Reuters reports that the UAW membership has “overwhelmingly approved” its deal with Chrysler, paving the way for union ownership of the firm. So it’s fair to say that Obama’s “what we’ve seen is the unions have made enormous sacrifices on top of sacrifices that they had previously made” line sent the right message?
(Via AP/Google)
Deb Price, Detroit News: Thank you, Mr. President. On the domestic auto industry, have you determined that bankruptcy is the only option to restructure Chrysler? And do you believe that the deep cuts in plant closings that were outlined this week by General Motors are sufficient?
Bloomberg reports that not-entirely-unexpected news that President Obama will announce Chrysler’s bankruptcy tomorrow. The president will outline the automaker’s restructuring, along not-entirely-unexpected lines (known in these parts as “good” Chrysler / “bad” Chrysler). In other words, Uncle Sam is reconstituting ChryCo as a partnership between the United Auto Workers (55 percent), Fiat (20 percent) and you, the people (25 percent). And guess who gets to put in the $6b plus to make this happen? That’s right: you! But then you’ve already put in over $4b, so what the heck. Anyway, Chrysler buyers (both of them) shouldn’t worry that C11 will stop Auburn Hills in its tracks; you’re very generous. Automotive News [sub] reports that Chrysler will extend current consumer incentives (a.k.a. employee pricing plus) until Monday. Meanwhile, The Wall Street Journal reports that President Obama is laying the blame for Chrysler’s collapse right where it doesn’t belong: Chrysler bondholders. Read More >
It’s getting to be sports metaphor time for the ChryCo deal: the fourth quarter, the ninth inning, the obese lady’s vocal warm-ups. Automotive News [sub] quotes a White House spokesperson as saying “hurdles still remain, but we remain optimistic and hopeful that something in the next many hours will get done that will provide a pathway for Chrysler’s viability without continued government assistance.” Maybe the White House should read more news. And not just assurances from the UAW’s Ron Gettelfinger who sounds downright thrilled at the possibility of seeing his union gain a controlling stake in ChryCo. No, The Detroit News points out that a grassroots UAW effort to scuttle the deal (which must still be ratified by a full union vote) is underway. “It’s time to stop the concessions. Send them back to the table. We need a week to see the agreement before the vote. Jeep workers should be allowed to vote. Vote no,” runs a letter being circulated amongst UAW workers. Why so confrontational? The (proposed) lack of confrontation.
Ok, it’s not really a secret. But I sure wasn’t aware that the Italian automaker is “the biggest player in the market for natural gas engines,” selling 68k natural gas-powered rides last year and aiming for 120k unit sales this year. Thanks for the heads-up, NY Times! In yet more evidence of Fiat’s politically-savvy strategy, Italy’s scrappage scheme currently doubles the rebate for paisans who junk their clunker for a natural gas hoopty. Naturally though, one government incentive isn’t enough: “Fiat is collaborating with fuel companies and the Italian government to provide more than 1,000 stations where motorists can fill their tanks with natural gas.” Though most NG Fiats are “dual-fuel,” US infrastructure will have to be significantly upgraded (with help from taxpayers) to cash in on NG’s green promise stateside. Nonetheless Fiat’s natural gas technology is raising hopes for Chrysler’s future, if a deal is done, if infrastructure is upgraded, and if US consumers spring for the emerging fuel. But a word of warning: eco-tech enticement sent several billion GM bucks down the Fiat rabbit hole in search of competitive diesel technology not that long ago. And we all know how that turned out.
The question of a sales recovery looms large in discussions of GM and Chrysler’s road to viability. In particular, GM has been accused of overestimating demand recovery, as its successive viability plans have consistently revised demand assumptions downwards. But a survey and followup by RL Polk (full report in PDF) suggests that not only are a significant number of American consumers considering vehicle purchases, but many would buy American to “support the economy.” In all of the surveyed regions at least 50 percent of vehicle owners aged 18-64 said they planned a vehicle purchase in the next two years. Good news for Detroit? Polk’s breathless press release for updated regional data sure makes it sound like it. “In fact, more than a quarter of consumers we talked to as of the end of March plan to buy a new car or truck within the next year, even better news for automakers struggling to move excess inventory from dealer showrooms,” says Polk’s Lonnie Miller. But a closer look at the original survey shows that it’s too early to start counting chickens.
Yesterday, TTAC reported that GM wasn’t waiting for bankruptcy to launch a dealership jihad: a 42 percent cull designed to placate The Presidential Task Force on Automobiles and, let’s face it, common sense. After that report, one of our GM moles gave us a heads-up that GM Marketing Maven Mark LaNeve was addressing the dealers live via satellite on some super-secret mission. Turns out it wasn’t LaNeve’s four missing “weekly updates” on GM’s reinvention. Automotive News [AN, sub] reports that Mark was using GM’s bird to flip the bird at GM dealers. In fact, the sales chief has declared war on his “underperforming” stores, vowing (by omission) not to pay the terminated dealers a penny in compensation. “There was no money for anything other than what the franchise agreement calls for,” a dealer informed. “Meaning we can send back new cars, parts, special tools and some signage.” And once again, AN has withheld critical information. In this case, it’s a two-day delay on LaNeve’s characterization of the dealers caught in the cross-hairs.
Holman Jenkins offers his analysis of the Motown meltdown under the TTAC-usurping title “The Truth About Cars and Trucks.” According to the Wall Street Journal scribe, we should blame the current domestic auto industry implosion on the United Auto Workers’ (UAW) monopoly on Detroit production. Oh, and the manipulation of federal law to protect same. I think. “For three decades, the Big Three were able to survive precisely because they skimped on quality and features in the money-losing sedans they were required under Congress’s fuel economy rules to build in high-cost UAW factories. In return, Washington compensated them with the hothouse, politically protected opportunity to profit from pickups and SUVs. Doesn’t sound much like what you hear incessantly from your Congressman, about how Detroit’s problems are all due to management ‘incompetence’ in deciding to build ‘gas guzzling’ SUVs, does it?” Uh, it kinda does. And I’d like to see a bit more detail on this assertion, please: “Washington’s latest fuel-economy rules actually reward manufacturers for increasing the size and weight of some vehicles.”
Earlier today, I wrote an editorial about the U.S. Treasury Department’s plan to “sell” Chrysler Financial to former GM captive lender GMAC. Motive: Chrysler could continue to function (under union control, no less). The lender could keep lending money to ChryCo dealers to buy ChryCo cars. Means: what are you kidding? Your tax money. Opportunity: none. Well, legally. Legally, a Chrysler Financial–GMAC merger would imperil the bank, in direct contradiction of FDIC rules. Of course, the fact that GMAC is a bank in the first place is a violation of federal rules. OK, not technically. Technically, the Fed bent the rules for GMAC to qualify for bank status at the 11th hour, behind closed doors, screwing over recalcitrant debt holders but good. So anyway, I called the ChryCo Financial–GMAC merger a clusterfuck. (I know: I should stop sugar coating my analysis.) Turns out I had no idea how bad things are over at GMAC. But CNNMoney does . . .
There are three things you really can’t avoid if you’re an American: death, debt (government inherited) and sales. Now that four GM brands have officially Oldsmobiled themselves, you’re going to hear a lot of retail sales cheerleading in the MSM. “Now’s the best time!”, “Vultures are gonna feast on these deals!”, and my own personal favorite “Get ’em while they last!” But unfortunately that last cliché is a really big part of GM’s problem.
Stand-up comic Kevin Meaney was in Detroit last weekend and the auto industry is in a mess out there . . . “They didn’t pick me up in a car at the airport . . . they picked me up on a horse.”
Automotive News [sub] reports that GM’s bondholders have turned down the firm’s debt for equity offer of 225 shares of “new” GM stock per $1K of debt. The deal, which would have given bondholders a ten percent stake in a partnership with the UAW (39 percent) and the Government (50 percent) and existing shareholders (1 percent) was derided as “neither reasonable nor adequate” and “a blatant disregard of fairness” in a prepared statement. “The offer was made unilaterally, without any prior discussion or negotiation with bondholders and in spite of repeated calls for dialogue,” write advisers to GM’s ad hoc bondholder committee. “We are deeply concerned that GM waited until late April to make its offer.” Money quote? “This offer demonstrates that the company and the auto task force, unfortunately, are pinning their hopes on an extremely risky and legally questionable turnaround in bankruptcy court.” And how.
On the day that The General announces involuntary gastric bypass surgery at the hands of Dr. O and while Crash Cart Chrysler waltzes with the Grim Reaper, not all is well with Toyota. The nosy newsmen at Boston’s ABC affiliate exposed a nasty little secret hiding under Toyota’s hospital gown. Yesterday, Team 5 divulged “more than two dozen complaints filed with the National Highway Traffic Administration” regarding 2001 and 2002 model year Tundra frames that are rusting and blowing away. Today Toyota implied responsibility when they offered to buy back the rust buckets at full retail value. Keep in mind that this issue is limited to certain areas of the USA and Canada where salt is used as the predominant ice melting material.
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