By Chris Haak
With the congressional hearings on auto industry assistance still in progress, I happened to walk past a TV today that had CNBC on, and the crawl at the bottom of the screen said, “WSJ: Chrysler hires bankruptcy firm Jones Day.”
Determined to find more information about this significant piece of news – and whether it meant that Chrysler was just hedging its bets in case it did not receive a bridge loan from the Federal government, or was using it as a bargaining tactic with Congress, or whether it really was about to declare bankruptcy – I immediately hit the web to find more information on this. This news is so fresh that an instant search on the Wall Street Journal’s website brought no hits, although the news has (subscription may be required) to their website.
According to the WSJ, Chrysler hired Jones Day several weeks ago in preparation for a possible bankruptcy filing. The Journal said that several people familiar with the matter have confirmed the story to them. The WSJ also reports that attorney Corinne Ball is handling the case. Ms. Ball has worked on other automotive bankruptcies, such as those of Dana Corp., GM’s purchase of Daewoo, as well as several cases involving the UAW.
by David Surace
Confirmation arrived this morning from the current 800 pound gorilla in sportscar racing: due to the current economic clusterf%&* conditions, Audi will not bring its works cars to contest the 2009 American Le Mans Series or its European cousin, the Le Mans Endurance Series, instead choosing to focus on its prototype entries in two major endurance races, the Sebring 12-hour race in early spring, and the 24 Hours of LeMans in the summer. These will be the prototype car’s only two appearances, both run by Audi Sport Team Joest.
Audi will remain focused on its A4 sedan entry in Germany’s astoundingly popular DTM series, and will also offer a racing version of its R8 production car for sale to privateer teams. That car, which was recently unveiled at the motor show in Essen, is being built to FIA GT3 specifications, a series with somewhat similar specifications to the SCCA’s SPEED World Challege GT class.
Far from being a time to stop and rest on one’s laurels, this is a perfect opportunity to evaluate why a top-level motorsport program is no mere frivolous advertisement pitch, but an important development tool for an automaker, even when the money’s tight.
By David Surace
What the heck is wrong with the denizens of this country, and the people we voted into office? Why are their opinions still hopelessly outmoded, after years of excellent products and the PR to back it up? Why is the poll-bearing public so convinced that there will be NO ECONOMIC FALLOUT from a Big 3 liquidation?
Why was there no problem at all when Wall Street jerkoffs arrived in Washington–in private jets, no less–to collect their $700bn without even so much as a wink and a nudge? “It’s all good! We believe you!”
What the hell happened to this mighty auto industry, that it couldn’t survive an (arguably sizeable) economic iceberg? After all the Previous Icebergs that have been spotted in these waters (the Suez Oil Crisis, the OPEC Oil Crisis, British Leyland, Audi’s Unintended Acceleration, the early 90’s recession, MG Rover, the meltdown of GM/FIAT, 9/11, two rounds of Gulf hurricanes, the subprime lending crisis), why am I getting the overwhelming impression that Future Economic Iceberg plans were not in place before the ship had even set sail?
By Roger Boylan
Plato had no room for artists in his ideal republic, but not because he didn’t respect them; on the contrary, he argued that the “sacred fear” inspired by great art could cause too much excitement and passion and ultimately undermine the entire social system. I surmise, therefore, that he would have been firmly opposed to anyone in his republic driving the car I just wrapped up a week with: the ’09 Dodge Charger SRT8, a work of mechanical art quite capable of generating excitement and passion and undermining anybody’s social system. At first sight, this sculpture of power parked in my driveway raised serious doubts in my mind that it and I could ever find a modus vivendi. After all, it’s an in-your-face statement of automotive moxie, a direct descendant of the macho muscle cars of the ’60s driven by televisual hillbillies, mechanical monsters that mostly made a lot of noise and smoked their rear tires during getaways from the moonshine authorities. This, I thought, was hardly my style; my daily driver is a Jaguar S-Type, nimble enough but comparatively discreet. I wondered if I hadn’t made a mistake; was this Charger my nemesis? I was eager to find out, so I stashed the Jag in the garage for the duration and embarked on my routine of weekday commutes and weekend excursions as the middle-aged driver of what appeared to be the quintessential young man’s car.
By Chris Haak
Leaders of the UAW met today in Detroit to discuss what concessions the union might be willing to offer to show both the theme of shared sacrifice to convince Congress that the union is doing its part to save the companies that employ its members, and to actually do something that might help preserve the rapidly dwindling number of UAW-represented autoworkers in the US. The result of that meeting is the UAW’s agreement to allow GM, Ford, and Chrysler to delay scheduled multi-billion dollar funding of the VEBA trust that was to have eventually assumed the companies’ retiree healthcare obligations and also “suspended” the jobs bank, which paid laid off workers up to 95% of their pre-layoff wages for sometimes several years.
The UAW said that these two issues were chosen because they did not require re-opening of the 2007 contracts to agree to. Re-opening the contracts would have required (and will likely require at some point) additional bargaining between labor and management, as well as another vote by the membership working at each company. The VEBA funding deferral is a big deal for several reasons; first, it was to have been a huge cash outflow for each of the companies in 2010, when they are still going to be very vulnerable and in need of cash. Second, the entire reason the automakers pushed for the VEBA was to eliminate huge liabilities from their books, as well as potentially saving money over the next several decades.
By Chris Haak
The smallest of the formerly Big Three submitted its “detailed business plan” last to Congress, with word going out via e-mail to journalists just before 7:00 p.m. EST last evening. In terms of the immediate need for cash, Chrysler’s desperation situation seems to fall fairly close to GM’s desperation, with the company warning that it expects to have $2.5 billion in cash on hand on December 31, and that it is due to pay out $11.6 billion in cash during the first quarter of 2009 for wages, parts, and other costs during a period when vehicle sales are traditionally slower – and will be even worse in 2009 than they have been historically.
Chrysler’s request is for a $7 billion working capital bridge loan, with the money to be received by December 31, 2008. It expects to apply the money toward paying the aforementioned $11.6 billion in Q1 2009 bills, but unlike GM, is not calling for negotiations with debt holders, but does assume that the company will receive $6 billion of the $25 billion in “advanced technology” money to be allocated by the DOE as well as “a reasonable level of support and concessions from the company’s constituencies. The plan that Chrysler submitted was also fairly vague on exactly what the company plans to do aside from launching new products with a focus on improved fuel economy, reducing structural costs, and sharing platforms and components with various models and manufacturers. The company said that its internal analysis of the cost savings to be realized from an alliance or consolidation could result in $3.5 to $9.0 billion in “synergies.”
The full presentation document is posted on Chrysler’s media site (and humorously labeled “Proprietary and Confidential” at the top of every page) as well as several other materials for the world to see:
High Tide and Green Grass—Apogee
By J. S. Smith
Mini sets the scene
As discussed in a previous installment, the Mini was not only a revolutionary design, it was also phenomenally successful as a race and rally car, probably more so than any other car of the 1960s. In addition to that role, the Mini was an international style icon. All four of The Beatles owned one in the mid-60s. Other stars did as well—Lulu, Peter Sellers and Brit Eklund, and others I cannot recall.
Even royalty owned Minis: Princess Margaret—the randy royal—and Lord Snowden drove a Cooper S, and Princess Grace owned a Mini too. Government bigwigs drove them too– Labour Minister Ernest Marples had a Mini with a customized hatchback. Alec Issigonis personally delivered a Mini to fellow automotive icon Enzo Ferrari.
Steve McQueen owned a tuned Cooper S. McQueen is well known as a screen legend, but he was also a very serious motor sport enthusiast. McQueen raced cars and motorcycles, and he loved his Mini. Mary Quant, inventor of the mini-skirt, liked the Mini, even designing a limited edition Mini in the 1980s. Countless other cultural icons of the 1960s drove Minis. One 1970’s music legend—glam rock king Marc Bolan of T. Rex—died when his wife veered off the road and struck a tree with his Mini in 1977.
By Chris Haak
GM has submitted its business plan to Congress for its review – and if the plan is deemed to be viable as far as limiting the likelihood that GM would have to come back to Washington down the road asking for more money – Congressional leaders Harry Reid and Nancy Pelosi will call another lame-duck session of Congress to vote on potential aid to the industry.
In marked contrast to Ford’s plan – where Ford basically said the money would be nice to have as a backstop in the event that things get worse – GM said that it needs $4 billion in Federal aid before the end of the month in order to continue operations. Further, two weeks ago, CEO Rick Wagoner told Congress that the company would need $10 to $12 billion in assistance; the price has now climbed to $12 billion in loans by the end of March, as well as another $6 billion in revolving credit if conditions don’t turn around.
While the full plan was not yet available on GM’s media website, portions of it are: