As we've reported, thousands of Canadian cars buyers have headed south of the border to save money on new and used cars. Several manufacturers have [belatedly] responded to the exodus by offering incentives that bring Canadian new car prices back in line with their American equivalent. But not all, and used car prices are still significantly lower. So the trade continues apace. Only now the Canadian government has stepped in and staunched the wound. The Toronto Globe and Mail reports that Transport Canada now refuses to license imported American cars until they're fitted with a Canada-compliant anti-theft immobilizer. Seriously. They're stopping vehicles at the border and/or allowing new car buyers to drive them home– and that's all. At least until the device is fitted and the car inspected (and Honda of Canada says they know of no legal aftermarket conversion). Transport Canada spokesman Patrick Charette moved to quash conspiracy theorists (that's us) by pointing out the new reg was announced two years ago. Mr. Hill ain't buying it. The Calgary financial consultant bought a 2008 Sienna in the U.S. last month, saving CA$15k. The vehicle is currently sitting on a dealer's lot 320 kilometers away from his driveway. "This is either collusion or unintended consequences." While dozens of frustrated buyers cry foul, the list of banned vehicles was broadened last week to include 2008 models manufactured after Sept. 1 and sold in the United States by Ford, Hyundai and Suzuki; all 2008 GM models, several Honda vehicles and about half of the Toyota Motor Corp. lineup.

Back when GM was offering zero percent loans to anyone with a pulse (i.e. "sub-optimal" FICO credit scores), we warned that this policy would come back and bite the automaker in the ass. CNNMoney reports that GM's glutes are in peril. "Lehman Brothers analyst Brian Johnson said in a research note Monday that GMAC is experiencing a 'sharp' increase in delinquency rates among its auto-loan customers since July. 'The precursor of credit loss is delinquency- and the 60-day delinquency rate is on the rise for recent issues of GMAC auto (asset-backed securities),' Johnson said. He noted that, with unemployment low, 'the deterioration in auto ABS credit conditions may be evidence of a likely spill-over of the mortgage woes onto the auto credit world.'" This is serious stuff; hundreds of thousands of bad loans nearly sank Mitsubishi. GM spokeswoman Gina Proia admitted a "small to modest uptick in [auto loan] delinquencies" in the third quarter and said GMAC is closely monitoring the portfolio (whew!). "We have taken some steps such as reducing the production of non-prime loans in auto finance. We have also expanded the collection force and we have placed an increased emphasis on the initial verification of applicants, especially those in the lower tier." What was that about escaped horses and barn doors? Oh, and GM stock dropped to a 17-month low.

Because health care VEBAs normally contains less than $1b in assets, they're usually nothing more than a sideline for sleepy old pension fund managers. But, as Bloomberg reports, a VEBA the size of the one The Big 2.8 have agreed to bestow upon the United Auto Workers (UAW) is a whole 'nother kettle of fish. At $54.4b, it's plenty big enough to catch the [cold, dead] eye of the big boys like JP Morgan Chase & Co., State Street and Merrill Lynch. According to trade publication Pensions and Investments, this health care fund is the same size as the University of California's pension fund endowment– which is the nation's 25th largest. UAW president, Ron Gettlefinger says his organization has been "inundated" with offers from Wall Street to manage the trust. And why not? Independent investment consultant Geoff Brobroff estimates the fees for managing the VEBA could total $285 million (not including kickbacks). Nice work if you can get it.

Speaking to [financial] analysts at Ford's conference call for Q3's financial results, Ford CEO Alan Mulally announced that the Blue Oval Boyz are going to hang onto their Swedish captive import for a while longer. "Our plan now is to not sell it and to focus on improving, especially, the cost structure and the position of the brand itself reflecting their new terrific lineup of cars and trucks." Wow! Alan calls SUVs trucks now! How car guy is that? Anyway, about that brand positioning… "They are really moving to a more premium brand, improving cost structure." So, no word for Volvo's brand postition other than "premium." You know, like safe. Or safe! At least Volvo's safe from Ford's axe for the time being. But are they safe from the prospect of losing money? "They're going to be fine," Mulally told the automotive egg-heads. "I think." He thinks? He THINKS? Will someone buy this guy a copy of The Little Engine that Could? Oh, and the AP reports that Mulally left the door open to the possibility of kicking Volvo out. "Ford will continue to review the brand periodically." How reassuring. 

As their hometown automakers sink into the miasma of disaster, The Detroit News' efforts to put a positive spin on Motown's woes is beginning to gain the force of farce. Slightly less poetically, they're missing the point. In today's report, Ford's third quarter $380m loss was painted as a victory, you know, compared to Wall Street's expectations and last year's $850 red ink stain. Or North America's pre-tax loss of $1b, compared with last year's pre-tax loss of $2.1b. The paper duly published FoMoCo CEO Alan Mulally's spin on the numbers, which claimed "We can see our plan taking hold with significant improvement continuing in our core automotive operations." And did you know that Ford has stabilized it's U.S. market share? News to me. To be fair, or in at least an attempt to be fair, the DTN also sounded a note of caution– albeit one attributed to a bunch of someone else's. "Ford, which is in the midst of one of the broadest restructurings in its 104-year history, is struggling to meet its target of restoring profitability no later than 2009. Many analysts still see that as a stretch goal for a company that lost $12.6 billion last year." It may come as no surprise, but you can add our name to that list.

Ironically enough, the name of the rare earth element "dysprosium" is derived from the Greek δυσπροσιτος [dysprositos] meaning "hard to obtain." But obtain it Toyota must; the element is crucial for the manufacturer of nickel metal hydride batteries and hybrid engines. The Guardian Newspaper reports that Japanese Trade Minister Akira Amari is lobbying China to ease-up on their tightening grip on dysprosium, platinum (needed for catalytic converters) and other rare metals. Earlier this year, China banned duty-free exports of rare earth ores for processing. On Wednesday, the PRC announced it would bar foreign investment in mining rare minerals or those that can't be recycled. China produces roughly 90 percent of Japan's rare earth earth minerals (i.e. "China's got Japan's manufacturers by the throat."). According to CBC News, that's because "Over the past two decades, China has tapped into a motherlode of cheap, easy-to-extract, rare earth resources, byproducts of the country's Bayan Obo iron ore operations in the north." Minister Amari isn't placing all his elements in one basket. He's also heading to South Africa and Botswana to secure alternative supplies. What was that about the total environmental impact of hybrids?

To try to get my head 'round the fact and ramifications of this accounting-related announcement, I sent an email to TTAC's Deep Throat. "Effectively, a company keeps two sets of books: one for financial disclosure and one for the taxman. The tax credits created by depreciating assets accumulate faster/look smaller on the tax books than on the financial books. The difference between the two creates a tax credit (a.k.a. an asset). Assuming static business, over time, as the financial books catch up with the tax books, the credits get "used up." If a company grows, those deferred tax credits also grow. But the tax credits cannot exist forever; they must get paid. With this move, GM is essentially saying its accountants can no longer justify carrying these tax credits as an asset; they reckon their employer's future growth is limited. All that said, the $39b announcement may not necessarily result in a cash payout because of the way the tax code works. It's very arcane stuff that few people really understand. My guess is that this will have some cash consequences, but we'll have to wait and see if, when and how much. Meanwhile, it's safe to say this announcement will raise concerns about GM's prospects in the credit markets given the further fragility of GM's balance sheet." [NB: Accounting and high finance experts are invited to add their perspective, as long as they do so in something resembling plain English.]

Reuters reports that U.S. gas prices have returned to summertime price levels, north of $3 a gallon. With the cost of crude oil jumping 17 percent to more than $96 per barrel, the AAA figures three buck a gallon gas was overdue. "We are surprised we didn't hit $3 sooner,” admits spokesman Geoff Sundstrom. “Prices could go higher now that we are moving into the higher-demand season that coincides with Thanksgiving and the year-end holidays." The US government says gasoline prices rose to $3.01 per gallon this week; diesel fuel is at a record high of $3.30 a gallon. “If we stay at $95 to $100 per barrel crude,” Sundstrom said. “It wouldn't be out of the question to see $4 in some places.” Additional insight arrives via the US Energy Information Administration (EIA). In its Short-Term Energy Outlook the EIA predicts “crude oil prices are expected to remain high and volatile.” Ya think?

Alan Mulally has publicly admitted the possibility that his employer may– indeed might— go belly-up. Automotive News reports today that they asked FoMoCo's CEO if his employer will survive. "Don't know — race against the clock. Are we working on the right things? Absolutely. I've been there. I've seen this movie. I performed well in it. I know exactly what to do. Do we have enough time? No idea." Arriving hard on the heels of this weekend's Ford – United Auto Workers' (UAW) agreement, Mulally's startling statement could be seen as an attempt to convince Ford's rank and file to ratify a contract which may not contain job guarantees. If so, his post-admission theatrics were suitably dramatic: "The more you worry about worrying, as opposed to worrying about doing, then you're going to put this at risk," he said, slapping a piece of paper on which he'd sketched elements of his turnaround plan. "So let's just do the goddamn plan." Of course, the date of AN's pow-wow with Big Al is the critical piece of information in this regard: October 26. That's 17 days ago. Why did Automotive News sit on this bombshell until now? Did they agree to an embargo? No matter how you look at it, this one stinks.

Autobild reports that the soon-to-be-Porschefied Volkswagen Group is adopting a low-price strategy for the US market. Beginning in 2011, VW US will sell several relatively cheap, not-for-Europe models: a $20k frumpified Passat, a $15k Jetta and a $25k Passat-sized SUV. (India and China will also be blessed with these Vee Dub strippers.) VW prays hopes this "mid-term strategy" will boost their American sales from last year's 235k units to a cool million vehicles per year. Autobild reckons this plan creates a conundrum: how to prevent gray-market exports to Europe? How to protect VW's international brand values? The magazine recommends introducing a new low-price brand (e.g. Toyota's Scion and Renault-Nissan's Dacia). Meanwhile, in Tokyo, VeeDub's upmarket sib has introduced the new, slightly-larger-than-Mini-sized A1. Badge-engineering alert! Although the new Audi A1 shares its atrocious gaping grille-mouth with the Q7, it sits on the VW Polo platform. The model also introduces Audi's new soft-touch, synthetic cow hide, trademarked "velvet leather." As Grace Jones will tell you, it just doesn't have the same ring to it as warm leatherette. 

As common sense suggests, GM's new "two-tier" contract with the United Auto Workers (UAW) works best (at least for the automaker) if the majority of their employees are on the lower tier. The Detroit Free Press reports that GM is using its corporate wiles to move its workforce's wage structure in a decidedly downwards direction. To that end, the automaker is dropping an entire shift at their Pontiac pickup truck assembly plant beginning in May. It's just one of three layoffs GM's planning under the new UAW contract that will eventually divest the domestic of several thousand jobs. GM claims the cuts are "to keep production in line with demand" and deny it's part of a plan to prime high paid hourly workers for a buyout– so they can hire cheaper "second-tier" replacements. Credit Suisse's Chris Cearso suspects "GM will be back before too long with an announcement of an attrition program geared to induce current noncore workers to retire so they can be replaced with new Tier Two workers at about one-third the cost." RN auto analyst Erich Merkle agrees. "I think GM wants to put as many people as possible into retirement and get young hungry workers, that are still treating their acne, in there at the lower rate." GM has responded to talk of buyouts or other attrition programs by labeling it "absolutely wild speculation." The UAW can't claim they didn't see this coming. And if they didn't, they sure as Hell should have. 

Yesterday, we speculated whether or not Chrysler would hang fire on trimming union jobs dud models until after the United Auto Workers (UAW) convinced Ford members to work without job guarantees. Turns out Chrysler didn't even wait for the ink to dry on its union agreement before axing its first three losers. The Detroit News quotes "people close to Chrysler" and "people familiar with the situation" (that could be you!) saying that the PT Cruiser, Dodge Magnum and Chrysler Pacifica will get the chop. Oh, and maybe the Jeep Commander. And possibly the Dodge Dakota pickup. And the Chrysler Sebring and Dodge Avenger. Meanwhile, Chrysler hired former GE exec L. John Cataldo to assume a newly created position: vice president of business development and mergers and acquisitions. Cataldo is in charge of hooking-up with other automakers and selling the family silver. Speaking at the Magazine Publishers of America annual conference in Boca Raton, Chrysler CEO Robert Nardelli reiterated Chrysler's 'focus on cash.' The company is moving to sell off $1b in "unneeded real estate and facilities." Not to go all TV Land on you, but I'm hearing "They call him stripper, flipper; faster than lightning."

Speaking to Automotive News [sub], GM CEO Rick Wagoner promised his employer will plow the money saved by its new contract with the United Auto Workers (UAW) into "green products."  Specifically, in the next four to ten years, GM will build  more [some?] low-emitting diesels, hybrid vehicles and electric vehicles running on lithium ion batteries. "If we have a significantly profitable and cash-generating enterprise, that really opens up the opportunity to be more aggressive and take more risks." Never one to miss an opportunity not to ask GM's jeffe the hard questions surrounding the details of a major announcement, Automotive News doesn't reveal GM's strategy in the event that GM isn't "significantly profitable" and the company's cash conflagration continues. (By GM's own admission, they won't realize any major savings from the new contract for another four years.) Right. That's it. I'm going to the Detroit Auto Show to find this guy. Who's with me? 

Standard and Poor's believes in giving credit where credit's due. General Motors doesn't qualify. According to the Detroit News, S&P has removed GM from its list of companies in line for a credit rating upgrade. The agency has decided that loaning money to the ailing automaker remains a risky venture, even with a new labor contract that GM says will save them billions of dollars. S&P still sees "serious challenges ahead" for the beleaguered company. ""We had to look at the economy and non-contract issues," demurred Analyst Bob Schultz. "Still, the most important factor is if they're using or generating cash. We still expect GM to be using cash in their North American operations." Schultz predicts weak U.S. auto sales will keep GM burning through its reserves, as it continues spending on restructuring without a significant increase in revenues. Even if GM's products suddenly find favor in the American markeplace, it's unlikely that S&P will upgrade GM for another six months to two years.

When Cerberus liberated Chrysler from its German captors, we speculated on the role parts maker Magna would play in the ailing automaker's future. At the time, we were looking for the three-headed canine to perform a quick strip and flip, off-loading a big ass chunk of Chrysler's production onto the cash-rich Canadians. Perhaps we spoke too soon. Bloomberg reports that Magna has reversed decades of anti-union efforts and signed a "Framework of Fairness" with the Canadian Auto Workers Union (CAW). Under the terms of the agreement, the CAW agrees to a no-strike clause, in favor of independent arbitration.Today's Globe and Mail prints a joint statement by Magna's Frank Stronach and the CAW's Buzz Hargrove claiming that they've put away their differences "for the sake of the industry." Apparently. "economic studies have suggested that companies that pair union representation with extensive mechanisms for worker involvement and participation attain the best possible combination of high productivity and high morale." Who knew? A more likely explanation: at a stroke, the deal removes Chrysler's United Auto Workers members' objections to Magna's purchase of Chrysler production facilities, if not the entire company. Rock and roll!