And the bigwigs spent ten years building brand equity with cheap, basic transportation. And lo, the Japanese automakers headed upmarket, ceding entry level business to the Koreans. And the Seoul sales train smiled for it was good. And then came the Genesis, and Hyundai’s new day morphed in the minds of its creators from budget luxo-fighter to an opportunity for sub-brand confusion and ADD.
TTAC’s Ken Elias was well pleased when Ford announced that it had trimmed $9.9 billion from its debt mountain by “convincing” investors to exchange debt for cash and stock. More specifically, Ford Motor Credit will use $2.4 billion in cash and stock to buy back the debt once the offer closes Wednesday. Ford agreed to pay investors about $380 in cash and stock for every $1,000 in bonds, or 38 cents on the dollar, according to company officials. As the BBC reports, removing call-it-ten-billion from Ford’s $25.8 billion debt lowers The Blue Oval Boyz’ interest payments by $500M per annum. FoMoCo’s stock rose sixteen percent on the news. Yes, well, Fitch Ratings isn’t planning a fiesta just yet. The Wall Street Journal reports that the agency isn’t impressed with Ford’s cash burn. Or rather they are, just not in a good way. And who can blame them? Last year, Mulally’s minions torched . . . ready? $20.7 billion. Remember: all the really bad news arrived at the end of ’07. Fitch analyst Mark Oline was sanguine. “Using liquidity reduces any buffer which they could need if the sales markets don’t improve in 2010.” If? Standard & Poor’s is also non-plussed . . .
According to Frank Herbert, fear is the mind killer. Well, it’s certainly a sales killer. And now that Hyundai’s cut through the FUD to rack up some U.S. sales with its CYA buyer protection, we’re witnessing an international outbreak of MSMD (monkey see, monkey do). Stateside, Ford has lost—I mean launched its Advantage Program. GM offers customers Total Confidence (as if). And now, from the Land of Hope and Glory, Autocar reports that Volvo and Honda will pay for British buyers’ wheels for one year should they get the boot. Of course, to qualify, you have to employed first, then buy the car, then become unemployed. Kinda like betting against yourself. Anyway, if it’s a Honda, you need to be on the dole for at least three months before you get your car payment relief. If it’s a Volvo, we’re only talking about the C30, S40 and V50 models. In both cases, future deadbeats have to finance through the cars’ respective in-house lenders. Look for Honda USA to implement the plan here STAT. Meanwhile, why do I get the feeling that all these programs are opening the door to some serious fraud?
One of our moles has emailed ALL the dealer paperwork on GM’s Total Confidence program. Blogger, editorialist and aspiring car reviewer (knees must) that I am, I shall leave it to you, our Best and Brightest, to dissect the offer and how GM dealers might sell the plan (or simply give up and sign the opt-out sheet). Michael Karesh, former TTAC partner and ongoing TrueDelta operator, has done some stellar work uncovering the flaws in the residual guarantee part of the Total Confidence program. If you want the inside skinny via Michael’s Delta force, click here. If you want the read the real deal, jump.
Why, that news is so good that the Freep is happy to throw ChryCo the irony-free headline. April Fools! Sales are actually down 39 percent compared to March 2008. It’s just that Chrysler hasn’t topped 100k monthly sales since September. Does this look like a turnaround to anyone? Bueller? Jim Press? “The market is starting to show small signs of life which need to be nourished like seedlings.” What a touching image. Tiny seedlings struggling to life under a pile of government cash. Please, describe these plucky little plants for us, Mr. Press. “The fact that we exceeded 100,000 units for the first time since last fall is encouraging, and evidence that our improved quality, improved mileage as well as value represented in Employee Pricing Plus Plus are just what the doctor ordered for recession-wary customers who are reluctant to make long-term purchases. It’s too early to see a trend, but spring shows signs of hope.” If showing signs of hope is your job description, perhaps. But how did the federal proclamation (PDF) of “the poor quality of [Chrysler’s] existing product portfolio” affect the sales seedlings?
And once again, the big T (via PRNewswire) proves to not be invulnerable to the weak sales environment. Toyota division sales were down an even 36 percent, but Lexus swooned slightly more, shedding 40 percent of its sales compared to last March. Scion models dropped between 50 and 60 percent, while Corolla proved more resilient than Honda’s Civic, dropping only 7 percent. Similarly, RAV4 and Lexus RX were off only 4.5 percent and 17 percent respectively, compared to 40-75 percent drops for nearly every other Toyota truck and SUV. Sequoia was also a surprising “could be worse” example, with sales staying over 2k monthly sales, falling only 20 percent compared to last March. Still, with sales like this it comes as no surprise that Toyota is dropping its second-half dividend.
GM’s March sales (PDF chart) slid 45 percent compared to last March. As usual, the official press release is crawling with standard-issue PR equivocation. 156,380 deliveries in March? Why in a total contextual vaccuum, that sounds downright mediocre! Compared with February’s pity party, “7 of 8 GM brands saw total sales increases with total volume up 23 percent.” And Mark “Rough Chuckles” LaNeve hears a slow, government-backed turnaround coming. “We had a strong close at the end of the month as customers responded to strong incentives, President Obama’s positive statements about GM, and the government backing domestic warranties,” soliloquizes GM’s S&M masochist-in-chief.
Volkswagen’s March sales were down nearly 20 percent compared to last March, a smaller drop than many other OEMs faced last month in a tough US market. Wolfsburg’s new Passat CC had its best sales month ever at 2,351 sales, but only new models such as the CC, Tiguan, Routan and Jetta Sportwagon kept VW’s sales looking decent. Models which were on sale in March of last year are down dramatically, from the Rabbit (-60 percent) to the “new” Beetle (-60 percent) and from the Eos (-62 percent) to the Passat (-72.4 percent). The best-performing existing VW model was the Jetta sedan which lost only 27.4 percent of its sales. Otherwise, things were pretty much a bloodbath that is only barely being papered over by new-model sales.
Have Honda sales hit bottom? Their March sales press release sure wants you to think so. The 33.7 percent drop in sales last month “appears particularly steep when compared to last year’s strong first quarter,” admits Honda’s NA sales honcho, John Mendel. Compared to January’s 35.4 percent slide, though, March’s are a slim improvement, and maybe (just maybe) a tipping point in Honda’s sales results. Breakdowns reveal that, in general, the bigger the Honda the worse the sales decline. Ridgeline (-66 percent), Element (-70 percent), RL (-69 percent), RDX (-50 percent) and MDX (-47 percent) were the big losers, while only the new TSX increased its sales compared to last March, posting a 16 percent increase. The new Insight Hybrid suffered from limited availability in its first partial sales month, posting only 569 sales. Given the larger sales trends, however, there’s a good chance that the new cheapest hybrid in America will help boost Honda sales in its bread-and-butter small, efficient car sales.
Detroit’s “last man standing” has taken another one in the chest, as March sales stats reveal a 41-percent drop compared to last year. The Blue Oval Boyz are in full spin mode, proclaiming an enlarged (if unspecified) retail market share, “growing awareness and consideration of Ford and its high-quality, fuel-efficient products” and, oh, yes, have you heard about Ford’s Advantage Program? Still, there is a bounce here, as dead cats GM and Chrysler take it on the chin (exact facial damage to follow). “Ford sales increased 30 percent compared with [a thoroughly miserable, unprofitable] February 2009 with retail sales up 34 percent [compared to February’s thoroughly miserable, unprofitable stats] and fleet sales up 22 percent [compared to February’s thoroughly miserable, unprofitable stats]. As incentive spending is also up, those numbers don’t do much for that whole viability thing. High profit SUVs’ 73.2-percent nosedive can’t help the bottom line, either.
The Blue Oval Boyz are launching the curiously named, Hyundai-trumping Ford Advantage Program. The deal—which runs from today to June 1—offers new car buyers 12 months of “payment protection” (leg breakers need not apply) up to $700 per month, zero percent financing and, of all things, a donation to a local charity. Strange times when it’s considered an “advantage” to know you won’t lose your car for a year if you lose your job. Hang on; I’m looking for the fine print now . . . nope, can’t find it. Will update ASAP.
Auto industry types tend towards hopeless optimism. On Friday, the Detroit Free Press gave the car biz’s rose-colored eyewear wearers an RTL (reason to live). “Big drop in March auto sales could be bottom, analyst says” sings the Freep’s now-standard, pre-monthly sales results tune: sales suck, they’re about to REALLY suck, but that’s it. We’ve hit bottom. Only this time the best the Freep can do is ONE auto analyst (Edmunds’ Jesse Toprak) and this money shot: “It is unlikely to get much worse.” Citation? “There has been encouraging economic news in the last two weeks. Housing starts rose 22% from January to February. Factory orders for durable goods such as home appliances increased 3.4% in February.” Yes, well, meanwhile, Volvo CEO Steven Armstrong told Autocar (or someone) that the NFSW world economy is good news for the brand that screwed itself by going upmarket. “We have a real opportunity for Volvo with respect to premium positioning. As people cut back, it becomes a little less acceptable to flaunt your money. Buyers who still want to reward themselves but don’t want to be ostentatious give us a great opportunity.” So great Ford can’t wait to ditch the brand.
Oh, and $8M. Or less? We shall see as the car in question, a 1939 Auto Union Grand Prix single seater, is up for auction this summer. “The 200 mph D-Type will be offered in Bonhams & Butterfields’ Aug. 14 sale of collectors’ vehicles in Carmel,” Bloomberg reports. “The silver rear-engined 485-horsepower racer was produced by the quartet of Horch, DKW, Wanderer and Audi. Helped by subsidies from the Nazi government, the ‘Silver Arrows’ of Auto Union and its rival Mercedes dominated European motor racing from 1934 until the outbreak of World War II.” Ach, ja. Die Nazis. Speaking of controversy, this is the same D-Type that was going to fetch $12M back in February ’07. Only Christie’s pulled the car four days before hammer time (sorry, Steve) due to questions about its provenance/authenticity. “Since then, further information was supplied by Audi Tradition, the heritage wing of the carmaker, said [Bonham’s Rupert] Banner. Audi identified the chassis as number 19, which was raced by Austrian driver Hans Stuck and finished sixth in the 1939 Grand Prix.” Bonham’s also confirmed that the car’s current owner is Abraham “Abba” Kogan, a Chinese-born Brazilian who manufacturers and leases gaming machines for the US and Japan. So, nothing untoward there, then.
President Obama wasn’t indulging in hyperbole last Sunday when he told 60 Minutes that “the only thing less popular than putting money into banks is putting money into the auto industry.” The Freep reports that a new Polk survey shows that 61 percent of Americans now oppose giving GM and Chrysler more money. More tellingly, support for a continued bailout of the auto industry peaks at only 16 percent in the manufacturing-heavy Great Lakes region and drops to as low as 4 percent in favor in New England. And there’s little room to argue that lack of support is based on ignorance or misperception. About the same percentage of people who opposed more loans also recognized that denying them would have dire economic consequences. One Polk analyst describes the emerging consensus on Detroit’s predicament as “it’s a problem, but it’s not a problem for taxpayers.” Cold.
Our regular CS FirstBoston mole has sent us an update on their analysis of the U.S. new car market. Bottom line: it’s going to get a lot worse before it gets even worserer. So, he asked rhetorically, is this a good time for the taxpayer to “loan” money to Chrysler and GM? Only if you define “good” as “worst possible.” Sorry, was I talking about ROI? My bad. In terms of bailing out automakers without a hope in hell of turning a profit for years to come, these are the good old days.
• We are slashing our forecast for 2009 light vehicle sales to 10.4 million units, down from 12.0 million units previously. Details of the changes in the factors that plug into our demand model and account for the revision are as follows:
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