Summer’s Automotive Summary

August 10, 2009

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.

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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:

BRITISH LEYLAND

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.


The sad, deadly side of cars

May 9, 2008

It\'s enough to make one cry. (Photo by J. Lok / Courtesy of the Seattle Times)
It is with a heavy heart that this picture of Jesse’s fatal accident (by J. Lok /courtesy of The Seattle Times) is posted. I hope it reminds us all how dangerous cars are and helps us all to drive slower and safer.


The automobile’s various roles in life are the topics of endless discussion here. Those of us who see vehicles as more than just a form of basic transport are never at a loss for words when describing how a specific car makes us feel.

Monday morning I was quickly reminded how cars can indeed leave me speechless. I received a call from my brother informing me that a person I had known his whole life was dead. The bright, energetic, funny 23-year-old had been killed in a car accident.

Jesse had been driving his Porsche Boxster when he somehow veered into a Ford Taurus head-on. Initial indications point that he might have been going too fast or he swerved and overcorrected to miss something. He crossed the center line and slammed into the larger Taurus. The picture shows the perfect angle the Taurus took up the side of the Porsche. Jesse was killed instantly. His passenger was rushed to the hospital with multiple injuries – but will recover. The driver of the Taurus was treated at the hospital with non-life-threatening injuries.

Just ten weeks ago, Jesse had gone to work for my brother at his business strategy consultancy. One of my best friends, who also happens to work for my brother, said it best: “all 23-year-olds drive fast, at least those you want to be friends with.” We all did at that age, and many still do. Most of us felt entirely invincible behind the wheel of a car until we started wondering if we had attached the baby seat correctly for our first child.

Speaking with friends at Jesse’s funeral, the common theme was “it could have been any of us.”

We might have escaped the probabilities, but they caught up with Jesse. The chances of a car-crazy guy in a fast car getting into a fatal accident are significantly higher than those of a minivan-driving forty-something mom. This doesn’t make it easier to swallow or accept.

Jesse had car crazy DNA. His father met my father at the Northwest racetracks in the late 1950s. His father has owned a number of wonderful sports cars, and just recently competed in the Chihuahua Express Mexican vintage rally in a borrowed Jaguar E-Type. Just a week ago, Jesse’s oldest brother (around 20 years older), three nephews and I attended an Italian car show together. So, Jesse getting his hands on a Porsche Boxster didn’t seem strange at all, because passion for sports cars ran deep in the genetic code.

And who wouldn’t like to own a Boxster? From the day it debuted, it has been a favorite of those of us who appreciate true automotive works of art. Pretty, refined, capable, exhilarating to pilot, the Boxster was a throwback to the early roadsters of the glory days of road racing. I would have bought one myself, but in a 1997 test drive, I realized I was about four inches too tall to comfortably fit. (I wound up with a C5 Corvette instead.)

Now every single time I see a glorious Boxster, I will be reminded of the tragic loss of a truly great individual. It won’t be the first time a car has been tied to horrible loss. The Mercedes 300SL still makes many think of the catastrophic accident killing drivers and spectators at the ’55 Le Mans. The Porsche 550 Spyder is synonymous with the loss of another young, handsome, promising gentleman: James Dean.

It’s entirely different when it’s someone you know. I remember when Jesse was born. I videotaped his circumcision, for God’s sake! I used to get frustrated when at family events he’d keep crawling under the table. He grew up into an admirable young man – and the over-capacity crowd of friends and relatives at his funeral spoke to his affect on those that knew him. Most did not know he had served as a Big Brother for Big Brothers/Big Sisters of Puget Sound. Professionally, my brother (not known for heaping liberal amounts of praise on anyone) had been extremely impressed with Jesse’s analytical abilities ever since his first interview at the company.

Life goes on for the rest of us. The chances that those of us who were car crazy before will swear off sports cars and unsafe classics are slim-to-none. We understand that while possible, Jesse’s accident resulted in a low probability worst-case scenario. Be this as it may it warrants a moment to stop and think.

No matter how good we think we are behind the wheel, all cars – be it a Porsche, Volvo, Model A, Packard, Ferrari, or Honda require a healthy dose of attention and respect. When we neglect attention or respect for even just the most fleeting moment, a car can bite back quickly, altering the course of lives forever.

Editor’s Note: Jesse had served as a big brother for Big Brothers/Big Sisters of Puget Sound. Donations of any amount can be made to Jesse’s memorial fund to support Big Brother/ Big Sister programs at http://www.bbbs.org/pugetsound