Last Thuesday, Automotive News [AN, sub] was busy towing [sic] the GM party line, suggesting that the U.S. new car market had reached its nadir (not Nader) in August. TTAC immediately called bullshit. And now AN is doing the same, to themselves, backpedalling so furiously they just might achieve reverse traction. “Has the mix been fixed?” Amy Wilson (and pals) asks, redundantly. “Are the truck behemoths really back? And has the slim-profit small-car craze peaked? Bean counters, beware. It ain’t over till it’s over. Small-car sales were constrained last month by low inventory levels, and don’t forget that gasoline — while cheaper than it was — still costs more than $3.50 a gallon. And although full-sized pickups posted their highest sales and industry share month of the year in August, manufacturers had to shell out. The average full-sized pickup incentive was $5,723 per vehicle last month, Edmunds.com reported. That’s the highest monthly pickup incentive since Edmunds began tracking the data in January 2002.” And then it’s back to the same old spinmongery, from Ford and, of course, GM’s Marketing Maven. “At some point, gang, the market bottoms,” said Mark LaNeve. “Nobody knows when the hell it is — me especially. I’d like to think it was June and July, and we’re starting to crawl our way out of this thing.” I’m sure he’d like to think that. The question is, is it the truth? Hopefully, this article marks AN’s resumed pursuit of same.

If you believe Iran will abandon its nuclear ambitions in the face of economic sanctions, there’s nothing to see here. If you believe there’s no way deny Iran The Bomb short of a military strike, the question becomes who and when? It’s hardly likely the Bush administration will want to engage in yet another military “adventure” before the next guy to accompany the football takes office. On the other hand, Bernard Baumohl thinks the Israelis want to get this thing done before Barack or John assumes the position (so to speak). ABC News reports that the Economic Outlook Group’s Chief Global Economist says a strike would disrupt oil prices (surprise!), one way or another. “It all depends on the success of the Israeli strike. If it was a quick, successful strike and Iran doesn’t block the Strait of Hormuz — a key oil route in the Persian Gulf — Baumohl sees a quick spike in oil prices and then a steady decline. He says that within three days of the strike oil could costs $175 to $225 a barrel. The record of $147.27 a barrel was reached back in July and oil today closed at less than $108. But within three months the price would fall because Iran’s nuclear weapons program would be destroyed or crippled. Oil would cost $70 to $85 a barrel. Of course, Baumohl has a more-dire scenario with oil prices between $200 and $300 a barrel. This happens if the strike fails, triggers a bigger war and the flow of oil is disrupted. In that case, the price of gas in America would climb to $5 to $7 a gallon.”

New York Times Op-Editorialist Dr. Kent A. Sepkowitz is an expert in infectious diseases and something of a professional essayist. Having dispensed with the “inexact science of penis length,” Sepkowitz is out to stop speeders. As you’d expect, he begins with a bit of statistical manipulation, or more, precisely, an accusation of same. “In Texas, in 2005, 3,504 people died in a traffic accident; 1,426 (about 41 percent) were considered speeding-related. In sharp contrast, for Florida, 3,543 died yet only 239 were considered speeding-related — about 7 percent. Arkansas, Georgia, Iowa, Kentucky, Louisiana and New Jersey, among other states, also report rates well below 20 percent. This variation is not just shoddy government work. With alcohol, for example, the 39 percent national rate varies only by a whisker when examined state to state (except for Utah’s admirable rate of 13 percent).” The bottom line for this non-expert expert: there ought to be a [new] law, ’cause speeding is dangerous and immature. “The technology to limit car speed has existed for more than 50 years — it’s called cruise control. In its common application, cruise control maintains a steady speed, but a minor adjustment would assure that vehicles, no matter the horsepower, never go past 75 miles per hour. This safety measure should be required of every new automobile, the same as seat belts, turning signals, brake lights and air bags. Sure, it would take us longer to get from here to there. But thousands of deaths a year are too great a cost for so adolescent a thrill as speeding.”

Ford, GM and Chrysler want $50b worth of low-interest federal loans. At the moment, the loans are specifically restricted to adapting 20-year-old manufacturing plants to build fuel-efficient cars. The money is, in the parlance, “earmarked.” Detroit would like you to believe that the limited use makes the moola a “green” initiative rather than a bailout. But it’s obvious enough (if you think about it) that any money spent re-tooling factories saves The Big 2.8 money that they would have spent re-tooling factories. Which can then be spend on whatever they damn well please. And that brings us to the inconvenient truth that a lot of Detroit’s products, and billions of dollars worth of parts that make their products, don’t come from the U.S.A. In the pre-election shuffle, Barack and friends are making noises that the federal loans will protect American jobs. But aren’t The Big 2.8 complicit in eliminating American manufacturing jobs? And if it’s all about jobs, well, there are roughly 400k Detroit auto workers. Why not just give the workers an option of a $125k buyout apiece, courtesy of Uncle Sam? Or spend the $50b on lowering barriers for other automakers to build in the U.S. Seriously. What’s your idea for a better way to spend this money to create/protect American automaking jobs?

“Black Lake” is a United Auto Workers (UAW) owned retreat near Onaway. The Detroit Free Press‘ Tim Higgins describes the golfing part of the 1000 acre for-profit (in theory) center. “UAW members and retirees get a 20% and 30% discount, respectively, on greens fees, according to the course’s Web site. Golf with a cart on a summer weekend costs $85 for 18 holes. The course offers five tees on nearly every hole to reflect a golfer’s skill. The par 72 course can play from 5,058 yards to 7,030 yards.” Now that it’s been revealed that the entire facility has lost $23m of members’ money over the last five years– not including the $6m up-front cost for the golf course– union officials are busy talking-up the education side of the endeavor. “The UAW family education center is an integral part of our union. It provides very important training and education activities for our members,” UAW spinmesiter Roger Kerson told the Freep, who added that “he declined to talk about specific operation numbers or plans for the future.” You want irony? “UBE’s management of the education center has generated revenue of about $30 million over the past five years — and net losses of $20.5 million. The operations were hit hard last year by a $5.9-million payment to an employee pension fund. And from 2003 to 2007, revenue at the education center dropped by 18%.” [NB: Look for more stories of Detroit’s perk pork in the run-up to the federal bailout.]

When we last checked-in with Washington Post columnist Warren Brown, he was showing the Cadillac Escalade Hybrid some love. Before that, he was predicting a Detroit comeback. And now Warren’s pimping for a federal bailout. Although we salute the WaPo car scribe for calling the federal loans by their real name, his argument for the 50 bil is equal parts belligerent and bizarre. For one thing, Warren blames his Capitol Hill brethren for The Big 2.8’s misery. “American politicians and regulators enabled Detroit’s profligacy. The same politicians who made a big show of demanding that Detroit produce more fuel-efficient cars and trucks did next to nothing to create a market for their sale. In fact, federal economic policy, deeply soaked in cheap gasoline, did just the opposite. By mandating more technical fuel economy without adjusting the price of the fuel consumed, federal policy lowered the cost of driving in the United States and, in turn, helped increase consumer demand for bigger vehicles and more horsepower. It was all good . . . until a meteoric rise in gasoline prices ended all of that.” Yes, well, Warren’s a moral relativist (as are several of our TTAC commentators). He believes that if we bail out Bear Stearns and Iraq we should bail out American manufacturing. Someone should tell Warren that the domestics receive plenty of federal, state and local tax breaks for their factories, just like the transplants. In case he forgot. [thanks to inept123 for the link]

Frank’s preparing to tackle the new GM website, GMfactsandfiction.com. Meanwhile, I was amused to find a link in the right hand column sending me to an August 1 Wall Street Journal Marketwatch blog. Ostensibly, GM wanted me to read a remark by house spinmeister Tom Wilkinson’s defending The General’s honor. [Quoting yourself is like the joke about the falling American tourist trade in post-911 Paris: the waiters were reduced to insulting each other.] But I got caught up in the blog post itself, filled as it is with its own set of facts. Or perhaps we should call them inconvenient truths?

“Shares of General Motors are down 6.2% after the company reported a staggering $15 billion loss for the second quarter, as a result of declining sales, losses on leases, lots of debt, high energy prices, and just about anything else that could go wrong with a company.

Here’s a list of some numbers to put the earnings report in perspective:

• $15.471 billion: GM’s loss for the entire quarter.
• $11.68 billion: ExxonMobil’s profit for the quarter.
• $6.267 billion: The market capitalization of General Motors as of this morning, according to WSJ.com.
• $7.512 billion: The market capitalization of Clorox, which reported net income of $158 million for its most recent quarter.
• $3.6 billion. GM’s cash burn during the quarter, according to Citigroup, who said that “weak fundamentals, low visibility and inherently slow company turnarounds stress the importance of liquidity.”
• $19.356 billion. GM’s cash on hand as of the end of the quarter.
• $56.97 billion. The total stockholders’ deficit as of June 30. That’s up from $3.77 billion at the end of June 2007. And yet, people continue to try to rally the shares.
• $4.55 million. The cost of insuring $10 million in GM bonds against default for five years (not including a $500,000 annual additional cost). That’s up from $4.2 million Thursday, according to Phoenix Partners Group.
• $16.91. S&P 500 earnings per-share before including GM.
• $15.29. S&P 500 earnings per-share for the second quarter, including GM’s GAAP results. GM’s earnings reduce S&P per-share earnings by 9.5%, according to Howard Silverblatt, equity index analyst at Standard & Poor’s.
• 21.3%. GM’s U.S. auto sales market share, for the year-to-date.
• 28.8%. GM’s U.S. auto sales market share, as of the end of 1999.”

The Connecticut Police’s press release on the recovery of this stolen 1958 250 PF Ferrari reveals that the po-po bought its owner’s Schultzian story (I know NOTHING) hook, line and sinker. Of course, the car’s owner and Bear Stearns heir’s friends in high places had nothing to do with it. Still, Paul Hallingby’s insistence that he was unaware of the show car’s dubious provenance is a PR nightmare. If Hallingby wasn’t criminally complicit, he was a silver-spooned rube. You might suggest that the fact that Hallingby was trying to sell the vehicle for ten percent of its $4m – $5m market value indicates a certain “awareness” (as intimated by my old college chum Bill Henderson at The New York Post). But I couldn’t possibly comment. In any case, full marks to the Ferrari’s Swiss owner, who refused to take an insurance payout when the car disappeared in Spain. His belief that his rare, beloved Ferrari would one day show up intact has been vidicated. Now, if only someone would be charged with the crime…

Democratic presidential hopeful Barack Obama is running the above ad, “Revitalize,” in Michigan. Obama hopes to win votes in the key battleground state by accusing of Senator John McCain of “selling out” Michigan workers. In other words, the republican nominee didn’t support $50b in low-interest federal loans. Before he did. Of course, neither that big ass billion dollar number nor the specifics of who might get what are part of the Obama spot. For his part, McCain said… nothing. Automotive News [AN, sub] reports that the Senator from Arizona brought his freshly-minted (and minty fresh) Veep babe to The Wolverine State for a 35-minute appearance. “Surprisingly, the question of whether the government should support General Motors, Ford and Chrysler with guaranteed loans for r&d efforts did not come up during the appearance.” Hey! What about you guys asking? Anyway, John’s nothing if not a seasoned politician. “We may not agree from time to time on a specific issue until I reverse my position,” McCain said. “But I will promise you this: I will never let you down and I will always, always put my country first.” Uh-oh.

Even before GM spun off parts maker Delphi in 1999, critics questioned the new company’s viability. Delphi depended on GM’s business for its survival. While bean counters talked-up diversification, new markets, etc., the 800-pound General in the room wasn’t going away– especially with all the GM-obligatory Delphi-related job, pension and wage benefits secured by the United Auto Workers. And GM’s need for parts. Since then, Delphi done well abroad and lost money hand-over-fist in the U.S. And so Delphi failed, filing for bankruptcy protection in 2005. But here’s the thing: GM wants Delphi to survive as is. The money they’re proposing to pour in– $650m loan agreed, $300m more proposed– seems a good money after bad mistake. Until you realize that a semi-viable Delphi guarantees the ailing automaker a supply of mission critical parts at a price they like. That’s right: $950m (and the rest) is less expensive than paying full freight for Delphi’s parts, which cost GM $3.12b in the first half of 2008. If Delphi goes into Chapter 7 (liquidation), GM’s either going to have to buy out the factories that make their stuff (with what money?) or face a more “realistic” pricing structure from the factories’ new owners. What’s good for GM isn’t good for Delphi’s investors and creditors, and don’t they just know it. “A group led by Highland Capital Management LP said in a letter to Delphi’s board of directors that the new financing by GM would benefit only GM while stripping worth from creditors imperiled by Delphi’s continuing massive losses in North America,” Automotive News [sub] reports. And there you have it. Until you don’t. Delphi’s Chapter 7 is coming; it could well be the straw that breaks GM’s back.

Hey! Here’s an idea! While we wait for the whole country to switch to E85 (and Mexicans to renew their tortilla riots), let’s double the percentage of ethanol in “normal” U.S. gasoline from 10 percent (E10) to twenty percent (E20). Sounds great! You know; if you’re an ethanol producer. And that’s as good a description as any for the majority of the people who read Ethanol Producer (EP) magazine. In the none-too-subtly titled “Overcoming E20’s Objections,” the September issue of that august journal identifies ground zero in the campaign to increase gasoline’s ethanol content by 100 percent. “In 2005, Minnesota passed unprecedented legislation requiring that the state’s fuel consist of at least 20 percent ethanol by 2013. The state already enforces an E10 mandate and is home to more than 300 E85 fueling stations. To raise total fuel consumption to a level of 20 percent, the state has two choices—consume enough E85 to total 20 percent of all fuel consumed or convince the U.S. EPA to grant a waiver to the Clean Air Act and allow E20 to be used in all gasoline.” Can you guess which way they’re going? To that end, The Gopher (It) state is already researching E20’s effects on ethanol industry profits auto engines. To scribe Kris Bevill’s credit, problems are identified– plastic corrosion, catalytic converter temperature increases, lost mpgs– before the expected coat of gloss is applied. Bottom line? “As far as the national initiative is concerned, we’ve started the ball rolling in that direction,” “marketing specialist” for the Minnesota Department of Agriculture Mark Groschen told EP. “If it didn’t happen until 2015, well that would still be progress wouldn’t it? If we got 15 percent instead of 20 percent—15 is more than 10. We’re just trying to make progress.”

The Washington Post reports that Uncle Sam is set to take yank the chain of Fannie Mae and Freddie Mac. “The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives, and use government funds to prop them up, government officials told the two companies yesterday, according to sources familiar with the conversations.” It’s a bailout, but not as we know it. “Under the plan, the federal government would place the firms in a legal state known as conservatorship, the sources said. The value of the company’s common stock would be diluted but not wiped out while the holdings of other securities, including company debt and preferred shares, would be protected by the government.” To avoid sticker shock, the feds will “invest” your money in stages. “Instead of giving each company a big capital infusion up front, the government plans to make quarterly infusions as the companies’ losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue.” Clearly, this is the template for the “real” Detroit bailout, once they piss-away $50b in federal low-interest loans. Either that, or it will lead to “bailout fatigue” that will torpedo the D2.8’s chances of taxpayer rescue.

Back when GM and Ford claimed that foreign sales would keep them afloat long enough to patch their hulls, turn their ships around and avoid reefs of their own making, TTAC called bullshit. First, we pointed out that the domestics’ American losses were simply too large to sustain with foreign profits. Second, we said overseas car markets were hardly immune to the forces sending the States into the doldrums. And so… The Daily Telegraph reports that rising petrol prices have lowered UK vehicle sales to their lowest level since England won the World Cup against Germany in 1966. “The latest sales figures from the Society of Motor Manufacturers and Traders (SMMT) showed that the number of new cars registered last month was down 18.6 per cent on the same period last year. Worst hit were luxury marques and 4x4s, with monthly sales of Aston Martin cars down by two thirds in a year, Land Rover suffering a 58 per cent drop and demand for Porsche models 58 per cent lower than August 2007.” Worse– much worse– is yet to come. “The car market is now in real pain, real free-fall,” Professor Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff University, told the Torygraph. “It is not just the private buyers who are not buying it is also the companies and the fleet side who have decided to pull their horns in, it is a sign of pretty awful times ahead.” Oh, and The Times of India says “Sluggish outlook in India has forced Japanese car major Toyota  to revise and extend further its market share target from the country by as much as 5 years.”

What did you expect? Jerry Flint has been a Detroit apologist since Kennedy’s Justice Department tried to force GM to spin-off Chevrolet (if only). Still, Flint’s argument [via WardsAuto] in favor of $50b in low-cost federal loan guarantees for America’s beleaguered automakers is yet another conflicted, half-hearted recommendation. “Detroit can’t convert from a truck-heavy mix to fuel-efficient cars without help, not the way the losses are piling up. General Motors lost $15 billion just in this year’s second quarter, and Ford lost more than $8 billion. Should the nation bother to save the industry? Yes. Opponents say Detroit brought the trouble on itself, ignoring decades of warnings about oil and letting foreign auto makers win battles over quality and technology. That’s all true. Detroit auto makers have made plenty of mistakes, but that doesn’t mean they should not be helped. The Detroit Three provide hundreds of thousands of good-paying jobs, plus millions more at suppliers and related businesses.’ Translation: the D2.8 are up shit creek, they failed to compete and they’re too big to fail. Double negative aside, it’s a reasonably coherent and compelling arguement. Especially when Flint adds the “strings attached” caveat (albeit asking workers rather than over-compensated executives to take a hit for the team). So why don’t the automakers themselves A) admit their failures and B) admit their mistakes and C) put a concrete proposal in front of the people who will (mark my words) guarantee these loans? Motown’s “reluctance” to come clean is reason enough to deny them the money.

Why the Hell would it? The U.S. “housing crisis” is far from over, money’s too tight to mention, getting credit’s a bitch and the consumer shift to more fuel efficient vehicles has left millions of SUV owners backwards/underwater on their loans. Amongst other things. Anyway, the idea that U.S. new vehicles sales have “bottomed-out” is a combination of wishful thinking and boilerplate bullshit, largely perpetuated by the weasel-word factory known as General Motors’ PR. (Show me ONE MONTH of sales gains and THEN we’ll talk.) As I wrote in my latest General Motors Death Watch, Automotive News [AN, sub] fell for– indeed perpetuated– this spinmeistery hook, line and sinker. In an attempt to atone for their shameless capitulation to Mark LaNeve’s mob, AN has followed-up with a micro-story on Toyota’s take on the American car market’s doldrums [via Reuters]. And here it is: “Despite signs of steadier U.S. auto sales in August, it remains uncertain whether industrywide sales in the largest vehicle market have hit bottom, Toyota Motor Corp. Vice Chairman Kazuo Okamoto said today. ‘It’s hard to say whether the U.S. market has hit bottom,’ Okamoto told reporters. Okamoto, speaking through a translator, also said that despite the recent decline in oil prices, Toyota, the world’s largest automaker, was still assuming oil prices would be higher over the long term as the basis for its product planning.”