You may recall this headline. That’s because we’ve already used it: “Chrysler Ends Jobs Bank on Monday. Calls It Something Else. Will Reinstate ASAP.” In said post, we debunked the idea that the United Auto Workers (UAW) was making anything resembling a concession. To refresh your memory, the union said the action on the Jobs Bank was a temporary suspension, rather than an outright elimination. Today, Bloomberg reports that the 1,600 GM employees currently enjoying the benefits of the UAW jobs bank will be out in the cold as of February second. But not really. GM spokesman Tony Sapienza tells Bloomberg that those leaving the jobs bank will get state unemployment benefits and “some GM pay.” Over at Automotive News [sub], Sapienza said GM is discussing “supplemental pay” [emphasis added] with the union “as part of current negotiations.”  

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The last time we heard that GM’s new Flint engine plant was canceled, we listed it as a Volt Birth Watch. After all, Flint was supposed to produce 1.4 liter four-cylinder engines for Volt range-extender duty as well as for the Cruze and siblings (in turbo form). But as we noted then, GM insists that Volt and Cruze will go ahead as planned regardless of whether the Flint plant is built. How? By importing 1.4s from Austria, according to MLive. But are imported engines included in those old “unprofitable at $40k” Volt cost estimates? We’d guess not. In any case, ABC reports that Flint conctracts have been canceled, and GM just ain’t sweating these details. Volts will have engines come 2010, and damn the german accent. And massive unprofitability. And already-approved tax credits. And patriotic subtext.  So really, this is just another “GM manages to pee on its own leg” post. The Volt is just fine, thanks for asking.

AutoNation’s Mike Jackson at World Congress

And yes, we’re talking about the CEO of Autonation, not the one-glove guy. Jackson’s keynote adress to “fellow survivers of 2008” at the Automotive News [sub] World Congress was TTAC-ish enough to be dubbed a “truth-serum” speech by AN’s David Sedgwick. Accompanied by the Laurel and Hardy influenced powerpoint presentation above, Jackson breaks down the great downturn of 2008 with wit and insight. He blames captive lenders like the “General Motors Rejection Corp,” and states that for 95 percent of the market, the price of gas determines the kind of vehicle they want. Check out the changes in captive lender approvals and the $10k swing in Prius residuals over the last year for some compelling evidence that he’s right. Listen to the whole speech below for a concise overview of the year that turned an industry on its head.

CEOs usually don’t get paid for gloomy forecasts. It’s their job to instill at least a modicum of stockholders fantasy. If two of them paint a dark picture the same day, take note. Reality will surely be darker.

Speaking at a meeting held in Riyadh, Saudi Arabia, Renault & Nissan Jefe Carlos Ghosn said that worldwide sales of all new cars will likely drop 14 percent to 55 million units this year, the Nikkei (sub) reports. The Nikkei: “His projection means that new-car sales, which slid 9 percent last year, will take an even steeper tumble in 2009. Ghosn also predicted that it will take at least seven years for global new-car sales to recover to their peak level of 69 million units, seen in 2007.” Ghosn expects that the current economic slump will drag on:
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Fiat CEO Sergio Marchionne has said that he is open to further consolidation talks with any interested firms. “A partnership with a European rival is vital,” says Emanuele Vizzini of Investitori SGR, who tells Bloomberg that PSA PeugeotCitroen or BMW are the “natural candidates.” Marchionne is staying mum, but he has aknowledged that many see a Fiat-Peugeot hook-up as a “marriage made in heaven.” For now, however, Marchionne and PSA are denying rumors of hookup talks to the Detroit News. But then, Marchionne has said that Fiat needs to approach its goals “softly and quietly.” So who knows? “The Chrysler deal does nothing to solve the overcapacity problem,” says Credit Suisse analyst David Arnold. An all-European deal could “offset spiraling costs and declining volumes with savings from joint procurement, capital expenditure and research and development,” argues Arnold.

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The man who knows how to get something for nothing (Fiat’s Sergio Marchionne) has “absolutely no intention” of running Chrysler as part of the two firms’ automotive axis, reports Automotive News [sub]. Marchionne will fill one of Fiat’s three seats on Chrysler’s seven-seat board, as he attempts what he describes as the “mission impossible” of turning Chrysler around. But before the dramatic-but-overplayed theme music cues a Fiat-led revamping of the ailing automaker, Chrysler’s stakeholders will have to make meaningful concessions, including debt-for-equity swaps. But will Marchionne accompany ChryCo CEO Bob Nardelli for future rounds of bailout beggary? Of course not. After all, the Fiat deal confirms the suspicions of at least one US Senator, that injecting cash into Chrysler would simply invite a takeover. And sure enough, Automotive News [sub] reports that officials concede that giving U.S. taxpayer money to an automaker tied to an overseas-based company will raise red flags in DC. Chrysler spokesfolks insist that the Fiat deal is consistent with the “stipulations and obligations” of the U.S. Treasury Department loan, but then they wouldn’t be insisting if there weren’t some question, would they? As Farago reported earlier, the promise of more federal money is what got Fiat sniffing around in the first place. And now there’s trouble afoot.

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Since Ford said sayonara to its stake in Mazda, the erstwhile allies have been been having a lot of those “relationship talks,” reports The Detroit News. And true to the cliches, it’s a case of “can’t live with you, can’t live without you.” Crack a beer if you’ve been there before. Anyway, therap, I mean, analyst Jim Hall of 2953 Analytics sat down with the two to get a feel for the situation. “They’ve had a very symbiotic relationship,” he tells DetN. “The risk for Ford is they lose Mazda’s small car expertise. They think they can make it up with Europe, but Mazda can do it cheaper. The biggest risk to Mazda is their ability to get components on a global basis is reduced because their volumes are so low.” Ford goes around insisting that their “close, collaborative relationship will not change.” Meanwhile Mazda tells the Japanese papers that the  partnership will be “fundamentally altered.” But despite its tough talk, Mazda might need Ford’s help to expand in China, where it’s looking at a 30 percent sales bump in 08. “The thing that Ford gives Mazda, historically, is capital — and that keeps the Japanese banks off its back,” empathizes Hall. “Now, the banks are a major shareholder.” Ford and Mazda still hold monthly meetings, and US executives say Mazda’s need for engines, successful JV plants, and mutual respect will keep them together. But will Mazda’s start-stop technology be shared with Ford? And for that matter will Mazda’s “own” DSG box be a dry-clutch like the forthcoming Ford Powershift? If two cannibals share a lifeboat, which one survives? So many questions. And based on how things usually go in relationships like these, the crazy kids probably don’t know yet themselves.

Last year, Toyota finished the year with an unsatisfying quasi-tie for the title “world’s largest automaker.” The NY Times reports that ToMoCo has won 2008’s volume battle by a 620k unit margin. According to US News and World Report’s Flow Chart Blog, this is no bad thing. Blogger RIck Newman argues that even the most well-insulated GM executive can no longer deny that things have been going horribly, terribly wrong. The company can move on dot org. It can accept the fact that it’s an underdog that must fight for consumer consideration. It can lose the size queen sheen, and operate as if profits are the real measure of success. (A point GM CEO Rick Wagoner made last year when his minions cooked the books to retain the world’s largest automaker title, before the company ran out of cash.) Most importantly of all, Newman argues, Rick Wagoner can finally tell the truth about cars.

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On this day of change, Toyota is returning to its roots, announcing the appointment of Akio Toyoda as its new President. Toyoda will inherit his grandfather’s firm from Katsuaki Watanabe, just as Toyota is facing its greatest challenges in years. Even Watanabe recognizes the need for change, telling the Wall Street Journal “times have changed completely and … it really requires very bold reform and something that is outside of the box.” And Toyoda hopes to reach back to the foundational principles his grandfather endowed to his firm, while injecting a relatively youthful perspective (Toyoda is 52 years old). “I will go back to the basics of the foundation of the company,” says Toyoda. “But at the same time I am not bound by past history. I intend to exercise as much boldness as possible in pushing ahead with the reforms.” Though a Toyoda hasn’t led the firm since 1995, Toyota also hasn’t lost money since it was founded. To fight the tide of bad news, Reuters reports that Toyota has announced further production cuts. Domestic Japanese production between February and April will be cut in half compared to last year, with plans for only 9k units of production. This will include an 11 day furlough at 11 of its 12 Japanese plants.

When the clock strikes 12 tonight and the year ends, Americans will most likely have bought 13.1m light vehicles. That according to Erich Merkle of Crowe Horwath LLP, the man everybody seems to turn to when it comes to counting units.

Next year will be much worse.

The first quarter of 2009 will be an atrocity. “Merkle expects that the industry’s seasonally adjusted annual rate will be 10.5 million units, an abysmal rate that would match that of the fourth quarter of 2008,” says Automotive News (sub.)

By summer, Merkle sees the recession coming to its end. “His forecast: an annual sales rate of 11 million units in the first half, and 13.5 million to 14 million units in the second,” says Automotive News. For the coming year, Merkle reckons 12.8m units will sold in the U.S.

Detroit thinks, Merkle is an optimist.
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When Toyota told the world that it didn’t want to see any of its American competitors go bankrupt, they meant it. And not purely out of fear of an anti-import backlash either. Toyota’s North American operations rely on many of the same suppliers as Detroit, and if GM were to go bankrupt, many of those suppliers could go under. This is especially dangerous for Toyota with its “just-in-time” production techniques, which is why contingency planning is underway at Toyota City to keep ToMoCo’s supply chain independently solvent. But as Bloomberg reports, that very contingency planning could eliminate the efficiency gains of the Toyota system, once dubbed “The Machine That Changed The World.” The lean, “just-in-time” system was developed on the model of American supermarkets, with components arriving as they are needed for the production process, rather than being mass-produced and stored until needed. Emergency planning includes possibly building up component inventories, which strikes at the heart of the “just-in-time” system’s competitive advantage. Still, a supplier bankruptcy would wreak even more havoc, holding up production lines until more parts arrive. The Japanese automakers have recently learned firsthand of the cost of supply disruption, especially among specialized (tier two and three) component makers. Last July, piston-ring maker Riken’s shut-down due to earthquake damaged forced eight of Japan’s 12 carmakers to temporarily suspend or cut manufacturing, leading to a total output reduction of at least 120,000 vehicles.

In their never-ending quest for excellence, the U.S. auto industry is number one again. The auto sector has been voted “the most financially troubled industry in the United States next year,” writes Reuters.

Last year’s top dog was homebuilding, which was bestowed the coveted title of “Most troubled industry for 2008.” For 2009, that crown goes to the autos.

The auto industry received top honors as the result of a survey by the Turnaround Management Association, taken during the first two weeks of December.

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Some 43 years after its Turin Show debut, Los Angeles based collectors have acquired the one-and-only 1965 Turin Salon Lamborghini Miura chassis, designed by chassis genius Gian Paolo Dallara, complete with Lambo’s first-ever transverse mid-mounted V12 engine (0293). It’s being “restored” now. Well, after Christmas.

“Robert, I am not sure if this appeals to your audience but we have quite an interesting feature on Lotus Cars just published. It is the first time anyone has been allowed to film the Hethel circuit where all Lotus chassis are developed. Gavan Kershaw who is their senior chassis engineer talks readers around a full lap of the circuit and shares some of his insights into what makes a ‘perfect lap’ in the new Lotus 2-Eleven GT4. We also review the Lotus 2-Eleven GT4 in full detail.”

Steve Davies
Managing Director
Drivers Republic Magazine

Bloomberg reports that Ford is seeking $6b for its Volvo division, and is “counting on the strength of the brand to draw bidders”. Dearborn has hired JP Morgan to advise in the sale of the final remaining brand from Ford’s erstwhile Premiere Auto Group. But even with a Wall Street heavyweight easing the deal along, Ford isn’t likely to get anywhere near that much. “Anything other than a heavily discounted sale seems unrealistic,” says Ferdinand Dudenhoeffer of Gelsenkirchen University. “For a buyer it’s the best time that one could wish for. But it’s not ideal for Ford.” With the global players facing a sales downturn, Dudenhoffer figures that only cash-rich Chinese automakers, buyout firms, or a group of investors backed by the Swedish government might be interested at all. Bloomberg quotes a mysterious “person familiar with the situation” as saying Texas-based TPG Inc may be interested in Volvo. TPG, which has more than $50 billion of capital under management, was among four private-equity companies to make preliminary approaches for Jaguar and Land Rover last year before Ford sold the businesses to Tata Motors. SAIC and Dongfeng are among the Chinese firms that could bid on Volvo.