A Holden Commodore By Any Other Name Is a Chevy Caprice

News has surfaced that the Pontiac G8 (and hopefully the hot rod version) will live on as a Chevy Caprice. Having witnessed (and partaken) of many Caprices of yore, this'll be the best of the bunch. Good move GM!!

Penske Purchases Saturn

Saturn's future is secure. Roger Penske has purchased the brand.

In statements made to the press, Mr. Penske has outlined the product plan for Saturn. In the interim they will continue to utilize products manufactured by GM. Down the road they are open to branding and supporting products from other sources.

Penske has associations with Renault Samsung Motors, which makes a couple of cars that are inherently prior generation Nissan vehicles. That is one possibility. But I don't think that likely personally.

There's the possibility that the products will be sourced from Opel (if they get the sale of that group to Magna sorted out). Opel builds decent product and it would help them to have a market in the US. (Ask Fiat if it's good to be in the US market. ; -)

However, I'll go out on a limb and say that Saturn may go after a Chinese manufacturer (and there's still a lot of work to be done to make that a viable proposition).

The one thing for sure that will happen with Penske ownership of Saturn is that Saturn will be a good company offering good product and service. Nothing is done shabbily, it's the Penske way.

What's Next?

The decision by Justice Ginsburg to delay the sale of Chrysler to Fiat until further notice may mean a lot or may mean very little. The action taken today is merely a delay - possibly only for a day or so, in order to review the documentation, before deciding to hear or dismiss the appeal.

If that's what is intended, an effort to peer under the hood to see if anything is amiss before dismissing, then look for a decision before Saturday. For some reason 15 June 2009 is important (upon which Fiat's obligation to 'purchase' Chrysler expires. ; -)

If, in the next day or so, the Supreme Court declares that they will hear the appeal, the Fiat deal is gone. Arranging a marriage partner at that point will be difficult at best and the most that can be hoped for is the liquidation of Chrysler, the most valuable piece of which is the Jeep brand.

And if the court does decide to hear the appeal, what has to be done to ensure the GM bankruptcy doesn't suffer the same fate?

Spin, Spin, Spin

Reinvention? Why didn't they think about this - oh say - ten years ago? I was at a press preview of a redone Cavalier in 1999 when the brand manager said, "I don't have gasoline in my blood . . . " and you knew it was going to go downhill from there.

Well here's the spin from GM:



Go back twenty years and Maryann Keller's, "Rude Awakening" was published. Subtitled, "The Rise, Fall, and Struggle for Recovery of General Motors". Some things don't change evidently.

A Long Row to Hoe

Chrysler is said to be emerging from bankruptcy today to be swallowed by Fiat. This is a cashless transaction where Fiat converts equity in Fiat for the purchase price of Chrysler. And some folks will say, "swell".

GM enters bankruptcy today, ostensibly to clear the cancerous brands, Saturn, Pontiac, Opel/Vauxhall, Hummer, and Saab, from the books. The Canadian parts firm Magna has entered an agreement with the German government to purchase Opel (which saves Vauxhall). There has been a series of suitors for the Saturn brand (the brand NOT the products ; -) as well as the Hummer brand.

But, the road to recovery for both Chrysler and GM will be long and fraught with additional peril, especially while the economy continues to under perform. In the long run both will be mere shadows of their former selves.

GM Bondholder Agreement

The New York Times is reporting that GM bondholders have reached an agreement on restructuring their debt stake. Currently there are $27 billion in outstanding bonds. For that outstanding debt, the restructuring will offer a 10% equity stake in GM with an additional 15% available through warrants (a financial instrument allowing the holder to purchase stock at a later date for a 'fixed' price - hopefully the value of the stock goes up sufficiently to make the warrants valuable - much like a stock option).

Here's where the math gets interesting. There are about 600 million shares of GM stock outstanding, 10% of that is 60 million shares. The closing price for General Motors on 5/29 was $0.75. So without the future prospect of exercising warrants, the value of the 10% stake is about $45 million. Talk about a BAILOUT - GM wipes out $27 billion in debt for $45 million. And talk about taking a bath - the only way a bondholder could have gotten off worse would be to have invested in one of Madoff's schemes. ; -)

I'll say it again - if you have a company with a unionized work force, that may some day find itself asking this government for help, have fun trying to raise capital by issuing bonds.

GM Headed for Bankruptcy?

Bondholders have rejected the latest offer to restructure their debt in GM. Look for a similar conclusion to this as occurred to the Chrysler bondholders.

On the other hand the UAW settled for a much smaller stake (17.5%) in GM than the proposed 39% they were asking for.

GM: The News Isn't Good

Looking at a number of articles concerning GM over the past two days make it clear that things are not going as well as hoped. The notion that GM is going to abandon Detroit as it's headquarters is deeply disappointing. (GM has been ensconced in the Renaissance Center - previously a Ford building - for over 10 years.)

Detroit is fast becoming a third world city, abandoned commercial property and depressed home prices coupled with massive unemployment. And that's a real shame.

'Oh the Tangled Web We Weave . . .'

The NY Times is reporting that GM is seeking an equity stake in Fiat for the turnover of GM's Latin American and European operations.

So Fiat owns Chrysler and GM owns a big chunk of Fiat? Ho boy. ; -)

Another View of the Chrysler Bailout

From this Atlantic piece by Megan McArdle:

When the government gives money to favored constituencies--well, I don't like it, but as PJ O'Rourke says, that's basically what our government does. "It ought to be right there in the constitution: 'We the People, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and give money to jerks . . . ' " But when it starts stepping in and trying to bypass the bankruptcy rules in order to make someone else give money to jerks, that's different in magnitude, and in kind.

I concur. What we needed to do was let our legal system run its course (and it can be expedited if need be). Of course the other piece of this I didn't quote was the notion that the institutions that have received TARP funds (and who now find the rules for repaying those funds changing) are on the hook to do their masters' bidding.

What we don't want are extra-legal reaches and grabs for our money - remember who ends up paying for all of this. We now own, thanks to our taxdollars-at-work, Chrysler and GM - we must want them to succeed. But what control do we have?

GM's Penny Stock

Automotive News reports overnight that GM will issue sixty billion (60,000,000,000) new shares of stock that they'll parcel out to the bondholders, gummint, UAW and give out as tickets to be redeemed for prizes at Chuck E. Cheese (well maybe all of the above except the last ; -).

So how much will GM shares be worth this morning? They closed at $1.85 yesterday. GM's current market cap is $1.13B so it looks like they're expanding equity by about 100 times current. Definitely penny stock territory.

Hmmmmm, I'll need to double check calculations after a full dosage of coffee, but if you haven't dumped your GM stock yet - it may be too late.

Fiat's Ambition

Fiat, not long from financial ill health itself, seems to be intent on soaking up the marginal players in the current business cycle. They are intent on picking up GM's Europe holdings.

Frankly this is a bit troubling because neither Chrysler or GM Europe has made a profit recently. Will these two additions prove to be the 'gravitas' that propels Fiat to the forefront of automakers, or will they prove to be the Albatross around the neck that brings Fiat down?

I suspect the answer will depend on the type of recovery we see from the current recession. If it is a V-shaped or even U-shaped recovery, they may come out smelling like a rose. But if it is an L-shaped recovery, Fiat may wish it hadn't reached for an Opel or Dodge too far. ; -)

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.

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.

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.

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.

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.

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.

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.