GM’s “different kind of car company” is furiously trying to forge a future amid plummeting sales and little outside interest in buying the brand.  Saturn’s Franchise Operations Team has been meeting with GM executives in hopes of creating some kind of strategy for the brand’s dealer network. According to Automotive News [sub] the options were narrowed down at a meeting last week, and after further refinement they should be presented to Saturn dealers later this week. When asked if this spelled the end for the Saturn name, Franchise Operations Team member Todd Ingersoll told AN “everything is fluid. You can’t commit to any option.” But he also indicates that “you don’t need four options to kill a brand.” So what’s really going on?

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Remember the “worst case sales scenario” in GM’s viability plan? It predicted 11.5m annual sales in the US. Unless a turnaround arrives sometime this year, there’s no chance that sales will hit that number. According to Automotive News [sub], annual sales expectations for 2009 have dropped to 9.8m units. But there’s still a surprising amount of unfounded optimism among Detroit’s spinners and marketing mavens. Specifically, Ford’s execs say that retail sales have “stabilized” over the past four months. Too bad, then, that they’ve stabilized at an abysmal rate of 8.5m units per year. “We’re heartened to see it stabilize — although stabilizing at an awful level,” said Ken Czubay, Ford vice president of U.S. sales and marketing. Heartened? Seriously? But enough of the maudlin posturing. There are scapegoats to blame!

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Bloomberg reports that the rumors circulating around the autobologosphere are true: Uncle Sam “forgot” to put itself ahead of other creditors before writing $17.4b worth of “bridge loans” to Chrysler and GM. Of course, doing so would have rewritten bankruptcy law and pretty much turned the feds into something roughly akin to Chile in the copper-bottomed days of 1972. But, hey, the buffet must go on! “U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site.” Doh! And so the government hired the flying Cadwaladers to correct that little problem, who’ve let it be known throughout the land that “If federal officials fail to get a consensual agreement to change their position regarding repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid.” Well, they had that option all along. Anyway, what are the chances that the people holding the paper at Chrysler and GM won’t let Uncle Sam go to the head of the [they hope] theoretical queue? Actually, a lot higher than you might think . . .

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GM Car Czar Bob Lutz is calling it quits at the end of the year. Or, as they like to say in the “here’s your golden parachute; see you in Aruba” RenCen echelons, Maximum Bob “will transition to a new role effective April 1, 2009, as Vice Chairman and Senior Advisor.” In other words, we still have MB to kick around until the end of the year or the end of GM, whichever comes first. GM CEO Rick Wagoner was effusive about Lutz’ contribution to the total destruction of GM’s brands—in his own entirely reserved way. “Bob Lutz was already a legendary automotive product guy when he rejoined GM in 2001,” Wagoner’s statement says. “He’s added to that by leading the creation of a string of award-winning vehicles for GM during his time here. His 46 years of experience in the global automotive business have been invaluable to us.” Love that “car guy” stuff. Now, for some more accountant-friendly info . . .

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Living in Breckenridge, Colorado, you need some sort of All-Wheel Drive setup. Snow remains the small town’s primary reason to exist. This explains the multitudes of Subarus, Audis, Volvos, and SUVs all equipped with four wheel motivation. Most drive away blissfully unaware of how recent this feature came to market (as little as 27 years ago). In 1980, Audi introduced the first permanently engaged all-wheel drive system in the Audi Quattro. Prior to this, all vehicles had a part-time system where only two wheels were driven most of the time, requiring driver intervention should the going get slippery. Audi changed all this by putting one driveshaft inside the other, saving space and weight and making it possible for a complex, permanently engaged system to function on a small car. Vorsprung durch Technik, baby!

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A US Department of Transportation study released last month shows that thousands of Americans (documented or otherwise) are injured or killed each year in vehicle-related accidents unrelated to driving. The National Highway Traffic Safety Administration (NHTSA) “Not in Traffic Surveillance – 2007 Highlights” study reveals that a total of of 1747 fatalities and 841k injuries were attributed to non-traffic crashes and non-crash incidents. The agency compiled the annual estimates to provide the first-ever look at the magnitude of accidents that cannot be resolved with a new law enforced with traffic citations. Among the findings: 168 individuals are killed each year by falling vehicles. Another 88 peg it by falling out of a car. Electric windows reduce the gene pool by five unlucky souls, and three die while locked in the trunk. About 22 percent of injuries are caused while entering or exiting a vehicle. Twenty percent of injuries are caused by car doors. Some 10k end up in ER after getting jiggy with jacks or hoists. The NHTSA compiled the information from a number of sources including police reports, hospital records and an injury database maintained by the Consumer Product Safety Commission.

In January, China’s auto sales for the first time in history exceeded America’s, making China the world’s largest auto market for the month. As we said, sooner than later, China is bound to outclass the US of A solidly. Xu Changming, director of China’s economic consultative center under the State Information Center, thinks that it is quite possible that China will overtake the United States as the World No.1 car market for all of 2009: “Chinese auto sales are expected to grow 4 percent to 5 percent from 9.38 million units sold last year, more than the estimated 9 million unit sales in the U.S. this year.”

“But this figure is not something we should feel proud of since the U.S. was just plunged into an economic recession,” Xu warns according to Gasgoo. “Once the recession ends, America can retake the sales crown by selling 16 million–17 million vehicles annually.” So even if China takes the crown this year, they might lose it, and then “China still needs at least four to five years to eventually catch up with the U.S. in the auto sales total,” said Xu. And he has reason for caution . . .
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“In the true spirit of the Ferrari racing team, the Acer Ferrari 1200 notebook combines powerful performance and extreme portability with the excellence of design. From the choice of materials to the smallest detail, the Ferrari 1200 conveys the look and feel of a F1 racecar. The carbon-fibre cover, a material actually used in racecars, is lighter yet stronger than magnesium alloy, making the Ferrari 1200 the perfect travel companion. Unique ventilation design echoes the exhaust pipes of F1 cars and the anodized-metal touchpad resembles the brake and acceleration pedals of a Ferrari car. A tasteful wave pattern embellishes the cover, while the soft-touch coating and the velvety texture of the interior ensure ergonomic comfort.” See? Now that’s funny. [thanks to Autoblog, without whom we’d know nothing of bodacious auto-brandation]

An overview of what happened in other parts of the world while you were in bed. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. WAS is being filed from Beijing until further notice.

Nissan sees red: Nissan cut its earnings outlook, saying it now expects a consolidated net loss of 265 billion yen for the year ending March 31, the Nikkei [sub] writes. The automaker earlier forecast a net profit of 160 billion yen, down 67 percent from the previous term. Nissan downgraded its sales outlook to a 23 percent fall. The carmaker also projects an operating loss of 180 billion yen, tumbling into the red for the first time in 14 years, in a sharp reversal from the 270 billion yen profit, down 66 percent. Nissan will cut 20,000 jobs in Japan and abroad by the end of March 2010, bringing the total payroll down to 215,000 employees. This is the first loss since fiscal 1999 when current President Carlos Ghosn became chief operating officer after Nissan formed an alliance with France’s Renault.

India keeps going down: India’s domestic car sales fell for the fourth straight month in January. Sales fell 3.2 percent in January, the Nikkei [sub] reports. They were down 7 percent in December, 19 percent in November, 6.6 percent in October, 4.4 percent in August, and 1.7 percent in July. Only in September 2008, sales rose 2.8 percent.
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Last Thanksgiving, I took my step-daughter to the GM “Test Track” at Disney World. When we walked up to the heavy steel door, the ride was “temporarily closed” for “technical reasons.” We waited. The ride reopened twenty minutes later. We were cattle herded through a chain link channel, passing various displays designed to educate guests about automotive development: air bags, door longevity, etc. The ten-year-old displays were worn, dated and dusty. There was no branding anywhere; no mention of Buick, Chevrolet, Pontiac, GMC, Saturn, Saab, Cadillac or HUMMER. When we got to the acoustic chamber, the ride broke. Not good: the chamber lacked ventilation. People started leaving the line after 20 minutes. Just before the ride, a short video (on a small TV) extolled the joys of ABS—for a Chevy Trailblazer.

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TTAC proofreader and Editor Jeff Puthuff has been helping me chase down the Chrysler–Cerberus story, trying to identify the automaker’s secret co-investors. In the midst of that pursuit, Jeff has unearthed this heretofore unreported document: “U.S. Motor Vehicle Industry: Federal Financial Assistance and Restructuring” Dec. 3. 2008 (Prepared for Members and Committees of Congress).” The Congressional Research Service (CRS) drafted the report for elected representatives contemplating whether or not to loan Chrysler and GM money to prevent their bankruptcy. The U.S. Senate and House of Representatives eventually failed to create a bill to fund the loans (though not for lack of trying). Then-president Bush stepped in at the eleventh hour and provided $17.4b worth of federal loans, by stretching the provisions of the Troubled Asset Relief Program (TARP). There are some startling—and not so startling—insights.

Widely quoted Center for Automotive (CAR) Research Study Debunked, Rejected

A general criticism of this analysis is that it assumes that the suppliers and all other automakers, aside from the the initially failed company or companies, would see their output drop to zero, and that they would be merely passive observers of an industry collapse. There are many examples in recent years of bankrupt or financially distressed suppliers being supported by their OEM customers, or by other suppliers that acquire parts of the business to gain new contracts or to be able to continue servicing their own contracts from a failed subassembly producer…

While CAR posits, for the sake of analysis, that, in the first year, no auto manufacturing in the United States could survive a major Detroit 3 bankruptcy, in actuality, such an extreme outcome is unlikely. Immediate and radical restructurings among suppliers is a more likely outcome, and other brands would continue to produce.

U.S. Auto Manufacturing Employment Declining Generally, Anyway

Automotive manufacturing employment has also fallen as a share of total employment in manufacturing. While total manufacturing employment has fallen by more than three million jobs since September 2001, employment in motor vehicle manufacturing dropped at an even faster rate, with its share of total manufacturing employment falling from 7.4% to 6.4%. During this period, total automotive sector employment, including services fell from 5.1 million to 4.6 million, while total U.S. employment grew by six million. As a result, automotive employment, including both manufacturing and services, as a share of total U.S. employment, fell from 3.9% to 3.3%.

GM – Chrysler Shotgun Marriage Still An Option

GM’s plan to acquire Chrysler and merge the two companies, which was widely reported in October 2008, was similarly withdrawn when the companies could not find sufficient funds, including proposed federal financial support, for the deal. The plan could still be resurrected as part of a general plan of government financial assistance for the Detroit 3.

Chrysler / GM Chapter 11 Could Increase Consumer Confidence

One might question whether the recent urgent requests for financial assistance do not diminish consumer confidence at least as much as would a bankruptcy filing designed to reorganize the company and lead to financial viability . . . filing under Chapter 11 could boost consumer confidence in the troubled automakers.

Feds Could Back Vehicle Warranties

If Congress finds that concern about warranty coverage is an issue that would doom a reorganization, it could be possible to provide for alternative warranty coverage. This might be funded with premiums paid by automakers, similar to premiums paid by financial institutions to the Federal Deposit Insurance Corporation (FDIC).

Loan Default Risk

However, direct loans from the federal government commit government money more immediately than would loan guarantees. Several have questioned the advisability of extending such loans, fearing that the troubled automakers may be unable to repay them even if the loan terms are very favorable.

Loans Could Leave Federal Government SOL

Under current bankruptcy law, the loans, if unsecured, would enjoy no priority status under 11 U.S.C. § 507. This means that the government potentially could “stand in line” with the other non-priority unsecured creditors and ultimately might receive only a few pennies for each dollar of outstanding loan balance. In the worst case, there might be no funds to divide between these creditors.

Chrysler Pension Plan Funding Unknown

As a privately-held company, Chrysler is not subject to the same SEC reporting requirements as are GM and Ford. Current information about pension plans was not available at the time this CRS report was written.

Loans Less Onerous Than Previous ChryCo Guarantees

By comparison to the broadly defined elements of these plans, the Chrysler loan guarantee legislation of 1980 was far more prescriptive in exchange for a loan guarantee that was worth far less than the $25 billion requested by the Detroit 3 in 2008, even allowing for inflation.

Clearly, the U.S. Congress had enough information to know that providing GM and Chrysler with federal loans was an extremely risky not to say stupid idea. As did President Bush. By making these loans, the president pushed “the Detroit problem” down the line to president-elect Obama.

The bottom line: adding more fuel to Chrysler and GM’s pyre is just as boneheaded now as it was then.

The Baltimore Sun reports on a car that exceeded 210mph on a track in Ohio.

What goes 0-60mph in 1 second, has 2,400 horsepower, and gets 10mpg on regular pump fuel? The world’s fastest-to-sixty, street-legal car: a Chevy Corvette Sting Ray.

It pays to have friends in high places. Just as politicians have favored constituents, the automotive auctioneer almost always has a good memory for those who help them during the sale. More than anything else, the auctioneer wants to generate a market and get his own share of greenbacks. Some are easily corruptible. Others less so. But supporting him at times when the bidders that are ‘working the sale’ (a.k.a. colluding) can be worth far more to the auctioneer than the occasional greenback. Doing it the right way, at the right moment, can create a very nice win/win situation that goes straight to the bottom line.

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