Funding for Detroit to focus on fuel-efficient vehicles rather than helping merger with Chrysler
Bill Vlasic and Micheline Maynard
New York Times


Nov 03, 2008

DETROIT–The Treasury Department has rejected a request by General Motors for up to $10 billion U.S. to help finance the automaker's possible merger with Chrysler, according to people close to the talks.

Instead of providing new assistance, the Treasury Department told GM on Friday, the Bush administration will shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department.

Treasury officials were said to be reluctant to broaden the $700 billion financial rescue program to include industrial companies or to play a part in a GM-Chrysler merger that could cost tens of thousands of people their jobs.

But it remained unclear whether the officials were also seeking to avoid making any decision that would conflict with the goals of a new presidential administration.

The Democratic candidate, Barack Obama, has said in recent days that he supports increasing aid to the troubled automakers. Republican candidate John McCain has not said whether he would support aid beyond the $25 billion.

While GM and Chrysler continue to talk, no deal is expected until the government clarifies its role, if any. Potential investors in the deal have been hesitant to back the merger without federal assistance.

GM chair Rick Wagoner had lobbied Treasury secretary Henry Paulson to provide aid to the automakers under the bailout program to stabilize the financial firms.

The Bush administration is still considering a range of options to aid the Detroit automakers, which are losing billions of dollars and rapidly depleting their cash reserves, said auto industry and administration officials, who did not want to be identified because of the sensitive nature of the discussions.

The first step is to get the Energy Department to expedite the release of the $25 billion in low-interest loans for GM, Chrysler and the Ford Motor Co.

Beyond that, the administration is also bringing the Commerce Department into discussions about channelling additional aid to the automakers. With auto sales deteriorating to their lowest level in 15 years, the Detroit Three are struggling to stay solvent.

The deepening troubles led GM into merger talks in September with Chrysler's majority owner, the private equity firm Cerberus Capital Management, and the request for Treasury Department aid.

Auto industry executives and analysts said over the weekend that the loan program is essential to retooling plants and developing vehicles that meet more stringent government fuel-economy mandates.

Getting the loans will allow GM, Ford and Chrysler to redirect money already budgeted for cleaner cars to other capital needs.

"The auto companies are clearly running out of cash, and badly in need of more liquidity," said David Cole, chair of the Center for Automotive Research in Ann Arbor, Mich. "Releasing the $25 billion in loans is a necessary first step.''

Cerberus has had discussions with the Japanese automaker Nissan Motor and its French partner, Renault, about bringing Chrysler into their international alliance. But people familiar with the discussions said Cerberus is now focused solely on a potential GM deal.

The depth of Detroit's problems will become more evident this week with the release of October sales figures and third-quarter earnings of GM and Ford.

Sales fell 26.6 per cent in September, but October's totals could be worse. Auto research website Edmunds.com forecasts sales of new vehicles during the month will drop nearly 30 per cent from the same period last year.

Times are tough for the world’s automakers, which means dealers are having a rough go of it, too. The world’s largest Chevrolet dealer was forced to close its doors earlier this year, but the economic downturn and credit crunch isn’t just reserved for the more mundane brands as the world’s largest Lamborghini dealership has officially closed its doors.

Located in Santa Ana, California, Orange County Lamborghini – the world’s largest Lamborghini dealer by volume – has shut down its operations. Thanks to its close proximity to Tinsel Town and celebrity customers like Kobe Bryant, Orange County Lamborghini routinely accounted for about 10 percent of Lamborghini’s annual sales.

According to Pietro Frigerio, COO of Lamborghini America, Orange County’s problem wasn’t related to sales, but rather to some of the owner’s other business ventures. No word on what else owner Vik Keuylian had gotten himself into.

Lamborghini is now scrambling to fill the massive void left by Orange County’s exit, both on the retail and service sides.

NEW YORK (CNNMoney.com) -- General Motors shook an already embattled auto industry Friday as it reported a huge loss that was much worse than expected and warned it is in danger of running out of cash in the coming months.

GM, the nation's largest automaker, reported it lost $4.2 billion, or $7.35 a share, excluding special items. That's up from the loss $1.6 billion or $2.86 a share it reported a year earlier and was far worse than the forecast of analysts surveyed by earnings tracker Thomson Reuters, which had forecast a loss of $3.70 a share.

But the most shocking news came in its statements about its cash position. GM said it had burned through $6.9 billion during the quarter and warned that it "will approach the minimum amount necessary to operate its business" during the current quarter.

11/07/2008, 1:21 PM
Cadillac News
GM delays CTS Coupe, 9-5, 9-4x, Cruze to 2011


Buried among its other massive news announced earlier today in Detroit, General Motors confirmed the long-speculated and rumored delays of a handful of its key products. Formerly set to be released during 2009 as 2010 model-year cars, the Cadillac CTS Coupe, Saab 9-5 wagon and sedan, 9-4x and Chevroelt Cruze have all been pushed back a year.

The most notable of that quintet of new models is the Chevrolet Cruze - Chevy’s upcoming Cobalt replacement - which will go on sale overseas a year before production begins at Lordstown, Ohio. GM is banking on the Cruze as a high-volume, high-profit premium compact car.

Also important to note is that the Saab 9-5 replacements have been pushed back yet another year. The current 9-5 dates to 1998 (1999 in the United States), though it was subject to a fairly extensive 2006 update. This leaves Saab with a small product portfolio since the Chevrolet TrailBlazer-based 9-7x SUV will go out of production when the Moraine, Ohio, assembly plant shuts its doors on December 23.

Though the CTS coupe was delayed, the CTS wagon will still debut as a 2010 model in 2009.

11/07/2008, 1:21 PM
Cadillac News
GM delays CTS Coupe, 9-5, 9-4x, Cruze to 2011

.....

The most notable of that quintet of new models is the Chevrolet Cruze - Chevy’s upcoming Cobalt replacement - which will go on sale overseas a year before production begins at Lordstown, Ohio. GM is banking on the Cruze as a high-volume, high-profit premium compact car.

.....

Though the CTS coupe was delayed, the CTS wagon will still debut as a 2010 model in 2009.

It seems like every day there is some headline involving the economic downturn and at least one of the major automakers, but very rarely is there anything on the smaller manufacturers. But even the little guys are feeling the economic strain, with Saleen recently announcing that its operations are up for sale.

Saleen is best known for tuning Ford products, but also produces the S7 supercar and has plans to produce the S5S concept shown at last March’s New York Auto Show. In addition to working on its own creations, Saleen also built the GT for Ford and has a hand in the production of the Dodge Viper.

The automaker has been in a bit of turmoil since Hancock Park Associates purchased a majority stake in Saleen in 2004, which ultimately lead to the departure of Steve Saleen, the company’s founder. High gas prices and the recent economic downturn have further eroded the business, leading to the ‘For Sale’ sign in Saleen’s front yard.

According to Automotive News, Saleen’s board is hoping for a quick sale, with a time table for a signed deal set for early next year. Saleen isn’t wasting any time getting the ball rolling as it has already sold 20 Ford Mustang GTs, office equipment and factory equipment at auction.

By Bertel Schmitt
November 18, 2008 - 3,031 views

Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports today. A National Enquirer the paper is not. It is one of China’s leading business newspapers, with a daily readership in the 3 millions. The paper cites a senior official of China’s Ministry of Industry and Information Technology– the state regulator of China’s auto industry– who dropped the hint that “the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.” These hints are very often followed with quick action in the Middle Kingdom. The hints were dropped just a few days after the same Chinese government gave its auto makers the go-ahead to invest abroad. And why would they do that?

A take-over of a large overseas auto maker would fit perfectly into China’s plans. As reported before, China has realized that its export chances are slim without unfettered access to foreign technology. The brand cachet of Chinese cars abroad is, shall we say, challenged.

At current market valuations (GM is worth less than Mattel) the Chinese government can afford to buy GM with petty cash. Even a hundred billion $ would barely dent China’s more than $2t in currency reserves. For nobody in the world would buying GM and (while they are at it) Chrysler make more sense than for the Chinese. Overlap? What overlap? They would gain instant access to the world’s markets with accepted brands, and proven technology.

21st Century Business Herald, obviously with input from higher-up, writes that Chinese industry must change and upgrade. China wants their factories to change from low-value-added manufacturing to technically innovative and financially-sound high-value-add industries. Says the paper: “It would be much easier now for strong Chinese automakers to go global by acquiring some assets of their U.S. counterparts in times of crisis.”

Deloitte & Touche sees a trend: “Chinese automakers can start with buying out the OEM projects and Chinese ventures of some global carmakers such as GM and Chrysler.”

The Chinese appear to have bigger plans than an accounting firm can imagine. 21st Century Business Herald acts and writes as if its already a done deal, and the beginning of more to come. “In the coming two years China is likely to see a few of its large Chinese automakers and other manufacturing enterprises set a precedent for achieving globalization by acquiring global companies, just like SAIC or Dongfeng’s possible acquisition of troubled GM or Chrysler.”

Just in case you missed it, the Shanghai Automotive Industry Corporation (SAIC) is China’s largest auto manufacturer. In 1984, the company entered a joint venture with Volkswagen. A decade later, SAIC entered a joint venture with General Motors. In 2007, SAIC bought the Nanjing Automobile Corporation, which had acquired British MG Rover in 2005.

Dongfeng Motor Corporation is a public company, although 70 percent of their shares are reported to be in government hands. They also are one of China’s Big Three. The company has numerous joint venture partners, such as Nissan, Peugeot-Citroen, Honda, and Kia. Dongfeng (which means “East Wind”) was founded at the behest of Mao Zedong himself in 1968.

A take-over of a large overseas auto maker would fit perfectly into China’s plans. As reported before, China has realized that its export chances are slim without unfettered access to foreign technology. The brand cachet of Chinese cars abroad is, shall we say, challenged.

General Motors announced today that it plans to refocus its dwindling resources on its core brands - Chevrolet, Buick, Cadillac and GMC - and sell Swedish automaker Saab, shrink Pontiac to a niche brand and either discontinue or sell Saturn depending on its value. The automaker will cut one-third of its current nameplates by 2012 and lose about 1,700 of its 6,400 dealerships.

The new, streamlined GM will debut by 2012, the automaker told the United States Congress today as a part of its restructuring plan.

Saab
GM President Fritz Henderson told reporters that Saab is essentially on the market effective immediately, though the automaker is conducting an “expedited and strategic review” of the brand. GM has owned Saab since 2000, though it has had a stake in the Swedish luxury automaker for nearly 20 years. Potential suitors for Saab haven’t been named.

Saturn
Henderson told Automotive News that Saturn “is just not successful.” He declined to specify whether the brand would be folded or sold off, though most analysts say that Saturn’s value is quite limited. Henderson said that the automaker would discuss the brand’s future with its dealer group before making an official decision.

Pontiac
Pontiac will become a “specialty niche” brand, according to Henderson. This likely means the brand will be trimmed down to core performance models and that the volume models, G5 and G6, will probably not be replaced. Speculation earlier today about the future of the slow-selling G8 leads us to believe it will probably not be replaced, either, and the automaker has reportedly canned the next-generation Solstice.

“Pontiac will be more of a high-value performance brand, like Corvette to Chevrolet,” Mark LaNeve, GM’s North American vice president of sales, told the Detroit News.

Further restructuring
GM says it will continue cutting up to 30,000 workers by 2012 and continue closing up to at least nine plants. The automaker said it will also slash more than 1,700 of its 6,400 dealers.

The automaker’s plan calls for negotiating with the UAW to help cut manufacturing costs further, as well as with lenders and bondholders to cut back about $35.6 billion of the automaker’s $66 billion in debt.

$18 billion
GM requested $18 billion of the $25 billion the three automakers are asking in low-interest loans from the U.S. government. That figure is quite a bit higher than the $10 to $12 billion that CEO Rick Wagoner requested two weeks ago when he first met with Congress.

Four billion dollars are needed by the end of December, GM says, or, according to Henderson, “the company cannot fund its operations.” He refused to confirm or deny that GM would go into bankruptcy, but the statement is still pretty clear about how dire GM’s need has become.

Absent such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the U.S. economy,” the automaker wrote in its report to Congress.

Salary cuts
In response to concerns about executive compensation, Wagoner will take a $1 annual salary.

Henderson, who received $1.9 million last year, will take a 30 percent cut, while three others - Vice Chairman Bob Lutz, Chief Financial Officer Ray Young and Tom Stephens, executive vice president of GM powertrain and global quality - will all take 20 percent cuts.

GM’s Board of Directors will also reduce their annual retainer to $1 in 2009.

Chrysler’s LX-based vehicles – the Dodge Charger and Chrysler 300 – aren’t exactly the most fuel-efficient vehicles on the road, but the next iterations of LX cars will be much more fuel friendly. Chrysler is making drastic changes to both cars in order to comply with upcoming CAFE regulations.

Re-designed versions of the Dodge Charger and Chrysler 300 are due out in 2011, with both models slated to see a significant boost in fuel economy. The reigning fuel-efficient champ of the LX stable is the 26 mpg (highway) 2.7L-powered Dodge Charger, but the next crop of LX-based vehicles will likely top the 30 mpg mark.

In order to improve fuel economy, Chrysler engineers will focus on aerodynamics, axel ratios and drivetrains. At the heart of the improvements will be Chrysler’s all-new Phoenix family of V6 engines. The new Phoenix V6 will likely replace both V6s currently offered in the LX cars, improving both fuel economy and performance.

But the new Phoenix V6 won’t be the only big news for the 2011 Charger and 300. Chrysler is also planning to replace the cars’ four and five-speed automatic transmissions with a new eight-speed unit, rivaling Lexus for the most cogs in the business.

“These vehicles will be CAFE-positive,” Frank Klegon, Chrysler’s executive vice president of product development, told Automotive News. The next round of CAFE regulations starts in 2011, with a ramp up to 31.6 mpg by 2015