Toyota recently declared that it would begin building Camry Hybrids in Melbourne, potentially reversing the industry's decades-long decline. The announcement vindicated the Australian government's half-billion dollar initiative to encourage local production of full-sized eco-friendly cars. PM Kevin Rudd and the Victoria provincial government each cut a $35m check to Toyota in return for its promise to build 10k Camry Hybrids per year. Win-win for all concerned, right? And then Toyota Australia spokesman Mike Breen opened his big mouth. Breen told The Australian an inconvenient truth: Toyota would have built Camry hybrids in Melbourne with or without the taxpayer-funded incentives. This prompted howls of outrage from the opposition, claiming the handout "amounts to nothing more than a $35m photo opportunity for the prime minister." Of course, Toyota has since backpedaled, disingenuously demurring that "Toyota's decision to build a hybrid Camry in Australia was based on various business considerations… however, the Governments' support was a critical factor in securing local production." Ford and GM reps are sure to learn the lesson when they meet with Australian Industry Minister Kim Carr this week; there's still $465m in taxpayer dross to be hustled Down Under.

Aston Martin needs some major investment to develop its next generation of luxury sportscars. When Aston met cute with Daimler a few months back, there was talk of Aston becoming another feather in Dr Z's mustache. Since then, Aston's owners have denied seeking a sale. It appears they prefer to take the company public. The Motor Authority reports that has Aston chairman David Richards says the company's eying an IPO that "would be for the next level of investment to finance the next models and fund engine development work where clearly there'll be a requirement for further investment." Richards said the public offering will likely take place on London's stock exchange sometime in the next three-to-five years. This time frame suggests that Aston may need the capital to pay off the $40m the boutique automaker owes Ford; payment's due by the time their engine supply contract runs out in 2012. Meanwhile, Aston will flog the bejesus out of the British brand, following Porsche, Ferrari and Lamborghini down the primrose path of branded laptops, mobile phones, etc.

Dell Computers wants to sell you a car. According to Automotive News [sub], we're talking expensive cars. Even though high gas prices and a crippled economy have put the brakes on the high end car market, Michael Dell re-thinks different. He sees "opportunity all up and down the spectrum." Dell CEO and former Sonic Automotive President Jeffrey Rachor might just be planning to spend $500m on premium and import car dealerships. Why? "When people are panicking and don't really know what to do, that's probably the period of greatest opportunity from an investor's standpoint to make changes and do good things." OK, but why cars? The elephant in the room: Dell's straight to the customer sales paradigm. Is the long-awaited era of B2C mass customization upon us? 

What if you threw a party for 20 million guests and over a billion said sure, they'd love to go! The AP [via Yahoo!] reports on Tracinda's offer to buy Ford Motor Company common stock for $8/share. Roughly half of the outstanding shares were tendered against the offer. The response reflects the pervasive pessimistic view of FoMoCo future; offer stockholders a little over the present trading price and they are so out-a-here. Maybe Kirk has a dastardly plan to buy up 10k Ford Explorers for $15m (fleet pricing), sell 'em to friends in Saudi Arabia, drive up the price of Ford stock, then dump his stock at a profit. Far fetched for sure. But what other explanation can we devise for Kirk Kerkorian's hots for Ford stock? Unless, of course, you have plans to seize control of the company.

In response to my manifesto on The Truth About High Gas Prices, a couple of people close to me confidentially told me that they thought I was nuts for predicting sub-$80 per barrel oil “in the not too distant future.” According to an economist at the Dallas Federal Reserve, I should have gone lower with my prognostication. Stephen Brown observes that cheap Saudi Arabian oil costs just $4 a barrel to produce. The most expensive oil on the market today, and the oil that set’s the world price, known as the “final barrel” or equilibrium price, is just $50 per barrel. Shawn Tully, CNNMoney editor, concludes, “It's even possible that, a few years hence, we could see a sustained period of plentiful oil supplies and low prices, meaning $50 or below.” But that doesn’t mean that it won’t get worse before it gets better. Today, the oil futures bubble inflated to a new record high above $135 a barrel, before settling back down to $134.35.

Chrysler is no longer "asking" suppliers for a five percent cost cut across the board– they're just taking it. More ominously, they've changed their payment terms. We just received this information from a reader (independently confirmed) who wishes to keep his name and company confidential for obvious reasons:

On June 3 we received revised purchase orders (PO's) indicating Chrysler will now be taking five percent off all PO's and will take 60 days to pay instead of 45. The trouble is they are doing it to all existing orders, not just future orders. I was told by Chrysler purchasing they were trying to keep their cash flow together and there was nothing they could do about the PO changes. I think that might be all for Chrysler unfortunately. They also told me the new rules were going to include PO's shipped after June 1 even if they hadn't bothered to change the order.

If Chrysler's cash flow is so precarious that they have to shortchange suppliers and take longer to do it, it doesn't bode well for the company's short-term prospects. It looks like the only thing that will pull them out of this death spiral is a healthy infusion of cash from Cerberus' deep pockets; the private equity firm isn't known for throwing good money after bad. Look for Chrysler to file for C11 before the end of August, when the statute of limitations expires for suing Daimler for false conveyance.

According to the Wall Stree Journal, octogenarian investor Kirk Kerkorian's $8.50/share offer for up to 20 million shares of Ford stock is likely to be fully subscribed when it closes on Monday. Ya think? The Lion of Las Vegas' offer is well above Ford's closing price on Friday ($6.04). "The original tender included a clause reserving the right to pull the offer if Ford's stock price declined by 10 percent or more from its May 8 closing price of $8.20. But the Beverly Hills, Calif., company, which is wholly controlled by Mr. Kerkorian, declared it would not employ that escape route — in a sign of confidence in the future value of the company." Why is Kirkorian willing to pay over market price for a publicly traded stock? Hey. he's the billionaire and I'm not. Kerkorian and sidekick Jerry York have been publicly advocating the sale of Volvo and axing Mercury. One problem: Ford family members have long resisted putting Mercury down. In fact, Elena Ford ran Lincoln-Mercury for several years (and claimed credit for it's turnaround) before being "promoted" to head of marketing at Ford Motor Credit. The Journal raises interesting questions about how Kerkorian's ownership will affect the Ford heirs' iron grip on decision making. Said heirs own about three percent of Ford stock, yet control 40 percent of the voting rights. If and when FoMoCo needs more cash, Kerkorian seems prepared to provide it; but only if his shares get full voting rights. In that scenario, there's a good chance Crazy Henry's third generation lucky eggs will have to surrender control to Kirkorian to raise the cash. Either that or everybody loses everything in Chapter 11. 

That RenCen money tree must be producing a bumper crop this spring. The custody battle over Cobasys between parents Chevron and Energy Conservation Devices (the loser gets custody) has reached the point where GM feels obliged to intercede (i.e. throw money at it). Cobasys makes the batteries for GM's mild hybrids. No other batteries will work in the vehicles, at least until they're redesigned in (all together now) 2010. Automotive News reports "three sources" told them GM is preparing to buy the floundering battery company. The irony: GM helped found Cobasys, then sold its share to Texaco (which later merged with Chevron). Just as spin-offs Delphi and American Axle continue to sap GM's waning resources, Cobasys now returns to haunt them. No one's saying what this acquisition will cost The General, but not to worry… they have plenty of money to get them to the end of the year.

Talk about your diminished expectations… Post-Black Tuesday, GM CEO Rick Wagoner's told the world [via The Financial Times] that his employer has enough cash to make it through '08. And while you're filing that under "methinks he doth protest too much," Wagoner defends GM's (and the rest of the 2.8's) reliance on big trucks and full sized SUVs by… pointing a finger at Toyota. By his way of thinking, you can't blame Detroit (i.e. him) for missing the SUV and pickup truck exodus because Toyota got caught building a new truck factory at the wrong time. Huh? Toyota added a full-sized truck to its product portfolio to compete vigorously in one of the few segments of the market where they were weak. (Lest we forget, they built the Prius in record numbers at the same time.) Sure it turns out that Toyota's Tundra timing was off, but they aren't at risk of closing up shop because of it. Bottom line: ToMoCo books more profit in one year than GM's entire net worth. Comparing GM's management decisions to Toyota's is patently absurd. Will no one rid us of this troublesome man? 

Canadian finance minister Jim Flaherty awakes!. After years of ignoring calls from Ontario's Premier Dalton McGuinty to subsidize Ontarian jobs, brushing off accusations of inaction vis-à-vis the steady outflow of Ontario's manufacturing jobs to lower-cost areas, Flaherty could hold back no longer. Call it a Shakespearean twist of fate, but of all of the 308 electoral districts in Canada, Flaherty has the misfortune of representing the federal electoral district of Whitby-Oshawa, right where GM Canada lives– the epicentre of Ontario's ailing manufacturing. Flaherty opened the newsday by announcing a $250m bailout of GM Canada. Except he didn`t call it a bailout. CBC reports the Flaherty will make money– set aside under an "environmental investment fund"– available to GM to help it pursue green technology. The move, another possible knee-jerk reaction to the closure of GM-Oshawa, has caught even Dalton McGuinty by surprise. (Dalton hasn`t decided whether to be pleasantly surprised or to, in typical provincial fashion, say it is not enough. Though the conditions of the deal aren't finalized,) Flaherty hinted heavily that the money should be used to replace truck production by smaller car production. Well duh.

As a burgeoning fuel crisis unseats the credit crunch as the downer du jour, the subprime woes of GMAC and ResCap are bubbling away under the surface. Reuters reports that GMAC has completed a $60b refinancing and funding package in hopes of returning its ResCap mortgage branch to reality liquidity. The bailout arrived just as ResCap revealed that it needed to raise $2b in cash by the end of June to meet its obligations, after losing $859m in the first quarter of this year. ResCap has refinanced its unsecured debt, renewed bank credit lines, and exchanged nearly $10m in bonds for higher-interest, longer-term debt. GMAC shareholders GM and Cerberus jointly provided $750m guarantee as part of a $3.75b line of credit extended from GMAC to ResCap, and have thereby exposed themselves to the first loss, should ResCap default. Interestingly, the bailout came in a week that saw rampant speculation (since denied) of a Cerberus sale of portions of GMAC and Chrysler. Far from punting, Cerberus is actually buying-up hundreds of millions of dollars worth of GMAC's resort funding division and ResCap's model home assets, since market conditions are slowing asset sales. "The fact that ResCap's owners – both GMAC and Cerberus – remain willing to pony-up cash in order to keep the mortgage subsidiary afloat, strongly suggests that they still see something there that's worth saving," KDP analyst Thomas Ferguson tells Reuters. Avoiding bankruptcy perhaps? Whatever it is, GM and Cerberus better hope it pays off, and soon.

Our fearless leader was not the only one who finds fault with the fact that GM CEO Rick Wagoner raked-in over $14.4m during a year when his employer lost some $38.7b. Automotive News [sub] reports that shareholders at yesterday's annual meeting attempted to inject a measure of sanity into GM's executive compensation. And failed. A proposal to give shareholders an annual "advisory vote" on executive pay and bennies received only 32 percent approval. Another proposal would have tied 75 percent of future stock options and restricted executive stock awards to GM's share price, market share and credit rating. Nope. That one received only 16 percent approval. A measure giving shareholder cumulative voting passed. Again. The same proposal passed in 2006… This time 'round, CEO Rick Wagoner passed the proposal to the board's corporate governance committee for review. But then, when the board has your back, why should you care about the stockholders? “And since we’re asking rhetorical questions, are there any remaining reasons to hold GM stock?” 

The relationship between battery maker Cobasys and parent companies Chevron and Energy Conversion Devices (ECD) is entering the crisis stage. Previously, we reported that Cobasys had no budget or business plan for 2008. They still don't. Chevron cut off funding in September 2007. Oakland Business Review (via mlive.com) reports "the company has been operating on a loan and price increases from an undisclosed customer since February." In February, Cobasys' corporate parents "entered into an interim settlement agreement to negotiate a sale with an unnamed bidder;" they've extended the deadline for completing the sale seven times since then. GM's rumored to be their benefactor and mystery buyer, since Cobasys has the contract to develop and test lithium-ion battery systems for GM's plug-in hybrid electric vehicle program. Given GM's current financial situation, buying into a dysfunctional battery maker seems like a particularly dodgy deal. Which probably means it's exactly what they'll do. [Hat tip to Dan Segal for the link]

The internets are abuzz with the "revelation" that Chrysler-owner Cerberus has sold off more than half of its investment in the ailing American automaker and lender GMAC to about 90 other investors. The only problem with this story: timing. As Reuters puts it (and The Detroit Free Press neglects to mention) "The timing of those transactions was not clear." IIn other words, it's a non-story. But not completely. For one thing, Cerberus' limited exposure to the two companies makes it easier for them to bail; it explains Cerberus' stated decision not to top-up GMAC with the $600m it needs to stave-off bankruptcy. Second, the story's original source, The Financial Times, paints an unintentionally humorous portrait of unbridled greed. "Most of those joining the GMAC deal in 2006 did not have much time to do their due diligence. Instead, Cerberus invited about 50 hedge funds to its Park Avenue office for a presentation by its chief administrative officer, Seth Plattus. 'It was a 'trust me' kind of trade,' says one investor, who bought a small piece of GMAC. 'You had no time to do real due diligence. But it was a hot deal and everybody wanted in as part of the gang.' Many of the people who took part in the deal were friends of Steve Feinberg, founder of Cerberus, and said they invested as a sign of faith in him… 'There was an element of the greater fool theory to it.'"

UPDATE [via Automotive News] "Cerberus has not sold any equity in Chrysler," said the Chrysler official speaking on condition of anonymity. "There are always co-investors at the time of the transactions so when they originally purchased 80.1 percent of Chrysler, there were co-investors at that time. They still own 80.1 percent."

It's officially official and completely complete. Ford has finalized the sale of Land Rover and Jaguar to Tata Motors. And boy are they not excited! In fact, the last sentence of the terse, four paragraph press release reads exactly like a rejection letter: "Ford Motor Company wishes the Jaguar Land Rover management team, its employees and the new owners every success for the future." Automotive News [sub] reveals that David Smith is the new boss of the two former Ford-owned rejects millstones automakers. "Smith is Jaguar and Land Rover's chief financial officer. He has been the company's acting CEO since the April 20 death of CEO Geoff Polites." So, steady as she goes? Yeah right. Anyone want to make any guesses on how long it'll be before we start seeing Tata's influence on the model lineup and the "Jaguar Land Rover management team?" Or they move production from Merrye Olde England to India? Meanwhile, Detroit's profit-drunk SUV party is now, officially over.