The General Motors spin-off of Delphi which never really was, isn’t. Today’s Wall Street Journal [sub] has another “people involved in the negotiations”-sourced story claiming that these latest moves are all “part of a strategy to qualify for additional government loans”. Delphi has never really been an independent company from the start. The obvious reason of course is that GM provides the vast majority of Delphi’s business. But more than that, GM is on the hook for Delphi’s pension costs, has paid the price for voluntary separations at Delphi and has repeatedly been the source of bailout bucks for Delphi. Considering that “since 2005, GM has poured in $11.7 billion to help sustain the company,” they might as well just call it the Delphi Division. But how do federal bailout dollars get wrapped up in this mess?

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Curious about the price tag on the current round of auto industry bailout mania? An updated TTAC Bailout Scorecard (pdf) is now available.

India’s Tata has gone from darling to dumpling in just a year. The high profile Nano People’s Car project still hasn’t gone into production, and the $2.3b purchase of Jaguar and Land Rover now seems spectacularly ill-timed. Business Week recently covered the story with these great opening notes: “What a difference a year makes.”  India is in the throes of its own economic crisis; thanks to high inflation, high interest rates, tight credit markets, excessive corporate debt and a suddenly spending averse middle class. Pretty much like most places in the world, but a little different.

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Peter M. De Lorenzo, the self-styled AutoExtremist, seems to have calmed down a notch or two in recent weeks. Sweet Pete is back to taking well-aimed rifle shots at the industry’s soft spots. This week, he takes on J.D. Power and Associates. As SP points out, few consumers realize that J.D. Power is a for-profit marketing/research/data mill firm dedicated to raking in the bucks by any means possible. “Their latest money-making brainstorm? Something called the ‘Vehicle Launch Index.'” Using a bunch of pseudo-scientific statistical mumbo-jumbo, J.D. Power says they will be able to measure the effectiveness of new model launch campaigns AND tell the auto makers how to do it better. Peter doesn’t miss a step when he says: “J.D. Power has honed its brazen formula of Unmitigated Gall + Unmitigated Bullshit = Huge Wads of Cash exceedingly well over the years, and too often the auto industry blindly catered to Power with little rhyme or reason other than the fact that they were afraid what would happen if theydidn’t bow down to them. 

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Leave it to a Texan to spin a subsidy of plug-in hybrids as a “damn the greenies and all things Washington, DC” move. Hard to believe, but that is what Gov. Rick Perry just did in his recent State of the State address. It’s an entertaining read for those who enjoy reading between the lines. Perry starts by decrying big spending interventionist government; then goes on to ask for more money for the state’s Emerging Technology Fund, Film Incentives,  Enterprise Fund, Skills Development Fund, the Texas Grant Program, the Workforce Commission’s Skills Development Fund …. well, you get the idea. But wait, this is The Truth About Cars, not The Truth About Government (someone start that site, ‘kay?).

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With governments everywhere becoming investors in their native auto industries, the question of what exactly is a native auto industry is suddenly big news. Veteran Wall Street Journal writer Joseph White has taken up the question: What is an American Car? [sub]. The Journal has a fun “Where is this Car Made” quiz to test your knowledge. What could be more American than a Mexican built Escalade, Dodge Ram, Silverado or F150? Is an Ohio built Honda Accord Japanese? What to make of a Mexican built Ford Fusion with a Mazda based design? Is Canada the 51st state or not? Coherent people everywhere have noticed that “the Detroit companies wave the Stars and Stripes when they advertise their wares or look for loans in Washington, but when they talk to investors or the business press, they stress their aggressive efforts to promote ‘global sourcing,’a code for, ‘Buy More Parts from China and Mexico.'” Such Detroit double-speak has a long and ignominious history.

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The long running Navistar/Ford dispute over warranty claims, pricing and other supply details vis-à-vis the Navistar-made Powerstroke diesel engines is over. The official press release [via Yahoo! News] gets right to the point: “Ford Motor Company and Navistar International Corporation have reached an agreement to restructure their ongoing business relationship and settle all existing litigation between the companies.” The engine supply deal is officially dead as of December 31, 2009. Cash is changing hands, but nobody is saying how much: “As a result of the agreement, Ford will make a payment to Navistar.” The South American and Blue Diamond F-650/750 joint projects will continue, for now. Cummins is the supplier of record for Ford branded F-650 and F-750 diesel engines but the trucks are actually produced in Mexico based on a Navistar design. International, meanwhile, sells version of the same trucks with its own engines.

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If you don’t think the automotive world is shifting beneath our feet, think again. USA Today reports on a growing trend: car makers and dealers pushing for higher fuel taxes, of all things. The auto industry’s newfound love of eco-friendly policy comes down its need to satisfy increasingly stringent federal fuel economy regulations. If gas prices stay low, the government-pleasing vehicles will continue to languish on the lots and docks, Prius-like. Small car profit margins will disappear, Prius-like. AutoNation CEO Mike Jackson was ahead of this particular curve ball when he called high gas prices a good thing. MJ is now joining the New York Times editorial board (amongst others) calling for increased federal taxes to git ‘er done. (After all, European motorists pay their governments through their nasal passages for the privilege of fueling their vehicles.) One of Uncle Sam’s new BFFs agrees. “GM CEO Rick Wagoner said taxing gas or providing rebates on fuel-efficient cars ‘is going to be the most effective way to move the needle fast.'” While Jackson and Wagoner are of one mind on raising gas taxes (or something), the AutoNation jefe is no fan of all this wild needle swinging stuff. “We watched the consumer stampede to fuel efficiency in May, and now the herd is getting ready to stampede back to their old ways,” says Jackson.

The Wall Street Journal carries the surprising news that General Motors management might be starting to edge closer to reality: “Speaking at the North American International Auto Show in Detroit, Rick Wagoner, GM’s chairman and chief executive, said the company wants to avoid a Chapter 11 filing, but also said its viability is ‘not 100%’ certain at this point.” Rick backing away from the position that GM hasn’t even thought about C11 is news. “The Treasury Department has said GM must have a plan by March to become ‘viable’ and have ‘positive net value.'” Nobody actually expects GM to have worked out details with bondholders or the UAW before the March  deadline. The March deadline was chosen by the current administration as a way to act tough while kicking the can over to the new team, and everyone involved knows it. The UAW says it isn’t clear what is being asked of it and hasn’t started negotiations. Meanwhile, regarding the bondholder negotiations; “GM Chief Operating Officer Frederick ‘Fritz; Henderson suggested Monday that it could be some time before substantive discussions can be held.” So, nothing is really happening with the UAW or the bondholders yet. How about pulling the plug on dead brands? 

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The talk about US-based A123 receiving federal and Michigan taxpayer funding to ramp up American-made batteries for the plug-in electric – gas hybrid Chevrolet Volt seems to have been much ado about nothing. The AP (via Yahoo) reports that GM “has picked LG Chem of South Korea to supply the lithium-ion battery cells for its Chevrolet Volt.” Apparently mindful of its precarious political situation, GM makes a big deal about the South Korean cells being “assembled into battery modules and packs at a factory in Michigan.” In the mid-80s, I was a young engineer in Silicon Valley’s then booming semiconductor industry, and we outsourced the low tech, low value added final packaging and assembly offshore to places like South Korea, Taiwan and Singapore. Back then, the high value added R&D and primary manufacturing still largely happened in the US. My how times have changed.

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You can sort of understand why Nissan decided to pull out of the Detroit Auto Show, er North American International Auto Show. For carmakers, these are the worst of times and the worst of times. But The New York Times reports that Nissan went on to strong-arm their Detroit area dealers into staying home as well. The locals had come up with a plan to staff a Nissan show presence on their own dime. Corporate’s stated reason for weaseling-out back of NAIAS in November: they had “no major new products to show.” And furthermore “the current economic conditions will impact the shows’ marketing effectiveness.” Nissan used those same reasons to back out of the Chicago Auto Show. But wait, it gets stranger. Nissan spokesdude Brian Bockman said that Chicago is back on after corporate “worked with our Chicago-area dealers and came up with a good creative solution that we could maintain a presence while still having an eye toward the challenging market out there.” One function of these regional auto shows: get potential customers out looking at the goods and falling in love. In fact, Nissan’s Detroit area dealers are pretty chapped about missing the shot at their traditional post auto show sales up-tick. The question is: why it is great for the Chicago dealers to put on a presence, but not OK for Detroit’s already challenged Nissan dealers to do the same? Could it be that Nissan corporate a stick it to all things Detroit agenda? Does Chicago’s home town status for the new President-elect have something to do with this? Damn strange. Any Nissan insiders care to share the real story?

The New York Times has put out a story saying what’s already on many industry observers’ minds: “The historic collapse of the new-car market dragged on in December, raising questions of whether the auto industry will ever again have sales levels that it took for granted just a few years ago.” The easy credit, hyper-consumerism era had established new car sales in the 16 million per year range. But then along came 2008’s dismal 13.2 million units… and the last half of the year was much worse than the first. Even the former “don’t worry, be happy, better days are just around the bend” cheerleaders have given up. “GM’s chief market analyst, Michael C. DiGiovanni, said the automaker was predicting industry sales of 10.5 million to 12 million vehicles for the year.” Long time industry pundit John Casesa says: “After an era of excess indulgence, we’re now entering a prolonged period of conservation. Trading in a car every three years is a luxury that the average American can no longer afford.” Against that background, one can only wonder what fantasies will be embedded in the new, new, newest turnaround plans GM and Chrysler will hand in to the U.S. Treasury Department a few short weeks from now. No matter what their term papers say, Casesa pegs it: “The internal problems of the Big Three are so great, there is no way they can survive without government help for several years.” 

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When is buying a used car from an established new car dealer actually the receipt of stolen property? When the dealer didn’t pay off the previous owner’s loan. The New York Times has tales of the woe car buyers are facing thanks to now-shuttered houses of ill-repute. Vacaville Ford, for example, sold Diana Foley a used 2006 Lincoln Town Car taken in on trade. Ms. Foley was probably feeling smart for saving herself the massive initial depreciation on a Town Car. Lttle did she know that Vacaville Ford never paid off the prior owner’s loan balance and didn’t own the car it sold her. Now Diana has a car in her driveway she can’t register and doesn’t really own; the prior owner of the Town Car still owes money on a car they don’t have anymore and Vacaville Ford is boarded-up. “David Paulson, the Solano County district attorney, is prosecuting Vacaville Ford-Mercury for similar fraud involving an as-yet-undetermined number of consumers.” Thousands of miles away, the attorney general’s office in Arkansas has sued McKay Hyundai of Pine Bluff on “charges that the dealership violated consumer protection laws by not paying off loans or by selling nonexistent extended warranties to at least 40 people.”  

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The recent historic drop in fuel consumption has translated into a $3b drop in taxes going into the Highway Trust Fund year-on-year. It’s a crisis! It’s a good thing that GW Bush signed into law the “Safe, Accountable, Flexible, Efficient Transportation Equity Act” back in August ’05. The Act empaneled the National Surface Transportation Infrastructure Financing Commission (NSTIFCT), and directed it to devise a new way to finance the Highway Trust Fund. Reuters has secured a draft copy of the commission’s final report. NSTIFCT’s recommending that Congress should raise U.S. gasoline taxes by 10 cents a gallon later this month, to “fix bridges and ease congested highways.” But that’s not all! “The gas tax is broken, so any increase in gas tax is just a Band-Aid,” commission member Adrian Moore said. “It gets you through a very short term. It doesn’t even remotely solve the problem.” Actually, the only thing broken about the federal gas tax is that it’s fixed at 18 cents per gallon. The tax hasn’t been adjusted for inflation– or any other factors– since it was last increased in 1993. But Mr. Moore doesn’t point out obvious fixes like indexing the federal gas tax to inflation, or otherwise periodically adjusting the tax based on the needs for highway spending. Anyway, Mr. Moore is down with pay-as-you go, we-know-where-you-are road pricing. Privacy concerns? No worry, Big Brother will not be a government agency, but a consortium of private road builders looking for a profit. Sort of like health insurance companies, only more intrusive. So which would you rather have, private toll roads and FasTrack monitoring everywhere, or gas taxes adjusted as needed to keep our highways in an adequate state of repair? Here’s hoping we get to make that choice.

Ed Wallace at Business Week offers a counter-intuitive view: 2009 will see record low automobile sales…. and increased prices. My first inclination was to dismiss the man out of hand. But this past April he presciently said “There is No Gas Shortage” and followed up a few weeks later with a well-argued skewering of the ethanol myth. So, Ed Wallace is no Bob Lutz. But still, his latest proclamation is hard to swallow. “The time of heavy rebates is over as carmakers get ready to raise prices to increase profits. Get ready for sticker shock.” After that opening salvo, Ed goes tells the global tale of automaker woe. He rightfully points out that governments in German, England, France, Canada and China are stepping in to make sure their companies stay in the game, while the US government wrings its hands. But does anyone really think that the new US government is going to sit back and watch the indigenous auto industry implode?

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