Define “soon.” Unfortunately, no one in federal bankruptcy court nailed that one down as Alfredo Altavilla, Fiat’s head of business development and future Chrysler board member, somehow managed to avoid the kiss of death. This despite Altavilla’s admission that the zombie automaker might not start making automobiles for an indeterminate amount of time. You know, given that the Chrysler dealers who didn’t take a bullet to the head have some 300,000 units sitting on their lots. Of course, it might help to know which units, their age and configuration. But the ChryCo bailout isn’t about selling cars, apparently. According to the Detroit News, all eyes were on soon-to-be-ex-CEO Robert “Run ‘Em Into the Ground” Nardelli. The failed former Home Depot despot “surprised a packed courtroom” when he testified that the whole “new Chrysler” thing’s a done deal, by close of play today [Friday]. The only real surprise: that someone would be surprised that Nardelli is happy to admit that the fix is in. ‘Cause the fix is in. Hang on . . . define “fix.”
After taking plenty o’ heat for “helping” Chrysler and GM shit-can nearly 2000 car dealers, the Obama administration has arranged a little sugar for the remaining stores—and then some. They’ve created a federal loan guarantee program for dealer inventory financing that’s worth, you guessed it, billions. Automotive News [AN, sub] reveals that the Small Business Administration’s “pilot” program for car dealers (women and domestics first?) will run from July 1 to September 30, 2010. And what, pray tell, do the lucky, politically-connected car dealers get for our money?
Automotive News [AN, sub] bears the glad tidings that the Presidential Task Force on Automobiles (PTFOA) has decided how much of your hard-earned money they want to plow into “new” GM: $30 billion. For now. Here’s the deal [as laid down in today’s 8-K SEC filing]: “the $30 billion federal loan would be converted to equity, with $8 billion of the total U.S. funds to be repaid by GM, the officials said. Most of the rest would be converted to equity, with the government initially holding a 72.5 percent stake in the new company. That portion could be reduced to 55 percent if a UAW trust fund and bondholders exercise warrants.” So how much is this boondoggle going to cost me, really?
Based on an Autoweek account it seems that not everyone at GM fears the reaper. Bob Lutz clearly doesn’t, meaning a thousand maximum sycophants are going to have to learn a joke that doesn’t involve the government being here to help. At a recent Automotive Press Association luncheon Lutz characterized the PTFOA’s influence as “benevolent oversight and two-way communication between Washington and the auto industry.” And who doesn’t like a good listener with deep pockets? As Lutz delicately puts it, “jeez, it only took 30 years for somebody to finally figure it out.” So when did Mr “Global Warming’s A Crock Of Shit” become such a fan of soft socialism?
Bloomberg reports that GM’s scheduled its Chapter 11 filing for Monday, June 1, 2009. And we were wrong about GM’s bankruptcy becoming the world’s largest. Thanks to Ex-CEO’s Rick Wagoner’s decision to throw all of GM’s “non core” assets into the fiery pit of the company’s endless cash burn, the American automaker’s C11 will only rank as number three. “GM’s bankruptcy will be the third-biggest in U.S. history after Lehman Brothers Holdings Inc. and WorldCom Inc., based on GM’s reported global assets of $91 billion and total liabilities of $176.4 billion as of Dec. 31.” Meanwhile, the company has pulled ahead its US white collar workers’ payroll. Apparently (unconfirmed), they’ve already sent out the checks for the week of May 25, 2009. “Other than the date change, all other payroll processes will remain the same in terms of paying employees at work or if they are on layoff,” a leaked memo from Marketing Maven Mark LaNeve reveals. According to the document, “This action is not an indication that GM plans to file for bankruptcy on or about June 1 . . . GM has determined this simple action — moving up the payroll pay date for this month — is the least the company can do to reduce any potential for disruption regardless of what happens.”
Don’t worry: despite the catchy headline, this isn’t going to become a regular TTAC feature. I think. Anyway, pistonheads reports that this tuned estate’s mill generates 585bhp and 509 lb·ft of torque. But wait! There’s more! “The brakes have been upgraded with six-piston callipers and 390mm drilled discs, and a new differential has been added. But the most obvious changes are to the body, on which Vath has spent considerable time and energy creating a new carbon fibre front lip returning 12kg of downforce, large carbon diffuser and carbon side vents. The whole Vath package is rounded off with 20-inch split rims and new Michelin tyres.” No word on price. But if even if you could afford it, would you?
Actor Mathew Modine votes aye over at HuffPo, calling our four-wheeled friends “the new pariahs.” After informing us that the world’s resources are finite, bicycles rule, and that there’s much to be learned from a baby’s first steps, Modine finally gets around to making his argument.
“We must look at the automobile as a cigarette–a cancer stick–a nail in our collective coffin. The sexy lifestyle that the tobacco industry sold to us contains the same advertising lies and poison which the automobile industry sold and continues to sell to the world. Look at the ads for automobiles and you’ll begin to recognize the lies. You’ll see open roads with happy smiling drivers. Ask yourself, When was the last time I was NOT stuck in traffic?”
Interestingly, the lasting impression from Modine’s rant is that actors’ opinions are like all forms of advertising: facile and misleading.
As GM augers-in for its Chapter 11 face plant, the Presidential Task Force on Autos (PTFOA) has been busy cutting back-room deals with bondholders. Reuters reports that the feds are getting their proverbial ducks in a row for a fast-track fustercluck—sorry, reenergized company. “Under the proposed deal, which is supported by major institutional creditors holding about a fifth of its debt, bondholders representing $27 billion in debt would be offered 10 percent of a reorganized GM — the same stake they had been offered previously. In a sweetener, bondholders would also receive warrants to acquire another 15 percent of the equity in the new company, provided they support a quick Treasury-backed sale process similar to one now being used for rival Chrysler.” GM has released a statement on the new plan, removing any last traces of doubt that it’s headed for the world’s largest bankruptcy proceeding . . .
You may remember Malcolm Bricklin as the man who unleashed the Yugo on an unsuspecting American public. Or as the car guy who brought automotive enthusiasts the mid-engined rust bucket known as the Fiat X1/9 (re-badged Bertone). Or, infinitely more forgivably, you might know Malcolm as the entrepreneur who gave Subaru its start stateside. Moving up the car nerd food chain and deep into the realm of delusion, Bricklin’s name is reasonably synonymous with his eponymous car company, Canadian manufacturer of the ill-fated SV-1. For those of you who have never heard of a Pet Rock (and couldn’t imagine why anyone would want one), Bricklin’s broken ass deal to import Chinese Cherys into The Land of the Free (Perkins, IL excepted) may be the freshest factoid. Moving on to today, Malcolm Bricklin has revealed his desire to end his career in ridicule. Which, of course, starts here . . .
So it’s the evaporation of easy credit that caused carmageddon? Don’t tell that to the Chinese. China became the world’s largest car market (as of the first quarter of 2009) with the bulk of its people paying cash for their cars. Until 2004, getting a loan for a car was more or less unheard of in the Middle Kingdom. Even after 2004, one could only finance a maximum of 80 percent of the price, and it was a straight loan for a maximum term of 5 years. To this day, “residual value” is not part of the Chinese language. Interest rates were high, twice that of a mortgage on a home. About 16 percent of cars sales were on credit after the rules were relaxed in 2004. Did that number improve while the world went on a credit binge? No way: In 2008, the number of cars financed had dwindled to 8 percent. There have been attempts to increase that number as part of the government stimulus package, but to no avail. Consumer credit “traditionally hasn’t been the Chinese way,” says the Wall Street Journal. Quite the opposite:
Vehicle owners could lose their car when passing through Pekin, Illinois, if a passenger happens to be carrying something on the city’s list of contraband. On Tuesday, the Pekin City Council agreed to tinker with its controversial automobile towing ordinance that has boosted the police department’s annual revenue by 29 percent. It has also generated opposition from local residents like Ed Emmons who is circulating a petition calling for reform. “The city saw a new way to make money and ran with the idea,” Emmons wrote in March. “The council should do what the majority of their constituents wish abolish the new vehicle impound ordinance.”
I was sitting around with the COO of one of Atlanta’s largest dealer networks. They now have nine different dealerships. Most of which have historically catered to the upscale and affluent. That is until now. For the first four months of this year, 60 percent of their retail sales profits came from vehicles that sold for $4500 or less. New car. Used car. CPO. Everything. That completely floored me. Then he asked the very same question I’ve heard at least fifty times this year, “How many new cars would it take for us to make as much as we get from these sleds?”
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