RANTS #436

March 12, 2008

The Buzz in the Biz.

By Peter M. De Lorenzo

Detroit. Anyone hoping that the people currently running amuck in the auto biz right now will come to their senses and miraculously see the light in an instant jolt of lucidity and clarity are sadly mistaken. The seriously misguided at work in the biz at this moment in time are all drinking from a frighteningly similar cocktail made up of one part delusion, one part runaway ego and one part abject stupidity, and the fog from the perpetual hangover they operate under permeates their organizations to the point of paralysis.

Example No.1, as I mentioned last week, is VW. I’m only going to mention them again briefly this week for the shocking notion that they’ve been floating to the media for a while now (and one we’ve mentioned before in “On the Table” – ed.), and that is that they intend on taking VW and Audi sales in the U.S. from 328,068 vehicles presently to 1 million units by 2018. Read between the lines of the typically soporific copy that the more conservative members of the automotive media are generating about VW’s quest and you can see that these journalists can barely contain their smirks, and that’s putting it kindly. Because VW’s goal isn’t akin to putting a man on the moon, it’s more like colonizing Mars and opening a VW dealership on the Red Planet by 2018 - that’s how wildly improbable of a scenario they’re embracing.

With a legacy of bone-headed product moves, horrendous service issues, woefully erratic dealers, pissed-off customers and an almost uncanny knack for doing the wrong thing at the wrong time – and doing it over and over and over again - VW will be lucky to maintain the “grip” on the U.S. market that it’s clinging to now.

VW’s chief spear carrier here in the U.S., CEO Stefan Jacoby, has even wondered out loud in comments to the media that it sounds a little crazy. Memo to Stefan: It’s not just a little crazy, it’s flat-out off the charts, cue-the-Twilight Zone music c-r-a-z-y. But then again, when it comes to German auto executives imposing their relentlessly clueless tunnel view of the world on the U.S. market, nothing ever changes. Not Good, Part I.

But then again, there's always the Koreans. Hyundai - the Korean auto conglomerate utterly devoid of common sense and rational thought – is hell-bent on pressing ahead into the teeth of a storm that threatens to swallow their listing ship whole.

The Koreans’ delusions of grandeur know no bounds. They set impossible fantasy sales goals and fail to meet them every time, and then they get rid of their U.S. executives – every time. Then they start the whole process all over again.

One minute they’re attacking the low-end market, insisting they’ll displace Toyota with its Kia brand in a matter of months; the next minute they’re going after BMW with a flourish, insisting that they belong in the pantheon of great premium automakers just for showing up. But it’s always the same scenario and endgame with the Koreans. They refuse to understand that there’s real blood, sweat and tears behind any of the premium automakers’ branding success, and they actually believe that they can just flip a switch back at headquarters, set improbable production and sales goals, and be a “player” overnight. And then, like clockwork, their U.S. operations implode from the sheer weight of their handlers’ suffocating stupidity.

And now, the buzz on the Koreans is assuming a more ominous tone. Hyundai and Kia models are piling up in storage lots all over the country (lots that no one, of course, is admitting to). The Korean overlords keep churning out product, and their handpicked, “hands-on” countrymen sent here to straighten things out keep insisting that they can sell every vehicle they can get - over the furious objections of their U.S. dealers.

We’ve been hammering away at the Koreans for some time now, but now the mainstream media is beginning to fire away too. A major, hard-hitting and excellent cover-length story on Hyundai in this week’s BusinessWeek headlined “My Way or the Highway at Hyundai” exposed Hyundai’s ingrained culture of corporate blockheadedness for all to see. And Automotive News weighed-in this week with a two-page piece carrying the following headline: “At hard-charging Hyundai, the plan is simple: More – now.”

More what, exactly? More cars and trucks that its dealers don’t want and can’t sell? More unrepentant, abject stupidity from the stumblebums back in Korea who not only can’t fathom the U.S. market, but by all indications couldn’t spell Automotive Marketing 101 even if you spotted them the “mark” and the “ing” - ?

We’re hearing from a wide array of sources that the U.S. dealers for Hyundai and Kia are nearing an apoplectic frenzy. From big dealer conglomerates to the mom and pop stores, talk of an open revolt is not out of the question. They’re tired of the bullshit and the bad decisions, and for many the promise of the next automotive “juggernaut” after Toyota - which was the initial premise envisioned for the Koreans (an image the Koreans did their best not to dissuade) - is coming apart at the seams.

I mean, when the Koreans actually put VW’s legendary delusional brain trust in a warmer, softer light, you know that things are bad. And that’s Not Good, Part II.

Oh, but just when you thought that these two shining examples of unfettered futility couldn’t possibly be topped, along comes “Minimum Bob” Nardelli and Chrysler. I have relentlessly pounded Cerberus and its Chief Apostle, Nardelli, for months now for a raft of egregious behaviors and sins, big and huge. Cerberus, the super-slick, cold-hearted mercenaries who couched their takeover of Chrysler in glowing, “we’re doing what’s right for America” terms, is like the (three-headed) dog in the neighborhood who chases cars from sun up to sundown, never catching one. Then, one day, the dog catches a car and hasn’t even the foggiest notion about to what to do with it. Cerberus is that dog, and Chrysler is its car.

This week, we get to witness another couple of stops on Chrysler’s Road to Ruin. First off was the announcement that the company was closing its Pacifica Design Center in Carlsbad, implying that it was redundant in Chrysler’s slim-dollar makeover. Chrysler suggested that its West Coast design center was no longer important, but the reality is that it's just another cost cut in Cerberus’ slow but sure dismantling of Chrysler in preparation for its ultimate sale.

But the other development at Chrysler that has the industry spinning is the fact that Nardelli has brought in alleged taste-maker Peter Arnell and given this overrated lightweight unrestricted access and input to all things Chrysler, including design, product planning, marketing and just about everything else. This development is horrifying not only to Detroit insiders but to the biz as a whole. Allowing this guy to have that kind of impact on Chrysler's day-to-day business is like asking the guy in charge of hanging the window trim to give advice on the structural build cadence of your new home.

Lunacy? This is beyond category idiotic. Arnell is the guy, after all, who shoved Celine Dion down Chrysler’s throat several years ago, a disastrous $20 million advertising boondoggle that did much to hype Arnell’s own self-inflated brand but that accomplished exactly zero for the automaker at the end of the day. But then again Arnell has always been more adept at self-promotion and spending clients’ money like water than delivering actual results.

Come to think of it, Arnell is probably a perfect foil for Nardelli because they've both made careers living off press clippings and making piles of money simply for being in the right place at the right time.

And these two misguided missiles working together to “save” Chrysler? Well, let’s just say it is the quintessential definition of Not Good.

When will it ever end? When the Cerberus “brain trust” admits to itself that buying Chrysler was the dumbest idea they’ve ever had as a company. But they will only admit that internally, because the endgame media release will say something like this:

“After months of tough decisions and sacrifices and a structural rebuilding effort executed to perfection by Bob Nardelli and his team, Chrysler has reemerged as a vibrant automobile company poised for success for years to come. We at Cerberus have accomplished great things in resurrecting an iconic American automotive brand, and we have exceeded the goals we initially set out to achieve beyond even our wildest expectations. With that, we are moving to secure Chrysler’s long-term viability for years to come by entering into an agreement to sell the company. Nissan-Renault CEO Carlos Ghosn will join Bob Nardelli in a joint press conference to discuss the details of the sale...”

Far fetched? Not in the least. The only question is when.

That’s the Buzz in the Motor City this week...

Thanks for listening, see you next Wednesday.