By Brendan Moore

05.29.2009

In surprising news, Bob Nardelli, current CEO of Chrysler, told reporters late yesterday that he expects the sale of most of Chrysler’s assets to Fiat to be consummated today.

According to reporters that were there at the press conference and some of the other participants in the hearing, most of the people that heard Nardelli’s statement were surprised by the news. An attorney from one of the pension funds trying to block the sale immediately asked Nardelli if he meant that the sale would close today with the required federal antitrust approval. Nardelli replied in the affirmative.

People scoffed when the US Treasury Department set a 30-60 day target for Chrysler to emerge from bankruptcy, but if Nardelli is correct, they will make that goal easily. Of course, it’s worth noting that the federal government provided all the early financing, the bankruptcy financing, and, shoved Chrysler towards Fiat, a maker of small, fuel-efficient cars. The Treasury Department, the Obama Administration’s proxy in this matter, has definitely had it their way so far. If the federal bankruptcy court approves the sale of Chrysler assets to Fiat today despite the objections heard so far and the hundreds of objections still scheduled to be heard in the future, that is quite a victory for the government and Fiat-Chrysler.

If the sale looks as if it will actually close tomorrow, you can be certain the hundreds of attorneys on the opposing side will ask the judge to postpone the sale, If that doesn’t work, you can bet there will be many appeals after the sale is completed.

The roster of those opposing the sale includes suppliers, debtholders, retirees, and of course, the almost 800 dealers that Chrysler wishes to shut down, who want the state dealer franchise laws to supersede federal law. The appeals will be filed immediately after any action by the court that gives Chrysler the right to move forward and discharge the bankruptcy.

Chrysler says it needs to go through bankruptcy in order to shed $6.9 billion USD in debt and some very expensive retiree benefits. It will gain small-car technology and a worldwide retail network through its “merger” with Fiat.

The entities objecting to Chrysler’s bankruptcy/sale are not opposed to Chrysler’s bankruptcy, per se. In the case of the debtholders, suppliers and the retirees, they are opposed to Chrysler not paying them. Their point of view is, “do whatever you want, but honor your obligations to us”. The dealers, meanwhile, are all for Chrysler’s bankruptcy as long as they’re invited to the party. Since they’re not, they want the bankruptcy court to prevent Chrysler from dropping them.

However, that’s what bankruptcy is for – casting off debt obligations, unwanted contracts, etc. It’s hard to see at this point how Chrysler (with the US Treasury Department backing them) will not prevail in their efforts to successfully discharge their bankruptcy and merge with Fiat.

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By Roger Boylan

05.27.2009

The statement Credo quia absurdum, or “I believe because it is absurd,” often attributed to the Christian Roman theologian Tertullian (ca. 160-220 A.D.), is, most probably, a misinterpretation of the original Latin, but it can still serve nicely as an introduction to this review of the Jeep Grand Cherokee SRT8. Consider an SUV that, in these times of economic hardship, fluctuating oil prices, and grassroots anti-SUV, pro-hybrid sentiment, costs north of $40K, gets a posted 14 mpg, pumps out 420 horses, and does 0-60 in 4.7 seconds. Absurd, no? Which is precisely why, at the end of a week with the brute, I grudgingly came to admire, even covet it: because it’s absurd.

But it’s also a superbly crafted machine as well as something of a paradox, a combination of seemingly irreconcilable opposites that Chrysler’s Street and Racing Technology (SRT) engineering division somehow managed to reconcile. They started with a respectable family hauler, the Grand Cherokee, one of the industry’s most venerable SUVs, with bloodlines that go back to the ancient Wagoneer and beyond, with all-wheel-drive (this is the first all-wheel-drive SRT product) and room for a family of five and their belongings. They juiced it up with a 420-hp Hemi V-8 (and matching 420 lb.-ft. of torque), twin center-mounted chrome rear exhausts (where the tow hitch in a more banal JGC would go), a yawning front air dam, matte-black mesh grille inserts, sport-tuned suspension, modified steering, and 20” forged aluminum five-spoke wheels, sheathed in 20″ runflat tires and coyly displaying between their spokes the glossy red calipers of Brembo anti-lock brakes. Result of all the foregoing effort: a comfortable, solid road monster that, with the ease of a lion on the veldt, can devour Mustang GTs and the like for lunch, but needs a stiff drink afterward. Estimated mileage is 14 on the highway. I managed a little more, 16 or so, by dint of (mostly) steady driving and judicious application of cruise control, when possible. In town, you’ll get a little less. But this is a performance car, and a pretty magnificent one, so who cares? Continue Reading

GM will likely file bankruptcy in the next 48 hours

By Brendan Moore

05.27.2009

GM has been trying to get bondholders to participate in a debt-to-equity swap, and those efforts were pronounced a failure late yesterday. GM hoped that 90% of the bondholders would forgive debt in exchange for a 10% ownership in the restructured company. Reports indicate that interest in the plan among the target population was approximately 8% of all the bondholders.

A resounding defeat, but it’s worth noting that no one thought that GM’s plan would succeed. It is obvious that GM was merely going through the motions of introducing the exchange offer and then recording the results so that they could get on with Plan B.

GM did reach an agreement with the UAW today that greatly reduced the company’s labor and pension/healthcare costs. Which, just as a heads-up, is exactly what happened immediately before Chrysler filed bankruptcy. In addition, and perhaps more importantly, the new agreement restructured GM’s payments to the trust fund which funds retiree health care.

The UAW did not really have much choice. They certainly didn’t hold back in their assessment of GM.

“GM today stands at the very brink of bankruptcy,” the union stated in a handout distributed to GM workers that was designed to inform members of the new terms of the labor agreement and the trust fund payments.

The GM shareholders that have remained were treated even worse in the GM offer – their outstanding shares would be a mere 1% of the proposed new company. If GM declares bankruptcy, their shares will have no value.

There is some good news for GM’s secured lenders, however. According to the Wall Street Journal, the bankruptcy plan that is being finalized as I type this grants the secured lenders a full recovery of their various loan amounts.

The plan also calls for GM to emerge from bankruptcy with approximately $11 billion USD in debt. GM currently has around $88 billion USD of debt.

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By Chris Haak

05.26.2009

My, how the mighty have [nearly] fallen.  The self-promoting “most profitable automobile company in the world” that owns a controlling interest in Volkswagen AG and had to only recently change its plans for world German auto industry domination from a takeover of VW to just a merger, apparently had an extremely close call with bankruptcy in March 2009.  German magazine Spiegel reported on May 25 that from March 22 through March 24, the company had to scramble so fervently to shore up its finances that German Chancellor Angela Merkel had to intervene on the company’s behalf.

According to Spiegel, the crisis in March was triggered by the impending expiraton of a €10 billion loan at midnight on the 24th.  As Porsche sought to get an extension of the loan’s terms, it met with unexpected resistance on the part of the financial community.  After several days of meetings, some banks agreed to extend additional credit to Porsche, while Volkswagen itself gave Porsche €700 million in bridge financing.  Even those concessions weren’t all that was needed, so Porsche CFO Holger Härter went through his Rolodex until 11:00 p.m. on March 24th – just one hour before the deadline – until he had secured the necessary funding. Continue Reading

By Chris Haak

05.26.2009

Ask nearly any American to think of the word ‘hybrid’ in any context – including outside of the scope of the auto industry – and odds are that they’ll tell you that they have the Toyota Prius in mind, not some sort of horticultural creation.  The Toyota Prius, just entering its third generation, is the car that out-sells every other hybrid vehicle on the market by a large margin.  The Prius has practically become a mainstream vehicle,yet one that moves a little more slowly uses far less fuel than any other four-wheeled, mass-produced passenger vehicle sold in the US.

Ever since I attended the launches of both the 2010 Toyota Prius and the 2010 Honda Insight at the 2009 NAIAS in Detroit this past January, I’ve been anxious to drive both cars.  I spent a week with a barely-broken-in 2008 Prius a year ago, and wasn’t crazy about its looks, performance, or passenger space, so I really wanted to see if Toyota was able to address those issues in the new version.  A half-hour first drive isn’t the best way to get a feel for a car, but it at least gave the car a chance to make a first impression on me. Continue Reading

By Brendan Moore

05.26.2009

Roger Penske has met with Renault-Nissan Carlos Ghosn and other Renault executives in Paris to discuss selling Renault-Samsung vehicles through the Saturn dealer network.

Renault-Samsungs are built in Korea using Nissan platforms and a combination of mostly Nissan and Renault parts. Renault owns 80.1% of the company and Samsung Card, the credit card division of Samsung, is the minority owner with 19.9%.

Penske is interested in selling some or all of Renault-Samsung’s four vehicles branded as Saturns in the United States. There is talk that Penske is also pushing for new models from Renault-Samsung that would be more focused on the American market.

Penske also has the Smart Car distribution rights in the United States.

Penske recently picked up former Chrysler head Tom LaSorda as a consultant to the proposed Saurn acquisition. Penske has also added two megadealers from Michigan; Joe Serra and David Fischer.

According to the usual anonymous sources, Penske has determined that he will only need around 250 dealers to retail the new Saturns, and the Saturn dealer network currently stands at 384 retail stores. It is expected that many of the surviving stores will be on the East and West Coast, with large metro areas in the rest of the country making the cut. Which, in a unusual coincidence, just happens to look a lot like the Smart dealer footprint.

Exactly what the proposed legal relationship between Penske and Renault-Nissan (or Renault-Samsung) will be is murky at this point. It is not known if Penske will do this alone as an exclusive distributor, or, be part owner of a new Renault-Nissan company set up to sell vehicles in the US.

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By Kevin Gordon

05.23.2009

Formula One (F1) is one of the greatest expressions of automotive passion. It is the world’s largest showcase of advanced automotive technology, it provides compelling story lines, and the competition has never been better. The time to watch F1 is now. If you love cars and competition, it is time to turn on your TV early in the morning (in the United States) to catch the greatest four wheel showcase going today.

Formula One does not have a mainstream following in the United States despite being the third most watched sporting event in the world.  For example, I was recently in Las Vegas, NV on an F1 weekend. While in the city of sin, no one aired the race and not one sports book would take a bet on the race. There was a time when North America showed a little more interest. In the 1960s and 70s, F1 cars could be found lapping the track at Watkins Glen, NY. Recently (2000) organizers spent north of $50 million to build a road course inside of the Indianapolis Motor Speedway which hosted races for eight years. In Canada, a Grand Prix was hosted (with two small breaks) from 1961-2008. Now, F1 has completely left North America. If you are a diehard fan in North America with a fear of flying, no worries - you can drive to Brazil to see a race. The reasons for this lack of interest could be debated endlessly, but the basic arguments against viewing seemed to be a lack of passing, a lack of parity in the field, and a steep learning curve to understand what was going on during the race.

These issues have been addressed through technical/rule changes and excellent television coverage. Speed TV is the primary host for viewing F1 in North America and their commentators do a great job of explaining what is happening for first time viewers. For some races Fox has purchased rights to air the races, but practice and qualifying can be found of Speed Fridays and Saturdays.

So why should you be watching F1?

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By Chris Haak

05.22.2009

I’ve now tried one of the vehicles at the beachhead of the electric vehicle revolution, and my reaction is that the revolution needs some more work if it hopes to succeed.  My first EV driving experience occurred this week in the MINI E.

BMW built a fleet of 500 individually-numbered Mini (sorry, BMW, but I’m tired of capitalizing the name) Coopers that substituted their nearly-useless back seats for a large lithium-ion battery pack.  Rather than the traditional gas tank and gasoline engine, the Mini E has a transversely-mounted electric motor under its hood bonnet.  The battery pack is constructed of 5,088 cells grouped into 48 modules.  The modules are arranged into three different battery compartments spread throughout the Mini E, and operate at 380 volts.

The E’s electric motor produces 204 horsepower and 162 lb-ft of torque from zero RPMs.  The weight of the batteries and electrical components adds almost 600 pounds to the car’s curb weight compared to the gasoline-powered Mini Cooper (3,230 pounds rather than 2,668 pounds).  BMW talks about how the suspension has been “tuned to match its weight distribution” the real meaning is that they had to change suspension settings to accommodate the previously lightweight car’s newfound heft. Continue Reading

By Chris Haak

05.22.2009

Earlier this year, during the auto-show circuit, Mercedes-Benz first displayed its all-new 2010 E-Class Sedan.  The previous E-Class was Mercedes’ second-best selling vehicle at 38,576 units in 2008, and behind only the C-class, which sold 72,471 units during the same period.  The E’s sales were behind its arch-rival BMW 5-series’ sales, but well ahead of the Audi A6′s sales pace.  Then, at the 2009 Geneva Motor Show, Mercedes-Benz revealed the new E-class coupe.  Until the current 2010 model year, there was no E-class coupe; instead, those duties fell to the C-class-based CLK-Class, which is being discontinued.  The E-Class Coupe shares no body panels with the E-Class Sedan, and even has its own architecture under the skin.

While the E-class sedan’s shape has some of the C-Class’ chunky, severe, cobbled-together appearnce – and, to my eyes, isn’t a lot better-looking outside than a far more expensive German version of the unloved Chrysler Sebring, I was absolutely dumbstruck by the shape of the new 2010 E-class coupe.  Rather than the staid, conservative styling of the sedan, the coupe breaks out with a unique style of its own.  The roofline flows in a nice arc and its line is not interrupted by any B-pillar; instead, the rear windows retract when wanted.  There are also small windows adjacent to the C-pillar that do not retract, but also help to prevent the gigantic blind spots that many vehicles with aggressively-sloping rooflines suffer from.  (Camaro, Challenger, and Genesis Coupe:  I’m talking to you.) Continue Reading

Odds and Ends about Cars and the Car Business

By Brendan Moore

05.22.2009

The Washington Post is reporting that the U.S. Treasury Department, the Obama Administration’s proxy in the current auto restructuring efforts, is getting ready to nudge General Motors into bankruptcy early next week. The paper is quoting a source as saying that GM would get approximately $30 billion USD in federal aid in order to steer itself (with a great deal of government help, of course) through bankruptcy, which would bring the total amount of federal aid to GM up to a breathtaking $45 billion. The US government plans to own 50% of GM and retain the right to name board members.

Speaking of GM, Mark McNabb, the head of Cadillac, has quit, and will take a powder on June 1. He was in that position only 13 months. When McNabb was hired, he was tasked to lead Cadillac, Hummer and Saab, but events have eclipsed that goal, with Hummer and Saab up for sale by a battered and punch-drunk GM. McNabb stated that he resigned in order to pursue other opportunities. Stephen J. Hill will be in charge of Cadillac. I spoke to McNabb for a moment at the Detroit Auto Show this year, and asked him about Saab and Hummer and whether GM had buyers for either brand. He gave me the corporate answer; the one printed in all the papers, and delivered it with a wan smile. He didn’t look unhappy, but he seemed a bit played out. We then started talking about the new Cadillac Sport Wagon, and he brightened up considerably.

The “Committee of Chrysler Affected Dealers,” which says it represents almost 300 dealers in 45 states, has filed legal documents that ask Chrysler’s bankruptcy court to delay hearings that would approve the quick sale of the bankrupt company and allow Chrysler to void 789 of its dealership franchise agreements, which is approximately 25 percent of its overall U.S. dealer network. The committee says it is the legal representation for almost 300 of the affected Chrysler dealers and wants the delay in order to do more investigation as well as to adequately prepare their defense. The smart money says that the committee will not be granted the delay, but bankruptcy judges are not entirely predictable.

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