By Chris Haak

05.20.2007

I’ve heard over the past several years that among the many problems the Big Three have, that their dealer count is too large. Basically, there are still nearly as many dealers today as there were years ago when the domestic manufacturers (GM, Ford, and Chrysler) had a stranglehold on the US market, with share above 75%.

The reality today is that amidst falling sales and even faster falling market share, the dealer count is not falling nearly as quickly. The problem then is that there is nearly the same number of dealers fighting for their piece of an ever smaller pie.

I’d known anecdotally that this was a problem, but this past week, I noticed in a supplement to industry publication Automotive News just how pronounced this problem is. The supplement had some data on both the number of franchises for each vehicle brand in the US – the number of Toyota, Chevy, Dodge, etc. dealers – as well as the average annual sales per store.

The results were startling. Topping off the list with the most unit sales per franchise is Toyota with 1,821 sales per franchise (1,224 franchises) with Lexus (1,479 per franchise and 221 franchises) and Honda (1,286 per franchise and 1,019 franchises). The mainstream brand at the bottom of the list is Isuzu, with 33 annual sales per franchise (227 franchises in 2007 – down from 294 a year earlier). That’s less than three new Isuzus per month, plus figure that this is only an average and there are probably some larger dealers moving more than that and some moving less. Fortunately for Isuzu dealers, only 20 of Isuzu’s franchises are exclusive, so most of them are selling another vehicle line, not to mention Isuzu’s heavier duty trucks (which are not included in this data).

In the middle of the list are the stalwart GM and Ford brands such as Chevrolet (586 sales per franchise, 4,063 franchises), Buick (88 sales per franchise, 2,751 franchises), Pontiac (148 sales per franchise, 2,763 franchises), and Lincoln (89 sales per franchise, 1,345 franchises).

The per-franchise sales figures above all include both cars and trucks. If trucks are taken out of the mix, Toyota, Lexus, and Honda remain at the top of the list, with 1,046, 840, and 694 cars sold per franchise, respectively, in 2006. The average Dodge franchise, on the other hand, sold only 111 cars in 2006.

You may ask, “What’s the problem with too many dealers?” Well, for consumers, it could be a good thing, because you’re likely to have more than one dealer fighting for your business, and thus willing to cut a better deal for you. For dealers, though, having other dealers selling the same products just a few miles away from you forces you to either sacrifice profits or sacrifice sales volume. The manufacturer is hurt when the profits are sacrificed (and transaction prices are lowered), that is one factor driving down the residual values of cars sold by too many dealers, which makes it more difficult or costly for buyers to trade in their car and move into a new one. Making it difficult for buyers to purchase your new cars can have an effect on new vehicle sales, which forces lower prices, and continues a vicious cycle.

Do the import brands selling the most cars per franchise have that favorable ratio due to astute management and planning? Not necessarily, though Toyota has recently said that they plan to be cautious about growth in the number of franchises; it’s mostly because these brands are still growing in the US market, so they have been cautiously adding dealerships while they gobble up more and more market share. Meanwhile, the Big Three mostly got to this point because they already saw their sales and market share growth during their golden age of the mid-20th century, and are now shrinking their way to profitability and selling fewer cars, but (due to the extreme costs) unable to quickly reduce their dealership counts to fall more in line with their present situation.

The solution to this problem is not easy, nor is it inexpensive. What dealer wants to give up his or her franchise, after investing into the facilities, training, and advertising necessary to operate a dealership? It cost GM $2 billion to compensate Oldsmobile dealers for the demise of that brand. GM is not willing to make that choice again, so instead has in effect folded Pontiac, GMC, and Buick into a single “channel” – encouraging dealers to sell all three brands side by side. The intended effect is to starve the stand-alone Buick dealers of enough different products (Buick is now down to three models – the LaCrosse and Lucerne sedans, and Enclave crossover; GMC sells only trucks, and Pontiac fills the holes in the lineup that Buick and GMC don’t offer) so that Buick- or Pontiac-exclusive dealers are forced to either sell only a handful of cars, or become part of a combined franchise in one way or another. As of January 2007, there were only 119 Buick-exclusive and 81 Pontiac-exclusive dealers (out of 2,751 and 2,763, respectively), so GM’s “encouragement” may be working. GM, Ford, and Chrysler each have more than 100 fewer dealers at the beginning of 2007 than they did in 2006. Unfortunately, overall all three still saw per-dealer annual sales declines, which means the dealer populations are not dropping quickly enough.

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By Bruce McCulloch

05.20.2007

The recently released “Wiesmann GT” is probably one of the best vehicles that you’ve never heard of. It’s a crying shame that prospective American buyers will never even have the chance to purchase a Wiesmann as they are not available in North America, nor does the company have any rush priorities to make it so. A bloody shame, no doubt!

Wiesmann might be new to us North Americans, but the fact is that “Wiesmann Ltd” was actually founded in 1985 (by Martin and Freidhelm Wiesmann – hence the “MF” badge which every model wears) in nowhere other than Dülmen, Germany. That’s right, this British-looking, Jaguar/Triumph- inspired beast comes from the Fatherland and it’s got the technology and packaging to prove it. Modern German mechanicals and classic British looks produce a winning combination in this case.

When originally shopped up in ’85, Wiesmann’s primary running operations served as an after-market tuner for all things BMW related. However, as the 90’s approached Wiesmann leaned upon their vast experience and connections with BMW to create a vehicle of their own, using many BMW components. Europeans (specifically Germans), know this vehicle as the “MF3 Roadster”. Since its release in 1993, Wiesmann has successfully been able to sell over 500 units and hence, establish a loyal fan base across Europe.

For years and years the MF3 had done its part to keep Wiesmann jolly good, but eventually the company decided they could focus efforts on creating a new vehicle. Initially, the idea for the “MF4 GT” was brought up in 2002 as a homologated road version of the race prepped MF3 which had been competing in the Nurburgring 24 hour race for a number of years by that point. With the introduction of the MF4, Wiesmann was able to explore a category which they hadn’t before, the Grand Tourer.

In terms of exterior styling there isn’t a great deal to separate it from the roadster variant, not that that’s an issue as both are stunning. While Wiesmann felt it was important retain many of the MF3’s characteristics, it hasn’t stopped them from making the MF4 essentially a new vehicle. You can see the MF4 GT shares family traits with the MF3, those first traits being the swollen fenders and curved bonnet, however take a closer look and you’ll see the headlamps are a different design – forming what resembles an arachnids eyes. Aside from that the centre grill has been redesigned with a smaller shape (which in turn adds more style), the bottom front bumper now features a specially designed undertray and lastly, the mirrors have been put upon the body using polished chrome stocks. Even the gracious rump has been given a make-over with an opening glass rear hatch and a slight redesign through out the tail lamps. Through and through the new MF4 features many tidbits which not only make it different from its counterpart, but even better looking.

It’s all retro in all design, while still managing to carry many of Wiesmann’s individual traits and specialties. The interior is no less lavish as it’s a festival of fine stitched leather, aluminum and chrome. Honestly, the overall cabin design is near identical to the roadster variant. Not that this is a bad thing, as it features all of those quirky things which most modern vehicle do not have, like an oil gauge and oil temperature gauge. Although Wiesmann wanted to make sure the MF4 was a better all around “cruiser” so as a result they fitted it standard with power operated windows, an air-conditioning system and the same “Becker Traffic Pro SatNav” found in the Pagani Zonda. I know what you’re thinking, those are common features on most vehicles, but you must understand that most of those particular items are either options or not available at all on the MF3. After all, the roadster wasn’t built to be a Bentley Arnage T, it was built as a hardcore, no-frills sports car.

Don’t be fooled though with the additional interior amenities though, Wiesmann’s vehicles are setup with sports car in mind, so neither the MF4 or MF3 feature airbags of any sort.

Don’t worry though, Wiesmann hasn’t decided to be cheap about the MF4 and simply redesign the body while leaving the electronics and what-not identical to the lesser model. The new MF4 was intended as a GT vehicle and that’s precisely why it’s 1.18 inches taller, 4.33 inches wider and 15 inches longer than it’s sister roadster. Even its petrol tank gets an increase of 2.64 gallons of gas to accommodate those long trips one might wish to take in it. The addition of the rear hatch also means one is able to bring some luggage along with them.

It’s clear they’ve really “gone to town” with the MF4 and that carries on with the technological features too. Unlike the Roadster, the GT is based on a state of the art epoxy bonded aluminum chassis tub with unique front double wishbone suspension castings (similar to that of a Lotus Elise). For comparison, the MF3 roadster relied on a simple steel tubular chassis and shared its front suspension with a BMW E46 M3. With the addition of the exterior body being completed from fibre glass the MF4 manages to weigh just 2,844lbs (1290kg) with a full tank of gas. For comparison, a 2007 Porsche 911 Carrera S with optional carbon ceramic brake rotors weighs 3,225lbs (1463kg)

In the past, when it came to propulsion Wiesmann leaned upon BMW because of their vast stock of inline six cylinder engines. For the MF4, Wiesmann was able to secure BMW’s 4.8 litre eight-cylinder found in vehicles such as the 650Ci, 550i, 750i and the restyled X5 SUV. This V8 churns out a maximum of 360bhp (367PS) and 362lb-ft (490nm) of torque which peaks at 3,400 rpm. If demanded, the power surge and curve can actually be increased with the press of the “Sport” button upon the center console. Performance claims are as follows: 0-62mph (100 km/h) in just 4.8 seconds and a unrestricted top speed of 175 mph.

That’s great in all, but how does it drive? Well I’m sad to say that I have not have the opportunity to drive one (and have little chance to do so living in North America) so I can only speculate on what the majority of other magazines have said. British magazine, “EVO” stated “The Wiesmann produces none of the understeer you might expect from a front engine car; the cabin is low slung with excellent ergonomics and quality to high levels”. “Sports Car International” said no less of the GT stating it was served its purpose as an all-around GT amazingly well. Based on the various reviews which the MF4 has completed it appears Wiesmann has been able to make a grand tourer which is not only great as a “GT”, but as a sports car. In the sports car world such a blend is an achievement and very few manufacturers have been able to successfully mold those two particular qualities.

The whole package is enough to make any automotive enthusiasts’ mouth water, but even more so when you find out Wiesmann is planning to develop a V10 powered MF4. Various test mules have already been caught in action sporting the 10 cylinder found in the E60 M5.

What Wiesmann has been able to achieve in such a short time is nothing short of amazing. For a company with small resources they’ve gone to extreme lengths to make a successful new vehicle out an already existing model. They could have renamed the car and said it was a different car – but they didn’t, which also shows some restraint not often seen in the car business.

My advice is if you’re living in Europe and are looking for a new coupe with a price tag around the €100k mark, check Wiesmann out. >> http://www.wiesmann-auto-sport.de/

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But there’s a big catch…

By Brendan Moore

05.19.2007

A weird but interesting minor provision of a new bill proposed by Senator Carl Levin, Democratic senator from Michigan, would exempt vehicle manufacturers from CAFE completely if the company in question commits to offering only vehicles powered by alternative fuels or “advanced technology” by 2020.

The overall proposal is called the “American Manufacturing Initiative” and is comprised of various tax breaks as well as changes to health plan policies, technology investment issues, and trade and currency regulations, all designed to assist the automakers with the transition to more fuel-efficient vehicles. Cost is unknown at this point.

The other Michigan senator, Senator Debbie Stabenow (D) of Michigan, is also involved with the American Manufacturing Initiative. Levin said the initiative will “focus on leap-ahead technologies, and we really want to have a major investment in those technologies, instead of focusing on those incremental changes”.

Levin intends to offer the bill as an alternative to the bill embraced by a majority of senators that requires all automakers to produce passenger vehicles that average 35 MPG by 2020. That bill is expected to come up for a vote in a few weeks.

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By Brendan Moore
Those consumers considering the purchase of a new hybrid car or truck may wish to consider some changes in the IRS schedule for deductions concerning those vehicles.

O5.17.2007

For instance, the most popular hybrid sold in the United States, the Toyota Prius, was eligible for a $3,150 federal tax deduction early last year, but is now only eligible for a $787.50 tax credit, and that drops to zero after September 30. Whenever a manufacturer sells 60,000 units of a hybrid vehicle, the amount of deduction for all of that manufacturer’s hybrid vehicles starts falling until it is phased out completely, and Toyota hit the 60,000 unit mark last year.

But, some good news: Toyota is the only manufacturer that has hit that ceiling, so every other car company that makes hybrids is still eligible for the full tax credit, which is redeemed at tax time by the individual purchaser. Those car companies are Chevrolet, Ford, GMC, Honda, Lexus, Mercury, Nissan and Saturn. It is also worth mentioning that tax credits vary by specific vehicle as the IRS uses a complicated formula to determine fuel efficiency gains of the hybrid model compared to the regular gas model, and awards the tax credits accordingly.

Last year, hybrids accounted for 1.75% of the total new vehicle market in the U.S. This year, with increased demand and more hybrid models available, hybrid market share is up; March 2007 saw 2.47% of total new vehicle sales go to hybrids.

If you’re interested in purchasing a hybrid, here is the list of hybrids eligible for the federal tax credit:

Ford Escape Hybrid 2WD – $3000
Ford Escape Hybrid 4WD – $2050
GMC Sierra Pickup 2WD – $250
GMC Sierra Pickup 4WD – $650
Honda Accord Hybrid AT – $1,300
Honda Accord Hybrid Navi AT – $1300
Honda Civic GX – $4000
Honda Civic Hybrid CVT – $2100
Lexus GS 450h – $775
Lexus RX 400h 2WD, 4WD – $1,100
Mercury Mariner Hybrid 4WD – $2,050
Nissan Altima Hybrid – $2350
Saturn Aura Hybrid – $1,300
Saturn Vue Green Line Hybrid – $650
Toyota Camry Hybrid – $1,300
Toyota Highlander Hybrid 2WD, 4WD – $1300

Finally, because I like you, I’m going to give you a tip. Both the Ford Escape Hybrid and the Mercury Mariner Hybrid (basically corporate twins) currently have a $2500 rebate on them AND the dealer gets another $1000 from Ford Motor Co. when he sells one, so that can be used as bargaining money, AND, Ford is having a tough time making the Escapes/Mariners go away, despite the fact that they’re pretty good vehicles. The rebate plus the dealer incentive plus the obligatory discount off of sticker plus the tax credit, and, the current pump price of gasoline means you can buy an Escape/Mariner and make it to your break-even point concerning the difference between the price of a regular Escape/Mariner and the price of the hybrid version in about 12 months. That’s according to my quick, back-of-the-envelope math, and using average miles of 15,000 miles a year. As they say in a lot of commercials, your results may vary, but after 18 months, you should be there easily. And if the price of gasoline goes up some more, then you’re there even more quickly. Now, that is a pretty good deal.

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Now there’s a shortcut in steel available for your classic car project

By Brendan Moore

05.16.2007

If you have ever tried to bring a tired and rusty body back to life on a classic car, then you know how much money and time it takes to get it right. Not perfect, usually, but at least right. I’ve done it more than a few times, and it’s expensive, and it’s still not perfect. Sure, you can make it look pretty good for under $10,000, which is most people do and then tell everyone the car is completely restored. Or, you can have the body taken off the frame, disassembled, and re-done, rotisserie-style for anywhere from $15,000 to $30,000, but even that doesn’t necessarily insure perfect seams or welds, or bring the factory-spec shut-lines back to the doors, etc. If you’re a perfectionist, you know what I’m talking about.

You could just replace everything with relatively inexpensive fiberglass panels or buy a whole body in fiberglass as those options have been available for years, but it usually doesn’t look right, and fiberglass has it’s own set of problems – both when you do the car, and later, as the years go by.

But there are other options now. There are some companies that are producing a few classic car bodies in high-grade steel and sometimes, under license from the original manufacturers. These bodies not only meet the original spec of the factory bodies, but are much stronger, and made to far better tolerances with better steel.

Let me give you a couple of examples.

1967 Mustang Fastback Coupe – painted for the SEMA show to bring out more detail. The bodies are actually sold EDP-coated (dipped and ionized) against rust corrosion and other possible environmental damage.

Dynacorn offers a complete and stunningly perfect 1969 Camaro Coupe all-steel body for $13,500 plus a $495 crating fee. And a 1967 Camaro Coupe and Convertible body. Like all of the bodies offered by Dynacorn, what you do with it once it’s unloaded from the truck is up to you. You can use it to replace the crumbling, rotten 40 year-old body you have on your 1967 Camaro, or you can use it as the perfect foundation for your custom restoration or “rod” dream wheels. The company also offers a 1967 Mustang fastback replacement shell that they produce under license from Ford Motor Company. Lastly, although these are not classic cars, the company also offers new steel cabs for postwar Chevrolet/GMC trucks. Both a ’47-’50 and a ’52-’54 body style are offered. They’re beautiful and they cost $8995 plus a $295 crating and handling fee, and, of course, come with doors, floor, and steel dash panel, just like the cars.

Then there are companies like Goodmark and Experi-Metal, Inc. that have perfect steel bodies on top of a relatively recent floorplan structure, i.e., a 2002 Camaro. So a car that looks correct from a period perspective, but rides like a modern car, brakes like a modern car, etc. And of course, you can add anything else you want to the modern structure – air-conditioning, stereo, power windows, leather interior, whatever engine you want, etc. These cars have starting prices of anywhere from $28,000 to $35,000. Very, very cool way to have someone else do all the heavy lifting if you want a great-looking classic car rod that you can use as a daily driver – these folks provide the perfect foundation for you to customize to your individual tastes.

Yes, it’s good to have options. I’ve spent a lot of money on project cars over the years, and speaking from my point of view, it would have been great to have these sorts of options available at the time, as I ended up spending more money and a lot more time on the cars I had in order to get to the same result that these companies can give you, and, for less money.

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The rules have now changed in Detroit

By Brendan Moore

05.15.2007

DaimlerChrysler (soon to be Daimler) has announced this morning that they have sold Chrysler to Cerberus Capital Management of New York, a large private-equity firm for $7.4 billion.

After lots of people did the math this morning on Wall Street, they’ve all come to the conclusion, that despite Daimler’s best efforts to hide it, Daimler has actually PAID Cerberus approximately $650 million to take Chrysler. So after paying $36 billion to acquire (laughably called a “merger” at the time) Chrysler in 1998, DaimlerChrysler has actually paid someone to make it go away. But, Daimler got rid of approximately $18 billion in healthcare and pension liabilities, which has to count for something. The new owner now has that millstone around its neck.

Over at Breakingview.com, Hugo Dixon took note of the rise in DaimlerChrysler’s stock price this morning (2.8% so far) and said that “if you have to pay to get rid of a business and shareholders still cheer, that really rams home how bad a business you had.”

Mark Warnsman, an analyst from Prudential Equity Group, summed up the transaction this way: “Daimler expects to realize relatively little from the sale beyond its ability to draw a line under what has been perceived as a nine-year misadventure,” he wrote in a research note Monday.The overwhelming sentiment among industry analysts and stock analysts is, however, relief that DaimlerChrysler got out as easily as it did – the feeling is that it could have been worse.

Somewhat surprisingly, Ron Gettlefinger, the president of the UAW, said that the deal “was in the best interests of our UAW members, the Chrysler Group and Daimler”. The UAW previously stated its opposition to any sale to a private-equity group, fearing that it would be asked for considerable concessions by the new owner.

What a tawdry end to the DaimlerChrysler relationship. Its embarassing for Daimler, humiliating for Chrysler. To Cerberus, it’s a variation on the old joke; the good news/bad news joke. They’re not even going to know exactly what they “won” for sometime until they start flipping over all the rocks there at Chrysler and letting all the snakes (production costs, lack of future product, actual losses on all those sales to rental firms, etc.) slither out.

And you have to believe the UAW is just playing possum at this point. This should be fascinating to watch as it plays out.I hope Chrysler makes it – the automotive landscape wouldn’t be the same without them.

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By Brendan Moore

05.13.2007

In a surprising reversal, Cerberus Capital Management appears to have won the bidding for Chrysler, pushing aside Magna International at the 11th hour, reports Forbes Online and The Wall Street Journal, as well as several other business publications. Magna has been the acknowledged front-runner for weeks in regard to purchasing Chrysler from Daimler, and so the news that Cerberus has emerged triumphant in the bidding process is somewhat of a stunner.

Daimler reportedly will make the public announcement tomorrow, confirming that Cerberus has won the bidding. They are expected to announce a substantial contribution to Chrysler’s $18 billion USD healthcare and pension liability as part of the deal, and that Tom LaSorda will stay on as Chrysler CEO. Cerberus advisor Wolfgang Bernhard is expected to be given a board seat in the new company.

If Cerberus pays Daimler an expected $5 billion USD for Chrysler and Daimler makes the aforementioned “substantial” contribution to Chrysler’s liability amount, the summing up is that Daimler is just making Chrysler go away at a fire-sale price. They are just giving Chrysler away to someone who can relieve them of the huge healthcare and pension liability that Chrysler brought to Daimler, and, they are paying part of that liability in order to get the deal done. By any reasonable calculations, this would have to rank as an ignominious end to one of the biggest deals of the past decade.

Daimler paid $36 billion in real cash money to acquire Chrysler in 1998.

No comment yet from the UAW, who can be assumed to be unhappy with Daimler’s choice of winner in the contest to own Chrysler.

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