The Carmagedonn Thread: FCA and "Consolidation"

[Sniffs]

for the hockey stick of it, I checked with the local Hyundai dealership, and got an informative and nasty suprise. you have to make at least 2000 dollars a month, or 25k a year to get a car loan. combine the fact that I have been vehicle hunting for about a month (with someone willing to give me a hand), and can't find anything less than 15 years old, 100k, etc for less than 4000 bucks around here, well..

with the US Government saying to GM and Chrysler "Not Good Enugh", there are allready rumors floating around that they may take over the car companies.
we may lose them outright. it might just be cheaper to let GM and Chrysler go...

 

[Tornado]

Wagoner should have stepped down immediately after hiring Lutz, but the fact that Obama made him do it angers me to no end.

 

[Philly]

Obama gave a speech on the situation just now apparently...

It looks like GM just gets another chance, and more money, to prove their viability.

Looks like they've given up hope on Chrysler. As one commenter said, it would make far more sense for FIAT to not make the deals the government wants, let them fail and then just buy everything up once Chrysler goes into liquidation.

I wouldn't be surprised to see a government-run GM and a dead Chrysler by the end of the year.

 

[YSSMAN]

Wagoner should have been out during that big shift in power pack in 2003, particularly when it was becoming increasingly evident that Lutz was running the show. To have the White House essentially force him out, its an interesting move, but I keep wondering why the board didn't do so in the first place. Clearly, he did not have a firm grasp on where the company needed to be going.

*sigh*

From Washington Today:

President Obama is scheduled to give a press conference today at 11:00 AM EST today in which he'll officially reveal his plans for the U.S. auto industry. Stay tuned and keep hitting refresh on your browser to learn the latest.

- Auto industry has shed over 400,000 jobs in the past year, Michigan has 10% unemployment rate [Its actually a bit more than that]

- "We cannot and must not, and will not, let our auto industry vanish."

NOTE: DOW down 275 points at 11:11 AM EST

- Companies must stand on their own, not as ward's of the state

- Neither restructuring "plan" goes far enough to warrant substantial new investment each company is requesting

- GM/Chrysler being offered limited, additional period of time to fundamentally restructure in a way that would justify new investment from government.

- Sounds like the administration is basically giving each automaker more time to restructure and another deadline to submit another progress report to justify more investment.

- Committed to working with Congress and automakers to meet one goal: "United States of America will lead the world in building the next generation of clean cars."

- Obama going through list of accolades that U.S. automakers have received for their "green" cars.

- "Our auto industry is not moving in the right direction fast enough to succeed in a very tough environment."

- Obama is now going to go over what each automaker needs to do...

GM
- Current GM plan is not strong enough
- Confident GM can rise again if it undergoes fundamental restructuring
- Rick Wagoner stepping aside is first step
- Not a condemnation of Wagoner, recognition that company needs new vision
- Gov't will give GM adequate working capital to survive next 60 days
- Criteria GM has to meet includes A) consolidating enough on profitable brands, B) cleaning up balance sheets, C) business model to survive and succeed in this competitive global market.

- "Let me be clear, the U.S. government has no interest in running GM."

Chrysler
- Situation more challenging
- Partner required to remain viable (Fiat)
- Fiat will give Chrysler technology and build cars and engines in the U.S.
- Chrysler will repay tax payers before Fiat can take majority stake in company
- Working capital up to $6 billion will be provided to Chrysler for next 30 days, during which time an acceptable deal with Fiat must be struck
- If no agreement with Fiat happens and no other partner steps up, Chrysler gets no more money


- Chapter 11 bankruptcy still an option, Obama is being very careful to explain what "bankruptcy" means, i.e. restructuring, clearing away old debts, companies remain open and workers employed.

- U.S. government will stand behind warranties of GM and Chrysler cars.

What gov't will do to support demand for auto sales...
- Gov't will make sure funds to purchase gov't cars will be paid as soon as possible
- Accelerate Treasury Dept's Consumer and Business Lending Initiative
- Work with auto finance company's to increase available credit

- NEW TAX BENEFIT (for vehicle's purchased between 2/16 and end of year): Deduct cost of any sales tax or excise tax.

- Cash for Clunkers incentive (get money to trade in old car and buy new one): Obama wants to make this happen and make it retroactive, work with Congress to carve out funds from Recovery Act to pay for it.

- Obama ending with speech directly to working people: "I will fight for you."

- Compares auto industry crisis to natural disaster, "Damage is clear and we must likewise respond."

- Designating a new Director of Recovery for Auto Communities and Workers to "cut through red tape". Ed Montgomery appointed, former Deputy Labor Secretary. Will provide support to auto workers and their families (not sure how, though). Apparently he'll have access to Recovery Act money.

Interesting. Very interesting. I'm interested to see if they could pull the "Cash for Clunkers" initiative out, its worked pretty well in Germany so far.

 

[Bones Brigade]

Wagoner should have stepped down immediately after hiring Lutz, but the fact that Obama made him do it angers me to no end.

Obama didn't make him. They shouldn't be getting government our money period. So if there are stipulations attached to plans that do get them money, it's up to the company to decide if they need our money, or if they go down.

Wheres WW3 when you need it?

 

[Philly]

Wheres WW3 when you need it?

Well it's starting to look like we'll be invading Iran any day now... So you might actually get your wish.

 

[Tornado]

Obama didn't make him. They shouldn't be getting government our money period. So if there are stipulations attached to plans that do get them money, it's up to the company to decide if they need our money, or if they go down.

Stipulations in a contract are supposed to be established before the contract is signed. Not afterwards. I saw nowhere in the US-GM handout package a line that said "Oh, and we can fire whoever whenever for whatever reason."

Furthermore, we have a large inefficient company (the U.S. government) with absolutely zero experience in the industry in question pretty much threatening an automaker over who should be allowed to run said automaker. The fact that they made a good decision this one time (and really, its been common knowledge that Wagoner should have been fired years ago, so don't give Obama too much credit) doesn't mean the next time they decide to directly screw around with a companies affairs that they won't screw something up completely, particularly when the government has no real grounds to do so other than "we''ll take your money away." Like that mess with the bonus checks for AIG. And the corporate jets shenanigans with Citigroup.

 

[YSSMAN]

Stipulations in a contract are supposed to be established before the contract is signed. Not afterwards. I saw nowhere in the US-GM handout package a line that said "Oh, and we can fire whoever whenever for whatever reason."

I think we all knew that at some point, it was going to be either the White House or Congress that would have asked for the CEO's to step down (I'll attempt to avoid a banking discussion here). Wagoner, simply put, was never consistent with his goals for the company. When they recognized that there were problems back in 2002 and 2003, they attempted to fix them. But the effort wasn't enough. When they realized that there were more problems in 2006, they did a better job trying to fix them. But, obviously, it still wasn't enough. The power dynamics within the company, I think, must have been flawed. Perhaps Wagoner did push for "the right thing," and it was the board and the bean-counters that consistently got in the way. I know Lutz bitched about it all the time, I see no reason why it couldn't have been the same for Wagoner. Either way, of the three CEOs, arguably he has done the worst job. Or, I suppose, the worst job that we can see the effects of thus far.

Autoline has a good piece on why Wagoner was canned, available HERE.

Oh, and, Did You Hear the One About Chrysler and FIAT?

Not long after the President concluded his televised press conference today, Chrysler released a statement saying that it and Fiat have already reached an "agreement on a framework of a global alliance".

The President announced that the U.S. government would supply Chrysler with sufficient capital (up to $6 billion) to operate for 30 days while it pursues a partnership with Fiat, but apparently Chrysler was farther along in its talks with Fiat than the President and his Auto Task Force realized. While terms of the arrangement have not been revealed, we do know that Fiat will provide Chrysler with product, platforms and technologies, as well as potentially use existing Chrysler manufacturing facilities to build its own vehicles in the U.S. In exchange, Fiat will get a stake in Chrysler that the administration has demanded will not become a controlling stake until the automaker has paid back all of the federal loans it received.

So, we know what the deal would look like on paper... But there has yet to be any signatures to make the deal happen. I'm still crossing my finger that it does. Grab that 30% stake in the company, shove your own cars into the market, take the optional 20% figure, and slowly eat Chrysler from the inside out - leaving just a handful of "worthwhile" models (ie, Jeep and a select few Dodge and Chrysler products).

 

[High-Test]

Who said Chrysler was going to get eaten? Is this eaten in a bad way? Or eaten like those crazy fish in the spas in Turkey? They could stand to lose some of their more pointless models. (which is a tricky task and will leave few standing)

The artist formerly known as menglan does hereby confess that his signature upon registration December 10, 2003 contained the phrase "DaimlerChrysler was a takeover!" and used it to spout unfounded, ignorant fourteen year old anti Daimler AG Rhetoric. Later operating systems within the same mainframe of this user have decided to continue the anti-Daimler AG rhetoric but with arguably more soundness in its claims. We (we!?) thank you for your support.


Hmm. Maybe FIAT will get Chryslered, just like what happened to MB. What, don't beleive me? it was a slow process starting in 1993. Equilibrium happened in about 2001 where there were no real differences in build quality, then the LX happened, which was everything the w210 wanted to be but wasn't. It's all a conspiracy for Chrysler to slowly infect other companies with their brand of mutated Ellis, Kansas shenanigans.

 

[Touring Mars]

Furthermore, we have a large inefficient company (the U.S. government) with absolutely zero experience in the industry in question pretty much threatening an automaker over who should be allowed to run said automaker. The fact that they made a good decision this one time (and really, its been common knowledge that Wagoner should have been fired years ago, so don't give Obama too much credit) doesn't mean the next time they decide to directly screw around with a companies affairs that they won't screw something up completely, particularly when the government has no real grounds to do so other than "we''ll take your money away." Like that mess with the bonus checks for AIG. And the corporate jets shenanigans with Citigroup.

The fact is, GM and Chrysler have no room for maneouvre, their hands are tied and are now almost totally dependent on public money to save them, therefore it is of little surprise that the government are calling the shots. The option of having the government calling the shots is far from ideal, but that's what is going to happen when that business can only function thanks to a government bail-out. As independent, privately owned and operated businesses go, GM and Chrsyler already no longer exist.

Obama spoke yesterday of not allowing the US auto industry to fail because US motor manufacturing was "an emblem of America's spirit" and a "source of deep pride" on which the nation was built. That's as maybe, but those are not good enough reasons to use billions of taxpayers' money to artificially prolong the lives of companies that the market has decided have failed already. Still, it looks increasingly like the penny is finally dropping - that the bail-outs are not working and merely delaying the inevitable (meanwhile costing the taxpayer more and more, with less and less chance of seeing any of it back) - and hence the time is fast approaching where the bail-outs will have to stop and the government will have to let capitalism take it's natural course.

 

[Sniffs]

this morning, On one of the morning shows, one of the reactions to Obama telling them what to do sounded distinctly like a restrained scream "THIS IS...COMMUNISIM!!!1!"
*sigh*
I'm tired of this.

 

[Philly]

I'd say more socialism. It'll be communism when the government owns and operates GM, and controls pretty much everything.

Who said Chrysler was going to get eaten? Is this eaten in a bad way? Or eaten like those crazy fish in the spas in Turkey? They could stand to lose some of their more pointless models. (which is a tricky task and will leave few standing)

I don't think FIAT has much of an interest in keeping Chrysler around. It would only make sense for them to buy it up when it's cheap and failing, pick it apart, and suddenly you've acquired a lot of power for not a whole lot.

I bet that this is what the clause saying FIAT cannot take a majority stake until the loans are repayed is trying to prevent. It would force FIAT to keep Chrysler around before dissolving them.

On the other hand, if that was FIAT's intention, they'll probably just not make a deal the Feds want and then buy it up during liquidation in a month or so.

I think that the only thing Chrysler can do now is get these new cars they were planning to debut out NOW, so they can prove that they will be building good cars in the very near future, and hopefully get them on the market in a couple months. Because I do not really want to keep pumping money into a brand that has a terrible lineup currently that may or may not put some new models out soon that may or may not be good enough to save the company.

If they say that development of these new cars is nearing completion but they still need a while, I say let FIAT buy them up and use Chrysler's assets to themselves.

 

[YSSMAN]

Who said Chrysler was going to get eaten? Is this eaten in a bad way?

Just a theory of mine, really. Not much else than that.

However, this story seems to make it somewhat inevitable:

Cerberus to Lose Stake in Chrysler as Part of the Bailout Deal

So, that'll make it easy for FIAT to take a 50% share in Chrysler in no time at all.

=-=-=-=-=

Hyundai Will Probably Like These

GM Announces the "Total Confidence Program"

Ford Announces their "Advantage Plan"

Hopefully, that will bring some people into the dealers.

 

[Prosthetic]

Yeah, and its not just car companys that are doing. Furniture, electronics etc...

 

[Sniffs]

remember, socialism and Communism are the same thing to older generations. and that includes Nationalized health care under that "red Blanket". again, I state that times will NOT change until all the people born under the shadow of the cold war are dead...

I won't be happy untill car values fall to something that a person who makes less than 25k a year can afford.

 

[High-Test]

Sad, but true.

Marx never thought that there would be labor laws and the right to unionize, along with such other communistic ideals such as free public education and a minimum wage.

Communism, socialism, marxism, they're all a bunch of words spouted out by idiot muckrakers and yellow journalist-politicians to rile up uneducated gun and jesus voters on other side of this "aisle" people keep talking about.

 

[Tornado]

The option of having the government calling the shots is far from ideal, but that's what is going to happen when that business can only function thanks to a government bail-out.

I want to speak hypothetically here: Lets say we have an American automaker with the government calling the shots. For this experiment, we will call it "Chrysler." Lets say they force out the current CEO without official reasoning and replace him with someone they assume will do a better job. Someone with years of experience in the automotive industry that looks good on paper, so the government hires him without realizing that he is actually completely incompatible with not only the company but the American buying public in general. For this experiment, we will call him "Dr. Z." Now what is to stop the government from hiring this "Dr. Z" character? Everyone in the industry knows it will be a failure from day one, but the government knows best so they do whatever anyways. Later, hundreds of thousands of Americans are out of jobs and the American taxpayers just lost billions of dollars.

I'm not saying that any future "Chrysler" type companies will be saddled with any "Dr. Z" persons, but I don't even think the potential of an occurence is worth risking.

Hmm. Maybe FIAT will get Chryslered, just like what happened to MB. What, don't beleive me? it was a slow process starting in 1993. Equilibrium happened in about 2001 where there were no real differences in build quality, then the LX happened, which was everything the w210 wanted to be but wasn't. It's all a conspiracy for Chrysler to slowly infect other companies with their brand of mutated Ellis, Kansas shenanigans.

Unless FIAT has some strange desire to lose money, I don't think they would make the same stupid decisions Mercedes made. Before 2001 (when the last of the Chrysler designed cars started production), Chrysler was by far the best American company when it came to cars. By 2005 (when most of the Chrysler designed cars were gone), they were just about the worst company overall on the entire American market. These things don't just happen.

 

[YSSMAN]

Thats mainly why I think FIAT is moving in to grab the dealer network, to force their way into their production facilities, and then they're just going to slowly strangle the brand. I can't see them outright killing them all, but certainly, model lineups will be minimized extensively... Sold alongside a few select FIAT models. The only Chrysler brand that FIAT would save would likely be Jeep, and even then, I only see the Wrangler, Grand Cherokee and maybe the Patriot making it through.

One of the problems still lurking in this whole deal is whats going on with Nissan, Mitsubishi and such. My guess would be that if FIAT were smart, they'd scrap those deals immediately.

 

[Tornado]

Those deals didn't do much for Chrysler anyways ("Here Nissan, have the best truck available on the market. What do we want in return? How about that crappy Renault looking thing?").

The being said, I don't see FIAT as putting the brands into a chokehold. Chrysler has their faults, but they certainly look to be trying to fix them as of late. Compared to a certain other American automaker, its almost refreshing. Then you realize that the nicest interior in the world wouldn't fix the Sebring...

 

[YSSMAN]

While I'm thinking of it:

The guys who do the 24 Hours of LeMons are putting together the 12 Hours of Sebring, a dedication to America's favorite rental car. I don't know if I could put into words how much I want to pick up an old, beat-up Sebring Convertible rental and race it. Beyond epic.

Anyway...

Updated Chrysler products are coming, and they seem better. It will definitely benefit the Avenger and the Journey. The Ram is still a good choice, and of course, most of the Jeeps still offer up a halfway decent value. Outside of the LX cars and those other ones listed there, there isn't anything worth saving in favor to a FIAT model. Well, the minivans too.

Another side thought:

When I was going out to lunch today at work, a Dodge Journey drove by - and it still comes off as a very nice looking car. The interior is decent, but not great, and mechanically speaking, its not the worst thing on the road. But in general, it just shows off as a fail. Its terrible, because it deserves better... And Chrysler can't make it so.

 

[ROAD_DOGG33J]

US "directs" GM to file for bankruptcy by June 1st

General Motors Corp. is believed to be preparing to file for bankruptcy by June 1 after being directed to plan for a filing by the U.S. Treasury Department, according to a report Sunday in the New York Times.

The Times, quoting unidentified sources, said the Treasury Department has directed officials at General Motors (NYSE: GM) to lay the groundwork for a "surgical" bankruptcy filing that could last as short as a few weeks for portions of the company. Those portions would be the "good" parts of the company, and the "less desirable" parts of the company would remain in court for much longer and possibly be liquidated, according to the Times.

The parts of GM that may get bogged down in a lengthy court restructuring or liquidation include the "unwanted brands, factories and health care obligations," sources said in the report.

A report in the Wall Street Journal on Sunday said that any attempt at a "quick" bankruptcy for GM could face legal challenges from bondholders of the company.

GM has accepted $13.4 billion in federal bailout funds and has asked for at least $16 billion more. However, President Barack Obama rejected GM's initial restructuring plan and forced former CEO Rick Wagoner to resign before setting a new deadline of the end of May for the company to come up with an acceptable new plan.

Fritz Henderson, the new CEO of GM, said last week in an interview on NBC's "Meet the Press" that while GM was not ruling out bankruptcy, it was not inevitable.

Chrysler LLC also has accepted billions in government bailout funds, but Ford Motor Co. (NYSE: F) is the only one of the Big Three automakers from Detroit not to take federal funds.

On Friday, Standard & Poor's Rating Services lowered its debt ratings for Chrysler and GM, and added that bankruptcy is likely and could lead to the break-up of Chrysler.

The S&P said in its warning that it was lowering the debt ratings because of the increased possibility of bankruptcy if the two automakers don’t meet deadlines set by President Barack Obama’s administration, according to numerous media reports.

GM operates a parts and service facility in West Chester. It shuttered it closest assembly plant, in Moraine, near Dayton, last December.

 

[Philly]

I do wonder how GM would look after getting broken up like they describe. They'd certainly be a lot smaller, and I'm guessing they'll never recover fully to the levels they were at before.

Is it pretty much a consensus that Chrysler is going under now? It seems that they have pretty much fallen out of the media and even the government isn't really talking with them anymore.

 

[YSSMAN]

My guess is that GM would be taken down to the basics; Chevrolet, Buick, Cadillac and Pontiac. Maybe GMC. It seems increasingly likely that Saturn and Hummer are dead, without a buyer. Saab is being offered up to 20 potential suitors, which should bring in some cash.

...Hey, if its the only way for GM to survive, its the only way. Get it done guys so I can still have a company to root for...

=-=-=-=-=-=-=

As for Chrysler, I think we've known for quite some time that the company is insolvent, and needs to file for bankruptcy or be purchased by FIAT. It seems increasingly obvious that FIAT will buy them.

Fine by me, just give me the option to buy a 500 already!

 

[niky]

Man, they finally got sick of delaying the inevitable. Good. The corporate structure and beaurecratic inertia of the General was just a hindrance to recovery.

Big question for us here in Asia-Europe... what's going to happen to GM's subsidiaries here? GM-China has the market and the money to go it alone and Saab is already a dead brand walking (has been for decades) but what about Daewoo GMDAT?

This leaves Ford, teetering and tottering, as the sole remaining member of the Big 2.1. They still have quite a bit of cash, a good amount of competitive product, and some decent overseas operations to lean on... I just wonder if they're fit enough to survive till 2010?

 

[YSSMAN]

Big question for us here in Asia-Europe... what's going to happen to GM's subsidiaries here? GM-China has the market and the money to go it alone and Saab is already a dead brand walking (has been for decades) but what about Daewoo GMDAT?

There are conflicting stories flying around everywhere, so it largely depends on who you believe and what time you read it at.

- Apparently SAIC has made an offer for Buick from GM, which reportedly was turned down almost immediately.
- GM-Daewoo is losing money despite being a success overall in Asia and Europe, no word on the immediate changes required.
- Saab has 20 potential buyers outside of their own reported independence from GM, so they'll be taken care of some way

Things will get interesting. GMI seems to think that on the whole, the company will be taken down (literally) to the core-of-the-core brands:

- Chevrolet
- Opel/Vauxhall
- Holden
- Cadillac
- Buick
- Daewoo

Pontiac may sneak in, but its being suggested that GMC will die along with HUMMER.

 

[Philly]

Interesting that they'd take GMC down. It is GM's second best selling brand, and I can't imagine it costing too much to just change the badge on the front and put a couple banners up in your local BPG dealer...

 

[niky]

- GM-Daewoo is losing money despite being a success overall in Asia and Europe, no word on the immediate changes required.

There's only one change required: Stop making ****ty cars. I've only driven one recent GMDAT product that was any good... the Chevrolet Captiva. And even then, it was only half-good. Terribly chintzy, Chinese-like instrument cluster, and epic understeer of epic proportions, served up with a big side order of epic steering numbness. At least the ride was averagely comforting, but I wasn't even half-impressed.

And the fact that they're still selling that steaming pile of garbage called the Matiz (which costs way too much for what is basically a Daewoo with less crash survivability than a Chinese car)... it's a terribly underwhelming brand. I'm wondering if the Epica will be any better, but I doubt I'll ever get the chance to drive one. Chevy doesn't like our magazine, for some reason. Must have something to do with my editor-in-chief saying that his personal P.O.*. Venture is made of "vermicelli and tofu". Breaks down at least six times a year (and they bought it new). (Oh, I know the Venture isn't GMDAT, but they're sold by the same people).

-

I quite agree that Hummer and GMC have to go. Chevy can carry the whole truck line by themselves. Hummer as a brand doesn't make sense... a GMC Hummer would have made sense... but a Hummer Hummer? I still don't get it.

GMC, as a brand, can't expand, takes extra money to market beside Chevrolet... extra money to badge-engineer (as does Hummer... and Pontiac... and Saturn) from Chevrolet, and can't be grown into the small car market, which needs to be done if it has any chance of survival in the future.

 

[Sniffs]

Paring down GM to nothing but a BUICK alternative??!

oh hell, just give buick to the chinese, and kill GM we're all drowning in Japanese anyway, and ford will finally get the crap beat out of them.

the way this is going, the guys that made the char cheap and common will no longer have any cars to sell...

and the reason your getting such crappy Chevys down there, niky, is that they're just rebadged Daewoos!

 

[niky]

Paring down GM to nothing but a BUICK alternative??!

oh hell, just give buick to the chinese, and kill GM we're all drowning in Japanese anyway, and ford will finally get the crap beat out of them.

the way this is going, the guys that made the char cheap and common will no longer have any cars to sell...

and the reason your getting such crappy Chevys down there, niky, is that they're just rebadged Daewoos!

I know that. Most customers don't. It was amusing, after the initial batch of Chevrolet Optra/Forenzas and Aveos were sold, how sales slowed to a crawl, as people realized how bad the cars were...

Still doesn't forgive the Venture, though...

 

[Tornado]

So now they will get rid of GMC? But still keep Buick?

I hope bankruptcy fixes the stupid, at least.