The Truth About Cars » Editorials

Editorial: Bailout Watch 234: The Truth Will Set Them Free

Ken Elias — Wed, 03 Dec 2008 20:33:53 +0000

TTAC could have saved Congress a ton of time and billions of dollars if the politicos had just read these pages over the last few years. We’ve diagnosed the patients, begged them to seek help, outlined some cures, and prayed that our worst fears would never be realized. And yet, here we are – in the midst of the biggest industrial meltdown of all times for the US auto industry. So again, we’ll just try to neatly summarize the actions that Congress needs to take now. It’s not pretty, probably isn’t politically correct, and will piss off a whole bunch of people. We’re hoping to influence you – our audience – to spread the word to ensure that Congress makes the right moves. After all, this is a democracy. The press – which includes TTAC – can make a difference in getting to the truth, and that’s what Congress needs to know today.

Editorial: General Motors Death Watch 222: The Truth Will Out

Ken Elias — Tue, 02 Dec 2008 13:30:28 +0000

If you need proof that GM's management hasn’t changed, consider the fact that the company is preparing not one but two rescue plans for Congress, The automaker claims it needs both a public plan and a top secret "for their eyes only" brief because sharing “proprietary information” in a public forum could be "problematic." Total hogwash. There is only one reason GM won't let the public view detailed information about its future-- it doesn't have one. With or without a look at the fine print, the truth remains: GM’s restructuring plan as presented to Congress will never work.

Editorial: Ford Death Watch 48: Branding Isn’t Everything

Robert Farago — Mon, 01 Dec 2008 22:11:57 +0000

It’s been a while since we’ve run a Ford Death Watch. Which doesn’t mean Ford isn’t dying. It is. It’s just dying more slowly and less spectacularly than GM and Chrysler. In fact, Ford’s head-faked the press. They’ve convinced the pundocrats that The Blue Oval Boys don’t need federal bailout bucks to survive. Oh what the Hell, FoMoCo CEO Alan Mulally just about told Congress, as you’re offering… we might as well accept. In truth, the Detroit’s last man standing is about to hit the pavement just as hard as its cross-town co-conspirators.

Editorial: General Motors Death Watch 221: Why GM Should Stop Worrying And Learn to Love C11

Richard N. Tilton — Sun, 30 Nov 2008 03:20:14 +0000

Speculation is rife that GM plans on shutting down or selling Saab, Pontiac and/or another brand as a prelude to a federal bailout. Common sense and recent history suggest that any such move will create a raft of breach of contract claims by jilted dealers and suppliers. As Oldsmobile's demise proves, there's only one possible resolution to the resulting feeding frenzy: cash termination payments. If, however, GM filed for Chapter 11 bankruptcy, these breach of contract claims would become nothing more than unsecured claims-- which are resolved within the debtor's C11 reorganization. The claimants would be legally barred from costly state court litigation. In a stroke, GM would be transformed. How great is that? But wait, there's more!

Editorial: General Motors Death Watch 220: My Kingdom For Your Debt

Ken Elias — Sat, 29 Nov 2008 16:42:32 +0000

Rick Wagoner lost control of General Motors this week. Forget about his title; game over for the embattled former Duke basketball wannabe. There's a new sheriff at GM - and it's a bunch of Wall Street guys that few on Main Street can name. It's the hedge funds that have been acquiring GM's bonds. So here's how these guys will play The General to make a killing on the pending government bailout:

Editorial: Winter Comes To Michigan

HeBeGB — Thu, 27 Nov 2008 15:44:36 +0000

I live in Michigan. Not on the Detroit side of things, around here it's mostly suppliers. I'm an engineer. As I write this, I'm off on unpaid furlough. I don't work in the auto business; my company is in an industry about 10 bailout levels down. But around here, it all looks the same. Two years ago the Delphi fuel injector plant was shut down; two months ago the big GM stamping plant was stamped for extinction. Winter even came a bit earlier this year. It's cold, damp, gray, and we got some snow before Thanksgiving. Not unheard of, but not exactly welcome. I think it was P.J. O'Rourke who remarked while flying over the "liberated" but still depressed Eastern Europe, "Communism is the only form of government you can see from 30,000 feet." This economy is like that. You can see it of course, but it's also cold and gray and it hangs in the Michigan air.

Editorial: General Motors Death Watch 219: Rrrrrrescue Pack!

Richard N. Tilton — Wed, 26 Nov 2008 03:52:57 +0000

In recent congressional testimony, GM admitted that its experts are "exploring" Chapter 11 reorganization. At the same time, GM continues to argue that a bankruptcy filing is the nuclear option-- it would vaporize jobs and inflict cataclysmic damage on the overall U.S. economy. While acknowledging the danger, many argue that reorganization is both necessary and unavoidable. They suggest that GM's recreation should somehow take place outside of the time-tested legal process known as Chapter 11. Sentiment is growing that a taxpayer-finnaced “prepackaged” Chapter 11 is the best way to solve both GM's business and financial problems, and perhaps of other automakers. Maybe so. Let's have a look...

Editorial: Does Detroit Have The Will To Succeed?

Ken Elias — Tue, 25 Nov 2008 15:20:03 +0000

Detroit's financial predicament today rests squarely on the shoulders of its executive leadership going back nearly four decades. The American auto industry failed mostly in its will to succeed in a changing business environment marked by the entrance of new competition, adoption of new technologies, and demands for greater fuel efficiency. Had Detroit taken those actions necessary to be leaders, rather than laggards, its overall situation of falling market share, reputation for poor quality (in comparison to certain foreign competitors like Toyota and Honda mostly), and weakening financials might have been avoided.

Editorial: Tomorrow, Porsche Will Disclose Their VW Plans. Any Bets?

Bertel Schmitt — Tue, 25 Nov 2008 15:15:09 +0000

If you think about flying to Stuttgart tomorrow, better book now. It will be a full house tomorrow at Porsche's annual "Bilanzpressekonferenz." The presentation of annual numbers to the press. At this confab, the information-hungry media will be fed with finger food and glossy brochures, drowned in champagne and a sea of PowerPoint charts. Why would anyone be interested in a small maker of sports cars that was nearly bankrupt when Wendelin Wiedeking took over? How did P.J.O'Rourke put it so nicely? "In the gutter in front of the razed crack houses was a brand-new Porsche 928 flipped on its back and wadded like Kleenex." That was then, this is now. Now, Wiedeking promises to reveal his timetable for the takeover of Volkswagen. "Waitaminute," I hear you say. "Don't they own VeeDub already?" Not exactly. Currently, Porsche holds 42.6 percent of the common stock of Volkswagen. It is also written that Porsche owns 31.5 percent in VW options, strike price and time to expiration unknown. Will Wiedeking say tomorrow when they'll finally go for the whole shebang? We doubt it. Will they go over 50 percent this year, as planned? Will they go to 75 percent soon as rumored? We believe, Wiedeking will keep everybody guessing. Despite the fact that Porsche is rolling in money, they are Swabian. And then ...

Editorial: General Motors Death Watch 218: Disconnect and Die

Robert Farago — Mon, 24 Nov 2008 16:10:24 +0000

When I moved to the UK, I was shocked by the price of petrol. “Britain’s an oil PRODUCING nation,” I kvetched to my accountant. “How could the populace allow their government to tax their petrol to the point where it’s the most expensive gas in Europe?” “Do you have any idea how much income tax you’re paying?” my personal pencil pusher asked. “If I were you, I wouldn’t worry about it.” In the same sense, I wouldn’t worry about GM CEO Rick Wagoner’s Gulfstream. It’s as nothing compared to the amount of money he’s pissed away on, well, everything else. Of course, it’s not the money, it’s the principle.

Editorial: Customer Care

Michael Karesh — Sun, 23 Nov 2008 13:59:15 +0000

The most ardent fans of Detroit accuse those who don’t buy domestic cars of being disloyal, if not downright un-American. But loyalty only makes sense when it runs in both directions. And Detroit has not been loyal to Americans, whether they be its workers, its suppliers, or its customers. But, assuming General Motors and Ford survive the current crisis, it’s not too late. Let’s focus on car buyers. What might Detroit do differently to deserve our loyalty? Well, a few things. But the most significant would be providing customer care that deserves the name. Most of those who refuse to “Buy American” do so because they were burned by an “American” car, sometimes multiple times. In these cases, not only did the car require too many repairs—which was bad enough in itself—but the manufacturer did little or nothing to accept responsibility for the design or manufacturing defect and take care of the affected car buyer. If Detroit does nothing to assist car buyers when design or manufacturing defects lead to expensive repairs, then why should car buyers support Detroit when it needs assistance? Read on ...

Editorial: Between the Lines: Pelosi/Reid Letter to Detroit

Ken Elias — Sat, 22 Nov 2008 12:49:33 +0000

So, the Motown millionaire's beggars' banquet blew town, retreating from Washington's corridors of power to their Detroit lairs to lick their wounds. To say the CEOs of Chrysler, Ford and GM were unsuccessful in their televised attempts to "liberate" $25b from the Troubled Asset Recovery Program would be like saying the Detroit Lions are struggling to get to the Superbowl. In many ways, it was over before it started. The CEOs arrived woefully unprepared, and left with admonishments to return next month after, how do I put this delicately, getting their shit together. House Speaker Nancy Pelosi and Senate Leader Harry Reid switched into CYA mode. As part of their campaign, they've written a letter to Detoit, telling that what needs doing the second time 'round. Having secured a copy of this missive, TTAC contacted our own Ken Elias to read between the lines on your behalf. As the automakers run out of cash, it all comes down to this.

Editorial: Detroit Bailout = Thermonuclear, Intergalactic Trade War

Bertel Schmitt — Sat, 22 Nov 2008 10:50:46 +0000

There may be another nasty aspect to the bailout: a full-scale trade war, launched by countries that don't (or even do) bail out their auto industries themselves. Bloomberg writes that "a U.S.-triggered spate of global carmaker-bailout proposals may spark trade disputes over whether the Americans are unfairly trying to subsidize their industry." Egged-on by the US bailout money that may, or may not, or may, or may not be in the offing, manufacturers all over the globe are holding up their tin cups. At the same time, the European Union threatens to lodge a complaint against any U.S. bailout on the grounds that it's unfair to the auto makers in the rest of the world, not to mention Renault, Fiat, Volkswagen, Daimler, BMW et al. China also may complain, although their complaints will ring a bit hollow, as the government owns most of the big automakers already. Probably won't stop them. "Now that we are in the WTO, we might as well use it." Payback is a bitch.

Editorial: Redlining the Domestics

Michael Martineck — Fri, 21 Nov 2008 23:37:52 +0000

Loans and leases are getting hard to come by for anyone interested in a car or truck from GM, Chrysler or Ford. Banks now routinely put out lists with “red lines” through makes and models they no longer want to finance. Those products are increasingly domestic in origin. Redlined vehicles are harder to sell, forcing down values, rendering loans even more unattractive, making those cars and trucks even harder to sell, forcing down... you can see where this is going. Major lenders in the US are not waiting for The Big 2.8 to file for bankruptcy. They’re treating them like it’s a done deal.

Editorial: The Battle At Midday. How America Can Win The War Against GM

Bertel Schmitt — Fri, 21 Nov 2008 14:29:42 +0000

Informa Global Markets (IGM) "is a world-class international supplier of real-time news and analysis to market professionals in the fields of foreign exchange, sovereign fixed income and corporate bonds." It's the stuff brokerage houses and investment bankers pay a lot of money for in order to look smart with their clients. Would definitely bust TTAC's budget. Some of my friends in high finance still hold a job, and one of them (you know who you are) was nice enough to forward me yesterday's IGM "Markets At Midday" issue. Reads like "Markets At Midway." With the appropriate ending: The bad guys lose.

Editorial: General Motors Death Watch 217: Let The Run Begin

Ken Elias — Thu, 20 Nov 2008 21:47:58 +0000

A run on the bank. That’s what will happen as soon as Congress adjourns without a bailout plan for the Detroit 3. Hard-pressed suppliers and creditors will force GM to do what must be done: Chapter 11. I guarantee it. GM and Chrysler will sink into bankruptcy before they even think about the annual Holiday shutdown. A few Senators and hundreds of thousands of workers within America's automotive industry don’t want to see that sad day arrive. But arrive it will. And as the Capitol Hill hearings proved beyond a shadow of a doubt, Detroit needs a thorough cleansing.

Editorial: China Could Buy 433 General Motors With Their T Bills Alone

Bertel Schmitt — Thu, 20 Nov 2008 17:52:17 +0000

We made a huge mistake with our "SAIC may buy GM" story. We paid for our sins. The story created so much traffic that it literally melted two servers. TTAC's China Syndrome. As you are painfully aware, TTAC was out of commission several times yesterday. A day after the story broke, the story broke our servers. Hit counters for all stories are currently SNAFU; they just gave up and went home. A huge amount of traffic keeps pouring in from China. And no wonder: a Chinese search for the same story produces 76,500 hits. If we'd run this story a few months ago, a wagon would have pulled up outside of TTAC World Headquarters, and they would have taken us away in straitjackets and a Thorazine drip in our veins. Now, a lot of people think GM is crazy for not doing the deal. A Connecticut hedge fund manger, who we reached for comment, looked at the screen, said "Ugh, the market is ugly." When prodded to focus on GM and SAIC, he said: "If I'd be GM, I'd be in Shanghai right now, negotiating the deal. Then I would go to Congress and say: What are you going to do about it?"

Editorial: Bailout Watch 223: Planes, Trains and Automobiles

Robert Farago — Thu, 20 Nov 2008 13:39:27 +0000

While Detroit News columnist Daniel Howes gently chides Motown's hometown heroes-- even as they continue to bleed to death all over his carpet-- The Washington Post's Dana Milbank kicks the Big 2.8's CEO while they're down. But good. The WaPo scribe warms-up with a few gentle toe jabs, simply repeating the Big 2.8's testimony regarding their recent travel arrangements. "There's a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands,' Rep. Gary L. Ackerman (D-N.Y.) advised the pampered executives at a hearing yesterday. 'It's almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo. . . . I mean, couldn't you all have downgraded to first class or jet-pooled or something to get here?" Fortress Detroit please note: no one mentioned the rejuvenating possibilities of a "convenient plane crash." Oops.

The LA Auto Show Must Go On. Mustn’t It?

Adrian Imonti — Thu, 20 Nov 2008 03:16:39 +0000

Auto shows are intended to be recipes for excess. Take one excessively large convention hall, fill it to capacity with excessive quantities of costly chrome and metal, mix in a few brigades of excessively attractive women, and cap it off with a cadre of excessively awkward journalists (present company excepted, er, we hope) to glorify the results with excessively vapid superlatives. But that was before Carmeggedon and the Great Credit Crunch of ’08 came to town, raining on the parade with an excessively nasty vengeance. Cars are a serious business, and 2008 is looking to be about as serious as it gets.

Editorial: The 2010 Ford Fusion - Why It’s Good. But Only Good.

Justin Berkowitz — Wed, 19 Nov 2008 22:30:04 +0000

At today's LA Auto Show, Ford revealed its refreshed Fusion. In large part, the midsize sedan's in synch with one of TTAC's core philosophies: evolution before revolution. Manufacturers should continue to improve existing decent products rather than swing for the fences-- especially when it's the bottom of the seventh. That said, plenty of pistonheads reckon the Fusion isn't a patch (or is) on the Euro-Mondeo. In Fantasyland, that's the Blue Oval mid-sizer on dealer lots. And if there's still a Ford America in 2013, we'll have our Mondeo and drive it too. In the meantime, good is good enough. Or is it?

Editorial: Bailout Watch 220: “We’ll Be Back;” Chrysler’s Dead; Where’s Barack? Here’s the Bill

Robert Farago — Wed, 19 Nov 2008 01:13:10 +0000

The table of Motown's CEOs facing Senator Christopher Dodd at today's Senate Banking, Housing and Urban Affairs Committee Hearing looked more than a little like The Last Supper. If only. When Senator Bob Corker (R, TN) pressed Ford, Chrysler and GM's top suits for a pledge that they won't be back for more money-- should they be granted $25b in taxpayer-backed loans-- only GM CEO Rick Wagoner answered. And then Red Ink Rick waffled, pegging his promise to an economic upturn that no one believes imminent. It was the moment when Motown's begging bowl brigade went seriously south, in that oh-so-public C-Span sort of way.

General Motors Death Watch 215: Man Up!

Ken Elias — Tue, 18 Nov 2008 15:13:54 +0000

GM’s at the cliff’s edge looking deep into the chasm and sees…nothing. How pathetic. Here's a company with $150b in annual revenues and all they can say is “give us the money or else.” How lame is that? Frankly, it speaks to the complete lack of leadership and direction at this company. GM has not advanced one shred of evidence that it knows what to do if it goes onto the government welfare roles. In fact, all we’ve heard is “more of the same” restructuring and downsizing that’s been completely ineffective to date in stemming the tide. That dog just won’t hunt. But if GM’s Board of Directors and executive managers had a clue, this is what they would do heading into the showdown with Congress...

Editorial: General Motors Death Watch 214: Whose Car Company is This Anyway?

Robert Farago — Mon, 17 Nov 2008 16:59:32 +0000

In the legend of Faust, the protagonist sells his soul to the Devil in exchange for knowledge and power. Needless to say, things end badly for one member of the transaction (hint: it’s not the guy with the horns on his head). A “Faustian bargain” has come to mean a deal where you surrender what’s truly important to achieve an ultimately worthless goal. Yes, I’m talking about GM. If the artist once known as the world’s largest automaker avoids Chapter 11 via a bailout deal with Washington (a.k.a. Mephistopheles), the contract will ensure its final, irretrievable doom.

Editorial: In Defense of: The Detroit Bailout

Ronnie Schreiber — Sun, 16 Nov 2008 12:55:12 +0000

As the domestic auto companies appear to be circling the drain, there's been debate about the extent of the impact of their failure on their supplier base, the impact on the industrial manufacturing base of the United States, even possible negative implications for Toyota and Honda. One party in all this that has rarely been mentioned are the consumers. While a few automotive analysts, pundits and bloggers have touched on how an implosion of the Detroit based car companies will affect consumers, almost all of the discussion has centered on whether or not people will buy a car from a bankrupt manufacturer, and the related issue of how product warrantees will be covered if their manufacturers go belly-up. A more basic consumer issue: how the loss of GM, Ford and Chrysler from the US auto market would affect the prices, features and technology of new cars.

Editorial: Bloom Off The Rose For Chinese Car Industry

Bertel Schmitt — Sun, 16 Nov 2008 12:04:45 +0000

Time for the United Auto Workers (UAW) to collect second-hand songbooks and ship ‘em over to their comrades-- make that "union brothers" in China. Chinese taking our jobs? Wake up guys! Solidarity forever! The Chinese worker is taking it on the chin just like the working stiff in God's Own Country. And let's ignore the fact for a while that FICA, SECA, COBRA, and VEBA are not part of the Chinese language. PSA Peugeot Citroën, an affiliate of Dongfeng Motor in China, has "decided not to renew the contracts" (translation: has fired) 1000 workers on their Wuhan site, Gasgoo reports. Volkswagen, which depends on China for 15 percent of its worldwide auto sales, gave the Chinese equivalent of pink slips to 700 people at their Changchun factory. According to Chinese media reports, Ford, BMW, Chery, and untold more are busy. Busy thinning out their working masses, that is. Where did all the thousand flowers go?

Editorial: Bailout Watch, German Edition, Vier: Merkel To Opel: “You Wait Until Mommy Comes Home!”

Bertel Schmitt — Sun, 16 Nov 2008 07:44:19 +0000

This weekend's G20 meeting was pretty much a non-event. A Bretton Wood it was not. While German Chancellor Angela Merkel and her Finance Minister Peer Steinbrueck were still in DC, an urgent e-mail was sent to Carl-Peter Foster, chief of GM Europe. Also on the To: line: Hans Demant, head of GM's German Opel subsidiary. They were ordered to get their glutei maximi to Berlin. They were furthermore told to bring Opel's workers council chief Klaus Franz along. Bloomberg reports that the sit down's set for the Kanzleramt, right after mammy comes home and emerges from her Airbus 310 (named "Konrad Adenauer," after Germany's first chancellor, who's busy rotating in his grave).

Editorial: Bailout Watch, German Edition, Drei: Opel, Heim Ins Reich?

Bertel Schmitt — Sat, 15 Nov 2008 09:48:24 +0000

Leave it to the B&B to really transcend the as-good-as-defeated General's Battle of the Deficit-Bulge, aimed right at the German taxpayer's money, a.k.a. Government loan guarantees for Opel. Tireguy typed: "The imminent bankruptcy of GM could endanger seriously Opel, although Opel is still profitable." Deutschland appears to agree. As we shall soon see, some may have a slightly less philanthropic angle. Let's get right to the point: Opel, Heim ins Reich, anyone? Indeed, some in Germany seem to be itching for a re-match of the Ardennenoffensive. Opel is GM's heavy artillery in the bastion Europe. Some 75 percent of GM's European business comes from Opel. If the not-so-secret plan survives, the offensive against General "Nuts" Wagoner will be fought partially in Brussels, coincidentally not far from Bastogne. The broken record called history repeats, again and again. Executive summary of the order of battle follows. Right this way, please!

Editorial: Bankruptcy Watch 189: Poll Position

Edward Niedermeyer — Fri, 14 Nov 2008 22:09:42 +0000

In December of last year, a certain Peter Hart wrote an opinion column for Fairness And Accuracy In Reporting (FAIR). Hart decried the prevalence of polling in political coverage. Not only did he cast aspersions on the accuracy and reliability of polls, he identified them as a sinister threat to no less than "American Democracy." "The more fundamental problem for the press — and for American democracy —" wrote Hart, "is that the media's overreliance on polls encourages a kind of political conversation that prioritizes strategic consideration and tactics over substance." He didn't know how right he was. Today, Peter Hart Associates released the results of a poll of their own, gauging support for an auto industry bailout. Read the results in the Detroit News and you might be surprised. Read the poll itself and the Hart Associates client list, and that surprise should evaporate faster than Mr Hart's ideals regarding polls and their cynical abusers.

Between The Lines: Automotive News’ “The Cost of GM’s Death”

Robert Farago — Fri, 14 Nov 2008 18:29:17 +0000

I can't remember the last time Automotive News [sub] unleashed an email alert for an editorial. Hell, I can't remember the first time they did it. As in this is it: the first time. You see how stunned I am? Well, no prizes for guessing which side of the bailout issue Crain's boys fall. They unleash the argument that's become the de facto Detroit defense: a bailout sucks, but not bailing out Motown sucks even more. They fucked-up but YOU will suffer. So YOU should pay. NOW. BEFORE IT'S TOO LATE! Hysteria and hyperbole? You don't know the half of it. Well, not yet anyway...

Is the American automobile industry worth saving? Pt. 2

Robert Farago — Thu, 13 Nov 2008 19:31:19 +0000

The question presumes that A) Detroit’s ailing automakers ARE America’s automobile industry and B) using our tax money to protect Ford, GM and Chrysler from their own incompetence would benefit the U.S. car industry. Not true, on both counts. And by ignoring the flawed assumptions underpinning the argument for raiding the average American’s wallet, bailout proponents are misleading what they condescendingly call “Main Street.” To which I say no, no, and Hell no.

Is the American automobile industry worth saving?

Ken Elias — Wed, 12 Nov 2008 17:34:40 +0000

Do we need an American automobile industry? And by American, I mean those manufacturers, suppliers, and associated vendors owned and operated by US citizens – red blooded, football-loving, meat and potato types. (Ok, that’s a stereotype, but you know who I’m talking about.) I submit that it’s in our national interest to keep it alive and moving forward. Farago disagrees completely (editorial to follow).

Editorial: Between the Lines: David Cole and the Bridge To Nowhere

Robert Farago — Wed, 12 Nov 2008 13:04:10 +0000

David Cole is the man whose industry and union-funded Center for Automotive Research carried-out a study of the economic implications of Detroit's meltdown. The result has become the de facto standard for "this is the serious shit that will happen if we don't bailout Motown's mismanagers with federal tax money" argument. So much so that the mainstream media uses the figures without attribution. TTAC has exposed Cole's blantant self-interest in this matter. Our Best and Brightest have examined CAR's study and exposed its deep methodological flaws. While there is no doubt that a GM, Ford and/or Chrysler bankruptcy filing would create an economic catastrophe for tens of thousands of workers and hundreds of communities, exaggerating the impact for political gain is deeply immoral. And just plain wrong. Giving Cole an uncontested platform to promulgate his propaganda is, if anything, worse. And yet that's exactly what The Detroit News has done...

Editorial: General Motors Death Watch 213: Blueprint for a Taxpayer-Funded GM C11

Robert Farago — Tue, 11 Nov 2008 19:00:00 +0000

[Once again, our anonymous bankruptcy lawyer has put his skills to use on our behalf. His C11 plan's a bit technical, and it sounds crazy, but it just might work.] The process kicks off with a GM Chapter 11 filing. The U.S. Treasury then gives GM a secured debtor-in possession line of credit for $40b. The line of credit is secured by a first security interest on all GM assets, being junior only to the existing secured line of credit. The fed's $10b of the line of credit is used to support essential suppliers through loans and pre-payments, perhaps tracking the existing GM model for financing its suppliers.

Editorial: In Search of: Honda’s Hybrids

Steven Lang — Tue, 11 Nov 2008 12:35:57 +0000

Once upon a time, Honda represented everything that Detroit was not. Efficient, lean, reliable and most of all, innovative. While The Big Three soldiered-on with the same powertrains for decades on end, Honda constantly renewed, redesigned and released cars that genuinely improved their customer's lives. Profits and widespread admiration followed... until the Honda hybrids came along. Then Honda, long regarded as the technology leader, got its ass kicked by Toyota. What happened?

Editorial: General Motors Death Watch 212: An Open Letter to President-Elect Barack Obama

Ken Elias — Mon, 10 Nov 2008 17:11:23 +0000

Dear President-elect Obama, Upon taking office, you will immediately face some tough decisions about the future of the government’s role in "saving" Ford, GM and Chrysler. As you know, the Detroit-based automotive industry has already bent the ears of your political colleagues, particularly Speaker Pelosi and Senate Majority leader Reid. These Democratic leaders in Congress seek membership approval to provide taxpayer dollars to prevent these automakers from impending collapse. While we respect the efforts of Congressional leadership, and we share their desire to enhance and protect America's industrial base and employment therein, we ask that you spare a moment to listen to the opinions of people who do not share their belief that massive federal funding will achieve these goals. First, our qualifications.

Editorial: Between The Lines: Barack Obama’s Shot Across Detroit’s Bow

Robert Farago — Sun, 09 Nov 2008 13:34:34 +0000

Senator and president-elect Barack Obama held his first post-election press conference on Friday-- the same day that Ford and GM revealed their respective arterial sprays of red ink and third degree cash burns. Rather than highlight those stats and go for the close, bailoutwise, Obama played his political cards close to his chest. The exact text of his remarks are extremely revealing, in that politicians don't really reveal anything unless they absolutely have to kinda way. "The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil." Translation?

Editorial: How to Give GM DOE Loans AND Protect Taxpayers

Robert Farago — Sat, 08 Nov 2008 15:48:01 +0000

[Another one from our anonymous bankruptcy lawyer.] I've had a look at the rules for the $25b Department of Energy (DOE) direct loans for development of advanced technology and manufacturing facilities. To qualify, an automaker must prove that it is solvent. Either that or it must meet one or more of the stated tests that relate to financial liquidity-- tests that can be met even if the automaker is insolvent on a balance sheet basis. In announcing its huge third quarter loss, GM has made a statement that suggests that it may not meet the liquidity tests and may not qualify for the DOE direct loans.

Editorial: General Motors Death Watch 211: For Whom the Bell Tolls

Robert Farago — Sat, 08 Nov 2008 14:41:26 +0000

It’s the morning after the day of. The day General Motors admitted to the world that they don’t have enough cash to last until the end of the year. And for once, GM’s standard-issue PR ploy-- leave the bad news until Friday afternoon, reveal some corrective action (axing 7k jobs) and downplay its significance-- worked against the General's generals. GM’s impending bankruptcy was buried beneath and within President-elect Barack Obama’s first press conference. The story was denied bailout-fueling urgency. It’s the ultimate condemnation of GM CEO Rick Wagoner’s administration: they can’t even exploit their own incompetence for the company’s survival.

Editorial: General Motors Death Watch 210: Abandon Ship

Robert Farago — Fri, 07 Nov 2008 18:21:47 +0000

With a bit of luck, I’ll finish this editorial before House Speaker Nancy Pelosi tells America how Washington will save Detroit by spending your tax money on a domestic automobile industry beyond salvation. I doubt it. As we’ve previously reported, our duly elected representatives have already met with the titanic captains of Ford, GM, Chrysler and the U.A.W. in a closed-door session. I'm sure they got their ducks— and our bucks— in a row. Nancy will sing an ode to the working man and pen a paean to the importance of American heavy industry. Grim faces will then face a grim task: figuring out the fastest way to put Ford, GM and Chrysler on federally-funded life support.

Editorial: Why the GM/Cerberus/Chrysler Bailout is bad for taxpayers and doomed to fail without the benefits of a Chapter 11 filing for both Chrysler and GM

Robert Farago — Thu, 06 Nov 2008 17:59:08 +0000

[The following analysis was sent to TTAC by a New York City bankruptcy lawyer who wishes to remain anonymous. It's twice as long as our usual editorial, but I think you'll find it's well worth your time. Thanks to you-know-who-you-are.] Cerberus Capital, a highly secretive NYC-based vulture investment fund, wants the U.S. government and taxpayers to bailout its failed investment in Chrysler and its failing investment in GMAC. Its partner in this raid on the US Treasury is General Motors, a woefully insolvent automobile manufacturer whose CEO is paid $40k each day. Here's why a bailout for GM and/or Chrysler is a bad idea.

Editorial: Things Are Not Always What they SEMA

Edward Niedermeyer — Thu, 06 Nov 2008 10:48:38 +0000

Environmental exploitation is here to stay. Even the threat of industry collapse has failed to take the collagen out of American automaker's eco-friendly lip service. In this they are hardly alone. The litany of firms running advertisements professing their undying love for our Mother Earth, and building concept cars to show their unconsummated devotion, continues apace. 2008 is the first year that the SEMA has set aside a portion of its annual show for green trendiness. It's not a concept that sits well with the show's ethos of excess. But never underestimate the power of hypocrisy. And America's ability to co-opt controversy to unite our society under the banner of the almighty buck. Amen.

Editorial: A Funny Thing Happened on the Way to Bankruptcy…

Robert Farago — Wed, 05 Nov 2008 18:52:51 +0000

Back when the “first” Detroit bailout bill was headed for the President’s desk, U.S. automakers scrambled to justify their $25b call on the public purse. Read the goddamn label, they cried. It’s a LOAN. For building FUEL EFFICIENT CARS. Meanwhile, Michigan Senator Stabenow displayed the political instincts for which she is rightly famous. “It’s about jobs, jobs, jobs,” the Debster decried. Well exactly. And thanks to “jobs, jobs, jobs,” the domestics will get a second, third, fourth and fifth turn at the taxpayer trough. But first, there’s a little business to take care of: Cerberus.

Editorial: So… SEMA’s Boring Eh? Well, MAYBE NOT

Edward Niedermeyer — Wed, 05 Nov 2008 14:17:40 +0000

I waited all day for the fear to take hold. Wandering through a parking lot jammed with alien whips, I wondered when the icy fingers would make contact with my sun-baked scapulae. But it never came. As the desert sun faded to dusk and Las Vegas slowly came to life with humming neon, I couldn't help but take what alcoholics call a searching and fearless moral inventory. What had robbed these ferociously unnecessary monuments to excess of their terrifying power? Were they too much at home in glittering Babylon, little more than tiny microcosms of the glaring titans that loom over the Vegas Strip? Or had some infectious irony (gone pandemic in the face of national malaise) landed in this last bastion of shallow glitz, reducing each glittering status symbol to so much light parody? Or was I (and the creators of these mechanical beasts) simply preoccupied with said malaise, and the seemingly inevitable national transformation which has only now, as I write from my hotel room, been officially realized? Nobody goes to Vegas seriously expecting answers, but was a little existential fear now too much to ask for too?

Editorial: How Porsche NSFWed the Hedge Funds

Bertel Schmitt — Mon, 03 Nov 2008 19:45:44 +0000

So you thought Porsche financed the VW takeover by foisting overpriced floormats and trucks on their well-heeled buyers? Yesterday’s issue of Die Welt, Germany’s conservative newspaper, thinks different. They undug the dirt on Porsche’s takeover-machinations of Volkswagen. It’s a story that makes Cerberus look like a frisky puppy. It’s an account that makes banks and hedge funds look like morons.

Editorial: MSRP RIP

Steven Lang — Mon, 03 Nov 2008 15:40:12 +0000

Everybody who knows me knows I'm a tightfisted son of a bitch. I may own Benzes for their profits, but gas sippers are my daily drivers. My wife's daily driver has been an old Volvo wagon (which she loves). And like many of you, I'm nearly OCD when it comes to buying quality on the cheap. When Robert asked me to find him a $5000 car, I found a $4000 car. Why? Because $4000 is the new $5000. For those of you contemplating a new ride and have the cash, now's a good time to buy. The Manufacturers' Suggested Retail Price (MSRP) is dead.

Editorial: What’s A Bailout to Do?

David Holzman — Fri, 31 Oct 2008 17:15:12 +0000

General Motors is on a crash course towards bankruptcy. The company once known as the world's largest automaker is burning cash so rapidly most experts agree that it won't last through next year. Although Ford has more money at hand, having mortgaged everything up to and including its logo, the Blue Oval is also spending its way towards C11. Chrysler? DOA. In response, Congress recently approved massive loan guarantees for the industry. But Motown's supporters are clamoring for another, equally massive handout. As our duly elected representatives argue how best to save Detroit, its champions warn of looming disaster. Still it must be asked: should The Shrinking Three be left to face market forces unaided by Uncle Sugar?

Editorial: Chrysler Suicide Watch 41: R.I.P.

Ken Elias — Fri, 31 Oct 2008 14:49:26 +0000

Chrysler is dead. Look for a Chapter 7 filing soon; that’s a liquidation plan, not reorganization. The judge will part-out and sell ChryCo's few valuable assets to the highest bidders. There will be no “Hail Mary” pass to General Motors, no government rescue, no money from Cerberus to keep its corpse from the grave. Yes, the mythical three-headed dog of Hades does keep souls from escaping Hell, try as they might.

Editorial: In Defense of: Bailing Out Detroit

Phil Ressler — Thu, 30 Oct 2008 10:40:31 +0000

No, it’s not welfare. It’s a little bit insurance mixed with an old-fashioned helping hand that ought to be extended with a little discipline to Detroit’s rump. Bailouts, subsidies, tax breaks and other sundry government instruments to influence the economy are recurrent and mainstream in American history. Less here than most countries, but nevertheless persistent. So let’s not pretend the program to assist Detroit, or the banks, or brokerages, etc., are new. We have an economy with gross annual activity valued over $14 trillion dollars. The absolute numbers bandied about today are big; the proportional representation is more modest. $25B, $50B, $75B are barely a bump.

Editorial: Between the Lines: How Detroit Drove Into a Ditch

John Horner — Wed, 29 Oct 2008 15:17:40 +0000

Paul Ingrassia's essay in The Wall Street Journal takes a stab at a question which has preoccupied me for years. How the hell did the American automotive industry, which once was the model of industrial might for the world, become a sickly embarrassment? Generally, blame is apportioned amongst these areas: management, labor unions, government, customers and bad luck. Ingrassia comes down pretty hard on management, with a supporting role for the unions.

Editorial: American Leyland: The GM - Chrysler Bailout That’s Guaranteed To Fail

Justin Berkowitz — Wed, 29 Oct 2008 14:34:49 +0000

After the initial media support for a potential GM-Chrysler hookup (e.g. Jalopnik.com's Ray Wert), the bandwagon began to roll like a snowball down the proverbial mixed metaphor hill, and everybody soured on the deal. We even charted how individual commentators changed their positions and eventually "threw Chrysler to the Wolves." In Monday's New York Times, Andrew Ross Sorkin said that GM CEO Rick Wagoner's continued employment is a "minor miracle." But the commentatorati are still behind the curve re: the government's rumored $10b "intervention" in the GM - Chrysler merger. In the main, they have't even acknowledged that the bailout is happening. That, and the critical fact that it's structurally designed to fail.

General Motors Death Watch 209: Reality is the New Perception

Robert Farago — Tue, 28 Oct 2008 13:49:32 +0000

The average American has no idea that GM is run by a bunch of nimrods. And even if they knew about the Machiavellian machinations behind the automakers’ recent struggle for survival-- including hiring a raft of ex-treasury officials to lobby their former employer for tens of billions of GM bailout bucks-- they wouldn’t care. That’s all Inside Baseball stuff. Joe the Public has enough on their proverbial plate just running the kids to school, keeping food on the table and putting a roof overhead. But when it comes to buying a new car, well, that’s a horsepower of a different color.

General Motors Death Watch 208: Autopilot

Ken Elias — Mon, 27 Oct 2008 12:53:43 +0000

Well, it’s official. The Wall Street Journal reports that GM pleaded its case to U.S. Treasury Secretary Henry Paulson. The General's looking for a mere $10b in “continuation” money to fund its Chrysler “absorption.” That’s a nice cover story for saying that GM cannot muster any other spin on “crying uncle.” Regardless of what Hank “the Hammer” Paulson answers, it's a safe bet that we’ll be seeing an epic amount of taxpayer money flow into the RenCen’s silos of despondency in the near future. Mark my words: at the end of this, we'll be saying that never have so many paid so much to so few for so little.

General Motors Death Watch 207: Saving General Motors

Ken Elias — Fri, 24 Oct 2008 15:57:27 +0000

General Motors will soon be a ward of the United States federal government. Make no mistake about it. Without some kind of massive financial injection-- not a mere few billion dollars but tens of billions-- there’s no real solution to the problems of GM’s legacy of epic, chronic mismanagement. We know that day of a government bailout will come-– and much sooner than even Wall Street wants to believe. In fact, it’s almost upon us.

Editorial: Between the Lines - Wall Street Journal Goes Jenkins Jr. Crazy

Michael Martineck — Wed, 22 Oct 2008 16:47:19 +0000

The Wall Street Journal’s Business World by Holman W. Jenkins Jr. exemplifies the dangers of always looking at the course through the same binoculars. His “Uncle Sam Goes Car Crazy” (WJS Oct. 22, 2008) rant is an attempt to view Detroit’s troubles through Government is Bad glasses, filtering out all other reasons for the slide. He’s wrong, and in a dangerous way.

Editorial: General Motors Death Watch 206: Antinomianism

Ken Elias — Tue, 21 Oct 2008 20:40:10 +0000

Ford CEO Alan Mulally goes to bed every night and prays that GM does a deal for Chrysler. In the morning, Big Al digests his corporate PR brief looking for missives from automotive and Wall Street scribes praising the combination of dumb and dumber. Every afternoon, he reviews Ford’s daily sales figures and wonders when the pain will stop. And soon, he’ll be rewarded with news he wants: his two Motown rivals will be bedding down together. “Thank you God, baby Jesus, and Fritz Henderson,” he’ll whisper to his wife. “Redemption is mine.”

Editorial: Between the Lines - Throwing Chrysler to the Wolves

Justin Berkowitz — Tue, 21 Oct 2008 12:58:02 +0000

The mainstream media suffers from “opinion inertia.' Once the press corps adopts a certain angle on a story, its superglue city, facts be damned. To wit: TTAC's been slamming Chrysler for horrendous product quality, bizarre model choices, asinine marketing and a bloated, piss-poor dealer network since... ever. Meanwhile, our colleagues have been playing the underdog American automaker meme. Post Cerberus purchase, they’ve been ignoring Chrysler’s failed products and telltale gaffes, such as CEO Bob Nardelli's infamous "operationally bankrupt" admission. But now that rumors of a GM - Chrysler merger have surfaced, the media's woken up. And the fangs are out.

Editorial: General Motors Death Watch 205: The World According to TARP

Robert Farago — Sat, 18 Oct 2008 12:39:53 +0000

A Chrysler – GM merger is a mind-boggling prospect on many levels. But the over-arching question is simple enough. Why? Why in the world would General Motors want to combine with Chrysler? Given their respective balance sheets and future prospects, the analogies pretty much suggest themselves. My favorite: the Titanic rescuing the Lusitania. But if you want to understand the logic behind this merger deal, such as it is, we’ve got to explore a different metaphor: “changing horses mid-stream.”

Editorial: Chrysler Suicide Watch 40: GM Merger A Done Deal. Or A Breakup. Or Something.

Robert Farago — Fri, 17 Oct 2008 12:34:04 +0000

The auto news biz is abuzz with rumors of Chrysler’s endgame. Even a quick scan reveals that there are more potential scenarios and pitfalls than Operation Eagle Claw, America’s ill-fated attempt to rescue its hostages from Iran. Cerberus trades Chrysler to GM for GM’s remaining share of GMAC. Chrysler sells Jeep to Renault and the rest to GM. Chrysler parts out the company and THEN declares Chapter 11. But no matter how this plays out, foot soldiers will be sacrificed, the American auto industry will remain bound and gagged and the generals will get off Scott free.

Editorial: General Motors Death Watch 204: GM Will “Absorb” Chrysler

Ken Elias — Fri, 17 Oct 2008 11:14:32 +0000

General Motors is on the brink of a financial disaster. It’s managed to keep out of the abyss through asset sales, hocking the company store, and yes, cost cutting. CEO Rick Wagoner’s “plan” might have worked had the economic winds blown more favorably. But they didn’t. The automaker is months away from a liquidity meltdown. Everyone who supplies GM knows it. The rating agencies know it. And yes, Rick Wagoner knows it. GM has to secure new funding or face a bankruptcy judge in Lower Manhattan. So now let’s talk about Chrysler…

Editorial: General Motors Death Watch 203: GMAC Headed for Bankruptcy

Ken Elias — Thu, 16 Oct 2008 14:26:58 +0000

GMAC will go bankrupt. The U.S lending giant is cut off from all lending sources. Smart depositors will flee its small bank (relative to GMAC itself). And its majority owner, Cerberus, won’t save it. It’s a pure liquidation play now-- with the bank going into FDIC receivership, maybe as soon as this Friday. Whether or not all Hell will break loose is an open question, with many answers...

How to Make Money From GM’s Chapter 11

Ken Elias — Wed, 15 Oct 2008 16:26:19 +0000

There are winners in every financial disaster. There are always a few folks-- heroes or scoundrels depending on how they make their profits-- who understand that the Chinese symbol for danger and opportunity are one and the same. GM’s impending bankruptcy (and likely Ford as well) will produce some winners. But not without serious financial and psychological risk to those who seek their fortune from misfortune. For those of you with a robust constitution, here's one potential game plan for GM's C11. First, some background for those uninitiated in the ways of the American automobile business...

Domestic Car Sales and The Riddle of the Sphinx

Andrew Dederer — Tue, 14 Oct 2008 11:38:05 +0000

Whatever the qualifications and diplomas accumulated by auto executives, it’s a pretty safe bet that they failed mythology. Automobile names are a silly subject already, bring in some of the poorer choices, and you have the makings of high comedy.The assorted Zodiac names are harmless, if a bit silly. I’ll accept that no one at Chevy realized that Cobalt is a poisonous metal named for a demonic imp. But really, who green-lighted “Gremlin” back in the day? Odyssey is a cool-sounding name, but really, shouldn’t it be some sort of mid-life-crisis car? Well, maybe it’s a car for a “homer”. What would Oedipus drive? That’s easy: a black 300 with tinted windows cause he’s one baaad.. OK, I’ll stop. But mentioning the poster boy for tragic screw-ups reminds us of something that does have relevance for today’s auto market, the riddle of the Sphinx.

Between the Lines: Jalopnik’s Ray Wert on GM - Chrysler Merger

Justin Berkowitz — Sat, 11 Oct 2008 12:58:45 +0000

Last night, the New York Times “broke” the story that General Motors and Chrysler/Cerberus were discussing a merger. The report lacked only one crucial component: facts. As RF reported in his initial blog on the subject, the story unravels by paragraph two. We learn that the entire story is based on “two people close to the process.” While anonymous attribution is common new industry practice, a story without independent corroboration is a nothing more than rumor— especially when it defies common sense. General Motors’ assertion that they routinely talk to other manufacturers about collaborative efforts doesn’t count. But it does reveal the truth of the matter. [Continued]

America’s Love Affair with Horsepower, RIP

Robert Farago — Fri, 10 Oct 2008 12:09:11 +0000

I was walking the dog the other day when I heard a V8 bellow. I turned around to see a perfect example of a latter day muscle car: a Chevy Silverado pickup truck. I was surprised by my surprise. Although the Northeast represents Middle America’s automotive tastes about as well as Harvard professors reflect conservative political values, I wondered if society has reached the point where the sound of unabashed engine power has become, well, boorish. Has the average American automobile, once a symbol of status, virility and pride, been castrated? And is that a bad thing?

The Great Auto Industry Crisis of 2008: History

menno — Thu, 09 Oct 2008 16:39:15 +0000

Doesn’t the human race EVER learn? Why must we continually have to go through the same pains, trials and tribulations that our parents, grand parents and great grand parents went through? Same with the automobile industry. Same with how our nations handle their affairs-- economics included. Even politics. Forever, politics.

Aporkalypse Now: End Game

Edward Niedermeyer — Sun, 05 Oct 2008 14:29:11 +0000

Hear that sound? It's the fat lady singing a dirge for $7.5b of taxpayer money ($25b at risk in total). It's now as good as spent on a few undeserving automakers. Industry executives and union bosses alike are celebrating their lobbying victory, ignoring their still-dire position for the glorious moment. Congress may have made with the cash in short order, but they aren't rid of the freeloaders just yet. In fact, no sooner had the ink dried on President Bush's signature on HR2638 than industry backers were telling the media what TTAC has surmised all along: $25b is only the first step. In its first story on the new law, the Detroit News reports that “Michigan lawmakers plan to return next year to seek another $25 billion in loans for 2009 and 2010, and more flexibility in how the funds can be used.” And why wouldn't they?

General Motors Death Watch 202: Carmegeddon Pt. 2

Ken Elias — Fri, 03 Oct 2008 17:38:38 +0000

Consumers will not buy a new vehicle from a bankrupt carmaker. That’s the over-arching fear preventing GM from filing for a court-managed rescue: a total collapse of consumer confidence in the company’s products. History suggests that a GM C11 would indeed trigger carmegeddon. Ask an automotive historian to name an American automaker that filed for bankruptcy, survived, emerged and thrived and you get a doughnut-hole shaped answer. But I submit that GM will reorganize successfully. C11 will be a new beginning for GM, its suppliers, dealers, workers and, yes, customers-- not the end of everything. But let’s start from the corporate perspective…

Consumer Reports Test Day: “The Future of the Car”

David Holzman — Thu, 02 Oct 2008 13:56:19 +0000

The biggest surprise at last Friday’s Consumer Reports’ press shindig: no plug-in electric - gas hybrid Chevy Volt. Not a mock-up. Not a mention. Oh, GM was there-- with two hydrogen fuel cell Chevy Equinoxes. So never mind all that talk of "reinventing the automobile." At “The Future of the Car,” the car of the future’s just like your current ride, only cleaner and, mostly, a lot less practical.

General Motors Death Watch 201: Carmegeddon Pt. 1

Ken Elias — Tue, 30 Sep 2008 11:32:16 +0000

When a company doesn’t have enough money to pay creditors what they’re owed, it’s considered insolvent. By this definition, GM is insolvent. The American automaker’s working capital stands at negative $20b. Cash outflow for the half year through June 30 remains negative, at over seven billion dollars. And it’s getting worse, as cash calls arrive on a regular-- and irregular-- basis. There’s no more credit to tap, and GM has few assets of meaningful value left to sell. Oh yeah, GM’s gonna file for bankruptcy. Then what?