By Peter M. De Lorenzo
©2016 Autoextremist.com, Inc.
April 28, 2016, 10:30 a.m., Detroit. Google, the all-seeing and all-knowing technical juggernaut, is in the late stages of negotiating an advanced technical partnership with Fiat Chrysler, according to a source with direct knowledge of the ongoing discussions. John Krafcik, CEO of Google's Self-Driving Cars operation and Sergio Marchionne, CEO of FCA, began talks not long after the Consumer Electronics Show in Las Vegas back in January, and have been in final negotiations over the last three weeks.
On the surface, this is a puzzling development, as FCA is the least technically savvy company in the car business by far. But that may be exactly what Krafcik wants. Why? Though the deal in the short term is said to include development of an autonomous version of FCA's new Pacifica minivan, it's the longer-term prospects that are of particular interest to Krafcik. It means that Google will have access to manufacturing capability and an existing dealer network for the distribution of its future vehicles, something the tech icon has clearly lacked.
Krafcik, a savvy industry veteran, has gone on record in recent weeks about this very subject. He is acutely aware that despite Google's flashy, "we can do anything we want" arrogance, without having the serious capability to build the cars and somewhere to service them, Google's Self-Driving Car program is going nowhere, fast. Lending gravitas to the proceedings is the fact that Google is planning to build a major technical center just west of Novi, a suburb of Detroit.
For Marchionne's part, this is almost the Hail Mary pass he was looking for. As I commented two weeks ago, in my column entitled "The Fools On The Hill", Marchionne and FCA are completely out of options, and without a key technical partner going forward FCA is facing the prospect of making the Jeep and Ram Truck franchises available to the highest bidder, in effect "parting out" the company in desperation.
But almost is the operative word here, because no matter how encompassing this linkup is with Google, I have serious doubts that it will be enough to keep FCA afloat, unless, of course, Marchionne and FCA Chairman and Fiat heir, John Elkann, are devising a plan to cede control of FCA in the U.S. to Google and cashing out for a huge dollar figure - somewhere in the neighborhood of $12-$14 billion - so that they can return to Italy, wallets overflowing.
FCA would not comment on this story. And Johnny Luu, Communications, Self-Driving Cars, had this obligatory response, "... we have a policy to not comment on rumor or speculation."
CRUCIAL QUESTIONS FOR CADILLAC.
By Peter M. De Lorenzo
Detroit. While the auto manufacturers are flaunting their newest models at the Beijing Auto Show this week - amidst the usual array of fantasy Asian auto manufacturer vaporware on display – to no one’s surprise the show has emerged as just another stop on the endless circuit of auto shows, with the same feel-good pronouncements and the same vacuous speeches by auto executives hell-bent on making a good impression in a market that will determine their companies’ fates for the next 50 years. Or so “they” say.
The only difference being that this year the show overlords banned female models from the show floor because they were too “distracting” and deflected attention away from the products. They were replaced with less threatening male attendants instead. Let’s just say that it’s a wonderful thing that the Paris auto show still exists.
There are plenty of other stories to talk about, however, as “The Swirling Maelstrom” - aka the auto biz - churned and boiled through another jaw-dropping week of lies, misstatements, rampant stupidity and flat-out nonsense. There was Mitsubishi, calmly admitting to the world that it had “misstated” its fuel economy numbers for the last 25 years. Think about that for a moment. Twenty-five years. Auto pundits wondered aloud if the Japanese auto manufacturer would survive this blow but let’s be honest here, it's a mystery why Mitsubishi even exists because it has been irrelevant in this country for over a decade. So if the company doesn’t take this opportunity to fold up its tent and high-tail it out of this market I would be stunned. Memo to Mistsubishi: Look at this incident as a free ticket out of here and run – don’t walk - run and never look or come back. The auto world here would be appreciably better off for it.
Then there was one Mike Keegan, FCA’s director of Human Resources, who went completely off the reservation with his gushing, blatantly Pollyannaish defense of all things Sergio in a written response to an opinion piece in Automotive News that was absolutely excruciating to read, to the point that it sounded like he had a lobotomy along the way. Let’s be frank here, as in, WTF? Does this guy really expect to get a job anywhere else after Sergio and Elkann take their billions out of FCA and return to their idyllic so-called life back in the home country? How about no. Blinders firmly attached, he forever pegged himself as a sniveling, clueless wanker in one fell swoop. Editor-In-Chief's Note (4/30): It has come to my attention that Sergio Marchionne actually wrote the letter to Automotive News himself. Keegan put his name on it, which doesn't absolve him from blame in the least, but that knowledge gives everyone a glimpse as to what Marchionne actually thinks of his own accomplishments. Marchionne says he's retiring in 2018. It can't come soon enough as far as I'm concerned. -PMD
And, if all else fails, there’s always the auto industry’s favorite carpetbagging mercenary his own self, The Great Sergio, who waxed eloquently to the press on Tuesday that Alfa Romeo would be a success in China upon its introduction there in 2017. Not kidding. No, you actually can’t make this shit up, folks.
But the top story this week came from Johan de Nysschen, Cadillac’s chief executive, who, in an interview with Reuters on the eve of the Beijing show, said that he is targeting an eleven percent operating margin for GM’s luxury division in ten years. Sounds noble and heroic and all but let’s be honest here, because it is a somewhat shaky timetable, at best. Even if everything went swimmingly well for the next decade, which, this just in, never really happens in the car business, this is one giant “ask” for Cadillac.
Cadillac’s de Nysschen, the chief architect of Audi’s success in the U.S. market (followed by a cup of coffee at Infiniti), has been spending most of his time fixing all of the “behind-the-curtain” issues that have plagued Cadillac for decades in his quest to reimagine the division in Audi’s likeness. That means fundamentally altering the way Cadillac operates, including how it interacts with its dealers, while repositioning the brand to be successful in the most competitive auto environment in history.
How is it going? Well, it’s rumbling along in fits and starts, because for every three steps forward there are usually five back, which means the victories can be miniscule. But de Nysschen is hell-bent on willing Cadillac to be great, so there's that.
Unfortunately, the ugly reality for GM’s luxury division is that it is flailing about and spinning its wheels in this market, for any number of reasons. As I said last week, you have to remember that Cadillac has exactly one grand-slam home run product: the Escalade. This unapologetically bold machine is the only product in the Cadillac lineup that has true crossover appeal, in that well-heeled buyers predisposed to owning expensive luxury cars regularly shop – and buy – the Escalade. Believe it or not there are people out there who are hungry for Cadillac to be Cadillac. In fact they’re expecting it. And the only machine that makes that kind of on-the-road statement is the Escalade.
Yes, the “V-Series” cars (ATS and CTS) are superb machines, but their appeal extends to a smattering of enthusiasts who understand what they’re getting, which is a level of high-performance rivaling the very best entries from Germany, a noteworthy accomplishment by GM’s True Believers, to be sure, but not enough to sustain the brand on its own.
But the rest of the lineup? Not so much. The new XT5 shows promise, but it should have been called the Escalade S in order to capitalize on the Escalade’s name recognition and reputation. “XT5” is just another garbled, alphanumeric mishmash nameplate in the marketplace that means less than zero to the average consumer.
As for the civilian ATS and CTS, the two blend together visually on the road to the point that most people only understand the difference with coaching. And the two cars are stepping on each other price-wise at the dealer level, which only adds to the confusion. To top it all off, the new, highly-touted CT6, which looks for all the world like a stretched CTS, is another Cadillac entry that threatens to blend in, too, what with its “restrained” design and already dismally forgettable marketing.
And therein lies the Cadillac dilemma. Remaking the brand’s image into one that appeals to millennials, while emulating Audi at every turn is shaping up to be Cadillac’s Abyss of Despair. Uwe Ellinghaus, Cadillac’s chief marketing honcho, has bought into the notion – hard - that aiming marketing at anyone falling outside the millennial demographic is a massive waste of time and money, because the millennials are the future foundation of the brand, and everyone else is officially expendable and inconsequential from this point forward.
And that perspective is all well and good, at least to a very limited degree, but really, whom is he kidding? Millennials aren't buying Cadillacs anytime soon (at least not enough to make a real difference). Instead, it's the rest of us who might consider Cadillac, and it's the rest of us who will actually make a difference when it comes to growing sales – and profitability - for the brand over the next ten years. After that the millennials can take over, if they even care by then.
Let’s consider the CT6, for instance. This is the much-vaunted machine that Cadillac is hanging its future promise on, the car with great technical prowess, boasting advancements in materials and assembly technology that GM confidently reckons are second to none. That’s all well and good, of course, but the new CT6 comes out of the gate with such low - as in less-than-zero - name recognition that it's going to take years and a ton of cash to convince the American consumer public to even take a serious look.
And according to Ellinghaus, it’s the millennials who will lead Cadillac out of the wilderness, which is why he is aiming some of the most tedious advertising in recent memory at these hordes of alleged new buyers who are just waiting in the shadows to embrace the promise of a “new” Cadillac. As if.
To make matters worse, Ellinghaus is dismissing the naysayers who say that the advertising sucks by insisting that the advertising isn't aimed at "old-world" consumers (aka people with the kind of money to spend on big buck luxury cars), but instead it is targeted at the vast, fertile, wide openness that exists in the minds of millennials. And because that’s how he’s spinning it, we're all excused because we're simply not hip enough to grasp the concept.
To echo what I said last week, what a bunch of unmitigated bullshit. That's analogous to a tragically self-important car designer explaining that his or her disastrously ungainly design isn't for you, because you're just not hip enough to understand it.
Even though I am decidedly removed from the precious aura of hipness that Ellinghaus & Co. is aiming for, that doesn’t preclude me from commenting on or “understanding” the CT6 campaign, because I know bad advertising when I see it. And I was in the ad biz long enough to know that the campaign for the CT6 is flat-out craptastic advertising at its most offensive. It is so remarkably uninspired and boring - let's face it, does "first ever" CT6 mean anything to anybody? - that it leaves the distinct impression that Cadillac is simply phoning it in. Add to that the fact that the spots are topped-off with a sullen and shockingly juvenile-sounding female voiceover, one that grows more grating by the spot, and you have a recipe for disaster.
Ellinghaus needs to separate himself from the haze generated from the thought balloons of his precious millennial marketing posse and start making effective advertising that's worthy of the brand. Because this advertising simply doesn't do the product – or the brand - any justice whatsoever.
As for the bigger picture it’s clear to me that de Nysschen and Ellinghaus, while both consumed by their respective missions inside the company, are failing to answer the two most crucial questions hanging in the air about their brand, as in: What is Cadillac? And why should I care?
And that’s the High-Octane Truth for this week.