ON THE TABLE #432

February 13, 2008

GM. The bad news? Take your pick from any of the eye-popping dismal financial figures released yesterday, starting with the $38.7 billion loss for 2007, the largest annual loss ever reported by an automotive company. The company formerly known as the world’s largest automaker took it on the chin in a number of ways and in a number of areas. The North American market continues to be a wasteland for the company, with no signs of a dramatic turnaround in sight, despite its impressive new (and burgeoning) product portfolio. The good news? GM’s core automotive operations showed signs of definite life, delivering $553 million in profits. Not that anyone will notice or care beyond that ball-busting $38.7 billion number...

The White House. From the "Clueless in Washington" File came this statement released by White House spokeswoman Dana Perino yesterday concerning GM’s financial numbers: "Obviously, the report from GM reflects what we've known for a long time which is that the automotive industry in the United States is having some difficulties and they are trying to work through those. They are trying to restructure, they have a changing marketplace, buyers have different tastes, and there are issues regarding how high their cost of business is. Today's report is obviously a significant one. They're trying to restructure in ways that can help keep them competitive in the future and we're confident that over time that they're going to be successful in doing that." Uh, gee, thanks, don't we all feel better now about our "difficulties?"

The IIHS. Publisher’s Note: Get ready enthusiasts, because the Insurance Institute for Highway Safety is about to launch a Holy War against big horsepower in our automobiles. The Wall Street Journal (with Joe White reporting) said Monday that the IIHS has brought forth the argument that increased horsepower in our vehicles went hand-in-hand with higher insurance claims in its latest Status Report newsletter. "All this power on U.S. roads has translated into higher insurance losses," the IIHS said. The IIHS highlighted a study released earlier this month by its sister organization, the Highway Loss Data Institute, that concluded insurance losses have been rising steadily since 1985, as cars have become more powerful. I actually wrote about this more than two years ago in "On the Table," when the horsepower race among the manufacturers was really taking off. Remember when 300HP seemed like the ideal number for a high-performance car? That translates into just a ho-hum figure for a typical sedan today. When we blew by the 300HP mark and 400HP, 500HP and even 600HP became somewhat commonplace, I knew we were heading for trouble. I urged the manufacturers to still deliver the big horsepower goods, but not to advertise it or hype it in extreme performance demonstrations or boastful ads, because I knew the IIHS would get into the act. “Speed kills” has always been the insurance companies’ mantra, and now that they’re baking big horsepower into their favorite equation, watch out. This linkage of speed to accidents has been proven time and time again to be scurrilous. The real culprit has always been irresponsible behavior behind the wheel, but “speed kills” has a nice ring to it for both insurance companies and law enforcement agencies alike, people who are always looking for someone or something to hang the blame on that makes for catchy sound bites on the evening news casts. Another problem today is that there is a huge preponderance of anti-car sentiment in the media out there - and if they grab hold of this story, it's going to get really ugly in a big hurry. I’ve got bad news for auto enthusiasts of all stripes: We're headed for a new Dark Ages when it comes to performance automobiles (the last one being from '70 - '80), the difference now being (thankfully) that the aftermarket for crate motors is huge, and custom car builders are aplenty out there, so that if you want to go fast and have big horsepower, our options are much better. But still, the anti-car, anti-performance cacophony in the media is about to explode. And the usual suspects - the insurance industry and its sycophants, who brought the last high-performance era to a screeching halt - are about to do it again. – PMD

GM, Chevrolet. As if right on cue, Chevrolet is going to urge buyers of its new, limited-production Corvette ZR1 to attend a high-performance driving school. It seems that GM legal has been hand-wringing about the 620HP+ super car since last fall, when its high-performance capabilities (0-60mph in 3.3 sec., 200+ mph top speed) first came to light internally. GM can’t force anyone who buys the car to go to a high-performance driving school, but they’re going to make it very clear that they strongly suggest it.

Detroit. Yeah, we’re down, and the Detroit jokes grew stale long ago. We’re not just part of the “forgotten middle” of the country, our new state slogan on our license plate is: “The Flyover State.” Our signature defining industry – the automobile business – is under attack from foreign competitors and ant-Detroit zealots masquerading as our fellow citizenry alike, to the degree that we can’t tell the difference anymore. Our mayor is a public and now national embarrassment, the city council makes an average episode of The Jerry Springer Show sound lucid, and to make matters worse, we’re in the throes of one of the worst winters in recent memory and our streets have become a maze of potholes the size of your average sofa that are tearing our wheels, tires and suspensions to shreds. Even our football team remains one of the perennial laughing stocks of the NFL. And now this from Forbes magazine: “Imagine living in a city with the country's highest rate for violent crime and the second-highest unemployment rate. As an added kicker you need more Superfund dollars allocated to your city to clean up contaminated toxic waste sites than just about any other metro. Unfortunately, this nightmare is a reality for the residents of Detroit. The Motor City grabs the top spot on Forbes' inaugural list of America's Most Miserable Cities.” Ouch. But hey, things aren’t that bad. We do have a hell of a hockey team, we've got the Pistons, and Tigers pitchers and catchers report to Spring Training on Friday...

Pontiac. Publisher’s Note: The entire raison d’etre for Pontiac is about to go right down the drain, it seems. The new fuel economy regulations on deck for 2020 have put a severe crimp in Pontiac’s plans to become GM’s rear-wheel-drive performance car division. Automotive News reported yesterday that the division lobbied hard for its own Trans-Am version of the new 2009 Chevrolet Camaro (due in-market one year from now) and was denied by GM due to the cost (estimated at $200 million) and the fuel economy regulations. This development has to really place the division’s viability going forward under severe scrutiny. The new rear-wheel-drive G8 held such promise for what at one time was GM’s most proud, march-to-a-different-drummer division. A big sedan with personality, performance and a point of view, the G8 pointed to an optimistic future for a revitalized Pontiac division, with its patented swagger and rebel attitude back as part of its fundamental equation. But without a stellar follow-up - the likes of which a new, properly-executed Trans-Am would certainly deliver - where does Pontiac go from here? Can Pontiac survive as a purveyor of chirpy, cheery, front-wheel-drive econo specials? Oh, Hell no. Pontiac is on the brink of extinction, and to pretend otherwise is pure folly. If GM can’t figure out a way to execute its original revitalization plan for Pontiac, then it should put it out of its misery before some marketing brainiac decides to brand it as GM’s “fun” division for the “smile” states. Ugh. – PMD

Kia. We have written repeatedly about the perils of working for the Korean car companies when it comes to the North American market. Hyundai and Kia are both run by their Korean-based overlords, who display a consistent level of beyond category incompetence, a stunning lack of insight, a total absence of cumulative knowledge and a flat-out cluelessness when it comes to doing business in the USA that almost defies description. And to add to their own self-inflicted chaos, they have the propensity to go through senior executives like your average diner goes through silverware. The latest examples of the Koreans’ utter futility in this market? Len Hunt, CEO of Kia Motors America, has exited the company, just two months after being promoted to the position. Kia officials told dealers at a Kia meeting during the National Automobile Dealers Association conference (as a matter of fact, it’s a common joke with execs working for Kia and Hyundai - to be careful around dealer meetings, because that’s when U.S. executives always get whacked). Mr. Hunt was with Kia since October 2005, when he was hired as chief operating officer. When he was promoted to CEO in November of 2007, the company released the following: "This decision reflects a solid vote of confidence in the leadership of Len Hunt," E.S. Chung, president-CEO of Kia Motors Corp. wrote in the statement. "He has put together and empowered a team of seasoned professionals to help Kia flexibly meet the changing U.S. market situation, and he is the right choice to lead the company going forward." Kia's new CEO for North America, Byung Mo Ahn, another humorless bureaucrat from South Korea, didn't appreciate the latest humor in Kia's upcoming President's Day ads, apparently, according to AdAge, which was the reason attributed to the exec's departure. While these Kia bozos were at it, Ian Beavis, VP-marketing, was also exited from the company. Why anyone - even with mediocre credentials – would ever remotely consider going to work for Hyundai or Kia at this point is beyond us.

(Photo by Alan Poizner for General Motors)
Making the most of the sunset years of the greatest high-performance era in automotive history - before we're all driving whisper-mobiles with the personality of a refrigerator - Chevrolet has announced the 2008 Corvette 427 Limited Edition Z06. This new limited production Z06 - a tribute to the big-block Stingrays of the mid-1960s - features a special Crystal Red Tintcoat exterior with "stinger-style" graphics, “427” hood badges, exclusive chrome wheels, body-color rear spoiler and door handles, exclusive dark titanium custom leather-wrapped interior, special Crystal Red interior trim plate graphic pattern, “427”-embroidered seats and floor mats and "Z06" sill plates. Each example is numbered and signed by Wil Cooksey, the Corvette assembly plant manager who is retiring after 15 years on the job, and comes with a certificate of authenticity. Available under order code Z44, this special Z06 enters production this spring. Only 427 will be offered in the United States and Canada, with 78 more exported outside North America. That’s a total of 505 production vehicles – the same number of horsepower produced by the LS7 engine. The MSRP for this new Z06 is $84,195 and includes the 3LZ premium equipment package with a custom, leather-wrapped interior. A navigation system is the only option ($1,750). As with other Corvette models, customer delivery is available at the Corvette Museum, in Bowling Green, Ky.