After reading Samir Syed’s Guide to the RESCAP/GMAC Crisis, TTAC's Deep Throat emailed to fit a missing piece of the puzzle. "The fear of a Rescap bankruptcy– or additional capital injections from GMAC– is weakenening GMAC’s own balance sheet and thus making it more difficult/expensive for its own financing. This in turn hurts GM’s dealers' ability to access GMAC for retail customers at competitive rates without massive rate subvention by GM… The cost of dealer wholesale financing is going through the roof. But it’s already happening, as smart lenders are poaching GM dealers for the better credit customers… and trying to win floor plan business (a huge uphill struggle as something like 80 percent or more of GM dealers use GMAC for wholesale. The bottom line: Moody’s is calling the future correctly with its downgrade."

Awesome. No really. I'm in awe. At the very moment GM NA's cash flow has gone bye-bye (thanks to union strikes at American Axle and GM factories), just days before the automaker gives the world the gory details of its American cash conflagration, the General reveals that it's bumped-up– sorry, "restored" its top suit's salary. CEO Rick Wagoner's paycheck returns to its 2003 – 2006 levels, from the "reduced" $1.65m back to $2.2m. But don't get to feeling what the Hell, it's only a $570k jump, and it WAS his old salary. Automotive News reports that Rick's TOTAL compensation for '07 was $14.4m, or $39,452.05 per day (including weekends). Meanwhile, Car Czar "Maximum" Bob Lutz gets a nice little "thank you" for winning TTAC's Bob Lutz Award: a base salary "boost" from $1.3m p.a. to $1.75m (so much for "I gave at the office"). MB's total compensation for '07: $6.9m. Newly promoted GM COO (from CFO) Fritz Henderson gets $1.8m; total pay package $7.6m. Friends of GM are free to defend this pay-out (supply – demand), but I find the fact that these guys are raking in MORE money as 32 GM factories are off-line, as GM struggles for its survival, appalling. But you knew that…

American Axle (AA) posted a $27m first quarter loss today. AA CEO Dick Dauch told the Detroit Free Press "AAM's first-quarter 2008 results were severely impacted by the strike called by the International UAW at AA's original U.S. locations." The loss is quite the comedown from last year's first quarter profit of $15.7m. Robert W. Baird & Co equity analysts David Leiker said the impact of the strike was about 40 percent larger than he was expecting., "We continue to recommend investors avoid the stock due to questions regarding the company's long-term growth opportunities." As if to illustrate Leiker's point, hundreds of strikers picketed AA headquarters in Detroit, after negotiations broke down late last week. AA had offered a wage and benefit package, claiming it's "substantially higher than $30 an hour and is higher than what its competitors pay UAW members." The UAW (perhaps waiting for AA to post its losses) rejected the offer. The strike will officially enter its third month tomorrow with 3,650 AA employees on strike and some 30 GM plants shut down or in limited production. 

Ford's CEO Alan Mulally might disagree with whoever said "you can't cut your way to profitability." After cutting jobs, cutting salaries, cutting supply complexity and cutting entire divisions, Ford reported a first quarter net profit of $100m. That's a lot better than first quarter last year, when they turned in a deficit of $282m. But wait… The Wall Street Journal reports that FoMoCo earned (pretax) $257m in South America, $739m in Europe and $1m in Asia and Africa. Ford Credit added another $36m to the company's coffers. However, North America — the one region where they made the most cuts– showed a pretax loss of $45m. Just like their RenCen friends, the Blue Oval's North American operation is being kept afloat by their overseas operations. Maybe instead of cutting so much, Ford needs to look at what the other regions are doing right (hint: it begins with "p", ends with "t" and rhymes with "brod muckt"). Meanwhile, expect a glowing second quarter report in July when the cash from the sale of Land Rover and Jaguar hits the books. 

In years past, Ford resolutely refused to report earnings for the individual brands in its Premium Auto Group (PAG) (Jaguar, Land Rover, Aston, Volvo and, for ten minutes, Lincoln). And for good reason. The brainchild of former BMW suit and bon vivant Wolfgang Reitzle, PAG has been a financial sinkhole since day one. Now that Jag and Landie's gone to Tata Motors and Aston's been flogged to an unholy alliance of a Texan and the Kuwaitis, PAG consists of… Volvo. And today, for the first time ever, FoMoCo's broken out earnings in the Volvo unit. And the news ain't good. Yahoo!Finance reports that a year ago, Volvo posted a $94m profit in the first quarter. This year, they had a first quarter pretax loss of $151m. So why, when Volvo was making money, didn't they brag about it? And why, now that it's losing money, do they disclose the fact? It's just one more indication that Ford is building a case to justify putting Volvo on the auction block a la Jag and Land Rover. Adjö Volvo.

S&P has upgraded Daimler's long term corporate credit rating, from a BBB+ to an A-. According to Thomson Financial News (via CNN Money), the S&P "expects Mercedes-Benz cars to be able to improve profitability further, based on the new models available and the better resilience to adverse economic trends generally attributed to premium cars, despite the weakening of the U.S. automotive market, where about one-fifth of Mercedes-Benz cars are sold." Got all that? With earnings on track to meet investor goals, Daimler is not resting on its laurels. The Car Connection reports that Daimler will be upping R&D spending, with plans to drop $21b between now and 2010. Claiming that Daimler has made significant breakthroughs in Lithium Ion battery cooling systems, CEO Dieter Zetsche laid out Daimler's development path. "(It is) clear that we won't be changing our strategy and building only small cars from now on now on," says Dr. Z. "Our route to sustainable mobility is based on technological innovations, not renunciation… we aim to offer at least one model in each of the Mercedes-Benz core model series that a leader in fuel consumption." But, in what appears to be a case of either ADD or indecision, Daimler will continue to push hydrogen vehicles. "To date, Daimler has made more progress with fuel cell technology than any another automaker and we plan to expand our lead in this area," say Zetsche.

Well, it only makes sense. You build cars in former communist countries a stone's throw away from the world's most militant (and deeply entrenched) labor unions and it's only a matter of time before the union boys show up and the term "low cost" no longer applies to your Eastern European factories. After reporting the end of the 19-day strike crippling Renault's Romanian Dacia plant, the Financial Times says Eastern Europe's wage inflation mirrors the majors' Spanish/Portuguese experience. "In the mid-1970s… Ford, General Motors, Renault, Peugeot-Citroën, Volkswagen and Fiat all established operations or joint ventures in the Iberian peninsula. But by the late 1990s, Spain had priced itself out of the market as a result of demands for higher wages and improved benefits from car workers and labour unions. A similar pattern seems to be spreading in eastern Europe – with one worrying difference. If it took roughly 20 years for the low-cost cycle to run its course in Spain; the current one looks like it will last only 10 years in eastern Europe." [thanks to starlightmica for the link]

The Toledo Blade reports that Hillary Clinton has gone on the record saying that "if confronted with the prospect of a bankruptcy by General Motors or Ford, she would extend the resources of the federal government to help keep them afloat." The quote comes from a meeting between Clinton and the editorial board of Pittsburgh Post-Gazette, in which manufacturing policy was widely discussed. When asked about her views on a Chrysler-style bailout of major American automakers, the Senator from New York said that "for both economic and national security reasons, the next president should be aggressive in taking steps to protect and nurture the nation's manufacturing base." Of course, politicians say lots of things on the campaign trail, and the worse-off the campaign, the more aggressive the sound bites. Had the Michigan primary been rescheduled, this blank check could have gone over well for Clinton, who is seen by auto execs as "anti-car." As things stand, however, this quote will accomplish little more than pointing out the desperation of the Clinton campaign, and the obviousness of Detroit's woe.

True story. Market Watch reports that Goldman Sachs has sold $500m worth of Chrysler debt at a discount, reducing its exposure to the troubled firm. The investment house– which underwrote Cerberus' purchase of Chrysler along with JP Morgan, Citigroup, Morgan Stanley and Bear Stearns– sold the loans at the discount price of $.63 (they currently trade between $.64 and $.66). Sources close to the deal (as opposed to those with a faraway look in their eyes) say Goldman Sachs made the sale to an investor group that included hedge funds. Goldman had already sold some $300m of its $1.6b exposure to Cerberus' $7b first-lien loan (used to buy the automaker from DaimlerChrysler). As disconcerting as the fire sale is for Chrysler, it actually signals an improvement. In August and November of last year, underwriters collectively failed to find interest in $2b and $4b chunks of Chrysler debt at any price. The risky debt now returns some 20 percent on investment; which helps investors accept the clear and present danger inherent in holding debt for the struggling American automaker. Good luck with that.

Reuters reports that Delphi is considering asking federal bankruptcy judge Robert Drain to force equity investor Appaloosa Management to carry through with their $2.55b investment in the bankrupt auto parts manufacturer. Last Friday, Appaloosa announced they were backing out, citing GM's expanded role in the Delphi's exit strategy as the deal breaker. [NB: Appaloosa doesn't want GM to be able to prevent a strip-and-flip resolution to Delphi's bankruptcy.] In a filing with federal securities regulators, Delphi stated their board has formed a special litigation committee and engaged counsel to explore their legal options. Appaloosa had no comment, but they've said they'll consider investing in Delphi under "different terms." If Delphi doesn't get the funding from Appaloosa and/or other investors, they'll have to go back to GM for more than the $2.8b the automaker's already promised. If that fails, Judge Drain could lose his near-infinite patience, with Chapter 7 liquidation to follow.

Bloomberg reports parts maker Delphi's exit from bankruptcy has hit a snag. Appaloosa Management, one of the six investors working to get the former GM parts division out of Chapter 11, backed out of the deal. In the termination notice, Appaloosa claimed Delphi didn't meet the conditions of the $2.55b deal. Oh, and they asked for a $82.5m "breakup fee." It's not an entirely unexpected development; Appaloose had not been happy with GM's expanded role in the Delphi's exit strategy. They felt the automaker would have too much power as a result. When GM offered even more money to help cover Delphi's $3.8b pension fund shortfall, it was the proverbial straw/camel thing. Appaloosa indicated that they're still open to investing, but "in a capacity different than currently envisioned by the agreement." 

UPDATE – General Motors released a statement on this matter: "GM is disappointed in the decision by Appaloosa and the plan investors to withdraw their support for Delphi. There has been a tremendous amount of effort and progress made to establish the foundation that would enable Delphi to emerge from Chapter 11. GM will continue to work with the involved parties to facilitate Delphi’s efforts to emerge from bankruptcy." Meanwhile, the lawyers…

Legendary automotive atelier Bertone has fallen on hard times, having filed for for bankruptcy protection back in November. Now Automotive News [sub] tells us the gentlemen callers from the world over are lining up, hoping to buy the Bertone name, assets and cachet. Automakers FAW from China, and Mahindra from India, as well as Italian suppliers DR Motor, and German engineering firm PCL Group join former Bertone rival Italdesign in the bidding war. Bertone was responsible for some of the most influential designs in automotive history, having penned Lambo's Miura, Espada, Countach and Diablo,  the Ferrari 250 Lusso, the Lancia Stratos and many others. Just how much wedge (sorry) it will take to buy up the design firm remains to be seen. We will go out on a limb and say that of all the competing firms, FAW probably needs a little Bertone styling magic the most. Lets just hope ol' Giovanni Bertone's grave has been properly spin-proofed.

Plastech is working on bankruptcy financing to keep the company afloat through the summer. However, instead of going to traditional lenders, they're going hat-in-hand to their customers for an $80m line of credit. The Detroit Free Press reports Johnson Controls, Inc. (JCI), GM, FoMoCo and Chrysler are expected to share the pain to ensure a steady flow of plastic parts to their assembly plants through the summer. Experts say the loans are a smart move, as the cost of the loan would be less than the cost of stopping an assembly line due to a parts shortage. At the same time, some of Plastech's other lenders are talking with JCI about the possibility of them buying Plastech's interior component operations. Plastech is preparing its customers for the possibility they could go out of business by building a bank of parts. Watch this space as the continuing soap opera unfolds.

GM must have a lot more cash laying around than they're letting on. The Wall Street Journal [sub]  reports The General is thinking seriously about taking on more of Delphi's pension liabilities on top of the $1.5b they've already agreed to assume. In an SEC filing last month, Delphi stated their pension fund is short about $3.8b; how much of that extra $2.3b GM is thinking about taking on is anyone's guess. However, experts say getting the pension money from their sugar daddy will grease the skids for six major investors who had planned to pump $2.55 into the company. The investors are threatening to take their money and run if Delphi can't get everything straightened out by Friday, so expect GM to act quickly. Then all Delphi has to do is come up with $6.1b in debt financing to exit Chapter 11. Piece o' cake!

Indian investors aren't thrilled with Tata's acquisition of Jag and Land Rover (JLR). Not only have JLR lost billions of dollars for Ford, but apparently Tata wasn't just pulling a fist full of coins out of the sofa to pay for the brands. Reuters reports this morning that "Tata has announced plans to raise $4 billion, expected to help finance the Ford deal and the manufacture of the Nano." And considering the added "earnings volatility" the JLR deal brings (translation: nobody knows what the hell could happen to Tata's bottom line), the purchase is sending ripples through the Indian stock market. It seems people are realizing Tata just bought companies that don't make money. You would have thought Tata already had the cash for the deal; this is not the best time to be looking for $4b on the credit market. And what happens if Tata can't raise the cash? Just sayin'…