On-the-Point

A Faster Horse

September 7, 2016

Courtesy Ford Motor Co. 
Courtesy Ford Motor Co. 

Whether he actually said it or not, one of Henry Ford’s most famous quotes is, “If I had asked people what they wanted, they would have said faster horses.” When he was the president of Ford, Lee Iacocca and his staff played off that legend, finding equine names for new models such as the Mustang, the Bronco, and even the Pinto. The Mustang became the subject of the documentary “A Faster Horse.”

Whether Old Henry said it or not, the philosophy permeated the entire industry for the next 50 years. The attitude of the Big Three in Detroit was, more or less, “The public be damned. We’ll build them and they’ll buy them.” That worked fine until the mid-’60s when the imports started coming ashore in large volumes. Better quality cars and trucks coming out of Japan and European luxury brought the Detroit giants to their knees and forced them to try something new. That’s when they actually began paying attention to consumers.

Unfortunately, as it is with all manufacturers, the lessons learned are never passed on to the next generation. As the old guard retires, the new executives often go down the same stupid paths, forever trapped in a “Groundhog Day” scenario and doomed to repeat their forebears’ mistakes.

The “autopilot” feature built into the Tesla Model S has come under scrutiny after a fatal accident. The feature allows for occasional hands-free driving but is not intended to replace the driver. Photo: Steve Jurvetson
The “autopilot” feature built into the Tesla Model S has come under scrutiny after a fatal accident. The feature allows for occasional hands-free driving but is not intended to replace the driver. Photo: Steve Jurvetson

Hands Off

Our entire industry is laser-focused on two trends right now: autonomous vehicles and electric powerplants. One thing that jumped out at me while researching this article was the glaring fact that neither has been driven by popular demand. Nobody actually asked the people. I looked at more than nine surveys and research reports on the subject, and the highest public acceptance of self-driving cars was 48% — and they were touting that as a huge mandate! Excuse me, doesn’t that mean 52% would not buy or ride in a self-driving car?

The government is also on board with autonomous, self-driving vehicles. Mark Rosekind, director of the National Highway Traffic Safety Administration (NHTSA), says the agency is enthusiastically backing the development of this technology. Rosekind cited alleged industry-supplied research that autonomous cars will reduce 94% of car accidents. This rush to autonomous cars is driven by nothing more than fluffed-up research and unbridled greed.

On May 7, Joshua Brown, a former U.S. Navy Seal, died after his Tesla S plowed into a semi-trailer while in “autopilot” mode. In a Senate committee hearing on the matter, the factory’s chief executive, Elon Musk, said the autopilot’s radar and camera systems might have failed to detect the white truck against a bright sky. Ziegler translation: The sun got in the computer’s eyes.

Consumer Reports asked Tesla to disable the autopilot feature in all its vehicles until they can install technology to verify the driver’s hands are on the wheel, as Tesla itself instructs. In reading articles from a number of sources, I was surprised to find a number of Tesla cars have crashed while on autopilot. I keep up with industry news as well as anyone I know, and I had no idea.

Besides Tesla, which, mind you, does not claim its autopilot feature qualifies as “self-driving” — we have Ford, Uber, Google and Delphi running small fleets of experimental, fully autonomous vehicles on our highways. When exactly did we give them permission to use public roads as experimental test tracks? And, of course, the question arises: How much liability belongs to the manufacturer when self-driving technology fails and causes a fatal crash?

Delphi is now taking their experimental autonomous testing on the road in Singapore. They’re even trying to build an Uber-type service, minus the drivers. You read that right. Their plan is to develop it in stages, ending up with what they called “driver-out-of-car” operations. One report referred to them as “robo-taxis.”

I suspect Delphi has a little more leeway in Singapore than it would in the United States. If you’ve ever been to Singapore, you know the traffic there is chaotic and dangerous. Cars, scooters and bicycles all merge and exit together and change lanes constantly. Navigating those streets requires a lot of courage and a touch of insanity. I hope any autonomous technology Delphi tests in Singapore is not allowed into the U.S. without a full reporting of what accidents they had in the process.

The old adage about ignoring the elephant in the room is certainly true here. We all know they’re working on it, but nobody is talking specifics. Apple is extremely active in developing autonomous technology, but they’re way behind the curve, at least compared to what others have already achieved. Most recently, I’m told, they have begun recruiting engineers and developers from competitors, including Tesla.

Is Tesla for sale? Investment insiders are abuzz, but it may just be wishful thinking on their part. The rumored sticker price is $75 billion. I predict it’s going to happen and it’s going to happen soon. Musk is on to new projects. He is launching a space program and developing a battery that could totally disrupt the power industry with low-cost, highly reliable and abundant electricity. In other words, Musk could sell Tesla vehicles to Apple and still manufacture the batteries in the “Gigafactory” he’s building near Reno. Musk says this plant will initially manufacture half a million batteries a year.

Apple would be the perfect steward to continue the Tesla brand and insert their own retail process innovations. Let’s see what happens.

Reporting Errors

Ziegler believes a request for records from the Securities and Exchange Commission (SEC) could be the opening salvo in a federal campaign to halt the falsification of vehicle sales reports. Photo: Agnostic Preachers Kid
Ziegler believes a request for records from the Securities and Exchange Commission (SEC) could be the opening salvo in a federal campaign to halt the falsification of vehicle sales reports. Photo: Agnostic Preachers Kid

Poor Sergio Marchionne. Right about now he must feel like Mister Bill getting pounded by Mister Sluggo. He’s got recalls and the Brexit-induced European recession to contend with, he can’t sell the company and nobody wants to merge. In spite of all of that, sales numbers have been incredible! … Oh, wait a minute, maybe not as incredible as we thought. FCA sales are setting records with 75 straight month-to-month, year-over-year sales increases, right? On July 18, news got out that the Securities and Exchange Commission (SEC), in tandem with the FBI, launched an investigation of Fiat Chrysler Automobiles for fraud and racketeering. At the heart of the issue is the allegation that FCA has falsified sales reports.

There’s no denying that almost every manufacturer gets busy at the end of every month and strong-arms dealers into inflating their sales reports by punching units as “sold” when they are really just transferring them into used inventory or loaner, rental or demo service. Those are just some of the ways dealers can sell cars to themselves and sell them again later as pre-owned. Sometimes they pay the dealers to do it, and other times they allow these bogus sales to count on the stair-step programs.

According to Bloomberg, the FBI/SEC investigation spun out of a lawsuit filed by the multistate Napleton Automotive Group last January, alleging that FCA managers had offered Napleton dealers $20,000 to falsify sales. Now we have the FBI/SEC investigators hitting all nine FCA regional offices and even the homes of employees and former employees. These visits have reportedly been a deep-dive that indicates this one’s going to be serious. Due to an earlier inquiry, the Department of Justice will also be joining in on the investigation. On top of everything else, Fiat Chrysler dealers are being hit by subpoenas nationwide to provide detailed sales records, with special attention paid to deals that were later unwound.

I had a lengthy conversation with Len Bellavia, my friend and personal attorney who is also representing some of the dealers receiving the subpoenas. He told me the subpoenas were overbearing, basically a fishing expedition by the Feds. According to Bellavia, they were looking for home phone numbers and cell numbers of all dealership employees for the preceding seven years, as well as all sales data. It occurred to me that this could be more than it appears on the surface. What if the FBI/SEC were looking into making the dealers co-defendants, co-conspirators, and charging the dealers as well as FCA?

If the Feds are serious about putting the brakes on these practices, they can’t just pick on FCA and call it a day. They should investigate everyone.

On a side note, I asked it in print three years ago, and I’ll ask it again now: What if Sergio sold off some of the Chrysler divisions? I started thinking this way back when he pulled Ram away from the Dodge nameplate. And he recently announced that he’s taking all passenger-car production overseas and ramping up Jeep SUV and truck production in the U.S. plants.

Is it too far out there to imagine that he might sell off the Ram division and maybe even Jeep? I can’t picture there’d be a buyer for Fiat or even Chrysler, but Ram and Jeep would have a lot of potential buyers. What if Sergio sold them to China? They’d pay heavily, and they’ve been trying to get a foothold in U.S.-based manufacturing plants.

The author fears the discontinuation of the popular SRX crossover is one more indication that Cadillac’s rebranding is heading in the wrong direction. Courtesy General Motors Co.
The author fears the discontinuation of the popular SRX crossover is one more indication that Cadillac’s rebranding is heading in the wrong direction. Courtesy General Motors Co.

A Return to Sanity

Apparently, hopefully, Mary Barra, chief executive of General Motors, has been reading my articles. I have been extremely critical of GM in recent years, especially their goofy, failed Internet initiatives and, most recently, their monumental failures, including the Factory Pre-Owned Collection and Shop Click Drive. I called it when I first saw it, and it’s turned out even worse than the trainwreck I predicted. When they combined the two programs, the word “cluster” became an adjective. Recently, GM’s management has been publicly apologizing to their dealers — that is, as close to an apology as arrogance allows. How many millions could they have saved if they’d read my column last year?

It’s no secret that my personal opinion of Johan de Nysschen, brand manager for Cadillac, centers on my belief that this guy is an incompetent bumbling cartoon character with a South African accent. My hardest shots have been aimed directly at de Nysschen and what he’s doing to GM’s former prestige brand. Well, it appears they’ve put the brakes on his $12 billion hallucination.

Why do manufacturers fall for these academic types? It would take most people with any perception about two minutes to say this guy doesn’t relate to his customers. His plan was — and probably still is — to eliminate a lot of the smaller volume dealers. The plan is to put a virtual reality headset on premium customers and let them take a “virtual test drive” which will inspire them to plunk down $80,000 on a car, sight unseen, to be delivered at a later time. Excuse me, Johan, have you been playing Pokémon Go on company time? Did you bump your head?

Let’s take a look at what de Nysschen said last year and what’s happening now. He promised there will be Cadillac diesels, four-cylinder and six-cylinder models. I’d be willing to bet that ain’t gonna happen. He said there will be electric vehicles in every model across the line. Cadillac just announced they will discontinue the ELR extended-range electric coupe. This was the future car that was going to blow away the Tesla S. He wanted to rename all the models to alphanumeric oddities, even though the models already had silly alphanumeric names and no one knew what they were even before he started changing them.

In 2015 — and continuing so far this year — the SRX doubled the sales of any other Cadillac model. Naturally, they decided to discontinue it. The SRX was a great entry-level SUV that obviously has a lot of appeal to certain buyers, but de Nysschen wanted an entry-level Caddy to compete with the Audi A3. Now that has been canceled by upper management. He also was planning on a high-end sedan to take on the Mercedes S-Class. That was canceled as well. De Nysschen said we’ll have a $250,000 Cadillac before 2020. Anybody want to place a bet on that one?

I believe de Nysschen wants to run off current Cadillac buyers because he believes he’s going to capture the BMW and Mercedes crowd. That could happen, but if I were top management, I’d never allow this buffoonery to prevail. We would build the brand incrementally. We would not turn our backs on our hard-earned and enviably diverse customer base. We would not move our headquarters to New York. But that’s just my opinion. Do you sell Cadillacs? What would you do?

Check Your Seatbelts

In last month’s article, I predicted a slowdown in sales starting almost immediately. I received a lot of criticism about that, but it’s time to face facts, folks: The halt is coming to pass exactly as I described it.

There are a lot of external and internal factors causing this phenomenon. It’s not the economy necessarily — it’s a lot of factors converging all at once — but I think you’ll agree it has slowed up. Personally, I believe the presidential election has polarized and spooked the public along with global terrorism, uncertainty and civil unrest. Consumers are hearing and seeing a lot of negatives and postponing the big decisions.

All I can say is tighten up your processes and don’t waste any opportunities. Control your expenses and hold your vendors accountable for producing results. It’s not going to be ungodly bad, but it will continue to be slow. The best way to do business right now is to outmarket and outsell your competition.

Until next month, keep those calls, emails and social media invites coming, and if you’re playing Pokémon Go, don’t forget to look up every once in a while.

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