Chrome Sweet Chrome

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”.

Back when I used to run with the big dogs, creating entertaining, informative, and interactive motor show displays for one of America’s more prominent auto makers, I was in awe of the public affairs people.  In the wake of motor show introductions and announcements, I would stare in wonder at the press statements that would ensue.  I even created my own, slightly ironic, catch phrase, “it must be true, it says so right here in the press release.”

We are all aware of corporate and political “spin”, as skilled professionals try to influence public opinion, mitigate damage and try to create positive impressions via the media.  This isn’t to say that anything “out there” isn’t true.  It’s just that you have to keep your BS detector in good working order at all times, and that one’s ability to critically consider any pronouncement should not be suspended.

With these parameters in mind, it is interesting to parse the subtle battle being played out between GM and Ford.  Longtime “Chrome Sweet Chrome” reader Dave Feinbloom was kind enough to forward two articles from the Detroit Free Press written by Brent Snavely, one headlined “The big change at Ford: Stability”, and the other, also penned by Mr. Snavely, “Change in Ford culture pays off”.  The storyline is that Ford’s management stability has led to the firm’s current market share and profitability success.

This press battle is occurring while GM is changing top execs, as shown in the May 6th Wall Street Journal piece headlined “GM Again Shuffles Top Managers”.

Of course, what those of us who went to Lit school know is that few newspaper articles are really written by the journalists credited.  There’s a lot of cutting and pasting from public relations press releases.  Hence, everything appearing in print (or posted online) should be viewed critically in terms of what is being said, who is providing the information, and what its implications are.  Critical thinking must always be exercised by any adults reading and reacting to published journalistic pieces.

On one hand, we have Ed Whitacre trying desperately to change GM’s hidebound, hubris-driven culture by playing “management musical chairs” to an increasingly rapid tempo, and on the other, we have Ford  trumpeting cultural and managerial advances via stability.  Do these diametrically opposed positions square?

You can’t help but see one of the harbingers of the impending recovery, increasing gas prices as local prices are now reaching the $3.00/gallon threshold.  There’s a story going round about how a brunette and blonde are at the gas station filling their cars.  The brunette says, “These gas prices are killing me, do they bother you?”

The blonde replies, “Oh, I don’t mind.”

“You don’t mind?” the brunette replies, incredulously.

“I always just put in $20 worth, so it doesn’t matter,” said the blonde.

The blonde, in this case, does what most business managers do, simply work with a budget.  If all you have is $20 for gas, that’s what you spend.  Travel, training, headcount, office supplies, any of a myriad of expenses can all be magically controlled via waving the budgetary wand on all those nasty expense problems.

Of course, classic static budgeting can be a problem for those businesses on the rebound from the depths of the Great Recession.  Last week in the Wednesday May 5 edition of the Wall Street Journal there was the story on how vivid the auto recovery can be for certain well-positioned suppliers.  

According to Borg Warner’s CFO Robin Adams, the first quarter of 2010 was a “blowout”.  Over the first quarter of last year, Borg Warner sales are up by 57%.  Sales at Arvin Meritor climbed 25% over last year.  Federal Mogul vaulted 20% in sales, as the company leapt over breakeven decisively with a positive $15 million profit over a 2009 $101 million loss.  Johnson Controls said that sales rose 32%, and also clambered over their breakeven point, earning a 2010 first quarter profit of $274 million from a 2009 loss of $193 million.

Overall industry sales were up 20% in the U.S., and overseas there’s strength as well in Brazil, India and China.  So we see some well-placed suppliers reaping the benefits of well placed bets at the industry roulette wheel regarding U.S. and European recoveries as well as plays in markets that continue to surge.

So, how do companies deal with revenue gains of 20 – 57%?  As the young Borg Warner sales rep is running out the door, does his manager call out, “Whatever you do, don’t entertain that client!  Better yet, cancel that flight.  We’ve got to save money here!”  Supporting rising sales is always a conundrum.   All these revenue jumps had to be supported, but you can bet that travel, entertainment, and even sales headcount budgets were very closely monitored.  Yet sales do not happen without some sort of budget support.  What happened?

Erik Buell, one time owner of Buell Motorcycles and now former Harley-Davidson employee, is a mad genius.  He is a monster iconoclast passionate engineer in a world of passionate people, the international motorcycle industry.  His genius was in making any one part do the job of two or more, all to lose weight or in some way improve performance.  Today, common sportbike practice is to package high temperature mufflers right over the rear tire, and just under the rider’s or his passenger’s behind.  This hot sport was created after decades of upswept mufflers – either elegant megaphones of the seventies to the huge and ugly canisters of today.  Erik thought hard, and decided the proper place for the heavy muffler was right under the engine, a proper engineering placement despite the fact that it led to a look that was distinctly odd.

Most sportbikes have perimeter aluminum frames.  These are hollow, as a practice.  Erik decided that these hollow frames would make perfect fuel tanks, so that later Buells use their frame to hold gasoline.  And instead of a unique holding tank to use as an oil reservoir, the hollow aluminum swing arm was pressed into service.  All these innovations reduced investment, decreased cost, lowered center of gravity, and improved performance of his motorcycles.  So naturally, Harley-Davidson, which now owns Buell Motorcycles, pulled the plug on the fledgling division and has brought this skunk works innovation center to a halt.

On these pages, I’ve often admired the focus of Harley and its success.  Was the closure of Buell a good or necessary thing?  What are the wider lessons for other unionized rust-belt American companies dealing with international competition?  The tale is more than a little convoluted, but it is anchored to a story of corporate cultures, planning for the future, and dealing with change.

The May, 2010 edition of Cycle World has a long piece by journalist and former Buell employee Steve Anderson who chronicles the rise and fall of the Buell enterprise.  As a former project manager for the company, he makes it clear that all his information in the article is in the public domain.  His preference for the company he worked for and the promise of future Buell sportbikes is clear as well.  Is his enthusiasm and point of view justified?

Last week’s Chat discussed “Crossovers” as a category.  A couple of key thoughts emerged from the readers.  One was posted by Dan Sherman, who thought that my notion that:

 “In the end, to me the real category is “utilities”, and the choice of unit-body (and car-based) or body-on-frame (and truck-based) is just a design and engineering decision made by the OEM.”

Was pretty insightful.  That is, that the distinction between “SUV” and “Crossover” is pretty slim.  Most vehicles deemed “crossovers” are unit bodied, but there are plenty of unit bodied SUV’s, too.  Nearly all Jeeps since the mid-eighties, for example.  Dave Feinbloom, posting on the Linked In Automotive Product Planning Professionals group said:

Is a Subaru Forester "as much" of an SUV as a Ford Explorer? Will the new unit body Explorer be "as much" of an SUV as the earlier body on frame versions?   Manufacturers can say what they want and undoubtedly will have some influence steering customers, but when it comes to purchasing the old adage "the customer is always right" will still apply.

Dave is making a “usage” argument.  When real customers start using the term, then we, as OEM people, need to understand want they might mean.    In some advertising, OEM’s are referring to “crossovers” as if it’s a category, hoping to create a category in consumers’ minds.  My own take is that OEM marketers have latched onto “crossover” as a term to denote an “SUV-lite”, that is, an SUV without the burden of excess size and with the weight benefits of unit-body construction.  But as so many “SUV’s” are unit bodied already, the distinction is pretty artificial.  

Still, there is “crossover fever” out there in the OEM world, and that has issues and implications all its own.  As many people are now shying away from the tall, imposing truck-based SUV image (think “Hummer”, “Escalade”, “Navigator”), the Crossover has come to provide an alternative for people who need the people and cargo carrying options of a utility, but don’t want to be painted with an anti-environmentalist brush.  And there are OEM’s in these days of political correctness and government ownership who would like to excuse themselves from that image as well.  On top of image issues, there’s that shootout at the CAFÉ Corral coming up very soon, where the total vehicle fleet will be tasked to average 35 mpg.  And 2016 is tomorrow for automotive product planners.

My piece last week included a long list of recent crossover product duds and soon-to-be duds as OEMs rush headlong onto the maw of crossover vehicles, that is, Frankensteinian half-car, half-truck creations and may not live and be embraced by the market.  The Aztek and Acura ZDX seem like high-profile duds.  These are vehicles that are just too odd to find a home in customer’s hearts.  But then there are products that should have hit that heart of the market, but have been cancelled, replaced or otherwise abandoned at the doorstep of automotive history.

Three promising, seemingly mainstream crossovers that didn’t make it were the Ford Freestyle, the Buick Rendezvous, and the Cadillac SRX.

Perhaps nothing is more confusing to understand than the so-called “crossover” segment in the auto industry.  What is a “crossover”?  What products make up the crossover segment?  Is the crossover segment its own segment at all?  Can anything be a “crossover”?

Before the nomenclature settled down, there was some movement to call these car-truck hybrids “hybrids”, but that quickly died down as hybrid electric powertrains took over that turf.  Still, what is a crossover?  The origin came in as CAFÉ pressures forced OEMs to try to lighten up their body-on-frame SUV’s and as the OEMs scoured demographic and psychographic trends to discover the “next big thing”.  After all, what was the original short wheelbase, four-cylinder, K-car based Chrysler minivan than the first “crossover”?  

The case for the Caravan is strong, as it fits the idea of a truck-like body on a car-based, unit body platform.

Once OEM’s began experimenting with truck-like bodies on car-based chassis, then the sky became the limit, and many crossovers were brought out, only for many of them to come crashing to earth.  Let’s take a short list of formerly offered crossovers.
- Ford Freestyle/Taurus X
- Cadillac SRX (Mk. I)
- Pontiac Aztek
- Buick Rendezvous
- Buick Terraza
- Pontiac Montana
- Chevrolet Uplander
- Saturn Outlook
- Saturn Relay
- Saturn Vue
- Chrysler Pacifica
- Pontiac Torrent
- Mazda MPV
- Suzuki X-9
- Suzuki XL-7

Yet despite all the crossovers that have crashed and burned (in the market) the segment is supposedly a “growth” segment.  This goes back primarily to the willingness of OEMs to keep investing in product after product as long as its labeled a “crossover”.  Factories will pump out the nameplates mentioned above, as well as:
- Jeep Compass
- Jeep Patriot
- Dodge Caliber
- BMW X6
- Acura ZDX
- Subaru Tribeca
- Honda Accord Crosstour
- Toyota Venza

All of whom are in God’s waiting room for failed automotive ideas.  Does anyone know why?

The mantle of leadership in the U.S. auto market is very much up for grabs.  The sales results from March clearly demonstrate how much the situation is in flux.  The “Big Three” for March, at a corporate level, according to Automotive News were:
- General Motors, with 188,011 sales
- Toyota Motor Sales, with 186,863 sales
- Ford Motor, with 183,425 sales

In a market that sold a whisker over 1,000,000 vehicles in March, these results show these companies within a bumper’s length in a race around the U.S. auto market track.  While these three vie for the lead, American Honda trailed at 108,262 sales, Nissan was at 95,468, Chrysler fell to 92,623 and up and coming Hyundai-Kai checked in with 77,524.

While Ford had a slight lead over GM in February sales, each month has its own character.  In this case, March is characterized by a 41% jump in Toyota sales, as that embattled company provided strong incentives to lure back its formerly loyal buyers into their showrooms.  GM has to be watched carefully, as their press releases trumpet an over 40% improvement in the sales of surviving brands of Chevy, Cadillac, Buick and GMC.  Overall, though, jettisoning both strong and weak brands yielded just a 21% overall GM corporate year over year improvement, a bit better than the 16% overall market improvement.  Ford, while fading from the lead from February, was still 40% better than March 2009.  I may not be a mathematics genius, but if GM keeps improving sales at a 20% clip, and if Ford improves by 40% every month, Ford may be seeing GM in its rear view mirror well before the year is out.

Analysts predict that Toyota will relax their incentives soon, as rebates and coupons largely cheapen the brand, reduce resale values, and reduce profits.  40% year over year improvements will probably not carry forward.  GM has been more aggressive in matching Toyota’s rebates, making their sales improvement a little disappointing.  Given that GM announced a post bankruptcy $4.3 billion loss, despite the benefits of debt restructuring, lowered labor costs, and the help of the Obama administrations best business minds, GM’s engine seems to have developed a bit of a miss.  Ford, on the other hand, has managed to eke out a small profit for 2009, and has seen strong sales gains despite that its new product blitz has not yet hit our shores.  Frankly, 40% gains every month may not be sustainable, given production constraints and the still fragile economy, but as new Fiestas and Focuses arrive, Ford may benefit from its business leadership tailwind more than GM or Toyota despite the new products expected (mainly Buicks and Chevy’s from GM).

The story not being pursued quite yet is the tale of how Steven Rattner and Ron Bloom pulled the plug on Chrysler’s developing alliance with Nissan-Renault and gave the operation of the company over to Sergio Marchionne.  The attentive reader might have already added up Chrysler’s 92,623 sales with Nissan’s 95,468 and realized the total was a healthy 188,091, enough to have “won” the March sales crown.  Instead of charging to the lead of the American market, we have Nissan-Renault trying to sort out a much more modest agreement with Daimler this past week, mainly centering on developing a four seat Smart product.

“It’s an outrage after all the sacrifices we have taken and the pay he gets.  His pay is coming out of our concessions.”

- Gary Walkowicz, UAW Local 600 committee man, Tuesday March 23, Wall Street Journal

The headline read “Ford CEO Pay Rose As Profit Returned”.  Unfortunately, Mr. Walkowicz is carrying over residual feelings of hurt and confusion.  One hopes that his quote was a bit of grandstanding for the membership and not his authentic misinterpretation of economic and business realities.

Mr. Mulally certainly doesn’t need me to defend his salary, compensation plan, or job performance.  In fact, he’s done all right on his own.  When asked at the Congressional hearings if he, like Rick Wagoner and Bob Nardelli, would take his salary down to a symbolic $1 a year, he simply said, “No, I’m good.”  And the overall reception of his performance by Wall Street, Main Street and most roads and by ways has been pretty positive.   After all, Ford stock traded at a low of $1.26 in November of 2008, on the eve of the congressional hearings.  Last week it had improved over ten-fold, at $13.57.

What I wish more people in this State and Industry understood was that not all management pay comes off the backs of the oppressed working class.  Now there are cases of head-scratching executive bonuses as employees are tossed out, shareholder value is being destroyed and customers flee from showrooms.  More about that later.  Unless there’s a plan by shareholders or the Board of Directors to deliberately shrink a firm and destroy their investments, such compensation schemes are suspect at the very least.

Fundamentally, though, whether in good times or bad management, labor, and even salaried people all get their compensation from one source – the people who buy their products.  Some compensation is more indirect than directly received via company revenue.  Mr. Mulally, who has provided so much good news of late, is a good example on how this works.

To the surprise of nearly everyone, Ford made $2.7 billion in 2009.  This was at the same time that GM and Chrysler were going bankrupt and each received billions in both loans and equity from we, the taxpayers.  This was a stunning turnaround by any measure, and Mr. Mulally certainly cashed in.  His total compensation rose from nearly $17 million in 2008 to a staggering $17.9 million in 2009, a huge 6% jump.

So, given the huge turnabout in the firm’s fortunes, Mr. Mulally hardly made AIG or Goldman Sachs bonus money.

When Detroit used to host the Grand Prix downtown, the family used to go for Free Prix Day on the Friday before the race.  Nancy and I would bundle up Kate and her buggy and head into the city for greasy food and glimpses of very fast cars twisting through the city streets.  The best part was just east of the Cobo Arena entrance where the turbocharged F1 racers would turn, twist and then dive under the tunnel to Atwater.

In 1985 when we did this sojourn, I had just picked up one my favorite cars, a silver Thunderbird Turbo Coupe with the 5-speed manual transmission.  When we were finished for the night, I drove along Larned next to Cobo Hall, and accelerated onto the Lodge with my window down.  I had the car in a low gear and I heard the turbo spool up as the soft screech echoed off the concrete wall just off the driver’s side.  The combination of power and control in that car was intoxicating as I quickly reached highway speed and powered home from there.

This was the first of many fond memories of that car which featured a relatively small 2.3L four-cylinder engine, but mated to the turbocharger it made “sufficient” power.  I was also fond of the car’s fuel economy, because despite its pulling power, I was still able to average about 25 mpg with it.

The Turbo Coupe managed to be a popular trim series for the Thunderbird.  If I remember properly, the “sport” version with its anthracite gray exterior trim, soft gray lower bodyside and GTI-inspired thin red stripe penetrated about 20% of Thunderbird market.  To be truthful, it was probably the trim, which made the body look like it was machined from billet stock that sold the car rather than the turbo engine.  The Mustang that featured the same powertrain as an option did not fare nearly as well, for example.  But still, that whistling turbo made the best sound as the car would fairly jump in response to a downshift and stab on the throttle.

And the best news is that those days are back.  At least for the turbo and the small displacement engine.

It is ironic that the recent flurry of sales in the first half of March, kicked off by Toyota’s 0% incentive campaign, is seen as some sort of recovery and good news for the industry.  At its heart, the sales rate that raises the Seasonally Adjusted Annual Sales Rate (SAAR) to the mid-13 millions represents a lot of demand pullahead, as all sorts of incentives have done in the past.  While SAAR has been trending on a slow rise of late, blips like the Clunker’s advance in August have been followed by dips, such as the post-Clunker’s September.  As long as Toyota is looking to intentionally accelerate its sales, and as long as other OEM’s play along, then we will see this so-called “recovery” in sales.

This isn’t to say that all “Clunker” sales were a waste of taxpayer’s money, nor that all of the sales over a 10.5 to 11 million SAAR will need to be paid back.  What the latest round of incentives is tapping into is the enormous reservoir of demand for cars and trucks.  The sales rate has been at about a 10 million SAAR for about a year and a half, while the scrappage rate runs between 13 and 14 millions.  The industry is upside down by at least 5 million units in replacements alone.  You can add in another 2 or 3 million based on the “natural” sales rate of 15 million units in the U.S.

The various incentives shift the demand curve, bringing some of the pent up demand back into the market, despite the overall economy.  The lesson?  There are sales to be had, the buyers are out there.  Most of the sales will have the effect of pulling ahead buyers who can buy in the current economy, but a percentage of the unmet need reservoir will be part of the equation as well.  How much? It might be the old 80/20 rule, or less.  But once incentives end, there will be a dip.

We have a different dynamic, though, in comparison to the days of CAFÉ-fueled and volume building incentives of the past that boosted sales to near 17 millions in the past.  First off, buyers are being coaxed in an environment of a market with a vast unmet need.  Secondly, we have incentives led and sparked by desperation on the part of Toyota.  Thirdly, and most importantly, the incentive war’s advantages are now held by the Detroit 3, especially GM and Chrysler, who can outbid the Japanese firm due to their post-bankruptcy cost advantages.  This changes the game.

This past week’s Automotive News’ feature story was how GM’s new old CEO Ed Whitacre wants more sales – NOW!  GM dropped a bit in the rankings as Ford eked out a 429 unit sales lead over GM in February, again according to Automotive News.  The last time Ford bested GM, no matter by how small a margin, was in the 1990’s, and due to GM suffering through a UAW strike.  Shouting the equivalent of “heads will roll!” Mr. Whitacre has shuffled GM’s deck chairs again, rearranging both the organization, mysteriously separating sales from marketing, and the people, removing some divisional heads (figuratively) and elevating Mark Reuss to the sales lead, along with manufacturing and engineering operations.

Of course, ever since Marcus Buy-from-us Finance-with-us (say it quickly and it almost sounds Latin) had too many chariots and oxcarts on the forecourt of his sales lot along the Appian Way, car and truck sellers have tried to “immediately” increase sales.  This is true whether the horsepower is supplied via internal combustion or real horses.  To date, only a few tricks will be found up the sleeves of Ed Whitacre’s tunic.

The good news is that “yes!” sales can be increased.  Ford increased sales by 43% over last February, GM itself gained 12%, despite scuttling four entire divisions, both popular and unpopular.  Hyundai, Kia, Subaru, VW and Audi all have been on a tear as well, increasing volume in a market still in the doldrums, as January’s SAAR was still only 10.5 millions.  So for sales to really go up, an economic recovery would certainly float all boats, and SAAR might recover to be nearer to the historic 15 million unit sales rate.  With a much lowered breakeven, GM would certainly benefit.  Absent that growth, GM, like everyone else, would need to improve its relative position vis a vis a world of competitors.  

So, how are sales improved?

Kent M. Keith, 61, is CEO of Greenleaf Center for Servant Leadership, a Westfield, IN non-profit that advises groups and individuals on practical and ethical ways to help others.  Kent, according to Jeffrey Zaslow in this past Wednesday’s Wall Street Journal, has been a do-gooder since his days as a Boy Scout in the 1950’s.  So intent on saving the world with his altruism, garnering merit badges and organizational praise, young Kent’s father pulled him aside on day and said, “Kent, don’t help the old lady across the street unless she wants to go.”

The point of Jeffrey’s discussion with Mr. Keith were summed up in four points with the headline, “Before You Decide to Save the World”:
 Throw away your assumptions about what you think people need.
 Ask recipients what they think might work.
 Focus on ideas that may be more effective than the obvious project
 Be willing to be anonymous.

Young Kent’s father’s advice and the life lessons he took away might serve as guide posts for leadership for the Detroit Three, recently chastened Toyota, and any number of enterprises, automotive and non-automotive alike.

I might sound a bit altruistic myself, but see how effective these rules are when we see GM offering to bring back 661 formerly cancelled dealerships back into the fold.  No doubt, GM and its government handlers were only trying to help, but found themselves making the damnest decision to actually hurt themselves in the market place, pursuing an assumed benefit in reducing their dealer body.  The action was so out of bounds, that even Congress could see it didn’t add up.

A further guideline to keep in mind would be, “Only the humble have true self-confidence.”

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.