Check Your Mirrors

MAZDA announced that it will scrap all 4,703 new vehicles that were on the freighter Cougar Ace when it went into a 60-degree list on its way across the Pacific Ocean in July of this year. Mazda originally said it would be selective about which vehicles to scrap since many of the vehicles suffered no damage whatsoever, and the company received a great many inquiries from consumers about buying one of the vehicles at a considerable discount. In the end, though, Mazda decided that all of the cars on the Cougar Ace would be tarred with the same brush of (suspicious) public opinion, no matter what their condition, and decided to scrap all of the vehicles in order to avoid any bad press that might result from someone getting a car with subsequent chronic problems.

AUDIO systems in cars are going to be changing dramatically in the next few years. You will still have a radio, but that radio will offer regular channels, a subscription channel (or two), and HD (high-definition) channels. You might have a CD player, but if you do, it will be in addition to a hard drive that will store 20 gigs or more of MP3 files, just like your PC does now. Through an input jack, BUS connection, or via a wireless connection, you will be able to load MP3 files from a laptop, flash drive, external hard drive, mobile phone, etc. right into your car’s audio system. Which, of course, is the hot setup, and is how it should be. There will also be input jacks that will enable to plug an external player, like an iPod, into your in-dash system. This option exists on many car audio systems now, but will be a requirement on OEM systems in the very near future. And that’s just audio – the video options available for your passengers to enjoy will also expand considerably. More on that later.

SMALL cars (B-Class cars in Europe) like the Chevrolet Aveo, Nissan Versa, and Honda Fit have doubled their market share in the United States in 2006, which sounds pretty impressive until you learn that their market share in the U.S. last year was 1%, making their current market share a wee 2%. Some market analysts are predicting another doubling in market share next year, but it depends on what the price of gasoline does in the next 12 months – Americans tend to react to current gas prices as opposed to long-term fuel cost trends when they’re buying a new car.

CHRYSLER has to contend with lots of problems these days; swollen inventory, poor sales figures, stale product, management departures, the ire of their German parent company, etc. You can now add this to the mix: the increasing chatter in in the auto industry that DaimlerChrysler will sell off ailing Chrysler in 2007, and that the most likely buyer will be one of the Chinese car companies. Will it happen? Hard to say, but it’s not a far-fetched scenario, that’s for sure. Any Chinese buyer gets access to the U.S. market and a huge existing dealer network, instant international credibility, and access to technology and design that they currently need, and all by simply writing a check, as opposed to having to wait for those advantages to occur slowly through organic growth. If DaimlerChrysler were to put Chrysler up for sale, at least two of the Chinese car makers would be likely bidders.

AUTOMATIC transmissions in AMC Ramblers in the 1960’s were called “Flash-O-Matic” transmissions by the company in the sales brochures and owner manuals.

EUROPE doesn’t like SUVs, and public opinion shows signs of increasing hostility toward SUVs and their owners. In London, city officials have proposed an approximately $40 USD fee for SUVs to simply be allowed to drive in the center of the city. Not $40 per year or month, but per day. The measure has widespread support in London. In Italy, the new national budget calls for an additional annual tax of approximately $1750 USD on any SUV registered for road use. The city of Florence in Italy has banned all SUVs from the city. Amsterdam is considering banning SUVs from its city limits. So are Madrid, Barcelona, Brussels, and others. In Paris, SUVs and their owners are subject to jeers and threats, and a whole movement called les dégonflés (the deflated) has sprung up, whose mostly-young members methodically deflate all four tires of any parked SUV they come across in the city. For the benefit of our American readers, it should be noted that the typical European SUV is only the size of a typical family sedan in the U.S. – these are not anywhere close to the size of the hulking 3-ton behemoths that Americans are used to seeing at their local grocery store or on the commute to the office. And yet, the feeling in Europe is that even the much-smaller European SUVs are too big for urban use, and should be confined to the countryside. People who drive an SUV in an urban area are generally viewed as selfish or stupid, or increasingly, both.

TOYOTA plans to produce 9.45 million vehicles worldwide next year (2007), according to Nihon Keizai Shimbun, a Japanese publication. This production number includes vehicles produced by Hino and Daihatsu, two of Toyota’s subsidiaries. If Toyota does hit 9.45 million, that output will probably be enough to surpass General Motors as the world’s largest vehicle manufacturer for the first time ever. I say probably because if GM has a good year, it will retain the top ranking by a thin margin. If not, then Toyota will be the new market leader, because it’s a pretty safe assumption they’re going to have a good year.

HOPE springs eternal for all sports fans, with cries of “wait til next year” heard after every losing season, and the car business is similar, but with a longer lag time – the cry of “wait till the next few years” is the one you hear when an automaker is having a bad year (or bad decade). Of course, you can’t just say it if you’re a car manufacturer, you have to show investors and the automotive press something, so the idea of advance showings of future product (and one-off design studies) was born a few years ago. It is now common to show everything in advance if the whole line-up is in trouble, but if the car manufacturer is in good shape, and there’s a single model that’s getting knocked around by it’s competition, then you give an advance showing of the one vehicle that will turn around that segment So, Ford just finished a series of preview shows of their whole lineup for the press, which by all accounts, was met with reserved applause by the various audiences; Nissan has offered a look at a single model, a fairly small crossover, again, to nodding heads, normally-reluctant Honda has shown drawings of a new sporty Accord coupe (the new Toyota Camry is giving Honda fits in that bread-and-butter segment) which will appear in the metal at the Detroit Auto Show in January 2007, and Chrysler is giving “exclusive” peeks at upcoming product in every segment to as many automotive scribes as possible. But, there is no auto maker that has mastered the art of the advance showing quite like General Motors. In the last two years, GM has been able to show enough future product to journalists so that the previous knee-jerk tendency by automotive writers to ridicule any and all efforts by General Motors has been tamped down considerably. Whereas, in the past, GM was usually described as big, dumb, and slow, and the cars they made were described in similar terms, those words don’t appear so much in print anymore. And last month’s show that GM was no exception; in fact, several people who were there (unfortunately, we didn’t get an invitation – maybe next year) were quite impressed and described some of the vehicles shown as “real game-changers” for GM. In addition, the Q & A sessions in which GM executives answered every question thrown at them by the press about market share, platform extensions, engine choices, design influences, etc. convinced those in attendance that the folks at General Motors actually have a plan, and at least as far as product goes, it’s a good one.

AUDI has decided to start production in India, and the first model produced in-country will be the A6. Production will commence in third quarter 2007 at a plant in Aurangabad.

SOMETHING interesting to think about: The U.S. Department of Energy did a study recently regarding the existing power grid’s ability to handle the demands of plug-in hybrid vehicles. And according to the DOE, the existing grid will handle 180 million plug-in vehicles. There were some other thought-provoking assumptions in the report; for instance, the fact that if more electric power was being provided by utility companies as a result of electric vehicles being recharged, this additional power would be provided over existing infrastructure, resulting in a maximum realization of value for the utility vis-à-vis the fixed network, thereby driving down the overall cost of electricity nationwide. This effect, however, would be much more pronounced on the East Coast and the Midwest, which currently has idle capacity in current transmission infrastructure. The report also noted that carbon dioxide emissions in cities would go down by about 5%, but sulfur dioxide emissions (the cause of acid rain) would go up in rural areas as a result of more coal being burned in those areas to produce the extra electricity. Just as an FYI, if you think environmentalists are fanatics about plug-in hybrids, you should spend some time with a utility company executive. To them, it’s all about a different kind of green power – a switch to hybrid electric vehicles by a substantial number of drivers would mean a tremendous increase in revenues and profits (green, indeed!) for utility companies nationwide. To say that their self-interests are at work in their support of plug-in vehicles is a considerable understatement of fact.

LEXUS is running television commercials in heavy rotation this holiday season showing nice-looking people giving a new Lexus to their equally attractive significant other. Seeing these commercials might make you think that this sort of thing happens all the time during the holidays. It doesn’t. There are some cars (almost always luxury makes) given as gifts this time of year, but most retail dealers say it is a small percentage (less than 2%) of the cars sold by the average luxury dealership in the month of December. Lexus, however, states that the percentage of their cars sold in December and subsequently given as gifts is around 10%. That statement can not be proved or disproved since the tracking data doesn’t exist regarding gift intentions, but it seems unreasonable to believe that their statistics regarding vehicles bought as gifts would be so different than the other luxury makes. But, at the very least, the marketing dollars spent on the commercials go to brand advertising, so no problem.

A 2007 Bugatti Veyron weighs 4162 pounds, has 1001 bhp, and tops out at 250 mph. It costs 1.2 million USD.

COPYRIGHT Autosavant – All rights reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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