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Archive for May, 2009

UAW on Offensive over its part in GM Restructuring

Reuther tells Congress news coverage and editorials are wrong.

by on May.29, 2009

Photo Leticia Quesada, courtesy of UAW Local 2244

The union, with uncharacteristic aggressiveness, took on the media.

The United Auto Workers Union yesterday told United States Representatives and Senators that recent news stories, editorials and op-eds about the restructuring plan at General Motors have a number of “inaccurate assertions” about the shares of equity in a New GM that will be distributed after it emerges from bankruptcy.

TheDetroitBureau.com has reported that the U.S. Treasury Department had revised an offer to angry, holdout bondholders, who claim that they are not being fairly treated in General Motors Corporation’s revised viability plan that gave them 10% of the new company to settle more than $27 billion in debt. Bondholders say the UAW is getting a better deal.

Treasury now challenges bondholders to accept the 10% stake in a reorganized GM as originally proposed by GM, and eventually another 15% of the new company will be offered by way of stock warrants.

The U.S. government will receive an initial allocation of 72.5% of the equity in the new company.

The UAW in its latest lobbying and p.r. push wanted to be sure that everyone understood that the bondholders not only will receive an initial allocation of 10% of the equity, but thee are now warrants that can result in their receiving “substantially more.”    (more…)

Opel Bailout, Sale, Threatened by Fiat Boycott

Italian maker, one of three bidders, refusing to attend talks.

by on May.29, 2009

Fiat CEO Sergio Marchionne boycotts meeting with senior German leaders over the sale of Opel.

Fiat CEO Sergio Marchionne boycotts meeting with senior German leaders over the sale of Opel.

The increasingly complicated effort to save General Motors’ German-based Opel subsidiary ran into yet another snag, today, when Fiat, one of the two remaining bidders hoping to acquire a controlling chunk of Opel, decided to boycott a bailout meeting, in Berlin.

The Italian maker’s move comes barely a day after German government officials ignored their own deadline and refused to complete work on a $2 billion bridge loan package Opel says it needs if it hopes to continue operating long enough to complete a sale.

The Friday meeting was supposed to bring together representatives from the two bidders, Fiat and Canadian mega-supplier Magna International, as well as GM executives and officials from both the German and U.S. governments.

Subscribe to TheDetroitBureau.comBut a spokesman for German Chancellor Angela Merkel now says such a high-level meeting will only take place if, “those involved … have something substantial to produce, contracts that carry their signatures.”  Without Fiat’s involvement, that appears unlikely. (more…)

Marty’s Marketing Minutia

Assignment, angst and acquisitive non desire.

by on May.29, 2009

More BMW Changes: Mini Appoints Dutch Shop for International Campaigns

Last week while attending the third annual Mini United 50th anniversary bash in England, (more about this later) I met briefly with Herr Dr. Andeas-Christoph Hoffman, head of Mini’s marketing and advertising throughout the world.

During the course of the conversation, I casually queried the youthful Hoffman if Mini would be following the recent BMW model of appointing a new creative agency for international advertising campaigns.  “No,” he replied, noting “Our local and regional agencies are doing a good job for Mini.”

So imagine my surprise when news broke this week that a modest-sized Amsterdam, Netherlands, ad agency, BSUR, a 40-person shop organized in the late ’90′s, had been appointed to develop international campaigns for Mini. I attempted to contact Hoffman in Munich, but was told he was in meetings and was leaving for two weeks starting Friday.

Sure.

A spokesperson at Mini confirmed that U.S. advertising will continue to be handled by Butler, Shine, and Stern & Partners in Sausalito, California, which just launched advertising for the new Mini convertible. WCRS Advertising in London, United Kingdom, will continue to handle Mini as the agency in Europe.

The name of the BSUR agency is based on a very-odd-semi-acronym for “Be aS You aRe.” This also appears to be the agency’s brand statement based on their web site proclamation which details the philosophy as, “Building a strong brand is a matter of finding yourself. Define the true essence of your brand. Unlock your values. Visualize your mentality. Then live that essence every day. Aim to get all the brand cues right.”

Among the agency clients are brands such as Bacardi, Deloitte, Ernst & Young, Glaxo, Samsung and Wrangler for which it has developed various campaigns. What they do to generate new business seems to work very well. 

For a look at the agency’s positioning PowerPoint deck that could be part of their new business pitch click here.  

Toyota’s New Prius Commercial: Cute Animation Reigns

It seems computer generated graphic animations have become the new favorite of creative directors and producers for hybrid commercials. Vivid colors, flowers, cute designs and bucolic, verdant settings abound. Check out Toyota’s new commercial(more…)

Q&A: GM Vice Chairman Bob Lutz

A candid look at government intervention, and his own legacy.

by on May.28, 2009

Whether in or out of bankruptcy, says "car czar" Bob Lutz, the automaker is about to face a "cleansing fire."

Whether in or out of bankruptcy, says "car czar" Bob Lutz, GM is about to face a "cleansing fire."

It’s down to the proverbial wire for General Motors. Within the next several days, the automaker will either work out a last-minute settlement with bondholders or face a historic bankruptcy filing.

To some, bankruptcy or not,  there’s an equally significant event occurring with the retirement of GM’s Vice Chairman and “car czar,” Bob Lutz.  The spry septuagenarian executive surprised the automotive world when he joined the automaker, early in August 2001 for what was supposed to be a couple-year assignment helping rebuild GM’s once-legendary product development operations. As he leaves, there’s little doubt that the carmaker is building some of the best products it’s made in decades, if not, as he suggests, “the best in our history.”  But what happens “if and when” it goes into court-appointed bankruptcy protection?

That was the central theme of a speech by the former Marine pilot to the Automotive Press Association, on Thursday. While he acknowledged there are many unknowns, Lutz insisted, “We will pass through the cleansing fire of a radical restructuring — whether in or out of court” and emerge a “smaller, leaner powerhouse.”  Surprisingly, the traditionally conservative Lutz said much of GM’s potential turnaround can be credited to the Obama Administration, which is the first administration “in decades” to actually pay attention to “the largest manufacturing industry in the country.”

Following his speech, Lutz offered his thoughts on a variety of other issues in this question-and-answer session.

Subscribe to TheDetroitBureau.comQ: It seems certain GM will declare bankruptcy by the June 1st deadline set by President Obama.

Lutz: It’s a matter of  ‘if,’ and not when.  And if we do, we intend to get in and out very, very soon. (more…)

Treasury Changes Offer to Balking GM Bondholders

Government says take the new deal or get nothing at all.

by on May.28, 2009

Is this an offer bondholders can't refuse from the U.S. Government.

Is this finally an offer GM bondholders can't refuse?

With part carrot and a larger stick the United States Treasury Department has put a new deal on the table for the GM bondholders who refused to go along with a debt-for-equity swap that expired yesterday.

Treasury now says accept the 10% stake in a reorganized GM and eventually another 15% of the new company will be offered by way of stock warrants. This is either a modest or generous peace offering, depending on your viewpoint.

The Treasury revised deal is clearly designed to head off bondholder objections to a GM reorganization, which will help streamline a bankruptcy filing that is now likely next Monday. For the second day now Chrysler bondholders are arguing in U.S. Bankruptcy Court in New York against a similar reorganization proposal and sale of good assets to Fiat, while Old Chrysler LLC is dissolved and bondholders and other debtors divide what’s left. More than 300 objections to the sale have been filed.

The GM reorganization involves the sale of substantially all of its assets under section 363(b) of the U.S. Bankruptcy Code, which allows a New GM to emerge with a healthy balance sheet, while the Old General Motors Corporation is dissolved and its creditors paid off from what little remains.

Under the GM  reorganization now proposed U.S. taxpayers would own 72.5% of New GM.

The revise bondholder deal comes in two parts: Old GM (Warrant 1) receives warrants to acquire newly issued shares of New GM equal to 7.5% of New GM common equity outstanding at closing. These warrants are exercisable at any time prior to the seventh anniversary of issuance, with an exercise price set at the share price that would equate to an aggregate equity value of $15 billion based on the shares outstanding at closing, fully diluted for the issuance of such warrants.

Then there’s Old GM Warrant 2 for another 7.5% of New GM common equity outstanding at closing, exercisable at any time prior to the tenth anniversary of issuance. The exercise price is set at the share price that would equate to an aggregate equity value of $30 billion based on the shares outstanding at closing, fully diluted for the issuance of such warrants. 

(more…)

More BMW Ad Agency Changes

Win one, lose one for Omnicomm.

by on May.28, 2009

Omnicomm scored a big win, just a week ago, nabbing BMW's global ad business.  But today it learns it's lost the automaker's U.S. ad work.

Omnicomm scored a big win, just a week ago, nabbing BMW's global ad business. But today it learned it lost the automaker's U.S. ad work.

It’s a win one, lose one scenario for the Austin, Texas-based, Omnicom advertising agency. Just a week or so ago the shop won the BMW’s global creative account  as reported here in TDB in a Friday column.

Today they got the bad news.

The media planning and buying account previously at GSD&M, estimated at $200 million, for BMW North America and its 60 regional group advertisers has been awarded to UM buying service.

“We are thrilled to have UM onboard as our new media buying and planning partner,” said Jack Pitney, Vice President of Marketing, BMW of North America.  “The agency has a solid reputation for excellence, and we look forward to a very productive relationship.”

Three other media agencies vied for the business including the incumbent, Horizon Media and Carat.

Pitney also noted, the recent review of the media buying and planning activities is part of a regular process put in place by parent company BMW AG.  It is designed to maximize efficiencies and increase the effectiveness of BMW’s media planning and spending worldwide.

UAW Vote on Revised GM Contract Proceeding

Asian imports are not directly addressed in the agreement.

by on May.28, 2009

UAW Vice President Cal Rapson, photo: Rebecca Cook

Union protests appear to have stymied, for the moment anyway, GM's plans to import large numbers of cars from abroad.

Members of the United Auto Workers Union are expected to vote to accept more concessions as part of revised contract with General Motors Corporation, including a ban on strikes until 2015. GM needs the concessions to survive and the union has no choice but to give them, observed one local union leader. “Ron Gettelfinger and Cal Rapson did about as well as they could do,” he added.

UAW local union leadership representing UAW members at General Motors facilities across the country voted unanimously on  Tuesday to recommend for ratification a new settlement agreement that modifies the 2007 UAW-GM National Agreement as well as changes to the Voluntary Employee Beneficiary Association trust for retiree health care.

As usual, the UAW is not releasing details of the agreement until after the vote is completed later this week. The agreement reduces the number of skilled trade classifications – long a point of contention inside GM plants – to just three for electrical, mechanical and tool and die trades. The sweeping consolidation of skilled trade classifications had long been sought, unsuccessfully, by GM’s management.

While not part of the latest contract, union protests appear to have stymied, for the moment anyway, GM’s plans to import large numbers of cars from abroad. The new GM plan outlined for UAW officials this week also increases the chance that of the four additional assembly plants GM was planning to close, at least three will now be retooled for new products previously slated for GM factories in other countries. The shift came on the heels of intense lobbying blitz by the union that put pressure on GM, the U.S. Treasury Department and the Obama Administration.

GM assembly plants in Orion Township and in Pontiac, Michigan have been on a speculative list of plants targeted for closing, along with GM plants in Wilmington, Delaware, Spring Hill, Tennessee and Shreveport, Louisiana. In fact, union officials in Tennessee last week had publicly pronounced the former Saturn plant Spring Hill plant as good as closed.    (more…)

Visteon Goes Bust

This time, it couldn’t escape a Chapter 11 filing.

by on May.28, 2009

Ford's former partsmaking operations, Visteon Corp., had repeatedly dodged the hangman's noose, but it's finally facing Chapter 11 reorganization.

Ford's former partsmaking operations, Visteon Corp., had repeatedly dodged the hangman's noose, but it's finally facing Chapter 11 reorganization.

After a series of narrow, 11th hour escapes, the clock finally struck for long-troubled auto supplier Visteon Corp., this morning, the company announcing it is filing for Chapter 11 bankruptcy protection.

The one-time Ford partsmaking operation has been in trouble almost since its birth, in late 2000, and has depended on a series of handouts and concessions from its former parent to avoid a financial collapse up until this point.  Indeed, it was only through meeting a last-minute deadline to cover interest on its vast debt, barely a month ago, that Visteon was able to remain solvent.

But the company says that the current, deep automotive sales slump, compounded by planned summer production shutdowns, simply made it impossible to keep going without a court-protected reorganization.

Subscribe to TheDetroitBureau.com“During the reorganization period, we will seek to address our capital structure and legacy costs that are not sustainable given the current economic environment,” said Visteon Chairman and CEO Donald J. Stebbins, in a prepared statement. (more…)

Merkel Mute on Opel’s Suitors after late Meeting

At midnight no word from German government on aid or sale.

by on May.27, 2009

Angela Merkel chats with Opel employees

A GM or Opel failure means the lights go out all over Europe. Potentially, 300,000 jobs could go.

German Chancellor Angela Merkel met this evening at the Chancellery with German and U.S. government officials, representatives from General Motors Europe and Opel’s potential buyers. Bidders for the cash starved Opel brand include Fiat SpA, Canadian autoparts supplier Magna International Incorporated, U.S. financial firm Ripplewood Holdings LLC, and possibly Chinese carmaker Beijing Automotive Industry Corporation.

GM spokesperson Chris Preuss told TDB, “We’re hoping Merkel will be confident enough with the bids to give GM a bridge loan to help until we can negotiate the sale.”

GM desperately needs a €1.5 billion loan just to keep its European operations running during the next couple of weeks; and is attempting to sell off all or part of Opel to help its global restructuring. A GM bankruptcy is expected at any time now in the United States, and it is complicating its ability to save its overseas operations.  About half of GM Europe’s 50,000 employees work at Opel in Germany. Vauxhall has 5,000 employees at two plants in England.

In order to facilitate the sale and help secure government loans, Opel’s supervisory board has approved a GM Europe plan to place its European plants, sales operations, patents and other assets, debt-free under German-based Adam Opel GmbH, Preuss said. GM’s Saab unit, currently in receivership in Sweden, is not part of this restructured, but cash short, Adam Opel.

There are “major questions” with all of the bids, German Economy Minister Karl-Theodor zu Guttenberg said today. And he would not rule out insolvency. In Europe, insolvency is similar to Chapter 7 of the U.S. Bankruptcy Code, which is not a restructuring of debt, like the one Chrysler is going through under Chapter 11, but simply a sale of assets and liquidation.

Senior GM officials have previously told TDB that a European insolvency is fraught with complexity and the risk of survival is exceptionally high.

GM’s negotiating position without government cash to keep Opel afloat is, obviously, weaker. GM would prefer to keep the race open so it can play the bidders off of one another.    (more…)

First Look: 2010 Cadillac SRX and CTS wagon

Two critical new products as GM’s luxury brand regroups.

by on May.27, 2009

Cadillac will introduce two critical new products for the coming model-year, including the 2010 SRX and the 2010 Cadillac CTS Wagon.

Cadillac will introduce two critical new products for the coming model-year, including the 2010 SRX and the 2010 Cadillac CTS Wagon.

There was a time, not all that many years ago, when General Motors’ Cadillac division seemed on a roll.  It received initial raves for the edgy styling of its first CTS sedan and promised to follow with a wave of additional products sharing the so-called “Art & Science” design theme.

But things didn’t work out quite as planned.  The SRX crossover and the current version of the big STS sedan didn’t click with consumers, while efforts to make the marque a serious player in Europe simply didn’t gain much momentum.  So, Caddy’s got a lot riding on it as it prepares to roll out two new products that could be critical – not just for the brand, but for its parent, GM, which has announced that Cadillac will be one of only four divisions it will keep as part of its corporate downsizing and restructuring.

The 2010 Cadillac SRX is, without question, the most important new product making its debut in the coming months.  While the division’s general manager, Steve Shannon, declined to mention its key competitor by name, the original SRX did little to displace the leader in the strong and growing luxury crossover-utility vehicle segment, the Lexus RX350.  But after a decade of import domination, Shannon insisted, during a Wednesday preview, “There’s an opportunity” to topple the king of the CUV hill.

As TDB has reported, of all the nonsensical opinions held by enthusiast writers, none is more pervasive or wrong headed than the proposition that luxury vehicles have to be rear-wheel drive. The Lexus RX series, built from the Camry no less, demolished that assertion a decade ago. Not only did the RX300 catapult Lexus to the number one sales spot in the U.S. luxury segment, where it still resides, but it ended the reign of body-on-frame, rear-drive trucks as the basis for luxury vehicles. And Lexus had customer satisfaction and quality levels that embarrassed German and American makers. It still does.

Cadillac, once the uncontested U.S. luxury vehicle leader, is coming off a disastrous rear-drive SRX model built from an aging platform. It’s finally seeing things the way Lexus envisioned. The next-generation 2010 SRX crossover is built from a GM front-wheel-drive architecture that promises relative efficiency in a mid-size package for five adults.

Subscribe to TheDetroitBureau.comIt’s harder to anticipate what opportunity awaits the 2010 Cadillac CTS wagon.  When first conceived, planners were hoping to use it as a wedge to pry their way into the European luxury market, where wagons are in high demand.  With Caddy scaling back – at least temporarily – its effort to penetrate the Continental market, the new CTS spinoff will have to make a go here in the States, where wagons haven’t exactly been setting the market on fire.

More on the new models after the jump. (more…)