The Battle Over Woodies

November 26, 2008

The 1941-1948 Chrysler Town & Country model line has become the Classic Car Club of America’s very own version of the abortion and gay marriage issues. Just like abortion and gay marriage, the T&C is a topic fueling crazy, non-sensible debates. By the way, it’s just a coincidence that they all have something to do with woodies.

Chrysler’s Town and Country ranks among the coolest of the blue-chip collectables – the best of the iconic wood-sided vehicles of the 1940s. To a vocal minority of the Classic Car Club of America, though, the T&C is a Trojan Horse used to overthrow the traditions of the club. Specifically, it was this motion recently passed by the club’s National Board, which was in direct opposition to decades of the Classification Committee (the group that decides the cars accepted by the club) voting to deny the model entry into the club:

Motion: That the Club recognize all Chrysler Town & Country automobiles from 1941 through 1948 as Full Classics. AS PART OF THIS MOTION, I move that the Board approve a POLICY EXCEPTION to the Classification Procedures reaffirmed 10-1-85 which states: ‘The CCCA policy regarding considering Classic status for production bodied cars is to accept only those production series in which the entire line of body styles may qualify. The Club DOES NOT ACCEPT INDIVIDUAL PRODUCTION BODY STYLES FROM WITHIN A PRODUCTION SERIES.’ This EXCEPTION to the aforementioned policy shall be specific only to the recognition of the Town & Country models specifically excluding Royals,Windsors, New Yorkers and Saratogas which are not Town & Country models.”

The Classic Car Club of America (CCCA) is one of the most visible and powerful car clubs in the nation. Its members are current and former board members, judges, organizers, and sponsors of the world’s best-known shows, such as the Pebble Beach Concours d’Elegance. Their roster contains many famous names, as well as some of the wealthiest and best-known car collectors…although the majority of the names over the years have been of guys you’ve never heard of. At one time, you could even find my name in there, because early in my career the Pacific Northwest Region of CCCA gave me a membership in return for serving as Editor for its regional magazine. I count members of the CCCA as close friends, mentors and family. My father has served for years as the Secretary of the Pacific Northwest Region.

Some Ironic History
The club actually formed in 1952 after members of the Antique Automobile Club of America got fed-up with the AACA’s stance that cars from the 1930s and 1940s… even Packards and Cadillacs, were nothing more than used cars. The AACA had no use for these vehicles on the show field (except in an exhibition class called “Tow Vehicles”), so a group collected their toys and started a league of their own.

The CCCA compiled a list of acceptable cars that are allowed in official club activities (meaning shows like “Grand Classics”). The cars on this list are deemed “Full Classics”, which is even a registered trademark by the CCCA.

It is this list and its long-time exclusion of the Chrysler T&C that finally resulted in the nuclear action that had the Board circumventing the Classification Committee. Now members are threatening to quit in protest. Some have even gone on record saying they’re considering pursuing legal action.

There is a very important fact here: the CCCA doesn’t discriminate in membership — anyone can join, even those without a Full Classic.

Defining “Full Classic”?
CCCA defines Full Classics as “fine or unusual foreign or domestic motorcars built between the years of 1925 and 1948, but including cars built before 1925 that are virtually identical to 1925 Full Classics and distinguished for their representative fine design, high engineering standards and superior workmanship.” Generally speaking, the definition works to point out that the CCCA is for high-end cars rather than the mass-produced Ford, Chevy, Plymouth, Dodge…

The CCCA started with only cars from the “Classic Era”, which the club self-defined as 1925-1941. Essentially, they wanted a club for hand-built, expensive cars made prior to WWII like Duesenbergs, Rolls-Royces, Mercedes-Benzes, and the senior (higher-end) Packards and Caddies with custom bodies created by coachbuilders like LeBaron, Murphy, Dietrich, Darrin, Figoni et Falaschi, Brunn, and others.

The Exceptions to the Rules
Shortly after the CCCA’s creation, they absorbed the Lincoln Continental Club. Since the 1946-1948 MKI Continentals were fundamentally unchanged from the pre-war run of 1940-1942 Continentals (which were already kosher with the club,) the CCCA extended the post war Contis a nod as Full Classics. Similarly, within the past decade the CCCA also decided to allow some vehicles prior to ’25, provided an earlier car was identical to an already approved 1925 model.

Price, Production, Prestige:
Many of the cars added over the years were justified due to its as-new high price, tremendous prestige value and/or low production. Unfortunately, since one of the club’s earliest tenants was that acceptance was based on an entire model line, not just a single body style, serious exceptions prevailed. For instance, the club wanted to include the 1936 Auburn 852 Supercharged Speedster (a $2245 car in 1936…and a landmark vehicle in anyone’s book), but in doing so, they also accepted the model line’s $995 852 Brougham. This might not seem like a big deal, but the vastly superior, more desirable, higher-performing, sexy-looking $1115 1936 Packard One Twenty series has never been allowed Full Classic status (due to the fact that the One Twenty was too “highly produced” and far less expensive than so-called senior Packards).

Indeed, in the club’s formative years, they tried to set up a hard price standard. Unfortunately, the methodology might have been less than stellar. According to one account, the price was set at the most expensive new Cadillac 60-Special sedan, because, according to a Classification Committee member at the time: “every in town drives a Cadillac 62.” (The 62 was a less expensive car.) Of course, this is a half-century-old story, so there’s a chance that it is apocryphal.

Similarly, I once questioned a former national CCCA board member (and regional past-president) regarding the seemingly cloudy criteria and how the Buick Roadmaster (never given Full Classic status) seemed to fit them better than many on the list of blessed vehicles. The person in question responded “we don’t want to be the Mediocre Car Club”. The fact that the Roadmaster line was more expensive, powerful, luxurious and desirable in its day compared to vehicles on the Full Classic list (such as the Packard Super Clipper) was never addressed. When I pressed the point, he returned a one-line reply: “Some people just like to be contentious”.

Post-War cars with Pre-War Designs:
CCCA has always maintained that for post war cars to qualify as Full Classics, they must be nearly identical to pre-war models. Again, while the club has followed this for the most part (including not allowing 1948 Packards and Caddies other than the sans-tailfin Fleetwood), there have been enough inconsistencies to raise doubts. In particular, post-war Rolls-Royces and Bentleys were of new design, yet have long been considered Full Classics. The reasoning: CCCA’s Classification Committee was dominated for a period by a group of Rolls-Royce and Bentley owners.

The T&C Conundrum
With all these issues, it is no wonder that at some point the CCCA was in for some serious debates over many great cars. For decades, though, the largest point of contention has been the 1941-1948 Chrysler T&C, although other cars like the Imperial Airflows and 1934 LaSalle have also been the subject of some serious food fights.

Over the years members of the CCCA have petitioned the Classification Committee dozens of times to include the T&C. Each time the petitions have been voted on and denied. In fact, the Classification Committee was so sick of the argument that they decided to pass a motion to not even hear another T&C petition for something on the order of twenty years.

So what was the argument for? The T&C was a high-end car with hand built parts. Carrying a base price of over $2700 in 1946, eight-cylinder T&C sedans and convertibles competed with Full Classic Packard Super Clippers, yet carried far more prestige and were significantly more sought-after then and now. With their hand-formed wood, the T&C was considered far more stylish.

The T&C was built on the 1941 Windsor/New Yorker platform. While it met the CCCA’s pre-war issue, Windsors and New Yorkers were low-priced cars, hence they have never been close to gaining Full Classic status.

The Nuclear Option Goes BOOM
The CCCA National Board’s decision to circumvent the Classification Committee by passing a motion to grant 1941-1948 Chrysler Town and Country Full Classic status pissed off quite a number of people. In the weeks that followed, emails and newsgroup postings aired the dirty laundry. Threats of boycotts, quitting and calls for the Board Members’ heads were met with strong words of support, and even much stronger language from those who disagreed. Those loyal to the Classification Committee called foul for short-circuiting the process. Others claimed the decision was a coup by T&C owners acting in their own self interests. Still more supported the decision and the means to make it.

So What’s the Verdict? Was It the Right Decision?
After all this history and build-up, my bottom line might surprise you:


The fact that this is such a big deal sheds a big spotlight on the more important issue: people take clubs way too seriously, and as such, these types of clubs are becoming less popular and important every year.

It’s not just the CCCA, because it seems that almost every club has a small percentage of people who use the organization as a vehicle for a power trip. In this case, the issue isn’t even much ado about a stinking car, it’s about process, heritage, power, respect, and other things that have nothing to do with actually owning a collector vehicle.

Like many clubs for older cars (such as the Horseless Carriage Club, the Model A Club, and the AACA), CCCA is slowly turning into a dinner group with an aging and/or diminishing membership. Each year, fewer members bring out their Full Classics for events, choosing more modern machinery in which to drive to and from garage tours and meetings.

The Full Classics come out primarily for Grand Classics, which is where people within a region give inflated judging scores and trophies to their friends in hopes that all of the cars will increase in value. The public is generally not made aware of Grand Classics, because most CCCA regions fear that Joe Q. Public will somehow not respect the cars or misuse the identities of owners. Control is a big issue.

Conversely, almost every weekend Ferrari, Lamborghini and Porsche owners who have gotten to know each-other via and other “online communities” park their six-figure exotics on the street while they have coffee and kibbutz, and often they’ll take impromptu drives into the hills. No club, by-laws, board of directors, security, judging, dues, or fear of being targeted…and if a lowly Fiat, MG Midget or Mustang shows up? All the better!

Indeed, it’s the new generation of car owners who are driving the car hobby. Whereas clubs used to be integral for collector car ownership, now web newsgroups and networking sites provide much more technical and historical support 24/7, as well as the coveted social interaction with other car nuts. Younger owners live in a world with Ebay parts availability and agreed-value insurance coverage — so driving expensive collector cars doesn’t scare them. And for those who came into success during Reagan, Clinton and Dubbya, beeing seen with an expensive car isn’t tacky or inappropriate.

Car enthusiasts understand that the cars are less important to the active club members who utilize organizations like CCCA as a substitute for the power-rush and social aspect of the business world left behind for retirement. Cars are the topic of conversation and the common bond, but actually interacting with the vehicles just ain’t what it used to be. The notable exceptions are those who make their money with the Full Classics – restorers, dealers and active-trading collectors. For those still in the prime of their careers in other professions, however, the last thing car enthusiasts need is another organization that feels like work.

Since people in CCCA are so passionate about including the T&C, AND the car still represents the basic ideals of the club, it makes absolutely no sense to deny the model from Full Classic status. It’s not even the least controversial car from a factual perspective! (Again, check out 1948 Rolls-Royces and Bentleys.) Most importantly, it could bring some fresh blood into the mix, but given the low rate of survival of the rust and rot magnets, CCCA shouldn’t even count on that too much.

It is similar to the pushback Bruce Meyer received for ages as he tried to get a class for significant hot rods on the field of Pebble Beach. A bunch of white-hairs feared the Concours would simply turn into a Goodguy’s rod meet, and that the Full Classics would be pushed aside. In the years since Meyer’s successful inclusion of the hot rods, this hasn’t even come close to happening.

The Question CCCA Needs To Ask Itself
Is it more important to keep the Full Classic list pure and enjoy the old country club-type politics of exclusion than it is to maintain current and maybe add younger members? There are plenty of purists who want to keep the CCCA what it is known to be: a group of well-educated, professionally successful, wealthy, white, Protestants with senior Packards and Cadillacs. From an actuarial perspective, in twenty years, a scary and overwhelming majority of the current CCCA membership will be dead or confined to a retirement home. The market, the public, and even those like me who are head-over-heels in love with cars of the so-called Classic Era will not give a moment’s thought whether a model was once considered a Full Classic by a club that will by then exist only in the pages of old publications and in the memories of people who ran the club into the ground by taking it all way too seriously, mistaking progress for attacks on traditions, and forgetting that passion for driving and enjoying cars is why most of us got into the hobby in the first place.


Why Cars Have Gotten So Heavy (or Yo Mama’s Car Is So Fat…)

November 20, 2008

Have you ever notice how cars are like their owners? All too often now “heavy” seems to apply to both the vehicle and the nut behind the wheel.

In times when everyone seems to be discussing fuel economy, the 800-pound gorilla is vehicle weight. The fact of the matter is that our cars are heavier than they’ve ever been, and that’s killing the mpg.

Ask an automotive manufacturing executive about why cars have become so portly and you’ll get a response like the one I heard GM’s Bob Lutz give a woman who asked why GM no longer makes economical cars like her diesel Chevette: “the government mandates a thousand pounds worth of safety equipment.” Lutz is definitely in the ballpark here. While 1000 pounds might be a little larger than life, the government is indeed responsible for ordering auto companies to install more and more safety gear.

The Safety Factor
It all started with seat belts in 1964, but most Americans with any gray hair remember the turning point as being the impact-absorbing bumpers mandated for 1975 cars. The original 5-mph bumpers were much heavier – using a combination of metal, plastic and struts. Now, however, cars use Styrofoam, plastic, composites, and other lightweight materials, making modern crushable bumpers dainty on the scale – even compared to those 1950s European sports car bumperettes. So bumpers aren’t adding anything more.

Ralph Nader was a big fan of improving side impact protection. The metal beams inserted into doors aren’t necessarily light, but they’re not really that heavy, either. In this case, a little iron goes a long way.

Airbags account for quite a bit of weight in a modern car. There are at least two airbags (driver and passenger.) In some cars there are driver, passenger (both face and knee), as well as side-curtain and head airbags. With sensors, wiring and the bag units themselves, it wouldn’t be crazy to figure the median extra weight added by airbags looming at around 100 pounds. Is it weight well spent? Absolutely!

Antilock brakes and stability control aren’t mandated yet, but they will be. Both require a number of sensors, wiring, valves, etc… When compared to older drum brakes, the modern ABS-equipped discs are often lighter. All that wiring for yaw sensors in stability control weighs more than you’d think, though.

Crash testing is an interesting issue. The more solid cars do better in NHTSA/IIHS safety testing, which can be a function of weight, but usually of well-engineered design. While performing well is not government “mandated”, poor ratings can be a kiss of death from a marketing perspective. Extra weight does not guarantee good ratings, but well-placed supports can help when lighter, better performing structures are precluded by money, time and/or existing designs.

The Green Factor
Safety isn’t that heavy, but preventing pollution really is. Catalytic converters to reduce emissions and mufflers to control noise pollution are heavier than a Metallica radio marathon. Many SUVs and trucks use two pre-cats and two cats to achieve emissions standards, while also sporting two huge mufflers to come in under ever-stricter noise ordinances.

Government Grand?
At the end of the day, though, safety and emissions brings a car nowhere near 1000 pounds. So let’s look at where the rest of the fat might be.

Let’s start where the rubber meets the road: wheels and tires. Back in the old days, cars used 14 and 15-inch wheels. In the 1970s and 1980s, 13-inch rubber was the norm among imports and econoboxes. Ferrari 328s had 16-inchers with wheels and tires at about 45-pounds each. Just ten years later, C5 Corvettes came stock with 35-pound run-flat tires over 25-pound 17 and 18-inch wheels. Now even Toyota Avalon sedans carry 17s and many sports cars and SUVs have 20-inchers. Larger wheels have also made way for significantly larger brake discs and calipers. Anyone who has ever tried to do brake work understands how much these components weigh. Larger wheels, tires and brakes together can easily add 250 pounds to a vehicle.

Transmitting the Weight
Engines are lighter than ever, but transmissions are heavier. In the 1960s if you had five speeds, you were probably driving a Ferrari. Now the standard is six speeds – for automatics and manuals alike, with seven (and even eight) speeds for the high-end vehicles. Since trannies are all computer-controlled, add in a box with wiring and some plastic to protect it from the elements. Use of lighter alloys and tighter packaging has kept the scales from overloading, but at some point, adding gears means adding weight.

It Makes You Feel Good, But Is It Good For You?
Where the real additional girth is now is in the interior – and it has nothing to do with safety or emissions.

  • Seats: Remember when seats slid forward and back and you could just recline the seat back? Gone now, in favor of 300-way adjustable buckets with multiple air bladders. Some seats, like those on my daily driver, offer heating and cooling. BMW and Mercedes chairs massage while you drive. All those features require motors, relays and wiring. Motors aren’t light.
  • HVAC Attack: I’m not sure why in my two-seat Corvette roadster I have dual-zone climate control, but I do. In some cars it is four or five zones. The more complex the HVAC system, the heavier it all is.
  • Infotainment Overload: Probably the main interior offender is the entertainment/information system. Back in the old days you had one head unit (weighing less than ten pounds) and two cheap paper speakers. Now hundreds of pounds are dedicated to up to two-dozen speakers, multiple amplifiers, complex wiring and multiple components to operate a radio, disc changer, and navigation. For SUVs and minivans, a DVD system is not uncommon.
  • Top Heavy: Sunroofs and convertible tops have become heavier. Panoramic multi-panel roofs can be had on everything from luxury cars to Subarus. As for drop-tops, the wild hardtop convertible contraptions that used to be reserved for anomalies like the Ford Skyliner, is now commonplace. It’s even an option on the Miata…which is supposed to be a throwback no-nonsense roadster.
  • Techno-burdened: High intensity discharge headlamps need automatic leveling systems, ballasts and larger gauge wiring that traditional lamps don’t require. Laser-guided cruise controls have a sensor box mounted in the front grill and a separate computer box to manage the system. Parking assist functions range from a few pounds for an audible alert and a handful more for a rear-mounted camera to a grade-schooler’s worth of equipment to achieve a fully-automatic parallel parking job from a Lexus. Just keep in mind that most core modern automotive technologies, like drive-by-wire and direct-injection fuel management, reduce weight.
  • Throw the Book At Ya: This might sound stupid, but even the owner’s manuals are overweight. The average manual from the 1960s weighed under a single pound. The combined weight of all the manuals (including several individual volumes for the car, the navigation system, the keyless entry/ignition, the laser-guided cruise control) that came with (and are still in the glovebox of) my 2006 Toyota is nearly six pounds.

Don’t get me wrong, I like butt warmers and nice sounding stereo. When I hop into a BMW 335 convertible, however, and realize that at 3960-pounds it actually weighs more than a mobile home-sized Chevy Impala with a 409ci big block, it’s startling. It is no doubt a testament to the capabilities of automotive engineers that the BMW out accelerates, out handles, is infinitely more comfortable, and gets exponentially better fuel economy than a 3705-pound 1964 Impala ragtop, a Chrysler 440-equipped 3696-pound 1973 Jensen Interceptor, a 2680-pound 1986 Dodge 600ES Turbo Convertible, or a 3471-pound ’96 Mustang GT Convertible – all vehicles that paved the way for the sport-luxury Bimmer.

The Big-Bottomed Line
Manufacturers need to cut back on this automotive version of the artery-clogger six-item breakfast from the local greasy spoon. Drop the useless huge tires and wheels – ’84 Corvettes hit 1g on the skidpad with 16”s, so anything larger is for looks. Reduce the number of multi-zones. Lighten the entertainment load…

But keep the safety and emissions controls like the vitamins we need each day.

A crash-course gizmo diet should do wonders to hitting and surpassing the 35 mpg CAFE standards. The next step is to take a page out of the auto racer’s bible: the easiest way to improve vehicle performance is to get a lighter driver.

Maybe we’d find that the weight the car and we could lose would make us…and the world healthier, more athletic and more fun. Plus neither the car or us could be the target of fat jokes.

Bail Out the Big Three? History Suggests “Don’t Do It”!

November 11, 2008

It would be catchy to lead with something like “I’ll give you fifty-billion reasons why the US government shouldn’t bail out the Big Three automakers.” Instead, I’ll just write: don’t do it.

I need to make something crystal clear here. My views are not ideologically-based. If you’d like some Republican versus Democrat, free market capitalism over big government socialism, Apple against Microsoft rants, you’re not going to find it here.

What you will find is a simple statement: history and common sense intersect at a point with a big marker titled “STOP”.

The Meat Of the Deal

Congress has already given General Motors, Ford and Chrysler around $25 billion so they can retool for production of more fuel-efficient cars. Last week the three CEOs returned to The Hill to ask for as much as $50 billion more to keep their companies floating while they hemorrhage cash in the down economy.

It is true that consumers are not buying new cars right now. That’s a huge problem for all automakers, not just the Big Three. When they start buying cars again, fuel-efficient vehicles like hybrids and compacts will be in demand. Actually, if we’re being truthful here, these vehicles are in demand right now. Just go try to find a Prius on a dealer lot.

So the Big Three CEOs have the audacity to go to Congress and say “give us money so we can ride out the bad economy and have what the consumers will want when they are ready to buy.” Audacity? Why did I choose that word?

Simple, because unless you’ve been living in cave for the last decade, you’ll know that even when GM, Ford and Chrysler were selling SUVs and trucks faster than a Ramones drum beat, they were largely losing money. Keep in mind that SUVs and trucks had a hell of a lot higher profit margin than compact and hybrid cars could ever hope to attain.

Imagine if the CEOs told Congress: “we need money, because we couldn’t make profits when we were selling high-profit vehicles. Since we pocketed that money in salaries, union deals, benefits, and executive bonuses, and got drunk on cheap gas (although in our hearts we knew it wouldn’t stay that way, but we hoped we’d be retired by the time it hit $4 per gallon), we never spent enough on R+D, so we didn’t have vehicle products ready to go for this current marketplace.” Unfortunately, that’s the truth.

Here is a scary reality
If Congress gave $50B directly to American consumers with the condition that we went out and bought new cars, here’s what would happen: $50B would buy 1,666,666 cars, based on the current average price of around $30,000 each. Given the current market share, GM at 22.4 percent would sell 373,333 vehicles, Ford (14.8%) would move 246,666 units, and Chrysler (11%) would sell 183,333 units. In other words, with fifty billion dollars going directly into the hands of consumers to buy a new car, the best any of the Big Three could do would be to sell a group of additional vehicles equating to less than one year’s worth of Honda Accord sales in America. (392,231 Accords were sold in the US in 2007.) Think that’s enough to keep them (or dealers) from failing? Nope!!!

Inevitably, there are those out there who will say the Big Three are “too big to fail”. Television news channels are already reporting huge job loss potentials if the companies go out of business—from a few hundred thousand to somewhere around 1.5 million. For every one job at GM, Ford and Chrysler, there are seven positions at vendors providing parts and services for domestic auto production. In other words: if they fail, we’re in a depression with millions of unemployed workers.

The logical conclusion, claim these folks, is to keep the government money flowing– no matter how long it takes, otherwise the companies will implode, everyone in the industry will be out a job, and a depression is unavoidable. To these people I have just two words:


Allow me to follow up those two words with a description of why this is critical history for every Member of Congress to know. England used to be tied with America as the automotive powerhouses in the world. We had Ford and Chevy, while they had Austin and Morris. Just like the contraction of companies in America that formed Ford-Lincoln-Mercury and General Motors, Austin joined Morris in BMC. Standard joined with Triumph, which was joined with Jaguar. Finally, by 1968 most British-owned brands were rolled into British Leyland.

Thanks to equal parts ineptitude, greed and lack of ethics, BL drove the British car industry into the ground. BL executives blamed the economy (including an oil crisis) and labor. Everyone else pointed the finger at products that were inferior to foreign competition, as well as short-sighted contracts and profiteering.

Despite selling forty percent of the vehicles in Great Britain, by 1975 British Leyland was broke. The British Government sank millions into the group and became the majority shareholder. The corporation was reorganized, and millions more went to cure production and labor problems.

The company was again reorganized into saleable units. Jaguar-Daimler was sold-off in 1984 (two years later it went to Ford). The Leyland truck and bus unit was merged with Dutch DAF in 1987, which later sold bus operations to Volvo. Just a year later the Rover Group (including most of the remaining car business) was sold to British Aerospace, which turned around and immediately sold this remaining part of Great Britain’s auto industry to German BMW.

Which puts us back to GM, Ford and Chrysler

If Congress simply let nature take its course, there is a strong chance that all would fail. But we need to DEFINE “FAIL”. In this case, do we honestly think that if any of the Big Three “fail” everything the company owns would simply be auctioned off to the high bidder in front of the local courthouse? Of course not.

All three companies own valuable plant assets. All still have cash. All own products and technology that are profit centers. There is certainly a big financial value to Chevy’s Volt product, as well as Chrysler’s ultra-modern flexible plant locations, Ford’s Mustang brand, Corvette production, F150 fleet sales, the “Hemi” trademark…

Considering that Porsche just tried unsuccessfully to buy VW, it puts them back in the market for an entity that will enable them to meet 35-mpg CAFE standards. By the way, Porsche has also been one of the most profitable automakers of the last decade. (Turns out that selling overpriced sports-SUVs is a cash cow.) So even after the botched buyout, they have money to burn.

Hyundai is also a strong competitor without a good hybrid play, as is Mitsubishi. Both have money. Mitsubishi’s dedication to cars might be questionable, but Hyundai’s certainly is not. Honda could use a more diverse product range, especially upmarket. Even Toyota could make a case to buy one of the Big Three — Chrysler for flexible production facilities or GM for Volt plug-in technology (since it could take a big bite out of Hybrid Synergy Drive sales).

Then there’s BMW – the same company that at one time or another has purchased Rover, MG, Rolls-Royce, Bentley, Austin/Morris/Mini, and still retains the rights for Triumph. They have cash and good credit…not to mention a pretty good history of acquiring, absorbing, improving operations, and remarketing companies. (We’ll give them a pass on Rover, which was a debacle, only because nothing short of a neutron bomb could have solved that company’s issues.) Finally, BMW has banked way too much on hydrogen over plug-in hybrids, so they could benefit from buying the technology, rather than developing it in house.

Don’t count on Mercedes to get involved. The company is still sore from its marriage to Chrysler. It turns out Mercedes was ill prepared to deal with the complexities of a merger with such a dysfunctional corporation at a time when it was challenged with its own operational and technical issues. Consequently, Mercedes lost more money than a drunk billionaire trying to impress the hotties at the high roller baccarat tables.

Hyundai, BMW, Porsche…Any of these companies could benefit by buying GM, Ford, or even Chrysler.

All have experience designing, building, marketing, selling, and servicing in America already, and do so with high profit margins.

No doubt each and any foreign buyer would bust the unions and negotiate dumping retirement benefits on the US government. Then the companies would kill poor performing legacy products, as well as the people who continued to push losing strategies. Good niche brands and solid future technologies would be exploited, while albatrosses like Hummer would likely be closed down or sold to a greater fool.

In the end, America would have to let go the concept of the American Big Three. One could get caught up in buzzwords like “failure”, but the goal is to save money and jobs.

No matter how we look at it, American jobs will be lost. The difference is that if the US Congress pushes the Big Three to sell, more people will actually be able to keep jobs. Granted some will do so at reduced wages and most at decreased long-term benefits. Wouldn’t it be better, however, for these people to work for a competitive company again – one that isn’t in jeopardy of needing to make more layoffs or beg for more government money next year?

Congress might still decide to throw good money after bad at GM, Ford and Chrysler, just like the British did for BL, but the best course of action is to allow these dinosaurs implode under their own weight sooner rather than later, and work to convince German, Japanese and Korean automakers to bring them back to life as more efficient, better targeted and longer-reaching versions of their old selves using the American workers and suppliers who are willing to adapt to a new world with a view far beyond the self-interests of Michigan and D.C..

Editor’s Note: We here at the Four Wheel Drift realize that this whole bailout issue is far more complicated than can be summarized in one article. We expect that if Alan Mulally or Rick Wagoner read the above article, they’d accuse us of missing important details. (We’d expect that Bob Lutz would say we’ve got our heads up our asses if we thought it was that simple.) The fact is that it isn’t simple. It took nearly a century for GM, Ford and Chrysler to create the mess they’re in, and there are no easy answers. We simply are taking a stand unpopular with car folks, especially those emotionally tied to the long history of American auto producers, and suggesting that the only way to stay competitive is to admit that there is no way to stay competitive by just taking government money and tightening belts.

Why I’m A No Show At the International Auto Show

November 10, 2008

Every year I seem to get hundreds of people asking me if I’ll be attending the Seattle International Auto Show. When I tell them that I have no plans to attend, I tend to see some pretty perplexed faces.

I’ve been to the Seattle International Auto Show in the past and generally consider it a waste of time and fuel. At least it is for me.

We need to get something straight. I’ve been to more shows for more industries than I care to remember. For way too many years, I was the guy standing up in the booth with the uncomfortable headset microphone on giving the same product pitch every twenty minutes to a large audience, while answering the same monotonous questions day-in and day-out. In general, I place trade shows right up there with taking the SATs, getting my teeth cleaned, and listening to city council meetings for levels of sheer enjoyment.

The nature of auto shows has changed dramatically since the days of the great GM Motorama. In those days, show-goers were dazzled by concepts that few had seen. Cars were created behind locked doors with teams headed by guys like Bill Mitchell. There were no spy shots in magazines, no Internet-spread rumors. A car you might see at the Motorama might be green-lighted into production and arrive at showrooms within six months. Production cars changed every year, so everything you saw at the show was fresh. The whole atmosphere was like going to the opening ceremonies at the Olympics.

Now when you go to an auto show, it’s basically like going from dealership to dealership talking to sales people. If you like window shopping for cars, the auto show is the place for you. If you’re like me and find the typical car salesman to be far less knowledgeable about his products than the seventeen-year-old kid with a Road and Track subscription at the Taco Bell drive-through window, then you’ll find the show to be less than helpful.

Indeed, the occasional interlude with a true knowledgeable product manager will yield no new information to that printed in the pages of auto publications for months. As for the standard show workers, expect them to try to convince you that the sky is green, the trees are blue, water isn’t wet, and that their cars are far better than any road test claims they are. Why do they do this? Because that’s the only information sales managers and product teams give them before turning them loose on the public.

The big draws for auto shows are new models and concept cars. Unless you’re in Detroit, Chicago, LA, New York, there will be no unveilings of any kind of new model or concept. For Seattle, the cars have already been shown for nearly a year on stages in other cities, or at the very least, in the pages of all the magazines and online. As the years have gone on, though, product launches have become less impressive. With such strict standards for crash testing, quality control and emissions, chances are that the car has been photographed and videoed dozens of times before it’s actually launched (on an average of three full years after the green-lighting of the concept). As for concept cars, depleted cash reserves means far fewer styling and image exercises.

There is definite truth to the fact that one has to see some cars to appreciate the lines. The Bangle-designed BMW 7 Series was definitely like that, being much more aggressive in person than on paper. Considering that you can see many of these cars in the dealerships, it’s not worth the money to see them with many thousands of other people.

As for getting in and sitting in cars, only expect to do this with currently sold mid range models. If you think you’ll be able to slide behind the wheel of a Ferrari California or Rolls Royce Phantom, think again. I’m sure they’ll let you sit in a Corolla, though. And what’s the use of just sitting in a car in terms of helping people make a buying decision? While sitting in a car can immediately rule out the uncomfortable and too-small ones, driving is what separates the herd.

Classics and special interest cars are also at the Seattle show, but I’ve seen most of these cars already…oftentimes two or three times before.

Readers will often ask “but don’t you just cover it, because it’s news?”

If nothing new is announced, no interesting cars are unveiled and nobody on the floor has anything important (or sometimes even factually accurate) to say, then my friends, there is no news.

GM and Ford Ask US Government: “Can You Spare Some Change?”

November 7, 2008

Chairmen from GM, Ford and Chrysler went to D.C. yesterday to ask for a handout. Evidently, the $25B they are receiving for retooling to produce high MPG cars isn’t enough to keep them afloat. They asked for an additional $25B for operations.

Some might ask “do they really need it?” The answer is pretty simple — look at today’s financial announcement from GM:

GM Reports Third Quarter Financial Results

Unprecedented economic and credit market turmoil dramatically impacts auto industry and GM results
Market volatility results in $1.5 billion in non-cash charges for commodity and currency hedging
Company anticipates soft U.S. market for remainder of 2008 and into 2009
Emerging markets beginning to show impact of credit crisis
Third Quarter
2008 2007* O /(U) 2007
Revenue (bils.): $37.9 $43.7 $(5.8)
Adjusted automotive earnings before tax (bils.): $(2.8) $0.1 $(2.9)

Reported automotive earnings before tax (bils.): $(.95) $(1.6) $.65
Adjusted net income (bils.): $(4.2) $(1.6) $(2.6)
Reported net income (bils.): $(2.5) $(42.5) $40.0
Reported earnings per share: $(4.45) $(75.12) $70.67
Adjusted operating cash flow (bils): $(6.9) $(2.5) $(4.4)
* 2007 figures reflect continuing operations

DETROIT –General Motors (NYSE: GM) today announced its financial results for the third quarter of 2008, reflecting rapidly deteriorating market conditions in the U.S., slowdowns in other mature markets around the world, and continued losses at GMAC Financial Services (GMAC).

During the third quarter the turmoil in the global credit markets resulted in the worst financial crisis in more than 70 years. The upheaval has had a dramatic impact on the auto business in particular, especially in the U.S. and Western Europe.

Tight credit, rising unemployment, declining income, falling stock markets, and continuing deterioration in the housing market in the U.S., resulted in an abrupt halt in consumer spending, with most consumers exiting the vehicle market. Many of those still intending to purchase vehicles were denied financing, or found the cost of financing prohibitive.

“The third quarter was especially challenging for the auto industry. Consumer spending, which represents close to 70 percent of the U.S. economy, fell dramatically, and the abrupt closure of credit markets created a downward spiral in vehicle sales,” said Rick Wagoner, Chairman and Chief Executive Officer. “The U.S. government’s actions to help stabilize the credit markets and eventually ease the credit crunch are an essential first step to the economy’s and the auto industry’s recovery, but further strong action is required.”

GM reported a net loss of $2.5 billion or $4.45 per share for the third quarter, including special items. That compares with a net loss from continuing operations of $42.5 billion or $75.12 per share in the third quarter of 2007, which included a non-cash charge of $38.3 billion to establish a valuation allowance against some of the company’s net deferred tax assets.

On an adjusted basis, GM posted a net loss of $4.2 billion or $7.35 per share, compared with a net loss from continuing operations of $1.6 billion or $2.86 per share in the same period last year.

Revenue for the third quarter was $37.9 billion, down from $43.7 billion in the year-ago quarter, reflecting dramatic sales declines across the industry driven by unstable market conditions, instability in the credit markets and dramatic retraction in consumer demand, especially in North America and Europe.

GM recorded net favorable charges of $1.7 billion for special items in the third quarter. Included in the charges was a curtailment gain of $4.9 billion resulting from the UAW Settlement Agreement becoming effective. The curtailment represents the accelerated recognition of net prior service credits, largely relating to the 2005 GM UAW healthcare agreement, scheduled for amortization after January 1, 2010.

The curtailment was recorded because GM’s UAW retiree health plan will not exist after January 1, 2010, and therefore no further basis for deferring unamortized prior service credits exists beyond that date. The $4.9 billion curtailment gain was partially offset by a non-cash $1.7 billion settlement charge related to the elimination of post-65 salaried retiree healthcare coverage, including the cost of increased pension benefits that were announced in July as part of GM’s operating actions to improve liquidity as well as the recognition of accumulated deferred losses related to the healthcare plan.

In addition, GM reported charges of $652 million relating to its commitments as part of Delphi’s bankruptcy proceedings, $251 million for impairment of investments in GMAC, and $641 million in restructuring-related and other charges. Details on these and all other special items are in the financial highlights section of this release.

GM Automotive Operations

GM reports its automotive operations and regional results on an earnings-before-tax basis, with taxes reported on a total corporate basis.

GM recorded an adjusted automotive loss of $2.8 billion ($947 million reported loss) in the third quarter 2008. The loss compares with adjusted automotive earnings from continuing operations of $98 million in the third quarter of 2007 (reported net loss of $1.6 billion).

The results reflect losses in GM North America (GMNA) driven largely by the U.S. industry volume decline of nearly 20 percent, and shifts in product mix. In addition, Europe saw rapid auto market contraction, leading to sharply lower GM Europe (GME) sales volume in the third quarter. GM Asia Pacific (GMAP) results were down due to commodity hedging charges and moderating demand in key markets including China, Australia and India. These losses were partially offset by very strong results in the GM Latin America, Africa and Middle East (GMLAAM) region.

GM’s automotive results in the third quarter include $1.5 billion of expenses related to mark-to-market changes in the value of GM’s commodity and foreign exchange hedging contracts, due almost entirely to falling commodity prices.

GM sold 2.1 million vehicles worldwide in the third quarter, down 11 percent year over year. Sales in GMNA were down 19 percent compared to third quarter 2007. GM global market share was 13 percent, down 0.7 percentage points compared with the third quarter of 2007, due largely to weakness in North America and Western Europe.


Third Quarter

‘08 O/(U) ‘07

Revenue (bils.)

Adjusted Earnings Before Tax
$(2.3) bil.
$(298) mil.
$(2.0) bil.

Reported Earnings Before Tax
$(395) mil.
$(1.8) bil.
$1.4 bil.

GM Market Share
(1.0) p.p.

GMNA revenue and earnings in the third quarter reflect dramatic industry deterioration and a sharp fall in consumer spending driven by the weak U.S. economy and a very harsh credit environment. Earnings were impacted by lower volumes, rapid shifts among U.S. consumers away from trucks and SUVs toward smaller cars, and unfavorable mark-to-market adjustments on commodity hedging.


Third Quarter

’08 O/(U) ‘07

Revenue (bils.)

Adjusted Earnings Before Tax (mils.)

Reported Earnings Before Tax
$(1.0) bil.
$(398) mil.
$(602) mil.

GM Market Share
(0.6) p.p

GME revenue was down 15 percent in the third quarter amid industry-wide volume declines ranging from 10 to 35 percent in certain major markets including the U.K., Spain and Italy. Overall GME sales volume was down 12.3 percent year over year, while up 10 percent in Eastern Europe. Earnings were largely impacted by the lower volumes, and unfavorable mix and negative pricing. In addition, unfavorable foreign exchange relating to the weakening of the British pound and the mark-to-market of commodity hedges negatively impacted earnings. Results were partially offset by favorable structural cost performance.


Third Quarter

‘08 O/(U) ‘07

Revenue (bils.)

Adjusted Earnings Before Tax (mils.)

Reported Earnings Before Tax (mils.)

GM Market Share
0.4 p.p.

Results in GMAP were impacted primarily by unfavorable mix and negative pricing. In addition, GMAP results were impacted by unfavorable hedging, which was largely offset by the favorable foreign exchange impact of exports.

Industry sales for the region were down by 134,000 units or 2.7 percent in the third quarter. Despite the slowdown, GM reported a 2.6 percent increase in sales volume, and modest gain in market share. Markets in the GMAP region are expected to remain soft through the fourth quarter, with further slow downs anticipated in Australia, China, South Korea and India as the contagion of the faltering U.S. economy and tightening credit conditions expand to other regions around the world.


Third Quarter

‘08 O/(U) ‘07

Revenue (bils.)

Adjusted Earnings Before Tax (mils.)

Reported Earnings Before Tax (mils.)

GM Market Share
(.4) p.p.

GMLAAM saw double-digit revenue growth, up 15 percent, and earnings, up 37 percent, in the third quarter, fueled by strong demand for Chevrolet and Cadillac products. GMLAAM sales volume was up more than 3 percent compared to the same period last year. Sales were especially strong in key South America markets, including Brazil, Chile, Ecuador and Peru, each setting all-time GM quarterly sales records. The region is on track for another year of record sales, although the effects of the global economic slowdown on credit availability and consumer behavior are likely to result in some moderation of demand in the fourth quarter.


On a standalone basis, GMAC reported a net loss of $2.5 billion for the third quarter 2008, down $900 million from the year-ago quarter. GM reported an adjusted loss of $1.2 billion for the quarter attributable to GMAC, as a result of its 49 percent equity interest.

GMAC’s automotive finance operation experienced pressure from lower used vehicle prices and weaker consumer and dealer credit performance. GMAC’s ResCap operations reported further losses as a result of adverse market conditions, which drove high credit-related provisions and weak revenue. GMAC’s Insurance business remained profitable.

Cash and Liquidity

Cash, marketable securities, and readily-available assets of the Voluntary Employees’ Beneficiary Association (VEBA) trust totaled $16.2 billion on September 30, 2008, down from $21.0 billion on June 30, 2008.

The change in liquidity reflects negative adjusted operating cash flow of $6.9 billion in the third quarter 2008, driven by the industry-wide slowdown in vehicle demand and compounding credit crisis, especially in North America and Europe. During the quarter, GM drew the remaining $3.5 billion of its secured revolving credit facility and made $1.2 billion in payments to Delphi as required by agreements between the companies as part of Delphi’s bankruptcy proceedings.

GM expects adjusted operating cash flow in the fourth quarter to be much improved versus the third quarter, and more consistent with the first half of the year. Improvements in fourth quarter cash flow are largely driven by anticipated improvements in working capital in North America relating to sales allowances, and lower fourth quarter finished vehicle inventory in Europe.

Improving its liquidity position remains a top priority for the company. In response to deteriorating market conditions, GM announced today that in addition to the $15 billion in liquidity initiatives it outlined in July 2008, it has identified $5 billion of incremental liquidity actions. Cumulatively, GM has announced actions aimed at improving liquidity by $20 billion through 2009. To date, $10 billion in internal operating actions have either already been completed or are on track for full execution by the end of 2009.

Even if GM implements the planned operating actions that are substantially within its control, GM’s estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. Looking into the first two quarters of 2009, even with its planned actions, the company’s estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve, it receives substantial proceeds from asset sales, takes more aggressive working capital initiatives, gains access to capital markets and other private sources of funding, receives government funding under one or more current or future programs, or some combination of the foregoing. The success of GM’s plans necessarily depends on other factors, including global economic conditions and the level of automotive sales, particularly in the United States and Western Europe.

Further detail on the additional liquidity actions and GM’s current liquidity position and outlook will be disclosed in a Form 8-K filing with the Securities and Exchange (SEC) later today.

Not to be outdone, Ford released its less-than-stellar earnings announcement:

Download Full Financial Release

Download Slides

Net loss of $129 million, or $0.06 a share, for the third quarter of 2008
Pre-tax loss of $2.7 billion from continuing operations, excluding special items ++
Favorable curtailment gain in excess of $2 billion related to approval of retiree health care agreement
Company remains on track to achieve $5 billion in cost reductions in North America by the end of 2008 compared with 2005 (at constant volume, mix and exchange; excluding special items)
Automotive gross cash (including cash and cash equivalents, net marketable securities and loaned securities) on Sept. 30, 2008 totals $18.9 billion +++
Available credit lines total $10.7 billion; overall liquidity totals $29.6 billion
Company planning further cost and cash improvements to continue implementing Ford’s product-led transformation plan and offset continued weakness in the global automotive industry
Financial Results Summary
Third Quarter
First Nine Months

O/(U) 2007
O/(U) 2007

Wholesales (000) ++

Revenue (Bils.) ++
$ 32.1
$ (9.0)
$ 110.1
$ (18.2)

Continuing Operations ++

Automotive Results (Mils.)
$ (2,906)
$ (2,544)
$ (2,924)
$ (2,715)

Financial Services (Mils.)
( 111)

Pre-Tax Results (Mils.)
$ (2,747)
$ (2,941)
$ (3,035)
$ (3,781)

After-Tax Results (Mils.)

Earnings Per Share ++++

Special Items Pre-Tax (Mils.)
$ 2,207
$ 2,557
$ (6,219)
$ (6,199)

Net Income

After-Tax Results (Mils.)
$ (129)
$ 251
$ (8,696)
$ (8,784)

Earnings Per Share

Automotive Gross Cash (Bils.) +++
$ 18.9
$ (16.7)
$ 18.9
$ (16.7)

See end notes on page 9.

DEARBORN, Mich., Nov. 7, 2008 – Ford Motor Company [NYSE: F] today reported a third quarter net loss of $129 million, or 6 cents per share. This compares with a net loss of $380 million, or 19 cents per share, in the third quarter of 2007. Ford’s third quarter pre-tax operating loss from continuing operations, excluding special items, was $2.7 billion, down from a $194 million profit a year ago.

The company also today announced additional actions to reduce costs and improve Automotive gross cash to enable Ford to continue to implement its product-led transformation plan despite the continued weakness in the global automotive market and economic environment.

Improvement actions include: an additional 10 percent reduction in North American salaried personnel-related costs; a reduction in capital spending enabled by efficiencies in Ford’s global engineering and product development; a reduction in manufacturing, information technology, and advertising costs due to the company’s “One Ford” global operations; and a reduction of inventories globally. Ford also said it would continue to explore divestitures of non-core assets and utilize equity-for-debt swaps and other incremental sources of financing to strengthen the company’s balance sheet.

At the same time, Ford reiterated its continued investment in the smaller, more fuel-efficient, high-quality products that will result in a more balanced global portfolio. Ford confirmed that nearly all planned product programs remain on track and on time – aside from a few select vehicles that will be deferred until industry volumes recover. Ford will, however, reduce spending for large vehicles in declining segments.

“We continue to take fast and decisive action implementing our plan and responding to the rapidly changing business environment,” said Ford President and CEO Alan Mulally. “We have a strategy that is broad and specific enough to handle the dramatic changes in today’s environment. We will continue to assess the rapidly changing business environment and modify implementation of our plan accordingly.”


The 2008 operating data discussed below exclude Jaguar Land Rover, which was sold on June 2, 2008. Jaguar Land Rover and Aston Martin data are, however, included in the 2007 data, except where otherwise noted. See tables following “Safe Harbor/Risk Factors” for the amounts attributable to Jaguar Land Rover and any necessary reconciliation to U.S. GAAP.
On an after-tax basis, Ford’s third quarter operating loss from continuing operations, excluding special items, was about $3 billion, or $1.31 per share, compared with a loss of $24 million, or 1 cent per share, a year ago.

Ford’s third quarter revenue was $32.1 billion, down from $41.1 billion a year ago. The decline reflects lower volume, the sale of Jaguar Land Rover, changing product mix and lower net pricing, partly offset by favorable changes in currency exchange rates.

Special items improved pre-tax results by $2.2 billion in the third quarter, or $1.25 per share, which is primarily due to the retiree health care curtailment gain in excess of $2 billion related to the approval of the retiree health care settlement agreement with the United Auto Workers.

Automotive gross cash, including cash and cash equivalents, net marketable securities and loaned securities, was $18.9 billion on Sept. 30, down from $26.6 billion at the end of the second quarter. The decrease primarily reflects Automotive pre-tax operating losses, changes in working capital and other timing differences, and upfront subvention payments to Ford Credit.

Ford’s Automotive cash flow during the third quarter was significantly affected by a number of unique factors during the quarter, including the decision to reduce truck production to allow for an orderly sell-down of dealer inventories to make way for new models. Overall, Ford’s global third quarter production levels were more than 100,000 units below retail sales and nearly 500,000 units below the second quarter levels. This had a substantial impact on profits, and the decline in production resulted in about a $3 billion reduction in payables during the quarter.

“Strengthening our balance sheet has been and remains a core element of our transformation plan,” said Lewis Booth, Ford executive vice president and chief financial officer. “We were fortunate to have gone to the markets at the right time two years ago to obtain significant liquidity to implement our plan and invest in the new products that will secure our future. We will continue to aggressively reduce costs and manage our cash with absolute discipline to ensure we have the resources to fund our plan going forward.”

In addition, Ford said it will continue working with a number of governments around the world to maximize the availability of funding to provide further protection against the uncertain economic environment that the entire automotive industry is facing.

The following discussion of third quarter highlights and results are on a pre-tax basis and exclude special items. See tables following “Safe Harbor/Risk Factors” for the nature and amount of these special items and any necessary reconciliation to U.S. GAAP. Discussion of Automotive operating cost changes is at constant volume, mix, and exchange, and excludes special items.

Launched the new 2009 Ford F-150 full-size pickup with best-in-class capability and unsurpassed fuel economy. The F-Series remains the No.1-selling truck in America for 31 years running.
Launched the new Ford Fiesta small car in Europe, the first of Ford’s new global small cars. Production began in Cologne, Germany, and the car is now going on sale in Europe. Fiesta also is beginning to now go on sale in Asia and will be introduced in North America in early 2010.
Debuted at the Paris motor show the all-new Ford Ka, a stylish subcompact car that goes on sale in Europe late this year and is featured in the new James Bond movie “Quantum of Solace.”
Launched the Ford Focus in China and the Ford Escape in key Asia Pacific and Africa markets.
Improved vehicle quality again, marking four consecutive years of progress. Ford, Lincoln and Mercury vehicles collectively reduced things gone wrong by 7.7 percent compared to last year, pulling Ford into a statistical quality tie with Honda and Toyota atop the list of seven major automakers in the U.S. Global Quality Research System study.
Achieved the leading number of “Top Safety Picks” from the U.S. Insurance Institute for Highway Safety with the 2009 Ford Flex and Lincoln MKS earning top honors. This builds on Ford’s achievement of the most U.S. government 5-star safety ratings in the auto industry.
Achieved total company cost reductions of $300 million despite commodity cost increases of more than $1 billion. During the first nine months, Automotive costs are down about $3 billion globally, and the company now is on track to reduce costs by about $4 billion for the full year.
Confirmed that Ford North America remains on track to achieve or exceed its commitment of reducing $5 billion in annual operating costs by the end of 2008 compared with 2005.
Achieved continued strong results for Ford South America with a profit of $480 million.

Automotive Sector* Third Quarter
First Nine Months

O/(U) 2007
O/(U) 2007

Wholesales (000)

Revenue (Bils.)
$ 27.8
$ (8.5)
$ 96.9
$ (18.1)

Pre-Tax Results (Mils.)
$ (2,906)
$ (2,544)
$ (2,924)
$ (2,715)

*excludes special items

For the third quarter of 2008, Ford’s worldwide Automotive sector reported a pre-tax loss of $2.9 billion, compared with a pre-tax loss of $362 million during the same period a year ago.

The deterioration was due to lower volume and unfavorable mix, particularly for North America and Volvo, unfavorable net interest expense and related fair-market value adjustments, and lower net pricing, partly offset by favorable cost changes.

Worldwide Automotive revenue in the third quarter was $27.8 billion, down from $36.3 billion a year ago. The decline reflected lower volume, the sale of Jaguar Land Rover, unfavorable product mix and lower net pricing, partly offset by favorable changes in currency exchange rates.

Total vehicle wholesales in the third quarter were 1,174,000, compared with 1,487,000 units a year ago.

North America: For the third quarter, Ford North America reported a pre-tax loss of $2.6 billion, compared with a loss of $1 billion a year ago. The decline reflected unfavorable volume and mix, and unfavorable net pricing, partly offset by cost changes. Unfavorable volume and mix primarily reflected a decline in the U.S. industry volumes, changing product mix, lower dealer stocks and lower market share. Third quarter revenue was $10.8 billion, down from $16.7 billion a year ago.

South America: For the third quarter, Ford South America reported a pre-tax profit of $480 million, compared with $386 million a year ago. The increase reflected higher net pricing, favorable volume and mix, and favorable changes in currency exchange rates, partly offset by higher net product costs. Third quarter revenue was $2.7 billion, up from $2.1 billion a year ago.

Europe: For the third quarter, Ford Europe reported a pre-tax profit of $69 million, compared with $293 million a year ago. The decline was primarily due to unfavorable cost changes (unfavorable mark-to-market adjustments for commodity hedges) and currency exchange, partly offset by net pricing. Third quarter revenue was $9.7 billion, up from $8.3 billion a year ago.

Volvo: For the third quarter, Volvo reported a pre-tax loss of $458 million, compared with a loss of $167 million a year ago. The decline was due to unfavorable volume and mix. Third quarter revenue was $2.9 billion, down from $3.8 billion a year ago. As part of its restructuring, Volvo plans a total reduction of 6,000 employees worldwide, including 1,200 agency employees.

Asia Pacific and Africa: For the third quarter, Ford Asia Pacific and Africa’s pre-tax profit of $4 million compares with $30 million a year ago. The decline was due to unfavorable volume and mix, partly offset by favorable net pricing. Third quarter revenue was $1.7 billion, down from $1.8 billion a year ago.

Mazda: Ford lost $1 million from its investment in Mazda and associated operations in the third quarter, compared with a profit of $14 million a year ago.

Other Automotive: Other Automotive, which consists primarily of interest and financing-related costs, reported a third quarter pre-tax loss of $411 million. This included net interest expense of $440 million.


Financial Services Sector* Third Quarter
First Nine Months

(in millions)
O/(U) 2007
O/(U) 2007

Ford Credit Pre-Tax Results
$ 161
$ (385)
$ (100)
$ (1,053)

Other Financial Services
( 2)

Financial Services Pre-Tax Results
$ 159
$ (397)
$ ( 111)
$ (1,066)

*excludes special items

For the third quarter, the Financial Services sector reported a pre-tax profit of $159 million, compared with $556 million a year ago.

Ford Motor Credit Company: Ford Credit reported a pre-tax profit of $161 million in the third quarter, compared with $546 million a year ago. The decline primarily reflected the non-recurrence of net gains related to market valuation adjustments from derivatives, a higher provision for credit losses, and lower volume, partly offset by a higher financing margin.

Ford said it is more focused than ever on implementing its transformation plan to respond to the significant challenges presented by the continued global economic downturn. Ford’s plan includes:

Aggressively restructuring to operate profitably at the current demand and changing model mix
Accelerating the development of new products that customers want and value
Financing the plan and improving the balance sheet
Working together effectively as one team, leveraging Ford’s global assets
“These are challenging and historic times for the global automotive industry, but I am more convinced than ever that Ford has the right plan to see us through,” Mulally said. “Ford remains well positioned to take advantage of our global scale and global product strengths worldwide, and we will continue to take the decisive steps necessary to operate through the current downturn and be in a position to begin to grow profitably again as the global economy rebounds.”

Ford said its plan to deliver more of the safe, affordable, high-quality, fuel-efficient vehicles that consumers want and value remains solidly in place. The plan includes:

Delivering best-in-class or among the best fuel economy with every new vehicle introduced globally.
Introducing industry-leading, fuel-saving EcoBoost engines and doubling the number and volume of hybrid vehicles.
Leveraging Ford’s product strengths to deliver more global vehicles in the B, C, C/D and commercial van segments. By 2010, nearly 40 percent of Ford’s product entries in these segments will be shared between Ford North America and Ford Europe, and 100 percent alignment will be achieved by 2013.
Upgrading the Ford, Lincoln, Mercury lineup in North America almost completely by the end of 2010.
Bringing six European small vehicles to North America from global B-car and C-car platforms.
Retooling three North American truck plants to produce small, fuel efficient vehicles.
Building on vehicle quality that is now on par with Honda and Toyota – and that consistently is being recognized by important third-parties like J.D. Power and Associates’ Initial Quality Study – driven by Ford’s disciplined and standardized processes for every product.
Building on vehicle safety leadership – with the most U.S. government 5-star safety ratings of any auto company and recently moving past Honda for the industry’s most IIHS “Top Safety Picks” – plus new smart safety features, such as the industry-first MyKey technology that limits top speed and audio volume for teens and the first forward crash-avoidance system for mainstream vehicles.
Supporting Ford’s global products with a lean, flexible global manufacturing system.

To support new product investments and offset continued industry weakness, Ford is implementing actions to improve Automotive cash by a total of $14 billion to $17 billion through 2010.

The actions include:

Reducing North American salaried personnel-related costs by an additional 10 percent by the end of January 2009, through personnel reductions, attrition and other actions. The reductions are in addition to personnel-related cost actions already taken in Ford North America and under way in Ford of Europe, Ford Asia Pacific and Africa, and Volvo.
Further reduction of U.S. hourly employees by approximately 2,600 as a result of the most recent round of targeted buyouts – bringing Ford’s total U.S. hourly reductions through buyouts in 2008 to approximately 7,000.
Eliminating merit pay increases for North America salaried employees in 2009.
Eliminating performance bonuses for global salaried employees, including the Annual Incentive Compensation Plan for the 2008 performance year.
Suspending matching funds for U.S. salaried employees participating in Ford’s Savings and Stock Investment Plan, effective Jan. 1, 2009.
Reducing annual capital spending to between $5 billion and $5.5 billion – enabled by efficiencies in Ford’s global product development system and reduced spending in declining product segments.
Reducing engineering, manufacturing, IT and advertising costs through greater global efficiencies.
Reducing inventories globally and achieving other working capital improvements.
Return of capital from Ford Credit to Ford Motor Company consistent with Ford Credit’s plan for a smaller balance sheet and a focus on core Ford brands.
Continuing to develop incremental sources of Automotive funding, including divesting of non-core operations and assets, and implementing equity-for-debt swaps.
Ford’s actions are based on the expectation that the global auto industry downturn will be deeper, broader and longer than was previously assumed. Industry volumes next year are expected to decline compared with 2008 levels. Ford said it will continue to adjust its production in line with the lower demand.

Ford’s 2008 planning assumptions regarding the industry, operating metrics and profit outlook are as follows:

Planning Assumptions
Full-Year Plan

First Nine Months

Full-Year Outlook

Industry Volume (SAAR):

–U.S. (million units)*



–Europe (million units)**



Operational Metrics

Compared with 2007:

. –Quality


On Track

–Automotive Costs***
Improve by about $3 Billion

$3 Billion

About $4 Billion

Absolute Amount:

. –U.S. Market Share (Ford Lincoln Mercury)
Low End of 14% – 15% Range


High 13%

. –Operating-Related Cash Flow

$(12.3) Billion****

Greater Outflow
than Plan

. –Capital Spending
About $6 Billion

$4.7 Billion

On Track

2008 Operating and Overall Results Will be Worse Than 2007

* Includes medium and heavy trucks

** European 19 markets that we track

*** At constant volume, mix and exchange; excludes special items

**** See tables at end for reconciliation to GAAP

Ford’s production volumes are shown below:

2008 Production Volumes Actual

Third Quarter
Fourth Quarter

Ford North America

Ford Europe


GM is also announcing plans to increase liquidity. Some of the steps include reducing expenditures for R+D. This enforces what I’ve told people for years when they ask why GM, Ford and Chrysler products seem not to be as well-built as Japanese and German cars: that when the going gets tough, they cut research, development and engineering, which are at the core of quality. (Unlike in the past where quality was the “worker on the line”, now failure rates are engineered in, or in the case of GM, Ford and Chrysler — not engineered out.

[b]So should they get the money?[/b]
Question number one seems to be “won’t the world end if the entire US auto industry tanks?” The answer is: look at your history books. Class, can anyone cite an example of a country’s entire auto industry tanking?

It was early in the ’80s when British Leyland, which owned every major English marque went down the tubes. Even a government bailout couldn’t really stem the disaster. Did the world end? No. The companies were simply sold off. Decades later, Jaguar, Mini, Land Rover, and MG all still exist (but by new owners). While not in production, BMW retains the rights to Austin, Morris, Triumph, and others.

If allowed to go down the tubes, GM, Ford and Chrysler would all be purchased by healthier companies like Porsche, BMW, Honda, Toyota, and Hyundai. Some jobs would be lost, but maybe not many less than through a prolonged suffering.

This is not about name calling — being a free-market type versus socialist. More, it’s about having consequences for decades of mismanagement and in-the-moment greed by executives, labor unions, investors, and dealers. We have to let the auto industry see if it can work it out on its own, because if we don’t, we’ll still be getting the same shortsighted business practices, products and labor contracts that we have for fifty years.

Barack Obama: The Lewis Hamilton Of Politics

November 6, 2008

While all the talk around the world has been about Tuesday’s election of America’s first black President, Barack Obama, mainstream media outlets have failed to tie in that, just days before, Formula One crowned its first black Champion. On Sunday, Lewis Hamilton of McLaren-Mercedes squeaked back into fifth place just seconds before crossing the finish line at the Brazilian Grand Prix to win the Formula One Season Driver’s Championship.

To add icing to the cake, Lewis Hamliton was also the youngest to ever win it, as well.

Obviously, there is little comparison in terms of relevance on the world stage between Obama being voted President and Hamilton winning in F1, but Hamilton’s accomplishments should not be dismissed. We’re not talking history back to 1776 here, but 107 years ain’t too shabby, either.

Okay, in actuality the modern era of Formula One started in 1950. The first “Grand Prix” race, however, was in 1901 at Le Mans. During this time not a single man (or woman) of color has captured a season championship. With European, Australian, New Zealander, South American, and North American (including one American and a lone Canadian) Champions, the faces aren’t quite as homogeneous as those of the US Presidents, but every Formula One champions’ has still been some shade of white.

The United States’ reputation for racism is legendary, but thousands of Formula One fans would fit in well in the deepest, darkest parts of the ugliest parts of America. During the last two years, fans have openly taunted Lewis Hamilton. Ugly racist comments from the stands…and even fans painted in mocking black face paint showed that there are plenty of classless David Duke types in Europe.

Unfortunately, F1 boss Bernie Ecclestone still is asleep at the wheel when it comes to denouncing the abhorrent actions of F1 fans. Just this week, Ecclestone commented that he felt some of the worst treatment – fans in blackface wearing “Hamilton’s family” t-shirts in the crowd at the Spanish Grand Prix, was just a “bit of a joke”. If the fans had dressed up in Chasidic diamond merchant outfits with signs saying “Ecclestone Only Cares About the Money”, we’re guessing that the Jewish Ecclestone wouldn’t have seen the humor. (And we wouldn’t have, either!)

But sadly, that’s in fact all Ecclestone cares about – and it has nothing to do with his religion or homeland. He has just proven time and time again to care about nothing other than control and receipts. If he cared about F1’s image, he would have squashed the nasty behavior of the fans and celebrated the groundbreaking achievements of a spectacularly talented driver.

So from The Four Wheel Drift: Congratulations to both Barack Obama and Lewis Hamilton for showing children with all skin colors that hard work and talent can translate to the highest honors in the toughest competitions.