Are the Cars the Politicans Want to See the Ones You Want to Drive?
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One of the striking elements of the Ford and GM business plans being presented to the Senate and House committees is both companies say they intend to comply fully with the 2007 Energy Independence and Security Act. In other words, they've publicly signed up to the government mandate that vehicles average 35 mpg by 2020.
To quote from the GM plan: " ...22 of 24 new vehicle introductions in 2009-2012 will be cars and crossovers. Twenty of these models will come from GM engineering centers having a long history of designing vehicles for $6-$8 per gallon gasoline." From Ford's: "We are leveraging our global product strengths to deliver six new world-class small and medium sized vehicles to the United States over the next four years ...approximately 50 percent of future U.S. [manufacturing] capacity will be allocated to small and medium-size vehicles."
That's exactly what the politicians want to hear. But is that going to be what you want to drive? The average price of a gallon of regular gas in the U.S. hit $1.81 yesterday, down from July's peak of $4.11. Still want that little 35 mpg gas-miser, or that expensive hybrid? Happy to hang on to your old truck or SUV for a little longer?
Of course, the dramatic decline of gas prices has everything to do with the ongoing implosion of the global economy. The price of crude oil has crashed to under $47bbl, more than $100bbl down from the peak recorded during the speculative frenzy five months ago. And while oil producers are likely to cut output in a bid to raise prices (ideally, OPEC would like about $80bbl) forecasters are betting crude will stay around $60bbl for most of 2009.
Only a fool would suggest gas will stay under two bucks a gallon for long, especially once the global economy stops flatlining, and demand picks up. But how long will it take gas to again reach a price point (like $4 a gallon) where a large number of consumers are going to demand -- and, more importantly, are prepared to pay for -- highly fuel efficient vehicles?
Despite such imponderables the politicians have insisted that before they get access to any bridging loans the Detroit Three must demonstrate how they will become, in the words of House Speaker Nancy Pelosi and Majority Leader Harry Reid "...long-term global leader(s) in the production of energy-efficient advanced technology vehicles." In other words: "You better sign up to 35mpg by 2020, or else."
So no matter what gas prices do in the medium term, America's transition to smaller, greener vehicles is going start pretty quickly. To quote GM: " ...further shifts to smaller displacement gas engines will occur ...8-cylinder engines are replaced by 6-cylinder engines, 6-cylinder engines are replaced by 4-cylinder engines. Four-cylinder engine usage, for example, will increase by 42 percent by 2012, and fuel-saving six-speed automatic transmission volume will increase by 400 percent, to over 90 percent of GM's U.S. automatic transmission sales volume."
And Ford? "EcoBoost engines ...will increase to more than 85 percent of Ford/Lincoln/Mercury nameplates by 2012 and 95 percent by 2015 ...electric power assisted steering will be available on 90 percent of Ford/Lincoln/Mercury nameplates by 2012 and 100 percent by 2014 ...six-speed transmissions will be in 100 percent of Ford/Lincoln/Mercury nameplates by 2012."
The future is here, so you better get used to it.
The politicians will be pleased, but getting the Detroit Three to make and sell highly fuel efficient vehicles in America is not actually the problem right now. The problem right now is a lot of Americans are worried sick they might not have a job next week, and there's no way they are prepared to pony up for a new car. No matter how fuel efficient it is.
The "B-Word" Hits Car Sales: GM down 41%, Toyota down 33.9%, Ford down 30%
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DETROIT - General Motors, Ford Motor and Chrysler LLC all reported a relatively strong November for the first couple of weeks of the month. Then the "B-Word" -- bankruptcy -- reared its ugly head. Talks broke down between GM and Chrysler regarding a merger or buyout and finally, Detroit Three execs were embarrassed by their Capitol Hill performance as they asked for $25 billion in bridge loans.
GM's North American sales chief, Mark LaNeve, said Pontiac will become a smaller, specialty brand but will continue to sell value-priced performance cars. Read news and analysis of GM's plan for Congress here later Tuesday: GM is looking for a $4 billion bridge loan to see it through 2008, with the request for another $8 billion in a line of credit for next year.
The industry was off 36 percent for the month. The notorious Seasonally Adjusted Annual Rate (SAAR) was 10.6 million units per year, down from a SAAR of 16.4 million units per year based on November 2007 sales. All numbers in this story compare November 2008 sales to November 2007 sales, unless I say otherwise.
Sales of pickup trucks, especially the new Ford F-150 and Dodge Ram, are rebounding, in that their sales didn't drop as much as other models. Chrysler attributes some of that to a strong farming industry, but the cheap price of gas has a lot to do with it, of course. Clearly, though, the utter lack of consumer confidence has hit the auto biz hard. Dealers have been hit on two sides: no customers in showrooms and lack of financing for their floorplans.
Here's how November shook out ...
GM: 154,877 deliveries, off 41 percent.
- Retail was off 45 percent, to 106,737 and fleet was off 29 percent, to 48,140.
- Four-cylinder take-rate for midsize cars remains high, at 63 percent (70 percent for Chevy Malibu).
- Malibu was the single GM model that outsold November 2007, up 31.3 percent, to 9,469
- Cadillac CTS, off 48.0 percent, to 2,902. Buick Enclave, off 40.3 percent, to 2,288. Hummer H3 was off 65.8 percent, to 1,048.
Toyota: 130,307 deliveries, off 33.9 percent.
- Toyota division cars dropped 31.1 percent, trucks dropped 37.4 percent.
- Lexus car sales fell 40 percent, truck sales fell 26.9 percent.
- The only gainers were brand-new models; the Toyota Sequoia, up 51.9 percent, to 1,873 units, and the Lexus LX, up from 71 units to 424.
- Prius was off 48.3 percent (to 8,660) and Camry was off 28.8 percent (to 25,224).
- Scion xB dropped 43.8 percent, to 2,161.
- Tundra was off 55.9 percent, to 6,607.
Ford: 118,818 deliveries, off 30 percent.
- Marketing veep Jim Farley sees the automotive market will continue to scrape bottom through the first quarter of 2009.
- Lincoln continued to outsell Mercury, 8,019 to 7,744.
- Ford Taurus was off 22.0 percent (3,040), Fusion off 27.4 percent (8,914).
- Focus freefell 38 percent, to 8,194.
- Mustang fell 50.1 percent, to 3,667.
- Ford sold 2,203 Flexes. Chevy Traverse beat it with 2,936.
- F-Series was 37,911, about 2,000 of them new models. Down 18.6 percent.
- Mercury Sable was up 4.2 percent, to 1,230.
- Volvo sales was abysmal, off 46.5 percent, to 4,404. The S80 was the only gainer, up 10.5 percent to 844 cars.
Chrysler: 85,260 deliveries, down 47 percent.
- The discontinued Chrysler Aspen was up 33 percent, to 2,013. Credit hybrid sales.
- Dodge sold 2,815 Journeys and 3,364 Challengers.
- Chrysler 300 was down 70 percent, to 3,423.
Nissan North America: 80,683 deliveries, off 42.2 percent.
- Infiniti was off 28.0 percent.
American Honda: 76,233 deliveries, off 31.6 percent.
- That's coming off a record November, in 2007.
- Honda Division was down 30.6 percent, to 68,345.
- Acura was off 38.9 percent, to 7,888.
- The new Pilot was the only gainer, up 4.5 percent, to 5,601.
- Accord was off 38.1 percent, Civic off 29.6 percent.
Others: BMW Group sold 19,762 vehicles, off 26.8 percent. Mercedes-Benz USA sold 14,102, and said it was off 8.6 percent for the year to date. Hyundai sold 19,221, off 40 percent.
The Hour Approaches: Detroit Returns to Capitol Hill; Buick and Opel To Converge
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DETROIT - While my colleagues in the auto-journo world are expecting a bonanza of new product news not seen since the 2007 United Auto Workers contract, a voice of reason on the Republican side of the aisle could put a damper on the big day. Senator George V. Voinovich (R-Ohio) has warned Congress not to go public with the Detroit Three's plans. Voinovich has "expressed concern about whether proprietary information submitted by the Big Three will be protected from disclosure," Congressional Quarterly reports Monday afternoon. Voinovich is part of the bi-partisan group of senators who introduced a plan after the D3 dog 'n pony show on Capitol Hill last month, calling on Congress to redirect $25 billion in low-interest loans originally part of the Energy Bill, and meant to help automakers switch to green, fuel-efficient cars.
Voinovich also has concerns Washington will continue to have problems understanding what Detroit has to offer. He asks whether members of Congress, including House Speaker Nancy Pelosi (D-California) and Senate Majority Leader Harry Reid (D-Nevada) would consult auto industry experts and executive branch officials, "or do you feel that Congress is qualified to draw such conclusions?"
Buicks Will Get Opel Styling
Here's one revelation connected to GM's reorganization plan. In the January 2009 issue of Motor Trend magazine, we report that Saturn's connection with Opel styling is over. Following the current wave of Saturns, Opel styling will merge with Buick's.
Believe it or not, the reasons are obvious. First, GM wants to push Opel back upmarket. It once competed nearly at Audi's level of prestige. (Since then, Audi has moved upmarket, toward BMW and Mercedes, while Opel has gone common.) GM wants Chevrolet to have a bigger presence as an entry-level brand in the European market, competing directly with Ford. Evidence is the new Chevy Cruze compact, which is set to launch in Europe next April, about a year before its planned North American debut.
Buick, which was once a slight step below Cadillac in prestige, has countered Cadillac's edgy Art & Science styling with more rounded, voluptuous sheetmetal...like on the new Opel Insignia. In both styling and interior quality, the Insignia would have made a perfectly decent 2010 LaCrosse (or Invicta). And smaller Opels already are built as Buicks for the latter brand's biggest market, China.
Which connects with speculation in recent days that GM will finally rid itself of less-than-successful brands. Bloomberg has reported that GM may cut one or more, or even all, of Pontiac, Saturn, GMC, Saab and of course, Hummer. The New York Times reported Monday that one scenario has GM buying out its Saturn dealers, and combining the brand with its Pontiac-Buick-GMC dealerships. Saturn has the fewest dealers of GM's full-line brands, at 400, so that scenario makes some sense.
And it's easier for GM to close a brand in a consolidated dealership channel, an option it has as soon as all Pontiac, Buick and GMC dealers are one in the same.
While many Motor Trend readers may lament the end of the "excitement division," fact is, it's little more than "Chevrolet-plus," with a low-end joint venture Toyota and a top-range car sourced from Holden. It would be easy to get rid of Pontiac as well as GMC, and sell Saturns and Buicks in the same channel.
Saturn might even continue to have some overlap with lower-end Opel/Vauxhalls. The lineup would include a Chevy Cruze- (stretched Gamma platform) or Opel Astra-shared (Delta platform) compact, the Malibu-based midsize and a Sky replacement, perhaps based on GM's endangered Alpha small RWD platform. Buick would consist of an Insignia-based LaCrosse, the Enclave (which has proved the brand can be premium, again) and, I think, a large, low-volume slightly decontented Sigma-based RWD sedan with V-6 and diesel engines.
And What About Chrysler?
But I'm just dreaming. GM doesn't see much future in RWD cars, even if Chrysler does. Chrysler has announced that it can meet upcoming Corporate Average Fuel Economy standards with its 2011 Chrysler 300 and Dodge Charger.
That's assuming that cash-poor Chrysler LLC survives the next few months. As a privately owned company, it has more issues than Ford Motor or GM in dealing with the government scrutiny that comes with a portion of the $25-billion loan guarantee/bailout. One insider warns me not to count the GM-Chrysler thing as done, yet, though I'm very dubious. If those other rumors are true, even GM knows now that it needs fewer, not more, divisions.
