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When to pull the trigger

horse In response to talk of bankruptcy as a better solution than a bailout, jgoods says you don’t shoot the horse you are riding.

He and I agree on the bottom line: the auto industry needs a complete overhaul. We both want to see the U.S. companies become competitive, and even lead, in the world of automotive innovation.

We agree that they’ve simply followed the easy money when Americans were in love with city dwelling monster trucks. In fact, I wrote a blog about that here. It’s true that the American public simply got what they were demanding and probably should accept some guilt.

However, it’s the responsibility of a corporation to plan for the possibility of future scenarios, rather than just hope a lot that things stay the same forever. That’s where the Detroit 3 have failed miserably.

The UAW hasn’t helped. The union has bogged down the industry with high labor costs and forced the Big 3 into paying unfathomable sums of money for health care and retirement benefits. While being good for the employees, it came at the cost of stagnant innovation and sub-par quality. That’s not good business.

It’s time to accept that the U.S. auto industry isn’t confined anymore to the United States. Those foreign transplants, Toyota, Honda and all the others, will have a significant impact on the shape of the industry here. We have to think bigger than our borders and accept the fact that organized unions can’t control everyone.

The U.S. automakers do need our support. And now that they’re being humbled and forced to play on the same field as the rest of the world, they’ll probably earn it. But that doesn’t mean all 3 companies have to survive by being bailed out.

Remember that horse? If he’s got broken a leg and won’t take you where you want to go, it’s time to shoot him. Even if you can’t imagine traveling without him.

Do you think all three U.S. auto companies can be succesful in the future? Let us know where you fall in this debate!

-tgriffith

Is the bailout just a band aid?

Wow, how about the pump-fake that ol’ Mr. Bush pulled on us all, huh?

On Thursday the White House was playing up the possibility of an ‘orderly bankruptcy’ for the Detroit automakers. Bush even said,

Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring.

Then the influence and pressure of the Big 3 and the UAW kicked in, who called the idea “unworkable and dangerous.”

bandaid Never mind the fact the majority of the Americans were against a bailout, as was Congress who voted not to bail out the automakers. Even the president was considering bankruptcy as the best option to allow a complete reorganization of the auto industry.

Then something happened and Bush abruptly threw to the other side of the field. Maybe his decision was partly the influence of Chrysler’s desperate ploy of playing up their upcoming month-long plant closure; portraying themselves as victims because people weren’t buying their cars anymore. (If they were any other business they’d react by decreasing the size of their business, not whining to the government that they’re out of money.)

President Bush’s $17 billion bailout does come with considerable restraints though, the biggest of which being the question of viability. According to the White House, “A firm will only be deemed viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan.”

If, by March 31, 2009, any of the companies are not deemed viable, the loans will be called and bankruptcy will likely result. Can GM or Chrysler achieve a “positive net present value” by spring and avoid having to give back the government’s money? I have my doubts.

This bailout seems like President Bush’s way of saying, “Hey, good luck President Obama. The automakers didn’t collapse on my watch, so now it’s your turn!”

Even though he believed it was the better option, I don’t think President Bush wanted to oversee a federally orchestrated bankruptcy process this late in his administration. The bailout option was easier and provided a nice band aid that would last until the next president could make the final decision.

Do you think at least one of the Big 3 will still end up in bankruptcy come spring? Let us know by leaving your comments here!

-tgriffith

Sneak Peek at the International Car of the Year Nominees!

The International Car of the Year Awards aren’t like other car awards. Rather than judging a car on its performance, comfort, quality and value, the ICOTY awards judge on emotion. They represent how cars make us feel, rather than how fast they get to 60 mph.

The award will be presented at the North American International Auto Show in January.

With that background in mind, here are the nominees along with my prediction of which car will win!

flexpng The Flex has two main innovations that will give it a shot at winning, the first being a built-in refrigerator that is surely a hit with parents on road trips. The second is Ford’s EasyFuel capless refueling system, which reduces the risk of gas theft and decreases the release of fuel vapors. Too bad it won’t win, though; the Flex’s exterior design is apt to produce emotions, just not the kind that make us feel good.

gt-r The $80K Nissan, with a twin-turbocharged V6 that corrals 473 horses and the ability to scream to 60 mph in three and a half seconds, could blow the doors off some Porsches. It has everything going for it, including a dashboard monitor to display steering angle and G-forces. This car will make your heart pound and your palms sweat… but it’s not something the average car consumer can identify with. That’s why it won’t win.

This reincarnated icon of the past is being brought back to life and will be accessible to nearly anyone with the desire to drive a symbol of American muscle. Yes, that muscle has weakened in past years, but that’s not the point. The Challenger invokes pure emotion in the millions of Americans who remember Dodge’s heyday. This isn’t just a car; it’s a car that builds hope in America’s automakers. And that’s the point of the ICOTY awards and why my money is on the Challenger to win.

Which car would you vote for to win the International Car of the Year Award: the Flex, GT-R or Challenger?

-tgriffith

What is REVO EVOM?

Imagine you’re on an open freeway with nothing but clear pavement and blue sky in front you. You’re cruising comfortably at 5 or 10 over the speed limit when you see a car up ahead that looks like it’s passing a semi in the left lane. You put on your left blinker, check your blind spot, and change lanes so you can overtake the truck without messing up the cruise control settings.

You’re expecting the car in front of you to pass the truck, then move over into the right lane so you can continue on your merry way without changing your speed.

Only there’s a problem. The car in front of you ISN’T passing the semi. In fact, for some reason only explainable by insanity he’s decided to match the semi’s speed EXACTLY. You grunt as you wait until the last possible second before pushing ‘cancel’ on the cruise control. Your car’s RPMs drop in response, which wakes up your spouse, who thinks you’re exiting for the next gas station.

You’re stuck behind a 1997 Buick and a lumbering truck stacked full of cows, and you’re out of options for passing either of them.

I can’t think of another situation on America’s freeways that so instantly dials up the road rage meter.

Enter REVO EVOM, a decal people are placing on their hoods or windshields that when read from the Buick’s rear-view mirror will give a very clear message: MOVE OVER.

Take heed, fellow drivers, because some states are coming to the rescue by actually enforcing new laws and fining people for spending too much time in the left lane. In my home state, Washington, that fine is $124.

It’s about time those left-lane lugnuts get taught a lesson and give us our open road back!

Are you more likely to be the one getting a ticket, or ordering a REVO EVOM sign? Leave your comments here!

-tgriffith

Did GM betray Americans?

Betrayal or just bad business?

GM today has officially brought their plea for billions of dollars to the public.

With a full-page print ad, the company admits to disappointing customers, letting quality fall below industry standards and creating lackluster designs. They also acknowledge having too many brands, too many dealers and building too many trucks and SUVs.

This is all true, and I’m thrilled to see GM own up to their problems. Of course, the motivation for doing so is a possible injection of billions of dollars of taxpayer’s money, so it’s a wise move to make sure those taxpayers feel some sign of corporate humility.

While there’s no doubt that GM has been poorly managed, made poor business decisions and produced historically sub-par vehicles, the ad also apologizes for at times betraying the American people.

I don’t think they have betrayed us, and I’ll put my neck out there to stand up to that.

While I still believe a bankruptcy filing would be a better consequence of their business decisions than a near-certain government bailout, I don’t think GM has done anything that has betrayed the people of America. They were greedy, cocky and arrogant, but it’s only now that they are being called out on it.

For years, Americans have bought right into their business practices and supported them. So it’s not a GM betrayal of Americans, it’s a failure of Americans to notice or care that we were being taken advantage of. In that sense, we are somewhat at fault for helping GM arrive at this point of financial collapse.

Maybe it’s us who has betrayed them by not forcing automakers to restructure years ago. We bought everything they threw at us, so it’s no wonder quality went in the tank and SUVs kept getting bigger.

While they should’ve had the foresight to know that couldn’t last forever, we should’ve taken a stand against their products and practices years ago.

And now here we are on the verge of a very different auto industry than the U.S. has ever seen. And you know what? I’m excited about the changes and the potential for cars of the future.

Do you think GM betrayed the American people? Leave your comments below!

-tgriffith

The 5 coolest movie cars of all time!

Sometimes the cars in movies are more memorable than the actors or even the movie itself.

In rare instances, a car will completely steal the show and over time become an iconic symbol and represent an entire generation of memories. Here are 5 of those cars, and I know there are countless more. Feel free to share your favorites here as well!

The Ghostbusters Ambulance

Just look at it and you’ll start singing the song. You’ll have memories of ectoplasm, Slimer and the Sta-Puft Marshmellow Man. Bonus points to you if you remember the name of the car: Ecto-1.

The Ferris Bueller’s Day Off Ferrari

If I was a valet guy and this car pulled up, I’d smile to myself knowing I was about to have the time of my life! Just like in the movie.

The Gone in 60 Seconds Mustang Shelby GT

Eleanor, as she is known, is simply beautiful. Plus she can jump over traffic jams and land without popping tires or breaking axles. Given the opportunity, I’d steal her too!

The Back to the Future DeLorean

Nuclear power, an onboard flux capacitor and the ability to travel through time once it hits 88 miles per hour makes this otherwise forgettable piece of automotive history memorable forever.

The Quantum of Solace Aston Martin DBS

Some say Bond should only be behind the wheel of a Bentley. I disagree. In fact, if I were to make a list of the coolest cars ever built in the history of the world, this Aston Martin would be on that list. So it’s only natural to put the car on this list.

What are some of your favorite movie cars? Leave your comments below!

-tgriffith

The new look of the American auto industry?

Alfa Romeo: Coming to America!

Of the 15.5 million vehicles built in America in 2007, foreign manufacturers built 6 million. That’s a number primed to grow as the U.S. automakers struggle and foreign companies see value in increasing operations here.

Cars will always be built in America, even if our homegrown Big 3 go belly up.

Even Alfa Romeo, who withdrew from the U.S. market in 1995, is coming back with new models and could possibly move production here in 2011 or 2012.

Honda has built cars in the U.S. for years, with a major operation in Ohio and another being built in Indiana. Last year 1 million Hondas were built in America and the Indiana plant will add capacity to build 200,000 more. Honda is also considering moving production of the Fit stateside, as Honda is looking for ways to keep up with demand. Honda’s overall sales were down 28% in October of this year, but sales of the Fit rose by that same percentage.

Toyota has a similar philosophy, having recently opened a new plant in Texas, and is building another in Mississippi to handle the production of Highlanders and Prius hybrids. In 2007, Toyota built 1.3 million cars in America.

BMW produced 150,000 vehicles in America last year and is investing to bring their capacity up to 240,000. Production of their X3 will move from Europe to South Carolina. Nissan is building a new plant in Mississippi, Kia is building a new plant in Georgia and Hyundai recently completed a plant in Alabama. Volkswagen will build a U.S. production plant in Tennessee, where they intend to build a car designed for the U.S. market.

All of these new plants are paying decent wages and have real advantages over Detroit, with younger workers and much lower benefit costs.

There’s a lot to be excited about in America’s future of auto production, even if that future is void of GM and Chrysler.

If automotive jobs are still in America, what are your thoughts on foreign companies providing those jobs?

-tgriffith

What bankruptcy would mean for automakers

Bankruptcy is a very scary word. For many of us, it conjures up images of financial devastation and companies going out of business for good.

So when we talk about bankruptcy and the three biggest auto companies in America, we become afraid that if they file for bankruptcy they will disappear forever. That is just not the case.

The fact is, GM and Chrysler are already bankrupt. They are out of money, all that’s missing is the formal filing.

If any of the Big 3 were to file for bankruptcy, they’d file for chapter 11. Cases filed under chapter 11 of the bankruptcy code are sometimes referred to as “reorganization bankruptcies” because it lets the company stay in business while changing the way they operate. A judge decides how and when debts are repaid.

Reorganization is what the Big 3 need, along with getting out of their current financial obligations such as labor costs, executive salaries, union workers benefits, dealer agreements, etc. Right now, it’s those union agreements that are resulting in a financial loss for every car sold. Logically that can’t continue.

A financial bailout would provide money to the automakers to continue business as usual, but provide little incentive to actually restructure. Chapter 11 bankruptcy would be like wiping the slate clean and starting over, continuing business while reorganizing.

For consumers, warranties would stay in effect and dealers would continue selling and servicing cars.

Of course there are consequences to filing for bankruptcy, one of which is consumer confidence. Given the choice of a bankrupt auto maker and a financially sound one, the decision may not take people long.

Considering though that GM and Chrysler are already out of money and in desperate need of cash, are you in favor of bankruptcy or bailout for the automakers?

-tgriffith

Forget the government, let Big Oil bail out the auto industry!

There's big money in Big Oil

I’ve got to give my wife a lot of credit, since last night she had an idea that could save the auto industry.

We were reading an article in the paper about the record profits Big Oil is hauling in… $44 billion in the last quarter. That translates to $176 billion in profits over a year. That’s PROFITS, not revenue. How much is the auto industry asking for? A measly $25 to $50 billion? I’m sure you see where my wife went with this.

Let’s let Big Oil bail out the Big 3.

It makes so much sense! The oil companies wouldn’t be living the good life if it weren’t for regular citizens like you and me buying and driving cars. The oil and auto industries rely heavily on one another, and Big Oil is sitting on the cash it could loan to the Big 3.

Of course, Big Oil may not have the vested interest in forcing automakers to adhere to strict fuel economy standards, but they do have the money and the influence to demand competitiveness while saving U.S. taxpayers from footing the bailout bill.

Imagine the scenario: Big Oil foots the bill and bails out the Big 3. Now they have a substantial financial interest in whether or not the automakers survive. If they do, Big Oil gets their loans paid back and earns even more profit. If the Big 3 still go under, Big Oil doesn’t get their money back.

And that’s not a group that likes to let profits slip away and would do whatever they must to ensure they get paid and the automakers succeed.

What do you think of Big Oil bailing out the Big 3 instead of the government?

-tgriffith

The $20 fill up that changes everything

Something incredible is happening.

Not long ago, in this very space, I said: “Americans could very easily get used to 3 dollar gas.” Well. Silly me. I would have never guessed that within a month I’d see 2 dollar gas!

I live in a state with relatively high gas taxes, and my local station is selling regular unleaded for about $2.25. That’s incredible, considering last summer that same station was selling fuel for $4.25. I could very easily spend my time here delving into the reasons for such a dramatic drop, but that’s not nearly as exciting as thinking about the consequences of the price drop.

The little Suzuki I drive has an 11 gallon gas tank and was costing just over $40 to fill up, which for such a small car was quickly becoming infuriating. I was ready to trade it in for a Vespa and seriously adjust my driving habits even with that. I was prepared to do whatever I had to so America could cut it’s use of foreign oil and usher in the era of hydrogen to power the next generation of cars.

Then I watched prices on the digital sign at my local gas station plummet, and I filled up Friday night for just over $20. It’s the 20 dollar fill up that is changing my outlook on our country’s gas situation.

Now I’m considering trading in my Suzuki again… only this time a Tundra sounds kind of attractive. Or maybe the practicality of a Pilot. Heck, if I can fill one of those up for 40 or 50 bucks, I’ll be one happy consumer of oil; wherever in the world it comes from.

How low will prices go before they are no longer an issue?

-tgriffith

Auto leasing: soon a thing of the past?

Lease returns: what will happen to them all?

Auto leases could become much more of a burden; for everyone.

By the looks of it, there could be a perfect storm brewing in the next year for consumers, banks, leasing companies and dealerships as the economy sinks, leases end and the vehicles are returned.

Already, according to a recent NY Post article, there’s a surge in people trying to get out of leases because they can’t afford the payments anymore. Companies like www.tradealease.com have seen thousands more transactions this year than normal.

And that’s not even where the real problem begins. As leased vehicles are returned, very few people are going to buy them.

Consumers who are interested in buying a lease return will have a heck of a time getting approved for a loan, which could mean banks and leasing companies getting stuck. Big time.

Normally when a leased car is returned, the consumer can buy the car, lease another or walk away. For many, buying the car will be out of the question. Few will want the commitment of another 3-year lease payment. Most will simply walk away, leaving thousands of unwanted vehicles in the ownership of the leasing companies.

There a few possible outcomes of such a scenario:

1. Leases will become just as difficult to obtain as loans, as leasing companies tighten their requirements to minimize risk. Lease payments could become equal to loan payments, which would further deplete the leasing business.

2. The cars that have been returned will be sold well under market value, as a way for leasing companies to clear their massive inventory and minimize their losses.

For those who are in the market for a lease-returned car, those potential bargains might be worth keeping an eye on.

Regarding the state of leasing in the future: What do you think will happen? Are the days of leasing vehicles numbered?

If you are currently leasing, what do you plan to do when the lease is up?

-tgriffith

Is diesel really worth it?

2009 VW Jetta TDI

Diesel fuel has been getting a lot of attention lately.

Bloggers all over the ‘net are claiming it’s the answer to slowing our oil consumption and raving about the high mileage diesel cars get. After all, Europe has been driving diesel cars for years yet American has been slow to get on the band wagon.

Cargurus.com even did a recent poll on this topic, with a majority of people who plan on buying an alternative fuel car saying they’ll buy diesel over hybrid.

While it’s true that diesels get 20 to 30 percent better fuel economy, diesel fuel is about 50 cents per gallon more than gas. On top of the higher fuel costs, diesel autos cost more upfront to buy.

I’m going to do the math right here and now, to see if going diesel on your next new auto purchase is financially worth it over a traditional gas-powered car.

The cargurus.com survey cited the 2009 Volkswagen Jetta TDI (diesel) as it’s example, so I’ll compare it to a similarly equipped 2009 Jetta SE (gas).

The SE costs $19,920. The TDI is $21,990 for a difference of $2,070.

Currently, gas costs an average of $3.48 per gallon. Diesel currently averages $4.00 per gallon.

The SE gets an estimated 20 MPG in the city. The TDI gets 29 MPG.

Assuming you drive an average of 15,000 miles per year in the city, you’ll use 750 gallons of gas in the SE for a total of $2,610 in fuel costs.

In the TDI, you’ll use 517 gallons of diesel, for a total of $2,068 in annual fuel costs.

With the TDI, you’re saving $542 per year in fuel costs. At current prices, it will take driving your TDI for almost 4 years to break even.

So the bottom line is simple: If you’re buying a diesel over a gas-powered car to keep for the long run, diesel is a good option.

I’m interested in what you think: is diesel worth the higher MPG? I only looked at the financials; what are some other reasons to go diesel?

-tgriffith

The world’s biggest Chevy dealer has closed… and keep your eyes open for more

You won't be seeing signs like this anymore!

The news that Bill Heard Enterprises has closed shop is more surprising than it should be.

It’s no secret that dealer consolidation has been a much needed action, and that fuel prices have left a major dent in the sales of high-profit trucks and SUVs.

But the fact that the world’s largest seller of Chevrolet couldn’t even keep ONE of it’s 13 stores open is surreal. Something more must be going on.

That ‘something more’ is a massive lawsuit against Bill Heard Enterprises, accusing the dealer of signature forgery and deceptive marketing; charges that could bring up to $50 million in fines.

So the credit crunch is likely a cause of failure, not THE cause of failure.

The credit crunch and gas prices are the reasons Bill Heard Enterprises is citing though, and that’s enough for me to sound the alarm for massive changes ahead in the auto dealer industry.

What kind of changes could we see as dealers begin to jump ship?

Consolidation for one. Perhaps even to the extreme: Imagine shopping for Ford, Chevy, Chrysler, Nissan and Toyota under one roof.

Imagine the current rows and rows of auto dealers lined up on main drags across America, relegated to just one or two city blocks.

Of course consolidation would not bode well for the automakers, who count on exclusivity and high volume sales from their dealers. They’d have to cut production dramatically and quickly adapt to a much leaner way of building and distributing their vehicles.

For you and me though, it means more power in how we buy our cars and eventually could lead to a shift away from the current high-pressure model of car sales.

I’d love to see going to the car dealer akin to going to grocery store… just pick out what I want, pay and leave.

I ask you: is that day coming? Would you want it to?

-tgriffith

Hybrid Escalade? Gimme a break!

I want to talk about something that’s incredibly simple, but for some reason a lot people don’t seem to get.

There’s so much talk right now about the importance of miles per gallon, and ways to increase the MPG of the cars being built.

The challenge so far is building a car that can be driven more miles for each gallon of gas it consumes. A popular solution that automakers, and the public, are embracing is the hybrid vehicle. While some hybrids do increase the MPG, they also cost a heck of a lot more money than comparably sized cars.

And I won’t even get into the fact that it takes years and years to even recover the cost of the car in gas savings. And what will happen to the toxic batteries once the car’s life is over?

What I want to talk about right now is even more basic than that: weight.

This is just simple physics, friends: the less something weighs, the less energy it takes to propel it.

Following so far?

I just don’t understand why the automakers in this country are so stuck on the hybrid concept, when we can achieve even better MPG than a hybrid in a gas-powered car that weighs less.

Instead, we have GM slapping a hybrid sticker on the side of a $70,000 behemoth Escalade that gets 20 MPG. Does that make sense? Think about how many non-hybrid vehicles get significantly better mileage than that.

It’s completely insane folks, and we need to step up as consumers and say, “Hey, GM, we don’t want a 6,000 pound monster that costs over 70 grand and gets 20 MPG. We want a 2,000 pound vehicle that gets more than 30 MPG.”

We can’t have it all, America, and it’s time to start making choices that have serious effects on the environment and perhaps more importantly, on our wallets.

Instead of dropping 70K on a hybrid SUV, save yourself 50 THOUSAND dollars and pick up a Mini Cooper that goes nearly twice the miles on the same gallon of gas.

What would you buy: the hybrid Escalade or the gas-powered Cooper?

-tgriffith

2009 Mini Cooper S Convertible Caught In The Wild [2009 Mini Cooper S Convertible]

Normally I’m the first to write off a group like drive55.org as extremists, ...

Save the Polar Bear

They say driving 55 will save the polar bears.

They say driving 55 will bring world peace.

They say driving 55 will stop global warming.

They, the folks at www.drive55.org, might have a point. Though for most of us living in civilized America, the only way a polar bear is going to slow us down is if one is standing on the interstate.

If Americans are going to make a change, I think it’s pretty well understood that we had better see an immediate and measurable impact that benefits us directly.

It’s hard for me to believe, or even care, that getting from point A to point B a few minutes slower than normal will have any effect on a polar bear living roughly 6,223,989 miles away. But tell me I could save 20 bucks and you’ve got my attention.

Gas costs around 4 dollars per gallon. And Americans use about a trillion gallons of gas per year. Yes, we probably should do something to reduce how much we use.

Normally I’m the first to write off a group like drive55.org as extremists, but this time, I could be influenced enough to agree. The math is simple: we drive slower, we use less gas, we pay less in fuel costs. Count me in.

Of course that also means we have to drive slower. A lot slower. Would Americans be willing to do that? Absolutely not. I think most of us would rather pay the speeding tickets than slow to a pace our grandfathers would approve of.

But what if the consequences were a little more severe? What if a revoked driver’s license loomed on the horizon if you crested it at 75 MPH?

If I were the boss at drive55.org, that’s what I would demand. If the group wants some serious attention, they should advocate for consequences that actually mean something close to home.

Saving the polar bears just isn’t going to cut it.

If this country is serious about reducing it’s consumption of gasoline, there are two things that will make a measurable impact immediately and require no new technology or infrastructure. The first has already happened: increased fuel prices. The second is lowering the speed limit, with severe consequences for breaking it.

- tgriffith

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