Plastech is working on bankruptcy financing to keep the company afloat through the summer. However, instead of going to traditional lenders, they're going hat-in-hand to their customers for an $80m line of credit. The Detroit Free Press reports Johnson Controls, Inc. (JCI), GM, FoMoCo and Chrysler are expected to share the pain to ensure a steady flow of plastic parts to their assembly plants through the summer. Experts say the loans are a smart move, as the cost of the loan would be less than the cost of stopping an assembly line due to a parts shortage. At the same time, some of Plastech's other lenders are talking with JCI about the possibility of them buying Plastech's interior component operations. Plastech is preparing its customers for the possibility they could go out of business by building a bank of parts. Watch this space as the continuing soap opera unfolds.

GM must have a lot more cash laying around than they're letting on. The Wall Street Journal [sub]  reports The General is thinking seriously about taking on more of Delphi's pension liabilities on top of the $1.5b they've already agreed to assume. In an SEC filing last month, Delphi stated their pension fund is short about $3.8b; how much of that extra $2.3b GM is thinking about taking on is anyone's guess. However, experts say getting the pension money from their sugar daddy will grease the skids for six major investors who had planned to pump $2.55 into the company. The investors are threatening to take their money and run if Delphi can't get everything straightened out by Friday, so expect GM to act quickly. Then all Delphi has to do is come up with $6.1b in debt financing to exit Chapter 11. Piece o' cake!

The situation has gotten so bad for parts suppliers, that even USA Today has an article describing the industry's abysmal conditions. After chronicling the travails of supplier bankruptcy poster child Plastech, the story notes that times will be tough for everyone in the biz. "I can't in my 21-year history in the auto industry think of a time when it's been more difficult than this," wails Laurie Harbour-Felax of consulting firm Stout Risius Ross. "More Chapter 11 filings are imminent in the next three to six months." The wide load of industry pressures: weak demand, rising commodity prices, increased overseas competition, tightened credit and cost-cutting pressure. Craig Fitzgerald, a partner at Plante & Moran, predicts that 50 percent of small and midsize suppliers will go out of business in the next five years, either selling out or shutting down. This is gonna get rough. I mean, rougher.

And so the United Auto Workers (UAW) strike at American Axle (AA) now enters its second month, without any imminent prospects of resolution (i.e. a GM payout). As Buffalo's Business First points out, "The upper hand clearly goes to (American Axle management) which has $350 million in cash on the balance sheet, does not need to supply GMT900 pickup truck axles for quite some time and has recently begun producing axles for the GMT900 SUV in its Mexican facility." Even so, the strike has shuttered 28 GM plants, and there's no way AA  could ramp-up to supply all of the truck-making factories from South of the Border. And while GM may be happy to watch its oversupply of SUVs and trucks melt away, there's a limit to how long they can afford the resulting termination of their cash flow. And now it seems that the AA strike is spreading in an entirely unwanted direction: Chevrolet Cobalt production at Lordstown. (Say what you will about the car– and God knows you have– but it's The General's second best selling car at over 200k p.a.) The Tribune Chronicle reports that "United Auto Workers Local 1112 President Jim Graham said the 2,400-worker factory could stop building the Chevrolet Cobalt small cars anytime between Friday and April 4 when it runs out of a [AA-made] part to make brakes that are used by nearby supplier Automodular." There's a 53-day supply of Cobalts on the ground, but no question: that's gonna leave a mark.

We haven't reported on the Plastech bankruptcy for some time. Well, they're still bankrupt. burning their way through a $45.15m line of credit (up $10m since we last checked). And they're still making parts for Chrysler, who is none-too-pleased about their inability to remove the tooling to make the plastic parts for the cars that they can't sell. Of course, you already know the big winner in this fiasco: the lawyers. Automotive News [AN, sub] reports that "The New York law firm Skadden, Arps, Slate, Meagher & Flom LLP on Tuesday, March 25, billed Plastech $1,002,674.50 in legal fees and $54,486.82 in expenses during the supplier's first month of Chapter 11 bankruptcy court proceedings, according to documents filed in U.S. Bankruptcy Court in Detroit." More specifically, "Skadden Arps billed Plastech for 1,835.05 hours of service at an average rate of $546.40 an hour. The $54,486.82 in expenses covered travel, printing, research and messenger fees, as well as meals for the Skadden Arps legal team." As AN points out, Skadden Arps is drinking small beer. "Supplier Federal-Mogul Corp., which emerged from more than six years of bankruptcy proceedings at the end of 2007, spent about $700 million, or $9.3 million a month, on bankruptcy related [legal] expenses." 

In his first conference call with automotive analysts, freshly-minted GM CFO Ray Young said that his employer has $27.3b in cash and $7b in undrawn credit lines upon which to draw. Although that ain't hay, subtract the $10b GM needs to keep the lights on, consider the company's ongoing cash conflagration, factor in declining sales and the American Axle strike's effect on cash flow, remember that GM lost $10.6b in 2005, keep in mind that GM's already sold the family silver and… the automaker's liquidity isn't quite so reassuring. But don't take my word for it. "As CFO, my priority is making sure this place is funded," Young said. "While we believe the industry (in U.S. sales) will be in the low 16 million units, we have triggered actions right now to make sure we start to conserve liquidity." Automotive News [sub] reports that GM's Beancounter-in-Chief revealed that GM is postponing [unspecified] non-product related capital expenditures from the first half of '08 to the latter half of the year– and beyond. "If the market doesn't return, we will defer that further into the future," Young said. GM's CFO said the suits are now running the business on a "quarter-to-quarter" basis. Oh, and Young said that GM ran about 940k units of dealer stock the end of February, roughly 125k units below the level at this point last year.

The autopblogosphere is abuzz with Chrysler CEO Bob Nardelli's memo to his employees, ordering the entire company to take a two-week vacation on July 7. Nardelli said he was putting 19k white collar and 52,500 hourly workers on simultaneous furlough to "create better alignment and efficiency across organizational lines and boost productivity." Huh? While most analysts take Nardelli at his word, and a company-wide summer break is an industry norm, rumors are circulating that Chrysler is going to file for bankruptcy while its workforce is off-site. Chrysler's market share losses and cash conflagration has continued (if not escalated) unabated since Cerberus bought the ailing automaker from [what was then] DaimlerChrysler. Chrysler workers' summer "vacation" could well be permanent.

If you were laboring under the impression that GM's European division was in the pink– after racking-up $4b in losses between 2000 to 2006– forgeddaboutit. [NB: freshly-minted GM COO Fritz Henderson was Chairman of GM Europe from 2004 to 2006.] Reuters reports that the Euro-turnaround has stalled– with an entirely predictable response. General Motors Europe is cutting 5k manufacturing jobs– about a tenth of its European workforce– as "the top U.S. car maker aims to stem steep losses in declining main auto markets." And if you think the United Auto Workers are tough (i.e. expensive to bribe), check out the European works council's response. "We want guarantees that there will be no plant closures in west Europe until at least 2020," Jean-Marc Ruhland demanded. And if that sounds familiar, so should the excuses. GM's Euro Prez Carl-Peter Forster said his employer's low profitability was "not confined to Opel but was an industry-wide problem among volume carmakers in Europe due to price pressure as Asian manufacturers exported cheap cars to the continent." America's tanking, Europe's struggling. Can the rest of the world buoy the corporate mothership? If so, for how long? 

When Plastech hit the skids and began its tussle with Chrysler for the tools that make the plastic parts for the cars ChryCo can't sell to the general public, Ford and GM made all kinds of soothing noises about their Plastech parts supply. Reuters reports that The General filed papers in U.S. Bankruptcy Court yesterday (Tuesday) to recover its tools from the embattled supplier. Ignoring/cognizant of the fact that 29 of its plants have been idled by a strike at American Axle, GM claimed "Any other course would constitute reckless endangerment of GM's production lines and those that rely on them." Given that the judge has denied Chrysler access to its tools, GM's petition doesn't stand a hope in Hell of satisfaction. No comment so far from either the Court or Plastech, which is busy trying to raise $14m to maintain operations through April Fool's Day (I kid you not). Under a court-approved bankruptcy agreement that expires tomorrow (Thursday), Plastech may borrow up to $35.1m. Yes, well, Plastech been "unable to complete long-term debtor-in-possession financing." Meanwhile, back in February, Ford told Reuters their supply of Plastech parts was cool. We shall see…

Define huge. And can we have a time frame please? According to CNNMoney, "JP Morgan analyst Eric Selle estimates GM will spend $1.8 billion if the strike lasts a month, based largely on hourly wage costs, according to a research report earlier this month." So that's besides the damage inflicted by the drying-up of dealer orders (GM books vehicles as sold when they leave the factory). Meanwhile, the United Workers (UAW) and American Axle (AA) are both toughening their positions. According to Automotive News [sub], the parts maker is threatening to further downsize its U.S. operations– two New York plants are due to close– if its UAW workers don't take a wage and benefit cut. UAW Prez Big Ron Gettelfinger went on radio to give AA a tongue lashing for dictating rather than negotiating terms. So far, the strike has idled 29 GM factories. For their part, GM spokeswoman Renee Rashid-Merem said the company "isn't commenting on the potential financial impact or on any analyst estimates." You know, other than Wagoner's assessment that it's no biggie.

Cerberus Capital Management has been building a name for itself by buying high-risk automotive assets like Chrysler and GMAC. Obviously Steve Feinberg's boys don't listen to analysts who say that Cerberus is already overexposed; the private equity fund is looking at sinking money into yet another troubled automotive enterprise. Forbe's reports that Dura Automotive, a supplier of door and seat systems and other automotive components is looking for loans to exit Chapter 11. A Dura spokesperson reveals that "Cerberus Capital Management's Ableco Finance LLC, [is] among the potential sources of Chapter 11 exit loans that are talking to the company." Dura needs a $150m first-lien term loan and an $80m second-lien loan to implement the Chapter 11 plan it filed Friday. This is Dura's second shot at exiting Chapter 11, having already failed to secure a larger loan package in December. Cerberus gave the company a $170m loan in January to defer foreclosure, meaning it may have no choice but to shell out the $230m Dura needs in order to protect its already considerable investment in the company. Preview of coming attractions?

When Chrysler went to court to retrieve tooling from their bankrupt supplier Pastech, the automaker's Director of Interior Purchasing dissed their former "partner's" quality control. Douglas Doran testified that Plastech components had triggered 450 "quality issues" in 2007. Doran drolly described the defect rate as "more than the average supplier." According to The Detroit News, Plastech execs have finally fired back. They claim that parts quality had improved steadily since 2006. What's more (or less), company data shows that there were five times fewer quality issues in the fourth quarter of 2007 than in the same period in 2006. In January of this year, a month before declaring bankruptcy, Plastech reported 26 problems per million parts. While Plastech's suits figure that's below industry targets, analysts counter that it also isnt industry leading. With the only proof of financial malfeasance by Plastech coming from an auditing firm staffed by former Chrysler flacks who refuse to answer our questions, it's beginning to look more like Chrysler squeezed on price, then whined about quality.

According to The Detroit News, the bankruptcy judge controlling Delphi's fate has OK'ed GM's $2.83b loan to its former GM parts division and current bankrupt. Delphi's other investors (save one) had protested the loan, saying the plan was "a brazen attempt to ignore a portion of the contract" and gave GM too much control of its former subsidiary. The judge overruled the protest. He green-lighted the Delphi cash conflagration– as long as The General laundered the cash made the payments through "a fully-owned subsidiary" (providing GM has any left). This stricture would meet the letter of the existing contract by keeping GM's name off the loan paperwork. GM said the ruling was "encouraging," but it's still "studying it." Delphi said the ruling will allow them to emerge from bankruptcy by April fifth, as they had originally planned. Although the ruling will ensure GM's largest parts provider keeps providing parts, GM's liquidity is looking increasing threatened.

Close your eyes. Picture Chrysler products from the last decade that you like. We imagine that your mental list is similar to ours. The 300 (and its derivatives), the Challenger and the Viper. Well friends, the savvy investors car guys over at Cerebus have shuttered the doors on the Pacifica Advance Product Design Center which gave us two of three (hint — not the Viper). Perfect. Chrysler is of course spinning it as a good thing. Here, you have to read for yourself: "Increasingly, we are leveraging resources worldwide, forming new joint ventures and alliances and consolidating operations in order to better achieve global balance. These moves are designed to help Chrysler become a more globally focused manufacturer, with design, engineering, sourcing and a local presence to serve local customers."  Right, they'll be helping out the local customers in California (where one in eight cars are sold in the US) by, wait, what? Bottom line: all future design work will be taking place in Auburn Hills, a plan that has worked marginally for decades.

"It is not hard to imagine a time in the not-too-distant future when General Motors Corp. will not exist. In fact, a lot of investors are imagining such a scenario… The GM-is-dying argument is certainly compelling, which is why the stock is down 75 per cent over the past eight years." Of course, the Globe and Mail's eye-opening lead is the prelude to an argument that GM's shares are undervalued. David Berman says GM could be a terrific buy IF the automaker returns to profitability. "A number of savvy institutional investors, not exactly prone to making silly guesses, are making big bets on a recovery." The "number" of investors adding to their GM shares seems to be one: "Legg Mason increased its holdings in GM by 5.4 million shares at the end of 2007, bringing its stake to 15 million shares." Yes, well, good luck with that. The more important point: the Mail's tacit admission that The General is in a fight for its life which it could well lose. This marks a fundamental shift in perception. If the [erstwhile] car-buying public picks-up this vibe (so to speak), it could further depress GM sales, which would push them further and faster towards Chapter 11. Send in the flacks, STAT!