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Just-auto reports that Honda is dropping dark hints about its future as a Japanese domestic. In fact, if the island nation’s government doesn’t do some of that currency manipluation that Detroit’s been blaming for their lost U.S. market share for God knows how long, HoMoCo may up stakes and move. “Chief executive Takeo Fukui told a small group of reporters in Tokyo on Friday the strong yen could cripple Japanese industry and spur massive layoffs, and added the automaker would be forced to send more production overseas if the dollar persisted below JPY100. ‘If the government is saying, ‘We don’t care about the export industry’, then that’s fine – we’ll act accordingly… we could switch to importing more cars into Japan, bring research and development facilities overseas, and in an extreme scenario move our headquarters offshore. It would cause nothing short of a hollowing out of Japanese industry.” Whoa. So much for the suggestion that Detroit’s been hobbled by Japan’s support for its domestic automakers. Who’d a thunk it?
Or the best, if you’re into the whole “half full” thing. And there’s no shortages of possible answers. Honda has dumped F1, but Toyota hasn’t. Subaru and Suzuki are dumping the WRC, but Chrysler‘s just “throttling back” (the technical term) its NASCAR involvement. Incidentally, NASCAR just settled a lawsuit for $225m involving “23 specific incidents of sexual harassment and 34 specific incidents of racial and gender discrimination.” And then there’s Ferrari, who is staying in F1 but at the staggering price of a Tata Motors sponsorship. Meanwhile, I’m still waiting for Tata to field the first-ever factory LeMons team. There may well be more storylines that I’m missing, but the trend is clear. Thanks to the economic downturn, motorsports aren’t the priority they used to be in terms of brand building. Or are they? Or did they even matter much in the first place?
Nothing like last minute preparations. Just as I waited until two hours before the first major snowstorm of the year to Blizzak my minivan, President Bush waited until the eleventh hour thirty to provide life-sustaining bailout bucks to Chrysler and GM. At first glance, the deal looks like something of a giveaway: here’s a $13.4b TARP under which you can shelter. Get back to us with the real plan in 90 days. I’m outahere. At second glance, it looks like the bailout is designed to fail. Our Torygraph friends across the pond get straight to the meat of the matter. “Bush’s Detroit bailout looks like a path to bankruptcy for General Motors and Chrysler. Billed as a way to give the two automakers breathing room, the deal actually imposes tough targets that must be hit in only three months. It’s likely the companies will fall short, which would force them to file for Chapter 11 protection. But that’s not necessarily bad – so long as they use the coming months to cut the deals with workers, creditors and others that they’ll need to get out of bankruptcy fast.”
Though the suspense is gone from the bridge loan debate, GM ain’t out of the woods yet. There is much work to be done in the land of GM product development, a fact that is emphatically underlined by the news of the day. The pre-Detroit Auto Show previews of the Orlando show car and a possible Cadillac-bodied Volt perfectly highlight The General’s future product flailing. The Orlando’s vision (high-efficiency transport for seven) won’t be realized for downgrading American SUV owners since it won’t be built here. While the Cadivolt rumor is yet another poignant reminder of that vehicle’s ill-fated development program and inevitable death by price point. Speaking of which…
It is being reported that Bush and Obama worked together on the $17.4b bailout package announced today, to avoid saddling the incoming chief executive with “the demise of a major American industry in his first days in office.” And based on Obama’s statement on the bailout today, it seems that he’s preparing yet more assistance for Detroit. Provided of course that automakers don’t “squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it.” Ironically though, the bailout’s structure does dump the problem on Obama before even the March 31 date. Dow Jones (via CNN Money) reports that the final $4b of Bush’s bailout (designed to carry the restructuring firms through February) can not be doled out without congressional activation of the second half of the TARP fund. And Bush ain’t gonna even try. “It’s not necessarily true that this administration, in the remaining 31 days, I believe, will go back to Congress,” White House Deputy Chief of Staff Joel Kaplan said. “What is clear is that the Treasury, with these loans (the initial $13.4b), have effectively committed the first $350 billion from the TARP.” Which means Obama will have to request that congress open the final $350b before the March 31 deadline, and only days into his presidency. And if he does free up the $350b (which he is far more likely to accomplish than Bush), well why the hell not give Detroit even more? We sure wouldn’t be surprised.
According to the Financial Times, the French president Nicolas Sarkozy and his government are sitting on an independent report about the future of cleaner, more fuel efficient cars. The 129-page document has been finished for months (since late September) and yet, from what the FT says, it will not be released to the public in the forseeable future. Apparently people who have seen the report say that it looks negatively on all-electric cars, instead preferring a motoring future based on a mix of gasoline, diesel, biofuel, and parallel and series hybrid cars, all with enhancements in tires, aerodynamics, and so on. In other words, the report said the variety pack we’ve got now seems to be the right approach. Unfortunately, Sarkozy is chummy with two billionaire businessmen who are both pursuing electric car businesses (Serge Dassault and Vincent Bolloré). To make matters worse, the French government still owns a 15% stake in Renault, which has poured a small fortune into the development of electric cars — including a large pilot testing program in Israel previously expected to launch in 2011. This stinks of corruption. And before we say “Well, it’s the French. They surrender and keep mistresses,” keep in mind that you should be no less bothered.
Ever since Cerberus took ownership of Chrysler, it has been lights out at what was once America’s third-largest automaker. With Daimler holding on to a 20% stake in the firm, some small news was public. And Chrysler did report its [dismal] sales each month. But that’s about it. The public relations folks were rolled into human resources. Cerberus played its cards close to its chest. And this was what we all expected from the beginning; it was at least in theory one of the major high-points of Cerberus taking over as Chrysler’s owner. They didn’t have to keep an open book, report financial data, and be subject to the short-term goals of shareholders. But it has also meant we have no idea what is going on inside this big company with tens of thousands of employees. Now that you and I are non-voting shareholders, we should have a better idea.
With $17.4b pledged to GM and Chrysler, and the Canadian “plus one” on the way (er, “plus several billion,” actually), the dark days of Carpocamageddon are all but over, right? Of course not. As several of the B&B point out in comments on the bailout announcement, GMAC is a giant question mark hanging over the entire situation. The former GM captive lender is headed for a massive GDIF (God Damn, It’s Friday) moment today unless about $5b of healthy capital lands on its lap… within hours. The AP reports that GMAC admits that it has no way of extending or sweetening the deal, implying that bankruptcy is an inevitability. And here’s the kicker: according to Brian Johnson of Barclays Capital, if GMAC were to fail, GM could need an additional $9 billion to $13 billion in funding to supply financing to its dealers. And GM only gets $9.4b from the bailout until February. One step forward and two steps back? Actually, the real bad news which the bailout does nothing to stop comes from GM bondholders. And their newly hired legal help. Read More >
The New York Times reports that President Bush has revealed his bailout plans for GM and Chrysler. The Gray Lady says the loans “include roughly the identical requirements in that bill, which had been approved by the House.” More specifically [via Bloomberg]: “Under the terms of the plan, if the companies can’t demonstrate financial viability by March 31 the loans will be called and the money must be returned… The government’s debt would have priority over any other debts. In exchange for the money, the automakers must provide warrants for non-voting stock, accept limits on executive pay, give the government access to financial records and not issue dividends until the debt is repaid. The government will have the authority to block transactions larger than $100 million. The automakers much cut their debt by two thirds in an equity exchange, make half of the payments to a union retirement fund in equity, eliminate a program that pays union workers when they don’t have work and have union costs and rules competitive with foreign automakers by Dec. 31, 2009. The requirements could be modified by negotiations with the union and debt holders.” The bottom line…
The Financial Times (sub) is pissed. Pissed at Peter Mandelson, Britain’s business secretary, and his planned bail-out of Jaguar Land Rover. Forgetting the old school of not mixing reporting with opinion, the FT pulls out the flame thrower and blasts away: “It is hard to imagine a less deserving candidate. The luxury carmaker fails the public interest test on two key grounds. First, its products are of questionable social utility. For the government to allocate scarce funds to prop up the production of the 4.2 Litre V8 Petrol Supercharged Jaguar is a nonsense. It has a top speed of more than 150mph, emits 299g of carbon dioxide per kilometre and costs about three times the average annual wage. True, the UK car industry employs 190,000 people directly and supports several hundred thousand more once components and retailing are taken into account. But if Mr Mandelson wants the government to underwrite this £50b industry, he should harness such public funds as are available to develop the green cars of the future, not pander to vested interests.”
Hmmm. Let us remind you: This is not a rabid blog. This is the venerable Financial Times. We kid you not. Would the pink Financial Times be so ferocious if Land Rover and Jaguar still be a company that’s firmly in British hands? We guess not. The FT seems to have issues with the current owners of Land Rover and Jaguar, who happen to sit in one of Britain’s old and long departed crown colonies. After refilling the flame thrower, the FT launches an incendiary attack in the easterly direction:
Read More >
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.
Bridge loan, possibly today: According to Reuters, “General Motors Corp and Chrysler are close to securing emergency loans as part of a U.S. government aid package that would demand sweeping restructuring at the troubled automakers, according to sources familiar with the talks.” Reuter’s sources say that bridge loans could be announced today, staving off – for the time being – the prospect of a bankruptcy. The aid package being spearheaded by the White House demands that both automakers restructure by seeking new concessions from unions and creditors.
Japan aghast: The shocks of Toyota’s announcement of a loss were so great in Japan, that there are no auto related news out of the country today while they crawl out from under the financial rubble.
Although genetically adverse to saying the L-word, the Japanese will have to famiriarize themselves with it: “Plunging sales worldwide and the yen’s sharp appreciation will likely push Toyota Motor Corp. into its first-ever operating loss” in their 2008 fiscal year, writes an aghast Nikkei (sub) today. In earthquake-prone Japan, this resembles a 9 on the financial Richter scale. Once, Toyota came close: In ancient 1949, when Japan was a chaotic mess after World War II and was ruled by a benevolent dictator called McArthur, Toyota had a pre-tax loss. But they never posted an operating loss since Toyota began releasing earnings figures with fiscal 1940. This announcement will leave Japan shell-shocked. They have a different attitude towards losing money than in What-me-worry Land.
“While in California for business last week, I took a day off and traveled out to The Salton Sea in my Dodge Caliber rental car. Salton Sea started when a flood at the turn of the century produced a substantial inland lake where there was originally barren desert. Soon agriculture thrived, then a tourism and investment boom hit to capitalize on the “desert oasis” image. Lots were being subdivided, roads and utilities were built out, and suddenly the lake tipped into dangerous salinity and pollution levels. It has no intake or outflow – salt and pollutants just concentrate over time. Just as the hotels, marinas, and communities began construction, algae blooms, massive fish kills,and related bird deaths turned the vacation paradise into a fetid, hellish nightmare. There’s no simple way to fix the health of the lake – and also no magic way to make use of the streets, utilities and plots of land already sold under the failed dream. Minor progress can be made on both fronts, but even with significant government intervention, its a rough, unattractive place to be. So here’s the Caliber in a long-abandoned parking lot of the never-built Salton City Marina, surrounded by tumbleweeds, dead palm trees, cracked concrete, and unnaturally blue water. Broken dreams and the smell of death. The Caliber looks right at home.”
Photo courtesy TTAC reader Jeff Conlin
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