Automotive News reports that members of GM's national dealer council purchased more than 107k GM shares on July 14. The store owners claim the million dollar move was a symbolic gesture to "show support and confidence in GM's future." No really. "We firmly believe in GM and that we have the best products to sell," proclaimed Duane Paddock, co-chair of GM's national dealer council and owner of Paddock Chevrolet in Kenmore, N.Y. "Our fuel economy is the best story in the industry and the best way to do it [the show support thing] was to buy an investment stock." Paddock says he added $100k worth of GM shares to his $200k position. [Reporter Jamie Lareau neglected to ask if that 200 large represented his original investment or a recent valuation.] The dealers made the purchase the day before Rick Wagoner's cost-cutting announcement. The day after Wagoner's chin wag, GM stock rose 16.6 percent, closing at $11.48. Today, GM stock surged another 11.9 percent, closing at $12.85 a share. It has to be asked– if not by the SEC then by us– was this really an It's a Wonderful Life-style gesture or was it insider dealing dressed-up for the media?

In his most recent GM Deathwatch, RF raised the specter of "Bailout Fatigue." The Detroit News' Gordon Trowbridge agrees. Their man in Washington says to the government's preference for financial sector bailouts like Bear Stearns, Fannie Mae, Freddie Mac and Indy Mac will queer the pitch for Motown. Rep. John Dingell cries foul! "If Freddie Mac and Fannie Mae ask for a bailout and they get it, [automakers] should be able to ask and get it, too," says the Dearborn democrat. Former Michigan governor James Blanchard agrees: "government  seems to treat financial services with special care, and not care about manufacturing until the last minute." President Bush begs to differ: "If your question is, should the government bail out private enterprise, the answer is, no, it shouldn't." According to the Chief Excutive, the Fannie/Freddy "rescue" isn't a bailout because "the shareholders still own the company." And now a word from someone without a horse in the race. "Fannie Mae and Freddie Mac are fundamentally sound businesses," says University of Maryland economist Peter Morici, implying of course that the D3 aren't. Besides, Fanny and Freddy hold 91 percent of America's mortgage debt on houses under $470k, while Detroit only employs about as many workers as Chrysler did when it was bailed out in 1979. 

Volkswagen has announced the location of their new U.S. plant. And the winner is… pardon me boys… Chattanooga. The Tennessee plant will be located in an existing "industrial megasite" to "produce a car designed specifically for the North American consumer." (The last time VeeDub tried building something specifically for the American market, they "Malibuized" the Rabbit– and retreated to the Fatherland, (cotton)tail between their legs.) VW figures on a 150k per year initial capacity for the new facility, which will begin production in "early 2011." "The U.S. market is an important part of our volume strategy and we are now very resolutely accessing that market," Martin Winterkorn, VW's CEO said. "We will be selling 800,000 Volkswagens in the U.S. by 2018 … [which] along with our growth strategy, is a prerequisite for the economic success of the company in the dollar region." Does that boy even know how to speak English? Anyway, inhabitants of the Tennessee Valley area of "the dollar region" are bound to appreciate the $1b VW's expected to pour into the local economy. 

GM just sent out a press release outlining "further steps" they taking "to adapt its business to rapidly changing market conditions." The high points of Rick Wagoner's plan include:

∙ Reduction of salaried workforce via attrition and "other separation tools."

∙ Eliminating "annual discretionary cash bonuses for the company's executive group in 2008… For the company's top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent. "

∙ Making "additional structural cost reductions… achieved through further adjustments in truck capacity and related component, stamping and powertrain capacity."

∙ "Revising its capital spending plan and reducing approximately $1.5 billion in expenditures versus prior plans… A major part of the reductions is related to the delay of the next generation large pickup and SUV program, as well as V-8 engine development and associated capacity."

∙ "Improv(ing) working capital…primarily related to the reduction of raw material, work-in-progress and finished goods inventory levels as well as lean inventory practices at parts warehouses."

∙ "Defer(ing) approximately $1.7 billion of payments that had been scheduled to be made to a temporary asset account over the balance of 2008 and 2009 for the establishment of the new UAW VEBA."

∙ "The GM Board of Directors has decided to suspend future dividends on common stock, effective immediately, which is expected to improve liquidity by approximately $800 million through 2009."

∙ "Undertaking a broad global assessment of its assets for possible sale or monetization."

∙ "Opportunistically access(ing) global markets to raise additional liquidity"

"The actions announced today are difficult decisions, but necessary to respond to the current auto market conditions," said Wagoner. "Even under conservative planning scenarios, GM is well-positioned to withstand the U.S. market downturn and emerge a stronger company. We have a solid position in the rapidly growing emerging markets, a global operating framework that allows us to respond to changes in the U.S. market, a commitment to technology leadership, and an ever stronger and competitive product line-up."

Click here for PDF of full press release 

To paraphrase an old expression, it stops being funny when it starts costing you billions. And make no mistake about it: Cerberus' investment in Chrysler has cost the private equity firm some serious scratch. Bloomberg reports that "The $7.5 billion Cerberus Institutional Partners Series Four [15-month-old fund] lost $32 million on $3.3 billion in investments through March 31… hurt by stakes in unprofitable companies including Chrysler LLC." That one percent drop might not seem like a lot of money in a shaky U.S. economy, but fans of Cerberus' top dog are used to returns in the neighborhood of 25 percent per year. Needless to say, Chrysler's been a bit of a drag for the three-headed dog, all things considered. "Founder Stephen Feinberg plowed as much $4 billion into automaker Chrysler and GMAC LLC, the former vehicle- and home- lending arm of General Motors Corp., before they were battered by the subprime-mortgage collapse and gas prices that rose 34 percent in the past year." Again, that's before the shit hit the fan. Bloomberg points out that Chrysler probably accounts for no more than five percent of Hell Dog's latest fund, and that the ailing American automaker is, supposedly, besting Cerberus' projections. Still, $375m here, $375m there…  

It's no secret that when strapped for cash the Detroit automakers often turn to Uncle Sam. Typically, these efforts involve a bailout, loan guarantees or tax breaks. But the Detroit News reports that Ford is trying a new method of squeezing cash from the feds: suing for overtaxation. Last Thursday, FoMoCo filed suit against the IRS seeking over $445m in interest on taxes it overpaid between 1983 and 1989, and between 1992 and 1994. There's no dispute from the IRS that Ford overpaid its taxes in those years, but… "We believe the IRS failed to pay the correct amount of interest," said Ford spokeswoman Marcey Evans. "We tried to resolve it at the administrative level without success. Because of the size of the amount and the dispute, we had no choice but to file." And having backed away from its promise to restore profitability by 2009, Ford could sure use a few hundred mil right about now. If Ford wins this lawsuit, it could cement its status as the best-positioned American automaker during the next several years. Then again, when that distinction is being earned by lawsuit, you have a good sense of how screwed American automakers really are.

The S&P 100 is the most widely watched index of large-cap US stocks. It's a bellwether for the U.S. economy, a vital component of the Index of Leading Indicators. Reuters reports that the index's managers have punted GM, replacing it with Mastercard. "S&P did not in a statement explain why it dropped GM from the S&P 100." The fact that the automaker's share price has recently slid to 50-year lows, and the international automaker's market cap has fallen from $56b in 2000 to around $5.6b (which means GM NA has a negative net worth), might have had something to do with it. Informed speculation about an impending GM bankruptcy certainly came into play. And now all the index funds that buy the basket of S&P 100 stocks will have to sell their GM and buy Mastercard– no matter what the current price. The news should drag GM's stock price even lower. It's only a matter of time– and not much of it– before the DJIA (Dow Jones Industrial Average) will have to take a hard look at GM's inclusion. If/when, GM gets kicked off that listing, raising money to feed the automaker's cash conflagration will get a lot harder. Leaving federal loan guarantees as GM's only recourse to stave-off Chapter 11. All this before July's sales number and GM's first quarter results. Dark days ahead. 

Setting aside the fact that an indeterminate number people buy hybrids for reasons other than saving money (green props, emissions, etc.), what about Ye Olde Hybrid premium? Where are we on that score these days, what with $4 the new $1.50 down at the pump? NADAguides has done a little number crunching on that score. They reckon "only a handful of hybrid cars make financial sense for a consumer who buys a new car every five years." Warning that miles driven and local gas prices are significant variables, NADA conclude that the following gas – electric cars recoup their "extra" cost within the five-year time frame (presented in order of fastest recoupage to slowest): Toyota Camry Hybrid, Chevrolet Malibu Hybrid, Nissan Altima Hybrid, Toyota Prius, Honda Civic Hybrid, Cadillac Escalade Hybrid (just kidding). NADA's press release gives us a big ass chart of local gas prices and uses EPA stats and manufacturers' MSRP. But they don't make mention of the single largest expense of car ownership: depreciation. And here's a question: to what "gas equivalent" did they compare the Prius?

We all know that GM is burning through cash faster than a well-oiled cash burning machine, but nobody seems to know where the next GM greenback fix is going to come from. Automotive News (sub) reports that a JP Morgan analyst thinks it could come from GM's VEBA contributions. The General has set aside some $14.5b for the UAW fund which was envisioned as a way for GM to get out from under its crippling benefit liability. But with cash tight and credit increasingly unavailable, the UAW may just have to loan that money back to GM to keep the lights on for another few years. Analyst Himanshu Patel reckons GM needs $10b to prevent a major cash crunch by 2009, and that GM could squeeze up to $6b from the UAW fund. "Why would the UAW agree to this? My short answer is they have to," Patel said, adding "the UAW now is extremely motivated to keep GM, Ford and Chrysler out of bankruptcy." Oh yeah, and GM would have to pay the UAW up to 12 percent interest on the friendly loan. It's a risky move though, given that nothing indicates that GM will ever be able to pay the money back. But then GM and the UAW are up the same creek with the same lack of equipment, so the partners in failure may have little choice to double down for another round. Unless of course there's some other white knight waiting to throw $10b into the giant sucking sound that is General Motors. Which there isn't.

That was then, this is now. Oh wait; that's now too– at least according to our friends over at Autoblog. Scribe Dan Roth offers the testimonial upon hearing the news that Volvo's COO is spinning faster than a supersonic dradle. ""We want to continue to compete with Mercedes, BMW and Audi," Steven Armstrong, Volvo's COO tells Automotive News [sub]. "We're working to improve the premium-ness of the brand and our products." Shouldn't that be premiumnessosity? And who considers Volvo an alternative to a Merc, Bimmer or Audi? You know; other than Autoblog? Not U.S. consumers apparently. "Volvo sold 458,323 units worldwide last year, of which 106,213 were sold in the United States. Volvo's U.S. sales peaked at 139,067 units in 2004, but they are expected to fall to around 95,000 this year." While we await the Swedish brand's long-denied sale, we're left wondering about Roth's comprehension and sentence construction skills. "The possibility of building its cars in the United States might bring prices down [Ed: the possibility will bring prices down?] and allow better developed performance versions, versus the outclassed R models of the past," Roth contends. "The issue is not quite as high on the agenda as it was in January," Armstrong said. 

Doth Chrysler President and Vice Chairman Tom LaSorda protest a possible C11 filing too much? You be the judge. Meanwhile, step forward JPMorgan auto analyst Himanshu Patel. And man did that dude set the Wall Street cat amongst the Detroit pigeons this week, most notably flagging GM's "not impossible" bankruptcy. Now that the dust has settled (i.e. GM's stock found a level below the basement) the AP is highlighting Patel's assertion that Chrysler is in worse shape than GM, or Ford. "Patel estimated the automaker will burn through $4 billion this year and could be forced to file for bankruptcy protection or sell off parts of its business in the second half of 2009 if industry conditions don't improve. Patel said it's difficult to predict the most likely outcome for Chrysler, but he said South Korean or Chinese automakers covet Chrysler's U.S. distribution network. A bankruptcy filing could be a hit to Cerberus, which invested $6.1 billion in Chrysler as part of its acquisition and also backed a $500 million line of credit that Chrysler tapped last month." [FYI: The steelworkers union was no big fan's of Patel's.] 

Red Sox fans will recognize this "not impossible nightmare" as the inverse of their team's fabled 1967 season. The rest of us will see it as a fancy way for an influential Wall Street firm to say a GM bankruptcy is "increasingly likely." In fact, Yahoo! News reports that Merrill's analysts had a gander at June's sales stats and GM's cash burn and reckon the ailing American automaker will need to raise an additional $15b– preferably with Merrill's help– to stay afloat. Meanwhile, Merrill Lynch analyst John Murphy shanked The General, cutting GM from "buy" (har-har) to "underperform," and lowering his price target from $28 to… $7 per share. The move slammed GM's stock price and forced a subtle shift in GM's increasingly taciturn spin. "We continue to believe the company has sufficient liquidity for 2008 despite lower volumes," GM spokeswoman Renee Rashid-Merem told Reuters. "If conditions continue to deteriorate, we would consider other operating measures." In other words, more cost-cutting in addition to fund raising. But honestly, what good what that do?

Last we heard, Ford tried to shop Volvo to China's SAIC. Now Automotive News [AN. sub] reports that The Blue Oval Boys are trying to dump sell its troubled Swedish division on to Renault. We now learn that initial talks with Renault began last fall. But those broke down over "price differences" (as in Ford thought Volvo was worth something). Apparently, talks have now resumed. Renault/Nissan CEO Carlos Ghosn has said on numerous occasions that he's looking for a partner in the American market. Someone. Anyone. GM? Chrysler? So, why not Volvo? You know, other than the fact the brand's only successful U.S. product– the XC series SUVs– just rolled-over and died. Of course, Ford continues to deny Volvo's on the auction block. "We are focused on improving Volvo's business results," says FoMoCo spinmeister Mark Truby. Meanwhile, AN says that Ford is also talking  with Dongfeng Motor Group. With Ford burning cash, and credit in short supply, expect a Volvo sale as soon as a sufficiently gullible partner is found.

The perfect storm we predicted is rapidly approaching hurricane force. Whether or not you believe Motown's automakers could have predicted the soaring price of gas (hint: they could have at least hedged their bets a little), it's increasingly clear that the truck-heavy domestics are in deep, deep shit. The price of oil has jumped again today; this time on rumors that Israel is about to attack Iran over their nuclear weapons program, "disrupting" Iranian oil supplies. Bloomberg reports that OPEC President Chakib Khelil predicted that the military threat– and the falling value of the U.S. dollar– may drive oil prices from their current price ($143 a barrel) to $170 a barrel. Meanwhile, Goldman Sachs has declared that supply and demand, rather than speculators, are responsible for oil's rally. All of which has raised gas prices, killed the U.S. new car market, murdered light truck sales and torn a hole in Ford, GM and Chrysler's balance sheets. Tomorrow is Black Hole Tuesday for The Big 2.8, when the full horror of the sales stats are revealed. In anticipation of this bad news, The Detroit News reports that GM stock hit a 34-year low ($10.57). Ford's stock tumbled to $4.46 a share. Barron's reports that late last week, "some [funds] designed for individual investors are selling at about 50 cents on the dollar-almost as if GM were headed for bankruptcy." Almost?

Credit Justin Berkowitz. On a recent podcast, Justin chastised Ford President Mark Fields for begging for bucks for hybrid batteries. "Stupid schmuck," Justin said [paraphrasing]. "Ford should concentrate on getting small cars like the Focus and the Fiesta to market as soon as possible." And now Bloomberg reports that FoMoCo is committing itself to NOT developing a plug-in electric hybrid (PHEV). Ted Miller, Ford's senior manager of energy storage, said Ford would not take an "overly aggressive approach" [as opposed to a conservatively aggressive approach] to introducing plug-ins. That would be "akin to a Hail Mary." And that's bad. "A Hail Mary means that we're probably going to have to neglect a lot of other things." In other words, Ford can't afford to chase rainbows. Despite the common sense, Bloomie Scribe Greg Bensinger feels compelled to warn his readers that Ford's non-tack might leave the automaker high and dry when GM or Toyota introduce a massively popular PHEV. See? Now that's funny! Meanwhile, Blue Oval Boy Said Deep revealed there'll be a hybrid Mercury Milan and Ford Fusion in Ford showrooms by year's end, for a total of four gas – electric models. A new-ish Mercury! More Jill Wagner ads! Rejoice!