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October 17, 2018

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On The Surface


On The Surface #468

October 22, 2008


  The Wall Street Journal. Publisher's Note: The Wall Street Journal weighed-in today (10/25) with Paul Ingrassia's view of how it all went wrong for Detroit with his piece entitled, "How Detroit Drove Into a Ditch." Besides the fact that the story is filled with questionable "tipping points" from throughout Detroit's history - he once was the WSJ's Detroit bureau chief - which caused the Detroit Three to fail, he seems strangely out of touch with the reality of what the Detroit auto manufacturers are about today, especially in terms of product. The evidence? He claims that, "These days, Detroit's styling advantage has largely disappeared, and excitement over new designs is reserved for iPhones." Huh? That single comment is simply laughable and tainted the credibility of the rest of the article (which was dubious to begin with, but I digress). One thing that even the most relentless critics of Detroit have agreed upon of late is that automotive design in the Motor City has undergone a genuine renaissance, and GM in particular has lead the way with a wide array of visually exciting designs that have rejuvenated the craft itself. Ingrassia has clearly been out of touch with the car biz for too long, so he has somewhat of an excuse. That the WSJ views him as one of their Detroit "experts" says it all about the kind of coverage we've been seeing from that paper of late, however. Uncharacteristically speculative, flat-out wrong (they've had to retract parts of their coverage of the GM-Chrysler deal) and tediously written, The Wall Street Journal continues to miss the mark when it comes to its auto industry coverage, and by a wide margin too. As a matter of fact, pathetic is the word that most comes to mind.. - PMD

  Ford. "Captain Kirk" Kerkorian has decided that the new "Detroit Miracle" is too slow in coming, apparently. Kerkorian's investment company - Tracinda - released the following statement yesterday: "In light of current economic and market conditions, (Tracinda) sees unique value in the gaming and hospitality and oil and gas industries and has, therefore, decided to reallocate its resources and to focus on those industries." Which means that Tracinda is selling off its investment in Ford stock beginning with 7.3 million shares sold Monday, with the rest of Kerkorian's stake - 133.5 million shares - possibly on the block (we're talking at a substantial loss too, like to the tune of around $700 million since April - ouch. We can see leaning toward the oil and gas industries over the auto sector, but the gaming and hospitality industries too? Maybe not so much. Kerkorian is the classic impetuous investor with a ton of money and he wheels and deals at a prodigious rate, but there's no question that his dumping of Ford shares sends a dire message about the state of the domestic automobile business. That giant steaming bowl of Not Good has just turned into a full-blown buffet...

   GM dealers. The credit situation is decimating the auto business, and auto dealers are on the brink. Peter Welch, the CEO of the California Auto Dealer Association warned GMAC CEO Alvaro G. de Molina that as many as 40 percent of California consumers wouldn't qualify for an auto loan under the new stricter guidelines recently announced by GMAC. "Unless immediately stopped, GMAC's actions will directly lead to insolvency of a number of our GM dealer members and will significantly erode GM's California market share," Welch warned. The NADA estimate of 600 dealers closing this year seems laughably low right now. We even view our estimate of 1,000 dealers going out of business in '09 as being well short of what it actually could be.

   Jurgen Schrempp. From the "Oh Please Just Shut Up" File comes word that Jurgen Schrempp, the former CEO of Daimler AG, is still carrying the torch for his failed "Merger of Equals" with the former Chrysler Corp. Schrempp defended the disastrous coupling with Chrysler as "vital" for Daimler-Benz during testimony in a German state court yesterday. You remember that, right? At the time of the "decoupling" Daimler's $34 billion - what it originally paid for Chrysler - was gone with the wind in just eight years. That one of the world's foremost delusional thinkers is still touting his remarkably warped view of the events that transpired under his watch is no real surprise, given the millions that Schrempp absconded with upon his exit from the company. But it still doesn't change the fact that Schrempp's relentless bungling during his reign over the Daimler empire established him as the worst auto executive - and one of the worst corporate executives in any sector - of the last 50 years.

   Mercedes-Benz. The wheels have come off for Mercedes-Benz sales in the last few months. Accordingly, the R-Class, S-Class, CL-Class and CLK-Class cars have huge incentives on them in the U.S. market - as much as $10,000 per car. Mercedes management is conveniently blaming market conditions - no auto executives play the blame game better - but their insatiable greed and their total oversaturation strategy in the U.S. market has played a huge role in it too. Not that they'd admit to any of that, of course.

   Steve Jobs. The Apple Maestro made some comments in a financial call yesterday that auto industry executives should pay close attention to. When asked whether users will be likely to see a cheaper computer from Apple, Jobs answered, "I think what we want to do is deliver an increasing level of value to these customers." "There are some customers which we chose not to serve," he added. "We don't know how to make a $500 computer that's not a piece of junk, and our DNA will not let us ship that. But we can continue to deliver greater and greater value to those customers that we choose to serve. And there's a lot of them." "We've seen great success by focusing on certain segments of the market and not trying to be everything to everybody. So I think you can expect us to stick with that winning strategy and continue to try to add more and more value to those products in those customer bases we choose to serve." Truer words were never spoken, and that's our AE Quote of the Week, Part I. (Thanks to Eric Trytko for pointing out Jobs' comments to us. - ed.)

  Detroit. As if we needed any more bad news, David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. had this to say to Bill Vlasic of the New York Times: "It's reaching a point where we'll have to decide if we're willing to let the U.S. auto industry fail. It depends on the urgency that the government feels to save these companies." And that's our AE Quote of the Week, Part II.

  The U.S. economy. Bill Vlasic, writing in today's New York Times: "The failure of General Motors, Ford and Chrysler would have far-reaching economic and social consequences. Together, the automakers employ more than 200,000 workers in the United States and provide health care and pensions to more than a million Americans. In addition, their operations are lifelines to 20,000 auto dealers and countless suppliers, and the source of major tax revenue to states and local governments." And that's our AE Quote of the Week, Part III. And you don't think Detroit's implosion will affect you, no matter where you live in this country? Think again.

   GM. From the "The Sky Is Falling" File comes word that rumors are flying around GM's Technical Center in Warren that there will be a shutdown from Thanksgiving until right after the New Year. None of this could be confirmed, of course, but such is the dire state of things in this city that grim tidings of this nature seem to be a normal part of the work day. Not Good.

  Toshiba. From "There's Gold In Them Thar Lithium" File, Toshiba is betting big that its SCiB lithium batteries will be better than all the rest of the competition out there, insisting they're safer and recharge faster. Toshiba will invest 20 billion yen ($194.2 million) to expand production for cars to make 3 million lithium-ion battery cells a month by 2010, according to Automotive News. Toshiba will join NEC Corp., Panasonic EV Energy Co. and Sanyo Electric Co. in supplying lithium-ion batteries to automakers. Toshiba now makes 150,000 cells a month, primarily for electric bikes.

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