No. 1018
October 16, 2019

About The Autoextremist

Peter M. DeLorenzo has been immersed in all things automotive since childhood. Privileged to be an up-close-and-personal witness to the glory days of the U.S. auto industry, DeLorenzo combines that historical legacy with his own 22-year career in automotive marketing and advertising to bring unmatched industry perspectives to the Internet with, which was founded on June 1, 1999. DeLorenzo is known for his incendiary commentaries and laser-accurate analysis of the automobile business, as well as racing and the business of motorsports. Author. Commentator. Influencer. The Consigliere. Minister of the High-Octane Truth. DeLorenzo is considered to be one of the most influential voices commenting on the business today.

DeLorenzo's latest book is Witch Hunt (Octane Press It is available on Amazon in both hardcover and Kindle formats, as well as on iBookstore. DeLorenzo is also the author of The United States of Toyota.

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By Peter M. DeLorenzo 

Detroit. Sometimes the automobile business makes you go hmmm… especially this week. The litany of bad behavior, wild-ass financial scams and other atrocities uncovered seems to be getting more bizarre by the day.

And if you’re wondering why, it’s the money, honey. Big piles of lucre. Rivers of it, in fact. And if you’re creative enough and brazen enough, you can tap into that cash with impunity. Well, almost. (For advertising agencies, the rivers of money dried up long ago; now they’re paid in Starbucks gift cards and donuts.)

A perusal of the news stories this week should give one pause, or something like that. Let’s start with VW, which seems to be destined to pay for the Dieselgate scandal for at least another decade. Prosecutors in Germany have accused CEO Herbert Diess, Chairman Hans Dieter Poetsch and former CEO Martin Winterkorn of failing to inform investors in time about the financial impact of the diesel emissions scandal. They're all lawyered-up, of course, with Diess' lawyers saying that he would remain right where he is while vigorously defending the charges. VW’s tab for the never-ending Diesel cheating fiasco after four years is $33 billion and counting. That’s a lot of wiener schnitzel, folks.

But the woes for German automakers aren’t confined to VW by any means. German prosecutors have fined Daimler 870 million euros ($960 million) for "negligent violation" in yet another probe into selling “cheater” diesel cars (meaning cars set up to circumvent existing emissions requirements). Prosecutors found that the automaker – the parent corporate entity for Mercedes-Benz - sold approximately 684,000 vehicles that did not comply with regulations on emissions of nitrogen oxides, according to a statement from Daimler and Stuttgart authorities. Daimler reaffirmed its financial guidance in a classic, “What, us worry?” tone, saying the fine will not have a significant impact on third-quarter earnings. So, there’s that.

Then there’s the ongoing Carlos Ghosn kerfuffle, which is growing more sordid by the minute. A settlement between the Securities and Exchange Commission, Nissan and Carlos Ghosn was revealed this past Monday. Basically, the SEC action revolved around the fact that Nissan failed to disclose the more than $140 million that was to be paid to Ghosn in retirement, which was not paid, it turns out. The SEC also accused Ghosn of being in on a scheme to conceal more than $90 million of compensation. Ghosn’s trial doesn’t start until next year, but in the meantime, Nissan was fined $15 million, while Ghosn had to pony-up $1 million for the SEC settlement. Not chump change, by any means.

And, FCA, not wanting to be left out of the bad news this week, apparently, suffered its own broadside. According to Reuters, “A senior manager at Fiat Chrysler Automobiles was charged in connection with the Justice Department's probe into excess emissions in diesel vehicles, according to documents unsealed Tuesday. Emanuele Palma, 40, a diesel drivability and emissions senior manager at FCA, was charged with conspiring to commit wire fraud, defraud the United States, violating the Clean Air Act and making false statements about the emissions system used on Fiat Chrysler's U.S. diesel vehicles, according to a grand jury indictment dated Sept. 18. Magistrate Judge Elizabeth A. Stafford entered a not guilty plea on Palma’s behalf. U.S. attorney Timothy Wyse wanted GPS monitoring of Palma because he considered the flight risk ‘severe,’ but he was released on a $10,000 unsecured bond.

Wyse said during the hearing that Palma "was the lead manager, the lead engineer of producing deceptive software that went into over 100,000 vehicles." Wyse said, "as a result of his engineering decisions, his management, his lies, that these vehicles on the road admitted dramatically higher pollutants then were allowed by law." Wyse said Palma then lied to investigators.

Not totally surprising, to be sure. After all, under Sergio, FCA was the corporate poster child for various misbehaviors, including the blatant over-inflating of its sales figures that went on for years. A giant mostaccioli bowl of Not Good.

In another dimension to the story of money and the auto industry, Ford is throwing in the towel in India. After two decades of wandering around in the desert and pissing away $2 billion in the Indian market, Ford reached less than three percent market share. In other words, we’re talking an unmitigated disaster for Ford. So, they’re partnering up with Mahindra & Mahindra in a joint venture in order to keep a toehold in the market. I say good luck with that, because Ford will still be throwing good money after bad, albeit at a much-reduced rate. Some companies never learn, apparently.

And, because you just can’t get enough of it, the GM vs. UAW debacle continues, with the burn rate of cash growing exponentially by the day. When will it end? No one knows. GM wants to have the freedom to use temporary workers as they see fit; and the UAW wants none of it. And so it goes.

We’ve clearly entered the “Duck and Cover” phase in this business. Past transgressions are coming to light, new issues are bubbling just below the surface, and the churn and burn of money marches on unimpeded. A caution to the auto executives out there currently enjoying their time in the sun: you might be next.

And that’s the High-Octane Truth for this week.