Grant's Auto Rants

Frankfurt Auto Show

Many manufacturers like to wait to launch new vehicles until one of the big venues, like Tokyo, Detroit, or Geneva, with their record attendance and superior impact. As one of the largest and certainly best known auto shows on the annual automotive circuit, the Internationale Automobil-Ausstellung in Frankfurt, Germany has launched more than its fair share of automotive icons over its 61 year history.

This year’s show, however, seems to be as much about displaying new executives as it is about new cars. Part of this has to do with the fact that a good part of the industry is playing “catch up” at the moment in terms of design and technology like hybrids and advanced electronics. Also, there have been some significant “changing of the guard” at several top automotive posts.

DaimlerChrysler

Among the white-collar reorganizations, DaimlerChrysler is one of the most significant. The early and somewhat controversial departure of Juergen Schrempp and subsequent resignation of Eckhard Codes at Mercedes-Benz were not anticipated, even in the face of the Mitsubishi and Mercedes-Benz fiascos. As a matter of fact, it seems that DC had already turned the corner in its latest recovery when it decided to make the largely symbolic changes in management.

Coming on the heels of the 300C success, substantial Mercedes-Benz improvements in terms of product development and reliability issues, and a global strategy reevaluation, one could argue that is was, in fact, the predecessors and their work that may have righted the ship. It is very safe to say, though, that Dieter Zetsche will garner much of the praise should this strategy pan out.

Volkswagen

While it doesn’t get near the amount of attention in our press as GM’s current implosion does, the problems at Volkswagen AG have grown eerily similar in many respects to those in Detroit. It is interesting to note the same legacy costs associated with healthcare and unions, coupled with the bureaucracy that comes with size and just a few poor management decisions can cripple a company. It is also worth noting that even the Asian brands are subject to several of these issues (Pre-Ghosen Nissan and current Mitsubishi, for example.)

Wolfgang Bernhard many be able to work his magic with cutting costs and setting precedent in Wolfsburg, but as we have seen, this is really only part of the equation. Many in Detroit criticized Bernhard while still at DC for trying to get too involved with the product development aspect of the business, and while it would be nice to have one person wave the magic wand and be the hero, the idea that one person is so proficient in all parts of a company is simply unrealistic.

The cyclical emphasis on design has predictably come back as companies look for causes to their problems. As such, there is also a lot of jostling for design talent among the majors.

Cars and Concepts

Of the cars to make the real debuts in Frankfurt, only a handful represent something new and aren’t a cobbled-together hybrid concept.

The category with the most promising entries was on the small side of the scale and included several new compact and sub-compact designs. Certainly a quicker and much less costly alternative to making large cars more efficient through new technologies is to simply build smaller vehicles with 1.0 to 2.0 liter power plants. Toyota (Yaris, Endo), Mazda, and Smart all had entries ready that didn’t come across as a simple “fix-it” it to current energy prices and rather as true, thought-out designs. Included in these were vehicles aimed at the now mature “mini SUV” or “mini wagon” niches with redesigned Rav4 and Mini Traveler.

In the mid to full sized category, the Ford group, Volkswagen, and Mercedes-Benz all had some new concepts. While the new Mercedes-Benz S-Class is really just the next version in the evolutionary progression of the top MB luxury liner, the car does have the obligatory set of new features, comforts, and technologies worthy of a redesign.

Ford introduced its new Fusion, which is aimed directly at the Camry/Accord crowd and is significant firstly because it represents the end of the Taurus era, which is being phased out. The story of the rise and fall of the Taurus line as the best selling car in America is a fascinating one, representing just about everything that has happened with the domestic manufacturers over the last 10 years.

Far more interesting from Ford is the Iosis concept. Designed for the European market, this new four-seat coupe design sports four flip-up doors and muscular, bulky features reminiscent of Aston Martin/new Jaguar design. Should Ford be able to filter these design elements down into the Ford brand, expect Dearborn to look to Europe to fix its bland North American styling.

Is it easy to see how Auto News mislabeled the Volkswagen Eos on its Web site as the Volvo C70 convertible, as the cars do share considerable design cues. Whether or not the car is positioned (and priced) within the Volkswagen segment or is used as another pawn in the attempt to move the VW brand upscale will likely determine its fate. The Eos showed up last year as a concept, but will go on sale in Europe this spring.

The SUV segment did see the introduction of the Audi Q7 (which is built on a lengthened version of the Cayenne/Touareg platform) and the Jeep Compass/Patriot concepts, which are both built on the Chrysler D platform. Really not much worth mentioning here.

By far the most intriguing and exciting design of the show comes from Porsche. Not only is the Caymen a Porsche (by definition making it neat), it also represents a new category for the manufacturer by slicing a razor-thin niche between the Porsche Boxster and the 911 (997) lines.

By combining all the feedback, control, and near-perfect driving characteristics of the mid-engine Boxter layout with nearly the same amount of power, refinement, and technology found in its eldest brother (911), the Cayman is the German version of a compromise providing Porsche enthusiasts with the proverbial best of both worlds. With the Cayenne behind us and the promise of not only a Porsche hybrid but also a four-seat luxury vehicle ahead, Porsche was well overdue for a design for the purists. While the names of Porsche SUB and newest couple may be similar, they could not be more different. One might say the Cayman is the antitheses of the Cayenne. The struggle between old and new Porsche is palpable.

If there was a common thread at this year’s show, it was hybrid technology. More than ever, fuel efficiency and new technologies are front and center on the collective automotive radar. The divide, however, between the “haves and have not yets” is also very clear. Honda and Toyota are able to exploit and further define the segment by simply converting their lines to hybrid technology, while the rest of the industry continues to scramble for partnerships, licensing agreements, and new hybrid products. The majority of the entries here were essentially of the “me-too” nature, like BMW’s X3 concept.

This year’s show is interesting in that it comes directly in the middle of some major transitions within the industry. Everything from personnel right down to the very fuel we used to power our cars is in a state of flux making for a unique offering across the board.

One thing is for certain: a lot of significant developments are going to have taken place by the time the next Frankfurt show rolls around. Hang on to your frankfurters.

MG, the opposite of GM?

In lieu of writing yet another critique of GM, I thought I might go out on a limb and provide my take and suggestions on some of their larger issues. So, in answer to their "So, what the hell would you do" question, here's my opinion.

Branding - Has anyone stopped for a minute to consider what sales of the Solstice might look like if it weren't badged as a Pontiac? There is certainly enough car there to support multi-brands (like Saturn), but what if it were a Chevrolet?

I'm afraid that the company is simply no longer in a position to support as many brands as it does. If there is no fundamental difference between the GMC and the Chevrolet, then why have both? There once was an argument for brand diversification, but those times are long gone. Today there is more than enough competition to go around. Maintaining so many brands simply dilutes the overall attributes of the individual vehicles and alienates resources when synergy would be much more helpful.

History and tradition are all fine and well, but not at the cost of the company's very existence. Pulling the plug on Oldsmobile is a good start, but they ought to take it to another level and swallow Buick, too. The resulting merge into the Pontiac brand should then focus solely on what people consider to be Pontiac's core competency: sedans. Fine, they can have a range going from entry to luxury, but only sedans. Leave the roadsters, minivans, and SUVs to the brands that are known for them.

And while we're at it, SAAB should stop worrying about the small segments around the entry category. If this brand is going to stick around at all, it should be positioned to concentrate simply on "European" sedans. Stop throwing good $ after the bad and leave the SUVs and hatchbacks to the other GM brands. Think of the average SAAB driver for a minute, and then try to squeeze them into a hatchback. Its like merging Frazier Crane with Pauly Shore.

There is a common marketing concept that suggests secretly owning your chief rival is pure genius (think of if Pepsi actually owned Coke). But who is this in the interest of squashing? RC Cola? It just doesn't make sense to allocate all the marketing, advertising and other dollars -- not to mention all of those expensive materials -- to different GMC badges. Please, lets just call it what it is and brand all GMC's as Chevys.

Management – I can't say that I know what the top brass at GM is after, because they have remained defiant with their apparent devotion to SUVs and trucks even in troubled waters. This isn't a comparatively small PR problem, but rather a systemic issue far greater in scope and gravity. One could argue that GM is trying to be everything to everyone, or label its efforts with some other neutral description. What GM really needs is a completely new strategy. Set product development, operations, tradition, and everything else aside for a moment and consider what the company is actually trying to do. Is it trying to remain something (i.e. relive the glory days or simply be the largest car company in the world?). I think it may behoove the company to provide a more tightly defined goal or definition of success. The game has changed fundamentally, though GM's vision has remained the same. It went from being the biggest in the world, to "how do we stop the bleeding?" As much its executives would like to be on the offensive, they simply are not.

The current management style at the top is very thorough, calculated, risk-averse, and contemplative. While it could be argued that such an approach may be prudent when one considers the size of the company, I'm afraid there's no time for slowly sifting through each issue problem by problem. The changes (labor, plants, and brands) need to be swift and large. They are going to be painful, but less so than the alternative.

UAW – Obviously a crucial component of the overall equation. Ron Gettlfinger has stayed on the offensive with harsh words, keeping GM at bay at least until their deadline. But my initial suggestion would be to go after them now. You are going to need some momentum on this (think of the slingshot method of passing someone on the highway).

To start from scratch in the fall of '07 is like riding the UAW bumper until the curve and then timidly pulling into the other lane. Beware of a fast moving Ford or Chrysler coming the other way. A strike is probably unavoidable at this point, so you might as well get the most out of it that you can. Give them a preview with Delphi. You aren't going to need that many parts this fall when the employee pricing promotion ends anyway.

Foreign Direct Investment – Even with the less than stellar performance at Opel, this could potentially be a bright spot. I can't really speak to what happens down under, though I know Holden is a strong brand. Russia and certainly China are very logical extensions of the company. Suzuki and Fuji have also performed domestically -- just don't be tempted to dump these assets like Kirk might if contract talks stall. To do so would be very shortsighted.

The other dimension to FDI is the extent to which GM should produce in China, or any other lower wage country for that matter. Consider the Equinox for a moment, a vehicle with loads of potential. The fact that it is produced in Ontario is actually endearing. The problem lies more with the engine. It would be one thing if GM were saving money on some great performing, fuel efficient technology by procuring its production in China. While there is a fine line here, bringing in an ancient pushrod V6 from China is simply cutting corners.

Obviously China is going to be a huge growth market for GM, and every manufacturer. To what extent and how they manage worldwide production from China is another matter. Robert Farago, author of The Truth About Cars, brings up some very interesting points on China in GM Death Watch XXVIII: Distant Waters.

Operations - Cost-cutting, normal employee attrition, and the promise of exciting new models isn't going to get you there. GM is already treading water with jeans on; adding healthcare costs and suppliers is like adding lead socks. Here is one place, however, where it could take a page out of Kerkorian's playbook. If one in four North American plants are sitting idle or running at less than full capacity, then those should go. The plan to resurrect GM is very unfortunately not the same thing as the plan to save all current GM employees. Selling off chunks of GMAC is only a good idea if you have a specific plan for the money, and GM is already sitting on a wad of cash. To do this just to buy time would be a real shame. To use it to hold out against the UAW could actually be much more constructive.

Design – At this point, we are going to really need to take some chances. The redesigns of the Malibu, Monte Carlo, and Impala are not particularly progressive. The LaCrosse, and G6? Come on. The SSR and the HHR, now that's taking a risk. So what if it is a me-too design, the HHR could sell, and even if the SSR's price made it a flop, this is the kind of thinking we need. We know you have the people to do it.

To paraphrase Lt. Frank Drebin, "It's fourth and fifteen, bottom of the ninth, and you're looking at a full court press." This is no joke folks; GM is facing ultimatums on all fronts. If it isn't a showdown with the UAW, then it's with Toyota. If not Toyota then Ford, if not Ford, then Kerkorian. And the company's friends are nowhere to be found. The EPA and CARB might still throw GM a bone, but it seems the political equity has long been lost. There are no bailouts in sight, especially not when you have that much cash on hand.

One way or another, GM is entering a transformation unlike any we have seen in the industry. Whether it comes out the other end as a much leaner, meaner, focused entity, or not at all is going to come down to how it maneuvers through this mess. Decades of growth and success brought GM to its current position, but it has been its obstinacy over the last 5 years that have done the company in. In any case, if I were making the 100,000 a week that Mr. Wagoner does, this is probably where I would look first.

MG sales under the new Chinese ownership were up 6% in the UK to 810 units. At least they are going in the right direction.

Katrina, Gas Prices, and a Missed Opportunity

Comments from some domestic auto execs earlier this year that noted demand for SUV's was inelastic in the face of rising fuel prices were, at the time, just plain stupid. Now they seem downright offensive. 

To admitted car buffs and normal driving folk alike, the fuel prices seen during the earlier part of the summer were quite shocking. At roughly 40 percent higher than the same period last year, these new prices quickly became an inconvenience, though not something that might get people to stop driving their boats, lawnmowers, and Jet skis on the weekend or (heaven-forbid), derail plans to upgrade from a normal Durango to the Hemi.

As the summer moved on, however, so did the gas prices -- to even higher levels. What was once thought to be a quick summer spike looked more like it might hang around for a while before getting back to the more acceptable sub $2 level. Then, of course, along came Katrina, which has had an enormous impact not only on our physical infrastructure in terms of refineries, distribution and drilling, but even more significantly in symbolic terms.

Our society has been conditioned for anticipation, and the current fuel prices are a very good indicator of this. Sensationalism in the media and its constant cry for tomorrow's impending doom have trained the average Joe into thinking that the other shoe could (and likely will) drop at any time.

When prices first started climbing at the beginning of the summer, the US was sitting on as many crude oil reserves as ever, gas prices hadn't jumped by more than a few percentage points since September 11^th, relations with OPEC countries were "consistent," and domestic automakers were still pushing an aggressive SUV business model. What is fundamentally different now, however, is that we are technically still in a time of "war." Under such conditions, any whisper of a death in the Saudi family, a new energy bill, or an active hurricane season can send prices soaring.

Yes, there is always likely to be additional energy demand from emerging countries like China at some point, not to mention our own taste for waste and the traditional summer surge in prices. There hasn't been, however, a rational or physical reason for the upswing to take off as fiercely as it has.

What got the ball rolling long before Katrina was the media kicking around a few doomsday scenarios about "dangerously low levels" and "unprecedented demand" for lack of other interesting stories. There is a small, very vocal percentage of the population that absolutely thrives on crying wolf and lives for catastrophe, and a very large percentage that is interested in hearing about it. Just watch CNN, FOX, or even the Weather Channel for two minutes when we aren't in a period of national crisis, and everything you hear will be directed to "Extreme" this or "you are in danger" for that.

Look at the news headlines this week. The energy department just came out with a study saying that in the wake of the hurricane natural gas prices for the Midwest may rise as high as 71 percent. Other than possibly helping to achieve this, what exactly is the point of this study?

To a large extent, the current prices we see are simply a manufactured phenomenon built on futures that are more volatile than the stock market itself.

Our society seems to move with all the tenacity and discretion of an angry mob. Whether its following a trend toward the oh so cool and efficient SUV's, or back to the environmental hybrids, we are a group of followers. The marketers and PR specialists rule the roost, and we are following them right to the end. In the wake of massive loss of property and life, no one could ever argue that Katrina was a good thing. If, however, paying nearly $4 a gallon for regular gasoline has finally debunked the myth that energy consciousness is someone else's problem, then there may just be a silver lining to this dark cloud.

It all comes down to communication. The timing and interpretation of a message can be more significant than the message itself. Consider the recent "rumor" of a suicide bomber on a bridge in Baghdad, which lead to a stampede and the death of 800 people. Or in the context of Katrina, it has been reported that roughly 200 auto dealerships have been affected by the storm with somewhere between 250,000 and 500,000 new cars damaged.

There is plenty of finger pointing and blaming to go around, and the idea of informing an entire city while a storm may or may not be impending is impossible. But even 10,000 of those cars could sure have moved lot of residents out of New Orleans, costal Mississippi, and Alabama.