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Dealers Plan to Test Strength of Franchise Laws

Legal action is already planned against Chrysler and GM dealer reductions

By Brendan Moore

05.08.2009

Chrysler dealers are unhappy about Chrysler’s plan to eliminate dealers while in bankruptcy and are banding together to fight the closures. State dealer organizations and the NADA (National Automobile Dealers Association) have kicked off a strong PR and lobbying campaign to fight the closures.

Right behind the Chrysler dealers are the GM dealers who are nervous about GM’s announcement that the company has a goal of reducing dealer count at GM from 6,246 dealers to 3,605 dealers by 2010.

The NADA launched ads in select publications two days ago that stated, among other things, that, “Cutting dealers at this time would do absolutely nothing to make either GM or Chrysler more viable. So why is your automotive task force demanding drastic cuts in the number of dealers?”

According to NADA figures, the GM and Chrysler plans mean the elimination of more than 3,000 Chrysler and General Motors dealerships employing at least 150,000 people.

The NADA has also asked all their dealer members to lobby their elected officials against the dealership closings.

I will tell you right up front that I am an interested party as to how this all gets resolved. I am interested because I want changes in the dealer franchise laws and I am interested because I want to see how the federal bankruptcy court Chrysler is in at this moment treats the state dealer franchise laws. My guess is that it will void Chrysler’s dealer agreements, and hold the company harmless against dealer suits brought under state law, but that is conjecture on my part.

Dealers, probably in class-action suits, will try to have state laws enforced against Chrysler, a defendant that is in federal bankruptcy court.

Scott Silverman, one of the attorneys at McCarter & English, a legal firm that specializes in dealer contract law, stated, “This is going to be the biggest week in the history of the U.S. auto industry as far as dealers are concerned”, in an article in the The Los Angeles Times earlier this week.

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Toyota Posts First Yearly Net Loss in 59 Years
May08

Toyota Posts First Yearly Net Loss in 59 Years

By Brendan Moore

05.08.2009

toyota-logo-smallThe world’s biggest automaker, Toyota, announced a $4.4 billion USD loss for the 2008-2009 fiscal year, and also stated that they expect to lose $8.6 billion in the 2009-2010 fiscal year as well.

Toyota went from record profits last year to their first loss ever, and all in 12 months. Toyota’s sales have plummeted in the US and Japan, the automaker’s two biggest markets, and have even dropped in China, a market that has seen healthy gains while the rest of the global market is receding.

The president of Toyota, Katsuaki Watanabe, said that the company was slow to act, and should have reduced capacity more quickly. “Of course the external environment doesn’t help, but we were lacking in the scope and speed of dealing with various problems and issues, and for that I am sorry,” he stated to reporters.

Watanabe’s forecast of future sales results was short on details, and seemed to be overly pessimistic, leading to the inescapable conclusion that either Toyota is sandbagging and making sure they exceed expectations in the near future, or, there is even more weakness in the company that outsiders are unaware of at this point. Toyota is forecasting a further 14% drop in sales during the 2009-2010 fiscal year.

Whatever the reason for the forecast, Toyota’s public statements made the ratings agency Standard and Poor push the long-term debt ratings of Toyota down to AA from the previous AA+. Standard and Poor also now considers Toyota to have a negative outlook going forward, as opposed to their previous positive outlook.

Every automaker is suffering during this downturn; Toyota is certainly no exception. However, the China results are troubling – sales dropping in a market that is going up is a bad sign. Even though China is a very small part of their global sales, there is no doubt that Toyota will do their best to solve that puzzle.

Toyota is still the number one auto producer in the world in terms of sales, and given the meltdown by GM, that doesn’t look to change anytime soon. Still, the sober statements coming out of Toyota clearly show that they’re worried about sales and financial results in the immediate future.

COPYRIGHT Techshake – All Rights Reserved

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Is Change Good?
May06

Is Change Good?

By Brendan Moore

05.06.2009

yin-yang-symbol1As the Grateful Dead used to sing, what a long strange trip it’s been. And the name of the song that those lyrics are in is Truckin’, so maybe they had some insight into the present state of the automotive industry.

Some strange things have happened lately, with changes taking place that would have been the stuff of fantasy not so long ago. And, since the changes are not even close to being over, let’s recap as of today.

Despite the fact that billions of dollars of federal aid has flowed its way, Chrysler has declared bankruptcy and will be controlled by Fiat, an Italian automaker that has never been anything than an also-ran in the European market, and a minor presence in the global market. The whole “merger” was arranged by the federal government’s Treasury department in a process that resembled nothing so much as a shotgun marriage. Fiat wants another crack at the North American market they were driven out of decades ago.

Despite getting even more aid than Chrysler, General Motors is a half-step away from bankruptcy and has announced that Saturn, Saab and Pontiac (one of its most storied divisions) will close. Oldsmobile, another once-proud nameplate with a lot of history behind it, went years ago. GM’s Opel and Vauxhall in Europe are also on the block.

Renault, a French automaker is interested in buying Saturn from GM. They, like Fiat, want another shot at the North American market. Roger Penske, the clever auto retailer, is also interested in Saturn, So is an investment group that has many Saturn dealers as members. No word on what Penske and the investment group might sell on their lots, since its probably not going to be GM iron.

Geely, a small, upstart Chinese automaker, has quite an appetite for Swedish cars. They are bidding on both Volvo (a Ford unit) and Saab, GM’s cast-off.

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Check Your Mirrors
May05

Check Your Mirrors

Odds and Ends about Cars and the Car Business

By Brendan Moore

05.05.2009

saturn-logo-smallROGER PENSKE is interested in buying Saturn, according to the latest rumor. Penske’s automotive group has 149 dealerships representing 40 brands. Penske’s group is the one that distributes Daimler’s Smart microcar in the United States. Penske has a (well-deserved) reputation for turning around companies and is a master at retailing cars, so if this rumor turns out to have some substance, Saturn dealers will be very happy.

TATA has announced that they have received 203,000 paid orders so far for their Nano, far more volume than they can build in their first stage of production. And so far, the orders are not shaking out as predicted in terms of trim level; the lowest trim level accounts for 20% of the orders, and the highest trim level accounts for 50% of the advance orders. Since Tata is nowhere close to full production capacity, and since production doesn’t start at all until June, with cars scheduled to be sold in July, the first 10,000 cars will be sold via a lottery.

tesla-model-s1

TESLA showed it’s Model S four-door to the press last month in Los Angeles, although no one has been allowed to actually drive it yet. Reporters get to ride along with a Tesla representative. We haven’t seen it in the metal yet here at Techshake, but the photos look good, showing a sleek design that is interesting without being too radical. The New York Times  when Elon Musk, the CEO of Tesla, was in NYC for a guest spot on the Late Night with David Letterman show, and the car simultaneously made its NYC debut. The claims for battery life in the Tesla S are aggressive, but the company has stuck to them in print and public statements, so they’re confident, even if others are somewhat skeptical.

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Fiat Wants Opel but Doesn’t Want to Spend Any Money
May04

Fiat Wants Opel but Doesn’t Want to Spend Any Money

By Brendan Moore

05.04.2009

fiat-group-logo-small1Fiat’s Sergio Marchionne met with Karl-Theodor zu Guttenberg, German Economy Minister, this morning in Germany, and, according to Guttenberg, the Fiat CEO told him that Fiat wants Opel, but has no intention of spending any of their own money to get Opel.

Instead, Fiat wants somewhere between five and seven billion euros (6.7 billion and 9.3 billion dollars USD) in bridge financing for their vision to become Europe’s largest automaker, as well as one of the largest automakers in the world.

Fiat intends to spin off Fiat automobiles into a separate company, and then add Chrysler and Opel (and probably Saab and Vauxhall, the other parts of GM Europe) to the new enterprise, which, by some calculations, will make it the second-largest automaker in the world – behind Toyota and ahead of VW (although it should be noted that estimates are still coming in at this point, and vary somewhat).

Well.

First of all, major props to Sergio Marchionne for coming up with such a plan. If this isn’t audacious, I don’t what is. If anyone had suggested this combination even six months ago, they would have been labeled as barking mad. And, Marchionne is basically betting the farm that it will work, because Fiat will be ground down to a fine powder if this all goes bad in a hurry.

Second, will this even work? The plan calls for a tremendous amount of integration and right-sizing. There are a lot of parts to this puzzle, and Marchionne will have to be a wizard to get it right. He has told reporters that Fiat believes there is $1 billion USD in savings through synergy if all of the above-mentioned disparate pieces are combined, but as a general rule, companies cannot save their way to profitability, they have to sell enough units in order to do that. That would seem to be the case in this instance as well.

It wasn’t so long ago that Fiat itself almost tottered into bankruptcy. And now they are the new royalty of the automotive world. It’s really quite amazing when you think about it.

No word yet on the financing; all the German minister had to say at this point was that the plan needed a closer look and that it was an “interesting approach”.

COPYRIGHT Techshake – All Rights Reserved

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