David Kirkpatrick

July 31, 2009

“Cash for Clunkers” too popular

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 12:32 pm

Rendering visible a point long obvious — Main Street needs, wants and will put to good use federal bailout money.

From the link:

The House rushed Friday to pump $2 billion into a popular cash-for-clunkers program running near empty, with a leading Democrat saying ”consumers have spoken with their wallets.”A floor vote was under way at midday on the bill to refuel the car-purchase program. House Majority Leader Steny Hoyer had said earlier that the additional money would come from funds Congress approved earlier in the year as part of a $787 billion economic stimulus bill.

Hoyer, D-Md., said that at the request of House Republicans — whose approval was required for swift passage — the bill would include provisions for government auditors to make sure the money was being spent as intended.

April 23, 2009

GM edges closer to bankruptcy

Filed under: Business — Tags: , , , — David Kirkpatrick @ 4:03 pm

The announcement to close 15 of 21 plants for over two months has to represent the beginning of the end. What do you bet some, if not all, of those 15 never reopen as General Motors manufacturing facilities?

from the link:

In what appears to be a record voluntary shutdown, General Motors (GM) plans to essentially quit making cars and trucks in the U.S. for nine weeks from mid-May through July.

April 8, 2009

Bankruptcy and GM, the countdown

Filed under: Business — Tags: , , — David Kirkpatrick @ 2:09 pm

Unless the public is being seriously misled bankruptcy is the only option for General Motors. And clearly the only option to stay in business in any fashion without being completely funded by taxpayers.

So far the bailout money received by GM? Used to just keep the lights burning. Nothing more.

From the link:

General Motors Corp is in “intense” and “earnest” preparations for a possible bankruptcy filing, a source familiar with the company’s plans told Reuters on Tuesday.

A plan to split the corporation into a “new” company made up of the most successful units, and an “old” one of its less-profitable units, is gaining momentum and is seen as the most sensible configuration, said another source familiar with the talks.

If the plan goes through, the new GM would be expected to assume some previous creditor debt from bankruptcy proceedings, such as secured debt, said the second source, adding that GM bondholders were likely to lose substantial value in bankruptcy.

Certain GM dealer and litigation claims would also be hurt if the new company structure is used as part of a company bankruptcy, said the second source.

The sources requested anonymity because they were not authorized to speak on the record.

GM declined to comment.

April 2, 2009

GM sales way down

Filed under: Business — Tags: , , , — David Kirkpatrick @ 1:38 pm

I really don’t see how General Motors can be considered a viable company right now. The bailout money that is basically already gone went solely toward paying bills and keeping the doors open. The very definition of a company running in the red.

From the link:

General Motors Corp. led the slide with a 45 percent U.S. sales plunge compared with a year earlier, while Ford Motor Co. reported a 41 percent drop. Sales at Toyota Motor Co. and Chrysler LLC both dropped 39 percent, while Honda Motor Co. reported a 36 percent decline.

Detroit-based GM sold a total of 155,334 light vehicles, while Ford sold a total of 131,102. Ford’s total came in slightly below that of Toyota, which reported U.S. sales of 132,802 units.

April 1, 2009

Peeking into the looming GM bankruptcy

Filed under: Business — Tags: , , , — David Kirkpatrick @ 2:04 pm

It ain’t over ’til it’s over, but it looks more and more likely that Genernal Motors and Chrysler will both do some flavor of bankruptcy protection in the coming months. Particularly since it seems that’s the preferred outcome at the White House.

Here’s some tea leaf reading on the GM version:

A possible bankruptcy plan being discussed for General Motors (GM.N) includes quickly forming a new company of the automaker’s most profitable parts, while a group of other units would remain under bankruptcy protection for a longer period, a source familiar with the plans told Reuters on Tuesday.

GM also would seek to have a new deal in place with the United Auto Workers union prior to any bankruptcy filing, the source said.

GM warned earlier on Tuesday that there is a rising chance it could file for bankruptcy by June, as the company has 60 days to reach deeper concessions with bondholders and unions after its previous restructuring plan was rejected by the U.S. government as insufficient.

While the automakers would still prefer to avoid bankruptcy, advisers to both GM and Chrysler LLC have been working to prepare for potential bankruptcy filings that would aim to preserve, or sell off, the best parts of the companies.

Under the plans being considered, GM would seek to quickly move its most profitable units into a new company separate from its other units in the early days of the bankruptcy filing, said the source who asked to remain anonymous because the person was not authorized to speak to the media.

The aim would be to show consumers, taxpayers, and the government that the new GM can survive and compete in the autos sector as a viable company, the source said.

March 6, 2009

GM, pull your begging hands back …

Filed under: Business — Tags: , , , — David Kirkpatrick @ 12:29 pm

… and accept the inevitable bankruptcy. Embracing Chapter 11 right now is much better than Chapter 7 down the road. No amount of taxpayer’s money will save your ass right now.

From the link:

Well, since the first government loan was written, car sales have dropped faster than just about anybody predicted. GM sales plunged 53% in February from a year ago. And the share price has continued to fall — down 41% since New Year’s and 93% over the past 12 months.

Shrinking sales and market cap put massive pressure on GM, whose survival now hinges quite literally on checks from Uncle Sam.

Wagoner has repeatedly raised the specter of bankruptcy, arguing potential customers would shun the company for fear it might no longer back warrantees or provide replacement parts.

But some of that fear is mitigated by the fact that people are buying fewer cars from all auto manufacturers, even those seen as financially healthy.

This means that no matter how much effort GM puts into restructuring, demand for new cars is now too weak to sustain a recovery. So, if Chapter 11 is inevitable, this might be the most opportune time to undertake the kind of top-to-bottom overhaul it needs. At least the company won’t be sitting out a booming market. And it could fend off Chapter 7 liquidation.

March 5, 2009

GM’s books look bad

Very bad according to its auditors. General Motors may fail after all. I can’t see any argument for propping up a firm weaker than wet tissue. Too big to fail? Maybe more like too screwed up to save.

From the link:

General Motors Corp.’s auditors have raised “substantial doubt” about the troubled automaker’s ability to continue operations.

The company revealed the concerns, raised by the accounting firm Deloitte & Touche LLP, in its annual report filed on Thursday.

GM has received $13.4 billion in federal loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30 billion from the government. During the past three years it has piled up $82 billion in losses, including $30.9 billion in 2008.

GM says in its report that its auditors cited recurring losses from operations, stockholders’ deficit and an inability to generate enough cash to meet its obligations in raising substantial doubts about its ability to continue as a going concern.

The company said in its filing that its future depends on successfully executing the viability plan submitted to the government in February to justify the loans.

“If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code,” GM said in the annual report, filed with the U.S. Securities and Exchange Commission.

March 3, 2009

Auto sales way down

Filed under: Business — Tags: , , , , , , , — David Kirkpatrick @ 4:43 pm

The Ru, st Belt just keeps taking body blows and crushing shots to the jaw. It’s hard to see how these companies can remain afloat without the government simply stepping in and taking over for the time being. Is GM too big to fail? Ford? Is the auto part supply chain so weak that if any of the onetime “big three” collapse, the whole system breaks down?

We may find out before long. Talking to a group of businessmen last night, the general consensus on the unemployment aspect of this financial crisis is the rate will slow, but rising unemployment will likely continue unabated through the end of 2010 if not longer.

From the link:

The three largest automakers, including Toyota, each said their sales declined at least 40 percent from February 2008.

Sales were down 53 percent at General Motors, 48 percent at the Ford Motor Company and 40 percent at Toyota. Chrysler sales fell 44 percent.

Honda reported a 38 percent drop, while Nissan said its sales fell 37 percent.

“The February numbers are clearly a step down from where we’d been running the last four months,” said Michael C. DiGiovanni, G.M.’s chief sales analyst. “It’s unsettling to our business. These are obviously unsustainable levels which are causing almost every auto manufacturer across the world to look for government aid.”

G.M., of course, has gotten $13.4 billion from the federal government to help it avoid seeking bankruptcy protection, while Chrysler, which will report its sales later Tuesday, has received $4 billion.

February 25, 2009

Ford stares, UAW blinks

Filed under: Business — Tags: , , , — David Kirkpatrick @ 11:51 am

Maybe sensing the hand tugging the rope around its neck was its own, the United Auto Workers has made concessions to help keep Ford Motor afloat.

From the link:

Signaling that it is willing to do whatever it can to save Detroit automakers, the United Automobile Workers union has agreed to concessions with the Ford Motor Company on its retiree health care fund.

The agreement, announced Monday, would allow Ford to substitute its stock for as much as half of the $13.6 billion it owes the fund.

 

It could also form the basis for similar deals with General Motors and Chrysler, which need to cut costs and demonstrate that they can survive under the terms of their loans from the federal government.

”What they negotiated today at Ford is really something that unions aren’t made to talk about,” said Gary N. Chaison, a professor of industrial relations at Clark University in Worcester, Mass. ”This is the union trying to hold onto a benefit that few retired workers enjoy and doing it at a cost that may be prohibitively high.”

But U.A.W. leaders clearly see the alternative to making such concessions as far worse for their membership.

”The modifications will protect jobs for U.A.W. members by ensuring the long-term viability of the company,” the union’s president, Ron Gettelfinger, said Monday in a statement.

February 16, 2009

GM and the UAW

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 5:26 pm

I’ve been hard on General Motor’s hands-out, crocodile tears method of hoping to stay afloat, but now the ball is firmly in the court of the auto unions. If the UAW balks and refuses to play ball in these negotiations GM has the absolute right to blame the last straw on the unions.

From the link:

With its access to a government lifeline in the balance, General Motors was locked in intense negotiations on Monday with the United Automobile Workers over ways to cut its bills for retiree health care.

Both G.M. and its rival, Chrysler, are racing to file restructuring plans with the Treasury Department by Tuesday’s deadline. The companies must show progress in cutting long-term costs as a condition for keeping loans they have received from the federal government.

For G.M., the restructuring will be the largest in its 100-year history, the next step in justifying its $13.4-billion loan package from the federal government.

The plan will outline in great detail, as much as 900 pages, how G.M. will cut its work force, downsize its North American factories and reduce its brand lineup to four from eight.

But G.M.’s plan to shrink will not mean much without an agreement with the U.A.W.

On Monday, G.M. pressed union leaders in a meeting in Detroit for a deal on financing what was the centerpiece of the 2007 U.A.W. contract — a perpetual, G.M.-financed trust to cover health care for hundreds of thousands of retired hourly workers and their spouses.

February 3, 2009

GM keeps hand out, sheds a tear

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 3:01 pm

It never stops with these guys.

Unbelievable.

From the link:

General Motors, which is borrowing $13.4 billion from the federal government to remain solvent, is pressing Congress to waive a tax liability of as much as $7 billion related to the overhaul plan that it is completing this month, people with knowledge of the discussions said on Sunday.

The tax bill, which could be enough to force the company into bankruptcy, would be a consequence of the terms that the Treasury Department required as part of the rescue package approved last month by the Bush administration. In accepting the loans, G.M. pledged to persuade its creditors to swap a large chunk of the automaker’s debt for equity in the company.

 

The equity-for-debt exchange is aimed at ensuring G.M.’s viability in the future, but under corporate tax law, the swap would amount to debt forgiveness and count as income for G.M. The resulting tax bill could take G.M.’s cash level below the minimum needed for daily operations.

G.M. is lobbying Congress to reduce or eliminate the tax liability, said people with knowledge of the effort, who spoke on the condition of anonymity because the discussions were private. The Detroit News first revealed the lobbying effort on Friday.

October 24, 2008

I don’t like all the corporate handouts …

… going around, and I certainly don’t like the fact automakers are right there on hands-and-knees, but the issue of auto loans to consumers is a real problem (I blogged on that issue here) so this proposal might not be all that bad.

From the second link:

Michigan’s Congressional delegation is urging the Treasury secretary and the Federal Reserve chairman to use their authority as part of the $700 billion bailout package to help more consumers obtain car loans, warning that the tightened credit markets were endangering millions of jobs.

The effort, led by Representatives John D. Dingell, a Democrat, and Fred Upton, a Republican, comes amid plunging vehicle sales as auto lenders struggle to find financing.

 

In addition, two of Detroit’s automakers, General Motors and Chrysler, are considering a merger to combine their cash reserves and cut costs.

”In this current economic environment, it is imperative that the government ensures that liquidity is restored so that the U.S. auto industry is able to function until normalcy is restored to credit markets,” the lawmakers say in a draft of a letter to the Treasury secretary, Henry M. Paulson Jr., and the Fed chairman, Ben S. Bernanke, that was obtained by The New York Times.

Automakers say that a lack of financing has compounded a weakened economy and kept consumers out of showrooms. The industry says that more than 90 percent of new-vehicle purchases are financed.

As of late Wednesday, all but three of Michigan’s 17-member delegation had signed the letter, and the others are expected to join as well, according to a person involved in the effort, who spoke on the condition of anonymity because the letter was not intended to become public until Thursday.

October 23, 2008

Presidential pick tied to auto preference?

Filed under: et.al., Politics — Tags: , , , , , — David Kirkpatrick @ 11:08 am

From the odd election-year-research department of this blog, here’s one of the more strange that’s crossed the inbox these last couple of horse race weeks.

The release:

Presidential Candidate Preference Related to Car-Owner Brands, Segments, According to kbb.com Market Research

Full-Size Truck Owners Favor McCain, While Wagon Owners Look to Obama

IRVINE, Calif., Oct. 23 /PRNewswire/ — According to Kelley Blue Book www.kbb.com Marketing Research, the car brand and segment owned by voters is related to their preference in presidential candidates.  Senator John McCain (R-AZ) rates high among domestic and luxury owners.  Among the domestic brands, owners of GMC (61 percent), Chevrolet (60 percent), Buick and Dodge (each at 58 percent), as well as Ford (57 percent) vehicles are the highest in favor of McCain.  In the luxury vehicle segment, McCain leads among Lexus, BMW, and Lincoln owners at 52 percent each.

Senator Barack Obama (D-IL) leads McCain among owners of import vehicles with the highest ratings for MINI (70 percent), Subaru (61 percent), and Saab (59 percent).  Fifty percent of Honda owners plan on voting for Obama, ten points higher than McCain.

In addition, vehicle segments have a direct correlation to car-owners’ preferred presidential candidates.  McCain receives the highest support from full-size truck (66 percent), full-size SUV (61 percent) and luxury SUV (61 percent) owners.  Obama leads McCain among luxury station wagon (59 percent), station wagon and sport wagon (55 percent), hatchback (52 percent) and luxury crossover vehicle (52 percent) owners.  Among owners of hybrid vehicles, Obama leads with 48 percent of the preferences, nine points more than McCain.

The connection between car ownership and Presidential candidates can also be seen in both the Democratic and Republican campaigns.  Republican rallies often promote the idea of “drill, baby, drill,” which may link gas-guzzling truck and SUV owners to McCain.  On the other hand, Obama has stressed the importance of putting more money toward wind, solar, and other alternative forms of energy, which may relate to his popularity among hybrid owners.

“McCain’s appeal among owners of domestics and large trucks/SUVs is right in line with where we see a majority of those vehicles selling – in the traditionally Republican ‘red’ states,” said Rick Wainschel, senior vice president of marketing and analytics for Kelley Blue Book and kbb.com.  “With import and hybrid owners typically favoring Obama, this also aligns with strong sales of these types of vehicles in predominately Democratic ‘blue’ states.”

Kelley Blue Book Marketing Research also conducted this survey for the 2000 and 2004 Presidential elections, and accurately predicted the results.  Eight years ago, the survey predicted George W. Bush would take the lead over Al Gore.  In 2004, the results revealed President Bush would win over Senator John Kerry.

“Car ownership says a lot about a person, and can even be an indicator who they are likely to vote for,” added Wainschel. “If consumers are concerned about the environment, they may choose a more eco-friendly vehicle, like a hybrid, and vote for the candidate with a favorable stance on energy.  Consumers’ values impact their purchasing decisions and reflect their preferences in political leaders.”

The latest study from Kelley Blue Book Marketing Research was conducted September 19 through October 8, 2008, on Kelley Blue Book’s kbb.com among 11,142 vehicle owners planning to vote in the upcoming 2008 United States Presidential election.

About Kelley Blue Book (www.kbb.com)

Since 1926, Kelley Blue Book, The Trusted Resource(R), has provided vehicle buyers and sellers with the new and used vehicle information they need to accomplish their goals with confidence. The company’s top-rated Web site, www.kbb.com, provides the most up-to-date pricing and values, including the New Car Blue Book(R) Value, which reveals what people actually are paying for new cars. The company also reports vehicle pricing and values via products and services, including software products and the famous Blue Book(R) Official Guide. Kbb.com is rated the No. 1 automotive information Web site among both new and used vehicle shoppers, and half of online vehicle shoppers visit kbb.com.  Kbb.com is a leading provider of new car prices, car reviews and news, used car blue book values, auto classifieds and car dealer locations. No other medium reaches more in-market vehicle shoppers than kbb.com.

 
Source: Kelley Blue Book
Web Site:  http://www.kbb.com/

October 15, 2008

General Motors ramps up plant closings

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:44 pm

No respite for an ailing Rust Belt.

From the link:

General Motors Corp. announced Monday that it will close its Grand Rapids stamping plant in December 2009 and accelerate the closing of its Janesville, Wis., assembly plant by more than a year to Dec. 23 of this year.

The plant closing announcements come just a little more than a week after the automaker said it would advance the closure of its Moraine, Ohio, assembly plant.

All three plants make parts for or assemble large and midsize trucks, which have seen particularly large drop-offs in sales this year with the worsening economy and high gas prices.

Monday’s announcements are part of GM’s plans to accelerate plant actions to save money in the face of the worst auto market in more than a decade.