No. 762,
August 27, 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


Monday
Jul072014

Bad Words.

By Peter M. De Lorenzo

Detroit. That the automobile business is a seething cauldron comprised of the highest of highs and the lowest of lows has been well documented in this weekly column. Doing time in the automobile business is an endless journey made up of noble, exhilarating quests, blessed with at times genuine achievement, punctuated by relentless disappointment, fueled by bad actors and diabolical miscues.

That this entire enterprise is wrapped in a suffocating cloak of rumor and innuendo just adds to the full color kaleidoscope, turning it into a shit storm of gargantuan egos and serial incompetence lifted up – albeit only occasionally - by flashes of brilliance and true genius.

I’ve talked about the lingo of this business in two previous columns, a “glossary of terms” update that sampled the current pulse of the biz and the words and phrases that provide the soundtrack for it. Today, I’m going in a different direction, because there are ominous words and phrases that have such deep and nuanced meaning with lengthy back-stories accompanying them, that it’s good to remind everyone out there that not all you hear and read about concerning this business is even half of the story, or even remotely accurate.

For instance, let’s take a look at SAAR, short for “seasonally-adjusted annualized selling rate” here in the U.S. Right now the automotive media is churning out glowingly upbeat stories about how the SAAR is looking good to sustain itself to more than 16 million vehicles this year, the most in eight years. All the usual leading indicators are up, including transaction prices, dealer profits and so on. In fact “glowingly upbeat” doesn’t even begin to describe the media frenzy going on right now, because the reporting has been positively giddy.

But before things get carried away, there is some ugliness associated with this rejuvenated SAAR that cannot be swept under the rug. Accompanying all of the gushingly optimistic projections for the automobile industry’s fortunes here in the U.S. are two phrases that carry ugly connotations, and those are short-term thinking and long-term financing.

Short-term thinking has been the bane of this industry’s existence since Day One. It’s an insidious disease that has warped minds and clouded otherwise bright brains into making massively stupid decisions, creating lingering effects that routinely cripple these companies’ fortunes. And it has been going on for decade after decade.

It wasn’t too long ago that this industry lived and died over its 30-day sales reports. Sales executives were only as good as the previous month’s results and a new month brought with it new hand-wringing and a renewed sense of urgency with executives looking at their watches while muttering, “Uh, what have you done for us lately?”

So when I see and read this ongoing obsession with the “SAAR” it gives me pause, because it was exactly this kind of short-term thinking and the boastful, “happy days are here again” tonality that accompanies it that led the domestic auto industry astray. While Detroit auto executives wined and dined on positive short-term sales results and touted their ability to deliver “the numbers," the import competition was taking the long view and plotting product moves that would result in sustained incremental growth over not months, or quarters, but years.

The “experts” – and I use that term loosely – insist that everything is different now and that the domestic automobile industry has learned its lessons and will not go back. On the surface that appears to be true, because the cars and trucks are excellent and in some cases class leading, but there’s a lingering cloud hanging over the proceedings, which suggests to me that things aren’t all that different, or better.

The most glaring indication of this is the return of long-term financing and subprime auto loans. Nothing suggests to me that short-term thinking is alive and well in the auto business more than the reappearance of these financial tools. And there is not one good thing about it either, in fact it’s a recipe for disaster. One car company in particular – if you’ve been paying attention, you’d know which one - has fueled its resurgence with this type of financing, and it stinks.

That there is a gathering storm associated with these practices is not news. This looming “bubble” due to easy money will hit this business hard, because the reality is that lessons learned in the past are quickly forgotten in the giddiness of pumped-up sales numbers. This industry has “SAAR” on its brain, and when that happens, watch out. The history of this business is littered with the carcasses of executives who thought they had it all figured out and believed that whatever badness happened in the past wouldn’t affect them because they were smarter, stronger and better than the people who came before them. As if.

Another stalwart example of the “bad words” phenomenon in this business is the phrase GM arrogance. Not that the word arrogance couldn’t be attached to every practicing upper-level car executive in this business because this just in, it most definitely can be, but there’s a particular place reserved in Hell when it’s attached to GM, because everyone in this business knows it’s a giant bowl of Not Good.

Remember, GM was once one of America’s corporate icons and a shining beacon of American industrial might around the world, and then when it had to endure a humiliating bankruptcy and assume the mantle of “Government Motors,” you would think that the bad old attitude leftover from the bad old GM would be long gone.

Not so.

I talk to suppliers and others involved in all facets of this business who deal with GM on a regular basis and remarkably enough, they insist that GM management still retains a level of arrogance that is almost incomprehensible to believe at this point.

Really? Even after everything that has transpired - and add to this the latest recall fiasco - and the prevailing GM corporate mindset still resolutely believes that GM somehow hovers above everyone else and is immune from disaster? Yes, really.

Despite all of CEO Mary Barra’s protestations suggesting otherwise, that it’s a brand new day for GM and blah-blah-blah, the vast, intransigent, middle- and upper-level bureaucracy that keeps the company running - through inertia alone for the most part – operates as if nothing has happened and that they can conduct themselves with a mind-numbing arrogance and a studied petulance that simply defy all of the evidence to the contrary. 

How does that work, exactly? How can a company that has mastered the art of taking three steps forward and five back for so long now that the cadence of it is now an amendment to the corporate charter have the temerity to retain even a shred of arrogance? Especially since GM’s acknowledged heyday has been over with for some 45 years? Yet I’ve seen it live and in color time and time again and it’s simply unfathomable.

A few weeks ago I suggested that GM either completely de-emphasize its corporate name in favor of promoting its divisions, or delete its corporate moniker altogether in the face of the endless drip of bad news associated with this never-ending recall. But in retrospect that’s not going to eliminate the offensive undertow of arrogance that courses through the company’s veins at a prodigious rate. If it weren’t for the True Believers in Design, Engineering and Product Development keeping the faith and churning out some excellent products, I am absolutely convinced GM would pirouette right back into bankruptcy.

And finally, what would a column about the industry’s bad words be worth if it didn’t include a mention of Sergio Marchionne? The Great Deal Maker has spewed his share of inanities since he and his espresso-swilling minions were gifted the Chrysler Corporation, but his most recent gambit might just take the cake, at least until the next one.

The Great Sergio was stunned a few months ago when his latest five-year plan - which he brought down from the mountaintop etched on carbon fiber tablets so the assembled multitudes could bask in the glow of his brilliance – fell on deaf ears.

It seems that Wall Street didn’t buy his predictions for Alfa Romeo (sales of 75,000 Alfas a year by 2018? Yeah, right), and they didn’t buy where all the money was going to come from to fuel his product dreams for the FCA Empire, either. And either did anyone else for that matter. (Well, except for certain members of the media who got coffee cups with Sergio’s likeness on them to add to their collection of other bootlicking mementos accrued over the years, and certain dealers of course. But then again they’ll believe anything as long as they’re making money. But I digress.) 

Leave it to Marchionne to add some new bad words to the automotive lexicon, to wit: “People in the U.S. like Chrysler, they like what happened. We were the poor kids, the Cinderella of the ball; we were given 2 cents to make it to Christmas and we are still here. We paid all the money back and it was clean."

Oh my. A carpetbagging mercenary equating being handed Chrysler by the U.S. government so he could prop-up that perennially failing, miserable excuse for a car company (aka Fiat) with the profits from selling Jeeps and Ram trucks a Cinderella Story?

It's a fairy tale alright, from the children's classic, You Just Can't Make This Shit Up.

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