How rivals should tackle the dominant German luxury brands

I can list at least eight luxury car brands that have long aspired to topple the Big Three from Germany, Audi, BMW and Mercedes-Benz.

Try as they have, and despite rich histories, Alfa Romeo, Cadillac, Lincoln and Jaguar Land Rover have not yet put even a tiny dent in the German armour. And Infiniti, Lexus, Acura and now Hyundai’s Genesis are Asian luxury upstarts that remain also-rans compared to the Germans.

BMW 7-Series: BMW offers the template for aspiring luxury brands to succeed. 

Now of those eight, I’m betting that one of will separate itself from the pack: JLR. Why? Let’s start with a little history.

In the late 1950s, BMW AG was on the brink of bankruptcy, with Daimler-Benz poised to scoop up its Bavarian rival until the Quandt family stepped in. BMW has remained independent and family-controlled to this day.

BMW spent the 1960s as a small, aimless automotive company producing a hodgepodge — from the tiny one-door Isetta runabout to the V8 507 sports car. This confusion was a prescription for failure for a company with annual sales of 140,000.

Even a nearly-blind Herbert Quandt could see this when he turned over the CEO reigns in 1970 to a relatively obscure Prussian engineer named Eberhard von Kuenheim. Armed with ambition, discipline and vision, von Kuenheim led the creation of a new BMW. That company would simply be “the best.”

Eberhard von Kuenheim

BMW lacked the resources to become a big volume automotive player, so von Kuenheim’s team committed to premium cars that would dominate niches by investing richly in engineering, manufacturing and supplier relations.

The goal was to have the best technical content, the best chassis, engine and handling. BMW’s plants would become famous for efficiency and flexibility. By 1972, von Kuenheim had wooed a young sales and marketing whiz named Bob Lutz to re-fashion the sales organization, too. By the late-1970s, BMW had established itself as uniquely premium automaker.

This brings us to today.

Von Kuenheim, in various interviews over the years, has laid out the exact strategy the eight aspiring luxury brands should follow if they hope to mount a challenge to the Germans. It starts with the teamwork of a dynamic group who make quick decisions about how to fashion excellent, ground-breaking products and services.

“Strategic decisions are never one man’s decision,” he told Automotive News Europe. “There is a chain of decisions, and the strategy is the sum of them. The important thing is to get up and act a bit earlier than others.”

Perhaps most important of all, this strategy demanded that BMW think and act bigger than itself – to think globally.

“We were very provincial,” von Kuenheim told Automotive News. “Not a European company, not even a German company. It was a Bavarian company.”

So here is the template for how any one or all of the eight wannabe-big luxury brands goes forward:

  • take decisions quickly
  • act boldly;
  • bring in young, dynamic and fearless talent;
  • act independently;
  • pioneer and dominate niche segments, loading up with the best technology.

That formula, followed over a multi-year commitment, backed by a strong board, will deliver great products, built in efficient, flexible plants, delivered through a world-best sales organization.

The Jaguar F-Pace crossover has been a smashing success. 

Of the Gang of Eight, JLR has the best chance of doing truly startling things. Jaguar Land Rover may be owned by Tata, but the Indian parent has used a guiding hand to write cheques when needed. Jag, underpinned by its excellent plants and the ability to act independently of Tata thanks to its modest size, is steadily moving into new segments with bold designs and fantastic technologies.

The rest? Well, Alfa Romeo is owned by Fiat Chrysler, which lacks the resources to set Alfa free. FCA needs Alfa to be a profitable success, and soon.

Then we have Cadillac and Lincoln. Both are owned by Detroit-based parents who seem incapable of leaving either one alone, completely free to be great or a disaster. Cadillac is the more independent of the two and might yet surprise us. But the new Lincoln Continental rides on a longer, wider, taller version of a CD4 platform shared with the Ford Fusion. Enough said.

Infiniti? Too many broken promises. Lexus is interesting in that Toyota is very rich and committed, but Toyota’s shadow complicates matters. Acura continues to make up-market Hondas and Hyundai’s Genesis is unformed and quite obviously a work in progress, designed to distance Genesis as far from Hyundai as possible.

If I were a betting man, I’d put my money on JLR, whose top leadership, by the way, is German.

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Tesla’s moment of truth is here

I drove my first Tesla many years ago in Los Angeles. I was appalled.

Model 3 prototype.

The Roadster, a modified Lotus stuffed with little lithium ion batteries, was quick and nimble, but comfortable as a straightjacket, hot as a sauna and crude as a high school science project.

For me, Tesla looked like a scam and its CEO, Elon Musk, a stock promoter. Then George Clooney’s Roadster burned to the pavement. That seemed it for Tesla.

It wasn’t. Give Tesla its due. Friday, with the official arrival of the much-hyped Model 3, Tesla will take a huge step. Kudos. No other start-up car company has managed to survive and thrive from a valuation standpoint.

Tesla has a market cap of nearly $57 billion (US), more than BMW and General Motors. Institutional investors have been propping up Tesla for years; that’s what is behind the strong share price.

Tesla CEO Elon Musk (right) and actress Amber Heard.

Indeed, Fidelity owns some $8.0 billion of Tesla, Baillie Giifford nearly $5.0 billion, T Rose Price $3.5 billion and Vanguard nearly $2.0 billion (all figures in U.S. dollars). The Chinese internet Giant Tencent has purchased 8.2 million Tesla shares, too – about one-third of what Fidelity holds. When a small handful of very large investors own the majority of a company’s shares, the potential for stock manipulation is high.

Still, Tesla seems on the verge of doing something quite unimaginable nearly a decade ago: start deliveries of a mass-market electric vehicle (EV).

We won’t know details until 7 p.m. PST Friday, but we do have Elon Musk’s tweets and promises. The starting price is $35,000 (US) and it will be available with few configurations. Range will be at least 344 km/215 miles. Many believe the battery pack will be 55 kWh, allowing Tesla to say it offers less range than the Chevy Bolt because it has a smaller battery.

The Model 3 prototype looks similar to the Model S and it will be a sedan, not a hatchback. The Model 3 will be offered with standard rear-wheel drive or optional dual-motor all-wheel drive. It will seat five. The prototype’s central dashboard display screen is unlikely to find its way into the production car.

Musk sees the Model 3 as a rival for the expected onslaught of EVs from BMW, Mercedes-Benz and Audi – and a current challenge to the likes of the current BMW 3-Series and Audi A4. He is less interested in positioning the Model 3 against the Bolt and Next-generation Nissan Leaf.

The Model 3 will use Tesla’s DC fast-charging capability, using Tesla’s own Supercharger – though owners will have to pay for the privilege. Surely the car will be nimble and fast.

Musk says Tesla will build 100 cars through August, followed by 1,500 or more beginning in September, and 20,000 starting in December. Most who paid deposits will wait for their ride.

Tesla, then, is about to transition from promising startup and stock play to a real car company producing, delivering and servicing huge numbers of cars each year. Such a leap forward will be extremely difficult. We have arrived at Tesla’s make-or-break moment.

If you believe in omens, consider: Consumer Reports just named the Model S its top-rated luxury sedan after the automaker updated its software. On the other hand, the Model X remains near the bottom of its category.

The marketplace will digest all this and come to a conclusion. We’ll have an indication of what that might be next week, when Tesla reports earnings and Musk is asked direct and probing questions from analysts and the like.

This fast-moving story is now becoming very interesting and very real.

 

 

 

 

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Nissan’s LEAF 2.0: room for improvement

Nissan has sold more than 260,000 LEAF electric vehicles (EV) since December 2010. As battery-powered cars go, one could argue the LEAF has been a rousing success. Nissan is the world’s No. 1 EV maker, period.

The world’s best-selling EV is the Nissan LEAF, but overall it’s been a disappointment.

Yet in the bigger picture, the LEAF has been a savage disappointment. Nissan had hoped it would ignite a frenzy of interest in EVs – among buyers and automakers racing to meet mounting consumer demand for zero-emissions vehicles.

Yet last month, only 122 Canadians bought a LEAF ($33,998). LEAF buyers may be eligible for up to $14,000 in provincial incentives, but a $20,000-something Nissan EV still has little mainstream appeal – even one like the zero-emissions LEAF, a five-door hatchback with a range of up 172 km.

The next-generation LEAF really must be a vast improvement over the outgoing one. And now the tease is on.

The Nissan Vmotion 2.0 is a new concept vehicle that signals the company’s future sedan design direction and Intelligent Mobility technology.

We’ve already seen a tiny bit of the “next chapter in Nissan’s Intelligent Zero-Emissions Mobility.” The teaser image is just the start of Nissan’s campaign to reinvent not just the LEAF itself, but its place in the world and how people perceive it. There will be more photos and infobits to come, culminating in the global reveal of the next-generation LEAF in early September.

So what’s Nissan’s plan for LEAF 2.0? It will go on sale by the end of this year and it surely will remain a hatchback. Expect it to go perhaps 400 km on a single charge.

We might also see the LEAF become something of a brand unto itself, one that includes an all-electric crossover. Nissan has hinted at this in discussing the coming Vmotion 3.0 concept to be shown later this year.

Teaser image: The new #Nissan #LEAF. Coming soon.

We’ve already seen Nissan’s EV design ideas in the Vmotion 2.0 concept. Nissan has talked about the styling demands and opportunities presented by electric motors and batteries and has said we’ll learn more about Nissan’s views here when we see Vmotion 3.0.

Nissan will also try to tie together the three emerging trends in the global car market: electrification, autonomous driving, and connectivity in LEAF 2.0.

“Why not try something new?” Alfonso Albaisa, Nissan global design chief, said in Automotive News. “In the future, we’re not going to have just one EV. So we’re starting to map out what is the DNA that can go across different genres.”

He told the industry publication that flat flooring, sleek aerodynamic shapes, and narrower, low-resistance tires will likely be prominent in Vmotion 3.0.

“We are clearly focusing our attention on a crossover EV, because it’s our DNA,” he said. “The crossover will really embody the latest Nissan Intelligent Mobility features.”

As for the current LEAF, the soft, bubble-like look is the automotive equivalent of a Birkenstock sandal. Ugly, but comfortable. And while that design might have some appeal for a sliver of true believers, we know from Tesla’s success that sleek styling sells electric cars.

The 2017 Nissan LEAF features a high-response, 80kW AC synchronous motor that generates 107 horsepower and 187 lb-ft of torque.

Here’s what else we can expect in LEAF 2.0. It would make sense for it to improve on the Chevrolet Bolt, which has a 60 kWh battery, a range of 383 km and a 0-100 km/hour sprint of about seven seconds. Nissan should also be able to improve on the Bolt’s recharging capability.

Using a DC (direct current) station, the Bolt can be juiced up to a range of 145 km in 30 minutes. However, rumours are circulating that Nissan might launch LEAF 2.0 with a pedestrian battery, say 36 kWh or 48 kWh. That would be a mistake. It would put the car at a big disadvantage versus the Bolt and Tesla’s promised Model 3 due later this year.

One advantage the LEAF will have is on the production side. Nissan makes the LEAF in three locations: Japan, Tennessee and the U.K., so buyers will have easy and quick access to the new car regardless of where they live.

We can expect Nissan to launch a well-tested, proven LEAF 2.0, one remarkably durable and reliable. The LEAF’s proven quality is one selling point going forward, and Nissan’s work on autonomous and connectivity technologies will surely shine in LEAF 2.0, too.

That leaves design. It’s time for Nissan’s stylists to step up and make LEAF 2.0 sexy, not just practical and durable.

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Will Ford’s new CEO fix wonky gearboxes and other quality woes?

One wag described Ford Motor’s new CEO as a “former furniture salesman and college football fan-boy.”

2017 Ford Focus: 14 recalls in Canada just since 2012. Ford quality has been terrible for years now.

Whatever his credentials, Denise Cuthbert would like new Ford CEO Jim Hackett to do two things: fix once and for all the wonky gearbox in her 2012 Ford Focus and put some serious effort into boosting her investment in Ford Motor shares.

Cuthbert has been through three transmissions since buying her Focus and “another is likely in the future.” At first, she had to fight Ford Canada tooth and nail to get the problem-plagued gearbox replaced. Then new ones were installed with maddening regularity, year after year.

The latest one, she adds, “is supposed to be good, but it was awful at New Year’s.” Going up hills during the holidays, her car stalled frequently and a dashboard light warned of overheating. “Ford said it was common when not broken in and it would get better. It did,” she adds.

Beleaguered Ford shareholders will not be happy to learn that Ford has told Cuthbert – and we can assume many thousands of others like her – that the company will cover all the costs of this disaster of an automatic transmission for 10 years.

Jim Hackett, Ford’s new president and CEO, with Executive Chairman Bill Ford (right).

The Focus, in fact, has been the subject of 14 separate recalls in Canada just since 2012. Last year, Transport Canada said it was investigating a “significant” number of concerns over Ford Focus and Fiesta models after owners said their cars began jerking and stopping suddenly.

Cuthbert and others appear to have been terrorized by Ford’s PowerShift Dual Clutch automatic. German automakers have had great success with dual clutch gearboxes, but Ford’s foray has been an utter catastrophe.

The problem boils down to this: Ford moved too quickly to introduce its dual clutch setup, pushing ahead with new technology before it was ready for prime time.

For Cuthbert, this experience has been especially troubling because she’s been a loyal Ford shareholder for more than half a decade. As a Ford owner, she’s embarrassed by Ford’s technological incompetence and she’s been troubled by a languishing Ford share price – despite a healthy and consistent dividend in the 5%-range.

Former Ford Motor Company CEO Mark Fields reportedly was more concerned with the nuts and bolts of running a car manufacturer than artificial intelligence, 3D printing, robotics and so-called “deep learning.

Shareholders and owners like Cuthbert may or may not be comforted by this week’s dismissal of Mark Fields, the ousted CEO who spent his entire career rising through the ranks of Ford. Under Fields’ leadership, Ford spun off record profits and a solid dividend, but the share price declined 40%.

Ford’s shares today sell for about $11 (US), down from $15 (US) two years ago. If you invested in Ford exactly two years ago, you would be down 27 per cent. Sure, sure, the dividends have been nice — including special dividends in 2016 and 2017) – but an investment in a basic S&P 500 index fund would have delivered a far richer return.

During that time, and dating back several more years, the quality of vehicles produced by Ford Motor has been terrible. In the latest J.D. Power and Associates’ long-term Vehicle Dependability Study (VDS), Ford is near the very back of the pack.

Indeed, Ford’s quality woes can be traced to the early part of this decade when the company began a serious push to become known as a maker of innovative, technologically advanced and very stylish cars and light trucks. As Ford has introduced new technologies and designs, quality has suffered and suffered badly.

How bad is Ford’s quality? As Automotive News reported last month, Ford’s top executives forfeited hundreds of thousands in bonus dollars after the company fell short of its internal quality targets in 2016. Ford’s proxy statement said senior leadership achieved just 52 per cent of the quality goals its board of directors set in 2016.

Ford’s fully autonomous Fusion Hybrid research vehicle on the streets of Dearborn, Mich.

And yet on Monday, when Bill Ford Jr. announced that Mark Fields would be replaced by new CEO Hackett, Henry Ford’s great-grandson didn’t focus on a renewed effort to improve Ford’s quality and boost its manufacturing and product-cadence efficiencies. Instead, he dwelt on this:

“Well, if you think about the trends that are coming at us, things like artificial intelligence, 3D printing, robotics, deep learning, we need to have a point of view on all of these things and not only a point of view, but a plan to either integrate them into our business, to help us drive our business, or a thoughtful reason as to why we don’t think that’s a right reason at the time.”

Ugh.

Let’s be very clear. Ford in 2017 is a car manufacturer. Of course Ford’s leadership needs to think strategically and for the long term, and it must be deeply concerned with “innovation.” But not at the expense of its core business – which is making and selling a commodity, in this case cars, to people like Denise Cuthbert.

Owners like her might enjoy owing a talking car that can do the laundry and drive itself. But what they really want is a reliable, safe, comfortable and affordable car that goes from A to B. Period.

And Ford owners and Ford stock owners don’t care whether or not Ford is a “transformative” company; they want cars that work every time with the turn of a key and a share price that goes up, not down.

This brings us to Hackett. Of all the potential replacements for Fields, he appears to be the most spectacularly unqualified candidate possible. New CEO Hackett, we’re led to believe, is a change agent who will push autonomous vehicles and drive all sorts of other technological marvels into new generations of Ford vehicles.

Hackett comes to the top Ford job after a brief stint as head of Ford’s autonomous vehicles subsidiary FordSmart Mobility LLC. He has been on the board of Ford since 2013 which is at least helpful in understanding the complexity of a global carmaker.

But Hackett’s resume should worry anyone with a deep understanding of the complex car business on a global scale. As former General Motors CEO Dan Akerson once told me, running a car company is more challenging and difficult than anyone can imagine who hasn’t done it. That from a man who ran two telecom companies and worked as an investment expert before taking on GM.

Hackett? Well, he was CEO of Steelcase, an ages-old Michigan furniture manufacturer before moving on to run the athletic department at the University of Michigan, famous for its massive football program and a big stadium He may be, as his supporters have argued, a wonderful leader, a gifted cultivator of corporate culture and a change agent of unparalleled skill. He’s also 62 and has never run a car company.

He seems a little late in life for on-the-job learning – like a branding expert becoming president of the United States. The truth is, Hackett simply cannot appreciate what’s in store for him. But he’ll find a cautionary tale in the story of how Ford botched the introduction of its innovative dual clutch gearbox.

After he studies that debacle, he should call Akerson right away. If that doesn’t sober him up, and before he gets all carried away with being a change agent, he should reach out to Cuthbert and all the other unhappy Ford owners and explain how his deep knowledge of making furniture and managing a college football program is going to get her Focus fixed now and forever.

 

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2017 Infiniti QX30: the alliances strike their compromises

The car business is glamourous and gritty. Complicated and simple. Global and local.

Every product decisions is a $1 billion investment, or more. The oversized egos who run car companies are amusing yet somehow manage to retain their sanity while managing creative types — designers and engineers who are passionate, eccentric and sometimes unruly.

2017 QX30: as interesting to look at as Scarlett Johansson in her Black Widow Costume.

Point is, while what you see in showrooms is sexy, the gritty business of conceiving, designing, engineering, building, marketing and selling cars demands courage, discipline and luck in the form of good timing. Governments are always a regulatory force, by the way. They impose costly rules and want to see car companies building “in-market.”

As a matter of economics, car companies form alliances and relationships with other car companies and with suppliers. This is often a strategic piece intended to help them navigate a thicket of consumer advocates, lawyers, and fickle consumers. Vehicles today come from global companies looking to sell to the entire world, yet cars are sold one at a time to local buyers.

But if a new model is a hit, fat profits pad expanding bottom lines. A failed model, however, wrings red ink from the balance sheet. Something like the Pontiac Aztek is a costly, embarrassing disaster that can become a metaphor for the company.

The undersized instrument cluster is not ideal for Boomers, but that miniature screen is completely behind the times.

This brings us to Infiniti’s QX30, a small, all-wheel-drive crossover wagon that is a perfect example of what’s happening in the auto game. The Q30 takes Infiniti into the “C-segment,” which is huge and growing. Small, luxury SUV sales in Canada are up 21.2 per cent this year, notes DesRosiers Automotive Consultants. This is where wealthy buyers are spending their money.

The QX30 is, in fact, a global model and the product of a tie-up between one alliance and another: the Renault-Nissan Alliance and Daimler. The QX30 uses the MFA chassis architecture of the Mercedes A-class, which provides the basis for the Mercedes GLA in Canada. The two share an engine, transmission, and interior elements.

When you look at these sister cars, you see similar dimensions, but different shapes, labels and badges. But under the surface, they are the same, though built in different factories. For now.

The 2017 QX30 ($38,490 base plus $8,150 in options) has a swoopy design that makes it is as interesting to the eye as Scarlett Johansson in her Black Widow costume. The driver’s seat offers supportive comfort. But from there, you look disappointment in the eye.

Sadly, the instrument cluster is slightly undersized, which makes no sense. Potential Baby Boomer buyers have aging vision that demands big gauges and readouts. Worse, the infotainment screen mounted atop the centre stack is just a little bigger than a postage stamp.

Okay, it’s 7.0 inches. But Infiniti’s designers need to take a look at what Volvo has done in this area. Start with the XC90. HUGE screen. Better still, go sit in a Tesla Model S, which boasts the absolute industry standard for big, colour touchscreens.

The optional Bose 10-speaker audio system isn’t exactly Bowers & Wilkins, but the sounds it produces are clear and crisp.  The cabin has space for four adults, no more, and even then the two in back might get stressed after an hour or two. Cargo space in the rear is adequate, given this is a small wagon: two sets of golf clubs. The Nappa leather and stitched dash insert are country club-ish.

The little turbocharged four-cylinder engine (208 horsepower) is strong, but the seven-speed automatic gearbox gets lost at lower speeds, in lower gears. But the dynamic responses – turn in, and so on — are first rate and highly entertaining.

As for extras, the $2,500 Technology Package delivers intelligent cruise control, lane-departure warning, emergency braking, and a parking maneuvers-friendly “around view” monitor. Bose sound is part of a Premium package that also includes a panoramic fixed glass sunroof and other things.

All told, the QX30 seems like a collection of compromises. Perhaps that’s an outshoot of the partnership that conceived it. It’s fine, but not great.

If this is the type rig you want, also look at Audi’s Q3, BMW’s X1, the Mini Countryman and, of course, the GLA. Of those, I’d put the Q3 at atop the heap, the X1 second, followed by the Countryman and the GLA/QX30.

2017 Infiniti QX30

Base price: $38,490. As tested: $46,640, plus $1,995 freight and PDI.

Engine: 2.0-litre four-cylinder, turbocharged (208 horsepower/258 lb.-ft. of torque).

Drive: all-wheel drive.

Transmission: seven-speed automatic.

Fuel economy (litres/100 km): 10.6 city/8.0 hwy using premium  fuel.

Comparables:  Audi Q3, BMW X1, Mini Countryman, Mercedes-Benz GLA.

 

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