Gary S. Vasilash
Gary S. Vasilash is the founding editor of Automotive Design & Production (AD&P) magazine, a publication established in 1997 by Gardner Publications with the cooperation of the Society of Automotive Engineers (SAE). He is responsible for the editorial management and direction of the monthly magazine. Vasilash continues to write a monthly column for AD&P and contributes several stories to each issue.
Vasilash has more than 20 years of experience writing about the automotive industry, best practices and new technologies. His work has appeared in a variety of venues, ranging from The Wall Street Journal to Lightworks, a journal of contemporary art. He has made numerous presentations at a variety of venues ranging from the annual meeting of the Association for Manufacturing Technology (AMT) to the Center for Constructive alternatives at Hillsdale College.
Prior to his present position, Vasilash was editor-in-chief of both Automotive Production and Production magazines—predecessors to AD&P. He joined Cincinnati, Ohio-based Gardner Publications in 1987 as executive editor of Production magazine.
Prior to that, Vasilash had editorial positions with the Rockford Institute and the Society of Manufacturing Engineers (SME).
He earned a Bachelor of Science degree in Journalism and a Master of Arts degree from Eastern Michigan University in Ypsilanti, Michigan. He is a member of the Automotive Press Association.
How VW Is Going Electric
5. August 2016
According to Dr. Matthias Erb, chief engineering officer and executive vice president, Engineering and Planning, Volkswagen of America, his company is focused on a strategy for 2025, although there is recognition that they’ve got to get there by doing some things that are essentially traditional. “There is still good growth in SUVs and CUVs worldwide,” he observed at the Center for Automotive Research Management Briefing Seminars, “and we are heavily investing in budget cars.”
During a conference where the issue of affordability of vehicles was a constant refrain (generally in the sense of “people may become unable to afford cars if there’s light weighting, turbocharging, etc.”), Erb’s comment about building cars that are from the get-go affordable almost seems as though it is an exotic idea, even though it is profoundly sensible.
That said, Erb said, “We know that we have to transform our core business. And that is easily said. But traditional companies are not easy to change. People are used to the environment they’re familiar with. You can’t switch the way things are done from one day to the other because you think that it is more interesting to work like a startup.”
However, at VW, that’s what they’re doing, in part, as they work toward 2025, the point in time at which he said they’ll have, throughout the VW Group, 30 new electric vehicles.
“It is time to get serious,” he said of the electrification strategy.
Erb said that the original Beetle of 1938 was an approach to mobility, something that was built to be affordable, reliable, and capable of meeting various needs.
Then as time went on, there was a second period, when a variety of vehicles were built for a variety of needs and interests.
Erb submitted that we are at a point in time where there is a change, one that requires a cooperation between digital technology and the automobile. One that results in a vehicle that is not only powered by electricity, but also powered, in effect, by silicon.
VW has created what he called a “modular toolkit” that will be the basis of the vehicles that the company plans to create. This toolkit is essentially a scalable platform; there will be, he said, two or three derivatives in order to accommodate the creation of a range of light vehicles.
The platform will be built around the battery. Then components—from the body components to the wheels to the seats—will be added to create the required configurations.
Sticking to Electric
4. August 2016
On July 18, the U.S. Department of Transportation (DOT), the U.S. Environmental Protection Agency (EPA), and the California Air Resource Board (CARB) released the draft Technical Assessment Report (TAR) for the mid-term evolution of the National Program for greenhouse gas emissions and fuel economy standards for light duty cars and trucks. It covers the standards for model years 2022 to 2025.
One of the big concerns voiced by some people in the industry is that the implementation of the technologies necessary to meet the proposed regulation would add several thousand dollars to the cost of new vehicles, which would have the consequence of cratering the car market, which would lead to reductions in jobs in the auto sector, which would have deleterious effects on places like the Midwest and Southeast.
According to the executive summary of the TAR: “the projections for the average per-vehicle costs of meeting the MY2025 standards (incremental to the costs already incurred to meet the MY2021 standard) are, for EPA’s analysis of the GHG program, $894 - $1,017, and, for NHTSA’s analysis of the CAFE program, $1,245 in the primary analysis using Retail Price Equivalent (RPE), and $1,128 in a sensitivity case analysis using Indirect Cost Multipliers (ICM). In the 2012 final rule, the estimated costs for meeting the MY2022-2025 GHG standards (incremental to the costs for meeting the MY2021 standard in MY2021) was $1,070.”
A cost premium, yes, But according to the summary, “EPA’s analysis indicates that, compared to the MY2021 standards, the MY2025 standards will result in a net lifetime consumer savings of $1,460 - $1,620 and a payback of about 5 to 5 ½ years. NHTSA’s primary analysis indicates that net lifetime consumer savings could average $680 per vehicle, such that increased vehicle purchase costs are paid back within about 6 ½ years, and $800 with payback within about 6 years in a sensitivity case analysis using ICMs” (indirect cost multipliers).
On August 2, a lively discussion was held at the CAR Management Briefing Seminars related to the subject, with (1) Christopher Grundler, director, Office of Transportation Air Quality, U.S. EPA, explaining it; (2) Mike McCarthy, chief technology officer, ECARS Division, California Air Resources Board (CARB), explaining what is occurring out in California; (3) Mitch Bainwol, president and CEO, Alliance of Automobile Manufacturers; John Bozzella, president and CEO, Association of Global Automakers, pretty much explaining that consumers aren’t interested in buying vehicles like hybrids and electric vehicles as those types of vehicles are more expensive than good-old internal combustion-engine cars and trucks; and (4) Wesley L. Lutz, owner of Extreme Chrysler/Dodge/Jeep/Ram pointing out that plenty of potential customers either can’t afford new vehicles or can’t get financing for new vehicles, and adding costs onto already expensive vehicles will make things even more difficult for them.
And then there was Diarmuid O’Connell, vice president, Tesla Motors, who said he’d read the full TAR, but as Tesla is already producing zero-emission vehicles that are electric, that perhaps more of an intellectual exercise than something to be met with fear and loathing.
O’Connell, who noted that there are some 373,000, $1,000 preorders for the Tesla Model 3, something the likes of which the auto industry has never witnessed, pointed out that while there may be weak consumer interest, as Bainwol and Bozzella cited, chapter and verse, he suggested that perhaps when it comes to the traditional auto industry and electric vehicles, it “probably not even trying.”
And to that end he rolled out the marketing element of Philip Kolter, who stressed the importance of Product, Price, Place, and Promotion.
For the first, product, he said that what’s mainly on offer by companies including Nissan, Kia, BMW, and Chevrolet in the EV space “simply aren’t compelling.” He likened them to major appliances.
He showed that many of the EVs are modified versions of existing products and yet they come with a significant price premium (why would you opt for the EV?).
“Place” is a question of where you can buy them, and he noted that (1) states like Michigan don’t allow the Tesla direct sales model, so it isn’t surprising that in Detroit there are 1,950 gas sedans for every electric vehicle and (2) dealers that have EVs on their lots along with gasoline powered cars tend to be gasoline-engine oriented.
And as for Promotion, he points out that there is very little advertising support for the products. (Tesla hasn’t spent any advertising dollars, it should be noted, but its overall visibility probably wouldn’t be much enhanced were it to.)
All of which seems to indicate that right now there isn’t a whole lot of compelling reason why anyone would buy an electric vehicle—unless, of course, it is something that is in itself compelling on various metrics, such as range, performance, and safety.
And which, like the Model 3 is supposed to, has a comparatively affordable price, (for the Model III the suggested price point is $35,000; given that the average price of a new car is $34,000, it doesn’t seem as though that is consumer crippling).
Economist vs. Economist
3. August 2016
On the day that General Motors announced its July 2016 sales—down 1.9 percent for the month compared to 2015; 1,706,173 sold year-to-date, off 4 percent—Dr. G. Mustafa Mohatarem, chief economist, General Motors made a presentation at the CAR Management Briefing Seminars hosted by Dr. Sean McAlinden, vice president for Strategic Studies, and chief economist of CAR, on the subject of the state of the economy now, and how it looks going forward.
Dr. McAlinden was, as is his wont, somewhat acerbic in his outlook, which includes the potential, within the next couple years, of a real downturn, one that could see a 29 percent falloff in vehicle sales. He also pointed out that the average length of a car loan is 66 months and that 29 percent are over 72 months. Meaning, of course, that there are some economic issues, apparently vis-à-vis a considerable number of consumers.
Red flags he enumerated are the lease rate (31 percent, which McAlinden said is a record), the length of loans, and the higher incentives that are being placed on the hoods, in the back seats and in the trunks of cars (especially cars, as trucks are having a steady climb, potentially reaching 70 percent of the market in the not-too-distant future, in McAlinden’s reckoning).
That said, CAR is still anticipating that 2016 could come in at 17.7-million units, besting last year.
Mohatarem was far more sanguine. In fact, he said that he’s pretty much had the same outlook for the last four years.
He noted that low interest rates, low oil prices, and full employment all lead to a conclusion that there is likely to be continued strength in the auto market. And, yes, 2016 sales will reach a new record.
And research he cited indicates that the cohort of people who were once thought to be more interested in smart phones than smart cars (and I don’t mean the smart brand, necessarily), the Millennials, are actually buying cars.
In addition to which, at the other end of the chronological spectrum, the +70 group, there is an increased number of people who are buying cars.
So it seems as though it is McAlinden’s long loans, high number of leases and incentives vs. Mohatarem’s low-cost loans, cheap gas and employed people.
Winston Churchill once quipped, “"If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions.”
The good news is that John Maynard Keynes wasn’t in the room in Traverse City, having passed 70 years ago.
Power of the People
2. August 2016
Listen to Wil James, president, Toyota Motor Manufacturing, Kentucky (TMMK), at the Center for Automotive Research Management Briefing Seminars.
It was October 1987, when he was on his first week on the job. He was in charge of a small team. (He became TMMK president in July 2010).
He was at the plant site in Kentucky.
“I can distinctly remember walking rough mud pits on the plant site, with construction all around me.
“I remember asking my boss, ‘When are we supposed to launch our first vehicle?’ He responded, ‘May.’ And I said, ‘Yes, but May of what year?’ He responded, ‘May of 1988.’
“I thought to myself there’s no way in the word that’s gonna happen!
“But in May of ’88 the first Camry came off the line in Georgetown. I learned what a strong team of capable of and I knew I was a part of something special.”
The first Camry produced at Georgetown
What didn’t seem in the least bit possible was completely realized. And the Camry has become a perennial number-one car in U.S. sales.
While there is generally a lot of concentration on things like materials and machinery—from composites to aluminum to ultrahigh strength steels, from laser welding to hot stamping to adhesive bonding—James makes another important point:
“You see, while advanced technology becomes more and more critical to our industry, and tooling and techniques evolve, at Toyota we still believe the single most accurate and valuable tool on our line continues to be the highly skilled, well-trained team member whose human senses help create a world-class vehicle.”
Sure, the technology is important.
But people are essential.
That’s a distinction that is often overlooked.
But shouldn’t be.
Car of the Year Awards for Designers Announced
1. August 2016
While there is an array of awards handed out each year for production cars, trucks and SUVs, these are primarily for cars that exist in a way such that you can actually go to a dealer and get one of them for your very own garage.
But then there is the North American Concept Vehicle of the Year Awards (NACVOTY) that are handed out each year for the vehicles that will have ramifications on the future of the industry—cars and trucks that may come to be.
Yesterday at the Concours d’Elegance of America at St. John’s in Plymouth, Michigan (which, as thoughtful readers of this blog will recall, happens to be the same town in which Automotive Design & Production’s Detroit office happens to be located, which is a coincidence, but what isn’t a coincidence is that I happen to be one of the judges for NACVOTY) this year’s awards were presented in three categories to three well-deserving winners:
The Avista is a 2+2 coupe that is sleek, stylish and the sort of thing that a 21st-century Buick needs in its portfolio.
The Budd-e is VW’s future vision of an electric minivan (microbus?) that they put a time marker of 2019 on, and with VW’s announcement of an aggressive rollout of electric vehicles within the next decade (“more than 30) new vehicles by 2025), this is something that could go quickly from the advanced studio to production.
The Hyundai Ioniq is a vehicle—or actually a set of vehicles, as it will consist of a full electric vehicle, a hybrid and a plug-in hybrid—that will soon be on the market, yet sets a new direction for a company that has distinguished itself in design over the past several years.
Incidentally, the Avista received a second NACVOTY trophy yesterday: Most Significant Concept Vehicle of 2016. Congratulations to Bryan Nesbitt and his team of designers.
Heck, kudos to all that not only received trophies, but who are working in studios around the globe to advance automotive design.