All this low-interest federal loans to Detroit (a.k.a. bailout) mishegaas started as a proviso of last year’s Energy Bill. That little codicil tabled $25b worth of loans for retooling automaking factories that were/are twenty-years or older (not-so-coincidentally all but two of which belong to Motown’s mavens). From there, the number under discussion suddenly zoomed to $50b. But all of this taxpayer-funded loot depends on getting Washington to A) OK the $25b B) increase it to $50b. Or, gulp, more. So, where’s the “extra” $25b going to come from? Nancy Pelosi! The House Speaker promised the American public [via Bloomberg] that funding for the loans will be included in the 2008 energy bill, in a second economic stimulus package, or in legislation that will temporarily fund the government until the congressional budget work is complete. “We certainly would hope it will be part of the supplemental at the end of the day,” Pelosi said. “It is very, very important. It is about jobs, jobs, jobs.” Well, that’s three jobs anyway (at, what, $16.6b each). What’s the hurry? “The automakers and their suppliers are trying to get the initial funding appropriated so it’s available in January,” Bloomie’s says. Or, say, before the presidential election, ’cause they don’t trust Obama OR McCain to honor their pledge to support the “loans” when bailout fatigue sets in, someone wants to balance the budget or… bankruptcy. Too cynical? If only.

The Newspaper does it again, exposing the hidden cash grab behind the blogger’s bugaboo: red light cameras. “In 2000 the Los Angeles County Metropolitan Transportation Agency signed a $3,497,960 contract with a Dallas-based firm, now known as Affiliated Computer Services (ACS), to issue pricey photo citations at seventeen railroad crossings. The county further ordered the company to keep a steady flow of tickets, or face corrective action… The contract sets as the baseline that the company must issue 25 tickets for every 100 alleged violations recorded by the machine. These recordings include any number of situations where either no real offense took place, or the driver cannot be positively identified — as required under California law. Nonetheless, if the total number of citations mailed falls under 25 per 100, the corrective steps must be taken to boost the number of citations mailed. In effect, this provides a direct incentive to the contractor to issue tickets regardless of whether the machine properly captured a true violation. There is no penalty under state law for a contractor to guess, for example, a license plate number when the image is unreadable.” As I don’t want to be responsible for mass blood boiling, I won’t tell you about the memo from a Roseville police chief telling his pencil pushers how to hide the hypocrisy. Suffice it to say, the safety argument doesn’t seem to be anyone’s primary concern in all this.

Just had a quick confab with TTAC’s Deep Throat. He makes an excellent point: against what can Detroit’s automakers secure their share of the $50b low-interest federal loans they seek? Ford’s mortgaged everything up to– and including– their logo. GM’s currently paying around $250m a month in interest payments on its current debt, pegged at $40.4b. (Some $9.1b in debt is coming due by January 2010, including $4.3 billion of long-term debt and a $4 billion note owed to a new trust fund for retiree health benefits.) The General has already sold off everything that isn’t nailed down, and much that was. Its foreign ops are its only remain asset of any value (and for how long?). Chrysler? They got nothing worth anything, except, possibly, the “value” of their Jeep brand. Quite aside from the question of what happens to the “old” debt (can the ailing automakers use the federal funds to pay off, pay down or even just maintain their existing loans?), what we’re looking at here is $50b of unsecured loans. In other words, if one or all of the automakers goes tits-up AFTER they suck on the taxpayer tit, John Q. Public will get nothing. Zip. Zilch. Nada. How great is that?

Well, they will be after they read Richard Sox’s article in Dealer Magazine. According the bottom blurbette, Sox is “a lawyer with the firm of Myers & Fuller PA, with offices in Tallahassee, Florida and Raleigh, North Carolina. The firm’s sole practice is the representation of automobile dealers in their quest to establish a level playing field when they deal with automobile manufacturers.” Now where have I heard the term “level playing field” before?” Anyway, if HUMMER is Gox, Sox has got his Gox box socks. “If GM were to give up on the franchise and simply discontinue the manufacture of Hummer vehicles, then as I have described in this column several times before in discussing Pontiac, Buick and Mercury, among others, dealers will have a claim against GM for wrongful termination under the franchise laws. Hummer dealers who either recently acquired the franchise or recently constructed a Quonset hut facility have easily-quantifiable damages resulting from the termination. If GM’s handling of the termination of Oldsmobile is any indication, with the right pressure, GM will settle with dealers that fall within this category.” Maybe after the federal bailout…

CNN reports that The National Highway Traffic Safety Administration (NHTSA) has issued a second recall for Ford; Lincoln and Mercury vehicles that may (more or less) spontaneously combust, thanks to a defective cruise control part. “NHTSA remains concerned that many owners have yet to respond to multiple safety defect recall notifications from Ford. Of the 12 million vehicles involved in the recall, nearly five million have not yet been brought to Ford for repair. The vehicles contain a defective cruise control switch that could lead to a fire at any time, even while the vehicle is turned-off, parked and unattended.” NHTSA promises that “repair parts are immediately available.” That’s a step-up from the initial recall, where a lack of parts meant that many Ford dealers were simply disconnecting the cruise control switch. [Click here for a NHTSA Press Release with a full list of vehicles involved.]

Detroit refuses to contemplate the only possible savior for their broken businesses: bankruptcy. Unless Chrysler, Ford and GM use Chapter 11 protections to kill products, spike brands, close factories, “renegotiate” labor agreements, terminate dealers and generally reinvent themselves, they will continue to die by a thousands cuts. The automakers’ pride– and their belief that “no one buys cars from a bankrupt automaker”– prevents this radical move. So, instead, they’re pursuing a federal bailout. Only they don’t call it that. And therein lays the seeds of their final destruction.

Thanks to epic leasing losses, bad loans and Chrysler’s declining market share, Chrysler Financial has been taking a beating on the Street, with a capital B. A month ago, ChryCo Financial struggled to re-new its loans on Wall Street, only managing to raise $24b of the $30b it wanted to stay in business. It now appears that the conditions of the re-fi include the end of the leasing (done) and new terms for Chrysler dealers. Automotive News reports that the lender has told dealers it will jack-up their floorplan interest rates by an unspecified amount and force them to pay off older, unsold vehicles. More specifically, “Dealers will be required to pay monthly fees on new-car inventory 180 days old and older. The fees start at $10 per unit, go to $15 at 270 days and $25 at 360 days. 2008 and older units more than 360 days old must be paid off at 10 percent a month. All used cars more than 180 days old must be paid off.” This is bad news for Chryco dealers; they won’t be able to get alternative wholesale financing elsewhere on better terms. It also means they’re going to be very careful on inventory. And that’s bad news for Chrysler’s factories (i.e. Chrysler). Other captive floorplan lenders, like GMAC, may soon follow suit. All of which means its hardly likely sales have “bottomed out,” although it’s for sure that dealers will have to do something to get rid of old inventory. As in price cuts. 

The internets have been abuzz with news that anti-environmentalists have vandalized Toyota Priora in the Golden State. Autobloggreen dutifully reports one hybrid flambée in July, and vaguely alludes to seven Priora attacks back in April. The site ends its blog with a condescending if PC plea: “Come on, people, this is ridiculous. Just because some SUV and some hybrid drivers act like jerks, that’s no reason to get violent. Let’s just live and let live.” Tracing the story back to Edmunds Inside Line, we learn “Violence Against Prius Hybrids Hits All-Time High.” Yes, “In the most brutal of a spate of attacks against the Japanese import this year, investigators concluded that a fire that consumed a newer Prius on a residential street in Los Angeles seven weeks ago was the work of an arsonist.” While the April outbreak seems real– “All of the [seven] attacks occurred at night while the cars were parked and unoccupied. Weapons included large rocks, bricks, and a motor vehicle used to ram a Prius”– are we sure there were no other vehicles involved? And connecting those dots to a single incident some three to four months later is a bit of a stretch. Common sense suggest that any coordinated “anti-green” group would claim responsibility for their actions. Maybe this last one was insurance fraud, or a neighborhhod vendetta, or… a technical glitch. Perhaps the police/Toyota suppressed vital information. Anyone care to speculate?

No, really. The Detroit News says that The General didn’t mean to release snaps of its plug-in electric gas hybrid Chevrolet Volt. GM blames “human error” for the plug-in’s premature publicity– I mean the most recent premature publicity. “Those were put up in error and taken down quickly thereafter,” Chevrolet spokesman Terry Rhadigan said. “It was not intentional.” What, putting them up or taking them down? I kid. Marty Padgett, TTAC’s good friend over at The Car Connection got the scoop. And he ain’t buying the GM “oops we did it again” line. “I think they’re getting very good at playing the game of public relations,” Marty Padgett told the DetN. “Everyone is interested (in the Volt), so why not let some teases float out there?” Because the Hail Mary is more than a year away from production? Here’s a more interesting question: even if it’s true, that the Volt snaps were unintentionally leaked, why is GM admitting it? Like we need something else to convince us of their institutional incompetence?

Last Friday, at the celebration of the Model T’s 100th anniversary, Bill Ford kept referring to the $50b federal loan guarantee proposal in the most oblique manner possible. “I’m very happy that both presidential candidates have endorsed this,” Ford said, as reported by the The International Herald Tribune. “The leaders of both parties are embracing this as something that they believe in, so that’s got to help us.” Billy’s once-heir apparent Mark Fields shared the non-nomenclature: “This is not about benefiting Wall Street like maybe some of the other actions that have been taken. This is benefiting Main Street, the working men and women. The auto industry is part of the backbone of the U.S. economy.” OK, so that brings us to today’s article in Automotive News [sub], where Ford CEO Alan Mulally has announced to the world that FoMoCo is “ready” for the bailout loans. “The only conversation we have now is, what is the right way to finance, and what is the right provision for deciding which companies participate,” Mulally opined. “We are very positive.” And that’s it. No wait. “I absolutely don’t think it’s a bailout.” And “We are in very good shape as far as liquidity.” That said, Mulally stressed that “current conditions” are the toughest he has seen in his nearly four decades in U.S. industry. Really? C’mon. I thought Boeing was on the ropes when Big Al took over. And what about the LAST energy crisis? And if liquidity’s so great, why borrow from the feds? These guys want to play it both ways: we need the money and we don’t need the money. That’s so annoying.

I never considered the California Air Resource Board (CARB) a motivating force for Chrysler’s Viper model sale– until I read this WardsAuto story. “The new minimum CAFE standard of 35 mpg (6.7 L/100 km) in 2020 and additional pressure from California and 15 other states to limit carbon dioxide is part of what may force Chrysler LLC to jettison its Viper high-performance model,” Wards reported after a chinwag with GM Car Czar Bob Lutz. “‘Setting lower CO2 limits would equal setting CAFE at 43 mpg (5.5 L/100 km),’ Lutz says. ‘This is why the sale of the Dodge Viper by Chrysler makes sense, because anyone selling fewer than 50,000 vehicles annually would be exempt (from fuel-economy requirements).'” The Car Czar’s got a point! OK, OK, so California bill AB1493 sets a fleet exemption of 60k vehicles. And the EPA has denied CA the waiver they need to implement the law. And the real– and really bizarre– threat is that each state would have different fleet-wide requirements, depending on the model mix in that state. Never mind. “So if someone else bought Viper,” Bob bitches. “They could sell to capacity, but Chrysler couldn’t. This is why we are concerned about Corvette.” Bob blames the hypothetical threat on hypocritical Hollywood environmentalists. “The reason California set the exemption for less than 50,000 units is that it would mean the Hollywood folks could keep driving their Lamborghinis and Ferraris. Porsche could sell 11-mpg (21.4 L/100 km) Cayennes, but we couldn’t sell 20-mpg (11.8 L/100 km) Chevy Tahoes.” [Thanks to KixStart for the link.]

Wall Street Journal scribe John. D Stoll gets it right: if HUMMER can’t make it in Las Vegas, it can’t make it anywhere. The fact that a Vegas-based HUMMER dealer is now as dead as a dodo indicates that the entire brand faces the same non-future. “This closing is notable because of where it is taking place and who is pulling the plug. It is, after all, one thing for enviro-friendly people in San Francisco–another city that recently lost a key Hummer dealership–to shun the brand. It is entirely different when Sin City decides the vehicles are too excessive. [Dealer owner Dan] Towbin said Las Vegas is a custom fit for Hummer. ‘It’s all about bling and it’s in the desert.'” It’s also about price (high), demand (low), resale (horrendous) and incentives (Olympian). In fact, how’s this for a parenthetical aside? “(Towbin says he was offering $6,000 in incentives, not including GM’s employee-pricing discount, hurting profit margins.)” Followed by “Hummer discounts represent 22.6% of the price of the vehicle–the highest in the industry, Edmunds.com says. And still Hummer sales are down 47% this year, the largest decline of any brand, according to Autodata Corp.” So, will anyone take this three-ton turkey off of GM’s hands? How’s that old joke go? For a nickel I will.