Selling Jeep: why it can’t happen and how it can happen

Analysts and autowriters are falling over themselves yet again to talk about how Chrysler could sell Jeep. Partly that’s just to reuse their old “Daimler’s selling Jeep” stories, I suspect; partly it’s because Mahindra is coming to America, with their own vehicles that share common spiritual ancestors.

As a company, Jeep cannot really be split off from Chrysler. Yes, production is (aside from Patriot and Compass) unique to Jeep; the Dodge Nitro is part of the Liberty production line, but it’s not a major vehicle and could be dropped easily enough. The hard part is the shared engineers and components. Jeep is intertwined with Dodge Truck quite thoroughly. It would take a long time to separate Jeep from Chrysler, not that it couldn’t be done with enough time, money, and focus.

But who would really want (and be able to buy) Jeep? Toyota already has an offroad reputation thanks to the 4Runner and Land Cruiser. Ford has marketed its vehicles as being off road ready, and doesn’t need vehicles that can actually go offroad without major modifications to reap the benefits of their years of marketing. GM is trying to get RID of Hummer completely, buying dealerships to avoid lawsuits. Honda rarely buys anything they didn’t invent.

Wall Street seems to think Mahindra or Fiat will buy Jeep - but why would they? Mahindra makes Jeeps already… perfectly suited to their market and far better suited than Jeep itself to higher gas prices. Fiat… they’d be nuts to go into an area so far from their home turf. But analysts don’t think like that; after all, they were very happy with Daimler ruling over Chrysler until the end. (See our earlier Wall Street blog.)

There is one possibility, though.

A more than usually knowledgeable reporter pointed out to me that the Jeep name could be sold without actually selling Jeep. Say Mahindra were to pay, say, $400 million for the name, which has a global reach. Mahindra has the products; they don’t have the name recognition outside of India. They could perhaps buy the Wrangler plans and plants; or perhaps not. It would not really be needed. Chrysler could simply drop the Wrangler and its unique platform, close down another factory (something which analysts always like). The Patriot could be renamed, the Caliber and Compass merged. The Liberty would be dropped and anyone who wanted one would be steered to a Nitro until the factory could be shut down. Finally, the Grand Cherokee is supposed to merge platforms with Durango anyway; so the name could be dropped and Durango would carry the torch. Chrysler would then have just two brands, with Dodge being its Toyota and Chrysler being its Kia.

It’s possible. It’s still not likely, but it’s possible.

Chrysler falls to #12

Chrysler Corporation in 1998 was ranked among the world’s largest automakers, though most of its sales were within North America (around 200,000 sales were outside the U.S., Canada, and Mexico).

For the first six months of 2008, Chrysler was #12. Toyota has a comfortable lead in the top spot, followed by GM, then Volkswagen, and then Ford.

Suzuki, a minor presence at best in the United States, made more vehicles than Chrysler, in the first six months of 2008.

Given that Chrysler was on an upward trend in profits and vehicle desirability, in both cars and trucks, before Daimler arrived with promises of international sales, expensive technologies, and bags of cash for hard times, the blame can be laid less on Chrysler’s foresight and more on Daimler’s abuse of a once great institution.

Lest we forget, Chrysler saved many lives during World War II by engineering and building highly reliable tanks - making its quota nearly every month, and in many months making up for the production deficits of other companies - as well as increasing the reliability of aircraft engines. They did all this while giving rebate checks to the government when they spent less than they expected to. That’s not even mentioning their contributions to the atomic bomb and rocketry.

Now is the time for investment in the future - the kinds of investments made in the early 1990s, which resulted in the 1993-98 renaissance of Chrysler Corporation. Does Cerberus have what it takes, or will they be happy to have Chrysler a niche player, pretending to be a full-line automaker by restyling other manufacturers’ cars? Will Chrysler be allowed to play to its strengths, or will it buy engines and transmissions from others?

Only time will tell.

Optimism in Auburn Hills

Much has been said about the various cutbacks at Chrysler, some seeming more intelligent than others. We’re just now seeing 1,000 workers, including numerous engineers and testers, being let go even as Chrysler has a dire need to improve existing product and develop new vehicles. Leasing has just gone out the window at Chrysler Financial. I could go on for a while, but here’s what gives me the feeling that the leaders and owners are highly optimistic for the future.

The Journey is not a barnstormer, and most PTs sold are now base models. Avenger and Sebring are slow sellers despite the move to four cylinder vehicles and smaller cars in general. Likewise, the Patriot, Compass, and Caliber all combined are not pushing the limits of the Belvidere plant by any stretch of the imagination. Someone must have suggested, at some point, either shutting down Toluca and moving the Journey to Sterling Heights, or moving the Avenger/Sebring to Belvidere, or… you get the idea. Between those three plants, one could be shut down without much disruption, if production was expected to continue at its current pace. What’s more, at current sales rates, one of the two large van plants and one of the two minivan plants could be closed without any particular impact. One does wonder whether that was the real reason for closing out the Pacifica, or whether the Pacifica was sacrificed for the Volkswagen minivan.

Newark and Conner Avenue are being closed or sold, but that doesn’t mean much. The Durango/Aspen doesn’t sell well enough for its own plant, and if it moves onto the Grand Cherokee platform, the three could all be built together on one assembly line (four if we include Commander).

However, Chrysler has not announced any further cuts, but have single-shifted or double-shifted rather than triple-shifted these plants. That indicates to me that they expect the Phoenix and automated manual transmissions, VCT Hemi, 2009 Ram, Cummins V6/V8 diesels, and other developments, coupled with the foreseen rise in demand around 2010, to make it worthwhile to keep the plants open.

Bug reports

It’s been a rough week or two in terms of hardware and software bugs.

I tried to upgrade an old installation of phpwebsite, and found that the developers left no documentation for upgrades, no upgrade path, and no explanation of an error message that, in the end, turned out to be from having php4. The developers have such contempt for people with “outdated” servers that they didn’t bother making an appropriate error message or even checking for the right php version when starting.

I used the latest versions of Microsoft Office. I don’t think I really need to say much more there.

I tried to make an animation on Photoshop. I gave up. The documentation is absurdly poor and the methods … strange. I had a great animations program a while back and I’ll have to run it on my kid’s computer (it’s old enough that it won’t run on my computer any more) if I want to make an animated GIF without going insane.

We finally got Verizon’s router working right - I think - though the tech could have mentioned along the way, “By the way, all your filters and settings will get wiped out by this.” I tried to switch from MSN to Yahoo with my Verizon account but the system doesn’t work quite right.

Sometimes, there was a way to register bugs. SPSS has an easy bug registry; so does OpenOffice though many bugs are dismissed with “What you want is wrong, anyway.” Good system, bad attitude (open source!!!) phpwebsite… is a mess in terms of any user relations. Lots of old, outdated documentation and nothing for the current versions. I think. They talked about release 10 and I was trying to install 1.52.

Meanwhile, every time my wife tries to use Allpar, she ends up frustrated with the navigation and orders me to change something.

So… I’m changing something.

You can now file bug reports at http://www.toolpack.com/allpar/bug-report.php — and if I get overwhelmed or overspammed, I’ll install a serious bug tracking system.

We’re here for you.

Wall Street is weird (big surprise?)

Some years ago, a company called Chrysler Corporation was valued at under $4 per share. The highly paid analysts didn’t think much of its future, and common wisdom was that its lineup of aging cars and unpopular trucks would end up slowly disappearing.

At that time, I had a copy of the press book for the LH series, and thought the stock would skyrocket. I didn’t have any money to spend then, but the stock did soar. First, the New York Times had to print a huge feature on the upcoming cars and how they would revolutionize big cars. Then the stock shot up. Those wealthy analysts who were paid to know the depths of the industry apparently had missed the upcoming Intrepid - though I, a humble writer of the odd truck review for Army-Navy Store and Outdoor Merchandiser magazine, knew about it.

Then of course there were the perennial “Apple will declare bankruptcy” articles, culminating in Michael Dell’s comment that Apple would best serve its shareholders by liquidating. Okay, we had some rough times until the Second Coming of Jobs, but here’s a little clip from today’s edition of the excellent on-line publication Macintouch:

[Apple] posted revenue of $7.46 billion and net quarterly profit of $1.07 billion, or $1.19 per diluted share. … International sales accounted for 42 percent of the quarter’s revenue….
Apple shipped 2,496,000 Macintosh computers during the quarter, representing 41 percent unit growth and 43 percent revenue growth over the year-ago quarter. … “We’re proud to report the best June quarter for both revenue and earnings in Apple’s history,” said Steve Jobs, Apple’s CEO.

Oh, and the analysts? Until the iPod set records, most of them were down on Apple, too. Apple was soon to declare bankruptcy for years. The same story was run about Ford, General Motors, and Chrysler, even now that Chrysler is owned by some of the richest men in the world, men who I suspect would not hesitate to bankrupt tens of thousands of people at once, but who I also suspect would prefer not to publicly admit making a huge mistake. Not that they did — I believe they knew what they were getting, and they know there’s huge profits in there somewhere, someday.

Most recently, General Motors was down in the gutter. One analyst dropped expected share prices from $27 to $7 in one day. Do these guys just make things up? The result was GM’s share prices dropping rather quickly. None seem to care that GM is investing in its future across the world, rationalizing its engineering to avoid duplication and bolstering its international presence. GM is working hard to get into emerging markets in India, China, and Russia, and I suspect they’ll succeed. The company is still turning around, perhaps despite its CEO, and probably thanks mainly to Bob Lutz.

And what of Rick Wagoner? Well, the market showed no response when he took his full 2007 compensation, which as I recall was around $24 million. It did, however, shoot the stock up by an amazing $6 a share - going back over the $10 line - when Wagoner announced that he’d slash lots of other people’s salaries and jobs. Oh, the analysts love it when you slash. Their favorite movie must have been Friday the 13th or the Texas Chainsaw Massacre. Slash and burn, they never learn. Back in the 1990s, GM slashed jobs too; while Chrysler invested heavily. You know what their pick was - but you also know who won the huge profits a few years later.

One of the scary news items today was the Federal bailout of Fannie Mae and Freddie Mac. The same people that objected to - and still object to - the government’s loan guarantees to Chrysler, which saved at least 100,000 American jobs and was in some ways the least the government could do after Chrysler saved billions of dollars in World War II, refusing to profit from patriotism - these same people are bidding up the stock market and approving of the bailouts. They still don’t want GM or Ford to be bailed out; they love to predict bankruptcy for what they see as the rusty relics of years past. But given them some paper-pushers who made a bunch of bad bets, and they’re all for spending a few billion taxpayer dollars. After all, it’s not much more than a little slice of Iraq war, right? Now, Obama’s ideas about putting $5 billion towards Detroit automakers to help them survive their own bad decisions… that’s just plain wrong. But $25 billion or so towards a bunch of bankers (or up to $1 trillion, depending on the source), now, that’s a great idea. It might save, um, actually, nobody has told us why we’re doing it, exactly. Apparently we need a cheap source of junk mortgages.

Congress is going ahead, full steam, with rescuing Fannie Mae and Freddie Mac, and the White House loves the plan. But then, Congress is probably relying on the analysts’ advice. Perhaps we need a new Congress and White House that have more perspective - and don’t assume that financial institutions deserve our hard-earned dollars while ordinary Americans (or big automakers that hire ordinary Americans) should be subject to the free market.

We need changes to our system - now. We’ve been ignoring reality too long, in Washingon, Detroit, and New York - and in all those places where people keep their eyes shut to reality and listen to the siren songs of the “experts” and “populists.”

Electric vehicles might avoid an electricity shortage

You read that headline correctly.

Utilities are in a tough spot, financially, when it comes to new power station. Generating stations are expensive and risky. Choose the wrong technology and you could get into trouble for it. Build a power station and if the demand doesn’t materialize, shareholders will call for blood. Especially if it’s a nuclear plant - those most expensive of powerhouses.

The problem is that power demand is not consistent. Commercial users tend to demand energy during the day, which is also the peak time for air conditioning during the summer as people fight the heat. During the winter, demand plummets. The result is that power companies have tremendously expensive assets sitting around idle, or nearly idle.

One solution is conservation, giving customers incentives to cut their power usage or to move it to the night time (which is why daytime power for industry is far more expensive than night-time power in many areas). That both avoids the need for new power plants and evens out usage a bit. Some utilities sign agreements with customers that cut their power levels slightly during peak times, a voluntary brownout which leaves most appliances working but still saves some energy.

But the ideal, as far as utilities are concerned, is probably simply having more capacity, but using it all the time. That’s where electric vehicles come in, and is no doubt the reason why 30 utilities are working with GM on plug-in cars. Having thousands of those things charging overnight would be a great boon to power companies that want to keep their expensive power plants operating at capacity both day and night, rather than running at capacity for nine hours and then dropping dramatically - or, worse, running peaking plants (generators that only run at peak times - sometimes the oldest, least efficient, and dirtiest ones) during selected days and having them sit idle for the rest of the year.

Some automotive writers have gotten nearly hysterical over how electric cars will destroy the electrical industry and cause widespread blackouts. In fact, as with many things hysterical auto writers claim, the opposite may be true. We may find that power companies are encouraging their customers to buy electric cars, on the condition that they charge them at night. Then the power companies will happily go out and build the new generating stations they’ve been coveting, perhaps even getting together to add the odd nuclear facility, now that there’s a way to pay for it.

After all, wouldn’t you prefer a nice, steady, year-round demand for your expensive new generator, over the possibility that you’ll only be able to use it during the day, for twenty days a year?