Thursday, July 30, 2020


This is not intended to be an “I Told You So” post, but as I pointed out yesterday, there are big storms ahead for the auto industry. The financial bad news is just beginning to roll in, and it’s really B-A-D.


General Motors has announced a second quarter loss for this year, of USD$800 million, down 132% year-on-year. Slow sales, shortage of stock of profitable pickups and SUVs, and 8 week factory closures all contributed to the result.

GM also ‘burned through’ USD$8 billion in automotive operating cash, trying to keep the candle burning. GM, very optimistically, stated that it expected to be cash positive in the second half, earning up to USD$9 billion, to help pay back a USD$16 billion revolving line of credit set up to survive the worst of the pandemic.

Sure, these are big numbers, but then GM is a big corporation. Wisely, it has not reinstated its dividend, and still holds USD$30.6 billion in operating cash.


However, the really big news is Aston Martin Lagonda’s staggering losses for the first half of 2020. It lost USD$295 million, and was also forced to restate its earnings down for 2017-2018 by USD$20 million, after it identified an ‘accounting error’ in its U.S. division.


The dramatic loss of sales, and the cost of the new factory to build the DBX SUV is pushing it closer and closer to bankruptcy, according to analysts. Adding to its woes, revenues plunged 64% year-on-year, and it has sold only one of its special (USD$3.5 million) DB5 ‘James Bond’ Continuation models from a planned production run of 25.

New Chairman Lawrence Stroll (also the owner of the Racing Point F1 team) said: “It has been a very challenging six months” and highlighted the struggle to reduce dealer inventories.

Meanwhile, Britain’s Daily Telegraph reports that former Aston Martin Chairman, Dr. Andy Palmer, did not spend long in the ‘no paycheck’ wilderness. He has been appointed as non-executive Chairman of UK bus company Optare. Palmer is quoted as saying: “I am excited to take on this role, as Optare is at a pivotal moment in its development.” 

If I was the head of Optare’s parent company, India's Ashock Leyland, I’d keep a close eye on Palmer’s future initiatives, to ensure Optare doesn’t end up in the same condition as Aston Martin.


Aston Martin Lagonda’s statement to the LSE ended on a rather obvious note: “Trading remains challenging in many markets and the pace of emergence from lockdown and consumer recovery varies significantly.” Well, duh! 

John Crawford

Wednesday, July 29, 2020


The global pandemic caused by COVID19 has dramatically re-shaped the worldwide car market, and Australia has not been immune to the rapid shift in market forces, and re-setting the balance between new and used car sales.


Leading Australian motor industry news source, GoAuto News, this week reports three separate changes in the Australian market, which individually may not seem significant, until the ramifications are wrapped together to reveal the extent of how the selling of cars is rapidly changing.


As sales of new cars have dived to record lows, and car companies begin thinning out their model ranges, to focus just on the models which are selling, sales of used cars, and used vehicle support services are showing a dramatic rise in importance.


You can also forget about weekly motoring news, because most automotive writers are still looking at the automotive scene with rose-coloured glasses, dazzled, and focussing on driving and writing about irrelevant supercars, hypercars and glamourous European imports (which are competing for dwindling new car sales), and are ignoring the more practical aspects of the changing market.

In no particular order, here are the key changes driven by renewed interest in sales of used cars. They fall into three categories – sourcing, salvage and transport.


First – sourcing. Due to the pandemic job losses continue, income levels are falling, distances travelled are dropping, and affordability, become paramount drivers of the shift to used cars. This is driving demand to new highs, and many dealers are having difficulty just getting stock of quality used cars.


GoAuto News reports that innovative schemes developed by some dealers are seeing dealers staging ‘drive-in appraisals’ in order to secure essential, potential new stock.

Where once, your trade-in vehicle would rapidly be despatched to the dealer’s favourite wholesaler, the demand for quality used cars, now sees dealers inviting car owners to bring their cars to dealerships, so they can re-evaluate the re-sale value of trade-ins. Cars are being bought by dealers from owners who no longer have need for their car, or simply cannot afford to keep it.


Second – Salvage. This is a hitherto unknown shift in the value of cars which are not considered good enough quality to be resold, and are sold off for salvage value. But even this activity is now under macro-focus. Whilst most of us imagine vehicle salvage as a mountain of discarded cars, being picked up by a crane and dropped into a ‘crusher’, a series of new steps has changed the whole image of salvage.

According to GoAuto News, the sales values of vehicles discarded for salvage are peaking dramatically, in some cases close to 50%. Salvage companies are now finding that recovering still-working parts from cars has become a valuable new income stream – so instead of going direct to the ‘crusher’, vehicles are stripped of still-useful, and readily-saleable items like engines, transmissions, suspensions, steering, electrical components, and in some case undamaged body panels, in far greater numbers than previously. To be fair, this has long been the case, except now, the scale has increased dramatically.

These components are being sold into the ‘used’ spare parts market, or are sold to private buyers who may need to replace a component, but demand a less-costly price than brand-new original equipment (OE) parts; or to assist in building up a restored special vehicle, such as a classic car.


Third – Transport. Australia’s leading vehicle transport company, whose business to date has been simply moving new imports from the docks to the dealers, or interstate from one dealer to another, have discovered that once the new cars are unloaded, their empty trucks have the ability to ‘back-load’ used cars to move them intra or interstate.

The huge increase in demand for quality used cars is driving a burgeoning used car market, and dealers around the country are trading in a rapidly-expanded wholesale market. These vehicles have to be ‘moved’, thereby creating a new income stream for the vehicle trucking companies.


So, if all this additional revenue growth is assisting disparate sections of the overall car market, especially the used car segment, and life is all about ‘Yin & Yang’, where is the loss being felt?


At this stage, even though falling new car sales have somewhat plateaued, the numbers are still down dramatically, and we are seeing new decisions by car companies on an almost daily basis on how they structure and price their model ranges.

In particular, passenger cars are disappearing to be replaced by crossovers and SUVs.

Restructuring in dealerships around the country is marked by staff layoffs for some, and unspecified furloughs for others.

Also, as new schemes such as jobseeker and jobkeeper have come into effect, the cost of those programmes are passed directly on to taxpayers (as these job-retaining subsidies come directly from the federal treasury).

This pandemic is going to cost us all - big time!

And, at the moment - there's no end in sight!

John Crawford

Saturday, July 25, 2020


The latest J.D. Power Initial Quality Study (IQS) and the ‘APEAL’ study (which measures emotional reaction to Brands) have just published and highlight for me, a number of interesting observations.

First, whilst Tesla is emotionally appealing, it ranks as the absolute worst when it comes to ‘faults’. The J.D. Power IQS study looks at the number of faults per 100 cars sold, and in a country with a population of 300 million, that’s a lot of sales, and thus a lot of faults in the ‘duds’.


However, in some rare good news for (my favourite US brand) Cadillac, it sits above the average number of PP100 (which is good news); and scores THIRD in the APEAL report.

Given that many (most?) people buy with their heart and not their head, that result is a very important way point for Cadillac, to remain relevant in the U.S. Market.


Sadly, one of my other favourite brands, Volvo, slumps down near the bottom of the IQS chart, but sits alongside Lexus in the APEAL rankings.


However, Volvo says its business model is not about volume, but profitably, and expects to definitely be profitable by the end of 2020.


But, for all the emotional adulation scored by Tesla, it’s no Volvo (even). In 2019 Tesla delivered half as many cars as Volvo globally, but it also lost USD$862 million, versus Volvo, which made USD$1.62 billion. I’d rather have the money in the bank thanks.

Surprisingly, FCA (which I am constantly bad-mouthing) managed to come top in the IQS with its Dodge nameplate, so it must be doing something right in its quest to fix the squillions of faults it has reported in recent years – with record recalls.

To bolster FCA’s confidence its RAM trucks came in fourth in the IQS.


When I was headhunted to join Jaguar Cars North America in 1990, Jaguar ranked last on the IQS, but by the time I returned to Australia in 1994, the efforts of the Ford-appointed Director of Engineering (Jim Padilla), and a willing Jaguar workforce, had pushed Jaguar up to third place.

That’s quite an achievement in less than four years.


Very sadly for JLR, Jaguar is back down to fourth from the bottom, beating its Land Rover companion brand, which suffers the ignominy of being last!


So, do these surveys count with buyers? Back in the early 90s we at Jaguar were counting on a statistical improvement to change the perception of the Jaguar brand, and for this hallowed British carmaker, it did make a difference.

However, with the introduction of the APEAL survey, the water gets muddy again. Back in the 90s J.D. Power did not run a study on emotional appeal, and we found (anecdotally) that despite Jaguar’s many reported faults, the owners loved their cars, regardless.


Note: Being a KIA owner, I was delighted to see the Brand come equal FIRST in the IQS.


Wednesday, July 15, 2020


Whither Cadillac?  Will it survive?  Or, will it wither and die?

I know I keep asking this question, but the COVID19 pandemic has savagely slashed Cadillac sales in America in much the same way all US carmakers have lost ground. However, the GM premium brand appears to be suffering a severe rejection by premium car buyers.


If you read DRIVING & LIFE regularly, you’ll know I’m a big fan of the brand, especially its proud history as an innovative carmaker from its earliest beginnings. Which is why I find it very sad to see such a prominent American marque virtually disappearing from the market.


Although the pandemic negatively affected all car sales, Cadillac’s sales performance for the first two quarters of 2020 were, in a word – dreadful. In the first quarter sales fell 15.8% (30,325 sales); and in the second quarter as the effect of the pandemic hit home, sales were down 41.4% (23,295 sales). Market analysts say nearly all sales for this half year were delivered from existing inventory.


GM’s response to deteriorating sales led to Cadillac stopping all production at its Hamtramck plant in suburban Detroit. This decision has also meant that two new ‘Blackwing’ high performance models have been relegated to release much later this year.

Cadillac CT4

With every model line suffering dramatic sales downturns, analysts say Cadillac’s future clearly rests on two models, the CT4 sedan, and the large XT6 Crossover. Both cars are, in my opinion, two of the most sophisticated design outcomes I have seen emanate from the Cadillac studio.

Cadillac XT6

What a pity the CT4 'Blackwing' is delayed, as it could be a very strong performer up against its European competitors.


It puts me in mind of the Cadillac STS-V I drove in Michigan back in October 2005. In terms of quality, fit and finish and material quality, it was First Class.

My good friend Bob Lutz and I swapped cars for a weekend (he got a Bentley Continental GT coupe, and I swanned around in the STS-V). The main reason we struck a deal for a car swap is that the Cadillac engineering team was fine-tuning the AWD V8 package, and was keen for comparison feedback with the Audi A6 V8 Quattro, which was my regular company car.


Chief Engineer Dave Leone and I spent quite a while reviewing my STS-V drive report. I have to say, the performance from the supercharged V8 was fantastic, even managing to lay two long black trace marks on the pavement during acceleration runs.


However, my report on the ‘balance’ of the AWD setup was less than flattering. I remarked that compared to the refinement of the Audi A6 V8, the calibration of the Cadillac system needed a lot of work. At high speeds the car was twitchy, and very nervous on varying or broken surfaces.

The engineering team took on board the opinions, got their heads down, and pulled off a neat revision, resulting in a much more civilised performer. 

Sadly, the STS supercharged V8 AWD did not last long in the marketplace. It was a ‘Revheads Special’ and  didn't  appeal to traditional Cadillac buyers.

Once again, it’s a shame that some really good work coming from the Cadillac design and engineering teams foundered.

The marque’s crossovers and SUVs have been the only strong sales performers, and the car models have been gradually thinned down to ONE – the CT4.

With passenger cars ‘on the nose’ in most global markets, compared to the rise of SUVs and Crossovers, it appears to me that GM could easily switch off the power plug to the Cadillac brand, and dump it, in much the same way it simply walked away from Holden in Australia.


A couple of recent appointments at Cadillac have tried to generate some energy behind the brand, but the big problem is always the GM Board. As I’ve said before Cadillac always needed to be placed on a pedestal, and sincerely treated as a true premium brand, with dedicated funding and encouragement for greater technical innovation, reflecting its glorious early history.


However, given the callous treatment of Holden, I think we may well see Cadillac, once bravely called 'Standard of the World', go the way of the 'Australia's Own'.


Friday, July 10, 2020


We all remember the Lancia Stratos (well those of a certain age), penned by Marcello Gandini at Bertone, and launched in 1973, with a transverse Dino V6 producing almost 200hp.

As a lifelong fan of Lancia’s spirit of independence, and innovation I thought this was the most exciting car I had seen come out of Italy for quite a while.

The 1970 Stratos Zero concept by Gandini has been suggested as the inspiration for the Stratos production car, but my dear friend the late Graham Ward (right - probably Australia’s greatest Lancia expert) told me he asked Gandini about it, and the Italian maestro said the Zero provided nothing except an outline.

However, of the 492 cars produced, the mantle for the most exciting version went to the HF, which was used as the basis for Lancia’s rally car, driven by the great Sandro Munari.

The new version may be bigger than the original Stratos, and almost 300kg heavier, but Stoschek says it delivers on every promise. The 4.3L V8 produces 542hp, and the car is roughly the same size as the Audi TT. 


I have to say Garella’s design is beautifully resolved and executed, faithfully following the themes and leitmotifs of the original Stratos, which is one of Italy’s most elegant and purposeful wedge-designs to move from sketch to reality.

According to Paola Garella, his company Maniffatura Automobili has already received interest from potential Stratos customers, willing to donate their Ferrari F430. This is exactly the same process as my friends at Touring Superleggera in Milano operate on, producing ‘new classics’ from current models as donor cars.


I’m thrilled that the historic skills of the carrozzeria survive in Italy, continuing to bring us sublime automotive beauty.


Wednesday, July 8, 2020


The Dodge Journey is the complete conundrum for me, especially in regard to the history of the third of America’s ‘Big Three’.


After more than 13 years, the Journey is now done.

It disappears from the production lines in August, but given the sluggish state of US car sales, they’ll probably be kickin’ around the showrooms for a while to come.


Despite my smartarse staging of this photo (right), when I drove the Journey in 2012, I was really impressed with what Chrysler had done with what began as a dog’s breakfast of platform sharing.


You’ll recall the ‘Merger of Equals’ in 1988 when Daimler Benz AG ‘acquired’ Chrysler. At the same time Daimler had almost swallowed up Mitsubishi Motors. 


What followed was a hurried confluence of platforms from the various companies to produce new models, which included a new Mercedes-Benz SUV (the ML) which shared a platform with the then current Jeep Grand Cherokee.

The Daimler-Chrysler AG entity lasted only nine years. In 2007 Daimler Benz AG sold its majority stake in Chrysler to Cerberus Capital, but before that even more platform sharing was happening. The Dodge Journey is a prime example of what happens when there is no coherent product plan. But, for once it worked out.


The Journey was designed by Ryan Nagode to sit on the platform of the GS Mitsubishi Lancer which was the basis for the Japanese company’s giant-killing EVO, or Evolution X, designed by my good friend Peter Arcadipane.


However, after the initial decision for the new Dodge crossover, the platform was twisted every which way and ended up also being the basis for a range of truly awful automobiles from Jeep and Chrysler. As this photo collage reveals, the platform took on various codes (JC, JS, MK and PK), all derived from what most Chrysler engineers called the least crappy platform, the Mitsubishi GS.

The cars included the Dodge Avenger, Caliber and Chrysler Sebring, plus the Jeep Patriot and Compass.


Chrysler wanted the Journey to be all things to all buyers, which of course creates fertile ground for compromise, where nobody gets what they want. Chrysler’s major focus was on value-for-money, and planned to undercut all its competitors on price. 


However, when you assemble all the components of a car, they all have an individual pricetag, and by the time you bundle them, you end up having to make some significant compromises when it comes to pricing.


The Journey’s biggest albatross was the ‘base’ car. To get the price down, the base model featured a 173hp (129kW), 2.4L four-cylinder petrol engine, which had a real hard time hauling the 1724kg crossover – and don’t even think of hitching up a trailer or a caravan. When that happened, your journey was accompanied by the distinctive aroma of a burning clutch plate!


Enough of the panning and ridicule. Inside the Dodge Journey, it was a design tour-de-force. The interior design team made up for most of the compromises by including such a wonderful array of thoughtful touches, storage innovations and practicality, that you should have bought it on that basis alone! 


To list just a few: the cushions of the front seats were front-hinged and when lifted up revealed a trimmed, secret compartment for valuables; the glovebox has a chilled compartment for drinks; there is a wide-angle mirror which you could pull down (to keep an eye on the passengers behind you); there was a standard in-car entertainment screen in the roof panel; and under the floor of the rear passenger area were two compartments large enough to qualify as an ice-box.


In addition to all this, the second and third row of seats were able to fold completely horizontal, providing a flat floor which allowed you to carry items up to 2.5m in length!


There was an expensive powertrain option, which was a 235hp (175kW) 3.5L V6 with a slick six-speed torque converter automatic. Nonetheless I think Chrysler's all-things-to-all-people car was an accomplished success.


After being dumped by Daimler in 2007 Chrysler hobbled along, borrowing money from any finance outlet willing to trust it. All of Chrysler's cars, Jeeps and trucks, people movers and crossovers were ageing rapidly, and once the FIAT acquisition occurred in 2014 there were some weird cars carrying FIAT and Lancia badges.

There was the ‘new’ Lancia Thema.

However, that turned out to be a re-badged Chrysler 300C. But, one of the more successful re-badgings was a version of the Dodge Journey, called the FIAT Freemont.

Only being available with a modest 2.5L diesel and 4-speed auto, the Freemont was nonetheless successful in Italy. It was a great family car.

Despite this burst of sunshine, Chrysler’s U.S. models became tarnished by sloppy assembly, cheap materials and shoddy workmanship along with poor paint durability.


I sincerely think the Journey was a high spot for Chrysler, but it’s one of too few. When it was the third of the Big Three, it competed equally against GM and Ford; but gradually as management hubris set in, and money ran short due to rapidly falling sales and loss of market share, Chrysler gradually lost its status as ‘BIG’, by any description.

To be fair, the company's American workforce were battered by its dramatically falling sales and status in the US market, and the 'takeover' by Daimler AG. This was a dispirited company, with badly-damaged workplace morale.


The now decrepit Italian-American car company looks like pulling off a major rescue of itself, by ‘merging’ (there’s that word again) with Groupe PSA. However, as I forecast when I wrote about the Peugeot-Citroen takeover, don’t expect to see many indigenous Chrysler models being retained.


The ‘new’ Chryslers that do appear will be built on PSA platforms, and I predict quite a few brand badges will just disappear. Really, all Groupe PSA wants from the deal is access to Chrysler’s US dealer networks, to save it the heavy cost of re-entering the American market, oh, and the Jeep brand!


So why am I writing about an ageing, and an about-to-be-discontinued Chrysler vehicle? For me it highlights the fact that occasionally in the car business you come across a vehicle that is more than the sum of its parts, and I think the Journey is such a car. A good car emerged from between the cracks.


The handling was predictable, the ride comfortable, the fuel economy was acceptable (providing you weren’t towing anything), the price was very competitive, and like all American-made trucks, it coped easily with Michigan winters!

All this from a company with two left feet which has produced some of most awful, retrograde products, and only barely survives thanks to Jeep, and RAM trucks.


I’m sure there are nights when FIAT Chairman John Elkann wakes from sleep, realising that the nightmare (acquiring Chrysler) is real, and has really done nothing to help the Italian car giant.

Maybe though he sleeps better now, knowing the Groupe PSA deal will go through, and at last FIAT may be able to assemble a range of well-specified and well-priced passenger vehicles, after a long period of serving up some truly pedestrian cars.

For example, the basic FCA Small Wide Platform (FIAT Tipo) was originally developed by GM in 2005!

Fiat Tipos, Brescia, 2017

I think the only bright lights were the FIAT 500, and the FIAT 124 sports car. That's a thin thread for an automotive colossus (?) to hang and survive on!


Tuesday, July 7, 2020


Given Aston Martin’s serious current debt; sagging car sales; massive investments and the fact that, as far as market analysts are concerned, it’s a company that’s ‘on the nose’ - automotive observers and commentators are throwing out some very wild ideas about how Aston Martin could be saved, and by whom.


One of the companies that‘s top of many lists is China’s Zhejiang Geely, currently saviour and owner of Volvo, Lotus and Proton.

However, it might be time for a reality check.

Its founder Li Shufu (left) is hailed as a god-like saviour to some famous brands.

Geely has done a great job rescuing Volvo, and helping Lotus climb back up the integrity ladder, but taking a major stake in Aston Martin, may be a step too far.


Car sales in China, the world’s largest car market, are tanking - and the competition to survive is getting stiffer.  The outlook is very grim.

While new car buyers accounted for two-thirds of sales over the last five years, the next five will likely be driven by replacement demand, according to a Goldman Sachs Group Inc. forecast.

Clockwise: Geely; Lynk & Co; Volvo; Proton; Lotus

Geely has done better through the downturn by maintaining a fine balance between production, sales and inventory. But it has had to slash sales targets, moving further away from its goal of selling 2 million vehicles by the end of 2020. While Lynk & Co sales volumes rose, net profit fell. Research and development costs continue to climb. 


However, Geely remains exposed to lower-tier cities in China, where demand has cratered. So, vanity buying is best saved for more upbeat times.


Investing in Aston Martin would be a cash sink, premium brand or not. Low as the price may be, a stake won’t add value to Li’s auto portfolio any time soon, given its debt burden, and a struggling core business. The Geely group should have other priorities, especially its finances. 


On the subject of debt, let’s take a close look at Geely. Debt at Zhejiang Geely totalled 136 billion yuan (USD$19 billion) at the end of September 2019, up from 92 billion yuan a year earlier.

Previous stake purchases (Volvo/Lotus/Proton) have come with leverage. To buy its stake in Daimler, for instance, Geely took to using complex derivatives. Its ratio of net debt to earnings before interest, tax, depreciation and amortization rose to 1.4 times in 2018, from 0.6 times in 2017, according to S&P Global Intelligence, because it took on a fair amount of debt to fund the acquisition of its 8% stake in Volvo AB. 


The credit rating agency estimated that the leverage ratio could rise further on lower sales and shrinking margins.


So despite Geely’s impressive aspirations, and the fine job it has done with the companies it now holds a stake in, I believe Geely is now finding itself in the same boat as a large number of global companies which have been hogging-out on cheap borrowings, at near record low interest rates.

Also, with Geely being mentioned in connection with helping to sustain Jaguar Land Rover, that would put increasing pressure on the Chinese giant.


Understanding debt and its relationship to success is not difficult. You borrow money (at low interest rates), based on a potential improvement in sales; cutting overheads; improving profit margins and efficient cash flow, based on increased sales. This is how a growing business expects these to be steps it takes, to improve its financial footprint. But everyone has to be reading from the same song sheet.


Screw up any one of those variables, and you’re in big trouble. Despite low interest rates on borrowings, maturing debt still has to be either paid off, or re-financed. If your cash flow suddenly sinks, and sales also fall, then paying off the debt, or re-financing becomes a huge impediment to survival – it’s that serious.

What the unitiated (in terms of global finance knowledge) should understand is that, taking these car companies as a giant group of potential borrowers, there is a limit to how much this group can borrow. There is neither a humungeous pot of money available, nor lenders with enough confidence to make loans in the current economic climate.

If the life lesson is, it's all about timing, then a shortage of funds to borrow couldn't come at a worse time for the car industry - which obviously tries to think years ahead.


As the impact of COVID19 changes the very nature of markets, it’s anyone’s guess as to how those companies are going to survive such a rapid and massive sales downturn.


Keeping everything moving in the right direction, like cash flow, and rolling along without impediment is getting harder and harder, as this virus stops factories, sales, and frustrates forecasting.

Number of cars sold worldwide 2010-2020

Of all the world’s global industries, the automotive industry may be in line for some of the biggest changes of all industries. It absolutely relies on replacement business – your car gets old; you replace it.

The cash keeps trickling down; but once the process hits a road block, it’s anyone’s guess how to restructure the centuries-old business model the automotive industry clings to.


Borrowing to keep it going is now a BIG gamble, and the reduction in the number of car companies which CAN remain afloat, is going to change the entire car business from designing, to making, to selling.


I’m glad I’m a spectator, not an investor.




NOTE: I relied on some data from Bloomberg to create a coherent explanation.