On-the-Point

Dawg in the Cat Box

Dealers, manufacturers and the Zieglers are learning to face their fears in a market rocked by recalls and initial quality concerns.

December 4, 2015

My wife, Debbie, finally took a long-overdue trip to Phoenix to visit her sister. It was an opportunity for both of us to face our fears. She had yet to take a trip by herself since we got married. I hadn’t been home alone for more than 20 years.

I arranged for transportation to and from the airport in Phoenix and assured Deb there was nothing to worry about. She showed me how to work the dishwasher and left a detailed list of household tasks. Heck, I thought, I was only going to have to manage the house for five days. How hard could that be? So let’s see what we got here. The pool guy and the gardener will be here Monday. The housekeepers come on Tuesday. Feed the dog. Feed the cat. Scoop out the cat’s litter box … Wait a minute! I didn’t sign up for that! Doesn’t she know I have a weak gag reflex?

That night, Deb called to let me know she’d arrived safely. I said I was doing just fine myself and, by the way, exactly how often does that cat box need to be scooped out? “Every day.” Can’t I just throw the entire contents over the back fence? “No.”

Equipped with the scooper, a bucket, rubber gloves and a shot (or two) of 100-proof vodka, I went to work. It wasn’t pretty, but I got the job done. I even posted a selfie of me holding the scooper on Facebook. After four days, I was a pro. (Deb came home on the fifth, so I saw no sense in overextending myself.)

I really missed my wife and I gained an appreciation for all the things she does. Above all, we both learned a lesson I’ve learned and relearned through the years: You have to face your fears and power through them. You have to just dive in and do it. So many people in the car business are stuck in their old ideas. They’re afraid to let go, learn new things, try new processes and use new tools. In our industry, if you can’t learn, adapt and change with the times, you become obsolete.

Dropping Takata Like a Bad Habit

Vehicle manufacturers are fleeing Takata in droves in the wake of the airbag manufacturer’s massive recall. The author believes the company could fail as competitors pick up its former customers.
Vehicle manufacturers are fleeing Takata in droves in the wake of the airbag manufacturer’s massive recall. The author believes the company could fail as competitors pick up its former customers.

Now who told you this was going to happen? I’ve been saying it all along. Honda, Toyota, Mazda and now Nissan are all dropping Takata, the second largest manufacturer of airbag inflators and seat belts. This week, the National Highway Traffic Safety Administration (NHTSA) imposed fines on the company of $70 million, with an additional $130 million fine contingent on their continued compliance.

As I’ve written previously, I think the main reason the Japanese manufacturers are throwing Takata to the wolves is because they’ve had concerns about defective ammonium nitrate propellant inflators for some time. If that’s true, they made a callous decision to continue to install these airbags in their products anyway.

This is just another brick in the wall. Manufacturers continue to be exposed as being reckless and deceptive, putting profits over safety concerns for their customers. In my last few articles and speeches I predicted that Takata is indeed not too big to be allowed to fail as their customers defect to Autoliv, TRW Automotive and Daicel Corp., none of which use ammonium nitrate.

Insiders are saying Takata will survive, but I’m going to predict this scandal has not run its course. One more headline could put Takata out of business permanently. As of today, their stock is tanking with the news of the Japanese manufacturers defecting, especially Honda. I hate to say I told you so, but ...

Hyundai has announced plans to spin off the popular Genesis into its own brand and lineup, including the “Vision G” sport coupe, above. Ziegler predicts standalone facilities and sales forces will soon follow.
Hyundai has announced plans to spin off the popular Genesis into its own brand and lineup, including the “Vision G” sport coupe, above. Ziegler predicts standalone facilities and sales forces will soon follow.

The Book of Genesis

I am cracking myself up and spraining my elbow patting myself on the back. I’ve been saying it, spraying it and writing about for the last three or four years. No less than two CEOs of Hyundai North America said I was wrong and it was never going to happen. Of course, my predictions seem to last longer than they did.

I said Hyundai was going to spin off their Genesis luxury lineup as its own brand. I also said they would require Hyundai dealers to compete for the franchise with standalone facilities. I’ve written and spoken about it in many articles, blogs, speeches and podcasts. I have argued and debated it with John Wedkos, my good friend and a Hyundai dealer. I intend to call him and rub his nose in it as soon as I finish this article.

That’s right: The announcement came this week. In the words of that great 20th century philosopher, Gomer Pyle, “Surprise, surprise!”

The “Genesis” nameplate will go solo beginning with the 2017 model-year, introducing six models initially. Hyundai spokespersons have said they’re going to rename the Genesis and Equus as the G80 and G90. (My regular readers know I believe going to alphanumeric designations instead of actually naming vehicles is always a mistake.) They are also going to introduce a new, smaller model called the G70. Then there’s the “Vision G” luxury sports car concept that has been making the auto show rounds. If that car goes into production, it’s a real contender. Beautiful! With the right power and amenities, Hyundai could get a whole new audience.

I am predicting right now they’re going to sizzle and pop. They’ve hired the best designers and engineers and are preparing for a full-out war with BMW, Mercedes-Benz, Lexus and all comers.

Of course they also announced they intend to sell them out of Hyundai showrooms, side-by-side with Hyundai products, by Hyundai salespersons and management. Let me think about that for a moment. OK, I thought about it. That ain’t gonna happen, not in a million billion years. My prediction is that as soon as they feel they have the brand established, they’re going to break it off and require dealers to produce facilities and new sales forces. Their grand plan will not be realized by lining the G90 up next to the Tucson.

Everything about this rollout is too well-planned in detail and premediated in the unpredictably predictable Korean factory mindset. Remember, this corporation has whacked more executives than the mob. By the way, don’t get me wrong — I love those guys and gals at Hyundai and Kia. They build great cars and they are ruthless businesspeople. Being a Hyundai or Kia dealer is really good when you can get the product, but don’t sit back and believe they are not going to move to dedicated, standalone facilities for Genesis. My advice is to just relax. When the time comes, they’ll be ready and it might just work out for all sides.

Hey, Kia dealers, don’t you go getting too comfortable either. You’re next.

Rocked by an ongoing emissions scandal, plunging values and imminent penalties, the author wonders whether Volkswagen will ever fully recover, particularly in the U.S. market. 
Rocked by an ongoing emissions scandal, plunging values and imminent penalties, the author wonders whether Volkswagen will ever fully recover, particularly in the U.S. market. 

Can Volkswagen Survive?

Just a few months ago, if you would have even insinuated the possibility that VW would go under, your friends and family would seriously consider having you committed. We’re talking about one of the biggest corporations in the world and an automaker that has been No. 1 globally more than any other manufacturer since the 1970s.

Educated estimates are saying this scandal will cost the company right around $40 billion in fines and lawsuits in the U.S. That is not even factoring in the already $20 billion in lost market value. To put that in the proper perspective, you might remember that General Motors burned through $32 billion in cash under the leadership of Rick Wagoner before they tanked and declared bankruptcy.

The main difference between GM and VW, however, is the trust factor. The public can forgive incompetence. But VW is guilty of much more. They deliberately engineered a massive deception of their customers and their governments.

In the U.S., I have a feeling forgiveness is not going to come easy, if at all. Some of us remember the diesel-powered Volkswagen Rabbit from back in the ’70s and ’80s. It legitimately delivered up to 50 miles per gallon. Of course, it was so underpowered it couldn’t get out of its own way. You had to turn the air conditioning off to go uphill. Stateside sales were anemic at best, but the Rabbit represented a renaissance of the VW brand in the U.S. market. It replaced the original Beetle and was replaced by the Golf.

This company has reinvented itself several times already. The real question now is: how many lives does this cat have?

They’re taking it from all sides, and not just in the U.S., but globally. Investors are righteously pissed off. Consumers are beginning to realize how much value their cars have lost because of this deception. Who knows how many governments are going to make them pay? The lawsuits will continue coming from consumers, dealers, investors and state agencies.

Engineers inside the corporation have admitted to two different issues of deception engineered into the cars: First, they dramatically misrepresented mileage per gallon with several tricks to fool the regulators. Insiders at VW admitted they mixed diesel fuel in with the oil during mileage testing to show less fuel consumed and the engines ran smoother. They also manipulated tire pressure to show higher mileage.

Second, they built in devices and software that only turned on emission controls when the cars were being tested. In reality, according to the Environmental Protection Agency (EPA), VW cars emit up to 40 times the national standard for nitrogen oxide, which contributes to asthma, emphysema and even lung cancer.

Now many dealerships have little or no inventory to sell; in effect, they’re holding units. Of course, VW is helping with flooring and other problems, but lost sales and profits have salespeople defecting in many stores. Some dealers are upping their used-car inventory. The VW dealers I know have long complained about the OEM as a manufacturer partner — overbearing, arrogant and difficult to deal with. Now they’re asking their dealers to be patient and understanding. They don’t deserve it.

Until now, customers have exhibited some amount of loyalty to the brand and the full effect hasn’t hit them yet. I predict what we are seeing now is the calm before the storm intensifies. We are seeing it from a U.S. perspective, but remember: VW sold more than a million of these globally and there are other governments and international consumers and dealers who are also pissed off.

I see attack attorneys advertising on television to get VW customers to join mass-action lawsuits. What’s the cap on their losses and liability here? Could it be as high as $100 billion? Will the German government bail them out if they need the help? It appears the scandal is already bleeding over to Porsche and Audi luxury diesels. This is all far from over. 

VW is issuing credit cards to owners of the affected models for an undisclosed amount. The catch is the credit card must be activated by a VW dealer. Well, that’s one way to be sure the dealer gets a shot at explaining and retaining the customer. Then there is supposed to be a second credit card sent to the customer good for service on their vehicle. Once again, a good strategy to keep them in the family. At the time I am writing this, the program is new and specifics are known only to the dealers.

I’ve talked to a lot of VW dealers in the last few weeks. Needless to say, they’re all privately pissed off and publicly in support of the brand. These are good and decent people, and some of the best dealers have been dealt a bad hand. VW better do the right thing. My only fear is that they might not recover from this one.

Oh, Good, Another Billion-Dollar Electric Startup

Darn you, Elon Musk. Look what you started! Details about a new electric-vehicle manufacturer known as Faraday Future are sketchy, shrouded in mystery and cloaked by intrigue. Who owns it? Where did the money come from? So far, it only exists in press releases and a kick-butt website. The executive team is said to include four vice presidents who defected from Tesla.

Their press releases incorporate every warm and fuzzy buzzword you could imagine, all strung together in a barely digestible form that makes a normal person want to choke. They tout a “user-centric, technology-first experiential approach to connect their car to the rest of your life.”

The insider money thinks this is Apple entering the automotive market. They’ve been threatening to do it, and the rollout, such as it is, matches their style. They certainly have the billion in spare change in the cushions of their corporate couch. They’re even shopping states competitively for concessions to build their first plant. In other words, whoever they are, they’re acting like the real deal. Yeah, it’s probably Apple.

The Fiat 500L finished No. 1 on Consumer Reports’ most recent list of unreliable vehicles as determined by surveys completed by car buyers.
The Fiat 500L finished No. 1 on Consumer Reports’ most recent list of unreliable vehicles as determined by surveys completed by car buyers.

Consumer Reports’ 20 Crummiest Cars

Whoops, I got the title wrong. Consumer Reports just released its annual list of the “20 Least Reliable Cars.” The report is based on thousands of reports from actual owners participating in the survey, much like the J.D. Power initial quality reports, and many of the same cars failed both tests. There were some real surprises in the mix — for me at least — including some cars few would suspect of harboring the potential for multiple operational failures.

Lexus came in as the most reliable car in the survey. Who would have guessed that?

Of course, the darling of everybody’s survey, the Fiat 500L, didn’t disappoint us. It came in dead last as the least reliable car out of all of them. No big surprise there. Fiat has dominated the bottom position of everybody’s surveys and research. They were crummy cars 20 years ago and they’re crummy today. You can put them in the Least Reliable Hall of Fame with the Yugo, Vega and Pinto.

One huge surprise is the new Corvette, which ranked as the fifth least reliable car in the survey. They cited the new car’s climate control system, engine and electronics as unreliable.

Fourth most unreliable was the new Jeep Cherokee. No surprise there. It was a really hot seller but initial quality and reliability surveys spelled trouble from the start.

The other big surprise to me is the third most unreliable car, the Cadillac Escalade. Say it ain’t so! Consumer Reports pegged the Escalade with problems in the transmission, electronics and drive system. There was a pattern with GM vehicles on the list, including trucks, all of which appear to have electronics problems.

Rounding out the bottom five, in the No. 2 spot, was the Ford Fiesta, which took hits for issues with the transmission, noise and leaks.

Cadillac, Lincoln, Mercedes, Acura, Hyundai and Infiniti all had cars in the Terrible 20. Almost every car on the list had electronics listed as one of the failure items. I’ve written about the overwhelming preponderance of (mostly useless) technology in new vehicles. Is it possible the manufacturers are stretching beyond their limits in the tech race?

On a side note, Consumer Reports also tested the Tesla Model S. The results were mixed. The electric car got rave reviews on handling and performance; in fact, analysts went so far as to say it was the best handling car they tested. But the reliability was substandard and did not even receive the “recommended” designation. Last year, the car received an “average” score for rate of incidents. This year it dropped to the category of “worse than average.” Those are their words, not mine. I would have said “crappy” and “crappier.”

The S earned demerits for reported problems with the drivetrain, charging equipment, center console electronics, sunroof, power equipment and squeaks, rattles and leaks. The analysts also noted that the S they tested appeared to have declined in reliability from the debut model in 2013.

This is going to be a growing problem as long as these cars stay on the road. Luxury buyers will not stand for bad grades. There might be as rapid a defection from the brand as there was initial enthusiasm. No matter how great the buying experience is, if the car sucks and the ownership experience sucks, good luck keeping those customers.

Well, as I near the end of another article, I can breathe a sigh of relief. My happy home is complete and my poop-scooping days are behind me — at least until Debbie decides to take another trip. Until then, keep those messages and emails coming, and don’t forget to find me and all the other cat lovers on social media.

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