Spotted on route FM812 in Elroy Texas, just around the corner from our new F1 track Circuit of the Americas. No telephone number provided.
Old Corvairs are hard to find… this one looks restorable and despite apparently sitting outdoors for years, the rust doesn’t look like a major problem. At least from what we can see.
812 was once part of the Austin-Port Lavaca Stagecoach Road, but the Corvair dates to more modern times than that!
James R. Healey of USA Today usually gets his test drives right. But not for his test of the new Chevy Cruze… which is in our opinion an example of what’s wrong with GM – not right.
First read his review of the Cruze: http://www.usatoday.com/money/autos/reviews/healey/2010-11-04-test-drive-chevy-cruze_N.htm
We’ll start with his statement: “The 2011 Chevrolet Cruze, on sale since September, finally seems a compact from General Motors that Honda, Toyota, Ford, Hyundai and Nissan should take seriously. It replaces the Chevy Cobalt, which was OK in its day, but that day is long past.”
But in the very next paragraph: “The Cruze test car — a nicely equipped 2LT, $21,890 — had its issues. In fact, if one were feeling mean, and choosing to define the car by its worst moments, the summary would be: guttural engine, jerky transmission, clunky suspension.”
Well guess what, James: the “worst moments” are what defines your ownership experience of a car or any product. It’s not being mean, it’s being open and honest.
And then he continues with what he calls “crepe hanging”:
- “Suspension thunk-clunked over patched and broken pavement.
- Engine muttered coarsely.
- Brakes were spongy: Push the pedal a little and you don’t get the feeling the car will halt in time. That provoked a much harder push (because by now you were a lot closer to the Hummer H2 stopped at the red light in front of you). And that, in turn, resulted in a sudden transition to panic-stop mode. Graceless, bothersome, unpleasant for all aboard.”
He goes on to talk about what he calls a “counterweight”: a classy interior and conservative styling.
My question: who cares? If the mechanical aspects are this bad, why would anybody buy this car over products from other manufacturers that don’t have these faults? Faults of the worse type. Who would want a car with a lousy suspension and engine? And lousy brakes, bordering on unsafe?
My answer: poorly informed buyers, who don’t shop across available brands and haven’t test driven them either. Buyers who are willing to settle for this kind of poor engineering because they don’t know any better or are blindly loyalist. It’s that last kind of buyer who has artificially propped up GM for so many years.
Healey should have said that this new car was unacceptable, instead of claiming it could compete in the total market. For informed buyers – it can’t. And it’s supposed to be Healey’s job to inform buyers. Fail.
According to Chrissie Thompson, of the Detroit Free Press. GM’s own sales figures show that less than 5% of the compact car-buying public have the Cruze on their shopping lists: http://www.usatoday.com/money/autos/2010-12-12-cruze_N.htm. Another disaster for GM.
My prediction: sales of the new Focus, when it arrives next month, will walk all over those of the Cruze.
Henderson has left the building!
I was recently on a business trip in two different cities and the roll of the rental car dice gave me an opportunity to drive two small SUVs: a 2006 Ford Escape and a 2007 Chevy Equinox. Both AWD and V-6 powered.
Summary: the Equinox is an absolute piece of junk.
First some background. I don’t always specify what car I want; I usually just request a class (size) of car. My favorite rental car company, Hertz, isn’t all Fords these days – you’ll find just about everything under the sun, with notable exceptions including Ferraris and Acuras. You know why you won’t find a Ferrari at Hertz. And you won’t find an Acura because Acura doesn’t want to hurt their image and lower the value (both residual and perceived) of their cars. So that leaves Chevys, Toyotas, Fords of course, the occasional Nissan and Infiniti, and Hyundai (which isn’t at all as bad as you might assume). I can’t remember ever seeing a Chrysler product at Hertz but I have seen Mercedes. My next Hertz rental will be specified as a 2007 G35, and on my prior trip I had a Lincoln Town Car. Hertz customer service is fairly consistent and reliable.
My first visit was to Raleigh, where Hertz gave me a Ford Escape. I’ve written about these before – they are a little dated but are still competent. Escapes (and their clones from Mercury and Mazda) make a fair amount of wind noise, the steering wheel is in the wrong position relative to the driver, the power steering is overly assisted, and the engine is no longer competitive (the competition having gone to the 3.5 liter range) in the current market. Still, it works and it’s reasonably compact and quick enough to get out of its own way. You can also easily see out of the Escape in all directions. Controls are familiar Mazda, and are logically arrayed. Seats are adequate for long durations. The Escape was designed by Mazda and rides on a chassis loosely borrowed from a previous-gen Mazda 626. The engine is Ford’s own 200 HP 3 liter DOHC V-6, NVH-tuned by Mazda, and throttle response is immediate.
My next stop was Washington DC and Hertz gave me a Chevy Equinox. I groaned at first but decided to take it – this presented an opportunity to compare and contrast 2 major competitors. And what a contrast: the Equinox is much bigger and taller than the Escape. But these two vehicles do compete in the market – they are each the logical step down in from a Trailblazer and an Explorer respectively. I’ll add that an Explorer is probabaly 100 times better than the terrible TrailBlazer – I’ve driven each dozens of times.
The Equinox makes a really terrible first (and last) impression – this truck has a tremendously ugly grill and headlights. You’ll also notice how tall the Equinox is, and you’ll confirm that as soon as you get into the drivers seat where you’re seated way down deep inside this truck. The view out the front is clipped and the view out the sides and back is poor. The front bucket seats are flat and offer very little support; power adjustment is provided but yields very little up/down travel and strangely warps the thigh support when you use it.
Ergonomic problems abound, and some are so bad that the net safety environment is almost dangerous:
- The A pillars are *enormous*. The view out the front of the truck is one of the worst I’ve ever seen.
- All the gauges go clockwise, except the temperature gauge. One quick glance at the temp guage makes you think something is very wrong.
- The power window buttons are on the center console (which is half-way up the dash – econobox style). It is confusing to try to reach for them while driving.
- The display on the radio is very reflective, even in moderate light. This makes it useless during the day and too bright at night. The buttons are tiny and are very tough to find while concentrating on traffic. They appear to have been styled rather than logically designed and arranged.
- When you lower the rear side windows, the airflow thru the car becomes painful to your ears and sounds like a helicopter is flying over the truck.
- The rear and side windows are so high off the ground that small cars can easily be lost 45 degrees to the rear. This is a problem in all trucks, but particularly so in this one.
- The dashboard leaves the lower 2 inches of windshield exposed, including the metal edging. The dash looks like it is missing it’s padded cover – it consists entirely of hard plastic pieces.
- The side mirrors have clipped corners, cutting off some of the most important view to the sides. Given the poor view out the windows, this is another critical – and dangerous – design flaw.
- The windshield wipers are all but worthless – in light rain there isn’t any speed or setting that doesn’t result in a dry and loud scrape across the window. The Equinox is equipped with very cheap wiper blades, and does not have infinitely variable wiper speed settings.
Front brakes are disc, but the rear uses drums. Pedal feel is soft and there is a delay in initial braking.
The engine is an oddity – a whopping 3.4 liters but only 185 HP thanks to ancient pushrod “technology”. There is a noticeable throttle lag that makes using the power in city traffic very clumsy. By contrast the Escape has no lag so it can easily be driven in cut-and-thrust mode in city driving. Unfortunately I needed to cut across about 10 miles of DC in rush hour traffic, so this cut-ann-thrust ability was important. And, despite the AWD, there is noticeable torque steer.
This lack of cut-and-thrust ability makes the Equinox overall the worst vehicle I’ve ever driven in DC traffic. It certainly won’t lead traffic, nor will it keep up with traffic.
So where was famed product czar Bob Lutz in the design of this hunk of junk? It appears that Lutz was absent, and that GM slid back to its old habits of cheap interiors and terrible ergonomics. All of the right technical bits are standard or optional on this vehicle, but none of them work well together. This is so typical for GM.
The bottom line is a vehicle that competes against several major domestic and import competitors, but doesn’t do a single thing well and doesn’t have a single factor to recommend it.
Very interesting “road test” of an interesting hyrogen-powered development car idea by GM.
Time has a fair article covering GM’s issues, with suggestions on how it can fix itself. This isn’t entirely a fair title… it needs help from the UAW to fix “itself”, even while it is letting go of 30,000 or more UAW laborers. The UAW is just as much a part of the problem as is GM’s lackluster products, spread across too many pointless brands. And don’t forget the dealer system, who sued to keep ye olde Oldsmobile going well past any point except their own very short-term profits. So much of the company is pointless you have to wonder what could be worthwhile.
The article points out that if a constomer wants a 4-door car, there are 10 to choose from (in my opinion mostly indistinquishable). In my opinion, take all the brands other than Chevy and Cadillac (who seems to be doing a lot that is very much right), and shrink them all into 1 or two cars that can leverage their brand name and that are unique from each other. This would leave the Pontiac Solstice and GTO (assuming there is another one), the Saturn Ion (but not the Pontiac Sunfire, or whatever the clone is called these days) and Vue, a luxury Buick 4-dr, a representative 1 or 2 GMC trucks of differing sizes, and that’s it. Then put all those products in a single dealership. That would be a rich dealership with a great range of products.
Solutions are cheap, so both my and Time’s opinions are nothing more than that. That real trick will be in the leadership to get this thing done. And leadership is what is sorely lacking at GM – and UAW.
A similar solution will be needed over at Ford… I still see no point in Mercury and strongly feel that Lincoln should be a boutique brand with it’s own chassis and engines (or those of PAG) – not rebodied Fords. A Five Hundred is a Montego… there is no difference (except perhaps in styling – but which is more boring?). Add the future LS replacement to that and you’ve still got another clone with little to distrinquish itself. Perhaps the Lincoln would offer HID lights and cooled seats, but is that and a giant grill worth another 10 grand? Same for the Fusion vs. the Zephyr – the difference amounts to absolutely nothing but a large grill, a unique dash (which with it’s round vents looks like any Ford truck or car these days), and nothing else. Not even a better engine (although the 3.5 will probably be standard in another year, it will also be an option in the Fusion – it has to be in order to be competitive).
The following are prepared remarks made by Delphi Corp. Chairman and CEO Robert “Steve” Miller to reporters in Washington, D.C., on Friday:
Thank you for taking the time to meet.
October has been a watershed month for the key automotive sector, with Delphi’s bankruptcy and GM’s historic rollback of retiree health-care benefits.
First, I’d like to share my perspective, starting specifically with Delphi and then, since this is Washington, I’d also like to talk about public policy implications. Then, I’ll be happy to respond to your questions.
At its birth at the spin-off in 1999, General Motors had created Delphi, the world’s largest auto supplier, with both the incredible blessing of sophisticated automotive technologies and the curse of uncompetitive labor contracts. By agreement, Delphi was saddled with automakers’ wages and benefits, yet it expected to compete with other US-based suppliers, many of which were organized by the same unions, but were paying less than half the automaker wages and benefits for their workforce.
The spin-off of Delphi was the right concept for GM. No automaker can successfully compete in the long-term, while paying above-market labor costs for the systems and components for their vehicles. The basic idea was for Delphi to outrun the legacy problem of its inherited labor costs by diversifying its customer base and global footprint. That strategy sounded good, but ultimately failed.
So what went wrong? Three things.
One. The spread between automaker’ labor costs and competitive supplier labor costs has widened sharply over the past decade, driven by globalization and by rising health care and pension costs.
Two. Given our high fixed costs and inflexible labor rates, the recent sharp declines in our shipments to GM due to their market share losses have been devastating.
Three. The game plan for Delphi included ‘flow-backs’ to GM of excess Delphi workers. But GM has had no room to accept Delphi employees, resulting in a $100 million penalty last quarter alone for 4,000 idled workers in Delphi’s jobs bank, drawing full pay and benefits.
So what’s happening now?
For one thing, our Chapter 11 process is limited to our U.S. corporate entities. So half of our business, which is located overseas, is not included in the filing.
Our customers are continuing to receive shipments on time, under contractual terms, throughout our restructuring.
Our workers are continuing to receive their current pay and benefits until we are well into the Chapter 11 process. Under the bankruptcy law, we are required to bargain with our unions in good faith. Despite all the noise, that process is under way. As is usually the case, we hope to arrive at an equitable settlement without court-authorized rejection of the labor contracts. Rejection results in a free-for-all, wherein management can impose contract modifications and the union is free to strike. Nobody wants to end up there. I believe we will find solutions that we can all live with.
Behind all the motions, hearings and ongoing negotiations are the lives and livelihoods of thousands of our workers. These are honest, loyal, hard-working people who took a job at GM or Delphi and played by the rules. They cannot be blamed for pursuing the American dream. They expected us to live up to our promises and we fully intended to deliver. All of us have been caught short by fast-changing global economics. Our people are being severely impacted. I don’t blame them for being frightened, uncertain or even angry.
It is a very difficult — and a very humbling — job to be the CEO of a company going through this transformation, knowing that my decisions will affect so many. I expect a continuing heavy barrage of criticism for my role here, but I will not shy away from facing up to the harsh realities of our situation.
Let me turn now to what I think is the broader context in which the Delphi reorganization is being played out.
Globalization is a fact of life these days. The implications for America are enormous. And it boils down to this: If you want your kids to live well and be in control of their own destiny, get them a great education. At one time in America a high school diploma and a job at the local factory was the ticket to success, but no longer. Nonetheless, globalization doesn’t deserve all the blame for what’s happening. There’s more to the story.
My recent experiences have been with three industries that are undergoing profound change: as CEO of Bethlehem Steel, as a board member at United Airlines, and as CEO at Delphi.
Steel, airlines, and autos. Different industries. Similar painful transformations.
What these three industries have in common is an implied social contract that has evolved over the past half century between oligopolistic competitors, in capital-intensive businesses, and fostered by workforces organized by strong centralized labor unions. With the enormous leverage inherent in the threat of prohibitively expensive work stoppages, unions in these industries were able to elevate their workforces above the standards enjoyed by most other Americans, while their employers passed along the costs to customers.
Elaborate defined benefit retirement programs, spurred on by favorable tax treatment, saddled future managers with growing burdens. Back in the days when you worked for one employer until age 65 and then died at age 70, and when health care was comparatively less sophisticated and inexpensive, the implied social contract inherent in these defined benefit programs perhaps made some economic sense. It no longer works in today’s economy.
In the steel industry, we were being run off the road, not so much by imports, but by domestic competitors such as Nucor and Steel Dynamics. They paid equally good wages, but needed half the labor hours per ton to do the same job. You may have seen the fine article in last Saturday’s NYTimes about Bethlehem Steel. Now part of Mittal Group, there are 8,000 well paid workers producing the same tonnage that 12,000 workers did just three years ago. How can that be? The elimination of antiquated work rules and job classifications is the biggest part of the answer.
In the airline industry, Delta and Northwest were shot down by Jet Blue and Southwest, not Air India or Air China. Worker productivity is a big part of the difference.
And in the auto industry, Toyota, Nissan, and Honda are competing from assembly plants in our back yard, but without the crippling work rules and social costs embedded in Big Three labor contracts. In each case, the old oligopoly has crumbled, not so much from globalization, but from upstart domestic competition.
This is part of the story of Delphi. We can compete on American soil with many of the components we make, but only if we have labor contracts that are competitive with domestic competition.
Today, traditional defined benefit programs are an anachronism, and we are witnessing the slow agonizing death of defined benefits as industrial compensation policy. That is not all bad. First, the lack of portability of defined benefits forces people to stay with one employer, even though we have a much more mobile and flexible population these days. Second, the notion of having all your retirement eggs in one basket — your employer — is a concentration of risk that is simply ill advised for anyone in today’s fast-moving economy. Finally, these programs have a way of toppling traditional large employers. No company should be making open-ended promises to its workers for events fifty years down the road. One of the more visible examples is GM, a junk bond credit these days as it staggers under a burden of $170 billion of combined pension and health-care obligations.
Add to the mix that people are living longer these days. And medical science is rapidly expanding the capability to spend vast amounts of money to keep individuals alive for decades. Of course, that is a good thing. But the question is, how do we pay for it? As a society, we must generate enough wealth in our working years to support our income aspirations and health-care needs in our sunset years. It’s getting tougher all the time.
In the midst of these trends, the unions in the traditional steel companies and the traditional auto companies successfully bargained for ‘thirty-and-out’. The theory was, create more jobs by retiring people sooner. And isn’t working thirty years in a factory enough? What this means is that people can start work at age 20, retire at age 50, and expect full pensions and health care until age 90 or so. In real terms, this idea says that you will enjoy the fruits of your labor for more years than you were actually at labor. As a society, somebody has to pay. And to the shock of the Big Three automakers, they’ve found that consumers won’t pick up these costs when they have choices. As someone said, buy a Hyundai and get a satellite radio as an option. Buy a Chevy, and social welfare comes as standard equipment!
Things are about to get messy for the Big Three in coping with all of this. The current labor agreements expire in 2007. Stay tuned for a historical collision point of all these social and economic forces.
My worries — and the scope of this problem — go well beyond the auto industry. What I am describing is also embedded in the ongoing debates over Social Security and Medicare. The overwhelming voltage in the political third rail of touching these entitlements will forestall corrective action for years, but the problem will only grow. Think of the coming inter-generational conflict, as young people increasingly resent having their wages reduced and taxed away to support social programs for their grandparents’ income and health-care concerns.
Now, let’s talk about pensions. It is an important topic that I’d like to spend a few minutes on today.
Delphi’s pension plans have been the object of much speculation. We have about a $5 billion shortfall in our plan assets to our plan liabilities. Some have speculated that Chapter 11 means automatic termination of the plans. That is simply not true.
As background, I have been involved in a leadership position in about ten corporate restructurings, starting with Chrysler in 1980, and now at Delphi. Half of them involved Chapter 11. Usually, the pension plans survived intact. Only at Bethlehem Steel did the PBGC (Pension Benefit Guaranty Corporation) take over the pension plan. There we had 12,000 active workers in six steel mills, all bleeding red ink, trying to support 130,000 dependents. The math did not work. The PBGC justifiably took action to terminate the plans.
At Delphi, we have made no decision to terminate our pension plans. The big question will be whether we can formulate a Plan of Reorganization over the next few months that can generate sufficient capital to support continued efforts to restore funding of the plans.
For starters, our labor agreements need to be modified such that we have profit margins sufficient to repay the pension plan shortfall out of future years’ profits. This will put the unions in the difficult position of perhaps having to make trade-offs between maximizing the pay and benefits for active workers versus maximizing the chances for saving the pension plans. It is a calculus made infinitely more complex by GM contingent benefit guarantees for our retiree benefits.
Second, we need to keep key customers confident in the future viability of our business.
Third, we will probably require some flexibility as to our required PBGC funding schedule.
And fourth, we will have to convince creditors in our bankruptcy case that we should reorganize in a way that holds the PBGC harmless.
Tough assignment. The jury’s out as to whether we’ll succeed.
Putting aside Delphi’s predicament, the PBGC has accumulated a staggering deficit from the numerous recent plan terminations, and Congress is clearly worried about it.
Here’s my take. On one hand, the pension problem is slowly being resolved as more and more of our private sector moves to defined contribution, 401(k) type of programs, which means no more legacy liability issues for the newer sectors of our economy. In recent years, the number of plan sponsors has declined from over 100,000 to fewer than 30,000. I think this long term trend is a good thing. We can still do something, however, to avoid further devastating train wrecks with remaining traditional defined benefit programs.
Congress has been wrestling with this issue for several years. The big question surrounds this dilemma: Do you tighten the funding rules and risk tipping over more pension plans into the arms of the PBGC? Or do you loosen the rules, only to find more pension plans getting into trouble later?
A number of companies, most notably some airlines, are pressuring Congress for relaxation of the rules. And I agree that more time to allow for a cure is preferable to plan terminations, which would further deepen the PBGC’s woes.
Where I find myself at odds with my colleagues in much of the business community is the notion that one-size-fits-all solutions are appropriate. In a nutshell, I would tighten, not loosen, the rules; require all plans to be targeted at 100 percent funding. At the same time, I would give the PBGC the flexibility, with approval authority vested in its board, to cut tailor-made repayment plans that reflect the needs of particular companies that fall behind. And I would give the PBGC what I call ‘conventional weapons’, including the right to negotiate covenants, collateral packages, benefit freezes, and other mechanisms to protect the interests of the PBGC from catastrophic failures. Right now, the PBGC has only the “nuclear option” of plan termination, which they use sparingly and only when all is lost.
One reason we seem to have so many plan failures is that our current accounting rules permit companies to use generous assumptions about the earning power of plan assets. These rules often end up underestimating the potential true economic shortfall in plan funding. The SEC is looking into this, and I expect some changes in the disclosure requirements so that we can at least face up to the problem.
Point Two is that there is incredible lag time in addressing any shortfall. A stock market decline in plan assets occurring in January of Year One does not even get addressed by the contribution rules until September of the following year, and then the recovery requirement is spread over a bunch of future years. By the time the rules catch up with you, you may be hopelessly behind. Sure, there are other things companies would rather spend money on than shoring up the pension plan. But it was not the intent of the system to provide easy credit at the expense of the PBGC. I would require a mark-to-market exercise quarterly, rather than annually, and require recovery plans to be worked out with the PBGC promptly.
What I am suggesting will not make our current problems disappear. But neither do I think Congress should be tinkering with a legislated rule set that can’t possibly fit widely different situations. And while I’m at it, why should airlines get an easier deal than auto companies? As noted in The New York Times a couple weeks ago, I have suggested changing the name of my company to ‘Delphi Airlines’ to get longer relief.
To repeat my suggestion: Don’t loosen, but tighten the legislative rules. But give the PBGC the tools to deal with problem situations.
Well, if you think the pension situation is bad, what about health care?
Unlike pensions, which are pre-funded to some extent, retiree health care promises by and large are completely unfunded and without any Federal backstop other than Medicare.
For some time, GM has been sagging under the weight of $80 billion in unfunded health-care obligations to retirees. Some have said GM is actually a giant HMO that happens to make cars! Just last week, they got some relief from the UAW in exchange for putting a billion a year or so into a VEBA, (Voluntary Employee Beneficiary Association) which reduces the reported accumulated liability to a mere $65 billion.
We are reaping the harvest of years of putting more and more of our country’s social costs on the backs of private employers. We lament the loss of jobs to foreign entities that sell goods to our consumers without those burdens. How long are we going to put up with it? Why do you think the next big Toyota assembly plant in North America is being built in Canada? The calculus of health-care costs might have been a major factor.
We could spend a month talking about all the things that could be done to reduce the cost of health care. It’s an important debate. Tort reform, prescription drugs, information technology, and health savings accounts all need to be part of the mix. Clearly it’s time to consider some bold proposals. I expect to join in the discussions as we search for answers. It won’t be easy.
So there you have it. Delphi is a metaphor for nearly every economic and social issue gripping American manufacturing. These are huge problems that also present huge opportunities to at last confront our economic problems straight on and deal with them.
Thank you for taking the time to hear me out. I’ll be glad to take your questions.
GM Sales Blowout Pulled Forward Sales, Power Says
The 47-percent boost in sales at General Motors last month didn’t pull in as many customers from other automakers as GM hoped, according to new information from J.D. Power and Associates’ Power Information Network (PIN). GM’s employee-discount program pulled forward customers who would have otherwise waited to buy a new GM product, rather than customers who shopped other brands, the PIN study of GM sales data suggests. Some 63.1 percent of vehicles traded in for new GM products during the month were other GM vehicles; in May, the figure was 64 percent, according to the Detroit News.
The paper adds that GM doesn’t agree with the Power assessment, offering that so-called “conquest” sales (those coming from customers shopping other brands) rose by 50 percent in the month, pulling in more than 150,000 new customers. Since GM announced its employee-discount offer for all customers, Ford and Chrysler Group have matched the deals.
GM Sales Explode in June by Joseph Szczesny (7/4/2005)
“Employee discount” offer sends sales skyrocketing.