Chrome Sweet Chrome

It’s not that I’m obsessed.  It just seems that every time I turn around, there’s Alan Mulally.  I ran into the Ford CEO at the Automotive News World Congress.  He is a featured often on the cover of Automotive News itself, the last being February 8.  The earlier this past week, I was getting ready for my day when Stuart Varney on Fox Business Channel mentions on his “Varney & Company” how he received an e-mail on his blackberry from Alan Mulally.  It seems Alan heard Stuart mentioning his Ford Escape Hybrid and was wondering how the ownership experience was working.  Mr. Varney was obviously impressed, as was his “company”, a brace of Fox News business analysts.  They intoned on how well Ford was doing under Mr. Mulally’s tutelage, and were impressed that he was able to give Mr. Varney (and, by extension, them) a shout out.  I seem to remember something about “America’s leading CEO” being mentioned, too.

The capper, though, was this Saturday’s Wall Street Journal, which featured Mr. Mulally as the subject of the newspaper’s “Weekend Interview”, conducted by Paul Ingrassia.  Yep, it seems everywhere I turn Alan Mulally pops up.  It makes one wonder, other than having a crackerjack public affairs office, what’s happening here.

Most often, business and political leaders crave approval and adulation.  We used to see this in the industry with Lee Iacocca, whose persona was projected via public affairs people and book publishing to be some sort of industry seer, able to move mountains and preserve not only thousands of jobs, but an entire industry.  In the last presidential election, we saw how a cult of personality was created around the rather thin qualifications of the junior Senator from Illinois.  Ultimately, such facades tend to fade quickly, as it did for Mr. Iacocca as Chrysler’s recovery faltered when the company returned to its habit of attention deficit disorder, and focused on differentiation in a world where its key competitors were intensely focused on tearing sales and profits away from American auto companies.  And we, thankfully, see the same politically, as the amateurish Obama administration focuses on issues people don’t care about, and the rather un-American, alien personality cult seems to have run its cringe-worthy course.  

It is one thing to try to impose an image from top down, but quite another to respond to one bubbling up from the bottom.  I submit that Mr. Mulally’s popularity, even his ubiquity, in the media and among many Americans stems from two factors.  The first is his enthusiastic, positive personality.  The second is the media’s and the public’s need for heroes.

I love classic movies.  I suppose movies for the most part were always banal and mundane, more often like Lifetime specials than works of moving picture literature, but true classics stand that test of time and strike at our enduring humanity.

On Ash Wednesday last week, Turner Classic Movies had two interesting offerings, “My Favorite Year” with Peter O’Toole and “Bang the Drum Slowly” with Michael Moriarity and (a very young) Robert DeNiro.  I paused to watch the last hour or so of “My Favorite Year” because I once had a favorite year of sorts, being part of Ford’s competitive intelligence team, dispatched around the globe to report on the technologies and innovations of our various competitors.  In the movie, Peter O’Toole plays a broken down old drunken actor trading upon past glories, and a young TV intern has the responsibility of delivering the wastrel to an early television variety show on time and in good order.  The tension makes up the drama of the plot, and who was once Clarence Duffy, the birth name of the O’Toole character, known as “Alan Swann”.  In the end Clarence Duffy overcomes the movie mythic Alan Swann and saves they day, all the while being completely soused.

In the next film, “Bang the Drum Slowly”, the Robert DeNiro character, a catcher for the New York Mammoths, is dying of Hodgkin’s Disease, lymphatic cancer.  The film chronicles the season of the baseball team, as the protagonist slowly succumbs.  It is that rarest of films, a man’s tear jerker.  The title is taken from the ballad “The Streets of Laredo” in which an outlaw sentenced to death is being marched to the gallows.  As he is “just a young cowboy who knows he’s done wrong”, he asks that the drummer bang his drum slowly, an Everyman on his way to his reward.

In both films, we deal with everymen who are dealing with moving from sin to redemption, the theme of Lent.  Contrast this to the announcement from Robert Benmosche regarding pay plans at our own favorite insurance company, AIG.  The company has now implemented a “pay for performance” plan as outlined in the February 11th Wall Street Journal.  Following the lead of Jack Welch’s General Electric and as disastrously copied by Ford’s Jac Nasser, The taxpayers’ own insurance firm is following a plan of forced ranking of individuals under strict guidelines so that 10% are “outstanding” number 1’s, 20% will be number 2’s, 50% number 3’s, and (one supposes) 20% will be number 4’s.  Robert Benmosche is quoted that the pay plan rewards, “the best people for their performance.”  In other words, we see the transition from redemption into sin.

Famously, Detroit automakers have historically only been able to focus on one aspect of their business at a time, and often that one thing has been the wrong thing.  Sometimes the one “key thing” is volume, sometimes it’s cost, going further back in time, sometimes it’s diversification and sometimes it’s quality.  And sometimes there is an emphasis on maximizing the key thing, sometimes to minimize it.

When volume was king, fleet sales were seen as a magic carpet ride to success.  Most of the D3 had ownership stakes in the car rental industry as a means of controlling the placement of hundreds of thousands of cars a year.  Ford owned Hertz, while Chrysler controlled Thrifty.  To be honest, I don’t remember if GM owned a rental firm, but they certainly sold a great deal of cars to rental fleets.

Of course, it didn’t take long for those rental units to find themselves into the resale market, and the Detroit 3 found themselves to have become, essentially, manufacturers of new trucks and used cars.  

Newton’s Laws of Motion (momentum, inertia and action/reaction) are not only laws of physics, they are laws of economics and social interaction as well.  In this case, the action of over reliance on rental fleet sales led to the over reaction of running away from fleet sales as undesirable.  Once again, Detroit pursued the right thing, but got it ever so slightly wrong.

A fleet sale is a sale.  Car companies are in the business of selling cars and trucks.  The car companies’ success lies in making those sales profitably.  There is nothing inherently wrong with selling to fleets, in many ways it is highly desirable business, as long as it is profitable.  In the case of the recent past, it isn’t that there were rental fleet sales, nearly as much as fleet sales served as a kind of spleen for over-production beyond the market demand for certain carlines.

Which brings us up to the January sales figures.

January 2010 sales of almost 700,000 were slightly higher (6%) from last January.  Ominously, they were still down 36% from January of 2007, the industry’s last “good” year.  I am not entirely sure how SAARs are calculated, but 700,000 times twelve yields 8.4 million.  According to Justin Mirro’s (of Moelis & Co.) “The Motor Weekly”, last January had a 9.8 million SAAR, suggesting a 10.4 million January 2010 SAAR given a 6% increase.

First it was floor mats on certain Toyota models.  Then it was condensation on the throttle pivot causing the accelerator to stick.  And now there’s speculation that the software’s to blame with some experts suggesting electromagnetic interference.  Given the software issues that recently came to light in the 2010 Prius brake system, as well as false negatives in some Ford hybrids’ brake warning system, the electronic mayhem theory is gaining steam, too.  All this is reminiscent of a household do-it-yourselfer trying to self-diagnose a tricky plumbing, heating or electrical problem and taking as many trips to the hardware store as it takes to finally solve the problem.

Some might think that my metaphor trivializes the risks involved, given that accidents and deaths have occurred.  But on the other hand, there’s no telling how many injuries or deaths occur each year due to botched home repairs.  Regardless, Toyota’s problems and attempts at resolution look to all the world like a homeowner pondering a water-filled basement, a flickering ceiling light, or a roof leak and the first couple of stabs just didn’t solve the problem.

Given the issue of sudden unintended acceleration, there are a few reactions that I have that might help everyone think about the problem.