Credit Suisse First Boston (CSFB) has had a look at Chrysler, Ford and GM inventories vs. the Seasonally Adjusted Annual Rate of Sales (a.k.a. SAAR), and it’s even uglier than we thought. Given that The Big 2.8 have already cut WAY back on production AND increased incentives, it seems that the US new car market is suffering from the worst case of constipation since WWII. CSFB’s analysis gives us further reason to doubt GM’s motives in declaring a 45 percent production increase for the second quarter of ’09. Whatever the reasoning behind GM’s announcement, it has nothing to do with market reality. These numbers also cast the chortling IHS Global Insight analyst—who bashed Honda for its inventory problems—in a slightly different light. But I’ll save those bon mots for after the data dump . . .
* Big 3 inventories fell by about 3% from Jan to Feb, compared to the normal seasonal increase of about 2.5%. Despite the favorable move in absolute stocks, the overstocked level worsened, owing to a dismal sales level that lowered our estimate of the number of vehicles dealers should be holding.
More and more suppliers of the collapsing auto industry are at the brink of collapse.
Visteon Corp. said on Monday it expects its auditors to question its ability to continue as a going concern due to the US auto industry downturn and the auto parts maker’s cash position, Reuters reports. The parts maker said that this warning could trigger a default under Visteon’s principal US senior secured credit facilities.
Visteon, spun off by Ford Motor Co in 2000, warned in February that it was uncertain of staying in compliance with its debt covenants. The auto parts maker still relies on Ford for one-third of its annual revenue. (Read More…)
The $13K-$15K American compact market is going to get another player, as Automotive News [sub] reports that VW’s Polo is coming stateside. But VW won’t be selling the traditional Yaris-fighting small hatch version of the Polo here, says VOA CEO Stefan Jacoby. Instead VW is easing into the segment Toyota-style, offering an Echo-echoing four-door sedan version of the Polo alongside a “Polo Plus” mini MPV. “It’s more like a cross between a compact minivan and a hatchback. In other words, it’s more like the Honda Fit,” says Jacoby of the “American fatty” version of the Polo. Expect the Polo to be built in Mexico in hopes of keeping the cost down, a consideration that takes on more importance thanks to VW’s decision to focus on the sedan/MPV approach. “We have to come in at the sweet spot of this market or else it makes no sense—and we come too close to the Jetta,” says Jacoby. So why sell a sedan at all? More importantly, why go with the cheap Hecho-En-Mexico approach when it prevents the US Polos from offering the real jewels of VW’s small-car portfolio: high-tech engines like its direct-injection, turbo- and super-charged 1.4 TFSI.
The New York Times has an interesting piece today comparing automotive rescue plans to earlier government intervention in the railroads. As apt a comparison as it might be, the piece ultimately advocates exploring an option for the auto rescue based on Conrail, the government-owned rail holding company created in 1976. If the American Leyland model worked for trains it might just work for autos, right? “The ideological debate already in progress,” says Wharton prof Peter Cappelli, “is whether government should actually direct the auto companies, stepping into management, or passively give them more loans, and then get out of the way.” Hows that for a choice?
Chrysler has a non-binding deal with Italian automaker Fiat, which has agreed to take a 35 percent stake in Chrysler in exchange for access to technology and overseas markets, and not a single dime.
But wait! It’s a miracle! Just as Jesus Christ turned water into wine, Bob Nardelli turned the no-cash-at-all deal into a bonanza.
The deal with Fiat is worth up to $10B for Chrysler and could preserve 5,000 North American manufacturing jobs, Chief Executive Bob Nardelli said on Monday in a missive to his minions.
After overtaking the United States in January car sales for the first time, China extended its lead as the world’s largest auto market in the second straight month, Gasgoo reports.
In February, China sold a total of 827,600 vehicles, up 24.72 percent year on year according to the China Association of Automobile Manufacturers (CAAM.)
America is addicted to oil. I’m sure this revelation ranks with ‘Chrysler’s in a spot of bother’ on the scale of surprises. Everyone from the Sierra Club to President George W. Bush has lectured the country about its dependence on oil in general, and foreign oil in particular. Pistonhead, blame thyself! Transportation fuels make up between 25 and 30 percent of total US energy demand. Needless to say, nearly all of that fraction is petroleum. Nicolas-Joseph Cugnot and the Stanley twins may have powered their jalopies on steam (even then, the Stanley Steamer was kerosene-fired), but modern vehicles are all about the distillates, baby.
The Freep’s Carol Cain has gone one better on the crazies who suggested that Steve Jobs should take over Detroit, nominating Oprah Winfrey to become Detroit’s cheerleader-in-chief. Noting calls from Senators for GM to declare bankruptcy and falling public support for the Detroit bailout, Cain suggests that desperate times call for desperate gimmicks. “I don’t know what kind of vehicle Oprah owns or if she even drives. I don’t know what she thinks about the auto industry or if she could be convinced to help. I know she likely wouldn’t be in this for the money, glory or stature,” writes Cain. But, “perhaps someone could appeal to her sense of patriotism in helping this industry that has been the bedrock of our nation for generations. Like many Americans, perhaps some family member worked in one of the auto factories. The industry still has dramatic impact on all 50 states and many livelihoods are impacted by it.” And hey, she has experience giving away cars!
The Freep reports that Obama’s Car Czarlet, Steve Rattner, is steering his Presidential Task Force On Autos away from earlier considerations of bankruptcy for GM. “Bankruptcy is not our goal,” Rattner tells the Freep after a week of Kool-Aid sampling in Detroit. “I’ve been in and around bankruptcy for 26 years as part of my private-sector work. It is never a good outcome for any company, and it’s never a first choice.” And by turning away from bankruptcy restructuring, the PTFOA has eliminated the only real possibility for comprehensive, radical changes to Detroit’s business model. The result? Don’t expect a single major turnaround effort to tackle Detroit’s unsustainable posture.
Cities around the country are ignoring state laws designed to curb the financial incentive for private red light camera contractors to generate the greatest number of violations possible. In Texas, for example, the city of College Station signed a deal to allow American Traffic Solutions (ATS) to operate red light cameras and collect fines on the city’s behalf. In return, College Station gives back to ATS a per-ticket fee that is capped at a rate of $4750 per intersection approach per month—in direct conflict with a state law that took effect on September 1, 2007.
Orlando is the unpopular car capital of the world. You name the dying models and brands. The City the Mouse Built has them in abundance. As I was counting the Mitsubishis and Chryslers on my way to a Disney Cruise, my mind began to wander and wonder. What if we avoided all these wasted resources? Surely there must be a few kindly politicians out there who can appreciate the more fiscally conservative amongst us. Somebody? Anybody? Bueller?
DW reports that German Economics Minister Karl-Theodor zu Guttenberg is in the US talking about how best to disentangle/jettison the Opel brand from its “struggling parent company.”
One of the main issues Guttenberg will address is the ownership of patents and other intellectual property Opel requires to continue producing cars. He will also explore GM and the US government’s willingness to let go of Opel.
Chancellor Angela Merkel told public broadcaster Deutschlandfunk that Guttenberg needed to “clarify how General Motors would be able to back away in order to give Opel more room to move.”
TTAC commentator Jeevesw reminds us that The Blue Oval Boys also got the Blogging Stocks reality check, and it looks like another case of chew and screw. GM is number 7 on their list of Portfolio Killers. Ford comes in at number eight.
Despite its recent successes at negotiating new contracts and its refusal, so far, to accept government funds, when General Motors (NYSE: GM) goes into Chapter 11, Ford (NYSE:F) will have to do the same to remain competitive.
Given the ferocity of this downturn, if it didn’t accept government handouts, it would probably end up in some form of forced re-organization anyway.
Chrysler’s Chief Financial Officer ended last week with an admission that a $5B “loan” from Uncle Sam may not get it through the summer. The AP [via The Detroit News] tells the tale.
Even if Chrysler LLC gets additional government loans, it could face another cash shortage in July when revenue dries up as the company shuts down its factories for two weeks to change from one model year to the next, its chief financial officer said…
Kolka wouldn’t say what would happen if the company doesn’t get further government aid, saying only that he’s not planning to run out of money…
“Following that, the next critical low point in cash is July shutdown,” he said Friday.
As TTAC commentator FredMan points out, Chrysler [via CNNMoney] spent part of this weekend backpedaling. “The $5 billion will help Chrysler work through the crucial July shutdown period when US auto makers traditionally idle their plants for up to two weeks to retool their factories, a company spokeswoman said.” Help? You’re welcome!
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