Here's An Economy Car the 'New' GM Might Be Interested In

One of the fears of government ownership of a car company is that we'll get 'government' cars (cars the government thinks we need).

Well to give you a glimpse of what that may look like, let's take a peek at the Lane Motor Museum's Peel Trident. (Video is a bit longish at seven minutes.)



Jeff Lane has to be commended for taking that out on Murfreesboro Road in Nashville. The Lane Motor Museum is worth a stop if you're in Nashville.

The 'Greedy' Speak

Found on The Business Insider, a communication from the non-TARP debt holders of Chrysler.

The TARP bondholders have some incentive for going along with what the gummint *ahem* suggests. Those debt holders that aren't on the public dole, however, have been frozen out of negotiations regarding debt relief for Chrysler. I especially find these lines informative from their communique:

As of last night’s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country’s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.

[SNIP]

Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars.

Greedy indeed - they end up losing. And the rule of law is being subverted in this process.

The Hypocrisy of Government

This irks me to no end. Gov. Granholm said the following regarding Chrysler bondholders, "On behalf of Michigan, on behalf of the thousands of people who will be affected if this company is forced into bankruptcy, I am publicly asking these hedge funds to not be greedy but to do what the banks have done and what everyone else around the table has done -- take the concessions,"

That's pure political horse manure! The bondholders have loaned money to Chrysler with conditions. They expect some repayment and if they aren't satisfied with thirty cents on the dollar they have a right to force it through bankruptcy to see if they can receive more. They are taking a loss regardless, they CANNOT be faulted for trying to minimize the loss.

If you loan $1,000 to your brother-in-law and he tells you he won't pay back the principal, let alone the interest, and then accuses you of being greedy when you ask for as much of the principal back as possible, you'd have a right to take him to small claims court.

But that won't stop politicians from railing against greed (don't ask them to give up any of the contributions they've received from greedy 'capitalists' though ;-).

Not so Fast!

Well - there may be a fly in the ointment of the Chrysler deal. Those pesky bondholders have turned down the offer from Chrysler to relieve the debt burden. Expect a bankruptcy to unshackle the debt. Then will the Fiat deal still be in place? Stay tuned . . . another episode of this soap opera is sure to happen.

This first came to my attention from Calculated Risk. Seeking Alpha has this story on the potential bankruptcy too. Hat tip to both!

Also read this for an interesting view of what happens if Fiat gets Chrysler.

The Consumation of Chrysler

Well - what a turn of events. While GM is slowly being whittled away into what is hoped to be a sustainable company, Chrysler appears to be off the hook.

They're not really. Word is out that the UAW has approved contract concessions for Chrysler and Fiat has agreed to manage Chrysler (and Fiat still isn't taking on Chrysler debt, AFAIK). What exactly is going on?

Well, it may be best summarized as the invasion of the pod people, Italian style. Basically, Fiat is getting a husk of a company (or the infrastructure of an industrial company) with which it can mold its, Fiat's, reentry into the US market. Fiat will displace the current CEO, Bob Nardelli with a CEO of their own (and who knows what will happen to Jim Press).

What Fiat gets is the ability to build, service and sell Fiats, Alfa Romeos, (and please, please Fiat, bring in Lancias) in the US using the existing structure Chrysler has in place. Expect few if any Chrysler models to survive beyond 2011, possibly some Dodge product will survive, and Jeep should be left pretty much intact (with some of the weaker Jeep product, such as the Compass, going away).

This is a completely different outcome than expected for GM, it basically appears that the US government had enough sense to own only one auto maker. ; -)

The Incredible Shrinking GM

GM held a press conference yesterday morning where Fritz Henderson discussed portions of the latest restructuring plan. As expected Pontiac will be dropped as a brand and the demise of Saturn will be accelerated.

That leaves four brands in the US; Chevrolet, Buick, GMC, and Cadillac. Chevrolet is a full line brand while the Buick, Cadillac, GMC brands together represent a full line of vehicles.

GM also announced that they intend to shrink the number of dealerships from over 6,000 now to around 3,600 in a couple of years. That is a costly proposition.

Discussion of exactly who will own GM ensued. Turns out about 50% will be owned by the government, and 39% by the union (technically the union's VEBA - Voluntary Employee Beneficiary Association). The bondholders are not happy - holders of $1,000 bonds are being asked to accept 225 shares of GM stock for their $1,000 loan. That's not much left at ~ $2.00 per share. Plus they'll not have much of an equity stake (around 10% of the total equity), which means little say in the direction of the company. And yet there is currently $27 Billion worth of outstanding bonds.

Also discussed were the future of Opel and Vauxhall (the venerated English brand that shares Opel platforms). Chevrolet is not a good replacement for Vauxhall or Opel since those brands occupy a higher rung on the status ladder than Chevy.

The Holden company was also talked about. Holden is GM's Australian arm that produces the Pontiac G8 and the last iteration of the GTO. The G8 has received great press and the GTO was one of the best cars GM produced. It had a great chassis, a Corvette motor, and the best interior to date for a GM car. A 2006 GTO can be had at a great price and if you want a rumbly V8 there are very few cars as good as the Holden developed Pontiac GTO.

Reports of UAW Accord with Chrysler

Now Automotive News is reporting that the UAW has reached an agreement with Chrysler, Fiat and the US government regarding contract concessions. We'll have to see if it's too little. too late.

Anyone Need Machine Tools?

This doesn't look good. According to this article, on Seeking Alpha, there are reports from the German press that Fiat will pick up Opel. The machinations around the bailout and potential Chrysler bankruptcy had to have been a factor.

Chrysler will probably end up in liquidation.

A Glimmer of Hope for Chrysler

The Detroit News has a story up saying that the Chrysler and the Canadian Auto Workers (CAW) have reached on an agreement on concessions. That provides a small glimmer of hope that Chrysler may be able to survive.

Meanwhile, back at Rancho Fiat, Fiat has been working on a 'Plan B' in case the Chrysler deal comes to naught. Word is they've been talking to GM regarding picking up Opel.

In the grand scheme of things we'll have the biggies, VW, Toyota, Fiat, Ford, and a whole bunch of also rans and boutique brands.

Pontiac: the Next to Go

Motorauthority has this on the demise of Pontiac.

Pontiac as a brand evolved from the Oakland brand in the late 1920s. Through much of its life it has a been a step up rung on GMs ladder of brands. In the 1960s Pontiac stole the performance halo from sister brand Oldsmobile with the GTO (for which John Z. DeLorean gets too much credit).

The brand was very successful in the 1990s with Grand Am and Grand Prix models. They were never all that good as drivers but they appealed to buyers looking for something visually splashy with a high tech image. Pontiac has had a split grille front end actually longer than BMW.

Speaking of BMW, Bob Lutz, who was an executive at BMW during his long career, was hoping to bring that cachet to Pontiac. The problem was that buyers of Pontiac didn't necessarily want a car with the driving dynamics of a BMW as much as they wanted a car festooned with the cladding and chintz that appealed to them. Pontiac had a decently sized audience for its products but in migrating towards RWD and less conspicuous styling they may have alienated their potential customers.

My favorite Pontiac, besides the odd duck SOHC inline six Firebird, was the 1935 coupe, a hot rod version shown here.

Standard Plug Agreed to for Plug-In Hybrids

One of the first things needed to build an infrastructure to refuel electric vehicles is some sort of standard plug-in and voltage ceiling. Motorauthority had the story up this morning.

Imagine if the nozzles to dispense gasoline, and the openings to accept gasoline in the car, came in different shapes and sizes. Fords would have to have a separate set of pumps from Toyotas, for instance.

There are an amazing amount of standard configurations for automobiles. Some driven by international standards bodies, some by government and many by the Society of Automotive Engineers.

If you ever want a good lesson on why standards are good, arrange to drive a Model T. ; -)

What the announcement of a standard plug configuration means to me, is that we will start seeing a lot of plug-in vehicles within the next five years.

More On Chrysler

This WSJ article points out issues with the debt to equity swap purposed for Chrysler's bondholders. The current administration believes that the banks holding debt are receiving more value than they should (in other words, they've attempted to minimize their loses in this case. ; -)

If the banks in question are receiving TARP funds and the automaker in question is receiving government loans also, how much say does the government have in the process? Could the demands of the administration block a potentially hopeful resolution of Chrysler's situation? Stay tuned . . .

More On GM

Here's a link to a good post on the issues facing GM if a decision is made to go to bankruptcy court. Basically, with all of the claimants and parties involved it would be messy regardless of any desire to do a 'quick turnaround'.

Of note is the fact that bondholders (basically people that have loaned money to GM with the hope of seeing it returned with interest) stand to lose substantially. One approach to this is to convert the bond value to equity. In other words, a bondholder becomes a stockholder (and that's something they didn't want to do in the first place.)

Also the union has to look out for the interest of their workers and their benefits. Wages may be negotiable, hopefully work rules will be negotiable, but pension and medical benefits are likely to cause the most angst.

It won't be pretty or easy and the judge assigned the case should be on the top of their game.

We are a long way from being out of the woods.

A Polite Rant

I put up a more vicious version of this - but took it down soon after.

There is too much government intervention in what should better be left to markets. The opportunity to fiddle with product in the reconstituted GM (or Chrysler) will just create cars that people won't buy. Especially at current fuel prices.

Further, the announcement of spending billions on high speed rail is a money losing proposition. Building passenger rail service has been a losing proposition in this country since the advent of jet air service. Sorry, but building trains that people won't ride is not a good use of public funds.

I get the feeling that the current administration resembles nothing as much as it does an undergraduate liberal arts college student council.

Personal Outsourcing

Why didn't I think of this! ; -)


More American Workers Outsourcing Own Jobs Overseas

That Certain Sound of a Ferrari Boxer 12

The Ferrari 312 'boxer' 12 cylinder engine. GMP has built a 1/6 scale model of the engine complete with a mounting base and 'soundtrack'. (Available amongst other places at the Motorsport Collector in Downers Grove, IL.) A bit hokey but for some the 312 Grand Prix and sports racers from Ferrari were the pinnacle of that marque.



Now a friend of mine, Cody, who happens to be a machinist extraordinaire, is building a 312 engine model from scratch (basically). Can't wait to see the finished product.

Fast Recharge Batteries

Toshiba announced it's 90 second recharge SCiB lithium batteries. Well . . . there goes the third leg of the puzzle; performance, range and now rate-of-refueling.

This battery technology in the Tesla Model S sedan and fathers will still be able to drive far enough to stretch their kids bladders and then rush them through bathroom breaks while they 'gas' up. Restores my faith in the electric car. ; -)

From MotorAuthority

Jim the Realtor

I love this stuff - it reminds me that I should be glad that I am in the mid-west. :-)



From Jim the Realtor's blog, bubbleinfo.com

Chrysler

It's looking less and less like Chrysler will make it. Fiat is saying that if both the UAW and CAW (Canadian Auto Workers) don't accept significant pay cuts they will pull out of the proposed merger.

I don't believe this is going to happen.

Update to F1 Follies

The disputed diffusers are pronounced legal by the FIA (International Federation of the Automobile, the governing body for motorsports) Court of Appeals. That means a number of teams have to scramble to catch up.

And quite possibly this season may be over already, with the Brawn team having a HUGE advantage, since restrictions on testing may preclude anyone from being able to incorporate new aerodynamics at the rear of the car. Keep in mind that change to the rear diffuser will necessitate changes to the aerodynamics in the front.

F1 Follies

We are two races into the F1 season and the winner of both races, Brawn, may be stripped of those wins if a ruling on the legality of their rear diffuser goes against them.

Then, if that weren't enough silliness to deal with, there is talk that the current F1 Champion, Lewis Hamilton, and the team he drives for, McLaren-Mercedes, may face more penalties and potentially be tossed from the lineup for the rest of the season. That coming from an incident at the end of the Australian GP where Lewis Hamilton's veracity under questioning regarding the incident was found wanting.

NASCAR used to be the arbitrary, over-officious, types but I think the F1 folks are taking them to school. ;-)

Read more @ http://www.pitpass.com/

Bailout Update

GM is being told by the US Treasury Dept to prepare a bankruptcy plan by June 1. Look for a two GM concept where the 'good' GM goes through one track and the 'toxic' GM goes through another. Saturn and Hummer would be the causalities.

The Chrysler - Fiat deal is making some news this morning also. Seems Fiat may be in the running for a larger Chrysler ownership stake (it was to have been significantly less than 50%) and in a position to put in a new board of directors and a management team.

Pirates!

Information Dissemination is a must read for me. And it rarely disappoints. Here is a very smart take on the piracy problem off the coast of Somalia.

Another View of the GM CEO Defenestration

When Rick Wagoner was forced out of GM by the Obama administration, my take was that when you went to the public trough for funding you have to accept their rules. And I stand by that. However, the politics involved (on all sides) are significantly more complicated.

This article from Wards Automotive highlights some of the back story.

Hat tip, Bob Storck.

More Flu Blogging

I hope to shake this bug soon, but one of the ATR guys forwarded this. An F-Production Lotus Seven tearing up Hallett last weekend (IIRC). The Lotus Seven first appeared in 1957 and has been going strong in various guises since.

Real Estate Follies

One of the great things about the mid-west is that so far we haven't seen the dramatic highs and lows of real estate prices. Yes houses are tending to stay on the market longer, but no great crashes in values or stratospheric pricing for basic housing.

Jim the Realtor has been posting videos, most with a wry wit, about the housing market in the San Diego area. Here's his website, BubbleInfo, and here's a sample of his video work.

Flu Blogging

I owe you a history of GM and I'd like to share a Jeep story. But until I shake the bug I'll go light on the posting . . .

So as an interregnum:

Kansas City Metro Saturn Dealerships Close

The three metro area Saturn dealerships in Kansas City have closed, eventually to reopen as used car dealerships.

Here's a link to the story found in the Kansas City Star.

Look for more of these types of announcements as hard choices are made by retailers in the near future.

Brief History of Chrysler Motors

Chrysler is the newest of the old line American 'Big 3' car companies. Chrysler cars hit the market in 1925 built in the Maxwell Motors facilities that Walter P. Chrysler had purchased four years earlier.

Walter P. Chrysler got his start in the railroad business as a machinist and mechanic in Kansas. He later ran Buick and when William C. Durant captured GM (for the second time), Chrysler tendered his resignation. Durant offered him an unprecedented salary and Chrysler was smart enough to accept it.

When he quit GM a few years later he was hired to fix Willys-Overland (for another unprecedented salary) which gave him the wherewithal to purchase Maxwell. Chrysler gave the company's product his name and later added Plymouth and De Soto to the product portfolio.

The Dodge Brothers concern floundered after the death of Horace and John; Chrylser purchased it in 1928. Shortly thereafter Dodge Brothers cars became simply Dodge cars.

Chrysler was known for engineering prowess (first mass produced four wheel hydraulic brakes) and in the mid-1930's was in second place in sales for US car manufacturers.

It moved through the late 1950s and into the early 1970s on the strength of the 'Hemi' engine and muscle cars. But by the end of the 1970s Chrysler needed government guarantees to obtain loans. Enter Lee Iacocca as CEO, and pitchman extraordinare, with the old salt, "If you can find a better car, buy it."

Chrysler survived on the strength of K cars and eventually one of the single most significant vehicles to ever exist, the minivan. (And the story of the minivan's origin is worthy of a novel. The short of it is that Ford originated the idea but didn't follow through.)

In the late 1980s Chrysler acquired the terminally ill American Motors, and quickly (and quietly) disposed of everything but the Jeep brand (and that was the reason American Motors was purchased). Along the way Chrysler picked up Bob Lutz and the Dodge Viper and Plymouth Prowler emerged.

Then Daimler-Benz pulled off a hostile takeover in the guise of a merger and that wasn't pretty for all concerned. (That chapter of Chrysler's history is well documented in the book, 'Taken for a Ride', by Vlasic & Stertz.)

But recently Chrysler has been lost in the wilderness, with wrong and uncompetitive product. In the end, Fiat is interested in the manufacturing capacity of Chrysler (and possibly the Jeep brand name). But if the government insists that Fiat absorb some or all of Chrysler's debt, look for the deal to fall through.

The last thing of any significant value in Chrysler is the Jeep name, and that brand's roots go back to Willys-Overland and without Walter P. Chrysler's ministrations in the early 1920s it wouldn't be there now to tempt a potential savior.

Lazy Days

Every now and then the pile of books by the den chair threaten to overwhelm. It's in times like those that a man has to put his head down and start reading. :-)

I'll be back with a short history of Chrysler tomorrow AM.

Steam Land Speed Record

The land speed record for a steam powered car hasn't been broken in over 100 years. It's currently held by a purpose built Stanley steamer and the record was set in 1906. (On Ormond Beach, Florida.)

Well the Brits are at the Land Speed business again and hope to eclipse the record of 127 mph by going 170 mph. There's some interesting technology involved, but if you've ever been around steam cars from the turn of the last century you will come away with an understanding of why gasoline engined cars prevailed.

So far they've taken baby steps, shaking down components, before going wide open throttle. They've had the beast up to 80 mph, less than half design speed.

Now I wonder if they can run a steam car on the salt flats? ;-)

The group is 'The British Steam Car Challenge' and their Web page is here.

Hat tip to Motor Authority.

What Could Possibly Go Wrong?

Experts Agree Giant, Razor-Clawed Bioengineered Crabs Pose No Threat

From 'The Onion'

The Tale of Two GMs

There has been talk of GM splitting into two entities and proceeding through bankruptcy. The two will be viable GM and GM junk. Expect Chevy, Buick, Cadillac to show up in the 'viable GM" and Saturn and Hummer to show up in 'junk GM'.

What's that? Where is Pontiac, Opel, Saab, and GMC? Well Pontiac may be a set of four or so models sold in Buick/Cadillac dealerships. Think of Pontiac's meagre offerings (the Solstice, Solstice Coupe, G8, and possibly one other vehicle) as being affordable 'sporty' alternatives to the Buick line in the showroom. Cadillac will retain its luxury/sport role.

GMC is pretty much badge engineered Chevy trucks and that grand old name may come to an end (though a set of pickups with GMC labels may live to round out the Buick/Cadillac dealerships' lineup).

Opel and Saab have been abandoned unfortunately. GM did make pretty good use of some Opel platforms through the years in the US. The Saturn L was very good car - if you can get past the plain jane interior.

But GM never did a good job integrating and using the goodwill of the Saab brand. Saab has the same type of buyer as Subaru (but a more affluent buyer). It's a shame because both companies have had rich heritages.

Steve McQueen vs Lewis Hamilton?

Well the FIA has gotten heavy into 'fixing' the F1 championship after just the first race of the season. They've disqualified Lewis Hamilton retroactively from the Australian GP. He loses the points for third (6), now restored to Jarno Trulli. So the hypocrisy (or, 'beat McLaren at all costs') has started. For the record I'm a Robert Kubica fan and he drives a BMW (so do I, but much differently than Robert does. ;-)

So where does Steve McQueen fit in all of this? Well I headed out to a site that I get to from time to time, Speedhunters, and they have this video embedded. It's a commercial (of course) from TAG Heuer, a Swiss watch maker. But what the heck it has Lewis Hamilton added into sequences from McQueen's movie, 'Le Mans'. Enjoy!

Tesla Model S Sedan

Tesla unveiled its Model S sedan recently. It's well styled (reminiscent of a Maserati Quattroporte) and seats up to seven (though how you'd squeeze them in is another matter). But the performance and range of the car are the real stand out features.

I still believe we have a ways to go before electric vehicles can be used for the 'family vacation'. (In light duty use, like city cars, electrics do have a role to play.) But Tesla's Model S may be the closest an electric car has come yet to providing the performance and range of an internal combustion (IC) vehicle.

The Tesla S is claimed to do 0-60 mph in 5.6 seconds (VERY quick for a family sedan) and, with an optional battery package, has a range of 300 miles before needing to be recharged.

Rate of recharging is another matter however, with the fastest recharging scenario, DC quick-charged, taking 45 minutes. Plan meals along the way rather than just a 'restroom break then grab-a-snack and go' type stops.

Still two out of three concerns met for electrics isn't bad. The three keys to the viability of electric cars are; performance, range, and rate-of-refueling.

Tesla press release on the Model S here.

Image via Tesla Motors

AIG and GM's Viability

This is surreal. Basically AIG has government guarantees that its CDSs will be worth face value at the end of the day and that includes some holders of GM bonds who also hold CDS hedges on those bonds. If GM goes belly-up then those holders of CDS hedges for GM bonds get all their money invested in GM bonds back. So why then would those GM bondholders want to exchange bonds for stock? Sheesh - talk about the left hand not knowing what the right is doing. ;-)

Hat tip to The Business Insider.

I Love April 1

And not just for the previously mentioned reason. Now comes word that we will finally get Squeez Bacon!!

The WSJ Opinion on the UAW and the Bailouts

What's the old saying about breakfast, the chicken is involved but the pig is committed? ;-)

The Wall Street Journal weighs in on their perception of the UAW's level of sacrifice in the bailout. If what they say is true, then we are just kicking the can down the road towards failure. Let's hope the President's team meant something significant when they cited the need for work rules change.

More On the Automakers Bailout

Some additional items appeared in the Determination of Viability Summary for both Chrysler and GM. One was an emphasis on small cars. Yes, at the moment, Americans are buying small cars. But if the price of gasoline stabilizes at the current levels for a period of 24 to 36 months, then Americans will quickly revert to buying large vehicles.

There is just something about bigness and the American market for cars. I can't explain it - I have always driven small cars. But anyone that believes that Americans will willingly emulate European tastes in automobiles is either not conversant with Americans' buying habits or knows something that we don't. (At what price will gasoline be set at using taxation? ;-)

One glimpse of reality did shine through though when the Chevy Volt was mentioned. The Volt will not save GM, and they had the sense to understand that. Good well appointed cars like the Malibu and decent well built affordable small cars like the Cobalt will. Small and midsize SUVs and decent trucks will save GM. And continuing to make the Buick name a star in the Chinese market will save GM (Buick is big in China).

As far as Chrysler is concerned, Fiat might be able to save Chrysler. Will Fiat be willing to do that?

Special Day

April Fools Day is special in our house. It's our wedding anniversary; 26 years ago today. When I proposed we couldn't think of a more appropriate day to get married on (and in 1983 it was Good Friday to boot!).

Thank you dear for putting up with me for so long - my parents wouldn't have. ; -)