The CarGurus Blog

The history of Cash for Clunkers offers a prime example of how Congress can make a total mess of a good thing. The Clunkers bill, which we described last week, demonstrates a history of special-interest pleading, unworkable and undesirable regulations, and political maneuvering—finally becoming tied to a $106-billion supplemental to fund the wars in Iraq and Afghanistan.

Sen. Diane Feinstein (D-Calif.) originally proposed Cash for Clunkers in January as a bill to promote fuel efficiency and environmental goals. Funny thing how the standards got rapidly watered down, and suddenly the bill was transformed into a “save the auto industry” effort by some Michigan lawmakers. The Detroit News and other major media now refer to it as a “program to spur new-car sales.”

People noticed that the bill would enable you to buy a new 16-mpg Hummer H3T in the light truck category and get a $3,500 voucher, because the mileage mandates got lowered. Others talked about how the bill would encourage scamming the dealers, buying up voucher specials, junking perfectly roadworthy cars, and so on.

In the Senate, Judd Gregg (R-N.H.) says that $85 billion in taxpayer assistance to the car companies is enough and, along with most Republicans, will try to get it removed from the supplemental war funding. (This is the first, maybe only, time I’ve found myself siding with Judd Gregg.) But wait, there’s more.

With the Democrats in power doing all these good things for everybody, maybe they’re banking on the fact that people won’t notice. But when Rep. Barney Frank (D-Mass.), right, calls up Fritz Henderson of GM to get a stay of execution for a parts dealership, anyone can detect the odor of influence.

Sen. Jeff Merkley (D-Ore.) pressured Chrysler to keep local dealers open; the company agreed to buy back 100 percent of dealer inventories. Rep. Ted Poe (R-Tex.) maintains that Democrats have deliberately shut down Republican-owned Chrysler dealerships. And so it goes.

The Congress seemingly can’t keep its hooks off the auto industry. “Well, we’re just supporting our constituents,” they claim. Yet President Obama pledged to keep the government out of the auto business, and maybe it’s high time that he speak for his constituents – that is, the rest of us.

How can Obama keep Congress from interfering politically in the operations of GM and Chrysler? Or is he powerless to do so? Tell us what you think.

—jgoods

Car Industry News, Car Minded, Car Politics, Domestic Cars, Gas for your car..., General Chat

CarGurus survey finds almost half (44%) of respondents want Pontiac to survive GM’s downsizing, and a quarter want Hummer. Few consumers care about Saab or Saturn.

CAMBRIDGE, Mass., June 15, 2009 — CarGurus®, a leading online automotive community, today announced the results of its latest survey of 1,693 online automotive consumers worldwide. When asked which of the four GM brands they want to survive planned elimination, forty-four percent of respondents selected Pontiac, and 27% chose Hummer. Saab was chosen by 20% of respondents, and Saturn by only 9%.

“Pontiac has a trailblazing heritage – the 1964 Pontiac GTO is widely credited with starting the muscle-car craze – and its current G6 is the 20th best-selling car in the U.S., so I’m not surprised to see consumers vote to save this historic brand,” said Langley Steinert, CEO of CarGurus. “What did surprise me, however, was the relative popularity of the Hummer brand over that of Saab and Saturn. The Saturn Vue, for instance, is a top-50 best-selling car in the United States, while Hummer’s best-selling model – the H3 – ranks 153rd. I would have expected Saturn to be the other brand consumers wanted to see survive GM’s reorganization.”

Survey Results

Across the CarGurus Network, 1,693 respondents answered the question:

About CarGurus LLC

Located in Harvard Square, Cambridge, MA, CarGurus LLC is a leading online automotive community founded by Langley Steinert , formerly Chairman/co-founder of TripAdvisor LLC, the 3rd largest online travel site in the world. CarGurus’ founders, board, and investors bring a wealth of experience from such leading web companies as TripAdvisor, eBay, Expedia, and Yahoo. For more information about CarGurus, visit us at www.cargurus.com.

CONTACT: Steve Halloran, Editor, CarGurus LLC
617-354-0068, x12
press@cargurus.com

Car Minded, CarGurus Features and Updates, Classic & Vintage Cars, Domestic Cars, General Chat, Trucks & SUVs

The future of Saab if it winds up in Wyoming?

As General Motors explodes and sends pieces flying all over the world, we’re closely watching where those pieces are landing.

As we mentioned earlier, Hummer flew all the way across the world and landed in China. Saturn landed on Roger Penske’s racetrack. Pontiac was blown to smithereens.

Saab is still up in the air, with suitors in Sweden and New York trying to catch it. A third player has also been rumored to be in the running, but up until now no one knew who they were or where they were from.

Now we know: Contender #3 is an investment firm in Wyoming.

Yes, go ahead and keep laughing; I’ve been chuckling for about an hour. Saab in Wyoming makes Hummer in China seem like a natural fit. Wyoming is the one state the U.S. could probably sell without anyone noticing. If there were a polar opposite of Sweden, Saab’s current home, it would be Wyoming. Sweden has Stockholm and beautiful fjords. Wyoming has Casper and a lot of dirt.

I’d say the odds of Saab arriving in Wyoming are as remote as the state itself, considering the other firms trying for Saab are Sweden’s Koenigsegg, the sports car maker, and an investment firm in New York City.

Of course, we’ll be sure to let you know where Saab ends up, but we’re curious: What do you think the future of Saab holds?

-tgriffith

Car Industry News, Car Minded, Domestic Cars, Foreign Cars, General Chat

When I saw our post on yesterday’s sale of Hummer to the Chinese, it was the photo in particular that gave rise to the following thoughts. One, the Chinese are welcome to it. Two, the car shown is a bad joke. Three, the size of the model’s legs indicates she needs a Hummer. Four, some people can never get enough of these cars.

Now comes a report on another, larger, more blood-curdling military-type vehicle called the Knight XV (above). Produced by a Canadian firm, this luxury armored vehicle, based on a Ford F-350, can “comfortably seat six professional basketball players.” Good to know, but what about the rest of the team? The thing is 19 feet long, weighs 5-1/2 tons, and makes the Hummer look, well, petite.

This fascination with military knock-off vehicles is not only an expression of macho, supremo-maleness. Two years ago, I was having dinner in an Italian restaurant in New York when six drunk, attractive young women emerged giggling from a private party, piled into a long Hummer limo, and sped off into the night. The Chinese seem to like doing weddings in Hummers, too.

For the company’s buyer, Tengzhong Heavy Industrial Machinery, congratulations are certainly in order. The news was spread all over Chinese papers yesterday. No price tag was announced, and the deal should close in September. One of the papers, the Shenzhen Evening News shown below, also announced in an unrelated development that

three batches of Red Bull drinks tested positive for cocaine in Hong Kong. The density of the dissolved chemical was 10 times greater than what was discovered earlier in Taiwan, but is still harmless, according to Hong Kong authorities. However, a second round of tests conducted yesterday in Hong Kong found no traces of cocaine in Red Bull, the government announced today.

If the Chinese build cars as well as they do drug testing, we’re all in trouble.

Which would you rather have: a Hummer, a Knight XV, or cocaine-laced Red Bull?

—jgoods

Car Industry News, Car Minded, Domestic Cars, Foreign Cars, General Chat, Trucks & SUVs

A Hummer modified in China at the 2008 Auto China show in Beijing

Some Americans may not be comfortable with the idea, but China is a force to be reckoned with. And now it might even save about 3,000 American jobs.

General Motors has a tentative agreement with Sichuan Tengzhong Heavy Industrial Machinery Co. of China, which plans to purchase Hummer. If the deal goes through, the new owner of Hummer would contract GM to continue building the Hummer H3 and H3T at their Shreveport, La., plant at least through 2010. 

That move, along with saving dealership jobs, would save thousands of manufacturing jobs. It’s hard to find fault in a sale that benefits newly bankrupt GM and saves American jobs.

Even so, it’s hard to look past the irony of an iconic American military-vehicle-turned-civilian-SUV being owned by a Chinese company. We might as well sell the New York Yankees and our patent on apple pie to the Chinese government, too. 

What I’m having trouble understanding is how Hummer’s new owner intends to make money. Hummer’s sales dropped nearly 70% in the first four months of this year, and I’m not sure Chinese ownership is a change that will lend itself to sales improvements in this country.

Maybe that’s the point, though. GM has had success with Buick in China, and maybe Sichuan Tengzhong plans to do the same with Hummer. If that’s the case, it’s probably only a matter of time before Hummers will be shipped with the words “Made in China” engraved into the sheet metal. 

I guess I should just quit complaining. An Indian company owns Jaguar, and now a Chinese company will likely own Hummer. Maybe it’s time for a U.S. company to buy Kia and complete the circle in this bizzaro new world. 

Will Chinese ownership of Hummer be good for the brand?

-tgriffith

Car Industry News, Car Minded, Domestic Cars, Foreign Cars, General Chat, Trucks & SUVs

Let’s see, GM has three weeks until it must pony up a plan for saving itself to the Feds.

That means getting concessions from the UAW on: wages and work rules, paying for retiree health care, and bickering over planned job cuts and plant closings. There will be bickering not just with Ron Gettelfinger, but with the Canadians: The CAW was told by its government on Thursday to negotiate a new deal with GM.

And the deadline also means getting bondholders who hold $27 billion in GM debt to settle for a minority 10 percent stake in the new company. They want a majority stake, but Treasury won’t buy that. Moreover, there’s the small matter of the company’s cash burn rate. It plowed through $10.2 billion in the first quarter of this year, worse than some analysts expected.

The prospect of bankruptcy in turn creates an impact on sales, which are dismal. GM has to figure out how to move product, eliminate or sell brands, and close hundreds of dealerships protected by state laws—all in three weeks. Oh, and let’s not forget, it also has to negotiate a deal with Fiat to sell Opel, plus get rid of Saab, Hummer, and Saturn.

We have a cascade of really difficult scenarios, all playing out at once. I have a hunch that if GM could get the bondholders in line, some or most of the other problems might get resolved, but the probability of that happening is remote. So bankruptcy looms, as Fritz Henderson acknowledged in his online press conference this morning.

He got some puffball questions about how good the company’s cars are and put off most of the hard ones (which he more or less had to do):

I understand the concern and quite bluntly fears that people have today. We will need to take further measures in this area to lean out our management structure and simplify the work of our salaried work force, which will mean we need further moves. I anticipate communicating our plans in this regard by the end of this month.

I don’t know if it’s good or bad news, but it was also reported today that GMAC, the financing arm for GM and now Chrysler, could receive up to $7.5 billion more from the Treasury in TARP funds. This bank still looks like a big loser to many people, and though it will still need more money, don’t look to private investors.

We can all remember the wretched onslaught of TV ads from Ditech, the noisy online lender that was absorbed into GMAC and contributed mightily to the current mortgage mess. If the government wants/needs to fund the GMAC enterprise, whose failure would cause real systemic problems, they are welcome to do so.

GM stock was selling at $1.46 at 1:30 pm today.

Do you think GM will successfully emerge from bankruptcy? How?

—jgoods

Car Industry News, Car Minded, Car Politics, Domestic Cars, General Chat

Hard for me to believe, but Roger Penske is 72 (which puts him in my age bracket), and the man is still larger than life in the automotive world. After a career in everything from Formula 1 racing to buying and selling dealerships, “The Captain,” as he is known, is now fishing for Saturn from The General.

As we reported, GM has put Saturn on the block, along with Hummer and Saab, and if a proposal is made, it must be by June 1. At least two dealer groups have shown interest in the company. But why should Saturn be attractive to the man who has everything, including a very successful Indy car team?

As detailed by Steve Parker, it’s because the way to make money in cars is with independent distributorships, and Penske has the second-largest U.S. dealership group.

Usually the car-makers control the distribution of their cars and trucks to their dealers, but there have been several independent distributorships operating between some import car-makers and their US dealers, left over from the days when the imports couldn’t afford every step of making the cars, shipping them to the US and then getting them to dealerships.

Some of these distributors, including JM Moran, also known as Southeast Toyota Distributorships, still get the cars from the plants, the ports and the parking lots to the dealers and make billions in doing so.

There’s also talk that Penske may team up with Nissan-Renault, whose U.S. sales are way down (36 percent) this year, to produce cars rebranded as Saturns for sale in Saturn showrooms. On a larger scale, this would be like what he has done with Daimler’s smart fortwo. Penske Automotive has 310 dealerships in the U.S. and U.K.

The Captain, of course, also runs a truck leasing business, understands shipping and logistics, and did a famous turnaround of Detroit Diesel in the ‘80s. Most people think he would be the right guy for the Saturn challenge, since he knows the auto biz better than just about anyone.

Do you think Saturn should survive—either as a standalone brand or a dealer network?

—jgoods

Auto Racing, Car Industry News, Car Minded, Domestic Cars, Foreign Cars, General Chat

I suppose this had to happen at some point.

Creating a Hummer that gets 100+ miles per gallon is a huge public relations story for the company that has managed to build one. And bloggers love to jump on the story and say that a Hummer can kick a Prius’ butt. 

Raser Technologies unveiled their Prius-kicking Hummers (an H3 and H3 SUT) at this year’s SAE World Congress in Detroit last week, and I have to admit at first glance, the technology is impressive.

Raser customized their H3 with a system similar to that in the Chevy Volt, which runs for the first 40 miles on pure electricity, then uses a gas engine to generate electricity for driving up to 400 miles on one tank. Drive 50 miles per day and this H3 will return 185 miles per gallon. Driving 200 miles or more drops the mpg to 33 (still about double the mileage of a gas-powered H3). 

It’s pretty obvious that Raser is proving a point by creating a Hummer, the epitome of gas hogs, that can run virtually gas-free on daily commutes. They might even be hoping to secure a licensing deal by impressing the bigwigs at the Big 3 and proving that the technology for extreme efficiency in trucks and SUVs does exist.

I do have doubts that an electric Hummer can maintain the legendary towing, off-road, and all-weather capability of its gas-powered counterparts.

But…

If electric Hummers were available that had the same capabilities as gas-powered versions, would your opinion about the brand change?

-tgriffith

Car Accessories, Car Industry News, Car Minded, Car Shows, Domestic Cars, Gas for your car..., General Chat, Hybrid Cars, Trucks & SUVs

The New GM Plan
GM put forth its latest (maybe last) plan for restructuring at Fritz Henderson’s press conference this morning. Both Pontiac and the jobs at 13 factories will be phased out by 2010, he said, and Treasury would own at least 50 percent of the company.

1968 Pontiac GTO

When asked how he felt about this kind of government control, Henderson responded, “I’m a believer in dealing in reality. We’ve gotten great support from the Treasury. It has viewed this matter from day one as a kind of private equity investment. It has pushed us in a lot of ways.”

Throughout, the CEO was forthright and responsive to questions. You can watch the whole thing here:

The big challenge, he acknowledged, was the debtholders, who have so far balked at the settlements offered. GM now wants them to accept a debt-for-equity deal that would give them 225 stock shares for every $1,000 of bondholder debt. In the end, this translates to a 10 percent equity stake (the $27 billion of GM debt exchanged for $24 billon). The U.S. and UAW would divide the remaining 89-90 percent, with probably 39 percent going to the union and its VEBA fund.

Bam: Take that, bondholders, and if you don’t, you will probably do worse in bankruptcy. Fritz indicated that even now he thinks bankruptcy is probable if the bondholders can’t come to terms.

Saturn and Hummer will be out in 2009 (talks with the Saturn dealers are going on, as we reported earlier), 2,600 dealers will go, plus the 21,000 workers by 2011.

There will be cries of anguish, mostly about Pontiac, but it was always a niche brand, and GM never followed through on marketing the few good cars they make.

Chrysler’s Predicament

2010 Dodge Challenger

Now, from Slate’s Matthew DeBord comes an excellent summary of the situation faced by Chrysler’s bankers and the government’s strategy of hardball in the game of “bankruptcy chicken,” as he calls it. He thinks a Chrysler partnership with Fiat looks likely, and the UAW, pending a membership vote, has agreed to cut its benefit trust fund in half (taking half in stock).

This leaves Chrysler’s bankers and their $6.9 billion in secured debt, on which they have been exceptionally reluctant to take a haircut. The government’s proposed terms have been rough: sacrifice $5.4 billion and take a 5 percent ownership stake. The debt holders want much more, but on Friday they signed onto the Fiat deal and abandoned efforts to get the Italian carmaker to kick in money.

As DeBord points out, there is no little irony in Treasury’s strategy. It’s trying to leverage the investment, meager as it was, it already made in Chrysler and the $6 billion the company will get if the reconstruction deal gets done—it’s playing this deal like the investment bankers themselves.

They have three days to do it.

Which company do you think will make it through without bankruptcy—GM or Chrysler? Could it be both?

—jgoods

Car Industry News, Classic & Vintage Cars, Domestic Cars, General Chat

Jay Leno writes a column for Popular Mechanics that you may have read, especially if you have an interest in classic or collectible cars. In addition to his comedic talents, Jay is of course one of the great car enthusiasts, and his thoughts are always worth reading. For the May issue, he talked about what makes cars collectible and which ones might be valuable in the future.

The gist is:

• Buy cars you like; don’t buy them as an investment.
• Buy cars that are simple, like the original Miata; technically innovative, like the first Prius; or styling breakthroughs, like the first-generation Taurus.
• Buy styling goofs, like the Aztek, or popular “nerd cars” like the AMC Pacer and Gremlin.
• Buy cars that will generate nostalgia: the Cadillac CTS-V with standard 6-speed, or the Hummer (“the ’59 Cadillac of 2025”).
• Avoid all newer Ferraris, which will cost you an arm and a leg to repair.

1988 Buick Reatta

Now we’ll add our two cents. First, don’t just jump in, but get smart about the car collecting field and investigate current values. It’s easy to get burned.

There are lots of online and print resources you can rely on—e.g., blogs like Duffy’s Collectible Cars, print mags like Hemmings Motor News, Automobile Quarterly, and Collectible Automobile, and sites with pricing info like NADA’s Classic Car Pricing, which gives data on collectibles, special interest cars, exotic and muscle cars, etc. Listed are cars from Alfas and Allards to Zimmers.

1990 Mazda Miata

Implicit in Jay’s advice is another admonition: Buy newer cars and wait for the value to accrue. Unless you’ve got lots of cash, leave the early Cobras and the Packards to the pros. The collectible market is like any other: Right now, it’s mostly in decline, except for the really high-end cars, but that doesn’t mean it’s a bad time to buy. Here’s one collector’s list of collectibles over the past 25 years.

Trust your instincts and your research!

Have you ever bought a “collectible car,” either because you loved it or because you thought it would appreciate? Tell us about it.

—jgoods

Car Magazines, Car Minded, Car Shows, Car Site Review, Classic & Vintage Cars, Domestic Cars, Exotic Cars, Gas for your car..., General Chat, Hybrid Cars