Grant's Auto Rants

Better Late then Never?

 

A profound speaker once noted that, "If at first you don't succeed, then sky-diving is probably not for you." The general trend in the automotive industry at the moment is to further fill as many niche segments as possible. It is almost as if the companies have conceded that they have reached a point of diminishing returns with regard to capturing market share with their current offerings, and instead, venture into uncharted waters by offering completely new models (or even brands). For some, this is, in fact, a second or even third time around this dangerous merry-go-round, and while failure might not kill them as quick as a faulty parachute, it seems like some are betting the farm on it.

A couple of the models that quickly come to mind are those from Honda, Pontiac/Saturn, and Audi. As you may quickly see, this trend is neither manufacturer- nor country-specific, but rather an industry-wide strategy afflicting anyone who doesn't already cover the entire gamut of possible vehicles.

Honda Ridgeline Truck

Now, Honda has never been shy about admitting that they are much more than just an automotive company. As a matter of fact, should you visit their Web site you will find as much attention paid to their handy household robots as you will their automobiles. However, the introduction of a truck, even from a company that produces such manly items as ATV's, generators, and snow blowers is, well, about as likely as a Gucci-designed hammer.

Such a departure from the norm this car is, Honda actually labels it as a "truck" right in the name, lest we forget what it actually is. And, wherever that moniker is displayed, they also add "Built by Honda." I guess that's to keep double takes at a minimum.

Themed after the widely successful and oh so stylish Chevy Avalanche and Cadillac EXT truck/SUV hybrid, I must admit that they nailed the sheer in-your-face ugliness right on the head. But who are they targeting with this behemoth? I would say that judging by its rugged looks, large size, and comfy interior…I have no idea.

Toyota permanently breached the unwritten rule that the truck domain was simply off limits to anyone but Detroit. It should be noted, though, that they have had aggressive SUV products dating back to the original Land Cruiser. Unless people enjoy being ridiculed around the worksite, I have a feeling that the Scooter guys might have some trouble with this one, no matter how well it works.

Pontiac Solstice/Saturn Sky

The trend is also not bound to the hefty end of the automotive spectrum. If it isn't the large that they are missing, then maybe the two seat roadster will do the trick. Again we find a situation where the car and the brand somehow don't exactly match up. Radical exodus from a brand's core competency may or may not work in the short term to move some cars, but one must consider if that is even the goal here.

In my own opinion, the Solstice/Sky are to Pontiac/Saturn what the "Fab 5" are to straight men. This automotive version of a makeover certainly fills a space not yet filled by GM. That they choose a brand that's name makes one think of their Aunt and Uncle's family sedan, and another that conjures images of the Sam's Club version of their Aunt and Uncle's family sedan, prompts the above question. A $20,000 roadster from Detroit is a very intriguing thought, but whether or not they capitalize on the marketing end will likely dictate whether or not this "brand imagination" floats.

AUDI Q7

Talk about showing up late to the party. Audi sat on the sidelines for a considerable amount of time, most likely to judge whether or not the SUV craze was sustainable and if they could leverage the "small SUV crossover" segment (which they basically invented with the Allroad). In bucking the trend, at least temporarily, Audi is able to learn from other's mistakes and get it right the first time. Let's hope there are plans for both diesel and hybrid versions in the pipeline.

The limited, cult-like following of the Allroad and extensive sales of the front wheel drive version of the Lexus RX300/330 are two answers to the same question, the question being whether or not people really need off-road capability or just like the size, comfort, and versatility (read trend) of sports utility vehicles.

Fortunately Audi has decided to extend the Allroad line to the new A6 platform, which should be an improbable improvement to an already great car. The larger picture, of course, is that there are in fact markets for two such subtly different vehicles, especially in the overpopulated SUV range.

Stay tuned to see whether they are "fashionable," or just plain late.

Detroit's Tale of Woe

There is a common belief among economists that all modern day industries evolve cyclically. Not surprisingly, so do the companies that make up those industries. The Big Three car manufacturers in America have an absolutely storied past and represent the epitome of what is now know as the Industrial Revolution, but unfortunately they too support this theory very well. Looking at them, one can clearly see what the declining side of this cycle looks like. In no place has it been more apparent over the last decade than in Motown.

It’s a simple fact of life that all things that rise must at some point fall, and industry is hardly exempt from this concept. North America is littered with the remains of small industrial cities and towns that house the remains of a more prosperous time. Like the historic ghost towns that came before them, it is not very difficult to find a vacant downtown with empty buildings and storefronts set against the backdrop of a crumbling mill or factory.

One can't argue that the Motor City has also become one of these vestiges, only on a much larger scale. During the height of the 60s Detroit held a population of over two million, making it the third largest city in the country. While the suburbs of the city have since grown tremendously, the city's actual "populous" is now less than half of that at roughly 900,000. That's not even enough to make the U.S. top ten.

Population decline in and of itself isn't necessarily a bad thing – if, that is, a city is continually attracting new industry and talent. Until recently, however, that was hardly the case with Detroit. The mass exodus very much revolved around the decline of one industry: automotive. While many competing companies have moved their operations to the U.S., they have generally chosen to settle in whichever Midwestern or Southern city happens to be offering the best incentives. The only thing replacing Detroit's declining Big Three, meanwhile, was a crumbling metropolitan infrastructure and demographic and racial imbalance.

Today, Detroit seems to be on the road to recovery. In electing a new Mayor in 2002 (the youngest of any major U.S. city, though hardly proven) it seems to have turned a corner where redevelopment is concerned. Local politicians and citizens alike seem to be accepting that the automotive industry may no longer be the sole attraction and can no longer provide long-term sustainability. Already there has been a massive undertaking to cut extraneous workers and expense from the city budget. Those items aside however, the best news may come from the auto industry itself, though not from the traditional "Big Three." Foreign automakers recognize the infrastructure and human resources benefits leftover from domestic fallout and are lining up to build technical and development centers.

The same can't yet be said for GM, Ford, and DaimlerChrysler themselves. In the face of continued loss in market share, exploding healthcare costs, and decreasing sales/profits, one would think that smaller, leaner, and stronger would be the way to go. Instead, these companies hang on to their wide assortment of brands, look to acquisition (which has dragged down partner brands), and even attempt growth as a way to combat the inevitable.

Now, the fact that they are in this mess to begin with is understandable. It just goes to support the initial "business cycle" claims mentioned above. Between 2000 and 2004 the number of auto-related jobs in Michigan shrunk by 21 percent, to the lowest point since 1991. As of April, 274,000 people were employed in the industry statewide, down from 347,000 in the same period in 2000, according to the Michigan Department of Labor and Economic Growth. Consider GM for a moment; For every current working employee there are over 2.5 retirees leading to an annual healthcare and benefits package costing the company over $5 billion a year.

To put that into perspective, GM is basically starting with a $1,500 handicap on every vehicle it produces relative to a foreign competitor.  In this industry, that is the equivalent of a boxer fighting an opponent with not only one hand tied behind their back, but with a "wedgie" to boot.

These three companies were built largely on the idea of fleet vehicles (i.e. rental, commercial , high volume economies of ). These types of cars need to be as basic, bland, boring, and cheap as possible. For every exciting model they put out, there needs to something else to pay the bills. But when you consider the legacy these companies have left behind in terms of overhead, healthcare/benefits, and unions, they really never stood a chance against the competition. The sooner the remaining "old school" management accepts this and convinces the unions to  start working toward a common goal, it will only get worse. Until, that is, one of these companies becomes the target of a takeover and the foreign buyer implements sweeping changes itself.

Once you are behind the competition in such a mature industry, catching up becomes very daunting. You have to adopt a completely different mentality and strategy. Trimming costs and cutting production here and there is not going to do it. I would argue that poor results from the top management within the Big Three hasn't been the problem, but rather that management has been too successful in that they have been able to squeak by for so long. They have made the inevitable that much worse when it finally arrives. The turnaround for these companies is going to come from radical thinking and will probably require a new breed of manager who will look a lot like Wolfgang Bernard before he lost the Mercedes-Benz post.

There will always be a "Detroit," and there will always be large American automotive manufacturers. What the successful ones will look like, however, is yet to be determined. Maybe they should look to their home city to see just how to evolve.