Yesterday, GM’s new boss (president Barack Obama) announced he was firing The General’s CEO and six members of GM’s Board of Bystanders. The new chief executive in chief also elevated BOD member Kent Kresa to the top slot. Kresa, who came to GM from the world’s least consumer-focused industry (unless you count killing them), replaces Rick Wagoner as GM’s new Chairman of the Board. You may remember Kent from from last May, when Kresa told the Wall Street Journal that Red Ink Rick was good to go. I mean, stay. “Management has a handle on the situation.” At the time, I wrote that the former Northrop CEO’s faith in Wagoner’s unspecified turnaround plan reflected “Kresa’s seat-of-the-pants, high stakes poker management style, and faith in political influence peddling.” But really, who IS this guy? Why is Kresa sitting pretty after sitting schtum? A little help from TTAC’s Best and Brightest in the Google department, and some thoughtful analysis, would be most appreciated.
I always tell people that their footwear will have a greater impact on their life than the car they drive . . . and they laugh. Then they start to think about it. All that money that goes into purchasing, financing, repairing, and insuring a car can be used for so many better purposes (for a non-enthusiast). College. Vacations. Cheap wine. You name it. The list is endless and the knowledge to achieve those ends is definitely out there. But how can it “really” be done? How can the laymen amongst us overcome the stacked deck of MBAs and conspicuous consumption that is seemingly “the American way” when it comes to cars and so many other things?
GM CEO Rick Wagoner promised to reveal the fate of the HUMMER brand today. Old Sparky was warmed-up and everything. Of course, that was before the President of the United States fired Wagoner’s ass. And so the maker of pseudo-military SUVs will spend its eleventh month on death row—sorry, “under strategic review.” Automotive News [sub] reports that GM will now postpone a decision “for a few weeks as it works to complete a sale.” No, they don’t mean “a” sale; they mean the sale of the entire brand. Wait! Does that mean . . . ?
“Our efforts to sell Hummer are proceeding, and there are several parties interested — and I would say really interested — in the brand,” Troy Clarke, GM’s president of North America, said during a call to dealers today. “We’re still very much in the process, although that process is maturing.”
WTH is a “maturing sales process”? Does GM have a buyer for the world’s most politically incorrect automotive brand or not?
Porsche presented the numbers for the first half of their fiscal 2008/2009. There is bad news and there is pornographic news, says Automobilwoche [sub]. The bad news is that Porsche is not immune against carmageddon: Their unit sales dropped 27 percent to 34K slot cars. In Euros, their sales dropped 12.8 percent to €3B.
Now for the pornographic part. On sales of €3B, Porsche reports a pre-tax profit of—hold on to whatever you can hold on to—€7.34B. In the same period last year, it was only €1.66B. How did they pull this off? You guessed it: The hedge fund with a sheet metal bending subsidiary earned €6.84B at the stock exchange, wheeling and dealing with stocks and derivatives. Why were Euro sales much better than unit sales? (Read More…)
So, where does DC vs. Detroit leave Opel, Vauxhall et al.? The “private intelligence agency” Stratfor [very expensive sub] summed it up most succinctly: “Add to this the complexity of Opel, a German car maker owned by GM, which Germany wants the United States to bail out but which the United States wants nothing to do with, and the fundamental problem is clear: While both Germany and the United States have a common interest in moving past the crisis, Germany and the United States have very different approaches to the problem.”
Ford apparently isn’t the only firm that “speaks car.” The ChiTrib reports that a Pennsylvania parts dealer is suing Ford for using the line “we speak car” in recent ads, claiming it has used the phrase for six years. Frank’s Auto Supply of Uniontown, PA uses wespeakcar.com as its website, and has used the trite neologism in advertising since June of 2003. The parts dealer is suing Ford in federal court, seeking unspecified damages and a ban on Ford’s use of the phrase. The upside to ripping off another marketing tagline? No one really misses the unoriginal ad when it gets pulled.
It’s time to buy Ford stock. It’s the big winner from the Presidential Task Force on Automobiles (PTFOA) announcement today– although you wouldn’t know it listening to the MSM. That’s the way Ford wants it… below the radar, off the screen, out of the limelight. They’ve been getting a dead cat bounce already; never has silence been so golden. The dictum “never gloat in the misery of others” makes for good business sense, since one never knows when the table will turn. Anyway, here’s why Ford will ride high.
ABC News reports that outgoing GM CEO Rick Wagoner will walk away with a $20.2 million retirement package, not including the usual perks bestowed upon The General’s generals (e.g., free air travel, secretarial services, cars for life, etc.). Also standard: Wagoner’s pension is insured. In other words, if/when GM eventually files for Chapter 11 protections, even if the company ends up in liquidation, Wagoner’s pension is safe. And as the money is not a “bonus,” it can’t be stopped by the federales. In an email to ABC, GM spokeswoman Julie M. Gibson pointed out that it’s actually only $5M or so paid out over five years. (It’s my money and I want it now!) In a subsequent “clarification,” Gibson said the terms of Wagoner’s final compensation were not yet hammered out. “Specifics on any compensation entitled to, or actually paid to Mr. Wagoner are still being reviewed.” Could that mean he actually INCREASED his pay-out to piss off? Anyway, if Rick decides to take GM to court, guess who pays for the lawyer? Not that he can’t afford one: Wagoner’s already banked over $60,000,000 in salary. As for the value of Wagoner’s stock options, well, I guess there is some justice in the world.
Automakers are cutting second quarter production plans by double digit percentages, as the US auto market continues to contract. Automotive News [sub] cites CSM Global’s estimate that North American auto production will not top 2.07 million units, the lowest level since “at least” 1981. And though GM, Ford, Toyota, Nissan and Honda are expected to cut production in the 30-40 percent range, the worst news comes from Chrysler. The Cerburian dog is “selling the majority of their vehicles out of inventory,” says CSM’s Michael Robinet. “They are trying to get much more realistic about production levels.” How realistic? Expect a 60 percent cut in production for the second quarter, and under one million units of total North American production on the year, reckons CSM. That’s well below Chrysler’s 1.6m annual production plan from its original viability plan.
A Georgia state lawmaker wants to know the best way to force local jurisdictions to obey a new law governing photo enforcement systems. House Resolution 774, sponsored by state Representative Barry Loudermilk (R-Cassville), would create the “House Study Committee on Compliance by Local Governments with the Red Light Camera Law” in response to evidence that cities are operating automated ticketing programs without complying with Georgia Code 40-14-22. This legal provision, which took effect January 1, mandates a one-second extension of the duration of the yellow warning phase at red light camera intersections. As TheNewspaper first reported earlier this month, several jurisdictions are openly flouting the law.
The U.S. government (ostensibly representing “the taxpayers”) is right to insist on conditions to the second round of federal loans to Chrysler and GM. As always, the devil is in the details. As always, the government has put politically motivated strings onto every moving appendage in this latest example of federal largess. The fundamental question here is not whether or not these strings– from a shotgun marriage between Chrysler and Fiat to a GM bondholder haircut– will rescue either company from liquidation. It’s whether or not the federal government should be involved in bailing out any company in any industry. Period. Though others may disagree, I believe that only companies absolutely essential for national defense/security might qualify for direct taxpayer support. Might. Otherwise, NFW.
Ronald Reagan once said that the scariest words in the English language are “we’re from the government and we’re here to help.” For troubled auto suppliers though, there are scarier things than government assistance. Specifically, government assistance administered by GM and Chrysler. Automotive News [sub] reports that the the newest automaking branches of the federal government will be in charge of allocating the $5 billion in supplier aid, and that they’ll be using the money to settle old scores. According to AN‘s breezy prose, GM and Chrysler may “pass over” suppliers that have sought to protect themselves from OEM bankruptcies by demanding payment in fewer than 45 days or arguing that insolvency worries allow them to break contracts with the automakers. After all, the government didn’t think the supplier rescue money would go to the most in-need firms, did it?
On Friday I was in Washington for a meeting with Administration officials. In the course of that meeting, they requested that I “step aside” as CEO of GM, and so I have.
Fritz Henderson is an excellent choice to be the next CEO of GM. Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts. His knowledge of the global industry and the company are exceptional, and he has the intellect, energy, and support among GM’ers worldwide to succeed. I wish him well, and I stand ready to support him, and interim Non-Executive Chairman Kent Kresa, in every way possible.
President Obama concludes his remarks on the auto industry:
“But there is something I want everyone to remember. Remember that it is precisely in times like these—in moments of trial and moments of hardship—that Americans rediscover the ingenuity and resilience that makes us who we are. That made the auto industry what it once was. That sent those first mass-produced cars rolling off assembly lines. That built an arsenal of democracy that propelled America to victory in the Second World War. And that powered our economic prowess in the first American century.
Because I know that if we can tap into that same ingenuity and resilience right now; if we can carry one another through this difficult time and do what must be done; then we will look back and say that this was the moment when America’s auto industry shed its old ways, marched into the future, and remade itself, once more, into an engine of opportunity and prosperity, not only in Detroit, and not only in our Midwest, but all across America.”
Ironic counterpoint courtesy of CBS News and several recently laid-off employees of a Western Michigan GM dealership.
Irony is the discrepancy between expectation and reality. Hypocrisy is the discrepancy between publicly stated intention and privately implemented execution. I’ll let you decide where President Obama’s statement on the federal government’s intervention in the “U.S. car industry” falls. No matter what you call it, there’s a huge disconnect between the President’s assertion that “We have no interest in running GM; we have no intention of running GM” and the fact that Presidential Task Force on Automobiles (PTFOA) is running GM. I mean, you can’t get much more interventionist than forcing the automaker’s CEO to resign and moving to replace the entire Board of Directors.
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