You may recall (or continue to choose not to if you work in Motown) that 2007 marked the first year when more U.S. new car buyers shopped for Asian than American brands. The trend continues. Automotive News had a look at J.D. Powers’ recent stats on the subject and provide the takeaway: “The Asian edge grew in 2008, with 63 percent of buyers considering Asian cars and 55 percent American cars.” Yes, there’s overlap. And yes, “consideration” led to sales. “In a survey of nearly 30,000 new-car buyers conducted between May and July, J.D. Power found that Asian vehicles won out for 58 percent of buyers who considered both American and Asian new cars, up from 55 percent in 2007. Only 40 percent of consumers looking at cars from both regions chose American autos, down from 43 percent last year.” It gets worse. A lot worse. “Those who decided on American products cited a desire to buy American and the incentives that U.S. carmakers offer as their top two reasons for choosing an American brand. Those who bought an Asian vehicle cited better retained value, reliability and gas mileage as their top three reasons for choosing a car from that region, according to the survey.” And worse. “Consumers cited high prices, high monthly payments and low gas mileage as their top three reasons for rejecting a vehicle, the survey found.”

Despite all the hush-hush talk of Russian oligarchs and Indian auto magnates, the tree-hugger (and GM’s) four-wheeled nemesis is still on the block, unloved and unsold. Yes, The General’s finally dropped the pretense that their HUMMER brand is under “strategic review.” With the American automaker scrimping for lost change (and borrowing billions from Uncle Sam), GM Treasurer Walter Borst is touring the globe with his cart and pony show, now with a “Make Me An Offer on Our French Factory” slide. According to the AP, who bought a “I Went to the Deutsche Bank Leveraged Finance Conference and All I Got Was a Lousy GM Brand” T-shirt, “The slides posted on GM’s [investor] Web site Wednesday say the assets under review are worth $2 billion to $4 billion.” With high labor costs in Old Europe and rampant overcapacity everywhere, it would be wildly optimistic to think that the Strasbourg plant would get even a quarter of that amount. As for HUMMER, could there be a worse time to sell the brand? The really scary answer: yes. Meanwhile, GM’s determination to slice its way to profitability– or at least survival– continues unabated. The Detroit News reports that GM plans to “accelerate” its $10b cost-cutting program. Product development– save the federally funded and subsidized Chevy Volt and Cruze– is sure to take a hit. Look for more badge engineering at a dealer near you.

Man, this news cycle is insane. Another Automotive News [sub] alert, this time telling us that the infamous Bill Heard dealership chain is toast. All 13 stores are about to close their doors. “The company notified the stores’ general managers at 2 p.m. today, the source said, who spoke anonymously because he was not authorized to speak.” The source offered a predictable litany of factors (aside from the fact that Bill Heard is one of the most reviled automotive chains in American history). “High fuel prices, cancelled floorplanning from GMAC Financial Services, a reliance on trucks and SUVs, a soft national economy and struggles in local markets had troubled the company, which on Sept. 12 closed its store in Scottsdale, Ariz.” The story behind the story will take some unearthing, but the damage to GM caused by the loss of “Mr. Volume” is calculable. “Bill Heard Enterprises, of Columbus, Ga., ranks No. 13 on the Automotive News list of the top 125 U.S. dealership groups, with 2007 group revenue of $2.13 billion.”

True dat. “The Statistical Office of the Republic of Slovenia announced that the consumer confidence indicator increased 8 percentage points month-on-month in September to reach its highest level since August 2007.” Meanwhile, here in the U.S., “The customer is telling us that their head is in a completely different place than in April when gas went above $3.50 per gallon. Their heads are right now where, ‘I’ve got to be more careful and I feel like I have less wealth,’ and that brings the whole industry down.” Sorry we missed that little bit of Cheech and Chongism from FoMoCo’s Marketing Guy Jim Farley [via Reuters]. But even if Farley seems a little lost in the [blue] clouds, the man’s not wrong. The current U.S. financial meltdown is hardly likely to encourage the average American consumer to run down to his local car dealer and sign-up for a three to (gulp) six-year loan. And even if they felt so inclined, as Federal Reserve Chairman Ben Bernanke told Congress, “The intensification of financial stress in recent weeks, which will make lenders still more cautious about extending credit to households and business, could prove a significant further drag on growth.” Bailout bucks notwithstanding, with gasoline shortages and the prospect of recession looming, the U.S. car market has hit the wall. “Economic activity appears to have decelerated broadly,” Bernanke warned, with British-quality understatement. If you don’t know it now, wait ’til TTAC reports September’s new car sales results…

After revealing JIT bailout bait (i.e. three potential electric vehicles), Chrysler CEO Bob Nardelli had a “confidential” chin wag with his dealers. Needless to say, the bottom line was the bottom line. According to sources blabbing to The Wall Street Journal [via Reuters], Nardelli told ChryCo store owners that the corporate mothership had lost $400m year-to-date. Boot ‘Em Bob added that sales fell 24 percent through August and Chrysler had $11 billion in cash. I’m not sure where Nardelli got his 24 percent figure from, nor the $400m red ink stain, or the $11b in cash reserves. But the fact that the official spokesman declared that Chrysler’s “not in the black on a net basis” leads me to wonder if the books have been set on low or medium heat. Just sayin’…  Oh, and Chrysler owner Cerberus says it lost $1.6b so far this year. For a company generating a self-proclaimed “$100 billion in annual revenues,” that’s chicken feed. Still, to paraphrase the old Midas Mufflers’ commercial, “How do you think a company like that got to be a company like that?”

Dear GM Dealers:

Last week, I sent you a note asking you for your support for the Advanced Technology Vehicles Manufacturing Incentive Program legislation. I wanted to thank you for the response you have shown to date and ask you to continue that effort. I also wanted to let you know about additional developments regarding GM’s liquidity position.

We’ve seen unprecedented upheaval in the global capital markets and GM is responding to ensure its ongoing access to capital to fund operations and the North America turnaround.

First, GM agreed last Friday with an existing institutional holder of its corporate debt to exchange $322 million worth of Series D bonds due to be repaid in June 2009 for 28.3 million newly issued shares of GM common stock. This exchange will save us money on debt repayment and interest expense and reduces the amount of debt currently on our balance sheet, a change likely to be greeted favorably by credit ratings agencies.

Secondly, GM has tapped the remainder of its $3.5 billion in its secured revolving credit facility. This facility has been in place since 2006 and allows GM to borrow funds at an attractive rate.  Given the events in the banking industry in recent weeks, we felt it was most prudent to draw the funds now and have the cash on hand as the need for it arises. A portion of the funds will go toward approximately $750 million of retiring debt and, pending court approval, payments to Delphi in excess of $1.2 billion to aid in its reorganization efforts.

I also wanted to reassure you that the internal liquidity plans announced on July 15 are on track, and these latest actions are consistent with our intention to safeguard GM’s access to cash. We will continue to look to the capital markets and other sources of liquidity as opportunities become available.  The economic outlook remains uncertain, but we are pursuing every avenue to guarantee GM’s ability to fund ongoing operations and to emerge from the recent downturn a stronger and more competitive company.

We appreciate your partnership in this effort and will continue to communicate with you about our activities as circumstances warrant.

Regards,

Mark LaNeve

Vice President

Vehicle Sales, Service and Marketing

The Financial Times has some scary ass shit to share re: the American mortgage meltdown. Scribe Nouriel Roubini reckons there will be another wave of bad news, as the so-called “shadow banking system” unravels. (And that’s no Bolero.) We’re talking broker-dealers, hedge funds, private equity groups, structured investment vehicles and conduits, money market funds and non-bank mortgage lenders. These guys face the final stage of collapse: “a run on thousands of highly leveraged hedge funds. After a brief lock-up period, investors in such funds can redeem their investments on a quarterly basis; thus a bank-like run on hedge funds is highly possible. Hundreds of smaller, younger funds that have taken excessive risks with high leverage and are poorly managed may collapse. A massive shake-out of the bloated hedge fund industry is likely in the next two years.” And then… “The private equity bubble led to more than $1,000bn of LBOs [Leveraged Buy Outs] that should never have occurred. The run on these LBOs is slowed by the existence of ‘convenant-lite’ clauses, which do not include traditional default triggers, and ‘payment-in-kind toggles’, which allow borrowers to defer cash interest payments and accrue more debt, but these only delay the eventual refinancing crisis and will make uglier the bankruptcy that will follow. Even the largest LBOs, such as GMAC and Chrysler, are now at risk.” Bottom line for the U.S.: recession. Bottom line for GMAC (and thus GM) and Chrysler? C11.

Former GM division and parts maker Delphi has been bankrupt for over three years. During that time, three main factions have emerged: GM (who wants to draw a line under its Delphi-related losses yet keep parts flowing at a low price), creditors (who want to make sure they get their god damn money back in the face of an increasingly inevitable Chapter 7 liquidation) and the lawyers (banking hundreds of millions of dollars from both sides). Matters are coming to a head, as all three groups face a September 30 deadline for agreement. GM wants to trade $3.4b worth of pension guarantees for, get this, $2b from Delphi’s coffers. AND The General wants a legal guarantee that Delphi can’t make any more calls on GM’s cash. Ever. Delphi’s creditors are, of course, livid. As The Detroit Free Press reports “The unsecured creditors committee says those measures make the deal untenable by eating into their payout. Often in bankruptcy cases, unsecured creditors see only a fraction of what they’re owed after a company files for bankruptcy.” Not said: the creditors would get sweet FA in C7. “The creditors committee today plans to ask U.S. Bankruptcy Judge Robert Drain to allow it to sue GM on behalf of Delphi, saying the supplier didn’t do enough to turn around unprofitable contracts with the automaker.” In other words, never mind all that other stuff for a second; GM’s been paying too little for its Delphi parts. The lawyers? Happy, happy, happy!

Reuters reports that Fitch Ratings has downgraded GM’s credit rating even deeper into junk territory, down to ‘CCC’, the eighth-lowest speculative grade in its corporate rating scale. Fitch based its downgrade on GM’s lack of liquidity. As TTAC predicted, The General’s cash flow– or lack thereof– is reaching a crisis point. “Fitch believes that GM would reach minimum required levels of available liquidity within the next 12 months without access to external capital,” analysts said in a note. “Contributing factors include weakening overseas results and the impact of the credit crisis on GM and GMAC’s ability to finance retail sales.” Fitch reckons GM will score its share of the $25b federal low-interest loans. To no avail. The wording of the agency’s note is as frightening as it is terse: “In all, Fitch believes that GM will be challenged to raise financing in an amount that exceeds $10 billion, and will therefore be unable to offset expected liquidity drains over the next 12 months.”

With new vehicle sales set to tank by over 30 percent this year, Chrysler is casting around for a way to generate a little cash. And the answer is… the after market! “[Chief marketing officer] Meyer said Chrysler’s loyalty study group includes dealers. The group is looking hard at service issues, notably customization. Advances in vehicle telematics and connectivity promote customization, she added. ‘If buyers keep their vehicle longer, do they want to customize it more?’ Meyer said. ‘Do you want something new on the interior or a little something to spiff the car up? There are opportunities for us.'” So, one failing business model (Pep Boys) replaces another (making cars). Oh, and did I mention ChryCo wants to get into the rental  business? “Chrysler also is looking at ways to provide customers occasional-use vehicles, Meyer said. As an example, she described an owner who has unloaded an SUV but ‘you have to move things twice a year for your parents.’ She said Chrysler and its dealers will seek to respond to that need.” Meanwhile, Automotive News [sub] reports that Jim Arrigo, chairman of the Chrysler Jeep National Dealer Council, says customer loyalty “has gone right out the window.”

Displaying a knack for euphemisms, The Detroit News reports that the Securities and Exchange Commission have banned short sales of General Motors stock until October 2, “a move aimed at preventing the stock from being driven down amid rocky market conditions.” (As the DeTN puts it, “Investors who engage in short sales attempt to profit from falling stock prices. They sell borrowed shares, hoping the price will drop so they can repurchase the stock later at a cheaper price and pocket the difference.”) GM joins a second wave of around 90 companies added to the list of 799 companies whose stocks can no longer be purchased in the hope/plan/acknowledgement that their share price is headed for the crapper. So why is GM on this list? “The SEC said the temporary move was needed to ‘prevent short selling from being used to drive down the share prices of issuers even where there is no fundamental basis for a price decline other than general market conditions.'” Again, so why is GM on this list? [As of 1:55pm, GM’s stock price was at $12.40, having dipped below $10 several times this year.]

Say what you will about the evils of globalism. One thing’s for sure: if you’re a global playa, there’s no escaping the market’s judgment. The Washington Post reports that sure, falling oil prices have taken their toll on the Russian economy. But Vlad the Inhaler’s power-grab is the real deal. “Analysts say Russia faces continuing doubts about the investment climate, given the Kremlin’s concentration of political power. These concerns were exacerbated by Russia’s war with Georgia last month. Putin’s tough, anti-Western rhetoric raised fears of a turn against foreign investors and even greater state control of the economy. Investors pulled nearly $35 billion out of the country in the weeks after the war.” Translation: GM’s highly-touted Russian investments are not looking so good, these days. “Rising inflation is a political problem. Most analysts expect inflation to hit 14 or 15 percent this year, which for the first time in Putin’s rule would leave the average Russian worse off at the end of the year than at the start.” Oh, and Putin’s regime has increased Russia’s roadways by .1 percent. [thanks to wludavid for the link]

“Their overriding challenge is: How do you manage eight different brands?” Well exactly. Dan Gorrell, founder of consultant AutoStratagem, understands that there’s only so much GM can do to promote any one brand or model when there are eight (minus HUMMER seven) hungry mouths (with over 40 models) to feed. No news there. The General’s inability to to trim its American ambitions has long passed the point where they can do much of anything about it (i.e. close or sell brands)– at least without without declaring C11. So the wind-down of what was once the world’s largest automaker continues on all fronts. Advertising Age reports the damage: “General Motors Corp. plans to cut its digital-media budget after dramatically increasing it in the past few years, the automaker’s North American marketing chief told Advertising Age.” Cutting as in no replacement. The Academy Awards are gone. GM Style at the LA and Detroit auto shows is gone. The Super Bowl is gone. So how much of GM’s $2b+ ad spend is left? GM’s Marketing Maven is characteristically cagey. “Mr. LaNeve said last week that GM has already implemented more than half the ad spending cuts it planned for the remainder of 2008. When asked where the reductions were, he said, “It’s 100 things. It’s a consolidation of promotions and getting out of some. It’s production, media, agencies, outsourcing contracts, structural costs and people.”

Rick Wagoner has problem with “b” words. You’ll no sooner hear the GM CEO utter the words “bankruptcy” and “bailout” than you’ll hear him calling the switch from SUVs and pickups (combined with the end of easy credit) “a God damn motherfucker.” But who knew that Red Ink Rink was so reticent about saying the name of his Detroit competitors? In honor of GM’s 100th anniversary (Hello? That’s so last week), The Detroit Free Press‘ Katie “I Heart GM” Merx gathered some reminiscences from the tano kubwa: Wagoner, Car Czar Bob Lutz, CFO Ray Young, design chief Ed Wellburn and, oops! Where’s COO Fritz Henderson? Probably down at the bank, getting a cashier’s check for $3.5b. Anyway, here’s Rick’s tale of his first awareness of the company that would eventually pay him $15.5m annually to run it into the ground. “‘When I was a kid, whether I was 10 years old or 8 years old, on the school bus coming home, we used to count whether there were more Fords or Chevrolets,’ Wagoner recounted for the Free Press this month. ‘And, um, at that point my father drove Brand X and my friend’s father drove a Chevrolet. And one day, there were more Brand X’s and my friend said, ‘That’s not fair. I’m only counting Chevrolet, and not all of General Motors.’ I said, ‘Well, what are you talking about?’ That’s when I realized there’s more to this than just the brand name on the car.'”