The Detroit News reports that Michigan’s congressional delegation has secured an agreement with House Democrats that could send three percent of the revenue from carbon emissions permits to American automakers starting in 2012. That would amount to billions of dollars every year, says DetN, and that’s not all. The new compromise also includes changes to carbon-cap proposals that “could ease the impact on states such as Michigan that rely heavily on coal for electricity generation.”
Yesterday, we had a post about far-reaching plans of GM. They wanted to sell exactly 17,335 made-in-China cars in the U.S.—by 2011. And triple that audacious number (51,546) by 2014. Or so they say in a (supposedly) confidential 12-page presentation to members of Congress. Trouble is, nobody really knows who will make the cars.
Gasgoo says today, “Shanghai Automotive Industry Corporation (Group) (SAIC), GM’s Chinese partner, said it hasn’t got such information from GM yet.” Mei you! Never heard of it. Could it be that someone just wants to rattle the UAW’s cage? If that’s the case, then the colleagues in Shanghai blew their cover. Or, less sinister, but more likely, does the left hand have no knowledge of the actions of the right? Or maybe, the cuts are so deep that they sent the P.O. by slow boat to China?
Of course not. It’s going to take a whole fistfull to make this spaghetti western happen. The Freep reports that when he replaces Bob Nardelli as Chrysler CEO, Marchionne will remain an employee of Fiat to avoid Treasury limits on executive compensation at firms receiving “extraordinary assistance.” Under these rules, compensation of Chrysler’s top executive is limited to $500,000 excluding restricted shares of stock. Marchionne earned around $4 million last year. Citing bankruptcy documents, the Freep explains that “under the deal, any of Chrysler’s top officers can be deemed a Fiat employee who’s “seconded” to Chrysler, and therefore take pay from Fiat beyond the Treasury cap.” Since Chrysler does just about everything “in consultation” with the Treasury these days, it’s hard to understand why Geithner’s own rules are being so blatantly flaunted. Oh well.
You’d better be, because the White House told Wall Street Journal that it will hold onto its GM stake for “at least two years.” Out of “necessity,” no less. And burning $10bn in cash per quarter all the way. According to the WSJ report, the White House still doesn’t want to involve itself in day-to-day operations. Is that offer only good outside of bankruptcy? If Chrysler is the canary in the coal mine, the answer seems to be yes.
Folks, we’re well into headless chicken territory here, as GM slides towards an end-of-the-month bankruptcy filing, pretending that it has clue one what to do next. Automotive News [sub] reports the latest End of Days delusion. GM’s circulating a “plan” amongst its legislative sponsors announcing its intention to sell 17,335 Chinese made somethingorothers in the US by 2011, and triple that number (51,546) by 2014. “The gains would come,” the document says, “as GM’s total US sales surge 50 percent in the next five years.” From current levels? Bullshit. Also, batshit. Why would GM seek to antagonize the United Auto Workers with all this import folderol? Surely the GM that I know and love would want to tell the world that the new GM will be an all-American carmaker, building American cars in American factories with American labor for American consumers taking full advantage of American subsidies and American incentives, with a warranty backed by the American government. Even—no, especially—as it’s not true.
The mainstream media is beginning to wake up to GMAC’s seemingly endless call on the public purse. Thanks to chronic mismanagement—and an 11th hour, last-minute back room deal with The Fed and the US Treasury that turned the virtually bankrupt lender into a bank that couldn’t pass a stress test if it was doped-up to the eyeballs with Thorazine—GM’s former cash cow has become a cow-sized vampire bat, feasting on US taxpayers’ blood, sweat and tears. It’s sucked-up $6 billion in federal funding so far, heading for another . . . wait for it . . . $15.5 billion. The Wall Street Journal is shedding a little heat (not light) on this “hidden” auto bailout, which is heading for another one of those dumb-ass “your money for government equity in a born loser” jobs. Without the slightest hint of accountability.
Time did the math, and reports that the total cost of the recent wave of automotive industry “assistance” has reached $83 billion. With Chrysler’s bankruptcy not going well (286,687 2009 models and 36,370 2008 models languishing on lots, according to Fortune) and GM about to join it in court, that number will top $100 million by the end of the summer. GM bondholders are also requesting something more than ten percent of New GM’s equity to give up their debt. And guess who’ll pay for that? Meanwhile, a lousy $4 million in federal emergency grants are going to assist Michigan’s autoworkers who have been laid off by the industry.
Remember the whole “we do not want to run the automakers” routine? Cue up the laugh track. President Obama’s PTFOA has intervened to halve Chrysler’s ad budget during its taxpayer-funded bankruptcy, reports Automotive News [sub]. Chrysler had requested $134 million for advertising during its alleged nine-week bankruptcy. That request was halved by the PTFOA because that body “believed that it was not feasible to not spend anything on marketing and advertising for fear of eroding the image of the brand,” says Chrysler Chapter 11 consultant, Robert Manzo, in court documents. We knew Chrysler’s DIP budget was being drawn up “in consultation with the Treasury,” but this is the first glimpse of a struggle between Chrysler management and its government paymasters.
The $5 billion bailout of Detroit’s suppliers has “flopped” according to Automotive News [sub]. Even though the bailout funds were made available in mid-March, money has yet to be disbursed even to firms which have been blessed with OEM approval. Problems seem to be traceable back to the decision to use Citigroup to manage the funds. “All our paperwork has been in for weeks,” says one supplier CEO. “But Citibank does not return phone calls or e-mails.” With reports of Citi being “overwhelmed” by supplier applications (aka anyone owed money by GM or Chrysler) and rampant government red tape, what do Citi, GM, Chrysler and the Treasury say about the unfolding boondoggle? Nada. “A Treasury spokeswoman said the government has no information on how the car companies have disbursed the money or to whom. She referred all questions to GM and Chrysler.”
Some vehicles are doomed from the start. Take the Acura RDX: a not-inexpensive CUV with aesthetically challenging looks nestling amongst Honda’s “Huh?” brand. The RDX seems carefully designed to appeal to the few, the proud, the pistonheads. You know: enthusiasts who absolutely must have a willing engine, a chassis that’s a suitable dance partner and the elevated driving position of SUV—all at a price that’s significantly higher than more sensible (if dull) alternatives made by brands whose street cred didn’t die with the Integra. You see how that doesn’t work?
TheDetroitBureau.com (TDB) reports that GM’s lame duck Car Czar is a Chrysler creditor. The size and nature of Bob Lutz’ claim against the other zombie automaker is not yet known. But I reckon the ex-ChryCo exec’s pensions and bennies got sucked into the black hole. (Hey, I did warn him.) In fact, Lutz is going for a C11 triple: Exide, Chrysler and GM. While we await the official Chrysler court docs, the list of Auburn Hills’ other creditors is long and revealing. Number one: you, the taxypayer, dwarfing the second largest creditor by some $9.42 billion. So large, in fact, it’s not even on the list. Which leaves chassis maker Ohio Module Mfg. Co. as the largest non-governmental creditor. Ad agency BBDO Detroit Incorporated clocks in at number two most owed, at $58,055,133.44. As TDB observes, “Who would have thunk it! Well maybe it’s like American beer, the advertising and promotion cost more that the production of the stuff inside the can. Still, this is more money owed for advertising than steel, since U.S. Steel Corporation is owed only $16,182,772, as of April 30.” Looks like the spinmeisters got spun.
Chrysler’s stiffed a member of our Best and Brightest:
When I purchased my ’09 300C I traded in an ’05 that had a Chrysler extended service contract with time and mileage remaining. I called Chrysler and they gave me all of the information for obtaining a pro-rata refund as per the contract. I faxed it over and got very quick service. I had a check from Chrysler in the amount of $363.62 in under two weeks. I cashed it at my bank and today my bank mailed it back to me: Insufficient Funds! The check was drawn on a JP Morgan Chase account. I guess the bankruptcy is going to strike close to home.
The Detroit News has obtained a confidential memo from GM to federal legislators. The smoking gun reveals that the soon-to-be-taxpayer-owned (officially) automaker plans to boost US sales of vehicles built in China, Mexico, South Korea and Japan by 98 percent (to 365k units). In the face of union criticism of the plans, GM claims that the percentage of its imports will remain at 33 percent. By 2014. When its sales recover to 3.1 million vehicles per year. Providing it maintains its current market share. All things being equal. With the wind in the right direction.
At the same time, The General aims to shrink production in Canada, Australia and European countries by about 130k. For a sneak peak at the less tortuous justification for this outsourcing on Uncle Sam’s dime, we turn to veteran Detroit apologist and Washington Post car critic, Warren Brown . . .
The US Treasury Secretary had a little chin wag with Reuters re: GM. It seem that Mr. Geithner is as pleased as punch with his minions’ work with Chrysler’s bankruptcy. So pleased, in fact, he sees ChryCo’s dissolution solution as a template for GM’s C11. You know “if”. “There is a range of ways to achieve [GM’s restructuring]. You saw what we did in the Chrysler context as one way to do it and if that proves necessary in the GM context, we’ll do that.” And then the aforementioned “if”. “But we’re not at the point where we need to make that judgment yet.” Sure. They’ve got 28 days to convince GM’s bondholders—a motley crew of “investors” looking at differing payout and maturity dates—to take a flyer on a company that hasn’t made a profit for . . . sorry, debt for equity swap. And here’s some fuel for those who see the government’s role in the US auto industry as reprehensible.
Time steps up to the e-plate with some timely cross-border bailout comparative analysis. “Canada is paying a significant premium over the U.S. to save Chrysler jobs at home, with no guarantees that the billions it is laying at the automaker’s door will ever be repaid or do anything to help maintain the country’s 20% production share of the North-American auto industry.” Drum roll . . . “Ottawa and the Ontario government are contributing a total of $3.2 billion in loans to keep Chrysler Canada alive, including $850 billion extended to the ailing automaker at the beginning of the year.” No, no, it’s a misprint. But even so, “the Canadian rescue package works out to more than $340,420 for every employee at Chrysler Canada, which has 9,400 hourly and salaried workers on payroll. That’s 15% more than the $295,000 per employee that Washington is shelling out to save about 40,000 Chrysler jobs in the U.S.” Why do I get the feeling that these numbers are lowball estimates? Because they are?
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