After the U.S. and Canadian government are out of the car business, at least as far as Chrysler is concerned, Fiat will own 52 percent. Who owns the rest? A large chunk, 45.7 percent, is owned by the UAW. By the UAW’s VEBA healthcare fund, to be exact. And the union is in no great hurry to change that. The UAW has a big “HOLD” on their share of Chrysler, hoping that the value goes up. That’s what “two people familiar with the fund’s strategy” told Reuters today. Read More >
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Category: High Finance
Fiat has reached an agreement with the U.S. Government that will give Fiat 52 percent of the shares in Chrysler and therefore the final controlling majorioty. The Treasury said on Thursday it will sell its remaining 6 percent equity stake in Chrysler to Italy’s Fiat in a deal that will net Washington $560 million, Reuters reports. Read More >
According to the White House’s just-released report titled “The Resurgence of the American Automotive Business” [PDF here]:
The U.S. Government provided a total of $80 billion to stabilize the U.S. automotive industry through investments in General Motors (GM), Chrysler, Chrysler Financial, Ally Financial, and programs to support automotive suppliers and guarantee warranties. As of today, $40 billion has been returned to taxpayers. While the government does not anticipate recovering all of the funds that it invested in the industry, the Treasury’s loss estimates have consistently improved – from more than 60 percent in 2009 to less than 20 percent today.
Independent analysts estimate that the Administration’s intervention saved the federal government tens of billions of dollars in direct and indirect costs, including transfer payments like unemployment insurance, foregone tax receipts, and costs to state and local governments.
This is as close as we’ve gotten to a thorough accounting of the full cost of the auto industry bailout, as both GM and Chrysler have erred on the side of counting as little of their own taxpayer support as possible (leaving out aid to their predecessor firms, finance companies and suppliers). On the other hand, it’s also two short paragraphs in a ten page report… and the rest of the document hews pretty closely to Democrat strategist Ron Klain’s advice to the White House, specifically
tell the story with fewer numbers and more emotion; less prose and more poetry
While the media debates whether this means the bailout bill will come to $14b or $16b, it’s becoming clear that the final number won’t make a big difference… at least politically.
When Chrysler celebrated its payback of “every penny that had been loaned less than two years ago” last week, I noted that CEO Sergio Marchionne’s triumphant line was technically correct, but hardly represented the whole truth of the story. I pointed to $1.5b in supplier aid that helped keep Chrysler afloat, as well $1.9b worth of the Bush Administration’s “bridge loan” to “Old Chrysler,” prior to its government-guided bankruptcy and sale to Fiat. Apparently my more-inclusive accounting of the price of Chrysler’s rescue (which was picked up elsewhere in the online media) caused Mr Gualberto Ranieri, Chrysler VP of Communication, to spend some part of his Memorial Day Weekend writing a response of sorts, outlining Chrysler Group LLC’s perspective on the situation. Hit the jump for Ranieri’s statement, and my brief answer to the headline’s question.
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It took a bit of research to fully parse the California New Car Dealer Association’s complaint against Chrysler and its partially company-owned store in Los Angeles, and our finding is that the CNCDA is actually gunning for Chrysler with gusto. But, argued some of the B&B, surely Chrysler doesn’t want to be kicked out of California? Surely Chrysler’s California dealers don’t want to see their manufacturer banned from selling vehicles in the state? Well, it turns out we were missing a little context that seems to indicate why Chrysler’s California dealers are willing to go to war over a single dealership: Chrysler is overhauling its California retail presence with the help of Wall Street hedge funds. Having used the bailout to wipe out 789 dealerships across the country, Chrysler appears to be working around franchise law to exert more control over its retail network in the Golden State. No wonder then that California’s dealers are standing together to attack Motor Village, the most egregious example of Chrysler’s new retail model. And there’s no knowing where the conflict could end…
With €30m from PangDa and €30m from Gemini Investments, Saab restarted production today at its Trollhättan factory. According to SaabsUnited, the line will run at 80% speed today and Monday, before moving to 100% (over 200 cars per day) by the middle of next week. Speaking at a press conference, CEO Victor Muller reflected:
It’s been an interesting lesson. A company like Saab, that lives in a glass house, should never be caught in a situation where there is not enough cash to withstand the storm as the one we have seen now. What happened seemed like a very insignificant situation became a very significant situation, and next thing you know, you are losing six weeks of production… it was very, very tough and we’ve had some very adverse circumstances that we’ve had to live with, but we got out of it. I think that if you got through 2009-2010 as Saab has been, anything else is relatively easy. We will definitely ensure that this will not happen again. This means that we will be on a quest to ensure that we have sufficient funds at all times to overcome adveersities like this because we can’t afford to have another production stoppage with all the relating downsides, such as disappointed customers, upset suppliers and media attention… that is definitely not in our interests.
There is a war of opinions over the direction of the Chinese car market. Bloomberg says that “China’s auto sales may fall 10 percent this year with the end of government stimulus policies and restrictions on car licenses, according to the China Automotive Technology & Research Center.” Bloomberg’s colleagues at Reuters called Chen Hong, President of China’s largest automaker SAIC as a witness. He expects the Chinese car market to grow 7.4 percent to end up at 19.7 million units by year’s end. Who’s right? Who’s wrong? Read More >
Say what you want about Tesla, but people are buying. Not so much the cars, more so shares in the company. According to a regulatory filing, Tesla plans to sell 5.3 million new shares to the public, and up to 795,000 more to the underwriter, at $26 each. That would raise up to $158.5 million. According to Businessweek, “CEO and co-founder Elon Musk will also buy 1.5 million shares at the same price in a private sale. Blackstar Investco LLC, an affiliate of Daimler AG, will buy 644,475 shares directly from Tesla at the public offering price. That would bring total proceeds of $214.3 million.” The proceeds are mostly for developing a crossover Tesla. Read More >
Chrysler’s bailout “thank you” event today was long on praise for the redemptive power of its government bailout and short on talk of remaining challenges, but at least one important fact was acknowledged: this highly-touted “payback” was only for 85% of the money loaned to Chrysler during the bailout period. Although, to be perfectly accurate, it wasn’t exactly Chrysler who acknowledged the outstanding obligation [the firm avoids any such nuance in its release], as CEO Sergio Marchionne simply stated that
We received confirmation this morning at 10.13 am from Citigroup that Chrysler Group repaid, with interest, by wire transfer to the United States Treasury and by bank transfer to the Canadian government, every penny that had been loaned less than two years ago. [Emphasis added]
That last bit was the important part… as in, the part that was most often repeated in Chrysler’s presentation and in subsequent media reports. But it’s not the whole story…
Supposedly, the idea of the Saab / Pangda deal was to skirt requirements to obtain Chinese government approval. As we have explained on the day the MoU (as Muller sees it) or contract (as Pangda sees it) was signed, it would be most silly to try to get around the Chinese government. They have a whole array of measures to demonstrate their displeasure if they don’t like a deal.
If ChinaCarTimes is correctly informed, the paperwork was barely dry and the Chinese government already made its annoyance felt. According to a CCT report, the Chinese government issued a warning to Pangda. The story is written in Chinglish, but this is what it seems to be saying: Read More >
We still have not heard from Saab and there have been six weeks without production. It eventually reaches a point when you have to make a decision
Johan Andersson of the Swedish unit of supplier giant Lear in the WSJ, on why his employers just laid off all 160 workers of its Trollhättan-based Saab workforce. Apparently Mr Andersson and Lear aren’t any more encouraged by Saab’s PangDa deal than TTAC. And considering that the Chinese dealer group is telling Gasgoo that “production has already restarted” at Saab, the fleeing suppliers who haven’t even heard from Saab yet create some credibility problems for the PangDa-Saab alliance (even if PangDa was referencing GM production of the 9-4X at Ramos Arizpe). Which makes the dire rumors that the deal has not, nor will be, blessed by the Chinese government a little more worrying. Sounds like the rotund lady is warming up her vocal cords…
For people with a sober mind, for people who do not suffer from a Stockholm Syndrome where hostages express empathy and have positive feelings towards their captors, the shotgun marriage between Saab and Chinese car distributor Pangda left many questions open. What was related through Spyker channels did not sound like business the way it is done in China.
Pangda’s CEO and founder Pang Qing Hua talked about his plans for Saab in an interview with the Chinese website, Auto Sohu. ChinaCarTimes supplied the translation into English, you can read the full version here.
What you will read will make much more sense than the breathless announcements by Victor Muller.
The interview answers some questions we had asked all along, for instance the question of the miraculous arrival of €30 million by last Tuesday. Pang Qing Hua explains: Read More >
Saab has received wire transfers of around €30m from both Gemini Investments and the Chinese dealer group PangDa, reports Aftonbladet, and it will be using that money to pay off its supplier debts which could use up most of that cash (Saab’s supplier debts are estimated by DI.se at between two hundred and four hundred million kroner, or as much as €44m). Leaving aside the issue of how that money was able to be transferred from China to Sweden in a matter of two days (more on that from Bertel here, the short version: the deal should need Chinese government approval), there are serious questions about Saab’s ability to restart production. After all, the €30m from Gemini is debt, while Saab owes PengDa for an undisclosed number of vehicles that it bought with its investment. Unless those cars are sitting somewhere waiting to be shipped, Saab will have to pay off its suppliers and then build the cars on what is essentially credit from PengDa. Meanwhile, that’s not the only demand on Saab’s finances and attention, as CEO Victor Muller is planning on taking a bonus of over half a million dollars, a decision that is creating fresh problems of its own.
A study of A.T. Kearney Management Consultants (for what such a study is worth) foresees that 13.2 million cars will be sold in the U.S. this year. It could be more, but the consultants reckon that “in the aftermath of the earthquake and tsunami, parts shortages will impact 2011 U.S. new vehicle sales by 200,000 units.” In the disaster, A.T. Kearney sees a golden opportunity: “Given what we know about production downtime, in 2011 we see 328,000 U.S. customers of the affected brands up for grabs, and more if the time to wait for a particular brand begins to extend.” Read More >
Does that headline seem ripped from the pages of TTAC’s 2008-2009 headlines, or what? But really, who’s shocked? Chrysler spent early 2009 trying to convince the government that it was worth a (second) taxpayer-funded second chance, and now that it’s looking for a private-sector bailout in order to escape the terms of its publicly-funded bailout, Chrysler’s still got some ‘splaining to do. The DetN reports:
Chrysler Group LLC does not intend to speed up plans for new cars despite media reports that investors see a high degree of risk in an automaker that has been so dependent on truck sales…
“Nothing has changed from the five-year plan,” [Chrysler Group VP of Design and Dodge boss Ralph Gilles] said.
New small and midsize cars for Chrysler, engineered by Fiat, “are coming strong and heavy,” Gilles told reporters following a speech. “There is no need to speed up.”
Now, nobody would suggest that Chrysler should mess with its product timing simply to please some bankers. If it’s even remotely possible to hurry new products to launch without cutting serious corners, Chrysler should/would be doing it anyway (ask Sergio). Still, Gilles’ “nothing has changed” sound bite isn’t exactly true.
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