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.

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This is the first official shot of Honda’s upcoming Prius-fighter. And if anyone can take on the Prius (which despite being down 50% in November compared to November 2007, still sold 8600 units), it’s Honda with this car. I say that because (1) Honda has genuine hybrid building experience with the Insight, and (2) unlike previous hybrid efforts from many manufacturers, it’s not merely a hybridized version of an existing car. It looks unique, and that carries the image that’s so critical in the hybrid market. Previously, we reported that the Insight was targeted to go on sale this Spring for less than $20,000. With continuing reports that Toyota may be taking a loss on every Prius, I’m not sure how Honda plans to pull this off. Still, if you’er into this sort of car (and I’m really not at all), you probably won’t care what Honda’s bottom line is.

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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Halt! Nothing goes there. Toyota will suspend production in Japan on Dec. 24 and 25. This sounds normal to you? Mind you: They don’t believe in Rudolph in Japan. Toyota will partially halt output of Lexus luxury cars at its Tahara plant in Aichi Prefecture and suspend all production at subsidiary Toyota Motor Kyushu Inc. “It is rare for Toyota to stop all production at a factory,” says an astounded Nikkei (sub.)

Honda submerges emerging market plans: Honda froze a project to raise capacity in Turkey and postponed the launch of its second Indian plant by at least a year, says The Nikkei (sub.) With raised eyebrows, the Nikkei notes that the “cutbacks are now spreading to emerging markets, which are seen as key battlefields for growth.”

European CO2 compromise: The EU member states agreed on a big CO2 compromise for cars, Das Autohaus reports. There will be limits. But not so fast and not so strict. Like in 2012,  only 65 percent of new cars should produce less than 120g/100km of the climate-killer. In 2014 it will be 80 percent. 100 percent in 2015. This is a big walk-back from original plans, and the greens are up in arms. The ruling still needs a formal approval.
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Bloomberg reports that Toyota will cut winter bonuses by about ten percent for some 8,700 managers. This is the first time Toyota has reduced bonuses since 1998, as economic headwinds batter even the strongest automakers. Toyota’s profit forecast was cut by 56 percent last month, spurring president Katsuaki Watanabe to create the cost-saving task force. Said hit squad recommended the bonus cuts as well as halving Toyota’s contract workforce by March 31. Watanabe has often warned his firm to beware the symptoms of what he calls “big company syndrome,” in reference to the problems with culture and execution that have reduced GM from its once-dominant position. Compared to Detroit’s production-slashing, brand-reviewing, bailout-mongering approach to hard times, Toyota is looking relatively nimble. Oh, and its projected to earn $5.7b in actual profit this year. It’s not the $18b of a year ago, but at least Watanabe isn’t staring at the possibility of a $1/year salary.

Toyota PR has signed in, reporting that their “Saved by Zero” marketing campaign ain’t saving much. This November, the Japanese automaker’s overall U.S. sales dropped 33.9 percent, from 197,189 to 130,307. Of course, it would have been worse without the zero percent finance deals, which is one scary ass thought. And speaking of frightening, Scion is dead in the water, from xB (-43.8 percent) to tC (-55.1 percent) to xD (-27.5 percent). Still, small dog, small problem. Big dog (Tundra), big problem (-55.9 percent). And that’s nothing as compared to Toyota’s volume sellers, sales of which fell off a cliff. We’re talking Corolla (-12.8 percent) and Camry (-28.2). And for all Congress’ hybrid love, as TTAC predicted (thanks to our tipsters) Prius mania has screeched to a halt. Sales of the gas – electric hybrid fell from last November’s 16,737 to this Turkey month’s 8,660. That’s a 48.3 percent drop. Except for the new LX (up 497.2 percent to 424 vehicles), ToMoCo’s luxury division lost ground across the board, to the tune of -34.7 percent. Clearly, it’s going to be a long, cold winter for everyone in this biz.

When Jonathan Swift’s “A Modest Proposal” was first published, its sustained and unyielding irony lead more than a few to believe that the Irish scribe was actually advocating for cannibalism and infanticide. With the benefit of nearly 300 years, we can now recognize Swift’s detailed plan to serve the children of Ireland’s poor to their landlords as biting satire. Reading the LA Times‘ Dan Neil’s own “modest proposal,” one can’t help but go back and check for signs of self-aware irony (a far less scarce resource than it was in 1729). Sadly, there’s no much to go on, leading me to believe that Dan Neil actually wants the United States federal government to purchase General Motors. Or is there? After the usual litany of Big 3 woes, Neil “modestly proposes” as US takeover of GM. He then correctly anticipates the “gall of free-market ideology rising” in his readers, and he breaks down the case. And it’s off to irony no-mans land. Read More >

Back when we TTAC didn’t have Ronnie Schreiber doggedly defending the D2.8, I contacted former GM PR spinmeister Gary Witzenburg to post an ed on the pro-Motown perspective. Big mistake. Despite– or because of– his exposure to our Best and Brightest, Gary went off the rails faster than the Polar Express. Other than an ex-girlfriend, he remains the only person I’ve ever blocked from my email. Let’s just say the man has “anger issues.” Actually, let’s not. Let’s revel in his vituperation and wonder if Autobloggreen is regretting letting him into their compound. “Here is what I’ll bet those long-suffering auto CEOs wanted to say, but couldn’t: You ignorant morons! How dare you accuse us of building cars nobody wants? We sold 8.5 million vehicles in the US last year and millions more around the world. GM still handily outsells Toyota here, Ford outsells Honda and Nissan, and Chrysler sells more than Nissan and Hyundai combined. How many of our new cars have you driven lately?” Personally, I think Gazza should have gone for the post-modern, hat tip to SNL approach, and begun with “Jane you ignorant slut.” More highlights from Gary’s take on “How to Win Friends and Influence People” after the jump.

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It’s been a while since we’ve run a Ford Death Watch. Which doesn’t mean Ford isn’t dying. It is. It’s just dying more slowly and less spectacularly than GM and Chrysler. In fact, Ford’s head-faked the press. They’ve convinced the pundocrats that The Blue Oval Boys don’t need federal bailout bucks to survive. Oh what the Hell, FoMoCo CEO Alan Mulally just about told Congress, as you’re offering… we might as well accept. In truth, the Detroit’s last man standing is about to hit the pavement just as hard as its cross-town co-conspirators.

Tomorrow, the injury will be audible– and not just in the halls of Congress. Ford’s November sales stats will go splat. Ford analyst George Pipas will seek shelter in metal-moving relativism. Just as Ford proudly trumpets the fact that their cars are nearasdammit as reliable as Toyota’s, Pipas will claim that Ford’s sales drop is nearasdammit as bad (i.e. good) as Toyota’s. Which will be both true and irrelevant.

All things being negative, ToMoCo is still on track to bank $5b in profit this year. Meanwhile, Ford shed $2.6b in Q3, burning through $7.7b of its cash pile. So forget Toyota. General Motors is the more appropriate comparison. And there are only two significant differences between Ford’s plight and that of GM: scope and scale.

GM has eight U.S. brands, six of which need to die. Mazda excepted, Ford sells four brands in the U.S., two of which need to die. GM has around 6550 dealers, 5k of which need to die. Ford has around 4k dealers, 3k of which need to die. Meanwhile, Ford and GM are struggling under the weight of identical labor contracts, desperately trying to shed plants and jobs. In short, as goes GM, so goes Ford.

Commentators— and Ford— like to point out that The Blue Oval Boys are in less danger of running out of cash than GM. Truth be told, the danger’s the same; only the time line varies. Ford’s decision to stock-up on money before the current fiscal meltdown– mortgaging everything up to and including their logo– was either the smartest move the company ever made or the luckiest. Or both. But it doesn’t alter the end result. Unless Ford starts taking in more money than it spends, it’s going to go bankrupt.

As Ford CEO Alan Mullaly bellies-up to the Congressional bailout bar, he’ll parrot GM’s claim that numbers alone don’t tell the story. Right-sizing, on track, bridge loan, bright future, new products, fuel efficiency, world platform, economic downturn, yada yada yada. As the only American automaker with a plausible turnaround tale to tell (which isn’t saying much), Ford will get the money. After all, Congress wants to save SOMEONE in the American auto industry.

Whether or not the feds re-stoke Ford’s coffers and/or help it reduce its overheads, FoMoCo’s comeback is destined for failure, for one reason: branding. Ford doesn’t have any.

Quick: what’s Ford’s slogan? Drive Quality, Drive Green, Drive Safe, Drive Smart or Drive One? Yes. The latter is Ford’s ur-slogan, which says, well, nothing. Given the ailing American automaker’s product overlap, the company’s call to arms might as well be “pick one.” Edge, Flex, Taurus X or Escape?

Make no mistake: this is no small matter. If Ford is to survive, it must come-up with a compelling reason to buy a Ford instead of anything else.

Reliability? Toyota. Resale value? Honda. Price? Hyundai. Stress-free shopping? Saturn. Buy American? Only if you’re thinking continentally. In today’s mixed media world, a car company without tightly-focused branding is like a twenty dollar bill that’s been bleached white in the wash.

Ford’s anodyne anonymity doesn’t end there. Lincoln’s “Reach Higher” slogan– a not-so-subliminal slam at working class buyers– reflects the luxury brand’s lack of a coherent product or marketing plan. And if that’s not enough to convince you that Ford doesn’t “get it,” Lincoln’s farrago of MK monikers illustrates the point nicely. As do the vehicles themselves: a range of tarted-up Fords whose excellence is there for no one to see.
As for Mercury, other than ogling their comely spokesmodel, what’s the point?

Legislators are not likely to concern themselves with such things. If products are the subject, mpgs are the answer legislators want to hear. If pushed, Mulally will argue that Ford’s 2010 Euro-style products will save both planet and company. Politicians will score some points for the folks back home, cross their fingers and sign the check.

But if the pols really wanted to protect the taxpayer’s money (as if), they’d remember that nobody ever submitted a business plan that ends in bankruptcy. The pols would focus on the fact that Ford’s future depends on its products, and products depend on their branding. Someone would look Mr. Mulally in the eyes and ask a simple question: what, sir, is a Ford?

A note to TTAC’s Best and Brightest: if this comparo sounds oddly familiar, that’s because something stinks. But it’s not the husky, malodorous adhesives wafting from the pleather-wrapped Hyundai Veracuz. Nor is it the you-gotta-be-kidding me popularity of a premium-priced Toyota Camry sitting on stilts. The funk comes from mentioning both in the same breath. But I swear on the effeminate grille of a B9 Tribeca that I’ve never read a certain Motor Trend review elucidating this very notion. Fair enough?

Tesla’s hubris knows no bounds. Not only has the Silicon Valley manufacturer of $109k lithium-ion-powered carbon fiber sports cars applied for a $400m federal grant to sustain its oft-delayed and hugely unprofitable quest to “reinvent the automobile,” but they’ve also publicly declared that Detroit’s bailout-seeking beancounters should keep their NSFWing hands off Uncle Sam’s $25b retooling loans. (I’d cut and paste the exact quote from their website, but ten seconds of their white-on-black text is enough to short-circuit my optic nerves). The New York Times fired back, pointing out that taxpayer funds should not subsidize expensive toys. Tesla owner Jason Calacanis retaliated in a fit of “just you wait” pique. “The fact is that Tesla could–right now–produce a car that is 1/3rd to half the price if they set it to go only 100 miles. In nine years, they will easily be able to produce a $40k car that does this. Is nine years too long to wait for this technology to reach the price point that 80% of the new-car-buying country could afford? I don’t think so.” Meanwhile, Toyota has seen the EV’s Li-ion Promised Land, and declared “I may not get there with you.”

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There is a whole lotta bailout going on. More and more people are bailing on lending the Detroit dunces a helping hand. Last to bail: CNN founder Ted Turner. He went on NBC’s Meet The Press and said to Brokaw: “I saw it coming years ago that Detroit was headed for a crash, and it’s amazing to me that they didn’t see it either.”  Ted’s recommendation: “Let them go bankrupt and get Toyota to buy them out.” As if they would. The one who stands firm by the side of the bail bondsmen is United Auto Workers (UAW) boss Ron Gettelfinger. The AP (via MSNBC) reports that Big Ron says the UAW would be “willing to consider more concessions on wages and benefits” to secure a federal bailout. But then again, not so much. “Based on the changes we’ve made to our contracts, we are competitive already.” By the same token (or a different one, I’m not exactly sure), Gettelfinger told CNN that $70-an-hour UAW wages were a “myth.” And Chrysler, Ford and GM should tell Congress they’ll limit corporate pay, bonuses and severance packages in return for bailout bucks. In other words, some pigs are more equal than others.

Sunday. Even  while God rests, the devils at TTAC perniciously prowl the news. While America Slept is a 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 that has its wheels coming off. Don’t let it ruin your well-deserved week-end.

Deutschland’s dealers found guilty of low car sales: J.D.Power, who’s fighting an uphill battle for the attention of Germany’s auto makers, may just have found the elusive key to their hearts and budgets: “Lack of attention from the salesperson is the most frequently cited non-price-related reason for customer rejection of European premium and volume automotive brands,” Power’s 2008 Germany Automotive Shopper Study says. We see all of Germany’s auto makers write the big checks for the study, and invite J.D.Power to conduct proprietary studies to further prove what auto makers deep in their dark hearts had suspected all along: The downturn is all the dealers’ fault. All dealers need to get fired.

Buick or bust: From the U.K., the Financial Times weighs in on the Detroit debate about D.C. dollar donations: “Congressmen mulling this request might want to visit their local Buick dealership. They should have no trouble finding one, with 2,751 nationwide the last time the National Automobile Dealers Association counted, more than double those selling Toyotas. As a result, only 88 Buicks a year are sold per dealer versus 1,821 for Toyota. Barring Chapter 11, multiple brands and excess dealerships can only be remedied with billions in dealer buy-outs due to state protection, as seen with Oldsmobile.”

Recession? Never heard of it: Honda announced that their production in Japan did set an all-time record for the month of October, The Autochannel reports. Even better, October worldwide production at Honda did set an all-time record for any month. What will they do with all those cars?

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Speculation is rife that GM plans on shutting down or selling Saab, Pontiac and/or another brand as a prelude to a federal bailout. Common sense and recent history suggest that any such move will create a raft of breach of contract claims by jilted dealers and suppliers. As Oldsmobile’s demise proves, there’s only one possible resolution to the resulting feeding frenzy: cash termination payments. If, however, GM filed for Chapter 11 bankruptcy, these breach of contract claims would become nothing more than unsecured claims– which are resolved within the debtor’s C11 reorganization. The claimants would be legally barred from costly state court litigation. In a stroke, GM would be transformed. How great is that? But wait, there’s more!

Suppose Saab’s potential new owners want to make the moribund brand profitable by using different suppliers. Outside of C11, fuhgeddaboutit. The resulting lawsuits would daunt even the most dauntless would-be rescuer. Inside Chapter 11, GM can terminate Saab’s supplier agreements without legal blowback. Creditors asserting liens and security interests on GM’s assets are prevented from delaying their sale; litigation over the validity of disputed claims is prohibited. Since the suppliers’ termination claims become unsecured claims, the affected manufacturers would receive no cash payments. None. In fact, GM can use the money “saved” to aid the profitable operations it intends to keep. And the savior gets to do it their way.

As regular readers know, GM’s renaissance is hamstrung by its bloated dealer network– which is protected by 50 state franchise laws. If GM is to match tri-branded Toyota’s slim-line 1200 dealer network, The General’s existing dealer agreements need to be terminated or modified. Outside C11, Oldsmobile. Under the terms of federal loans (or loan guarantees) for GM, the resulting legislation could amend the Federal Bankruptcy Code to create a “GM exemption.” A U.S. District Court could receive exclusive jurisdiction over any and all auto dealer termination claim. No fuss, no muss, no “ongoing situation” a la Oldsmobile.

A disadvantage (apparently) to GM in Chapter 11: the rules of reorganization require full and complete disclosure of the automaker’s financial status and future profit (you remember profit?) projections. Truth be told, “limited disclosure” to taxpayers is nothing more than contrived non-disclosure– which is insulting, misleading and dangerous. By “encouraging” GM to file, the feds would be forcing GM to open its books to full public scrutiny.

This would help end GM’s stifling corporate culture. It would encourage a new broom, and the introduction of a key concept long missing from Renaissance Center: accountability. In fact, prior to December 8, 2008, GM should be required to make a written SEC filing disclosing the identity of:

a. its 100 largest bondholders;
b. its 50 largest trade creditors/suppliers; and
c. its 20 largest common shareholders.

Knowing how much debt is concentrated with which bondholders helps us gauge the prospects for conversion of debt into equity. Knowing the amounts owed to the largest trade creditors helps us understand how quickly creditors/suppliers can be organized and the terms of a Chapter 11 prepack negotiated. [Much of this information is readily available from paid providers of financial data– but not to the public.] This information will also disclose who benefits most from a taxpayer-funded automaker bailout/rescue.

Sorry for the digression. But in corporate restructurings, whether in or out of bankruptcy, there are obvious concerns about management’s competency. It’s rare for creditors or potential lenders to blindly swallow/follow management’s restructuring recommendations. Captains of sinking ships should not get the chance to prove that they were right and the iceberg was wrong. Congress needs its own independent restructuring experts to decide if sinking automakers can be salvaged. Again, Chapter 11 helps bring the automaker out of the shadows and into the light, where it belongs, for its own good.

By the same token, a Chapter 11 filing would eliminate the uncertainty now surrounding GM and its brands. While there’s no doubt that GM’s sales would crater, an “everything must go” sale would create a new buzz for the company’s vehciles. With a compelling public spokesperson at the helm (shades of Lee Iaccoca), GM could ask for– and receive– public sympathy and support for a fresh start. With the right brands, PR guidance and corporate policies (e.g. U.S.-built products or a new committment to green machines ), GM would have a genuinely compelling– and credible– story to tell.

In short, GM’s fear of chapter 11 is entirely misplaced. After the hearings next week, I will propose a 100-day plan for a GM restructuring in a prepackaged Chapter 11. Meanwhile, there are question that need asking. And ask them I will.

Thank God it’s the weekend-edition of While America Slept. That’s pretty much all we have reason to be thankful for. WAS is a 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 that has its wheels coming off. If you hate bad news, don’t tread it.

Japanese car market commits seppuku: Japanese domestic new car sales are likely to drop by around one-third in November, “raising the odds that the full-year tally will be the lowest since 1974,” writes The Nikkei (sub.) Folks, Japan has it worse than back home, so cheer up! Full-year sales of all types of cars, including mini vehicles, are forecast at around 5.1 million units — the lowest total in 28 years. Japan gave up its rank as the world’s second largest auto market to China in 2007, but remained the world’s second largest producing nation. It is expected to relinquish that rank also to China in 2008. That spells major itai (pain) for Nippon. Soon they’ll complain about exporting all those jobs to gaijin America.

It’s all in the brand: To add insult to injury, China’s Guangzhou Automobile Industry Group (GAIG) announced that its two subsidiaries “Guangzhou Toyota” and “Guangzhou Honda” will be renamed as “GAIG Toyota” and “GAIG Honda.” Harmless so far. Here comes the unusual part: Toyota and Honda will be required to pay for the honor of carrying the GAIG trademark, Gasgoo reports. It used to be the other way. The two brands will be sold through one “GAIG” sales channel. GAIG’s chairman Zhang Fangyou said his focus will “shift to brand marketing.” Of the GAIG brand.

GM says bondage no fun: GM is trying to talk their debt holders into exchanging bonds for stock, the WSJ (sub) says. That would help GM avoid C11. The proposal, along with the daring assumption that doubtful investors will accept it, will make its way into the business plan due in DC on Tuesday.

GM BOD to sacrifice Wagoner? The WSJ (sub) also picked up indications from GM’s BOD that the directors may be increasingly inclined to serve Wagoner’s head on a platter to mollify the angry gods of the Beltway. More than one-fourth of the automaker’s 14 directors have already privately expressed frustration with Wagoner, the WSJ says. COO Fritz Henderson is being floated as a successor.

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