As you know, TTAC has a simple posting policy: no flaming the website, it's authors or fellow commentators. As some commentators have [rightly] pointed out, the policy contains a glaring inconsistency: we allow flaming of third parties. GM Car Czar Bob Lutz, Toyota, The New York Times, President Bush, etc. have all been flame-broiled on this site. [NB: if Bob Lutz or George Bush posted on TTAC, they'd have anti-flame protection.] My only defense for this obvious double standard: it works. I'm not going to make that case by pointing to any of the incisive remarks penned by our Best and Brightest. Instead, I'd like to draw your attention to the comments (and picture of a douche) underneath a Jalopnik link to my last GM Death Watch. If you share some of these sentiments about TTAC, I invite you to voice them right here, right now. All I ask is that you do so in a civilized manner. Because that's who we are, and that's what you do. Meanwhile, Justin and I discuss the day's news.

The AP reports that Toyota is tackling slow Japanese sales with a new, 200-store and restaurant, auto-themed mall. The Tressa mall in Yokohama features car-shaped shopping carts, a model car store and musical robots. The mall's "anchors:" massive Toyota showrooms. A Toyota subsidiary has been operating an automall in Gifu prefecture since 1999. Despite the marketing razzmatazz, the root problems for Toyota– and Japanese car sales in general– remain. An analyst with Mizuho Investors Securities says that Japanese OEMs have ignored the competitive domestic market for too long in favor in favor of higher profits abroad. Atsushi Kawai says the neglect has created a cultural resistance to the enormous hassles of Japanese car ownership. "Domestic sales are a total disaster now," says Kawai. "A car used to symbolize a dream. People used to work hard to buy a car. These days, nobody is saying that. No one thinks a car is cool anymore."

Ford invited journalists over to check out its "virtual assembly" technology. (Our invitation was lost in cyber-space.) The Detroit Free Press came, saw and geeked out, leading off their breathless coverage with "If you want to know why Ford Motor Co.'s quality is improving so much…" But what exactly is this strange and mystical technology which makes otherwise credible journalists into so many ad copy writers? Combining motion-capture and computer modeling technologies, Ford "builds" model factories and inhabits them with avatar workers who virtually assemble vehicles. By analyzing how production operates virtually, Ford engineers can streamline and simplify the process. The result: better ergonomics and fewer injuries for production workers, improved production efficiency and quality improvements. AND the computer modeling allows Ford to develop production processes faster, so it can bring new products to market in less time. (Where? What?) Ford is so proud of their sim factory it boasts that productivity master Toyota is curious about the technology. Then again, ToMoCo knows that the map is not the territory. 

It’s getting close to the first anniversary of Chrysler going to the dog. While there’ve been job cuts and “market adjustments,” the shoes are still hanging. Chrysler is still a long way from being profitable. But it appears to be an equally long way from breakup. What exactly is planned? The truth may be that Cerberus isn't “planning” so much as “waiting.”

For Cerberus, buying Chrysler was a gamble. As you’d expect from New York money men, they did several things to “stack the deck.” First, they got the company for a song (under seven and a half billion) with some working capital included. More importantly, they took the automaker private. With no shareholders to whine about dividends, no “captain Kirks” to try to swing a takeover, Cerberus can afford to take the long view. And the long view says… go public. Or strip and flip. Either way, now’s not the time.

Cerberus’ holding pattern has less to do with ChryCo’s declining fortunes than OTHER carmakers’ declining fortunes. In other words, you can’t flip a company without a flipee. The current U.S. automotive market leaves very few players flush with cash, looking for an American dance partner. And those that are, aren’t. Splitting-up Chrysler’s assets is the only realistic alternative, and that idea poses involves many of the same issues.

At the moment, Jeep is only spinnable hunk of Chrysler. (No surprise there; Jeep’s had more “partners” than the widow next door.) Jeep is the only part of Cerberus’ entire car making operations with a positive cash-flow. While the profits aren’t enormous, the brand’s “trail-ratings” carry enough cachet to allow big mark-ups on simple vehicles. 

There are several problems with Cerberus selling Jeep sooner rather than later. First, while Jeep’s hard-core fan base is less (more?) affected by fashion than most, SUVs are not the flavor of the month. The new U.S. federal corporate average fuel economy (CAFE) regulations are in flux, awaiting clarification and California-compliance (or not). In any case, whatever Cerberus could get for Jeep now pales is comparison to what Jeep would be worth in a hot, relatively settled market. 

Next and again, who’d buy Jeep? With credit in short supply, a US-market outsider would have trouble stumping-up the dough to snag it. And those foreign firms that could afford Jeep (BMW, Toyota, Honda, etc.) either already have off-road products or don’t want them. VW is busy. Daimler is sitting in the corner, grinning.

Renault/Nissan is the only like foreign suitor— only they aren’t. Carlos Ghosn may make noises about mergers, but there ARE limits. And lest we forget, NONE of the imports are brave/stupid enough to buy a unionized company, bringing the (free!) Trojan horse through the gates. Domestically, Ford just sold Land Rover. And although GM has decades of experience cannibalizing itself, even RenCen knows it doesn’t need Hummer AND Jeep.

Besides, what would Cerberus do with the rest of the company after they stripped-out the only part anyone wants? China is often named as a potential buyer, but even for pennies on the dollar for U.S. production capacity and access to thousands of dealers, they’d see Chrysler as the financial sinkhole that it is.

No matter how much— or more likely little— Cerberus made from a larger Chrysler breakup, it could be the volte face that launches a thousand lawsuits. Shuttering Oldsmobile cost GM billions; the General’s terminal brand wasn’t a fraction the size of Chrysler, Dodge or Jeep (never mind the three brands combined). Filing for bankruptcy and THEN selling off the bits would mitigate Cerberus’ legal risk, but it’s hardly a profitable exit strategy. If nothing else, Chapter 11 would decimate the brands’ street value.

As I stated at the beginning, any fool knows that Chrysler is a long, long way from profitability. But who said anything about profitability (other than me)? Cerberus doesn’t have to “build equity;” they don’t have to justify their decisions to institutional shareholders. Think of Chrysler as a slum landlord who bought a building on the cheap awaiting a buyout offer and you begin to get the picture.

Watch as Chrysler reins-in R&D while “consolidating” dealers (i.e. watching them die). This viewpoint explains “quicker than quick” Chrysler’s strange reluctance to cut vehicle lines that everybody (but their few remaining buyers) know are dead in the water. The superabundance of product forces dealers to go tits up, and leave their proverbial apartments.

Remember: Cerberus is in this to make money, not to “save Chrysler.” They need to get their $8b back, plus a little extra (Daimler holds 19.9 percent). To do that, all they have to do is run the business into the ground. When the time comes to “sell Jeep, liquidate the rest,” Chrysler’s corporate coffers will be conveniently bare (or pretty close). The lawyers can fight over the bones. And the “dog” will have had its day.

Diesel Forcast is reporting that Indian firm Mahindra & Mahindra will be showing a diesel-hybrid powertrain on its Appalachian pickup at the Society of Automotive Engineers World Congress in Detroit. Not much is known about the system, other than that it's likely based on the company's 50-state-legal 2.2-liter inline four engine. [Note: Mahindra VP for Engineering and R&D Arun Jaura worked on the Ford Escape Hybrid program before moving to his current position.] Mahindra already has a U.S. distributor, but has not yet provided details about the U.S. release of its pickup or Scorpio SUV in either diesel or hybrid diesel forms. This widens the race to release a U.S. diesel hybrid to three companies: Mercedes, Ssangyong and Mahindra & Mahindra, with hybrid giant Toyota vowing to sit out the diesel-hybrid competition.

In a desperate effort to sharpen the dulling edges of Scions "edgy, youth-oriented brand," Toyota is offering fans a website (scionspeak.com) where they can channel their youthful enthusiasm towards designing individual logos for their sweet rides. The New York Times reports that Scion owners can build a logo from hundreds of symbols designed by a professional graffiti artist, download them and have them made into window decals or airbrush templates. Whether the middle-aged-and-up folks who occupy most of the Scions I see on the street even know that there is such thing as a "professional graffiti artist" or will use this website remains very much to be seen. The real point of this exercise is to keep the myth of Scion-as-youth-brand alive… among those who already own one. The campaign is not aimed at actually reversing Scion's sagging sales, but "reducing Scion's investment on conquering new customers and increasing the passion for the brand among its core fan base," according to the company running the campaign. We bet they'd do better by offering a special ramp so your youthful Rascal Mobility Scooter can drive out of the back of your xB.

With Toyota set to begin selling hybrids in South Korea this year, Hyundai is fighting back by announcing it will begin mass-producing its own hybrids. Donga reports that the announcement of a liquid petroleum gas (LPG/LNG)-electric hybrid and gas-electric hybrid versions of the Avante (Elantra) sedan coincided with Chairman Chung Mong-koo's visit to a Kia factory over the weekend. The automaker has already provided hybrid cars to the Korean government, but this announcement heralds Hyundai's first attempt to go after the commercial market. The LPG-hybrid will be available in 2009, followed by a standard hybrid and larger LPG-hybrid models in 2010. Also planned are fuel-cell models to go on sale in 2012. No word yet on whether these models will be available in the States, but since Hyundai cites the projected million-unit hybrid market of 2010 as rationale for this move, one has to assume that we'll be seeing these gas-sippers at some point.

Scientist/environmentalist Amory Lovins believes that America can solve oil dependency with efficiency. In the early '90s, Lovins conceptualized the Hypercar: an ultra-light, aerodynamic hybrid vehicle with three-to-five-times better mpg than your average bear, with comparable performance, safety, usefulness and affordability. According to US News and World Report, Lovins recently told a National Academy of Sciences energy summit that building cars with advanced lightweight materials like carbon fiber (instead of steel) would boost automotive efficiency to 85 mpg for midsize cars, 66 mpg for midsize SUVs. Lovins claims that "lightweighting" would also improve vehicle safety since the advanced materials can absorb "up to 12 times as much crash energy per pound as steel." Automakers aren't buying it. Literally. "Lightweight materials are horrendously expensive," GM Vice Chairman Bob Lutz told Automotive News [sub]. "People keep forgetting the cost equation." D'oh! Anyway, Lovins and Lutz must live in parallel worlds. "I'd say lightweighting is the hottest strategic trend in the industry right now," Lovins counters. Ah, "strategic." Meanwhile, Lovins' FiberForge seeks to capitalize on his faith in adding lightness. 

The line of succession at Ford Motor Company doesn't have a Ford in it (surprise!). In an interview with Automotive News [sub] last week, Ford personnel chief Joe Laymon laid out the short list for the next CEO. Of course, the board of directors has the right to consider other than these candidates, but the self-proclaimed "owner of Ford's succession-planning process" said CEO Alan Mulally asked him to identify those within the corporate structure worthy of ascension to the throne. Not surprisingly, "Mullet" Mark Fields is on the list; when asked to comment on his chances of making it to the top, he stated "I am not going to go there…I am not focused at all on things like the succession race. We [note the change to the "royal we"] are focusing on doing our jobs." And of course, Big Al's favorite Toyota ex-pat Jim Farley made it. Assuming the proper "aw shucks" attitude, he humbly commented "You earn those opportunities. Right now, I haven't done anything." [At least he admits it; honesty has to count for something.] The other four in the running are Lewis Booth (VP for Ford of Europe and what's left of the PAG), Joe Hinrichs (VP of global manufacturing), Don Leclair (CFO), and Stephen Odell (COO, Ford of Europe). So who will it be when Mulally's five-year contract runs out in 2011? Just as with GM, watch to see who they move into the corporate COO position next.

“Not making a car like the Prius was a mistake.” In recent days, GM’s Car Czar has amped-up his pro-hybrid rhetoric, including this mea culpa. Clearly, Vice Chair Bob Lutz’s enthusiasm for gas – electric products has undergone a volte face, inspired by his fatalistic conclusion that only alt power can satisfy federal regulators’ mandates for increased fuel efficiency. But in his newfound zeal, Maximum Bob is rewriting history. In the interests of truth, let’s set the record straight.

“We had the technology to come out with a hybrid at the same time as Toyota… In hindsight, it was a mistake… We made the mistake and we won’t make it again” (ABC News). 

Lutz is referring to GM’s 1996 EV1, whose release predated the Prius by a model year. More specifically, the year after the Prius began its long, slow, difficult march into the automotive mainstream, GM introduced several alt power variants of their all-electric EV1 at the Detroit Auto Show. They displayed a diesel/electric parallel hybrid, gas turbine/electric series hybrid, fuel cell/electric and compressed natural gas low emission internal combustion engine EV1.

With the benefit of hindsight, it’s easy to say GM should have developed the EV1 as a gas – electric hybrid. But the EV1 was NEVER designed as a mainstream vehicle. It was produced solely to satisfy the demands of California’s Zero Emissions Vehicle regulations and, latterly, PR. The exotic powerplants the EV1 could have been offered were blue sky. Besides, it’s quite a leap to think that GM would have backed the right horse in this alt power race when, in fact, they didn’t.

In contrast, Toyota chose one environmentally-friendly technology and stuck with it– through three years of development and many more thereafter. Right from the start, the Synergy Drive-equipped Prius was designed to be both scaleable and affordable. In terms of price, range, convenience and comfort, the dumpy first generation Prius was irrefutably more of a “real world” vehicle than the 90-miles-per-charge EV1.

“Lutz said being late to the market with hybrids has cost GM billions in sales because it lost its image of having superior technology” (Detroit News). “I think the company has learned when you step out and do bold things, you win” (ABC News).

Truth be told, GM hasn’t had an “image of superior technology” since the mid-fifties. Since then, GM’s half-baked efforts to cultivate “superior technology” have destroyed its image, wounded its rep and shed sales. Corvair, Buick aluminum V8, Vega, the Wankel rotary engine, Cadillac V8-6-4, Oldsmobile diesel, X-car FWD, plastic intake manifolds— GM’s list of abortive cutting edge technologies is long and depressingly consistent.

GM has not learned from this history, and if it has, it’s learned the wrong lesson. In its attempt to recapture the technological high ground, GM has developed four hybrid systems, all of which are bold, none of which is commercially viable. GM could stick with one system and try to use economies of scale to generate a profit. But it hasn’t. Once again, it’s chasing a new technology.

“GM’s initial estimates of 60,000 to 100,000 annual Volt sales could grow five-fold, Lutz said, adding that the car is a ‘game changer’ on par with the Ford Model T.” (Detroit News).

The Volt has absolutely nothing in common with the Model T. Henry Ford’s “game changer” was all about the rationalized production of a quality, economical low-cost car. The affordable, reliable Model T was the most profitable industrial undertaking the world had ever seen.

The $2500 Tata Nano is a “game changer” on a par with the Crazy Henry’s Tin Lizzy. To suggest that the $40k-plus Chevrolet Volt (or the forthcoming $48k plug-in Saturn Vue) will revolutionize transportation and save GM’s bacon is the worst kind of hyperbole: the kind that deceives its originator into self-destructive delusions of grandeur.

“I don't think it would be a vast overstatement to say the Volt is in many ways symbolic of a renaissance in the American auto industry” (Bob Lutz, Wired).

Lutz is re-writing history in advance. While it’s often said that history is written by the winners, it’s equally true that propaganda is written by its losers.

In any case, the U.S. auto industry has already experienced its renaissance— in the transplant factories dotted across the South. Volt or no, GM will never– can never– recapture the market share its shed over the last five decades.

(Lutz comparing the Volt to the moon shot) “Yes. That's a good analogy. If it doesn't work, it's not fatal. But if it does work, it will be sensational” (Wired).

The history here is apt. The moon shot was a hugely expensive and unsustainable exercise in national pride that enriched its subcontractors but not its “investors” (i.e. taxpayers). The Volt will eventually appear. But it will not save GM. It will be a historic achievement marking the end of GM's history.  

As sure as night follows day, you can count on seeing the following after news of an automaker in trouble.  “___ is in talks with Renault/Nissan CEO Carlos Ghosn.” The other thing you can count on: these talks won’t amount to a hill of beans. At most, the result will be some sort of technology-sharing venture in some peripheral market or an engine deal for a car you’ve never heard of. Why all this sound and spin signifying nothing? Because the Brazilian-born auto exec knows which side of his bread is buttered. 

The biggest problem facing Renault Nissan (R/N) isn’t failure; it’s their lack of “success.” R/N’s operations are profitable, their factories efficient, their cars respected. All this is true, but… while both companies’ model lineups contain plenty of fine cars, there are no “segment-busters.” Worse, these R/N machines aren’t languishing in second place; they’re forgotten cars. 

Nissan’s USA ops are a classic example. The Altima and Sentra are not even mentioned in the same breath as Accord/Civic or Camry/Corolla, sporty performance or not. The Quest is buried deep in the minivan heap. Nissan’s crossovers are a mishmash: two-row vehicles in two sizes (and price points) with no true three-row offering.

Nissan’s American SUVs tell the same tale: competent enough, but lost in the shuffle. The recent meltdown/price war in pickups hit Nissan even harder than the beleaguered Chrysler Corporation. The Titan’s profits evaporated. Toyota, the new new kid on the block, managed to shift four times as many Tundras as Titans.

And that’s where it hurts. If you were to boil Nissan’s corporate motto down to two words, they would be “beat Toyota.”

If you were allowed a caveat it would be “especially in Japan.” Historically, chasing down Toyota on its home turf has been the doom of ambitious Japanese makers. Mazda is no longer an independent automaker (part assimilated by Ford) because they tried to fight Toyota in Japan; Suzuki’s making a push right now (film at 11). Fighting Toyota in every niche (and keeping enough capacity to match them) almost killed Nissan ten years ago.

Ghosn is still hailed as a savior and great business leader in Japan for pulling Nissan’s fat from the fire. But it’s important to note that most of Ghosn’s miraculous “fixes” were nothing more than cutting Nissan down to its actual size, jettisoning their unrealized ambitions. And just because Ghosn made Nissan see sense– in the short term– doesn’t mean that Nissan’s old guard have to like it. To trail Toyota can be borne. To trail Honda (the Taro-come-lately of the Japanese makers) is unacceptable.

This is the rub at Renault/Nissan: while they’re holding their own in terms of profits and market share, their natural rivals– both above and below– ARE gaining ground. 

With organic growth stuck resolutely in neutral, Ghosn understands that there’s only one other path capable of placating his Japanese taskmasters: adding another “partner” to the firm. After all, it worked before. Hence the abortive merger talks with GM— which ultimately served to consolidate both GM CEO Rick Wagoner and Ghosn in their respective executive suites. Hence murmurs of a Chrysler conglomeration.

Without delving too deeply into Ghosn’s Machiavellian machinations, it’s highly doubtful that the Brazilian-born auto exec is doing anything more than a head fake when he speaks of cooperation. Ghosn is smart enough to realize that trying to recapture the “magic” of the Renault/Nissan merger would put the company on a hiding to nowhere. After all and again, it wasn’t THAT successful.

IF the Nissan – Renault merger would have been wildly profitable, leading to a true Toyota-rivaling corporate colossus, Ghosn would now be untouchable. If the R/N merger had been an abject failure, he would have been axed. Stuck in the middle, Ghosn keeps the acquisition pot boiling. Removing him would kill the [theoretical] deal that would deliver the last bit of wanted size.

And if such a merger should happen, Ghosn's the only logical person to handle the change-over. Clearly, demonstrable, he's the consummate integrator. Other auto execs are sharper with numbers (though Ghosn's no slouch with financials). Others have closer ties to product (though Ghosn is quite the car-nut). But it’s doubtful any other auto exec could have held two such disparate automotive companies together while keeping them out of each other's hair. This is, was and will be Carlos Ghosn's genius.

As long as Nissan and Renault’s owners dream of expansion, Ghosn’s position is safe. The moment Nissan or Renault believe that Ghosn can’t fulfill their long-term aspirations, they will begin the process of finding someone who can. It is therefore in Ghosn’s best interest to fuel rumors of mergers that are not in the best interest of Renault Nissan or its [supposed] dance partners.

Not that the average American Lexus buyer could give a damn, but Toyota's luxury division has singularly failed to gain traction outside the U.S. market. Which is exactly the point: Americans are far less bothered by issues of provenance (i.e. or lack thereof) than any other developed automotive market. Business Week reports that the analysis applies to Lexus' home turf. "When Toyota (TM) introduced its Lexus brand in Japan three years ago, the company was hoping drivers like Masayoshi Haku would swoon over the luxury lineup. The 46-year-old doctor is a car lover with a $110,000 BMW 750 sedan and a $60,000 Porsche Boxster, so he should have been a prime customer for Lexus. But Haku hasn't taken the bait. Why? Lexus is too Japanese for his tastes… 'Foreign brands have more individuality.'" Sales reflect this non-import bias; Lexus sold just 34,800 cars in Japan last year. As Biz Week points out, Lexus did itself no favors with its initial lineup, featuring "the $52,000 GS sports sedan, the $68,000 SC convertible, and the entry-level IS sedan, starting at about $40,000. All three had previously been available in Japan under the Toyota nameplate— for about 20% less than the Lexus models." Oops. [thanks to stalightmica for the link]

We reported earlier that ToMoCo is considering adding a pickup to the Scion line in hopes of boosting sagging sales of its "youth brand." The Detroit News reports that a hybrid drivetrain might be the sales medicine Scion needs. "Does it make sense to have a hybrid powertrain?" asks Scion VP Jack Hollis, answering his own rhetorical flourish with "We don't know the answers but we're very open-minded." Although the gas – electrification of the current lineup makes a lot more sense than a Scion truck or SUV, it raises a few questions about Toyota's burgeoning brand portfolio. If Lexus gets a hybrid and Toyota launches a new Prius brand, where does a hybrid Scion fit in the mix? GM-style brand proliferation issues aside, Toyota has committed to equipping all of its offerings with hybrid drivetrains by 2020; the sooner it can exploit economies of scale, the quicker it can lower its costs for the still-expensive system. Note to Volt: the car in front is still a Toyota.