So, this is how it’s gonna go, eh? Chrysler’s going to dress-up the cratered car company long enough to use federal funds to stay alive long enough to strip and flip the company’s assets. Sweet. For some. More specifically, if Fiat’s grabbing 35 percent of Chrysler, can we, the taxpayers, have our $4b back now please? Nope. “The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.” Jeez. Couldn’t they at least contemplate it? Anyway, a joint statement (don’t bogart that BS, my friend) explains the thinking “The alliance, to be a key element of Chrysler’s viability plan, would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. Fiat would also provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities. In addition, Fiat would provide management services supporting Chrysler’s submission of a viability plan to the U.S. Treasury as required.” That last one’s kinda weird. What “management services” are required to write a viability plan? Emptying the waste baskets?
Category: Chapter 11
Chrysler Cinquecento anyone? According to Reuters [via Automotive News Europe], Fiat is in talks with Chrysler LLC to form a strategic partnership. Automotive News says the deal could give Chrysler access to platforms, engines and transmission. The august publication also suggests the dalliance could lead to Fiat taking an equity stake in Chrysler. FIAT has been on the prowl lately to find a partner. PSA apparently gave the Italians the cold shoulder. Fiat’s CEO Sergio Marchionne had made noises that his company cannot survive alone and is in urgent need of a strong partner. Eh, Sergio! You said “strong” partner! Cosa fai?
Auto industry suppliers have been stuck between a rock (penny-squeezing OEMs) and a hard place (volatile commodity prices) for some time now. And though the Detroit Three argue relentlessly that their own bankruptcy would doom them in the eyes of consumers, bankruptcy protection has practically become the norm for their suppliers. Which is why supplier firms need a bailout of their own in order to give Detroit’s bailout a chance. Chrysler’s endless winter break, GM’s half-sized Q1 production plan and general industry turmoil is about to cause exactly what the bailout was supposed to prevent: cascading supplier bankruptcies. Bloomberg documents the doom in detail, concluding with American Axle’s Dick Dauch’s assessment that “there’s a shakeout occurring.” Unless…
GM Provides Global Business Update at Auto Analyst Event
Mark LaNeve, Vice President, GM North American Vehicle Sales, Service and Marketing
01/15/2009
To All General Motors Dealers:
General Motors provided an update to financial analysts today on the company’s restructuring efforts included in the viability plan that was submitted to the federal government last month. Rick Wagoner and Fritz Henderson told the group that GM is on track and making progress toward meeting its goals. Given the ongoing weakness in the automotive markets, they also explained that GM has adopted a more conservative U.S. industry volume assumption of 10.5 million units for 2009. The original baseline projections for 2009 were for a 12 million unit U.S. market. Rick and Fritz also said that we would continue to refine the plan in response to changing market conditions.
Regarding General Motors’ brands and dealers, the plans have not changed from the original submission. Hummer and Saab are under external review, while Saturn is being reviewed internally by a team that includes dealer representatives via the Franchise Operating Team. Product discussion in the plan focuses primarily on GM’s core brands: Chevrolet, Cadillac, Buick and GMC, with Pontiac as a specialty, focused brand. Also unchanged from the original submission is the projection that GM will have 4,700 dealers in the year 2012. As we have in the past, we will continue to work together with you personally as we move through this difficult, yet necessary dealer network re-sizing. Today’s update also provided the analysts information on the progress being made by GMAC and its ability to return to sub-vented financing.
Toyota is declining to provide details on its next round of U.S. production cuts. Automotive News [sub] illustrates the automaker’s newfound inscrutability. “This is a tough environment, and it may continue for a while,” said Jim Wiseman, Toyota’s vice president of English understatement. Just kidding: Jim’s ToMoCo’s Veep of external affairs. “In addition to slowing production, we are redoubling efforts to cut costs at each of our facilities,” Wiseman added, ominously. Although we don’t know the who, what and when of the cutbacks, Toyota’s why is quickly becoming an industry rallying cry; call it the ET or “even Toyota” defense. “The industry downturn has caused inventories to build up even for Toyota, which is known for running lean and cost-efficient production where parts are delivered in a ‘just in time’ system to be installed in vehicles on the assembly line. It had already reduced North American production of its best-selling cars, including the Camry and Corolla sedans, and suspended work on a new plant in Mississippi that was due to start producing the popular Prius gasoline-electric hybrid car from 2010.” Not so popular now, eh Mr. Bond-san?
You remember The Center for Automotive Research (CAR). They’re the Detroit-based automaker and union-funded think tank that progated the “soup lines beckon if you don’t bailout Detroit” study. The mainstream media repeated CAR’s stats– debunked on TTAC by both myself and our Best and Brightest— as gospel. Now that CAR has had its wicked way with $17.4b of your tax money, they’re back from hiatus with fresh apocalyptic visions for policy makers. Only this time, they’re right. “McAlinden, director-economics research for the Center for Automotive Research, predicts auto makers will sell 11.5 million units in 2009, down from 13.2 million last year and 16.2 million in 2007,” Ward’s Dealer Business reports. ‘The U.S. will not see 14 million new-vehicle sales again until 2012 and 16 million in 2013. The downturn will last a long time.'” OK, so… “Whether the two auto makers can meet the loan requirements set by the Bush Admin. remains to be seen. However he does not believe GM can meet the obligations as they are written now, adding, the ‘conditions will be changed so GM can keep them.'” Make no mistake: McAlinden has no faith in GM’s recovery plans.
Chrysler will stop building PT Cruisers this summer. OK, they’re not actually building anything until next month, and maybe not even then, but you know what I mean. Displaying the link between stress, huge salary, government begging and multiple personality disorder, ChryCo Co-Prez Tom LaSorda got on the blower with Bloomberg to acknowledge that the entire PT model is for sale. “Would we sell those assets? Yes. Do we have any offers to sell those assets? No. Would we be pursuing a buyer? Yes.” In China? Yes. Would they buy it? No. Despite the idea that China wants our cast-offs, they’re way beyond that point. And make no mistake, the PT has gone all the way from hero to zero. “U.S. sales of the PT Cruiser plunged 49 percent last year to 50,910 units, outpacing Chrysler’s 30 percent slide and the 18 percent tumble in the domestic auto market. Deliveries peaked at 144,717 in 2001, according to Autodata Corp. in Woodcliff Lake, New Jersey.” For those who lament the death (dearth?) of American automotive production, remember that the PT is hecho en Mexico. Still sucks for them, obviously.
Money’s too tight to mention. But Rick Brown, president of GM Asia Pacific, mentioned it to Automotive News [AN, sub]. “We won’t be participating [in the you can call it the Tokyo Auto Show]. If you really look at the business conditions that we are in right now, where we really have to make a bang out of every buck we spend, it’s simply a business decision.” AN reckons a presence at the Tokyo show cost $2m. No wonder Japan’s Yomiuri newspaper says Ford and Chrysler also “missed” last year’s deadline to register for the show. That’s the price of one year’s G4 lease! As we reported yesterday, the Japan Automobile Manufacturers Association is hemming and hawing about whether or not to cancel the event until 2011. Previous media speculation centered on whether one of Japan’s “Big Three” (Toyota, Honda, Nissan) would withdraw and kill the event. Now, with the Americans out of play, it’s only a matter of time. Who’s next to go? New York? Barcelona? Watch this space.
* Light vehicle sales tumbled 18% in 2008, to 13.2 million units from 16.1 million in 2007, with the selling rate deteriorating significantly in the second half of the year, finishing with a barely-breathing 10.3 million SAAR in Q4.
* Sadly, it looks like 2009 will be even worse than 2008. Our latest forecast for 2009 US light vehicle sales is a shade under 12.0 million units, which is down from our earlier forecast of 13.0 million, and down another 9% versus 13.2 million in 2008.
* North American light vehicle production in this scenario should be in the range of 10.6 million units, down about 13% vs. 12.2 million in 2008, reflecting the sequential decline in sales, as well as an oversupply of vehicles remaining on dealer lots at year end. The year-to-year drop in production should be even more pronounced for the Big 3 (about 19%).
Chrysler has been – some say desperately – seeking to “sell key assets” for a while. The Nikkei (sub) now says that Chryler might be getting close. The usual “unnamed people with knowledge of the discussions” whispered that Chrysler is talking to Nissan-Renault and the Canadian auto supplier Magna. The topics of the discussion are the Jeep brand and Chrysler’s Belvidere plant. The Jeep brand would go to Renault-Nissan, Magna would take the plant.
The parties aren’t strangers.
Chrysler had announced an alliance with Nissan last April.
As for Magna, the interest probably stems from Magna’s subsidiary Magna Steyr, which is creating more and more auto contract manufacture business. Magna Steyr has produced the Chrysler Voyager from 2002 to 2007, and currently produces the Chrysler 300C, the Jeep Commander and Jeep Grand Cherokee. Magna was one of the bidders for Chrysler when it was sold by Daimler in 2007.
“To dial the industry back to a point where it’s viable at 11m is going to be hard – though we’re going to try,” GM Car Czar Bob Lutz promised at the don’t call it the Detroit Auto Show [via just-auto, sub]. “But there’s a question as to whether any car company in the world can survive on an 11m market for a sustained period of time. If it continues I would imagine you’d see massive consolidation in the industry, massive plant shutdowns, massive layoffs and much smaller product programmes.” Needless to say, Maximum Bob doesn’t like that idea one bit. OK, well, a little. “A better proposal is not to get it back up to 17.5m because on a sustained basis you could argue that was an unrealistic number with a financial and housing ‘bubble’ effect,” Lutz said, taking no responsibility for helping to create that self-same bubble. Anyway, thatleaves us… “I don’t think it’s unreasonable to expect an industry level of 13 or 14m – with the restructuring we’re undergoing, that’s going to be OK.” When asked if that was a PR-oriented asessement or a promise to stay away from the federal bailout buffet, Maximum Bob showed NFL-quality broken field running. “Talk to Rick Wagoner- I don’t do money,” Lutz demurred. “I do product development – I only spend it.” How great is that?
“‘The government loan was just in time,’ [Chrysler Co_president jim] Press said. ‘It’s kind of like if you were in college and you were at the last of the four years and you were kind of low on money and your parents put all that money back into the back account. ‘It’s good timing.’
“Press also joked about the federal loans when introducing other top executives at Chrysler as Sunday’s press event started.
“‘This is the guy that has the money, he’s got all the money,’ Press said in introducing Chrysler Chief Financial Officer Ron Kolka. ‘The government checks go right to Ron Kolka, so if anybody needs a loan, see Ron Kolka.'”
Hey Ron, can I borrow $1m? I’m just messing with you. No, but seriously. We could become an official supplier of Chrysler humor.
The day after threatening to extend its production shutdown, Chrysler has officially announced it’s hitting-up Uncle Sugar for another $3b– on top of the $4b recently transferred to its account. At the same time, it’s asking for an as-yet-unspecified amount of U.S. Treasury “investment” in Chrysler Financial. As duly appointed guardians of the public trust, the Treasury Department “declined to discuss the talks.” “We’re in touch with the automakers and their financing sources and continue to evaluate their financing needs,” Treasury spokeswoman Brookly McLaughlin said on Sunday. Speaking to reporters at the don’t call it the Detroit Auto Show, ChryCo CEO Bob Nardelli was equally tight-lipped. According to The Detroit News, Boot ’em Bob refused to say how much Chrysler Financial was seeking, but said he hoped “it would provide the kind of support for us in a similar fashion that GMAC was able to provide to GM.” So, what, another six billion? By Friday? Before the automakers try and make the case that they can pay the money back? The raid on the public purse continues.
“My god, I hope that a [federally appointed, $17.4b loan guarding] car czar does not get into the product strategy of the companies,” Ford CEO Alan Mulally said at a dinner with journalists last night (our invite got lost in the mail again). “The product strategy has to be led by the companies.” Since when? Did Big Al miss the memo on the latest Corporate Average Fuel Economy (CAFE) standards, and Congress decision to support California’s even higher tailpipe regs? Reading between the lines of his post-prandial pronouncements, perhaps not. “Mulally said he’s encouraged by president-elect Obama’s understanding of the challenges facing the industry. ‘I’ve been very pleased with the fact that it seems like he really understands that dealing the economy is a very, very high priority…. To have a policy where we’re trying to jam products out that people don’t want doesn’t make any sense at all.'” Very, very as in “can we talk about those federal standards again?” Very, very as in ditch CAFE for higher gas taxes? “We’re not presumptuous enough from the automobile industry frankly that we should lay out the energy strategy of the United States.” Shall we file that one under “beggars can’t be choosers” or “methinks he doth protest too much”?
The news is flying thick and fast out of Detroit this week, as the annual conclave at the don’t call it The Detroit Auto show puts hundreds of journalists in close proximity to corporate newsmakers and spinmeisters. Automotive News [AN, sub] is doing the do. First up: Toyota’s admission that its “Saved by Zero” didn’t save the automaker from a humiliating December; trucks sank by 50 percent and they lost critical U.S. market share. So ToMoCo’s reaching deeper into its deep pockets.”The shift that you’ll see in January from December is more consumer cash and less APR and lease support through our dealers,” Toyota USA Prez Jim Lentz told AN. Jimbo didn’t offer any specifics, but AN rightly points out that Priora are stacked up like cordwood. “One of the largest sellers of Priuses in the country, Earl Stewart Toyota in North Palm Beach now has about 70 on the lot that it can’t get rid of. ‘Any kind of Prius anybody wants — any color, any anything — I’ve got it,’ Stewart says. ‘And if I don’t have it I can get it because there are several hundred in the port. Dealers don’t want them.'” Note: “According to Edmunds.com, Toyota had the biggest percentage boost in incentive spending in December at an average $1,995 per sale. That was up 87 percent from what the brand spent in December 2007.” The implications of all this are pretty clear…
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