Most auto industry observers have lauded President Obama’s decision to defenestrate GM CEO Rick Wagoner and his Board of Bystanders. Their logic is as simple as one, two, three. One: U.S. taxpayers have “loaned” The General billions of dollars. Two: GM’s management failed to provide a viable viability plan to return the money. Three: the presidential putsch protects America’s “investment” in General Motors. Yes, well, protect THIS. When GM files for bankruptcy 59 days hence, $17.4b to $19.5b worth of taxpayer money will disappear down a rathole, never to return. That’s a conservative estimate of the total amount of federal “loans” and grants and God knows what that will be wiped out the moment the judge signs GM’s C11 papers. Oh, and after we kiss that cash goodbye, U.S. taxpayers will provide the cratered carmaker with debtor-in-possession financing. In other words, more money. And who’s to say that money will ever be repaid? What’s the end game? Is there one?
Honda announced March 31 that it would cut production in North American by 204,000 units, aiming their yearly output at 1.25 million. For the first time ever, Honda is also slashing salaries. Hourly employees and executives all the way to the top get a trim; and bonuses get bounced. Honda’s US sales dipped 7.9% in 2008 (compared to 2007) but the American market overall fell 18%. Honda wasn’t in terrible shape and seemed to have a good product mix. Then the first quarter spreadsheets began to fill in—a 33% drop in sales is a plunge of a different color. Carving will take place at all North American facilities.
Not everyone can weather an economic downturn with the grace of, say, a Ferrari. Even with Wall Street bonuses under fire from DC, The Scuderia’s North American boss tells Wall Street Journal that “our customer base is not mainly those people. Our people have serious money.” No, really. Giant, heaping piles of it. Which is nice for them, but we’re not all in that boat, ne’est-ce pas? For the “less insulated” portions of the economy struggling to make payments on our less “investment grade” vehicular assets, the new economy is here to make things more efficient. For the people to whom you owe money. The Journal explores the rise of vehicle disablers, small satelite-linked devices with which your loan holder can “turn off” your vehicle when you miss a payment. The logic goes that people miss fewer cell phone bills if they know they will instantly lose service. And if it comes to reposession, satellite tracking makes the job easier and less expensive. Some customers complain that the ever-present reminder of their indebtedness is unwelcome, but lenders and dealers are finding them harder to resist every day.
No, they’re not brushing off the old 1907 plans, so Zap’s Xebra won’t be the target competition. Financial Times reports that the reborn EV firm has moved on from its Zap Alias escapade (due, uh, now to quote RF) “to buddy up” with Malaysian OEM giant Proton. The cunning plan? Sell Protons with DE’s drivetrain, for cheap and cheerful “real car” EVs. “We believe in an affordable, practical, everyday electric car,” says Detroit Electric’s (it’s so hard to type that without scare quotes) Albert Lam. “It’s not a high-end vehicle we are targeting or a short-range city car.” The one wacky part of this otherwise seemingly sensible plan? They plan to sell them in the US.
Ousted GM CEO Rick Wagoner is being posthumously hoisted onto a cross by Michigan’s Governor Granholm and the Detroit News, which is running a piece today entitled “GM Workers Upset That Wagoner Became Sacrificial Lamb.” Huh? Better him than them, right? “Here we got past all the bad media, all that fury during congressional hearings, and now they want him to resign,” says UAW Local 599 (Flint) Chair, Terry Everman. “It’s really a setback, because you don’t know what new direction GM will take.” And it’s not just the uncertainty that has workers in a kerfuffle over the Wagoner pink slip. “It just didn’t seem appropriate for the administration, rather than the board, to dictate,” says OnStar Manager, Bryan Bateman. “I think Rick was a sacrificial lamb in all this. I think he took one for the company.” Except that Red Ink Rick should have been dumped years ago, and the irresponsible board members that kept him around have been canned by Obama as well. Oh, yeah, and GM turned its fate over to the feds the second it took public bailout money. But, hey, one man’s sacrificial lamb is another man’s tasty entrée. To (you guessed it) more government intervention on behalf of the General. Of course.
Take a good long look at this handsome car. This beauty was one of the best in that beautiful decade of the sixties. Are you seeing its magnetic attraction yet? Well, this rough survivor might need a little help; try squinting a bit. I sure saw it when I was seventeen; I simply couldn’t keep my eyes off a black coupe exactly like this. And as a consequence, I learned a painful and lasting lesson. OK, better stop looking and keep reading.
GM is still trying to bean count their way out of this mess. But, thankfully, they’re using better quality beans. The powers that be (or were in this case) have designed a new program that affords customers the opportunity to once again become conspicuous consumers of GM products. Two of these items are old hat. The 5-year/100,000-mile warranty is now, get this, a 5-year/100,000-mile warranty. Did we mention GM has a rather large PR department? You also can get one year of OnStar which, again, isn’t newsworthy. But there are a couple of interesting additions designed to minimize the “fear factor” of making a dumb car buying decision.
Delphi is the former GM parts division. It had been spun off, only to go into bankruptcy not much later. Delphi also was amongst the first to embark on an aggressive “source in China” policy. Large chunks of Delphi’s production were moved to China. Large chunks of Made-in-America cars were actually Made-in-China. Now, China buys large chunks of Delphi. Possibly all of it.
According to the Freep, two Chinese companies and the Beijing government banded together to buy Delphi Corp.’s brakes and suspension business. The Chinese auto supplier Tempo Group will acquire a 24 percent stake, China’s Capital Iron & Steel Co. will purchase a 51 percent stake, and the Beijing government will own the remaining 25 percent. They will form a new Chinese company called Beijing West Industries Co. Ltd., based in Beijing. Delphi needs the money: (Read More…)
Chevy’s Volt “will likely be too expensive to be commercially successful in the short-term,” reveals the PTFOA in what amounted to stunning news for Volt boosters and no one else. Wasn’t the Volt supposed to justify the whole bailout in the first place? The DetN‘s Scott Burgess takes the “yeah, but” tack, spinning expensive impracticality into farsighted vision. With a little help from his friends, of course. “In hybrid technology, it’s hard to argue that we’re not behind,” GM’s Rob Peterson tells Burgess. “But we believe we have a better solution.” And what of that $40K price tag that the government says will require “substantial reductions in manufacturing cost in order to become commercially viable?” “It’s a transformational technology,” says Peterson. “That’s part of the reason the cost is so expensive. But we believe if you start in the right direction, as the supply base matures, the volumes of the vehicle increases and the costs will go down.” If. As. Will. As in “we hope.” Meanwhile, someone has to pick up the bill and worry about the viability of a firm that is staking everything on an unprofitable-at-$40K moon shot. Needless to say that someone ain’t Bob Lutz . . . .
If it wasn’t clear before, it is now: GM will use the next 60 days to prepare itself for a Chapter 11 filing. Freshly-minted CEO Fritz Henderson told a suited and booted press Detroit press corps that he wouldn’t have taken the job from Rick Wagoner if he wasn’t prepared to do “whatever it takes” to return GM to profitability. Henderson spoke of his distaste for “messy” bankruptcies, but indicated his willingness to be the new broom. (Dream on, Fritz.) Meanwhile, despite repeated requests by the friendly press flacks, Henderson refused to be drawn out on how much GM will draw out of the taxpayer’s purse while it gets ready to file Chapter 11. He skated over the point faster than a duck landing on a frozen pond, saying that GM might scarf the $2 billion that it didn’t take this month, or the $2.6 billion it requested for April, or both. At the beginning of the conference, Fritz touted GM’s new “Total Confidence” program. TC is designed to protect GM buyers from losing their wheels after they lose their job, and insulate them from [some] negative equity at trade-in time. It doesn’t, however, protect TTAC’s Best and Brightests’ finely honed sensibilities by the unintentionally humorous irony implicit in the program’s name. If you know what I mean.
Big Brother could actually be her indoors, to use the British term for a female spouse. The Sun [UK] reports that a snooping wife was doing the electronic version of twitching curtains (Googling her friend’s house) when she spotted her hubby’s motor parked outside. “The love cheat is not the only husband trapped by Google’s controversial new 360-degree photo search which covers 25 cities and towns throughout the country. Top media lawyer Mark Stephens said: ‘I was talking about the Range Rover case when another divorce lawyer came up to say his firm was dealing with the same sort of thing. People are getting caught out on Google.'”
Mega dittos from our neighbors to the north. The Globe and Mail reports that the Canadian government is also playing hard man re: GM and Chrysler’s call on federal bailout bucks. Yada, yada, yada, restructure, union concessions, new plans, bankruptcy. And then, this:
Chrysler was unable to meet its Canadian payroll today without a $250-million advance on a $1-billion bridge loan from Canadian taxpayers. To qualify for up to $4-billion in long-term aid, Chrysler has to conclude now-stalled negotiations with the CAW on a cost-savings contract and complete the Fiat deal.
To stave off an immediate crisis, the federal and Ontario governments offered the bridge loans—including up to $3-billion for GM—to allow them to continue operating while they work to satisfy U.S. and Canadian government demands.
The Blue Oval Boyz are launching the curiously named, Hyundai-trumping Ford Advantage Program. The deal—which runs from today to June 1—offers new car buyers 12 months of “payment protection” (leg breakers need not apply) up to $700 per month, zero percent financing and, of all things, a donation to a local charity. Strange times when it’s considered an “advantage” to know you won’t lose your car for a year if you lose your job. Hang on; I’m looking for the fine print now . . . nope, can’t find it. Will update ASAP.
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