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Tuesday, December 02, 2008 11:02 PM


Auto Sales Plunge To Lowest Level Since 1982


MarketWatch is reporting Automakers post steep sales declines. Here are some of the highlights from the report.

  • Ford, Lincoln and Mercury combined car sales fell 31.5% to 37,272 units. Ford truck sales slumped 29% to 81,546 units with sales of the flagship F-Series pickup down 18.6% to 37,911. Volvo sales tumbled 46.5% to 4,404 vehicles. Ford said it's considering the sale of its lone remaining European brand as part of its revival.
  • GM took an even harder hit with its 41.3% drop to 153,404 vehicles from 261,273 a year ago. Chevrolet was the best of the worst in terms of brands, but still turned in a 36.9% decline to 95,756 vehicles. Hummer sales dropped 63.9% to 1,454 vehicles from a year ago.
  • Leading all decliners, Chrysler reported a 47% plunge in November U.S. sales to 85,260 vehicles from 161,088 a year ago. Chrysler's car sales slumped 59% to 20,475 units while truck sales slid 42% to 64,785.
  • Toyota, the second-biggest car seller in the U.S. behind GM, said its U.S. November sales fell 33.9% to 130,307 vehicles from 197,189 a year ago. Sales of the Prius, Toyota's one-time hot-selling hybrid, dropped 48.3% to 8,660 vehicles from 16,737 last year as gas prices fell hard from record highs.
  • Honda reported a sales decline of 31.6% to 76,233 vehicles from 111,431 a year ago. Honda brand sales slid 30.6% to 68,345 units while Acura division sales tumbled 38.9% to 7,888.
  • Nissan turned in a 42.2% fall to 46,605 cars and trucks from 80,683 a year ago. Nissan branded vehicle sales dropped 44.4% to 38,974 units, and luxury Infiniti branded vehicles slid 28% to 7,631 units from last year.

While CEO Rick Wagoner prepared to face Congress later this week, GM sales analyst Mike DiGiovanni made his own plea for federal stimulus in a conference call following the report.

"Our industry is in a much more severe situation than the rest of the economy," he said. "It's in an unsustainable position and it's unsustainable for all manufacturers. We cannot continue to operate at these levels or the entire industry's going to go down."
It is quite apparent that Mike DiGiovanni is admitting an enormous overcapacity problem and GM has no idea how to fix it. This is all the more reason for Congress to turn down GM's request for aid. The reality going forward is that fewer cars are going to be sold and GM calling the position "unsustainable" has no idea what to do about it or how to survive on fewer sales.

U.S. Automakers, UAW to ‘Genuflect’ to Split Congress

Bloomberg is reporting U.S. Automakers, UAW to ‘Genuflect’ to Split Congress
General Motors Corp., Ford Motor Co. and Chrysler LLC, running out of money to operate, must convince a divided Congress that their plans to shrink are severe enough to ensure repayment of $25 billion in proposed U.S. loans.

GM Chief Executive Officer Rick Wagoner will cut debt, shuffle U.S. brands and offer to work for $1 a year, while Ford will emphasize speeding a shift to cars from trucks, people familiar with the matter said. The United Auto Workers called an emergency meeting tomorrow to consider concessions making it less expensive to eliminate jobs, people familiar with that session said.

“Our expectation is that they go and duly genuflect and appear to be repentant,” said Eric Noble, president of Car Lab, an Orange, California-based consulting firm for automakers including GM, Chrysler and Toyota Motor Corp.

Republican Senators Bob Corker of Tennessee and Richard Shelby of Alabama suggested that the automakers needed deeper restructuring, fewer dealerships and more competitive labor costs or they would end up in trouble again.

James Clyburn, a South Carolina Democrat and House majority whip, said the CEOs of all three companies should be required to step down as a condition of the loans, according to his spokeswoman, Kristie Greco.
Old way of doing business just won't fly

Yahoo Finance is reporting US automakers ground jets for trip to Washington
If the Detroit Three automakers have learned anything since their last trip to Washington, it's that the old way of doing business just won't fly.

So the decision by auto executives to travel in hybrid cars rather than corporate jets is just the start to overhauling their image as the industry pleads its case for $25 billion in federal loans. The CEOs of General Motors, Ford and Chrysler are making the roughly 525-mile trek from Detroit to Washington in hopes of securing loans to help them through the recession and the worst sales downturn in 25 years. Hearings are scheduled for Thursday and Friday.

Democratic Rep. Gary Ackerman of New York, a member of the House Financial Services Committee, said last month that it was "a delicious irony" to see the executives arrive on private jets "with tin cups in their hands."

In response, the automakers said top executives needed to fly on corporate planes for security reasons. They also pointed out that taking commercial flights risked delays or cancellations, a chance the executives would not want to take when scheduled to testify in front of Congress.

In an effort to curb bad publicity, Ford Motor Corp. and General Motors Corp. said their CEOs would take the wheel for at least part of the roughly nine-hour trip.

Ford also announced Tuesday that it will sell its five corporate jets, and GM said it would close its corporate jet operations on Jan. 1 and try to sell the remainder of the lease time on its seven aircraft.
From one extreme to another. Driving over 500 miles to genuflect does not make a lot of sense. Is there any middle ground for this crew, like taking a regular flight that arrives a couple hours early?

GMAC Puts Individuals After Institutions in Bond Plan

If Congress is looking for something to stew on they can look at GMAC Puts Individuals After Institutions in Bond Plan.
GMAC LLC, the financing unit of General Motors Corp., is placing individual investors who loaned the company $14.6 billion behind institutions should the company file for bankruptcy.

Holders of so-called SmartNotes, which GMAC sold to individuals since 1996, aren’t included in the company’s $38 billion plan to exchange securities for new, discounted debt and preferred shares or cash, said Gina Proia, a spokeswoman for the Detroit-based company. SmartNotes investors “would be subordinated to the new notes, but they’re not being asked to take a principal discount,” she said.

SmartNotes show how perilous the bond market can be for private investors in times of financial stress. Individuals continued buying the debt as recently as last year, even as the world’s biggest carmaker reported losses. GMAC lost $7.9 billion over the past five quarters, and October was its worst month for sales since 1945. Moody’s Investors Service cut the company’s credit rating to C on Nov. 20, the lowest ranking.

Retail holders “could get virtually nothing if the company files for bankruptcy,” said Kathleen Shanley, an analyst at Chicago research firm Gimme Credit LLC, who recommends investors sell GMAC debt. “If the exchange goes through, they would be subordinate. That would not be a good position to be in.”

GMAC issued $25 billion of SmartNotes in $1,000 denominations during the past decade, using the proceeds to help pay for day-to-day operations. The notes, introduced by Chicago- based LaSalle Bank, allow individuals to be paid interest on an annual, semi-annual, quarterly or monthly basis. They include a “survivor’s option,” permitting spouses to sell the bonds back to the issuer if the owner dies.

The offer to swap unsecured notes held by institutions is part of GMAC’s plan to convert into a bank to gain access to the Treasury’s $700 billion rescue fund. The exchange is the second in five months for the company and its Residential Capital LLC mortgage unit, which have reported losses since mid-2007.

GMAC is seeking access to federal funds as a recession grips the U.S. economy. The government has provided more than $8.5 trillion in financing to unlock credit markets after almost $1 trillion in writedowns and credit losses at the world’s biggest banks and financial institutions.

If the debt swap isn’t completed by year-end, there is a “significant risk” GMAC will default, the company said in a Nov. 20 regulatory filing. Private equity firm Cerberus Capital Management LP in New York bought 51 percent of GMAC in November 2006. GM, also based in Detroit, owns the rest.
Making GMAC a bank is of course ludicrous but who knows anymore what the Fed is likely to do.

Ford sees at least breakeven in 2011

In what has to be the joke of the day, Ford sees at least breakeven in 2011.
Ford Motor Co said on Tuesday it expects overall and North American automotive business pretax results to break even or be profitable in 2011.
* Says submits business plan to Congress
* Says plans electric vehicles
* Says will sell its corporate aircraft as part of overall cash improvement
plan
* Says asking for access to up to $9 billion of bridge financing
* Says does not anticipate a liquidity crisis next year, barring a bankruptcy
of one of its domestic rivals
* Says hopes to complete its transformation without accessing government loan
* Says company plans call for investment of about $14 billion in the US on
advanced technologies and products for fuel efficiency over next seven years
Ford To Break Even in 2009

Flashback May 22, 2008: Ford To Break Even in 2009
Ford said Thursday it likely will not hit its target to be profitable in 2009, but will just break even, due to the deteriorating economy, soaring gas, steel and other commodity prices and a dramatically shifting consumer preference toward fuel-efficient cars and crossovers from more lucrative trucks and SUVs.

Ford CEO Alan Mulally in a statement issued by Ford Thursday morning. "Overall, we expect to be about break-even companywide in 2009 -- with continued strong results in Europe and South America."
Ford To Be Profitable in 2009

Flashback November 8, 2007 Despite $380 million loss, Ford is optimistic
Ford said it was on track to meet its goal of being profitable in North America and in all of its automotive operations by 2009.
Ford To Be Profitable in 2008

Flashback Jun 22, 2006 Ford on track to be profitable in 2008
Ford Motor Co. said it was on track to meet its goal of making its North American auto business profitable by 2008 and remained committed to that target.

Mark Fields, Ford's president of the Americas, announced the company's upcoming vehicle line-up and a push to offer more fuel-efficient vehicles.
Forgive me for not believing a damn thing Ford says.

Automakers Need $25 Billion

Flashback November 19, 2008 Automakers seek $25 billion bailout deal
Detroit's Big Three automakers pleaded with Congress on Tuesday for a $25 billion lifeline to save the once-proud titans of U.S. industry, warning of a national economic catastrophe should they collapse.

Millions of layoffs would follow their demise, they said, as damaging effects rippled across an already-faltering economy.

But the new rescue plan appeared stalled on Capitol Hill, opposed by the Bush administration and Republicans in Congress who don't want to dip into the Treasury Department's $700 billion financial bailout program to come up with the $25 billion in loans.

"Our industry ... needs a bridge to span the financial chasm that has opened up before us," General Motors Corp. CEO Rick Wagoner told the Senate Banking Committee. He blamed the industry's predicament not on failures by management but on the deepening global financial crisis.
Wait A Minute, I Mean $34 Billion

Had Congress given the automakers $25 billion on November 19, exactly two weeks later the automakers would have needed another $9 billion. Please consider Big Three Seek $34 Billion Aid.
Detroit's Big Three auto makers presented turnaround plans to Congress on Tuesday that indicate both General Motors Corp. and Chrysler LLC could collapse by the end of the month unless they get billions of dollars in emergency government loans.

As part of a renewed bid for a bailout, GM said it needs an immediate injection of $4 billion to stay afloat until the end of the year, a fact it hadn't before disclosed. In total, the company said it needs $18 billion in loans -- $6 billion more than it said it would need just two weeks ago.

Chrysler's 14-page summary of its presentation to Congress requests $7 billion, and it said it needs the funds by Dec. 31. Chrysler also wants $6 billion from a Department of Energy program aimed at promoting fuel-efficient vehicles.

Ford Motor Co. seeks a $9 billion line of credit from the government, though it adds it may not need to tap it. In addition, Ford wants $5 billion from the Energy Department program.

Both companies have said they don't see bankruptcy as a viable option for any auto maker. They believe customers would stop buying cars and the company would be forced to liquidate.

But bankers and other financial experts are telling lawmakers that bankruptcy is the best option for creating smaller but viable U.S. car companies.

"I think GM is eminently re-organizable," said Durc Savini, managing director at Miller Buckfire & Co., a New York investment banking firm that advised on the bankruptcies at auto suppliers Dana Corp. and Dura Automotive Inc. He said he recently talked with staff members for three House and Senate members to discuss a bankruptcy at one or all of the Detroit makers.

In a conference call with reporters, GM President Frederick "Fritz" Henderson said bankruptcy is not a viable option and the company is focusing solely on securing help from Washington. "There is not a Plan B," he said.
Here's the deal: GM is begging for taxpayer handouts, going to the negotiating table with no contingency plans needing $6 billion more ($4 billion of it immediately) than it did just two weeks ago. GM management is pathetic. It deserves to go under. And the first order of business under any restructuring should be to get rid of GM's management team, lock, stock, and barrel, starting with CEO Rick Wagoner.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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