Auto Industry News 10/31/06

The Month of October is going out with a bang. I'm too busy to provide links but here are some headlines of the day. You can Google them if you are interested. Do you see a pattern here?

Ex-Delphi CEO Charged with Civil Fraud
Workers Threaten Strike - Goodyear Closes Plant
Dura files Chapter 11
Visteon Posts $177 Million Quarterly Loss
First Mississippi-built Altima Rolls off the Line
Ford Cuts Production 8-12% for first half of 2007.
Reprts Grow of DCX Split

Halloween Craft of the Day:
Make a "Rat Throwie"
Jeopardy style lead in:

Answer: You stuff a dead rat and replace the eyes with glowing red LEDs.

Question: How do you make a rat throwie?

Peyton Manning
NFL MVP

Excuse the brief detour to hometown boosterism. I watched the last quarter of yesterday's Colts/Broncos game, and what I saw was one of the best quarterbacking jobs I've ever witnessed. The Denver Broncos have one of the best defenses in the NFL. IN the first six weeks of this season, they only allowed two touchdowns. Peyton Manning hit 32 of 39 passes for 345 years and 3 touchdowns, everyone of them needed, to move the Colts to a 34-31 victory. This game both teams treated like a playoff game. It would not be surprising to find at the end of the season that the outcome of this game determined home field advantage for the playoffs.

The most impressive thing was the control and the poise that Manning demonstrated. It was clear that he would not let himself lose this game. It didn't matter that the Colts defense couldn't have stopped the runs if it had a case of Ex-Lax, Peyton was not going to lose. If anyone else is going to be MVP of the NFL this year, he's going to have a lot of work to do better than Peyton Manning.

GM 3rd Quarter Results in - Better than Expected
North American Operations Profitable before "special charges"

General Motors posted a net loss for the third quarter of $115 million. While that may seem bad, this time last year, GM posted a third quarter loss over a billion dollars. GM sold fewere cars, but lost less money, a sign that sales of unprofitable (e.g. fleet) cars have been reduced.

Overall, things are going in the right direction for GM.

Ford's 3rd Quarter Loss $5.8 Billion . . . and Counting

Ford just released its 3rd quarter financial results. Ford reported a $5.8 billion dollar loss. Ford's North American operations lost $2.0 billion, up from $1.2 billion last year. Results in the rest of the company were mixed, and it looks like about half of the $5.8 billion dollar loss was attributable to restructuring costs including the recently-announced employee buyout.

The "and counting" portion of the headline to this entry refers to Ford's announcement that Ford Motor Credit plans to restate results going back to 2001. Apparently, there were some accounting issues that rendered previously announced statements inaccurate. Let the lawsuits begin.

Bush Press Secretary Disses Ford

Maybe George W. isn't the biggest idiot in the White House after all. Press Secretary Tony Snow went on an incredibly ignorant rant about Ford pensions during a press conference according to a story at Jalopnik.com. Here's what he said:

"One of the things that's really hit Michigan hard, for instance, at Ford, are defined benefit plans that were bankrupting the company...I mean, I know this personally because people very close to me are now having to make the decision that the pensions that have been promised to them are not going to be available and they're going to have to take a cash payout."

Where do you begin in explaining the errors in such a statement? Ford isn't bankrupt. Even if it goes bankrupt, the pension won't necessarily be insolvent. Even if Ford goes bankrupt, the pension is unlikely to be the cause. After all, Ford has been salting away money into the pension fund for decades, and pension obligations should hardly be considered to be a surprise. For workers taking buyouts, it's rarely a pension-driven decision, since in the plans I've seen vested employees keep their accumulated pension rights.

Snow should go back to work at Fox News, where getting the facts wrong isn't just expected, it's part of the job description.

Wall Street Journal: It takes a Doctorate to Beat Inflation

According to David Wessel's October 16, 2006 "Capital" column in the Wall Street Journal (paid subscription required), the only group of Americans whose wage gains exceeded inflation in 2000 to 2005 were those with Doctorate degrees. We (our education group anyway) beat inflation by 10.6%. If you didn't finish high school, your wages went down 4.6% after inflation.

Wessel also cites statistics gathered by a researcher at University of California, Berkley showing that wincome inequality in the US is getting worse. In 1984, the top 1% of income earners earned 9% of all income. In 2004, it was 16% of all income.

2006 Pontiac Grand Prix - Base Model
Rental Car Review

My car is in the shop this week, and Enterprise Rent-a-Car, kindly lent me their 2006 Pontiac Grand Prix. This gave me a chance to explore General Motor's current offerings in the low-middle of the market. Bottom line - it's not bad. It's better than the last rental car that I had, a 2006 Buick LaCrosse, and it's way better than the one before that, a 2005 Dodge Stratus.

I'll be frank. I didn't want the Grand Prix. I was looking for either an Impala (the Grand Prix's more-popular platform mate) or a somewhat smaller Chevrolet Malibu or Pontiac G6. As keys disappeared from the rack at Enterprise, I decided to go ahead and take the Grand Prix.

I'll overlook the fact that the car had that distinctive rental car smell of smoke covered by Febreze, and I'll go to the substance. The test car is quite attractive, well-integrated swoopy lines make the car look smaller than it really is. The car has a well-done grey paint job and attractive alloy wheels. The interior is almost entirely black. It has dark-grey to black cloth upholstery and is finished mostly in black plastics for the doors and dash. GM often takes hits for their "hard plastics". On this car, the plastic is soft where you would touch it. Where it is hard, it really doesn't make a difference. The dash is curved to create a cockpit feel. The gauges are clear and are instrumented with typical Pontiac red-orange lighting. Some people like the color, other people don't. It's a matter of taste. The trunk is large, and there's a fold-down rear seat. There are four very functional cupholders.

In terms of performance, Pontiac got the important things right. Even though this car has the base 3.8-liter V-6 engine, it has plenty of power. The transmission may only have four gears but it shifted seamlessly. The 3.8-liter V-6 performed much better in the Grand Prix than in the Buick LaCrosse that I rented a couple months ago. The Grand Prix rode comfortably but is well-connected to the road. The steering response was very good. Overall, the driving dynamics are such that you will probably find yourself going quite a bit faster than you think you are. My car didn't have a fuel-economy read-out (more on that later), and because it wasn't full when I got it, I haven't been able to check the fuel mileage. It appears to be reasonable based upon the movement of the gas gauge.

Given the size of the car, the back seat could be larger, but it's not bad overall. I think the Grand Prix isn't really marketed at families. It's more company-car/commuter-oriented.

As far as I could tell, this rental is the base model with just one option: a $150 upgrade to the stereo. If you get the car, get the upgraded stereo. The CD player (single disc) plays MP3 files. The tuner performance is exceptional. It pulls in stations that I didn't know existed. This is the first car radio that I've seen that the RDS really works as it's supposed to.

There are a few nagging omissions from the equipment list in the base model without options. There is no trip computer in the information display. Since the engine computer automatically complies the information necessary to calculate MPG, the only reason to leave it off the display is to sucker people into buying an option package. The base car has a power-adjustable driver's seat, but the driver's seat has no lumbar support. Also, there are no steering wheel radio buttons. Fortunately, all of these omissions can be rectified by ordering the "Preferred Option" package which lists for $965 and has an invoice price of $801. The preferred option package includes a front passenger flat-folding seat (handy); a driver' side 2-way power lumbar adjuster (needed); remote vehicle start; cargo net; leather-wrapped steering wheel with audio controls and shift knob, visors with illuminated vanity mirrors; reading lights front & rear; an overhead console; a trip computer; and some upgraded trim. I would highly recommend getting this package as it promises to cure virtually all of the Grand Prix's weaknesses as tested.

The only weakness that I saw that would not be cured by the preferred package was the tendency of rain to collect on the back window. The car is swoopy, and the back glass is large. It is not angled enough for rain (and snow) to fall off immediately, and there is no wiper. If you get this car, I strongly suggest that you try a water beading compound like RainX.

Finally I get to crunch time - price. The Grand Prix is well-priced, and it appears that GM's "value pricing" model works. GM only has a fairly modest end-of-model-year rebate of $1500 on the Grand Prix. Per Edmunds, equipped as the rental, the Grand Prix would have a list of $22140, an invoice of $20,942, an Edmunds TMV(TM) of $21,195. Subtract the $1500 rebate and you get a net TMV of $19,695. That's under 20k for a "full-size" V-6 powered car. With the GM Employee discount, you could likely get the base car with the Preferred Package for under $20,000 before tax; and for that money, you'd be getting a good value.

Social Security Checks to Go Up 3.3% in 2007

The AP newswire is reporting that Social Security recipients will receive a 3.3% cost of living raise next year. It's ironic that most wage earners will be lucky to see an increase of half that percentage. Twenty bucks who will complain more, the wage-earners or the social security recipients.

Walmart Employees Revolt at Florida Store

Walmart Employees Revolt at Florida Store

According to Businessweek.com, on October 16th almost the entire morning shift of a Walmart store in Hialeah Gardens Florida walked off the job in a mass demonstration against changed work policies. According to the Businessweek article:

SCHEDULE CHANGES. The protest wasn't led by any union group. Rather, it was instigated by two department managers, Guillermo Vasquez and Rosie Larosa. The department managers were not affected directly by the changes, but they felt that the company had gone too far with certain new policies. Among them were moves to cut the hours of full-time employees from 40 hours a week to 32 hours, along with a corresponding cut in wages, and to compel workers to be available for shifts around the clock.

In addition, the shifts would be decided not by managers, but by a computer at company headquarters. Employees could find themselves working 7 a.m. to 4 p.m. one week and noon to 9 p.m. the next. "So workers cannot pick up their children after school everyday, and part-timers cannot keep another job because they can be called to work anytime," says Vasquez.

I have nothing else to say.

Inside Toyota's Hybrid Factory

Here is a facinating article from Cnet.com.

Get a Human

Tired of being in Voice-mail hell? Gethuman.com is a list of phone numbers and instructions on how you can talk to a real person, unless, of course, the machine can pass the Turing Test. If the machine can pass the Turing Test, do you really care if it is a machine anyway?

How Your Senator Voted on Torture

President G.L. Bush (G.L. stands for "Generational Loss) never ceases to amaze me when it comes to bad ideas. What amazes me even more is the spineless way that Congress rubber-stamps the worst of the worst. I finally tracked down the roll call vote on Senate Bill 3930, the Torture Bill. This bill makes torture legal by not calling it torture. It specifically would allow tactics such as waterboarding, and would immunize interrogators from liability even when they cross the line. Not only that, but generally, information obtained by torture would be admissible in what passes for a trial of "enemy combatants".

For a while, during the debate, it looked like McCain and a few other Republicans would stop this mess. In the end, however, McCain did what he has done consistently since before the 2000 election, complain about Bush, then roll over and let Bush have his way. I wonder what kind of dirt that Bush has on McCain to turn feisty McCain into a lapdog.

So anyway, look at the vote. To make things easy, I will tell you that the only Republican senator to vote against the bill was Chaffee of Rhode Island. Good for you, Senator Chaffee! The Democrats who listened to the wind and headed the way of agonized screams were

Carper - DE
Menendez - NJ
Lieberman - CT
Lautenberg NJ
Landriew - LA
Johnson - SD
Nelson - FL
Nelson - NE
Rockefeller - WV
Salazar - C0
Stabenow - Mi

If you live in a state with a senator who voted for this travesty, I urge you to send your senator a picture of a waterboard, and ask the senator how they would like it if their son/daughter was tied to a waterboard in North Korea.

Detroit Teachers Get Contract 0% First Year Raise BUT New Legal Services Benefit
Large Number of Teacher Contracts Up for Grabs in Indiana

After a 15 day strike, the Detroit Federation of Teachers resolved its labor dispute. The teachers drew a line in the sand when the administration went into negotiations demanding a 5% pay CUT and other accommodations from the teachers. The net result of the negotiations is a contract that results in a 0% increase the first year, a 1% increase the 2nd year, and a 2.5% increase the third year. The teachers made some work-rule concessions but gained a legal services benefit. The teachers apparently successfully fended off demands that they pay substantially more toward their healthcare costs. It should be noted that Detroit teachers were significantly better paid than average, with an average salary in 2005 of $57,702, substantially higher than the average pay of UAW-LSP lawyers.

This last point should be of interest to members of AFSCME 3357. We are facing an inevitable shrinking of our union and continual pressure on our jobs and our salaries unless we somehow loosen the tie between our jobs and the domestic unionized auto industry. The most fundamental UAW Legal Services Plans and establishing a marketing presence.

Teachers Unions may be a prime target market. According to an Indianapolis Star article published this morning, the number of teachers working with unsettled contracts is at a historic high. One hundred and twenty-one out of two hundred and ninety-three districts are working without a contract. Judging from anecdotal reports of recent negotiations in Indiana, the teachers' contracts that are settling are delivering 2% pay raises for the teachers. The addition of a low-cost legal services benefit may be just the thing to sweeten a package enough to get it approved. Matching new business to capacity within the current UAW-LSP structure could be a challenge. According to Wikipedia, Detroit has approximately 7,000 teachers. That's enough to keep two UAW-LSP offices busy.

BREAKING NEWS: GM - NISSAN - RENAULT MERGER DEAD

Eleven days before the scheduled end of the management review process, executives from General Motors and Renault/Nissan are expected to make a joint announcement that talks for the merger have been called off. While it's not official at this point, reports from multiple sources suggest that the chances of the merger happening are about the same as the chance that Bobby Brown will be named Father of the Year. Face it, it's about as dead as Generalissimo Francisco Franco. It's as dead as an ex-parrot. It's snuffed it.

You'll read a lot of speculation about what killed the deal. There are many reasons. You'll hear talk that the parties couldn't agree on how to distribute the savings from combined parts distribution. You'll hear talk that Renault didn't want to pony up cash. You'll hear talk that GM's entrenched management didn't want to give up control. All of these are probably true to a point, but I think the compelling reason is that Renault didn't have enough reason to buy now when it can pick up the best parts later for a fraction of the price. Carlos Ghosn got what he wanted the most, a chance to look under the hood and see what was down there. Ghosn knows what the parts are worth now, and you can bet that He will be first in line to pick out the juicy bits when GM files Chapter 11.

Was all this merger speculation a waste of time, probably yes for GM, almost certainly no for Renault. Carlos Ghosn knew from the get go that the chance to look was worth the cost of looking.

Ford "Cuts and Runs" Again
The Focus Wagon Gets the Axe

Ford continues to reinforce its image as the "Sir Robin" of the auto Industry. Ford just announced that it will be discontinuing the Focus station wagon in December, not even waiting until the end of the model year. Although the Focus wagon only accounted for about 9% of Focus sales, the buyers of the wagon may not have considered any competitors, becaus the Focus wagon is in a segment of the market where most of the competitors have left. Rember the Saturn SLW? The Corolla Wagon? The Jetta Wagon? All of the rest of the "current" crop of small wagons are seriously hampered by their wannabe suv pretentions. Even with its outdated engineering, the current Focus wagon delivers better room, performance, drivability and fuel economy than the Dodge Caliber for significantly less money. I put together a chart on Edmunds.com comparing several small wagons. None have the cargo room & utility of the Focus. None match the Focus's 27/37 fuel economy ratings.

Getting back to the topic of Ford's "cut & run" mentality. Here are vehicles that Ford cut out rather than redesigning:

Freestar
Continental
Villager
Taurus/Sable
Ranger (soon)
LS
Thunderbird
Focus Wagon

Instead of cutting the Focus Wagon, Ford should engage in a target marketing campaign aimed at current owners of the Focus (and Escort) wagons. Let these people know that this could be their last chance to get a Focus Wagon, and many will dig deep to come up with some dough for a replacement. Ford probably has the computer power to also screen DMV registrations and target owners of competing small wagons as well. The entire project would cost less than one Taylor Hicks commercial.

You can't be on the "Way Forward" and retreat at the same time.