AUTO MANIA

by Dr. Iain Corness
PAG looks to the USA for its salvation

It is no secret that CEO Bill Ford expects each section of the FoMoCo empire to pull its weight and produce a profit. One group that has not, in fact quite the reverse, has been the Premier Automotive Group (PAG) comprising Jaguar, Land Rover, Volvo and Aston Martin. To turn this around, new blood was brought in, after the old blood was spilled (previous PAG CEO Reitzle).

Mark Fields

Mark Fields, previously in Mazda, was named CEO of Ford’s Premier Automotive Group in July 2002 and has spent the first six months on the job learning the differences between his four luxury brands and setting priorities for cross-brand efficiencies (in corporate-speak). In other words, he now knows the differences between a Land Rover and an Aston Martin, and whether you can get a Landy engine in a Jag and vice versa.

After his speech to the Automotive News World Congress, Fields said he plans to implement at least the top three of his priorities this year. They are to launch products flawlessly, secondly to reach efficiency and cost-saving goals and thirdly to balance its marketing equation of vehicle volume, marketing costs and pricing.

According to Automotive News, Fields would not disclose specific goals for efficiency and cost savings among his four brands, nor would he say how much PAG is expected to contribute to FoMoCo’s earnings goal of 70 cents a share for 2003.

However, he did elaborate on a few areas. “In the United States, just on facilities costs alone, we’ve saved about 6 percent,” Fields said. “As you look at logistics, there are huge opportunities there. We kind of combined port logistics here in the U.S., and that saved us about 7 percent. Depending on the issue, you can get some quick wins. Other things will take more time.”

Examples of cost savings that will take longer are parts sharing between the brands. For example, he said that versions of Volvo’s 6-cylinder engine will be shared among the group, commencing around 2005. Volvo engined Jaguars are on their way.

Bunging all the four brands under one dealership roof, will not necessarily occur, though in some regions this will happen, but Fields would not be specific on this.

In his prepared remarks, Fields told the World Congress attendees that he is particularly focused on the United States, PAG’s most important market. “Strong premium and luxury credentials give our brands great potential,” Fields said. “But if we are to realize that potential, and make our full contribution to Ford’s revitalization, we still have a lot of work to do.”

Brighter future?

At the same Automotive News World Congress, the GM Vice Chairman Robert Lutz gave his views on the way the American auto scene was headed, and the tough old car man acknowledged there were problems, but none that the industry couldn’t take care of, in his opinion.

Bob Lutz

In his speech, Lutz listed four guidelines the industry could follow to reach a new Golden Age:

1. “The world is what it is: Deal with it.” Companies must remain calm while dealing with change and difficult market conditions. “Companies with common sense of purpose will be able to swiftly adapt to all sorts of market conditions, and those that cannot will suffer because of it.”

2. “Like humans, all companies are different; do what’s best for your particular situation.” Each company must find its own formula for success, based on its own strengths, markets and culture. “We all have a tremendous opportunity to build the best vehicles that have ever been built. And part of the reason why is these diverging product philosophies that result from the diverse, creative talent pool at our collective disposal.”

3. “The love affair with the automobile is not dead - but maybe we just forgot how to do it!” Resurgent automotive design, power train innovation and advanced technology, such as hybrid vehicles and cylinder deactivation, will win back customers’ affection. “The automobile is still the most emotional product on the market today.”

4. “Seventeen million buyers can’t be wrong.” Four years of 17-million U.S. vehicle sales show that buyers still crave cars. “The demand and attraction still exist,” Lutz said. “If the passion part of the equation has stagnated a bit - well, that’s going to change.”

Lutz is certainly the man who is putting the passion back into the GM line-up, with the Pontiac GTO and the Cadillac V16, 1000 horsepower, concept car being shown at the Detroit show.
What will really happen with Eff Wun

Since last week and the FIA’s bombshell to the Grand Prix circus teams, the team owners have come out of their foxholes and we are now in the situation of seeing the real situation.

Just recapping, the main parts of the FIA decree was to eliminate driver aids - make the expensive parking jockey change his own gears, get off the line by himself and watch his own instruments and drive accordingly if the engine oil temperature was getting too high, instead of having the engineers limit engine revs and such, all done electronically from the pit wall. There was also the edict that spare cars were to be a no-no as was driver to pit communication and pit to driver radio.

2003 Renault F1

The constructors have a body called the Technical Working Group, and this has helped iron out some of the more ambiguous proposals put forward by the FIA President Max Mosley.

One of the main problematical areas was when exactly were most of the driver aids to be dumped? Although all driver aids are banned for 2004, the FIA seemed to leave it up to the individual teams to decide when, or even if, the devices should be removed this season. Knowing the F1 teams, this did not seem to be all that bright!

The FIA has now clarified some of the rulings, stating that traction control and automatic gearbox will be outlawed from the British GP onwards, six months hence. Launch control will also be banned after the British GP, providing all teams can operate their clutches manually. Eh? Has Michael Schumacher forgotten how to use the left side pedal? And he gets 30 million big ones a year? Come on!

Spare cars, which were originally going to be banned, will now be allowed, but only if a car is seriously damaged in practice or qualifying. The spare car will also be released for use if the race is red flagged during the first two laps. The spare car will also be allowed if one of the main cars fails just before the race. In both instances the spare car will start from the pit lane. This is a little bit more sensible. The spectators (us) want to see the maximum number of cars out there.

Although pit-to-car telemetry remains banned, car-to-pit telemetry is now allowed. Furthermore, contrary to the FIA’s earlier ruling, radio communication between the pits and drivers will be allowed providing the communication is left open to the FIA and the media. So now we should be able to hear just what goes on, like, “Michael, let Rooby Baby win this one, go on. You won the last one, be fair!”

Ah well, we shall see, but don’t expect drivers to be using their clutches and changing gears by themselves in Melbourne!
Gloom and Doom ahead?

Morgan Stanley Managing Director Stephen Girsky told the Automotive News World Congress that slumping markets overseas and declining domestic sales are likely to create a tough year. While the US markets have continued to experience 17 million car sales a year, this is a false barometer of the true situation says Girsky. He cites the fact that competition has grown even stronger between automakers and much of the sales has been brought about by decreasing profit margins, keeping prices artificially low.

Morgan Stanley projects 2003 US sales of 15.9 million - low compared with most other industry estimates, which are in the 16 million to 16.5 million range, and much below the previous marks. In addition, Girsky said poor sales in markets such as Japan and Brazil are likely to prompt automakers to ship vehicles built in those markets to the United States. “We expect Japanese sales to be up about 1 percent this year,” he said. “The worry is that demand is weak in Japan and that capacity is going to find its way over here.”

He also pointed to other indicators for a bad year ahead with hikes in interest rates, petrol prices, consumer confidence, used-car values and unemployment rates. He also said that the downturn in leasing and the upsurge in low interest car loans would not be beneficial to the industry. “Fewer consumers are going to be force-fed back to the dealership,” he said.

Autotrivia Quiz

Last week I said let’s go across the pond to the UK and specifically Jaguar, even though it is now owned by FoMoCo. The XK 120, a classic, was the result of a cock-up by the bodywork company that had been assigned to build the Mk VII Jaguar sedans. They were unable to deliver on time for the 1948 London MoShow, and the boss of Jaguar, Sir William Lyons, said that if nothing else, the new chassis would go on display. To make an impact, he designed a spectacular 2 seater bodywork to go on the chassis. This was called the XK 120. Now I am coming to the question - I asked how did they pick on that designation for the 2 seater Jaguar? A clue - there was one reason for the XK part and another for the 120 bit. This was easy, the experimental engines were designated XA, XB, XC etc and the one in the final mock-up was the XK version. The 120 came from the estimated top speed of the car - 120 mph. Simple!

So to this week. Another easy one and let’s stick with the XK 120 Jaguar. What speed did it do?

For the Automania FREE beer this week, be the first correct answer to email [email protected]

Good luck!

Buying a car on the drip. How long before you can sell it?

Hire purchase, low interest, long term agreements are all the rage, both here and overseas. You can buy most vehicles these days on minimum deposit and sometimes zero percent interest rates. This looks attractive, bringing many new cars into the “affordable” region for many wage earners. But there is a catch.

As soon as you drive out of the dealership, the value of your “new” car just fell - alarmingly! In simple terms, you now owe more on the car than you can get for it if you try and sell it. Financially, you are now caught. If something happens and you cannot afford the repays any more, you are sunk. Get out and cop a big loss.

I came across some interesting statistics, in America in the fourth quarter of 2001, it took 26 months for consumers to get “above water” on their car loans, but that figure had risen to 33 months by last August. Frightening. And worth remembering!