Sticker Shock

The good and bad of buying a new used car - the demise of Hummer?

As noted before, we have been looking for a replacement for our late BMW, which perished roadside in a fire. It’s been interesting, and while we do try to speak of marketing more than anything here, buying a car is such a bad time, our search is worth mentioning.
We started by going to the third party sites, including autotrader.com and cars.com. The quarry was a 2007 Mercedes C230. Found a place about 45 miles down the highway that had bought a few of these cars, but the place dealt mostly with used Fords and Mercs. You get the idea. Sent our contact to them via email, and someone called back. We said we’d be down later that evening. Showed up. Used car salesman comes out, we tell him our name and that we want to drive one of the C230s. He goes in to get the keys and lets us know that no one there has heard of us. We drive the car, which it is apparent that this dyed-in-the-wool sleazebag has no interest in selling, and knows nothing about. The car checks out, though. I go inside with him to get the Carfax report, which tells you who has owned the car, if it has been in may major wrecks, etc.. I look around at the poor, huddled masses who are about to get taken for a ride. They are defenseless in the fluorescent-lit, linoleum-floored shack that is a used car office. Soon, they will be upside down on that used Taurus that will have only 50,000 miles on it.
We leave and two days later, I email the sales guy an offer for the C230, about $800 below asking price. I expect a counter offer. I never hear from him again.
A couple days later, we head to our local import auto place. A kid of about 25 comes out, all boyish enthusiasm and surfer-style chatter. We drive a BMW X3, just to check it out. Caleb, the salesman, is terrifically funny, witty and curious about everything. And mostly, it’s not about the deal. We tell him the X3 is nice, but really want a good used C230. Give him our contacts and leave. Three days later, I get personal letter from Caleb, thanking us for coming in. Guess where we’re buying our car?
Not with the non-responsive American car guy, who thinks he’s doing us a favor.
It’s just another way that that the American auto industry has killed itself. And we're glad to see it go.

We see that Hummer is on the block. 
Great timing, eh? At the North American International Auto Show, General Motors made plenty of noise about the H3T and the possibility of a hydrogen-powered Hummer. GM last year spent $56 million on ads for the H3, the smaller of the two Hummer vehicles available. Now, as it begins a new campaign for the brand, the whole thing has been realized as a mistake, or so it seems.
“They are in a world of hurt,” auto consultant Gordon Wangers told us as we began gathering notes for that story a couple of weeks ago. He was amazed that GM didn’t see gas price hikes and managed its marketing for the brand in a better fashion.
“I think GM should have known what was coming and planned accordingly. They commitment they made to Hummer, and forcing the dealers to build palaces exclusively for Hummer in recent years, I’m not sure I would have done that.”
He ended our chat with: “I think if I had a Hummer now, I’d let it sit in my garage.”
And when asked if there was any possibility that Hummer might lay low while these gas prices sort out, a Hummer spokesman maintained that it is a “niche brand.” Oh. It looks as if Hummer may be headed for the boneyard if GM can't unload it.

Mercedes or BMW: Who rules?

Which would you rather drive, a BMW or a Mercedes? We’ve been driving some of the Mercedes product lately, and have been pretty happy with most of it, specifically the SL 550 and the GL class. This past weekend, we took the C 300 on a trip to Chicago, about 230 mostly-highway miles from here, though, and were unimpressed. The C class is positioned as Mercedes’ entry level line of vehicles – recall last year’s massive marketing effort for the C class, hitting network TV for the first time in five years – and should be a formidable challenger to BMW’s 3-series. But it’s not happening, and for good reason. The engine of the C 300 lacks the purr and easy acceleration of the BMW 325xi, which we own. At several points, we punched the pedal to merge and felt the engine hesitate. Ever so briefly. Enough to make us feel we wouldn’t want to spend the $40,000.
The 3, even down this year in sales at 38,414 units sold through April, is outpacing the C, which is up at 23,991.
By the way, we are in the market for a car at the Brandweek motor compound. We lost one of our favorite vehicles, a 1999 323i BMW, which looked and ran like new, in an unfortunate fire. As in, the thing overheated while cruising down the highway. Or so we thought. As we dialed for some assistance, the paint on the hood started to bubble. Then the flames came licking out the side of the hood. Then the fire department came. Then we got a fat check from the insurance company. We were looking Mercedes C class. Now we are not so sure.

Is anyone interested in the new campaign for the Hummer, with the tag, “Welcome to the Open”? We didn’t think so. Our calls to GM have gone unanswered and we are pretty sure that GM is rightfully ashamed of trying to pass off a gas-sucking truck when oil prices are at $133 a barrel.

We can read between the lines in this one, where Chrysler appears embarrassed to be hitting the market with the new Ram. It’s not that people don’t still need pickup trucks, but it’s that they won’t be buying a new one any time soon. So you can market this thing all you want, but sales are off 25% for the Ram this year and things are going to get worse.

Obama, out of touch and what auto brand do you want to see eliminated?

We don’t like to get all political, but what kind of advisors does Barack Obama have? Do they drive cars? Have they studied free-market theory?
When the candidate expounds his simpleton view of the U.S. auto industry,it erodes his credibility across the board. Did the Detroit 3 know that gas prices would end up in the stratosphere? This is a group that has lost market share via a series of marketing and design miscues and has a bureaucracy as thick as a politician’s skull. Not only that, but when SUVs started rolling off the line in earnest, consumers were buying them up. And let’s remember that in Q1, the top selling vehicle in the U.S., despite the gas price gains, was the Ford F-Series, trailed by the Chevy Silverado. Consumers have loved these vehicles, and the move to small cars is market driven. Which is good, natural. For some out-of-touch politician (what other kind are there?) to step in and make silly statements like this squeaks of poor advising. We think that if he drove the streets more and spent a few hours trying to understand the industry, being the thoughtful fellow we perceive him to be, he would expound with more reason.
We might also remind candidate Obama that for three decades, congressional types have refused to allow expansion of U.S. refineries and the No Nuke Kooks have stomped on nuclear development.

On a lighter note, in a poll at Businessweek.com, readers believe that the next auto brand to go should be Mercury. We’re not sure why. We have driven the Mariner Hybrid and found it to be by far the best of the CUV hybrids. The Milan sedan is likewise a fine machine. Both suffer from poor marketing, because Ford doesn’t have the money to spread around these smaller brands.
Coming in second in brands to do away with was Hummer.
We like Hummer and there is a place for it. One of the things auto companies need to be wary of is overcompensation. Don’t do away with your large models. Things will get better, and there will be oil. And we will adjust.

Jim Farley - Rock Star, GM and syntax

“All my life, General Motors and Ford Motor have tried to go bankrupt. It takes them a long time because, even at this sorry task, they’re not very competent. I have faith. They will eventually succeed, which will benefit Toyota, the world’s leading carmaker.” – Ken Fisher, columnist, "Portfolio Strategy" Forbes magazine.

We had a good two-day trip to Las Vegas with the fine people at Ford. Heard about the new corporate campaign, the new tag, “Drive one,” and how it will be put into effect. And we have to say, Jim Farley is one of the most engaging, enthusiastic, sincere marketers we’ve seen. His absolute euphoria about the brand is contagious and if he could walk the streets and talk to everyone about Ford, the brand would recover quickly. And his idea of taking it to the employees, retirees and dealers to allow them to talk up the brand is a good one. He’s got the makings of a hero, for sure.
And Farley is now a rock star in Detroit. We talked with him one evening while we were there about how he’s coping with it and he said it was unusual for him. He and his wife are living in a Detroit suburb as they close on a house and he goes to the local Border’s bookstore sometimes to browse.
Sticker Shock: So do you get recognized there?
Farley: I do! I’ve been there looking at the magazines and I run into Ford employees. It’s kind of weird. I’m leafing through “Hot Rod” and “Tattoo” and there they are.
SS: “Tattoo?”
Farley: Yeah…I’ve always liked the permanence of tattoos, how each one has a story. If you ask someone about each tattoo, they can tell you the story.
SS: Do you have any?
Farley: No
So we moved along and asked about being recognized when he was with Toyota in Los Angeles.
Farley: No, hardly ever. I’d go to these Hollywood parties with my wife (who had some ties to the movie industry – SS) and someone would ask me what I did, and I’d tell them I worked for Toyota. And they’d walk away.
It is gratifying to see someone as decent and down-to-earth as Jim Farley being recognized. We do believe he’ll fare well anywhere he goes.

Yesterday, we listened in briefly to a phone conference Q & A with General Motors marketer Mark LaNeve and before we fell asleep, Mark was trying to explain how the new marketing realignment
was going to work. “I know it can be kind of obtuse,” he noted. We think he may have just gotten his word wrong. But he's a smart dude: He may have been obliquely referring to the reporters, who really didn’t seem to grasp the simple move.

BMW fails the test with the 1-Series while Mercedes catches up

By now we’ve all seen the ridiculously way-too-wordy print ads for the new BMW 1-Series. The TV buy is minimal, and BMW is instead trying to garner interest via social networking  sites like Facebook. It also claims that this is its biggest Web buy yet, with nearly 50% of it's spend going to the Internet.
This is, presumably, to nab some of those younger buyers with less cash.
One problem, and this is a big one – the 1-Series is no bargain and fails miserably in its allure to younger buyers compared to the entry level offerings of brands like Volvo with its snappy C30 and Mercedes venerable C-Class offerings.
The Web has given luxury brands a venue to ply its smaller vehicles, but if someone has the time to engage in such simpleton endeavors like a “design your own car,” the chances are they don’t have the cash for a 1-Series. And it doesn’t come cheap.
While an uncritical look at the pricing may find that, sure, the 1-Series has a relatively low base price, Car and Driver recently crunched the numbers and found that “The price spread from a base $29,375 128i to a larger 328i is $6700, and the $35,675 turbo 135i is just a $5900 saving over a 335i coupe.”
Further, the 135i, with a few features, comes in “at a breathtaking $42,895 and still not at full froth…just $5400 less than the comparably optioned 335i. Some back-of-the-napkin calculations on a 36-month lease put the monthly payment difference at $90 to $100, assuming all terms are equal. The world may have tilted, but BMW dealers will need well-lubricated tongues to steer buyers into the 1-series.”
It was crucial that BMW come out with a strong campaign for the 1, because there aren't going to be a lot of them on the road, which is huge for selling these pricey beauties; One dealer told us that there will be only 40,000 1-Series shipped to the US this year.
We are fans of BMW for the most part, but its snooty marketing is wearing us out. (As we have noted before, in the interest of full disclosure, we are a two-BMW family here.)
BMW seems to feel that when it arrives with a car, everyone cares and no one even dare look at a Mercedes or, God forbid, an Audi. We love Audi's idea of redefining luxury in order to take it out of the country club snobbery arena and into the hipster lounge. Who would mind pulling up to the tavern in their A6, popping back a couple of drafts and moving on? Doesn't feel quite as right in a 3-Series.
We should also look at BMW’s tenuous grasp on 2nd place in the luxe category, behind Lexus, whom no one is catching any time soon.
BMW sales in Q1 were down 13.4%, with Mercedes up 2.9% and behind BMW by 709 sales. Mercedes has trailed BMW in sales for years, finishing behind by 42,000 vehicles as recently as 2005. Stronger marketing, a more varied lineup and better quality ratings have brought Mercedes within striking distance of BMW, and this could well be the year it moves into the #2 spot.

While we're here, the notion of allocating more ad bucks to the Web is hardly significant. The new Dodge Journey campaign will put 29% of its adspend into Web-based platforms, trumping its previous high of 24% for the Jeep Liberty. And recall when Pontiac in 2006 opted to launch its G5 online exclusively. What a bust – the car sold 27,928 last year. We’re pretty sure a mix is a good idea.

Car sales dip; Big Deal

Let’s get over this drop in car sales. There are several things at play here and to imply that the drop is solely due to a stagnant economy – ironically, a dip that can be in part attributed to this ethanol lunacy that has driven up food prices – is folly.
Let’s start with the durability of today’s cars. Quality has given cars longer lives in which they deliver well. There are also longer, more extensive warranties for both used and new cars. Here at the Sticker Shock compound, we have two BMWs in the fleet, including a 1999 323i with 90,000 miles on it that runs like new. The other is a 2004 325xi with 40,000 miles on it that is still under warranty. At BMW, that means free oil changes and free repairs.
Finally, the consumer is confused. Last week, Brandweek ran a story  about the mixed message being sent by car makers, who want to appear environmentally responsible, whatever that means, but also want to provide product that is wanted. So their message becomes a twisted mélange of 14 mpg Yukons and some sort of futuristic dream.
A car buyer will sit if he is not given a reason to move. Right now, there are not so many reasons to move. How about an AWD Lexus IS 350 starting at $31,000? That would move us here.

Consumer Reports driven to advertise?

Consumer Reports' annual auto issue has traditionally been a strong seller for the title, but for auto marketers, it’s been something else—an occasion for sweaty palms and fervent prayers.
Such execs could testify to the magazine's influence by recounting stories of consumers walking into dealerships with the issue tucked under their arms.
For years, Consumer Reports gave high marks to Japanese brands Toyota and Honda before the car makers gained the solid foothold on the market they now enjoy.
And at the same time, domestic automakers received poor marks, which eventually sunk their market share. But the issue’s reach may at long last be waning. When the magazine said last October that Ford's quality was on the increase and Toyota products would no longer be assumed solid because of a series of quality issues, some gasped. Would this affect Toyota sales and boost Ford's?
Not drastically. Toyota saw a sales jump in November of 2.2% while Ford saw no change. In December, Toyota dropped 1.7%, and Ford was down 9%, per the companies.
Part of the reason may be Consumer Reports’ questionable findings. Over the years, it has dogged some popular favorites—the Toyota Camry—and heralded some dogs like the Buick Rendezvous.
Such things can open an institution up to competition. Now it has.
Third-party auto consumer sites like Edmunds.com and Kelley Blue Book's kbb.com offer much of the same information on a real time basis for free, allowing car buyers to search with startling minutiae.
Both Edmunds and KBB have more than double the monthly Web traffic of Consumer Reports site, per Compete.com, Boston, a Web analytics firm. In the past year, Edmunds' traffic is up 42% to KBB's 12% increase and Consumer Reports' 8%. “These third-party sites have been rising in prominence,” acknowledged Ken Weine, a spokesman for Consumer Reports. The competition has prompted the advertising-free Consumer Reports to do something unusual: Advertise.
A full-page ad ran on the back of the USA Today business section earlier this month, and banner ads appear through the end of this week on a host of car-related Web sites, including autobytel.com, Edmunds.com, and caradndriver.com.
The print ad, via VisualMax, New York, featured a yellow yield sign and touted a feature on extended warranties.
Weine downplays the fact that Consumer Reports is driven to advertise its auto issue for the first time
since its product testing began in 1934. And in fact, book sales have increased in the past 20 years for the monthly issue as well as the auto issue, the company reports.
In 1988, average newsstand sales were 134,000, with the rule being that the atuo issue sells double the usual. For fiscal year 07, average monthly sales it 173,299 and last year’s auto issue hit 350, 362.
Its survival hinges on a small base of benefactors and subscribers, and it charges for access to its Web site, $5.95 a month or $26 a year.
But the advertising choice is one of altruism, not competition, Weine said.
“We want to support our mission through an untraditional means, and for us, that's advertising,” Weine said. “Ours is an important consumer message and we want to reach the broadest audience possible.”
Kelley Blue Book, long the publisher of the pricing guide for used cars at banks and dealers, still releases its guides in print, “but it's a mature market for us,” said Paul Johnson president of Kelley Blue Book. But on the Web side, “we're nearly sold out for our Web site inventory for the past several years,” he said. “Seventy percent of car shoppers go to the Internet to do research, and that's where the advertisers are. The internet has far surpassed magazines for where buyers find cars to buy.”
When Edmunds first hit the Web in 1994, “it was basically an attempt to sell more books,” said Jeremy Anwyl, Edmunds' CEO. It worked for a few years, but book sales were declining in favor of the Web site.
“By the time the book hit the streets, it was already dated,” Anwyl said.
When it was scrapped two years ago, the brand endured no hardship; Ad revenues at Edmunds.com have risen 50% annually for the last five years, he said.

VW's new marketing campaign and Chevy Maliblues

Volkswagen’s new head marketer, Tim Ellis, will trot out the new VW marketing campaign April 7 and we’re in awe of one thing he’s accomplished: Keeping lips tight on the specifics of the campaign. Usually we’re all over that stuff, but this time, no one wants to play ball and tell us anything.  Well, almost no one. We know there is a new tag line, but don’t know what it is. We also know that it involves a look at the heritage of the brand, which is a smart way to go. Volkswagen has always been the little brand that should and it clearly grasped defeat from the jaws of victory in the North American market. And when marketing broke down, it became a revolt from the grass roots up. Dealers were extremely unhappy with the guitar giveaway (one dealer told us: “I haven’t broken the guitar over my knee yet, but I will”) and the GTI “Umpimp Mein Auto” campaign was too focused on the GTI (“How many of those are they really going to sell?” another dealer posed – answer from us: Not a lot). All said, this new campaign will have to kick VW in the ass all the way up to around 250,000 this year. The brand has the new Tiguan SUV coming in June diesel variations later in the summer, the Passat CC sedan in September and the Routan minivan later in the fall.

Auto scribes ranted and raved about Chevy’s new Malibu when it arrived in the fall. But we just got our test car. We like the battleship gray color and the five-star safety ratings for a frontal crash are nice. And the 22/30 mpg rating is good, even though a 4-cylinder should get better. But so far, it is not the “Car you can’t ignore,” as the early ads portrayed the Malibu. In fact, it kinda turns the parking area in our industrial encampment here into a rental lot. It’s a car, in the most generic terms. And they will sell plenty to fleet. Chevy is moving them a little, 12,460 in February, about half as many as the Impala. But maybe they aren’t selling 50% or so for fleet, as is the case of the Impala. The marketing campaign for the Malibu has been terrific, and the results have been strong. But when you drive the thing, it fails to live up to the hype. And the wishful thinking of the reviewers who loved it shows some pretty uncritical thinking.

Pontiac: No motorheads here and Chapman's Car Compendium

We don’t think that Pontiac should be getting such a tough rap.
As it moves down the ladder in rank at General Motors. That G6  two-door is a cool ride as long as you buy it in black and the Solstice is a good time drive. But we are saddened to see that GM’s idea is to make the brand into some kind of gear head’s dream again. The Grand Am was the backward baseball cap of autos – you knew the beholder of that fashion was ranking low in the gene pool. The Grand Prix was launched on the rental lot and never left. We wince and refuse when they try to give us one at the rental counter, and for some reason, they still keep them in the fleets. Now the G8 is coming to dealers and we are not enamored. Power is cool when it's under the hood of a BMW or an Audi, because German engineering is tops when it comes to horsepower. But the Detroit Three version of power means malfunction and bad ads of cars screaming about. It's so dumb American, so greaser.
The G6 is a winner and it should stay that way as long as Pontiac doesn't forget about it when it comes to marketing bucks. As for the G8, well, put on that baseball cap any way you want.

We recently scored the book Chapman's Car Compendium, a collection of facts and non-essential points about cars that just about anyone will dig into and find something illuminating.
We usually don’t care for lists, but this thing is full of things like the 20 greatest car movies and their stars (includes “Bullitt” and Steve McQueen, “Goldfinger” and Sean Connery and, regretfully “Driving Miss Daisy”). Our favorite is 20 celebrity car deaths, which include the unfortunate ends of  President Kennedy, Sam Kinison and Jackson Pollock, among others.

Chrysler 300; Ethanol: the other inflation driver; Consumers say no to hybrids,

We just got done driving the Chrysler 300 C for a week, and must say it’s very Caddy-ish. We like our luxury here, but this is not only plush but huge, and at $42,000, there are better places to lose our money. Simply put, the thing is a boat, with V-8 power, a wide turn radius and more than enough room for our two 75-pound pit bulls. Our grandparents had a Tornado, and it was a pup compared to this. The ride, though, is smooth as glass and the 4-wheel drive made our daily driving routine worry-free, even when we took it out on some icy roads the other night. We have to add that this car has been a tremendous success for Chrysler, and we are big supporters of the brand, dubious marketing moves aside (Bring back George Murphy). When you can move 120,000 of these gas-sucking brutes amidst all the unreasonable calls for restraint, you’ve got a car that should stick around for some time.

Speaking of ill-advised, politically-motivated institutions, we see the Ethanol Promotion and Information Council (EPIC) is at it again with a new campaign called "fuel the change." Would that be, “fuel the change to the cost of our food, the price of corn and, partially, to our economy?” It’s a sure bet that although this is user-generated, there will be no dissenting voices allowed, no criticisms of the welfare queen farmers who are making out like bandits thanks to strong lobbying. Good example? How about Schlicht Farms Enterprises, a multi-county outfit in Illinois. It received payments totaling $2,842,671.96 between 1995 and 2005, 86% of it to grow corn, which is currently the primary crop used for ethanol. Money must be flowing in at EPIC, as well – adspend in 2006 was $25,000, per Nielsen Monitor-Plus. Adspend last year through November? $1.5 million.
So we decided to take a look at its tax form 990, which is a public record.  EPIC in 2005 took in $966,146 in membership dues. In 2006, when Congress began propping up ethanol, that figure jumped to $5.6 million.
And imagine our surprise when we checked what EPIC claimed it spent on ads in 2005 ($1.7 million) vs. what it claims it spent in 2006 ($1.1 million). We're just sayin'...
Anyway, the farmers have slickered a good many people and it appears they are content to count their money while, no doubt, laughing at the green movement, or whatever this current money-grab is supposed to be.

Then we find a bit of sanity in a J.D. Power survey.
“Although many new-vehicle buyers may want to purchase an environmentally friendly vehicle, only 11 percent are “very willing” to pay more to do so…” Sure, recycling, keeping the heat low, coughing up carbon credit money to some scamster to quell your guilt for your heartless, pollution-emitting self is stupid. But at least we aren’t collectively dumb enough to pay even more for our cars to assuage mostly-media inflicted guilt.

Ok, ‘scuse us. It’s 26 degrees out, the long winter is making us a little cranky, in an ugly, Lewis Black kinda way. We now plan to lock the doors, turn up the heat put on this MC5 box set we just scored on eBay, "Purity Accuracy,"  and think good thoughts to a soundtrack of good, violent music.