THE AUTOEXTREMIST

January 19, 2011

Auto Show Aftermath.

By Peter M. De Lorenzo

(Posted 1/17, 1:00 p.m.) Detroit. Now that the smoke has cleared from the shock waves of media coverage of the annual Detroit Auto Show, it’s time to assess what really happened beyond the chrome and glitz and hot air wafting through Cobo Hall. Beyond all the positive vibes and in some cases, flat-out euphoria from last week, the fact remains that the overall industry is facing daunting challenges, formidable obstacles and reoccurring questions on the way to having a more-than-decent 2011. And none of that changed just because there was a feel-good auto show in the Motor City last week. Let’s take a look.

The Good News? The Industry is embracing premium smaller cars. The Bad News? No one is quite sure what consumers are going to do with them. Outstanding smaller cars were overflowing at the Detroit Auto Show. The Ford Focus, Chevrolet Cruze, Buick Verano, Honda Civic, the multiplying Prius family from Toyota, and the strong Hyundai and Kia entries were impressive in their depth and breadth. Well-executed smaller vehicles with premium features, quality, first-rate construction and a definite sense of style were everywhere, an impressive snapshot of where the industry is headed and what consumers can expect in the future. The only problem is that none of these manufacturers really know how consumers – at least in this market – are going to accept them, or even if they are going to accept them. Will consumers take the enlightened approach and recognize the inherent goodness of these vehicles in terms of their integrity of engineering, design and overall operating efficiency? Or will they only embrace them at the gunpoint of high gasoline prices?  It’s not only the billion-dollar question for 2011; it’s the billion-dollar question for this industry for the next decade.

It’s one thing for Green-tinged politicians in Washington and Northern California to get on their high horses and shove efficiency down American consumers’ throats by making laws forcing the manufacturers to comply to higher mileage standards; it’s quite another to force consumers to actually buy them. The government’s heavy-handed approach is based on the idea that if we “starve” consumers by forcing auto manufacturers to build only smaller, more efficient vehicles, then they won’t have a choice as to what they can buy and voila! the “problem” will be fixed and we’ll all be driving Shiny Happy vehicles in no time.

Except it just doesn’t work that way.

Given their druthers, most American consumers want as much car or truck for their money as they can get their hands on. And at this point in time those “druthers” don’t include choosing a premium small car out of a lineup of vehicles if they can get their hands on a larger, fancier, more powerful one.

And this mindset isn’t going to change overnight. As a matter of fact I will answer that billion-dollar question for the industry right now: Without sustained higher gas prices the sales projections for these premium smaller cars are optimistic at best and there’s a very good chance that dealers across the country will be wallowing in them by the third quarter of this year.

Marchionne speaks, the media fawns, but what just happened, really? The media gushing over Fiat-Chrysler CEO Sergio Marchionne in Detroit last week was simply appalling. Memo to the eager members of the media: Does hanging on every word from this guy and regurgitating his pronouncements in rote synchronization without a shred of critical dissonance the very best you can do? I think not. As I’ve said repeatedly, just coming out with new products doesn’t constitute a comeback. Look closer. The 200 was a yawner as was the Sebring and it’s still a yawner with a few contemporary tweaks. And the Fiat 500 launch has “problematic” written all over it. Incomplete showrooms and an intro that keeps getting pushed back doesn’t constitute a launch - it’s a burgeoning train wreck, no matter how cute and cuddly the car is. Instead of focusing on the cute and cuddly aspect of the 500 maybe you keyboard-pounders should train your intermittently focused gaze on the fact that this launch is being bungled right before your eyes. Remember one crucial thing in all of this: Just because Marchionne says they’re going to play in all of these new segments doesn’t mean they’re going to automatically succeed in these new segments, does it? No. As I’ve said many times before since founding this publication there’s a difference between just showing up and competing. Right now, Sergio is just showing up, and the last time I checked no one gets a gold star in this business for just showing up.

Does Toyota really think they can become “the Prius of Car Companies” - ? Let’s just say that they literally don’t have a choice. With an image in disarray and growing boredom attached to the brand, Toyota’s only play at this point is to lay all of its “Mr. Green Jeans” cards on the table and hope for the best. Meaning that they must entice a majority of their vanilla-loving green-tinged faithful to walk directly to Toyota showrooms with blinders on so that they don’t get distracted by the latest offerings from Hyundai, Kia, Chevrolet and Ford and plunk down cold, hard cash on a brand spanking new Toyota. And if a family of Prius vehicles is what it takes, then so be it. Going from being “the Juggernaut” to being woefully clueless in a little less than 24 months has been a sight to behold from the outside, but I’m sure from the inside it has been a 3D horror movie filled with considerable gore. Toyota is grasping at straws right now and has been for a while. And the Prius Multiplier is the only play they’ve got.

Is GM PR serious about this Dan Akerson image push, or are they being forced into it? Do I really have to ask this question? Given a choice do you really think the pros on the GM PR staff would willingly generate the embarrassing image-shaping barrage they’ve been orchestrating for “Lt. Dan” on their own? Of course not. But it’s tres embarrassing nonetheless. Listen, folks, don’t kid yourselves for one minute, Akerson is a bull that has been unleashed in the U.S. auto industry china shop and this situation is going to get a lot worse before it gets better. Powered by a hard-headed, remarkably arrogant mindset, a general operating principle that he’s never wrong - okay maybe once back in ’72 but you get the drift - and the growing certainty that oozes out of him more each day revolving around the fact that he’s mastered this business in a matter of months making him the King of the “instant” experts hands down, and worse, that he’s hell-bent on leaving his mark on it, and you have a recipe for disaster that no PR offensive on earth can sugar coat. Stay tuned, kids, and buckle those five-point harnesses, because this is going to be a one hellaciously bumpy ride.

Speaking of being serious, does the brain trust at the VW Group really believe they’re going to sell 800,000 vehicles here by 2018? Oh they not only believe it alright, they’re booking their future bonuses on it. People outside of this business have trouble understanding the German auto executive mindset, hell, even those of us inside this business have trouble fathoming the German auto executive mindset, but there it was on display yet again at last week’s media day in all of its unbridled, breathtakingly arrogant glory. This insufferable arrogance stems from a fundamental belief that they not only know more about this business than anyone, they’ve forgotten more about this business than anyone else is liable to accumulate in their careers. And they view the rest of the automotive world as mere speed bumps on the way to world domination. This mind-numbingly poisonous arrogance prevents them from A.) Admitting they make mistakes at all costs. Ever. Example? Daimler’s takeover of Chrysler wasn’t a horrifically bad judgment call by their disgraced former leader Jurgen Schrempp; it was instead the mismanagement of Chrysler’s handlers before they got there that did the company in.  And B.) Understanding the reality of the markets they compete in. You only have to recount the myriad mistakes that Mercedes-Benz, BMW, Porsche and Audi have made over the years in this market to understand this. German auto executives are notorious for cramming their view of local markets down the throats of the people who are actually in them and who are fighting in the trenches everyday, and then making piss-poor judgment calls based on those views instead of what’s really happening. The VW Phaeton saga is only the most egregious example of a long line of bad calls unleashed by all-knowing German car executives who ignore reality and insist that their view of the world is always right. The chief booster of the Phaeton? None other than the VW Group’s maniacal uber leader, Ferdinand Piech himself. Executive underlings who disagreed with Piech and who insisted that the Phaeton was a horrible idea - and even more so for the U.S. market - found themselves pushing Golfs in Siberia. And guess what? Piech is insisting on bringing it back. So, 800,000 VWs by 2018? For the brain trust in VW Group’s management it makes perfect sense. For everybody else in this business it represents sheer lunacy. And trust me, when they don’t make that sales projection - and they won’t - it will be because of the clueless and tasteless consumers in the American market who were at fault, not them, or their magnificent products.

Finally, can Hyundai keep their big “Mo” going? My bet is no. The Koreans just can’t stand prosperity, no matter how well their American chief, John Krafcik (the industry’s Stuart Smalley impersonator), keeps churning the butter and spinning his tall tales. There aren’t enough UWVs (Urban Whatever Vehicles) in Hyundai’s quiver to keep the whole thing rolling, and they will make mistakes, I guarantee it. The Koreans are magnificent at emulating, but when it comes time to actually innovate, not so much. And the one quality they’re beginning to emulate more than any other? German auto executive arrogance. Uh-oh.

And that’s the High-Octane Truth for this week.

See another live episode of "Autoline After Hours" with hosts John McElroy, from Autoline Detroit, and Peter De Lorenzo, The Autoextremist, and guests this Thursday evening, at 7:00PM EDT at www.autolinedetroit.tv.

By the way, if you'd like to subscribe to the Autoline After Hours podcasts, click on the following links:

Subscribe via iTunes:

http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?id=311421319

Subscribe via RSS:

http://www.autolinedetroit.tv/podcasts/feeds/afterhours-audio.xml



If you would like to read previous Autoextremist issues, click on "Next Entry" below.