#HighFinance

Investors in Redflex Traffic Systems were resigned toward the photo enforcement vendor’s declining US performance at Wednesday’s annual shareholder meeting in Melbourne, Australia. The company has lost significant US market share and profit as more cities reject automated ticketing machines. Nonetheless, large executive compensation packages were approved without the dissent found in past meetings.

Shareholders signed off on a $324,926 salary for chief executive Graham Davie, plus $194,956 in stock for a total of $519,882 — a raise of 3.6 percent. Board member Karen Finley’s salary increased 3 percent to $318,270 plus $196,060 in stock for a total of $514,330. Finley is in charge of US operations which saw a drop in profit from the first and second half of the year of 7.4 percent.
Redflex has also lost its position as the dominant player in the automated ticketing market to American Traffic Solutions which has used funds invested by Goldman Sachs to buy out smaller competitors and take on their municipal contracts. ATS now boasts the greatest number of cameras deployed.

One of the great mysteries to many inside the auto industry is why is GM’s stock price so low? Though the company had a weak third quarter, its stock price has been stuck well below its IPO price for much of the last year, despite a return to profitability. Though GM faces challenges, few inside the auto industry understand why its stock price remains so low. One theory: the government’s mere continued presence as a major stockholder creates uncertainty around the company. If this is the case, it creates something of a vicious cycle: the lower the stock price, the less likely the government is to sell its shares, leaving it lingering with no exit strategy, in turn driving the stock lower. Though that’s not likely to be the whole story, one thing is certain: the government has been forced to increase its loss estimate for the GM bailout. The Detroit News reports that the Treasury’s losses on GM are now estimated at $23.6b, up from $14.4b. And with an election looming, it seems likely that the White House will sell within the next six months. But will the government’s desire to protect itself politically trade off with GM’s PR? After all, whatever the Treasury’s final loss is, that number will be pinned to GM as a symbol of what it owes the American people. On the other hand, with most analysts insisting that GM stock is undervalued, another year of government ownership could convince investors to bid up the price, greatly reducing GM’s public debt. Too bad electoral politics will probably prevent that from happening….

Saab’s Memorandum of Understanding with PangDa and Youngman expired today, returning Saab to what must by now be a rather comforting, familiar state of limbo. Of course, the MoU in question was already dead, as GM had publicly nixed it, saying it wouldn’t supply parts or license technology to a 100% Chinese-owned Saab. But now, without an official agreement to rally around, Swedish Automobile, PangDa and Youngman are desperately pitching new ownership structures to GM in hopes of approval. Swedish Auto’s Victor Muller tells the WSJ [sub]

We are submitting an information package to GM and we will have to await the feedback that GM has on that package and then we’ll know.

Muller says the lesson of the failed MoU is that GM won’t accept Chinese control, and as a result the new proposed ownership structure is “very carefully crafted” so that none of the three partners has complete control. But since the previous deal, in which PangDa and Youngman would split a 54% stake in Saab, is also off the table, it’s tough to say what Muller’s “carefully crafted structure” entails. And while Saab and its Chinese suitors wait for GM approval that may never come (but don’t tell Keith Crain [sub] that!), it seems both time and money are getting tight. Again. Still.

Do you badly want a new mid-engined Porsche? Is the Boxster/Cayman combo still a bit rich for your blood, given the weak economy? Chances are you have been waiting patiently for news about Porsche’s “Baby Boxster,” the long-discussed, entry-level, flat-four-powered version of Volkswagen’s Bluesport concept. The sad news: you may be waiting quite a bit longer. In an interview with the FT Deutschland, Porsche CEO Matthias Mueller says

There is no decision to develop this car into production. The decision is due soon, but they may well drag on into next year

Why? Well that’s easy: Porsche’s number one priority is to remain the world’s most profitable automaker, with “at least” a 15% operating margin and a 21% return on capital. And it can hit its 200k sales by 2018 goal without adding a sixth or seventh model… thanks to the fact that its fifth model is an entry-level SUV, called the Cajun.

With Saab’s latest MOU with PangDa and Youngman expiring on Tuesday, the heat is on for parent company Swedish Automobile (SWAN) to hash out the many problems and disagreements between GM and the proposed Chinese buyers. And now that it’s fairly obvious that a deal won’t happen, as GM and the Chinese Government seem fairly well set against it, the question is “what next?” How do you plan an endgame that should have been initiated months, if not years ago? That’s the challenge being considered by the few remaining shareholders in SWAN, who are meeting in Holland to pick through the none-too appealing options.

According to Tesla CEO Elon Musk, the EV luxury brand has pre-sold all 6,500 units of its new Model S to be built next year, and the company is on-track for a 2013 profit. Bt if you’re comparing Tesla to the erstwhile EV darling BYD in order for it to look good, you have to wonder how good things really are. If anything, Tesla should be compared to Audi, an established (and hot) luxury brand with the same EV technology and one of Tesla’s founders on board. Losses for this fiscal year are estimated at $437m, and Tesla’s crucial loans from the Department of Energy are attracting a distracting investigation in the wake of the Solyndra scandal (but hey, Musk is “personally guaranteeing” those loans, so no worries…). And, in a truly puzzling move, Tesla is ignoring the SAE J1772 protocol for rapid EV charging because it isn’t sexy looking enough. As EV guru Chelsea Sexton puts it to the New York Times

It’s hardly unusual for Tesla to zig where the rest of the industry zags. But it’s particularly counterintuitive not to use the J1772 standard, since Model S drivers will be more interested in public charging than Roadster owners. Tesla’s proprietary connector choice requires getting customers to care about form over function on one of the most utilitarian aspects of the car. How many people stare at a gas nozzle and think, ‘If only that were better looking’?

Selling out of a first-year production run is good news, but hardly surprising (all plug-in vehicles are currently capacity-constrained). Preventing buyers from using public charging infrastructure because it’s unsexy is the kind of surprising news that could seriously damage Tesla’s long-term efforts. Meanwhile, we still don’t know how this company will do with regards to manufacturing quality and reliability, especially as volumes ramp up to 20k units per year. After all, Tesla’s hype and niche marketing efforts are well-proven… it’s all the other aspects of building and selling cars that we’re still unsure about.

On the last possible day to work out a deal before being forced into bankruptcy, the Victor Muller era has ended at Saab. The Swedish brand will now become a completely Chinese-owned company… if all goes to plan. A press release explains

Swedish Automobile N.V. (Swan) announces that it entered into a memorandum of understanding with Pang Da and Youngman for the sale and purchase of 100% of the shares of Saab Automobile AB (Saab Automobile) and Saab Great Britain Ltd. (Saab GB) for a consideration of EUR 100 million…

…The administrator in Saab Automobile’s voluntary reorganisation, Mr. Guy Lofalk, has withdrawn his application to exit reorganisation. The MOU is valid until November 15 of this year, provided Saab Automobile stays in reorganisation.

But remember, this is Saab… and its fate rests in the hands of many, many people not named Victor Muller. Despite the air of finality that is surrounding some of the media coverage of this latest announcement, this is not a done deal. The Saab saga rolls on…

With a Halloween deadline to get its restructuring back on track looming, Swedish Automobile has rejected an offer by Youngman and Pang Da to buy 100% of Saab’s shares. Moreover, the struggling Swedish brand has canceled the existing agreement with Youngman and Pang Da, its erstwhile would-be rescuers. A Saab presser notes:

Today, Swedish Automobile N.V. (Swan) announced that it has given notice of termination with immediate effect of the Subscription Agreement of July, 2011 entered into by Swan, Pang Da and Youngman.

Swan took this step in view of the fact that Pang Da and Youngman failed to confirm their commitment to the Subscription Agreement and the transactions on the agreed terms contemplated thereby as well as to explicit and binding agreements made on October 13, 2011 related to providing bridge funding to Saab Automobile AB (Saab Automobile) while in reorganization under Swedish law.

Pang Da and Youngman have presented Swan on October 19 and 22 with certain conditional offers for an alternative transaction for the purchase of 100 percent of the shares in Saab Automobile which are unacceptable to Swan. However, discussions between the parties are ongoing

Lyssna: Saabs vd, Victor Muller, om företagets situation

Whenever a CEO says “bankruptcy is not an option,” you know the game is up. After complaining in this Swedish Radio interview (in English) that his court-appointed administrator is trying to sell Saab off wholesale to the Chinese, Victor Muller trots out Churchillian and Nietszchian calls to arms… in fact, he does everything short of bursting into a spirited rendition of “I Will Survive.” Unfortunately, Muller’s credibility is long gone, and he doesn’t help himself by trying to portray Lofalk as some traitorous backstabber. With Saab months (years? decades?) into its death-flails, and the most recent “rescuer” turning out to be a non-player, is it any wonder Lofalk wants to hand over the mess to the only viable companies involved (especially when Muller calls North Street a “strong partner”)? Muller continues to labor under two basic delusions: first, that he can sell a majority share to the Chinese while keeping Saab an essentially Swedish (or at least European) company and second, that anyone cares whether Saab becomes a Chinese company. Sorry Victor, there’s just nothing left here to fight for…

With both China’s NRDC and Sweden’s NDO appearing unready to approve the Chinese takeover of Saab before a Halloween bankruptcy deadline, it seemed that Saab was properly borked. Without Vladimir Antonov or Gemini Investment Fund to hit up for yet another “bridge loan,” we fully expected to see Saab placed into bankruptcy a week from Monday. But if Saab’s parent company, Swedish Automobile, had found a private equity fund that was gullible enough to rush in where Antonov feared to tread and drop $44m on Spyker… well, we should have known that North Street Capital would be fool enough to get sucked into the Saab maelstrom. And sure enough, Reuters reports that

The private equity firm of racing car enthusiast Alex Mascioli, which bought the luxury sports car business of the Dutch owner of Saab in September, is to invest $70 million in the cash-strapped car maker as Chinese bridge financing looks uncertain.

Here we go… again.

No, it’s not a special-edition 911 with a few extra horsepower and leather-wrapped mirror-adjustment levers. Nor is it a water pipe built to the most exacting standards ever imagined by German engineers. No, Porsche has a freaking palace for sale, Schloss Bullachberg to be precise. Conveniently located in Bavaria’s castle district, near some of Germany’s most famous castles, Bullachberg was once the seat of the von Thurn und Taxis dynasty… and can now be yours for an undisclosed sum. The Frankfurter Allgemeine Zeitung reports that Porsche bought the property five years ago, for some six million Euros, with plans to turn it into a luxury resort hotel for “kaufkräftig” (literally purchase-powerful) customers and management retreats. Fast forward through one financial crisis and one overambitious attempt to buy Volkswagen, and Porsche has decided to let the property go. But be warned, as the FAZ reports that

only the most necessary work was done on the building’s upkeep.

Now that Ferrari even has its own amusement park (conveniently begun before the financial crisis), there’s no way Porsche will ever match its Italian rival in terms of cross-branded destination tourism. Which is fine. After all, we’re talking about car companies here… right?

Today’s Rasmussen poll results, which show that Americans are arguably less likely to buy from a bailed-out automaker, raise some interesting questions. Like, does receiving a bailout constitute an inviolable black mark on an automaker? Do the size of the bailout, and the amount the government recovers make a difference? With a presidential election looming, these factors are worth knowing: after all, the government still has the choice of when to divest its shares in GM. And with GM’s stock down over 40% from its $33 IPO price last November, the government is looking at a significantly larger loss than it would have endured had it divested immediately aftter the IPO. So, should the government dump now, anticipating larger losses in the near future, or should it hang on in hopes of a rebound, increasing the risk that “Government Motors” will become a political hot potato going into 2012? The latest clue, via CNBC, remains as cryptic as ever…

Reuters reports:

Republican leaders in the House of Representatives want to halve the balance of a U.S. government loan fund established to help the auto industry make more fuel efficient cars and trucks.

If plans to shift some $1.5 billion from the Energy Department advanced technology fund to disaster assistance are carried out, serious questions would be raised about Chrysler’s ability to fully capitalize on its bid for new financing.

That the DOE loan program is under attack comes as no surprise: it’s been savaged by both the GAO ( twice) and the Center for Public Integrity for a lack of clear goals, weak oversight, misappropriation, and political patronage (more on the patronage bit here). And with the Solyndra DOE loan scandal blossoming, it’s no surprise to see ATVM going under the axe (although Rep Steny Hoyer is leading the Democrat pushback). What’s worrying about this development, however, is that Fiat-Chrysler CEO Sergio Marchionne has said that the DOE loan was “a crucial part” of negotiations over its recent Wall Street bailout loan refinancing. When GM quit the program earlier this year, Marchionne also said that

I have neither the arrogance nor the cash to show any disdain toward the DOE process.

Chrysler also cites its ability to secure the DOE loans as a major risk factor in its latest 10-Q SEC filing. And with only about $10.2b in cash and equivalents on hand at the end of June, there’s a chance that this attack on the ATVM loan program could deal a body blow to Chrysler’s finances. Here’s hoping Sergio has kept the runt of the bailed-out automaker litter from dependence on this apparently corrupt, and politically vulnerable loan program.

The national character of auto brands is a tricky thing. For decades, Volvo wore its Swedishness on its sleeve, emphasizing the values that made Ikea, Abba and Swedish porn so popular in the US… even when it was an outpost of the Ford empire. And then the unthinkable happened: Chinese up-and-comer Li Shufu bought the brand and rolled it into his Geely empire. In the world of national-character-branding, being bought by a Chinese firm is something like hiring Casey Anthony as a brand ambassador, or using a mascot called “Mr Melamine Milk” (another nightmare scenario can be found here). So, how does a brand like Volvo, that was built on Swedishness, get past the “China Factor”? By doubling down on Swedishness? How about by building cars in the US?

Bloomberg [via the Financial Post] reports that “one of the five biggest European banks” is “close” to loaning Saab $157m so that it may pay workers and suppliers, in order to move towards restarting production. According to DI.se, the deal is predicated on Saab securitizing the loan with shares of Saab Great Britain or other “alternative assets.” But apparently whatever the banks ask for, Saab will try to give, as Theodoor Gilissen Bankiers analyst Tom Muller explains

They need the money immediately. I hope they solve it this week, otherwise I think it’s over for Saab. It’s a very dire situation.

He’s not kidding…