More new information from today’s GAO post:

Moreover, whether enough time has passed for the impact of the structural changes to be seen is unlikely, especially given that the automakers have not completed restructuring, the economy is still recovering, and new vehicle purchases remain at low levels. For instance, although the federal Car Allowance Rebate System program resulted in a sales spike in August,16 September sales returned to historically low levels. These and other challenges are likely to delay the companies’ recovery beyond what it would be under more favorable economic circumstances.

As TTAC noted last Friday, “finding a real, sustainable bottom of the market from which to grow is not made easier by erratic bursts of stimulus frenzy.”

From the just-released GAO report (PDF) on the auto bailout:

Chrysler’s shareholders, including Treasury, have agreed that  Fiat’s equity stake in Chrysler will increase if Chrysler meets certain benchmarks, such as producing a vehicle that achieves a fuel economy of 40 miles per gallon or producing a new engine in the United States. Treasury officials stated that they established such up-front conditions not solely to protect Treasury’s financial interests as a creditor and equity owner but also to reflect the Administration’s views on responsibly utilizing taxpayer resources for these companies. While Treasury has stated it does not plan to manage its stake in Chrysler or GM to achieve social policy goals, these requirements and covenants to which the companies are subject indicate the challenges Treasury has faced and likely will face in balancing its roles.

As we wait for October sales to come rolling in, I’d like to take advantage of the calm before the storm to update our faithful readers on the wild week to come. Tomorrow I’ll be flying to Detroit to cover Chrysler’s five-year product and business plan. Luckily though, the trip will not be limited to a six hour presentation on “Fiat’s fuel-efficient engine technology” and sundry Pentastarred optimism. We’re also getting the opportunity to interview a certain Mr Ian Callum, chief designer for Jaguar. Do you have any burning questions about the new XJ, the XF or Jaguar’s new styling direction? Let us know and we’ll be sure to ask for you. We will also be covering the roast of Bob Lutz, so be sure to tune in for a report on the best jokes of the evening (although really, nobody expects them to improve on Farago’s effort). Though we’re thrilled to be able to offer a week of fresh reporting, interviews and jokes about GM’s Vice-Chairman, making it happen might require a slightly slower pace of content this week. Luckily Robert Farago, Bertel Schmitt, Paul Niedermeyer, Sajeev Mehta and other TTAC faves will be stepping up to keep the flow of news, commentary and analysis steady. So get ready for a big week, and take a moment to tell us what you most want to hear from Mr Callum, and the New New Chrysler. And thanks, as always, for your tips, comments and support.

For those of you unfamiliar with the secret language of telephone-based customer service representatives, RTFM means “Read the F-ing Manual.” Only now, for Chrysler, it’s PTF-DVD: “Play the F-ing DVD.” Automotive News [sub] reports that “Chrysler Group is replacing its traditional owner’s manuals with DVDs and an abridged printed guide in an effort to reduce costs and save 930 tons of paper annually.” Wow! Can you imagine how much better off the planet would be if Chrysler stopped making cars? Just kidding. As for costs, well, taxpayers have sunk over $10 billion in this bad bad boy, so every penny ChryCo doesn’t spend on paper manuals goes to their “Save the Sebrings!” campaign. Uh, how many pennies is that, anyway? “Spokesman Bryan Zvibleman . . . declined to say how much will be saved by the change, which is taking effect with 2010 models.” Declined? As in refused? I like “demurred,” but then I like my euphemisms shaken, not stirred.

Is this a big deal? It sure was to Chrysler (the artist formerly known as “under private equity ownership, we can move much faster than our competition”)  . . .

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A dealer writes:

Say I order a pickup truck from the Chrysler mothership: an ’09 Dodge Mega Cab Cummins 4×4. MSRP: $59k. Invoice: $53k. Hold back: $2,400. Chrysler bills my bank for invoice ($53k). My bank gets the title and pays for truck. [ED: this is also known as floor-planning or flooring.] I take delivery of the truck, I sell the truck. Two weeks later, my floor-planning bank transfers the funds to Chrysler. First, I have to pay off the flooring liability: the Ram’s invoice price ($53k). Then I wait for the factory rebate money. That’s why it costs so much to operate a franchise dealership: the operating capital requirment is huge. We are fronting the manufacturer’s cash flow by overpaying for the units when we (the dealer) buy them from factory.

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So it’s the dealers’ fault if Chrysler goes down in flames. Nothing to do with Daimler, who gutted the company like a fish. Or Cerberus, who wanted to gut the company like a fish, but found itself without a fish to gut. Or the company’s current management, who have lied, stonewalled, mislead, cut backroom deals with our elected representatives and generally manipulated honest, taxpaying Americans into supporting their stupid selfish schemes. As Chrysler’s backers, as their only means of survival, let’s think about this. ChryCo dealers are sitting on a 151-day supply of new vehicles (provided new car sales have stabilized). Even if Chrysler dealers didn’t order another car, truck or minivan, they’d have five months’ supply. There’s only one reason for them to take any more vehicles: to help justify the company’s desire to milk/bilk/fleece/con Uncle Sam for more “loans.” And still Cerberus point blank refuses to reveal to us, their supposed paymasters, who owns the company. No matter what you think of a ChryCo Chapter 7 or 11 or car dealers, this is an unseemly, disgusting clusterfuck. Look what they done to my Chrysler, ma.

An increasing number of media reports are indicating that instead of a single “car czar,” Obama will appoint a team to oversee the auto industry turnaround effort. Current reports indicate that Democrat fundraiser Steve Rattner will likely take the top oversight position, but his total lack of (non-political) qualifications for the job is considered an issue. Which is where Stephen Girsky comes in. “They clearly need an adviser who knows the industry,” former Chrysler president Thomas Stallkamp tells Bloomberg. “Girsky certainly knows the industry, and he was close to both GM and the union.” And though I have questioned whether Girsky’s UAW affiliations are best described in the past or present tense, this 2004 presentation (PDF) to Original Equipment Suppliers Association is decidedly prescient. Especially for 2004. And this December 2008 presentation to UAW Local 14 seems to indicate that his recent advising stint with the UAW was a mission of truth and reconciliation rather than one of conniving and obfuscation.

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Or so goes the logic of Brent Snavely and friends over at the Detroit Free Press. Sales down 37.1 percent? The lowest seasonally adjusted annual selling rate (SAAR) since 1982? No way is it going to get worse before it gets better! “This is not real. This is artificially low,” says Jesse Toprak, executive director of industry analysis for Edmunds.com, who goes on to warn that “the industry might not recover without some sort of external stimulus.” Not here, not now! And yet in the midst of all this turmoil, a strained and unconvincing optimism abounds. Well, at the Freep anyway . . .

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In fourteen days, GM and Chrysler will submit realistic plans for viability to Congress. See what I did there? With January’s sales slaughter revealed, it’s obvious neither automaker can survive without a huge and ongoing injection of working capital from the nation’s working capitol. Even if Uncle Sam provides this staggering amount of money (more than enough to start a car company from scratch), GM and Chrysler wouldn’t make enough profit to pay the interest and the principal during the loan’s term. The plans the automakers are about to present to your elected representatives are a fictional moon shot—with a make-believe launch vehicle that couldn’t propel a chimpanzee ten feet.  

Chrysler will point to its deal with FIAT as their lifesaver. In truth, it’s nothing more than a “free look” for the Italians to figure out what pieces of Chrysler they want to buy when the liquidation sale begins.

Worse, if Congress bails out Chrysler with more of YOUR dollars, the deal gets even sweeter for FIAT. Entry to the US market on the back of the taxpayers, a significant ownership stake and eventual control (for $25m) of Chrysler and the time to try and make it all work. That’s some plan. For FIAT.

But here’s the kicker. Nardelli says Chrysler needs “only” three billion dollars more of your money to get there. Are Bob Corker and Dick Shelby the only two guys in Washington that can see the sheer and utter stupidity of this? It’s as clear as daylight that this dog won’t hunt.

What’s the point of throwing $7b (or more) into a company that has no reason to exist in the US market?  A company that needs import technology for small cars and engines to meet the new standards from the Green Party? Heck, save our money and let FIAT come in on their own.

In GM’s case, the plan will look like everything else Wagoner and his team have presented in the past. Goals and actions that have no hope of realization. So far, the UAW hasn’t made the accommodations required—and never will—to the terms of wage/benefit/work rule parity with the transplants.

The unsecured bondholders and other financial creditors might take a cramdown BUT . . . one of the most skillful members of this group (PIMCO) has already pulled out of the negotiations. How about restructuring of the brands and dealer network? They’ll reveal their latest “no plan” plan (i.e., “we’re still reviewing all options”).

The facts are self evident. GM alone lost 122k units of sales in January 2009 versus last year. At an average wholesale to GM of say $24k/unit, that’s a loss of nearly $3b in revenues for the month. Or a run rate of $36b/year. Throw in the drop in sales in Europe and elsewhere around the world, and it might be another $1b to $2b dollars a month in lost revenues. Combined, it could be as much as $50b revenue hit (annualized) for the first half of this year. GM simply can’t cut its expenses fast enough.  

As for Chrysler, it’s worth repeating what Jim Press told his dealers. (“Without orders, the company has to liquidate.”) Uh Jim, your dealers have over 350k units on the ground and you sold 62k units in January. Do you really expect them to “stock up” now?

Bottom line: the car market will suck for the next six months, if not longer. It makes no sense for Congress, the President or the Car Czar to try and craft a plan that saves Detroit with taxpayer dollars without a bankruptcy.

GM and Chrysler have no viability plan that can work in the current sales environment (not that they had one during better times). If anything, now IS the time for bankruptcy, not later. Let the bankruptcy court system do what it’s designed to do best: figure out what’s worth saving (GM) and what’s not (Chrysler).

When the market does come back—and it will—a restructured and reorganized GM will be well suited to offer a smart and sensible line of brands, cars, and dealers that will all earn substantial profits. Parts of Chrysler will still exist (Jeep, Mopar, a couple of others). And Ford might be able to survive on its own as it gains share from the pieces shed by its Detroit rivals.

Why go to all this trouble of proving a case that doesn’t meet the sniff test to the most junior financial analyst on Wall Street? Is it pure politics to save union jobs and avoid the shame of bankruptcy? Or has Washington, DC and the Messiah Crew (Obama, Pelosi, Reid, and the Democrats in Congress) simply lost all sense of the common good with your tax dollars?

Forget it. Let’s not spend any more taxpayer dollars on a moon shot from Detroit.

Not buyers of Dodge Vipers per se. Some 127 of them found their way to a Dodge dealer in January, a 74 percent gain from last year’s total. Of course, that may have a little something to do with the fact that A) Dodge dealers are dealing as if their life depends on it (which it does) and B) the chances of buying a new Viper are decreasing by the minute. Especially since Chrysler revealed that it wants to sell the model as a brand to . . . someone. Oh how we laughed! Well, not Autoblog obviously, despite having reported that American tuner Saleen was a suitor (after having reported that Saleen’s busy going belly-up). I mention this not because I’ve been dying to put the boot in to Autoblog ever since my reader-inspired vow of fraternity, but because it raises the obvious question. Is Chrysler lying when it told the MSM that it has three companies interested in buying its Viper tooling and trademarks? (Setting aside the question of whether or not Cerberus has already mortgaged these “assets.”) Here’s AB’s take:

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It’s the hottest road race of the year. Who are the champs and who are the chumps of the global auto industry? Everybody who’s somebody wants to become a statistic in “world motor vehicle production by manufacturer.” Officially, that race is not over until the fat lady at OICA, the “Organisation Internationale des Constructeurs d’Automobiles” or International Organization of Motor Vehicle Manufacturers, sings. OICA still has the 2007 numbers on their website. Yet, General Motors has already conceded the top post to Toyota. All other manufacturers have already announced their numbers. While OICA is taking their good old time counting, the Nikkei [sub] performed its own tally.

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Holy lack of internal controls Batman! Automotive News [sub] reports the “now it can be told” story behind the story of a Minnesota mega-dealer’s collapse. Chrysler pulled the plug on Denny Hecker last fall, forcing Hecker to close six of his 16 dealerships and sell three others. Turns out Chrysler Financial lent the “flamboyant 56-year-old entrepreneur” $550 million. And get this: $50m of that went to Hecker personally. The information surfaced after Hecker sued Chrysler Financial for canceling his dealerships’ credit lines “without warning.” Chrysler countersued, revealing that it loved them some Hecker. Post-Cerberus, ChryCo threw money at—I mean, “invested”—in Hecker’s dealerships, a rental car agency (since bankrupt), real estate and “investment firms.” Ford was behind the curve on this one; they’ve sued Hecker for a relatively paltry $3.1m for missing vehicle and parts payments. As the Detroit-shaped crater grows larger, look for more “revelations” from American automakers’ go-go past. Others may have done the same thing, but they won’t be facing the same volume or genre of music if/when their dealers end up in bankruptcy court. Meanwhile, Denny better hope his tagline doesn’t apply to his forthcoming court battles: “Nobody walks!”