After reading Samir Syed’s Guide to the RESCAP/GMAC Crisis, TTAC's Deep Throat emailed to fit a missing piece of the puzzle. "The fear of a Rescap bankruptcy– or additional capital injections from GMAC– is weakenening GMAC’s own balance sheet and thus making it more difficult/expensive for its own financing. This in turn hurts GM’s dealers' ability to access GMAC for retail customers at competitive rates without massive rate subvention by GM… The cost of dealer wholesale financing is going through the roof. But it’s already happening, as smart lenders are poaching GM dealers for the better credit customers… and trying to win floor plan business (a huge uphill struggle as something like 80 percent or more of GM dealers use GMAC for wholesale. The bottom line: Moody’s is calling the future correctly with its downgrade."

Awesome. No really. I'm in awe. At the very moment GM NA's cash flow has gone bye-bye (thanks to union strikes at American Axle and GM factories), just days before the automaker gives the world the gory details of its American cash conflagration, the General reveals that it's bumped-up– sorry, "restored" its top suit's salary. CEO Rick Wagoner's paycheck returns to its 2003 – 2006 levels, from the "reduced" $1.65m back to $2.2m. But don't get to feeling what the Hell, it's only a $570k jump, and it WAS his old salary. Automotive News reports that Rick's TOTAL compensation for '07 was $14.4m, or $39,452.05 per day (including weekends). Meanwhile, Car Czar "Maximum" Bob Lutz gets a nice little "thank you" for winning TTAC's Bob Lutz Award: a base salary "boost" from $1.3m p.a. to $1.75m (so much for "I gave at the office"). MB's total compensation for '07: $6.9m. Newly promoted GM COO (from CFO) Fritz Henderson gets $1.8m; total pay package $7.6m. Friends of GM are free to defend this pay-out (supply – demand), but I find the fact that these guys are raking in MORE money as 32 GM factories are off-line, as GM struggles for its survival, appalling. But you knew that…

While rumors that GM's letting the UAW run it into the ground (accidentally on purpose) are pretty far-fetched, it's highly likely that GM knows it's flaming-out (cash-wise), heading for C11 in a death spiral. So what's stopping them from using C11 to protect their current cash reserves (which they need for reorganization) other than, say, hubris and self-delusion? Chrysler. When Chrysler files ("how our employees spent their summer vacation"), GM and Ford will get a short term boost. Sales will come from former MOPAR devotees, rural areas without a large transplant presence and people who consider Chrysler's bankruptcy a "wake-up call" to start buying American. If GM files before Chrysler, ChryCo gets the dead cat bounce. Oh, and why not let Chrysler introduce Americans to the possibility of buying a car from a bankrupt carmaker? Look for a full editorial on the slings and arrows of a GM bankruptcy by the end of the week.

Here being China. We being GM. The speaker being GM CEO Rick Wagoner. And yet… Automotive News reports that The General is deploying Ye Olde "A Car for Every Purse and Purpose" strategy developed by Alfred P. Sloan– and then annihilated by every cash-grabbing, corner-cutting CEO since, sending the former world's largest automaker sliding towards bankruptcy. Never mind; it was implementation that killed the golden goose. "The China market also gives it a rare chance to try to repeat the business past with a happier ending for investors… GM introduced Chevy to China just three years ago after concluding its Buick brand was over-extended by a product line-up that had saddled it with everything from a minivan marketed as a kind of executive taxi to a cheaper hatchback. 'We could see Buick was being stretched,' [GM's head of Asian operations Nick] Reilly said." Uh, hello? Buick still sells the same product line-up in China as before. They've simply added Chevy (i.e. rebadged Daewoos). Oh, and Cadillac's in the People's Republic as well. What are the chances GM will show the same branding discipline in China that they've shown in the U.S.? And if it's good enough for China… 

Not that you'd know it from reading Jamie Lareau's lead in Automotive News [sub]: "As General Motors works on its corporate turnaround, a smaller version is under way at its Saturn brand." To use a phrase popular back when Saturn was GM's import fighter (as opposed to its import provider), gag me with a spoon. So how does Lareau justify his faith in Saturn's future? Not very well. "Customers have yet to arrive in a huge numbers. Through March, Saturn's U.S. sales totaled 48,306 units, down 15.3 percent from 2007." Ain't that the truth. Apparently it's not the whole truth; Lareau feels obliged to dredge-up a two-month old quote from GM CEO Rick Wagoner re: Saturn's recovery: 'We knew what we were doing, which is to change the profile of the kinds of products that we sell at Saturn from basically low-priced cars to cars that compete on the basis of being great cars, European influence, et cetera. It's fair to say that's not an easy assignment.'" Et cetera? Anyway, is it also fair to say Saturn's failed, considering the brand's shot its proverbial new product wad and still managed to under-perform a declining U.S. new car market? Of course not. Lareau gives the last word to Saturn's recently-snubbed brand manager Jill Lajdziak. "There's no question we have to continue to build the awareness of our new products. That doesn't happen overnight. You don't just walk into a segment. You have to earn your way into the segment." 

Automotive News [sub] reports that the growing paucity of parts from American Axle has "forced General Motors to eliminate a shift today at its auto assembly plant in Oshawa, Ontario. GM also said it slowed production of four-speed transmissions in Ypsilanti Township, Mich." The obvious question: who cares? Aside from no one in the first instance (LaCrosse) and fleet buyers in the second (Impala). OK, that's a bit harsh (Mikey). But the fact that the slowdown/shutdowns caused by the eight-week old United Auto Workers' (UAW) strike at American Axle hasn't got GM execs in a lather is either a condemnation of the affected products' appeal or management acumen, or both. Anyway, for those of you keeping score, the AA strike has now impacted 32 GM factories. And then there's the unresolved UAW strike at Lansing Delta (Enclave, Outlook, Acadia) and the looming strike at Fairfax (Malibu). What was that about bang vs. whimper?

As discussed in the last General Motors Death Watch, GM is reorganizing into four divisions: Bugmontiac (Buick, GMC, Pontiac), Summilac (Saab, Hummer, Cadillac), Chevy and Saturn. Automotive News [sub] reports that the internal realignment has begun. Scorecards ready? "The [new] channel heads report to Mark LaNeve, GM's vice president of vehicle sales, service and marketing. Meanwhile, GM is eliminating much of GM's central sales organization. When Brent Dewar, North America vice president of field sales, service and parts, moves to become marketing chief of GM Europe, that position won't be filled. Regional sales manager jobs will be eliminated, with regional sales staff reporting to yet-to-be-named sales managers for the channels. Those jobs likely will be in Detroit. That gives added power to channel heads, three of whom also become vice presidents of GM North America: Peper, Docherty and McNabb." Hey! No VP (with jet) for Saturn? "Marketing chief LaNeve says that is because Saturn is a smaller-volume channel than the others." Just what GM needs right now: a bureaucratic power struggle. As TTAC commentator Robert Schwartz said, "Deck chairs. Titanic."

"We've just got to get behind the doors and get these things resolved, which I'm sure we can do." So what is Rick Wagoner waiting for? God knows. But not Automotive News, which is happy to report (without further questioning) GM's Beancounter-in-Chief's belief that his back room boys can resolve the ongoing strike at American Axle, currently idling some 30 GM manufacturing facliities. And the United Auto Workers (UAW) strike over two-tier wages at GM's Delta Township factory. And, while they're at it, the possibility of a UAW strike at Fairfax, Kansas; the plant that makes the Chevrolet Malibu. And, at the same time, figure-out the mess at bankrupt parts supplier (and former GM division) Delphi. "Wagoner also said the work on Delphi's restructuring since it entered bankruptcy in 2005 provided 'a good base' for a revised exit financing plan. 'I hope it doesn't take an extended period of time,"'he said. 'The fact that they were able to arrange the debt side of the financing would suggest that the restructuring can be done.'" So much for a sense of urgency. 

Bankrupt GM supplier Delphi announced yesterday that it had contributed $46m to its pension fund. It sounds like good news for a company struggling to emerge from bankruptcy– until you realize that federal law required a $369m contribution. The Detroit News tells us that despite Delphi having $3.3b in unmet pension obligations by the end of 2007– on top of this latest shortfall– the company will not be transferring pension obligations to the Pension Benefit Guaranty Corp. And don't blame Delphi Prez Robert Miller, because he tells us the ship is righted, and now needs only a few billion in funding to cover pension costs and ensure liquidity (couldn't we all say that?). With Appaloosa Capital pulling out of a planned $2.55b bailout deal, Delphi is considering suing them for a $250m "termination fee." Hey, if they stuck it all in the pension fund, they'd only be a few million from compliance with Federal law. Just like that.

Yes, Delphi CEO Steve "Take the money and then take some more" Miller is declaring mission accomplished. Automotive News [sub]  reports the generous self-assessment– considering the recent collapse of the bankrupt parts maker's bailout plan. Not-so-coincidentally, Miller indulged in the entirely unjustifiable double-jointed back patting at the Automotive Press Association launch of his [twice delayed] autobiographical biz book: The Turnaround Kid. (Kid? Who's kidding whom?) Just in case you thought Miller was the unassailable captain of the ship that his book paints him to be, Miller revealed "he's not a big fan of his book's title — chosen by the publisher — because it suggests a 'tinge of arrogance.' The first title suggested for the book was Not Worth a Buck, a reference to UAW criticism and his $1-a-year salary during the first phase of the bankruptcy" [emphasis added]. Anyway, after declaring Delphi's exit from C11 a done deal, Miller takes a deep breath and promises that, well, it will be. "We will get it done. It won't get done in weeks. It'll be months, but we will get it done." 

After Rob Diel read a Detroit Free Press article about the automaker's Indian outsourcing, the Chrysler contract information technology worker posted CEO Bob Nardelli's telephone number and email address in the comments section. It wasn't long before the suits descended on Diel's desk. "They said unlock your laptop and come with us," Diel told TTAC. "When they show up doing that, it's not a good thing." Today's Free Press says "Diel, who expected to lose his job at the end of May, said he made several postings on the Web site under the name 'Chryslerworker,' including: 'Boycott Chrysler. If Chrysler is going to screw all the American workers, than (sic) it is only fair that America screws Chrysler. E-mail Nardelli and tell him what a great job he is doing.'" The Freep has since removed Nardelli's information. Meanwhile, Diel says Chrysler's Indian IT operators wouldn't know how to respond effectively to a glitch in the company's production computers, increasing the likelihood of delays. Diel also says morale in his former department is "just horrible… Nobody cares about doing anything. People are just wandering around; they just go for walks and stuff 'cause it's just so depressing." BTW: you can contact Mr. Diel at tripower428@hotmail.com. [apologies for the low audio levels]

Reuters reports that Delphi is considering asking federal bankruptcy judge Robert Drain to force equity investor Appaloosa Management to carry through with their $2.55b investment in the bankrupt auto parts manufacturer. Last Friday, Appaloosa announced they were backing out, citing GM's expanded role in the Delphi's exit strategy as the deal breaker. [NB: Appaloosa doesn't want GM to be able to prevent a strip-and-flip resolution to Delphi's bankruptcy.] In a filing with federal securities regulators, Delphi stated their board has formed a special litigation committee and engaged counsel to explore their legal options. Appaloosa had no comment, but they've said they'll consider investing in Delphi under "different terms." If Delphi doesn't get the funding from Appaloosa and/or other investors, they'll have to go back to GM for more than the $2.8b the automaker's already promised. If that fails, Judge Drain could lose his near-infinite patience, with Chapter 7 liquidation to follow.

Well, that's what happens when your employer pays you 80 cents on the dollar for your health care, and says here, you guys sort it out. The Detroit News reports that U.S. District Court Judge Robert Cleland considers Chrysler's $10.3b health care compact with its United Auto Workers (UAW) members "fair and reasonable." Under the terms of the agreement (a.k.a. health care VEBA), 170k active Chrysler workers, retirees, spouses and dependents will face new charges for their doctors' visits. In the short term, Chrysler retirees will now pay an $11 monthly premium and a $159 annual deductible. After that, a new 11-member supervisory board (six court appointees, five union reps) will ensure that the fund makes up the $8b shortfall AND makes enough money to cover soaring health care cost inflation, WITHOUT raising deductibles or further limiting patient choice OR allowing union members to plunder the fund OR letting cronies (lawyers, hospitals, etc.) get sweetheart deals OR waste precious VEBA funds. Meanwhile, Chrysler's lawyer says the VEBA's a good deal because her employer might go out of business. "We do believe in the light of the uncertain environment that Chrysler is operating that this settlement is the best for all parties," Nancy Ross pronounced. Ready for that summer vacation yet Nance?

Bloomberg reports parts maker Delphi's exit from bankruptcy has hit a snag. Appaloosa Management, one of the six investors working to get the former GM parts division out of Chapter 11, backed out of the deal. In the termination notice, Appaloosa claimed Delphi didn't meet the conditions of the $2.55b deal. Oh, and they asked for a $82.5m "breakup fee." It's not an entirely unexpected development; Appaloose had not been happy with GM's expanded role in the Delphi's exit strategy. They felt the automaker would have too much power as a result. When GM offered even more money to help cover Delphi's $3.8b pension fund shortfall, it was the proverbial straw/camel thing. Appaloosa indicated that they're still open to investing, but "in a capacity different than currently envisioned by the agreement." 

UPDATE – General Motors released a statement on this matter: "GM is disappointed in the decision by Appaloosa and the plan investors to withdraw their support for Delphi. There has been a tremendous amount of effort and progress made to establish the foundation that would enable Delphi to emerge from Chapter 11. GM will continue to work with the involved parties to facilitate Delphi’s efforts to emerge from bankruptcy." Meanwhile, the lawyers…