Notice the word “claims.” You see, the thing is, TTAC starts off from a cynical perspective. And then we consider past history. For example, Chrysler. And Chrysler CEO Bob Nardelli. And Chrysler CEO Bob Nardelli’s claim that he was misquoted when he said that his [then new] employer was “operationally bankrupt.” Followed by the “news” that the ailing American automaker was actually “profitable.” Or the hype that accompanied the pre-D.O.E. loan program introduction of three electric vehicles, “one of which is headed for production.” Or PR guy Scott Brown’s assertion earlier today that the company had “a lot” of orders for the Aspen and Durango HEMI-hybrids. Clearly, Reuters isn’t keeping score. They’re happy to repeat Chrysler’s announcement that they’ve “received multiple bids on its Viper sports car business and was reviewing the offers.” Strangely, “Chrysler… did not disclose the number of bids or the timeline of the sale.” Although “One person familiar with the process said no additional bids were likely to be considered.” One person unfamiliar with the process says they’ll take the best offer, right up to the moment they sign the contract selling now-GM Car Czar Bob Lutz’ seminal moment. So to speak.
Category: High Finance
Get in line, bub. Still, it’s nice to see GM’s CEO not get credit where credit’s not deserved. The Wall Street Journal is the bearer of bad tidings for the Wagoner clan, delivering Red Ink Rick’s pink slip in the most public of manners. Yes, “people familiar with the matter” of the GM – Chrysler merger reveal that Cerberus wants some “fresh air at the top.” Anonymous sources are breaking out all over, and it’s an endless row of shot glasses full of not good for GM’s current management. “Cerberus and other investors who pump money in the new entity would want to keep significant equity and have the ability to appoint members to its board and influence its management, these people said. Cerberus’s position suggests GM could be in for a shakeup of the nonconfrontational culture that has developed between its 14-member board and its management team, led by Chairman and Chief Executive Rick Wagoner.” Noconfrontationalsmytuches. How about clinicallyinsane? So who’s going to steer this new ship of fools?
My, how things change. Just two short months ago, Automotive News [sub] publisher and editorial director Keith Crain was asking us to redefine our very notion of what an automaker is in order to justify Chrysler’s continued existence. “Who knows?” mused Crain. “Before too long, Chrysler might just do some engineering and perhaps a bit of design and let someone else build its vehicles. Chrysler would become a marketer rather than a manufacturer, sort of like Home Depot.” Fast forward through two months of bad news, and suddenly Crain has realized that just maybe it’s more likely that Chrysler will die rather than challenge paradigms. And though his latest missive “Just Put Up A ‘For Sale’ Sign” is doom-and-gloomy enough to get him membership in our rapidly-growing Cassandra club, he makes sure blame goes where it belongs: the fools who were dumb enough to buy the mess the last time it was for sale.
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Peter Lattman at The Wall Street Journal has nailed the banker’s motto: “In Cerberus we trust.” Remember when bankers were steely eyed, risk averse curmudgeons who would only lend money to those who didn’t need it? Hah, that was before the days of fee based income, monster annual bonuses and surgically enhanced trophy brides. “More than 40 elite investors from Citigroup Inc.to Third Point LLC put up at least $12 billion of the roughly $15 billion used to fund Cerberus Capital Management’s acquisitions of Chrysler LLC and GMAC Financial Services. Most even agreed to pay a fee for the privilege.” What a hangover. The banks are said to have already written off over $5 billion on those deals, and it ain’t over. “Cerberus long honed a reputation for buying companies others had left for dead”, and for doing so with other people’s money. “The firm boasts to its own backers how little of its $27 billion portfolio is allocated to the two deals — less than 5%. In his most recent letter to Cerberus investors, Mr. Feinberg didn’t even mention Chrysler or GMAC by name.” Never ones to let reality intrude, “investors have marked GMAC to about 50 cents on the dollar and Chrysler to about 75 cents on the dollar.” But hey, buying Chrysler was never about making money, that deal was pitched as a matter of “patriotic dut.” Hedge funds and bankers, the last real American patriots, right?
So much for editing on my iPhone. Anyway, again, it’s nice to see The Ascot-wearing one finally acknowledge the fact that the people running GM are clinically insane. In fact, Jerry Flint’s Road to Damascus moment is so powerful that it miraculously transforms the Forbes’ columnist’s prose into something altogether more readable than usual. “Let me make this clear: Any merger between General Motors and Chrysler would mean the death of Chrysler and another coffin nail for GM.” Crystal. But Jerry can’t just leave it at that. Oh no, he’s got to shoot down my theory: the Chrysler merger is a cash-grab to sustain GM and better position the artist formerly known as the world’s largest automaker for federal bailout bucks. In fact, Mr. Flint thinks the whole idea is… silly.
According to Tom Krisher of the Associated Press, “A person briefed on discussions about selling Chrysler LLC says the automaker could be sold in pieces to other companies… The person said Tuesday night that many combinations are being discussed. The person asked not to be identified because he doesn’t want to be accused of being a moron for stating the blindingly obvious the talks are private.” How… helpful. Meanwhile, independent talking heads continue to heap scorn on the idea of a Chrysler – GM merger, even as it looks like the deal’s going down (predicted for next Friday). Phil LeBeau over at CNBC shares his “Three Reasons for GM Not to Buy Chrysler.” Here on TTAC we’ve been talking about the parting out scenario since well before the Cerberus/Chrysler deal was done. With Renault-Nissan not interested in a wholesale merger and GM struggling to come up with the cash to make the merger work, parting-out seems like such sweet sorrow. Stay tuned.
In this breathless interview by an adoring newswoman, Elon Musk says that the Tesla Roadster is doing great! And that Tesla’s OEM supply business is doing great! And that the Silicon Valley electric vehicle maker (retrofitter? is slowing down on WhiteElephant sedan development because it’s the fiscally prudent thing to do so. Musk anticipates some cheap government capital in six months (courtesy of tax payers just like you), so why raise more money now? In other words of wisdom, Tesla’ self-appointed CEO says falling gas prices aren’t a concern for the company’s business plan because gas prices “aren’t the main reason” for buying a hot sports car which is “environmentally friendly.” (Hint: it’s all about green cred.) Officially, Musk has “no comment” about specific time frames for an IPO, but says it’s “within the realm of possibilities” that Tesla will fleece more investors let outsiders buy a piece of the automaker’s mean, green dream sometime next year. Meanwhile, if your idea of great reporting is a newsbabe hanging on every word of a sanctimonious rich guy, today’s your lucky day.
We’ve just received a press release from GM announcing that it’s “exploring a potential sale” of aftermarket parts maker ACDelco. Apparently, “a sale is expected to promote more rapid growth of ACDelco globally.” The move is painted as a logical outgrowth of “a number of initiatives to bolster [GM’s] liquidity position by approximately $15 billion through year-end 2009, including the sale of assets which are expected to generate approximately $2-4 billion of liquidity.” In other words, we told you we were throwing furniture on the fire, and there you go. Equally unsurprising, GM hasn’t revealed the amount of money it wants for ACDelco. And GM is, once again, paying Merrill Lynch to do the dirty work. You may remember that Merrill arranged GM’s billion dollar payoff to FIAT for NOT buying the Italian automaker, and then bought GM’s abandoned shares for pennies on the dollar. If not, you should.
As we’ve just reported, The Detroit News seems to have abandoned the normal standards of reporting. In j-School ethics world– informed as it is by the movie All The President’s Men— if you can’t confirm a story with two independent sources, you either don’t run it or you clearly identify the info as unverified. As in “according to unconfirmed anonymous sources,” presenting the resulting material as speculation. To avoid the semantic hoops, TTAC established the Wild Ass Rumor (WAR) category. With this story on Kirk Kerkorian’s Ford stock sell-a-thon, we’re deploying WAR on the DetN’s behalf. “Billionaire investor Kirk Kerkorian’s decision to sell off his stake in Ford Motor Co. may have been precipitated by a series of high-profile departures from the struggling automaker that began less than two weeks ago with the abrupt resignation of Chief Financial Officer Don Leclair. Since then, two of Ford’s most respected board members also have tendered their resignations. Ford says the events are unrelated, but a source close to Ford’s largest private shareholder told The Detroit News that Kerkorian doubts that and is concerned that the departures signal trouble at the top of the nation’s second largest auto company.” Trouble at Ford? NO WAY! And there’s no reason Kirk would want to pin the blame for his $600m or so loss on someone else, is there? More meshugas after the jump.
We’ve been largely ignoring this possibility because, well, the GM – Chrysler merger thing is a much more appealing possibility, in that “how nuts do you have to be to be a top executive for a domestic car company” kinda way. But now that it’s OK to write news reports based entirely on anonymous sources, well, why not Chrysler – Nissan? I mean, Chrysler – Nissan – Renault? I mean, Carlos “The Jackal” Ghosn? And The Detroit News is there! “The Renault-Nissan alliance is proposing to acquire around 20 percent of Chrysler LLC and bring the Auburn Hills automaker into the French-Japanese automotive partnership, according to sources familiar with the situation… Sources familiar with the discussions said Carlos Ghosn, CEO of both Renault SA and Nissan Motor Co., sent a proposal in recent days that included revisions to a draft agreement prepared by Cerberus… The sources said Tokyo-based Nissan would acquire the stake because it has cash on hand, whereas Renault now has debts of more than $5 billion.” So, which company does Cerberus favor to gut Chrysler like a fish? Go ahead and jump.
JP Morgan Chase (JPMC) owns enough Chrysler paper to line the inside of the New Orlean Superdome. Not to mention a stake in GM. Hey! You don’t think… yes we do. And the fact that automotive analyst Himanshu Patel works for JPMC is more than slightly relevant when it comes to considering his opinions on said merger. Only not to Bloomberg’s Hyman, who presents his “Hell yes!” take on the merger without once mentioning the connection. “By saving Chrysler from a liquidity even, GM may also be able to get itself much needed secured bank financing,” the graphic reads. But wait, that’s not all! Patel also reckons the combined company would have more leverage over the United Auto Workers (they’re gonna need it). “Inicidentally” the news reader concludes, “Patel is the only one of the analysts who covers General Motors who has a buy rating on the stock.” Gee, I wonder why…
CEO Bob Nardelli tells CNBC [via MSNBC] that “a steep decline in U.S. auto sales has created an environment for industry consolidation.” And just like that, out comes the “S” word. “It certainly creates an environment for consolidation where you can get synergies of productivity that will allow you to be more competitive, not only here in the U.S. market, but on a global basis,” Nardelli opined. And though ChryCo execs won’t talk about the GM deal, they’re more than happy to suggest mergers for others in the biz– a sure-fire sign that more bad news is coming. Chrysler’s President Jim Press tells Bloomberg that “there is too much capacity in the supplier community, there are too many dealers, there is too much manufacturing capacity. We think alliances are good things for the industry.” Keep it nice and vague these things sound good. Get back to the specifics of a GM-Chrysler hookup, and Press’s logic leaves the building. “In our view, it is unlikely that the combined entity would be able to maintain 11 distinct brands and roughly 30 percent market share,” says Deutsche Bank analyst Rod Lache. Though Chrysler’s cash is the big prize for GM, much of that reported $11b pile would be eaten-up by consolidation costs. But that would be, you know, later.
Yahoo! Finance reports that Michigan Representative Thaddeus McCotter has joined State Senator Carl Levin in suggesting that the GM – Chrysler merger is something that really ought to happen, even if the feds have to, uh, help. A Republican suggesting government intervention to broker a deal (i.e. kick-in your tax money) between two large corporations? Sure! “I would be supportive of anything as long as it guarantees people the opportunity to vote for me keep their jobs so they can vote for me so I can keep mine.” In fact, Tad’s “biggest concern” is “if there’s not a merger.” “If there is no merger you could see the entire Chrysler car company destroyed, disbanded and thousands of Americans put out of work.” Which is also true if there is a merger, but as they say, a week is a long time in politics. Anyway, check out the video interview on the page; Tad’s got a terrific little wiggle as he explains the difference between being a capitalist and a “free market supporter.” [thanks to Steven Lang for the link]
Automotive News [sub] reports that billionaire investor Kirk Kerkorian has sold part of his 6.5 percent stake in Ford Motor Co. and could sell the rest before this blog hits the net. This according to spokesfolk for Kerkorian’s investment “vehicle” Tracinda Corp. “Tracinda, which has invested about $1 billion in Ford, said in regulatory filings it sold 7.3 million Ford shares on Monday in the open market for an average price of $2.43 per share. Tracinda intends to further reduce its holdings, including the possible sale of all of its remaining 133.5 million shares, or about a 6.09 percent stake, depending on market conditions and available sales prices.” Hang on; is this the same Captain Kirk who offered a cash infusion to FoMoCo in June? The same Lion of Las Vegas who, according to last Friday’s Bloomberg report, “pledged another 50 million MGM shares to back the $600 million Bank of America Corp. credit line he used to buy into the second-largest U.S. automaker?” Yup. There’s at least one analyst and an investor with a massive egg on their respective faces…
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