“There must be increased access to capital through the entire supply chain — from the largest tier one to the smallest family-owned firm,” Dave Andrea, vice president of industry analysis and economics at the Original Equipment Suppliers Association told the Senate Banking Committee [via The Freep]. “Without assistance this country will needlessly lose manufacturing capacity, technology development and jobs.” Which is about what suppliers have been telling congress since bailout mania struck. What the Freep fails to properly explain is that the supplier bailout passed earlier this year was an unmitigated disaster for suppliers and their relations with OEMs.
After four years in Chapter 11 protection, GM’s largest supplier Delphi is returning to the land of the living. For now. Along the way, though, Delphi racked up some impressive bills. Automotive News [sub] estimates that GM has spent $12.5b on Delphi during its bankruptcy, and has pledged a further $1b in debt assumption, $2b in forgiven claims and $1.75b in investments in the new company. For these (taxpayer funded) sacrifices, GM will get Delphi’s money-losing US operations and steering unit business. Delphi’s new owners Elliott Management and Silver Point Capital walked away from $3.5b in debt to assume control of the company, and $6.25b in pension obligations were dumped by Delphi and had to be assumed by the Pension Benefit Guarantee Corporation. Delphi’s bankruptcy alone cost $400 million in legal and professional fees. The new company’s manufacturing base has been migrated outside the US, and its main business will be in supplying electronics and air conditioning systems. Expected annual revenue is $10 billion compared to the $22.59 billion the firm earned in 2005, before entering bankruptcy. But rather than tut-tutting the waste, greed and ineptitude that has marked Delphi’s bankruptcy, let’s take this moment to remember the thousands of employees and retireesDelphihascastaside in the name of rescuing the US auto industry. For, as the Sibyl of Delphi foretold in the 9th Century B.C.E., love of money and nothing else will ruin Sparta.
What a funny coincidence. On the very same day that a government oversight panel rips GM a new one for disappearing billions of taxpayer bucks, the Detroit News brings word that GM’s CFO, Ray Young, will be leaving the company. Young’s departure comes as GM is shaking up its finance department, the division which gave the company such fine leaders as Rick Wagoner and Fritz Henderson. The DetN identifies Young’s announcement that GM would not disclose all of its financial information as a publicly-funded private company as a major cause for his ouster. And if the DetN‘s reporting is to be believed, Young isn’t the only GM exec who should be worried.
Fritz Henderson got a thumbs-up from the Board of Directors just days ago, but it seems that Chairman Ed Whitacre doesn’t want anyone to get comfortable. The Freep‘s Tom Walsh just posted a column describing GM execs as “rattled” by Whitacre’s recent revelation that at the New GM executives must earn their keep.
On Wednesday, Whitacre told a group of GM salaried staff — in one of several “diagonal slice” meetings, so called because they mix people from all levels — that he expects to see lots of changes in the next 12 weeks. Changes every day.
So, is the party over? Surely GM’s brass knew that there would be some accountability, someday. Right?
GM is stepping up efforts to retain some control over Opel this week, as political pressure builds to find a solution before German elections on September 27. GM sources told the Wall Street Journal that Spain, Britain and Poland would jointly contribute “about €1B” towards repaying a German government bridge loan. Should the nationalized American automaker pay off the note, they could then sell Opel to their “preferred” third party buyer option, RHJ. The private equity fund dug around in the couch and came up with another €25M, raising its offer to buy Opel from GM to €300M. Coincidence?
The board of GM convened on Friday to finally decide Opel’s fate. The board did as expected: It did nothing. They left everybody hanging. The board decided to not decide anything.
According to Reuters, the GM board desperately needs critical information from the German government. To wit: What state financing would be available if GM would sell Opel to their darling RHJ International, and not to Magna, which is favored by Germany.
Excuse us?
Do we have a serious case of highly contagious ADD, which has befallen the complete GM board? We thought it had been made perfectly clear: Read More >
The AP [via Google] reports that 13.9m shares of Old GM were traded last Thursday alone, raising the obvious question: why? “There are people who think they are buying the new General Motors. Stop. You’re not. You’re buying the detritus,” says Harlan Platt, a finance professor at Northeastern. And Old GM’s spokesfolks agree. “We’re not in any way promoting the trading of it,” says Old GM spokesman Tim Yost. “We have no legal right to stop the trading. That’s well beyond the purview of any given company.” And though some are trading Old GM for short-term profits, a number of traders seem to be buying Old GM stock out of ignorance or unfounded optimism. One Detroit-area investment advisor explains: “the thing about people in the Detroit area is we’re homers,” he said. “We want to root for the home team. A lot of times people will do that, more with their heart than with their head.” But does Detroit’s hometown loyalty extend far enough to motivate people to buy stock in a liquidating company?
At least 20 of the 789 dealers cut by Chrysler during its restructuring are still owed money for vehicles they sold before their wind-down. According to FOX Business News, NADA has been receiving complaints from the dealers. “This situation is unacceptable,” says a NADA spokesman. “The dealers got 26 days notice they would be closing. It’s been two months now and to not pay dealers even a portion of what they are owed is outrageous.” Chrysler’s response? Be cool. “All dealers will be paid monies due to them for incentives and warranty work,” Chrysler tells FOX Business. “On July 28 Chrysler notified its former dealers that the payments were delayed, due to unforeseen complexities as a result of the bankruptcy reorganization, but they will receive final monies due to them.” Unforeseen complexities? Oh, boy . . . .
Christian von Koenigsegg speaks to Automotorsport Sweden about the future of his new acquisition. Managing Director Jan-Åke Jonsson’s interview can be found here.
Ford has roughly $18 billion in the bank. The company’s CEO has slowed The Blue Oval’s cash burn to about a billion a month. If you take away $10 billion—the amount of float needed to keep the lights on—Crazy Henry’s mob has eight months to stop the arterial spray of red ink before contemplating C11 (or a “proper” bailout). Volvo’s sale looks like it will give them another month (about a billion). Although Ford tapped the credit markets for $1.6 billion in May, another offer may not be greeted with open arms. So let’s call Ford’s drop-deadline a year, maybe 18 months. Oh, did I mention a $5.9 billion dollar Department of Energy “retooling loan?” That’s worth another six months on our timeline. But that’s different. “Ford is the only one of the Big Three U.S. automakers that hasn’t taken government bailout money or declared bankruptcy,” NPR declares, disingenuously. “Ford is still losing $1 billion per month, but it has money in the bank and hopes to be making money by the year 2011.” The media meme in a nutshell. In an interview with publicly-funded radio, Ford’s CEO connected the dots between perceived purity and customer conquest, and hinted that yes, they did stick their noses in the taxpayer trough.
News is flashing across The Swedish Wire that GM and Koenigsegg have reached a final agreement on the future of the Saab brand. A share transfer agreement has been signed for an undisclosed sum and equally undisclosed technology and service understandings. Koenigsegg and its consortium partners are still waiting on $593 million worth of financing from the European Investment Bank. More details as they become available.
Having won the battle of the alpha males, Volkswagen now bares its fangs at two new enemies: Big Toyota, which Volkswagen wants to unseat from its #1 position; and moribund Opel, which VW would rather see dead than alive. VW CEO Winterkorn growled that VW might pull its parts business from Magna if the Canadian-owned partsmaker proceeds with their plan to acquire Opel. “We are looking with suspicion at what’s happening here,” Winterkorn said, according to the German edition of the Financial Times. Things are getting nasty, again . . .
BusinessWeek (BW) offers its readers a look inside Brand Spanking New Chrysler, or whatever they call it these days. Although the article’s written in the style of a PR puff piece, there’s plenty to disconcert the inherently skeptical (guess who). For example, does this strike you as the best way to re-jig your executive ranks? “Rather than rely on suggestions from top management, Marchionne asked more than 100 middle- and lower-ranked staffers what they thought of their bosses. Then, say people familiar with the process, he picked people most respected by their subordinates. ‘If he didn’t hear expressions of leadership voluntarily from people, he took it as a sign that they didn’t view the executive as a leader.'” So no one lied about their boss? Or everyone did? Or Marchionne favored the suits favored by brown nosers? And how did he know whether a testimonial was voluntary or inspired by Christmas party pictures? Color me confused about Chrysler.
You may recall that President Obama has appointed a “Pay Czar” to “review” the compensation packages enjoyed by executives working for companies suckling on the TARP-shaped teat. As Bloomberg reports, “Feinberg, the Obama administration’s ‘special master’ on executive pay, is due to receive compensation proposals by tomorrow from Citigroup Inc., American International Group Inc., Chrysler LLC, Chrysler Financial Corp., Bank of America, GMAC LLC and General Motors Corp. The companies must tell him how they plan to pay the 25 top-earning employees. Feinberg will rule on the plans within 60 days after they’re completed . . . In a second phase, Feinberg will decide on pay packages for the next 75 highest-paid employees at the companies.” In anticipation of the gravy train pulling into the station, Chrysler said “it will adhere to the requirements outlined in its $12 billion U.S. government bailout”—presumably as long as they don’t apply to their new Italian employees (wink wink). “GM, the recipient of $65 billion in U.S. aid, said today that it has submitted its proposals. It doesn’t plan to make the submission public.” Looks like GM CEO Fritz Henderson had his fingers crossed when he promised—under oath before the Senate—that the nationalized automaker would be transparent to taxpayers. Huh.
Until now, owning an Oldsmobile dealership was kind of like Ford’s logo-and-all, pre-meltdown mortgage: at the time it seemed bad, but history proved that the alternative was worse. After all, the Olds wind-down paid dealers up to $4 million to go away. Only now, several Oldsmobile dealers are getting a little taste of what GM’s less fortunate, bankruptcy-culled dealers have been put through. The Detroit News reports that “a handful” of Olds dealers are still owed annuity payments from the brandicide, and GM is filing those claims as “unsecured” debts of old, bad GM. Nobody likes being shorted in the neighborhood of $20K, but at least Olds dealers got something, right? Shouldn’t they count themselves lucky to be free of GM with any compensation at all? Not according to their lawyer . . .
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