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Archive for April, 2009

Requiescat In Pace, Pontiac

When GM decided it needed an easier step-up from Chevrolet, the Pontiac brand was born.

by on Apr.29, 2009

The Pontiac brand, introduced as a 1926 coupe and sedan, was Sloan's first step up marketing ploy.

The Pontiac brand, introduced as a 1926 coupe and sedan, was Sloan's first "step up" marketing ploy.

In truth, the Pontiac brand is not yet dead; it’s only had its death sentence pronounced by General Motors, in an April 27 announcement about adjustments to its February plan for survival that was rejected by the U. S. Treasury Department. The pronouncement came after months of rumors and speculation. 

In addition to announcing that Pontiac would be “phased out by the end of 2010″-20 months from now-GM said it would dispose one way or another of Saab, Saturn and Hummer by the end of this year, a mere eight months distant, in the process targeting a 42% reduction in dealer count by the beginning of 2011. 

When all these cards are dealt, or dealt with, GM will still have a viable “step-up” product system with Chevrolet car and truck, Buick, GMC truck and Cadillac. Many of GM’s dealerships lately have been Pontiac-Buick-GMC and Cadillac. I’ll be willing to bet that for 2011 Buick will get some entry-level models, as they once had beginning in the Sixties, and it is conceivable they could be called Pontiacs or even have familiar Pontiac model names.  

This announcement is very hard on GM people whose pride is grievously wounded whether or not they still have jobs and benefits. To the legions of Pontiac fans, especially the boomers who came of driving age just as Pontiac changed is image from stodgy to racy in the late Fifties, the news is nothing short of cataclysmic. 

The Pontiac brand, introduced as a 1926 coupe and sedan, became the first major, uh, product step in Alfred P. Sloan’s strategy to create “step-up” marketing of motorcars. Notably both Pontiacs were “closed” at a time when “open” cars were still the majority of those sold, one of many “firsts” known to Pontiac enthusiasts. 

Three years earlier, by means of price adjustments, Sloan had rationalized GM’s crazy quilt organization of different brands and companies acquired by founder Billy Durant starting in 1908. 

In 1922, GM’s car lineup consisted of five brands: Chevrolet, priced at $510 to $1,395, Buick from $865 to $1,395, Oakland from $975 to $1,545, Oldsmobile from $1,095 to $2,145, and Cadillac from $3,100 to $4,600.

This confusing overlapping stew was corrected a year later with this lineup: Chevrolet $490 to $795, Oldsmobile $750 to $1,095, Buick Four $935 to $1,495, Oakland $945 to $1,395, Buick Six $1,275 to $2,285, and Cadillac $2,985 to $4,600. Later came product feature step-ups, a straight eight in the Buick, for instance.

But GM decided it needed an easier step-up from Chevrolet-offered then only with a four-cylinder engine–so it introduced Pontiac as a one-price ($825) model with a standard six-cylinder engine, a companion to the pricier Oakland.

From 1936 to 1956, Pontiacs were noted for their often heavily chromed waterfall front end appearance. Generally they shared GM's Fisher "A" Body with Chevrolet.

From 1936 to 1956, Pontiacs generally shared GM's Built by Fisher "A" Body with Chevrolet.

After international promotion around its quintessentially American “Indian” name, it could be said that Pontiac was an overnight success, but so were Plymouth and DeSoto a couple of years later. By the depth of the Great Depression in 1932, Oakland-a Durant acquisition in 1909–was gone but Pontiac lived on in its place.  

From 1936 to 1956, Pontiacs were noted for their often heavily chromed waterfall front end appearance. Generally they shared GM’s Fisher “A” Body with Chevrolet.

A flat-head straight-eight engine was added. Pontiac claimed to be first with a column shift, in 1938. For 1949 an “Indian” moniker, Chieftain, was introduced for the upper series.  (more…)

Dealer Group “Disappointed” in GM’s Plan to Close Thousands of Stores. Customers Could be Too

NADA says GM needs to treat dealers fairly and is lobbying for concessions. Owners need to lobby for themselves.

by on Apr.29, 2009

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"We feel a strong sense of disappointment that GM has, for whatever reason, decided to accelerate dealer consolidation in such a drastic way."

The controversy surrounding General Motors pending reorganization continues to attract disapproval from related firms struggling to survive the effects of GM’s forced transition to a drastically smaller auto company. For owners of GM vehicles and prospective buyers, the next 30 days will be critical time when the choice of a buying a car, or having it serviced at a dealer could affect the value of what is still the second largest investment – after a home — that most Americans make. GM has said it will close 2,641 dealer locations from its existing 6,246 stores by next year.

The latest criticism comes from a statement by the National Automobile Dealers Association, which said that GM’s plan to eliminate dealers came as a “surprise” and will hurt sales, even though the closings were basically outlined by GM back in February.

There is also the now real threat of lawsuits by dealers against the company that could drag on for years. It is clearly not in the interest of GM vehicle owners to get caught in the middle of litigation, even if their warranties will be honored. Owners should be confident that the dealer they are using has a future, and that its employees are properly compensated and following the authorized service procedures. Can a customer expect fair treatment from a dealer that is financial threatened?

“GM’s decision to radically cut its dealer network over the next 18 months comes as a surprise. We understand the realities of current market conditions. But nevertheless, we feel a strong sense of disappointment that GM has, for whatever reason, decided to accelerate dealer consolidation in such a drastic way,” said John McEleney, chairman of the National Automobile Dealers Association.

NADA has asked GM and Chrysler dealers to contribute $2,000 for each store to a legal fund in the event of a bankruptcy. “It is critically important that dealers have legal advisers with expertise in bankruptcy and corporate restructuring,” Nada said to GM dealers in a letter. “ If GM were to file, its bankruptcy would almost certainly be one of the largest and most complex corporate reorganizations in the nation’s history.” Chrysler dealers got a similar plea. Bankruptcy or not, the threat of legal action is real.

GM said it is moving forward with dealer closings to meet the terms for continued loans imposed on it by the Auto Task Force. The GM goal is to accomplish this reduction in an “orderly, cost-effective, and customer-focused way.” GM said that fewer U.S. dealers will allow for a more competitive dealer network and higher sales effectiveness in all markets. But it didn’t provide any information that consumers could act on now. (more…)

UAW Agrees to Ban Strikes

New Chrysler contract alters traditional confrontational mode.

by on Apr.29, 2009

Picket Lines are a thing of the past as a UAW bargaining tool.

Picket Lines are a thing of the past as a UAW bargaining tool under the revised contract.

The United Auto Workers Union’s tentative contract with Chrysler LLC presented to union members Tuesday fundamentally changes labor relations by curbing the UAW’s right to strike for the next several years.

The contract was being presented to the more than 28,000 UAW members ahead of the ratification vote today.

“It’s very difficult,” said one union leader, who asked not to be identified.

“I really don’t think we had much choice but to go along,” Harley Shaiken, a labor expert from the University of California-Berkeley, said the “no-strike” provision represents a major change in Detroit’s often contentious labor relations. “That’s a fundamental change,” Shaiken said. “But it’s being done in the context that it will take anywhere from three to five years for this company to recover,” he said.

For years, the union had used the strike threat in economic disputes, particularly at General Motors and Chrysler. In fact, the union staged brief strikes against Chrysler and GM during contract talks in 2007, and a major 80-day strike against American Axle. However, the terms of the bridge loan agreements, effectively ban strikes. A strike is considered a default under the terms of the loan, which means even a local strike, a favorite union bargaining weapon in recent years, is probably off the table now, said one key union official. (more…)

Chrysler Deadline Met or Just Chrysler is Dead?

Chrysler working to the bitter end (beginning) to meet Treasury's demands for continued aid.

by on Apr.29, 2009

Once again financial speculators on Wall Street will determine Main Street's fate.

Financial speculators on Wall Street will determine Main Street's fate.

It all comes down to bondholders of $6.9 billion in debt. Chrysler LLC, in the latest version of its restructuring plan, wants to give them $2 billion in cash and shares in a restructured company.

Bondholders are balking, though, and it apparently requires the agreement of almost all of the 46 financial institutions and hedge funds that hold its virtually worthless debt at current trading prices to prevent a bankruptcy.

Chrysler, late yesterday, reached a tentative agreement to an equity swap with its four largest banks that hold 70% of its debt.  But it isn’t clear, if that is enough to force the 42 others to fold. As of this evening, Chrysler was still waiting to hear if  it will be forced into bankruptcy tomorrow by the  U.S. Treasury Department Auto Task Force.

Neither the President and Vice President would confirm a bankruptcy today, and the Treasury Department appears to be using the uncertainty, and media leaks about getting reading for a filing, as a cudgel to force the bondholders to relent.

“I am very pleased that principal banks have reached a deal with Chrysler to restructure the company’s debt so it can achieve viability.  A month ago when I first wrote to the CEOs of Chrysler’s major debtholders they were not even at the table, so this is a very positive development,” said Rep. Gary Peters (D-Michigan), who has been prodding the banks to negotiate with Chrysler. “The remaining debt holders should understand that this deal is better than what they could expect in bankruptcy and I encourage them to accept this fair offer,” he said.  

All the other pieces of the restructuring are basically in place. The Canadian Auto Workers Union and the United Auto Workers Union have cut their labor and benefit costs. By accepting stock for its health care fund, the UAW will end up with 55% of the new company, if ratification of the  revised agreement by members comes through tonight as expected. (more…)

Cash-for-Clunkers Deal Could Give Big Boost to Economy – and Environment

Program could revive auto industry, inject $25 billion.

by on Apr.29, 2009

A cash-for-clunker deal could help the auto industry, boost consumer spending by $25 billion -- and yield huge benefits for the environment, according to a new study.

A cash-for-clunker deal could help the auto industry, boost consumer spending by $25 billion -- and yield huge benefits for the environment, according to a new study.

A well-executed program encouraging American motorists to trade in their “clunkers” for new vehicles could not only give a big boost to the auto industry but inject as much as $25 billion in much needed consumer spending into the troubled economy, according to a new study.

Such a program – which has already proved highly successful in Europe – would work at the state level, as well, boosting local economies, and it would have a significant benefit on the environment, since older cars, trucks and crossovers emit far more pollution than new ones, says the consulting firm, CSM Worldwide.

Subscribe to TheDetroitBureau.com“When it comes to scrappage programs, simpler is better,” says Craig Cather, president and CEO of CSM. “The more clear-cut the value proposition is for consumers and the fewer exclusions and limitations it has, the more successful it will be.”

(more…)

Daimler’s Losses Continue To Mount

No turnaround in sight for the German luxury car maker.

by on Apr.28, 2009

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"Earnings in the second quarter are expected to be significantly negative once again," Uebber said.

Daimler AG lost more than $1.7 billion during the first quarter as its revenue dropped 22% from weak sales of luxury cars, trucks and vans.

The Daimler Group’s total revenue is likely to decrease significantly in full-year 2009, Bodo Uebber, Daimler’s chief financial officer, acknowledged during a conference call with analysts today. He said that it would be difficult for the German automaker to get back to profitability, though he continued to hold out hope in the second half of the year.

“Earnings in the second quarter are expected to be significantly negative once again,” he said. In addition, Daimler will also be asked to absorb a $700 million write down, according to the terms of new deal that terminates its ties with Chrysler LLC.

Daimler also expects its unit sales to drop dramatically this year.

“The Daimler Group’s total revenue is likely to decease significantly in full-year 2009,” Uebber said. As a result of the dire outlook, Daimler is mounting a quest for $5.2 billion in savings that will reach across the company. The cuts could include delaying or trimming some research and development and capital spending projects that were once untouchable. “We will do whatever it takes,” Uebber said.

Only last week, Ernst Lieb had said in an interview with TheDetroitBureau.com that, “while we’ve made cutbacks, you’ll not hear (Daimler AG CEO) Dieter Zetsche cutting our R&D.” (more…)

Nissan Reorganizes in The Americas

Huge losses spur a regional approach and a retreat from large trucks to electric vehicles.

by on Apr.28, 2009

"We recognize that we are competing under very difficult conditions,” said Carlos Tavores of Nissan The Americas.

"We recognize that we are competing under very difficult conditions,” said Carlos Tavores of Nissan The Americas.

Coming off  large global and regional losses during the 2008 fiscal year, Nissan is changing the management and structure for the Americas. The latest moves seem to be as much about increasing its share from insignificant in South America, as it is also an attempt to shed costs in North America, after a company-threatening, failed foray into making large SUVs and pickup trucks there.

Carlos Tavares, chairman of the newly reconfigured Management Committee-Americas, described the new plan for growth in the region as a “renewed commitment to delighting customers with innovative ideas for the joy of everyday driving.”

“We are taking a holistic approach to unlock new synergies in the region and to shift the Americas to zero-emission mobility,” he added, in what could be a record for meaningless clichés in one statement, although it is an extremely competitive field among auto execs.

The only immediate “innovation” on the product planning horizon that TDB is aware of involves Nissan’s attempt to counter Toyota’s and Honda’s hybrid dominance with a line of electric vehicles that are due next year in the U.S. and Japan as a demonstration fleet. Two years later, Nissan EVs will be made available to the mass market globally. Demand for EVs remains to be proven.

Japan’s third largest auto company is the only offshore company that has asked for U.S. taxpayer assistance, via a grant from the U.S. Department of Energy, where $25 billion has been allocated to encourage production of vehicles that are 25% more fuel efficient than others in the class. The controversial formula used for mileage attained by electric vehicles puts gasoline-powered ones at a disadvantage. (more…)

First Drive: 2009 BMW Z4

What's wrong with doing too much, too well?

by on Apr.28, 2009

BMW hopes to win over snobbish roadster purists with the launch of its all-new update of the Z4.

BMW hopes to win over snobbish roadster purists with the launch of its all-new update of the Z4.

Climbing into the southern extremes of the Swiss Alps, I muscle the ancient roadster into a corner, well aware of the way its skinny tires have begun to slide on the wet pavement.  The guardrails are few, even though the drop-offs are becoming increasingly steep.  As I steadily climb higher, the rain morphs into snow, the wind whipping it in through the open cockpit.

Spend a few hours behind the wheel of an antique BMW 315 and you understand the classic definition of roadster.  Fun, absolutely, but it’s also primitive, cramped even dangerous when road conditions are less than perfect.  So it’s not hard to understand why I jumped at the opportunity to swap out for the car my traveling companion had chosen for the day, a 2009 BMW Z4.

The name may be familiar, but the ’09 roadster is a very different beast from the one you might already know.  It is, for one thing, the first complete makeover of the Z4 since 2002.  Among other things, the Bavarian maker has opted, this time, for a foldaway hardtop, rather than the canvas roof that the old Z4 shared with BMW roadsters dating back to my pre-War 315.

(more…)

Treasury Report on Macro-Economic Activity Shows It’s Really More Like Micro

The bell is tolling for all of us in a dead economy.

by on Apr.28, 2009

The refusal of European economies to undertake deficit spending to stimulate consumer spending is slowing economic recovery.

The refusal of European economies to undertake deficit spending to stimulate consumer spending is impeding a global economic recovery.

The latest report from the U.S. Treasury Department  that conducts economic analysis confirms that the U.S. economy remains deeply troubled, and that an improvement is not expected anytime soon across broad sectors of the economy. While the report has negative implications for all of us, automakers looking for an upturn in sales will likely have to continue sharp cost cutting actions as sales continue to languish.

In a statement yesterday to the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association, the Director of the Office of Macroeconomic Analysis, Ralph Monaco, said: “Data for growth in the first quarter will not be available until April 29, but economic indicators released thus far suggest that real GDP declined sharply again in the first three months of 2009.  In the fourth quarter of 2008, real GDP fell by 6.3% at an annual rate – the largest quarterly loss since early 1982.  That followed a 0.5% decline in the third quarter.  Private forecasters are looking for about a 5% decline in the first quarter.”

It was of course the precipitous decline in consumer spending during the second half of 2008 that was largely responsible for the downturn in global economic activity, which sent virtually all of the world’s automakers into losses. A viscous cycle of worker and production cutbacks, which then resulted in declining buyer confidence, which resulted in more losses and cutbacks, was established, a negative trend that persists to this day.

Particularly troublesome for international automakers is the refusal of most governments,  except for China and the U.S., to embark on large fiscal spending programs to revive their own economies and bolster consumer confidence and spending.

Treasury noted that consumer spending in the U.S. “stabilized early in the first quarter,” according to data available through February, and appears to be on track to make a modest positive contribution to growth in the first quarter. Preliminary estimates for April U.S. auto sales results show annual selling rates stuck below ten million units, with no signs of recovery. It is not coincidental that over in another part of  Treasury, the Auto Task Force is insisting that restructuring plans from Chrysler and General Motors use annual rates of around 10.5 million units in their sales volume assumptions. (more…)

Drivers More Distracted and at a Much Higher Risk Than They Realize

A new study from the National Safety Council says you overestimate your skills. Cell phones should be banned.

by on Apr.28, 2009

Despite clear evidence of the dangers of using cell phones will driving, national safety regulators are not doing anything.

Despite clear evidence of the dangers of using cell phones will driving, national safety regulators are not doing anything.

The National Safety Council has just cited a study published in the Journal of Safety Research that says drivers overestimate their skills and underestimate distractions caused by other activities while they drive. Particularly dangerous is the widespread use of cell phones.

In January the NSC urged a total ban on that activity, based on scientific estimates that cell phone use while driving contributes to 6% of crashes, or 636,000 wrecks, 330,000 injuries, 12,000 serious injuries, and 2,600 deaths each year. NSC estimates the annual financial toll of cell phone-related crashes at $43 billion.

“Our nation has reached a point where we estimate more than 100 million people are engaging in this dangerous behavior daily,” said Janet Froetscher, NSC president. Froetscher added that the issue is not the type of phone a driver uses, rather it is the distraction caused by the conversation. 

“Hands-free devices do not make cell phones any safer. Several studies indicate that the principle risk is the cognitive distraction. Studies also show that driving while talking on a cell phone is extremely dangerous and puts drivers at a four-times greater crash risk,” she said.  (more…)