Thursday, September 3, 2009

Dreams don't always come true. If you are GM, they never do.

It is always a letdown when your dreams don’t come true. For instance, I wanted to be a fighter pilot. GM has a dream as well. GM believes it can claw back market share and return to a position of being one of the great world carmakers. Just as I am not writing this article from a cockpit, the dream of GM is just as likely to be frustrated.

Why is GM’s dream impossible? It’s the product, or in GM’s case, not a huge amount of new, exciting product. While GMC, Buick and Cadillac, the three non-Chevrolet brands remaining in the “New GM” have been clearly profitable, many potential buyers have been turned off from GM products as of late, and commercials which exhort the consumer to “take a look at me now” are probably not going to drastically improve sales figures. Chevrolet, which itself is supposed to be the major seller and ostensibly profit-maker for GM, has virtually no future product lined up other than the Volt. If the Volt fails, GM will probably go down in flames; if it succeeds, then it is back to business as usual with Chevrolet – only one car carries the fortunes of the firm and the rest are mediocre at best.

A good example of GM’s inability to strike gold is the Chevy Malibu. According to sources, GM will be unveiling a new Malibu very soon. The Malibu was the car that was supposed to have clawed back a major chunk of the midsize car market, and has so far failed in that mission. It is certainly GM’s hope that a new Malibu might succeed, but if it’s the badge on the hood that is hurting sales, no amount of gorgeous sheet metal will make up for it – just ask Alfa Romeo.

I don’t think I can be optimistic about the Cruze, either. The Ford Fiesta will be the first to show what American carmakers will do when bringing European products to America. It has been a reasonable seller in Europe, but that does not mean it will succeed in America, where consumers will not be willing to pay European prices—that is, several thousand dollars more—for these cars. Trying to lower the price to make it attractive to the American market may require GM to remove the more appealing features of the European model, such as the interior.

Potential buyers have been completely turned off of GM brands as of late; and in the area of small cars, where people are expecting GM to compete and even profit, GM has neither the history, know-how, nor drive to build small cars that will be what the public and the government both want. It all sounds like GM will have to make compromises in its quest for competitiveness, but this will likely come at the consumer’s expense.

I’m actually glad that GM has the dream it does. It gives me hope that GM will at least try hard to achieve its goals, and so even if it falls short, it will try to build the best cars it can. But as to which of these dreams is most likely to come true? I’m fairly confident that I’ll be writing a road test (sky test?) of an F-22 for you before GM is able to make the turnaround it hopes it can.

Tuesday, December 30, 2008

When you turn your car on, does it say “Built for the Bailout?” – Why GM still has only the slimmest chance of survival.

GM is going down the tubes; it has less than 100 days to prove it deserves the bailout the government has given it, and is still saddled with large legacy costs due to agreements with the UAW. The situation is grim for GM, and it is doubtful that the company can survive in a form even remotely resembling what it is currently. GM might be able to make its organizational structure more logical—even killing off a brand or two could make sense at this point—and working out better terms with the UAW is a given. However, the issue remains how GM can return to profitability. The bailout money is for GM to build smaller, more fuel-efficient cars. Unfortunately, the compact cars GM has made to date have been rubbish, and the cars it can consider successes are ones that go against what the government has decided GM’s direction should be.

Chevy's slogan used to be “Like a rock.” More than appropriate when you think about how unsophisticated and unreliable GM cars have been on the whole. The organization has brought forth many horrible cars in recent memory. In many cases the cars weren’t inherently awful, with a huge exception being made for the Pontiac Aztek, but virtually every model was worse than what GM’s competitors were producing at the time. Speaking of inherently awful, it would be good to mention here that GM has in fact produced a small, fuel-efficient car in recent times, in the form of the Saturn S-series. Having driven one many times, I can tell you they were torquey with a manual and got good fuel economy, but the interior was possibly the worst car interior of any car sold in America in the last 10 years. What the S-series shows is that GM felt fuel economy was more important than having a car people wanted to actually be in. Every one of GM’s competitors has rolled out cars that show that having both is possible and reasonably priced.

“When you turn on your car, does it return the favor?” That is the phrase Cadillac is using in its recent marketing campaigns, but moreover it symbolizes the focus of the company. Cars and the companies that make them need to have a reason for existing, a style or a je ne sais quoi that conveys an image of what a company’s cars are supposed to be as well as what the car company’s values are. Cadillac is selling cars people want to drive because it has found a central theme that resonates with consumers. For BMW, it is “The Ultimate Driving Machine,” and for Audi, it is the crystallizing word “quattro.” However, the rest of GM lacks that focus, and as a result their cars lack the style and the quality that is expected of a modern car manufacturer. All GM has to go on is “Surprised?” Apparently, GM thinks that consumers like playing Russian roulette when it comes to the reliability of their automobiles.

Even if GM does succeed in selling a decent small, fuel efficient car, then what? The Chevy Cruze, the car that along with the Volt are being touted as GM’s saviors, looks fairly promising, but one car does not make a volume car manufacturer. What about Pontiac? Their apparent savior is a rebadged Daewoo. What about Buick, which went from having seven models in 2005 to only three in 2008? To put this in perspective, Mercedes-Benz has no fewer than 13 models currently on sale in the US. The only cars which have truly screamed success for GM are cars like the Corvette and the Camaro/Firebird, and GM can’t be building its other cars solely in order to support their successful models. Porsche can, because they understood that their “mass-market” car, the Cayenne, would have to be every bit as sophisticated as the sports cars they design. Porsche followed through on a Mercedes advertisement I found on the back of a magazine: “Make the car you have to drive the car you want to drive.”

In the hilarious Saturday Night Live skit about the Big Three, Walter Jones asks Rick Wagoner, “According to your testimony earlier in the week, for every car General Motors sells it loses $2500. Now if that’s the case, just how are you going to turn your company around?” Wagoner responds, “Well I guess we’ll just have to sell more cars…oh no wait…forget that. I don’t know.” No one—not pundits, CEOs, or even comedians—seem to be able to chart a course that could lead GM to success. GM’s corporate structure has to become the paragon of efficiency, the UAW has to concede virtually every benefit, and the Cruze has to sell better than every other competitor combined for GM to have a chance of making it. The government gave GM money to build cars that GM has a poor track record with and will be up against incredibly stiff competition from companies which have already proven they can do small-fuel efficient cars that people like. The cars that GM DOES do well are definitely not small and fuel-efficient.

Ultimately, GM as an institution cannot last. Its ways are too backward and inefficient, and its cars are just too crappy or uninspired. The bailout simply sets requirements that ignore reality and promotes the fallacy that GM can continue on as it has been doing. Once reality has caught up with GM, there are two options. The first, like the fake Rick Wagoner does in the SNL skit, is to ask Congress for tens of billions of dollars every six months. The second, more likely, answer is that GM collapses finally and that something rises from the ashes. This might not be what politicians and people dependent on the Big Three want, but as a result of its collapse GM might finally satisfy the consumer.

Wednesday, December 12, 2007

Saving the world, one math problem at a time...

In high school algebra and geometry, you were taught that have variables which must be understood and solved in order to solve the overall equation. Proofs which incorporate different laws and properties use logic to derive an acceptable conclusion from an initial premise. The fuel crisis we are facing is no different. By taking this problem step by step and working it like you would a math problem, you will hopefully have a better view of the individual pieces of this problem and see how inept most attempts so far have been at providing a solution.
Read the article before calling me a doomsayer or a hippie or even someone who doesn't care about an imminent threat. I like my low-30s mpg Volvo station wagon which also has a bit more than 200 hp when my right foot asks for it. I like driving fast and enjoying cars but I also understand that there is a problem, and whether it becomes serious ten years or one hundred years down the road, a solution had better be in hand. I simply want to provide a clearer understanding of the situation for people.

The initial premise for our fuel crisis is this:
  • Oil is running out, whether in the next 20 years or 200.
  • Oil mostly belongs to states which are unstable and don't seem to like America very much.
  • As populations grow they require more resources.
Thus at some point, oil supplies will run out or become prohibitively expensive. Every day, more and more people become dependent on a resource that can only decrease. Elementary notions of supply and demand give you two options. The first is to restrict the supply of oil that individuals can actually consume, thereby lengthening the amount of time that the Earth's oil supplies will last. The second is to make our use of oil more efficient, thereby reducing the overall demand for oil.

The first option is the less appealing one at first sight; if America suddenly imported less oil, we'd be back to the 1970s and gas rationing. The second option looks much more appealing. All we need to do is make our cars and planes and power generators more efficient.

Now cut to this scene: you are driving along the interstate in your Toyota Camry. Bestselling car in America for years. You went for the four cylinder because you wanted fuel economy more than you wanted horsepower, so you've got about 160 horsepower and 30 mpg under the hood. Driving along in the middle lane, you see a Chevy Tahoe in your left mirror coming up fast. Though it is in the HOV lane, which requires that you have at least two or three occupants depending on the road, you can't see anyone but the driver in the vehicle. As it passes by, you see it's the new Tahoe hybrid, which Chevy's website quotes as having "fuel efficiency you never imagined — an outstanding EPA estimated MPG of 21 city, 22 highway for 2WD models, and 20 city, 20 highway for 4x4. In fact, 2008 Tahoe Hybrid 2WD offers the same city fuel efficiency as a four-cylinder Toyota Camry."

Great, so the giant rolling fortress which gets ten mpg less than you gets to go in the HOV lane even with only one occupant.

Chevy also announced that the hybrid versions of the Tahoe will receive special "Hybrid-specific badging and graphics."
As far as I can tell, the only real purpose to this vehicle is to give a bold middle finger to Greenpeace and undermine all the consumers who own more fuel efficient non-hybrid vehicles.

Mathematical modeling, anyone?

What is decent fuel economy? Would a minimum of 25 mpg for every vehicle on the road (excluding true farm equipment, but this means every vehicle, not the average over a manufacturer's range) start saving America, if not the world? 35? 75? How do we determine adequate reductions in fuel consumption?

It is incredibly arrogant for politicians and activist groups to issue calls for radical change in

I have put forth to you, the reader, many questions that cannot be fully answered by me. If they could, our energy crisis would be on its way to being solved and I'd be incredibly rich. If we do not understand all important aspects of a problem before trying to solve it, we will not get anywhere closer to a solution. We didn't send astronauts to the moon using an Acme slingshot and a protractor. Solving a problem which affects every American who has anything to do with a car will require as much sophistication, resources, and public support as spaceflight. One of the defining moments of my parents' generation was landing on the moon. If one of the defining moments of my generation turns out to be virtual energy independence, it would be no less glorious a moment.