Chrysler is no longer "asking" suppliers for a five percent cost cut across the board– they're just taking it. More ominously, they've changed their payment terms. We just received this information from a reader (independently confirmed) who wishes to keep his name and company confidential for obvious reasons:
On June 3 we received revised purchase orders (PO's) indicating Chrysler will now be taking five percent off all PO's and will take 60 days to pay instead of 45. The trouble is they are doing it to all existing orders, not just future orders. I was told by Chrysler purchasing they were trying to keep their cash flow together and there was nothing they could do about the PO changes. I think that might be all for Chrysler unfortunately. They also told me the new rules were going to include PO's shipped after June 1 even if they hadn't bothered to change the order.
If Chrysler's cash flow is so precarious that they have to shortchange suppliers and take longer to do it, it doesn't bode well for the company's short-term prospects. It looks like the only thing that will pull them out of this death spiral is a healthy infusion of cash from Cerberus' deep pockets; the private equity firm isn't known for throwing good money after bad. Look for Chrysler to file for C11 before the end of August, when the statute of limitations expires for suing Daimler for false conveyance.
Alfa's recently debuted [and far less cute than the] MINI-fighter– the MiTo— will soon get some drop-top glamor, according to promiscuous British car magazine AutoExpress. The cabrio is likely to debut in 2009. It's meant to offer "class leading" handling. For the sake of weight and price, the top will be soft. AutoExpress also reports that Alfa is angling to give the MiTo much, much better reliability than current and former Alfa nightmares– lest they continue to scare-off all remaining customers. While AE's chop looks good, Alfa, Fiat, and forgotten-sibling Lancia all need a rear wheel-drive (RWD) sports car or roadster. While Lancia recently declared that their two-seat Fulvia concept car was headed to production, there are two absolutely critical vehicles to affordable Italian brands: fantastic city cars and RWD roadsters. But as fuel economy and packaging are concerns for everyone, including the Europeans, front wheel drive just makes more sense. Not to mention the cost of developing an all new RWD platform. But really, do you want to live in a world where the Miata has no true Italian or British competitors? In any case, if Alfa's long prophesied return to the U.S. is for real, the MiTo and MiTo cabrio will most likely be part of the entourage.
The new GT-R from Nissan is a media darling, and deservedly so; a gran turismo with enough usable performance to tackle the Porsche Turbo. My question: does the GT-R still leave room for a smaller sports car like the Z-Series? The 350Z's decreasing sales and the increasing age (five years) tells us that the car will need a replacement soon. Hence Nissan test mules showing slightly longer and wider bodies. This "up-sizing" game has always amused me; the spot left empty by an enlarged car is often filled by a new "compact" model. Anyway, it seems the sixth Z will be a bigger, badder sports carl. I imagine the trademark sharp lines of the Z mixed with carbon-fiber parts (a CFRP roof would make sense), eye-catching LEDs and just a bit of GT-R. Enough to tell the two are brothers but not so much as to make the Z a GT-R wanna be. Let's see if fame runs in the family.
Computer industry pundit, columnist, documentary film maker, small airplane pilot, classic car enthusiast and former international oil industry correspondent Robert X. Cringely is talking up SwiftFuel. Just in case the name isn't catchy enough (the fuel, not the author), Cringley calls sorghum-based go-juice “The Splenda of motor fuels." "It has an octane rating of 104 (higher than the 100 octane fuel it replaces) yet contains no lead or ethanol.SwiftFuel mixes with gasoline, can be stored in the same tanks as gasoline, and be shipped in the same pipelines as gasoline.”Swift Enterprises claims the sorghum brew yields six times as much fuel per acre as corn and delivers get up to 20 percent better gas mileage than… gas. They're currently selling the alt fuel as a replacement for leaded gasoline in small airplanes.Too good to be true?Cringely doesn’t address many of the problems associated with the whole agricultural feed-into-fuel deal: converting wilderness into farmland, fresh water consumption, the use of pesticides and fertilizers, energy required to convert the biomass into SwiftFuel, etc. Despite E85's rough ride (here and elsewhere), look for more of this outside-the-oil-well thinking as oil prices escalate.
BBC News reveals that the UK government is about to reveal their plan to introduce a £5 ($9.84) congestion charge to the city of Manchester. This despite the recent public backlash against increased petrol taxes, simmering resentment towards new "green" sales taxes on vehicle purchases, the ouster of London Mayor Ken Livingstone (proponent of increased, CO2-based congestion charges), polls showing widespread opposition to a Manchester congestion charge, and calls for, God forbid, a referendum on the issue. Of course, British politicians didn't get where they are by attending Oxbridge. Oh wait… I mean, they didn't get where they are by not playing the class warfare card. This piece by The Times' transport correspondent on the issue– and the timing of the charge– offers a fascinating insight into British politics. "The deal has been cleverly designed by Government to ensure that local politicians of all parties must risk their political necks by approving it. Seven of the ten local authorities in Manchester have to vote in favour of the deal for it to go ahead. Once they have accepted it, they will not then be able to claim that it was forced upon them. It may sound like the councils are being bribed [by a promise of £3b for public transportation improvements] into charging drivers up to £5 a day, but they will be wary of making this accusation themselves because he who accepts a bribe is just as guilty as he who offers it." Madness.
In the face of bracing headwinds (sales down nearly 30 percent year-to-date), Bentley has unveiled its latest variant: the "Continental Flying Spur Speed." Well, of course it is. The new "Speed" trim is less about competing with Merceeds' AMG brand as it is about making sure their cars don't get completely dusted by uber S-Classes at stoplights or during an ad hoc Monte Carlo road race. To that end, the British/German engineers tuned the 12-cylinder engine to produce 600 horsepower (up from 552), refreshed the suspension, added new exterior trim pieces (especially around the front fascia, which now looks like it wears a goofy smile), and slotted-in bigger brakes. The sprint from rest to 60 now requires only 4.5 seconds of you and your cosseted passengers' time. Gas price crisis? Surely you jest. Bentley Chairman Dr Franz-Josef Paefgen waxes, "The global success of the Continental Flying Spur has created a new generation of Bentley owners. Responding to their feedback, we have refined an already remarkable car and with the debut of the Flying Spur Speed we are extending its appeal." In other words, pro athletes don't care about no gas prices. Touché.
The AP reports that U.S. minivan sales are down a pickup-truck like 20 percent so far this year, against an overall light vehicle market drop of eight percent. Ford has already given up on minivans; they scuttled the Freestar in 2006. GM is nearly done as well; deep-sixing the Ten Worst-winning Chevy Uplander. Some would-be minivan buyers are moving to "crossovers" and others are downsizing more radically. Some market watchers see a minivan renaissance ahead, as Generation Y starts sharing both X and Y chromosomes and Baby Boomers look to minivans to transport their grandchildren (huh?). Global Insight predicts U.S. minivan sales will settle in at around 650,000 through 2012, when they could jump back up to 700k as the market improves. Maybe. Global ignores the fickle nature of fashion-oriented buyers; there's a solid history of generational antipathy, as car buyers reject their parents' vehicles. Still, seven-passenger SUVs, mpg and gas prices…
"The Porsche Cayenne is a deeply misunderstood machine," RF told me before my test drive. "It's one of the world's fastest off-roaders, not a house-broken truck." Huh? Why would a world famous sports car maker (if not THE world famous sports car maker) tempt infamy by making a kick-ass mud plugger instead of a FX-style sports-car-on-stilts? The answer, I'm told, lies deep in Porsche's DNA. In the late eighties, Porsche jacked-up their 959 supercar and entered it in the grueling Paris – Dakar rally. In their second attempt, the German automaker scooped first, second and sixth places. "Take the entry level V6 off road," RF commanded. "Thrash it without mercy. THEN tell me what you think." Sounded like a plan.
Automotive News [AN, sub] continues the Black Tuesday mop-up; this time they pickup on pickup profits. Or lack thereof. "The segment is expected to shrink by about 500,000 units this year to as low as 1.65 million. That's a far cry from the 2.5 million in the peak years of 2004 and 2005." Buried at the end of an article suggesting that now might not be the best time to be launching a new Ford F150 or Dodge Ram (if not now, when), AN reveal that F150 annual sales are tumbling from last year's 690,589 to, by Ford's admission, "well below 600,000 this year." Rounding that out to a 100k hit, at $8k – $10k profit per vehicle, that's $800m to $1b the cratering market's excising from FoMoCo's annual pretax profits. (That's profit folks, not turnover.) Using those same numbers, Ford's "horrendous" 142-day supply (226k) of F150s equates to $1.808,000 to 2.26b to worth of profit locked-up on the lots. AN doesn't run the numbers for GM and can't do the math for Chrysler (it's now mostly owned by private equity). Instead, they offer this helpful tidbit. "Chrysler remains hopeful for a turnaround. 'Whenever gasoline prices spike, there's a free fall in the truck segment,' said Mike Accavitti, director of the Dodge brand. 'But the market is still sizable.'
Also in today's Washington Post: an profile of Chevrolet Cavalier fans. Yes, fans of a car that would have made TTAC's Ten Worst (had the award existed then). The article starts with the sad fate of the last production Cav (MIA) and quotes from Edmunds such as "the worst [drive] we've experienced in recent memory", "homely," "[engine vibration] like a caffeine addict going through withdrawal," and "seats are uncomfortable for any length of time." WaPo then heads to the flat trailing end of the automotive bell curve with fan testimonials, pimped rides, and the disturbing fact that the Cav is #2 (after Camaro) on CarDomain's directory of vehicles with >9000 entries. The print edition managed to devote just about a whole page to this article, and it shows: serious padding about the apartment complex where a Cav tuner and his family live, the dozens of mods and hundreds of related pictures on his iPod. Click here, if you dare.
GM's executive director of manufacturing quality Joe Mazzeo speaks the truth when he tells The Detroit News that GM's customers are oblivious to the threat to vehicle quality posed by GM's employee changeover. But they might care later, after GM replaces some 19k "top tier" union workers with half-price subs, expecting them to hit the assembly line after two week's training. "GM has been flooded with job seekers at many plants, but first crack at the jobs goes to idled employees of GM and Delphi Corp., the automaker's bankrupt former parts unit. The jobs then open up to outsiders, whose only shot at landing one is to be referred by someone who works at a factory." How reassuring. On the other hand, "GM is going to exhaustive lengths to ensure the shift doesn't erase hard-won improvements in factory efficiency and vehicle quality… [Workers] will be reminded that well-made vehicles keep consumers buying, which in turn leads to job security — and vice versa. Many workers will get a job shadowing assignment, and all of them will learn through simulated training done on assembly lines with fake cars made of two-by-fours and plywood." As for how many of those 19k union jobs are being axed and how many simply "downsized," the DetN is clear: "The automaker won't say." Oh, and those workers who are "transitioning" from one tier to the other get ten day's training– the same amount of education Disney requires for its "cast members."
I know that's waaaay too easy a headline, but how else would you describe this ad for the Ford Flex, launched this weekend? The TV spot gives the crossover a SteadyCamaroscopy and a 360-degree website spin (or eight) to the tune of the song "Son gonna rise" by Citizen Cope. So the unique selling point is… style. I mean it must be, as there's no strapline revealing its Unique Selling Point, no voiceover announcing its arrival, no nothin'. Ah, but there's another ad [click here]. This one touts the Flex as an "agile, 24mpg crossover," then proclaims– both in narrative and in mescaline-tinged imagery– its drug-like ability to warp-your mind. "Suddenly, everything looks a little different." In fact, "Discover Flex" is as trippy a tagline as I've heard in some time. Like, wow Scoob.
The post-Black Tuesday world is an interesting place for media junkies looking to gauge the U.S. automotive press' level of sycophancy. Yesterday, we reported on Motor Trend's take on May's sales collapse: blame the victim (the American consumer). Or CAFE regs (the feds). Today, we present Warren Brown's analysis. And the first thing the Washington Post car columnist wants you to know: greens can't take credit for the death of the great American gas guzzler. "It is the world Hummer-haters said they wanted. It is the one for which legions of environmentalists and believers in the corrective powers of regulation lobbied. But here's suggesting that they had little to do with the current situation. When it comes to change in a capital-intensive industry such as the car business, money talks, and politics walks." High gas prices did the deed? OK, we'll buy that for a dollar (or four). But we're a little less convinced by Warren's corollary: chill. Brown says the domestics are switching gears to make money in the brave new world of $4+ gas. All will be well. "They [the transplants] have, therefore, a temporary advantage over GM, Ford and Chrysler in the current market shift from trucks to cars. But 'temporary' means just that. Domestic car companies are adjusting to fuel-price-induced changes much more quickly than vehicle sales numbers or media reports indicate." In fact, "The GM-Hummer relationship was never meant to be permanent."
According to the Wall Stree Journal, octogenarian investor Kirk Kerkorian's $8.50/share offer for up to 20 million shares of Ford stock is likely to be fully subscribed when it closes on Monday. Ya think? The Lion of Las Vegas' offer is well above Ford's closing price on Friday ($6.04). "The original tender included a clause reserving the right to pull the offer if Ford's stock price declined by 10 percent or more from its May 8 closing price of $8.20. But the Beverly Hills, Calif., company, which is wholly controlled by Mr. Kerkorian, declared it would not employ that escape route — in a sign of confidence in the future value of the company." Why is Kirkorian willing to pay over market price for a publicly traded stock? Hey. he's the billionaire and I'm not. Kerkorian and sidekick Jerry York have been publicly advocating the sale of Volvo and axing Mercury. One problem: Ford family members have long resisted putting Mercury down. In fact, Elena Ford ran Lincoln-Mercury for several years (and claimed credit for it's turnaround) before being "promoted" to head of marketing at Ford Motor Credit. The Journal raises interesting questions about how Kerkorian's ownership will affect the Ford heirs' iron grip on decision making. Said heirs own about three percent of Ford stock, yet control 40 percent of the voting rights. If and when FoMoCo needs more cash, Kerkorian seems prepared to provide it; but only if his shares get full voting rights. In that scenario, there's a good chance Crazy Henry's third generation lucky eggs will have to surrender control to Kirkorian to raise the cash. Either that or everybody loses everything in Chapter 11.
In 1996, General Motors rolled-out the infamous EV1. The battery-powered car satisfied California zero emissions regulations (its raison d'etre), sat two, could travel 160 miles (or less) on a charge and plugged into a wall outlet. The General leased 1,117 EV1s. By all accounts, the lessees loved the car. GM killed the EV1 in 2003, claiming they couldn't make a profit on the vehicle. The automaker also maintained that they'd sunk $1b in R&D into the project. GM destroyed the vast majority of the returned EV1s and decided to sue California to recoup their development costs (even though the Clinton administration had deferred $500m in costs). Fast forward five years. Where the hell is the EV1? Forget for a minute all the drawbacks (runs off electricity derived from oil and coal, no storage space, insanely heavy) and think about $4.69 a gallon gas (what I paid this morning). Consumers are clamoring for this very car. Speaking frankly, the people least shocked by the Volt's painful birth has to be General Motors. 2010? Good luck. Why not bring back the EV1 now? Not tomorrow, but right now. Why not?
Chrysler is no longer "asking" suppliers for a five percent cost cut across the board– they're just taking it. More ominously, they've changed their payment terms. We just received this information from a reader (independently confirmed) who wishes to keep his name and company confidential for obvious reasons: 
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