September 24, 2008

Auto News Wrapup: F-bombs, tax bills and buyouts

Cerberus in talks to buy out Daimler AG stake in Chrysler

A day after the company's bold assertion to enter the EV market in less than three years, Chrysler may soon be owned wholly by current majority shareholder Cerberus Capital Management.

This afternoon, officials from both companies confirmed the talks regarding the sale of the 19.9 percent stake Daimler currently holds in Chrysler LLC. A spokesman for Cerberus Capital Management also said that the current supplier agreements between Daimler and Chrysler would continue after a potential sale.

The private-equity firm Cerberus bought 80.1 percent of Chrysler from Daimler AG in August 2007 for $7.4 billion. Chrysler Holding encompasses Chrysler LLC, the automaker, and DaimlerChrysler Financial Services Americas LLC, known to the market as Chrysler Financial.

"It's still very early to tell why this is happening," Aaron Bragman, auto analyst at Global Insight, told Reuters. Bragman posited that the full purchase of Chrysler may be a prelude to selling the automaker whole to a third party.

House approves $25 billion in auto industry loans; Senate passes $7,500 tax credit for plug-in hybrids

As the mortgage bailout dog and pony show continues on Capitol Hill today, the House of Representatives voted 370 to 58 in favor of a $25 billion aid package for American automakers and suppliers. The bill sponsors the issuance of low-interest government-backed mortgages that would allow automakers to retool factories and expedite the production of more fuel-efficient vehicles.

The Senate is expected to vote on the budget bill by week's end; President Bush is likely to sign it. When signed, the new loan program will set a new precedent in government involvement within the auto industry, far exceeding the 1979 bill which provided loan guarantees to Chrysler Corporation.

Rep. John Dingell, D-Mich., chairman of the House Energy and Commerce Committee, said in a statement:

"Some critics will call this loan package a bailout. It is not. These loans amount to a little more than 1 percent of the real bailout -- the one that the Bush administration wants for Wall Street at a cost of $700 billion to taxpayers.

"The loans to the automakers will cost about $7 billion and will be repaid to the taxpayer at a profit," Dingell said. "The auto direct-loan package is a good deal for auto workers and a good deal for taxpayers."

Rep. Jerry Lewis, R-Calif., ranking member on the House Appropriations Committee, complained that the bill was put together by a handful of Democratic leaders and the vote was taken before it was properly reviewed in session.

Chevy Volt to qualify for maximum plug-in hybrid tax credit

Meanwhile in the Senate, General Motors is one step closer to their wish of a $7500 tax credit to help jump-start sales of the Chevrolet Volt. In a wide-ranging and intricate tax bill, a small provision creating a new tax credit for buyers of plug-in electric vehicles was passed today.

The credit would start at $2,500 and rise to as much as $7,500 for a light-duty vehicle, depending on battery capacity. As currently written, the Chevrolet Volt qualifies for the maximum tax credit. The measure would begin to phase out tax credits for plug-in electrics after 250,000 units have sold — a marked contrast to the 2005 tax bill that began to phase out after only 60,000 units.

The complex tax bill ricocheted through the various subcommittees for months, but when the votes was taken, the bill passed by 93-to-2. The House must still act on the bill, but with the upcoming recess for the election, a vote is expected by week's end. The White House dropped objections to some provisions unrelated to the plug-in hybrid tax credit.

As of a few days ago, Toyota officials complained that the 2011 plug-in hybrid Prius would be excluded from the tax credit. It's unclear how far the Senate moved to meet Toyota's objections, but it appears the issue has been resolved.

Dropping "F" Bombs: Ford family heir sells 1M shares of company stock

And in our last news item of the night: Bill Ford, chairman of Ford Motor Company and grandson of founder Henry Ford, dumped one million shares of common stock on Sept. 19 — in part to pay off debt incurred by exercising stock options in 2004 and 2005.

Ford sold the shares at an average weighted sale price of $5.05 on Thursday and continues to hold more than 5.3 million shares of common stock in the automaker, according to a filing on Friday with the U.S. Securities and Exchange Commission.

Ford bought over 1.4 million common shares in the company since March 2004 and another 1.5 million in March 2005 after exercising options granted over the years, according to SEC filings. Share prices fell in the immediate aftermath of Friday's sale before rebounding to close at $5.03 tonight.

[AN, Reuters]

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