Friday, October 30, 2015

Back to the Past

Just following the 30 year anniversary of Back to the Future made me recall the DeLorean.  Before that iconic time traveling car and the man who brought it to the present, there were other wealthy entrepreneurs and automotive engineers that had the dreams and beliefs that the automotive industry will be revolutionized by their design of the car of the future.

The Crosley Hotshot was the work of Powel Crosley Jr., an Ohio industrialist who owned Crosley Broadcasting and the Cincinnati Reds. Despite this impressive resume, he was unsatisfied. Crosley longed to make cars, and in 1939 he founded Crosley Motors. Despite his success in several different businesses over the years, however, the car company never took off, and it became a black mark on Crosley’s otherwise impressive career.

One of the company’s biggest embarrassments was the 1950 Hotshot. A stylish enough car on the outside, its major design flaw was its engine. The car could only manage an average speed of 52 miles per hour, and instead of casting it in iron, it was welded together with tin. The welding failed on a regular basis, and heated the inside of the vehicle to an alarming degree. Crosley Motors closed its doors in 1952, but the Hotshot lives in infamy for a generation who saw a mangled specimen in the 1961 driver’s education film “Mechanized Death.”

As for the DeLeorean, that was due to John DeLorean was an American automobile executive who developed the GTO, the Grand Prix, and the Firebird. Despite being involved with such iconic cars, he’s best known for the one that bears his name, the DeLorean DMC-12, which rolled out in 1981. What first got people talking was the unique gull-wing design of the doors. Once people stopped marveling at it and decided to drive it, however, their enthusiasm quickly evaporated.

The DMC-12 took more than 10 seconds to go from zero to 60 miles per hour, something that would make most Toyota 4 Runner owners take their cars to the shop. The 2.8-liter V6 was lethargic at best, particularly when its job was to power a car with as heavy a build as this one. After a year of flagging sales, the British government ordered the car’s Northern Ireland factory shut down as the workers were unskilled and untrained and that FBI sting over DeLorean might have had something to do with it and the DMC-12 ceased production in 1982.

But even Ford had a lemon.  And  perhaps no car on earth is as identified with failure as Ford Motor’s Edsel. It was discontinued more than 50 years ago, and yet the name “Edsel” is still popular shorthand for a very expensive failed product.

Made by Ford and named after Henry Ford’s son, it was manufactured from 1958 until 1960, but never caught on with consumers. In reality, there was nothing particularly wrong with the car. It’s true that it was overpriced, it didn’t get great gas mileage, and the design of the vertical grill was somewhat ill-advised. However, the Edsel was no lemon, and its failure in the marketplace was due more to excessive marketing hype and an economic downturn in 1957 that made the car’s sticker price prohibitively high. Still, rightly or wrongly, the Edsel is unlikely to ever shake its image as the ultimate failed car.

And lastly another car made infamous by a movie - the Tucker.
Unveiled in 1946 in a series of sketches, the Tucker Torpedo, as the sedan was called, hurtled into the future: With its swooping lines, the car appeared almost as if it were moving, even when standing still. “It was like the Star Wars of that period,” says Jay Follis, historian for the Tucker Automobile Club of America. It wasn’t only the sleek shape that resonated: The car boasted innovations including a third, centered headlight, which swiveled to light the way around corners; fenders that pivoted defensively when the car turned; disc brakes; a pop-out windshield (designed to eject during a crash, protecting passengers); a rear engine; and a padded dashboard.

But while his designs and safety innovations were pioneering, Tucker’s business model lagged. Car manu­facturing had contracted during the Great Depression; by the late ’40s, only a handful of companies remained, rooted in a culture that valued corporate prudence over individual genius. By the mid-1950s, Ford, General Motors and Chrysler manufactured 95 percent of American cars.

So while I appreciate the idea of the Tesla I have little of the adoration for Elon Musk. His Hyperloop is enough to make me laugh my ass off but hey at least he is busy with rocket ships and solar power so he has plenty on his plate to occupy his time and take VC money.  But as for the Tesla  I suspect it will go the way of those other iconic brands.

Is Tesla Doomed?
Road & Track
October 28, 2015

 Bob Lutz thinks the writing is on the wall for the EV maker. Is Tesla Doomed?

 Tesla's showing all the signs of a company in trouble: bleeding cash, securitized assets, and mounting inventory. It's the trifecta of doom for any automaker, and anyone paying attention probably saw this coming a mile away.

Like most big puzzles, the company's woes don't have just one source. It's true that the world may be running light on buyers who will spring for a big-dollar electric vehicle that can't make the hike from Detroit to Chicago without stopping for a long charge. And cheap gasoline isn't helping Tesla's case.

Right now, prices around the country are hovering close to $2 a gallon. If that's bad news for the Prius and the Volt, it's worse for the Model S. In addition, there's never been any secret sauce to the company's battery technology.

The automakers that bought into Tesla's tech early did so to avoid having to pony up development dollars on first-generation battery packs of their own. Now that Audi has announced it's getting into the EV game, Tesla should be even more concerned. If you're a luxury buyer, which car would you rather have? And then there's the distribution problem. Nobody has ever been successful with company stores, though plenty of manufacturers have tried them.

When I came to BMW in the Seventies, it had five factory stores. The idea was, like Tesla, to be in control of the retail environment and give customers an upscale experience. They were all money pits.

 I think Tesla CEO Elon Musk figured that if factory stores work for Apple, they'll work for Tesla. But the fixed costs for an Apple store are next to nothing compared with a car dealership's. Smartphones and laptops don't need anything beyond a mall storefront and a staff of kids. A car dealership is very different. It sits on multiple acres.

You need a big building with service bays, chargers, and a trained sales force, plus all the necessary finance and accounting people. It ties up a staggering amount of capital, especially when you factor in inventory. Under a traditional franchise arrangement, the factory never has to carry that burden. Right now, Tesla does.

Stockholders may be clinging to the hope that the company's upcoming crossover will help put Tesla back on track, but there's little evidence to bolster that optimism. A big, expensive vehicle with a compromised structure to accommodate gullwing doors can hardly be a sales knockout. If I were sitting in Musk's seat, I would take an urgent look at cutting cost. Not just taking cost out of the car, but reducing expense in general.

When they have a situation where, on an operating basis, they're losing $4000 per car, they're in trouble. At some point, they're not going to get any more money. I would seriously consider an entry-level model with a cheaper, range-extended hybrid driveline. Something with a much smaller battery that also looks great and drives great. Something that's electric most of the time, say 50 or 60 miles, but can carry on under gasoline power past that.

Would an internal-combustion engine dilute the Tesla brand? Maybe, but everyone said Porsche could never build a front-engine car, and look how that turned out.

 I like Elon Musk personally, and I think the Model S is a fabulous car, but history's filled with defunct companies with great products run by brilliant people. Unless Tesla rights its organization and products in a hurry, it'll join those ranks.

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