By Chris Haak

06.29.2007

Yesterday, GM announced that it had agreed to sell its Allison Transmission unit to private equity firms Carlyle Group and Onex Corp. for about $5.6 billion. Wall Street cheered the announcement, sending GM shares up to $38.19, nearly $20 per share higher than the shares were at their low point in 2005 during the worst of GM’s bankruptcy fears. It seems that GM has managed to get a better price for Allison than Wall Street was expecting.

Allison Transmission, which makes transmissions for commercial trucks, buses, and military vehicles, as well as dual-mode hybrid transmissions for the upcoming light duty hybrid pickups and SUVs and for the popular Duramax/Allison combination in 2500 and 3500-series trucks, is headquartered in Indianapolis, Indiana. The sale announced yesterday excludes a plant in Baltimore that makes conventional and dual-mode hybrid transmissions used in GM’s light duty trucks.

The Allison money will help offset the expected $7 billion cost that GM will incur to fund the UAW-Delphi bankruptcy settlement, which (if approved by union membership) will pay union workers upfront payments as well as ongoing supplemental wages for a period of time, in return for a reduced hourly rate in the future. There is also speculation that GM might use the Allison money to help fund a potential union-managed trust fund to pay for workers’ health care coverage, similar to the agreement that Goodyear came to with its union membership last year.

Unfortunately for GM, the Allison unit was “highly profitable,” and now it has killed another cash cow. The sale of 51% of its GMAC financing arm to Cerberus (the same company that bought Chrysler) marked the sale of another major contributor to GM’s black ink in North America.

Other than these two, more “non-core” assets that GM has sold off in the past two years include stakes in Fuji Heavy Industries Ltd. (Subaru), Isuzu Motors Ltd. and Suzuki Motor Corp.

It’s a shame that GM has to continue selling assets, but this is a necessary move for them to add to their cash balance and ensure that they can still meet their operating cash needs and keep the company running. But this is not the end of GM selling everything but the proverbial kitchen sink. They’re also in talks to sell the (also profitable) medium-duty truck business. No announcement has been made, but the word is that Navistar is the front runner to acquire that business. Medium duty trucks are sold as the Chevrolet Kodiak/GMC Top Kick conventional cab trucks, and the T- and W-series cab over engine trucks, which are rebadged Isuzus, and are generally labeled as 4500-8500 series trucks (versus 1500-3500 series for the light duty ones).

Shedding assets of non-core businesses as GM and Ford have been doing is OK from the standpoint of allowing management to concentrate on core operations, and monetizing an asset, but it also eliminates a layer of safety net should core operations falter. There have been several quarters over the past few years that GMAC results helped to prop up GM’s regular results. Now, they’ll only be able to help 49% as much as they had before. After this year, there will be no return from Allison, and likely no return from the medium duty unit if it’s sold off.

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By Chris Haak

06.28.2007

Last week, photos and video started circulating online of the horrific crash test results of the Chinese Brilliance BS6 sedan. The car was tested using the well-recognized Euro-NCAP (New Car Assessment Program) offset frontal crash test at 40 miles per hour by ADAC, a German auto club.

In cars that ace these tests, the passenger compartment stays almost completely intact with no intrusion of the floor into the driver’s footwell or the instrument panel into the driver’s face. The best cars often still have functioning driver’s doors, yet sacrifice so much of their front end absorbing the crash energy that the occupants get out of the car relatively unscathed.

Instead, the poorly-named Brilliance BS6 saw the pedals intrude into the driver’s space by 18 inches, and the dashboard by 7 inches. The driver’s door wouldn’t open without the technicians using a huge crowbar, and the rocker panel bent almost 90 degrees, stopped only when it hit the floor. The base of the windshield moved to the same vertical plane as the top of the windshield was before the crash, and the driver was left sharing space with steering wheels, windshields, and the front end of the car. He or she would have almost certainly been killed instantly.

ADAC also tested another BS6 for side impact protection (this is also in the video linked above). In this test, the side impact cart intruded past the width of the door into the passenger compartment (over 12 inches) and whipped the driver’s head so severely that he would have almost certainly been killed.

Naturally, the car earned the minimum rating, one star, on a five-star scale.

If you’re keeping score at home, Chinese vehicles undergoing western crash tests have both failed miserably (the earlier being the Landwind SUV, which fared so poorly it was withdrawn from the European market).

So far, the Luxembourg-based distributor for the BS6, HSO Motors, has sold 350 of the €19,000 cars, and has said that dealers should offer to repurchase the cars from owners who are concerned about its crashworthiness. However, one dealer quoted in Automotive News said, “For price-conscious customers who are careful drivers, this safety issue does not have priority.” He also said that he would continue selling the car.

Great – so if you’re sure you won’t be in an accident, you’re OK in a Brilliance. But I always thought that most accidents sort of happened, you know, accidentally. I’ve been in two of them in 16 years of driving, and I didn’t plan them ahead of time. I really didn’t expect them to happen, frankly. Sometimes, they’re unavoidable.

For its part, the manufacturer doesn’t believe that the poor crash test results will hurt sales. The company also accused the German media of “viciously playing up” the ADAC test results. Brilliance also said that they agreed to cooperate with ADAC on the BS6’s safety, and expect the car to earn three stars within a year. Brilliance also would like to find a partner to help it crack the US market, and said in April that it would like to sell cars in the US, including the BS6, no later than early 2008.

Personally, I don’t plan to set foot in a Chinese car that will be moving (I’d feel reasonably safe in one in a static display at an auto show) until I’m convinced that the safety of these vehicles has improved to modern standards. I’d take a good used car – or a new Renault/Dacia Logan/Nissan Aprio – any day over a Chinese car with questionable occupant protection capabilities. But, if you have a death wish, you can always buy one of these and drive into an offset barrier at 40 miles per hour. You won’t be around to tell us about it.

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Our writer says when it comes to cars, love is not blind

By Bruce McCulloch

06.27.2007

“Not only does my new vehicle boast a great amount of horsepower and great interior, but it’s it provides great entertainment as a driver’s vehicle. The exterior on the other hand, well, let’s just say it’s… Oh, did I mention how much of a bargain it was?!”

How much of that design do you actually like? Such a question had recently dawned upon me when a fellow automotive enthusiast was deciding on purchasing a new vehicle. At the risk of possibly offending him – I choose to leave out his name and of course, the car which he eventually purchased.

When I showed my interest in the particular vehicle that he had purchased, he responded with a few remarks about the vehicle’s styling which he disliked. In fact, despite his recent purchase of the vehicle, he seemed overly disappointed with the vehicle’s exterior design. Personally, this shocked me very much. Not only did he describe a styling cue of the vehicle as one that was a blatant copy of another, he also made note of how he thought its exterior design was ‘efficient’, rather than good. With such an attitude, you’re probably wondering why he would purchase something he didn’t have much appreciation for. The answer to that question was practicality – as an overall vehicle it suited his needs just about perfectly. Oh and before you ask, yes, he’s a huge automotive enthusiast.

While I can understand the necessity for practicality, I cannot understand why one would purchase something that they do not like to look at , now, and then every day they own it in the future. Mind you, he’s most certainly not the only one to buy a car, or for that matter, even like a car with a design they were just ‘ok’ with.

Admittedly, I’m an overly picky enthusiast when it comes to car design and let me tell you, there’s no way in hell that I’d purchase any car (at any price) if I didn’t like the exterior styling of the car. Of course, this is all going to depend on the individual in question and what priorities they lay out when purchasing a new vehicle. Certain individuals will purchase on the merit of reliability, while others on the merit of either power or interior comfort. Perhaps for some (certainly myself), most everything must be considered – but in any event: I don’t care how much practicality; how much power or how much of a bargain an automobile is, if I’m not satisfied with the exterior metal. Honestly, I mustn’t only like the front of the car, but also the rear and with that, the side profile. That being said, I think it’s fair to say that with an attitude such as mine, I have a far shorter list of automobiles I would actually buy than most enthusiasts.

Arguably, there is no such thing as a ‘perfect design’, especially as one is most usually forced to focus upon a certain aspect of the vehicle’s exterior design which they like, or dislike. For instance, the BMW 8-Series is a car which I have great affection for, but I must admit to having greater appreciation for the front end than the rear end. Although that’s not to say that I entirely dislike the rear end though – not at all, I’m just merely pointing out a styling cue throughout the design. That being said, I can still safely say that I like the entire design of the car, unlike an E60 BMW 5-Series (for instance).

Those are some of my thoughts and annoyances regarding car design. So then, how about you? Are you willing to purchase a vehicle with a design which you only consider to be “ok” for the sake of such things as comfort, practicality, badge, power, price, etc?

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By Chris Haak

06.25.2007

The smart [the all-lowercase name is almost as irritating as Saturn's all-uppercase names, and will not be repeated throughout the rest of this post], a diminutive “city car” produced by Daimler, is going to make its official US sales debut in the first quarter of 2008, to be sold by United Auto Group, a large dealership chain owned by Roger Penske. There has been a lot of hype surrounding the US availability of this car; the official website at http://www.smartusa.com/ even is so kind as to provide a way for interested owners to “reserve” a 2008 Smart for just $99.

Although the reservation fee is refundable at any time, and the company claims that the fee and reservation system are there to “gauge interest” in the car, it sounds to me that it’s arrogant at best, and a scam at worst. How does committing $99 – in what is not even really a commitment, because you can get your money back, and they don’t have to sell you a car if they don’t have enough – really gauging interest? Plus, the “deposit” is less than 1% of the $12,000 base price of a Smart. So basically, Smart expects buyers to pay $99 for the privilege of being contacted if a Smart car is available for purchase.

As of early June, UAG announced that they had over 20,000 Smart “Insiders” who paid $99 to be on the sort of wait list…so Smart is now holding almost $2 million for basically doing nothing. I’d like someone to give me $2 million for a little while. I won’t even touch the principal, and if I invested it in a mutual fund that earned 10% per year, I’d be making six figures without lifting a finger. Sweet.

Smart expects to produce about 16,000 ForTwos for sale in the US for the 2008 model year, and I can see them meeting or even exceeding that goal, but is this really a car that’s going to succeed beyond core urban centers like New York, San Francisco, Chicago, or Miami? Everything I’ve read about them has said that they’re surprisingly roomy inside for two passengers, but lack luggage space, and give off a vibe of feeling a little too close to the road and surrounding traffic, without much sheet metal between you and them.

For a quick run to the grocery store, or for simple urban parking, they seem like a neat idea, if perhaps just a novelty. They’ll get pretty good gas mileage (over 40 miles per gallon, even without the benefit of hybrids or diesels) and crash tests have been successful in them because of their innovative engineering. But how many Americans, who pretty consistently are in love with 1) large vehicles, and 2) fuel economy, as long as it requires no sacrifices in vehicle size, comfort, or engine power will be willing to pay $12,000 for an 8.8 foot long, 1600-pound “city car,” when most Americans live in large suburbs and do not have to worry about urban parking or maneuverability? I think the Smart requires too many sacrifices – namely, interior space, engine power, and perceived occupant protection – to be a huge success in the US.

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By Brendan Moore

O6.24.2007

As most people that read this site are aware, the U.S. Senate bill to increase fuel standards on new cars through the mechanism of CAFE has passed. In fact, not only did it pass, but the bill came up for a vote without any debate and without a roll call vote, something that doesn’t usually happen in the Senate unless the amendment in question is considered a slam-dunk for approval. The auto companies and their friends in the Senate fought hard to get an amendment approved with easier fuel economy requirements and easier timelines for achieving those requirements, but they were swept aside in the Senate’s rush to look like they were doing something to reduce Americans’ expenditures for gasoline. The bill was approved 65-27 on Thursday, June 21.

The new CAFE requirement will require all auto companies to produce cars and trucks that average a combined 35 mpg by 2020. That’s a 40% increase form the current combined average. The bill goes to the House next, where it is expected to pass easily in its current form, and may, in fact, be toughened up considerably by the time it emerges from the House. So, there is no upside for the car companies in this scenario, only more downside.

The automakers did everything they could in an all-out effort to get the bill derailed or diluted, but it appears that the car companies no longer have anywhere close to the influence they’ve enjoyed for the past few decades. Almost every senator on both sides of the aisle turned a deaf ear to the industry entreaties, and the auto industry and its allies went down to a stunning defeat. It is not an exaggeration to say that the auto industry now matters very little in Washington. The politicians have determined that they will get more votes from the public going against the car companies than going with them, and from a government and regulatory perspective, it is now guaranteed that things are only going to get tougher for the auto industry going forward.

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By Chris Haak

06.24.2007

Yesterday, I came across some interesting data on fleet sales as a percentage of total sales for each car and truck sold in the US for the first half of the 2007 model year. There were some surprises and some non-surprises in reviewing the list.

Before pointing out some of the more notable items, let’s talk about fleet sales. What is a “fleet sale” anyway? Well, auto sales are broken into two main categories: retail sales and fleet sales. Every manufacturer wants high retail sales, because they’re not giving volume discounts on the vehicles, retail units are generally better equipped than the ones sold to fleets, and retail sales don’t end up at auctions or used car lots for half of their original MSRP with 10,000 miles after only a year. Heavy fleet sales (and thus a large volume of fleet vehicles on the used car market) depress residual values of every one of that model, including ones sold to retail customers , making unhappy retail customers and likely further reducing retail sales.

Fleet sales can also be broken down into a few subcategories: commercial, government, and rental. The daily rental fleet sales are the worst kind, because the cars are driven by hundreds of different people during their time owned by Hertz or Avis, and not necessarily babied by their drivers. They are also quickly sold back to the manufacturer, as opposed to a car sold to a company for use by a sales representative, where he or she would keep the car for three years before turning it in. Also, having a substandard car in your lineup that is a “rental car favorite” is not a good way to turn renters into future buyers, because you’re not putting your best foot forward as a manufacturer. For example, imagine if the general public thought that all GM sedans were on par with the Grand Prix, when the reality is that many are better.

The source of my data is http://www.fleet-central.com/. Fleet Central is a website for automotive fleet managers and appears to be pretty comprehensive. Fleet percentages given are as a percent of the model’s total sales midway through 2007 unless otherwise noted, and include commercial, government, and daily rental sales.

The Non-Surprises

Ford Taurus

Think about the cars you have rented over the past few years. Most likely, they were models such as Chevy Malibu (58.8%) or Impala (53.9%), Ford Taurus (96.5%), Pontiac Grand Prix (77.6%), etc. For this reason, these models are all leaders on this list. Some others on the list are not surprises; the Ford Crown Victoria, a government favorite (thanks to police departments) sold 91.3% of its overall sales to fleets, mostly governmental agencies. The Ford Econoline, a favorite of plumbers and contractors, was 69.2% fleet sales because not many retail buyers need or want the capability and size of a full-size van.

The Surprises

Dodge Avenger

This part is more fun, but it’s not necessarily good news. There are some 2008 model vehicles, just introduced in the past few months that are already selling more than half of their production to fleets (and mostly daily rental fleets). Offenders include the Chrysler Sebring (63.5%) and Dodge Avenger (79.4%!!). No wonder Chrysler management is so concerned about those two vehicles and has implemented an immediate improvement program to make them more attractive to people who want to buy the cars, not just catering to people who rent them and don’t get to choose.

Other relatively new models with somewhat high fleet percentages include the Kia Optima (52.8%), Dodge Caliber (45.1%), Ford Edge (32.0%), and Chrysler Aspen (31.2%).

The Fleet “Hall of Shame”

Pontiac Grand Prix

The following vehicles sold more than half of their overall sales to fleets; if you would like to buy one of these cars for yourself, you can probably get a great deal on a slightly used one, but you’re likely to take a huge depreciation hit if you decide to be in the minority and buy one of these new from the dealer.

• Chevrolet Express (58.4%)
• Chevrolet Impala (53.9%)
• Chevrolet Malibu (58.8%)
• Chevrolet Uplander (70.9%)
• Chrysler Sebring (63.5%)
• Dodge Avenger (79.4%)
• Dodge Caravan (54.8%)
• Dodge Charger (56.2%)
• Chrysler Crossfire (70.6%)
• Chrysler PT Cruiser (61.8%)
• Dodge Magnum (60.9%)
• Ford Econoline (69.2%)
• Ford Taurus (old version) (96.5%)
• GMC Savana (50.9%)
• Kia Optima (52.8%)
• Mercury Grand Marquis (50.0%)

Study the list above carefully; odds are, next time you visit the rental car counter, they’ll hand you the keys to one of the models above.

The full lists are available here:

Cars: http://www.fleet-central.com/af/stats2007/cars_web.pdf
Trucks: http://www.fleet-central.com/af/stats2007/trucks_web.pdf

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Try something a little different…

By Bruce McCulloch

06.23.2007

Tired of the same old repetitious and uninteresting newspaper clippings and/or common mainstream magazines about automobiles? Want a magazine offering entirely different perspectives on your favourite automobiles? If so, I’ve got five magazines which I’d like to recommend, and they happen to be ones which I guarantee will fuel every North American sports car enthusiast needs.

My list includes five paper-back products which I believe offer exciting and entertaining journalism on vehicles commonly not spoken of in most North American magazines.

‘EVO’


Origin: Great Britain

If you’re expecting a roster of reviews on vehicles such as the Opel Astra and Peugeot 407 you’ll be sorely disappointed. On the other hand, if you’re interested in the world’s most thrilling and exciting drivers’ cars, then EVO is the magazine for you. In addition to unique humour and writing, you’ll get a chance to see what is arguably the best photography of some of the world’s rarest and unknown vehicles.

Where to Purchase: Barnes & Noble, Chapters, Borders, etc
Price: Anywhere from $8 to $13 (depending on country)
*Note: Occasionally shipped a month late (IE. June issue arriving in July)
Website: http://www.evo.co.uk/

‘Sport Auto’

Origin: Germany

Sport Auto is most definitely a magazine which all ‘performance buffs’ should check out. This magazine, which is written entirely in German, offers what is arguably the best performance test in the world. The monthly ‘Supertest’ is in fact what set it apart from all other performance oriented magazines.

In Europe the Supertest has become a benchmark not only among automotive enthusiast groups, but also among the automotive companies themselves. As Sport Auto is a monthly magazine, they choose to restrict output of the Supertest to one vehicle per month – as a result, the waiting lists for automotive companies to get a spot in this exclusive test can easily build towards the length of a year!

This comprehensive performance test includes two different racing circuits. The first is the world famous Nürburgring Nordschliefe (which spans over 13 miles), the other a much shorter, twisty 2 mile circuit referred to as the “Hockenheim Ring”. The advantage of offering two entirely different circuits is important as it gives us a look at those vehicles that can tackle the fast and sweeping corners of the Nürburgring Nordschliefe and those that are able to adapt to the tight and challenging corners of the Hockenheim.

Furthermore, this amazing test also includes: various slalom courses, braking tests, acceleration figures (standing and rolling acceleration) and last but not least, a wet-handling circuit.

Where to Purchase: Availability is scarce in North America, but there are a few select shops which choose to sell it. Although I’m afraid I cannot point you to any specific distributor as I’m not aware of the retail locations that may carry the publication where you live. If you truly desire Sport Auto, but are unable to find it any of your local stores, I’d suggest ordering from such websites as websites as Ebay, etc.
Price: Anywhere from $5 to $10 (depending on country)
Website: http://www.sportauto-online.de/

‘GT Purely Porsche’

Origin: Great Britain

For any Porsche enthusiast, ‘GT Purely Porsche’ remains the undisputed ‘king’ for information and subjects on the Stuttgart firm. Not only does it offer a wide of assortment of newer vehicle tests, but also offers useful additions such as a buyer guides, complete specifications for every vehicle Porsche has produced as well as information and tidbits on the rarest of Porsche automobiles.

Where to Purchase: Barnes & Noble, Borders, Chapters, etc
Price: Anywhere from $8 to $15 (depending on country)
Website: http://www.gtpurelyporsche.com/

‘Sports Car International’

Origin: United States of America

Sports Car International (or alternatively known as ‘SCI’), is often viewed as the American magazine which reads and looks European. That being said, SCI provides information and test reviews of vehicles not commonly covered in North American magazines. Thanks to a large variety of journalists from around the world, it’s both well written and informative. This magazine is among the best at providing cultural differences and opinions.

Where to Purchase: Borders, Barnes & Noble, Chapters, etc
Price: Anywhere from $5 to $8 (depending on country)
Website: http://www.sci-mag.com/

‘European Car’

Origin: United States of America

Contrary to what its name may suggest, European Car is actually a product of North America, and it certainly covers more than just European automobiles! For those with the interest in high performance tuner vehicles (Brabus, Nismo, Ruf, etc), as well as a general interest in regular exotics (like Porsche and Ferrari), European Car may well be the magazine for you.

Where to Purchase: Borders, Barnes & Noble, Chapters, etc
Price: Anywhere from $5 to $8 (depending on country)
Website: http://www.europeancarweb.com/

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