Last week’s announcement that had Chrysler turned a Q1 profit and GM had “repaid” taxpayer loans brought a flurry of political posturing about the success or lack thereof of the auto bailout. With Republicans laying into the auto bailout from several angles, President Obama dedicated his weekly address to a defense of industry assistance. Obama still frames the bailout as an unpleasant necessity, but argues that last week’s news means the chances that taxpayers will recoup their “investment” are improving. And apparently the Treasury agrees. According to the Detroit News, Treasury has revised its estimate of auto bailout losses (not counting GMAC) downwards, from $30.6b to $28b. Progress, sure, but hardly a sign that taxpayers can expect full payback from its state-owned automakers.
Tag: Chrysler
While the White House and most of the media spent the last two days parroting GM’s claim that it “paid back” taxpayers, Senator Chuck Grassley was busy writing a letter to the Secretary of the Treasury [letter available in PDF here]. The three-page note opens:
Dear Secretary Geithner:
General Motors (GM) yesterday announced that it repaid its TARP loans. I am concerned, however, that this announcement is not what it seems. In fact, it appears to be
nothing more than an elaborate TARP money shuffle.
No surprises there: TTAC has been all over this ruse for months now. Grassley does sum the situation up nicely, stating that “A debt-for-equity swap is not a repayment,” but the most interesting part of his letter is his theory for why GM and the Administration approved the tax-money reshuffle. Thus far, we’ve assumed that PR was the driving concern in this transparent deception. According to Grassley though, there may be another reason…
Having laid into GM today for trumpeting a government loan repayment, it would be churlish not to point out that, by Detroit standards anyway, GM’s “partial refund” is actually kind of a big deal. Take today’s news from the nearly year-long liquidation of “Old CarCo,” the poisoned (in some cases, literally) remains of what was once “Bad Chrysler.” Bloomberg reports that the US Treasury’s $5b line of credit has been placed in the “unsecured” category of Old CarCo’s last debts, meaning recovery is “undetermined.” As in not so very likely at all.
The last ten years have not been kind to Fiat’s Alfa-Romeo brand, as 2009 sales levels fell to about half their 2000 volumes. Having put Alfa on “strategic review” and stuffed it into a “brand channel” with Maserati and Abarth, CEO Sergio Marchionne has had a change of heart, and is now “determined” to build the brand into a “full-line premium carmaker.” According to Automotive News [sub]’s coverage of Fiat’s five year plan presentation, that means committing to a US presence targeting 85,000 annual sales by 2014. For a sense of scale, the Alfa brand sold a grand total of 103,000 units globally last year. And Alfa is going to have to kick ass around the world to meet Sergio’s goals. By the time Marchionne expects American Alfisti to buy 85k units each year, he wants the brand’s global sales to have increased nearly five-fold to half a million units. Ambitious doesn’t even begin to describe it…
Be extra careful when you read Bloomberg this morning. It will make you think you had one too many last night. The financial news service reports that Chrysler posted a $143 million operating profit in the first quarter,“after cutting costs and introducing a big pickup.” It’s a miracle alright. (Read More…)
Analysts will have a lot of uncomfortable questions tomorrow when Chrysler reports post-bankruptcy financial results, while Fiat unveils “la strategia grande” domani in Italy. They will finally unveil their long-awaited 5 year plan.
According to Reuters, “more questions than answers could still remain about Chief Executive Sergio Marchionne’s turnaround strategy.” The most uncomforting question will be: “Are you sure?” (Read More…)
Fiat Chairman Luca Cordero Di Montezemolo will be leaving the firm to pursue a career in Italian politics, according to Automotive News [sub]. Montezemolo will remain on Fiat’s board, and will continue to serve as chairman of Ferrari, but he will be replaced atop the Fiat empire by vice-chairman and Agnelli family heir John Elkann. Fiat’s shares rallied considerably this morning, according to Bloomberg Businessweek, but not because Montezemolo is on the way out. Rather, Fiat has finally announced the news that speculators have been waiting patiently for: the firm now confirms that it plans to spin off its auto business.
Chrysler is considering bringing a Fiat-engineered subcompact sedan from Serbia to North America under the Chrysler brand. The Chrysler brand product plan, unveiled in November, called for a Fiat-derived subcompact sedan to be imported in 2013. The vehicle would be built in Kragujevac, Serbia, where Serbian automaker Zastava Automobili once made the Yugo.
Chrysler? Fiat-engineered subcompact? The Yugo plant? C’mon Automotive News [sub]… April Fools was weeks ago. Besides, this seems too cruelly ironic to even properly be a joke. Remember, these little gags have to come from a place of love…
Ahead of Fiat’s 5-year plan presentations, Automotive News [sub] is reporting that the Turin-based firm is developing a four-door version of its 500 subcompact. And not just to take on Europe’s Opel Meriva and company: the 500 Multipla will be then fourth and final member of the US-market 500 family.
Chrysler has always held a special place in TTAC’s chronicling of Detroit’s decline, enjoying a bespoke “Suicide Watch” in contrast to our Ford and GM “Deathwatches.” In the first entry in that series Frank Williams wrote of a gutted firm, dependent on incentives and flagging truck sales, seemingly doomed to drag its foreign partner into bankruptcy. Four years and countless opportunities for death with (some) dignity later, Chrysler presents much the same picture. Sure, it’s been rinsed of debts and excess capacity in bankruptcy court, but the Pentastar’s brands are still fundamentally damaged from years of self-abuse and the firm is struggling (and failing) to improve on last year’s sales numbers, which were recorded en route to said bankruptcy. Inventory may be under control, but Frank’s four-year-old assessment of an investor warning by JP Morgan could have been written yesterday [with “DCX” replaced by “Fiat”]:
JP Morgan remains convinced that management patience towards Chrysler has “worn thin and increases the likelihood that DCX will reduce exposure to Chrysler.” It’s the investment community’s equivalent of yelling “jump!” to someone standing on a ledge.
In fact, analysts from London’s Bernstein Research wrote nearly the exact same line yesterday. Chrysler has officially shuffled back onto the ledge, and once again the analysts are shouting “Jump!”
With weeks of recall coverage and with Lexus’s GX460 snagging a rare Consumer Reports “do not buy” warning, you’d think that at least one of CR’s recent “worst-made cars on the road” [via Forbes] would be made by Toyota. But you’d be wrong. Dodge Nitro, Jeep Wrangler, and Ford F-250 join four GM products (Cadillac Escalade, Chevy Aveo, Chevy Colorado and GMC Canyon) as the seven worst cars CR could come up with. And though this hometown sweep for Detroit goes a long way from separating facts from fiction, it’s nowhere near as instructive as the responses from each of the Detroit automakers to the charge of making crap vehicles. Let’s take a look, shall we?
(Read More…)
That was a marriage in heaven but didn’t end up in heaven. We start on earth this time and stay there.
Daimler CEO Dieter Zetsche, explaining the difference between Daimler-Chrysler and the new Daimler-Renault-Nissan alliance in Automotive News [sub].
My first day back at the helm of TTAC has been accompanied by an embarrassment of riches, in the form of both a GAO report on GM and Chrysler’s pension obligations, and the release of GM’s first post-bankruptcy, GAAP-approved financial results. We will continue to mine these documents for the most revealing quotes and statistics, but for now let’s take a moment to consider the political tensions caused by the auto industry bailout. TTAC has long held that political conflicts over the government’s stewardship of GM and Chrysler is a pressing concern, nearly on par with the financial ramifications of the auto bailout, and today’s GAO report confirms our concerns. As the following quote reveals, Treasury is under constant pressure to accommodate political concerns over the management of its stakes in GM and Chrysler, and has received no fewer than 300 official letters from congressional representatives, eager to subordinate the long-term health of the bailed-out automakers to their local concerns.
It would be impossible to blame Detroit’s decades-long decline on a single factor, but if one were to make a list, defined pension obligations to workers would be somewhere very near the top. Thanks in large part to the unionization of America’s auto industry, Detroit has groaned under the weight of crushing pension obligations since time immemorial. And, according to a new report by the Goveernment Accountability Office [full report in PDF format available here], last year’s bailout of GM and Chrysler has not eliminated the existential threat that these obligations pose to the industry. In fact, the taxpayer’s “investment” in GM and Chrysler appears only to have exposed the public to even an greater risk of catastrophic pension plan failure.
Why the endless questions and arguments about the origins of the Chrysler minivans? It’s the old story: “success has a thousand fathers”. You don’t see designers and execs fighting about the paternity of the Aztek. We stepped on some toes regarding the origins of the Espace, and heard from its father. And we took a wild (and disputed) stab at finding the maternal lineage of European minivans, but the American minivan paternity wars go on. Its origins clearly go back to the early seventies, when both Chrysler and Ford developers claim to have been working on “garageable vans”. Meanwhile, the commonly held story is that Hal Sperlich and Lee Iaccocca’s Minimax concept was spurned by Henry Ford II, and they took it with them to bring to fruition at Chrysler. And as usual, its not quite as simple as that. (Read More…)
Recent Comments