We have a rule in my house: no sugar cereal until you eat your "good" cereal.  By the time the girls have inhaled a bowl of non-sweetened Cheerios, Weetabix or Rice Krispies, their appetite for kiddy crack is destroyed or diminished.  Of course, that doesn't stop the bun fight over any promotional toy that dares hide at the bottom of the box. I reckon a Ford marketing maven saw his kids ripping apart a box of Sky High Blood Sugar Flakes to get at a wind-up plastic spaceship and thought "Why can't adults display the same animal enthusiasm for a Ford Fusion?"  A promotion was born.  On Sunday, parents who buy their Fruit Loops, Apple Jacks, Frosted Flakes or Cocoa Krispies from Target will find a free Ford Fusion Hot Wheels model inside.  I rang up FoMoCo's point man Monte Doran to get the skinny on childhood obesity– I mean whether Ford will slap cash on the hood if the models don't move by September.  No seriously, I wanted to know if this was the beginning of a shift away from traditional marketing.  Hey, if you don't ask…

According to GM, happy days are here again.  Profits are up, costs are down and the company’s turnaround plan is on track.  The automotive media have swallowed The General’s spiel hook, line and sinker.  The financial markets are ready, willing and able to view The General’s second quarter losses through the automaker’s prism of perpetual positivism, sending GM’s stock price to its highest level since last October.  Well folks, it ain’t necessarily so…

First, let’s not forget that a $3.2b dollar loss is a $3.2b dollar loss.  Sure, if GM hadn’t bought out 34,410 UAW workers’ contracts, it might’ve made a $1.2b profit.  And if my grandmother had wheels, she’d be one of those trolley cars that GM removed from city streets in the 40’s.  More to the point, GM’s US market share is still in decline, down 3.1% from last year, to 24%.  Until and unless that changes, the “one time charges” related to production downsizing won’t be enough.  Or, if you prefer, they signal the beginning of a trend, not the end.

So if things are so bad for GM, where did all the profit come from?  As TTAC’s Deep Throat has pointed out, GM’s public promise to wean itself off fleet sales, to boost residuals and transaction prices, isn’t being born out at the sharp end.  In the second financial quarter, GM sold at least 120k high content units to rental fleets.  The General also sold their new LWB GMT-900 SUV’s to dealers, which carry fat margins.  [NB: In this case, “sold” means shipped to dealers.]

And then there’s accounting. For the second financial quarter’s statement, GM made some pension calculation adjustments, reduced their warranty charge (lowering their warranty reserve fund on the supposition that their vehicles are getting better), booked some workers costs (which previously appeared as expenses) against previously charged restructuring costs and benefitted from a strengthening Canadian dollar. 

In fact, if not for the GMAC dividend of $900m, GM’s cash position wouldn’t have changed.  So while it looks like The General’s making earnings, cash generation from operations isn’t getting better.  GM still has an inventory problem at its dealers, which isn’t going to go away without massive incentives.  And thanks to hundreds of thousands of “zero percent financing for anyone with a pulse” deals, the loan rate buy down is probably on the order of several thousand dollars per vehicle. 

Pistonheads have a better grasp of the situation than the bean counters.  They know GM has failed to produce a runaway best seller (or sellers) to replace their [once] hugely profitable SUV’s.  They know that it’s business as usual down at their local Buick, Chevy, Cadillac, Saab, Saturn, GMC and Pontiac dealer— at least from a product point of view.  From a financial perspective, there’s been a huge change.  Again, GM’s dealers have been writing bad paper; lots and lots of bad paper. 

It’s Mitsubishi redux.  The Japanese manufacturer’s US fortunes foundered on the rocks of easy credit, when hundreds of thousands of borrowers defaulted on their loans.  There is every reason to believe GM’s bad paper will also spontaneously combust, leaving dealer lots stuffed with vehicles no one wants and a big old hole in their accounts receivable.  The practice may appear better than offering large discounts on slow selling GM products.  But if you think about the implications of writing bad loans in the medium to long term, it isn’t. 

There are other dark clouds on the horizon. GM watchers seem to have forgotten about bankrupt auto parts supplier Delphi.  While most industry wonks discount the possibility of a strike– now that GM’s paid thousands of Delphi’s UAW workers not to work– there’s still an August drop deadline for union – management agreement, and no agreement.  At the same time, we hear ominous rumblings that other GM suppliers may not make it out of Chapter 11. And while analysts have hip-hip-hoorayed GM’s job cuts and plants closures, they would do well to remember that reducing production in the third financial quarter will create a significant drop in revenue. 

Meanwhile, the list of assets GM put on the line for its new secured credit facility should give GM boosters pause for thought: “certain” North American accounts receivables, unspecified vehicle inventories, the entire Saturn brand, its Canadian operating unit (plants and property) and 65% of GM de Mexico.  In short, The General has wandered into the pawn shop with a large list of assets to secure credit it once enjoyed on the back of its income.  Add GM’s dicey cash position and the situation doesn’t fill me with $30 a share confidence in the company’s future.  But hey, that’s me.

The real bottom line is that GM is a car maker.  There’s only one way out of their current death spiral: produce enough vehicles that people want to buy at a price that makes the company enough profit to stay in business.  It still ain’t happening.   

When I ordered my first Ferrari, I spent entire nights dreaming of rust, mechanical failures, stratospheric repair bills, cliff face depreciation, uncontrollable oversteer, towering monthly payments and long, expensive separations.  No wait; that was after I bought it.  Before the F355B graced my drive, my obsession had no hard edges– or time limits.  In fact, it got to the point where I considered taking out a no contact order on my imagination. So I understand Dave Plews' plight.  The London-based web designer wants a Veyron so bad he's gone a bit loopy. He's set up a website to try and raise money to buy the big Bug, selling lottery tickets to cars he doesn't have and mechandise I don't think you'd want. I called Dave to try to get a handle on the logistics of this enterprise, and discovered a man possessed is a man prevaricating. Still, TTAC wishes "Supa Dave" luck. If he succeeds, I'll gladly chip in for one of those pine tree air fresheners. 

With only 750 American gas stations providing the corn juice for flex-fuel vehicles, there's more E85 hype than E85.  Which is the point collegiate road tripper Mark Pike and his cohorts over at kicktheoilhabit.org decided to make by attempting an E85-only trek across the North American landmass in flex-fuel Crown Vic supplied by the bad mo fo's at FoMoCo.  In the PR sense, the trip's a hit.  Pike's Vic has garnered a bushel of free publicity for the supporters of fuel coming from Billy Ford's "heartland."  Of course, the socio-polticial issues surrounding E85 production, transportation and provision are only slightly less complex than the home assembly instructions for a Bowflex Versatrainer. [Read Mark Hasty's post on E85 economics on tomorrow's TTAC.]  A quick call to Mr. Pike revealed that the flex-fuel campaigner is a bit of a piker in terms of the fine print, but props are due.  The most socially responsible thing I ever did during my college vacation was making sure that my empties were placed in a proper trash receptacle. 

According to BMW’s ad for its M products, “history and compromise cannot be made at the same time.”  Huh?  What about The Missouri Compromise, the Camp David accord and The SALT treaty?  The headline’s patent absurdity is capped by the copy’s intellectual inanity.  “Nothing about our M cars is a compromise.”  Anyone familiar with automaking knows it’s nothing but compromise: design vs. packaging vs. performance vs. technology vs. price vs. regulations vs. cost vs. time vs. internal and external resources.  To suggest otherwise isn’t just wrong, it’s nuts.  A very strange kind of nuts… 

Obviously, the German automaker fancies itself a company apart: the last great independent automobile manufacturer. Which is almost true and fair enough.  But it’s one thing to weave a less tangled corporate web than your conglomerated competitors, and quite another to advertise the fact.  It’s hard to imagine a potential Zephyr, 9-3 or LS430 buyer opting for an equivalent Bimmer simply because Lincoln, Saab and Toyota nestle within larger corporate structures.  On the sharp end, it’s “don’t know, don’t care.”

Of course, BMW’s latest ads are designed to make you care; to explain how the company’s independence ultimately produces ultimate driving machines.  Quite apart from the ads’ creepy subtext (Aryan purity produces purebred automobiles) and the strange non-sequiturs born of megalomania (“It is a high-performance vehicle that actually exists in the real world”), it’s simply not true.  The dreaded iDrive mouse-driven multi-media controller proves that BMW’s corporate independence doesn’t guarantee “the pursuit of great ideas.”  More to the point, BMW no longer produces “the ultimate driving machine.”

At the risk of being over-literal, which BMW model would that be?  Yes, the M3 is a truly magnificent motor, well worth a seat in the Driver’s Car Hall of Fame.  But anyone who’s driven a Porsche 911 or Ferrari knows the M3 doesn’t even play in the same league as these phenomenal foreigners.  You could argue the point on price– the M3 offers maximum pistonhead pleasure for a more accessible entry fee– if BMW let you.  Their M ad clearly states “We refuse to subject them [BMW’s M cars] to money-saving shortcuts or mass production.” 

In truth, enthusiasts have known for over a decade that BMW has lost the plot.  The company’s campaign to expand into every product niche extant has sacrificed their cars’ unique selling point on the altar of growth and profit.  How can an SUV– any SUV– be an ultimate driving machine?  Although you can credit the X5 for at least trying to satisfy the brand proposition, the X3’s execrable ride and handling demonstrate the company’s complete lack of commitment to their creed.  By the same token, the rest of BMW’s product line has become heavier in weight and lighter in steering.  The 6-Series is a travesty.

Look closely and the evidence of BMW’s ultimate brand betrayal is everywhere: the fitment of stiff run-flat tires (that tramline on smooth pavement), disastrous ergonomics (what happened to the driver-angled console?), compromised visibility, over-complicated driver interfaces (column-mounted shift knobs, starter buttons and the world’s worst gearbox); even Chris Bangles’ fussy exterior shapes reveal a distinct turn away from the company’s former focus on driver satisfaction.  The fact that BMW hasn’t built a convincing answer to Porsche's Boxster in ten years tells the tale.

And now BMW is putting Dr. Norbert Reithofer at the helm.  Dr. R is Bimmer’s production go-to guy, the man who ensured that the company’s factories in South Africa and Spartanburg, South Carolina created profitable products worthy of international export.  In his treatise “The Fascinating Power of Production – Worldwide Competence in Producing Premium Products,” Dr. R touted the fact that Bimmer’s production process meant that luxobarge customers could have it their way, choosing from variations that “amount to 10 to the power of 17- that is 100,000,000,000,000,000, which is an incredibly high number.”  Yes it is.  It’s also a very revealing one.  Instead of boasting that BMW makes one ultimate driving machine, Dr. R took pride in 100 quadrillion possible variations.

I suppose it only makes sense.  When a car company loses focus, it can either accept the fact that it’s lost its way and begin the long, painful and expensive process of returning to its roots (wither Cadillac), or it can widen its original remit to justify– if not celebrate– it’s more expansive agenda.  BMW's ad campaign and Dr. R’s appointment tell us which way BMW’s wind is blowing.  They formalize Bimmer’s hugely successful growth-oriented philosophy, and ensure its continuation.  Never mind that BMW no longer “sticks to the knitting.”  The company has never been so profitable.  

And yet, history will record that BMW’s decline began even as it entered its most vigorous period of growth.  Ironically enough, the automaker’s fate was sealed years ago, when the company compromised it core value in the pursuit of profit.     

A new TTAC podcast feature is born: a conversation with a car salesman about what's going down on the front line.  We begin with my go-to Porsche guy, Kirk Stingle.  Kirk's been selling Porkers for 10 years, establishing a large fan base of devoted buyers down in Southern New England.  When the Cayman S first arrived at the permanent construction site known as Inskip Porsche, Kirk told us that the mid-engined tin top confused a lot of Boxster and 911 buyers. According to the man with the million dollar smile, there's still a bit of a bun fight amongst the models.  And it's getting worse, what with a smaller-engined Cayman and bigger engined Boxster due soon.  But who cares?  Sales are up across the board. You pays your money, you gets your Porsche. 

On the same day TTAC published Sajeev Mehta's less than flattering review of the Lucerne, a Buick spinmeister emailed the site to offer a cross-Canada jaunt in said sedan.  To their credit, GM's Zen division (Beyond Precision?) weren't daunted by the Divine Mr. M's mauling of their quiet tuned car.  The offer stood.  So Sajeev gathered-up his wits– and his Mom– and flew off to sample the Strongbad-like millieu known as a GM junket.  Sajeev's willingness to confront his, um, confrontees illustrates the writer's spirit of adventure and his dedication to the truth.  That's one of the key reasons the Houston-based writer has quickly become one of TTAC's core reviewers. The other is… style.  Time to meet and greet the man who rolls in American splendor.    

As a kid, I instantly "got" James Bond: look cool, kill the bad guys and the girl's yours.  I was a little vague about what you did with her afterwards, but the British secret agent still made perfect sense.  Dean Martin's riff on 007, Matt Helm, was a different story.  As far as my crew was concerned, the American booze hound super spy lech didn't even qualify as a junk Bond.  In fact, I got the same feeling watching Matt Helm movies as I did I seeing local Catholic boys dress up like girls for their "father."  And while Bond's Aston was the business, I didn't know until this morning which wheels Matt Helm graced with his cinematic presence.  Well, here it is: a George Barris modified 1966 Mercury station wagon.  Figures.  A station wagon is about as cool as The Carpenters, maybe, no, definitely, less.  My mom drove a station wagon.  (There's that icky thing again.)  Turns out the Volo museum snagged this formica and plexiglass shag palace for their collection.  Lucky them.  I rang up the museum and spoke to their Director about Dino's Sex Wagon and the museum's more, um, salubrious whips.  

Frank Williams came to TTAC's attention after he cc'ed us on an email to Car & Driver.  The long time C&D reader was all het up about Brock Yate's summary execution– I mean, dismissal.  Reading Williams' take-no-prisoners diatribe against the banal buff book, I immediately recognized Frank as a kindred spirit: a car guy with fire in his belly and an itchy keyboard.  Since his TTAC debut, Frank's gone on to become one of our most prolific and entertaining talents. Today's anti-nostalgic deconstruction of a 70's icon offers yet more proof that the net is giving voice to a whole new generation of automotive writing talent– even if it's not exactly a younger generation.  And speaking of voice, here's Frank's…

I’m not a big fan of segregation.  Obviously, US car culture splits into distinct niches: hot rodders, low-riders, urban gangstas, tuners, etc.  Equally obvious, these niches attract adherents from specific ethnic groups.  But just as communities throughout my home state meet down at the markets as they root around for fresh ingredients for their ethnic cuisine, there is an element of respect and inter-mingling between these petrol-powered fraternities.  Anyway, I don’t get the male – female automotive divide.  I seriously doubt that there’s a female automotive perspective– even when it comes to child safety and minivanning.  So when I saw a press release about a new female-oriented automotive website, I decided to do what it said on the tin: ask Patty.  Turns out “Patty” is a male invention and the company producing the website makes its money sensitizing dealers to “women’s needs.”  I quizzed Jody Devere, President of www.askpatty.com, about the statistical justification for the segregation.        

The moment I dropped the hammer on the Porsche Cayman S, an entirely unexpected emotion welled-up inside: fear.  I was holding the wheel of the world’s best sports car on a perfectly-groomed country road and I couldn’t fully commit to a corner.  I wasn’t afraid of crashing— the Cayman is far too accomplished and forgiving and electronically mindful for that.  I was afraid of the unknown.  What if some dumb ass pulled out of a hidden drive without looking?  What if a child’s bike suddenly appeared just beyond the apex of a turn?  My sightlines were good, but my nerves were shot.  I suppose that’s what happens when you spend too much seat time in a Honda Odyssey.  

I know, I know; there's been a lot of Ford and GM bashing on this site as of late.  All of it deserved.  As long as car companies make crap cars– and that's ANY company making ANY crap car– The Truth About Cars is ready, willing and able to provide a no-holds-barred reality check. But here's the important bit: every TTAC writer would love to see the former Big Three produce the world's best automobiles.  It literally pains us that they don't.  If and when America reclaims its mojo and produces world-beating product, be it a Chevrolet Corvette or a Ford Freestyle, we will give its maker its due.  To wit: Lieberman likes the Freestyle, Big Style.  [His review goes up tomorrow.]  It's both sad and symptomatic that Ford doesn't share JL's enthusiasm enough to dig down and make something more of a potentially great vehicle.  By now, Toyota would've been busy on gen II.  Will this misery never end?  Oh, and if you could please suggest a photo caption in the comments, I'd be much obliged. 

Relax.  The news that GM stockholder Kirk Kerkorian has been playing footsie with Renault/Nissan doesn’t represent some kind of paradigm shift for GM or global capitalism.  When assessing Kirk’s secret plan— selling a minority share in GM to the Franco-Japanese automotive alliance— remember whose interests The Quiet Lion serves: his own.  This is not about GM.  It’s about Captain Kirk’s spectacularly bad investment in the world’s largest automaker.  But don’t take my word for it.  "Sometimes the news in itself is already the purpose," DaimlerChrysler's CEO announced upon hearing the news.  In other words, multinational automotive conglomerator Dieter Zetsche thinks Kerkorian is just talking up GM’s stock price.

Lest we forget, the octogenarian investor has lost about a billion dollars since he started buying up GM stock.  (I don’t care how many billions you’ve got stashed in Swiss bank accounts and offshore trusts, one less thousand million has GOT to hurt.)  Anyway, mission accomplished.  Despite the fact that GM-friendly Wall Street analysts have just celebrated GM getting smaller, the investment community is, let’s face it, a size queen.  The news that Captain Kirk has been busy whoring GM to dubious foreigner carmakers— I mean discussing the possibility of GM entering into a mutually beneficial strategic alliance– sent GM’s stock price soaring.  On Friday (always a good day to hit the market with a surprise), GM shares closed at $29.79 up $2.35.  

On the other hand, if Wall Street catches wind that Kerkorian is unloading a chunk of his 9.9% GM shareholding, the company’s stock price will swan dive.  So it’s not entirely impossible that Kirk’s play is what it seems: an attempt to save GM’s bacon.  And yet, on the face of it, a GM – Renault/Nissan hook-up makes no sense.  Even The Detroit News’ resident optimist sees no benefits to the deal.  “GM has spent the past 15 years pushing to achieve what the megadeal would purport to achieve," Daniel Howes wrote yesterday. "Economies of scale in purchasing, common manufacturing and product development processes, global leadership in developing world markets.  These megadeals seldom — if ever — deliver the ‘synergies’ their highly paid outside architects say they will.”  

Of course, there is one important benefit to Captain Kirk’s bold moves: cash.  If you take a close look at what’s been proposed, Kirk wants Nissan/Renault to partner up, then “seal the alliance” by buying 20% of GM’s common stock for $3b.  Three billion dollars doesn’t seem like a lot of money in the GM scheme of things.  It’s almost a billion less than GM CEO Rabid Rick Wagoner recently spent paying 37k union workers not to work.  But it’s not chump change either— especially when you consider the fact that GM is running on fumes.  Remember the extension of GM’s accounts payable and the new secured line of credit?  Cerberus does.  

The [fire] sale of The General’s GMAC finance unit to Cerberus Capital Management is the last bit of family silver The General has left to flog.  And it’s only two credit downgrades away from implosion.  Without GMAC cash, the show’s over.  In fact, it may already be too late.  GM’s vehicle sales are in the doldrums, there’s no Hail Mary in the pipeline, market share (dealer income) has gone south and a bunch of humongous downsizing bills are coming due.  Not to mention the possibility of an August strike at GM’s mission critical ex-subsidiary, bankrupt parts supplier Delphi (yes that).  Avoiding Delphi's cyanide pill may require another billion or so from GM’s threadbare corporate pockets.    

If you doubt that GM could be so cash-starved that The Quiet Lion would be allowed to sell the company’s soul to Renault/Nissan, consider this.  TTAC commentator Finance Guy recently alerted us that GM is offering its zero percent new car financing deal to anyone with a pulse.  More specifically, FG has resurrected 10 dead deals.  No wonder: GMAC will now buy down on credit tiers A to E (prime to non-prime buyers).  Cutoff is around a 590 FICO.  Typically people in that range can’t get a new car without a substantial down payment.  Obviously, GM is opening the floodgates.  There’s one word for that: Mitsubishi.  The Japanese carmaker’s US fortunes foundered on the rocks of easy credit, as hundreds of thousands of come-on-down loans blew up in their face. 

In short, the idea that GM would contemplate joining a Renault/Nissan “alliance” is a sign of the General’s desperation, not its ability to seize an international opportunity (whither Fuji, Fiat and Suzuki).  Viewed from another angle, depending on what the Franco-Japanese contingent want for their money, you might even say that GM’s breakup has already begun.  In any case, it’s yet another one of the bizarre episodes we’ve been predicting for some time: the end of days at GM.   

With all the talk in these parts about what it means to be an American automobile manufacturer, I couldn't resist Chrysler's press release about arranging some 200 employees to spell out the words "O Say, can you see" (complete with human punctuation).  Chrysler Group Spokesperson Jodi Tinson stepped into the podcasting breach, challenging my de-PR-speak abilities and facing the inevitable questions about Francis Scott Key's magnum opus (set to a bawdy English drinking song) and Chrysler's Americanosity.  The two-legged vowels and consonants will assemble on the front lawn of DaimlerChrysler's Auburn Hills Headquarters on Friday, July 7 during morning drive time.  According to the press release, the employees will sing the national anthem loud enough to be heard across I-75.  Here's hoping the DUB car show isn't rolling into town at the exact same moment the crooning begins. 

This weekend, a conspiracy of  VeeDub owners will assemble in Roswell, New Mexico for the seventh annual New Beetle “2K Car Show Weekend."  According to VW PR flack Clark Campbell, this bizarre intersection of dead aliens and live Bug owners began with a VW ad claiming that the new Beetle was reverse-engineered from an alien spaceship.  Needless to say, TTAC has uncovered previously classified government documents that prove that the commercial was created by an ad exec who'd been kidnapped by aliens, given the usual complimentary colonoscopy and returned to earth to spread disinformation: an ad that claimed that the new Beetle was reverse-engineered from alien craft to make people think it wasn't reverse engineered from alien craft, when, of course, it was. You know, this stuff practically writes itself. How spooky is that?