The difficulties facing the US car industry have been transformed over the last year from contraction to a battle for outright survival. How did this happen, what will happen next and what are the likely consequences?
Created by robinbrown78 on 07/11/2008
Last updated: 12/03/10 at 09:53
Tags: big-three detroit chrysler cerberus general-motors ford obama chevrolet-volt mulally wagoner nardelli
General Motors Co. will extend the deadline for talks on its Saab unit until Jan. 7, giving Spyker Cars NV more time to come up with financing to buy the Swedish brand, a GM official briefed on the matter said.
GM is willing to review bids until Jan. 7, when it begins the legal process of closing the business by notifying governments and cutting off supplier contracts, said the official, who asked not to be identified because the discussions are private. The new deadline coincides with a Saab board meeting, said an official at the Swedish unit.
GM said Dec. 18 it will shut the unprofitable Saab unit after talks collapsed on a sale to Spyker. The Detroit-based automaker has yet to receive a bid that has financing secured and will proceed with selling individual assets, said the official. Mike Stainton, a spokesman for Spyker, confirmed the deadline and declined to comment on financing.
About a week ago, GM had as many as a dozen potential bidders, most of which lacked funding or industrial capabilities, said a person involved in the negotiations.
http://www.businessweek.com/bwdaily/dnflash/content/dec2009/db20091231_189370.htm
U.S. Rep. Gary Peters, D-Mich., and Sen. John McCain, R-Arizona, held a digital smack-down with each other this week -- with e-mails flying like fists -- over the ultimate fate of Chrysler.
It began Tuesday when Peters took exception to comments McCain made to reporters during a NASCAR race. The senator and 2008 GOP presidential candidate said he still disagreed with using federal money to rescue General Motors and Chrysler and wondered whether there was anyone who really believed Chrysler would survive, "then I'd like to meet them."
Peters urged McCain to take a closer look at the benefits of the rescue and invited him to visit Michigan's 9th Congressional District, which Peters represents and includes Chrysler's headquarters in Auburn Hills.
McCain sent a terse response Wednesday, saying, "When I stated 'Anybody believes that Chrysler is going to survive, I'd like to meet them,' what I meant was any objective observer."
Peters responded, offering three objective experts: Mike Jackson, chairman and CEO of AutoNation; automotive journalist John McElroy and David Cole, chairman of the Center for Automotive Research in Ann Arbor.
As of Thursday evening, there was no response or RSVP from McCain.
"The next step is up to McCain," said Peters' spokesman, Cullen Schwarz.
Ping-Pong, anyone?
http://www.freep.com/article/20091120/NEWS06/911200361/1002/Business/McCain-Peters-spar-via-e-mail-on-Chryslers-fate?utm_source=twitterfeed&utm_medium=twitter
Russian president Dmitry Medvedev is ready to step in and save Magna and Sberbank’s takeover of Opel/Vauxhall from GM.
Medvedev is visiting Germany this week and as part of his trip he will go to Munich to add his backing to the faltering deal.
A Kremlin aide said: “In Munich we will speak out in favour of this deal. It's a good deal. We hope others will support it as well.”
GM had originally agreed a deal with Canadian parts supplier Magna and Russian state bank Sberbank to buy a 55 per cent stake in Opel/Vauxhall.
Since the deal was agreed in May, progress has been slow and Chinese manufacturer BAIC and Belgian private equity firm RHJ International have both lodged bids for the firm.
RHJ is the latest company to bid for Opel/Vauxhall, a move which has angered the union leader of 55,000 GM Europe workers.
“If GM decides for RHJ, it will be business as usual,” said Klaus Franz. “That will kill the company.”
http://www.autocar.co.uk/News/NewsArticle.ASpx?AR=241546
Saab has spelled out to CAR its vision of being an independent car maker double the size of Jaguar. Saab is in the process of separating from GM, as part of the seismic restructuring underway at the car maker previously known as the world's biggest. The final details of Saab's future ownership should be announced in the next few weeks.
Saab plans to build around 130,000 cars a year as part of the Koenigsegg group. It has signed a memorandum of understanding with the Swedish company, which does everything from industrial design to supercars. Koenigsegg is way, way bigger than just the sports car division with well financed backers.
Initial production targets of around 130,000 cars a year are close to today's levels, but in the longer run the new owners hope to take Saab sales closer to the 180,000 capacity of the Trollhattan factory in Sweden – the single factory in the new Saab universe now that the new 9-5 will be home-grown rather than assembled in Germany alongside the Insignia whose underpinnings the new Saab shares.
'Above 100,000 units, we are very efficient,' a senior Saab source told CAR. 'Our record year was 134,000 in 2006 – and we're not far off that now.'
Saab has suffered with an ageing product line-up in recent years. The 9-5 is now 12 years old and the 9-3 has passed its sixth birthday. But the range is about to be refreshed with the new 9-5 waiting in the wings, as well as a 9-4X and – in 2012 – the new 9-1 Golf range. All are signed off, bar the smaller Saab which requires further research under the new owners.
http://www.carmagazine.co.uk/News/Search-Results/Industry-News/Saabs-plan-to-become-a-successful-independent-car-maker/
Magna is on course to complete its deal to buy a stake in Opel/Vauxhall from GM within the next week, according to the firm’s co-CEO.
Siegfried Wolf told a German newspaper that the Canadian parts supplier was still likely to complete its deal, despite interest from Chinese car maker BAIC.
He said: “Every day without a decision is one when cash is burned. We are heading towards 15 July as a target corridor to present documents upon which a decision can be made.
“One or two days are not decisive; we are well on our way (to coming to an agreement).”
Magna’s offer for Opel/Vauxhall includes more job cuts and requires more state aid than the offer from BAIC.
Despite this, Magna is still considered favourite to complete a deal after BAIC’s offer was heavily criticised by politicians, unions and Opel officials.
http://www.autocar.co.uk/News/NewsArticle.ASpx?AR=241378
General Motors and China's Tengzhong will begin talking with regulators this week in a bid to obtain government approval for Tengzhong to buy the Hummer brand by the end of September, a GM spokesman said on Monday.
The relatively unusual step by the two sides of engaging regulators so early in the process, before a formal agreement has been reached, reflects the widespread skepticism surrounding the deal.
"We will start discussions with the Chinese government this week on the Hummer deal," said Micahel Albano, a spokesman with GM's Asia Pacific operations. "We can't sign the deal unless we have approval from the government."
Sichuan Tengzhong Heavy Industrial Machinery, a little-known Chinese machinery maker with no experience in the car industry, raised eyebrows in June when it unveiled a tentative plan to take over Hummer from the Detroit carmaker.
Doubts about whether the deal would get Beijing's approval have been swirling as many believe Tengzhong lacks the experience and expertise to revive money-losing Hummer's operations.
The gas-guzzling nature of the U.S. sport utility vehicle was also cited by state media as reasons for expected opposition from the National Development and Reform Commission (NDRC), the country's top state planner, which must approve the sale.
http://www.reuters.com/article/asiaDealsNews/idUSTRE55S1LO20090629
A decade after General Motors Corp. and Ford Motor Co. spun off their parts subsidiaries, Delphi Corp. and Visteon Corp., the two automakers are now playing a critical role in keeping the suppliers alive.
GM plans to take back several Delphi plants and has proposed putting up billions in a deal that lets a private equity firm, Platinum Equity, acquire what's left of the company. That would bring Delphi's more than 3-year-old bankruptcy case to an end.
Visteon has already handed back many of its plants to Ford, and now the automaker also is paying for the supplier's operations while Visteon moves through its first month in bankruptcy.
Struggling through the worst automotive downturn in decades, Ford and GM have been forced to prop up their former parts subsidiaries to keep much-needed parts flowing.
But the success of the two suppliers -- and the decisions by GM and Ford to spin them off -- was in question even before that.
http://www.freep.com/article/20090621/BUSINESS01/906210536/1014/rss13
The sale of Opel/Vauxhall to Canadian parts manufacturer Magna – widely held to be the most likely outcome from GM's attempts to sell its European operations - is in doubt after the German government announced that the auction process for the troubled Opel/Vauxhall operation is to be reopened.
The German government has received a memorandum of understanding from Magna over the sale, which does not constitute a commitment to buy Opel and Vauxhall. Magna is understood to have financial backing for the deal, but further details have been scant.
German economy minister Karl-Theodor zu Guttenberg and Business Secretary Peter Mandelson have announced that they a re keen to talk to other bidders, potentially bringing Fiat back in the frame. Several Chinese manufacturers have also been mentioned in conjunction with the sale of Opel and Vauxhall.
Due diligence has commenced on Opel and Vauxhall this week, and its outcome is likely to influence Magna's decision on whether to press ahead with the takeover.
It has already committed €300m to Opel/Vauxhall and will need to hand over another €700m to take a majority 55 per cent stake in the company.
Both German and UK governments are seeking assurances from Magna over job losses, but there have been conflicting reports on the safety of Opel and Vauxhall plants under Magna.
http://motortorque.askaprice.com/news/auto-0906/doubt-over-magna-takeover-of-opelvauxhall.asp
Like a resourceful alley cat -- disrespected, kicked around by various owners, starving but tenacious -- the Chrysler automobile company appears to have cheated death once again.
And maybe this old feline can find comfort in the arms of Sergio Marchionne, son of an Italian police sergeant.
"It's like a cat with nine lives, only Chrysler is on its 10th or 11th," says Arthur (Bud) Liebler, Chrysler's senior vice president of marketing until 2001, when he was shown the door after 21 years by the German bosses of what by then was DaimlerChrysler AG.
After Daimler took over Chrysler in 1998 and then discarded her in a humiliating auction nine years later to private-equity outfit Cerberus, named for a mythological three-headed dog, the world economy tanked in mid-2008. Cerberus tried to peddle Chrysler to potential buyers all over the globe but, finding no takers, begged for a bailout from Uncle Sam.
Uncle Sam didn't have much interest, either -- several members of Congress kicked the poor alley cat around in hearings on Capitol Hill -- and basically told Chrysler to find itself a solvent partner. Then along came Marchionne, head of Italian automaker Fiat SpA.
http://www.freep.com/article/20090611/COL06/906110535/1014/rss13
The U.S. House approved a plan today offering up to $4,500 for owners of gas-guzzling clunkers to trade in their wheels for new models in a bid to boost the lagging market for new vehicles.
With broad support from both political parties, the bill passed by a wide margin of 298-119, with two abstaining. Backers in the Senate hope to attach it to whichever major bill will move through that chamber next, although there’s still a disagreement there over whether the plan should focus on higher-mileage models.
The House bill sets aside $4 billion to pay for electronic vouchers given to owners of older vehicles toward new models. With auto sales running at their lowest rate in four decades, the Congressional Budget Office estimated the bill could spur sales of about 625,000 vehicles; backers are hoping for 1 million.
The act “will shore up millions of jobs and stimulate local economies,” said Rep. Betty Sutton, D-Ohio. “It will improve our environment and reduce our dependence on foreign oil.”
The government’s interest in goosing the vehicle market extends to its ownership in General Motors Corp. and Chrysler LLC, both of which are counting on a healthier U.S. market in the coming years for survival.
http://www.freep.com/article/20090609/BUSINESS01/90609078/1014/rss13
Detroit business lion Roger Penske, who led the city’s Super Bowl preparations, downtown cleanup program and revived Grand Prix racing on Belle Isle — all while running the nation’s No. 2 auto retailer — is on the verge of rescuing General Motors’ embattled Saturn brand.
GM is close to selling its Saturn division to Penske in a deal that could keep the brand alive and allow a new manufacturer access to the dealer network, people briefed on the matter said today. An official announcement could occur within 24 hours.
As part of its efforts to refocus itself from eight brands to four, GM has been trying to find a buyer for Saturn. Earlier this week, the automaker said it had 16 interested parties.
A deal to sell Saturn this week would cap a week of sweeping restructuring efforts that included GM’s historic bankruptcy filing and the announcement GM planned to sell Hummer to a Chinese manufacturer.
Penske confirmed in early May that his company, Bloomfield Hills-based Penske Automotive Group Inc., was interested in Saturn.
http://www.freep.com/article/20090604/BUSINESS01/90604081/1014/rss13
Chrysler LLC will be reborn today through the signing of an alliance with Fiat SpA and a renewed pledge of financial support from the Obama administration.
The only question remaining: whether it happens inside or outside of a bankruptcy court. As of Wednesday evening, three of Chrysler's 46 secured debt holders were holding out against a proposed $2.25-billion settlement of the $6.9-billion debt. The Associated Press reported early today that talks had broken off. The three were under intense pressure from the White House and Michigan's congressional delegation to reach a deal, people familiar with the talks said.
Meanwhile, the UAW late Wednesday night overwhelmingly ratified cost-cutting changes in its labor contract that freeze wages for Chrysler's 26,000 U.S. hourly workers and slash more than $5 billion from what Chrysler was to pay into a retiree health care trust next year. That trust would own 55% of the new Chrysler, while Fiat would start with a 20% stake and the government would own another large portion.
President Barack Obama addressed government ownership of car companies at a news conference Wednesday. "I don't think we should micromanage," he said. "But like any investor, the American taxpayer has a right to scrutinize what's being proposed and make sure that the money's not being thrown down a drain."
http://www.freep.com/article/20090430/BUSINESS01/904300501/1014/rss13
Vauxhall may have to source its cars from Korea if General Motors retains the brand after a possible sale of sister brand Opel.
The possibility of Opel becoming separated from GM leaves what one US-based General Motors insider described to Autocar as “a precarious position” in terms of future models and ongoing production in the UK.
GM is weighing up a plan involving sourcing models from its Korean subsidiary, GM DAT (formerly known as Daewoo). It carried out a similar move when its Australian outfit, Holden, began sourcing its front-drive cars from Daewoo instead of Opel in order to improve flagging profits, hit by a weak Australian dollar and a strong Euro.
As a result, many Holden-badged Opel-sourced models have since been replaced by cheaper Daewoo-produced successors.
Under a similar scheme, Vauxhall models such as the Corsa, Astra and Insignia would, in the longer term, be replaced by Daewoo-produced models such as the Kalos, Lacetti and Epica.
“If Opel is sold and becomes separated from General Motors it will leave Vauxhall in a rather difficult position. In the longer term, there may be no option than for it to begin sourcing future models from Daewoo,” said our US source.
As a knock-on effect, Chevrolet would be likely to cease to exist in the UK, with its sales network being incorporated into Vauxhall’s operations. Holden sources have hinted at a possible increase in operations with Vauxhall.
http://www.autocar.co.uk/News/NewsArticle.ASpx?AR=239832
The White House said today that the government does not want to run General Motors Corp., despite GM's restructuring plan that would give the Treasury 51% of the company.
The swap of debt-to-stock proposed by GM today must meet the approval of the Obama administration, which has set a target of 90% acceptance from bondholders who own $27 billion in GM debt. The automaker warned that should it not reach that target, it would consider a bankruptcy where the government would buy much of GM's assets.
President Obama has said the administration did not want to manage an automaker, but the deal at GM and what's expected to be a similar proposal at Chrysler would give the U.S. government great say in both firms.
"This administration and this government have no desire to run an auto company on a day-to-day basis," White House spokesman Robert Gibbs told reporters. "It is not our desire to own or run one of the auto companies."
GM Chief Executive Fritz Henderson said today that while the Obama auto task force has pressed the company on its goals, its also relied on management to determine how those goals would be met.
"What the government has told us is that they want us to develop a plan, to execute the plan, to run the business, to be successful, to be viable, and to take care of the taxpayer so the taxpayer gets a return on their funds," Henderson told analysts.
http://www.freep.com/article/20090427/BUSINESS01/90427079/1014/rss13
Saab is in serious discussions with six potential buyers, according to reports.
Although a Saab spokesman said yesterday that there were 27 parties interested in buying the company, the Bloomberg news agency is quoting a company source as saying only six of them are being taken seriously.
According to the reports, the bidders include an individual investor, a consortium of Swedish companies and at least two private equity firms. None of the leading bidders are reported to be existing car makers.
Saab has been in a state of court-appointed bankruptcy protection since early April, which gives it three months to overhaul the business and seek an agreement with creditors about outstanding loans.
The courts may grant extensions to this state of up to one year in total, but only in three-month steps.
No definitive timescale has been set for the sale process.
http://www.autocar.co.uk/News/NewsArticle/AllCars/239595/
General Motors chief executive Fritz Henderson said a bankruptcy filing is "more probable" than before given the concessions the company must achieve before the end of May, although it is working to avoid that outcome.
GM, which has received $13.4 billion in government loans, is working on parallel strategies: one that would restructure the automaker outside of bankruptcy court and another that would reorganize it inside.
"We are on a two-track plan," Henderson told reporters yesterday. "We have contingency planning underway."
In a push to be more transparent, yesterday's GM conference call was the first of a series of updates on the auto giant's decisions and actions aimed at remaking itself, which must be completed by June 1.
GM will need a $4.6 billion cash infusion in the second quarter to keep the company running, in keeping with a previous plan submitted to the Treasury Department.
"It would be premature to say there has been an approval for further funding, but the size that has been discussed has been consistent with what we have laid out in our plan on February 17th," Henderson said.
GM has not yet made a request for the funds, and last month the company announced it would forego its urgent request for $2 billion in federal loans because it was making progress reducing costs.
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/17/AR2009041701815.html?hpid=topnews
It’s nearing decision time for Saturn. Sometime in the next several days, perhaps as early as this week, General Motors – actually the U.S. Treasury Dept. – will decide whether to allow the brand to survive.
Insiders tell Ward’s the decision will be made by the government and not necessarily GM executives. Apparently, the question is whether to sell Saturn and allow it to become a potentially viable competitor to GM.
According to several Saturn dealers, the real question is whether President Obama’s administration will act with a capitalistic or socialist mindset.
Fortunately for Saturn, there are a number of bids on the table, but are they realistic?
Sources say it’s a process of elimination, based on criteria necessary for the brand to succeed. Working through the list narrows the field of realistic suitors significantly and leaves the Renault-Nissan Alliance as Saturn’s best hope for survival.
Here are the reasons. First and foremost, the winning suiter likely has to be an auto maker, which could make last week’s offer from the Oklahoma-based private-equity group Black Oak Partners a non-starter. That’s not to say a Black Oak or some other private-equity group won’t have a significant role, but the deal will have to be married to a manufacturer in some way.
Saturn has vehicles guaranteed from GM through 2011, unless something drastic changes in the next few weeks. For it to continue beyond that time, the brand needs an ironclad agreement, not a potential promise, with an auto maker that makes it the distribution network for its vehicles.
Without such an agreement, Saturn dealers are existing on a wing, a prayer and crossed fingers.
http://wardsauto.com/commentary/best_partner_saturn_090420/
California Gov. Arnold Schwarzenegger said Monday the federal government should come to the aid of the domestic automotive industry, blaming its problems on a lack of a national energy policy.
"It was not the car manufacturers that created the mess -- it's the government that has screwed up," said Schwarzenegger, a key speaker at the Society Automotive Engineers 2009 World Congress in Detroit.
Schwarzenegger, often a harsh critic of the domestic automotive industry, went out of his way to say he actually supports the industry during an on-stage interview with CNBCautomotive reporter Phil LeBeau.
"Detroit is going to be back," said Schwarzenegger, known for his "I'll be back" line from the 1984 movie "The Terminator."
http://www.freep.com/article/20090421/BUSINESS06/904210371/1002/BUSINESS
Over the past few years, the United States has seen a sharp decline in the number of people purchasing American-made vehicles which tend to be significantly bigger than its foreign counterparts.
After all, why would you want to buy an American-made car when you can get a foreign one for a fraction of the price?
Now, more than ever, people are looking for the lowest prices and more practical deals. It’s becoming less about the bells and whistles and more about function, performance and safety.
According to Edmunds Inside Online, the following are 10 examples of American-made cars that don’t stink:
Pontiac G8
Buick Enclave
Cadillac CTS
Chevrolet Corvette
Chevrolet Malibu
Dodge Ram
Ford Flex
Ford Fusion
Ford F150
Ford Mustang
http://nationaltransportllc.com/blog/what-is-the-future-for-american-cars-10-american-cars-that-dont-stink/
The Treasury Department on Wednesday finalized its program to offer up to $5 billion in short-term financing to parts makers who directly supply General Motors Corp. and Chrysler LLC; the same day fifteen members of the Obama administration's auto task force visited Detroit to meet with executives at GM.
Under the supplier aid program, GM will receive $2 billion initially and Chrysler $1.5 billion, with the ability to tap more if demand is strong. The automakers will run the program and approve suppliers to participate. The carmakers must contribute an amount equal to 5 percent of the government's loans.
Within a week, suppliers could get cash payments, as opposed to the typical 47 days after shipment, as well as credit insurance at a slightly higher cost.
"The U.S. Treasury Department is pleased that both GM and Chrysler have moved quickly to launch supplier support programs," Treasury spokeswoman Jenni Engebretson said.
But the conditions of the aid mean many needy companies won't get help, said Jim Gillette, director of financial services for CSM Worldwide in Grand Rapids. The money is only available to companies that supply directly to Chrysler or GM in the U.S., with parts made in this country.
"I'm not sure it's going to save anybody. The immediate situation is so dire," Gillette said, adding many firms on the edge are farther down the supply chain, supplying other suppliers.
But, if the aid helps suppliers survive until there is an increase in orders, the industry as a whole benefits, Gillette said.
http://www.detnews.com/article/20090409/AUTO01/904090355/1148/
Toyota officials reiterated Thursday that they wished the best for struggling General Motors, and expressed hopes the latest U.S. sales data show an approaching recovery in a key market battered by crushed consumer spending.
"We don't see it as an opportunity," Yasuhiko Ichihashi, senior managing director, said of GM's woes. "We want the American market to return to health."
Ichihashi said Toyota was only hoping for an overall recovery for the U.S. auto industry, including GM. Japanese automakers have said that what is bad for the U.S. auto business is also bad for them because they share parts-makers. The collapse of an auto giant like GM would also likely depress consumer sentiment.
"We hope the American market will recover soon," Toyota executive Masayuki Nakai said at a Tokyo showroom, where the revamped Wish compact minivan was introduced for the Japanese market. "We want GM to keep going."
The plunge in U.S. sales and the strong yen have sent Toyota Motor Corp. into its first expected annual loss since 1950 for the fiscal year that just ended in March.
U.S. car sales figures Wednesday brought some modestly encouraging news: Americans bought 857,735 new vehicles in March, a 25 percent improvement from February, although that was still a 37 percent drop from the same month a year ago.
Ichihashi acknowledged it may be too early to declare that the drop had bottomed out, but said the numbers suggested some hopes for a recovery.
Toyota executives have been tightlipped about the possibility that Japanese manufacturers stand to benefit from a weakening General Motors Corp., and have repeatedly expressed worries about its future.
http://www.detnews.com/article/20090402/AUTO01/904020442/1148/rss25
Opening Day came early for employees Tuesday at Jack Kain's Ford, Lincoln, Mercury dealership, when Ford Motor Co. announced a new program that would help buyers in the event of a job loss.
"When I read it to our sales people, you would have thought we just knocked a home run," said Jack Kain, a dealer in Versailles, Ky. "We've been waiting for this for a long time."
Weighed down by the lowest sales levels in 27 years and consumer confidence at historic lows, Ford and General Motors Corp. announced two programs that would cover buyers' monthly car payments in the event they lose their jobs. All automakers report sales figures for March on Wednesday, which are expected to be just as dismal as February, when companies sold about 688,909 cars.
"It really attacks one of the key challenges in the market right now, and that's confidence in the consumer's ability to make their car payment," said Tim Longnecker, automotive industry executive for Acxiom Automotive, a marketing consulting firm. "I think they're good programs and I think they will spur demand."
The announcements come a day after President Barack Obama said the government will back new car warranties issued by GM and Chrysler LLC, who have accepted federal assistance and are seeking more, to help boost consumer confidence about buying their vehicles.
Ford has not requested federal bailout funds. The company also said it would offer zero percent financing on its vehicles and partner with its dealers to introduce a program that would help local charities affected by the economic downturn.
Under Ford's plan, customers that purchase a new car or truck between Tuesday and June 1 and subsequently lose their job through no fault of their own, will have Ford make their monthly payments for up to one year. The maximum monthly payment Ford will make is $700 — customers would have to make up the difference for payments exceeding that amount. That amount would cover the monthly payment of a $30,000 to $40,000 vehicle depending on interest rates, down payment and trade in value.
The company is offering the plan through a third-party underwriter.
http://www.google.com/hostednews/ap/article/ALeqM5gCkR253_Hxt49TGjzpVLooMnR5JgD9798T600
According to The Wall Street Journal, Cerberus Capital Management is set to shed its stake in Chrysler as part of the conditions surrounding the company's bailout arrangement with the U.S. government.
According to the article, the financial paper cites an anonymous source within the Obama administration as effectively saying that "Cerberus' equity stake no longer holds value" and "...the firm's ownership will come to an end."
According to the WSJ's sources, Cerberus will still hold on to a controlling stake in Chrysler Financial, but its stake in the automaker itself will likely be eviscerated. Such a move could make it easier for Chrysler and Fiat to come to terms on their alliance within the next 30 days (a deadline given to them by the Obama administration yesterday).
http://www.autoblog.com/2009/03/31/cerberus-to-reportedly-lose-stake-in-chrysler-as-part-of-bailout/
Fiat SpA’s Chief Executive Officer Sergio Marchionne said he was very pleased today with the way that the Obama administration viewed the Italian company as a good partner for Chrysler. Obama said that Chrysler has 30 days to conclude a partnership with Fiat or the government will not invest any additional taxpayer funds into the company. He said that the government is willing to pump $6 billion into the company if it partners with Fiat.
Sergio Marchionne’s Statement:
I would like to publicly thank President Obama, on behalf of the entire Fiat management team, for the kind words he used in referring to our work over the past five years and for his encouragement to finalize a sound alliance between Chrysler and Fiat.
We are firmly convinced that Fiat’s environmentally conscious technologies and small and medium car platforms will play a key role in re-establishing a close rapport for the Chrysler brands with the American consumer. Our alliance will not only make Chrysler a stronger company financially, but it will also help preserve American jobs, significantly accelerate Chrysler’s efforts to produce fuel efficient vehicles, and lead to a more rapid repayment of U.S. taxpayer dollars.
The engagement with the President’s Automotive Task Force has been tough but fair, and we believe we will arrive at a result that will establish a credible future for this crucial industrial sector and that assigns the right priority to the repayment of US taxpayers’ funds.
We are delighted that Fiat can play a key role in this important endeavour.
http://www.egmcartech.com/2009/03/30/fiats-ceo-releases-statement-thanks-president-obama/
The founder and chief executive of Cerberus Capital Management, the private equity fund that owns Chrysler LLC and GMAC, said in a rare interview published Wednesday that the firm has "the feeling of a greater calling" with the companies.
But Stephen Feinberg told the Financial Times that Cerberus could not invest more client money into the companies, citing internal rules.
Among Chrysler, GMAC and Chrysler Financial, Cerberus-managed companies have received $11.5 billion in federal loans. Chrysler has said it needs an additional $5 billion by the end of the month to help consummate an alliance with Fiat SpA, and Chrysler officials have also asked for more aid for its finance arm.
"As far as GMAC and Chrysler are concerned, we will hang in there as long as it takes," Feinberg said.
http://www.freep.com/article/20090326/BUSINESS01/903260340/1014/rss13
As public outrage over executive pay continues simmering, Ford Motor Co. disclosed Tuesday in a regulatory filing that CEO Alan Mulally made $4.9 million in compensation in 2008, or $9.6 million less than in 2007.
Mulally, along with Ford's other top executives, all took compensation cuts in 2008 in recognition of sacrifices that employees and other stakeholders have made as the company restructures, the company said Tuesday.
Ford, which posted a record loss of $14.6 billion last year, also has eliminated its annual incentive compensation bonuses for 2008 and 2009 for salaried employees and disclosed that its board of directors will receive no cash compensation this year.
"We do not view these actions as merely symbolic, but as a necessary step in the restructuring of our business," Ford said in a statement accompanying its Tuesday filing with the U.S. Securities and Exchange Commission.
In addition to his $4.9 million in salary, bonus and other benefits, Mulally received stock options with an estimated value of $8.7 million.
http://www.freep.com/article/20090325/BUSINESS01/903250341/1014/rss13
Euroda, the European Opel and Vauxhall Dealer Association said it was willing to impose a levy on every vehicle its dealers sell in Europe.
The money would be used to set up a fund to aid GM's European operations, once it was separated off from the US parent.
GM warned last week that its European arm could run out of cash as early as next month.
The Euroda proposal will be submitted to the German Opel Dealer Association on 19 March.
Euroda agreed in principle a fee of Euro150 on every vehicle sold over the next three years. If all dealers in the networks agreed, this would generate Euro400m over the period
Euroda hopes the levy proposal will go to vote at its general meeting on 15 May.
Euroda chairman Jaap Timmer said: "We have full confidence in our European colleagues and their ability to evaluate the actual situation in the best possible way, also based on their dedication to the brand.
"Across Europe, Opel and Vauxhall dealers employ 125.000 employees and they are responsible entrepreneurs, wanting to preserve these jobs as well as their investments.
http://www.talkingmotors.com/industry-news/28828-dealers-gear-up-to-help-gm-in-europe.html
Days after General Motors Corp. outlined three possible bankruptcy scenarios, the U.S. Treasury Department acknowledged Monday that it is exploring how it might fund a court-protected bankruptcy by GM and Chrysler LLC.
An Obama administration official indicated Monday that the efforts do not reflect any decisions about the auto industry's future.
In its viability plan filed last week, GM said a traditional Chapter 11 reorganization bankruptcy could cost more than $100 billion -- hurting sales as consumers reject GM products and causing turbulence during a process that could take years. But the automaker, which has resisted bankruptcy and emphasized its risks, also said that other bankruptcy scenarios could cost half that much.
For example, a prepackaged bankruptcy, in which GM and its stakeholders would come to terms prior to the filing, could cost an estimated $45 billion. Under that scenario, GM estimates the impact on revenue would be "quite severe near-term." However, the long-term consequences would be "less severe" than a full-blown Chapter 11.
Some outside experts have argued that a court-supervised bankruptcy would allow GM and Chrysler to more easily overhaul their debt and contracts.
http://www.freep.com/article/20090224/BUSINESS01/902240337/1014/rss13
Germany's new economic minister said he has set up an informal working group with the U.S. treasury secretary aimed at finding a way to save General Motors Corp.'s Germany-based Opel unit, according to comments published in a newspaper today.
Karl-Theodor zu Guttenberg said he had contacted Timothy Geithner in Washington about setting up a working group in hopes of finding a way to secure the future of Adam Opel GmbH, according to Bild am Sonntag.
"I will use my first visit to the USA in March to hold further talks" on the issue, zu Guttenberg was quoted as saying.
A member of Opel's supervisory board — the equivalent of a U.S. board of directors — said Friday that Opel needs $4.2 billion to get through the economic crisis. The company has sought government help, but German officials insist that its U.S. parent GM first come forward with a proposal for the future.
Foreign Minister Frank-Walter Steinmeier proposed a European-wide solution that would assist all of GM Europe's subsidiaries across the continent.
"Whomever wants to save Opel must think beyond the next church steeple," Steinmeier was quoted as telling the Rheinische Post. "No single factory is able to survive on its own, whether in Germany or elsewhere."
On Friday, GM Europe's Swedish-based Saab division went into bankruptcy protection, leaving the government in Stockholm rejecting a bailout request from GM.
http://www.freep.com/article/20090222/BUSINESS01/90222019/1014/rss13
General Motors Corp. has hired one of the Democratic Party's top political consultants, sources have told The Detroit News, a sign the company's fight for survival has become as much about politics and public image as business acumen.
Michael Whouley, among the party's most respected organizers of grass-roots politics, most recently was a top strategist on Hillary Clinton's presidential campaign. Whouley's addition comes as even some of the companies' allies in Washington have raised questions about GM's political and public relations strategy.
The carmakers' first round of appearances in congressional hearings in November were widely seen as damaging to their hopes, but, even more recently, there have been issues. Last week, when GM CEO Rick Wagoner met with members of Congress, he did not mention that the company would ask for up to $16.6 billion in new federal aid, according to several sources familiar with the discussions.
The size of the request surprised even some of the company's staunchest defenders, said the sources, who were not authorized to speak publicly. Republicans opposed to more federal aid have cited the size of the request, amid massive federal spending on economic stimulus and bank bailouts, as a reason to cut the companies off.
At the same time, potential foes in the bailout battle are enlisting their own top consultants. A committee of bondholders in tough negotiations about restructuring GM's massive debt has retained the Glover Park Group, one of Washington's most prominent lobbying and political consulting firms.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20090220/AUTO01/902200382/1148/rss25
General Motors Corp. and Chrysler LLC are due to submit their restructuring plans today to the Canadian government for billions in financial aid, but details about how much more they'll need and how it will be used will be hard to come by.
The terms of their requests to the Canadian and Ontario governments are supposed to mirror the demands set by the U.S. government in return for its auto bailout money, including contributions from all stakeholders. GM and Chrysler submitted plans Tuesday to the Treasury Department without final agreements from the United Auto Workers and bondholders, but concessions from suppliers and dealers had been settled.
In Canada, even less has been pinned down. Automakers have complained they have had trouble getting a clear idea of the terms sought by Canadian officials and the Canadian Auto Workers say without conditions from the government and without a sense of what the automakers have planned for their Canadian operations, the union will not even start formal talks.
Despite what appear to be huge voids in communication and negotiations, the consensus is GM and Chrysler will ask for as much as $8 billion (C$10 billion) . The original request was for $3.2 billion (C$4 billion) and was based on the Canadian government's obligation to lend an amount equal to 20 percent of the U.S. bailout figure to protect Canadian operations that provide one-fifth of North American production.
If the U.S. government approves the latest request for $39 billion, that equates to $7.8 billion (C$10 billion) in Canadian aid, with three quarters earmarked for GM.
President Barack Obama, in a meeting with Canadian Prime Minister Stephen Harper in Ottawa on Thursday, said both countries must work together to help the auto industry. "It's going to be very important for our government to coordinate closely with the Canadian government in whatever approach that we decide to take," Obama said.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20090220/AUTO01/902200396/1148/rss25
After receiving billions of dollars in taxpayer-funded bailouts over the last few months, General Motors and Chrysler returned to Washington on Tuesday to shake their chrome-plated tin cups again.
In addition to begging for billions more in bailout funds, the automakers presented the Treasury Department with plans for how they will repay -- eventually -- their taxpayer-funded bailouts and get back on their feet.
But at a time when boldness is demanded, the plans lack innovation. They call for laying off more workers, cutting pay and benefits, and reducing the number of models that are manufactured. And GM even had the chutzpah to cut its projected fuel economy by 10% from what it promised in the survival plan it submitted to Congress in December.
What the automakers don't get is this: What's good for America is good for GM (and Chrysler), and not the other way around. With billions of dollars of taxpayer cash in their bank accounts and billions more coming, GM and Chrysler work for us now. And they have to start thinking about how to serve the country.
Americans need cars that go farther on a gallon of gasoline, pollute less and save money at the pump.
http://www.latimes.com/news/opinion/commentary/la-oe-gerstenzang18-2009feb18,0,730300.story
China is poised to overtake the US as the world’s biggest car-market in 2009, according to estimates released by General Motors.
Based on January’s sales, China’s new car market is forecast to hit 10.7m units by the year’s end, versus 9.8m in the US.
If true, it will mark a further milestone in the meteoric growth of the Chinese new car market, which overtook Japan’s a couple of years ago.
With a population of at least one billion people, China has potentially four times more car buyers than either the US or EU, whose populations are around 240m each.
Today only 200m Chinese are ranked as ‘middle-class’, with a salary big enough to afford a new car, but that figure is expected to grow rapidly in the coming years.
GM estimates that new car sales in January in China reached 790,000 units. GM has to estimate the figures because official numbers take a long time to be collated. The equivalent figure for the US was 668,000.
http://www.autocar.co.uk/News/NewsArticle.aspx?AR=237887
Ford has started to approach potential buyers for Volvo, even though the terrible economic climate is taking a heavy toll on the global motor industry.
The American car giant is keen to sell off its premium Swedish sub-brand as it fights to stay afloat in the midst of the global financial downturn and the collapsing US auto market.
Bankers acting on behalf of Ford are contacting western, Chinese, and Asian car-makers, as well as private equity groups to gauge interest in buying Volvo, according to a report in the FT.
Any deal for the struggling Swedish brand will be difficult to nail down. Ford paid $6.45 billion for Volvo in 1999, but few industry analysts believe it will fetch that much in today's climate. Most car firms have slashed spending as they focus on surviving one of the motor industry's deepest ever downturns.
http://fifthgear.five.tv/jsp/5gmain.jsp?mnk=101&id=3126
It’s clear from how various governments have reacted to the global recession that Europeans value their auto industry more than Americans do, says Carl-Peter Forster, General Motors Corp.’s top-ranking executive on the continent.
“Europe has a very different attitude towards its automotive industry than the U.S.,” Forster tells Ward’s during an interview at the recent North American International Auto Show here. “Much more positive.”
After the U.S. recession went global late last year, European auto makers found themselves facing the same credit crunch as GM, Ford Motor Co. and Chrysler LLC. Although in Europe the situation resulted more from banks hiking interest rates sky-high than simply refusing to lend, it has had the same effect in pinching new-vehicle sales.
According to the latest data from Ward’s, Western Europe sales slid 25.8% in November, leaving the market’s 11-month total off 7.9%. GM, which sells two-thirds of its vehicles in Western Europe, delivered more than 2 million units in the region in 2008 for the third consecutive year, but overall sales dipped 6.5%.
U.S. light-vehicle sales finished 2008 down 18.0%, with GM North America deliveries sliding 21.1%.
But while executives from the Detroit Three faced two rounds of painful Congressional hearings in a bid to secure taxpayer-funded bridge loans to stave off bankruptcy – GM and Chrysler needed cash immediately while Ford sought an emergency line of credit – European auto makers encountered a much smoother path to government support.
GM’s Carl-Peter Forster says autonomous, self-supporting Saab must precede divestiture talk.
For example, GM’s Adam Opel GmbH unit conducted just one top-level meeting with the German government before receiving a €2 billion ($2.6 billion) pledge of support. In the U.S., lawmakers failed to pass a rescue package, leaving an outgoing President Bush to authorize loans totaling $17.4 billion in late December.
Forster says the relative ease with which European auto makers secured backing mostly boils down to dollars and cents. Put simply, Europe’s auto makers needed a much smaller bailout.
Nonetheless, he also notes Europeans have a different attitude toward the auto industry, even as a contentious battle between car makers and environmentalists rages over lowering carbon-dioxide emissions, much like the fuel-economy debate in the U.S.
http://wardsauto.com/ar/industry_regarded_europe_090127/
Chrysler LLC Vice Chairman Jim Press said today the company's discussions to receive an additional $3 billion in federal loans and an alliance with Fiat S.p.A have "gone very well."
So far, nothing in the talks has indicated that either milestone for the Auburn Hills automaker won't come to fruition, Press said during a roundtable discussion with reporters, just ahead of a meeting with dealers at the Westin hotel at Detroit Metro Airport.
Meanwhile, Chrysler, which is operating with a $4-billion loan from the federal government, has "ample cash," Press said.
Press wouldn't disclose how much cash the automaker – private now for 17 months – has in its cash reserves.
But Press stressed that with $3 billion in additional loans, concessions from stakeholders and federal money for technology development, the automaker will have enough cash to make it through the year.
"We feel good, as good as we can in these uncertain times," Press said.
Last month, Chrysler and Italian automaker Fiat announced an alliance that would give Chrysler access to Fiat's platforms – quickening the automaker's pace to make small, fuel-efficient cars – and giving Fiat 35% of the company.
http://www.freep.com/article/20090203/BUSINESS01/90203023/1014/rss13
There wasn’t a V8 to be heard. Full-size SUVs were banished from sight. And the words “electric car” and “hybrid vehicle” were on every carmaker’s video screen.
Detroit—This year’s Detroit auto show was tossed into a brave new world where every manufacturer has to show a plan for hybrid, plug-in hybrid, or battery electric cars for the new US administration that will begin next week.
We previewed the show a few days ago; now we’ll recap the results. A few automakers actually pulled off a surprise or two, a rare and welcome gift these days when everything’s previewed online. To help you sort through the hype, here’s our list of what’s real and what’s not.
http://www.hybridcars.com/news/detroit-auto-show-hybrid-electric-report-card-25418.html
GM and Chrysler have decided to offer hourly employees buyouts to leave the companies and decrease their expenses again. That really isn’t that shocking considering that the companies are desperately trying to pare down expenses in order to meet the terms of a bailout for the industry but there are a couple of interesting points about this round of buyouts that are interesting.
http://missmotormouth.com/2009/02/02/gm-chrysler-buyouts-for-employees-decrease/
For the third time in 30 years, the fate of Chrysler LLC lies in the hands of the U.S. government.
The automaker made it clear last week that it needs $3 billion more in federal loans to close its proposed alliance with Italian automaker Fiat SpA -- a deal that many view as essential for Chrysler's long-term survival.
The alliance would help Chrysler quickly bring small, green cars to the United States and open up overseas markets to Chrysler, Dodge and Jeep vehicles.
But that deal, which would give Fiat an initial 35% stake in Chrysler, also could lead to Fiat owning a majority stake in the Auburn Hills automaker.
That has sparked some political leaders to question whether Chrysler, which already is operating on $4 billion in federal loans, should receive any more U.S. money -- especially since Chrysler is asking for federal money to close the deal, even though Fiat is not offering any of its own.
"It's a big catch-22," said auto analyst Erich Merkle. "You're trying to take the actions necessary for long-term viability. But if you take the actions necessary, you don't know what the government's reaction is going to be."
http://www.freep.com/article/20090201/BUSINESS01/902010420/1014/rss13
Chrysler LLC confirmed Thursday it needs an additional $3 billion in loans from the federal government to close its deal with Fiat SpA.
The deal also requires concessions from stakeholders that are in the terms of the $4 billion in loans it already has received.
Chrysler must present a viability plan by Feb. 17 that the Obama administration will use to determine whether the automaker will receive more loan money.
Chrysler CEO Bob Nardelli said the $3-billion loan and Fiat deal could be closed "basically back to back" after the company meets its loan conditions.
"They're not asking for anything more than what the U.S. Treasury has asked for," Nardelli said in a taped video message on the company's Web site Thursday.
http://www.freep.com/article/20090130/BUSINESS01/901300328/1014/rss13
supercharged A6 luxury sedan will come roaring at viewers of the Super Bowl on Sunday during the first commercial break, but there will be no commercials from the Detroit Three during the game.
General Motors Corp. decided in September to skip the big game for the first time in 10 years because of budget cuts. Audi and Hyundai, which are both pushing for additional shares of the U.S. market, are back for the second year in a row. Toyota Motor Corp. also purchased one commercial.
“We were already operating under reduced operating budgets,” said GM spokeswoman Kelly Cusinato said. “Secondly, we didn’t have a major vehicle launch that aligned.”
The last time Ford ran a Super Bowl ad was in 2006, the same year it posted a record $12.6-billion loss. That was also when the game was played at Ford Field in Detroit. The last time Chrysler LLC ran an ad during the game was in 2007. Later that year, Cerberus Capital Management took a majority stake in the automaker.
“It’s not a strategic priority for us,” said Ford spokesman Robert Parker.
Both the cost and the potential payoff of Super Bowl ads are huge. Last year’s game between the Patriots and the Giants was viewed by a record 97.5 million people nationwide, according to Nielsen Co.
http://www.freep.com/article/20090128/BUSINESS01/90128106/1014/rss13
Ford today announced that it has promoted Elena Ford, 42 — the great-great granddaughter of company founder Henry Ford — to director of global marketing, sales and service operations.
She will report to Jim Farley, Ford’s group vice president of marketing and communications.
Elena Ford, who is currently executive vice president, Ford Motor Credit Co., global brand and marketing, begins her new assignment Feb. 1.
“Elena brings a wealth of experience to the new position and is the leader to drive a coordinated approach for our worldwide marketing efforts and speak with one consistent and compelling voice to customers,” Farley said in a statement.
This marketing approach follows consolidation of Ford’s global product development activities in 2006 and global purchasing operations in 2008. It also reflects Ford’s strategy to move to global vehicles. All Ford vehicles competing in global segments will be common in North America, Europe and Asia within the next five years. They include Fiesta- and Focus-sized small cars, Fusion- and Mondeo-sized mid-size cars and utilities, and commercial vans.
http://www.freep.com/article/20090127/BUSINESS01/90127061/1014/rss13
Visteon, one of Ford Motors' biggest parts suppliers, has hired legal and financial advisers to prepare for possible bankruptcy proceedings, the Wall Street Journal reported, quoting people familiar with the matter.
The hirings don't mean a bankruptcy filing is imminent, the paper said, quoting the people.
Meanwhile, parts makers with stronger finances, like Lear Corp, are working with restructuring specialists and stepping up lobbying in an effort to cushion the blow of a possible industry meltdown, the paper added.
Visteon and Lear Corp were not immediately available to comment.
Some of the biggest U.S. auto-parts makers are planning for potential bankruptcy filings, or are scrambling to avoid them, amid uncertainty about Washington's willingness to increase a $17.4 billion bailout plan for Detroit's Big Three automakers, the paper said.
Production cuts at U.S. automakers are burning into the earnings and cash balances of their suppliers and, as the consumer slump deepens, some may not survive.
General Motors, Ford and Chrysler have slashed production as they strive to turn around their businesses, though government aid has removed some of their default risk, at least temporarily.
http://uk.reuters.com/article/companyNews/idUKTRE50P0UK20090126
General Motors executives today said productions cuts at GM assembly plants, expected to be announced Monday, are in response to the down sales market.
“We need to right-size our production with our sales and inventory. ... We’re going to take the appropriate actions that need to be taken,” Ed Peper, GM North America vice president of Chevrolet, said following a meeting with GM dealers at the National Automobile Dealers Association convention in New Orleans.
Asked about the upcoming production cuts, GM North America President Troy Clarke said the announcement would come in a press release Monday, saying the decision was “a function of the fact that the market is down.”
http://www.freep.com/article/20090125/BUSINESS01/90125032/1014/business01/GM+to+announce+production+cuts
General Motors Corp. said today the Saturn brand could survive a broad restructuring plan being developed that involves selling, shrinking or killing half of its eight brands.
All possibilities are being considered but the options will be narrowed next month when the cash-strapped automaker submits a restructuring plan to Congress, said Mark LaNeve, GM's vice president for North America sales, service and marketing, while talking to reporters during the National Automobile Dealers Association convention here.
"If we just wanted to shut it down, we could have announced that," he said. "Saturn may very well have a place" within GM.
Meanwhile, a decision on a possible sale of the Hummer brand could be announced this quarter. The automaker's restructuring plan must be developed under requirements of a $17.4 billion federal loan package that is keeping GM and Chrysler LLC afloat during an industry-wide sales slump caused by soaring gas prices, low consumer confidence and a credit crunch that ushered in a market downturn described as possibly the worst since the Great Depression.
Last year, U.S. car and light truck sales plunged 18 percent to 13.24 million vehicles, while GM's sales fell 31.2 percent last month and 22.7 percent for the year.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20090124/AUTO01/901240422/&imw=Y
Fiat Auto Group’s deal to create a strategic alliance, and eventually take a 35% stake in ailing Chrysler, has been met with a mixture of despair and rejoicing by the wider automotive industry and its league of commentators.
http://movementbureau.blogs.com/projects/2009/01/fiat-chrysler-a-marriage-made-in-heaven.html
We saw the storm brewing earlier this month when it was learned that Chrysler had spent over $100,000 to print a “thank-you to the American people” in several large national media outlets. It’s now clear Chrysler can’t take the heat the ad is generating. A company blog posting that received hundreds of negative comments was suddenly deleted yesterday.
The move came after a link to the comments became popular on the news aggregation website, Digg. The consumer advocacy website Consumerist.com is in on the action as well.
The surprising move underlines how poorly Chrysler understands the purpose of having a corporate blog. The internet is not always a warm and fuzzy place for fans of your company or product to pat you on the back. Company blogs are increasingly being used to hold companies accountable. When you’re spending billions of taxpayer money, shutting the door to upset investors and potential customers is not usually recommended.
Had Chrysler issued a thoughtful response to the outrage they could have stemmed the tide of negative PR that’s about to head their way. Instead they pulled the “act like it never happened” PR slant- and things will only get worse. That’s because, as the PR company who manages Chrysler’s company blog found out, nothing ever goes away on the internet.
We ran through the comments and here are some of the most intense. It’s clear that some are just mean spirited or downright rude, and while it’s easy to pick out the negative examples we’ve made sure to include some of the comments made in support of the company’s choice to run the ad as well.
http://www.autoinsane.com/2009/01/23/news/marketing-advertising/chrysler-censors-outrage-over-six-figure-thank-you-ad/
General Motors' attempts to cut its debt as required by the government's $13.4-billion loan hit a serious roadblock after one of the world's largest bond investors pulled out of talks with the automaker, an analyst said Thursday.
The decision by Pacific Investment Management Co., known as PIMCO, raises questions about whether the Obama administration will have to recast the goals of the loan agreement and increases the chances some analysts have forecast that the automaker might have to ask a bankruptcy court for help in cutting its debts.
As part of its federal loan deal, GM has to outline a strategy by Feb. 17 for reducing about $27.5 billion in debt by two-thirds. To accomplish that, GM had been negotiating with a committee of bondholders and the UAW, which must consider taking half of the money it's due for retiree health care costs as GM stock.
Without bankruptcy, GM must rely on bondholders and the UAW to voluntarily take cuts.
PIMCO's decision "suggests that negotiations are already unraveling amongst bondholders," KDP analyst Kip Penniman said in a research note to clients. "We don't believe GM can gather enough bondholders ... and holdouts will pose a major challenge to the company's efforts."
http://www.freep.com/article/20090123/BUSINESS01/901230390/1014/rss13
A Democratic senator on Thursday urged President Barack Obama to require Chrysler to repay the federal bailout money it received if Italy's Fiat should take a controlling stake in it.
Sen. Robert Menendez of New Jersey, a member of the Senate Banking Committee, said in a letter to Obama that American taxpayers should not prop up a foreign automaker.
The Treasury Department agreed to provide a $4 billion loan to Chrysler LLC and another $1.5 billion loan to Chrysler Financial.
Fiat said on Tuesday that it was planning to take a 35 percent stake in Chrysler in exchange for access to technology and overseas markets.
"As a potential partnership between Chrysler and Fiat moves forward, I am asking you to address the potentiality of foreign control and require the immediate payback of the loans already dispersed should such a scenario present itself," Menendez wrote in the letter.
A spokeswoman for Chrysler was not immediately available for comment.
Menendez said he personally spoke with Chrysler Chief Executive Robert Nardelli about the possibility of a merger with Fiat. "Mr. Nardelli assured me that he would be supportive of such a requirement," Menendez wrote.
http://www.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUSN2215669820090122
The auto industry has just ended one of the worst years in its history as per-capita sales slumped to levels unseen since World War II. For Detroit's Big Three - General Motors Corp., Ford Motor Co. and Chrysler LLC - survival could hinge on President Barack Obama's willingness to extend a controversial government bailout and their ability to reinvent themselves. At this year's North American Auto Show in Detroit, normally the industry's biggest show of the year, the mood has been grim, as many auto executives contemplate their prospects for survival. Much will depend on an expected federal "car czar" who would oversee the bailout.
Here are 10 fundamental questions facing the car czar and the industry:
1. How many jobs does the U.S. auto industry account for?
The motor vehicle and parts manufacturing industries employed 703,900 people at the end of November, according to the Bureau of Labor Statistics. The sector has shed 116,500 jobs since November 2007, a 14% decline, according to the agency. Auto dealers account for about 1.1 million more jobs.
The Big Three car makers employ about 201,000 workers, according to the Center of Automotive Research, compared with about 113,000 working in the U.S. for foreign auto makers such as Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. The industry as a whole, the research group estimates, indirectly employs between 2.5 million and three million workers, most of whom are employed by suppliers or in services such as warehousing and ports. As a whole, the industry accounts for 13% of U.S. manufacturing jobs.
But such numbers are a big part of the bailout debate. Former U.S. Labor Secretary Robert Reich, who doesn't see a need for bailing out the U.S. companies, says foreign companies who have invested in the U.S. provide work for Americans across the country.
"I'm not sure why it is all that important for them to work for an American-based company. Big companies are becoming global at a very rapid pace," says Mr. Reich. "Our goal should be high-wage jobs in the United States."
But that doesn't mean Washington should stand by and let Detroit collapse, Mr. Reich says. The rapid demise of the auto sector and the three million jobs that it creates would be a disaster, especially for the upper Midwestern states, and should be avoided.
Peter Morici, a business professor at the University of Maryland, says the auto industry drives new innovations, from software to steel. He says that if the U.S. didn't have a domestically owned auto industry, the technological advancements made here would suffer.
"It's hard to have an industrial sector of consequence without an automotive industry," Mr. Morici says. "Would there have been a Microsoft without an IBM?"
http://online.wsj.com/article/SB123257089526103491.html
Update Sources
