AD #1486 – Ford Earnings Fall, Buffett May Create Largest Dealer Group, New Volt Details

October 24th, 2014 at 11:52am

Runtime: 7:51

- Ford Earnings Sputter
- Lunch with Ford’s Mark Fields
- Buffett to Create Largest Dealer Group?
- New Chevy Volt Details
- Toyota Dumps Tesla
- What Experts Think of Gigafactory

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43 Comments to “AD #1486 – Ford Earnings Fall, Buffett May Create Largest Dealer Group, New Volt Details”

  1. C-Tech Says:

    Many thanks and kudos to Mark Fields for a creative way of helping Focus Hope. For those who are not familiar with Focus Hope, in a nutshell it is an inner-city job development program for low-income people. The unique thing about Focus Hope is that they focus on training in areas which are in demand, skills that can be learned in 12-24 months, and squarely pay middle-class wages. They started training young people to be machinists and have expanded from there. At one time their trainees were in such demand that Focus Hope also produced small, specialty parts batches for Ford, GM, and auto suppliers. which funded the program. John, if you have an opportunity, it would be great to add some information about Focus Hope.

  2. C-Tech Says:

    Imagine creating a business which could control 25-30% of new car sales and you are protected from competition by state laws. Warren Buffet can imagine that.

  3. Lex Says:

    Ford can increase sales by cloning the face of the Explorer onto it smaller SUV (Edge) and CUV (Escape) which make them resemble Land Rover / Range Rover vehicles. I see a definite resemblance between the Ford Explorer and the full size Range Rover. This would essentially make Ford the average persons Range Rover. As everyone is aware Land Rover / Range Rover has huge plans to increase production. Ford could grab some of than pent up demand with a simple facelift on there vehicles. I hope Mark Fields is watching today.

  4. Lex Says:

    I believe Elon Musk has huge plans for his Giga Battery Factory which are not just limited to the Automotive Industry. His batteries could be adapted for household / domestic, aerospace / airline, and disaster recovery applications. I believe the technology gained from this endeavor will spawn a battery revolution.

  5. John McElroy Says:

    @1. Focus Hope has an excellent vocational program that trains IT technicians and CNC machinists. It even provides engineering and technology degrees. Almost all the people coming out of those programs walk right into good paying jobs. And it does a lot more than this. It’s great to see Mark Fields dedicating his time towards helping Focus Hope raise money.

  6. Lex Says:

    Warren Buffett is definitely setting up Berkshire Hathaway to be the conduit to bring or block Chinese vehicles into the USA. I also believe his plan has two elements:

    1. US Automotive OEM’s and Dealers pay him royally for his dealership network to block the Chinese OEM’s easy access into the US Market.

    2. The Chinese will pay Buffett a Kings ransom to get his dealership network.

    Either way Buffett and Berkshire Hathaway Win!!!

  7. RumNCoke Says:

    Maybe Toyota should keep a relationship with Tesla’s designers since that FCV concept is probably the ugliest vehicle since the Bentley SUV concept.

  8. C-Tech Says:

    @ #7 Why are electric cars so ugly? With the exception of Tesla, Fisker, and Volt, the others all look like they were designed by a 3rd grade student.

  9. Bradley Says:

    GM is really dropping the wrong one liners about the “new” Chevy Volt.

    They should be saying things like:
    20 Mile added range, reduced weight by 200lbs, reduced charge time…

    New Battery and New Engine for such a new car really sounds like “we got it wrong the first try”.

  10. HtG Says:

    I think the reduced cell count is evidence of advancing tech. If you watch this week’s Autoline you’ll hear the LG engineer speak about reducing cell pack numbers as a way to reduce costs.

    —–
    Hands up. Who doesn’t think Warren Buffet is going to be combining his financing abilities and scale in order to squeeeeeeze the other folks that wholesale auto loans through dealers?

    2.5% margin business, my back end.

  11. Bradley Says:

    #10

    I will have to watch that. However, cost savings and advancing tech or typically polar opposites.

  12. Mike Says:

    It is interesting to watch the big money people as they look at the margins available in various kinds of business. They seem motivated by big margins, low investment, and RIGHT NOW DARN IT timing!! It is hard to imagine why anyone would want to invest in Tier one or OE manufacturing of automobiles. In fact there does seem to be an effort among the suppliers to disinvest and look for better opportunities else where. This does speak well for auto retailing. The margins have always been in the sales and finance ends rather than manufacturing.

  13. pedro fernandez Says:

    Buffet Vs Huizenga, the new thrilla in Manilla, on pay per view. I have the feeling if he brings Chinese cars here, they will sell well, I mean, people bought those Hyundai cars when they first came out even though they sucked compared to the Japanese ones.

  14. HtG Says:

    When the Chinese cars meet US safety standards, that will
    be quite the moment. But does Buffet want to be the facilitator? He’s got his own brand to protect; yukelele pluckin midwestern upfront merrican.

    I think safety is a brilliant trade barrier.

  15. pedro fernandez Says:

    HtG, you think Buffet will put country ahead of profits? If there is a buck to be made with them there Chinaman cars, he’ll do it, he figures if he does not, someone will anyway, so it might as well be him.

  16. HtG Says:

    No idea, Pedro. But the man can count.

  17. Brett Says:

    I shall have to share my story about Wayne Huizenga and the beginning of AutoNation.

  18. pedro fernandez Says:

    I recall when Autonation began just selling used cars to go against Car Max, they had a local dealership with a humongous selection of used everything, it was so big, that they broke it up into 2 dealers now.

  19. Kit Gerhart Says:

    15, Is he lobbying for the repeal of the “chicken tax”? If so, he might be planning on selling Chinese pickup trucks or (real) minivans.

  20. pedro fernandez Says:

    I read a few yrs ago an article which claimed China would not be selling “cheap” cars here, but instead,”quality’ cars at a lower price point than the competition, both foreign and domestic, I say that unless they come in well under the competition, they will fail, people would be scared to buy crappy cars unless the price is really low. I have seen quite a few new Mirages, even though it has been critically panned all over the place.

  21. Kit Gerhart Says:

    Out of curiosity, I read CR’s review of the Mirage a couple days ago wow, did they ever hate it. It was slow, noisy, ill handling, had a crude interior, and probably some things I’ve forgotten. It got good gas mileage, though, I think better than any non-hybrid or non-diesel they have tested. Still, it’s hard to see why anyone would buy it, when you can get a much better one or two year old used car for the same money.

  22. pedro fernandez Says:

    Kit, same thing I said, but there are some people out there who just have to have a new car, no matter how inferior it is, it’s new. Never mind they could get something way better, used for the same money, but they just want a new car. I bet on that Mirage, the new car smell is either not present or it will go away quickly

  23. pedro fernandez Says:

    #21 That about sums up the original Excel back in the mid 80′s when it first came out, it sold well but again the bar for that class was not set as high as it is currently.

  24. Kit Gerhart Says:

    23, A friend bought one of those early Excels, and it was not only a crappy car, but it was unreliable. I haven’t heard about how the Mirage is on reliability.

  25. pedro fernandez Says:

    It’s gotta be better, after all, Mitsubishi has been around for a long time, even though that model is made in Thailand, I believe. I don’t know how well built those cars are.

  26. Kit Gerhart Says:

    25, Yep, it is built in Thailand, and is the first Thai vehicle to come to America, as far as I know. There are a number of other vehicles made there, like the HiLux pickup that we don’t get.

  27. GUYBOB Says:

    MAYBE BUFFETT CAN BRING BACK THE YUGO!!

  28. Kit Gerhart Says:

    Malcolm Bricklin imported Subaru before Yugo, so he had an inverse learning curve. If Buffett imports cars, based on Bricklin’s experience, he needs to quit after the first try.

  29. cwolf Says:

    I think Buffett got into the dealership biz because of the finance part of the operation. I believe this because the markets have reached their “tops” and there are a fewer number of profitable investment areas here or globally. Investing abroad has not been very lucritive and the stronger US dollar reduces any returning profits. US auto sales should be strong for maybe a couple more years, and financing auto loans seems like one of the better opportunities to make the most profits possible. Our QE is over,thus I don’t see Buffett staying in this game long term.

  30. HtG Says:

    Keep in mind,cwolf, that ole Warren doesn’t exactly need to scour the financial ads for business opportunities. Businesses come to him, looking to be acquired; they know he’s loaded for bear.

    I also think it’s the financing side that is attractive to this owner of GEICO insurance. Maybe he’ll offer car insurance from his own stores, eh? Maybe he’ll buy another chain of stores, eh? Maybe he’ll be buying quite a few cars from the OEMs in the near future, eh?

    Player, yo!

    https://www.youtube.com/watch?v=QBKwTSBBn7U

  31. pedro fernandez Says:

    So does this mean that the Buffett-owned dealers will have a sign that reads: “Buy here. pay here”? Just think, a one stop place for all your transportation needs, buy, finance, insure.

  32. cwolf Says:

    31 Not a bad way to reduce overhead,eh?

  33. pedro fernandez Says:

    Come to think of it, a dealership would be a good place for an insurance kiosk, like Geico or Allstate.

  34. Kit Gerhart Says:

    I did my first real road trip in the plastic Chebby, 720 miles, and overall, it’s not too bad. It’s kind of noisy, especially at about 70 mph where there is a lot of gear noise from the differential. I don’t know if that is normal; I’ll try to find out from a Corvette forum when I get to FL.

    As far as comfort, the seats are pretty good, about as good after 12 hours almost non-stop as any car I’ve had. The extra zip it has over my other cars is fun once in a while, but totally un-needed. The diesel Jetta wagon I had several years ago took about 14 seconds 0-60, and it had all the power you need for driving on the interstate, including cruising at 80 mph.

    Gas mileage with the ‘Vette is 25.2 for 2 fill-ups. I checked the odometer with mile markers and GPS, and it is about 1/2 % low. The speedometer is dead on, like most GM speedometers I’ve experienced over the last 30 years.

  35. pedro fernandez Says:

    Thanks for the input, Kit. I never thought of the Vette as a long distance cruiser. Yet another reason to pick it over any of those “exotics”

  36. HtG Says:

    How’s the hauling ability? Quite a big space behind the seats.

    Do people try to race you?

  37. Kit Gerhart Says:

    The hauling ability is adequate for what I was hauling, but no more than adequate, and I don’t take a lot of stuff. The MINI has quite a bit more cargo room with the back seat down.

    A couple people seemed to want to “play,” but I refrained. I don’t want any tickets. Yesterday, I drove about 76-77 most of the time when traffic was flowing normally. That is about the same speed I go in the Prius on the interstate, but the speedometer on the Prius is saying 79 when you go that speed. Today, at times, there was a lot of traffic going a little over 80, so I went with the faster of the traffic. The car really likes 85 mph. It would probably like 95, but I haven’t tried it for more than a few seconds.

  38. Kit Gerhart Says:

    For what is basically a 1984 car, it works pretty well. It’s quick, handles well, and even gets decent gas mileage. I got 25, but I have the Z-51 package which has shorter gearing, so a non-Z-51 would do better, and a non-Z-51 manual would do better yet. I didn’t feel too guilty about wasting gas, seeing all of those pickups and SUV’s going 80 mph that would be getting much worse mileage.

    Though the car goes down the road well, you are reminded that it is a GM car that started life in the 80′s, with the really crappy feeling turn signal/wipers switch stalk, and the “stupid key syndrome” where different keys work the door locks and ignition. I think Corvettes like mine were the last holdout on those GM “features.” Even though the turn signal and wiper switch action feels really bad, they work just fine, and that’s the important thing.

  39. Brett Says:

    People shopping a Mirage aren’t in an economic class you are accustomed to considering. You don’t need 20% down to purchase a new car. The captive finance arm of the manufacturer will be much more inclined to finance a marginal credit score. A new car has a warranty, a used car seldom does.

    The 2014 Mirage is a superior experience compared to a “class leader” of 20 years ago. The 1994 Toyota Tercel wasn’t much to write home about at the time. Contemporary automotive writers tend to be rather jaded.

    If you read the owner reviews at someplace like Edmunds, they generally praise the vehicle.

  40. Kit Gerhart Says:

    The Mirage would get someone by, especially as a city car, but pretty much everyone says it is worst-in-class, except in fuel economy. According to Edmunds,a base Chevy Spark is cheaper than a base Mirage, and while not quick, the Spark is quicker, quieter, handles better, and has a much nicer interior. Then, if you get a “loaded” Mirage, you could have had a Yaris or Versa Note for the same price.

    Yeah, maybe Mitsu is still the “lender of choice” for those with poor credit, and the Mirage gets better mpg than any 4 seat non-hybrid sold in America.

  41. pedro fernandez Says:

    Agree with Brett, only thing is if for the same price, I can buy a used compact with an extended warranty, I would pick that one. Day in and day out. you’ll be driving a much more comfortable, safer and much better driving dynamics than a new Mirage.

  42. Brett Says:

    I was mostly addressing the “You can get a much better used car for that kind of money.” You still have to come up with 20% down.

  43. pedro fernandez Says:

    If money down is an issue, there are some no money down leases around, but even those are hard to find, I saw a real low monthly payment on a new Corolla and the down payment is small print was like $4900, most Corolla buyers don’t have that kind of cash laying around.