Down the rabbit hole our tax money goes, as a “merger” has become a “rescue.” Reuters reports General Motors and Cerberus Capital Management have asked the U.S. government for roughly $10b in an “unprecedented rescue package” to support a merger between GM and Chrysler, according to “two sources with direct knowledge of the talks.” But don’t worry, because only $3b of that would buy Uncle Sam preferred stock in the merged automaker, “according to one of the sources, who was not authorized to discuss the matter publicly.” You may have qualms about government ownership of a large slice of the American auto industry, but Reuters writers are down with that. “It would… give U.S. taxpayers a large stake in the turnaround of a struggling auto industry that employs over 350,000 American workers and is credited with supporting employment for another 4.5 million in related fields.” So what of the remaining $7b?
Posts By: Robert Farago
News flash! Automotive News [AN sub] finally talks to someone on the record! And it’s no less a personage than GM Marketing Maven Mark LaNeve, the man in charge of managing The General’s declining ad budget. To celebrate the occasion, AN’s crack reporters resort to the lazy journalist’s best friend: Q & A. The resulting edit begins with the usual “these grapes are not sour, there must be something wrong with your taste buds” waffle. LaNeve would have us believe that the new media is so wicked cool GM doesn’t really need to spend as much money as it did before the last of the corporate cash pile went up the chimney. “When a lot of the digital technology was new, all marketers were learning. As you learn, you get more efficient and you spend less money to get the same results, the same impact, the same reach in the marketplace. That is why I am comfortable with some of the cuts we are making. We are a whole lot better at search, at digital, at working with our third-party partners like Edmunds.com and The Truth About Cars.” Just kidding. About TTAC. Anyway, AN raises the spectre of GM’s octo-brand stretch. Pah! “We prioritize the launches. The key launches are the Chevrolet Traverse, Camaro and Equinox. Cadillac has the CTS wagon, CTS-V series and CTS coupe on the horizon. And the Buick LaCrosse and GMC Terrain are two big launches.” THOSE are GM’s priorities? My children’s children’s children’s tax money is so dead. More revelations after the jump.
TTAC called this the moment we heard that Uncle Sam was allocating your taxes– I mean your children’s children’s children’s taxes– to bail out the banker boyz from the sub-prime mess they created. Still, it’s strange to hear GMAC– the lender that poured tens of billions of dollars into GM’s coffers– admit they need to suckle on the federal teat suckle on the federal teat. “GMAC has been in discussions with the government on a multidimensional level,” said GMAC spokeswoman Toni Simonetti. “We are interested in exploring options that are available to us through the federal government’s tool kit that was implemented under the new legislation.” To its credit, Automotive News [sub] asked GM’s Dr. Who fan what form this “assistance” might take. “Simonetti declined to say whether GMAC wants to sell troubled assets to the government or to sell a stake in the company to taxpayers.” Oh yeah, I want a piece of GMAC. But then I like lighting Franklins on fire. Meanwhile, “Last week, Ford Motor Credit Co. said it had registered with the Federal Reserve to participate in a new program aimed at easing the sale of commercial paper, which companies use to raise money for day-to-day operations. Ford Credit has not decided if it will take part in the program.” That’s news to me. Or, you know, not.
Automotive News [AN sub] reports that GM is giving workers an extra week off over the holiday period at its Detroit-Hamtramck (Cadillac DTS, Buick Lucerns) and Bowling Green, Ky. (Chrevrolet Corvette, Cadillac XLR) plants. And no wonder. “As of Oct. 1, GM had a 95-day supply of the Corvette and a 215-day supply of the XLR. It had a 70-day supply of the Lucerne and a 50-day supply of the DTS.” Actually, a 50-day supply is quite good; the industry considers 60-days the sweet spot. But even so, the additional week off indicates the “pull” for all four vehicles is weaker than a snail darter on a deep sea rod and reel. A fact which AN confirms. “Through September, U.S. sales of all four of the vehicles have fallen from the first nine months of 2007: Corvette sales are down 9.5 percent to 23,384, XLR sales are off 26.3 percent to 1,039, Lucerne sales have declined 32 percent to 43,839 and DTS sales have dropped 32.4 percent to 25,790.” Whether intentionally or not, for once, GM’s spinmeisters offered a straighforward assessment of the reason behind the slow-down. “The market is telling us we don’t need that many cars,” GM spokesman Tony Sapienza admitted. Roger that. So to speak.
Not far to go now. MarketWatch reports that “General Motors Corp.’s creditworthiness came under fire yet again on Monday, with Moody’s Investors Service slashing its debt even deeper into junk territory at Caa2, three rungs above the lowest possible rating.” Ready for some carefully-couched euphemistic double talk? You know you want it. “Moody’s cited its expectation that the erosion in the U.S. auto sector that ‘will severely outpace’ GM’s ability to respond adequately.” More directly, analyst Bruce Clark reckons the downgrade reflects “the risk that despite all of GM’s business restructuring and liquidity raising efforts to date, the magnitude of cash outflows due to ongoing operating losses, debt repayments, and other uses will consume the company’s available cash during 2009.”
The Detroit News reports that the White House wants the feds to cover GM, Ford and Chrysler’s bad paper. “White House spokeswoman Dana Perino said that GMAC, Ford Motor Credit and Chrysler Financial could be part of the Trouble Asset Relief Program — the $750 billion Wall Street rescue package approved by Congress. ‘It’s possible that some of those financing arms could be a part of the rescue package — the TARP, as they call it at the Treasury Department. So that’s why — that’s one of the reasons Treasury has been in contact with them.'” (The other: to buy 5k Trailblazers on the cheap.) Meanwhile, The Energy Department named a senior career U.S. Treasury Official named Lachlan W. Seward to oversee the Department of Energy’s $25b low-interest-for-20-year-old-or-more-auto-plant-retooling loan program. (Either that or buy Siberia from the Russians.) Parenthetical asides aside, it looks like TTAC’s Ken Elias was on to something. Something that smells BAD. “People familiar with the matter said General Motors Corp. chairman and CEO Rick Wagoner was in Washington last week for meetings with U.S. Treasury officials. GM spokesman Greg Martin declined to confirm or deny the visit. Bloomberg News reported that GM had offered to swap an equity stake in the company in exchange for federal help.” Looks like I was right about the race against bailout fatigue, as well.
Toyota outsold GM globally last year. Of course, GM took the low road and claimed they were still number one by dint of their minority partnerships with Chinese automakers. This year, ToMoCo will lift the crown as the world’s largest automaker– joint ventures or no. Anyway, here in the real world, that gig’s been up for a while. More than a year ago, GM CEO Rick Wagoner declared that Toyota’s title-taking didn’t matter. OK, it did, a bit. But it really didn’t; ’cause we don’t have time to worry about that shit [paraphrasing]. After all, we’ll be profitable by…. uh… hey! Is that an SSR? Well, Red Ink Rick’s going to get another chance to play spin the news. CNBC’s Phil LeBeau reports that Toyota’s three U.S. brands could outsell GM’s eight brands in October. “This week is not only the last one of the month. It’s also the week that could determine if GM holds on to the top spot in monthly auto sales in the U.S. Initial reports of October retail auto sales show Toyota outpacing GM and Ford. If that trend holds for the full month, we could be looking at the day many in Detroit have feared for years.” Even if GM doesn’t, Phil worries about the psychological impact of the smack-down.
As a website that started a General Motors Death Watch on April 3, 2005, and published its 208th episode this morning, TTAC is no stranger to the idea that GM has been heading for a Chapter 11 bankruptcy for quite some time. We’ve also reported that The General has refused to contemplate the possibility, nay, utter the word “bankruptcy” for lo these many years. About a month ago, we brought this Voldemort problem to our reader’s attention. And now GM Car Czar “Maximum” Bob Lutz brings it to ours [via the Detroit Free Press]. “Bankruptcy for GM certainly is not an option,” Lutz announced at the Public Relations Society of America. “The board has never talked about it… It’s not something that we consider would be constructive or would solve any problems for anyone.” While you’d expect an ex-marine aviator to tell the world “failure is not an option,” the idea that GM’s Board of Bystanders are sleep-walking towards disaster is as predictable as it is lamentable. [thanks to Polishdon for the link]
We now have it confirmed from two– count ’em two– inside sources close to the story familiar the matter who can’t speak publicly for fear of getting their asses canned: GM is shutting off voicemail for certain employees and contractors. One anoymous person who wishes to remain anonymous but really does exist (or so he thinks) estimates that about half of those working in GM’s RenCen HQ will be affected, mostly in manufacturing. “A lot of it had to do with redundacies between office phones and GM provided smart phones.” Although, it should be said, not all.
Bloomberg reports that the American Revolution may have to continue (start?) without America’s small town atheletes. “Chevrolet will stop promotions tied to college sports and only advertise during games, said Philip Caruso, national promotions manager. The brand will also eliminate partnerships with some of the smaller sports such as skiing, he said.” When you’re shutting off escalators and limiting voice mail to save some money, excising a big chunk of change like this makes sense. That said, check this out. “The economy is making us re-look at everything we do,” Caruso said in an interview after awarding Major League Baseball’s Roberto Clemente Award at the World Series in Philadelphia. “It’s cutting back mainly spending in the sports area and promotions as a whole, and then reallocating in some of those areas that help grow our business.” So, does that mean the previous ad spend wasn’t helping them grow their business? D’oh!
I agree. Merge in haste, repent at leisure. Or, as Maximum Bob puts it to The Detroit News, “There is no timeframe at all for having anything definitive.” This said following Lutz’ speech at the “2008 Public Relations Society of America International Conference” at the Renaissance Center. The what? A PR conference? Oh, no spin there, then. I mean, is there some timeframe to have something not so definitive? Meanwhile, we so totally believe that the “sources close to the deal” quoted by Mowton’s hometown paper aren’t GM itself. The DetN reports that these SCTTD have previously told them that “GM and Chrysler want to get a deal done before the presidential election on Nov. 4, when politicians may be more receptive to requests for federal aid to complete a merger.” I make that “Who’s your Mama, Obama” by rapper 2 Big 2 Fail. “Lutz would not comment on reports GM has approached the U.S. Treasury for help financing a deal with Chrysler owner Cerberus Capital Management LP.” In other words, MB doesn’t know, doesn’t care (golden parachute at the ready), doesn’t remember or ain’t sayin’. We’re still hearing that the deal’s going down on Halloween. No, really.
In a world of wild ass rumors, the four door everyman’s supercar is King. Maybe. No matter how you look at it, you gotta wonder what these Nissan/Infiniti guys are thinking. Pistonheads says “Unconfirmed reports from Japan say Nissan engineers are actively evaluating a four door built on a stretched version of the GT-R platform, with a view to introducing a new flagship to the luxury Infiniti brand in 2011.” New flagship? So Infiniti GT-R sedan replaces the previous, now extinct Q-ship, slots above the M-people, pals around with the G-men and lives happily ever after? And if that’s not enough to make Infiniti a success in Europe, PH reckons the new GT-R car will be horsepower-deficient. “Sources suggest an output of around 420bp is on the cards, significantly down on the output of European super-saloon rivals. However, with the GT-R’s intelligent ATTESA-ETS AWD system and six-speed dual-clutch transaxle carried over, it will be interesting to see how the lack of outright muscle translates into track times – although Nissan insiders have apparently conceded that any Infiniti flagship will be tuned for luxury before ultimate performance.” Right, ’cause GT-R means luxury. Go figure.
As Ken Elias points out in his latest General Motors Death Watch, GM is asking the feds for money to fund their merger (now buyout?) plans for Chrysler. The Wall Street Journal [sub] tells the tale, highlight analyst Ron Lache’s “come to Jesus” moment re: the automakers’ cash conflagration. “”Without external intervention, from consolidation or government assistance, we expect GM to reach its minimum cash position in under 12 months,” Deutsche Bank auto analyst Rod Lache wrote last week. In an interview, Mr. Lache added that Chrysler is also running dangerously low on funds. “We believe Chrysler is in the same position. It’s either August 2009 or December 2009 they run out. Both have a limited runway.” OK, so, now, bring on the anonymous source! “GM and Chrysler ‘are basically waiting on the government,’ said one person involved in the merger talks. ‘The three choices are bankruptcy, a big intervention from the government or some big deal like this that has massive cost-cutting possibilities,’ this person said. ‘That’s it. And even the big deal may require government help.'” Or… the feds could do nothing. You know, theoretically. But wait! It gets worse!
The worm has turned. The unabashed adulation given the Tesla Roadster and its wide-eyed progenitors has turned into something altogether vitriolic. In other words, payback’s a bitch. Even before the first demo Tesla prototype hit the streets, TTAC called on the media to stop the love fest and wait and see if the company’s product lived-up to the hype (250 miles to a charge! Recharge in three hours! Ready by spring!) The “you can only ride with us but not drive or test” press teasers set off ALL our alarm bells. When Tesla spinmeister Daryl Siry withdrew his offer of a TTAC test drive, we knew the company was full of shit (to use the technical term). In fact, the Roadster STILL HASN’T BEEN FULLY INDEPENDENTLY TESTED FOR SAFETY, RANGE AND RECHARGE TIMES. But the unwinding process has begun. And this shot across Tesla’s bow, via Tony’s Climate Change Blog, could leave a mark.
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