With the third deadline for Detroit’s viability plans rapidly approaching, President Obama needs something, anything, to work with. “My goal, consistently has been to offer serious help once a plan is in place that ensures long-term viability and that we’re not just kicking the can down the road,” Obama tells Reuters. “What the nature of what that help ends up looking like, I think is going to depend on the plan.” And at first blush, Detroit’s task appears to be an easy one: tell the President what you need to survive and he’ll give it to you. But there’s a catch. “If a plan is presented to us premised on 20 million sales when we just know that’s not going to happen, then we’re going to have to ask them to go back to the drawing board,” says Obama. Seriously though, isn’t a plan premised on 10m sales this year a bit overoptimistic?
It’s insane. Chrysler and GM’s executives run their companies into the ground, shedding billions of dollars worth of shareholder value, destroying tens of thousands of jobs, sucking-up taxpayer funds, and the public gets all bent out of shape about a couple of jet flights. Still, point taken. And TTAC can now reveal that two Pentastar chartered jets (a former Chrysler subsidiary) took off from Oakland County International Airport on the morning of December 2, two days before the hearings wherein Chrysler CEO Bob Nardelli appeared before Congress. (where all three Detroit auto execs made a big deal about driving to the hearing and arrived on the Hill in their company’s hybrid vehicles.) A Gulfstream G550 [aircraft pictured above], left at approximately 6 a.m. A Gulfstream IV [$5700 per hour], left at 8:45 a.m. Both planes flew to Teterboro Airport, NJ. Both planes were carrying Chrysler executives. We have reason to believe Chrysler CEO Bob Nardelli was on board one of the planes.
And why wouldn’t they? As attractive as 30 cents on the dollar for equity in a firm that has five frantic days to produce a viability plan is, there seems to be some . . . hesitation. The Detroit News reports that GM is trying to finagle a $9.2b debt for equity swap with the holders of its unsecured debt to fulfill the requirements for federal loans. According to the usual anonymous sources, bondholders are holding out for 50 cents on the dollar. They say the figure mirrors the value of concessions being negotiated with the United Auto Workers. (Sound familiar?) Luckily bondholders seem to have an ingenious solution for the UAW-bondholder deadlock: the government could just lend GM more money. This is some seriously high-stakes poker.
The more tax money GM asks for the more it seems to need. Starting at home, it had come to the attention of our elected leaders that their $13.4 billion bailout of GM would bump GM’s tax liability by $7-$10 billion dollars. Specifically, the loan terms (new equity structure) would have constituted a “change in ownership,” potentially triggering the massive tax bill under terms set to prevent companies from merging to avoid tax liability. Luckily for GM, the new compromise stimulus bill exempts TARP-receiving firms from these ownership requirements, reports MLive. Good luck digging through the 778-page bill to find the exact wording, though. Meanwhile, we’re still waiting on word from the International Swaps and Derivatives Association as to whether these same equity structure changes and government regulations will trigger GM’s default swaps. And while DC kisses $7-$10 billion in potential GM tax revenue goodbye (which should be reflected in the total bailout cost), GM has already moved on to the next trough.
Well good for them. As we said at the time, whenused responsibly, a private jet is an invaluable management tool. An executive lording it over a far-flung empire can use private transpo to gather otherwise unobtainable on-the-ground intelligence. (Body language is 65.7 percent of all human communication.) Not to mention instilling the fear of God by all-of-a-sudden showing-up amongst his or her minions. Of course, as far as we know, and they ain’t sayin’ nothin’ (surprise!), that justifiable jet set savvy doesn’t apply to Chrysler, Ford or GM.
It may be a groaner, but it’s oh so true. Kia’s replacement for its aging Spectra is a cleanly-styled, classy little sedan that looks more Civic than, say, Optima. Already available in Korea and coming to the US this summer, the Forte is about an inch longer and an inch and a half wider than the the Spectra it replaces. According to Automotive News [sub], base engine is a two liter four-pot, making 156 hp and 144 twisties of torque and mated to a five-speed manual or four-speed automatic. Upgrade to the SX trim level, and you get a 2.4 liter engine with 173 hp and 168 lb·ft, and a standard six-speed manual standard or five-speed slushbox. Which probably has visions of Forte Coupe hoonage dancing through your head. Well you can just forget it.
There’s a certain raw satisfaction to be had in seeing a man go utterly, completely mad in public, particularly when there’s a plateful of free bacon in front of you and an attentive server standing behind you, ready to swap your newly emptied bacon-plate for a full one at the slightest, Sotheby’s-private-bidder-esque, wave of a hand. This happy spectacle was available to all and sundry at the media breakfast that opened the Chicago Auto yesterday morning, courtesy of Hyundai’s American CEO, John Krafcik.
New twist in the SAIC buying GM saga (and fair warnings to TTAC’s admins to allocate extra bandwidth). We’ve said all along that SAIC had designs on GM’s assets. That they would just wait until the time—make that until the price—is right. Well, the time is right. GM has until Tuesday to submit a new restructuring plan to the U.S. government detailing its progress cutting costs, shoring up its balance sheet and figuring out a way Fordward [sic]. So the time has never been righter, and the price is most likely commensurate. With all other deals failing, GM is getting ready to sell their crown jewels: their China operation.
Despite constant denials, General Motors has held talks with China’s SAIC Motor Corp about selling part of its stake in their joint venture or other assets as the U.S. automaker, Reuters reports. GM needs the cash, STAT. According to Reuters, GM approached SAIC Motor in recent weeks with an offer to sell some of its stake in their 50-50 joint venture that builds and markets Buick, Cadillac and Chevrolet models in China. And why would they do that? (Read More…)
How much fun are those back seats going to be? Tesla plans to fully reveal the Model S and its spec sheet on March 26, “by which time Tesla hopes to have a final decision on its DOE loan application so that they can make other announcements about production,” according to Autoblog. Or not. Etcetera.
Back to this morning’s wildly exaggerated rumors of GM’s resurrection, via today’s USA Today. After Wagoner has his Annie solo, Sharon Silke Carty (I ordered one of those for my wife for Valentine’s Day!) offers a prescription for GM’s Return to Greatness. The fact that the list doesn’t come from Wagoner is, perhaps, the most irrefutable evidence of the CEO’s incompetence ever not documented (if you know what I mean). Top of the list, in bold and all: More federal loans. Need I say any more? I thought not. But just for SAG: More customers. “‘We’re hearing that people are paying attention to us,’ says Mark LaNeve, GM’s head of North American sales and marketing. ‘It’s a great opportunity.'” Yup, it’s Marketing Mark up on that cross with Rick. Dealers hoping for salvation would be best advised to look elsewhere. To wit: this, under the helpful topic “More coastal support.”
An overview of what happened in other parts of the world while you were in bed. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. WAS is being filed from Beijing until further notice.
HUMMER sold to China? General Motors Corp., working to sell assets to help keep $13.4b in US loans, has drawn interest in its HUMMER brand from a Chinese company and a private-equity firm, says Bloomberg [via Gasgoo]. The pace of negotiations has intensified in the past few weeks, said the people, who wouldn’t name the suitors and asked not to be identified because the discussions are private (so there). More meetings are scheduled this week. According to Bloomberg, “unloading the sport-utility vehicle unit would move GM closer to the goal of showing its future viability to the U.S. Treasury by Feb. 17. If the biggest US automaker can’t prove its ability to return to profit, it could be told to give up the loans or use the cash for a government-funded bankruptcy.” Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan, estimates Hummer might fetch $100m or less.
Fallout in Japan: The major production cuts being implemented by Japan’s carmakers are beginning to seriously hurt the finances of their parts suppliers, the Nikkei [sub] writes. Autoparts suppliers and other firms in the industry employ a total 670k workers in Japan, nearly four times as many as those working at domestic carmakers. Says the Nikkei: “If many of them fail, the industry itself could become unsustainable.”
You may recall Phil as one of our Best and Brightest, a forensic accounting gumshoe hot on the trail of who owns Chrysler. You know, the company that sucked-up $3b of your tax money, looking for $4b more. And the rest (DOE loans and whatnot). Well, Phil outed Franklin Templeton Investments as one of the firms holding Cerberus CNG Investor I – III paper. Phil and I wanted to know a few things about Franklin’s folly. Why did they list the funds under “Consumer Credit” in their annual report? What’s with the Cerberus’ bonds paying 12 percent by 2014? So Phil called Big Ben. And . . . nothing. Despite a promise to answer his questions. So Phil’s not a happy camper. Not at all.
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