The main tool for the government’s crusade to get one million plug-in cars on the road by 2015 is the “Qualified Plug-In Electric Vehicle Tax Credit,” a credit that returns between $2,500 and $7,500 to purchasers of a qualifying vehicle. To qualify for the minimum $2,500 credit, a vehicle must have a traction battery with a minimum of four kW/h, and the credit adds an additional $417 in credits for every kW/h above the minimum. Why? Well, you might think that it’s because the DOE has done its research and determined that larger battery packs deliver more social benefits… at least until the 16kW/h limit (the exact size of the Chevy Volt’s battery), where the credit tops out at $7,500. But according to new research by Carnegie Mellon’s Jeremy Michalek, that basic assumption doesn’t appear to be true at all. In fact, his latest paper argues that the government would actually be better off subsidizing smaller, not larger, battery packs.
One of the legacy costs that GM was not able to reduce in the bailout was pension costs, a whopping $128b obligation as of the end of 2010. And though the plan is “only” underfunded by $10.8b at the end of June according to GM, Kenneth Hackel, president of CT Capital LLC (and author of two textbooks on valuing securities) recently told Bloomberg
The financial risk because of [GM’s pension liability] is higher than people understand. The cold reality is if you used a conservative discount rate and you wanted to close out the plans, you would have to raise about $35 billion.
With GM’s market cap sagging into the low-$30b range (currently around $34b), the risk of pension liabilities growing larger than GM’s market capitalization is very real. And as lower interest rates and a weak stock market reduce pension fund returns, the obligations grow, in turn putting pressure on GM’s stock price. And it’s not like nobody saw this coming: a GAO report released in April 2010 issued dire warnings about the state of GM and Chrysler’s pension obligations. Now, according to the ace reporters at Reuters, GM and the UAW have hashed out a buyout deal giving workers the option of being bought out of their pensions. Which has us dying to know: what’s a UAW pension worth in cash?
Approval rating, based on the question “Do you think each of the following generally do a good or bad job of serving their consumers?”
Auto industry rejoice: you are no longer as despised as the banking industry! Harris Polls didn’t release data for the years 1999 and 2010 exaggerating some of the swings you see in this graph, but it’s safe to say the auto industry has clawed its way out of a post-bailout PR hangover. Sure, Big Auto is still trailing such glamorous industries as Online Retail and Packaged Food, and only barely beat Electric and Gas Utilities for the hearts of consumers… but after nearly falling into negative approval numbers in 2009, this is still a big comeback. And compared to the industry that Big Auto is most closely tied to, namely Big Oil, even 2009 was a “what PR problem?” kind of a year. Which is more than a little strange when you think about it…
[Editor’s note: the following block-quoted passages were sent to us by an enterprising anonymous tipster (italicized passages were quoted in the original from linked sources). I’ve decided to let the argument speak for itself, and simply interject a few thoughts (non-block-quoted) towards the end.]
“On Slide 12, we provide what we view as key performance indicators for GM North America. The 2 lines on the top of the slide represents GM’s U.S. total and retail share. The bars on the slide represent GM’s average U.S. retail incentives on a per unit basis. Now U.S. retail incentives as a percentage of average transaction price and compared to the industry average is noted at the bottom of the slide.
“For the second quarter of 2011, our U.S. retail share was 17.6%, up 1.3 percentage points versus the prior year and down 0.6 percentage points versus the prior quarter due to the absence of the first quarter sales programs. Our incentive levels on an absolute basis have declined significantly from the prior year as well as sequentially. On a percentage of ATP basis, our incentives were 8.9%, down 2 percentage points versus the prior year. This puts us at approximately 103% of industry average levels for the second quarter of 2011, flat versus the prior year.
“In terms of incentive levels, our plan continues for us to be at approximately the industry average for the year on a percentage of ATP basis. These results for share and incentive demonstrate the impact of our plan to produce great vehicles the customers are willing to pay for.”
I did not try to verify the first part of the highlighted claim (that incentives have declined compared to previous year totals), but the second part of the claim (that incentives have declined sequentially) is demonstrably false.
Are car buyers rational? Anyone who deals with car-shopping consumers on a regular basis would probably answer with a hearty “no.” In fact in my experience, helping prospective car buyers navigate the many considerations and options available on the market usually ends with me throwing up my hands and saying “if you like a car, just buy it.” But according to research cited by Wired’s Jonah Lehrer, conscious reasoning might not be the ideal way to shop for a car in the first place. Sometimes “going with the gut,” and making a decision without thinking it through is the best way to solve complex choices like finding the car that’s perfect for you.
WARNING: If you have any track experience, or even if you don’t, the above video can be painful to watch. It’s the long-legged Monticello Motor Club racetrack as experienced by the IMPA journalists on their test day: coned off, watered-down, speed-limited. Had I made the 584-mile drive to Monticello and found conditions like this, I’d have been furious.
Still, the above restrictions weren’t enough to keep the Korean journalist, identified to me as Tai Sung “Peter” Park, from wiping an IS-F against the guardrail. What followed that incident was an odd tale of international misunderstanding, possible deceit, and Keystone Kops silliness…
The board of GM has a week-long meeting in Shanghai. Someone just happened to be in the same place at the same time, and quite possibly unearthed the secret all of India is dying to hear: Under what brand will the Wuling cars be introduced once they hit India? Apparently, not Wuling. Read More >
Speak the truth, even if your voice shakes. Robert Farago didn’t invent the idea of telling the truth about this business, but he made it possible for me, and others like me, to bring that truth forward. At this very moment, there are several “respected journalists” flying business class to Europe where they will be fêted and pampered like kings in five-star hotels along the Spanish coast. There, they will pretend to be the customers for cars they will never be able to afford as they attempt to drown the still, small voices of their stunted consciences with free alcohol. Best of luck to them.
Back here in the United States, one East Coast autowriter received the following email and decided that the best, the most fitting, the most ethical thing possible would be to forward it to me, so that I, and all of our readers, can see “how the sausage is made.”
At the height of “bailout fever,” after TARP had been instituted but before the automakers had been completely bailed out, one argument that we heard a lot of from Detroit’s defenders was “how can you begrudge the manufacturing base a few billion when speculators at the banks are receiving far more support?” At the time, the argument seemed to me like a convenient way to shift attention away from Detroit’s failures and undercut the argument that consumers, not a credit crunch, were responsible for killing off GM and Chrysler… but at least then it still had some validity. Fast forward to today, and history has stripped it of all relevance, as it turns out the banks will likely be picking up the automakers’ bailout tab.
“Chris” from Ford’s “Press Conference” commercial, which has received extensive media play recently from TTAC to Fox News, has uploaded a Youtube video in order to give his own, non-Ford-approved perspective on the controversy. He claims to be “just a guy who loves his F-150,” and insists that the commercial wasn’t staged or intended to be about the bailout. And based on his spontaneous thoughts in this video, the ideological component of his views do seem genuine. But don’t take my word for it, watch for yourself.
Not long ago, I considered asking the Best and Brightest if something like this were possible. You see, when I was a younger man, I was a big fan of the game Aerobiz, a tough, take-no-prisoners Super Nintendo simulation of the (Cold War-era) airline business. Since I’ve been immersed in the world of the car business, I’ve often wondered if it were possible to create a game that similarly captured the challenges of running a car company. And now, it seems, that game is already in development by a couple of coder car nerds from Australia. Called “Automation,” the game is still a ways from completion and its creators are soliciting pre-orders to help fund development (sound like any car startups you can think of?). Read More >
Sources close to the negotiations told The Detroit News that a deal was imminent with General Motors Co. when Chrysler CEO Sergio Marchionne sat down at his Mac computer and fired off a sharply worded letter to UAW President Bob King at 10 p.m. Wednesday, accusing the union leader of violating their gentlemen’s agreement to sign off on a deal by the 11:59 p.m. deadline.
Shortly after the letter was sent, talks stopped at both companies.
Chrysler and the UAW agreed to extend their current contract for one week. Talks resumed Thursday between the two sides, but nothing of substance is being discussed at the bargaining table, according to people familiar with the talks.
Actually, that’s not exactly what everyone is reporting…
The United Auto Workers and the Detroit automakers have been locked in negotiations for months now, as both sides seek to redefine their relationship in the post-bailout era. And though all sides have stressed the importance of avoiding intractable disputes in an alleged new spirit of cooperation, it seems that the prospects of a quick, painless conclusion to negotiations remains elusive. The UAW’s contracts with Chrysler and GM both blew past their deadlines at midnight last night, and Ford, the only manufacturer at theoretical risk of a strike, extended negotiations earlier this week. TTAC has not covered these negotiations in much depth for the simple reason that little information leaks out of them. But with contracts expiring and optimistic rhetoric crashing on the rocks of reality, the frustration is clearly starting to boil over. And who is surprised that Fiat-Chrysler CEO Sergio Marchionne is the first to let his frustration show?
Volkswagen will almost certainly finish the year as the second-largest automaker by volume… and if it wants to take the top spot, it will do so on sales, not acquisitions. Having gobbled an extraordinary number of acquisitions over the past several decades, including Bentley, Lamborghini, Bugatti, Italdesign and Karmann, VW’s monstrous appetite appears to be waning. And no wonder: the latest mouthful, a partnership with Suzuki, has gone sour and recent lustful glances at Alfa have drawn sassy rebukes from Fiat’s Sergio Marchionne. Accordingly, VW’s Chairman Ferdinand Piech tells Bloomberg [via AN [sub]] that no more acquisitions are planned and that
We’re big enough
Of course, this is also coming from the company that’s been struggling to swallow Porsche for the last several years. Once that deal is complete, we’ll check back on Herr Piech’s appetite. Because in an industry built on scale, you never know when hunger will strike…
NB: Chrysler 200 sold 3787 in August 2010, and Kia Optima sold 1714.
Well, it’s that time again TTAC fans: the Midsized wars roll on with Camry retaking the top spot to extend its advantage in YTD sales. Altima continued its consistent year with a second place showing, and improving over its August 2010 number better than any nameplate besides… the Chrysler 200? Yes, Chrysler’s updated Sebring stopgap outsold the freshly-chic Optima on the month, and passed it in YTD sales. Meanwhile, the Hyundai Sonata may still have been 10k off the Camry’s pace, but its August volume was a mere 37 units from tying Mazda6’s YTD volume (through August). All in all though, this wasn’t an incredible month for midsizers, as half of the best-selling nameplates failed to improve on their year-over-year numbers. But what this segment lacks in volume growth it makes up for in drama, as a falling Accord runs the very real risk of being passed by Malibu and Sonata. Camry may be back in control, but the fight for the rest of the podium is as tight as ever.
Approval rating, based on the question “Do you think each of the following generally do a good or bad job of serving their consumers?”
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