Now that GM's staring down the barrel of bankruptcy, the artist formerly known as the world’s largest automaker has launched a fresh offensive. Not a product offensive, of course. That would have required forward planning. We’re talking about a PR offensive. Hope for the hopeless. Alternatively, weasel words for the unwary. Here’s the headline, courtesy of unnamed sources, via the Wall Street Journal: a return to profitability by 2010. And here’s the kicker: the target date is “unofficial.” Does it get any more fantastic than that? Yes, it does.

The trick, of course, is for GM to get from here (looming cash-starved bankruptcy) to there (profit). You know: a plan. The only thing is, GM CEO Rick Wagoner has steadfastly refused to publicly declare any details of his “turnaround plan” since the words first passed his lips. Details as in targets. Targets as in accountability. Accountability as in “If I don’t do what I said I was going to do, fire my ass.” You can see the problem with that one.

Instead, GM PR's fed the ailing American automaker's camp followers a steady diet of generalities, dreams and excuses. Back in November ’05, the turnaround plan had four points: health cost reductions, product renaissance, better sales and marketing, and capacity reduction. Obviously, GM’s products were, are and always will be the most important element. If GM had made the right decisions then, they’d be well-positioned now.

“GM North America will continue with its aggressive product assault on all vehicle segments," the '05 press release declared. "To target key growth segments with the right products, GM earlier this year increased capital expenditures, with the vast majority of that increase going toward future car and truck programs…

“Starting in January, GM will begin rolling out more than a dozen all-new versions of its full-size SUVs for Chevrolet, GMC and Cadillac, to be followed in late 2007 with the availability of GM's advanced two-mode hybrid powertrain. In the same year, GM will begin rolling out an entire new lineup of full-size pickups, another segment in which GM is the industry leader.”

Oops. So much for Car Czar “Maximum Bob” Lutz golden touch. Or Rick Wagoner’s leadership. So, what’s the new new plan; the strategy that will rescue GM now that the old new plan is in shambles? According to the Journal’s proverbial “people close to the matter” (i.e. GM PR Spinmeister Steve Harris), The General is “preparing to cut thousands more white-collar jobs and is considering whether it should sell or shutter more of its brands.”

While white collar cuts are no biggie (unless you’re a GM white collar worker), the idea that GM is “considering” slicing dead brands is awe-inspiring. Anyone with a basic grasp of auto industry economics knows that GM's 19 percent U.S. market share mandates brand extinction. Buick, Hummer, GMC, Pontiac Saab and Saturn are all dead brands walking– to the point where no one in their right mind would buy them. At the same time, it’s equally obvious that GM cannot afford to cut the deadwood.

As we’ve pointed-out numerous times, the U.S. franchise system is a patchwork of 50 state laws that all favor franchisee rights. GM can’t just shutter its moribund brands and walk away from thousands of dealers. As long as there is a company to sue, the abandoned store owners will sue it. When GM closed Oldsmobile, the pay offs cost the company a billion dollars (back when a billion dollars was real money). And almost as much again in legal fees. Not to mention lost sales.

GM’s looking to raise $15b by the end of the year. There’s no way they can use the money to pay off six brands. First, it’s not enough. Second, GM needs the money just to keep the lights on. There are only two practicable way to downsize GM’s portfolio. Either GM must starve the brands of product– as it is now doing (not doing?) for HUMMER– or declare bankruptcy and use the court’s protection to git ‘er done.

GM doesn't have enough cash to wait out its dealers, and can’t stomach the nuclear option (C11). Which is why, back in February, Mr. Wagoner dismissed the idea of killing brands as "not a thoughtful discussion." So why, pray tell, is the Journal/GM re-raising the possibility of brand slaughter? Because GM wants that 15 bil and the financial markets have completely lost faith. But not, apparently, GM’s Board of Bystanders.

"[Wagoner] also has support on GM's board. Key directors still believe the management team under Mr. Wagoner is capable of delivering a turnaround and insist ‘we will win or lose together,’ this person said. Despite GM's mounting troubles, the board is anticipating management will soon notch "some victories under our belt," one director said, asking not to be named.’”

The Bystanders will go down with the ship? GM’s going to pull a rabbit out of its hat? At GM, fantasy never goes out of style.

Rick Wagoner is a lame duck. No matter how you look at it, it's clear that the failing, flailing CEO must go. Next week, The General's Board of Bystanders will meet to "discuss" the crisis. GM's dividend will disappear, triggering fresh anxiety (and some atta boys) from the financial markets and the media. The Bystanders should push Rick out of the RenCen penthouse, to glide to Aruba on his golden parachute. But they won't. They can't. Wagoner walking would be the final straw: an admission that GM's forked. And before he goes, Wagoner's got one more job to do… 

Obviously, Wagoner doesn’t want to be GM's CEO when the artist once known as the world’s largest automaker (a.k.a. the world’s most profitable company) files for bankruptcy. Common sense suggests that Wagoner wants to be IN the lifeboat BEFORE the women and children (i.e. assembly workers) make egress… problematic. Or, preferably, he'd like to be watching the ship sink from the safety of a tax-free tropical island.

Remember that Wagoner’s banked well over $100m in pay and benefits during his tenure at the top. And no, they can’t take that away from him. (His pension is bankruptcy proof.) So, really, all Wagoner has to worry about is his “legacy.” He’s proclaimed that GM has enough liquidity to make it to end of ’08 (woo-hoo!), To leave on a high note, Rick's got to raise some money– say, $15b or so– and then quit before the well runs dry (again). There’s only one problem: who’s going to lend GM $15b?

There are two ways GM could secure that kind of cash. First, they could hock their foreign operations. In a way, that’s already happened. Instead of plowing overseas profits back into overseas operations– to fend off increasingly strong competition– GM NA has been using foreign income to prop-up, indeed, justify, the overall corporate bottom line. We don’t know exactly how much, from where and when this transfer has occurred, but we do know that GM NA sucks. Cash, that is.

Putting a lien on GM Europe, Latin America, et al. would be seven kinds of stupid. Although the same old management mistakes are beginning to take their toll abroad (overlapping brands, too many brands, non-competitive products), GM’s foreign empire is in relatively good shape. But the bottom line is the bottom line. The money raised by the loan would only stave-off a GM NA filing, not prevent it. GM has no high-profit replacement for light trucks to pull its ass out of the fire. When the inevitable occurs, the whole Empire would crash and burn.

The second, more likely strategy: secure federal loan guarantees and then hit-up the banks. As mentioned before, it's virtually a done deal; Uncle Sam (that's you) will back-up the notes needed to keep GM from filing for bankruptcy. It will be the perfect time for Rick Wagoner to leave– even though GM will continue to burn through the money and stay on course for Chapter 11.

C11's a good thing for GM. It's the only way it can prune its bloated dealer network and diseased brand portfolio. But again, Wagoner will do everything he can to NOT be the man in charge when– not if– the deal goes down. All of which leaves GM where we started, 183 episodes ago. Well, not quite…

Back at the beginning, I argued that all eight GM brands should be hived off into separate companies. Since then, Wagoner’s decisions have sucked the life blood (cash, distinctive models, brand equity) out of HUMMER, Buick, Saturn, Saab, Pontiac and GMC. What’s worse, he’s rearranged the automaker's structure to further blur their identities. At this point, no competitor, private equity firm or management buyout group would dare touch ANY of GM's brands.

These days, Cadillac and Chevrolet are GM’s only viable brands, and not convincingly so. Does anyone really think Caddy has what it takes to compete with BMW, Lexus and Audi? Even GM’s fiercest supporters are beginning to understand that the Volt will not be enough to rescue The General. Will the plug-in gas – electric hybrid even be enough to rescue Chevy in the face of the well-established Toyota Prius? The Honda Accord? Hyundai? Anyone? Bueller?

I used to believe that a better, stronger GM would arise from the ashes of Chapter 11. I am now resigned to the fact that it's too late. To use Car Czar Bob Lutz' terminology, all of GM's brands are damaged beyond recovery. Still, some good WILL come of this. Someone will sell something worthwhile in GM's stead. 

Meanwhile, THIS is Rick Wagoner’s legacy: an enormous automobile company without a chance at survival. That pays $1m a week to its employees not to work (not including benefits). That pays $250m a month in interest payments. That bought car divisions it didn’t need and sold cash cows it did. That sank from 29 percent of U.S. market share to less than 19. That wiped away tens of billions of dollars from shareholder value. That lied to itself and the world that it was better than it was.

[NB: This is an updated version of the original post.] 

In the nineteen-eighties, Ford CEO Donald E. Petersen's recipe to save Ford from near-bankruptcy was "higher quality products… emphasizing smaller, more efficient cars." It worked, propelling Ford past Chevrolet to world-record profits. Current CEO Allan Mulally is banking on essentially the same ingredients: de-emphasize trucks and rejuvenate the car palette with global platforms largely designed in Europe. Ford's future, perhaps its very existence, is riding on it. Is the recipe still golden?

Ford's strategy is essentially defensive, conservative and obvious. The big truck/SUV paradigm that propelled Ford to outsized profits in the nineties is broken. Ford neglected its car lines, and never bothered to learn how to produce small cars profitably. It became distracted with Jaguar and the ill-fated Premium Auto Group (PAG), at the expense of Lincoln. Quality gains unraveled with disastrous transmission and head gasket problems. And the foresighted "world car" platform plans, beginning with the 1980 Escort, were unraveled by corporate fiefdoms running amok. The result was a Balkanization of car platforms.

Centralizing development and unifying Ford's global car line-up is a necessary and essential move fordward, but it's hardly a "Bold Move." There's no guarantee that the cars will be hits.

Ford's handsome new Mondeo is already in trouble in Europe, selling at lower volumes than its predecessor. Every time Ford (and Opel) attempts to go upscale in Europe, they run into a glass ceiling, where the premium brands aggressively shove downwards with their own smaller models. Ford's global Focus and Fiesta are attractive and competitive products. But expectations for their success stateside may be inflated. In the Euro-zone, the Astra is a credible competitor to the Euro-Focus and VW Golf. Setting aside questions about profitability, the imported Astra's hardly setting the U.S. market on fire. 

The same forces shrinking Ford's market share in Europe are increasingly at work here. Whereas in the eighties Mercedes and BMW were decidedly upscale, they too are pushing downwards, along with Audi, Lexus and Infiniti. And that's just the premium brands putting on the squeeze from above, keeping potential profit margins for Ford-brand vehicles in the thin end of the wedge.

In terms of direct competition, 1981 looks positively idyllic compared to 2008. In the eighties, the Japanese were limiting imports voluntarily. The Koreans were where the Chinese are today: just getting warmed-up for the attack on the U.S. market.

Ford has no realistic hope of recreating the 20+ percent share of the passenger car market in the eighties. Those days are gone, forever. The volume-brand market is fragmenting dramatically. The advantage accumulated by Toyota and Honda is staggering. Ironically, their top-selling Camry and Accord are not global cars, but targeted US models. The tables have turned, and Ford is taking on the role of an "import.. But the solidly entrenched transplants are not going down easily like Ford and GM once did.

The best Ford can hope for is to hang on to its current share, trying desperately to offset its shrinking truck and SUV sales. And the thin profits from smaller cars are going to be a big let-down from the $10+k per vehicle Ford once minted with its trucks and SUV's.

Ford bet the family farm on the original Taurus, and won big. But there's no repeating that gamble. The mid-size car market is mature. The only gamble in that segment was made by Toyota with its Prius, and it paid off.

In 2005, Billy Ford promised to build 250k hybrids per year by the end of this decade. A year later, he recanted. Meanwhile, Toyota is closing in on a million hybrids per year. Ford builds 25k hybrid Escape/Mariners annually, keeping the volume low, below market demand, because it can't make any real money on them. Ford backed away from its bold hybrid gamble. It has the technology, but failed to crank-up production and wring out the costs for eventual profits, a la Toyota. A distinctive Focus-based hybrid sedan built in quantity could have been a genuine Prius competitor.

Yes, the hybrid Fusion is coming, but it's too little, too late. Ford is not really committed to volume hybrids, unwilling to spend its dwindling cash reserves on chasing difficult profits. And except for the obligatory show-off plug-in version of the Escape, Ford has absolutely nothing in the hopper regarding electric cars, having sold off its Think EV division years ago.

If oil prices settle down a bit, Ford's strategy may buy them some time. But if Peak Oil really is lurking around that bend in the road, and/or there is a substantial shift in consumer demand for EV's and hybrids, Ford is screwed. Every other major global manufacturer (Chrysler excepted) has serious hybrid, EV and battery development projects in high gear.

In the eighties, Ford made some genuine bold moves, faced less intense competition, and benefited from falling oil prices. History doesn't necessarily repeat itself. 

Oil prices have just hit record highs. Talk of recession is in the air. Ford’s line-up of bloated, heavy vehicles is piling-up like cord-wood on the dealer’s lots. The only car selling: its “Americanized” global compact. Ford stock is in the toilet and bankruptcy rumors are swirling. The top exec hired a year earlier is intelligent, unassuming and straight-talking. He commits Ford to building “higher quality products with stronger customer appeal… emphasizing smaller, more efficient cars.” Ford in 2008? No, it’s 1981.

Like current Ford CEO Allan Mulally, Donald E. Petersen was an atypical choice when he was promoted to the Presidency by the Ford family in 1980. An engineer, development executive and genuine piston-head, Petersen was also the antithesis of Lee Iacocca, whom he replaced. Never in modern history has an automotive CEO been so devoid of spin and hyperbole. No wonder Ford of the eighties looked to Japan for inspiration.

Petersen learned of Toyota’s use of quality guru Edward Deming. In the first coherent US automaker assault on “total quality,” Petersen adopted Deming’s techniques, and those of corporate guru Peter Drucker. As measured by owners, Ford’s vehicle quality improves 60 percent from 1980 to 1987.

The aerodynamic 1983 T-Bird launches a dynamic wave of efficient, exciting and successful passenger cars. The Turbo-Coupe has the world’s first fully computer controlled (EECV-IV) integrated turbocharged fuel injected engine. The Ranger successfully takes on the long-established Japanese compact pickups, becoming the category best seller for many years. The Fox-body Mustang’s balance of light weight and V8 power at an affordable price reinvents and dominates the pony-car class.

In the biggest single auto product gamble in modern times, Ford launches the 1986 Taurus. It leapfrogs the competition, and sets the packaging and dynamic standards for the modern US-market sedan. For sells 400k Tauruses per year, grabbing the best-seller crown from the Honda Accord by 1992. Petersen employs Japanese “just in time” production methods at Ford, and the Atlanta Taurus factory becomes the most efficient auto factory in the US (including Japanese transplants).

Petersen’s honest, cooperative, non-political management style motivated FoMoCo’s management ranks as never before. His deep experience in car development as a car enthusiast ensurfed that Ford’s products were consistently more dynamic than their competition.

In trend-setting, car-conscious California, Ford becomes the number one selling brand. The Blue Oval Boys’s passenger cars sell well in The Golden State; GM and Chrysler have already become irrelevant (except for trucks and Corvettes). Ford’s profits explode. In 1986 and 1987, Ford was the most profitable car company in the world. As its stock ascends from around $1 in 1982 to $17 in 1987, “F” becomes a Wall Street darling

But what really separates Petersen from the rest of his ilk: he maintains perspective, candor and modesty– despite the phenomenal success that was his doing. It’s a stark contrast to Chyrsler’s Iacocca, who had to be dragged out of Chrysler kicking and screaming, well past his sell-by date. And then tried to weasel his way back several more times, Petersen consciously and quietly retired two years early in 1990 at the age of sixty-three. He wanted a new management team to have a running start dealing with the clouds he clearly saw gathering on Ford’s horizon.

In an exceedingly frank and prescient farewell discussion with thirteen journalists the day before he retired in 1990, Petersen expressed grave concerns about the future of the U.S. auto industry. According to one reporter, “his terse answers were sobering. The word survival came up a lot because it’s no joke to ask how much of a home-grown auto industry will exist a generation from now.”

“Because of the deep partnerships of the Japanese companies with their suppliers, changes can be implemented predictably and rapidly. The steady loss of state-of-the-art manufacturing technology in the US manifests itself in the longer product cycles and lower real or perceived quality of the domestic automakers… There’s this nibbling away, this gradual erosion that’s occurring that nobody sees very well, I don’t think. It bothers me a lot.”

Petersen ended with a warning that “the manufacturing sector in the US is going through the same process now as the agricultural sector went through in prior generations… we have to accept that it (manufacturing) will generate a far smaller percentage of the employment of the people of the United States than it does now or did 10 years ago. There will be far fewer jobs.”

Those words spoken eighteen years ago seem remarkably prophetic (“how much of a home-grown auto industry will exist a generation from now?”) ,especially during Ford’s current déjà vu crisis. Alan Mulally has charted a very similar course for Ford’s salvation, emphasizing efficient European cars and quality. Will the same medicine save Ford a second time?

Source Interlink Media owns Motor Trend magazine. Both conglomerate and car mag are heading south, quickly, in a big way. Ad revenues and circulation are in free fall. Motor Trend (MT) is fighting for it survival with glossy pimpatorials for equally doomed advertisers. The August issue features a glossy "special advertising section" for Buick ("Drive Beautiful") and a slick "advertisement" for the Dodge Challenger ("Motor Trend drives the new Dodge Challenger Through Europe"). Meanwhile, the chronically undercapitalized columnist arthur st. antoine takes a whack at a premium car brand: BMW. Huh? 

Start with this: BMW doesn’t advertise in Motor Trend. GMC, Extenze (male enhancement pills), Mercedes-Benz, The Sinclair Institute (“Better Sex for a Lifetime”), MINI, Xomax (male enhancement pills), Infiniti, MAGNA-RX Inc. (male enhancement pills)– but no BMW. You could say with all those pills readers need not buy a BMW– but I couldn’t possibly comment.

Anyway, no feeding hand is bitten, bitte. If MT’s Editor at Large had taken a shot at the Chevrolet Aveo on the mag’s back cover– now with extra hideousness (courtesy of an Audi meets Malibu snout)– I would have been impressed. But he didn’t so I’m not.

“We car journalists are suckers for BMWs. Every model the Bavarian Brand produces is an engineering masterwork, manna for driving enthusiasts, an internal combustion mallet for pummeling comparison-test rivals into humiliated awe. Why even bother to conduct such tests? We’ll choose the machine with the blue-and-white propeller every time. Right?”

Clued-in parsoholics will realize that “Right?” signals st. antoine’s sarcasm. Clued-in pistonheads will realize antoine’s defense comes hot-on-the-heels of Car and Driver’s July comparo, where the mag rated a BMW M3 higher than a Porsche Turbo and Nissan GT-R. Though st. antoine is a former Car and Driver writer, doesn’t he have anything better to do than defend his erstwhile rivals? Apparently not.

“That’s the cliché… But the reality is this: BMW’s supremacy is a myth, one based in part on some historical validity but sustained in recent years largely by a single model, the 3 Series (okay, the new 1 Series seems strong, too). As for the rest of the lineup… where are the superstars? M5 sedan? A thrilling drive, yes, but in its most recent comparo (February 2007) a second-place finisher to the sweeter, sleeker Audi S6.”

Is it me or is st. antoine trying to gum BMW to death? The new BMW M5 blows compared to any car in the entire world that doesn’t have an SMG gearbox. The latterly six-speed manual M5 is OK, and plenty damn quick by any metric, but the Bimmer is a bling-bang-boom travesty when contrasted with its legendary predecessor.

There, that wasn’t so hard was it? And either the 1 Series is strong or it isn’t. It “seems” like a good time for st. antoine to get off the fence. Of course, attacking BMW isn’t really the point of this dietribe [sic]. It’s all about defending MT’s “objectivity” and “integrity” (har-har). Hence st. antoine presents a list of MT comparos Bimmers DIDN’T win within its increasingly tissue-like pages.

And now, a bit of dead horse beating…

“…the iDrive controller remains a poster child of frustration and feature-glut (do you really need a an electronic menu to adjust the airflow from individual vents?), we simply can’t heartily endorse a car– no matter how surgical its steering or smooth its inline six– blemished by that glaring chrome iDrive mole.”

Wow! That’s a LOT of punctuation. But little punch. Critizing BMW for iDrive is like slagging an Escalade for lousy mileage; it’s safe, well-trodden ground. Oh, and in this case, st. antoine's claim of withholding his love for the propeller people's products simply isn't true. st. antoine on the 135i:

“I'm blown away by this little stealth fighter. I can't recall another car that's been more surprising to drive; I expected the 135i to offer solid performance, but it's breathtakingly quick. Refined, too- it's a bona-fide BMW."

Sounds solid to me. Uh, where was I? More importantly, where was st. antoine? Ah, giving the BMW X6 what the Brits call a proper pasting.

“…the X6 is also grotesquely heavy, too small to carry anything, compromised in the back by that free-falling roofline, saddled with iDrive and a needlessly complicated shift lever, and absurdly expensive.”

Finally! st. antoine substantiates his contention that BMW ain’t so big (it’s just tall, that’s all). The paragraph is also a compelling argument that his employer isn't in BMW's pocket. So, a quick twist of the knife and out. Right?

“That BMW’s engineers are gifted goes without saying. As German-born architect Mies van der Rohe once said, though, “Less is more.” Also, “What is this big chrome mole here?”

You gotta admire a writer who can so deftly blend ass-kissing, name-dropping and a non sequitur. Still, at the end of page 24, st. antoine’s quasi-rant provides proof– if proof be needed– that MT is doomed.

For the third time, a dramatic oil price spike has thrown the auto industry a curve ball. And once again, after years of supersizing, manufacturers are lacking the right-sized, economical products for which the market is desperate. Instead of spending three to five years developing new cars from scratch, it’s time to dust off the best from the past and put them back into production. An air bag here and some updated engines and technology there, and these seven classics are ready to save the day in each of the major categories: Read More >

Back in 1783, Paris was all abuzz with the exploits of the Montgolfier brothers’ balloons. Using a simple bag and a lot of hot air, men (and sheep) were able to fly (or at least float). One of the observers was none other than Ben Franklin, who was fascinated by the display. An onlooker was less impressed “What use is it?” America’s founding dirty-old-man smiled and replied, “Of what use is a newborn baby?"

To get your head around some of the fancier experiments going on in auto-land you have to keep in mind that what we’re seeing now is the proof of concept. Practical applications may be a long way off, and require extensive infrastructure creation or modification. The important thing is not to confuse technological issues with infrastructure challenges.  

History shows that if the technology catches on, the framework will catch up (and quickly). I remember getting excited when I upgraded to a 1200 baud modem. I thought I was on the cutting edge. Broadband was less than a decade away. On the auto front, Henry Ford started selling Model Ts when the USA had less than 100 miles of paved roads. In short, pay very little attention to grousing about lack of stations to re-fill/charge prototypes. If they take off, the infrastructure will be there in less than a model cycle.    

For example, Honda's hydrogen fuel-cell Clarity is being rolled-out in what is essentially a beta-test. There is no way to judge real-world sales success from a handful of 20K ($600 x 36) leases. There are hardly enough filling stations to support the test. But Honda wants some basic real-world information about how the car handles in real-world traffic (and attendant publicity of course). We won’t really know whether the whole hydrogen fuel-cell thing is the tip of the iceberg– or the next turbine car– for at least five years.

Slagging the Clarity for being a power-shuffler is legit, if a bit obvious. Energy has to come from somewhere, even for electric cars. Fuel cells and hydrogen cars need some means to produce their fuel (natural gas or electricity being the most likely sources). Electrics (and plug-in hybrids) need to connect to a grid somehow. There is no such thing as a free lunch.  

While complaining that “green” vehicles use power is slightly disingenuous, bitching about the availability (or lack thereof) of green power sources to motivate them is significantly less so. It's a legitimate beef that should be part of any up-front discussion of alt powered vehicles. Expanding the electric grid to handle fuel cell or EV-powered cars won’t be cheap or easy, but it's doable. Finding enough cropland to “grow our own” gasoline may not be.    

When digging through all the auto-related “greenery” it's best to try to figure out what axe each commentator has to grind. Old-school gas-burner types seem to favor the infrastructure argument (being short-sighted goes with the territory). Occasionally they shift into the “battery disposal” mode. The “greens” are much worse, quite enough to make Eyore seem cheerful. Their problem is that there is no getting around the fact that doing work requires power, which requires energy, and that is always going to be less than perfectly efficient (if they can even bring themselves to admit we need to move things and people).  

All “green” systems have trade-offs. Hybrids don’t take gasoline completely out of the equation, but remove fairly little in "end user" capabilities. Electrics pretty much eliminate pollution at the sharp end (and one power-plant scrubber is much cheaper than 100,000 catalytic converters), and offer massive torque. But have significant range and weight issues. Hydrogen can be used in a standard ICE engine or to run an electric motor via fuel cells.

In either case, end use pollution is virtually gone. The biggest obstacle is cost both from making the fuel and the power source. The other issue with fuel cells versus batteries: the cells can go farther, but are not as energy efficient as batteries. Cells take more energy to store the same power, but use less space and weight. That’s the reason we went to the moon on fuel cells, not batteries.    

The one absolutely game-changing effect most of this distant tech promises is fully electrical drive. Forget about the environment for a moment. Imagine getting rid of gears and gaining maximum torque from a standstill. Still not convinced? How about individual motors in each wheel? If you can’t do some seriously crazy things with that, you aren’t trying. Of course, most of the really fun stuff is a good ways away, but it will happen.

We are living in an interesting era. Right now, there are multiple alternatively-powered cars nearing practicality. Some will succeed. But if you’re trying to pick the “winners,” look for problems of production, not logistics. If they need it, it will be built.   

Earlier today, GM CEO Rick Wagoner told the world that the automaker has “adequate liquidity” until the end of the year. So I guess no one believed him the first time. Ipso facto. Wagoner’s reassurance came on the same day GM’s stock price sank to a forty-year low. The same day Goldman Sachs recommended that investors run for the hills. No surprise, then, that Wagoner felt compelled to go beyond his previous “we’re good” guarantee. "We have a lot of options to fund beyond that," Wagoner soothed. Unless they don’t. In which case, it’s fork sticking time.

The idea that GM’s cash burn will force them to go back to the well to keep the flames at bay is gaining momentum. The Bank of America and Goldman both hold this opinion, and peg the amount required at around $10b. And then, today, GM's cost of borrowing increased. Again. Fitch Ratings downgraded the ailing American automaker to B-, six steps below investment grade. That’s not good with a capital S, for hello New York? SELL!

Remember: GM is already paying $3b a year in interest ($250m per month). Also keep mind that Fitch Ratings is not a populist stock picker like Jim Cramer. The agency has access to information that the average investor will never see— including projections. If Fitch jerks your chain, you’re definitely barking up the wrong tree. Even worse: Fitch gave GM a negative rating, leaving the door open for further downgrades. 

How low can GM go? The company’s fortunes and rep can sink to the point where Wagoner’s “other funding options” disappear. If GM's bankers think the automaker is headed for a massive default, the money men are under no obligation to let GM play with other people's money. (In fact, just the opposite.) New lenders? What makes you think the people who can write billion dollar loans are more clueless than the average TTAC reader? I mean, now.

In terms of raising money, credit ratings are more important that GM's horrific stock price/market capitalization. But the sinking share price reflects the general take on General Motors: there's no boffo sequel to virtually extinct high-profit light trucks.

Pawning GM foreign ops to fund GM NA would be even greater lunacy than the current set-up, where cash generated outside the U.S. disappears down the corporate rat hole. There's nothing to stop GM declaring NA kaput and hiving-off the rest of the world, in the same way Delphi’s done. There's everything to lose by NOT doing so. Literally. 

If GM can’t raise additional money, and even if they can, the artist formerly known as the world's largest automaker needs to file for Chapter 11 sooner rather than later. The more cash General Motors has going into bankruptcy, the better the chances are that they can make it out. Not intact– that would defeat the entire purpose of the exercise. But out.

At the moment, there’s only one real glimmer of hope on the horizon: Chrysler files first.

When ChryCo goes, it will NOT be coming back. Their C11 will leave a Honda-sized hole in the American market. Presumably, Chrysler-favoring domestic loyalists will then head for GM and Ford stores. But they may not. They may apportion themselves to other automakers as they do now— which is to say they’d continue leaving Detroit metal for transplant products in ever greater numbers. Alternatively, the U.S. new vehicle market may contract so radically that Chrysler going away wouldn’t make that much difference to anyone.

Meanwhile and in any case, Wagoner is sounding increasingly Nixonian. I don’t know if Rick is kibitzing with a portrait of Roger Smith at the top of RenCen, but statements like “GM has moved quite proactively to address the dramatic consumer shift away from light trucks,” and taken "some very tough measures” sounds both revisionist and, well, nuts. Given GM’s double digit sales declines and sub-20 percent market share, Wagoner’s “we knew this was going to happen” assertion can only strike a handful of people as even remotely credible.

I still think that GM will be felled by something out of left field; some unexpected big ticket item that will do the straw camel’s back thing. A key supplier hitting the wall that GM can’t afford to bail out. A court ruling of some sort. GMAC’s collapse.

But perhaps not. Perhaps GM’s Board of Directors will allow GM’s management to keep flying until the corporation runs out of gas, and falls out of the sky. Which is a shame. Chapter 11 was designed to offer dying companies a chance at a gentler landing and a fresh start. But I suspect that the people running GM couldn’t give a shit about GM.

$11,800. That’s the price for a 2008 Chrysler PT Cruiser down at my local Chrysler dealer. Throw in the “Refuel America” $2.99 per gallon guarantee into the equation and you end-up with a pre-tax, tag, title price right around $10,200. Not bad. Not bad at all. Then again, is it? There are a lot of factors to consider when approaching any of the bargain basement cars currently on offer during this, Detroit’s [most recent] dark days. Join me as we journey down the PT-shaped rabbit hole…

If you're not an enthusiast, and simply want a 'keeper' car, the $10k Cruiser may be a great deal. What’s that you say? It’s going away? Well exactly. There are a lot of pluses for soon-to-be-defunct, less popular cars like the PT Cruiser that go far beyond the initial purchase price.

A long model run usually translates into a lot of easily obtainable spare parts, from multiple sources. The nearby parts store or junkyard will likely have replacements available for the eight year-old PT in duplicate or even triplicate. The PT Cruiser will also outdo recent entrants like the Toyota Yaris, Nissan Versa and Honda Fit when it comes to parts cost. For transplanted customers who have been beholden to the dealer for a $500 repair, that would cost maybe $150 in a mainstream Detroit iron, this is a weighty consideration.

All things being equal, a long model run also has the advantage of offering far fewer defects 'on average' than the latest and greatest models. A car that's been built a million times over has effectively given the supplier and the manufacturer plenty of opportunity to improve the car's design and reduce defects.

[Note: this isn't always the case. Google 'engine sludge' or 'transmission issues' and you'll see a long list of both domestic and transplant products that failed to make the grade, either initially or over time. However a quick visit to an enthusiast's site for your car (Google the model and add 'enthusiast' to the search) or owner's review sites like TrueDelta can tell you all you really need to know about a vehicle's true quality.]

Then there’s the double whammy of depreciation and gas cost.

For a car like the PT Cruiser, depreciation can be an absolute killer. As of writing, a PT Cruiser will lose an estimated 63 percent ($9,644) of it's retail value over five years. That’s far more of a hit than new models like the Yaris ($3,960), or Versa ($5,059), or the Fit ($5,152). For those who keep their rides for five years, the Intellichoice site is a good place to figure out your true costs of ownership, including depreciation. 

If you're one of the wiser souls who decides depreciation should be minimized at all [non] costs, you’ll find that a 10-year ownership period will reduce this difference by at least two-thirds. As common sense suggests, when it comes to depreciation, it's the keeper who usually comes out ahead.

There’s a lot anyone can do to minimize their vehicle’s depreciation. Keep it, clean it, use high quality parts, drive conservatively and know your car by joining an enthusiast's group. But gas cost is a far, far stickier wicket.

The PT Cruiser may be seen as frugal wee beasties, but a 19 city and 24 highway mpg rating puts it far behind on the other three competitors. If you keep a PT for 100k miles and drive evenly between the city and highway, you’ll spend $18,605 on gas (assuming $4/gallon). That is $6,105, $4,320 and $5,490 more than the Yaris, Versa and Fit. Double the duration and your gas costs may outweigh any other single cost. Even depreciation. With gas supply on a perpetual plateau and demand only going up, this is a real deal breaker for those who’ve changed their fuellish ways.

Finally, there’s insurance. An older and more conservative car with a strong safety rating will usually do far better here than a fashionable car that appeals to a riskier audience. In this sense, the PT is good news. A car like the PT Cruiser A) generally appeals to conservative and mature drivers B) offers pretty good safety ratings, and C) and requires cheap replacement parts (as mentioned). Most folks will simply call their insurance company and get a quote. That's fine. But being on the right side of these three rankings can make a big difference on the bottom line. 

So, for a retiree who drives sparingly, a brand new PT Cruiser is an excellent value. For an enthusiast, the Fit and Versa are the more fun vehicles to drive. If you look at cars as an overall economic proposition over a relatively short time period, the Yaris is probably a better bet. Personally I’d pick a VW Rabbit. But that’s an article for another day.

Earlier today, General Motors announced a "temporary" return to zero percent financing. It’s a clear, unavoidable sign that the automaker’s June sales slump is, as predicted, cataclysmic. Staring down the black hole begun on Black Tuesday, GM had to do something, anything to move the metal. And yet, at the same time, GM also revealed it’s raising its prices by 3.5 percent across the board. This second piece of news is equal parts bizarre and revealing. In essence, in the final hand of the poker game for its existence, GM has just doubled down. And now it’s Toyota’s bet. Here’s the thinking…

GM NA is desperate for cash. It simply doesn’t have enough liquidity to stave off bankruptcy. The automaker’s cash cow– high margin pickup trucks and SUVs– has become an endless supply of mad bovine burgers. So what can they do? They can discount the moribund metal, sacrificing profits to generate some cash flow. This GM's done, via zero percent financing. 

GM knows it’s not going to work. GM dealers know it’s not gong to work. Hell, even the stock market knows its not going to work (the share price reacted by falling to a 33-year low). The fact that some GM stores point blank refuse to accept SUVs and pickups in trade is only one of several unavoidable signs that light trucks– GM’s life sustaining market– is dead. There’s only one other way GM can raise some money fast: up the prices on those vehicles they ARE selling.

With GM’s U.S. market share past the point of sustainability, below 20 percent, all Toyota has to do is hold the line on their prices, amp-up production of its hot selling fuel sippers and wait for GM to die. Even by GM CEO Rick “We have enough cash for ’08" Wagoner’s own admission, it won’t be long. Especially not for Toyota— a company that’s taken the long view of its business prospects since they had a view to take.

Keep in mind that ToMoCo makes more profit it one year than GM’s entire market capitalization. Toyota could afford to give their cars away for the rest of the year and shrug off the loss. Literally. BUT… why would Toyota want GM to go out of business? Answer: they don’t.

GM still sets the floor for vehicle prices in the U.S.; a floor that allows low-cost, no-legacy Toyota to make a healthy margin on their North American products. If GM files for Chapter 11, car prices will crater. Even worse, a post- or even intra-bankruptcy GM– OK, Chevrolet– could emerge a lean, mean competitor, forcing Toyota to engage in some serious trench warfare. For a change. Yes it’s a far-fetched scenario. But don’t think it hasn’t occurred to Toyota, because it has. 

You may recall that the last time GM was generally recognized to be headed for extinction, Toyota’s Chairman offered to raise vehicle prices in North America to help the beleaguered automaker. At the time, Wagoner (for it was he) dismissed ToMoCo’s proposal with the kind of arrogance you’d expect for a man who's led GM to where it is today. But times have changed. Wagoner is up a river of excrement without a rowing implement. So he’s taking-up that offer.

Wagoner’s calculating that Toyota will also raise its prices, either to save GM or, at the very least, add to its mountainous profits. After all, the transplant’s raw commodity prices have risen by a similar amount, and their cars are flying off the lots. Surely they’ll take the path of least resistance– and maximum profits.

I reckon Rick’s right. Toyota is not GM. It will act in its long-term interests by taking a short term profit. (Oh, go on then.) GM will get its 3.5 percent extra margin on those products that are, somehow, making their way into customers’ driveways. If needs be, they can kick back that 3.5 percent to the customer and, hopefully, tread water— as opposed to watching their margins slip even further into the briny deep. 

Of course, even that won’t be enough. The inherent, fundamental, inescapable problem is that Toyondissan, and soon Ford, makes more popular products than GM in those vehicle genres that a U.S. automaker now needs to survive. The General’s general trend towards a declining share of the American pie is not about costs. It’s about a decades-long lack of competitive vehicles and loyalty-inducing customer service. Is there anyone left who genuinely believes that the Cobalt replacement or the Prius-fighter will kick Toyondissan’s ass? That a Buick-Pontiac-GMC dealership's a nice place to visit?

In truth, there are plenty of consumers who wouldn’t buy a GM product at any price. And won’t. This is the sad legacy of GM’s broken branding, dealer bloat and safe-fail engineering. One way of another, it’s only a matter of time before all bets are off.

A guy says he’s stopped using premium gas in his “premium gas required” car because it’s too damn expensive. It’s a joke, right? He’s saving 30 cents now, only to threaten his warranty and pay thousands in repairs later? “Yes” is the easy answer. But the truth about cars can be a funny thing, especially when you add fuel and flames.

With apologies to the chemists, theoretical physicists and tuners out there, here is an octane apercu: octane rating measures knock resistance. It has nothing to do with energy content. Engine knock (or ping) occurs when fuel detonates before the piston is in the right spot. The temperature and pressure in the cylinder cause the fuel-air mixture to detonate prior to the spark.

The effect is like tapping the cylinder head with a ball peen hammer, hence the sound. Add the intended spark, and you can have two flame fronts in the cylinder smashing together in the kind of closed-cage match no one leaves. Seriously, knock would destroy a lot of engines if not for octane.

Octane (a.k.a. 2,2,4 trimethylpentane) is a chunk of carbon and hydrogen added to gasoline to prevent premature detonation. In a bit of counter-intuitive chemistry making phrases like “high octane thriller” slightly ridiculous, it actually slows the combustion process. Octane’s fame as a performance enhancement comes from allowing higher compression, which results in more punch. The higher compression comes from the factory, not the pump.

The octane rating itself comes from good old fashioned testing. And I do not use that phrase lightly. To rate octane, testers use special single cylinder motors developed in the 1930s. In the United States, octane is reported as an average of research octane (RON) and motor octane (MON). That’s what that yellow "octane by R + M / 2" pump sticker means. In Europe, it’s RON only, so the numbers run higher. RON tests the fuel under load, but both numbers help engine makers match their designs to available fuel.

The rule, then, is use whatever octane rating the manufacturer recommends. A force-fed SAAB asking for 93 octane fuel really needs it. Fuel with less won’t be able to put up with the pressure of the turbo and temperature inside the cylinder. It will start sounding like the opening of Silly Love Songs, and no one wants to hear that.

On the other side, a Honda Accord is set up to use 87 octane. The environment inside Accord cylinders is not going push that fuel beyond its limits, so it can’t take advantage of the extra resilience of the more expensive brew. It’s added cost with no added advantage. Who wants to waste an extra cent on their fuel?

All rules are meant to be broken, though, which is why dropping gas grade to save money– or picking it up to increase performance– isn’t necessarily a joke. There are times when you may want to stray from the owner’s manual and, as is usually the case, only you can help you know when.

With some cars, there is no choice.  Carbon build-up inside an engine might mean you must use higher octane fuel. In older cars, you are the knock sensor and have to respond accordingly.   

Newer cars have their own knock sensors, like little U-boat commanders listening for pings. Upon hearing the noise, they retard the timing, firing off sparks when they can still do some good. That means reduced power and efficiency. So, while you’re saving at the pump by avoiding higher octane fuel, you’ll end up paying at the throttle.

Exactly how much difference any of this makes varies for every car. You can (and this is not recommended the author or anyone remotely related to TTAC) take a new Passat, run regular gas and not hear any blacksmithing from under the hood. You will also fail to get that squeal you wanted as the light turned green. 

Perhaps more importantly at the moment, your mileage may be off. Whether the drop is enough to warrant the extra cost of higher octane fuel is… uncertain. The only way to really know for sure whether or not premium fuel is worth the money: test out a couple of tanks of gas.

If a test is allowed. Some manufactures "recommend" premium fuel, others "require" it. For the most part, a car manufacture weighs mileage, horsepower and fuel grade against its perception of the ideal buyer. They want to put out the best numbers they can. Conversely, no company wants to tell you to fill up with 93. It’s an added, and inconspicuous, cost of ownership, one that owners are forced to confront often.

Bottom line: if a manufacturer asks you to spend more ON their car, not FOR it, you may want to laugh it off.

(The following email was sent to Chrysler employees today. It was released to the media with a note which read "'This information should help you cover Chrysler. We also sent it to our employees to help them as ambassadors of the company – Nancy." We leave it to you, our Best and Brightest, to make what you will of it.) 

Keeping Track of the Facts on Chrysler LLC
By Nancy Rae
Senior Vice President, Human Resources and Corporate Communications

As the industry goes through a period of great change and a slowing economy, we all face difficult questions about the status of the industry and our company.  Following are a number of the leading subjects that come up in the media and in our daily conversations, as well as information you need to know and share:

The State of the U.S. Auto Industry in 2008 .

Our full year plan for the market in 2008 has been aggressively conservative, allowing us to be better positioned for the current slowdown.  We are clearly in a challenging environment, but continue to be focused on building a profitable enterprise for the long term. We are committed to good business practices despite the market slowdown such as reducing fleet sales (volume down more than 20% YTD) and dealer inventory (volume is down 67,000 units from a year ago).

The State of Chrysler
. As a private company, we are like a $60 billion startup with a real owner-operator mentality. 
. Despite the challenges, we are meeting or exceeding our financial targets.
. According to Bob Nardelli (in The Wall Street Journal), "Cerberus nor its backers are second-guessing the deal. They are not looking back." 
. According to Tim Price, Cerberus spokesman, "We are comfortable.  We are long-term investors.  Chrysler is ahead of its cash flow forecast by $1 billion."
. We currently have our top 300 leaders going through a comprehensive leadership development program consisting of five segments focusing on strategic thinking, operating excellence and leadership.
. We are developing project-specific alliances to help bring the world's best technology to our customers, as soon as possible. Examples range from working with Nissan on a new small car for global markets to partnering with GM, Daimler and BMW on hybrid technology.
. We enacted a 5 percent cost reduction on certain non-production materials and services as a part of ongoing efforts to reduce our cost footprint in a highly competitive marketplace.

Chrysler's Sales in 2008
. Worldwide sales are down 14% YTD, which includes YTD increases in Canada, Mexico and International Markets. Fleet sales in the U.S. were down 40% in May and 23% for the year.
. Sales are rising for new products, such as Dodge Journey (2nd best selling mid-size crossover in May), Dodge Avenger (+15% YTD), Dodge Caliber (+9% YTD), Chrysler Sebring Sedan/Convertible (+11% YTD), and Jeep Patriot/Compass (+65% YTD).
. Our long-wheelbase minivans' U.S. retail sales are up 30% YTD, and retail share is up.
. In Canada, Chrysler is the #2 best selling manufacturer in the country, and up 5.5% YTD.
. In Mexico, Chrysler's sales are up 5.1% YTD.
. Outside North America, Chrysler's international sales are up 8% YTD, with markets like China and Russia becoming a larger part of our business.
. Dealers have embraced Project Genesis, and we are making progress in transforming the U.S. dealer network. Through May, 58% of our dealers are tri-branded, compared to 50% a year ago.  In the U.S., we now have 3,488 dealers, down from a year ago 3,684.

Chrysler's Alignment with Marketplace
. Chrysler is better aligned than previously for the shift towards smaller, more fuel efficient vehicles.  We also believe there is a strong and viable pickup truck market going forward.
. Through May, our U.S. sales were 41% pickup trucks and traditional SUVs, and 59% cars, car-based crossovers, compact vehicles and minivans.  (Industry is at 33%/67% ratio)
. Chrysler has six vehicles that achieve 28 MPG on the highway: Dodge Caliber, Dodge Avenger, Chrysler Sebring, Chrysler Sebring Convertible, Jeep Patriot and Jeep Compass.

Chrysler's Launch Lineup for 2008
These new vehicles have competitive advantages and are well-suited for today's marketplace:
. Dodge Journey – A crossover with class-leading (25 mpg) with a 4-cylinder engine.
. Chrysler Aspen/Dodge Durango Hybrids – Full-size SUVs offering up to 40% improved fuel economy in the city at a price thousands of dollars less than the competition.
. 2009 Dodge Ram – There is no better way to fight truck buyer malaise than with our best truck lineup ever boasting breakthrough new features. The new Dodge Ram lineup will also soon add optional light duty diesel and hybrid powertrain options.
. Dodge Challenger – This modern muscle car will come with a fuel-efficient V6 option at an aggressive entry-level price of $21,995.

Harbour Report for Manufacturing Productivity
. This year, Chrysler tied Toyota for #1 in manufacturing productivity (avg assembly hours).
. Chrysler has the #1 assembly plant (innovative Toledo Supplier Park) and #1 engine plant (GEMA joint venture with Hyundai and Mitsubishi).
. The combination of lower hours-per-vehicle production and a more competitive wage rate helps us compete with the transplants.

Quality
. In the latest J.D. Power IQS, the company improved six points, and Chrysler and Dodge brands showed improvement.  Unfortunately, the Jeep brand was last in the survey due to concerns about the Wrangler Unlimited.  We can do better and we know it.
. Dodge Durango and Dodge Dakota were tops in segments for least problems per hundred. Chrysler PT Cruiser took second place in the "Compact Multi-Activity Vehicle Segment".
. We have a corporate wide focus on the customer.  As part of this, we have put in place the industry's first Chief Customer Office, Doug Betts, and the Customer Advisory Board. 
. Chrysler LLC has approved more than 400 improvements in areas such as better materials, fit and finish and quieter operation.

Commodity Prices
. In the wake of mounting pressure from ever-increasing steel and other commodity prices, Chrysler is managing its costs and revenues to partially offset spiraling commodity costs.  
. Chrysler will continue its overall commitment to deliver the best values in the business through increasing standard equipment with our New Day packages to creative incentives, such as the $2.99 Gas Guarantee and our industry-leading lifetime powertrain warranty.
. At the beginning of the model year, Chrysler added, on average, $1,200 of new content to the vehicles in its lineup.

Investing in our Future with Advanced Technology
. Chrysler is in the midst of a $3 billion investment in advanced powertrains to develop new fuel efficient engines, axles and transmissions.
. ENVI is Chrysler's in-house organization charged with establishing Chrysler leadership in electric-drive vehicles and related advanced-propulsion technologies.
. Chrysler's UConnect® is a Bluetooth® enabled voice-activated, in-vehicle, hands-free communications system that recognizes more than 100,000 words and is capable of learning new words. Voice commands can input addresses to the navigation system, select satellite radio stations and access voice mail. New for 2009, the hands-free system automatically downloads up to 1,000 phone book entries per phone.

. Examples of new advanced technologies available on 2009 models include:
. In-vehicle wireless Internet connectivity: coming from Mopar® by year end 2008.
. Rear Cross Path: Chrysler-exclusive system warns drivers of approaching traffic in the parking lot aisle during back-up maneuvers.
. Blind Spot Monitoring: exclusive to Chrysler and Dodge in minivan segment.

We are committed to continuing to share information with you.  As an ambassador for this company, we hope you will communicate this information in your conversations about Chrysler.

Nancy

TTAC’s Deep Throat and I have been talking about GM’s decline and fall for well over two years. My man’s mantra: “follow the cash burn.” And so we have, through foreign misadventures, asset fire sales, union payoffs, supplier bailouts and more. We’ve watched GM CEO Rick Wagoner mortgage the American automaker’s future to conflate the company’s bottom line— to little avail. Throughout this firestorm, we’ve wondered how the automotive and financial press could miss the simple fact that GM’s been taking in less than it spends for a long, long time. And now, suddenly, they’ve noticed. And now the end is near. Here’s how DT sees it going down…

In February 2006, The General halved its dividend to .25 a share. At the time, GM claimed it made the move “to support its ongoing turnaround plan, particularly in its North American business, to reduce costs and business risks, and to further enhance its financial flexibility.” Two years later, GM’s spending $3b a year on interest payments, burning through a reported $1b per month and contemplating borrowing $10b to bolster its liquidity. In short, the dividend is doomed.

Today's GM’s stock price: $13.79. According to DT, when the dividend disappears, the share price will fall through the floor. The elimination of GM’s dividend will have an enormous psychological impact— none of it good. Talk of a GM bankruptcy will erupt once again, driving institutional investors away from GM stock and scaring-off potential customers.

Meanwhile, ResCap, the mortgage arm of GMAC Financial, is headed for bankruptcy. GM will not have enough financial muscle (i.e. money) to rescue the lender. Co-owners Cerberus have already declared their refusal to throw good money after bad. What with all the bad news– June sales are going to be nothing less than horrific– the banks will refuse lend GM cash within their existing credit facilities. There won’t even be ten-foot pole marks on additional large-scale loan applications.

DT surmises that when ResCap goes Tango Uniform, GMAC will follow. Without GMAC as a lender of choice for GM dealerships, the automaker’s stores will find it nearly impossible to offer accessible, low-interest loans. GM’s sales will spiral even lower, even faster. And then…

DT reckons GM will file for bankruptcy protections well before it runs out of cash in North America. When I pressed him on a time line, he estimated it could be within the next three months if sales don’t recover from June. GM’s highly-touted, Hail Mary overseas operations won’t be included in the Chapter 11. Like Delphi, the filing will only cover U.S. ops (GM corporate and GMNA).

The day GM files for Chapter 11, they’ll unleash an extensive advertising and PR assault. The huge (and hugely expensive) campaign will assure customers, dealers and suppliers that the automaker’s business will continue. The offensive (in all senses of the word) will blame GM’s collapse—sorry, “restructuring” on rising gas prices, the general economy malaise, imports, etc. Customers will thrill to the revelation that all GM warranties will still be in force on existing and new cars.

DT says GM will immediately seek– and receive– Debtor-in-Possession (DIP) financing. How many billions they’ll Hoover-up to keep the lights on is anybody’s guess. Congressional hearings? Of course. Federal loan guarantees? You betcha. Strings attached? Plenty.

After six to nine months, GM as we know it will be dead. Under new leadership (one can only hope), the company will carry-out the brand restructuring that was due even before GM went nuts and bought Saab and HUMMER. Buick, Pontiac, Saab (in North America), Saturn and GMC will all be axed. DT has no doubts about what will happen on the sharp end: “dealers get fucked without recourse.” Only Chevrolet and Cadillac will remain in business.

Meanwhile, despite their political influence, the United Auto Workers will not be happy; the Mother of All Health Care VEBAs will not be funded. Period. The union will have to make do with what they have. DT figures the rest of the OPEB (Other Post-Employment Benefits) also face a grim, under-funded future.

DT and I have discussed GM’s post-C11 prospects at length. We both agree that bankruptcy will not stop General Motors from selling plenty of cars. Everything sells at a price, and the deals will be nothing less than astounding. But bankruptcy will definitely cut into GM’s volume. That’s the multi-billion dollar question: how much will Chapter 11 hurt GM’s sales from a “normalized” level?

Make no mistake: GM’s bankruptcy is going to hurt a LOT of people. But not, DT says, one smart cookie: Kirk Kerkorian. Captain Kirk will lend Ford the money it needs to stay solvent. FoMoCo’s stock price will soar on news of a GM C11. To the victor belongs the spoils. The rest is, as always, collateral damage.

I recently bought a dishwasher. Investor Kirk Kerkorian (a.k.a. “The Lion of Las Vegas”) bought 20m shares of Ford Motor Company. As a percentage of net worth, we each spent comparative amounts. But I’m pretty sure I got the better deal. I’m positive I’m going to have guacamole-free dinnerware for the next five years. Capt. Kirk can’t make anywhere near as bold a statement about the longer-term value of his Ford shares. Or can he?

In May, billionaire Kirk Kerkorian’s Tracinda Corp. tendered an offer to purchase Ford stock at $8.50 per share, back when the American automaker’s stock price hovering around $6.12. Investors offered 1.02 billion of the outstanding 2.24 billion shares. Tracinda increased its stake in FoMoCo from 4.7 to 5.5 percent. This week, Kirk's mob upped their share of FoMoCo to 148m shares, or 6.49 percent of Ford's public stock.

The deal is glass-like, as in half empty or half full. The fact that the nation’s seventh richest man is willing to overpay for Ford paper by 34 percent is a glowing vote of confidence in the company. Tracinda believes Ford will transcend its troubles.

Conversely, owners holding almost half the company’s value wanted to dump and scatter like the cops just showed up. These people didn’t think Ford stock would reach even $8.60 any time soon. And why would they? Ten years ago, the stock traded in the 60s. Exactly whose view is more valid is a matter of perspective. Do you put more credence in the opinion of a couple thousand people or one 91-year-old guy?

It helps to know more about Kirk. An accomplished pilot, Kerkorian made his early money delivering Canadian planes to England using the fastest, most profitable and life-risking route. After WWII, he turned surplus bombers into an enormously successful charter airline. Its core service was Los Angles to Los Vegas. Sin City is where Kerkorian made his banked billions, buying and selling casinos and hotels.

Kerkorian’s interest in America’s automotive world is a familiar story. In 1995, he ambled over to a house of straw. Chrysler fended off the hostile takeover. In 2006, it was the RenCen’s house of wood. Kirk blew into the boardroom with 9.9 percent of GM’s stock, but accomplished nothing. He unloaded it all and huffed away. Departing from the traditional tale, Kerkorian went back to Chrysler in 2007, as Daimler sought to shed the company. He was outbid by Cerberus Capital Management. A year later and he’s standing outside Ford’s house of glass.

So what, precisely, does Tracinda want out of its Ford position? Seven percent of a company is certainly a good chunk, but it’s far from controlling interest. The Ford family retains 40 percent control, no matter who else owns what. Sure, you get influence, but you are not in charge. Even if, according to regulatory filings, Kirk's willing to offer an an "infusion of additional capital."

Perhaps Ford is a good buy. There are angles from which to view Ford stock whereby it’s doesn’t look so limp. Cash and equivalents divide out to more than $11 per share. Property is worth about $16 per share. Eight dollars and fifty cents ain’t bad if you’re going to carve this pig up. Not that slicing and serving are in Ford’s future. The family has become quite attached. Besides, if GM or Chrysler go down, they’ll be other meat on the table.

If Tracinda were simply taking a position in an undervalued stock, why go whole hog for this one? As of June Standard & Poors put FoMoCo in the bottom 40 of their 500 index. Ford’s off 28.9 percent for the year. Soaring gas prices are shifting U.S. consumers' tastes faster than any company can re-tool. Ford is running far bellow capacity at eight of its 15 North American plants. 

On the positive side, Ford is probably better positioned than Chrysler or GM to survive the near future. At the very least, they have some fuel-efficient cars to market, with another on the way. The other two American automakers have sucking chest wounds where their trucks and SUVs used to be. Still, that is an odd way to buy stock: wait to see if two major competitors kick it.

Kerkorian is euphemistically referred to as an “activist stockholder.” During his 18 months as a major GM player, he tried to force a deal with Renault/Nissan. When the board wouldn’t play his game, he sold his ball and left. Again, despite the back room meetings with Big Al and attendant ass-kissing, Kirk can’t realistically expect more power at Ford until the company is so far gone it's probably not worth it. 

All Kirk can really do is depreciate CEO Alan Mulally’s authority, either by suggesting what Mulally was going to do anyway, thus sapping credit, or causing dissention. Put short, he can make a small mess just when it appears Mulally has set the Blue Oval for “pots and pans” and hit start. Half full, half empty, whatever. For Ford’s sake, I’d like to see Kerkorian come clean.

High gas prices are a bit like the weather: everyone’s complaining but no one’s doing anything about it. Actually, that’s not true. At the sharp end, consumers are buying more fuel efficient vehicles. They’re driving less. We’ve even heard talk of gas-conscious automobilists driving more slowly. Now THAT’S serious, and, to mind, reprehensible. So, while the mainstream media is full of helpful advice on how to use less gas (e.g. take those gold bars out of your trunk), I hereby present TTAC’s unconventional guide to saving fuel this summer.

1. Let someone else drive. I know: Hell is other people. But we’re talking about freeing America from its dependence on foreign oil, stopping the oceans from overrunning the coasts (whatever happened to that idea?) and saving enough money to buy better quality alcohol. Which reminds me: designated drivers don’t usually drive your car…

Of course, that dodge won’t work during the day. In that case, don’t have a car– even if you do. In all cases, common courtesy says you should offer to help pay for gas. But before you do the right thing, hide your credit cards and carry no more than $10 in cash. By the same token, avoid car pools. They are official arrangements where someone is always calculating costs.

2. Don’t go to work. Let’s face it: work sucks. And half the time you’re there, you’re doing nothing more than schmoozing with people you can’t stand or sitting in meetings where nothing that gets discussed actually gets done. Telecommute.

The trick with this strategy is to start small. Ask the boss for an afternoon off– ONE– to work from home. Send him enough email cc’s so that he knows you’re not not working. Then make it formal. Then gradually increase it to a full day. Then two. Then three.

And make sure you show up on days when you’re NOT scheduled to be in the office. That way the boss knows just how dedicated you are (i.e. he’s never quite sure if you’re supposed to be there or not).

3. Get everything delivered. If humans weren’t warm-blooded, we wouldn’t need to eat so damn often. But hey, we didn’t get to the top of the food chain (never mind Camaro-ownership) by basking in the sun all day long. Darwin rules. As does your local grocery chain’s delivery service, which will gladly drop off all your basic foodstuffs after six hours spent registering on the internet.

In fact, pizza lover, virtually everything you need to survive in this life can be delivered to your door: your children, dry cleaning, alcohol, hookers, everything. Alternatively, stop buying so much shit in the first place. A 1080 HDTV with a PS3 (rent games and movies via snail mail) and a maximum cable bundle will help in that regard. Hey, sometimes you gotta spend money to save money. I mean, the environment.

4. Add a fuel surcharge. This is the flipside of bumming rides, and it’s surprisingly effective.

First and foremost, don’t let anyone passenger in your car without kicking-in for gas. Guilt trip them on saving trees or limiting foreign entanglements or personal penury. It may sound mean– OK it is– but deduct a small percentage from your children’s allowance to teach them about environmental responsibility. Call it the Revenge of the Soccer Mom.

If you’re the boss, tack on an optional (small print) customer charge to cover your gas costs. If you live close to either coast, call it a “carbon offset fee.” If you’re an employee, ask your boss for a gas allowance. Again, start small. “These fuel prices are killing me. Do you think the company could kick in $10 a week for my gas?” Get the accountant in the habit of paying for your receipts…

5. Get the taxpayers to pay for your gas. There are lots of part-time government gigs– both elected and appointed– that come with free gas (if not a free car), from city councilor to “private consultant.” Most drivers won't consider this option because it means spending thousands of hours telling people exactly what they want to hear (i.e. lying) despite the fact that they're ill-informed or deeply misguided. But there is a hidden payoff: public service puts you in the unique position where you can lecture people about the evils of Big Oil knowing that these same people are paying your fuel bills.

And now I throw it to you, TTAC’s Best and Brightest. What other “unconventional” methods can beleaguered motorists deploy to take the sting out of soaring fuel costs? Although I’ve restricted myself here to the [barely] plausible, feel free to wander into the realm of the ridiculous. Remember: our country’s future, indeed, the safety of our entire planet is at stake! Not to mention your beer money.