Oil prices have just hit record highs. Talk of recession is in the air. Ford’s line-up of bloated, heavy vehicles is piling-up like cord-wood on the dealer’s lots. The only car selling: its “Americanized” global compact. Ford stock is in the toilet and bankruptcy rumors are swirling. The top exec hired a year earlier is intelligent, unassuming and straight-talking. He commits Ford to building “higher quality products with stronger customer appeal… emphasizing smaller, more efficient cars.” Ford in 2008? No, it’s 1981.

Like current Ford CEO Allan Mulally, Donald E. Petersen was an atypical choice when he was promoted to the Presidency by the Ford family in 1980. An engineer, development executive and genuine piston-head, Petersen was also the antithesis of Lee Iacocca, whom he replaced. Never in modern history has an automotive CEO been so devoid of spin and hyperbole. No wonder Ford of the eighties looked to Japan for inspiration.

Petersen learned of Toyota’s use of quality guru Edward Deming. In the first coherent US automaker assault on “total quality,” Petersen adopted Deming’s techniques, and those of corporate guru Peter Drucker. As measured by owners, Ford’s vehicle quality improves 60 percent from 1980 to 1987.

The aerodynamic 1983 T-Bird launches a dynamic wave of efficient, exciting and successful passenger cars. The Turbo-Coupe has the world’s first fully computer controlled (EECV-IV) integrated turbocharged fuel injected engine. The Ranger successfully takes on the long-established Japanese compact pickups, becoming the category best seller for many years. The Fox-body Mustang’s balance of light weight and V8 power at an affordable price reinvents and dominates the pony-car class.

In the biggest single auto product gamble in modern times, Ford launches the 1986 Taurus. It leapfrogs the competition, and sets the packaging and dynamic standards for the modern US-market sedan. For sells 400k Tauruses per year, grabbing the best-seller crown from the Honda Accord by 1992. Petersen employs Japanese “just in time” production methods at Ford, and the Atlanta Taurus factory becomes the most efficient auto factory in the US (including Japanese transplants).

Petersen’s honest, cooperative, non-political management style motivated FoMoCo’s management ranks as never before. His deep experience in car development as a car enthusiast ensurfed that Ford’s products were consistently more dynamic than their competition.

In trend-setting, car-conscious California, Ford becomes the number one selling brand. The Blue Oval Boys’s passenger cars sell well in The Golden State; GM and Chrysler have already become irrelevant (except for trucks and Corvettes). Ford’s profits explode. In 1986 and 1987, Ford was the most profitable car company in the world. As its stock ascends from around $1 in 1982 to $17 in 1987, “F” becomes a Wall Street darling

But what really separates Petersen from the rest of his ilk: he maintains perspective, candor and modesty– despite the phenomenal success that was his doing. It’s a stark contrast to Chyrsler’s Iacocca, who had to be dragged out of Chrysler kicking and screaming, well past his sell-by date. And then tried to weasel his way back several more times, Petersen consciously and quietly retired two years early in 1990 at the age of sixty-three. He wanted a new management team to have a running start dealing with the clouds he clearly saw gathering on Ford’s horizon.

In an exceedingly frank and prescient farewell discussion with thirteen journalists the day before he retired in 1990, Petersen expressed grave concerns about the future of the U.S. auto industry. According to one reporter, “his terse answers were sobering. The word survival came up a lot because it’s no joke to ask how much of a home-grown auto industry will exist a generation from now.”

“Because of the deep partnerships of the Japanese companies with their suppliers, changes can be implemented predictably and rapidly. The steady loss of state-of-the-art manufacturing technology in the US manifests itself in the longer product cycles and lower real or perceived quality of the domestic automakers… There’s this nibbling away, this gradual erosion that’s occurring that nobody sees very well, I don’t think. It bothers me a lot.”

Petersen ended with a warning that “the manufacturing sector in the US is going through the same process now as the agricultural sector went through in prior generations… we have to accept that it (manufacturing) will generate a far smaller percentage of the employment of the people of the United States than it does now or did 10 years ago. There will be far fewer jobs.”

Those words spoken eighteen years ago seem remarkably prophetic (“how much of a home-grown auto industry will exist a generation from now?”) ,especially during Ford’s current déjà vu crisis. Alan Mulally has charted a very similar course for Ford’s salvation, emphasizing efficient European cars and quality. Will the same medicine save Ford a second time?

To paraphrase John F. Kennedy (who probably stole the expression from someone else), a falling tide lowers all boats. Or, if you prefer, it looks like Toyota got keelhauled along with the rest of 'em this month. Automotive News [sub] also does nautical metaphorication, reporting that "Toyota Motor Corp. ran aground in June, with U.S. sales down 21.4 percent (unadjusted), the biggest drop of the year for the world's No. 2 automaker. For the first half, Toyota said it sold 1,240,086 vehicles, down 6.8 percent from the first half of 2007." ToMoCo doesn't break out their Scion sub-brand's sales, but Lexus is proving to be a luxury canary in a gold mine- or if we're unmixing metaphors, a bit of a boat anchor. Lexus' Junes sales slumped 21.1 percent vs. June '07. Truck sales? We're talking post-iceberg Titanic; down 31.1 percent. What's worse, Toyota can't build Prius-shaped lifeboats fast enough. "Sales of the Prius hybrid were down 25 percent during the month as Toyota struggled with supply problems. Dealers are reporting a two-month wait for the fuel efficient hatchback." Clearly, the U.S. market is undergoing a sea change. Toyota has the products it needs to change course, but it's hard to sell anything when people ain't buyin'.

UPDATE: Toyota just sent out a revised press release with June's sales breakout. The numbers in the press release are adjusted for selling days. The numbers used both by Automotive News and TTAC are unadjusted. 

Click here for Toyota Sales Press Release 

Talk about the right place at the right time. Toyota's Yaris three-door hatchnack– excuse me, three-door liftback— and four-door sedan have been taking numbers and kicking names in the American new car market. Well, duh. First, Yari are fuel-efficient wee beasties (34/40 or fight). Second, despite a whole bunch of piggish SUVs, Toyota is still the small-car manufacturer of the moment. And third, they are cheap ($11,350 and up). So it makes sense that ToMoCo would bring the five-door Yaris– already on sale in Canada and most of the rest of the world– to the US. Americans certainly seem to have warmed-up to hatchbacks. As the basic Yaris is already America-compliant in terms of crash testing and emissions, it's a no brainer. If only the D2.8 were so smart. Lucky? Well-prepared? Prescient? Your choice. 

In today's Wall Street Journal, Joseph White proposes Three Vehicles Detroit Should Build. Y1) a seven-passenger vehicle that gets 30mpg highway, 2) a midsize sedan that gets 40mpg highway that doesn't cost much more than a Malibu or Camry, and 3) a pickup truck large enough to do real work and comes close to 30mpg highway. Worthy goals, indeed. But, Mr. White, may we suggest looking at what the competition already has on the market: 1) no current US market seven passenger gas-powered vehicle gets close to 30mpg highway. [Note: such vehicles exist overseas – assuming you don't look like the humans in WALL-E] 2) The Toyota Prius is the only midsize car that gets 40+ mpg on the highway, never mind that the Cobalt XFE can't hit that number on the side of a barn despite its stick, and 3) if someone builds it (a compact diesel pickup), will they come? What of high diesel prices and competition? And what if ALL of The Big 2.8 builds these self-same vehicles? Anyway, the D2.8 have enough to worry about just trying to survive the next year, much less leapfrogging the competition in the fuel economy department.  Of course, there's always the option of installing much smaller engines and asking customers to put up with 0 – 60 times up to 20 seconds, just like in the 1970's. 

For the third time, a dramatic oil price spike has thrown the auto industry a curve ball. And once again, after years of supersizing, manufacturers are lacking the right-sized, economical products for which the market is desperate. Instead of spending three to five years developing new cars from scratch, it’s time to dust off the best from the past and put them back into production. An air bag here and some updated engines and technology there, and these seven classics are ready to save the day in each of the major categories: Read More >

After thirty-two years in the media, I know how this works. You take a popular, generally negative story like, say, rising gas prices. You think of a likely trend within the story: the effects of $4 a gallon gas on teenage cruising. Must be down, right? Makes sense, yes? So you find people who can validate the central thesis: teens, teens' parents, cops. You weave the tale with plenty of anecdotes and call it good. In fact, there's only one thing missing from this otherwise boilerplate New York Times feature: facts. "From coast to coast, American teenagers appear to be driving less this summer. Police officers who keep watch on weekend cruising zones say fewer youths are spending their time driving around in circles, with more of them hanging out in parking lots, malls or movie theaters." Note the word "appear." And the reliance on an unspecified number of police officers. To be fair– not always a NYT hallmark– The Grey Lady mentions the possibility that the dearth/death of cruising might have something to do with… something else. "To be sure, the number of teenage drivers nationwide was already on a downturn over the past decade, a trend fueled by tighter state laws governing the hours when teenagers can drive, higher insurance costs and a move away from school-sponsored driver’s education programs to more expensive private driving academies." To be sure, we expect better reporting from America's newspaper of record.

Automotive News [AN] reports that the Wall Street Journal has got a hold of a J.D. Power report on June's sales stats. As you can see above, it ain't pretty. In fact, it's ugly as Hell. If J.D.'s mob are even remotely accurate, the U.S. market is undergoing a contraction violent enough to make a mother of five think twice. "J.D. Power and Associates is predicting the June seasonally adjusted annual sales rate will plunge to 12.5 million vehicles, down from 16.3 million last June. That is far below what other analysts have projected for the month's sales." Especially GM, which predicted (at last count) 14m new vehicle sales for the year. J.D. Power expects Toyota's sales to tank by 6.6 percent. "That would give it a market share of 18.7 percent, near GM's predicted 19.2 percent share." Yes, well, there is no way GM can sustain itself at a 19.2 percent market share of 12.5m vehicles. Chrysler? Again, I reckon their company-wide summer break will be terminal. Meanwhile, the real numbers will be released on Tuesday, and TTAC will be there. 

Credit Justin Berkowitz. On a recent podcast, Justin chastised Ford President Mark Fields for begging for bucks for hybrid batteries. "Stupid schmuck," Justin said [paraphrasing]. "Ford should concentrate on getting small cars like the Focus and the Fiesta to market as soon as possible." And now Bloomberg reports that FoMoCo is committing itself to NOT developing a plug-in electric hybrid (PHEV). Ted Miller, Ford's senior manager of energy storage, said Ford would not take an "overly aggressive approach" [as opposed to a conservatively aggressive approach] to introducing plug-ins. That would be "akin to a Hail Mary." And that's bad. "A Hail Mary means that we're probably going to have to neglect a lot of other things." In other words, Ford can't afford to chase rainbows. Despite the common sense, Bloomie Scribe Greg Bensinger feels compelled to warn his readers that Ford's non-tack might leave the automaker high and dry when GM or Toyota introduce a massively popular PHEV. See? Now that's funny! Meanwhile, Blue Oval Boy Said Deep revealed there'll be a hybrid Mercury Milan and Ford Fusion in Ford showrooms by year's end, for a total of four gas – electric models. A new-ish Mercury! More Jill Wagner ads! Rejoice!

First, this was an easy call. Commodity costs have jumped significantly in the last year, eating into Toyota's– and everyone else's– profits. Second, as the new world leader, ToMoCo is best positioned to pass on those costs. Quoted by Automotive News [sub] CEO Carlos Ghosn admitted as much. "It's very, very difficult to move in a market without somehow the leader of the market (making a) move." Third, you gotta read between the lines here. "Our basic principle is to continue to work on cost reductions within the company first," said Toyota spokesman Paul Nolasco. "But we won't be able to avoid thinking about price hikes in the future considering a recent jump in raw materials costs." How… inscrutable. As I reported in General Motors Death Watch 182, here's real deal: Toyota wants to see what happens to the other guys– specifically GM– before upping its profits. "We'll make a final decision after evaluating April-June sales and production costs," a "top Toyota official" told The Nikkei business daily. 

We hear reports that Mazda is fueling its growth by stocking American rental companies with product. Normally, this sales strategy is a sure way to run a brand into the ground; to ensure that factories build The Least Objectionable Automobile rather than something inherently worthwhile. Not in this case. In fact, you could say that Ford's Japanese partner has created the world largest, perhaps best demo fleet for the four-cylinder Mazda6i. If you have a choice, make it your default option.

CNN Money's editor at large, Paul LaMonica, thinks GM should be kicked out of the Dow Jones Industrial Average. He argues that GM's poor performance, their plans to ditch HUMMER and the current 0% financing offer are all indicators that GM is in trouble. (If I were a cynic, I'd ask where he was when GM dumped Oldsmobile and had their "anyone with a pulse" financing deals.) What does LaMonica suggest to replace GM in the Dow? It "can still have an automotive component… GM is continuing to lose share to Japanese rivals Toyota (TM) and Honda (HMC). While the editors at the [Wall Street] Journal have maintained that the DJIA is only for American companies, I think that's a view whose time has passed." He concludes GM's just one of several companies "that are just not as relevant as they used to be, such as Sears, Eastman Kodak and U.S. Steel… GM's time has come." Ok — enough is enough. What took you (and everyone else) so long to figure this out?

Toyota's dominance in hybrid technology has other OEM's straining to leapfrog on to The Next Big Thing. While GM tries to beat ToMoCo to the PHEV punch, Mazda decided to combine three imperfect technologies into one over-the-top rolling lab. By modifying a Wankel rotary engine to run on hydrogen, and then adding a hybrid system, Mazda's Premacy Hydrogen RE Hybrid wins the prize for the most complicated possible approach to high-efficiency motoring. But let's not condemn this franken-hybrid to the scrap heap of engineering excess just yet. Wards Auto has learned that the Japanese Ministry of Land Infrastructure and Transport has given the Premacy Hydrogen RE Hybrid permission to undergo testing on Japanese roads. Of the three systems, hybrid technology is clearly the most promising. But Mazda's blind technophilia has mated it to an immature fuel source and an inherently inefficient ICE. Who cares that it gets 124 miles from a tank of hydrogen and boosts power 40 percent over a "standard" hydrogen Wankel. Mazda plans on leasing these people-movers in Japan later this year. Here's hoping that the lease comes with an uncompromising warranty.

$11,800. That’s the price for a 2008 Chrysler PT Cruiser down at my local Chrysler dealer. Throw in the “Refuel America” $2.99 per gallon guarantee into the equation and you end-up with a pre-tax, tag, title price right around $10,200. Not bad. Not bad at all. Then again, is it? There are a lot of factors to consider when approaching any of the bargain basement cars currently on offer during this, Detroit’s [most recent] dark days. Join me as we journey down the PT-shaped rabbit hole…

If you're not an enthusiast, and simply want a 'keeper' car, the $10k Cruiser may be a great deal. What’s that you say? It’s going away? Well exactly. There are a lot of pluses for soon-to-be-defunct, less popular cars like the PT Cruiser that go far beyond the initial purchase price.

A long model run usually translates into a lot of easily obtainable spare parts, from multiple sources. The nearby parts store or junkyard will likely have replacements available for the eight year-old PT in duplicate or even triplicate. The PT Cruiser will also outdo recent entrants like the Toyota Yaris, Nissan Versa and Honda Fit when it comes to parts cost. For transplanted customers who have been beholden to the dealer for a $500 repair, that would cost maybe $150 in a mainstream Detroit iron, this is a weighty consideration.

All things being equal, a long model run also has the advantage of offering far fewer defects 'on average' than the latest and greatest models. A car that's been built a million times over has effectively given the supplier and the manufacturer plenty of opportunity to improve the car's design and reduce defects.

[Note: this isn't always the case. Google 'engine sludge' or 'transmission issues' and you'll see a long list of both domestic and transplant products that failed to make the grade, either initially or over time. However a quick visit to an enthusiast's site for your car (Google the model and add 'enthusiast' to the search) or owner's review sites like TrueDelta can tell you all you really need to know about a vehicle's true quality.]

Then there’s the double whammy of depreciation and gas cost.

For a car like the PT Cruiser, depreciation can be an absolute killer. As of writing, a PT Cruiser will lose an estimated 63 percent ($9,644) of it's retail value over five years. That’s far more of a hit than new models like the Yaris ($3,960), or Versa ($5,059), or the Fit ($5,152). For those who keep their rides for five years, the Intellichoice site is a good place to figure out your true costs of ownership, including depreciation. 

If you're one of the wiser souls who decides depreciation should be minimized at all [non] costs, you’ll find that a 10-year ownership period will reduce this difference by at least two-thirds. As common sense suggests, when it comes to depreciation, it's the keeper who usually comes out ahead.

There’s a lot anyone can do to minimize their vehicle’s depreciation. Keep it, clean it, use high quality parts, drive conservatively and know your car by joining an enthusiast's group. But gas cost is a far, far stickier wicket.

The PT Cruiser may be seen as frugal wee beasties, but a 19 city and 24 highway mpg rating puts it far behind on the other three competitors. If you keep a PT for 100k miles and drive evenly between the city and highway, you’ll spend $18,605 on gas (assuming $4/gallon). That is $6,105, $4,320 and $5,490 more than the Yaris, Versa and Fit. Double the duration and your gas costs may outweigh any other single cost. Even depreciation. With gas supply on a perpetual plateau and demand only going up, this is a real deal breaker for those who’ve changed their fuellish ways.

Finally, there’s insurance. An older and more conservative car with a strong safety rating will usually do far better here than a fashionable car that appeals to a riskier audience. In this sense, the PT is good news. A car like the PT Cruiser A) generally appeals to conservative and mature drivers B) offers pretty good safety ratings, and C) and requires cheap replacement parts (as mentioned). Most folks will simply call their insurance company and get a quote. That's fine. But being on the right side of these three rankings can make a big difference on the bottom line. 

So, for a retiree who drives sparingly, a brand new PT Cruiser is an excellent value. For an enthusiast, the Fit and Versa are the more fun vehicles to drive. If you look at cars as an overall economic proposition over a relatively short time period, the Yaris is probably a better bet. Personally I’d pick a VW Rabbit. But that’s an article for another day.

Several of TTAC's Best and Brightest sent us links to today's Wall Street Journal article "GM Slates Sweeping Rebates As Toyota Closes In on No. 1." That's bad news, but it's not new news– in these parts anyway. The real reason so many of our readers sent the tip is buried in the body copy of the story. "The cost of insuring against a default in GM's bonds has soared to a high in recent weeks as fears of a bankruptcy-court filing have grown. An investor who wants to buy credit protection on $10 million in GM's bonds for five years currently has to pay $2.8 million upfront and $500,000 annually for that insurance, through what are called credit-default swaps. A year ago, that protection cost only $400,000 annually, with no upfront cost, according to Credit Derivatives Research LLC. Based on market prices, debt investors currently see more than a 70% chance that GM will default on its obligations sometime in the next five years, said Boaz Weinstein, co-head of credit trading at Deutsche Bank AG." The really worrying part? "A spokesman for GM said it has sufficient liquidity for 2008. He declined to comment on 2009." Saepe ne utile quidem est scire quid futurum sit.  

Edmunds Auto Observer is often the first website to review a new car– in the sense of showering it with love and happiness or, at worst, gumming it to death. Suddenly, uncharacteristically, under the guise of humor, the bloggers who still won't fully disclose car manufacturers' contributions to their editorial (a.k.a. junketeering) grew a pair. Ish. Writer Bill Visnic offers a list of cars that "don't have a chance." Of course, it's not the carmakers' fault. Oh, no these whips are doomed "mostly [due] to the new rules governing the auto industry" Some of the cars– which now "suddenly look titanically dumb"– are easy targets (VW Rotten). Others are guaranteed sales successes (Honda Accord). So we put it to you, our Best and Brightest: which of these things is not like the other? Which of these things will not belong? And what other vehicles should be on this list of future flops, and why?

BMW X6
Cadillac CTS-V
Dodge Challenger
Dodge Ram
Ford F150
Ford Flex
Honda Pilot
Honda Accord
Infiniti FX50
Lincoln MKS
Hummer H3T
Toyota Venza
VW Routan
VW Tiguan