By Brendan Moore

03.18.2007

After losing $6.3 million in 2005, Autobytel lost even more in 2006, notching a $31.5 million loss in 2006, the company announced last month. Concurrent with that announcement was the statement from Autobytel that they were in the process of launching a new website in second quarter 2007 named MyRide.com, which will eventually become the focus of the company’s efforts to turn itself around.

In effect, Autobytel stated that they will abandon their current internet model. The new site is expected to be more consumer-focused and generate higher margins.

Autobytel is one of the pioneers of consumer online auto shopping and makes most of its money from the fees it charges dealers from sales referral fees. As more and more dealers have acquired in-house expertise regarding internet marketing, Autobytel’s fee income from dealers has decreased, thus leading to financial difficulties at the company.

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 By Brendan Moore

03.15.2007

After a much-delayed restating of results due to accounting discrepancies, GM announced a net profit of $950 million USD in the fourth quarter of 2006. General Motors took in $207 billion in 2006, but nonetheless lost $2 billion for the year. GM stated that the results showed that there was still quite a bit of cost-cutting to do going forward.

Additionally, GM needs to wring out substantial concessions from the UAW this summer, and in a recent development, has lost some of the financial cushion it expected to have from GMAC as a result of expected defaults (approximately $1billion) on sub-prime mortgages projected for this year.

Of course, all of this would be a sidebar to the real news of a wonderful 2006 if GM was able to sell cars at the same levels of profit as Toyota. As an example, if GM matched Toyota’s return on sales of 5%, GM would have made a profit of over $10 billion in 2006.

There is no doubt that General Motors needs reductions in their costs, wherever those cuts come from – union healthcare concessions, platform sharing, manufacturing efficiencies, etc. But they also need to sell more of what they have and without resorting to rebates and incentives, which drain away profit. Many new models were launched recently, and have made a good accounting of themselves in the automotive press. Yet, except for the new Silverado pickup, those models (i.e., Saturn Aura) are not getting the volume of customers they should proportional to their press clippings.

Why is this?

Putting aside the developments with Chrysler for a moment, even the most optimistic of brand managers at the Big 2 would tell you Ford and GM have been in trouble for a long time, losing market share to the imports in steady fashion. Ford is actually in much worse shape than General Motors at the moment because General Motors, as mentioned, actually has some pretty good product out right now and a lot more really good product in the pipe. Ford has some vehicles that are good and almost nothing in the pipe. Ford almost deserves the kicks it’s getting right now from the buying public, at least in terms of paying the wages of sin, anyway. The poor guys that just showed up (read: Mulally) at Ford don’t deserve blame for the past neglect foisted upon the company, but those are the breaks.

So, let’s focus on GM for a minute. Even though General Motors has much better product than Ford available now, it’s really not doing that much better in terms of sales of cars. Trucks and SUVs, sure, they’re doing well, but GM has some very good cars that are just basically being ignored by consumers. This brings me to the reason GM had a bad January and February in 2007 and will probably have a not-so-great March, too:

Despite the fact that General Motors has some good cars to sell now, most people in the United States just refuse to believe it. This is a huge problem for GM and will continue to be a problem for years to come. So the unfortunate situation is that many millions of people in the United States have a dated perception of GM that has been eclipsed by current reality.

And here’s why – General Motors put out a lot of junk (except for trucks) in the U.S. for about 30 years, and there is no one that blasted GM more than I did in those years. However, some of the vehicles in their product line now have achieved parity with the best that the Japanese automakers have to offer. Not all, mind you, I would say, but rather a growing minority. But there is some excellent product at General Motors here in the States if you know where to look. Unfortunately for GM, perception lags reality – witness the many opinions offered by millions of consumers here in the U.S. about how EVERYTHING made by GM is awful. Usually this is followed by some anecdote about some awful GM product they had in the past. I’m reasonably certain those same people would also offer up a contrasting anecdote about their wonderful Japanese or European car that racked up a huge amount of mileage on the clock and rarely broke down.

Now, despite what some people may think, big ‘ol fat dumb GM is acutely aware of this. But, what can they do? There is not enough marketing money in the world to erase the past, so all they can do is keep making their cars better, keep pointing this out to automotive journalists and the public and hope that people notice. I am not taking on the role of apologist or cheerleader for GM; I am simply stating the facts.

Yes, many of their models need a lot of improvement (I just described three of them in print recently as “craptastic”). But there are quite a few models that are very, very good, and deserve consideration if you’re looking at cars in their particular segment. General Motors is on its way back, no matter what some sizable percentage of the public says.

It’s painful to the people at GM that all of GM’s vehicles get tarred with the same brush of outdated perception, but then again, GM has no one but themselves to blame for the current point of view many people have about General Motors. Everyone seems to have an anecdote about a lousy GM car that they had, or their brother had, or their best friend’s fiancée had, or whatever. As I said, GM put out lousy cars here for about 30 years and since they are still the largest car maker in the world, that’s a lot of lousy cars, and a lot of lousy car anecdotes. Millions upon millions of lousy car anecdotes. There are currently a large percentage of people in the U.S. that believe in their heart of hearts that if a car has any General Motors badge on it, it’s rubbish. They don’t need to drive it, they don’t need to look at it – no need, it’s junk. Nothing, and I mean nothing, can dissuade these people from this point of view. It’s going to take many years of good cars across the model lineup for people to change their opinions about GM. And until that happens, it’s going to be very much an uphill struggle here in the States for GM to take away car sales from the imports. If I had to guess, I would say that GM is simply at the end of the beginning of their long rehabilitation.

GM needs to sell enough of their current cars that are good/great before something ugly happens from a financial perspective in order to allow public perception to catch up to the reality that they’re got some pretty nice iron available. And how long will that take? I don’t know, and I don’t think anyone else does, either. Regardless, none of what I’ve written here is a secret to anyone at General Motors. They are all well aware of how much the General Motors brand has been damaged over the years. But, to give credit where credit is due, they’re dug in for the long haul. They intend to be around for a long, long time. As an auto enthusiast that enjoys having a lot of choices in terms of companies to buy from, I hope they’re successful in turning GM around.

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By Brendan Moore

03.14.07

As of last month, hybrid vehicles accounted for 1.82% of all new vehicles sold in the United States. Not much, but the numbers are increasing steadily, and it begs the question of “how many plug-in hybrids would be too many for the electrical grid?” here in the U.S. All those future hybrids need to be recharged, right?

Other people have asked that question as well, specifically the federal government and the large utility companies. In late 2006, the U.S. Department of Energy did a study (DOE website) regarding the existing power grid’s ability to handle the demands of plug-in hybrid vehicles. And according to the DOE, the surprising conclusion is that 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.

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Brendan Moore

3.12.07

Ford announced that Aston Martin was sold for $925 million USD to Prodrive, Aston Martin’s racing division. The deal was financed by banker John Sinders and several investment banks in the Middle East. Ford has retained an 8% stake in the company.

Prodrive got a huge bargain at the purchase price of $925 million USD. When you consider the manufacturing upgrades that Ford paid for, Aston Martin’s current product mix, their future product pipeline, and their market prospects, Prodrive has got to be awfully happy with the deal.

By Brendan Moore

03.11.2007

Ford will announce the sale of Aston Martin tomorrow, according to multiple news agencies. The buyer is almost certainly Prodrive, the company that currently runs Aston Martin’s racing program. Ford is expected to sell Aston Martin to Prodrive for approximately $870 million USD. The financing that Prodrive needs for the deal is coming from a consortium that includes Egypt’s Naeem investment bank and several American investors. One of the terms of the deal would leave the current CEO of Aston Martin, Ulrich Bez, in charge of the famous automaker.

Fans of Aston Martin are expected to be quite happy with the overall sale as there were fears that the fabled company would be sold to someone that would either not possess enough capital to adequately maintain the company’s reputation going forward, or, conversely, a large corporation that would dilute Aston Martin’s sporting focus.

While not commenting on the prospective sale today, Ford reiterated that Volvo, Jaguar, and Land Rover, their remaining luxury brands, are not for sale.

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By Chris Haak

03.09.07

Congressman Lloyd Doggett (D-Texas) introduced a bill earlier this week that would encourage sales of plug-in hybrid passenger cars by providing a $3,000 to $6,150 tax credit for people who buy them. Is this the best, most cost-effective way to clean our air and reduce our dependence on imported oil?

Maybe a look at the bigger picture is in order. I propose that instead of tax credits on new cars, that the government provide similarly-sized tax credits to allow owners (who are in lower income levels) of older cars that fail emission tests to purchase a used car that pollutes a fraction as much as an older pre-1990 car. A $5,000 to $6,000 car is in most cases a heck of a lot nicer than a $1,000 one.I’d rather see the $5,000 incentives go to these less fortunate people who are buying a better used car than to someone who has money and just wants to get the latest environmentally friendly vehicle. In absolute terms, I really think something like that would clean up the environment and reduce oil consumption better than making already-clean vehicles cleaner. In addition, it could potentially help the market for used cars (more demand, hopefully better resale values) AND cut new car manufacturers some slack in their R&D expenditures.I don’t know – it’s just an idea – but I’ve always been bugged that the cars that are already not the problem are being focused on. Sort of like the argument in favor of large hybrids (city buses, UPS trucks, GM’s large SUV hybrids) rather than small hybrids (Prius, Civic). Sure, the Prius might get great fuel economy, but even if you took away all the exotic hybrid components and put a regular 1.8 liter engine in that thing, it would probably still get 35 mpg (as the Corolla already pretty much does). You’ll save many more barrels of oil reducing consumption of the biggest vehicles by 20% rather than reducing consumption of the smallest vehicles by 20%. Plus, you’d clean the air more effectively by removing the worst polluters rather than making the least-polluting vehicles even cleaner.

You can contact Chris Haak at chaak@autosavant.net

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03.06.07

It was only a matter of time and the time is now: Brilliance Jinbei Automotive is the first Chinese automaker to display it’s vehicles at the Geneva Auto Show. In what is a planned coincidence, five hundred Brilliance BS6s sedans are currently on their way to the port of Bremerhaven, Germany from Dalian in North China. Those cars are scheduled to make port by the end of March. HSO Motors Europe will be Brilliance Jinbei Automotive’s importer and representative agent for all of Europe. HSO has already secured distribution agreements in several EU countries, including Belgium, France and Switzerland and will sell both cars and trucks to their retail partners.

An HSO spokesman said that Brilliance Jinbei is committed to building a global presence quickly, and added that similar arrangements are being made in the United States currently.

This is simply put, the beginning of the beginning of the Chinese push.

Renault is trying to boost itself out of a sales slump in Europe, and is trying a little bit of everything in order to reach that goal.

And we do mean everything – here is the Renault Rip Curl Clio, a special-edition trim package put together by, and licensed from Australian surf and snowboard specialist Rip Curl. Lots of surfers in Europe, right? Well, I guess there are enough snowboarders that this sort of makes sense. Or maybe it’s for the “aspirational” twenty-somethings that wished they lived near a beach or a snow-covered mountain. Regardless, The Clio hatchback as done up by Rip Curl has special exterior paint, 16-inch alloys, an upmarket stereo that also provides both a USB and an iPod connection inside the glovebox, and of course, an edgy tw-tone interior.

The power is strictly standard Renault, however – you can get either the 85 HP 1.5 liter turbodiesel or the 100 HP turbo 1.2 liter gasoline engine. Renault says they have high hopes for the Rip Curl across Europe and look at the model as something unique that appeal to those young people with an active and athletic lifestyle.

The FCC has said that the merger will only be allowed if it’s in the consumer’s best interest. Our reporter doubts that it is.

By Chris Haak

03.06.07

Recently, XM Radio and Sirus – the only two satellite radio operators in the US – announced their plans to merge. There is a specific rule the FCC’s books prohibiting any single company from owning the only two satellite radio broadcast licenses. FCC Chairman Kevin Martin has said that this merger will face a “high hurdle” to determine whether the proposed transaction is in the “public interest.”

Overall, it will end up as a bad deal for consumers.

The only people I could see this merger being good for consumers are for those who are already subscribing to both XM and Sirius, and those who subscribe to one or the other, and are dissatisfied with the quantity of content they are receiving from their current service.

You can bet that if this merger passes, consumers will not be given 50% more programming for the same $12.95 per month price. Instead, we’ll get 50% more programming for $19.95. Management will then argue that they are actually saving us money, because previously, subscribing to both services would have cost $25.90 per month, and now they’re “only” charging us $19.95. I forget which executive has already made a similar argument, but it was something very close to this logic.

I am a longtime XM subscriber (since 2003), and I’m very happy with the service. But with 200 channels and two half-hour commutes per day, I really don’t need more than the 200+ channels that XM already has. I listen to about five or six different channels (mostly talk radio) and only very rarely venture outside of my “comfort zone” into unknown channels. I just don’t know what else is out there and if it’s worth my time to explore new content. That problem would get worse with 300 channels, not better.

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