Friday, January 16, 2004
I read on Allpar, probably the best source for Chrysler news out there, that Schremp, the German-Mercedes Benz installed head of Chrysler, was voted one of the worst managers of 2003 by Business Week. That made me think: Have any acquisitions gone well in the auto industry? Here's a list of the one's I came up with:
GM/Saab: After a decade of GM interest in this company, only VERY recently has the company begun to turn around, and only after largely compromising what it is Saab does. The 9-3 is the most un-Saab car ever made by Saab, and though I personally like the vehicle, it has little of the old Saab quirkiness in it. I expect this trend to continue, but I also expect the trend of Saab to improve, to continue. Grade C+--for compromising the brand, and only achieving success recently, after a failed decade.
GM/Fiat: So far, I haven't seen one good thing to come out of this partial acquisition for GM, except that Fiat might pull out of it, and it has convinced GM to stop buying failing European brands. They didn't get control of Ferrari, Fiat has not started selling Alfa Romeos in the US, and Fiat could at any time force GM to buy the remainder of the company at a cost of billions. GM would undoubtedly fight this in court, but even that would cost millions. Fortunately for GM, it looks like Fiat is getting out of the deal. It might make future development of Opel cars cheaper, but even that is years off and will cost billions in research.
Grade D--For no benefit to either company, except for serving as a warning to not acquire further in Europe. GM of course bought Daewoo recently, but I have high hopes for that acquisition.
GM/Suzuki--Suzuki has a strong presence in Japan, but not that strong, and GM has benefitted from the relationship with a line of small SUVs built on Suzuki platforms, for sale as Chevrolets. These SUVs aren't that popular however, and Suzuki continues to struggle in the only foreign market Japan finds success in: the U.S. Still Suzuki is not in danger of bankruptcy anytime soon like some other acquisitions. Grade C---This still might work out, and GM gets a toehold in the Japanese market. It's up to GM to make use of that toehold, the Chevy Cruze did abominably in Japan. Boost Suzuki, not Chevy in the JDM, Japanese are very brand conscious.
GM/Subaru/Fuji Industrial--This deal has gone well for GM, to a small extent. Subaru is a small company, but it is a successful small company, so that must bring GM some profit. The jury is still out on whether Subaru can help Saab with the Saab 9-2x; at the LA autoshow, NO ONE was looking at this car. Subaru does well in the US, but it can't afford more mistakes like the Baja. Grade B---Again, just because you own it, doesn't mean you can sit on it. GM should make more of an attempt to utilize Subaru. It's clear they don't know what to do with it, but won't sell it, because it makes money. They should use it to help their own line of small cars, like the Cobalt.
Daimler/Chrysler--Where to begin with this one? Sure, some might say, it's easy to beat on the injured, but realistically Mercedes has done a TERRIBLE job with Chrysler. Since the acquisition, there have been ZERO new car platforms for Chrysler. Not one. The only new models that have come about, were already in the pipeline. The first new platform will be the Chrysler Cordoba errr, I mean the Chrysler 300, and I am very skeptical this will sell. Chrysler has been trying for decades to get into the luxury business, and no one has fallen for it. Realistically, I think Mercedes was never wealthy enough to both buy Chrysler and fund the company's future. Chrysler was a larger company than Daimler, they were only bought out because their stock price was so low. It's probably too late to separate the two companies, as Kerkorian the disgruntled stockholder wishes to do, and separation would probably only hurt both dramatically. Grade C--We'll have to wait for what the future will bring, but so far Mercedes has only done what it knows how to do, which is make luxury cars. And Chrysler/Dodge is not a luxury car maker.
That's all for now, I'll go over some of the other mergers in the industry tomorrow...
Wednesday, January 14, 2004
Is there a media bias against the Big 3? Maybe...
Chrysler recalls more than two million vehicles. GM a few days earlier was a recaller as well.
Are the Japanese or Europeans issuing recalls? From my own personal experience, several thousand Nissan Sentras were recalled for an engine insulation problem, that can cause complete stoppage of the vehicle. I know this, because I own a Sentra '01. Where is the coverage of this recall? Nowhere to be found.
I've wondered why this occurs, why the American recalls make waves, while Japanese recalls are not as prevalent. Many on message boards that support American vehicles, and many American executives have made light of this, and called it bias. I think there is some bias but there are other factors:
1. There are just more American cars on the road. Though the Big 3 have taken hits in the past few decades, still more than 60 percent of the new passenger vehicles sold every year are American. That means more people are buying more of the same model, and when there is a recall on that model, more are affected.
2. There is an organized auto writing industry that is in Detroit. There really is no automotive journalism in California that is as critical, or as close to the Japanese industry as the one in Detroit. The Detroit Free Press has pretty good coverage, and even though there are a lot of fluff pieces, there are also a lot of stories about the American auto industry's problems.
3. Honda and Toyota make slightly better vehicles. The quality gap is closing, but Toyota is not immune, with their engine sludge problem for instance. But it's still better. In a few years though, with more Japanese cars on the road, expect their to be more big recalls. And more coverage.
4. The Japanese are probably not as open with their recalls. Mitsubishi is famous for covering up recalls for decades. The practice is undoubtedly used by the other Japanese manufacturers, but probably (hopefully), not as large in practice. Mitsubishi has a reputation for not building as high of quality of vehicles as its Japanese cousins. But it wouldn't surprise me if there is a practice.
Regardless, these enormous recalls are a sign that there are still problems, even with JD Power reporting the quality gap closing between domestic and foreign. Reputations take decades to make or break, and I fully expect, if the Big 3 keep making quality products, for buyers of foreign cars to come back to the fold, but a media blitz like this doesn't help things.
Tuesday, January 13, 2004
Click here. Culture DOES effect design.
Sunday, January 11, 2004
What's the biggest difference between American cars now, and American cars at the height of their popularity in the 1950s? The cars now are bland, and inoffensive.
What kind of vehicle has kept the Big 3 in business? Big, offensive, brawny vehicles like SUVs and pickups.
In no industry can you play catch up and expect to win. The American manufacturers will never build a car with as few problems as a Toyota or a Honda. They'll also never be able to build a car that handles as well as a BMW or Mercedes. But why should they try? Every auto exec from Detroit I see interviewed, tries to compare their car to something else. References are made to JD Powers on custumer satisfaction, and how their cars never break down like the Japanese. And then when a new luxury car is made, it is immediately compared to the latest from BMW. In fact, Bob Lutz bragged about how the Cadillac CTS was track tested at Nurburing race track in Germany, where they test their cars.
But they don't get it. Why would I buy something that is like a Bimmer, when I can just buy a Bimmer? There is no Bimmer supply problem, I could walk down to the local dealership and drive home today in one if I had the money.
What American manufacturers need to create are vehicles that are uniquely American. Americans want big cars, they want cars that are flashy. What are the most popular American cars year in and year out? They're the cars that haven't really changed in focus through the generations. Corvette, Mustang. The best selling convertible is a Chrysler Sebring. Where else can you get a large car convertible, that is cheap and perfectly suited for grand touring? It's a perfect car for retirees, and it sells well to them. Americans don't mince words in their demands. The world is offended by our large SUVs, but we're proud of them for better or for worse. The Ford 500 was an attempt to do that with a car. It's big, but then they Europeanized the exterior, and they ended up compromising. Because of this, the car is in danger of becoming another Ford Taurus, rental market only.
So go for broke. The American consumer will thank you with his or her paycheck.