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An ambitious plan for the American automobile industry.

Thursday, 11 December, 2008

I cannot get the example of the British auto industry out of my head. So many makes, so much mediocrity.

Out of desperation and after having had the riot act read to them by their non-US components, Ford and GM within two years shall bring products which are not insultingly mediocre to the American road. The question remains, exactly what shall compel the average Civic, Passat, Accord, Camry, UAW-built Corolla, or Sonata driver to look at a Malibu, Fusion, world-class Focus, Fiesta or whatever the remnants of Chrysler can screw together … the repair record is such with the Chrysler 300 and Charger that they are out of contention.

How do you keep the Toyota, Honda, BMW, VW, Hyundai, Kia buyer from running, pale and sweaty, from the “dealer experience” of an American-owned brand? Your humble commenter has no answer to this. I do not want to live in a world in which there is no Chevrolet or Dodge even if they don’t make a single product I would buy; and I am in the market for another car.

For one thing, the made-in-the-USA card cannot play anymore because all these companies build, or soon shall, automobiles in the lower forty-eight and Toyota builds more vehicles and employs more people in America than any other automaker, full stop. Somehow Toyota builds not unpleasant 200K mile cars using designs created in California, from their headquarters in Houston, and sometimes even American union labor, including more than a few Americans from my native Kentucky. The Detroit Three simply fail to comprehend that this can be done.

I do not worry long for the suppliers, those companies mostly spun off from the automakers themselves in order to pad the books one quarter. As VW, Fiat, Mahindra, Renault-Nissan and heaven knows who else enter and the Asia-registered automakers expand their presence on this continent the suppliers should not have any trouble finding new contracts.

The consequences of the elimination of any of the Detroit Three is too horrible to contemplate. It is difficult to believe these companies can survive without intervention from the outside, and the Three are culturally conditioned to avoid anything not created in-house. Excepting Chrysler, but they cannot so much as spring for an experienced designer to put a new “top hat” on their Daimler-and-Mitsubishi-based vehicles. For all points and purposes the American automobile industry as we have known it is completely lost.

This is a good thing.

Evidently a nation our size, requires a degree of domestically controlled industrial capacity. Aside from potentially limiting the possibility of a repeat of WWII, during which Fiat and Bosch factories built material for the allies, I do not understand the value of keeping this capacity tied up making one kind of product.

The short-term, say five years, consequences of the loss of this much activity is horrible to contemplate, but the US automobile industry has resisted every attempt to compel competence. They manufacture products all over the world which they say cannot be built, could not be invented and would not sell in America. Somehow the Japanese, Koreans and Europeans do not suffer this dissonance.

GM and Ford build legendary lines of small trucks. They tell us now, they have only been building the vehicles people wanted. What analysis I have seen so far conspicuously ignores that these companies saw no reason to compete in any other segment except among one another.

If, somehow, a person interested in a standard family car (called “compact” in the U.S.) wandered onto a GM lot they would have seen the J-Body, Cavalier or equivalent. In this decade, they would have found the somewhat less miserable Cobalt. Even to the automotive novice, something is not right with these cars. Panel gaps, wheezing engines, jerking automatics, electrics to which only Ford or Lucas could aspire, which would be just fine if the cars were amazingly cheap. They only met an acceptable price point to fleet buyers and during the end-of-model-year panic sales events and can not make a profit.

If, somehow, this same person found themselves on a bus which broke down while passing a Ford lot, he would find the Escort or Focus. The original North American Escort had such a reputation, that the far superior (MY 1992+) vehicle on a Mazda chassis which carried the name was contaminated by it. The Focus was a wonder of engineering and design when it premiered in 1999. Few could believe Ford would design and build a car as practical and appropriate for its times as the Focus. As with all mass-produced things, many aspects of the Focus were sub-par and this lead to a radical redesign which hit the road in 2005. Except in North America. We still get the 2000 Focus, except now it has a softer and more dangerous suspension, lots of chrome and swoopy lines.

Evidently, the NA Focus, isn’t profitable either. We didn’t get the Euro Focus because it is sold as Mazda 3, and two Volvos. You wouldn’t want people who don’t want to pay a premium getting a good car, would you? It is worth noting that Ford has spent dollars and resources to make the original Focus even less good.

Reasonable people see the “small” American cars then buy elsewhere. This does not mean Americans do not want rationally-sized automobiles. This means they do not want the GM, Ford or Chrysler rationally-sized automobiles offered today. They certainly do not want it at full price. People go and look at the 2000 Focus, Cavalier II and the stunningly overcompensating Caliber. The next day they go see the nice Honda people, the Toyota people or even the Hyundai people and purchase a well regarded, superficially superior and comparatively priced vehicle. It’s only a few extra dollars per month, after all.

I am encouraged by GM’s investment in cellulosic ethanol. Ford is finally bring the Fiesta and Transit Connect to North America, and retiring the Crown Victoria. Both companies are subjugating themselves to the popular subterfuge of E85. (When will we see a proper E85 or E98 native, high-economy engine?) Chrysler only gets a pass because they are in a transition period, or will soon become the U.S. arm of an automaker looking to increase, or create a presence on this continent. Fiat comes to mind.

Considering the hopelessness of Chrysler, and that Ford has decided to not participate in The Bailout, the primary concern becomes General Motors. Looking at the product offerings among the various operating groups within GM, the impression soon arrives that the operations in North America and the operations in the rest of the world may as well be separate companies. In fact, this is what I propose. Daewoo, Holden, Opel and so forth are perfectly sound, reasonable divisions who, although they are having a bad year, could clearly survive if freed from the anchor which is General Motors.

What follows is an ambitious outline proposing the saving of the successful elements of General Motors, at the end of which process would leave the world with three automobile manufacturers based in the United States.

Presently GM is organized into regional operating groups covering:

  • North America
  • Asia-Pacific, including Australia and China
  • Europe, including Russia
  • Latin America, Africa and the Middle East, in essence the rest of the world.

General Motors shall be split into two companies. Splitting the rest-of-the-world division into Latin America and Everywhere Else, shall be a first step in the process. GM then spins away their North American operations and Latin America operations into a new company. No money changes hands except for a few lawyers.

The new company would retain the name, and be composed of the following brands:

  • Chevrolet, including Corvette
  • Cadillac
  • Hummer
  • On Star
  • GM’s stake in GMAC financial.

This new GM inherits all North American facilities, except the Wilmington Delaware plant.

The remainder of GM takes another name, like Opel-Holden, and proceeds with the following lines:

  • Buick
  • Daewoo
  • GMC
  • Holden
  • Opel-Vauxhall
  • Pontiac
  • Saab
  • Saturn
  • Wuling

The rest of the world proceeds as before, but the minor-league U.S. brands become outlets for Opel-Holden in North America. Pontiac becomes Holden’s U.S. operations. Saturn becomes Opel’s U.S. operations. In the U.S., Buick uses the larger platforms of both companies and attempts to compete with Lexus, Acura, et al. China Buick continues. GMC becomes the brand for all trucks or commercial vehicles. This relieves GM NA of many dealers which they can no longer support. Presumably all fleet vehicles are badged Pontiac.

Opel-Holden inherits only the Kappa plant (Saturn Sky, Pontiac Solstice, Daewoo GX2 and Opel GT) in Wilmington Delaware, and all facilities outside the Americas. They lose their license to the Chevrolet name and must devise another for Europe’s Daewoo distributors, South Africa and the Middle East. GM NA loses their arrangement to distribute Daewoo vehicles or build Opel-Holden designs in South America. This could be solved to mutual benefit through hastily prepared licenses.

I cannot imagine how the intellectual property would be split aside from GM NA retaining everything, both trade and technical, developed in North America, save that which is directly associated with the divested brands.

Would you like to go further?

GM NA then trades, in a no-cash transaction, its remaining interest in GMAC to Cerberus Capital Management in exchange for Chrysler, LLC bringing that company into General Motors. At which point a Detroit-based company called General Motors holds responsibility for On Star, Cadillac, Chevrolet, Chrysler, Dodge, Global Electric, Jeep and Hummer.

  • Jeep and Hummer are merged into one division with one dealer network. Hummers become Jeep models.
  • On Star is aggressively marketed to other automakers doing business in North America.
  • Chrysler, Dodge and associated facilities shall be offered for sale. I believe Renault-Nissan might like to have Dodge and a few plants.
  • GM absorbs the RT minivans, and the VW Routan continues.
  • Renault-Nissan is ticked off that the Ram, in particular the 2010 Titan, shall be discontinued after a few years.

Ignoring Jeep-Hummer and GEM, since they offer distinctive products, the positioning would be

  • Dodge, low-specification vehicles especially fleets, but the image is toughness not speed.
  • Sprinter distribution ends and becomes a Freightliner only.
  • Chevrolet, the everyman car plus all trucks.
  • Chrysler competing with the new Buick, Acura, Infiniti, and so on.
  • Cadillac at the very top of the range, as always.

Dodge and Chrysler, as dealer networks or whole concerns, should be sold at any price and quickly. GM NA should seriously consider contract manufacturing for other companies including but not limited to other automakers.

At the end of this process, we have three Detroit-based automakers: General Motors, Ford and Opel-Holden. Of these, two are ready to face the future. General Motors will putter along, much like their products, for several years to come.

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