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Sunset Over Detroit

By Joe Benton
ConsumerAffairs.com

March 13, 2006

• Sunset Over Detroit • Japan's Big Three Take Aim at Gens X and Y • GM's Regional Brake Recall • GM's Collapsing Tailgates • Flaming Fords • Spitting Spark Plugs • Nader's Report --- • Automotive Recalls

With the two remaining American automakers racing one another into bankruptcy and beyond, the best days of the U.S. auto industry are a fast-receding memory.

Both General Motors Corp. and Ford Motor Co. are desperately cutting second-quarter production in North America as sales plummet at an alarming rate. The automakers are steadily losing ground to Japanese rivals while Toyota prepares to unseat GM as the world's largest automaker.

The two automakers each are losing their customer base amid a rash of recalls, poor engineering, slipshod manufacturing and tone-deaf marketing

As the U.S. automakers try to find a way to move more hulking SUVs, the Japanese are methodically coming up with new designs to appeal to the Generation X and Y buyers who are the future of the automobile business in America.

Ford and GM have both announced massive layoffs and plant closings aimed at improving their balance sheets, but analysts are so far unimpressed. General Motors is selling off assets as it scrambles to avoid bankruptcy.

At Ford, there are few public details other than the admission that the company doesn't expect its automotive business to make a profit in 2006 as it struggles with declining U.S. market share and rising costs.

In a recent report to the SEC Ford said that it still hasn't stabilized its market share, which continues to decline.

The news is no better across town at GM where the world's number one automaker announced it will freeze accrued pension benefits for U.S. salaried employees. The freeze should save GM $1.6 billion in its pension liability -- a big number for a company that reported a loss of $8.55 billion last year.

Like Ford, GM has struggled with high labor costs, slow sales of once-profitable SUVs and fierce competition from Japan and Asia. "Global competition is truly changing the auto industry, and we must restructure ourselves to compete successfully in it," GM CEO Rick Wagoner said.

Even as GM sells off assets to raise cash reserves, a handful of investors are betting that the company will eventually file for bankruptcy protection. Distressed debt investor Marty Whitman, founder of the Third Avenue Funds, is one of them.

"It seems odds-on that General Motors has to reorganize if it is to solve its problems with burdensome legacy costs, pensions and health care," Whitman said in a letter to shareholders.

In a Chapter 11 proceeding, he said, because "GM is so big and important for the U.S. economy, heaven and high earth would be moved to preserve some equity for existing GM shareholders."

Though not without risk, a Chapter 11 bankruptcy might offer an avenue for GM to solve some of its most intractable cost problems.

Just the suggestion of a GM bankruptcy is a matter of deep concern over at Ford.

In a thinly veiled reference to GM, Ford warned shareholders recently that it could be hurt if one of its major competitors files for bankruptcy protection. Ford said a bankrupt competitor could gain a significant advantage since it could negotiate cheaper labor contracts.

A P.R. Disaster

Just when it looked like things couldn't get much worse, Consumer Reports magazine delivered a public relations disaster to Detroit last week.

The worst news in almost a decade arrived with the automotive issue of the magazine which, for the first time, named only Japanese automakers to its top ten list, leaving Detroit out in the cold.

Detroit auto executives were hot -- if not burning -- and fired back.

Lori Queen, a General Motors executive involved in small car production, branded the editors and reporters who put together the Consumer Reports auto issue as "the most unprofessional group of people I have ever worked with."

"They are totally nonobjective and go to great extremes to paint a picture for their paid subscription readers, who primarily buy Japanese cars. They don't consider price or price differences, they don't consider model mix or consumer preferences, they buy the cheapest car they can find and then base all their opinions on a limited sample," Queen said.

For the record, the Consumer Reports top ten included the Honda Civic, Honda Accord, Acura TL, Infiniti M35, Subaru Forester, Toyota Highlander Hybrid, Honda Ridgeline, Honda Odyssey, Toyota Prius and Subaru Impreza WRX/STi.

But Ford and GM get little sympathy from most consumers, who themselves are boiling over about service and reliability issues and the refusal of the companies to do the right thing for customers who get stuck with a lemon.

GM Truck Recall

GM, in December, grudgingly expanded its recall of sport utility vehicles and pickup trucks to include another 553,000 vehicles because of potential problems with the anti-lock braking system. GM also increased the number of states covered by a controversial regional recall to 20.

The automaker had recalled 804,000 full-size pickup trucks and SUVs in August in 14 states because of the brake problem.

In all, 1,357,000 pickups and SUVs are now part of the massive GM recall and things are not going well for truck owners or the automaker.

Owners of General Motors trucks and SUVs in 30 states not covered by the GM regional recall continue to struggle with malfunctioning anti-lock brakes. Owners in the 20 states and the District of Columbia covered by the recall are struggling with GM dealers reluctant to fix the brakes as part of the recall.

Because of the well-documented problem, the anti-lock brake system in some of GM pickups and SUVs sometimes does not work properly causing increased stopping distances during low-speed braking, contributing to many accidents.

A Bruising Ride

Then there are those tailgates. For years, the tailgates on GM trucks have been collapsing because of rust and corrosion.

"My buddy was driving his Silverado with 3 of us on the tailgate," Daniel of Forest Lake, Minn., told us. "We were heading to a lodge approximately 1/2 mile from our resort house. The last thing I remember is the tailgate snapping down at an angle."

"The next thing I know I'm laying in an emergency room. I currently have 8-10 staples in the back of my skull, 3 skull fractures behind my right ear, and a potentially damaged ear canal. I'm currently unable to go to work and neither is at least one of my family members everyday that I'm home," Daniel said.

OK, Daniel shouldn't have been riding on the tailgate. But what about all the other GM customers who were using the tailgate as intended?

Kenneth of Sacramento put his toolbox on the tailgate, which promptly collapsed, dropping the toolbox onto his toes. "No damage to the ground, truck or tool box but seven mean and very sore and bloody toes screamed bloody murder," he reported.

Chevrolet shrugs off the problem, saying there have been "mostly" minor injuries associated with the defect.

Blazing Ford Truck Recall

Even worse than sluggish brakes, an entire generation of Ford trucks are likely to burst into flames while parked in consumers' driveways or garages.

Lauren of Red Bluff, Calif., came home one day to find her Ford F-150 had burned to the ground. Like many other loyal Ford owners, she is now minus her truck and unable to replace it because of Ford's what-me-worry stance.

"Ford kept passing the buck down until I came to someone who ultmately made the decision to say they would not help me out as the truck was too badly burned to know how the fire had started. The insurance company said that because there was a recall on this truck that they would not cover it," Lauren said.

As it does routinely with its design and manufacturing defects, Ford dragged its feet on the fire issue for years, denying there was a problem but finally agreed to a recall in September. But many owners have been unable to have the recall completely because parts aren't available.

Others can't benefit from the recall because their trucks have already burned to the ground.

The recall letter from Ford to our reader Jennifer in Broken Arrow, Okla., arrived a day too late. She owned a 2001 Lincoln Navigator that sat quietly in her driveway as Jennifer entertained a house full of guests.

Then came the frantic knock at her door.

"A police officer street barged in my house screaming my car was on fire and to get out of the house," Jennifer wrote ConsumerAffairs.com. "I had 13 people in my house that day. Thank God no one was hurt," she said.

The family Navigator was a total loss. "The firemen said it was all under the hood and told me about the Ford recall," Jennifer said.

"I received the recall letter the day after the fire. I have the envelope with the postmark of October 4, 2005." she told us.

She has tried several times to get in touch with a representative of the Ford Motor Co. to discuss the loss of her Lincoln Navigator but, "Ford will not speak to me," she said.

Jennifer says that her insurance company paid for most of the damage but, "I am out of pocket for my rental car and it has caused me many headaches and time off work."

Jennifer thinks Ford ought to assume some responsibility for the difficulties she now faces.

"Ford needs to step up and take care of us. We bought their car. The finance company paid Ford and they do not care about us. I paid on that car $581.09 a month for 2 1/2 years and that money is just lost. That is so wrong," Jennifer wrote.

The September 2005 recall involved an estimated 3.8 million Ford trucks from the 1994-2002 model years; it included the Ford F-150 pickup as well as the Ford Expedition, Lincoln Navigator and Ford Bronco SUVs.

Adding fuel to the flames, recent fires suggest more Ford trucks may be afflicted by the flaw that led to Ford's reluctant and long-delayed recall.

Ford Trucks Spitting Spark Plugs

As Ford struggles with its turnaround plan, the company might want to turn around and examine a problem it's left in the dust: Ford F-series trucks built between 1999 and 2004 have a nasty habit -- they spit. Spark plugs, that is.

It happened to Brodie of Lubbock, Texas. When her 1999 Ford Expedition a spark plug, she wasn't surprised.

"My sister-in-law's Expedition did the same thing about 6 months prior," she said. "The mechanic told me that he could not remember how many Fords that he has had to repair with this same problem."

Brodie and her sister-in-law aren't alone. For years, consumers have complained about their trucks blowing spark plugs out of the aluminum cylinder head, leaving a hole in the head and rendering the $30,000 vehicle useless, often on the side of the road, until repaired.

Ford has never conceded that there's a problem.

As they have been doing for years, Ford owners are snorting, spitting and suing. So far this year, more than a dozen have reported the F-series blown-spark-plug problem to ConsumerAffairs.com, adding their names to a list of hundreds who've reported similar incidents with Ford F-series trucks or SUVs.

"I have been a loyal Ford customer for over thirty years," said Paul of Coppell, Texas. "I purchased my 1999 Expedition with 41k miles and had no problems with it untill the Triton V-8 started to spit out spark plugs."

"The first time it happend at 96k miles, I thought it was a freak thing and the cyclinder head was not damaged, thankfully. However, when it happened again (at 101k miles) on a different cyclinder this time, it stripped the threads," he said.

Nader Rips Automakers

Among those who would argue that Detroit has no one but itself to blame for its problems is consumer advocate Ralph Nader. He issued a stinging indictment of the domestic auto industry earlier this year, accusing it of failing to stimulate innovation.

Nader's report, "Innovation and Stagnation in Automotive Safety and Fuel Efficiency," details what he sees as glaring oversights by the auto industry, identifying specific missed opportunities in the areas of safety and fuel economy, and provides a blueprint to jolt the domestic industry out of its downward slide.

"Even as some Japanese and European manufacturers prove that advanced technology sells -- especially in safety and fuel efficiency -- the market-shrinking domestic auto industry thinks that the only path to profitability is penny pinching on parts," Nader fumed.

West to Asia?

While Ford and General Motors steadily fade from the domestic marketplace, they are doing surprisingly well in Asia.

Ford's Chinese car joint venture expects its sales to climb sharply this year, as much as doubling on the strength of new models.

Ford is a relative latecomer to the hotly competitive Chinese market, which is led by GM and Volkswagen AG, with Asian players such as Hyundai Motor Co. Ltd. and Toyota Motor Corp. catching up fast.

GM unseated Volkswagen in 2005 as the top foreign seller in China and sold 665,390 vehicles. That is an increase of 35 per cent in sales of all models of vehicles in China last year.

GM plans to launch more new products aimed at Chinese consumers and accelerate business expansion in China this year.

China is potentially the world's largest auto market, with amazing growth potential. At present there are only 24 cars per thousand people compared with the world average of 120 cars per thousand and a U.S. average of 700 cars per thousand people.

As China continues to grow the country will produce increasing incomes and improving living standards. The Chinese people will be buying cars in record numbers but if today's patterns persist, those cars won't come from Detroit.

Out of Town by Sunset

Not long ago, millions of Americans proudly bought American-made cars and trucks, whether for reasons of patriotism, union loyalty or a belief in U.S. workmanship. Their numbers thin each year.

"I have always been a huge fan of Fords and have owned several older models," said Eli of Boise, Idaho, whose Expedition blew out its spark plug and ruined the head. "This is so unbelievable. How can Ford get away with this?"

"This is my first Ford vehicle and will be my last, should Ford not step up to the plate and provide customer satisfaction by reimbursing me for these charges," said Susan of Lake Ariel, Penn., another Expedition owner. "If Ford is built tough, then prove it. Spitting spark plugs is by no means my definition of being tough."

While Ford spits out customers, General Motors' head-in-the-sand approach to the brake problems on its trucks is rapidly putting the skids to its ranks of repeat buyers.

"I have had my 2000 Silverado pickup in the shop three times for the brakes. The brake pedal goes right to the floor whenever it wants and I can't stop," said Chuck of Conestoga, NY.

"They keep telling me there is nothing wrong. Tonight when I came home, I almost hit my house. I have been lucky so far because I crawl up to stop signs and red lights waiting for the brakes to fail. You never know when they won't stop you."

Dead Men Walking

Patriotism is laudable but consumers shouldn't be expected to sacrifice their livelihood or personal safety to enrich corporations that build defective products and then refuse to lift a finger to help those harmed by them.

If U.S. automakers want to win back consumers' loyalty, we have a database bulging with customers who will be happy to give them some advice.

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