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Yes, you read it right. Over a nice little breakfast with the good folks at The Christian Science Monitor [reported by The Detroit News], Rick “Bankruptcy Equals Death” Wagoner said a GM pre-packaged Chapter 11 might work. Apparently, GM has “carefully studied” the idea of a 30- or 60-day, pre-packaged bankruptcy and “pointedly didn’t rule it out.” The bottom line: “It could work. It might not work.” Yup, those are the two possibilities all right. Wagoner also “revealed” that “There is no (debtor-in-possession) financing other than the U.S. government because my administration has systematically destroyed or sold off all of General Motors’ assets.” Just kidding, although Wagoner did admit Uncle Sam was the only DIP-shit in town. Oh, and Wagoner also added that a bankruptcy would “likely cost the government far more money than the Detroit automaker has sought.” Likely? How likely? Numbers? And they say a Harvard MBA isn’t worth the paper it’s printed on. Speaking of collegiate carousing, “Wagoner said the company would pare back its dealers by 25 percent in a ‘measured thoughtful aggressive way’ to ensure it didn’t hurt sales. ‘This isn’t a meat cleaver deal.'”
Credit reporting agency TransUnion has released its analysis of the US’ auto loan situation and finds that, unsurprisingly, things have deteriorated. “The national 60-day auto delinquency rate (the ratio of auto loan borrowers 60 or more days past due) edged upward between the third and fourth quarter of 2008 from 0.80 percent to 0.86 percent. Year-over-year the delinquency rate increased 8.86 percent in the fourth quarter.” That works out to about one out of 116 auto loans being delinquent. “Delinquencies were highest in Mississippi, at 1.62 percent, followed by California, at 1.46 percent, and Louisiana, at 1.37 percent. The states with the lowest auto loan delinquency rates were Alaska, at 0.19 percent, North Dakota, at 0.34 percent and Wyoming, at 0.41 percent.” Oddly enough, these delinquency rates by state only roughly track unemployment rates.
Regular readers of this site know that I’m math challenged. To paraphrase Blanche Dubois (tragic heroine, not TV psychic), I have always depended on the calculations of strangers. Which is one reason I NEVER sign ANYTHING at a dealership without having my good friend Steven Lang give it the once over. Of course, that’s looking at the car sales paperwork from the customer side. Pity the poor Chevrolet dealer. Given the farrago of sales incentives, discounts, cash-back deals, financing offers, etc. how do they set a price? Seriously. Even a dealer who wants to give his customer the best possible deal has the devil’s own time establishing what that actually means. Check out this Top Secret(ish) Powerpointery and tell me that Roger Smith’s no-haggle Saturnalia wasn’t the way forward. Oh well, too late now. And, as we reported last night, there’s more post-bailout deals a brewin’. Good luck with that. [Thanks to you know who you are.]
TTAC reader Chris writes:
Regarding my 2007 Sonata 2.4L, 5-speed: can I use 0W-20 in place of 5W-20 and keep the warranty intact?
There are a lot of places you’d expect to find a defense of trickle down economics (the idea that wealthy people create jobs for people further down the food chain). National Public Radio is not one of them. And yet there it is: the publicly-funded [via rich people] bastion of liberalism ran a piece thanking Mr. and Mrs. Moneybags for . . . buying the Tesla Roadster. Otherwise, Tesla wouldn’t have the capital to build cheaper Teslas for the rest of us (providing you exclude their applications for federal funding, paid for by rich people). “Using money from rich customers to fuel mass-market production is a fairly common business model,” NPR’s reporter reports. “Think of the Tesla Roadster as the $2000 cell phone of 1985,” Tesla spinmeister, Diarmuid O’Connell, suggests helpfully. Is it a coincidence that the DeLorean-lauding movie Back to the Future came out that year? Probably. Anyway, “O’Connell says we take for granted our easy access to cheap products, and forget the role of the rich in making it happen. He says we wouldn’t enjoy such low airfares today if it weren’t for the initial wealthy travelers.” Me, I worship first class passengers. Anyway, big news! New car!
The Financial Times carries the crazy news that General Motors is planning to celebrate its next bailout check by throwing more money–-your money—on the hood of its moribund metal. I repeat, GM wants to increase sales and reduce profits by using your taxes to reduce its prices to sell its cars that it wouldn’t be making–-couldn’t be making—if GM didn’t get some $30 billion of your tax money. This would [almost] explain GM’s otherwise inexplicable decision to increase production during the second quarter by 45 percent: they really do believe they’re going to sell a shit load of cars. Which they might if they slash, say, 50 percent off sticker. Hell, why not? It’s not their money. As TTAC, commenter lw points out, “the new owners are not interested in profits.” Wait! Don’t tell me! GM announces it’s “Thank You America” sale.
Inside sources reiterate what we’ve heard before: the mission critical battery for GM’s plug-in Hail Mary hybrid gas electric Volt is not achieving its performance requirements. Not even close. In fact, we’ve heard that the battery is failing to meet ANY of its targets: range, recharge time, battery life expectancy, cold weather performance, cost, nada. That said, this is a rumor [see: question mark above]. Therefore, we invite representatives of GM to contact TTAC (robertfarago1@gmail.com) to spin the story until we pass out from dizziness—I mean, assure GM’s many stakeholders that mass production of the single most important vehicle in their portfolio—if not the last—will begin on the date promised. Wait, what was that date again?
OK, guys, feel free to get it out of your system. No flaming TTAC policy switched off for this post. Yes, I know what you’re thinking: TTAC always finds the dark cloud outside the silver lining. Here we have unexpected good news: in V6 form [not shown, ’cause it’s rental car fodder], the new Camaro gets 29 miles per gallon highway. As The Detroit News giddily points out, “The brand initially estimated its highway mileage at 27 mpg but had provided a conservative estimate, said Troy Clarke, GM’s president of North America. ‘We did error on the side of caution,’ Clarke said. ‘This is at least three miles per gallon (more) than the (Ford) Mustang.'” When did error become a verb? See how that works? If TTAC isn’t criticizing GM’s turnaround plan—such as it isn’t—it’s trying to kill the ailing American automaker via death by a thousand cutting remarks. Well, two things: 1) GM should have never wasted money building this car and 2) Is anyone going to buy a Camaro over a Mustang or Challenger because the Chevy’s V6 gets better mileage? Oh, and 3) there’s something really creepy about this quote: “‘We need to seduce new customers,’ Peper said. ‘We feel (the Camaro) will have a very broad reach.'” Is that a reach around? Hey, it had to be said. OK, flameproof suit on. Gopher it.
If you’re in the automotive business and can understand German, then A M und S (as the cognoscenti know it) is the must-read bi-weekly. Auto Motor & Sport offers features with brilliant technical detail about the snazziest innovations and highest-tech automotive gadgets. For me, it’s always a chore, never a pleasure. The Stuttgart- based periodical is dour and relentlessly auto-centric. If something is pro car industry, then they like it, if not . . . they don’t. Reading AM&S is as about as much fun as a listening to a cocktail party-goer going on about the Swabian way of sweeping sidewalks. Anyway, here’s my beef . . .
Credit Suisse First Boston (CSFB) has had a look at Chrysler, Ford and GM inventories vs. the Seasonally Adjusted Annual Rate of Sales (a.k.a. SAAR), and it’s even uglier than we thought. Given that The Big 2.8 have already cut WAY back on production AND increased incentives, it seems that the US new car market is suffering from the worst case of constipation since WWII. CSFB’s analysis gives us further reason to doubt GM’s motives in declaring a 45 percent production increase for the second quarter of ’09. Whatever the reasoning behind GM’s announcement, it has nothing to do with market reality. These numbers also cast the chortling IHS Global Insight analyst—who bashed Honda for its inventory problems—in a slightly different light. But I’ll save those bon mots for after the data dump . . .
* Big 3 inventories fell by about 3% from Jan to Feb, compared to the normal seasonal increase of about 2.5%. Despite the favorable move in absolute stocks, the overstocked level worsened, owing to a dismal sales level that lowered our estimate of the number of vehicles dealers should be holding.
More and more suppliers of the collapsing auto industry are at the brink of collapse.
Visteon Corp. said on Monday it expects its auditors to question its ability to continue as a going concern due to the US auto industry downturn and the auto parts maker’s cash position, Reuters reports. The parts maker said that this warning could trigger a default under Visteon’s principal US senior secured credit facilities.
Visteon, spun off by Ford Motor Co in 2000, warned in February that it was uncertain of staying in compliance with its debt covenants. The auto parts maker still relies on Ford for one-third of its annual revenue.
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The $13K-$15K American compact market is going to get another player, as Automotive News [sub] reports that VW’s Polo is coming stateside. But VW won’t be selling the traditional Yaris-fighting small hatch version of the Polo here, says VOA CEO Stefan Jacoby. Instead VW is easing into the segment Toyota-style, offering an Echo-echoing four-door sedan version of the Polo alongside a “Polo Plus” mini MPV. “It’s more like a cross between a compact minivan and a hatchback. In other words, it’s more like the Honda Fit,” says Jacoby of the “American fatty” version of the Polo. Expect the Polo to be built in Mexico in hopes of keeping the cost down, a consideration that takes on more importance thanks to VW’s decision to focus on the sedan/MPV approach. “We have to come in at the sweet spot of this market or else it makes no sense—and we come too close to the Jetta,” says Jacoby. So why sell a sedan at all? More importantly, why go with the cheap Hecho-En-Mexico approach when it prevents the US Polos from offering the real jewels of VW’s small-car portfolio: high-tech engines like its direct-injection, turbo- and super-charged 1.4 TFSI.
The New York Times has an interesting piece today comparing automotive rescue plans to earlier government intervention in the railroads. As apt a comparison as it might be, the piece ultimately advocates exploring an option for the auto rescue based on Conrail, the government-owned rail holding company created in 1976. If the American Leyland model worked for trains it might just work for autos, right? “The ideological debate already in progress,” says Wharton prof Peter Cappelli, “is whether government should actually direct the auto companies, stepping into management, or passively give them more loans, and then get out of the way.” Hows that for a choice?
Chrysler has a non-binding deal with Italian automaker Fiat, which has agreed to take a 35 percent stake in Chrysler in exchange for access to technology and overseas markets, and not a single dime.
But wait! It’s a miracle! Just as Jesus Christ turned water into wine, Bob Nardelli turned the no-cash-at-all deal into a bonanza.
The deal with Fiat is worth up to $10B for Chrysler and could preserve 5,000 North American manufacturing jobs, Chief Executive Bob Nardelli said on Monday in a missive to his minions.
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