Reuters reports that GM’s deadline to participate in its Daewoo division’s $424m rights offering has passed without GM putting any money down. But the Korean Development Bank, which GM-Daewoo owes $2b (soon to be closer to $3b), isn’t freaking out yet. “Given that GM is not allowed to take money out of the United States, it seems to have a plan from the beginning to drop the rights and use its units to buy them,” say KDB spokesfolks. KDB will not participate in the offering until GM stumps up some cash, so the betting marker has been passed to GM’s units. But which unit will answer the call? Opel is days away from being sold, so you can rule that out. Holden is a possible white knight, but the Australian division is hardly a piggy bank with which to keep other operations afloat. Which leaves only GM’s South American, Chinese and Indian operations to pick up the slack.
Category: Industry
Former head of the Presidential Task Force on the Auto Industry, Steve Rattner has penned a retrospective for Fortune on his time guiding the auto industry bailout. He covers everything from how he assembled his team and developed a strategy to the decision to fire Rick Wagoner and the showdown with Chrysler’s creditors. There are no real surprises if you’ve followed TTAC for the last year or so, but it’s fascinating stuff to read coming from the horses mouth. Take Rattner’s initial impressions of the GM “culture thing”:
Everyone knew Detroit’s reputation for insular, slow-moving cultures. Even by that low standard, I was shocked by the stunningly poor management that we found, particularly at GM, where we encountered, among other things, perhaps the weakest finance operation any of us had ever seen in a major company.
For example, under the previous administration’s loan agreements, Treasury was to approve every GM transaction of more than $100 million that was outside of the normal course. From my first day at Treasury, PowerPoint decks would arrive from GM (we quickly concluded that no decision seemed to be made at GM without one) requesting approvals. We were appalled by the absence of sound analysis provided to justify these expenditures.
If you think about it, AM General really is a pioneer in the 21st Century automotive industry. How so, you ask? By cutting out the consumer and building its business around government vehicle buyers. From GM to Better Place, almost everyone in the business either owes a government money or is pitching a future based on government assistance or involvement. By this logic, the GM-Hummer experiment was a predictable disaster, eschewing AM General’s core strength and attempting to build a consumer brand. But with Hummer as good as sold off, AM General is going back to its bread and butter, showing off this MV-1 developed in conjunction with the Vehicle Production Group.”The vehicle is the first purpose-built vehicle for people in wheelchairs,” VPG’s chief marketing officer tells The Freep. “Every municipality has to offer on-demand service for the disabled as a result of the Americans With Disabilities Act.” See how that works? That’s how you build a vehicle with built-in demand.
Curious about how in the hell Chrysler is going to turn it all around, and go from an industry punchline to, well, less of an industry punchline? We sure are. Especially now that we know the presentation of Chrysler’s five-year product and business plan is going to be a “six hour extravaganza.” We knew ChryCo had some ‘splaining to do, but six hours worth? Or is this just ChryCo’s way of not letting anyone get an awkward question in edgewise? Either way, mark November 4 on your calendar. And while you’re at it, drop a comment to let us know what you’re most curious to learn about the New New Chrysler. You never know where TTAC is going to show up to ask these awkward questions…
Bailout and reorganization gave GM the fresh start it so desperately needed in the US, but other governments have been decidedly less sympathetic to GM’s plight. Germany saw an opportunity to free Opel from GM’s grip, and now the Korean Development Bank has GM up against the wall over the future of GM-Daewoo. Reuters reports Fritz Henderson flew to Korea to meet with Daewoo’s creditors and put a cheery face on the situation. But calling the talks “very positive” is more tribute to Fritz’s unflagging optimism than an indication that GM-Daewoo is almost out of the woods. GM has no choice but to fight for its only remaining small car development center, the only question is with what?
A touching story of auto-industry love may be developing between Mitsubishi and PSA, reports All Cars Electric, citing Wards [sub] and French newspaper reports. It seems the French concern was deeply smitten with Mitsubishi’s $45k MiEV electric car and pursued the option for Citroen and Peugeot-branded versions. And apparently, the more PSA learned about the Japanese company, the more they liked. Did hands brush awkwardly over battery capacity charts, causing a thrilling moment of heart-fluttering eye contact? Executives did share the stage at the announcement of the EV-sharing deal, and now sources close to the deal say the new-found relationship could be snowballing towards a full-on R&D cost-sharing alliance.
Unlike Chrysler and GM, Ford has managed to minimize the downward depreciation spiral that’s been plaguing business models across Detroit. In fact, FoMoCo has increased its net pricing by $1.9b in the first half of this year alone. Ford explains this achievement with a reach back to history: a team of 19 P.H.D.s tasked with managing pricing, production and option mixes is given credit, and compared with the “Whiz Kids” of the post-war era in the Detroit News. “They are unbelievable,” gushes Ford’s Jim Farley. “It’s very scientific. I’ve never seen anything like it in our industry.” The Global Lifecycle Analytics Department (GLAD) was formed in 2000, as a modern-day equivalent to the statistical analysis pioneers hired to bring Ford back from the brink of oblivion in the 1940s. By 2005 the team, led by Rose “The Silent Lamb” Peng, had figured out that “the resale value of Ford’s cars and trucks was being eroded by sales of poorly contented vehicles to rental agencies.” Go figure. Let’s hear it for statistical analysis.
Laugh, said an anonymous sage, and the world laughs with you. The corollary to which apparently, is “make unrealistic predictions of your own success and the world laughs at you.” Fiat CEO Sergio Marchionne is finding this out the hard way, having predicted in a Globe and Mail interview that his Auburn Hills-based bailout baby will be making money “in the next 24 months.” And how, pray, does Marchionne expect to achieve the impossible? Marchionne insists his goal is achievable “because we have decided not to flog inventory, because we’re disciplined about production, because we’re going to try not to discount the vehicles. If [discounts are] the only way I can sell them, I’d prefer not to produce them because I’m not making any money.” But is there some other way of selling Chryslers?
Did you think that finally sacking Mark LaNeve might have been another step in the direction towards the “culture change” promised land? Time for some new meds. And while we usually have to sit on our sour-puss predictions for a few days before being proven right, GM decided to back us up early this time. Automotive News [sub] reports that none other than Buick-GMC boss Susan Docherty will be replacing LaNeve at the pinnacle of the GM sales operation. “She brings a fresh perspective to the job and she has an extraordinarily high level of energy,” says Fritz Henderson. By which he means she’s a lifer, and owes her career to the timid, inept culture Henderson is simultaneously a product of and ostensibly bent on breaking.
90 days out of bankruptcy, GM is taking a moment to explain just how well the turnaround thing is going. Or, to use the PR-present tense, how GM “Accelerates its Focus on Customers, Cars and Culture.” CEO Fritz Henderson explains in the report press release (PDF):
Over the past ninety days since we created the new GM, we’ve already launched a number of new, fuel-efficient, highly successful cars and crossovers; introduced a new marketing campaign that highlights our best-in-class fuel economy, quality, warranty and safety performance; sworn in a new Board of Directors; and overhauled our management. We are taking aggressive actions and moving quickly to transform our culture into one that is truly customer focused
Everything you need to know about this exercise in corporate affirmations (I’m good enough, I’m smart enough, and doggone it, people like me!) can be found in the slide (above) titled “Concerns” from the report’s accompanying presentation (PDF). Nothing about the crisis surrounding Daewoo. Nothing about a steady erosion in sales that no marketing effort has been able to turn around. Nothing about binge-and-purge inventory “management.” Nothing about the near-impossibility of showing a profit by the planned IPO. In short, GM glossed over its issues like a 12 year old with her first stick of Lip Smackers. Read More >
Greentech Automotive is the hybrid vehicle firm founded by the former CEO of Brilliance with plans to build a plant in Mississippi with funds raised through the EB-5 visa program. Not to be comfused with Hybrid Kinetic Motors, the hybrid vehicle firm founded by the former Chairman of Brilliance with plans to build a plant in Alabama with funds raised through the EB-5 visa program. Now that we have that clarified, we can declare Greentech the frontrunner of these two competing enigmas, for at least showing a few hecho-en-China prototypes. The DeSoto Times describes the prototype models as a hybrid coupe that can deliver 45 miles per gallon and go from zero to 60 mph in 5.9 seconds, a four-door, mid-size hybrid which should deliver 50 mpg, a zero-emission electric sub-compact capable of traveling 80 miles on a three-hour charge and a high-efficiency gasoline sub-compact capable of 65 mpg. Initial factory plans call for a $1b phase-one investment, which will get the plant to 150k annual capacity and employ 1,500 workers. Eventually, Greentech hopes to employ 4,500 workers building 250k units per year, and –get this– capture one third of the US market.
GM’s Daewoo division is on the verge of being taken over by its largest creditor, the Korea Development Bank, reports the Korea Times. KDB CEOO Min Euoo-sung warns GM:
If General Motors does not play the role of the largest shareholder of GM Daewoo in an appropriate manner, we will start to retrieve loans that will mature this month. General Motors should accept both the financial and non-financial requirements of the creditors. If not, we will collect loans and will not participate in a paid-in capital increase
GM Daewoo lost about $2.6b in forward exchange transactions (a form of currency hedge) last year, exhausting its $2b line of credit with KDB. GM had asked KDB to roll these obligations forward and throw another billion dollars on the fire, a request it then reduced to $835m. The problem is that GM hasn’t raised enough money, or offered a larger equity stake in GM Daewoo. As a result, KDB is forcing GM to raise new equity, share licenses for jointly-developed vehicles and introduce a co-financial officer to look after KDB’s interests. Otherwise, the collections begin, with $100m due this month alone. And interestingly, money isn’t the only issue at play.
Derren Brown is, for me, the World’s greatest illusionist. In his career, he has, played Russian Roulette (and won), predicted the National Lottery numbers live on TV and tricked bookmakers in paying out on bets which hadn’t won. But this problem, I think, would have been beyond him. How do you revive a car plant in a high cost country? The answer? A 4 month break.
The Wall Street Journal reports that Roger Penske has pulled out of a deal with GM that would have kept the Saturn brand in business. Per the WSJ report:
The deal called for Penske to initially acquire vehicles from GM but eventually branch out to sell products from Renault SA (RNO.FR) and its Samsung Motors unit, which is based in South Korea. Penske Auto said Wednesday that it negotiated a supply agreement with “another manufacturer,” but that company’s board rejected the deal.
“Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction,” said Penske Auto.
Reuters confirms the story, adding “GM said in a separate statement it would wind down the Saturn brand and its dealership network.”
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