Euro Car Guy

Failure to Act Part I: I hear a creaking. Do you hear a creaking?

2008-07-10T14:02:00.000-07:00

A few years ago, I was interviewing a Detroit-based automotive analyst and asked him where he thought the threshold was for gas prices to change the behavior of US consumers. He said it was 3 dollars a gallon. He was wrong. It's 4 dollars a gallon. And it's doing a number on consumer behavior right now. (Gasoline prices average 5 dollars a gallon in California.)

The current oil crisis (what is it today? 146 dollars a barrel?) is certainly the main catalyst of the sweeping changes we are seeing in the US automotive market today and threatening the very solvency of the Detroit 3 car makers. But it is just that – a catalyst. There are many other pieces that have been in place for years that have led to this crisis for the US auto giants and much of that can be blamed on the short-sighted greed of the automakers themselves, the health-care crisis in America that is beyond their control, the voraciousness of consumers who simply want big cars, and the inertia of the political leadership of the country who for decades understood that US dependence on cheap foreign oil was the soft underbelly of the economy but still failed to do anything about it.

Will oil prices fall back again to manageable levels like they have after previous shocks? And didn't we weather those just fine in the end? Maybe. But there are two main differences today.

First, the world's known oil resources have been pretty much mapped out, so we know what we have left, more or less. Any new reserves that have yet to be found will be minimal because technology has allowed us to find all major deposits which we've tapped into already. Also, demand is growing in rapidly developing mega-population economies like China and India (1.3 billion/1 billion people respectively who would like nothing better than to be able to shop like a Texan at Wal-Mart or any Westerner at a large box or department store).

Second, even if this is simply a spike similar to previous ones (and that would be good news for the global economy, though, not for the atmosphere) with all the change in thinking about the environment, global warming, dependency on foreign oil, the sedentary nature of a lifestyle dependent on automotive transport, etc., it's still bad news for automakers. Consumers seem to have made a cosmic shift in their thinking and are looking for ways to insulate themselves from any future price shocks. It is likely they'll forgo gambling on buying large vehicles and downsize their consumption of fuel by buying more efficient automobiles.

So where does this leave GM? The automotive behemoth that for a while came to define American industry. Well, are you hearing that sound? That thick, creaking metallic sound? It sounds like a hundred tons of steel collapsing on itself. It sounds like an industrial colossus crashing to its knees. It's GM. It's going down first.

Some facts to consider:

Many Wall Street analysts seriously consider GM at risk of bankruptcy
Ford recently reported SUV sales down 55 percent from last year
Ford F-150, the nation's best selling vehicle for 26 consecutive years (yearly sales reaching 950,000 units at one point) is now down 40 percent in sales.
The world economy needs about 85 million barrels of oil a day – more than 20 of those go to the US alone

General Motors has come inevitably to the only fate it made possible for itself with its decisions to focus on pick up trucks and SUVs back in the roaring 90s. And all the Detroit 3 campaigned against tougher CAFE standards that would have forced them to make more efficient cars and, hence, be more competitive with the Japanese and Korean brands today. As things stand now, if you increase economy standards federally, you're just giving the Asian automakers even more of a sales boost than they're already getting from the oil markets.

Also, I've always thought that CAFE (Corporate Average Fuel Economy), the federal mileage standards that insanely apply only to passenger cars and not trucks or SUVs, was a silly way to regulate emissions. Directly regulating emission of CO2 and N-O-x gases makes much more sense. Even if it may seem to be essentially the same thing, it isn't. Certainly for new diesel technologies coming on the market now that can trap noxious gases which are strictly limited by current rules in California and several other Northeastern states. But those CAFE standards did help increase fuel economy in American cars which went from 13.8 miles per gallon in 1975 to 27.5 in 1989 and help stabilize US consumption of oil. The SUV and pick-up craze of the 90s wiped out any progress that change brought in reducing consumption and the number of barrels of oil needed to keep the US economy afloat has increased steadily since 1990.

In all fairness, as an automotive writer, and disregarding environmental concerns for a moment, some of the SUVs and pick up trucks that GM, Ford and Chrysler put out were great vehicles that offered a lot of value and practicality and were fun to drive too. This is not to criticize every vehicle they put out, even though quality standards and technology failed to keep up with Asia and European cars. It's just to say, they laid their gamble on the SUV craze and forgot to remember that fads and fashions all come to an end.

GM in particular is in real trouble. They're too big and have too much weight to carry with their responsibilities towards their retirees (health benefits and generous pensions). They just cannot downsize easily because they need to stay big to fund those liabilities. But in this regard it is not their fault. The health-care crisis is one of those things that keeps going on and keeps getting ignore because of ideological blindness in the American political culture which refuses to address the issue. So much for Can-Do Americanism. It's old news now that GM spends more on health-care per vehicle it builds than on the steel it needs for it. That's insane. And no relief is coming any time soon, no matter who wins the presidential election.

The current shift to smaller cars in the marketplace due to higher gas prices can be the proverbial straw to break the camel's back. This change in the market should not come as a surprise to anyone, but it's pretty shocking how quickly it's moving now. And it's a boom solely for the Asian brands since European's will have trouble selling cars profitably in the US market for some time given the strength of the Euro.

But there is also a lesson here for those CNBC and Wall Street Journal folks who are just so in love with American capitalism. What the hell went wrong with the American auto industry? And why are the European automakers not in distress? Don't they have even higher labor costs and more regulation and taxation to deal with? And don't they sell smaller cars with less margins?

The lesson is simple: quality products. Often American capitalism is about sales and marketing and flash and image and branding and all that other crap. The people getting so high on watching their investment portfolios temporarily flourish ("the business of America is business") on some company selling a cool business plan instead of bona-fide business model tend to forget that longevity in the marketplace requires making something of quality that people want to buy. And those socialistic Europeans are so weighed down by their welfare state and over taxed, over-regulated economy they cannot conceivably compete with American industry, can they? Well, the European automakers are just not as threatened by the Asian brands. They have competitive quality, better technology and more style and performance.

I actually believe, in a Darwinian sense, that tighter regulations and more taxation make businesses more competitive, not less. It's like someone on a strict diet and exercise regime. It puts them in better shape. It may be too late to save GM but to help free the country's economy from its dependence on imported oil more taxes, more regulation and government-funded research into sustainable sources of energy is the only way to go.

Four Bucks a Gallon! We're in the game now, Buddy Boy!

2008-06-09T15:58:00.000-07:00

Well, it's finally here. Gasoline in the US is now 4 dollars a gallon. Although pump prices always spike this time of year as the summer driving season begins, there is also that small matter of oil going for like 650 bucks a barrel or so. So, the safe bet is to get used to it. It's not likely to get better soon. Most evidence actually points to it getting far worse.

US consumers have had inexpensive gasoline for a long time. Prices in Europe right now are above 8 dollars a gallon. But, of course, the market here has always been adjusted to high fuel costs and the current crisis probably doesn't represent a paradigm shift like it does in the United States. In Europe, anything above a 2 liter engine is considered big.

The US market has begun adjusting in a fairly radical way. The Ford F-150, the defining vehicle of the American automotive industry, is no longer the country's biggest seller. That honor now goes to the Toyota Camry, followed by the Honda Accord – two well-built, extremely reliable mid-sized sedans. The Detroit 3 have been avoiding taking that hint for far too long. The consequences are crashing down upon them now.

But there is also something exciting going on here. The energy of the moment is palpable. Alongside that sense of apprehension at not knowing exactly what is coming also comes an anticipation for it. There is the possibility of improvement here.

Looking back at the last year or so, I realize how much less driving I've been doing, despite my occupation. Even when I test a vehicle I don't rack up the miles like I used to and try to get things done quicker and less painfully for the environment. As for my own car, I often leave it parked and walk or take public transportation. When I do take it, it's for short commutes to go shopping or visit friends who live outside the city.

This isn't something that I've done with any amount of deliberateness. I just did it without thinking much about. And not only do I not miss hoping into the car 8 times a day, I've come to realize that, with some Zen-like effect, the walking coupled with the psychological reward for my non-polluting ways has reduced my stress levels somewhat.

It's like this dream I once had. I'm in a parlor with a group of eccentric people. Three of them are sitting at a table playing cards. One of them, an older gentlemen, asks me to sit and play. I don't know what the game is and I'm not even sure what the stakes are but a sense of excitement takes hold of me and I can't wait to play. I feel like whatever happens, things will never be the same again. But somehow, I'm not worried at all. It's going to be a wild ride but it's going to be fine in the end.

The Beginning of the End - Is the automotive age, as we have known it, over?

2008-05-12T07:25:00.000-07:00

I hope not to be one who readily assumes a grievous tone as they portend of a dire future only to drop whatever the current subject may be on a dime for a new paradigm every time the headlines change. Remember how in the 70s we were running out of oil? Now, as the planet warms, we can't run out of it fast enough. But with oil at 122 dollars a barrel and rising and our dwindling oil supplies having the potential to send the global economy into a tailspin, it's obvious that game-changing events are quickly closing upon us.

The current crisis does not necessarily spell the end of the automotive age as we know it, not yet, but it just may be the beginning of the end. And one has to say, finally! As much as I enjoy the rush of a gasoline powered acceleration, you have to ask yourself why, with all the technological advances we've had since 1885 (and from first flight to the moon within 66 of those years), is humanity still stuck with this primitive propulsion system we've had for over 120 years? Namely, the internal combustion engine.

Even before the food crisis, we had ample science telling us the agricultural math just didn't add up for growing bio-fuels such as ethanol or bio-diesel. We couldn't possible make anything beyond a single-digit percentage dent in our use of fossil fuels. The EU has a proposal to have bio-fuels make up 10 percent of supplies by 2020 but the European Environment Agency has asked the EU to suspend the plan fearing it may cause unintended consequences in food supplies and won't do much to address the rising emissions which are the cause of global warming. Bio-fuels emit less CO2 than carbon-based fuels, but their use alone, with all their limitations and our ever growing total emissions, wouldn't have much of an impact on global warming.

So what are the alternatives? Hydrogen? Battery-Electric? A giant windmill on the roof of your car? Well, actually, all of those technologies are electric propulsion. Hydrogen-powered cars convert the energy into electricity to drive the car and batteries simply store electricity from an outside source. Even the windmill would have to deliver power to a battery unless you were into funky transmission systems. So, the only question is how we produce the electricity that will power those cars. Solar and wind are as environmentally friendly as we can get and the only drawback seems to be our own unwillingness to invest in these technologies.

The main limitation in this regard is the ability of batteries to store enough energy to power a car for 500 kilometers or so and have re-charging be as quick and convenient as gassing up a car is today. But improvements in battery technology are coming along, however slowly. Tesla Motors, the California start-up making an electric roadster claims the car can run up to 400km on a single charge. You will have to give up the rush of a rumbling engine for the low-key, baritone droning sound of and electric acceleration with tons of torque. And you'll be giving up the horsepower and the romance that comes with it. But so what? I mean, riding a horse is fun but I'm not going to be using one to get to work.

The good news is that you don't have to give up the concept of an automobile. We can still live in a world that affords you the comfort, convenience, mobility and enjoyment of your own set of wheels. It will just be powered with technology from the 21^st century instead of the 19^th.

Would Top Gear succeed or flop in America?

2008-04-21T13:51:00.001-07:00

(from left to right: Top Gear hosts Jeremy Clarkson, Richard Hamm and James May)

There have been some minor rumblings about bringing the BBC's Top Gear to US television. As Jay Leno confirmed in a recent Sunday Times piece, NBC has bought the US rights to Top Gear and has asked him to host the American version of the show. Leno turned them down (wisely, I believe) and in his column he explains why he thinks a direct translation would not work. I agree. At least, not on network television.

There are many challenges to a US adaptation of the show, the main one being that the BBC's independence from advertising allows it's hosts, in particular, the lethally-tongued Jeremy Clarkson, to bread and fry any car they don't like. In fact, that is the main appeal of the BBC show and part of a trait that is perhaps uniquely British – reveling in the language of clever insult and sardonic savaging.

For the show to survive on network/commercial television it would have to get most of its sponsorship from the automakers themselves, who are one of the largest buyers of prime-time TV advertising anyway. Leno says it himself in his column, that you couldn't criticize the cars anywhere near how they do so on Top Gear because the car makers would pull their advertising and the network would pressure the hosts to tone it down and hence, the formula is no longer. Leno should know something about all the sensibilities required for working in TV; his Tonight Show has been the leading late-night talk show for about 15 years.

But even if NBC were to take the show to cable, like the Discovery Channel, owned by NBC Universal, you still have the fundamental problem of whether there is really any sizable audience for such a show. A cable channel would not be dependent on ad sales and would require a much smaller audience for the show to be a hit, but they would still need to have broad appeal. Why wouldn't there be? Because, there is no equivalent car culture in the US as there is in the UK or Germany, which has about half a dozen popular car shows on TV too Some of those German shows air on private networks that run on advertising dollars. Those advertisers include automakers and, hence, the reviews are relatively sedate. (Besides Germans love their domestic makes and never really dog them. Fortunately, German cars happen to be pretty good anyway.)

Top Gear gets about 8 million viewers in the UK, a country of 65 million people. That would be comparable to something like 30 million viewers in the US, numbers only American Idol achieves on network TV. In Germany and the UK, these shows have broad appeal, primarily to a male audience, yes, but to the general male audience. The same kind of viewer who watches football matches and F1 races on Sunday. Just about every adult male is a potential viewer. There is no comparable generalized male demographic in the US. Even NASCAR is a particular kind of sport and not nearly as mainstream as football, basketball or baseball. In Europe, football (soccer) and F1 are the big sports. And other motor sports such as WRC are huge too.

Also, Jeremy Clarkson is a contradiction of a television personality. He can be an acerbic jerk or a witty cynic with a hidden humanity; often, all in one sentence. This, I believe, is too...just too 'much' for a mainstream American audience. In the US you are either 'edgy', in which case, you have no broad appeal, or a milquetoast host, like Leno himself, who's mass appeal comes partly from the fact that he's not the type to cut anyone down mercilessly, let alone the product of a major sponsor.

Also, a show where a host talks wittily about cars would come off as odd and peripheral to critics. Americans tend to see cars as utilitarian and only a very small percentage are buffs of any kind. In a success-obsessed culture, critics unfamiliar with what is to them an alien sub-culture would ask of a talented host like Clarkson (or Hamm or May), why is this guy's talent being wasted on some low-brow car show? The Top Gear hosts are smart, witty gents. 'Smart' and 'cars' don't mix so easily in a American culture subdivided and pigeonholed into niches.

And where are the fun and affordable cars to talk about? If you're only covering high-end brands like BMW or Lexus or Mercedes, that can alienate your average viewer who has no reasonable chance of ever owning one. Conversely, many of the models that have any mythology attached to them, that bear any character, are actually pick-up trucks, since that is what the domestic automakers have been focused on for the last 15 years. But with oil at 117 dollars a barrel do you really want a host to be waxing poetically on all the fun she/he had driving across country in their old '93 Chevy Z71, which gets about 13 miles per gallon?

It's tempting for auto enthusiasts to want a show like Top Gear to come to the US and expect it to work. The US is just as much a car culture as the UK, right? Just as much, yes, but very different. Americans drive a lot because they have to; which may explain why as consumers they prefer large, comfortable vehicles to small, nimble performers. They also see premium brands more a measure of wealth than as vehicles with superior driving dynamics. Many observers have noted that cars in the US are a commodity and often taken as an appliance by consumers. Some automotive writers have made that point to explain the popularity of Toyota models which may be unexciting to journalists but are extremely reliable and therefore a favorite for consumers. The percentage of time commuters in the US are spending in their cars is ever rising, much of it stuck in unbearable traffic. And maybe those drivers don't want to go home and watch a show that is just about driving.

Mad Max Mosley - "I'm not a Nazi but I play one in grainy sex videos"

2008-04-20T14:53:00.000-07:00

In a recent interview with The Sunday Telegraph, Fomula One boss Max Mosley “has defended his right to pursue an 'eccentric' private life” and continues to resist demands that he resign before the end of his term as head of Formula One next year.

Mosley, president of the Federation Internationale de l’Automobile (FIA), the body that oversees Formula One, was caught on video role-playing a Nazi (and alternately a concentration camp prisoner) in an S&M dungeon with 5 prostitutes. You can find the video on YouTube, where you actually hear him shouting in German, which he learned as a teenager.

It all sounds bad enough, but Mosley is also the son of a notorious Nazi-sympathizer. So his insistence that this is just some private 'eccentricity' is of no comfort to his critics (nor to this humble blogger). Mosley's father was the infamous Sir Oswald Mosley, head of the British Union of Fascists, who's second wedding was held at the Berlin residence of Joseph Goebbels (Hi, honey, no need to make supper, we're going over to the Goebbels' tonight) and was attended by Hitler himself.

But hey, there have been more twisted, Nazi-themed sexual fetishisms haven't there? Like this.

Now, I've always thought that one day someone ought to write the definitive book on the psycho-sexual subtexts of Nazism - you know, given all that leather and the barking of orders and stuff. First on the list to be interviewed would be Paul Verhoeven, director of Robocop, Basic Instinct and other exceptionally subtle films with very little sexual and violent content. Just check out the Wehrmacht and SS-style uniforms in his Starship Troopers (Verhoeven lived under German occupation as a child in Holland) and you'll have a laugh, especially seeing Doogie Howser dressed as a proto-Nazi. Extreme satire or fetishism? Maybe both.

BMW M3 Coupe – The mechanical bull dialed back to 1

2008-04-08T16:12:00.000-07:00

You know, one of the biggest disappointments of my life has been that I was not old enough to have experienced the Country & Western fad of the late seventies. Of course, I was barely ten when the seventies ended and I grew up in Quebec. Nonetheless, some of you may recall movies like Smokey and the Bandit and Urban Cowboy (and other cinematic and TV fare that made the profession of truckin' look fun), the excessive exposure of Dolly Parton's breasts and, of course, the mechanical bull, which I never got to ride. I think just about every sit-com in the late 70s had an episode where one of the main characters had to ride one. Actually, the last time I saw this lame comedic tactic employed was on an episode of Sex and the City. Although, I believe I may have hallucinated that so, please, do correct me if I'm wrong. And I would have to have been on some serious drugs to be watching Sex and the City.

But I know what it feels like to ride one. The mechanical bull in question here is the BMW M3 coupe, which looks like a huffing and puffing steer at the running of the bulls in Pamplona and rides like you would imagine a Japanese animatronic version of one to. It straddles and grips the road like a beast of burden and measuredly puts kilometers behind you very, very quickly. To its credit, it is direct in its approach to driving – it is all engine and wheels. The original M3 more than 20 years ago came with a 2.3 liter four-cylinder engine with 200hp. Today it has 8 cylinders, 3999cc that pumps out 420hp at an incredible 8300rpm. It's all that revving that makes the car a true rocket. And by rocket I don't mean to employ that word, being the cliché that it is, in a positive sense. After all, a rocket is just an engine and fuel with a singular purpose and nothing else. Where is the personality?

No, this is no wild bull but a robotic one that has been dialed back down to 1. It's all safe. It's made for people with more money than driving skills and for 125,000 Swiss Francs (80,000 euros or 120,000 USD) you're buying the M-brand as much as you're buying an M3 itself and this cars feels like it was designed to 'be' the brand.

It's not that I object to these super cars on moral reasons but aesthetic ones. Power doesn't necessarily make something fun to drive. I'd love to see an automaker one day come out with a version of a car that has less horsepower than it's predecessor but more of the crazy factor. An automobile that matches and balances the engine's performance to the limits of the suspension and chassis but one that twists and spasms and surprises you. I've come to believe that some of these premium brands really get stumped about what to do next with each successive model. Hey, what should we do for the new M3? I dunno. Let's add some more horses. That'll impress them.

All that power comes with a cost. As in, about a quarter tank of gas just to get from Zurich to Basel (about 70 km). Every time I touched the pedal, I would warp-speed into another dimension and instantaneously find myself in the next town 20 kilometers ahead. If I had floored it for more than a second I would have shot up to Brussels instead. (And I'm getting a little tired of BMW's iDrive navigation telling me what to do. I half expect it now to scold me with its female Hal-like voice,”What do you think you're doing, Dave?” every time I make a false turn. “Dave? You weren't supposed to turn there, Dave. Dave? I didn't tell you to turn there, now, did I?...Daisy, daisy...” I guess, it's my fault for still not figuring out how to turn the damn thing off.)

Anyway, having said all that, I have to say, there is no way you cannot like this car. It's pure BMW precision. The 6-speed manual transmission puts you in control and lets you have your bursts of power and decompression thrills. Push the engine past 8,000 rpms and it barely seems rattled. You can try to kill yourself by taking a 40km/h turn at 120 and this car will chuckle at you. If I sounded disappointed before, well, the reason is that driving BMWs spoil you. I was looking for spunk and soul and that's a gratuitous complaint with BMW which can make such perfect performers like this. Yes, sometimes you want to dislike the brand. You hate those pretentious drivers who scurry around in them with smug self-satisfaction. And yet, when I was driving the Z4, which is my absolute favorite convertible ever, and I was getting those looks from people, all I could think was, hey, you would love driving this car too.

The M3 can only be seriously compared to competition like the Mercedes C-Class AMG or the Audi S4/RS6. I will be soon reviewing the RS6 and will post on that. In general, Audis drive like quieter, slightly sounder VWs. And Mercedes' are always mature, responsible, solid, fast and comfortable. But the M3 owns this segment and easily leads in the driving pleasure factor.

With these kind of cars you have to judge them for what they are, for what they are intended to do and how they rank along with their competition. That means acknowledging that M-series models are still the benchmark that no other automaker has really yet to meet as a whole. But it also means being harsh on a car this expensive and with a brand that promises so much. BMW has set the bar real high with the M3 and that is a compliment in itself.

The Ugly Bavarian (or A Little Criticism of Criticism)

2008-03-20T14:51:00.000-07:00

Can you see a difference?

Dan Neil at the LA Times thinks the BMW 1 series is ugly.

I have to say I agree with his judgment on its looks, even if I've only once sat in the car and had to be placed in treatment for a bout of claustrophobia, so, I can't say anything about the way it drives.

Now, I envy Neil. He has my number-two dream job (I won't reveal my first, which involves...ah, forget it). Meaning, I would be doing exactly what I'm doing right now, except getting paid enough to purchase consumer goods and services such as food, shelter and clothing. And I'm a huge admirer of Dan Neil's talents, which I've written about before. Although, reading that post now, it kinda verges on the sycophantically creepy. Rest assured, though, I'm not the type to go all Glenn Close and boil anyone's bunny.

But I do feel the need to advise Neil on something he wrote in his review of the 1-series.

“I search the stars in vain for a reason the designers gave this car a notch-back design -- so that there is a discernible trunk in the back -- when it so plainly aches for a fastback. “

The answer is simple, Dan. There is a fastback version in Europe. But when you say fastback in the United States of America, someone will inevitably provide its bastardized translation: hatchback. Subsequently, as soon as American consumers hear the word hatchback they, each and every one of 300 million people, immediately think of their uncle Lou's 1984 Dodge Omni and flee accordingly in the opposite direction, howling madly and flailing their arms in the air in hysteria.

There.

And since when can't the LA Times afford to spring for a photographer instead of lifting its photos of the car from the BMW press site (the German plates sort of give it away) like some second-rate car blog (not this one!) too afraid to break copyright rules? This does not bode well for my career in automotive criticism (gotta get back to that novel) if a huge paper like the Times is that cost-conscious with its auto section even with a story by a Pulitzer-Prize winning writer.

Times change, people change, currency rates fluctuate

2008-03-13T14:47:00.000-07:00

The currency markets are at it again. The dollar took another dip today and it takes an amazing 1.54 US dollars to buy yourself a euro these days.

But the strength of the euro is hurting European car makers in the global market. VW is looking to hedge their currency exposure by building a plant in the US. They're still searching for a site somewhere in the business-friendly (read: union hostile) Southern states.

But Dieter Zetsche thinks it's good exercise.

From the FT:

Dieter Zetsche, chief executive of Daimler, likens European carmakers’ battles with the strong euro to a session in the gym.

“The currency situation is a permanent training course for us. We always have to keep going and improving and that is keeping us fit.”

But the German car makers are all making more money now, except for BMW, than they were in 2002 when there was a dollar/euro parity.

Maybe he has a point. The currency pressures and competitiveness make them improve their productivity and creativity in delivering desirable products to the marketplace.

--

And building a US plant is not a simple solution as the FT story explains.

Part of the reason lies in the fact that production accounts for only a small proportion of a carmaker’s dollar exposure.
BMW estimates it is worth about 10-15 per cent of its exposure whereas purchasing accounts for 60-80 per cent. And here matters are much trickier.
The crisis in the US car industry has led to severe problems for suppliers and the German luxury carmakers have found difficulties in building up a reliable supply base that can provide them with the same quality of components as back home.
“There is a big problem with suppliers over there – many of them are almost dead. That makes a new factory less likely,” says Mr Zetsche.

Geneva, Geneva - It's better to look good than to feel good

2008-03-13T14:19:00.001-07:00

This is what the Geneva show is really all about.

Gawking at the cars is for the motor heads.

Journalists who cover this yearly event and the people in the industry who work it know what I'm talking about. The Geneva show is essentially a massive marketing campaign which the automakers conduct in collusion with one another. It's about roiling in the glamor of motoring and the auto industry and getting a bunch of free press for all the new car launches.

For journalists it's always a fun gig to cover but I have to say the blatant gender inequality on display at Geneva (and at the Paris/Frankfurt shows too) makes even this macho Italian uncomfortable.

Already, the European industry suffers from a dearth of female executives, which is something I've written about before. And automotive journalism too is still predominantly a man's game. So you have the executives there, a collection of middle-aged white guys, in their 3,000 euro suits talking shop with the journalists, a collection of slightly younger, much more poorly dressed white guys and then all these would be models standing around looking pretty...and pretty tired too from all the hours of posing and forced smiles. It is really striking. The women are basically props and the message it sends is very clear.

I've always thought it would be a good joke if one day a female executive unveils a new car launch accompanied by a set of buffed up, stupid good-looking male models with fake tans and steroid tweaked muscles. Just to make a point, really.

I'm a guy and the girls are cute but, man, come on, this is ridiculous.

Peugeot 308 2.0 HDi - I'm getting old, buy me a diesel

2008-03-03T12:21:00.000-08:00

I remember once seeing the actor Brian Dennehy being interviewed on a late-night talk show about 10 years ago. The host happened to mention the name of the latest, hip rock band that was raging against the world at the time and asked Dennehy (then about 60 years old) if he had even heard of them. Dennehy just brushed him off with a wave of the hand and said dismissively, ”I'm old. I don't have to know.”

Such is the advantage of getting older. You get to not care. And don't underestimate the luxury of that in our technology-driven, changes-by-the-minute, hipness obsessed culture. There is also the lesson here of life coming in cycles. Remember how you would make fun of your teachers in school for wearing clothes that were out of date? Well, one day, that will be you. It might be you already. This world is cruel and it will inevitably make you uncool. Your only response can be to not give a crap. Because, in truth, not giving a crap is one of life's most liberating pleasures.

Which brings us to the modern diesel engine. When I test a car I have to push it to certain limits to get a feel for its engineering. Meaning, I floor the pedal and shift gears at the rpm of maximum horsepower; which for diesels is usually somewhere around 4000 and for gasoline engines in the region of 6000. But while driving the new Peugeot 308 HDi (2.o liter with 140 hp and 320 Nm) I just didn't bother.

I happen to like this engine which Peugeot developed together with Ford and is found in the Ford S-Max and other models I've tested before. This diesel is so easy that no matter which gear you're in you can call upon a massive reserve of pulling power with a stomp of the accelerator. I found this comfortable. I found it comforting. I liked just being able to enjoy the drive and not having to bother to shift all the time or worry whether I'm in the right gear or not. You could driver this car in 4^th gear all day long and it wouldn't matter. So, I did. Don't feel like changing gears? Don't. Not a problem. We are not in a rush. We are not looking to look cool anymore. We've got other worries to occupy our time. As I drove, whilst at the same time driving myself insane with those mundane pre-occupations of daily life, like getting the laundry out, cooking the baby's food, handing in that story on time, doing my banking, calling my mother, picking up that thing for my sister, etc. etc., I really didn't need to give a hoot what gear I was in. I'm Dennehying.

The 308 feels a little lumpier and more languid than its predecessor which itself was not as nimble as the 306. But this growth is a contagion affecting much of the cars in this segment including the segment-leading VW Golf. The 308 drives like a sedan - which isn't to say it's necessarily a bad thing. Remember, none of us are getting any younger and to have a car that's large and comfortable while still pretending to be a sporty(-like) hatch...well, that's the definition of the compromises we make while aging.

But I have no idea how Peugeot ever hope to make a GTi version of this car. They probably won't, since the 307 GTi never came to be. Peugeot sources tell me they are very reticent to be seen doing anything that smacks of me-too-ism with regard to VW. Hence they don't offer 4 wheel drive or a GTi version. Smart move. Maybe next they can eliminate air conditioning. But hey, they have a glass roof where you can drive under the sky all day without having to brave the elements.

Market-wise, I think the 308 is a very competitive model, particularly with this diesel engine. It still offers better looks than the Golf, although it's really just a pumped up 207 with a design that better suits the smaller dimensions of that model. In this most competitive segment, which is also the largest in the European market, you have to change your standards of judgment as the cars become larger and aiming for comfort and space over performance. These really are no longer the 'hot-hatches' of the past. Not this 308 and not all the others like the Astra, Focus, Megane, etc. That label belongs solely to the segments below now - the Polo, the 207, Clio, and all. For what the 308 promises - comfort, room, the sedate stylishness in the delicate lines of its sloping design, lots of soft power under the hood with some precise steering (electric) and some remaining echoes of Peugeot's previous magnetic handling - it delivers in a very typical, modern, corporate-competent manner. It's a car even Brian Dennehy would like a ride in.

The Zeitgeist is Green (or is it blue?)

2008-02-19T00:16:00.000-08:00

It does seem as if we've reached a point of critical mass on the issue of CO2 emissions and that there really is going to be some movement here on the part of the automakers. They've simply made too much of an issue of it themselves to back off now.

Automakers are going green - even branding themselves as such. VW has Bluemotion - it's name for its clean diesel technology - Mercedes has Bluetec and both are marketing these new diesel sub-brands to highlight their fuel-efficiency and emissions reducing credibility. I guess neither of them bothered to check what the other was going to call their technology. In any case, green is blue for both of them.

But not for BMW.

BMW: We may need a 'green' brand
Separate brand would preserve performance image
The new U.S. fuel economy standards are squeezing BMW so tightly that it might create a fourth brand to sell ecologically friendly cars.

BMW must find a way to satisfy growing pressure for vehicles with lower emissions and better fuel economy, says Stefan Krause, BMW AG's board member for sales and marketing.

But it must do so without distorting the images of its existing three brands, BMW, Rolls-Royce and Mini.
...
"We cannot take the blue out of BMW and change it to green," said Krause. "Maybe we could add a fourth brand."
...
Despite talk of starting a green brand, BMW executives are unsure how badly their customers want fuel-sipping vehicles. "People go to cocktail parties and talk about being green and then drive home in their M6s," Krause said.

It seems that Krause is not aware that, according to his chief competitors at Mercedes and Audi, blue is green. They've made it easy for him.

But a fourth brand? What does this mean? Does Krause really think they have to start a whole new brand just to market their more efficient cars?

Maybe he should speak to his marketing people and they can teach him the meaning of brand image and what a loss-leader means. Yes, people may say they want a green car yet still opt for speeding guzzler but the technology of the brand is what attracts them anyway, and that includes green technology. You don't need another brand. Being green is good for your brand. Period.

Will the Nano sell in Europe?

2008-02-19T00:00:00.000-08:00

Tata has announced that it will bring the Nano to Europe in 4 years. A good guess is the price tag will be somewhat higher than the 1,800 euros of the model launched in India earlier this year. Tata Motors would have to bring the car up to European safety and emissions standards and that in itself will add considerably to the price of the car. Of course, when you are starting from such a low base-line, it will likely still be the cheapest new car on the block.

The question is will it sell? Or maybe, there are several questions. Like, if there is a market for ultra-cheap cars, will this invite competition? Or is the Nano just plain too small for Europeans?

Many parts of Europe can be densely populated, yes, but mostly in the wealthier markets in Western Europe where such a cheap car is not necessarily a draw. And in Eastern Europe, where micro-models such as the Chevy Matiz find a market, will the Nano have competition that offers more room and better quality? After all, there are very few places in the world where drivers have to share road space as much they do in India.

If Tata really wants to enter the European market and succeed, do they really want to be known only for making the absolute cheapest car? Is that the wisest strategy? If you have a cost advantage in manufacturing there are plenty of ways to exploit that without defining your brand so lowly. Maybe they should aim a little higher and look at how the Korean brands Kia and Hyundai have quickly mimicked the success of Japanese automakers in the West. There is a model there to follow.

To blog or not to blog

2008-02-05T08:52:00.000-08:00

Before I began Euro Car Guy I had some ambivalence about blogging. I didn't want this blog to be a bloviator's forum. And as someone who cherishes language, I wanted to do some real writing - thoughtful, insightful, analytical and with every argument tamed by mitigating factors. Of course, I always fail at this but that doesn't mean my objective should not remain to try to meet the highest of standards. While my opinions can be sharp, I like to think they stand in contrast to conventional thinking or try to get at an essential truth or logic often lost in the wave of news details. The critique of blogging is that it is usually philistine and unprofessional. Yes, the writing has to come fast to meet the demands of the medium but I don't do my thinking as expediently. Hence, most of my blog posts run so long that they are more essay writing than anything else.

The ambivalence I had came from that general critique, and for me it drove a skepticism, bordering on condescension, of blogging. But then I thought about film. And about literature, which I studied in university. I've been a lover of both my entire life and could never understand the snobbery one sometimes encounters amongst literary types with regard to cinema. Conversely, I've always recoiled at the contempt some Hollywood players express for literature, both literally and in the work that they do.

So, I had to come to the conclusion that it is not the form but the content. It's easy to be a bad blogger, just as it's easy to write a bad book or make a poor film. It's incredibly difficult to author a good book or create a quality film. And there is nothing that makes a filmmaker any less of an artist than a writer or vice-versa. Being good at anything is tough and rare and ought to be acknowledged and praised wherever it is found. Blogging is just a new form of writing, or, better yet, a new medium for writing, and it has established for itself a legitimate space as part of the media landscape. Many blogs serve as a means for people to sift through the tonnage of news and content that is out there through a trusted, human voice. Creating a quality blog is part of the business of journalism now. In fact, blogging seems to be a natural morphing of commentary/analysis and news meant to meet the demands of the Internet.

Blogging got its bad name from mainstream journalists who resent its peanut gallery tactics. This is especially the case in the US where political blogging came to fill a vacuum left by the traditional media when it failed to critically question the Bush administration on many issues, but mainly in its decision to take the country to war in Iraq. People were angry and angry not only at the news but at the journalists. Oddly enough, the internet and technology was supposed to fragment the media and it has. But it has not fragmented the media structure. There has actually been tremendous consolidation taking place in American media in parallel with the rise of the Internet since the late 90s with a handful of massive conglomerates owning most of the newspapers and broadcast news outlets.

Blogs invited the derision of traditional journalist who see them as self-appointed op-ed columnists who don't have to verify sources or meet any standards of journalism. But they also serve as a check on bad journalism which relies too heavily on conventional thinking and reflexive ways of doing things. But now, most major newspapers and magazines have incorporated blogging into their online operations which I find makes their presence on the Internet more organic, as the voices of those publications interact with readers and create a more heightened sense of accuracy and accountability. They also serve as a great stop over for a quick fix of info on a select topic.

Blogging is a great, self-correcting form of writing because it is constantly evolving, assimilating new information and adapting to it and developing analysis along that ever improving collection of data and input. You don't even have to call it blogging if you don't like the term. But I don't mind it now. I'm a blogger.

Say again, BMW?

2008-02-05T08:34:00.000-08:00

January sales in the US just dropped dramatically for BMW. BMW says it has to do with inventory and a sales surge in December and that they expect sales for this year to grow slightly. One has to be skeptical about that even though those factors they mentioned may have had an impact. The US is experiencing a credit crunch right now and how many people do you know buy a BMW and pay the full amount in cash?

Story below.

Toyota's sales are also down slightly in the US for the fourth quarter which they blamed on the subprime crisis. Meaning, US consumers simply can no longer borrow to spend at anywhere near the rates they've been doing so over the last several years. Spells recession? Maybe, maybe not, but it sure sounds like it.

I think all automakers, but especially the German brands, are going to have to re-assess their position in the US market. And just when VW has chosen to make its long-overdue push in the US, this crisis hits. Hey, the world waits for no one.

--

BMW U.S. vehicle sales drop 22 percent in January
FRANKFURT (Reuters) -- German carmaker BMW said group vehicle sales fell 22 percent to 16,935 in the United States in January but said it expected retail sales there to rise slightly in 2008 compared to last year. "Sales were impacted by lower than normal inventory levels due to a very strong retail performance in December and high demand for all-wheel drive models," BMW of North America said in a statement on Monday.

BMW brand sales were down 26.7 percent to 14,475 vehicles, compared to 19,761 vehicles sold during January 2007, BMW said.
--

The Big (False) Hope for German Carmakers

2008-01-30T12:53:00.000-08:00

Yet another German automaker announces it wants to increase sales in the US market. After VW and Audi each vowed to grow sales aggressively in North America, now BMW is saying,"me too."

From Reuters:

Report: BMW eyes U.S. sales of 400,000 cars per year

Reuters
January 28, 12:00 CET

FRANKFURT (Reuters) -- German premium carmaker BMW aims to increase its sales in the United States to 400,000 units per year in the medium term from 336,000, the German auto motor und sport magazine reported.

"Today Europe is still our main market with a share of around 60 percent followed by North America with 24 percent and Asia with 11 percent," the magazine quoted BMW's head of sales and marketing, Stefan Krause, as saying.

"Looking at countries, the United States with 336,000 units overtook Germany as our main market already a few years ago. And it is there that we see the absolutely strongest growth worldwide," Krause said.

Well, that's a lot of expectation to deal with and I'm not sure the German automakers are reading each others' press releases. If every automaker is going to grow their sales in the US like they say they are, then Americans are going to be buying a lot more cars in the near future than they are today.

Yes, the US market is the world's biggest and is certainly still one of the most dynamic markets where consumers will flock to buy a product that strikes their fancy. But it's also a very mature one and quite saturated already. And the country's economy is teetering on the edge of a precipice called "the R-word" which can stick a pin in all those balloons carrying your rising German brand sales numbers.

I'll leave the last word on this to my colleague Guido Reinking, editor of Automobil Woche in Germany who thinks that German automakers are in denial about the looming US recession.

Is it blissful ignorance, whistling past the graveyard or willful self-deception?

There must be some explanation for the lack of concern, the serenity even, with which German automakers and suppliers view the looming economic crisis in the United States.

It should be clear to all executives involved in the United States that their lofty sales goals border on the nonsensical.
...
But at the Detroit auto show this month, executives for BMW, Mercedes-Benz and Volkswagen were still voicing their projections that the United States could continue absorbing more of their cars each year than in the previous year.

That is yesterday's equation. For the foreseeable future, the sales trajectory will flatten or even turn down. America's economic crisis this time is not likely to bypass the upper classes, those ready buyers of premium German cars, even if they're usually more independent of economic cycles.

As usual, the middle class will be hit hard. Do German executives need to be reminded that the middle class provides the lion's share of demand for VW in the United States as well as the lower-priced models from Mercedes-Benz and BMW?

No, there's no longer much doubt that a U.S. recession is on the way.

GM vs.Toyota - Update

2008-01-24T14:52:00.000-08:00

So, today the news is about the battle of the giants - GM versus Toyota...and Automotive News versus the Financial Times, apparently too.

The FT called GM the global sales leader in a story they posted earlier today at around 2pm (I'm assuming the dateline is London). At 12pm EST Automotive News called it for Toyota (disclosure: Euro Car Guy freelances for Automotive News Europe, sister publication to AN).

Oddly enough, the FT also posted a simultaneous story by the same two reporters which said the two automakers were 'neck and neck'.

GM reported global sales for 2007 of 9,369,524 cars. While Toyota reported 9.37 million. So, okay, let's just call it a tie lest we have to ask Toyota for the exact number of cars, which I'm not even sure is possible.

But Automotive News called the race for Toyota since it discounted the Wuling brand of China sales that GM included in its total.

From Automotive News today:

It was widely reported this week that the two automakers finished in a dead heat for the No. 1 spot. Here is why: GM includes in its total 516,435 vehicles of the Wuling brand in China.

But GM owns only 34 percent of the Chinese company that produces Wuling vehicles, SAIC-GM-Wuling Automobile Co.

Shanghai Automotive Industry Corp., a major automaker in China, owns 50.1 percent of SAIC-GM-Wuling Automobile Co.

Automotive News follows industry practice by including sales of only majority-owned subsidiaries in an automaker's global total. For instance, sales of Mazda Motor Corp. are not included in Ford Motor Co.'s total because Ford owns 33.4 percent of Mazda.

So Automotive News subtracts Wuling-brand sales from GM's reported total, arriving at 8,885,599.

I guess that settles it.

Biggest is not always best

2008-01-24T07:51:00.000-08:00

Why do automakers always want to be the biggest? For that matter, why do all corporations want to be the biggest in their sector?

Maybe it's because journalists like to report on who is the biggest instead of who is the best. After all, you don't see regular headlines about how BMW consistently makes the best premium sedans in the world.

The latest is the horse race story for top global automaker between neck-and-neck GM and Toyota. (A game VW would like to get into as well.)

But what does that really mean? Not much. It's pure vanity. Toyota is extremely successful, profitable and with loads of cash (estimates run at around 50 billion) to invest in future production.

GM has been on the verge of bankruptcy for the last couple of years. The two situations could not be more different. So you have to ask the question: What does remaining the worlds largest automaker really mean for GM?

But call me a romantic...I still would prefer to be the automaker who has the most exciting and quality vehicles rather than be the biggest seller or the richest guy on the block.

Ford of Europe helps keep Ford going

2008-01-24T07:46:00.000-08:00

Ford of Europe and PAG are in the black and mitigating Ford's losses. Ford has reported a loss of 2.7 billion US for 2007.

From the FT:

Ford’s Asia-Pacific, European, and South American operations were all profitable last year, but the core North American operation lost $3.5bn before taxes, compared with a loss of $6bn in 2006.

You can read the entire FT story here.

VW engine and transmission plant in North America - Update on rumor

2008-01-24T00:30:00.000-08:00

Volkswagen has announced it will also build an engine and transmission plant in North America to feed a new assembly plant it hopes to build there and have operational by the year 2010.

VW plans engine, transmission plants
North American plants will feed U.S. assembly operation

Rick Kranz
Automotive News Europe
January 23, 2008 - 1:28 pm ET
DETROIT -- Volkswagen will have engine and transmission assembly plants in North America to support a new vehicle assembly plant the automaker is expected to build in North Carolina.

The assembly plant could be operational in 2010.

" We'll make an announcement within six months" about the location of the plant, Stefan Jacoby, CEO of Volkswagen Group of America Inc., told the Automotive News World Congress today. After that announcement, the first vehicles could appear in " a little bit more than three years," he said.

Jacoby said the engine and transmission plants do not have to be near the assembly plant, saying Mexico and Canada are options. But " if we don't localize the plants" in North America, he said, " we can't be competitive."

This makes perfect sense, as I've written in earlier posts. They need to localize content in order to get the most value out of a local plant and hedge their currency exposure and drivetrains usually account for about a third of the cost of building a vehicle. A plant in Canada or Mexico can keep labor and health care costs in check as well. The problem is that the two-plant strategy requires huge investments and makes it a riskier proposition for VW to turn things around in the market there.

VW says it wants to sell about 800,000 vehicles a year in North America by 2018. For that, a local plant is necessary so that they aren't selling more cars just to lose more money. But if they don't turn their brand position around, or if their local products become plagued with quality issues, then they run the risk of losing...and losing big time.

VW has recognized the need to reposition the brand and has vowed to do so through redesigning their models and offering a wider product line, focusing on technology, a new advertising strategy and expanding the dealer network.

Jacoby also wants to relaunch the Phaeton.

"It was a mistake to end Phaeton sales in the United States. We are thinking of relaunching the Phaeton, which is difficult in this market. I think Volkswagen is so good at brands that we can offer models in the volume segment and also in the luxury segment. It is a state-of-the-art car, and I think this car will fit very well in this market."

--

And Jacoby has denied the rumor that Volkswagen has already bought some land in North Carolina for the location of their future plant there.

From Automotive News:

[CEO of Volkswagen Group of America Inc., Stefan] Jacoby refused to confirm an Automotive News story that the automaker purchased or had an option to purchase land in Rocky Mount, N.C., east of Raleigh and Durham.

Said Jacoby: " There has been a lot of speculation on this front, including the silly rumor that I've been traveling the Carolina countryside with a bunch of Germans purchasing land. That is not true."

VW on the warpath: Part II

2008-01-24T00:00:00.000-08:00

After I wrote my earlier post on VW's ambitious plan to sell 10 million units and overtake Toyota as the world's largest automaker by the end of the next decade, I had some second thoughts about it and felt that maybe my judgment had been rather harsh.

But what do you call it when you have second thoughts about your second thoughts? Can you really begin a sentence by saying, "On third thought..."? Probably not.

After reading what many other, more experienced experts and observers of the industry have said about the plan (i.e. that it is, indeed, too ambitious) I will stick by my initial analysis. Notwithstanding that, though, Volkswagen does need to increase their sales in North America and for that they need a plant in the region. This was something I addressed in an earlier post on Volvo, which itself does not need a plant there, and despite its musings about it, and will probably not go ahead on that.

[There's been a rumor - and this is a blog so I can report a rumor - that VW has already bought the land for the plant somewhere in North Carolina. I will follow up on this and if it comes to anything, will post about it.]

VW is in a bind in the US market - it doesn't have enough of the right products for US consumers and is losing money on selling them cars made in Wolfsburg. But their main problem, I would argue, is the brand. They simply are not well positioned in the marketplace and that is not entirely of their own doing.

Let me explain.

Think of it this way, if you're the only volume European automaker in the US market (no Fiat, no Peugeot, no Opel, no Renault, etc.) shouldn't you have a natural advantage? Shouldn't you be able to go to the American consumer (and let's not forget the Canadians too) and give them the following argument?

"You can buy a crappy domestic make. Or you can buy a boring, although reliable Japanese make. Or you can buy European luxury, for a steep premium. But only VW can offer you European quality, style and performance for a reasonable price. There is no one else who can do that except us. So please, buy this GTI."

You would think than any automaker in such an advantageous position in the market would be able to exploit that and be successful. You would think that performance and style oriented consumers would flock to the product like those techies who stampede for the latest iPhone or iPod from Apple. Then why hasn't VW been able to do that?

It's really a matter of the brand image. VW has not being able to forge for itself the brand identity that it should have as a slightly upmarket, technologically advanced automaker. Historically, Volkswagen came into the US market as a cheap car maker with the Beetle and it has never been able to shake that image. Their problem now is that consumers see VW as just another average brand but with higher prices. Which is why VW has cornered themselves into a niche market they can't break out of, with Yuppie customers mostly along the coasts of the country being the core of their customer base. (VW does well along west coast of the continent from Vancouver down to LA.)

Part of this problem is also the stubbornness of US consumers, who refuse to look at a Volkswagen as a great value purchase - essentially getting an Audi at a solid discount. VW has some great products like the Passat, which often tops the ratings list as the best in its class at Consumer Reports. But just ask anyone looking for a car in the US or Canada if they would consider a VW and I'm sure more often than not they will say that they're too expensive. This is because their brand image has not caught up to where the actual products are in the marketplace.

But ultimately responsibility lies with the car maker and it is up to VW to make a value proposition that will appeal to the North American driver. They have not done that.

And what would that proposition look like? I'm not an expert in marketing but it would involve promoting the technology they have, such as direct-injection gasoline engines, high-powered diesels and their dual clutch DSG transmission. It would tell consumers, in a very direct way, you only get this technology at this price with VW. It would mean hyping the excitement factor of the GTI in their advertising strategies. It would mean taking a leap of faith with American consumers and offer the GTI in a five door configuration. Truly, fun for the whole family. Create an ad where Dad or Mom take the kids shopping, loading up the hatch with groceries, dropping the kids off at soccer practice and then roaring away in what is now a sports car. You see so many drivers doing just that every day in Germany. Yes, Americans don't see a hatchback that small as a family car but it's an image your selling not that specific model to a family of four. You let them know, hey, with the GTI you get a sports car you can go shopping or take the kids to school with too.

VW can deliver the right products (i.e. great cars to drive) to the North American market with the technology and expertise that they have (something that is definitely part of their game plan now). And they will build a plant there and reduce the cost of delivering products to the market so that they can sell cars profitably there. But they also have to change and take upmarket the VW brand identity - and to do that they're going to have to ask the consumer to take a chance and meet them halfway.

The Tata Nano - cheaper than a bread box

2008-01-15T14:31:00.001-08:00

This car is made to be affordable for the Indian market. At 100,000 rupees (2,500 US dollars, or 1,750 euros) it will be one of the cheapest new cars available in the world today, which is the reason this release has gotten so much attention.

But I doubt the car will make it to too many other markets in the developing world as so many have speculated. It seems designed specifically for the type of traffic you have in India, which requires small vehicles to navigate roads crowded with everything from large transport trucks to farm animals. Driving conditions in India, from what I understand of it, are insane by our Western standards. But for most other developing countries in Asia, Africa and South America, where the market demands cheap cars, people probably would like a little more room than that and will stick to importing used cars from more developed countries. In most of those places, you don't have the crowding conditions you have on Indian roads.

As for the car coming to Europe, which seems a real possibility given Tata's alliance with Fiat, they'd have to make substantial investments in further development just to meet safety standards here. But even at that, the car would still come cheap given the low baseline of its current selling price. But I'm guessing Tata's strategy for Europe is smarter and more ambitious than that. They will probably aim on bringing more competitive and profitable models to Europe once they consolidate the purchase of Jaguar and Land Rover. Maybe they will badge them as Tata or they'll be sold as Fiats, but I'm sure they don't want to be in the same situation as the Chinese automakers who are looking to bring cheap products here but are Keystone copping their way through the process of bringing the cars up to Western standards. They will want to make cars of acceptable quality for the volume market and maintain and build their palette of brands from Tata at the low end to Jaguar and Land Rover at the high end.

Either that, or they can Keystone cop it too.

Volvo also considering North American production

2008-01-14T15:07:00.000-08:00

First, it was VW which began throwing the idea of another plant in North America around as part of their extremely ambitious target of overtaking Toyota as the world's biggest selling automaker within a decade. Now Volvo too is considering a plant in the region.

Volvo CEO [Fredrik Arp] said the brand will not compete head-on against premium brands BMW, Audi and Mercedes-Benz. Arp said Volvo will continue to emphasize its Scandinavian heritage, mostly in its design, as well as safety and environmental credentials.

Said Arp: " Over the past three-four years, we have lost very significant money because of the dollar decline."

The key here is where Arp says "over the past 3 or 4 years". Yes and in another 3 or 4 years when you actually have the plant up and running, the euro is suddenly back down to 85 cents US and you're scratching your head wondering why you just dropped a billion dollars in order to mitigate your currency exposure.

Maybe I'm making too much of the currency issue, but I used to cover the currency markets and I understand well how wildly currencies fluctuate over the span of just a few years and how volatile a market it is. Which is why they're more often called currency speculators rather than currency traders.

For Volvo, who's global volume is about 450,000 cars, a North American plant probably does not make much sense. Their brand is, as acknowledged by their own CEO, not in the same league as BMW and Audi and so they're not quite sure where they stand in the marketplace. They are actually competing in a vaguely defined niche segment with a hard to pin down customer base. They're like Subaru; you see them around, you know they're good cars but only the most austere and practical minded people buy them.

VW is a different case.

Although their ambition to sell 10 million cars globally is admirable, in the same way that those groups of insane people who dive into freezing waters each New Year's Day just to make the local news are, VW does need to improve their sales dramatically in the North American market in order to justify their presence there. VW says that a plant there would have to have at least a 250,000 unit capacity and that makes perfect sense. They should increase their sales in the US by about that much just to get back to where they once were. A plant won't necessarily mitigate their currency loses right away and it won't guarantee that they will achieve their goal with their "Up!" plan for global domination (in the car sales sense, not in the German...oh, never mind). But they need one and they know it.

A word or two on CO2 - Why reducing emissions in the US won't be easy

2008-01-07T06:05:00.000-08:00

This blog has, in earlier postings, written about the differences between the US and European car markets. Euro Car Guy has recently, for example, praised Ford of Europe's product line up and touted it as a successful brand strategy on the part of the US automaker's European operations. That is not to say that all of Ford (or even Opel's, GM Europe's main brand here, much improved product offering, which we haven't yet covered) don't have products that are easily outdone by the competition, but this blog is focused on the industry, with a special interest in marketing and brand performance, rather than coming from a pure consumer's point of view alone. And Ford of Europe has a successful product strategy in place as opposed to its domestic operations in the US. So hence, the praise, and the main reason that is, on both sides of the Atlantic, is consumer tastes and expectations.

To be curt, European consumers demand (and have always done so) small, efficient and sporty/performance oriented cars in ways that US consumers simply do not. US automakers spent the 90s chasing the booming SUV market, investing little in passenger car development, which has now left them at a loss vis-a-vis the competition in these gloomier days of 100 dollar a barrel oil and the dire prognosis of global warming. But, as you've probably heard many people say, you sell cars in the US by cubic feet. And it seems US consumers still value size and that doesn't bode well for any efforts to reduce emissions in the United States (and Canada too).

I don't like to tout myself as any sort of expert, which I definitely am not, but I do have a particularly unique experience having lived and traveled widely on both sides of the Atlantic and I like to think I know as much as anyone about the cultural differences between the US and the major Western European countries. I spend 5 years in the 1990s on the road in the US and Canada, working as a camping adventure guide doing cross country tours for European backpackers. I have also lived for the last 10 years in Switzerland, while traveling around the continent in several capacities, from work to please to family.

So why is a pressing issue like global warming going to be a tough problem to tackle in the US? Besides the simplistic and inaccurate assumption of a regulation averse America vs. rule-happy Europe, there are a couple of main reasons why that is which I will cover here:

1. Topography and Sense of Space

Anyone who's ever crossed the Atlantic has seen plainly how far more densely populated Western Europe is compared to the US. America's got space, lots of it, and that is what those European backbackers came to see when touring the United States. This is particularly the case in the American West, and much more so in the Canadian West, where you could fit most of Switzerland just in our two main National Parks – Banff and Jasper.

Western Europe is even more densely populated that the US Atlantic Seaboard, where you have about 80 million Americans living in the region roughly from DC up to Boston. The entire EU, which includes much of Eastern Europe now, has a population of about 450 million and a land mass smaller than the lower 48 states with a population of about 300 million.

European towns and cities all predate the age of the automobile and most even the age of the railway. They are more densely developed and closer to each other. We don't have to get into too many details here to say that such a population concentration gives you an efficiency with public transport such as buses, trams and trains that you simply cannot replicate in the US, no matter how much track you lay or how much you invest in mass transit in major American cities. The rest of America is not like Manhattan whereas much of urban Europe is.

And Americans are not only used to having large amounts of space - they demand it. It's thought of almost as a right. Average living space in the US is much larger than in Europe, and much of the world for that matter, and American's have become accustomed to a luxury that would be difficult to give up were it possible to do so but, in fact, isn't even so.

Notwithstanding American attitudes towards space, the US has simply built much of its housing and communities in the age of the automobile and you're just not going to force people to live closer to each other and share more space. So, with urban sprawl, distant suburbs and exurbs even further out, and small towns with lush spaces, Americans need to cover longer distances for work and travel and other commutes than Europeans do. (It is similar in Canada, Euro Car Guy's native land, although our cities are smaller and have better mass transit and much of the population is concentrated around them and less dispersed than the US)

And along with those massive swaths of land comes a North American recreational culture centered around automotive mobility. This is represented by the RV and recreational sub-culture in the US is based on large vehicles (pick up trucks) that can haul trailers or boats. It also includes off road and all terrain vehicles whose use has sky rocketed in recent years. There is no real such equivalent in Europe, where there are few national parks or public recreation areas and travel outside of cities consists mostly of visits to the countryside or stays in small towns for such things as local festivals or simply enjoying the local culture.

America's dispersement of living space and recreational culture is is why the Ford F-150 continues to be the country's largest selling vehicle, selling about 900,000 units a year. I could drive a fully outfitted Chevy Silverado with a V8 engine in Zurich and still consumer less gasoline and pump less CO2 into the atmosphere than someone driving a Prius in suburban California simply because I would have smaller distances to cover and could make use of a top notch public transport system.

If Europeans, per capita, consume about 50 percent the energy that Americans do, it's not because they are more frugal or more virtuous. It's mostly because the place is made that way.

2. Climate

Air conditioning and heating require massive amounts of energy and the North American climate is far more extreme than the mild, temperate climate of most of Western Europe. Temperatures vary greatly, from the cold in Canada to the suffocating heat in Florida. The eastern third of the continent is very humid, which is why you always have a fat, sweaty, evil sheriff's in those melodramas about civil rights in the American South. The mid-West and mountain states are more exposed to the elements given the plains, the deserts and the mountains which provide for hot days and very cold nights.

3. Social Philosophy

You simply cannot solve a problem like global warming by asking individuals to do their part or by even having policies that encourage people to drive more efficient vehicles. You need to mandate emissions cuts and restrict the use of fossil fuels but either regulation or severe taxation. This will be a tough sell in a country where politicians like to sell hopeful solutions that require little sacrifice but are utterly ineffective.

As an auto journalist, I know, that there is still no easier and more comfortable way to get around than in your own private car. You can go to any address you like, at your own pace, listening to the music you like and taking whatever route you please. And Europeans love their cars as much as Americans do. But if you base your CO2 emissions reduction strategy on the premise that Americans will have to drive smaller cars it just might not be enough and getting them to do it in the first place might prove impossible.

There is a strong ideological strain in American society where people value their individual prerogatives to buy and consumer and not lead lives with restrictions or too much social accomodation. "Hey, our forefathers left Europe for a better life in America where they could, literally, live large. Living small, with constant compromises, that's for crowded old Europe." There's a psychological dimension to it where there is no rational response for.

I hate to sound so simplistic or crass but I don't think the US is willing to legislate the kind of stringent regulations necessary to reduce emissions enough to affect the outcome of global warming. As I mentioned earlier, some politician will always try to sell the easy solution, which will inevitably be that alternative energy sources and propulsion systems will negate the need to tighten our fossil fuel burning belts. And that becomes self-fulfilling.

The solution has to be in technology. And the good news is that there are plenty of alternatives around. From solar, to geo-thermal, to hydrogen. We just have to pick one.