Last night's banner headline over at the gadget blog Engadget read "2010 Prius revealed, sneakers still a major design influence." But no, it wasn't revealed and no, that's not the Prius. (Props to Engadget for being snarky, at the least.) This was a great case of how misinformation spreads like a gasoline-fueled fire in the ol blogosphere. Here's how it went down: Car and Driver put up a story with some not remarkably new details and a CGI of the next generation Prius just to illustrate. Of course, they didn't actually say it was a photoshop or "artist's rendering." TG Daily picked up the story from Car and Driver, along with the picture. Then Engadget – one of the largest gadget and tech blogs on the 'nets – ran with the story from TG Daily. Eventually a reader alerted Engadget that they were holding onto a not-so-hot photochop. The site added a disclaimer at the bottom of their post "Update: Our bad, looks like the image above is apparently just Car and Driver's illustration of what they think it COULD look like. Thanks, Dave." Dave? Dave's not here. Anyway, that's cool. But why is the headline still saying "revealed?" And for whatever it's worth, Vince Burlapp already posted the same CGI – as well as a back view – on Saturday.

Scott Held draws a line in the sand. “I firmly believe we will be selling Chrysler for quite a long time.” Held is the president and managing partner of Sherwood Partners. In the same year that Chrysler’s U.S. sales have shrunk by 35.9 percent, his group has just spent CA$18m on a new, super-sized Chrysler dealership in Edmonton, Alberta. What if Held’s wrong and Chrysler goes belly up? “I know I am taking a risk,” Held admits. "But I have faith."

Held’s been in the business for fourteen years, including the last three managing or running dealerships. He’s lived through Chrysler’s chequered past– and sees good things in its future. He disputes the widely-held belief that Daimler-Benz pillaged Chrysler.

“Yeah, it was a take-over. I mean, all the Chrysler execs were fired and replaced with Benz guys. But under Benz, I saw some of the product development; it gave us access to some high-technology Mercedes components we would never have had access to,” he states matter-of-factly. “It was better for Chrysler than it was for Benz. Benz bought the company for $40b and sold it for $7b,” he reminds me.

And yet, the sharp decline in bankable market value didn’t set off warning signs that Chrysler may be in bad shape.

Several factors fuel Scott Held’s optimism, not the least of which is the 22 straight months of sales increases for Chrysler’s Canadian retail operations. The success is in stark contrast to Chrysler’s U.S. misfortunes. Held attributes the Chrysler’s Canadian success to “aggressive marketing and incentives”, and, surprisingly, product.

“The Patriot, Caliber and Compass are giving us access to young people we’d never have seen… The Caliber is doing much better than the Neon.”

It’s difficult to say if Held’s analysis is on the mark. Though smaller SUVs have always fared better in Canada (where gas prices are currently hovering near $5.20/gallon), Chrysler advertises heavily in the U.S. also, and all of the models Held named are also on sale there. And doing badly.

Chrysler was one of the earliest automakers to cut Canadian MSRP to achieve parity with U.S. prices. I asked Held if he thought the move created a sales bubble, foreshadowing an eventual decline.

“They addressed the [rising dollar] very early. It didn’t give us a boost. November and December [2007] were tough months for all of Canada but we still kicked ass. If anything that just let us keep our customers we would have lost to the U.S.”

Held is fully confident in Canadian demand for Chrysler products; no bubble here, move along.

Held admits Chrysler has made a few mistakes over the years, most visibly on the Sebring. “That’s an easy one to pick on,” he jests. He was also worried about Chrysler dropping the short-wheel base Caravan for the new 2008 generation. “It did a lot of stuff for not a lot of money.”

But the bravado of the salesman always returns to the discourse. Those things “have been addressed” now. Old Sebring buyers are going for the Avenger, and SWB Caravan shoppers are going for the new Dodge Journey. “I’m surprised at how well that thing is doing,” he muses. 

Despite the “good years” under Daimler, Held thinks Cerberus is a better fit for the troubled Detroit automaker. “I’ve met Bob Nardelli,” he mentions. “They’ve done a significant amount of restructuring. They’ve committed to spending large dollar amounts on product development and on hybrids.”

Daimler, he recalls, was much more obsessed with diesel-powered cars, as befitted its European heritage. Held thinks the hybrid Durango/Aspen twins will be some great sellers. He’s so confident, that he’s ordered a “bunch of them” for his dealership. “A more volume-selling [i.e., smaller] hybrid is on the way. I think that’s where Jim Press wants to go.”

When prodded about Chrysler’s lengthy development time, Held concedes that Chrysler is a bit late to the hybrid party, but it still has to be done. “Honda and Toyota have the most success with hybrids on cars that are already fuel-efficient. We’ll be a bit late to the party, but I don’t think the party will be over.”

Held isn’t sure when such a car will come, as he doesn’t hear from Chrysler’s new, mysterious overlords much earlier than the Internet does, but his optimism isn’t tainted.

To my relief, Held’s not fazed by any of the doom-and-gloom I bring to the conversation. “I think that ‘operational bankruptcy’ thing was played up by the press because it makes a good story. The brand isn’t going to disappear.” One thing’s for sure: time will tell.

Japan has laws mandating the size of your waistline. And now the auto companies are slimming down their cars–any way they can. Automotive News [sub] reports Nissan plans to reduce its fleet's average weight by 15 percent by 2015 (from 2005 levels). Toyota is looking for a 10 percent loss. Mazda wants to pare 220 lbs. from each of its new models. Honda's trimming down (2008 Accord notwithstanding), but hasn't publicized any goals. Automakers are doing what they can to lose weight, from using aluminum and plastic body panels to re-engineering existing components to make them lighter. For example, the next Prius' electric motor will be one-sixth as heavy as the current powerplant; the batteries will weigh half as much. Honda's even going so far as to shave off slivers of steel between spot welds on the Fit to save a few ounces overall. Adding lightness is an expensive business, but with existing safety regulations and new fuel efficiency standards, there may be no choice.

I'm beginning to lose track of manufacturers' excuses for slumping car sales: Japanese currency manipulation, the "perception gap," diminished fleet sales, poor housing market, the credit crisis, gas prices, etc. Here's the latest, courtesy of USA Today. "June sales were constrained because few automakers had enough cars that shoppers really want: well-appointed but with gas-sipping engines. 'I'm sure we're missing some business because we don't have exactly the configuration the consumer is looking for and adequate stock to satisfy' the demand, says Jim Lentz, president of Toyota Motor Sales." While the explanation makes some sense for ToMoCo, who couldn't build the Prius fast enough for demand, are we seriously meant to believe that Ford would have sold lots more Fusions if the base model had more features? Yup. "'A lot of it had to do with price points,' says Eric Peterson, communications manager for Ford Motor's crossovers. Buyers who spent more wanted more power. 'Now, there's more of a shift in consumer mind-set that we're reacting to… Consumers are saying, 'I want fuel efficiency, and I want all these options as well.'" So where's the statistical evidence for this theory? You know; some data showing that highly-optioned four-cylinder models are gaining popularity? *crickets chirping* Facts. Who needs 'em?

Word has leaked out that the next-generation Toyota Prius will offer optional solar cells on the roof manufactured by Kyocera. Yahoo! News reckons the new system, rated at least 2kW, should be capable of powering the air conditioner unit. The current Prius and other Toyota hybrids already have an electric AC unit. "Adding solar panels to a model targeting mass consumers would mark a first for a major automaker", The Nikkei said. Ahem. Let's flashback to fall 1991, courtesy of the New York Times archive. The last generation Mazda 929 had 500W solar panels on the sunroof. The cells ran exhaust fans in conjunction with the AC unit (the Mazda's chiller wasn't electrically powered). The rooftop solar system could trickle-charge the battery from dead to full steam ahead in one week– assuming the 929 was parked in Arizona during the dry season. The old system was perfect for the airport long-term parking lot. It'll be a lot harder for the Prius to make this work on a daily basis, but the PR benefit for both the ToMoCo hybrid– and solar technology in general– is literally priceless. Even before it turns a wheel, the next gen Prius has trumped Chevy's plug-in electric – gas hybrid Volt. 

As Autoblog (AB) didn't see fit to pick-up the gauntlet thrown down by TTAC on the Top Gear drink driving story, we'll blog one of theirs. And hey, wouldn't you know it? AB finally finds their inner snark and wastes it on an entirely sensible post on Toyota's Open Road blog. ToMoCo offers the above advise, including get on your bike (mate) and skip the drive-thru (unless you have a Toyota hybrid, of course). To which AB scribe Chris Shunk replies: "Automakers understand that the buying public is struggling with high gas prices, and the entire industry is working on new technologies to ease our financial burden. Unfortunately, new fuel efficient products are going to take a while to develop on a large scale, so for now we're just going to have to grin and bear it. That is unless you want to follow the wisdom of Toyota, which has dug deep into its core of corporate genius to give the car-driving public this little tidbit of advice: drive less. Wow, the solution was right under our noses the whole time, and we just didn't figure it out." Silly you.

I would have gone with Major Investor Liquidity Fuck-Up. But I suppose MILF's already taken. Anyway, The Detroit Free Press is waking-up and smelling the coffee, and JPMorgan (the investment bank, not the Gong Show judge) is brewing-up some sobering news. "Analysts at JPMorgan painted a bleak picture for Detroit’s automakers today, suggesting General Motors Corp. might need to raise $10 billion, Ford Motor Co. could be forced to sell Volvo and Chrysler LLC may have few if any options by late next year." Few options as in "The company could face a 'major liquidity event' by the second half of 2009 — and its options for raising capital are limited." Is a MLE the same as Chapter 11? While we await clarification from TTAC's Best and Brightest, I reckon JP's timeline is a bit optimistic. Their overall outlook, however, isn't. "The analysts note that a bankruptcy filing at any major U.S. automaker would be catastrophic for the broader industry, resulting in widely lower vehicle prices and dealing a severe setback to auto parts suppliers." (It's that middle bit that's got Toyota worried.) Oh wait! Maybe not "They sharply widened their loss estimates for both Ford and GM for the next two years, but still expect both companies to return to profitability by 2010." Gotta love that year!

Rick Wagoner is a lame duck. No matter how you look at it, it's clear that the failing, flailing CEO must go. Next week, The General's Board of Bystanders will meet to "discuss" the crisis. GM's dividend will disappear, triggering fresh anxiety (and some atta boys) from the financial markets and the media. The Bystanders should push Rick out of the RenCen penthouse, to glide to Aruba on his golden parachute. But they won't. They can't. Wagoner walking would be the final straw: an admission that GM's forked. And before he goes, Wagoner's got one more job to do… 

Obviously, Wagoner doesn’t want to be GM's CEO when the artist once known as the world’s largest automaker (a.k.a. the world’s most profitable company) files for bankruptcy. Common sense suggests that Wagoner wants to be IN the lifeboat BEFORE the women and children (i.e. assembly workers) make egress… problematic. Or, preferably, he'd like to be watching the ship sink from the safety of a tax-free tropical island.

Remember that Wagoner’s banked well over $100m in pay and benefits during his tenure at the top. And no, they can’t take that away from him. (His pension is bankruptcy proof.) So, really, all Wagoner has to worry about is his “legacy.” He’s proclaimed that GM has enough liquidity to make it to end of ’08 (woo-hoo!), To leave on a high note, Rick's got to raise some money– say, $15b or so– and then quit before the well runs dry (again). There’s only one problem: who’s going to lend GM $15b?

There are two ways GM could secure that kind of cash. First, they could hock their foreign operations. In a way, that’s already happened. Instead of plowing overseas profits back into overseas operations– to fend off increasingly strong competition– GM NA has been using foreign income to prop-up, indeed, justify, the overall corporate bottom line. We don’t know exactly how much, from where and when this transfer has occurred, but we do know that GM NA sucks. Cash, that is.

Putting a lien on GM Europe, Latin America, et al. would be seven kinds of stupid. Although the same old management mistakes are beginning to take their toll abroad (overlapping brands, too many brands, non-competitive products), GM’s foreign empire is in relatively good shape. But the bottom line is the bottom line. The money raised by the loan would only stave-off a GM NA filing, not prevent it. GM has no high-profit replacement for light trucks to pull its ass out of the fire. When the inevitable occurs, the whole Empire would crash and burn.

The second, more likely strategy: secure federal loan guarantees and then hit-up the banks. As mentioned before, it's virtually a done deal; Uncle Sam (that's you) will back-up the notes needed to keep GM from filing for bankruptcy. It will be the perfect time for Rick Wagoner to leave– even though GM will continue to burn through the money and stay on course for Chapter 11.

C11's a good thing for GM. It's the only way it can prune its bloated dealer network and diseased brand portfolio. But again, Wagoner will do everything he can to NOT be the man in charge when– not if– the deal goes down. All of which leaves GM where we started, 183 episodes ago. Well, not quite…

Back at the beginning, I argued that all eight GM brands should be hived off into separate companies. Since then, Wagoner’s decisions have sucked the life blood (cash, distinctive models, brand equity) out of HUMMER, Buick, Saturn, Saab, Pontiac and GMC. What’s worse, he’s rearranged the automaker's structure to further blur their identities. At this point, no competitor, private equity firm or management buyout group would dare touch ANY of GM's brands.

These days, Cadillac and Chevrolet are GM’s only viable brands, and not convincingly so. Does anyone really think Caddy has what it takes to compete with BMW, Lexus and Audi? Even GM’s fiercest supporters are beginning to understand that the Volt will not be enough to rescue The General. Will the plug-in gas – electric hybrid even be enough to rescue Chevy in the face of the well-established Toyota Prius? The Honda Accord? Hyundai? Anyone? Bueller?

I used to believe that a better, stronger GM would arise from the ashes of Chapter 11. I am now resigned to the fact that it's too late. To use Car Czar Bob Lutz' terminology, all of GM's brands are damaged beyond recovery. Still, some good WILL come of this. Someone will sell something worthwhile in GM's stead. 

Meanwhile, THIS is Rick Wagoner’s legacy: an enormous automobile company without a chance at survival. That pays $1m a week to its employees not to work (not including benefits). That pays $250m a month in interest payments. That bought car divisions it didn’t need and sold cash cows it did. That sank from 29 percent of U.S. market share to less than 19. That wiped away tens of billions of dollars from shareholder value. That lied to itself and the world that it was better than it was.

[NB: This is an updated version of the original post.] 

Far be it from me to overuse a metaphor, but you know things are bad for the home team when the head cheerleader starts following the other team's plays. Right in the heart of UAW-land, Detroit News' Auto Editor Manny Lopez [reads TTAC] and mulls over the question of what constitutes an "American" car. His answer will probably piss off the Level Field Institute: as long as it's built in America with American parts, it doesn't really matter where the parent company resides. Waxing philosophical, he asks "what's more American: a Dodge Caravan built in Canada with fewer American parts or a Toyota Sienna chock full of Red, White and Blue components and built in Indiana [Ed. By non-union labor]?" Continuing along the same lines, Manny also wants to know if it's "more important to have the dollars flow back to Detroit, Dearborn or Auburn Hills or to employ American workers?" He'd better be careful or the home team fans may demand he turn in his pom-poms.

It's not even 9am, and it looks like we have a theme for the day: irresponsibility. Reuters reports that "A special edition of the [Top Gear] programme, aired in July last year, featured the show's three presenters in a race to the Magnetic North Pole. Two of them, Jeremy Clarkson and James May, were driving a heavily-modified Toyota [Hilux] pick-up truck and were shown drinking gin and tonics as they did so. It prompted one viewer to complain that the footage was 'grossly irresponsible.'" The show's producers had one word for the allegation: bollocks [paraphrasing]. They claimed they'd filmed the segment in an uninhabitable area of the North Pole. Just in case the Inuit population took offense that that suggestion, the BBC's Bad Boyz pointed out that they were in (on?) international waters "where no drink driving laws existed, and that the presenters were not shown to be drunk or out of control." Not to mention “that at present in the UK, it’s legal to drink a small amount of alcohol and still drive.” So that's alright then. Actually, no. "The BBC Trust upheld the complaint [made in APRIL] saying that drinking while driving "could be seen to glamorise the misuse of alcohol." So.. that's that then. Oh wait; the complainant was also peeved that the programme featured a bit about “parts of the anatomy and injuries to them that could shock." That's a reference to a frostbitten penis to you and me. Over to you Autoblog…

In the nineteen-eighties, Ford CEO Donald E. Petersen's recipe to save Ford from near-bankruptcy was "higher quality products… emphasizing smaller, more efficient cars." It worked, propelling Ford past Chevrolet to world-record profits. Current CEO Allan Mulally is banking on essentially the same ingredients: de-emphasize trucks and rejuvenate the car palette with global platforms largely designed in Europe. Ford's future, perhaps its very existence, is riding on it. Is the recipe still golden?

Ford's strategy is essentially defensive, conservative and obvious. The big truck/SUV paradigm that propelled Ford to outsized profits in the nineties is broken. Ford neglected its car lines, and never bothered to learn how to produce small cars profitably. It became distracted with Jaguar and the ill-fated Premium Auto Group (PAG), at the expense of Lincoln. Quality gains unraveled with disastrous transmission and head gasket problems. And the foresighted "world car" platform plans, beginning with the 1980 Escort, were unraveled by corporate fiefdoms running amok. The result was a Balkanization of car platforms.

Centralizing development and unifying Ford's global car line-up is a necessary and essential move fordward, but it's hardly a "Bold Move." There's no guarantee that the cars will be hits.

Ford's handsome new Mondeo is already in trouble in Europe, selling at lower volumes than its predecessor. Every time Ford (and Opel) attempts to go upscale in Europe, they run into a glass ceiling, where the premium brands aggressively shove downwards with their own smaller models. Ford's global Focus and Fiesta are attractive and competitive products. But expectations for their success stateside may be inflated. In the Euro-zone, the Astra is a credible competitor to the Euro-Focus and VW Golf. Setting aside questions about profitability, the imported Astra's hardly setting the U.S. market on fire. 

The same forces shrinking Ford's market share in Europe are increasingly at work here. Whereas in the eighties Mercedes and BMW were decidedly upscale, they too are pushing downwards, along with Audi, Lexus and Infiniti. And that's just the premium brands putting on the squeeze from above, keeping potential profit margins for Ford-brand vehicles in the thin end of the wedge.

In terms of direct competition, 1981 looks positively idyllic compared to 2008. In the eighties, the Japanese were limiting imports voluntarily. The Koreans were where the Chinese are today: just getting warmed-up for the attack on the U.S. market.

Ford has no realistic hope of recreating the 20+ percent share of the passenger car market in the eighties. Those days are gone, forever. The volume-brand market is fragmenting dramatically. The advantage accumulated by Toyota and Honda is staggering. Ironically, their top-selling Camry and Accord are not global cars, but targeted US models. The tables have turned, and Ford is taking on the role of an "import.. But the solidly entrenched transplants are not going down easily like Ford and GM once did.

The best Ford can hope for is to hang on to its current share, trying desperately to offset its shrinking truck and SUV sales. And the thin profits from smaller cars are going to be a big let-down from the $10+k per vehicle Ford once minted with its trucks and SUV's.

Ford bet the family farm on the original Taurus, and won big. But there's no repeating that gamble. The mid-size car market is mature. The only gamble in that segment was made by Toyota with its Prius, and it paid off.

In 2005, Billy Ford promised to build 250k hybrids per year by the end of this decade. A year later, he recanted. Meanwhile, Toyota is closing in on a million hybrids per year. Ford builds 25k hybrid Escape/Mariners annually, keeping the volume low, below market demand, because it can't make any real money on them. Ford backed away from its bold hybrid gamble. It has the technology, but failed to crank-up production and wring out the costs for eventual profits, a la Toyota. A distinctive Focus-based hybrid sedan built in quantity could have been a genuine Prius competitor.

Yes, the hybrid Fusion is coming, but it's too little, too late. Ford is not really committed to volume hybrids, unwilling to spend its dwindling cash reserves on chasing difficult profits. And except for the obligatory show-off plug-in version of the Escape, Ford has absolutely nothing in the hopper regarding electric cars, having sold off its Think EV division years ago.

If oil prices settle down a bit, Ford's strategy may buy them some time. But if Peak Oil really is lurking around that bend in the road, and/or there is a substantial shift in consumer demand for EV's and hybrids, Ford is screwed. Every other major global manufacturer (Chrysler excepted) has serious hybrid, EV and battery development projects in high gear.

In the eighties, Ford made some genuine bold moves, faced less intense competition, and benefited from falling oil prices. History doesn't necessarily repeat itself. 

At the recent Toyota Environmental Forum, ToMoCo’s Executive Vice President outlined the company’s five-point plan for a “sustainable mobility society.” Green Car Congress charts the ch-ch-changes. 1. Further development of gasoline- and diesel-fueled combustion engines; 2. Hybrids and plug-in hybrids; 3. Alternative fuels, including synthetics and biofuels; 4. Electric vehicles; and 5. Hydrogen fuel cell vehicles. Masatami Takimoto revealed that gasoline and diesel will remain the corporate mainstay. To that end, Toyota will reduce vehicle size and weight and introduce a new family of engines with start-stop, direct injection, forced induction, HCCI and variable compression. The automaker will hybridize all its vehicles lines by 2020, increasing NiMH batteries density. Li-ions are heading for city electrics and plug-in hybrids; the plug-in Li-on Prius hits the streets in 2010. And here’s the kicker: Toyota’s working to leap-frog Li-ion technology. Takimoto says a practical and cost-efficient EV demands a technological breakthrough. Maybe GM’s Volt isn’t so much a “Hail Mary” pass as an intentional out-of-bounds throw before it gets sacked by the “Sakichi” battery (named after Toyota’s founder).

Bengt Halvorson's thesis for Newsweek/MSNBC/Forbes is a predictable, plodding piece of work. The dietribe [sic] makes a stab at exploring the muddy waters surrounding domestic vs. transplant "issue." "For instance, the Chevrolet Equinox, which is assembled in Ontario, has an engine made in China and a transmission from Japan, which brings its domestic content down to 55 percent. The Chrysler PT Cruiser is assembled in Mexico, has a Mexican-made engine and only 37 percent domestic content. Yet the Japanese-branded Toyota Sienna minivan, with a West Virginia-built engine and transmission, and a final assembly in Indiana, boasts 85 percent domestic content." Rather than negotiate a sensible path through this maze– screw it, it's a global economy, buy some Toyota shares, get over it– Halvorson's propagates the propaganda perpetuated by the "Level Field Institute." [This pro-domestic lobby group, run by United Auto Workers retirees, rightly points out that The Big 2.8 account for more U.S. jobs than transplants so that you'll consider rewarding their incompetence by buying a Korean-built Chevrolet Aveo.] Halvorson's "don't buy anything but Motown product" summary [as above] arrives in the third paragraph. His list of acceptable American cars are all made by GM, Ford and Chrysler. Well, it's supposed to. The embedded link to the "10 Most Patriotic Vehicles" takes you straight to the Honda DX Civic Sedan, one of the ten "Least Expensive Vehicles to Own." Funny, that. 

Forbes, that Number One purveyor of "Top 10" lists, has devised a list of the ten hardest-to-get cars. They've based their selections on dealer inventory levels and retail turn rates (how long a model sits on the lot before it's sold). While some of the selections are obvious (anyone try to buy a Prius lately?), who would expect the 14mpg Lexus LX to be in short supply? The other two anomalies (considering gas mileage and purchase price) are the Audi A5 and the Mercedes-Benz C-Class, both of which are selling faster than they can build them. Here's the entire list and supply level of each model:

Toyota Prius – 7-day supply
Lexus LX Series – 8-day supply
MINI Cooper – 8-day supply
Audi A5 – 8-day supply
Toyota Yaris – 13-day supply
Scion xD – 19-day supply
Honda Fit – 20-day supply
Honda Civic – 21-day supply
Toyota Corolla – 23-day supply
Mercedes-Benz C-Class – 29-day supply

While GM's North American operation has been hemorrhaging money like a hemophiliac having heart surgery, its overseas operations have managed to turn enough profit to keep them from the bankruptcy court. Chinese sales are still growing, but the boom may go bust. In 2007, sales increased 19 percent. So far this year, sales are up 14 percent. Although China's still the world's fastest-growing auto market, raw material costs are soaring, and The People's Republic is easing off fuel price subsidies. Through their "joint venture" (i.e. shotgun wedding) with Shanghai Automotive Industry Corporation (SAIC), GM is the Republic's largest carmaker. But they're beginning to face stiff[er] competition from Toyota and Volkswagen. Joseph Lau, vice president for GM China, told Bloomberg "Shanghai GM has been facing difficulties by relying on existing models to compete with rivals that have added new ones." Sound familiar? Lau added that GM/SAIC has only one new model in the pipeline for this year: a locally-made hybrid version of the Buick LaCrosse. They're adding one new model next year, a Buick sedan to compete with the rapidly-growing Camry and Corolla. Does anyone know the Chinese translation for "Those who do not learn from history are doomed to repeat it"?