Analysts are reporting that GM could announce full-year 2010 profits of over $5b tomorrow, although Q4 profits may have dipped to $1.06b. That would make its full-year results the best since a $6b profit in 1999, but Q4 results could be the second-worst since emerging from bankruptcy. Why the slowdown? Analysts give Bloomberg a number of possible explanations, including

• GM’s spending on cars including the Chevrolet Volt plug-in hybrid and future products may lead to higher costs similar to those that restrained profits at Ford and Daimler AG.
• Automakers are paying more for materials such as steel and are struggling to pass the costs to consumers amid a “somewhat weak” economy
• Restructuring unprofitable European operations

Of all these dynamics, however, CEO Dan Akerson’s rush to revamp GM’s lineup and expand the applications of the Volt’s drivetrain could end up driving the most cost. Though GM is making a healthy profit again (and not paying taxes on it), an overly-ambitious speed-up in product cadence could combine with rising costs to slow The General back down (as they have already done to some extent at Ford). In any case, we will certainly have a better picture of GM’s financial performance tomorrow, when the firm’s results are announced.

Automotive News [sub] reports:

Sixty-four dealerships that were terminated during Chrysler’s 2009 bankruptcy reorganization sued the U.S. Treasury Department today, seeking at least $130 million.

The suit, filed in the U.S. Court of Federal Claims here, alleges the government violated the Constitution by taking the stores’ franchises and their state legal rights without adequate compensation.

Lawyers for the plaintiffs say that more dealers could come on board, as the 64 suing dealers represent only eight percent of Chrysler’s cull. Neither Treasury nor Chrysler (which is not named in the suit) have commented. The suit, which can be read in its entirety in PDF format here, claims violation of Fifth Amendment rights, arguing that:

[the dealer cull] served the public purpose of promoting stability to the financial system of the United States… This is a loss that should not, however, be borne by a few individual dealers but, by reason of its broad and salutary public purpose, must in fairness and justice be borne by the public as a whole.

Bloomberg reports

GM plans to pay bonuses to most managers equal to 15 percent to 20 percent of their annual salary and as high as 50 percent to less than 1 percent of its 26,000 U.S. salaried employees, said one of the people, who asked not to be named revealing internal plans. Bonuses for Chrysler’s 10,755 salaried workers will average about $10,000, with a small group getting as much as half of their salary, one of the people said.

And with GM and Chrysler heading into contract negotiations with the UAW, this is not going to be winning the manufacturers many friends among the union.

“The union is going to be very angry about this,” Gary Chaison, a professor of industrial relations at Clark University in Worcester, Massachusetts, said in an interview yesterday. “If these kinds of bonuses are paid to salaried workers, then the union’s demands will increase, knowing management can’t claim an inability to pay.”

But wait, isn’t GM giving hourly workers the biggest bonuses in company history? What’s going on here?

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CEO Sergio Marchionne certainly suggested as much in a speech at the NADA convention over the weekend, in which he said

Who knows? In the next two or three years, we could be looking at one entity. It could be based here

From the perspective of the American taxpayer, this would certainly be the favorable outcome. After all, Fiat didn’t put a single Euro into the restructured Chrysler, and national bailouts don’t usually result in the expatriation of the bailed-out firm. But the US Treasury department isn’t the only master Fiat has to serve, and Marchionne’s suggestion that the Fiat-Chrysler alliance has touched off something of a “firestorm.” The Financial Times reports that

Pierluigi Bersani, leader of the [Italian] opposition Democratic party, demanding an explanation from Mr Marchionne said it was unacceptable for “Turin and the country to become a suburb of Detroit”.

Industry Minister Paolo Romani adds [via the Montreal Gazette]

The head of the carmaker must remain in Turin

And with Italian backlash against a possible Detroit headquartering of the Fiat-Chrysler alliance building, Marchionne is backpedaling furiously.
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You want the good news or the bad news first? OK, the good news is that Fiat/Chrysler CEO Sergio Marchionne told attendees at NADA’s annual convention that Fiat and Chrysler “may” be merged into a single company, possibly headquartered in the US. Which means the federal bailout may not have simply been a transfer of the firm to Italian ownership, news that many taxpayers likely find at least a little bit comforting. Now, about that bad news… while saying that he planned to “work his [rear end] off” to pay back taxpayers, Marchionne let slip a bit of the resentment he clearly feels at government ownership of Chrysler, saying

I am paying shyster rates. We had no choice… I am going to pay the shyster loans.

Jalopnik does a good job of covering the roots and associations of Marchionne’s choice of words (and clearly he could have chosen better), but we’re mostly irked by the victim complex embraced by executives of the bailed-out automakers, especially in Marchionne’s case. The Fiat CEO was given 15 percent in Chrysler for no cash down, and will be able to take control of the automaker for a tiny fraction of its actual value. All this was possible only because the government guided Chrysler through bankruptcy, crammed down its bondholders, demanded union concessions and injected tens of billions into the company… and now Marchionne wants to employ slurs to complain about the fact that some of that money must be paid back?

These comments cloak Marchionne in the gravitas and respectability of someone who believes he should be able to receive unemployment benefits without actually looking for a job. Especially considering that only yesterday Marchionne was slamming GM for turning down DOE loans, saying

I have neither the arrogance nor the cash to show any disdain toward the DOE process. It would be wiser to Chrysler to continue to try to secure that funding.

Given that public support for the bailout is still quite low, Marchionne’s comments could hardly have been more poorly chosen.

GM has just dropped a press release [in .docx format here] announcing that it has withdrawn its request for $14.4b in low-cost government retooling loans through the Department of Energy’s “Section 136” or ATVM loan program. Says CFO Chris Liddell

This decision is based on our confidence in GM’s overall progress and strong, global business performance. Withdrawing our DOE loan application is consistent with our goal to carry minimal debt on our balance sheet. Our forgoing government loans will not slow our aggressive plans to bring more new vehicles and technologies to the market as quickly as we can. We will continue to make the necessary investments to assert our industry leadership in technology and fuel economy.

Color us stunned. The “136” loan program was nearly used as a slush fund to bail out GM and Chrysler before President Bush ruled that the automakers qualified for TARP relief. Shortly after the bailout, GM said that the loan program was “one of the sources of liquidity GM is factoring into its plans in order to meet its capital requirements in the future.” More recently, it seemed that the loan program was on hold while GM and Chrysler were qualifying for loan requests that would have drained the program of funds. Now, with GM’s request dropped from the queue, there could be as much as $10b left for other manufacturers. Plus, by turning down cheap government loans, GM has made its first major (voluntary) step towards beating back the Government Motors moniker. Good for them.

One of the more dangerous conflicts embedded in the US auto bailout that was identified in the recent Congressional Oversight Panel report has been a TTAC hobbyhorse for some time, namely the tradeoff between GM’s success and that of its former captive finance arm GMAC (now known as Ally Financial). As we wrote back in May,

if government-owned Ally isn’t interested in underwriting GM’s volume gains with risky loans but also isn’t interested in seeing its auto lending business bought by GM, there’s trouble brewing. After all, that would leave GM with only two options: partnering with another bank, or starting a new captive lender. Either way, a new GM captive lender would likely force Ally into offering more subprime business anyway, or face losing its huge percentage of GM business.

Fast forward the better part of a year, and GM has indeed bought its own in-house subprime lender, leaving the COP to term The General’s lack of interest in taking care of “the Ally Tradeoff” as “disconcerting.” After all, with over 20 percent of GM’s equity and over 70 percent of Ally’s stick, the Government should have been able to work out some kind of deal that gets GM and Ally back on the same page… right? Not so fast, reports the WSJ. Ally turned down a $5b GM offer for its wholesale lending business earlier this year, and now it seems another deal may be in the works. But it has nothing to do with maximizing taxpayer payback, and everything to do with shoring up GM’s floorplanning credit. And it’s not coming from the government, but from GM’s newly-ubiquitous CEO Dan Akerson.

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The Department of Energy’s $25b Advanced Technology Vehicle Manufacturing Loan program was very nearly used as a slush fund to keep GM and Chrysler afloat during the dangerous days leading up to the federal auto bailout. Though President Bush’s decision to use TARP to rescue America’s failing automakers took away the need to tap the so-called “retooling loan” program to fund America’s auto bailout, that decision also contributed to a long delay in the allocation of the ATVM loans. Because the loans require applicants prove “financial viability,” GM and Chrysler’s requests (which account for $17.4b out of the remaining pool of $16.7b in non-allocated loans) have been on hold, and with them, every other automaker still seeking approval for its requests. And now, with no word from the DOE on the loan program since last April, congress is agitating for the DOE to make with the loans already. Senator Diane Feinstein captures the frustration in a letter published by the Detroit News

“On multiple occasions, the department has missed internal deadlines for initial decisions, term negotiations, final decisions and loan closure,” she wrote, saying the department failed to give applicants “a clear timeline.”

But did the DOE miss deadlines and string automakers along out of negligence, or because it had to wait in order to fulfill the loan program’s mission, namely supporting the bailed-out automakers?

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Fiat split its auto business from the rest of its industrial operations today, creating two new companies: Fiat and Fiat Industrial. Fiat CEO Sergio Marchionne announced the move as a way for Fiat to unlock its share value and concentrate on its core business, telling the AP [via Newser]

This is a very important moment for Fiat, because it represents at the same time a point of arrival and a point of departure. Faced with the great transformations in place in the market, we could no longer continue to hold together sectors that had no economic or industrial characteristic in common.

But with Fiat Industrial taking care of the truck-and-tractor side of the business independently, Fiat SpA is focusing on the task at hand: Chrysler. With a 35 percent stake in the bailed-out American automaker in the bag, Fiat is aiming for a controlling stake when Chrysler’s IPO hits the markets later this year. And though the spin-off of FIat’s non-automotive business opens the door for a full merger of Fiat and Chrysler, Marchionne denies that a full merger will take place, saying only that

I don’t know whether it is likely, but it is possible that we’ll go over the 50 percent mark if Chrysler decides to go to the markets in 2011. It will be advantageous if that happens.

But don’t mind Sergio’s equivocation. Fiat will almost certainly snap up the remainder of a controlling stake by the end of this year. Here’s why…

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Chrysler’s bailout-era dealer cull has ended up being something of a nightmare, with a number of dealers successfully fighting for reinstatement as federal investigators look into possible criminal wrongdoing. And whereas GM has basically rolled back much of its dealer cull, Chrysler has consistently used arbitrary calculi for closing dealers and has resisted giving dealers the opportunity to reclaim their franchises. Now, the dealers that have won reinstatement in congressionally-mandated arbitration hearings are facing a new threat: relocation. Automotive News [sub] reports that Chrysler’s method of dealing with reinstated dealers is to force them to relocate wherever Chrysler wants them to go. Chrysler has filed a request in a Michigan District Court, asking for the ability to relocate some 20 dealers in 6 Midwestern states, a move it says it must undertake in order to protect its non-culled dealers. But, having picked the winners and losers among its dealers only to see some of them reinstated, shouldn’t these reinstated dealers be afforded the same rights as the dealers who weren’t culled in the first place?

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One of the many reasons for Ford’s surging market share are Americans who refuse to buy a car from a company that has been bailed-out with their tax dollars. In survey after survey after survey, Americans took issue with the bailouts. The backlash was so severe that one of the first measures Joel Ewanick implemented at GM was to get rid of GM. He replaced “General Motors” with “the parent company.” Smart move: You can be against Government Motors. But who dares to be against parenthood?

Ford meanwhile rode high on the perception that they didn’t accept a single dollar. “Ford did not seek a government bailout,” says a very recent Rasmussen Report,  “and 55 percent of Americans say they are more likely to buy a Ford car for that reason.”

Americans (and possibly GM and Chrysler) are the victims of a big lie, says Wall Street insider Eric Fry. And he has the numbers to back it up. Read More >

ABC reports that GM has purchased $2.1b worth of its stock from the Treasury Department, bring the government’s stake in the bailed-out automaker to 33 percent. GM’s stock price must now reach $53/share in order for the government to recoup its remaining $16.88b investment in The General. GM’s stock currently trades at around $33.70, and recent analysis from UBS shows that the company faces significant short-term challenges as an investment.

GM CEO Dan Akerson may believe that

There’s more to life than money,

but he tells the Freep that GM is running the risk of losing top managers to the competition, and must seek more flexibility on pay rules from the Treasury. Akerson wouldn’t clarify what kind of concessions he’s asking for from Treasury, but says that the risk of losing employees in the short term is very real. Meanwhile, even though the government isn’t the majority stakeholder in GM any longer, it will have to OK executive compensation packages until the bailout is paid back. Which prompts The Atlantic‘s Daniel Indiviglio to suggest

there may also be ways to structure pay to minimize cash in compensation packages. For example, if a large portion of compensation is awarded in GM stock that does not vest until the company has paid back the bailout, then this would provide additional incentive to these executives and limit their immediate cash compensation. Unfortunately, there’s no perfect solution to this problem, because the government shouldn’t be involved in the business of bailouts in the first place.

The bailout of GM and Chrysler was nothing compared to the giant TARP thrown to bankers and brokerages, or so the argument goes. A panel of constitutional experts, convened at a Stanford Law School conference about the constitution and bailouts, has a totally different opinion: Bank rescue o.k., car rescue not o.k. Read More >

As of last December, GM’s pension accounts faced a $17b shortfall, raising a real concern about the long-term viability of the bailed-out automaker. With its IPO put to bed, GM is now announcing that it will pay $4b into its salaried and hourly pension accounts, and plans on adding another $2b in stock to the accounts by year’s end. That roughly approximates the $5.9b that GM will have to pay by 2013, which still leaves a $6b minimum payment due by 2014. Add that to the billions likely required by its Opel and Daewoo divisions, as well as the billions needed to pay back taxpayers, and it’s clear that GM’s dwindling cash pile still faces considerable demands. But at least the firm isn’t pretending like its pension shortfalls don’t exist.