Friday, December 12, 2008

Michael Moore weighs in on the Senate's failure to pass the auto loan

For once, I agree with Michael Moore. His take on the auto industry loan is worth reading, only if to the see the truth through one of America’s great storytellers.

Thursday, December 11, 2008

Question for Richard Shelby: Can we call you Dick?


Richard Shelby: Can we call you Dick? If we may, then why, Dick, on Fox News recently, why would you lie—and then let people know you just lied—about your interest in helping foreign companies at the expense (via neglect) of the U.S. automanufacturers?

Wallace: Do you have as Sen Levin has said an agenda to help your local foreign auto makers?

Shelby: I don't have an agenda, but I'll tell you this, in the South, from South Carolina to Kentucky, Georgia, Tennessee, Mississippi, Texas, we have about 124,000 people employed in the automobile industry. They are competing. They are competing. GM, Ford, Chrysler can compete, but not under the model that they have now [Ed: that part is true]

124,000 is very specific number. Where did you get it if you don't have an agenda?

You know, Dick, the Hyundais and Toyotas and Hondas and Mercedes of the world come from countries where their Federal governments pay for workers healthcare. For better or worse, the U.S. largely does not. So when the Big Three could, they paid for their workers healthcare.

Wasn’t that terrible? U.S. citizens . . .or let me put this another way . . . voters, had their healthcare provide for if they got a job working for the Big Three.
And these same companies paid into large pension funds to help fund their retirements. I know Alabama workers would have like that, wouldn’t they?

Two points: one, the playing field isn’t level and GM, Ford and Chyrsler are very much trying to shed these legacy costs (lower standards of living for American blue collar guys, isn’t that awesome? I frankly do not want the guy next to me at the gas pump to make Chinese or Mexican wages; yes, the entitlement mentality must go, but I wish poverty on no one).

But you can’t just turn the spigot off, Dick; two mega forces (the formerly Big Three and the UAW) regrettably have to work at at rate I’ll call “hastened incrementalism.”

As Wagoner testified, the margin of labor costs between Toyota and GM will be essentially nothing come 2010. It’s happening. We all wish (except those UAW families) that it had happened sooner.

Point two: even though you’ve got some 100K plus employed by foreign interests in the South, the vast majority of the vehicles goes back to Korea, Japan and Deutschland AG. Dick, they’re foreign. That means the money, too, is mostly shipped back to foreign interests--that is non-American interests, Dick.

Yet you sit wobbly on your throne of sorgum on C-SPAN talking about the purity of capitalism, and how the beauty of it is that some companies rise and succeed and others fail.

But you didn’t point out that you interferred with the market by supporting millions in subsidies to these foreign interests by way of tax abatements(remember, if you believe the UAW, labor is only 10% of the cost of a new car, which means most of the money flows out of the U.S.).

To better understand the gross hypocrisy of Dick Shelby, undoubtedly ghost written for Compuware Chief Peter Karmanos by my former boss, read on. Jason knows how to make a point (and if you somehow see this Pella, Iowa, let me know what you're up to these days).

Friday, December 5, 2008

Today's Hero on Capital Hill: Jeffrey Sachs


Today’s superhero in the bridge loan debate on Capital Hill is Jeffrey Sachs of Columbia’s Earth Institute. This guy laid down such incredible smack not only some of the idiocy and hypocrisy on the Hill on the current crisis, but put the perspective on Citi Group and other financial giveaways that ballooned into the hundreds of billions of dollars with no strings attached with no calls for bankruptcy. I’m going to find his opening statement when it’s up and post it, it’s phenomenal.

Sachs pointed out something not yet heard that deserves attention: the auto industry is the largest industry in the U.S., and that governments globally are injecting billions into their own country’s auto industry. This guy just kicked ass (sorry Mom). Lucid, forceful, zero pretense . . . Professor Sachs, you Sir, were a surprise and delight of the first order. This guy salutes you.

Thursday, December 4, 2008

Mark Zandi: New Detroit Superhero

This guy should be on everyone’s radar in Detroit, the Midwest and taxpayers in general.

Dr. Zandi broke it down in simplist terms: the bailout loan will be pricey, and could be even as much as $75M to $125M . . . but letting GM, Ford and Chysler slide into oblivion will cost taxpayers much, much more.

It’s that simple.

Thursday, November 20, 2008

Detroit Goes to Washington, Take Two

This is how they should have gone to DC. Why didn't I/we think of this.

Mr. Scott has a bright career in automotive PR should he ever want to leave The Detroit News. I don’t think this would have changed the outcome ulimately, but if would have changed the tenor and welcome from Congress.

Tuesday, November 11, 2008

Panic in Detroit: Not Just a Bowie Tune

There’s no way around it. At this point, I’m pretty worried about our future.

As a PR guy who’s been try to help engineer consensus on different companies in the automotive industry for 12 years, it’s been amazing to watch the trajectory of the car companies and suppliers during this time. The last three years have been water dropping on a rock, slowly eroding my confidence in this town’s ability to compete. Circumstances, as they say, allayed their forces against us. But lest we not forget decades of horrible judgment, both of which got us here today.

And then ├╝ber-industry watcher D. Howes drops this bomb in today's Detroit News.

That Detroit is going down is done; the question is what will it look like on the other side? Will Southeast Michigan look like one enormous sprawl of Canton/Akron, Ohio . . . a broad swath of decrepitude with homes priced as they were in the early 1970s with wages and salaries that match?

Even as GM and Ford continue to grow overseas—in many cases profitably—there’s only so many jobs in Detroit to be had going forward for essentially holding stewardship of the brands, sales/marketing and finances. GM has said that different regions will take ownership of developing global platforms, and North America/Detroit will retain fewer of those (B-cars will come from Korea; large rear drive cars from Australia, et al.). Design jobs, too, will be (are) widely dispersed as GM rightfully has said that designers in local markets should skin these platforms to tailor shapes to local tastes. Most people don't know that the auto industry until very recently was in great shape . . . just not in North America.

Detroit will be still smaller (remember, fifty years ago Detroit proper was 2 million people; today it’s less than half that size). Many of its best and brightest leave to escape the crime and “schools” the city has to offer (don’t believe a white guy from Lake Orion now living in Livonia, read this from my colleague Jacqueline Harrington on what it’s really like to live in Detroit . . . less than hopeful. Yes, she's African-American.)

We can keep working hard, and hope. On our hopes, here are a few of mine:

· The Joseph Goebbels-lookalike/rodent-faced/car industry-hating Henry Waxman goes three rounds of bare-knuckle boxing with local champion John Dingell. Waxman gets waxed by the senior Dingell on C-SPAN. It makes Sports Center. A sweet bronze statue goes up in Palace to honor the event.

· Detroit becomes the lithium-ion capital of the world.

· Gas prices stay under $2/gallon for five more years (I’m betting this won’t happen, get in now, buy me a beer in five years).

· The Japanese continue to mostly build excellent cars with forgettable or downright weird styling that turn people off; as cars become more commoditized and uniformly reliable, styling is what sells and Detroit gets its mojo back.

· The Germans continue to build overpriced cars that aren’t very reliable (I’ve had several; great to drive, terrible to own).

· Detroit comes back . . . property taxes drop . . . businesses move back in to the city . . . suburban people begin buying up the big mansions and turning many of the great downtown neighborhoods back into highly desirable places to live. There remains pockets of slums, but they grow smaller.

Feel free to add yours. If Obama showed us anything, it’s that sometimes big hopes can become bigger realities. While the lights are still on, keep hope alive.

Monday, November 10, 2008

Jim Cramer: GM Really Is Too Big to Fail

Here’s another reason why GM can’t fail as pointed out by the Mad Money’s Jim Cramer: the U.S. financial system “is riddled with GM [and] GMAC paper.” GM’s bankruptcy would lead to a meltdown in the trust of the U.S. financial system.

Not only are GM’s bonds everywhere, how many people own GM stock without even knowing it in or out of their retirement accounts?

Wednesday, October 29, 2008

Requiem for Pontiac

Another cyst erupted on the ailing corpus of Southeastern Michigan.
The hospital my brother Bryan and I were born in closed yesterday. It used to be called Pontiac General. 800 or so people lost their jobs. Poor people who already have a tough time getting medical care will now find it harder to transport themselves to a hospital. Meanwhile, new hospitals are spring up like mushrooms after a hard rain on the fertile soils of the affluent outer ring communities like West Bloomfield and Gross Pointe.

Just as stock markets rise and fall over regular intervals, just as human beings are born, live their lives and die, this year has really questioned my fundamental belief in this area. Pontiac isn’t in Detroit, it’s roughly 20 miles away but they have a lot in common. Pontiac holds a special, bittersweet place in my heart, and not just because I was born there or raised fifteen minutes north of the city in Lake Orion (I think they’re calling that Orion Township now, but no one did when I was there).

I went to high school there for two years at Pontiac Catholic. It’s now called Notre Dame Prep. I’m told it's good now. In 1988, I lead a minor defection of some of the brightest Lake Orion students back to Lake Orion’s public high school (Go Dragons) after my sophmore year there because the teachers were too busy with discipline issues: fights, coke dealers, thuggery, and the like. I got called to the principal’s office a month or so before the end of school. I thought I was in trouble for something dumb I did or said. Rather, he pled that I would convince the Chris Bzdoks of the world to not leave. I told him he failed us and that I was becoming dumber at his school. I was.

Pontiac saw a minor resurgence in the late 1980s and 1990s for having one street with a bunch of hipster bars on it. Like downtown Detroit, it was a cool area that comprised about one percent of the land mass, and yet people had the shortsightedness/gall to call it a “comeback,” meanwhile four blocks away from these tiny enclaves of bars and restaurants were endless blocks of decreptitude and shamefully abysmal high school graduation rates. 20 years later, Pontiac, regrettably, is mostly still an insolvent dump. North Oakland Medical Center's closing downtown is another sign of the same.

Notice that I don’t say “Michigan” is failing. Even though the current recession is hammering the entire country, the West side of the State is not faring anywhere nearly as poorly as the Detroit region. Hell, people in Kalamazoo can send their kids to college for free. How crazy is that . . . free college at any public university or college in the State.

I want to be optimistic about this region. The people here are really nice for the most part. Homes are affordable. There’s a ton of recreational opportunity, our parks are good, and we have the best city water in the U.S. (really, try the tap water everywhere that you go). But our enemployment rate is the worst in the country, our anchor industry is getting absolutely smoked right now, and many smart, affluent young people are leaving in droves (no, make that Civics) for places like Chicago, North Carolina, Arizona, Texas, etc.

Maybe North Oakland Medical Center closing means nothing. But in its dying, I know for certain that my children will not and cannot be born there.

To end on a lighter note, my dear mother Patricia shared a room with another young mother from Pontiac who also had just given birth. My Mom said, “So what did you name your baby?”
“Urethra.”
Stunned, my Mom said, “Oh . . .”
“Yes, well, I heard the doctor say that name and I thought it sounded pretty.”

I guess it could have been worse.

Tuesday, October 28, 2008

So Why Is Chyrsler in Trouble?

So why is Chrysler really in trouble? Gas prices, credit crunches and the lack of cash to buy their cars outright (some people still do this; I for one have never had a car payment aside from the $2,900 Tom Terry loaned me in February 1989 for my ’68 Camaro) have hurt plenty.

The bigger reason, aside from Jeep and the (mini)vans: their cars are just not good. How are they not good? In the 1990s, at least they looked good, even if they weren’t terribly reliable and depreciated faster than the stick of gum you put in your mouth. Ok, the 300 was a hit. But if ever a car was a total ripoff of another design, the 300C is it (of a Bentley).

I don’t feel good saying so. I grew up near Auburn Hills, and I want no harm to come to even more people of Southeastern Michigan. But the subject that just gets danced around here in Motown, but is taken for granted essentially everywhere in the country, is that Chrysler doesn’t make great product. Sorry.

Take a look at this article and accompanying list. I show it to illustrate not any particular model of the “Ten Cars Nobody Would Miss if they Vanished”, but the number of Chrysler products on it (interestingly, the Lucerne which is mentioned as a car that should go away was purchased recently by my parents who drive back and forth from Boyne country to Sun City and back every year—they love it. Yeah, they’re in their mid 60s, but guess what, so are tens of millions of other Americans too, and if you look at the list, you’ll see Lucerne isn’t down that much this year).

Among the domestics, Ford and Chevy have developed some extremely competitive products lately. You can shop a Fusion, a Camry, an Accord and a Malibu and personal preference and aesthetics will inform your decision as much as presumed reliability, etc.

But can you really put the Avenger in that category? It’s like looking a three-legged dog: you could love it and give it a home, but you’d always be feel sad for it. And for the owner.

So here's one way out: the Michigan Ecomomic Development Corporation works with State funds to turn Auburn Hills into the lithium-ion Capitol of the world.
How? No clue, but there's a lot of smart guys up there, we have a ton of research universities within one hundred miles that could join forces to supply brain power, and unlike products like the Avenger, the entire world will be clamouring for high-energy, high-power batteries in huge numbers within a decade. Jennifer Granholm, how about you do that with my tax increase?

Thursday, October 16, 2008

Will GM Buy Chrysler?

GM absorbs Chrysler? Desperate times call for desperate measures, and with the Cerberus gang looking to make some money from their acquisition of Chrysler from Daimler a year ago, Cerberus certainly has an incentive to cut their losses.

But what about GM? The Detroit News’ Daniel Howes does a good job of going into why this might not be a crazy as it sounds in the story above.

My brother and I were talking yesterday about this, and asked if it was true that Chrysler's Auburn Hills HQ was designed in the 1990s so that it could turned into a should Chrysler vacate the premises. I assured him that it could . . . but Oakland County would be devastated by such a loss, so what retailers would sign leases there, especially with Somerset five minutes away?http://www.thesomersetcollection.com/

Monday, October 13, 2008

A Tale of Two Launches

My colleagues and I at work have been arguing for a few years that the days of the big, splashy, event-driven new car launches should probably be relegated to the dustbin of auto PR practice.

For decades, automakers have flown cadres of journalists to expensive locales replete with ribbons of billard-ball smooth road surfaces (southern Spain seems to destination favorite). The reason we think this model is dying is fairly simple: the number of impressions (# of stories written x the number of times those stories are read/seen) doesn’t justify the huge cost, nor is there any tremendous body of evidence that proves that the kind of coverage you earn is much better.
What matters most these days, not shockingly, is the product.

There was a time when marketers could hope to wine and dine journalists into good reviews by appealing to their wanderlust/go-somewhere-warm self-interest , but with the internet trading on its ability to speak truth to power, journalists have an even greater incentive to be very forthcoming and candid about their impressions on new cars. For the most part, they are pretty fair.

In other support for our thesis, Dave Kiley at BusinessWeek weighs in on two recent launches, and gives another reason to keep it local:

"When Ford introduces an all-new F-Series pickup truck to media this month, it is holding the event at a local hotel and its own Romeo, MI proving ground. That may not sound like a big deal. But when Ford launched the Edge SUV in 2007, it flew reporters from all over the country to San Francisco. Mind you…I like this idea, as I often find it a pain in the neck to arrange to go to the West coast just to hear speeches and drive cars that I could drive just as well in Michigan."

His entire post can be read here.

Thursday, October 9, 2008

The Future of Turbodiesels (and Gas Turbos)

Everyday on my way to work, John McElroy’s Automotive Insight story runs at 6:53 a.m. on WWJ newsradio 950AM here in Detroit. John has covered the auto industry forever, and knows automotive like no one else in the world. Today's story, which can be heard here, points out that diesel penetration in Europe has fallen back below 50 percent for the first time in a while, and after talking to automakers, John concludes that diesels have probably topped out, and will likely continue to slowly decline.

He notes that this is happening just as all of the German OEMs introduce 50-state diesels here in the U.S. (for the last several years, most diesels were only compliant with emissions regs in 45 states, the oddballs being California and four Northeastern states that follow California Air Resources Board tailpipe standards).

McElroy’s conclusion is that the prospects for widespread diesel adoption in mainstream passenger cars in the U.S. are less than what they were even one year ago, and that diesels will likely remain in the realm of luxury cars in the U.S. where buyers won’t mind higher fuel costs.

My take: this presumes that diesel will continue to cost more than gasoline. Until September 2004, this wasn’t the case. I’ve no indication that this will reverse course anytime soon, but it’s still necessary for this argument to hold water. Although I just paid $3.17/gallon to fill up my car this morning, but there are so many scenarios whereby crude prices could shoot back up in the next 24 months, I don’t know that I’d make a long-term bet on cheaper oil . . .

If you haven’t driven a modern diesel, like VW and Audi’s TDI vehicles, or the monster BMW 330d with a proper Getrag six-speed manual, I can tell you that they are astounding to drive. Driven back to back with gas engines of the same displacement in the same cars is a night and day experience.

Still, John may be on to something here, at least in Europe. Or not. One of my clients, Honeywell Turbo Technologies, has been suggesting that diesels will continue to grow, albeit slowly, through 2012. But in an interesting twist. They contend that while turbodiesels will grow, the real action is in gasoline turbo-equipped vehicles (e.g. EcoBoost and GM’s 1.4 turbo in the Chevy Cruze). Between 2007 and 2012, Honeywell says that gas turbos will triple their share of the global passenger vehicle market.

Still, if regulations in Europe and the U.S. continue their slide toward zero tailpipe emissions, especially of NOx and PM (soot), the cost of meeting these regs--and the subsequent decrease in diesel's efficiency advantage (plugging up those exhaust streams hurts efficiency), John may be right after all.

Monday, October 6, 2008

The Electrified Car Continuum: Volt vs. Insight

If the Chevy Volt is what’s next, the new Honda Insight is what’s now. While the stock market and new car sales are tanking, the end of the decade is shaping up to be the most interesting time for powertrain geeks and new car buyers since, well, in a while.

The Volt and the new Insight can rightly be seen as bookends to the “electrified car” continuum over the next few years; the Insight is essentially the 1.3 liter mild hybrid already found in the Civic Hybrid. Unlike the Prius, which can run on electricity alone up to low speeds, the Insight’s gas engine will always power the car with assist from a small electrical motor. The Volt, of course, will run with no gas at all up to forty miles, afterwhich a small (but interestingly, bigger than the Insight’s) 1.4 liter engine charges the battery.

In the future, all automakers will likely offer a broad spectrum of efficient technologies, possibly in the same car, as it the case today in Europe: the entry level models of many B- and C-class cars use small, inexpensive gas motors, while the top of the range typically sports a high-tech, direct-injection turbodiesels.

And this is where I think it gets really interesting . . .how will the “low-end” of the mild hybrids (e.g. Insight-like) compete with the “high end” of the advanced “traditional” powertrains like turbodiesels? Today, at least in Europe, the diesels win by an enormous margin.

The turbodiesels are typically much torquier and more efficient than the mild hybrids, but as Honda comes out with a $19K starting price on the Insight, the turbodiesels might feel added pressure to continue to take cost out. To say nothing of the surge in advanced gas turbos . . .

Powertrain geeks and greenies rejoice, ‘cause these are the good old days.

Monday, September 29, 2008

Reaction to the Volt Launch

The year was 1972. Then Motorola R&D Chief Martin Cooper told designer Rudy Krolopp that they had to have a portable cell phone prototype in six weeks. Rudy’s response?

What the hell’s a portable cell phone?”

Ten years and $100 million dollars later, they launched their phone, the $3,995 DynaTac 8000x, affectionately dubbed “the brick.” If only the wealthy could afford it, and calls were a dollar a minute (staggeringly steep in 1983), some critics said it was too expensive to buy, too expensive to use, and the range wasn’t what they would have liked.

So what exactly, was the point?

25 years later, cellular phones would be nearly ubiquitous worldwide, with millions of consumers ditching their traditional home landline phones for their cells (me included).

Fast forward to September 16, 2008: GM unveiled the world’s first extended-range electric vehicle, the Volt, to a curious and sometimes puzzled press corp. Some reporters noted that it likely would be expensive to buy and the electric-only range wasn’t what they would have liked.

Sound familiar?

I wasn’t surprised when people questioned the yet-to-be-announced but oft-speculated $40K price tag. After all, $40K is well above the median price for a new car in this country, and the Volt is a compact, four-passenger car. Even with the $7,500 dollar tax credit, it’s a lot of money for a compact, but not unheard of for tremendous performance (e.g. BMW 135i, Audi A3 3.2).

But I was surprised to see some folks miss the point by citing the Chevy Cruze as being the far more significant car to roll out in 2010. Their argument is that it will be affordable to mostly everyone (relative to the Volt), and therefore it will save more fuel overall as more people are able to buy it (#/units sold x mpg increase = total fuel saved).

Don’t get me wrong, I think the Cruze will be great, and I’ve posted earlier on the virtues of turbocharging everything on this site. The Cruze will be marginally bigger than a the Cobalt, but its 1.4 liter gas turbo will push fuel efficiency into extremely competitive territory; interestingly the Cruze and Volt will share a common body structure, known in GM circles as Delta II. But is the Cruze really more significant than the Volt?

If the future of the auto industry ended in December 2010, this view would stand to reason. But the difference in interpretation of the significance between the view of some and GM is the long-term implications of the Volt, and its ability to begin to write a new chapter in the annals of energy and personal transportation. GM’s Frank Weber and Larry Burns made a very compelling case, and if you missed it, here it is in a nutshell:

· GM extensively studied the range issue, and found that the forty-mile range from the battery is the sweet spot for most U.S. consumers. Roughly 80 percent of drivers could commute without using a drop of gasoline;

· In the next iteration of the Volt, the electric-only range would still be forty miles, the aim will be to reduce size, mass and cost from the battery pack (keep Motorola’s “brick” in mind), which will bring down the cost of the car;

· For the next iteration, and subsequent extended-range electric vehicles, stir and repeat.

I thought they made this pretty clear. Thoughtful people ought to agree that the implications for weaning ourselves off oil for personal transportation are staggering . . . no, not by 2010, but neither will it take fifty years (keeping in the mind the adoption/development curve of the cell phone).

As I wrote after watching the unveiling of the production Volt, I think the Volt will be remembered in coming years as much for what it will represent—the all-too-rare game-changer ushering in the electrification of the automobile and the overcoming of our complete reliance on diminishing oil reserves for personal transportation. GM is one of our clients, but I still really believe this.

As Burns pointed out, by 2030, two-thirds of the world’s population will live in cities where vehicle speeds average 12-13 miles per hour. Using the tech represented in the Volt, close to none of these would need gas or diesel to drive around town. No gas. No diesel. No idling. Think about it.

Agree? Disagree? I'd love to hear what people think about this.

Thursday, September 25, 2008

Volt Scores Big $7,500 Tax Credit

The verdict is in: the Volt will qualify for a $7,500 tax credit, as reported by Dave Kiley over at BusinessWeek. While $10K would have been better (the Li-Ion battery pack alone has been estimated to cost this much), $7,500 helps GM put generation one extended range hybrids into the hands of consumers.

This is a big deal, especially for people in upper-middle and higher income brackets. If it were simply a deduction, it would mean a lot less. For the difference between the two, read Kiplinger’s explanation here.

In other Volt news, I have a post going up on the GMnext blog soon about how so many journalists missed the big picture last Tuesday on the Volt’s coming out party.

Thursday, September 18, 2008

Report from the Volt unveil . . . very interesting

If you haven’t heard, the production version of the Volt was officially unveiled as part of the GM Centennial celebration. I spent the day with reporters obeserving their observations.

If you want to know what it was like to be there in person, and gleans some offhand media reactions, read the post following the CEO's here.

Thursday, September 11, 2008

The Craziest Car I Ever Drove

As an auto flack, my job occassionally gives me the opportunity to drive really cool, new and interesting cars. I've driven fuel cell vehicles (very quiet), a ton of turbodiesels unavailable for sale in North America (but a few are here, I helped Honeywell petition EPA for the waivers to register them here), Australian gas turbo Fords, the EV1 in DC in the late 1990s when I with USCAR, but none can top the utterly ridiculous vehicle here.

I few years ago, a client wanted to see his Delahaye featured in AutoWeek. I wanted to be published in a car magazine, as this was my dream all through college. We both lucked out. The owner, all round cool car nut with the means to have a warehouse full of cars, Gordon Wangers of AMCI/Jim Wangers fame, told me a few years ago that the car had been traded.
Here is the brief report on driving a 70-year-old, now $400,000 LeMans winner in rush hour traffic:

Driving the 1937 Delahaye Type 135M Drophead Coupe

Kill CAFE Rules and Save Taxpayers $25 billlion

In a thought-provoking opinion piece yesterday, this Wall Street Journal article by Holman Jenkins offers a novel—and to my mind theoretically (but not politically) practical way of saving taxpayers $25 billion+ dollars in Federal loan guarantees:

"For a sum small compared to their revenues but large in relation to their market caps, the Detroit auto makers were all over the two conventions. Their lobbyists had something to sell -- a plea for $50 billion in federal loans. Congress practically owes us this money, Ford, GM and Chrysler argue -- because Congress slammed us with new fuel mileage mandates that will cost us $100 billion to meet.

John McCain caved. The White House is in the process of caving. Barack Obama didn't need to cave. But before rushing to pass the legislation, there's an easy way to save $50 billion or whatever part of these loans wouldn't be paid back: Just repeal the fuel economy rules."

To note: I say in my title here that it's $25 billion, the Journal quotes $50 billion. Smart $ is on the former.

The corollary, according to this classic by my favorite contemporary economist, Greg Mankiw from Harvard, is that rather than burden the OEMs and consumers with CAFE rules that just don’t work, is to permenently raise fuel taxes above where they are now. The following from Mankiw is a must read:

Raise the Gas Tax

Wednesday, September 10, 2008

For Auto Supplier PR Executives

Can your PR agency explain what this picture is and how every component here works? We can because we work for manufacturer of both the variable geometry turbo and the engine manufacturer.

Our shop in Detroit is a curious bunch. We run the gamut from former Chicago-based consumer marketing PR-types to more B2B auto technology/policy industy PR strategists (I fall into the latter).
Interestingly, our growth n the last five years has been built primarily on getting ahead of the curve on using social media (i.e. the internet) to creatively engage consumers for companies, but we've also added clients on the more traditional auto supplier B2B side of the house . . . the difference being that Weber Shandwick is more global than most of our clients, let alone our competition, and having capabilities worldwide is a quickly growing need as the supply base continues to consolidate. Here's us in a nutshell:

Where Should the OEMs Be Placing Big Bets?


Why is GM spending billions on “far-out” technology like extended-range hybrid vehicles in the midst of such industry and market turmoil? Because the global trends that are shaping the industry—and society—demand that leaders lead.

This "leaders lead" talk doesn’t jive much right with auto cognoscenti because GM has had a tough time as of late (but let's be clear: so has pretty much everyone else, including Toyota, whose coronation may put on hold in light of lowered sales/revenue forecasts). Early indications are that the industrialized West is sliding into a low-to-now growth period; next year could be some really tough sledding for mature markets with emerging markets still keeping the lights on.

But those trends are alarming, and in spite of tremendous pressure to shoot the moon with the next product cycle, GM, along a few others, are looking well beyond the current market downturn and next product cycle.

In the following link from the GMnext blog, click on the presentation at the bottom that shows why the big picture includes much bigger issues than today's credit crunch, housing decline. If intelligent people don’t find the global trends frightening, we may all be in big trouble.

Feeling Gravity's Pull

Tuesday, September 9, 2008

Autoextremist: PR Won't Work for Detroit?

http://www.autoextremist.com/current/

The ever delicate and nuanced Peter DeLorenzo essentially says to Detroit OEMs: Give up on your PR efforts . . . you lost the image war. As usual, his reasoning is on very solid ground, the idea being that amazing products will help cure what ails GM, Ford and Chrysler. That's right. But he's wrong (sorry Peter).

But to say that communications and marketing just don't/won't work is folly. I offer as Exhibit A a brand that makes high-quality, reliable, intrinsically good products, but doesn't communicate its value very effectively as measured by sales . . . Acura.

Mercedes-Benz, on the other hand, outsold Acura in August, as they do most months/years, but hasn't remotely approached Acura's reliability in recent years. I'm aware the reliability is but one reason people buy cars (especially luxury cars that no one needs); design, performance, resale, et al. all count too. But when you ask most real people what is meant by a "good" car, they'll say "high quality" or "reliable."

Sorry to say this Peter, but the brand still counts for something, and Mercedes proves the point. And brand is another word for the intangibles. Some of those intangibles are not consciously communicated, and not all can be helped by PR and marketing, no argument.

But I fully appreciate and mostly agree with the spirit and direction of Delorenzo's rant. Autoextremist has always been a provocative, thoughtful read and product, product, product is still the automotive equavalent of location, location, location.

Monday, September 8, 2008

Should Tier 1 Auto Suppliers Blog?

At this point, I don't see why, but convince me otherwise. Here are a few of my reasons:
  1. Their customers are too few. Suppliers talk to a fairly short list of engineering, planning and purchasing people. Traditional PR works better unless . . .
  2. You're a massive supplier capable of actually affecting (i.e. have lots of $ to spend) consumer demand for a particular technology. ABS brakes, which were lobbied behind (and if front of) the scenes with NHTSA, and diesels (jury is still out, diesels are great but not inexpensive) are two that come to mind from Christmas Past and Present.
  3. Unless you've got a highly differentiated product, and can hope to own a category like safety, fuel economy or in-car entertainment, you won't be able to convince enough consumers that your site is worth going to several times a week, or more.

Would love to hear what you think.

Wednesday, September 3, 2008

How Do Blogs Work in Automotive?

Simple: talk about stuff that real people care about. Like turbocharged Camaros, for instance:

Turbo Camaro . . . Why Not Turbocharge Everything?

Success with this particular post was fairly modest, but it's a good reminder that a. it bears repeating, companies can't really control the conversation--and shouldn't try to; and b. people are still really, really sensitive to engine cylinder count in this country (in Europe, average specific power output is something like 80 hp/liter, in the U.S., it's . . . less), but this may be changing with the volitity of gas prices.

Can they work? The anwer is yes . . . as demonstrated by der ├╝berblog that isn't just a model for corporate blogs in auto, but corporate blogs period:
GM Fastlane. Of course, GM is a Weber Shandwick client; no, we didn't come up with Fastlane; and no, we don't always drink the Kool Aid because our job is help counsel companies on how things will be perceived by, again, real people, which GM is doing a better job of and has for the last several years. Yes I really think so . . .

The "Efficacy Cycle" of the Press Release, Part I

When I got my start in public relations, I worked for USCAR, a very interesting technology consortium made up of engineers and R&D types on loan from Chrysler, GM and Ford, whose job it was to collaboratively research advanced technologies in the pre-competitive stage of development. Most recently, USCAR’s battery consortium made some news by awarding $8.2 million to a batter suppler to further develop lithium ion batteries.

Back then, we were issuing several releases per year, and going the normal route of pitching individual reporters at the key automotive trades, as well as issuing on the auto list of PRNewswire. This being in the earlier days of the Internet, online pickup was modest.

By 2000 or so, many PR practicioners, including me, were growing wary of the avalance of releases issued by companies of various size and importance, and many became, for lack of a better term, anti-release. The idea was: the more you said, the less they remembered, and worse, your credibility could be harmed if editors and reporters kept getting inundated with inane, non-news releases from companies starving for attention and coverage. We felt a certain pride—and still do—by having the nominal fortitude to tell clients, “Regrettably, that’s not news, don’t do a release on that.”

Today, the pendulum has swung back, and not entirely for the right reasons. One client recently had their IR folks audit their company vs. competitors, and one of the metrics was “# of releases.” One, but not all, of the reasons this mattered was that as auto blogs, news sites, etc. developed this nearly unquenchable appetitite for content (especially video, but that’s another story), releases were getting “picked up” online, and these hits “counted” towards media coverage targets, and boosted share of voice (Factiva’s definition is as good as any). But the IR guys seemed interested not just in the resulting coverage, but just the raw volume of releases issued as a surrogate for “media” activity.

The implicit debate, of course, isn’t limited to automotive, but it just happens to be top of mine these days for some of our auto clients. I’d love to hear what you think though, whether you’re inside or outside of auto.

Tuesday, September 2, 2008

It All Started with a '68 Camaro . . .

In 1989, I went into debt to the tune of $2,900 in order to buy a canary yellow, "ten-footer" '68 Camaro (you know, looked wicked from ten feet away) during my senior year of high school in Lake Orion, Michigan. The guy I bought it from worked in a now-forgotten Corvette speed shop in Troy, and had done Wendy (that's what I called her, named after The Descendents' remake of the Beach Boys classic of the same title) the great service of swapping out her peashooter 250 c.i. straight-six for the hi-po Corvette engine from 1979, the 220-hp L-82. Don't knock the QuadraJet (had an iguana named Q-Jet; you could say I was pretty well-obessessed with small block Chevys).

I loved Wendy . . .and so did the little kids across the street, who started a club that met under my parents' bushes to argue about the coolest cars, known as the Hot Rod Club, and wait for me as came home from school everyday. While other kids got trips or big checks for graduation, I got a new exhaust, including headers that didn't really fit right because they were for the automatic . . . and I had the Saginaw three-speed stick shift (you know where first gear is normally? That was reverse). I grew up in a GM family. I've loved cars all my life, and have had a few good ones (1993 Beretta GTZ, yes really and a 1997 M3 Coupe) and a few less so (1980 CJ-7 when I lived in Colorado).

Some years later, both Wendy and Q-Jet were shipped to my cousins in Indy.
Wendy was completely rebuilt and later sold. Q-Jet, well, was not.

Fast forward nearly twenty years. Today, I co-manage a growing automotive practice at Weber Shandwick, one of the biggest PR firms in the world. I'm launching this blog to lend some (hopefully) unique color commentary on the fast-changing automotive industry in which we live and work (when you live in Detroit, you do live the auto industry, some of us more than others). I hope you enjoy, and maybe even find something here of interest for you. So buckle up (have to say this because my Dad a safety czar of sorts) and have fun.