Farago said it might never happen, but it did: Tata's bought Land Rover and Jaguar. Bloomberg says the announcement will come tomorrow morning, perhaps even before the NYSE opens for the day. Tata has purchased Land Rover and Jaguar for $2.65 billion, or about the cost of dinner for four people at a pub in London. As we've said all along, the best English high tea in the world isn't served in England; it's in Hong Kong and India. So 150 years after flooding China with so much opium that the Chinese government started two wars with England to get it to stop, Chinese businesses bought what remained of Rover. Now the Indians are having their turn, as Indian industrial giant Tata (recently in the news for selling the cheapest new automobile in the world), have completed the deal to buy the former crown jewels of the British automotive manufacturing industry, Jaguar and Land Rover. Ford purchased Jaguar in 1990 for $2.5 billion and Land Rover in 2000 for $2.73 billion, making this a multi-billion dollar loss even if they hadn't been operating the companies for a total of 25 business years. Here's to hoping for a brighter future for these storied companies.

Anyone remember Chevy Chase's immortal line "Francisco Franco is still dead?" I'll wait until the Tata purchase of Ford's Jaguar and Land Rover brands goes through– if it does–  before using Chase's riff. Meanwhile, Tata is launching some kind of weird-ass PR offensive. The Wall Street Journal [sub]  is carrying a press release feature story on Tata's "hands-off" acquisition style. Apparently, the Indian way of such things, in general, is to "Do next to nothing." The evidence for such patent rubbish? Tata didn't throw management overboard when they acquired the U.K.-based Corus Group and Tetley Tea. Oh, and apparently Tata won't be outsourcing. "During a London meeting with Tata Motors executives in November, Mr. Maddison [Unite union rep] recalls, 'We came straight down and said 'We've obviously got fears that you've got a massive component base across Asia. Would it be your intention to source from Asia into the U.K.?'' They hit it straight back and told us 'No way.'" Dude, get it in writing. [thanks to Robert Schwartz for the link] 

In his first conference call with automotive analysts, freshly-minted GM CFO Ray Young said that his employer has $27.3b in cash and $7b in undrawn credit lines upon which to draw. Although that ain't hay, subtract the $10b GM needs to keep the lights on, consider the company's ongoing cash conflagration, factor in declining sales and the American Axle strike's effect on cash flow, remember that GM lost $10.6b in 2005, keep in mind that GM's already sold the family silver and… the automaker's liquidity isn't quite so reassuring. But don't take my word for it. "As CFO, my priority is making sure this place is funded," Young said. "While we believe the industry (in U.S. sales) will be in the low 16 million units, we have triggered actions right now to make sure we start to conserve liquidity." Automotive News [sub] reports that GM's Beancounter-in-Chief revealed that GM is postponing [unspecified] non-product related capital expenditures from the first half of '08 to the latter half of the year– and beyond. "If the market doesn't return, we will defer that further into the future," Young said. GM's CFO said the suits are now running the business on a "quarter-to-quarter" basis. Oh, and Young said that GM ran about 940k units of dealer stock the end of February, roughly 125k units below the level at this point last year.

The Detroit Free Press reports that Alvaro de Molina has been named to replace Eric Feldstein as CEO of GMAC "because of rising mortgage defaults and slowing auto sales." The Cerberus-owned finance company lost $2.3b last year and things don't look so hot this year so far. So where is Feldstein going? As seems to be the trend nowadays with execs who lose billions, he's being bumped up the corporate ladder where he will "will advise Cerberus on investments in financial services companies" according to a GMAC statement. Yep… sounds like just the guy I'd trust for advice on financial services.

© 2008 by ttac.com 

As the American Axle strike stretches into its fourth week, GM still maintains it's not affecting them. Not that they'll admit, anyway. With truck sales (real trucks, not them sissified half-breed crossover things) down 20 percent last month, they've weathered the storm pretty well with what they had on hand when the strike started. As the strike progresses and the inventory starts getting picked over, they're going to start feeling some pain as buyers look elsewhere for their $50k crew-cab, long-wheelbase, four-wheel-drive, six liter commuter vehicles. Since The General counts a "sale" when they ship a vehicle to a dealer, this quarter's sales will look really bad (but they'll have the strike to blame it on). Once production resumes and they start stuffing the supply channels again, you can bet GM'll be bragging about their best truck sales in years. But now CNNMoney reports Standard & Poors placed GM's ratings (as well as those of American Axle, Lear and Tenneco) on "creditwatch with negative implications" because they "believe the strike has gone on long enough to possibly begin to affect the financial resources of GM and those suppliers most exposed to the automaker." I wonder how Rick Wagoner will spin that one!

Analyst Todd Sullivan over at seekingalpha reckons it's a good time to invest in the auto sector. Operating under the principle that Americans need cars for their economic survival, Sullivan says motorists will still be in the market– just shopping at a different stores. Sullivan points to Warren Buffet's recently acquired 13.98m share stake in CarMax and Sears Holding's big investment in AutoNation and AutoZone as proof that there's gold in them thar' pre-owned autos and car parts. Sullivan also tempts investors with the fact that all of these companies are "hovering around 52-week lows." Meanwhile, Sullivan counsels investors to avoid Detroit's domestic manufacturers' shares like the proverbial plague. "It should be noted that this is NOT an endorsement of the US auto industry via Ford or GM as these are just terrible businesses due to legacy union costs," Sullivan opines. "They are stuck in a cost structure that dooms them. It is probably the only business the airlines can look at and say "at least we are not them."

Japanese leaders have been making noises about the Yen's slide against the dollar recently, prompting Detroit to whine about "Japanese interference in the currency market." According to Dow Jones (via CNN Money), the Big 2.8 were spooked by Japanese finance minister Fukushiro Nukaga's statement that his government will "keep watching movements in foreign exchange rates from now on." Japanese currency manipulation has long been one of Motown's pet peeves. The issue is a red herring; the majority of import-branded vehicles sold in the U.S. are made right here in the good old USA. Still, the accusations of sinister foreign forces manipulating international finances in their favor provides politicians with a welcome opportunity to look like they're fighting the good fight for American jobs and businesses. "Please stand up for American companies and workers by warning Japan that the United States will not sit idly by while it interferes in currency markets," wrote Sen. Debbie Stabenow (D-MI) in a not-so-private letter to U.S. Treasury Secretary Henry Paulson. Hey, election campaigns don't fund themselves.

Indian automaker Tata has moved one step closer to purchasing Jaguar and Land Rover. Reuters reports that the Indian automaker has secured a $3b one-year bridge loan from Citigroup and JPMorgan. The usual "sources familiar with the deal" say the loan is to "help finance a potential purchase" of the luxury brands from Ford. The principals declined to comment, but media reports from India say Tata is expected to agree to the purchase at the end of the month. (And Francisco Franco is still dead.) Tata may still balk– especially as Standard & Poors is reviewing Tata for a possible downgrade in the light of the potential increase in the company's debt load. If the sale goes through and FoMoCo's cash flow goes critical, Volvo and their 33.9 percent share of Mazda could be next.

Who profits most when you pay $3.28 for a gallon of gasoline? Taking their cues from the mainstream media, many people blame oil speculators for driving-up the prices. According to CNNMoney, they don't actually get a cut of the price. Some traders profit by correctly predicting the change in prices, but others balance that by losing money. Meanwhile, only about seven to 10 cents of the retail price goes to gas stations; which make more money selling legal drugs (caffeinated beverages, artery-clogging, obesity-reinforcing snack foods; cigarettes, lottery tickets, etc.). Federal taxes account for 18 cents; state taxes average 22 cents/gallon. Shipping and storing fuel costs between 23 and 26 cents/gallon. Refiners like Valero, Sunoco or Frontier charge about 24 cents/gallon, but get squeezed when oil prices rise quickly. That leaves crude oil suppliers like BP, Chevron, ExxonMobil, Petroleos Mexicanos, Petróleos de Venezuela and Saudi Aramco. They take the lion's share: roughly $2.04 per gallon. And now that gas is averaging $3.285 a gallon, they make even more. But then, it's one of those risk reward deals. And these calculations don't include the cost of U.S. military efforts in oil-producing regions. Or an eventual federal bailout when one of the D3 goes belly-up. Or a lot of other things, really. 

According to the American Automobile Association [via The New York Times], the average nationwide price for diesel has set records 18 of the past 19 days. It's currently sitting at $3.83 a gallon. (New York, California, Pennsylvania and Vermont averaged over $4 a gallon.)  The effects are being felt throughout industry. On the positive side, trucking companies are buying more fuel-efficient equipment, using electronic devices to slow driving speeds and installing auxiliary power units so truckers can sleep in their cabs without idling their rig's engine. Larger companies are looking to hybrid diesel-electric powerplants and better aerodynamics for fuel savings. On the negative side, paying for the new equipment could lead to layoffs. Smaller trucking firms and independents are putting off maintenance and generally struggling to make ends meet. “It’s killing us,” said Chad Beachler, co-owner of nine-truck Beachler Trucking. “Every day, I come in here and wonder if I have enough money to buy fuel.” 

In recent years, Ford has sold off valuable assets, including Aston Martin and Hertz Rentals. They're currently flogging Land Rover and Jaguar to India's Tata Motors (fingers crossed). Although Ford's got plenty of cash for the time being– having mortgaged itself up to the eyeballs in '06 for $23b– the American automaker's just about out of stuff to sell. So is Ford is going to have to face the music and… start selling cars? Analysts quoted in the International Herald Tribune say you got that right. John Casesa claims Ford couldn't get diddly squat for Mercury (who?), Ford Financial or Volvo. That's because "interest from private equity companies had pushed takeover prices sky-high, but the credit squeeze that began last year has made it harder for those companies to borrow, forcing asset prices down." Oh, and Ford Financial is staring at a credit meltdown and Volvo isn't making any money. In fact, Ford wrote down about $2.4b of the Swedish brand's value in January. So there really is nothing left for Ford to do but make and sell profitable vehicles in the North American market. What are the odds? (Hint: check the stock price.) 

Focus magazine [via The International Herald Tribune] says leaked Porsche internal planning documents reveal that Porsche Holdings is secretly (well, not now) aiming for a 75 percent share in Volkswagen. Analysts point out that a more sizable share would give Porsche access to VW's cash flow through a "domination and profit transfer agreement." (That's a far cry from a "collegial partnership," but hey, who's listening?) To get their hands on VeeDub's cash, Porsche would have to up its $15b deal by an additional $35b. Apparently, Porsche's got the finances to git 'er done. BUT… The German state of Lower Saxony is unlikely to surrender any part of its 20 percent VW stake, which "safeguards" 82k jobs withiin its jurisdiction. Furthermore, much of Porsche's controlling family oppose the deal; they're not in love with either VW's risk or VW chairman Ferdinand Piech. Porsche denied the Focus Magazine story this morning, saying Piech is the anti-Christ. No wait; the deal "overlooks the realities of VW's shareholder structure."

According to The Detroit News, the bankruptcy judge controlling Delphi's fate has OK'ed GM's $2.83b loan to its former GM parts division and current bankrupt. Delphi's other investors (save one) had protested the loan, saying the plan was "a brazen attempt to ignore a portion of the contract" and gave GM too much control of its former subsidiary. The judge overruled the protest. He green-lighted the Delphi cash conflagration– as long as The General laundered the cash made the payments through "a fully-owned subsidiary" (providing GM has any left). This stricture would meet the letter of the existing contract by keeping GM's name off the loan paperwork. GM said the ruling was "encouraging," but it's still "studying it." Delphi said the ruling will allow them to emerge from bankruptcy by April fifth, as they had originally planned. Although the ruling will ensure GM's largest parts provider keeps providing parts, GM's liquidity is looking increasing threatened.