Tag Archives | bailout

I Love the Opel Insignia, So Why Does the Buick Regal Rub Me the Wrong Way?

By on November 19, 2009 in Editorials

By Kevin Miller

11.19.2009

2011 Buick RegalRecent news that GM will be bringing the lauded Opel Insignia to the US as a Buick Regal has been met largely with praise. Having recently traveled to Europe, I’ve seen plenty of Insignia sedan and wagon variants on the road, and, to my eyes, they look great. The Insignia is a good-looking vehicle in both sedan and wagon form, and it has been largely unadulterated in translation to Buick, with the same striking interior and body lines; only the front fascia is notably different. Slated to be available with normally-aspirated and turbocharged four-cylinder powerplants (with enthusiasts hoping for even more poweful OPC-based variants in the future), the Buick Regal will be an economical and spacious family sedan which should be more fun to drive than anything wearing Buick’s shield logo since the GNX a quarter century ago.

Of course, I had the same feeling about the Astra when it was launched as a Saturn a few years ago. I thought that the good-looking, Euro-flavored new Saturn would sell like hotcakes compared to its ugly-duckling predecessor, the Ion. Unfortunately for Saturn, the Astra never caught on has was hoped. The Astra wasn’t price-competitive because of its Made-in-Germany label, and it turned out to be a bit too European (both in design and ride) for mainstream American buyers. Saturn dealers, whose star burned so brightly in the brand’s early years, didn’t find their salvation in the Astra; and they had been eagerly anticipating their own version of the Opel Insignia, but cruel fate conspired against that eventuality, condemning the brand to the history books. Unfortunately for Saturn (and GM), Opels have never sold very well in US. Continue Reading →

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GM No Longer Considers Chapter 11 Filing Off The Table

By on February 16, 2009 in News

By Chris Haak

02.16.2009

With the economy in the US and globally showing no signs of improvement, and the new-vehicle market showing no signs of life, the cash situation at GM has become even more desperate, if that’s to be imagined.  The company that had previously not even uttered the word ‘bankruptcy’ except to say that it was out of the question and not an option is now making noise that in spite of all of the negatives that go along with declaring bankruptcy, it’s very much on the table unless the company gets more money from the US government, and quickly.

The Treasury Department believes that GM needs at least another $5 billion from the government in order to survive beyond the first quarter of 2009.  So far, the company has received $9.4 billion.  The Wall Street Journal reported over the weekend that the usual “people familiar with the situation” indicated that GM is going to present the government with two alternatives – that the government must either commit additional billions to keep the company afloat, or commit additional billions for debtor-in-possession financing because those funds (far more money would be required for that than has already been committed to keep the lights on thus far) would likely be unavailable from anywhere in the still credit-frozen and shell-shocked private sector. Continue Reading →

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GMAC Receives TARP Funding; Immediately Offers Better Terms

By on December 30, 2008 in News

By Chris Haak

12.30.2008

The US Treasury announced yesterday that it had approved a $6 billion financial assistance package for GMAC, the heretofore 49% GM-owned/51% Cerberus-owned finance company.  The assistance is coming in the form of a $5 billion purchase of preferred GMAC shares and a $1 billion loan to GM so that it can buy additional shares in GMAC.  The preferred shares pay an 8% annual dividend.

Under the terms of the capital infusion, which is occurring under the TARP program originally intended to provide assistance to financial institutions (actually, it was originally intended to purchase troubled assets from banks, to get them off of the banks’ balance sheets, but TARP has evolved over the past few months), a new sub-program under TARP has been set up to aid auto finance companies.  Treasury also said that this just the first in a series of deals expected in the coming days and weeks to aid other auto-finance firms, hopefully making consumer lending and dealership inventory financing less expensive and more accessible.

Toward that end, today GMAC announced that it had immediately lowered its unfortunately-high bar of requiring a FICO score of 700 and above (in place for the past two months) for approval of any loans to a more reasonable 621 and above.  As our own Brendan Moore noted during a brief interview with NPR’s Marketplace radio show today, GMAC had just been out of the game as far as its ability to offer financing to a large swath of the buying public.  And, by the way, all of GMAC’s competitors – and therefore GM’s competitors who still have possession of their captive finance arms, like Toyota Financial Services, Ford Motor Credit, and others – were still able to make loans to individuals with FICO scores below 700.  According to GM, about 40% of buyers have a FICO score of 700 or greater, so they were shut out of a major slice of the market. Continue Reading →

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Bob Lutz, the Original ‘Car Czar’

By on December 25, 2008 in Editorials

By Sam Boni

12.25.2008

They called him Mr. Horsepower.

Born in Switzerland, he is the only top executive who worked in that capacity (in alphabetical order) at BMW, Chrysler, Ford and General Motors, in Europe and on this continent. At Chrysler he was the driving force behind the V10 Dodge Viper. At the age when most people retire, he was persuaded to become CEO of Exide Technologies, the battery maker. After he “retired” from that position, General Motors coaxed him into revamping its model line-up as vice chairman of global product development.

You will know by now that we are talking about Robert A Lutz, “Maximum Bob” as he is known in Detroit these days. He started to influence the new cars coming from ‘The General’ a few years ago, and that influence has only gotten stronger. The beautiful Pontiac Solstice and Saturn Sky sports cars were some of the early models designed and produced under his leadership. The amazing 1,000-horsepower V16 Cadillac, which could have topped Rolls Royce, has become a victim of the times. The world now awaits the Volt, the extended-range electric car that everybody knows about before anybody has actually seen the final production model.

“This is now what I’m more excited about than I was about the Dodge Viper,” Mr. Lutz said in early 2008. “I think this can bring about the revolution and really make us independent of foreign oil and solve all the other problems.”

The one problem Bob Lutz did not anticipate is the financial and credit meltdown caused by years of ineptitude by the Bush administration. We hear every hour on the hour how deep we are in trouble, and how much money the auto industry needs to convert for the time “After Oil”. Continue Reading →

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Chrysler To Halt All Production for a Month – Or More

By on December 17, 2008 in News

By Chris Haak

12.17.2008

Chrysler LLC announced late today that it is roughly doubling the length of its normal holiday shutdown period in an effort to both conserve cash and to allow customer demand to catch up to inventory levels.  So, as soon as the last shift ends on Friday, December 19, Chrysler will not build another car or truck in North America until no sooner than January 19 at the earliest.  Below is the full text of Chrysler’s statement:

Chrysler LLC Adjusts Production as a Result of the Deteriorating U.S. Credit Crunch

Auburn Hills, Mich., Dec 17, 2008 -

Due to the continued lack of consumer credit for the American car buyer and the resulting dramatic impact it has had on overall industry sales in the United States, Chrysler LLC announced that it will make significant adjustments to the production schedules of its manufacturing operations. In doing so, the Company will keep production and dealer inventory aligned with U.S. market demand. In response, the Company confirmed that all Chrysler manufacturing operations will be idled at the end of the shift Friday, Dec. 19, and impacted employees will not return to work any sooner than Monday, Jan. 19, 2009.

Chrysler dealers confirmed to the Company at a recent meeting at its headquarters, that they have many willing buyers for Chrysler, Jeep® and Dodge vehicles but are unable to close the deals, due to lack of financing. The dealers have stated that they have lost an estimated 20 to 25 percent of their volume because of this credit situation.

The Company will continue to monitor the production schedules of its manufacturing operations moving forward.

Continue Reading →

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White House Signals that TARP Money Might Be Used for Bailout

By on December 12, 2008 in News

By Chris Haak

12.12.2008

President Bush, probably (and fortunately) eager to avoid the black eye on his administration’s legacy should GM and Chrysler declare bankruptcy and eventually fold, has changed his position in light of the failure to pass the Detroit rescue package in the Senate last night.  Until today, Bush had been opposed to using some of the $700 billion in TARP (Troubled Asset Relieve Program) money – intended originally to purchase troubled assets from financial institutions, but actually used for the government to take a stake in financial institutions - to fund the immediate cash needs of Chrysler and GM.  Treasury Secretary Henry Paulson had previously indicated that he was not in favor of using TARP funds on the auto industry, but since his boss is now coming out in favor of doing so, “in light of Congress’ inaction,” Paulson would probably do what he’s told to do.  In fact, the Treasury Department issued a press release that said, “Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry.”

White House spokeswoman Dana Perino said something that many proponents of the bridge loans have been saying all along; setting aside ideological differences, bankruptcy will tank the economy:  “Given the current weakened state of the U.S. economy, we will consider other options if necessary — including use of the TARP program — to prevent a collapse of troubled automakers.  A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time.” Continue Reading →

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Detroit Bailout Dies in the Senate

By on December 12, 2008 in News

By Chris Haak

12.12.2008

In the face of Senate Republican opposition, the $14 billion auto industry aid bill that passed in the House of Representatives on Tuesday has died.  The biggest concerns raised among Senate Republicans were that the House version was not tough enough, so a day of negotiations yielded tougher language suggested by Senator Bob Corker (R-TN) surrounding restructuring.  The changes that Senate Republicans sought to make to the House-approved bill were 1) converting at least 2/3 of the companies’ outstanding debt to equity by March 31, 2009 – or repay the loans, or face bankruptcy, 2) half of the GM/Ford/Chrysler VEBA contributions would be in the form of equity and not cash, and 3) UAW workers would have to accept the same pay, benefits, and work rules as transplant workers now have by 2009.

Ironically, before this news hit the wire tonight, I was going to write about how Senator Corker (pictured above) – who came off as a grandstanding smart ass during the Big Three CEOs’ testimony – came to grips with the reality of what a failed domestic auto industry would mean to the economy after having spoken with industry and UAW leaders, analysts and investors, and said that he “came back with a much fuller understanding.” He said during a conference that he fears what effect an OEM bankruptcy would do to the supply chain.  Well, yeah! I do applaud him for not only offering a reasonable alternative, albeit one that was not palatable to the UAW. Continue Reading →

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Painting a Bailout British Leyland Racing Green

By on December 12, 2008 in Editorials

By Kevin Gordon

12.12.2008

In recent news coverage, there has been extensive discussion that bailing out GM, Chrysler, and Ford will have similar results to what happened to British Leyland in the ‘70s and ‘80s. For those not familiar with the story, in this time period, almost $17 billion, of British citizens’ tax dollars (USD inflation adjusted) were injected into Leyland and the company still failed.

Wall Street analysts call the phenomenon “Bad-on-Bad Money,” stating that throwing money at these failing auto companies is like throwing a cinder block to a drowning man. I want to tell a slightly different story and one that I have heard far less often in the mainstream media.

That story is what happened when the French government loaned $5.1 billion (USD inflation adjusted) and took a significant ownership interest in a company named Renault in the 1980s. Again, for those that do not know the story, Renault was losing a billion francs a month, and two years after the bailout, they became profitable. Since this “bailout,” Renault has remained profitable and produced some amazing products inside and outside of their product line. Continue Reading →

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House Passes Auto Industry Bailout Package

By on December 11, 2008 in News

By Kevin Miller

12.11.2008

Last night, the US House of Representatives passed H.R. 7321, Auto Industry Financing and Restructuring Act, the anticipated legislation to provide a loan package to US automakers. Democrats in the house worked with members of the Bush administration to negotiate the auto industry aid. The bill passed by a margin of 237 to 170.

Prior to voting in the House, White House spokeswoman Dana Perino issued a comment in support of the legislation, stating “We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs.”

The same tone was echoed in the House, with House Speaker Nancy Pelosi stating “This legislation is about offering Detroit and America a chance to get back on track,” in a speech made prior to voting. Under the terms of the plan, the government will grant direct bridge loans to automakers, using money that was previously earmarked for promoting more efficient vehicles by funding plant retooling. In return, the government gets an equity stake in the automaker totaling twenty percent of the amount borrowed.

This $14B rescue package, which is less than half of the amount requested by the automakers’ corporate executives during hearings earlier this month, is intended to carry the automakers through the end of March. By that time, the automakers must convincingly restructure their businesses in order to be eligible for more aid under an Obama administration. Continue Reading →

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Hell Hath No Fury Like an Auto Writer Scorned

By on December 4, 2008 in Editorials

By David Surace

12.04.2008

After absorbing all of the media over the last week or so, I’ve come to a conclusion. And I think it’s not safe for me to write about this industry.

I’m pissed.

What the heck is wrong with the denizens of this country, and the people we voted into office? Why are their opinions still hopelessly outmoded, after years of excellent products and the PR to back it up? Why is the poll-bearing public so convinced that there will be NO ECONOMIC FALLOUT from a Big 3 liquidation?

Why was there no problem at all when Wall Street jerkoffs arrived in Washington–in private jets, no less–to collect their $700bn without even so much as a wink and a nudge? “It’s all good! We believe you!”

What the hell happened to this mighty auto industry, that it couldn’t survive an (arguably sizeable) economic iceberg? After all the Previous Icebergs that have been spotted in these waters (the Suez Oil Crisis, the OPEC Oil Crisis, British Leyland, Audi’s Unintended Acceleration, the early 90′s recession, MG Rover, the meltdown of GM/FIAT, 9/11, two rounds of Gulf hurricanes, the subprime lending crisis), why am I getting the overwhelming impression that Future Economic Iceberg plans were not in place before the ship had even set sail? Continue Reading →

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