One of the theories explaining GM’s downfall is that they did not invest enough in R&D. Wrong! Booz & Co.’s latest report on Global R&D spending says: bar Toyota, GM was tops. Here’s the 2007 ranking:

Company      R&D expenditures in $m

Toyota         8,386
GM              8,100
Ford            7,500
Honda         5,142
VW             4,757
Daimler        4,321
Nissan         4,001
BMW           3,995
Peugeot      2,835
Renault       2,531

Booz says in comparison to 2006, R&D expenditures in the auto industry grew by about 10 percent. European “champs” pale, with the European primo (VW) being only around half as research-intensive as the biggest spender. Here are some other findings…

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With the end of the (Western) year in sight, Chinese auto makers look in their books, roll their eyes, and sigh. One by one they come to the same conclusion: this year’s targets are toast. Bu hao, no good.  According to a tally by Gasgoo, five Chinese auto makers have officially written off their old targets and revised them way down: Changan Mazda (-50 percent); Dongfeng Yueda Kia (-20 percent); Dongfeng Peugeot (-31 percent); Dongfeng Citroen (-27percent); FAW-VW’s Magotan (-22 percent). This doesn’t mean that their year-on-year sales will be down by that much. They probably started the year with optimistic growth rates. Which are now coming home to rust. Other companies don’t want to throw in the towel yet, or they say it’s too early to call. But ending October, most of China’s big auto makers were way off course.

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These are indeed turbulent times in the automotive industry. With every new day comes a flood of bad news, and a fresh sense of ominous momentum. As we continue to serve up hefty sides of bailout beef, we thought we’d offer up a quick, palate-cleansing taste of the non-bailout, non-industry-implosion gossip going ’round the net. And you’ll never believe what insiders have to say about the Toyobaru coupe pregnancy scare! Read More >

The Senior Director of Communications for the Alliance of Automotive Manufacturers has revealed that Subaru and Nissan are applying for Department of Energy’s (D.O.E.) low-interest loans. As TTAC reported earlier, the just-released rules for the loans do NOT contain a provision limiting calls on the $25b available to American factories twenty-years-old or older– as originally thought. The door is now open for any automaker with operations within these United States that thinks it can build a vehicle that’s 25 percent more fuel-efficient than a comparable model. “For competitive reasons, I would think that any elegible automaker would apply for the loans,” Charles Territo told TTAC. “You can’t write anyone off.” That said, if the D.O.E. rules are enforced as written, you CAN write off GM and Chrysler; they don’t meet the regulations’ criteria for financial viability. Territo expressed confidence that Detroit’s automakers will “figure out a work around” for that and other stipulations. “It’s Washington. Where there’s a will, there’s a way.” Territo’s organization is also supportive of the next bailout: another $25b to $50b aimed at improving American automakers’ liquidity. “A failure will cost more than a bailout,” Mr. Territo opined, declining to provide statistics to justify the claim.

Everybody who knows me knows I’m a tightfisted son of a bitch. I may own Benzes for their profits, but gas sippers are my daily drivers.  My wife’s daily driver has been an old Volvo wagon (which she loves). And like many of you, I’m nearly OCD when it comes to buying quality on the cheap. When Robert asked me to find him a $5000 car, I found a $4000 car. Why? Because $4000 is the new $5000. For those of you contemplating a new ride and have the cash, now’s a good time to buy. The Manufacturers’ Suggested Retail Price (MSRP) is dead.

Reality check. At the moment, there are only two types of car companies: the living and the dying. Brands such as Toyota, Honda, VW, Porsche, Mercedes, BMW, Audi, MINI and Nissan still have healthy balance sheets and great products. As long as they stay true to their core talents, today’s recession will lead to long-term global progression. But even though these brands offer quality vehicles, the money to support the demand has disappeared. That’s bad for some customers. Good for everyone else.

Most credit-driven customers have been cut off. Many of the banks that were ‘helped’ by the recent bailout are also among the largest auto finance lenders in the U.S.: Capital One, Citibank and Bank of America. The bank’s balance sheets are looking better– in the same that clothes can hide leprosy. Unfortunately for the ‘fleeced’ taxpayer, and the political ‘yes’ men, the banks are hoarding their new found, taxpayer-funded wealth.

This net drop in the amount of money truly available has resulted in a cliff-face 20 to 40 percent drop in new car sales for even the “good” brands. Although these manufacturers aren’t selling vehicles at Buick levels, the previous customer dealer paradigm has rolled-over and died. To say it’s a buyer’s market would be like saying a jailhouse crack dealer has sway over an incarcerated junkie.

The consumer strategy required to make the best of a bad situation (for the dealer) is simple enough. When you visit that big fishbowl called the dealership just say no to whatever’s on offer and wait. Or leave. There’s no ‘take it or leave it’ or ‘you really need to buy today’ when the inventory is stacked to the roof and the customers are none deep. If you want to squeeze the best deal, all you have to do is say ‘No!’ for a week and enjoy what amounts to a Chinese auction.

Sticker? What sticker? Brand new 2008 Mercedes GLs are going– or not– for $14k off sticker. The same vehicle can be had for a three-year lease for $5k down, $800 a month. Did I say $800? How about $700? $600? I’ve never seen anything like it. Pay no attention to Edmunds or anyone else. Published deals have nothing to do with anything anymore. Desperate doesn’t even begin to cover it.

The same reality applies to the used car markets. Last night I saw a 2003 Mercedes SL500 go for a mere $20 grand, a 2006 Scion Xb sell for $9200, and a loaded 2008 Hyundai Santa Fe Limited with less than a thousand miles no sale at $17k. All of these cars were in strong demand when they were first released. Now they’re just casualties of a credit-driven economy and a repo-saturated car market. In a recession, used car vehicles pick up some of the slack. But not today. Even the market leaders of not too long ago are in a depreciation death spiral.

Then we have the ‘patients.’ GM, Ford and Chrysler are fighting for their survival. Many of their models will not be replaced (through Ch11 or otherwise), and virtually all have record levels of supply. From a 200+ day supply of Corvettes to fields of near-new rental crapmobiles (e.g. Pontiac Grand Prix and Chrysler Sebring), there’s nothing but metal to be moved. Buickman is sending brand new Chevy Silverados our the door at $10k. Again, just say no and reap the rewards. Stupid deals are smart. Don’t be what William Shatner calls timid negotiatiors these days: “mamby-pamby.”

The situation is even more ridiculous at small dead brands such as HUMMER, Saab and Volvo. Their dealers face the morbid task of selling cars that with virtually no marketing dollars behind them. A 2008 Volvo S80 may theoretically compete with the Lexus LS and Mercedes E-Class, but no one knows or cares. A non-competitive product with no market presence will eventually go out the door for a price that is closer to the lower car class.

RF and I are still debating the ‘when’ of car buying during this current carmaggedon. I believe now’s a great time to buy. Robert points at the sheer volume of unsold inventory at the new and used car level, and the lack of consumer confidence (tied to the housing market). Whatever the scenario, however long it lasts, however MORE desperate things become (fancy buying a C11 Malibu for under $5k?), MSRP for all but the most exclusive vehicles is RIP. Go get ’em tiger!

As Detroit remains bogged down in the Russian winter of their hubris and mismanagement, Nissan is launching a counter-offensive. Not only is Nissan joining Toyota in launching zero-percent financing on select models, they’re even launching factory leases at a time when nearly every finance company is running away from the lease business screaming. Automotive News [sub] reports that zero-percent financing is available on Altima, Rogue, Sentra, Versa and Murano, with all the “qualifying buyers” mumbo-jumbo that could keep many from the deal. Nissan is also launching factory-subsidized $199-a-month leases on the Altima sedan and Rogue, as well as extending a $339-a-month lease offer on its newly redesigned Maxima. If you just want a deal on basic transportation and don’t care much about financing, Nissan is also rolling out a stripped Versa sedan with a MSRP under $10k. “We are making a bold statement to our customers and to our dealers that we’re here for them,” says Nissan Division Vice President Al Castignetti. “If you need financing, we have it. If you want to lease a vehicle, we have it. If you need to buy an inexpensive car, we’ll have it for you.” While feasting on the dying corpses of the Detroit Three.

Chrysler is dead. Look for a Chapter 7 filing soon; that’s a liquidation plan, not reorganization. The judge will part-out and sell ChryCo’s few valuable assets to the highest bidders. There will be no “Hail Mary” pass to General Motors, no government rescue, no money from Cerberus to keep its corpse from the grave. Yes, the mythical three-headed dog of Hades does keep souls from escaping Hell, try as they might.

Despite GM’s desire for the $9b in cash supposedly on Chrysler’s books, the money comes with even bigger liabilities: health care, pensions, taxes, supplier obligations, the works. In fact, Chrysler is saddled with as much as $27b worth of claims. Those claimholders have no interest in letting Chrysler unwind in the hands of GM– which would keep all those claims unpaid. Better to just get it over with and pay it out now. The best idea for Chrysler is, was and will be immediate liquidation. Add the proceeds from the sale of Chryco’s assets to that cash pile and there might be as much as $20b+ to disburse.

The first ones to dine on the cash are Chrysler’s lenders, led by Goldman Sachs and JPMorganChase. They originally lent Cerberus about $10b or so to fund the acquisition from Daimler, with the hopes they could then sell the debt off to bigger schmucks. Well, they mostly failed at selling it, unloading only a portion, maybe about 40 percent (or so we’ve heard) at discount to some greater fools.

The banks are still stuck with the rest and they aren’t happy about it. If you were a sane banker in troubled financial times, would you transfer your repayment risk to General Motors, an equal if not even worse credit than Chrysler today? GM was counting on a government loan to GM to pay these lenders off– or at least guarantee their debt. Give Hank Paulson credit; he simply said “no way.” The Feds aren’t gonna take the heat for paying Wall Street off while jobs are lost.

So no, the bankers will never agree to a GM-Chryco Motors tie up. Better for them to take the priority position they get in liquidation today and take what they can. After all, Chrysler’s cash pile only gets smaller every day Chrysler continues to operate.

The second group that has a claim on Chrysler’s cash: vehicle owners. Yep, warranty claims out into the future. Remember, most recent vintage Chrysler vehicles (in service beginning in 8/07 and later) have powertrain for life warranties. The bankruptcy judge has to set aside funds to cover those claims. Say… $3b worth.

The third group: labor. The United Auto Workers (UAW) negotiated a contract that requires Chrysler to shovel $10b into a health care trust (a.k.a. VEBA) for retirees. Even the UAW wasn’t crazy enough let GM takeover Chrysler and absorb this liability when GM can’t even pay what it promised to the union. In any case, this is an unsecured claim. It’s doubtful the UAW could legally stop a sale to GM, but they can make life unpleasant for an automaker.  Heck if the workers are going to lose their jobs anyway, they might as well get what they can now for retirees.

And last: working capital claims for the balance. Unpaid vendors, employee wind downs, taxes, and the rest. Maybe another $4b or so. All told, $27 billion in claims against the cash plus whatever the Court can sell the rest of the assets for. Call it $10 to $15b. Best of all, assets sold out of bankruptcy come with no liability tail for the buyer, which make them much more attractive. No pension obligations, no warranty claims, no retiree health care. Clean and simple. And you don’t even have to take the UAW contract!

I reckon that there are four major components of Chrysler that will get sold. First, the Jeep brand. Although known worldwide, it really has only has one unique product (the Wrangler). But it’s cheap to build, generates a ton of profit per vehicle and will never go out of style. Yep, wrap that up. Maybe it’s worth $3b?

Second, the minivan biz. Already having consolidated assembly in one plant (Windsor), it’s easy to just supply other automakers like GM and VW. Hmm, do I hear Magna calling? So let’s say it’s worth $5b.

Third, RAM trucks hecho in Mexico. Nissan needs a truck and they’ve already agreed to buy their next Titan built in Chrysler’s Saltillo plant. Ok, so maybe it’s 100k units per year only. Might as well buy the plant and the rights to the truck. How much did it cost Toyota to develop the Tundra and build its now underutilized San Antonio truck plant? Let’s put a $2b price tag on this.

And fourth, Chrysler’s parts supply division. I don’t know how many Chryco rigs are on the road, but they’re going to need parts for a long time. Existing parts inventory that’s worth something plus profits from sales that will continue for years. So we’ll put a $1b price tag there.

So are you getting my drift now? There’s no GM-Chrysler deal ever. The government can’t stomach funding a deal where jobs are lost with taxpayer money. Better to shut Chrysler down in bankruptcy, and let Cerberus lick its wounds. Those jobs were going to be lost with or without GM in the picture.

“Earlier this week, industry sources said GM had asked for roughly $10 billion in an unprecedented government rescue package to support its acquisition of Chrysler from Cerberus Capital Management LP,” Automotive News [sub] reports. Today, we learn that “The U.S. Treasury Department is not negotiating with General Motors and the owners of Chrysler LLC on a request to provide direct government aid to their proposed merger, a Bush administration official said today.” Uncle Sam’s reluctance to grease the deal’s wheels puts it in serious doubt. As in kills it dead. Which raises a familiar question: what the Hell was the point of this merger thing, anyway? There are two main theories. 1) GM viewed Chrysler as a cash grab and 2) GM is/was/wanted to position itself for a massive federal bailout. Proponents of theory two suggested that the feds strongly favored a GM – Chrysler merger so they could then bailout two Dodos with one stone (or something like that), and “save” Chrysler’s jobs. When it became clear that no such jobs rescue was possible, the Treasury balked. Assuming the American Leyland deal doesn’t go down, all that’s left for Chrysler is Chapter 7 liquidation. Yesterday’s Wild Ass Rumor of the Day– which had GM and Renault/Nissan carving-up Chrysler– could well be ChryCo’s pre-C7 valuation process. As for GM, one way or another, they’ll get their own damn bailout. Too big so they failed is still seen in D.C. as too big too fail. At least until the election’s over…

One of our informants within GM tells us that Renault/Nissan (R/N) has entered the negotiations for Chrysler owner Cerberus’ final dispensation of Chrysler. Apparently, “Nobody wants to swallow Chrysler whole.” Although this one comes at us from deep left field, we have heard rumblings that GM wanted to merge Jeep with HUMMER– which we completely discounted at the time. We’re now told that GM and R/N are casting lots for production capacity. Allegedly, only one brand (as a brand) will survive the evisceration. You guessed it: Jeep. So the split would look like this: Jeep/minivans – GM. Trucks/SUV capacity – R/N. Cars? Neither one wants anything to do with them. The unnamed source close to the story familiar with people close to deal says that’s been the hang-up for Cerberus. Interesing…

When I set out on a comparison test like this, I have one main question in mind: if I were in the market to buy a new car for my family, which one of the cars tested would I buy? I love supple leather seats, premium sound systems, grippy wide tires and an engine with the torque of a diesel freight train. But the reality at this time is that my employer, one of the world’s largest financial institutions, has lost billions of dollars in recent quarters. Its epic balance sheet can now be described as fragile. As a financial controller, I see first-hand how budgets are being drawn in asphyxiatingly tight. I know that I’m not alone in feeling nervous about my future in this economy. So which of these family sedans would I buy? The Mazda Mazda6 i Sport.

Ahead of the LA Auto Show, which is coming up in a few weeks, Nissan has gone ahead and released images of the 370Z. This is phase 3 in a prolonged effort to give the car about a month of buzz before its official reveal (phase 1 was intentional spy shots and video, phase 2 being the Edmunds pretendo-leako). No specs from Nissan yet, though 330 horsepower or north is a good bet.

Second place sucks. Witness the U.S. Women’s Gymnastics’ squad in Beijing last summer. Pony tails drooped and tears streamed down their be-sparkled cheeks when gold medals were hung on the necks of the young (we swear they’re at least sixteen!) Chinese Olympic team. My heart goes out to Nissan, whose excellent 2009 Altima 2.5 sedan fell just short of the 2009 Mazda Mazda6 i Sport in this comparo.

This morning I rolled out of bed, performed my morning ablutions, downed a bowl of Raisin Bran, dropped my sons off at school and started my stop-and-go commute to work. A never-ending stream of blinking taillights precedes me up and down the interstate through the pre-dawn din. Wannabe comedians inanely chatter and squawk through my radio. Finally my exit arrives: a lightly traveled mile-long arcing two-lane spur that connects interstate to turnpike. In a brief burst of adrenaline energy that widens my bleary eyes, I break away from the gridlock and shoot up the ramp. In third gear I push up to 80 mph as my car confidently hunches down and steers precisely through the sweeping turn. By the time I join the turnpike I coast down and assimilate into the flow of the traffic. These brief thrills make me glad that I opted for a sportier, nimble handling family sedan. But I drive an ’01 Accord. The 2009 Accord LX is no fun at all.

It was just a month ago that Edmunds was falsely claiming they had the “World’s First Test of the VW Jetta TDI.” Now Edmunds InsideLine is at it again, this time lying about the Nissan 370Z. The article lead, which appears on the InsideLine home page, says “First Photos of the 2010 370Z Convertible.” Except that under the pictures, the caption reads: “This photo illustration offers an early look at the future Nissan 370Z convertible. (Photo illustration by Nick Wilcox).”

The phrases “photo” and “photo illustration” don’t mean the same thing. If they did, the Weekly World News would be unbelievably successful and Sarah Palin really would be holding that baby and gun in her bikini. And by the way, even if “photo” included “photo illustration,” Edmunds wouldn’t be first; Japanese car magazines have been photoshopping the 370Z for several years already.

During his first inaugural speech, given at the height of the Great Depression, President Franklin D. Roosevelt famously said, “Let me assert my firm belief that the only thing we have to fear is fear itself – nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” Once again, Americans find themselves living through days of economic infamy. Uncertain times and erratic energy costs have cured fearing suburbanites of their predilection for gargantuan SUVs. It’s time for practical pragmatism; inexpensive family haulers that dine lightly on 85 octane and stay firmly bolted together for years to come. To fully understand this segment, I tested and compared a quartet of economy sedans. First up: the Toyota Camry.