According to CNN and other news sources, the CEOs of the Big Two and a half have agreed to salaries of $1 for 2009 if the government hands over the $25 billion in aid that they seek. As Swade and others have said, this won’t be a difference maker in the long run, although it’s nice of them to make the gesture.

Rick Waggoner made $15.7 million in salary in the last complete GM fiscal year.
Alan Mulally made $22.8 million in salary in the last complete Ford fiscal year.
Robert Nardelli’s salary isn’t publicly known since Chrysler is, ostensibly, private.

Even if Mr. Wagoner forgoes his salary, and Maximum Bob Lutz and all of their cronies over at GM took $1 million pay cuts in 2008, how much would that help? For argument’s sake, let’s assume that about 20 or so executives at GM (other than Mr. Wagoner) make enough money each year that they could pony up a $1 million pay cut in 2009. That would be $35.7 million returned to the coffers next year. For the 74,000 UAW employees in GM’s employ, that amount would buy another 6.3 hours of pay for each UAW worker at the current rate of $77 per hour. It doesn’t even buy another day of operating cash!!

Even if we expand the executive pay cuts and reduction in executive privileges to $100 million in savings for 2009 (a number that likely exceeds reality), that only buys 17.6 hours of employment for all UAW workers employed by the General. Just over two additional days of operation.

On the other hand, if the UAW cuts to the same pay structure that Toyota workers in Georgetown, Kentucky or Honda workers in Marysville, Ohio enjoy, that’s a $30 per UAW employee per hour savings. Multiply that by a standard 40-hour work week year (2080 hours), you’ll derive over $4.6 Billion in additional cash for the corporation. As a point of reference, I estimate that Saab’s annual sales are just below that amount (about 125,000 vehicles at $35,000 per car*). The delta in UAW vs. Toyota pay is, for GM, larger than Saab’s entire budget.

Do I agree with exhorbitant executive pay and privilege? No, I don’t. I don’t think that Rick Wagoner or Alan Mulally are worth anywhere near the amounts that they get paid. For that matter, I hope that the GM board gets their come uppance for steering this company into the rocks in the first place, and those rocks include this inflated executive pay and lifestyle.

However, my point is this: the cost of the UAW is so huge that other cutbacks pale in comparison to the reductions needed there. Yes, cuts are needed across the board, but unless the UAW cuts to a competitive wage, everything else is for naught.

* – Remember that you have to consider that Saab only makes money on dealer cost, not selling price, so I feel that $35,000 per vehicle is about right.

For reasons which will soon be revealed, I’ve been become acutely aware of the margins on auto options as mentioned in a previous post. The prodigious markups are obvious on some items — after all, who really believes that floor mats cost anything near the charge? How about the stereo upgrades that can be bested in aftermarket gear for less than half the price? In some cases the upgrades are worth the price because they look or feel better, but in others the value vs. the cost is debatable. In this post, I explore this question: is metallic paint really worth the price?

Most car makers still charge a premium for certain colors of paint. Saab is no different. Buy a Fusion Blue Metallic 2009 9-3 and the car will set you back US$550 over the same model with Polar White paint. On a 9-5, the same privilege will lighten your wallet by the same amount. In fact, only three colors, white, red and black, are offered at the “base” price.

Is this additional cost justified, or is the option up sell for metallic paint simply additional margin for the automaker?

First of all, let’s explore the roots of metallic paint and why automakers charged a premium in the first place.

The obvious question: does metallic paint and it’s close cousin pearlescent paint cost more than solid color paint? The answer: not much if any. Metallic paint simply has a very small amount of aluminum flake added to the formulation while pearlescent paint has an equally small amount of mica flake added. Certainly these raw materials are very inexpensive, and the remainder of the mixture doesn’t vary to any great degree. If you want to test this theory, call an automotive paint supplier and request pricing for any color in both metallic and solid. There will be no difference.

The next question: does metallic paint cost more to apply? Well, that’s debatable.

In the 1960′s, metallic paint really was something special. Without the automated paint booths that create today’s perfect finish, paint was either applied with hand-held sprayers or with full-component paint baths, neither of which guaranteed even coverage and therefore even distribution of metal flake. Therefore, paint rework was more common and more difficult with metallic colors and thus metal flake was more expensive overall.

By the late 1970′s, the environmental regulations and workforce protection laws changed paint formulations dramatically to reduce airborne pollutants released in the paint manufacturing and application processes. Faced with the differences, automotive finish experts were forced to change many established practices to make the new paint work. Because I can find almost no data on the comparative costs, I’ll give the car makers the benefit of the doubt here — let’s assume that some difference in cost existed during this period.

Therefore, there was likely some historic precedent of increased production cost for metallic paint.

Today, however, I believe that most of the cost differences for application of metallic versus solid paint are miniscule if any real difference exists. Certainly, automation is a huge advantage overall for auto builders, but no place more so than in the modern paint booths employed in all current auto assembly plants. Once the correct procedures are dialed in, all cars are produced with similar results. Sure, certain paints my need slightly different procedures, but those changes easily happen on the fly with the manufacturing computers remembering the “recipe” for each configuration.

Certainly there are many that agree with me.

From drive.com.au, Mr. Tim Colquhoun finds that auto OEM’s are keen to defend their position that metallic and “special” paint colors cost more, but paint experts differ:

Darren Kenney, owner of Kenney’s Automotive Paints in Carramar, says that there is little justification for car makers charging a premium for metallic paint.
“It’s a bit of a rip-off really,” he says. “The only difference between standard and metallic paint is that metal flakes are added to the tinter in metallic paint.”

Wikipedia has this quote, which is, in my experience, true:

Manufacturers almost always charge a premium for the “option” of metallic paint on a new vehicle, although metallics usually account for all but one or two of the colours from the palette available (only red and white are available as solid colours from many makers).

The same article goes on to say:

…many consider the price premium for metallic paint as a way to boost the base price of a new vehicle.

In the end, I find these sorts of games with numbers annoying. You can view the inflated cost of the metallic paint “option” in two directions: either the auto OEM is attempting to raise the profit of the car with a low-cost, high-priced up sell, or the maker wants to advertise an artificially low starting price. Either way it’s attempting to obscure the truth. When the consumer doesn’t have a firm grasp of the truth, the relationship deteriorates. It’s really that easy in my view.

Does it have to be this way? I think not. In fact, consider the Saab 9-7x. For the Saab 9-7x, your choice of available colors adds nothing to the price of the vehicle. That’s right: for the 9-7x, easily the largest vehicle in Saab’s line up, the additional cost for metallic paint is zero.

So, tell me this — how can this be? Does Swedish metallic paint cost more than American metallic paint? Does Saab simply think that they can get an extra $550 per car, but not on the SUV?

Your opinion, as always, is welcome.

A light went on today. It’s like one of those bits of knowledge that you already have, but it just hasn’t been made apparent to you yet.

Today I figured out why Saab (and Volvo) are so important to the North American market. Why GM can’t let Saab fall into a generic design haze. Why they HAVE to retain their Swedish identity if they’re going to remain viable as a brand.

I spent a lot of time on the road today and the subconsciously obvious took front and center in my conscious mind – around 98% of the vehicles on Canadian roads are either from the domestic North American market, Japan/Korea (which I deliberately lump together) or Germany.

Around 85 of the 98% is North American or Asian, and almost all of it is either totally uninspiring or derivative, with a small proportion of the vehicles warranting a second glance.

I knew with my head that this would be the case before I got here, but there’s something about actually seeing the situation for yourself that brings it home. In my home market, in Australia, we also have a large proportion of domestic and Asian cars, but we also have a faithful and pretty interesting French and Italian presence as well. They may not sell a LOT of cars, but they certainly add color and interest to the automotive landscape.

GM have to make Saab more distinctive if they’re going to have a presence in the North American market. “Distinctive” is what brought a great number of us to Saab in the first place. There was nothing else like a 99, or a 900 or a 9000. Saab needs a presence in the sports sedan market, but the fact is that they aren’t doing 3-box sedans well enough to survive here, and I don’t think I’d really want them to. If all I wanted was a basic sedan as adequate transport then I’d buy a Honda.

But that’s not what I want, and I don’t think it’s what many Saab buyers want, either.

I’ve seen a lot of new Mustangs on the road since I’ve been here, and I’ve got to congratulate Ford on the design job they did with that car. It looks exactly as a modern interpretation of the old Mustang should. I’m yet to drive one, but hopefully the opportunity might arise.

I’m not suggesting that Saab should do a modern take on the 900, though I’d love it if they did. But like Ford did with the Mustang, Saab need to do something that captures the essence, the spirit of what made them great.

Unfortunately, North America is too important a market to let go of. Saab have to stand out if they’re to make an impression here and the best way to do that is outstanding value and superb Saab design.

Right now, and contrary to what we might think and what we know is historical fact, Saab are rated lowest in terms of customer retention by JD Power. The all-sedan lineup hasn’t worked and the addition of the SportCombi was too little, too late.

Saab needs it’s mojo back, and quick. Seeing GM have committed themselves to Saab for the long haul, it’s in their best interests to let the designers off the leash a little and let Saabs be Saabs. They’ll drown in a true sea of mediocrity if they don’t.

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Spend some time in something other than a traditional Saab interior, and you’ll come to understand how well they’ve been thought through, and how well they’re appointed.

Earlier this week I drove my 900 for the first time in quite a while and it was magnificent to get back into the car again. The seats were supportive, the gearshift perfectly placed, the steering wheel just the right size, and all the controls were solid (for their age) and positioned just where you thought they should be.

As much as I like the Saab 9-3, it misses a few core Saab elements on the inside, things I’d really love to see remedied in future models. A real fear of mine, actually, is that the next generation Saab 9-5 will head in the 9-3′s direction rather than establish a new distinct interior for Saab.

What’s encouraging, and scary at the same time, is that GM do understand the importance of the interior. This is from today’s entry at GM Europe’s blog:

70-80 percent of what you experience in the interior of a car is purely subjective, sensual, perception…. In simple terms it’s what you see, touch (feel), smell and hear while sitting inside your car but cannot directly point to when asked. It’s still integral in forming your perception of the car.

In this post, they’re talking more about quality materials and the way buttons etc ‘feel’ during operation, but all that forms a part of that blanket term, interior design. GM seem to know it’s important, which begs the question as to why Saab interiors have been dumbed down a little in recent times.

There are certain things that are almost essential in a Saab interior. For example, it’s my belief that a modern Saab interior should have its window controls in the center console, just back from where you insert the key. Own a Saab with it’s switch arrangement set up this way and you’ll see that it makes perfect sense. And how many cars have you driven with window switches on the doors that are either awkward or unnatural to reach?

This one’s going to sound snobbish, but I don’t care, because when it comes to Saabs, I’m a bit snobbish.

GM talk themselves about ensuring that the interior of the car is fitting for the brand. So why on earth do their premium European cars – Saabs – share the same radio fascia and button mechanism with their base range Chevy’s?? This is not a new question and it flies directly in the face of what GM themselves have written in this article. That gives me a modicum of hope for the future.

It’s not that form is unimportant, but Saab have always proclaimed to give function preference over form when it comes to car design. This is an essential part of what made them different and whether you realise it or not, if you love Saabs then their distinct design characteristics are probably a big reason as to why.

Here’s hoping that GM are good to their word when it comes to interior design and the coming range of new Saabs.

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