The debate over Toyota's Tundra over-eagerness (and subsequent production juggling) got me thinking of the above quote from management guru Peter Drucker. And that reminded me… Whenever someone ridicules TTAC's GM Death Watch for cresting a particular episodic number, I ask them to imagine the count if I'd started writing when GM began its decline. For proper mind boggling, cast your mind back to 1946. After spending two years inside GM, management Drucker published "Concept of the Corporation." Although Drucker's tome praised GM's infrastructure, the author suggested that the automaker should decentralize power to autonomous business units. GM Chairman Alfred P. Sloan's inability to grasp the implications of Drucker's recommendations marked the beginning of the end for what was once the world's most profitable business. It took more than half a century for GM's fundamental cultural weaknesses to drag it into today's ignominy. And the slouch towards Bethlehem was not inevitable. Or was it? "Management is doing things right; leadership is doing the right things." This GM's CEOs have not done for many, many years. And that's the truth.

The breakup of Chrysler has begun. It’s been done quietly, in the open, but under obnubilating nomenclature. That last phrase says it all. Why lie when you can make the truth so damn confusing? While Cerberus denies imminent sell-off, a cadre of automotive executives has Chrysler on a hook, passing around a felt tip pen. In fact, a pre-break up party is the only way of explaining some of the crazy-ass deals the three-headed dog has been fetching lately.

To wit: April 15. Chrysler and Nissan agree to build big vehicles for each other. Nissan will make a small, fuel-efficient car for Chrysler, shoring-up a hole they created by letting the once successful Neon whither and die. This makes sense, kind of, for the dog.  Chrysler has no small car in a blooming small car market. 

Nissan, on the other paw, generates a new competitor for itself. The Versa and Sentra are performing well in the new $4.25 a gallon US. But not as well as Honda’s Fit or Civic, or Toyota’s Corolla.  So let’s see… if you are in third place, what’s the best thing to do? Take a lesson from the leaders and refine your product? Or, take a lesson from the guys running in the opposite direction and badge engineer your current cars into vapor?

And that’s just half the deal. Chrysler’s going to build a new full-size truck for Nissan. Who the what now?  Chrysler’s truck business fell 48.1 percent in June. It’s off 30.4 percent for the year, and last year wasn’t that great. Nissan wants a piece of that? Doesn’t Nissan already have a full-size truck?  Built in Canton, Mississippi? Yeah, let’s ditch that for a Ram knock-off from Saltillo, Mexico. 

Again, let Toyota keep working their platform till they get it right. It’s foolish when you can just go buy a bunch of Dodges. That’s supposing that you need a full-size truck on your lots in the first place, which is debatable when you’ve made it from 1914 to 2004 without one.

Exactly how much of Renault – Nissan’s resurgence can be attributed to CEO Carlos Ghosn’s brilliance is always up for discussion. It’s tough to find someone who says he’s outright stupid, though. Most reports label him smart. Ghosn says the Chrysler deal will save millions in development costs and provide more efficient use of manufacturing capacity. It’s the kind of statement that seems to make sense– until you place it in context. The American market has contracted, the dollar is down against the everything and trucks are no one’s growth potential. 

Ghosn also said he wants a third, preferably North American, leg for his stool. He played with GM two years ago, but that went the way of the Datsun. Nissan and Chrysler forged a transmission deal in 2004 and announced a Versa re-badge for South America back in January. He’s been trying to form a backroom mega manufacturer for years. Ghosn doesn’t want trucks. He wants inroads.

Nissan is not the only “strategic partnership” with a knife and fork, waiting until everyone is seated. Chrysler builds the Routan for Volkswagen (a match made in purgatory.) They buy hybrid systems from General Motors to disguise Durangos and Aspens as modern vehicles. Chrysler has some kind of deal with Chery Motors, though its importance outside of China is unclear. They’ve also had talks with Mahindra & Mahindra. (Although who hasn’t, really.)

Chrysler has lost billions of dollars for its canine overlords, none of who got into the car business to make cars. They want to make money. Exactly how long they are going to wait for a profit is an X in the equation. Anyone looking at current sales figures and all the new product Chrysler’s not preparing can tell you positive cash flow is years away. As opposed to slicing off branches, divisions and units, which can serve-up cash tomorrow.

It is easier to sell to people with whom you are already doing business. If your plant is tooled-up to build Nissan Titans, why not become a Nissan Titan plant? Getting a hold of 3,700 Chrysler dealers across the heartland of America is, conceivably, a good idea for someone who needs a U.S. presence. OK, maybe not all of the Chrysler, Dodge and Jeep shops. But about 1400 stores might look tasty. 

VW wants to increase North American sales by a billion percent. In this economy, if you want to sell cars in the States, you better build them in the states. Yes, VeeDub’s looking to cut a deal down south. Meanwhile, anyone got a Sebring plant they’re not using?

Cerberus can tout all the synergistic original equipment manufacturing global positioning alliances it wants. The lines will have been drawn. Dotted lines. As in, cut here. 

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

Motor Trend (MT) is filling-up bandwidth and hyping-up baby boomers with a post on the forthcoming New Beetle Mk II. The bulk of it isn't all that earth-shattering: there will be a new New Beetle. MT reckons it will be based on the next Golf and it should arrive in 2010. There will likely be a hybrid version. Motor Trend says VW should (or could) make the New Beetle a hybrid-only model since "its distinctive style lends it the same kind of instant recognition as the Toyota Prius." Except that the Prius is actually aerodynamic; a far more important feature for efficiency-oriented cars than boomer nostalgiamobiles. But that isn't even MT's wildest bit of speculation. They speculate that VW's forthcoming city car, the up! could be restyled to look like a "Baby Beetle." Hmmm. The VW up! was planned as a rear-engine car, and it will cost enough to place it in the "small-but-premium" category. By giving it a Beetle-inspired shape, VW could use nostalgia to trump the price point. A light, rear-engined baby Beetle would capture more of the original kaeferwagen's appeal than another reskinned Golf. But there's a small problem with the theory. As Mr Berkowitz pointed out, the up! is no la rear-engine, rear-wheel drive car. That doesn't mean a baby Beetle isn't coming. But if it does, it will be just another reskinned FWD VW. Or will it?

There are three phases of life. 1. When you don't know any of the songs playing in the elevator. 2. When you know all the songs playing in the elevator. 3. When you don't know any of the songs playing in the elevator. I feel like I'm getting closer to phase three. Not because I've just celebrated my 49th birthday. Nor because of Muzak; it's been so long since I've been in an office lift they're showing the Elevator News Network for all I know. No, it's down to the fact that Justin had never heard of the word "cheesecake." It's an old-fashioned expression (sigh) referring to semi-pornographic pictures of attractive women (I daren't ask Justin about T and A). You may have noticed there's a lot of these sorts of pictures hereabouts, as of late. Frank made the decision to deploy garage wall pinups after contemplating our 4856th image of a Toyota Prius. I agreed because I'm largely heterosexual (so to speak), and what the Hell– it's not all about you. We realize this shift has rendered TTAC less cubicle-friendly. And so we've charged out boffins with creating a button to make TTAC a text-only site. Meanwhile, your thoughts?

Setting aside the fact that an indeterminate number people buy hybrids for reasons other than saving money (green props, emissions, etc.), what about Ye Olde Hybrid premium? Where are we on that score these days, what with $4 the new $1.50 down at the pump? NADAguides has done a little number crunching on that score. They reckon "only a handful of hybrid cars make financial sense for a consumer who buys a new car every five years." Warning that miles driven and local gas prices are significant variables, NADA conclude that the following gas – electric cars recoup their "extra" cost within the five-year time frame (presented in order of fastest recoupage to slowest): Toyota Camry Hybrid, Chevrolet Malibu Hybrid, Nissan Altima Hybrid, Toyota Prius, Honda Civic Hybrid, Cadillac Escalade Hybrid (just kidding). NADA's press release gives us a big ass chart of local gas prices and uses EPA stats and manufacturers' MSRP. But they don't make mention of the single largest expense of car ownership: depreciation. And here's a question: to what "gas equivalent" did they compare the Prius?

You'd think we were back in second grade, what with all this "not" stuff. New York Times Op Editorialist Roger Lowenstein joins celebrity stock picker (and former GM booster) Jim Cramer and Merrill Lynch analyst John Murphy in accepting GM's not impossible nightmare. In his attempt to discover "WHO shot GM?" Lowenstein passes rising gas prices, a lack of hyrbids and bad design and goes straight to… the United Auto Workers' (UAW) legacy costs. "None of G.M.’s management miscues was so damaging to its long-term fate as the rich pensions and health care that robbed General Motors of its financial flexibility and, ultimately, of its cash." Huh? Apparently, without paying all that money to the UAW GM could have "designed new cars or researched alternative fuels. Or it could have acquired half of Toyota." Or bought Saab! Or HUMMER! Or started Saturn! Oh wait… sorry. It's all about universal health care and highly relevant shit like that. "The sorry decline of General Motors has proved Reuther right: the government is the better provider of social insurance. Let industry worry about selling products." Sure. That's the right approach. NOT! 

America can't get enough of the Prius. To meet demand, Toyota will begin building the gas – electric four-door in the U.S. in late 2010 (yes, at the same time the Volt is supposed to debut). ToMoCo'll use the plant they're building in Blue Springs, Mississippi– originally destined for Highlander production. Highlanders are moving to the Princeton, Indiana plant starting in late '09. To make room for the Highlander, they'll shift Indiana Tundra production to San Antonio, consolidating Tundra production in Spring 2009. But before they do that, they'll shut down all Tundra production from August 8 until early November (lagging sales). Toyota says they'll continue to provide work for the non-union "team members" at both facilities, as well as those working at the Huntsville, Ala. plant that builds Tundra and Sequoia engines.

New Corporate Average Fuel Economy (CAFE) standards are enshrined in federal law. It's 35mpg by 2020, or a 4.5 percent annual increase. So why would The Big 2.8, Toyota and Porsche renew their efforts to raise the bar? Especially as someone might be looking for federal loan guarantees… As mob boss Carl Rojeck said in "My Favorite Year," "the fighting is in rounds." Now that the The National Highway Traffic Safety Administration's (NHTSA) writing the fine print, the kvetching starts afresh. To switch movie references, "Can you squeal like a pig?" The Detroit News reports that The Big 2.8 have filed paperwork urging NHTSA's pen pushers to "roll back proposed 4.5 percent annual increases in fuel efficiency requirements between 2011-15." Apparently, "the new rules will force them to slow the rollout of some advanced vehicles." Huh? Wouldn't it make them speed-up? Go figure. GM: We can't build enough Volts [more on that in a separate post]. Toyota: the 2011 requirements are "too aggressive." Ford: the proposal "seems to impose a disproportionate share of the burden on domestic manufacturers." Chrysler: ""It will cost Chrysler LLC thousands of dollars per vehicle in additional technology, not hundreds of dollars." Porsche: We might have to "leave the U.S. market until such time they develop new vehicles with advanced propulsion systems." Hyundai: bring it on! 

 As previously promised, here are the June 2008 market share numbers for the top five automakers.  Click here for a comprehensive chart of 2008's market share data

Toyota has been the matinée idol of mainstream automakers for some time now. Car buyers want to be with it, and car makers want to be it. But how does the Toyota stack up against other well-known (non-car) brands? The Global Pulse survey (pdf) by research firm The Reputation Institute shows that even compared against 1,000 of the worlds top brands, Toyota is the Worlds Most Respected Company. Setting aside the pure hyperbole of the title, and the fact that it comes from a firm that should have been voted "Most Pretentiously Named Company," this is a huge achievement. Indeed no other automaker cracked the list, save for Volvo Bilar and Tata Motors' parent company, Tata Group. And whence cometh these godlike achievements by ToMoCo? Very, very committed employees is one possible answer. Motor Authority reports that a Toyota engineer involved in developing the Camry Hybrid died as a result of overwork. Although overtime work is common in Japan, the late engineer was working 80 hours of overtime per month prior to kicking the bucket from ischemic heart disease. The last time we heard about a Toyota employee being worked to death was back in 2002, when a 30-year-old worker died after carrying 70 hours of overtime per month. Apparently, that's the kind of improvement that it takes to stay at the top.

Everyone in the car biz knows that June was a catastrophic month for the U.S. new car market. Total sales dropped by 18.3 percent. The big change this time 'round: it wasn't just light trucks that took it on the chin. Car sales received some body blows, as well. If you're an auto industry exec [still] living in denial, it's best to stop here. If not, read 'em and weep. [NB: As per TTAC policy, sales numbers not adjusted for "sales days."] 

Family Cars

As SUV refugees seek car-shaped shelter, there were some big winners in June. Sales of the Chevy Malibu* rose by an astounding 73.4 percent over last June, up 31.2 percent year to date (YTD). Honda's Accord chalked-up a 37.3 percent gain for the month, up 12.9 percent YTD. Ford's Fusion finished the month 18.4 percent ahead of last June, up 11.7 percent YTD. Meanwhile… Chrysler's once-proud full-size sedan continues to tank; 300 sales dropped 61.6 percent from last June, down 36.5 percent YTD. And surprise: the Toyota Camry took a hard hit, dipping 10.8 percent below last June, posting a 0.3 percent loss for the year.  

Compacts

The Chevy Cobalt was another winner for GM, up 21.6 percent for the month and 18.5 percent YTD.  The Dodge Caliber was another loser for Chrysler, down 43.6 percent for the month and down 0.5 percent YTD. Worryingly, Ford's Focus dropped 5.5 percent in June. But it's still 27.6 percent ahead of last year. The Toyota Corolla** continues strong sales, up 15.6 percent on month. Yet it still trails last year by 3.8 percent. Honda's Civic* finished the month 9.5 percent ahead of last June and 17.9 percent ahead of last year. The Sentra didn't do as well for Nissan.  It was down nine percent on month, struggling to finish the first half of the year up 3.5 percent.

Subcompacts

Honda's fuel-efficient Fit was a big winner. Sales leaped 78.2 percent ahead of last June, finishing the semester up 67.4 percent. Nissan's Versa finished the month up 17.4 percent for June and 20.7 percent ahead YTD. GM's entry in this genre ran out gas. Sales of their Korean econobox Aveo were down 19.7 percent; down 1.7 percent YTD. Toyota's Yaris also lost ground, ending June down 7.5 percent; though staying 39 percent ahead YTD. 

Trucks

Brace yourself. Chevy's Silverado* sales tumbled by 23.7 percent on the month, 25.6 percent YTD. Dodge's Ram fell 48.1 percent in June, down 30.4 percent for the first six months.  Ford's F-Series sales dropped by 40.5 percent from June '07, ending the first two quarters down 22.7 percent. The Toyota Tundra , which had posted sales gains for the first quarter, finished the second quarter down 52.9 percent from last June; down 7.6 percent YTD. The Texas-built Tundra may soon drop below 2006's sales line.

Truck-Based SUVs

Chevy's Tahoe* showed a surprising gain from May (fleet sales?), adding about 2.5k units to the tally. finishing the month "just" 9.8 percent below last June. However, Tahoe sales are still down 26.6 percent YTD. The Dodge Durango continued its descent into oblivion, dropping a massive  67.3 percent in June, down 48.4 percent on the year.  The Ford Explorer showed an equally abysmal June, losing 52 percent from last June and 33.2 percent from last year.  Toyota's Sequoia continued its death-defying growth, surging by 25.1 percent in June, showing a 28.8 percent gain YTD.

Crossovers

The crossover bubble's burst. Thanks to a slow start last year, GMC's Acadia is up 8.5 percent on the year. But June sales fell off a cliff, down 40.1 percent from last June. Ford's Edge also dropped in June, this time by 19.9 percent. Robust sales earlier this year puts it 16.9 percent ahead of last year– for now. Toyota's woes continued, with Highlander* sales down 38.9 percent in June and 5.2 percent compared to 2007. The new Honda Pilot wasn't exactly pulling them in either; sales were down 29.8 percent for the month and 16.7 percent YTD.

Prius

Toyota's Prius dropped for the second month in a row. Due to short supplies and high demand worldwide, stateside sales are down 33.7 percent from last June. Sales drops in May and June pulled its year-to-date sales to 3.2 percent below last year. Toyota plans to produce 450k Priora in 2008; they've already sold 91.4k of them in North America alone so far this year. So look for their sales numbers to remain relatively low, in spite of growing demand.

By Manufacturer

GM's Hail Mary end-of-month 0% financing deal helped stave off a total rout. The General managed to finish June a "mere" 18.2 percent below last June's pace, down 16.3 percent for the year. Toyota's performance was June's shocker. ToMoCo ended the month 21.4 percent below June '07 (well below GM's dismal performance), dropping 6.8 percent on the year. Meanwhile, Chrysler sales fell by a staggering 35.9 percent for the month. ChryCo's trailing last year's sales by 22 percent. Ford was down 29.5 percent for June, 14.5 percent YTD. Honda managed to finish the month relatively unscathed, showing a 1.1 percent increase, with a 4.1 percent increase year to date.

Looking Ahead

July's misery may well eclipse June's. GM ran their 0% financing deal for the first week of the month, so they've up you-know-where without a you-know-what (small car?). Ford, Chrysler and Toyota are all offering incentives of varying sizes, particularly on the trucks and SUVs nobody wants. At what point will the deals become sweet enough to overcome the fuel bill? The sales numbers show we aren't there yet. As fuel prices climb, or even just hold steady, as the Fed declares that the economic gloom will extend well into '09, it's clear we're still a long way from the bottom of this combination of a violent contraction and a wholesale shift in product preference.

*Includes hybrids
** Includes Matrix

Click here for June's market share numbers 

The Lexus IS250 is a chick car. Funny that. Its predecessor, the IS300, was such a guy car. In fact, every time I see a male of the species behind the wheel of a Lexus IS, I check my theory by scoping the badge. Sure enough: it's an IS350. Strange. The IS250 is a great entry-level luxury car. While it's slower than the 350, not everyone can afford to pay that much needs that sort of power. So why aren't more guys driving one?

Guess what? SUVs are dead and gone, nearly buried. Goodbye, nice knowing ya! When the future business case histories are completed, the research will show that while some people bought big boys to compensate for small johnsons or to venture off pavement, others purchased SUVs because they were a lot like station wagons. Sure we have CUVs (crossovers) to (kinda) plug the gap. But here's the thing, putting a sedan up on stilts adds weight — a lot of weight. Turning a 4-door into a 5-door? Not so much. A top spec Nissan Murano weighs in at 4,130 pounds whereas a fully optioned Altima sedan is just 3,292 lbs. 838 pounds of flabola. Of course, there's no Altima wagon, but we can look at Subaru. A Legacy 2.5 GT Limited (with auto) weighs 3,490 lbs. Compare that to the essentially identical Outback 2.5 XT Limited's 3,605 lbs. That's just 115 pounds, the weight of a healthy teenage girl. For fun, a Tribeca weighs 4,129 pounds. A slushbox Impreza 4-door weighs 3,131 pounds. The 5-door? The exact same (though… Subaru's website may be mistaken). Long story short, wagons offer the same amount of practical utility as CUV/SUVs and are inherently better on gas. Yet I don't see a single Honda Accord, Toyota Camry, Chevy Malibu, Nissan Altima, Ford Fusion or Mazda 6 wagon. Not anywhere. Any thoughts?

With mature markets under-performing spectacularly, Toyota continues to invest in supplying China's endless thirst for cars. Shanghai Daily reports that ToMoCo is about to drop some $529m on increased production capacity in the Middle Kingdom. With volume leaders GM and VW in its sights, Toyota hopes to snag ten percent market share (1m vehicles). Sales are already headed for 700k this year. Toyota is scrambling to meet demand with a production capacity of only 640k units annually. And so its joint-venture plants are getting more money for more cars; Guangzhou Auto Group will double production to 400k units, while Sichuan FAW Toyota will hit 30k and Changchun FAW Toyota will build up to 10k Priora and Land Cruisers. Of course tooling-up takes time; ToMoCo won't be finished until 2010. By which time steel and fuel prices may have taken some of the zest from the Chinese market. Still, in its pursuit/maintenance of world domination, Toyota can't afford not to build more cars in China.