Just to Clarify

A Google Price Index?

Last week Google generated a flurry of interest about their idea to launch a Google Price Index (GPI) to track inflation.  One example of the coverage is this article from the FT.

The idea has obvious appeal.  Using real time shopping data, Google is able to publish data that is far more up-to-date than the government’s CPI.

Google was typically spare with details, but I see problems already.  Let’s start with something simple.  Say you are tracking the price of colas.  (The beverage, not the cost of living adjustment.)  Tracking price changes for colas is easy.  But how do you account for the fact that when faced with rising prices, many consumers might shift from Coke to 7-Up?  Or if prices for carbonated beverages rise, they might shift to fruit drinks.  Or what if consumers just drink tap water.

What I am describing is substitution.  It is not a new idea, but it is an idea that has yet to be fully incorporated into the government’s CPI; nor presumably would it be included in a GPI.  (The fact that this is untracked is one reason the CPI is often seen as overstating inflation.)

The second problem is harder to resolve.  Colas are simple products compared with, say, vehicles, which would surely be included in the GPI.  Tracking the changes in sticker and transaction prices together with incentives is complex enough.  How do you factor in shifting equipment levels?  (Over the years, optional features tend to become standard.)  And what about things like changes in quality and resale values?

The government makes an attempt to adjust for these factors, but I have to say I am skeptical about the results.  Would Google—who are the master of the algorithm, but culturally opposed to manual manipulation—even try?

We have looked at an Edmunds Vehicle Price Index for years.  So far, we are still looking.  (What we are capable of doing today would not pass our data quality standards.)

Not to split hairs, but what Google is proposing is a measure of price trends, not an inflation index.

A Mea Culpa on the Volt

Last week I promised to stop posting on the Volt story.  Over the weekend I ran across two pieces that I thought were worth sharing--despite my promise. 

The first is a thoughtful piece that ran on Motor Trend.  And the second ran on the New York Times. 

The upshot in both pieces is that GM could have easily avoided last week's kerfuffle. 

And for the record, I am not buying GM's assertion that they had to disambiguate during the development of the Volt to protect trade secrets.  It is a nice spin, but refusing to comment is a time tested solution when needing to keep secrets under wraps.  Most importantly, it is a solution that protects your credibility.

That's it. No more posting on the Volt.  Promise. 

 

A Role for Brands in Media

The Internet has certainly “democratized” publishing.  Anyone can start a blog and instantly be a reporter.  (Even me.)

As I pointed out yesterday, there is more to being a good reporter than simply having a blog or a column.  It also means getting the story right, being skeptical and verifying facts.

This is where brands play a role.  They can give consumers a signal as to which media consistently conform to these standards—and which do not.

At least it should work this way.

I have been surprised over the past few days at the level of confusion over the government’s $7,500 tax credit program.  Not just among blogs, but traditional media as well.  The idea being proposed was that if the government is offering a tax credit of $7,500 to buyers of the Chevy Volt then the government has designated the Volt as an EV.

Obviously these reporters did not check their facts.  At its core, the tax credit program is about spurring battery development—not engines.  As such, it is largely based on the size of the batteries in a vehicle.  The vehicle must have an electric motor, but can also be powered by a gas engine.  The Nissan Leaf gets a $7,500 credit.  So does the Chevy Volt.  The Toyota Prius Plug-In Hybrid also gets a rebate.  We are estimating around $2,500—a lesser amount as the vehicle has smaller batteries.  Bottom line, this program makes no attempt to limit the credits to EVs.

We issued a press release yesterday to try to clean up the confusion.  You can read it here.

If you are interested, you can find a list of all the vehicles that currently qualify for tax credits or other government subsidies here.  (The list is longer than you might think.)

Finally, if you want an example of a story that got the tax credit story wrong, you can read one here.  (The article also missed that GM does now acknowledge that the gas engine provides power to the wheels in some circumstances.)

E15 Decision Stirs Controversy

Seems like the EPA decisions to allow up to 15% ethanol in fuel hasn't pleased anybody. 

The "against" lobby didn't want to allow the increase at all and the "for" for lobby wanted it to be mandatory.

See, the EPA split the baby and allowed the option to increase ethanol use.  I have to side with the EPA on this.  Inform consumers and let them make up their own minds.

Critics will imply that consumers aren't smart enough to read the gas pump labels or to understand the risks.  (Obviously they won’t go there outright.)

But come on.  Informing consumers is everyone's job.  And the idea that we should limit choices because consumers can’t be trusted to think is a slippery slope I won’t go down any further than we already have.

October Sales Tempo

A couple weeks back I was making the point that October sales would offer up an important view on whether there was any direction to vehicles sales.  (You can read the post here.) 

The idea was that without any major sales events we could get a clear sense at to the consumer's willingness to buy without the perception of exceptional discounts.

Since then the picture has gotten a bit murkier as several major incentive programs have been launched.  Even so, the early numbers are modestly encouraging.  Keep in mind; these sales illustrate a tempo, not a forecast…

Retail looks like it could be around 770k, or 9.9m SAAR as compared to a 9.5m rate in September. Assuming fleet is down slightly at 17% this amounts to total sales of around 930k, or 11.9m SAAR.  In other words up a bit up from September.

In terms of winners and losers, notable retail share shifts are as follows: Mercedes Benz (+14%), BMW (+10%); Nissan (-10%), Chrysler (-6%), Kia/Hyundai (-5%).  

Not great news, but any increase is encouraging.  Let’s hope it holds until month-end.

A Wrap-up on the Volt. (Hopefully)

The story on the Volt keeps shifting.  Right now the discussion centers on whether the Volt is a hybrid, an EV or something different.  Or, more broadly, does any of this even matter?

To me there are more interesting lessons to be drawn from all of this. To illustrate, consider this timeline that is based on what I have learned over the past few days.

Since its announcement, GM execs have gone out of their way to “sell” the Volt as something other than a hybrid, even going so far as to visit our office to tell us:  You guys need to really understand the Volt is not a hybrid.  It is an EV with a gas engine that charges the batteries.  The gas engine does not power the wheels (and other riffs on this theme.)

This distinction has become important because GM made it important.

What I learned yesterday (unofficially) is that late in the development of the Volt, something changed.  The engineers found that using a clutch--which was potentially there anyway from GM’s two-mode hybrid system--was an add that could increase efficiency at high speeds and/or high loads, like when the driver is climbing a mountain grade while towing, etc.

Sounds like a great add to me.

But here is where things go off the rails.  Someone at GM must have realized that this spec change was enough to raise questions about the original the-Volt-is-not-a-hybrid story.  But perhaps this issue was never discussed.  Who knows?

Fast forward to last Sunday where the technical specs for the Volt were being revealed for the first time.   Now, what I would have done if I were GM would have been to schedule an off-the-record briefing—embargoed until Sunday—for key media.  The messages could have been “Hey guys, we are releasing technical details for the Volt on Sunday and we wanted to brief you on a design changed that occurred late in the process.  It is a change that by any measure enhances the Volt, but we realize it may not jibe with earlier statement about the Volt’s powertrain.  We couldn’t bring you in the loop earlier because we needed to protect our competitive advantage.”  Then, have an engineer ready to tell the story and answer questions. 

That would have been it.  No controversy, and the focus would be on the Volt itself.

Instead, what happened is that rumors started back in June based on an announcement in Europe.  When questioned directly, GM persisted in saying the Volt gas engine did not power the wheels (when a simple “I can’t comment on details of the Volt’s power train at this time" would have sufficed.)

Saturday night, Motor Trend broke the new story based on what looks like materials leaked by GM.  That set everyone scrambling.  Even now, GM's official response doesn’t explain how this happened, preferring to suggest that it didn’t really happen at all.

This has been called "Volt-gate" and perhaps the comparison is apt.  History has shown repeatedly that the original problem is not usually the real problem.  The real problem comes if the communication of the original problem is mishandled.

So, point #1 is this is a good example of how not to manage PR in this era of 24/7 media demanding transparency.

Speaking of media, let’s get to point #2.  This is media’s perspective.

Even in the age of the Internet, legitimate media have responsibilities:   To get the story right, for one.  And to be skeptical—to not accept what we are told at face value; to verify with multiple sources whenever possible.

For reporters covering the auto industry a major source are the car companies themselves.   Because of familiarity this exchange of information is informal, but there are rules of engagement (off the record or the record, background only, etc.)

One of the most important is trust.  Media (usually) enjoy the trust of their audience, and media, in turn, trust their sources.  Frankly, when a source is trusted, there is tad less required skepticism than otherwise.  So trust is a big deal.

GM feels that our coverage of this Volt issue was overdone; that we are bashing GM.   But what we were really bashing is the way this was handled.  Changing the story is fine, but don’t leave the media you relied on to get the old story told hanging when the story changes.

Chances are they will feel duped and respond.

Incidentally, this is not just my view.  Another story that does a nice job of explaining this is on AOL.  You can read it here.

 

(UPDATE 10/14/10:  MediaPost is reporting that GM denys any changes to the Volt.  You can read this post here.)

News on E15

Last month we sent a letter to the EPA urging caution in approving a requested lift in the amount of ethanol allowed in gasoline to 15%.  (I blogged on it here.)

Last night the WSJ reported the EPA is preparing to announce the lift will be allowed. (If you have an account, you can read it here.)

The good news is that it appears the fuel will be approved for vehicles 2007 and newer.  And pumps offering E15 will be labeled, so presumably consumers will still have a choice.

These were the primary points in our letter.  No one wants to take responsibility for damage to engines and fuel systems related to higher ethanol content in fuels.  So fully inform consumers of the pros and cons and let them decide.  (The emphasis here is on fully.)

If this plays out as reported, sounds like the EPA is headed in the right direction.

 

The Latest on the Volt Story

The story on the Chevy Volt keeps swirling with AutoLine Detroit now tagging it “Volt-gate.”

I have had several conversations with GM executives today and here is what is emerging:

There was a press event over the weekend where detailed technical specs on the Volt were released for the first time.  Those details confirmed what had been reported on Green Car Advisor back in June; that the gas engine “indirectly” connects to the drive wheels in some conditions.  It also has been confirmed that prior to this event, GM was stating that the gas engine acted solely as a generator.

So the story on the Volt has changed.  Best I can tell, there are three explanations for the change.  The first is that when GM stated the “gas engine as generator” version of the story, the execs we spoke with told us the correct story—as they understood it.  The Volt technology is complicated and perhaps the exes didn’t have the full picture.  The second is that because the connection is “indirect,” the story really didn’t change.  The third is that the “misdirection” was intentional.  That it is a competitive world and GM wanted to keep its technologies a secret until patented.  (Obviously the second and third versions are incompatible.  You can’t say the story didn’t change, but then say the change was on purpose.)

Some of this confusion is that GM is in uncharted territory for any car company.  The Volt was announced back in 2007--far earlier than most any other vehicle.  There is no rulebook on what to announce and when.

But really who cares?

Well GM doesn’t like being called a liar.  I get that.  And while perhaps an extreme characterization, it does seem to be one supported by the facts.  (Perhaps calling it a white lie would be better.)  GM also seems to want to avoid the word “hybrid” in describing the Volt—probably to separate it from the Prius.  (EVs are more “green” than hybrids, right?)   Based on what we now know, the most accurate description seems to be that the Volt is an advanced serial/parallel hybrid. 

It also seems to matter to enthusiasts.  Car nuts who bought into the Volt story often became evangelists.  They told their friends about the technology and how cool the car would be.  When the story changed—even when arguably for the better, it is easy to see why they felt duped. 

Looking at the big picture, our engineers seem impressed with the new Volt story—even more than with the old story.  That is really the key.  Forget about the details of the power plant.  Will the Volt live up to all the hype?  (Such as 230 MPGe.)  More pointedly, is it better than Toyota’s upcoming plug-in Prius in the real world.  (Acceleration, braking, comfort, mileage, etc.) 

That verdict will have to wait until we get a Volt here for testing. 

Incidentally, Bill Visnic posted on AutoObserver his impressions on the Volt from Sunday's event.  You can read them here.

And GM has posted a response to the controversy you can read here.

More on GM and the Volt

The Internet is really buzzing over the Chevy Volt story.  Is it an EV with a gas engine to charge the batteries?  Or is it an advanced hybrid?

More importantly, does it matter?

I am talking with GM personally in the morning, but from what I can see as of now the evidence seems clear that the Volt is a next generation hybrid.   Albeit it, one with some very cool technology.

So what is the fuss? 

Simply that, up until now, GM has been very clear that the gas engine was for charging the batteries only.  If this turns out to not be the case, it is understandable why people are shocked.

I am no engineer, but from what I can see the Volt looks to have a great story—EV or hybrid.  Like everyone else, I just can’t figure out why we might have been told the wrong one.

More tomorrow…

 

Should LaHood Ban Passengers?

One great thing about being a cabinet secretary is you get a car and driver.  It’s great because you can then propose banning the driver’s use of cell phone use and not have to worry being a hypocrite.

Banning all cell phone use is exactly what the Honorable Ray LaHood seems to be proposing.  In an article that ran in Automotive News, LaHood compares cell phone use to drunk driving and seat belt use. (Seriously) 

I get that drivers need to pay attention.  Accidents and injuries caused by driver distraction are a bad thing.   But as Automotive News notes, even the IIHS has said that LaHood is focusing too much attention on distracted driving instead of other safety pursuits.

So what is LaHood really up to?  Perhaps burnishing his safety credentials for his post DoT career?

It is hard to say for sure.  One thing I can say:  If he is really serious about driver distractions, why stop at cell phones?  Why not go all the way and ban other forms of distractions a well? 

And what could be more of a distraction than turning to talk with a passenger?    Why not ban passengers?

After all, when you are being chauffeured to work, what is the downside?

You can read the Automotive News piece here.