The engine in question is Fiat’s 1.4 liter “Fire,” planned for use in the Fiat 500 as well as planned Dodge and Chrysler B-segment hatchbacks. Automotive News [sub] reports that the Michigan Economic Growth Authority has authorized ten years worth of employment tax credits if Chrysler builds the engines at an unused plant in Dundee, MI. But the credits are only worth an estimated $4.6m, and MEGA admits that that building the engines in Mexico would be cheaper for Chrysler. The most important factor: the engine will primarily power the Fiat 500, which will be built in Toluca, Mexico. Since most of the 500s built in Toluca will be headed to the Brazilian market, Michigan engine production makes even less sense. And since there won’t be any other North American products using the 100 hp, 92 lb-ft engine until 2013 (if the Fiatsler experiment even makes it that far), there’s almost no reason for Michigan to build these engines. Still, with 250k units planned annually, it’s no wonder MEGA dangled tax credits anyway. Besides, there’s one more wrinkle: one of the ways Fiat can gain another five percent of Chrysler’s imaginary equity is to “manufacture state-of-the-art, next-generation engines at a U.S. Chrysler facility.” Fiatsler is bringing Fiat back to the US as a one-model-brand (500) with a dedicated sales and support staff just to meet one of these government benchmarks… will they be crazy enough to build an engine in Michigan and ship them to Mexico to meet another?

There’s no shortage of analysis hailing Ford’s last-man-standing status, but there’s plenty of buried truth that’s not being brought to light. For example, Ford’s version of Delphi, bankrupt spun-off supplier Visteon. The firm’s non-European and Asian operations have been in Chapter 11 bankruptcy since May, and according to Automotive News [sub], it’s running out of DIP financing. Ford financed the supplier’s first month in bankruptcy, after which Visteon began burning through cash it was holding as collateral for its borrowings. And now that money is set to run out in March, forcing the firm to go hunting for $150m in further DIP financing. Unsecured creditors are objecting, calling the move a power grab by senior, secured lenders who seem willing to lend more money in order to edge out unsecured claims. And while that battle rages on, other OEMs are bailing on Visteon. Chrysler will come up with some $31m to buy back its supply business from the weakened supplier, Nissan is buying its Visteon-run North American interior plants back for $11m, while GM shifted its Visteon business to competitors at a cost of $22m. Ford, Visteon’s biggest customer and former owner is making no such move to abandon its most crucial supplier. If DIP funding comes up short, or if more bumps appear in Visteon’s bankruptcy (or if things continue as normal… Visteon lost $38m last quarter), Ford will face the brunt of the fallout. And with $30b in debt, and no government escrow account to draw on, Ford won’t be able to help out Visteon the way GM rescued Delphi earlier this year.

Well, the “what makes an American car American” debate just got a little more interesting (and a lot more interesting than the “who ‘won’ the CTS-V Challenge” rigmarole). Automotive News [sub] reports that Ford’s Oakville, Ontario plant and GM’s Delta Township plant have ceased production of Flex, Edge, MKX, MKT, Acadia, Traverse and Enclave as supplier Rico Automotive is unable to supply key transmission components. The reason for the parts stoppage: labor violence… in India. Turmoil at Rico’s plant in Gurgaron (30 miles from New Delhi) came to a head on the 18th, when clashes between temporary workers and factory staff left an employee dead. Now GM stands to lose 7,200 units of production, while Ford admits “several thousand” units won’t be built over the next week. This striking illustration of how globalized the auto industry is, is causing some analysts to question the wisdom of using Indian suppliers. They argue that labor unrest like this is common in the subcontinent, compounding already-challenging logistical and shipping-cost issues. But GM and Ford aren’t exactly about to stop investing in Indian firms and production capacity either, since that market shows more growth potential than the US. One thing is for sure: there’s no such thing as an “American car,” let alone an “American car company” anymore. Government ownership notwithstanding.

“There must be increased access to capital through the entire supply chain — from the largest tier one to the smallest family-owned firm,” Dave Andrea, vice president of industry analysis and economics at the Original Equipment Suppliers Association told the Senate Banking Committee [via The Freep]. “Without assistance this country will needlessly lose manufacturing capacity, technology development and jobs.” Which is about what suppliers have been telling congress since bailout mania struck. What the Freep fails to properly explain is that the supplier bailout passed earlier this year was an unmitigated disaster for suppliers and their relations with OEMs.

(Read More…)

After four years in Chapter 11 protection, GM’s largest supplier Delphi is returning to the land of the living. For now. Along the way, though, Delphi racked up some impressive bills. Automotive News [sub] estimates that GM has spent $12.5b on Delphi during its bankruptcy, and has pledged a further $1b in debt assumption, $2b in forgiven claims and $1.75b in investments in the new company. For these (taxpayer funded) sacrifices, GM will get Delphi’s money-losing US operations and steering unit business. Delphi’s new owners Elliott Management and Silver Point Capital walked away from $3.5b in debt to assume control of the company, and $6.25b in pension obligations were dumped by Delphi and had to be assumed by the Pension Benefit Guarantee Corporation. Delphi’s bankruptcy alone cost $400 million in legal and professional fees. The new company’s manufacturing base has been migrated outside the US, and its main business will be in supplying electronics and air conditioning systems. Expected annual revenue is $10 billion compared to the $22.59 billion the firm earned in 2005, before entering bankruptcy. But rather than tut-tutting the waste, greed and ineptitude that has marked Delphi’s bankruptcy, let’s take this moment to remember the thousands of employees and retirees Delphi has cast aside in the name of rescuing the US auto industry. For, as the Sibyl of Delphi foretold in the 9th Century B.C.E., love of money and nothing else will ruin Sparta.

The Detroit News reports that nastiness between Chrysler and its former overlords at Daimler could prevent the much-needed (by ChryCo) launches of new versions of the 300/Charger and Grand Cherokee/Durango. Apparently production of these new products can’t take place until Daimler and Chrysler agree to terms for Daimler-supplied components. Chrysler needs to resolve its legal differences with Daimler within 20 days in order to prevent delays to the roll-out of the Grand Cherokee/Durango. If the conflict continues, Chrysler admits it won’t be able to find a new supplier until January 2011. The Grand Cherokee/Durango and 300/Charger are planned to be Chrysler’s only 2010 debuts.

(Read More…)

Any hippie will tell you what Chrysler is finding out as it tries to kick-start its product development to life: karma’s a bitch. In the pre-bailout era, Old ChryCo held the dubious distinction of having the worst supplier relations in Detroit. Now, for some odd reason, suppliers aren’t wanting to shoulder the cost of developing components for new Chrysler vehicles. The Wall Street Journal reports Chrysler isn’t making any production volume promises for future products (an ominous sign in its own right), which means cash-strapped suppliers aren’t rushing in to spend their money developing parts. “Why would we want to tie ourselves to Chrysler when GM and Ford are a known factor?” asks one interior-component supplier. “We’re already financially strapped so we have to be more choosey in where we will spend our money.” Meanwhile, this supplier recalcitrance is making it hard for Chrysler to plan anything.

(Read More…)

Chinese T-bill buyers may have provided the capital for GM’s bailout (and by extension, GM’s bailout of Delphi) but American taxpayers will have to pay them back eventually. Meanwhile, the Chinese government gets to yea-or-nay GM’s rescue of its spun-off supplier. And the yeas have it. Automotive News [sub] reports that GM will assume more than $1b worth of Delphi’s debt, while waiving $2b in claims against its largest supplier. Additionally, GM will invest $1.75b in Delphi and provide an unspecified amount of new debt. China’s only concern was that Delphi set up firewalls between GM and its other Chinese clients in order to protect the intellectual property of Chinese firms. With that measure taken, and Chinese approval secured, Delphi appears on track to end its four year sojourn in bankruptcy by month’s end. Can GM afford this kind of outlay to keep Delphi alive? Shouldn’t Delphi have been given its own separate bailout to keep costs transparent? No matter, it’s fait accompli at this point. At least the Chinese government was kind enough to approve the deal (oh, and back its financing in the first place).

We obviously were micromanaging our cash — down to the penny, down to the minute — because that was our lifeblood

GM Spokesman Dan Flores in an Automotive News [sub] story on GM’s decision to pay suppliers weekly instead of monthly. The savage irony? By making payments monthly, GM actually had a harder time managing its dwindling cash pile during the bad old days referenced by Flores. And now? “We’re not going to save money by doing this,” says Flores. “But it’s a better, more reasonable, smarter way to run the business.” On the downside, the changes won’t mean suppliers will get paid any sooner as GM plans on maintaining the 47-day lag between supplier delivery and payment. Plus ça change…

Yes, that is what I’d truly like to be. For if I were a big GM supplier, they’d pass the big old savings on to me. And if that doesn’t make you want to break into song, you’ve never dealt with a Mr. Bo Andersson. Yes, now that Andersson has taken his fight to make the world a less cheerful place to Russia (where such causes are far better rewarded), GM’s supplier relations are going swimmingly. Andersson’s replacement, Bob Socia, has told GM’s suppliers that under his benevolent reign, GM purchasing will split any future cost savings on parts even-steven with the supplier. Of course, it’s up to the supplier to come up with the cost savings, but c’mon. Really. Just, c’mon. “We think this decision will help generate enthusiasm in the supply base for doing business with the new GM,” say GM spokesfolks. And guess what? They’re right! [via Automotive News [sub]]