Archive for January, 2008

I’m in the process of updating the prices of 2008 cars and trucks, and GM’s recent price hikes are especially pervasive. Some base prices are up by about $500, many others by about $300. On the base Malibu LS the MSRP is unchanged, but the invoice has crept up about $100, further squeezing the already tight dealer margin. The senior trim levels of this strong seller have received larger price increases in both MSRP and invoice.

The destination charge on the Malibu remains unchanged at $650. Yet many others are up, in some cases by nearly $100. That for the tiny Chevrolet Aveo has been bumped from $565 to $660–oddly higher than that of the larger Malibu. Notably, the destination charges for the large SUVs remain unchanged at $900–GM might be wary of getting too close to $1,000, which might prove to be a psychological barrier. Who’ll test it first?

Many option prices are also up. The price of the Bose audio system in the large SUVs has been bumped only $5, to $500. This suggests that GM carefully considered everywhere it might eke out a few extra bucks without causing potential customers to walk. The price of the center roof rails on these SUVs has actually been doubled, from $45 to $90. This resembles the recent price increases on engine block heaters. Seems some features were priced well under what people would willingly pay for them. The captain’s chairs in these SUVs now list for $590, up from $490, a healthy 20 percent jump. Many option packages have received $50 to $75 increases.

And so on across the board. Now GM will study the impact on sales. If buyers balk, we’ll see higher rebates, resulting in little or no net change. And if they don’t, GM could get the stronger balance sheet that has eluded it in recent years.

I first started subscribing the Car and Driver in the spring of 1983. My very first issue contained an infamous comparison test where a group of writers led by Brock Yates took a bunch of midsized sedans to baja. Much mayhem ensued. Still my favorite comparison test ever.

Yates also authored one of my favorite books on the auto industry, The Decline and Fall of the American Automobile Industry. Excellent early chapter on GM’s J-Cars.

Before the Internet gave everyone a place to talk, Brock Yates was the one American auto journalist you could count on to say what was on his mind. I didn’t always agree with his rants, but you knew where he stood.

Well, this week Yates found his way to The Truth About Cars, a site that more than any other has given automotive writers a chance to say whatever they want to say about a car or the industry that makes them. (I’ve written for TTAC, and TrueDelta currently supplies them with its vehicle price comparison tool.)

It’s a fitting match, and I look forward to seeing what Yates says now that he truly can say whatever the hell he feels like saying.

Back when SUVs were first becoming hot, Isuzu had a winner in the Trooper.

But other manufacturers caught on, and at this point the conventional SUV segment is well pasts its peak. Isuzu’s sales peaked at 103,937 back in 1999, and totaled only 7,098 last year.

Few people were probably aware they were still here.

Well, as of January 31, 2009, they won’t be.

Who’s next? For years I’ve been saying that both Isuzu’s and Mitsubishi’s days in the U.S. car market were limited. But Mitsubishi has refused to give up, and now has a couple of moderately strong products. Meanwhile, Subaru is proving adept at botching just about every recent redesign. If they do the same with the next Legacy / Outback, they could be the next to go.

With J.D. Power and even more with Consumer Reports, it has not been possible to buy a new model while it was still new without taking a chance on reliability. J.D. Power releases its results in early June (based on data collected early in the calendar year), while Consumer Reports releases its results in late October (based on data collected in the spring).

I started TrueDelta’s Vehicle Reliability Survey because I realized, among other things, that using the Internet could yield much fresher results. The upcoming February results will validate this process: they will include a few 2008 models based on data collected from October through January. In other words, TrueDelta’s process can yield initial results on new models about four months sooner than J.D. Power, and nearly nine months sooner than Consumer Reports.

The 2008s that will be in the February results, with no asterisk for insufficient sample size (assisting forums noted):

Buick Enclave, GMC Acadia, Saturn Outlook
(EnclaveForum.net,  AcadiaForum.net,  SaturnFans.com,
SaturnOutlookForum.net)

Honda Accord (DriveAccord.net)

Infiniti G35 / G37 (NICOClub.com)

2008s that will be there, with the asterisk:

BMW 5-Series

Cadillac CTS (CadillacForums.com)

Mazda3 (MazdaForums)

Mercedes C-Class

Nissan Altima (NICOClub.com)

Nissan Rogue (NICOClub.com)

Nissan Versa (NICOClub.com)

Saturn VUE (SaturnFans.com)

Scion xB

Toyota Prius (Prius Chat)

Suzuki SX4 (SX4Club.com)

By far, the main thing holding this research back are the sample sizes. There are 119 responses so far for the large GM crossovers, 43 for the Accord, and 41 for the Infiniti, but the others are in the twenties and thirties. The system is in place, and it is working as intended. All we need is more people, and we’d have results for all mainstream 2008s, with no asterisks.

So, what else did I see at this year’s less than inspiring Detroit auto show?

The general impression was that every company sought to portray itself as green. And there were various hybrid, fuel cell, diesel, and so forth concepts on display. But with few exceptions they were just that, concepts. I’ll get more excited when they’re available to buy–at a reasonable price.

I add that last bit because GM did show “two-mode hybrid” and “plug-in hybrid” variants of its Saturn VUE compact SUV, and these will be available in the next year or two. The big question: how much will they cost? As I wrote earlier in this blog, the “two-mode” version of the Chevrolet Tahoe costs about $10,000 more than its non-hybrid counterpart when features are adjusted for. If the “two-mode” VUE checks in at $35,000+, I suspect the market for it will be quite limited.

From a sales standpoint, the most important introductions were undoubtedly those of the revised Ford F-150 and Dodge Ram pickups. In neither case is the revised styling a home run, and the Dodge’s new Tundra-like nose is especially disappointment. Both trucks also benefit from upgraded interiors, with Chrysler’s Jim Press suggesting that the new Ram interior indicates how much higher in quality future Chrysler interiors will be. Well, while the improvement in the Ford interior is somewhat impressive, the revised Dodge Ram interior remains clearly inferior to both that in the Ford and that in GM’s pickups. Sure, they’ve upholstered the top of the instrument panel, but even this manages to look cheap. And the rest remains hard plastic that looks like hard plastic.

Most impressive about the pickups: all of the new features Ford and Dodge have added. Both manufacturers appear to have decided that the best way to counter increasing competition in the segment is to meet previously unmet needs. So we have additional storage compartments, track systems in the beds, trick integrated bed extenders, and so forth. Most interesting on the Ford: steps on the sides and rear to ease access over the tall sides of the bed. On the Dodge: a four-cubic-foot storage compartment in each side of the new “Ram Box” bed. Together they offer as much storage volume as a small trunk. And you can get to them when the bed is loaded. Take that, Honda!

The car I’m most looking forward to test-driving: the 2009 Mitsubishi Lancer Ralliart. With a 235-horsepower 2.0-liter turbo four, all-wheel-drive, sport buckets, and a price likely in the mid-twenties, it’ll hit a sweet spot that was owned by the Subaru WRX–until the botched 2008 redesign.

The car most essential to the survival of its brand: the 2009 Lincoln MKS. The upcoming large Lincoln sedan checks off all of the boxes. Like the Taurus on which it is based, the MKS will be a good car for those who buy a car for rational reasons. It’s reasonably powerful, very roomy, comfortable, and pleasantly styled. But it also shares the Taurus’ weakness: it won’t stand out in the crowd, and no one’s going to lust after it.

No one’s going to lust after the redesigned 2009 Honda Pilot, either. Luckily for Honda, people are more likely to buy an SUV for rational reasons than they are to buy a luxury sedan for rational reasons. Especially when it’s a Honda. How else to explain the success of the even more boring first-generation Pilot over the last five years?

I was able to take a close look at the redesigned 2009 Nissan Murano, which should be reaching dealers soon if it hasn’t already. The styling of the first-generation Murano really grew on me. The new styling is more forced and cluttered, and I don’t care for it nearly as much. However, the revised interior is significantly nicer, and the seats are excellent in both rows. From a comfort standpoint, they were about the best I sat in at the whole show.

Maybe next year, but more likely the year after that, I believe Volkswagen will acquire Chrysler from private equity firm Cerberus.

The pieces fell into place during NAIAS. Over the past few months it has become clearer and clearer that Cerberus is in over its head. And private investors aren’t in for the long term regardless. So they’ll do their best to streamline the company in ways that an owner like Volkswagen could not get away with. Then they’ll unload it. Yes, and the sky is blue.

But why will Volkswagen be the buyer?

1. Volkswagen has decided that they want to surpass GM and Toyota to become the world’s largest automaker. At the auto show, they announced that they intend to grow U.S. sales from 300,000 to 800,000. That’s going to be very tough. Even tougher will be growing from roughly 6 million sales worldwide today to 10 million a decade from now–at a time when China and India will become major players. This level of ambition can lead companies to do irrational things–like buy Chrysler. While Renault-Nissan has also expressed interest in linking up with Chrysler, they simply don’t have the drive for growth that VW has.

2. To grow so much in the U.S., they’ll have to enter additional market segments. Chrysler is about to start supplying them with a version of its minivan. That will serve as a test of how well the two organizations can work together.

3. They’re probably also going to need a large pickup. And while looking at the 2009 Dodge Ram at the show I looked to my left, and found VW Chairman Ferdinand Piech and VW CEO Martin Winkerhorn standing at my elbow. Maybe their interest in the pickup was merely casual. After all, auto execs tour the show floor. But maybe not. If the minivan deal works out well, why not a pickup, too? In general, there is very little product overlap between the two companies. They’d be a great fit from this perspective.

5. VW wants U.S. production capacity, because the dollar is low and because they want to hedge against changes in exchange rates. Rumor is they’re going to build a new plant in the southeast. But they’re going to need more than one additional plant to realize their ambitions, and Chrysler has plenty of excess capacity.

I’m not saying this deal will happen tomorrow. Cerberus has work to do first. And the two organizations need to learn whether they can work together. A couple of years ought to do it. Look for a deal in 2010.

First, the bad news about this years North American International (Detroit) Auto Show: everyone I’ve talked to was at least mildly disppointed in this years show. There are no major introductions, and (by my count) only one introduction that wasn’t largely leaked in advance of the show.

That one introduction: the Cadillac CTS coupe. I assumed this car was going to be at the show, but then when GM released information about the high-performance CTS-V in advance of the show, and made no mention of a coupe, I assumed they had decided to show the coupe at another show later in the year.

Instead, they had decided to withhold the coupe from the pre-show release, in order to have a surprise. It worked.

The coupe’s styling is certainly dramatic, with a bobbed tail and steep C-pillar that runs all the way to the rear of the car. I didn’t initially warm to it as I did to the sedan. There a sport hatch flavor, in the vein of the VW Scirocco and Mercedes C-Class coupe, even though the Cadillac is not a hatch. Does this look like $40,000, and a Cadillac? Most people I’ve talked to love it, and responses on online forums have mostly been positive. And I must admit that the more I look at it, the more I like it. One thing is certain: the car’s styling is distinctive, and ellicits strong opinions.

Hyundai introduced its Genesis large luxury sedan. The specs are impressive, the interior materials are somewhere between Honda and Acura, and the price will be relatively low. But nearly every styling element has been borrowed, making the Genesis a pastiche of the cars it aims to steal sales from. It’s not cohesive, and lacks a distinctive character.

At the launch of the Genesis, Hyundai announced that while other auto companies serve people who “have more,” Hyundai will be serving those who “deserve more.” I feel sorry for those people who want to buy a Genesis, and have the money to do so, but fail what it bound to be a strict test of how much car they truly deserve.

Speaking of stealing, a number of Chinese automakers are present at this years show. One, BYD, claims to stand for “Build Your Dreams.” But one reporter quipped to me that it should stand for “Borrow Your Designs.” The models hired to stand next to the cars looked at best bored, at worst embarrassed. But when they saw my camera, they managed some quick smiles.

On the subject of bored, Jaguar is displaying not one but two of the new XF sedan in “bore me blue.” A third XF, with silver paint and more dramatic alloy wheels, is tucked away upstairs where a much smaller number of people will see it. Are they trying not to sell cars?

I found Jaguar’s choice of color all the more surprising, as luxury automakers are clearly trying to use paint to bolster their premium images. Increasingly, the metallic finishes on premium European sedans appear a step or two above those on more pedestrian cars. (Cadillac needs to step up its game here.) The most interesting paint at the show: an experimental finish on two Mercedes that has the appearance of liquid metal. I spoke with the Mercedes rep. He said they want to get this paint into production, but that this is very challenging.

I’ll post some additional impressions in the next day or two.

One of the most frequently asked questions on the forums I visit is, “Do I need to do anything special to break-in an engine?”

Responses tend to follow the conventional wisdom, as stated in most owner’s manuals: for the first 500-1000 miles, avoid strong acceleration and steady speeds.

Another school of thought says that with the much tighter tolerances and more precise assemly of todays low-emission engines, no break-in is necessary.

Yet another approach advises warming the new engine up then accelerating at full throttle. Supposedly, this creates a better seal between the piston rings and the cylinder wall, by forcing the rings against the wall around their entire circumference.

I’ve never seen any recent laboratory results that support the first approach. I’ve heard powertrain engineers espouse the second. And the site linked for the third displays pistons from engines broken-in the first way vs. the third.

What I’d like to see: a controlled test of the three approaches. Take three groups fo engines, one for each approach. Drive them 1,000 miles as prescribed. Then dyno and emissions test them, to see how powerful and clean they are. And maybe take them apart to look for signs of poorly sealed rings. Any consistent differences? 

So what to do now, since no one has published the results of such a test? I’d like to say to follow one approach, if only because it’s “better to be safe than sorry,” but the first and third approaches contradict one another. So which one is the safe approach?

The third approach actually makes the most sense to me, but as the author grants it’s scary for people used to the traditional approach.

I can say this: I’ve been conducting TrueDelta’s reliability research for a few years now, and no one has ever reported a repair necessitated by an improper break-in procedure.

I decided to include a “pep talk” in the first follow-up email that went out to members who didn’t respond to the initial email. It went like this:

This research is a team effort. It isn’t conducted for corporate clients. It’s conducted for those who participate in it–you.

As with other teams, if too many members rely on others to carry the ball, the team will fail. With the best teams, everyone plays, and everyone wins.

We’re doing well, much better than many expected. It’s hard to get anything that requires the participation of thousands of people off the ground. We are doing it.

We’ve gone from hundreds of responses to thousands, and within the next year it’ll be tens of thousands. Our response rate is far higher than other such surveys. The next set of results will be the largest yet.

But dozens of models for which enough owners are signed up will not be in the results because too many members are deciding to let others carry the ball.

We’re a good team that can be a great team. People are here for the right reasons. And the load is not heavy. If you don’t have a repair to report, we’re talking under a minute. Even if you have a repair to report, the survey is short.

So please click on the appropriate link (or links, if you have multiple cars) below. Let’s make the best results yet even better–for all of us.

I’ve been told more than a few times that my emails contain too many words. And I’d love to just include the links to the surveys in those emails. But this latest email makes the case for words. Three months ago, with the typical follow-up content, about 360 responses rolled in before midnight. This time: close to 900.

Overall, nearly 3,750 responses have been received so far. We’re aiming for another 1,000 before the end of the month. The next set of results is projected to include about 90 models, and another 90 with asterisks for sample sizes between 15 and 24.

If you’ve already responded, thanks for doing your bit for the team. If you haven’t, what are you waiting for?

In a few months, Hyundai will start selling the Genesis, a large rear-wheel-drive luxury sedan with an optional 368-horsepower V8. Notably, this sedan arrives just as Cadillac and Lincoln decide that a DOHC V8 engine for their cars is no longer financially justifiable. Can the new Hyundai succeed in a segment that the domestic nameplates appear to be abandoning?

With the Genesis, Hyundai is taking a few key pages out of Lexus’ 1989 playbook for the then-new LS.

First, specs. The basic specifications–exterior dimensions, engine configuration, horsepower–are close to those of the target cars. Interior dimensions are probably also similar. There’s no attempt to either cut a corner or go above and beyond.

Second, styling. Even more than that first Lexus LS, the new Genesis “borrows” styling cues from leading competitors. There’s a strong Lexus flavor to the exterior, but with bits of BMW 5-Series and 7-Series and Mercedes S-Class tossed in. The result is more a pastiche than a cohesive whole, but most of the target market won’t mind. After all, a similar design strategy hasn’t been hurting the new Honda Accord.

Inside, the resemblance is strongest to the big Benz, but a Lexus flavor is present in the details.

So, dimensionally and aesthetically, we have a copy.

Third, like Lexus back in 1989 Hyundai isn’t seeking to appeal to driving enthusiasts. The Genesis is unapologetically a luxury sedan, not a sport luxury sedan.

Fourth, like the Lexus LS the Genesis will be priced way below established competitors, probably in the low thirties to low forties. So, at least initially, they’ll lose buckets of money on the car.

But while the Lexus LS started out at $35,000 back in 1989, over the next four years this price rapidly increased to $50,000. I cannot remember another car that has increased so rapidly in price after adjusting for inflation (which was low in those years). So while Lexus lost money for a couple of years, this didn’t continue to be the case.

Hyundai might be hoping to pull off a similar feat. But the odds of this aren’t good, for at least three reasons.

First, Hyundai still doesn’t have the reputation Toyota had even back in 1989.

Second, the Genesis is being marketed as a Hyundai, not as part of a new premium brand.

Third, and I think most importantly, the Genesis brings nothing new to the table. The first LS certainly resembled its targets in many ways, but it brought a few major innovations to the table as well. Most notably, the car’s extremely high level of refinement, its smoothness and quietness, eventually shook up the entire car market, from top to bottom. All cars are much quieter and smoother today because of that first Lexus LS. Also widely influential, but a smaller piece of the puzzle: a dramatically lit high-tech instrument cluster. Sure, there had been glitzy high-tech-seeming instrument clusters before, but the one in the first LS was far more tasteful, and a truly awe-inspiring experience at the time. Instrument clusters haven’t been the same since.

Put another way, while the Hyundai Genesis strives to offer (roughly speaking) 90 percent of what the target cars offer at 70 percent of the price, it doesn’t offer 110 percent in any area.

Without something new, the Genesis won’t break through the way the first Lexus LS did. They won’t be able to ramp up the price, so profits will prove ellusive. The Koreans’ forays into the next segment down, the Hyundai Azera and Kia Amanti, haven’t sold well. If you can’t sell $30,000 cars, good luck selling $40,000 cars.

My sales prediction: they’ll be lucky to sell 20,000 Genesis per year in the U.S., perhaps 5,000 of which will be V8s. After all, this would match the Infiniti M, which is priced about $10,000 higher, but has a much more prestigious brand and has won many comparison tests. With such limited volume potential, no wonder Detroit has decided that a V8 can’t be financially justified.

Perhaps Hyundai’s primary goal isn’t profits, but prestige. Perhaps they hope to sell more Elantras and Sonatas by having the Genesis in the same showroom. But the same factors apply. Without some breakthrough aspect to the car, some area in which it offers 110 percent, prestige will prove even more ellusive than profits. You can copy many things, and succeed. But you cannot copy everything, and succeed.