MERGER: DO, OR DIE?

GM and Chrysler: as one? How could that be? What would it mean?

The initial reports first hit the internet. GM and Chrysler were in exploratory talks. It was down played; explained that companies talk with each other all of the time to explore common goals and interests. But this one has not gone away, and it is actually accelerating.

The automobile sector has always been a cyclical industry. It ebbs and flows with the economic cycles. Manufacturers make billions in the best of times, and save cash to survive the worst of times. This economic barometer has traditionally been read by how many extra shifts are needed to keep up with demand, as opposed to how many auto employees are being laid off.

Domestic auto manufacturers have been hit twice as hard this time around. The inevitable economic downturn came, but they were caught with all of their eggs is one basket. Trucks and large SUVs brought them record profits. Domestics specialized in them. Then, gas prices escalated and they were all caught without a backup plan. Not only were consumers buying fewer vehicles, but they looked to the foreign fuel efficient choices when they bought anything at all.

Daimler was not happy with their purchase of Chrysler and sold the majority of its interest to the investment group, Cerberus, back in early 2007. Perfect timing! Daimler dodged the bullet that has hit all three domestic manufacturers straight in the eye.Ford, GM and Chrysler are all in dire straights. Not only did demand for their product cease, but the credit structure that sustained their livelihood collapsed as well, all part of the housing credit debacle. Now, with survival at stake, all three need money, and they need it now.

Rumors are flying. Ford, on the heels of already selling Aston Martin, Jaguar and Land Rover, is now rumored to be in talks to sell its one third stake of Mazda, either back to Mazda or to a group of Japanese companies. Chrysler’s Jeep brand might be sold to Renault. And now, GM and Chrysler are going to merge? The others make sense, but a GM/Chrysler merger is puzzling. What form would it take? What would it look like? What models would stay, and which would die? Or, would GM just swallow Chrysler and liquidate everything in sight to benefit from its $11.7 billion of cash and sell the remaining hardware?

Many stumbling blocks and questions remain in the way of a GM/Chrysler merger. What role will the unions play in allowing a merger to succeed? Also, Cerberus must buy the remaining 19.9% stake of Chrysler that Daimler still owns, in order to be free to merge. Would the government allow them to merge and own 36% of the US auto market? What would happen to the finance branch, GMAC, a hotly contested issue between GM and Chrysler? Cerberus already owns 50%, GM the other 50%. The investors that are Cerberus wants all of GMAC, and for good reason. When the economy turns around, its massive influence in providing credit is worth millions.

GM now has many interesting choices throughout its product lines (see previous blogs), but within GM, there is already too much redundancy (see my blog, “Power of Twins”). What would be the outcome of diluting the product line further with all of the various Chrysler models? Some would stay, many would not. If the merger became a reality, my crystal ball says: Jeep will remain, GMC will go, Chrysler will become an affordable luxury wing, Dodge will remain with several performance models, Viper will be sold to a customizing manufacturer, Hummer will be bought by an Arab or Russian company, Cadillac will continue to thrive as an icon, Chevrolet and Buick will blend together to become one, eliminating many models. In addition, there will be fewer dealerships, higher prices, many more plant closings, and thousands more jobs lost. GM will again dominate the domestic auto industry, and I will still prefer Ford, or a Japanese brand.


This story seems to change by the hour. Stay tuned to what surely will be a dramatic saga. It is hardly a merger made in heaven, but it appears to be a case of do or die. If the deal does go through, what would the logo look like and how would it fit on the grill of a Solstice?

UPDATE, 11/10/08
The latest rumor is that talks between GM and Cerberus are off, and discussions are proceeding with Hyundai.

UPDATE, 11/11/08
Now GM is out and Cerberus is talking to Hyundai instead. Meanwhile, GM's stock price dropped another 20+%, and a federal bailout is imminent. Stand-by!

HAVE YOU DRIVEN A FORD LATELY?

I have always been partial to Ford products. Maybe it is because of my initial exposure to my childhood friend’s father’s beautiful black 1957 Ford Thunderbird, or my sitting behind the wheel of a new Ford Galaxy 500 at the New York World’s Fair years ago, or because I was always envious of my neighbor’s 1968 Ford Mustang Mach III. For whatever reason, Ford products have always caught my attention.

My appreciation of Fords has not just been admiration from afar, I have owned three over the years. My first was a Thunderbird of my own, followed by a Taurus wagon for the family, and now our current Windstar van (see July’s blog). All have been well designed, serving with near flawless performance. The acronym, Fix Or Repair Daily has not been the case in my experience. While for a variety of reasons my last two cars have been from Honda and Toyota, I am now once again intrigued by Ford.

Despite the doom and gloom of today’s economy, Ford appears to be working towards a position of strength. Its recent sale of Jaguar and Range Rover gave them the needed cash to keep running. Now it is up to their product line to return Ford to profitability, and that is where the fun begins.

My renewed interest in Ford began with the stunning redesign of the Mustang in 2005, rejuvenating the aging brand. Recapturing the style of its best incarnation, the 1968 Mustang, sales and awards quickly followed. It was impressive enough that I almost bought one. Now in its 5th year, my head still turns every time I see one drive by. Fans (and I) anxiously await its next generation due as a 2010.

Ford’s rebirth continued with the launch of the Ford Freestyle in 2005, then the Fusion in 2006.
The Fusion was the first to feature Ford’s now signature sparkling chrome three bar grill. With a sharp looking design, this Accord fighter attracted attention, and sales, immediately. The owners I have asked love them. Ford’s crossover entry quickly followed in 2007 with the Edge; plenty of room, excellent handling, and another design success. A friend of mine says that it’s the best vehicle he has had in years. Now for Ford, it is the much anticipated launch of their new people mover, the Ford Flex.
It is not a mini-van or a crossover, but seats 7 and drives like a car. Print photos do not do it justice. In person, the Flex is impressive. While I have not driven one yet, the reviews in the trades are glowing. NOTE: The Flex was just placed on Consumer Reports' Top 5 list of crossover SUV's.

Ford faced a public relations nightmare following the Explorer rollover/tire debacle a decade ago. While their F150 truck retained its #1 position (until recently), the consumer’s perception of Ford’s safety and reliability was severely tarnished. That perception is now changing. Many of Ford products proudly wear Five Star safety ratings in most categories. JD Power gave the Mustang their endorsement with an excellent high initial quality rating. In response to high gas prices and a pleasing redesign, the Ford Focus is now flying off of dealers’ lots, selling for less money than the Honda Civic. The quality is excellent. Still have doubts about Ford? My company’s fleet of Ford Escapes has been indestructible. One Escape was retired recently after 7 years old and 220,000 miles with no complaints throughout its proud service.

Ford now offers some genuinely interesting choices in its current line-up. With safety and reliability in its pocket, and deals available in this tough economy, this domestic brand is again worth serious consideration. I will take a Flex for my family and a deep red Mustang GT for me (a man can dream can’t he?). Have you driven a Ford lately? I hope to do so again soon.

UPDATE, 10/24/08: Consumer Reports has just released its 2008 Car Reliability Survey and it places most models of all three Ford brands (Ford, Lincoln and Mercury) ahead of all other domestic manufacturers. Based on Consumer Reports’ Readers’ Survey, almost all models received “average or better” reliability results, placing them on the same playing field as its Japanese competitors.

UPDATE, 1/7/09: Consumer Reports' chief car tester, David Champion, has published the following quote: "Ford has been doing a lot right on reliability for the past five years. It's not immediately apparent that the Ford Fusion would be more reliable than the Toyota Camry, but it is, and the Fusion is one of the more reliable family sedans on the market."

Pride Auto Care now in Parker Colorado!

Pride Auto Care---Come Ride with Pride!
With two, long time successful full service tire and auto centers under our belt, why did the four Pridemore brothers decide to buy an existing Parker car care business and set up their third shop there? Simple… We love this area and wanted our next great car care location to be in our own backyards. WE were amazingly blessed to find the old Hometown store…it was just the right place for us.
The original owner was “hands off”, tired of the car care business and has wanted out for some time now. While the old Hometown crew recently had a decent technician or two in the fold, the store was understaffed, un-marketed and starting to get rundown. But, to their credit, the store crew had a pretty decent reputation for good service of late and were situated in a prime Parker location...right behind the Super Target in the Parker Valley retail complex.
Douglas County and Parker are one of the premier areas to live in in Colorado, heck in the whole country for that matter. It’s a clean, beautiful growing city that still embraces the country charm that makes it such an awesome place to live and rear a family.
Of the four brothers that makes up the Pride Auto Care ownership, two of us live near the store, one just “over the line” in Centennial and the other lives in Parker off Bayou Gulch Rd. WE are hands on owners. We work at the stores we operate and that makes a difference because it’s our friends, and neighbors, our extended “family” that have us work on their “pride and joy!” They trust us. They see us at school, at church, at grocery store, at the movies…these are our neighbors. We know they expect nothing but great, honest service and a fair price from us and that exactly what they’ve gotten for over 19 years now. We are now working on the second and third generation of drivers in many of the original families who’ve been our customer’s for almost 20 years.
We love people and love fixin’ cars. The new store in Parker is an exciting first for us as our original two stores were built new in 1989 when two of the four brothers were just manager and technician at the time. Then in 2001 we became minority owners in the operations and eventually bought the business outright in 2005. We’ve been looking to expand to a third store in the southeast corridor” since then and Parker is perfect. A great town with amazing people and a great country feel. What more could we ask for.

SPASTIC DRIVERS

I have already shared my thoughts about distracted drivers (see May). I am totally against it, regardless of the circumstances. No cell phones, Ipods or knitting. Just drive! Now my beef is about spastic distracted drivers.

You can spot one with as little as a glance in the rear view mirror. On the way home the other night, I observed a perfect example. The man had a stressed expression on his face as he waited at the red light. He was agitated as he talked on his cell phone, gesturing wildly. Sure enough, when the light turned green, he floored it, and zig-zagged through traffic on his way to somewhere really important. It was obvious that driving for him was secondary to everything else going on in his life. He whizzed past me on the interstate, still talking on his phone. As he drove with one hand, he quickly changed several lanes and then disappeared, speeding well above the speed limit. He was a distracted spastic driver, endangering everyone on the highway.

Last night it was a well tuned Honda Civic zipping by me. The thunder of his car’s stereo could be heard and felt even at highway speed. He was sitting low and dancing to his tunes. The music was primary, the driving secondary. He passed several cars, crossed several lanes at speeds well above the posted limit, then he quickly cut in front of a car and decelerated rapidly to exit at the next ramp. First music, then driving. Dangerous!

There is an intersection that I cross on the way home every night. During rush hour, the right hand lane is congested with drivers lined up at the traffic light waiting to access the ramp to the interstate. Impatient, spastic drivers choose the left lane to save time. There is at least one for every cycle of the traffic light. When the light turns green, they cut across traffic into the right lane at the last minute to make the ramp. Those left behind slam on their brakes, or blow their horns. Accidents frequently follow. Another spastic driver, preoccupied with everything else but driving. Dangerous, spastic drivers!

Driving a vehicle is not playing a video game. It is serious business that requires 100% of the driver’s attention. Lives are at stake, not to mention expensive repairs. Encourage your friends and relatives to put the phones down, lower the stereo, and obey the traffic laws. With a little common sense and courtesy, we can all be happier and safer drivers. Save the spastic driving for XBOX 360.

Fun for the Kids!

Centennial Medical Plaza Hosts Trick-or-Treat for Health
WHAT: Trick or Treat For Health
WHO: Children of all ages and their families
WHERE: Centennial Medical Plaza, 14200 Arapahoe Rd. Centennial, CO. 80112
Information: 303.938.9237
WHEN: Saturday, October 25, 2008. 11am-2pm
WHY: To provide a safe & fun atmosphere for the community to celebrate Halloween.

DETAILS: Trick or Treating through Doctor's Offices, Kids Crafts, A Climbing Wall, Fire Trucks, Police Cars, Ambulances and a Helicopter! Get your Car Seat Safety Check and “Say Boo to the Flu” with $25 Flu Shots. Plus much much more!

POWER OF TWINS

In this trying, uncertain economy, purchases large and small need to be carefully evaluated and scrutinized. Only the essentials become a buy. This is especially true with a big ticket item like a car or a truck. Ask any auto dealer. Now more than ever, buying a vehicle requires a well thought out process; extensive research, and wise decision making. While now is a good time to buy with some real deals available (see previous blog, LET’S MAKE A DEAL), it is also a time to be smart. No buying of a status symbol to impress the neighbors, no impulse purchases. Thrift and common sense is king. This is the time to take advantage of the dollar cost savings delivered by the POWER OF TWINS.

Twins are vehicles from separate brands that share platforms, engines and major components. Product is shared to keep design and manufacturing costs down, with the goal of increasing profits for each of the companies. Some twins are sold through a different brand within the same manufacturer (Ford & Mercury); others are available through a competitor (Pontiac Vibe & Toyota Matrix). Usually the vehicles’ interior and exterior styling designs differ, while the engine and suspension are nearly the same.

One brand of the twins may include a lot of bells and whistles at a higher price. The other may provide a more expansive option list for the buyer to choose items individually. One may have a longer running, more comprehensive warranty, and may appear to bring a higher resale value with less initial depreciation. The other twin may be able to save you a lot of money now. Generous incentives may apply to one, and not the other. A personal consideration, you may find that you like one twin’s dealer better than the other. These are all factors to consider. At stake, deciding which twin to buy could save you thousands of dollars.

Manufacturers have shared their designs and hardware for years producing twins. Mercury is Ford, but has traditionally included more standard options. A little more flash, for more money. For years, the Ford Thunderbird was essentially the Mercury Cougar. Now, the buyer can choose between the Ford Explorer ($26,495) & Mercury Mountaineer ($26,800), the Ford Escape ($19,140) & Mercury Mariner ($21,540), and the Ford Fusion ($18,135) & Mercury Milan ($19,095)*. Each of them twins. The separate product lines allow for an expanded dealer network, and more profits for the parent company. The downside is in this difficult economy, dealers are competing with each other. For you as the buyer, it gives you more choices, and bargaining power.

The many brands of General Motors have always shared amongst twins, producing essentially the same vehicles under different brands for many different prices. GMC has traditionally been the rougher version of the more domesticated Chevy truck. Buick is perceived as the luxury sibling of Chevrolet, while Pontiac is the sportier treatment. Some twin GM choices include: Chevrolet Trailblazer ($27,745) & GMC Envoy ($27,980); Chevrolet Impala ($21,975) & Pontiac Grand Prix ($22,210) & Buick LaCrosse ($24,250); Saturn Outlook ($28,625) & GMC Acadia ($30,140) & Buick Enclave ($33,220). My personal favorite is the Pontiac Solstice ($22,455) & Saturn Sky ($25,855). All are twins, all are priced quite differently.

Chrysler is considered the luxury, more expensive brand, while Dodge is the performance choice, and depending on options, generally costs less. The Chrysler Town & Country minivan ($23,415) is a plusher version of the Dodge Grand Caravan ($22,520). Compare Dodge Avenger ($19,640) & the Chrysler Sebring ($19,840), along with the Dodge Durango ($27,335) & Chrysler Aspen ($32,905). They are all Chryslers, but with interesting differences in price.

The foreign manufacturers also provide the buyer twin choices, sometimes at considerable dollar savings. Look at the difference between the Honda Pilot ($27,595) & the Acura MDX ($40,195), along with the Nissan 350Z ($28,510) & Infiniti G37 ($34,900). Is the name plate worth the extra dollars? The power of twins even crosses between domestic and foreign lines with the Pontiac Vibe ($16,855) & Toyota Matrix ($15,510); and the Ford Fusion ($18,135) & Mazda 6 ($19,140).

While it is generally true that you get what you pay for, with a little research and soul searching, you may find that you do not need all of those options, as well as paying a premium for just a name. Do you really need a Lexus to impress, or is a Toyota Camry with similar options going to satisfy you? With a little humility and common sense, you could save thousands on the purchase price, not to mention the excise tax and insurance. Those dollars saved can buy a lot of gas. Do your research, and ask yourself honestly, "What do you really need?" Then, use the POWER OF TWINS for a smart purchase.

*All prices listed are for Base 2008 models.

LET’S MAKE A DEAL

A primary principle of investing is, “Buy low, sell high.” It is basic, common sense. With today’s economy, other phrases come to mind: “It’s darkest before the dawn”; “Buying opportunity”; “Buy when it seems the bleakest”. Such advice is hard to follow when the stock market is tumbling, the housing crisis continues to mushroom, layoffs are in the news daily, and everyone talks doom and gloom. With all of this negative karma, it takes a strong individual to be a contrarian; buy for the future, by buying during the worst of times. But history shows that a wise, disciplined investor should do just that, despite the adversity. This also holds true with buying a vehicle.

Now is the best time in years to buy a new ride. Traditionally, this time of year is a good time to buy anyway. As summer fades, so does the current model year. Manufacturers and dealers want the old models off the lots to make room for the new. Also, as winter approaches, buyers are hesitant to subject a new car to ice and snow, often choosing to hold off on a purchase until spring. As a result, aggressive incentives are marketed to overcome reluctance, and move last year’s vehicles.

The escalation of gas prices has helped to make this a perfect time to buy. Overnight, buyers deserted the gas guzzling SUV’s and pickup trucks, replacing them with anything green. It is now difficult to buy a compact car, and nearly impossible to find a Prius or other hybrids, without a long wait and paying a premium. Meanwhile, dealers’ lots are overflowing with fleets of pick-ups, SUV’s, minivans, and some very attractive crossovers. All of these vehicles are now available at bargain basement prices. Check the papers, television ads, or maineautomall.com: a new Mustang for only $14,995; a Ford Edge with an MSRP of 26,035, selling for $19,745; trucks of all shapes and sizes for thousands off of the sticker prices. No matter what type of vehicle you might be interested in, dealers do not want you to leave the showroom empty handed. Auto dealers have never wanted, or needed, your business more than they do now. Now is the perfect time to buy.

The down turn in the economy scared the consumer. Suddenly they stopped spending. Vehicles continued to come off the assembly lines in droves. Manufacturers eventually slowed their production, but not before inventories were at record levels. Meanwhile, the housing crisis worsened. Banks and lending institutions lost millions. Their restructuring has now begun. For them to recover, they want to loan you money. In fact, to survive, they must loan you money. The Fed did their part, and responded to the impending economic doom by lowering interest rates several times. This year, in particular, is the best time to buy. Inventories are high, interest rates are low, and dealers want to deal.

Another reason to buy now is that never before has there been a better selection of well designed, quality choices available to the consumer. Both domestic and foreign manufacturers are now making great vehicles. The Ford Flex, an alternative to an SUV, is just now available, receiving glowing reviews. Ford knows that the buyer will be reluctant to buy a large vehicle, but Ford must succeed with its launch. They will do whatever it takes for it to sell. Deals will be made. Similarly, the “new” Chrysler must succeed with its recent crossover entry, the interesting Dodge Journey. Deals! General Motors’ economic challenges are in the news daily. For GM to recover, they must sell vehicles. The newly revamped Saturn line is ready for delivery at attractive prices. The Japanese auto makers are not immune. Overall, Toyota’s sales are down. Even sales of the seemingly invincible Honda CRV are off. Deals must, and will be made.

For any, or all of these reasons, if you are entertaining even the slightest notion of buying a new vehicle, any vehicle, now is your absolute best time in years to buy. Be a disciplined, wise contrarian, and lead the economic recovery. By the time that your neighbor feels better about his economic future, the deals will be gone and the dealers may not be quite as friendly. Buy now, and invest the savings for your future.