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The Earth Moved in Munich (October 2006)
Did you feel the earth move? Did you sense the shifting of the tectonic plates? The tsunami engulfing the whole of the world's motor industry? I did when I read an interview with Burkhard Göschel on the Autosport.com website. Though the bespectacled Professor has just stepped down from his post as management-board member at BMW for development and purchasing, he remains a senior advisor to the board. Thus when he speaks we can consider his views authoritative.
'What we are doing in the car industry,' he said, 'and you can see this at BMW, is that we are shifting over to turbocharged engines with a high point of efficiency. In the future we will have downsized engines with turbochargers.'
This is a shift of galactic proportions on the part of the auto maker that has earned the reputation of thinking more about engines than any other. Hitherto BMW has been a staunch and committed advocate of the naturally aspirated engine, favoured for its smooth and confident throttle response. The Munich firm has been a leader in advancing the state of the unblown-engine art with its masterful in-line sixes, precise foundry techniques, Vanos variable valve timing and innovative Valvetronic power control. Now BMW has taken up the technology it has hitherto scorned, the turbocharged engine, and placed it at the heart of its future programmes.
Of course BMW hasn't altogether ignored the turbo. Its previous flirtations with exhaust-driven blowers for its road cars were the 2002 Turbo of 1974 and then turbo sixes for the 7 Series from 1980 to '86, at a time when it hadn't yet perfected its eights and twelves and needed more power to compete with Mercedes-Benz. From 1980 to 1987 BMW was a supplier of turbocharged engines to Formula 1 teams. First raced in 1982, their potent four - producing up to 1,200 bhp for qualifying - took Brazilian Nelson Piquet to his world championship in 1983. They also powered entries from Benetton and Arrows.
None of this prepared us for the total commitment of BMW to smaller-capacity turbo engines across the board for its future production models. Burkhard Göschel explained the rationale: 'As everyone already knows the engines are losing two-thirds of the energy by heat. One of the ideas is: how do we bring that back?' BMW has concluded that the exploitation of exhaust-gas energy to drive a centrifugal compressor is perhaps the best way to make use of heat energy that's otherwise wasted.
BMW is confident that this new approach will appeal to its customers. After decades of steadily increasing power, acceleration and speed, a certain plateau has been reached. That's the feedback that BMW is getting from some of its markets. 'Some customers are saying that the performance is enough,' said Klaus Borgmann, senior vice president for engine and gearbox development. 'They are downsizing, so we are focusing on fuel consumption. They want performance and fuel economy.'
Poster boy for this revolution in Bavaria is the twin-turbocharged six that powers BMW's latest 3 Series Coupe. Punching out 306 bhp at 5,800 rpm from 2,979 cc (89.6 x 84.0 mm), the Coupe's top-ranked six delivers 295 lb-ft of torque - a proud 400 Nm - all the way from 1,300 to 5,000 rpm. To get comparable output from a normally aspirated eight, says BMW, you'd need one displacing 4.0 litres and weighing 155 pounds more than the turbo-six's 412 pounds.
The new engine's high output means that it needs a more rugged block than BMW's less-potent sixes, which is why it's cast entirely of aluminium instead of the composite magnesium/aluminium that BMW has pioneered. The pistons run directly in its high-silicon-alloy bores. Uniquely in this 3.0-litre six the bores are 1.6 mm bigger and the stroke 1.0 mm shorter. The result is that with its cylinder centres spaced at 91.0 mm there's only 1.4 mm of solid aluminium between adjacent bores. This is a tribute to the precision of BMW's foundry methods that suggests technology transfer from its Formula 1 engine program.
Fabricated of high-nickel steel sheet, two three-cylinder manifolds pipe exhaust straight into the close-placed turbines of tiny Mitsubishi-IHI turbochargers. Having two chargers means that each can be very small, which gives low rotary inertia for excellent throttle response. This is a prerequisite for BMW, which is proud of the eager attack of its engines. The mini-turbos rev to an astonishing 201,000 rpm, delivering wastegate-controlled boost to a maximum of 8.5 psi.
The turbos are so close to the exhaust valves that IHI had to develop a special ultra-high-temperature alloy for their turbine wheels. Primary catalysts are close by in the downstream exhaust flow. Pressure air is piped forward and through an intercooler to the inlet manifolding on the six's left-hand side. Good economy when the engine is off-boost is assured by its base 10.2:1 compression ratio.
Fuel enters the Coupe's turbo-six through tiny nozzles set into the centres of its four-valve combustion chambers, a scant 10 mm from the spark plug. This is the business end of a fuel injector developed jointly with Siemens. Instead of old-fashioned solenoids to operate its spray valve each injector contains a crystal-like ceramic that reacts to electricity by deforming slightly, just enough to open the valve to release 200 atmospheres of fuel pressure.
The effect, called "piezo-electric" after the classical Greek word for pressure, works both ways: squeezing such a crystal generates electricity. In this case a peizo-responsive material like lead zirconium titanate is used to control the injector, opening only 0.03 mm when electrically triggered as many as three times if necessary during every power stroke. Extremely precise, the injector forms a fine conical spray of fuel in the combustion chamber, burning with high efficiency.
The new injection system lends itself to a lean-burn operation mode. Installed experimentally in a naturally aspirated in-line six of 2,996 cc (88.0 x 85.0 mm), the result has been a dramatic 10 percent reduction of fuel use on the EU's test cycle. Consumption in relaxed driving on normal roads is niggardly, easily in excess of 200 miles per gallon. 'We have never seen fuel economy like that on the road before,' said Klaus Borgmann. 'We expect real advantages against the competition.'
In a test drive in a 3 Series sedan over a variety of roads on the north side of Munich the six's air/fuel ratio ranged between Lambda=2.0 and 2.5 when full power wasn't demanded, inhaling more than twice the air of a standard mixture. The system delivers up to Lambda=3.0, a true lean-burn engine. Yet the six retained typical BMW smoothness and free-revving characteristics, producing 272 bhp at 6,750 rpm and 232 lb-ft of torque at 2,750 rpm.
After the lean-burn engine's control system is optimised it will be introduced in 'relatively high volumes' in a new BMW model. Sales will initially be in Europe because the system needs a catalyst to cope with its high generation of oxides of nitrogen (NOx) at Lambda=1.1-1.2. Such catalysts are degraded by sulphur, which is still present in petrol outside Europe. The engine will run on fuel with sulphur, but its NOx catalyst will need more frequent regeneration.
Next step, say BMW's engine men, will be to marry the twin-turbo and lean-burn technologies. This could bring them even closer to the diesel's low fuel consumption. A key difference is that the gasoline engine is boosted at lower pressure, which is why it doesn't require a two-stage turbo system like that recently introduced by BMW for a diesel six. The latter is boosted at up to two atmospheres, almost 30 psi, which means that it benefits from the higher efficiency of a two-stage layout. Series instead of parallel blowers don't yield significant efficiency benefits at lower boost pressures.
The concept of boosted small engines won't be unique to BMW. Information exchanged at the monthly meetings among the engine designers of the German-owned auto companies means that they'll all be heading in that direction. Audi has introduced a new four which in turbo form will be powering many future models. VW is pursuing its marriage of a turbo with a positive-displacement blower in a two-stage system to give optimum throttle response.
The bottom line? Paradise awaits for makers of turbochargers and suppliers of the high-temperature materials that such systems need. Will this be another instance where non-European suppliers benefit from the failure of indigenous producers to meet their industry's demands? Let's hope not.
- Karl Ludvigsen
The American Challenge - This Time it's Real (September 2006)
Now that the high-profile publicity-seeking stock-ballooning conversations promoted by Kirk Kerkorian have come to a predictably fruitless end, the real talks can begin. The serious negotiations can get under way, negotiations which, in fact, could lead to a result that's the ultimate nightmare of the European motor companies: that the American auto makers would finally get their act together in Europe. Not only get it together but get it together - together.
It's time for Ford and General Motors to combine their European auto operations into a single company. Everything they've done so far in Europe could and would culminate in the creation of a vehicle-making juggernaut with the potential to seize and hold the high ground in one of the world's most important markets. With the European Union expanding, thinking big about the future of its borders and economies, the opportunity is tailor-made for America's auto makers to think and act likewise.
Through the first eight months of 2006 the sales leader in Europe by far was Volkswagen with 2,089,462 units, 20.02% of the market. VW is the only big European motor company; the next largest, PSA, was far in its wake with only 1.4 million units and a 13.3% market share. Ford and GM ranked third and fourth, each with a share of just over 10 percent. Renault, Fiat and DaimlerChrysler trailed in their wake.
What would be the picture if GM and Ford joined forces? Taking the same two-thirds of calendar 2006 they'd have built 2,168,052 vehicles, making them the leaders in Europe ahead of Volkswagen with a 20.77% market share. For the first time we'd have two big auto makers in Europe instead of the "Little Seven" plus Volkswagen with which we've been struggling along, taking all steps possible to avoid the industry's inevitable consolidation. Why shouldn't the Americans seize the lead?
European Motors - as we can call it for the time being - would start from a formidable base. It already has the top-selling cars in the important British and Spanish markets plus the best-sellers in Ireland, the Netherlands and Sweden. Its Ford Focus and Opel/Vauxhall Astra are the first- and second-best sellers in Europe's 27 countries, giving great coverage of the most important volume segments. With Jaguar, Saab, Land Rover, Volvo and Aston Martin it has superb coverage of the specialist segments as well.
Exploiting its assets in Germany - inevitably the new company's centre of gravity - European Motors would have outstanding research and development facilities. Most importantly, by virtue of its size and scope the company would be able to attract top talent. At all levels of its organisation European Motors would be a substantial independent company fully able to staff all its positions, from top to bottom, for life. No longer would its key jobs be used as temporary training posts for Americans, who only dimly begin to grasp the needs of Europe before they go back to the land of baseball and apple pie. Under a supervisory board representing its owners, the company would be managed like the dedicated European motor maker it would in fact be.
European Motors would be easily large enough to meet its principal platform-sharing needs from within its own organisation. Including its production for exports it would be making 2.5 million units yearly and aiming for 3.0 million. Thus its owners would no longer need to be struggling with the trans-Atlantic platform- and product-sharing projects that have wasted so much time, energy and money in the past. Ford and GM could leave European Motors to get on with its own imperatives while they concentrated on building the best possible cars and trucks for the American market - another piece of bad news for the Europeans and Orientals.
Such a consolidation would bring surprising benefits. In Sweden, Volvo and Saab could finally begin exploring the joint activities that the nation's two domestics have long thought of doing while lacking a suitable industrial basis. That door would now be open. As well, European Motors would be big enough to create and share a larger platform between Ford and Opel. Neither has independently been able to maintain a position in the vital European executive class. With their shared volume they'd be able to step back up to the Scorpio/Omega category to the immense delight and profitability of their dealers.
I'm not underestimating the challenge of such a merger. There'd be huge impact at the factory and workforce level with substantial redundancies. But that's just an indication of the economic benefits that would result from the creation of European Motors. Important and effective effort would be needed to maintain the strengths of the respective brands while their product commonality is achieved. Toward the latter objective I see the job as substantial but not Sisyphean, thanks to the already-existing broad commonality between the Ford and GM Europe product lines.
Making decisions about which plants would stay and which should go would require dispassionate analysis by the European Motors staff. It would also need to take into account the group's hesitant eastward expansion when compared to its chief rival Volkswagen. New factories are needed in the East to supplement GM's Polish operations. They may well wish to leapfrog their rivals and consider the Ukraine and Belarus. In the Far East European Motors would exploit its access to China and Korea to form alliances of both marketing and supply.
The major downside would be for the top officials of GM and Ford, who would no longer be leading imperial processions through their European empires with cadres of bag-carriers in tow. Instead they'd have to settle for attendance at periodic supervisory-board meetings. The compensation would be that they'd be getting the good news about the impressive results being achieved by European Motors, not to mention the steady flow of half its dividends into their coffers.
GM and Ford might well argue that this isn't the time to think of such a merger. Both have been saying that their European operations are in good shape. Well, this is just the time, then, to unify them as a purely European motor maker that's fully able to act independently with speed and decisiveness to meet the mobility needs of Europeans. To help them out I've taken the first step by registering www.europeanmotors.eu. I'll be happy to provide it to the new company on request.
- Karl Ludvigsen
Breech to Mulally in 60 Years (August 2006)
This month's management moves at Ford have a startling symmetry with those at Dearborn almost exactly 60 years earlier. Then a young Ford family scion realised that he needed help in getting to grips with the problems of a company that was out of synch with its industry and markets and losing money hand over fist. He reached out to an executive who had made his reputation in the aviation industry.
First with North American Aviation and later with Bendix Aviation Ernest R. Breech had proved to be an outstanding manager and leader. Both were properties of General Motors, which initially hired the accounting and business graduate for its finance staff. Considered by Alfred P. Sloan to be 'an excellent prospect for top management', Ernie Breech became a trouble-shooter for the Corporation. But before Sloan could manoeuvre him into a top slot Henry Ford II lured the 49-year-old Breech to Ford as executive vice-president, effectively Ford's operating chief. He joined effective 1 July 1946.
The analogy with Bill Ford's hiring of Alan Mulally from Boeing is striking. Once again a Ford realises that he's out of his depth and needs the help of an experienced executive who's been seasoned in the aviation industry. The big difference, however, is that Ford in 1946 was a tabula rasa on which Breech could write his own saga of success. Not only did Ford need help, Ernie Breech concluded, 'it had to have help or the Big Three would surely become the Surviving Two.' In spite of his strong ties to GM, Breech took the job because 'it's a great challenge and if I don't accept it I shall always regret it.'
At Dearborn the executive found 'run-down plants, obsolete products, almost non-existent financial control, an inadequate engineering staff and just sufficient cash to meet daily operating requirements.' Ford's balance sheet, he found, was 'about as good as a small tool shop would have'. Breech found a Ford that he could mould in the GM image with decentralised profit centres and a differentiated staff and line organisation.
Ford today is not the basket case that Breech took over. Although its organisation is still in flux following the dismantling of the disastrous 'Ford 2000' effort at the end of the 20th Century, Ford does have the necessary people and processes in place. That its engineers are top-rank is shown by the excellence of its first full hybrids. One hopes - perhaps in vain - that the 'Way Forward' job losses won't deprive Dearborn of its most experienced and capable senior managers.
Mind you, one senior manager who could be shown the door is J Mays. It never ceases to amaze me that among the Jac Nasser appointments this one has survived Jac's departure. Like other top car makers Ford has first-class designers but under Mays they haven't been able to show what they can do. Fortunately Peter Horbury has slid in below Mays, who's been kicked upstairs. Horbury says he's rejecting Euro-centric styling for Ford's North American offerings, which will have distinctive design instead. This is very promising.
The more that Ford is seen to be in crisis, the better the opportunity that Alan Mulally will have to put into effect the changes that he finds that the company needs. People throughout Ford, among both management and labour, have to understand that change is necessary. Ford must find a new direction and pursue it aggressively. It must sweep aside the Titanic deckchair-arrangers, some of whom are emasculating Lincoln by saddling it with alphanumeric model names and eliminating its V8 engines. They should be borrowing V12s from Aston Martin instead!
Mulally could well find it desirable to hark back to the methods that Ford used in developing the Taurus, methods that he says he used in creating Boeing's 777 airliner. Though this philosophical link between Ford and Boeing was much-touted in the release announcing Mulally's appointment, the irony is that the methods referred to were those introduced to Ford in the 1980s by then-CEO Don Petersen.
'Pete' took the radical - by Detroit standards - step of bringing in Dr. Edwards Deming, the efficiency expert whose teachings on quality made him a god in Japan. He implemented Deming's principle of driving decisions down to the lowest possible level, assigning respected Ford executive Tom Page to the task of spreading the gospel throughout Dearborn. This created the atmosphere in which a Taurus could be conceived.
Of course in time-honoured Ford tradition this vital and productive campaign was abandoned after Petersen's departure in 1990. His successor, the ultra-dry Red Poling, had no mandate to continue down the Deming-driven direction. Neither did Alex Trotman, author of Ford 2000. Between them they snuffed out the most potentially productive initiative ever launched at the Ford Motor Company. Is there anyone at Ford who remembers the efforts of Petersen, Deming and Page? If so I hope they'll have a word with Mulally.
Needless to say the highly politicised atmosphere at Ford will pose a challenge for someone parachuted in at such a high level as Mulally's. He'll need to move fast to implement the mandate he's received from Bill Ford. Bill in turn will need to show solid support for his new president and CEO.
The new man has a huge advantage in his impeccable engineering credentials. In no aspect of the auto business is it easier to buffalo ignorant managers than in engineering. Mulally will be able to cut through the technical obfuscations to find out what's really going on. He'll have to adjust his thinking from hundreds of units a year to hundreds of thousands but that shouldn't be a problem.
Alan Mulally will also have the urgent task of trawling Ford's management ranks to find the people who are really good at their jobs. Will Mark Fields measure up? It'll be interesting to see. The ex-Boeing man shouldn't overlook fellow engineer Ulrich Bez, who has done such a fine job at Aston Martin. In any rational world Bez would be rewarded for his work at Aston by being given the top job at Volvo - plus a shareholding in the Swedish company to compensate him for relinquishing his plan of a management buyout of Aston Martin. Bez would know just what to do to make Volvo live up to the Latin meaning of its name: 'I roll'.
There's lots positive to say about the Alan Mulally appointment. In only one respect is it problematic. The new man is 61 years old. That gives him far too little time to make his mark on the Ford Motor Company. He'll be long gone before any important new models designed on his watch will be launched. If in those four years he can steady the ship, identify and promote the real producers and inculcate a firm policy of quality and creativity, Mulally will have achieved a lot for Ford.
- Karl Ludvigsen
The Vultures are Circling (July 2006)
My first reaction to the news about Renault, Nissan and General Motors was, 'Has Ghosn started to believe his publicity?' Sure, it must have been flattering to be asked to lunch with Kirk Kerkorian and Jerry York, men who have made a substantial living, thank you, from their plunges into the shareholdings of major motor companies. Even a man whose ego is massaged as devotedly and often as Carlos Ghosn's would find that an intriguing concept.
The native of Brazil has rightly been hailed for his success in reviving Nissan. He achieved a major turnaround for that struggling company. He became a hero in Japan, achieving the ultimate kudos of being starred in comic books. You don't get higher recognition than that. Now he's keeping an eye on Nissan while turning his attention to Renault with the aim of improving the French company's margins. But General Motors as well? Only a man who believes he's really as good as they say he is would dare to take that on.
Ghosn found plenty of low-hanging fruit at Nissan. One was its traditional ring of tied suppliers; it took the arrival of a foreigner, a gaijin, to take the unprecedented step of shattering that ring to allow access to lower-cost suppliers. The alliance with Renault gave Nissan's people new insights into the prices being paid for purchased parts; especially in Europe they were surprised to discover that Renault's buyers were striking significantly better deals than Nissan's.
Thus I'm not surprised to see "parts procurement" on the list of topics that a Japanese newspaper says the Renault-Nissan men would like to discuss with GM. The prices paid for parts are among the industry's most closely-guarded secrets. I should know; I was asked to research them often enough. I can just imagine the reaction of GM's straight-taking purchasing czar Bo Andersson if he were asked to open his books to a bunch of French and Japanese. For better or worse, thanks to a certain Mr. Lopez, GM is as savvy a purchaser as any auto company in the world.
Speaking of purchasing, General Motors doesn't need to be bigger than it is to gain additional economies of scale. A company making more than 7 million vehicles a year has access to all the cost-reduction tools that the industry has to offer. It doesn't need to be part of a group making more than 14 million vehicles annually in order to obtain scale economies. I can see that it would be appealing to Renault and Nissan to have access to GM's buying power, but the reverse is decidedly not the case.
Of course, managing that 7-million-plus production is another matter. GM has struggled with this in the most public way possible, casting aside one plan after another in its effort to co-ordinate its global activities. Now, however, it seems to be getting a grip. The idea of linking Opel with Saturn is a good one. Opel's Hans Demant says that 'it makes sense, in order to make the Saturn brand more emotional and more successful until Saturn itself is able to introduce attractive new models.' This suggests that the Opel/Saturn link could be a temporary one. Evan as such it could help revitalise the customer-friendly Saturn proposition.
In Just-Auto I've also praised the way GM is making use of its Korean arm. Thanks to the way Daewoo's product development was transformed by the energetic Ulrich Bez, that company is well able to generate new product not only for the global Chevrolet brand but also for other GM divisions. Under Nick Reilly GM Daewoo has become an important source of fresh designs for GM in a remarkably short time. The General may even regret not having taken over some of Daewoo's other plants in Poland as demand for these new small Chevrolets grows.
Interestingly, GM's success with Daewoo has been achieved with a shareholding of only 48.6 per cent. It was bumped up to 50.1 per cent only at the end of last year through the purchase of Suzuki's stake in the company. This is a salutary reminder that Renault-Nissan is not the corporate monolith that many seem to suppose. Renault owns 44 per cent of Nissan while the latter has a reciprocal 15 per cent of Renault. In other words, if improvements have been achieved through their alliance - and they have - it's not the consequence of a merger, DaimlerChrysler-style. Rather it's the result of a willingness to work together constructively to share components and platforms while maintaining strong brand competition in the heart of the auto market. The same applies to the co-operation between Toyota and PSA Peugeot-Citroën.
Meanwhile GM has been making headway. Those turning up their noses at its technology may have overlooked the recent launch of its dual-mode hybrid drive, which is so good that both BMW and DaimlerChrysler want it enough to have set up their own development centres to adapt it to their products. As well, the General has finally bitten the bullet by downsizing its North American production and workforce, struggling to get capacity in line with sales. Then when sales improve their manufacturing efficiency - and profits - will skyrocket. That's the unique leverage of the car industry, the leverage that Ghosn exploited to put Nissan back in profit.
I wonder if Carlos Ghosn was surprised to see the Kerkorian letters to General Motors made public so soon after their June talks in Nashville. After all, the whole matter was only a germ of an idea. French industry minister François Loos gave the impression that he was the last to be informed about the idea when he counselled 'enormous caution' in dealing with 'the United States, an immense market, a complicated market'. As the holder of 15.3 per cent of Renault and 18.8 per cent of its voting rights he has a need to know. Memories in France are still vivid of Renault's costly adventure with American Motors.
I'm in agreement with DaimlerChrysler chief Dieter Zetsche, who remarked that 'Sometimes the news itself is already the purpose, not necessarily leading to a result.' Of course Kerkorian made his letters public. His 9.9 per cent shareholding in GM gives him every reason to stir up interest in a possible deal, no matter how specious. The markets obliged with a Pavlovian response.
GM's board has acted appropriately in authorising a GM management team to met with Carlos Ghosn to discuss the options on the table. At the same time it has rejected the Kerkorian/York concept that the board itself should form a subcommittee, backed by outside advisors, to assess the Renault/Nissan proposition. The board should get involved, but only after GM's management has prepared its view on the potential risks and benefits of co-operative activities.
Who'll be on the Wagoner team? I'd be surprised if Bob Lutz were excluded, as he was in the talks that led to the DaimlerChrysler merger. Bob will bring a lot of experience to the table along with a knowledge of French that will keep the other side honest in their talks amongst themselves. Another GM man who should be there is Carl-Peter Forster. The former BMW production chief who now heads Opel and GM Europe is running the operation that will either benefit greatly from a relationship with Renault/Nissan or be decimated as a consequence of it. If he and his people aren't involved the talks will be a sham at best.
At the end of the day, a Renault-Nissan initiative and the menace of 'Le Cost-Cutter' arriving at the Renaissance Center may be all that's needed to encourage GM's many stakeholders, in business and government, to get firmly behind the General's plans and actions for recovery. Britain's indigenous carmakers enjoyed no such support and either collapsed or were gobbled up. It's time for Americans to show they're made of sterner stuff. And that goes for you too, Rick Wagoner!
- Karl Ludvigsen
Hybrids the Answer?(June 2006)
If you've ever driven in Japan you can easily understand why Japan's automakers were first off the mark with hybrid-drive cars in production. Their traffic is dense. The concept of hybrid propulsion, combining both a petrol engine and electric drive with batteries and a control system that decides which to use when, pays off best in slow stop-and-start driving like that in Japan. It's of little value on the highway.
That this would be so is not exactly news. A 1981 investigation by Volkswagen and General Electric concluded (slightly edited) as follows:
It is clear that the attractiveness of the hybrid vehicle is a strong function of daily driving distances. For daily ranges of 25 miles or less, the use of the hybrid would result in saving a large fraction of the fuel use by an internal-combustion (IC) car of the same passenger-carrying capacity. For much longer daily urban ranges and highway driving, the hybrid is much less attractive.
Last April, after the passage of 25 years, researcher and author Jamie Lincoln Kitman highlighted the same shortcoming of the hybrid in remarks in the International Herald Tribune:
As consumers and governments at every level climb onto the hybrid bandwagon, there is the very real danger of elevating the technology at the expense of the intended outcome - saving gas. Just because a car has so-called hybrid technology doesn't mean it's doing more to help the environment or to reduce the country's dependence on imported oil any more than a non-hybrid car. The car that started the hybrid craze, the Toyota Prius, is lauded for squeezing 40 or more miles out of a gallon of gas, and it really can. But only when it's being driven around town.
The Prius, added Kitman, spends 'most of its highway time running on gasoline because at higher speeds the batteries quickly get exhausted.' He's rightly concerned that people will be buying hybrids just because it's the new buzzword, not because they've actually considered the real-world fuel economy they'll be getting.
Insufficient attention is being given to the engines that are used in hybrid vehicles. In 1975 a University of Wisconsin study reached the following conclusions:
The hybrid vehicle is complex, expensive, difficult to maintain, heavy and ill-suited to highway driving. A hybrid vehicle with an IC engine small enough to obtain significantly higher mileage than present-day cars will be unable, because of that small engine, to cruise for long periods of time at highway driving speeds; and a hybrid vehicle with an IC engine large enough for continuous highway driving will not be able to achieve significant improvements in mileage. A worthwhile hybrid vehicle may be possible but only with a heat engine different from those now commonly employed.
Since that was written the small-engined hybrid has been helped significantly by improved car aerodynamics and higher-performance engine design. But the fundamental point remains valid: no hybrid can be better than its base IC engine. This is what designers and buyers should be assessing in weighing the merits of a hybrid vehicle.
This point was made forcefully by a senior BMW engineer at a recent technical exposition in Munich. He was frankly dismissive of the engines in Toyota's hybrids. 'As a basis,' he said, 'you need a good engine and a gearbox with mechanical gears. Then you can use electricity for the recovery of energy and the accessories. With that, in a hybrid you can get a 10 percent economy improvement if you use small higher-revving electric motors that are less heavy.'
BMW recently announced that it was partnering with General Motors and DaimlerChrysler in the application to its products of GM's so-called two-mode hybrid drive. It will be well suited to BMW's bigger products. But the Munich firm will take a different approach in the drive's application, the engineer said. 'Toyota has a 100-kilogram battery pack with a 40-kilowatt capacity,' he said. 'But with 100 kilograms of capacitors you have 400 kilowatts! For BMW it has to be light and powerful!'
Emphasising what they call 'Effcient Dynamics', the BMW engineers showed the results of some of their latest researches into engines that are fuel-sipping without losing their zip and zing. 'High performance at reasonable fuel consumption is an important objective for us when developing engines and vehicles for the BMW Group,' said Prof. Burkhard Göschel, management board member for technology. 'Mobility as we understand it means continuing to offer the sporting flair, safety, convenience and driving pleasure people are used to.'
Impressively, BMW has been working through the entire vehicle power train to find fuel savings and performance enhancements. Added to its unique Valvetronic induction system is an impressive use of high-precision fuel injection close to the spark plug that achieves charge stratification, allowing extremely lean part-load fuel/air ratios. The result has been a dramatic 10 per cent reduction of fuel use on the EU's test cycle. Consumption in relaxed driving on normal roads is niggardly, easily in excess of 200 miles per gallon. 'We have never seen fuel economy like that on the road before,' said BMW's Klaus Borgmann. 'We expect real advantages against the competition.'
BMW's energy-saving measures include electric power steering, electric drive for the water pump and an ingenious alternator control that heightens the battery charge when braking and cuts out electricity generation when accelerating. Other important savings come from lighter vehicle construction and better aerodynamics, thanks to underbody cladding. Improvements to its 6-speed automatics will deliver a 3 per cent economy improvement with gasoline engines and an impressive 6 per cent with diesels on the EU driving cycle.
BMW has already shown a system that stops the engine when the car stops, starting it again when the driver takes his foot off the brake. Offering important fuel savings, this will come to the market in 2007 in Europe. In combination with the alternator control, said Klaus Borgmann, this gives 'about an 8 percent fuel-economy improvement, depending on the driving cycle. That's about half the value of a hybrid system. We will introduce this in Europe on a broad range of cars because it's not so expensive.'
So…are hybrids the answer? That depends on the question, but in general the answer is no. For decades researchers have been telling us that a hybrid system is no better than its IC engine. BMW's findings confirm that the venerable piston engine can still deliver impressive results without hybrid band-aids. What we need now are new fuel-consumption testing regimes that will better represent real-world experience. With their help, customers will be able to make intelligent choices of the cars whose fuel economy best suits their driving needs.
- Karl Ludvigsen
Mighty Ambitious Engine (May 2006)
There's only one thing I regret about writing this piece, and that's that I'm going to give a so-called 'miracle engine' even more publicity than it deserves. But respectable news sites have already given time and space to an 'engine' that was first publicly shown at the recent auto show in Los Angeles. It goes by the handle of 'Mighty Engine' or 'MYT Engine' and is the work of Raphial Morgado of Angel Labs LLC of Lodi, California. Their website is www.angellabsllc.com.
You'll be stunned, stupefied and staggered by the claims made for this engine. Claimed to lack 80 per cent of the parts of a conventional engine, it is said to pack 848 cubic inches of swept volume into a cube 14 inches on a side and weighing only 150 pounds. Its output is forecast as 850 bhp normally aspirated and as much as 3,000 bhp when supercharged. Naturally it's claimed to have minimal emissions and fuel consumption and to be easy to manufacture. 'We're hoping that the fact that it can be constructed without major retooling means that it's suitable for a rapid commercial launch by engine-manufacturing licensees,' inventor Morgado told www.americanantigravity.com in an exclusive interview.
All you hard-working engine designers and developers out there will be mortified to know that the potential of such an engine was right under your noses all the time, a powerplant that's 'a breakthrough of immense proportions that will spawn the next industrial revolution and will rocket the internal combustion engine into the next millennium,' to quote the Angel Labs website. Aren't you ashamed of having failed to spot and exploit such an obvious engineering breakthrough?
'Angel Labs is a close-knit family of professionals working as a team to make my inventions into viable products,' says former drag racer Morgado. 'Angel Labs is composed of inventors, scientists, engineers, business managers, computer technicians, programmers, machinists, engine experts, patent attorneys, business consultants etc. As Angel Labs grows, different teams will be able to develop individual and numerous inventions simultaneously under my direction. Ultimately, the goal is to introduce several revolutionary products every quarter of the year.'
By now you must be wondering just how this miracle has been achieved. The heart of the MYT Engine is a an operating cylinder that's been bent to form a complete circle, a toroid like the negative volume of a doughnut. Circulating in it, guided by levers from the centre, are ringed pistons so compact that they're more like paddles. There are eight pistons in all that are sorted into two sets of four. Each set is mounted in a cruciform pattern. An ingenious if bulky and elaborate mechanism allows the two pairs of four pistons to rotate in the toroid and, at the same time, carry out a clap-hands motion that opens and closes the volumes between them. In just a half-revolution of the toroid each piston pair carries out the complete four-stroke cycle, inhaling and exhausting through peripheral ports.
If it were to function - the MYT hasn't run yet - the engine would produce 16 power strokes per revolution of its output shaft. For this reason its developers are claiming credit for four times the swept volume that the engine actually has. This is specious. Swept volume of an engine is the sum of the difference between maximum and minimum volume of all its chambers, which in the case of the MYT Engine prototype is 212 cubic inches or 3.5 litres. It's extremely commendable to have packed so much swept volume into a small package, but it's far short of the claimed 13.9 litres.
No matter what an engine's cycling relationship is to its output shaft, we don't credit it with more or less swept volume accordingly. Plenty of engines, including some classic racing and aero units, have geared output shafts for various functional reasons. The MYT design can be seen as having a freakishly slow output shaft in relation to its firing rate, which can cause as many problems as it solves.
You'll be well aware that toroidal engines are anything but new. In France Dewandre built one in 1905 that was revived as the Esselbe for aviation in 1912. Another French effort around that time was the Beck engine. In the 1930s John Paddon's design used cams to control the pistons in the toroid, while at the end of that decade BSA built an engine for possible moped use. In Nebraska's Omaha engineer Louis Wolff built toroidal engines for both vehicles and aircraft during the 1930s. Strong claims for products of his Toroidal Aircraft Motors Company failed to translate into practice.
After World War II two major efforts to develop toroidal engines were mounted. One was by veteran engineer Granville Bradshaw, whose wartime concept, his Omega, ingeniously rotated its toroid around cyclic piston motions. Bradshaw built 1,100 and 1,250 cc versions of his engine, which was widely publicised in the 1950s. The other effort was Traugott Tschudi's design of the 1960s, which drove its pistons through rollers and cams. Though hoping to capitalise on the post-Wankel boom of interest in radical engines, Swiss engineer Tschudi failed to make headway.
None of these unsuccessful toroidal engines had anything like the power density expected from the MYT design. Those designed by competent engineers had cooling systems, conspicuously absent from Morgado's concept. Sealing is a huge challenge; the MYT prototype shows but a single ring facing each side of a combustion chamber. No comment is made by the developers about the sealing requirements of the arms and surfaces needed to actuate the pistons - though they'll be severe.
The Angel Labs people like to show their engine in contrast to massively huge and heavy conventional powerplants. In fact its forecast specific power is pretty close to that being developed by current Formula 1 engines. They're getting 700+ horsepower from 2.4-litre V8s that weigh less than 200 pounds - not all that far from the MYT claims. And those engines are running with impressive durability!
If by some miracle the MYT Engine could be made to work, its lack of cooling and indeed lubrication would mandate manufacturing it from ultra-high-temperature alloys or ceramics - hardly the low-cost solution that 'will rocket the internal combustion engine into the next millennium'. In short, the MYT will never make an engine. It could however be the basis of an interesting pump!
- Karl Ludvigsen
Fatal Distractions: MG and its Suitors (May 2006)
From the annals of motor-industry management consulting comes this cautionary tale. We did a lot of work in the 1980s and '90s for an independent American car importer. It had a provisional agreement with a Far-Eastern auto producer to import its cars, contingent upon its providing certain services. The importer had to organise safety and emissions compliance and the necessary redesigns. It also committed to help the car maker reduce its production costs in its home country.
On behalf of the importer we undertook the job of cutting costs. We explored many avenues, including recommending a negotiating strategy with its Japanese OEM supplier of parts and intellectual property, reviewing of its manufacturing operations, shifting of sources of supply and developing local suppliers to replace those located abroad. For the latter job we subcontracted work to another consultant with experience in purchasing and supplier relations.
Acting as a member of our team, the consultant reviewed the local supplier base and developed recommendations for the changeover of some componentry to capable sources within the country. We found this to be no easy task. Local suppliers were happily making parts for the aftermarket and even for export, tasks they could carry out without having to meet the demands and standards of an OEM. Nor were they necessarily tooled to meet the volume runs that an OEM requires. Nevertheless we found some suppliers with the potential to measure up, helped in some cases by their counterparts in the developed world.
Needless to say, this broad palette of work held out the promise of further assignments from our car-importer client and indeed from the Far-Eastern company itself. Follow-up was needed both with the local suppliers and with the car maker to achieve the cost-down objectives. Understandably, our aim was to get these assignments. The standard terms of our agreements with subcontractors required them to carry out any such new projects through us. If we hadn't engaged them, they wouldn't have had a sniff at these jobs. They weren't to start booking new work to their own account.
In this particular case I got an uneasy feeling. Our supplier/purchasing consultant was visiting the Far-Eastern company and I was in my office in London. I rang him to remind him of his obligations to us. Never did a man sound more offended. 'You don't know me, Karl!' he shouted down the line. 'There's no way I'd do anything like that! My business ethics wouldn't allow that! You shouldn't even suggest such a thing!'
You guessed the ending. It wasn't long before I stopped hearing from the consultant, only to learn that he was dealing directly with our importer client on further stages of the cost-down project. I was furious. After all his protestations he did exactly what he'd said would never cross his mind. Taking to some of his former colleagues I learned they'd had similar experiences. He was the kind of fellow who'd go in the revolving door behind you and come out in front.
The man made one or two attempts at a rapprochement. I asked him to write to me to explain his actions, which I thought a reasonable request, but he declined to do so. He may have thought that a written reply might have opened him to a legal attack, though that wasn't my intention.
These unpleasant events came to mind the other day when I read that the consultant in question is now a responsible executive with Project Kimber, the entity set up under company doctor David James CBE to make a bid for MG-related assets when MG Rover collapsed a year ago. Now that China's Nanjing Automobile has confirmed its grip on the remaining assets and activities at Longbridge, Project Kimber has moved on to its 'Plan B', which is the setting up of European production facilities for niche vehicles.
One car the Kimber people have their eye on is the Smart Roadster, production of which was halted at the end of last year after the sale of some 40,000 units. DaimlerChrysler decided that neither it nor the ForFour version was a viable contributor to the Smart range. The Roadster was indeed one of the odder cars on the market with its turbocharged 698 cc three-cylinder engine in the rear, coupled with a six-speed semi-automatic transmission whose frustrating hesitations between shifts are now the stuff of legend.
Project Kimber sought to envision an MG version of this rejected model. There's nothing new in basing an MG on another brand; both Wolseley and Morris have contributed to MG's engineering in the past. But thanks to the switched-on styling appreciation of MG founder Cecil Kimber - the man for whom the new company is named - the result was invariably handsome. At least in Kimber's day an MG of any kind was a good-looking machine. His 2006 counterparts have a much tougher task with the Smart Roadster, which is one of the ugliest cars ever foisted on the public. It should perhaps be allowed to expire in peace.
As fate would have it another contender for the MG assets was a consortium based in Nice, France called 'Triple A'. Its spokesperson was and is a 'Professor' who in fact has long ceased being a Professor of anything. Under what he calls 'Project Tempest' this expatriate has been hawking renderings of a sports car in the British tradition that resembles an updated Austin-Healey. Only one small problem: he has no rights to either name. A Healey rebirth is under way but with the approval and support of a family member. It's a great name - especially in the sports-car world - that deserves to survive.
These shenanigans lead to fonder thoughts about Alan Curtis's 1980 effort at Aston Martin to take over the MG works at Abingdon after BL decided to close it. The Curtis plan envisioned an updating of the MGB, which would have made an attractive higher-volume companion to Aston Martin. The idea had potential, which is why it was negotiated over for months, but fell at financing hurdles affected by the high value of the pound and a recessionary tendency.
Sum it up by acknowledging that there's still a lot of appeal in both MG and Healey. Both should survive in some manner, ideally in the hands of a major maker who has the means to resuscitate and market them. Just one word of advice to those auto makers: watch out for revolving doors!
- Karl Ludvigsen
Proton Problems and Solutions (April 2006)
When Bill Ford took over the family firm he had to dispose of some acquisitions made under the previous regime. Neither the British KwikFit chain nor the Norwegian Think! electric-car operation looked like justifying the expenditure of more Ford money and executive time. Now imagine that Jac Nasser and Bill Clinton teamed up to lambaste Bill Ford and his management in public for letting these go without adequate compensation. Imagine further that they demanded answers to eight specific questions about the selloff, probing into the decision to sell and the amounts received, stirring up vigorous and critical press and public discussion about Ford and its management.
That's just the situation in which the chairman of Malaysia's Proton finds himself. When Datuk Mohammed Azlan Hashim left his job as head of Kuala Lumpur's stock exchange a year ago to take over Proton's chairmanship he faced a number of challenges. Thanks to falling import tariffs Proton's domination of its domestic market is under heavy pressure from rivals, its share shrinking from almost two-thirds of the home market to some 40 per cent. Tie-ups with foreign partners were looking hard to arrange, although talks were ongoing with Mitsubishi and Volkswagen.
Datuk Aslan found one other big headache at Proton. In 2004, under previous chief Tengku Mahaleel Tengku Ariff, a Proton subsidiary had spent €70 million to acquire a 57.75 per cent interest in struggling Italian motorcycle maker MV Agusta Motors. The deal, which was supposed to provide benefits in both product technology and manufacturing know-how to Proton's automotive operations, didn't allow the Malaysians to exert control over MV Agusta, in spite of their majority ownership.
Good money was flowing after bad into the coffers of MV Agusta. Officially Proton provided another €44 million to help the motorcycle company restructure and make its move upmarket, but some observers think the true figure is many times that. The crunch came last September. Datuk Aslan learned that while MV Agusta was demanding €40 million in the short term and another €66 million soon thereafter, it was still unwilling to grant management control. The ways of doing business in Italy, he quickly discovered, were less straightforward than elsewhere.
Seeking a buyer for MV Agusta, Proton instructed its subsidiary to bring in its investment bankers. The latter found an Italian property which, to quote a Proton report, 'had negative shareholders' funds, was cashflow deficit, [had a] track record of years of losses and no concrete business plan moving forward.' While it was splashing out on fancy showrooms the company's motorcycle sales were negligible, not even into five figures a year. As collateral against which to negotiate a loan, Agusta's existing bankers said that 'they viewed the shares as worthless'.
The upshot was that on 1 March 2006 in Varese a deal was signed for Genoa-based investment holding company GEVI SpA to acquire Proton's shareholding for a nominal one euro. GEVI pumped in more capital and now holds 65 per cent of MV Agusta. I'm sure that Datuk Aslan and his colleagues wish them the best of luck. I'm sure as well that much as BMW disposed of its investment in MG Rover for a tenner the managers at Proton are now happy to see the back of an investment which seemed certain to be a long-term drag on the company.
Bizarrely, however, former Proton head Tengku Mahaleel has gone public with his outrage over the disposal of the MV Agusta interest. Even more spectacularly former Malaysian premier Dr. Mahathir Mohamad has added his indignation to what's become a cause celebre in Kuala Lumpur. The 2M, as they're known, issued joint statements reacting angrily to the divestment and, as well, to costly Proton marketing initiatives aimed at stemming the slide in domestic sales. Separately, Tengku Mahaleel accused both the nation and its auto industry of 'losing its way' and threatening to tip over into a role as 'a labour supplier in the industry', simply screwing together imported products.
The task facing Proton is indeed daunting. Once ambitious as an exporter of autos to the world, Proton had its wings clipped by Mitsubishi in the late 1980s in return for the latter's help with product development. Since then its Korean rivals have roared ahead with broad model ranges and competitive quality that have left Proton in the dust. It faces a hard slog in developing new models that will allow it to develop the export markets that it desperately needs.
This is where partnerships come in. After the collapse of a 2004 deal to assemble Volkswagens in Proton's plants, VW has agreed to supply technology and, in the words of Bernd Pischetsrieder, to support Proton 'in a few isolated projects'. The link with Mitsubishi has been renewed, providing vehicle-development assistance and updated production technology. Later this month Proton expects to announce another partnership, thought to be with a Chinese company. Whatever the deal, it has to offer the prospect of help with the promotion of exports. In the motor industry a good offence is the best defence.
But with all the turmoil over the disposal of underperforming MV Agusta, there should be worries among 1,200 executives and engineers at far-away Norfolk. Proton is also the owner of Lotus. With its roster of past owners including such eminent names as Toyota, General Motors and Bugatti, Lotus has been in Proton's portfolio since 1996. It too is a money-loser, €10.5 million in 2005, though credited with many improvements to Proton's model range.
At Geneva last month Datuk Aslan affirmed Proton's support for Lotus. The launch of its new Europa S, he said, was 'a declaration of Proton's backing and support for one of the world's leading automotive and engineering companies.' Some observers, however, have not found the Europa S all that convincing. Nor has Lotus found a customer for its 'Versatile Vehicle Architecture' as displayed at Detroit and Geneva in its APX concept. Affirmation from the top or not, if I were at Lotus I'd be starting to prepare for life after Proton.
- Karl Ludvigsen
Ford's Better Ideas (March 2006)
Ford's been taking some pretty big hits lately. A guarded left hook came its way the other day from another website, thetruthaboutcars.com. Bob Elton, author of the piece, was tough on Ford's pace of innovation. "In Ford's latest ads," he said, "Mr. Bill touts The Blue Oval as a tireless automotive innovator. In reality, Ford has seldom, if ever, taken the technological lead." This statement doesn't pass the 'truth' test. It falls to me to enlighten Mr. Elton about some of Ford's Better Ideas.
Ford's forays into the structure of the automobile began with its exploitation of better materials. "Without question," wrote Henry Ford's colleague Charlie Sorensen, vanadium-alloy steel "furnished the real impetus for abandoning the sensational success of Model N for the evolution of Model T and ultimate realization of Henry Ford's dream of a car for the masses." Legend has it that American discovery of this improved alloy occurred on Florida's Palm Beach in 1905 when an inquisitive engineer picked up steel shard left there by a French racer's engine. According to Sorensen, however, its origin was Britain, "a country which had been in the forefront of steel development."
Early in 1906 an English metallurgist paid a call on Ford, bearing samples of vanadium-alloyed steel. Small amounts of vanadium, as little as a quarter of a percent, more than doubled steel's tensile strength and increased fatigue and shock resistance without degrading ductility. Once he was convinced that the alloy could be produced consistently and machined easily, Ford went all out to design a new car to exploit it. "We can get a better, lighter and cheaper car out of it," he told Sorensen, who recalled, "It was the great common sense that Mr. Ford could apply to new ideas and his ability to simplify seemingly complicated problems that made him the pioneer he was."
Exploitation of the new alloy in the frame and other major parts of the Model T accounted for its ruggedness and resilience in spite of components that other engineers thought flimsy and fragile. The improved steels, worked out by C. Harold Wills in many experiments at Ford's Piquette Avenue plant, were used throughout the Model T. Another striking feature was the T's use of steel pressings for such major parts as the rear-axle housing and the sump beneath both the engine and the transmission. Later Ford would acquire the Buffalo, New York plant that made them and - even before that - the lanky Danish mechanic who supervised the pioneering stamping job, William "Bill" Knudsen.
Henry Ford had less success with his next major structural innovation. At the end of the 1930s he was building plastic-bodied prototypes with steel tubular frames. Engineer Robert Boyer led the creation at Ford of a plastic sheet made from agricultural products such as soybeans, wheat, hemp, flax and ramie. Using panels fabricated from this plastic, in April 1941 Henry Ford revealed his prototype with a complete plastic body supported by a tubular space frame. Recalled engineer C. J. Smith a decade later: "They made molds and made the whole car. It had a welded, tubular [steel] frame because this type of frame is strong, but it cost too much to make. Nowadays, since they have [automatic] welders, it wouldn't cost so much. Then, it had to be all welded by hand." Ford's vision for this vehicle even embraced a rear-engined version using a transversely mounted V-8.
After World War II the rebuilding of Ford's engineering cadre including its luring from GM of Earle Steele MacPherson, a man remembered by an associate as "an engineer's engineer, an idealist, self-centered and very usually right." MacPherson was 56 in 1947 when he jumped ship to Ford. His last project at GM had been the design of a small car for Chevrolet, the stillborn Cadet. Features that MacPherson sought to give the Cadet appeared instead on Ford's cars in Europe and America.
Clutch and brake pedals suspended from the firewall marked one MacPherson innovation. They appeared on new British Fords in 1950 and American Fords two years later. Most profound, of course, was his introduction of what has become known as MacPherson front suspension - using a strut instead of an upper wishbone to guide the wheels and provide springing, damping and turning. This was first used on the British Consuls and Zephyrs introduced at the Earls Court show in the autumn of 1950. "When the Ford organization produces an entirely new model," said London's The Motor about the Consul, "one can expect to find evidence of original thinking." In this MacPherson's pathbreaking suspension didn't disappoint.
Moving from structure and suspension to body innovations, Ford broke ranks with others in its price class in 1928 when it made laminated windshield safety glass standard in its new Model A. Henry Ford had seen once too often the injuries that ordinary glass could cause. Safety was also behind the design of the interiors of 1956 Fords, with padded instrument-panel cowls, a recessed-center steering wheel and optional lap belts. These were innovative and welcome safety features whose merits would soon be proven. It proved premature, however, to promote them as positive features of a new-car design.
A remarkable body innovation came to the Ford range in 1956 for the 1957 model year. This was the Sunliner, a retractable-hardtop convertible. Originally developed in support of Lincoln's Continental Mark II program, the all-electric folding top was launched on a Ford model instead. The innovative convertible - obvious forerunner of the many retractable hardtops of today - remained in the Ford range through the 1959 model year. In all, 48,394 were produced.
Nineteen fifty-five saw Ford launch an innovative model in its two-seat Thunderbird. Its heart wasn't in this project, however, and even before the two-seater was introduced its four-passenger successor was on the drawing boards. This turned out to be the more innovative car, for the idea of a modern close-coupled 2+2 "personal car" had legs. With its dedicated seating for four and deep central console (which was also structural) the 1958 Thunderbird was the envy of Ford's competition and soon imitated, especially by GM with its Buick Riviera.
In 1964 Ford unveiled its affordable personal car, the Mustang. This became an object lesson - arguably the industry's first in the modern era - in the exploitation of a volume platform to permit the production of an appealing derivative. The ingenious conception of the Mustang broke open the floodgates to alternative body styles and configurations having a stronger appeal to specific groups of customers, a trend that still hasn't run its course.
Bodies of Ford cars were better protected during these years by a 1958 innovation by Ford's manufacturing engineers. They developed electrocoating or E-coating, immersing a complete body in a bath of primer with an electrostatic charge that persuaded the primer into every nook and cranny. This was quickly taken up for Ford's European models, whose unitized body-frame construction benefited greatly. In America it was phased into Ford's Wixom plant in the early 1960s to the benefit of the unitized Thunderbirds produced there. Adopted as it was by Ford's rivals, E-coating earned the Blue Oval handsome royalties payable against its patents.
Ford's drive-train innovations are traceable back to the ingenious planetary transmission of the 1908 Model T. Though planetary drives weren't unknown, none matched Henry Ford's in compactness, simplicity and ease of operation with its unique combination of pedal with lever controls. Thought it had its limitations - only two forward speeds - the unique planetary drive was one of the T's most endearing features.
Near the end of the century Ford found itself pioneering in drive trains again with the offering of a continuously-variable transmission or CVT in its European Fiesta. Although delayed from its hoped-for 1984 introduction, Ford's launch of a CVT-equipped car in April 1987 was the first ever in Europe, followed by Fiat. Ford's engineers had been working with Van Doorne, inventors of the push-type belt for CVTs, since 1976. From its first "CTX" units, which were supplied by Van Doorne, Ford later moved to its own manufacture of the compact transaxles at its Bordeaux factory.
In power units the Model T helped establish Ford's reputation for innovation at the service of the car owner. Thought through from first principles, its engine marked a break from all past practice and set new guidelines for the future. In 1908 its use of a one-piece cast-iron block with a detachable cylinder head was unique for a car in volume production at a time when individual or paired cylinders with integral heads were the norm. It did without an oil pump altogether, instead using its flywheel to deliver oil through a pipe to the cam-drive gears, from which it flowed back through the pressed-steel oil pan, and its troughs for con-rod lubrication, to the sump below the transmission.
The Model T engine abounded in ingenious detail, such as its pioneering use of clamps to retain both the inlet and the exhaust manifolds. Water jacketing was provided over only the upper one-third of the cylinder. Excess metal was absent. In 1925 Murray Fahnestock would write, "The Ford crank shaft is relatively small for the piston displacement as compared with the crank shafts or other-than-Ford cars." Indeed, exploiting vanadium-alloy steel, the forged crankshaft resembled more a bent wire than what we'd think of as a crankshaft today.
Two decades later Henry Ford's team, including Joe Galamb and Charlie Sorensen, brought their skills to bear on the volume production of a V8 engine. Here again they made significant breakthroughs in design and production. One claim that Sorensen made for the new eight didn't hold up, however. "All previous V8s had been case in more than one piece," he wrote. Most indeed used separate blocks on a crankcase or a block cast in two halves. In 1929, however, GM's Oldsmobile introduced a V8 with a one-piece block for its new "companion car," the Viking. With the block of the 4,252 cc Viking needing only its cylinder heads added, it was called "a rather remarkable casting" by Automotive Industries.
It wasn't the Viking that survived, however, but the Ford. In volume terms, of course, Ford's challenge was far greater. Its V8's one-piece block was designed as much for manufacturability as for performance. "When they found me making changes in design so as to fit the foundry and machine needs," Sorensen recalled, the designers "actually believed I would ruin the engine." A major coup in the V8's production was the development of a two-ton molten-iron furnace that followed molds moving continuously down a pouring line at a rate of 100 per hour. Cooling of the castings was carefully controlled to create an iron structure that was compatible with high-speed machining. From 1934 Ford's V8 also broke with convention in its use of cast instead of forged crankshafts.
Seen at the time as a radical departure for a low-priced car, Ford's V8 was one result of a program of exploration of unusual engine types that Henry Ford conducted personally. Henry had the will and the resources to build and test unusual engines to see how they worked. Included were flat opposed twins and fours, an L-head in-line five and an overhead-cam V10, many versions of the V8 including air-cooled and overhead-cam variants, overhead-cam sixes and an aluminum-block overhead-cam V12 of only 2.1 liters. A particular obsession was an X-pattern eight-cylinder engine with four sets of paired cylinders, made in both liquid- and air-cooled versions. Henry had high hopes for this but it proved difficult to package.
After World War II Henry Ford II's engineers in Europe were his company's point men in engine innovation. First in Germany in the 1950s, its in-line fours began using three-bearing crankshafts cast of nodular iron that looked massive but in fact were impressively light yet stiff by virtue of being cast hollow. This type of crankshaft was used by Ford of Britain in the new 105E overhead-valve four it introduced in 1959. Its "80-bore" nickname was off only slightly because its 3 3/16-inch bore equated to 80.96 mm, which with its ultra-short stroke of 48.4 mm gave 997 cc. The short stroke allowed its iron cylinder block to be only 7 ¼ inches high.
Better known later as the Kent engine, powering the popular Fiesta, Ford's four was a breakthrough in combining performance with efficiency and simplicity. When enlarged to 1.5 liters it retained the same bore with a longer stroke and taller block and required five main bearings. This provided a firm base for the 1.6-liter Lotus Cortina version with a special twin-cam cylinder head designed by Harry Mundy and, later, for the four-valve-per-cylinder BDA engine built by Cosworth for Ford's Escort RS1600. As tweaked by Cosworth the Kent four was a winner in Formula Junior and also a sound base for Formula Ford, perhaps the world's most popular single-seater racing format.
In a joint effort between Ford's Dearborn engineers and those in Germany, a different approach was taken for a new family of small-car engines in the late 1950s. Launched in Europe in 1962, the first of the new breed used a 60-degree V4 engine of 1,183 cc to power a front-drive small car, the Taunus 12M. While the four's 60-degree vee provided compatibility with a V6 sister engine, as was implemented in both Germany and Britain, it posed the challenge of a high primary horizontal imbalance. This was overcome by the use of a contra-rotating balance shaft running at engine speed, the first use of such a shaft in the modern era and the first use ever for a vee engine.
With reduced emissions and low fuel consumption on their agenda in the later 1960s and early 1970s, Ford's Dearborn engineers developed a series of engines using direct fuel injection to achieve charge stratification in a bowl-in-piston combustion chamber. These pioneering efforts led to the development of Ford's Programmed Combustion Process or PROCO system. This showed great promise in both conventional and military vehicles, using a fuel-injection system developed by American Bosch. Although PROCO was overtaken by other technologies and especially by advances in electronics, it was an important attempt to encourage the engine itself to reduce emissions without resorting to aftertreatment.
Further research toward achieving optimum combustion-chamber design in Dearborn during the 1970s led to the creation of Ford's Compound-Valve Hemi or CVH engine. With its low surface/volume ratio the semi-spherical chamber outperformed wedge-type and Honda-patent CVCC chambers both in the laboratory and on the road. Ingeniously, Ford found a way to marry the hemi head and its inclined valves with a single overhead camshaft and hydraulic lifters. Mutually inclined at an included angle of 45 degrees, the valve stems were also rotated seven degrees in the chamber's plan view. Accounting for the "Compound-Valve" appellation, this cleared space for pressed-steel rocker arms to operate the valves from a single low-placed camshaft.
Ford launched its innovative CVH engine in displacements from 1.1 to 1.8 liters in 1980 in both Europe and America in its first front-drive Escort, jointly engineered as the "Erika" program to gain "world car" economies from a sharing of technologies. The CVH served manfully in a wide range of products on both sides of the Atlantic into the 1990s, being both fuel-injected and turbocharged successfully. More recently similar research into optimum valve and chamber designs led to Ford's adoption of a standard layout, its four-valve "modular" chamber, for families of North American engines.
Like Henry himself between the wars, the modern Ford Motor Company has never been slow to explore alternative prime movers for its cars. Gas turbines and Stirling engines have both been on its agenda. Electrics have been pursued from Britain's Comuta of the 1960s to the bought-in Th!nk project of the 1990s. Where fuel cells and hybrids are being developed, Ford is in the thick of it. Strong leadership in on-board electronics was signaled by Ford's "Continental 90" concept car and its series of powerful EEC power-train control systems.
This is a pretty compelling list of Ford's Better Ideas. To his credit, Mr. Elton allowed as how Ford has made consistent and effective use of one innovative technology: air suspension, introduced on the Lincoln Mark VII in 1984. It then migrated to the Continental in 1988 and later to the Town Car and Mercury's Grand Marquis. Air springing also benefits Ford's sport-utilities and models from Jaguar and Land Rover. Bob Elton rightly suggested that it would be a Better Idea for Ford's trucks as well.
So Ford's record for innovation is pretty good. But in the car business the question is, "What have you done for me lately?" It's time for its engineers in Dearborn, Cologne, Dunton, Coventry, Gaydon and Gothenburg to reach out for radical new solutions to the immediate challenges facing car makers: reducing both cost and weight at the same time. Henry did it. Now it's Bill's turn.
- Karl Ludvigsen
Daewoo to Bow Tie (February 2006)
I have a lot of time for my friend and former colleague Dick Herdegen. We worked together at GM in the 1960s; Dick it was who came to Europe to introduce the Fisher Body Craftsman's Guild to Vauxhall. Later he set up the first GM news broadcast network to all the company's dealers. Herdegen has observed the motor industry from the inside. This qualifies him well to have his letters frequently published by Automotive News, which identifies him as "a retired automotive executive" living in Michigan's Bloomfield Hills.
But this time Dick Herdegen is wrong. During a trip to Europe, he said, he saw "a covey of small, unrecognised cars wearing the distinctive Chevrolet livery. The Chevrolet nameplate and bowtie were figuratively camouflaging the identity of Daewoo (Korean) products also made by General Motors." Dick didn't like this. He considered it the consequence of a "(mistaken) theory that a marketplace perception is far more important than the product itself," asking, "Why can't GM just be straightforward with the public?"
My friend felt that GM should have kept the Daewoo brand because "a quail is a quail and it doesn't become an ostrich when it scurries across a border." As an example of best practice he cited the way VW has nurtured its Skoda brand, which at one time was the butt of cruel jokes, at least in Britain. "Unlike GM," he said, "VW resisted the temptation to play the name-change game."
I don't know about quails and ostriches, but this isn't an apples-for-apples comparison. Skoda was and is a great international brand that needed help. It was the leading East European marque by far before VW stepped in, It had some useful export markets as well. It was VW's commitment to keep the respected Skoda brand that helped it beat off Renault's challenge for possession of the company.
Daewoo was an ostrich of another colour. It hadn't really been in the car business long enough to have a recognisable profile, let alone one worth nurturing. Like all the Korean chaebol leaders Daewoo's Chairman Kim felt that it was vital to use the company name as the automotive brand name, no matter how bizarre or irrelevant it might be in export markets. If it stood for anything, Daewoo was known for low prices and, in Britain, a factory-direct style of selling that failed to endure.
The use of "Chevrolet" as the company's brand name outside Korea is a stroke of genius. It's been a great auto brand since 1911 at the heart of GM's most successful sales years. Chevrolet, prominent in Latin America, regained American sales leadership in 2005. That Chevrolet hasn't previously been deployed as a brand in Europe in a major way has been a consequence of the lack of suitable product; USA-made Chevys were far too big. The availability of Daewoo product solved that problem.
Traditionally, of course, GM has looked to Opel and Vauxhall to be its European brands. This was fine during the decades when there was little challenge to them at the lower-priced end of the market. They could tolerate being undercut by Fiats and VWs; there was room in the market for all. That's changed with the arrival of imports from Malaysia and Korea. There's no way that European-built cars can compete on cost with them, let alone the coming exports from China.
Thus it's to GM's great credit that it strategised a positioning for Chevrolet in Europe that's based on the ability of its Korean plants to produce both well and cheaply. The only way the strategy can stumble is if some well-meaning higher-up tries to set artificial product and segment boundaries between Opel/Vauxhall and Chevrolet, saying that one shouldn't cannibalise the other. That would be a Big Mistake. Each brand should be allowed to find its own customer body.
So far I don't see signs of such constraints. As the Korean company makes a transition away from Daewoo products to new designs it's making a very good fist of its styling and equipment. The Epica it's introducing at Geneva is a case in point. Called the Tosca in Korea, this is an impressive sedan with impeccable styling inside and out. Its bold five-spoke wheels communicate a "take no prisoners" attitude. The Epica will keep the transverse in-line six that's been praised for its smoothness, a product of the tenure of Ulrich Bez as engineering chief at Daewoo.
Nor is there anything to be said against the SUV design first shown as the S3X concept car and soon to be in production. Its chassis is the basis for the T2X show car, a "sporty off-roader" crossover that's won praise from critics and rival designers. It's a tribute to the work of a 100-strong international team led by David Lyon and Max Wolff that's carving out a distinctively feisty identity for future products from the former Daewoo factories. "What we want to do at Chevrolet is have a much more dramatic, bold, dynamic look," says Lyon, "very powerful-looking cars, whether it's a car or a truck, commuter car or whatever."
Three Korean factories make more than a million vehicles a year with 18,000 staff and 2,000 engineers, the team that Bez built. Under the overall supervision of Welshman Nick Reilly they're manufacturing products to be sold with the Daewoo, Chevrolet and Suzuki nameplates. The outfit is now officially GM-Daewoo Auto & Technology or GM-DAT, owned 52 percent by GM. The balance is held by Suzuki and China's SAIC at ten percent each with the balance in the hands of a consortium of Chairman Kim's creditors.
All this bodes well for the future of the Chevrolet brand in Europe, where GM-DAT can make serious money. It will soon be present in a big way as the creator of GM's new Gamma platform, which will underpin the next generation of Opel/Vauxhall Corsa and Chevrolet Aveo and Matiz. Nick Reilly's calling card to win this important project was the relatively low cost of engineers in Korea, reckoned at half European costs when social overheads are considered. Also helping, said Reilly, is "the long-hours culture here in Korea".
With the coming introduction of the diesel engines needed to succeed in the Old World, Chevrolet is looking to raise its market share. From 0.9% in 2004 it rose to 1.2% in 2005, a jump in volume of 26.5% to 240,500 units. It plans to break well through 250,000 this year and be selling 300,000 in Europe in 2007, thanks to fresh product and broader market coverage.
It looks like we'll be seeing a lot more of the distinctive Chevrolet bow-tie emblem, which William Crapo Durant discovered at Hot Springs, Virginia either in a newspaper or on his hotel-room wallpaper, depending on which legend you believe. As for the badging of other makes as "Chevrolet", this is a tradition that goes back to the founding of the brand. Swiss-born Louis Chevrolet's name was prominent in the racing world, thanks in part to his achievements as driver and tuner for Durant's Buick racing team. Chevrolet started racing for Billy Durant in 1907.
By 1911 the bankers had booted Durant out of the company he'd founded, General Motors. He turned to Chevrolet to create a new car to be sold under the racer's name. While Louis was developing a much too elaborate and costly six in Detroit, Durant was backing former Buick works manager William Little in his creation of a range of smaller, cheaper cars at a factory in Flint. When Chevrolet returned from a European trip in 1913 he found that previously-Little products which he did not fancy at all were being sold under his name.
In a supercharged huff Chevrolet left the enterprise. He was so disgusted with Durant's high-handed actions that he sold his substantial shareholding in the Chevrolet Motor Car Company, the enterprise that would soon grow spectacularly and become the wedge with which Durant would prise his way back into General Motors. The Little car vanished and Chevrolet prevailed. Contrary to the reservations of some of Durant's colleagues, Americans learned to pronounce it. Europeans will have it easier.
- Karl Ludvigsen
The Callous Corporation (January 2006)
I’ve seen corporations take a few hits in my time. Having worked in public and governmental affairs for Ford, GM and Fiat, I could hardly fail to be aware of the attacks made on large companies by people and organisations who fear their power and resent their behaviour - actual or suspected. I was reminded of my past thoughts and efforts in this field by a quasi-documentary called ’The Corporation’ broadcast during the holiday period. Needless to say, it wasn’t praising the power supposedly wielded by corporate entities around the world.
I subscribe to the idea that corporations and the technologies that they espouse are gradually increasing their influence across the globe in relation to the powers of governments. While governments struggle to adjust and implement their local, regional, national and trans-national responsibilities and authorities, corporations are relatively free to focus on achieving their business goals, aided and abetted by their creation of technologies that governments believe they can’t do without.
This theme was shrewdly foreshadowed a quarter-century ago by famed CBS News presenter Walter Cronkite. Cronkite, a car enthusiast with a racing record to prove it, warned of a coming collision between the products of technology and the needs of governments. On his retirement in 1981 Cronkite speculated on the difficulty of legislating ’for a democracy with inputs from the population when the legislation is highly technical and scientific in nature. One group of scientists says one thing, another group contradicts the first.
’These sorts of problems have become reality today,’ the respected newsman continued. ’A hundred and fifty years ago you might have only face one such problem in a lifetime, like where to build a steam plant. Today it seems like ten a day. We have to concern ourselves with computer safety, auto emissions standards, auto safety, water pollution, the atmosphere, chemical additives in the food we eat, cures for all sorts of ailments, just name them. Our lives are built by the technological impacts on society, and here we are turning over so many of these decisions to government. I really think one of the great problems of our future will be how to keep democracy alive in a technological society.’
Expressed before the internet, Microsoft, GM crops and the exploitation of DNA, this was a prophetic view. Some of us in Britain are experiencing the tyranny of government and technology in harness with the erection of ugly wind farms in areas of natural beauty where the local populace is in complete opposition - democracy in retreat. The same applies to the proliferation of speed cameras throughout the UK, another government initiative riding piggy-back on technology. Underpinning both such actions and others like them are corporate initiatives that governments take up willy-nilly without knowing enough about them - a knowledge lacuna that companies are eager to exploit.
At Ford in Europe our strategy was to work behind the scenes with civil servants and technologists in government, acting as an ’impartial’ source of interpreted information about technologies affecting the auto industry. This was our best lobbying stance because, as a ’foreign’ company, we didn’t have the national clout of the indigenous auto firms. Indeed, they wouldn’t even admit Ford and GM to some of their national and trans-national industry associations.
There wasn’t much we could do, however, about attacks on Ford from those who felt we were arch exploiters of humankind. A 68-page report of 1976 by Counter Information Services took as its theme that ’The Ford Motor Company is in the business of making money out of car-workers. To do this it mounts a constant three-pronged attack: on wages, on productivity levels and on workers’ attempts to organise themselves.’ One of its main themes was that Ford whipsawed work forces in various companies to keep wages as low as possible. The report’s authors would be dismayed by the level of international sourcing of cars and components practised today by Ford and most other car makers in search of cost reduction in harness with quality improvement.
One of Europe’s more enlightened auto executives, Volvo’s Pehr G. Gyllenhammar, sought to give big companies a voice in 1982 by founding the Roundtable of European Industrialists. He put together a board of CEOs whose combined companies had turnover on the order of Spain’s GNP. ’For all my adult life,’ said the Volvo chief, ’industry has had a bad name in Europe. Now governments realise that they cannot do everything. We are wanted again and are asked to help solve problems.’
In addition to setting up a venture-capital company, Gyllenhammar and his partners backed studies on Europe’s transport needs and other issues. True to form they initially rejected membership by American firms, though this was relaxed later. Advocates would say that the Roundtable was an enlightened effort to raise business issues with governments; critics would call it yet another attempt to substitute the agenda of business for that of the public’s elected representatives. They could relax when, after Gyllenhammar was voted out of Volvo in 1993, his Roundtable quietly faded from view.
Needless to say, the TV programme on corporations didn’t overlook the 1984 disaster at a Union Carbide chemical plant in India that killed 3,000 and affected the lives of 570,000. Rightly enough it was excruciatingly difficult to allocate blame for the toxic-gas leakage between Union Carbide, 51 per cent owner of the Indian subsidiary, and the local staff - let alone the officials who allowed a shantytown to be built illegally close to the plant.
Commenting on the consequences of this tragedy at the time, a legal expert drew the lesson for multinationals that they should ’control their safety arrangements and environmental impact strictly by their own inspectors on the spot.’ They were also advised to ’abandon the project rather than succumb to the host government’s pressure to give up technical control of potentially dangerous plant.’ Here are important warnings for a new generation of managers for whom Bhopal is only a historical curiosity.
In the wake of Bhopal in 1985 multinationals were also warned not to ’fool yourself that lawyers can prevent liability by cleverly drafted contracts or extricate the multinational corporation from a major accident. The cost of unlimited insurance cover for a disaster of Bhopal dimensions may be too high even for a major company.’ This was borne out by litigation over the Indian calamity that has rolled on well into the 21st Century.
The mention of lawyers brings me to the core of this column on corporations and their impact on society. As the aforementioned TV programmed rolled along, with its litany of corporate misbehaviour, I began to sense a common theme among its indictments. That is that the corporate structure, with its presumption of limited liability and its comfortable insulation from the cares of mere mortals, engenders a callous attitude on the part of its leaders and managers.
My dictionary defines callous as ’unfeeling, insensitive’. I think that’s fair as applied to the attitudes of many people who find themselves in positions of corporate responsibility. How often have you heard someone say, ’Well, I really regret this, but we have to do it for the sake of the company.’ That’s callousness. That’s the slippery slope down which moral men and women make immoral decisions.
In the 21st-Century corporation we consider that our ability to act callously is enhanced by the protective walls we believe our lawyers have erected. We think we can shelter behind the legal defences they’ve constructed at such great cost. Recent court cases, however, and the post-Bhopal warning, remind us that some callous acts take us well beyond the limits that civilisation is willing to tolerate.
Corporations, say the experts, are treated like people under the law. It is up to the people in those companies to act with greater sensitivity to the consequences of their corporate actions in the 21st Century. Only if they do so will corporations begin to live down their well-deserved reputations for callousness.
- Karl Ludvigsen
No More a'Roving (November 2005)
You're probably fed up with hearing about the on-off saga of Rover and the Chinese. I sure am. But the news that the last Rover built at Longbridge has gone on display at Gaydon struck a chord. There's an inescapable air of finality about that. The last all-British Rover in a museum - that's the end of one road at least. But it started me thinking about Rovers. I reached the conclusion that Rover represented the best and the worst of the British motor industry.
Rover cut an amazing swathe after the war with its gas-turbine car, the world's first, and then the original Land Rover which, more or less, is still in production. The launch of its 2000 in 1963 brought Rover its first Car of the Year award, recognising its ingenious de Dion rear suspension and Heron-head engine. My friends Bruce and Jimmie McWilliams did a great job of positioning both Rover and Land Rover in the US market, including a memorable ad for the latter that exploited its role in the Great Train Robbery.
Rover's next Car of the Year, in 1977, was the SD1. With rakish styling by David Bache it gave up the 2000's exotic chassis features in favour of a more rational and less costly base vehicle. Conceptually the SD1 had lots going for it, including its Ferrari Daytona nose, which all too often was ahead of my Ford Capris on the track. However it never seemed to have just the right engine and suffered from lackadaisical manufacturing quality. An ill-judged effort to market the 3500 in America produced more lawsuits from irate dealers than sales successes.
Nevertheless the early 1980s saw Austin Rover on the way back to a decent market presence. At Ford we were even quite worried that the Morris Ital, with its hint of Italian glamour, might be a big threat in the UK market! In the mid-1980s, however, the car division was in the hands of manufacturing man Harold Musgrove, whose attitude to the press and public was, 'These are damn good cars and you're an idiot if you don't buy them.' In harness with him was product planner Mark Snowdon, who filled various executive roles with overweening self-confidence out of proportion to his talents.
Of course Morris wasn't long for this world and, as it turned out, neither was Austin. I felt then and still feel that the decision to delete the Austin name from Maestros and Montegos in 1989-90 was misguided. The rationale for dropping the great 'Austin' name was that it was seen as having been degraded over the years to the degree that it was holding back sales of the cars to which it was attached. The solution to that should of course have been the building of better cars under the badge, which still had wide acceptance and indeed inspired considerable affection. Most importantly, Austin possessed what the company most needed: a widespread dealer network. Without the Austin brand, this was vulnerable to the predatory Japanese.
We gained an insight into Austin Rover's problems when we carried out in-depth interviews with dealers in the 1980s to find out what Lancia would have to offer them if the Italian marque were to return to the UK market. We discovered that Austin Rover dealers were profoundly frustrated by the company's failure to back its products in the field. They had more product problems than other dealers and worse factory support, in parts and warranty, than their contemporaries. This was a formula for future disaster.
Speaking of dealers, Rover's effort to return to the USA's market with the Sterling in 1986 was a fiasco of the first magnitude. I had an interest in the matter because I was trying to persuade them to sell their cars through Malcolm Bricklin's private network, but they chose instead to ally themselves with Florida dealer Norm Braman in one of the most bizarre and unworkable joint ventures even conceived. Mortifyingly the Rover name wasn't used because doing so would open Austin Rover to attacks from dealers still smarting from the SD1 episode. There was also the risk of confusion with Land Rover, which had its own sales network in the USA.
In 1987 I was given an early look at the company's post-Austin outlook by product planner John Stephenson. Using market research from ad agency Dorlands, the Austin Rover Group was dead set on 'Roverisation'. For smaller cars, it found, buyer priorities were cost of use, styling, practicality and manoeuvrability, while in the executive class buyers wanted a sound purchase, robustness, driving comfort and styling again. To the extent that Rover had any distinctive attributes they were found to be 'Britishness' or 'Englishness' and the quality of the driving ambiance. Their aim was to develop themes like 'Driving a Rover says something about you' and 'Rovers are excellent cars to drive'.
Looking back, it's easy to see that as a marketing meal this was pretty thin gruel. Rover seemed inclined to make what it could of existing perceptions instead of crafting a new persona that would match and better the efforts of the opposition. Any such efforts were further diluted by the alliance with Honda, which anchored Rover to banal if worthy basic platforms that frustrated new chief Graham Day's plan to 'transform Rover Group in the medium term from a volume producer to a specialist producer offering a limited range of upper-market models containing higher value added and profit margins.'
I had something to do with one of the thrusts Rover made in this direction. Struggling to keep a grip on the MG brand, in 1992 it introduced the MG RV8, based on the new body shells that were being produced by the company's parts people for the MGB. This led to the idea of setting up a Special Vehicles operation to develop high-value short-run products based on mainstream products. For guidance my consultancy looked at how other companies did this, such as Mercedes-Benz and AMG, Fiat and Abarth. They did set up a company to produce such special vehicles as the Spen King Range Rover, but it didn't last long.
Ironically, just when Rover was trying to move upmarket its engineers made good use of a government grant, one they'd fought hard for, to create the all-aluminium K-Series engine. Here like the earlier 2000 was an example of the best of British engineering, an ingenious sandwich structure for a four-cylinder engine that adapted it ideally to die casting. But it was hardly the answer for an company that had set its aim as duking it out with Jaguar to create a British rivalry like that between BMW and Mercedes in Germany.
In 1992-93, emboldened by our success in recruiting dealers for Nissan in the UK, we undertook to do the same for Rover in Germany. So confident were we that we made our compensation chiefly contingent on signing dealers. Needless to say, we found Rover a much less saleable proposition in Germany, where dealers were excruciatingly slow to consider a new marque, especially one from Britain. We did achieve one signing and had a number more in the pipeline when we had to shut down Euromotor Franchising lest it drag down the rest of our business. It was an unhappy outcome for both consultancy and client.
When the dust settled - and after one of Rover's frequent management changes - we had another crack at them, carrying out a study of the Car of the Year competition to see how it worked and how the company might increase its chances of winning the accolade. This was undoubtedly with the new 75 in view, but it lacked the credentials to take the prize.
My correspondence with Rover shows that by 1997 it was faltering in its upmarket drive, now conflicting with the needs and desires of BMW, and looking to forge a more mainstream profile after all. With such fluctuations of purpose over a decade it's easy to see how Rover fatally blurred the perceptions of dealers and the public regarding its products and objectives.
So in Rover we had the best of British: intriguing and often advanced engineering, professional interior and exterior styling - combined with the worst of British: frequent changes of management and objectives, inadequate quality and cavalier disregard of the needs of dealers and distributors. In the end the latter far outweighed the former.
- Karl Ludvigsen
A Family Affair (October 2005)
There's never been any doubt about the industrial and financial heft of the Porsche and Piëch families. Their dynasty, descended from the son and daughter of protean engineer-executive Ferdinand Porsche, controls Europe's most profitable car maker and its largest independent vehicle-distribution company. Between Porsche cars in Stuttgart and Porsche Holding in Salzburg the family has the means to do pretty much what it wants. Nevertheless its decision to acquire a 20-percent share of Volkswagen, Germany's largest car company, came as a shock.
This action, which could only have been carried out with the complete agreement of dozens of Porsches and Piëchs, has several dimensions. One is that they see it as a good investment. When you have as much cash in hand as they do, it's not easy to find places to invest it. Leaving it in the bank has little appeal. Thus the share acquisition is seen as a good bet by the family for the medium term. It's an investment in a company that they know and understand.
They should understand it, with a grandson of Ferdinand Porsche chairing Volkswagen's supervisory board. The share-purchase initiative is that of Ferdinand Piëch, also a member of Porsche's supervisory board. Never shy of the grand gesture - witness his 250-mph Bugatti Veyron - Piëch serves notice with this deal that he hasn't retired with his double-digit offspring to the family acres in Austria's Zell am See. This is a clear indication that Piëch, the ultimate insider, both has confidence in the course of recovery that Volkswagen has set and was able to communicate that confidence to other family members.
The Porsche investment, to the limit of 20 percent allowed under German's "Volkswagen Law", is also one in the eye for a fellow member of Piëch's Wolfsburg supervisory board: the minister president of Lower Saxony, Christian Wulff. In the job since 4 March 2003, in just over two years Wulff has managed to rub Piëch the wrong way. He's been publicly outspoken about VW's problems, saying that it has capacity to make 6.0 million vehicles but has been producing only 5.1 million and highlighting its shortcomings in personnel costs and what Wulff calls "sales stagnation". This can't go down well in Wolfsburg.
Nor are Piëch and Porsche boss Wendelin Wiedeking happy about Christian Wulff's campaign for greater transparency in financial reporting. As deputy chairman of the CDU, Wulff is among those who'd like to see German corporate reporting more on the American model. VW has in fact made some changes in this direction, but like other German companies it prefers an opaque accounting style that permits the husbanding of reserves for a rainy day. Nor is quarterly reporting seen as desirable in the highly seasonal motor industry. Specifically to avoid this burden Porsche withdrew from the M-Dax in 2001.
Christian Wulff sees it as his mission to keep the pressure on VW. "One thing's clear," he says: "When VW gets the sniffles a flu epidemic breaks out through all of Lower Saxony. Thus the state government has a vital interest in keeping the cost structure competitive in VW's West German factories, in bringing its quality to the top level again and in matching its model policy closer to customer requirements. We want VW to become fully competitive again. We want to keep all its enterprises in Lower Saxony. Last but not least for that reason we will continue to hold the state's participation in the future" - a reference to its 18-percent share of Volkswagen Group.
If I were Ferdinand Piëch I'd deeply resent the implications of such public assertions that VW needs the state's help to get its act together. Rather the state, obsessed with joblessness reduction, has been the dragging anchor that keeps VW from making the deeper workforce cuts that it knows are needed to improve competitiveness. In Europe, said, one CEO, "Volkswagen is the last enclave of communism". VW would clearly be better off if Lower Saxony divested its shareholding.
If however the state sold its shares, and if the EU is successful - as many expect - in its current effort to strike down the Volkswagen Law, which it sees as restraining trade, the VW Group would be exposed to predators. The interests of some of these could be inimical to the many mutually beneficial arrangements between Porsche/Piëch and VW. They might have other means of selling VW, Porsche and Audi cars in Austria and the east than through Porsche Salzburg, for example. They might not be keen on the platform sharing practised between the VW Touareg and Porsche's Cayenne, a successful strategy which may be repeated with a new smaller SUV in the future.
Most of all, the Porsches and Piëchs fear an attack on Volkswagen by DaimlerChrysler, against which their ownership of one-fifth of the company acts as a fresh deterrent, one that will remain in place if the state's share is sold. For they detest DaimlerChrysler. Even in its present globe-girdling form the Stuttgart neighbour of Porsche is clearly "Mercedes", an enterprise against whose past actions they hold an implacable grudge. In particular they haven't forgotten that Daimler-Benz fired their dynasty's founder in 1928.
Having joined Daimler in 1923, Ferdinand Porsche was in charge of its engineering during one of the most turbulent episodes of its history. Taking the job had been a bit of a comedown for Porsche, who'd previously been managing director of Austria's Austro-Daimler, but he was determined to make a good fist of product policy at Daimler. But then in 1924 Daimler and Benz began to combine their interests, followed by a full merger in 1926. This brought the combined company huge product and technical challenges, plus a passel of Benz engineers who lost no opportunity to criticise Porsche's work.
With the company moving too quickly to introduce new smaller cars, some of Porsche's Daimler-Benz entries were bug-ridden. Launched in 1926, his 2-litre 8/38 was popular, priced at well under 10,000 marks and selling in four-figure annual volumes. The bad news was that early cars suffered problems with valves, gearboxes and erratic braking. A later audit indicated that the 8/38 cost Daimler-Benz a minimum of six million marks in warranty repairs, an average of 570 marks per car produced based on 10,504 cars produced from 1926 through 1929.
The warranty cost per car was high but may be seen as less than astronomical for a model selling at around 7,500 marks. Because the 8/38 was the first model ever produced in four-figure yearly volumes by Daimler, Benz or Daimler-Benz, its problems and their resolution placed unprecedented pressures on its dealer and service networks that had their echoes in the boardroom. Nevertheless the 8/38 evolved successfully into the 200 and 260 Stuttgart models, which were produced well into the 1930s.
The buck for the 8/38's maladies stopped at Porsche. Informed that the technical director hadn't been responsible for the 8/38's detail design, the supervisory board rejoined that it was created under his stewardship and thus was his responsibility. Coping with the company's huge range of models, produced at dispersed locations and exported throughout the world, tested Ferdinand Porsche's capacity for organisation and oversight beyond its previous limits.
Meanwhile in 1926 Ferdinand Porsche initiated work on a new small car. In 1928 it matured as the four-cylinder W01 of 1.6 litres. Plans were laid down for production of this promising new model at a rate of 1,000 cars per month, an order of magnitude more than the company had ever essayed and a sign of its confidence in Ferdinand Porsche's design. Whether this would happen depended on the ability of the company's consortium of banks to provide credit lines for the 10 million marks needed to fund the tooling and machinery.
To their dismay - for they believed strongly in Porsche's design - the Daimler-Benz board was rebuffed by the banks. Although they agreed that such a car was needed, the banks hadn't the courage to stump up the needed investment. They blamed the bad experience with the passenger cars that the company had most recently introduced. Here was a direct reference - and a negative one - to the problems with Porsche's 8/38.
Instead of defending the car and its designer, the supervisory board decided that the Austrian engineer had to go. Matters came to a head in a stormy October 24, 1928 board meeting from which Porsche drew the clear conclusion that his services were no longer required. Thus were the engineer and his career sacrificed by the Swabians for the greater good of Daimler-Benz.
The board tried to engineer a genteel transition that would keep Porsche's skills within the house and out of the hands of rivals. He should take a longish study trip to America, they suggested, to learn more about the US-built cars that were causing ructions in Europe's markets. When he returned, they promised, he would be a senior advisor and "would be involved in all the major and difficult projects." Such a passive role, however, was never Ferdinand Porsche's cup of tea, not even at the age of 53.
Porsche's exit from the Daimler-Benz management board was anything but amicable. He'd just started a new contract with the company after his first one expired the previous April. Anton Piëch, newly minted as his lawyer son-in-law, led a lawsuit against Daimler-Benz over the dismissal which was settled out of court in 1930. This Anton Piëch, married to Porsche's daughter Louise, was the father of Ferdinand Piëch.
During the 1930s, to meet the exigencies of the Third Reich and to ensure the employment of the engineers in his new consulting company, Porsche worked with Daimler-Benz again. It built prototypes of the Volkswagen and funded Porsche's design of a land-speed-record contender. But theirs was a shotgun marriage. The way Porsche was kicked out of the company rankled then - and still rankles.
In the last half of the 20th Century Daimler-Benz tried to kiss and make up. It assigned some design contracts to Porsche's engineering consulting arm. Early in the 1990s, when Porsche had capacity to spare, Mercedes asked it to engineer and produce its 500E model as a gesture it hoped would be interpreted as friendly.
In the mid-1990s Daimler-Benz came close to forging an alliance with Porsche. Both had decided to produce SUVs and there seemed good reason to co-operate in their design and manufacture. Toward the end of 1996 the deal was on track for signing. There would be a Porsche version of the coming M-Class, with the two companies sharing engineering costs and certain components.
The parties sat for a final discussion. Across the table from the Porsche contingent, said Porsche boss Wendelin Wiedeking, "someone on the board said they would want a small piece of the company." This was as a red flag to a bull. Wiedeking knew that the Porsches and Piëchs would never entertain such an idea.
"I'm not spending a second to discuss this," rejoined the Porsche chief. "Let's close the books on this right now." The other party was dumbfounded that Wiedeking wouldn't even talk about the idea of a Mercedes shareholding in Porsche, but for the Porsche man "even one share would be too much. I didn't even speak to the shareholders about it." He knew well that they wouldn't tolerate even a chink that might give Daimler-Benz access to ownership in Porsche.
Nor do they want to see DaimlerChrysler buying into Volkswagen, the company that was managed during the war by Ferdinand Porsche and Anton Piëch. For 25 years afterward Porsche acted as VW's engineering office. Major sports-car programmes such as the 914 and 924 were shared between VW and Porsche. VW covertly funded major racing programmes at Porsche when Ferdinand Piëch was the latter's technical board member. In the cosy industrial world of Germany such ties are not easily broken. Small wonder that they have been reinforced, indeed, by Porsche's investment in Volkswagen.
Readers who are interested in knowing more about Porsche's business history are invited to read Karl Ludvigsen's new book, Porsche - Excellence Was Expected, published by Robert Bentley (www.bentleypublishers.com) and available at specialist booksellers.
- Karl Ludvigsen
Technological Tyranny (September 2005)
Sometimes a chance juxtaposition highlights an issue that needs to be addressed. One such popped up the other day in my International Herald Tribune. It published an obituary of Joseph Rotblat, a Warsaw-born nuclear physicist who made brief but important contributions to the creation of the atomic bomb at Los Alamos in 1944. An early advocate of the need for an Allied bomb to counter the one being worked on by the Germans, Rotblat quit the program 'terribly shocked' when he learned that work on the bomb was continuing even thought it had been learned that the Germans had no such weapon.
Subsequently based in England, Joseph Rotblat became an outspoken critic of the global nuclear-arms race. In 1955 he and ten colleagues issued a manifesto in London that declared that researchers must take responsibility for their creations. Said the Daily Telegraph, he 'called on the creators of nuclear weapons to consider, without flinching, the implications of their discoveries.' Citing the example of the atomic bomb and its devastation at Hiroshima and Nagasaki, Rotblat argued that those who develop new technologies cannot do so in a vacuum, that they have an obligation to consider their consequences.
Adjacent to its report on Rotblat's demise at the age of 96 my newspaper reported on Rome's new programme of paving over 17th-Century cobblestones in the historic city centre. Rome's 400,000 scooters find asphalt much more to their liking than slippery and bumpy cobbles. Nevertheless many in this beautiful city regret seeing the historic cobblestones sheathed by smooth black paving.
Asked his opinion of the controversial paving project, a Rome engineering professor equivocated. 'I think it's very difficult to balance the technical advantages and safety advantages with aesthetic advantages,' he said. 'Being an engineer, I prefer not to face this kind of problem.'
Here, separated by a fine black rule, were the alternatives that confront every engineer. He can hunker down in his cubicle and get on with the job, irrespective of the consequences of his creations for society, or he can act with an acute awareness and sense of responsibility for the systems and devices he creates. The Roman engineer preferred to abjure responsibility for a decision, leaving it instead to civic authorities and politicians. A Joseph Rotblat, in contrast, believed that it is incumbent on a creator to consider the consequences of his work and act accordingly.
Many human activities demand that engineers and scientists make such distinctions. Among them are architecture, civil engineering, food preparation and delivery and pharmaceuticals. And the motor industry. The industry in which we work and from which we earn our livings provides transportation of goods and people, to be sure, but at great cost. Directly in accidents our products kill more than a million people every year - that's a 9/11 every day - and maim an estimated 50 million annually according to the FIA. Many more suffer from the effects of exhaust byproducts to an unquantifiable degree. Cars and trucks are major consumers of irreplaceable natural resources. The roadside 'culture' blights many urban areas.
In the broadest terms we have accepted these negative impacts of the motor vehicle in order to enjoy its flexibility and versatility. But increasing congestion and concern over atmospheric carbon dioxide threaten to curtail the use of vehicles, especially their access to city centres. Some car makers are responding to the challenge with innovations such as hybrids, while others pin their hopes on diesels. Car owners are responding too, rejecting thirstier vehicles in favour of more rational alternatives.
What's the role of the engineer in all this? In many auto companies he's at the mercy of senior executives who have little understanding of the problems he faces and the contribution he can make. In others, often those run by engineers, he's encouraged to bring his creativity - even, indeed, his judgement - to the party. Sometimes this has positive results for the customer and for the industry, as in the case of the championing of hybrids by Toyota and Honda. In other instances it has negative consequences, such as the ludicrous Bugatti Veyron, perhaps the ultimate example of motoring masturbation.
I understand that an engineer can't refuse to work on a car like the Veyron or indeed the Ford GT, another ineffectual waste of natural resources. They may even find such design challenges interesting and rewarding. But they must be aware that they're helping create a vehicle of spectacular uselessness and unprecedented menace to fellow road users. Though such über-sports exotics may be statistically insignificant, thus less likely to mow down very many other cars and indeed mainly vulnerable to single-car accidents, they're clear evidence of a wanton waste of talent and resources by their producers - a waste of which the wider world will be all too aware.
I appreciate also that engineers will see it as their mission to probe the limits of their disciplines to make available new technologies that others will decide to use - or not. This is what the nuclear scientists at Los Alamos did, to the dismay of Joseph Rotblat and others. They created the atom bomb and left it to the politicians to decide whether and how to use it. Often the very existence of a technology will force through decisions to use it that will be seen later as misguided. A good example in our industry would be telematics, which have resulted in complex and costly installations that correspond in no way to what motorists really want and need. Systems are installed because they can be, not because they need to be.
The engineers among you will be well aware of other technologies that are being introduced for their own sake, not because they contribute to better or safer motoring. One that's all too threatening is the ability to use GPS tracking to keep cars from exceeding the speed limit. Researchers at Britain's Leeds University say they've developed the means to do just that. They've developed the 'atom bomb' of motoring; now the question is how to deploy it.
Officials seem to think that the only way such technology could be used would be to curtail car speed automatically. I beg to differ. One very effective way to use it would be to create a new type of instrument that shows the driver the relationship between his speed and the local limit. This would be far more effective as a means of helping the driver keep within the limits than the conventional speedometer. Another excellent option would be to increase accelerator-pedal pressure substantially when the local limit is exceeded. Thus would give the driver a clear indication that's he's over the limit while allowing him to use extra speed if conditions require it.
It's not in our industry, but another example of technological tyranny is the plan of at least one airline to allow the use of mobile phones on board during flights. I can't imagine a less desirable 'advance'. Airline flights allow uninterrupted time for reading, working, quiet conversation and contemplation. The last thing we need is a jabbering seatmate, voice so loud that you wonder he needs a telephone at all. Here's another example of something that's being done because it can be, not because it should be.
I'm not knocking engineers. We desperately need their creativity. But they need to take a moral position somewhere between Joseph Rotblat and the Roman engineering professor. They're increasingly obliged to monitor the objectives of their own work and its validity for the changing world of the 21st Century.
And if motor company executives are of a mind to pervert what their engineers have done, if they choose the less desirable solution from those on offer, they can be sure their gaff will be blown by an anonymous internet blog. As Microsoft is discovering (see http://www.minimsft.blogspot.com), dissatisfied employees now have a safe way to vent their feelings about a company's management and practices. The old days of corporate secrecy are gone for good. The opportunity for the company with a conscience has arrived.
- Karl Ludvigsen
Seeing the Back of 'Bullshit Castle' (August 2005)
One man is watching the recent dramas at DaimlerChrysler with a special perspective. He's entitled to, because this year's Frankfurt show, only a month away, will see the launch of one of the last and one of the finest cars created on his watch, the new and eighth-generation S-Class Mercedes-Benz. But will Jürgen Hubbert be a non-person at Frankfurt, as he's been ever since his retirement two years ago? Shoved to the sidelines to keep his amazing career from overshadowing the lacklustre achievements of his superior and successor? I have every hope that Hubbert will get the credit he deserves.
As Jürgen Hubbert rose through the corporate ranks of the Swabian company the man in charge of the Mercedes-Benz marque was Werner Niefer. Not for nothing was the robust, knowledgeable Niefer known as 'Mister Mercedes'. Niefer showed the younger Hubbert the way forward when the latter was appointed head of the passenger-car division of Mercedes-Benz in 1989.
Both men were credited by the company's chairman at the end of the 1980s, Edzard Reuter, with initiatives that secured the future of the Mercedes-Benz brand. 'Above all there are two names without whom the success would be unthinkable,' said Reuter: 'Werner Niefer and Jürgen Hubbert. Already at that time these two began to develop that strategy which, in the second half of the 1990s, would aim toward a shrewd broadening of the traditional Mercedes-Benz model range, the so-called "Model Offensive".'
Hubbert had his hands full when he stepped into the passenger-car job at Daimler's Untertürkheim headquarters. Mercedes-Benz market share was down 1.7 percent and the average age of its owners was up to 52½ years. As Germany's executive-car icon Mercedes was under heavy assault from its feisty competitor in Munich - a rivalry that constantly spurred both companies to higher performance. As well there was a new opponent on the block. Toyota's Lexus was forcing fresh assessment of value for money and customer satisfaction in the luxury-car category of the vital American market.
The Niefer-Hubbert assault on these problems was two-pronged. One prong was the development of a successor to the 'Baby Benz', the 190, that was built to strict and binding cost targets for the first time. Hitherto, the engineers built the cars and assumed someone would buy them. Now the new model, the first C-Class, was rigorously engineered to meet its market targets. When it was introduced in 1994 the C-Class was dubbed the 'Rescue Wagon' of Mercedes-Benz by some observers. 'We didn't like it,' Jürgen Hubbert said, 'but it wasn't far from the truth.'
Matching the new car's marketing with its design, Hubbert engaged a new advertising agency, Springer & Jacoby. It brought a fresh style to the company's communication which, like Hubbert himself, stressed 'self-confidence, humour, understatement and facts.' Prompted by the agency, Mercedes shattered precedent by advertising the base price of its new C-Class: DM40,825. To its Konstantin Jacoby, Hubbert joked, 'If we sell too many of these cars I'll have to get rid of you, because we'd have no more money with which to pay you.' Fortunately the average C-Class sold for nearer DM50,000.
The other prong of the 'Model Offensive' was the introduction of a radical new small car, the A-Class, a front-drive Mercedes for the first time. Its aim was to provide product protection at the base of the Mercedes-Benz range, just as the 190 had a generation earlier. It would, said Hubbert, 'redefine the concept of a subcompact car. It is proof that the traditional Mercedes qualities, such as safety, comfort and reliability, can also be incorporated in a significantly smaller car. This contributes toward ensuring mobility in conurbations in the future.
'When we launched the A-Class,' Hubbert said later, 'I was criticised for stretching the brand name too far. But exactly the opposite happened. That model opened a completely new segment for us.' In a style again unprecedented, the advertising and marketing launch of the A-Class began a year and a half before its launch. This gained outstanding acceptance for the new model, acceptance that stood it in good stead when it suffered its Scandinavian setback. And its second generation provided the basis for a larger B-Class model as part of a new family that includes both cars.
In Edzard Reuter's decentralised and diversified Daimler-Benz, the Mercedes-Benz vehicle operation was a stand-alone business in its own right. It was deprived of its powerful leader in 1993 when Werner Niefer succumbed to illness. Parachuted in to lead the all-important vehicle company, financial powerhouse of Daimler-Benz, was Helmut Werner. With remarkable speed and effectiveness Werner became the arch-advocate of Mercedes-Benz. 'Werner fought for the company,' Jürgen Hubbert recalled. 'What he could do best was selling. He sold the company. He sold the brand. And he was someone who gave you freedom to do your job. He gave you all the freedom you need. He had great support inside Mercedes.'
Werner and Hubbert faced troubled years together. The vehicle unit lost money in 1993 and Daimler-Benz was a money-loser in 1995 in spite of improved profitability at Mercedes-Benz. Both men exploited these exigencies to put through further cost-reduction measures. In 1993 Jürgen Hubbert showed the steel behind the smile when he led negotiations with the workforce to forge a suitable basis for making the A-Class in Germany. 'If our wage partners remain this intransigent,' he warned the unions, 'we'll be compelled to build the A-Class in England or France instead of Rastatt.' He got his way, to the benefit of industry in Germany.
Under new company chief Jürgen Schrempp the mantle of Mercedes-Benz defender passed to Jürgen Hubbert in 1997 when the vehicle unit was merged back into Daimler-Benz. This brought turmoil, as did the merger with Chrysler a year later. Through these dramatic changes Jürgen Hubbert kept Mercedes on track. In 2000 he celebrated his unit's first million-car year. Turnover was up 73 per cent from 1990, exploiting a product range expanded from six to 15 model series, and average customer age was 50 years and falling. Globalised production included the M-Class in the United States, A-Class in Brazil and C-Class in South Africa.
Through the chaos of the 'merger' with Chrysler, Jürgen Hubbert saw his duty as defending the independence of the Mercedes-Benz marque, protecting it from those who urged cost-saving commonality with Chrysler. In doing so, said one observer, he 'spoke of the Mercedes brand as if its sanctity and distinction were beyond comparison.' In their book about the merger Bill Vlasic and Brad Stertz said, 'The fifty-nine-year-old head of the Mercedes passenger-car unit considered himself the true guardian of the proud legacy of Gottlieb Daimler and Karl Benz. Dignified-looking, with wire-rimmed glasses and silvery hair swept back from his high forehead, Hubbert wielded serious power in Daimler's decentralised corporate structure.'
The Hubbert legacy at Mercedes-Benz is awesome. We'll soon see his new S-Class and not long after that his final C-Class iteration. Critics agree that the latest SLK-Class is an exemplary roadster. Sales of the latest M-Class are up and the CLS-Class coupe-sedan continues to make waves. With these models doing so well I can't be too worried about some weakness of the E-Class, with which several of the new models compete in Mercedes showrooms. The new R-Class, which is getting rave writeups, will adequately fill that gap.
What of DaimlerChrysler's other initiatives? The ill-fated Swatch venture dates back to the era of Helmut Werner, who took up a project that Ferdinand Piëch turfed out of Volkswagen. Although not strictly in his ambit, Hubbert defended Swatch as 'a laboratory' in which the company could experiment with new ways of making and selling cars. Many would argue that the laboratory has now served its purpose and should be shuttered or sold off.
At the other end of the scale is the Maybach, with which Hubbert can't escape an association. In contrast to Volkswagen, which took a luxury nameplate in Bentley and made it affordable, Mercedes-Benz took a little-known exotic nameplate - a major money-loser in its heyday - and is charging the earth for it. Debate in the company was intense about how to position this rival to BMW's Rolls-Royce: as a marque in its own right or as a top-of-the-range Mercedes model. With sales languishing at 600 per year against the hoped-for 1,000-plus, it's clear that the wrong decision was made.
Both Smart and Maybach are issues that new DaimlerChrysler chief Dieter Zetsche will need to tackle. But he won't have to do so right away. No one expects either problem to be solved soon; in the meantime Zetsche has good people in place dealing with both products. His focus instead will be on the mainstream Mercedes operations. Here his experience in engineering and production will qualify him eminently. 'Zetsche will walk through Sindelfingen and see exactly what's going on,' said an Untertürkheim insider. It's in these core manufacturing and assembly operations that the company's acknowledged quality shortcomings must be addressed.
Here the outgoing head of Mercedes-Benz operations, Eckhard Cordes, was utterly at sea. An able finance man, a competent corporate analyst and strategist, Cordes had no grasp of the realities of carmaking. He was easily buffaloed by his engineers and production aides. Nor did he have petrol in his veins. 'He tried to make a car guy of himself,' said a Mercedes executive, noting Cordes's awkward appearances at a few Formula 1 races. Nor did he show anything resembling loyalty to his troops at the end with his sale of 92,500 shares of DCX stock and the exercise of a similar amount of options. 'This didn't sit very well with a lot of us who don't have such options,' said one of those troops.
Neither was Jürgen Schrempp an executive able to command an automotive company from a base of intimate knowledge of its operations. An apprenticeship as a Mercedes-Benz mechanic proved an insubstantial basis for mastery of the production of some of the world's most complex automobiles. An outstanding dealmaker, Schrempp was an ineffectual manager.
Ironically this very lack of managerial skill served to insulate him from criticism over his fiascos. About Chrysler's struggles in 2000, for example, he said that 'the operational issues have nothing to do with what I term an absolutely perfect strategy.' His strategy, he said, simply needed 'operational implementation'. That was for others, not for the almighty Jürgen. 'Schrempp is the poster child for overwhelming vision and underperforming execution,' sniffed Peter Brown in Automotive News last year. Rightly enough, Brown added that 'vision without execution is a road to ruin for investors and employees alike'.
Small wonder, then, that both Schrempp and Cordes wanted to see the back of Jürgen Hubbert, who proved amply capable of both vision and execution and whose automotive know-how put both in the deep shade. It was a sign of their fear of this exceptional individual that they denied him the courtesy of a transitional office and car and driver after his retirement. Many think it likely that Dieter Zetsche will right this wrong as a justifiable tribute to the man who has given Mercedes-Benz by far the most attractive product range in its long history.
Many are forecasting that Zetsche will be forced to choose a new head of Mercedes-Benz before the Frankfurt Show, to demonstrate action and control. I'll be surprised and indeed disappointed if he does so. In the interim he has a capable chief operating officer there, Rainer Schmückle, who's well able to hold the fort. Zetsche needs to have direct contact with his Mercedes-Benz people to form a view of their capabilities before he nominates one of them to head the three-pointed star. This would take him at least until the end of the year.
Postponing the naming of a Mercedes-Benz chief will suit the supervisory board, which famously went on holiday after the Schrempp announcement. This is the board which delayed the firing of Schrempp until it had a clear view of a potential successor. None was in view until Dieter Zetsche achieved the signal success at Chrysler that had him named American Executive of the Year twice in a row by Automotive News. Subtly, as well, Zetsche mounted a campaign for the job, popping up in editorial pages and conferences in Germany with remarkable frequency in recent weeks. He made sure he wasn't overlooked.
Dieter Zetsche will easily be able to be able to head both the company as a whole and its Mercedes-Benz auto arm for the time being. He doesn't have to worry about Chrysler, where his successor is eminently qualified Canadian production expert Tom LaSorda. You may remember LaSorda as the engineer who headed the creation of Opel's Eisenach plant, a model of productive efficiency. He's also installed at Chrysler a rigorous 'Fix it Right Now' follow-up system for stopping problems spotted at warranty level by using methods pioneered at America's Centers for Disease Control and Prevention. In the tradition of other production experts such as Wendelin Wiedeking and Bernd Pitchesrieder, we can expect strong performance from Tom LaSorda at the helm of Chrysler.
We can also count on Dieter Zetsche to bring LaSorda's take-no-prisoners attack on quality problems, based on daily inputs of warranty data from dealers, to the plants of Mercedes-Benz. It will speed identification of the sources of the faults that are undermining the famed Mercedes reputation for outstanding engineering and quality. Although Zetsche's success at Auburn Hills is attributed by many to such hit models as the Chrysler 300 and Dodge Charger, he and his team have been quietly grafting away on other aspects of the business. Plant productivity is improved, market share is increasing and relationships with suppliers are better than with Ford and GM. These are some of the basics on which Zetsche can deliver at Mercedes-Benz.
In his earlier days with the company Dieter Zetsche used to work in the high-rise headquarters of the historic Mercedes-Benz complex at Untertürkheim. I'd like to see him based there again instead of at the pretentious offices on the south side of Stuttgart at Möhringen that date from the expansionist Edzard Reuter era. In fact Möhringen, which Schrempp himself nicknamed 'Bullshit Castle', should be sold off. Car-company managers need to be close to their businesses. And it is as a car company that DaimlerChrysler will either fall or rise under its new management. I predict the latter.
- Karl Ludvigsen
Car Dealerships: "Do Not Disturb" (July 2005)
I wish I could say I was surprised. It would be nice to think that in these highly competitive days, Europe's car dealers were raising their game with customer-pleasing initiatives - as we're always told they should do. The gurus in the world of customer satisfaction - this guru included - have been preaching the importance of taking care of both present and potential customers with exceptional skill and attention. Regrettably, however, a new survey of 1,120 dealerships in Germany shows that we have a long way to go.
Published by auto motor + sport, the survey was conducted by Concertare, a German company that's experienced in many survey disciplines including mystery shopping on behalf of auto companies. The magazine dramatised its report on the findings by showing the doors of a dealership with a prominent 'Do Not Disturb' sign. Though this expresses some editorial hyperbole, it's a fairly accurate description of the way they found walk-in car-buying intenders treated during a sampling of the dealerships of 34 different marques in Germany, for each of which at least 33 purchases were attempted.
Of the twelve dealership disciplines assessed by Concertare - detailed at the end of this piece - two stood out as being poorly handled. One, which will absolutely distress car makers, concerned test drives. On a scale from 0 to 100, the latter being fully satisfactory, test-drive satisfaction rated only 58 to a low of 25. 'That dealers offered a test drive on their own initiative,' said auto motor + sport, 'represented an exception.' Even when dealership visitors requested a test drive, this seemed to be far too much trouble for most dealers in Germany.
In response to the article, one would-be real-world Chrysler intender wrote to the magazine to say that he'd been promised a test drive seven days after a dealership visit and given an appointment. On the morning the test was to take place, he said, the 'salesman' called to say that he couldn't offer a test car that day, but he'd be in touch soon to arrange another date. That was, said the letter writer, twelve months ago. He'd received nary a call.
Many car makers the world over are putting major programs into the field to encourage potential customers to try their cars. A test drive is a powerful marketing tool, exposing the customer to the product's qualities and at the same time giving the salesman a captive audience. It also has the potential to create a small but nagging sense of obligation on the part of the customer. But in this busy world people are reluctant to take the time to test-drive a car, even though all the experts tell them that's what they should do. With this in mind Vauxhall is backing an ambitious programme to get people into their cars for three-day test sessions. Costly though it may be, I think this has the potential to make a test-drive breakthrough. If it works as well as I expect, it could be rolled out to other GM markets in Europe.
The other area where the dealerships fared poorest was in providing what Concertare called Needs Analysis - whether the interest was in a new or used car, what they were now driving, need for financing, specificity of the advice given and competence of the salesman. Here the ratings of the dealerships were no better than 53 out of 100 for the best and a disreputable 24 percent for the worst. Would-be car buyers had the impression that they were tolerated, not wanted. Sales people made little effort to ascertain their needs or desires, let alone engage in a meaningful discussion about a purchase as important and as costly as an automobile.
'The service wasteland is alive and well,' said a correspondent to auto motor + sport. 'Seemingly no one wants to sell cars. In the last three days I visited seven car dealerships in the Karlsruhe area. In five of them I was allowed to look at cars, climb in and out, check the boot carefully, adjust the seats, etc. without anyone speaking to me.' In their visits the Concertare researchers were obliged to press beyond this initial barrier, this lack of interest, but would-be car buyers have no such obligation.
Where initial contact was successfully made in a dealership, it was rated pretty highly: 83 to 52 out of 100. But more often than not there was no meaningful follow-through. Said one of the researchers of a visit to a Ford dealer, 'No inkling of the car I wanted, no recommendation, no attempt at conversation.' In one Mercedes dealership a salesman handed over a brochure, saying, 'Just wait a minute, I have to make a call to Poland.' When he finished his call the salesman vanished, leaving the would-be car buyer clutching his brochure and none the wiser about Mercedes products.
'The salesman greeted me arrogantly,' said a researcher of his visit to a Jaguar showroom, 'put himself out not at all and had no interested in what I wanted. I had the feeling of being unwelcome.' This was ironic, for in fact Jaguar dealers were among the best that Concertare found. They gained a 75 percent overall rating, only two percent short of the leaders, Volvo dealers. Others ranked at the top were sellers of Skoda, Smart, Chrysler, Land Rover, Mini and BMW, the last at a 72-percent level.
Germany's volume sellers, Ford, VW and Opel, languished back at 61 percent in the research results, right in the heart of the 'less than satisfactory' bracket. At VW dealers, more than any other, the researchers reported the greatest 'complete uninterest' in walk-in car buyers. Surprisingly Lexus, often held up as an example of customer coddling, was at 57, while others at the poorer end of the scale were Fiat, Kia, Saab, Hyundai, Chevrolet (ex-Daewoo), Suzuki and Daihatsu. The last two were at 51 percent, just short of the 'unsatisfactory' break point of 50 percent.
Most lacking, concluded Concertare, was a sense of professionalism among the more than 1,000 salesmen that its people met. This is consistent with the findings of my book, Creating the Customer-Driven Car Company. In America salesman turnover exceeds 50% a year, hardly conducive to effective training and development. Yet this is happening at a time when the customer has more time and is being provided with much more information to develop his own ideas about the information he needs to make a car-buying decision. Only an intelligent conversation with a knowledgeable salesman will satisfy the demanding 'professional customer'.
To fight high salesman turnover, the American car dealer association (NADA) launched a salesman certification programme. Its objective is to train and certify dealer salesmen to give their job more real and implied professionalism. Better professionalism on the part of salesmen helps substantially to improve their rates of success, the dealers believe.
In my view, the system of paying car salesmen a commission tends to work strongly in favour of the needs of the salesperson as a priority over the customer's needs. One proposal to adjust the balance is that a salesperson should be paid a fixed rate of commission on all his vehicle sales. If he's paid a fixed amount, whether or not he is selling a new or used car or whether the profit is large or small, he will be selling the car that is best for the customer and for the dealer.
Crucially important in the development of sound customer-satisfying techniques is that any financial rewards offered for good performance are fully compatible with the values that are taught in parallel. 'Despite all this training,' says one analyst of dealer systems, 'most dealers haven't changed their pay plans and the employees will do what they're paid to do. The manufacturers are sending two messages and the dealer will always pick the one that makes the most money - incentives are usually stronger than training.'
Coddling salesmen is not the answer, suggests the experience of Longo Toyota, America's largest car dealer. When they join Longo, salesmen sign a code of ethics which is rigorously enforced. 'If they lie to a customer, we fire them,' said Longo president Greg Penske. 'Our staff are not allowed to smoke or wear sunglasses at work and they have to adhere to a dress code. All these things give the right impression.'
Another successful dealership, Sewell Village Cadillac in Texas, practices balance in its relationships with its employees. 'Treating employees with respect doesn't mean you have to be weak,' said dealer principal Carl Sewell. 'You can be firm without being rude. We don't have to swear at people to get them to do something. We ask politely. If that doesn't get them to do the job, we'll get someone else who will. After that happens a couple of times, everybody gets the message.'
Whatever the solution, the findings of the Concertare survey must alarm car makers who are relying on their dealers to represent their interests in the intensifying war among both major and minor marques. The basic problems have been known for decades. That no company has convincingly solved them is the clear finding of this research. That's a devastating verdict on the efforts of car makers, dealers and their organisations to advance the art and science of auto salesmanship.
Concertare's Dealership Judging Criteria
External Impression - customer parking places, presentation of display vehicles.
Internal Impression - ease of access to customer area, cleanliness, orderliness, greeting.
Front-Desk Employee - friendliness of greeting, engagement, waiting time.
Initial Contact - availability of sales advisor, presentation, determination of customer's desires.
Discussion Atmosphere
Needs Analysis - interest in new or used car, what now driving, need for financing, specificity of the advice given and competence of the advisor.
Quality of Advice - interruptions in the discussion, active offers from the advisor.
Product-Feature Demonstration
Progress to Conclusion - sales arguments, discount offers, taking of a deposit, recording of customer details.
Impression/Behaviour of Sales Advisor
Test Drive
Overall Impression
- Karl Ludvigsen
New-Car Lights and Shadows (June 2005)
Last month, courtesy of Britain's SMMT and its member companies, I had a chance to drive some of the latest cars from a variety of makers at the Millbrook Proving Ground in Bedfordshire. As an insight into the current state of the art it was edifying. With that in mind I'd like to share some of my impressions with you.
Vauxhall Tigra 1.4 Sport
I'd seen one of these on the Continent recently and was intrigued by its cheeky looks and foldaway top. I found it a charming little automobile with responsive handling and grippy low-profile tyres. It does feel at times as if it's about to tip over but fortunately this turned out to be illusionary. For a sporty car of this kind its power leaves something to be desired, with a buzzy although willing engine. Perhaps the 1.8 Sport would be the answer. Its general sparkiness and sharp styling make the new Tigra extremely attractive.
Toyota Aygo Sport five-door
This of course is a landmark car, the result of co-operation between Toyota and PSA, whose Peugeot and Citroën marques share the basic vehicle in five- and three-door forms. I found the Toyota Aygo version a remarkable small car for our times. It's extremely compact yet remarkably roomy, apart from an intrusive central console.
Working clearly to cost, Toyota has used relatively cheap interior plastics but has given them grained or finely ribbed finishes that disguise their cheapness. This is quite satisfactory in a car of this kind. While a serious automobile, the Aygo nevertheless has some charming toytown features such as a tachometer sprouting from the upper right of its speedometer in a practical and amusing way.
Considering that it's powered by a 1.0-litre three-cylinder petrol engine, the Aygo has impressive performance. Its triple has a remarkably pleasing sound. It would be no exaggeration to say that its thrumming beat reminds one of a Porsche six - bizarre though that might seem. Shifting is light and easy and steering is effective, with a wheel that's adjustable for height and carries with it the speedometer and tachometer in a sophisticated manner. All in all the Aygo is just the sort of clever small car that one might have expected from Toyota at this stage of its development.
Mazda6 2.3 four-door Sport
I drove this car with great interest and anticipation as I thought it might be a possible successor to my much-loved Mazda Xedos 6. However I found it disappointing. Its performance is reasonable but with a buzzy four-cylinder engine. The overall impression given by the Mazda6 is tinny and bouncy. The ride is nothing to get excited about and the interior trim is less successfully handled than that of the Toyota Aygo. All in all not a wonderful effort from Mazda. One wonders where this marque is heading. It will struggle to find a place among competitive offerings from people like Toyota and Nissan, not to mention the resurgent Europeans.
Lexus GS300SE
This Lexus deserves full marks for impressive performance, delivered with the attribute of silence that has become associated with the brand. Interior materials in this model are less than gorgeous but the panel itself is attractive and functional. As well the operation of the manual control for the automatic transmission is exemplary, holding the box in the requested gear without automatically upshifting at the rev limit. This shows an awareness of the needs of the capable driver. This is a very likeable executive-class car that shows that Lexus has a good grasp of what will appeal to buyers not only in Europe but also in North America.
Vauxhall Astra Sport Hatch 2.0
The first question you might ask with regard to this car is: What's wrong with it? It does all the things you might want a two-door sport hatch to do. It misses a dead pedal to the left of the clutch which would be very helpful for fast cornering. The seat squab could be considered a bit on the short side. Otherwise the Vauxhall's interior is laid out with great care and precision, giving an extremely modern appearance.
The Astra's handling is stunningly neutral and well-balanced. The power progression of its turbocharged four is very gradual and effective. There's no sense of turbo lag at all. Indeed it accelerates with great smoothness and effectiveness. The ride is adequately good for a sporty car of this kind. It isn't offered with a sunroof so that could be considered a disadvantage, but an upsweeping 'panoramic' windscreen is an option. Overall, then, this new Astra acquits itself exceedingly well.
Volkswagen Golf GTI
The new GTI is a car of divided personalities. It's a very serious car of some dimensions, not at all the compact Golf of years past. It has a solid feel, very robust and is trimmed with the care and attention that you would expect from Volkswagen.
Contrasting with this is the GTI's performance, which is impressive, but married with an automatic transmission - in this case the DSG gearbox - which doesn't seem to be able to make up its mind whether it should be going or stopping. The throttle also has a peculiar variable-pressure feel which presumably is meant to provide certain control attributes.
It's not quite clear to whom this car is supposed to appeal. Is it for the very sporty person or the reliable Golf driver who wants something extra in the way of performance? I'm not sure and I don't think Volkswagen is either. By the way it has a ludicrous 180 mph speedometer.
Nissan 350Z
This is an impressive sports car with a V6 engine that revs strongly, giving excellent performance, and sounds terrific. It's a wonderful engine by any standard. However the car it's installed in has a generally heavy feel about it. It looks and handles in a weighty manner. It's very competent, no question about it, but it doesn't inspire the driver in the manner in which I rather hoped and expected that it would.
The 350Z's detailing is very good, its interior austere to a remarkable degree. It seems very highly geared as I was only able to use second and third on the handling circuit. With six forward speeds its topmost ratios must be geared very highly indeed. An impressive car, but not the handy and sporty machine that you might suspect from its exterior.
Citroën C4 2.0 VTS 180bhp Coupé
I can see why the new Citroën C4 has charmed so many automotive writers. Its interior is engaging, with nubby cloth upholstery and suede side seatings and door coverings. It has a handsome mixture of patterned plastic with bright-metal décor at the centre. The various controls on its steering wheel would take some getting used to but are very conveniently positioned. The tachometer on the steering column and speedometer high on the dash are both legible and useful. The C4's interior has a particularly roomy feel.
Performance-wise the 2.0-litre C4 acquits itself extremely well. The engine isn't too intrusive and has a nice range in terms of torque and power. It seems to be geared quite low so at relatively high speeds over 90 mph it does get a bit noisy. From the wind-noise standpoint it's very good, however. In sum this is an appealing package from Citroën. Standard fittings like the compass and satellite navigation in this model are extremely useful.
Alfa Romeo GT3.2 V6 24V
This is a car I very much wanted to like. It makes a good first impression with a well-finished if rather anonymous interior. Getting in reminded me of the disadvantage of a two-door car, which is a very long door. There's much to be said for four-door cars because their front doors are less long, obvious but important. I wasn't impressed by the instrumentation. Deeply embedded, this makes daylight reading of the speedometer and tachometer rather difficult.
The potent engine easily takes the Alfa to high road speeds and gives good acceleration. When I opened and then closed a window at high speed, however, there was a hiss from the gap afterward. This suggests that either the window fit or the engineering leaves something to be desired.
The Alfa's handling was disappointing. Its steering seemed to have a bit of pull and reaction under drive conditions, something we've generally gotten away from in well-designed front-drive cars. As well its ride was wallowy in corners, not giving the sense of robust handling capability that one would expect from an Alfa. All in all, then, not the kind of car that Alfa Romeo should be making.
Mercedes-Benz CLS 500
It was a pleasure to drive this new four-door coupe, as Mercedes styles it, to see how its performance compares to its rakish looks. Generally I found it very impressive indeed. It has ample power and stable and agreeable handling to match. This is a capable and attractive new entrant that will certainly find a niche for itself and cause some problems for BMW.
By the way, I've pointed out to a friend of mine at DaimlerChrysler than the company's claim that this is the first such four-door coupe is flagrantly in error. I sent him documentation on the Rover Coupe of some 40 years ago. The 'Coupe' name was in fact part of its model designation. The name was apt in the Rover's case because its roof line was in fact 'cut' to a lower level to give a sportier line and it had a different windscreen as well. Acknowledging its receipt, my friend concurred in the authenticity of the material I sent him and added, 'I don't know whom to make unhappy with this information.'
Cadillac CTS V Series
This Cadillac CTS is powered by a 5.7-litre ex-Corvette V8 developing 400 horsepower. It says in the press kit that 'it is designed and engineered to set the pulse racing of luxury saloon driving enthusiasts, either on the road or the track,' and this couldn't be put better. Five minutes after driving it my pulse was still racing. This is an absolutely awesome saloon with unbelievable power and an ability to deliver it to the road that is a credit to the Cadillac engineers who have worked on the development of this car at the Nürburgring and elsewhere.
It has a clean-cut and functional interior that matches its edgy exterior style. In size terms the CTS is well positioned for the European market. Of course its left-hand drive is a bit of a hurdle but for those who appreciate this kind of car it shouldn't present too much of a problem. In fact one would be tempted to take it to the Continent as often as possible.
It's quite an experience to have the wonderful throaty roar of a Corvette engine in a luxury saloon like this Cadillac. This is a phenomenally appealing combination for those who enjoy real power in an automobile. The manual-box ratios are good, with six gears allowing high cruising speeds while also providing a good set of lower ratios. Shifting is good although the pattern is wide and requires some initial attention.
This Cadillac is a seriously tremendous package that could get the unwary into a lot of difficulty. Fortunately it's equipped with traction control and a stability package that saw me through the hill course at Millbrook without undue anxiety.
In Summary
This was an enlightening day at Millbrook. Knowing that Peugeot and Citroën will get versions of the Aygo, the 107 and C1 respectively, I can see that this joint venture will be a storming success for its factory at Kollin in the Czech Republic. It's tooled for 900,000 units per annum - unprecedented for a Sub-B platform - but some of its customers are already saying they'll need more volume. Starting with a Toyota platform, the three design partners (Peugeot and Citroën designing theirs separately) have fashioned what one commentator rightly called 'ultra-compact city cars that are small in size but big in charisma'.
That Citroën's designers are on a roll was shown vividly by the C4, chock full of driver-pleasing features. My positive comments on Vauxhall last month are supported big time by the two I tried at Millbrook, each impressive in its own way. That Lexus has the product to support its planned sales pushes in both Europe and Japan was shown by my drive in the GS300SE. And the hyperthyroid Cadillac - together with a C6 Corvette that I also drove - gave fair warning that American exports to Europe are not to be taken lightly by their marketplace rivals.
Some cars disappointed and confused. In the first category were the Mazda6 and Alfa Romeo GT3.2. Neither gave great confidence that their makers have a firm grasp on the attributes that would secure their futures. In the second category were the Nissan 350Z and Volkswagen Golf GTI, cars that didn't succeed in that ineffable knack of melding the attributes of performance, handling and styling in a coherent and convincing manner. It's useful to be reminded that there's still progress to be made in an industry that often claims to have achieved perfection.
- Karl Ludvigsen
The most binnable news releases received by those of us who follow the motor industry are those announcing awards. I understand the need for awards. They're useful for the people who give them and also for those who receive them. But they're rarely of much interest outside the narrow circles for which they're conceived, such as the company-car market or commercial-vehicle circles. And why the PR departments of vehicle makers think that a magazine will publish the details of an award given by another magazine is beyond me.
These thoughts are prompted by an award program launched in 1999 that has witnessed its 2005 incarnation. I refer to the International Engine of the Year Awards. This has just resulted in a wodge of news releases from car makers giddy with excitement at the "prestigious" recognition given their power units. And there have been plenty of them, for this program awards gongs in eight displacement categories plus "Best Fuel Economy" and "Best Performance Engine". There's also the gong of gongs for "International Engine of the Year".
It's taken these seven years for this awards program to impinge on my consciousness. When the latest raft of releases crashed through my mailbox I decided to find out who was making these awards. Like you, I assumed that the judges were auto-industry engineers who were intimately familiar with the demands and problems of making good engines, or at least industry executives who have faced the challenge of managing a budget and setting targets for engine development. People, in other words, who really know what constitutes a good engine.
No such luck. The judges are - wait for it - journalists. And not particularly technical journalists at that. One, we're told, is "America's most-watched TV automotive pundit". Though there are a few well-known names among them, such as Germany's Georg Kacher, Japan's Jack Yamaguchi and America's Csaba Csere and Dennis Simanaitis, the cast reads like rejects from the European Car of the Year panel. We learn from the website (http://www.ukintpress.com/engineoftheyear) that they "judged each shortlisted engine using their subjective driving impressions and technical knowledge, and took into account characteristics such as fuel economy, noise, smoothness, performance and driveability."
I'm unimpressed. There's no clue as to how the short list was prepared. Nor is there any assurance that the judges have driven and inspected all the contenders, let alone some of them. The chaps in Egypt, India, Argentina, South Africa and Slovenia are likely to have been particularly disadvantaged in this respect. In spite of this, say the awards' organisers, they've "become one of the most sought-after automotive accolades and an effective marketing tool for triumphant marques". Well, they would say that, wouldn't they?
Who are the organisers, then? They're an outfit called UKIP Media & Events - nothing to do with the UK Independence Party - that's a subsidiary of Autointermediates Ltd. They organise events and publish various technical magazines, including some in the auto industry. Thus it's a richly self-serving activity for them, creating a virtuous circle of back-slapping award-giving and advertising opportunities. There's nothing wrong with that in our mendacious age, but it doesn't mean we have to take these awards seriously.
Nor are the actual awards terribly insightful. For example the 2-litre category has been hammerlocked from 2000 to 2004 by the engine in Honda's S2000 sports car. I grant that this engine has the highest specific power of any unblown unit in production, but its actual significance in the world of cars is negligible. In the class below 1 litre the judges have given the nod to Honda's IMA engine in the Insight for six years running. Again, this overlooks many meritorious efforts in an important category. Needless to say, BMW has always dominated the category to 4 litres, to the exclusion of engines of far greater economic merit.
Another inherent problem is the granting of yearly awards in a discipline that makes major changes every decade or so. Engines aren't renewed all that often, for obvious reasons. Handing out fresh engine awards every year makes no sense at all, at least not over ten categories. The yearly choice of a single engine would be a more-than-adequate task for a well-qualified judging panel.
This reminds me of the award by the Society of Automotive Engineers for which yours truly is responsible. It was my idea for the Millennium to have the SAE members vote on a "Best-Engineered Car" for the preceding century. In the end they voted on one for each decade in a program that honoured such disparate but significant autos as the Ford Model T, Chrysler Voyager and Porsche 911. Thereafter the SAE continued the program with the choosing of a Best-Engineered Car annually. One car honoured per year by the members of the world's largest auto-engineering society - that makes sense. Ten engines honoured per year by a bunch of journalists? That doesn't.
- Karl Ludvigsen
The Penalty of Indecision (May 2005)
With justifiable pride GM's UK arm trumpeted its success in April: 'Vauxhall storms to the top of the charts!' headlined its news release. In that month it seized 14.9 per cent of the British new-car market, against 13.8 per cent for Ford, the only other company with a double-digit share of UK auto sales. Vauxhall's market share was up from 11.5 per cent in the same month in 2004, while Ford's was down from 15.5 per cent. This was good going for Vauxhall in a month that was down 4.0 per cent from last year's April.
When I was with Ford of Europe I often said that the one job I wouldn't want to have would be chairman of Ford of Britain when it lost market leadership. Ford's Number One status in the British market has iconic status in the Corporation. It's the sole major market where it holds first place. In July 1974 Ford outsold BL for the first time and went on to grab Number One status in Britain with an attractive and rational range of high-value automobiles. Now that leadership is menaced by a revitalised Vauxhall.
It's not over yet for 2005, of course. Through its first four months Ford had 14.76 per cent of the market against 13.58 percent for Vauxhall. The latter's volume is up slightly in a market that's down 6.6 per cent from last year's, while Ford's volume is down by more than 9 per cent. Alarm bells are ringing at Ford's Warley headquarters, where they're only too well aware that at this rate Vauxhall could grab the lead for the year. Responsibility for this debacle would be shared between Roger Putnam, who has chaired Ford UK since March 2002 and leaves at mid-year, and Stephen Odell, who then takes over a seat that's going to be one of Ford's hottest. I don't envy the hapless Odell, who moves in from the presidency of Mazda Motors Europe.
Much will depend on how well the market takes to Ford's new Focus, lacklustre in looks though capable on the road. It's still Britain's best-seller, with 55,993 year-to-date against 40,004 for the Astra, but in April volumes of the two were uncomfortably close. Also Corsa is holding a strong third place while Fiesta seems to be flagging. Mondeo leads Vectra for the year so far, through neither was in the UK's top ten sellers in April. Menwhile feisty foreigners like Mégane, Clio and Golf are grabbing market share, exploiting the gap left by the failure of MG Rover.
After having topped the UK market more than 30 years ago, Ford never seemed to have a clear idea of what to do with its leadership in Britain. I recall Ford UK's Sam Toy saying, 'I know they'll never love us, but I hope they'll respect us.' That was a fair assessment of the way Ford was regarded through the 1980s, at least until it lost that respect with its bloated and boring 1991 Escort - a final gift to Ford of Europe by the recently deceased Alex Trotman - and bizarre 1995 Scorpio, a contribution by the departing Jac Nasser. These aberrations had many questioning the way Ford was being managed in Europe.
Lack of consistency was shockingly obvious. Rapid management turnover was one reason for this. Early in 1991 I was called in by Ford's agency, Ogilvy & Mather, to assist in framing the urgent overhaul of the company's public-facing activities that was being demanded by Ford of Europe's incumbents, Lyn Halstead and Lou Lataif. They were dismayed that the British press and public seemed to be down on Ford and its products to an unprecedented degree. This was winter and they wanted people to like Ford better by springtime!
When I reviewed the research information that Ford had on public attitudes, I said, 'This is where I came in!' Exactly ten years earlier I'd taken part in our internal discussions at Ford of Europe to frame a shakeup of our products and their presentation. We were well aware that the Japanese in particular were menacing our traditional 'Value for Money' positioning of Ford products. On the technology front both VW and Renault were taking the lead in improved fuel economy and high-tech power trains. Based on market research, we were told, 'Ford produces average cars for average drivers with average aspirations.' Not exactly a compelling reputation.
The mountain that was Ford of Europe Marketing laboured and came forth with the proposal that our new goal should be to be perceived as 'A dependable manufacturer of efficient and exciting vehicles.' I thought this was pretty vapid, but at least it was a goal to which we could all sign up. Personally I was happy because the 'exciting' part needed the motor-sports programmes that I was running at the time. But what became of this simple objective? To what extent did Ford's products later in the 1980s reflect its principles? Very little, thanks to the management churning that's so beloved of the multinationals. Thus Ford was back to the proverbial square one a decade later, having failed to meet this objective or, indeed, even to remember that it once had it.
Something else has changed in the meantime. We used to say that Britain was the wrong place for the Ford of Europe headquarters, because it bred complacency. On British roads we'd look around and see Fords everywhere. The headquarters should be in Germany, we said, where we'd be motivated to improve on our much smaller share and our toughest competitors would be all around us. Now, of course, Ford of Europe is managed from Cologne. It doesn't seem to be helping in the way we thought it might.
The other big change is more obvious: Fords are no longer made in Britain. This historic die was cast several years ago by Nick Scheele and David Thursfield as part of their review of Ford's need for capacity reduction in Europe. While all Fords are now imports, Astras are still produced at Ellesmere Port in Wales. Does this make a difference to the way the respective brands are viewed in Britain? I don't see how it could fail to have a bearing on the inexorable rise and rise of Vauxhall in Britain.
Back in 1991, what did I say that Ford should be doing to win its publics around? To have an impact by spring? I said that this could only be achieved by the use of a well-known spokesperson in Ford's advertising, someone trusted and respected in Britain. This was needed, I said, 'to give the campaign a "talked-about" potential and "huggable" impact.' I even suggested that 'we could find an actor with strong physical resemblance to the original Henry Ford and "bring back Henry" to talk about the cars his company is building today and the ways in which they make life better - just as Fords always have.'
They didn't do it, of course. But soon thereafter Vauxhall unveiled a new campaign starring Nigel Hawthorne and Tom Conti in amusing and memorable story lines that played up the positive features of the company's products. What was much too radical for stuffy Ford was just the ticket for feisty Vauxhall. I see them as virtually unstoppable in their rise to the top of Britain's market.
- Karl Ludvigsen
The Value of 20-20 Hindsight (April 2005)
In the wake of the tragic collapse of MG Rover at Longbridge it's time to take a look at what might have been done to save the site and a substantial proportion of its experienced workforce. Yes, at several points during its troubled history this could have been achieved.
This isn't to gainsay the challenge of dealing with Longbridge. According to a 1987 report it was one of the largest car-production operations in Europe. Its total area of 1.53 million square metres surpassed that of Fiat's Mirafiori complex (1.36 million m²), Peugeot's Sochaux factories (1.30 million m²) and Ford's at Cologne (1.19 million m²). Supporting its operations, the company's press plant at Swindon was the largest in Europe with 40 major press lines. Total employment at Longbridge in 1986 was 13,328 while Swindon employed 3,165 more and the central staff at Canley amounted to 2,505.
Together with Cowley, in 1986 Longbridge accounted for 40 percent of Britain's car production. Market share was 16 percent in the UK and just under 4 percent in Europe as a whole. Both production and share were the attractions for Ford, which early in 1986 said that it would be willing to acquire the BL Group, for more than a decade a needy creature of the British Government.
This reminded me of a meeting in London in the early 1980s at BL's offices with Michael Edwardes and David Andrews. On our side were Bob Lutz, Derek Lewis and yours truly. Our aim was ensure that if their thoughts should turn to offloading some of their properties, we at Ford would be interested. The MG owner among us, Bob Lutz, expressed particular interest in that marque, which had just wound down its sports-car production. Land Rover was obviously attractive to us as well.
Early in 1986, however, Americans weren't wanted. On the 9th of January Michael Heseltine resigned from the Thatcher cabinet when it seemed the Government would favour an American offer for Westland Helicopters instead of the European consortium he preferred. Anti-US passions were still raging when news broke of takeover talks between BL and Ford. The Dearborn company was acceptable as a buyer for Jaguar, but not for a flagship enterprise like BL. Ford was angrily shouldered aside as a possible owner of BL and its products.
This was a Big Mistake. There would have been job losses, simply because the opportunity was there for synergy between the products of the two companies. Ford's marketing know-how would have helped sell BL's products abroad, while the introduction of new models would have been assured. Two decades later would both Longbridge and Cowley have been making cars? Probably not, in a competitive Europe that's seen Ford bow out of car production at Dagenham, but any phase-out would have been gradual with decent consideration for the workforce.
General Motors was next to knock on the door of Number 10. GM's approach was led by one of the company's brightest and most approachable executives, Bob Price, who had headed Vauxhall from 1971 to 1979. His interest was in the Leyland truck operations, which he wanted in harness with Land Rover. In those days a money-spinner, Land Rover was needed to provide the cash flow GM required to put the Leyland operations on a sound footing. But GM's suit too was turned away. Belatedly, Margaret Thatcher said that she feared that "some anti-American feeling has been aroused, and I fear deliberately, in the UK about the future of BL." The xenophobia had been rampant on both sides of the aisle; better a failing BL, it seemed, than more UK involvement by the Americans.
Meanwhile Rover (as the company and all its products were renamed under Sir Graham Day) continued the unflashy but effective and productive partnership with Honda that Michael Edwardes and his team had engineered in 1979. Their relationship seemed a win-win arrangement. Rover got the new models it desperately needed and invaluable insights into the methods of a successful car company. Honda got a important customer for its power trains and indirect access to European markets at a time when its exports were constrained by mutual understandings.
When news broke in March 1988 that British Aerospace was contemplating a Rover takeover, the Honda connection was deemed important enough for the Government's Lord Young and leading lights from Rover and BAe to fly to Japan for talks with Honda's president. They told Tadashi Kume in the "clearest terms" that a BAe-owned Rover would want to expand and deepen its Honda relationship. For his part, said Lord Young, Kume "made clear that he would be very concerned if the bidder had been another car manufacturer." The fact that the Government held a golden share in BAe, the Honda president was assured, would make the aerospace company a reliable owner of Rover.
"Shock and amazement" described the reaction to the Rover purchase by BAe, which was confirmed on 14 July 1988. Much was made of the "synergies" between the two companies but analysts were hard-pressed to find any. One pundit who claimed that they were there for the asking was Prof. Kumar Bhattacharyya of Warwick University. Establishing synergy, he said, "would be fairly straightforward. There would be obviously shared interest in developing new composite materials and electronics systems.
"Austin Rover over the last few years has brought in graduates from the shop floor upwards to create a dynamic management," an enthusiastic Bhattacharyya added. "Austin Rover has to operate in a fiercely competitive consumer market, responding to demands for design, quality and low manufacturing costs. Those are important disciplines and the company is now a pace-setter. That, combined with the sharp commercial approach of British Aerospace, has to be a recipe for success." The Professor seems to have suspended his critical faculties to favour an alliance that would bring more money and students to his institution.
Under BAe the co-operation with Honda flourished. In April 1990 the two companies agreed to a share exchange that gave Honda a 20% shake in Rover's car-making operations and Rover a similar investment in Honda's new Swindon factory. The parameters of the deal valued Rover Group Limited at £520 million at the time and disclosed net assets of £1.1 billion. The deal triggered accusations that the Government had sold Rover too cheaply. More fallout came in February 1991 when an all-party committee found that £44.4 million in undisclosed "sweeteners" had been paid to BAe by the Government to help the deal go through.
That BAe's interest in Rover was short-term and opportunistic was confirmed by Sir Graham Day in April 1991 when he hinted that the auto company might be floated on the stock market in August 1993 when it could be sold under BAe's agreement with the Government. "You can always suggest that a company with a multitude of industrial holdings can be broken up and BAe is no different from that," said Day. The company's acquisition spree under Sir Rowland Smith could be reversed, he indicated, under new chief executive Dick Evans. This was an early warning to interested parties that Rover might be available.
When it did come to sell Rover in 1993, BAe made the decision that effectively sealed its fate. On the table was an exceptional offer from Honda, exceptional in the sense that the Japanese company, known for its independence of thought and action, had never before sought deep involvement with another company. Valuing Rover at £650 million, it would pay £167 million to bring its shareholding up to 47.5%. The same amount would be held by BAe, while Rover managers and employees would have a 5% stake. Provided that Rover met certain profit and cash-flow criteria, Honda promised to take the company public by 1998. "Our philosophy was to maintain Rover as an independent British company," said Honda Motor Europe president Shojiro Miyake.
Here was an offer from an auto company that had already worked with Rover for almost 15 years and knew its strengths and weaknesses well. Honda had real synergies with the British company and a product range that could support and underpin the future of Rover. To his credit, John Towers strongly favoured the Honda proposition, as did the Dti, which saw Honda as a loyal and valuable partner of Britain's motor industry. Against it, however, was George Simpson, Rover chairman. He and BAe's Dick Evans felt the offer didn't adequately reflect Rover's book value of £1.3 billion. Nor was BAe's ultimate exit route guaranteed. So they shouldered the Japanese aside and accepted a stunning - in retrospect - deal from BMW which, including assumptions of debt and other obligations, was worth an astounding £1.7 billion.
The last opportunity to save Rover was now on the table. "A secret clause in the Rover deal" with BMW, wrote Chris Brady and Andrew Lorenz, "provided for BAe to get an extra £20 million from BMW if, having used its good offices, the British company helped persuade Honda to stay on board." Here was a sign of awareness on BMW's part that it would be valuable to continue the co-operation with Honda. John Towers led meetings in both Tokyo and New York in which means were sought to keep Honda on board as a shareholder and supplier. It had the front-drive technology that Rover needed; synergies with BMW's rear-drive cars were non-existent. But new Honda chief Nobuhiko Kawamoto was unpersuaded. Like Tadashi Kume in 1988, he was resistant to an involvement with a third car-producing party in the Rover relationship. The negotiations failed and BMW paid another £200 million to Honda for its Rover shareholding.
Lacking Honda's help, failing adequately to get to grips with Rover's fundamentals, BMW bowed out in 2000. Rover was now effectively over. If BMW couldn't make it work, who could? The bid by Jon Moulton's Alchemy lacked credibility; Chris Woodwark was propped up as the company's putative chief, but he's an executive whose slick presentation exceeds his ability. There's no certainty that Alchemy's vision of a slimmed-down sports-car company would have been viable.
Thus "Project Crufts" gave way to "Project Phoenix" in an attempt to carry on as a volume car maker that was doomed from the start. To be fair, Phoenix-owned Rover had bad luck. It ended up with Longbridge rather than Cowley, which BMW kept, and had to move the whole Rover 75 assembly line to Birmingham. It had a joint-venture partner in the MGF in Mayflower; Mayflower went bust, leaving MG Rover holding the bag. It contracted a new-model-development project to TWR; TWR went bust. Now it's been the turn of MG Rover.
Investigations are under way to find out "what happened to the money". The most important question to be answered is: At what point could the Phoenix Four, well aware that their company was on the skids, have closed it in an orderly way that would have left something for the suppliers, workers and dealers? This they conspicuously failed to achieve.
- Karl Ludvigsen
DeLorean Story - The End (March 2005)
Was John DeLorean as bad as many said he was? Or as good? A man who knew him attempts a summing-up of a brilliant and controversial motor-industry executive and entrepreneur.
It was too much to hope for. I'd nursed the fond expectation that when John DeLorean died, his obituaries might give the man some credit for what he'd achieved as a motor-industry executive, largely private achievements in the 1960s and 1970s that go some way, at least, to compensate for his very public defeats in the 1980s. And the first newspaper reports I saw provided factual statements about John's death. This seemed promising. But when the Daily Telegraph headed its obituary "Dodgy car manufacturer who relieved successive British governments of £78 million of taxpayers' money", I knew it was cut-down time.
I can understand why the press in Britain has it in for John DeLorean. Their enmity began long before his DeLorean Motor Company failed and John was entrapped by a cocaine sting. Though he established his car factory in Northern Ireland, DeLorean made no effort whatsoever to cultivate the British press. They were kept at arms' length from a project in which they were understandably very interested. Even worse, DeLorean hired a plant manager who had nothing but disdain for the press. This policy went hand in glove with the decision not to make the DMC-12 available in the UK until well after its launch in America, thus giving up any home-country sales opportunity. So when the DeLorean plant got into trouble, John and his people had no reservoir of press good will on which to draw. That reservoir is still bone-dry.
The Dunmurry plant should never have closed. As a recent TV documentary showed, it made a great contribution to the area both in employment and in bridging Belfast's sectarian divide. The same documentary also portrayed the unseemly relish with which the new Conservative government smashed DeLorean's dreams. The release of some export credits could have given the plant a chance to survive, but DMC was denied even this small concession. I believe that Margaret Thatcher's view of John DeLorean was coloured by her youthful recollections of a free-wheeling Grantham entrepreneur, Denis Kendall, whose nascent car-building enterprise crashed in 1946 with debts of almost half a million pounds in the town where her father was mayor.
In fact a strong effort to keep the Belfast factory open lasted well after John DeLorean's personal disgrace. Suppliers rallied round to try to keep it going. Many American dealers had learned how to sell the silver sports car and were keen to get more of them, albeit not at the volumes originally proposed. Some of them, to be sure, were painting their DMC-12s, a part of the process that DeLorean should never have tried to do without, environmentally friendly though it was to have a paint-free plant. Basically sound, the car was on the brink of being upgraded with a first-class turbocharging system.
No one, with the possible exception of Walter Chrysler, was better equipped to start a car company than John DeLorean. John was one of the broadest-based and best-equipped executives ever to come down the pike. He'd been reluctant to move from little Packard to huge General Motors in 1956 "because I didn't want to be the guy who draws the fenders, or something," he told me in 1972. "I enjoy getting involved in marketing, in manufacturing, in engineering and what's going on in the world, and everything else."
Although he came up the engineering ladder to head GM's Pontiac division and then Chevrolet, DeLorean fought hard against second-guessing his chief engineers. "You really have to work hard at not being a chief engineer," he said, "although I'm also sure that the chief engineer doesn't try to kid me because he knows I know a little bit about it." No area of knowledge is more important to the leader of a car company, because engineers can easily deceive a boss who isn't wise to their double-talk. With 44 patents to his name, John DeLorean wasn't easily misled on technical matters.
John's technical contributions at General Motors were manifold. He weaned GM away from X-frames, hazardous in lateral crashes, to perimeter frames with torque boxes at transition points. He was the first to tool up for disc brakes at Pontiac - though the Corporation wasn't ready to use them. He found an ultra-simple way to give turn signals a lane-change feature without the integrating computers that some were proposing. His overhead-cam Pontiac six was America's first in the modern era and second in the world to have a cogged-rubber-belt drive. Body-colour bumpers, now common across the industry, were a Pontiac first. John fought hard for individuality of components among GM's divisions to keep cost down, instead of knee-jerk parts sharing that meant that less-costly cars had to carry expensive parts that suited larger, heavier models.
John DeLorean was promoted from Pontiac to head Chevrolet in 1969 at the age of 44, the youngest man ever to take charge of GM's largest division. Then in a seven-year profitability slump, Chevy was a candidate for intensive care. Its sales of cars and trucks in 1970 were less than 1.7 million after a five-year decline of 30 percent. Back in the days when GM's general managers had real power John revitalised the division, restoring the confidence of a demoralised organisation. Some heads rolled; he stripped three levels out of the manufacturing staff. Inventory turns were accelerated and new sales and marketing guidelines were established.
The result was spectacular. In 1971 Chevrolet sales were up to 2.8 million and in 1972 with sales of 3,060,178 units Chevy became the first vehicle marque in history to sell more than three million cars and trucks in a single year. It wasn't a flash in the pan; 1973 sales were 3,446,162 Chevrolets. Greatly benefiting were the division's dealers, whose profits rose 300% on average during DeLorean's tenure. This, following his successes at Pontiac, confirmed an outstanding reputation for DeLorean among America's auto dealers, who were to provide important support for his car-making enterprise.
In one of its least explicable actions GM promoted DeLorean out of Chevrolet after only 44 months. When he first heard hints of a possible move upstairs in 1972, he said, "I didn't want to leave Chevrolet because we still had work to do with the division. But if I had to leave, the overseas operation was where I wanted to go." GM trailed Ford abroad, an unfamiliar position, and John saw profitable opportunities in enabling local people overseas instead of the usual cookie-cutter approach of imposing American templates on decision-making in other countries.
But this didn't happen. Instead John was promoted to the post in charge of the domestic car and truck divisions, a fusty bureaucracy against which he'd often struggled at Pontiac and Chevrolet. He soon found that people on the infamous 14th floor of the GM Building liked it that way. Many, from finance backgrounds, were nervous in the presence of someone who knew something about cars.
This was the environment in which DeLorean grew frustrated with his inability to influence the business, a frustration that led to internal dissension and his resignation from GM in April 1973. "Looking back now to the changes that have taken place in the auto industry," John wrote in 1979 in his excellent and enlightening book, On a Clear Day You Can See General Motors, "it is even more obvious that I should have managed somehow to get the job done on The Fourteenth Floor. But I didn't do it. And I consider that to be the biggest failure of my business life at GM."
I was a consultant to DeLorean in his immediate post-GM years, when he set up his consulting organisation and took his first steps toward the creation of his own auto company. Finding a suitable engine for his sports car wasn't easy. He had high hopes of Comotor, a joint Citroën-NSU enterprise that was to make rotary engines, but it never reached critical mass. Neither was a Citroën four - the engine in his first prototype - the answer. The PRV V-6 that was ultimately used was in fact a good solution, meeting US emissions requirements as it did in its Volvo version.
In setting up and running his DeLorean Motor Company, John made several crucial missteps. Ex-Chrysler Eugene Cafiero wasn't the hands-on president that he needed. DeLorean struggled with his car's engineering until Lotus came into the frame. John's enterprise was scattered too widely with its factory in Belfast, engineering in Norfolk, headquarters in New York and sales operations under Dick Brown in California. Delegating, as was his style, DeLorean was too far from the crucial decision-making process in a small company that demanded - and would have benefited from - his close oversight.
Financing his dream was a nightmare for John. "At General Motors it was pretty straightforward," he told me. "If you wanted to set up a new plant you prepared the proposal, sent the authorisation around and got all the necessary signatures, and then at the end you got the money." He wasn't prepared for the raising of money in the real world, especially in the wake of the very public 1976 failure of Malcolm Bricklin's sports-car-manufacturing venture in Canada. The memory of the collapse of that gull-winged-car company was all too recent.
Thus John DeLorean was the architect of some of the flaws in his car company that contributed to its failure. Although often criticised, the car wasn't the problem. In all some 8,800 were made during three years. Most are giving considerable satisfaction to their owners. They'll gain succour from one mention in John's Daily Telegraph obituary: "Meanwhile," it said, "his gull-winged sports car has become a collector's item, changing hands for around £18,000." Could this mark the beginning of the DeLorean boom? After all, the explosion in Ferrari prices closely followed the death of their creator in August 1988. They don't make them like Enzo Ferrari any more - or like John DeLorean.
- Karl Ludvigsen
Foreigners Not Wanted (February 2005)
When I decided to join Ford of Europe I had an attractive counter-offer from Fiat, my then-employer. I would move from America to Turin at a high level in the public affairs office. Awkward problems of Italian taxation would be avoided by delivering some of my pay to Switzerland. The idea had its attractions. When I thought more about it, however, I realised that the job would inevitably be a dead end. An American's aspirations would soon be stalled at Fiat. There was no way that the Italians would tolerate a foreigner in the upper reaches of the company, I felt.
How right I was!
Not a few foreigners have passed through Turin's revolving doors. Britisher James Blades served a few years at the top of marketing, a job later taken by Klaus Fricke, formerly with Smart, who's now back in Germany. American Anthony Sheriff was director of product development for a time before finding a new home in Britain at McLaren Cars. These were relatively minor posts, however, compared to those that have just been vacated by some of the industry's highest-level personalities.
Highly experienced and qualified foreigners have been shown the door. Herbert Demel and Martin Leach must be numbered among those men who are able to run motor companies. The evidence is firm for ex-VW man Demel although we have to be cautious about ex-Ford executive Leach, who so far has been making a fine career of collecting golden handshakes. Nevertheless he was once a candidate to head Fiat Auto, so someone in Turin must have thought well of Leach.
Also shown the exit was the ultimate foreigner, General Motors. GM must be relieved to have removed the threat of a forced purchase of Fiat Auto. It's facing more than enough challenges in its businesses both at home and in Europe, with erosion of market share undermining its ability to profit from its automaking and big problems in funding its pension plans. Europe in particular has been a sore spot for GM. Adding a money-losing Fiat Auto to its European portfolio - where Saab is already living on borrowed time - would have far exceeded GM's ability to manage its combined European operations, let alone to fund them adequately.
This was over and above the special challenge that a takeover of an Italian company would have offered GM. They do things differently in Italy. Italy may be a member of the EU, but few governments surpass Italy's in their ability to work around the dictates that emanate from Brussels. Italy's banking networks are Byzantine and her governments impenetrable and bordering on incompetent. Still with an unmistakable whiff of Communism - they don't know it failed - her labour unions are among Europe's most volatile. In the past the Americans have come close to gaining a foothold in Italy, Ford trying on both a purchase of Alfa Romeo and a merger with Fiat Auto - Chrysler also considered the latter - but wisely withdrew from a country where too many stakeholders would work against their interests. Now it was GM's turn.
Dismantled as well are the two joint ventures that GM and Fiat formed five years ago. The Powertain joint venture had already shown some results. That its overall costs were down was shown by a staff reduction from 27,000 to 22,000 for the JV, which shuttered plants at Ellesmere Port, Kaiserslautern, Mirafiori and Arese and laid off staff at Termoli. The purchasing joint venture was less advanced in terms of results.
Interestingly, that wasn't the limit of their co-operation. The new Fiat Croma, unveiled at Geneva, is built on GM's Epsilon platform as used for the Signum. A jointly developed platform will be under the new Punto, due this September, and a new Corsa next year. GM and Fiat also worked together on a new top-level platform for Alfa, Lancia, Saab and Cadillac. The GM-owned brands subsequently dropped out of the project, but the new platform will be under Alfa's replacement for its 156 and also under the Brera coupe, another Geneva debutante. So the two companies will still have relationships for several model cycles to come.
Replacing the GM alliances will be selected partnerships that follow the PSA Peugeot-Citroën model. Already partnering with PSA in several areas, Fiat feels less threatened by this strategic style. 'We learned about alliances in the last five years,' said chief executive Sergio Marchionne. 'In the future we will have targeted alliances.' They are likely to be with fellow Europeans, not with those fickle and troublesome Americans, who showed their unreliability by pulling out of the executive-car JV and thus undermining its scale economies..
I was pretty confident that it wasn't the aim of Fiat SpA to sell its auto unit to GM. At first glance such a sale seemed feasible. Auto produces some 43 per cent of the Group's revenues, so quite a lot would remain if it were hived off. But we're forced to reconsider after a closer examination of the rump that would remain after a sale of Auto.
Eighteen percent of Group sales are made by truck company Iveco, which has been bouncing back and forth between profit and loss in Europe's highly competitive commercial-vehicle market. We're told it's returning to the proifit column. Then there's CNH Global, formed by a merger between Case and New Holland in 1999. Based in Illinois in the USA, the agricultural equipment maker contributes one-fifth of turnover but has found profitability elusive.
A tiny 2 per cent of Group sales comes from Ferrari-Maserati, which is owned directly by Fiat, not Fiat Auto. F-M has been struggling to fund the revival of its Maserati arm, which has now been folded back into Fiat Auto in preparation for a stand-alone Ferrari IPO this spring. While this liberates Ferrari, Maserati will become a burden on Alfa Romeo, with which it plans to co-operate on future models. Glamorous though it is, Ferrari will never throw off the kind of cash that can support the Agnelli tribe. And after the planned IPO Fiat would own only 51 per cent of Ferrari.
Around 13 per cent of Fiat Group revenue comes from Magneti Marelli, Teksid and Comau, companies that are suppliers to the motor industry. Although none is convincingly profitable, their roles as principal suppliers of goods and services to Fiat Auto means that their transfer pricing can be regulated to suit the net financial results that incur the lowest taxation. But if GM had owned and operated Fiat Auto, that company's comfortable relationship with these Italian suppliers would have ended. Their futures would have been in doubt.
Remaining are other holdings in publishing, advertising, business management, power generation and banking that contribute less than 4 per cent of group revenue. Included are respectable businesses in their own right, such as the La Stampa newspaper, but again several whose activities are linked with those of others in the Group, including Fiat Auto. Without Auto, therefore, the Fiat Group courts disintegration. Auto is the glue that holds the whole enterprise together. Selling it is not an option. Only reviving it will meet the needs of its shareholders.
Therefore we are not surprised that Sergio Marchionne has added Demel's Auto portfolio - with his 28 direct reports - to his own at Fiat SpA. 'Of all Fiat Group sectors,' he said, 'Fiat Auto must be the principal focus of our attention. The auto [sector] remains the group's main problem.' He said that his decision to take the helm of the auto unit was intended 'to speed up the company's recovery, concentrating Fiat Group's efforts on the recovery and relaunch of Fiat Auto.'
In taking this line, Marchionne has been quoted as saying that he's already dealt with the problems of the enterprises that make up the other 57 percent of the Group's revenues. The test of that will come at the end of this month when Fiat SpA's latest results are announced. They will tell us whether the new CEO's vaunted turnaround skills are applicable to the automotive world.
Sergio Marchionne is an interesting choice to be offered complete operating control of Fiat. Of Italian origins but raised in Canada, he girded himself with a varied education that includes a philosophy degree at the University of Toronto and a law degree at Osgoode Hall Law School in 1983 while earning a chartered accountant's credentials. He then completed an MBA at the University of Windsor. Thus he qualified as a barrister, solicitor and chartered accountant.
Marchionne first made his name in Switzerland at the Alusuisse-Lonza Group in various capacities, including chief financial officer, and from 1997 as CEO. Then when the Lonza Group AG was spun off from Alusuisse-Lonza in October 1999 he became its CEO. Although he claims a turnaround of the maker of chemical and biotechnological precursors, its reported earnings have been in steady decline.
In February 2002 Sergio Marchionne became CEO of Switzerland-based goods inspection and testing company SGS, where he gained a reputation of being an aggressive executive and a turnaround expert. 'He gets things done,' testified David Loggia, fund manager at Carmignac Gestion in Paris. The Canadian was a non-executive board member at Fiat before he was tapped by chairman Luca di Montezemolo to replace Guiseppe Morchio in the operating job.
We're seeing a revival of the good-cop, bad-cop regime at Fiat of Gianni Agnelli and Cesare Romiti. Under Agnelli's patronage, Romiti too was given command of both the Group and Auto. With a degree in economics, like Marchionne he came from non-automotive industries that included a chemicals company and state-owned Alitalia, where he was managing director. The lantern-jawed Romiti brought an iron hand to a Fiat SpA which, at the beginning of the 1980s, was loss-making and debt-burdened. Starting to sound familiar?
Cesare Romiti won a power struggle with Vittorio Ghidella, a talented auto man who was forced out of the company - the Demel of his day. Romiti then proceeded to 'sanitise' Fiat Auto by the simple means of emasculating future product development. The gap in products and profits thus created fell to later managers to fill, including Romiti's former aide Paolo Cantarella.
Will history repeat itself? Will the traditional feast-and-famine cycle of Fiat Auto products and profits continue? The best guarantee that it won't is Luca di Montezemolo's presence as chairman. With impeccable automotive credentials from his Ferrari years, di Montezemolo should and indeed must stand guard over Fiat Auto's future product programmes. If he does, these good and bad cops might just get the job done.
- Karl Ludvigsen
The Chinese Are Coming (January 2005)
So far all the news from China has been about the big investments being made there to build cars and trucks to meet the demands of its huge potential market. Car makers and suppliers from all the major economies are plunging in to make sure they have plants and facilities to build vehicles for China's population of more than one billion. Risks are high, they say, but so are the potential rewards.
This story from China is different. It's about the first dedicated effort to create in China a source of cars to compete in the West. This has always been seen as a possibility, but only well down the road after domestic demand began to be satisfied. Suddenly, it's not far down the road at all. January 2007 will see the launch in America of a completely new range of cars from a Chinese maker through a network of 250 dealers in stand-alone stores who will each have invested more than a million dollars in their franchises. And the Chinese products will sell for a stunning 30 percent less than their competitors.
This is the spectacular joint vision of China's Chery Automobile Company and an importer based in New York, aptly named Visionary Vehicles. Although only founded in 1997, Chery is already making waves as one of the 'young tigers' in China's young industry. Know-how came in at the top in the person of Yin Tongyao, formerly a senior engineer at the FAW-Volkswagen joint venture and now Chery's president. Backing is by Anhui Province, which funded the company's founding in an economy and technology development zone at Wuhu, 200 miles inland from Shanghai, through its investment companies.
From its standing start only seven years ago, without the help of a western automotive partner, Chery has raced its production to 100,000 vehicles a year. One-tenth are sold abroad in Egypt, Bangladesh and Cuba among a dozen of its markets, making Chery China's biggest auto exporter. Its comprehensive production facilities include a stamping plant, engine and transmission plant, body and welding plant, a modern paint facility and a spacious assembly operation that one observer has called 'a state-of-the-art two-billion-dollar manufacturing campus'. That Chery cares about quality is shown by its adherence to international standards with ISO/9001 certification in 2001 and ISO/TS16949 certification in 2002.
Without an international partner to deliver ready-made designs, Chery had to scramble to put a product line together - and this has already landed it in hot water. Chery says that one of its initiatives was to buy the rights to Daewoo's Matiz small-car design when that troubled company was in bankruptcy. Now that GM has taken over Daewoo, and is selling the Matiz as the Chevrolet Spark, it's complaining in court that Chery's QQ is a knock-off of the Matiz design. Chery has won the first round but GM still seems determined to seek redress.
That's the bad news. The good news is that the cars to be sold in America will be completely new, nothing to do with exiting Chery products. Knowing that it needed outside help to create a modern auto range, the company has already engaged the help of Italian stylists Bertone and Pininfarina to pen its new models. In Austria, the renowned form of AVL is at work on a new engine family of 2-litre fours, 3-litre V6s, 4-litre V8s and turbo-diesels. It commissioned Britain's Ricardo to develop a hybrid power train. Thanks to Chery's interest in low-emissions power trains, the Beijing government will support its efforts with funding and technical support. The final designs will come together at Chery's new multi-story R&D facility at Wuhu.
At the heart of the Chery proposition is its complete freedom of action. Where Japanese and Western auto producers have formed partnerships in China, those links include constraints on exports. The foreign partners have learned from bitter experience that they don't want to meet cheap competition in their home markets from the products of their Chinese plants. Chery faces no such constraints. In fact, as a latecomer to its home market, where it's a minnow with a 4-percent share, Chery wants to emphasise expansion abroad. By 2007 it plans to be able to ship a quarter of a million cars to America.
Waiting eagerly to receive the Chery range - which will include two sizes of saloons, a crossover saloon, a sport-utility and a sports-luxury coupe - is one of the most charismatic and controversial entrepreneurs ever to enter the automobile business. Fast-talking Malcolm Bricklin, now 65, heads privately held Visionary Vehicles, the company that will set up Chery's American importation. This is the same Malcolm Bricklin who founded Subaru's American import company, lost $20 million of his own money trying to build his eponymous sports car in Canada, and went from hero to zero when his low-cost Yugo - greeted with wild enthusiasm - imploded on the American market.
Since then, Bricklin has been combing the globe in search of another make to import. 'I thought it would be great to find a car company that could build vehicles that had great style, ride, price and service,' Bricklin said. The Yugo's failure was a direct result of its maker Zastava's refusal to meet the quality standards that export markets demanded, in spite of Bricklin's best efforts to get them to see the light. When one quality-control expert delivered his scathing report, Zastava's reaction was to bar him from the factory. 'Every business I've been in has been successful, if the factory did its job,' Bricklin reflected. 'This factory can do the job,' he added of Chery.
Malcolm and his VV team scoured the world in search of a new source of imports. They've been to MG Rover in Britain, Tata in India and auto makers in Eastern Europe. For a while hopes were high for a revival of Zastava, but this never took wings - fortunately, in my view. 'What I was really looking for,' said Bricklin about his quest, 'was a factory to build my cars. And I found a factory that was about as impressive as any I'd ever seen.'
The first meetings in Wuhu took place in April of last year. Talks followed both with Chery and with officials of Anhui province, the company's owners. By December agreement had been reached and Bricklin travelled to Wuhu on the 11th. On the 16th he and president Yin signed the contract covering their business relationship. 'I have great confidence that they are going to be as innovative and productive as any automobile company in the world,' Bricklin said of Chery. 'They're ambitious like crazy. They want to be a major global player.'
Under the agreement Bricklin's VV team has significant responsibilities, including product planning, engineering of safety and emissions systems for the US market and homologation of the cars - not to mention signing up the 250 dealers with which VV plans to launch Chery's products - under a new brand name - two years from now. To meet his commitments Bricklin has assembled a team that includes some of his colleagues from the Yugo days, such as Paul Lambert in marketing and Tony Ciminera in product development. A newcomer is manufacturing consultant Ron Harbour, whose company - famed in the industry for its studies of factory efficiency - will advise Chery on improving quality and output. The import company will have offices in New York and New Jersey and a technical centre in Detroit.
Malcolm Bricklin has never had difficulty in assembling a blue-ribbon team of backers and advisors. After all, it was international businessman Armand Hammer who raised the Yugo opportunity and Henry Kissinger whose consultancy supported his efforts. Advisors of like calibre have signed on for the Chery adventure, which offers the huge potential of cars of quality sold in America at almost one-third less than the opposition. One such is William vanden Heuvel, senior adviser to investment bankers Allen & Co. and a former director of Time Warner Inc. 'I was taken by his personality and his vision,' he said of Bricklin. 'To be the first importer of Chinese cars will be a huge achievement. I think Malcolm is a master salesman who got everyone to understand the dimensions of his vision.' Vanden Heuvel is chairman of the Visionary Vehicles management board.
Not everyone is cheering for Bricklin's new initiative. 'I wouldn't trust him as far as I could throw him,' said Ron Tonkin, an Oregon auto dealer who was out of pocket to the tune of six figures after the collapse of a Bricklin venture to sell electric bicycles through auto dealers. In fact this aborted venture saw Bricklin fleeced as well when a master wheeler-dealer, Lee Iacocca, came on board and snaffled up the electric-bike idea to promote it for his own advantage.
Bricklin's team how has until mid-year to raise the $200 million that it needs for its end of the deal with Chery. Seeing the potential of what Malcolm likes to call 'the next Toyota', outside backers are swarming around like bees to the honeypot. Bricklin, on the other hand, may wish to maintain control of what promises to be the best deal he's ever negotiated. The next few months will determine whether he's able to do that.
This is by any standard an awesome initiative, one that has major implications for the industry in all parts of the world. With VV's assistance, Chery plans to offer cars of quality, with a warranty of 10-years/100,000 miles, that will compete with the mainstream offerings of major auto producers at a price 30 percent lower. No spelling out is needed for the implications of such an offer not only for the export markets of the Japanese and Europeans but also for their home-market prospects. In five years from 2007 the partnership expects to be selling a million cars in America. After that, exports elsewhere will be on the agenda.
Thanks to his rocky experiences as an importer, Bricklin is realistic about his prospects. 'If we don't make sure these cars are among the best in the world,' he told the Detroit News, 'we're going to get our ass handed to us. But if we do what we're supposed to do, this could be the deal that changes the industry.' Malcolm is a promoter par excellence, an artist at seizing the deal. If he can back this up with a strong team at VV and maintain good relations with Chery, I think he'll pull off the deal of a lifetime. Not bad for a guy who should by rights be in the pipe-and-slippers category.
- Karl Ludvigsen
Belt up Lutz (November 2004)
I recently had the pleasure of putting a few miles on a Vauxhall Monaro, the Australian-built 5.7-litre coupe that's sold in America as a GTO by Pontiac. This is one heck of an impressive automobile. It's robust, with a great V8 sound and huge acceleration, but at the same time refined with outstanding cornering and handling. It's good-looking with an understatement that goes down well in Europe and an interior that's a big step up from what we're used to in cars made Down Under. In short, quite an automobile and a real pleasure to drive.
So why is the Monaro underperforming as a GTO in the American market? Sales there are well below hopes and expectations. There's a clue in a recent issue of Automotive News, which contrasts the GTO's market impact with that of the successful 300C Chrysler and added that the Pontiac 'looks more like an oversized Sunfire than a muscle car. Too bad, because the GTO is a wonderful car to drive and might have made a worthy successor to GM's F-body Camaro and Firebird.'
How true! The Monaro is right in the heart of the sprit of the Firebird and would have suited that moniker to a T. The GTO was famous for having an over-large engine in a mid-size body and was never hailed for its subtlety. This historic identity didn't suit the Monaro at all. Yet when the plans to built it as a GTO were announced, Bob Lutz, GM's vice chairman of product development, said, 'This latest GTO will carry on the proud tradition of a legendary line. This car is a strong statement from both Pontiac and GM that we are determined to re-energise the car market with vehicles that command the customer's attention and excite their senses.'
Lutz's various public statements in support of the new GTO had the effect of ramping up expectations for the car to unrealistic levels during the several years required to bring it to market. Wrongly positioned and too subtle in its styling to make much impact with muscle-car lovers, the new Pontiac didn't 'excite the senses' of the enthusiasts who had waited for it so patiently.
'It's pretty obvious that the dyed-in-the-wool old-line GTO fans (mostly probably also collectors) are disappointed that it's a non-retro-themed car with few throwback GTO cues,' said Lutz in response to criticisms of the car's styling. 'But that's not what we set out to do. We wanted a modern interpretation, with a really slick chassis to go along with a big engine. It will more than live up to the GTO heritage in terms of driving excitement and performance. We really would like to draw new customers, rather than traditionalists.' Well, that's not what Maximum Bob said previously, when he claimed that the new car would 'carry on the proud tradition of a legendary line'.
Not satisfied with queering the pitch for GM's new models in America, Bob Lutz has been giving European car buyers the benefit of his 'wisdom' as well. In a recent interview with auto motor und sport he went out of his way to point up the deficiencies of Opel's offerings. 'In the next version of the Vectra,' he said, 'the design will be much more dynamic' - with clear inferences for the current Vectra, which I happen to think is a damn good-looking car. It's a good car as well, as the same magazine confirmed in the same issue with a comparison test of Opel's new Vectra diesel against the offerings of Mercedes-Benz, VW and Peugeot. The Vectra came out on top.
Lutz went on to inform his German readers that under its previous structure GM Europe 'had at that time, internally, a virtual civil war that was very damaging for all concerned.' The implication, of course, is that that has all been sorted during and after his spell in charge of GM Europe in the first half of this year. Sweetness and light will now prevail in the relationship among Zürich, Rüsselsheim and Ellesmere Port. I don't believe it for a minute.
I'm not the only person who is astonished that Lutz left Zürich in place. A separate office to run GM Europe was established only to strike a balance between Opel and Vauxhall in days when a real 'civil war' prevailed. It was plunked down in Switzerland because GM's American managers were terrified of the European Union's socialistic ideas on taxation and workers' legislation, their theory being that if they were headquartered in a non-EU country they could avoid any such annoyances. Only after they made that decision did they discover that Zürich had virtually no housing for their people and that Swiss salaries had to be sky-high.
Now the rationale for Zürich has gone away. Vauxhall is simply a home-brand marketing arm of Opel in product and production terms, with negligible involvement in the product-development process. Zürich has become as useful as the proverbial tits on a bull. Yet Lutz has not only kept it, but strengthened it. And this is the same man who, when he was running Ford of Europe, bemoaned the size of its central staff and said that it should be managed from a small cadre in a BAC 1-11 who could fly wherever problems needed solving.
My conclusion is reinforced by Lutz's remarks about Carl-Peter Forster, the ex-BMW production expert who's been promoted to a job directly under Fritz Henderson in the GM Europe hierarchy. 'We've sent Carl-Peter Forster to the European headquarters,' said Lutz, 'because he's shown that he's an outstanding manager.' Well, if that's the case, why not give him the top job? Instead Forster has to report to Henderson, a time-serving bean-counter who started in the GM treasurer's office in New York - a career path that led a certain Roger Smith to the chairmanship of GM. A couple of guys named Pitchesrieder and Wiedeking have shown it's no bad thing to have someone with production know-how in charge of a car company.
Of course, Forster may have been happy to leave Henderson in place as the lightning rod for all the criticism of GM's plans to make swingeing job cuts in Europe. The GM Europe chief has already shown that he has the short-term outlook that's so typical of American finance executives. 'I need to have a significant impact in 2005.' He said in September, 'so I need to have a plan in place in the next 60 days - we don't have the luxury of time.' It's the all-too-familiar American refrain, to paraphrase the proverb, of 'decide in haste, repent at leisure.'
'Our assumptions on volume and market share were wrong,' added Fritz Henderson, 'and picking up market share in Europe is incredibly difficult.' Welcome to the EU! And with impeccable timing GM has also announced its plan to transform Daewoo into Chevrolet in Europe, at the first of next year, to attack the very foundations of the market for family cars that chiefly support the sales efforts of Opel and GM's business partner Fiat. Might people be concerned that the quality of Korean-built Chevrolets could fall short of European requirements? Bob Lutz reassured them: 'Korean quality is coming up so fast now, it rivals the rest of the world,' he said. Big help for Opel and Fiat that was!
Lutz also had some peculiar comments about Chevrolet. 'It has become a sacrificial brand,' he said about the bow-tie marque, 'but we had to do it. It's easier to pull a brand down than to build it up.' I guess that means that it's okay to drag Chevrolet down to Daewoo's level by putting the bow tie on questionable cars because it would be too difficult to make the best of the Daewoo brand.
The excellent sniffpetrol website had a natty comment on GM's strategy. 'We realised that Daewoo is a badly devalued brand that means nothing to people outside of its home market,' it quoted a mythical GM spokesperson. 'So it made perfect sense to replace it with Chevrolet, which is a badly devalued brand that means nothing to people outside of its home market.'
I rest my case. It's time for Rick Wagoner to belt up Lutz. The man has clearly come to believe his press, which continues to hail him as the Second Coming of the Saviour of the auto industry. That he's not is gradually becoming evident. The Buick LaCrosse, a car strongly championed by Lutz, is my next and last exhibit. 'Curvy LaCrosse concept turns into Plane Jane car,' says a headline in this week's Automotive News. 'Nuff said.
- Karl Ludvigsen
Renault's Dacia Challenge - Another Palio? (August 2004)
Renault has startled the world's car producers by making good on its commitment to build a '$6,000 car'. Karl Ludvigsen, whose consultancy advised Renault on the project, assesses the chances of a daring and unique initiative.
I've always admired the creative drive that underpins the success of Europe's auto industry. Aluminium bodies, disc brakes, common-rail diesel injection, multi-link suspensions, variable valve timing, advanced and exotic materials - Europe's car makers and their suppliers constantly push for the most advanced technologies for their products. This has been, and remains, an important advantage for the European auto industry over its rivals in America and Asia. The way the Europeans push forward with new technologies, it's hard for competitors to catch up.
Some, however, are wondering if this relentless upmarket pressure has left too many car buyers behind. In Germany, for example, Götz Leyrer wrote that Ford expects to base-price its new Mustang below $20,000 in America, close enough to €16,500 or £11,000. That's a lot of automobile for a price, said Leyrer, that's less than a €17,000 VW Lupo TDI in his driveway. Of course, he remarked, the Mustang has a live rear axle, a technology that's regarded as Stone Age in Europe. He pointed out that the sophistication of the latest Golf's multi-link rear suspension will be lost on most of its buyers, who nevertheless have to meet its costs.
Auto journalists have their share of responsibility for the rejection of low-tech solutions. They turn up their noses at cars like the Malaysian Perodua Kelisa (£4,999), Korean Kia Picanto (£5,495) and Indian Cityrover (£6,495). Simple, straightforward cars without all the latest technological bells and whistles don't earn their respect. Admittedly, there's an exception. Fiat's new Panda (£6,295) has won praise from the auto writers for its honest design and good road behaviour - a return to the virtues that once marked the best of Fiat.
Now there's a new low-priced car on the block. I refer to the newest Dacia from Romania, the Logan, as described recently in Just-Auto.com by Mark Bursa. In 1969 I attended the launch of its spiritual predecessor, the Renault 12. Significantly, the 12 was conceived by Renault as a design that would be well suited for manufacture and assembly abroad. That accounted for its longitudinal-engine front-drive layout and its use of straightforward coil springs at all four corners. The 12 became the basis of the Romanian Dacias and Ford's Corcel in Brazil. It's still the foundation of the base Dacia models. Come to think of it, I maintained my relationship with the 12 by writing the brochures with which Renault sold them in America.
How did Renault drive down the price of its daughter Dacia's new Logan to meet its €5,000 target? It achieved Louis Schweitzer's goal precisely by not innovating. It told its engineers and designers to use available bits from their parts bins to create a new model that would meet but not exceed the expectations of many world markets. Its bare-bones approach, eschewing innovation that didn't add value, wasn't unlike the way the Twingo was created.
An important open issue for Renault in its $6,000-car project was branding. How should it market the car? Should it use the Renault brand, or Dacia, or some combination of the two? Or should it create a completely new marque? They turned to none other than Ludvigsen Associates to resolve this issue. We surprised them with our finding, which was that they should stick with Dacia. The brand had a good reputation in its home country and in Central Europe, while elsewhere it was little known. While Dacias had been sold in the west, their impact - positive or negative - had been slight.
It's always nice when a client acts on your advice. The Logan will be a Dacia in most of its markets. The only exceptions are Russia, Iran and Colombia, where it will be branded as a Renault and given a Mégane-like front end. A decision hasn't yet been made about China, but I'd be surprised if the Renault brand weren't used there.
Speaking of names, I do hope that when Renault brings out the Dacia's additional body styles it simply names them as different versions of the Logan. It's never been clear to me why Fiat used Palio, Siena and Strada as names for different body styles of its 178, the world-car project that it launched in 1996 with its Brazilian plant as its linchpin. The different names may have been part of its effort to mix and match models from the 178 range for distinct markets, but this aim seemed to be defeated by associating the names with body styles rather than market demands.
Dacia Logan, like Fiat 178, is a bold effort to overcome the problems that car makers face in marginal secondary markets, namely their inability to generate enough in the way of profits to pay for needed updating of their products. This way, the aim is to generate enough overall volume to be able to justify facelifts and new platforms as and when required, on a global basis. The risk, of course, is that the single product made in this manner will be not quite right for most of its markets. That's been the hurdle that's tripped up most "world car" projects in the past.
Fiat's 178 traced its beginnings to a plan to facelift the Brazilian-built Uno in 1992. From there it progressed in 1993 to a full-fledged effort to design a single product to suit many secondary markets. Key project-driving nations in addition to Brazil were Argentina, Poland and Turkey, with high hopes for India and Russia as well. The 178 project's theme was to have the vehicle absolutely identical in all the producing countries. A special controlling centre was set up at Orbassano to check the parts being made at many different locations to gauge their conformity. Another aim of the 178 project was a car that would meet European safety and emissions needs, although this wasn't required by all its markets.
Instead of designing the 178 in-house, as Renault did with the Logan, Fiat farmed it out to the extent of 80 percent of the work by value to Turin engineering consultancy IDEA. This reflected a general trend at the time for Fiat to outsource many activities, such as TNT's assignment to handle its internal logistics. For the 178, with sheet-steel pressings coming chiefly from Brazil and Turkey and going as far afield as South Africa and Morocco, the global logistics challenge became mind-boggling. Fiat had to create a special category of employee, "packaging technician", to cope with the preparation and handling of parts.
Fiat's 178s were rolled out starting in Brazil in January 1996. Not until 1998 did key participant Turkey begin its production. India was a disappointment, one partner falling out and another failing to proceed, while in South Africa the local Nissan plant agreed to assemble 178s. Sourcing complexity there was such that sedan body panels from Morocco had to fit with rear doors coming from Brazil. In just such ways the project posed almost insuperable challenges to Fiat's Global Sourcing Department and to the monthly meetings of its World Purchase Committee.
Overall, said an academic study of the 178 undertaking, 'the project complexity a) tremendously increased as it began touching significantly different countries, like India; b) required product customisation and conspicuous local adjustment in technologies, organisational structures and management practices, especially in existing brownfield plants. In India, the "world car" approach did not prove to be completely robust. There, in fact, the strong commitment to global optimisation and cross-country standardisation has been challenged by the peculiarities of local competition, institutional constraints and cost factors.' Nor was Fiat thrilled when local producer Tata launched its Indica, designed - like the 178 - by Turin's IDEA.
Three and a half years from its launch the 178 saw its millionth car produced. This was short of expectations, however, owing to the slump in the South American markets on which the concept materially depended. To its credit the Dacia Logan hinges relatively little on fickle South America, apart from a small module for Colombia. Rather, its critical mass is based on Romania and Iran with China a major hoped-for add-on.
Insiders at Fiat have told me that as far as they're concerned the 178/Palio is a failed concept. The dream of a true world car became a nightmare of conflicting national desires and demands that had to be satisfied by an almost unmanageable supply infrastructure.
Can the 21st-Century version - the Dacia Logan - succeed? Much will depend on whether the model's vaunted low variable cost has in fact been achieved. If it has, the upscale launch models will be profitable. It's going to be a close-run thing. I can see the Iranians taking to the Logan, but will the Chinese? Won't they want the best the West can deliver, not a Frankenstein's monster assembled from miscellaneous body parts? The balance of this year will tell the story.
- Karl Ludvigsen
Agnelli to di Montezemolo: a Dynasty Change at Fiat? (June 2004)
Recent weeks at Fiat have seen almost unprecedented turbulence at the top, with the appointment of a new chairman and the fifth CEO in three years. For Karl Ludvigsen these events have a personal edge. He assesses the new setup at Fiat and pinpoints the thrust that its new boss, Luca di Montezemolo, can and must bring to the group.
The death in May of Umberto Agnelli was poignant for me personally. I've thought of ours as parallel lives in the world of cars. We were both born in 1934, Umberto a few months later than I. We first met in the late 1970s when he visited Fiat Motors of North America, where I was a senior executive. He and his brother took a close interest in our struggles in the troublesome American market. I subsequently saw Umberto a few times in Europe, most recently at the Geneva Salon, where he didn't look like a man on his last legs. My photos of him there, with Giorgetto Giugiaro, are among the last ever taken of Umberto.
Gianni would have been both surprised and pleased by the way his 13-years-younger brother dealt with Fiat's problems after his death in March 2002. Umberto had often seemed the ultimate pragmatist, swayed by the demands of the day. At times he seemed ready to jettison the autos unit if it seemed likely to pull down the rest of the Agnelli empire, while Gianni more consistently supported autos, the business founded by his grandfather of the same name that provided the foundation of the family's wealth.
Previously, in the 1970s, Umberto Agnelli had been active at the top of Fiat as managing director to his brother's chairmanship. This was the period of the Group's diversification, giving it the broader base that still supports it today. Umberto flirted with politics in 1976, achieving election to the Senate, but found a frosty atmosphere in Rome and soon returned to Turin to resume his managing directorship. These were the poisonous and dangerous years of the Red Brigades in Italy, when it was a courageous act to be a prominent industrialist. In 1980 Umberto stepped down in favour of hard man Cesare Romiti. In the next ten days Fiat's shares rose almost ten percent - a harsh verdict on the younger Agnelli's stewardship.
After Gianni's death Umberto more than made up for these vacillating years with his staunch support of both Fiat Auto and his no-nonsense choice as the Group's chief executive, Giuseppe Morchio. The younger Agnelli deserved credit for persuading his family to stump up 250 million euros to bolster their company's capitalisation. 'He has impressed me with his deep love of Fiat,' said Morchio of Umberto, 'the sense of duty, of responsibility and the spirit of service. I will miss him a lot.'
Now Umberto is gone and with him Morchio as well. The latter cared little whom he offended in his effort to sanitise Fiat, knowing that an Agnelli was there to support him. Without Umberto he was vulnerable, especially to one of the Group's managers he had most offended, Luca Cordero di Montezemolo. The two had struggled over the role of Luca's Ferrari-Maserati group, with di Montezemolo successfully defending his turf. Having been denied the chairmanship of Fiat by the board, and knowing that di Montezemolo was arriving above him, Morchio made a hasty and indeed undignified exit.
Di Montezemolo's Group role is aided by the fact that he's been on the board of Fiat for some months now. Another newcomer to the board is Sergio Marchionne, whose career has been so low-key in Italian terms that Luca's reaction on hearing of his board appointment was 'Marchionne who?' Since then he's obviously gained a better appreciation of Marchionne, whom he named as the new chief executive only a weekend after Morchio flounced out. The 52-year-old CEO of a Swiss testing and inspection company will need all his supposed turnaround skills to maintain the Agnelli-Morchio team's momentum.
Luca and I go back a while too. As head of Fiat's public relations at the end of the 1970s he was the counterpart in Turin of my activities in America. He is supernaturally bright, incredibly focused at all times and - importantly for his present job - he can talk for Italy. His background and experience in public-facing activities will be a huge asset as he comes to grips with the governmental and union problems that Fiat is facing. This must be Luca's task while Sergio Marchionne concentrates on operational problems. Di Montezemolo will balance his new job with his responsibilities as the head of Ferrari-Maserati and, since March, the Confindustria, Italy's equivalent of the CBI.
Ironically it was Luca's election to head the Confindustria that had already led him to make the management changes in his own group that now allow him to transition to Fiat's top job with ease. He's given Frenchman Jean Todt more authority at Ferrari and Briton Martin Leach the responsibility for Maserati, having fought off Morchio's attempt to put Leach above both his brands. Leach, you'll remember, was to have taken over Fiat Auto until Ford enforced the non-compete clause in his contract. Hired instead for that job was Herbert Demel, who looks secure enough.
Luca di Montezemolo is an outstanding choice to chair Fiat. Like Giovanni Agnelli he's dubbed 'Avvocato' by his staff, by virtue of having studied law. As the boss of hyper-successful Ferrari he has charisma to spare. He also has a record of achievement there, not only in racing but also on the production side. Before he arrived, Ferraris were sexy toys but not serious cars. Luca made Ferraris even more sexy, if anything, and at the same time raised their quality enough to allow them to be daily drivers. This shows that he has the focus that Fiat, Lancia and Alfa Romeo desperately need: close attention to quality. Without much-improved quality, all three marques will slump back to the status of third-world products. They're perilously close to that already.
In his new post Luca di Montezemolo will be in the eye of the public and press as never before. His personal side interests, such as Tod's shoes, will be the subject of fervid speculation. So will his relationship to the Agnelli clan. When he was Ferrari's racing manager in the mid-1970s, many thought he was related to the Agnellis, a perception he would have been foolish to disabuse. He's said not to be, though he played with the younger Agnellis as a child. But if in fact he's the secret love child of Gianni Agnelli - another product of Italy's world-class rumour mill - he can expect it to come out. For di Montezemolo the roar of the Formula One pit wall will be as a whisper to the tumult that his rise to the top of Italy's biggest firm will generate.
- Karl Ludvigsen
Making God Laugh (May 2004)
'How do you make God laugh?' goes the old joke. 'Tell him your plans.' Karl Ludvigsen assesses the apparent failure of some grand plans in the car industry and their implications for the future.
Hype was hot and heavy recently over the plans of DaimlerChrysler for Mitsubishi Motors. The German-American company would invest billions more in its loss-making Japanese affiliate, came confident reports from Tokyo. With the help of DCX, said the pundits, loss-making MMC would at last implement the turnaround that it had been talking about since 2000. Together they would march hand-in-hand into the sunset.
I wasn't so sure. DCX boss Jürgen Schrempp had made it clear that all options were open where Mitsubishi was concerned. And his recent history showed that the 'Jürgennaut' didn't flinch from taking tough decisions. I thought back to the Fokker case. When he was running Daimler-Benz arm Deutsche Aerospace, then known as Dasa, he invested DM530 million in a 51 percent share of Holland's Fokker. Though the veteran aircraft maker was struggling, Fokker seemed to have the key to the regional-jet-airliner market that was a gap in Dasa's offerings.
In 1994 Jürgen Schrempp became Daimler's chairman, and in 1995 Dasa became Daimler-Benz Aerospace. Fokker wasn't getting any healthier, however, one commentator saying that with its funding Daimler was keeping it 'on life support'. In January 1996, Daimler announced that it was withdrawing its ongoing backing of Fokker. Schrempp forthrightly admitted making 'a $1.4 billion mistake'. Stunned, the Dutch company had no alternative but to file for bankruptcy. Against this background the digging in of heels in Stuttgart was easier to understand when Mitsubishi proffered its begging bowl.
In fact, DaimlerChrysler showed some stubbornness when it bought its 34 percent share of Mitsubishi in 2000. The deal was originally pegged at $2.1 billion, but when word surfaced about some of the Japanese company's latest peccadilloes - such as concealing faults in its cars for several decades - DCX negotiated the price down to $1.9 billion. In acquiring that shareholding Schrempp was on the rebound from a failed negotiation with Nissan, which he saw as a company too far for his hard-pressed managerial cadre. Thereafter, in March 1999, he said, 'We are not making a move on Mitsubishi.' His aim of gaining 25 percent of DCX's revenue in Asia could, he said, be achieved by the company on its own: 'On the car side, there is no need for an acquisition. We can do that ourselves.' Less than a year later he would rethink that assertion.
Of course this is déjà vu all over again for Chrysler's people. In 1971 Chrysler negotiated for a 35 percent share of MMC, only to discover - to its embarrassment - that it didn't have access to enough cash to fund the deal. That's why it bought 15 percent then and another 20 percent later. The alliance was a help to Chrysler and an incredible windfall for Mitsubishi, which sold millions of engines and cars to Chrysler during their relationship. Of the 100,000-odd imports that Chrysler sold in the USA from 1983 to 1992, 80 percent came from Mitsubishi. This partnership continued even though Chrysler began selling its MMC holding in 1989, as it was obliged to do by the Loan Guarantee Act passed by the US Congress.
The partners made cars together in America as well at their new plant in Normal, Illinois, set up by their Diamond-Star Motors joint venture. Although viewed dimly by Bob Lutz, who arrived from Ford a year after the project was launched in 1985, Diamond-Star did have the merit of educating Chrysler in the latest Japanese production techniques. These were proselytised by Glenn Gardner during the push for platform-team engineering at Chrysler and did help the American partner raise its manufacturing game. On a strictly financial basis Lutz's concerns were justified by Chrysler's loss of $200 million on Diamond-Star operations, thanks to parts supplied from Japan in high-valued yen. The loss, plus the initial investment of $100 million, was recouped when Chrysler sold its half share in the plant back to MMC in 1991 for $305 million.
Although in those days Chrysler never contemplated the degree of product-line integration with MMC that's been on the cards since the beginning of the 21st Century, there's certainly ample evidence that the two companies can work well together, with or without shareholding links. Nor has DCX indicated any early plan to dispose of its 37 percent shareholding in MMC. This is likely to shrink, of course, if parent Mitsubishi invests more in the company in the absence of a proportional investment from Daimler. Thus in the medium term the product plans that have been launched jointly between MMC and Chrysler should not be in jeopardy.
This assumes, of course, that one way or another Mitsubishi will keep on building cars. Signs are that its parents will step up to the challenge of stanching its losses. You may recall that three years ago MMC announced a restructuring plan that was to cut costs and personnel so that it would achieve operating profits of 2.5 percent in 2002/03 and 4.5 percent in 2003/04. Instead, in the latter year it lost $700 million. A miscalculation of that magnitude makes any failure of strategy by DaimlerChrysler look like very small beer indeed.
Why wasn't MMC dealt with as effectively by DCX as Nissan was by Renault? The reason was that while Nissan was and is a stand-alone enterprise, at the centre of its keiretsu relationships, MMC was and is an arm of the Mitsubishi Group, which has a wide range of other businesses. With Mitsubishi Central constantly interfering and blocking the initiatives of DCX's people in Japan, the latter had far less scope for making meaningful change than did Carlos Ghosn at Nissan. Here, for sure, is fair warning for anyone thinking he can succeed where DCX didn't. And if the folks at Mitsubishi are hoping to entice yet another gaijin to invest in their troubled car company, those hopes are likely to be misplaced.
In the wake of its decision not to fund MMC further, the press is coming down heavily on DCX's strategy. 'The idea behind it was neither dreamy nor theoretical,' said the Daimler chief of his grand plan. 'Not the conception, nor the vision was wrong,' he added. 'It had much more to do with a somewhat defective execution by the respective management.' Much though they apply to the current stance of DCX's leader, these were the comments of Edzard Reuter, speaking in 1998 of the failure of his strategy of transforming Daimler-Benz into 'an integrated technology concern'. In 2000 the current boss, Jürgen Schrempp, sounded much the same when he said that 'the operational issues have nothing to do with what I term an absolutely perfect strategy.' His strategy, he said, simply needed 'operational implementation'.
Now, it seems, grand strategies are not to be attempted. 'Schrempp is the poster child for overwhelming vision and underperforming execution,' tut-tutted Peter Brown in Automotive News. Rightly enough, Brown added that 'vision without execution is a road to ruin for investors and employees alike'. He mentioned the Jac Nasser era at Ford, where the energetic Nasser tried to manage massive change centrally with a few sidekicks. He could have added the preceding 'Ford 2000' fiasco under Alex Trotman. It turned out to be less easy to transform Ford into Toyota than Alex thought.
Nevertheless, visions are necessary. 'Make ye no little plans,' said poet Robbie Burns, 'for they have no power to move persons' minds.' A vision is essential, if it is to carry all stakeholders with it. We have enough good and bad examples from the dot-com era. But a grand strategy must be clear, communicable to all and directly relevant to a company's business. If it isn't, it's better not to have one and to stick to hard graft instead.
The last word can go to another and exceptionally able German. 'I must confess that I am opposed to the making of theoretical plans which do not face up to practical experience,' he said. 'Obviously all economy must be directed according to definite general principles, but the now fashionable setting up of four-year plans and similar plans, the creation of planning bureaus, etc., is propaganda rather than effective achievement.' These were the views of Hjalmar Schacht, the financial genius behind the revival of Germany's economy in the 1930s and the funding of its preparations for war. By all means make plans, Schacht was saying, but be sure that they are capable of being implemented on the ground. That's been forgotten too often in our industry.
- Karl Ludvigsen
Celebrating the Comeback Kid: Kia (April 2004)
Humble clone of Mazda and captive brand of Ford, debt-burdened Kia looked out for the count at the end of the last century. Backed by Hyundai, however, it's back in the ring and battling hard. And for the rivals of both brands there could be worse to come.
Of all the car-company sagas of the 21st Century, surely none overshadows the achievements of Kia. From virtual extinction Kia has recovered to become one of the fastest-growing brands, bolstered by the announcement of its new factory in Eastern Europe. It's a comeback of epic proportions.
In 1998 Kia Motors Corp., then $7.2 billion in debt, had applied to be placed in receivership. Caught in a bid battle between Hyundai and Ford, which already held a 9.6% stake, Kia earnestly hoped to be bought by Ford. With Ford, it felt, it had the best chance to continue on its own and develop as a company. As well, it could carry on its technical relationship with Mazda, which had 6.7% of Kia.
On the other hand, if Hyundai were to win the auction for the troubled company, Kia feared that it would be consigned to oblivion. Many analysts foresaw this at the time. Said one, "Hyundai has the clout to shut down the excess capacity that is the bane of the industry." Expectations were clear: Hyundai would close down Kia and use the best of its plants to make more Hyundais. Any urgings of an independent role for Kia and its engineers and employees would be stifled.
Kia is one of the newer kids on the block. It traces its origins to 1944 when, with Korea still occupied by the Japanese, it was founded by Kim Chul Ho, an engineer in a Japanese steel-processing company. In 1952 Kim and his 50-strong workforce made South Korea's first complete bicycle, and 1961 they made their first motorcycle. In 1976 Kia took over Asia Motors and by 1979 it was assembling Peugeots and Fiats on the peninsula. Early in the 1980s, with Mazda's help, it made the first Kia-badged cars. In 1993 it warded off a hostile takeover attempt by Samsung, which entered the auto industry through a tie with Nissan instead.
Like its fellow Korean auto makers, Kia bet big on a global future in the 1990s. In 1990 it opened its new plant at Asan on land reclaimed from the sea in the Hwasung region. Adding to its facilities in Sohari and Kwangju, this brought Kia's total capacity close to the million-vehicle mark. "Expansion is necessary to survive and grow," said its president at the time, justifying the spending of $6 billion on his investment plan. Those were the days when the Korean banks and government tossed loans to big business like bonbons from a tray. With Kia choked by indebtedness to 23 banks and its workforce on strike against its liquidation, its chairman stepped down in October 1997, apologising "to the public, the government, our creditors, the Kia family and subcontractors for causing a lot of concern" and calling his previous 100 days "hellish".
That was about as low as it gets for an auto maker. Kia and its 20,000 workers braced themselves for decimation after October 19, 1998 when it was announced that arch-enemy Hyundai, the 800-pound gorilla of Korea's motor industry, had won the auction for Kia Motors and its affiliate Asia Motors. But they were in for a surprise. Hyundai's chairman, the youthful Chung Mong Kyu, said that he would try to preserve Kia's brand, technology and platforms to the extent possible. Although in his job for only a year, Chung spoke with confidence about his vision for Kia. It involved building the brand, not destroying it.
Chung Mong Kyu's ideas were pivotal in the actions that Hyundai took with respect to its acquisition. He's a firm believer in Hyundai's need for additional volume to gain economies of scale. At the same time, however, he realises that Hyundai alone can't expand its product range in such a manner as to meet everyone's needs and desires at higher volumes. That's why he places high value on Kia's independent image and heritage, scanty though both were at the time of the takeover. It's Chung's decision to build up - not destroy - the Kia brand as an independent alternative to Hyundai.
At the same time, Chung Mong Kyu realised that he had to effect economies behind the scenes. "One of his key decisions was to bring the research and development people of both companies together right from the beginning," said Stephen Kitson, Kia's press chief in Britain and a former Hyundai man in Seoul. "He also brought the purchasing people together very early." Product-planning staffs were merged as well at Hyundai's Seoul headquarters, as I recall from my own visits there to consult on product and brand research. The styling teams, however, are separate, each nurturing a separate look for its marque - not without success. Kia's brand is being taken in a "young, sporty and friendly" direction while Hyundai remains more serious.
Thanks to these early co-ordinating actions, said Kitson, less than five years after the acquisition "there are no engines, gearboxes, suspensions and the like that aren't derived from technologies that are shared between the two brands. Our platforms are shared to a 97% level." This is a remarkable achievement in a short period by car-industry standards that gives the enlarged Hyundai Group the opportunity to effect remarkable scale economies.
Importantly, the rapport is excellent between Hyundai's Chung and Kim Yong Hwan, Kia's vice president and chief operating officer. Kim, who was formerly in Europe with Hyundai, is able to lead Kia bolstered by the confidence that Chung approves of what he's doing. The clearest sign of this was the decision, announced at Geneva in March, to put Kia in charge of the Group's new factory at Zilina in the Czech Republic, 120 miles north-east of Bratislava and not far from Poland's southern border. It will give Kia the yearly ability to make 200,000 B- and C-segment cars that will penetrate the heart of the European market.
"Our commitment to Europe is absolutely clear for all to see," said Kim Yong Hwan at the announcement of the new plant. Kia sold 150,000 cars in Europe last year and is aiming for 240,000 this year. By 2005 it would like to have 2% of Europe's car market - a very aggressive goal, considering that Nissan's share today is 2.8%. But the revitalised Korean company has, or is getting, the product to do the job. "We now have our infantry divisions equipped with ammunition," boasted Oh Tae Hyun, Kia's director of export planning.
That Kia is gaining respect in Europe is shown by auto motor und sport's latest survey of its readers. Its findings marked Kia as one of the year's gainers, ranked only behind Skoda and Hyundai in providing a "good price/performance relationship". Germans now put Kia - Kia! - ahead of both Mazda and Toyota in this important category. Findings are good Stateside too. In 2002 J.D. Power & Associates named Kia as the world's "most-improved" brand for new-car quality while in 2003 it was still third on that list and well above average in quality.
Kia's improved penetration has been abetted by its broader coverage of the car market. It had ten new-product launches between 1999 and 2003 and is scheduling 16 in the 2004-2007 time frame. This is bad news for a lot of people, especially the C-class contenders who'll be faced by its JB model set for launch in the spring of 2005. Many of its new designs are brewed in a $62 million R&D centre in Rüsselsheim near Frankfurt, at the nexus of what Kia sees as Europe's most important auto market.
A hint of Kia's new European-honed design smarts is given by its Picanto supermini, its five-door answer to the Opel Agila and Ford Ka. It's built on a new platform that will be shared with the next-generation Hyundai Atos. Autocar was impressed, calling it "a capable, charismatic little motor. One thing's for sure: success or failure, the Picanto will go down as one of the most vital small cars of the year, along with the Fiat Panda and the Cityrover." "Overall the Picanto feels very European," said Automobil Revue, "though it's a shame that we have to wait until mid-2005 for the promised diesel engine." Just providing a diesel in this category will be a big breakthrough for Kia.
At the less-praised end of the Kia scale is its Rio, which Britain's Jeremy Clarkson called "dreadful…something that's not very good, but probably good enough." With its Cerato, launched at the Geneva Salon, Kia expects to be offering a better contender. It's Kia's first model with an optional diesel engine. We can also be sure that Kia's designers are hard at work on better small cars for Europe to be built in its Slovakian plant.
At its top end Kia offers a 4,100-pound luxury four-door that's badged Amanti in America and Opirus in Korea and Europe. Sharing a platform with Hyundai's XG350, "the Amanti whisks together traditional luxury and Asian quality at a ground-ball price," said Car and Driver. "Gosh, the kids grow up fast these days." The value is there too, said Road & Track: "An Amanti in base trim has more standard features than a base Toyota Avalon and it's roughly $1,000 less expensive."
Only one part of the Kia picture could be more rosy. The scene at home isn't the brightest. Last year's home market in South Korea was in recession, down some 18% from 2002. Kia's Korean sales, however, were down by more than 26%. Now backed by GM, Daewoo hasn't obliged Hyundai/Kia by collapsing, and Renault's Samsung is enjoying a revival. Kia has to hope that its increased emphasis on global products won't undermine its appeal to its dealers and customers at home. Just that has happened to some of its Japanese rivals (Mazda and Nissan to name two) in the past.
Now here's something that may give pause. Around 2000, providing as I was guidance to both Kia and Hyundai, I said that it was not too soon to start thinking about the introduction of a premium marque for the group, a new brand at the very top. Positioned as they are to offer value above all, neither Kia nor Hyundai is likely to inspire enthusiasm among buyers looking for a prestige luxury car. What they needed, I said, was a new third brand at the apex of their product pyramid.
The bad news for rivals of by far the biggest Korean car company is that I heard, a bit more than a year ago, that they're starting to put some meat on the bones of my suggestion. If they get it right, a premium brand from Korea could become a very powerful global moneyspinner. And if they don't get it right, they'll try again. That's the Korean way.
- Karl Ludvigsen
The Fantasy that is Alfa Romeo (February 2004)
Alfa Romeo has been touted for years as the brand of the future. Is that future ever likely to materialise? Unless the Italians get their act together, Karl Ludvigsen has his doubts.
When I visited Fiat on a consulting assignment late in 1986, the company was mulling its options in the light of an offer by Ford to take over Alfa Romeo from the state holding company, IRI. The latter, then headed by none other than Romano Prodi, now the grande fromage of the EU Commission, was eager to rid its Finmeccanica arm of loss-making Alfa. Ford saw Alfa Romeo as an attractive way of riding a Trojan horse into the otherwise almost impenetrable Italian market. Although its offer was heavily ring-fenced with conditions, as a Ford friend told me later, the Blue Oval looked like the best candidate to take over Italy's still-glamorous albeit underperforming maker of sporty cars.
"Should we buy Alfa Romeo?" That was the question a senior Fiat man asked me. My answer was unequivocal: "If you can buy Alfa, you have to buy it. Your greatest strength is your domination of your home market. There would be no greater risk to that domination than to let a foreign company-especially an American one-into Italy through an acquisition of Alfa. You have to do it, even if it's more a defensive than an offensive move." As we now know they did indeed acquire Alfa in November of 1986. Since then the saga of this once-great brand has been anything but encouraging.
The acquisition was a culture clash of the first magnitude. Imagine Toyota acquiring Nissan? GM buying Ford? DaimlerChrysler scooping up BMW? Here were two great rivals in their home market, Alfa assuredly the minor player but very proud of his history and the prestige of its brand-perhaps too proud. The two had coexisted quasi-amicably until 1972, when Alfa Romeo aimed an Exocet into Fiat territory with its cheeky Alfasud small car, made in a factory near Naples that was built with taxpayers' money by government-owned Alfa. Here, thought Fiat, not without reason, was unfair competition on its home ground. Though fraught with strikes and absenteeism, the Naples plant produced an attractive car conceived by Rudolf Hruska that was a lively domestic alternative to Fiats and an export success until rust ruined its reputation.
Alfa's acquisition by Ford would have been benign by comparison. Having seized Alfa Romeo, Fiat immediately created a new company called Alfa-Lancia, forcibly marrying the Milan company with its long-time Turin rival, which Fiat had rescued from the breaker's yard in October 1969. Famously there is no love lost between Turin and Milan; each has contempt for the other. And in naming the joint company Alfa-Lancia the proud Alfa Romeo name was mortifyingly subjugated (much like the erasing of Benz from DaimlerChrysler).. When I braced senior Fiat people on this point-as I did-they feigned mystification. They were the conquerors; they could do as they liked.
Fiat Auto's dynamic managing director, Vittorio Ghidella, was named chairman of Alfa-Lancia. In an interview he was scathing about Fiat's new acquisition, briefing a reporter that it was 'in serious trouble because of the strategic error of having attempted to enter the small-car market with its humble Alfasud,' which 'went against the image of power associated with Alfas for more than half a century. Alfa always sold well because of its exceptional performance and aggressive line until mistakes were made in recent years.' Ghidella may indeed have been the man to put things right, engineering some commonality between Alfa Romeo and Lancia over and above the Type 4 project that created the 164 and Thema, but only two years later he was out of the Fiat group after a bitter internal clash over its allocation of resources.
Missing the jet thrust of Ghidella, Alfa Romeo declined into the doldrums. Production had been just short of 200,000 in Fiat's first year, 1987, and rose initially to 220-230,000 through 1990. Then it collapsed, tumbling to half that level in 1993, 1994 and 1996. New models based on Fiat platforms arrived, but with excruciating slowness. Only with the launch of the gorgeous 156 in 1997 did Alfa sales start to recover, with more than 200,000 made from 1999 through 2001. In 2002, however, output declined to 187,437 Alfas. Two thousand and three looks like being worse yet, with output down 5.3 percent on 2002 through November. This is hardly a success story under Fiat's stewardship.
Most mortifying of all must be the negligible market success of Alfa Romeo's prestige flagship, the 166. Its predecessor, the Enrico Fumia-styled 164, made a valiant effort to establish a place for Alfa in the executive-car market, selling a quarter-million over seven years, a decent annual average of 35,000. In contrast, the 166 is muddling along at annual volumes of 8,000 that Autocar called 'pathetic'. When I saw its styling model several years before launch I though the 166 looked far too vague and flabby, and the final version was little better. Now it's going to be facelifted, which Alfa hopes will double its sales. That'll still be an order of magnitude less than the German rivals in its class.
I discussed this and the parallel problems of Lancia with a Roman friend who is highly knowledgeable in the field of auto design. 'I think the reason that the Italians don't do well with luxury cars is that they lack the necessary culture,' he said. Italy has a flourishing culture in small cars and sports cars, segments in which it's among the world's best. But luxury cars? Italians just don't believe in them. They're heavily dutiable and an all-too-visible sign of wealth that attracts the tax man. Italy's finest post-war effort in the luxury-car field, Lancia's Flaminia, struggled vainly against these handicaps. Italy should be able to make outstanding executive cars; Lancia's Thesis shows willing. But her designers and engineers lack a heartfelt commitment to this class of car. That they don't like the people who drive them is all too obvious.
Another handicap for Alfa Romeo is the brand's insularity. All but a handful of its cars are sold in Europe; the rest of the world doesn't exist. Even at that the picture in Europe is not reassuring; Alfa Romeo's share of Europe is a wafer-thin 1.14 percent, down from 2002's 1.18 percent. A key market, Germany, has seen a steady decline from 2001's 25,700 units to 19,000 in 2002 and 15,000 in 2003. It's not easy to prevail in Germany against 'noble' Mercedes-Benz and BMW and 'semi-noble' Audi, as Jaguar has found, but with the right product Alfa Romeo has a brand that could succeed there.
The story of Alfa Romeo in North America is not a pretty one. A friend was an Alfa dealer in Cleveland; in the 1960s he went two years without cars and Milan didn't seem to think that was anything out of the ordinary. Alfa relied on the fact that it had a core of dealers in America who were so dedicated to the marque that they would put up with anything, including indifferent quality and elusive parts supplies. Those days are long gone, of course, now that dealers have been badly spoiled by the Japanese. And the attitude of Alfa's men in America didn't help. 'What's the matter with these Americans?' one grumbled to me in frustration. 'Don't they know this is an Alfa Romeo?' No wonder most of them seemed to be bought by Italian-Americans. They knew what they were.
I breathed a big sigh of relief when I heard that the original plan to return Alfa Romeos to America in 2003 was postponed. In the wake of Fiat's 'strategic alliance' with General Motors in 2000 the first signs were that Alfa would be back in jig time but with a minimal model range, a sure-fire recipe for disaster. It was likely too that Alfas would piggy-back on the GM dealer network, a concept that brought back memories of the ill-fated partnership between Chrysler and Alfa Romeo in the late 1980s. This was a vestige of the failed talks between Chrysler and Fiat Auto that had hoped to achieve an alliance. Against goals of selling up to 30,000 cars a year, the effort struggled to move 8,000. Alfa carried on alone and sold 414 cars in its final year in the States, 1995.
Now the plan is to return to America in 2007 with a full line of new cars that will be launched in Europe in 2005 and 2006. The goal will be annual sales in the 50-60,000 bracket, which should be enough to allow a small and focused network to survive. However, I'm very nervous about the mooted plan to give the Alfa Romeo franchise to Cadillac, Saab and Saturn dealers. Saab might have a fighting chance, but otherwise these are not dealerships that would attract people who'd consider an Alfa Romeo. If the new Alfa range is broad and deep enough-as it threatens to be-and if quality is at competitive levels, its dealers everywhere should be stand-alone outlets backed by people who understand the sporty-car market. They're out there; whether they want to sign on for another exciting ride with Alfa Romeo remains to be seen.
One of the saddest sights in Alfa Romeo's universe is its plant at Arese outside Milan. Once an ultra-modern facility, it's now moribund. Alfas have not been made there since 2000 and even Arese's last production of multi-fuel Fiat Multiplas has been halted. Still on the site are Alfa's magnificent museum and archive and its styling centre, where Walter da Silva established Alfa's latest design direction before being lured away to Seat by Volkswagen. Most of the rest of the site has already been sold to a property developer, who'll tear down the factory to make an 'Alfa Business Park' if and when the courts will let him.
Speaking of Walter da Silva reminds me that when I first met him he handed me his business card. Nowhere to be seen was the handsome Alfa Romeo badge. Alfa, like Jaguar in the bad old days of BL, has been relegated to a business unit. Since then some effort has been made to rediscover the brand's soul. Alfa-Lancia is no more; Alfa Romeo is able to make decisions on its own. Leading that effort is Daniele Bandiera, who has been looking after the Alfa business unit since February 2002. A manufacturing engineer, Bandiera is well qualified to fight for the much higher level of quality that Alfa will need to achieve its goals. The prototypes it has shown, such as its own Kamal and 8C Competizione and Italdesign's Brera, suggest that its new chief designer Wolfgang Egger is leading it in the right direction. A return to rear-wheel drive for the 167, successor to the 166, will be good news for serious Alfa drivers.
Daniele Bandiera must be looking over his shoulder at Luca di Montezemolo, who has made no secret of his interest in Alfa Romeo. The charismatic boss of Ferrari and Maserati envisions Alfa completing a hat trick of companies that would represent the very best of Italian design and engineering. The internationally minded di Montezemolo has forged a technological alliance with Audi that would be very beneficial if rolled out to Alfa as well. Maserati is already providing the power train for a production prototype of the sexsational 8C Competizione that will make its bow at Geneva in March. If priced as planned at £80,000 this sleek two-seat coupe would be a worthy flagship for a revitalised Alfa Romeo.
In this product-led industry, Alfa's plans look good. Will they look good enough to attract the dealers that Alfa Romeo needs? The business unit is planning to invest 200 million euros in dealer development to lift its world-wide network from less than 1,000 dealer principals today to almost 1,100 in 2005. Much-needed upgrading of existing dealers is also on the cards, says Alfa sales chief Roberto Zuccato. He hopes to bring the network up to standard along with the cars. If he, Bandiera and Egger can achieve this, it will reward the commitment of the Agnellis to a former rival and bring a much-deserved boon to those of us who remember and respect Alfa Romeo's salad days. It could even happen.
- Karl Ludvigsen
Karl Ludvigsen at the wheel of a
"Birdcage" Maserati in 1961. Return to Karl Ludvigsen main page