Ford is jumping on the recently-signed Car Allowance Rebate System (a.k.a. Cash for Clunkers) to lure customers into the showroom. Ford’s home page includes a highlighted link to the “Recycle Your Ride” program. A prospective Ford buyer can enter details about their current vehicle into a drop-down menu system and quickly see if it qualifies for scrappage. They can also discover which Ford models earn the $4500 or $3500 federal voucher against the crusher candidate. So far the Dodge, Chevrolet, Honda and Nissan websites have nothing. Toyota and Volkswagen both offer primitive informational pages, but nothing to match the sophistication of Ford’s effort. You would think the government-owned auto companies would be all over the government-run incentive program. But no. And get this: KBB’s man tells the New York Times that the consumers might be better off without the vouchers . . .

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TTAC commentator Aren Cambre writes:

I have a question about my 2002 Nissan Maxima. A while back, I had the battery disconnected for a few hours. After reconnecting, the car forgot how to maintain idle right after starting: if I don’t nudge the gas pedal for several seconds after starting, RPMs fall to 0. Internet research is conflicting. Some say it will heal on its own, others say dealer-only repair.

It’s been a few months now. How do I fix this? Is it really dealer only? If I don’t fix, will I hurt the car? (I don’t mind nudging the gas pedal–kind of like when I set the carburetor choke on my ’74 Nova.)

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Despite the backbiting and overextension engendered by round one of the Department of Energy’s retooling loans, another $25 billion could be headed down the pipe. Automotive News [sub] reports that a second dose of retooling loans (the first having launched our Bailout Watch series) is headed towards a vote this weekend. The DOE’s loan budget would be doubled under the current climate change bill sponsored by Reps Henry Waxman (D-CA) and Ed Markey (D-MA). But before Ford starts counting its (non-bailout) chickens, remember this: “no comparable bill has been introduced in the Senate, and similar legislation was shot down in the Senate last year.” And with luxury firms (Tesla), foreign transplants (Nissan) and the proudly bailout-free (Ford) topping the list of tranche un, don’t expect a groundswell of support for tranche deux.

Ford may “just say ‘no’” to TARP (Troubled Asset Relief Program) money that puts them under the control of the PTFOA (Presidential Task Force on Automobiles), but the other wise acronym-aversive automaker doesn’t mind bellying up to the DoE’s (Department of Energy) bailout buffet. Bloomberg‘s mysterious “people familiar with the plans” say Ford, Nissan and Tesla will all dine upon  loans from the “original” bailout package: the $25 billion feast created by the 2007 energy bill. The loans were intended to “help automakers boost fleetwide fuel economy.” In February, the DoE said they’d received 75 applications, totaling $38 billion. According to Bloomies, Ford, Nissan and Tesla are the first to get the handouts loans.

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“A new order is emerging where the Detroit companies may no longer be the volume leaders in their home market,” says GT’s Kim Rodriguez in a release [via PRNewswire] which spins the news as an opportunity for US suppliers. The upshot is that even if the Detroit firms return to profitability by 2012 (hello, Vegas?), suppliers will have to diversify because expansion in US production is coming from the transplants. VW and BMW plan on doubling their US production capacity in that timeframe (to 1m units) while Toyota, Honda, Nissan and Hyundai will collectively add another million units. GT expects other firms to add another 200,000 units of production to the US mix by 2012 as well. Meanwhile, Chrysler and GM are shuttering plants and shedding capacity while taxpayers bail them out in the name of the “American automotive industry and manufacturing base.”

Joe from Boston writes:

Here’s what happened to my 2003 Murano with 145k on the clock: the “service engine” light came on. So I took the car to dealer. They said the oil was low, and they put car on computer and said it needs a new engine, for a mere $7,000. I thought they were joking: they claim the computer says the engine is failing internally and there is nothing they can do about it. I had the oil changed and by my calculations, the car is consuming about a quart of oil every 1,400 miles.

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I love technology. I was an early adopter of the microcomputer (8” SS/SD floppies, anyone?). I spent way too much on a TI calculator in college because it could *gasp* do square roots. My car has rain-sensing wipers, self-leveling headlights and power headrests. However, spending a week with an Infiniti FX35 made me wonder if, just as electronic calculators have given us a generation who can’t do simple math in their heads, the technical fripperies in our cars are going to produce a generation of drivers who can’t drive.

Cleveland Business News reports that ChryCo will cancel its contract with Cummins for diesel engines slated to power its Ram 1500 line of pickup trucks. This news comes as OEMs are abandoning diesel trucks in droves. Ford and GM have recently backed away from diesel light-duty trucks, while Toyota and Nissan have canceled heavy-duty diesel truck plans. “From a business case, I don’t think anyone can make one right now,” says IHS Global Insight’s Paul Lacy. “We are still negotiating with the new Chrysler group,” retorts Cummins spokesman Mark Land optimistically. “I don’t think they’re forever gone. I don’t think they’ll just throw all of this investment money away.” Right.

The so-called “Cash for Clunkers” legislation demonstrates everything that’s wrong with a political process playing in the market arena.  It’s legislation that will do little to improve car sales. But it will drive traffic to dealers—mostly credit bandits scurrying around trying to buy new cars they can’t really afford.

There is one fundamental issue which restricts the usefulness of either the House version or the Senate (Feinstein-sponsored eco-version) of the legislation. Simply put, many current owners of low-value vehicles are unlikely to possess the resources to acquire outright for cash or qualify for financing on a new vehicle. Such owners are typically used car buyers, not new car buyers, and are likely the second, third, or later owner of said vehicle.

The benefit of the voucher diminishes as the value of the new vehicle increases (on a percentage basis), so customers with larger passenger vehicles or trucks looking to buy new of comparable size receive less perceived value from the voucher.

And worse, the value of the voucher limits qualifying vehicles to those which have an actual cash value (ACV) below the voucher value and also have EPA combined mileage rating low enough to meet the required mileage threshold gain or the limit to qualify in the first place (18 mpg for passenger cars in HR2571 or 17 mpg for all classes in the Feinstein bill).

The combination of these two factors limits the pool of vehicles to mostly older large passenger cars, SUVs, and trucks. Smaller vehicles, such as more recent vintage Honda Civics and Toyota Corollas, would not qualify for vouchers, as their combined mileage rating exceeds the maximum threshold value already in either bill and are likely worth more than the voucher anyways.

One key provision is that the vehicle traded must be owned and insured by the current owner for at least one year and must be in “drivable condition.” This will limit the formation of a “secondary market” of voucher-eligible vehicles and hence will not raise the minimum value on clunkers sitting on dealer lots. (It cannot be assumed that everyone will be honest and it’s not far fetched to believe that there will be fraud on the ownership requirements.)

The one category of vehicles that will likely gain the most from this program: the compact truck segment, such as the Ford Ranger, Toyota Tacoma, Nissan Frontier, and, perhaps, the Chevy Colorado. The base models of these vehicles tend to be relatively inexpensive, with four-cylinder engines. Owners can maximize the value of the voucher on a percentage basis on a price basis, especially when manufacturer rebates and dealer discounts are included.

And the maximum voucher could be obtained by buyers coming out of larger engine passenger vehicles (such as an old Monte Carlo) trading for a new light truck to gain the bigger mileage boost to qualify for the biggest voucher.  These buyers need transportation (and financial assistance) in order to get a new vehicle – and the type of vehicle may be less important to them.

While this “cash for clunkers” program appears to be successful in Germany, there are other factors at work there. For example, small cars are more prevalent in Europe than in the USA (due to energy costs). Then there’s the qualifying restriction; it’s simply based on vehicle age: nine years or older. And the fact that the rebate is equivalent to the German VAT paid on smaller mass-market cars. Many manufacturers also matched the government rebate, making lower cost vehicles even more affordable. [NB: larger vehicles, particularly in the luxury class, saw very little benefit from the program.]

The net benefit of this program will not necessarily come from sales of new vehicles, but rather a government-sponsored marketing effort (courtesy of the news media and dealer promotion) to drive traffic to new car dealers.  Without a doubt, owners of low value vehicles of any type will consider exploring a new car purchase in response to the hype of vouchers providing a minimum value on their existing vehicle. But most of them probably can’t qualify for financing (and don’t have the cash anyways), so they’ll either leave disappointed or end up driving home in a newer used car.

All in all, don’t expect the proposed Cash4Clunkers legislation to create a big boost in U.S. new car sales. It’s just a promotion by the government to make it look like it’s a good thing for the environment and the economy.  But what’s really scary: it foretells a future where the government will really start to modify our taste for fun, powerful (but less fuel efficient) vehicles through coercive taxes and penalties—while promoting Pelosi-cars through government giveaways.

The Senate should kill this wasteful legislation now before things really get crazy. May I suggest you call yours?

China is becoming the new America, while America is becoming the old China. Jack Perkowski thinks it’s happening right now. Jack is an Old China Hand and a colleague in the automotive parts business. He’s an American and a Yale graduate. Fifteen years ago, he came to China and started ASIMCO, an auto component manufacturing company. In January, Perkowski left the company. The global decline in the business didn’t spare ASIMCO. Perkowski is a true Lao Wai, which literally translates into “Old Foreigner” in Mandarin. From one of the first in China, we inherited a lot of his experience. Some is chronicled in Perkowski’s book Managing the Dragon, which made the bestseller lists. Most is regularly updated in Perkowski’s blog that goes by the same name. In a recent post, he left us some interesting thoughts. Some may find them revolting, even seditious.

During my time here, China has become the third largest economy in the world, the world’s largest market for cars, computers, cell phones and a host of other products, and the country has accumulated $2 trillion of foreign currency reserves. China is now the single largest investor in the United States, unthinkable in 1994 when China had less than $50 billion of reserves.

As the single largest creditor, is China worried about where the U.S. of A. are going? Perkowski sure thinks so:

Given all that has transpired, the leaders at Zhongnanhai must be scratching their heads, wondering what their counterparts in the United States are up to. It began with Enron, Worldcom, Tyco and a host of accounting scandals. In a flash, the financial statements of Chinese companies were just as believable and just as transparent, if not more so, than those of U.S. companies. Then it was Bear Stearns, Lehman, AIG, Bank of America, Freddie Mac, Fannie Mae, Citicorp and the meltdown of the U.S. financial industry. Hoping to learn how to develop its own financial system, China encouraged investments in its state-owned banks by leading U.S. players. Maybe they aren’t such good examples to follow after all?

While China is trying to divest itself from state-owned companies, what is China’s largest debtor doing? Just the opposite.

But the sharp left turn that the Obama Administration has taken since coming to power must really have China’s leaders wondering. Not just the banks, but now large industrial companies, are owned by the U.S. government, and the United States is doing what any government does when it owns companies—it meddles, and political, not economic, considerations are taking precedence.

The takeover of the car industry by the US government reminds Perkowski of the bad old days in China. The courts ignoring the law? Employment for the working masses trumps turning a profit? Where does one still find these egregious practices?

Rather than let the bankruptcy system work as it has over the years to restructure companies, billions of dollars, much of which will never be recovered, have been pumped into General Motors and Chrysler, two companies that represent less than 30 percent of the U.S. automobile market and have been losing market share to foreign-owned companies that now also happen to manufacture in the United States-all in the name of saving the jobs of the United Auto Workers, whose support played an important role in getting the current administration elected.

Central planners deciding the direction of the companies? Heads of state-owned enterprises serving at the pleasure of party bosses?

An administration-appointed car czar, not the company’s board of directors, has fired the General Motors chairman and CEO and installed a new CEO, president and chairman. General Motors is told what plants it cannot close and where its offices should be located. Barney Frank personally called the General Motors CEO to reverse a decision to close a GM distribution facility in his district, and President Obama himself assured Detroit’s mayor that GM’s headquarters would remain in Detroit, rather than move to a neighboring suburb. Undoubtedly, the Obama Administration and Congress will tell their management appointees what types of cars GM should produce. Toyota, Honda, Nissan, Hyundai and their U.S. workers must be delighted with this turn of events.

At least we can find solace in the fact that there still is justice in America. Perkowski is beginning to have his doubts.

As for the vaunted ‘rule of law’ that the United States has been known for, ask the GM and Chrysler secured bondholders what they think. And as for manufacturing statistics—Americans are being told that the administration will ‘save or create’ 600,000 jobs this summer, a statistic that the Wall Street Journal has labeled an ‘immeasurable metric.’

I there anything that doesn’t remind Perkowski of the times before Deng Xiaoping? Yes. China was never ruled by Russian Emperors, who were famous for mistreating their serfs:

A newly appointed pay czar (there are now more than 20 such ‘czars’ in Washington) will now review the compensation of the top 100 managers of any company that has received support from the government.

So what does Perkowski suggest?

Somewhere along the line, the United States picked up that socialist economic playbook that Deng Xiaoping was smart enough to throw away. Perhaps the U.S. should ‘follow Deng’ and go back to what got the United States, and now China, to where it is today?

If it walks like a lame duck, talks like a lame duck . . . . During an interview with Fritz Henderson, the New York Times asked the GM CEO if the bankrupt automaker needed someone from outside GM to inject a little fresh blood. Fritz didn’t care for the insinuation. “Carlos Ghosn was no outsider [when he turned around Nissan]. Lee Iacocca wasn’t an industry outsider when he took over at Chrysler.” That’s right, Fritz, but neither of them had spent their entire working life sipping the corporate Kool-Aid at the company they saved. You, on the other hand, have never tasted any flavor but GM Grape. As former GM Director and current behind-the-scenes talent spotter Jerry York points out, “Fritz might be 20 percent better than Wagoner, or maybe 50 percent better, but the question is, is that good enough?” Talk about damned by faint praise . . . What’s the bet that the new, government-appointed BOD’s answers “no” after they “evaluate whether Mr. Henderson deserves to hold his job more permanently”? Place your wagers on Henderson’s defenestration date below.

walterrobin writes:

Recently we took our 2005 Murano with 75,000 miles on it into the mechanic for the 70k maintenance. It was making a bit more noise than we thought it should and the mechanic says from a cold start this morning it sound even worse. He says the oil stick did not register and he believes it is 2 qts down. We put in synthetic about 7k miles ago. He suggests while it is in ‘decent’ shape (after an oil change and oil treatment/flush) we should consider trading it in.

The feedback on Murano repair history that I’ve seen says they have the ability to drive for quite a few more miles than 75k. We had planned to keep it for at least a few more years but the mechanic says he believes we may be at risk of losing an engine in a few thousand miles.

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The Truth About Cars wasn’t founded for the discussion of partisan politics. Thanks to the Motown Meltdown bailout buffet, it just turned out that way. While the intersection of automobiles and ideology has become both inevitable and unavoidable, the discussions centering on political ideology have recently spun OOC. In certain threads, we’re seeing the same endless rounds of right/left blunderbuss action. Even worse, it’s become nasty. As I was away from my desk for 35 seconds yesterday, I missed the onset of the flame wars and, thus, failed to extinguish them. By the time a couple of our Best and Brightest sent a heads-up email, more than a couple of commentators were burning down the house. This morning, I’m in retroactive delete and warn mode. TTAC’s flaming rule is simple: no flaming the website, its authors or fellow commentators. The corollary is this: please keep it as car-related as possible. If you can’t work your way back to the words “and that’s why I’m a Porsche/Corvette/Nissan/Ferrari guy,” you’ve probably gone too far.

Enthusiasts consider this idea every once in a blue moon. “If you could have just one car for the rest of your life, what would it be?” Last-gen BMW M5? Porsche 911? Corvette? Pontiac G8? Lotus Elise (just kidding). But how about folks who don’t care about cars? What should they get? The Camrolla and Civords would likely be at the top of the lists for the frugal and apathetic. But maybe a Grand Marquis or Crown Vic Interceptor would do fine. Then you have pre-Daimler Jeep Cherokees, RWD Volvo wagons, Subarus of certain stripes, and old Benzes that may now require German translations and Indian parts. The 10+ year old used car world has several winners for the tightwad crowd. But what about new and late model cars?

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USA Today is in the thrall of . . . the Ford Escape Hybrid. As is the President of these here United States, who traded his gas-hungry Chrysler 300C for the gas – electric trucklette. No surprise, then, that we’ve heard rumors of shortages. Well, not rumors, exactly. More like an open admission by FoMoCo’s El Presidente del Americas. “We are constrained by the amount of components, including batteries, that the supply base can provide us,” Mark Fields said in December ’08. Same spin again in January ’09, via a Blue Oval Boy on Edmunds. The scuttlebutt: Ford loses money on every Escape Hybrid they sell; so it sells as few as possible. Of course, that doesn’t stop The Glass House Gang from using the vehicle to earn brownie points with the MSM . . .

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