Paul Meisel

Do Pickup Truck Sales Make Any Sense?

Most tradesmen (carpenters, glaziers, plumbers, builders, repari contrators, you name it) drive some sort of a truck to carry tools and materials. Many suburbanite DIY types have one truck as a drive to work vehicle so they can move materials for projects on weekends. Many hobbyists (snowmobilers, boaters, motorcyclists) have a truck to tow or carry toys.

In my suburban neighborhood, it is odder to have two cars and no truck. The people who do are largely retirees who have aged beyond doing home and yard projects on their own.

I have been without a truck for two years now, and have had to borrow a neighbor's several times. Guess what my next vehicle will be?

Ford Denies Reports of Plans to Sell Volvo

PAG was just a concept, anyway -- it never became an effective operating unit.

Jaguar was only a fit if Ford could substantially grow and sustain volume, which it didn't. Land Rover was never a fit.

Ford's Inventory Mix: What the Heck is a 'Crossover' Vehicle?

"While more crossovers are likely to hit the market, I will continue to encourage automakers to avoid the temptation of "product proliferation." The more you try to splice the market to meet the individual wants and needs of consumers. The more investment that is required with lower returns."

True, but if you can do proliferation more cheaply (I think Chrysler is the leader) then you get more customer market penetration with reasonable investment.

I used to have arguments like this with my dad all the time (he wasn't sure why the 50s Ford Station wagons weren't still in production, along with the Studebaker Hawk, the Avanti, and the Checker.) He said "why do you make all those models" and I said "Because people buy them, Dad..."

George's remarks highlight the difficulties of segment analysis. I think to be really accurate you have to do it by model, trended in monthly data over several months (I am quite sure that is how George does it internally).

Gimme Credit: Ford Faces Eventual Bankruptcy, Restructuring Without Union Concessions

A lot of Ford's better financial talent works for Cerberus now........

Ford Considering Jaguar Sale: Any Takers?

I am interested in your view on how good, better, best should apply to Pontiac and Buick.

Navistar Sues Ford, Again

This divorce has been brewing for years. Navistar problems with warranty and slow response to design issues date back at least a decade....

It will be interesting to see how the claims play out. The automakers have subtly copied each other's designs for years without violating patents or contracts (for example the DCX small V6 is a subtle knock-off of the Ford Duratec, and the Ford 8.8" axle designed in the early 80s was a subtle knock-off of the GM 12 bolt.).

Ford's Mulally: A Plan and a Purpose

I think you are right, but Ford waited 4 years too long in hiring him.

Ford's Mulally: A Plan and a Purpose

The depressing part about this is that Stu Frey, Lou Veraldi, Bill Scollard, Dale McKeehan, Max Jurosek, and several others were on to this 20 years ago, and a number of others as well. Unfortunately they got old and retired, and a number of others were run out of the company for disagreeing with Jac Nasser.

The brain drain you mention is mostly people who liked the old Ford Motor Company but couldn't abide the butt-kissing and ego-growth that happened over the last 10 years.

Auto Retailers Should Approach the Vendor as a Resource Center

This thought spurred my thinking: The tradition of having 60 or 75 days of inventory for customers to shop from originated in the days when A) most dealers were one store operations B) there were a higher percentage mix of small dealers compared with larger dealers C) there were no good information systems to know where a car that you didn't have, and a customer wanted, might be available.

Given the business changes, with more multi-location and large dealers, good information to allow you to leverage inventory between locations and to some extent with other dealers, wouldn't you expect the business to carry less inventory?

Further, since the OEM's now produce most of their product based on the order bank and schedule their supply base with real orders back to tier 2, if the OEMs could tie into sales at the dealer level in "real time" -- let's say daily six days a week -- some reasonable collaboration could cut the amount of capital tied up in inventory by 50%. For the North American industry that would be something close to $15 billion of capital released. That is about the market cap of Ford, isn't it?

Now how this windfall would be shared is another question.....

ITC Rules in Ford's Favor: Risk Profile for Keystone and LKQ Negatively Affected

Erik, I think the "OEM identical" can be easily applied. All the automakers have detailed quality specs that go beyond dimensional issues to a variety of engineering test specifications. If the aftermarket can meet those specs, and pay an appropriate royalty for their use, both the OEM and the aftermarket can make some money and the repair shops will get the best possible product.

I have seen some crappy aftermarket parts (and some crappy OEM Service parts -- from inside the OEM), but their are good aftermarket producers both onshore and offshore. The middle ground would be a good business model for the industry to pursue.

ITC Rules in Ford's Favor: Risk Profile for Keystone and LKQ Negatively Affected

If you believe in a strategic, long term relationship with the customer, keeping repair costs reasonable should be part of your business planning. The OEM's have long treated service parts as "gravy" with high markups -- they had the leverage, and for newer cars they weren't gouging the consumer directly, but indirectly through the collision premiums charges by "those greedy insurance companies". They won't be able to compete with directly with more flexible and low fixed cost parts suppliers.

A good middle ground would be to license those parts to suppliers as "OEM approved" and correct a reasonable royalty -- perhaps even selling some of their surplus tooling and eliminating some of their ongoing service support costs. They have been using outside suppliers to fill their network with parts they could not effectively produce for years, often model changeovers leave the OEM factory unable to produce both new and old model parts.

But the "management team" at Ford is focused on short-term survival -- I can't see them taking the time to recognize the opportunity.

Highlights From Ford's Sales Conference Call: Inventories Not As Bad As They Seem?

I also admire George Pipas as a straight shooter and knowledgable man.

I think that your criticism of the in-transit stock level is a little mis-informed. About 90% of all vehicles move by rail. Rail transit of autos and auto parts is notoriously slow -- cars go from the plant to a rail yard, then another, then another, crossing the country. And then there is usually one to two day's worth of stock in the loading yard, so they can make up a train, and then one or two days at the unload yard, because they don't schedule trucks until the stock gets there.

This is true regardless of manufacturer. Cars coming through a distributor are treated differently; they don't start the clock until the car ships, so they save a little off the beginning end. But Ford and GM treat the car as "sold" the minute it leaves the line (they started doing this many years ago, for tax reasons -- cars sitting on the lot at the factory are not subject to local taxes because they are already sold, and so are interstate commerce).

The real answer is not in the transportation system, but in having product that sells so the dealer wants more instead of complaining how much he has. The rest is rearranging the deck chairs on the Titanic.

I disagree with the previous poster about propaganda. There may be a little spin but I have never heard George with numbers he couldn't back up. He's a real pro.

Detroit Gets it Right This Time

The basic analysis of leasing here is very good. I would like to add a few points:

Many (not all) dealers count on the ignorance of customers to improve margins. They can use the magic of more numbers to manipulate (down payment, security deposit, financing rate, residual value, lease term) to get a customer to pay a higher price than they would on purchase while seemingly offering a lower rate... or making some of the margin back in financing fees.

If you want to have some fun next time you buy, ask the salesman to quote you the deal as a buy, with price, payments, etc. all written down... then ask him to quote it as a lease, with all the numbers written down... then keep both pieces of paper and tell him you need to discuss it with your significant other. Watch his face (still not very many women in car sales, don't know why, they should be good). If you want to cause a stroke tell him your significant other is a CFP or CPA or works for the Better Business Bureau. If you can't get the numbers on paper just go to another dealership, there is a reason you can't get them.

Second -- used car residuals are notoriously volatile, for many reasons other than gas prices. When lease returns and trade-ins run high (often due to new car sales promotions) those cars have to go somewhere and they get dumped on the market. When this flow slows, used car sales move up again. New cars, 2 year old cars, 4 years old cars, etc. all compete against each other in a market filled with many smaller used dealers, e-bayers, etc. ------ The point of all this is that the projection of the residuals at the point of lease is nothing more than an intelligent guess. A conservative projection may result in a higher lease price that could lose sales -- an aggressive one main gain sales and lose money on the end of the lease. And the auto companies are considering this closely as they make their pricing and discount decisions. Whether the risk is borne in the financing entity or by the automaking entity makes little difference to a stockholder who owns both, or to the customer.

Further -- that volitility of used car prices also has a regional component, depending on local markets and conditions, and although cars can be transported the expense of that is significant, so your local mileage may vary.

Why Japanese Cars Earn $2400 More Profit Each

The following I received by e-mail from a conservative business man and engineer I know:

"Think of the benefits EVERYONE would have if we had a single payer plan similar to Medicare but everyone would pay based on their income.

The current system of; insurance company / employer controlled health care is a TOTAL mess and a tremendous waste of time and money.

Every time I visit a doctor I make it a point of discussing with them the fact that for every 15 minutes of time I spend with them, I spend at least an hour or two reading paperwork and statements etc. ... or on the phone with the insurance company trying to get the cost coverred or trying to find out what they will/will not pay. The doctors complain about the current system as well and how it wastes their time. Add to this all the time the doctor's staff has to spend on this insurance crap and then just try to picture all the clerical time, mailing, paper work etc that is going on behind the scenes at the hospitals and insurance companies and it becomes pretty clear that the "medical" time spent between you and the doctor is minimal compared to all the cost put into the system by the insurance companies themselves.

A Federal program, available to all, single payer, pay based on your ability, is the only way to go."

Whenever we look at US competitiveness, health care is the moose head in the middle of the table that no one discusses.

Why Japanese Cars Earn $2400 More Profit Each

I didn't see this report yet, but it makes sense for a couple reasons:
1. Laurie is one of the best informed industry observers and has good insight into the data
2. These variances are roughly the same in order of magnitude as they were 20 years ago when I worked on these studies.

The sad fact facing auto industry management is that they have known about this problem for 20 years and have been unable to impact them -- because of shrinking share, inability to significantly change their labor contracts, and a national unwillingness to address the health benefits issues.

Combinations of existing companies won't fix the problem. In total, there are too many factories, too many employees, too many retirees, and health costs are too high in the US.