Check Your Mirrors

By Chris Haak

02.27.2009

Already-reeling Saab had to halt production this past week when a wrinkle occurred between a supplier of parts imported to Sweden and Swedish customs.  Originally, the news indicated that the issue was between Saab and Swedish customs, but apparently, the issue has been resolved.  Still to be resolved is a “considerable” sum of money for spare parts and inventories in two customs-operated warehouses.  This sum is due to be paid no later than March 4, or apparently, production would have to again halt.

Ford CEO Alan Mulally, in spite of not agreeing to work for $1 per year as GM CEO Rick Wagoner and Chrysler CEO Bob Nardelli have done, has agreed to a 30% pay cut for 2009 and 2010 in an effort to win concessions from hourly workers represented by the UAW.  Further, Ford has eliminated performance bonuses for salaried employees and senior executives in 2009.  Ford’s Board of Directors also decided to forgo any cash compensation during 2009.  Mulally took home $21.67 million in 2007, most of which was in the form of equity awards and bonuses (includign a sign-on bonus to replace compensation that he left on the table when he departed Boeing).

General Motors had about as bad a week in terms of financial news as could be imagined.  On top of the news of Saab’s reorganization (also known as bankruptcy), GM announced that it’s slashing its marketing/incentive budget by $800 million in 2009.  That move surely won’t mean new GM cars and trucks will be flying off dealer lots.  Then GM’s European subsidiary saw its annual loss in 2008 quadruple over its 2007 results, to a pretax loss of $1.6 billion (from a $55 million profit a year earlier).  Then GM announced its fourth quarter results, in which it burned through $5.2 billion in cash and posted a $30.9 billion loss for the year and a $9.6 billion loss for the fourth quarter alone.  The annual loss was the second-worst net loss in GM’s 100-year history, behind only the $38.7 billion loss in 2007, just one year earlier.  Finally, GM announced that its auditors are reviewing whether the company is viable enough to be considered a “going concern.”  If its outside auditors rule that it is not, then the company would be in violation of some of its debt covenants.  Not a good week for GM.

Tier-one automotive supplier Magna-Steyr announced that it will be displaying a flexible electric car concept at the Geneva auto show.  Magna has experience in contract manufacturing for various OEMs such as Chrysler and BMW, so having a car of its own isn’t a huge leap of logic.  The car, called the Mila EV, is built on a flexible platform that can accommodate any range of alternative propulsion methods, from full electric, to mild or full hybrids.  The company doesn’t intend to market the car on its own, but instead hopes to find customers for the various components that it developed for the car.  Magna will build an EV for Ford, powered by lithium ion batteries, that will hit the market in 2011.

The Chinese central government has said that it would like to see some mergers and consolidation in its domestic automobile industry.  There are currently 14 “major” automakers in China, and the government would like to see that number reduced to 10.  The Chinese government would also like to increase the market share of Chinese-brand companies from the current 34% up to 40%.  In spite of persistent rumors about a Chinese firm expressing interest in one of the car companies that are for sale (Saab, Hummer, Saturn, Volvo), the Chinese government has also said that they didn’t feel that any Chinese automaker had the capability to manage a larger and more complex multinational automaker – even one with a less-than-full lineup like Volvo or Saab.  Maybe that’s the end of it, and maybe it’s not.

GM’s Adam Opel subsidiary in Germany announced its own restructuring plan, and it holds an interesting twist.  In exchange for $4.18 billion in Europe-supplied aid, GM would split between 25% and 50% of Opel (and its UK-based cousin,Vauxhall) from the corporate mothership and allow outside investors to purchase stakes in Opel/Vauxhall.  Opel’s announcement came (probably coincidentally) just one day after thousands of workers at GM’slarge plant in Rüsselsheim, Germany protested GM’s ownership and asked for Opel to become a separate entity from GM for the first time in 80 years.  German Chancellor Angela Merkel has indicated that she is willing to consider state-supplied aid to Opel in an effort to preserve some of the 25,000 jobs that the company provides in Germany, as long as the plan presented by Opel is a viable one.  One condition floated by GM in the spinoff plan is that Opel would have to pay a 5% royalty fee back to GM for every car that Opel or Vauxhall sold; such a move could potentially doom any chances that Opel might have of turning a profit, since margins are already razor-thin among mass-market brands in Europe (often less than that 5% figure).

COPYRIGHT Autosavant – All Rights Reserved

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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2 Comments

  1. it could be interesting to know who could be interested to the other parts of Opel: Fiat? Renault-Nissan? VW despite having a huge portfolio with Seat, Skoda, VW, Audi and I don’t mention Bentley, Lamborghigni. Some mentionned Dailmer but they only interested to one Opel plant.

  2. That move by Ford impresses me, I have to tell you. These guys are in it for the long haul, unlike someone like the dogs at Cerberus.

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