Facing its worst financial outlook in more than a decade, General Motors outlined a new product development and sales strategy Thursday, saying that from now on Chevrolet and Cadillac would be the company’s only brands to offer a full lineup of vehicles. Sorry. My bad. That’s a quote lifted from a May 2005 New York Timesstory about GM. It’s only taken The General, what? Four years to almost make it so? Oh, and $20+ billion worth of American taxpayer’s money. Anyway, today’s report of Pontiac’s incipient demise hails from Automotive News [AN, sub], which confirms Edmunds’ Inside Line‘s, uh, inside line. Bloomberg’s in too. GM says no. Well, shudduppayourface. “Contrary to media speculation, General Motors has not announced any changes to its long-term viability plan or to the future status of any of its brands. GM is continuing to review its restructuring plan to go further and faster and best ensure its future success. Additional information will be released as any decisions are finalized.”
“I want to be absolutely clear: we will not spend a single dollar, neither today, nor in the future. Would we like to call this a barter? Well, yes, it is a barter.”
—Fiat CEO Sergio Marchionne on negotiations with Chrysler
Move over, Neil Barofsky. The SIGTARP may make the media rounds, but he’s got three trillion worth of TARP to cover. Which is why his recent Quarterly Report to Congress (PDF file available here) wasn’t exactly breathtaking for Chrysler/GM watchers. The Government Accountability Office, on the other hand, has just dropped a report specifically covering the Treasury’s execution of the auto bailout. If you’ve been following TTAC’s coverage through these strange days, the 48-page Summary of Government Efforts and Automakers’ Restructuring to Date (PDF file available here) won’t exactly brim with new insights either. It’s the fact that anyone in the government (sandbagging senators aside) is acknowledging some seriously inconvenient truths.
For me to steal! Check out this putative 2011 Hyundai Sonata! It’s not ginormous! And its Californian curves raise my expectations, even though they (the curves)’re camo-clad! But does it hasten the day when we’ll resort to coining the term “Camccordnata”?
Or, more specifically, what in the NSFW is going on at Suzuki? To this industry observer the last year or so has seemed like one giant shakeout, with the hand of Darwin separating the wheat from the Sebrings. Certain automakers appear to have been grabbed by said hand and dragged screaming down a swirling trough of declining sales, dealerships and revenue. TTAC has foreseen the demise of certain automakers for years, but it started looking like even the marginal firms (as compared to just the downright dysfunctional) were caught in the inexorable downward spiral, never to return. Take Suzuki. The firm lost 60 dealers in ’08 as sales tanked and floorplanning credit dried up. Even as late as last month, Automotive News [sub] reported the demise of major Suzuki dealers as every possible trend seemed to be pulling the plucky brand underwater. And severalTTACcontributors have labeled Suzuki as a “marginal player” doomed to expire at the hand of Car Sales Suckapocalypse. But something happened. Suzuki’s either experiencing the mother of all dead cat bounces, or maybe, just maybe, the hand of Darwin screwed one up.
The Automotive Alliance has released a pdf of its jefe’s statement to the House Committee on Energy and Commerce re: the American Clean Energy and Security (ACES) Act of 2009. Dave McCurdy has four words for proponents of the proposed “cap and trade” legislation: “give us the money.” Or, more politically, “We strongly urge the Committee to use revenues generated from the proposed cap and trade system to help fund research, development and implementation of new technologies and upgrading/re-tooling of manufacturing facilities to provide the next generation of green vehicles.” I guess that Department of Energy’s $25 billion retooling fund (remember that one?) just doesn’t scratch that itch, then. But that cash4clunkers deal? Magic! We’ll have one of those, please. Fans of spinspeak and lovers of kow as she is towed will enjoy the Alliance Prez’s concluding remarks . . .
For some reason, The Detroit News columnist Daniel Howes reckons the average Joe will blame the bankers when—sorry “if”—Chrysler goes Tango Uniform. Yes, the money men will take the hit “whether they deserve it or not. I say this not because it would be entirely fair, either, unless ‘fiduciary responsibility’ and the duty of lenders to determine whether a Chrysler allied with Italy’s Fiat SpA would have a shot at survival now are quaint notions that no longer apply. In normal times, lenders are supposed to decide where credit-worthiness ends and recklessness begins. But these are not normal times and bankers, as one of them quipped privately to The Detroit News, ‘are the most hated people in America.'” I know TTAC is guilty of first degree inside baseball, but I’m not feeling that at all. The average American will place the blame squarely on Chrysler for not building competitive products. But it’s interesting that Danny “I can’t get off the fence but I know who’s on either side” Howes would see it that way; it shows that Detroit still can’t take responsibility for its failures. Or admit defeat . . .
The Turtle Wax junket was a learning experience for everyone involved. Look for a branding-minded editorial and a product review in the not-too-distant future. But for now, let’s answer the B&B’s questions about Turtle Wax. Surprisingly, the amount of controversy over their ICE lineup was enough to merit a separate section. As always, The Truth About Cars is here for you, so don’t be shy if you need more info than what I’ve provided.
Harleyflhxi: Will Turtle Wax be coming out with a product to compete with the “Mr. Clean” carwash system?
Sajeev Mehta (SM): Turtle Wax says the Mr. Clean system uses parts and chemicals that aren’t part of Turtle Wax’s core strategy. Turtle Wax also says the Mr. Clean system isn’t doing well in the market; Turtle Wax isn’t feeling any pressure to revise their product technology or strategy.
Schm: What would be the best method for eliminating water spots (without buying a buffer)? I own a black car (I’m a masochist) and I can never seem to get rid of them. Is there a Turtle Wax product that can help me? I own a microfiber towel, and always dab dry; I just can’t seem to get rid of water spots. And I don’t want to spend a fortune.
The New York Times really pisses me off. This is not the first Gray Lady story I’ve read based entirely on a report by a “think tank”—where the reporter somehow fails to mention the organization’s ties to labor unions. In this case, scribe Elisabeth Malcolm is happy to share the results of a study from the “Economic Policy Institute, a Washington think tank that studies economic issues that affect workers.” In this report (download pdf here) EPI economist Robert E. Scott “argues that saving American automakers may instead end up saving — and even creating — Mexican jobs.” And that means that the feds should use the Motown bailout as a lever with which to undermine The Big 2.8’s plans to build cars in non-unionized Mexico. “The conditions Mr. Scott proposes: G.M. and Chrysler (and Ford, if and when it asks for money) should face a limit on their investments in Mexico. The way to do that would be a cap on imports from Mexico as a share of sales. He also suggests a domestic content requirement for American-made cars that would halt the increase in parts imports from Mexico.”
Ah, Delphi. I remember predicting—what, two years ago?—that parts maker Delphi’s collapse would drag GM into bankruptcy. Well, just as GM is falling into C11 on its own accord (so to speak), it seems the ghost of subdivisions past are about to . . . drag GM into bankruptcy. The Detroit News reports that GM’s sent up an emergency flare. “In light of adverse developments in the industry, at GM and at Delphi, GM has been in negotiations with Delphi and its lenders to arrive at solutions that would ensure GM’s source of supply under fair and reasonable terms,” GM said in a statement today. “While GM has proposed a potential solution that would allow for the successful and rapid resolution of Delphi’s bankruptcy case, its lenders have rejected this proposal.”
Unnamed sources tell the New York Times that the Treasury has agreed “in principle” to protect UAW pensions and retiree health care when Chrysler files for C11 “as soon as next week.” Protect with what? Fifty percent new Chrysler stock and 50 percent new Chrysler profits. Or, uh, more Treasury money. Fiat, say the sources, will “complete its alliance” with (i.e., pick the carcass of) Chrysler during bankruptcy. The only loose thread for the sources who “were not authorized to discuss the case,” is the bondholder brigade which recently turned down the Treasury’s haircut offer. Which leads one to believe that this revelation comes from someone negotiating opposite Chrysler’s bondholders (the Treasury) as a none-to-subtle bargaining gambit. Jump, or we file.
And the deals, they keep on coming. Bloomberg reports that the Porsche and Piech families “plan to sell their main car assets to Volkswagen AG under a plan that would tighten Porsche SE’s grip on Europe’s biggest automaker.” Hold it right there: Haven’t they just BOUGHT Volkswagen? Are we confused yet? This is how it works:
One of our Best and Brightest sent me a link (farago@ttac.com) to an article in The Charlotte Observer about GMAC’s move away from the Bank of America (BofA) and into the credit card business. As one of the few media commentators who knows enough not to report stories about which I don’t have a fucking clue, I pinged our man William C. Montgomery for some analysis. In addition to reviewing cars for TTAC, Bill works for a large credit card company. He knows his onions. While his reply reveals that there’s nothing untoward here, and TTAC’s core concern is GMAC’s car loan biz, I thought it sufficiently interesting to share with you, our highly informed (now more so) audience. Forgive the digression.
Let me tell you the state of the credit card industry right now. We expect the default rate this year to be about 15% (up from about 6% during normal years). This means that for every dollar we lend, only eight-five cents will get paid back. Plus, it costs us about another 6% to borrow the money, print and mail statements, maintain customer service call centers, etc. In other words, we’d need to be earning 21% in finance charges just to break even. On top of this, new credit card lending rules make it much harder to raise interest rates. In other words, no bank want’s to be in the credit card business right now. Just about every bank I know of is looking to unload their credit card receivables so that they can lesson their exposure to the sky high credit losses we are experiencing in the current economy.
The Globe and Mail reports that the Canadian government is negotiating (with whom?) to provide $6 billion in post-bankruptcy financing to Chrysler and GM. It gets worse/better. The six bil represents a fixed percentage of a larger post-bankruptcy fund, currently under construction over at the US Treasury. That would be 15 percent. Which puts the size of the US fund at $40 billion. A pittance, apparently. “The companies had initially proposed that governments lend or guarantee a staggering $125 billion in bridge or long-term loans, but the number was whittled down over months of difficult negotiations led largely by Treasury officials in Washington. In recent weeks, sources said, talks shifted to a plan for the governments to provide financing and guarantees for debtor-in-possession, or DIP, loans. These are used for day-to-day operations while companies restructure their debt under the protection of court supervision.”
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