Deploying its best practitioners of English understatement, Reuters translates an Auto Motor und Sport interview wherein GM COO Fritz Henderson says the “hard-pressed U.S. car market” may have reached bottom after “a dramatic fall” last month. “This September was the weakest month (in years) but I think all the factors that influence consumer behaviour have since emerged. We could have reached the low point.” To substantiate the claim, the former CFO (just like Rick!) spun the previous spin: GM has seen “improved demand” for pickup trucks in August and September. (Improved from what and at what cost in terms of profits? Not specified.) “I don’t mean to say that this marks the turning point. But oil prices have come down and consumers are buying pickups again. That helps us. I am optimistic about our future products but the market has to stabilize.” Which isn’t exactly true: the U.S. new car market seems to have stabilized at 12m units p.a.– roughly 2m lower than Fritz was predicting last spring. At that level, bumping along below a 20 percent market share, GM cannot a profit make.
Category: Chapter 11
First, this from Chrysler’s September sales press release. “Chrysler LLC’s minivan sales continued to thrive in September based on their strong appeal as fuel efficient, multi-passenger vehicles. Compared with September sales in 2007, the Chrysler Town & Country achieved a 6 percent increase with sales of 9,229 units, and the Dodge Grand Caravan increased 6 percent with sales of 11,056 units. With more than 12 million minivans sold worldwide in their 25-year history, Chrysler and Dodge minivans still command 40 percent of the U.S. minivan market.” Now this from CBCnews.ca. “Chrysler said Friday it will eliminate one shift at its Windsor, Ont., assembly plant over the next three weeks… CAW local 444 President Rick Laporte said he’s aware the company is trying to re-adjust inventory since minivan sales have dropped. ‘My understanding is the minivan sales have really fallen off; my understanding is they have actually fallen off 25 per cent,’ said Laporte, whose local represents about 5,000 workers at the Windsor minivan assembly plant. ‘There’s no orders — the dealer’s have got all they need at this point in time, so that’s why they’re slowing down.’ Each shift employs between 1,200 and 1,500 workers. The employees will be able to file for unemployment insurance and supplementary unemployment benefits.”
TTAC called this back in January, when we first heard reports that construction had stopped on a $530m Getrag transmission plant in Tipton, Indiana. The factory was designed to crank-out DSG-style (dual clutch) transmissions for the Phoenix V6 engine program. Our initial instincts were correct: Chrysler has cut bait on the deal. ChryCo’s official FOAD came despite (because of?) the fact that they’re suing Getrag for breach of contract. Chrysler alleges the supplier failed to raise an agreed $300m in debt financing to build the plant. “Getrag said on Friday Chrysler had rejected a financing structure it offered with banks,” Reuters reports. “[The arrangement] required Chrysler to secure some of their obligations under the supply agreement.” Translation: Chrysler refused to guarantee factory finance with its assets. “Getrag is still evaluating its options in light of Chrysler’s decision… It also said it would seek reimbursement from Chrysler for expenses incurred by Getrag and its suppliers in the project.” Good luck with that.
Whew! Quite the headline. But that’s how GM rolls these days: save the bad news for Friday afternoon and couch it as “cost savings,” “re-sizing” or some such nonsense. Anway, Reuters reports that The General’s hammered-out a deal with the International Union of Electrical, Radio and Machine Workers (IUE-CWA) union to close the ailing American automaker’s Moraine, Ohio SUV plant, home of the deeply unloved Chevy TrailBlazer and GMC Envoy. As it says above, GM will pay $1.6b into a health-care trust (VEBA) for IUE-CWA retirees and offer 1500 union members up to $140k each to head for the bar to talk about “the good old days.” The IUE-CWA pronounced itself satisfied with the deal. “It’s like getting paid not to breed Dodos.” No, seriously, union reps said they’d set up a board to manage the VEBA account which will take effect in January 2012. Now, I know what you’re thinking. Did someone forget to tell the union that GM’s heading for Chapter 11? Nope. But when faced with the inevitable, what were their options? See you in court, fellas.
The Brooklyn Paper has rightly taken local state Supreme Court judges to task for commandeering the northern part of a Columbus Park public parking lot for their own private use. The paper also did the public a service by revealing that the judges’ contention that they needed the space for “security” was a crock. Turns out that roughly 15 of the 30 drivers using the private lot are secretaries, law clerks, court aides and other non-judges. But the next part of the newspaper’s campaign raises uncomfortable (if not for Phil Ressler) questions about the political climate vis a vis a Detroit Bailout. To wit: “It’s un-American!” the Paper proclaims. “On Tuesday and Wednesday, 15 out of 16 cars parked in the judges’ temporary lot were made by non-American companies. The sole American car on the Cadman Plaza side of 360 Adams St. courthouse was a Ford Mustang convertible. And speaking of Ken Elias’ Death Watch prediction that ChryCo and GM will merge, check out off-hand remark regarding Chrysler’s fate. “Looking out over the lot on Wednesday afternoon, a court officer laughed when he realized that more than 93 percent of the cars were not from the Detroit Big Three (soon to be Big Two). ‘I guess that’s the state of America now — we buy foreign,’ said the guard, who would not give his name.” [thanks to thenewspaper.com for the link]
Fresh off his recent membership in TTAC’s Cassandra club, Daniel Howes of the Detroit News has gone back to spinning bad news into industry gameplans. His latest column extolls the virtues of a GM-Chrysler merger, while admitting that such a move would be disasterous for everyone except GM and Chrysler. “Seen from the viewpoint of blue-collar labor, white-collar employees, local governments, dealers, the state of Michigan and the industrial Midwest, just about anyone whose livelihood depends on the dubious survival of Chrysler would pay a dear price,” writes Howes of a possible GM absorption of Chrysler. But, from the narrow perspective of an industry suit, these myriad viewpoints are just so much firewood to be burnt at the altar of survival. And Howes is conveniently on hand to stack it up and pass the matches.
Absorb? Absurd! Still, The Detroit News is reporting the GM Chrysler merger deal as if it exists. Which, if true, is one scary ass concept. Well, to most rational people. Which, according to the trifecta of scribes assigned to story, doesn’t include everyone. “Analysts say a deal along the lines of Chrysler’s purchase of AMC, which eliminated Detroit’s No. 4 automaker as an entity and all its brands except Jeep, would make sense for GM.” Huh? Ladies and gentlemen, Aaron Bragman, an analyst at Global Insight: “For GM, the only reason to absorb Chrysler would be to eliminate a competitor.” Yes, but does that make any sense? No comment. So, never mind analysts. Let’s talk to someone in the shadows. “The source familiar with the negotiations told The Detroit News that GM could cut costs by eliminating much of Chrysler’s staff and gradually shifting production of Chrysler vehicles to use more GM components.” THE source? We’re down to one now are we? And is that BS or what? But wait! There’s more!
TTAC’s Ken Elias reckons the next step for GMAC is C11. Meanwhile, Automotive News [AN, sub] reports that GM is set to launch its “Finance that Fits” ad campaign, hoping to shovel new loan-seeking customers to, well, anyone, really. “GMAC is still a very important partner,” declaimed Jim Bunnell, executive director of GM’s channel support group, told AN. “Over time, a large chunk of the business went to GMAC. But if you look at the last 60 days — in August and September — well over 80 percent of all the business went to outside banks and credit unions.” Hang on; it’s not as bad as it sounds. “Bunnell said GMAC’s share of GM dealer finance business was typically about 20 percent or slightly higher at that time of year. He could not provide a comparable figure for August and September of 2007.” So, uh, maybe it is. One thing’s for sure: touting easy money in the middle of an economic meltdown is bad juju. Which is why GM’s hedging its bets: “The multimedia campaign promotes GM’s cash-back deals up to $6,000 on every 2008 vehicle left in stock.” Anyway, the U.S. new car market is dead in the water. J.D. Power reckons annual sales will drop below 12m units, as predicted here, which is two million less units than GM had predicted at the start of the crisis.
Why would anyone want to move from head of Cadillac to being the guy in charge of the dead brand walking known as HUMMER? Answer: they wouldn’t. But there it is: Jim Taylor is now the GM of HUMMER. Meanwhile, back at Stately Wayne Manor, Automotive News [sub] reports that “Mark McNabb, 47, remains GM North America vice president in charge of Cadillac and GM’s premium sales channel. The three general manager positions reporting to him — for the Cadillac, Hummer and Saab brands — are being eliminated.” In other words, three for one and one for three! So what happened to HUMMER’s existing GM? “Martin Walsh, 56, general manager of Hummer, will work with Taylor guiding the Hummer transition, [GM spokesfolk Joanne] Krell said. She said GM plans to appoint Walsh to a new job.” Oh, and the Saab guy? “Steve Shannon, 50, Saab’s general manager, will become executive director of product and marketing for the premium channel, reporting to McNabb.” What are we to make of all this? “By creating a new and more comprehensive leadership position for HUMMER with Jim Taylor as the top executive, we are bolstering the strategic review process and the brand.” said Mark LaNeve, GMNA vice president of Vehicle Sales, Service and Marketing. “At the same time, we’re sharpening our focus on Cadillac as GM’s flagship brand in the global luxury marketplace under Mark McNabb’s leadership.” Me. I’m thinking deck chairs. Titanic. Feng-Shui.
First we had Forbes’ columnist Jerry Flint bellowing (meekly) “Remember the Maine!” Now we’ve got Automotive News‘ [AN, sub] engineering beat reporter Richard Truett defending Detroit in that scary ass demented stalker fan club president sort of way. “Here’s what I find especially disturbing: Whenever there’s a story about one of the Detroit automakers on a Web site that allows readers to comment at the end of the article, you can count on loads of vile bile from respondents who can’t wait for GM, Ford and Chrysler to go out of business. For the most part, these are angry people. But… I wonder: How long does GM have to be punished for making Chevrolet Vegas and Oldsmobile diesels or relying too long on the fat profits of trucks and SUVs? When does Ford get forgiven for the Pinto and other crimes against auto mobility? When will Chrysler be let off the hook for making everything out of the K car and for the rotten minivan transmissions in the early 1990s. When will people — environmentalists, especially — chastise Toyota for making its share of gas-guzzling behemoths? WHY CAN’T YOU JUST LEAVE BRITNEY ALONE?” I added that last bit, obviously. Anyway, there’s more after you click on that “more” button below
Another scribe joins the elite squad of automotive analysts who’ve had their Road to Damascus moment re: GM’s inexorable slide into bankruptcy. Alex Taylor Three Sticks’ misFortunate conversion was inspired by the epic tomfoolery commonly known as the GM – Chrysler merger. Taylor warms-up by pre-spinning the General’s forthcoming pitch for a federal bailout. “A government loan wouldn’t be about protecting well-compensated union jobs or keeping afloat inefficient suppliers in Michigan and Ohio. It could be directed toward advancing Detroit’s and the country’s strategic interests by speeding development of alternative fuel technologies that reduce our dependence on foreign oil as well as help limit the generation of greenhouse gases.” Hang on; isn’t the rationale behind the current Department of Energy bailout loan program? Anyway, “GM may have a decent shot at that in a Democratic administration. If not, there is bankruptcy.” Da-da-DAAAAAA. OK, make the jump for Alex’ conclusion, his very own version of “Dr. Strangelove or How I Learned to Stop Worrying and Love a Cadillac CTS for 25 Grand.” [thanks to Polishdon for the link]
Technically speaking, a spiff is an immediate payment to a sales person for a cha-ching. But you get the picture: GM is adding a one percent bonus for any of its dealers that [somehow] manages to shift certain ’09 models (i.e. not the new, still mythical Camaro). “The so-called marketing stimulus payments will be made six months after a vehicle is sold,” Bloomberg reports, upping the New York Times and Wall Street Journal’s recent run of “unnamed sources” by one. “It will be computed from the base-model invoice price, said the people, who didn’t want to be identified because the plan hasn’t been made public.” The come-on is extremely important for GM’s cash flow, or lack thereof; the automaker books a vehicle as “sold” when it ships it to the dealer. So what are we talking here? “Dealers would receive hundreds of dollars per vehicle under the GM program. For instance, the payment would be $166 on a GMC Sierra pickup truck and $549 on a Hummer H2 SUT sport-utility vehicle, according to base-model invoice prices of $16,623 and $54,940, respectively, listed for the 2009 models on Edmunds.com, a provider of automotive information.” But not THE provider. And it’s all caps for HUMMER bub– and no sales. Hey waydaminute! Do they even make those things anymore? And if so, why?
Autocar‘s Steve Cropley doesn’t discuss the US market much, focused as he is on European happenings. But the man who called Rick Wagoner’s take on ethanol “crisp and lucid” (and blacklisted our own Robert Farago from Autocar’s pages back in the day), now agrees that a US automaker will almost certainly cease to exist. Unfortunately, his belief in this inevitability is borne not of clear-sighted analysis of Detroit’s predicament, but of a deep and abiding love for all things GM. Speculating on rumors of a possible GM-Chrysler hookup, Cropely suggests that Chrysler should go down and be subsumed by the General. “My own impression,” writes Cropely, “is that, even when times are as tough as this, a GM led by Rick Wagoner and the fine teams that he’s assembled, stands a better chance of making the cars we’ll need tomorrow than what I’ve seen of the modern, Cerberus-controlled Chrysler. All GM needs is time to implement its bold plan followed by some faith from car buyers.” But Cropely’s analysis is not all GM fanboyishness. “The Chrysler marque itself stopped meaning very much to me 20 years ago,” intones Cropely. “I mean, who cares if the Voyager and PT Cruiser live or die?” [Note to Steve: they are dead, and nobody cares.] Picking Chrysler to go belly-up is hardly a bold claim at this point, and arguing that GM is the firm to fix it is beyond absurd. Still, add another post-Detroit Three pundit to the Cassandra list.
Like the gas price spike that helped launch the current industry death spiral, nobody saw a possible D3 bankruptcy coming. Well, outside of this little corner of the internet, anyway. But with the mainstream media catching wind of what we’ve been crying in the desert for years now, a number of well-known industry analysts are coming around to the notion that America may not have three big automakers anymore. Jalopnik’s Ray Wert was ahead of the (adjusted) curve, bellying up to the TTAC line (sorta) yesterday. Today, none other than Danny Howes of the Detroit News is playing Cassandra-come-lately as merger and bankruptcy rumors take industry-watchers by storm. To be fair, Howes isn’t blind to Detroit’s sins, and his columns have been taking an increasingly alarmist tone for some time now. But until this week he’s faced the strings and arrows of outrageous fortune with brave face and stiff upper lip. No longer.
Democratic presidential candidate Barack Obama says that the federal government should double the amount of money allocated to the Department of Energy’s Detroit-friendly low-interest “retooling” loans. For those of you keeping track of our federal deficit, that would be $50b. But that’s not all! “Barack Obama’s top economic adviser said Monday an Obama administration would consider steps to rescue a failing domestic carmaker,” The Detroit News reports (without a single huzzah). “‘We should keep all options on the table’ to help the battered industry, Obama aide Jason Furman said. When asked twice if that meant Obama would prevent Ford, GM or Chrysler from going under, Furman would not commit to a specific strategy, repeating that ‘nothing would be off the table.'” Now how much would you pay? But wait! There’s more!
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