If patriotism is a scoundrel’s last refuge, American automakers and their domestic defenders have been fixated on the end game for decades. The Car Connection’s Gary Witzenburg is only the latest industry wag to try to wrap The Big 2.5 in the American flag. In a rehash of a November 2003 editorial for Automotive Industries magazine, Witzenburg offers gullible readers a lesson from his school for scoundrels.

Witzenburg’s polemic– "What's an American Car?"– starts with a proposition. “Say General Motors decides to build Chevrolets in Japan…” The former GM PR flack argues that you couldn't consider this theoretical, made-in-Japan GM product a Japanese car because it was built by an American-owned company.

Meanwhile, back in the real world, Chevrolet builds and sells the Epica and Spark in China. Buick builds and sells the GL-8 minivan in The People's Republic. GM builds Aveos in Korea and sells them at Chevrolet dealers across America. By Mr. Witzenburg’s standards these are all American cars. By anyone else’s, they’re Chinese and Korean.

In Witzenburg's world, a Honda Accord designed by American engineers, fabricated by American workers (paid in American dollars), built in America (Marysville, Ohio) with mostly (though not exclusively) American-made parts is… Japanese. Anyone familiar with multinational automobile manufacturing knows that today's world market simply isn’t simple enough to support Witzenburg’s simplistic logic fed by yo yo bento.

For example, how would the polemicist classify the country of origin for cars built at NUMMI, the joint venture between GM and Toyota? The California plant produces both the Toyota Corolla and Pontiac Vibe. Do their respective badges make the Corolla Japanese and the Vibe American, even though they share parts and roll out of the same assembly plant? Not even dancing Tony Tuttle would agree with that.

As Witzenburg’s rhetoric shifts into high gear, the contradictions raised by his position become increasingly obvious. The writer’s definition of American cars expands to include Chrysler products— even though the company is owned (at least for now) by Germany’s DaimlerChrysler. At the same time, Witzenburg labels Opel a German car brand– even though it’s owned by General Motors.

So the location of a car company’s headquarters determines its products’ nationality; or the citizenship of the people who screw it together; depending on Witzenburg’s personal preference.

Poor Witzenburg. He lives at a time when Australian Holdens become “American” Pontiacs and German Opels become “domestic” Saturns– which are sold in showrooms next to "true American” cars (many of which are built in Mexico and Canada). The Big 2.5’s global production model has removed any remaining justification for the writer's “America first” defense, who must serve at the pleasure of the president.

No surprise, then, that Witzenburg changes tack and adopts the hackneyed “what’s best for America” argument. He states “while some (mostly southern) states continue to battle each other with big incentives to attract new foreign-maker plants to gain two or three thousand jobs, other (mostly northern) states lose tens of thousands.”

Witzenburg seems unaware that these “mostly southern” states have been trying to attract the automotive industry for years. They were snubbed by the American automakers based in the “mostly northern” states. Now the same automakers are crying foul when southern states do whatever’s necessary to lure industrial facilities, using incentives to create jobs for their citizens. Just like Michigan.

“What they did not see, or chose to ignore, is that ‘creation’ of a few thousand plant jobs here and there would eventually destroy many more and better jobs elsewhere.”

What Witzenburg doesn’t see, or conveniently ignores, is that the jobs in question were destroyed by The Big 2.5's refusal to recognize and adapt to a changing market, and the way they rolled over and played dead for the UAW. The Big 2.5’s tunnel vision led to this situation, not the efforts of a few state governors to provide a better standard of living for their constituents.

Witzenburg then quotes Jim Allard, professional organist and president of the Ford-funded Level Field Institute. “Is it more important to the U.S. economy for someone to buy a Ford Fusion, although it's built in Mexico, from a company that employs 105,000 SUV-driving Americans than a Honda built in Ohio from a company that employs 27,000 sushi eaters?”

In a word, no. If Americans bought automobiles based entirely on the number of ignorant Americans an automaker employs– not upon the vehicle's quality or value– there'd be only one domestic manufacturer. We'd all be driving something truly nasty (e.g. Lada). What's more, if foreign consumers followed the same rule, they'd never buy an automobile from an American subsidiary.

The Big 2.5 have staked their future on their ability to leverage the world automotive market for domestic success. Their plan contradicts the knee-jerk patriotism they've promolgated– or at least tolerated– ever since the foreign "invasion" began. Ironically enough, Gary Witzenberg is paving the domestics' road to Hell.

[To read Gary Witzenburg's editorial, click here.] 

Twenty-six summers ago I arrived in San Antonio, Texas. I quickly surmised that the pickup truck was River City residents’ favored mode of transport– preferably with an occupied gun rack. These pickup-driving Hill Country Texans worshiped at the altar of one of two churches: Chevy or Ford. Since those simple days of my youth, the rules of the game have changed. That community, so steeped in American pickup truck tradition, is now the production site for the all-new 2007 Tundra. Question: is Toyota’s big rig good enough to pry the keys out of the hands of F150, Silverado, and Ram-loving Americans?

Since the General Motors Death Watch began, GM employees, dealers and customers have emailed me their perspective on the General’s general degradation. Obviously, financial analysts are important (and confidential) contributors to this mix. While their info provides invaluable insight on the automaker’s slide into bankruptcy, their language can be daunting. So when I read this simple declarative statement in a recent investor briefing, I was shocked. “GM and Ford retail sales should continue their precipitous decline."

The numbers are bad. The Wall Street firm reckons GM’s February sales are set to drop 11%. That would leave the world’s largest automaker with a relatively paltry 23% share of the domestic market. Small, and unsustainable. According to The Detroit News, GM is currently losing $1300 on every vehicle it sells in the North American market. Toyota is making $2100.

The numbers suck, but the word is worse. “Precipitous;" as in “over a precipice.” As in free fall. Indeed, despite an endless stream of new product hype, the question is finally beginning to be asked: when and where will GM’s domestic misery end?

Although Rick Wagoner is the head of one of the world’s largest publicly held companies, GM's CEO has been stonewalling on this question since June 2005, when he announced the first round of production cutbacks and employee pay-offs buy outs. Unlike Carlos Ghosn, who set hard targets for Nissan’s turnaround, Wagoner has refused to commit to a defined– and thus measurable– corrective course. In other words, he’s completely unaccountable.

The American people aren't bothered. In fact, they're clueless. While amateur and professional pundits busy themselves debating GM’s fate, the average GM buyer doesn’t know/care about their transportation provider’s financial woes. They remain oblivious to the seismic rumbles foreshadowing the yawning chasm that’s about to open up and swallow GM’s business. At least that’s how things stood until last week.

Last week, the automotive press went slightly crazy. The possibility that GM would buy Chrysler unleashed a torrent of speculation about The Big 1.5. Aside from the frightening fact that Rabid Rick’s ego could be stroked with sufficient skill to get him to even contemplate such a preposterous move, and the millions in consultants’ and bankers’ fees paid to the strokers, the “GM wants Chrysler” media feeding frenzy was nothing more than a feeble distraction from a looming catastrophe.

The real action was going down at Daytona. During the Daytona 500 pre-race show, Toyota’s entry into NASCAR was a hot topic. Commentator Darrell Waltrip, who runs a Toyota truck in the Craftsman series, whose brother Michael operates a team that races Camrys in the Bush and Nextel series, was ready with a reply.

"Don't forget: the Camry is the only car of the four [Camry, Fusion, Monte Carlo and Charger] that's built in America. The Monte Carlo and Dodge are built in Canada and the Ford is built in Mexico. There are seven thousand people in Georgetown, Kentucky who build over three hundred thousand Camrys a year."

It was a defining moment in GM’s history. At a single stroke, the carmaker’s ability to wrap itself in the American flag was dealt a telling blow– in front of the very people to whom it matters most. By a man they respect and admire. This is our truck, this is our country. Uh-huh. Now tell me again what the Hell you boys are doing building Montes in Canada? Never underestimate the damage a company suffers when it breaks faith with its customers’ deeply held beliefs.

GM’s very own perception gap– the difference between the idea that they’re the home team and the company’s willingness to outsource automotive production abroad– is headed for extinction. It’s only a matter of time before GM is just another car company, just another once proud old line American business that couldn’t compete with faster, sharper and more intelligent competition.

The loss of patriotic identification is simply the continuation of a longstanding trend: GM’s diminishing stature. Fire Sale for All. Toe Tag Sale. Anyone with a pulse financing. Cash back. Imported Monte Carlos. At some point soon, the “average” GM customer’s understanding of GM’s place within the automotive firmament will evolve, from mighty power to beleaguered underdog to loser.

No wonder GM chose to pretend (perhaps even to itself) that’s it’s in a position to “buy” Chrysler (straight stock swap more like). Lest we forget, General Motors was formed by swallowing up smaller car companies. But this, well, this is a sad echo of a once great dynastic power’s ability to mow down all before it. The “Chrysler deal” is one last chance for GM’s power players to pretend that they’re calling the shots in the U.S. automotive market, rather than fighting a losing rearguard action against the barbarians inside the gates.

A recent post questioned the relative power of engineers and MBA’s in the automotive industry. A quick scan of corporate rosters reveals that the biz brains control most companies. The hierarchy makes sense; automaking is a business. Yes, but– whether their MBA's came from Harvard, Yale, or Vinny’s School of Business and Mortuary Services in Hoboken, the “suits” should know that too much unsold inventory is a bad thing. As a corollary, continuing production as unsold inventory piles up is a very bad thing. As in fatal.

Last year, Tommy LaSorda’s mob over at Chrysler put the theory to the test. At one time, the guys stuffed Chrysler’s “sales bank” with 100K excess vehicles. And there they sat, waiting for the dealers to catch up and cough up. After drastic production cutbacks and “if you’re breathing you’re approved” financing offers, dealers managed to whittle that number down to something a little less, um, dangerous.

The holiday break certainly helped; the two week shut down cut off the unwanted flow at the knees. As the sun rose on the New Year, Chrysler’s supply was closer to the industry’s Maginot Line: 60 days. The carmaker claimed a 51-day supply of 300's, a 68-day supply of Jeep Libertys and a not entirely horrendous 110-day supply of gas-guzzling Dodge Rams.

When production started again, inventory levels rose with tidal inevitability. In January, Chrysler averaged 14 sales per dealer. Dodge dealers dealt 28 sales apiece, and Jeep dealers averaged 13 sales per store.

The Chrysler Group then added an estimated 152K new cars to their inventory. And so, by the first of February, Chrysler/Dodge dealers sheltered a 78-day supply of 300’s, a 98-day supply of Libertys and a 111-day supply  of Rams.

Meanwhile, GM dealers are also choking on product. As of February first, GM’s “Like Always” brand (a.k.a. Saturn) had a 230-day supply of Ions (which is only 29K units, but there you go). GMC dealers were sitting on 20K or 211 day’s worth of Yukon XL’s, a 98% increase from January’s 113-day supply. 

And the hits just keep on not happening. In January, Buick dealers averaged just four new car sales per store. No wonder they have a 170-day supply of LaCrosses and a 116-day supply of Lucernes.

Ford can’t afford to laugh at their cross-town rivals. Mercury dealers only managed to move six cars apiece in January, staring down the barrel of 7K unsold Montegos (enough to last 147 days). Ford stores averaged just 35 sales each last month (mostly trucks), with 24K post-pre-Taurus Five Hundreds (a 169-day supply) going nowhere slowly. 

In a declining market with hundreds of available models, Toyota is the only transplant that seems immune to the temper of the times; they’ve got low supplies of, well, everything and an industry leading 126 sales per dealer.

Meanwhile, Honda holds a three-month supply of Elements and Ridgelines. Nissan can’t shift enough quirky Quests (144 days), Frontiers (122 days) and Maximas (113 days).

Even so, thanks to hot-selling Fits (25-day supply) and CR-Vs (19-day supply), Honda stores are cranking out 87 sales per dealer. While Nissan thanks its lucky Altima (51 days) and Versa (52 days) for helping dealers achieve 68 sales per month.

Mitsubishi? Not so good. The automaker started February with 3400 Eclipse Spyders (a 275-day supply). Relatively speaking, the Dodge-built Raider pickup is a hit. At the end of December, Mitsu had a 165-day supply. By the start of February, inventory had dwindled to 149 days. Of course, that’s still more than double the industry benchmark…

While manufacturers are quick to blame excess winter inventory on seasonal fluctuations, here’s the bottom line: unions.

Common sense says that when sales drop, you cut production. Unfortunately, the automakers’ contracts with the United Auto Workers (UAW) mandate that they must continue to pay their employees full whack even if The Big 2.5 cut back or stop production.

They’re caught in a classic Catch-22. Should they pay workers to do (and produce) nothing, or keep the lines running in hopes they might sell a few more vehicles?  Either way they’re screwed.

Rather than force a showdown with the UAW, automakers are going hey diddle diddle, straight up the middle. They’re paying the workers a big pile of cash up front to go away forever. Market share may be lost forever, but hey, they're gonna hit something and that’s the way it goes.

Even with the buyouts, supply continues to outstrip demand, leading to drastic deals. Buyers looking for bargains wait for the desperation sales and the cars’ reputations suffer accordingly. Brands become synonymous with “cheap”– regardless of product quality. Sales fall further as most consumers turn to undiscounted brands, figuring they must have higher quality. (There’s your perception gap.) And the production lines keep moving.

One way or another, it’s a death spiral that has to end. 

The automotive media have their hands full chronicling the slow motion train wreck known as The Big 2.5. But there's another pile-up in progress. Here in the States, Volkswagen of America (VWoA) has transformed itself from a highly profitable purveyor of mesmerizing motors to a struggling brand with an ugly, overpriced and unpopular lineup. To properly parse this fall from automotive grace, let's start with the Phaeton. 

The Phaeton was VW's uberluxe sedan. The concept was so brand-defiling that the normally sycophantic buff books felt free to unleash juvenile taunts about the $70k “people's car.” While the VW-badged Mercedes tank killer gave birth to the immensely lucrative Audi A8 and Bentley Continental GT, it was an epic miscalculation that revealed a startling lack of focus. 

The Phaeton landed in America (with an almighty thud) in 2002. By then, the company's wandering eye had placed its U.S. operations in harm's way. The core of their product portfolio– which is to say every car other than the Phaeton– was decidedly stale. From 2001 to 2005, VWoA sales fell down some 37%, to 224,195. Even worse, the Germans didn't seem to care.

The Jetta and Golf ranges exemplify the product neglect. While the rest of the world savored the Golf MK V in 2003, the older MK IV models hung around in the U.S. until 2005. The competition grew larger, more powerful and less expensive; the centerpiece of VWoA's U.S. lineup stood still. Volksie's rep for clever and compelling advertising nosedived as well; the brand lost both its populist edge and its competitive advantage.

When the new Jetta and Golf Rabbit finally arrived (last year), the real trouble began. Whereas the previous Jetta was a tidy, micro-luxury car that epitomized the VW-Audi design language of the day, the new Jetta looks like a badly photochopped Toyota Corolla. Bizarrely, VW nailed the Jetta's design in Europe; subsidiary Skoda’s Octavia is a far more coherent proposition. 

The Golf arrived in better shape, spared the Jetta's awkward C-pillar and rear end. But the company's decision to retrofit the new model with the old American Rabbit nameplate (foreshadowing Ford's Taurus recall) highlighted their creative distress. Clearly, VW's US executives were trying to hearken back to a kinder, gentler time– before Japanese transplants stuffed the U.S. car market full of highly evolved and constantly evolving small car choices.  

VW has also widened the schism within its products' personalities. While the current GTI's engine makes it a terrific hoonmobile, the Rabbit's, Bug’s and Jetta's powerplants are less fun than a Form 1040. Their 2.5-liter inline five cylinder mill combines the fuel economy of a six (25mpg) with the power of a four (150hp). It's slow and buzzy AND loses the mission-critical fuel economy sweepstakes to its 35+ mpg Japanese and Korean competitors.

Diesel engines might have rescued the entire VW lineup from such ignominy. Unfortunately, the VW Group's amazing range of fast and frugal oil burners fell afoul of California emissions regulations. Next year's California-compliant Bluetec clean diesel could presage a turnaround, but VW should have found better motorvation in the meantime. Where is the magnificent Twincharger engine, with a supercharger and a turbo, putting out 150 horses while yielding 40 miles per gallon? 

Meanwhile, VWoA has failed to leverage its brand equity to exploit new niches. The Touareg SUV was a start– and a lousy one at that. Sales of the unpronounceable, under-promoted, gas-hungry five-seat off-roader fell 43.7% last year. The equally unpronounceable Tiguan CUV arrives sometime next year to take on the updated CR-V, Freelander and others. Given the large temporal stretches between VW model updates and their U.S. appearance, we could be looking at a provisional respite.

As other manufacturers deliver new compact cars, VW's showrooms are bereft of four-wheeled frugality, save for ageing Jettas and Bugs, expensive Golfs and unattractive Passats. Volkswagen already makes a sub-Golf car, the Polo. That should be the new Rabbit. And if we're looking for opportunities, what happened to the VW Bus concept– a slam dunk if there ever was one?

As far as anyone knows, Volkswagen still wants to sell small cars at premium prices. News flash: to do that you must offer something premium. Standard leatherette isn’t enough. Vee Dub’s once legendary reliability is now among the worst in the U.S. market. The brand's charming design and class-leading driving dynamics are also fading into the mist of time. 

Toyota has proven that you can conquer the world with focus, flexibility and, above all, speed. If VW wants to get back into the race, it must realize it IS a race. It's got to find new niches, refresh its models more quickly and get ahead of the powertrain development curve. If it wants to succeed stateside, the stodgy German brand must get its Fahrvergnügen on.

Henry Ford knew a thing or two about motivation. “Enthusiasm is the yeast that makes your hopes shine to the stars,” Crazy Henry opined. “The grip of your hand, the irresistible surge of will and energy to execute your ideas.” Yes, well, Blue Oval morale is at an all time low. After watching Billy’s Boyz lose over $24k per second, faith in The Glass House gang is fading. Faced with a failing grade on an interim report and a Way Fordward that needs to be Fixed Or Repaired Daily, Mulally’s masses are about as enthusiastic as Dick Cheney’s hunting buddies.

It’s true; not even Mercury’s curvaceous raison d’etre (a.k.a. Jill Wagner) could rally Ford’s troops at a recent USO show. In a survey included with FoMoCo’s recent NorAm report card, less than 45% of the 15k employees polled expressed faith in the new new turnaround plan. Ninety-three hundred respondents simply don’t believe that the vehicles within Ford’s “showroom of the future” have what it takes to pull Toyota’s next victim out of its tailspin.

The survey-sporting internal audit indicates that Dearborn’s darlings are missing their spending targets. Sales are still falling quicker than Mercury in the cold.  Save for one Edgey new product, January saw Blue Oval sales submarine expectations by some 10,600 units. 

The reason is (again, still) a “greater-than-expected segment shift out of pickups and SUV’s.” Look for a greater-than-expected 6k more units to litter dealer lots by the time Spring rolls around. For those keeping score, at quarter’s end, an additional 1.5 percent of Ford’s market share will have melted away.

The report also predicts that the first three months of ’07 will suck up lots of Big Al’s newly leveraged liquidity. The Blue Oval’s bean counters have been clamoring for 50% cost reductions. This month’s savings barely scratch 25%. What’s more (much more), FoMoCo’s spending will miss the bulls-eye again in March. You don’t need a magic eight-ball to predict that the highly touted “we’ll be fine in 09” is quickly becoming a [crack] pipe dream.

The negative results are clearly a blow for The Man from Boeing. The report reveals Big Al’s first fiscal kick at the can as a swing and a miss. Not to put too fine a point on it, Ford’s North American unit is still failing, despite Mulally’s humbly mutated metrics.

Unbelievably, despite Ford’s failing grades, cataclysmic losses, epic layoffs, plentiful plant closings and uninspiring products, market mavens have yet to abandon Ford. Right about now, Ford shares are up 5.6% from this time last year. In fact, Ford’s share price is at its third highest market value. Wall Street Journal (WSJ) scribe Robert Schwartz doesn’t get the math.

Mr. Schwartz estimates that even if Dearborn’s Darlings can convince the United Auto Workers to convince its members to slough 25% of Ford’s health costs, The Blue Oval will still be $58b in the hole. Factor in family assets like Mazda, the Premier Automotive Group, Ford Credit and Big Al’s mortgaged moolah, and you’ve still got six billion greenbacks in the debit column.

Note: FoMoCo’s MoCo is MIA from this list. And therein lies the problem.

Market mavens currently ascribe the automotive arm a value of $39.5b. That includes the $17b three-year cash burn just to keep Mulally’s motor runnin’.  To hit that valuation, the WSJ figures Ford needs a 4% pretax sales margin on $132b in sales.  That’s just to maintain the current downward trajectory.  A turnaround is going to be Ford Tough.

Based on the success at Nissan, turning this sum bitch around would require an operating margin of nearly 8%. Yeah right. It took Nissan six years and a Ghosn in the machine to get back in black, and Nissan didn’t have two 800-pound gorillas in the room: a bloated dealer network and a vapid product pipeline.  

So, basically, Ford’s employees are right to be shit scared. To date, the fact that the corporate coffers are full and the Hecho en Mexico Edge is firing on all cylinders are the only positive pegs for psychological hat hanging. Or… not.

Ford has just announced that they’ll cough up $500 in dealer cash on an entry level Edge. While the top-o’-the-line 18” clad SEL and SEL Plus cross-border crossovers are commanding sticker price, the entry level model is languishing. Unless this stock imbalance comes good, the glut of entry level incentivized SE’s could end up destroying the model’s overall resale values or worse, end up in rental hell.

Henry Ford may have been a vicious anti-Semite and a generally loopy guy, but he knew business basics.  “You can’t build a reputation on what you are going to do,” Hank famously pronounced. Unless and until Ford can live up to its promises, Henry Ford's corporate legacy is doomed. 

Coupes should be firm flagships and style vanguards: the best of a brand. Where does that leave Lexus, a marque best known for… reliability? With the Lexus SC430. The folding-roofed Lexus coupe is the second oldest model in Lexus' portfolio of pomp. For a company [relentlessly] pursuing perfection, that would make the SC430 the most imperfect car Lexus sells.

Californians designed it. Italy’s glass blowing artisans lent it their name. A Franco-Japanese alliance headed by a Brazilian CEO builds it in a Japanese factory. The Murano is a twenty-first century multinational mutt. Introduced in 2002, this strange beast has faithfully served owners in the great melting pot of America’s sprawling suburbs. In dog years, the model’s now 67 years old. And the CUV market has suddenly become more crowded than a backwoods puppy mill. So has Nissan’s crossbreed aged well, or is this old dog ready for the vet’s needle?

Our man Mehta recently ran into a GM PR flack at an industry event. When Sajeev revealed TTAC as his spiritual home, the GM underling shook with rage. Still, it being the South and all, pleasantries were exchanged. After sweet talking the spinmeister, Sajeev promised I’d call and oil the troubled waters. During the ensuing conversation, I [once again] offered GM the right to reply– unedited– and promised to correct any factual errors. And then, quite out of the blue, she lost it. “Why do you hate domestic cars so much?” she demanded.

I asked my antagonist if she’d read our reviews of GM products. She admitted that she hadn’t visited the site “in about a year.” I pointed out that we’ve praised many a domestic product, and eviscerated plenty of imports and transplants. I also reminded her that several "foreign" cars have a higher domestic content than GM's wares (e.g. the Honda Odyssey) and mentioned GM's Canadian Buicks, Korean Aveos and European Astras.

I also told her I'm a patriotic American who’d love to see General Motors build a vehicle– any vehicle– that stands head and shoulders above all comers. “What about the Corvette?” she interjected. Yup, the ‘Vette offers unparalleled bang-for-the-buck. But clock that plastic craptastic interior. Could she honestly say a Corvette's cabin was even half as welcoming as a Porsche Boxster's? The silence was deafening. Not because she’d been trumped; she simply didn’t know.

“Have you ever been in a Porsche?” I asked, succumbing to the knife twisting urge. Faltering slightly, she admitted she hadn’t been in “one of the new ones.” An Audi? “My neighbor has one, and she’s had problems with engine sludge.” Volvo? Viper? Mustang GT? Clearly, the GM factotum had never spent seat time in much of anything that wasn’t sold by GM.

Although I find ignorance, arrogance, defensiveness, paranoia and aggression an unappealing combination, I blame nurture, not nature for the spinmeister’s ‘tude. Any automaker that doesn’t expose its front line workers to their competitors' cars gets the representation they deserve. Is it any wonder that GM makes a huge range of “nearly there” cars when even the people charged with their public promotion do so with their eyes wide shut?

When Toyota developed the new Tundra, they based it on information provided by a research team that traveled America to see how "real" pickup truck buyers use and abuse, love and loathe their vehicles. Once the Tundra was finished, ToMoCo then made sure all their dealers' staff– right down to receptionists– spent seat time in the new vehicle. And now they're organizing the Mother of All Ride and Drive Events, inviting anyone who so much as glances at the big rig for an extended test drive.  

Meanwhile, GM's importing yet another Australian RWD sedan, re-badging it a Pontiac and sticking it on the showroom floor. The fact that they've done this before without success (GTO), the fact that the G8 has no visual connection to Pontiac's hit Solstice, demonstrates the company's profound inability to learn from mistakes AND capitalize on success.

Car Czar or no, GM lacks Fingerspitzengefuhl: an intuitive sense of what's happening on the battlefield. Put another way, they don't understand the automotive landscape in which they work. They are, quite literally, lost.

Of course, GM's uninformed and misguided executives could simply read The Truth About Cars. I’m serious. If GM wants a road map back to reality, they could do a lot worse than ask TTAC for directions. Our writers are deeply immersed in American car culture. They call it like they see it, without fear or favor. And our commentators add invaluable perspective.

Better yet, GM could actively engage TTAC and its audience. They could provide us with press cars and then publicly address our criticisms. Hell, what’s to stop The General from participating in ALL car enthusiast sites? Why not assign a team of literate, experienced and open-minded experts to demo the metal, confront critics, answer problems, correct mis-impressions, quash unsubstantiated rumors and, yes, toot their own horn?

Oh, I’m sorry, I forgot: all statements must be approved by GM PR. And GM PR's too busy whining and dining beating up the buff books for “unauthorized” new product leaks to monitor a fast, frank and open exchange of ideas. 

Anyway, for some reason, Sajeev's PR contact called me back. She told me Flack Central had declined my invitation to post on this website. “They prefer to use their own blog,” she announced, with no small amount of smug self-satisfaction.

And there you have it. GM will not “break the fourth wall” (as theater folk call it). The General’s majordomos will continue to hold tight to the reins of power, sheltering inside The Kremlin The Renaissance Center, relying on their toadies, spies and consultants to tell them what’s going on in the real world, and then communicating pre-approved responses through "official channels." Thus empires do fall.

Back before gas prices scared SUV owners sensible, most CUV’s were “cute utes.” As the SUV exodus gathered pace, several abandoned truck makers figured SUV refugees were a bit half-assed not fully committed to downsizing. They built CUV’s that are only slightly smaller than their SUV’s, only without the towing capacity, off-road ability and, most importantly, extreme thirst. Never one to miss a trick, the transplants have been growing their CUV’s to nibble away at the same market. Case in point: the Hyundai Santa Fe.

For decades, Toyota has balanced superb management, impeccable quality, exemplary financial discipline and flawless product planning. As other manufacturers chased market trends and neglected core models, Toyota made incremental improvements to existing models and introduced new models slowly and carefully. Their perseverance has paid off; they’ve elbowed Ford aside and are nipping at GM’s heels. But as Toyota prepares to replace The General as the world’s largest automaker, they’re finding out that getting to the top is one thing; staying there is something else altogether. 

No doubt about it: Toyota’s on a roll. They posted a record $3.6b third quarter corporate earnings and hope to exceed $13b profits for this fiscal year. In spite of growing profits worldwide, the picture isn’t so rosy on this side of the globe. Although their revenues in North America were up 17.3 percent, their North American operating profits were down 22.4 percent in the third quarter. 

Part of Toyota’s American problem relates to federal contract-sized cost overruns on their new truck plant in Texas. When ToMoCo started the project, they budgeted $850m to git ‘er done. To date, the company’s sunk almost $1.3b on the plant– and they’re still spending.  The expenditure seems manageable enough, until you tote-up the cash they’re also shelling out to build another Canadian facility and modify the Subaru plant in Indiana to build Camrys. 

Perhaps Toyota should be putting some more of their resources into making sure their products live up to their reputation for quality. As production numbers rise, their recall rate is keeping pace. The latest recall– involving faulty ball joints in the previous generation Tundra and Sequoia– could end up costing Toyota more than $600m.

And then there are the high hundreds of millions of dollars Toyota may need to settle the class-action suit for oil sludge (affecting about 3.5m Toyotas and Lexi). All in all, we’re talking about a serious chunk of change coming directly off the bottom line.

Meanwhile and in any case, sales of the Pious Prius are down. Whereas the automaker once measured the model’s supply in hours, there’s now a 30-day supply sitting on dealers’ lots. Though it’s nothing like the 80 day supply of GM product lingering on their dealers’ lots, the growing Prii glut is definitely trending in the wrong direction.

The extra inventory is attributable to a combination of factors which, uncharacteristically, Toyota didn’t read correctly. They increased production just as gas prices started going down, the hybrid tax credits started going away and those buying hybrids to make a social statement had bought them. So, for the first time in the model’s short lifetime, Toyota’s offering incentives.  They’re nothing on the scale of The Big 2.5’s spiffs of course, but it’s cash on the hood nonetheless.

These issues pale in comparison to one problem that could make or break Toyota’s North American operations:  their relationship with their hourly workers. In a confidential memo that accidentally ended up in workers’ hands, Seiichi Sudo, president of Engineering and Manufacturing in North America, discussed the cost of American labor and the steps they need to take to control those costs. 

The memo, which was inadvertently stored on a shared computer drive, states the US auto industry pays some of the highest manufacturing wages in the world. It compares American wages to those in France and Japan (50 percent higher) and Mexico (500 percent higher). They project their American labor costs will increase by $900m over the next four years.

Toyota’s concerned that even though their profit margin is increasing, it’s not growing as fast as their labor costs. Their strategy: “base our Hourly Wages more closely with the State Manufacturing Wages where each plant is located, and not tie ourselves so closely to the US Auto Industry, or other competitors.” Their “challenge”: how they’ll tell the workers “so that they can understand and accept change.”

The bottom line: “Human Resources is developing strategies which will reduce Labor Cost (and increase Profits) by $300 Million by Fiscal 2011 by focusing on: Headcount and Rate (Wages and Benefits).” This isn’t exactly what you want the rank and file to hear. 

This memo could do more to damage Toyota’s future than any other factor. Toyota got a lot of press when the (non-union) workers at their Kentucky plant made more than union workers on average last year. Now they want the same workers to take a pay and benefit cut. Is that the UAW I hear knocking at the back door?

Ironically enough, Toyota is in the roughly the same position (re: its labor relations) as GM during the ‘70’s. Of course, GM basically rolled over and played dead for the UAW, burdening itself with an unwieldy labor force and an unsustainable cost structure. Will Toyota make the same mistake? It’s not likely. But it is possible.

[Read the Toyota memo here ] 

To capture maximum market share, does a car company have to forget how to have fun? Toyota seems to think so. The Japanese manufacturer has spent the last ten years purging its product line of irrational exuberance. It scrubbed the Supra in 1998, canned the V6-and-a-stick Camry CE in 2002, and wasted the Celica and MR2 in 2005. In that same year, another anomaly slipped through the cracks, a car that’s still with us today (at least for a while): the Toyota Corolla XRS. 

On January 24, President Bush issued an executive order. All federal agencies with 20 or more vehicles in their fleet will now use plug-in hybrid vehicles– “when PIH vehicles are commercially available at a cost reasonably comparable, on the basis of life-cycle cost, to non-PIH vehicles."  Cool. So, ah, where are these government buggies and when will we see some sporting a U.S. Fish and Wildlife Service crest on the doors? This, my friends, is what’s called a “faith based initiative.”

Nobody in America currently sells a plug-in hybrid. Some seriously brave hackers have converted a Toyota Prius or two. And that’s about it. General Motors wooed a covey of press at the Detroit auto show with the Volt, their collective dream of a plug-in hybrid electric vehicle. The spinmeisters say it may be on the street in three years, if it’s able to fly General Lee style over a fat, flaming obstacle: batteries.

Lithium-ion batteries are currently our best electricity storage devices. They serve the lap-top and cell phone world nicely– at least for the moment. Compared to other batteries, they’re fairly light. On the downside, they catch fire if their insides are exposed to oxygen; not a great feature in a car. But it’s not an impossible situation. The all-electric Tesla Roadster uses an array of 6,831 lithium-ion cells, deploying a number a safety devices to keep it from becoming Tesla toaster.  

The other downside: weight. While the two-passenger ultra-light Tesla can get away with schlepping a bunch of batteries, a mid-size sedan, pick-up truck stuffed with a bed full of peat moss or an SUV full of Boy Scouts, sleeping bags, tents and scarves are going to struggle just to get rolling.

General Motors hopes new, lighter batteries will be developed before people start asking when they can pick up their Volts. Notice the qualifier. The General isn’t committing to a timeline for the Volt. What they and their Detroit brethren really, really want, what the battery world probably needs, is a Manhattan Project-style initiative to give the domestic battery community a… um… charge.

The League of Beleaguered Gentlemen may actually get their wish. In the President’s 2007 State of the Union address he said, “We need to press on with battery research for plug-in and hybrid vehicles…” Not exactly a promise of billions, brains or tax-breaks, but it’s nice to get a nod. China, Korea and Japan have national lithium ion battery development programs, putting them each a half a lap ahead. But, the US has lithium reserves in Nevada, so it’s not out of the race. And the lithium race is not the only game in town.

When it comes to who really killed the electric car, the culprits are cost, weight, safety and power limits. Scientists have been looking for a better battery since Edison. More than a few think they’re almost there.

Former Air Force major Ross Dueber used to design batteries for the Strategic Defense Initiative. After retiring from government service, he didn’t take any confidential tax payer research to start Zinc Matrix. Dueber’s dudes are developing energy storage systems based on zinc (duh) rather than lithium, mostly because of that annoying flame out problem. Cost and weight will have to wait. At the moment, zinc offers no advantages there.

Europositron of Finland is working on nano technology they hope will lead to the production of rechargeable aluminum batteries. The prototypes are safe, fully recyclable and boast 20 times more capacity than current batteries. To put that in perspective, a pre-crushed GM EV1 with Europositron tech would have extended its range from 80 miles between charges to almost 600. Aluminum batteries are still at least two years from market.

The vanadium redox flow battery is the brainchild of Professor Maria Skylass-Kazacos (and team) at the University of New South Wales, Australia. Cheap, environmentally tolerable, vrf’s can be refueled in minutes, mechanically. The vanadium redox battery stores energy in a liquid electrolyte solution. The batteries can be charged by pumping in new goo, just like gas at the old fillin’ station.

A UK company called RE-Fuel is working on vehicles using vanadium batteries. Their 50 mile range leaves the comnpany concentrating on urban delivery trucks, shuttle buses, airport tenders– the kind of worker-bees that don’t venture far from the hive.

In the end, it all comes down to physics. We use a lot of gasoline because it’s a damn fine way to store energy. The need for new batteries is clear, though. You can tell because a Presidential administration made of ex-oil men says it’s time to look for alternatives. This year’s class of batteries gets by with barely a passing grade and the under classes coming up don’t look much better. So, a little advice for the next generation: stay awake in Chemistry. 

During the salad days of my college career, I had the dubious pleasure of working as a car jockey for one of the major rental car companies. My minimum wage foray into the automotive industry offered few perks– aside from its modest contributions to my then-favorite charity (the Collegiate Beer Fund) and the opportunity to study physics and engineering (handbrake turns, and engines on the wrong side of redline). Little did I know that this humble McJob would also give me unique insight into the Big 2.5's ailments.

More than a few years have passed since I surrendered the keys to my part-time fleet job. Yet when business travel puts me behind the wheel of today’s rental pods, I soon discover that the names have changed but the song remains the same.

You don’t have to be a car guy to know that rental vehicles showcase technologies that more competitive automakers refer to in the past tense. These sleds remain more committed to their “traditional values” of thrift, thrift and thrift than a coupon clipping service.

That’s because fleet operators take a less sentimental approach to car ownership than Joe and Jane Sixpack. In particular, the Hertz-Avis-Budget-National cabal demands wheels that can be acquired cheaply and delivered in large quantities. (About one of every eight new cars sold last year found its first home in a rental lot.)

Constrained by their high inventory costs and low margins, fleet operators are not particularly inclined to pay extra for innovative features. Driving intangibles– handling, ergonomic pleasure, haptic excellence, etc. — don’t translate into higher rental rates. Good enough is good enough.

But is it? With the Big 2.5 teetering at the abyss, the mainstream press has finally discovered what those inside the auto industry have long understood: much of our domestic auto production is destined for wholesale dumping, knee-capping their retail business.

How’s this for a snapshot? In 2005, the Big 2.5 commanded 81% of the 2.1 million-unit US rental car market. Sixty percent of Malibus, 55% of Impalas, 42% of G6’s, and 34% of Cobalts moved during the first half of the 2006 model year were enlisted into fleet duty, while only 13% of Camrys and Corollas, and a mere 1% of Accords and Civics, succumbed to the same fate.

Many pundits are directing their wrath towards one specific aspect of fleet sales, namely their low margins. They repeat this mantra endlessly, despite an abundance of Wall Street stalwarts (e.g. Wal-Mart) who've made low-margin enterprises into an art form. The analysts singularly fail to grasp the fact that the impulse to accommodate the fleet buyers’ product requirements poses the greater threat to a potential Detroit recovery.

In that sense, GM, FoMoCo and DCX have been unfairly accused of being out of touch with their customers’ needs. It would be more accurate to fault them for understanding their customers too well. The domestic automakers have excelled in providing their largest customers with precisely the sorts of frills-free, bargain-priced blandmobiles that the large fleet buyers require.

As Supreme Commander of the Fleet, Rick Wagoner would do well to spend some time in the trenches with the “We Try Harder” team. There he would encounter the wheezing fruits of his labors, as GM products struggle up steep inclines and slog through real-world traffic.

Perhaps he’d appreciate that epiphany that must be experienced by many a hapless rental customer (read: average middle-class retail car buyers) who departs the return lot, looking forward to jumping into their own staid but steady Camcord. 

GM has committed to reducing its rental fleet in the first half of this year alone by 120k units. At a briefing on Ford's 2007 sales outlook yesterday, Ford spokesmodel George Pipas told reporters that the automaker's sales would fall 40 percent in January, driven by a 60 percent decline in sales to car rental agencies. While the new Sebring tells us that DCX hasn't kicked the habit, declining sales means it's only a matter of time before they follow suit. 

But the numbers are still huge. Ford, for example, will sell 700k rental units this year (down from 900k). More to the point, simply reducing the quantity of fleet sales isn't enough. They are merely symptomatic of the disease. Rather, the cars themselves need to be fundamentally redesigned, built to precisely match the unique tastes and proclivities of American retail customers, while eschewing the low-budget design dictates of the fleets.

The Big Two Point Five must also avoid the temptation to chase what promises to be the Next Big Disaster: the peddling of Euro-market designs to US consumers who prefer sedans crafted for their tastes. 

If Toyota’s and Honda’s US market success and Ford’s frequent missteps with the “world car” concept teach us anything, it’s that automakers who succeed in both the US and abroad must satisfy two very different markets. The rental fleets isn't one of them.

Back in the day, Subaru couldn’t afford to build a new vehicle to compete in the smoking hot SUV sector. So they took an Impreza, jacked it up a couple of inches, raised the roof and reskinned the body. The result was a hit, and helped define the modern small CUV. Ten years later, the Subaru Forester battles on, facing its third gen competitors (Honda CRV and Toyota RAV4) with nothing more than a few questionable sheet metal creases, a spiffed up interior, and the addition of the turbocharged XT model. The CUV pool’s getting more crowded by the day, and, compared to the Subie’s well-worn REI fleece, the competition looks like its wearing designer duds. We checked out an XT to answer a simple question: is it a classic or a relic?