THE WEEK THAT WASN’T.
Tuesday, July 30, 2019 at 04:58PM
Editor

By Peter M. DeLorenzo

Detroit. Maybe it was the hangover from the new Corvette reveal, or maybe it’s just the time of year frequently labeled as “the dog days” of summer, although I find that to be grossly unfair to our fine furry friends to be honest. But this time of the year leaves a lot to be desired in the car business, there’s no question about that. 

The “end of summer” sales have started, like clockwork, and somewhere out there a “truck month” sale is going on (then again, every month is truck month around these parts). It’s also about the time that overly optimistic sales projections for the year made during the auto show season are – ahem – “adjusted” through various explanations, like unanticipated supply problems, trade uncertainties, a bad product mix and our perennial AE favorite: sunspots.

And since accountability is in such short supply – at least in some quarters of the business – you won’t hear much about the blatantly boneheaded decisions made that cost the companies dearly, the totally unrealistic boastings of a sales juggernaut that never materialized, or the flat-out disasters that left careers decimated. Well, except for one, anyway. Audi’s complete screw up that left its dealers without new Q3s to sell – in the hottest segment in the market - until now, August 1st, cost the company and its dealers hundreds of millions of dollars. Even in a business that makes a cottage industry of avoiding accountability, this was an unmitigated disaster that couldn’t be swept under the rug. 

But as bad as the Audi debacle is, it’s completely overshadowed by the implosion going on at Nissan. I’ve taken a lot of broadsides over my haranguing of Nissan and its so-called executive leadership team over the years – I was never a fan of “the Ghosnster” because of his overinflated ego and obsession with volume over everything else – but if anything, I’ve been too kind.

I’m sure there are some out there who are saying to themselves while reading this right now that to use the term implosion is over the top, but let’s review, shall we? 

The current CEO, Hiroto Saikawa – and I say “current” because let’s face it, I think we’re about to see a revolving door become part and parcel with this position as Nissan’s fortunes continue to slide – is taking aggressive steps to bring back the company from the brink. He’s slashing Nissan’s global model portfolio by ten percent, which seems like an aggressive move except if that number was doubled it still wouldn’t be enough. Then he’s cutting 12,500 jobs worldwide, which make no mistake, is a significant number. But the real eye-opener came when Nissan announced last week that its operating profit in the April-June quarter plummeted by 99 percent. Yes, you read that correctly. And to make matters worse, its North American retail sales dropped 6.3 percent. (I was going to italicize that percentage but at this point it’s just piling on.) Memo to emerging scholars of this business getting their MBA’s right now: For future reference, this is what implosion looks like. 

Saikawa insists that it won’t be long before Nissan is back on track, but I really don’t know many out there who are buying that notion. There are dealers out there who believe it can and will happen but to say they have a vested interest in things working out is an understatement. They really have no choice at this point but to believe that the Turnaround Fairy Princess will drop pixie dust on things and make it all better for Nissan here in the U.S. 

But Fairy Tales have never found purchase in the car business. In fact, this business is littered with bad stories and even worse outcomes that started out bathed in sweetness and light and boundless optimism. Nissan is paying for the years of abuse in the way it conducted its business, especially here in this market. It cranked out volume and shoved it down its dealer throats. And the rest? It was dumped in rental car fleets to pump up the numbers. Nissan lived off consumer incentives in the U.S. market for years, because that was the only way they could meet Ghosn’s ridiculous sales projections. And the products were too often middling to mediocre and sold not because of their inherent goodness, but because it was a “deal,” which made matters worse.

Saikawa may have a chance, but we’re talking about an extremely narrow window of opportunity to fix things. But that is only if everything goes right at just the right time. And banking on that in this business is a pipe dream, at best. Add to this the overcapacity in this business and all of the negatives that are associated with that, the crushing costs with the transition to electrification, the fact that sluggish sales are indicating that there’s a real chance that we’re heading for a significant slowdown, and you have a recipe for disaster and a giant, steaming bowl of Not Good.

Nissan needs a reason for being in this market, and right now it’s hard to see what that is, especially given the relentless product onslaught coming from the Korean manufacturers. 

I see only one way out of this mess for Nissan. The company can start by focusing on building extraordinary cars and SUVs that present real value for the money in this market. Vehicles that present such a compelling reason for buying on their merits alone that Nissan can slowly work its way back to respectability. 

A giant “we’ll see” if I’ve ever seen one.

On a sunnier note, I had the opportunity to see the new Corvette Sting Ray (in Elkhart Lake Blue Metallic) over the weekend. The car was running so I had a good opportunity to drive all around it and see it from every angle. I still don’t care for the rear-end design, but the new Corvette has undeniable road presence and it looks flat-out sensational in the flesh.

Kudos to the True Believers at GM Design, Engineering and Product Development – the new Corvette is a grand-slam home run by every measure.

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

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