A Tale of Two Turbos: Cruze vs. Jetta

Reuters has a good piece on turbochargers that ran yesterday that nicely sums up a good deal of the good on turbos, especially for the U.S. market.  Ten years ago, U.S. motorists enjoyed VW products that could get an honest 50 mpg highway (EPA said 49 mpg I seem to remember) from their stellar little 1.9l turbodiesel that went into the Golf and Jetta.  Decent U.S. compacts were seeing mid- to high-30 mpg highway.  Fast forward to today, and that gap between turbo gas and turbodiesel is quickly closing.  The ever-scrappy Scott Burgess of The Detroit News wrote a piece today on the new uber-fail Volkswagen Jetta (google the reviews, no one really likes it), which points out that the turbodiesel only manages 42 mpg, even though the engine has only gained 100 cc of displacement. 

 In Detroit's corner, the new Chevrolet Cruze will go up against the Jetta (and forthcoming, sure to be pretty competitive Ford Focus), and the Cruze Eco will get 40 mpg highway using regular grade pump gasoline and a very underspecified 1.4l gas turbo.  Pricing for the Jetta diesel was unvailable for the new model, but we know the Eco model of the Cruze will start at $18,175.   There's no way you'll be able to touch a new Jetta diesel for under $20K; even though they've made the car cheaper, the diesel adds a variable geometry turbo (as opposed to a simpler, waste-gate, non- variable geometry turbo), pricey high-pressure fuel injection (Cruze to use cheaper, less efficient port-fuel injection) and not-cheap exhaust aftertreatment that is far more costly than the conventional 3-way catalytic converter in the gas powered Cruze (oxides of nitrogen, and to a lesser degree, particulates--otherwise known to we wood-burners as "soot"--are still the bane of diesel exhaust).  Let's guess that the cost difference is $4,000.  Is $4,000 worth it for a 5% improvement on something that already gets 40 mpg?

Don't get me wrong, I love turbodiesels.  Diesel proponents would rightly point out that the Jetta would likely have 100 additional lb.-ft. of torque that would make the Jetta likely feel much more stout in daily driving.  But most consumers are not cross shopping torque ratings like this author.

My point: gas turbos, as pointed out in the Reuters piece, are likely to skyrocket in coming years.  Ford already said they'll offer gas turbos on 90 percent of their vehicles in coming years.  Full disclosure, GM and Honeywell are clients of my firm; I own neither GM nor HON stock.  That said, would I really like to own a Cruze turbodiesel, especially if they made a hatchback or wagon?  Hell yeah.

On Independent Thinking and the Real Significance of the G8

Suffice to say that the Pontiac G8 has been receiving fairly stellar views for while now; click here to see thecarconnection.com’s “review of the reviews.”

Now there’s loose talk that the G8 will survive Pontiac’s demise as a Chevy or sorts, but GM (client) has not and will not confirm this. The enthusiast in me—as well the detached PR practioner—hopes they figure out a way to make this work.

The enthusiast loves this car because while everyone thinks “muscle car,” all accounts are that this is not the “beast-in-a-straight-line, but-I-wouldn’t-want-it-as-a-daily-driver/boy racer/aging-boomer-with-no-taste” car some might have guessed it would be. Where I live in Northville, Mich. (Ford country), I see a surprising number of these cars. I walk by one house every day that has a new-ish 5-series BMW in the driveway, and the G8 looks every bit to be its equal (the BMW I see, and the G8 I always see in the Cabbagetown area I live in are both white. . . nuanced menace. Dig it.) The PR guy likes it because making great product and creating "owner-advocates" is the best PR going for any consumer products company. I don't even own one and I find myself always talking about it.

Reports are that body integrity, structural rigidity, steering feel, brake feel/strength are all the equal of the benchmark 5 (people say Infiniti is coming up on BMW; having been in a recent G37, I don’t think BMW or Pontiac have much to fear . . . Carlos, check quality control bud . . . dash rattles? Come on, not in 2009). That the G8 has the beans under the hood to run with a 550i with the big mil is the least biggest surprise.

What I believe are the biggest markers of “quality” to most people in the showroom or on test drives. . . the whooomp with which the doors close; the body control and quick chassis recovery from railroad crossings or deep pocked Michigan roads; shutlines . . . the big Poncho/Holden can legitimately hang with the 5-series . . . that’s amazing. BMW can put a ton more money into pricey shocks, better/lighter/stronger structural materials, etc. because, well, it’s costs a lot more.

I think fans of GM should be elated, as should independent thinkers who believe that whoever makes the best cars should win; the doubters/cynics should wallow in some strong cognitive dissonance, because this isn’t about the G8 living on or not . . . it’s about having such kickass product development within the company that any GM product could and does compete with any BMW, let alone for at steep retail discount.

I owned two BMWs, a ’97 M3 and ’94 325iC. Both were great or good to drive, but horrifically expensive to own. If GM could make a G8-like car, this means they could make another car that equally baffled the cynics and delighted the open-minded drivers of America. Here’s to hoping they do (whoops, Camaro already is). Rock steady Tom Stephens, rock steady.

December 2008: GM Beats Toyota

And now for some more (marginally) good news: yes, the Big Three got hammered in December for reasons everyone knows, but the big Japanese players fared even worse. GM was down 31%, Ford was down 32%, but Toyota was down 37%.

In these parts, we’ll take any sign that could be contrued as positive and breathe deeply. Not sure on the exact timing, but Toyota and GM might have both had zero percent financing deals running concurrently. Normally, if GM does much better than others—in this case, Toyota, but not Ford—it’s because GM had a massive incentive/giveaway that others did not, so this is interesting as Toyota had to pony up to the zero percent financing bar still fewer were ordering their vehicles relative to Toyota.

What’s interesting to watch closely are the subtle, if anecdotal, signs that the pervailing coastal sentiment of “domestics = bad; foreign makes = good” may be beginning to change. Read the comments sections of Dave Kiley's post on the Ford Fusion smoking the Camry Hybrid. The contrarians are starting to root for Detroit, and this is a trend that I suspect may continue as Ford and GM especially continue to make extremely competitive product.

In Case You Missed It, Some Good News for GM

For those of you that missed the action over the holiday, GMAC--GM's formerly wholly owned lending arm--received a financial infusion from the Fed that led them to offer zero percent loans on new car sales. You can rea more at David Welch's write up from New Year's Eve: http://www.businessweek.com/autos/autobeat/archives/2008/12/gmac_gets_a_gov.html

As everyone expects industry sales figures today from December to show more more serious sales declines, the effect of this should be allow more consumers to loan money for cars. The lack of credit in recent months has been a very serious problems for dealers and automakers; this should help remove at least one roadblock on the auto recovery highway.

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.

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.

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.

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.

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 über-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.

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?

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/

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.

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

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

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.

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 überblog 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 . . .