Category: Auto Industry

Wicked Stupid

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As a result of the blow-back from their spate of problems and associated recalls, Toyota is considering US automaker style incentives to move its cars.

They are talking about the various “invoice pricing” and “rebate” programs, and this is a bad thing, because they push down resale value.

One of the things that drives people to Toyotas is the fact that depreciation is much less than in similar American cars.

If they go the rebate programs, they won’t get out easily, and they lose one of their market advantages.

Remember the Furious Fuchsia Dodge Challenger?

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Oh My God it’s the Barney Car!

It’s the Barney car!I knew that it was wrong and evil, and I posted such, though I think that at tht time I focused more on stupid than evil.

Well, now now I have proof that it’s not just stupid, it’s Evil (beginning with a capital “e” and ending with a sputter).

Tekeli li!! Tekeli li!! Tekeli li!! Tekeli li!!

H/t Oggie at the Shortskoolbus BBS for the Photoshop.

Really Bad Ideas: Dodge/Chrysler Edition

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No, this does not look macho!

I know that it’s kind of like shooting fish in a barrel, but the idea that Dodge will reinvigorate interest in it’s muscle cars with “Furious Fuchsia” special edition Chargers is just too stupid to ignore.

Fuchsia? Seriously?

What the hell were you thinking?

Seriously, real men don’t even know the world fuchsia.*

This is an aesthetic right up there with the AMC Pacer.

Sharon† looked at the picture, and said that she, “Wouldn’t be caught dead in it,” so the minivan driving mother segment doesn’t like it either.

*Full disclosure: I’m not a real man, even if I do detest quiche, and I can’t spell fuchsia.

†Love of my life, light of the cosmos, she who must be obeyed, my wife.

It’s Been a Weird Year for the Auto Industry

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Play them off, Jon Stewart

With the recall of more than 6½ million to repair a sticky accelerator pedal, Toyota’s sales fell by 47% from December, and 16% year over year, which was enough for both Ford and GM outsell to outsell the Japanese car firm.

Of course, we now know that it’s not just accelerator pedals, but also the brakes on its Prius hybrid, where it appears to be a software issue that creates unsteady breaking in the interplay between regenerative and mechanical braking.

It may not be any consolation to the Toyoda family, but Ford just rolled out a software update for its hybrid vehicles:

Ford Motor Co. announced Thursday that it will ask owners of its Ford Fusion Hybrid and Mercury Milan Hybrids sedan to bring their car into their Ford dealer to replace software that operates the car’s braking system.

While the cars maintain full braking ability, Ford said, drivers may occasionally experience a strange feeling in the brakes under certain circumstances.

So the latest problems may be an artifact of the move to “drive by wire” technologies for hybrid vehicles, you pretty much have to, because managing the battery/engine balance cannot be done manually by the driver.

In any case, the juxtaposxition of glitches in software and automotive hardware, it seems appropriate to invoke the proven to be false by Snopes joke:

At a computer expo (COMDEX), Bill Gates reportedly compared the computer industry with the auto industry and stated: “If GM had kept up with the technology like the computer industry has, we would all be driving $25.00 cars that got 1,000 miles to the gallon.”

In response to Bill’s comments, General Motors issued a press release (by Mr. Welch himself) stating:

If GM had developed technology like Microsoft, we would all be driving cars with the following characteristics:

  1. For no reason at all, your car would crash twice a day.
  2. Every time they repainted the lines on the road, you would have to buy a new car.
  3. Occasionally, executing a manoeuver such as a left-turn would cause your car to shut down and refuse to restart, and you would have to reinstall the engine.
  4. When your car died on the freeway for no reason, you would just accept this, restart and drive on.
  5. Only one person at a time could use the car, unless you bought ‘Car95’ or ‘CarNT’, and then added more seats.
  6. Apple would make a car powered by the sun, reliable, five times as fast, and twice as easy to drive, but would run on only five per cent of the roads.
  7. Oil, water temperature and alternator warning lights would be replaced by a single ‘general car default’ warning light.
  8. New seats would force every-one to have the same size butt.
  9. The airbag would say ‘Are you sure?’ before going off.
  10. Occasionally, for no reason, your car would lock you out and refuse to let you in until you simultaneously lifted the door handle, turned the key, and grabbed the radio antenna.
  11. GM would require all car buyers to also purchase a deluxe set of road maps from Rand-McNally (a subsidiary of GM), even though they neither need them nor want them. Trying to delete this option would immediately cause the car’s performance to diminish by 50 per cent or more. Moreover, GM would become a target for investigation by the Justice Department.
  12. Every time GM introduced a new model, car buyers would have to learn how to drive all over again because none of the controls would operate in the same manner as the old car.
  13. You would press the ‘start’ button to shut off the engine.

Everything old is weird again.

I Said that This Would Happen

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When GM backed out of its deal to sell Opel, so that it could suck up the promised state aid from Germany, I said that they were snatching defeat from the jaws of victory.

Well, they are now seeing blowback from this decision.

The German government is demanding that GM put significant resources into Opel, resources that it really doesn’t have, before it will make any state aid available:

Germany wants General Motors Co. to increase its contribution to the Opel unit’s reorganization before considering whether to provide state aid, according to two people familiar with the matter.

Economy Minister Rainer Bruederle is using a two-day U.S. visit, which includes a meeting with Treasury Secretary Timothy F. Geithner in Washington, to express that view, said the people, who declined to be identified because the discussions are confidential. GM has said it will provide 600 million euros ($836 million) for Opel’s restructuring and ask for as much as 2.7 billion euros from European governments.

I said that the result of the decision would be labor unrest, consumer disgust, and hostility on the part of German authorities.

You can’t go wrong betting on the managerial incompetence of GM.

Deep Thought

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Why is it that washer fluid reservoirs in your car always hold something like 2-3 quarts, which means that when you refill it with a new bottle, you have a more than half empty bottle to bang around in your trunk?

These things are blow molded, and can easily be made in to irregular shapes, so that they could hold, for example, 5 qt, and then you could toss the bottle after you filled the tank.

It’s kind of like hot dogs coming in packages of 10, and hot dog buns coming in packages of 8.

Saab Auto to Survive

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I think that the folks at GM have finally realized that they could either close down the company, pay the costs for that, and secure the undying enmity of a lot of potential future customers, or sell it to someone for a bag of magic beans.

In this case, “someone” is the Dutch sports car manufacturer, and the magic beans are $74 million in cash and $326 million in preferred shares, which, for a company that can manufacture about 100,000 cars a year, is a pittance.

I’ve always liked the cars, though I’ve never owned one, and I think that this is a positive.

Year End Auto Wrap Up

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Numbers are year over year h/t CNN

The surprising news is that in 2009, more old cars were scrapped than new cars were bought, meaning that the US auto fleet fell to 246 million from 250 million.

Note that “cash for clunkers” accounted for only about 700,000 vehicles, so the auto fleet would have contracted without the program.

This is the first time that the US fleet has shrunk since probably the end of WWII.

So the year sucked in terms of sales, though December was good for Ford and Toyota, but bad for GM and Chrysler.

Sales had to go up, as at their nadir, sales would have resulted in a fleet age of almost 30 years.

Saab Not Dead Yet.

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Rule 1 of this blog:
Never miss a chance to invoke Monty Python

Well, it looks like the Saab automobile manufacturer may be back from the dead, with Spyker reentering negotiations, and there are nibbles from other firms. (also here)

There are two paragraphs of note in the story:

Spyker said Sunday it has submitted a renewed offer including an 11-point proposal addressing issues that arose during the due diligence process.

……

GM—which had previously entered talks with Spyker after a deal with Swedish luxury car builder Koenigsegg collapsed last month—had set an original deadline of Dec. 31 to seal a deal.

My guess as to what this means is that GM is spend a lot of time dicking with potential bidders, either in terms of an unwillingness to allow the transfer technical rights and data to the prospective bidders, or in terms of financial issues, particularly in terms of the dealers and access to GMAC financing for those dealers.

Unlike Pontiac or Saturn,* Saab, small though its sales are, has the advantage that it actually has a devoted and nigh-fanatic following who are willing to pay a premium for the product, and so there are companies, particularly in the very end super car field, who are interested in purchasing it, because it gives them a way to go mass market with some of their more esoteric technology.

If there is a mass market car company that will implement things like friction stir welding on its models to go with an all aluminum body at a reasonable price, it would be Saab, and I can see how a supercar manufacturer like Spyder, or Koenigsegg, might use the interplay between the low-volume hand made autos and the (relatively) high volume Saab to create a sort of “technical echo chamber” to move the implementation of this technology along.

*Actually, Saturn did too in the mid 1990s, with people literally going on vacation to their manufacturing facility in Spring Hill, Tennessee, but once GM realized that people loved their cars, they spent the next 10 years doing their level best to piss off employees and customers, because if Saturn could make cars that people liked, it would put too much pressure on the rest of GM.

GM’s to Shut Down Saab Auto

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Which is distinct from the aviation company, having been sold off to GM some years ago. It appears that the GM and bidder, Danish company Spyker, could not close the deal, and so it will be shut down.

I’m not sure what queered the potential deal, but I think that GM’s turnabout on Opel may make any potential investor leery of attempting to buy a brand from them.

After all, the “try to sell a division, take state aid to facilitate that sale, and then turn around and not sell and keep the aid,” 2-step does not make negotiating partners confident.

It’s a pity. It was something different in the auto industry.

G.M. Is Snatching Defeat from the Jaws of Victory with Opel

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As a part of the deal that would have GM’s Opel/Vauxhall division sold to a consortium headed by Canadian auto parts manufacturer the workers agreed to wage and benefit concessions that would save the firm €265 million.

OK, so far, so god, but then GM decided to back out of the sales deal at the last minute.

This is apparently because they think that bring their European division back to profitability will be easier than everyone else thinks:

The company said it expected to spend 3 billion euros, or $4.4 billion, to downsize operations, which it said was “significantly lower” than what Magna and other bidders had projected.

There is also the matter that GM has next to nothing by way of fuel efficient cars in its labs in the US, because….because…They are f%$#ing morons, and they need Opel’s technology in order to make fuel efficient cars in the US.

Well, good luck with that, as the abrupt reversal has enraged Angela Merkel in Germany, and Putin in Russia, as well as the their workers, who now see the entire sales fiasco as a sort of Kabuki theater for the benefit of Angela Merkel’s reelection.

We are already seeing calls in the Bundestag for the immediate return of the €1.5 billion bridge loan that was floated by the Germans to facilitate this sale.

As a result of this decision, there have been strikes across Opel’s German factories, with protests by people carrying signs saying, “GM – Go Away!” and “Hands off Opel!”, and the German unions are demanding changes to the structure of the company, from LLC to AG (joint stock corporation), so as to increase German, and lessen US control, over the firm, because joint stock corporations in Germany mandate greater worker stock ownership and board participation.

So, GM, which will still need government support for the foreseeable future, has double-crossed and made enemies of the entire political establishment in Russia and Germany, while also creating a hostile and demoralized workforce.

Heck of a job, Brownie.

Economics Update

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The Misery Index Continues to Rise
H/t My Budget 360

Today will be a slow news day, because everyone is waiting on the Federal Reserve Open Market Committee’s (FOMC) statement tomorrow afternoon.

I think that the big news is that Warren Buffet’s Berkshire Hathaway has bought the Burlington Northern-Santa Fe Railroad, betting on recovery while further reducing his stake in Moody’s Investors Service.

Warren Buffet does not invest in things that he cannot get his head around, which is why he missed the dot com implosion, he couldn’t figure out how they could make money.

So now, he is dumping a financial company for rail, which implies to me that he sees a lot more trouble ahead for the banking industry, even as the economy recovers, and the demand for goods and services increases.

This is further reinforced by the September new factory orders rising by 0.9%.

Also the numbers for automobile sales were remarkably good, considering the “cash for clunkers” sales hangover.

There was strong sales growth for and strong October sales numbers from Ford, GM, Nissan, Hyundai and Kia, while sales for Toyota and Honda were basically flat.


Bummer of a birth mark, Chrysler

As for Chrysler, well…..”Bummer of a birthmark, Hal.

BTW, if you’ve been reading the financial press, you may not that they are touting a 4.4% increase in the MIT Center for Real Estate’s transaction-based index (TBI) index for the 3rd quarter.

One should note, as Calculated Risk does, that this is not the But this isn’t the monthly Moody’s/REAL Commercial Property Price Index (CPPI), which actually showed a drop.

This is an index of, “commercial properties sold by major institutional investors,” and these institutional investors are likely avoiding the distressed properties like the plague.

It should be noted that things are still bad, with business bankruptcy filings rising 7% in October, a change from the drops in filings in August and September.

Gold surges to an all-time high – Nov. 3, 2009: “

Here’s a bonus for the gold bugs, gold hit a new high, $1,084.90/oz (troy) after the Reserve Bank of India announced that it was bought 200 metric tonnes of gold from the IMF. (What’s up with this? Really, I have no clue.)

In energy and currency, both oil and the dollar rose today.

It’s Official, Ford UAW Votes Down Concessions

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This is no big surprise, the UAW has voted against wage and benefit concessions to Ford.

It would have been the 4th round of concessions since 2005, and the rank and file said, “Enough is enough”.

Basically, they are not in the mood to make more give-backs when the stockholders, including the Ford family, are kept whole.

Additionally, I think that the Ford workers really do believe that they make a better car than their competition, something which is born out by 3rd quarter results, where Ford posted a profit of nearly $1 billion, largely on the fact that it was the US manufacturer to do best on the cash for clunkers program, because Bill Ford, even in the days of the SUV, was committed to making good quality smaller automobiles.

In a way, they are a victim of their own success: Their workers believe in their ability to make a good product that people will buy.

Economics Update

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Employment Chart H/t Calculated Risk

Home Vacancy, Home Ownership Rates, and Rental Vacancy Rates Also Courtesy of Calculated Risk


Some Improvement on Homeowner Vacancy Rates


Note that the Rental Vacancy Rate is an All Time High

Thursday is the new jobless day, and new unemployment claims were basically flat, falling from 531,000 initial claims to 530,000. The 4 week moving average, a generally better metric, was down to 526,250, from the previous week’s 532,250, and continuing claims fell to 5,797,000 down 148,000 from last week’s 5,945,000.

All in all, generally good news.

Additionally, US GDP increased at a 3.5% annual rate in the 3rd, which is a solid, though not stellar, growth rate.

By way of example, the recovery in the early 1980s was around 7% for a full year.

There is also the question about how much of this was driven by cash for clunkers driven auto sales, and the first time home buyer’s tax credit.

The former has expired, and the is due to expire, though I would only give it a 1:2 chance that Congress won’t renew it.

In any case, the 30-year fixed mortgage was basically flat this week.

The market’s reaction to the GDP news was as expected.

There was movement from safety to higher rates of return, which drove US Treasuries down, and their yields up, and the Dollar fell.

Anticipation of a recovery also drove oil higher, to back above $80/bbl.

Ford’s Unions Draw a Line in the Sand

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There have been 6 plants so far that have rejected Ford’s request concessions on their contracts in order to match the terms at Chrysler and GM.

I understand it. If I were a worker on the Ford shop floor, and I had already made major concessions about 8 months ago, I’d want to make sure that the shareholders, including the Ford family, were wiped out before I would give anything more:

[UAW Local President Tom] Spears, who backed the contract changes, said in an interview. “The membership did not have a warm reception to additional contract modifications. We did this in ‘05, ‘07 and in February and now they’re back at us again.”

Of course, you will doubtless hear how these guys are being selfish and stupid, and have to give back more, but if you go through those same papers over the weeks before and after, you will find them defending the outrageous pay and bonus contracts as sacrosanct.

It’s kind of like the Droit de seigneur, where of the local lord in the old days had the right to deflower any new bride, only with the banks, we all get f#$@ed.

Look for the Union Label

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Here is an interesting fact: If you retired from Delphi, the bankrupt GM parts supplier, and you are a member of the UAW, your pension is safe, because the Union fought for contractual assurances that it would be safe, but for non-union middle management? Not so much:

But four months later, Mr. Gump finds himself in a far more perilous condition than his neighbors.

On his street, he is the only Delphi worker whose pension benefits may be cut. His neighbors all belong to unions and have received a lifeline in an unprecedented deal related to the government-supervised bankruptcy of General Motors, the onetime parent of Delphi. (G.M. spun off the parts division as a separate company 10 years ago.)

Mr. Gump and some 21,000 other salaried workers and retirees are furious that their roughly 46,000 union co-workers at Delphi have had their benefits restored, apparently with government largesse, and they have not.

This is not “government largesse”, of course, it’s because the Union used its clout to protect its people, and got agreements and guarantees from GM as a result.

Mr. Gump, like myself, is an engineer, who as a group are tremendously resistant to the idea of unionizing, and this cost him, and thousands like him at Delphi.

Cash for Clunkers Have had a Long Term Effect

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The folks at the Wall Street Journal miss the point, by stressing capacity cuts, but it takes 2-3 years for new cars to become used cars.

I’m not sure whey they do this, except for the fact that the jobs being lost are UAW jobs.

More significant is the fact that anyone who got cash for a clunker under the government program did not have their car work its way down the used car ecology.

Cars traded in under that program had to be rendered undrivable, generally by putting abrasive in the crankcase.

What that means is that there has been a significant reduction in used cars in the pipeline, which is likely going to be boosting used car prices, and possibly new car prices, for the next few years.