You Got Change For a 500?

I sort of figured this was going to happen.  Fiat is discontinuing its small, cute 500 retro car in North America after nearly a decade.

You might expect that I, as a fan of extremely small cars, am saddened by this news.  Actually, not at all.  Because while it's easy to assume that the discontinuation of the 500 in America is the result of cheap gasoline and a preference for large wagons, that, while partially correct, is hardly the whole story.  The truth of the matter is that the 500, for all its charm, was an unreliable car that consistently rated at the bottom of consumer-satisfaction surveys.  It only reminded Americans old enough to remember when the Fiat brand, which returned to the U.S. in 2011 after a 27-year hiatus, was last available here what lousy pieces of crap Fiats really are.  Also, a new generation of consumers now know how bad they are.

And get this - the 500 was actually Fiat's bestseller in this country!

When Italy's Fiat and the U.S. firm Chrysler merged in 2009, I had such high hopes for the new company.  The Chrysler Group would get new, sophisticated cars much nicer that what was in its Chrysler and Dodge lineups.  Fiat would return to America and get the chance to show how it had learned from its mistakes and was able to produce a quality car.  Also, Fiat's premium Alfa Romeo brand was coming back.  The return of Alfa Romeo turned out to be the only positive thing that resulted from Fiat and Chrysler joining forces.  Fiat-based Dodge and Chrysler models, like the Dodge Dart, flopped in the ten-day sales reports.  The company focused more on Jeeps and the newly created Ram light-truck brand as gas prices dropped and gas-guzzler sales rose.  And Fiat itself, rather than bringing to the States a full lineup of affordable family cars like Volkswagen or Toyota, only gave us the 500, silly crossover derivatives of the 500 and a 124 roadster that's actually a Mazda Miata.  Mainstream Fiats like the Panda and the Tipo never made it to these shores.  Not that their reliability would have been all that much better.

Rather, Fiat centered its U.S. lineup around the 500 and its spinoffs in an attempt to be the Italian equivalent of Mini, whose Mini Cooper model has been a fantastic success in the United States and has spun off a whole slew of derivatives like the Clubman and the Countryman.  Mini thrives because, contrary to popular wisdom, Americans will buy a small car if it is unique, well-appointed, and fashionable.  But it also has to be good, and Fiat's 500 never caught on like the superior Mini Cooper, which, despite some early reliability issues, has been continuously improved and remains a desirable, sporty little car.  With the similarly small 500, Fiat had the chance to make Americans fall in love with its own idea of a little retro vehicle, but the firm blew it.

I can't see Fiat lasting in the United States much longer the second time around.  When your bestselling vehicle is too unpopular to continue offering, it doesn't make sense to go on.  Its cars are so bad that even if gas prices hadn't come down after the Great Recession was over, the 500 still would have ultimately flopped and Fiat still would have regained its reputation as a joke of a car brand.  And the joke is this: The name Fiat officially stands for "Fabbrica Italiana di Automobili Torino," which means, "Italian Factory of Turin Automobiles."  What Fiat really stands for is, "Fix It Again, Tony!"

The Penske File

Roger Penske's auto parts company looks to a be a big winner in the shakeup affecting the American automotive industry. Penske's namesake transportation services company, which already sells Daimler's Smart car in the United States, has acquired GM's Saturn brand.

Why is this good? Well, it will keep Saturn dealers in business and save jobs. And, despite the brand's loss of direction in this past decade, it continues to have a good reputation for quality service and no-haggling deals. Penske will continue to sell GM-made cars for a couple of years - sorry, no Astras - and after 2011, the firm will sell cars from other manufacturers.

The sad irony is that Saturn started out as an effort by GM to win buyers back from imports, and it succeeded at first. But as subsequent product became more generic and efforts at carving out a new image for the division failed, the General has had to give up on the venture and concentrate on its more mainstream brands. Penske will have to find another source for Saturn vehicles, and there's no other domestic manufacturing base he can turn to, unless he wants to sell Fiskers or Texas-made DeLoreans. What's left? You got it.

Saturns for the 2012 model year might come from Renault or possibly even from a Chinese company.

Meanwhile. . . . After years of a huge German and Japanese presence in the U.S. automobile market, the pending sale of Chrysler's assets to Fiat of Italy seemed to complete the domination of the American highway by the old members of the Rome-Berlin-Tokyo Axis. Not so fast. Chrysler's stiffed bondholders, whose intransigence put the automaker in bankruptcy in the first place, petitioned the Supreme Court to block the sale approved by a New York bankruptcy judge, and Justice Ruth Bader Ginsburg - who must have had a bad experience with a Dodge - temporarily delayed the sale pending a review by her and her colleagues. If the delay goes on long enough, the Fiat-Chrysler deal could be scuttled and the company liquidated. Fiat CEO Sergio Marchionne, Il Duce, would not be pleased.

And if that happens, how would Marchionne get Fiat back into the U.S. market?

Hmm, maybe he should call Roger Penske . . .

Breakdown

The latest news from Detroit, the city of lack of opportunity and of impossibility and the place where anything can go wrong (and does), is the elimination of several GM and Chrysler dealerships in the U.S. to get Chrysler out of bankruptcy and to save GM from it. Roughly forty percent of dealers representing each company are to go out of business as soon as possible.

Most of the dealerships being eliminated are small, local ones that stick to one GM or Chrysler brand, and each company hopes to cut costs on maintaining their franchises by relying on the larger dealerships. Wayne Dodge - a small dealership that handles the immediate area in Wayne, New Jersey, based in the township's Mountain View section - is one of the many small local dealers known for friendly, one-on-one service that is closing down. By cutting out local dealers - some of whom have been in business since the Wilson administration (including Chrysler-affiliated dealers who predate the company itself and probably started out selling Maxwells) - and staying with the big, impersonal dealers known more for their obnoxious radio commercials than for quality service or a strong commitment to their customers, GM and Chrysler are only proving themselves to be more out of touch with the consumer.

Either way, there'll be a whole lot fewer dealers, and thus fewer opportunities for reasonable, sound deals. A lot of customers are going to get screwed.

Meanwhile, GM is looking to sell Opel and Vauxhall to Fiat. Since these brands (Vauxhalls, sold in Britain, are just rebadged Opels with right-hand drive) are the crown jewel of GM's foreign operations, it only goes to show how far the General has fallen. To leave Europe and to sever itself from Opel's stellar engineering and design (not to mention the GM employees responsible for it) shows how diminished the once-mighty company has become.

Fallen Pentastar

Chrysler declared bankruptcy today. This is the biggest blow to the American auto industry since Tuesday.

The nation's third-largest (read smallest) major automaker almost avoided this fate. Chrysler managed to negotiate respectable deals with its banks and with the American and Canadian autoworkers' unions to stay in business, but a consortium of forty hedge funds refused to renegotiate their loans with the company and so Chrysler entered Chapter 11. What David Riccardo, Dieter Zetsche, Cerebrus, products like the Dodge Daytona and the Chrysler LeBaron GTS, the Eagle brand, and a series of other missteps and disasters over the past thirty years couldn't do, a bunch of greedy investors managed to do in one fell swoop.

Needless to say, President Obama was not happy with the hedge fund investors. But he does hope to help shepherd Chrysler through the even more difficult period it's now entering. Bankruptcy does not mean going out if business; rather, it means a restructuring of operations, a reworking of debts, and a fresh start once it's through. And with Fiat guaranteed a 35 percent stake in the company, along with the workers owning 50 percent, the federal government will take an eight percent share (with the Canadian federal government getting the remaining two percent) with $8 billion of aid from Washington. And of course, there will be new product, like the upcoming new Jeep Grand Cherokee, as well as small cars from the Fiat connection.

But who will by cars from a bankrupt company? The Chrysler reorganization sounds promising, but will consumers have any faith in it?

Chrysler already has new product creating a buzz, like the newly revived Dodge Challenger, but that may not be enough. After all, Studebaker impressed everyone with the Avanti in 1963 and was gone in five years.

Chrysler Hanging On, Pontiac Gone

Being able to by a Fiat in America for the first time since 1984 is one step closer to reality as Chrysler has reached a tentative agreement with the Canadian Auto Workers Union, with only the UAW in America to negotiate with. Once both unions finalize these deals, Chrysler's big bondholders - mostly banks whose loans are secured by Chrysler's assets - need to take care of any remaining business. Hopefully, the dirty work will be done by the Thursday deadline, and we'll soon know whether Chrysler will survive with a little help from Turin. As for the Dodge and Chrysler vehicles we can expect, well, let's not get any half-baked collaborations. (The Chrysler-Maserati TC was bad enough, thank you.)

Meanwhile, events are moving quickly at General Motors. In a bid for more cutbacks to save the company, GM is expected to announce that Pontiac will be discontinued. It's a sad end to a once proud brand. As GM's performance division, Pontiac put out sporty cars usually far more interesting than the similar product from Chevrolet's lineup. The Firebird Trans Am was distinguished by an optional 301-cubic inch turbo V8 in the seventies, and the styling of later Firebirds was far more daring than their Camaro cousins. They also had those magnificent 305 V8s with port injection. The original GTO - a mild-mannered family sedan turned into a powerful performance vehicle - was the first "muscle car." More recent sports sedans include the Bonneville SE and the 6000 STE. And who can forget the Fiero, the first mid-engined two-seat sports car from a major U.S. manufacturer? Sadly, most people have. Lasting only five years in the eighties, it's mostly thought of as a Reagan-era relic, the automotive equivalent of a Members Only jacket, a running joke on "How I Met Your Mother."

Sadly, more recent Pontiac product hasn't caught on. The reborn GTO was a flop, as was the rakish G6. The Solstice - a roadster that marked Pontiac's return to the two-seat sports car market segment - has generated more interest than sales. Many of Pontiac's product of late hasn't even been developed at home. The aforementioned GTO was a Holden from Australia, as is the G8 sedan. Pontiac isn't even an autonomous division anymore; it's just a brand name now, sharing floor space at dealerships with Buick and GMC.

I should have realized that the brand's days were numbered back in 2004 when Oprah Winfrey gave away a G6 to everyone in her studio as a promotional stunt for both the brand and for herself. If even Oprah couldn't get people into Pontiac-Buick-GMC showrooms, no one could.

Rest in peace, Pontiac. :-(

Government Motors

President Obama pretty much had the government take charge of what's left of the American automobile industry, dismissing GM and Chrysler's survival strategies as insufficient and having them go back to the drawing board . . . and giving Chrysler only a month to finalize a partnership deal with Fiat that has only a slight chance of being completed in that time. The government will now back warranties for GM and Chrysler products, and GM chairman Rick Wagoner has been forced out of a job, with a severance package of $23 million. That's pretty good for someone leading an industry whose remaining employees are asked to make the kind of sacrifices the bankers don't have to worry about.

It seems weird to many that the automakers are being punished so severely for their bad business practices while the banks get even more money on top of the bailout funds they've already received for their bad business practices. But Obama has gotten caught in the devil's bargain. The banks are too big to fail, and money has to be pumped into the system to get credit flowing again. This is what most consumers need to buy a car.

Some of the government's policies in helping out Detroit make sense. GM and Chrysler are overrepresented by too many dealerships meant to cater to a market share that was once much larger than it is now, so dealerships have to be sacrificed. Also, many of GM's brands, which once dominated American highways,have become irrelevant and redundant. Pontiac, after trying to produce a distinctive high performance image for their cars, are once again becoming nothing more than Chevrolets with split radiator grilles; its "newest" model, the G3, is actually a rebadged Chevrolet Aveo. I used to insist that Dodges were Plymouths and Plymouths were Dodges and Chryslers were Dodges and Plymouths with upright grilles, plushly upholstered seats, and more chrome, but even with the Plymouth brand name long gone, Dodges and Chryslers are still rather redundant, and even the distinction of Jeep trucks and SUVs (made by Chrysler since 1987) is getting blurred as some Dodge trucks (like the Nitro SUV) derive much of their styling and engineering from the Jeep lineup.

GM should survive; even though new chairman Fritz Henderson (do you really want a guy whose nickname is slang for something that's broken?) has indicated that bankruptcy is "probable," its new product should help. Many of GM's latest models are more competitive with their Asian counterparts; my own cursory, unscientific census suggests that the all-new Chevrolet Malibu is selling well among the few Americans still buying cars. Chrysler is a question mark; even though some question the logic of its deal with Fiat, due to the fact that Chrysler's 1998 merger with Daimler-Benz was a fiasco, it's worth noting that Fiat makes more cars for the average buyer; its legendary 500 was and the retrograde 500 is the Italian equivalent of the Volkswagen Beetle. This deal will allow Chrysler to make and sell European-engineered cars prices for more of a mass market.

Ironically, despite Obama's call for Detroit to make greener cars, his administration has declared that the coming Chevrolet Volt hybrid is too expensive to turn things around for GM. Its sophisticated components are too costly to produce. And here's another dirty little secret; hybrids are only a small part of the car market. Most people in this country buy cars that use gasoline, and, as long as gas is cheap, prefer bigger cars that use more of it. Unless gas prices go up again and stay up - or unless gasoline subsidies in this country are eliminated and more punitive federal taxes for gas guzzlers are imposed - you won't see many more Aveos or G3s on the road, much less Volts. Which works out fine, since the Aveo/G3 twins are made in Korea anyway.

Obama hopes to save the American auto industry, and I hope he does a better job than the guys who actually ran the industry. But that industry could just as easily disappear, or be reduced to total irrelevance even in the best of circumstances. I'm somewhat skeptical myself. In fact, I saw something really eerie today. On the road, driving home from work, I saw a Model T going the other way. Okay, it was a collector's car, being driven by its eccentric owner. But even though Ford is doing relatively better than GM or Chrysler, the sight of a Model T Ford was still rather symbolic. The Model T is a ghostly symbol of Detroit's glory days, and the sight of one was like a premonition of the industry's death.

After all, Model Ts are black.

(Whew! I certainly didn't go out like a lamb tonight! It's March 31, 2009, and that's the end of the first quarter!:-D)