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Archive for March, 2009

Obama Administration Rejects Both Chrysler and GM Restructuring plans

It says bankruptcy may be best option.

by on Mar.30, 2009


GM's and Chrysler's best chance at success "may well require utilizing the bankruptcy code in a quick and surgical way."

In a draft of the key points of the upcoming auto announcement that has obtained, the Obama Administration has concluded that “the plans submitted by GM and Chrysler on February 17, 2009 did not establish a credible path to viability,” according to the Auto Task Force.

“In their current form, they are not sufficient to justify a substantial new investment of taxpayer resources,” the Administration concludes.

As a result each company will have 30 or 60 days to revise their plans. They will be given an “adequate amount of working capital” to establish a new strategy for long-term economic viability.

While GM’s “current plan is not viable, the Administration is confident that with a more fundamental restructuring, GM will emerge from this process as a stronger more competitive business.”

This process includes leadership changes at GM and an increased effort by the U.S. Treasury and outside advisors to assist with the company’s restructuring effort. Rick Wagoner is stepping aside as Chairman and CEO. The  Administration will provide GM with working capital for 60 days to “develop a more aggressive restructuring plan and a credible strategy to implement such a plan. The Administration will stand behind GM’s restructuring effort.”

After extensive consultation with financial and industry experts, the Administration has “reluctantly concluded that Chrysler is not viable as a stand-alone company. However, Chrysler has reached an understanding with Fiat that could be the basis of a path to viability. Fiat is prepared to transfer valuable technology to Chrysler and, after extensive consultation with the Administration, has committed to building new fuel efficient cars and engines in U.S. factories. At the same time, however, there are substantial hurdles to overcome before this deal can become a reality.” (more…)

Treasury to Back GM, Chrysler Warranties

Program aimed at salving concerns of nervous domestic buyers.

by on Mar.30, 2009

Treasury Dept. will provide the bulk of funds for the Warranty Commitment Program, designed to cover GM, Chrysler warranties in the event of a bankruptcy.

Treasury Dept. will provide the bulk of funds for the Warranty Commitment Program, designed to cover GM, Chrysler warranties in the event either makes goes into bankruptcy.

The White House and U.S. Treasury Department have announced a new program that guarantees the warranty of every new GM and Chrysler car and truck sold during the companies’ restructuring efforts, even if one or both of the companies becomes unable to honor warranty claims during that period.

According to the Obama administration’s automotive assessment and restructuring plan:”If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always,” asserted President Barack Obama, during his speech on the automotive bailout, Monday morning. “Your warranty will be safe. In fact, it will be safer than it’s ever been. Because starting today, the United States government will stand behind your warranty.”

Consumers won’t have to do anything to qualify for the warranty guarantee. Enrollment will be automatic when a vehicle is purchased. (more…)

Obama Reportedly Finds GM, Chrysler Fell Short in Bailout Bids

Offers limited additional aid; GM to be told to restructure; Chrysler ordered to form Fiat alliance.

by on Mar.30, 2009

GM's new CEO, Fritz Henderson will have 60 days to restructure the automaker, which could still receive additional aid.

GM's new CEO, Fritz Henderson will have 60 days to restructure the automaker, which could still receive additional aid.

Both General Motors and Chrysler have reportedly failed to convince the White House that they can survive in current form, leading Pres. Barack Obama to order GM to restructure, during the next 60 days, and its cross-town rival to complete a proposed alliance with the Italian automaker Fiat, within 30 days, according to overnight reports out of Washington.

Failing to meet those short-term targets, the White House would let both makers fail, according to reports.

On Monday morning, at 11 AM EDT, the President will issue a formal response to the request for an additional $21.6 billion in federal loans the two U.S. makers claim they need to survive.  But while he is expected to provide some financial assistance, it will fall short of their request and require significant additional sacrifices by GM and Chrysler.

The first such step was announced overnight by GM, which belatedly confirmed reports, leaked from the White House, that Chairman and CEO Rick Wagoner would step down.


Peugeot-Citroen CEO Ousted

Replaced by industry outsider; could alliance be in plans?

by on Mar.30, 2009

PSA CEO Streiff falls victim to auto slump and automaker's mounting losses.

PSA CEO Streiff falls victim to auto slump and French automaker's mounting losses.

France’s leading automaker, PSA Peugeot-Citroen, announced it had ousted CEO Christian Streiff, following an emergency meeting of its board of directors, Sunday, citing the industry’s “exceptional difficulties” for forcing the change in top management.

PSA will turn to Roland Vardanega, a member of its three-man board, to manage things until June 11, when the company will bring in a new, outside CEO. The new Chief Executive is the 56-year-old Philippe Varin, who previously led turnarounds in the steel and aluminum industries. (more…)

GM Confirms Wagoner Resignation

Fritz Henderson takes over as Chairman; more management changes are coming.

by on Mar.30, 2009

The new General Motors Chairman, Fritz Henderson, talks to reporters whn he was the head of Europe.

The new General Motors Chairman, Fritz Henderson (right center), at the Geneva show.

Early this morning a scrambling public relations operation at General Motors confirmed that Rick Wagoner is stepping down as chairman and CEO, effective immediately. Wagoner, 56, was named president and CEO in 2000, and assumed the role of chairman in 2003.

Fritz Henderson, GM president and chief operating officer, will serve as CEO. Henderson, 50, was named to his current position in 2008.  He was previously vice chairman and chief financial officer.

Kent Kresa, chairman emeritus, Northrop Grumman Corporation, has been named interim non-executive chairman of the board of directors. Kresa became a GM director in 2003. 

“The Board has recognized for some time that the Company’s restructuring will likely cause a significant change in the stockholders of the Company and create the need for new directors with additional skills and experience,” Kresa said. 

“The Board intends to work to nominate a slate of directors for the next annual meeting that will include a majority of new directors taking into account the addition of new directors, retirement, and decisions by individual directors not to stand for re-election, although the specific individuals who will be nominated or choose not to run or leave the board are not yet known,” Kresa concluded. 

Wagoner said, “On Friday I was in Washington for a meeting with administration officials.  In the course of that meeting, they requested that I ‘step aside’ as CEO of GM, and so I have. Fritz Henderson is an excellent choice to be the next CEO of GM. Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts. His knowledge of the global industry and the company are exceptional, and he has the intellect, energy, and support among GM’ers worldwide to succeed.  I wish him well, and I stand ready to support him, and interim Non-Executive Chairman Kent Kresa, in every way possible.  

“I also want to extend my sincerest thanks to everyone who supported GM and me during my time as CEO.  I deeply appreciate the excellent counsel and commitment of the GM Board and the strong support of our many partners including our terrific dealers, suppliers, and community leaders. I am grateful as well to the union leaders with whom I have had the chance to work closely to implement numerous tough but necessary restructuring agreements.  

“Most important of all I want to express my deepest appreciation to the extraordinary team of GM employees around the world.  You have been a tremendous source of inspiration and pride to me, and I will be forever grateful for the courage and commitment you have shown as we have confronted the unprecedented challenges of the past few years.  GM is a great company with a storied history.  Ignore the doubters because I know it is also a company with a great future,” Wagoner concluded. 

The GM statement also said it is awaiting further announcements by the President and the Auto Task Force on Automotive Reconstruction, and will have additional comments at that time.

General Motors CEO and Chairman to Resign

Rick Wagoner is stepping down at GM, while Peugeot-Chairman ousts its CEO.

by on Mar.29, 2009

GM CEO Rick Wagoner, (r) and Bob Nardelli testifying before Congress. Is Nardelli out like Wagoner?

Rick Wagoner, (r) and Bob Nardelli (c) of Chrysler before Congress. Is Nardelli out like Wagoner?

While an official announcement is not expected until sometime Monday, General Motors Chairman and CEO, Rick Wagoner, is expected to resign after eight years as head of the struggling automaker at the direct request of the White House. That, insiders report, was the last remaining obstacle before President Barack Obama would approve a second round of federal loans needed by the automaker if it hopes to survive the current U.S. automotive sales slump.

The news, which was apparently first leaked out of the White House on Sunday afternoon, came as a setback for Wagoner, who said, just last week, that he had no plans on resigning, and that the GM Board of Directors supported him.

GM officially refused to comment since the announcement hasn’t been made, saying only “we are anticipating an announcement soon from the Administration regarding the restructuring of the U.S. auto industry. We continue to work closely with members of the Task Force and it would not be appropriate for us to speculate on the content of any announcement.” (more…)

Chrysler Canadian Restructuring Talks Remain Deadlocked on Eve of Loan Decision

Neither union nor management gives as deadline nears.

by on Mar.29, 2009

By signalling it is going to help Chrysler, the U.S. government has made it more difficult for obtaing concessions.

By clearly signalling it is going to help, the U.S. government has actually made it more difficult for Chrysler to obtain concessions needed for viability.

While the U.S. industry and associated pundits were transfixed by the apparent decision of the Obama administration to force out Rich Wagoner, CEO of General Motors, to give it political cover for an extension in loans, Chrysler and the Canadian Auto Workers remained locked in an intense battle over the company’s future. A Chrysler negotiator reiterated over the weekend that it needed more concessions from the CAW, which has said talks have broken down.

“We all recognize that we are in unprecedented times as it relates to the global economy and current financial crisis, which has a direct impact on the automotive industry. After several days of bargaining in good faith, Chrysler and the CAW have not reached an agreement that closes the competitive gap with other automobile manufacturers in Canada to ensure Chrysler’s immediate viability,” said Al Iacobelli, Chrysler’s top labor negotiator.

“The Company has been very clear in its Canadian Government testimony and position with the CAW: We must close the competitive gap of $19 an hour immediately. Although we made progress toward closing the gap, significant issues related to the existing ‘pattern’ remain on the table. These are not normal business circumstances and all Chrysler constituents have been asked to break the pattern – employees, retirees, dealers, suppliers and others. These requests have been made to all of our constituents, including the CAW, to ensure Chrysler’s viability,” he said.

CAW President Ken Lewenza had no immediate comment on the Iacobelli’s comments. The talks have been particularly tense because the CAW has made an issue than $30 million in bonuses Chrysler Vice Chairman Tom LaSorda has collected in the past two years both from Daimler AG and from Cerberus. Other Chrysler executives also have collected substantial “retention” bonuses while the company has suffered financially and thousands of employees both in the U.S. and Canada have been laid off. (more…)

President Obama Wants More Concessions in Automaker Restructuring Plans

In a taped interview he says "they are not there yet."

by on Mar.29, 2009

The chief is using the bully pulpit to wring more restructuring concessions.

The commander-in-chief is using the bully pulpit to wring out more restructuring concessions.

President Obama, in an appearance on CBS’ Face the Nation that was broadcast Sunday said automakers must do more to receive additional financial aid from the U.S. government. The  show was taped last Friday, and it is not known what, if any, progress has been made since then.

The president is due to announce tomorrow morning his vision for the future shape of ailing Chrysler LLC and General Motors Corporation. The administration has not completely ruled out receivership as the restructuring plans at both companies have bogged down over union issues, as well the resistance of bondholders, who refuse to accept what will be a costly for them debt-to-equity stock swap.

“We’re trying to let them know that we want to have a successful U.S. auto industry. We think we can have a successful U.S. auto industry. But it’s got to be one that’s realistically designed to weather this storm and to emerge, at the other end, much more lean, mean and competitive than it currently is,” Obama said.

“That’s going to mean a set of sacrifices from all parties involved — management, labor, shareholders, creditors, suppliers, dealers. Everybody’s going to have to come to the table and say it’s important for us to take serious restructuring steps now in order to preserve a brighter future down the road,” Obama said.

“We are anticipating an announcement soon from the Administration regarding the restructuring of the U.S. auto industry. We continue to work closely with members of the Task Force and it would not be appropriate for us to speculate on the content of any announcement,” General Motors said in a statement late Sunday afternoon.

BMW X6 M Debuts in New York

Bringing M performance to whatever it's called.

by on Mar.28, 2009

BMW is trying to bring some life to a wilting segment.

BMW is trying to bring some life to a wilting segment.

In the twisted logic of automotive marketing, calling a four-door a “coupe” makes sense. And it also takes some work to provide a sport utility with a performance image. But that’s what BMW hopes to do when it presents in New York next month the M version of its mid-size X6, err, Sports Activity Vehicle, as it’s called in its marketing jargon. Let’s get this straight it’s not a SUV, but a SAV; but then it’s not a four-door, so it’s a coupe; that makes it a SAC — are you still with me?  

The New York reveal does make perfect sense in this sense though, about 40% of all 24,000 global M sales occur in U.S. The M line of performance cars started simply enough with the hot rodder’s trick of an engine swap, in BMW’s case by taking the six-cylinder engine from the M1 race car and stuffing it into a 5-Series sedan. Der neue M5 resulted. 

Faced with the collapse of its SAV sales, BMW is trying the old performance market gambit once again. The X6 M will have several new engine, drivetrain, and suspension technologies to transform the world’s first SAC into an M product, says BMW.  (I guess that makes it a SAM?) All of these needed tweaks are unspecified at this time. (more…)

President Reshapes the Auto Industry on Monday

Press secretary confirms "drastic changes" coming.

by on Mar.28, 2009

The Task Force finishes the restructering plans this weekend.

Restructing plans are being finished this weekend.

Late Friday afternoon as the Auto Task Force was working over the restructuring plans of Chrysler and General Motors, the President’s press secretary, Robert Gibbs, confirmed that on Monday the President will speak about his requirements for continued aid for the automakers. This followed at least two meetings between the Auto Task Force and the President on Thursday. Gibbs said the Task Force was “winding down the decisions that have to be made and putting in place a plan.”

On Thursday, President Obama confirmed his belief that America needed a viable auto industry, but that viability means being able to compete in a global environment and not depend on truck sales for profits. Gibbs said the companies must be able to compete without continued government assistance. 

President Obama was sharply critical of the management of the auto companies since they did not invest in technologies that would have allowed a broader array of cars that they could sell in good times as well as the current bad ones. 

Both the President and Gibbs have acknowledged that the current annual selling rate of 9 million vehicles would challenge  any company since sales were at only a little more than half the usual rate. U.S. taxpayers have already lent Chrysler and GM $17.4 billion, and the companies have requested another $22 billion to carry them until their restructurings take effect.

The President is at Camp David for the weekend, but is due back Sunday afternoon for more meetings prior to Monday’s announcement and a trip to London for a meeting on the global economy with the heads of the Group of Twenty nations.

The G20 is made up of Finance Ministers and Central Bank Governors, and was established in 1999 to bring together industrialized and developing economies to discuss key issues in the global economy. The U.S. Treasury has been critical about the ongoing reluctance of European governments in particular to stimulate economic demand through deficit spending on a scale large enough to be effective. The U.S. is preparing to spend $3.6 trillion to do so, but wants other participants in the global economy to do much more than they have thus far.

“The President, I think, will outline what he thinks is the best way forward to achieve viability for the companies in both that short term and in the long term, Gibbs said. “How do these companies get through the global recession that sees a great decrease in demand for the product? And how, when we emerge from recession to recovery, how do we have a sustainable path that makes good business decisions not just for one year but for many years?” 

We’ll know the President’s plan on Monday.