Grant's Auto Rants

Decisions...Decisions...

Next to a keen propensity for concern with their personal appearance, the most notable characteristic of a person born under the astrological sign of Libra is the difficulty (or downright inability) to come to a conclusion.

A true Libra will toil under the pressure of even the simplest of decisions, like choosing between sweet or spicy mustard on their ballpark frank (provided someone helped them decide to go the game in the first place). And the difficulty will only increase with the perceived importance of the task at hand. For example, they are completely lost when trying to negotiate what profession to follow, where to live, or heaven forbid, what type of car to drive.

The North American automotive marketplace is not kind to the Libra, especially today. With over forty brands, and even more models to compare, the time it takes to determine the appropriate vehicle may be measured not in weeks or even months, but rather administrations. Now with all of the niche cars and their laundry lists of available options, one could probably do quite well for himself in an occupation that simply involved choosing for them.

People born between the third weeks in September and October aside, what is the "right" mixture of nameplates and models a car company should offer? It seems that people are demanding more and more niche areas be filled, but on the other hand when you look at the two companies with the broadest concoction, both are just trying to keep the proverbial wheels from coming off.

I guess conventional wisdom would be to consider the "anti-GM." Toyota's product assortment neatly spans three distinct income brackets: small, medium, and large (Scion, Toyota, and Lexus). Within each brand is a little bit of something for everyone. It makes almost as much sense as the "Kaizen" business model itself.

Let's try another one. How about the Volkswagen, Audi method? Instead of a three-part approach, they come at you with just two. One would think the strength of the two-sided assault would be like offering small – large, Laurel – Hardy, Peanut Butter – Jelly. Instead, however, they have somehow crossed their wires, and cars that are clearly Audis are sold as VWs, and vice versa.

The plan to offer an attainable "intro" line, with a nice compliment to follow once the kids move out and college is paid for, seems so simple and has been successfully done by others (Honda - Acura, Nissan - Infiniti). At the end of the day, it is in the overlap where the identity and message is lost and you run into trouble.

Well then, how about one-line? Unlike the multi-brand approach, offering just one and then some variations on it can capture a specific bracket of each segment. Very interesting approach. The first three manufacturers that come to mind (Hyundai, Kia, and Suzuki) do just that, and compete in the "economy" bracket with a single brand message, which no one will confuse with anything else.

OK, so we have seen that efficient product mixes can come in one, two, or three brands. Judging simply on the examples we have seen, one is good, two is better, and three is best. How about four? Or more?

Four, hmm, ok…Chrysler, Dodge, Jeep, and Mercedes-Benz. But here is where the law of diminishing returns really starts to take shape. The Sebring is the Stratus? Or the Charger is really a 300C -- no wait, the Aspen, Durango and Commander? Hold on, the line up here is like the "who's who" of evil twins and alter egos. What is a Chrysler and what is a Dodge?

The idea that there might be some overlap between a loaded VW GTI and an Audi A3 may be passable, but making "Doppelganger" the foundation of your product mix simply leaves customers guessing. And its not just brand identity we're talking about here. Once you start messing with a car's DNA -- the Crossfire, for example -- people take one look and say, "Well, what is it?"

So, based on this highly technical and scientific analysis, it seems three's company when considering the optimal number of brands. Maybe that's why we always had three domestic automakers in the first place. If you just keep adding brands and models, do things swing back into shape?

I'm afraid not. All we are left with at this end of the range are Ford and GM, tipping the scales at a hefty eight brands each. What's truly fascinating is that there isn't one brand designated for trucks, one for economy cars, one for sports, etc., but rather they try to cover nearly every segment with every brand. It's like running Dell, Compaq, and Lenovo under one roof.

These companies have grown to the extent that their very names can't adequately describe them. Ford "Motor" Company and "General" Motors, boy we have gotten fat and happy. In this world there are compulsive eaters and then there are those who simply consume for sport. Admitting you have a problem is half the battle.

Having been born in the second week in October, I will not make it past large or small. But for the rest of the buying public who are looking to purchase a domestic automobile, please, just give us a chance.

Politics of an alternative: E85

Even though the oil companies and their political pundits would have you believe otherwise, the world does have at its disposal several energy resources with which to power North America's vast fleet of vehicles aside from regular gasoline. The petroleum infrastructure and prosperity however, carry considerable influence and incredible resources meaning that they can pretty well squash any campaign to introduce alternative energies, no matter how many celebrities, environmental impact studies and dandelions you throw around.

Lest we forget that these are some of the world's largest corporations who just had their most prosperous string in history and are certainly accountable in many worldwide political and social implications (read: wars), meaning they aren't about to let some guitar-slinging, ex-hippie and his biodiesel-powered bus jeopardize their empire.

Aside from alternative energies, their only real foes are anything having to do with the environment and fuel-saving technologies. (It is not a stretch to see how or why the automotive industry fits nicely into this equation, whereas someone like Amtrak does not.) As far as they are concerned, the more cars and gallons-driven, the better -- damned be the consequences. But you can't completely write them off as the villains, because as a society we demand their products. Asking them to do any different would be akin to asking the fast food industry to stop chopping down the rain forest and raising cattle because North Americans are already grotesquely overweight. As a matter of fact, if you could just swap petroleum products with something more environmentally friendly, which provided all the same returns, they would jump on it, wouldn't they?

The crude industry is a unique one and is characterized by high barriers to entry and a few large players. The academic term is oligopoly, but you may know it as a cartel, which by definition can act together to affect pricing and supply. The most similar businesses are probably the diamond and drug trades, hardly pillars of society.

So when Honda, Toyota and Ford put the collective electric pedal to the medal on hybrid technologies, I thought that for sure there would be some anonymous anti-hybrid slandering making headlines. For a while there were some suggestions that the production of batteries is more harmful to the environment and it would be interesting to see the source of the strongest cost arguments against hybrids, but this is where this technology is vastly different from diesel or bio-fuels, or (for the time being) hydrogen.

Appealing to mass media has hade it cool to drive a hybrid and promote peace, save the environment, and whatever else they say comes along with it. It has taken the might of at least three major manufacturers working simultaneously over a period of time to make it happen, but it has finally taken off in a way that a few farmers or environmental coalitions could only hope for.

At this point, is hybrid technology even on Big Oil's radar? Well, after $60+/barrel and record profits, probably not, but something has happened recently that makes you wonder if the long-term squeeze on light sweet crude may get a hand from technology. Fortune magazine has a large spread on the virtues of ethanol and GM used the backdrop of the Superbowl to kick off its Yellow Cap campaign. Looks like we may have a trend here.

I must say this approach is very different from Toyota's Hybrid campaign. Instead of propping up their technology in the spotlight, the Big Three have chosen instead to build and deliver nearly 5 million cars equipped to utilize E85 (ethanol/gasoline mixture) and not even tell the people who bought them. This supports the claims that they have done so merely to satisfy fleet standards for fuel efficiency. (They have countered that because only 600 or so of the 170,000 gas stations carry it, that it wasn't a major selling point).

GM's sudden interest in touting the technology has all of the markings of another company "about face" redefining the term "Detroit U-turn." It seems that many of the major advances in automotive technology start out as the enemy in Michigan (before coming a major proponent, Mr. Iacocca's Chrysler was adamantly against the use of air bags, presumably due to their associated costs).

President Bush dusted off the Ethanol argument in his "State of the…, Speech to the…Nation's Speech…Speech of the People" State of the Union address not only in response to the country's recent increase in energy prices, but possibly also because the Ethanol argument has taken some interesting turns.

Typically, the ethanol in E85 (mixture of 15% gasoline, 85% ethanol) is produced by the manufacture of corn. Without getting stalk deep into details, producing ethanol is quite similar to making grain alcohol from corn and other grains. Corn has been the natural choice because the US is good at it and has tried to neatly bundle farm subsidies in its production (but that is another story). It was easy for the oil companies to take this one on by "employing" a couple of University professors to come up with some elaborate formulas to say that it takes more energy to produce than it supplies.

Advances however, in the production technology have dramatically lowered the costs associated with ethanol and has identified other, more efficient biomass for the production of cellulosic ethanol. (Cellulosic ethanol is produced from fibrous material, which humans can't digest anyway, removing the "threat to food supply" argument).

GM isn't the only one leaving oil's corner on this one. Many high profile companies and personalities are jumping on the E85 bandwagon and use Brazil as their poster child. (Ethanol is available at nearly all of the country's filling stations and account for about 40% of the 16.5 million driver's fuel). The greatest indicator that E85 might just be for real is the "real" amounts of money the oil companies themselves are now dedicating to its research.           

In the end, E85 is likely no more perfect a solution to our fleet's energy solution than is diesel, hybrid, or pure electric technologies. As a matter of fact a combination of all of the possible technologies may be the best solution. Breaking away from the status quo, however, has proven very difficult. Ethanol is yet another argument in favor of alternative fuels.