USA TODAY reports Saudi Arabia offered to boost crude oil production by over 9.7m barrels per day (bpd) in July. That's if– and only if– the market requires it. Anyway, say the Saudis, under-supply isn't the problem. "I am convinced that supply and demand balances and crude oil production levels are not the primary drivers of the current market situation," Saudi Oil Minister Ali al-Naimi announced at the global energy summit in Jiddah. King Abdullah joins both John McCain and Barack OBama in blaming "speculators who play the market out of selfish interests." The Saudis remind us that they have already boosted production twice this year (by 300k bpd in May, and 200k bpd in June), and neither increase has had much effect on climbing prices. American and British diplomats expressed disappointment with the Saudi position, having hoped for a promise of specific production increases. Echoing US sentiments, British PM Gordon Brown said that with a clear production increase "instead of uncertainty and unpredictability, there is greater certainty, and instead of instability, there is greater stability." But the Saudis aren't alone in looking away from production levels for the cause of high oil prices. The joint statement issued by the Jiddah summit is deliberately vague, reflecting deep divisions over the causes of the oil price shock– and the cure.

Sources tell TTAC that the glut of SUVs and trucks is so bad that the banks are not calling in the repo men. I repeat: banks are cutting maximum slack to people who are behind in their loan payments– to the point where some are driving around in their vehicles without making any payments. In a bizarre way, this makes perfect sense. Repo services cost money. Re-conditioning costs money. Storing the vehicles costs money. Equally important, the banks/credit agencies don't take the full hit to their bottom line until they sell the vehicle. Needless to say, the market is so stuffed with both brand spanking new and slightly used (i.e. excellent condition) product that we're talking about a MASSIVE hit. What's more, our man in the auction biz tells us that many dealers are holding their light trucks until the end of the month– and then selling them without reserve. You can imagine what that's doing to residuals. If not, check this from Tom Folliard, president and chief executive officer of CarMax: "During the quarter, wholesale industry prices for SUV's and trucks declined nearly 25%, which is approximately four times the normal depreciation expected over this period and well in excess of the depreciation expected over a full year. This is the most rapid depreciation of any vehicle segment that we have experienced in our 15 years."

It's no secret that we treat GM's plug-in electric hybrid vehicle (PHEV) with a healthy dose deal of skepticism. But at least GM is actually trying to develop a production plug-in car. The PHEV strategy at Ford is considerably less admirable, being largely composed of procrastination and panhandling. When asked to speak at a Brookings Institute/Google symposium on the question "Plug-In Electric Vehicles 2008: What Role for Washington?," Ford's President of the Americas Mark Fields had THE answer: writing checks. To that end, Fields touted the "success" of the as-yet-unreleased Escape plug-in. Sure, only 20 of these wunder-autos will ever be made. But that's where your tax money comes into play! The feds should be "creating a new industry/government partnership to aggressively advance battery research, development and commercialization; injecting significant federal funds into advanced plug-in vehicle technologies and into facility retooling to produce these vehicles; enacting comprehensive climate change legislation; requiring regulatory policies that stimulate innovation, rather than just imposing new mandates; and, enacting one national standard for fuel economy – rather than allowing a patchwork of state and federal regulations." In short, you give us our entire lobbying wishlist, and we'll build a plug-in. Ah, modern capitalism.

When we heard that "Bearish" Bob Nardelli got the top spot in Auburn Hills by boldly predicting that Chrysler was in deep shit, we reckoned that the former Home Depot CEO would be soon bordering on clinical depression. Well, more evidence has emerged that Nardelli "gets it" that Chrysler is swirling down the sales toilet, this time in the form of an email circulated to the Pentastar legions. The Detroit News reports that Nardelli's email "warned of worsening U.S. automotive sales and encouraged employees to stay focused." So what strategy did the bearish vicar (oh dear) offer to his troops to get them through the hard times? Little more than a Bush-esque "stay the course," as it turns out. Acknowledging Chrysler's overdependence on  tanking pickup and SUV sales are a problem, Nardelli says that "further action" would be taken only (when) if sales continue to dip. Nardelli did justify his hefty salary by saying he predicted the current unpleasantness way back in November of last year. Then again, Chrysler doesn't pay Nardelli to be a fortune-teller; his job is to actually turn the company around. Or something.

Analysts are predicting auto sales in June will drop below 13m units for the first time since 1992. The Detroit News reports the shift from trucks to fuel-efficient cars is hitting the truck-heavy Big 2.8 the hardest (ya think?). Ford market analyst George Pipas provided the auto industry understatement of the year: "Unfortunately, the consumer demand for [trucks and SUVs] is very low." Equally disturbing, "The inventory for products which are in high demand is very low." Even the transplants are feeling the pinch; their production can't keep up with demand for fuel efficient cars from buyers willing to all but give away their gas-guzzlers. What happened to those pre-May prognostications from the D2.8 that the sun will come out in September? *crickets chirping* Meanwhile, even as American automakers struggle to shut off truck production, they still don't have desirable small cars and hybrids anywhere near the production end of the pipeline. It's 1973 all over again. 

Truckers may not be spending much time in Nevada these days, but the big wigs from Ford are. The Wall Street Journal [sub] reports that Chairman Bill Ford, CEO Alan Mulally and CFO Don Leclair have gone to Vegas for a sit down with Kirk Kerkorian, his attorney Terry Christensen and wing-man Jerome York. What happens in Vegas stays in Vegas. So no formal word on what went down between FoMoCo and the boss man at MGM-Mirage, and what kind of suite Ford got comped. If and when FoMoCo needs more cash to keep the lights on, it's unlikely to be able to borrow it legit. Everything up to and including the Blue Oval is already hocked with the well dressed pawn brokers at Citigroup, Goldman Sachs and J.P. Morgan Chase. . When the time comes, FoMoCo is going to need an equity investment, not more debt. Kerkorian seems like the only player who is in, but only on his terms. As we've speculated here before, those terms are likely to include full voting power stock, not the pretend stock normal shareholders get. Goodfellas indeed.

As I highlighted in the Chevy Express review, I believe the vehicle is inherently unsafe. The Ford E-Series and Dodge Ram Van (RIP: 2002), aren't much better. From 1990 to 2006, over 2700 people have died in extended van accidents, they majority of which were rollovers (seat belt use is an important variable). In 2002, The National Transportation Safety Board wrote an open letter to Bill Ford and Rick Wagoner, stating "Heavily loaded 15-passenger vans are particularly susceptible to rollover… Simulations conducted for the NHTSA research illustrated the adverse effects that a fully loaded 15-passenger van can have on the vehicle’s handling properties and rollover propensity. Fully loading or nearly loading a 15-passenger van causes the center of gravity to move rearwardand upward, which increases the vehicle’s rollover propensity and could increase the potential for driver loss of control in emergency maneuvers." Ford and GM declined to make a $300m (per design) modification to the rear end to enhance van safety. They did, however, add stability control systems, as requested. While NHTSA stats show the accident and fatality rate for these vehicles are falling, it's still proportionately higher than for other passenger vehicles. Both the Ford and Chevy score a measly two and three stars respectively in roll-over tendency. These are outmoded designs whose active safety is woeful inadequate– especially when you consider their cargo.

"When will the [economic] pain go away?" That's what Newsweek asked their "Business Roundtable Experts," including GM Car Czar Bob Lutz. Maximum Bob begins by affixing blame: it's big oil's fault. Rising oil prices affect the price of everything because oil "goes into making virtually everything." Fair enough. And then Maximum Bob's off, talking about the "short-term disruption in [GM's] growth caused by rising oil prices." Growth? Seems Bob's suffering from half-zeimer's, conveniently overlooking the fact the GM started losing market share and sales long before oil prices rocketed upwards. Anyway… "Fortunately… we are a global producer, and we're well positioned in the rapidly growing economies of China, Russia, India and Latin America." Yes, despite GM's cash flow problems and mounting debt, "we're going to increase our R&D spending to expand alternative fuel solutions and advanced technology solutions to lessen and ultimately eliminate everyone's dependence on petroleum." [emphasis added] Of course, Mr. Lutz doesn't mention where they'll get the energy to generate all of the electricity or produce all the hydrogen and ethanol for these "alternative fuel solutions." But at least these remarks put him at the front of the pack for next year's Bob Lutz Award.

As this 1999 New York Times article illustrates, Ford's Wayne factory was once Ford's golden goose. The factory cranked-out about $3.7b profit per year building Expeditions and Navigators. Tempus fugit. Nine years later, Yahoo! Business reports that the golden goose will be put into a cryogenic freeze for at least nine weeks, starting June 23rd. The unusually long "temporary shut down" could well become permanent. The Michigan Truck plant builds the Expedition and Navigator. According to the Kansas City Star, "Expedition sales are down 31 percent for the first five months of the year, and Navigator sales are off 22 percent, according to Autodata Corp. Ford had a 124-day supply of Navigators and a 100-day inventory of Expeditions." It seems safe to say that production for the 2008 model year will be over by the time Michigan Truck shuts down next Monday. If future production of these barges is ever needed–a highly doubtful proposition– one of Ford's underutilized pickup truck factories could take over. As for costs savings, United Auto Workers get 95 percent of their pay while the factory is "off-line." This "right sizing" an expensive business, but Ford had to do something to shut off the production spigot.

Like any Big Lie, this one's based on fact. Automotive News [sub] reports "Through April, Chrysler reduced fleet sales by about 45,000 units, or 17 percent, from a year earlier. GM cut fleet sales by nearly 40,000 units, or 14 percent. And Ford Motor's fleet sales fell 25,000 units, or 9 percent." Both AN and our good friends at Autoblog are happy to parrot the "admirable restraint" explanation. In other words, Detroit could dump sales into fleets, but chooses not to to protect vehicle residuals. AN: "GM is not going to reconsider its decision to reduce fleet sales, said Brian McVeigh, GM's general manager of fleet and commercial operations. Residual values have been rising since GM started cutting daily rental fleet sales three years ago." Autoblog: "Showing great discipline amid declining sales, the Detroit 3 have held back on the temptation to dump vehicles on fleet customers in order to boost numbers." Bullshit. First, the rental car business is in the crapper; they're buying less cars. Second, ALL fleets are holding onto their vehicles longer. Third, they're not buying Detroit gas hogs (or even their relatively thirsty cars). Fourth, reflecting U.S. sales trends, fleet buyers are switching to more fuel-miserly transplant products (ToMoCo sold 100k units into the fleets in the first four months of '08). Fifth, if you think WE'RE nervous about Detroit's prospects, how would YOU like to be a finance company that gets stiffed with a hundred thousand cars made by a bankrupt automaker? And sixth, how gullible IS the U.S. automotive press anyway? 

If the Board of Directors at GM and Ford want to pay their CEO a billion dollars a year to run their companies into the ground facilitate their turnaround, far be it for me to tell them they should do otherwise. But if you're looking for a reason why these two automakers are on an engine out terminal approach, clock those annual pay packages and remember that they are the tip of the iceberg of over-paid unaccountability. Add in the rest of their executives' compensation and you have a culture of entitlement that makes Moctezuma's priests seem like chimney sweeps. The info [via The Detroit News] raises at least two important questions. First, why were we thinking that GM CEO Rick Wagoner earned $14.4m last year ($1.3m less than today's report)? Second, what was all that about Ford CEO Alan Mulally's pay being front-loaded to account for the fact that he left Boeing behind? Big Al's '07 $22.7m comes after last year's $28.2m. I make that $51.4m for two year's work. There are lot of other ways to crunch those numbers, as even the DetN feels it must. Wagoner's 64 percent rise "followed the posting of a $39 billion loss in 2007, a year when GM's stock price fell by about 19 percent, without adjusting for dividends." The DetN forgets to provide the same info for Ford. FYI FoMoCo lost $2.7b ($3.5b in NA) in '07 and their share price dropped 10.4 percent. Nardelli? Chrysler? That information is privileged…

The Wall Street Journal carries a rare interview with Honda CEO Takeo Fukui. Ever the cagey character, Fukui claims to be completely uninterested in the fact that his company just passed Chrysler for the number four slot in the U.S. sales race. "It doesn't really matter if you come in fourth or fifth or first. What's important for us is that our production is going at full capacity and production is balanced with sales." Yeah right, the former Honda motorcycle race team manager doesn't care about the score. When the subject is the delicate matter of how Toyota pulled the green carpet out from under Honda's environmental image, Fukui turns a bit more… combative. "Honda's image was better but has evened out with [Toyota] because of the strong image of one single model, the Prius, which Honda feels is a problem. Next year, we will come up with a dedicated hybrid vehicle. We feel this model will have to overwhelm and overtake Prius. That is key for us." (The hyrdogen fuel cell-powered Clarity? Not so much.) Ladies and gentlemen, start your electric engines! 

Let's start with the end of The Detroit News' HUMMER-related "analysis" and work our way backwards. "So, does Hummer stay or does it go? Right now, your guess is probably as good as GM Chairman Rick Wagoner's." WTF? If the man at the helm of GM, an executive pulling down $14.4m per year (plus) doesn't know whether or not he's killed HUMMER, let's hope his bankruptcy-prof health care bennies include Alzheimer's medication. Meanwhile, columnist Mark Phelan needs to adjust his own meds, or whatever it is that stops him from facing reality (his paycheck?). "With dealers in 37 countries and assembly in South Africa as well as the United States, 'the potential for global growth is a huge opportunity. It's one of Hummer's strengths,' spokeswoman Joanne Krell said. Developing markets in Asia, Central and Eastern Europe look particularly promising." Once again, GM is spinning the idea that its foreign ops will save North America. Once again, Phelan is happy to broadcast the corporate line (hook and sinker included). Phelan also forwards the idiotic idea that HUMMER could be re-jigged to build green vehicles, and the possibility of an overseas buyer. Let it go Mark. Just let it go.

The Detroit Free Press confirms what we've been reporting: Chrysler is forcing a five percent price cut and change from Net 45 to Net 60 on their indirect suppliers. A "company document obtained by the Free Press" states Chrysler predicts they'll save $100m over the next 12 months by doing this. Chrysler wouldn't comment on the document, saying somewhat redundantly "The type of information described would be considered confidential. … We do not discuss confidential information on a public basis." The document acknowledges they'll piss off their suppliers: "It seems that this action is in direct conflict with Chrysler's desire to rebuild relations with suppliers… [but] Chrysler is committed to improving its relationships with suppliers through open, honest communication — no matter how difficult the subject." I don't know which school of management teaches this kind of logic, but common sense says the way to improve your relationship with someone you're buying stuff from is to pay them on time and at the agreed price, not name your own price and pay when you're jolly well ready. Just sayin'.