Forget H1N1! How Computer Viruses Could Kill Cars (And Those In Them) In the Near Future

One evening recently my wife yelled for me from her home office. Unfortunately, a virus had infiltrated her notebook pc and had taken the whole system over.

Like other pediatricians, she has been working long hours due to the nasty spread of H1N1. Ironically, standing in the way of her dictating the huge stack of patient charts was an entirely different type of destructive virus.

As some loyal readers know, long before I was an automotive writer I was a tech geek. I was first exposed to computer viruses in the 1980s when my high school became the first in the world to get hit with a system-wide virus — the dreaded nVIR, which took down the school’s fledgling Mac network. After college, I ran the business and technical operations of an early internet provider, Cyberspace.com, which in 1995 provided me the opportunity of working in cooperation with the FBI Computer Crimes Division in an attempt (make that “failed attempt”) to apprehend one of the world’s most wanted hackers and phreakers (one who hacks telecommunications networks and phone systems). I also later worked for web, system management and security software companies.

Ridding computers of malware (the name for malicious software viruses, worms, adware, etc…) is very similar to fixing problems with a car. One simply tries to methodically isolate the symptoms and problems. It is generally a tedious process, but with a great sense of accomplishment when the system is returned to good working order. It’s not surprising that I take as much pride in ridding a computer of a virus as I do synchronizing a pair of SU carbs.

Just like with automotive technology, computer viruses have become far more advanced and complex. I marveled at this specific virus’ ability to lock out the Task Manager and Registry Editor functions, prevent .exe files from running, all while elegantly blocking any web site with any mention of the name of the top anti-virus software applications.

At roughly 1:30AM in the midst of running a scan my train of thought segued from tampering with computers to hacking cars. I chuckled as I remembered when my friends wired the brake light circuit of a guy’s Miata to the horn, so the horn blew every time he hit the brakes.

Then almost immediately I got a sinking feeling in my gut. It occurred to me that the day when an elegantly-designed, yet very malicious virus targeted towards cars and trucks is far closer than any analyst or auto manufacturer have seemingly acknowledged.

Hackers and virus designers utilize two elements to work their evil magic: a host (a vulnerable system) and access (the ability to remotely install software to said host system). As far as the former, cars have been developing as host systems since ECUs of electronic ignition and fuel injection systems replaced points and carburetion in the 1980s. When the 1997 C5 Corvette first appeared, it did so with more on board computers than the first NASA Space Shuttle.

Access to car-based computer management, however, has been lacking. Over the last twenty years automotive systems have essentially been closed systems with access available only via mechanics’ scanners. While scanners do have downloadable updates, the manufacturers ensure that these are also fundamentally closed systems.

The biggest gift to hackers in terms of access is the Internet. By web-enabling cars and trucks to upload and download data from the ‘Net, this can certainly provide the right mind with a key to create mass vehicular chaos.

Let’s face it — the worst thing that can happen to your home computer is that all the data is erased and a full reformat and reload of software is required. All one needs to do is have a creepy imagination (like I do) to see the infinite opportunities for wreaking far greater damage on daily life that viruses could have in the automotive world as compared to personal and business computing. Think of it like Hootie and The Blowfish versus The Beatles in terms of global impact.

New vehicles feature drive-by-wire throttle control, computer-managed variable ratio steering, software-driven transmission, data-processing for stability control (yaw, ABS braking and traction control), and of course on-the-fly manipulation of fuel, spark and air induction. If these systems were to be insecurely tied (even indirectly) to a seemingly innocuous web-enabled process – any or all systems could be hacked and reprogrammed with a virus created by a guy sitting in his parent’s basement with a couple computers and a stack of empty pizza and Mountain Dew bottles.

Imagine if your car had a virus that sporadically reversed the drive-by-wire gas pedal to make wide-open-throttle at the standard idle position. Maybe someone’s idea of “funny” would be to constantly vary the variable ratio steering or deploy all the airbags given a certain odometer reading. My nightmare, though, is that a hacker would write a virus to utilize throttle position data and stability control to simply speed a car up, apply one brake and disable all airbags to ensure a catastrophic collision.

How much web-enabling is enough to open the Box in Pandora’s Camaro? I have no idea. Since manufacturers are already touting in ads the ability for cars to send emails to dealers and text to owners when service is necessary, the window of opportunity seems to be opening. If I were a betting man, I’d guess that the moment one can browse the web or check email via a factory-installed navigation system, the games will be on.

I hope I’m wrong. Maybe the worst thing that will happen is that the nav system in all Dodge Chargers will instantly show all Hooters restaurants and adult theaters in the US. Of course, given that car’s demographic, this would probably be considered a well-appreciated benefit.

And don’t expect anti-virus software to help your car. Most system administrators will tell you that the consumer security software products like Norton are useless, because they are reactionary. They are even less valuable than a car alarm, because at least a car alarm annoys people into noticing a vehicle has been broken into before they throw rocks at the car in hopes of shutting off the noise. In the case of consumer anti-virus software, it just sits there eating RAM totally unaware that the system has been taken over.

As I recall in my discussions with the FBI Computer Crimes guru, the challenge is that there are lonely people spending twenty hours seven days per week trying to hack software, but in the best case scenarios, the engineers are only working eight to twelve hours Monday through Friday to prevent them. Maybe I’m a cynic, but I don’t trust that auto manufacturers right now are taking to heart the old precept: hope for the best, plan for the worst.

Electric Car Ideas That Are Bound To Fail

It seems like just about everyone has a “new idea” that will inevitably make electric cars more popular than those relying on the good old internal combustion engine. Of course, maybe it just seems that there are way too many people trying to reinvent the wheel, because at every function I go to there’s someone telling me about another company or individual who is going to revolutionize electric cars.

Let’s get something straight here folks – there haven’t been any discontinuous innovations in the electric car in over 100 years. There haven’t been any important continuous innovations in nearly 100 years. Even the gas-electric hybrid with regenerative braking was developed when a very famous dead guy, Ferdinand Porsche, was a very young, very alive engineer for Lohner.

Blame low gas prices and Cadillac’s introduction of the electric starter for all of this. Prior to the debut of Kettering’s self-starter as standard equipment for the “Standard of the World” automaker in 1912, thousands of people drove electric cars. Not coincidentally, 1912 was the peak year for sales of electric vehicles. In fact, electric cars were a larger percentage of the market in 1910 than now.

Demographically speaking, most electric car owners/drivers were urban women who used the cars for shopping. Considering that starting a car used to require a strong pull on a large crank while standing directly in front of the vehicle, it is not surprising that women tended to like the quiet reliability of flipping a switch inside an electric car. As for the quiet, powerful steam cars – these often took nearly a half-hour to warm up, after which the right set of circumstances could set the whole system on fire like Nikki Sixx’s boots during early Motley Crue concerts.

It’s only recently that companies have again thought about electric cars. Since people aren’t really that interested in history, they’ve decided to reinvent the wheel or bark up trees that have long been deemed worthless.

Here are some of the “revolutionary” ideas about which people have told me while at dinners or other functions:

The “battery swap” concept: There are a lot of people trying to do this, but the most visible is from Shai Agassi, an Israeli guy who believes that the key to electric car acceptance is to have battery stations where motorists simply pull out the depleted tray of batteries in their cars and swap for charged batteries. Sounds like a great way to overcome the range issue, right? It’s just like barbeque propane tanks – when you’re out you swap, correct?

No – not really. In fact, the relationships of car versus propane tank is about as valid as the shared characteristics of Rush Limbaugh and Anne Hathaway. I have a better shot of winning the Formula One Driver’s Championship and America’s Top Model in the same year than this becoming a reality.

Let’s tackle the minor challenges first:

• Unlike propane tanks, batteries – even lithium ion (or any yet-to-be invented cell made out of a combination of unobtanium and whatever pops out of a moon crater explosion) lose quality over time. You drop off your perfectly good new batteries and possibly get a tray of old crappy ones in return. Instead of getting a 50-mile range, you get 18 miles and the oh-no light comes on – which, incidentally, you scream at, because this warning light is taking much needed juice away from propelling your ass back to scream at the place that gave you these used-up batteries in the first place.

• Distribution: Then you have to find a station with batteries. Not only are battery packs much, much, much more expensive than metal propane tanks, but also they are a lot heavier and more space-consuming. Don’t think that every Kwick-E-Mart is going to invest in a large extra building and employ another foreign-born better-educated-than-your-average-banker worker to lug 200-pound battery packs all day.

Now, it’s time to bring up the toughest barrier:

• Standardization: As it stands, no single electric car or hybrid shares the same battery type/number, connectors (and most importantly) packaging with another non-badge-engineered vehicle. For instance, Tesla uses thousands of modified laptop battery cells, which is totally different from the dozens of lead-acid batteries in many of the electric tin-can commuter boxes I see around my parts of town. Considering that automakers have found six different ways of manually shifting an automatic (push up on a stick to upshift, pull down on a stick to upshift, push right on a stick to upshift, pull the right paddle to upshift, push the right button on a steering wheel to upshift, or BMW’s push either thumb paddle to upshift – not to mention the 7-Series unique one-button to downshift) ever expecting the companies to unite and tackle the almost impossible task of standardizing on a single battery technology that fits (and complies with safety regulations) in everything from an SUV to a sports car is about as big of an ask as requesting your spouse arrange for your birthday a three-way with you, her and the entire San Diego Chargers’ cheerleading squad.

“Electric Car Only” Charge-While-You Shop Parking Spaces: Some companies exist to print signs and install charging stations for restaurants, coffee shops and grocery stores. In some cases, these charging stations are little more than standard outlets. In any event, even with high-voltage charging stations, most cars get little more than a mile’s worth of juice in a standard ten-minute excursion into a store. If it’s a 110-volt outlet, ten minutes on the charger won’t give any electric car enough juice to make it out of the parking lot! In other words – it’s snake oil, which might explain why the nutritional supplement store I passed the other day had one such spot.

And before you write in and talk about real high-voltage charging stations in office parking garages and park-and-ride lots: yes, these are great ideas. I do a) believe they need to be installed and b) predict that their adoption and use will be proportional to increases in peak electricity charges and brownouts in California.

The Back-Alley “Plug-In” Conversion: A friend of mine is renting space in his warehouse to a company that expects to get rich installing plug-in electric engines into existing new cars. My advice was to get as much rent up front as possible.

Where to start with this? First, these guys void the new car manufacturer’s warranty. Second, low production – no matter how careful, means poor quality control. Finally, the result is a shorter range at a higher cost per mile than the new car prior to removing the gas engine.

There are some businesses doing decent plug-in conversions for the Prius. Their corporate lifespan is limited, though, since Toyota has already committed to creating plug-in hybrids of its own.

At the end of the day, the only thing that will improve the acceptance of the electric car is to cure what killed it in the first place: range. These small companies will exist in the margins for a year or two more, but then the Chevy Volt technology will certainly kill most of them. I say Volt “technology” rather than just the Volt itself, because the plug-in engine/motor that is the basis of the Volt model will be used in all of GM’s front-wheel-drive vehicles.

When consumers can buy a single car that goes 40 miles on electric and then also go 350 miles on single tank of gas (plus fill up at any existing gas station to continue), it accomplishes what electric cars never could: kill two birds with one stone. The Volt will give electric-only benefits for those who want it without forcing them to exchange batteries, get some shadetree-mechanic conversion…or also own a standard car if they need to go on a road trip.

The Volt might not be that huge of a jump in technology, especially given what the industry had 100 years ago, but it’s a good small step in the right direction that will result in large change in gas prices (good), electric prices (bad), electric production challenges (really bad), and domestic automotive industry growth (very good). It might do very little for the environment, as production of electricity is like Mother Earth smoking ten packs a day and occasionally shooting heroin with the odd nuclear plant. At least it makes oil production a little less important on the world stage.

So Long To Saturn — Its Rings Not Worth A Thing

As The Princess Bride’s Miracle Max would say, Saturn is “mostly dead”. Yesterday GM said Saturn will simply be retired, because after the deal between Penske and GM fell apart, it would take a miracle for anything else to happen.

When the Penske/GM deal for Saturn was announced many months ago, I was a tad surprised. Roger Penske has always had something of a Midas touch turning businesses into cash cows. The buyout of Saturn, however, seemed to be more of a pig than a bounty-producing bovine.

The main problem with the deal was that GM would only continue to build three models—the Aura, Vue and Outlook for Penske through 2011. At that point, Penske would need to find some other corporation to build the cars, which he thought he had (insiders claim it was Renault-Nissan). Unfortunately, that all fell through.

Or maybe it is actually fortunate. The value of a brand producing badge-engineered product lines is precisely the issue I brought up back when Saturn was put on the block. In the old days when a corporation bought out another automaker, it got the brand, one or two production facilities, the trademarks, the equipment, and workers. Now it simply isn’t that easy. Since Saturn produces not one single vehicle unique to its brand, Penske didn’t have the opportunity to buy anything that resembled a true going concern.

It’s obvious that Penske was placing the value on Saturn’s distribution network with which he had longer-range plans. Saturn’s current lineup of vehicles was no doubt a stop-gap until other foreign car lines from China, India and other countries could be imported and sold/serviced via Saturn dealers. Since importing cars is a tricky business, relying heavily on emissions and safety regulatory bodies, Penske needed some breathing room if certain brands needed more time to meet American standards.

I said it before and I’ll say it again – GM killed Saturn a long time ago by stripping its primary value proposition: autonomy. When the brand was introduced nearly twenty years ago, all of the company’s products were unique. If 1990’s Saturn were to have been shopped, it would have found a buyer.

Over the last two decades GM let Saturn lose its value. Initially it was by not replacing the original car models, and then they replaced it with badge-engineered crap. While some would argue that the current lineup of Aura, Outlook, Vue, and Sky are pretty good, there’s no escaping that all the vehicles were available with slightly altered sheet metal (actually, usually it was simply plastic) carrying other brand badges. Penske might as well have been buying the Chevy Malibu as the Saturn Aura!

Sure, there are other reasons people buy dying – or dead and buried, for that matter, automakers. It was popular in the 1980s for entrepreneurs to buy existing parts supplies of automakers leaving the US market…or the entire world, such as was case for companies like Maserati, Checker and DeLorean. Since the parts of Saturn are largely shared with other GM products, it makes this tactic a moot point.

And what about simply buying the Saturn name and brand logo for trademark value sake? C’mon – you’d be hard-pressed to find an automaker with a more ambivalent customer base less likely to buy logo apparel. I suppose Saturn is the modern brand image value equivalent of Essex or Frazer.

So Saturn will soon hit the junk bin. At the very least let’s hope that GM has figured out a better way to close-down a brand more efficiently than when it killed Oldsmobile at a cost of a BILLION dollars.

Tell you what – I’ll make GM stockholders a deal. I’ll buy Saturn…at the invoice price of a new Sky, which is the only Saturn product that (with enough development and bug fixing over a couple generations) I ever thought had any chance of being a really great car.

Come to think of it… GM is going to have to throw in an extended warranty.

Someone Has To Be Profiting Now, Right?

There’s an old adage in the business world: no matter how bad things get, there’s always someone out there profiting from it. It was true when my immigrant great-grandfather and grandfather (with his sixth-grade education) bucked the tide against the depression during the years running into WWII thanks to their scrap metal business…and it must be true in today’s economy.

When it comes to the auto industry, however, winners are seemingly nowhere to be found. We already know that the manufacturers have been getting slammed harder than a teenager in a punk concert mosh pit. Consequently, all the new car dealers, OEM parts suppliers, Madison Avenue advertising companies, and sponsorship-heavy auto sports and lifestyle events have taken it in the shorts.

But someone has to be winning, right?

The knee-jerk reaction is to say used highline auto sales operations are profiting, but that’s not really accurate. It is true that with production of new Mercedes, BMW, Audi, and Lexus at a snail’s pace, new car inventory is a thing of the past (at least for certain models). With desirable units nowhere to be found, potential clients have to either wait or buy used. Most are simply not buying at all, which means compounding the problem with no used car trade-in. The lower supply combined with higher demand has driven up the values of highline used vehicles.

This doesn’t necessarily mean more profits for the dealer or the auction company. Higher prices can’t necessarily be recouped by dealers, and auctions are killed by lower volume. The only dealers which have seemed to do well are those well-run operations catering to demographics rich in panic sellers as well as gotta-have-it-now buyers.

If people are keeping their cars longer, then the automotive service industry is making off like a bandit, right? Nope. Dealer service centers rely almost entirely on new and used car sales to generate business – and overall corporate profits. As for independent shops, the down economy has turned regular service clients into “fix it when something important breaks” customers. Furthermore, the costs of parts, tools and services used by mechanics have all increased…and only so much of these cost increases can be passed on to the customer base in a down economy. The only upside is that there are more good mechanics looking for work, so hiring qualified talent isn’t as hard as it was in the good old days a few years ago.

Collector car auction volume and results are down. Car shows have reduced attendance and participation. People are buying less gas. Restoration parts suppliers are hanging on by a thread. Online listings on sites like eBay and Craigslist are up, but sales resulting from these listings are down sharply.

The bottom line is that no single group associated with the auto industry seems to be “winning”. The quick and the smart individuals, though, are out there positioning themselves for success. Buy low now to sell high later…or taking the opportunity to develop, test and create synergies for new technologies/products now to fulfill a need when the market returns.

And if you couldn’t guess — automotive journalists aren’t winning now, either. With advertising revenue down, the newspaper industry in shambles and a flooded talent pool, it’s nearly impossible for automotive content providers to expand into new publications. Maybe our President will bail out the automotive journalists? I’m 6’4”, doesn’t that qualify me as “too big to fail”?

Chevy Volt’s 230-mpg EPA rating makes even new CAFE standards obsolete

When I had dinner last year with a group of GM executives, Bob Lutz talked at great length about the Chevy Volt. During one part of the discussion where Lutz was complaining about adverse affects of legislators increasing CAFE standards, we had a back and forth regarding the fact that the Volt could conceivably be rated at somewhere between 100mpg and 200mpg by the EPA…hence making those increasing standards moot.

GM announced today that the Volt will likely be rated at 230mpg in city driving. Seeing that, according to Lutz, GM plans to standardize all front-wheel-drive vehicles on the Volt technology (and we have no reason to doubt this strategy), worrying about the new CAFE requirements will be for not.

While the EPA ratings have never been Sandy Koufax-accurate, they have been a good predictor of expected economy. Unfortunately, with the rise in electrical Kwh prices due to millions of plug-in hybrids hitting the grid, they might not be such a great predictor of what the Volt and other future plug-ins might realistically cost to run. But let’s not fret about this today…this is the time to give the 800-pound gorilla plenty of “atta-boy”s for another step in the process of creating a true game changer.

Here’s the release:

WARREN, Mich. – The Chevrolet Volt extended-range electric vehicle is expected to achieve city fuel economy of at least 230 miles per gallon, based on development testing using a draft EPA federal fuel economy methodology for labeling for plug-in electric vehicles.

The Volt, which is scheduled to start production in late 2010 as a 2011 model, is expected to travel up to 40 miles on electricity from a single battery charge and be able to extend its overall range to more than 300 miles with its flex fuel-powered engine-generator.

“From the data we’ve seen, many Chevy Volt drivers may be able to be in pure electric mode on a daily basis without having to use any gas,” said GM Chief Executive Officer Fritz Henderson. “EPA labels are a yardstick for customers to compare the fuel efficiency of vehicles. So, a vehicle like the Volt that achieves a composite triple-digit fuel economy is a game-changer.”

According to U.S. Department of Transportation data, nearly eight of 10 Americans commute fewer than 40 miles a day http://tinyurl.com/U-S-DOTStudy .

“The key to high-mileage performance is for a Volt driver to plug into the electric grid at least once each day,” Henderson said.
Volt drivers’ actual gas-free mileage will vary depending on how far they travel and other factors, such as how much cargo or how many passengers they carry and how much the air conditioner or other accessories are used. Based on the results of unofficial development testing of pre-production prototypes, the Volt has achieved 40 miles of electric-only, petroleum-free driving in both EPA city and highway test cycles.

Under the new methodology being developed, EPA weights plug-in electric vehicles as traveling more city miles than highway miles on only electricity. The EPA methodology uses kilowatt hours per 100 miles traveled to define the electrical efficiency of plug-ins. Applying EPA’s methodology, GM expects the Volt to consume as little as 25 kilowatt hours per 100 miles in city driving. At the U.S. average cost of electricity (approximately 11 cents per kWh), a typical Volt driver would pay about $2.75 for electricity to travel 100 miles, or less than 3 cents per mile.
The Chevrolet Volt uses grid electricity as its primary source of energy to propel the car. There are two modes of operation: Electric and Extended-Range. In electric mode, the Volt will not use gasoline or produce tailpipe emissions when driving. During this primary mode of operation, the Volt is powered by electrical energy stored in its 16 kWh lithium-ion battery pack.

When the battery reaches a minimum state of charge, the Volt automatically switches to Extended-Range mode. In this secondary mode of operation, an engine-generator produces electricity to power the vehicle. The energy stored in the battery supplements the engine-generator when additional power is needed during heavy accelerations or on steep inclines.

“The 230 city mpg number is a great indication of the capabilities of the Volt’s electric propulsion system and its ability to displace gasoline,” said Frank Weber, global vehicle line executive for the Volt. “Actual testing with production vehicles will occur next year closer to vehicle launch. However, we are very encouraged by this development, and we also think that it is important to continue to share our findings in real time, as we have with other aspects of the Volt’s development.”

Summer’s Automotive Summary

We’ve been getting quite a bit of email wondering where we have been and why we haven’t chimed in on a number of large automotive issues. The short answer has been that It has been a busy summer over here. We provide content to a number of different publications, so quite simply put, it was the Four Wheel Drift that suffered.

For all of you who were desperately waiting for our view on current events, here is a summary of where we stand on the issues.

Cash For Clunkers: With our reputation for being involved with collector cars, people assumed we’d be absolutely against CFC. They were right, but not for the reasons they figured.

The conventional wisdom circulating in the classic car and hot rod circuits is that CFC would cause the destruction of thousands of tomorrow’s classic cars…and therefore the program must be stopped at all costs.

We take a different…more pragmatic view that exposes our business backgrounds. The crushed future classics affect from CFC will be far less noticeable than from rising scrap prices prior to WWII…or from the use of salt in a particularly bad winter in the Northeast and Midwest. In other words, most of the vehicles succumbing to the CFC crushers a) are mass-produced vehicles, b) are family cars, c) consequently are less likely to be restored in twenty to thirty years as collector vehicles.

There are two big issues we do dislike about CFC. The first is that we’ve always felt that rebates simply create sales by cannibalizing future higher price/profit sales. Part of the decreased demand in 2007, 2008 and 2009 comes from the direct result of massive factory rebates in 2001, 2002 and 2003. Rebates are an ongoing nightmare for good product marketing folks who battle sales, finance and PR departments who are more focused on making numbers now so they can get their gold Rolexes from bonuses. Rebates kill the pipeline, dilute product value and image (although admittedly the CFC rebate doesn’t dilute product image like a standard manufacturer versions), and create a way for local dealers to provide vehicles at the same price as before the rebates, but without giving up any profit themselves.

The second reason we dislike the CFC program is that unlike a standard manufacturer rebate program that puts the financial burden on the corporation, the CFC program puts it on taxpayers. And before you start writing the comment regarding that the program replaces the current fleet with more fuel-efficient vehicles, that’s a total red herring. This exact same thing would happen anyway – as the current fleet ages, it is replaced with newer vehicles – all which are more fuel efficient. The difference is cost. The artificial way costs taxpayers several billion, the other doesn’t.

The bottom line is that the CFC program is nothing more than a boondoggle for auto manufacturers, dealers and scrap metal recyclers in a wrapper of good intentions paid for by taxpayer money.

GM Selling Cars Via eBay: Here’s a whole lotta nothing. Simply an official program that mimics what hundreds of dealers have been doing with varying degrees of success for nearly a decade. It would have been a real story had GM found a loophole for the anti-trust laws prohibiting manufacturer-to-consumer sales to allow such sales using eBay as the “dealer”.

New Hybrids: Yawn. Meet the new boss – same as the old boss. These are still uninspiring vehicles that struggle to get better mileage than the original Geo Metro despite delivering not much more in terms of performance, size, comfort, or enjoyment. Again people, hybrid technology is over a century old.

Seller Beware: Autoweek reported in its current issue how people consigning their classics to Kruse have reported not receiving payment from the auction house for more than six months after their vehicles sold at auction. Even scarier for vehicle sellers – there is the Washington State court opinion at http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=614185MAJ , which results from the mess created when a car consignment operation (AGS Performance) closed prior to distributing the funds received from selling a Ferrari F355 on consignment. To complicate the matter, the selling party never provided the title for his Ferrari. The courts maintained that since AGS was in the business of selling cars, it didn’t need the title to facilitate a legal sale, leaving the buyer (Hensrude) with a legal purchase and the former owner (Sloss) with only the recourse of suing AGS for non-payment on a contract.

The bottom line is that sellers of collector cars need to be very careful these days.

Porsche Panamera: If we have to read another column in a major publication or hear another enthusiast question if the four-door Panamera is a “real Porsche”, we’re going to set ourselves on fire. It was a valid question when the 914…and maybe even somewhat valid when the 928 replaced the 911 as the “top-of-the-line” model in the late 1970s, but not anymore.

Note to publications, enthusiasts and auto manufacturers: the Cayenne is the best-selling Porsche ever and no Porsche enthusiast or purist not wearing a tinfoil hat has ever cared about its affect on the brand, other than to thank it for providing the necessary cash flow to develop low-production high-performance cars like the Turbo, GT3, GT etc… More manufacturers need to ignore the purists, because if you cater to them, you get the GTO, Challenger, retro-Mustang, and new Camaro. Purists love these, but people with money don’t like them enough to buy them.

Meet The New Chairman, Same As The Old Chairman

General Motors just announced that Edward Whitacre, Jr. will be the company’s new Chairman upon the launch of a revised GM company this summer. Kent Kresa has been serving as interim Chairman.
Six board members will be “retiring”. Whitacre will join current interim Chairman Kent Kresa, Philip A. Laskawy, Kathryn V. Marinello, Erroll B. Davis, Jr., E. Neville Isdell and President and Chief Executive Officer Frederick A. Henderson as the core of the board.

At first glance, it might seem like GM is following Ford’s lead by going outside the inbred automotive manufacturing community for its grand poobah. The 67-year-old Whitacre served as CEO of AT&T and Southwestern Bell from 1990 to 2007, which at first glance brings up comparisons to Ford’s selection of former Boeing executive Alan Mullally to be CEO of its company. The primary difference here is that Mullally had significant organizational and line operations experience when he was hired to be the hands-on leader. Whitacre’s experience is mostly in turning entrenched, old-school technology companies into larger companies by purchasing new technology companies. Plus, Whitacre’s position as Chairman is more of an advisory role.

Whitacre also serves on the boards of ExxonMobil and Burlington Northern Santa Fe, which leads one to ask: is it possible to find a guy who has been involved in more old technology / old white-men’s culture companies which have seen their market share shrink due to ignoring shifts?

In other words, it seems GM went out of the auto sector to find a Chairman who is most like a brother from another mother.

This being said, we wish Whitacre luck in his role and hope he surprises the world by working with Fritz Henderson to successfully reinvent GM.

Import Tuners, Hot Rods, Muscle Cars And “Getting It”

If I had a dollar for every collector car guy or hot rodder who communicated to me in some way their lack of understanding about import tuner cars and the kids who drive them, I’d be able to afford a thumping subwoofer and some neon lights for my ‘60 TR3. All too many car enthusiasts seem to look at the coffee-can exhaust crowd with one part confusion and another part disgust.

For those who grew up in the pre cell phone days, allow me to make this very simple for you: the kids you’re looking at driving slammed Civics with wings are just a younger version of you. You just haven’t made the connection yet.

So allow me to make the connection for you.

About ten years ago my father-in-law made some statement about not understanding why someone would do all that crazy garbage to a Honda. I simply asked him: “what was your first car?”

“A 1950 Ford” he replied.

“Did you buy it new?”

“No, it was my parents’ old car.” He explained.

“What was the first thing you did to it when it became ‘your car’?” I continued.

“I stripped off all that chrome. It’s what everyone did in those days.”

“And what did your parents think about that?”

“They asked me why I was ruining the car!”

After explaining that parents don’t give their kids hand-me-down ’50 Fords anymore…now it’s Accords, Civics, Corollas, Tiburons, Eclipses, Imprezas, and since there’s no chrome anymore to take off, personalization trends have swayed towards exhaust, wings, lenses, wheels…he “got it”.

“Getting it” doesn’t necessarily mean wanting it for yourself. It does, however, lead one to understand that spouting derogatory phrases at the guy with the stickers, aero kit and wing on the ten-year-old econobox is no different than your dad yelling at you for buying Cragars and glass-packs for Mom’s Impala…or your dad getting yelled-at by grandpa for unbolting the perfectly good fenders from the ’32 Ford and spending a week’s pay for and a weekend’s time installing that foolish Edelbrock intake and carb setup on its flathead.

At the end of the day, we’re all car people. We might express our love for the hobby in different ways based upon where, when and how we were exposed to cars, but at the core we’re far more similar than we usually realize.

And even if it isn’t your cup of tea, take solace in the notion that most of the drivers of cars you shake your head at today will be scolding their own kids for making similar counterproductive modifications to a hand-me-down family car in the future.

GM Files Chapter 11 and I Say “I Told You So”

This is about the right time to shout “I told you so”.

Way back on November 11, 2008, I wrote an article about why the US Government should not bail out the Big Three called Bail Out the Big Three? History Suggests “Don’t Do It!” I cited England’s debacle with British Leyland and the sad similarities to Chrysler, GM and Ford.

Chrysler already dropped the bomb and filed, then jumped into a panic marriage with Fiat to avoid being auctioned off in parts. Now today, GM dropped the other shoe by announcing this:

GM ANNOUNCES AGREEMENT WITH U.S. TREASURY AND CANADIAN GOVERNMENTS PROVIDING FAST TRACK TO COMPETITIVE FUTURE FOR ‘NEW GM’

NEW GM, BUILT FROM COMPANY’S STRONGEST OPERATIONS, EXPECTED TO LAUNCH IN 60-90 DAYS UNDER NEW OWNERSHIP

GM FILES VOLUNTARY CHAPTER 11 TO IMPLEMENT ‘363′ SALE AGREEMENT

GM IS OPEN FOR BUSINESS IN THE U.S. AND WORLDWIDE, HONORING ALL CUSTOMER COMMITMENTS

Warranty, service and customer support continue uninterrupted, backed by the U.S. and Canadian governments
Essential suppliers to be paid in the normal course
Employees to be paid in the normal course
Operations outside U.S. not included in court filing
DETROIT, June 1, 2009 – General Motors Corp. (NYSE: GM) today announced that it has reached agreements with the U.S. Treasury and the governments of Canada and Ontario to accelerate its reinvention and create a leaner, stronger “New GM” positioned for a profitable, self-sustaining and competitive future.

Pending approvals, the New GM is expected to launch in about 60 to 90 days as a separate and independent company from the current GM (“GM”), with two distinct advantages: it will be built from only GM’s best brands and operations, and it will be supported by a stronger balance sheet due to a significantly lower debt burden and operating cost structure than before. The New GM will incorporate the terms of GM’s recent agreements with the United Auto Workers (UAW) and Canadian Auto Workers (CAW) unions and will be led by GM’s current management team.

The New GM will execute the key elements of its April 27 viability plan, along with additional initiatives, to achieve winning financial results by putting customers first, concentrating on adding to the company’s line of award-winning cars and trucks through four core brands and continuing to invest in green, energy-saving technologies.

Under its plan, GM will sell substantially all of its global assets to the New GM. To implement the sale agreement, GM and three domestic subsidiaries have filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York, and the sale is subject to the approval of the Court. Because GM’s sale of assets to the New GM already has the support of the U.S. Treasury, the UAW and a substantial portion of GM’s unsecured bondholders, GM expects the sale to be approved and consummated expeditiously.

GM has asked the Court to approve a number of steps to protect current and new GM customers, ensure that its operations will continue uninterrupted during the court-supervised process, and provide for a smooth transition to the New GM.

GM dealers will continue to service GM vehicles and honor GM warranties, and U.S. and Canadian government guarantees of manufacturers’ warranties are designed to reassure consumers.
GM will use its cash-on-hand and a new Debtor-in-Possession (DIP) financing of approximately $33 billion to: ensure an uninterrupted supply of goods and services and provide for other cash requirements prior to closing of the asset sale; fund liabilities to secured lenders; and provide contingency funding to handle any potential unexpected needs. Furthermore, in conjunction with the sale, the U.S. Treasury and the Canadian and Ontario governments will provide funds to administer the wind down of the remaining assets and the closing of the chapter 11 cases.
GM employees worldwide will become part of the New GM.
“Today marks a defining moment in the reinvention of GM as a leaner, more customer-focused, and more cost-competitive company that, above all, can quickly generate winning bottom line results,” said Fritz Henderson, GM president and CEO. “The economic crisis has caused enormous disruption in the auto industry, but with it has come the opportunity for us to reinvent our business. We are going to do it once and do it right. The court-supervised process we are pursuing provides us with powerful tools to accelerate and complete our reinvention, as well as strong safeguards for our customers and our business. We are focused on the job at hand, for the benefit of our customers, employees, dealers, suppliers, retirees, taxpayers, investors and other stakeholders.

“We recognize the sacrifices that so many have been asked to make as we have worked to reinvent GM and the automobile,” said Henderson. “GM deeply appreciates the support and the demonstration of confidence in our future by President Obama, the Presidential Task Force on Autos, the Canadian and Ontario governments, American and Canadian taxpayers, the unsecured bondholders who are supporting the proposed sale transaction, the UAW and CAW and their leadership, and the men and women of GM, including our retirees. You have enabled us to carry out this vital transformation for the good of GM, our customers and the economy, and we are working to validate your trust each day.

“From day one, the New GM will be well-positioned to capitalize on the award-winning vehicles we have developed and launched during the past few years, and on our investments in exciting new technologies like the Chevy Volt, so that we can build and return value to our customers and to the millions who will have a stake in our success. The New GM will play a critical role in the future of the automobile, and assure that the U.S. has a strong stake in this rapidly changing global manufacturing industry,” Henderson said.

Business operations continue globally without interruption

GM’s North American manufacturing operations continues to monitor production output to make sure it aligns with market demand, and currently intends to ramp up manufacturing operations as market demand improves during the latter half of the year.

None of GM’s operations outside of the U.S. are included in the U.S. court filings or court-supervised process, and these filings have no direct legal impact on GM’s plans and operations outside the U.S. GM confirmed that all business operations are continuing without interruption in its Europe; Latin America, Africa and the Middle East; and Asia Pacific regions.

“Worldwide, GM dealers are open for business, offering competitive financing options on our award-winning vehicles, continuing to honor our industry-leading warranty coverage, and providing outstanding service,” said Henderson. “Furthermore, the U.S. Treasury and the Canadian governments have issued a strong vote of confidence by backing GM’s vehicle warranties.”

GM has filed various “first day” motions with the Court to ensure the company’s continued ability to conduct normal business operations. Upon Court approval, GM will be expressly authorized, among other things, to:

Honor all obligations to customers and continue customer programs, including warranties, without interruption
Respect our operating and financing agreements with GMAC, supporting continued wholesale financing for dealers and retail financing for customers
Pay dealers’ open accounts and continue warranty and incentive programs
Pay essential suppliers and logistics providers for goods and services provided before and after the company’s court filings
Continue pay and benefits for employees and retirees; however, the amount of non-qualified pension for some executive retirees may be affected.
The New GM

GM’s agreements with the U.S. Treasury, the Canadian and Ontario governments and the UAW and CAW, in addition to the support of a substantial portion of GM’s unsecured bondholders, will enable the New GM to be a leaner, faster and more customer-focused enterprise, consistent with the vision, goals and plans of GM’s enhanced operating plan announced April 27.

The New GM will:

Focus on four core brands in the U.S. – Chevrolet, Cadillac, Buick and GMC – with fewer nameplates and a more competitive level of marketing support per brand
Effectively close the competitive gap in active worker labor costs compared with transplant auto manufacturers
More efficiently utilize U.S. capacity while increasing over time the percentage of U.S. sales manufactured domestically
Feature lower structural costs enabling its North American region to break even (on an adjusted EBIT basis) at a U.S. total industry volume of approximately 10 million vehicles. This rate is substantially below the 15 to 17 million annual vehicle sales rates recorded from 1995 through 2007
Achieve its lower structural costs in part by further reducing 2009 salaried employment in North America from its year-end total of 35,100 to approximately 27,200, and continuing to improve its balance sheet by reducing retiree benefits for salaried retirees and non-UAW hourly retirees
Provide a higher level of customer service through a more focused U.S. network of approximately 3,600 dealers
Continue and increase its investment and leadership in fuel economy and advanced propulsion technologies
Capital Structure of the New GM

A critical element of GM’s reinvention is to achieve a significantly stronger and healthier balance sheet. On March 31, 2009, GM reported consolidated debt of $54.4 billion, along with additional liabilities, including an estimated $20 billion obligation to the UAW VEBA.

Under GM’s agreements with the U.S. Treasury, the Canadian and Ontario governments, and the UAW and CAW, and with the support of a substantial portion of GM’s unsecured bondholders, upon closing of GM’s sale of assets to the New GM, the New GM’s capital structure will be comprised of:

Approximately $17 billion in total consolidated debt, including:
$6.7 billion of debt owed to the U.S. Treasury
$1.3 billion of debt owed to the Canadian and Ontario governments
$2.5 billion of notes issued to the new Voluntary Employee Beneficiary Association (New VEBA)
Approximately $6.8 billion of other, primarily international debt, but excluding Europe
$9 billion of perpetual preferred stock with a 9 percent annual dividend, payable quarterly in cash, $2.1 billion of which will be issued to the U.S. Treasury, $0.4 billion of which will be issued to the Canadian and Ontario governments and $6.5 billion of which will be issued to the New VEBA
Common equity, 60.8 percent of which will be owned by the U.S. Treasury, 11.7 percent of which will be owned by the Canadian and Ontario governments, 17.5 percent of which will be owned by the New VEBA, and 10 percent of which has been reserved for GM for the benefit of the unsecured bondholders and other unsecured creditors of GM
Warrants granted to the New VEBA to acquire newly issued shares in the New GM equal to 2.5 percent of its outstanding common equity
Warrants granted to GM at closing to acquire newly issued shares in the New GM equal to 15 percent of its outstanding common equity, with various exercise prices and expirations
Other than the $8 billion of debt owed to the U.S. Treasury and the Canadian and Ontario governments by the New GM, all amounts owed by GM or the New GM to the U.S. Treasury and Canadian and Ontario governments would be equitized in exchange for the New GM securities described above, and no other debt will be owed by GM to the U.S. Treasury and the Canadian and Ontario governments.

GM Europe Restructuring

GM announced separately today, GM Europe has an agreement for €1.5 billion of bridge financing from the German government and a Memorandum of Understanding to partner with Magna International Inc. Under the agreement, the Opel/Vauxhall assets have been pooled under Adam Opel GmbH, with the majority of the shares of Adam Opel GmbH being put into an independent trust (the balance to remain with General Motors), while final negotiations with Magna proceed. Negotiations to close the agreement should take several weeks. Additional details will be available athttp://media.gm.com/eur/gm/en/.

New products and technologies on track

The New GM, with its strong financial base and best-in-class dealer network, will support a portfolio of award-winning vehicles, including the Chevy Malibu (2008 North American Car of the Year and J.D. Power and Associates’ segment leader in its 2008 Initial Quality Survey), Cadillac CTS (Motor Trend Car of the Year) and its Buick brand (tied for 1st place in J.D. Power and Associates’ 2009 Vehicle Dependability Study). The New GM will have a number of key vehicle launches in 2009 and 2010, including:

Chevrolet Camaro, a dramatic, moderately priced sport coupe with highway fuel economy of up to 29 mpg
An all-new Buick LaCrosse premium midsize sedan
The luxury midsize Cadillac SRX crossover and CTS Sport Wagon
The Chevy Equinox and GMC Terrain, midsize crossovers with class-leading highway fuel economy of 32 mpg
The Chevy Cruze, GM’s new global compact car
The revolutionary Chevy Volt, an extended-range electric vehicle that can travel up to 40 miles on battery power alone with the extended-range capability of more than 300 total miles.
“Our products are our future, and our lineup of new cars and crossovers are a great foundation for success,” said Henderson. “The New GM is here to stay, and our brands position us to compete well in profitable segments with vehicles that are second-to-none.”

GM also reaffirmed its commitment to improve the fuel efficiency of its vehicle fleet, meet or exceed new federal fuel economy and emissions regulations, and push ahead with advanced propulsion technology. GM will launch the Chevrolet Volt extended range electric vehicle in 2010, expects to have 14 hybrid models in production by 2012, and will have 65 percent of vehicles alternative-fuel capable by 2014.

“The New GM will become a long-term global leader in the development of fuel-efficient and advanced-technology vehicles,” said Henderson. “In doing so, the New GM will contribute to the development of advanced engineering and manufacturing capabilities in the United States, which are critical to the future of the U.S. economy.”

GM’s primary bankruptcy counsel is Weil, Gotshal & Manges LLP. GM is also represented by Jenner & Block LLP and Honigman Miller Schwartz and Cohn LLP as counsels. Cravath, Swaine, & Moore LLP is providing legal advice to the GM Board of Directors. GM’s restructuring advisor is AP Services LLP and its financial advisors are Morgan Stanley, Evercore Partners and the Blackstone Group LLP.

More information about GM’s chapter 11 cases is available at www.GM.com/restructuring.

Court filings and claims information are available at www.GMcourtdocs.com.

Why is it that nobody ever believes me? What insight could I possibly have as an automotive historian with Fortune 500 product and corporate marketing experience and a stint in D.C. working for a Member of Congress on transportation issues?

Just trust me next time and we’ll save a ton of money to put towards things that will inevitably show a better return…because bailing out GM and Chrysler is the government’s version of frame-off restoring a Chevette to Pebble Beach standards.

Don’t Blame The UAW — Update

It appears that when GM engages the UAW in an effort to work together to promote their common interests (such as: “survival”) good things happen. GM and UAW announced today a new agreement:

DETROIT, Mich. – General Motors today confirmed that its UAW-represented employees have ratified the modifications to the GM-UAW 2007 National Labor Agreement. The amended agreement covers approximately 54,000 hourly employees located in 46 U.S. facilities.

“The leadership demonstrated by UAW president Ron Gettelfinger and UAW vice president Cal Rapson, and the hard work from the members of the GM and UAW negotiating teams, resulted in an innovative agreement that will enable GM to be fully competitive and has eliminated the gap with our competitors,” said Diana Tremblay, vice president of GM’s Labor Relations. “We very much appreciate the support of our employees and retirees. Their shared sacrifices will enable GM to become a stronger, more viable company that will continue to deliver world-class cars and trucks.”

Key highlights under the modified agreement include attainment of cost and cash savings comprehended in the GM Viability Plan that will enable the company to eliminate the wage and benefit gap with its competitors. It also includes changes to the agreements regarding the Voluntary Employee Beneficiary Association (VEBA) trust for retiree healthcare. The agreement also highlights GM’s plan to utilize an idled assembly and stamping facility for future production of a compact/small car in the United States to meet future fuel efficiency regulations.

In other words, in exchange for a healthy cut in overall compensation (wages, health insurance coverage/retirement benefits) GM agreed to use UAW workers to build the cars instrumental to its survival, including the Volt.

This is a good move by both sides.