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Archive for March, 2009

Ford Solicits Scarce Buyers with Advantage Plan

Payments are covered for 12 months if purchaser loses job.

by on Mar.31, 2009

Ford marketing flatters Hyundai by emulating incentives.

Ford marketing copies Hyundai incentives.

If imitation is the sincerest form of flattery, then Hyundai Motor America marketing executives should be blushing bright red as General Motors Corporation and Ford Motor Company followed it today with buyer payment protection plans that emulate its breakthrough Hyundai Assurance Program that has boosted sales by at least 10% in Hyundai’s estimation.

In the face of frightening U.S. sales declines in February that made it the lowest February sales on record going back to 1967, automakers are desperately trying to reassure customers that now is the time to buy with a variety of incentive packages. (February year-over-year comparisons ranged from -53% at GM, -48% Ford, -44% Chrysler, and -35 to -37% at Toyota, Honda and Nissan.)  Auto sales in the first two weeks of March were down 40% compared to a year ago, and running at a dismal annual rate of  9.2 million units, according to J. D. Power and Associates.

Automakers are increasingly using as an inducement guaranteed-payment of car loans, if the buyer loses his or her job — certainly a very real threat at domestic car companies, if not for workers in the slumping economy as a whole. 

controversial bill has also been introduced in the U.S. House of representatives (H.R. 1550, or the CARS Act) could help kick-start the American automotive market by providing cash incentives of up to $5,000 for those who trade in a vehicle at least eight years old for a limited selection of  fuel-efficient products produced in North America.  The legislation, as initially proposed, would offer the biggest tax credits for U.S.-made vehicles, though products made in the NAFTA countries, Canada and Mexico, would also qualify.  (more…)

New GM CEO Confirms More Cuts Are Coming

Fritz Henderson vows to get the job done "in or out of court."

by on Mar.31, 2009

The aura of confidence projected by Henderson belies the enormity of the task in front of him.

An aura of confidence projected by Henderson belies the enormity of the task in front of him.

General Motors CEO Fritz Henderson in his second day on the job held a news conference that reaffirmed his commitment to “go deeper and go faster” in preparing a revised viability plan with “a clean balance sheet” that will pass muster with the President’s Auto Task Force. If not, Henderson said “we will do it in court.”

He acknowledged the sweeping criticisms of the President and the U.S. Treasury Department as “painful,” but quickly added that “we got it” and sketched in broad outlines the areas of the strategy that need improvement by June first. 

More job cuts and plant closings will be required, and bondholders and retirees will see commitments made to them by GM trimmed or eliminated. The decision on the sale or closing of Hummer will be made shortly. Saturn’s future remains in doubt beyond 2011, but Henderson said that it is still being studied with no immediate need to take action. Few details emerged, as Henderson said he was not going to conduct negotiations in public that are properly done at the bargaining table. 

Henderson also claimed not to be concerned about his own future beyond 60 days, “I don’t really worry too much about that,” he said. “If we get our job done it’s going to be okay,” he added. In a press briefing yesterday, Robert Gibbs, the President’s Press Secretary, denied that Rick Wagoner’s resignation as GM’s chairman was a quid pro quo for the continuation of aid. He also refused to speculate on what happens to Henderson or GM beyond the current 60-day deadline. 

Treasury is in the process of appointing two directors to the board of General Motors Acceptance Corporation, and is expected to have a significant, if not dominant role, in the remaking of the GM board of directors so that a majority of its members are new by the August meeting. Henderson now has the unenviable task of reporting to two constituencies – the changing GM board, with its new interim chairman, Kent Kresa, and Treasury through its Auto Task Force, headed by Steve Rattner and Ron Bloom. Treasury continues to be involved with any GM decisions that involve taxpayer funding on a “daily basis.”

Henderson said that the need for further cash is being evaluated, and would not say how much more liquidity from U.S. taxpayers would be needed during the next two months. The need for the $2 billion in support that was skipped in March and the $2.6 billion requested for April are still being evaluated. He would not say when taxpayers could expect to see repayment of the loans.

The aura of confidence projected by Henderson during his first leading role belies the enormity of the labors in front of him and his management team that has careened and crashed through an unending series of emergencies.  Henderson worked for virtually his entire career for Rick Wagoner, and he did not really say what would be different now that he is boss in spite of multiple questions on the topic.

Perhaps the biggest issue in getting through the next two months is the core problem of fleeing customers. It’s lights out, if an even worse sales collapse occurs than GM is currently enduring as car buyers shun its brands. The President’s warranty program announced yesterday will be of some, as yet unknown, help. GM also announced — just prior to Henderson speaking — that it will start a plan called “GM Total Confidence,” that it says protects a customer’s paycheck, investment and vehicle for 24 months.  (more…)

GM Launching Total Confidence Program

Automaker hopes to ease concerns of reluctant buyers.

by on Mar.31, 2009

"GM Total Confidence," a 24-month customer protection package that will make up to nine payments for up to $500 per month for new car buyers who may become unemployed.

"GM Total Confidence," a 24-month customer protection package that will make up to nine payments for up to $500 per month for new car buyers who may become unemployed.

Hoping to assure reluctant motorists staying out of the new car market – or simply avoiding General Motors vehicles – GM has launched its expansive Total Confidence Program which, among other things, will protect buyers who unexpectedly lose their jobs.

The new program, announced during the first news conference by new GM CEO Fritz Henderson, offers to cover up to $4,500 in payments should a buyer lose his or her job, and even come up with some cash if a potential customer is “upside-down,” owing more money on their old vehicle than it would bring as a trade-in.

“This is about providing a full range of protection for our customers,” said Henderson, insisting the Total Confidence Program is more expansive than competitive measures launched by competitors, such as the Hyundai Assurance Program, which allows a buyer to return a vehicle, without penalty, if they lose their job.

The TCP program is GM’s latest response to the overall slide in U.S. new car sales and to the specific downturn it has faced as buyers grow wary about dealing with a manufacturer that could soon go bankrupt. On Monday, Pres. Barack Obama warned that a Chapter 11 filing was a very real possibility, as he rejected GM’s bid for a second round of emergency government loans. (more…)

Can Cash-for-Clunkers Save U.S. Auto Industry?

Deal would provide trade-in incentives, especially on American-made vehicles.

by on Mar.31, 2009

New bill would offer up to $5,000 in tax credits for trading an old car in on a new one -- though this clunker may not qualify.

New bill would offer up to $5,000 in tax credits for trading an old car in on a new one -- though this clunker may not qualify.

It’s officially known as H.R. 1550, or the CARS Act, though you might as well call it cash-for-clunkers.  Whatever the name, the proposed House measure, given a boost by President Barack Obama, during his Monday speech, could help kick-start the American automotive market.

The measure is designed to provide cash incentives of up to $5,000 for those who trade in a vehicle at least eight years old on a select list of fuel-efficient products produced in North America.  The legislation, as initially proposed, would offer the biggest tax credits for U.S.-made vehicles, though products made in the NAFTA countries, Canada and Mexico, would also qualify.

Similar legislation failed to catch fire, in recent months.  A similar cash-for-clunkers proposal failed to make it into the final White House economic stimulus package.  But with U.S. auto sales continuing to plunge, and the prospects for Detroit’s makers, in particular, worsening, there’s growing support on Capitol Hill.  House Speaker Nancy Pelosi is reportedly lending her backing, and President Obama belatedly offered his own support, on Monday.

(more…)

Sneak Peek: 2010 Acura ZDX

4-door sport coupe to debut at New York Auto Show.

by on Mar.31, 2009

2010 Acura ZDX: the newest coupe-like sedan or start of an all-new segment?

2010 Acura ZDX: the newest coupe-like sedan or start of an all-new segment?

Joining the procession of manufacturers hoping to combine the functionality of a sedan with the sporty styling of a coupe, Acura plans to pull the wraps off its new ZDX at next week’s New York Auto Show.

Whether it truly defines “a new luxury category,” as Acura claims, in an advance press release, remains to be seen, but Jeff Conrad, the Veep in charge of the Honda division’s sales, claims of the 2010 Acura ZDX that, “The prototype is unlike anything you have ever seen before from Acura. The prototype showcases a new level of luxury, style and refinement for Acura and speaks volumes towards our commitment to advancing the brand.”

The prototype will be formally unveiled next Wednesday, April 8th, with the production Acura ZDX scheduled to reach U.S. showrooms next autumn.

Run, Rabbit, Run

VW brings the Golf back -- again.

by on Mar.31, 2009

Run, Rabbit, Run. VW is dropping the Rabbit nameplate...again...and bringing back the all-new, sixth-generation Golf for 2010.

Run, Rabbit, Run. VW is dropping the Rabbit nameplate...again...and bringing back the all-new, sixth-generation Golf for 2010.

We’d like to think that this time Volkswagen has finally made up its mind.  Reversing its decision to revive the old Rabbit nameplate, for the 2007 model-year, the German maker is “realigning with our global heritage” for 2010.  That means the Rabbit is gone…again.  And the Golf nameplate is back…again.

Three decades ago, when VW set up an assembly line in Westmoreland, Pennsylvania, it decided to Americanize the name of its fuel-efficient small car, adopting the Rabbit badge.  When that factory closed and the car was again imported, the automaker switched to the global nameplate, Golf.

Three years ago, desperate to reverse sliding sales, VW revived the Rabbit badge, relaunching it with a catchy ad campaign that included a TV spot featuring Rabbits multiplying fast as they raced through the streets of New York City. (more…)

Obama Administration Spares Nardelli from Sacking

Calling the Chrysler situation different, a Fiat deal is blessed.

by on Mar.30, 2009

Chrysler CEO Bob Nardelli has 30 days to forge an alliance with Fiat.

Chrysler CEO Bob Nardelli now has just 30 days to forge an alliance with Fiat.

The Obama White House appears to have cleared away some of the barriers to a deal between Chrysler and the Italian carmaker. A green light for the Fiat deal was near the top Chrysler’s wish list when it submitted its viability plan to the White House back in February. Washington hands said the Fiat deal might not pass muster in the nation’s capitol. However, Obama’s Auto Task Force has now approved the concept of Chrysler-Fiat, pending resolution of the final details. The Obama’s administration said that the company has another 30 days to finish restructuring its operations and debt, and complete negotiation with Fiat. The deal with Fiat could be instrumental in reviving Chrysler, Obama said.

Chrysler Chairman Robert Nardelli said he was encouraged by the administration’s commitments to both the American automobile industry and “Chrysler’s viability through an alliance with Fiat.”

“I want to personally assure all of our customers, dealers, suppliers and employees that Chrysler will operate ‘business as usual’ over the next 30 days,” Nardelli said. “While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force to secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed.

Nardelli ignored comments from the White House and the Automotive Task Force, suggesting the company was no longer “viable as a stand alone company.” (more…)

New General Motors CEO Expands Restructuring

Henderson implicitly accepts President Obama's harsh criticism, but what's next at the failing automaker?

by on Mar.30, 2009

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The party's over, now the real cutting, consolidation and closings begin at General Motors.

President and politician Obama went directly to the point during his auto industry announcement. The way the industry got to its latest crisis is because of management.

“The pain being felt in places that rely on our auto industry is not the fault of our workers, who labor tirelessly and desperately want to see their companies succeed. And it is not the fault of all the families and communities that supported manufacturing plants throughout the generations. Rather, it is a failure of leadership – from Washington to Detroit – that led our auto companies to this point,” he said.

In a reaction to the President’s explicit criticism, newly appointed GM CEO Fritz Henderson said, “Over the next 60 days, we will work around the clock, with all parties, to meet the aggressive requirements that have been set by the Task Force, and to make the fundamental and lasting changes necessary to reinvent GM for the long-term.”

What this means is that there are more, many more cuts coming at GM. More brands will have to go. More operations will have to be eliminated in the U.S.

GM faces similar challenges and the same solutions in Canada and Europe, where skeptical national governments and the European Community central government have not committed to helping it. In fact, they have been  just as publicly critical of the ailing maker. Fritz Henderson was recently thrown out of a meeting with the patrician German economic minister Karl-Theodor zu Guttenberg and told not to come back until he had a better plan for Opel.

And within minutes of the of the President’s speech, Canada mirrored his position.

“The plans submitted by General Motors and Chrysler to the government of Canada, do not go far enough to ensure the long-term viability of these companies,” said Tony Clement, Canada’s industry minister. Like the U.S., Canada will provide some short-term financing until a better plan is arrived at.

The question is what can GM do to make its already heavily reworked plan better?

(more…)

30 Years of Restructuring

From Iacocca to Nardelli, Smith to Henderson, what's different?

by on Mar.30, 2009

Iacocca won over Washington, in 1979, but this time, could "the pieces of the mosaic fall off the wall"?

Iacocca won over Washington, in 1979, but this time, could "the pieces of the mosaic fall off the wall"?

The mood was somber, yet there was a sense of electricity surging through the room as the CEO strode up to the microphone. The situation was desperate, he quickly acknowledged, and without everyone’s cooperation – workers, bankers, investors and even the federal government – he warned, “then the pieces of the mosaic fall off the wall.”

That eloquent turn of phrase just might have come from Barack Obama, this morning, as he explained his decision to delay any additional assistance to General Motors and Chrysler. Perhaps it could have been the words of Rick Wagoner, the newly-ousted GM CEO, or Chrysler’s chief executive, Bob Nardelli, when they glumly admitted the need for a government bailout to save their companies, last autumn.

In fact, the speaker was Lee Iacocca, the legendary Chrysler chairman, when he announced plans to seek his own federal bailout, nearly 30 years ago.

That news conference was one of the very first events I covered as a rookie on the Detroit beat, and I can still recall the shock his words generated in the cramped and overheated news room at Chrysler’s old headquarters, the K.T. Keller Building, in Highland Park, Michigan. It was long before cell phones and Blackberrys, yet before the blunt-talking executive had even finished his presentation, those words were echoing across the world.

Anyone who thinks the battle for federal aid has been tough, this time around, should check the archives to see what Iacocca and the rest of Chrysler’s stakeholders went through those many decades ago. A thorough bit of research will also reveal just how strongly the automaker emerged from that particular brush with bankruptcy. And, by the time the last check was written to cover the loans Chrysler got, it had also presented U.S. taxpayers with a nearly 40% return on their investment.

That’s the good news. But the flipside of the story is that it didn’t take all that long before Chrysler once again was in trouble. By the end of the 1980s, it was sinking rapidly towards insolvency, a collapse this time forestalled by the arrival of the so-called LH cars, a line-up of strikingly different mid-size sedans, such as the Dodge Intrepid. (more…)

President Obama Calls for More Aggressive Plans

Chrysler and General Motors threatened with bankruptcy.

by on Mar.30, 2009

Year after year, decade after decade, we have seen problems papered-over and tough choices kicked down the road, even as foreign competitors outpaced us.

"We have seen problems papered-over and tough choices kicked down the road... Well, we have reached the end of that road."

In a speech heavily tinged with populist sentiments, President Barack Obama told General Motors Corporation and Chrysler LLC, Monday morning, that they will not be allowed to continue floundering along with the support of “an unending flow of taxpayer dollars.” At the same time, he sought to assuage nervous automotive buyers, and shore up hope among those who could soon lose their jobs or watch their communities founder as the result of the automotive industry’s crisis.

The president announced that GM will get an additional 60 days to pull together a much more aggressive restructuring program than it has so far submitted to the White House’s Automotive Task Force.

“The situation at Chrysler is more challenging,” added Obama, revealing plans to give the smaller maker just 30 days to complete a proposed partnership with the Italian automaker, Fiat, or some other potential alliance.

Failing to meet those deadlines, said the president, would almost certainly result in bankruptcy at the automakers.

President Obama’s comments, made at the White House, were clearly meant to balance the concerns of a wide array of constituencies. For critics of Washington’s increasing interventionism – especially in the form of supporting failing industrial companies – the speech made it clear that it can no longer be business as usual, in Detroit.

“Year after year, decade after decade, we have seen problems papered-over and tough choices kicked down the road, even as foreign competitors outpaced us,” Obama declared, adding that, “Well, we have reached the end of that road. And we, as a nation, cannot afford to shirk responsibility any longer. Now is the time to confront our problems head-on and do what’s necessary to solve them.” (more…)