The Detroit Free Press reports that GM retirees could face pension interruptions thanks to the General's dumping of obligations to bankrupt supplier Delphi. Salaried employees who never worked for Delphi had their pensions handed over to the troubled GM spinoff in 1999, and had wondered what was happening when checks began arriving with Delphi's name on them. But puzzlement is giving way to concern, as the federal Pension Benefit Guarantee Corp has warned that Delphi is some $3.5b in the hole on its pension obligations. And no wonder, considering GM saddled it with pension obligations from several closed and sold factories as a spin-off goodbye present in 1999, a move pension experts call "legal." As in there ought to be a law against it. Meanwhile, hundreds of the non-Delphi retirees have received letters from the supplier saying their pensions are at risk, thanks to Delphi's bankruptcy. Delphi is supposed to transfer $1.5b in (hourly retiree) obligations back to moneybags GM, but mysteriously that hasn't happened yet, prompting the PBGC's concern with the situation. Though Delphi's bosses swear up and down that they're committed to honoring pension obligations, if the transfer doesn't happen by September 30 when new PBGC rules go into effect, Delphi will likely find itself in pension default. Which means hundreds of workers who never even worked for Delphi would be at the mercy of the PBGC. And those same new rules mean the PBGC will likely not honor most planned payment step-ups and early retirement benefits. "I don't want a handout," says one retiree. "I want General Motors to pay my pensions like they told me they were going to do."

Rumors have been flying for quite a while that Cerberus would sell off parts of Chrysler. Most of the conjecture centered around Jeep being the first to go. However, Automotive News [sub] reports the Dodge Viper could lead the exodus through the gates guarded by the three-headed dog. This morning Chrysler said they're "exploring strategic options for the Dodge Viper business… as the Company focuses on enhancing its core business and leveraging its assets." CEO Bob Nardelli doesn't deny they're considering the sale. "We have been approached by third parties who are interested in exploring future possibilities for Viper." Then, proving he's unable to speak in any tongue but ManagementSpeak, he added, "As the Company evaluates strategic options to maximize core operations and leverage its assets, we have agreed to listen to these parties." But fans of the hotrod Dodge needn't feel betrayed. "Viper is an integral part of this Company's heritage. While this is a strategic review, our intent would be to offer strong operational and financial support during any potential transaction, in order to ensure a future for the Viper business and perpetuate the legacy of this great vehicle." In other words, "we're going to sell the IP rights to it lock, stock and sidepipes then market the remaining dealer stock as 'last of a legend' to get every cent we can out of them."

The Detroit automakers are trimming or eliminating their leasing programs due to plunging resale values and inflated residuals. In fact, in July leases accounted for only 19.7 percent of retail volume for the U.S. auto industry. However, leasing remains the way a lot of automakers use to put someone into an expensive car they really can't afford. And four of the most-commonly leased vehicles in the U.S. are BMWs (7 Series, Z4, 6 Series and X3). Bucking the current trend, sales and marketing VP at BMW Group Financial Services, Daniel DeChristopher, told BusinessWeek "we are still very committed to the leasing business." That's even though 70 percent of off-lease vehicles are returned to BMW Financial to be resold, usually as certified pre-owned cars. BMW is hedging its bet on leasing, though. They're also offering 0.9 percent APR loans during their "gotta unload these '08s before the '09s show up" sale. The top ten most commonly leased vehicles, and the percentage of them leased between January 1 and August 10 this year are:

BMW 7 Series – 85.3 percent
Saab 9-7x – 82.2 percent
Audi A6 – 74.1 percent
BMW Z4 – 70.7 percent
Mercedes E-class – 70 percent
Range Rover – 69.6 percent
BMW 6 Series – 68.6 percent
Audi A4/S4 – 68 percent
BMW X3 – 67.3 percent
Jaguar XJ – 65.8 percent

Why doesn't GM just go ahead and admit they're selling HUMMER? In spite of accusations of media "speculation" and assertions they "have not negotiated with any parties" by HUMMER GM Martin Walsh, GM just keeps moving steadily towards the auction block. In a phone interview, General Motors Middle East Managing Director Terry Johnson told Reuters:  "There has been interest from various parties within the Gulf … there is a precedent in the cases of Aston Martin, Ferrari or Daimler and those kinds of solutions could be very realistic solutions." GM is getting their paperwork ducks in a row and "has initial expressions of interest from [two] potential buyers that it hopes to develop into formal sale talks." However, in keeping with the corporate party line, Johnson also stated that keeping HUMMER humming is still "a realistic option" and selling was not a "forgone conclusion."  The sun rising tomorrow isn't a "foregone conclusion" either, but the smart money is still on it happening.

It's official: Chrysler's in talks with everybody and nobody. As if finally realizing that the North American market is lost to it, Chrysler has been going after the much-touted growth markets of India and Russia. Not that there's much to talk about yet. "When we look at alliances in different regions, we have had discussions with multiple companies in Russia," says Chrysler's Tom LaSorda. "In India we have had discussions with many companies." Mr Lasorda also confirmed that the sky is indeed blue. When the talk turns to Fiat, LaSorda gets all bashful, like an eligible bachelor accused of lowering his standards. "Have they approached us? Yes," LaSorda tells Reuters . "At this stage there is no formal discussion going on, but there was an inquiry." And he's quick to point out that Fiat will get with anyone, asserting that "we are not the only ones." In India, Chrysler wants to sell Wranglers through Tata Motors, and it's expecting to announce a new Russian hookup by the end of the year. Between Nissan, Fiat and Tata, the Chrysler plan is beginning to look like rebadging foreign cars while building trucks for others to sell around the world. Then leasing cheap American manufacturing as the dollar continues to slide. Or being sold for scrap when they run out of time to sort it all out. We shall see.

Since taking over as Chrysler's purchasing boss in January, John Campi has whipped the Cerburian dog into an appetite for hardball supplier tactics. And the pressure to hoist the black flag and begin slitting throats is coming from Cerberus, who have mandated a $1k per vehicle cost reduction within three years. Automotive News (sub) details Chrysler's nasty legal battles, from the shockingly crass Plastech debacle to (relatively) petty suits against giant firms like Magna and JCI. When asked about his law-firm-fueled approach, Campi talks a blunt party line. "I will work with every supplier I can in a collaborative fashion to help them become profitable and help us. "But we don't have the wherewithal to prop up a supplier simply to keep them running. I won't do it." And oil, steel and plastic price hikes be damned. Supplier lawyer Fred Smith of Warner Norcross & Judd characterizes Chrysler's negotiating style as "we don't care who is at fault, you will contribute; give us money if you want to maintain a parts relationship." Acknowledging that several suppliers have threatened to stop production over price negotiation, Campi has only tough talk for the malcontents."If a supplier wants to push us because of their fear, then they are violating the contract in place, and I will take the necessary action," he glowers. "And I say, I'm not going to let you shut down production. If you're serious about this, you have to live with the legal consequences." But, after showing off all the lawyers in his Rolodex, Campi seems to remember that Chrysler has to at least appear to care about its middle- to long-term, and pledges "equally shared benefits." Meaning there's plenty of nothing to go around.

GM's $350m investment in Cruze production capacity in Lordstown, OH was big news for the "American Revolution." A compact car, built in America… and all it took was $80m in taxpayer-funded incentives to GM.  That, ladies and gentlemen is what passes for a PR win-win these days. In fact the good vibrations were flowing so freely at the big Cruze announcement that Ohio Lt. Gov. Lee Fisher even told Rick Wagoner that if he commited to another Lordstown model by Thursday, the good people of Ohio would "double the incentives." The Detroit News reports that Fisher was "joking" but goes on to say that GM did take the offer seriously enough to go on the record and decline the kind joke/offer. But the unrequited-love awkwardness isn't stopping the DetN from wallowing around in the Cruze-y feel-good. Check out their soft-focus paean to GM's once-proud tradition of actually employing Americans, featuring proud Hamtramck workers gushing lines like "We've got such an incredible history. I mean GM, of course, but I guess I'm thinking of my family too." As the kids say, Vom.

If you happen to be looking for a quick fix to GM's and Chrysler's myriad woes, the closest you'll come to a silver bullet is good old Chapter 11. But Rick Newman of US News And World Report's Flow Chart blog seems to think a quiet little housecleaning bankruptcy isn't even an option any more. Newman argues that unlike, say, airlines, the automakers can't declare bankruptcy and still expect consumers to buy their expensive, warrantied products. He cites a CNW Marketing Research study which shows that 80 percent of respondents would suddenly lose interest in a brand if it declared bankruptcy. Then there's the chance that Washington D.C. could just decide that Detroit had the bad times coming and not make with the bailout. And unlike the recently-rescued financial giants, GM or Chrysler wouldn't bring the whole economic party crashing down around them if they did fail. Finally, Newman reckons Detroit's complex issues can't be solved with a simple reorg. After all, GM and Chrysler are slashing costs and squeezing suppliers in the status quo. The real issues, argues Newman, are revenue and products, neither of which will be fixed by bankruptcy. Taken together, the arguments seem convincing, but there are a few details being left out. Like the epic cash burn, the need to slash dealer franchises, and Washington's apparent openness to a hefty bailout. I, for one, am not completely convinced that (at least for GM) a Chapter 11 filing isn't the way to go. Chrysler, on the other hand, should just be taken out back and shot (Chapter 7). What say you?

In Farago's editorial about the domestic automakers' attempts to get $25b in federal loans, he stated, "it's a prelude to a kiss: the REAL bailout (in for $25b, in for another $25b)." Well, it didn't take long for both sides to pucker up. The International Herald Tribune reports this morning the total has grown to $50b– it turns out the $25b was just for the first year. That would be followed by additional $15b in the second year and $10b more in the third year. Why? The UAW's legislative director, Alan Reuther explains "the amount of concern and urgency from the Detroit companies has increased in the last month and significantly ratcheted up what they're communicating what their funding needs are." But he makes it clear you don't dare call it a bailout: "We don't see it as a bailout. We see it as government assistance to help retooling tied to the production of these advanced technology vehicles." Whatever. It still amounts to billions of the taxpayer's dollars going to fund companies which have been driven to the brink of bankruptcy by inept management who collected obscene salaries for doing so. If they do get these handouts, it should include an oversight committee from outside the industry and from outside congress to make sure the money goes for vehicle design and retooling. Not a cent should be allowed to go to executive salaries or perks, bonuses, lobbyists or any of the other thousands of ways the automakers seem to find to fritter away money. And once that's gone, that's it. No third chances! And furthermore… Huh? … Oh… OK. Here comes the attendant with my Thorazine. I'll go sit quietly in the corner now.

As you might expect, with Toyota nipping on GM's heels sales-wise, the two companies' financial arms have also been neck-and-neck. Automotive News [sub] reports for the first half of 2008, though, Toyota Financial Services pulled ahead of GMAC as the biggest U.S. auto lender. Research done by AutoCount estimates TFS had a 6.35 percent share the lending market, while GMAC held 6.2 percent. With GMAC's cuts in leasing, they expect TFS to stay ahead for the rest of the year. In the first six months of this year, 58 percent of Toyota, Lexus and Scion vehicles sold in the U.S. were financed in-house. About 46 percent of GM vehicles in North America were financed by GMAC. Other captive finance companies in the top ten were: American Honda Finance at fourth overall with 4.95 percent of market share; Ford Credit at fifth with 4.77 percent; Chrysler Financial holds seventh place with 3.15 percent and Nissan Infiniti Financial is eighth with 1.87 percent market share. The other four spaces are held by various banks. Perhaps a more interest and relevant stat would be the total lost in over-estimated residuals and bad credit risks.  Anyone want to guess who'd be most likely to top that list?

With the auto industry in the midst of wrenching change, the most valuable resource is brainpower. A Bureau of Labor Statistics study says that the U.S. could face a shortfall of 160k engineers by 2016, but JCI-Saft CEO Mary Ann Wright thinks the situation could become even worse than that. Arguing that the BLS number doesn't take retirements into account, Wright tells MLive.com "I think that's too low. Today the United States is not producing the right skill sets." Part of the problem could be the efforts to educate engineers to be better communicators rather than technical geniuses. John Fuhs of the auto supplier firm Swoboda says "We try to hire engineering people for our company, but typically they come up way short in basic skills. They made a very big point of switching 25 years ago for more rounded engineers, and that's what we got. They all want to be project managers now, but they don't know the science or what's going on to get the job done." But the problem doesn't end there, as too few American engineers are graduating to fill demand in other industries as well. So the industry has to either inspire newly-graduated engineers or hire away talented engineers from other countries. Or simply continue the trend of outsourcing product development abroad. 

It's always good to know the boss has your six. Yesterday we reported HUMMER's general manager said all the talk about GM selling eco-unfriendly-brand was "just speculation." According to the Wall Street Journal, Rick Wagoner announced that his employer is "preparing data and other materials to open formal talks" with "potential buyers." So much for "speculation." The usual "people familiar with the matter" told WSJ that GM is no longer "seriously considering" revamping HUMMER. Basically, GM can't afford to do it because of "a potential liquidity crunch" (to put it mildly). Of course as WSJ points out, selling HUMMER would be only "a minor part of GM's plan to raise the $15 billion in additional liquidity by the end of 2009 that it needs to remain viable." The only real hurdle they'll have in shutting down HUMMER and shuffling it off to India, China or Russia will be dealing with approximately 170 HUMMER dealers who have state franchise laws on their side. No doubt the vultures lawyers are already circling.

Is they is, or is they ain't? According to The Detroit News, Hummer's general manager, Martin Walsh told dealers that The General "never solicited offers and we have not negotiated with any parties" re: selling the company's eco-nightmare brand. However, "GM did receive expressions of interest from various entities." According to Walsh, reports that GM has talked with Mahindra & Mahindra, Tata and Russian Machines are "just speculation." However, Citigroup's Hummer review "is being conducted with the utmost urgency." So, Hummer sales are down 44 percent year to date. On June 3, Rick Wagoner said GM's reviewing Hummer for possible revamping or sale. They hired accountants to do the review. GM's received unsolicited interest in the brand from rapidly growing companies with a strong presence in the international truck market. GM needs cash. It looks like there's a much more sound basis for all the "speculation" about selling than there is for GM's dismissal of same. Just sayin'.

Nissan's taking a hit where it didn't expect, thanks to their failing full-size truck sales. According to the Madison County Journal, when Nissan built their plant in Canton, Mississippi, the automaker struck a deal with the county for accelerated depreciation on machinery. The company claimed it would depreciate faster, as it would be "used more frequently across multiple work shifts." Obviously, the local politicians would have said yes to a back massage write-off clause to get the plant. So they agreed. But things aren't working out quite like they planned. The county pays $1.67m per year on debts related to incentives they bestowed upon Nissan. Last year the plant only brought in $1.64m in taxes. And now that the plant isn't generating the estimated tax revenue due to production cuts, the county wants to tax the machinery using a standard depreciation scale. Of course, Nissan protested, saying "the assessment should not be based on a bond payment, it should be based on true value… nothing has changed to take away from the spirit of [the original] agreement." The county says that that may have been the case originally, but running two shifts instead of three changes the equation and doesn't wear out the machinery as fast. The county board of supervisors passed the new tax assessment unanimously. Anyone want to place any bets on whether Nissan will invest any more on expanding their operations in the Magnolia State?

TrueDelta has released the August results of its Vehicle Reliability Survey. Among the models surveyed: the 2009 Nissan Murano, 2009 Jaguar XF, 2008 smart fortwo (no caps) and 2008 Saturn ASTRA (all caps). The Murano follows the Rogue in requiring fewer repairs in its first few months than Nissan's previous redesigns. The smart requires more repairs than the average car, but not too many more. That would be the Jaguar. Though the sample size for the new XF was small, the reported repair rate was nearly four times the average of a nearly new car. Most commonly reported… wait for it… electrical glitches. Finally, the most reliable of the three European-sourced models, with a require rate about half the average, comes from… GM. GM designs often require far fewer repairs in their second year of production. Following what used to be a common practice with new Japanese designs, the ASTRA also spent its first year overseas. So it comes to the U.S. nearly glitch-free. Full results at the link below.