And then there were two?

Phil Edmonston thinks Chrysler's days are numbered:

When it comes to predicting the future of the Detroit Three automakers, outspoken consumer car critic Phil Edmonston doesn't mince words:

Chrysler Group LLC "is doomed." General Motors, if it survives, will be ratcheted down to one brand -- probably Chevrolet, and Ford, "has a future, for the time being."

Edmonston's pessimistic outlook is included in his 2010 Lemon-Aid New Cars and Trucks guide, which has been a key reference for new vehicle buyers over the past four decades. A former NDP member of Parliament, Edmontson, 65, has been a thorn in the side of automakers -- domestic and foreign -- taking them to task and, in some cases, to court over substandard quality and mechanical defects.

As U.S. and Canadian automakers and dealers face bankruptcy and unprecedented downsizing, the task of buying a car has become more precarious than ever, said Edmontson.

"These are treacherous and challenging times," Edmonston said in a phone interview from his home in Panama. Especially if you're considering buying a vehicle from a GM or Chrysler dealer, he warned.

"Chrysler buyers face huge risk of becoming orphan buyers," Edmonston said. The Auburn Hills, Mich., automaker -- which received billions in U.S. and Canadian bailout funds -- has no hope of long-term survival despite its partnership with Italian auto giant Fiat SpA.

"Chrysler hitching its wagon (and minivans) to Fiat will be like two drunks propping each other up," he said. "Both of them have inherent quality problems, and Fiat cannot 'Fiatize' Chrysler because you're looking at different platforms, different cultures.

From the Vancouver Sun.

A couple of auto industry stories

As we know, Ford is the only American automaker that didn't need a bailout. Why might that be? Well, maybe it's because they don't suck:

DETROIT -- Ford Motor Co. has secured its position as the only domestic automaker with world-class reliability, according to a report released last week by Consumer Reports.

The findings for the trusted magazine's 2009 Annual Car Reliability Survey are from 1.4 million consumer surveys combined with its own performance testing.

Of the 51 Ford, Mercury and Lincoln cars and trucks surveyed by Consumer Reports, 90 per cent were average or better.

The Ford Fusion and Mercury Milan midsized sedans ranked higher than any other family sedan, except for the Toyota Prius hybrid car.

That's noteworthy because the Ford Fusion, which is the 10th best-selling vehicle in America so far this year, outperformed the better-selling Toyota Camry (No. 2) and Honda Accord (No. 4).

Interesting; so much for "found on road dead". Maybe GM and Chrysler are being held back by their unions... Oh, wait. Our friends on the Kitco and iTulip boards will be a bit nonplussed by that, but maybe there's another reason? Like, say, that the management at GM and Chrysler don't know what the hell they're doing, while those at Ford do?

But there's good news for Wilmington, Delaware, whose GM plant closed this year. Fisker Automotive is buying the plant to build electric cars:

NEW YORK -- Electric-car start-up Fisker Automotive said Tuesday that it will invest nearly $200 million to buy and retool a former General Motors plant in Wilmington, Del., facing off against Honda Motor Co., Toyota Motor Corp. and other big manufacturers in the nascent market for electric vehicles.

Topped off by an appearance from U.S. Vice-President Joe Biden at the plant in Delaware, Fisker Automotive said it hopes to support 2,000 factory jobs and more than 3,000 vendor and supplier jobs by 2014 at the site, with a production target of 75,000 to 100,000 vehicles per year.

The Irvine, Calif.-based company will spend about $18 million to buy the plant from Motors Liquidation Co. and then spend an additional $175 million to retool the plant to begin production in 2012. "This is a major step toward establishing America as a leader of advanced vehicle technology," said Henrik Fisker, the firm's chief executive.

Fisker Automotive received $529 million in government-loan guarantees in September to develop plug-in vehicles, after breaking into the business as the maker of a luxurious, $80,000 electric car with a range of up to 483 kilometres. That car, called the Karma, is expected to go on sale in 2010.

Given the need to reduce our greenhouse emissions, this could be the best news of all in the long run, if the cars work as advertised. I am curious, though, as to whether Fisker will hire laid off workers from the plant, or if they'll hire kids straight out of school? The former would probably be better for the community, but it remains to be seen whether Fisker will choose that route. After all, many companies don't like to hire people who have worked for other companies in the same industry. The Toyota plant in Cambridge has a reputation for this, for instance. I suppose this could be rationalized in terms of differing corporate cultures, and preferring to train a worker who is, relatively speaking, a tabula rasa than one who's already habituated to a different corporate culture. I suspect, though, that these companies' real fear is that people who have worked in a unionized environment might have traits that they might not want in their company -- like, say, knowing what their rights are.

And speaking of car crashes...

... or rather, car manufacturer crashes:

NEW YORK (Dow Jones)--Credit markets weathered an uneasy Wednesday punctuated by word that beleaguered General Motors Corp. (GM) won't make a scheduled $1 billion interest payment.

From the Wall Street Journal, via Sapiens in this iTulip thread. More details here.

So what does this mean? Bankruptcy seems almost certain now; and they've announced that they're closing their US plants for 9 weeks this summer. Meanwhile, Ford seems to be doing a lot better:

April 22 (Bloomberg) -- Ford Motor Co. rose 13 percent in New York trading after Goldman, Sachs & Co. advised buying the shares, citing likely bankruptcy filings for General Motors Corp. and Chrysler LLC.

Ford will gain U.S. market share from GM and Chrysler, and the stock may climb 58 percent to $6 within 6 months, Patrick Archambault, a New York-based analyst, wrote in a research report. Goldman previously had a “neutral” rating on the second-largest U.S. automaker.

“The stage is set for a sea change in the structure of the U.S. auto industry,” Archambault wrote. “We do not foresee bankruptcy at Ford, which we believe has sufficient liquidity to make it through to 2010 without additional funding.”

As for Chrysler, the question is probably better not asked. Ford may well end up being the last US automaker standing. If nothing else, there might be some huge bargains on houses in Windsor, St. Catharines, and Oshawa pretty soon...

More economic chaos...

More trials and tribulations in the US auto industry:

Chrysler LLC may be sending a message to President Barack Obama’s autos task force by saying the “best option” for survival is a merger with General Motors Corp. that both sides have labeled dead.

Chrysler, propped up like GM with federal aid, is suggesting a new appraisal of a tie-up in hopes that the auto panel meeting for the first time today might force a “shotgun marriage,” said Brian Johnson, a Barclays Capital analyst in Chicago.

“I can’t imagine GM doing that without being forced into it by the government, but that’s a possibility,” said Kimberly Rodriguez, a principal at consulting firm Grant Thornton LLP in Southfield, Michigan.

Obama’s task force will start reviewing $21.6 billion in new loan requests that include Chrysler’s comment on the advantages of a GM combination. GM, the biggest U.S. automaker, abandoned merger talks in November and said it is focused on its own survival, not hooking up with No. 3 Chrysler.

From Bloomberg. Meanwhile, other big industries aren't much better off:

New York Times Co., the third-largest U.S. newspaper publisher, will stop paying a dividend for the first time in its 40-year history as a public company.

The publisher said in a statement today it suspended its quarterly dividend of 6 cents a share to help reduce debt, three months after slashing the payout. It joins McClatchy Co., owner of the Sacramento Bee, and Media General Inc. in halting dividends.

The suspension will save New York Times about $34.5 million annually, based on shares outstanding. The publisher is cutting jobs and selling assets as advertising dwindles. It’s seeking buyers for its stake in the Boston Red Sox baseball team and is in talks about a sale-leaseback on its Manhattan headquarters.

“It’s going to be very challenging for them to generate much free cash flow even after this cut,” said Mike Simonton, a credit analyst at Fitch Ratings. “It’s certainly a prudent move to preserve liquidity in light of the difficult credit market and their heavy debt burden.”

From Bloomberg once again. I guess companies at all levels are slashing their advertising budgets, which is bad news for commercial media. It's happening in Canada too:

Leonard Asper is scrambling to secure a financial lifeline for CanWest Global Communications Corp. before the end of the month to prevent his family-run media empire from sliding into bankruptcy protection.

Yet even if he is successful, the price of that lifeline could be steep. Some potential investors - including Fairfax Financial Holdings Ltd.- want to take control of CanWest away from the Asper family in exchange for any cash infusion.

At least one investor weighing a proposal said it would insist that Mr. Asper step aside as chief executive officer and that he and his siblings eliminate the dual-class share structure that gives them control of the company, according to sources familiar with the matter.

Officials at some of CanWest's main creditors believe that if the company cannot find access to hundreds of millions of dollars in new credit within the next few weeks, it could be forced to seek protection from lenders and restructure under the Companies' Creditors Arrangement Act. CanWest, which owes $3.9-billion, and its primary adviser, RBC Dominion Securities, have approached numerous institutional investors to gauge their interest in a deal.

The response from potential backers has been lukewarm, not merely because of CanWest's economic woes brought on by the recession, but because several creditors are jockeying for protection in any restructuring process.

CanWest's borrowing capacity was put on a tighter leash this month when a senior credit facility was cut back to $112-million from $300-million by Bank of Nova Scotia. The new limit is about $20-million above what CanWest has already drawn.

From the Globe and Mail. Can't say I'm shedding too many tears for the Asper family, and in any case I don't think they're going to end up living at the Main Street Project or anything. On the other hand, it would be a shame if Manitoba's second largest city were to lose its only TV station:

Another local Canadian television station has been tossed on the auction block, and could be shut down if a buyer isn't found by next month, signalling major changes in the broadcasting industry.

This time it's CTV Television Inc. that's putting CKX-TV Brandon in western Manitoba up for sale, while warning that it will pull the plug on the station if another broadcaster doesn't fork over the sufficient cash.

The announcement follows a decision by Canwest Global Communications Corp. to place five of its local E! network stations on the market after eroding advertising sales dashed its profits.

"Whether we like it or not, we are seeing the beginning of the end for small market TV stations in Canada," said Kaan Yigit, an media analyst at Solutions Research Group in an e-mail.

"They are costly to run and maintain and were having difficulty providing a decent return on investment even in good times."

From the London Free Press. I'd like to see some local media co-op form and buy the station, but I wouldn't bet on that happening.

GM, Chrysler buy a bit of time

How much is a matter of debate, though:

U.S. automakers are calling on the government to provide even more funding to ensure the survival of General Motors Corp. and Chrysler LLC.

General Motors on Tuesday said it could need up to $30 billion from the U.S. Treasury Department to continue operating.

Included in that amount is $13.4 billion the company has already received. Previously, GM had said it could need as much as $18 billion.

GM said it could run out of money by March without the new funds from the government.

From the CBC. So they're staving off bankruptcy for the time being, though they're cutting things to the bone. For instance, check out what's happening at GM:

A total 26,000 of the cuts will come from outside the U.S. as GM downsizes its global operations. It is not yet clear what the impact will be in Canada. The cuts are expected to be made by the end of 2009.

The company may be eliminating its Hummer brand and said it will make a final decision by March 31.

GM is also considering selling its Pontiac and Saab brands and the Saturn brand is being phased out, officials said. The Saturn plant will remain in operation until the end of its current life cycle in 2011, officials said.

The changes will see GM focusing its efforts on Chevrolet, Cadillac, GMC and Buick.

Kind of a shame about Saturn actually; I kind of liked some of their lineup (though Phil Edmonston and others question their quality control). I know my friends in Waterloo who are on their third Saturn will be disappointed. Saab might well get taken over by the Swedish government (which wouldn't be a bad outcome actually). As for Hummer, good riddance. Meanwhile, at Chrysler they're doing the same:

It plans to cut 3,000 jobs and three models — the PT Cruiser, Dodge Durango and Chrysler Aspen — as part of its restructuring plan. None of Chrysler's job cuts are expected to impact its Canadian operations.

No great loss lineup-wise, though it's a bit of a surprise that the PT Cruiser is on the list given the number of the things I see on the streets. Maybe sales have fallen off more dramatically than other vehicles in their lineup, or maybe they never sold as well in their core markets as they have in Canada.

Speaking of the PT Cruiser, one of my disreputable friends once told me she had an idea to get a black PT Cruiser and tell people it was a hearse for midgets. Her original idea was to say it was a hearse for babies, but she figured that would annoy too many people.

On a clear day you can see General Motors...

...spiralling inexorably earthwards:

General Motors Corp [GM-N], nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition.

"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."

Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.

GM declined to comment, the story said.

From the Globe and Mail. Of course, talk of bankruptcy might be simply another tactic to scare the government into handing them more bailout money, but it's noteworthy that Ford has not yet asked for money. But then, Ford's product line of late has been better than GM's, especially in Europe (a lot of people lament the fact that the European version of the Focus isn't sold on this side of the pond).

Even if GM files for Chapter 11, the company might continue running, though that would likely render their contracts with the UAW null and void... not a good situation if you've been working for them for 25 years and were hoping to retire on your pension. But consider this comment to the story:

Allan VCR from Vancouver, Canada writes: Best Option;
Chapter 11 for GM & Chapter 7 for Chrysler

Chapter 7, of course, means liquidation. It's possible under such circumstances for some divisions (e.g. Jeep) to be sold off as units and thus stay open, but the effect of this would still be dramatic, to say the least. And this sounds decidedly plausible; I bet the folks at Cerberus are kicking themselves for buying it, at least.

Thing is, though, the car industry is going to have to shrink, whether we like it or not; we can't afford the energy that goes in or the pollution that comes out. Too bad, but as Ray from Trailer Park Boys would say, "That's the fuckin' way she goes."

Auto industry bailout has a catch...

... the employees lose their right to strike:

Provisions of General Motors' and Chrysler's US$17.4-billion in federal loans automatically places them in default if union workers go on strike.

A General Motors Corp. filing this week with the U.S. Securities and Exchange Commission detailed the provision as part of its $13.4 billion in federal loans.

From the Winnipeg Free Press. I wonder if the loans will automatically be placed in default if executives are paid bonuses? Somehow I doubt it...

11th hour salvation for automakers?

Maybe:

It would be "irresponsible" to hurt the economy by letting the Detroit Big Three automakers fall, a White House spokeswoman said Friday following the Senate's rejection of a massive auto industry bailout.

Speaking to reporters aboard Air Force One, press secretary Dana Perino said the White House is considering using money from the $700-billion US Wall Street rescue fund to support the domestic automakers.

Perino said the administration would not typically make such a move, but said the White House would consider the option due to the economic distress confronting the United States.

"While the federal government may need to step in to prevent an immediate failure, the auto companies, their labour unions and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable," Perino said.

From the CBC. Whether this will help in the long run is hard to say; some are saying it's too late for GM. One thing is clear, though, the unions are getting a disproportionate amount of the blame for the automakers' troubles. For instance, ever hear that "$73 an hour" figure, about how much money the auto workers supposedly make? Well, it's misleading to say the least, according to no less authority than the New York Times:

Seventy-three dollars an hour.

That figure — repeated on television and in newspapers as the average pay of a Big Three autoworker — has become a big symbol in the fight over what should happen to Detroit. To critics, it is a neat encapsulation of everything that’s wrong with bloated car companies and their entitled workers.

To the Big Three’s defenders, meanwhile, the number has become proof positive that autoworkers are being unfairly blamed for Detroit’s decline. “We’ve heard this garbage about 73 bucks an hour,” Senator Bob Casey, a Pennsylvania Democrat, said last week. “It’s a total lie. I think some people have perpetrated that deliberately, in a calculated way, to mislead the American people about what we’re doing here.”

So what is the reality behind the number? Detroit’s defenders are right that the number is basically wrong. Big Three workers aren’t making anything close to $73 an hour (which would translate to about $150,000 a year).

But the defenders are not right to suggest, as many have, that Detroit has solved its wage problem. General Motors, Ford and Chrysler workers make significantly more than their counterparts at Toyota, Honda and Nissan plants in this country. Last year’s concessions by the United Automobile Workers, which mostly apply to new workers, will not change that anytime soon.

And yet the main problem facing Detroit, overwhelmingly, is not the pay gap. That’s unfortunate because fixing the pay gap would be fairly straightforward.

The real problem is that many people don’t want to buy the cars that Detroit makes. Fixing this problem won’t be nearly so easy.

Get it? It's not because the Detroit Three are being bled dry by the unions. It's because too many of their cars suck.

But now for some good news. Not all vehicle manufacturers are doing badly:

New Flyer Industries has racked up more than $1 billion in orders over the last three months, driven by the recent spike in fuel prices and concerns about the economy.

It is the first time the Winnipeg bus maker has reached the $1-billion sales milestone during a quarter. The value of its order backlog has ballooned by 50 per cent this year.

The company said Thursday it is further evidence of the recession-resistant nature of the business.

Glen Asham, New Flyer's CEO, said the strong sales are a result of increased ridership throughout North America, spurred on at the beginning of the year by sky-high fuel prices and more recently by economic concerns.

"I would suggest the current recessionary environment we are in is causing people to watch their cash flow," Asham said.

The largest of the new orders was from the Chicago Transit Authority (CTA) which is purchasing up to 900 60-foot diesel-electric hybrid buses. Since 2002, CTA has ordered a total of 1,258 buses from New Flyer.

From the Winnipeg Free Press. Let's hope this last trend continues; maybe New Flyer could buy up some of those shuttered auto plants in southern Ontario and put some of the people back to work making vehicles for the 21st century rather than for the 20th.