Talk of the UAW getting a seat on the board of General Motors in return for “concessions,” has Automotive News [sub] executive editor Edward Lapham thrilling at the idea of a UAW-run GM. Read only the title of his latest piece “UAW should get on board,” and you might assume it to be a call for more substantive UAW concessions to match the imminent bondholder haircut. You’d be wrong of course. “Nearly three decades ago, Doug Fraser, who was then president of the UAW, got a seat on the Chrysler board until the union recouped the wages and benefits it gave up so the automaker could get loan guarantees,” writes Lapham. “But this time, the union should do more.” Really? More? “Imagine what would happen if the UAW beat its sword into stock shares and invested its $1 billion strike fund in GM,” challenges Lapham. But there’s no need to imagine, because Lapham breaks it down for you. “It would effectively usher in an era of industrial peace and labor cooperation,” he figures. Not to mention the dawning of the Age of Aquarius. And with GM’s market cap treading water at $3b, the UAW could just snap up nearly a third of the company and get several seats on the board. Not only would this “send a loud, clear message to Congress and America that the UAW believes in GM’s chances to survive and thrive,” figures Lapham, “If you believe in the upside, it could be a spectacularly lucrative investment.” Or not. The relationship between the UAW and its employers has been defined by abuse, parasitism and disregard for the perogatives of competition. And it seems like even Lapham understands this, concluding his piece with the dire-but-fun-loving admonition to: “think of all the fun the UAW directors could have. Especially around contract time.” And you think GM is in bad shape now.
Posts By: Edward Niedermeyer
Autoblog Green has all the info on the “all new” 2009 Zap Xebra. The good news? Bye-bye fiberglass, hello steel construction. The bad news? It’s still a freaking Zap Xebra. Oh yeah, and nothing was done to improve the range or power, according to ABG. But, according to a statement from Zap found in the EETimes test drive (key bits: “quite rudimentary,” “struggle to get comfortable,” “somewhat unsettling,” and “noisy and bumpy”) all this was done without the benefit of a federal bailout. Hallelujah! All hail our new green car champions! Or not.
In the cosmology of the ancient Greeks, the universe would not tolerate a gross breach of justice. When a hero was killed with dishonor or without completing his destiny, supernatural forces would emerge from the cthonic realm to haunt the guilty party. These karmic enforcers were called the Erinyes, or Furies, and they are coming for Chrysler. The Detroit News has gone past mere Cassandra status, no longer satisfied with merely prophesying doom for the Pentastar brand. No, since its DCX gutting, private ownership, pathetic products and tiny scale reflect poorly on the other Detroit automakers and their bailout beggary, the DetN is actively calling the wrath of the Furies upon the house of Mopar. Interestingly, the Furies appear to have changed their name to CSM global forecasting. “It would be best for everyone involved if Chrysler were allowed to gracefully wind down and go away in a controlled, staged process, leaving a Detroit Two,” intones Michael Robinet, CSM vice president of global vehicle forecasts. There’s “not a whole lot of vehicle development going on at Chrysler,” Robinet said. “It has slowed down substantially and (is) just focused on core vehicles,” he said. “How long can it continue as a caretaker company?” asks Robinet, calling for the just vengance of the gorgon-headed Furies. CSM CEO Craig Cather argues that much of Chrysler’s weakness can be blamed on Daimler, which he says “handicapped Chrysler and its ability to expand internationally.” Whatever the sin against the natural order, when the Detroit News begins listing the crimes of a hometown automaker, you know their fate is nearing its end.
Marketwatch reports that the federal appointment of a “Car Czar” could trigger a “credit event” for Ford and GM’s credit-default swaps, according to Bank of America Securities analyst Glen Taksler. Taksler points out that the International Swaps and Derivatives Association, the trade association that acts as a standard-setter for credit derivatives trading, says one trigger for a bankruptcy credit event is the appointment of an administrator, trustee or similar official to oversee all or most of an entity’s assets. But it’s unclear whether the potential car czar’s powers would correspond with the ISDA definition. The authority to review and prohibit certain transactions, or what’s been discussed in one piece of draft legislation, is different from having control over assets, Taksler noted. “The result may depend on the exact wording of a potential bailout package,” he wrote in a report made public late Tuesday. “We find arguments both for and against an autos czar triggering CDS,” he said, adding: “The actual process is likely to be determined through ISDA.” MW concludes that if the auto maker bailout does amount to a credit event, it would create another shock in the $50 trillion market for credit default swaps. Talk about unintended consequences! Stay tuned…
…and Honda tops the list for the first time. Nearly 65 percent of new Honda purchases replace an older Honda, edging Toyota’s retention rate by 1.5 percent. Lexus comes in third with 60.4 percent retention, followed by Mercedes and BMW. Ford scored the highest of all domestic brands, capturing 6th place with 52.5 percent retention and barely edging Chevrolet which boasts an even 52 percent retention. Cadillac was the only other domestic brand coming in above the industry average of 48 percent. Jaguar scored the lowest in the survey, with only 26.2 percent retention. Pontiac was second to last with 27.2 percent, with only Mitsubishi and MINI joining it under 30 percent. Check out the full results in PDF form at JD Power’s site.
Jalopnik has the latest in the ongoing “Ford sues everybody over use of its logo” story. Having already sued the Black Mustang Club (in a move that PR Squared called a reminder that “customers are in control of the brand”) and the Calgary Stampeders (whose stampeding horse was trademarked twenty years before the Mustang) Ford’s lawyer are continuing their reign of pathos. Therangerstation.com and nearly every website with “mustang” in the url have been targeted by Ford’s lawyers, demanding “the relinquishment of all Ford trademarks including domain names, banners, signs and merchandise as well as a restitution payment of $5000 by December 19th, 2008.” The huge irony in this is, of course, that Ford doesn’t really even own its logo, having mortgaged the blue oval during its $23b borrowing spree. Meanwhile, Mustang Evolution appears to have contacted Ford’s Scott Monty who reveals that some sites may have been selling “unauthorized Ford decals.” Still no word on whether or not it’s illegal to have a ford product name in your domain name.
From Politico, we have a counter-proposal on auto industry assistance by House Republicans, led by Rep John Boehner. In essence, it advocates for a pre-packaged bankruptcy with major concessions from all sides. More importantly, it suggests that instead of $15b in interim financing and a Czar to keep things in line, the government should “provide insurance, funded by the participants with a modest FDIC-like fee, which would cover up to 50% of the losses of new investment in the case of default, helping to unlock immediate private investment (not unlike debtor in possession financing). Such insurance would expire on March 31, 2009.” Hit the jump for a complete statement from Boehner and more details.
Toyota spokesman responds in the Detroit News, asking “How do you tell a worker in Kentucky who’s producing a Toyota that his job is worth less than another American autoworker’s?” How indeed. And we thought the bailout was about fighting racism.
In an SEC filing today, GMAC Financial Services warns that it may back away from its bank holding company status application, due to its inability to refinance some $38b in debt. That bank holding company status would make GMAC eligible for TARP funds, but without a federal rescue many see GMAC heading for bankruptcy court says Automotive News [sub]. Including GMAC. The Cerberus-owned finance firm warned that if it doesn’t receive holding company status by December 31, “it would have a near-term material adverse effect on GMAC’s business, results of operations and financial position.” Meaning it will be forced to sell of more assets (with no buyers lining up) and miss 2009 debt payments. To meet the Fed’s requirement, GMAC said it needs about 75 percent participation in its debt-swap offer. So far, participation is just over 20 percent. The good news? If you’ve got $20b or so rattling around and you want in, GMAC has extended its debt-swap deadline until December 12. Deep Throat breaks down the bad news thusly: “GM would have to write down its investment in GMAC likely to zero. The big problem is the floorplan issue for dealers. There are few replacement lenders right now, and those that will step up will offer harsher terms, curtailments, etc. That means less ability for GM to stockpile cars at dealer lots. OTOH, it’s possible that other captives, like Toyota’s finance arm, could seize an opportunity to play… especially if a GM dealer is also a Toyota dealer. But again, terms will be critical, and depends how much exposure these guys want and how much capacity they have. What’s interesting is that the bonds trade high with only 10-15% discounts from par. This is due to the recovery from finance assets being much better than from manufacturing assets.”
Bloomberg reports that Fed Chairman Ben Bernanke has ruled out any Fed loan to automakers. In a letter to Senate Banking Committee chair Chris Dodd, Bernanke questions whether automakers have “unencumbered assets of sufficient amount and quality” to qualify even for emergency aid. “Even if the companies have sufficient collateral,” continues Bernanke, “lending to an auto manufacturing company would represent a marked departure from that policy, and would take us into distinctly new realms of policymaking. In particular, it would raise the question as to whether the Federal Reserve should be involved in industrial policy, which has traditionally been outside the range of our responsibilities.” Bernanke identifies the “critical unknown” in the automakers’ plans as “their ability to develop and produce vehicles that the public wants to buy.” Even more tellingly, Bernanke says the Fed is “not able to verify” the assesments that GM and Chrysler can even survive on the $14b the say they need. Congress should consider a “range of possible policy actions” besides direct aid, including a government-assisted “orderly bankruptcy reorganization” according to the letter. While we scurry around looking for a full copy of this letter, consider this Bloomberg article titled “Democrats Tone Down Prediction of Automaker Bailout Approval.” It looks like we may have just taken another turn on this crazy roller-coaster ride, away from consensus on a $15b plan.
With Bob Lutz pounding the media pavement for his credibility-challenged boss, it was only a matter of time before someone really hit the Maximum-quote jackpot. Chalk up a doozy for CNN, who snagged Lutz for its “American Morning” show, and got an interview which proves why Lutz was being kept away from bailout talk in the first place. The honesty flowed like single-malt in a boardroom from the very first question. When asked what GM would do with the $15b to ensure its survival, Lutz hedges, answering “this is simply a bridge loan which will get us into the next administration, where we hope we can do something more fundamental. Because the main problem is the lack of liquidity and the lack of revenue flowing in as we’re facing absolutely the lowest, lowest car market in history, and it’s not just the domestics.” AM anchor John Roberts, smelling blood in the water, presses Lutz. “You don’t see Toyota and Honda coming to the government for a handout. But based on what you said there — that this is just the beginning — you’re going to need more money next year?” To which Lutz replies “I think that’s a reasonable assumption.” Reasonable, eh? (Read More…)
Autoremarketing reports that not only were November’s results the 11th straight monthly drop this year, they were also the steepest thus far. In even better news ( at least for the makers of your favorite brand of anti-depressants), the Seasonally Adjusted Annual Rate (SAAR) of sales shows that things are even worse than they initially appear. “When December’s numbers are extrapolated, fourth-quarter SAAR is expected to be 10.4 million units,” intones Autoremarketing, “which would be 35.8 percent weaker than the fourth quarter of 2007 and the heaviest drop-off in 4Q SAAR since 1967.” And this, despite widespread attempts by OEMs to redline their sales with cash on the hood. Average cash rebates in November were $3,392, up 71 percent from a year ago and at their highest level since 2003. Incidentally (or not) 2003 was also the last time we saw turn rates as slow as this month. Vehicles sat an avaerage of 83 days on the lot in November, up from 73 days in October and 58 days in November of last year. Market stratification continues apace, as “compact basic” and “compact conventional” models sat only 35 and 44 days respectively, while anything with the name “utility” in its category sat for at least 100 days on average. Finally, “negative equity trades (as a percent of all trades) dropped to 25.48 percent in November, the lowest level for this metric since the start of 2003 as owners with upside-down vehicles either could not obtain a loan or stayed out of the market altogether.” Bail that.
Oil shocks, terrorism, economic malaise, automaker bailouts and now six-wheeled cars. What’s next? Disco and pet rocks?
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