The Globe and Mail reports that the International Energy Agency (IEA) has cut its 2008 forecast on global demand for oil. Don't worry, the IEA says demand will still grow. But not by the aforepredicted 1,233,000 barrels per day (BPD). The new figure: 1,030,000 BPD. The 230k BPD adjustment was attributed to softening demand for oil in the USA (still the world's largest consumer) and world-record oil prices. I wonder if those two factoids are connected… Anyway, the news comes as oil futures hit $126.40 per barrel on Monday. Hedging its oil futures bets, the IEA notes that "sustained weakness in European consumption" and "reassessment of fuel subsidies in countries such as Indonesia may create more downside risks." If their predictions come to bear, it'll be a simple affirmation of market principles. That said, if oil prices go down, the consumer will be the last to see it.

GM's Rick Wagoner clone, Fritz Henderson, recently told the AP's Tom Krisher that the U.S. auto industry is in a recession. (Insert "Duh!" here.) Regular, non-lobotomized reader of Frank Williams' By The Numbers series would have come to that conclusion two months ago. Fritz trots out the usual explanations for GM's woes: "troubled housing market, tight credit and higher gasoline prices that are sending consumers from trucks to cars at a rate much faster than the company has ever seen." The last part is particularly odd and GM-centric, because the truck-for-car swap hits GM a lot harder than Toyota or Honda given each company's respective product mix ratios. Fritz then goes on to confirm what many have speculated: "The 11-week strike at parts supplier American Axle and Manufacturing Holdings Inc. has had only a minimal effect on the company's retail sales, largely because it had built up a large inventory of pickup trucks and sport utility vehicles at a time when the market shifted to smaller vehicles." By minimal, of course, Fritz means $800m in lost EBT (earnings before taxes, which in this case, is sales to dealers) as the AP diligently reminds us. Be careful Fritz, $800m here, $800m there, and pretty soon we'll be talking about real money.

We've reported that Delphi was a little tardy on making its required pension contributions. Some $323m short, to be precise. Even so, Delphi said it wouldn't be transferring its obligations to the Pension Benefit Guarantee Company (PCBG). The Detroit News reports that the PBGC is switching into proactive mode. "We will act forcefully to protect Delphi's pension plans," the PCBG's director warned. "Especially in light of the company's decision not to seek renewal of its pension funding waivers." Charles E.F. Millard ain't just whistling Dixie. "We will draw down certain letters of credit and keep liens in place on the company's assets until Delphi has successfully emerged and made its pension plans whole." As Delphi won't be seeking an extension of it's pension-funding obligation waiver from the IRS, the PBGC will cash some $173m in Delphi credit when the deadline expires (23rd of May). Delphi spokesfolks say the company "expects to be able to meet its pension funding strategy through a combination of cash contributions and transfers of certain unfunded pension liabilities to a plan sponsored by GM." Delphi's skipped $2.3b in pension contributions since declaring bankruptcy in 2005. At the end of 2007, the former GM parts division was carrying an unfunded pension obligation of $3.3b. So who's gonna end up with that hot potato? 

Slumping U.S. new car sales– and their effect on manufacturers– are getting a lot of ink (and unleashing torrents of the red variety). Meanwhile, the American used car market ain't a load of laughs, either. Dollar Rental has checked-in with their financial results for the first quarter of the financial year. Explaining their $297.9m Q1 loss, Dollar's CEO brings the noise. "As we had anticipated, weakness in demand and pricing in January, coupled with an increase in fleet costs, adversely affected our performance in the quarter." Now don't get to thinking that this is good news for The Big 2.8, reflecting their oft-stated commitment to cutting back residual-killing fleet sales. Dollar asserts that "vehicle depreciation costs per vehicle increased approximately 31 percent in the first quarter of 2008 over the first quarter of 2007, and were above the Company's expectations due primarily to softness in the used car market." In other words, unloading their old shit is proving problematical. Solution? "The Company expects that its new fleet optimization software, together with the anticipated extension of fleet holding periods, should moderate the increase in vehicle depreciation costs over the course of the year and should enable the Company to operate a more efficient fleet program." Bottom line: look for rental cars to get older and prices to go up. 

In a direct homage to Glorious Communist Plans of Stalin and Mao, Nissan CEO Carlos Ghosn has announced his employer's latest five-year plan. The New York Times reveals the catchy name: GT 2012 (G for Growth, T for Trust). Trust? "In our industry, the companies that are performing best are the ones that have established a high level of trust with the different stakeholders.” So no American Axle, Plastech troubles for them, then. Anyway, amongst Carlos' goals: improved quality control, expansion of the Infiniti lineup into Europe, mo' and mo' better entry level cars , increased sales in the BRIC and Middle East, and something about profit (per-share dividend of 42 yen for '09'10, the rest TBA). Oh, and electric vehicles in the U.S. market within two years (yes 2010) and globally ever after. Just remember: they chose to do it. "Nissan decided to accelerate  development of battery-powered vehicles because of high gasoline prices and environmental concerns, not just because of the need to meet stricter fuel-economy standards." The conflict being? And in a dig at another electric vehicle, Carlos proclaims "We're not interested in some Stars Wars prototype." Tough talk for a man who says "“We’re talking about hundreds of [electric] vehicles first."

FT.com reports that Jerry York– car industry veteran and investor Kirk Kerkorian's Number One– apologized to Ford executives for shooting from the lip. Apparently, the Grand Old Duke of York regrets advising The Blue Oval Boyz to sell Volvo and give Mercury the needle. "Tracinda, Mr Kerkorian's holding company, disclosed in a regulatory filing that Mr York had backtracked on his 'off-the-cuff' remarks." When was the last time Jerry York apologized for anything? He and Captain Kirk are well known for their stock shenanigans, notably the one which pushed Chrysler into being bought by a merger of equals with Daimler– which resulted in dismantling of the vaunted Chrysler management team. We're still waiting for that apology, Jerry. Let's not forget you were the CEO of Micro Warehouse, which went Chapter 11 a few years back. On the flip side, Lutz got his golden parachute, rode Exide into Chapter 11 as well, then got hired by GM where he went on to win his own award here at TTAC. [Check out John Horner's take on Captain Kirk in Ford Death Watch 44. And TTAC welcomes longtime contributor and tipster Richard Chen into the blogging fold.]

The Associated Press reports [via Yahoo!] that GM has just spent $626m of its dwindling cash pile to purchase its Renaissance Center office building, and another $200m cash to buy office buildings in nearby Pontiac, Michigan. Incroyable! Just yesterday, we learned that Fitch Ratings estimates GM will burn through $8b in cash in '08. THEN we heard that the American automaker has set aside $200m to pay off the striking workers at American Axle. Delphi's not a done deal. AND one wonders if GM's going to fork out $600m to GMAC to keep the mortgage lender afloat. The Volt development program (and the rest) are sucking up the capex bucks. In short, is this really the best time to be shelling-out millions to reduce the rent? We're thinking… no. 

It should come as a shock to no one that the AP is reporting (via Yahoo! News) that GM has agreed to kick-in up to $200m to end the strike at American Axle. In "a government filing" today, GM said the money would go for bribes payments to make up for wage reductions for the employees, buyouts and early retirement packages. AA spokeswoman Renee Rogers said there's been no agreement between the UAW and AA. But the supplier is "hopeful that GM's financial assistance to help fund the buyouts, retirement incentives and buy downs… will facilitate an expedited resolution to the international UAW strike." In a separate filing, AA said GM's aid depends on how quickly the strike is resolved. Meanwhile, GM indicated they have enough money to "meet its needs," even though the strike has cut its liquidity by $2.1b. They didn't indicate from which bodily orifice they plan to pull the $200m.

Fitch Ratings released a report yesterday warning that GM and Ford are facing a severe cash drain in '08. Fitch rated both GM and Ford at "B" levels, a non-investment grade. They blame the usual suspects for the poor outlook: sagging US sales, high fuel costs and rising manufacturing costs– all while Ford and GM seek to restructure. Fitch says the negative outlook on the two companies will persist until either the US economy improves or the firms prove to investors that their cash flow position has improved significantly (Fitch would not comment on a scenario involving Hell freezing over). Of the two, Fitch is more bullish on Ford. "In light of Ford's progress on its restructuring program and its product profile, it may achieve (positive cash flow) before the end of this year." But "liquidity drains at GM this year may result in its rating being downgraded further." Folks, we're talking an $8b '08 cash burn. That is one serious ouchie.

The New York Times reports that Toyota reports (and we report their reporters reporting the report) that Toyota's profits sank by 28 percent. "For the year to March 31, 2009, the Japanese automaker forecasts net profit to fall 27.2 percent to 1.25 trillion and operating profit to decline yen 29.5 percent to 1.60 trillion yen, breaking a seven-year string of record results." That's a whole lot of yen. And make no mistake: ToMoCo is hurting. Stateside sales of the new Texas Tundra are up 24.8 percent year-to-date– but that's an increase of fewer than 7k units. And despite several hot-selling products, overall U.S. sales are down 3.3 percent (789,447). This after Toyota put the pedal to the metal on production, building big-ass factories worldwide. Equally painful in that "be careful what you wish for" kinda way, worldwide market growth has sent commodity prices through the [optional sun] roof. Not to mention the fact that all that Detroit-sourced kvetching about Japanese currency manipulation has proven to be so untrue it literally hurts (the dollar's down 10 percent on the yen). Still, these guys are strong enough to weather the storm. The Times concludes by pointing out that Toyota is still valued at about $180b, and compares that to Daimler and VW combined. We'd like to point out that Yahoo!Finance puts GM's "enterprise value" at $32.94b. 

Or any other U.S. industry for that matter. WardsAuto.com dropped in at the Consumer Bankers Assn.’s auto finance conference in mean old Frisco and reports that no one in the car world expects the election year sop to economically downtrodden voters to stimulate sales. Emily Kolinski Morris cites historical precedent to conclude that no one's gonna buy nothing with their refund money. “An estimated 25% of rebate checks were spent in 2001," Ford's senior economist declared. "And that is expected this time around, too." Which raises an interesting question, why'd they hold a conference, then? Meanwhile, Morris cited a more recent survey showing similar stats: 43 percent of today's Americans will use the refund bucks to pay off debts, 26 percent will save it and 24 percent will spend it. Apparently, "that leaves one banker at the conference torn. 'As an automotive lender, do I want people to take the money and pay off debt or take it and buy a car?' says Nicholas Stanutz, senior vice president of the Huntington National Bank. 'I have mixed feelings.'” Consumers saving money? Bankers with feelings? Strange times. 

Automotive News [sub] reports that Chrysler has switched the status of the Walter P. Chrysler Museum to non-profit– to keep expenses from impacting the company's bottom line. And that's not all. Chrysler is asking its beleaguered dealers for $5k apiece to fund the museum. To that end, the museum will now be known as the "Walter P. Chrysler Founding Dealers Society" (as opposed to something catchy like The Chrysler Museum). Luckily for ChryCo dealers trying to make their nut on sales of $20k Rams, the program is voluntary. Dealerships who pony-up the five Gs get their name on a donor wall in the museum. With 70 vehicles and six full-time employees, the WPCFDS is hardly a major drain on Chrysler resources. Who knows, maybe this is a test balloon for taking all of Chrysler to 501c3 status, establishing the country's first non-profit (as opposed to profit-free) automaker.

Residential Capital (a.k.a. Rescap) is GMAC's mortgage-finance company. GMAC's owned jointly by GM and Cerberus (the private equity firm that also owns 80 percent of Chrysler). Now, on Monday, ResCap announced it "might not be able to meet debt obligations" unless it secures an additional $600m by the end of June. Translation? "Rescap's cramming its debt on its bondholders. It's now a game of chicken. They're offering to convert unsecured debt into secured debt– but not all creditors get even money. Some will be forced to take a hit. And if you don't agree early, you may really get hit with a loss. Of course, there's a lot of lawyering going on to figure this out. (Keep in mind that this is mostly a paper for paper deal.) Meanwhile, the company's problems have not gone away. The question is how much GMAC will contribute to Rescap to keep it afloat. Do the bondholders want to see it meltdown and pursue recoveries through court, or go along with the plan and delay what may be inevitable anyways. Effectively, Rescap is admitting its bankrupt but trying to find a solution to stay out of court – which is an expensive process and subjects loss of control of the company to creditors. The point is that GMAC's valuation keeps going downhill and its own credit situation worsens as it throws money at Rescap. At some point the music will stop."  

The obvious answer is not. But MAN did the beleaguered American automaker get bent out of shape when analysts did the math on Daimler's financial report and reckoned Chrysler dropped $2.7b in Q4. Chrysler told TTAC (and the world) that they had "positive operational earnings," and confirmed (to us) that they meant honest-to-God profits. As we pointed out, that kinda conflicted with Chrysler CEO Bob Nardelli's previous statement. The ChryCo jeffe admitted that Chrysler was "operationally bankrupt" (which also triggered a PR offensive in all senses of the word). And now we read in The Detroit News that Bob Nardelli addressed cash flow in his usual "we're privately held so we can move fast and not have to pander to stockholders with 'the collective attention span of kindergarteners.'" "Yes, We don't have to worry about over-reaction in the market," Nardelli told Daniel Howes. "We are still on track to deliver a positive cash flow. We are not there yet." So what exactly does "positive operational earnings" mean, then? You know, other than something a lot less than the truth. 

Ford CEO Alan Mulally's turnaround plan might not be able to overcome the weight of history, but these guys sure seem to have a handle on, gulp, reality. To wit: FoMoCo analyst George Pippas' [above] acknowledgment of the American consumer's shift away from pickup trucks. Pippas' remarks come via BusinessWeek, which reports that April light truck sales (pickups, minivans, SUVs and crossovers) dropped by 17.4 percent across the board. That's compared to an overall passenger car increase of 4.5 percent. And a total new vehicle sales decrease of 7.8 percent, to 4,819,709 units. So, what does GM make of the pickup truck cash cow barbecue? "We certainly think the pickup truck market will bounce [back], but it's hard to say how quickly and how high that will go," pronounced Marketing Maven Mark LaNeve. Chrysler? "We don't see this market as a sea change against pickup trucks," spokesmouth Stuart Schorr said. "But it is a challenge. That's why we're developing hybrids, for instance. But Americans will continue to want pickup trucks." Toyota used PR-speak to split the difference between realism and delusion. ""Consumers are delaying their purchases now," admits ToMoCo GM Bob Carter. "But it's going to recover in the future." One thing for sure: the future isn't now. [thanks to jthorner for the link]