The recently-debuted Chevrolet Volt ads are built around the same basic assumption that drove the design of the Volt’s extended-range electric (EREV) drivetrain: Americans will not tolerate running out of vehicle range. So severe will be America’s Range Anxiety®, GM is guessing, that its electric vehicle (EV) consumers would be happy to lose some electric range and pay a significant price premium compared to the pure-electric competition in order to fill up on gas when they forget to plug in. But while we wait for this psychological insight to prove true across the broader market, recent news seems to show that GM has forgotten about another beloved American freedom: the freedom of choice. For example, the choice to buy a GM-made “pure” EV. To find that kind of freedom you have to go to China…
From conflict-torn Afghanistan [via Newsweek] comes this strange tale of Taliban tribute to the “the vehicular equivalent of the AK-47”: the Toyota Hilux (more famous among Western car nuts for its infamous Top Gear adventures).
As the war in Afghanistan escalated several years ago, counterinsurgency expert David Kilcullen, a member of the team that designed the Iraq surge for Gen. David Petraeus, began to notice a new tattoo on some insurgent Afghan fighters. It wasn’t a Taliban tattoo. It wasn’t even Afghan. It was a Canadian maple leaf.
When a perplexed Kilcullen began to investigate, he says, he discovered that the incongruous flags were linked to what he says is one of the most important, and unnoticed, weapons of guerrilla war in Afghanistan and across the world: the lightweight, virtually indestructible Toyota Hilux truck.
OK, we get it. Ford’s all-new global Ranger is “90 percent of an F-150” and it would make as much sense to sell it here as it would for Toyota to sell the Hilux alongside Tacomas and Tundras. We may not completely buy the argument that Fiesta, Focus and F-150 make for an adequate replacement to a true compact pickup in the US, but having starved that segment for so long, it’s understandable that Ford would now leave it to die. After all, nobody’s offered a truly new compact pickup for so long, it’s almost impossible to say whether the consumers or manufacturers killed off the once-burgeoning segment of efficient, utilitarian trucks.
With Mahindra struggling to offer its diesel pickups to American dealers, we aren’t holding out much hope of anything compact pickup-related changing anytime soon. Sure, there are whispers of a GM compact pickup in development (and some promising talk from Nissan), but that’s strictly in “wild ass rumor” territory. Meanwhile, VW is trying to apeal to more American consumers, doesn’t have a full-size truck lineup to cannibalize, and yet refuses to send its Amarokstateside. If any of the automakers is going to take a risk on compact (preferably diesel) pickups, Volkswagen seems like the one to do it. Alternatively, Mazda has its own version of the new Ranger and no full-sizers to cannibalize. Someone step up here!
A report in Japan’s Kyodo news agency [via Reuters/Automotive News [sub]] must have raised a few eyebrows in Japan: thanks to a rising Yen, Toyota is reportedly eying an end to Corolla exports from Japan by 2013. Toyota has since emphasized that
it has made no decision to halt production in Japan of its Corolla automobiles for overseas sales but said it was always considering an optimum global production structure.
The yen hit 81 to the dollar today, both on Yen strength and dollar weakness. ( A Euro buys 1.41 dollars again – get ready for Eurotrash invading Manhattan.)
Toyota has already shifted the bulk of its Corolla production overseas: last year it built 815k Corollas outside of Japan, and only 235k in its home country (60 percent of which were exported). Still, Toyota has long considered stability in its Japanese workforce as core institutional value, and previous currency rises led to changes in design and quality philosophy rather than reductions in Japanese production levels. But then Toyota is no longer in a position to release currency pressure by targeting “fat” or “overquality” product the way it could in the early 90s. The “overquality” simply isn’t there anymore. Like everyone else, Toyota’s major competitive option is to move production closer to cheap labor and large markets.
Despite not having spent a dime on the US firm, Fiat is widely credited with “rescuing” Chrysler. Here’s another way of looking at it: the United States taxpayers bailed out Fiat, an Italian firm with no presence in the US market. For no money down, Fiat got a 20 percent stake in a Chrysler that, although troubled, had been rinsed clean in bankruptcy. Now, analysts looking at Fiat’s spin-off of its automotive unit are telling Automotive News [sub] that
Fiat’s 20 percent stake in Chrysler, currently with a zero book value, is the biggest positive element seen by analysts for the new Fiat S.p.A., which will comprise the Fiat, Alfa Romeo, Lancia, Ferrari and Maserati car brands when it starts trading on Jan. 3. Fiat’s truck and tractor units will be spun off on the same day into a new unit called Fiat Industrial S.p.
Analyst estimates place the value of Fiat’s 20 percent stake in Chrysler at between 45 and 53 percent. Including synergies, Fiat’s stake in Chrysler is said to account for between 60 and 74 percent of Fiat Automotive’s projected value of €5.20 and €7.40 per share. The fact that the US auto task force “struggled to persuade [Fiat CEO Sergio Marchionne] to put up some cash” for a deal that more than doubled his company’s value, makes this news something of an embarrassment for the White House. Fiat is likely to eventually buy a controlling stake in Chrysler, and if, as has been widely speculated, GM ends up being owned by Chinese firms, the Great American Auto Bailout will end with both “rescued” firms in foreign ownership. Which, incidentally, is how the British Leyland experiment ended. And it’s all just a little bit of history repeating…
With Ford’s Ranger scheduled to expire sometime in 2011, Ford’s Derrick Kuzak spends most of a recent interview with Pickuptrucks.com proclaiming the death of the American compact pickup market. But after trotting out the numbers, and talking up the F-150 Ecoboost, Kuzak finally gets to the real reason Ford won’t be selling the new Ranger in the US market.
The new Ranger is 90 percent of the size of an F-150. In the rest of the world, compact trucks have grown over time. They’ve become dual-use [vehicles for work and family] and they’ve increased cab size, payload and towing.
Mercedes, BMW and Volkswagen/Audi are all moving inexorably towards a major downmarket expansion, as they develop a new generation of compact and subcompact cars based on front-wheel-drive architectures. Though Volkswagen has played in this space for some time, the move is a major cultural shift for BMW and Mercedes, which are typically associated with rear-drive luxury cars, particularly in the US market. But the truth is that the German luxury brands have always sold products in the German and other European markets that don’t match their premium overseas brand images (see, among other examples, the ubiquity of Mercedes taxis in Germany). But the strange thing about this next push towards smaller cheaper cars is that it’s not not aimed at Germany at all.
Think GM has a tough sell for its coming IPO? Chinese battery/automaker BYD is preparing its own $420m stock offering, likely to be floated on the Shenzhen A-Shares exchange, in the midst of a Chinese-market downturn, and an ongoing lawsuit with electronics manufacturing giant Foxconn. And all this comes after a long run of good news for the Hong Kong-listed BYD, which had been running strong on optimism generated by Warren Buffet’s major investment in the firm nearly two years ago. So, is BYD in real trouble of having its overvalued stock burst, or is the company strong enough to weather the storm that’s swirling around it? (Read More…)
GM’s IPO filing still has yet to appear on the SEC’s EDGAR database, but while we wait for the S-1 form to clear, Reuters has some details on what to expect from the sale. The big news:
GM is mulling a plan under which sovereign wealth funds or pension funds would serve as “cornerstone investors,” a technique often used for large initial public offerings to show that key investors are supporting the deal, four people said…
Each cornerstone investor would likely be asked to commit to buying 2 percent to 10 percent of the IPO and cornerstone investors would likely account for 10 percent to 30 percent of the total IPO, one of the sources said.
On the other hand, another source says GM is targeting 15 percent of its equity towards cornerstone investors, with 20-25% is aimed at the retail investment market. Either way, Reuters points out that another recent large IPO of a government-owned business, the Agricultural Bank of China, relied heavily on cornerstone investors… but that the politics of such a strategy could be risky.
When I was a young and budding Creative Director on the Volkswagen account (some time in the wild 70s,) I was told that there is only space for 10 automakers on this planet. In 2008, Marchinonne said there is room for 6. Now, the odds are there is Lebensraum for 3 to 5 automakers, depending on who you ask.
The prophets don’t seem to look around when they say that. The annual OICA list of the world’s largest automakers has 50 positions. In China alone are anywhere between 60 and 120 automakers, nobody seems to have a definitive number. Since I was a young and budding Creative Director on Volkswagen 30 years ago, the number of carmarkers worldwide has risen dramatically. It looks like the minute a country turns from a “developing country” into an “emerging country” (whatever that may be,) they want at least one of their own automakers. Even Iran has a couple of sizable automakers, they aren’t on the OICA list, and it’s not for a lack of units made.
If it would be true that one needs annual output in excess of 5m cars to survive, then our choices would be limited to Toyota, GM, and Volkswagen. Reality looks different.
The motorized mass mortality doesn’t seem to happen, and it won’t happen anytime soon. (Read More…)
There seems to be an appetite debate about this issue, not just here at TTAC but in the industry as a whole. Just look the philosophical divide between the “One Ford” strategy and Volkswagen’s 2011 Jetta strategy. So instead of filling up the Jetta review comments with this debate, let’s have it out… right here, right now.
Recently, Opel’s boss Nick Reilly was asked by the Süddeutschen Zeitung how long it could be before GM’s top management decides that it doesn’t want to rescue its European division Opel after all. His answer [via Autobild]:
It’s not a question of two years, but rather six or nine months, before we need to have proven that we’ve made positive progress
Even then, Reilly admits that
We need four to five years before we’re able to get back to where we were
Will the North American market for cars go up 45 percent in the next four years? I’m not convinced. Certainly the momentum hasn’t shown up yet. But this slide is from GM’s “Global Business Conference” which the company is holding in Michigan this week to drum up support for its forthcoming IPO. So… a little over-optimism is hardly surprising. But we’re not the only ones skeptical of GM’s ability to take flight as a public company. Automotive News [sub] reports that
Mirko Mikelic, a fixed income portfolio manager at Fifth Third Bank in Grand Rapids, Michigan, said he expected GM to face grilling about the risks of a return to recession in the United States.
“There’s concern about a double dip out there. That’s probably the biggest thing that’s weighing over GM coming to the market because that’s going to keep (auto sales) down for another year or two,” he said.
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