Why Do We Need GM to Pay Us Back?

Matthew DeBord — Mon, 23 Nov 2009 17:10:31 +0000

The New York Times has an op-ed today from Edward Niedermeyer, who edits The Truth About Cars, taking strenuous issue with the idea that General Motors will ever be able to pay back the taxpayers’ $50 billion-plus investment in the company. In other news, cats and dogs still don’t get along and day still gives way inevitably to night.

TTAC has been heralding the demise of GM for some time now, so it’s no surprise that Niedermeyer would be shocked—Shocked!—that the New General would dare suggest it can refund some of the money the Treasury has given to it. An IPO in 2010 is also preposterous. But the TTAC about doth protest waaaayyyy too much. How is that GM is even still around!?!? it asks itself. This is like being in a horror movie in which the bad guy/monster/zombie JUST KEEPS COMING BACK.

The hysterical concern that GM might not ever be able to pay back the American people misinterprets what the American people actually sought in bailing out GM. We’re not such a shortsighted nation that we could be convinced, contra-TTAC, that GM should go away, leaving us with another bankrupt automaker, Chrysler, and Ford (F) as the sum-total of our domestic auto industry. We weren’t investing for return, or to break even, but rather to avoid mega-unemployment and, perhaps more importantly, retain some of the admittedly fraught psychological engagement with carmaking culture that GM has always represented.

And of course, Niedermeyer ignores the most obvious aspect of the GM bailout, which is that the U.S. government can lose as much money as it wants, whenever it wants. In times of war and economic catastrophe, this is highly useful and expedient. It may not ultimately match one’s long-held views about the fortunes of industrial enterprises, but there it is. It may not even perfectly align with taxpayer interest, but then again, making the citizenry money isn’t really the government’s job. Exercising the ability to evade crisis is.

GM Customers Give Back

Matthew DeBord — Fri, 20 Nov 2009 23:23:35 +0000

Their cars, that is. General Motors is updating the world on how many buyers have returned their vehicles under the company’s “May the Best Car Win” 60-day satisfaction guarantee. And the number is [drumroll]...193. Out of 220,000 cars sold so far, in the month since the program debuted. Doesn’t sound like a lot, does it? Autoblog’s Chris Shunk takes a closer look:

“[W]while 193 appears to be fairly insignificant when compared to overall sales, it also represents 30 percent of the 653 people who actually opted for the 60-day option in lieu of a $500 discount. While some would say that the 30% number is very bad for GM, we'd say that it isn't much of a surprise given the fact that those 653 customers obviously weren't very sure about their purchase decision to begin with.”

In other words, those customers wanted a safety net and used it, while the vast majority of other purchasers were confident enough going in to their deals to see that a $500 discount made more sense.

This is more good news for GM, on balance. The company’s confidence is growing, even as odd things are happening in its boardroom and executive offices. Its market share is expected to slightly increase this month, and it’s edging closer to making money in the U.S. On the downside, discounted inventory season is coming, so that dealer lots can be cleared for 2010 models. And an important number looms: the size of the North American market next year. Will it be 10.5 million new vehicles? 11.5 million? 12.5 million? GM is supposed to be able to make money in a 10-million market. That would be squeaky, however. 12 million or more could enable GM to get its market share above 20 percent and hold it there, making a good case for an IPO before next fall.

Who Will Charge America?

Matthew DeBord — Fri, 20 Nov 2009 16:50:18 +0000

When electric cars and plug-in hybrids begin hitting the U.S. market in bigger numbers next year, a significant barrier to entry for consumers who don’t live in places where people have garages with electrical outlets will be where to obtain juice. True, you could run an extension cord out of the apartment window—although if you live in a 40-story high rise, that will need to be a pretty long cord.

Obviously, this means a market for charging stations, which will also help alleviate “range anxiety” issues by supplying plenty of locations to juice up. These stations have an advantage over your basic household outlet in the sense that they can deliver higher voltage and charge an electric car or plug-in hybrid faster. Some manufacturers are saying that owners will be able to get an 80 percent recharge in 15 minutes. This has led to speculation that charging stations should be located in the parking lots of Starbucks (SBUX) and Wal-Marts (WMT) (as well as in parking structures). In denser urban areas, streetside stations are an option. But who will provide the technology?

In England, a company called Elektromotive has begun to define the space, with its Elektrobay product, described as “an exquisite, sophisticated piece of design engineering offering a safe and user friendly means of charging electric and plug-in hybrid vehicles. We are sure you will agree.” It’s essentially a pole, hooked into the grid, that users can access wirelessly. Users can be billed by having charges applied to their power bills or through prepaid services. As of now, it doesn’t seem that a credit-card option is available.

But that will have to be added in if the system comes to the USA, where drivers are accustomed to dipping and swiping cards at gas stations. Drivers also have to tote around a charging cable, as the Elektrobays don’t have one that extends from the unit. Elektrobays were debuted in London and have now spread to the rest of the United Kingdom. It would be nice, obviously, if a U.S. company could offer a similar product, but Elektromotive seems to have the best technology, so an export deal with U.S. cities and power utilities looks more likely. So there you have it. In our electric car future, we’ll be dependent on Asian batteries and British charging stations. Oh, the humility.

Presented By:

Fri, 20 Nov 2009 16:50:18 +0000

Soros Gives Ford More Cause To Be Giddy

Matthew DeBord — Thu, 19 Nov 2009 21:00:30 +0000

No doubt about it, Ford (F) came out of the springtime auto bankruptcy follies looking a whole lot better than its Motown rivals, General Motors and Chrysler. Now we learn that billionaire investor George Soros took a big stake in the company. Soros. Ford. CEO Alan Mulally has to feel like he’s on top of the automotive world right now.

Sure, there are regrets. If only I had bought Ford when it was at its “You want fries with that?” price of $1.26 per share, laments Autoblog’s Jonny Lieberman. I’ll admit that similar thoughts crossed my mind, but I believe I’m technically prohibited from directly investing in any automaker (ethics!).

Yet before we hand Ford the keys to the kingdom, let’s remember that its market cap of $29 billion is still far less than its overall debt burden of $35 billion. Soros’ investment sends a message, but part of that message is that you need billionaire-investor tolerance for risk to invest heavily in Ford right now. Amateurs could rightly be advised to stay away until Ford manages to rack up enough consecutive quarters of profit to make its huge debt look, well, smaller.

The Car Czar Cannot Be Serious

Matthew DeBord — Thu, 19 Nov 2009 17:51:46 +0000

Ron Bloom, the man taking the lead for the Obama administration’s auto task force, told Reuters that the U.S. Treasury, which controls 60 percent of General Motors, was a tad surprised when the carmaker decided against selling Opel: “Bloom said the administration was caught off guard when GM decided this month to keep its European Opel unit rather than sell a majority stake to a Russian-backed group led by Canadian auto parts maker Magna International.”

Um, WHAT?!?! We should assume that this means the president of United States, who, after all, fired GM’s former CEO, Rick Wagoner, before the company entered bankruptcy, was also caught off guard.

OBAMA: “So, Tim, what’s doing with that Opel sale that has been in the news for months now and is essential to Angela Merkel’s political destiny in Germany?"

GEITHNER: “Let’s ask the guy who’s running GM for the Treasury, Mr. President, and looking after the taxpayer’s $50 billion investment. Ron?”

BLOOM: “Yeah, we’re pretty much done, fellas. We’re not saying what we think anymore.’’

Something deeply strange is shaping up at GM. First off, it’s completely inconceivable that Treasury didn’t know the GM board hated the Magna deal and wanted to keep Opel. So we’re just going to say that we flatly don’t believe Bloom there. Second, Bloom is now siding with GM’s chairman, Ed Whitacre, in saying that a GM IPO next year isn’t a priority for the company. GM’s CEO, Fritz Henderson, on the other hand seems to be cheerleading for an IPO in the third quarter.

Let’s break it down. Either GM is breaking into fiefdoms, each with its own agenda, or GM is trying to float all kinds of options to see how the markets respond. Initially, I thought that Whitacre and GM’s marketing head, Bob Lutz, were pushing one vision of the company, while Henderson was pushing another (the former to be based on innovative new product and string managerial leadership, the latter to be based on getting GM back in the money-borrowing business as fast as possible). Now I wonder if we aren’t seeing feints and probes coming out of the New General, with Bloom acting dumb on Opel but siding with Whitacre to see how that plays with the UAW and the taxpayers.

Obviously, whatever happens with GM next year is politically critical, as an IPO could come in the thick of midterm elections.

Car of the Future Boardroom Melodrama

Matthew DeBord — Tue, 17 Nov 2009 17:45:56 +0000

You may never have heard of Aptera, but its exotic, three-wheeled car is widely viewed as the most daring of the new generation of vehicles to come out of California automotive startup culture. Sculpted from composites, aerodynamically designed to have a preposterous low coefficient of drag, it was at one time rumored to get 300 mpg. However, all is potentially not well with its management. Maybe. Possibly. Wired Autotopia recently reported that a boardroom confrontation led to the firing of Aptera’s founders, effectively by the auto-industry expert Paul Wilbur, who had been brought in to run the company.

But wait a minute: Popular Mechanics then reported that those rumors were bogus and that the founders were simply taking a little time off while Aptera awaits a decision on a Department of Energy loan, similar to loans that have been extended to Tesla Motors, Fisker Automotive, Nissan, and Ford (F).

I fear we are headed deep into the canyons of spin here. For example, Steve Fambro, one of Aptera’s founders, told PM:

"I think some people read into this situation a little further than they should have," Fambro says. "Some folks were let go, and since they hadn't seen me around—they put two and two together and made a fairly large and incorrect assumption," he says. "Since I started Aptera, I've had like three or four vacation days. One of them was after receiving a 2008 Popular Mechanics Breakthrough Award in NYC. So I need to take some time, and come back in the beginning of the new year."

Did Wired overthink whatever was/is going on at Aptera? Perhaps. It did engage in some bold meta-speculation regarding the way that high-tech auto startups want to bring cars to market:

[Aptera’s situation] is also a good example of the typical dynamic between the culture of California technology startups and the auto industry. The tech industry is more apt to ship a product early and make improvements down the line. This approach is exemplified by Tesla Motors, which continued to iterate improvements—including an entirely new powertrain—into the 2008 Roadster shortly after entering production. More recently, Tesla has introduced major improvements to the Roadster for what it calls "Roadster 2.0."

The counter to this is the "Detroit" perspective, perhaps best described by Tesla co-founder Martin Eberhard when he frequently said the difference between cars and software is it isn’t so easy to recover from a car crash. The auto business historically is much more methodical and risk averse, preferring to make every effort to ensure a car is completely ready for the market before starting production. This perspective often also comes with deeply ingrained views on what must be included to achieve product parity in the market. A small dose of this perspective may prove valuable for EV startups, but too much can be problematic.

It should be pointed out that the author of the Wired story is Darryl Siry, who used to work for Tesla and is an authority on greentech startup culture. Maybe not the most objective person to break news about Aptera and its inner-workings, but still, someone who probably knows where all the bodies are buried.

So what’s going on with Aptera? It wouldn’t make sense for the company to ax its founders if its immediate goal is to secure a DoE loan. The other possibility is that Aptera wants to go to the private capital markets and get some more financing to stay afloat, and that its board figured jettisoning the founders was the best way to make the necessary design modifications to the car to get that to happen. However, it now seems that Aptera is presenting a story that has the company essentially going into hibernation for a while, a sort of split-the-difference explanation that allows the founders to remain in the picture while management figures out how to preserve operating cash. The Los Angeles Times summarizes this perspective.

Throw in a healthy dose of auto startup cattiness and you kind of want to change the channel to whatever Detroit is broadcasting these days.

Live-blogging GM

Matthew DeBord — Mon, 16 Nov 2009 23:27:06 +0000

Now that we have Twitter, I don’t much see the point in live-blogging events if your goal is simply to tell people what’s happening, rather than why or what it means. The New York Times’ Micheline Maynard live-blogged GM’s third-quarter financial report today, but besides telling us what CEO Fritz Henderson said, or how he responded to this or that reporter’s question, there isn’t much that tells us the significance of the information dispensed. Maynard has been covering the auto industry for a long time, so this is actually kind of dumbfounding.

Or else it’s an indication that live-blogging is actually kind of pointless. Increasingly, I think it is. Twitter is vastly better for providing the moment-by-moment rundown, as I discovered last week when I covered the L.A. launch of the Nissan’s new electric car, the Leaf. The blogging part becomes useful later, when you need to provide more analysis, quotes, pictures, and video. Not much later, obviously. But after enough time has passed to digest the proceedings and provide context, links, etc. Much later, you can start thinking about how to sew it all up and create some kind of big-picture piece. But you can see the outlines of a new journalistic cycle here. Twitter first.

Maybe the NYT isn’t ready to make this leap with its business coverage, assuming that proper reflection needs to skip the blogging stage and go retro with an officially sanctioned report in the paper itself, plus a more traditional story also published on the Web. In any case, I typically ignore live blogs these days and almost automatically try to find out if there’s Twittering afoot instead. Maynard tweets, but there wasn’t the kind of activity I imagined on her account. DealBook didn’t do much either, and the live blog they posted was less a blog and more a time-stamped summary—which could probably be blamed on the fact that they don’t really have a way of doing a blog-within-a-blog. The NYT does have an automotive blog, Wheels, but it’s more of a running document of all things cars than a focused business, finance, or econo blog.

I still don’t know what the NYT’s perspective on today’s GM report is, although a more elaborate blow-by-blow is now available. Contrast this with the Wall Street Journal, which has already provided a quick take on a salient aspect of what GM CEO Fritz Henderson had to say.

Nitpicking GM’s Third-Quarter Results

Matthew DeBord — Mon, 16 Nov 2009 21:32:54 +0000

The Wall Street Journal has a good rundown of General Motors’ third-quarter results, reported today, which have the new company losing $1.15 billion but making money in China as well as achieving profits on some of its new vehicles. At issue for the WSJ is whether GM is really living up to government expectations:

[T]he bigger question is whether the new GM–the quasigovernment enterprise–is on track to meet the goals set forth when Congress approved the car maker’s $30 billion bailout last winter....The government’s goals for the new GM–which were either implicit or explicit in the bailout funds–include expanding its work force in the U.S. and building smaller, more fuel-efficient cars.

Well, if GM keeps making money on crossover SUVs and the new Chevy Camaro, it’s going to potentially have to add production to keep up with demand. That could very easily translate into more hiring. As for the small car thing ... .

If it had its way, GM would probably be content to ignore this mandate. U.S. carmakers have found it difficult in the past to make money on small cars. And they are accustomed to seeing consumers take an interest in small cars when gas prices spike, only to return to larger vehicles when gas prices fall. Still, GM may be planning to at least have some small-car technology and, more importantly, fuel-efficient engines in reserve should gas prices jump up around $4 a gallon again. This is one reason for holding onto Opel, rather than selling the European division.

There’s also the EPA’s insistence that carmakers achieve a fleet average of 35.5 mpg by 2016. Small cars are one way to do this, and, as a result, GM may be compelled to move in that direction. However, GM may also believe that the use of new drivetrain technologies, such as the serial-hybrid in the forthcoming gas-electric Chevy Volt, when applied across the fleet, may get them where they need to be on MPGs.

Regardless of the tricky negotiations required of a company that’s largely owned by the taxpayers, GM is doing exactly what I said it needed to do a while back: Sell as many profitable vehicles as possible, right now, in order to improve its financial position. The company appears, with its new products, to be moving in a direction that will enable it to convert rising market share into profits. And it shouldn’t entirely matter if the U.S. auto market doesn’t support 12.5 million new sales in 2010, as was projected by GM back in April, because the company is supposed to be profitable in a market of only 10 million.

The WSJ is concerned that New GM is behaving like Old GM, chasing profits in vehicle categories that won’t be “sustainable” in the future. The trouble is that unless it chases those profits, sustainability won’t even be an issue. Automakers aren’t in the business of building the cars that consumers think they want to buy—they’re in the business of building cars that make money. In the near term, this should make the GM-owning American citizenry very, very happy. And not just because we get more Camaros.

Nissan's Zero Worship

Matthew DeBord — Fri, 13 Nov 2009 23:16:17 +0000

Above, you can see the business end of a Nissan Leaf, the 100-mile-per-charge, all-electric car that Nissan will begin selling next year (the charging ports are located right between the headlights). I attended a sunsplashed media even in the parking lot of Dodger Stadium today (read: it was toasty hot, even for November). Carlos Ghosn, Nissan’s (and Renault’s) CEO was on hand to introduce the Leaf as part of Nissan’s “Zero Emissions” tour, which will take the car from West Coast to East Coast over the next few months.

Regardless of how you feel about EVs and the future, Ghosn’s commitment to Leaf is intriguing. I asked Scott Becker, Nissan’s Senior VP for Administration and Finance, if Leaf had become Ghosn’s baby, in the same way that the Chevy Volt is close to GM’s Bob Lutz’s heart. Becker said that could be a bit of a stretch and that Ghosn is determined to lead Nissan forward as a company, not just see it as one vehicle.

With the Leaf, Ghosn is actually trying to make a business case not just for EVs, but for pressing toward zero emissions (hence the name of the tour). Because the Leaf burns no gas, it emits nothing. As environmental requirements for cars and their emissions become more stringent over the coming decades, zero-emissions vehicles are going to become a larger part of automakers’ fleets. And as far as Ghosn is concerned, there’s an excellent case to be made for leading the pack right now.

Nissan also wants to reduce emissions across its entire fleet, as Becker maintained when I asked him about Nissan cars and trucks that aren’t 100-percent EVs. Ultimately, this may be more significant, because if you’re a carmaker with an EV hitting the market, proclaiming zero emissions, you’re not going to want the rest of your vehicles to be tarred as pollution-wagons. For the time being, however, Nissan is keeping its mega-SUV, the Armada, around.

As I’ve pointed out before, there’s a potential advanced-mobility smackdown brewing in 2010 between the Leaf and Chevy’s Volt, a vehicle that runs on electricity, that that can also call up a small gas engine to serve up much greater range than the Leaf when the juice runs out. The folks at Nissan and General Motors don’t see a battle royale on the horizon, but with both cars vying for attention, the comparisons will be inevitable. Nissan does think it has an advantage on price, as the Leaf will should cost around $25,000, with a leasing deal for the (expensive) battery. The Volt will probably be priced between $30-40,000, but GM could easily decide to come in closer to $30,000, losing money in order to establish its new hybrid technology in the marketplace.

Nissan is also up against a adoption problem: even optimistic predictions for EV penetration only have them making up 10 percent of the global market by 2020. And that doesn’t necessarily figure in a massive infusion of cheap internal-combustion cars, like Tata’s sub-$3,000 Nano.

I’ve posted video from the Leaf event below (apologies for any shakiness, I was getting dehydrated), and I Twittered the whole thing at @mattdebord. I tried to get Ghosn on tape, but local TV media is brutal! Enjoy.

UPDATE: Best quotes from Ghosn: "The Leaf must make money, because if it doesn’t, the technology is condemned." Well, there you go. Please make money, Leaf! Also, in an exchange with a sassy British journalist, who insisted that electric cars must be sexy: ”You don’t find this car sexy?"

Megan McArdle Doesn’t Heart Electric Cars

Matthew DeBord — Fri, 13 Nov 2009 17:18:57 +0000

Over at the Atlantic, econoblogger Megan McArdle offers deep skepticism about electric cars in general and Chrysler’s now-defunct E.V. program, ENVI, in particular. OK, she has a point about the promotion of ENVI being a cynical play on the part of Chrysler to secure bailout funds pre-bankruptcy. The proof of that is that Fiat, which has taken over a chunk of Chrysler and is now running the company, swiftly axed the ENVI program.

But this bit is a little heavy-handed: She suggests that the enthusiasm around electric cars is “top-notch twaddle.” Au contraire! E.V.s, while not necessarily the magic bullet for all our climate and transportation woes, are going to play a major role in the future of mobility. And while it may take a while for them to displace internal-combustion cars, that day is coming.

Additionally, just because Chrysleriat is killing the ENVI program, that doesn’t mean the company is out of E.V.s. Obviously, CEO Sergio Marchionne doesn’t think the market conditions are favorable right now for Chrysler to be delivering this kind of disruptive tech. Better to concentrate on a product that customers might actually buy in big numbers. This may out Chrysler, and Fiat, at a long-term disadvantage to automakers like Nissan and General Motors, when it comes to E.V.s. But, then again, whatever technology was developed through ENVI will still be available to Chrysleriat when it decides the market for E.V.s has been sufficiently tested. In fact, if you’re inclined to take Chrysler at its word, ENVI is being discontinued as a separate entity, with the technology and development plan absorbed into the main company. Take that with a grain of salt, to be sure. But do take it.

Twittering Nissan’s New Electric Car

Matthew DeBord — Fri, 13 Nov 2009 04:18:38 +0000

Nissan is rolling out its forthcoming all-electric car, the Leaf, for media on Friday in Los Angeles. It's part of the Leaf’s “Zero Emission” tour, which will take the car to other cities. And it’s all happening at Dodger Stadium, where I last was when the Dodgers clinched the NL West title. I’m going to Twitter the event—check it out at @mattdebord—and assuming there’s no ban on Flip video, provide an analysis of what Nissan has to say, with moving pictures.

Carmakers Hit Twitter Squatters

Matthew DeBord — Thu, 12 Nov 2009 22:10:25 +0000

From Automotive News, via Nick Chambers at Gas 2.0: automakers don’t appreciate it when their names are turned into Twitter accounts that have nothing to do with their brands. Evidently, Twitter has been overwhelmed and slow to deal with carmakers’ complaints.

Of course, as Chambers points out, maybe carmakers are overly concerned about the ur-brand and not grasping how Twitter really works: as a highly focused, micro-broadcasting outlet. For example, if @volkswagen or @generalmotors isn’t obviously doing anything VW or GM related, Twitter users will figure that out pretty fast. However, if VW or GM wants to set up a Twitter feed to promote or market a new car, they can do that pretty easily. Given the way that Twitter works, people will figure out how to find the feed, especially since Twitter forces users to decipher some convoluted lingo- and posting-protocols.

Hyundai has had a different problem. @hyundai became a suspended account, due to bad behavior. It’s not clear whether Hyundai can now take control of that account, as Twitter seems to have forbidden the development of a username market as part of its terms of service (it also forbids outright impersonation, and presumably that extends to established business names). Hyundai would probably want to. But would it be worth it? What works best on Twitter isn’t the mega, but the micro.

GM to Repay Taxpayers. Definitely. Maybe.

Matthew DeBord — Wed, 11 Nov 2009 21:21:04 +0000

General Motors’ Chairman, Ed Whitacre, said yesterday that GM plans to pay back the government loans it accepted during its bailout/bankruptcy, contradicting a GAO report that maintained GM will never be able to return those taxpayers' funds. On the one hand, GM seems to be doing better than anyone expected. Its decision to not sell Opel to a Canadian parts suppliers and Russian bank and, instead, to restructure its main European subsidiary on its own, is a sign of confidence. On the other hand, Whitacre is only talking about paying back $6.7 billion in cash that GM owes the Treasury. There’s another $50 billion to consider, which the Treasury took on as stock, and which will presumably be worth something when the New GM issues an IPO.

The Economist recently took a look at the U.S. car industry and rightly determined that GM should be profitable in a year or so, given that it’s been downsized to earn money in a domestic auto market of around 10 million new vehicles per year. The U.S. auto market should recover to between 12 million to 14 million by 2011-12 and could improve well beyond that by 2014. In that kind of environment, a GM IPO makes sense. The obvious question is whether the stock will ever be valued highly enough to translate into a $50 billion holding for the Treasury. Obviously, if it doesn’t, the taxpayer will lose money on the simple arithmetic aspect. However, the cumulative gain of having avoided massive unemployment out of a GM/Chrysler liquidation, which might have pushed the jobless numbers into double digits much earlier this year, could mean that taking a loss on the bailout could be OK in the long run.

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Wed, 11 Nov 2009 21:21:04 +0000

Amusements: Used Car Bake Sale

Matthew DeBord — Tue, 10 Nov 2009 21:49:33 +0000

Go to lunch, spot an example of the innovative used-car economy in action. This is from a used-car lot in northeast Los Angeles. I think ”L” stands for “large.” Regardless, they have a 1980 Alfa Romeo on the lot, and getting a free cupcake to drive that strikes me as going well past the payoff for your average bake sale.

Cash for Clunkers Proves Truck Love

Matthew DeBord — Tue, 10 Nov 2009 18:21:07 +0000

Felix Salmon doesn’t like Cash for Clunkers. I think it saved as the U.S. economy. Regardless of who you believe, C4C did prove that American truck owners, given a decent incentive, will trade in their old truck for ... a new truck.

In terms of MPGs, this doesn’t sound good. New Ford F-150s, for example, return only a one to three mph improvement over clunker F-150s traded in. (The F-150 has long been America’s best-selling vehicle, and it was the most common C4C swap for the same model, according to AP.) However, it’s not surprising. Trucks are popular, truck owners tend to be lifetime truck owners, and the pickup truck market, as I’ve pointed out many times now, has been horribly depressed.

Is there another indicator nestled in here someplace? True, this data shows that C4C was less about the environment than it was about stimulating auto sales (and, I would argue, auto loans). But how many of those old F-150s were worn-out trucks being traded in by contractors who’ve seen their work crushed by the housing downturn? Could it have been that in late summer and early fall, they were beginning to see signs that their business was, um, picking up?

GM’s Lutz Polishes His Opel

Matthew DeBord — Mon, 09 Nov 2009 21:04:41 +0000

Here’s what we know: General Motors decided at the 11th hour to not sell Opel to Magna, a Canadian parts supplier, backed by a Russian bank. This enraged Germany and Russia, and Germany is now saying that in addition to GM having to pay back billions in bridge financing from earlier this year, it may now not receive the $6 billion in loans that the German government had committed to the Magna deal. However, the GM board seems happy that it’s keeping Opel. And now Bob Lutz, who came out of retirement this year to run GM marketing, has been put in charge of Opel until a new CEO can be found. (The old CEO stepped down immediately and looks as if he’s going to work for India’s Tata Motors, heading up new acquisitions Jaguar and Land Rover.)

What’s it all mean? Well, the new GM board, led by former AT&T (T) chief Ed Whitacre, never liked the Magna deal. So as soon as the EU began making noises about how the sale had been forced on GM, the board acted to kill it. The board was also reportedly unhappy when current GM CEO Fritz Henderson presented the Magna deal as GM’s only real option several months back. It remained unhappy. The question: Is Henderson, who once ran GM Europe, sufficiently at odds with the GM board that a Whitacre-Lutz axis is developing within the new company? After all, not long after Lutz came back to head up GM marketing, Whitacre appeared in a very Lee Iacocca-tinged TV spot for GM’s “May the Best Car Win” campaign.

If you read quasi-car-czar Steven Rattner’s post mortem account of the GM bailout and bankruptcy, it sounds as though Henderson was the quick choice for a CEO to succeed Rick Wagoner after Wagoner was fired. But Henderson insisted that he not be labeled an interim CEO. Has he crossed swords with Lutz? To a degree: Lutz wanted to convert a soon-to-be-discontinued Pontiac rear-wheel-drive platform into a revived Chevy Caprice, but Fritz shot the idea down. Then again, maybe Opel is supposed to keep Lutz busy so he doesn’t cause any more trouble in North America. Still, Lutz has become very high-profile again, suggesting that maybe retirement wasn’t every really what he had in mind.

No Goodwill for Hummers

Matthew DeBord — Fri, 06 Nov 2009 23:52:11 +0000

Over at the New York Times Magazine, “Consumed” columnist Rob Walker has seen a Hummer— the large and often derided, military-derived General Motors SUV that will soon be sold as a brand to the Chinese—in the parking lot of a Goodwill and “smirked.” The implication is that the Hummer owner painted himself (and it’s probably a him) into a financial corner through his purchase of a pricey, gas-chuggin’ monstrosity and must now wear clothes and shoes that other people have worn before him. Or maybe he was just looking for a set of old golf clubs or hoping to pick up a dozen wine glasses for $6. Point is: You own a Hummer now, you’re on the road to ruin.

Of, if you consider some research that Walker cites, you find yourself in a “brand-mediated moral conflict.” Basically, people who own Hummers have a vastly different view of themselves than people who don’t like people who own Hummers.

It’s always tempting to view Hummer, now headed for the Middle Kingdom and new life as an emblem of hulking aspiration for a whole new population, as a symbol of something arrogant and fallen in Americans. Not long after the Hummer arrived, we rushed at breakneck speed toward an inconvenient truth, peak oil, the 2008 gas crisis, the Great Recession, and the Detroit meltdown.

But the truth is that Hummer is just a brand, and GM wanted to develop it because it needed vehicles with an aggressive image to suggest bold, aggressive things about itself as a car company. GM does the same thing with Corvette, but there’s not very much Corvette hatred in the land, mainly because people who drive Corvettes are viewed as pathetic midlife gearhead hillbillies; if they had any class, they’d drive Porsches. The Hummer owner is reviled. The Corvette owner is pitied. Also, Corvettes have been around for so long that no one gives them much thought, whereas Hummer is seen as the Darth Vader of automotive galaxy.

But it was just a vehicle, it never sold in massive numbers, it didn’t really mean anything, except as a focal point for fringe debates about personal style and the environment. It garnered GM the brand attention it sought. It’s now too charged and difficult to manufacture and market effectively, so GM is selling it. As purchases go, it was a pretty good one. Some have argued that it’s more sustainable than a Prius, because it’s built to last.

What Hummer-hatred really points to is a misunderstanding about environmental damage. There are many reasons why the globe is warmer, ranging from continued burning of coal to deforestation to transportation emissions. On this last, it isn’t Hummer that’s the real problem—it’s the widespread availability of personal mobility. The Volkswagen Beetle did far more damage to the environment than the Hummer ever did, or will (more than 21 million Beetles were built). But such is the trade-off. We’re not a society that’s going to give up personal mobility so we can have cleaner air and a cooler atmosphere. So in that sense, there’s a little Hummer in all of us.

Toyota Weeps

Matthew DeBord — Fri, 06 Nov 2009 17:48:26 +0000

A number of commentators have wondered why Tadashi Yamashina, who runs the Formula One racing effort for Toyota, became so emotional a few days ago when he announced that Toyota would be pulling out of the world’s premier racing organization. Obviously, this was a blow to Toyota’s high-performance pretenses, coming awkwardly on the heels of its debut of a $400,000 Lexus supercar at the Tokyo Motor Show. But it could also be more signs of cracks in Toyota’s legendary management culture. Could it be that the gray-suited men of Toyota City have grown weary of producing ultra-reliable car after ultra-reliable car, but having mastered the mid-market sedan, gnash internally at the prospect of never achieving the mythical heights of Ferrari or Porsche?

Unfortunately, F1 has been something of an expensive debacle for Toyota, which followed Honda in exiting the sport. (Honda’s team was revived as Brawn, and its lead driver, Jenson Button, won this year’s world championship, and Brawn won the manufacturer’s title—so the Toyota team could come back to life under a new name and management scheme). It’s the perception that Toyota threw away money on F1—money that could have been better spent on, oh, I don’t know, designing better floor mats—that may have led to Yamashina’s tears.

Chrysler’s Master Plan

Matthew DeBord — Thu, 05 Nov 2009 23:05:24 +0000

Yesterday was D-Day for Chrysler and Fiat’s CEO, Sergio Marchionne, to present his five-year plan for Chrysler. Reportedly, for more than six hours, Marchionne and his lieutenants PowerPointed their way to the future. There was much live-blogging and tweeting of this event, which sounds as though it was astonishingly dull and intensely granular, if utterly necessary given the relative lack of information that’s emerged from Fiat-controlled Chrysler since the company emerged from bankruptcy.

The New York Times provides a breakdown. What’s most important is that Chrysler isn’t currently burning through as much money as some have speculated; it still has almost $6 billion cash on hand. It also figures it will be making $5 billion a year in profit by 2014 and raise its market share from a current 8 percent to 14 percent (just for perspective, General Motors' market share is currently about 20 percent).

The strategy for achieving what some might call patently ridiculous goals is as follows: Fiats will be sold as Dodges, Fiats will be sold as Chryslers; Fiats will be sold as Jeeps; Ram has been re-styled as a stand-alone truck brand; and $3 billion in savings will be achieved through combined Fiat-Chrysler purchasing. The IPO won’t come until 2011

If you were to accuse Fiat of setting Chrysler up to function, essentially, as a Fiat re-badging and distribution channel in North America, no one would say you were too far off the mark.

The Fiats that are coming, and that will be sold as Chryslers, Dodges, and Jeeps, are going to be strange machines, Italo-American hybrids, Chrysleriats. What they may very well have going for them is a certain design flair and more fuel-efficient engines, which will matter by 2014, when the EPA’s new CAFE standard of 35.5 mpg across vehicles fleets will come on line. What they won’t necessarily have going for them is enough brand identity to yield a wildly ambitious 14 percent market share. Consider that at the moment, there is exactly one Fiat vehicle that’s generating excitement in the United States: the BMW Mini-killing 500, scheduled to arrive late next year.

But we’ll see. Marchionne has already proven himself to be an adventurous global manufacturing executive. Now he’s shown that he can also lay out a very detailed battle plan. He’s sort of like Eisenhower and Montgomery, rolled into one appealing rumpled, be-sweatered and chain-smoking package. Now we’ll see whether he can also do Patton and take his plan to the field.

As an aside, there’s something kind of amusingly out-of-sync with Marchionne and the way this first big media statement of Chysler’s recovery was staged. It consumed nearly an entire working day and constituted a marathon press conference. Something like that doesn’t really fit with the Twitter-fied ways that these events are now covered. And yet, Twitter they did. But Chrysleriat rolled out so much detail it was impossible to live-blog or Twitter any kind of theme or theory. For this kind of big-B Business presentation, even old-school journalism struggles to lay it all out in a coherent way. Chrysler’s plan is actually the type of thing that cries out for lengthy study, so that the key elements can be focused on.

This could be a signal of the way that Marchionne intends to do business with the media—not briskly, but in accountant-level detail. You could see this as a kind of CEO jujitsu, creating a condition of semi-permanent confusion in auto- and business media that just want to know, know, know. It’s clever, it’s serious, and it’s new. But in terms of seeing the auto industry as a form of entertainment, it’s a thorny new challenge.

Blogger TV: Talking GM-Opel

Matthew DeBord — Thu, 05 Nov 2009 19:57:04 +0000

I did a short interview with RT (a Russian English-language TV network) about the failure of General Motors’ sale of Opel to Magna International and Sbrebank, a Russian bank. They’re not happy in Germany, and they’re not happy in Russia. But from what I can gather, they are happy in Detroit. I continue to think that it’s pretty cut-and-dried: GM’s board doesn't want to lose Opel's (and in the UK, Vauxhall’s) European operations, but it also must think that it can get restructuring funding for Opel out of the German government, and it may plan to use jobs as leverage.

BusinessWeek’s Baffling “Ugly 50”

Matthew DeBord — Thu, 05 Nov 2009 15:58:32 +0000

BusinessWeek has put together a slide show of the “Fifty Ugliest Cars of the Past 50 Years” that has the auto blogosphere scratching its collective head. There are some usual suspects: the Pontiac Aztek, the Yugo, the Cadillac Cimarron. But there’s also the Ferrari Enzo, the Chevy El Camino, the Volvo 240, the Aston Martin Lagonda, the Honda Element, and the Toyota Prius, as well as some offbeat models, such as the Corbin Sparrow. Particularly disturbing is BizWeek’s apparent hatred of El Camino derivatives: any non-truck-like car with a bed, including both the Subaru Brat and Baja, gets clonked. But the El Camino is one of the greatest cars of all time. It’s good to be both a car and a truck! It lives on, in fact, in Australia. Also, taking a whack at the Tata Nano is a cheap shot—this is a car that has to revel in its inexpensive smallness. Finally, BusinessWeek could have been sharper with the lingo. The DeLorean DMC-12 makes the list, but its rear is referred to as “especially disconcerting with its window shading and cubed tail lights.” Window shading? That’s a louvered back window, sometimes called a “backlight,” gentlemen.

The Trouble With Small Cars

Matthew DeBord — Wed, 04 Nov 2009 16:30:31 +0000

Felix Salmon is back from vacation and considering the fortunes of RBS and General Motors, the latter of which just decided to not sell Opel, its main European division, to an unholy investment consortium made up of Canadians, Russians, and German laboristas. He uses both companies to make a valid point about why big and boring can be better than big and not boring, in the pre-financial crisis sense. (Too much risk!) But he also says this about GM:

“Opel is GM’s best hope for the future, in that it’s very good at making small, fuel-efficient cars. Selling it makes much less sense than trying to import that technology into the US. If GM’s management can work out a way in which keeping Opel costs less than selling it, that’s a great result for the company.”

There are several problems with this, although it could be that Salmon is simply not being specific enough about what GM might do with Opel. Opel platforms have been used for cars sold in the United States, but GM rebranded them as Saturns and tried to sell them to younger customers who might have considered Chevy insufficiently stylish. GM is now in the process of shutting Saturn down, so the sales channel for Opels is closed. Opel engines are another story; those could wind up in a variety of GM vehicles.

Admittedly, both the Chevy Malibu and the new Buick LaCrosse use Opel platforms. But neither is a small car.

There’s also the question of whether GM even wants to sell small cars. Back in 2007-08, when rising gas prices pushed consumers toward more fuel-efficient cars, GM luckily had a small vehicle, the Chevy Aveo, based on a design produced by Daewoo, its Korean division. But profit margins on small cars tend to be ridiculously thin, and the common wisdom was that Detroit was happy to give the business to the Japanese and the newer Asian imports so that it could concentrate on more profitable, larger cars and trucks.

On top of this is the fact that Americans only intermittently like small cars. When gas prices spike, they buy them. When gas prices level off, they realize that they don’t fit the American lifestyle very well, and they get rid of them. There’s already a backlash, or episode of buyer’s remorse, mounting after increased small-car sales in 2008.

Plus, looming on the horizon are ultra-low-cost small cars from India and China—cars that are so cheap that it would be pointless for GM, Ford, or Chrysler to even try to compete with them.

However, a car doesn’t have to be small to be efficient. The forthcoming Chevy Volt, while not inexpensive, will be relatively good-sized, but with its combination of an electric and gas-motor, produce high MPGs and low-emissions. GM builds a hybrid version of its massive Cadillac Escalade that gets 20 mpg. Ongoing advances in engine technology will lead to higher-displacement engines, as well as turbocharged engines, that can produce the kind of power that Americans typically want while still managing the kind of MPGs that will fulfill the 35.5 mpg CAFE fuel-economy target that the EPA has set for 2016.

The real question here is whether GM is keeping Opel because it needs small cars—or because it wants access to international markets that it would have lost if Opel had gone to Magna and the Russians. A bright spot in GM’s ordeal over the past decade has been its international business. While it continues to lose market share and shed profits in North America, it makes money in China. I doubt it wants to leave Europe, and the potentially large Russian auto market, to Ford (F) and other global competitors.

GM’s Opel Sale Crashes

Matthew DeBord — Wed, 04 Nov 2009 04:11:37 +0000

What once looked liked a done deal now suddenly isn’t. General Motors’ board has decided against selling Opel, it main European division, to Magna, a Canadian part supplier, which had partnered with Sbrebank, a Kremlin-backed bank, along with GAZ, a Russian carmaker, and the Opel union. Germany wanted this deal, but GM’s new board increasingly didn’t.

There’s been plenty of bobbing and weaving in this thing. In the New York Times, Bill Vlasic has the basic facts but next to nothing about what GM’s board has in mind, where the auto task force is on this, what the view from Treasury is (GM’s majority owner), nor anything beyond vague indications that GM now thinks it’s better off keeping Opel to bolster its international presence and maintain a source of small cars platforms, as well as fuel-efficient engines—both of which GM will need if it plans to meet the EPA’s new CAFE standards of 35.5 MPGs by 2016.

This leaves me free to speculate. Why not follow the money? Germany has $6 billion in loans to put into the deal. It’s certainly possible that GM’s board decided that such a generous sum might be better going into GM’s post-bankruptcy coffers than those of some untested Canadian-Russian hybrid. But then again, GM might just be getting cocky. Or this could be a pre-emptive strike aimed at Sergio Marchionne and Chrysler, and their bring-the-small-Euro-car-to-America-plans, scheduled to be be revealed...tomorrow! Of course, given than the government owns almost 10 percent of Chrysler, you’d think there’d be orchestration of such events. And perhaps there is...

UPDATE: Oh no. The dreaded “R” word has crept back into GM’s lingo: restructure. Here’s CEO Fritz Henderson, in the official release:

““While strained, the business environment in Europe has improved.’ Henderson said. ‘At the same time, GM's overall financial health and stability have improved significantly over the past few months, giving us confidence that the European business can be successfully restructured. [my emphasis] We are grateful for the hard work of the German and other EU governments in navigating this difficult economic period. We're also appreciative of the effort put forward by Magna and its partners in Russia in trying to reach an equitable agreement.’”

From 2005, GM restrcutured its way right into bankruptcy. For now, I’ll stand by my analysis: GM wants Germany’s billions. And given prevailing calculations about its ability to pay back the investment of the American people in its ongoing operations, probably figures that free money is...well, free money, just with a German accent.

Fritz is now sounding a lot like Rick Wagoner, GM’s deposed CEO. Isn’t GM supposed to be re-inventing now, not restructuring?

ANOTHER UPDATE: Conspiracy theories run amok in Germany. Has this all been a ruse to get money out of German banks so that GM could stall on Opel until it exited bankruptcy and started to see the business climate begin to turn around? Shocking! Yes, shocking... Again, where is the auto task force on this? Perhaps remaining mum to prove my theory that the Obamastration has, all along, wanted to mess with Angela Merkel in ways she hadn’t thought possible.

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Wed, 04 Nov 2009 04:11:37 +0000

GM’s Delphic Albatross

Matthew DeBord — Tue, 03 Nov 2009 18:20:27 +0000

At one time, Delphi was just another component of the vast vertically integrated manufacturing, management, and marketing colossus that was the Big Old General Motors. But in the early 1990s, GM decided to de-integrate and created the Automotive Components Group as a separate entity. About a decade later, this entity became Delphi. By 2005, Delphi was bankrupt. The bankruptcy gobbled up four years, with Delphi only emerging recently. And now GM wants to draw almost $3 billion in loans from an escrow account it has with the Treasury, its majority owner, to help Delphi out.

GM is just completely and totally stuck with Delphi. It borrowed Treasury funds right after Delphi emerged from bankruptcy to finance a new steering-components company. According the the New York Times, GM has spent more than $12.5 billion on Delphi since the company was formed in 1999. Add to that a few billion more. Why? GM needs parts, Delphi’s retirees need to have their pensions funded, yada yada yada. The story isn’t that complex.

But it makes you wonder why GM’s vertical-integration model of parts-sourcing was jettisoned in the first place. When GM spun off Delphi, it was trying to rid itself of retiree benefits obligations. All this did was eventually create the current situation, where GM has to rely on Treasury to provide funding so that GM can in turn maintain its parts pipeline, as well as “top up” the Delphi pension fund (but only for UAW retirees). Yes, it’s enough to give you a headache. And you don’t want to think about the Pension Benefit Guaranty Corporation, the federal agency that’s now responsible for Delphi’s pensioners.

Vertical integration, with its paleolithic Ike Era associations, was supposed to have been killed off for the greater good of an advancing manufacturing model that sought to relentlessly rid itself of waste and please Wall Street. At this point, however, Delphi functions as a good case study in why de-integration is arguably worse, at least in an industrial sector, like automobiles, where components are in constant, if quantitatively unpredictable, demand and chunks of the workforce have had historic access to collective bargaining.

So does GM’s—and now the taxpayer’s—experience with Delphi mean that vertical integration is due for a comeback? My theory is that vertical integration has simply migrated, stealthily, to other industries. Apple (APPL), for example, is basically a very successful, modern-day vertically integrated enterprise. Ironically, Apple is in the tech sector, where mountains of anti-vertical-integration gibberish have been piled up over the years, peaking...about the time that Delphi was spun off from GM. Timing is everything, right? The Delphi spin-off coincided with the high-point of dot.com mania, and the Delphi bankruptcy coincided with the birth of Web 2.0.

But convergence never happened! Tech has been questionably profitable, in spite of all the blue-sky rhetoric pumped out by its evangelists, while old-line manufacturing companies, although subjected to many struggles over the past 30 years, can still make money, as Ford (F) proved this week. So maybe GM and Delphi should just face an obvious reality: They were meant to be together, and always will.

UPDATE: Actually, it’s all about Obama helping the unions. Savage stuff from the Detroit News.

Should Automakers Do Robots?

Matthew DeBord — Mon, 02 Nov 2009 20:46:43 +0000

Well, one of them already does. Honda just celebrated the 9th birthday of its iconic robo-creation, ASIMO—although according to Wikipedia, the models on which ASIMO are based have been around since 1986, making him/her/it a whopping 23, plenty old enough to drink, drive, and vote. Why am I interested in this? For starters, ASIMO shows everything that’s right and wrong about Honda. The Japanese company seems to make ... you name it. Motorcycles, generators, snow blowers, Acura sedans, lifelike robots. This is great, except that Honda at times looks as if it’s taking its eye off the ball when it comes to being a carmaker. Witness the difficulties it’s experienced with its new Insight hybrid sedan.

Still, if robots are to be part of our future, it would be natural for automakers to build them.

Except that we hate robots.

We have come to hate cars more than we used to, but we really, really hate robots. They scare the bejeezus out of us, have spawned countless dystopian/apocalyptic nightmare entertainments, and have become objects of outright ridicule in popular culture. No wonder no one gives a crap that ASIMO is 9. The less we have to think about ASIMO, the better. Honda’s robot is cute and all—it needs to be, given the widespread fear and distrust of robots—but no one is keeping track of how long it’s been around. At this point, ASIMO is headed into space-program territory: It’s almost time to retire the idea and say, Check! Been there, done that.

Actually, it might be humanoid robots that are the waste of time. Roomba, the vacuuming robot, is very popular, and is produced by a company, iRobot, that also makes highly un-human-looking robots for the military. Unmanned drones are to modern warfare what the machine gun and the tank were to WWI and the long-range bomber was to WWII.

No carmaker in its right mind would roll out an ASIMO competitor now, which is probably why no carmaker has. If, say, General Motors (MTLQQ) wanted to do robots, it would do something with wheels. And a rocket launcher. Honda made the right call when it made ASIMO look like an innocuous small servant/companion, because it gathered all the robot mindshare. That particular take on robots is decisively Honda-branded.

But the brand isn’t going anywhere. The last thing we want is for the robots that we reflexively hate to look anything like us. A sad thing for ASIMO, with its Pinocchio-by-way-of-a-shrunken-Neil-Armstrong pathos. But a good thing for any automaker that wants to get into the robot game and roar past Honda.

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Why Do We Need GM to Pay Us Back?

GM Customers Give Back

Who Will Charge America?

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Soros Gives Ford More Cause To Be Giddy

The Car Czar Cannot Be Serious

Car of the Future Boardroom Melodrama

Live-blogging GM

Nitpicking GM’s Third-Quarter Results

Nissan's Zero Worship

Megan McArdle Doesn’t Heart Electric Cars

Twittering Nissan’s New Electric Car

Carmakers Hit Twitter Squatters

GM to Repay Taxpayers. Definitely. Maybe.

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Amusements: Used Car Bake Sale

Cash for Clunkers Proves Truck Love

GM’s Lutz Polishes His Opel

No Goodwill for Hummers

Toyota Weeps

Chrysler’s Master Plan

Blogger TV: Talking GM-Opel

BusinessWeek’s Baffling “Ugly 50”

The Trouble With Small Cars

GM’s Opel Sale Crashes

Presented By:

GM’s Delphic Albatross

Should Automakers Do Robots?