Risky Biz

Yeah so I changed the title to avoid either Scientological or commercial (same thing really) liability.....

Soon, unless you like the same boring crap as every other automaton, your favourite thing is going to be cancelled. This is not a new development. Anything remotely defined by being different, is living on borrowed time and it is because of that ominous monstrosity called risk.

Used since the dawn of litigation to not only put a value on fun, but also to quantify how much you can have, and, how much it will cost to have more, risk is the financial impact of a failed plan.

That's the business related definition anyway and that's the aspect (the dominant influence at least) currently pointing a loaded calculator at the head of your favourite product.

If you've seen those stories about Gen Y or Z or whatever being more interested in mobile technology than mobility technology, and the associated cacophony from the automotive opinion-o-sphere, then you have also seen a prime example of how obsessed modern business has become with risk.

Now, any automotive product developed with Gen Y in mind is less likely to succeed (unless it's a rectangle with round corners and we know that can't happen without a lengthy patent war). Therefore, making products for these yoofs is a riskier form of product development. Even worse, these young adults (which have barely experienced life mind you so are hardly in a position to determine what it is they actually want) could reduce demand for automobiles in the future, causing total collapse of car culture and the industry as a whole!

It really is best if everyone just invests in mobile technology and spends all their development cash on thinking of new and exciting apps......

Or, of course, you could do what happened waaaaay back in 1995. I was a mere 20 years old and didn't even want a mobile phone. What I wanted was something that scared the shit out of me, and I got it in the form of a 1988 NSR 250 motorcycle (which I ended up crashing.... often). One thing I had no interest in was Japanese sedans or 5 door hatchbacks. Then this happened:

 
I was in the back seat (sideways mind you as rear seat leg room wasn't a strong suit for the Impreza) as a friend of mine took the first WRX in Toowoomba for a test drive. The dealer, sitting in the passenger seat, offers some vague permission "it's only just arrived so feel free to make a little noise".

Two seconds later, I'm airborne over the Herries Street railway crossing.

Now the WRX was not the first vehicle of its kind. In fact another workmate had a Mazda 323 Turbo AWD but that was quite soggy and slow in comparison, and when was the last time you saw one of them or a Ford Laser TX3) on the road? Subaru had a hit on their hands which redefined their reputation beyond dependability (which came from their other segment maker the Brumby/BRAT) to a haven for enthusiasts.

Now this may sound counter-intuitive so take a deep breath, 2 bravery pills and try not to sprain your heartilage:

You do not mitigate risk by making a product that is the same but ever so slightly different to the competition. You mitigate risk by making a ground breaking product.

 What seems to be happening lately is that companies try something briefly, accept the outcome of a focus group as representative of society as a whole and decide it best to direct development funds to the current growth segment.

When it comes to growth segments in Australia and the North American market, SUVs are the strongest, which in one dimensional world says "low risk", but you know what? There will never be another ground breaking SUV (I can't remember the first or last one) and it seems that they have become as good as they can get. Where, then, is the room to improve, to become the standard bearer. SUVs are now so similar in specification, and function, and economy, and price, that every single one of them has a higher proportion of direct competitors. That makes every single one of them HIGH RISK with LOW RETURN!

Want more risk? Where do your peers go when they want to know about new cars? Since everyone likes to be perceived as a know it all these days, they head on line. And what type of car creates the most content on line? The kind of car that car lovers love.

The Subaru BRZ sold out in Australia in a single day and it didn't even get as much coverage as the Toyota FT 86. The non-turbo twins are run away hits and it's not because they copied anyone else in their segment. (are they even in a segment with anyone else?)

It was high risk from a one dimensional focus group point of view. Who would want a sports car with meagre torque and cramped accommodation and it doesn't even have a turbo!?! Everyone it seems. It was low risk to anyone who knows anything about car culture and the current state of the industry.

Now forget for the moment, development costs and consider the value of the product. What has it done for Toyota and Subaru as brands?

Toyota has recalled MILLIONS of cars over the last 3 years and Subarus last WRX was such an under-steery porpoise that it had to go back to fat camp before being allowed back out into the public.

All is forgiven because someone finally made something to rave about and it's not even very fast.

Get out of the box and build something different. It's too risky not to.

I know there will be a million risk specialists that will pick at this post because you need to specify the risk in order to attribute appropriate mitigation, but I am referring to net product risk which is a term I just made up especially for this disclaimer. 



  

Value and the Eye of the Beholder

My neighbour gave my six year old son one of life's essential tools the other day. Fashioned from an innocent twig and a rubber band, the slingshot is small enough to not do any serious damage, but strong enough to demonstrate the folly of playing with the laws of physics should he follow in his dads foot steps and shoot a small pebble at his own foot. Rubber bands were much prized when I was a whippersnapper. They could be used in the aforementioned construction of a weapon, strap additional guns to your G.I. Joe, make spider web patterns between your fingers, or even shoot your teacher in the back with nothing more than courage, and a little bit of luck, if one were so inclined. Getting a good thick one would ensure convergence of the greatest minds on the playground during recess trying to concoct a new way to propel things at new and interesting girls.

Imagine then, my surprise when I first saw a whole bag of them for sale in the newsagents, for a mere 50 cents!

More recently, I've been seeking a toy more appropriate to my age: a manual RWD something or other. Initially my goal was simple; find a cheap Kingswood, do a quick engine swap and a little suspension tweakage and viola! Daily driver/weekend cruiser.

Seems as though I'm not the only one. A few years ago I could have picked up a straight sedan for less than 2 grand. It is now cheaper to buy an XJ Jaguar than a Holden of similar vintage!

Why then, is a car which once cost 2 to 3 times more, now considered a second choice? You can blame Lucas electronics I suppose. Lord knows its the scapegoat for all that ails British automobilia, but really, why is a 30 year old busted ass Kingswood (the HQ in particular which Holden's best selling series) fetching twice the value of a 30 year old piece of British luxury?

I have a few theories; foremost being that the mining boom has created a pool of cashed up bogans ready to meet the market in order to own what they once thought impossible.

Another possibility is, when viewing this end of the market, a replacement engine for an old Holden will set you back a carton of beer and maybe a couple of tickets to the footy. Conversely, a replacement interior light bulb for an old Jag requires in depth discussions with your nearest financial planner.

I think I'll jump the queue and buy a shitbox 1992 VP Commodore for $950 from that bloke down the street. Should be worth it when the next generation finally realise that cars give you far more freedom and value than the latest smart phone..... or even rubber bands.

Self-Inflicted Nanny State

That's right: self-inflicted. The main vehicle in our family is a rather gorgeous and willing, Sizzle red Holden SV6 Sportwagon. It's got whizz bangs and geegaws up the whatsit. You can access all the iWizardry of my iPhone 4 via the illuminated thumb wheel on the multiadjustable steering wheel. The phone book in said phone is accessible through the touch screen on my centre console, as is recent call history. I can switch between iPod streaming, USB connection, HDD burned CDs, or if I'm feeling old skool, AM/ FM radio.


The engine management system ensures that fewer baby whales are killed by my right foot than ever before (can't say the same for Japan or South Korea), and, we are hardly struggling for grunt with 210+ KW pushing the rear wheels in appropriate directions with impressive enthusiasm.


There is also an arms length of sensors and design elements incorporated to give my family maximum safety (5 Stars says NCAP). Best of all, if I am suddenly confronted by Skippy leaping across the highway in the rain on a Sunday afternoon, all that electrickery (AKA Electronic Stability Control or ESC) will bring myself and my family to a halt in the fastest and safest way possible. Skippy hops away and we're all feeling warm and fuzzy.


Sounds great right? Well it is, but today I feel a little.... cheap. For the second time this week, I have driven the Sportwagon into the ESC safety net. They weren't massive incidents that I couldn't get out of and the intervention is as unobtrusive as one could hope for, but that is hardly the point.


I spend a lot of time in my piece of crap 10 year old Vectra with a now sagging head lining, manual winder windows and intermittent volume control, honing my car control skills during my daily commute. If I get it wrong in "Victoria" as she is known, things can go pear shaped quickly so I make every consideration about where to stick which boot and when to "spare the rod".


In the Sportwagon however, I seem to have gotten lazy, knowing that ESC will save my ass. It wasn't a conscious decision, but, now I am aware of it, and, I feel like a cheat!


Think about how that will play out in the general motoring public. Drivers will spend less time thinking about what their car is doing, instead, driving to the electronically imposed limit. It's a scary proposition, especially when it becomes the norm for a car to save you from yourself and car companies start getting sued for not taking over when you are trying to text your #bff.


It's not the end of the world. It's not too late. Turn off your OEM installed nanny goats and go do some donuts.

Opel Rush

So here they come. Via my snail mail box a few weeks ago, came the first tangible evidence for the arrival of General Motors troubled European branch, Opel.

Technically, I already own one (kind of) with all manner of Achtung stickers under the bonnet of my well weathered 2000 Holden Vectra, and, ownership is not without it's challenges.

Though my particular unit must be a Wednesday car, only midly possessed by the Lucas gremlin, Vectras in general have a bad reputation for undiagnosable stalling issues and diabolical electrickery, so much so that even the local shitbomb peddlers would not even give me a lazy 2 grand for it. To be fair, she just ticked over 278000 kms, but last time (also the first time) I got a lift from Mr. Tow, I was regaled with horror stories of disintegrating engines (due to tardy timing belt maintenance) and bazillion dollar spare key programming.

Does that make me gun shy about the new Opel range? Hell to the no! Have you seen what they are offering?

Let me just firstly say, that you'll have a hard time prying my left hand from the steering wheel of my 210kw RWD Sportwagon, because my right hand will be alternately punching you in the face and family jewels (whether they be nuts or the other kind). However, all three model ranges (compact Corsa, small[ish] Astra, and mid size Insignia) all come with a beautifully modern sleek design, and, at least a passing interest in going around corners.

Most exciting for me, is not the hot hatch GTC, but the arrival of 2 new wagons to the Oz market.

Firstly, the return of the Astra wagon, which I can only hope includes a turbo manual something (petrol), will hopefully help to rid the roads of all manner of clumsy looking inefficient faux SUVs (from the Mitsu ASV to the Angry Birds inspired French 3008). Whilst it may not wipe them off the map, it's a very handsome start.

Next is the Vectra.... ahem, sorry Insignia Estate, which is the first FWD based wagon I've lusted after since I cant remember when (though AWD R36 Passat gets an honorable mention). Virtually perfect proportions, stunning backend and an interior flare that pulls up short of gauche, all add up to a vehicle with real potential in the Australian premium market.

I would even like to see the Zafira Tourer make an appearance but I guess they just don't know if the Oz market is ready yet. And that is the real question. Can Australia's already crowded market provide any meaningful volume for Opel?

There are signs of higher ticket prices for small to medium vehicles (such as Golf which is the prime competitor for the Astra in Europe) and unlike Volkswagens current crop, the Opel range don't look like Teutonic toasters.

So what do Opel need to do? They need to create brand recognition for their fancy lightning bolt, which allows the owner to believe they are driving something above and beyond the much revered VW.

That is certainly a hard task as VW fans can be just as one-eyed as the fans of any other brand, but, Opel do win many European comparisons against the VW equivalents. So I guess you will see a lot of quotes from Europe about how good Opel is, and that is a pretty sound strategy. With 38 awards relating to design, innovation and including European Car of the Year, the Insignia certainly has a healthy pool of praise from which to draw.

Pass The Matches

Caught an interesting media call out today, falling into my inbox with the interesting title: "Comments on Australian Automotive Industry & Rise of Luxury Import Car Sales spike"

"Summary: Need comments on the Demise of Falcon and Commodore in particular.


Details: Automotive piece in The Weekly Review to look at slump in iconic brands' sales (Ford/Holden) and the spike in sales of import vehicles including Jeep Chrysler, Audi/VW and JLR."


You can't really blame them can you? I mean, is there really a need to report information now, or just cut through the boring numbers etc. and just go straight for the flavour of the month beat-up?

Well, if your publication actually provides news, then I guess you would be required to maintain your integrity. Fortunately, "The Weekly Review" is a fluff rag for inner city Melbournites looking for an opportunity to get a jump on the neighbours who always seem to have, and be rid of, the latest fad before it's even featured on "The Panel" (how do they do it!?!) [/sarcasm].

You can't really blame the writers either. With Ron Hammerton on board (notable for his contributions to the well respected GoAuto), it's not like they picked up some lazy ass blogger to fill their Auto review department. Still, a cursory glance across their "Automotive" section shows the same level of superficial sales pitch style editorial policy that usually comes with regular broadsheet lift outs.

And that is the problem. These types of magazines (and newspapers) are made to appeal to as many people as possible, most of whom have little exposure to Automotive industry news. I'm not trying to poke holes in people with little to no interest in the industry. I wouldn't want to suffer their furrowed brow because I can't tell if a bottle of plonk is from Bordeaux or the Barossa. The point is, when you are reading about a subject outside your own interest, it is very easy to have your opinion swayed.

 Obviously it is this very audience where a dialogue with a deliberate negative intent (as with the media call out detailed above) will propagate unabated, and often unfounded, negative public opinion.  

My money is on Mr O'Neill from the Adelaide Centre of Economic studies putting up his hand as an expert industry commentator, but how can you expect an ex-advisor to the Greens, to pass on an unbiased view of the auto industry, to the less aware masses?

All I really want to see is fairer reporting from the Australian media. The fire starting headlines may raise readership, but they erode your integrity, just like citing a "spike" in luxury car import sales, despite the total volume of Audi or Land Rover not even getting into the top 20 for February.

You would think Land Rover would have fared better considering they've already had 2 full articles on the Evoque in The Weekly Review.


I'm sure it's a coincidence....... 
(and for the record George Ierodiaconou, on the last generation Ford Focus you could hold a button on the remote to drop all the windows, waaaay before the Land Rover Evoque even hit the concept car scene. Did you know that Land Rover used to be owned by Ford, and, now they are owned by Indian car maker, Tata?)


There you go. The truth can be interesting.

Australian Automotive Manufacturing Home Truths

Roughly twice a year, Australian media goes on a little crusade to try and “reveal” the level of assistance which domestic manufacturers are currently receiving from Federal and State coffers. And, as inevitable as the rising of the sun, opinions fly about the viability or value for money obtained through these continual hand outs. To be honest, it’s pissing me off! Not the government support. Not even the genuine concern that other Australians have about the current circumstances surrounding our manufacturing industry. It is the unfounded, and often, inaccurate rhetoric that is passed on as facts. Still, you can’t expect everyone to know everything about …everything, so here are a few (literally just a general run down) of the key facts about Automotive Manufacturing in Australia.

Let’s have a look at some of the circular arguments that always seem to materialise:

They’re not even Australian Companies! They don’t even use local content!

Yes, local cars do have content from foreign manufacturers. It’s a global market place. But, making a price competitive, wholly Australian built car with 100% Australian content could only be done with manufacturing subsidies which would tower above the current level of public investment.

 Aside from that, tell me Arm Chair Industry Ministers, which car are you going to buy? How much local content is there in fully imported vehicles? More than you think, but obviously not as much as locally assembled products.

Most of the engines in Australian built cars come from Australian manufacturing plants.

The money just goes off shore to the foreign owners!

The overwhelming majority of government assistance goes to LOCAL research and development. Funds are utilized to engineer powertrains (such as engines, drivelines and gearboxes) and domestic products, to better suit Australian tastes and conditions. Holden is a leading Design Centre for the infamous US Bogey man General Motors, as is Ford Australia for their evil foreign overlords (just accept the sarcasm okay? I’m all out of smilies). As a result, their expertise, and thus, a small portion of your investment (assuming you pay taxes) does benefit the foreign parent company. The return on that investment is an international reputation that puts them in favourable stead for winning future business. Which brings me neatly to the next Furphy (if you don’t know what a Furphy is kids, google it).

They aren’t innovative enough. They’re still building Dinosaurs. They’re no longer relevant.

This is probably the most ridiculous of all misconceptions (considering 4 of the top ten in Oz are Australian made), so I’ll address it individually by manufacturer:

Toyota

They still build the most popular mid size car on the market; the Camry. Not only is this Camry widely sought after in the used car market (it’s not my kettle of fish, but plenty love it) but it is also a staple of fleets looking for a reliable, cost effect vehicle. Aside from the new generation (just arrived), Toyota also locally assemble the Camry Hybrid. What the Hybrid lacks in driver involvement, it makes up for in impressive fuel economy. Try 6.0 litres/100kms (ADR Rated). 

Toyota Australia used a large portion of government research and development funds to instigate a local engine manufacturing plant. Both, the Hybrid, regular Camry, and their V6 sister car, the Toyota Aurion, are all built right here in Australia. Last year they built around 94,000 examples for local sale and export.

Ford

Ford Australia has had a tough run with their parent company placing the Oz manufacturing arm in a less than favourable position. Despite the Falcon beating Ford Taurus (a gargantuan FWD monstrosity) in packaging (interior space) and beating their halo SHO model (a gargantuan all wheel drive monstrosity) to the punch with Euro IV (that’s an emissions standard kids. Again with the googling) compliant turbo charged 6 cylinder, which would out drive it any day of the week and twice on Sundays, Ford North America declined and denied any opportunity for export.

Nonetheless, the Ford Falcon continues to innovate, with the all new LPG system bolting onto the Australian made in line 6, which shames many 4 cylinder cars for Carbon emissions and running costs, whilst returning better power than the regular Petrol iteration.

 Their impending Ecoboost 2.0 direct injected turbo engine is apparently worth raving about and is the first time the global powerplant has been used in a RWD vehicle anywhere in the world. Economy is likely to scare most mid size vehicles and rightfully shame many compact and mid-sized SUVs (Don’t kid yourself; just accept that you bought a mini-van).

Last, but not least, Ford Australia also engineered the much needed diesel V6 (originally from Land Rover) to slot into the Territory. It pulls like a truck (I recognize that many inner city folk don’t need to tow, but I didn’t exclude the merits of the Camry, so recognize the skills okay) and can handle most anything Australia can throw at it (unlike Mercedes G-Wagens which get stranded in the desert awaiting rescue).

Holden

If the Commodore is such a dinosaur, why has it sold more units in Australia for the last 16 consecutive years? That’s right: 16. Mazda 3 outsold the sedan and wagon by a few hundred units this year, but ute sales are not included, as they are classed as a commercial vehicle. That is despite the fact that the base model is now only built to order. The sport models are far and away the biggest sellers.

The HFV6 engine has dedicated engineers who work tirelessly to improve economy yet still gain power, and, both the 3.0 litre and 3.6 litre units are built right here in Australia (Port Melbourne to be exact). The 3.0 litre has it’s own throttle mapping to match Australian tastes (the US 3.0 has a sky high pek torque) . Both versions (and the GM Power train V8) can all run on 85% ethanol. In case you didn’t know, ethanol is a renewable energy source that can be extracted, not just from regular organic sources such as sugar cane, but also household rubbish and old car tyres.

Have a guess who is investing in the business case for a garbage munching ethanol plant in Victoria….

That’s right; Holden (and their partners) are investing in other industries, with the potential of creating more jobs outside of their sector.

Beyond the Commodore, Holden also locally manufactures the Cruze sedan and hatch. Boasting the largest interior in it’s class and competitive pricing, the Cruze also offers buyers a choice of 1.8 petrol, 2.0 diesel and a turbo charged 1.4 petrol (unlike Japanese and European turbos, the Belgian sourced 1.4 can run on regular unleaded). After 2 years on the market, it falls nicely into the top 5 best selling vehicles in the country. Don’t forget that: both sedan and hatch are made in Australia. For some reason, many people seem to have trouble grasping that point.

Did you know that all of them are built on the same assembly line in Elizabeth, South Australia? No, not just the Cruze sedan and hatch. I’m talking about the Cruze sedan and hatch (in four different specifications, with manual or automatic transmission and 3 different engines) as well as the Commodore sedan, sportwagon, ute, Caprice and Chevrolet Caprice PPV (google) which offer 3.0 and 3.6 Direct injected V6, 6.0 Litre V8 with AFM (you should really have google open in a separate tab by now) and associated gearboxes. This has been done so that Holden can respond to market shifts as swiftly and efficiently as possible.

Oh, and they also export to China as a Buick.

Remember, this is just the manufacturing side. I assume you are starting to glaze over by now, so I’ll just generally tell you that Ford Australia was lead developer for the new Ford Ranger (which is sold across most of the planet). Holden is also doing development work for Buick and Chevrolet. Let’s cover the international design and R&D side of things another day mkay?  All righty then.

So let’s just summarise with another old chestnut.

It’s protectionism, pure and simple.

Well duh. It is protecting one of Australia’s greatest assets: the manufacturing industry as a whole. There is an estimated 200,000 of your fellow Australians building, designing and innovating across the country. Not all of them rely directly on the Automotive industry, but most will take a severe hit if the three local manufacturers go down the gurgler. Just think for a second, what effect that will have on state and federal revenue, not just through personal income tax, but our reliance on importing goods, and, as skills decline, the importation (or off shore outsourcing) of professional services. How can states build infrastructure when you can’t pay for it?

What it isn’t, is Isolationism. In reality, our level of protection for the Automotive industry is actually the lowest in the developed world. Germany has a significant finger in its Automotive pie (German state, Lower Saxony, owns 20% of VW) and in China, you can’t even build a car unless you enter into a joint venture with a State owned company. 

We tried to play fair with Thailand, entering into a Fair Trade agreement, and they stiffed us by introducing big fat tax on six cylinder cars (essentially eliminating any opportunity for our products to reach their shores). Conversly, here are a few vehicles we import from Thailand:

Toyota Rav-4 and Hilux, Nissan Navara, Honda Jazz, Civic and Accord, Ford Ranger (Mazda BT-50) and Holden Colorado. 

For us, imported vehicles are hit with a piddling 5% tariff. Most of those products come from countries where workers do not enjoy the level of rights, nor the standard of living that we have in Australia. Don’t let anyone tell you that the luxury car tax is to blame either. That only kicks in above $57,000, so there is no excuse for Audi to cry poor when you have to pay for options in their base model A3, like cruise control and pockets in the back of their front seats (really, you can’t make this stuff up).

So next time you are at a dinner party and the discussion turns to the local Automotive industry, don’t be a chicken shit and shake your head in disapproval with the rest of the know-nothings (there is no excuse now that you know the facts). 

Be proud of what the local manufacturers are doing. Their products are Australian cars built for Australian conditions, by Australians and for Australians (and occassionally, the middle east, Asia and potentially...North America come MY2014). 

Four Australian built cars in the top ten can attest to that.

Why don’t you instead ask why, despite our sky rocketing Australian dollar, does it still cost tens of thousands of dollars more to buy a European marque than the equivalent model in the US. After all we just hit parity. Or is that parody? 

Disclaimer: some of those European cars may not actually be built in Europe. Try South Africa. Shhhhh, it’s a secret.

The truth shall set you free.