Can you believe it? And to think they were trying to become the first firm to offer a production diesel-hybrid. In 2010. Sound familiar?
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Credit is at the heart of the current auto crisis, a fact agreed to by all sides of the debate. But while the pro-bailout crowd wails about needing a 700 FICO score to get a car loan, the fact of the matter is that cheap credit allowed Detroit to create this problem in the first place. Mother Jones correctly points out that Detroit has been redlining the American auto market for years, by finding the easiest profits possible. And no, they’re not talking about SUVs. The thesis is that with car pricing easily available online, dealerships relied on financing offers to lure consumers into the store. Loans were loaded with extras, interest rates would be bumped for kickbacks, and upside-down trade-ins were rolled into the new loan which often stretched to six or seven year terms. These tactics, which MJ calls “endemic,” have left a US market where 85 percent of Americans with a car loan have negative equity. On average upside-down Americans owe $4,400 more than their car is worth. And all the while congress has played right along, from including a provision in the 2005 bankruptcy “reform” which forces filers to repay the entirety of a car loan, even if they owed substantially more than their car was worth, to engaging in fraud themselves. Now, as Rosemary Shahan of Consumers for Auto Reliability and Safety puts it “no matter how much money Congress throws at the automakers, it’s car buyers who will rescue them or not.” With 85 percent of American car owners looking at an average of $4,400 negative equity on their vehicles, Mother Jones is absolutely correct in assuming that the $17.4b bailout band-aid won’t bring back the business Detroit needs. Which proves that even when their main product was financing, the Detroit Three still just couldn’t get it right.
Autoblog Green has picked up a press release from Alcoa, which reveals that the aluminum giant has secured the wheel contract for the Chevy Volt project. And though we could justifiably complain that this is literally putting the wheels before the horse (we still have no official confirmation of the battery contract status) there’s even more to dislike about this move. Obviously the Volt has to justify its sky-high MSRP on its green credentials (given that GM’s green credentials are riding on this single program), but choosing Alcoa as a wheel supplier further degrades the program’s green cred. Alcoa was recently named number 15 on Political Economy Research Institute’s (PERI) Toxic 100 of 2008 for releasing 13.11 million pounds of toxic air this year. The firm has run afoul of the Environmental Protection Agency several times for violations of the Clean Air Act and creating at least one groundwater superfund site. But hey, Alcoa’s wheels are about 20 percent lighter and twice as strong as other cast aluminum wheels. So whatevs, right? Then again, we are talking about a firm that trumpets paint burning as an environmentally friendly move.
When Chrysler stuck its nose in the bailout trough, the ailng American automaker’s executives had to wonder what the Hell anyone within the company could possibly tell lawmakers/money givers about Chrysler’s viability. Except, you know, the fact that they don’t have any. But never underestimate the power of positive PR or, as we call it around here, bullshit. To wit: former ToMoCo Prez and current ChryCo co-Prez Jim Press’ comments to Automotive News [sub, AN] last week. “He suggested that Chrysler could show the way to a sustainable model for a smaller U.S. auto industry. ‘If there’s one company in America that can build high-craftsmanship, innovative vehicles, it’s Chrysler,’ Press said.” Hey, is Jimbo saying American can’t build high-craftsmanship, innovative vehicles? Anyway, down ye olde rabbit hole we go…
Don’t worry. The economy won’t hurt you. It just wants you to have some fun. To prove it, the price of gas continues to fall, now averaging $1.66/gallon according to USA Today. Officially, the last time prices were this low was in 2004, and prices are still dropping after hitting an all-time high this June at $4.11/gallon. The government’s weekly gas and fuel price update shows prices are at their lowest in the Gulf Coast and Rocky Mountain regions. Diesel prices are falling as well, hitting a national average of $2.42/gallon. Help keep downward pressure on fuel prices by finding the lowest local prices (with help from your federal government) here. And if you’ve got a dime you can listen to your V8 tonight. Freaky!
CNW Research’s of Brandon, Ore, is in the business of tracking “consumer confidence, new-used floor traffic, manufacturer and dealer incentives, and used vehicle sales by channel.” In their daily work, they stumbled across a disturbing trend. As every grizzled veteran of this industry remembers, when the economy is down, used cars do well, because folks can’t afford new ones. People hold on to their ride much longer, which lowers the supply of used cars. Fewer new car sales mean fewer trade-ins, which lowers the supply of used cars. Or so the wisdom of the grizzled veteran goes. This time, it’s different. Sales of used cars fell 20.7 percent in November, compared with the period a year earlier. That’s still benign compared to the 37 percent hit the new cars took. But it disturbs the veterans nonetheless.
CNW expects 2008 to come in 36.6m units sold, down 11.5 percent from 2007. That would mark the lowest levels since the 1982 recession. Whoa: November new car sales also were the lowest since 1982. Are people tired of cars, whether old or new? Have we just been catapulted back to the bad early Reagan years?
The Australian federal government has hopped on the auto bailout bandwagon, “investing” $149m in production of a Holden-badged GM compact car. The South Australia state government will kick in $30m as well, as the Delta-platformed Cruze-alike will be produced near Adelaide. Styling and engineering will be carried out in Melbourne. And what do the Australian people get for their representatives’ fiscal abandon? According to Adelaide Now, the project will “support” 600 GM jobs and 600 supplier jobs, but it seems that these will likely not be new hires. Money for the project comes from Australia’s “Green Car Innovation Fund,” and its use is being justified by the possibility of ethanol, LPG and CNG powertrains at some indeterminate point in the future. “We recognise the needs and desires of motorists are evolving with growing concern around environmental factors and shifting consumer sentiment,” says Holden Chairman Mark Reuss. “Such evolution calls for an innovative approach… (and) the new vehicle will cater for growing demand for smaller cars focussed on economy.” when all is said and done though, the environmental issues are simply a greenwash for Australia to prop up weakening production and subsidize a “domestic” Corolla competitor. Sound familiar? The irony is that the GM doesn’t especially need a bespoke version of its global Cruze for Australia, although it will be required to match the government’s $149m outlay.
Egan-Jones Ratings is a relatively obscure little outfit out of Haverford, PA. It’s one of those companies whose website doesn’t have a flashy design or, for that matter, a phone number (just a contact form). Forbes rates them number 1 on their list of eight financial mavens (not ten!) “who saw the crisis coming.” “A vocal critic of rivals Moody’s, Fitch, and Standard & Poor’s, Egan has a track record of warning investors about poor credit quality long before the Big Three ratings agencies. Most recently he said to shun subprime-mortgage-backed bonds even while the other agencies said these were investment-grade credits.” And now Sean has a few words on Ford, via a ginormous Fordetorial in Bloomberg. ““It’s unrealistic of Alan [Mulally] to expect Ford to survive, let alone profit, when they’re experiencing a 30-plus percent decline in sales. Without a bankruptcy filing and a complete reorganization, Ford is not going to be profitable, period.” Egan ain’t kidding. His company rates Ford’s debt a D, its lowest level. And if that’s not enough blowback for Mulally-loving Fordophiles, here’s some more…
Mark LaNeve is GM’s Vice President, North America Vehicle Sales, Service and Marketing. Still. As such, the marketing maven must motivate the masses of metal movers who are morose at the moribund market. Of course, LaNeve has a major victory to report: the corporate mothership no longer depends on its dealers for its immediate and, let’s face it, longer term survival. That sponsorship has been transferred to the U.S. taxpayer. Still, in a letter to the stores [full text below], LaNeve reminded the troops what it’s all about. “I pledge to all of you that my team and I will continue to work together with you as we make the necessary structural changes to prove the viability of a new General Motors –to the current and incoming Administration, to Congress and, most of all, to our current and future customers.” Ah, customers. Now you’re talking!
With GM, the bailout is pretty straightforward. Give us money or the economy dies. With Chrysler, it’s a lot more… complicated. In case you hadn’t noticed, ChrCyo owner Cerberus is looking for an exit strategy. Give us the money and we’ll sell/give our 80 percent share of the company to someone else. The United Auto Workers. Suppliers. Someone. Anyone. The New York Times quotes the official statement: “Cerberus has advised the Treasury that it would contribute its equity in Chrysler automotive to labor and creditors as currency to facilitate the accommodations necessary to effect the restructuring.” How… magnanimous. Meanwhile, president Bush is throwing a quartet of billions Chrysler’s way– without anything resembling a specific plan for recovery (’cause there ain’t one). And here’s the [non] money shot, from the privat eequity firm’s own mouth : “Unless Chrysler’s labor costs can achieve parity with the foreign transplants and without the restructuring of Chrysler’s debt,” Cerberus announced. “Chrysler cannot be restored to long-term health and the government loan will be unlikely to be repaid.” So, unless the UAW capitulates (which it won’t) and the feds bailout Chrysler Financial Services (which it will), you can kiss the Chrysler bailout bucks goodbye. It’s an extraordinary, and extraordinarily honest, admission. But it seems that honesty’s got nothing to do with it…
According to a picture posted on Flickr, corporate identity firms all over the globe are busy adapting their clients’ corporate design to the new strained financial environment. People dig it: A the time of this typing, the picture has received 4172 diggs. The current “Top in all topics” is “If Marijuana was legal” with only 1981 diggs.
A short 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. For the next two weeks, WAS will be filed from Tokyo.
Toyota officially in the reds for 2008: Toyota announced today what we had reported a few days ago: “Toyota will make its first-ever operating loss in the fiscal year through March as recessions at home and abroad corral Japan’s biggest automobile maker into as tight a corner as it has ever known,” the Nikkei writes. The dark stars are in perfect alignment: The yen is too strong, the slump in vehicle sales in key markets like the U.S., Europe and Japan is too big. Toyota expects a consolidated operating loss of Y150 billion, or about $1.68 billion, in the fiscal year through March. Six weeks ago, the company still expected an operating profit of Y600 billion in the current fiscal year. Now, “it’s a kind of emergency that we’ve never experienced before,” said Toyota President Katsuaki Watanabe, speaking at a news conference in Nagoya. “The environment surrounding us is extremely harsh.” The Toyota stock went up on the news. The market had expected worse.
Daihatsu slimming also: In related news, Toyota’s small-car-making subsidiary Daihatsusaid it will cut domestic automobile production by a another 16,000 units, and will shed about 20% of its temporary work force, the Nikkei (sub) reports.
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