As noted back on 9/21, auto sales were in the tank after the “cash for clunkers” program stopped. Individuals in the auto sales noted the drop off was back to early spring sales numbers.  Now we know just how bad sales were…

General Motors Corp. says sales fell 45 percent from a year earlier. Chrysler Group LLC says sales slid 42 percent. Ford Motor Co. was down 5.1 percent, breaking a two-month streak of gains.

Cash for Clunkers created a false demand, GM and Chrysler continue to circle the drain, and it will only continue as there are no drivers (no pun intended) for the market to turn.

Several days back I caught wind of this story but did not get around to reading about it.  On 8/19/2009 Chrysler, the ailing U.S. auto manufacturer, said that it was dropping their lifetime powertrain warranty, replacing it with a 5 year / 100,000 mile guarantee.

Now this is going to seem odd – guess why they are cutting the lifetime warranty? Consumers do not want a lifetime warranty!

Chrysler spokesman Rick Deneau said the decision was driven by market research that showed consumers prefer warranties with a fixed time period. Powertrain warranties typically cover repair or replacement of transmission and engine parts.

What?

Chrysler is trying to tell us that consumers only want a warranty that is for a set limited time.  Does this make sense to anyone? You don’t happen to think this is a cost savings measure on the part of Chrysler, especially when you factor in how poor Chrysler’s quality is over a long period of time, do you?

Once I get past the performance requirements I have in a vehicle, the very next thing I am looking at is the warranty. A 5 year / 100,000 mile powertrain warranty is an automatic “no purchase” in my book simply because I hear “this car will pall apart on year 5, day 1”.

Just another step in Chrysler’s move towards automotive obscurity.

On Monday Supreme Court Justice Ruth Bader Ginsburg put the future of the Fiat/Chrysler purchase in doubt by issuing a stay on the sale. Three Indiana pension funds are suing, claiming the bankruptcy is unfair to lenders such as themselves, while favoring other lenders who took less risk. Unfortunately for Chrysler, they had until June 15^th to complete the sale or Fiat could walk away.

Today, however, Fiat is sticking to their guns.

Italian automaker Fiat said Tuesday it will not turn its back on a deal to acquire a controlling stake in Chrysler despite a U.S. Supreme Court stay on the sale.

Under terms of the agreement, Fiat has the option to abandon the deal if it is not completed by June 15.

“Fiat won’t walk away from Chrysler,” Fiat spokesman Gualberto Ranieri said.

If Fiat does walk away, then Chrysler will have basically no choice to liquidate. While Fiat seems committed to the purchase, at this point, anything is possible.

UPDATE: Supreme Court will not block the sale.

The June 1st, government imposed, deadline for a General Motors restructuring or bankruptcy filing is less than a week away and the situation is looking grim. While the company was able to work out agreements with the United Auto Workers and the Canadian Auto Workers unions that would allow cuts to wages and health care cost, the big unknown at this point are the bond holders.

GM set an internal deadline of 5/26/09 to reach an agreement on debt restructuring.  No news has yet hit the wires of this effort, but can one take the “no news is good news” approach in this situation?  I don’t know. Based on the details floating around the press, the bond holders would give up a lot in order to keep GM out of bankruptcy. Their stake would be reduced to 10% of the company – from their current 40%.  That is a massive loss.  Furthermore, if the proposed deal does gain approval the government would be a 50% owner in the new company.

But what if a restructuring deal cannot be reached, then what?

A number of groups would be hit if the company slides into bankruptcy.  One has to figure that all shareholder equity would be wiped out.  You know that stock that is virtually worthless now?  It will be completely worthless if bankruptcy takes place.

Employees and dealerships may be placed in difficult position where they have no options – they could be out of jobs, the locations closed down – where as before bankruptcy they may have options to be bought out or able to have some flexibility in retaining their position(s).

Suppliers would not only face the process of filing claims against the bankrupt company, they may face bankruptcy themselves.  Companies such as Lear, American Axle, TWR, and Dana all may face difficulty due to the loss of revenue and outstanding debt.

General Motors themselves may also fall victim to bankruptcy.  Will customers start moving away from purchasing their products (well, more than they have) if bankruptcy takes place?  Fiat is concerned about Chrysler’s financial deterioration since the company went belly up, would the same thing happen to GM? Would the business fundamentals fall off yet another cliff?

Ironically, bankruptcy may be the best option for the bond holders as they stand to obtain more money and potentially more ownership in a new company, assuming a new company is organized, than simply letting the government come in and have their way with the company.

I’ve argued for some time that General Motors and GMAC need to be left to their own devices or simply die.  Years and years of poor management decisions will come to a head, one way or another, in the next two weeks. While it would send a very poor signal if the Government simply allowed the company to restructure while screwing the bond holders, I fear this will be the patch chosen – even if General Motors goes into bankruptcy.

The outsourcing of all things manufacturing from the United States to China is now, virtually, complete. All things from clothing to electronics have been produced in China and shipped to the mighty consumer, the U.S., for years now. Wasn’t it a matter of time before the same was true for automobiles?

Both General Motors and Chrysler are looking to cut cost in just about every way possible. The major focus in the press has been labor. You know, the whole “how can an American car manufacturer stay competitive if it costs $123 per hour to build a car in the US, but a German manufacturer can assemble a car for $4.35 per our in Mexico” thing… (yea, numbers are pulled right from my armpit, thank you.)

While having no specific information to cite, I would make the assumption this has not happened in the past due to a number of factors, the biggest being Union Contracts and trade agreements. The economic chaos experienced by the United States in the fall of 2008 and Early 2009 seems to have changed all of that.

General Motors plans to sell cars in the United States that it makes in China, starting in 2011. That could make GM the first major automaker to import Chinese cars to the US market.

The carmaker expects to sell about 17,335 of the China-made vehicles in the US in 2011, and triple that number to 51,546 in 2014, a planning document circulated by GM among US lawmakers showed.

The gains would come, the document says, as GM’s total US sales surge 50 per cent in the next five years.

The plans are subject to change pending the outcome of negotiations with United Auto Workers (UAW).

Put aside any anti-China business emotions for a moment. To me, this very concept seems to make business sense. If the company had the ability to manufacturer a quality product at a lower cost, why wouldn’t GM or Chrysler make such a move? Isn’t such flexibility the key to survival in business?

One can make the argument that such a move will place American workers on the unemployment line, and they very well may be correct in saying so, but where does the responsibility of the company sit? Is it to the line worker or is it to the survival of the company?

I would also look at the importing of American branded, Chinese manufacture cars, as a test balloon for Chinese manufactures. If the U.S. consumer is willing to purchase a U.S car produced in China, why wouldn’t the U.S. consumer be willing to purchase a Chinese car produced in China?

I think this whole situation is opening up a wide rage possibilities for the Chinese manufacturing sector. Even more than may have existed today…

Being out of it for the last 24 hours (or there about) means that I’ve missed a few things in the world of business.  Well, in the world in general as well.  

Anyway, there are a number of things that caught my eye as I went over the headlines for the last day.

Chrysler Dealers: ‘They Turned Their Back On Us’ 

You knew it was just a matter of time before the dealers/dealerships that fell victim to the Chrysler cuts started to speak up.  It didn’t take long, actually.  Something along the lines of 12 hours…

“I had to notify just around 50 people today that our business has been terminated, that they no longer have a job,” said Kevin Ormes, owner of the dealership. 

Ormes got a courtesy call on Thursday morning delivering the news, and he’s angry. 

“Over the past months, they’ve begged us to buy vehicles, they’ve begged us to do everything for them and when it came time to do something for the dealers that basically invested everything that they have, they’ve turned their back on us,” he told CBS 2. 

I actually feel quite sorry for Ormes.  The dealers who stuck with Chrysler, who ended up buying stock when Chrysler needed – but their dealership may not have – are not left in the dark.

Too bad for the dealerships that Chrysler went into bankruptcy. That move allows the company to void contracts (with the approval of a judge), leaving the dealer network virtually hostage to whatever decisions Chrysler made in the name of rightsizing.

G.M. Notifying 1,100 Dealers That They Will Be Dropped

And just as expected, General Motors did the same – the notified and additional 1,100 dealerships they were no longer needed in the GM family.

What I find interesting about the latest news is the input provided by the National Automobile Dealers Association.

The National Automobile Dealers Association estimated that the G.M dealerships being dropped employ 63,000 people, and that 40,000 work at the Chrysler stores being closed. Thousands more jobs are at stake in the later phases of G.M.’s dealer cutbacks.

There are another 100K jobs that will be looking for employment.

Empire State Manufacturing Survey: Conditions worsened modestly in May

The much watched Empire State Manufacturing Survey data was released on Friday, and wouldn’t you know it, conditions continued to decline.  

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers worsened only modestly in May. Although negative, the general business conditions index rose 10 points to -4.6, its highest level since August of last year. The new orders index fell several points and remained below zero, while the shipments index inched into positive territory. The inventories index remained negative, but rose from last month’s record low. Price indexes also continued to be negative, with the prices received index falling 10 points to a record low. Employment indexes indicated further contraction in employment levels and in the average workweek. Future indexes improved substantially for a second consecutive month; the future general business conditions index rose 11 points to its highest level since September.

Business news is now reaching what I would call the “good bad news” cycle. People are now taking bad news and are trying to make it look good by saying “it wasn’t as bad as the last report”.  

Contraction is contraction.  Wake me up when growth actually starts.

Signs that the consumer is hurting, Credit Card Defaults Reach Record Highs in April

For most of this recession cycle, the news has focused on the business community.  How banks are not making a profit, how retailers are overstocked with inventory, how homebuilders are unable to sell.  

Well, the signs that the consumer is actually hurting can now be seen.

Take a look:

Default rates (per credit card issuing bank)

• Citibank – 10.21
• Wells Fargo – 10.03
• JP Morgan – 8.07
• Discover – 8.26

As unemployment continues to rise, it would be safe to expect the above numbers to continue climbing.

Chrysler came out today and said they are closing down roughly 25% of their dealerships as a condition of their recent Bankruptcy filing, and they want to do this by June 9th. The obvious reason given – the identified dealership are under performing.

Chrysler said its dealer network “needs to be reduced and reconfigured in a targeted manner to strengthen the network and dealer profitability and to achieve optimal results for the dealers and consumers.”

Here is the interesting, seemingly little know, fact that the press seems to be overlooking with this news. Dealerships do NOT cost Chrysler anything. Each individual dealership is an independently owned and operated franchise. So, while it may be underperforming, there is no negative cash impact to the parent company (Chrysler).

If I owned a dealership – regardless if my location was being closed down – I would take this as a sign of distrust by the parent company. Why? Only three months ago Chrysler urged their entire dealership network to buy more cars, specifically 15,000 more cars.

Chrysler executives in the US are making their second sales plea to dealers in two weeks, urging them today to order 15,000 more cars by Monday to keep the company viable.

“You have two choices,” said Chrysler co-President Jim Press. “You can either help us or burn us all down.”

Just imagine what it would feel like to be one of the dealers who went out, purchased more cars than they could sell (yes, it is a stupid business choice) but did so out of loyalty and belief in the company. I’m guessing these individuals feel betrayed, and I would be looking for the lawsuits to start shortly.

This news won’t only be limited to Chrysler. No, no. Expect General Motors to shut roughly a third of their deal network by the end of 2010.

GM, facing a U.S. government-imposed deadline of June 1 to restructure or file for bankruptcy, is expected to send termination notices to up to 2,000 dealers — a third of its roughly 6,000 U.S. dealers, the sources told Reuters.

All this doom and gloom aside, it is about time GM and Chrysler shut down their under performers. Both companies overextended and over saturated the market place, which lead to customer cannibalism. That said, it is rather sad that they are doing this as a cost cutting measure when, in the end, it will not help their short of mid-term bottom lines.

Happy May to everyone.  Once again, time seems to be whipping by as the month of May just seemed to pop up on me.  Ok, time for some random thoughts.  

Trying to get back into the swing

For about a week now I’ve been trying to get back into the swing of things, but I’ve had a little – if any – luck with this.  I’m massively behind on my RSS reading (yes, I hate that), I haven’t had any energy to cook (I’m so sorry, yeswecook.com) and there is plenty I have to take care of at the office.  Basically, I feel a bit behind.

I’m going to try to use this weekend, once again, to get back into a pattern of reading/posting/cooking.  I hope to be successful at this one.

The Orb’s New Album

A few months back I posted a bit of exciting news about The Orb, they have a new album coming out this July title “Baghdad Batteries”.  Well, thanks to Resident Advisor we now have access to the tracklisting:

1. Styrofoam Meltdown
2. Chocolate Fingers
3. Baghdad Batteries
4. Raven’s Reprise
5. Dolly Unit
6. Super Soakers
7. Suburban Smog
8. Orban Tumbleweed
9. Pebbles
10. Woodlarking
11. OOPA

What I really like about this album is the Thomas Fehlmann addition.  I really like the minimal aspect he adds to Orb work. 

The Prodigy Tours North America

For you North American Prodigy fans, you’ll have a chance to see them once again.  The Prodigy will be stateside in the month of May on a mini-tour in order to promote “Invaders Must Die”

Let me just say this… DON’T GO.  The Prodigy, by far, is the worst live performance I’ve ever had the chance to see stateside.  Sure, they pack every venue in the rest of the world – I’m sure they will do so here – but their show is surprisingly uninspiring.  They have the whole “rock star” mentality just doesn’t seem to fit here any longer and cannot be justified by their work (any longer).

Let’s face it, they are a shell of who they used to be. Unless you have a desire to relive the old days, I strongly suggest you pass on the show.

The Rookie

I’m sitting here typing with “The Rookie” on in the background.  The feel good story about a man who makes it to the majors as a 38 year old relief pitcher.  I don’t have a review to write… just impressed how strong the emotion in the movie is.

Fiat is the new Chrysler

As I am sure you know by this point, Chrysler is now in bankruptcy.  Funny thing is you wouldn’t know that from reading their press release. They decied to focus the first portion of their “news” on a partnership with Fiat.

By partnership I mean that Fiat will buy the majority of Chrysler assets.  Oh, yea, that and the company gets an additional 8 Billion from the government to go into bankruptcy.  Funny how that works, isn’t it?

Here is what I would like to know, it’s the two questions that I’ve consistently asked:

1)If Cerberus, Chrysler’s parent company, is not willing to put any more money into the company why – WHY – should the the government?  The parent company obviously sees no value in the Chrysler brand(s), why should anyone continue to support it?

2)The second Daimler Group saw how bad the brand was they ditched, took a loss, and went on with life. What is Fiat thinking?  Are they looking at this as an opportunity to gain a foothold in the U.S. market?  Are they looking for the intellectual property the company has?  Are looking to suffer like those that came before them?

I don’t care what anyone says, this will not end well.  People must adjust to the fact that this brand (except for the Jeep assets) need to fade into history.

Ok, I’m off…

For the next several days I will have conversations with others only to reply in this manner – “What do you mean they found the killer of JFK?”  

Sure, I won’t be saying the exact words but the reaction key.  There will be huge news – be it in business, entertainment, politics – and I will have completely missed it has my head was – and firmly remains planted in – my world of work.

One story I did not miss, well, due to an email alert to my phone was this: Chrysler could file bankruptcy next week 

The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, people with direct knowledge of the action said Thursday.

The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

Moreover, Fiat of Italy would complete its alliance with Chrysler while the company is under bankruptcy protection.

Or this

GM to shut down 13 plants for over 9 weeks.

 General Motors’ decision to shut down 13 assembly plants for up to 11 weeks this summer will disrupt far more than the lives of nearly 24,000 workers, rippling out to damage part suppliers, local businesses and state economies. 

The Detroit automaker had little choice. GM, surviving on $13.4 billion in federal loans, must steady itself, slash costs and align production levels with the shrunken demand if it wants to live much longer. The announcement Thursday comes as GM races the government’s June 1 deadline to squeeze deeper concessions from bondholders and the United Auto Workers union. 

In this case, the issue isn’t debt – per se.  They are shutting down plants because no one wants their product.  They have enough old/overstock to last for four months or longer.

Chrysler and GM get ready for the hard(er) times.

Even thought it is spring, I sit here and look outside and the sky have a fall feel to it.  I would also expect to see people walking around with cider, going to Halloween festivals, planning for Thanksgiving and the like… but it’s not.  

I’m sitting here having the stew that I made the other day, the smell of cinnamon faintly in the air, all of which helps bolster the feeling of autumn.  I’m shocked to say the stew tastes FANTASTIC today.  That is to say, this is a dish that actually tastes amazing after sitting for a day or so. 

Technical aspects of the site.

Yesterday evening, one of my reader asked that I add a subscription feature to the comments on the site.  This is something I’ve wanted to do for some time but for some reason the plugin I install malfunctions.  

What happens is this…

The plugin ends up placing the “subscription” option at random places on the post page and it changes each time I attempt to active the plugin.  I am not sure if this is a problem with the plugin OR with the template I am currently using. Oddly enough, this behavior takes place no matter what template I use which would make me think there is an issue with the framework I’m using.

I’m attempting to resolve this issue so please hold tight as I try to figure this out.

GM, Chrysler and the Government

With Wagoner out at GM, it looks like the Government is laying down the law…. and the funding that will be provided is VERY limited.

Obama, flanked by several administration officials at the White House, announced a short-term infusion of cash for the firms, and said it could be the last for one or both.

Chrysler, judged by the administration as too small to survive, got 30 days’ worth of funds to complete a partnership with Fiat SpA, the Italian manufacturer, or some other automaker.

GM got assurances of 60 days’ worth of federal financing to try and revise its turnaround plan under new management with heavy government participation. That would involve concessions from its union workers and bondholders. The administration engineered the ouster of longtime CEO Rick Wagoner over the weekend, an indication of its deep involvement in an industry that once stood as a symbol of American capitalism.

First, I am surprised by the announcement because it now appears the government is pushing automakers toward bankruptcy.  In my mind I had expected some negative news on Chrysler today, and while 30 days of funding is not at lot, it’s more than I had expected. The big surprise for me was that General Motors only obtained 60 days of funding.

Last evening, I made the statement the government actions were socialist. I stand by those claims.  Now the U.S. government is providing warranty coverage for GM and Chrysler products.  The American Automotive makers are, essentially, under government control.  

The “One A Day” pill to cut the risk of heart issues?

I am very skeptical of Big Pharma.  As more evidence come to the surface, it is becoming clear  drug companies are more concerned with creating drugs that help their own bottom line – not helping people address their medical issues.

So, please understand how view this story with skepticism:

The experimental combo pill was as effective as nearly all of its components taken alone, with no greater side effects, a major study found. Taking it could cut a person’s risk of heart disease and stroke roughly in half, the study concludes.

The approach needs far more testing — as well as approval from theFood and Drug Administration, something that could take years — but it could make heart disease prevention much more common and more effective, doctors say.

How much will this cost?

$17 a month.