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Tuesday, January 10, 2006 

Vol. 2 No. 3

The Blunders that Car Guys (and Gals) Do

As we look back on 2005, I refer again to one of my favorite Automotive News issues (January 2006) this year and offer some commentary on the missteps in our industry of 2005. Here’s hoping we all avoid our own in 2006….

Top Ten Big (Automotive) Blunders 2005

  1. “Now everybody’s mad” – In early December, due to “cost cutting” according to Ford Motor Co., the company decided to stop advertising in gay and lesbian publications in 2006, just after meeting with the American Family Association that threatened a boycott if it continued support. Then angered gay and lesbian advocates had their own meeting with Ford, and two days later Ford said it would run corporate ads in gay and lesbian publications. The American Family Association said the next day that Ford had broken an agreement and a threatened boycott was back. How to lose friends and offend everyone?

  2. “Just desserts?” – Two days into Kia’s celebratory national dealer meeting, at the closing dinner, Kia Motors’ Korean owners fired U.S. CEO Peter Butterfield, and not very nicely…Butterfield was escorted from the dinner and fired in a nearby meeting room. All of Kia’s numbers were up with Butterfield, but supposedly the Korean bosses were afraid that Butterfield, an American exec., was taking too much of the credit…really, the top guy taking credit for company success in the car business, how unexpected.

  3. “Kirk’s bad bet” – Kirk Kekorian’s Tracinda Corp. paid $1.7 billion for 56 million shares of GM in 2005, acquiring a 9.9 percent stake at about $31 a share. In December, Kerkorian sold 12 million shares for roughly $21 a share, to take advantage of tax savings stemming from his investment losses. Kerkorian’s remaining stock is down about $500 million in value…but I guess you can do that kind of stuff without regret when you still have multiple billions?

  4. “A bridge too far” – Nissan’s Titan pickup truck ad, “Pied Piper” showed a bunch of heavy trucks following a Titan towing a boat. Nothing controversial there, but when the background music chosen was, no fooling, the theme from the 1957 movie The Bridge Over the River Kwai, the film set during World War II that focused on British prisoners of war forced by brutal Japanese captors to build a railway bridge, it raised quite a few eyebrows, and the commercial was redone with a different sound track. Why it’s probably a good idea to always have some “grey hairs” among the young hot advertising execs?

  5. “Brickyard blowout” – Two thirds of the racing teams set to run in the U.S. Grand Prix in Indianapolis on June 19 decided at the last minute not to participate, citing their concern about the safety of Michelin tires after faulty tires were discovered during weekend practice. Only six cars ended up participating, and as “a gesture of goodwill” Michelin reimbursed 100,000 fans the cost of their $100 race tickets and will be donating 20,000 tickets to next year’s race…but odds of winning were historically good for the six who “dared.”

  6. “The damage done” – In March, at a trade conference, Robert Lutz, General Motors Vice Chairman, incited an already nervous dealer body into an uproar when he was quoted in the press as calling Buick and Pontiac “damaged brands.” It didn’t matter that his full quote was, “Buick and Pontiac are both damaged brands that have suffered from years of harvesting with very little reinvestment. And that’s what we are trying to correct with an exciting array of new products”…hardly a death call, but somehow the press only caught on to the first sentence…I wonder why?

  7. “Class warfare” – Right after Delphi CEO Steve Miller made a case for obliterating the UAW wage structure after filing for Chapter 11, and asking the union to take up to 60% in wage cuts, he asked the bankruptcy court to approve a retention bonus structure for 500 top managers and executives with a potential windfall payment of about $500 million – needless to say, the union cried foul…and Miller decided to work for $1 this year, but kept his $3 million signing bonus…Seems to me that when Steve worked for Chrysler when it went through its first financial crises, and new CEO Lee Iacocca agreed to work for $1, there were no signing bonuses – apparently $1 was really $1 way back in those days.

  8. “The people’s party” – Klaus Vokert, the Chairman of Volkswagen works council in Germany, and the head of Volkswagen human resources, Peter Hartz, both resign over the “VW hooker scandal.” Seems German prosecutors are investigating charges that top Volkswagen labor union officials traveled around the globe and attended lavish parties complete with prostitutes paid for on the company tab. Kind of adds a new meaning to the word “fringe benefits” for labor, doesn’t it?

  9. “Slow go from China” – Old Malcom Bricklin is at it again. He’s the guy who scored big co-founding the company that imported Subarus back in the seventies, and has had many wild (though hardly successful) ventures in the car business since, has talked up his “imminent” plans for selling Chinese made cars through his own recruited dealer network. Bricklin’s “Visionary Vehicles” has pledged $200 million for a proposed joint venture with Chinese auto manufacturer Chery (sp?) Automobile Co., where the money would be used to design their vehicles for export to the US – the problem is the pledge only turns into reality when Bricklin sends the cash, which depends on the dealer network, which seems more unreality than reality…Seems every few years Bricklin comes up with a new colorful auto scheme that makes news for a while but never goes anywhere, but it’s fun to read.

  10. “GM’s Italian Divorce” – Another footnote to the “GM has had better years front,” GM spent $2 billion to buy its way out of the “put option” Fiat had for GM to buy its ailing Fiat Auto unit in 2005; but GM insists its five year association with Fiat gave them more value than the $4.4 billion in cash it cost them to get in, and then out, of the deal. I guess you really couldn’t expect them to claim anything different, right?

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