Last year, the Ford Motor Co. lost $12.7b. The company is carrying $188b in debt. Its bonds are non-investment grade. It’s got to the point where less than one in ten American analysts recommends the former blue chip stock. In fact, by any measure of financial health, Ford is knocking on death’s door. So why did Alan R. Mulally leave Boeing to heal The Blue Oval– aside from the $45m plus transferred into his bank account? Mulally is an engineer, a man who can’t resist taking something apart and trying to put it back together better. Or, if you prefer, Humpty Dumpty.

Mulally is looking at a lot of broken eggs. Ford’s dealer network is obese, its product line lags, UAW negotiations loom, healthcare costs outpace kudzu and the corporate culture is a capitalistic tribute to the Kremlin. But to an engineer, all things are simple. To solve even the most complex problem, just break things down into their smaller components, then repair, reengineer and reassemble. Simply put, simplify! 

That is, after all, how Ford made its bones. Crazy Henry designed simple cars that were easy to operate and maintain. He built them on simple assembly lines, with simple jobs that were easy to master.

Mulally understands how things work (or don't, as the case maybe.) Upon installation, he called for a company-wide audit to find ways to cut costs and complexity. Those auditors are just now sending in their reports.

They’re discovering (surprise!) that Ford wastes an obscene amount of money on unnecessary duplication. For example, The Blue Oval builds its products on no less than 30 engineering platforms. In contrast, Honda has six platforms and Audi has four. Sure, these companies don’t manufacture a vast variety of cars. But they make money and Ford doesn’t.  But wait! There’s [lots] more! No two of the vehicles Ford builds upon these 30 platforms share seat rails, springs, hood hinges and God knows what else.

Last January, Ford announced Sync, a voice-command system for phones and MP3 players. The company will start rolling out the new (soon-to-be-obsolete but that’s another story) technology in the fall– but not on Volvos or Land Rovers. The system is incompatible with Volvo and Land Rover’s existing electronics– even though the Swedish and British marques haven’t really been “foreign” for over a decade. 

Analysts call it Balkanization. Ford has four disparate operating units around the world, each with its own costly management team, research and development staff and production facilities. This wouldn’t be a problem if they shared, which they don’t.

No wonder Mulally recently read his execs the Riot Act: "There's no global company I know of that can succeed with the level of complexity we have at Ford." 

Mulally knows that streamlining production and development is like finding money. Audi was formed on this principle; the Volkswagen Group hangs onto the principle like grim death. By the time this century hits its early teens, Audi’s new modular MLP platform will be the one ring to rule them all. 

Lotus is vending their version of a universal platform: Versatile Vehicle Architecture. While not known for mass-production, Lotus is very adept at selling its services, and they’ve had a fair amount of interest in the technology. And why not? Automotive research and development costs are not receding. It costs about $1b to create a new platform, why not do it once or twice, instead of 30 times?

But even as Mulally the engineer strives to simplify Ford’s design, engineering and production process, once again aiming to replicate Toyota’s methodology (as he did at Boeing), Ford’s entrenched bureaucracy is hard at work, striving to keep things comfortably labyrinthine.

"The managers take refuge in the structure when things get tough,” Allan Gilmour, Ford’s now-retired Chief Financial Officer and Vice Chairman told BusinessWeek. “Rather than innovate or try new ideas that seemed risky."   As the popular management expression says, “Culture eats strategy for lunch.” One wonders if the engineer in charge of Ford gets it. Perhaps so. Mulally has pow-wowed with Gilmour twice since taking the reins. And Mulally ain’t no dope. 

Last September, Mulally’s underlings told him the Focus loses Ford roughly $3k per sale. "Why haven't you figured out a way to make a profit?" he asked (demanded?). The suits explained that Ford needs to sell lots of Foci to maintain its corporate average fuel economy (CAFE) ratings, AND that the car is made in a high-cost UAW factory. "That's not what I asked," he replied.  

There's an old engineer’s adage: you can have something good, on time or under budget. Pick two. Mulally's about to test the theory’s inverse. When you're out of money and, as your competitors jack-up their existing efficiency, out of time, can you still create something good? The answer is painfully simple.

On Tuesday, Detroit's top execs made another pilgrimage to Washington, D.C. The Detroit News reported that the troubled troika all arrived at Capitol Hill in fuel-efficient vehicles as a "symbolic gesture." Mulally belted across the Beltway in a Ford Escape hybrid. Wagoner wheeled up in a hybrid Saturn Aura. And LaSorda made the scene in a flex-fuel Town & Country minivan. Of course, none of these vehicles are their makers' most frugal cars. However, we can't have America's automotive aristocrats getting off their fuel-sucking private corporate jets and jumping into a run-of-the-mill Aveo, Focus or Caliber, now can we?

The hypocrisy is stunning. Lest we forget, when the Toyota Prius first whirred into view, Detroit dismissed the gas-electric hybrid vehicle as a meaningless PR stunt. And now, two out of three American automotive magnates cloak themselves in hybrid hype to convince Washington they're down with the whole hi-tech gas-saving thing. You know; now that they want some help competing on a "level playing field" with those tricky transplants. Again. Still.

Of course, this kind of running-on-empty automotive gesture is hardly restricted to Michigan's golden parachute-clad corporate con artists. No Hollywood star worth his or her Oprah confessional would dare show up at a red carpet event in a gas guzzler. They leave their multi-thousand-square-foot homes, heated pools and garaged exotics to make the scene in the latest hybrid or electric trendmobile- just in case anyone questions their environmental credentials. 

Likewise, politicians. Last month, Senator Barak Obama harangued the Detroit Economic Club with a scathing condemnation of the U.S. auto industry. The Democratic Presidential hopeful accused The Big 2.8 of unconscionable foot-dragging on CAFE standards. According to the man who would be President, Detroit's "spending millions to prevent the very reform that could've saved their industry" and "spending their time investing in bigger, faster cars." 

Almost as soon as Obama's anti-Detroit bombshell hit the PR newswires, hometown reporters revealed the inconvenient truth about the pol's garage, filled as it was with a Chrysler 300C. The Senator duly ditched his Hemified whip for a Ford Escape Hybrid.

No surprise there. The Missouri-made Escape Hybrid and its corporate clone (the Mercury Mariner Hybrid) are the politicos' gesturemobiles du jour. When she's not being ferried about in an armored Cadillac or Chevy Suburban, Hillary Clinton (well, actually, hubby Bill) drives a refrigerator-equipped Mariner Hybrid. John Edwards and Al Gore both keep the planet cool (warm?) with their Escape Hybrids. 

At least that's what their PR folks say. One wonders how much time our democratically-elected leaders spend in these cramped hybrids in lieu of the limos, SUVs and staff cars that transport these prodigious pork barrel purveyors around town, and block the streets around Capitol Hill.

And onto those storied streets drove Rick, Alan, and Tom, trying to neuter legislation designed to force them to build more fuel-efficient vehicles, like the ones they were driving. The heads of GM, Ford and Chryslerberus know they can't stop increases in the fuel economy standards. All they can do is minimize the federal minimum so they can keep selling more profitable gas guzzling trucks and SUVs have the time they need to engineer more fuel-efficient vehicles, like the ones they were driving. 

Rick Wagoner more or less admitted that the mandatory fuel economy gig was up. The GM lifer told long-suffering GM stockholders that it was time to move on to the other bulges in the Gordian knot strangling The General. "It looks like… it's very likely there will be increases in CAFE… Let's make sure that we also fix the real problems while we're doing that."

By "real problems," Rick was alluding to his company's [self-inflicted] unsustainable cost structure and ongoing failure to maintain domestic market share- problems shared by his friends indeed.

So… bad boys, bad boys, whatcha gonna do? More specifically, what the Hell are you doing in DC when you should at home figuring out how to build products consumers want to buy at a price that makes you enough money so you can sort this out yourself?

Of course, Detroit's corporate lions prefer maintaining the status quo and jetting to Washington on someone else's dime. They're old pros at pressing the flesh at the center of an enormous bureaucracy; a bureacracy that sees nothing wrong with running-up massive debts, mortgaging their constituents' future to protect their own short term interests.

If CEOs Rick Wagoner, Alan Mulally and Tom LaSorda wanted to make an effective symbolic gesture, they should have driven from Detroit to Washington and back in an Aveo, Focus, or Caliber.

By enduring 1000 miles in those noisy, cramped, cheap cars– byproducts of their bean-counted design and engineering processes– they'd tell the world that their very best fuel-sipping products are good enough for government work. How appropriate is that?

Last month, I field tested a new methodology for analyzing the American car market. Reader feedback on TTAC’s month-by-month sales charts of “key” U.S. models was overwhelmingly positive. Your most excellent comments and insightful methodological suggestions were noted, logged and, where possible, incorporated. OK, so, May car sales were the highest so far this calendar year. Without further ado, here’s how our 19 models floated within this rising tide.

Passenger Cars

Taken as a whole, U.S. passenger car sales showed a sharp upturn in May. The Chevrolet Impala , Chrysler 300 and Toyota Camry all rebounded from their April dip. Ford did not share in this good fortune. After climbing steadily, Fusion sales dropped below 2006 levels for the first time since last November.

The Camry’s still the segment leader, but the Impala’s coming on fast. The mid-sized Canadian is now selling more briskly than it did during GM’s epic “fire sale for everyone” back in 2005 and was GM's best-selling passenger car in May. That said, GM lavished $1500 in incentives on the Impala– the highest amount they offer on a Chevrolet passenger car. 

Pickup Trucks

For the first time since February, Silverado sales have topped last year’s levels. The good news comes with a minor caveat: GM is still producing and selling the “Classic” (non GMT900-based) Silverado, a cheaper model that’s buoyed by $2k to $3K rebates and dealer incentives. Still, the new model’s leading the charge.

Meanwhile, assisted by massive incentives (up to $5K rebates plus dealer incentives) the Dodge Ram also bested last year’s number. Chryslerberus is planning a redesigned Ram for 2009 with diesel engines across the board. They’ll most likely increase the incentives to keep current sales from tanking in anticipation of the new model.

Ford's F-Series continues to show lower sales than in previous years. Look for Ford to add to its $3k rebate as the Glass House Gang fight to keep their perennial best-seller at the top of the sales charts.

Tundra sales showed another record month. It remains to be seen if the model’s camshaft problems will damage the Tundra’s momentum, or if Toyota’s rep for bulletproof build quality will reduce the issue to a minor bump in the road.

In any case, the Toyota’s entry into a declining market has had the anticipated effect: pickup truck margins are down across the board.

Truck-Based SUVs

Tahoe and Explorer customers shrugged off high gas prices. Tahoe’s May sales have remained steady for the past three years. Explorer sales reached the highest level since last September.  

Dodge and Toyota weren’t so lucky; Durango and 4Runner sales both continue their downward trajectory. The Durango has practically flat-lined in the mid-4K range, while 4Runner sales are the lowest they’ve been since last October.

Small SUV/CUVs

CUV sales split into two distinct camps: the old and the new. Sales of the elderly Chevrolet Equinox and Chrysler Pacifica fell well below those of previous years. If Chevy and Chrysler want to remain competitive in this hot market segment, they have to hit refresh in a big way, and fast.

Sales of the recently refreshed Ford Escape and Toyota RAV-4 rose sharply. The more boldly grilled Escape hit an all-time high in May, with the gas – electric hybrid model accounting for 14 percent of the total. RAV-4 sales were up by more than 2K units over last month, and against the same month last year.

New Models

All three of the new-for-‘07 models I’m tracking showed increases in May. The Jeep Compass rebounded slightly above last month’s performance, but still remains below the curve for the year. The GMC Acadia continues almost straight-line steady growth. After an inexplicable dip last month, Ford Edge sales are back, and they ain’t bad. 

Total Sales

GM, Chrysler and Toyota all saw higher sales in May than in April, and with higher sales than May ’06. Even though Ford showed an increase from April, they still remain well below the previous years’ sales levels. (For cumulative sales YTD, click here: GM, Chrysler, Ford, Toyota .) But the numbers mask a worrying development. 

In spite of The Big 2.8’s pledge to wean themselves from incentives, they haven’t. In May, GM’s incentives rose 6.1 percent (year on year) to a $2,950 per vehicle average. Ford’s incentives rose by 4.6 percent to $4,040 per vehicle. Chrysler's incentives soared by 7.1 percent to an average of $4,178 per vehicle. (Toyota’s incentives averaged $1,140 per vehicle.)

This does not bode well for Detroit. In 2006, GM and Chrysler’s North American operations lost an average of $1,436 and $1,072 respectively per vehicle. Ford lost a whopping $5,234 per vehicle.  In contrast, Toyota and Honda made $1,200 on every vehicle sold. The greater Detroit’s incentives, the lower their profits. Or, let’s face it, the greater their losses. It’s still early daze, but 2007 is turning out to be a “make or break” year for The Big 2.8.

GM had an excellent May. Despite the title of this series, I’m not going to dwell on the fact that The General’s ten percent year-on-year sales increase is actually a rebound from a disastrous May ’06 (overall sales are still down 3.2 percent compared to the first five months of last year). And I won’t bother pointing out that the majority of GM’s one percent market share gain came out of Ford’s two percent market share loss. Or that GM’s “rising tide lifts all boats” progress pales in comparison with the sales tsunami that Toyota’s [still] riding deep into the American heartland. No I want to focus on debt.

GM is carrying a monumental amount of debt. Forbes pegs the stat at $445b, against a market capitalization of $17b. General Motors has so much debt that even their high-flying foreign divisions know it’s hammer time (“You can’t touch this”). Only a major recovery in the black hole known as GM’s North American market can hope to pay off the interest on the company’s loans– never mind reduce the principal, break even or, Heaven forfend, bank a surplus. 

Less than fifty years ago, General Motors had no such burdens. It was one of the world’s largest multi-national, multi-industry conglomerates. The company was so big and so rich it spent all its energies extending and embellishing its status. GM had so much money swilling around its corporate coffers it made money loaning its money to other people.

Those days are long gone. While auto industry pundits focus on the fading fortunes of GM the carmaker, it’s important to remember that virtually all of GM’s ancillary businesses– from refrigerators to airplanes to defense research to locomotives– have been de-acquisitioned. More recently, GM's been jetisoning bits of its core business, from shares in foreign automakers to the entirety of their [now bankrupt] parts provider Delphi.

The full list of items included in GM’s epic family silver sale is too long to provide here. Suffice it to say, in the 15 months to January 2007 alone, GM shed $17b worth of assets. Last month, the corporation hocked their remaining 49 percent share of their GMAC financial unit for $4.1b. Allison Transmissions is next to go. Aside from a few under-the-radar bits and bobs, there’s literally nothing left to sell. (Would YOU buy Saab?)

So it’s on to the plastic! Last Wednesday, GM replaced $1.1b in convertible securities with new unsecured convertible notes. As we reported previously, GM plants and machinery have also been “monetized.” Not to put too fine a point on it, the quintessential American automaker has reacted to the violent contraction in its Empire by going into eyeball level debt. Their dynastic dreams are history (literally). Servicing the debt is Job One.

In the last decade, only two profit engines have been able to perform that life-sustaining task: North American truck sales and GMAC. Now that GM’s pawned its remaining piece of GMAC, the golden goose is dead. High margin pickup trucks and SUVs are the last great hope for bailing out the artist once known as the world’s largest automaker. 

While GM's PR machine trumpeted May’s rise in full-sized truck sales, America’s once profitable pickup truck and SUV market continues to contract. Last month, for the first time since 2002, U.S. dealers sold more cars than trucks. Cars accounted for 51.4 percent of all new vehicle deliveries. Aside from the $5k+ incentives GM’s piling on its slow-selling vehicles to staunch the truck-shaped wound, here’s the really scary bit: transplants scarfed-up 61.4 percent of last month’s 804,196 car sales.

Strangely, the Dallas News reports that GM is planning to increase production of the Chevrolet Tahoe, GMC Yukon and Cadillac Escalade at their Arlington, Texas plant in August. Either GM’s planning a major new incentive campaign in July or they’re stockpiling product for a United Auto Workers’ strike. No matter; there’s little expectation that SUV sales can generate the gi-normous profits that management squandered to get them into this mess.

On the face of it, everything’s going to be all right. GM will use the debt/cash to complete its turnaround plan, and then reduce its debt. But first it's got to placate (i.e. pay off) its former workers over at Delphi. And do something about (i.e. pay off) that union guy in Canada who’s watched too many episodes of Dallas ("I’m gonna bring Ricky down, if I have to destroy GM to do it!"). And fund their on-again, off-again, on-again, off-again, on-again range of rear wheel drive-cars. And, perhaps, pony-up a bil or so for the new “Beta” small car platform.

GM’s “We Heart Debt” strategy has topped-up their bank account to git ‘er done (even if it don't). But here’s the problem: they’re tapped out. If there’s a cash-related setback– be it a union strike, gas price spike or a big rise in interest rates– that’s it. Chapter 11. What are the odds?  

It’s hard to believe global positioning satellite (GPS) technology was once the sole purview of the U.S. military. It’s equally difficult to comprehend how James Bond’s first in-car tracking device thrilled pre-pubescent boys. These days, a luxury car without a satellite navigation system is like a luxury car without dual-zone climate control. Still, it’s a pretty pricey item that’s bound to bite you in ass at trade-in. So should you listen to your oleaginous salesman and tick that option box?

The tech market is a fickle mistress. That way cool RAZR phone that cost $500 and a two-year contract is now as precious as a Pet Rock at a garage sale. Ask any hapless fool that made a high-end high tech purchase a couple of weeks before a product refresh hit the market— they know the pain of instant 60 percent depreciation (worse than buying a new Chevy). 

Product cycles for factory-fitted satellite navigation units aren’t quite that rapid, but they ain’t slow neither. Sat nav units' display screens and memory– the highest cost parts– are getting cheaper and better, fast. At the same time, operating systems have moved from CD to DVD to memory chip, while the user interface has progressed from 2D to semi-3D, heading towards “street view” and God knows what else.

If you think that’s been a quick change, handheld sat nav units are evolving twice as quickly. It takes carmakers time to spec, design, test, manufacture, fit, ship and sell new devices– never mind clearing the whole schmeer with legal. Portable GPS manufacturers have fewer technical hurdles and a MUCH smaller bureaucracy. In fact, products from companies like Garmin, Michelin, Maxtech and TomTom (not to mention phone and PDA-based sat navery) are making brand new in-car systems obsolete before they’re even launched.

Thanks to the Original Equipment Manufacturers'' (OEMs') slow tech turnaround, by the time a customer comes to sell a car equipped with a factory-fitted sat nav system, the clever route guidance gizmo is not worth the silicon it’s printed on. Or, if you prefer, somewhere around $500.

That’s the average used car sat nav premium, and that’s not good. Not when you consider that an average built-in sat nav package costs the new car buyer a whopping $2k+ (not including tax). Of course, that’s the manufacturer’s suggested retail price (MSRP); the invoice cost is about $400 to $500 less.

That's a decent chunk of change for a hard-pressed salesman or car dealer. Working our way back up the food chain, the in-car sat nav system costs automakers at most a sixth of its MSRP, even with all the frills. So it’s no surprise that carmakers, dealers and salesmen are all pushing built-in sat nav systems on the consumer.

Now that portable sat nav units are making a financial mockery of their car-bound cousins, and  even wealthy new car buyers are shunning built-in GPS units as a money-losing proposition, the car cartels are fighting back in the great tradition of “keep screwing the customer as long as you can.” It’s called bundling.

Fancy a Mark Levinson 14-speaker 330-watt Premium Surround Sound Audio System in your Lexus GS430? Excellent choice! But you can’t have it without satellite navigation, and forking out $4230. Want a rear back-up camera and park distance control radar in your BMW X5? That’ll be the $2600 “Technology Package,” with DVD-based, voice-activated, real-time traffic computing satellite navigation.

There’s a flip side as well. If you JUST want sat nav, plenty of automakers force you to purchase a passel of luxury options before you’re allowed to buy it. The Chevrolet Corvette only offers sat nav on the $5k 3LT trim level, which includes a fancier standard sound system, head-up display, memory package, heated seats, power telescoping steering wheel and universal home transmitter [whew].  

While not as reprehensible as safety option bundling bullying, this sort of “take it or leave what you really want” sat knavery will only continue for so long, as the value of factory-fitted systems continues to plummet and customers get stiffed at trade-in time. 

The practice also faces pressure from the declining cost of sat nav systems, which will make them available in a wide range of mass market motors, which will eliminate sat nav’s “premium” patina. Toyota recently announced it will offer “entry-level” sat nav in some of its models, with a lower resolution screen, without voice activation. 

It’s only a matter of time before factory-fitted satellite navigation will eventually go the way of the FM radio and CD player; it’ll be a low-cost standard feature. Manufacturers are already searching for The Next Big Thing: a new “must have” luxury that commands the same premium. Meanwhile, unless you’re a neat freak who doesn’t like anything stuck to the windshield, leave that sat nav option box unchecked and buy a portable unit.

Japanese society is known for its rigid social stratification. Depending on the listener’s relative status, there are four ways to say “this is a book." Individuals within this system are well aware that anyone who moves upwards from their "natural" place in the pecking order risks ridicule, jealousy and attack. Hence the ancient Japanese proverb: “The nail that sticks out gets hammered down." Automotively- speaking, Toyota is the tall nail these days, and boy, is it getting hammered.

Earlier this year, Toyota passed General Motors as the world’s largest automaker. Last month, Toyota’s U.S. operations ended Ford’s 76-year reign as America’s second biggest automaker. If you’re wondering why Toyota hasn’t celebrated these accomplishments with a bit of good old American swagger, see paragraph one. The Japanese carmaker knows it’s in the crosshairs. For now, the company figures that silence is the better part of valor. 

The problem is simple: Toyota’s reputation exceeds them. The automaker is famous for building vehicles that never break, rust, fail or fall apart. Automobiles that are so well-built they’ve stood the old ‘70’s idea that “made in Japan” means cheap on its head. Toyota’s reliability rep is so strong that a disgruntled aircraft owner recently evoked the company’s mythical mechanical prowess on an internet forum: “I want Toyota to make a single engine piston [airplane].” 

For some time, domestic supporters have been trying to tell American consumers to stop drinking the Toyota Kool Aid. Citing independent surveys, they claim The Big 2.8 have narrowed the quality gap to the point where it’s statistically meaningless, making the discrepancy a matter of [misinformed] perception. More to the point, they say the Japanese company is no stranger to product delays and recalls, and mechanical issues. Which is true.

While Toyota’s design, parts and production process remains second to none, carmaking is such a vastly complex business, and Toyota such a vast enterprise, that mistakes are inevitable. No carmaker– or car– is perfect. Toyota’s recent problems with the new Tundra pickup’s defective camshafts illustrate the simple fact that shit happens– especially when you’re building a new product in a new factory using new suppliers.

Still, there’s no question that Toyota’s rapid expansion in the North American market is giving the company growing pains– or should I say, continuing to challenge the storied Toyota Production System. Ironically enough, Toyota is suffering from a perception gap. Their quality problems are not significantly worse than before, but the company’s newly assumed tall poppy status makes them seem so. Simply put, people are paying attention.

Well, the media is, as witnessed by the relatively prominent play given the Tundra screw-up. That said, it would take at least a decade of crap Toyota products and bullet-proof Detroit metal to reverse the curse. And no matter what The Big 2.8 do or don’t do, Toyota is not about to let its products suffer from endless rounds of mechanical mishaps and expensive recalls.

Toyota is taking radical action to sort out its North American quality woes. The company is currently retraining ALL of its North American assembly workers. This “back to basics” course is designed to identify and correct defective working practices and highlight the need for increased front line vigilance. At the same time, Toyota is devolving decision-making powers and back office support from its Erlanger, Kentucky headquarters to regional centers in California and Texas.

Anyone who thinks Toyota will ease-up on its commitment to product quality, brand integrity and customer satisfaction is delusional. The automaker is nowhere near the peak of its global or national ambitions, and they know exactly what they have to do to get there. And make no mistake: Toyota’s current production problems are NOT a reflection of corporate hubris. They're a direct result of their desire to keep a low profile. To avoid the hammer.

How’s this for an inconvenient truth: building vehicles abroad would be the easiest way for Toyota to assure product quality and increase profits. They refrain from doing so for political reasons. The Japanese automaker knows that their top dog status makes them the logical scapegoat for failing American automakers. Planting factories on U.S. soil at least partially protects them from the slings and arrows of outraged patriots.

Speaking to Automotive news, management guru Jim Womack went further. The co-author of a seminal book on Toyota’s lean, mean production machine claims that the American political landscape makes it difficult for Toyota to be Toyota.

"The short-term rate of expansion in the States is not being driven by long-term judgment about what is truly best for the business as a business," Womack said. "Rather, it's being driven by an assessment of what is necessary for the company due to short-term politics.

“Toyota is terrified that it will be blamed for the collapse of Ford and the potential collapse of Chrysler, followed by GM."

If you were wondering how such a successful automaker could have such a paranoid corporate culture, it's best to think of Toyota's psychology as the reverse of Abraham "hierarchy of needs" Maslow's aphorism. When you're a nail, everything looks like a hammer.

Let’s face it: Subaru isn’t known for building physically attractive automobiles. Their products are the automotive equivalent of the “butter face” girl: everything is great “but her” face. Fortunately, the new Legacy GT (LGT) avoids the brand’s heavy-handed airplane-inspired refreshes, or the new Tribeca’s po-faced Pacifica pandering. The Legacy GT’s not-so-B9 makeover puts the model in prime position for the legions of more mature automotive enthusiasts desperately seeking Subie. 

The American Automobile Association recently calculated the average cost of driving a car. News flash: your automobile is devouring your children’s college fund to the tune of 52.2 cents per mile. Multiply that number by 15k miles and decades of driving, and automotive ownership costs make Ivy League tuition seem like a bargain. Thankfully, you can lower your cost of ownership (of the car) with three strategies. Each one will put a nice six figure dent back into your savings account, and a big fat smile on your face whenever you turn the key.

The first strategy is conservation: spending as little money as humanly possible. Automotive conservationists aren’t motivated by performance, comfort or snob appeal. All they want to do is get from Point A to Point B while keeping as much money in their pocket as humanly possible. They want to save in the showroom, at the pump, after service and at trade-in time.

Conservationists are, by their nature, small car aficionados. They’re willfully oblivious to the fact that small cars are an SUV’s accidental toe jam. They happily endure cramped quarters, sloth, low status and any of the other so-called downsides of owning a small, “boring” car. They concentrate on their econobox’s purchase price and operating costs.

Conservationists are big fans of Kia, Hyundai, Suzuki, Subaru and, of course, Honda and Toyota. They’re value junkies who scour the value of used cars before they even think about buying a new one.

To become a conservationist, find someone who drives a small, cheap, boring car who can tell you how much they spend on their car per month AND annually. Internet owners’ forums are an invaluable resource. Just register on a site dedicated to an inexpensive small car (“Cheap bastard” ought to do it) and post a thread asking “How much does it cost to run your X?”

The second strategy is endurance.

When most folks think of a car that last forever, they think of an old Volvo or Mercedes. That’s so last century. These days, most every automobile built can crest 100k miles without much trouble. In fact, 150k is the new 100k: the way point that tells an owner that he or she’s found a machine that can go the distance. Which is, let’s face it, one of your cheapest possible ownership options.

Frugal endurers are closet conservationists. They tend to pay cash up front (they consider monthly payments and interest charges an automotive fashion victim’s sin tax) for two-year-old or older cars.

They’re looking for vehicles blessed with [documented] factory-approved maintenance that have passed the “is it a lemon?” threshold. They look for unloved, low-spec models. Depending on their dedication, they’ll happily forgo such basic comforts as air conditioning and power door locks.

As endurers aren’t looking to trade in their wheels (i.e. they plan to run the vehicle into the ground), they couldn’t care less about their purchase’s short-term residuals. It’s all about keeping the car going, to get to those “cheap miles” at the end of the [hopefully] epic ownership period. And that means fastidious maintenance, extended warranties and celebrating the inevitable wear-and-tear.

To benefit from endurers’ sagacity, buy the most reliable car you can and hold it as long as possibly can. Period.

Mule trading is the third money saving strategy.

Mule traders buy from used car auctions. They buy whatever vehicle [they believe] will hold its value in the retail market. Due to a fickle public and sinister depreciation curves, many mule traders skip the way cool late model stuff and go for ‘sleds;’ vehicles that cost $5k or less. They drive em’, fix em’, sell em’, rinse and repeat.

Of course, not all mules are broken down beasts of burden. There are plenty of hot (though inexpensive) used cars available at auction that will protect the mule trader’s money (e.g. the Mini Cooper, Scion Xb, and Honda Fit). After anywhere between six months to 18 months, the traders simply sell the vehicle to a dealer, who uses them as high profit ‘finance fodder.’

The mule trader takes on the depreciation risk on the assumption that today’s hot new car will be tomorrow’s hot used car. The keen-eyed mule trader gets a higher trade-in value for the car, the dealer receives a larger profit off the financed vehicle.  Everyone wins– save for the poor bastard with the hot car and large monthly payment.

Whether you reduce your overall automotive operating costs by conserving cash, fixing costs (endurer) or taking advantage of automotive fashions (mule trader), there’s always an opportunity to save a chunk of change on your motoring expenses. The challenge: determining which mindset best suits your budget, skills and time. As Patek Phillipe’s ads used to say, choose once but choose wisely.

The Aerio was supposed to be Suzuki’s Corolla-beater. Born in ’01, refreshed in ’04, the Aerio is one of the few cars that can make a Corolla look sexy. While Suzuki’s website assures us “one thing is for sure about the Aerio: it really stands out in a crowd,” one thing’s for sure: it really doesn’t. The Aerio’s sheetmetal is so deeply and completely plain that Top Gear used it as a beast of burden for its ‘Star in a Reasonably Priced Car’ segment. And now it's a lame duck waddling into the history books. How should we remember this entry level captive import?

Nine countries in the world have nuclear weapons. Oddly enough, that’s the same number of nations that design and build their own cars from scratch. The two accomplishments don’t have all that much in common, except that the former may indicate just how much scientific and engineering prowess the latter requires. India is one of a handful of states on both lists. The West tends not to think too much about the country’s carmakers because the world’s largest democracy has spent the last 50 years making cars for India, and India alone. That’s changing. Fast.

India’s automotive market is booming. While U.S. automobile sales stalled in April, India’s rose 11.8 percent year-to-date (105,962 units vs. 94,771). In 2006, local and foreign firms combined to manufacture 1.4m vehicles. Sure, experts estimate that China’s vehicular population will hit 10 million in 2007, but India’s growth rate is even more spectacular. They’re expected to double automotive output by 2008, and keep going from there.

The Indian car industry’s explosive growth reflects three main trends: a huge jump in the living standards of India’s middle class, an increase in their disposable income and regulatory liberalization. The latter includes the relaxation of the foreign exchange and equity restrictions, reduction of punitive import tariffs, and reform of Byzantine banking policies (to allow consumer financing).

The changes have created a vibrant sector. There are currently 41 automobile companies operating in India, from Ashock Leyland to TVS Suzuki. There are native companies, foreign partnerships and foreign subsidiaries. They offer a wide array of automotive products, from the (plug in) all-electric Reva Standard, to the once import-protected and now embattled Hindustan Ambassador, to the Lamborghini Murcielago.

The country has a “Big 2.5” and they’re on a roll. Last year, Mahindra & Mahindra earned $3.2b in gross profits from its car and truck branch. Maruti Udyog Limited, a subsidiary of Suzuki and Indian automotive industry leader, sells about 50k cars a month. Tata Motors also sells just under that amount AND brags of a 19 percent rise in sales for ‘06.  

Western automakers are betting on India. Mercedes' new Indian factory is set to produce 5k cars a year (up from 2,121 vehicles in 2006). Ford India plans to open 135 new dealerships this year, capitalizing on its 45 percent year-on-year sales growth (41,797 vs. 28,840 units). GM recently declared it wants 10 percent of the Indian market by 2010 (200,000 units). To that end, they have just launched the 309k rupees ($7,300) Chevrolet Spark.

Toyota’s also shooting for 10 percent of India’s automotive business by the same deadline. India is reported to be ground zero for the Japanese automaker’s new global small car platform, which will be modified for local tastes and budgets. The GM and Toyota products will go up against Mahindra & Mahindra’s sub-$3k car and Tata’s planned 33 horsepower, $2500 four-door.

Fully assembled cars are only part of the story. Successful parts manufacturers have sprouted up alongside the assembly plants throughout India, contributing to the industry’s overall health and wealth. The main reason BMW opened an assembly plant in Chennai: access to quality suppliers.

All these Indian operations require local labor and management. Necessity has proven the mother of talent. A new cadre of educated automotive professionals has emerged.

Dilip Chhabria is a prominent example of India’s new breed of auto industry insiders. Chhabria began his career as an automotive designer working for General Motors in the States. It was not the best fit (or finish) for him. "I was not going to design door handles and hub caps for 20 years before I got a shot at designing cars," he told Businessweek.

Chhabria set up DC Design in ’93. The company now claims 300 employees and over 500 automotive designs (OEM, custom and prototyping). Dilip Chhabria decided to take his stake in India nascent automotive industry to the next level, and share his intellectual capital.

This August, the eponymous DC College of Automotive Design will welcome 1500 students. DC is working with Italy's Polytechnic di Turino to develop engineering courses, and the Istituto Europeo di Design for creative curriculum. DC will offer undergraduate and two-year postgraduate programs on automotive styling, transportation design, and engineering. By the time the first students matriculate, the Indian automotive industry may already be operating on the next level.

As American gas and labor prices continue their inexorable rise, demand for well-made yet cheaply-produced gas-sippers has blossomed. While all eyes are on China, it's only a matter of time before Ford, GM and other Western automakers use their Indian assets to design, build and export inexpensive and frugal ‘captive imports’ stateside.

After that, who knows? If Korea’s Hyundai can move its products upmarket, so can India. The United Auto Workers had better watch out. If they dig in their heels, domestic automakers are sure to use the nuclear option.

In January, Gary “Mr. Roadshow” Richards of the San Jose Mercury News argued that hybrid cars with one occupant should be allowed in California carpool lanes because they reduce congestion, gasoline usage and smog. Richards was deploying the exact same argument used to justify the passage of California statute AB 2628 which allowed “solo-carpools” in the first place. Here’s a simple question about the logic employed: was the California Assembly on peyote when they cooked up this crap?

It’s certainly true that an average hybrid-powered vehicle uses less gasoline per mile than a “normal” (i.e. gas only) car. But it’s also true that putting two passengers into any car makes it roughly twice as efficient– in terms of mpg per person– as the same vehicle with only one passenger. So even if a solo hybrid is 40% more efficient than a solo car, it’s 60% less efficient that the comparative non-hybrid with two passengers. Put a third passenger aboard the non-hybrid and it’s game over– by a very large margin indeed.

Bottom line: solo-carpools increase congestion, rather than prevent it. To suggest otherwise indicates a failure to grasp elementary mathematics, and common sense. I mean, how do you reduce congestion without reducing the actual number of cars on the road? Answer: you can’t.

And yet AB 2628 incentivizes drivers to buy hybrids and use the carpool lane without human companionship. If they can drive solo, what reason do they have to go even a mile out of their way to pick up someone to carpool (in the previous, coherent sense of the word)? NONE. 

It’s a question that would be well worth asking California’s 85k (at last count) carpool stickered hybrid drivers (more than half of whom live in the Bay Area).

Meanwhile, the 2008 Environmental Protection Agency (EPA) has released its revised fuel economy ratings. The Toyota Prius’ combined 2008 numbers drop to 46mpg. The Honda Civic hybrid sinks to 42mpg, while the conventionally (though frugally) powered Honda Fit scores 31mpg. At the other end of the scale, the Chevrolet Suburban sinks to 17mpg and the Rolls Royce Phantom plunges to 14mpg.

Returning to our “passenger-miles per gallon” (PMPG) calculations, a Fit with two people on board gets 62 PMPG. A Suburban with a trio seems positively green at 51 PMPG– especially compared to a solo gas-electric Civic (42 PMPG). In fact, a chauffeur-driven Phantom with a brace of Grey Poupon sharers drains resources at the same rate as the hybrid Civic. Truth be told, a wide variety of luxury cars and SUVs with “real” carpools trounce solo hybrids daily.

What’s more, hybrid batteries lose their ability to hold an electric charge over time. In 2006, the Department of Energy conducted static battery testing on several end-of-life (160,000 miles) hybrids. They reported that two first gen Prii had “remaining battery capacities of about 39%.” [TTAC contacted Toyota PR about this study. They declined to comment.] In other words, the more you “carpool” your hybrid, the worse your mileage.

In terms of emissions, hybrids may have a relatively small “carbon footprint” compared to non-hybrids, but a stampede is still a stampede.

A Suburban driving three-up produces nine percent fewer greenhouse emissions than a solo driver in a Civic Hybrid. Two people in a Honda Fit produces 28 percent lower emissions per person than the gas-electric Honda. Hell, a run-of-the-mill Accord with a party of two achieves 14 percent lower emissions than a solo Civic hybrid. Where’s the bumper sticker for Hummer carpools saving the Earth?

Once again, we’re talking about new cars. As a hybrid’s batteries age, its emissions numbers will increase (the engine must run longer and more often to compensate). In fact, if you think about it, hybrids should never be allowed in the carpool lane regardless of the head count. After all, all hybrid cars produce lower emissions and consume less gasoline per mile in stop-and-go traffic than travelling unhindered in the carpool lane.

Anyway, as previously stated by this website, California’s solo-carpool caveat is a complete violation of the spirit of the entire carpooling concept. Even Mr. Roadshow admits that the inclusion of solo hybrids pisses on an idea designed to “get more solo drivers out of their cars.” “The law allowing solo drivers in hybrids that get 45 mpg or better to use carpool lanes doesn't help here,” Richard concedes.

But Richards and the California legislature are happy to clock hybrid vehicles’ EPA numbers and SULEV (super ultra low emission vehicle) status and back the pro-hybrid policy– without bothering to think through the implications of their PC posturing.

When you do the math, there’s no logical reason whatsoever for California’s solo-carpool stickers. It’s time for California to revoke the hybrids solo-carpool free ride and return the carpool lane to its original, effective form.

Having wrested the title “world’s largest car manufacturer” from General Motors, Toyota’s already committing some of the same mistakes that brought GM down. The all-new 2008 Scion xB is a blot on Toyota’s relatively unblemished copybook. It bristles with classic GM-think: dumb it down, fatten it up and cheapen it out.

Nominations for the Ten Best Automobiles remain open ‘til midnight tonight (Friday). So far you’ve nominated over 100 praise-worthy (if occasionally dubious) rides. Over the next week, TTAC’s writers will vote on which 20 vehicles deserve your final selection. You, our core of persnickety pistonheads, will then be charged with choosing ten cars from this list. We will announce the winners here, of course, and send a press release to our devoted fans in the automotive media. Meanwhile, we’ve had plenty of pithy comments and observations.

Several of you noted that suggesting nominees worthy of being called the “best” is a difficult process. David42 explained his dilemma eloquently: 

"I tried to come up with a nominee, but got stuck. Which got me thinking: the US auto market is in a weird place today. Generally speaking, cars are better than ever, but the selection is a lot less interesting than it used to be…

These are great days to buy a new car… if you’re in the market for a CamCord. But if you want something interesting (and not impossibly Italian), there’s not much out there."

Despite of this purported quandary, relatively inexpensive, fun-to-drive cars like the Honda Civic si and the VW GTI (mit DSG paddle shift transmission) have dominated the proceedings straight from the git-go. Beken’s MINI nomination spoke for many:

“It is one car where you can have it all without the SUV size. Sports car handling and chuckability without the sports car price.” 

TreyV shared similar sentiments re: Subaru's WRX STi:

“Goes like hell (straight or turning) while still a practical small sedan. Shockingly easy to drive fast and highly forgiving. You can just feel the quality of the drive train oozing into the cabin, which itself is a study in clean driving functionality.”

Yup, practicality was a big factor. Curisu noted the Mitsibushi Lancer Evo's liveability.

“It boasts four doors, seats five, and has a reasonably large boot for those extra-quick milk runs. I’ve personally seen many examples with baby seats (Recaro, of course) in the rear – so it can serve as a perfectly reasonable family vehicle.” 

TeeKay thinks the Maserati Quattroporte fits into the same category:

“Hey, I need something to transport my family and a few child seats, and I’m not going to deny my kids the glorious engine note at 8000-rpm redline.”  

And if the big Maser’s looks help it qualify it for a TBAG, the same holds true for the xB– apparently. In fact, mehugtree penned a soft porn paean to the wee Scion:

“The gently rounded corners of the roof evoke the soften the senses and evoke a feeling of peace… The ribbed roof reminds me of old school Suburbans I never had. The subtle love handles at the beltline coming off the taillights make me proud of mine. The stubby little nose and side, open windshield… cause me to think of Drew Barrymore in The Wedding Singer.”

More prosaically, there are plenty of you who heaped praise upon Ye Olde Panther platform, home of the Crown Victoria. Armadamaster (whose nic indicates a preference for full-figured vehicles) named that tune:

“The Panther platform is the most underrated, unacknowledged, unappreciated cars on the road. The new Charger/300C are nice American styled cars but the Vic/Grand Marquis/Town Car are as American as the Mustang any day of the week.”

While exotics were notable by their absence, a few of you shared lumberg21’s champagne dreams and caviar nominations.

“Nicest thing about driving through Novato (other than getting through it) was the Ferrari dealership. I’d be headed down 101 when I would first here that unmistakable shriek of the engine followed by the gorgeous form that almost defines the I-want-it-but-I-can’t-have-it car."

Ferrari? Cellman don’t need no stinkin’ Ferrari! The Corvette rocks!

“This affordable monster simply outperforms most supercars especially at basic tasks. Forget that American-as-apple-pie interior plastics and creaks and rattles. It’s part of the sensory overload. True Americana: big brute power at Wal-Mart prices.”

Technology caught some of your eyes, by Prius engagement. Galaxygreymx5 penned his ode to the high tech Toyota:

“Only Toyota could build the space shuttle for $21,995 and have it top the reliability charts. Even discounting the high-tech hybrid aspect, the Prius is a lot of midsize sedan with a handy hatch, plenty of room for five and some nifty gizmos on the option sheet.” 

And if you think no one’s paying attention to your nominations, note what Joe O had to say:

“So many people have nominated the GTI that I will once again go test drive it; this time, with DSG. And I will seriously consider it (or its A3 cousin).”

Will TTAC’s Ten Best influence a generation of pistonheads? Probably not. But the final list will tell the world who we are, and what we stand for– automotively speaking. As far as we’re concerned, you are what you drive. Voting to select the Ten Best winners opens next Wednesday, the sixteenth. 

Car-based crossovers (CUV's) are America’s SUV escape pod of choice. Domesticated SUV’s from Nissan, Toyota, Honda, Ford and more have found favor, as have their upmarket homonyms. Although GM was late to the crossover party, the GMC Acadia and Saturn Outlook are (at least for the moment) highly competitive products. At the top end, Cadillac stands pat with its three-year-old SRX. For '07, Caddy’s attempted to re-invigorate their CUV with a new interior.

This month, a new approach. I’ve picked examples from the Big 2.5 and Toyota in four categories: passenger car, full-sized pickup truck, truck-based SUV and small SUV/CUV. I've also chosen one brand-new model from each of the 2.5. If this approach finds favor, we’ll follow these 19 vehicles through the calendar year, comparing their U.S. sales each month with sales from 2005 and 2006. I've also shown major rebates ($5K and over) and the "employee pricing" incentives from 2005.  Once we’ve looked at how well these key vehicles are selling, we’ll look at overall sales to see how the individual models’ sales track with the overall sales trends from their makers. Capisco? Here we go!

[Note: Clicking on the links below will bring up a graph showing sales for that vehicle for the past two years and 2007 YTD. Use your browser's "back" button to return to the article. The graphs show sales for each month. Green links with double underlines are not linked to the graphs.] 

Here are the charts for last year's best selling passenger cars from their respective manufacturers: Impala (GM), Fusion (Ford), Chrysler 300 (Chrysler Group) and last but not least by a long run, Camry (Toyota Motor Sales USA).

Passenger cars overall didn’t fare very well in April. The Fusion showed growth, but at a distinctly slower pace than it enjoyed during the first quarter of the year. The Impala, 300 and Camry– all of which had been showing sales increases for the first three months of the year– took a dive. Camry was the most surprising; April sales dipped below those of the previous two years.

Pickup Trucks

The choices here are pretty straightforward: Ford F-Series , Dodge Ram , and Toyota Tundra. GM offers its full size truck under both the Chevrolet and GMC brand names.  I'm tracking the Silverado , as it’s the better-selling of the two GMT900-based pickups.

So far this year, the Ram is currently following the same sales trend (and almost same numbers) as last year. It's an interesting development for a design that’s the oldest in its class.

Ford's F-Series is also showing the same sales trend as in previous years– but at an alarmingly lower level.

The Silverado bears watching. For the second consecutive month, sales were below previous years. This despite the fact that it’s a new design; sales should be trending higher. Chevy just announced new incentives to see if they can pull sales up.  If not, failure to elevate could portend some scary problems for GM.

Truck-Based SUVs

These are the traditional SUVs we all know and… uh… know them. They’re represented here by the Tahoe , Explorer , Durango and 4Runner.

The new[ish] Chevrolet Tahoe is the only SUV showing an overall sales increase over last year. However, its sales are still well below ‘06, and there was a major sales drop from March to April this year. Since the Tahoe tends to show the same drop over the last three years, there may not be a cause for alarm– except in light of the overall numbers.

This year's sales-to-date for the Ford Explorer, Dodge Durango and Toyota 4Runner are all below those for the previous years. With gas prices climbing, logic suggests sales have not yet hit rock bottom.

Small SUV/CUV's

In 2005, these models were all considered SUVs. Two years later, they’re CUVs (Crossover Utility Vehicles). Go figure. The models shown here– Equinox , Escape , Pacifica , and RAV-4 — were each manufacturer's 2006 top selling whatever-they-call-them-this-week. 

All but the Pacifica show a drop from March to April. Although sales of the newly-designed Toyota RAV-4 took a sharp fall in April, they're still above the previous years’ totals.

Ford has just introduced the refreshed 2008 Escape, so sales there may grow a bit over the next few months.

Chevy's Equinox stumbles and tumbles with practically no updates since it was introduced. With newer competition from Ford and Toyota, its sales will probably continue to decline.

New Models

You never know how the market will react to a newly-introduced vehicle. Each manufacturer is trying a new model that’s somewhat of a departure from their usual offerings.

GM now offers the Lambda-platform CUVs, represented here by the GMC Acadia. These CUVs are shouldering a lot of responsibility. They must replace GM's TWAT award winning minivans, take up the slack for some of the Trailblazer-based SUVs, and provide an alternative to The General's slow-selling large SUVs.

Ford introduced the Edge amid a lot of fanfare, touting it as Ford’s [latest] “make or break” vehicle. Chrysler is also taking a chance with the Jeep Compass — the first Jeep product in a long time that isn’t “Trail Rated." We’ll keep an eye on them to see how well the market accepts each.

Total Sales

All four automakers lost sales last month. Only Chrysler ended this April in better shape than last year; GM , Ford, and Toyota all ended the month lower than a year ago. It’s a bit early to tell if April's downturn represents a broader pattern, but we’ll keep tracking it and let you know what we find.