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VehicleVoice #36 – Ford's New CEO, Dip in Fuel Prices, Roadtrips

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Welcome to VehicleVoice – Episode #36

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This week, our VehicleVoice audio podcast has host David Barrett sitting down with AutoPacific’s Vice President and Senior Consultant Jim Hossack for a conversation about the state of the American Auto Industry.

Jim and David chat about dropping fuel prices and the sights seen from the window during a roadtrip through the Rockies, not to mention GM’s new warranty, BMW’s new hydrogen car (is it practical?), and how renting a Mustang convertible in the Yellowstone region is a lot easier than you might think. And that’s just the beginning!

Show Runtime – 15:04

Show Rundown
00:28 GM’s recent changes – Are they turning things around?
03:33 Ford’s New CEO – Will an outsider make a difference?
07:29 Gas Prices – Why are they falling and will Americans start buying big cars again?
09:55 BMW’s New Hydrogen Car – Will it sell?
11:38 Western Mountain Road Trip – What kind of cars can you see on the road in the Rockies?


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GM's New Trucks

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We Catch the Summer Reveal of All-New Chevrolet Silverado and GMC Sierra
GM’s leader Rick Wagoner took some time from his work on the turnaround project and the ongoing Renault-Nissan tie-up evaluation to introduce new products critical to GM’s future profitability and success. VehicleVoice contributors Jim Hossack and Stephanie Brinley, from AutoPacific‘s Market Research and Industry Analysis offices, were on hand for a first look. Brinley helps with the overview, while long-time full-size truck owner Hossack tells us what’s missing.

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The current full-size Chevrolet Silverado (image here) and GMC Sierra, developed under GM’s GMT800 program and first introduced for 1999MY, launched to strong reviews and well-deserved praise. Sales increased throughout the lifecycle and combined they outsold their rivals. Even in 2005, GM outsold the Ford F-series by about 80,000 units, according to AutoPacific’s Sales Forecast Service.
The GMT900 pickups offer significant improvements to body, chassis, and powertrain. GM developed them with the eye to improving on every level an already successful truck. We saw them in pre-production form, but didn’t get the chance to drive them. Based on our first look, the trucks will arrive boasting a best-in-class standing. The 1500 series gets to showrooms in November 2006. Heavy-duty (2500 and 3500) models arrive during the first quarter of 2007. Unlike the previous generation, which rolled out over two years, all versions of the GMT900 trucks roll out in five months.
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The Good Stuff
On a bright, hot August morning, dozens of Silverado and Sierras drove up in front of us at the GM Milford, Michigan, proving grounds. Showing off their versatility and working natures, the display trucks towed boats and equipment, hauled hay and horse trailers. The message was clear: Choice and capability. Whatever you need these trucks to do, they can do it. Whatever form you need, they have it. Short beds, medium beds, long beds, crew cabs, regular cabs, extended cabs with a cool new 170-degree opening rear door, all are available from the GM trucks. It was a dizzying array, but all these options keep loyal buyers happy and to prove that GM is dedicated to full-size pickups.
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GM, Renault, Nissan in Possible Tie-up

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The buzz around the global auto industry on Friday June 30 was that a possible tie-up between General Motors, Renault and Nissan was being seriously discussed by GM’s board. A meeting held on June 20 in Nashville (Nissan North America’s new headquarters) between Kirk Kerkorian, Jerry York and Carlos Ghosn explored possible relationships. Kerkorian’s Tracinda Corp. owns 9.9% of General Motors – the 4th largest shareholder – and Jerry York, Kerkorian’s right hand man, is Tracinda’s representative on GM’s Board. Carlos Ghosn is chairman of Renault and chairman of Nissan. Could he also become chairman of General Motors and then rule the auto world with 25% of the global market?
GM’s Board had a urgently called telephone conference on Friday to discuss the issue. No news yet.
General Motors Share Price Skyrockets
GM’s share price rocketed 8.6% on Friday on the news and skeptics opined that Kerkorian had orchestrated the news to win back the losses his investment in GM has taken over the past year. Others saw this as another wake-up call to Rick Wagoner that the restructuring of General Motors is not moving fast enough and that someone like Carlos Ghosn is needed to impersonally and analytically cut through the inertia that faces the General. Admittedly, Rick Wagoner has one of the toughest jobs on the planet and steering GM is like steering the Titanic. It cannot change direction quickly. But Ghosn demonstrated that you can turn around a huge ship – Japan’s second largest carmaker Nissan returned to profitability two years following Ghosn taking the helm.
Personalities, Personalities, Personalities
Think about the personalities. Wagoner the low-key professional chairman trying to improve the General incrementally. Bob Lutz the charismatic product czar of GM whose impact is just beginning to be seen in newly introduced products. Jerry York the impatient financial wizard from Chrysler/IBM/Tracinda who is delving into GM’s operations. Kerkorian the “long term investor” trying to make a risky investment a sure thing. Carlos Ghosn another charismatic exec credited singlehandedly with saving Nissan. Wow! This is fun!
Don’t Forget China
Oh, don’t forget. GM has a solid presence in China and Renault and Nissan much less so. This tie up could really benefit Renault and Nissan in China.
Stay Tuned
Stay tuned. This will play out quickly over the next week or so. Is Kerkorian just playing with his share price? Is he really able to goose GM into accelerating its restructuring? Will any sort of relationship develop between GM/Renault/Nissan? Between Wagoner/Lutz/Kerkorian/York/Ghosn?


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SUV Jihad Continues as SUV Segment Atomizes

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Back in November 2005, a VehicleVoice Blog commented on the existence of a periodic jihad on sport utility vehicles in the USA and worldwide. The introduction of General Motors’ GMT900 SUVs – the Chevrolet Tahoe and Suburban, the GMC Yukon and Yukon XL, plus the Cadillac Escalade and Escalade ESV have set the earth-is-flat crowd wailing again.

Audi Q7 Latest Target of SUV Jihad… This Time From British – Austrian Axis

But June 2006 intro of the Audi Q7 in the USA following its earlier introduction in Europe also will be watched closely. As Audi is about the last major brand to add an SUV to its lineup, it is a fresh target for the anti-SUV crowd. The March 2006 issue of CAR Magazine is a case in point. Georg Kacher, a 6-foot, 13-inch Austrian based in Germany, writes, “Big, heavy, chunky, aggressive, unwieldy – SUVs deplete our resources, tear up the countryside and flatten whatever they hit.

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So why does a company like Audi, renowned for advanced engineering enter this bad karma segment?”
Because the market is allegedly craving a mud-crawler made in Ingolstadt, and because Audi firmly believes it can add a new dimension to the SUV game.”
As with many non-USA automotive journalists and even American buff book scribes, Kacher’s loathing of SUVs is mis-directed.
SUVs respond more to customer pull than manufacturer push. After the demise of station wagons (or estates as the Europeans so lovingly call them) and the image black hole called Minivans, came sport utility vehicles. These jack-of-all-trades vehicles carry people and stuff with aplomb. Well… more aplomb today than at any time in the past when they were admittedly crude trucks with a closed in cargo area. They go anywhere, anytime, with anyone, carrying anything within reason. They come in all flavors from the late and not particularly lamented Ford Excursion to the Suzuki Vitara. Populated between the Excursion and Vitara are SUVs of every ilk. Some are suited for suburban streets only. Some are rock crawlers. Some are designed to tow horse trailers and boats.
The beauty of SUVs is the breadth of choice within the segment. The SUV buyer has the luxury of choosing between more brands and more models than ever before. Like the overall auto industry, the larger SUV segment is atomizing into smaller and smaller niche entries.
Choice is good and Audi is welcomed.


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2007MY Chevy Suburban Continues Value Pricing

Pricing for 2007MY Suburban Follows Tahoe with a Drop in MSRP
According to an announcement from Chevrolet, a comparably equipped 2006 Chevrolet Suburban LS was $2550 more expensive than a 2007MY LS. This may well be true for the new Suburban’s MSRP, but the transaction price for the outgoing SUV was far lower than MSRP, sometimes varying appreciably from month to month. GM’s new approach to pricing is logical, whether customers can be weaned off incentives or not. If your vehicles almost never sell for full price and there is a significant difference between transaction prices and MSRP, the MSRP is clearly set above what customers are willing to pay. Moving MSRP and transaction prices closer together, in the long term, should improve the image of the brand. Some buyers will feel smart for getting the “great deal” incentives can appear to be, but others are turned off by constant loud and dramatic incentives.
While a 2006 Suburban 1500 4WD started at about $42,500, the LTZ package (which included the 6.0L engine) also added almost $11,000 to the price. For 2007, Chevrolet says the 4WD LTZ starts at $48,455. Though the trim package components may have shifted a bit, both LTZs get the bigger engine and there is a price drop between the models.

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The reduced pricing strategy is supposed to help Chevrolet and GM reduce their dependence on rebates, incentives, a deal-of-a-lifetime sale periods, like last fall’s Employee Pricing for everyone and even the $5500 hundred sitting on the hoods of 2006 Suburbans through at least the end of February. Dropping the price by something in the neighborhood of $2500 can earn some goodwill as well as setting themselves up for potentially smaller rebates if they are needed down the road. Whether this really works with customers now conditioned to blow-out sales and large incentives remains to be seen.
Read on for the official Chevrolet 2007 Suburban pricing release.


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Let's Talk Cars: GM, Fuji and Toyota

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Welcome to “Let’s Talk Cars.”

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The premier episode of Let’s Talk Cars covers the purchase of General_Motors‘ stake in Fuji Heavy Industries by Toyota Motor Corporation. Is GM finding ways to streamline it’s operations? How does Saab fit into the picture?
Noted industry analyst Jim Hall speaks with AutoPacific founder and VehicleVoice editor George Peterson to give you the inside scoop on this hot automotive topic.


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Crossover SUVs to Outsell Traditional SUVs in 2006

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Crossover SUVs will outsell Traditional truck-based SUVs beginning in 2006. This forecast comes from George Pipas, Ford’s Manager of Sales Analysis and Reporting in a presentation in Long Beach, CA on December 12, 2005. Refer to the VehicleVoice Blog on December 8 citing a USA Today article on similar observations.

A Few Comments on What a Crossover SUV Is

Pipas’ analysis charts the meteoric rise of Traditional SUVs during the 1990s and the similarly meteoric rise of Crossover SUVs since 1996 when the first crossovers – the Honda CR-V and Toyota RAV4 – were introduced. Of course, defining SUV categories is getting murkier and murkier. VehicleVoice (http://www.vehiclevoice.com) and AutoPacific (http://www.autopacific.com) have used the “at-a-glance” rule to define SUVs. If you can, at-a-glance, tell that a vehicle is an SUV, then by golly it is an SUV. In this way you are not confused about whether it is car-based or truck-based. (Pipas contends that only about 70% of Crossover SUVs meet this at-a-glance requirement with 30% easily confused as cars, hatchbacks, or wagons.)
Escalade Blog.jpg Traditional SUV 2007 Cadillac Escalade – Category Expected to Decline as a Percentage of Overall SUV Universe
The auto industry thinks differently and often gets caught up in definition problems. They have variously called car-based SUVs “hybrids” (a term since adopted by gasoline-electric ‘hybrid’ powerplants) or “crossovers”. In our research, we have found that folks really have not yet adopted the crossover term and still like to refer to SUVs as SUVs. But enough about splitting hairs about what is a crossover and what is not.


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Ghosts That Still Haunt GM – Samuelson

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The following article was published in the Washington Post on November 30, 2005. It is an interesting historical and current perspective on how the more things change the more they remain the same… at least in the case of General Motors. Isn’t it interesting that Chrysler Group remains able to stay under the radar as GM and Ford are getting all the brickbats from the media?
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Ghosts That Still Haunt GM
By Robert J. Samuelson, The Washington PostWednesday, November 30, 2005
In 1927, “The Jazz Singer” — the first successful major movie with sound — opened. In 1931, Charlie Chaplin, a silent-movie star, said: “I give the talkies six months more.” A similar frame of mind now haunts General Motors, which recently announced it would close 12 facilities and cut 30,000 jobs by 2008. Granted, GM is burdened with costly labor contracts and huge numbers of retirees, reflecting an era when it had (in 1962) as much as 51 percent of the U.S. vehicle market. But GM also inherits a self-defeating management style formed during its glory days. It presumed that superior managers could always anticipate and control change. By contrast, many top managers in younger companies accept that they will face disruptive surprises that could, unless successfully countered, destroy them.
The difference has consistently disadvantaged GM. Its latest downsizing is the company’s third since the early 1980s. With each, GM has struggled to catch up with changes that it badly misjudged — the demand for smaller cars in the late 1970s; the superior quality and production techniques of Japanese manufacturers in the 1980s; and now the demand for snazzier cars and (almost certainly) better fuel efficiency. The conceit that GM could “manage change” often served as an excuse to stand pat — until change was unavoidable.


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Toyota to Overtake GM as Top Carmaker

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An article in the Saturday, November 19, 2005 Wall Street Journal projects that Toyota may overtake General Motors as the highest selling carmaker in 2006.
While Toyota (Toyota, Lexus, Scion) may not sell more than GM (Chevrolet, Pontiac, GMC, Buick, Cadillac, Hummer, Saturn, Saab) in the United States, it may sell more worldwide. Toyota is concentrating much of its sales expansion in North America where it is pulling sales from General Motors and Ford. GM is bolstering production capacity in China and South America where it sees room for growth where Toyota is not yet strong.
The Wall Street Journal article is one of many recent media reports confirming the results of VehicleVoice research and forecasts by AutoPacific. VehicleVoice research shows a continuing deterioration in General Motors’ (and Ford and Chrysler traditional brands) market share in the United States under the concentrated onslaught of the Japanese Big Three. AutoPacific’s forecast of United States sales shows Toyota, Honda and Nissan increasing market share by adding new assembly capacity and models.


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GMT900 SUVs Miss Important Feature

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General Motors is getting ready to launch its new GMT900 SUVs. This lineup includes the Chevrolet Tahoe, Chevrolet Suburban, GMC Yukon, GMC Yukon XL, Cadillac Escalade and Cadillac Escalade ESV. The shorter versions will be launched in the 1st Quarter 2006 as 2007 model year vehicles. The long wheelbase Suburban, et. al. will be launched in March or April.
Early reviews of the GMT900 provided in Burbank, California (GM’s California Design Studio) and Warren, Michigan (GM’s Design HQ) prove that the GMT900s are an excellent piece of work. While they do not look too much different from their predecessors, they have wider front and rear track and larger tires and wheels. This gives the GM SUVs a very purposeful stance avoiding the undertired appearance some past GM vehicles have had. At the same time, the more prominent tires and wheels actually make the vehicles look slightly smaller even though they aren’t.

Lack of Fold Flat 3rd Row a Major Omission

To keep these comments focused on what we want to observe, lets change the order a bit.
The most glaring omission in the GMT900 SUVs is the lack of a 3rd row seat that folds flat into the floor like the Ford Expedition and Lincoln Navigator and now the Ford Explorer and Mercury Mountaineer. The key to the Ford system is the use of an independent rear suspension that allows the rear floor to be dropped several inches providing space for the seat to fold flat. GM’s GMT900 management said they “couldn’t break Ford’s code” and it appeared that they were thinking Ford adopted IRS more for ride and handling than for interior package. WRONG. The key all along was the rear seat package.
The resulting seating package is very similar to the GMT800 SUVs. The seats, when folded, rest on top of the floor obstructing the load area of the vehicle.
GM also claimed their research showed that SUV buyers wanted a power folding 2nd row seat more than they wanted a flat folding, power operated 3rd row seat. According to ex-GM researchers who shall remain anonymous, GM’s research actually showed a strong preference for “a seat like in the Expedition in a body like the Suburban”. The real reason, of course, is investment. The expenditures for the combination of IRS and fold flat 3rd row seat has variously been quoted as $165 million or $300 million. Either number would cause a product planner to pause and clearly these very important features were pipped – not easily.


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