It looks like Chrysler got out the old checkbook and paid Plastech some money to ship the damn parts already. USA Today reports nothing more than the fact that the two companies are doing business again, which should result in a production restart at Chrysler's four idled factories and two de-accelerated plants within a few days. Automotive News [sub] says it's strictly an interim affair; the deal only runs through Feb. 15. So the fat lady ain't singing. More accurately, the fightin's in 'rounds. Just as Delphi bedeviled GM for years, this dispute will go through several more permutations before it's done. Even if you don't factor in lawyer's fees, this little "spat" has already cost Chrysler millions. More importantly, one wonders what effect Plastech's insurrection's had on Chrysler's other suppliers. Will they be more willing to go to the mat when Chrysler comes calling? Count on it. Chrysler's ability to do business with its suppliers just got a whole lot tougher. 

Right about now, U.S. Bankruptcy Judge Phillip Shefferly is deciding the fate of Chrysler Corp. If he rules that parts supplier Plastech must surrender its Chrysler-related tooling, Chrysler will live to die another day. If he rules that Plastech has the right to keep the machines, Chrysler will have to play ball with Plastech (indeed the judge may "force" both sides to play). And if Chrysler agrees to pay the supplier on a shorter term basis for its parts than the usual 90 to 120-day basis, and all the other parts makers want a piece of that action, Chrysler's cash pile will fail and it will still head for the buffers. Anyway, the star.com reports that the lack of plastic parts has cut output by about half at Chrysler's Brampton (300, Charger and Magnum) and Windsor (Dodge Caravan and Chrysler Town and Country) plants. "Ed Saenz, Chrysler's corporate communications manager, said the company will be able to operate the two plants on four-hour shifts until the end of the week before completely running out of parts." Just like a labor strike, every day this drags on, it costs Chrysler millions. It's highly unlikely they could last more than three weeks before filing.  

Automotive News [AN sub] reports that Chrysler is asking U.S. Bankruptcy Judge Phillip Shefferly to let the automaker take immediate possession of its tooling equipment from former supplier Plastech. If not, the automaker says the ensuing parts disruption will quickly spread from the four plants currently off-line to ALL of Chrysler's American production facilities. Plastech's lawyers opposes the motion, saying its business assets are protected by bankruptcy law. [TTAC previously reported that Chrysler had already taken possession of the tools; AN says Chrysler tried to do so on Friday, immediately after canceling the contract. And failed.] Chrysler's petition to recover the equipment will be heard tomorrow morning in a Detroit bankruptcy court. If the judge rules against Plastech, Chrysler could well file for C11 soon thereafter; it can't afford a three-week shutdown. 

Not to be alarmist (much), but TTAC has been saying for some time that the collapse of Detroit's domestic supply chain could force one or more of the automakers into bankruptcy. On Friday, Chrysler canceled its contract with Plastech Engineered Products (PEP) of Auburn Hills, MI. Plastech immediately filed for bankruptcy and stopped shipping parts to Chrysler. USA Today reports that a lack of plastic parts has forced the American automaker to suspend operations at four U.S. assembly plants: Sterling Heights, Mich. (Sebring and Avenger); Newark, Del. (Durango and Aspen); Toledo, Ohio (Nitro and Liberty); and Belvidere, Ill. (Caliber, Compass, Patriot). While Chrysler should be able to reestablish parts production (e.g. engine covers, grill panels, moldings, metal stampings, door panels, floor consoles), we hear that Chrysler's been slow paying all its suppliers. If suppliers see this move as a sign of things to come, they might reach the point where they demand cash up front– tipping Chrysler into bankruptcy. Watch this space. 

"If everything goes well in the rest of the world, we can take a couple hits in the U.S. and still be okay." Bob Lutz, GM Vice Chairman of Global Product Development. [via TTAC]. "Those emerging markets can't carry GM. We've got to get the job done in all markets." Fritz Henderson, GM Chief Financial Officer [via Automotive News, sub]. Given GM Car Czar maximum Bob Lutz' reputation for "shooting from the hip" (a.k.a. making shit up as he goes along), I'm going with Fritz' analysis. Oh wait, "Henderson also said the U.S. economy in general is faring better than the financial markets. He said he doesn't think the nation is in a recession, thanks to strength in certain sectors of the economy, such as exports." Holy Cruising Down Denial Batman! If anyone is in a recession– you know, other than the housing market– it's the U.S. automobile industry. On the other hand, Fritz also told the assembled car hacks "In terms of what we have to do — profits, cash flow, market cap — we're not the world's largest automaker." So he's down with that. But– "That's what I'm spending 100 percent of my time trying to figure out." Hmmm. Maybe it has something to do with, I dunno, product, or, I'm guessing here, branding. Anyway, if it's not a recession, what is it? Downturn? Market correction? Help Fritz out here guys; what euphemism should he use? 

CSM Worldwide [via Automotive News, sub] is the bearer of bad tidings: the slowing new car market will force The Big 2.8 to cut even more production in the second quarter than the first. The auto forecasting firm says Chrysler will slash second-quarter production by 19.1 percent (compared to the same period last year). Ford will trim production by 16.3 percent. And GM production will drop 8.1 percent. Joe Langley, CSM senior market analyst for North American forecasts, sees an end to the pain for Ford and GM in the fourth quarter, with production edging ahead of year-ago levels. He doesn't see a Chrysler turnaround until 2009. Saying that, Langley attributes Ford's potential upturn to the debut of the MKS (Lincoln somethingorother) and Flex (xB on steroids) and ongoing sales of a TTAC Ten Worst finalist, the Ford Focus. And just in case you were thinking this is "a falling tide sinking all boats" deal, "the three biggest Japanese automakers expect to ride out a recession without serious pain. Toyota is expected to boost North American production 3.1 percent, Honda 1.9 percent and Nissan a whopping 11.0 percent."

The Wall Street Journal's "Boss Talk" chin wag with Nissan boss Carlos Ghosn begins innocently enough, providing a potted history of the Brazilian-born exec's career to date. As soon as the Q & A starts, things get ugly– for Detroit. "WSJ: Who is hurting the most in this market? Mr. Ghosn: Obviously, the Big Three. So how much more are they going to be able to sustain this kind of pressure and what's going to happen? That's a very important question for all the industry. WSJ: Can all the auto makers survive in such a difficult environment? Mr. Ghosn: No." And then, "WSJ: When it's all over, is there a native U.S. auto industry? Mr. Ghosn: Frankly, I don't know. I can tell you it's going to be very different from today. But whether there is going to be one left or two left or none left I don't know." Huh.

As TTAC previously reported, Getrag has pulled the plug on its $530m Chrysler transmission factory "indefinitely," for reasons that remain well outside public purview. Those of us in these parts who see the [non] development as a death rattle in Chrysler's corporate chest have yet more reason to wonder about the implications of the hard stop to a key part of Chrysler's powertrain program. Automotive News [sub] says Chrysler's new owners have gone radio silent on the automaker's suppliers. "Only 22 percent of the 90 suppliers surveyed said Chrysler executives had communicated with them since Cerberus took over in May, reports supplierbusiness.com, a research firm in Stamford, England. Of the vendors surveyed, most were direct suppliers to Chrysler. Forty percent had annual sales exceeding $500 million." The blackout could be the result of personnel changes; former Home Depot purchasing chief John Campi was named Chrysler's new supplier supremo on January 3. Or…?

Cerberus may be positioning itself to sue Daimler for unfair business practices. They could do so– after filing for Chapter 11 bankruptcy protection– under a claim of "fraudulent conveyance." Rather than turn this into a boring law seminar– and God knows I'm an expert on that front– let's just say that the provision in question (or not) is part of the U.S. bankruptcy code designed to stop management from hiding capital from creditors. Here's the twist: Cerberus could use fraudulent conveyance to claim that the Germans cooked the books, sneakily selling them a business they knew wasn't "a going concern." While Cerberus wouldn't get a full refund, every little bit helps AND it would be a genuine PR coup, protecting Cerberus' rep (tricky German bastards). There are a couple of caveats. First, that small matter of filing for bankruptcy. Second, Daimler could be protected by a statute of limitations, whose term depends on which country's laws govern the terms of the original sale. I'm still checking, but it appears that it's a U.S. deal, giving Cerberus a year from the transaction's conclusion to file and bite Daimler's ass. Hang on; this could get seriously weird. 

Some? I mean, c'mon Mr. Phelan. As a Detroit Free Press columnist, if you're going to proclaim a design renaissance at GM, why go half way? Why just trot out the Buick Enclave, Saturn Aura, Chevy Malibu and Silverado, draped though they are in various advertiser ingratiating COTY awards? What of the Pontiac G6? Saturn Sky? Chevrolet HHR? The General has 51 models spread over eight brands. Or are these four examples a sign of things to come. Apparently so… "The reason the new 'vehicles happened is that GM now has a hyperefficient, product-focused vehicle development program,' said Jim Hall, managing director of 2953 Analytics of Birmingham. GM's vehicle-development system today can stand alongside Toyota and BMW as the best in the industry." While one wonders just how efficient a development system has to be to qualify as "hyperefficient," Phelan identifies the three major changes ensuring that his Big Four aren't flukes. First, "A single executive is responsible for each family of vehicles, usually keeping the job for 10 years." Second, "Each of GM's global engineering centers now concentrates on the kind of vehicles it does best." And third, "The goal for each new vehicle is to be the best in its class, rather than simply hoping to be competitive." Phelan ends his paean to The General by elevating CEO Rick Wagoner, design chief Ed Wellburn and Car Czar Bob Lutz to sainthood. Clearly, the hometown scribe knows how to put the sick in sycophancy.

Fitch Ratings isn't overly interested in Detroit News columnist John McCormick's assertion that Motown's recent model introductions promise brighter days ahead for his paper's hometown heroes (Big 3 get it right with new vehicles). The hard-nosed financial analysts are more concerned with the cancer eating away at the Big 2.8: debt. The automakers' recent agreement with the United Auto Workers to establish a union-controlled VEBA health care superfund threatens to evoke that old saw about straw-carrying camels. While Fitch doesn't reveal the total financial burden weighing down The Big 2.8, they reveal that Ford's debt has grown by $21b since 2001, while GM added $31b worth of debt in the same time period. Uh-oh. "Increasing interest costs from higher net leverage will represent a more significant claim on operating cash flows," Fitch managing director predicted to Reuters. Mark Oline was quick to add that liquidity isn't [yet] an issue, but "with few assets left to divest, liquidity positions will likely drop through 2008." So, how low can you go?

When former GM division and bankrupt parts supplier Delphi tried to get their re-organization plan approved by a federal judge earlier this month, shareholders and creditors panned it. In the last filing, Delphi's top brass wanted to cut the shareholders' recovery from $470m to $69m. The latest revision ups the pay-off to $190m. To make that happen, Delphi looted took money from the right to purchase stock assigned to the United Auto Workers (UAW) and other unions– reducing the UAW's cut by 6.4m shares. Even so, creditors aren't happy with the new plan. But they're caught by the short hairs; they lose everything if Delphi goes under. The clincher: if the new new new plan isn't in place by December 31, Delphi's IRS waiver expires. Delphi would have to cough-up $1.4b for taxes and penalties on pension obligations. Other disclosures from the filing: their legal expenses have topped $320m and could reach as high as $400m. And they're capping the agreement to supplement some long-term employees' retirement plans. Oh, and they're still going to give their top executives at least $216m in bonuses, post-bankruptcy.

The Kansas City Star reports that sluggish sales of Ford's former cash cow, the F-150 pickup truck, have led to a dramatic production slow-down. For two weeks in October, FoMoCo will idle half their operations at the pickup-producing Claycomo plant. Some 2100 (of 4400) hourly employees will be paid for doing naught. And thanks to "competitive operating agreements" negotiated with the United Auto Workers, returning employees will work 10-hour shifts for four weekdays with Fridays off. Currently, Ford dealers are holding 185,400 F-series trucks in their lots, which represents a 72-day inventory. (This after Ford's Norfolk F-150 plant was permanently shuttered last year.) Hot on the heels of GM's pickup truck pull-back (now a full stop, obviously), the F-150 slowdown is more proof that the entire pickup segment is undergoing a radical contraction. The trend will hit The Big 2.8's bottom lines but good.   

The English say it’s horses for courses. The French say it’s horses for main courses. And the German say it’s horsepower uber alles Schätze. Well, everyone except Porsche. Since ’96, Stuttgart’s parsimonious power brokers have restricted their entry level Boxster’s engine so as not to steal big brother Carrera’s thunder. Porsche’s policy stands in direct contradiction to Mercedes and BMW, who happily pump-up the volume on vehicles that need more speed like an obese caffeine addict needs a bottle of Black Beauties. That’s just mean; the Boxster deserves proper motorvation. And now, finally, it’s got it.