Yesterday, TTAC reported that GM wasn’t waiting for bankruptcy to launch a dealership jihad: a 42 percent cull designed to placate The Presidential Task Force on Automobiles and, let’s face it, common sense. After that report, one of our GM moles gave us a heads-up that GM Marketing Maven Mark LaNeve was addressing the dealers live via satellite on some super-secret mission. Turns out it wasn’t LaNeve’s four missing “weekly updates” on GM’s reinvention. Automotive News [AN, sub] reports that Mark was using GM’s bird to flip the bird at GM dealers. In fact, the sales chief has declared war on his “underperforming” stores, vowing (by omission) not to pay the terminated dealers a penny in compensation. “There was no money for anything other than what the franchise agreement calls for,” a dealer informed. “Meaning we can send back new cars, parts, special tools and some signage.” And once again, AN has withheld critical information. In this case, it’s a two-day delay on LaNeve’s characterization of the dealers caught in the cross-hairs.
It’s been a while since we gazed into the crystal ball to see what’s beyond the horizon on the automotive landscape. A lot has happened in the intervening eighteen months or so: GM and Chrysler are closer to bankruptcy, Ford is the only American auto company likely to survive the decade relatively unscathed, the market for hybrids peaked then bottomed out as gas prices did the same, and the only thing flowing out of Washington D.C. faster than bailout money is political BS. Join us as we check the tarot cards to see where it’ll all lead. Here are the headlines of the future.
Per Wikipedia, the Marxist theory of False Consciousness claims, “material processes in capitalist society are misleading to the proletariat.” Trabants aside, it’s pretty clear that the founders of Communism would love today’s Smart ForTwo. It’s the one-dimensional vehicle that denies its occupants the luxury of time, space and value. But it’ll pop eyeballs like Gisele Bündchen in a Target. It didn’t hurt that my tester had the blessings of noted Mercedes tuner, Carlsson Autotechnik. Too bad it didn’t help.
This is not what I expected. Sure, I got the bankruptcy bit right. Big deal. Better analysts than I were making that call back when I was playing with Corgi toys (another car company destined for the scrap heap). But I never thought Uncle Sam would nationalize GM. Ace commentator PCH101 will tell you it’s all in good fun: a temporary government intervention that gives taxpayers a shot at recovering some of the tens of billions [we shouldn’t have] spent keeping the zombie automaker alive. Or at least postpones GM’s inevitable dissolution for a less financially fraught finale. But I reckon politics will rear its ugly head, create a distortion field around GM’s carmaking business and kill any hope of GM surviving in any way, shape or form. The acid test: the Chevy Volt.
Holman Jenkins offers his analysis of the Motown meltdown under the TTAC-usurping title “The Truth About Cars and Trucks.” According to the Wall Street Journal scribe, we should blame the current domestic auto industry implosion on the United Auto Workers’ (UAW) monopoly on Detroit production. Oh, and the manipulation of federal law to protect same. I think. “For three decades, the Big Three were able to survive precisely because they skimped on quality and features in the money-losing sedans they were required under Congress’s fuel economy rules to build in high-cost UAW factories. In return, Washington compensated them with the hothouse, politically protected opportunity to profit from pickups and SUVs. Doesn’t sound much like what you hear incessantly from your Congressman, about how Detroit’s problems are all due to management ‘incompetence’ in deciding to build ‘gas guzzling’ SUVs, does it?” Uh, it kinda does. And I’d like to see a bit more detail on this assertion, please: “Washington’s latest fuel-economy rules actually reward manufacturers for increasing the size and weight of some vehicles.”
Earlier today, I wrote an editorial about the U.S. Treasury Department’s plan to “sell” Chrysler Financial to former GM captive lender GMAC. Motive: Chrysler could continue to function (under union control, no less). The lender could keep lending money to ChryCo dealers to buy ChryCo cars. Means: what are you kidding? Your tax money. Opportunity: none. Well, legally. Legally, a Chrysler Financial–GMAC merger would imperil the bank, in direct contradiction of FDIC rules. Of course, the fact that GMAC is a bank in the first place is a violation of federal rules. OK, not technically. Technically, the Fed bent the rules for GMAC to qualify for bank status at the 11th hour, behind closed doors, screwing over recalcitrant debt holders but good. So anyway, I called the ChryCo Financial–GMAC merger a clusterfuck. (I know: I should stop sugar coating my analysis.) Turns out I had no idea how bad things are over at GMAC. But CNNMoney does . . .
There are three things you really can’t avoid if you’re an American: death, debt (government inherited) and sales. Now that four GM brands have officially Oldsmobiled themselves, you’re going to hear a lot of retail sales cheerleading in the MSM. “Now’s the best time!”, “Vultures are gonna feast on these deals!”, and my own personal favorite “Get ’em while they last!” But unfortunately that last cliché is a really big part of GM’s problem.
Once upon a time, two Jeep Gladiators were built at the great big Jeep factory in Toledo, Ohio. One Gladiator was white, and the other was green. Gladiators were built to be the toughest trucks in the whole world. They could outwork any other pickup. And outlast them too. And for thirty some years, the white and green Gladiators worked and worked, doing all sorts of really hard jobs. Then one day, a couple of years ago, the white Gladiator said to the green Gladiator “I don’t need to do this hard work anymore. I’ve figured out an easier way to make a living!”
Stand-up comicKevin Meaneywas in Detroit last weekend and the auto industry is in a mess out there . . . “They didn’t pick me up in a car at the airport . . . they picked me up on a horse.”
Automotive News [sub] reports that GM’s bondholders have turned down the firm’s debt for equity offer of 225 shares of “new” GM stock per $1K of debt. The deal, which would have given bondholders a ten percent stake in a partnership with the UAW (39 percent) and the Government (50 percent) and existing shareholders (1 percent) was derided as “neither reasonable nor adequate” and “a blatant disregard of fairness” in a prepared statement. “The offer was made unilaterally, without any prior discussion or negotiation with bondholders and in spite of repeated calls for dialogue,” write advisers to GM’s ad hoc bondholder committee. “We are deeply concerned that GM waited until late April to make its offer.” Money quote? “This offer demonstrates that the company and the auto task force, unfortunately, are pinning their hopes on an extremely risky and legally questionable turnaround in bankruptcy court.” And how.
On the day that The General announces involuntary gastric bypass surgery at the hands of Dr. O and while Crash Cart Chrysler waltzes with the Grim Reaper, not all is well with Toyota. The nosy newsmen at Boston’s ABC affiliate exposed a nasty little secret hiding under Toyota’s hospital gown. Yesterday, Team 5 divulged “more than two dozen complaints filed with the National Highway Traffic Administration” regarding 2001 and 2002 model year Tundra frames that are rusting and blowing away. Today Toyota implied responsibility when they offered to buy back the rust buckets at full retail value. Keep in mind that this issue is limited to certain areas of the USA and Canada where salt is used as the predominant ice melting material.
Believe it, kids . . . the Cimarron is back! According to a Motor Trend “Scoop,” GM has acknowledged that it doesn’t have the resources to compete in Europe’s tough luxury market, build an RWD Alpha-platform “baby CTS,” or really do much of anything besides bringing another Epsilon II-based whip to the US market. Can you feel the excitement? The project, codenamed “GM 166,” will reportedly be positioned between the Buick LaCrosse and the Cadillac CTS. How? By costing more than the LaCrosse, of course. Because who doesn’t want a warmed-over FWD midsize starting at $35 grand?
As part of Viability Plan III, GM announced its intention to close 42 percent of its bloated dealer network, reducing the number of stores to 3,600. That’s a cut of 2,600 dealers. Our take on that part of that part of the new new new new new new new new turnaround plan: a Mandarkian laugh. American car dealers are covered by 50 states worth of franchise laws; politicians don’t get elected without the support of their local or state dealers’ council. Any dealer cull would have to wait for a bankruptcy judge. Nuff said? Apparently not. Wards’ Dealer Business reports that The General is laying the groundwork for an anti-dealer jihad, regardless of the “niceties” of C11.
The Washington Post reports that the Treasury reached an agreement “in principle” with major Chrysler bondholders last night on the terms of their haircut. Under the deal, $6.9 billion in debt would be paid off with a mere $2 billion in cash once Chrysler completes restructuring. Unlike GM’s debt-swap effort and Chrysler’s UAW VEBA deal, the debt is not being swapped for equity in a reconstituted Chrysler. Which means Chrysler’s lenders would rather walk away with about 28 cents on the dollar than cast their lot in with the New, New Chrysler. The Treasury is still trying to keep Chrysler’s restructuring out of bankruptcy court, but officials emphasize that this deal does not guarantee that Chrysler won’t file. Also, about a third of Chrysler bondholders are still mulling the offer over.
Recent Comments