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Filed under: Government/Legal , Chrysler, LLC. , Ford , GM , Earnings/Financials There have been so many different arguments for why The Detroit 3 should or shouldn't get a bailout that we could make a casserole out of them. One argument against a bailout -- or at least, a reason for the futility of a bailout -- that we don't recall hearing yet is "vehicle density." The argument is put forth by Anthony Mirhaydari at MSN Finance. Basically, he says that with 981 cars per 1,000 people of driving age in America and new cars being sold faster than used ones are taken out of service, there simply isn't enough room for U.S. auto makers to sustain the volume of sales necessary to avoid factory closures and layoffs. As an argument against the bailout, though, we find it tenuous. No one is saying that Ford, GM and Chrysler won't need to cut a lot of fat whether or not they get bailed out. But the bailout is to aid the survival of the companies at all, not to prevent layoffs...
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Filed under: Government/Legal , Chrysler, LLC. , Ford , GM , Earnings/Financials Mitt Romney, former Massachusetts governor, former entrant in the marathon to win the White House, and current automotive industry expert (who knew?) had a few things to say in the New York Times today on the potential auto industry bailout. The opening paragraph says it all: "IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed." Romney is not rooting for the end of the biz, but he believes that bankruptcy is the only way to save it because it will force a reset, and that will be the only way for the Detroit 3 to rectify entrenched structural problems. These include UAW contracts -- "a new direction for the UAW," executive perks -- "sanity in salary and perks," getting rid of old blood -- "management...
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Filed under: Government/Legal , Chrysler, LLC. , Ford , GM , Earnings/Financials So here's a breakdown of what's going on in Congress concerning federal aid for U.S. automakers. A Senate bill expected to be voted on this Thursday would expedite funds for Ford, GM and Chrysler so that they could actually get the cash they need within 22 days after the bill becomes law -- should the bill become law. The $25 billion loan, paid back at an initial rate of 5-percent, would come out of the $700 billion bailout fund for financial institutions. The Senate's stipulations would be that the government receives "stock warrants or senior debt instruments to the government," similar to actions taken with banks that accessed the $700 billion. As well, top executives get no big payouts and stockholders get no dividends. The rumblings on the track indicate that unless the folks in favor can change a lot of minds before Thursday, the Senate bill has little hope of passing. That makes...
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Filed under: Hirings/Firings/Layoffs , Chrysler, LLC. , Earnings/Financials Executive bonuses are a hot-button issue in these difficult economic times, and for good reason. As companies in every industry teeter on the brink of bankruptcy, paying out millions in bonuses to execs is a breach of trust to those white- and blue-collar workers in the cheap seats who are being asked to sacrifice benefits, retirement security and even their jobs to keep a company solvent. The Detroit Free Press recently discovered that Chrysler LLC has an executive bonus plan in place that will cost the automaker about $30 million at the same time it's asking Congress for federal aid money to keep the lights on. Chrysler's executive vice president for human resources, Nancy Rae, who herself is on the receiving end of $1.6 million in bonus money, tells the Freep these bonuses were designed to keep executives in place after the automaker was sold by Daimler to private equity firm Cerberus. She goes on to...
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Filed under: Government/Legal , Hirings/Firings/Layoffs , Chrysler, LLC. , Hyundai , Jeep , Nissan , Earnings/Financials , Renault , Rumormill On the same day that General Motors announced that it would be discontinuing talks with Cerberus over a possible purchase of Chrysler, news hits by way of Reuters that a new suitor has sprung up. Wow, that didn't take long. The latest partner is none other than Hyundai, Korea's largest automaker. Not surprisingly, it's the Jeep brand that is again taking center stage according to these initial rumors. Everybody wants Jeep, it seems. If true, the possibility of breaking Chrysler's automotive operations into bits and pieces once again seems like a distinct possibility. What's more, after acknowledging that GM is abandoning talks of a "strategic acquisition," Chrysler's Bob Nardelli may now be back on the phone with Carlos Ghosn, head of the Nissan/Renault juggernaut, along with, presumably, anybody else that's...
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Filed under: Government/Legal , Chrysler, LLC. , GM , Earnings/Financials In the latest development of The Incomprehensible Union, General Motors is reportedly asking the U.S. government for $10 billion -- on top of the $25 billion loan approved recently -- to help it merge with Chrysler. The supplemental infusion would give the government, i.e. you and me, a stake in the merged company in the form of preferred stock, would see the government taking over pension obligations and provide a credit line for operations. The government is weighing the request since it's likely that no federal official wants to be on the watch that saw the instantaneous vaporizing of two American icons and hundreds of thousands of jobs. The government has asked that as many jobs as possible be spared, and GM said "Sure!" Yet for a merger where cost savings and redundancy elimination have been the headlines, we don't know why anyone believes GM-Chrysler wouldn't jettison a whole bunch of the...
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Filed under: Government/Legal , Hirings/Firings/Layoffs , Chrysler, LLC. , GM , Earnings/Financials , UAW/Unions General Motors and Cerberus reportedly want to act as quickly as possible if they are going to make a move on Chrysler. It seems that the two bargainers would like to come to a decision before the upcoming Presidential elections, as they believe they may get more promises from either candidate before the actual vote takes place. A potential problem exists though, as General Motors is finding it tough to come up with the cash needed to make a deal happen and banks aren't about the lend it to them. An alternative option that's being considered is getting government backing for the deal. Though it sounded hard to believe when we first heard the GM/Chrysler merger rumors, it truly appears that these talks are taking place at a very high level and the deal could indeed be on its way to. We'll just need to pay close attention in the next few weeks to the reactions from...
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Filed under: Chrysler, LLC. , GM , Earnings/Financials It's been a crazy few days as news broke that Chrysler and General Motors have been in talks to combine operations . It turns out that there's a pretty significant back-story to these proceedings, and it involves Cerberus Capital Management's possible desire to shed its car-building operations and acquire the rest of GMAC, of which it already holds a controlling stake of 51%, with GM holding holding the other 49%. According to reports, Cerberus would like to combine Chrysler Financial with GMAC, which would allow it to merge the offices of the two financial institutions and reduce costs. All right, that might make some sense, but what about merging the two automakers? That's the part that seems so confusing to analysts and us meager bloggers. Somehow, we feel certain that there's more to this story, which we'll be hearing about for some time. [Source: The Detroit News ] Read | Permalink | Email this | Comments
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Filed under: Government/Legal , Chrysler, LLC. , Ford , GM , Earnings/Financials No matter how you slice it, a proposed $25 billion loan from the Feds is a bailout, and that's exactly what Detroit's Big Three automakers are after, according to a report by the Wall Street Journal. Lobbyists for General Motors, Chrysler and Ford have met with White House officials, Rep. John Dingell and a smattering of Michigan Democrats to discuss the loan, with plans to unveil the proposal after Labor Day. The plan includes lending $25 billion to automakers in its first year at an interest rate of 4.5 percent (about one-third of what the companies are currently paying), with the government having the option to defer any payment for up to five years. Details are scarce, and naturally, GM, Ford and Chrysler reps aren't saying much, but if the automakers and the Feds are serious, expect more information to leak out before the proposal is officially announced. [Source: WSJ , Photo by Tracy O | CC2...
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Filed under: Plants/Manufacturing , Chrysler, LLC. , Earnings/Financials In an effort to cut down on travel and energy costs, Chrysler is said to be in negotiations with the United Auto Workers Union to switch from five, eight-hour days down to four days with ten-hour shifts. We first heard this scheme mentioned as a possibility for the Jeep Factory in Toledo, Ohio, though it now appears as if all but the few plants turning in high amounts of overtime would be affected if the UAW agrees to allow Chrysler to make the scheduling change. As is typical with the new Cerberus-owned automaker, the Chrylser LLC isn't giving out any information on specific savings targets, though preliminary figures put the reduction at something close to -- but under -- $10 million a year. The new shifts are already underway at a Chrysler distribution center in Atlanta, Georgia. [Source: Automotive News - sub. req'd] Read | Permalink | Email this | Comments
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Filed under: Chrysler, LLC. , Earnings/Financials It's up and down, but nowhere near out for Chrysler, LLC. The Big Three's smallest sibling says that it's ahead of internal estimates and has posted earnings in excess of one billion for the first half of '08. True, the company also posted a $510 million loss in Q1 according to minority shareholder Daimler. And since Chrysler is privately held, it doesn't need to tell anyone whether these earnings put it in the red or black. But whatever's on the books was good enough to convince lenders to grant Chrysler's financial arm a $24 billion line of credit. Said a Chrysler spokesman, the money will be used to "support our dealers and their retail customers." The pentastar just got out of the leasing business , so the influx of credit will keep the financial arm doing what it needs to do as all those remaining lease vehicles come back with empty tanks and bottomed-out residuals. And believe it or not, those...
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Filed under: Car Buying , SUVs , Chrysler, LLC. , Dodge , Jeep , Earnings/Financials The automotive sales sector is in a major state of flux as consumers continue to run from SUVs and pickup trucks into smaller, more fuel efficient cars. One manufacturer hit especially hard by this transition is Chrysler, a company that recently posted the worst fleet average fuel economy numbers of all major automakers in the U.S. due to its truck-heavy lineup. Still, the automaker has built up a large supply of Chrysler, Dodge and Jeep utility vehicles that they have got to get off dealer lots somehow. To ease consumers into the fuel-thirsy utes, Chrysler has introduced new incentives of zero-percent financing for 72 months on the 2008 Dodge Durango, Chrysler Aspen and Jeep Grand Cherokee and Commander. While the lack of any financing charges will certainly impact the bottom line, it is nothing compared to the losses the automaker has been hit with over its past lease deals. In fact, truck and SUV residuals...
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Filed under: Car Buying , Chrysler, LLC. , Earnings/Financials Chrysler LLC's financial division will no longer be offering leases to U.S. consumers on Chrysler products as of August 1st. The automaker will be holding a conference call with dealers later today to go over the changes and the reasons behind the decisions, but Chrysler spokesperson, Bill Porter, told Reuters "We are shifting our strategy to focus on retail products." The move comes amidst Chrysler's attempt to get 20 banks to renew a $30 billion credit facility for the automaker's financial arm. The rise in borrowing costs next month will make it more difficult for Chrysler to offer low-interest loans and could spell further disasters on the sales front. Thanks to all who tipped in. [Source: Reuters , WSJ ] Read | Permalink | Email this | Comments
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Filed under: Chrysler, LLC. , GM , Earnings/Financials Despite recent rumblings to the contrary, both General Motors and Chrysler claim that they will not be going bankrupt any time soon. Still, as much as the two American automakers would love to quell fears of unsustainable liquidity, questions remain, especially as the pickup market in the United States continues to dwindle. In a note sent out to dealers, Chrysler's Jim Press and Steven Landry say that the automaker will focus its efforts on small cars for the rest of this year, though the current pickings from the automaker's stable seem a bit slim. Chrysler is surely banking on its alliances to bolster its line of small car offerings, which could help to dampen the blow of lost truck profits -- somewhat. General Motors , for its part, has invested heavily into its upcoming Delta platform vehicles, which will include a compact Chevrolet-branded car known as the Cruze as well as the Chevy Volt electric vehicle. [Source: Automotive...
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Filed under: Trends , Minivans/MPVs , SUVs , Hirings/Firings/Layoffs , Plants/Manufacturing , Chrysler, LLC. , Dodge , Jeep , Earnings/Financials Click above high-res gallery of the 2008 Dodge Grand Caravan SXT Now that General Motors and Ford have completely abandoned the minivan market for good, the American originator of the species faces only Honda, Toyota, Nissan, Kia and soon Volkswagen as manufacturers that also offer competitive choices. Perhaps you'd think that Chrysler would be benefiting as the only domestic automaker currently playing in the segment, but it seems that sales are down this year by 13 percent for the Chrysler Town and Country while the Dodge Grand Caravan is down an alarming 35 percent. High gas prices are the obvious reason why the minivan market is seeing such a harsh downward trend, and likely the culprit behind Chrysler's impending move to idle its St. Louis South minivan plant as early as December, which would leave some 1,500 employees jobless. Utility...
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