David Leggett's automotive industry blog - from just-auto.com

April 21 is date for Fiat Auto spin-off verdict

Wed, 10 Mar 2010 13:58:00 GMT

Fiat's Sergio Marchionne is dropping lots of hints that there will be news of a possible Fiat Auto spin-off on April 21 when an investors' meeting is scheduled in Turin. There will also be a presentation of a five-year strategic plan then. Five years continuing as now? I doubt that, even if the spin-off isn't exactly imminent. Marchionne has been thinking about a spin-off for a while now and he'll be wanting to set out a future for a consolidated automotive company merged with Chrysler and looking out for still higher scale economies in alliance with others (PSA speculation will obviously continue).

ITALY: Fiat Auto spin-off rumours gain momentum

Sudden acceleration - the early years

Wed, 10 Mar 2010 13:34:00 GMT

The problem of 'unintended acceleration' is indeed a thorny one and the media is like a dog with a bone. It is becoming increasingly difficult to distinguish between a genuine issue and something that is contrived by an over-zealous journalist/publisher/broadcaster or simply an unfortunate incident blown up out of all proportion.

Anyway, we have come across a little ancient history that is interesting - below link. Poor old Audi. The small matter of being innocent of all charges (unless you count having the accelerator and brake pedals 'too close' - not an issue anywhere else) and being the victim of actively misleading media coverage couldn't rescue diving sales on the 5000.

Sudden Acceleration: The Early Years

Geneva leftovers

Mon, 08 Mar 2010 10:12:00 GMT

I have been going through my Geneva notes and there are a few nuggets picked up in interviews that didn't make it into articles that might be worth sharing anyway. So here they are, in no particular order:

Toyota's Didier Leroy said that in Europe some 200,000 accelerator pedal recalls have been made out of 1.7m cars; also more than 16,000 of the Prius software changes have been made – out of 52,900.
Lexus is aiming for around 28,000 European sales in 2010 – versus 27,000 last year.
Bob Lutz pointed out that while General Motors the brand has attracted negative baggage, the brands underneath will often be viewed much more positively by the same people with negative views of GM. 'Hate the parents, don't blame the kids' was the phrase he used.
I asked Lutz about the chances of a GM IPO this year. 'It will be done at the appropriate time' was his straight bat response.
Should GM have kept Saab? Is there a danger that it will now be successful and GM will have sold something that it should have held on to? Lutz pointed out that GM was under strict instructions from the Obama task force to halve the number of brands and had little alternative but to divest loss-making Saab.
Lutz said that the US market has changed in the sense that the formerly 'impregnable membrane' that appeared to divide the market into import and domestic brands has opened up with owners of cars in both categories now prepared to consider cars in the other category in a way that was not the case a few years ago.
Nick Reilly thinks that alliances have more mileage in them.
Allan Rushforth - who has worked in other OEMs - enjoys the speed and autonomy for Hyundai in Europe. 'It's not a culture based on endless committee meetings – we just get stuff done.' He also sees only a 'marginal business case' for hybrids in Europe, acknowledging the marketing benefit for companies with hybrids right now but questioning whether that advantage will be as strong in 18 months' time when there are many more hybrids around. He noted that there is still a lot to be done with clean diesel and improved performance of gasoline engines.

Good wishes to Bob Lutz

Thu, 04 Mar 2010 09:44:00 GMT

Whatever you make of GM's Bob Lutz, there are surely few who would begrudge him good wishes for his retirement. I saw him a couple of days ago in Geneva when he gave an interview to journalists and he was on his usual good form, as enthusiastic as ever at delivering his views on the industry.

There were some who portrayed him as a kind of relic from the past with old-fashioned attitudes. That is way too simplistic and, in fact, Lutz has always been a difficult guy to stereotype. A small example. In Geneva this week he mocked the 'right-wing radio talk show hosts' in the US for the way they portray the 'nationalisation' of General Motors. He pointed out that it was a free market Republican – Harry Wilson – who persuaded Democrats that the equity solution was preferable to loading GM with more debt to service. 'And now the poor Obama administration gets blamed for a left-wing socialist takeover of GM when in fact that solution was proposed by a free market Republican,' he said.

Is Lutz fond of RWD muscle cars? Do bears tend to defecate in the woods? Yes, bears do, but they will also go anywhere to answer the call of nature. Lutz is also the guy who has enthusiastically championed the Volt and understands that the auto business is rapidly changing.

One thing about Lutz is you always have the feeling he will say what he thinks and not slavishly follow the company line. I think he probably revelled in that image as the maverick, but he did seem to say things in a way that suggested his words were not exactly crafted by a PR person. I guess the 'global warming is a crock of shit' remark was a striking example of that. A stupid thing to say, or wonderfully provocative, brutally honest? Or all of the above? Discuss.

But he was not some kind of 'always shoot from the hip for maximum effect' idiot; far from it. He had a good grasp of the numbers and the big strategic picture. He also understood collective responsibility and I'd wager his colleagues would have liked having him on the board, bringing his considerable experience to the table. Have there been disagreements? I'd guess so, but Lutz doesn't seem the type to undermine people through media manipulation. Perhaps he is more team player than the maverick reputation suggests.

On a simple human level, you had to respect the guy's experience and history, his enthusiasm for the auto business and its products. Hard to believe Lutz is 78. I like the idea of him enjoying a good few years on his motorcycles/cars/airplanes, perhaps occasionally raising his head above the parapet to express some pithy and forthright views.

US: GM's Bob Lutz to retire (again)

GENEVA SHOW: Fuel prices key to small cars in US – Lutz

Geneva press day

Mon, 01 Mar 2010 19:13:00 GMT

I have been looking at my schedule for the first press day at the Geneva Show tomorrow (March 2). There are a number of formal interviews that have been arranged in advance. I'm seeing Didier Leroy of Toyota at 10:15am, Bob Lutz on the Chevrolet stand at 11:00am and Nick Reilly CEO of Opel/Vauxhall at 2:00pm. At 4:00pm there's Allan Rushforth at Hyundai. In between, there's a list of people who said 'let's meet up in Geneva', a few more stands to call in on and, lest we forget, some new automotive metal to have a good gander at.

It certainly won't be dull.

Lotus proActive

Mon, 01 Mar 2010 14:37:00 GMT

The latest Lotus proActive e-magazine is out and available for perusal. It includes the first half of an interview I did with Richard Parry-Jones, as well as some informative articles on emissions rules and two-stroke engines. The latter article poses the intriguing question: could upsizing be the new downsizing? And the interview with RP-J reveals who it was who inspired his '50-metre test'...

Get signed up for free

Going, going, going...

Fri, 26 Feb 2010 15:02:00 GMT

GM did this before. Saab was being wound-down after a planned sale had fallen apart, but it was made clear that new offers would get a hearing. So, step right up ladies and gentlemen. Hummer, creator of life-size Tonka Toys, is being wound-down but is also back in the shop window. Is it a duffer? Well, it doesn't exactly capture the spirit of the age perhaps, but we're talking niche here. Are there enough people in the globe who would buy a Hummer? Maybe. They were going mad for them in Russia a few years ago, too. If you can get the production economics right, it could be a brand that is less bonkers than it at first appears.

US/CHINA: GM approaches previous Hummer bidders

JLR in the black

Fri, 26 Feb 2010 13:56:00 GMT

Things seem to have turned up a bit lately over at Jaguar Land Rover. Sales have sparked into life for both brands – albeit off a low base when compared to early '09 – and Tata Motors has announced that JLR was in profit in the fiscal quarter ended Dec 31. That's not bad going when you consider how the recession seemed to be hammering both brands in the early part of last year. The contribution of cost-cutting is an interesting one. Clearly it has made a difference already and suggests that the JLR cost base isn't quite as ripe for radical surgery as some had feared (and taking a plant out after 2014 suggests further efficiency gains ahead). But the key thing, of course, will be maintaining progress in the coming quarters.

INDIA: Tata says JLR has turned profitable

Keeping warm in an EV

Mon, 22 Feb 2010 18:28:00 GMT

There are some interesting observations in our forum area on the problem of heaters in EVs draining battery juice. Trading off cabin warmth for vehicle range might not be a fun choice if you live in a part of the world subject to occasional cold weather (and I guess the converse applies in hot/humid places where you might want the AC switched on more or less constantly).

Human ingenuity being what it is, solutions are being found that don't necessarily include long johns and woolly hats...

Diesel powered heaters for EVs

If you can keep your head...

Mon, 22 Feb 2010 18:16:00 GMT

Learning new things is one of life's little joys. If you had asked me at the beginning of last week what a 'double McTwist 1260' was, I'd have probably guessed it was something to do with a well known fast food chain. It is not. It is the name for a snowboarding manoeuvre that involves quite a bit of twisting and flipping. I am not all that into winter sports, but the guy who pulled that one off in Vancouver last week had my undivided attention and considerable admiration (he already had the gold and didn't even have to do it). As, indeed, did some of the other competitors in other events.

I guess the thing is, whether you are a winter sports fan or not, the competition for Olympic medals is about human endeavour and competition on an epic scale. People train for years and then push themselves to the absolute limit. The guys who failed spectacularly in the two-man bob also got my attention last week. It had all gone horribly wrong for them but, again, I guess we can empathise on a certain level.

We have all failed at something at some time or another and we have hopefully learned something from that experience. Saying sorry and working hard to correct something that has gone wrong occasionally goes with this territory.

Dealing with Kipling's 'two imposters' of triumph and disaster is a part of life, whoever you are and whatever business you are in. And sometimes it's how you deal with the bad stuff that is particularly important; how you cope in a crisis can be more revealing about character than how you milk the plaudits in the good times.

Toyota president Akio Toyoda - new to the job last year - has had a pretty tough time of late and I would assume that his decision-making is governed by what he believes is in the best interests of his company and its customers. And of course, he is no doubt in receipt of plenty of good advice and wise counsel from his close associates.

He also needs to bear in mind how things are perceived and how the media interprets things. Sometimes the media is unfair in the way it treats things and we have seen plenty of evidence of that here in the UK since the 'Toyota recalls' story first broke last month. The media - in the broadest sense - is on the case and some of the nuances of what a recall actually is, quality versus safety concerns and so on, have been a little lost at times - especially in the non-specialist media.

To some degree, it is a no-win situation for Toyota. The bad PR is already out there and the priority is to limit damage and repair confidence (among customers, dealers, suppliers, employees) as soon as possible. Storms do eventually move off. Dire situations become less dire if you do the right things. Do Mercedes-Benz customers today worry about the firm's serious quality troubles of a few years ago? No. It was very effectively dealt with.

If there was ever a time for effective and decisive leadership at Toyota it is now. And anything that can be interpreted as prevarication or indecision - however unfair that interpretation may in fact be - is certainly not going to be helping.

US: Toyota confirms recall document subpoenas as president flies in

Lotus and Naomi team up for Haiti

Tue, 16 Feb 2010 19:05:00 GMT

In response to the horrific consequences of the Haiti earthquake, Naomi Campbell together with Lotus Cars will be auctioning eight special edition "Naomi for Haiti" Lotus Evora sports cars, with the proceeds from the auction going to help the relief effort in Haiti. There will also be an opportunity to bid for some of the cars online. The grand total raised for the charity and the highest bidders will be announced by Naomi Campbell at the Geneva Motorshow on the 2nd of March.

Well done to Naomi for taking time out from throwing telephones at people. And eight cars is a pretty decent sounding donation so well done also to Lotus!

Carl-Peter Forster at Tata

Tue, 16 Feb 2010 16:24:00 GMT

The announcement that Carl-Peter Forster has taken a senior job at Tata Motors (TM) isn't exactly surprising. It was rumoured to be on the cards last year after he had left GM in the immediate GM/Opel/Magna fallout. Ratan Tata is clearly looking for someone with the relevant experience and ability to take TM to the next level - essentially a major presence on the international stage. He has got his man.

Forster is in many ways the ideal candidate. He knows the European automotive market and industry intimately. He also comes with knowledge of how a big car company like General Motors, with diverse operations and an international footprint, actually works.

He also knows a bit about cost management from his 'Project Olympia' GM Europe experience. And he ought to be able to offer some insights on industrial relations (which might be particularly helpful to JLR).

Forster comes with a Rolodex full of contacts and a level of strategic know-how that is informed by his high-level industry experience. He is much respected in the industry, especially in Europe. Home grown managers are great, but sometimes the mix at the highest level benefits from a fresh perspective.

The big project is taking Tata Motors to a new level. Forster will have to have a vision that chimes with what Ratan Tata wants and - crucially - a plan on how to realise that vision in the long-term. Many of the building blocks are already in place: Tata Motors is a considerable industrial force based in one of the world's high-growth emerging markets that also boasts low manufacturing costs. Tata Motors is no one-trick pony - it makes cars and trucks and is part of a conglomerate which can also bring further, less obvious, benefits to bear.

I wouldn't mind betting that one of the first things Forster will want to do is review the whole Tata Nano project, top to bottom. It has not been an unqualified success so far and he will want to get to the bottom of where the problems have been, what has worked well and what hasn't. And then there's the small matter of turning a car like the Indica into something that would work in overseas markets. The trucks? They may be a nice little earner in India, but is there more potential for overseas sales?

Jaguar Land Rover is probably something he will want to take some time over. Sales have looked better recently and there is already a plan in place to consolidate on facilities (with a plant to go after 2014) which will save on cost. Can some JLR activity or some models - old ones perhaps - be made in India? That, as Mr Forster will be well aware, is a suggestion to be handled with the utmost sensitivity. Getting JLR back in the black is the immediate priority as the business model is retuned - especially at Jaguar where the dash for volume growth under Ford ultimately failed.

Ratan Tata will want Tata Motors in 5-10 years' time to look different from the Tata Motors of today - with a bigger spread of products (and better ones) and much more international market presence. Getting an industry heavyweight like Forster on board - and basing him in Mumbai - sends out a message to the industry that Tata is serious about growing outside of India.

INDIA: Carl-Peter Forster appointed CEO of Tata Motors

Greeks send a warning

Mon, 15 Feb 2010 11:43:00 GMT

We were fairly forcefully reminded last week that the adverse consequences of the international financial crisis of late 2008 that ushered in the economic recession of last year are not exactly fully behind us. In fact, there are serious structural issues concerning national public finances and rebuilding household balance sheets that will take a fair few years to work through.

The German economy - by far the EU's biggest national economy and its industrial powerhouse - isn't rebounding very strongly. In fact, it's stalled - adding to worries over an economic 'double dip' this year in Europe.

We also saw a public deficit and debt servicing crisis in Greece that threatened to spill over into a broader crisis of confidence in the markets. Are stock markets - which surged last year - now set for a rebalancing? Is confidence generally about to take a knock? There is some talk of an asset bubble that could be about to burst.

Thank goodness, then, for the emerging markets and growth in China. Yes, but imagine if things - for whatever reason - turn a little sour there?

My point is simply that there remain serious global economic challenges ahead and those challenges are particularly relevant to the auto industry's overall demand environment and the companies that depend on that.

The worst economic scenarios may well have been avoided last year, but we are nevertheless a long way from business as usual. Governments are having to make the call on when to ease off on fiscal stimulus packages and start to make headway on bringing seriously damaged public finances back into balance. If they ease off too soon, the fragile economic recovery in the West may tank. Too late and the debt hangs around too long and dents economic prospects for the long-term.

Companies in the automotive business need to stay in crisis mode and be well aware of the 'what if' scenarios for a while longer yet. Look around. There are still plenty of question-marks for GM in its home market, especially. Toyota is enduring a torrid time on recalls. Ford - undeniably a relative star performer - nevertheless has a lot of debt. Renault posted an ugly looking record loss last week. Fiat's ambitious project to develop a successful alliance with Chrysler is far from a done deal.

The unrelenting pressure to trim costs and make efficiency gains wherever possible is still there, the relative competitive positions of the big automotive groups in this rather hesitant post-recessionary environment far from decided.

GOLDING'S TAKE: Why Whitacre and Liddle will have Ghosn to Amsterdam

Spark

Thu, 11 Feb 2010 15:58:00 GMT

Chevrolet Spark is an interesting vehicle and the latest instalment in the ambitious Chevrolet project. The thing with Chevrolet is to look at the global scale of sales for the value brand. There is a lot of volume for the BRICs, naturally.

And in Western markets – like the UK? The Aldi of the automotive world? UK MD Mark Terry spins an upbeat tale of not having enough Captivas to meet demand last year, of getting into new segments. The Orlando will be an interesting one.

I still don't quite get how Volt works as a Chevrolet in markets outside the US where Opel/Vauxhall is selling it as Ampera. Well, they don't sell fresh lobster in Aldi or Lidl do they? Actually, I'm told, they do. With more people from the more upscale supermarkets downtrading in the recession, they found demand for it. Brands and the way people perceive them aren't set in stone.

Incidentally, I stayed in a prison cell for the Spark launch – well, it was once a prison but has been converted into a hotel. Cool place. You know that prison scene in the movie The Italian Job? When Noel Coward's Mr Underworld walks down the staircase in the prison gallery to a rousing chorus of 'England!' from the other inmates. That was filmed there.

INTERVIEW: Chevrolet eyes organic UK market growth

Chevrolet Spark

Tue, 09 Feb 2010 08:41:00 GMT

I'm up to Wellingborough (Northants, southern fringes of the English midlands) today for a Chevrolet Spark drive event. The Spark, you may recall, is the small car that was picked for production by the public from three concepts. The styling certainly looks very interesting, though I note the car has already received some criticism for its drive in some quarters. I guess that depends to some degree though on what you are comparing to; eg new Fiesta or the outgoing Spark/Matiz...

I'll be interviewing Chevrolet UK MD Mark Terry later on today.

Besides the usual drive in the car, the Chevrolet PR people have set up a 'Spark and Ride' depot at the home of the Chevrolet World Touring Car team where they have commandeered a warehouse for the week. There are some interactive product presentations and we are also promised 'monkeys, bananas, Welsh footballers and magic pianos'. That's some combo. Ryan Giggs on acid?

Parts commonality bites Toyota back

Mon, 08 Feb 2010 08:00:00 GMT

It wasn't so long ago that Toyota's progress seemed rather relentless. The company posted one set of record results after another. There has been something of a rude awakening lately on quality.

Maybe the firm has tried to grow a little too quickly. And there have been pressures to cut back on cost - which perhaps partly explains what has been going on with the recall.

One of the striking things about Toyota's accelerator pedal problem is just how many vehicles are affected. The component is common across many Toyota models globally.

That's how you get cost down, by employing vast scale economies on parts like that which can be described as 'commodities' - a part of the vehicle that is unseen and makes no difference to the end-product in terms of customer perception. It doesn't need to be specified differently according to model, as an interior trim component that the customer sees and feels might be. The lower the cost, the better.

That's all fine and dandy when there are no problems with the component or its design. But if anything goes wrong, the commonality of supply that got the unit-cost of the part so low becomes a double-edged sword: the fallout is wide.

I would guess that some other manufacturers are looking on with mixed feelings. Yes, they are probably feeling that Toyota taking a hit like this one provides a market opportunity for them, at least in the short-term. But they may also like to reflect on the dangers of global sourcing and scale economies.

The pressures for 'cost-down' have never been as big as they are these days and Toyota's experience provides a warning on the risks that come with that.

ANALYSIS: Growing pains and 'Throttlegate'

Video clip showing US dealer dealing with recall

Thu, 04 Feb 2010 16:54:00 GMT

I have been sent this clip from FOX Business in which you can see a service centre manager explaining the technical fix to the pedal problem. Interesting thing is, there's also a car in the workshop getting a software download that means the brakes will override the accelerator pedal in an emergency - I guess for a little added reassurance.

Toyota troubles

Thu, 04 Feb 2010 09:44:00 GMT

I heard Toyota GB's PR man Scott Brownlee on the radio this morning being interviewed over the accelerator pedal recall. He gave a decent performance, responded clearly and confidently to the potentially awkward questions and it occurred to me that for the PR people at Toyota, it maybe feels a little bit like soldiers going off to the front line for the first time. No more phoney war. This is it; this is what we trained for. Helmets on.

This global recall on a safety-critical component has blown up like a squall out of nowhere to become the perfect storm that some commentators reckon will do great damage to Toyota. It is clearly a serious problem not to be belittled, but I wonder whether it will really do much long-term damage to Toyota sales. A lot depends on how quickly this issue is dealt with and how quickly a sense of business as usual at Toyota can be restored.

Can a reputation for industry leading quality and reliability built up over decades really be ruined overnight? A few people in the media are jumping on this particular bandwagon (and predictably taking some knee-jerk investors with them), but I'm not so sure.

For many, the idea that Toyota equals quality and reliability, even if it comes with a little blandness of product, is very deeply ingrained. It's almost a given and it will take a fair bit of shifting. I'm not saying that cannot happen, just that we're not there yet.

If Toyota can ride the initial bad PR (no escape from that) and get the pedal problem fixed quickly, the car-buying public may well view it as an outlier or blip, a one-off that was very effectively dealt with. It could even end up being viewed as a positive, a case study on how companies handle product-based PR nasties. In this admittedly optimistic scenario Toyota's image is hardly dented and a short-term hit to sales is contained.

The eventual outcome may, of course, fall somewhere in the middle with the costs and sales fallout turning out worse than Toyota is planning for, but not as bad as the worst fears. By next year it's becoming a fading bad memory; Toyota still a brand associated with generally good quality and reliability.

That word 'containment' is important. Any sense that there is more going on than just the accelerator pedal, that there are underlying quality and reliability issues at Toyota, would certainly impact long-term sales. Keep an eye on that Prius brakes situation. And things got ratcheted up a notch in the US yesterday with some politicians' comments (always be wary of politicians wading in publicly over something like this).

Toyota has perhaps had its aura of invincibility on quality punctured a little in recent years with other recalls, but it is hardly a company devoid of good processes, a laggard among its peers or one that is instantly associated with poor quality product - far from it.

We're too early into this recall to say that Toyota has royally screwed up and that's done it, reputation for quality now in tatters. Crisis management and shaping perceptions will be key. It is all still to play for, Toyota's managers and PR people very much in the heat of the battle.

Good article - below link - from special agent Coolbear looking at 'Throttlegate'. He makes some very good points concerning Toyota's overall strategic direction, cost-cutting dangers, the risks inherent in parts/design commonality across model ranges and the new emerging markets model - Etios.

ANALYSIS: Growing pains and 'Throttlegate'

Rubbing shoulders with yer actual Royalty

Tue, 02 Feb 2010 12:59:00 GMT

I think I mentioned last week that I was attending an event at which Prince Michael of Kent would be present. The people at Automotive PR have sent me a pic - you can see that HRH and I are in deep conversation (that's my best angle, I reckon). He was asking me about just-auto, numbers of readers, who they are. I remembered not to call him Mike. He prefers Mick.

Is my hair really that grey? Guess so.

UK: Recovery to UK economy and auto industry fragile - academic

Peugeot's 'Mu'

Mon, 01 Feb 2010 16:29:00 GMT

There's an interesting scheme called 'Mu' that Peugeot has got going in France that is coming to Britain. On the face of it, it sounds like a bit like a car club - but with more choice of vehicle on offer (so long as it's a Peugeot - you can get a scooter, a bicycle or a van, for example, as well as a car).

It could be a mobility solution for some, especially in cites where outright car ownership is a hassle as well as costly. There's a bit more to it that that though: the idea is to build brand loyalty and help lift car sales in the long run. In the preferred Peugeot scenario, people are still buying cars and acquiring Mu points for other transportation purposes which could include short-term vehicle rentals or bike rides.

It will be interesting to see how it goes with Peugeot's scheme and whether other makers will try something similar. There's a good description of 'Mu' in an article from yesterday's Sunday Times (below link).

No wheels? no worries - a whole fleet awaits you