth be told, GM's financials are far worse than yesterday's official report revealed. For example, GM took $3.6b in charges against earnings to cover Delphi's pension liabilities. Yes, well, GM currently reckons the final tab for the parts workers' pensions will be somewhere between the stated $3.6b and… $12b. GM also took a $2b charge against earnings for its much-publicized production cutbacks. Although most of this figure is earmarked for employee costs, those costs continue: the idled workers go straight into the UAW "jobs bank' (where they're paid full whack not to build cars). By the same token, the charge doesn't include the cost of buying-out a large percentage of these idled UAW workers' contracts. Plant write-down accounts for the remaining charge, but the amount stated won't cover the cost of writing down ALL the plants GM intends to close– or will be forced to close.

And none of this includes the damage from Rabid Rick's forthcoming billion dollar (plus) payoff to the UAW to maintain Delphi's union peace. Remember: the cash outflow from these events is out there… waiting. If GM had to pay these charges today, the company's bank account would be perilously close to its minimum operating cash level ($10b). In short, Rabid Rick's erstwhile turnaround strategy relies heavily on underwater bilge pumps. If GM continues to lose market share, if it doesn't create some financial buoyancy, Rabid Rick's crew will have bought no more than a six month reprieve before GM begins its descent into Davey Jones' locker.

File all of the preceding information under "Iceberg, Tip Of." Meanwhile, Wagoner's music-facing ceremony also failed to include any mention of the lifeboat: GMAC. Due to the looming prospect of bankruptcy, only magic bean salesmen appear to be interested in GM's loan arranging cash cow. (If GM goes belly-up, creditors would pig pile on GMAC.) And Rabid Rick didn't make any mention of GM's dividend payments, which show a bizarre, Rasputin-like ability to avoid necessary execution. Oh, and what of the ongoing SEC probe into GM's accounting practices? You can bet there are a lot of crossed fingers on THAT score…

As bad as GM's financial situation is, as bad as it's going to get, the bottom line is more about psychology than numbers. The entire world now knows The General is in deep shit. (When the President of the United States says he ain't gonna bail GM's ass out, a lot more consumers suddenly know GM's ass needs bailing.) An ever-increasing number of current and potential GM buyers are suddenly realizing that they could be left with worthless trade-ins, questionable warranty protection, limited parts availability and problematic service. At some tipping point, they'll simply stop buying GM products. The General's hull will fracture, and the ship will slip between the waves in triple-quick time. Ironically enough, fleet sales will be the first to go…

There's only one thing that could bridge the death accelerating perception gap between GM's potential/inevitable slide into bankruptcy and the [slim] chance that everything will [someday] be all right: GM CEO Rabid Rick Wagoner. THIS is the time for Rabid Rick to publicly announce a bold, clear, inclusive and unequivocal course to a financial safe haven. But no. Rabid Rick's refusal to say (guess? predict? estimate?) when GM will be profitable again is a PR obscenity. Hey Rick; news flash. If you say you don't know when, you're also saying you don't know how, and if you're saying you don't know how, it's time to jump in your golden lifeboat and go. It's not good enough to BE the captain; you have to ACT like one.

[powerpress]
By on January 24, 2006

 In 1817, Marie-Henri Beyle toured the Uffizi museum. Lost in a maze of galleries, the French novelist was paralyzed by indecision. His heart raced. His breathing was shallow and labored. His mind was completely disoriented. He couldn't move. Beyle eventually wrote about his experience under his pen name, Stendahl. In 1979, Italian psychiatrist Graziella Megherini coined the phrase 'Stendahl Syndrome' for people paralyzed by excessive choice. It's a concept bedeviling supermarkets, web pages and… carmakers.

For example, BMW's M5 is considered the ultimate sports sedan. And yet the uber-5er faces a bewildering range of operational decisions: three suspension, shifting and e-traction levels; two horsepower options and eleven gearbox modes. While a hard-core cadre of enthusiasts embrace the Bimmer's programmability, most newbies sit in the M5's driver's seat and… freeze. After overcoming their initial shock, they rely on one or two factory settings– or walk away thanking Gott in Himmel they own something a lot less complicated.

The M5's complexity reflects automakers' overly literal interpretation of America's favorite shibboleth: freedom of choice. Carmakers clearly believe that the more their products cater to each owner's personal preferences, the better. You only have to count the number of motors underneath a S-Class' seat– or tally-up the number of ways it can massage, heat or cool its occupant's hindquarters– to see the philosophy in action. And it's not just the luxury playas kissing ass. Even a humble Hyundai Elantra offers eight-way adjustable seats. This sort of multi-variable "feature creep" is spreading through the automotive landscape like electronic kudzu.

The personalization craze is based on a couple of false assumptions. For one thing, it assumes that people are different. As much as purple dinosaurs would have us believe otherwise, most humans share the same likes and dislikes. Put an Audi MMI interface in front of a wealthy, middle-aged man, and he'll use it (or not) the same way as any other wealthy, middle-aged man: completely ignoring 80% of its functions. If middle-aged men are your core clientele, confronting them with options they don't want or (worse) understand is an indisputably boneheaded idea.

The "options uber alles" movement also assumes that people enjoy experimentation. How do you decide when your M5's chair bolsters should deploy? Which suspension setting is best for the family on a road trip? Technophiles are comfortable "playing" with BMW's buttons until they achieve a suitable result. Regular Joes prefer to leave things as they are (rather than get lost inside an iDrive sub-menu). In both cases, psychological comfort depends on a precise balance between the amount of available choice and a person's ability to understand and evaluate the options. Today's luxury car salesmen spend twice as much time on customer deliveries– explaining functionality– than they did ten years ago. That's a sign of trouble, not progress.

Automotive Stendahl Syndrome isn't restricted to the human – vehicle interface. The industry itself is triggering buyers' instinctual freeze response. Customers must select from literally hundreds of models. Let's say a potential buyer restricts themselves to Ford products. They must then choose from one of eight brands: Ford, Lincoln, Mercury, Mazda, Volvo, Jaguar, Land Rover or Aston Martin. If they take a fancy to Volvo, they must then select a vehicle from eight models: S40, S60, S80, V50, V70, XC70, XC90 or C70. If they opt for an XC90, they then must decide on one of two engine configurations. And then there's the options list… Is it any wonder so many people buy a newer version of their existing whip, rather than face the prospect of Stendahl Syndrome?

Automakers looking to increase customer satisfaction and build their brands should buck the trend and implement a radical, counterintuitive strategy: less choice. First, they must only offer the options and features their core clients really need/want (erring on the side of minimalism). Second, they must make all in-car functions completely intuitive. Third, they must realize that customers are most comfortable choosing between two– count 'em two– options (e.g. heated seat: on or off). Fourth, they should never offer a customer more than three choices for adjusting an in-car device (e.g. driving character: comfort, sport or extreme).

Here's the really tough part: carmakers should only sell three models per brand. I know it sounds crazy, but the average luxury buyer has a better chance of naming the staff at their local Starbuck's than listing Cadillac's entire lineup. By the same token, back in the days when a VW was a Beetle and a bus, the automaker's image was far stronger than it is today. By simplifying their products and scything their range, carmakers would eliminate Stendahl Syndrome, making it easier for customers to choose and enjoy their car. Any way you look at it, that's got to be a good thing.

[powerpress]
By on January 19, 2006

 If I hear that "you can't cut your way to prosperity" line one more time, I swear I'm going to post a forty-eight page article about surgical cancer treatment. Listen up. General Motors sells a vast range of crap automobiles for less than they cost to make. The General has only one hope for survival: cut itself into pieces, jettison ALL the cancerous bits (products, brands, management, committees, supervisors, labor contracts, buildings, factories, suppliers, dealers, Gulfstream jets, the lot) and get on with the business of making the world's best vehicles at… wait for it… a profit.

It's increasingly obvious that this necessary (not to say inevitable) "restructuring" will have to wait until GM goes under. The General's generals made that clear when they reacted to Turnaround King Jerry York's suggestion that GM should deep-six or sell their Saab and Hummer brands. GM execs dismissed the idea with the PR equivalent of a derisive snort. Marketing Maven Monster Mark LaNeve, a man whose comments about GM's pricing strategy sound a lot like a snake-handler speaking in tongues, assured the press that "all GM's brands will eventually be profitable." Bet your bottom dollar? Done. GM has mortgaged its future on baseless brand optimism.

You wouldn't expect anything less from Rabid Rick Wagoner's "Iceberg? What iceberg? Oh THAT iceberg" administration. But what's up with ascot-clad industry doyen Jerry Flint? Forbes magazine's Main Man reacted to York's call for brand assassination with thinly-veiled scorn and happy-clappy cheerleading. In an anti-cull diatribe published by The Car Connection, Flint was contemptuous of Wall Street analysts in general and Kirk Kerkorian's proxy in particular. He excoriated them all with characteristic bluntality: "Well, they are just wrong."

Flint says GM will save Saab by federalizing German Opels, slapping on a Saab sticker and sending them stateside. He predicts that THIS plan will deliver the goods (as opposed to the previous brainstorm involving rebadged Subarus and touched-up Trailblazers). Yes, well, as the writer himself pointed-out back in '93, "For $1.5 billion, GM got a money-losing operation that needs a 30 percent sales increase to break even and maybe a 50 percent increase to be seriously profitable. For that money, it could have built a new line for Cadillac to make it a global contender in the luxury field. Instead, it has Saab." Which still hasn't made a dime for GM; ending '05 down $300m on increased sales.

Flint also sneers at York's proposed Hummericide. He lauds the new H3's sales and trumpets the fact that it's built on the Chevy Colorado platform, sharing its asthmatic five-cylinder engine. Why kill a brand that's on its uppers– you know, other than the fact that it's not profitable? On one hand, you gotta love a GM brand– ANY GM brand– with such a tightly-focused product portfolio. On the other hand, even casual observers might suggest that the whole Hummer shtick is a great landing in the wrong decade. Cliff diving sales figures for Hummer's ludicrous H1 and laughable H2 are only one indication that the brand may not have the brightest of futures. Gas prices are the other.

Flint's Hummeraphilia reflects his faith in GM's overarching strategy of platform sharing (a.k.a. badge engineering). The rest of his article defends Buick, Pontiac and Chevrolet against the executioner's blade on the basis that they sell a Hell of a lot of stuff, and that much of that stuff comes from the same assembly line. "If you eliminated the Pontiac Torrent, for example, there would be less volume for the factory that makes the Equinox and the Torrent. Kill Buick and you starve the factory making the Cadillac DTS and the Lucerne. The trick is to make distinctive models off the same platforms."

For a lesson on how it should be done, Flint points to the factory cranking-out the [sisters under the skin] Chrysler 300, Dodge Charger and Dodge Magnum. On the face of it, DCX' cost savings reaffirm Flint's case for cranking-out as much shit as humanly possible. But the strategy holds a hidden danger: homogeneity. The Dodge Charger may be relatively cheap to build, but the NASCAR Dad's sedan is hardly a "distinctive" departure from the Chrysler 300– or, for that matter, a solid sales success. Lincoln Mercury's disastrous dependence on tarted-up Fords is teaching The Blue Oval Boys that platform sharing and genre-killing brand-specific products are mutually exclusive.

Corner-cutting kills cars. And brands. And companies. Longtime pundits like Flint, who look at the ever-changing roster of products slated for GM's various divisions and conclude "The way up is to grow, not to kill", are just wrong. GM is clinically obese and chronically slow. Platform sharing just makes The General fatter and lazier. Yes, killing brands– and models– would be enormously expensive. But General Motors is diseased. One way or another, sooner or later, the surgeon's knife will swing down and do what must be done.

[powerpress]
By on January 11, 2006

 On Tuesday, the elephant in GM's boardroom removed its cloaking device. In the heart of GM's corporate HQ, in the middle of the Detroit auto show, Jerome P. York told GM's management to fall on their swords. More specifically, the man behind The Man Who Would Be King told The General's generals to prune their salaries, big style. Sure, Kirk Kerkorian's proxy also recommended killing brands, halving dividends, eliminating production capacity and a bunch of other turnaround type stuff. But his call for deep cuts in executive compensation was the exec's most chilling suggestion– at least to the people pulling the strings at the world's largest automaker. RenCen shuddered in horror.

Characteristically, the West Point grad was happy to put some hard numbers to his personal attack. According to York, GM's Board of Bystanders should work for "significantly less" than $200k per year. The company's top five officers should take a "significant" hit to their $7m per year salary. Management further down the "pyramid" should suck up double digit reductions, until "you got to the lowest levels in the plants and offices, where the percentage would hopefully be only a single digit number." In short, Mr. York seems Hell bent on turning on the lights and sending GM's lifelong party-goers home to their parents.

And why not? Obviously, Kirk "Mr. Las Vegas" Kerkorian doesn't have the juice to whack GM CEO Rabid Rick Wagoner and his Board of Bystanders and replace them with made men like York. Captain Kirk knows if he leaves it too long, it'll be too late: they'll be nothing left to plunder. So Kirk decided to kick 'em where it hurts. You know, wake 'em up a little. And just in case GM's fat cats were too stupid to feel the pain, York pointed to the time bomb ticking in the corner: "…the current cash burn rate of $24m per day would keep GM going for another thousand days or… roughly three years." Whew! "But of course that's if conditions remain the same as they were in the first nine months of 2005." Stop it Jer; you're killing me!

York's speech gave three reasons why GM's thousand day march to bankruptcy might take a bit longer (The General's new SUV's, the Chevy Malibu "renewal" and the Saturn Aura), and a more complete and plausible list of reasons why the gig could be up by next Friday (a weakening US economy, the cost of Delphi's union peace and downsizing production, the loss of GMAC income and market share). As far as veiled threats go, this one arrived buck naked on a white charger, and I don't mean the sexy new Dodge. In fact, it was so compelling it probably scared GM's top dogs for a full ten minutes.

Despite York's ability to spell-out GM's clear and present danger, his speech lacked sufficient animus to light a sustained fire under GM's corporate butt. It was couched as "tough love", suffused with compliments and reassurances. "We're not waiting to feast on GM's dismembered body," York as-good-as declared. "We're here because we want to see GM restored to its former glory– well, OK, profitability." Call it the Home Depot approach: You can do it. We can help. To which GM's Car Czar Maximum Bob Lutz immediately and publicly replied: I can do it and you can piss off. And leave your hands off my salary, Bub.

If only York hadn't pulled his punches. As TTAC's Deep Throat points out, York's estimation of GM's cash stockpile included money that isn't there: gains from the sale of GMAC, Saab, Hummer and anything else that isn't nailed down. Also, GM would be forced to declare bankruptcy well before it runs out of cash. Analysts say The General needs at least $10b on hand just to run the business (York uses $5b as an acceptable minimum). My Go-To Guy says GM currently can get its mitts on about $5b (above the $10b bankruptcy threshold), plus an equal amount from its VEBA fund (Volunteer Employees' Benefits Association, whose use is restricted). So, at $24m a day, GM's nest egg will be gone in 400 days.

That's IF things stay on an even course. York's doomsday scenario was bleak, but it didn't include the fact that a new pension funding rule could wipe out GM's entire hoard. Or the cataclysmic effect of recent price cuts and incentive reductions on GM loyalists, who are already so far backwards on their loans they can't afford a new car. Or what happens if fleet buyers– 25% of GM's business– smell bankruptcy. Or what's going on with the SEC probe. Or, let's face it, any number of nasty things currently hidden and vaguely hinted at in York's "aside" calling for greater transparency. When you think about it, York's audience may not know the half of it– literally. Clearly, they should.

[powerpress]
By on January 10, 2006

 If you're visiting the Detroit auto show, do me a favor. Go to the GM stand, find the new Chevrolet Tahoe Dual-Mode Hybrid SUV and ask the moto-bouncer to pop the hood. See if the thing's got a hybrid engine. (Ignore the engine cover; a few months ago, GM put a fake plastic cover over a pushrod powereplant to convince AutoWeek they were driving a hybrid prototype.) If The Man refuses to accommodate your request, try to decide if he's hiding something. Either way, let me know. 'Cause I'm beginning to think that Buickman is on to something…

If you don't know Buickman (a.k.a. Jim Dollinger), it's not for lack of trying. Since '94, the Michigan car salesman has dedicated his life to promoting his "Return to Greatness" recovery plan. He's brought his campaign to salesmen, customers, stockholders, board members, union members, dealers, the press, the web (www.generalwatch.com); anyone and everyone who'll give him the time of day. Now that GM faces the final curtain, Buickman has pretty much given-up on his quixotic quest and transformed himself into a whistle blower, or, if you prefer, a professional thorn in the side of GM's masters. Less charitably, Buickman is now a full-blown GM conspiracy theorist.

Buickman believes a cabal of international financiers is driving GM into bankruptcy so they can buy it up for "cents on the dollar". If I tell you that Buickman identifies the main culprits as the Rothschilds, a favorite villain for folks suspecting the secret implementation of a non-democratic "New World Order", your mind may turn away from the details of his allegations. As would mine– if it weren't for that damn engine cover. Even though I don't buy into that whole "World Bank as KAOS" shtick, I keep wondering what kind of company would create a hybrid head fake. Whose idea was it? Who knew about it? More to the point, if GM's willing to lie about the availability of hybrid engines, what else are they up to?

On the face of it, Buickman's allegation of corporate suicide don't square with counterfeit hybridism; if Rabid Rick Wagoner wants to jam GM's yoke forwards, why pretend The General's got the magic engine elixir? Of course, whenever you enter Conspiracy World, every objection has an equal and opposite explanation. In this case, Buickman maintains that Wagoner wants the world to think he's trying to save GM, even though he isn't. Plausible deniability. And then Buickman brain dumps a mountain of innuendo, from Wagoner's bankruptcy-proof pension to the company's $4b FIATsco.

And that's where it starts to get weird, because Buickman ain't just whistling Dixie. Why would GM's Board of Bystanders let Wagoner create a bankruptcy-proof pension if, as he claims, "we don't have a plan for bankruptcy"? Why did Merrill Lynch immediately buy GM's abandoned FIAT stock, given that Merrill's CEO also serves on GM's Board? Furtive Jewish bargain hunting bankers or no, Buickman's right: there are a lot of dubious goings-on over at RenCen involving the disposal of GM's assets.

And then there's the union health care 'giveback.' When we first heard of the deal, we were surprised to learn it established a $3b health care fund for the United Auto Workers (UAW). Aside from the obvious duplicity involved (when is a giveback not a giveback?) and the devious timing (Wagoner made the announcement on the day GM revealed its third quarter losses), why did GM fork over a lump sum to the UAW? Why not just pay out for increased health care coverage from The General's corporate coffers? Buickman points out that the UAW receives a 20% "administration fee". If true (neither GM nor the UAW will confirm the report), that's a $600m 'tip'. That's… scary.

And then Buickman says that the UAW and GM have agreed to stage a union strike later this year to destroy the company, so that the nefarious forces responsible can live happily ever after. As Buickman can't provide any evidence for his GM-killing, nest-feathering conspiracies, sorting fact from fantasy is nearasdammit impossible. Applying Occam's razor (the simplest explanation is most likely to be correct) doesn't help when you're forced to explain GM's endless F-ups by choosing between gross incompetence and Enron-style shenanigans.

The best I can do is reference Martha Mitchell. Mrs. Mitchell's husband John was the US Attorney General under Richard Nixon. Mrs. M would call Washington reporters in the middle of the night with bizarre tales of illegal activities: a secret enemies list, South American assassinations, break-ins, wiretaps, the FBI Director wearing a dress and more. By the time these reporters realized Mitchell wasn't a crazy drunk, her husband was in jail for conspiracy, obstruction of justice and perjury. In other words, while it's easy to dismiss Buickman's rants as the sour fruit of a man scorned by GM's Boy's Club, being bitter doesn't make a man a fool. Or, come to think of it, wrong.

UPDATE: The Chevy Tahoe hybrid has been removed from the floor of the Detroit Auto Show for 60 Minutes spinnery. We await confirmation of its powerplant…

[powerpress]
By on January 9, 2006

 I don't want to be the one to throw cold water on Detroit's billion dollar beauty pageant, but someone's got to do it. The workers' demonstration outside Cobo Center turned out to be a damp squib (probably because the workers in question enjoy a union contract that guarantees them job security, a comfortable salary and comprehensive health care). The mainstream automotive press isn't about to bite the hand that RSS feeds. So I'll step into the breach with a simple statement: the last thing Detroit needs right now is a bunch of new cars.

Once upon a time, the Detroit auto show was The Detroit Auto Show, not some gussied-up international flying circus. Carmakers showed off wild, inherently stupid concept cars that would never, EVER be built and the latest update to their showroom models. And then everyone headed off to open bars and hooker-laden hospitality suites to do what comes natural to middle-aged white men. Now the suits are serious and the web is alive with the sound of clickery, as even industry addicts struggle to keep up with dozens of new models headed for the showrooms. While it's easy to get caught up in the buzz, I'm here to say that all this product overkill will, as the Brits say, end in tears.

Of course, niche marketing mania already has a lot of shareholders crying– should anyone be bothered to notice. GM and Ford have wiped off tens of billions from shareholder value in the last year alone, and yet everyone is happy to believe that spending hundreds of millions of dollars building and showing off a fantastic over-abundance of new products is a sign of corporate health and hope. Even Daimler-Chrysler-Mercedes-Dodge-not-so-SMART, a company that missed a date with the executioner by the skin of the [Hail Mary] 300C, is happy to move with the gluttony-as-God groove. Detroit's submersion under a red ink tsunami ought to tell folks in no uncertain terms that this "car of the minute" shotgun approach is an abject failure, even if Detroit's titanic deck party says otherwise.

While GM unveils the latest Buick van (a vehicle that should have been called "Last Days in the Bunker" instead of "Enclave") and declares a corner turned for a dead brand waiting, Toyota reveals a refreshed sixth gen Camry with a hybrid engine option, and keeps grinding the competition into the dust. The makers of America's best-selling sedan (for the last four year's running) "get it": you sweat blood and spend billions to get customers into a new vehicle, and then you sweat blood and spend billions to bloody well keep them there. Lexus' updated eight-speed LS technobarge will keep their customers away from Mercedes dealers. Infiniti's non-radical G35 concept car and tweaked FX and M models will do the same.

The Big Three are neglecting their core models in favor of entirely new models that look like nothing else in their portfolio (e.g. the Lincoln MKX). While the Japanese are not adverse to growing and selling a bit of strange fruit from time to time, they refine and refine and refine their existing best-sellers, minting money and growing market share. Screw GM's new crossovers, how's the new Impala and big Caddy? Forget about the Ford Edge, how's the new Lincoln LS– I'm sorry, Five Hundred? Crap, really. Nothing but a big soft target for rival automakers coveting their audience. The fact that Ford and GM's "new" SUV's won't offer a world-class hybrid powerplant for another year is nothing less than a disgrace.

A while back, the "ten day car" was the talk of Cobo Township. The idea: build a customized version of a mainstream model and deliver it to the buyer in ten days. At an auto show conference, consultant Michael Robinet declared the concept dead. At the same time, The Vice President of CSM Worldwide acknowledged that dealer profits are increasingly dependent on aftermarket conversions. Hel-lo? As the increasing number and sophistication of Camry options indicates, the ten day car concept is far from dead. And money, like energy, is never lost; it just changes form. The dealer profits are a clear indication that mass customization IS the future– not the explosion of new models. In fact, its realization could help save Detroit's automakers from oblivion, maintaining what little customer loyalty remains.

Think about it. Check the history of the sales charts, where the same models appear again and again. That's because the vast majority customers don't want a NEW car. They want a BETTER car. As you can plainly see at The North American International Clusteryouknowwhat, Detroit seems resolutely determined not to give it to them. So party on guys. A reckoning is on its way.

[powerpress]

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