No. 758,
July 30, 2014

About The Autoextremist

What do you do when when you've been immersed in all things automotive since before you took your first steps? When you're the scion of an automotive family in an automotive town in its very own automotive universe? When you've forgotten more about cars and motorsports and everything and everyone involved in the business than most people will ever know? When cars aren't just in your blood, but also in your bones and your brain and the very air you breathe? If you're Peter M. De Lorenzo, you ramp it up a bit further. National commentator, industry consultant and author (as well as former superstar ad man), De Lorenzo's daily (and nightly) focus for the past 15 years has been Autoextremist.com, a weekly Internet magazine devoted to news, commentary and analysis of the auto industry and the business of motorsports. Translation: De Lorenzo likes to tell the truth about what's really going on behind the scenes in the car business. And sometimes, things get ugly. Real ugly. But he is as passionate with his praise as he is with his critiques, and Autoextremist has become a weekly "must read" for leading professionals in all industries. De Lorenzo is considered to be one of the most influential voices commenting on the business today. It's the very definition of a high-octane life. And it's what fuels De Lorenzo to keep the pedal down - hard. He won't stop because he can't stop. A bit tired, perhaps? No way. De Lorenzo is one of the most untired people we know.

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

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The Autoextremist - Rants


Tuesday
Jun232009

THE AUTOEXTREMIST

June 24, 2009

 

Mid-term Musings.

By Peter M. De Lorenzo

(Posted 6/23, 10:30pm) Detroit. We’re halfway through the most tumultuous year in automotive history, and the business gets crazier by the week and with no respite in sight, apparently. Not even close, as a matter of fact. This business continues its inexorable march toward change at a dizzying pace. Giant auto companies are consolidating at the same time new, start-up auto companies are springing up all over the place, so the business is contracting and expanding all at once, which makes for a kind of semi-organized type of chaos on a global scale.

Since we’re in the midst of an unprecedented time in the history of the business, what do we know at this point and what’s to be learned? Let’s take a look...

Meet the “new” Motor City. The constant upheaval going on in the auto business will be the norm for the foreseeable future, and that’s no more evident than the seismic shift taking place right now before our eyes that has the center of the automotive universe on this planet shifting to China. More vehicles have been sold in the Chinese market than the U.S. market for going on six straight months now. Yes, the U.S. market is in the tank, but there’s no denying that what’s going on is more than an anomaly. But that’s not all, because China has made more vehicles in the first half of 2009 than the U.S., and it is likely to stay ahead of the U.S. manufacturers until the end of the year.

The fact of the matter is that China will be the largest car market in the world for at least the next 50 years, or, to be blunt, let’s just say indefinitely. Every major manufacturer in the world will have to succeed in China if they plan on surviving in the global automobile industry. China is where the most consumers are and where the most money will be spent - and made - on automobiles and transportation from here on out.

The U.S. market had been the focal point for the world’s auto manufacturers for over a century, but that era is now officially over. A seismic shift indeed.

And the “new” Motor City? The city of Shanghai.

What about the “old” Motor City and what does the future look like for the Detroit Three? Will the domestic auto industry here in the U.S. still be relevant? The short answer? Yes. The North American market will still matter a great deal. Of the domestic automakers, two of them – Ford and GM – have serious global reach and impact, and that will continue. In GM’s case, I believe they’ll survive because they have too much design and engineering talent, too many outstanding products in the pipeline, and too large and successful of a presence in China. As a matter of fact, I believe GM has a good chance of doing very well when the global economy picks up steam again. Will they ever be as successful as they once were? Of course not. The history books have been closed on that era for good.

But saying that, the U.S. auto company to watch is Ford. I believe that Ford will emerge as the largest and most profitable U.S. automaker and stay that way for the foreseeable future. They have the strongest management team (led by ex-Boeing executive Alan Mulally who is simply one of the best who has ever worked in this business), they have sensational products here and on the way (their new product cadence is extremely impressive and rivals that of any automaker in the business), and they are demonstrating signs of real momentum in an absolutely dreadful market.

I expect Ford to be a global force to be reckoned with in this business for years to come.

As for Chrysler, about all I can say is not so much. With exactly two new products coming – a new Jeep Grand Cherokee and an updated Chrysler 300 (okay, maybe two and one-half with the possibility of a new Charger) – Chrysler is in exactly the opposite situation from Ford. Chrysler is still formulating a plan, while Ford and GM and every other car company in the world are well into executing their plans.

And that will be a dramatic obstacle to overcome.

Will the Fiat connection make a difference? It is Chrysler’s only hope, obviously, but even that connection is terribly suspect when you really lay out the realities of the situation. As much as I like the Fiat 500, will it be the game changer that will save Chrysler? Of course not. Chrysler needs bread-and-butter, real-world cars that sell, not a cute niche exercise that garners cuddly reviews. And they needed them yesterday.

Does Chrysler have a chance in spite of that gloomy assessment? Absolutely, but it’s only a shot. And it will take nothing short of every single possible factor falling into place at exactly the right time to make it happen, so to be blunt, we’re talking a miracle here, folks.

And whether or not new CEO Sergio Marchionne is the miracle worker for this task remains to be seen. I do know his “management by chaos” style – he’s fond of watching junior managers torpedoing their bosses in management meetings, thinking it breeds a healthy edginess – is a recipe for disaster. Rather than getting to the heart of making accurate decisions quickly, his management style creates a kind of corporate anarchy that undermines the chain of command and sets people off in opposite directions, which is exactly what Chrysler doesn’t need at this juncture. Instead, Chrysler needs to be pulling in the same direction and making decisions at warp speed, and there’s zero time for pandering to Marchionne’s particular management proclivities just for his amusement.

The bottom line? Whatever worked in Italy is likely to get lost in translation here, Sergio.

What’s going on with this Porsche-VW soap opera? I am happy to report that Porsche CEO Wendelin Wiedeking is damn near out of a job. Let’s review his credentials, shall we? Wiedeking is the self-anointed “genius” of the automobile business and titan of the German business world (just ask him) who has been relentlessly fawned over by the German media for years. And no doubt he was h-o-t for a while. He’s the man who changed Porsche’s raison d’etre from a maker of exclusive sports cars to a full-line manufacturer of cars and trucks, and the man who changed Porsche’s corporate rallying cry from “There is no substitute” to “The Most Profitable Car Company in the World.” He’s also the man who - full of “Master of the Universe” bravado and fueled by a level of ego and greed and delusions of grandeur unprecedented in the history of the auto business - went on a financial rampage that revolved around the “optimistic” (at best) scenario of Porsche taking over VW, the corporate equivalent of the minnow swallowing the whale. And guess what? It all blowed up real good, as John Candy use to so eloquently say. After the German government has said nein emphatically to the idea of a bailout for Wiedeking’s Folly, Porsche is now pounding the pavement and begging for money all over the globe. As a matter of fact, right now Wiedeking’s minions are trying to cut a deal with Qatar for a major infusion of cash and even listening to overtures from Daimler-Benz, all in a desperate attempt to keep from becoming just another division of the VW Group.

Guess what, Wendelin? It’s way too late. You took your eye off of the ball and forgot that you were in the car business instead of the banking business.

How’s that working out for you?

What about the other German automakers? Like the rest of the world’s automakers, German automobile companies are looking to China for growth and profitability. The reality for BMW and Daimler is that they’ve hit the wall in the mature markets and they need China. But that’s not the real concern for these two companies. No, the real question is whether or not either one of these companies can survive as independent entities at all. The luxury-performance category is the most cutthroat part of an already wildly cutthroat auto business. And these two German companies are struggling right now while losing money hand over fist in this down market.

On the other hand, Audi is the German car company ascendant. Don’t be surprised if the Volkswagen Group’s shining star eventually overtakes both Mercedes-Benz and BMW in luxury performance sales down the road.

Mention the word struggle in conjunction with a German car company and the name that immediately comes to mind for me is VW. Not because the huge conglomerate is struggling, but because they have been openly eyeing takeover targets on their own home soil.

With Porsche becoming part of the VW Empire shortly, it is not hard to see both BMW and Daimler eventually having to raise the white flag and become at least affiliated with a larger automaker. And knowing that the Germans view their auto companies as crown jewels, you can bet that they will stay German, one way or the other.

And China? It’s no secret that a period of rapid consolidation will take place within China as a scattershot number of automobile companies’ are partnered up, merged, or are taken over. I see two homegrown Chinese auto conglomerates eventually emerging from this turmoil, but it remains to be seen who they are. Will it be an automobile company that emerges from one of the Chinese government’s mandated joint ventures with a foreign manufacturer that will transform into a global juggernaut? Or will it be a Chinese corporate entity buying their way into the business? Needless to say, the biggest automobile market in the world will definitely have two homegrown automobile companies that will become global in stature.

How goes the Electric “Revolution?” It’s clear we have moved into a regulatory period here in the U.S., and it’s a movement gathering momentum around the world as well. Emissions regulations and fuel economy standards are conspiring to change our transportation future, whether we’re prepared for it or not. Vehicles in general will become lighter and much more expensive, because the technology needed to meet these standards is costly.

A lot of people are insisting that pure electric vehicles are the best option, but I beg to differ. Electric vehicles are only part of an overall solution, and to suggest otherwise is nonsensical, to put it mildly. Pure electric vehicles will have a much more prominent role in urban centers, obviously, but for large swaths of this country they will be impractical for anything more than controlled destination use due to their limited range. The bottom line on pure electric vehicles is that they will definitely play a crucial role, but I don’t see these vehicles making up more than 20 percent of this nation’s fleet even 25 years from now, no matter how much bullshit Tesla’s Elon Musk spews to the salivating mainstream media who should know better by now.

Our driving future will be made up of a kaleidoscope of transportation options when it comes to our personal vehicles. Pure electric, extended-range electric, gas-electric hybrids and diesel electric hybrids will all play a role. But, believe it or not, traditional piston engine-powered vehicles have a long way to go too. Watch for Homogeneous Charge Compression Ignition (HCCI) engines - basically gasoline-fueled piston engines that function very much like diesels and that deliver impressive gains in efficiency, power and reduced emissions - to become the next big thing in internal combustion engine technology.

A few last thoughts. There seems to be a growing cacophony out there suggesting that we are at the End of The Road in terms of the consumer society that we’ve grown to accept as being never-ending, and that the emergence of strident environmentalism will mark the end of consumerism as we know it.

But I’m not buying it.

Developing countries are just ramping up to their age of consumerism, and I don’t think there’s enough guilt in the developed world that will quell that. I’ve often said that by the time America is fully engaged in its “Shiny Happy Smiley Car” environmentalism-driven era - with neutered green automobiles being the norm - China and India will be fully immersed in their own version of the muscle car era.

The global financial doom and gloom that we’ve all been experiencing won’t last, it’s just that simple. New technologies will be developed, and with new technologies come new solutions, and with new solutions come new opportunities, ultimately leading to economic expansion.

Will it be all rainbows and bunny rabbits? Of course not. The world is faced with deep problems that seem to grow exponentially by the hour. But I also believe that we are about to embark on a new age of achievement that will combine new growth as well as enhanced and enlightened environmental responsibility.

So will there be challenges? Yes. Will there be changes? Absolutely.

But it’s clear that the global demand for automobiles – as well as new forms of transportation and personal mobility – will continue on an upward trajectory for a long time to come.

Thanks for listening.

 

See another live episode of "Autoline After Hours" hosted by Autoline Detroit's John McElroy, with Peter De Lorenzo and auto industry PR veteran Jason Vines this Thursday evening, June 25, at 7:00PM EDT at www.autolinedetroit.tv.

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