Three months later and enough bluster to buffet a Cape Cod winter resident for a decade, and the United Auto Workers (UAW) have reached a tentative agreement with GM parts supplier (and former GM Division) American Axle. Automotive News [sub] reports that, uh, the UAW have reached a tentative agreement with GM. That and the fact that ratification is "scheduled" for next week. I sure hope they tell the workers. And where are AN's vaunted "inside sources" when you need them? Of course, AN pads out its story with a little background/analysis. The good news? The strike "gave GM a chance to run down overstocked inventory for slower-selling models including its Chevrolet Silverado pickup." [Frank William's report on this "run down" on Monday.] The bad news? "GM, which books revenue when it produces vehicles, also said that the strike had cost it $800 million in the first quarter and 230,000 units of lost production as of April. GM had also shut or partly idled over 30 facilities and put thousands of its own hourly workers on lay-off due to parts shortages caused by the strike." Ramping-up production ain't like flicking a switch neither; so expect that cash burn to smolder a while. What's more, GM will no longer have any excuses. They'll have to face the fact that their truck and SUV business has rolled over and died.
Posts By: Robert Farago
Can a guy get weekend off? Jeez. You put your proverbial pen down for five minutes and the next thing you know Automotive News is tossing the alerts at you like a Vegas knife thrower. Most of the time, it's GM trying to sneak in some bad news (e.g. Rick Wagoner's $14.4m pay packet) while non-OCD reporters and stock market traders pursue what's euphemistically called "a life." OK, so, first up: auto supplier Delphi have sued investors Appaloosa [AN, sub] and eight co-conspirators for walking away from a bankruptcy exit plan for the troubled (and how) former GM division. "Delphi is alleging a breach of contract and fraud, and is asking the court to provide up to $2.55 billion in equity funding and to pay compensatory and punitive damages in an amount to be determined at trial." (Of course, that's just bad writing; the court doesn't have $2,55b. But you get the idea.) Any such court case would ehance Delphi's United Auto Workers' ire and feed TTAC's grist mill; like this little gem from Delphi Veep David Sherbin. "The plan investors vigorously pursued a prominent role in our restructuring, received over $60 million in fees for their commitments." Wow! Add in the lawyers fees– which could easily eclipse that amount– and there's no question Delphi's ignoring the wise British maxim "When you're in a hole, the first thing you do is stop digging." In any case, once again, it looks like a GM – Delphi bailout could well be the cash burn that finally sets The General's hair on fire, helping secure their seat next to Delphi in federal bankruptcy court. Next up: the UAW "settlement" at American Axle…
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As you probably know, TTAC is an R-rated site. After a discussion with our readers, we decided to allow swearing on both sides of the editorial curtain, subject to existing anti-flaming regs. In this Brave New e-World, the fall-out from our "no bad word left behind" policy has been… non-existent. Even so, you can hardly expect our good friends over at G-rated, AOL-owned Autoblog to allow 'effing and blinding (although flaming and trolling doesn't seem to be an issue). So it's no surprise that John Neff's blog on a swear-laden "That's a Saturn?" ad provides some unavoidable comic relief. "Steve Hall at AdGabber found a different version of the commercial, which we'll call 'That's a f@#$% Saturn!'. It seems after they had gotten the footage that Saturn's ad agency requested, the actors, director and production crew had some fun and made a different, rated R version of the commercial that probably more closely resembles reality than the canned responses in the original commercial." Reality? Aside from the Sky (anyone remember the Sky?), no one's ever done a verbal double take on a Saturn. More importantly. this is not a bunch of bored actors "goofing off." It's an officially-sanctioned viral-ready production (mission accomplished) designed to get slackers to "rethink" Saturn's flag-waving, American-as-apple-pie image. Call me a fucking hypocrite, but I liked "The Different Kind of Car Company's" picnics, honesty and just plain folks approach. The swearing Saturnalia may make industry insiders chuckle, but this will not play well in Peoria.
And so it continues: the debate about the Toyota Prius as a fuel saver/economy car/green badge of honor/etc. over on Captain Mike's review. Sammy Hagar's off-hand comment about the Prius cannibalizing Camry sales intrigued me. For some strange reason– not anti-Detroit bias I can assure you (if you can be assured)– I'd never thought of the Prius as a cannibal. But it makes perfect (imperfect?) sense. If you're in the market for "inexpensive, efficient, reliable transportation that makes you feel good about not driving anything else," why wouldn't you choose the Prius over the Camry? Or, for that matter, the Camry over the Prius? We've heard rumors that ToMoCo's going to launch the Prius as a fourth brand. On one hand, yes. On the other hand, uh-oh. Toyota's entirely useless Scion brand (remind me again what PRODUCT-related focus they bring to the table) is one GM-style branding mistake. Launching a Prius brand would be another. In fact, it looks to me like Toyota could, some day, maybe, not beyond the scope of possibility, become the new GM (especially when the old GM goes C11). Hey, empires rise, empires fall. C'est la guerre.
Not for same reasons you do. You want a battery-powered Tesla Roadster because it’s a way cool car boasting bleeding edge technology. Or maybe you just like sexy sports cars. Or perhaps you’re looking for massive eco-auto props. As a free marketeer, I’m good with any of these motivations. As a Porsche Boxster S owner, I’m not bothered (I’ve already found my dream date). But as the publisher of this website, I want a Tesla Roadster BAD. I want to reveal the truth about the EV– whatever that may be.
Did you know that sprinter Michael Duane Johnson could (can?) run 27 miles per hour? Obviously, he could only maintain that pace long enough to catch a bus or win an Olympic medal, and he'd have a hard time doing either whilst talking on the cell and carrying a child in one of those humongous child seats. But the point remains: 20mph is a very, very slow for a car. And a more important question also persists: is 20mph safer than say, 25mph? Or 30mph? In absolute terms, if we're talking about car – pedestrian contact, ipso facto. The faster the car at the moment of impact, the more energy involved. But driving safety's a slippery customer, where the primary variables are the driver's level of attentiveness, personal reaction times and a wide variety of road conditions. So, will the UK's decision to lower speed limits in town centers to 20mph help the Government reduce road deaths from 3,000 to 2,000 a year? To make that analysis, you'd have to know how many of those fatalities involved pedestrians in town centers, what speed the contact occurred, if a reduced speed would have prevented the fatality, and what other, perhaps more crucial variables were in play. From a public policy standpoint, you'd have to also analyze the expense of changing the signs and time lost vs. any other, perhaps more effective measures. But two things are for sure: that's a debate the UK isn't having, and no other measure would collect so much– if any– revenue for the government. And remember: it's all for the children.
This "article" by Sam Moses appeared on an newsletter/website called autowriters.com, an Inside Baseball-type publication for automotive journalists. When I read the not-so-divine Mr. M's diatribe, I was more than slightly miffed. His rant completely misrepresents Frank Williams' editorial on automotive reviews in newspapers. So I called autowriter.com's main main, Glenn F. Campbell. I asked the publisher point blank if he'd actually read Frank's article. Nope. But that was O.K. because it's OK to publish someone's opinion, even if it is factually inaccurate or, in this case, devoid of factual justification. When I reminded Campbell that he's legally liable for libel (just to tweak his nose), Campbell didn't get it. "You said there were no facts cited so what could I check – to see if my opinions agree with Sam’s? Homogenous opinions would make a dull, narrow-minded Newsletter." And yet, that's what he's created. I've calmed down enough to see the unintentional humor of Mr. Moses' TTAC attack. Still, I think it's important for our readers to contemplate the full glory of what we're up against, day in, day out.
Click here for
The Truth About The Truth About Cars’ Take
on The Truth About Newspaper Car Reviews
Our detractors are sure to take that headline literally. So be it. If you judge a man by the quality of his enemies, TTAC's about as good as it gets. In any case, I apologize to TTAC's Best and Brightest for the extended site crash. We're just as addicted to posting the truth as you are to reading and commenting upon it. In fact, I was apoplectic today at a certain website (who shall not remain nameless) that smeared Frank Williams, and enormously frustrated that I couldn't let loose the dogs of TTAC on the rat bastard who dared allow such an unsubstantiated, poorly-written piece of libelous garbage onto his corner of cyberspace– without even bothering to read the article in question. There. I'm feeling better already. On a more General Motors level, the interruption of service ruined our product cadence. Which is a fancy way of saying we've lost our mojo. For a bit. 'Cause when it comes to automotive journalism, we're the new generation, and we've got something to say. If you've got ten minutes, have a listen.
NBC's fall lineup is out and American Top Gear (ATG) is too. According to Dark Horizons.com, the pilot for the American version of the British car show didn't light the suits' hair on fire (if only). The decision denies the entire autoblogosphere the chance to say "I told you so" to episodes containing neither the spirit nor the veracity of the original. (It also means that Dan Neil got pissed off at me for outing him for no reason and I needn't have fallen down on the job.) The show's death is probably one of those Murder on the Orient Express deals, where manufacturers (we're not really comfortable with this show), NBC ad execs (we're not really comfortable with this show) and suits (we're not really comfortable with this show) conspired to strangle the program in its crib. On the other hand, ATG may have been, as Dan Neil suggested off-camera, pre-castrated. And then tested with an audience who liked it about as much as every other car show NBC's ever-produced– only less. The move is yet another blow to the beloved franchise. Back in Old Blighty, TG's next season of has been delayed indefinitely. Our only hope for home-grown mass media motor-oriented mayhem now lies where an American Top Gear should have started in the first place: on PBS or a non-commercial cable network.
AutoblogGreen sets 'em up. We knock 'em down. This time, Tesla's cheerleaders are hailing the fact that Larry Sonsini has joined Tesla's Board of Directors. "The presence of Sonsini as a member of the Tesla team is of particular importance moving forward because of his area of expertise. Sonsini is Chairman of Silicon Valley law firm Wilson Sonsini Goodrich & Rosati and a specialist in IPOs and mergers and acquisitions. This is important because Tesla chairman Elon Musk has previously declared that the company will be going public, likely sometime in 2009." So the car company that's allegedly delivered two car to a single paying customer, a Silicon Valley start-up that's lighting cigars with $100 bills, wants some more cash to burn. Some more of someone else's cash to burn. And Sonsini, a man hauled in front of the House for investing in whilst advising companies who backdated options, is just the shark they need to find and devour the whales. You know, as "Tesla Motors drives forward the electric transport revolution and grows to become one of the great car companies of the 21st century." Call me cynical, but Silicon star IPO guy or no, how can anyone trust a lawyer who says his "yardstick of success" is "inner peace?"
Industry Week's David Blanchard offers an analysis of Just In Time (JIT) manufacturing's dangers, from Boeing's delayed Dreamliner to Motown's supplier woes ("woes" as in torpedoes aimed straight the mothership's hull). Blanchard says JIT is fine in theory. "Some Japanese automakers have done quite well with that type of win-win relationship, often symbolized by the idea of the keiretsu, or joint partnership. The Detroit Three automakers, on the other hand, apparently see greater promise in pursuing lose-lose relationships… Look at the relationship (if you want to call it that) between Chrysler and one of its Tier One suppliers, Plastech, who had fallen on hard times. Rather than offering assistance to a key supplier, Chrysler canceled its contract with Plastech, which not only led Chrysler to temporarily shut down production at four assembly plants, but also caused Plastech to file for bankruptcy protection." While that's not the way it went down– Chrysler bailed and bailed until it bailed– Blanchard's wider point is valid. "The key word in supply chain management is management, and when relationships aren't managed properly (or at all), then there really isn't much of a supply chain. What you've got instead is a mad free-for-all, and ultimately, a lot of unhappy customers." And, we might add, employees, shareholders and dealers.
In my imagination, GM execs start every major meeting cranking-up the Talking Heads' "Burning down the House" and dancing in that awkward style peculiar to drunk 50-somethings at the latter part of their daughter's wedding. In real life, they probably exchange worried glances over highly polished tables every now and then and continue their "work" with grim, monotone determination. Well here's an arched eyebrow for you guys: The Wall Street Journal reports that GM CFO Ray Young is "open to raising additional financing to weather the auto industry's current downturn and other challenges facing the company" at the same time that he "remains confident in its liquidity for 2008." I love a mixed message in morning. Smells like… bankruptcy. "If the current adverse economic conditions persist or deteriorate further we would consider a wide range of actions," Mr. Young said. On Ray's To-Do list: "opportunistically" tapping credit markets, including funding sources in the U.S., selling "noncore" assets and/or "reprioritizing" its capital spending. Question: what credit markets? GM credit ratings sucks. Cerberus' struggles with Chrysler have polluted the private equity pond and GM's already spending $2b on interest payments. What non-core assets? GM's already sold off everything it's got of any real value. And what do you mean by "reprioritizing" cap ex? Cutting back on product development? And I wonder why this article neglected to mention the newly released information that GM's cash burn for the year is estimated at $8b– and counting. $24b (claimed liquidity) – $10b (float) – $8b (current cash burn) – ? = C11. [thanks to jthorner for the tip]
The problems at Chrysler are immense: lackluster products, development cutbacks, a hugely bloated dealer network, cash flow issues, you name it. And don't forget Chrysler Finance. Although the former cash cow is now behind the veil of private ownership, the lender is in deep doo-doo. Not as deep as GMAC's ResCap. If GMAC's mortgage unit goes down, it'll take GMAC with it, and, potentially, sink GM. Even if GMAC somehow makes it though this incipient recession, GM's supplier problems– including the unresolved strike at American Axle and the ongoing debacle at Delphi– are looking more and more like a Gordian knot making love to a black hole (thank you Jonny). In fact, taken as a whole, GM's problems are worse than they were in late 2005. Oh, did I mention that the window for Chrysler owners Cerberus to sue Daimler for fraudulent conveyance ends in early August? Folk, it’s getting ugly, and we're not even calculating Ford's woes or the simple fact that Detroit's manufacturing jobs are leaving the country. We will be here through these dog days. When the excrement hits the air re-circulation device, just remember: we told you so. And we will take no joy in what happens next.
How else are we supposed to spin this? The Detroit News reports that Ford engineering veep Paul Mascarenas has announced an "international campaign (?) with five universities to develop a car that is simple, lightweight, practical and priced below $7,000." Something like, I dunno, the Tata Nano? Of for God's sake, you say, stop picking on these guys. The Model T redux is part of that national transportation week weak deal, and a laudable effort to encourage and reward young engineering talent. What's this then? Mascarenas says the program, which will award an $25k to the winning university, is more than an academic exercise. "The Model T has assured its place in history; perhaps 100 years from now, someone will be standing here honoring one of these cars." Which cars? The cars they haven't built? Or the cars that Ford won't be building? Or the ones Ford will be building, after all the paperwork's been signed. Meanwhile, GM's global sales veep has a thing or two to say about the whole past – future thing. "GM is venturing into the future with some ambitious plans, a solid determination, as we launch into our second century," John Middlebrook intoned. "We believe strongly about what we will deliver." For what they are to deliver, may the federal bankruptcy court make us truly thankful. Amen. [thanks to MgoBLUE for the link]
Slumping U.S. new car sales– and their effect on manufacturers– are getting a lot of ink (and unleashing torrents of the red variety). Meanwhile, the American used car market ain't a load of laughs, either. Dollar Rental has checked-in with their financial results for the first quarter of the financial year. Explaining their $297.9m Q1 loss, Dollar's CEO brings the noise. "As we had anticipated, weakness in demand and pricing in January, coupled with an increase in fleet costs, adversely affected our performance in the quarter." Now don't get to thinking that this is good news for The Big 2.8, reflecting their oft-stated commitment to cutting back residual-killing fleet sales. Dollar asserts that "vehicle depreciation costs per vehicle increased approximately 31 percent in the first quarter of 2008 over the first quarter of 2007, and were above the Company's expectations due primarily to softness in the used car market." In other words, unloading their old shit is proving problematical. Solution? "The Company expects that its new fleet optimization software, together with the anticipated extension of fleet holding periods, should moderate the increase in vehicle depreciation costs over the course of the year and should enable the Company to operate a more efficient fleet program." Bottom line: look for rental cars to get older and prices to go up.
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