This year is going to be a devastatingly bad one for car valuations. If you’re a keeper, this is great news. New and near-new cars are going to continue with their proverbial freefall. You will more than likely be able to get a good vehicle with 80 percent of its useful life for 40 percent of the price (two to four year old vehicle). The frugalists amongst the keeper crowd will likely do even better than that. A well-engineered seven- to nine-year-old vehicle may truly be the best sweet spot in the market right now. With some diligence, you can find a conservatively driven car with 50 percent of its life (90k to 120k miles) for a mere 20 percent of its new car price. But what will be the absolute best deals? Read on . . .

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Saturn dealers, customers, managers, assembly workers, The Presidential Task Force on Automobiles, what’s left of General Motors and the mainstream media (MSM) would all like to believe there’s life after GM for the moribund “rethink” brand. A group of investors calling themselves Telesto Ventures has stepped forward to enable these champagne wishes and caviar dreams. Their plan: rebrand other people’s stuff and sell them as Saturns. It’s the same sort of plan that saw Americanized Opels in Saturn showrooms—that led to a 58 percent sales drop so far this year, compared to 2008’s miserable 188,004. (Toyota sold 158,884 Priora last year.) It was also a part of Cerberus’ original plan for the bankruptcy-bound Chrysler Corporation. Anyway, the MSM’s down with Saturn’s “rescue.” “While such a business model doesn’t exist today,’ the Detroit Free Press almost warns, ‘Telesto’s backers say the global overcapacity among automakers and the growing number of start-up firms in China and elsewhere would give the reformulated Saturn several possible sources of new vehicles.” Gullible much?

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TTAC’s very own Paul Niedermeyer writes:

I bought my ’05 Scion xB two years ago (used) with 15k miles. Perfect condition; mommy driver. Within a couple of weeks, I started hearing a chirping sound when the clutch was not engaged (pedal up); it stopped as soon as I put some pressure on the pedal. Bad throw-out bearing! Dealer confirms, replaces bearing, resurfaces flywheel, and throws in a new clutch as “goodwill gesture.” I’m very happy with how I was treated (it was under warranty, of course). They tell me these bearings hardly ever fail; I must have gotten a fluke bad bearing.

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The New York Times reports that hecklers are verbally assaulting GM’s booth babes at the New York Auto Show. Worse, the glamor girls are wearing last year’s dresses. Literally. This is not what you’d call death with dignity. This is GM on federal life support, drooling and soiling itself uncontrollably as it waits and waits and waits for someone somewhere to pull the damn plug already. As I’ve asserted in the past few episodes of this series, I no longer believe GM can be revived. The company is brain dead. No matter what cancerous parts of The General’s terminally ill body Uncle Sam’s surgeons separate from the corporate body, GM can’t function as an independent entity. Chevrolet and Cadillac? Building what? For whom? At what profit? Both of those brands are money losers losing market share right now. They may have volume but they ain’t got game. Of course, that’s not going to stop the feds from trying to revive GM. And boy, are they—I mean “we”—going to piss away a LOT of money.

In 37 days the Presidential Task Force on Automobiles (PTFOA) will force GM to file for Chapter 11. A friendly bankruptcy judge will then split the artist formerly known as “the world’s largest automaker” into “good” GM and “bad” GM. “Good” meaning a new(ish) American carmaker, freed from a mountain of debt, pesky union contracts, health care obligations, pensions, unprofitable brands, outdated factories, commitments to Delphi, etc. “Bad” as in all that worthless NSFW piled into one place, where the creditors can squabble with each other over its worth until death do them part.

This the PTFOA will do in the name of jobs, jobs, jobs. Or, more accurately, finding a way to support GM with [your] federal tax money without completely alienating the 70 plus percent of Americans who are against supporting GM with [their] federal tax money.

Politically, the split makes sense—but only if the US government takes an equity position in the “new” GM. See? We didn’t throw billions of dollars worth of your hard-earned money down a rathole. We used it to help GM rise Phoenix-like from the ashes. It’s an investment. Uncle Sam gets to make a new cake and eat it too because GM’s current U.S. Treasury loans (call it $22.8 billion) are secured, backed by all of GM’s assets, including the assets owned by its subsidiaries.

The Fed’s claim on GM is junior only to the existing, secured, revolving credit facility (a pittance at about $5 billion). I repeat: GM’s federal loans are senior to all GM’s creditors, including the retiree trust claims (around $27 billion), GM bondholders ($29 billion) and the trade payables owed to suppliers ($22 billion).

Moving forward, leaving all of those “stakeholders” behind, “good” GM is looking for another $22 billion from the Treasury to fund its future operations. Oh, and an additional $6.6 billion to develop energy efficient vehicles and $6 billion from foreign governments. If Santa leaves all these presents under GM’s Christmas tree, all of this new money would ALSO be senior to existing unsecured creditors, ahead of payments to bondholders, the retiree trust and creditors.

Again, in exchange for their largesse, US (and foreign) taxpayers get a stake in the new, relatively unencumbered “Good” GM. The Treasury Department converts all of its current and upcoming senior secured debt into  junior preferred stock. Ladies and gentlemen, I present to you, American Leyland.

Here’s the worst part: what if it doesn’t work? What if the PTFOA puts the paddles on the new, cancer-free GM and the patient fails to revive? I mean, if consumers are ignoring, eschewing and even heckling “old” GM, why does anyone think that “new” GM will recover or even maintain life-sustaining market share?

To pull that one off, Chevillac would have to steal customers from Honda, Toyota, Nissan, Hyundai, Ford, Mercedes, BMW, Infiniti, Audi, Lexus and all the rest. In five years, maybe. Short term? No NSFWing way. Damaged brands, damaged company. And if this American Leyland plan bites the dust, all of that preferred stock will be completely, 100 percent worthless.

Alternatively, the PTFOA could put GM into Chapter 7 and let someone try to make a go of whatever bits are make-a-go-able. And if politics demand it, Uncle Sam could spend that $34.6 billion worth of additional funds sending every UAW worker and supplier employee and Detroit-area pump jockey a big fat check.

Assuming (as we must) that common sense has nothing to do with this, the flip side is the really scary bit. What are the feds willing to do to “protect” their (your) investment in GM? As the “investment” gets larger, so does the pressure to make sure it doesn’t fail. The PTFOA has already fired GM’s CEO, gelded its Board of Bystanders and manipulated the bailout bill to send the automaker tens of thousands of sales. What’s next?

Whatever it is, you can bet it won’t benefit the American consumer.

Hi Robert – My name is Karah Street and I work for a PR firm that represents smart USA. I see that you have written about the new crash test conducted with the smart fortwo by the Insurance Institute for Highway Safety (IIHS), in which the smart for two was paired against a Mercedes C-Class. Two other cars were paired with larger vehicles from the same automaker (Honda Fit vs. Accord, and Toyota Yaris vs. Camry). What you may not know is that this test represents a type of crash that is rare and extreme — less than 1% of all accidents can compare to this type of test — and it is neither recognized nor required by federal safety regulators. By pitting “big vs. small,” this test seems to have one goal: to imply that bigger, heavier cars are always safer.

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Marketing to a particular demographic is a tricky business–just ask Honda or Toyota. Honda introduced the Element in 2003. Toyota brought us the Scion xB in 2004. Both machines were designed as funky vehicles to fit the twenty-something lifestyle. Needless to say, their room and versatility immediately found favor with the quintagenarian crowd. Now Kia’s taking a shot with the Soul. Our own Eddie Niedermeyer, squarely in the demographic Kia’s aiming for, liked it. But then there are us pesky demographic-bustin’ Boomers. Will we see more Souls parked at the old farts’ home than on college campuses?

TTAC doesn’t “do” press embargoes. While some of our writers have put me in the awkward position of respecting their desire to respect a manufacturer’s prohibition on publishing a review until the appointed second (I kid you not), if someone sends me anything other than private correspondence, I feel free to publish it. This evening (Monday), the Insurance Institute for Highway Safety (IIHS) e-mailed TTAC a couple of pdfs (click here or here), They were embargoed until one minute after midnight, Tuesday. So I immediately decided to publish them. Besides, big whoop; Pentagon papers these ain’t. It’s an anecdotal study of three—count ’em, three—crashes. The match ups: Toyota Yaris/Toyota Camry, Honda Fit/Honda Accord, Smart Fortwo/Mercedes C-class. What’s up with the lack of inter-brand rivalry? Apparently, “the smallest cars do a comparatively poor job of protecting people in crashes.” Huh. And just in case that’s a bit tame (despite the usual photos), the IIHS did some number crunching on fuel economy. They’d like you to know that “even though fuel economy is their biggest selling point, many cars just a little bit bigger get close to, or the same mpg as the mini and micro cars tested.”

[UPDATE: Embargo time and second link now fixed.]

Less than a generation ago, speed was the name of the game. Hands-on automotive enthusiasts would swap their car’s two-barrel carb for a four, replace the manifold, straighten the exhaust, anything and everything to make their ride go faster (at least in a straight line). Even the mechanically ignorant knew that power equalled status, whether under-hood or at their fingertips (windows!). These days, consumption is no longer a disease; it’s an addiction. Where once we laughed watching my buddy Artie’s ’69 Camaro’s fuel needle fall, the new Honda Insight has a needle showing me how much fuel I’m saving. It’s not a very clever insight, but the Insight is a very clever car.

Formerly proud Toyota is staring in the eyes of another multi-billion dollar loss for the new 2009 fiscal year, the Nikkei [sub] reports. The fiscal year lasts through March 2010. According to estimates, the world’s largest automaker will report a loss of around $5 billion for the 2008 fiscal that just ended on March 31. For the new year, the loss may be steeper.

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A year ago, TTAC published a story about out-of-control Toyota Tacomas. Since then, reports continue to surface of “unintended acceleration” events in Lexus ES and IS and Toyota Camry and Camry Solara vehicles. Toyota insists that all-weather floor mats are causing the problem; the accelerator becomes stuck under the rubber. Autocoverup.com alleges, well, you know. “This is a known problem with over 432 complaints,” the site’s author insists. According to NHTSA’s Defect Investigation’s database, reports of unintended acceleration in Lexus ES models first surfaced around 2004 and continued until late 2008. One report (ODI-NHTSA Complaint Number 10252860) describes the problem:

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I used to fly in to do an old auction out in Baltimore. It was a strange place reeking in decrepitude and there were a lot of weird things out there. A 130,000 mile Saab 9000 with no registered owner, ever. A couple of Peugeot 505s with huge attached bumpers that were used to push non-running junk through the block (apologies to Paul Niedermeyer). Oh, and about 300 Daewoos rotting away in no man’s land.

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Holy NSFW. When Toyota’s No. 1 American executive steps up to the microphone and declares that his employer’s ready for the fallout from a GM Chapter 11, you might as well stamp “done deal” on the, uh, deal. The AP reports that “Toyota Motor Sales USA President Jim Lentz says his company shares about two-thirds of its 500 parts suppliers with GM. . . only a small number of Toyota suppliers are critically short on cash.” Of course, we knew that already. Both the GM and the supplier thing. But still. You gotta wonder: is Jim Lentz sticking the knife in GM to goose ToMoCo’s April and May sales. According to Automotive News [sub], Lentz says US auto sales may rise in the second quarter. Well they will for someone.

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CNNMoney reports that GM is looking to stoke-up on its federal funding to keep the lights on (and the Segeways humming) until its June first bankruptcy filing. I mean, restructuring deadline. And the winner is. . . not the U.S. taxpayer. The General may take the U.S. Treasury Department for another $4.4b hit before Hune1, bringing its total to date to $17.8b, not including the $1b tip thrown GM’s way to help GMAC makes its eleventh-hour transition from deadbeat sub-prime lender to federally flush bank, and back. ALL of which will be written off when GM files for C11. And THEN, presumably, the feds will pony-up the debtor-in-possession financing to establish the new, “good” GM. As my father would say, how much is that boondoggle going to cost me?

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For years, Motown and Motown-sympathetic carmudgeons tarred and feathered the Toyota Prius for its “hybrid premium.” Other than Car Czar Maximum Bob Lutz, who never held a stance he couldn’t not defend with fact=based logic, critics of the “eco-weenie’s poseur mobile” trotted out chart after chart on the Prius’ miles per gallon, purchase price, the cost of gas and the cost of batteries; compared to, say, a Chevrolet Monte Carlo SS. Meanwhile, consumers bought the Prius—to the point where the model outsells entire GM brands (something of a mean feat). Meanwhile, the LS600h L. As my review pointed out, flipping heck! The gas – electric luxury car has one of the world’s finest engines. Not to be outdone—provided you don’t think “first in” counts—Mercedes has unveiled its first gas – electric hybrid: the S400 HYBRID (all caps all theirs).

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China’s automobile sales should hit an all-time high in March and help the country to beat the US in automobile sales during the first quarter, a key official from the national planning body said to Gasgoo.

“The 14 major automakers sold 1.026 million vehicles in China last month, which account for 90 to 91 percent of the total market,” said Chen Bin, director general of the Department of Industry at the National Development and Reform Commission.

The total sales will likely overtake the monthly sales record of 1.059 million units in March 2008.

This will be the third consecutive month that China has sold more vehicles than the US. It also puts the Middle Kingdom well on its way to become the worldwide king of auto sales in 2009, toppling the US from its threadbare throne. It will also help Volkswagen in its race to the #2 spot behind Toyota. VW is underexposed in the US, but very strong in China.