According to Automobilwoche, FIAT signed an agreement to purchase 70 percent of Yugoslavia's Zastava in Belgrade Wednesday. This is a marriage made in Heaven — if you're a comedian. Picture Jay Leno combining Yugo jokes with "Fix It Again, Tony" witticisms. Or Stephen Colbert commenting on a car the grandchildren of Mussolini would build in joyful cooperation with the children of Milosevic. FIAT is investing 700 million Euros in a new modernized plant which will build 200,000 subcompact cars in (you guessed it) 2010 with a new mid-class car to follow. And the punchline of the biggest joke? The Yugo car Americans loved to hate was derived from a FIAT: the 127 model.

Wondering why politicians are considering bailing out the D2.8 to the tune of billions in subsidies and tax breaks? Wonder no more. The Center for Responsive Politics [via The Detroit News] reports that the auto industry spent a record $70m bribing lobbying congress last year. The General lavished $14.3m on its legislative campaigns, with Ford’s Capitol (capital?) efforts racking-up $7.2m. Toyota dedicated $5.9m to its lobbying team. Much of the money was spent [unsuccessfully] fighting recently-increased CAFE standards. A GM spokesman justified this a noble battle as “proportional to the potential competitive and economic impact that proposed legislation could have on our business.” It’s not like their $14m could have been better spent heading off other competitive challenges or paying an executive’s salary and bonuses. Anyway, don’t expect CAFE hikes to diminish GM’s enthusiasm for politics. They’ve already spent $4.1m on lobbying this year, not including $25k spent on The Governator’s re-election campaign (in unfulfilled hopes that he’d “hasta la vista, baby” to California’s new emission standards). Ain’t democracy grand?

While GM bleeds cash at home, its overseas business continues to fare pretty well. Auto Motor und Sport reports that GM's European Opel division posted a record 572k sales in the first quarter of this year, earning a pre-tax profit of $198m. Although profit is its own reward (and apparently an actual priority for GM), GM is rewarding its German branch with a $9b investment over the next five years. $2.5b of the cash will go towards renovating Opel factories in Rüsselsheim, Kaiserslautern, Bochum und Eisenach. The remaining $6.5b will help Opel bring 17 new passenger cars (and three new commercial vehicles) to market by 2012. And now the bad news: Opel's European market share declined from 9.7 to 9.6 percent. Opel GM-Europe boss Carl-Peter Forster says never mind, pointing to hbis employer's 11.6 percent Russian market, where car sales jumped by 78 percent in the first quarter. "Russia will be Europe's largest car market by next year at the latest," says Forster. With Opel providing several of GM's most popular U.S. products (Saturn Astra and Vue), GM's investment could well keep the sinking ship afloat for an extra quarter or so. Just kidding. On both counts.

Business Week's ed forgot the "compare" side of the "compare and contrast" assignment to scribe Ian Rowley re: Japanese and American automakers' fortunes. Wander 'round TTAC for the U.S. side of the equation (hint: falling market share is rarely a good thing). For Japan, BW tells us that reduced targets for operating profits paint a bleak picture for Honda, Mazda and Mitsubishi (trimmed by 32, 29 and 45 percent, respectively). But it ain't all that bad, when you think about it. "All $3 billion of the projected decline in Honda's operating profitability is explained by the yen's sudden rise against the dollar and other currencies. Against the greenback, for example, Honda is projecting a dollar-yen rate of 100, compared to an average of 114 in the previous year. That alone is enough to wipe off $2.4 billion from profits when sales made in dollars are translated back into yen. Yet when it comes to selling vehicles Honda shows few signs of slowing down, despite weak market sales in the U.S. and Japan, its two biggest markets." All the Japanese majors are expanding production– and for good reason. "In markets including China, India, and the Middle East there is a major change in their trend toward higher ownership levels and the Japanese majors are well placed to benefit from this trend,' says Deutsche Bank's Sanger. After a tough 2008, look for an earnings recovery at Japan's carmakers." [NB: Toyota and Nissan have yet to sign-in with their numbers. We'll update you as and when.] 

And this, folks, is just the beginning. Or the end. Or the beginning of the end. Whatever you call it, however you look at it, GM's $3.25b first quarter financial loss makes a mockery of CEO Rick Wagoner's $14.4m annual compensation, and eliminates any hope that GM's foreign markets can keep the corporate mothership afloat. As Bloomberg reports, the number would have been even more horrific if not for GM's international growth. "GM's European profit grew by more than 18 times to $75 million. The Asia-Pacific region and Latin America-Africa-Middle East region doubled earnings to $286 million and $517 million, respectively." Meanwhile, "GM had an $812 million pretax loss in North America, its largest region, wider than the $208 million deficit a year earlier." And if you think things will be better stateside in the second, third or fourth quarter, what with strikes and tanked SUV and pickup sales, you need to be working at GM. Otherwise, no one will believe you. [Read General Motors Death Watch 175: Phone Calls from the Dead for a full analysis.]

Earlier today, automotive analysts blamed a large chunk of Daimler's Q4 profits downturn on its remaining 19.9 percent share in Chrysler. According to their calculations, Chrysler inflicted a $2.7b drag on Daimler. Although Market Watch duly reported that "the German automaker cautioned against making that calculation, citing the differences between international and U.S. accounting," Chrysler PR switched into damage control. An email pointed-out that the results are for Chrysler Holding LLC, which includes both the automotive and financial services operations. What's more, that accounting thing is a big deal. "There are significant differences between IFRS and U.S. GAAP accounting standards. Major differences include the effects of the acquisition of Chrysler Holding LLC by Cerberus, including recent restructuring actions by Chrysler LLC and the accounting for pension costs under the 2007 UAW contract. Accordingly, the 2007 financial results of Chrysler LLC under U.S. GAAP are substantially better than the IFRS-based financial results utilized by Daimler." Chrysler flackmeister Katie Hepler told TTAC that ChryCo "enjoyed positive operational earnings during Q4." So what about CEO Bob Nardelli's statement back in December that his employer was "operationally bankrupt?" No comment.

With gas heading for $10/gal (maybe), automakers aren't raking in the bucks. But oil companies are. Marketwatch reports that British Petroleum and Royal Dutch Shell both released 1Q profit numbers yesterday, and the results would make any automaker drool a little. BP made $7.2b in the last three months, beating analysts expectations by over a billion bucks. Shell boasts a whopping $9.08b in profit this quarter, also beating market expectations by over a billion. Neither BP nor Shell increased production by more than one percent; they received between 52 and 66 percent more per barrel sold than last year. Even the oil companies are scratching their heads– all the way to the bank on these numbers. "We don't understand the oil price at this stage," Shell CFO Peter Voser tells The International Herald Tribune . "The fundamentals will not justify an oil price as we see it at the moment." Voser added that Shell "was not investing money in projects that would require oil prices to remain high to be profitable." (That's the job of SUV makers.) ExxonMobil and Chevron are expected to announce their own knee-weakening profits later this week.

Marketwatch reports that Daimler's profits dropped 32 percent in the first quarter of this year, tumbling to $1.3b. Revenue actually jumped about four percent in the same period, although pre-tax earnings dropped by an even more precipitous 40 percent. Daimler blames the red ink on its remaining 20 percent stake in struggling Chrysler, which created a 340m Euro drag on operating profits. [Chrysler's reply coming.] Another hit: Daimler's sale of its minority stake in EADS, parent of Airbus, in the first quarter of last year. Daimler's core business is operating on a fairly solid financial basis; Mercedes sales increased by 17 percent, operating profit by 45 percent. Only Daimler's truck business remains shaky, due to the "tense economic situation in the United States," a European oversupply of commercial trucks and new emissions standards. Still, Daimler is sticking by its forecasts that profit will continue to rise throughout the year. What a difference a brand makes. 

GMAC is the lender underwriting the vast majority of GM dealers' loans, facilitating the finance that's been fueling GM sales. GMAC's ResCap sub-division handles residential mortages. It may come as no surprise that both parts of the biz– owned jointly by GM and Cerberus (Chrysler's 80% owner)– are in deep shit. Yahoo!Finance reports "GMAC lost $589 million during the first quarter of 2008, compared with a loss of $305 million during the same period the previous year. [Ed: that's a 93 percent swing in the wrong direction.] The automotive finance division earned $258 million during the first quarter, a 35 percent decline from the year-ago period. GMAC cited weaker credit performance, including rising credit loss provisions and rising costs tied to restructuring operations." Something to do with a tanking new car market as well. ResCap "only" lost $859m during the first quarter, a slight improvement on the $910m lost during the same period last year. GM's former cash cow will soon require a fresh capital injection— a possibility dismissed by Cerberus– or face bankruptcy. And if GMAC goes down, there will be chaos on the showroom floor.

If so, stick a fork in Detroit. And federal mpg regulators will look like geniuses, as the free market stampedes to high mileage vehicles. As Captain Picard might say, what will make it so? Writing for The New York Sun, Dan Dorfman relies on three analysts for his, uh, analysis. First up, Troy Green of the American Automobile Association. The trip-A guy's forecast "calls for" (perhaps not the best choice of words) a jump to between $7 and $10 a gallon in two to three years, based on $200 a barrel crude. The chairman of Houston-based Dune Energy is slightly more optimistic. Alan Gaines sees gas rising to $7 to $8 a gallon on Arrakis. I mean, stateside. Weiss Research commodities trader Sean Brodrick projects $8 to $10 a gallon gas. Like any good financial pundit, Dorfman hedges his cred. "His [Gaines] latest prediction of $200 oil is open to question, since it would undoubtedly create considerable global economic distress. Further, just about every energy expert I talk to cautions me to expect a sizable pullback in oil prices, maybe to between $50 and $70 a barrel, especially if there's a global economic slowdown." [thanks to jthorner for the link]

This morning, octogenarian investor Kirk Kerkorian bid $8.50 per share for 20m shares of Ford. His offering was 13 percent above FoMoCo's closing share price on Friday. While the total is only a fraction of Ford's $16b market cap, it does create a lot of speculation about his intentions. Tracinda stated they "believe that Ford management under the leadership of Chief Executive Officer Alan Mulally will continue to show significant improvements in its results going forward." Just a few minutes ago, we received this statement from Ford: 

The following statement is attributable to Ford Executive Chairman Bill Ford and Ford President and CEO Alan Mulally:

Dearborn, Mich., April 28 -"We welcome confidence in Ford and the progress we are making on our transformation plan. Any investor can purchase Ford shares, which are sold on the open market. The Ford team remains focused on executing our plan to transform Ford into a lean global enterprise delivering profitable growth for all."

After Kerkorian's attempt to take over GM and his bid to buy Chrysler both failed, is The Lion of Las Vegas trying once again to buy a car company? Or is he just making a shrewd investment? With GM struggling to keep its plants open, with Chrysler on the ropes (rumors of bill-paying problems), perhaps Captain Kirk is anticipating the TTAC-foretold dead cat bounce. As always, watch this space.

Even The Detroit News had a hard time spinning GM CEO Rick Wagoner's gi-normous pay rise as anything other than a travesty. But you gotta give home town scribe Sharon Terlep credit for trying. (Or not.) Her report on Red Ink Rick's $14.4m 2007 compensation waits until all of paragraph four before defending the man whose administration of the American automaker hasn't seen a profit since 2004. Terlep turns to Wall Street analyst John Casesa to do the deed. "There's a broad recognition that you've got to pay someone a lot of money to do this job," Casesa prevaricates. And then the quote above. Ah, so Rick's bottom line performance has been hamstrung by uncontrollable factors… Terlep underlines the point. "Broad economic forces, from soaring oil process to the collapsing U.S. housing market, have slammed GM and the domestic auto industry as the companies work to execute sweeping restructuring plans." So GM's $38.7b loss during the time of Wagoner's $14.4m pay package isnt' really Rick's fault, is it? In fact, he's something of a bargain! "Apart from the labor deal, Wagoner has overseen structural cost cuts that amount to $9 billion a year in savings." So that's alright then. 

TTAC slots all its blog posts into categories. I sometimes have trouble figuring-out which box to tick. If I'm stumped, I can create a new category. But then I have to wonder how many posts will fit the new attribution, and the wisdom of creating a drop-down menu that's longer than an E85 producer's list of tax deductions. And then there's the name of the category. For example, this post could go into "We Can't Make This Shit Up," "and "Who Believes This Shit?" Or both. I mean, c'mon. If you wanted to eavesdrop on Porsche CEO Wendelin Wiedeking– as Wendy's in full takeover mode looking to kick some major status quo ass– why would you use a baby monitor for the job? But it's true. Or not. Spiegel [via Automotive News, sub] reports that "a security firm found a switched-on babyphone behind a sofa in the room where Wendelin Wiedeking was going to stay for a supervisory board meeting of Volkswagen." In this brave new world of electronic eavesdropping, where experts can listen to conversation by pointing a laser at a window in the room, where a "bug" can be smaller than the chances of Jalopnik/Autoblog not carrying this story, why would a VW spy use a babyphone (a.k.a. baby monitor or kiddiespy)? If they did, what does that tell you about the automaker's mastery of technology. If they didn't, what does that tell you about Porsche's disinformation efforts? Crime and punishment? High Finance? Sure.

I know we've already reported GM CEO Rick Wagoner and his cronies' '07 pay hikes, cynically released on a Friday to avoid full media scrutiny. But I thought it was worth repeating to place this compensation in perspective. To wit: Standard & Poor's is signaling [via Forbes] that the credit rating service "may as yet downgrade General Motors Corp. (GM), after the agency downgraded GM's 49 percent-owned units GMAC LLC and Residential Capital LLC. The downgrades were triggered by the resignation of the only independent directors at Residential Capital, and the union strikes at American Axle, which have shuttered 30 GM factories. Although we expect these labor issues to be resolved, the timing, and therefore the full extent, of their effect on GM's liquidity is unknown. We expect the American Axle strike to contribute to a very large use of cash in GM's first-quarter 2008 results, which GM will announce in the next few weeks, and the effect will be magnified by the timing of GM's payables and  receivables." If S&P downgrades GM, the extra cost of borrowing will add tens of millions to GM's cash burn. So those execs salaries are only the tip of the iceberg when it comes to measuring their true cost to shareholders, employees, suppliers, dealers and customers.

E85 is, indisputably, a less efficient energy source than normal gas. (In other words, you get less miles per tank with E85 than non-E85 fuel.) According to a study based on EPA data by the Department of Agricultural, Environmental, and Development Economics at Ohio State University, the "E85 penalty" varies according to vehicles and vehicle types, and city or highway driving. "The mean fuel economy of E85 in city driving is 73.42% that of gasoline, with a range of 66.89% to 81.33%. In highway driving, the mean fuel economy is 73.4% that of gasoline, with a range of 67.61% to 81.53%." OK, so the American Automobile Association tracks fuel prices for both blends. "Over the course of time that AAA has been tracking adjusted E85 prices, they’ve never fallen below the daily price of regular gasoline," The Wall Street Journal reports. "Since early October, adjusted E85’s price spread over regular gasoline has varied widely, between 4% and 12%, suggesting there’s at least some potential for improvement. However, Trilby Lundberg, publisher of the Lundberg Survey newsletter… says it’s 'extremely unlikely' that the adjusted E85 price can ever fully close the gap with retail gasoline." I dunno. E85 is already heavily subsidized from the field to the pump; what's the bet that [more of] your tax dollars "help" close that gap?