By Peter M. De Lorenzo
Detroit. Searching for newsworthy items this week proved to be a futile pursuit, because in reality the industry is in a holding pattern now. Yes, we have the sales winners regularly crowing over their notable increases, the players who are keeping their powder dry through the transition while preparing for the breakout fight ahead, and the rest who are just trying to get through each day in better shape than the previous one.
What passes for news this week isn’t much. Toyota piling on record profits on top of record profits – including a whopping 23 percent increase in net income in their latest tally – has long ceased to be frightening and has transitioned into something like the looming thunderhead off in the distance that never goes away. We’re talking about a corporate monolith – I am retiring the “juggernaut” moniker – that could simply crush the U.S. industry if it wanted to.
Fortunately cooler heads prevail over in Toyota headquarters and they’re merely content to ride the wave of sanctioned currency manipulation - under the auspices of Japan, Inc. – to reap staggering profits from the U.S market. As I said this isn’t really news, it’s simply re-stating a grim fact that every other auto company in the world has to live with.
Let’s see, what else? Well, the All Knowing and All Powerful Sergio Marchionne is exercising his FCA stock options and manipulating his stake in the company to great effect and tremendous personal gain (he now owns 1 percent of FCA). Good for him, it’s something he’s excellent at and it seems to keep him occupied and distracted from the fact that it if it weren’t for having Jeeps and Ram trucks to sell, the whole enterprise would probably have done a pirouette into the grand abyss long ago.
Despite Marchionne’s predilection to dismiss all bad news and negative comments as irritating chatter that need not be listened to, it’s growing more obvious by the day that if it weren’t for the aforementioned super-heated sales of Jeeps and Ram trucks that FCA’s blatant inability to build products with even a modicum of quality would be front and center in the industry discussion right now.
Red-hot sales cure all ills in this business, and the current sales numbers for Jeep and Ram are truly breathtaking. But for all of the awesomeness surrounding this sales performance, the reality for FCA is that the holes are deep and troubling. As I said last week in our “On The Table” column, the second phase of FCA's marketing campaign for the all-new Chrysler 200 is not only relentlessly tedious, it is flat-out disingenuous.
Using the hackneyed device of subtitles as four non-English speaking voiceover announcers express shock that the new 200 is from Chrysler and not from a German or Japanese automaker, the spot goes on to make all sorts of promises about quality and integrity that Chrysler simply cannot deliver. Olivier Francois, FCA’s marketing guru went out of his way to say that, "We are a principled company, and we really legitimately would not run a campaign like this without solid product proofs of the car being at par.”
Oops, Olivier. Chrysler ranked below average in J.D. Power's most recent Vehicle Dependability Study, which measures problems over a three-year period. And the brand placed 12th out of 32 brands in another J.D. Power study, which evaluates the reliability of cars over the first 90 days of ownership (not to mention the fact that in Consumer Reports latest rankings of vehicle reliability, Fiat Chrysler's brands were mired at the bottom of the industry).
And let’s remember that this is the same "principled" company that sold its Fiat dealers a bill of goods by demanding that they build separate brick-and-mortar showrooms for the Fiat 500 because they would be swimming in Alfa Romeos profits by 2014. How did that work out for ‘em?
Of course, Olivier, being Olivier, can’t contain himself and went on to drop this gem of a quote: "For us, the 200 is setting a benchmark on how we plan on developing cars." Wow. Despite the fact that the spots say “lame” in any language, the underlying – and ugly - reality about the 200 is that, though light years better than the previous model – which was an homage to crushing mediocrity that the industry will not soon forget – the car is exactly what I said it was last January in my review of the 2014 Detroit Auto Show. And that is that it allows Chrysler to be present and accounted for in the segment, and that’s all.
Yes, Smoke and Mirrors marketing and PR has been FCA’s specialty since Day One, but for Marchionne, Francois and the rest of the FCA carpetbaggers who parlayed their fading Fiat fortunes into spun gold with the Jeep franchise, the reality gets even uglier, because they have yet to come to the realization that they sell Jeeps and trucks, period. And that's really all they have. Everything else is a frickin' tedious afterthought.
And finally this little tidbit: BMW just posted another set of eye-popping results in its latest quarterly financial report, delivering a 9.4 percent profit margin, which eclipses Audi and Mercedes-Benz. And the company did it primarily on the back of its X1, X4, and X5 sport utility vehicles, which are selling at a torrid rate.
And this is on top of the fact that the Cayenne has been Porsche's principal profit driver for years now.
I said a while ago that this industry is an SUV and crossover world after all. And every once in a while we’re reminded of what that really means.
And that’s the High-Octane Truth for this week.