As we chronicled in GM Death Watch 165, details of the new $33b – $36.5b GM – United Auto Workers (UAW) health care VEBA (Voluntary Employees Beneficiary Association) are beginning to emerge. That said, neither this site nor the 600k+ UAW workers whose health care depends on this trust know the timing or amounts of GM's contributions to the fund. While we await that info, The Detroit Free Press reports that GM's raising money to pay into this Mother of All Health Care Trusts. Regulatory documents reveal that GM has taken on an additional… wait for it… $8.39 billion in debt. The Freep breaks it down to "4.37b in 6.75% bonds, due in December 2012 and convertible into GM shares, and a $4.02 billion, 9% short-term note." As a quick reminder, GM's interest payments on its current debt burden are $2.9b per year. Again, we don't know how much more cash GM will need to fund the VEBA, and when they'll need it.

According to The New York Times, GM has confidence that Cerberus will fix GMAC. GM CFO Fritz "What Me Worry?" Henderson played down Cerberus chairman Stephen Feinberg's recent warning that "things could get a lot worse" at the finance company. While acknowledging GMAC subprime mortgage market struggles (how could he not?), Fritz believes GMAC has the cash reserves to see them through the current crisis. More to the point, GM's Chief Beancounter says GMAC won't need additional cash from GM. In fact, "We expect that GMAC will turn a profit in 2008." (That's three years before Fritz' predicted return to profit for GM.) Fritz didn't comment on Standard & Poor's recently GMAC and ResCap downgrade, which lowered both to junk-bond status, raising their cost of borrowing. While the storm clouds gather over the troubled lender, GM is doing what they can to help GMAC return to profitability: continuing to offer zero percent financing on a number of vehicles. We'd appreciate a heads-up from our dealer readers as to whether or not they've tightened credit requirements for these killer deals…

According to Bloomberg, last Thursday, GMAC loaned its Residential Capital (ResCap) mortgage unit $635m. ResCap needed the money to get a credit line to sell a financing business. On Friday, Standard & Poors lowered GMAC's and ResCap's credit ratings to medium "junk" status. Hang on; wasn't the whole point of separating GMAC from GM to get a better credit rating? Auto loans (GMAC's primary business) packaged as securities aren't affected by the downgrade; they're rated separately. But GMAC will now find it more difficult to get the warehouse funding it needs to accumulate those loans. Reuters quotes a Cerberus spokesman, who said tut-tut. Apparently, GMAC is "a resilient business platform with strong long-term growth prospects." Yes, well, anyone remember Aegis Mortgage?

Following its decision to spend $2b manufacturing seats on the Indian subcontinent, the Detroit Free Press reveals that Chrysler LLC is outsourcing $120m worth data crunching to India. The contract is headed for the Tata Group, whose portfolio includes Nano-maker and Jag/Landie suitor Tata Motors. Chrysler spinmeister David Elshoff said Tata will be working on dealers’ online vehicle ordering system and maintaining the company's dealer-brand websites. “The first phase of this evolution and our new partnerships will start this month and will continue throughout 2008,” Jan Bertsch, Chrysler chief information officer told her employees. “As the year progresses, we'll continue to evaluate additional opportunities… and will keep you apprised of the outcomes of our efforts." Not surprisingly, Tata’s CEO was slightly more upbeat. "The expertise and in-depth knowledge of the automotive industry and Chrysler's business, coupled with our ability to deliver certainty of results will provide sustained value to Chrysler." Does this move indicate Chrysler's desire to outsource car-building to Tata Motors? They should live so long…

It's a bit early to declare February the beginning of the long-anticipated new car sales face plant, what with President's Day sales and a couple of weeks to go, but the Wall Street Journal reports that the industry took a 16 percent dive so far this month. Zoom in on the main players and folks, these decade-low numbers [via J.D. Power] are downright scary. "General Motors Corp., riding momentum created by updated products and hefty incentives, recorded the only sales gain among major manufacturers last month. The latest numbers indicate GM ran into a roadblock during the first 17 days of the month, with dealers selling 31% fewer vehicles than in the first 18 days of February 2007… Chrysler LLC experienced a 27.5% decline despite a recent move to offer more free features on its cars and trucks." CNNMoney reports that "shares of automaker General Motors Corp. fell nearly 6%, making it one of the biggest losers on the Dow 30 Thursday afternoon, as investors were dismayed by weak economic data released earlier in the session." And that was BEFORE this information was released…

Ford was late breaking into China's red-hot car market, and it's paying the price. Detroit News reports that Ford's share of the of the Chinese pie grew from two percent to 2.1 percent last year– falling well short of FoMoCo's internal 2.4 percent target. This in a year where car sales spiked 20 percent. Ford was late developing manufacturing infrastructure in China; it opened its first factory some 18 years after longtime China sales leader VW, five years after GM. Ford's only top-ten hit in The People's Republic: the Focus. Due to the large number of Focus parts sourced from outside China, the model still generates less profit than its competitors. Perhaps more worrisome for Fords long-term efforts: its inability to put together an attractive, coherent brand for the Chinese market. Ford's Asia/Pacific division chief John Parker blames Ford's "big car" image. Meanwhile, Mazda is taking up the slack. Of Ford's $244m pre-tax profit in the Asia/Pacific region, Mazda accounts for $204m. Ouch.

The last thing GM needs right now is a $2.25b bill to go splat on the mat. But if rumors are accurate, The General will spend yet more money on its bankrupt former parts maker Delphi. While examining various scenarios for Delphi to come-up up with the $4.5b in needs to exit Chapter 11, the Financial Times hypothesizes "the exit funding would consist of a USD 2.275bn first lien loan, while GM would assume a USD 2.25bn junior facility." GM would have to pay their chunk to take the remaining debt down to a size that current debt holders JPMorgan and Citibank could sell. They'll have to move fast, though. The current funding agreements will all be history by the end of April, and Delphi will be back to square one. Unless…  nah… GM wouldn't be stupid enough to try to pay all the debt, would they?Could they?

The Houston Chronicle reports that Nissan spent $3.9m last year on lobbying in Washington, D.C. What's Nissan's beef with the feds? "The U.S. segment of the Japanese automaker lobbied Congress on anti-dumping, currency exchange-rate manipulation and other trade competitiveness issues. The company also lobbied on renewable energy and average fuel economy standards, among other issues." While we'd like a LOT more specific info, it's worth seeing that number in context. According to Opensecrets.org, Toyota spent $2,730,000 and GM spent $6,420,000 on lobbying legislators in '07. Despite the recent battle over federal Corporate Average Fuel Economy standards, both GM and Toyota forked-out about $2m less on their lobbying efforts than they did in the previous year. What does all that tell you? Seriously; I have no idea.

Cerberus Capital Management had to know it was taking on risk when it picked up Chrysler and GMAC at cut-rate prices. After all, Chrysler had tried its level best to drag Daimler down during their brief, unhappy marriage and GMAC is hardly a low-risk proposition given the current credit market dyspepsia. But private equity firms are big and loaded, right? Cerberus will weather the storm, right? Andrew Sorkin of the NY Times' Dealbook blog reckons it might not, and predicts dire consequences for all of private equity-dom. Noting Cerberus' founder Stephen Feinberg's disdain for publicity in the wake of its purchase of the terrible twins, Sorkin figures the fund is in for some more bad press in coming days. He calls the purchases "perhaps the riskiest bets at the peak of the buyout boom," and points to Chrysler's $18b in pension and health care liabilities as a potential cause for a Cerberus meltdown. If such a meltdown were to occur, it would certainly have Sorkin running for his superlatives thesaurus.

Yesterday’s closing price for crude represents the first time oil's spiked above $100 a barrel since January 3. Analysts say there isn't a single factor to explain the move. Houston’s KHOU reports that a refinery explosion in West Texas and the possibility that OPEC will cut production next month are driving prices higher. Alon officials say the refinery in Big Spring, TX could be closed for as long as two months; company president and CEO Jeff Morris says the refiner should have contingency supply plans in the coming days. The company doesn’t know what caused the blast, but says it happened near a propylene splitter unit. As of early this afternoon, our friend Steve Austin over at Oil-Price.net pegs the current price of oil just under $99.50 a barrel. The website also forecasts the price of oil will be $129.04 a year from now. If so, it’ll be more bad news for consumers, automakers and the U.S. economy in general.

Is Cerberus about to Strip 'n Flip GMAC? According to Bloomberg, the floundering finance company will announce that they're closing 75 percent of their regional auto-lending centers in the U.S. and Canada. That means 12 of the 16 GMAC's U.S. centers and three of four Canadian GMAC centers will bite the dust. In a letter to be delivered to GM dealers, GMAC VP Barbara Stokel said the move was part of an effort "to make structural cost reductions to restore our competitive position." The remaining offices will be in Dallas, Pittsburgh, Atlanta, Chicago and Toronto. You can't help but notice the conspicuous absence of an office location on the west coast. Is this an indication of how little business GM dealers are doing in that area? Or does it mean the Dallas office is so good it can handle the entire western half of the country? My money's on a little of both.

Tesla Motors has apparently run out of toilet paper again. Valleywag reports that they're off in search of another $250m to keep the lights on fund development of the "Whitestar" electric sedan. That's right, if you have a quarter of a billion dollars burning a hole in your pocket, you too can invest in a company that has produced exactly one working "production" car (delivered to the company's CEO) in five years, in exchange for over $145m and Federal regulatory exemptions. I'm not an expert, but this strikes me as a particularly optimistic investment. Oh, and Tesla also wants a guaranteed loan from the Department of Energy to build a factory for these new electric sedans. To quote President Bush, "Fool me once, shame on you. Fool me – you can't fool me again." [NB: I know we're a little late to this story, but that's kind of appropriate don't you think? And here's an old video for potential investors that shows the critical coverage given Tesla by our blogging pals. Driving range of 250 miles. Those were the days…]  

Ferdinand Piech is the Porsche family patriarch [still] pulling the strings at Volkswagen. Wendelin Wiedeking is the Porsche executive who would be king of VW– once Porsche takes control of the mass market motor maker. And Der Spiegel [via Just-auto, sub] is the magazine that says that Piech wants to kick Wiedeking out of the corporate jet, golden parachute and all. Motive: Piech believes that Wiedeking has become too powerful and autonomous. He wants to replace Wendy with Wolfgang Reitzle, the high-living executive who ran BMW well enough– and convinced Ford to lose billions creating its ill-fated Premier Automotive Group (Jaguar, Land Rover, Volvo, Aston Martin and, latterly, Lincoln). Means: Piech's family still controls VW. Opportunity: VW's unions are unhappy at the prospect of surrendering board seats to the numerically inferior Porsche workers. All that said, VW moved to quash the rumor. "The report about a supposed contact between Piech and Reitzle with regard to the replacement of Wiedeking is nonsense and lacks any foundation," a Volkswagen spokesman told Reuters. "Piech has had no contact with Reitzle for years, and has none currently." Ah, but what of intermediaries…?

To paraphrase the Bard, "there's many a slip between the cup and the transfer of over a billion dollars into a bank account." TTAC has been studiously avoiding all those "Tata Motors about to complete Jag and Landie sale" stories filling our competitors' columns. Just as a week is a long time in politics, "soon" is a meaningless term in corporate buy-outs. And now comes word from the Times of India that Ford's U.K. unions are part of FoMoCo's problem, not its solution. Apparently, the unions are unhappy about "issues of job security and retaining production capacity in England." Although Ford has steadfastly refused to retain a stake in Jaguar and Land Rover (JLR), union leaders are pressing Ford to extract long-term commitments for their services re: production of engines, axles and other major components. The Times reports that Ford is "independently negotiating" continued support to Tata Motors post purchase. "When contacted, a senior Ford official insisted that the sale process of JLR was independent of the talks with the Unions." In other words, this one's still set to run and run… 

"So many vehicles are being snatched from owners who stop making payments that some repo operators and auto auctioneers say lots are overflowing." This from USA Today; another sign that the U.S. automotive market is headed for the buffers, Big Style. Thomas Webb, chief economist Atlanta-based Manheim auctions, says that repos will rise 10 percent this year– for the second straight year– to 1.6m vehicles. As TTAC warned at the time (and subsequently), Webb says "overly generous" auto loans in the past couple of years are driving-up defaults, leading to a surge in repossessions. Last month, Wells Fargo wrote off $1b in auto loans, compared with $857m in '06. The new figure represents 3.5 percent of its portfolio; the bank says it expects a higher write-off rate this year. As repos increase, they flood the market with used cars, lowering residuals, trapping more and more customers in "backwards" loans. Burned banks (and credit companies tied to automakers) also raise their rates, making it harder for carmakers to move the metal. One part of a perfect storm?