As compelling as Ford’s executive paycut for Easter Monday holiday “compromise” is, there are still plenty of stormclouds brewing around Dearborn. For example, Ford’s supplier spin-off Visteon is tanking, telling Automotive News [sub] it “cannot assure that it will remain in compliance with the terms of its outstanding debt instruments.” The firm’s $328m fourth-quarter loss is being blamed on a billion dollar revenue drop and “asset-impairment charges” of $200m. This coming from a firm that has never turned an annual profit. Amid growing rumors of bankruptcy filings (and 13 cent stock price), Visteon’s only other choices are asset sales or government bailout. Meanwhile, inquiring minds (OK, MSNBC) are beginning to wonder when Ford will succumb to the siren song of the federal bailout.
Whoa. I mean, way-hey! It seems like just a thousand years ago that GM started hyping their retro-styled rear wheel-drive Chevrolet coupe. And now, at least a week before GM scarfs another “bridge loan” and a good month before the company files for Chapter 11, one of our valued contacts has sent us these dealer prep sheets (PDF) for the new 2010 Chevrolet Camaro. Thank God GM Car Czar Bob Lutz is still alive to see this day.
Bloomberg reports that a GM bankruptcy filing could result in an up to $1.2b payout to its advisors, lawyers, accountants and affiliated toadies. According to UCLA Bankruptcy professor, Lynn LoPucki, the GM bailout bonanza could easily shatter the previous record for bankruptcy fees, set at $906 million by Lehman Brothers. “The bonanza has already begun and will continue through the bankruptcy,” LoPucki tells Bloomberg. Her estimate is based on bankruptcy statistics that she collects, and she says the size and complexity of GM would make its bankruptcy significantly more expensive than even the Lehman filing. And of course news of these fees has anti-bankruptcy politicians downplaying rumors that the Obama administration will arrange a Chapter 11 reorganization for GM.
The Freep reports that Chrysler’s cash reserves will fall well below the $2.5 billion the firm needs to survive sometime in March. Based on a liquidation analysis in Chrysler’s latest viability plan, Auburn Hills will be down to $1.3 billion by the first of April. According to the same analysis, Chrysler would need $25 billion in Debtor-In-Posession (DIP) financing to survive through Chapter 11 reorganization, a process the firm expects to last two years. And if the private sector won’t provide it (it won’t) and the government won’t cough up DIP financing or more loans (it shouldn’t), Chrysler will begin to liquidate its assets in April. After all, why should Cerberus lift a damn finger? But if liquidation does occur, Chrysler would dump $2 billion in pensions and $20 billion in health care obligations on the government, not to mention defaulting on the loans it currently owes the government. Meanwhile . . .
Well, the headline is there and the news is there. But is it? The Freep reports that a UAW-Ford deal on VEBA has been announced by the UAW, but there’s nothing there that you can’t find in the UAW’s press release. Go figure. Sure, it may be the first reported agreement on the future of VEBA, but there’s basically nothing to go on. “We appreciate the solidarity, understanding and patience the members have demonstrated throughout the bargaining process,” says UAW President Ron Gettelfinger in his press release and nearly every news report on the item. “The modifications will protect jobs for UAW members by ensuring the long-term viability of the company.” But how? The UAW rejected stock for VEBA out of hand a few short days ago, as VEBA became the sticking point that kept union concessions out of last Tuesday’s viability plans. And like all UAW “concessions,” this one has to go to the membership for ratification. Furthermore, according to the Freep, “proposed changes to the VEBA will require court approval.” Meanwhile the only possible insight we have into the UAW’s strategy comes from a boilerplate Gettelfinger op-ed in the Washington Times. And there’s little there to indicate a VEBA deal.
Trollhättan – As a result of GM’s strategic review of the global Saab business the Saab Board announced today that it will file for reorganization under a self-managed Swedish court process to create a fully independent business entity that would be sustainable and suitable for investment.
The reorganization is a self-managed, Swedish legal process headed by an independent administrator appointed by the court who will work closely with the Saab management team. As part of the process, Saab will formulate its proposal for reorganization, which will include the concentration of design, engineering and manufacturing in Sweden. This proposal will be presented to creditors within three weeks of the filing. Pending court approval, the reorganization will be executed over a three-month period and will require independent funding to succeed.
Now that’s its all over bar the shouting (Saab has filed for the Swedish equivalent of bankruptcy), the shouting begins. Saab’s new owners (themselves) say they need $1B to stay in the game, and they want GM to pay it. (Reparations?) Automotive News [sub] reports that GM is willing to surrender a big chunk of your taxes to cut bait and [Swedish] fish. But not a billion. “GM Europe’s head of communications Chris Preuss said GM was prepared to provide some funding for Saab but the brand needed outside money as well.” And who in their right mind would provide the lion’s share of this IV drip? “We have asked the Swedish government for loan guarantees for $600 million to give Saab a balance sheet as an independent unit which will allow it to continue.” The Swedish government has said no. So Saab is hitting up the European Investment Bank for a €500m loan. So . . . now what?
Today, the Supervisory Board of Saab decided to declare bankruptcy, Automobilwoche [sub] writes. The 4000 employees of Saab are being informed at a meeting how the company will continue. The company is now under the supervision of an insolvency administrator. Since Sweden’s government had turned down bailout requests of the mother ship GM, according to Swedish media, one possible solution would be a merger of Saab with a spun-off Opel.
“On thursday, supplier P-E Plast stopped their delivieries of parts to Saab in Trollhättan.
The owner, Patrik Ekwall, who runs the company since some months back, is afraid he won’t get paid for his deliveries, reports Swedish Radio (SR).
At Saab, no one answered when he phoned them. “We are wating for a reply” he says.
The last month, P-E Plast has delivered parts for 400 000 kronor (around 80 000 dollars) to Trollhättan. The company makes plastic details for the car industry, and a third of its sales goes to Saab.
In spite of the current circumstances, Patrik Ekwall hopes to keep the eleven employees.”
The Daily Mail reports on a warning by the UK’s Unite union to Chancellor Alastair Darling. The union told Darling that 100k jobs are at risk by the “imminent” closure of a car factory. “We made it absolutely clear that the prospect of a plant closure will have a devastating effect on UK manufacturing,” Unite’s Derek Simpson told the paper. “Immediate and effective intervention is required from the Government.” That would be a £13b bailout. Yes, yes. Who’s in danger of going belly-up, then? As, the Brits would say, that would be telling. Keep in mind, that the union boys are throwing around the 100k number in the same way that the infamous CAR study claimed 3m U.S. jobs would be lost if Detroit didn’t receive a federal bailout. You know, counting anyone even remotely affiliated with the car biz, like gas station attendants. Anyway, according to the Mirror, “All the major car manufacturers denied they are considering shutting down factories in Britain.” So I’m thinking . . . Vauxhall told its UK CEO to “send the boys ’round.”
The Washington Post reports that “many analysts say the [TARP] pot isn’t big enough to address current plans to fix the financial system, let alone prop up the auto industry.” Since the first round of auto industry bailouts came from TARP, many considered the Toxic Asset Recovery Program the logical source for tranche deux. But if that money is needed for banks, as analysts indicate, the Obama Administration may have to return to congress for more funds. “From where I sit, it’s an executive decision,” says Republican Senator and bailout critic Bob Corker. “[The Treasury] fully understands we’re coming in with additional requirements,” said GM’s Ray Young after GM’s viability plan was released on Tuesday. “It will come as no surprise.” Who looks surprised?
Accounting firm Grant Thornton LLP caught our eye with a press release (via PRNewswire) warning the auto industry of possible “going concern opinions” as auditors complete fiscal year-end reporting. “Going concern opinions” are an auditor’s statement in SEC Form 10-K annual reports that there is substantial doubt about the entity’s ability to continue as a going concern. “It’s important for the public, the supply base and all of the parties involved in restructuring the auto industry not to overreact if they start seeing ‘going concern’ opinions,” says Kimberly Rodriguez, co-leader of Grant Thornton’s global automotive team and a principal in the firm’s restructuring practice. “We’re in uncharted waters and auditors face extremely difficult decisions.” Translation?
Ingvar, Swedish member of TTAC’s Best and Brightest, translates a report in today’s Aftonbladet:
“Aftonbladet can disclose today that Secretary of Industry Maud Olofsson fasttracked GM into the Europan Investment Bank. But GM said no. A source says: GM wasn’t interested in saving Saab.
In the late fall, Maud Olofsson had talks with GM Europe boss Carl-Peter Forster. Olofsson offered GM government loan guarantees if they turned to the European Investment Bank. But his response was lukewarm. It takes too much time to go through EIB, was his answer.
But Olofsson didn’t give up. In early december, she contacted EIB and asked them if they could fast track GM’s eventual case. The answer was positive. But when GM was told, they were only making excuses. There was obviously no interest from GM in pursuing the case, they only kept stalling, a source says.
Between holidays, the Swedish government called in consultants to review the numbers for GM and Saab. They shook their heads in despair, there was no reality in the numbers, a source says. The advice they gave: Forget about Saab.”
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