The Case for Kia

While the rest of the automotive industry struggles, few have noticed the bright spot in the business - Kia, and its corporate parent, Hyundai.

Sales are up dramatically, but more importantly, both Kia and Hyundai are producing high-quality, stylish and relevant cars.

In the last few months, Kia has introduced the Soul, targeted at the youth market, to many positive reviews. It's a well-made, inexpensive small car with character, well-suited to customization and sure to draw attention. Kia is trying to out-Scion Scion, and they may just do it. On top of that, they've come up with a clever, catchy ad campaign that incorporates music that is getting people's attention, too.


At the same time, they replaced the Spectra with the Forte. The Forte has an impressive feature list, a good looking design inside and out, and a very competitive price. Up against perennial winners like Civic, it shows quite well. And the good-looking coupe version (Koup, in Kia-speak) should appeal to style-conscious people on a tight budget, and maybe even those with a little extra cash to spend, too.

Over at Hyundai, they're definitely moving upmarket. Everything in the Hyundai lineup looks and feels solid and expensive. They're incorporating content not generally available at the price point from the competition, and they're moving into segments previously reserved for the Europeans and the luxury brands.

The Genesis is a credible competitor in the near-luxury segment, with good looks, strong content and high-quality materials and construction. It'll never displace BMW for the car nuts (no matter how much Hyundai pitches it that way), but the folks at Buick and Lexus should be nervous. And the Genesis coupe is even a strong player against cars like the Nissan 370Z, with its RWD and strong styling.

While the Americans have been watching the Japanese, and the Japanese have been watching the Europeans, the Koreans have been sneaking up on us. Hyundai-Kia is now the fourth-largest automaker in the world (and the sixth-largest in the US), and given the current state of GM, it wouldn't be at all surprising to see them move up a step or two in the near future.

Competition is a good thing, and Korea is certainly bringing it. Now let's see if the Americans and Japanese can step up their game to match.

Ford and the C-Max

Well, maybe somebody's actually reading this thing.

Ford announced today that they're bringing the European-market Grand C-Max to the US. For those who don't know, the Grand C-Max is a 7-passenger "mini-minivan" similar to the Mazda5. It's based on the European Focus platform, and if previous iterations of the EuroFocus are any indication, it should be a good ride.

The Mazda5 and the Grand C-Max are minivans for people who like to drive. Not as capacious as Siennas and Odysseys, but infinitely more fun. And they are an alternative to heavy, fuel-sucking crossovers.

On top of this, they announced that there would be 10 vehicles built on that same Focus platform, with at least 6 of them coming to the States. That will do wonders for Ford's small-car presence here, and it won't hurt their CAFE numbers, either.

In my previous post, I said that Ford should be (1) leveraging European capabilities, and (2) focusing on small cars. With this announcement, it's clear that they're doing both. I'll be waiting to see how well they do it. Another repeat of the Contour/Mondeo fiasco could be trouble.

GM and the Money-Back Guarantee

I'm adding a bonus post today because of the news that GM will be offering a money-back guarantee on their cars. I'm filing this under the heading of "What are you thinking?"

A few years back, when Hyundai was dealing with quality issues, they wanted to reassure their potential customers, so they created the longest warranty in the biz. There was some risk to this (if they hadn't fixed their quality, the cost of warranty work could bankrupt them), but it accomplished what they set out to do. People were more willing to take the risk on a Hyundai, because they saw that the company was standing behind it.

The GM guarantee is different. It's a 60-day guarantee, so if things break after that, you're still using the same warranty you had before (which, to be fair, is quite good). And interestingly, I can't find any details on the guarantee, so I don't know what conditions have been put on it. It's not mentioned on the corporate website or any of the brand websites, that I can find.

I'd be very surprised if this really changes anyone's mind about buying a GM product. Most of what you can learn in 60 days, you can learn from a decent test drive, so most people aren't going to go to the trouble of financing a car, only to return it in 60 days. Now if they offered a 60-day test drive BEFORE you buy...

If I were the Car Czar (Part 3)

OK, today's target is Ford. Yes, yes, I know - Ford didn't take federal money, so the Car Czar has no say over them, but let's pretend...

And in the interests of full disclosure, Ford is my former employer, although I won't reveal any privileged information here.

Up front, I'd like to say that I think Ford is the domestic with the best prospects by far. Both their financial situation and their product portfolio (current and future) are much stronger than their Detroit (Italian?) rivals. But the bankruptcies of the other two have put them in more competitive positions in some ways. So here are my recommendations for the Blue Oval:

1. Reduce the size of the dealer network, and monitor dealer performance.

This one is tough, because franchise laws make it hard to eliminate franchises, but Ford has way too many dealers given their volumes. Incentives for dealers to merge could help drive a reduction, which in turn could help the bottom line. It's also important to make sure dealers are in tune with the "new Ford". The old Ford was all about the deal - incentives, special financing, etc. The new Ford is about product. Make sure dealers understand what they're selling. This is especially critical with all of the new features, like adaptive cruise control and blind spot detection, and ESPECIALLY Sync. Which brings me to #2...

2. Aggressively expand useful, innovative features.

Sync has been a wonderful selling tool. A number of people have told me that it made the difference in their buying decision. But so far, the Sync platform, which is designed to allow for expansion, has not been fully leveraged. Use the iPhone model and allow third-party development of applications (within reason, of course). Make sure it's fully integrated with all other vehicle features - climate control, navigation, etc. It's a powerful platform, and it can create a strong differentiator for Ford, especially among the tech-savvy youth market.

And don't stop there. Many of the other features that have been introduced are not related to Sync (like blind spot detection), and many aren't even technological (like the integrated step on the F-Series tailgate). But make sure all of the features have a purpose, and aren't just clever gadgets. The F-Series team has done an excellent job understanding what its customers want and delivering innovations that matter, like integrated trailer-brake control. Don't forget that the customer should drive the innovation, not the engineers.

3. Focus on the small cars

Right now, Ford's small car (the Focus), while certainly no slouch, is the weakest link in the Ford portfolio. Don't lose track of that market. For one thing, it's one of the few segments that's growing, and for another, it's a way to get people into the Ford brand so they can graduate to the bigger (and more profitable) cars later.

The Fiesta, with its strong feature set, good driving dynamics and aggressive styling, seems to be a step in the right direction, but the next generation Focus will be critical. And keep an eye on the competition - especially the Koreans. Vehicles like the Kia Soul and the Nissan Cube may not appeal to the older crowd, but they certainly create buzz in the youth market. Mini has been a hit since it came out, and Fiat is likely to be bringing the 500 soon. Ford has strong platforms in Europe and elsewhere that could be leveraged to create similar strong designs. Which leads me to point #4...

4. Leverage Ford's global reach.

Ford has outstanding design and engineering teams on five continents. With GM selling a good chunk of Opel, Ford is the best positioned to be a true "world brand". Let the Europeans and Asians focus on small-car engineering (which they do quite well), and let Dearborn handle the big iron. Use Ford of Australia's RWD experience to develop true performance platforms (next-gen Mustang based on the Aussie Falcon, anyone?). And make use of Volvo's engineering and safety expertise while you still can.

5. Don't try to be "the American Toyota".

Ford's focus on quality has been impressive, and quality levels are higher than ever. But remember that perception is reality. Buyers who are solely interested in reliable transportation continue to go to Toyota, because they have a reputation (albeit a bit tarnished of late) for quality. So Ford needs to have another "hook".

Quality with character can be that hook. People want reliable cars, sure, but they also want their cars to have personality. It's important to note that sometimes, a car with personality will also turn off some customers. Flex is a good example of this. Some people hate it, some love it. But everyone has an opinion. Make your cars something people will talk about.

6. Keep building the relationship with the unions.

Ford already has the strongest relationship with the unions among the Big 3. Keep it up. Sure, unions make some things more difficult, but those guys on the line can tell you a lot about the cars they're building. Just ask Toyota. With good union relations, you can dramatically improve quality, productivity and overall efficiency. And as we've seen, the opposite is also true. Make sure that the unions remain true partners in the business, and you will see the benefits.
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It's important to note that much of what I mentioned here, Ford is already doing. Alan Mulally has done an outstanding job refocusing the company on what matters. But they're still not out of the woods. A continued focus on customer and product will position them well to compete in the global market when the world economy bounces back.

If I were the Car Czar (Part 2)...

Last week, I fixed GM. Today, it's Chrysler's turn. This one's a little trickier, because they have a new partner (Fiat). So here goes:

1. Stop building FWD cars.

No, really. Now that you have a partnership with Fiat, leverage their extensive experience in this area, and trash your entire FWD fleet. None of them is really worth saving. Just look at how many Chryslers were purchased during the Cash for Clunkers program and you'll see what I mean.

Most importantly, get the Fiat 500 over here as soon as possible! It's a great competitor for Mini, and it can create a halo effect to get people back into dealerships.

2. Reduce "Badge Engineering".

Chrysler/Dodge/Jeep has WAY too many nameplates, given their market share. How many vehicles can you build off of the Caliber platform, anyway (I count at least 4!). Depending on how you count, there are between 20 and 25 nameplates across these three brands.

3. Clearly focus each brand.

Right now, each brand is trying to reach every consumer (hence the proliferation of nameplates). Refocus each one on its core customer.

Chrysler represents style and class. FWD is fine here, because Chrysler buyers aren't hot-rodders. Aspen is out of place - not clearly differentiated from the Durango it came from. Journey is more the Chrysler style.

Dodge is power. For cars, this means RWD. Challenger and Charger fit. Nitro doesn't. Dodge is also the logical home for trucks. Durango and Ram are right at home here. No sissy boys here!

Jeep is for the off-road crowd. No Jeep should ever be beaten off-road by any non-Jeep. Liberty? Maybe. Patriot? Probably not. Compass? Definitely not.

All three brands (especially Chrysler/Dodge) can be sold at the same dealership (and usually are), so people can cross-shop. Make sure that they don't see the same car over and over with different badges on the hood!

4. Leverage the Fiat relationship.

I mentioned this earlier with regard to FWD cars, but the reverse holds true as well. Alfa Romeo (a Fiat brand) has been selling fine FWD cars for quite some time. But they could (and it appears they will) leverage the 300 platform for the next-gen Alfa 159, which will allow for economies of scale in production and development.

On top of that, you now have a dealer network you can leverage to sell Fiats and (more importantly) Alfas in the States again, and a dealer network in Europe that can sell American muscle and off-roaders.

And finally, you now have plants on just about every continent, so if you get your production systems aligned (not a trivial task), you can build cars wherever it makes the most sense based on manufacturing and transportation costs.

5. Most importantly: FIX THE QUALITY.

Land Rover has perennially been at the bottom of the quality ratings, but this year, they were bumped out of that slot by Jeep. Build quality is abysmal, and hasn't really shown much improvement.

On top of that, the appearance of quality is missing! Too many hard plastics, loose switches and enormous panel gaps. As I said in the previous post, VW, despite middling quality, is able to sell on quality because the cars SEEM well put-together. Without that, you'll never get anyone back.
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Of the Big Three, Chrysler is the company with the most challenges ahead of it. But the partnership with Fiat presents some unique and promising opportunities. Let's just hope they don't let those slip through their fingers, because it would mean the end of several storied automotive marques.

If I were the Car Czar (Part 1)...

There has been much talk about how the government bailout of GM and Chrysler would affect their business. The appointment of a "Car Czar" caused special consternation.

In the end, though, not much has changed. GM and Chrysler are still operating fairly independently, with little interference from the government.

Still, I thought it would be interesting to ponder what I would do if I were in charge. I'm tackling it in pieces, because it's just too much to think of all at once, so here's my advice to GM:

1. Dump GMC.

Kudos to GM for dumping Pontiac, Saturn, Saab, Opel and Hummer, but I don't see any reason for GMC to continue to exist as a separate brand. GMC products fall into 2 categories: Chevy clones, and heavy-duty trucks.

GM has positioned GMC trucks as "luxury" versions of the Chevys, but that's why they have the Escalade. As Colin Chapman once said, "Simplicate, then add lightness". In this case, lightness means reducing the weight of additional brands and their overhead.

As for the heavy-duty trucks, buyers of these are driven by cost (both purchase cost and maintenance cost). They couldn't care less whether the grille has a "GMC" or a Chevy bowtie on it.

2. Move some existing Pontiacs over to Chevy.

With the death of Pontiac, GM loses some beautiful cars. Most notable are the G6 (especially the coupe and the convertible) and the Solstice. Turn these (at least the G6) into Chevys, and retire the Chevy versions.

Sure, you may need to redo some details for brand consistency (the grille, for example), but you'll have cars with character, which many of the Chevrolets are sadly lacking. And the Solstice would provide Chevy with a less-expensive alternative to the Vette, giving people a path to step up to the real thing.

3. Clean up the Chevy lineup and improve differentiation.

Can anyone tell me the difference between the Impala and the Malibu? Anyone? Bueller??

Chevrolet doesn't have a clear "product walk" in their lineup. At Ford, it goes Focus->Fusion->Taurus. At Toyota, it's Yaris->Corolla->Camry->Avalon. But at Chevy, once you pass the small stuff, it gets messy. It's hard to tell whom they're aiming each product at.

4. Focus on quality finish, inside and out.

GM quality is light years beyond where it was even a few years ago, but most people don't realize it. Why? Because the parts that you see still sometimes have a low-quality "feel". They have gotten much better in this regard, and some cars (notably the Malibu) are quite good, but in many cases, there's still too much hard plastic, floppy switches and wide panel gaps.

Volkswagen has understood this for years. While their quality has never been terribly high, people have always perceived VWs as high-quality because their interiors are beautifully finished.

Quality is reflected in design, too. The Mini is an extreme example of this. Again, BMW's build quality is only average, but the design is so appealing, people see it as higher-quality than it actually is. Get this right, and people will beat down your door. Get it wrong, and they won't even get to the showroom.

5. Don't obsess over market share.

I was very concerned when I heard Ed Whitacre, GM's new chairman, say that they would focus on not losing more market share. Focus on profitability, not market share! The easiest way to increase market share is to give away the cars, but I'm pretty sure that's not really a good business model.

Bankruptcy gave you the opportunity to reduce your infrastructure by closing plants and dealerships, which you did. Now it's time to recognize that with fewer plants, fewer dealers and fewer nameplates, it's reasonable (and can be profitable) to have lower market share. Once you've stopped the bleeding, THEN you can think about gaining back lost market share.
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Of course, there's much more that GM can do, both on the product side and on the business side, to get their house in order. But I'd say that these few things would get them well on the way to regaining their lost mojo.

Welcome to Thought-o-Motive!

If you're reading this, you're probably wondering who I am to be writing about cars and the automotive industry. Ah, who am I kidding? If you're reading this, it's probably because you know me and I sent you the link!

Still, just in case there's anyone out there bored enough to land here randomly, I thought I'd let you know where I'm coming from.

I have some experience in the industry, working for one of the Big (or not-so-big) 3, and my time there helped color my thoughts on the industry. But most of my viewpoints are not those of an industry insider. They are instead those of someone who has loved cars since he was a boy.

I came of age in the bad old days of the Big 3, the '70s and '80s. Back then, GM, Chrysler and Ford didn't really have anything worthwhile to offer. GM had Fieros, whose name reflected an unfortunate tendency to burst into flames, Chrysler had "fine Corinthian leather", and Ford had 4-cylinder Mustangs (!). Yet even then, there were flashes of brilliance.

Of course, there were Porsches and Ferraris, but who could afford those? I learned to drive in a Subaru GL wagon with a 5-speed, and for a 16-year-old, it was actually pretty entertaining. Fiat, MG and Alfa hadn't left these shores yet, and if you looked hard enough, you could still find well-cared-for, low-mileage '60s Mustangs and Camaros.

The year I graduated from college, Mazda introduced the Miata. I bought one of the first ones to arrive in the US, and I was in love right away. I took it to the track, and I took it for long drives on twisty roads. Sure, it only had 116hp, but it was the MGB I remembered from my youth, without the oil leaks and random electrical failures.

Still, I always wished that the US manufacturers could get their acts together. They had been great once, right? Then they lost their way, wandering amongst the Explorers and Grand Cherokees, while their cars remained stuck in the past. But recently, there have been signs of life. Cars from the Big 3 (well, Ford and GM, at least) are higher-quality than ever before, and often beat the imports. And just as important, they're building cars with CHARACTER again. Despite the economic climate, there's never been a better time to be a gearhead.

So my goal with this blog is to throw out my opinions on the industry and the cars and trucks they're building. I don't claim to be an expert, and I'm not poring over sales numbers and profit margins. If you disagree with my comments, let me know about it. But mostly, I hope you find this an interesting source of good "car talk"!

David