Minutes after Ally Financial, the bs-artist formerly known as GMAC, took its Residential Capital bankrupt, David Shepardson tweeted to his followers that all is fine:

“GM owns 9.9% of Ally Financial Inc, while @USTreasuryDept owns 74 percent”

Isn’t that reassuring?

TTAC readers are not surprised by Ally’s ResCap going under. A bankruptcy by May 14 had been predicted. Shepardson is the Washington, DC Bureau Chief of the Detroit News.

There is new trouble brewing in an important part of GM’s business: Ally, the former GMAC. Nearly 75 percent of the credit that GM dealers in the United States use to finance their inventories is from Ally, says a Reuters report. The report also says that Residential Capital (ResCap) – Ally’s mortgage servicing and lending unit – is again on the verge of being put into bankruptcy.

Ally still owes the U.S. Treasury Department about $12 billion. GM and Chrysler, two key sources of customers, are increasingly reluctant to steer business to it, says Reuters. This puts Ally deeper into trouble.

ResCap faces litigation over underwriting standards. The suits could bring a new set of liabilities that threaten to take Ally down with it unless it is somehow separated. According to Reuters, ResCap is seriously considering filing for bankruptcy by May 14 when it must repay a portion of its debt.

Once upon a time, GM’s North American operations spewed red ink across the firm’s balance sheet, with the whole mess kept afloat by relatively strong overseas operations. Now GM makes most of its money at home while its international divisions limp along. No, really: in its just-released Q1 financial report, GM reveals that some $1.7b of its $2.2b global EBIT came from its once-troubled home markets. What a difference a bailout makes!

GM CEO Dan Akerson sums up the situation with refreshing candor, noting

New products are starting to make a difference in South America, but Europe remains a work in progress. We’ll continue to work on both revenue and cost opportunities until we have brought GM to competitive levels of profitability. [emphasis added]

That GM is not yet experiencing the kind of hot streak one might expect from a global titan that’s been stripped of debt and loaded with government cash is self-evident. Like its share price, GM’s performance in the last quarter has been merely adequate. A billion dollars in profit is always a good thing, but around the world GM is still underperforming the market. In fact, The General lost .3% global market share. in Q1 2012, the third straight quarter of such declines, and GM’s share of the world market is now a full point lower than it was in Q2 of last year.

Even in the US market that now provides the lion’s share of its profit, GM is losing ground to the competition. North American market share has also fallen for the last three quarters, now standing at 16.4%, some 2.4% lower than Q2 2011. US dealer inventories jumped dramatically in the quarter as well, from 583,000 to 713,000. All this in the face of above-average incentives (as a % of average transaction price) and subprime financing (8.2% compared to an industry average of 6%). In light of these developments, GM’s ability to earn the majority of its profits in North America speaks to its bailout-streamlined cost structure. Still, there’s no denying that things are not headed in the right direction.

GM Europe continues to be the source of the most serious bad news, although its $300m loss is half of the Q4 2011 number. Still, restructuring and plant shutdowns will cost GM a pretty penny at some point in the not-to-distant future, and until that bitter medicine is administered, GME can only try to control its losses. GM South America turned the corner into profitability, yielding a $100m gain on its lowest production volume in over a year (albeit with steady market share).

But GM’s opaque “International Operations,” which include Korea, Australia and the crown jewel of China show some of the most troubling signs of malaise. With costs rising faster than volume and pricing gains could make up for, GMIO’s EBIT declined by $100m compared to Q1 2011. With the Chinese market cooling off, GMIO is also losing market share at a steady .1% per quarter for the last three quarters. Given how crucial China is to GM’s global future, this is not a promising development.

This is not a return to “Deathwatch” territory by a long shot, as GM still has $31.5b of government cash and equivalents on hand, and $37.3b of available liquidity. But the premise that GM simply needed a bailout in order to soar to global dominance is certainly wearing thin. And with the government waiting for an uptick in GM’s stock price to sell its stock at a politically-palatable price, mediocre results like this will allow the stigma of government ownership to linger.

The Emir of Abu Dhabi is tired of the car business. Germany’s Spiegel Magazin heard that Abu Dhabi’s sovereign wealth fund Aabar wants to sell all stock in Daimler. Aabar also wants out of Daimler’s Formula 1 team and the joint investment in Tesla.

Both Daimler and the funds have no comment on the matter. However, both the Wall Street Journal and Reuters  received confirmation from their sources.

The sheikhs had bought 9 percent of Daimler AG in March 2009, which made Abu Dhabi Daimler’s largest shareholder. That engagement is now down to 3 percent. Both share 7.8 percent of Tesla’s stock 60 (Daimler) to 40 (Abu Dhabi).  Abu Dhabi National Energy held 7 percent of Tesla, and has already sold it.

A look at Daimler’s chart says that it is a good time to sell. The Sheikhs approximately doubled their money in Daimler. Reuters thinks they cleared 2 billion euro ($2.6 billion.)

Volkswagen’s CEO warned its shareholders of a “very demanding year,” what with the European debt crisis depressing auto markets and growth in growth markets slowing. What is growing is risks, said Winterkorn at VW’s annual general meeting. Oddly enough, it is Volkswagen’s competitors who should be very worried.

U.S., South America and Russia helped VW increase group sales by 15 percent last year to a record 8.36 million cars. Volkswagen’s first quarter of 2012 broke another record with global sales increasing nearly 10 percent. In Europe, Volkswagen eked out a small gain in March, while competitors like PSA, Renault, GM and Fiat suffered double-digit losses.

Despite the warnings, Winterkorn did not lower expectations. Volkswagen wants to increase 2012 auto sales and revenue beyond 2011 results. Winterkorn restated the company’s goal to match last year’s record operating profit of 11.3 billion euros ($14.8 billion).

The total absorption of Porsche will have to wait some more. Volkswagen would have to pay about 1 billion euros in taxes if it would buy the remaining 50.1 percent of Porsche’s core car business before 2014. Buying Ducati for fun is one thing. Giving the money to the tax man is another.

Writes the New York Times:

“As financial institutions recover from the losses on loans made to troubled borrowers, some of the largest lenders to the less than creditworthy, including Capital One and GM.

Consumer advocates and lawyers worry that the financial institutions are again preying on the most vulnerable and least financially sophisticated borrowers, who are often willing to take out credit at any cost.

‘These people are addicted to credit, and banks are pushing it,’ said Charles Juntikka, a bankruptcy lawyer in Manhattan.”

Other people worry that GM fell off the wagon, and is getting a fix on the same old junk. Continues the Times:

“Moody’s was already sounding the alarm last year that some very risky borrowers were getting auto loans. The market, Moody’s wrote in a report in March 2011, could be growing “too much too fast.”

Steve Bowman, the chief credit and risk officer for GM Financial, expects subprime auto loans continue to grow. GM Financial openly flaunts its return to the subprime poker table. On its website, GM Financial says:

“When it comes to subprime auto financing, GM Financial is the perfect fit … Today, over 40 percent of Americans are in need of subprime financing options. And, according to A.T. Kearney’s 15th Annual Automotive Study, the economic downturn of 2008-2009 resulted in an additional 15 million Americans being classified as subprime.”

There is nothing wrong with having a well-managed captive finance arm. Ford Credit is one example. A captive finance arm can provide profits and increase customer loyalty. It is not without risks however. In the wrong or desperate hands, it can get more dangerous than crack. Customers can default. Overly optimistic residuals can break the bank. A parent that is desperate for gaining market share can prod its financing arm into making riskier and riskier bets until the house of cards comes crashing down – again.

Forbes says that subprime lending is “not such a bad thing,” and that “the most important thing for lenders is to keep the lessons learned from 2008 crisis fresh in their memory.” It seems like the only lesson GM Financial has learned is that the 2008 crisis was just the right thing to produce 15 million additional subprime marks.

The scuttlebutt on Mazda is that Japan’s favorite independent automaker is in the toilet, having to shed jobs in America and assets in Japan just to stay afloat. While Mazda may be strapped for cash, their less-than-liquid holdings, like a baseball team and $5 billion worth of land, don’t look so bad.

Mazda’s holdings include a 34 percent stake in the Hiroshima Carp baseball team, a struggling but well-loved team, hospitals and other social facilities worth $253 million and various land holdings worth $5 billion. Mazda was in good financial shape before the financial crisis, but in recent years, the company has weathered the dissolution of its relationship with Ford, and a rising yen that has had devastating consequences for a company that produces most of its vehicles in Japan.

While Mazda has announced plans to build a factory in Mexico and is well on its way with their SkyACTIV technology aimed at reducing fuel consumption, the company will have to enact some short term measures to help ease their financial burden – like selling a bunch of valuable assets that are held for no other reason than because of a tie with Mazda’s hometown.

Before and after Saab had gone bankrupt, pipe-dreamers thought that the company can be revived with just a few million dollars. The number commonly used was $50 to $70 million. We maintained that it would cost a few billion dollars to get the company going again.

As it turns out, we were way too optimistic.

Saab’s unpaid bills are between SEK12-13 billion (USD1.8-2 billion) says the Wall-Street Journal. The number is based on information from the court-appointed receivers. A full accounting will be published on April 10.

The books must have been in a royal mess if it had taken until now to establish total debt with a ten percent variance.

It is no surprise that no buyer was found for Saab as a whole. The buyer would have shouldered the $2 billion in debt and would have needed another 2 billion at least to have a chance at viability.

Also on April 10 is the final deadline for bids for Saab assets. According to the Journal, “a handful of parties are interested in buying Saab Automobile’s facilities in Trollhättan, Sweden. All of them are interested in producing cars at the plant.”

GM’s new partner PSA Peugeot Citroen needs more cash. To raise money, PSA sells its headquarters building in Paris and will turn into a renter. Signing GM as a new 7 percent partner apparently hasn’t improved PSA Peugeot Citroen’s cash position. Au contrair, PSA’s credit rating had gone to junk.

PSA told Reuters that it will sell its head office building in the fashionable 16^th arrondissement in Paris to institutional fund manager Caisse de depot et placement du Quebec for 245.5 million euros ($326.54 million) as part of a property disposal plan announced in February.

The building is said to have 540,000 sq ft, PSA will lease back the high rent building under a renewable nine-year lease,.

In the nice problem to have department, Shell is doing its very best (or so they say) to settle a $1 billion bill for about four large tanker loads of Iranian crude. The problem: Sanctions make payments to Iran hard if not impossible.

“Shell is working hard to figure out a way to pay. It’s very sensitive and very difficult. They want to stay on good terms with Iran, while abiding by sanctions,” a source told Reuters.

Shell was one of Iran’s top clients, along with France’s Total and Turkey’s Tupras. After sanctions on Iranian oil were declared, companies have until July 1 to take last deliveries of oil. Payment however is a whole different matter.

“It is now nearly impossible to use the banking system,” an oilman told Reuters. Payments had been hard for a while. Dubai banks used to be able to facilitate payment in and out of Iran, but this has stopped following pressure from Washington.

Isn’t this a problem we all would like to have?

An I.P.O for a physical product is a refreshing change from the Tech 2.0 bubble we’ve been subjected to lately. Allison Transmission, formerly of General Motors, just issued their first I.P.O, raising $600 million for the company. Allison is now valued at $4.2 billion.

Allison’s current owners, which include the Carlyle Group and Onex (both private equity firms), should reap a fairly decent return from the company, having only invested $1.5 billion on their own (the rest of the money was borrowed). The two firms purchased Allison in 2007. Shares are going for about $23 each, though that may change if the underwriters of the deal decide to issue more. As of 1 PM Friday, the stock was up 3.03 percent to $24.11.

The podium was all smiles when Volkswagen reported an unheard-of profit of €18.9 billion ($24.8 billion) before tax, which turned into €15.8 billion ($20.7 billion) after the taxman got his €3.1 billion share. When Volkswagen announced this today in the annual results press conference, there was one man who grinned even more than anybody else.

That man was Stefan Winter. He is a reporter of the Hannoversche Allgemeine. He reported a month ago that Volkswagen would have a €16 billion profit. And he was right. The world’s second largest automaker in volume definitely is the largest in profits. For details, the annual report is available here.

PSA Peugeot Citroen doesn’t just have problems selling its cars lately. It also has problems selling its stock. To move the paper, a tried and true tactic is employed: Cash on the … where do you put the cash when you sell shares at a fire sale deep discount?

PSA is doing a €1 billion ($1.3 billion) rights issue to fund an alliance with General Motors. The announcement prompted a Moody’s downgrade. The new shares appear to be a hard sell.

PSA said today it would offer 16 new shares for every 31 shares currently held by investors at 8.27 euros apiece. This would be  “a 42 percent discount to its closing stock price on Monday,“ says Reuters. Actually, the stock had dropped after the announcement of the GM alliance. Compared to a few days ago, we are looking at a 50 percent discount. Everything has its price.

Yet another hopeful maker of electric vehicles called it quits in Indiana. Bright Automotive of Anderson, Ind., announced this week that it will wind down operations after withdrawing an application for a DOE loan. This is the latest in a series of EV companies that went belly-up in Indiana, where Gov. Mitch Daniels had vowed in January 2010 to make the state “the electric vehicle state.” The Chicago Tribune lists the failed companies:

• Last year, Think, an electric vehicle manufacturer in Elkhart propped up by government incentives, filed for bankruptcy.
• A month ago, Ener1, the battery-maker that was to supply the Think vehicle from three manufacturing facilities in Indiana, filed for bankruptcy reorganization.
• An unrelated plug-in manufacturer the state tried to nurture has yet to get off the ground.

February’s incentives came in at the lowest of any February since 2003, says the Edmunds.com’s True Cost of Incentives barometer.  Edmunds.com reports that the average TCI per vehicle in February was $2,193, up 2.4 percent over January (MoM,) but down 14.5 percent from February of last year (YoY.) Says Edmunds.com Senior Analyst Jessica Caldwell:

“The decreased incentives spending across the industry so far in 2012 really underscores the healthy performance we’ve been seeing at dealerships nationwide. Car manufacturers know that consumers who deferred purchases in 2011 are still coming back to the market and by stepping back the discounts, they stand to pocket bigger profits. The first quarter of 2012 is shaping up quite well for automakers.”

GM and PSA praised monstrous synergies and annual cost savings of $2 billion a year as an effect of the alliance that was announced yesterday. The savings won’t come immediately, rather in about 5 years from now. Moody’s thinks it’s a bad deal, and did cut PSA’s debt rating to junk status.

Moody’s Investors Service lowered Peugeot’s rating to Ba1, the highest so-called “speculative” grade with a negative outlook. Moody’s reasoning, according to Reuters:

The cost of implementing the alliance will hurt Peugeot’s earnings in the short term, the agency warned, and cooperation may not produce the savings expected later. “Moody’s notes that past mergers and alliances in the automotive industry have often not resulted in the anticipated competitive advantage and improved performance,” it said.

When the stock markets close in Europe today, PSA Peugeot Citroen and GM should announce that they are going ahead with the plan of GM buying seven percent of PSA. That according to “sources with knowledge of the discussions” that talked to Reuters.

GM and Peugeot will pool R&D, vehicle platforms and technologies, Reuter’s sources say. PSA hopes to save $2 billion in 4 years through the deal. What GM is hoping is anybody’s guess.

In the morning, The Detroit News reported that Sergio Marchionne also would not mind taking a stake in PSA. Depending on how that announcement is coming along, all Sergio can do is stand and watch while GM and PSA are doing the alliance.

PS: After the close of the market, the deal was announced.

Not all of this will be free cash: The number contains unrealized profits from stock options in relationship to the Porsche takeover. Volkswagen stockholders can expect a dividend of €3 per share, says the paper. Stockholders probably expected a bigger share of the hefty profits. Unions also demand more money. Usually, 10 percent of the profits are bonussed-out to the workforce, but as “Volkswagen was never really affected by the crisis,” Volkswagen works council chief Bernd Osterloh wants “a healthy amount on top.”

According to the well-informed paper, the Supervisory Board will not be presented imminent plans of a final Porsche takeover. Volkswagen’s legal team has developed an intricate plan than allows a merger in a tax-efficient manner, however, Wolfsburg still is waiting for word from the tax authorities to see what kind of a share they want.

Also expecting more: The analysts. According to Reuters, analysts had expected a better 4th quarter. Quarterly operating profit was €2.29 billion ($3.05 billion), while analysts had forecast €2.38 billion. Shades of GM.

Hammered by the tsunami, the Thai flood and a monster yen, the Japanese car industry is looking back at one of the worst years in modern history. Amazingly, Japan’s top three, Toyota, Nissan and Honda survived the year intact, and are looking at a profit.

Of all Japanese automakers, Mazda is bleeding the most. 70 percent of Mazda’s production is  in Japan, and 90 percent is for export. Mazda predicts that it will close the fiscal year on March 31 with a net loss of 100 billion yen ($1.25 billion.) This will be the fourth year of losses for Mazda. On top of all the disasters, Mazda has to digest a painful divorce from Ford which cut into overseas production capacities. In the words of Mazda,

“Its financial standing has temporarily worsened due to rapid changes in its business environment, including the continuing sharp appreciation of the yen since 2011, the unstable economic conditions such as the financial crisis in European countries, as well as large-scale disasters such as the Great East Japan Earthquake and the floods in Thailand.”

How is Mazda going to survive this?

It will sell shares instead of cars.

In order to finance urgent investments, which target 50 percent overseas production by 2016, Mazda announced today that it wants to raise up to $2 billion via a public share offering. This means a haircut for current shareholders to the tune of a massive 69 percent dilution, Reuters says.

Some of the money will go towards building factories in Mexico and Russia, most of it will be spent in Japan. While other automakers are forging alliances to share the cost of research in new and untested technologies, Mazda fights alone. It is betting on optimizing the internal combustion engine with its Skyactiv technology, an exercise in diminishing returns.

50 percent overseas production by 2016 are widely regarded as too little, too late. Nissan and Honda only have 24 percent of global production  in Japan, Toyota has 44 percent of its global production in Japan. All of them would like to lower exposure to the yen as quickly as possible.

Chrysler alerted the Securities and Exchange Commission that they’d be withdrawing their request for as much as $3.5 billion in loans. The money was to be used for the development of unspecified “green” vehicles.

The Advanced Technology Vehicles Manufacturing program, passed by Congress in 2007, helps automakers their current plants to build more fuel efficient vehicles. The program is worth as much as $25 billion in total. Chrysler CEO Sergio Marchionne was on record expressing frustration at the speed of the loan application, stating that it put Chrysler in a “ very, very uncompetitive position”.

Analysts had already expected a disappointing 4^th quarter, but when GM announced the results of the October – December quarter today, the results were worse than feared. Net income attributable to common shareholders was $500 million, or 28 cents a share. Analysts had expected two cents more.

Strong results in North America were dragged down by losses in Europe. Said GM CFO Dan Amman:

“We clearly have work to do in Europe. We have work to do in the South America business. Frankly, we have work to do all around the company in terms of cost opportunity.”

That work should not be easy. The business climate in Europe is getting rougher. Opel is losing market share in Europe, and the unions oppose any further plant closings. In China, the growth of the new car market has come to a halt.

When GM will announce 4^th quarter and year-end earnings tomorrow, a lot of fingers will be pointed at Opel, and on GM CEO Dan Akerson who decided to keep the hemorrhaging unit instead of selling it off to Magna and the Russians. Bloomberg expects that tomorrow’s quarterly profit will be “GM’s lowest since it emerged from bankruptcy in 2009,” despite record sales in the U.S. and China. According to Bloomberg,

“The darkest cloud on GM’s horizon is Opel, the biggest contributor to GM’s $14.7 billion in European operating losses since 1999.”

Adam Jonas, an analyst at Morgan Stanley Jonas, estimates the value of GM’s European operations at a negative $8 billion. The automaker’s China business would be worth $10 billion, he said.

“The negative value of GM Europe is almost as big as the positive value of GM China,” Jonas said.

GM shareholders will demand action to cut German losses, but unions in Germany point to the contracts with GM that rule out further plant closures and layoffs.

PSA racked-up a 497 million-euro loss in the second half of 2011, after a 405 million profit posted in the first six months of the year. This does not bode well for 2012 which looks like a tough year for European automakers. PSA raised its saving target and considers sales of assets in a battle against rising debt.

The red ink should fuel speculations about a tie-up with Fiat, which had been rumored ever since Sergio Marchionne said that “he would be willing, in principle, to be part of a consolidation that would create another car company in Europe rivaling Volkswagen AG in size.”

Rival Volkswagen in the meantime is expected to exceed the record profits of 2010 when it presents the 2011 balance sheet on March 10.

GM’s turn-around hinges on a market share above 19 percent, board member Stephen Girsky said at an industry meeting in October 2009. “The public plan is 19 percent and change. That is what everything is being based on,” Girsky said during a panel discussion at a conference at Columbia Business School. Reuters was taking notes.

In the 3^rd quarter of 2009, GM had a market share of 19.5 percent. The share climbed to 21.8 percent in January 2011, and eroded ever since.

In January 2012, GM’s market share stood at 18.4 percent, says Edmunds. In the same month, GM CEO Dan Akerson had a change of heart and said that this had been the plan all along:

“I like profitability more than I do market share. We’re a mass producer and scale matters to us, but obviously we’ll look for margin and profitability going into 2012.”

This is what Akerson dictated into the notepad of Reuters at the Detroit auto show. Reuters continued:

“Prior to its 2009 bankruptcy, GM was criticized for loading incentives onto its cars to drive sales and keep its factories operating at high capacity, regardless of what that did to profits. Since its restructuring, GM executives have stressed protecting the company’s ‘fortress balance sheet.’”

Data collected by Edmunds tell a different story. GM is by far the most generous American maker when it comes to incentives. In January 2012, GM’s Total Cost of Incentives (as calculated by Edmunds) was $3,171 per unit. Ford spent $2,788, Chrysler $2,447. The industry average stood at $2,141. In January 2012, only BMW put ($28) more on the hood of its much pricier cars than GM. GM out-spent Mercedes Benz which had been in a bitter fight with BMW for the luxury sales crown last year, and spent $3,107 in January.

At the same Detroit auto show, GM’s North America chief Mark Reuss promised that GM’s U.S. consumer incentives will remain at or near the industry average. Imagine what would happen if Reuss keeps his promise and drops incentives by $ 1,000.

Analysts polled by Bloomberg predict that U.S. automakers led by GM will lose more market share this year.

Was it luck? Was it hard work? A mixture of both? After escaping a near collision with fate in Iwaki, and not even getting its feet wet in Thailand, Nissan emerges as the most successful after the trials brought on by the unholy triad of tsunami, flood and yen. We said this a while ago when we compared 2011 production numbers of Japan’s majors.

Today, we go to Yokohama to check the balance sheets.

In the most unceremonious way, Japan’s second largest automaker Nissan today stands out as the country’s most profitable. On the 8^th floor of Nissan’s glitzy building by the Yokohama waterfront, there is no arm-waving Carlos Ghosn today who fills the room with French-accented quotables. In his stead, Nissan fields a nondescript Nissan’s Corporate Vice President, Joji Tagawa, to present thgwe quarterly results.

The bespectacled  VP with chin fuzz and spiky hair rattles off words and numbers as if his life would depend on the speed of their delivery. It does not matter: The numbers could have been delivered by a silent nun, they still would have conveyed their punch:

Both in the October-December quarter, and also in its guidance for the results of the fiscal year which ends on March 31^st, Nissan trounced Honda and Toyota. October-December, Nissan’s  operating profit was 118.1 billion yen ($1.54 billion). Net profit amounted to 82.67 billion yen ($1.07 billion.)  Even better, Nissan sticks with its profit forecast for the fiscal that calls for a net profit of 290 billion yen ($3.8 billion).

Post water torture, Nissan appears to be in the best shape of all.

While Toyota and Honda had to scrounge for cars and parts, and still are supply constrained to some extent, Nissan rebounded quickly and gained market share around the world. Toyota lost 240,000 cars to the Thai flood, Honda’s plant in Thailand was submerged for months and is a near total write-off. And Nissan? Only 33,000 units went down the drain.

Now, let’s see whether they can keep it up.