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Archive for April, 2009

Mercedes-Benz Slashes E-Class Pricing

Price cut aimed at undercutting BMW and other competitors

by on Apr.30, 2009

Mercedes plans to slash the price of its new E-Class models by 10 percent, despite the addition of significant new hardware -- and a complete interior and exterior redesign.

Mercedes plans to slash the price of its new E-Class models by 10%, despite significant new hardware -- and a complete interior and exterior redesign.

Aiming to undercut the competition, and stop a precipitous sales drop, Mercedes-Benz is taking the dramatic step of cutting prices on its all-new, 2010 E-Class sedan by about 10%, despite the addition of “significant” amounts of new content on the updated model.

The 2010 E350, with its 3.5-liter V-6, will start at $48,600, the automaker announced, during a media preview of the sedan, on Thursday. The ’09 E350 currently goes for $53,200. (The figures don’t include destination and delivery charges, which will come to $875 on the 2010 E-Class.)

The more powerful E550, meanwhile, will start at $56,300, also a cut of about 10% compared to the 2009 model.    (more…)

High Noon as President Obama Shoots Down Hedge Funds and Speculators

President shoots to kill and explains where he stands on reviving the U.S. auto industry.

by on Apr.30, 2009

As to they implications of this shoot out on recalcitrant GM bondholders, well, I'll bet the President has already reloaded.

As to the implications of this shoot out on recalcitrant GM bondholders, well, I'll bet the President has already reloaded.

At eight minutes past noon today the President of the United States strode into the Grand Foyer of the White House to speak on the Chrysler restructuring.

It may as well have been the OK Corral by the time the President got done shooting down the outlaws that were holding up the restructuring of the wounded, but still breathing Chrysler Corporation.

He began simply enough by saying that his team would continue working with General Motors as its May 30 deadline approached, but quickly moved to the show down at hand.

“And today, after consulting with my Auto Task Force, I can report that the necessary steps have been taken to give one of America’s most storied automakers, Chrysler, a new lease on life,” he said.

“This is a company that has a particular claim on our American identity… Chrysler has not only been an icon of America’s auto industry and a source of pride for generations of American workers; it’s been responsible for helping build our middle class, giving countless Americans the chance to provide for their families, sending their kids to college, saving for a secure retirement.  It’s what hundreds of thousands of autoworkers and suppliers and dealers and their families rely on to pay their bills in communities across our industrial Midwest and across our country.” (more…)

Dealers Buzzing on Chrysler Bankruptcy

Offshore brand organization is shaken by the President's patriotic sales pitch.

by on Apr.30, 2009

Cody Lusk, AIADA

Not so fast Mr. President, said Lusk.

President Barack Obama rattled the windows around the car business with a “buy American” plea as he rolled out the administration’s plans for rebuilding Chrysler with help from Fiat.

The American International Automobile Dealers Association responded almost immediately to a speech in which President Barack Obama asked Americans to “buy American” vehicles as part of our economic recovery.

“AIADA objects to President Obama’s ‘buy American’ solution for the auto sector,” said AIADA President Cody Lusk. “In today’s globalized economy ‘buying American’ can mean anything from buying a Chevy Avalanche built by Mexican workers in Silao, Mexico to buying a Toyota Camry built by Americans in Georgetown, Kentucky.”

“The real issue is that every car purchased in America today is a shot in the arm for our economy, a boost for car dealers, who are the cornerstones of communities all across this country, and a win for American consumers who have the opportunity to choose the vehicles that best meet their driving needs. President Obama must recognize that protectionist policies and statements like “buy American” have no place in America’s economic recovery,” said Lusk.

Critics would maintain that the real issue is the closed markets to American exports of all kinds by the governments of offshore-based automakers, including, Korea, Japan, and China, among others. This is destroying American jobs. So is the refusal of  European and Asian governments to increase deficit spending to stimulate their home markets now that the American market has collapsed, and can no longer be a dumping grounds for their exports. The U.S. Treasury Department has been highly critical of such practices recently, and a trade war is already underway. (more…)

GMAC Financial Services Agrees to Provide Financing for Chrysler Dealers and Customers

Chrysler Financial will be phased out.

by on Apr.30, 2009

Alvaro deMolina, CEO GMAC

"GMAC is pleased to be part of the solution to restructure and stabilize the U.S. auto industry," said GMAC Chief Executive Officer Alvaro G. de Molina.

GMAC Financial Services has just announced that it has entered into an agreement with Chrysler LLC to provide automotive financing products and services to Chrysler dealers and customers. Chrysler Finance will continue to carry the existing book of business for dealer inventory, but would eventually be liquidated as those loans are paid off. Retail contracts going forward would be handled by GMAC.

GMAC is a bank holding company with operations in North America, South America, Europe and Asia-Pacific, and that gives it access to funding that Chrysler Finance does not have under the existing frozen credit markets. The company is owned by a Cerberus-led consortium, which holds 51%, and  former owner General Motors, which now holds 49%.  Cerberus, of course, is the soon to be former owner of Chrysler, which filed for bankruptcy earlier today. As of December 31, 2008, the company had $189 billion in assets and serviced 15 million customers around the world.

Under the tentative agreement, GMAC will be the preferred provider of new wholesale financing for new Chrysler dealer inventory and has a four-year agreement for “incentivized” retail financing with limited exclusivity.

President Obama had explained the rationale for the new financial arrangement earlier in the day. “It’s now clear that Chrysler Financial — the institution that finances Chrysler cars and dealers — would on its own require an unacceptably large stream of taxpayer money to remain viable — and that’s something I refuse to provide,” the President said. “And that is why, as part of this agreement, GMAC, an independent bank holding company that finances General Motors, has agreed to finance new Chrysler sales.”

The President went on to explain that the U.S. would be providing additional capital to GMAC to help unlock the frozen credit markets and free up lending so that consumers can get auto loans and dealers can finance their inventories. “Tomorrow, the Small Business Administration will be announcing it is expanding eligibility for some loans to include more suppliers and dealers, including RV dealers,” the President concluded. 

“GMAC is pleased to be part of the solution to restructure and stabilize the U.S. auto industry,” said GMAC Chief Executive Officer Alvaro G. de Molina. “Providing financing options to dealers and consumers is critical as we work through one of the most challenging periods in the global auto sector. We will leverage our strengths and capabilities as the leading automotive finance company to serve our new customers, while maintaining our commitment to current customers.

“Serving as the primary source of financing for Chrysler is consistent with our strategy to diversify our automotive business,” de Molina said. “We intend to work through the operational process quickly and effectively to ensure that the appropriate level of credit is available to support the sale of Chrysler vehicles.” (more…)

Chrysler to Shut Down Most Manufacturing Operations While Bankruptcy Proceeds

Production halts this Monday, May 4, and only resumes when the New Chrysler emerges from the court proceedings.

by on Apr.30, 2009

Tom LaSorda, Chrysler Vice Chairman and President, left, and Bob Nardelli, Chairman and CEO, will leave Chrysler.

Tom LaSorda, Chrysler Vice Chairman and President, left, and Bob Nardelli, Chairman and CEO, will leave.

Chrysler LLC today announced that, as a result of the comprehensive restructuring plan agreed to by many of its stakeholders, it has reached an agreement in principle to establish a global strategic alliance with Fiat SpA to form a new company. 

Unfortunately for workers, the company also filed for bankruptcy at a Federal court in New York City. During the bankruptcy proceedings, which are expected to last from 30 to 60 days, most of its manufacturing facilities will be closed. It is only when the New Chrysler emerges from bankruptcy that production will gradually resume. Workers will be eligible for supplemental unemployment benefits, worth about 80% of pay. Some additional plant closings are anticipated.

Chrysler already has a relatively low inventory as a result of previous cutbacks. The decision does not restrict Chrysler’s ability to reopen the plants if buyer demand warrants. Nonetheless, this is a severe blow to suppliers, who are also under pressure from GM’s announcement last week to take its plants down for 90 days.

“Even though total agreement was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an agreement in principle with Fiat,” said CEO and Chairman, Bob Nardelli. “My number one priority has been to preserve Chrysler and the thousands of people who depend on its success. While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice. “ 

Things didn’t work out so well for Nardelli, as TheDetroitBureau.com previously predicted, and even though he was singled out for praise by the Administration today. “Chrysler’s management, and in particular, its CEO, Robert Nardelli, have played a positive and constructive role throughout this process,” President Obama said. (more…)

U.S. Treasury Moves Forward with Chrysler Bankruptcy and Fiat Partnership!

President makes tough decisions to move forward with the agreement of major stakeholders.

by on Apr.30, 2009

"It is unaceptable to let a small group of

"It was unacceptable to let a small group of speculators endanger Chrysler's future by refusing to sacrifice like everyone else.

The failure of some of Chrysler LLC’s creditors to agree to a debt-for-equity swap, tested President Obama’s patience for a month, but not his resolve or his readiness to save the once proud Michigan automaker from oblivion, and give it what he said would be a “new lease on life.”

So the President agreed with the recommendations of his Auto Task Force and directed that Chrysler LLC enter into bankruptcy under Chapter 11, section 363, in a Federal District Court in New York City, which is vastly experienced in such matters. The bankruptcy was filed today.

New Chrysler will emerge “stronger, and more competitive,” the President said.  No further job cuts are anticipated at this time. If all goes well, more jobs will ultimately be created.

The “alliance” with Fiat will create the sixth-largest global automaker, spreading R&D and design development costs over higher volumes, making it more competitive in an increasingly global and consolidating industry.

Fiat is contributing billions of dollars in advanced technology and intellectual property, and offering Chrysler access to its global distribution network.  Fiat’s technology will allow Chrysler to build new fuel-efficient cars and engines in North American factories.

The “appropriate level of shared sacrifice” was not achieved, so Chrysler will go through what is termed a “surgical, short bankruptcy in order to finish the restructuring of its balance sheet and  emerge with as a properly capitalized company that could be competitive,” a senior administration official said in a background briefing that TheDetroitBureau.com participated in.

Chrysler’s largest secured creditors have agreed to exchange their portion of the Company’s $6.9 billion secured claim for a pro-rata share of $2 billion in cash at closing. The Bankruptcy Court will be used to impose this treatment on those lenders that failed to accept the offer, which was accepted by a majority of the lenders.

The President lambasted hedge funds and speculators looking for “unacceptable” taxpayer subsidies.

During the 30 to 60 days the bankruptcy is predicted to take, Chrysler will function normally, suppliers will be paid and people will be able to finance and purchase vehicles because of funding from the U.S. and Canadian governments. Funding  is being provided on about a $3:C$1 ratio, reflecting the highly integrated nature of Chrysler’s operations on both sides of the border.

Employees will get paid, including salary, wages and ordinary benefits.  Workers compensation claims will continue to be paid by Chrysler’s insurers.  Assuming the sale moves forward as expected, Pension Plan and VEBA funding will be transferred to the purchaser. (more…)

Chrysler/Fiat Deal Will Require Bankruptcy

President to approve Fiat deal, but require bankruptcy to solve bondholder issue.

by on Apr.30, 2009

Chrysler will complete its deal with Fiat -- but only after a "brief," stage-managed bankruptcy.

Chrysler will complete its deal with Fiat -- but only after a "brief," stage-managed bankruptcy.

President Obama is expected to announce a successful deal between Chrysler and Italy’s Fiat during a noon news conference, TheDetroitBureau.com has learned.  But due to problems with a few, reluctant lenders, it is expected that he will force a short, “surgical” bankruptcy process, sources are reporting.

Exactly how long the process will take is not yet clear, but Chrysler will receive interim funding to keep operating “normally” during the process, and additional funds once it emerges from bankruptcy.

More details should emerge from the President’s speech, which comes a month after he initially declined to provide further aid to both Chrysler and its cross-town rival, General Motors Corp.  One uncertainty is what will happen with Chrysler’s CEO, Bob Nardelli.  Many observers believe he may be replaced by an executive chosen by Fiat Chairman Sergio Marchione.

TheDetroitBureau.com will be filing updates throughout the day.

BorgWarner Loses $7 Million in First Quarter

The respected supplier finds hope in a positive cash flow and further cost cuts.

by on Apr.30, 2009

BorgWarner DualTronic

Borg's dual clutch automatic transmissions return the fuel economy of a manual, making them an increasingly popular automaker choice.

In a sign of difficult economic times, BorgWarner Incorporated posted this morning a negative swing of -$97 million in Q1, which is viewed by analysts as a good performance these days in the depressed auto supplier sector.

The word’s largest maker of automatic transmissions, including extremely efficient dual-clutch versions that are being adapted by most automakers, lost 6 cents a share or $7 million. This compares with earnings of 75 cents a share or almost $90 million in Q1 2008, which was before the Great Recession took hold and automotive production was slashed globally.

The loss was actually worse, at -12 cents a share, since the company excluded non-recurring items, including a 15 cent a share credit it took for shutting its fabled Muncie, Indiana, transmission plant. Still, losing only $14 million is considered a victory in the current economic climate, which can be likened to requiring the management team to running–and completing–a marathon in a hurricane.

“The restructuring actions we took in 2008, while difficult, have already begun to yield positive financial results,” said Timothy Manganello, Chairman and CEO.

The company has eliminated almost one quarter of its work force since the middle of last year, in a bid to remain profitable. (more…)

Concorso d’Eleganza Villa d’Este

Enchanted April, unsurpassable automobiles.

by on Apr.30, 2009

Enchanted April, at least along Italy's Lake Como, means one of the world's most heralded classic car shows, the Concorso d'Eleganza Villa d'Este

Enchanted April, at least along Italy's Lake Como, means one of the world's most heralded classic car shows, the Concorso d'Eleganza Villa d'Este

There’s something about spring in Northern Italy that makes you feel like you’ve stepped onto a movie set.  Maybe it’s the soft light or the gentle breeze as our boat slowly rounds a bend on Lake Como and the lush grounds of Villa d’Este suddenly come into sight.

At first, the palatial hotel, with its trompe l’oeil columns, dominates the vista, but as we draw closer, we remember the reason we’re here, dozens of classic cars sprawling across the estate’s grounds.

The Concorso Eleganza Villa d’Este is neither the first classic car show of the season, nor the largest.  But it is perhaps the most charming and delightful, a setting even more lovely than the grounds of Pebble Beach and a collection of rare and amazing automobiles that few, if any, other Concours can match.

(more…)

Virtually all UAW Members Ratify Chrysler Settlement Agreement. President Obama Speaks at Noon About the Company’s Future

Only bondholders remain in the way of a last minute reprive of the company.

by on Apr.29, 2009

"Our members have responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve U.S. manufacturing jobs and gives Chrysler a chance to survive."

"Our members have responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve U.S. manufacturing jobs and gives Chrysler a chance to survive."

UAW members at Chrysler have overwhelmingly ratified a settlement agreement with Chrysler, Fiat and the U.S. Treasury that will allow the restructuring of the ailing company to go ahead.

The remaining obstruction to a reorganized Chrysler this morning are hedge funds that hold its virtually worthless secured debt. The four largest banks, holding 70% of the debt have already agreed to the proposed swap, but it appears that all of the bondholders must go along, and small ones are refusing to do so.

The funds are expected to try and hold out until the last possible minute – midnight tonight – of the deadline imposed by the Auto Task Force. But President Obama is due to speak at noon today, an indication that the administration is willing to act forcefully and move on. If agreement is not reached by then, the U.S. government is prepared to put Chrysler in receivership and provide funding until Chrysler’s assets can reassigned to a new company that would then go on.

With the approval of a new contract, union workers are putting their jobs on the line, saying they are willing to take the risk that a new, new Chrysler can survive and ultimately thrive.

Eighty-two percent of production workers, and 80% of skilled-trades workers voted for the agreement in balloting that took place at UAW Chrysler locations throughout the United States. Ninety percent of office and clerical workers voted in favor of the agreement, and 94% of UAW-represented Chrysler engineering workers voted for approval.

“This has been a challenging time filled with anxiety and uncertainty for our membership,” said UAW President Ron Gettelfinger. “Our members have responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve U.S. manufacturing jobs and gives Chrysler a chance to survive.”

UAW Vice President General Holiefield, who directs the union’s Chrysler Department, said: “Once again, UAW members have stepped up to the plate and acted responsibly. If other stakeholders will join us in making difficult sacrifices, Chrysler will have a chance to rebuild and participate in the eventual recovery of the U.S. vehicle market.” (more…)