Download this pdf to get the 411 on a new GM-on-the-brink compensation scheme, sent to us by a member of TTAC’s Best and Brightest. The program has been activated by GM’s recent decision to shut down production for nine weeks over the summer. How’s this for reassurance? “SDPA salary will be paid on a semi-monthly basis. The current percentage established by this policy is 75%. Leadership reserves the right to terminate, modify, suspend, increase or decrease salaries and benefits provided under this policy.” Equally worrying (for some), employees getting free vehicles form GM will have to pay for their own fuel during the downtime. “Fuel expenses incurred during the entire paid downtime period are at the expense of the employee (similar to when on vacation or Holiday). All other vehicle expenses (e.g., oil changes, etc.) will continue to be covered in accordance with the PEP/ECVP rules and terms in effect throughout the paid downtime period(s).” Every 3000 miles?
Posts By: Robert Farago
“I’ve heard of some updated information. It sounds like progress is being made and I hope they’re successful in their discussions together so that Chrysler can avoid liquidation,” Canadian Finance Minister Jim Flaherty told reporters after a meeting of G7 finance ministers and central bankers in Washington. And it’s timing Jim. But. Not. As we know. It. Reuters: “Minutes before Flaherty spoke, the Canadian Auto Workers Union postponed a press conference scheduled for 6 p.m. (1000 GMT), in which it was expected to announce an agreement.” [Thanks to Jules for the link]
Facing its worst financial outlook in more than a decade, General Motors outlined a new product development and sales strategy Thursday, saying that from now on Chevrolet and Cadillac would be the company’s only brands to offer a full lineup of vehicles. Sorry. My bad. That’s a quote lifted from a May 2005 New York Times story about GM. It’s only taken The General, what? Four years to almost make it so? Oh, and $20+ billion worth of American taxpayer’s money. Anyway, today’s report of Pontiac’s incipient demise hails from Automotive News [AN, sub], which confirms Edmunds’ Inside Line‘s, uh, inside line. Bloomberg’s in too. GM says no. Well, shudduppayourface. “Contrary to media speculation, General Motors has not announced any changes to its long-term viability plan or to the future status of any of its brands. GM is continuing to review its restructuring plan to go further and faster and best ensure its future success. Additional information will be released as any decisions are finalized.”
The Automotive Alliance has released a pdf of its jefe’s statement to the House Committee on Energy and Commerce re: the American Clean Energy and Security (ACES) Act of 2009. Dave McCurdy has four words for proponents of the proposed “cap and trade” legislation: “give us the money.” Or, more politically, “We strongly urge the Committee to use revenues generated from the proposed cap and trade system to help fund research, development and implementation of new technologies and upgrading/re-tooling of manufacturing facilities to provide the next generation of green vehicles.” I guess that Department of Energy’s $25 billion retooling fund (remember that one?) just doesn’t scratch that itch, then. But that cash4clunkers deal? Magic! We’ll have one of those, please. Fans of spinspeak and lovers of kow as she is towed will enjoy the Alliance Prez’s concluding remarks . . .
For some reason, The Detroit News columnist Daniel Howes reckons the average Joe will blame the bankers when—sorry “if”—Chrysler goes Tango Uniform. Yes, the money men will take the hit “whether they deserve it or not. I say this not because it would be entirely fair, either, unless ‘fiduciary responsibility’ and the duty of lenders to determine whether a Chrysler allied with Italy’s Fiat SpA would have a shot at survival now are quaint notions that no longer apply. In normal times, lenders are supposed to decide where credit-worthiness ends and recklessness begins. But these are not normal times and bankers, as one of them quipped privately to The Detroit News, ‘are the most hated people in America.'” I know TTAC is guilty of first degree inside baseball, but I’m not feeling that at all. The average American will place the blame squarely on Chrysler for not building competitive products. But it’s interesting that Danny “I can’t get off the fence but I know who’s on either side” Howes would see it that way; it shows that Detroit still can’t take responsibility for its failures. Or admit defeat . . .
The New York Times really pisses me off. This is not the first Gray Lady story I’ve read based entirely on a report by a “think tank”—where the reporter somehow fails to mention the organization’s ties to labor unions. In this case, scribe Elisabeth Malcolm is happy to share the results of a study from the “Economic Policy Institute, a Washington think tank that studies economic issues that affect workers.” In this report (download pdf here) EPI economist Robert E. Scott “argues that saving American automakers may instead end up saving — and even creating — Mexican jobs.” And that means that the feds should use the Motown bailout as a lever with which to undermine The Big 2.8’s plans to build cars in non-unionized Mexico. “The conditions Mr. Scott proposes: G.M. and Chrysler (and Ford, if and when it asks for money) should face a limit on their investments in Mexico. The way to do that would be a cap on imports from Mexico as a share of sales. He also suggests a domestic content requirement for American-made cars that would halt the increase in parts imports from Mexico.”
Ah, Delphi. I remember predicting—what, two years ago?—that parts maker Delphi’s collapse would drag GM into bankruptcy. Well, just as GM is falling into C11 on its own accord (so to speak), it seems the ghost of subdivisions past are about to . . . drag GM into bankruptcy. The Detroit News reports that GM’s sent up an emergency flare. “In light of adverse developments in the industry, at GM and at Delphi, GM has been in negotiations with Delphi and its lenders to arrive at solutions that would ensure GM’s source of supply under fair and reasonable terms,” GM said in a statement today. “While GM has proposed a potential solution that would allow for the successful and rapid resolution of Delphi’s bankruptcy case, its lenders have rejected this proposal.”
One of our Best and Brightest sent me a link (farago@ttac.com) to an article in The Charlotte Observer about GMAC’s move away from the Bank of America (BofA) and into the credit card business. As one of the few media commentators who knows enough not to report stories about which I don’t have a fucking clue, I pinged our man William C. Montgomery for some analysis. In addition to reviewing cars for TTAC, Bill works for a large credit card company. He knows his onions. While his reply reveals that there’s nothing untoward here, and TTAC’s core concern is GMAC’s car loan biz, I thought it sufficiently interesting to share with you, our highly informed (now more so) audience. Forgive the digression.
Let me tell you the state of the credit card industry right now. We expect the default rate this year to be about 15% (up from about 6% during normal years). This means that for every dollar we lend, only eight-five cents will get paid back. Plus, it costs us about another 6% to borrow the money, print and mail statements, maintain customer service call centers, etc. In other words, we’d need to be earning 21% in finance charges just to break even. On top of this, new credit card lending rules make it much harder to raise interest rates. In other words, no bank want’s to be in the credit card business right now. Just about every bank I know of is looking to unload their credit card receivables so that they can lesson their exposure to the sky high credit losses we are experiencing in the current economy.
The Globe and Mail reports that the Canadian government is negotiating (with whom?) to provide $6 billion in post-bankruptcy financing to Chrysler and GM. It gets worse/better. The six bil represents a fixed percentage of a larger post-bankruptcy fund, currently under construction over at the US Treasury. That would be 15 percent. Which puts the size of the US fund at $40 billion. A pittance, apparently. “The companies had initially proposed that governments lend or guarantee a staggering $125 billion in bridge or long-term loans, but the number was whittled down over months of difficult negotiations led largely by Treasury officials in Washington. In recent weeks, sources said, talks shifted to a plan for the governments to provide financing and guarantees for debtor-in-possession, or DIP, loans. These are used for day-to-day operations while companies restructure their debt under the protection of court supervision.”
As GM’s journey to bankruptcy nears its conclusion, the punditocracy is busy contemplating the company’s afterlife. The current line of thinking: the feds will cleave General Motors in two. Bad GM gets Buick, GMC, HUMMER, Pontiac, Saab and Saturn. Good GM “buys” Chevrolet and Cadillac. It emerges from Chapter 11 unencumbered by outdated production facilities, warring management, befuddled marketing, over-priced labor, restrictive union work rules, astronomical pensions and onerous health care obligations. Chevillac rises from the ashes to steal share from both mainstream and luxury brands, repay its debts and thumb its nose at Bailout Nation’s critics. But here’s the thing: good GM is “saving” the wrong brands.
Huh? Is there anyone inside or outside of GM who seriously believes that all hell will break loose on or around June first, the federal deadline for the zombie automaker’s “restructuring”? At this point, GM planning for a summer production shutdown is roughly akin to a customer readying a garage charge point for his/her plug-in hybrid gas – electric Chevy Volt. This is the company that’s expected to kill somewhere between two and six brands. And yet, there it is, via The Detroit News: “General Motors Corp. is expected to announce Friday it’s cutting about 170,000 vehicles from its planned production this year, closing factories for as long as nine weeks this summer as the automaker works to dramatically toughen its restructuring plan before a June 1 government deadline.” Shouldn’t that be “melodramatically toughen”? If you want real drama, wait ’til the Presidential Task Force on Automobiles pulls the plug (or doubles down) on Chrysler. Then we’ll see whether or not an ocean of blood on the carpet is enough to convince GM’s stakeholders to let Uncle Sam add their scalp to his collection. I mean, take a haircut.
Thanks to kamikaze2b for the link
After yesterday’s post on rip-offs on autotrader.ca, I looked into the Internet used car sales fraud deal. It’s a BIG deal. The industry estimates that some twenty-two million used cars were sold online last year. According to a recent FBI report, the number of complaints the agency received re: Internet fraud rose 33.1 percent during the same period, representing a $265 million loss. Yes, well, that’s the reported figure. No one knows the actual size of the car classified rip-off problem and which way it’s trending (to use the proper verbization). The companies who provide the websites where these shady deals go down ain’t gonna to fill in that blank, now are they? Autotrader.com spokesman Mark Scott wouldn’t disclose the number of fraud tips sent to them by aggrieved/suspicious users. But he claims his employer investigates all leads within an hour of receipt.
You gotta think the head of the Presidential Task Force on Automobiles (PTFOA) is in deep shit re: the growing kickbacks for public pensions scandal—given that Steve “Chooch” Rattner couldn’t be more politically connected if he was tied to President Obama with an umbilical chord made of piano wire. Not only was Rattner Obama’s personal choice to “fix” the US auto industry (i.e., Chrysler and GM), but the ex-journalist also manages Mayor Bloomberg’s personal fortune. As The New York Times reports, Rattner also knows a Senator or two. “Mr. Rattner forged close personal ties in New Mexico, which invested $20 million in Quadrangle. He met with Senator Jeff Bingaman, a Democrat from that state, on at least one occasion, according to a person with knowledge of the meeting. From about 2004 until early this year, Quadrangle also employed the senator’s son as an associate. A spokeswoman for Senator Bingaman said that the senator’s son did not raise money for Quadrangle, but instead helped make investments. Senator Bingaman was not involved in the pension process, she said.” Sure, coincidence. I buy that. But then I believe Rattner and his 24 PTFOA teammates are more qualified to run the US auto industry than say, someone with industry experience who doesn’t depend on his ability to grease political palms for his or her livelihood.
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