“LOOK AT THAT CADILLAC!”: GM TRIES A GEOGRAPHICAL CURE AT CADDY

9/24/14

General Motors announced yesterday that Cadillac will move its headquarters to New York, part of a larger move to establish Caddy as a separate business unit.   Part of the rationale for abandoning the city whose founder gave Cadillac its name is, as new Caddy boss Johan de Nysschen, put it

“There is no city in the world where the inhabitants are more immersed in a premium lifestyle than New York.”

Mr. de Nysschen thus outlines about as good a reason as any not to live in New York, but I digress.

Will this move to New York work?  Caddy has to do something.  Year to date through the end of August, its sales were down 5% in a strong car market.   Making the story even worse, Caddy’s SUVs, the SRX and especially the behemoth Escalade, are selling quite well.  Sales of Cadillac cars, however, were down 15% as of 8/31/14.  Dealer lots are teeming with CTSs and ATSs that simply won’t sell.

So is moving to New York going to change Caddy’s fortunes?   Employing a little uncommon common sense, one suspects not.  But the move to the Big Apple is at least consonant with Caddy’s pricing strategy; i.e., Caddy vehicles definitely are listed at New York prices.  Therein, one suspects, lies the problem; Cadillacs are simply too expensive.  

The ATS starts in the low $30s, which yours truly thinks is a lot of money but apparently no one else does.  But try finding an ATS at that price point; walk around a dealer lot and you will notice that most of the stickers on this cramped car sport a $40 handle, and many are priced in the high $40s.  The CTS starts in the mid $40s, which gives yours truly apoplexy, and can easily reach the high $50s and low $60s.

C’mon!   These aren’t Mercedes or BMWs; they are Cadillacs, for Pete’s sake.  Yes, the current Caddy products are, in many aspects, as good as the European fare to which they aspire.  The handling of the ATS, which is at least as good, in many knowledgeable people’s opinions, as that of the BMW 3 Series comes immediately to mind.  And it is possible to argue with a straight face that the Cadillac cars are as good as or better in totality than their German competitors.  But that misses the point.

People who spend these brobdingnagian amounts on cars are buying, as much as they will never admit it, an image, not a car.  And while Caddy may be as good as BMW, Mercedes, Audi, Lexus, Infiniti, or what have you, it doesn’t have the image of those “luxury”(whatever that means) marques.  And therefore Caddy can’t charge BMW, Mercedes, Audi, Lexus, and Infiniti prices; those who buy such cars will not stand for it.   And old time Cadillac buyers are not used to paying such prices.  But Caddy doesn’t seem to care much for the traditional Cadillac buyer; in fact, Caddy seems to treat its traditional buyers like something it would like to scrape off the bottom of its shoe.  That also is a big part of the problem.  Older, largely self-made, people have money and are willing to spend it on expensive products that deliver value.  Caddy used to know that, but now seems to be tossing such customers over the side while fixating on capturing the attention of the insecure types who fancy themselves the nouveau riche and seek to prove it, perhaps to themselves, by the accumulation of showy and glittery yet ultimately useless gimcracks and trinkets.

So Caddy can tell its hometown to screw itself.  But as long as it charges prices commensurate with those that prevail in its new HQ town, and tells its traditional buyer base to also do the aforementioned anatomically impossible, it will have problems that far transcend geography.

GO AHEAD, DRIVE LIKE AN IDIOT; YOUR LUXURY CAR’S ELECTRONICS WILL BAIL YOU OUT

8/20/14

CNBC, among other networks, has been featuring ads for Lexus of late that highlight Lexus vehicles’ passive electronic safety devices.   In an ad I just saw, a mother driving a Lexus SUV turns around completely to attend to her child seated in a safety seat in the backseat of the vehicle.  In doing so, she wanders into the oncoming lane of traffic and only turns around to face the road when she hears the blaring horn of an approaching semi.  Her Lexus automatically stops, avoiding certain death, or worse, for her, for her innocent child, and for the equally innocent semi driver.  What horrible fate befell those driving behind the frantically breaking semi (and Lexus) is left to the imagination.

Hmm…

The message here is clear:  You can drive your Lexus like a total a—hole, but don’t worry; the car’s electronic gizmos will save you.   So go ahead and drive inattentively. Ignore your primary job when behind the wheel (driving) and attend to life’s more urgent matters, like sending that text, checking that e-mail, gazing at the nav screen, or immediately attending to the slightest hint of discomfort from your child.   Do the sorts of things that normally would put you at risk of life and limb because your car can save you.  Driving no longer requires skill or attention, thanks to Lexus.

Yours truly is only picking on Lexus because that overpriced Toyota brand seems to run this same ad repeatedly and I happen to see it on CNBC.  Other carmakers, and especially “luxury” (whatever that means) car makers use the same approach with varying degrees of fidelity.

The whole “Now you can drive like a moron because the electronics will save you from your utter stupidity and lack of responsibility or concern for anyone but yourself and (maybe) your immediate loved ones” approach genuinely infuriates those of us who simply love to drive.  By “drive,” in this instance, I mean really drive…attentively, safely, skillfully, hopefully manually, and, yes, in a spirited manner.  Slow does not equal safe.   There is no lack of speed that will overcome lack of attention, but I digress.  The ads that embody the “drive foolishly because we have your back” approach encourage the types of imbecilic driving that is becoming increasingly prevalent on the nation’s highways and byways.   More importantly, this inattentive, who gives a rat’s hindquarters what I do because my expensive car will bail me out, approach to driving dramatically increases the danger factor on America’s roads, regardless of the gizmos we pack in our cars.

One of my favorite bumper stickers is

“It’s car, not a phone booth.”

(Incidentally, my favorite bumper sticker is

“Forget world peace; envision using your turn signal.”  But I digress.)

Now we need a new version of the first sticker, something like

“It’s a car, not a phone booth, office, e-mail reception area, restaurant, grooming station, opinion forum, TV room…”

But I fear such a long bumper sticker would be counterproductive, or at least ironic; reading the whole damn thing would require too much diversion of attention from the task at hand.  

TOYOTA’S MARKET SHARE AND THE JAPANESE BUICK

6/13/13

Toyota’s North American boss Jim Lentz said yesterday that Toyota (TM) is unlikely to reach its peak U.S. market share (17% in 2009) this year.   Some observers had expected, or at least hoped, that Toyota could reach this milestone after having a great 2012 after a series of sudden acceleration recalls in 2009 and 2010 and tsunami related supply disruptions in 2011.  These expectations, or hopes, have been dashed as sales have been up by only 5.2% in 2013, not enough to coax TM’s market share beyond the low 14% handle.   The problem seems to have its core in slow sales of the Camry, the Yaris, and the whole Scion line.

So why isn’t Toyota reaching its former market share glory?   The answer is two-fold.

First, Toyota is a successful car company, both here and abroad, because it makes, with a few exceptions, reliable and boring transportation.  In this context, boring is not exclusively a negative; it can be taken in the context of

“This car gets 30 miles per gallon (starts on the coldest of mornings, doesn’t burn oil, never has an electronics problem, etc.) with boring regularity.”

Most people like, or at least will certainly accept, boring with their transportation, and not only in the context of their car providing no surprises.   They aren’t in it for excitement; they want reliable transportation and will accept, or even embrace, boredom for such reliability.   Even though most car guys don’t understand this, this set of preferences is perfectly understandable.   For most drivers, cars are not sources of recreation, or even outright joy, as they are for yours truly.  They are a means of getting around in comfort, a place of temporary much welcomed solitude, and a tool for navigating the roadways of life, literally and figuratively.   They aren’t meant for flinging into curves, apex hunting, rev matching, or other such activities that occupy the time and thoughts of those of us who look to our cars as ways of life, or at least a means of enjoying ourselves.

While those of us who seek outright excitement, exhilaration, and never ending entertainment in our cars constitute a very small minority, there is a substantial subset of people who, while not seeking out excitement in their cars, would certainly tolerate, or even seek out, a little excitement if it requires little or no sacrifice in reliability.   That excitement can come in many forms, be it styling, handling, power, or interior features.  With the vast improvement in cars of late, car buyers are increasingly finding that they don’t have to put up with the boredom of most Toyotas and Lexi in order to enjoy, well, boring reliability.   The Camry and its competitors immediately come to mind.   While the Accord has traditionally been the slightly more fun alternative to the Camry, the Ford Fusion, the Mazda 6, and the Subaru Legacy (See my 5/31/13 piece “OOH, OOH SUBARU…THERE’S SO MUCH THAT CAR CAN DO…”) are all capable of nearly, or completely, matching the Camry in reliability while providing a measure of excitement in styling, handling, power, or some other aspect or combination of aspects of the driving experience.   The same argument can be made to an even greater degree regarding the Lexus ES350 and the BMW 3 series, the Caddy XTS, the Audi A4, and even the Mercedes C Class.

So one doesn’t have to drive a boring Toyota to achieve boring Toyota reliability.

Second, Toyota has been effectively “Buickized,” a phenomenon I’ve been talking about for years.   Toyota is seen by GenXers, GenYers (or millennials or whatever one calls kids born in the ‘90s) as old guys’ cars, much as our generation regarded Buicks.  (Things are changing at Buick in this regard, but not many people seem to notice, but I digress.) This trend was arrested dramatically  in 2012 when the new body style of the Camry, which looks sharper but is still, at least of on a relative basis, a wallowing mattress on wheels, was reducing the average age of its buyers to the mid ‘40s from the (obviously intolerably old!) mid ‘50s.   But that reduction, while dramatic, may prove to be temporary and is reversing in 2013, with the average Toyota buyer’s age stabilizing in the mid 50s.

This is not necessarily a bad thing; there are a lot of people in their mid 50s and we are all getting older (if we aren’t dying) and we all spend money, even if we don’t have it.  (See my 5/29/13 post SAVING FOR RETIREMENT, PAYING FOR EDUCATION, AND TALKIN’ ‘BOUT MY GENERATION.)  Why car buyers feel compelled to constantly go after the younger consumer, even as the legions of older consumers keep growing, is beyond me.   Note, for example, that Pontiac, GM’s division that supposedly aimed at younger buyers, is a memory while Buick soldiers on.   That had more to do with China than the U.S., but that is another story.  The point is that selling to older consumers when the population is aging does not seem to be a bad strategy to yours truly, but those who are smarter, or at least who make a lot more money, seem to think so.

So there are two reasons that Toyota, while seeing increasing sales and consistently being among the top selling manufacturers in the U.S., is not likely to reach its peak 2009 market share in 2013:   more interesting, exciting competitors can match, or nearly match, Toyota and Lexus for reliability and Toyota and Lexus remain old people’s cars.   But don’t make too much of the latter.

I SPENT MINE. YOU STILL HAVE YOURS. SO GIVE IT TO ME.

5/12/13

Some of my musings on financial matters can be attacked by those who consider themselves sophisticated as a mere restatement of the obvious, and I freely plead guilty to such criticism, e.g., S&P YIELDS VS. BOND YIELDS:  I’M YOUR MAN WHEN IT COMES TO STATING THE OBVIOUS, 4/16/13.   Sometimes (usually, really) the path to the truth, and much enlightenment, lies in a firm grasp of the obvious, e.g., ANOTHER OF THOSE TRITE BUT TRUE INVESTING MAXIMS, 5/8/13.   So please bear with what might seem like simple logic in this post; such simple logic seems to escape not only our policymakers but also many people of my generation when considering their finances.

A common theme of my writings through the years in many forums has been the financial irresponsibility of my generation, e.g., THE ATTACK OF THE McMANSIONS FOR SALE:  A SECULAR BRAKE ON THE HOUSING MARKET, 4/23/13, which doesn’t hurt the popularity of my writing as much as one would think.  Apparently, people aren’t afraid of hearing the truth; they are just afraid of acting on it, but I digress.  My generation, as a group, simply doesn’t save money.   Oh, yes, our savings rate has gone up…from abysmal to merely miniscule.   Only a generation ago, the U.S. savings rate was twice as high as our current savings rate, which the baby boomer and younger talking heads describe as “healthy” and “balance sheet restoring”; two generations ago it was three times as high.

Rather than save money, my generation has spent itself silly in order to achieve a borrowing induced lifestyle of which its parents could only dream but to which this generation feels entitled.  Luxury cars, ostentatious homes, yearly “trips of a lifetime,” private colleges whose most salient feature is not their academic superiority but their snob appeal, personal trainers, weekly “spa treatments,” multi-hundred dollar shoes, regular attendance at “priced for the tax code” professional sporting events, restaurant bills that could feed a family, in America, for weeks...you know the drill.  Luxuries are now necessities.

Now my generation nears retirement.  They are, by measures of only a few decades ago, deeply in debt and have, of course, saved nothing.   Yet they are used to a lavish lifestyle.   While they probably haven’t thought about this (They have been too busy “acquiring” things.), they will be heading toward retirement with nothing…okay, maybe a 401k with about a year’s worth of income in it if they have, by standards of my generation, saved assiduously and refrained from borrowing against the 401k for that Lexus that makes last year’s model look, well, “so last year.”   AND YOU CAN’T FINANCE A LAVISH LIFESTYLE WITH NOTHING.

So we will soon be faced with a generation that has grown accustomed to living like kings but can only afford to live like paupers.   They either will be forced to adapt a lifestyle that would make even that of yours truly seem lavish or, following the great American tradition of late, they will look for someone else to not only blame but also to pick up the bills for what they consider “the necessities of life” or a “bare bones lifestyle,” which doesn’t involve less gaudy living quarters, trips to Wisconsin, or non-“luxury brand” cars.

When large groups of people no longer have access to things to which they feel entitled, trouble ensues.  Look at Greece and much of southern Europe.   This story will soon play out in America, as legions of what we used to call “yuppies” and their wannabes can no longer afford the lifestyles they spent through generations of seed corn to attain.  Besides the obvious financial consequences of their spendthrift ways, e.g., enormous debt to foreign countries, there will be societal consequences.   People will feel deprived and turn their greedy eyes on others.  Those few who have been responsible, who have lived modest lifestyles and managed to save (and surprisingly somehow never felt deprived or that they had missed something by doing so) could become the targets of vilification campaigns led by politicians eager to appease the broke majority.  The savers will be castigated as “the rich” and various schemes, like direct or indirect wealth taxes, will be concocted in order to transfer funds to those who spent their vast, or not so vast, incomes on foolish attempts to fill the voids in their lives with material things.

The nearly incessant message of all my even remotely financially oriented writings is to save your money and invest it wisely.  Sadly, in our increasingly crazy world in which politics, the art of pandering to the inattentive or the downright silly, trumps good sense, that advice may turn out to have been silly.  You save, but the government punishes you for it; notice I didn’t use the future tense; this is already happening.  See, inter multa alia, STUDENT LOAN FORGIVENESS:   THE OBAMA ADMINISTRATION’S (?) ASSAULT ON THE RESPONSIBLE, 5/10/13.

I, however, will continue to save and will always encourage you to do so.   Saving is not the ultimate act of optimism; having children is.  But saving still requires more optimism than is normally advised.  So, yes, it is surprising that the advice to save is coming from yours truly, who equates pessimism and cynicism with realism and optimism with refusal to face the plain truth.   One supposes that a spark of optimism still exists in those of us who save, that the habits of a lifetime, perhaps genetically implanted, are simply impossible to break…or that we are foolishly and naively setting ourselves up to be fleeced to pay for those whose most salient characteristics are their financial idiocy and sense of entitlement.