Special Car, auto, cars, vehicles

At the end of the first session, Representative Thaddeus McCotter, Michigan Republican serving Livonia, outlined the reasons for his compromise bill.

Half of the loans, presumably $17 billion for the Detroit Three, should come from the financial industry TARP, because if the D3 get no loans, there will be thousands more home foreclosures.

The other $17 billion, under McCotter's proposal, would come from the Energy Bill's $25 billion for advanced fuel-efficient technologies. McCotter says that without the loans, a lot of research & development the D3 already has funded would be lost to foreign competitors.

Almost sounds too logical for Capitol Hill.

"Just like British Leyland."

Indeed. Earlier, Chairman and CEO Rick Wagoner described how GM looked at acquiring Chrysler before the credit crisis. When the credit crisis hit, GM had neither the money nor the time to pay attention to Chrysler.

I don't know what's more troubling: that GM might re-consider buying Chrysler, perhaps to refill its North American brand lineup now that it has a plan to change or get rid of Saab, Saturn and Pontiac, or that a Republican senator is willing to mandate a "shotgun wedding."

Corker's interest in a federal government-forced merger does stem from a rational concern. The good senator, much to Chrysler chairman Bob Nardelli's dismay, said he spoke with a Cerberus Capital Management board member Wednesday who told him the automaker's private equity owners has enough cash on its own to avoid a government bailout. Cerberus has no interest in giving Chrysler more money for its operations, Corker said.

Nardelli replied that private equity doesn't work that way; it consists of pension funds and other investment money, just like investors in public GM and Ford Motor Company. He also asserted that Cerberus isn't considering selling Chrysler. Corker said that Nardelli's probably the only person with knowledge of the matter who believes that.

Ford and Chrysler wouldn't have come to Capitol Hill to request bailouts, Corker said, if not for GM's desperation. And therein lies the rub. Corker, and his Republican and Democratic colleagues don't want to lend Chrysler $7 billion just to see it sold to a foreign company.

Corker also wants GM to consider restructuring its debt, a kind of pre-bankruptcy, including paying 30-cents on the dollar for its bonds, and of course, getting a better deal from the United Auto Workers. The UAW remains conservative Republicans' biggest target. Senator Richard Shelby (R-Alabama) maintained his status as biggest opponent of the loan guarantees.

Senator Christopher Dodd (D-Connecticut), the committee chairman, said that the only person at the witness table who has already contributed to a Detroit Three turnaround is UAW President Ron Gettelfinger. "They haven't said what they're going to do. They're saying what they've done. Hundreds of thousands of workers at the Big Three already have made concessions."

Good to see someone still calls them the Big Three, even if it's someone with little prior knowledge of how the auto industry works. From dealership floorplans to the vagaries of production, the Senate committee learned a lot about the industry Thursday.

Senator Sherrod Brown (D-Ohio), asked Wagoner what it takes to "ramp up" production for the 2011 Chevrolet Cruze.

"A good rule of thumb would be half a billion dollars," Wagoner responded. "If we have to develop the product as well (if it's all-new, not on an existing platform) that's three years. It's a long-cycle business."

"What happens in Lordstown (Ohio)?" Brown asked.

"We're going to proceed. We're going to build the Chevy Cruze in Lordstown," Wagoner replied.

Will GM still be around to do it? "We're not going to write a blank check, but we're going to get something done," Dodd told reporters after the hearing. "People are angry about bailouts. I suspect they'd be angrier about the failure of the auto industry with hundreds of thousands of jobs. My preference would be if the Federal Reserve and Treasury would step up with the authority we gave them."

Dodd believes the public opposition to loan guarantees for the D3 stems from the mishandled Troubled Asset Relief Program (TARP). Wagoner, Mulally and Nardelli all agreed to oversight - they said they'd prefer a "car czar" to a government board.

Dodd, who blasted Fed Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson several times Thursday for failing to show up at the hearing, said he'll continue to push to fund automaker loan guarantees from the $700-billion TARP. GM, Ford and Chrysler have requested a total of $34 billion, and it appears the "136" funds from the Energy Bill for fuel-efficiency are not available.

"The secretary of the treasury is in China right now. He needs to come home."

Perhaps Paulson is trying to find a buyer for Citicorp.

And so, after a six-hour hearing with no break, things don't look so bleak for GM, Chrysler and Ford, at least not on the Senate side. The fun continues Friday, at the House Financial Services Committee. Stay tuned.

Dodd is not exaggerating. During today's hearing Wagoner admitted GM had investigated acquiring Chrysler a month or so back, but had abandoned the idea because it was running out of money: "...we were concerned we did not have the liquidity to survive until the deal closed." Senator Bob Corker from (R-TN) made this point: "GM is the reason we are here. There is no way we would be having these meetings if GM was not having problems." UAW chief Ron Gettelfinger told the assembled Senators: "Unless something changes, General Motors will be bankrupt by the end of the month."

No-one disagreed with him.

Here are some of the key themes to come out of today's hearing:

• The actual bailout bill could be $75 billion to $125 billion

Mark Zandi, chief economist, Moody's Economy.com, attending as an expert witness, claimed the $34 billion requested by the Detroit Three would not be enough to avoid bankruptcy in the next two years. Zandi contends the new car market will not recover as quickly as the Detroit Three anticipate. The credit crunch will continue to keep customers out of showrooms, and that the frenzied discounting of the past decade has led to a pull forward of demand that has yet to work through the system. He says a market of 17 million units -- close to the average of the past few years -- "is not supportable by underlying demand".

• Bankruptcy is not an option

Rick Wagoner confirmed fears over a possible bankruptcy had already begun to impact GM sales. "It is clear the overhang surrounding bankruptcy is affecting certain buyers." Ford Boss Alan Mulally claimed American consumers needed to believe in the company they were buying their cars from. Bankruptcy would mean "sales would fall off so fast we couldn't restructure". Mark Zandi pointed out the automakers would not get the financing they needed to work through a Chapter 11 bankruptcy in the current environment, so the government would likely have to provide that money. The taxpayers would therefore be on the hook "no matter what". "We recognize bankruptcy is not an option," said Senator Elizabeth Dole (R-NC).

• There should be a government-appointed "car czar" with wide powers

The need for strong oversight to ensure public funds were being applied correctly was a recurring theme among the senators questioning the Detroit Three CEOs, mainly, as committee chairman Dodd implied in his closing remarks, because it was felt the banks had gotten public money with too little clear direction as to how it was to be used. All three CEOs agreed with the idea of an oversight board or a trustee to monitor how loan money be used, even if that body or person had the power to impose sweeping restructuring conditions.

• GM and Chrysler should merge

"No thinking person thinks three companies can survive," said Senator Corker, who questioned Chrysler CEO Bob Nardelli at length as to why Ceberus would not make further investments in the company. "Chrysler doesn't want to be a stand alone business," he said, adding that it troubled him any loan to Chrysler would simply allow Cerberus to keep the company operating long enough to find a suitable buyer. He described a consolidation or merger of GM and Chrysler as "the kinds of things we need to force to make happen". "Everything I've seen suggests a merger between GM and Chrysler is a good idea," said Senator Bob Bennett (R-Utah), who claimed the two companies didn't need loans but an injection of government money he called "patient capital". Bennett then asked if GM and Chrysler would agree to a merger if it was made a condition of receiving government money. "I would be very willing to look at it," said Rick Wagoner. "The first job that would go would be mine," said Nardelli, "but if that's the criteria ...I would do it."

• Only $17 billion -- for now

Economist Mark Zandi recommended any money be paid in two tranches. As GM claims it needs $10 billion to get through into the first quarter of 2009, and Chrysler $7 billion (Ford's Alan Mulally stuck to the line the Blue Oval may not need to touch the $9bn credit line it's requesting) it was suggested this amount be paid, and a review set for March 31 next year to see whether restructuring plans were on track. The "car czar" or oversight body would then decide whether more money would be paid.

• The UAW needs to give up more

Senator Corker pressed UAW chief Gettelfinger hard on the issue of more concessions. GM's core problem, Corker said, was its debt level. He believed it would be necessary for GM's bond holders to accept 30 cents for every dollar of debt they held by March 31 (roughly a 50 percent premium over what it is currently trading for) to reduce the debt burden. But he said it was unreasonable to expect the bond holders "to take a haircut" without the UAW giving up more. Specifically, he wanted Gettelfinger to agree to cut UAW wage rates to the same level as that paid in transplant factories "and not a penny more", and wanted 50 percent of the $35.5 billion GM was due to pay into the union-owned VEBA fund by 2010 to be taken in the form of equity.

Tomorrow the CEOs sit down in front of the House Financial Services Committee for another grilling. While Chris Dodd took a swipe at the Bush Administration for not making some part of the TARP funding quickly available to help automakers, noting drafting legislation in the next 72 hours to ensure funding would be a mammoth task, he did say "...inaction is not an option". It's a long way from a slam-dunk, but the mood in Washington seems to be tilting towards a bailout. Whatever happens in the next few days is still open to plenty of speculation. But this much is clear: Detroit has changed forever.

GM's North American sales chief, Mark LaNeve, said Pontiac will become a smaller, specialty brand but will continue to sell value-priced performance cars. Read news and analysis of GM's plan for Congress here later Tuesday: GM is looking for a $4 billion bridge loan to see it through 2008, with the request for another $8 billion in a line of credit for next year.

The industry was off 36 percent for the month. The notorious Seasonally Adjusted Annual Rate (SAAR) was 10.6 million units per year, down from a SAAR of 16.4 million units per year based on November 2007 sales. All numbers in this story compare November 2008 sales to November 2007 sales, unless I say otherwise.

Sales of pickup trucks, especially the new Ford F-150 and Dodge Ram, are rebounding, in that their sales didn't drop as much as other models. Chrysler attributes some of that to a strong farming industry, but the cheap price of gas has a lot to do with it, of course. Clearly, though, the utter lack of consumer confidence has hit the auto biz hard. Dealers have been hit on two sides: no customers in showrooms and lack of financing for their floorplans.

Here's how November shook out ...

GM: 154,877 deliveries, off 41 percent.

• Retail was off 45 percent, to 106,737 and fleet was off 29 percent, to 48,140.
• Four-cylinder take-rate for midsize cars remains high, at 63 percent (70 percent for Chevy Malibu).
• Malibu was the single GM model that outsold November 2007, up 31.3 percent, to 9,469
• Cadillac CTS, off 48.0 percent, to 2,902. Buick Enclave, off 40.3 percent, to 2,288. Hummer H3 was off 65.8 percent, to 1,048.

Toyota: 130,307 deliveries, off 33.9 percent.

• Toyota division cars dropped 31.1 percent, trucks dropped 37.4 percent.
• Lexus car sales fell 40 percent, truck sales fell 26.9 percent.
• The only gainers were brand-new models; the Toyota Sequoia, up 51.9 percent, to 1,873 units, and the Lexus LX, up from 71 units to 424.
• Prius was off 48.3 percent (to 8,660) and Camry was off 28.8 percent (to 25,224).
• Scion xB dropped 43.8 percent, to 2,161.
• Tundra was off 55.9 percent, to 6,607.

Ford: 118,818 deliveries, off 30 percent.

• Marketing veep Jim Farley sees the automotive market will continue to scrape bottom through the first quarter of 2009.
• Lincoln continued to outsell Mercury, 8,019 to 7,744.
• Ford Taurus was off 22.0 percent (3,040), Fusion off 27.4 percent (8,914).
• Focus freefell 38 percent, to 8,194.
• Mustang fell 50.1 percent, to 3,667.
• Ford sold 2,203 Flexes. Chevy Traverse beat it with 2,936.
• F-Series was 37,911, about 2,000 of them new models. Down 18.6 percent.
• Mercury Sable was up 4.2 percent, to 1,230.
• Volvo sales was abysmal, off 46.5 percent, to 4,404. The S80 was the only gainer, up 10.5 percent to 844 cars.

Chrysler: 85,260 deliveries, down 47 percent.

• The discontinued Chrysler Aspen was up 33 percent, to 2,013. Credit hybrid sales.
• Dodge sold 2,815 Journeys and 3,364 Challengers.
• Chrysler 300 was down 70 percent, to 3,423.

Nissan North America: 80,683 deliveries, off 42.2 percent.

• Infiniti was off 28.0 percent.

American Honda: 76,233 deliveries, off 31.6 percent.

• That's coming off a record November, in 2007.
• Honda Division was down 30.6 percent, to 68,345.
• Acura was off 38.9 percent, to 7,888.
• The new Pilot was the only gainer, up 4.5 percent, to 5,601.
• Accord was off 38.1 percent, Civic off 29.6 percent.

Others: BMW Group sold 19,762 vehicles, off 26.8 percent. Mercedes-Benz USA sold 14,102, and said it was off 8.6 percent for the year to date. Hyundai sold 19,221, off 40 percent.

Voinovich also has concerns Washington will continue to have problems understanding what Detroit has to offer. He asks whether members of Congress, including House Speaker Nancy Pelosi (D-California) and Senate Majority Leader Harry Reid (D-Nevada) would consult auto industry experts and executive branch officials, "or do you feel that Congress is qualified to draw such conclusions?"

Buicks Will Get Opel Styling

Here's one revelation connected to GM's reorganization plan. In the January 2009 issue of Motor Trend magazine, we report that Saturn's connection with Opel styling is over. Following the current wave of Saturns, Opel styling will merge with Buick's.

Believe it or not, the reasons are obvious. First, GM wants to push Opel back upmarket. It once competed nearly at Audi's level of prestige. (Since then, Audi has moved upmarket, toward BMW and Mercedes, while Opel has gone common.) GM wants Chevrolet to have a bigger presence as an entry-level brand in the European market, competing directly with Ford. Evidence is the new Chevy Cruze compact, which is set to launch in Europe next April, about a year before its planned North American debut.

Buick, which was once a slight step below Cadillac in prestige, has countered Cadillac's edgy Art & Science styling with more rounded, voluptuous sheetmetal...like on the new Opel Insignia. In both styling and interior quality, the Insignia would have made a perfectly decent 2010 LaCrosse (or Invicta). And smaller Opels already are built as Buicks for the latter brand's biggest market, China.

Which connects with speculation in recent days that GM will finally rid itself of less-than-successful brands. Bloomberg has reported that GM may cut one or more, or even all, of Pontiac, Saturn, GMC, Saab and of course, Hummer. The New York Times reported Monday that one scenario has GM buying out its Saturn dealers, and combining the brand with its Pontiac-Buick-GMC dealerships. Saturn has the fewest dealers of GM's full-line brands, at 400, so that scenario makes some sense.

And it's easier for GM to close a brand in a consolidated dealership channel, an option it has as soon as all Pontiac, Buick and GMC dealers are one in the same.

While many Motor Trend readers may lament the end of the "excitement division," fact is, it's little more than "Chevrolet-plus," with a low-end joint venture Toyota and a top-range car sourced from Holden. It would be easy to get rid of Pontiac as well as GMC, and sell Saturns and Buicks in the same channel.

Saturn might even continue to have some overlap with lower-end Opel/Vauxhalls. The lineup would include a Chevy Cruze- (stretched Gamma platform) or Opel Astra-shared (Delta platform) compact, the Malibu-based midsize and a Sky replacement, perhaps based on GM's endangered Alpha small RWD platform. Buick would consist of an Insignia-based LaCrosse, the Enclave (which has proved the brand can be premium, again) and, I think, a large, low-volume slightly decontented Sigma-based RWD sedan with V-6 and diesel engines.

And What About Chrysler?

But I'm just dreaming. GM doesn't see much future in RWD cars, even if Chrysler does. Chrysler has announced that it can meet upcoming Corporate Average Fuel Economy standards with its 2011 Chrysler 300 and Dodge Charger.

That's assuming that cash-poor Chrysler LLC survives the next few months. As a privately owned company, it has more issues than Ford Motor or GM in dealing with the government scrutiny that comes with a portion of the $25-billion loan guarantee/bailout. One insider warns me not to count the GM-Chrysler thing as done, yet, though I'm very dubious. If those other rumors are true, even GM knows now that it needs fewer, not more, divisions.

In the white-hot crucible of the European mainstream market, products like the Ford Ka, Fiesta, Focus and Mondeo, and the Opel Agila, Corsa, Astra and Insignia hold their own against rivals from Germany, France, Italy, and -- yes -- Japan and Korea. More importantly, these Fords and GMs compete against VWs, Renaults, Fiats, Toyotas and Hyundais on style, performance, handling, efficiency, innovation, not price.

Both Ford and GM have been quick to move into emerging markets. GM has a 10 per cent share of the Chinese market -- second only to Volkswagen, the first western automaker to move into manufacturing in China -- and last year sold twice as many Buicks there as it did in the U.S. GM also has 20 percent of the Russian market, 22 percent of the Brazilian market, and last year its sales growth in India outstripped that of Hyundai. Before the global economic collapse emerging markets accounted for 35 percent of total GM sales, and helped boost total GM sales outside of North America to 65 percent of the company's total volume earlier this year.

Ford lags behind GM in China and India, but it was one of the first western automakers to invest in Russia, establishing an assembly plant near St. Petersburg in 1999. It now has 10 percent of the Russian market, selling more cars in a week than it did in a year when it started. Emerging markets now account for about 25 percent of Ford's global sales.

Before the bozos on Wall St. drove the world's economy off a cliff, both Ford and GM planned further significant investments in emerging markets. Here's why: In the U.S. there are more than 900 cars and personal use trucks already on the road for every 1000 people of driving age. In Europe, where cities are more densely packed, and there is a more effective public transport network, there are still more than 600 vehicles per 1000 people of driving age. But in Russia, that number is under 200, Brazil it's about 130, China 30, and India under ten.

With those four countries alone accounting for about 42 percent of the world's population, the growth potential is huge. Assuming the global economy gets back on track, China will soon surpass the U.S. as the world's largest auto market, and Russia will surpass Germany as Europe's largest within a few years. In Brazil, sales have been growing at the rate of 30 percent a year for the past two years.

Apart from the fact the Ford and GM experiences overseas suggests the senior management do know something about running an auto business, and the companies do know how to build competitive products, all this raises some interesting questions.

First, if Ford and GM can be competitive in other markets around the world, why not here in the U.S.? What special factors are preventing Ford and GM performing here more like they do in the rest of the world? Is it solely a problem with management? Unions? Product? Or is it a wider structural problem with the U.S. economy?

And then there's this: If they can survive the impact of the economic meltdown on their North American operations, Ford and GM currently look well positioned to profit from the explosive growth in demand for cars and trucks in emerging markets over the coming decade or so. So does it make sense to just let them die?

2007-2008 Acura TL Type-S -- The new for '09 TL is a technical advancement over the outgoing model. It offers a smidge more power, outstanding infotainment offerings, optional all-wheel drive, and more room in back. But it's so hideous-looking, I could never bring myself to buy one. The previous gen TL is just the opposite; one of the most attractive sedans on the market, and the Type-S is the performance version. At launch, we called it "A Japanese Alfa Romeo." Great V-6, good electronics (first car I ever tested with Bluetooth), and high quality. Shop now and you may still find a fresh one.

C5 Corvette Z06 -- Many Corvette guys I know have to have the latest and greatest. Now that the C6-series Z06 (and ZR-1) are in the marketplace, people are offing their previous gen Z06s. Sure, they have about the same horsepower as a base C6 -- but the price should be half or less. You have to be careful here; they are made to be run hard, and often are. And the first of them had some piston problems as I recall. But a lot of hardcore Vette types really care for their cars, and don't beat them to death. The newest of them is five years old now; find one that's lived a good life, and you'll have something special.

Volkswagen Phaeton -- The right car wearing the wrong badge. VW wanted to see how far upmarket it could take the brand in this country, and went one step too far. That takes nothing away from the greatness of the machine. They are fabulously engineered, looks the business, shared a lot of stuff with the Audi A8, and are fine driving cars. A bit of an odd duck as it came and went so fast, but its not an orphan as VW is still around, and will continue to be. If you want a top drawer luxury sedan for near econobox money, find a clean Phaeton, and enjoy flying first class for a coach fare.

2004-2008 Ford F-150 -- Even though fuel prices have halved in the last 90 days, the truck market is still chilly. Every time a new version of a high volume model, like the F-150, comes out, the latest-and-greatest crowd dumps their old ones. Between this phenom, and lots of lease turn-ins, means that a two, three, or four-year old F-150 can be a great deal if that's the vehicle you need. Bargain hard - there are many new choose from.

1990-2002 Mercedes-Benz SL-Class -- Even the newest of these falls well outside the three-year lease turn-in window, but they are superbly engineered machines. Although not a metal retractable hardtop, the SL's top is a one-touch unit. Engineered and built to high standards, these "Sacco era" SLs will run long miles without trouble. They don't have as many power goodies as the new ones, but they are great to drive, and still look good to many eyes, including mine. Get the latest, lowest mile example you can find, and it'll still be cheaper than a new four-banger Camry.

What's on your Great Deals list?