The Wall Street Journal’s Evan Newmark takes a look at GM’s Congressional bailout begging term paper. To paraphrase, “we are amused” (in a deeply cynical, bemused sort of way). More specifically, “The restructuring plan comes up short on the most fundamental question. Will this company actually make money? Just look at the details — or what details are lacking. GM says it plans to focus on only four brands. So why does the number of models only drop from 48 to 40? GM has 6,600 dealers, which it says it will cut to 4,700 by 2012. Honda has 1,300 dealers. Even Ford has only 4,100 — which it will cut further. And nowhere in the document does GM lay out, year by year, its own projected market share. This is perhaps the most critical part of any business plan. The kind of thing you learn in the first day of business school.” Yup, the WSJ gets it– in the same place the American taxpayer will… well you get my drift. More mill grist for left-brained nay-sayers after the jump.
Category: News Blog
They didn’t call Ford’s founder “Crazy Henry” for nothing. But Henry Ford had a knack for aphorisms, such as “You don’t build a reputation on what you’re going to do.” I’d stick the word “say” in the middle of that, but what do I know? I know that on the same day Chrysler’s monthly sales cratered by a staggering 47 percent, Automotive News [sub, AN] revealed that ChryCo product development chief Frank Klegon told the world that the 2011 300 sedan and variants will be “CAFE positive.” One wonders why AN waited until yesterday to run the story. Anyway, it’s nice to hear that Chrysler– the automaker that says it need $7b worth of federal funds by the end of the month or goodnight moon– plans on conforming to new U.S. fuel efficiency regs. Of course, like the 2011 300 sedan, those laws don’t actually exist. “The U.S government has not released regulations for the new corporate average fuel economy [CAFE] law, Klegon said, but ‘we think we know what it is.'” Franks identified “the biggest factor” underlying its democratic party positive environmental optimism: “a new, more efficient V-6 engine family, code-named Phoenix.” Rising from the ashes, eh? Maybe…
This week while your eyes are wide shut: Our daily round-up of the news that happened in other continents and time-zones. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. Note: For all of this week, WAS will either be late, or non-existent. I’m in Germany on business and will post as time allows. They woke me up for the Chinese story, so you get WAS on time today.
It’s official: Saab for sale. Long predicted by TTAC, now confirmed by GM’s Frederick Henderson: Saab will be sold. If no buyer is found, they will be shuttered. Automobilwoche (sub) has the story.
Sweden to bail Saab and Volvo from hell: According to AFP, “Sweden will come to the rescue of its US-owned carmakers crippled by the financial crisis, Saab and Volvo, to secure the future of an automobile industry which accounts for 15 percent of exports.” Details are yet murky. There isn’t much more than a “we want to keep that here and to protect it,” announced by Frank Nilsson, a spokesman for Sweden’s enterprise and energy ministry. Anything akin of a bank rescue package is definitely being ruled out by Nilsson. But he “can guarantee that we will have car manufacturing in Sweden.” Interesting undertones: Volvo is officially up for sale, Saab is, see above, on the block also. According to the report, “no matter who ends up as the owner, the [Swedish] government is committed to supporting the industry.” How? When? For whom? Stay tuned.
Volvo doesn’t want to buy Volvo: Ford bought the Volvo brand from Swedish Volvo Group. Their chairman Finn Johnsson doesn’t want them back. He told Swedish financial daily Dagens Industri via AFP that they are not interested, and that the Swedish government shouldn’t buy Volvo either. Johnsson: “The state knows nothing about the car industry and Volvo needs an owner that can increase sales and cooperate with suppliers on components and development.” He thinks, Renault would be a fine partner. It’s Swedish for “Up urs.”
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As reported by TTAC weeks ago, Chinese auto makers are seriously looking into buying all or some of General Motors. The story was never officially denied in China. Now, there are fresh and more concrete indications about a possible Chinese move on GM. Hu Xindong, Secretary to the Chairman of China’s third largest auto maker Dongfeng, said they have been contacted by financial groups which have close relationships with GM. Topic of the discussions: A possible takeover. This according to China’s National Business Daily via Gasgoo. His company “has not started formal discussions yet,” said Dongfeng’s Hu. He also said that “for the moment,” Dongfeng Motor has no intent to take over GM as a whole. They are interested in buying “overseas assets.” In China, “overseas” usually means outside of China. Hu: “Our managing board has not officially considered the option yet.” In China, where one never gets a clear yes or no, these statements are tantamount to a “Hell yes! We are crunching numbers day and night!” When Dongfeng was floated weeks ago, eyebrows went up. Wouldn’t SAIC, GM’s longtime Chinese partner, be a better fit? So, where did SAIC go?
If anyone knows the pressures of covering Motown’s meltdown, it’s me. I’m putting in some serious time behind this keyboard (“that’s why they call it work” my wife reminds me) trying to keep up with a news cycle that makes a racing bike seem like a mobility scooter (or something like that). My favorite carmudgeon Dan Neil blew a gasket earlier today, arguing for– yes for— the creation of an American Leyland. The same Dan Neil whose criticism of GM’s management (before criticizing Motown’s management was cool) sparked a retaliatory ad boycott and, thus, the first GM Death Watch. And now Autoblog supremo John Neff has gone off the deep end. In the recently launched “Opinion” category– an inherently bad idea for writers with all the teeth of a Chrysaora fuscescens— Neff wails “Stop arm-chair quarterbacking the auto industry.” Huh? If that’s not a textbook example of pathological solipsism, Bob Lutz is. Anyway, Neff’s knickers are in a right royal twist.
Back when I started the General Motors Death Watch, I had no idea that I’d also be starting a Ford Death Watch. Or a Chrysler Suicide Watch. If you’d told me that they’d all be staring down the barrel of Chapter 11 at the same time, I would have found the suggestion highly improbable. As Edna Mole said to Mrs. Incredible, “And yet Darling, here we are.” And here’s Ford’s federally-mandate bailout plan. Automotive News [sub] headlines their summary “Ford tells Congress profit may be restored in 2011,” but that’s all kinds of misleading. In fact, Ford’s plan says The Blue Oval Boys won’t be profitable until at least 2011. And the cover sheet is covered with caveats, from continued decline in market share (ya think?) to “New or increased credit, consumer or data protection or other regulations resulting in higher costs and/or additional financing restrictions.” Well, at least Ford knows what political buttons to press to get Congressional democrats behind them…
So here it is: Chrysler’s turnaround plan. And while you’re digesting that, Automotive News [sub] gives us the takeway: ChyCo will have $2.5 in cash by the end of the month. That’s not enough money to pay its suppliers, never mind anything else. “The bridge loan will help cover an estimated $11.6 billion in expenditures it [Chrysler] will have in the first quarter of 2009. The biggest chunk of those expenditures will be an estimated $8 billion tab from component suppliers.” Hang on; $2.5b plus $7b is $9.5b minus $8b is $1.5b. So, by it’s own reckoning, Chrysler will be back for more money by the second quarter of 2009. And why wouldn’t it? Profit! “Chrysler assumes it will have a 10.4 percent share of the U.S. market in 2009 and 10.7 percent in each of the next three years after that. Based on those numbers, Chrysler estimates it will have operating profits of $400 million in 2009, $2.6 billion in 2010, $2.0 billion in 2011 and $1.8 billion in 2012.” That’s IF the suppliers play ball and DON’T demand cash on the nail. But wait! There’s more! “Nardelli cautioned that the federal loan will work only if Chrysler Financial can support Chrysler with wholesale and retail lending. ‘Chrysler Financial is in need of immediate liquidity support,’ the Chrysler statement said.” So how much is THAT boondoggle going to cost us? Not specified, but I wouldn’t bother checking your wallet for twenties. Anyway, why isn’t Cerberus paying for all this? They can afford it. Anyone? Bueller?
We now know why The Big 2.8 postponed their Capitol Hill bailout begging ’til the end of the week: they were waiting for November sales results to up the ante. Automotive News [AN] reports what we glommed-onto earlier: the Motown bailout bill has ballooned by billions. “General Motors, Ford Motor Co. and Chrysler LLC together are asking Congress to approve loans and credit lines that total $34 billion.” So Congress is going to lend three automakers $34b– when the same automakers couldn’t properly assess their financial needs two weeks ago? Yup. “House Speaker Nancy Pelosi said automakers will get help. ‘An intervention will happen,’ she said at a Washington news conference. Echoing industry leaders, the California Democrat said bankruptcy is not an option for any of the companies.” To be fair, the privately-held Chrysler corporation’s “request” is, was and will be $7b– which doesn’t make it right (just consistent). And GM that looks like the biggest NSFW; upping its call on the public purse from somewhere between $10b – $12b (what’s a couple of billion between business partners?) to $18b. But the big surprise here is Ford. The Blue Oval Boys are in real danger of over-thinking this one…
Like everyone else, Nissan reported dismal sales for November, with total US sales down 42.2% and off 9.5% YTD. Without good news to report, Nissan’s press release consisted of a list of GT-R awards and future vehicle fluff (Cube, $10K Versa 1.6, 370Z, Infiniti G convertible). The Nissan division took a 44.4 percent hit with just about all cars and trucks taking double digit percentage hits. The little Versa was down 18.4%, Altima down 45.3%. The Murano and Rogue were faint bright spots, down 2.6% and up 4.7%, respectively. Other trucks took a pounding: Frontier down 70.7%, Titan down 79.6%, Xterra down 71.6%, Pathfinder down 70.6%, Armada down 70.5%, with the Quest minivan lagging at a whopping 81.3% drop and a mere 342 vans leaving the dealer lots. The Infiniti division took a 28.0% hit with all products in negative territory. Godzilla Watch: GT-R sales were steady at 208 for the month, 1,581 for the year.
Between the release of its congressional bailout term paper and November sales results, it’s been a big news day for Ford. And the hits keep happening. Automotive News [sub] reports that Ford will cut its 2009 Q1 production by 37.9 percent to 430k units, No surprise there; FoMoCo’s monthly sales are sitting at under 125k– and dropping. Dow Jones (via CNN Money) says that Ford’s 2009 Q1 production plan consists of 305k pickup trucks and 125k cars, compared to this quarter’s 255k pickups and 175k cars. A quick look at Ford’s November sales shows that cars are down 31.5 percent while total truck sales are down 29 percent. So what’s the deal? Is Ford signaling to congress that it plans on asking for $13b ($5b more than they asked for on 11/18) only to turn around and ramp-up truck production? Or is there some play here that I’m missing? I can’t make sense of it, so I’m asking: what’s the deal?
You gotta love Chrysler. But not me. How in the world can they claim a right to MY tax money when they can’t even acknowledge their sales debacle on their own website? In fact, ChryCo’s sales dropped from last November’s 161,088 units to this year’s 85,260 units. Instead of admitting they’re up excrement creek without a paddle, today’s ChyrCo posting is “Why America Should Care About the U.S. Auto Industry.” How about this: why should we bail out Chrysler when its owned by a private equity group with deep pockets?
As GM’s 41 percent November sales drop sinks into the public consciousness, The General’s generals have not-so-coincidentally released their not-secret bailout request. And here it is. Judging from the state of things, Rick Wagoner might need to fly to DC– before it’s too late. “General Motors said Tuesday it needs $4 billion in government loans this month and a total of $12 billion by late March to keep operating,” MSNBC reports. “Altogether, the auto giant is seeking up to $18 billion in government funding — including a $6 billion line of credit in case market conditions worsen.” Jeez, that doesn’t leave much for Ford or Chrysler! I make that $7b between them. A pittance really. Unless… they’re planning on asking for more. Could it be?
It shouldn’t come as a huge surprise to hear that sales of nearly every Honda and Acura model were down in November, but just try guessing the one vehicle that actually increased sales. It’s not the brand-spankety new version of the once-hot Fit, which is down by 8.4 percent. Perennial best sellers Accord and Civic were also down 38.1 and 29.6 percent respectively. Nor did a single Acura crack into positive territory compared to last November, with the RL losing 40.3 percent, the TL dropping 22.2 percent and the all-new TSX down 9.1 percent. No, the only Honda/Acura vehicle that was up in November was the Pilot SUV, which was up 4.5 percent versus last November’s sales. Perhaps the biggest surprise isn’t that Honda’s best seller is an SUV, it’s that the Civic Hybrid is down 67.8 percent. The learning just never ends in this industry.
ABC News— originators of “Jet-gate”– report that both Ford and GM have decided to sell their corporate aircraft. GM’s press release on the subject was uncharacteristically terse, and characteristically timed (released on the same day as November’s abysmal sales stats). “GM… is ceasing operations at General Motors Air Transportation Services (GMATS) at Detroit Metro Airport. Due to significant cutbacks over the past months, GM travel volume no longer justifies a dedicated corporate aircraft operation.” So where does that leave The General’s transport? The automaker is “currently exploring options for transferring its aircraft to another operator” and “pursuing sale of four of the aircraft so it can terminate the leases. GM will shutter the facility at Metro Airport effective January 1, 2009. GM will work with the airport to seek a tenant for the balance of the lease, which expires in 2009.” Zero percent finance available? Meanwhile, Ford’s decision to sell four jets (Volvo thrown in) didn’t make its press site. But we can now reveal that GM CEO Rick Wagoner will be racing Alan Mulally’s Escape Hybrid to Washington in a Malibu hybrid. ChryCo’s CEO will also be driving to DC, but his exact mode of transport is a state secret, for security reasons.
If you go to Germany, as I did today, you won’t see or feel much of a recession. If you read the GMSM (German Main Stream Media – and I had 9 hours of reading the latest editions today while flying in from Beijing) you’ll learn that the jobless rate is contained, that people are buying, that Frau Merkel sees no need for s stimulus package, and that retail is looking for 150,000 temps to help them with the Christmas boom. All divvy in Deutschland?
When you go to a bit less than main stream, you are in for a shock: “German new cars sales down by 18 percent” says Automobilwoche (sub.) Aua! After slowly decreasing over the month, November sales suddenly cratered in Deutschland. It looks more and more like 2008 will be the worst year since 1989. Who was the worst performer in the volume segments? You guessed it: Opel. Down 36 percent. BMW lost 20.8 percent, VW shed 18.6 percent. Horrors! Mini cars went out of style, bigtime: The Smart lost nearly 46 percent. Best performer: Audi with a loss of only 1.1 percent. If you want the official government data in full gory detail, here they are.
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