While GM say it turns to face the strange ch-ch-changes, it seems old pork barrel habits die hard (with a vengeance). The Detroit News reports that US Rep Joel Knollenberg (R-MI) has proposed $1.2b in federal spending and $3.2b in tax rebates to help American automakers achieve recently-increased CAFE standards. The bill sports a nausea-inducing acronym: "Bridging Industry and Government Through Hi-Tech Research on Energy Efficiency Act." Yup, that's the BIG THREE Act. The easiest of the bill's provisions to stomach: $750m over five years for "advanced battery research and development" The hardest? The $50m to pay for 200 hydrogen fueling stations, and the $150m to buy fool-cell vehicles for government use. The big-ticket spending comes in the form of a 20 percent refundable tax credit for research and development costs connected to meeting fuel efficiency standards. Figure that at $3.2b. The Detroit automakers are lining-up to fawn over Rep Knollenbergs fiscal irresponsibility bold leadership. Which was probably the point of the exercise anyway. Knollenberg is locked in a tight race for re-election (with suicide Doc Jack Kevorkian amongst others). To differentiate himself from his opponents, he's been emphasizing his support for the auto industry. Sounds like several billion well spent.

Consumeraffairs.com reports NHTSA is investigating complaints of rust producing "fist-sized holes" in the subframe on Hyundai Sonatas, resulting in suspension failure. So far the problem has occurred in 1999 – 2002 model year Sonatas. The rust weakens the subframe to the point where it causes "wheel collapse or separation, half shaft detachment resulting in sudden vehicle disablement and or steering anomalies" according to the NHTSA web site. Most of the reports are from states where salt is used to control ice in the winter. Several accidents have been reported, and one car was rusted so badly the insurance company totaled it. If you have a Sonata, you may want to check under it to see if yours is affected. The car comes with a seven-year, unlimited mileage warranty against rust through; depending on how old yours is, you may need to move fast. Or slowly. Or both.

It was the best of times, it was the worst of times. Just kidding, it's the worst of times. I can't even turn on the TV for fear of seeing anything having to do with the election. And gas prices have and are going up and up; I've paid $4.10 a gallon for the past two weeks. But presumptive Republican nominee John McCain (presuming he lives long enough) has a solution. Suspend the Federal gas tax for the summer. That's 18.4 cents per gallon to you and me. Not so fast says Barry Hussein Obama. That's a smoke and mirrors election year tactic that will, "save consumers little and do nothing to curtail oil consumption and imports." In comes Hillrod off the top turnbuckle. Mrs. Clinton says that Mr. Obama is "out of touch with ordinary Americans who are struggling to meet their mortgages and gas up their cars and trucks." Anyone else LOVE when multi-millionaires accuse other multi-millionaires of being out of touch? OK, so you might be expecting a spot of analysis. All I can tel you is this: my girlfriend is driving around in my WRX this week because her car is a death trap and I have some $100,000+  fun toy press car that you'll hear about later. Anyhow, she was bemoaning the fact my car requires premium fuel. I explained to her that the 20 cent premium over regular works out to less than $2 a tank. And the Federal gas tax is less than that. You catch my drift?

The Detroit News reports that GM will be cutting one shift from its Flint, Pontiac, Oshawa, Ontario, and Janesville, WI factories by July 14. The slashing eliminates some 3,500 jobs from GM's North American workforce. The move eliminates produciton of some 50k body-on-frame vehicles– which have already fallen 100k due to the ongoing American Axle strike. Analyst Joe Phillippi of AutoTrends Consulting says this is gonna leave a mark. "These are the most profitable things they make, and losing those profits is going to hurt for the next three quarters." Still, there's no point in building 'em if nobody wants to buy them; GM has seen a 17 percent decline in pickup sales and a 29 percent drop in large SUVs in the first quarter of this year. Sure, cutting makes the powerless feel like they're in control, but until GM goes "down the road, not across the street," expect the misery and moodiness to continue.

Earlier today, automotive analysts blamed a large chunk of Daimler's Q4 profits downturn on its remaining 19.9 percent share in Chrysler. According to their calculations, Chrysler inflicted a $2.7b drag on Daimler. Although Market Watch duly reported that "the German automaker cautioned against making that calculation, citing the differences between international and U.S. accounting," Chrysler PR switched into damage control. An email pointed-out that the results are for Chrysler Holding LLC, which includes both the automotive and financial services operations. What's more, that accounting thing is a big deal. "There are significant differences between IFRS and U.S. GAAP accounting standards. Major differences include the effects of the acquisition of Chrysler Holding LLC by Cerberus, including recent restructuring actions by Chrysler LLC and the accounting for pension costs under the 2007 UAW contract. Accordingly, the 2007 financial results of Chrysler LLC under U.S. GAAP are substantially better than the IFRS-based financial results utilized by Daimler." Chrysler flackmeister Katie Hepler told TTAC that ChryCo "enjoyed positive operational earnings during Q4." So what about CEO Bob Nardelli's statement back in December that his employer was "operationally bankrupt?" No comment.

With gas heading for $10/gal (maybe), automakers aren't raking in the bucks. But oil companies are. Marketwatch reports that British Petroleum and Royal Dutch Shell both released 1Q profit numbers yesterday, and the results would make any automaker drool a little. BP made $7.2b in the last three months, beating analysts expectations by over a billion bucks. Shell boasts a whopping $9.08b in profit this quarter, also beating market expectations by over a billion. Neither BP nor Shell increased production by more than one percent; they received between 52 and 66 percent more per barrel sold than last year. Even the oil companies are scratching their heads– all the way to the bank on these numbers. "We don't understand the oil price at this stage," Shell CFO Peter Voser tells The International Herald Tribune . "The fundamentals will not justify an oil price as we see it at the moment." Voser added that Shell "was not investing money in projects that would require oil prices to remain high to be profitable." (That's the job of SUV makers.) ExxonMobil and Chevron are expected to announce their own knee-weakening profits later this week.

Marketwatch reports that Daimler's profits dropped 32 percent in the first quarter of this year, tumbling to $1.3b. Revenue actually jumped about four percent in the same period, although pre-tax earnings dropped by an even more precipitous 40 percent. Daimler blames the red ink on its remaining 20 percent stake in struggling Chrysler, which created a 340m Euro drag on operating profits. [Chrysler's reply coming.] Another hit: Daimler's sale of its minority stake in EADS, parent of Airbus, in the first quarter of last year. Daimler's core business is operating on a fairly solid financial basis; Mercedes sales increased by 17 percent, operating profit by 45 percent. Only Daimler's truck business remains shaky, due to the "tense economic situation in the United States," a European oversupply of commercial trucks and new emissions standards. Still, Daimler is sticking by its forecasts that profit will continue to rise throughout the year. What a difference a brand makes. 

GMAC is the lender underwriting the vast majority of GM dealers' loans, facilitating the finance that's been fueling GM sales. GMAC's ResCap sub-division handles residential mortages. It may come as no surprise that both parts of the biz– owned jointly by GM and Cerberus (Chrysler's 80% owner)– are in deep shit. Yahoo!Finance reports "GMAC lost $589 million during the first quarter of 2008, compared with a loss of $305 million during the same period the previous year. [Ed: that's a 93 percent swing in the wrong direction.] The automotive finance division earned $258 million during the first quarter, a 35 percent decline from the year-ago period. GMAC cited weaker credit performance, including rising credit loss provisions and rising costs tied to restructuring operations." Something to do with a tanking new car market as well. ResCap "only" lost $859m during the first quarter, a slight improvement on the $910m lost during the same period last year. GM's former cash cow will soon require a fresh capital injection— a possibility dismissed by Cerberus– or face bankruptcy. And if GMAC goes down, there will be chaos on the showroom floor.

If so, stick a fork in Detroit. And federal mpg regulators will look like geniuses, as the free market stampedes to high mileage vehicles. As Captain Picard might say, what will make it so? Writing for The New York Sun, Dan Dorfman relies on three analysts for his, uh, analysis. First up, Troy Green of the American Automobile Association. The trip-A guy's forecast "calls for" (perhaps not the best choice of words) a jump to between $7 and $10 a gallon in two to three years, based on $200 a barrel crude. The chairman of Houston-based Dune Energy is slightly more optimistic. Alan Gaines sees gas rising to $7 to $8 a gallon on Arrakis. I mean, stateside. Weiss Research commodities trader Sean Brodrick projects $8 to $10 a gallon gas. Like any good financial pundit, Dorfman hedges his cred. "His [Gaines] latest prediction of $200 oil is open to question, since it would undoubtedly create considerable global economic distress. Further, just about every energy expert I talk to cautions me to expect a sizable pullback in oil prices, maybe to between $50 and $70 a barrel, especially if there's a global economic slowdown." [thanks to jthorner for the link]

Last year, I scored over $400 worth of auto supplies. All it cost me was sales tax, a few stamps and about thirty minutes of my time. It was a lot of good stuff too: 24 quarts of synthetic motor oil, six gallons of coolant and a seemingly endless amount of top quality car waxes and detail products. Heck, I was even able to get three different tool sets and free wipes once all my maintenance work was done! Unfortunately, for a frugal enthusiast like me, that was then and this is now.

AutoWeek reports GM's downsizing models to meet the new federal Corporate Average Fuel Economy (CAFE) regs. Buick is thinking of a Corolla-sized "Buick luxury car" to be based on China's Buick Excelle. The baby Buick would be built somewhere in North America on the rear wheel-drive Alpha platform currently under design in Germany. Given Buick's past history with badgineered small cars (Apollo, Skylark, Skyhawk) and the Beyond Precision people's current three cars per month dealer average, this one is doomed. Doomed I tell you. Doomed. A more interesting prospect: an "economy" Hummer smaller than the H3 called the… wait for it… H4. Since the H3 is already built on the smallest truck GMNA offers (Colorado/Canyon), upon what platform will Hummer (or its designated hitter) build this bad boyette? The HX concept supposedly previewed the H4– but we all know what happens in the Journey from concept to reality. Will the H4 end-up a testosterone-laced Theta (Equinox/Vue)? Or will our 2006 prediction come true: a tricked-out Aveo-based super-economy SUV?

A sports car? An economy car? A pickup truck? A genuine off-roader? A soup ladle? The reincarnation of an '87 AMC Eagle? Oh wait, maybe the last one. Anyway, the official pre-ad campaign press release reveals that Spartanberg's finest– the X6 "SportyActivity Coupe" — is about to get the Star Wars Episode IV "A New Hope" treatment. The company will project a holographic image of Bimmer's new car truck SAC in the lobby of four prominent Wall Street enclaves (so to speak), complete with the message "You must see this droid safely delivered to Alderaan." The ad agency that devised this hi-tech, what's the word? Solution, clearly understands the vehicle's WTF factor. "The BMW X6 doesn't look like anything BMW has ever produced — you have to see it to believe it," said Duff Stewart, President and COO of GSD&M Idea City. "Our goal was to put this amazing vehicle in front of its best prospects and stop them in their tracks." How come those ad guys never say "and buy it?" BTW: BMW says the X6 is "Coupe's evil twin."

Jim Croce wouldn't like TTAC; we have no compunctions about tugging on Superman's cape. In fact, it's no big deal. But it is for Automotive News [sub]: "Still, Toyota's vaunted inventory controls have come up against market forces even it cannot tame." Whoa! And there I was thinking ToMoCo had moved past inventory control to weather control. Nope. "The number of units in dealership stock and en route have swelled to about 376,000. That's about 100,000 units more than were on the ground last summer, and up from about 348,000 a year ago." While ToMoCo's "turndown pool" (vehicles rejected by dealers) has swelled to 9700 vehicles, these stats are, frankly, small beer compared to the situation over at GM. GM's cash flow and profit-critical truck inventory may be in great shape, but that's because the American Axle strike means they ain't building them. And they've just announced their decision to make 138k fewer trucks this year. That's in addition (?) to all the trucks they're currently not making. "With rising fuel prices, a softening economy, and a downward trend on current and future market demand for full-size trucks, a significant adjustment was needed to align our production with market realities," said Troy Clarke, GM NA Prez. This, folks, is the reckoning. 

Are you a Cornhusker State resident working in the ethanol industry– and who doesn't?– but don't know how to get your piece of the taxpayer pie? Well come on down to Nebraska's E85 Direct Marketing Workshops! Domestic Fuel reports/shills that "The aim of the workshops is to promote direct marketing relationships between ethanol producers and fuel retailers and reduce costs for all parties involved. Ethanol plants, petroleum equipment suppliers, petroleum marketers and auto dealers are encouraged to attend these free workshops. Presentations will address E85 handling and storage, regulations and safety procedures, applying for the ethanol blender tax credit, and direct marketing of E85 from ethanol plant to retailer." The workshops are sponsored– sorry, "presented" by The Nebraska Ethanol Board, the National Ethanol Vehicle Coalition and the Clean Fuels Development Coalition. Just in case you can't see through that smokescreen, Domestic Fuel spells it out. "The project is funded in part by a grant from the Nebraska Department of Economic Development administered by the Nebraska Rural Development Commission." 

With five months left on their current contract, Ford and the Canadian Auto Workers Union (CAW) have agreed on a new deal. Union workers will see a wage freeze and reduction in vacation time, in exchange for holding off the "two tier" wage system which have wreaked havoc cut U.S. labor costs.Yes, well, The Globe and Mail reports that the new contract calls for new employees to receive "70 per cent of regular base wages in the first three years of work." So what does Pierre Hardhat get in exchange for the cost of living freeze and stealth two-tier wage structure? Cash money, of course. Ford will pay each CAW worker a $2,200 bribe "productivity and quality bonus" when the contract is ratified, and $3,500 reimbursement for giving-up 40 hours of vacation time in January '08. The St. Thomas plant will stay open under the agreement; Ford has promised to find a replacement for the Crown Vic/Grand Marquis/Towncar combo. Still on the table: health and safety provisions and clauses covering skilled trades workers. With some of Ford's most important products coming out of Canada (Edge/MKX and soon, the Flex), look for a final contract to be settled sooner, rather than later.