Swedish customs halts Saab production, citing unpaid taxes

Reuters is reporting that the Swedish customs authority has effectively shut down Saab's Trollhättan factory, citing a "considerable" sum of import duties that have been left unpaid.

Saab set to sink as GM steps aside

"Nej tack nu går bort!" (No thanks, now go away!)

Such was the response from the Swedish Industry Ministry, when approached by the General to purchase a majority stake in the ailing automaker.

Now, Saab is mounting its last stand against mounting debts and a critical lack of suitors interested in the struggling automaker.

GM seeks $16 billion; dire future looms for Saturn, Saab

Today was the due date for GM and Chrysler to turn in their homework -- a plan defining each automaker's long-term viability. And in defining the way forward, General Motors has put the hangman's noose around Saab and Saturn.

And that's just the start.

GM to Washington: Loan $25B now or lose $150B later

If General Motors fails, nearly three million jobs could be lost in 2009 as part of a cascading collapse of suppliers, shipping companies and ultimately dealers. So argues General Motors in a video released as the embattled automaker campaigns for immediate federal aid in the wake of a cash-flow crisis.



Released on Sunday, GM's four-minute video highlights the fact that American auto industry is one of the largest economic multipliers in the U.S. economy. GM employs more than 1.7 million people, either directly or through parts suppliers, subcontractors and dealers.

The key argument is that if either GM, Ford or Chrysler fails, the industry would be faced with an imminent collapse due to the impact on suppliers and the cascading effects of production lines being halted and workers laid off at every level of production.

All told, as many as three million jobs could be lost if one or more the Big Three automakers fail. GM argues that in such a scenario, with no cars being made or sold, as much as $156 billion in tax revenue would be lost between 2009 and 2011.

And the economic catastrophe wouldn't stop there.

Add in the cost of supporting 775,000 retirees currently drawing a GM pension. And the health care costs of 2 million people who would find themselves uninsured if GM were to fail.

A collapse of the U.S. auto industry would reduce personal incomes by $150.7 billion, the automaker warns. Over three years, the cost could grow to $398 billion in unemployment assistance, as people struggle to find new work.

By every measure, the damage from a collapsing US auto industry will reach far beyond the industry itself.

The nation's auto industry is a major contributor to our gross domestic product -- nearly four percent in total. According to the Center for Automotive Research, our current recession was fueled by three-tenths of a percent decline in GDP. If GM alone is left to fail, a sudden one percent loss in GDP could easily trigger panic, turning a recession into a depression.

[GM]

GM posts $4.2 billion Q3 loss; exits Chrysler merger talks

Over the last three months ending Sept 30, General Motors has lost $46 million each day.

Announcing its third quarter earnings today, General Motors posted a $4.2 billion dollar loss, its fifth straight losing quarter and in an amount far greater than analysts had expected. In response, GM shares fell 13 percent to close today at $4.16m amidst doubts about the company's cash reserves.

“The third quarter was especially challenging for the auto industry. Consumer spending, which represents close to 70 percent of the U.S. economy, fell dramatically, and the abrupt closure of credit markets created a downward spiral in vehicle sales,” said Rick Wagoner, GM Chairman and Chief Executive Officer in a statement.

Tight credit, rising unemployment, declining income, falling stock markets, and continuing deterioration in the housing market have all contributed to an abrupt halt in consumer spending. Many customers who still intended to buy or lease a car this summer were denied financing, or found the cost of financing prohibitive.

In response to today's earning report, the beleaguered automaker said it would cut white-collar jobs and slash next year's capital spending budget by $2.5 billion in attempt to cope with the troubled economy. Including job cuts made in July, more than 7,000 salaried and contract positions are being eliminated, trimming spending on salaries by $500 million.

This afternoon, Wagoner renewed his pleas for low-interest loans from the U.S. Treasury. “The U.S. government’s actions to help stabilize the credit markets and eventually ease the credit crunch are an essential first step to the economy’s and the auto industry’s recovery, but further strong action is required.”

The biggest problem confronting GM is a lack of cash to pay it's suppliers and operating costs. Most of the company's funds are tied up in factories or tooling; without an injection of capital, analysts predict that GM will run out of cash by the second quarter of 2009.

Finding new lenders will not be easy, either. In response to the $46 million per day cash burn, Standard & Poor's lowered GM's debt rating further into junk status, from B- down to CCC+. "We now believe GM will use much more cash this year than our previous estimate of as much as $16 billion in its global automotive operations," said Standard & Poor's credit analyst Robert Schulz in a statement.

The 'will-they, wont-they' romance is over: GM kills Chrysler merger talks
Without mentioning Chrysler verbatim, Wagoner confirmed the end of negotiations with Chrysler to Automotive News.

"We have recently explored the possibility of such an acquisition based on the analysis that it would strengthen our industry position in the long term," Wagoner said. "we are better off to put 100 percent of our efforts on the liquidity side. We've set aside such (acquisition) actions as a near term priority."

Chrysler issued its own statement separately, saying the company would continue to work on returning to profitability. "As an independent company we will continue to explore multiple strategic alliances or partnerships as we investigate growth opportunities around the world that would aid our return to profitability."

Majority shareholder, Cerberus Capital Management declined to comment.

So what's next for GM?
In short, a fire sale.

The automaker has already killed the next generation of its full-size sport-utes and is ramping up efforts to sell the ailing HUMMER brand. Today, GM said it would put its ACDelco aftermarket parts business up for sale, a move the company expects will raise another $2-$4 billion.

Wagoner reiterated today that bankruptcy is not an option and that the company "will take whatever actions we can to avoid it."

But Wagoner's pledge will be hard to uphold given the state of the economy. Ford Motor Co. posted a $3 billion after-tax operating loss for the third quarter today, and said it too would cut costs further to preserve cash.

Both automakers said that U.S. sales will worsen next year. GM forecast its 2009 U.S. sales at 11.7 million units; if true, next year will be the company's slowest since 1982. In 2010, GM predicts US sales will rise to 12.7 million unit -- over 4 million less than the automaker's 10-year average ending last year.

[GM,AN]

GM, Chrysler lead horrific month as October sales plunge

Falling gas prices and rising inventories weren't enough to offset a tight credit market, leading to another awful month of sales for all automakers.

On average, October sales were down 32 percent from a year ago, with General Motors hit the hardest. Not only did GM's HUMMER brand lead the industry with sales off by 64 percent, but the rest of the GM portfolio followed closely behind.

Cadillac and Saturn sales fell about 55 percent, GMC trucks were down 52 percent, followed by Pontiac, Buick and Chevrolet, which were all down by at least 40 percent.

The decline is largely due to tighter lending policies adopted by GMAC Auto Finance. With GM's in-house lending unit refusing loans to buyers with credit scores below 700, a large percentage of prospective customers were unable to qualify for a loan.

Possibly the worst month since World War II
"If you adjust for population growth, this is probably the worst industry sales month in the post-WWII era," said Mark LaNeve, GM's vice president for sales and marketing, speaking with Automotive News. "Until the credit markets open up and consumer confidence improves, the entire U.S. economy, and any industry like autos that relies on financing, will suffer."

To spur sales, GM said today it will start its annual Red Tag Sale early this year. The event - which normally runs from Thanksgiving weekend to January 5, will instead start tomorrow, with some GM vehicles carrying up to $7,250 in cash incentives.

Chrysler sales fell 50 percent, trailed by Jeep and Dodge, down 32 and 27 percent respectively. Ford sales were off 28 percent from a year ago.

So far only two automakers have reported monthly sales increases this year: Toyota in April and GM in January. This month, Toyota's decline was lead by its Lexus unit, down 35 percent. The Toyota brand retained its position as the nation's best-selling brand, ahead of Ford and Chevrolet.

MINI posts gain, Audi bucks the downward spiral
Among the few to post gains were BMW's MINI brand, up 56 percent. Audi, whose sales were up by less than one percent were weighed by parent company Volkswagen AG, whose sales fell by nearly 8 percent.

"This is the toughest economy we've seen in a long time," Mark Barnes, COO of VW Group of America, said in a statement.
[AN]

[Photo: Flickr.com; Original by Broken Wing Productions. Post-processing by David Moll.]

Treasury says no cash for GM, Chrysler merger talks stalled, Renault hookup rumors persist

The tumultuous storyline of the GM - Chrysler merger reads like a script fit for Hollywood. Both need each other to survive.
Neither can make it alone.

But parties on both sides have a lot to lose.

And with today's news from the Treasury, the White House — and even Renault — the story gets messier by the minute.

Will they? Won't they?
Read on..



Yesterday, it seemed a forgone conclusion that General Motors and Chrysler LLC would merge within the next month, despite the consequences for nearly all Chrysler's models.

Now, the US Treasury and the Bush administration are adamant, saying they will not broker a merger deal or heed GM CEO Rick Wagoner's request for more money. Speaking with Reuters, a Bush administration official said that the "Treasury is not negotiating with the automakers, the administration is working to get the $25 billion Congress already authorized to the industry."

Instead, the Bush administration and the Treasury will speed the distribution of $25 billion in federally-backed, low-interest loans, drawn from an aid package approved by Congress last month.

Automotive News reports that both GMAC and Chrysler Financial - finance agencies owned jointly by GM and Chrysler's owner, Cerberus Capital Management — would qualify to sell their distressed assets to the Treasury under the $700 billion Troubled Asset Relief Program.

"An unmanageable disaster" for Rust Belt states
While the sale of troubled debt will help GM's overall cashflow, it doesn't help the underlying problem that drove GM to seek Chrysler in the first place: a lack of financing. Without new borrowing or asset sales, GM is in danger of running dangerously low on cash in 2009, analysts have said.

Hoping to draw attention to the dire need for capital, the governors of Michigan, New York, Ohio, Kentucky, Delaware and South Dakota wrote the Bush administration in a plea for further assistance. Facing pressure from a surge of unemployment claims and a decline in state tax revenue, the "economic crisis" facing automakers "threatens to create an unmanageable disaster at the state level," the letter said.

Michigan's congressional delegation — lead by Energy and Commerce Committee chair John Dingell — has also lobbied the Bush administration to free up funds for the Big Three.

Ford joins the bailout fray, seeking "degree of parity"
And just when this couldn't get more complicated, here comes Ford. Reuters reports that FoMoCo has been angling for their own piece of the financial aid pie. If the government provides a direct injection of capital into either GM or Chrysler, Ford want their fair share as well.

Speaking with reporters, Mark Fields, Ford's president of the Americas said the company wants to "make sure that whatever happens, there is a degree of parity."

But for now, any aid — or merger negotiations — will be delayed until after Election Day.

So what happens now?
With the GM-Chrysler talks stalled, Renault pops back into the picture. As NMM reported two weeks ago, French automaker Renault has expressed interest in buying Chrysler's Jeep division outright from Cerberus.

Recently, Renault has backed away from the table, playing down rumors of a three-way partnership between Chrysler, Renault and it's Japanese partner Nissan Motor Corporation.

Nonetheless, the lack of progress with General Motors opens the door to new talks between Cerberus and Renault. Sources close to the early discussion said that Cerberus has considered a deal with Renault and Nissan as a favorable alternative to a full buyout of Chrysler by GM.

The sources declined to be named as they were not authorized to discuss the private talks. General Motors and Cerberus both declined to comment.

[RTS, AN]

Report: GM-Chrysler merger likely to decimate Chrysler lineup, trigger more layoffs

The fallout from a merger between General Motors and Chrysler LLC will lead to the closure of many as half of Chrysler's factories and the elimination of nearly all Chrysler models, according to a report released by consulting firm Grant Thornton LLP.

The report comes a day after General Motors canceled a $2 billion program to replace its trio of aging full-size SUVs and Chrysler culled its two full-size hybrid SUVs after only three months of production.

Merger and more layoffs seem inevitable
Despite the gloomy forecast, a GM / Chrysler merger seems highly likely at this point. Reuters reports that GM and Chrysler have resolved the major issues in a merger agreement and that the final form of a deal will depend on financing and federal support.

The New York Times reports that the Department of Energy was working to release $5 billion in government-backed low-interest loans to GM so it could complete a deal with Cerberus Capital Management, the majority shareholder of Chrysler LLC. The $5 billion in loans would come directly from a $25 billion pool of funds approved last month by Congress in an effort help Detroit retool as a maker of more fuel-efficient cars.

And while a merger may save the two embattled automakers, it most certainly will not save all their employees.

Speaking with Automotive News, Kimberly Rodriguez, principal of Grant Thornton's automotive practice said that a deal also could result in a loss of 100,000 to 200,000 jobs at the two automakers, their suppliers and other industry shareholders.

According to the report, the majority of job cuts would come as most of Chrysler model lineup is phased out. Chrysler's sedans have failed to outsell their domestic competitors and both the Dodge and Jeep division are heavily invested in SUVs and light trucks.

Massive consolidation of models, factories
Currently, Chrysler operates 14 factories, with two of them scheduled to close at year's end. During the summer, Chrysler has offered its Viper model lineup for sale, along with the Detroit plant where they are made.

In the report, Grant Thornton says that four more factories could close in the aftermath of a merger with GM. Those on the hit list produce the Chrysler Sebring and the Dodge Avenger in Michigan, the Jeep Liberty and Dodge Nitro in Toledo, Ohio, the Dodge Ram in St.Louis, Mo. and Dodge's heavy-duty truck plant in Saltillo, Mexico.

As production of these models wound down, a second wave of layoffs would then hit the third-party suppliers that provide transmissions, windows, dashboard assemblies — all of the primary components unique to each Chrysler, Dodge and Jeep model.

All told, the lost work to these suppliers would put hundreds of companies at risk. Up to 50,000 additional non-Chrysler jobs could be lost if Chrysler were to close the plants Grant Thornton expects.

Timing is critical; contraction is inevitable
If a GM-Chrysler merger is completed, it may take years to phase out all of the models listed in the Grant Thornton report. Some platforms may be eliminated through attrition; left in production until they cease to turn a profit. Some plants could be closed as early as the holiday shutdown and others could take years to close, said Rodriguez.

It is, in your humble author's opinion, a "damned if you do, if you don't" scenario.

Neither GM or Chrysler can survive alone in this market. While Chrysler has more cash on its books, they are in the worst position to capitalize on high gas prices. Worse yet, they lack the resources to improve their CAFE rating without aid. And while GM has a more fuel-efficient lineup, they are burning through their cash on hand at an alarming rate.

If either fails, far more jobs could be lost than those through the merger of these two former titans.

For more punditry on this unholy mess:
NYT: Views on a GM-Chrysler merger

[AN]

As a merger draws near, GM and Chrysler cull the SUV herd

In cattle ranching parlance, culling the herd is a process of selective slaughter. It is a metered and carefully planned elimination of the weak and unfit, done to protect the rest of the herd either from disease or in hard times, from starvation.

General Motors and Chrysler both sharpened their fiscal axes today and took drastic steps to ensure their continued survival. Upon unanimous approval by the board of directors, GM announced it has cancelled Project CXX, a $2 billion program to replace the aging Cadillac Escalade, GMC Yukon and Chevrolet Suburban sport-utility vehicles.

“It would have been very difficult in today’s environment to spend a couple of billion dollars to do a replacement,” said Bob Lutz, GM’s vice chairman and head of product development in a statement.

All three full-size sport utes — which a decade ago were icons of a resurgent GM — are now living on borrowed time. With the recent truck plant closures in Ohio and Wisconsin, the current generation of sport-utes will only be built for as long as sales volume remains self-sustaining.

Sales of sport-utility vehicles have steadily waned since 2004. As the highly profitable market shrank, losses continued to mount at all of the Big Three. And after posting a $18.8 billion loss in the second quarter of 2008, GM is reported to be in the final stages of a merger with embattled Chrysler LLC. While 2008 hasn't been kind to any domestic automaker, GM will likely suffer the worst in the coming months; its passenger cars were often sold as loss-makers and the company staked it's continued success on its line of sport-utes.

Layoffs at GM plants are set to continue, with Janesville, the firm's oldest and most reliant on sport-ute production, set to close by Christmas. If the Chrysler merger goes through, further layoffs are expected.

Chrysler pulls plug on Aspen & Durango hybrids
Earlier this week, Chrysler announced it would close its Newark, Del. plant nearly a year ahead of schedule. As a result, the Dodge Durango and Chrysler Aspen Hybrid sport-utes will be culled before they complete their first full model year.

Production of the two full-size hybrid sport-utes began two months ago, just in time to be scorched in September, the worst month of U.S. auto sales in 15 years.

Speaking with Automotive News, Chrysler spokesman Todd Goyer said the company had no plans to move the Aspen and Durango hybrids elsewhere. "Keeping the plant open for the hybrid versions isn't a sound business decision," he said.

1,000 Chrysler employees will be laid off when the final shift is completed on Dec. 31, 2008.

The Detroit News reports there are no signs that Chrysler will commit to another body-on-frame full-size sport-ute. Ford has already committed to a unibody layout for the next Ford Explorer, following the lead established by Honda with their Pilot sport-ute and Ridgeline pickup truck.

Unibody layouts used stamped steel sections that are welded together to form the structure of an automobile. Commonly used to build passenger cars, unibody designs are typically 10 to 20 percent lighter — and hence, can be more fuel-efficient — than a similarly sized body-on-frame vehicle.

[ NYT, AN, DTN]

2010 Camaro orders heavily favor V8 SS, production delays possible

Since the books opened two weeks ago, Chevrolet has received 6,000 orders for the forthcoming 2010 Camaro.

In a time when consumer confidence is at an all-time low and wallets are clamped shut from coast-to-coast, 6000 sales in 14 days is a decent response for an all-new model.

But depending on who you listen to, filling all those orders may be a bit difficult.

When the time came for GM to decide how many V6 and V8 Camaros would be built, crude oil prices were pushing $130 per barrel with no sign of retreating. Expecting an early rush to the more fuel-efficient V6 models, GM settled on a 50-50 split.

In recent months, oil prices have done what once seemed unthinkable, plummeting to nearly$70 per barrel. And as gas prices have slowly fallen, a flood of orders have come in for the V8-equipped 2LT and 2SS trims. With 84 percent of orders-to-date requesting a V8 Camaro SS, demand may outstrip supply for the first year of Camaro production.

What we don't yet know is how quickly GM can clear the potential backlog.

In 2006, when the 2010 Camaro was announced, GM said that 80,000 units would be built in the first year of production. But as time has passed, that number has slipped. Unconfirmed reports now suggest that as few as 20,000 units will be built. If demand remains high for the V8 models, it may take weeks for GM to meet the demand.

Since production efficiency is the crux of the issue, it's worth pointing out that V8 Camaros will use different engines depending on the chosen transmission. Stick-shift models will use the 422-hp 6.2-liter LS3 V8, while automatic-equipped models will use the 6.2-liter 400-hp L99 V8 with Active Fuel Management.

This is still a developing story, so this post will be updated as more information becomes available. One thing is for sure; if you're interested in a 300-hp V6 Camaro LS or LT, get to your local Chevy dealer. There will plenty of room on the production line.

[GM, Camaro5.com]

Amidst dealer protests, GMAC seeks quiet retreat from lending business

In a move that has angered dealers and strained relations with General Motors, GMAC Financial Services has begun its retreat from the business of financing automobiles.

The first step came on Monday, when GMAC announced it would only offer financing to customers with FICO credit scores of 700 or higher.

Cerberus Capital Management, who owns a controlling 51 percent stake in GMAC, has tightened lending terms as the global credit market has ground to a halt. General Motors owns 49 percent of GMAC. Throughout history, GMAC has been the financier of most General Motors' retail sales.

California dealer group irate over new GMAC policies
The unilateral move to distance GMAC from risky auto loans has strained dealer relations so sharply that the California New Car Dealers Association put their objections in writing to GMAC Financial Services CEO Alvaro de Molina.

On its website, CNCDA says it represents over 1,350 franchised new car and truck dealers. The Sacramento Bee reports that among them, CNCDA represents 400 GM dealerships, located throughout California.

In their letter to GMAC, CNCDA President Peter Welch wrote that "Unless immediately stopped, GMAC's actions will directly lead to the insolvency of a number of our GM dealer members and will significantly erode GM's California market share." Welch said that 40 percent of California vehicle buyers will be cut off from GMAC financing under the new lending restrictions.

Compounding the problem, GMAC is now giving dealers less time to pay off their inventories.

Dealers often take out revolving lines of credit to replenish their lots with new vehicles. Depending on the terms of the credit line, dealers usually have from 90 to 120 days to pay the invoice price for the vehicles they order. But as new car sales have tanked this fall, inventories have languished with hardly any buyers in sight.

For dealers who finance their operations through GMAC, they now have fewer customers to sell to, since only those with above-average credit will qualify for an in-house loan from GMAC.

Financing that Fits... from someone else
And while dealers are being squeezed, General Motors has launched a new marketing campaign to reassure buyers that financing is available -- from someone else.

Called "Financing that Fits", the campaign will promotes the ease with which buyers will find financing at their local GM dealer, as well as large cash incentives on remaining 2008 models.

Speaking with Automotive News, Jim Campbell, GM's director of marketing and incentives said the ad campaign is aimed at potential buyers who are put off by news that financing isn't easy to come by. To aid the process of securing a loan, GM dealers will have access to Route One, a new web-based system that connects dealerships with a network of outside lenders. The new ad campaigns won't mention Route One specifically.

And as the ads hit the airwaves, GMAC is desperately seeking ways to cut its exposure to high-risk loans. So much so that minority stakeholder GM will quietly off incentives to dealers to arrange loans with outside lenders.

Automotive News reports that the program will pay up to $250 in incentives for every non-GMAC loan. Salespersons will get $100, sales managers will receive another $100 and dealers can designate an employee of choice to receive another $50. The length of the incentive program isn't clear.

According to the memo, all 2008 and 2009 Chevrolet, Pontiac, Buick, GMC, Hummer, Cadillac and Saturn vehicles will qualify.

[AN:1, 2, 3, SacBee.com, Edmunds.com]

Cerberus courting all bidders, may break up Chrysler, Jeep divisions

Just weeks after Chrysler's EV dog and pony show, majority stakeholder Cerberus Capital Management is courting a deal an effort to sell their stake in Chrysler LLC to General Motors, according to the Wall Street Journal and Reuters.

According to the Wall Street Journal, GM execs are receptive to the notion of a buyout and want to close the deal by the end of the month. Meanwhile, Reuters is reporting that French automaker Renault S.A is pursuing their own deal to purchase Chrysler's Jeep division, widely regarded as the single most valuable asset in Chrysler's portfolio.

Both Reuters and the Wall Street Journal report bankers are encouraging a GM-Chrysler deal. J.P. Morgan is the largest holder of Chrysler debt and is also a major banker for GM.

But here's where things get complicated.

Cerberus is not interested in exiting the auto business. Cerberus wants to continue to own a stake in a future Chrysler - GM conglomerate. This has become a point of contention for some board members at GM who have as yet gone unnamed.

Plan B? Sell Chrysler a la carte
Reuters has reported that if a full buyout cannot be agreed upon, GM may instead choose to pick at the bones of the Chrysler portfolio. GM has expressed interest in buying Chrysler's minivan line — a niche Chrysler pioneered some 25 years ago and one where GM has had trouble competing ever since.

GM may also buy Chrysler's truck manufacturing plant in Coahuila, Mexico – a purchase that seems at odds with the GM's decision in July to idle the Oshawa, Ontario truck plant.

Other potential sales and mergers include spinning off Chrysler Financial to merge with GMAC, General Motor's captive finance unit. Cerberus currently owns a controlling 51 percent stake. Alternatively, Cerberus may buy out GM's remaining 49 percent share to sweeten a struggling buyout deal.

Chrysler's MOPAR parts division is rumored to be for sale. So too is Chrysler's engineering division, which recently unveiled a plug-and-play electric-gasoline drivetrain the company says will be on the road by 2010.

All of these deals — and the future of Chrysler as an automaker — hinge on whether Cerberus decides to sell the company off piecemeal and whether GM, Renault and other bidders can secure financing to complete their acquisitions.

Shortly after this blog was launched, I expressed my doubts that Cerberus would treat Chrysler as a long-term investment and whether Chrysler itself could survive. That was before the near total seizure of inter-bank lending and the worst month of retail car sales in 15 years.

While the ink has yet to dry on any of these deals, the decision by Cerberus to start shopping now speaks volumes. If Chrysler has any future at all, it will likely be one far removed from it's Hemi-powered days of glory. Which — to nostalgic old salts like me — is an awful thought to consider.

[RTS,WSJ]

September sales hit 15-year low as credit crunch hits car dealers

When it comes to our nation's economic future, I am reticent to join the chorus of hyperventilating worrywarts wringing their hands at the approach of fiscal Armageddon. But one thing is clear -- the impact of a shell-shocked credit market hit car dealerships in full force this September with predictably grim results.

On average, sales for September were off by over 27 percent from a year prior. Overall sales volume for September totaled 965,160 units - the first month in 15 years to sell fewer than one million units industry-wide.

Ford Motor Company posted their 10th straight month of declining sales as its three domestic divisions dropped 34 percent. Chrysler LLC sales fell 33 percent and General Motors was down 16 percent.

European and Asian automakers also suffered. Porsche sales were off by nearly 45 percent from a year ago. BMW Group sales fell nearly 26 percent. Suzuki and Mitsubishi sales fell 47 and 39 percent respectively, trailed closely by Mazda, Nissan and Toyota.

No automaker posted an increase. Only German automakers Volkswagen AG and Daimler AG were able to limit their declines to less than 10 percent.

Sales results were released today as the Senate prepared to vote tonight on a revise $700 billion bailout plan to rejuvenate lending by purchasing the toxic mortgage-related securities left behind by the collapse of the sub-prime mortgage industry.

Credit crunch hampers dealer financing
As the drama on Capitol Hill and Wall Street has played out, buyers have postponed big purchases. And dealers say buyers with good credit ratings are being denied loans more often.

"In the past, we were accustomed to financing 70 to 80 percent of our cars sold," Jim Weisbecker, general manager for Belle Glade Chevrolet in Florida, told Automotive News on Tuesday, Sept. 30. "Now we finance about 20 percent, if that. It has been a drastic turnaround."

Jim Fosche, sales manager at Buddy Foster Chevrolet in Zephyrhills, Fla., said volume at his store plunged 50 percent last month. He blamed the credit crunch and job worries.

Future remains grim as Big Three attempt to restructure
For the faltering domestic automakers, weak sales and tight credit couldn't come a worse time.

Combined, the Big Three have cut tens of thousands of jobs since 2006. Many GM and Chrysler plants have been idled for weeks at a time this year to slow production of slow-selling pickup trucks and sport utility vehicles.

Compounding the problem, billions of dollars in cash reserves are being spent to finance new products as well. General Motors lost $15.5 billion in the second quarter of 2008; Ford lost $7.8 billion.

[AN]
[Photo: Flickr.com; Original by Broken Wing Productions. Post-processing by David Moll.]

Resurgence in Flint: Volt, Cruze engines to be built in Michigan

General Motors CEO Rick Wagoner announced today that the automaker will build engines for the Chevrolet Volt and Chevrolet Cruze in Flint, Michigan at a entirely new plant. Construction of the new factory will commence immediately.

The plant will begin producing the company's new 1.4-liter dual overhead cam Inline-four in 2010. The $370 million investment will include a 552,000 square foot facility, machinery and tooling to build the new engines.

The plant will build two 1.4-liter inline-fours: a 140-horsepower turbocharged motor to be used in the 2011 Chevrolet Cruze, and a naturally-aspirated version to be used with the 2010 Chevrolet Volt extended-range electric vehicle.

Both engines will feature variable valve timing for both the intake and exhaust cams. Both engines will also use a molded resin intake manifold to save weight.

Final horsepower figures have not been released for the naturally aspirated motor.

The new engines are part of a global engine family dating back to 1997, debuting as a 1.6-liter inline-four for the Opel & Vauxhall Corsa.

Speaking with Automotive News, Tom Stephens, GM Powertrain Group vice president, said production would start at 800 engines per day. Stevens didn't say how production would be split between the two motors.

Today's news comes as a watershed moment for Flint as well. In 1984, General Motors CEO Roger Smith closed the automaker's largest plant in Flint, a town that once was a symbol of GM's manufacturing might.

The plant closure eliminated 300,000 jobs and sent the town of Flint — which grew up around the plant — into severe decline, as later documented in the 1989 film "Roger and Me."

Speaking of the company's return to its roots in Flint, Wagoner said that "GM, the UAW and the city of Flint have had a long-standing relationship. We are confident that Flint is exactly the right place to build our all-new powertrain plant."

[AN, GM]

2011 Chevy Cruze: 45 mpg, but with a three year wait?

In the mass-market MPG race, Chevy's Cruze is the one to watch and wait for.

While the Chevrolet Volt has been stealing headlines (mine included) with its environmentalist cache and its electron-wily ways, the replacement for the Cobalt is shaping up to be the fuel miser for the masses.

Yesterday evening, the House of Representatives passed legislation that would qualify the Volt for a $7500 tax rebate. Toyota is not at all pleased with being left out in the cold; they've redoubled their lobbying efforts to get the bill amended before a vote in the Senate.

While the exact size of the rebate remains unknown, the current speculation pins the Volt's sales price at $35,000 or so, a large chunk of change for the average family. Hence why the 2011 Cruze — Chevrolet's successor to the maligned Cobalt — will go on to be GM's mass-market fuel sipper and the company's likely savior.

But not before a whirlwind tour in Europe.

When sales begin next March, the Cruze will be offered with three engine choices: a naturally aspirated 1.6 liter inline four good for 112-horsepower, a 140-horsepower, 1.8-liter turbocharged four or a 2.0-liter turbodiesel four producing 150 horsepower and 320 Nm of torque. Five speed manuals will come standard on all Cruze models. The Cruze will also be the first compact car to offer GM's new six-speed automatic transmission as an option.

While official EPA figures aren't available yet, the 1.6 liter four is projected to return about 45 miles per US gallon of gasoline. Judging by the contemporary Opel diesel lineup, the 2.0 liter diesel Cruze will likely get up to 50 mpg per US gallon.

These are impressive figures, considering that the current Cobalt eeks out 34 miles per gallon and only when tarted up in XFE trim with a miserly ECU tune and low-rolling resistance tires.

But despite the new car's technological bona-fides, the Cruze faces stiff competition simply overcoming the precedent set by the mediocre Cobalt sedan.

"Our goal in designing Cruze was to be bold, not evolutionary," said Taewan Kim, chief designer on the Cruze. "We wanted to take a big step forward, making a strong design statement for Chevrolet products around the world."

Kim clearly broke with the Cobalt and Cavalier mold, giving the Cruze an arching roof-line and steeply raked windshield that together seem more Teutonic than its bulbous predecessors. At the front, the Cruze employs one of the better uses of Chevrolet's global dual-panel grille layout — a trend your author still despises. Large headlamp housings frame the signature grille, wrapping around the front corners giving the Cruze an aggressive countenance that again seems more Germanic than Yankee.

Then why the long wait?
After decades of floundering in the compact car market, it seems like General Motors is finally beginning to understand how to use it's engineering muscle effectively. But the next step is to get the product planners on board. The Saturn Astra is the first US compact car to build on GM's strong European offerings; as gas prices rose, the Astra became a viable competitor. The Cruze seem set to solidify those gains.

Which begs the question why American buyers must wait until 2011. When viewed with the same cynicism as the Cruze's predecessors, the pre-sale braggadocio is merely a shot across the bow of Chevrolet's Japanese and Korean competitors, giving them nearly three years advance notice to counter the Cruze's strengths.

Mr. Wagoner, if you're reading this... stop talking and start selling.
After all, the purpose of building a competitive car is to sell it, rather than gaze at it longingly from afar.

[GM]

Requiem for the H3: one of the nation's largest Hummer dealer will close tonight

With sales run aground by soaring gas prices, General Motors is scrambling to sell the ailing Hummer division before year's end. Yet the process of courting buyers is bound to get worse with today's news.

The Wall Street Journal reports that Towbin Hummer of Las Vegas, Nevada - the nation's largest Hummer dealer — will shut its doors for good tonight.

Some may remember the Towbin name from short-lived reality show "King of Cars" on A&E.

By staking his claim as the biggest and best dealer in town, dealer and brand aficionado Dan Towbin capitalized on the Sin City market to become one of the nation's largest Hummer dealers. During the dealer's best year, Towbin Hummer sold five percent of all Hummers in the nation.

But now, Sin City has shunned the rolling testament to excess, leaving Towbin to stop selling the lumbering 12-mpg leviathans and start selling diminutive Smart ForTwos.

While Towbin isn't the first dealer to close, it is by far the largest — and thus, the most problematic for GM. Now that the capital of conspicuous consumption has passed on the Hummer for smaller fare, it is clear that twilight draws near for the brand.

Listen to the bell, HUMMER... it tolls for thee.

[WSJ.com]

Chase terminates Chrysler leasing program; GMAC rates rise for high-risk borrowers

Unwilling to get stuck with a glut of depreciated and difficult to sell lease returns, Chase Auto Finance announced today that they will no longer finance leases for Chrysler vehicles. This news comes on the heels of Friday's announcement that Chrysler's own financing arm will exit the leasing business on August 1st.

In the announcement, Chase cited concerns about the residual value of Chrysler's current products. Since lease payments are calculated based on the anticipated residual value, any further depreciation beyond what is factored into the lease agreement would become the lender's liability.

[Source]

GMAC revises lending guidelines; finance rates to rise for high-risk borrowers

In other news, General Motors' financing company GMAC has rewritten their lending policies, placing new restrictions on high-risk borrowers with poor credit ratings.

The move is part of an ongoing process to curtail loan delinquencies.

"In general terms, GMAC is not a subprime credit company," said spokeswoman Sue Mallino in an interview with Automotive News Daily. "About 80 percent to 90 percent of our credit is in the prime arena for auto financing in the U.S."

Mallino denied a report that the company would halting all leases to high risk borrowers. Instead, GMAC will ask borrowers with poor credit scores to produce a larger down payment or in some cases, move to less expensive vehicles in the GM lineup.

[Source]

Fleet-footed once more, Mercury will lead Ford's transition with new cars from European market

It is no secret that the auto industry has been hit hard by the double whammy of high gas prices and soaring inflation. Amidst this bad news, Ford's Mercury division appeared to be wilting much the same way that Chrysler's Plymouth brand did a decade earlier.

The lack of investment in new vehicles was readily apparent by 2007. While Ford CEO Alan Mulally insisted last fall that Mercury was not circling the drain, news leaked that suppliers had stopped renewing their contracts and that no new vehicles had been planned beyond 2012.

At the time, Ford had just sold Jaguar and Land Rover to Indian automaker Tata Motors for $2 billion, barely breaking even on their investment to rescue the iconic British marques from the clutches of then ailing British Leyland.

In poker parlance, the fire sale of Jaguar and Land Rover was a tell. A desperate move amidst a tidal wave of red ink.

But it appears that rumors of Mercury's death were greatly exaggerated.

The New York Times has reported that Ford will revitalize the Mercury brand with an entirely new model range, drawn increasingly from Ford's European offerings. An official announcement is expected tomorrow morning as the automaker releases their quarterly earnings report.

The move is similar to General Motors' strategy to redefine the Saturn division as the US line for their European models. The strategy has paid off so far; as sales of trucks and SUVs have flat-lined, demand has risen for smaller cars. The Saturn Astra - itself a rebadged Opel Astra from GM's European division - has been selling a pace the outgoing ION sedan could never match.

As a part of the shift in product strategy, Ford is expected to make permanent cuts in truck and SUV production. According to the New York Times report, three plants will be retooled for car production -- the Wayne, Michigan plant (which builds the Ford Expedition and Lincoln Navigator) and the Louisville, Kentucky plant (which builds the F-250 and F-350 pickups).

The location of third plant chosen for retooling has not yet been released. Besides Kentucky, Ford builds trucks and SUVs in Dearborn, Michigan, Kansas City, Missouri and Cuautitlan, Mexico.

[Link]

2009 Chevrolet Equinox to receive all-new drivetrains, Pontiac Torrent SUV culled

In the wake of the restructuring plan announced last week, we are learning more about the sweeping changes coming to all corners of the GM empire. With fuel economy triage being the top priority, the General is tending to the patients in worst shape first.

For 2009, the Chevrolet Equinox SUV will ditch its 3.4 liter pushrod V6 for an all-new 2.3 liter turbo inline 4 with direct injection. The motor is a stroked version of the 2.0 liter turbo four found in the Chevrolet Cobalt SS.

Official horsepower figures haven't been released yet. Given that the current V6 is rated at 185 horsepower, we expect output in the mid 200s. Fuel economy figures aren't in either, yet a 15 percent improvement from the current model's mileage (16 city / 24 highway) isn't out of the question.

In addition to the base four cylinder, a Sport model will join the lineup in mid-2009, powered by a 263 horsepower DOHC 3.6 liter V6 taken from the Saturn Aura.

Both trims will be front wheel drive using the same six-speed automatic transmission with manual shift control.

The Pontiac Torrent — a badge-engineered clone of the current Equinox model — will cease production at the end of 2008. The new Equinox will be re-badged by the GMC division and sold as the GMC Terrain, starting mid-2009.

[Source: GM]

GM dealer council buys $1 million in stock

Dealers from GM's national dealer council put their money where their mouths are this week, purchasing more than $1 million in GM stock.

GM has been battered on the NYSE in recent months and recently took a sharp blow to its stock prices, trading below $9 per share last week. Yet the council of dealers remain committed to the company's future with both their words and wallets.

"We took a hard look at General Motors and we wanted to show our confidence in General Motors," says Duane Paddock, co-chair of GM's national dealer council and owner of Paddock Chevrolet in Kenmore, N.Y.

The purchase was completed on July 14, buying 107,000 shares for a total of $1,057,000.

Their timing could not have been better. GM stock rose 16.6 percent two days later. Today, shares surged another 11.9 percent closing at $12.85.

The council will be sending a letter to dealers this week explaining the move in greater detail, Paddock said. "We want them to know the confidence their dealer council -- as a group -- has in GM and to let them know that it's a great investment for other dealers."

The council is also considering purchasing airtime to share their message of confidence with consumers. "We firmly believe in GM and that we have the best products to sell, our fuel economy is the best story in the industry and the best way to do it was to buy an investment stock," said Paddock.

[Link]