After calling global warming "a crock of shit," GM Car Czar Bob Lutz is using his fastlane blog to defend the remark that launched a thousand blogs. Instead of an apology, Maximum Bob declares himself– and you– an irrelevance. "Never mind what I said, or the context in which I said it. My thoughts on what has or hasn’t been the cause of climate change have nothing to do with the decisions I make to advance the cause of General Motors. My opinions on the subject — like anyone’s — are immaterial. Really." Bob then tells the tree-huggers to stop picking on him. "Instead of simply assailing me for expressing what I think, they should be looking at the big picture. What they should be doing, in earnest, is forming opinions not about me but about GM, and what this company is doing that is — and will continue to be — hugely beneficial to the very causes they so enthusiastically claim to support." I think that's what psychologists call "disassociation." But the best bit is here: "General Motors is dedicated to the removal of cars and trucks from the environmental equation, period. And, believe it or don’t: So am I! It’s the right thing to do, for us, for you and, yes, for the planet. My goal is to take the automotive industry out of the debate entirely." I guess he missed the irony of "taking GM out" of the equation. 

The last thing GM needs right now is a $2.25b bill to go splat on the mat. But if rumors are accurate, The General will spend yet more money on its bankrupt former parts maker Delphi. While examining various scenarios for Delphi to come-up up with the $4.5b in needs to exit Chapter 11, the Financial Times hypothesizes "the exit funding would consist of a USD 2.275bn first lien loan, while GM would assume a USD 2.25bn junior facility." GM would have to pay their chunk to take the remaining debt down to a size that current debt holders JPMorgan and Citibank could sell. They'll have to move fast, though. The current funding agreements will all be history by the end of April, and Delphi will be back to square one. Unless…  nah… GM wouldn't be stupid enough to try to pay all the debt, would they?Could they?

Judge Phillip Shefflerly has ruled that Chrysler does not get to strip parts supplier Plastech's factories of tooling, effectively forcing Chrysler to continue buying parts from Plastech. Shefferly's conceded that his decision may take a bite out of Chrysler's short term bottom line. But he decided that Chrysler has "numerous options" on the table, whereas Plastech would be staring at eight plant closures in the next nine months (were Chrysler to seize the tools). Shefferly's decision scrupulously avoids any indication on which party is "in the right." No word on the validity of (former Chrysler honcho-staffed) auditing firm BKK's findings of Plastech malfeasance. Nor any mention of the several bailout agreements, in which Chrysler forked-over cash for the rights to its Plastech tooling. So, is Plastech lucky or good? In any case, the ball's back in Chrysler's court, with big, expensive choices looming. Which begs an even more important question. With bankruptcy rulings favoring "successful reorganization" over financial commitments, how long before other suppliers take Chrysler down bankruptcy lane? By the same token, now that Cerberus management is crowing that it "doesn't have to be heroes with Chrysler," how long before Cerberus pulls the trigger on a Chrysler filing?  

Now that The Big 2.8 have paid the mother of all bribes (a.k.a. a $29.9b health care VEBA) to the United Auto Workers, now that the automakers can pay their workers lower rates, they're supposedly going to start "insourcing" parts production. The Freep takes one example– Ford's decision to produce instrument panels for the Taurus and Lincoln MKS in-house in Chicago– and calls it a trend. Yes, well, Sarah Webster says the move to take back parts production will hurt suppliers; The Big 2.8 use it as [another] stick to beat them up on price. And even if Webster's wrong about insourcing, outsourcing will continue– to Mexico, China, India, Ant frickin' Arctica. This. Is. Madness. The relationship between a manufacturer and its suppliers must be one of friendship, good will and mutual profit. To hammer down your suppliers on price to the point of bankruptcy and then move your business elsewhere is to cut off your nose to spite your shareholders. Wait, here's the key bit… eventually. At 4pm today, a federal judge will rule whether Chrysler can remove mission critical tooling from its supplier. No matter which way this goes, the chickens are coming home to roost. 

Two weeks ago to the day, Frank Williams provided a heads-up on the impact of the coming credit crunch on new car sales. Automotive News [AN, sub] now reports that some small regional banks have stopped making loans through auto dealerships. Even the big boy's auto loan departments– Chase Auto Finance, AmeriCredit Corp., Wells Fargo Auto Finance, Mechanics Bank and Sovereign Bank– are reining-in their metaphorical horns. And that's led "many would-be consumers to buy cheaper models, or purchase a used vehicle instead. If customers with shaky credit can get loans at all, often they must make a bigger down payment, pay higher interest rates and accept loans of shorter duration." And here's the kicker: "Consumers with subprime credit ratings buy nearly 30 percent of all new vehicles." Oh wait, that's not the kicker. This is: "Dealers are more dependent than ever on automakers' captive lenders. The captives appear more willing than independent lenders to make subprime loans in what is shaping up as the worst year in a decade for new-vehicle sales." Which will be true (the loan part) right until it isn't. And if GMAC goes down, look for all Hell to break loose.  

While we've taken Detroit to task for its lousy supplier relations (nose, face, spite, rhinoplasty, etc.), we finally get a look at the Plastech showdown from Chrysler's perspective. It's buried at the bottom of a Crain's Business Detroit article on their "Crain's Newsmaker of the Year" award to United Auto Workers' boss Ron Gettelfinger. After Big Ron wishes [unionized] Plastech well, we learn that "During court testimony last week, Douglas Doran, director of interior procurement, said Chrysler had been monitoring Plastech's financial condition for more than a year through Southfield-based BBK Ltd. BBK told Chrysler that Plastech was having trouble paying suppliers and had violated agreements with its lenders." And so "Chrysler twice participated in bailout agreements with other customers [GM? Ford?] over the past year, including in January when it contributed $10.7 million to help bail out Plastech. Chrysler attached conditions to each bailout agreement granting Chrysler the right to relocate its tools at any time." Yes, well, Chrysler acknowledged that Plastech has an additional $13.4 million of equipment for which the automaker didn't pay. Meanwhile, we hear that "Plastech's production quality was falling. In 2007, Chrysler issued 449 'quality tickets' to Plastech for 'non-conforming material.'" That's a lot of deeply worrying info, especially the bit about "other" supplier bailouts. Could this thing snowball? We shall see. [NB: Federal Judge Phillip Shefferly is set to rule on ownership of the disputed tools tomorrow, at 4pm.] 

Belvidere has been down since early Wednesday morning due to a broken gear in a press in stamping area. Trucks came and removed the dies and such to other Chrysler stamping facilities. There were a lot of trucks though. More than I would imagine would be needed for one press and its dies. Is it possible they are pulling out all stamping? Is it possible they may close the doors at the Belvidere facility? Nobody knew anything on Tuesday, yet the union seemed to know we would be off at that time without notifying the workforce. I can't get any info. I know they have bounced checks and aren't paying suppliers. They intend to cut one shift next Friday. Their supply of vehicles is much higher than that posted on your site. Chrysler bullshit. That's what it is most of the time.

You know that perfect storm that I keep predicting for Detroit? Keep in mind that the metaphorical meteorlogical phenomenom requires a confluence of jumbo-sized atmospheric disturbances. So, what have we got? Well, even if we restrict our forecast to Chrysler, we've got parts supply problems, too many products, too many bad products, too many dealers trying to sell bad products, not enough customers willing to buy bad products, lousy marketing, killer competition, a private equity firm with all the patience of a crack head, and a CEO whose M.O. is cut and run. Add to this looming prospect of GMAC going belly-up. Bloomberg [via Automotive News, sub] reports that Cerberus founder (and current Chrysler owner) Stephen Feinberg sent a letter to investors warning that GM's finance arm faces "substantial difficulty" if credit markets do not improve (what are the chances?). Last year, GMAC lost $1.6b in the first quarter, and $724m in the fourth. If GMAC's mortgage and car loan biz sucks to the point of collapse, Chrysler Financial isn't likely to be hale and hearty. At some point, Cerberus will have to switch into dump mode. They'll throw the automaker and their two financial units into Chapter 11. What would happen to GM, which owns 49 percent of GMAC and depends on the finance arm for cheap car loans? That's another story…

So, here we are. The interim agreement between Chrysler and bankrput parts supplier Plastech that kept mission critical car parts flowing is set to expire. Earlier today (Thursday), Chrysler asked a federal judge to let them remove tooling from the bankrupt parts suppliers' premises. If so, Chrysler says they could be up and running with new parts in less than a week. According to Automotive News [AN, sub], Plastech's Veep of Ops called bullshit. "I don't believe that," Donald Coates testified. "There's no way it could be done in 4 or 5 days." So what's the real deal? Matt DeMars, Plastech's president of interior and exterior business, pegged the necessary transition at 24 to 30 months. Coates testified that removing the tooling would mean "four or five assembly plants would be idled within five hours of a shortage… followed by material shortages at 11 or 12 plants within 72 hours, with all plants affected within a week." Richard Schmidt, Chrysler's senior manager of materials supply operations, said "vehicles could be assembled without some parts and wait on a factory lot until the parts are added. But that could create quality problems. Vehicles could be damaged by parts being added out of sequence. Customers also would face delays as their vehicles wait on lots to be completed." Customer delays? In Chrysler's dreams. Meanwhile, Chrysler's nightmare continues…

UPDATE: As we predicted, Judge Phillip Shefferly urged Chrysler and Plastech to extend their interim agreement. Next Tuesday, at 4pm EST, Judge Shefferly will rule on Chrysler's request to remove tooling from the bankrupt parts maker. 

In case you were thinking Chrysler's supply chain was relatively robust– aside from last week's spat with Plastech that shut four factories and caused slow-downs at four more– The Chicago Tribune reports that Chrysler's now idling its Belvidere assembly plant for at least the first shift Wednesday, due to an "unexpected parts shortage." Chrysler spokesmouth Roger Benvenuti told the Trib that the latest disruption– which halts production of the Jeep Compass and Patriot and the Dodge Caliber– was not Plastech-related. He also revealed the astonishing fact that production will resume when parts became available. Meanwhile, no matter how you slice it, this doesn't look good for Chrysler. Either they screwed-up their logistics or they have another Plastech-type dispute rumbling away somewhere in the background. Watch this space…

The mainstream media may have forgotten that last week's Plastech parts embargo threatened to throw Chrysler into Chapter 11, and that the agreement saving the automaker from that fate expires this Friday. But we haven't. And neither has Crain's Detroit Business. According to the paper, a U.S. bankruptcy judge is set to hear arguments to [ultimately] determine who owns the tooling that makes the parts that Chrysler needs to survive. Chrysler says mine, mine, mine. "The automaker alleges that its right to the tools was gained through two prior bailout agreements. In those agreements Chrysler gave the supplier $6.9 million and sped payment of an additional $10.7 million." Plastech says bankruptcy obviates those claims. To wit: pulling the tooling from Plastech plants would hamstring their ability to secure life-sustaining, long-term financing. The most probable outcome is an extension of the interim agreement, but you never know. Meanwhile, here's a factoid that might explain Plastech's hang-tough strategy: the parts maker, owned by Vietnamese immigrant Julie Brown, is the largest minority owned company in the North American automotive supply chain.

In his raucous yet rambling history of the American west, author Hampton Sides reveals the surprising fact that the Confederate Army didn't lose their Western campaign in glorious battle. According to Blood and Thunder, they lost their war in Apache Canyon, when a Union commander named John Milton Chivington stumbled upon his rival's supply train. Chivington's men rapelled down the canyon walls and overcame the camp's defenders. He then destroyed 80 wagons' worth of supplies and some 600 horses and mules. And that was that. It was only a matter of time before the largely Texan force limped home, starving, sick, beaten. Flash forward to Detroit. Experts say that Chrysler's Plastech debacle– a dispute which threatened to sink the entire company– is only the tip of the proverbial iceberg. As many as two dozen key automotive suppliers could file for bankruptcy this year. Their demise is down to the domestics' belief that their competitive future depends on outsourcing parts-making to low-cost foreign countries. Maybe so. But only a fool abandons (or lightly guards) his vital supplies before securing a new supply. Think Detroit's ready for a U.S. supplier meltdown? Obviously not. More to the point, isn't there anyone in Detroit who knows how to fight?  

It's no secret that The Big 2.8 have been beating-up on their suppliers for decades, banking profits on the backs of their parts making "partners" by squeezing them for every possible penny (often at the cost of quality). Not to put too fine a point on it, relations between parts providers and American automakers are positively poisonous. So why is Reuters taking the automakers' side in their analysis of supplier – manufacturer relations post-Chrysler – Plastech blow-up? "And the stand-off between the companies will not be the last either, as U.S. automakers — looking to close plants, slash jobs and streamline operations to return to profits — lose patience with financially stressed suppliers." So how does scribe Ben Klayman reckon the suppliers became "stressed" in the first place? Anyway, "that hard line certainly caught suppliers' attention." Yes, but not in the way Klayman suggests. Suppliers are fed-up with Auburn Hill's late payments and now, bully-boy tactics. If they think Chrysler's pulling-out or going under, why wouldn't they get tough? Chrysler could soon learn that Hell hath no fury like a supplier scorned. 

BusinessWeek's Dee-Ann Durban had the pleasure of attending the Chicago auto show to get a feel for how the suits are feeling about the future. And the answer is… great! "We're beginning to see, after six quarters of declines, the beginnings of some pent-up demand," opined GMNA Prez Troy Clarke. "You could make a case that the second half of the year could be significantly better." Marketing Mark LaNeve agrees with his co-worker's "Annie" analysis. "We really believe the industry's going to be OK this year," LaNeve said. "We've had a fairly weak car market for the better part of two years. Economic weakness is being experienced in other places right now. We've already been in it." Ford's President de las Americas, Mark "Tool Time" Fields, was also optimistic, in a plausible deniability sort of way: "We do see opportunity in the second half." While you can easily file all this spinnery under "What else are they going to say?" one could make a case that when the going gets tough, Pollyanna should go away. Sense of urgency. That sort of thing. 

Just four days after Plastech's parts embargo shut down Chrysler factories, just eight days before the two companies' interim agreement is set to expire, Chrysler's CEO is deploying the same sort of charm offensive that made him so popular at Home Depot. "This was not hard-ball tactics, it was a solid business practice," Nardelli told reporters at the Chicago Auto Show. "We never meant to create an adversarial relationship with Plastech or any other suppliers." In other words, hey, it's just business. "We have to stay competitive. Our customers expect that. Obviously if [Plastech's] not financially sound, we certainly aren't in the business of subsidizing. No hard feelings, no animosity, just solid business practices." No subsidizing eh? The Detroit Free Press reports that Chrysler resolved the Plastech missile crisis by agreeing to pay some its bills "early;" an undisclosed portion of a $23.4m early payment cash infusion. It's a dangerous precedent that could consume Chrysler's cash pile. Meanwhile, Nardelli says Chrysler will continue to remove its parts contracts from Plastech. Somebody send that man a copy of "How to Win Friends and Influence People," STAT.