Friday, June 30, 2006

Renault-Nissan to Buy Stake In GM?

Kirk Kerkorian's Tracienda company, a large minority investor in General Motors, has sent a letter to General Motors conveying an indication of interest by Renault-Nissan to buy a "significant minority interest" in General Motors. So is this a sign of a turn-around for General Motors, or a sign that the vultures have started circling the carcass to pick off the juicy bits? Perhaps it's a little of both.

What would the combination look like? Though the letter speaks of synergies between the two companies, both companies are so diversified now that I doubt the synergies would justify a full fledged merger. Moreover, Would Renault-Nissan risk sinking from GM's liabilities? Of course not. Nissan-Renault would not risk anything it couldn't afford to lose. Instead, the likely short term agreements would involve R-N purchasing a single digit percentage of GM's stock, probably a new class of stock created just for this purpose. The stock sale would be accompanied by distribution agreements, cooperation on component parts and technology sharing. These agreements would put Renault-Nissan in a position to buy off choice technology in the event of a General Motors bankruptcy. In a best case scenario (best for R-N anyway), GM would go bankrupt and Renault-Nissan would submit a Chapter 11 plan to give a significant amount of money to otherwise-stiffed creditors in exchange for wiping out all unfavorable contracts and operations, not to mention wiping out all existing shareholder equity in the process. Still, the rank and file workers would probably come out better in this scenario than other post-bankruptcy scenarios because only with a single company picking up most of the pieces is there any chance of revival of any entity that even bears a passing resemblance to the old General Motors.

Assuming GM did not go bankrupt, what would Renault-Nissan get out of the deal? As big as the combined Renault-Nissan enterprise is, General Motors is larger, with a broader product line and broader distribution. Renault has been looking for North American distribution for some time now, and a GM agreement could be the ticket. Nissan and Renault have no presence in heavy trucks over much of the world, whereas GM is a leader. In the recent past, GM has scored a home run with its purchase of Daewoo. Renault could piggy-back on Daewoo. GM's distribution network in 2nd tier markets such as Canada, Australia and most of Latin America is stronger than Renault/Nissan's.

What would GM get out of the deal? Mainly money, money and time. Renault and Nissan have some technology that would be useful. Nissan has a 3.5 liter engine that is more powerful and cheaper to produce than the comparable GM 3.6. Nissan affiliate, Jatco, is the largest maker of CVT transmissions. GM would also get access to Carlos Ghosn, the turnaround specialist who took a basket-case Nissan and turned it into the most profitable automaker in the world.

Where does the UAW figure in this? Good question. I don't know. In theory, the UAW could try to use the deal to get into one or more of the domestic Nissan facilities. I don't see Nissan agreeing to that. More likely, the UAW could negotiate to have Renault models "domesticated" in an otherwise idle GM plant. When it comes down to it, any plan that increases the odds of survival of General Motors is beneficial to the UAW and the retirees who rely on General Motors for their healthcare and other benefits.

Overall, I think there is room for a win-win agreement here, and I wouldn't be surprised if they get a deal done. Will a deal be enough to save General Motors? We'll see.

Thursday, June 29, 2006

Ford Backs Out of Hybrid Promise

Bill Ford Retracts Hybrid Promise

Bill Ford has publicly retracted his promise that Ford Mo.Co. will produce 250,000 hybrid vehicles by 2010. He attributes this change to other technologies that promise similar energy savings. This follows his earlier retracted promise in 2000 that Ford's SUV fleet would be 25% more efficient in 2005. I've decided the surest way to get rich isto have Bill Ford publicly promise NOT to give me $10,000,000. I figure that if I can get him to say it, my odds of winding up with the dough look pretty good.

Wednesday, June 28, 2006

Smart ForTwo Coming in 2008
Penske Dealerships to have exclusive

DaimlerChrysler has made it official. They plan to start selling the Smart ForTwo, the two-seat Smart car, in the United States in 2007 or 2008. United Automotive Group, Inc., the dealership chain headed by car legend Roger Penske, will have the exclusive rights to sell the cars in the US.

Two questions remain. Will Rick Mears be the developmental driver? Will they come with the Marlboro paintjob?

Here is the page from the Smart website with video of crash tests. Despite its small size, the Smart ForTwo is a safe car.

Before you Make the Loan

A Simple Way to Avoid Most Mortgage Fraud Cases

The Consumer Law Committee of The Bar Association of Metropolitan St. Louis has come up with a form that it distributes to consumers who are contemplating taking out a mortgage loan. The form is called "Before You Make the Loan" Checklist, and it is available online here.

You know how mortgage brokers just present unwitting borrowers with reams of documents to sign? The concept of this checklist is to have the consumers ask the mortgage brokers a series of questions, and have the BROKER sign the form with the answers, kind of "turn about is fair play". I can imagine a broker being aghast that a lowly consumer would actually make a broker sign off on the representations made to close the loan.

I suggest that you bookmark this form, and if you have a client come to you with questions about a mortgage loan, download this form and give it to the borrowers.

Tuesday, June 27, 2006

It's Hard to be Rush Limbaugh

Rush Limbaugh got a little bit more national security than he bargained for at the Palm Beach Airport. Security screeners found Viagra in his luggage for which Rush didn't have a prescription. A Limbaugh spokesman said that the drugs were issued in the physician's name for privacy reasons. Well, that whole privacy thing worked really well there, didn't it Rush?

GM Buyouts 47,000 buyouts - $4.8 billion

GM Math: 47,000 Employee buyouts = $4.8 Billion Cost = $8 Billion/year in Cost Savings
Nay Nay says Farago

More figures are coming in regarding the General Motors employee buyout program. GM is expecting 35,000 of its own workers, plus 12,000 Delphi workers to take the buyouts This is significantly more than General Motors initially projected, but welcome news nevertheless. Here is the Detroit News article on the buyout. General Motors says that the higher buyout level puts the restructuring plan two years ahead of schedule and results in annual savings of $8 billion instead of $7 billion.

GM Critic Robert Farago, in another segment of his his GM Deathwatch series on makes a strong argument that the emperor (or the general in this case) has no clothes. First, he points out that of the 35,000 to 47,000 workers (depending on whether you count Delphi), only 4,600 of them will be abandoning GM health care. So General Motors' $1,500 per car disadvantage for health insurance costs will not be materially reduced. Farago's most compelling argument is that the magnitude and the timing of the savings aren't enough in the face of declining market share.

GMÂ?s earnings situation is both dire and deadly. In a note to his clients, Deutsche Bank analyst Rod Lache estimated that every point of market share GM surrenders to its competitors equals roughly $1.3 billion in lost [pretax] earnings. In May, the worldÂ?s largest automakerÂ?s US market share fell three percentage points to 22.5%. Using LacheÂ?s calculations, if GMÂ?s market share doesnÂ?t recover, the worldÂ?s largest automaker is looking at $3.9b in lost income AND $3.8b for its worker buyouts. No wonder theyÂ?ve announced a fire sale.

In laymans' terms: GM,a company that started the year losing money at the annual pace of $10 billion per year, started the year with $20 billion in cash. It still faces the same market realities that it faced last year but has suffered further declines in market share this year to the tune of $4 billion or so, and it will pay $4-5 billion in buyouts while still looking into the maw of a potentially crippling Delphi strike. If that ain't enough, health care expenses are still going and gas prices are still high. Let's start with 20 billion in cash. Subtract losses equal to last year, 10 billion. That leaves us with 10 billion. Subtract 4 billion for further market share loss. That leaves us with 6 billion. Subtract 4 billion for worker buyouts. That leaves us with $2 billion. Subtract $2 billion for increased health care cost. That leaves us with nothing but a technically bankrupt General Motors by the end of 20006. That's with no surprises and no Delphi strike. When was that turn-around supposed to happen again?

Monday, June 26, 2006

Can DaimlerChrysler find 150,000 Smart Customers a year?
Microcar coming to America

For many years, DaimlerChrysler has been on-again/off-again in its plans to bring the Smart microcar to the U.S. It's on again. DC plans to bring the two-seat Smart to the USA in 2007. It's not clear from the linked Detroit News article which Smart model(s) will be introduced. It appears that Smart will be marketed through an independent dealer network even though Smart is currently part of DC's Mercedes organization. I'm sure we'll find out more info later.

Thursday, June 22, 2006

Peugeot 308 - Return of the Omni/Horizon?

Peugeot 308 - Return of the Omni/Horizon?

DaimlerChrysler has said publicly that it is looking for a carmaker with which to partner for the next generation small car project. Though the odds favor Volkswagen due to current collaborations and Volkswagen's presence in Mexico, I'll throw out another possibility: Peugeot. Peugeot has announced a new small car, the 308, which is quite striking. Chrysler has a history of collaborating with VW and Peugot, but you have to go back a ways. The 1970s Plymouth Horizon and Dodge Omni were based on a platform shared by Simca, then one of Chrysler's European subsidiaries. The Omni and Horizon originally had a VW derived 1.7 liter engine. It was later replaced with a Peugeot 1.6 liter engine. The Peugeot engine was actually originally developed for the Omni/Horizon. Peugeot acquired the engine when it bought Chrysler's European assets, including Simca. Confused? Test on Tuesday.
2006 National Consumer Law Convention Brochure is Available

Here is a link to the .pdf version of the brochure for the National Consumer Law convention to be held November 10-13 in Miami, Florida. The National Consumer Law Convention is a joint enterprise cosponsored by the National Association of Consumer Advocates and the National Consumer Law Center. It is a great place to learn "the tricks of the trade" in practicing consumer law and to meet prominent consumer lawyers from all over the country. If you are a UAW-LSP lawyer, you might want to consider paying the bucks and going to this convention. UAW-LSP work is good training for private practice in consumer law, but there is more to learn if you want to make money at it. I'm not saying that a certain generous motor-related company will file bankruptcy, but if it does, any one of us could be out on the streets looking to hang up a shingle. It couldn't hurt to know a person here & there. Advance registration (by 9/8) is $435 for NACA members and $495 for nonmembers. That may sound like a lot, but that is for 2 and a half days of intensive CLE.
Toyota's SH*T Doesn't Stink

Toyota has been riding high the past year. Now Toyota has come up with a process to deodorize livestock waste. Read all about it in Edmunds' Inside Line.

Chrysler Employee Discounts are Back

Chrysler News #1:
Employee Discounts for Everybody Returns July 1

According to multiple news reports, Daimler Chrysler is set to bring back employee discounts for everybody on or about July 1. The Detroit News also predicts that DC will introduce a 30-day like-it-or-your-money-back plan as part of the same campaign.

Chrysler News #2
First Pictures 2007 Chrysler Sebring

The 2007 Chrysler Sebring is set to be unveiled next week in London, but the first undisguised pictures are on the web. The Chrysler Sebring and Dodge Stratus are in the same size class as the Honda accord, but they are not even close to being in the same sales class. DC has been less than diligent in updating the current cars; preferring to sell them almost exclusively to rental car outlets in recent years.

The new cars ride on a new platform and get a mixture of new and carry-over engines. Unlike most cars in this segment which are offered with a four-cylinder and a six-cylinder engine, the Sebring/Stratus will get three engines. The base engine is the 172 horsepower "world" 4-cylinder which debuted in the Dodge Caliber. The middle engine is the 2.7-liter, 190 horsepower, 6-cylinder which is the upgrade engine on the current car and infrequently ordered base engine on the 300 series. The top engine is a 235 horsepower 3.5-liter V-6 mated to Chrysler's, new, Kokomo-built, 6-speed automatic. I had originally read that this transmission would be ready for 2005 models.

The upcoming cars have a really tough task ahead. This is perhaps the toughest market segment in the industry, a segment where lots of players are good, and a few are exceptional. From the pictures, it looks to me that the styling will be controversial. Also, judging from the pictures, it's my guess that these cars will come in somewhat overweight. I'm guessing curb weight will be a couple hundred pounds more than the Honda Accord and Toyota Camry. We shall see when the official specs are released. The cars are set to be available in the "4th quarter" of 2006.

By the way, if you want a Mopar midsized sedan with a manual transmission, you might want to consider getting one of the last few Stratus SRTs. From early information, no manual transmissions will be available on the new generation.

Wednesday, June 21, 2006

AOL Hell

From the AOL Hell file:
What Happens You try to Cancel AOL

Here is an audio clip of a guy trying to cancel his AOL. Woe unto he who gets caught in the "savings" department. We've handled tons of complaints from people with AOL cancellation problems. The FTC has gotten on AOL about it. The problems continue. It's time for the FTC to get on them again.

Remember folks, there's no such thing as a "free 30 day trial". There is a 30 day trial, but that's 30 days that you'll be on the phone trying to cancel your freaking AOL. By the way, good luck in getting an address for cancelling in writing. That's the first thing that the FTC should mandate -- that AOL should provide and publish an address for cancellations.

Tuesday, June 20, 2006

Segway Polo

Segway Polo Video

What do dot-com millionaires do with their free time after they retire? Play Segway Polo of course.

Rename the UAW Contest

Rename the UAW Contest

One of the ongoing issues that will linger long after the UAW's Las Vegas meeting is whether the exodus of auto industry jobs justifies renaming the UAW. If so, what should it be called?

That's where you come in dear 3357 readers. E-mail me your name for the UAW. There might be reasons that I don't want to post them here, but I will collect them and have them available for my fellow 3357ers upon request. If you are not a 3357 member you can e-mail me too but you won't get a prize. Actually, 3357 members won't get a prize either, so don't feel too left out.

If you read this & get pissed, call me when you have a sense of humor.
Niche Site of the Day: is a website specializing in posting pictures of very expensive wrecked cars. Lamborghinis,Ferraris etc. Oh sure, they sometimes show pictures of wrecked cop cars and "weird crashes". Admit it, it's stupid, but you're going to click on it anyway.

GM Update #1: Pro

Lutz raves about the Saturn Aura and the DOD Impala

GM Update #2: Con

Farago posts GM Deathwatch #81

Monday, June 19, 2006

Rollin' With Sagat Video of the Week: Rollin with Sagat

Last year, Chuck Norris was the retro-cool celebrity of the year. This year, it looks like the award is going to Bob Sagat. First, Sag got dirty in "The Aristocrats", and now he's the man in a rap video by Jamie Kennedy "Rollin with Sagat".

Friday, June 16, 2006

GM's Battery Advantage
Large-Format Battery Powers Saturn Vue Greenline

If you open up the battery packs of existing hybrids like the Toyota Prius and the Ford Escape, you'll see rows of Ni-MH batteries that look like they could come from your digital camera, often AA size. On the one hand, the standard cells are a quick answer to the argument that the battery packs will not be practically replaceable. On the other hand, the cell sizes create packaging problems and inefficiencies and suggest room for improvement.

The upcoming Saturn Greenline uses a "large format" NiMH battery from a company called Cobasys. Cobasys is a firm put together by Chevron Texaco to house its NiMH battery technology that it purchased from, guess who, General Motors. Cobasys was criticized as the evil child of an oil industry that was conspiring to keep elecric cars off the market. Cobasys had gotten into a patent battle with Toyota. That battle was resolved with a settlement that Toyota could produce and license small-format batteries only for mobile use. As I understand it, the Saturn Vue Greenline and an upcoming hybrid bus are the first applications for the Cobasys's large-format batteries.

Battery Update Part Deux - Li-Ion Maker in Financial Trouble?

Valence TechnologyInc. (VLNC) for many years a "story stock" as the company that invented a "safe" lithium-ion battery has delayed the issuance of its 10k financial report. Its previous report had an auditor's "going concern" warning. Last time I checked, Valence was trading steadily under $2.00 per share. Since going public in 1989, Valence has burned through more than $100 million in capital and still has revenue insufficient to meet its debt load.
Toyota is in the House

Toyota has started building houses in Japan. Prefab metal frame modules can be combined and embellished to form many different styles of houses. I'm putting a link to this news item to show that there should be alternatives to excess capacity other than plant-closings and layoffs. Historically, auto plants have been converted to many other uses. The fact that most recent plant closings have resulted in plant shutdowns and idle facilities is evidence that virtually no other industry can command the high labor rates paid by the automakers. It's also evidence of a lack of will and imagination, and to a certain degree, lack of capital at the "Big 3". Frigidaire refrigerators used to be built by General Motors. Philco Ford made televisions.

I can imagine the government paying GM and Ford to build generators for FEMA, fuel cells and solar arrays for the GSA to be installed on federal buildings, pre-fab homes for hurricane victims, water purification systems to be sent to the third world, and government subsidized, retrofitable engines to replace 1% of the cars that emit over 25% of the pollution attributable to automobiles. No, instead the needs go unfilled, people get paid not to work, and the factories stay idle. Oh, well.
Behind the Scenes at the UAW Convention features posts from delegates to the UAW Convention that is currently finishing up in Las Vegas. As expected, UAW President Ron Getelfinger was re-elected. He was unopposed.

That doesn't mean that the UAW is filled with happy campers. The Delphi people are particularly pissed. Some are ranting at and suggesting that if you got to go down, go down in a blaze of glory in a strike. It's hard to tell how rational the Delphi agitators are. A strike is rational if you have something that can be gained in the strike. Before you can get to the decision whether to strike, you have to figure out whether you are in a non-zero sum game featuring sub-optimal outcomes,like the Prisoner's Dilemma,or in a no-win scenario, like the Kobayashi Maru situation.

The Delphi buy-outs suggest to me that the UAW has identified this from their perspective as a prisoner's dilemma and they have gracefully negotiated an outcome, though not optimal, is better than nothing. Some Delphi members can't accept this, because from their perspective, they feel stranded on the Kobayashi Maru.

As Monday-morning quarterbacks, folks can argue endlessly on how the UAW and the companies got into the positions they did. I found this statement interesting on the entry covering "no win situation"

Some cognitive biases such as anchoring and framing, or emotional biases, such as greed, fear, and herding, are reasons why people create no-win situations which may be potentially avoidable.

Hmmm, "greed, fear, and herding", I can see each of those behaviors in the collective bargaining context. Interestingly, I see all of those behaviors in our societal approach to resource consumption versus conservation. I'm wondering if we should mandate that all high school seniors not take a course in classical economics (you know, supply, demand, yada yada) but instead, take a course in public policy economics and game theory.

Thursday, June 15, 2006

Ford's Way Forward Ends in Mexico

Ford's 'Way Forward' Ends in Mexico
$9.2 Billion investment to create 150,000 Mexican Jobs

A disgruntled Ford employee leaked a memo to the Oakland Press outlining Ford's strategy for vastly expanding its already substantial operation in Mexico. The five-year plan outlined in the document proposed an investment of $9.2 billion in the expansion, and projected an employment increase of 150,000 workers, though it was not clear whether that was just Ford workers or workers from Ford and indirect economic expansion. Apparently, the document was intended, in part to entice Mexican Government investment in the project.

Ford's Southern Strategy

Tuesday, June 13, 2006


Encyclopodia - Wikipedia to Go

Attention teenagers who want an iPod: now you have ammunition to aid in the battle for your parents' pocketbook. Encyclopodia is a free version of the Wikipedia encyclopedia that can be downloaded to a (full-screen) iPod. Like Wikipedia, Encyclopodia is open source. It is free but donations are requested.

I consider Wikipedia to be the most comprehensive encyclopedia available. By itself, it's worth the cost of an iPod.

I found out about Encyclopodia from good old Popular Science magazine. This month's issue features information on how you can get your iPod to run Linux and more.

Pop Sci & iPods

Gettelfinger Speaks

From the 'Other than that Mrs. Lincoln, How did you like the play?' File:
Gettlefinger's Keynote

UAW President, Ron Gettelfinger gave his keynote speech at the UAW national convention yesterday. Though he tried to give a pep talk, he didn't have much good news to report. Gettelfinger said that UAW healthcare benefits are "unsustainable" and that the solution is political. He also acknowledged that right now, they don't have the political clout to either overturn the antiunion policies that have created what in his view is an unlevel playing field or, for that matter, a national healthcare plan, which he asserts is necessary for long-term competitiveness.

Monday, June 12, 2006

UAW Convention Preview

UAW Convention Preview

The UAW is getting ready to hold its annual convention in Las Vegas. Union President Ron Getelfinger is expected to win reelection by a landslide. Plenty of challenges are ahead for the union. Here is a preview from

Rock Paper Scissors

The Discovery Order that You Don't Want to See

According to the New York Times, a Florida judge ordered two feuding lawyers to settle a dispute over the location for a deposition by playing a game of "rock paper scissors". The attorneys could not agree on a site for a deposition even though both attorneys worked in the same building, and the court reporter's office was just down the street.

If I ever become a judge I'm going to keep a big dead fish handy, and if one of these silly disputes comes before me I'm going to fish-slap the lawyers until they come to their senses.

Rock Paper Scissors (free registration required)

GM - Delphi UAW Deal

UAW Reaches Deal with Delphi

Late last week, the UAW officially reached a buy-out deal with Delphi and General Motors. In the deal, almost all UAW members with under 26 years seniority would be offered a buy-out: cash from $40 to $140,000. In exchange, the worker would have to give up the right to all benefits except for vested retirement. Workers with over 26 years could retire with full pension and vested benefits.

The UAW represents about 22,000 of Delphi's 30,000 workers. If all of the UAW members would take the deal, and assuming the payout averaged $100,000, the deal would cost GM a cool $2.2 billion. All of the workers will not take the deal, but this shows you the order of magnitude of the GM cash outlay. Although $2.2 billion is a lot of money, that's about how much GM paid for the privilege of not buying Fiat, and the Delphi deal is a lot more critical to GM's immediate vitality.

As far as Delphi is concerned, even if it can check the UAW buyout off its list, it still has about 8,000 workers represented by other unions. It is unlikely that GM or anyone else will subsidize buyouts for these workers who are likely to demand a similar deal. Delphi will still have to come up with some cash to assure labor peace. Delphi wants to close 21 of its 29 US plants.

Finally, the buyout deal does not include agreement on a new contract. Delphi has proposed a gradual lowering of hourly pay for UAW workers from $27 to $18 per hour IF GM subsidizes the wages. If GM does not subsidize the wages, the offer on the table is reduction down to $12.50 per hour. Delphi hopes that the buyout will rid the company of the "troublemakers" (my term) who would make waves and stand in the way of wage cuts.

For UAW Delphi workers, a few things are clear: If you are to have any hope of retaining a UAW job with a high wages, your only possibility is a flowback to General Motors. Delphi will dissolve or be destroyed before it will pay the accustomed wage. The decision the workers have to weigh when deciding to take the buyout or holdout and (at least threaten to) strike is whether the UAW has the power to force Delphi to pay (and whether Delphi has the capability to pay) something close to half way between the current wage and the current offer. Personally, I doubt that Delphi can pay it. It seems to me, therefore, that the average Dephi worker will be better off taking the buyout and taking his/her chances in the job market. Even with taxes, a $140,000 buyout could subsidize your wages $20,000 per year for at least 5 years. If you can't change your lifestyle within 5 years, then you're not trying too hard. If you have a special circumstance, such as a pre-existing medical condition that makes maintaining your insurance crucial, then you're going to have to just suck it up and take less pay.

Sunday, June 11, 2006

2007 Saturn Outlook Preview

2007 Saturn Outlook
Is it getting warm on this planet or what?

In about a month, give or take, the first of GM's new 3-row "crossover" utes, the Saturn Outlook, should begin dribbling out to dealers. Here is a link to a preview by a Canadian site, Though it offers 3 rows of seating, the Outlook also weighs over 4900 lbs. in AWD trim. That's more than the porky Chrysler Pacifica, and not much below a GMC Yukon truck-based ute. It's almost 1000 lbs. more than a Toyota Highlander. If Carpages' fuel economy projections (and my metric conversions) are right, an EPA rating of 17/25, though good for this size of vehicle, would still be nothing to brag about overall. It's comparable to today's competion, but it's probably below what is coming around the bend. Projecting from their hybrid sedans, Honda and Toyota have the technology to bring out a 30/30 MPG city/highway minivan right now. One must keep in mind that the Outlook will spend most of its model run competing not with what's on the market now, but with what will be on the market in the near future.

The bottom line is that global warming is an inconvenient truth. The future of family transportation can't be a 4900 lb. behemoth. Between the full-size utes that started the year and the crossovers like the Outlook, GM is too dependent on SUVs. It is arguable that as a matter of national policy, the biggest cost of a GM bailout would not be the money funnelled into the corporation but, rather, the impact of the hefty vehicles streaming out of the plants.

Friday, June 09, 2006

VW - GTI - HUH? Video of the Week
VW - GTI Trebuchet Commercial

A trebuchet is a type of catapult that uses a counterweight powered sling rather than a torsion-energized bar. Large trebuchets are entertaining car-throwers. This commercial is just plain weird.

Ja, Just Throw the Car

Det. News Reviews Cars

Pixar's Cars
The Jay Jay Factor at Work?

Today is opening day for the Disney-Pixar movie, Cars. I am a huge fan of Pixar movies and a car enthusiast, yet I am having a hard time getting excited about this movie. The reason was actually clear to me several years ago, when the movie was first announced as in production. It's the Jay Jay the Jet Plane Factor.

In short, The Jay Jay factor is my term for the practical limits on anthropomorphism for mainstream audiences. We can be comfortable with talking clownfish, but talking cars? We can't or don't want to stretch our imaginations that much. Don't believe me? Look at Jay Jay the Jet Plane. Jay Jay's fan base peters out when you hit kindergarten. Thomas the Tank Engine? Maybe first grade, and it only goes that far because the little trains are fun.

Not only do I think that Cars will be a disappointment vis-a-vis the popularity of previous Pixar films, I think Pixar insiders have known all along that it was not their best concept. Once upon a time, Monty Python produced an LP that they called the The Contractual Obligations Album. I think that Cars, at least in part, started as a film designed to finish up its contractual obligation to Disney without giving away the crown jewels. It serves as secondary function of serving as a "thank you" to Pixar's (and now Disney's) creative head, John Lasseter. Lasseter was the creative spark behind previous Pixar hits. He also happens to be a car nut, and he took it upon himself to personally direct Cars after vacating the director's chair for the last few Pixar releases. If Cars becomes a hit it will be not because the concept is so great; rather, it will be because of the standard of technical excellence that pervades Pixar and because of John Lasseter's force of will.

I might be wrong about Cars. A mostly positive movie review by the Detroit News is linked below. Other reviews are mostly positive as well, albeit more reserved than for past Pixar movies such as Finding Nemo and The Incredibles. The trailers for cars are visually stunning. No doubt there will be some funny bits and maybe an exciting scene or two. Nevertheless, I have a hunch that most adults, and many kids over 7 or 8 will walk out of the theater feeling that they weren't moved as much as they expected to be, and that's the Jay Jay factor at work. I'll eventually see the movie, and when I do, I'll write to say whether I was right or wrong. In any case, if you start reading and hearing comparisons between Jay Jay and Cars, remember you read it here first.

Wednesday, June 07, 2006

GM Shareholders Meet

GM Shareholders Meet - Remarkably Passively

Yesterday was General Motors' annual shareholders meeting. Given the events of the past year, the meeting was remarkably sedate. All of the directors were re-elected with over 96% of the vote. The shareholders did pass two non-binding corporate governance resolutions approving cumulative voting for directors and a majority voting for directors.

At the meeting, GM CEO Rick Wagoner went over a variety of cost-cutting and revenue generating steps that management has taken over the last year. The cumulative effect of the cost-cutting measures is to reduce GM's costs $7 billion per year. Just to keep this in perspective: remember, GM lost 10.5 billion last year. GM's accounting is also under fire for being overly rosy. Even Wagoner did not predict increased sales or market share in North America over the near term. Overseas, GM is doing significantly better and is at least somewhat profitable.

According to the write-up in the Detroit News, one shareholder predicted GM stock would rise (from its current mid-20s price) to $100 per share. When that happens, we might or might not have flying cars, but if we do have flying cars, there will be so many flying pigs that traffic will be jammed up there anyway.

GM Annual Meeting

Tuesday, June 06, 2006

Are You Down with DSG?

Audi and VW Owners Love Their Direktschaltgetriebe
The Rise of the Direct Shift Gearbox

There has been a lot of discussion in the automotive sector regarding which emerging transmission type is better, the 6-speed automatic or the Continuously Variable Transmission (CVT). Wait, there's a dark horse coming along the outside rail, and it's the DSG. DSG stands for Direct Shift Gearbox.

There are several types of DSGs, including the clutchless types used by Formula One racecars, but most of the affordable DSGs are actually double-clutch designs. The most popular versions are used across the line on Volkswagen and Audi models. Judging from car reviews and internet message boards, owners love their DSGs. See the search below.

Owners Love DSG

Negative comments about the DSG are few & far between. Contrast this to reports that 6-speeds shift too much, CVTs rev the engine too much, and neither consistently delivers the superior fuel economy claimed.

A DSG transmission is in its basic workings a computer-shifted manual transmission. It retains the fuel efficiency and performance of a manual, but with an automatic mode, so your foot isn't married to the clutch pedal.

What's not to like about the DSG? At the present time, there's no long-term word on reliability. Some of the early computer-controlled transmissions had problems with reliability that significantly hurt their manufacturers' reputations.

What's the future of the DSG? Volkswagen/Audi licenses technology for its DSG from Borg Warner. I don't know the details of the BW-VW deal, but I suspect that it's non-exclusive. Likely you will see more DSGs in cars by other manufacturers as soon as Borg Warner can ramp up supply and the automakers can can integrate the DSGs into the designs of new cars.

DSG - Wikipedia

Hello Mudda Hello Fadda
They're Giving A-way - New Sonatas reports that Hyundai is giving dealers up to a $2,000 incentive on the redesigned 2006 Sonata. Although the Sonata was introduced to great fanfare last fall, the manufacturer has used rebates to keep the cars moving off the lot, usually near the invoice price. Since the Hyundai was competitively priced to begin with, a $2,500 direct to customer rebate, plus negotiated sale prices below invoice (thanks to the direct-to-dealer incentive) should mean that the Sonata should be available for a song -- perhaps a sonata.

Hyundai give-away
It's GM Annual Meeting Time

Let the fireworks begin. Here's a preview from the Detroit News.

Friday, June 02, 2006

Ford's Way Forward:
Kill the Most Productive Plant in the US

Ford has been touting its "Way Forward" plan for returning to profitability. "Job 1" apparently is to kill the plant that produces its most popular passenger car, which happens to be the most productive automobile assembly plant (of any maker) in the United States. I'm talking about the Georgia plant that builds the Ford Taurus.

I'm wondering if some adventurous "Gung Ho" employees, you know, Michael Keaton types, could get together a plan to buy the plant from Ford, buy the Taurus tooling, and manufacture "Taurus Motor Co." cars to sell to fleet buyers. Just a thought.
From the NotAvailable Here File:
New Cherys, baby. Have they got the way to move you?

China-based Chery Motor Company is showing off a number of new designs, virtually a whole line of modern-looking automobles including a new minivan and a new crossover.

I'm linking a page from the incongruously-named blog, Though it sounds like a celebrity gossip site, in fact it's one of the better-established sites for advanced news on upcoming cars.

New Metal from Chery

Here's a link to

Thursday, June 01, 2006

Delphi's Losses Balloon in April
Red Ink is $181 Million for the Month

Embattled and bankrupt Delphi Corporation announced a $181 million loss for the month of April. This is up from a $93 million loss in March. If the increased losses aren't bad enough, Delphi has worse news when it comes to sales. Sales to GM, it's #1 customer fell from $1 billion to $761 million. Though GM sales are also down overall, the magnitude of the Delphi business loss seems to indicate that GM is well into a plan to reduce its reliance on Delphi by finding outside suppliers. Other customers may be diversifying as well. Sales to non-GM automakers went down from $644 million in March to $548 in April. Clearly uncertainty relating to Delphi's labor contracts has the potential for turning into a death spiral even if the parties keep putting off judgment day for resolution.

Sales to Non-GM automakers went down from $644 million in March to $548 in April. It doesn't look like non-US operations will be Delphi's salvation. The foreign operations have been, and still are, profitable. Moreover, the foreign operations aren't technically involved in the bankruptcy. That being said, profits from foreign operations went down from $70 million to $22 million.

Note these figures are now a month old. If the losses continue to increase at the same rate, any labor deal that Delphi can negotiate with GM and with the UAW is liable to be obsolete before it can be put into practice. Already it may be to the point where a reorganization of Delphi (at least as a single going concern) may be impractical. If I were a creditor, I would think about proposing a competing plan for piecemeal sale of the operating facilities. This may be in General Motor's best interest because GM (with the help of venture firms) could bid on facilities that are key, and ignore facilities that are not essential.

Delphi's April Red Ink Shower