The Boston Globe says Chrysler’s 2008 minivans are set to arrive at dealer showrooms with more features– extra air bags, electronic stability control, seats that swivel six ways to Sunday– and sticker prices averaging $2k below ‘07 models. The official party line: the price reductions will improve residuals and lower incentives (current average: $4,400 per vehicle). Yes BUT—Chrysler’s current family taxis are already sold at bargain prices. Base vs. base, the Caravan’s less expensive than a Toyota Sienna (-$4,400), Honda Odyssey (-$5,900) and Hyundai Entourage (-$4100). How can everyone else sell their minivans for thousands more than the company that invented it? The answer has very little to do with the price, indicating that Chrysler's financial salvation does not lie in offering bigger discounts– or more spin.

Readers may recall that my previous review of the Subaru Tribeca described the SUV’s front end as a flying vagina. Shortly after this aesthetic assessment hit the web, the San Francisco Chronicle canceled my regular reviews. Both Subaru and BMW banned The Truth About Cars from their press cars. While the column is history and the ban remains, Subaru got the message. The new Tribeca’s front end looks nothing like airborne pudenda, and everything like a Chrysler Pacifica. 

Yesterday, Ford CEO Alan Mulally announced that Ford would have plug-in hybrids for sale in "five to 10 years." Today, Consumeraffairs.com reports that FoMoCo's spinmeisters are touting hydrogen as the fuel of the future. We're talking about Ford, right? The same Ford that backpedaled on their 2005 promise to build 250k hybrids by the end of the [last] decade? The same Ford that "rethought" their 2000 promise to improve SUV fuel economy by 25 percent? The same Ford that promised alternate fuel vehicles for Europe and nowhere else? Naturally, today's round of attention-grabbing was carefully hedged with cunning caveats: hydrogen fuel storage limitations, public concerns, "if all things were perfect," etc. Except Honda already has a running hydrogen fuel concept, slated for production and public consumption in less than three years. Oh dear.

Why do buff books and big sites feel compelled to be a cheering section for the home team? When these guys catch a glimpse of a Detroit concept car they like, the gloves they took off for their reviews of home-grown product are put under lock and key. And out comes the brass section. Paul Eisenstein over at The Car Connection has tested not one but three FoMoCo ain'tgonnahappenmobiles. Obviously, there's not much there there– other than Ford designer Peter Horbury calling the Toyota Prius the Toyota Pious, albeit "impishly." (I guess he missed the memo on Ford's plug-in hybrid dreams.) So, has Ford green-lighted the Mustang-based Interceptor? "In the future, we have to go in a different direction," cautioned Horbury, adding that "especially with tight budgets," Ford can no longer afford many of these wild and wacky concepts. "We're not going to waste time and money showing something that has no chance of being put into production." Don't you just hate it when they play coy like that? 

Do ya have a hankerin’ for a cheap small car that can’t be satisfied by an offering from Korea, Japan, Europe or the good ‘ole US of A? Me neither. But Chrysler’s CEO thinks you– or someone– does. On July Fourth (no less), Tom LaSorda finally inked a deal with China’s Chery Automobile Company. As early as 2009, Chrysler could be offering Dodge-branded, Chery-manufactured subcompacts in the US and Europe. Target price: $7k. Too good to be true? You bet it is.

About a week before LaSorda was ordering Chinese, Brilliance submitted their would-be Autobahn cruiser to the Germany’s Automobile Association for 40mph head-on and side-impact tests. The sedan failed brilliantly, earning just a one star rating (five possible). The spectacular result for a Chinese-made sedan has raised new questions about Chery’s readiness to produce vehicles for the U.S. market.

You may recall that Chery, China’s eighth largest automaker, survived a brief association with the sterling silver tongued Malcolm Bricklin, whose numerous vehicular importation schemes include the shameful Yugo. The rupture of the Bricklin-Chery deal cleared the path for the Chrysler agreement. As Bricklin walked away from his abortive Chinese venture, his parting comments were prescient.

“The Chinese need to learn that you cannot develop cars for the Chinese market and then upgrade them for the North American Market,” the entrepreneur proclaimed. “You must build for the North American market and then de-option for other markets, never having two standards for quality since great quality is the only option.”  

That’s pretty rich for the man whose Canadian-built SV-1 (Safety Vehicle 1) was famous for its leaking gull wing doors. Anyway, assuming Bricklin learned his lesson, Chrysler didn't. The Sino-American partnership plans to upgrade the Chinese market Chery A1 for the U.S. market.

John Humphrey says Chery’s unlikely meet their ambitious 2009 target for U.S. export. In fact, J.D. Power and Associates’ General Manager for the Asia/Pacific region says that none of the Chinese auto manufacturers are prepared to meet U.S. environmental and safety standards.

Humphrey says Chery is closer to being ready than its fellow Chinese manufacturers, but a U.S.-legal Chery A1 is still “at least a product generation away.” If Humphrey’s correct, Chrysler’s re-branded subcompact is about five years out. 

In China, the Chery A1 sells for $7100 to $7900. Both LaSorda and Chery’s CEO have announced that the U.S. A1 will sell for $7k. Does this mean that the American market will get a stripped-down version? Not likely.

Industry analysts say that the A1’s $7k price point is highly unrealistic; they estimate that the Chinese export would have to sell for $10k to turn anything even remotely resembling a profit.

George Magliano, automotive research director for Global Insight is adamant. “I don’t think seven is going to work… In the U.S., this thing has got to be styled right, it’s got to perform right, it’s got to have quality, it’s got to have safety. You don’t get that for $7k.”

Erich Merkle, director of forecasting for IRN Inc., predicts that the Chery-Dodge could cost as much as $15k– once laden with features that U.S. consumers demand (e.g. power door locks and windows, and a high end stereo system).

Immediately after Chrysler and Chery signed their agreement, PRC Communist Party bureaucrats gave official approval to the Chrysler-Chery deal ('natch). At around the same time, the partnership garnered the attention of another government.

Reacting to the importation of tainted Chinese pet food and toothpaste into the American market, Congress plans to hold its first hearings on the safety of Chinese-manufactured goods this month.

The recent recall of 450k defective Chinese-made tires sourcing from the Hangzhou Zhongce Rubber Co. also caught the eye of the Senate’s Commerce Committee. Don’t expect any pity on Chinese manufacturers from the Democrats that now control both houses of congress, who’d love nothing more than to slow the tide of imported cars and Chinese car parts that “steal” union jobs.

The smallest car in Chrysler’s current arsenal is the linebacker-sized Caliber, whose base price is roughly twice that of the proposed sticker for Chery A1 import, whose quality and driving dynamics can’t hold a candle to the Honda Fit, Toyota Yaris or Nissan Versa.

While you don’t have to survey a dealer lot stuffed with unsold Aspangos to appreciate Chrysler’s need for a viable subcompact, summoning a federalized Chery A1 seems a distinctly enigmatic choice.

OK, dumb. If the Chinese import's two years too late and twice the targeted price, it’s going to hit the exact same wall as the Caliber. If the Chery A1 gets a one star government crash test rating… In this country, three strikes and you’re out.

The June auto industry’s sales results are in. The numbers have sent shock waves throughout Detroit— a town that’s become increasingly familiar with seismic events. Although sales tend to slip slightly as the model year winds down, these figures are stimulating some serious hand-wringing amongst The Big 2.8. When you factor in/out fleet sales, the future looks bleak.

Passenger Cars

Ford Fusion and Toyota Camry sales slid slightly from last month, but their mid-year report card’s looking good. For the first half of 2007, both Camry and Fusion sales are up 10 percent over the same period last year. Comparing June ’06 to June ‘07, Camry sales rose by 12.5 percent, while sales of Ford’s “hecho en Mexico” midsizer declined some nine percent. 

The Chevrolet Impala and Chrysler 300 both showed significant increases over last June. The Impala is up by almost 17 percent, while the 300 ascended by 29 percent. There’s a big mid-year divergence; during the last six months, Impala sales rose by almost 25 percent while 300 sales sank by 14 percent. 

Keep in mind that both models are fleet queens. In 2007, 46 percent of the 300’s and 44 percent of the Impala’s total sales sailed with the fleets. This does not bode well for either model’s long term prospects.

Pickup Trucks

As predicted, a weak housing market, high gas prices and the new Toyota Tundra’s debut have sparked an incentives war. The trend looks set to drive sales— and steal profit— all summer long.

The newcomer’s sales increased 4K from May, and jumped 146 percent compared to last June. ToMoCo’s rebates and special financing (average incentive: $5083) are working a treat. 

Incentives didn’t help Chevy’s Silverado (average incentives: $3064) . Sales of GM’s turnaround dream dropped 23.5 percent from last June. Year-to-date sales are down almost two percent. 

Thanks to huge incentives (averaging $6831), the Dodge Ram  is holding its own. Sales were down less than four percent from last June. So far this year sales are up a little over one percent. 

Sales of Ford’s F-Series (average incentive: $4272) were down less than one percent from last June. Over the past six months, sales sank over 11 percent compared to the previous year. 

Truck-Based SUVs

SUV sales are still taking it on the chin. The Dodge Durango showed a 900-unit increase over May, but slid over 28 percent from last June, and almost 26 percent year to date.

The Ford Explorer lost only about 100 sales from May, but sank 23 percent from last June, and 22 percent year to date.

Chevrolet Tahoe sales slid 14 percent from last June and 16 percent over the last six months. Toyota’s 4Runner is down almost 28 percent against last June and almost 20 percent year to date. 

CUVs

Once again, sales of older designs fell well below last year’s levels. The Chevrolet Equinox dropped 1.5K units from May, losing a whopping 53 percent from last June. So far, the Equinox is down 26 percent year to date versus last year. 

Chrysler Pacifica's June sales climbed 500 units from May, but sank 41 percent versus June ’06, and lost 24 percent in the six month comparison. (Some 52 percent of this year’s Pacifica total has gone to fleets .)

Ford Escape sales are 33 percent above last June’s, and three percent ahead of the first six months of last year. The Toyota RAV-4 showed an 11 percent growth, with a 16 percent increase over the first half of 2006.

The new-for-‘07 CUVs showed slight dips in June. Most notably, sales of the box-fresh GMC Acadia were almost 2K lower in May. The Ford Edge and Jeep Compass held fast, dropping by fewer than 300 units.

Total Sales and Fleet Sales

Overall, all four manufacturers detailed here (Ford, GM, Chrysler and Toyota ) lost sales from May. Comparing total sales in June ’06 to total sales in June ’07, all but one crapped out. GM was down 21 percent, Ford dropped 8 percent and Chrysler lost 1.4 percent. Toyota’s sales grew by 10 percent.  (Year-to-date cumulative: GM, Ford, Chrysler, Toyota.)

Over the six month period, GM is down seven percent, Ford is down 11 percent, and Chrysler is down 1.4 percent. Toyota is up 8.7 percent.  

Chrysler’s relative success may be Phyrric. During the last six months, fleet sales accounted for almost 45 percent of Chrysler's total passenger car sales. The artist formerly known as DCX also designated tens of thousands of leftover '06 models as loaners– for one day– and then moved them into their used car inventory. 

This is serious. GM’s June market share slumped to 22.17 percent. That’s the lowest level since the company passed that mark on their way UP to their '60's high water mark (48.3 percent share). If sales don’t pick up, The Big 2.8 will enter September (and the history books) with a combined U.S. market share of less than 50 percent.   

General Motors is a trash talker. The automaker brags about future show-stoppers, unveils concept vehicles with a sly wink (knowing full well they're stuck in development Hell) and offers press hacks "preview" drives of half-baked green machines. No GM brand has been more abused by these dishonest "you just wait" promises than Buick. The 2004 Velite was a glimpse of an alternate universe, where Buick made perfect sense. And as far back as 2003, board-certified spin specialist Bob Lutz was busy proclaiming that Buick will be "an American Lexus." As if.

That said, last year, with minimal fanfare, General Motors introduced a brand new model: the Buick Park Avenue. The badge-engineered Aussie (nee Holden Statesman) is a full-sized rear wheel-drive sedan boasting the kind of understated elegance– both inside and out– capable of resurrecting the ailing marque's appeal. In China. 

America didn't get it. (Literally.) Buick's U.S. aficionados couldn't understand why America's favorite military dictatorship received the brand's potential savior, while the States got a milquetoast sedan whose name means masturbation in Quebecois. Slapping the "Super" moniker on Buick's front wheel-drive sedans did nothing- as in zilch- to appease the faithful. Buick's beat-up bolsterers lit-up their corner of the Internet, venting their electronic ire at the missed opportunity. 

Understandably, John McElroy over at Autoline Detroit wanted to quiz Bob Lutz about Buick building better cars in The People's Republic. In May, GM's Car Czar agreed to tackle the issue– provided Autoline didn't air the relevant segment on TV. The news op could, however, put video of Maximum Bob's reply on their website. 

Hang on. Never mind the fact that "one of the deans of the Detroit automotive press corp" [sic] agreed to censor himself at GM's behest. Consider GM's logic. The automaker attempted to minimize the spread of Lutz's response to an internet-disseminated controversy by restricting it to the internet. 

Anyway, Lutz blamed that the Statesman misstep on Buick's beleaguered dealers. Back around the time Lutz had been playing the dozens with Lexus, his minions had previewed Lucerne and Holden Statesman prototypes to American Buick [Pontiac, GMC] dealers. According to Maximum Bob, the car floggers said they didn't need two models. They picked the Lucerne to grace their showrooms.

It's hard to understand why General Motors left the fate of the entire Buick brand in the hands of its dealers. Buick dealers don't really have customers. How does a car dealer grasp the desires of potential buyers that have never darkened their doorways?  

Answer: you don't. Buick's sharp-end sharpies opted for what was clearly the worse of the two cars: a front-wheel drive H-body sedan riding on a platform dating back to the year Geraldo Rivera opened Al Capone's secret vault (1986). Twenty-one years later, and these not-entirely-prescient Buick dealerships are selling, on average, six cars a month. Not six Lucernes. Six Buicks. 

Normally, GM in general and Bob Lutz in particular sweep these sorts of decisions under the red-ink stained rug (GTO?) and tout The Next Big Thing. For reasons known only to Maximum Bob and his handlers (i.e. his ego and super ego), Lutz felt compelled to address the question again, via a video on GM's Fastlane Blog. So, Bob's people asked Bob, why is China selling a better looking Buick luxury car than the U.S.?

"I don't think they are," Maximum Bob insisted, confusing prevarication with fact. "They simply are the first market to get the new Buick Park Avenue, which they will actually assemble in China. And that vehicle, or a variant of it, is always a possibility for Buick [USA] in the future." 

Translation: "The critics are wrong! And even if they are right, we were also right, just a bit… premature. Cautious. Sensible. You'll see! Maybe."  Bob's answer may not set new standards for this master of ill-informed, shoot-from-the-hip and sort it all out later (or just forget it) analysis, but it's not for lack of trying. Meanwhile, the Buick brand is spinning off into oblivion.

Or not. No discussion of Buick's Lexian aspirations would be complete without mentioning the new Enclave. The brand's sales may be down 30.4 percent from last June, but their crossover is gaining traction. May's aforementioned six cars per dealer per month average represents a two car per dealer improvement on their previous stat. As GM ramps-up Enclave production, Buick dealers may soon stagger into double digits.

But the broader question remains: is the vehicle pitched against the RX350 Bob Lutz' "American Lexus?"

Perhaps. But there is an important corporate disparity that overshadows any model vs. model comparison. Toyota doesn't compete with itself. GM does (Buick Enclave vs. GMC Acadia vs. Saturn Outlook vs. Chevrolet playertobenamedlater). As Buick's Chinese debacle proves, whenever you compete with yourself, you lose.

Earlier this week, the European Union rubber-stamped the DaimlerChrysler divorce. So that's it. Later this financial quarter, prefix and suffix will go their separate ways and Cerberus Capital Management will marry the battered bride. Overlooking the fact that Chryslerberus will soon be importing Chinese-built cars for their U.S. customers, the automaker plans a nationwide dealer party for the born-again "all-American company." With all that has– and hasn't– happened to Chrysler of late you have to wonder exactly what and why they're celebrating.

Other than Chrysler's liberation from spousal abuse, there's not a lot to commemorate in Auburn Hills. Despite Cerberus' deep pockets, Standard & Poor's and Moody's Investors Service have just dropped the American automaker's debt rating to "junk" status. Whether this will affect Chrysler management's ability to float loans to stay afloat remains to be seen, but it's not what you'd call a good omen.

And loans are the order of the day. Even as Chyslerberus' debt rating's tanked, Chrysler's new management's been busy looking for someone to loan them $12b for the automotive side AND $8b for Chrysler Financial. If going $20b deeper in debt isn't risky enough, the automaker is reportedly borrowing the big bucks at around 8.5 percent. The interest payments alone could keep Chrysler from profit for many years to come.

S&P analyst Gregg Lemos-Stein goes further. Lemos-Stein says if the U.S. car market remains on its current downward trajectory, Chrysler could be in default by 2010. In an interview with BusinessWeek, he said "One of our big concerns is that it doesn't take a dramatic reduction in sales to put Chrysler at risk." In plain terms, one good recession and Chrysler would join AMC and Studebaker at that big car lot in the sky.

Cerberus' top dog realizes his new acquisition's precarious position. After the House passed stringent new fuel economy rules, Stephen Feinberg made a rare personal appearance to schmooze senators into relaxing the standards. Chrysler's taskmaster's pegged the cost of meeting those standards at $7K per vehicle. The extra expense would, Feinberg argued, put Chrysler out of business.

Well, he would say that, wouldn't he? Gas-guzzling trucks and SUV's still account for some 70 percent of Chrysler's U.S. sales. And North American sales account for 92 percent of Chrysler's total turnover. Not to put too fine a point on it, the automaker is at the mercy of the U.S. economy. And, by extension, gas prices.  

As American gas prices climb and large vehicle sales plummet, Chrysler has nothing in their automotive arsenal to staunch the arterial spray. Their last two "Hail Mary passes," the Sebring and Avenger, are so bad that even CEO Tom LaSorda was reportedly "quite upset" with what his employees had wrought. Chrysler's smallest cars, the ancient PT Cruiser and the only slightly more technologically advanced Caliber clones, hardly have Toyota, Honda or even Chevy scurrying for cover.

Next up: the refreshed minivan twins, out this fall. While Chrysler has been the minivan sales leader since inventing the genre, and the new models' rear facing captain's chairs are a way cool unique selling point, it's unclear whether or not the minivans can reinvigorate a moribund market. And if they don't, what profit is there being King of a shrinking kingdom?

Even Chrysler's much-ballyhooed partnership with China's Chery carmaker offers no immediate prospect of financial relief. By the time the partnership designs a car to U.S. safety and environmental specs, ramps up the supply chain and assembly line, works out any production and quality problems, passes all EPA and NHTSA tests and puts the first cars on the boat, the entire market may have shifted, leaving the Sino-American venture flatfooted.  

None of this bodes well for the future of Chrysler as we know it. As we've pointed out time and time again, Cerberus is in the business of dissecting sick businesses. They rend asunder what the founders hath put together, make as much as they can from the salvageable parts, and then dump the rest.

The more time that passes before Cerberus takes control of Chrysler, the worse their immediate prospects and the higher the likelihood they'll do what they swore they would never, ever do: strip and flip. 

The Detroit News estimates that once the ink is dry and the dust settles on the financial dealings, DCX will have paid $673m to get rid of Chrysler. Given the problems facing Chrysler, and the way DCX stock has gone up since they started dropping hints they were selling it, it looks like money well spent.

No matter what Cerberus does or doesn't do to/with Chrysler, the forthcoming party in Auburn Hills will be nothing compared to the celebrating that will be break out in Stuttgart.

In June ’05, GM CEO Rick Wagoner unveiled his turnaround plan for the beleaguered automaker: accelerate new products, eliminate discounts, renegotiate union contracts, import parts from China and downsize to match diminished demand. The last of these five points captured the critics’ imagination. “You can’t cut your way to profits,” they warned. Wagoner reacted with characteristic bravado: “We aren't going out of business in the next six months.” One wonders how those words would sound today, two days after the world learned that GM’s June sales slid 21.3 percent.

By now GM has a lot of practice explaining operating losses, shrinking sales and lost market share. Still, Black Tuesday challenged veteran mouthpiece Paul Ballew’s exculpatory skills. Once again, Ballew was determined to convince GM’s camp followers that the automaker’s sagging fortunes actually represent good governance and bad luck. To that end, Ballew rounded up the usual suspects.

GM’s Spinmeister began by pointing out that the showroom massacre was “partly attributable to a planned reduction of an additional 13,487 daily rental sale vehicles.”  Although Ballew did his best to headline the fact, empirical analysis suggests additional emphasis on the word “partly.” In June, GM’s sales fell by 86,825 units (320,688 vehicles vs. 407,513). GM’s reduced fleet sales only account for 15.5 percent of the total tumble.

Ballew then trotted-out the old “soft industry” excuse. Only it turns out the U.S. automobile industry has an airtight alibi. According to Autodata, American automobile sales fell just three percent in June; from last year’s 1.5m to this year’s 1.46m. The numbers clearly indicate that the industry was tucked-up in bed at the time of GM’s bloodbath.

And anyway, how do you explain the fact that GM’s transplanted competition went nuts? Nissan posted a massive 22.7 percent sales increase. Toyota’s turnover rose by 10.2 percent. Honda’s sales ascended by 11.5 percent. Hyundai’s sales climbed 11 percent.

Surprisingly, Ballew says GM wasn’t surprised by their [continuing] shimmy down the sales charts. “We had very strong retail sales in June and July a year ago, so we knew we'd have a tough time on the retail side.”

Yes, well, that's what happens when you offer zero percent financing to anyone with a pulse for six days, and then don't. In any case, there's no getting around the fact that GM sold 50k units less in June than it did the previous month.

Ballew identified two legitimate conspirators: rising gas prices and slowing housing starts. The twin terrors tore into GM’s truck sales, scything 22.9 percent from the previous June's total. Sales of the relatively new GMC Sierra and Chevrolet Silverado pickup trucks fell 26.5 and 23.5 percent respectively.

Surprisingly, Ballew says GM was surprised by Toyota’s aggressive offers on their Texas Tundra: zero-percent financing for 60 months and $5k in dealer incentives. The fact that GM failed to realize that their deep-pocketed nemesis would slap cash on the dash to attain their 200k per annum Tundra target shows GM’s woeful lack of situational awareness.

It gets worse. Ballew hinted that his employer will react in kind, increasing incentives on its pickups to protect its turf. As predicted, Toyota’s entry into the market is gradually and inexorably taking its toll on the profitability of GM’s last remaining cash cow.

Meanwhile, GM's new product cadence has peaked, and its eight brands are in dire straits. Caddy (-28.4 percent), Chevrolet (-23.5 percent), Hummer (-10 percent), Pontiac (-18.1 percent), GMC (-16.1 percent), Buick (-30.4 percent) and Saturn (-8.8 percent) all sucked the joy out of June. Only Saab stayed above water, adding 1066 sales, topping out at 4361 vehicles.

In silver lining search mode, Paul Ballew and Marketing Maven Mark LeNeve pointed to the early success of the SUV-sales-stealing Lambda triplets (Acadia, Outlook and Enclave) — although admitting you can’t build a new model fast enough to meet demand is a curious sort of boast for a company that's boasted about reduced production. 

So, where does all this leave Rick Wagoner’s turnaround plan? Accelerate new products. Flop. Eliminate discounts. Nope. Renegotiate union contracts. Health care “giveback” swallowed by soaring costs. Import cheaper parts from China. Check. Trim excess capacity. Who cares? If you didn’t believe it then, believe it now: you can’t cut your way to prosperity.

To wit: GM’s U.S. market share fell 3.3 percent in June, down from last year's 25.4 percent to this year’s 22.1 percent. (Down 8.1 percent since '90.) Toyota’s U.S. market share now stands at 16.9 percent. When you consider the disparity in the two automakers' dealership count– 7715 vs. 1740– it's easy to see which company is headed for Chapter 11, and why.

In fact, since Rick Wagoner launched his turnaround plan, GM’s market share has shrunk by 5.2 percent. No matter what else GM's CEO may or may not have achieved in that time, the figure is an irrefutable condemnation of his administration. GM's Board of Bystanders granted Rick Wagoner a bankruptcy-proof pension. It's time they activate it.

According to the now-infamous Georgetown, Kentucky memo, ToMoCo’s brass are concerned that their workers’ wages are growing faster than the company's profits. To rectify this situation, Toyota’s newest plants will pay workers based on local manufacturing wages– not United Auto Workers (UAW) scale. Naturally, the UAW is using this as flamebait to organize Toyota’s stateside operations, starting with Georgetown. Toyota’s launched its next salvo in this ongoing war of wages: they’re contemplating pulling Tacoma production from NUMMI.

GM and Toyota formed NUMMI (New United Motor Manufacturing Inc.) in 1984. The Fremont, California facility was Toyota’s first foray into American manufacturing and GM’s chance to learn about Toyota’s take on lean manufacturing. The 380-acre NUMMI facility currently cranks-out approximately 250k cars (Toyota Corolla, Pontiac Vibe) and 170k trucks (Toyota Tacoma) per year.

The NUMMI plant employs around 5440 “team members.” Some 4550 of these employees also play for the UAW. This makes NUMMI the only Toyota plant using UAW labor and one of the highest-labor-cost manufacturing facilities in the entire American automotive industry.

Some NUMMI workers earn more than $32 per hour, plus benefits. Combine this compensation with the joint venture's location– a high-cost area away from Toyota’s major suppliers– and it’s no wonder the factory’s drawn negative attention from its Tokyo taskmasters. 

In a prepared statement, NUMMI officials recently declared that the plant must do more to improve its “competitiveness” and stated it would only stay in business “only if it is able to do so.” That’s management-speak for “if we can’t get labor costs under control we’re abandoning this turkey.” 

Moving Tacoma production from Freemont to a lower-cost production facility does not pose insurmountable difficulties. Toyota’s Tijuana plant already makes the beds for all Tacomas, along with small quantities of complete trucks (34K in ’06). For the money saved in labor costs, the world’s largest automobile manufacturer could expand their Mexican production facility to accommodate increased Tacoma production.

Toyota also has excess capacity at their new Tundra plant in San Antonio. As the automaker builds Tundras in both Texas and Indiana, they could shift production around to open up some spare capacity for the Tacoma, at either location. And Toyota could also modify plans for their new plant in Elvis' birthplace (Tupelo, Mississippi) to build Tacomas as well as Highlanders.

The UAW knows Toyota’s serious about walking away from NUMMI. Last week, leaders from Local 2244 and 890 told their members that they stand a good chance of losing Tacoma production and warned “we are now fighting to exist.”

There are still a couple of years before the axe falls; the current UAW contract at NUMMI expires in August 2009. In the meantime, a “no layoff” clause means Toyota can’t trim costs by jettisoning employees. So the union must devise other alternatives to entice Toyota to change their mind.

The UAW’s already started making nice with management, offering proposals for the increased use of temporary employees and other cost-cutting measures. These stopgap measures may or may not satisfy Toyota. The Wall Street Journal recently reported that high level Toyota executives are actively contemplating cutting back North American production.

According to the report, Toyota’s U.S. production capacity is growing faster than sales, and a cheap yen makes importing cars from Japan a cost-efficient proposition. Toyota’s pulling back on plans for new plants and revamping pay policies. They’re on a cost-cutting spree, and anything between the Pacific and the Atlantic is fair game. 

NUMMI's Toyota bosses will be watching the outcome of this summer’s UAW negotiations with The Big 2.8 with considerable interest. As Toyota products account for the vast majority of NUMMI production, when it comes to any decisions regarding the facility's operating costs or, indeed, its future, Toyota calls the shots.

Toyota is sure to use the upcoming negotiations as a barometer of the local UAW’s willingness to accept wage or benefits cuts and/or changes to work rules. These concessions will be the deciding factor when Toyota makes their final decision on whether or not to maintain California production.

But two years is a long time to wait if you’re trying to cut costs. And there’s just so much you can do with suppliers, utilities, work rules and other expenses. Short term, Toyota has two choices: coerce the UAW into giving back some of what they gained in the last contract or move production elsewhere. Look for the Japanese automaker to take the path of least resistance.

The uncertainty surrounding NUMMI reflects the fact that the union’s future isn’t looking too rosy right now. Delphi’s UAW workers just took a massive cut in potential earnings and other benefits. The upcoming negotiations with The Big 2.8 seem to have the deck stacked in Detroit’s favor. And in spite of the UAW’s attempts to gain ground in Toyota’s plants, Toyota still holds the trump card. 

In the Dirty Harry movie Sudden Impact, Jennifer Spencer (Sandra Locke) confronts one of the gang members who raped her sister and left her for dead. Even though the cornered perp is looking at the business end of a gun held by a woman who has already killed every other conspirator (shooting them once in the genitals, once in the heart), the gang leader taunts her executioner. "So how's your slut sister?"

Hate rapists. Love the ‘tude. Here's a felon who sees Death's blade scything towards her and mocks its master. Compare that attitude with The Big 2.8 of late. These beleaguered automakers are busy advertising their po-faced passenger cars as highway high mileage champs and Camcordima-crushers. Puh-lease.

While I'm sure there are plenty of readers ready to pronounce Detroit's passenger cars superior to their transplanted competition, what IS the point? That train has left the station. The Big 2.8 would have to crank out a decade's worth of mechanically bulletproof, class-leading cars to regain the mid-size momentum from well-satisfied Toyondissans.

News flash: Detroit doesn't have a decade. As Ford's Presidente de las Américas Mark Fields recently admitted "Time is not our friend."

Gentlemen, it's true: you're screwed. Your margins are in pickups and SUV's, the trucks ain't movin' in big numbers no mo', you ain't got the time to change focus (so to speak) and you're selling three-quarter-assed transplant wanna-be's based on price. On top of all that, you're busy rushing more milquetoast motors to market. 

Hey, it's the ‘70's all over again! Gas prices spiked and Detroit didn't have anything genuinely competitive to offer, save market share. Gas prices have risen again and Detroit STILL doesn't have anything competitive to offer. And their passenger car market share is history.

Back in the day, Detroit destroyed their vehicles by trying to compete on the imports' terms, sticking diesels into piss-ant little Cadillacs for Christ's sake. And now they're doing it again.

Yep, they're building a whole range of slow, bland, watered-down versions of their once all-conquering SUVs. If ever a vehicle lacked edge, the Edge is it. And what's a honking great Buick somethingorother doing with a weedy V6 under the hood? Trying to be a bigger Honda Pilot? Fuhgeddaboutit.

More generally, why is Detroit trying to be Toyota? OK, The Big 2.8's gas-guzzlers aren't selling. That really blows. But here's an idea: go out and sell them!

The current generation Ford Explorer is safe, cheap, comfortable, smooth, powerful, versatile and handles like a dream. So when was the last time you saw an ad for a Ford Explorer that didn't scream CASH BACK! DEALER INCENTIVES! ZERO PERCENT APR! LEASE A NEW FORD EXPLORER FOR $199 A MONTH!

C'mon guys, you're staring down the barrel of bankruptcy (at best). Stop selling cars like Ginsu knives! Just look death straight in the eye and tell it to F-off. All I'm seeing is market-reactive, mileage-related come-ons. How about some ads telling people to forget fuel efficiency and buy big?  

"Excuse me sir, you don't seriously think a few more mpg's is going to save the planet do you? Life is short! Do you want to spend it DOWN THERE, eye-to-eye with all those passenger car people? Speaking of which, have you ever wondered what happens when an old school SUV hits one of those new school compacts? Of COURSE you have.

"Yes, I know: gas is expensive. What if I can show you how to save enough money on the purchase of your SUV to pay for that gas? You LOVE your SUV. You give that up and the next thing you know you'll be eating soybean burgers and drinking white wine spritzers. We build some GREAT SUV's. Do yourself a favor. Do US a favor. Buy one."

Meanwhile and in any case, the fact that the Chrysler 300 was a hit seems to have escaped Detroit's import-addled attention. Hello? Can Toyota, Honda, Nissan, KIA, etc. build a big, bad, trad American sedan for the masses? I wouldn't recommend waiting to find out.

Or, for that matter, trying to sell [non-fleet] American motorists more lily-livered Euro-styled front wheel-drive mileagemobiles. Go wake up your design teams and show us what real ‘Merican metal is all about. What? You killed the Cadillac 16 and Buick Velite in favor of green machines? When did hara-kiri hit Detroit?

Will a more ballsy strategy work? Hell no. The Big 2.8 have too many dealers, brands and overheads; their continued survival demands all blockbusters, all the time. That just ain't gonna happen. But what the Hell. When you're moments away from the big sleep, it's better to go out like the Dirty Harry villain, showing a little class. OK then, style.

No wonder the Germans are so gung-ho on sending their diesels across the pond. Europe’s two-decade long diesel-keg party has been crashed by a new generation of super-efficient, clean and cheaper gasoline engines. A royal diesel-overproduction hang-over is inevitable. The Germans’ morning-after solution: send the stinky leftovers to enthusiastic Yanks waiting with open arms, who’ve conveniently forgotten their killer hangover from the last US diesel orgy.

In 1892, an experimental ammonia engine literally blew up in engineer Rudolph Diesel's face. Laid-up in a hospital bed, he pored over Nicolaus Otto’s pioneering work on the internal combustion engine. Diesel identified its weakness.

Diesel tumbled to the fact that the Otto engine’s efficiency was intrinsically compromised by the fact that it mixed fuel with air prior to compression. Too much compression resulted in uncontrolled pre-detonation. Diesel’s solution: inject fuel separately from the air to allow super-high compression and eliminating the need for a throttle (reducing pumping losses). Diesel's engine was roughly 30% more efficient than Otto's. 

In 1989, VW/Audi ushered in the modern direct-injection (TDI) diesel. The group's oil burning powerplant set a high-water mark in the diesel’s long development. With Europe’s high fuel costs, the more expensive (yet efficient) diesel engine could now pay for itself quite easily. The calculation triggered Europe's diesel-boom, resulting in a 50 percent market share vs. gasoline-engined propulsion. 

But Europeans have been paying a price (other than at the pumps): particulate emissions (Particulate Matter, or “PM”) and NOx pollution. Many European cities have serious particulate and diesel odor problems. Several European cities impose restrictions on diesels during PM alerts.

The new generation of “clean(er)” diesels that meet the US Tier2 bin5 standards cut PM emissions substantially, but not completely. Already, there are warnings that PM from “clean” diesels still poses a significant health risk.

The diesels coming our way carry several other penalties, especially versus the gas hybrid. The complicated and expensive NOx catalysts and urea injection schemes (“BlueTec”) cut efficiency by five percent. Meanwhile, the next Prius is projected to be 15 to 20 percent more efficient. And Toyota is bringing down hybrid production costs.

The diesel vs. hybrid mileage/cost gap widens… further. And the “clean” diesel’s just-barely compliant emissions still can’t touch the gas-hybrid’s practically breathable exhaust.

Then there's the elephant in the room: global warming. Clearly, the political winds are blowing against CO2. Diesel fuel has higher carbon content, resulting in 17 percent more CO2 per gallon of fuel burned than gasoline. With the diesel’s efficiency superiority down to 25 percent, a “clean” diesel emits only 13 percent less CO2 than yesterday’s gas engine. And that small gap is… wait… gone.

While the diesel’s efficiency peaked in 1989, and lost 5 percent to PM cleansing, gas engine development is on a roll. Engineers are systematically tackling all the inherent deficiencies that Diesel identified in his hospital bed. (No wonder Rudolf was considered paranoid; maybe he suspected that eventually the Otto engine would catch up.)

A farrago of new gas-engine technologies has converged, which Europeans have been quick to embrace. VW’s 1.4-liter 170hp TSI gas engine is a perfect example of the trend. The TSI starts off with the help of a supercharger (no turbo-lag), and then switches to turbocharging (no parasitic losses). With diesel-like torque and direct injection, it’s the best of both worlds.

A CO2 output comparison with two other similar-output VW engines is telling. Their 170 horse 1.4-liter TSI produces 174g/kms of CO2. Their 150hp 2.5-liter five cylinder engine (US Rabbit only) emits 240g/km. And their 170hp 2.0-liter TDI diesel (not US compliant) produces 160g/km.

American Rabbit drivers are paying a whopping 38 percent efficiency penalty compared to the Euro-Golf TSI, as well as giving up gobs of torque and twenty horsepower. If VW’s 170hp TDI were “cleansed” to T2b5 standards, its CO2 output would be no better then the gasoline TSI.

And that’s just the jumping-off point. Start-stop technology, full valve control, and stratified direct-injection offer anywhere from 10 to 25 percent further improvement potential. Combine these goodies with mild-hybrid assist/regeneration, and the diesel party’s kaput. No wonder the Germans are all hard at work on mild-hybrid technology. It’s their best shot to keep up with Toyota’s CO2 meister, the Prius (102g/km).

A study by the consulting firm AT Kearny confirms the diesel's demise. It predicts that only 25 percent of Europeans will find diesels an attractive economic proposition by 2020.

Have Rudolf Diesel’s paranoid nightmares come true? Not totally. Diesels are a welcome mix to the party for larger vehicles that spend a lot of time on the open road. Count on GM’s new 4.5-liter “baby” Duramax diesel to be more popular with the light-truck crowd than the gas hybrid option. But when it comes to smaller vehicles, the numbers just don’t add up.

Although Rudolf Diesel’s engine WAS intrinsically more efficient, it turns out that Otto’s engine is a lot more clever at learning new tricks.

Let’s keep things in perspective. Delphi has been in bankruptcy since October 8, 2005. As in "we need protection from our creditors and a new way to do business or we’ll have to throw all our workers onto the streets." Since the former GM subsidiary filed for Chapter 11, the company has lost billions of dollars. To view Delphi's deal with the UAW as a demonstration of the union’s ability to “accept reality” is like suggesting that a doctor looking at a patient with multiple bullet wounds should be praised for thinking a bit of surgery might be in order.

As Frank Williams pointed-out previously, the union has already drained huge amounts of blood money (GM’s) from Delphi’s wounded body. By the time yesterday’s UAW contract vote rolled around, 8k of Delphi’s 25k UAW workers had already been bought out (with General Motors’ money). Of the 17k remaining members, 4k more get a buyout and/or buy down program (financed by General Motors). The rest exchanged job security for pay and benefits cuts.

Well, not exactly. The agreement allows Delphi to close or sell 21 of its 29 U.S. factories. While there are lay-off payments (up to $40k) and “flow back” provisions for workers whose plants are history, a great number of Delphi’s union members will be SOL. And while the words “pay cut” may be music to Detroit execs’ ears, it’s actually more like a glass ceiling; the majority of Delphi’s current UAW members already work at the lower wage rate. 

In short, the UAW arranged a pay-off for 4k GM-era members, maintained the status quo on pay for the remaining workers and “allowed” Delphi to downsize its U.S. operations by around 80 percent.

Ah, but does this set a pattern bargaining precedent for the UAW’s upcoming negotiations with GM? Does the Delphi agreement reflect a “new era” in labor negotiations that will allow General Motors to reduce its wage costs to parity with Toyota and transplants and, thus, turn its business around? Nope.

Again, Delphi is a bankrupt company hemorrhaging money. GM is a going concern, albeit one that’s hemorrhaging money. In fact, the new Delphi – UAW contract will cost The General $7b (for pension and retiree health care expenses), a one-time $500m payment (when Delphi emerges from bankruptcy protection) and annual payments of $400m to $500m after that (for an “undetermined number of years"). 

[GM says a forthcoming $2b reduction in their Delphi-related parts bill cancels out the cost of the annual payments. That remains to be seen.]

Anyway, when it comes to their upcoming contract with GM, the UAW will abide by the same principle that informed the Delphi deal (and every other deal they’ve ever made): get as much money as possible for their members. Nothing wrong with that. But you can't ignore the fact that the union was perfectly happy to let/watch Delphi fall into Chapter 11 before [eventually] agreeing to this week’s contract. 

I know, I know: management. Even so it’s not credible to think the UAW will cut a similar deal with GM to prevent the automaker from tipping into bankruptcy. Even though The General’s mortgaged up to its eyeballs and burning through cash, the company’s ability to stay in business is proof that it can afford its UAW contracts. You know; if you see it that way.

Of course, the "you" in question here are GM’s UAW workers. While Delphi’s UAW workers had over two years of doom and gloom in which to contemplate a jobless future (and then four days to forestall it), GM’s UAW workers see signs of life everywhere.

GM’s foreign subsidiaries are going great guns. There’s a whole bunch of shiny new products on the showroom floor. Five hundred engineers are working on fuel cells. CEO Rabid Rick Wagoner, Car Czar Maximum Bob Lutz and the rest of The General’s high-flying management team are still swanning around in their Gulfstream jets, banking millions in bonuses and stock options. General Motors’ stock price is now sky high. And just this week, GM sold its Allison Transmission unit to a pair of buyout firms for $5.6b.

And they want me to work for $14 an hour?

UAW boss Ron Gettelfinger is no dope. He’s looked at GM’s books. He knows what’s really going down (market share, for one, margins for another). But at the end of the proverbial day, GM’s UAW workers must agree to cutbacks, givebacks, buyouts or layoffs. At Delphi, they were already in the shit, convinced they faced a choice between nothing (chapter 7), a little more than nothing (Delphi’s original offer) and something (the final deal). Similar concessions from GM’s workers are not likely.

Until GM goes bankrupt. When GM files for Chapter 11, its workforce will finally start coming ‘round to the idea that it's time to give back what they already enjoy. Until then, why would they? 

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