A third of all subprime car loans are now being categorized into the ominous-sounding “deep subprime” group. The designation has become progressively more inclusive since America clawed its way out of the recession and now accounts for 32.5 percent of all high-risk loans — up from just 5.1 percent in 2010.
While consumers have fallen behind on most subprime auto loans, the deep classification is responsible for the most serious cases of nonpayment. Delinquencies surpassing 60-day periods have tripled since 2012 and indicate little sign of stabilizing. (Read More…)
With memories of the 2008 financial meltdown still fresh, American consumers aren’t borrowing wildly anymore — except when it comes to cars and credit card purchases.
As of the end of June, car buyers racked up the highest auto loan debt in U.S. history — $1.1 trillion, according to a quarterly report from the Federal Reserve Bank of New York. Also on the rise? Credit risk. (Read More…)
A group of Jeep fans wants Fiat Chrysler Automobiles CEO Sergio Marchionne to make a Sophie’s Choice-style decision to save their beloved offroader.
To avoid the destruction of the storied brand at the hands of its parent company, FCA must cast it loose, the group states in a strongly-worded Change.org petition.
“As owners and fans of Jeep vehicles, we are calling on Fiat Chrysler Automobiles to separate Jeep from FCA’s stable of failing brands and debt,” the petition states. “We urge FCA to execute a spinoff to save Jeep.”
Millennials are buying Ford SUVs like it’s going out of style, no doubt dismaying the friends who like to lecture people about their lifestyle on Facebook.
That, Chevrolet offers a voyeur package for its full-side pickup, Fiat Chrysler Automobiles grabs a stack of cash with both hands, Mercedes-Benz gives its midsize SUV the AMG treatment, and two more automakers eye the Formula E grid … after the break!
Standard & Poor’s downgraded Volkswagen’s rating on long-term debt Monday, and said the company’s diesel scandal indicates poor management. The financial agency further warned that its debt rating could be cut further if the automaker doesn’t immediately address the deepening scandal, Bloomberg reported (via Automotive News).
“VW has demonstrated material deficiencies in its management and governance and general risk-management framework,” Alex Herbert, a London-based analyst at S&P, said according to Bloomberg. “VW’s internal controls have been shown to be inadequate in preventing or identifying alleged illegal behavior.” Further damage and other violations “represents a significant reputational and financial risk.”
Like many of the people who write to you, I am having trouble deciding if I should keep my current car or trade it in for a new one.
I currently own a 2010 Honda Civic EX-L with 140,000 miles. It has been the single most reliable car I have ever owned. I keep it meticulously maintained and generally change its oil every 6 to 8 weeks. Otherwise, I have only paid for a set of brakes and new tires.
A week ago, I test drove a brand new Honda Accord Touring and fell in love. The dealership has offered me an excellent deal that includes trading in my Civic. My dilemma is that I feel an allegiance to the Civic. The car has the soul of a toaster and is not exciting to drive, but like a trusty horse, it gets me everywhere I want to go without any complaints. The Civic will eventually need repairs as it approaches 200K but I feel like I would be letting it down by trading it away. On the other hand, I can easily afford the payments for the Accord, but I generally try to avoid debt.
What should I do Sajeev? Should I cut the Civic loose and replace it or keep on driving until she can carry me no more?
It’s almost a cliche. Someone mentions the $23.5 loan package that Ford Motor Company presciently took out in 2006, a loan that allowed Ford to develop new products and survive the economic meltdown and credit crunch of 2008 while its crosstown rivals were reduced to begging Washington for a bailout, and almost invariably they will bring up the fact that Ford pawned everything including their “blue oval”. Well, Ford once again owns the famous cerulean logo free and clear. Now that Moody’s has joined Fitch Ratings in restoring the rating on Ford’s debt to investment grade from junk status, the collateral that Ford put up for the loan, which included the logo, Ford’s “glass house” headquarters, several factories, and intellectual property including the Mustang and F-150 trademarks, is no longer security on that debt, per the terms of the loan.
I know I’ve said this several times before, but the end really is near for Saab. The WSJ [sub] reports that Sweden’s Debt Enforcement Agency began auditing Saab’s finances after several debts came due earlier this week, and found only 5.1 Kroner ($796,291) in its Skandinaviska Enskilda Banken account. That’s barely enough to cover the 5.06m Kroner in debts that came due this week alone… and Saab’s total outstanding debt is ten times that amount, around 50m Kroner. And as if the financial trouble weren’t dire enough, key stakeholders are abandoning Saab in embarrassment, like Benny Holmgren, one of Sweden’s largest car dealers. Holmgren tells SvD.se that his contract to sell Saabs has expired and that he won’t renew, explaining
“For me, it is important to be proud of the brands that we have in our halls. Saab does not deliver cars they promised, they do not pay wages to their employees, nor debts to their suppliers while the owners pick out big money. It does not feel right for a [my] car dealers.”
But among the hardcore Saab faithful, today is not a day of sorrowful resignation… but a day of totally overblown and unrealistic hope for their dying brand. Yes, really… (Read More…)
Just three weeks after Saab narrowly avoided being pushed into bankruptcy by supplier SwePart, SvD.se reports that three other suppliers have now initiated the bankruptcy process by requesting that Sweden’s national debt bailiffs pursue their debts. One Spanish supplier is reported to be foreclosing on €2m ($2.8m in debt), while two of the rebelling German firms are said to be owed at least €5m each. And though Saab says it is meeting with the Spanish firm to try to hammer out a deal, SvD reports that four of the 14 outstanding claims against Saab have run out of time. Lars Holmqvist, head of the European Association of Automotive Suppliers argues that, by paying some suppliers and not others, Saab is de facto bankrupt, and that a trustee should be brought in to pay suppliers in order of priority, rather than order of Saab’s necessity. Meanwhile, Saab CEO Victor Muller has been in Brazil and the US, trying to bring new investors on board, as its Chinese funding won’t be approved for two-to-three months, if ever. Meanwhile, “taxes and fees” must be paid by Friday, August salaries are due in just two weeks, and Muller cut his latest money-raising trip short to reassure workers back in Trolhättan. But according to thelocal.se, even the most optimistic of union leaders hope Saab will have a new CEO soon. Do I hear the fat lady warming up her vocal cords?
A group of businesses that are owed anywhere between $198 and $744,083 could force ailing Saab to declare bankruptcy. They have turned to the Swedish Enforcement Agency, better known (and feared) in Sweden as the “Kronofogden.”That agency introduces itself as follows:
“Is there a bill you cannot pay? Or are you not getting paid by someone who owes you money? In both cases, it will be Kronofogden that you come into contact with. A debt that is not paid ends up in Kronofogden´s register. This register is open for all to consult. As a result, anyone wishing to find out how someone else manages their finances can check the register. If a person´s name appears in the register, he/she can find it difficult to buy on hire purchase, borrow money or rent an apartment.”
Currently, there are 48 entries on that list that claim that Saab owes them. Lots of suppliers. A few bill collectors. A patent attorney. One of the world’s largest CPA firms, Pricewaterhouse-Coopers, demands $104,904.
Swedish online newspaper GT published a list of all the claims allegedly reported up to Tuesday. Here it is: (Read More…)
As Steve Rattner described in his book “Overhaul,” the Presidential Auto Task Force very nearly decided not to rescue Chrysler, with the decision coming down to a single vote. Now, it seems, that with Chrysler blaming the “shyster” interest rates on its government loans for its lack of profitability, Chrysler’s viability now depends on rounding up a “lender of second to last resort.” And, according to the latest reports, that rescue-of-a-rescue effort is still very much hanging in the balance as well. If CEO Sergio Marchionne thought the government’s loan terms were “shyster”-ish, he was clearly in need of some context from Wall Street… and he doesn’t seem to be liking it. (Read More…)
News that the government will sell only $6b-$8b worth of its GM equity has been joined by an even more surprising GM IPO announcement: GM will buy the Treasury’s entire $2.1b holding of preferred stock in the initial offering. GM has not announced how much it will pay for the stake, and the Detroit News reports that it’s not yet clear if GM will also buy some $400m in preferred stock held by the Canadian and Ontario governments. We’re also getting word via Twitter that GM will put $4b in cash and $2b worth of its stock into its overdrawn UAW pension fund, as well as making a $2.8b payment to the UAW VEBA account. With a $5b line of credit secured, GM says these and other steps will reduce its debt by $11b over an unspecified timeline. And speaking to Reuters, GM CEO Dan Akerson made it clear what the point of these moves are:
It’s up to people like you and me, the burden we share, that we deliver on the promise and return the investment to the American taxpayers. We are going to do our level best to make that happen, and we will only do that by expanding our industrial base and entering new markets and being a better competitor.
Of course, we’ll have to see what value The General places on the preferred stock to know how seriously Akerson should be taken. After all, talk is cheap and money isn’t. [UPDATE: It appears that GM will buy the preferred stock for $25.50 each, essentially giving the Government its book value of $2.14b]