It’s that time of the year when industry pundits [usually] run out of news. Normally, this leads to retrospective reflection and informed speculation. The autoblogosphere has been pretty bad at this, of late. They missed  carmageddon more or less completely, treating Detroit’s BS like the Lord’s own gospel. That said, TTAC has offered its share of botched timelines and devil-may-care details. One nice, unforeseen twist: Ford. CEO Alan Mulally flew in from Seattle and kicked some Blue Oval butt. As a result, I give FoMoCo a chance of making it– albeit a shot rather than a dead cert. Ford must withstand the fallout to come, as GM and Chrysler head for bankruptcy. Now that’s for sure– regardless of the automakers’ progress on Capitol Hill of Pennsylvania Avenue. While I’m at it, I’ll go out on a limb and make some more predictions for 2009.

Near Term – Next Few Months

I repeat: the U.S. federal government will bail out Detroit. Despite the Republican Senators’ moaning and groaning and defeat of the first go-around, the money will head for Motown– even though the bailout billions only delay the reckoning day for a few months. Plenty of TTAC fodder ahead as we watch GM and Chrysler try to negotiate with their creditors and the UAW.

GMAC will avoid going bankrupt– barely. The debt exchange hasn’t been going down well with bondholders; it’s now on its last iteration with plenty of sweeteners. But they’ll make it across the finish line. GMAC will convert to a bank holding company and voila! Another government bailout via TARP. Too bad its base of principal customers– GM dealers and their car buyers– is gonna be much smaller. And soon. Another bad deal for Cerberus. No tears here.

Auto sales will still suck. Yep, the entire first quarter will be a disaster for everyone. More dealers will fail; at least a thousand. All manufacturers will cut production. Again.

Transplants’ fear of the UAW organizing their plants has disappeared. Their workers know for certain that union affiliation has zero benefits (as if it ever did before). The Republican bailout bill mandated that Detroit blue-collar working stiffs get paid the same as Toyota workers today, not in the future. In the next Congressional go-around, the Republicans will stick to their guns on their “wage parity” demand. So why would transplant workers consider organizing and give two hours a month of pay for union dues and get nothing in return? Answer they wouldn’t.

Toyota and Honda will furlough employees.

Ford’s MY2010 Fusion will get [more] rave reviews. Three years since the launch of the Hermosillo trio, Ford’s redesigned and reengineered C/D mid-size vehicle will be hailed as a true competitor to the Camcord duo. FoMoCo’s four cylinder EcoBoost will provide more power with better fuel economy than any engine from the Japanese. And the Fusion hybrid, with its US-sourced technology, will officially beat the pants off Toyota’s hybrid. Only problem: low gas prices mean no one will care.

Mid Term – Next Spring/Summer

Assuming the government steps up this week with a federal grant (a.k.a. loan) now, GM and Chrysler will go belly-up later. Over the winter, the financial situation at both companies will worsen, and the cash burn will increase. There’s not enough emergency money in the government kitty. Worse, the attempts to get reorganized outside of bankruptcy will fail miserably; every single creditor will want a better deal. The UAW will show its real intentions: no sacrifices. “We already gave.”

The car czar will have no enforcement power to make the deal work. And even if he does, the cuts required will be so drastic that they border on ridiculous (at least outside of bankruptcy).

Cerberus will refuse to support Chrysler. It will go straight to Chapter 7.

Congress will step in with Debtor-in-Possession (DIP) financing for GM. Expediting the bankruptcy, cutting out any negotiation in the bankruptcy process among creditors, will be allowed as a “national matter.” Some will cry foul, but Obama will take the lead from his “bully pulpit.” Hard to argue with the President – makes you look bad.

The biggest losers will be the bondholders – the hedge guys get their knees chopped off in the non-negotiated reorganization. Amazingly, GM will still believes it can support its multiplicity of brands. Thankfully, Rick Wagoner will resign (forced out) and take rest of the Board with him to Aruba. The new CEO will call the game: Chevrolet and Cadillac are the “go forward” brands. The Swedish government will take on Saab (and Volvo from Ford). Every other GM brand will die.

Ford will get close to seeking government assistance, but instead tap its credit line. Ford will count on picking up sales as Chrysler folds, especially in the truck business. CEO Alan Mulally will decide not to replace Chrysler’s foregone rental fleet business with his own vehiclesl he will figure that nameplate devaluation will be too severe. GM will jump on with the business along with Hyundia, Kia, Nissan,and Toyota. But Ford will have a new problem: GM’s cost basis will be lower than Ford’s.

Long Term – Fall

Ford will negotiate a partial debt for equity swap with its debt holders. The deal will dillute current shareholders but the possibility of prosperity is on the horizon. Mulally will keep the Ford jet and his paycheck. Time will name him “Person of the Year.”

GM will undergo a painful restructuring. The dealer body count will fall drastically. Half of GM’s labor force will get shown the door, with little compensation. The UAW’s health care VEBA superfund will get stock in the new GM but little cash. It will be enough to give UAW retirees full health care coverage short term, but it will only be a promise for the future. Ouch.

Parts of Chrysler will find their way to other car companies. Mostly to GM, which will get the minivan business. Ford will scarf the Jeep brand but only pick up the Wrangler. Nissan will pass on the Saltillo truck plant, rightly  figuring it can never compete with Ford, GM and Toyota in the pick up market.

As the credit crisis passes, car sales will rebound late in the second half of 2009. But to everyone’s chagrin, car prices actually increase, forcing folks to “trade down.” This plays right into Ford’s 2010 playbook with its line up of well-equipped small cars.

What say you?

If I didn’t know better, I’d bet carmakers choose model names via a Google simulation. A computer identifies search words that can be punted to page four within days of launch. In this case, it’s only a matter of a week or so before lornezovenza.com and Jac Venza slip into double digit obscurity. At the same time, I suppose Toyota settled on “Venza” because it sounds vaguely Italian– perfect for a car built in Georgetown Kentucky on a Camry platform. In truth, I don’t know what it is: the word, the car, the point. All I know is after spending time in the new Toyota Venza I’ve become a cautious and reluctant fan.

For days, Fiat’s CEO Sergio Marchionne had made noises that his company cannot survive alone and is in urgent need of a strong partner to live to tell the tale in the nasty car business. He may have found a suitor, the Italian business paper Milano Finanza (sub) reports: PSA, maker of Peugeot and Citroen. According to the paper, the marriage is being arranged at the highest levels: Italian Prime Minister Silvio Berlusconi and French President Nicolas Sarkozy are discussing to tie the knot between their countries’ automakers. There could even be a dowry: Berlusconi is currently thinking about aid to the auto sector. Except for Fiat, Italy hasn’t much of an auto sector. PSA and Fiat are no strangers. They have two joint ventures, one for trucks and one for the “Eurovan” MPVs. Combined output of the two companies was 6.2m units last year. A combined Fiat-PSA would have a good shot at the number 4 slot, with Toyota first, GM second, and VW third. Fiat-PSA would have to duke it out with Ford and Renault-Nissan. What’s the prospective couple saying to all this?

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Next time you’re driving, look around. Provided you’re one of TTAC’s North American readers, chances are you’ll see at least one third-gen Accord humming along happily– despite its tatty cosmetic condition. The late ’80’s Accords showcased perhaps the finest demonstration of Japanese manufacturing capability; Honda crafted a sedan rivaling the legendary Toyota Hilux’s affinity for destruction-resistance.

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ToMoCo tightens belt hard: Toyota has put major capital investment projects on ice while sales tumble and the global economic condition looks grimmer by the day, the Nikkei (sub) says. Major projects affected: Chinese factory expansion delayed until sales recover. Capacity expansion in Brazil and India on halt. Mississippi plant opening delayed until 2011 or later. Revamping of production lines in Takaoka, Japan, pushed back to at least 2010. The Nikkei: “The recent postponements are likely to impact a wide range of entities, including part suppliers, materials makers and equipment manufacturers. Other automakers might follow Toyota’s lead in cutting capital expenditures amid the global sales downturn.”

VeeDub closes Chinese plants “for maintenance:” Volkswagen’s two Chinese joint ventures are planning to partly suspend production lines to “conduct maintenance work,” China Daily says, citing a Sunday report by state television. FAW-Volkswagen plans to suspend part of its production at their plant in Changchun at the end of the year. Shanghai Volkswagen will also suspend work at its production line for half a month from mid-December to early January. China Daily called Volkswagen’s office in Beijing and the two joint venture companies. The phones “rang unanswered on a Sunday,” writes China Daily.

Daimler cuts costs: Daimler aims to cut costs at its Mercedes-Benz Cars group by 10-15 percent in 2009, Reuters says. In the sales division, costs were to be reduced by up to 30 percent.

And it’s hitting the parts makers: Bosch plans to reduce costs in its automotive division by not renewing temporary workers’ contracts and possibly cutting jobs outside its German home market, a company spokesman said on Saturday to Reuters. Sales in October and November slumped by 20 percent.

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According to Dubai’s Radio One, the credit crunch has dealt a serious blow to the venerated extravaganza of excess known as the Abu Dhabi Motor Show. Several major manufacturers have pulled out of the venue due to start on the seventeenth of this month, citing diminishing returns for the capital invested in the displays. BMW, Porsche (which just pulled out of the Canadian show as well) and the VW Group (most notably Audi and Skoda) all cut bait. Who’d a thunk it? The Cayennes, X5s and Q7s blasting down Dubai’s dusty but extremely smooth highways almost outnumber Nissan Tiidas and Toyota Corollas. General Motors, on the other hand, has upped their square footage to dominate the Exhibition Hall in downtown Abu Dhabi. They’ve also setup a test drive program (as long as you have a driver’s license, are 21 and don’t look dubious). GM offers easy financing: “0-new car in 60 Minutes.” As many of the potential customers of the various GM models in the UAE are ex-patriots, or imported slave labor with limited UAE credit, this prearranged financing should prove very successful. Manufacturers  certain to display their wares: Lamborghini, Bentley, Rolls Royce, Ferrari, Aston Martin and Shelby, with the fastest production car in the world, the Ultimate Aero.

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.

Canada ready to help – if U.S. goes first: Canada’s industry minister Clement said that the Canadian government has agreed to provide aid to automakers – as soon as the U.S. government approves a rescue package, says Reuters. The amount of money Canada is proposing is based the country’s 20 percent share of the auto industry. The more the U.S. shakes loose, the more Canada’s 20 percent share will amount to.

Japanese strength hurts Japan: Japan’s automakers will lose $2.2b in profits in the current fiscal year if the yen remains at current high levels against the dollar, the Nikkei (sub) reports. Toyota’s full-year operating profit falls by $450m for every 1-yen decrease in the value of the dollar. Most automakers have an exchange rate of 100 yen to the dollar in their budgets. If the yen stays stronger than planned, it’ll mean itai-itai (major pain) for their books. The Japanese fiscal year usually ends in March. Markets have a perverse way of regulating themselves. And governments have a tendency towards tinkering with the market when they see fit. Some, amongst them the Financial Times, expect an engineered drop of the Yen before March.

Japanese unions want more: Toyota Motor Workers’ Union is unimpressed by the plight of the company, and is expected to demand steep pay increase in the upcoming spring wage negotiations, the Nikkei (sub) learned. That would be the fourth annual pay increase in a row. In tune with the current discussions, the union argues that the increase would “boost domestic demand” in addition to maintaining living standards.

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As demand goes, so also goes production. With sales dropping month after month, nearly every major player has been slowing or shuffling production for some time now. Today we are being treated to a pile of cutback stories that is so large as to invite speculation on the timing of the simultaneous announcements. By the way, if you love conspiracy theories and have the [sub], AN’s James B Treece will tell you his favorites. Just remember, all that glitters is probably tinfoil. Anyway, back to the horrible news about how horrible everything is. GM is slashing 250k units from its Q1 production plan, reports Automotive News [sub], a move that affects “virtually” every GM plant. The General Motors that built 885k units in Q1 of this year is looking at a production target of 425k for Q1 2009. GM denies that it will close all its plants for all of January, but according to spokesfolks “it’s safe to say that most of our plants will be closed the week of Jan. 5.” And GM is far from alone. Chrysler, Honda, Subaru and Toyota all have their own awful news to pile up on the mess.

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For some companies, the ongoing financial crisis will be fatal, but for others, it may turn out to be a historical opportunity to re-define themselves. When weak brands disappear, others can fill their niche. Honda, for one, seems to be one of the first car makers to seize the opportunity that the industry’s re-structuring is providing. “Where we want to be by 2015 is the environmental leader. I mean that in a credible sense, not a greenwash sense,” Chris Brown, the head of marketing for Honda Motor Europe, told The Guardian. Which is easy to say, although Brown says Honda does support an eco-rating system to prevent misleading environmental advertising claims. But the first step in this branding conversion was announced last week, when Honda said it would be terminating its Formula One activities and re-assigning its F1 engineers to work in eco-technology. Egads! Is Honda about to put all that talent towards becoming the car for the dour, anti-car league?  Honda is directing its $150m+ ad budget for Europe and Africa towards addressing this question. As Brown puts it, “We want to change the conversation completely. At the moment everything is heavy-handed, preachy and overwhelming. We want it to be positive, optimistic, joyful, powerful.” 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.

Congress sends Asian stock market to crapper: When Asia heard of the Detroit debacle in Congress, everybody called their broker and placed sell orders. Hong Kong was down 5.5 percent. Tokyo stocks fell 5.56 percent. Hardest hit were autos with Toyota down 10 percent, Honda lost 12 percent, The Nikkei (sub) reports. Investors fled the dollar for the safety of the Japanese Yen. The greenback fell to a 13-year low versus the yen Friday afternoon. This doesn’t make exporters happy, as their wares get more expensive in dollar terms.

Changan stock halted, pending “unprecedented” news. Changan, Ford Motor’s China partner, said on Friday it will continue to suspend trading in its shares “pending announcement of a major issue,” Gasgoo reports. In a statement, Changan did not specify the nature of an “unprecedented” issue, which it said the company’s management was still discussing. Its A shares, traded in Shenzhen, were suspended on Oct 10, a day after news of a possible purchase of Ford’s Volvo unit hit the wire.

Sweden bails out Volvo and Saab: At least for the time being. Sweden’s government approved a care-package of $3.4b for the two formerly Swedish makers, das Autohaus reports. They also reiterate: “Both brands are for sale.” Most of the money will be loans by the European Investment Bank, guaranteed by the Swedish government. Sweden’s finance minister Borg rules out a takeover by Sweden’s government.

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Ah, the first snow of the year.  The frozen blanket transforms even the ugliest landscapes into crystalline sanctuaries. Crisp air fills the lungs and the inevitable homey smell of a wood fire tells of a distant warming hearth. Earth’s annual metamorphosis triggers a few moments when we get to live a dream stolen from the cover of an old December issue Saturday Evening Post. But for too many, this winter wonderland fantasy is abruptly cut short by the sickening sound of exploding metal, glass and plastic, because the first snow of winter also invites a rash of traffic accidents.

I spent ten winters in northern Utah. Every year, highways ground to a halt from hundreds of traffic accidents on the first day that snow accumulated on road surfaces. I thought, these are Utahans, they should know how to drive on snow. What’s the deal?

Driving on snow and ice requires a recalibration of our timing. By the end of the summer, we don’t think about how long it’s going to take us to brake for an upcoming stop sign on naked pavement; we feel it. Our ingrained habits betray us when water, snow and ice rudely come between us and the road surface. We need practice.

Coming from Texas, I feel disadvantaged driving through white-capped Wasatch Mountains. As George Strait crooned, there’s no Snow in San Antonio. So at the first accumulation of snow, I hop into my old Camry and head for empty parking lots and sparsely traveled back roads for a little automotive me-time.

With no other cars around, I experiment to find out how fast I can corner and stop. I also test to see how steep a road I can safely climb or descend. I re-learn how to finesse both brake and throttle. Back in traffic I’m rightly adjusted to slow-up and allow for proper intervals.

Each year, I repeat this practice ritual at first snow fall. it’s kept me accident-free through rough Rocky Mountain winters.

But despite the drill, getting caught in a blizzard in my trusty old front-wheel drive Toyota still took its toll. I vividly remember white knuckling my way through several snow storms on the road home from grandmother’s house (literally) with my wife and small kids, as I struggled to keep the car on the road and avoid hitting or being hit by other drivers. While the greatest winter driving safety device is the lump of fat and knot of neurons floating between a driver’s ears, equipment also plays a role.

First and foremost are the right tires. On snow and ice, a good pair of snow tires can make even the worst rear wheel-drive (RWD) car a significantly more competent machine. Conversely, the most advanced all wheel-drive systems are rendered impotent with summer meats or worn treads.

Traction control (TC) has emerged as a great equalizer for RWD cars. TC uses either the Anti-lock Brake System or electronically controlled clutches to transfer engine torque to the wheel with the best traction. Last winter I drove a convertible Mustang (top up) through a Chicago snow storm. Despite the superabundance of torque, the pony car’s rear-end stayed safely behind me at all times, without so much as a slip or stall. With the TC off, I turned enough doughnuts to feed the entire Chicago PD.

It would seem that AWD or four-wheel drive cars and trucks are less safe than FWD. Very often we see that the first drivers to slide off the road when the weather turns bad are at the wheel of these “super capable” cars and trucks. But overconfidence is a form of driver error, not equipment failure.

This is an important distinction. When Jack Frost catches a cold, technically the best-equipped cars and truck for safely driving are AWD and 4WDs with appropriate tires.

In low-friction environments, being able to put power to all four wheels can provide up to four times greater traction while acceleration or pulling through a corner over a RWD or FWD car without traction control. To an extent, 4WDs also help in braking due to increased power train drag that allows drivers to moderate their speed without hitting the brakes.

On the down side, these systems add weight and neither improves braking or cornering (except while accelerating). And that’s where lame brain drivers get in trouble. The ability to accelerate on the slippery stuff seems to drain IQ points from drivers.

And so we come full circle. While equipment can help aid drivers, the greatest factor is the man or woman gripping the steering wheel. I love the change in seasons and look forward to winter sports, or just messing around in the snow. But when it gets icy and dicey, nothing beats proper snow tires steered by a calm, practiced, alert and sensible driver.

…and Honda tops the list for the first time. Nearly 65 percent of new Honda purchases replace an older Honda, edging Toyota’s retention rate by 1.5 percent. Lexus comes in third with 60.4 percent retention, followed by Mercedes and BMW. Ford scored the highest of all domestic brands, capturing 6th place with 52.5 percent retention and barely edging Chevrolet which boasts an even 52 percent retention. Cadillac was the only other domestic brand coming in above the industry average of 48 percent. Jaguar scored the lowest in the survey, with only 26.2 percent retention. Pontiac was second to last with 27.2 percent, with only Mitsubishi and MINI joining it under 30 percent. Check out the full results in PDF form at JD Power’s site.

Toyota spokesman responds in the Detroit News, asking “How do you tell a worker in Kentucky who’s producing a Toyota that his job is worth less than another American autoworker’s?” How indeed. And we thought the bailout was about fighting racism.

In an SEC filing today, GMAC Financial Services  warns that it may back away from its bank holding company status application, due to its inability to refinance some $38b in debt. That bank holding company status would make GMAC eligible for TARP funds, but without a federal rescue many see GMAC heading for bankruptcy court says Automotive News [sub]. Including GMAC. The Cerberus-owned finance firm warned that if it doesn’t receive holding company status by December 31, “it would have a near-term material adverse effect on GMAC’s business, results of operations and financial position.” Meaning it will be forced to sell of more assets (with no buyers lining up) and miss 2009 debt payments. To meet the Fed’s requirement, GMAC said it needs about 75 percent participation in its debt-swap offer. So far, participation is just over 20 percent. The good news? If you’ve got $20b or so rattling around and you want in, GMAC has extended its debt-swap deadline until December 12. Deep Throat breaks down the bad news thusly: “GM would have to write down its investment in GMAC likely to zero.  The big problem is the floorplan issue for dealers.  There are few replacement lenders right now, and those that will step up will offer harsher terms, curtailments, etc.  That means less ability for GM to stockpile cars at dealer lots.  OTOH, it’s possible that other captives, like Toyota’s finance arm, could seize an opportunity to play… especially if a GM dealer is also a Toyota dealer.  But again, terms will be critical, and depends how much exposure these guys want and how much capacity they have. What’s interesting is that the bonds trade high with only 10-15% discounts from par.  This is due to the recovery from finance assets being much better than from manufacturing assets.”

German VeeDub dealers want Wolfsburg bail-out: Most of VW’s dealers in Germany are in dire straits. They are looking to Wolfsburg for financial help. “Others can ask for government help, we need the help of Volkswagen and the Volkswagen Bank,” said Michael Lamlé, head of the VW/Audi dealer council to Automobnilwoche (sub.)

Stimulus, Russian style: To protect the nascent Russian car production, and to lure/blackmail more manufacturers into building in Russia, the country has raised its import duty on new cars to 30 percent, reports Automobilwoche (sub.)

Chinese VW workers get German Christmas holidays: Volkswagen’s two joint ventures in China are planning to give their workers 15 working days of vacation from mid-December until the beginning of January, Gasgoo reports.  SAIC will make approximately 20,000 units less. VW’s second venture FAW-VW has similar plans. VW has already sold 931,000 cars in China through to the beginning of December this year and is determined to hit the 1m mark.

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