According to the (appropriately-named) SubPrime Auto Finance News, you can blame the cratering housing market for collapsing new-car sales. "Lower equity translates into an inability to borrow against the house to buy a car," opines Art Spinella of CNW Research. This is especially true in California and Florida, where new car buyers lead the league table for tapping into their home equity to finance a new whip. As of six months ago, California's supply of unsold new houses was running in excess of 80 months. Spinella reckons the Golden State's (and thus America's) auto sales recovery depends on reducing the staggering inventory of unsold new homes. So, Art, when? "Probably not until the final quarter of this year or the first quarter of next, but in either case a California turnaround will benefit all auto sales in 2009." Meanwhile, the number of homeowners who are "upside down" on their home loans is adding more fuel to the pyre. In fact, some  68 percent of those who bought homes in 2005 owe more than the house is worth. Ouch.

The internets are abuzz with Fiatitude. Motor Authority reports that CEO Sergio Marchionne fingers distribution, rather than manufacturing, as Fiat's greatest hurdle to selling cars in the U.S. True dat. Setting-up a factory in Mexico wouldn't be impossible. But setting-up dealers and warranty service departments (which Fiat will need to convince people their cars aren't the unreliable rust buckets of yore) will cost serious dough. Wth U.S. car sales on the wane, who wants to buy a franchise from a risky manufacturer? Marchionne says he's shopping for an American partner. You just know it's going to be Chrysler. Maserati TC redux? Meanwhile, Reuters reports that the Italians (who already own the Fiat, Lancia, Alfa Romeo, and Maserati names) are considering an additional brand to sell extremely low-cost vehicles in developing countries. Come again? The Fiat name has a lot of equity in the developing world (including Brazil, where the brand is popular). And besides, building cheap and cheerful cars is Fiat's forte. Anyway, my suggestion for a name for the automaker's low cost brand: Fiat.

Kia, Hyundai's neglected smaller brother, plans  to double their non-Korean sales by 2010 (!) to 1.9 million. How? Good question (I'm glad I asked). The Cee'd– a Golf competitor with a daft, sexually ambiguous name– has received solid reviews in Europe. Stateside sales continue to be… adequate. Plans for a Kia pickup truck were recently, wisely, cancelled. Fortunately for Kia, their Georgia (the y'all state, not the Central Asian country) manufacturing facility comes on line soon, Kia can then expand beyond America's import cap and take advantage of our not-so-hot currency. In truth, Kia is a brand in search of identity. While the Koup concept was a nice try at sportiness, Hyundai is the company that gets to do smoke-filled donuts on stage at the NY Auto Show. And the Optima sedan is still underpowered compared to the Sonata. But hey, whatever. Considering the affordability and relative fuel efficiency of their American lineup, Kia's continued growth is a possibility. Probably. Maybe. Eventually. Later soon.

It turns out that Chrysler does have assets worth selling. Automotive News (sub) reports that Mercedes has agreed to purchase Chrysler's recently-shuttered Pacifica design center in Carlsbad, California. The 35k square foot building was listed at $7.3m, but with neither side commenting on the terms of the sale, one has to assume that Mercedes (once again) took advantage of its erstwhile partner. Mercedes already has a design studio some 51 miles away, in Irvine CA. At less than half the size of Pacifica, the Irvine design studio will likely merge into the newly acquired building, although Stuttgart is staying mum on the topic for now. Pacifica was responsible for some of Chrysler's most successful designs, from the 300 to the Challenger, from the Plymouth Prowler to the eponymous Pacifica. Of course they also designed the Dodge Intrepid and the Jeep Compass, so… maybe it's not a huge loss after all.

How does a company with $1.3b in 2007 sales disappear by the second quarter of 2008? By trying to supply parts for the D3. The Detroit News reports that bankrupt parts supplier Plastech is extinct. The company will sell its manufacturing operations to Johnson Controls (JCI) and auction off the rest. Plastech will close plants in Ontario, Ohio, Indiana, Tennessee, Louisiana and Michigan, laying off some 1500 employees. Global Insight analyst Aaron Bragman says The Big 2.8 are "breathing a sigh of relief" at the decision: "they will be much happier to deal with JCI over Plastech." As to who will scarf-up Plastech's assets, Bragman expects a "Chinese or Russian buyer." "The root cause of these problems," says IRN's Merkle, "is that [the Big 2.8] will take a company out of business to squeeze 3 or 4 percent out of the price rather than looking at long-term interests." Look for more short term thinking as Chrysler works to slice 25 percent out of its supplier costs.

With the nastiest auto biz strike of the year (so far) almost, not quite behind it, American Axle is looking away from its eponymous home country for future business. Automotive News (sub) reports that the axle supplier has already established itself in developing markets like Brazil, China, Mexico and Poland, and is looking to expand in Thailand and India. Thailand is the second largest pickup market after the U.S., and American Axle is looking to take over axle supply there for locally produced Chevy Colorado pickups. While company officials declined comment, GM is AA's biggest customer, and as AN points out, "the company does not build foreign plants without the promise of future business." With the Thai pickup market set to increase seven percent this year, and American truck and SUV sales already down 28 percent on the year, this has "inevitability" written all over it. In India, AA's first plant is just coming online, and there's already talk of a second. AAM Sona Axle Private Ltd, the joint venture with Sona Koyo is building a new corporate headquarters in Pune, India and there's talk of building a greenfield plant to supply Tata Motors. With at least two U.S. plants set to shut down in the wake of the the AA-UAW agreement, the American Axle name is beginning to develop a bitterly ironic ring. Is a generic supplier name-change (Visteon, Delphi, etc) in the offing?

While some people remain relaxed about the price of gas, few will take comfort in the fact that the price of a barrel of oil reached $129 for the first time this morning. According to the AP [via CNNMoney], even after Saudi Arabia promised to pump an additional 300k barrels of crude oil a day, the price spike continues over  "concern about global supply." Energy trader Nauman Barakat says he's seen "no news that would have caused the jump," but notes that strong demand for distillates used to make diesel (and heating oil), have been pushing up the price for those fuels. As for "Big Oil," Steve Austin at oil-price.net says governments in oil-producing countries "are demanding higher prices from oil conglomerates for tapping into their onshore reserves and sometimes even excluding them in favor of domestic expertise." Despite the large profits reported by Big Oil, Steve figures things look bleak for Big Oil. "In the 1970s, 80% of the world oil reserves were controlled by Big Oil companies, but now those numbers are reversed, with local government-owned oil companies holding 80% to 94% of the block." Steve's bottom line: "Clearly Big Oil's business model is due for a revision." After reaching the record high of $129.31 earlier this morning, the current price of oil (as of this writing) is $128.42… and rising.

The Wall Street Journal [sub] reports Volvo's saying farväl to a third of the production workers at their last remaining Swedish factory. (The Belgian factory which makes Volvo's smaller vehicles is so far exempt from the cutbacks.) And no wonder. "Despite expansion in Russia and China, Volvo reported selling 22,000 fewer vehicles during the first quarter of this year compared with the same period a year ago." And there there's a sales mix shift to smaller, cheaper, less profitable vehicles and the weak U.S. dollar. It all adds up to a loss of "$151 million in the first quarter of this year, compared with a $94 million profit during the same quarter in 2007." Both are mouse nuts numbers in the Ford scheme of things, but Investor Kirk "The Lion of Las Vegas" Kerkorian's minion Jerome York recently opined that FoMoCo will probably jettison Volvo within 18 months. Ford says Volvo isn't for sale, forgetting to add "we constantly review the situation." Translation: yet.

Unless you don't live, breathe and sleep auto industry goss, you know high gas prices and a construction industry slowdown have killed sales of full-size pickups. Not a moment too soon, Ford is developing a new, more efficient pickup to fit between the F150 and the Ranger. Dubbed the P525, the lighter vehicle's based on the F150 frame, likely powered by one of Ford's new Ecoboost turbocharged V6s. "Sources" tell Automotive News [sub] that the pickup (which could carry the old F100 nameplate) is in Ford's product cycle plan, awaiting final approval. Will this new pickup will replace the Ranger, which could go out of production when Ford's Twin Cities plant shuts down in 2009? Hell if I know. But with revised CAFE regs looming, the new pickup is more likely to replace the F150 as Ford's volume truck (the current F150 returns between 13 and 20 mpg depending on trim). If the P525 graduates from development, expect "unique sheet metal and innovative storage space." We'll be a little more concerned with the weight and miles per gallon.

Chrysler's told its suppliers to cut their prices by 25 percent and get the Hell out of Dodge. ChryCo Purchasing Czar John Campi unveiled his employer's latest supplier initiative to hundreds of Chrysler suppliers. Here the deal [via Automotive News, sub]… ChryCo promises to give its suppliers 30 days' notice of its production schedule (rather than seven), share more parts among nameplates, and reduce late engineering changes. Suppliers will split the savings with Chrysler– unless they fail to reduce component costs by 25 percent. If not, they'll have to cut prices and eat the loss. (The 25 percent reduction benchmark applies to parts both old and new.) With "the vast majority" of Chrysler components coming from America, Campi is encouraging suppliers to move operations overseas to facilitate the costs. Holy shit! It's bad enough that Chrysler's driving itself into the ground, but owners Cerberus seem hell-bent on taking its entire American supply chain down with it. You can't squeeze blood from a stone; with the price of nearly every raw material rising, Chrysler's audacious cost-cutting will only yield more bankruptcies. And lower quality products. And American job losses. This will not make Chrysler any friends when it hits the bankruptcy buffers, nor should it.

Porsche has categorically denied nearly every speculative report recently revealed on the internet– and there've been lots. Stateside Cayenne SUV production? Nein. A Porsche spokesperson reminded Automotive News [sub] that the model's supply chain is in Europe; production can't be moved to the states. (At least not until the next generation Cayenne debuts in 2015.) Baby Cayenne? Chilling with Auto Motor und Sport, Porsche's Sales Boss says the "Roxster" is a non-starter. "We don't want to chase volume," Klaus Berning soothed, ignoring the whole Cayenne deal. "We'd rather make money on every car we sell. The larger the segment, the harder it is to make money, so a small SUV is certainly not Porsche's way forward." Rumors of a two-door Panamera (news to us)? What's German for fuhgeddaboutit? The Panamera provider said why would we? The four-door Porsche will increase volume by 25 percent. Which kinda contradicts his "no-volume chasing for us" assertion, but never mind. We're just happy to set the record straight. Until next time.

Photochop by Andrei Avarvarii

No, we're not talking about Tony Romo and Jessica Simpson's impending breakup. We're quoting directly from the mustachioed horse's mouth. The headline my friends, is none other than Daimler CEO Dieter Zetsche (Dr. Z to you and me) discussing why the 1998 "merger of equals" between Mercedes-Benz and Chrysler failed so miserably. To refresh your memory (in case your life is filled with more interesting activities than watching the disintegration of poorly planned global corporations)… Daimler sold Chrysler for billions and billions less than they paid for it to a hedge fund last year. Our favorite David Cross-lookalike CEO was speaking to gathered business leaders at a symposium about "Global Capitalism, Local Values" trying to explain exactly what went so badly. He points to the level of cooperation between MB and Chrysler as being "less" than he would have liked. Dr. Z goes on to say that Daimler learned a valuable lesson. "It's fair to say that we overestimated the potential of passing leading-edge technology from Mercedes-Benz to Chrysler. Unlike premium brand customers, American volume brand customers are far too price-sensitive to absorb its cost." To which TTAC says, "Duh!" And of course, know thy brand.

VW's announced a new North American factory and whittled down the short list of locations in Alabama, Tennessee and (yeah right) Michigan. Volkswagen has only one problem with its U.S. market strategy, which calls for sales of 1m units per year: "we need models for the US market." Yes there is that. In an interview with Auto Motor und Sport, VW works council boss Bernd Osterloh says that picking the right models for the American market is a far more important (undecided?) issue than the American factory's location (yes way). That said, Osterloh claims the decision is not urgent; VW's Mexican facilities can begin production of the new, as-yet-undecided American models before the new factory is online. Osterloh calls the U.S. market a herausforderung (loosely translated as a pain in the ass) for the entire industry. Apparently VW doesn't even have a coherent diesel strategy for their deeply respected American consumers. For a German firm, that's saying a lot. Machts schnell burschen!

Canada's Magna International rarely makes headlines these days, unlike bankrupt suppliers Delphi and Plastech, and strike-afflicted American Axle. But the Quiet Canadian blew past rope-a-doped Delphi into first place in the US auto parts market, as reported in Automotive News [via the Financial Post]. A bit over a year ago Magna lost out to Cerberus in the war for Chrysler– and says a little prayer of thanks every night. So far, Magna has proven wrong those who say that unions and effective financial management cannot co-exist. After last November's deal with the Canadian Auto Workers (CAW), credit rating agency S&P said "Magna's ratings and outlook will not be affected by the agreement, which preserves key elements of Magna's unique culture and employee-profit sharing while keeping the union in check with a no-strike provision." At the time the CAW deal was a shocker because Magna boss Frank Stronach had been a staunch "we don't need no stinking unions" CEO. Recent supplier of the year awards from GM and PSA-Peugeot-Citroën point to a high level of customer satisfaction. Magna's most recent quarterly report reveals that sales are up while earning are slightly down. Is this a dead cat bounce, or can a North American-based auto parts supplier remain financially strong, unionized and productive all at the same time? And what's the bet Frank swoops down on Jeep or other bits of Chrysler when they file for C11? 

On April 17, United Auto Workers (UAW) union members at GM's Delta Township plant walked out in a dispute over their local contract (two-tier terms and conditions). The action shut down production of two of GM's most popular products: the GMC Acadia and Buick Enclave (Saturn Outlook production also halted). After almost a month spent working its way through a dwindling dealer inventory, the Detroit News reports GM turned up the heat on Delta's striking workers. At midnight Wednesday, GM canceled their medical and life insurance benefits. As of 4:30 am today, the Local's web site is reporting a tentative agreement. (The site instructs picketers to continue "until further notice.") Whether GM will apply the same pressure at the Fairfax plant in Kansas– where Malibu production was halted by a similar strike– is unknown. 'Bu production continues at the Orion plant in Michigan, and there's a 34-day inventory on the lots. Still, between the strikes at American Axle and Alliance Interiors and negotiating the local contracts, GM's hardening line on "local disruptions" is both understandable and predictable. But will the UAW now toughen theirs? Count on it.