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By 2g1c2 girls 1 cup

Ford announced today a new program designed to encourage would-be buyers to step up and buy.  The Ford Advantage Plan will cover payments (up to $700) for up to 12 months on any new Ford, Lincoln or Mercury vehicle if customers lose their jobs.  The program runs through June 1, and is addition to other incentive programs available.

Not to be outdone, General Motors unveiled its own version, called GM Total Confidence.  GM’s plan covers you for 24 months of ownership, but has a maximum of 9 payments of up to $500 each.  GM’s plan also has “Vehicle Value Protection” which protects the residual value of the vehicle starting when you are halfway through your finance contract.  If your outstanding loan balance (when you buy a new GM product) is more than the NADA Clean Retail Value, GM will provide “negative equity assistance,” meaning that GM will cover you for the difference up to $5000 on a trade-in, or $2500 on a sale.  GM Total Confidence also runs through June 1.

Why the sudden interest in protecting buyers?  Two reasons.  First is that buyers are staying out of the vehicle market out of fear that they might lose their job due to the economy.  With these programs, GM and Ford hope to quell that fear. The second is that Hyundai began offering this same basic idea a few months ago.  Not coincidentally, Hyundai is one of only 2 manufacturers that have posted higher sales in 2009 so far (Subaru is the other one, but that is only because they have a new version of the Forester, their biggest seller.  All of their other models are down). Ford and GM obviously saw this and decided it is worth a try as well. Will it work? Probably, but perhaps not as well as Hyundai’s.  Hyundai has the advantage of being a (relatively) healthy company that is not caught up in the specter of bankruptcy, government loans, etc.

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Mercedes has plans to expand its Vance, Alabama plant with a $290 million investment which will increase its capacity and allow it to add another vehicle to the plant.  They have not formally announced these plans, but some details emerged when they requested and received property, sales and use tax abatements from the Tuscaloosa County Industrial Development Authority.

Senator Shelby, are you paying attention to this? I fully expect you to get on TV and tell us all about the evils of corporate welfare! How dare Daimler request the government to give them your state’s taxpayers’ hard-earned money. I demand a hearing!

We all know that Senator Richard “Dick” Shelby, R-AL will not hold any hearing, nor will he speak out against this tax abatement.  Why?  1. Because he knows that car manaufacturing is good for the national and his local economies. 2. He is a hypocritical, two-faced “person” who was only trying to help out the (foreign) auto manufacturing of his home state when he blasted the Detroit 3 in the Senate hearings last fall.  He cares nothing about the country as a whole, nor about doing what’s right.  Only about what will help his own state.  He and Nick Saban deserve each other.

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Buick and Jaguar each rank highest in vehicle dependability in a tie, according to the J.D. Power and Associates 2009 Vehicle Dependability StudySM (VDS) released today.  Buick improves from a sixth-place ranking in 2008, while Jaguar improves from 10th place. Following in the top five rankings this year are Lexus, Toyota and Mercury.

The study, which measures problems experienced by original owners of three-year-old (2006 model year) vehicles, has been redesigned to include 202 different problem symptoms across all areas of the vehicle.  Overall dependability is determined by the level of problems experienced per 100 vehicles (PP100), with a lower score reflecting higher quality.  The average number of problems is 170 per 100 vehicles, which is down from 206 in the 2008 study (an improvement of 17%).

J.D. Power also gives segment awards, which honor the top vehicles in each class.  Toyota led all manufacturers with 10 vehicles getting top honors in their segments.  Ford was next with 4 (5 if you include Mazda), followed by Honda with 2.  GM, Chrysler and Nissan received 1 segment award each.

There were some surprises in the results.  We are used to seeing Toyota and Honda vehicles at the top of most quality rankings, and they certainly make good products – just ask any southern senator.  The most startling is the ranking of the much-maligned (and now deceased) Ford Freestar over the Toyota Sienna in the minivan category (Dodge Grand Caravan won the segment).  Another big one is in the midsize car category, where the Buick LaCrosse won, beating out the Toyota Camry and Mercury Milan – Honda Accord was nowhere to be found.

The 2009 Vehicle Dependability Study is based on responses from more than 46,000 original owners of 2006 model-year vehicles. The study was fielded in October 2008.

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Hot off the presses! GM has advised the Obama administration that it will not need the $2 billion previously requested for March. Ray Young, GM Executive Vice President and Chief Financial Officer, issued the following statement to the GM leadership team early this afternoon:

We have advised the U.S. Presidential Task Force on The Auto Industry that the $2 billion of funding previously requested for March would not be needed at this time. This development reflects the acceleration of GM’s company-wide cost reduction efforts as well as pro-active deferrals of spending previously anticipated in January and February. Thanks to you and your teams for your tremendous focus on cost during this critical time.

We will remain in regular contact with the Task Force on the status of GM’s restructuring actions, our liquidity position, timing of future funding requests, and other relevant topics of mutual concern. We will continue to keep you informed as well.

Hopefully, this means that GM is turning a corner, but it is clearly too early to say that.  Instead, it probably reflects GM’s wish to make themselves look “viable” to the task force that is in the process of deciding their fate.  GM isn’t going to take any money that it does not desperately need, given the terms of the loans and the negative PR associated with the whole process.  GM’s sales have clearly been affected by all of the negative publicity and the specter of a possible bankruptcy.  Turning down the loan might very well help their short-term sales.

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GM Cancels Diesel Program

11th March 2009

Another shoe drops.  GM has announced that it cancelled the 4.5L Duramax Diesel engine program – indefinitely.  They released the following statement today (11 March 2009):

“Given the current economic climate, GM has reviewed and updated its U.S. product portfolio and has decided to place on indefinite hold its previously announced plan to add a Duramax 4.5L V-8 diesel engine in 2010 to its Chevrolet Silverado and GMC Sierra light-duty trucks.

Chevrolet and GMC will continue to offer a heavy duty Duramax 6.6L V-8 diesel, which is class-leading in both horsepower and torque. Light-duty truck customers can also choose from several fuel-efficient gasoline engines with GM’s Active Fuel Management mated to a six-speed transmission or a new 2-Mode hybrid that provides up to 40 percent improved city fuel mileage and 25 percent improvement in overall fuel efficiency. In fact, no other full-size pickup has better fuel economy.

GM remains optimistic that the Duramax 4.5L V-8 diesel may be a viable option in its future portfolio.”

This is truly a sad day for many reasons.  GM stood to gain revenue and share with this engine.  Diesels command a healthy premium over gas-powered vehicles and they would have been first to market in the light-duty full-size pickup segment.  Pickup buyers tend to be very loyal, but the Diesel could have tempted some Dodge or Ford buyers into a GM showroom.  So GM, its dealers and shareholders all lose money with this decision.  GM’s reputation would have gained as well.  Being first with a feature like this carries may benefits that no amount of advertising or PR money can buy.  This engine was going to be very innovative, with cylinder heads that eliminated the need for intake and exhaust manifolds.  In addition, Diesels get better fuel economy, more torque and last longer than their gasoline friends – all of which would contribute to the reputation gain mentioned above.

So why is GM pulling the plug?  There are probably several reasons.  The most obvious is an effort to save money, which is in precious short supply over at the General.  However, if this engine was scheduled to begin production this fall, the facilities and tooling have to be substantially complete, as does the engineering.  Can you say, “Sunk costs?”  Another reason is gas prices have fallen significantly in the last 6-8 months.  Lower gas prices make the advantage of Diesel’s fuel economy less compelling for customers, resulting in lower sales.  Another possible reason is posturing for the administration task force.  Maybe they think if they are shown cancelling high-profile projects, that will demonstrate the severity of the situation.  If so, they are playing a very risky game of chicken.  Cancelling a program whose investments have largely already been paid and that will make you money and improve your market share and reputation to make a point could VERY easily backfire.

I think GM is simply trying to conserve funds.  This might seem short-sighted, due to the benefits outlined above, but GM’s situation is dire, to say the least.  While certainly not the optimal solution, they are finding themselves in the position of making decisions now which will hurt them in the long-term to save them from collapse in the short-term.  The long-term only matters if it exists.

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Amid all the doom and gloom in Detroit, and all of the hoopla surrounding Toyota’s hybrid program (you would think that “Toyota” is Japanese for “hybrid”), Ford quietly announced that it has produced its 100,000th hybrid SUV.  Ford launched the Ford Escape and Mercury Mariner hybrids five years ago and the vehicles remain the most fuel-efficient SUVs on the market.  Today, the Ford Escape Hybrid SUV and Mercury Mariner Hybrid SUV deliver 34 mpg city driving, 31 mpg highway.  This makes them the most fuel-efficient hybrid SUVs available, beating the Toyota Highlander (27 city / 25 highway) by several miles per gallon on the EPA list.

In 2004, Ford introduced the world to the first hybrid SUV – the Ford Escape Hybrid – by taking a record-breaking trek through the congested streets of Manhattan, where the vehicle exceeded all expectations, driving 37 straight hours and 576 miles on a single tank of gas.  In 2005, it became the first hybrid vehicle to be used as a taxi in the U.S. The Escape Hybrid taxis were first introduced in San Francisco, and soon after, in New York City. There are now 250 Escape Hybrids providing taxi service in San Francisco and 1,400 in New York City.

This month, a San Francisco Escape Hybrid cab fleet accumulated 300,000 miles with no major mechanical problems. It is a true demonstration of the durability and reliability of the vehicles. Compared with conventional cabs, those 300,000 miles translate into a savings of approximately 5,000 gallons of gas or 100,000 pounds of carbon emissions.

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GM announced that is disbanding the group responsible for the high-performance versions of many of their “regular” cars, High Performance Vehicle Operations (HPVO).  HPVO is responsible for the V-Series Cadillac CTS/STS/XLR and for the Chevrolet SS versions of the Cobalt and HHR.  More were to be on the way, including a rumored SS version of the upcoming Cruze small sedan.  Enthusiasts should mourn the loss of this “tuner” division with the General’s ranks, even if you don’t like GM’s products.  The existence of this type of “car guy” division likely has influence not only on the General’s products, but on other manufacturer’s as well.  The automobile business is largely one of copy cats.  When one has an original idea and implements it successfully, the others are sure to follow as soon as their engineering and manufacturing systems will allow it.  The interesting thing there is that they don’t even try to hide it, at least internally.  When Chrysler introduced the Neon in 1994, Ford immediately put a product in the cycle plan called (and I’m not making this up), “Neon Fighter”.  While the Excursion was still in development and before it was named, it was known as “Suburban Fighter”.  The point is that if the General doesn’t see value in the performance division, then others may start to question theirs.  Then we all lose.

The problem is that the HPVO products simply don’t generate enough revenue to cover the costs (ongoing per-unit costs and development).  However, I think GM is missing part of the equation.  Products like these help sell the lesser, more plebeian versions of those same products.  A customer enthusiastically enters a Cadillac dealer to check out the CTS-V, for example.  He read about the CTS-V in an enthusiast magazine, and is excited to have the “fastest production sedan in the world.”  The $60K+ price tag, though, is a major buzz-kill.  He looks next to his dream and sees a “regular” CTS, which starts at less than $40K, looks about the same, and has as much as 304hp!  It’s a steal compared to the V, because he realizes that he really wouldn’t be able to use the 556hp anyway.  The V or SS versions drive traffic in the showroom, but it’s the regular versions that pay the bills.  To properly evaluate the benefit of HPVO, you need to understand this dynamic.  I’m sure the General understands this, but lacks an ability to measure it.  In the D3 world where the “bean counters” have final say, if you can’t measure it, it doesn’t exist.

With this action, GM is NOT going to pull any products already on the road; it is redeploying the engineers to other programs that will get more bang for the government-loan buck (this is good for your humble reporter, as I have my eye on a Chevrolet HHR SS for my next vehicle).  This also does not affect Performance Vehicle Engineering – a separate group that develops performance vehicles from scratch like the new Camaro or the Pontiac Solstice – or Corvette, which has its own engineering team.  Maybe this is part of the General’s problem: 3 separate groups with the task of developing performance vehicles.  If there were only 1 with all 3 roles, they would likely get better efficiency and maybe be able to keep developing these stealth rockets.

All this doesn’t change the fact that GM needs to cut costs as quickly and as severely as possible, without damaging the revenue stream.  With apologies to Fig Newton, that’s the tricky part.  Cutting costs where the customer can’t see them requires engineering money and resources and time; cutting features and options is relatively easy and quick.  It’s the catch-22 of the modern automotive industry.  Cut later and do it right and you might not be around later.  Cut now to live later and you hurt your ability to generate revenue now and later.  The answer is, of course, constant vigilance on reducing costs where the customer cannot see them.  You must build that into every new product program.  No detail is too small.  Unfortunately, the D3 have not done a good job of managing this in the past, and it might be too late now.

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