GM and American Auto Industry Near Bankruptcy News and Discussion
12-13-2008, 11:27 AM
#201
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Canada To Help Bail Out Big 3 Automakers Canada To Help Bail Out Big 3 Automakers
Wallace Witkowski
MarketWatch
SAN FRANCISCO -- The Canadian government will provide General Motors Corp. , Ford Motor Co. , and Chrysler LLC with CA$3.5 billion ($2.8 billion) to help shore up the Canadian auto sector, CTV News reported late Friday on its Web site. The support falls short of the CA$7 billion the automakers requested, the news agency said.
Wallace Witkowski
MarketWatch
SAN FRANCISCO -- The Canadian government will provide General Motors Corp. , Ford Motor Co. , and Chrysler LLC with CA$3.5 billion ($2.8 billion) to help shore up the Canadian auto sector, CTV News reported late Friday on its Web site. The support falls short of the CA$7 billion the automakers requested, the news agency said.
12-16-2008, 01:20 PM
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Moody’s : Prepackaged Bankruptcy Filing Most Likely
By Bertel Schmitt
December 16, 2008
The ratings agency Moody’s Investors Service gets, well, a bit moody about the “bankruptcy is no option” outlook favored in certain Detroit circles. Moody’s says the odds are 4:1 against that happening, Automotive News (sub) reports.
Moody’s said there is about a 70 percent chance of a prepackaged bankruptcy coupled with government assistance. Moody’s graciously places these odds on all three Detroit automakers.
A government bailout without a bankruptcy, Detroit’s favorite, is given just a 25 percent chance.
Detroit will find solace in the fact that Moody’s sees just a 5 percent chance of a “freefall” bankruptcy without a prepackaged plan.
“We think it’s most likely that a prepackaged bankruptcy filing coupled with government financial assistance will be needed to restructure the Big Three,” Moody’s Senior Vice President Bruce Clark said in a statement.
http://www.autonews.com/article/2008...312169870/1197
By Bertel Schmitt
December 16, 2008
The ratings agency Moody’s Investors Service gets, well, a bit moody about the “bankruptcy is no option” outlook favored in certain Detroit circles. Moody’s says the odds are 4:1 against that happening, Automotive News (sub) reports.
Moody’s said there is about a 70 percent chance of a prepackaged bankruptcy coupled with government assistance. Moody’s graciously places these odds on all three Detroit automakers.
A government bailout without a bankruptcy, Detroit’s favorite, is given just a 25 percent chance.
Detroit will find solace in the fact that Moody’s sees just a 5 percent chance of a “freefall” bankruptcy without a prepackaged plan.
“We think it’s most likely that a prepackaged bankruptcy filing coupled with government financial assistance will be needed to restructure the Big Three,” Moody’s Senior Vice President Bruce Clark said in a statement.
http://www.autonews.com/article/2008...312169870/1197
02-04-2009, 12:13 PM
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The Moon’s a Balloon
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 lasy 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 other). 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.
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 lasy 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 other). 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.
02-04-2009, 01:12 PM
#205
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The Man Who Would Be Czar
By Edward Niedermeyer
February 4, 2009
Point three of Barack Obama’s ethics pledge to the American people is that “no political appointees in an Obama-Biden administration will be permitted to work on regulations or contracts directly and substantially related to their prior employer for two years. And no political appointee will be able to lobby the executive branch after leaving government service during the remainder of the administration.” Obviously that’s a high standard, and one that seems increasingly important as the lines between government and industry are blurred by rampant bailouts. And clearly not everyone makes the cut. But as Obama assembles a team to “restructure” the auto industry, the spirit (if not the letter) of his ban on revolving door hiring seems to be falling by the wayside.
According to the Detroit News, the leading candidate for Obama’s “Car Czar” position is a certain Mr Steven Girsky, who the DetN describes as a “longtime auto industry analyst.” Having advised Centerbridge Industrial Partners and JP Morgan on auto issues, Girsky is more than simply an analyst. Automotive News [sub] reported in October of 2008 that Girsky was hired by the United Auto Workers to advise on the proposed Chrysler-GM merger and as AN dryly put it “he may also advise the UAW on a possible federal bailout of the U.S. automakers.” Girsky was also a consultant to GM’s CEO and CFO for just under a year, leaving the firm in 2006. As of October 2008, he also served on the board of Dana Corp, a massive auto supplier firm.
Does Girsky’s experience make him incapable of living up to Obama’s high moral standards? Technically, no. Like Tom Daschle before him, Girsky is clearly a lobbyist, though he’s not registered as one (the defacto brightline for Obama). But having been paid by the UAW within months to advise them on bailout strategy, he’s also clearly not going to live up to the “no work on regulations or contracts directly and substantially related to their prior employer for two years” standard. And if he is appointed as Car Czar, it’s safe to say that he will be guiding regulations and money disbursements that are “substantially related” to the work he has been doing for the UAW.
But as with so many political decisions, the choice of a Car Czar will likely be decided on the lesser of two evils. After all, Girsky may be steeped in the cozy relationships between GM management, the UAW and the government, but at least he has industry experience. Steven Rattner of Quadrangle Group has also been named as a possible czar, but as Newsweek reports, his main qualifications appears to be as a Democratic fundraiser (he is married to the National Finance Chairwoman of the DNC) and media-elite insider. Sure he covered energy and economy beats at the NY Times back in the day, but there’s little to indicate that he would make an especially good Car Czar.
Meanwhile, for all of Girsky’s industry connections, some of his ideas are decidedly TTAC-ish. Like when he got AN Executive Editor Edward Lapham’s collar up by suggesting [sub] that the Detroit Three might need to cut as many as 70 percent of its dealerships. He even seems to cause some consternation among his UAW employers, based on this post at Salon. And that might just indicate the kind of experience and perspective that Obama’s team clearly needs. After all, his Climate and Energy Czar Carol Browner told Automotive News [sub} at the DC Auto Show that there are “lots of clean cars out there and options for the consumer.” You know, because the OEMs say so.
Meanwhile, it seems that nothing will stop or slow the rolling tide of money that is about to slosh into the automotive industry. $2b worth of battery research money is said to be going into the forthcoming stimulus package, and the Senate just approved an amendment to the stimulus bill which would make auto loan interest and state sales taxes deductable from federal taxes. Whether Girsky or Rattner is appointed as Car Czar won’t likely make much of a difference in terms of the amount of money that will be funneled into the industry over the following years. The crucial distinction is whether experience is worth the possibility of a conflict of interest.
Obama’s strict ethical standards are admirable, but if his options for Car Czar are between an industry insider who defines the term “revolving door” and a candidate who is being considered solely due to his political connections, something has clearly gone wrong. I’m not sure this kind of compromise is what people had in mind when they voted for “change we can believe in.” But in this familiarly frustrating choice, at least Girsky has a record of taking stands on crucial issues facing the industry. If he can publicly explain his recent UAW dealings in a way that passes Obama’s muster, Girsky may actually be the least of the available evils
http://www.thetruthaboutcars.com/bai...would-be-czar/
By Edward Niedermeyer
February 4, 2009
Point three of Barack Obama’s ethics pledge to the American people is that “no political appointees in an Obama-Biden administration will be permitted to work on regulations or contracts directly and substantially related to their prior employer for two years. And no political appointee will be able to lobby the executive branch after leaving government service during the remainder of the administration.” Obviously that’s a high standard, and one that seems increasingly important as the lines between government and industry are blurred by rampant bailouts. And clearly not everyone makes the cut. But as Obama assembles a team to “restructure” the auto industry, the spirit (if not the letter) of his ban on revolving door hiring seems to be falling by the wayside.
According to the Detroit News, the leading candidate for Obama’s “Car Czar” position is a certain Mr Steven Girsky, who the DetN describes as a “longtime auto industry analyst.” Having advised Centerbridge Industrial Partners and JP Morgan on auto issues, Girsky is more than simply an analyst. Automotive News [sub] reported in October of 2008 that Girsky was hired by the United Auto Workers to advise on the proposed Chrysler-GM merger and as AN dryly put it “he may also advise the UAW on a possible federal bailout of the U.S. automakers.” Girsky was also a consultant to GM’s CEO and CFO for just under a year, leaving the firm in 2006. As of October 2008, he also served on the board of Dana Corp, a massive auto supplier firm.
Does Girsky’s experience make him incapable of living up to Obama’s high moral standards? Technically, no. Like Tom Daschle before him, Girsky is clearly a lobbyist, though he’s not registered as one (the defacto brightline for Obama). But having been paid by the UAW within months to advise them on bailout strategy, he’s also clearly not going to live up to the “no work on regulations or contracts directly and substantially related to their prior employer for two years” standard. And if he is appointed as Car Czar, it’s safe to say that he will be guiding regulations and money disbursements that are “substantially related” to the work he has been doing for the UAW.
But as with so many political decisions, the choice of a Car Czar will likely be decided on the lesser of two evils. After all, Girsky may be steeped in the cozy relationships between GM management, the UAW and the government, but at least he has industry experience. Steven Rattner of Quadrangle Group has also been named as a possible czar, but as Newsweek reports, his main qualifications appears to be as a Democratic fundraiser (he is married to the National Finance Chairwoman of the DNC) and media-elite insider. Sure he covered energy and economy beats at the NY Times back in the day, but there’s little to indicate that he would make an especially good Car Czar.
Meanwhile, for all of Girsky’s industry connections, some of his ideas are decidedly TTAC-ish. Like when he got AN Executive Editor Edward Lapham’s collar up by suggesting [sub] that the Detroit Three might need to cut as many as 70 percent of its dealerships. He even seems to cause some consternation among his UAW employers, based on this post at Salon. And that might just indicate the kind of experience and perspective that Obama’s team clearly needs. After all, his Climate and Energy Czar Carol Browner told Automotive News [sub} at the DC Auto Show that there are “lots of clean cars out there and options for the consumer.” You know, because the OEMs say so.
Meanwhile, it seems that nothing will stop or slow the rolling tide of money that is about to slosh into the automotive industry. $2b worth of battery research money is said to be going into the forthcoming stimulus package, and the Senate just approved an amendment to the stimulus bill which would make auto loan interest and state sales taxes deductable from federal taxes. Whether Girsky or Rattner is appointed as Car Czar won’t likely make much of a difference in terms of the amount of money that will be funneled into the industry over the following years. The crucial distinction is whether experience is worth the possibility of a conflict of interest.
Obama’s strict ethical standards are admirable, but if his options for Car Czar are between an industry insider who defines the term “revolving door” and a candidate who is being considered solely due to his political connections, something has clearly gone wrong. I’m not sure this kind of compromise is what people had in mind when they voted for “change we can believe in.” But in this familiarly frustrating choice, at least Girsky has a record of taking stands on crucial issues facing the industry. If he can publicly explain his recent UAW dealings in a way that passes Obama’s muster, Girsky may actually be the least of the available evils
http://www.thetruthaboutcars.com/bai...would-be-czar/
02-04-2009, 11:05 PM
#210
Do you mean 'new companies' as in a restructured GM and Chrysler (and maybe Ford as well)?
Or do you mean 'new companies' as in Hyundai, Kia and/or some new Chinese built line of vehicles etc?
I don't know how you feel about your RWD V8 but I like mine...I'd rather not be forced to someday drive a Hyundai Accent or Kia Rio LOL.
Or do you mean 'new companies' as in Hyundai, Kia and/or some new Chinese built line of vehicles etc?
I don't know how you feel about your RWD V8 but I like mine...I'd rather not be forced to someday drive a Hyundai Accent or Kia Rio LOL.
02-05-2009, 08:38 AM
#212
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Do you mean 'new companies' as in a restructured GM and Chrysler (and maybe Ford as well)?
Or do you mean 'new companies' as in Hyundai, Kia and/or some new Chinese built line of vehicles etc?
I don't know how you feel about your RWD V8 but I like mine...I'd rather not be forced to someday drive a Hyundai Accent or Kia Rio LOL.
Or do you mean 'new companies' as in Hyundai, Kia and/or some new Chinese built line of vehicles etc?
I don't know how you feel about your RWD V8 but I like mine...I'd rather not be forced to someday drive a Hyundai Accent or Kia Rio LOL.
And I think that's exactly the wrong way to do it... we need more than a band-aid.
02-05-2009, 10:46 AM
#213
I agree, but without a restructured deal from the UAW and time (which is the issue here), I don't think they can save it. The Big 3 are losing money just by coming to work and turning the lights on. They really need sales to save them (among other things), and the economy sucks so bad right now that they can't give cars away. Watching this unfold is like watching a train wreck. You really want to see what happens, but at the same time, you really don't.
02-05-2009, 12:19 PM
#214
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I don't think even if everyone one America bought a big 3 car it would help them much. They are so screwed from bad descions in the past, that they need a bailout, everyone to buy a couple of cars, and all the moons and planets to be lined up perfectly for them to come out ahead.
02-05-2009, 01:28 PM
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What do you think about the tax credit for purchasing a new vehicle; I think I heard this mentioned in the news but come to think about it even this will not help. I don't really know what the answer is to the present situation...
02-05-2009, 02:30 PM
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Do you mean 'new companies' as in a restructured GM and Chrysler (and maybe Ford as well)?
Or do you mean 'new companies' as in Hyundai, Kia and/or some new Chinese built line of vehicles etc?
I don't know how you feel about your RWD V8 but I like mine...I'd rather not be forced to someday drive a Hyundai Accent or Kia Rio LOL.
Or do you mean 'new companies' as in Hyundai, Kia and/or some new Chinese built line of vehicles etc?
I don't know how you feel about your RWD V8 but I like mine...I'd rather not be forced to someday drive a Hyundai Accent or Kia Rio LOL.
02-07-2009, 01:11 AM
#219
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January ‘09 NA Automotive Production Falls 65.6%
“442,241 vehicles were built last month, compared with 1,170,816 in January 2008. The previous smallest month took place during a UAW strike at Delphi Automotive Systems Corp. in July 1998. That month, North American automakers produced 667,074 vehicles. Total U.S. vehicle output plunged 65.6 percent; Canada fell 58.0 percent; and Mexico shriveled by 49.8 percent.”
http://www.autonews.com/article/2009...902069970/1176
“442,241 vehicles were built last month, compared with 1,170,816 in January 2008. The previous smallest month took place during a UAW strike at Delphi Automotive Systems Corp. in July 1998. That month, North American automakers produced 667,074 vehicles. Total U.S. vehicle output plunged 65.6 percent; Canada fell 58.0 percent; and Mexico shriveled by 49.8 percent.”
http://www.autonews.com/article/2009...902069970/1176
02-09-2009, 09:24 AM
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General Motors to Invest $1 Billion in Brazil Operations -- Money to Come from U.S. Rescue Program
By Russ Dallen
Latin American Herald Tribune staff
SAO PAULO -- General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.
According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."
"It wouldn't be logical to withdraw the investment from where we're growing, and our goal is to protect investments in emerging markets," he said in a statement published by the business daily Gazeta Mercantil.
Meanwhile, he cut the company's revenue forecast for this year by 14% to $9.5 billion from $11 billion, as the economic crisis began to cause rapid slowdowns in sales.
GM already announced three programs of paid leave, and Ardila added that GM Brazil "is going to wait and see how the market behaves in order to know what decision to take" with regard to possible layoffs.
For Ardila, the injection in Brazil's automobile sector of 8 billion reais ($3.51 billion) recently announced by the federal and state governments of Sao Paulo "has already begun to revive sales," which fell by 12% in October.
The executive said that the company will operate a "conservative" scenario in 2009 with an estimated production of 2.6 million units, and another more "optimistic" that contemplates sales of 2.9 million.
This year sales will reach 2.85 million vehicles, which represents a growth of 15% over last year.
By Russ Dallen
Latin American Herald Tribune staff
SAO PAULO -- General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.
According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."
"It wouldn't be logical to withdraw the investment from where we're growing, and our goal is to protect investments in emerging markets," he said in a statement published by the business daily Gazeta Mercantil.
Meanwhile, he cut the company's revenue forecast for this year by 14% to $9.5 billion from $11 billion, as the economic crisis began to cause rapid slowdowns in sales.
GM already announced three programs of paid leave, and Ardila added that GM Brazil "is going to wait and see how the market behaves in order to know what decision to take" with regard to possible layoffs.
For Ardila, the injection in Brazil's automobile sector of 8 billion reais ($3.51 billion) recently announced by the federal and state governments of Sao Paulo "has already begun to revive sales," which fell by 12% in October.
The executive said that the company will operate a "conservative" scenario in 2009 with an estimated production of 2.6 million units, and another more "optimistic" that contemplates sales of 2.9 million.
This year sales will reach 2.85 million vehicles, which represents a growth of 15% over last year.