The United Auto Workers (UAW) brought all its chairmen and presidents of Detroit 3 locals together in Detroit yesterday for an “emergency meeting.” Translation: a publicity stunt to show the politicians in Washington that the union’s part of the solution, and not the problem. (Well, actually the unions were part of the problem, but that’s managements fault for giving in to union demands decades ago.) Afterwards, Big Ron told everyone that the UAW will “suspend the JOBS Bank” (money for nothing and your checks for free) and delay the VEBA funding payments (XXXL lootable health care fund). Woohoo! One slight problem: we still don’t know the truth about the “concessions.” All we know is that the 2007 contract won’t be re-opened, just slightly modified. In other words, fuhgedabout any major revisions JOBS Bank (your money for nothing and your checks for free) suspension might mean that the language in the contract stays, just that Big Ron will suspend it for a week or a month or until and unless Detroit gets a bailout. Yeah, big savings there. Not. And the delated GM payment into the health care VEBA superfund? Ok, fine. Detroit can make the payment later into the Mother of All Lootable Bank Accounts. But in the meantime, Detroit still must pay retiree healthcare in 2010 and beyond– until it can make the payment. So it’s just like before: an expensive drag on earnings. And yet the press is abuzz with talk of “concessions.” Fool them once…
Category: News Blog
Neither rain,nor sleet,nor gloom of night, our daily round-up of the news that happened in other continents and time-zones must go through. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. Note: I’m in Germany on business and will post as time allows. Last night’s news kept me sleepless, so you get WAS on time.
GM and Chrysler ready for ultimate sacrifice. GM and Chrysler executives are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multibillion-dollar government bailout, says Bloomberg. “Staff for three members of Congress have asked restructuring experts if a pre- arranged bankruptcy – negotiated with workers, creditors and lenders – could be used to reorganize the industry without liquidation.” Bloomberg quotes Lynn LoPucki, who teaches bankruptcy law at Harvard: “The Democrats’ goal of preserving a U.S. auto industry is not doable without a bankruptcy.”
China mulls GM’s default consequences: The Chinese government is also beginning to think aloud about the consequences of a possible GM default. Gasgoo quotes Xu Changming, Director of Information Resources Department under China’s State Information Center. He feels, not surprisingly, that “if a global company failed in management in its headquarters, impact will be felt by its Chinese business.” According to the Chinese, Chapter 11 would “have limited effects on Shanghai GM. The technical center built by GM and its partner SAIC will be running as usual.” However, if GM would go C7 “then Shanghai GM couldn’t produce Cadillac, Buick and Chevrolet and GM is likely to sell their 50% share in its Chinese JV.”
Volvo China unfazed, hopes for Chinese buyer: Gasgoo quotes a source at Volvo China that said that production of Volvo cars at the Chongqing plant will not be affected by the possible sale of the brand by its US parent. “Volvo Car’s Chinese partner, Changan Ford Mazda Automobile (CFMA) will start production of Volvo S80 next year, and this plan is unlikely to be affected by the change,” says Gasgoo. They also felt compelled reiterating that Bloomberg had said that an industry insider had said that Chinese automakers are among possible bidders for Volvo. Gotta read between the lines in China. And if that’s not enough …
I’ve been seeing stick-on wood for as long as I can remember, but this is a first: plastiwood around the Lexus logo on the steering wheel. I like wood trim in cars when it’s actually wood. At the point where you know it’s just a junky sticker, what’s the appeal of this crap?
Ken Elias just emailed me, asking why I’d neglected to blog Peter DeLorenzo’s Wednesday rant. Ken was irked by Sweet Pete’s claim that a 20 percent decline in car-related California sales tax proves that America ought to bail out his pals in Detroit. DeLorenzo writes: “‘This is very bad for states,’ Donald Boyd, senior fellow at the Nelson A. Rockefeller Institute of Government told the Times, who went on to point out that sales taxes are the first or second most-important revenue source in almost every state. And to think there are people still out there who suggest that the collapse of the domestic automobile business somehow ‘won’t affect them.'” I also thought that passage was a pan-Pacific-sized stretch. But its was the self-styled Autoextremist’s “the fat lady done sung” triumphalism that caught my attention. “In just this past week, the true value of the domestic automobile industry is coming to the fore, and people all across this country are starting to take notice.” You bet they are—but not in the way that Pete fervently desires and hysterically promotes. A new CNNMoney poll suggests that 61 percent of Americans are opposed to a federal bailout for the AutoExtremist’s hometown heroes. And that’s not all . . .
Litigators use yes/no questions to focus witness testimony and prevent dodging, weaving and long-winded evasiveness. Here are 20 direct questions for Wagoner, Mulally and Nardelli. No doubt TTAC’s Best and Brightest have their own questions which they would like to have answered under oath.
1. Did you bring with you complete and current financial statements, including a balance sheet and financial projections?
2. Are all these financial statements and projections submitted to this committee also available to US taxpayers?
3. Have your financial statements and projections been shared with the UAW?
4. Have they been given to any of your bondholders?
5. Are your financial projections based on the “worst case” scenario?
6. Do you have other models/scenarios for financial projections? For example, is there a best case scenario?
7. Have you provided us with a written statement of all the assumptions you relied on in preparing the financial projections?
8. Did outside consultants/advisors assist in the preparation of your financial projections?
9. Based on the balance sheet presented to us, do your liabilities exceed your assets?
10. Have you spent more than $1 million in 2008 lobbying Congress for financial aid? More than $10 million? More than $20 million?
11. Have you had discussions with your largest bondholders about forgoing interest and principal payments until any taxpayer loan is repaid?
12. Have you asked any bondholders to convert their unsecured debt into common shares?
13. Have any bondholders agreed to convert their debt into common shares?
14. Have any of your bondholders formed a negotiating committee?
15. Do you intend to renegotiate your current labor agreements with the UAW?
16. Do you intend to reduce your dealer network?
17. Have you retained investment bankers to assist you in selling any assets?
18. Do you have collateral to secure repayment of any loan made by US taxpayers?
19. Do you personally have an employment agreement?
20. If your employment is terminated, are you entitled to a severance payment?
According to the AP, Korea’s Yonhap news agency reported last week that work could be delayed at Kia’s new West Point, Georgia factory. A wait and see approach would make a lot of sense too, considering that Kia is cutting production worldwide and that the bottom appears to be falling out of the American car market (Hyundai sales being no exception). Except that the report was not true. “No change has been made to our schedule to complete the plant by the end of November and to start production in December (2009)”, says Kia’s Michael Choo. The $1.2b plant was announced in 2006, and will employ 2,500 workers building 300k vehicles annually at full capacity. The West Point factory is Kia’s first in the US, joining parent company Hyundai’s single factory in Alabama. This makes the Georgia Kia’s third overseas production center, joining China and Slovakia, the latter of which is the subject of a fascinating piece by the International Herald Tribune. In it the secretary general of the Automotive Industry Association of Slovakia brushes aside those who would call her country (which builds more cars per capita than any other) “the Detroit of Europe.” “We’re in a good position to grow,” Maria Novakova tells the IHT. “Frankly, we don’t want to be compared to Detroit because we don’t want to end up like Detroit.” An understandable sentiment, to be sure, and one that is poignantly underlined by Kia’s decision to build cars in the US.
US auto sales in the month of November are down to a 26-year-low, with losses ranging between 30-47 percent for the top six manufacturers. I went to visit one of my favorite Mercedes dealers this weekend to see how my friends were faring (truth be told, I was bottom fishing) and I heard one tale of woe after another. One salesman, who I have known for more than ten years explained that he had sold one single car for the month of November. His wife had worked for one of the banks that cratered a few months earlier, so they were trying to get by on his meager commission, without much success. Since they cannot afford their mortgage payment anymore and they are underwater on the value of their home, my friend is staring down the barrel of the bankruptcy option. Even if you slept through much of Econ 101 in college, you cannot fail to recall that when supply greatly outstrips demand that lower pricing is the only solution and I am not talking temporary discounts and special financing deals. Everything you own is worth less today than yesterday- your home, your 401K and your only consolation is that the gas costs less, retailers are cutting their throats to get your business and soon even food will cost less.
Thanks to Dr. Gad Saad and his research associate John Vongas (a former grad student of the good Doctor), we can now argue the physiological benefits of driving a Porsche. According to an article in Psychology Today (tomorrow the world), Saad cites several evolutionists who claim expectant fathers’ T levels (that’s Testosterone to you and me) decrease immediately after the birth of their child. This reduced T level is “nature’s way of freeing the expectant father from the incessant pursuit of sex, and refocuses his energy on his newborn child.” Not in a hurry to see that T level dip? Don’t want to be free of your sexual drive? Saad suggest the remedy is as simple as taking a Porsche for a quick spin through a heavily populated area. More technically, “Put a man in a high status car, and his hormonal response will correspond to a social win (T levels go up subsequent to a competitive win). Place him in a ‘beta’ car, and his tail will be between his legs (T levels go down subsequent to a competitive loss). Furthermore, the changes in testosterone levels should be more pronounced as a function of whether the drive takes place in a public or private setting.” Finally, the mid-life crisis automotive purchase is explained through medical science. ‘Bout time.
[For the latest Porsche news, please visit http://993C4S.com]
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Business Week caught up with the Ford Circus road trip to Washington for a telephone interview. Having presumably learned some lessons on that last trip, Alan is re-engaging with the wonders of road food and claims to like it! “We stopped at a dynamite service plaza and we bought a little boxed lunch.” Wow, after putting up with the crap food served on the Boeing and Ford corporate jets old Alan must be in heaven to finally get some good old fashioned Service Plaza Boxed Lunch. Somebody tell him not to eat the box, even if it does taste just like the sandwich. You have to hand it to the guy for being able to spin with the best of ’em though. Read More >
So, we know Ford’s Alan Mullaly is driving from Detroit to DC in an Escape Hybrid, and GM’s Rick Wagoner is pushing a Malibu Hybrid from Motown and exchanging it for a Cruze/Volt mule to drive (carefully!) the final two miles to the capitol. We even know that UAW Boss Ron Gettelfinger will be *gasp* flying to the hearings, thanks to the fine reporting at Jalopnik. Then again, Gettelfinger had concession-scrounging duty today while the executives and their symbolic vehicles are frantically prepped for their big day at the Capitol. Only Chrysler’s Bob Nardelli has yet to publicize his vehicle of choice, and I’m wondering what the hell he’s gonna show up in. As Fox points out, if he takes the easy route and rolls up in a Hybrid Durango or Aspen, he’ll be “riding a dead horse to Washington.” Chrysler canceled its only hybrids a short week after launching them this October, and will be shutting down the factory that made them this month. Then there’s the famous EV vaporware that Chrysler pulled out of nowhere, but the risk of national humiliation is a big load for these unproven vehicles to carry. So what, a Sebring and a prayer? If I were him I’d be tempted to say “NSFW it” and show up in a black Challenger R/T. Preferrably modified in such a way that violates as many emissions and noise regulations as possible. That would show them who’s begging. So what’s your guess?
Oh sure, it looks like a Morgan. But it’s not. Fresh from Mitsuoka, the same company that turned an Infiniti M35 into some kind of time warp British sedan for James May, is the Himiko roadster. It’s based on the Mazda MX-5, which means it’s great to drive. And the bodywork is just insane enough to walk the border between embarrassing and awesome. While most of TTAC’s finest will probably say it looks like a mutant and they’d rather chew glass than have one, I’ll proudly stand in the minority. Oh, and Lieberman and I talk about a number of rockin’ cars in today’s podcast.
The Detroit Free Press is reporting that GM Chairman Rick Wagoner will “drive a prototype Volt wearing the sheet metal of the upcoming Chevrolet Cruze to the Senate committee hearing on the company’s request for $18 billion in emergency loans.” And though they mention that GM will bring a production prototype Volt as well, they make no mention of where Wagoner will depart from on his drive to the capitol. Here’s a guess: somewhere less than 30 miles away. The WSJ now reports that “Mr. Wagoner plans to drive from Detroit in a hybrid Chevrolet Malibu. He will then drive about two miles — from his hotel, to GM’s Washington office, to Capitol Hill — in a test version of the Volt.” So yeah, a little less than 30 miles.
After recently appearing to edge away from his electorally necessary pro-bailout stance, it seems Obama is headed back towards his original position. “It appears based on reports that we’ve seen that this time out the executives from these automakers are putting forward a more serious set of plans,” the president elect tells Automotive News [sub]. “I’m glad that they recognize the expectations of Congress, certainly, my expectations that we should maintain a viable auto industry,” Obama said. “We should also make sure that any government assistance that’s provided… is based on realistic assessments of what the auto market is going to be and a realistic plan for how we’re going to make these companies viable over the long term.” When pressed for details, such as whether “bridge loans” should come from TARP or the already-approved $25b retooling loan package, Obama stays resolutely nonspecific. “At this point, I’m more interested in seeing whether or not there is a sound plan there,” he said. “Then I’ll be in discussions and listening about where the best sources of money are. But I think it’s premature to get into that issue.” So does President Bush according to Dow Jones (via CNN Money), although we know that he favors using the $25b fund. Of course, with the Detroit bill now coming in at $34b, that $25b will only go so far. Either way, Bush won’t make any kind of decision on the issue until after congressional testimony tomorrow and Friday… and Obama still has the better part of two months to test the waters.
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