Chrome Sweet Chrome

Early this month, Automotive News presented its view on Ford’s future product plans.  In their predictions, they said, “Ford is expected to pull the plug on the aging Ranger in 2011.  It is unclear whether the company will replace the compact pick up with another product.”  While the once popular compact pick up segment may be abandoned, SUV’s and crossovers are having a heyday at Ford.  Long ago looking at projections in the press, I predicted a “pile up at the intersection for four-door and utility”, and the gridlock is approaching Chinese month long traffic jam proportions.

While Ford may well eliminate the Ranger, despite the overall CAFÉ pressure for more fuel-efficient vehicles, the list of SUVs and crossovers continues to grow.  Plans are in place for revised Flex, Edge Escape and Explorer products.  The Expedition continues to explore the larger SUV segment with regular and extra long products.  All this while the long delayed EcoSport Fiesta-derived and Grand C-Max Focus-derived crossovers are expected in the showroom.  While the Transit Connect remains essentially a commercial offering, adding some of the interior trim on the Euro Tourneo model would add yet another four-door crossover to the mix.  Personally, the Transit Connect is just a few creature comfort features away from being a tremendous choice for my family, what with handicapped scooter, walkers, and other paraphernalia.  While Mercury has been axed (as well as the chance for a, wait for it, Mercury Kuga to replace the Mariner), Lincoln MKX, MKT and Navigator products are still in the plan, while the new more upmarket Lincoln C-sized vehicles are yet to be revealed.

While Ford’s certainly made competitive strides, let’s not forget the strategic objective of business is to conquer and hold the territory known as the consumers’ share of mind.  It looks like the portion of that landscape known as “compact pick up” is currently suffering from lack of attention, while there are plenty of assets bumping into each other at that “four-door utility” cross roads.  On the principles that investment dollars are always scarce, that one should exploit gaps in the competitive landscape, and that opportunities exist for efficiencies in a line up overfull of four door utilities, permit me to recommend to Ford that they do replace the Ranger, while rationalizing an increasingly overlapping SUV and crossover lineup.

As sure as God made little green apples, there are three things you can count on as the Ed Whitacre – Dan Akerson team wends its way to GM’s impending IPO (initial public offering).  Those three things are:

1) No matter what, the U.S. taxpayer will get a raw deal.
2) No matter what, the Government will still exert control over GM
3) No matter what, once the IPO is concluded the press will trumpet the end of “Government Motors”

So, how is it that the taxpayer is not going to be amply rewarded for its “investment” in GM?  Let us take a look at the “New GM”.  61% of the new GM (the old one still exists as “Motors Holdings” and the liquidation continues) was taken over by the U.S. government on behalf of the nation’s taxpayers and citizens.  17.5% was given to the UAW for reasons not entirely clear, although some sort of security for the union’s acquiescence in the government takeover is suspected.  The remaining 21.5% is made up of various entities, including the Canadian Government and many of the former investors and bondholders of the “old” GM.

According to the Wall Street Journal, the market capitalization of the New GM would have to exceed $70 billion for the U.S. taxpayer to breakeven on the Obama Administration’s investment.  At that point, the $50 billion remaining in the company becomes worth more than what was put in.   This would make the market valuation of the new GM the second ranking automotive firm on the planet, over 10 times the worth of GM prior to the bankruptcy and almost $30 billion more than Ford.

Last week, according to Moebius & Company's (a Wall Street firm that analyzes these matters) publication The Motor Weekly here is the market capitalization of the world's leading automotive firms (in millions):

Toyota - $110,213
Honda - $58,584
Daimler - $51,156
VW (including Porsche) - $50,687  (VW - $42,461  Porsche Holdings $8,226)
Nissan-Renault Alliance - $43,496  (Nissan - $31,353  Renault - $12,143)
Ford - $41,784
BMW - $35.066
Hyundai-Kia - $31,353 (Hyundai - $24,732  Kia $10,177)

Nature provides templates for us that have analogs to circumstances in human society.  In many interactions between living organisms, there are many parasitic relationships and then there are symbiotic relationships.  As a “parasite” is defined as an entity that feeds off a host organism up until and including the death of the host, can there be no more better candidate in the auto industry over the last few decades for the parasitic role than the UAW?

After all, the burden of the union wages, benefits, retirement pensions and a thick stack of master agreement work rules all sucked the life out of the former Big Three.  In the years immediately following World War II, the Big Three could wield oligopolistic power pricing on the market, and thus continue to feed the labor beast that had latched onto the industry with its labor monopoly.  Once competition from overseas and, later, onshore manufacturing began in earnest, the parasitic model was no longer viable.

Despite the writing on the wall for the industry, where CAFÉ rules, including those lobbied for by the UAW, enforced regulations that doomed at least half of all production to be unprofitable, the union contracts eventually drove GM and Chrysler into bankruptcy, a situation only narrowly averted by Ford.  If people are offended by the characterization of the UAW being parasitic, I can offer the evidence that once the accumulated burdens of the wage and benefit structure were stripped away, the path to profitability was paved.

It is true that management had its share of the blame for the parlous state of the domestic industry.  For one, the massive debt that was washed away in bankruptcy was built up by the industry managers.  And given the labor situation that management agreed to, their response was to try to maintain volume, and not consumer value.  But still, the burden of trying to outrun the rabbit of overcapacity, largely retained to support assembly labor led to the collapse of both GM and Chrysler.

For over 40 years, Traverse City hosts the Management Briefing Seminar, a gathering of the industry’s best and brightest, and a few people trying to make connections, meet deadlines, and find out what’s going on in what had been America’s bellwether industry.

This year’s conference from CAR (Center for Automotive Research) was a bit of a rebound.  Conference materials referenced attendance back north of 800 participants, over last year’s dismal attendance in the 600’s, reflecting some optimism in the industry itself.

Much of the news you already know came from John Krafcik and the 50 mpg fleet promised for 2025, Mark Fields talking about some hiring at Ford, as well as Ed Whitaker mentioned how embarrassed GM people feel about being called “Government Motors”.   Under the big news, three themes seem to dominate the conference, Collaboration, Connectivity (both with interactivity and vehicle electrification) and China.  Let’s examine these.

Perhaps those Toyota pickets aren't working so well after all.

Collaboration

While many recently have announced the end to capitalism, its death notice seems premature.  Resurgent and aggressive companies had their representatives present on the dais at the conference.  Ford, Hyundai, and many other firms echoed a cautiously optimistic view of the future.  Bob King, new president of the UAW, proposed a less confrontational union.  This from a fellow who just sent pickets to Toyota dealers to ward customers away the buying the very cars and trucks built by the assembly workers he’s been hoping to organize.

While sounding conciliatory, Bob’s “offer” was basically a plea for access to workers at Toyota, Honda, Nissan, BMW, Mercedes, Hyundai and Kia.  Steve St. Angelo of Toyota found ready refuge in the company’s “No Solicitation” policy.  While this doesn’t bode well for direct and immediate Japanese management and American labor reconciliation, most speakers looked at the current crisis as an opportunity too good to waste for helping to heal many of the great divides that showed themselves prior to recent economic collapse.

The big news last week was President Obama coming to Detroit to declare “Mission Accomplished” on the auto industry bailout.  The President’s message was wildly popular with the UAW membership at Poletown and Jefferson Avenue plants.  But you know that I felt that a Chrysler-style loan guarantee program would have been appropriate to smooth out any bankruptcy, keep the supply base solvent and get the OEMs over a rough patch and one last chance to get their operational house in order.  But the Administration did the right thing in the completely wrong way.  Not to mention that the major part of the Detroit turnaround story is based in Dearborn, with Alan Mulally leading Ford to the sort of renaissance that even Lee Iacocca couldn’t pull off at Chrysler with its government-backed loans.

I could reiterate the long list of ineffective, wrong headed and potentially illegal or unconstitutional actions undertaken by the Auto Task Force, but frankly I would rather talk about happier topics, like some takes on recent Ford stories.

Naked City

The motorcycle market was once dominated by the “Universal Japanese Motorcycle”.  The prototype ideal for this was the groundbreaking Honda 750 starting in 1970.  These bikes had four cylinders in a transverse location, chain drive, a flat seat, wide handlebars and a comfortable, upright riding position.  Over time, though, the market bifurcated into Harley-style cruisers, the motorcycling equivalent of a Lazy Boy recliner, and race replica sport bikes with full plastic fairings, short and low clip-on hand controls and rear set foot pegs.  Not all riders were chrome encrusted cruisers, though, and many felt that grown men should not have to ride a sport motorcycle with their rear ends higher than their heads.

The Japanese OEMs half-heartedly tried to plug the gap between the two extremes with the “standard” bike.  Unfortunately, these were not very popular and the style didn’t take off.  Then riders in Europe began customizing their sport bikes, removing their damage prone fairings and raising their seating positions.  They created the “naked” bike, which had the one element the “standard” was missing – passion.  These “hooligan” bikes, starting with the Triumph Speed Triple and the Ducati Monstro, have been copied by the Japanese, who are now bring some panache to their non-cruising and non-race replica bikes.

This past week Ford brought out a restyled Freestyle crossover.  What, isn’t the Freestyle dead?  Let’s face it, the Freestyle (later the Taurus X) didn’t set the world on fire, despite having a well-balanced package and concept.  It was the automotive equivalent of a standard motorcycle.  The Freestyle and its virtues, though, were reborn last week via a comprehensive restyle as the new Ford Explorer.

Perhaps over the last couple of years of job search, it was bound to happen.  Over the last few weeks my phone’s been ringing with, if not actual job offers, at least inquiries.  This may be a sign that the long winter is over and the industry, if not the economy, is starting to warm.  It may be a welcome “disturbance in the Force.”  Perhaps every one’s been picked up and the recruiters have finally reached the bottom of the barrel.  Whether or not I’m benefiting from some general trend some inklings and feelers from employers have certainly been welcome.

Of course, the stubbornness of the economy to revive might dash these hopes, as regulations, taxes, and anti-business sentiment from the current administration continues to dampen the enthusiasm of both consumers and employers.  But still, I am hoping for at least one point of light amongst the gloom.

I’ve had a wide span of inquiries.  One to work as program manager on a vehicle program.  Another to keep the management of a supplier informed of industry trends through attending conferences, motor shows and being able to report significant opportunities and threats.  In other words, what I generally enjoy doing.  I’ve had many of my past associates working behind the scenes in ways I cannot discuss (mostly because they tell me they’re working behind the scenes so I can’t discuss because I have no idea what’s going on).

But one opportunity flew in over the transom regarding a corner of the industry that I didn’t know existed, but fits into my background, interests and network.

I didn’t know, but there’s a whole supplier subculture doing what’s known as “containment and inspection services”.  What’s this?  Simplistically, do you remember my story of the millions of washers that were sourced to a supplier in China?  And that 20% of these “washers” had no holes?   It would be a containment and inspection service that would sort through the millions of parts and separate the washers from the slugs.

With my Marketing MBA and focus on customer satisfaction and pursuit of Quality, people have often asked me why I didn’t have a career in automotive marketing.  My usual response was that the Detroit 3 never really did classical marketing.  In fact, they were pretty much immune to the discipline.

Marketing has its “Four P’s”, product, price, promotion, and place (also known as “distribution”).  In the Detroit automotive world, “product” has been the realm of designers, engineers, planners, and senior executives.  There is some lip service historically given to people who track demographic trends, to customer input via market research, and other customer driven data.  For the most part, though, this market data is only summoned when it agrees with the assumptions made by the top designers, the senior executives or the chief engineers.  Otherwise, it was pretty much disregarded.  Pricing followed the assumption that the lower the price, the more metal would be moved, so that ideas to maximize revenue via judicious pricing given more or less generous content were usually ignored.  To move the metal to meet volume requirements, thousands of dollars were placed “on the hood”, which is hardly a measured and scientific approach.  “Promotion” meant “advertising” and Detroit advertising historically has been pretty banal.  Detroit’s distribution efforts, as manufacturers with assembly plants to feed and large dealer bodies, pretty much meant forcing cars down dealers’ throats.

These days, of course, things have changed, as more sophisticated industry outsiders are at the helm and customer input is highly prized and strong brand identities are being fostered, like Miracle Gro given plants in the garden.

Well, not so much.

Imagine a lone pirate on a deserted island.  The island is barren, without animal life, a water source, or much in the way of edible plants.  Yet the pirate has a treasure map and he uses the last of his strength to dig out a buried cask of gold and jewels.  While he has uncovered this vast trove, he dies.

Does he die wealthy?

Well, of course not.  All he has is a box of rocks.  Whatever value money has, it is a medium of exchange for goods and services.  Yet at the recent G20 conference, you would think that the two sides, the Barack Obama “public stimulus” argument and the EU leaders making the case for “austerity” were nothing more that rival pirate crews arguing over the shiny baubles they found on a sandy beach.

You see, they were both arguing that how governments spend money, public money, makes a difference in an economy.  They make the mistake that monetized gold, paper currency, or stored bits and bytes held in bank computers are the source of wealth and well being.

While money does have a key economic role, it must be emphasized that it is secondary and transitory in comparison to the creation of real wealth, that is the production of sale of desirable goods and services.  Imagine our pirates on a slightly different island, full of game, vegetation, land for tilling, wood for building and metals for forming.  Our patchwork crews could uses their talents, knowledge and native genius to create building materials, food, drink, and even boats to find their way back to civilization.  

Eventually, they might even turn to using their gold coins and other bright baubles to facilitate these exchanges.  Like other inhabitants on this Island Earth, they might well go right on and develop cruise ships and luxury hotels, and even casinos to catch the unwary and simple-minded.

Demographics are useful in predicting that things will change, but not so useful in predicting how things will change.  I’m sure that the reason GM set aside both Willow Run and Arlington assembly plants aside to build the whale-like proportioned last Chevy Caprice was because they knew that Baby Boomers were having their own baby boom and they would need family-friendly transport.  Naturally, they would need a family station wagon.

Instead, of course, Boomers turned in droves to the newly minted minivan concept, saving Chrysler and leaving GM with lots of capacity for not only the big Caprice sedan, but the Chevy, Olds and Buick wagon versions that were available, but were sadly out of step.

About the same time, Ford Motor knew that as the Boomers matured through their thirties and into their forties, huge opportunities would present themselves in the luxury market.  While it didn’t hurt that the Ford family were well-known Anglophiles, the drive to spend billions to purchase Jaguar was motivated, and not just rationalized, on the demographic logic of the aging “pig in the python” shift in population.

What happened, of course, was that while BMW and to some extent Mercedes benefited from the Baby Boomers hitting their wage earning stride, outside of the left and right coasts, in Red State territory “luxury” meant not trim little BMW’s or six cylinder Jaguars, but rather huge, hulking, imposing SUV’s, the rulers of the cul-de-sac.  

Ford could have jumped on the phenomenon earlier than they did, as the Explorer’s success was dawning on the planners in Dearborn, and a “four door Bronco” could very well have been part of the 1993 model year F-series freshening.  Instead, the money went to buy Jaguar, and the Explorer lesson was not exploited until the 1998 model year and the Ford Expedition and Lincoln Navigator.

The fact, though, is that demographics do drive vehicle tastes, but it is extraordinarily difficult to predict what might emerge, to what degree, and to get management to agree to it.  As a younger analyst at a “major Detroit OEM” in the mid 1980’s, I did simple examination of each brand and nameplate sold in the United States based on age and income of the buyer.  I found proof of the phenomenon that well-off younger buyers were import loyal, and that the domestic brands were being pushed into a section of the market that was poorer for younger buyer and much older for richer buyers.  This was not a surprise, but I did find one anomaly.

It was getting to the point where I was afraid to drive my 1972 MGB convertible.  At 45 mph the car began to shake.  By 50 mph, the steering wheel was moving about and there was a general vibration.  At more speeds, things got more and more dramatic.  As I have been out of work for going on two years now, “deferred maintenance” is the order of the day.  I’ve been lucky to been able to keep up insurance payments on the car, but visions of not sugar plums but dollar signs danced in my head as I occasionally took it out on nice days.  Was it the suspension bushings, which have endured for decades?  Was it that I had finally exceeded the capability of simple grease to fill the sliding parts of the front suspension, and the (expensive) kingpins were crying for rebuild or replacement?  What if the dreaded tin worm had eaten away at the structure of the trim little car’s structure at long last?

Imagine my relief when I discovered that all the drama was simply a matter of tread separation in the long-serving, long-suffering Michelin 165Rx14 XZX’s.  Now all I needed was a source of long obsolete 80 aspect ratio tires.  Luckily, I had stashed two tires of the very same make and size when I was forced to replace all four tires on the ’73 B GT with 185/70x14’s a few years ago.  Ideally, not the best choice, but given the convertible’s local, light duty cycle, it seemed provident these tires were tucked away.

Similarly, my 200,000+ mile 1998 Accord has had some issues.  The front steering and suspension has been somewhat troublesome.  There was some nibbling on the roadway when driving, braking could induce a shudder, and things just seemed untidy in general.  A quick assessment at the local Belle Tire brought back the news that the 12 year old car, too, suffered from tread separation and a quick replacement for the two front tires was ordered.  Moths flew out of the wallet slot where my credit card has been hiding, but safety is paramount.  Once equipped, the nibbling and the shuddering stopped, and more expensive repairs had been avoided.  But still, there were problems.  At highway speeds the car felt like a Zamboni at 80 mph after laying down a fresh layer of yet-to-be-frozen water.  The tires all looked good, but the unsteady feel never went away.

Once again, a trip to Belle Tire was in order.  This time, the rear tires were low on air pressure, and the dynamic stability on the front by the new tires only further emphasized the dartiness of the rears.  An examination pointed to several nail holes that made maintaining air pressure all the more problematic.  A new pair of tires on the rear has since restored safety and stability.  In fact, for under $300 the old girl feels very much like an all new car.

Such is the power of the tire, and it reminded me of the importance of market research.

Astronomers would tell you that the planet Mercury is the most cratered planet in the solar system.  I suppose it owes that honor to being at the bottom of the solar system’s gravity well, orbiting so close to the Sun itself.    Those who study auto dealerships might add that Mercury dealers are perhaps the most cratered stores left in the automotive universe.  The surviving dealers have weathered the current economy, new product starvation, and decades long declining sales in both of their brands.  The implosion of Mercury to them looks like a replay of the Death Star’s attack on Alderaan in Star Wars.

Of the 276 remaining standalone Lincoln-Mercury dealerships, there’s lots of handwringing about how they will not be able to survive when half their volume is vaporized by the wind down of the Mercury branded Ford products at the end of this year.  The above the fold Automotive News story this past week tells how Darryl Wischnewsky in Houston is awaiting nervously for his Volvo application to be approved.

A number of his colleagues are in the same boat, and some commentators don’t feel that being Lincoln exclusives will be enough to pull through before the cavalry arrives in the form of seven new or refreshed vehicles for Lincoln over a four year span.  

Despite the challenge, I wonder if there might be some hope for these dealers in a timeframe somewhat closer than years.  And perhaps the answer is in providing immediate (and near immediate) relief via some relatively simple product actions.

The volume problem for these dealers lies in three product lines – replacing the Milan, Grand Marquis, and Mariner sales.  The Milan sold about 2,700 units in May, the Grand Marquis about 2,300 and the Mariner nearly 3,200 (the legacy Mountaineer is now down to about 900/month).  A component of my proposed mitigation action falls into the probable move of Lincoln to be positioned a bit more down market, as it is likely due for smaller and cheaper (but not cheap) cars and crossovers.

Purple Heart

My Uncle Joe lay dying on Guadalcanal.  His near lifeless body had been placed among the dead as the chaplain moved along the line, blessing each of the fallen marines.  As the chaplain had passed along the line of fallen heroes, he glanced back, and noticed that my uncle (great-uncle actually, the youngest of my grandfather’s brothers) was slowly fingering a rosary he had in his hand.  The chaplain called out and my Uncle Joe was culled from the dead, and was placed among the wounded.

He recovered, and although he lost an eye and was told he would never walk again, during his recovery in Australia, he determined he was able to walk and went on to father three sons and a daughter and support his family, running a meat market in Detroit.

While I had known about his losing an eye on Guadalcanal, I had not known about his harrowing near-death experience until his funeral, this past Thursday.  He passed away on the 66th anniversary of D-Day, 21 days short of his 90th birthday.  Present were his sons and daughter, and a large brace of grandchildren, all which owed their very existence to the high school-educated farm boy’s devotion to Our Lady.  Late in the funeral ceremony the “Ave Maria” was hauntingly sung.

Earlier at the visitation, I was talking to one of the sons.  He mentioned that one day they were watching a TV program about Guadalcanal, and it hit him that his father had “hit the beach” three times.  He had asked his dad, “I can understand how you can do that once, you don’t know any better.  But once you know what will happen, how did you do it the second and third time?”

Like most vets, I suppose, he never gave an answer.  He did what he had to do.

The ramp on the Higgins boat dropped three times for Joseph Dzuirman, and each time he clutched his rifle, ran out and did his duty.  This is what Americans do when called upon, and I am proud to have known the man.  God help us all if we do not have his kind now and in the future.

We probably all have a number of Mercury memories.  My uncle’s sled in the mid-fifties was a black early fifties Mercury, all low and menacing.  He replaced it with a bronze color 1958 Pontiac Chieftain, with the white scalloped semi-fin with the chromed diamonds meant to recall a jet engine exhaust.  To be honest, the Pontiac was more ornate Wurlitzer than a car, but at least it had a throbbing 389 cubic inch V-8.  Frankly, his Mercury didn’t leave much of an impression.  I do recall the very cool bright neon Mercury Head logos that sequentially lit up at the dealer (Stu Evans?) in my grandparents’ neighborhood, on the corner of Outer Drive and Van Dyke on the east side in the early 1960’s.

The coolest Mercury, though, I ever saw was the Cougar my best friend’s sister got in 1966 or 1967 when I was about 14.  It was the original Cougar bodystyle, based on the then-new Mustang.  It was definitely upscale, in a metallic blue-green, black vinyl top, V-8, hidden headlamps and those groovy sequential rear turn signals.  But the coolest feature was the overhead console that monitored the lights and turn signals.  It was one thing to have a console between the seats and a floor mounted shifter, but the overhead feature turned the whole cockpit into a three dimensional Gemini spacecraft.

That Cougar, you’ll recall, turned Mercury into “the Sign of the Cat” and brought in thousands of eager and younger buyers into Mercury showrooms, whose only previous claim to fame was the rather lame power operated rear window in the full size Turnpike Cruiser.

I was a little shocked to see that Curtiss-Wright corporation is still alive and well in the 21st century.  These days the company, the result of the merger of 12 different entities of the Wilbur and Orville Wright founded firms and archrival Glenn Curtiss’s companies in 1929, is now a tier one and two supplier to the aerospace industry specializing in flow controls.  Remarkably, they have just issued a press release regarding applications of their flow management technology in nuclear engineering applications.

But that’s not why I’ve selected the firm for a case study.  When the company was founded it was the largest aeronautical firm in the country.  By the end of World War II, Curtiss-Wright was the second largest company in the nation, second only to General Motors.  While some of us know that the firm was primarily known for three wartime aircraft designs, the P-40 Warhawk series, the C-46 “Burma Hump” transports and the Helldiver carrier based dive bomber, its size was dictated more by its Wright engine and Curtiss-Wright propeller divisions.  In fact, the company’s aircraft were far from the cutting edge by the end of the war, the P-40, the mount of the Flying Tigers, was obsoleted by any number of aircraft – the P-38, the P-41, the iconic P-51 Mustang for example.  The C-46, with its Wright engines, was well regarded, but never lived up to the reputation of the Douglas C-47, the military version of the legendary DC-3.  While the Helldiver was the most widely produced dive bomber of the war, it was a beast to fly and unlike almost any other US naval aircraft was not accepted by the Royal Navy’s Fleet Arm.

Perhaps no better example of how Curtiss-Wright lost its mojo was the case of its last attempt to land a military aircraft contract, the XP-87 “Blackhawk” interceptor.  This attempt used four early underpowered jet engines mounted in twin-engined nacelles and lost out to the relatively trim Northrop F-89 Scorpion to guard North American skies against assault from Soviet bombers.

Bob Lutz is never for a loss for words.  He put down his lack of enthusiasm for the slate of presidential candidates for the 2008 race to “electile dysfunction”.   In his farewell address to GM employees last week, he had a lot to good stuff to say, and the video is on the link at the end.  Like most things he says, there’s a lot of truth.  And there’s some stuff that needs a little explanation.

Mr. Lutz starts out saying the CAFÉ and retiree costs led to GM’s failure and bankruptcy.  In the end, I have to agree.  The story of how CAFÉ legislation and how reactions to meeting the regulations destroyed the U.S. auto industry has not been fully explained or understood by our policy makers.  Bob did toss out that the Japanese competitors didn’t have to downsize to be competitive while the domestics did, which is true.  But it goes very much deeper than that.  In the end, Detroit built many awful small cars and trucks at tremendous discounts in order to be able to sell larger profitable and desirable cars and trucks.  In short, half or more of Detroit’s products were sold at a loss in order to build volume for other products, thus slowly destroying the brands.  Add in union shenanigans in preventing counting good overseas built products into the mix, and you’ve got a recipe for brand image and financial disaster.

Both the CAFÉ regulations and obligations to meet retiree benefits led to all sorts of means to build sales and production volumes over the short term, rebates, 0% financing, subprime financing, force feeding fleet sales at discount and mean, low cost products all conspired to bring the domestic industry low.  GM and Chrysler were the ones who reached bottom first.

Mr. Lutz has some fun putting down Business Schools and the “MBA mentality”.  In some ways his aim is a bit off the mark. Bob takes the MBA crowd to task for gaming the system and taking the customer, and her all important revenue, for granted.  He flat out said that the reason the Japanese were so successful in the U.S. market is because they “didn’t go to business school”.   As a wise woman once remarked to me, “half of all sweeping generalizations are wrong”.