dsc_5668Mostway through February, and the Naples boosters have yet to make their usual breathless announcement of how great January’s tourism biz was. Given that December 2016 was a let down from previous Decembers, I think this means that January was really slow, and they’re hoping for a better februrary or the rest of the year so things average out and then they can announce breathless record tourist biz for the winter season or year or some time or other announcement.

Half of Florida tourism’s problem is exhibited above… The lake is at 42 degrees north in Minnesota and the temp is just north of 60 degrees, and what remains of that ice may not be long for the world. We’ve already had ice out on some of the ponds, and I wouldn’t be surprised to see ice out on a shallow lake or three tomorrow. Kinda blows the incentive to travel to Florida… But talk of global warming is pretty much forbidden amongst the Florida tourism boosters, so they’ll have to come up with more “creative” explanations for the sagging tourism numbers.

Florida tourism’s other problem is equally unmentionable… No PR flack employed by the boosters of one of America’s reddist counties is going to admit that the spectre of a President Trump is scaring off foreign tourists. But the analytics don’t lie (though some of the analysts do), and web searches from several foreign countries on Florida tourist websites are down by double digit percentages. No surprise that I heard fewer foreign language conversations and even English english in Florida this winter, and traffic seemed a bit less but still too slow. Heck, even the Canadians seemed to disappear for a few days around the inauguration. And if the Brits and even Canadians and tourists from a bunch of other countries not on Trump’s list of “Moslem” countries are staying away, I doubt many wealthy Arabs will grace us with their presence and tourist dollars either.

But Florida tourism boosters, don’t give up hope yet…

Winter storm watch for hereabouts on thursday and friday. So I might come back for a few weeks and spend a few bucks at Micky D’s supper clubs and I can’t make it to Naples and back without buying a least a tankful of Florida taxed fuel. So ya, I might drop a whole $20 to the state of Florida in taxes on my next visit.

But I’ll try to drop more in the donation jar at the next Florida Airhead Tech Day… Worth every cent!

Since the first of the year we’ve been hit with news that Mack’s Titan heavy hauler, EBR’s sport bikes, and Victory’s cruisers were being discontinued. Volvo’s sacrifice of the Mack Titan was seen as yet another cut into the heart of the Bulldog, until Volvo sacrificed their own VTX heavy hauler, further swelling the body count. EBR’s current owners looked to be just assembling a few bikes from parts so no big deal, except they announced the factory’s tooling and machinery would be up for sale. Given that Polaris’ Indian brand has Harley on the run in a shrinking market, it may not have made sense to keep building in house competitor Victory. OK, almost makes sense.

Then the real felony level assault came on the 20th, with failed businessman and reality TV show host Trump exploiting a legacy vulnerability in the constitution to become president, despite having lost the election. Trump’s reality TV show moved to a new set in the White House, and kicked off their season with a flurry of orders, none well thought out. Amongst these edicts was one ordering the building of a wall along the Mexican border, billed to Mexico. Mexico promptly refused the charge, forcing Trump to substitute a 20% surcharge on Mexican imports to the U.S., charged to the importing company and of course passed on to the consumer. Trump has been whining about imports from China, Europe, and even Canada as well as Mexico, and threatening even higher tariffs in the 35% to 45% range.

Now a president has the power to create “emergency” tariffs all by himself, and “emergency” is not well defined. So we can full well expect some tariffs, and it isn’t just Trump that’s been afflicted by this epidemic of tariff fever- Republican congress members have been throwing around the 20% number too. Twenty percent… “That ain’t much, I’ll just buy American”, you say. If only it were so- The highest domestic content on any new car or light truck is around 80%, which means Trump and his GOP chorus get to add 4% to the price of your “Made in America” car or truck. That’s another thousand or three dollars price increase. Looking at a new GM or Fiat Chrysler pickup? There only around 50% domestic content, at a 20% duty figure on a $3k to $7k price increase. Looking for a new VW Golf or Jetta to replace your TDI? Zilch domestic content, so figure on a $5k price increase, guess we’ll keep our dirty diesels instead. Are you an environmentalist, looking at a hybrid or electric? Almost all of them have near zero domestic content, thus adding thousands in tariffs that could eat up any electric/plug in hybrid tax credits.

It gets worse… American made motorcycles are pretty much cruisers, forcing the other half of us riders to buy imports. When Trump and his GOP add 20% to the price of a BMW or Gold Wing or metric cruiser, silent factories that once built¬† EBRs and Victories could be busy again. Same in the truck biz, where market leader Daimler and International too are building a lot of their trucks in Mexico. Volvo builds engines and transmissions here, and assembles most all their trucks for the American market here too… That might come in handy.

But I’m just engaging in wistful thinkin’, in reality even a 20% duty on imports would be a disaster. Australia, Brazil, and a few other South American countries tried that… And were stuck with Falcons for half a century and aircooled VW engined motorcycles. For the U.S., 20% tariffs would force carmakers to discontinue economy models that working families rely on, restricted options on everything else, and wholesale layoffs through the whole automotive, truck, and motorcycle biz as sales drop in response to tariff driven price increases.

And that most American of motoring icons, Harley-Davidson? Maybe bankruptcy liquidation…

 

 

“Drivers Wanted” has been replaced by “Drivers Wandering Away” at VW USA. As reported to the court supervising the TDI buyback and “fix”, about 10,000 drivers a week are turning in their TDIs at VW dealerships. That’s about 40,000 a month, and VW can only wish they could sell that many cars a month these days. VW’s U.S. sales for 2016 were a hair over 322,000, picking up only slightly in December. December was also the month where the TDI buyback finally got going after initiating the week of thanksgiving. Drilling down in the data, around 40,000 TDIs were returned in december and VW’s sales went up by a paltry 6,000 odd cars. If we assumed those 6,000 sales were to the newly ex-TDI drivers, which I wouldn’t by and of itself, that’s a 15% owner loyalty rate. But given that an online VW forum survey found that only 15% of TDI owners would stick with VW and the december increases tended to be of models like the Golfs popular with TDI owners, that 15% may be close to the real loyalty rate.

Meanwhile Ford, GM, and Toyota sold around three million cars each, and about tow thirds of them to repeat buyers. That meant that two thirds of their sales were “in the bag”, repeat buyers who only needed to be treated decently and reminded of the new models occasionally. Thus while enjoying the revenue from 3 million or so sales a year, they only had to spend money to bring in a million or so new customers a year. Used to be like that for VW with the TDI buyers, an reliable army that consumed a hundred thousand TDIs a year with little need for advertising or rebates.

For VW, the situation is grave… The most loyal chunk of their customer base will have dropped off their TDIs and picked up their buyback checks at VW dealers in a mere year or so, and a mere 15% or so will spend those checks on another VW. No surprise, a lot of us TDI drivers would have stuck with VW even after the TDI scandal, but throw in VW’s dropping Consumer Reports reliability scores and indifferent dealers, and we’ve had it. Before the TDI scandal, VW talked of a reaching a million U.S. sales a year. That’s about the number of new sales Ford, GM, and Toyota have to make here every year, and they’ve got 10 times the volume to afford the advertising and incentives to do it. VW USA? The death spiral may only be just beginning…

Today our new unelected president was sworn in, rather boring event. I was more interested in his inauguration speech, and Trump went full nationalist. Hitler and Mussolini would have been proud, and both managed to leave their country’s industry, auto and otherwise, in ruins. In the worst tradition of those fascist dictators Trump promised “America First”, with “Hire American” and “Buy American” policies. I’ll put aside the “Hire American” threat for now, suffice to say with our ‘Merican economy at full employment, we’ll need some new americans to hire if Trump’s Tariffs actually work.

Trump has been ranting threats of 35% tariffs for months against Mexican, German, and now even Canadian built cars. Yet the automakers haven’t announced a single new American auto plant as a result. For good reason- An auto plant is a multi-billion dollar investment that will take at least a presidential term to build and bring online, and decades to pay off. And while you’d think the companies with the most plants and production capacity here would welcome Trump’s offer to disadvantage their more foreign made competitors, none have welcomed Trump’s tariffs.

Why?

Well for a start, there’s no such thing as an “American” car, or even truck. Ford is building pickups in Kansas City and Kentucky with engines made in Canada, Mexico, and the U.S.. Same with hundreds and even thousands of other parts. GM and FIAT-Chrysler build many of their pickups in Mexico with engines from the U.S.. I’m currently in the market for a new vehicle and choosing between the Ford Fusion built in Mexico, the Escape built in Michigan, and the Transit Connect built in Spain… And depending which model and drivetrain I choose, those parts make come from Great Britain, Spain, or the U.S.. The automakers decisions of what to build where are driven by economics- It costs a billion dollars or more to develop and tool up for a new model, and they need a volume of 200,000 units a year to make a popular priced vehicle profitably. Thus Ford builds models that sell in low volumes here like the Transit Connect in Spain where the added volume of the Euro market makes it profitable, while building high volume models like the big Transit and F150 in the U.S.. The Fiesta, probably Ford’s lowest margin car, is built in Mexico while the the slightly more profitable Focus is built in Michigan. Conversely, the pickups are largely a North American market only product, with the exception of small but profitable export markets like the mideast oil producing countries, while an older model Super Duty is produced in Brazil in response to tariffs there. GM, FIAT-Chrysler, Toyota etc. follow similar strategies.

So despite most of our auto plants here running at capacity, Trump turns loose his threatened 35% tariffs. BMW, Mercedes, and the other luxury brands privately laugh, using the tariffs as an excuse to further inflate prices and profits on cars that in some cases are already built here anyways. Ford, for example, is in a pickle though- Without a huge profit margin, they’ll have to increase prices on U.S. built vehicles to cover the tariffs on imported parts going into those vehicles. Sales on the U.S. built pickups, Transit, Focus, Taurus, and SUVs fall. Once prices rise to cover Trump’s 35% tariffs, not enough low volume models like the Transit Connect sell to be worth the bother, and a Mexican built Fiesta costs more than a bigger Focus. Ford drops the Fiesta from the U.S. lineup and maybe the Focus too, and imported powertrain options like the PowerStroke diesel are dropped after 35% tariffs make them unmarketable. The more profitable Bronco and Ranger that were going to keep autoworkers employed in Michigan are cancelled because they require a lot of imported parts that are too low volume to build here, and with Focus sales falling Ford is forced to close that very same Michigan plant he made such a fuss about “saving”. Same at GM, FIAT-Chrysler, Toyota, Honda, etc… prices rise as imported content is hit by Trump’s tariffs, sales drop, and plants are closed.

The process is repeated in most every industry like construction equipment, machinery, aircraft, etc. that the U.S. is still competitive in thanks to international parts sourcing. And that’s just the first order consequences of Trump’s tariffs… Next we’ll see retaliatory tariffs destroy family farming in a way we haven’t seen since the depression. But I’ll save that discussion for a future post…

 

dsc_5558I’ve made something of a career of postmortems of rallies that didn’t go well, especially BMWMOA’s. But the North East Florida BMW riders have made my job near impossible… I can’t find much to complain about. Sure, the traffic between south and north Florida makes for a long grueling day of riding through the 700 mile long suburb better known as Florida. The winter rally makes up for it by letting us arrive thursday, so we miss none of the friday events and get two full days in GearHead heaven before we face Florida traffic again. This is the Winter Rally, and even in north Florida it can get below freezing. Not to worry, highs in the 70s and lows in the 50s. The site is a military base in the middle of nowhere, but the club provides ample sustenance, supplemented by a couple on base restaurants and a well stocked PX, just in case you lost some required uniform bits on leave. The campgrounds are huge, or join the club and get cheap “billeting” on base. The only down side I see is that unless your active duty or a vet, you have to leave when the rally ends on sunday…

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‘Course, every self respecting BMW rally has an airhead encampment, and we did the Winter Rally proud. My hack’d R65LS needed but a sip of oil, but the electricals of the bike on the left allowed some essential electrons to turn to smoke, and we made repairs at least as good as the already disreputable wiring harness. Got the bike running, and haven’t heard of it breaking down on the way home to Tampa. Oh, and see that substantial woodpile behind the Prius? The airheads also build an impressive bonfire as well as keep the campers cafinated via the airhead cafe’ under the canopy.

So BMW ¬†clubs and especially the MOA, kindly follow the Northeast Florida Club’s example and put on a great rally!

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OK, while attendance did rise into the double digits (most had left by the time we remembered to take a picture) we’re, as they say in sports, in a “rebuilding year”. Veteran “coach” Roger, after a legendary string of successful tech daze, has finally taken a well deserved retirement. We also lost a couple star performers to heaven’s airhead team. But new “coach” Jeff is growing into the job, and us old players will still make the plays and score some points while our draft picks hone their skills. Didn’t help either that we had an 80% chance of rain that became 100%, followed by gusty winds bringing in a cold front. Heck, they even had wind chill warnings out for South Florida!

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None the less, we muddled through pretty well- This /2 received a new U-joint boot. Also did some general maintenance on Louis’ R100, new steering bearings on I think it was a /6, and assembled another /6 from the crankshaft back. Got everything back together by mid afternoon and kicked back with the usual airhead libations… We usually don’t reach that point until after dark sunday!

So like the Cubs, hope springs eternal, and we’ll win the series next year… See you in Naples again, first weekend after new years!

Read the book “Hidden Figures”, see the movie too. This is the story of the women, many of them African American, who made 30+ MPG cars powered by 200+ HP engines that do 150 MPH possible. Back in 1935 NASA, then known as NACA, began hiring “computers” to do the maths to determine the best way for cars and planes to carve through the air and air to get through engines better. Only one year before Chrysler has introduced the radical for it’s time Airflow, the first car that was more aerodynamic going forward than in reverse. These were the dark days of aerodynamics, and these women did the heavy lifting to bring us the fast and efficient vehicles, aircraft, and spacecraft of today.