By Alex Ricciuti

07.31.2007

Automotive criticism (Part I): More than just a business

I am an automotive journalist. I cover the industry for a living. When I mention this to people they immediately assume that I am some sort of car enthusiast or expert. If they ask me for advice on what kind of car to buy, I am happy to oblige, though I usually just say, “Buy a Toyota and you will be happy. Or at least you will not be on a bus one day cursing me while your car is in the shop. “
Here’s the distinction: I do not adore cars so much as I like to drive. Driving is relaxing for me. A nice roll across the Swiss countryside, where I live, helps jump-start my creativity as much of my writing begins while I’m behind the wheel. Music always accompanies me on these journeys – Miles Davis, Mogwai, or whatever best reflects and suffuses the mood I am in.

What I do like is a car that is well-engineered and fun to drive. I like the way the better Peugeots handle and I like a car that is stylish and practical and that drives outside of its class. That’s what I like about European marques, you don’t have to go to a luxury brand to get a great driving experience.

And this is why I like new cars. Pretty, shiny new vehicles fresh from the manufacturer and into press fleets with only a few thousand kilometers on the odometer at most. Cars engineered with all the advances made over the last hundred years or so that make them lighter, safer and more nimble on the road than anything in years past. Many of the people I meet who are enthusiasts of one degree or another often start to talk to me about classic cars – 1968 Mustangs or ‘61 Ferraris and hope that I have something insightful to add. I don’t. Show me a classic car and all I’ll say is,”No airbags? Deathtrap.”

I also happen to believe that there is something unique about the car industry. There is some glamour to it. Not as much as the entertainment or fashion business but it carries more desirability weight than say, working in IT or being one of those pathetic suppliers the car makers enjoy jerking around like the office cad with the frumpy girl in accounting who’s hooked on him.

Cars very much define the cultures we live in. The car makers know this, which is why they try so hard to make that one, perfect, I-gotta-have-it car. That the Ford F-150 is the biggest selling vehicle in the US says something about American culture and that the VW Golf serves as its counterpart in Europe also speaks to how people live here. Perhaps no other industry, including Hollywood, defines our modern, industrialized, and now post-industrialized, technology driven societies as much as the automobile industry does. The automobile symbolizes the fulfillment of the capitalist promise – it is our freedom and mobility. A car is iconic. It is this cultural aspect that fascinates me most.

Automotive Criticism (Part II): My two favorite car critics

I was once talking to a GM spokesperson when I casually brought up the name Jeremy Clarkson. I didn’t mean to, it just happened to come out when I mentioned something I had seen on Top Gear. I must have sent his blood pressure soaring as a crossroads pattern of veins began to emerge on his forehead and his face turned flush with rage. I found myself thinking where would I be able to find the nearest defribilator. I was lucky this man was under 50 lest I be charged with involuntary manslaughter for provoking a stroke.
He spouted contemptuously about Clarkson. That Clarkson just hates Vauxhall and automatically dismisses and mocks any car they put on the market. He did have a point. Clarkson can be, and usually is, vicious towards cars he doesn’t like and he hardly ever tries to be objective. Even if a car has its good qualities, he’ll just nominally mention them and then move on to trash it anyway.

For those of you who don’t know him, Clarkson is the automotive critic for the the Times (The Times of London, as it is called elsewhere) and hosts a widely popular BBC show called Top Gear that is shown around the world on various BBC channels.

Now, I have to make a distinction here between the Clarkson on TV and the writer for the Times. The guy on TV can be more than a little obnoxious and you have to have a sensibility for a particular brand of British humor to understand him. He wears tight blue jeans like your still-trying-to-be young uncle, needs a haircut and looks particularly shabby for a man his age. Clarkson has also appeared on a BBC show called Grumpy Old Men, which actually explains everything.

But, for me, not being properly groomed for TV is not one of the things I would criticize about Clarkson. If he were on American television, by now he’d have to have had more plastic surgery than Joan Rivers just to keep his job. And he’d have to tone down his act. Basically, he would have to reinvent himself as Ryan Seacrest to keep working. So, I admire him and the BBC for letting him be who is he is, all critics be damned. Still, there are many Brits who think of him as a colossal jerk and he does do his part to encourage them.

What I am critical of Clarkson for, both the writer and the Top Gear host, is how he engages in outdated national stereotypes whilst reviewing cars. In fact, there’s a whole page on the Times‘ website which features a list of reviews based on his thoughts about the countries that build the model. You can see it here.

For Clarkson, French cars are always flashy but awful, German cars reflect Germans – sensible, reserved, etc. Engaging in these stereotypical notions is unfair to both the countries and their automakers, and in the year 2007 it’s really time to move past them. Maybe the underlying ant-Americanism (Clarkson can really rag on those big, clunky American imports) and Euro-skepticism sells in the UK but Top Gear has an international audience and it would be an improvement if he dropped it.

What I really respect about Clarkson is the writer you see in the Times. One cannot deny his humor, talent for language and the authenticity of his voice. It defines the notions of trade craft and professionalism. This guy can write. Most of his reviews begin with a few hundred words on whatever theme or topics have come to mind. The first half of his articles are not car reviews at all but ruminations on life. He then picks up a theme and transitions into the car review and whether it really fits or not doesn’t matter because his writing is so strong.
Click here to check out Clarkson’s work.

But the one critic I do enjoy reading most, without reservations, is another writer whose whirling prose and apt metaphors never seem forced or ring false. That would be Dan Neil of the LA Times.

Neil has the talent of Clarkson but with a quainter, reserved style. As an American, he lacks the brashness of Clarkson’s sardonic humor. He’s more good-natured but I don’t think GM would agree. They once pulled half their ads off the LA Times because of him and were forced back because of complaints by local dealers dependent on the ad spending.

(Note to GM: If you don’t want negative reviews, don’t make bad cars. You made some really bad cars for many years, as your own most-candid executive Bob Lutz will readily admit. If it soured both critics and consumers alike, maybe even to the point where they wouldn’t give you credit when you built a decent car, it’s of your own doing.)

I was once talking to James Cobb, editor of the NY Times automobile section where Neil worked for many years, and he remarked how Neil had honed his skills while working there. He was taking credit but credit the NY Times, or any paper that gives a writer a chance to evolve, deserves. No matter how much raw talent you have, you don’t just wake up one morning and start writing like Dan Neil. Neil has the distinction of being the first and only automotive writer to win a Pulitzer Prize for criticism. That is an exceptional achievement. To write so well on what is essentially consumer advice that it overwhelms judges measuring your work up against theater and art criticism for literary merits considerable praise. You have to be pretty spectacular to get that kind of attention.

Neil is probably more telegenic than Clarkson, judging by the video reviews posted on the LA Times Highway 1 section. It would be great to see a North American version of a show like Top Gear that is as much about punned metaphors as it is about a passion for driving. I’d love to see Neil host such a show – just as long as he doesn’t wear tight jeans.

Alex Ricciuti is a freelance writer and automotive journalist based in Zurich, Switzerland. He writes frequently for Automotive News Europe.

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By Brendan Moore

07.30.2007

GM’s future product table was published by Automotive News today, and I couldn’t help but notice that Pontiac is planning on releasing a fastback coupe version of the Solstice convertible in 2009.

Good news for me as I have been waiting for the car ever since it was shown as a concept a few years ago. And GM has been denying that a closed-coupe version of the Solstice was in the works ever since. The coupe will be built on the same “Kappa” platform as the convertible, the small rear-wheel drive platform that underpins both the Pontiac Solstice and its stable mate, the Saturn Sky convertible. You have to assume that the same engine and transmission configurations will be offered, but maybe we’ll get a more powerful engine choice with the coupe, since it can handle the power a little better, but that’s just idle speculation on my part. The Kappa platform is set up to accommodate a four-cylinder like the one it has now, as well as a V6 and a small V8. I can dream, can’t I?

In terms of looks, no word on whether the planned coupe will hew to the lines of the concept (shown above) or go in a different direction. One would think the production car will resemble the concept, but it’s been so long since the concept was shown that the production car may have evolved considerably in the design studio since then.

Regardless, it’s exciting that we’re finally going to get a small affordable RWD performance car to consider again when we’re car shopping. A lot of people that would prefer RWD in their car cannot afford a RWD car like a BMW, and find a RWD car like the Chrysler 300 just too big for their needs. So, good news and the payoff is not very far away, either.

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By Brendan Moore

07.29.2007

There have been several articles recently in various publications (Automotive News, The New York Times, etc.) concerning the fact that although light-truck sales have dipped as the price of gasoline has remained higher than in the recent past, sales of the largest and/or most luxurious of the full-size pickups have actually increased. Consumers cannot seem to get enough of pickup trucks like the massive Toyota Tundra CrewMax and the King Ranch Ford F-150, which also, by the way, have massive price tags of $40,000 and up. If the truck happens to be both large and luxurious, there are sometimes waiting lists for specific models. Large, luxurious, or the usual combination of both, I will state the obvious and mention that these behemoths drink down gasoline at alarming rates.

Even though I am fully aware of the consumer behavior noted above regarding truck purchases (I look at the sales figures of every vehicle every month so it’s tough to miss), it still is perplexing to me how these truck buyers seem to be able to willfully ignore the ever-increasing price of gasoline in terms of justifying the purchase of a full-size pickup truck.

And, I should be more specific here: I’m not referring to commercial concerns or small businesses like tradesmen or delivery services, etc. that actually use their pickup truck in the pursuit of profits, I’m referring to the consumer buyer that buys a Crew Cab pickup as a family vehicle, or buys a new Toyota Tundra or a Chevy Silverado to use as a commuter vehicle.

Much like SUV buyers, a large percentage of these truck buyers tend to rationalize their purchase by over-estimating the frequency of “maximum-need instance” events in their lives.

So, an SUV owner may tell you that she “needs” a 3-ton, seven-passenger SUV because it will seat seven people, and she carries seven people “all the time”. The reality you find upon analysis in this specific example is that this maximum-need instance occurs on the average once every 35 days, and even then, it wasn’t a necessity – the six kids she carried could have been split up into different vehicles after soccer practice, but the choice was made to put them all together since space was available.

Many consumer truck buyers engage in the same sort of rationalization; if you ask them why they bought a truck, they’ll tell you that they “need” it for picking up lumber at Home Depot or moving furniture or something else that they do “all the time”, when the actual frequency of these maximum-use events is very low indeed.

2007 Toyota Tundra 4×4 CrewMax (5704 lbs.)

Of course, to be fair, human beings rationalize all sorts of things, and it’s not to be expected that people who buy trucks or SUVs when they don’t really need them would be different in that regard. What is surprising is that the desire to have a large truck seems to be so resilient in the face of rising gasoline prices. A reasonable assumption would be that every rationalization has its limits. Even consumers that can afford a $40,000 or a $50,000 pickup truck are not immune to the price of gasoline. I mean, I like trucks, too – I’ve owned over 12 pickup trucks so far, so I can understand the attraction, (although I’ve never used one as commuter vehicle) but gasoline where I live (Northern CA) is around $3.50 a gallon and it keeps going up inexorably. The situation is the same in the rest of the country, even if the price isn’t as high. Even if you skip the rationalization, and say, “Well, I don’t have a good reason, I admit it, I just like driving a truck, and that’s my reason for having a truck”, there still has to be some point at which the price of gasoline intrudes upon the fulfillment of your desire to drive a large truck.

And not to get sidetracked here, but people often ask us here at Autosavant if we think the price of gasoline will keep going up and what it will be two years from now (24 months into their 60-month auto loan).

In case you have the same question, here is the general answer I give them:

Oil is being depleted steadily while demand worldwide continues to rise. There are no indications currently that any new oil reserves in any significant amounts will be suddenly available in the future. There are no indications currently that demand for oil will do anything except increase dramatically in the next 20 years. There may be hiccups in the price of oil that manifest themselves as price plateaus such as the one we had recently, but the long-term forecast is for oil prices to continue their steady trajectory upward over at least the next two decades.Oil prices will drop when there is less demand for oil. That condition is extremely unlikely in the foreseeable future. You should prepare yourself for higher oil prices, and therefore higher retail prices of gasoline until substitutes are found for one or both. To not prepare yourself for this pricing environment is to delude yourself.So, the summing up is this: If you’re in an income range where it doesn’t really matter how much gasoline costs, then buy whatever you wish without regard to future price increases. If you are in an income range where paying $4 a gallon of gas would take up too much of your after-tax income, then I would suggest you do the math based on gasoline being $5 a gallon (it’s not that unlikely within the service life of the vehicle) and buy what you can afford to buy gas for at that price per gallon.

In terms of a temporary spike to $5 a gallon, refinery capacity is so stretched at this point that we may be only one Gulf hurricane away from the five-dollar mark. But I digress.

Back to the big trucks: And so, of course, occasionally the question about what we think the price of gasoline will do comes from someone considering buying a big ‘ol truck. Despite the answer above, I’ll still get an email back from a percentage of those prospective truck buyers saying something along the lines of: “Thanks for your advice, but I got the Dodge pickup with the Hemi engine I was looking at. I just couldn’t pass it up. Hey, what can I say, I just love driving a pickup truck, and besides it will be handy for carrying stuff around, right?”

So, another guy using a truck as a daily driver that gets 10-15 mpg. There are millions and millions of people that have made the same decision.

Part of my background is in consumer research and statistical analysis, and obviously, there must be some price point at which the cost of gasoline will decrease the sort of behavior you see regarding the purchase of trucks and SUVs by consumers, but I must admit, although large SUVs are showing serious declines in retail sales, I thought that we would also see much bigger declines in full-size truck purchases than we have so far at the current price point of gasoline. You see some deterioration in consumer sales in these segments, but no large-scale abandonment. And, as noted previously, the upper-end vehicles in the light-truck segment are actually showing healthy sales gains. It’s stunning, really – there actually seems to be a point-for-point inverse correlation between fuel mileage and unit sales. The lower the fuel economy, the greater the sales gains in the full-size truck segment.

2007 Ford King Ranch F-150 – be prepared to pay over sticker

How much will gasoline have to cost before economic self-interest supersedes the desire for a large truck for most of the people in this group of consumer buyers? Right now, I’m just not sure. A Reuters/Zogby poll released last week stated that 40% of Americans would curb their driving habits if gasoline reaches an average $3.50 a gallon, but, personally, I don’t think that that’s the magic number (see Ok, but if they go any higher, THEN we’ll cut back by Chris Haak printed earlier this month). I think it’s the psychological barrier of $4 that will really do it.

But, I think we’ll find out soon enough whether I’m right about the $4 a gallon threshold. Then, the question will be whether this group of consumers that buys large luxury trucks and so far has been impervious to large increases in the retail price of gasoline, will show any signs of migration to other types of vehicles. Theoretically, their price point could be $5 a gallon. I cannot fathom this, but I suppose it could even be as high as $6 a gallon for the buyers in this segment. It’s a price point that would have seemed ridiculously high to me if I had plugged it into a statistical model 24 months ago, but now, I’m not so sure. A sustained average retail price of gasoline at $5 a gallon would decimate a lot of vehicle segments in the U.S., but I’m uncertain about this buyer segment. It seems to have a lot in common with the high-performance sports car segment in terms of its ability to absorb fuel price increases.

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By Brendan Moore

07.28.2007

The largest auto manufacturer in China, Shanghai Automotive Industry Corp., and Nanjing Automobile Group, the owner of MG, have announced plans to merge.

Shanghai Automotive produced around 350,000 cars through its joint ventures with General Motors and Volkswagen in the first 5 months of 2007. It has also started producing cars under its own brand in 2007.

Nanjing Automobile is a much smaller concern, but it owns one of the most recognized brands in the world, the famous MG Rover brand of England. Nanjing outbid Shanghai for the rights to the failed MG Rover in 2005, surprising everyone in the process. Nanjing started producing MGs in China in March, started limited production again at the famous MG plant in Longbridge, England last month, and has vague plans to build MGs in Ardmore, Oklahoma as well.

It is well known that Nanjing’s efforts to revitalize the MG Rover concern have taken a heavy financial toll on the company. Additionally, the company has made some public relations missteps in the U.K. regarding their efforts to re-start production and market the cars in England. Nanjing also over-estimated the brand power of MG in China, and has not experienced the anticipated welcome in the local market it counted on for their MG coupes and sedans.

As an example, Nanjing’s sales brochures in China state that MG stands for “Modern Gentleman” since the company believes that “Morris Garages”, the original meaning behind the initials in the famous octagon, does not resonate with prospective buyers in China.

Concurrent with their difficulties with the MG Rover business, Nanjing is also deep into in a so-far disastrous joint venture with Fiat in China.

The announcement of an impending merger lines up with the Chinese government’s keen desire for the many companies in all industries in China to merge and create strong national entities to compete on the global stage.

No other details in terms of timing of the planned merger are available at this time.

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By Chris Haak

07.26.2007

Chrysler announced today that it is expanding its existing 3 year/36,000 mile basic limited warranty to a lifetime limited warranty on powertrain components on “most” new Chrysler, Jeep, and Dodge vehicles purchased from dealer inventory and delivered on or after July 26, 2007.

I applaud this move – it’s likely to get the company noticed by buyers and alleviate many of the quality concerns they may have had. It also can work as an olive branch from Chrysler to its frustrated dealer body, who are still smarting from having sales bank inventory shoved down their throats over the past few years. The company also expects that the better warranty coverage could allow it to reduce its incentive spending, which is among the highest in the industry today.

The details are:

• The warranty covers all parts and labor needed to repair covered powertrain components – engine, transmission, and drive system.
• It applies only to the original owner or retail lessee.
• To continue warranty coverage, the owner must have a powertrain inspection performed by an authorized dealer once every 5 years, within 60 days of each 5 year anniversary of the warranty start date.
• Diesel vehicles and SRT vehicles are excluded from the lifetime powertrain warranty plan.

One key detail isn’t clear. Chrysler’s press release specifically says that the warranty applies to most new Chrysler, Jeep, and Dodge vehicles purchased from dealer inventory. So, what isn’t clear is whether the improved warranty coverage also applies to units ordered, and not purchased from dealer stock.

While the move certainly shows a lot of confidence on Chrysler’s part in its products, the move could backfire, because there will probably be some die-hards who kept their 2008 Sebring until 2048 and need a part, which may be nearly impossible to find or repair at that point. As long as the powertrains prove to be reliable and durable, and enough original owners sell or trade in their cars before problems arise, it should be a successful program and possibly inspire competitors to improve their coverage. If Chrysler’s 2006 and newer powertrains do have problems in coming years, the company is going to be stuck with a huge bill.

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Ford introduced its advanced Twin Force engine family with the 415hp 3.5l V6 in the Lincoln MKR Concept.

While in Europe the Twin Force engines will supplement and possibly replace diesels, in the United States, they will be the only non-hybrid fuel-efficient options. In the U.S. the diesel emissions regulations are already very strict, making diesels quite expensive, and removing them as the clear choice for fuel economy. Only a handful of diesels have been announced for the US market, and while there will be a couple more, we are unlikely to experience the kind of diesel revolution that swept Europe about ten years ago.

We cannot, however, credit Ford for pioneering development of advanced gasoline engine. Volkswagen has been exploring, developing, and selling advanced gasoline engines for years now, using exactly the model Ford is pursuing – their turbocharged engines were the optional, more powerful, and more efficient options to the base engines. VW is also well ahead of the game of moving the gasoline engine even further. They have developed an experimental gasoline engine that can run off of spark-less compression ignition, just like a diesel, and it also delivers equivalently excellent mileage. Ford has not gone that far, yet.

Unlike VW, Ford also has previously not had the same success squeezing mileage out of their turbocharged and supercharged engines. We do not have to go very far in the past to see some examples. Mazda offers three models with turbocharged 2.3l four-cylinder engines, and while at least one of the vehicles – the CX-7 crossover – is pegged as “efficient alternative to V6 crossovers,” in reality the CX-7 fails to deliver. The 260-odd horsepower turbocharged CX-7 achieved considerably lower mileage than, as an example, the Toyota Rav4 with a 3.5l V6 and the same power output. To add insult to injury, the Rav4 can run on regular, while the CX-7 requires the premium stuff. Other examples, like the supercharged 3.8l V6 from a couple years back, did not fare much better. Inside sources, however, indicate that the new 3.5l Twin Force six-cylinder testing in the F150 delivered 28 miles per gallon in highway driving, which would of course be an incredible number for a 380 ft-lb engine in a full-size truck.

Needless to say, Ford is excited about their new family of engines. They are aiming to deliver some excellent performance and economy, and even adding a new advanced dual-clutch robotic transmission to the mix (another example of taking ideas from VW). For now, the prudent realist should be skeptical of these promises and watch the official numbers as they are released. Fortunately, we will not have to wait too long to see; all but the eight-cylinder are to be on sale by February 2009, with the first engines appearing around this time next year. Until then, here’s to hoping.

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By Chris Haak

07.25.2007

Chrysler Group, which has been acquired by Cerberus Capital Management, is trying to tap debt markets for $20 billion to fund the new company’s automotive operations and its finance unit after the transaction between Cerberus and DaimlerChrysler closes on August 3. The company’s bankers have been trying to convince investors to purchase $12 billion in loans for the auto business and $8 billion for Chrysler Financial.

So far, the $8 billion loan sale for Chrysler Financial appears to be on track to be sold by the end of this week, but today, the bankers decided to postpone the sale of the $12 billion loan sale for the auto business due to a lack of buyer interest. Instead, they will fund the bulk of that debt – $10 billion – from their own pockets. If these banks (J.P. Morgan, Citigroup, Goldman Sachs, Bear Stearns and Morgan Stanley) don’t eventually find buyers for the loans, and if Chrysler has trouble repaying them, these banks would bear the first losses (investors who bought the rest of the loans would be given priority over Chrysler’s assets if the company was in default).

Chrysler isn’t the only auto company experiencing this problem. GM’s sale of its Allison Transmission unit ran into similar financing problems this week. Wall Street firms put off a $3.1 billion sale of loans that would have funded the buyout of Allison by private-equity firms. Like the Chrysler-Cerberus transaction, the Allison sale is likely to still proceed.

The root of the problem is that debt investors have gotten nervous lately about the huge amounts of debt being underwritten to fund buyouts. On top of that, bonds tied to the subprime mortgage debt market have suffered in the past several months, making debt financing – a favorite tool for both the auto industry and for private equity – more difficult to use.

In the Chrysler and Allison situations, the lack of an interested market for the debt offerings probably won’t be a deal-killer, but this development in the debt market may not be welcome news for companies that are in a compromised state and need access to as much capital as they can get to fund their restructurings.

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By Chris Haak

07.24.2007

Today, Maserati announced that it has earned an operating profit for the second quarter of 2007 (before one-time items) of approximately €1 million. This is the first time that Maserati has turned a profit since it was acquired by Fiat in 1990. Last year in the same period, Maserati reported a loss of €7 million. The company also broke even for the first half of 2007, while it had a €26 million loss in the first half of 2006.

The company attributes its newfound financial success to the highly-regarded Quattroporte automatic, which boosted Quattroporte sales by almost 40% over the first five months of its availability. Previously, the Quattroporte’s transmission was a rear-mounted Duo-Select semiautomatic transmission which was relatively unrefined (according to reviews) and wasn’t happy loping around town. It might have been acceptable in a no-holds-barred performance vehicle such as a Ferrari, but not in a car that competes with other $100,000 luxury sedans.

After much criticism, Maserati re-engineered the floorpan of the Quattroporte and equipped it with a ZF-sourced six-speed automatic transmission mounted in the front of the car to create the Quattroporte Automatica. The new transmission basically addressed nearly all of the complaints that owners and reviewers had about the Duo-Select one, and proved to be a wise move for the Italian automaker.

Maserati expects further success for the rest of 2007; in fact, with the upcoming launch of the Granturismo four-seat premium coupe, Maserati expects to earn a profit for the full year and to sell 35% more vehicles than it did in 2006 (7,600 versus 5,600), and even more in 2008.

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