Readers who’ve accompanied me on this long, strange trip– from my automotive awakening to this, the final installment of my Auto-Biography– may recall my earliest childhood memory: riding in a 1950’s VW Beetle in Austria. The bug was the automotive womb from which I sprang. I’ve carried the Volkswagen DNA ever since. Even as a freewheeling young adult, I was a loyal Volkswagonista. Eventually I strayed, looking for more space, speed, comfort and even prestige. But I’ve finally returned to my automotive happy place, reunited with my one true love. Read More >

On Tuesday, the junk bond market sneezed and General Motors caught a cold. Less poetically, the money men behind the buyout of GM’s Allison transmission unit postponed a junk bond offering designed to pay for same. According to market sources, when the “spread” (the extra yield investors demand to compensate for their risk) widened by about 100 basis points, Merrill Lynch, Citigroup and Lehman Brothers pulled the plug. GM spokeswoman Renee Rashid-Merem said the company wasn’t worried about the sale: “The buyout remains on track.” Maybe so, but GM can’t afford this kind of setback. Literally.

GM is now deep into contract negotiations with the United Auto Workers (UAW). By all accounts, The General’s generals need some kind of “game changing” deal with the UAW. In other words, GM must take CEO Rick Wagoner’s well-established “pay off to f-off” union template to the next level. If, for example, GM wants to dump their health care liabilities into a UAW-run VEBA, it will require tens of billions its U.S. operations are still not generating. 

It’s true: the chips are down. Without delving into the finer points of the fire raging through GM’s cash hoard, the automaker needs the $5.6b check from the Allison sale to finance its “turnaround.” Ipso facto. Whether or not The General’s advisors manage to off-load $3.1b in junk bonds to finance the Allison sale in a timely fashion, the fact that it’s happening at all tells us the company’s corporate masters are still mortgaging the farm to bet the farm on the farm. And the crops are still failing.

Confirmation came [again] on Monday, when we learned GM’s set to cut production of the vehicle Rick Wagoner hailed at launch as “the most important part of GM's strategy to turn our fortunes around.” GM’s Pontiac Production Center will soon be building 17 percent fewer Chevy Silverados.

More specifically, GM is reducing Pontiac’s pickup production by 3060 vehicles per month or 36,720 per year. If you [conservatively] figure GM clears $2k per truck, the move evaporates $73.4m in profit. And it still might not be enough; Silverado sales dipped 23.5 percent in June. Another month like that…

Is exactly what the financial whiz kids over at Barron’s are predicting. If so, by the time GM unveils its UAW window dressing in September, Wall Street’s confidence in the automaker’s prospects may be so low that another “historic union giveback” won’t make no never mind to the money men. The cost of GM’s borrowing, which is already onerous to the point of near-usury, will escalate even further, even faster. For a company already downing in a sea of debt, that’s not good.

What’s worse, GM’s faces a more general malaise in the leveraged loan and high-yield markets. Ironically enough (given GMAC’s role in the debacle), the sub-prime mortgage crisis has taken the sheen right off the sector. Cerberus is reportedly having problems financing its Chrysler takeover at the desired price. Despite Ford’s “surprise” results (attributable to asset sales and foreign ops), investor confidence in The Big 2.8 is fading. Same result: the cost of borrowing rises. 

Brad Rubin, senior auto sector trading specialist for BNP Paribas, recently stated that “Investors know both Ford Motor Co. and GM are going to have to tap the debt markets at some point, and unfortunately it's at much wider levels than what they've done before.”

GM already rolls over tens of billions of dollars in debt each year. As Slate’s Daniel Gross pointed out way back in ’05, if GM borrows $30b and the rate it pays for new debt rises 1 percent, the company has to stump-up $300m in additional interest costs. “And since interest has to be paid first, higher interest costs mean less money for important things like executive compensation, investment in new plants, marketing, and developing hybrid engines.”

Fast forward three years and you can add financing union givebacks to the list. And update GM’s debt rating to Fitch Ratings’ “negative," despite dodging the Delphi bullet (by paying off the unions, ‘natch). While the media talks about GM's union-related health care burden, pegging the cost at $1800 per car, if The General returns to the Wall Street well in a big way, its vehicles could soon be shouldering half as much again in interest payments.

GM’s debt is a ticking time bomb; the fuse is well and truly lit. In terms of ridding itself of the UXB, nothing much has changed: GM can only eliminate its gigantic debt burden by selling hundreds of thousands of high margin vehicles in the United States.

Yes, well, in response to fading market share and continued over-production, GM has just amped-up its financial incentives on languishing metal (including leftover 2006 models). Meanwhile, Toyota’s going great guns. Its new entry into the full-sized pickup truck market has triggered the predicted incentives war in GM's most profitable segment, in a declining market.

As a TTAC commentator recently pointed-out, GM is now like communist Russia, with Toyota as America spending them into oblivion. For those who believe that GM can emerge from this crisis– or Chapter 11– fitter, better and stronger, the parallel is instructive.

Last week, Chrysler announced they’d cancelled plans to build their super-sized 300, the Imperial sedan. Company Spinmeister David Elshoff cited new, more stringent EPA mileage and emissions regulations and added a moral spin: given the “current climate,” bringing the Imperial to production would have been "irresponsible." Regardless of the need to conform to political correctness and regulations yet to be enacted, the “poor man’s Phantom” had few friends in the punditry biz. (The word ugly featured prominently in their analysis.) And yet, deep-sixing the Imperial was a big mistake. 

To recap: aside from Jeep, Chrysler’s LX platform cars have been the automakers only functional success since the 300 debuted in ‘04. In the first half of 2007, the 300, Charger and Magnum sold a combined 145k units (including the endlessly scorned fleet sales). That's a pretty impressive accomplishment considering that the base cars are saddled with an overburdened 190hp 2.7-liter six cylinder engine connected to a four-speed slushbox. Or the not-entirely-unexpected fact that Chrysler has done nothing to build on the models’ success.

This neglect lies at the heart of Chrysler’s boom-and-bust problem. The cycle is simple: teetering on brink of disaster, Chrysler bets the farm on a new car. The finished product is a good idea, adequately executed with bang-up-to-the-minute looks and acceptable functionality. The press goes wild. Chrysler lets its Savior sit and rot while competitors catch up and move forward. The company once again peers into the precipice of penury and prepares for yet another four-wheeled Hail Mary.     

So here we are, with a three-year old Chrysler 300 and Co. Their interiors are still unacceptably bland and rubbery. The Insurance Institute for Highway Safety (IIHS) still describes their side impact rating with a curt “internal organ injuries likely.” More disconcerting (from a marketing standpoint, not your liver’s), Chrysler doesn’t have a clue where the 300 and its platform siblings go next.

Ask Porsche or Jaguar; evolution is a bitch. Move too far away from a model’s original design and you alienate your base. Stand pat and at some point everyone who wants one, has one. Either way, after the initial surge, conquest sales are a constant uphill struggle. When you’re talking about a car with an iconic design and a tightly gathered brand proposition— 911, MINI, Beetle, Mustang, 300, Charger, Magnum— the struggle is even harder.

The Imperial was a bold attempt to extricate Chrysler from this predicament. Although stretching the brand to include a $50k stretched 300 may seem a bit of a stretch, Chrysler was once an upscale brand. A reasonably priced Imperial would have been just the thing to move the company upward and forward. Much as BMW’s 7-Series casts warm fuzzies on the “lesser” 5-Series, the Imperial could have served as a step-up for 300 drivers.

If Chrysler had decided to put the Imperial’s hypothetical budget into developing their existing LX cars— new engines, interiors, gizmos, suspension components, etc.—you could make a good case for ditching the XXXL LX. If Chrysler were spending the development bucks on rescuing the lame and lamentable Sebring, you could also—

Actually, no. Chrysler doesn't have a prayer of going toe-to-toe with Toyota. Test drive a four-cylinder Sebring and a four-cylinder Camry back-to-back, witness the utter devastation and then you too can see why Bob Lee, Chrysler’s head of powertrain development, called the Sebring an “embarrassing miss.” Besides, why reinvent the wheel? The LX cars were a hit. Stylish, big rear-wheel-drive cars differentiate Chrysler from Toyondissan. Connect the dots.  

And if EPA regulations are becoming more restrictive, pulling the plug on the Imperial is not the answer. (In fact, it’s a particular craven solution.) How about lightening the load and/or fitting it with more fuel efficient engines, including Chrysler’s well-regarded three liter Euro-diesel. And anyway, given the volume of Chrysler 300s and Dodge Chargers, fuel economy need not be a selling point.

Let’s get real: people buying cars equipped with Hemi engines clearly aren’t gas pump sensitive souls. So what if these are not volume-leader automobiles? If the LX triplets were better products, higher margins could offset their lower sales numbers.

By killing the Imperial, Chrysler is yet again demonstrating a void where its automotive acumen should be. Stylish, big, powerful and distinctive ought to be the buzzwords on their dry-erase board. If you must, cross off “big.” But the other attributes should be treated like pre-safari inoculations.

When Chrysler sticks to this approach– the Charger, 300C, Magnum, Jeep Wrangler– it sees green. When it deviates– the Sebring, Avenger, Aspen, Compass– salesmen have to feed their kids toothpaste sandwiches. With the Imperial, Chrysler had a shot at selling a vehicle in the winning category. As far as stockholders and stakeholders are concerned, not building the Imperial was irresponsible. What was Chrysler thinking when they cancelled it? They weren’t.    

Not that Camcordima or Miata drivers have noticed, but GM’s long-neglected Saturn brand has been busy rolling out a raft of new models. I came, I saw, I drove, I despaired. The Aura, Sky and Outlook are fine machines, but even better examples of “80%” cars: GM vehicles that are an interior, gearbox, suspension and/or trunk space away from greatness. So when I saw the all-new, Opel-sourced 2008 Saturn Vue, I thought I knew exactly what was coming my way. I don’t mind saying it: I was somewhat wrong. 

The Socialist Republic of Vietnam is on its uppers. The Viet Nam News reports expanding tourism and exports, a stock market that’s expanded by 145 percent and a growing, car-hungry middle class. Auto sales are up 79 percent year on year. Toyota salesman Cao Hong Quang says his customers must plunk down a VND 10 – 15m ($625 – $938) deposit and wait between a week to four months before delivery. The demand also represents a sense of resignation. Many aspiring Vietnamese motorists were hoping that the country's entry into the World Trade Organization (January '07) would trigger a reduction in government taxes on car purchases. By now, they’ve given up waiting and started buying.

Automotive safety has improved by leaps and bounds over the years. The Herald Sun reports on the not unexpected corollary: comparing like-to-like, new cars are vastly safer than their antecedents. According to a study of 2.8m real world crashes by Melbourne-based Monash University, larger locally-made cars (e.g. Fords and Holdens) are less safe than smaller European cars, which still "lead the way in safety features." The report lists five vehicles to "avoid in the used car lot:" Mitsubishi Cordia (1983 – 1987); Ford Falcon XE/XF (1982-1988); Mitsubishi Starwagon/L300 (1983-1986);Toyota Tarago (1983-1989); and the Toyota Hiace/Liteace (1982-1995). Interestingly, the official list also scores "How seriously your vehicle is likely to harm another road user."

Despite The Big 2.8's mantra that their declining market share and evaporating sales volume reflect a concerted effort to reduce dependence on low-margin bulk sales, Automotive News [AN, sub] reports that Detroit's fleet sales have declined by just one percent during the first five months of '07 vs. '06. Fleet sales still account for roughly 25 percent of GM's total, 32 percent of Ford's and 35 percent of Chrysler's (a slight increase from last year). Into the breach dear Horatio: the transplants. Toyota/Lexus/Scion's fleet sales have increased from seven to 11 percent. Fueled by corporate demand for the new Altima, Nissan's fleet sales rose from nine to 15 percent. One fourth of all Kia sales now sail with the fleets (up from a fifth). And Mazda's fleet sales jumped from 18 to 24 percent of their total. The numbers reveal a stunning lack of resolve by Detroit, and a residual-threatening expansion for their competition.

When it comes to the debate over proposed increases in U.S. Corporate Average Fuel Economy (CAFE) standards, rational argument takes a back seat to politics as usual, as this article in Pennsylvania's Patriot News illustrates. Hometown rep Todd Platts, lead Republican is lead on a bill raising federal mandated fuel efficiency by 40 percent (to 35 miles per gallon) by 2018. Platts: "The auto industry, as it does today, said it was impossible– it would compromise safety, choice. Obviously, history has proven that their statements were untruthful and technology did allow the advances." The opposition (a.k.a. "one industry lobbyist"): "Under this bill, in wanting to make the U.S. more like Europe, every American would be driving a Toyota Corolla. I don't think most Americans want that." Will Platt compromise with the forces of evil? Sure! "We believe there is technology that would allow you to go beyond 35, but we also know that given the special interests that are lined up against us — the auto industry and the oil industry — you have to be realistic," Platts said.

Earlier this year, GM admitted it was getting creamed on the coasts; the General promised to launch major marketing efforts to reclaim major metropolitan areas. Other than Chevy's recent tie-in with Rolling Stone magazine, we've seen little of what could be called bi-coastalistic marketing. Meanwhile, Toyota continues to target their new full-size Tundra pickup at the American heartland. Tomorrow, visitors to Minot's North Dakota State Fairgrounds will get a chance to put the Texas-built pickup through its paces as part of Toyoya's "Tundra, Prove it!" campaign. The high touch experience includes a limited slip diff demo, an "acceleration run" and a "braking zone" test with and without load. GM would be well-advised to watch its back.  

Ford is hawking their “new” Taurus (née Five Hundred) as America's safest full-size sedan. This tells us two things. First, the Ford division famous for producing the world’s safest cars (Volvo) is as good as gone. Second, The Blue Oval Boyz replaced their alleged allegiance to Bold Moves with a profound proclamation of Risk Aversion. Whether or not either decision is correct is a moot point; FoMoCo doesn't have the time nor the money to not to sell Volvo or develop edgy new automobiles. So is Ford’s safe car a safe bet? As the Afrikaners say, Ja nee.

While Toyota has declared itself fully committed to a hybrid-powered future, Honda's hedging its bets. Honda is developing hybrids, more efficient gas-powered engines, clean diesels and now, biomass. Working with non-profit partner Research Institute of Innovative Technology for the Earth (RITE), Honda says they've developed a new bacterial strain that produces large volumes of ethanol. The microorganisms munch on widely-available waste products including wood, leaves and plant stalks to ferment sugar into alcohol. Quoted by Reuters, RITE's chief researcher at their molecular microbiology and genetics lab didn't beat around the bush. Hideaki Yukawa claims his team has cracked the biomass nut: "This achievement solves the last remaining fundamental hurdle to ethanol production from soft biomass." Next year, Honda plans to set up a test plant (so to speak).

We've reported here about the huge surge in Toyota Prius sales over the last few months. In contrast, the number crunchers over at JD Power report that U.S. consumer interest in hybrid-powered automobiles has begun to fade. According to their second annual Alternative Powertrain Study, half of all new-vehicle shoppers polled (4k) are considering a hybrid. That's down from 57 percent of shoppers polled in their 2006 survey. Mike Marshall, director of JD's automotive emerging technologies unit, attributes the drop to the discrepency between inflated expectations and reality: "In the 2006 study, we found consumers often overestimated the fuel efficiency of hybrid-electric vehicles, and the decrease in consideration of hybrids in 2007 may be a result of their more realistic understanding of the actual fuel economy capabilities." In other words, the new EPA fuel economy calculations have hit hybrids hard. 

Cell phones cooler than cars? No way! Way. CNW Marketing Research recently reported that thirty-two percent of today’s 16 to 29-year-olds view Apple’s new cell phone as the hot ticket to campus stardom. Only twenty percent made the same claim for a car. In fact, the survey found that any kid fortunate enough to lift an iPhone to his or her ear was guaranteed a seventy percent popularity rating. If we accept that the iPhone is the King of cool, what does Apple know that has the U.S. automobile industry doesn’t, that allows a nerdy little electronic device to trump the [formerly] ultimate symbol of adult independence?

Apple works to a relatively simple recipe: combine incredibly appealing form with reliable, user-friendly function. As Apple’s former vice president of advanced technology put it, “Attractive things work better. When you wash and wax your car, it drives better, doesn’t it? Or at least it feels like it does.” Warm fuzzies are high on Don Norman’s list of priorities, as he explained in his tome Emotional Design. “Positive emotions are critical to learning, curiosity and creative thought.”  

Reflecting this ethos, Apple sweats the small stuff. In 1983, the company adopted a design language with its own “coherent visual vocabulary” to insure continuity across its products. Today, Apple devotes at least 15 percent of its hardware development process to conceptualizing the look, shape, size and feel of a new product. Most companies– in most fields– do not.

The majority of the domestic automobile industry spends precious little time coordinating / obsessing about the look and feel of the entire product (not just the sheetmetal). And that’s just wrong. Although many enthusiasts dismiss mass market motors as “appliances,” all drivers and passengers interact intimately (now, now) with their transportation. And just like computerized gizmos, a car’s design has a huge impact on our mood.

When Toyota launched Lexus, auto aficionados heard tales of ToMoCo engineers sweating minute details, from the placement and feel of the switchgear; to the tone, pitch and volume of the exhaust note; to the suspension’s rebound rate. By contrast, most domestic interior during the late ’80’s were an afterthought– as were exteriors, exhaust systems and handling dynamics.

To a greater or lesser extent, Toyota, Honda, Nissan, Audi and VW have also created handsome, aesthetically coherent products for the mass market. With rare exceptions, Detroit still doesn’t get it. You need only look at the interior of the Chevrolet Corvette to wonder why Lord, why?

Norman also revealed that Apple’s product evaluation process requires a marketing plan, engineering specifications and a user experience document.  “Marketing is what people want,” Mark Rolston, senior vice president of creative at Frog Design, adds: “Engineering is what we can do; user experience is ‘Here’s how people like to do things.’”

A coherent evaluation procedure does not guarantee great products. Apple’s product development system was in place during those bleak years when Steve Jobs was in exile. Without Jobs’ presence to steer the ship, Apple’s design-by-committee free-for-all created severely compromised products. 

Jobs– whom Norman describes as a “dictator with taste”– restored discipline in the development cycle. Once the concept of the final product crystallized, no deviation was permitted. Period.

How many times have car manufacturers paraded around delicious cutting-edge design concepts at auto shows– only to deliver ridiculously compromised copies in production? Well exactly. Clearly, Detroit lacks the commanders and command structure needed to fully realize its designer’s visions.

“The hardest part of design,” writes Norman “is keeping features out.” Rolston underlines the point: “[Apple] is just as smart about what they don’t do. Great products can be made more beautiful by omitting things.” The iPod, for example, has fewer features than its competitors, but its minimalist elegance makes it a success.

In the automotive arena, feature overload is rampant. In Jay Shoemaker’s recent critique of the Porsche Cayenne Turbo, the TTAC scribe was dismayed by the 39 buttons crowding around the navigation screen on the center console. For the love of the fish, it’s an SUV, not the Space Shuttle!  Without a navigation officer, how’s a pilot supposed to operate the nav system while negotiating his way through traffic?

To recapture hearts and minds, automakers need to design elegant vehicles that don’t try to be all things to all people. They need to produce simple, well-engineered cars with tastefully uncomplicated driver interfaces, free from distracting superfluous accessories.

The alternative is unthinkable. Imagine a modern day American Graffiti.  Bad boy Bob Falfa (Harrison Ford) sends innocent young Carol (Mackenzie Phillips) into ecstatic delirium each time he whips out his iPhone. While intimidating rival John Milner, Falfa says, “Hey you're s'posed to be the fastest thing in the Valley man, but that can't be your iPhone. It must be your mama's iPhone! I'm sorta' embarrassed to be this close to ya!”

Poor Ford Motor Company! Even when FoMoCo produces a good car, the product is still weighed down by the stigma of Tempos and Escorts of yore. In his latest column, MSNBC 's Roland Jones takes stock of the Ford Fusion's dismal sales in June 2007 (12,435 examples sold), what it means for FoMoCo, and how they can generate Impala-like numbers (35,489 examples sold). In this bread-and-butter segment so thoroughly dominated by Camcords, Jones asserts that people don't want an import-clone from a domestic automaker. He's right. Fighting Toyota and Honda on their own turf is a losing battle for Detroit. The market has shown a willingness to buy boldly-styled, rear-wheel drive Americana from America. That's what Ford should build.

Five years ago, on a whim, I rented an RV and we headed for the Sawtooth Mountains of Idaho, Yellowstone, and the Grand Tetons. The late October weather was exquisite; we didn’t see a single cloud for the whole two weeks. And the scenery was stunningly, drop-dead awesome. Once again, my wife and I (and now our youngest son) were hooked on the freedom of the open road and self-contained camping. But steep prices and free-fall depreciation of new RV’s was off-putting. But the answer was waiting just down the street… Read More >