WaPo columnist Warren Brown never turns down an opportunity to show Detroit some love. Or at least lash out at its haters. Today he takes on the “sophist nonsense… spun by people who haven’t bothered to check the numbers, and who have paid even less regard to the history of their supposed knowledge,” otherwise known as opposition to the government bailout of a failing industry. And like Michael Jackson’s greatest music video, the arguments appeal to the sense of pathos rather than logic or reason. The financial sector and price-conscious consumers are blamed for dragging down Detroit, despite the fact that both have supported Detroit for decades. The automakers may have slurped all the credit they could get for years, and consumers may have only purchased Detroit iron on price alone, but they’re the ones to blame for the industry’s downfall, reckons Brown. But like the gloved one, Detroit can’t create its own very public trainwreck and then blame people for noticing. Or if you must damn the media and public for calling your failures like they see them, at least do it with a sense of humor. Even Michael Jackson knows that.
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This one isn’t so much a new boondoggle as the failure of an existing boondoggle. Falling fuel prices have triggered a clause in Missouri’s ethanol blending mandate, which allows retailers to sell unblended gasoline instead of E10. The Springfield News-Leader reports that gasoline is now cheaper than ethanol, which means station owners have the right to ignore a state law requiring pumps to sell the ten percent ethanol blend. “The gas price has really dropped tremendously and ethanol has not quite kept up with the pace,” said Ron Hayes, director of the Missouri Department of Agriculture’s weights and measures division, which monitors gasoline sales in the state. The drop in the price of oil has “really slowed down, if not stopped, any additional expansion of capacity” at the state’s six farmer-owned ethanol plants, said Gene Millard, president of the Missouri Renewable Fuels Association. “Plants are just not going to start up producing a product that’s showing negative pricing margins,” he said without placing blame directly where it belongs: ethanol mandates which have drastically elevated the price of corn. Aint it tough when markets don’t respond to your political agenda?
Dark clouds over the land of the rising sun. Japan Inc is deeply involved in the atrophy formerly known as the U.S. auto market. Two of what was known as the “Big Five” are Japanese: Toyota and Honda. Over the past 10 years, Toyota and Honda had been steadily taking market share from Detroit. Now, Detroit is in trouble. So is Tokyo, due to its inordinate exposure to the US auto market. Klaxons are sounding in Nippon. “Although their situations are not as dire as those harrying the top three U.S. automakers, major Japanese carmakers are rushing to review their operations and revise business plans in the face of quickly deteriorating auto sales worldwide,” writes the Nikkei (sub) today.
A side effect of Toyota’s race to become the world’s largest auto maker was that ToMoCo built more factories than some other companies built cars. Toyota’s production capacity rose by half a million annually since 2000. In North America, Toyota used to earn half of its worldwide profits. The crash in the US hit them real hard. Sales in Japan and Europe have also been decreasing faster than the firm can adjust production levels. To not end up like the formerly Big 3, Toyota has to act fast. A committee headed by President Katsuaki Watanabe is busy cutting costs and improving earnings in a stormy environment. What about Honda?
Bloomberg reports that Fitch has cut Toyota’s credit rating amid a tanking US new car market, the first such cut for Toyota in ten years. Toyota was cut from AAA to AA, with a negative outlook; still comfortably above the sub-junk ratings of some automakers. However, the increased borrowing costs associated with a cut credit rating could bring an end to Toyota’s zero-percent financing incentive program. But according to Fitch, this rating cut is simply a sign of the times, rather than eing based on some specific Toyota wrongdoing. “The negative developments in the industry are so substantial and fundamental that even the strongest player — Toyota — can no longer support a `AAA’ rating,” according to Fitch director Tatsuya Miyuno. For some analysts, Toyota’s position is strong enough to weather the storm. “Toyota’s financial foundation is solid, and I don’t think there has been such a drastic change to warrant a two-level downgrade,” says Yasuhiro Matsumoto of Shinsei Securities. “I don’t see an impact on the company’s new bond issues.” The rating cut leaves only five companies left with an AAA rating from Fitch: Exxon Mobil Corp. and Johnson & Johnson in the U.S. and Regie Autonome des Transports Parisiens, Reseau Ferre de France and Societe Nationale des Chemins de Fer Francais in France.
Another top elected official in Arizona has spoken out against photo radar in response to increasingly vocal resistance from the driving public. State Treasurer Dean Martin (R) on Monday wrote to the state’s solicitor general instructing her to side with the League of Cities and Towns — and against himself — in a lawsuit brought against the state budget. As custodian of the state’s monies, Martin is a defendant in the suit which argues that several of the revenue-raising provisions in the $9.9 billion budget adopted in June were unconstitutional. “The governor and legislature cannot raise taxes or ‘log-roll’ provisions into the budget that violate the constitution,” Martin explained in a statement. “These laws are unconstitutional since they did not receive the 2/3 majority vote of the legislature which is required to raise taxes.”
The CC stood out like a swan amidst a gaggle of homely Jetta ducklings on the VW dealer’s lot, its aesthetic appeal undeniable. In contrast with the company’s marketing approach with the Phaeton, the CC is virtually badge-less and, at first blush, hard to identify as part of the VW family. I suppose it still looks vaguely Germanic since it shamelessly cribs from the Mercedes CLS it aspires to be. Comfort Coupe or Caustic Copy?
We’ve already reported Nissan’s decision to take a powder from the hugely expensive business of cock-walking at Cobo. As the Brits would say, the other shoe has dropped. Honda has announced that it will announce bupkis at this January’s North American International Auto Show. It’ll show show-goers what it’s got– and that’s it. Bloomberg reports the reason: “The Asian brands are mired in the industrywide slump that cut U.S. auto sales by 15 percent through October. U.S. automakers led by General Motors Corp. are seeking $25 billion in federal loans to help stave off a financial collapse.” Cutbacks fer sure, but the missing message is clear enough: Detroit’s auto show is fading fast. The fact that unions have driven-up the cost of the show is one show-collapse-related irony. Toyota’s decision to stay the course and unveil new models is another.
The Bush Administration’s decision to release $27b from the Troubled Assets Recovery Program to prop-up Citigroup has pissed-off Motown’s bailout brigade but good. “Financial industry rescue criticized as double standard” the Detroit Free Press‘ headline kvetches. “While the pending bailout of Citigroup is absolutely necessary because they’re too big to fail, it’s the height of hypocrisy of the outgoing administration and the treasury secretary to not make a more robust effort to do the same with Detroit,” said Anthony Sabino, a professor of business and law at St. John’s University in New York (chosen especially for his non-Detroit residency). “One cannot sit here in America and say Citigroup is more important than any one of the Big Three, let alone all of them together.” On the bright side, the funds directed Citi’s way have played straight into the hands of MSM class warriors like MSNBC’s Rachel Maddow, who see Congress’ reluctance to spread the national debt to Detroit as a classic triumph of evil champagne-swilling bankers over Bud-drinking blue collar builders. Paper shufflers vs. honest folk who make “stuff.” The meme is picking-up a head of [non-hybrid] steam– despite the fact that the banking system IS more important than Detroit’s stuff makers, and two wrongs don’t make a right, and where do you draw the line and who do you think you’re foolin’ (I got the presidential seal)? Never mind. Hubris will get you every time. Bank on it.
More news coming in from Porsche’s annual numbers press conference. Due to the worldwide recession, our TTAC correspondent in Stuttgart has to moonlight as a security guard at the event, but whatever works. We already announced this morning that Wendy Wiedeking said that “it is becoming increasingly unlikely” (translation: don’t even think it) that Porsche will go for 50 percent this year. Porsche holds 42.6 percent of the common stock of Volkswagen. They also own 31.5 percent of VW in options, but derivatives don’t count in the boardroom. “Wiedeking says their goal is still to build up to a majority of 75 percent in 2009,” our correspondent whispers into his lapel mike. But there are “too many uncertainties.” (Not to mention the VW-law, that makes owning 75 percent utterly wasteful.) Therefore, Wiedeking punts, much to the chagrin of our reporter-cum-rent-a-cop: “Wendy just said there is no telling how many moves will have to be made until the game is over.” He just said that. Wendy thinks, taking over the world’s third largest automaker, Volkswagen, he calls that a game? Where’s the outrage? “What game? Monopoly? Chess? Pick-up sticks?” Wendy won’t say. Maybe later, in the Q&A. Wait, there is more …
Better go back to bed. It’s safer in there. Lot’s of bad news awaiting you. While America Slept (WAS) is a daily round-up of the news that happened in other continents and time-zones. TTAC provides round-the-clock coverage of everything that has wheels. Or that has its wheels coming off. Are you really ready for this? Then read on.
Porsche: We told you so. Autohaus somehow got ahold of Wendelin Wiedeking’s notes for today’s “Bilanzpressekonferenz.” And as predicted, Wiedeking will say that Porsche will take it easy with VW’s takeover. They won’t even go for 50 percent yet. “Given the current economic circumstances, it is becoming increasingly unlikely that we will reach that target in the current calendar year.” More as it develops. There still is (faint) hope. What does it say on the manuscript? “Es gilt das gesprochene Wort.” (Check against delivery.) Always a good idea in the car business.
Nipponese go-slows: Mazda will suspend operations at Hofu No. 1 and No. 2 plants in Japan’s Yamaguchi Prefecture, western Japan on Dec. 25 and 26. Toyota Motor Corp. has decided to slash production 20 percent at its French factory from January through March, following similar moves in the U.S., Britain and Turkey. Suzuki will increase its production capacity for scooters and motorcycles in India by 47 percent to meet rising demand. Mitsubishi will build forklifts in China. All sources Nikkei (sub).
Limeys go for the green: The U.K. auto industry (what U.K. auto industry?) welcomes the government’s attempts to boost consumer spending by reducing a sales tax, but says it needs urgent help to overcome the cash flow problems created by the credit crunch. The society of Motor Manufacturers and Traders will meet Secretary of State for Business Peter Mandelson Thursday for an intensive begging session, CNN reports. You think that’s bad? Try Spain ….
While we at TTAC aren’t big fans of the “anonymous source” reporting method, there are times when it’s that or nothing. Especially when we’re not reporting on “real” news of theoretical upcoming events (i.e. NY Times claiming that all major hurdles for the Chrysler-GM merger had been cleared a few weeks ago). So in this case, I have to cite an anonymous source. But I have it on very credible authority that Ferrari brass in Maranello have procured a ZR1 – not necessarily a purchase, possibly a car on loan from a Ferrari customer. The car is being shipped from New York out to Italy so they can have a look at Chevy’s $100,000 wondercar. Considering that it – at the very least – runs neck and neck with most of Ferrari’s finest cars, it seems like a wise choice. That being said, I’m not entirely sure what Ferrari hopes to learn from scoping out the ZR1. But hey, maybe Ferrari just wants to have one for collector purposes.
In recent congressional testimony, GM admitted that its experts are “exploring” Chapter 11 reorganization. At the same time, GM continues to argue that a bankruptcy filing is the nuclear option– it would vaporize jobs and inflict cataclysmic damage on the overall U.S. economy. While acknowledging the danger, many argue that reorganization is both necessary and unavoidable. They suggest that GM’s recreation should somehow take place outside of the time-tested legal process known as Chapter 11. Sentiment is growing that a taxpayer-finnaced “prepackaged” Chapter 11 is the best way to solve both GM’s business and financial problems, and perhaps of other automakers. Maybe so. Let’s have a look…
People have been sticking cheesy Bentley knock-off grilles on their 300s since the day they went on sale (my favorite one has a probably copyright-infringing “B” at the top). But what you really need, if you want to trick the half-blind into believing you have a Roller and not a mere rapper’s Chrysler, are suicide doors. The seller tells us it’s a replica of the as-yet unreleased Rolls-Royce RR4. It’s missing some of the fine details of the Bentley TowncArnage, like the hood logo, seat covers, and “Rolls-Royce of Beverly Hills” license plate frame. You can read the seriously hilarious description after the jump.
Ford Motor Company is getting some much-needed positive press today on the back of the Insurance Institute for Highway Safety’s (IIHS) just released “2009 Top Picks awards.” Top picks need to have best in class front, side and rear impact protection and include electronic stability control. Ford (including Volvo) took the model count grand prize with 16 vehicles getting top honors. Honda placed second with 13 vehicles and Chrysler came in dead last with exactly zero models clearing the hurdle. Of course the Ford brand portfolio includes many more vehicles than does Honda’s, so you could argue that Honda is the real winner as a percentage of its vehicles sold. In fact, ALL of Honda’s 2009 North American models made the top pick level except for the S2000 sports car. The redesigned 2009 Fit (with optional stability control) is the first minicar to make the IIHS’ list. Ford’s numbers were pumped up by multiple models of the same car each getting their own gold star. Fusion and Milan, Taurus and Sable, Escape and Mariner … you get the idea. But even with badge engineering magic, GM only managed an eight count including the sisters Enclave, Traverse, Acadia and Outlook. Once again, Ford has trounced its domestic competitors and is in the hunt with the rest of the international market. Likewise, Toyota continues the pattern of mimicking GM with only eight top picks of it’s own. Soon I suppose we will see Toyota, GM and Chrysler executives complaining that the IIHS tests aren’t representative, include selection bias …. or are just plain un-American.
“Spirit Airlines wants to bailout Detroit air passengers.” Geddit? The airline is offering a “Detroit Bailout” sale; travelers can fly from Detroit to domestic and international destinations at prices starting from $59 each way. This isn’t the first unusual promotion offered by Spirit. The airline once held a “Hunt for Hoffa” promotion in which visitors to its website could play an online game involving longtime missing and presumed dead labor leader Jimmy Hoffa. Customer complaints forced the cancellation of the Hoffa promotion.
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