The "run on the bank" supplier scenario we predicted for Chrysler is coming to pass. We've already reported that Chrysler's been playing silly buggers with their payment (stretching terms to keep the cash flowing flowing). And now ChryCo is beginning to face the predicted backlash. At the Traverse City management ho' down, Chrysler's executive vice president for procurement did his best Joe Pesci imitation for insolent suppliers, The Detroit Free Press and TTAC's Best and Brightest. "If a supplier wants to push us because of their fear [that we're going bankrupt], then they're violating the contract that's in place and I will take the necessary actions," John Campi intoned. "I have had suppliers come to me with a gun to my head and I say, 'I am not going to let you shut down production, but if you are serious then you have to live with the legal consequences.' And the legal consequences are not the end of it because if somebody does that, I can tell you they will not be walking around very long a supplier of choice."
Posts By: Robert Farago
GM's next Next Big Thing (a.k.a. Chevrolet's plug-in electric – gas hybrid Volt) just got a whole lot bigger. Conceptually. The Detroit Free Press reports that GM execs are trumpeting their [Wall Street-friendly] plan to Volt-ize everything that isn't nailed down, including SUVs. Eventually. "The executives would not say how many vehicles they expect to run with the E-flex system, but Andrew Farah, the Volt's chief engineer, said the system is most likely to first be used on GM's global compact and midsize car architectures. The electric propulsion system would need to be greatly altered to work with larger vehicle architectures, such as those for SUVs or pickups, he said." You got that right. Meanwhile, Volt Supremo Frank Weber "expects major improvements to the Volt… to occur on a yearly basis early on. That is different from most vehicle lines, which typically offer major updates every three to five years." Good news? Uh, well… "Weber said the automaker has already identified nine areas on the Volt where it expects to make major improvements or greatly reduce costs in the second year of production. It can't make those improvements in the first year, or it would delay the quick timeline the automaker is on for the launch of the car."
Who knew that Jochen Felsenheimer, the Munich-based head of credit strategy at UniCredit SpA, was an AC/DC fan? One things for sure: he's no fan of GM. After Moody's downgraded GM's creditworthiness, Felsenheimer pronounced "Recovery on GM might be significantly below 40 percent.'' Bloomberg provides the quote and explains the math. "Bondholders may lose as much as 73 percent in the event of a default by the world's biggest automaker, based on the price of contracts used to fix a recovery value for the securities. The recovery swap rate on GM dropped to 26.5 percent, from 39.5 percent at the end of June, meaning investors expect to get only 26.5 cents on the dollar in an insolvency, CMA Datavision pricing models show. Investors are pricing in a lower recovery rate than the average of 40 percent in bankruptcies as capital is eroded by $69.8 billion of losses since 2004." In other words, the market's confidence in GM's ability to stave-off C11 is at an all-time low. And headed lower.
Earlier today, GM’s purchasing chief warned his light truck parts suppliers that he’s looking to halve their number. No surprise there. GM’s SUV and pickup truck sales (and margins) have fallen like a stone thrown in a deep, dark well. But here’s the strange thing: Bo Anderson wants credit for his forward thinking. “The effort is proactive," he told the Traverse City management seminar. "To be sure that we get the best suppliers." Bo’s boast is based on GM’s faith that it will persevere through the current unpleasantness because yes, Virginia, you CAN cut your way to prosperity. Only no, Bo, you can’t. But hey, it’s something to do.
There is an argument to be made for car mags and websites accepting long term test vehicles. But I'm not going to make it. If these consumer champions want insight into what it's like to live with a particular car on a day-to-day basis, ask one of the people who bought one. To my mind, long-term test cars are nothing more or less than payola: a manufacturer's unspoken quid pro quo, just for being a friend of ours. There's no question that a week's access to a press car is one of the major perks of working as an automotive journalist– albeit a pleasure more-or-less denied TTAC writers (doesn't go with the territory). But it's high time for Road and Track, Car and Driver, AutoWeek, Edmunds Inside Line and the rest to Just Say No to long term test cars (a.k.a. "our fleet"). Their readers deserve a higher standard of journalism. (BTW: I'd like to see a writer argue with an I.R.S. auditor that driving their family around in a long term test car is not a taxable perk.) As for those who claim our policies are self-serving sour grapes, I assure you that as long as I'm the publisher, TTAC will not be bought by any manufacturer, at any price.
![By now, Delphi had lost much of its importance (and wealth). It still existed as a cultural and religious center, but never regained its political power again, although it remained important as a center of \"creating Greekness\". For example, Roman politicians who wanted to show that they were civilized people, sacrificed in Delphi - if only to win political support in the Greek world. (text and pic courtesy livius.org)](https://www.thetruthaboutcars.com/wp-content/uploads/2008/08/delphi_tr_athens12.jpg "By now, Delphi had lost much of its importance (and wealth). It still existed as a cultural and religious center, but never regained its political power again, although it remained important as a center of \\"creating Greekness\\". For example, Roman politicians who wanted to show that they were civilized people, sacrificed in Delphi - if only to win political support in the Greek world. (text and pic courtesy livius.org)")
Once again, former GM division and bankrupt parts supplier Delphi is proving to be the thorn in GM's side that could well prove to be a lance through its heart. Or something like that. Anyway, Automotive News [sub] reports that the feds are taking steps to sort out Delphi's pension liabilities, and The General could end up with one big ass bill. "In a letter to GM and Delphi, the federal Pension Benefit Guaranty Corp. warned it would lay claim to $8 billion if the automaker does not keep its pension plans intact, the [New York Times] paper said. This would dilute the claims of Delphi's other unsecured creditors, who are owed about $3.5 billion." To forestall that possibly mortal blow, "The U.S. government has asked bankrupt auto parts maker Delphi Corp. to transfer more than $1.5 billion of unfunded pension obligations to former parent General Motors by September 30." Whew! And here I thought we were talking about real money.
Yup it twofer Friday over at The Standard of the World, as Cadillac unveils both the CTS Medusa Sport Wagon and this, the new SRX. And once again, the brand's Global (?) Design Director Clay Dean is talking about how he's clad a Caddy in the Art and Science motif– without using that term. "The next-generation SRX is the result of the continued exploration and refining of Cadillac design language, with the goal of creating dramatic presence in the luxury crossover space." Am I the only one in the automotive space who hates the current use of the word "space" by cubicle overlords? Who killed the word "market?" Speaking of which… “The next-generation SRX, along with the new CTS Sport Wagon, showcases Cadillac taking its dramatic design into new directions," Caddy GM Jim Taylor agreed with his copywriter. "Particularly cars and crossovers that are the right size at the right time for today’s luxury consumers." Hey, if loving Vue is wrong, I don't want to be right.
Granted, these are the new CTS' Sport Wagon's most offensive angles (courtesy GM PR). And beauty is in the eye of the lease holder (zero percenter?). But to my jaded eyes, the new Caddy is one aesthetically- challenged automobile. Needless to say, that means GM is launching it at the Pebble Beach Concours d’Elegance, and hyping its looks. "It’s a taut design that not only suggests sleekness, but delivers it,” Caddy Global (?) Design Director Clay Dean announced, in that usual artsy, syntax-bending sort of way. 
“Indeed, the drama of the sedan is amplified in the CTS Sport Wagon, as the centerline cue that is part of the exterior and interior is more prominent and plays a stronger role in defining the design at the rear of the vehicle… The liftgate area, for example, is a confluence of angles and planes that typifies the vehicle’s design tension.” In short, the new CTS five-door is "a dramatic design that elevates and updates the classic wagon body style." I thought Lincoln was reaching higher? Well, at least the CTS-based Sport Wagon is reaching wider, with standard 19" wheels. Anyway, some of you have a major you-know-what for wagons and the CTS made our Top Ten list. So let's hope this design grows on you, but not like a fungus.
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Motorcyclists. Of course, Mary E. Peters didn't quite put it that way. “We have seen the total motorcycle participation in vehicle miles traveled go up,” Mary E. Peters, the secretary of transportation and a "longtime Harley-Davidson rider" told The New York Times. “We might see more people moving to that mode of transportation. We might see that data skew.” (I don't know about you, but I wouldn't use that kind of language around my fellow Hell's Angels.) By the numbers, "Deaths of motorcyclists surged 6.6 percent, to 5,154; 2007 was the 10th straight year of increase… Total deaths in motor vehicle crashes in 2007 declined to 41,059, a drop of 3.9 percent compared with 2006. Deaths in cars fell 7.8 percent, and in light trucks 2.7 percent. Even alcohol-related deaths fell." Obviously, there are enough unconfirmed variables to please/challenge any advocacy group: gas prices, passive safety, driver education, drink drive enforcement, changing demographics, helmet laws, etc. But common sense suggests that gas price hikes are a double-edged sword. At the moment, it looks like a net safety gain. Or loss. Or something.
The Volt PR drip-feed continues. The Hail Mary's Design Director hung with his homies in Traverse City (rated E for everyone), then jumped into GM's FastLane to release some teaser pics and say absolutely nothing ("The Chevrolet Volt’s exterior design is an attractive balance between aerodynamic performance and styling.") The Volt's Chief Engineer was more forthcoming– and forthright. Andrew Farrah tells the AP [via Autonet] that "GM workers are testing batteries to make sure they last at least 10 years or 150,000 miles. It would cost more than $10,000 to replace them." The batteries or the engineers? Anyway, "The Volt also is going through the same design issues as a new car powered by a conventional engine, Farah said. 'The program has all of those same things built in. We're just doing them faster because we have to.'" How reassuring is that?
Cornering's the thing, but I am an absolute horn dog for automotive aural sex. Yes, I bought an E39 M5 for the stealth style, comfort and continent-crushing high speed stability. But it was the car's low-speed V8 burble that captured my heart. I held off from Boxsterhood until Porsche finally put some genuine aggression in its exhaust note. (I could easily understand why a pistonhead would prefer a Corvette over a Porsche based on relative exhaust notes.) Folks, I've got 47 of my favorite engine sounds on my iPod. SL55 AMG. Ford GT. Lamborghini Murcielago. And the rest. And I still think the Ferrari F355's flat-plane crank eight-cylinder engine is the world's best sounding powerplant. It's nuts, then crazy, then insane, then maniacal, then the Four Horsemen of the Apocalypse leaving hoof-prints on your temporal lobe. You? [NB: Wait until the end of this video.]
Frank Williams arrived at TTAC as a reader. He became a writer. Then an editor. Then Managing Editor. His tenure at the top has been a blessing, freeing me from the bonds of admin, buffering me from the buffoons who enter our little corner of cyberspace. At the same time, Frank's editorial contributions have been legion, from pithy blogs to in-depth statistical analysis. But more than that, Frank's been my constant companion and emotional support. As of September 1, Frank will be tapping computer keys on behalf of a Washington think tank. He's moving on to bigger, better-paying things. But I hope that Frank shares my belief that helping build and maintain TTAC's audience has been one of the best things he's ever done. While I welcome Justin as our new ME, I think our Best and Brightest will agree that Mr. Williams is an irreplaceable talent. His wit, wisdom and perspicacity will be missed. You know; later. For now, thanks for sorting out that Lego blog. You are one persistent son of a bitch. And for that, I'm truly thankful.
So Ford's President of the America's, Mark Fields, did his stint at the Traverse City auto industry management mahalo. Ford was kind enough to publish the formerly private jet-setting Fields' speech, which we present below. His opening theme is clear (expressed above): "I also have been watching some of the recent commentary – including from speakers this week – about who's to blame for the auto industry not anticipating the dramatic increase in fuel prices and the accelerated segmentation shifts this year. But I really wonder if that is where we should be spending our energy as industry leaders." No, of course not. (Ignoring the fact that Fields was in power way back then.) Even stranger: "While none of us would have planned for the sharp downturn in the industry or the dramatically accelerated segment shifts, we are seizing the opportunity in a dramatic way." Would have? Yes, the guy's got a 'tude. "Some of our rivals snickered when we first starting talking about EcoBoost nearly two years ago – but it's interesting to see others trying to catch up with us…" To be fair, Fields is making all the right noises, plan-wise. But you have to wonder why such a shoulder-chipped old school Detroit apologist (and aspiring CEO) wasn't swept away by Alan Mulally's new broom.
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