Triskedecaphobes beware: I make it 13 days until GM files Chapter 11. It will be interesting to see which meme means business on the day. Will the popular press parrot Detroit’s party line: comeback interruptus (i.e., unforeseeable events destroyed the best laid plans of mice and men)? Or will karmic retribution be the topic du jour (i.e., they killed the electric car)? No matter how the Monday morning quarterbacks parse it, there’s no doubt that Detroit’s decline will serve as THE case study in monumental failure for those who don’t want to read Gibbon’s “The Decline and Fall of the Roman Empire.” Always ahead of the wave, TTAC’s Paul Neidermeyer has already shared his analysis of this debacle. Paul’s warming up his Dawn of the Dead essay for the actual event. Meanwhile, a number of our Best and Brightest have sent me a link to a BusinessWeeksynopsis of “How the Mighty Fall: A Primer on the Warning Signs.”
Less than three weeks after Chrysler filed for bankruptcy protection, it looks as if the Obama administration will pull off its goal of completing the carmaker’s restructuring by June, allowing it to emerge as a smaller, more viable contender in the global auto market.
Who pressed the Easy button? Reading between the lines, it’s clear that the New York Times editorial board’s faith in “new” Chrysler stems from the fact that they’re planning to build the kind of cars [theoretically] favored by people who live in large urban areas. Hence the fact that The Gray Lady uses the phrase “fuel-efficient” twice in two sentences.
In an article about US Treasury Secretary Tim Geithner’s inability to tie his own shoes, the Washington Post leads with the heretofore disclosed fact that Wagoner’s looking forward to a $20 million payday. While the Post paints Geithner as an incompetent manager, that’s a no-win proposition no matter how you look at it. Stiff Rick and the guy’s bound to reveal the finer points of Uncle Sam’s takeover of a [former] blue chip company, including the deal they promised Wagoner to get him to jump. Pay him off and the howls of indignation will rile the nation, pissing off potential GM customers, further sinking “good” GM’s ability to sell someone a car.
Automotive News [sub] reports that Chrysler’s national dealer council has filed a motion in U.S. Bankruptcy Court to “save” the 789 ChryCo dealerships slated for termination. The council’s asking federal judge Arthur “Fast Track” Gonzalez to stay Chrysler’s dealercide in the name of Joe Q. Public. “Fewer dealers will mean less inventory available to the public,” the document maintains, placing Chrysler products on the same level as, say, foodstuffs. “Lower inventory reduces the chances that a customer will find the car they are looking for and therefore hurts sales.” A federal ruling to protect consumer choice in an industry with 40 percent plus overcapacity and enough excess inventory to choke an entire industrialized country? That’s just silly. Arty is scheduled to hear objections to Chrysler’s request on June 4, five days before the axe falls for good (or, in this case, “bad”). Never mind. Here’s where the REAL battle lines are forming . . .
Bloomberg reports that General Motors marketing maven Mark LaNeve is set to announce that the bankruptcy-bound automaker will drop the axe on 1100 US dealers at noon EDT (16:00 UTC). The move is designed to reduce GM’s dealer count from 6200 to 3200. Don’t tell the MSM, but the news is nowhere as dramatic as it seems. First, the cull won’t—in fact, can’t—take place until after The General files for Chapter 11, where bankruptcy law trumps franchise law. As Bloomberg’s insider says, “GM is hoping for an orderly wind-down of the affected dealers over the next year or so.” In that sense, the pre-C11 dealercide decision is just for show.
You may recall that General Motors recently circulated a document amongst their paymasters on Capitol Hill “revealing” that they planned to import 17,335 Chinese-made cars by 2011. At the time, we speculated that the leaked “bailout bucks for Chinese trucks” memo was nothing more than a negotiating gambit by GM, designed to bring the United Auto Workers to heel. Play ball and we build here. After all, what else does GM have to offer, other than threats to up stakes and leave? That said, floating a GM in China trial balloon makes the company no friends, uh, anywhere. Especially with their most important stakeholders: customers. Anyway, Bloomberg indicates that the cudgel may have done it duty. GM CEO Fritz Henderson told them (yesterday) that “using U.S. production instead of imports would pivot on whether the UAW can build the vehicles at a cost GM can afford . . . This is a discussion we’re having with the UAW.” And so, today’s Wall Street Journal tells us that “GM Nears Crucial Deal With UAW.” Which could all fall apart.
According to ABC News, on the same day that Chrysler filed documents with federal bankruptcy judge Arthur Gonzalez to terminate 789 dealers, the bankrupt automaker is scheming to reclassify its top suits as Fiat employees. The change would allow the execs to avoid the bailout-related federal salary limit. “In documents filed in bankruptcy court, the company said senior Chrysler ‘officers’—the company’s top executives—can be considered Fiat employees ‘seconded’ to Chrysler, and therefore be paid by Fiat beyond the $500,000 cap set by the government.” The smoking gun: “Any such seconded officer may receive supplemental employment compensation from Fiat . . . notwithstanding any ‘cap’ on compensation payable to such officer . . . under any Law, rule or policy applicable to the Company.” The MSM is bound to take this story and run with it. Which isn’t going to help ChryCo on the forecourt or in court after dealers file the inevitable class action suit against, uh, someone.
Well, duh. I mean, there could always be a planet killing meteor strike or something. But I wouldn’t count on it. Anyway, GM CEO Fritz Henderson left little doubt that May 31 is all she wrote in terms of GM’s ability to forestall the end of its glide-path into bankruptcy. “It is probable,” Fritz told Bloomberg. “Any trip through bankruptcy court must be fast, Henderson said today. It’s also important for GM to be able to make speedier decisions,” he said. What IS IT with this guy and speedy decisions? More haste, less speed, Mr. Henderson. Alternatively and inevitably, step aside and let the Big Boys git ‘er done. Meanwhile, how long before GM is de-listed from the stock exchange?
Chrysler has come within 11 dealers of confirming media reports that it would terminate 800 US dealers (dowload pdf list of 789 terminated ChyrCo dealers here). This as the bankrupt automaker steps-up its efforts to satisfy its federal overlords and prepare for Fiat’s command and control. Oh, and emerge from C11 as a viable automaker. Automotive News [AN, sub] has intercepted a memo from the corporate mothership highlighting the company’s care and concern towards the dead stores not selling. “Dealers are learning of their fate via UPS letters to be delivered this morning, the memo says. Dealers will get 23 business days for a ‘court review’ of their cases, according to the memo, from a sales manager to district dealers. ”All of this information is subject to change,” the memo says. Music to the dealers’ lawyers’ ears, presumably. Meanwhile, NADA . . .
You may remember that TTAC almost just about virtually proved that Chrysler CEO Bob “I Heart Pasta” Nardelli jumped on a corporate jet to fly from Motown to the City of Brotherly Love (then was driven in an EV mule to D.C.), to attend the second round of bailout hearings. This after The Big 2.8 execs (as they were at the time) flew straight into “jet-gate,” where reporters hammered them for Gulfstreaming to the bailout buffet. Far be it for me to repeat such lazy journalistic innuendo (oops), but the thick plotzes, as the Detroit Free Press reports that ChryCo is asking permission to terminate its leases on not one but two mighty fine Gulfstreams: a $38 million Gulfstream 450 and a $55 million Gulfstream 550. Leases, eh? “Chrysler took possession of them Jan. 1, 2008. It put up a $3.6 million security deposit on the 450 and a $5.3 million deposit on the 550. The automaker is seeking to apply the deposits to its seven-year lease obligations.” Awesome.
The Chinese “home grown” automaker Geely had been widely rumored to be highly interested in snapping up Volvo or Saab. Or both. They either have lost interest. Or they employ the stratagem usual in a Chinese market: Shout “Tai gui le!” (too expensive), make an indignant face, and walk away. If they run after you, the next round of haggling ensues.
Geely “has not submitted, and has no plans to submit, any bids concerning the takeovers of ‘Volvo’ or ‘Saab’ as stated in recent press articles,” said Geely in a notice to the Hong Kong stock exchange, and their stock price promptly jumped 13.6 percent, Gasgoo writes. It doesn’t mean they were not or are not interested. They just didn’t hand in a—formal—bid. They sure had been talking. Read More >
There’s really only question remaining: can GM make it to the end of the month? As the artist formerly known as “the world’s largest automaker” augurs-in for its official face plant, the market is readying for a total wipe out, sending The General’s share price to a buck a pop. Which is, as we all know, about a dollar too much. “Experts have said that GM’s stock is overpriced,” USA Today reports, “considering that the automaker’s debt-restructuring plan will leave current shareholders with just a 1% stake in the reconstituted company.”
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.
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