GM recently settled an SEC investigation into its accounting practices. The automaker didn’t admit guilt or pay a fine, but it was confirmation– if confirmation was needed– that GM under Rick Wagoner has played fast and loose with the numbers. And when you’re as big as GM, little “tweaks” here and there can have a significant effect on the bottom line. In fact, I’d go as far as to say that history will eventually regard Wagoner as an accountant gone wrong: a GM lifer whose only genius lay in his ability to make numbers his bitch. Until he couldn’t. As part of that legacy, this [press release after the jump]. I’m no lawyer, but it appears that GM violated rules regarding mark-ups to dealers and, thus, customers. And once again, the “winners” of a legal action against an automaker get discounts on the offending company’s products, while the lawyers get millions of dollars. Not to coin a phrase, but how great is that?
Posts By: Robert Farago
At the risk of slipping in a “I told you so,” TTAC flagged the current automotive meltdown back in summer ’06, when new housing starts cratered. A bit late, but there you go. At the time, TTAC pointed out that the housing slowdown would kill pickup truck sales– at the precise moment GM CEO Rick Wagoner and his media groupies were saying the then-new Silverado was GM’s salvation (Edmunds: “If these hit, GM might have a full turnaround on its hands.”) Obviously, we didn’t see the collapse of the entire housing market and then, by extension, the new car market. But we sure as Hell made the connection between too-easy credit (for both homes and cars) and an eventual, inescapable reckoning. I mention all this because it’s obvious enough that new car sales won’t recover until the U.S. housing market recovers. And not just to us. Speaking at the dealer wake in N’orlins, the National Automobile Dealers Association’s chief economist Paul Taylor preached econ 101 to the bruised and battered faithful.
“One of Cadillac’s most anticipated models is being delayed one year.” Automotive News [sub] breaks the story- and stretches the limits of credulity. Anticipated by whom? The luxury coupe market is a niche within a niche. And to this blogger’s jaundiced eye, the CTS Coupe is hideously overwrought (which probably means it would have been a hit). GM spinmeiser Joanna Krell says the CTS two-door will now appear in summer 2010. Meanwhile, Cadillac really needs to concentrate on flogging the new CTS Wagon, apparently. Oh, and the next gen SRX, which is about as brand faithful as you’d expect for a vehicle that’s so not an Escalade it Hertz. Not to mention the fact that GM may not exist per se in one year. Or that this “postponement” is just another example of GM’s on-again, off-again, on-again, off-again product planning. “Selected journalists were shown the 2010 CTS coupe last August at a private party held in conjunction with the Pebble Beach Concours d’Elegance in California. At that time, the car was scheduled to debut in November at the Los Angeles auto show. In early November that plan was canceled, and the car’s debut was postponed indefinitely.” Taxpayer-funded chaos.
As America’s car dealers gather in N’orlins– an ironic enough venue given that some 80 percent of U.S. car loans are “under water”– the talk of the town is culling. Where once there were too many domestic car dealers, now there are too many car dealers full stop. Now you might think that a process of natural selection would have untied the Oldsmobile-shaped Gordian knot (i.e. 50 states’ worth of franchise laws say they can’t simply pull the plug and be done with it). Nope. In a story that somehow got culled from The Wall Street Journal website, Sharon Terlep provides a reality check. “NADA in December predicted about 900 dealerships — including small numbers of foreign-based auto makers — would go out of business in 2008. But Detroit’s auto makers alone lost more than that, company executives said this weekend. About 300 Ford dealers closed last year, while 401 GM dealers and 287 Chrysler dealers went out of business. Consulting firm Grant Thornton estimates about 2,500 of the nation’s 25,000 new vehicle dealerships will close in 2009. However, 5,000 would need to close to have a healthy level for this year’s anticipated level of auto sales, the firm said this week.”
At the moment, Chrysler reimburses a dealer for the cost of topping-up the gas tank on a car the dealer sells to a customer. No mas. That little tidbit was buried deep in the Detroit News story about Chrysler’s incipient “traveling roadshow”– a corporate effort to “convince” dealers to order more cars despite the fact that no one’s buying them and it costs money for the dealers to have vehicles sitting on their lots. We also learn that Chrysler has frozen the labor rate for warranty work, scheduled to rise in ’09. “‘I think they understand the place we are in and understand the need for all parties to put some skin in the game,’ said [former Toyota Prez and current Chrysler Co-Prez Jim] Press, who received a standing ovation during the meeting with about 400 dealers.” Somehow I don’t think it was that particular statement that earned Mr. Press the standing O. Perhaps it was his pledge to work for $1 until Chrysler paid back its four soon-to-be seven billion dollar loan. Just kidding. Unfortunately. Anyway, Chrysler’s set a target for channel stuffing– I mean, dealer orders…
California accounts for a huge chunk of America’s new car sales (at least for the transplants). And 13 other states (Arizona, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont and Washington) follow its vehicular emissions laws. Put them together and they account for just under half of all American new vehicle sales. And now, thanks to President Obama’s decision to grant California a waiver from federal emissions regulations, they’re going to call the shots for the entire U.S. automotive industry.
How reassuring. Not to taxpayers, obviously. We’re supporting this dead brand with $13.4b of our tax money– if you don’t include GM’s share of the Department of Energy’s $25b retooling loans (remember those?). Still, Saturn dealers must have been pleased as punch to hear The General claim– at The National Automobile Dealers Association (NADA) conference in N’orlins– that it will continue to build models for Re-Thinkers through 2012. Why “in some cases,” they’ll keep creating Saturnalia until 2013! After the meeting, GM Marketing Maven Mark LaNeve told Automotive News [sub] “We have all the current products funded. What we told them was the biggest issue is slimming down our product cadence. We don’t have enough finances to fund all these brands.” What new product cadence would that be? “I’m talking about vehicles with a fluid, uniform design theme, top-notch engines, dynamic chassis philosophy and a focus on detailed interior and exterior execution.” GM Car Czar Maximum Bob Lutz, “Product Will Reign,” 2005. Two years later, via Edmunds, “If this lineup doesn’t work, I’m out of ideas.”
TTAC’s posting policy is clear, and clearly stated (above the posting box): no flaming the website, its authors or fellow commentators. I’ve explained the policy many times; it’s not about promoting a particular point-of-view. It’s about maintaining sufficient civility to engender honest, informed and passionate debate. Scartooth’s comments may have been a bit short on the informed side of the equation, but they represented a perspective which he has a right to hold and share. A perspective that gives us insight into the opinions of an increasingly bewildered and vocal segment of the U.S. population. That said, when Scartooth stepped over the line with a couple of racial slurs (which we don’t allow as a matter of course), he was warned. When Scartooth dissed his fellow commentators (who dares trip trap across this bridge?), he was banned. I am not delighted with his departure. Nor am I happy about some of the responses to his comments– since deleted. But I will defend TTAC’s comments section with vigilance and discipline. Feel free to discuss our posting policy below, but know this: I’d sooner cut off comments altogether than allow outside contributions to descend into meaningless name-calling.
Driving Lexus’ top-of-the-line luxobarge, I couldn’t figure out why I liked it. Seriously. The LS600h L is everything I don’t like about a car: huge, heavy, amorphous, numb, floaty-drifty and over-complicated. And yet… there was something subconsciously seductive about the big rig. I asked my step-daughter Sasha why she’d taken a shine to the world’s most expensive hybrid. “Because I can sleep in the back,” she replied. Three minutes later she was sheltering in the arms of Morpheus. Narcoleptic Lexus meme confirmed. So I amped-up the critical analysis and noticed a slightly crashy edge to the suspension and some wind noise on the driver’s window. Ha! The Big L isn’t even a perfect, four-wheeled slug of Ambien CR. To reality check my impressions, I floored it. And backed off. And pressed a couple of buttons. And floored it. And backed off. And then it hit me: the LS600h L has the world’s finest automobile engine.
(Read More…)
Just when I thought I was too cynical for this world, the world proves that I’m not cynical enough. To wit: The Detroit Free Press headline proclaims “Chrysler jobs bank ends Monday.” Seems clear enough, right? The Congress demands that ChryCo end the United Auto Workers’ Jobs Bank (95 percent pay and full benefits for not working). ChryCo and the UAW end the Jobs Bank. Done. Sure. I’ve pointed out many a time that the UAW hasn’t given back anything without a quid pro quo. “Historic health care giveback” my ass. How about a couple of billion bucks up front? So anyway, I’m scanning this article, looking for the catch. And by God, here come paragraph five, six, seven, etc. “Chrysler told employees in a letter Friday that workers now in the jobs bank would be placed on ‘enhanced layoff,’ effective Monday, until a final agreement has been reached with the UAW. Workers going into enhanced layoff were advised to apply for jobless benefits and told they will keep medical, dental and group life insurance during that time. [UAW ChryCo Veep General] Holiefield advised members that the changes are temporary until negotiations are completed. ‘It is important that everyone understand that these provisions will only be in effect until such time as the mandates from the U.S. Treasury Department have been clarified.” So it ain’t really over ’til… the workers or Chrysler die. Oy.
“We haven’t quite figured out exactly between sports cars and entry-level cars, but it’ll be a very narrowed and focused brand.” So pronounceth GM NA Marketing maven Mark LaNeve at a “roundtable interview” attended by Automotive News [AN sub]. Here’s another surprise: GM can’t figure out to do with HUMMER, Saab or Saturn, either. “There’s nothing that can be said today that can calm the nerves of a Saturn, Hummer or Saab dealer,” LaNeve said. Or is there? “The studies of Saab and Hummer are very externally focused,” LaNeve said. Translation from AN (for the drunks and idiots amongst us): “That means GM hopes to sell them or form some type of partnership.” Mark his words. “We have production facilities that could be carved out; we could build the vehicles for somebody.” Any idea who that could be? Me neither. Oh wait; “The Swedish government is involved in the Saab review.” Is that the same Swedish government that declared it would be a cold day in Hell before they combo-nationalized Saab and Volvo? Chrysler and GM, on the other hand… It gets better, Saturn-wise.
One of the most ridiculous aspects of the Chrysler bridge to nowhere $7b bailout buffet: we still don’t know who owns the ailing American automaker. Yes, it’s Cerberus Capital Management, a company with its fingers in many pies, from guns (Remington) to paper (NewPage Corporation) to a chain of TV stations (Four Points Media Group) to bad loans (GMAC). That’s disturbing enough– given that the federal government is shoring-up a deep-pocketed, privately-held company. Worse (again): we don’t know the identity of “about 100 co-investors” who anted-up when Cerberus bought the domestic automaker from Daimler. Anyone remember Cerberus’ official response to Senator Corker’s question: why don’t you use your own money to bailout ChryCo? “No one is asking General Motors and Ford to pour their money in, and Cerberus has the same shareholders as they do— retirees, pension plans and endowments.” Yeah really? Who are they? Whose investments are we protecting? So I called Cerberus.
“Am I reading this right?” That’s the question posed by one of Our Best and Brightest regarding GM’s recent SEC filing [excerpted text after the jump]. The 8-K details the automaker’s purchase of GMAC shares. A purchase funded with your money (thanks to the Treasury Department). Here’s Uncommon Sense’s take:
1) GM is now the majority owner of GMAC
2) GM has to sell from over 50% to under 10% in 3 years — sounds like some cash
3) GM can’t try to influence GMAC until March of this year
My take: the more you monkey with a free market system, the worse it is for the consumer. Yours?
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