The AP (via Yahoo!) reports that Chrysler will ask Judge Gonzalez to cancel “at least” 800 dealer franchise agreements on Thursday. The news comes from lawyers of Cincinati firm Squire, Sanders & Dempsey, who are organizing opposition to the move. Automotive News [sub] has more on the effort, reporting that the National Automobile Dealers Association is soliciting $4,000 contributions from members to create a legal defense fund. Also, just because a dealer doesn’t get the axe on Thursday doesn’t mean they’re out of the woods yet. Mother Fiat is sees dealer cuts as business item number one for its new Chrysler division, and Thursday’s cuts are being called “preliminary.” Dealer cuts “won’t be a huge catastrophic number,” Jim “It’s Always Sunny In Auburn Hills” Press tells Bloomberg. After all, about 50 percent of Chrysler’s 3,188 dealers generate 90 percent of its retail sales.

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.

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Credit Default Swaps (CDS) are a fairly complicated financial instrument. The bottom line: a significant number of GM debt holders stand to make more money if GM defaults and enters Chapter 11 than if it doesn’t. “According to the Depository Trust & Clearing Corporation, investors hold $34bn in CDS on GM,” the Financial Times reports. “Once off-setting positions are considered, the DTCC estimates CDS holders would make a net profit of $2.4bn if GM were to default.” That’s net profit. Reuters puts the total pay off at $4 billion. But don’t worry about the CDS payees; the Bank of America says “any payments are unlikely to cause widespread losses.” Easy for them to to say. The feds gave the Bank of America a $20 billion bailout in January and $118 billion worth of guarantees against bad assets. Anyway, CDS are not THE reason why GM’s debt holders won’t agree to restructure the ailing American automaker outside of bankruptcy. Some may actually believe that a liquidation offers a better chance of recouping their money. But CDS are not exactly at the bottom of the causation pile, either. Especially as the Treasury’s out-of-court debt-for-equity offer requires a 90 percent conversion rate. Say goodnight, Dick.

Automotive News [sub] reports that Vice Chairman of Global Product Development, Bob Lutz, has cashed in his GM chips, selling all his remaining shares in his bankruptcy-bound employer. The ex-Car Czar dumped 81,360 GM shares, slipping $130,989 into his pocket. The sale follows Lutz’s recent filing in Chrysler’s bankruptcy case: an effort to settle an unspecified, but most likely, pay-related claim. Meanwhile, “According to the [SEC] filings, the five other executives who sold all of their GM stock holdings were: Lutz’s successor, Thomas Stephens; GM North America President, Troy Clarke; Chief Information Officer, Ralph Szygenda; manufacturing chief, Gary Cowger; and head of European operations, Carl-Peter Forster.” Apparently, insider trading laws had prevented this mass display of confidence in GM previously. But a “trading window” opened on Monday that allowed the transaction without any legal repercussions. Morally, well, that’s a different story. Bottom line: GM C11 by June 1.

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.

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“Today’s equity offering is another example of the fast, decisive action we are taking as we build momentum on our plan, including further progress on improving our balance sheet.” Well, he would say that, wouldn’t he? And now’s as good a time as any for Ford CEO Alan Mulally to cash-in some of his employer’s chips by selling 300 million shares of common stock. Ford’s stock price has tripled—from not very much to three times not a whole lot—since Chrysler filed for Chapter 11 and GM heads for same. And Ford needs a mountain of cash to honor their contract with the United Auto Workers. While the MSM is busy repeating Ford’s “we’re the only one not suckling on the federal teat” mantra, keep in mind that the sale should raise $1.8 billion or so, and we’re talking a $15 billion total obligation the union’s VEBA health care fund. The market knows: Ford’s stock sank nine percent today on the news of the offer. Still, as we’ve said all along, there’s something to be said for being the last man standing. The question is, what? Let’s hope it’s not “our turn.”

General Motors is is “open to considering moving its headquarters from Detroit, selling off U.S. plants and even renegotiating parts of its restructuring plan with its major union,” CEO Fritz Henderson told Reuters today in a conference call. The possible relocation and renegotiations are part of a last-ditch effort to restructure GM outside of bankruptcy, a move that Henderson admits is likely to fail. “It’s more probable that we would need to accomplish our goals in a bankruptcy,” says Henderson. “There’s still a chance for it to be done outside a court proceeding.”

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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 . . .

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A TTAC source signs in with an interesting question:

I have one on “anonymous background.” Did you know members of the board of bystanders at Chrysler get new cars for life? I’d have thought Cerberus would have gotten rid of that stuff, but no. There is someone I know who was a director who got his new car this year. You think the gov’t is going to change that policy now that we own it? I wonder how many other “traditional” perks that were waaaay too common in Detroit and not the rest of the world are still being given to retired execs and board members?

When life gives you lemons, you make lemonade (or glazed strawberry lemon streusel muffins). When Chrysler gives you lemons, you’re SOL. Since April 30, Judge Arthur Gonzales has to approve payment on claims against Chrysler incurred before C11. That includes “lemon law” settlement checks to customers who bought defective Dodge, Chrysler or Jeep products. Not happening. “San Diego attorney Ellen Turnage represents a client who reached a settlement with Chrysler over a 2006 Dodge Magnum with a bad suspension. The car has been returned to Chrysler, but the automaker’s check bounced. ‘Now he’s got no car and no money, so he can’t go buy a new one,’ Turnage said of her client. ‘He’s stuck. We’re hanging on to a glimmer of hope that at some point this will all be resolved.'” As the LA Times reports, Turnage’s pessimism is well-justified. Instead of saying, sorry, we’ll expedite this, the new Chrysler is telling aggrieved customers to FO&D.

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A TTAC source has pinged us: “‘I’ve just heard 2nd hand that the Delphi OnStar team has had all their GM contracts canceled. It seems that GM may be getting rid of OnStar completely, but it isn’t clear when that would happen. This sounds like a pretty good business decision to me since cell phones have become so widely adopted, and navigation systems are getting cheaper.” This tip flies in the face of a recent Reuters report, in which the head of said OnStar claimed the service was wildly profitable. OK, “highly.” Which is the same as “wildly,” given GM’s current slide into C11. Anyway, “GM does not break out its revenue or profits from OnStar, but had said the division had turned profitable in 2003 and has been steadily and more profitable since. The division receives part of its revenues from consumer subscription fees.” One possible explanation (just in): GM is simply “de-sourcing” Delphi as OnStar supplier, as it prepares to deep-six the bankrupt parts-maker’s contracts. Or something. But wait! More tipster action from an ex-OnStar employee after the jump.

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The Motor Authority reveals that Cadillac has spiked the STS-V model for 2010. The high-performance variant of the brand’s slow-selling flagship (who knew?) joins the Impala SS, Cobalt SS and Pontiac G6 GXP in model heaven (purgatory?). The SS moniker will live in in the hearts and minds of students of Jewish persecution and fans of the new Chevrolet Camaro. As widely reported elsewhere, GM CEO Fritz Wagoner Clone Henderson specifically highlighted the fact that GM was NOT going to drop the Corvette from its shrinking roster of performance-oriented brands—I mean, products. This despite slow sales, a ruling Presidential Task Force on Autos that keeps mentioning the words “small” and “fuel efficient” (yes, I know), and the fact that the in-house fanzine “Corvette Quarterly” has published its last paean to pistonhead perfection, or a reasonable facsimile thereof.

Tom Blumer, in the WSJ, says, “Non-TARP Lenders Aren’t Making Up the Stories of White House Pressure,” citing conversations with anonymous Non-TARPies. According to these former holdouts, still masked and anonymous due to fear of reprisal, government officials went to the mats to pressure bondholders into compliance. Seeing as the group has dwindled from twenty to five since Obama called the group “hedge fund holdouts,” these tactics seem to have been highly effective. GM bondholders, pay attention (if you aren’t already).

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We’ve received this heads-up letter to GM dealers from one our sources on the front line. [Thanks to you-know-who-you-are.]

IMPORTANT BULLETIN: Parts Order Management Update

Paul Copses, Executive Director — GM SPO Sales and Marketing, and Charlie Hyndman, Executive Director– GM SPO Global Warehousing and Operations

05/06/2009

To: All ACDelco Customers, GM Dealers and Saturn Retailers (US, Canada, Mexico, Middle East, Other)

Please be advised that GM Service and Parts Operations have been working on supply plans for all of our suppliers over the past few months to ensure adequate inventories of service parts for our customers. However, in order to carefully manage inventories for our key supplier, Delphi, it is necessary to take some near-term actions.

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