Chrysler Today...GM Tomorrow?

The Bush legacy just keeps giving and giving...
A question...does the United States need to produce cars in today's world?
TMT
Chrysler will file for Chapter 11 bankruptcy By STEPHEN MANNING and TOM KRISHER, Associated Press Writers Stephen Manning And Tom Krisher, Associated Press Writers
WASHINGTON ? Chrysler will file for bankruptcy after talks with a small group of creditors crumbled just a day before a government deadline for the automaker to come up with a restructuring plan, President Barack Obama said Thursday.
The Obama administration said it had long hoped to stave off bankruptcy for the nation's third largest automaker, but it became clear that a holdout group wouldn't budge on proposals to reduce Chrysler's $6.9 billion in secured debt. Clearing those debts was a needed step for Chrysler to restructure by the Thursday deadline.
Chrysler will file for Chapter 11 bankruptcy protection in New York, giving Chrysler time to galvanize a partnership with the Italian car maker Fiat Group SpA. The government, which has already poured $4 billion in loans into Chrysler, would provide up to $8 billion more to carry the company through bankruptcy, said senior administration officials speaking on condition of anonymity. The government will also help appoint a new board of directors.
The deals give Chrysler "a new lease on life," President Barack Obama said.
"This is not a sign of weakness," he said. "I have eery confidence that Chrysler will emerge from this process stronger and more competitive."
Under bankruptcy, Chrysler would still sell cars and the government would back its auto warranties.
The officials, speaking on condition of anonymity because the terms of the bankruptcy had not yet been released, said there would be no job losses or plant closing due to the Chapter 11. But it will be up to Fiat and Chrysler to decide whether to restructure the steadily shrinking company.
Obama said Chrysler Financial, the arm of the company that makes loans to buyers and to dealers to finance their inventories, will be merged into GMAC Financial Services, once General Motors Corp.'s finance arm. The new GMAC will get government support.
The Treasury Department's auto task force has been racing in the past week to clear the major hurdles that prevented Chrysler from coming up with a viable plan to survive the economic crisis ravaging nation's automakers.
Along with the Fiat deal, the United Auto Workers ratified a cost- cutting pact Wednesday night.
Treasury reached a deal earlier this week with four banks that hold the majority of Chrysler's debt in return for $2 billion in cash.
But the administration said about 40 hedge funds that hold roughly 30 percent of that debt also needed to sign on for the deal to go through. Those creditors said the proposal was unfair and they were holding out for a better deal.
A person briefed on Wednesday night's events said the Treasury Department and the four banks tried to persuade the hedge funds to take a sweetened deal of $2.25 billion in cash. But in the end, this person said most thought they could recover more if Chrysler went into bankruptcy and some of its assets were sold to satisfy creditors. This person asked not to be identified because details of the negotiations have not been made public.
Fiat will obtain a 20 percent stake in Chrysler in return for giving the company access to its fuel-efficient technology, a move toward cleaner cars that the Obama administration thinks is critical to Chrysler's future survival. The company has committed to building Fiat cars in Chrysler factories, to be sold as Chryslers.
The bankruptcy will be filed under a section of the law that allows a company to shed bad assets and some liabilities. The administration expects it to last only up to 60 days.
Obama's auto task force in March rejected Chrysler's restructuring plan and gave it 30 days to make another effort, including a tie-up with Fiat. The company has borrowed $4 billion from the federal government and needs billions more to keep operating.
The UAW agreement, which would take effect May 4, meets Treasury requirements for continued loans to Chrysler Corp., and includes commitments from Fiat to manufacture a new small car in one of Chrysler's U.S. facilities and to share key technology with Chrysler.
Meanwhile, the Fiat partnership means Chrysler CEO Robert Nardelli could be out of a job. In an April e-mail to employees, he said that if the deal is completed, Chrysler would be run by a new board appointed by the government and Fiat. The new board, Nardelli wrote, would pick a CEO "with Fiat's concurrence."
Sergio Marchionne, CEO of the Italian automaker, told reporters earlier this month that he could run Chrysler. Obama said Wednesday that Fiat's management "has actually done a good job transforming their industry."
___
AP Auto Writer Tom Krisher reported from Detroit.
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distro pruned to amc and rcm
On Thu, 30 Apr 2009 09:58:34 -0700 (PDT), Too_Many_Tools

-------------
Didn't this dips**t ever hear of Walmart, NAPA, Autozone, Pepboys, etc. It is this mentality that caused their problems in the first place.
----- Chrysler's temporary idlings raise concerns
BY JUSTIN HYDE FREE PRESS WASHINGTON STAFF May 1, 2009 Dangers of Chrysler's hibernation
12:49 p.m. |
The temporary shutdown of Chryslers factories starting Monday as part of its bankruptcy comes with the risk of pushing back key new models, hurting suppliers and even the risk that Chrysler dealers could run short of parts.
In a bankruptcy filing, Frank Ewasyshyn, Chryslers executive vice president of manufacturing, makes his part of Chryslers case that selling the company in 60 days or less to the Chrysler-Fiat partnership is its only route to survival.
<snip> The government has guaranteed Chryslers warranties, but Ewasyshyn warns that Chrysler dealers could run short of key parts such as oil filters usually built by the company or its suppliers in as little as 28 days if payments arent restored and some production restarted. <snip> ----- http://www.freep.com/apps/pbcs.dll/article?AID=/20090501/BUSINESS01/90501002&s=a
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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wrote:

http://www.freep.com/apps/pbcs.dll/article?AID=/20090501/BUSINESS01/90501002&s=a
Several of Chrysler's plants shut down Thursday afternoon George, because vendors were refusing to ship parts. There is a real possibility that they will never come out of bankruptcy and will end up being liquidated.
Consider that the sums of money that will be infused are really trivial and then ask yourself why private equiyy doesn't think there is any value.
The world is literally awash in money right now but nobody has 20 billion dollars to buy this company out of bankruptcy? I don't think so.
Sumpin' still ain't right.....
JC
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On Fri, 1 May 2009 10:26:19 -0700, "John R. Carroll"
<snip>

What a bunch of ingrates. Won't ship parts just because they might not get paid. Didn't Chrysler always pay, even if it was a few days late, like 90-120 days? Several of the vendors they are stiffing are German firms with American operations, apparently left over from the Damiler days.

IMNSHO -- if the bankruptcy judge is honest (and he is the one that oversaw the Enron bankruptcy) Chrysler will be out of chapter11 and into chapter 7 [liquidation] in a few days, just as soon as the "real" books are examined and the actual forecasts/projections analyzed. The question then is will criminal charges for fraud and wrongful conversion be brought.

Like Evert Dirkson said "a billion here and a billion there and pretty soon we are talking about real money."
Just because something costs a lot does not mean it is worth a lot [or much of anything].
Where/how is there an expected return on investment? From the latest media reports it appears that Uncle Whiskers [the US taxpayers'] are to put up 3.5 billion more in debtor-in-possession financing with another 6 billion to follow as exit financing to be provided by the Canadian and US taxpayers. This is on top of the c. 5 billion already flushed down the Chrysler toilet, and there appears to be considerable additional taxpayer liability for import guarantees and GMAC/Chrysler Finance.

Again, a bunch of ingrates that expect something of value for their money... Where's/what's their ROI?
Remember that the GM bomb has yet to explode and pro rata from their sales volume that nut should be 2 to 3 X the one from Chrysler.
Many of the major Chrysler and GM creditors are familiar names such as Bank of America, Chase and Citigroup. Much of the CDS insurance on the Chrysler and GM debt was written by AIG. The taxpayers are about to take it in the shorts again from every possible angle.
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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wrote:

LOL How about that huh? They want to be paid.

Pffft. KKR paid 31 Billion dollars for Beatrice when a dollar was still worth someting. The Anadarko Energy purchase of Kerr McGee was 42. It isn't what you pay, it's what you get that counts. The question everyone ought to be asking is where is the Cerberus money? They have a bunch but have chosen to write off thier entire investment just to get out from under. I'd also be interested in learning just how many suppliers they have bought up and now own. There are wheels within wheels within wheels here George. This is going to be a fascinating chapter in the history books at some future date.

Well that's the thing.The vultures that wouldn't write down their bonds bought insurance, or "uninsurance". They would have been criminally negligent had they taken a $0.33 offer. They will get full face value through this BK. It's a little like a short. You hope for a BK 'cause the share price is then Zero. You've maximized your upside. BofA, Chase, and the rest of the "Bigs" didn't hedge. They bought their bonds a year or more ago and Chrysler looked pretty good in December of '07. They had slashed costs and lines, restructured operations, and had a wad of cash in the bank. They wouldn't have been willing o take a lump otherwise. They couldn't have as a matter of corporate governance and fiduciary responsibility.
I'll tell you who ought to be upset with all of this. Ford shareholders and employees. They ate their restructuring costs and got it right. Now, they are seeing their competition given an unfair competetive advantage and, to add insult to injury, have to pay the freight because they are taxpayers. That's a big dose of salt to rub in. They ought to be hopping mad and I give Ford's management a lot of credit for keeping the lid on. They must be thinking it's good PR not to cheerlead the failure of Chrysler and GM and thereby avoid any ill will.
JC
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On Fri, 1 May 2009 13:50:44 -0700, "John R. Carroll"
<snip>

<snip> ----- Indeed.
It may be that they know both GM and Chrysler are headed into chapter 7 and don't feel the need to publically get involved.
Given Ford's resources, I would be susprised if they did not "throw something over the transom" to the media from time to time about Chrysler's and GM's corner cutting and angle playing, which executive has their mistress on the company payroll, which executives were on the take for accepting below spec parts, which executives were taking playola from their vendors, etc., that sort of thing. No need to get your hands dirty, and you can make some reporter *VERY* happy...
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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On May 1, 2:38pm, F. George McDuffee <gmcduf...@mcduffee- associates.us> wrote:
ngsolution.com> wrote:

<snip>
IMO, the reason they kept those 2 companies aflot for awhile was the dire straits of the financial system a few months ago. There was a real danger that banks would completely stop lending to each other leading to a total freeze in global trade. The artificial prolonging of those 2 high profile companies' descent into bankruptcy was meant to address the *psychology* of the economy at that very critical point.
Now that the danger seems to have passed and things are unlocking, they've obviously come to the conclusion that it's now safe to allow the bankruptcies to happen.
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On Fri, 1 May 2009 16:28:22 -0700 (PDT), "Kurgan. presented by

----------- Makes more sense than most of the crap I see in the media.
How long before the Chapter 11 [reorganization] morphs into chapter 7 [liquidation] for both Chrysler and GM? Are any criminal charges going to be filed?
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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wrote:

I'm curious George. Since GM is now a chartered Bank Holding Company wouldn't a BK for them be a matter for the FDIC? LOL
JC
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On Fri, 1 May 2009 16:50:04 -0700, "John R. Carroll"
<snip>

--
Actually I think that is GMAC which is now part of Cerberus,
parent of Chrysler. This is another one of the multitude of
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wrote:

Chrysler got a load of TARP money too. It looks like GMAC is going to get their finance division.
--

Dan

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wrote:

This one is a little involved Dan. Cerberus owned Chrysler and a chunk of GMAC both.
Regardles the outcome, at this point the North American car market won't support as many players as there are. Even if they don't end up in Chapter 7 proceedings they will probably dissapear in a couple of years anyway. While GM and Chrysler sit around touching their private parts, the Japs are preparing an all out assault with the next generation of personal transportation and they have the bucks to make that happen. They also have a huge advantage with their technology.
JC
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On Sat, 2 May 2009 18:18:26 -0700, "John R. Carroll"

One of the understatements of the year!!!!

Indeed. They have far too many plants, and theseproduction plants are sized far to large for any foreseable volume. This kills utilization and the fixed costs per unit with current low volume are astronomical.

Just about every factor leads to this conclusion. http://247wallst.com/2009/04/27/when-does-gm-gm-get-too-small-to-survive /
This is the case for sure if they do not get younger management with manufacturing backgrounds. It is one thing to preserve the status quo when you have 51% of the US market share in a growing market and quite another when you have >20% of a rapidly shrinking market. http://topics.nytimes.com/topics/news/business/companies/general_motors_corporation/index.html
Another problem is the source of capital. Depending on how the Chrysler bk plays out, who will lend GM or Chrysler any money regardless of collateral?
Another major problem is parts procurement on anything but a COD [cash or cashiers check] or even payment-in-advance basis.
The dealers may also be a problem http://www.thetruthaboutcars.com/bailout-watch-510-gm-to-terminate-40-its-us-dealers /

I don't know that their automotive technology is any better, but the Japenese are willing to implement it.
One example, consider the Chevrolet small block V8 engine first sold commercially in 1955. While this is a good engine with a few design shortcomings such as valve oil seals and for a while engine mounts, the basic design is now 54 years old. Materials and production methods have moved on. Engine design has moved on. http://en.wikipedia.org/wiki/Chevrolet_Small-Block_engine
On the other hand, the Japanese DFMA [design for manufacture and assembly] methodology is world class, and gives then a considerable advantage. Not only are the transplant hourly labor rates lower for several reasons, but perhaps more importantly, the transplants need considerably less total labor to assemble comparable cars than the domestic manufacturers do.
The Japanese seem to have been able to avoid "micro-optimization," stressing total cost reductions and are willing to pay 5 cents more per part, if this will save dime or quarter for the price to install it.
Another factor is the basic assembly plant design and location. Apparently the transplants have "modularized" their operations so they can scale back/ramp up production while maintaining higher levels of utilization/efficiency.

Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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wrote:

Yup. But they aren't spending much yet. Domestic machine tool sales are in the toilet in Japan at the moment. Automotive there hasn't spent much in recent times. The difference is they they will spend when the time is right.
On the American front the 2010 Ford Taurus looks like a winner.
http://www.fordvehicles.com/2010taurus /
I know it's not a segment that most car guys get all excited about, but there's good sales volume there. Sales drones have to dive something.
They are even bringing back the SHO, so the sales managers will have something new to drive too. LOL.
--

Dan

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wrote:

They have steadily invested in future technoloies over the years Dan. I think Honda and Toyota, in particular, are waiting to see what happens with the energy portion of the 2010 budget and to see if we pass supplimental energy legislation.
There really isn't anything to do today or for a short while going forward except to keep ones powder dry. You can bet your butt their economists, mathemeticians and intelligence guys are working overtime right now keeping track of what's going on on the one hand and modelling possible futures for their industry on the other.

VVVRRRRRRRRRROOOOOOOOOOOOOOMMMMMMMMMMM Hahaha! Pretty good, but Ford is betting the farm on hydrogen fuel cells so are the Japanese. Ford has had a fleet in the field for some time. Did you know that Toyota (IIRC) completely pulled the plug on the Canadian company that made their Quick Fill CNG hardware? Just shut them down. Those sales were profitable and the fleets so equiped are just screwed without replacement parts. Ask yourself why they'd do that. My guess is that they don't want to end up competing with themselves and a down market is a good time to get focused.
JC
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Speaking of Vrrroooom check out the torque er uhm curve? -
http://jalopnik.com/5151498/2010-ford-taurus-sho-live-and-with-a - ridiculous-torque-curve
Not much curve.

We're probably two economic cycles away from alternate fuel vehicles being in play. The survivors of this downturn will be selling good ole fossil fuel burning buggies. Ford has a few more winners in the stable and ready to go. The new Fusion Hybrid is outselling the Toyota. Some guys took one and drove 1445 miles on 17 gallons of gas setting a new record. Plus they have that Fiesta thing coming out for the kiddies.

That is bizarre. I believe the next step is CNG, then on to hydrogen. Not much infrastructure though. That might have more to do woth it.
--

Dan

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No not much at all.

Yes Dan. The hybrid cycle is upon us today. Right now. I don't think there will be a single gas only engine plant operating in the US by Monday next. There might be but I think you see my point.

Not with gas at $4.00 per gallon they won't or at least not for long or in significant numbers.

Four year old stuff. It takes about that long and it current generation stuff. The generation after that, which is what's in development and testing today, is what poeple will really put their money into because it won't be transitional.

Same difference. A transition to hybrids and then all electric is one thing. There isn't the time or energy to revamp our energy infrastructure completely more than once. What is realy bizarre is the willingness to incur ill will among an established customer base that has their own fueling stsaions. CNG's are a fleet vehicle Dan and I guess I can only conclude that it's been decided that CNG isn't significant as an interim solution. OOPS!
JC
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Actually John, the next step is GDI or TGDI. These are already either in production or in testing and development. (Gasoline Direct Injection or Turbo Gasoline Direct Injection). These engines are 20% or better more efficient than today's gasoline engines. Part of the efficiency comes from the greatly increased compression ratios allowed by GDI on pump gas. This has been a goal of engine designers for a long time, but the injector technology wasn't there to allow reliable production. It is now. Both Bosch and Siemens have dead-reliable GDI injector systems now. By injecting fuel directly into the combustion chamber (aka like a diesel), you get a major cooling effect as the fuel evaporates. This allows compression ratios of 12:1 or higher on regular unleaded fuel without denotation. This efficiency increase allows a downsized engine for the same KW output, resulting in a major fuel savings over the life of the vehicle. You will soon see 2.0L engines with >300 hp as a normal "base" engine, 1.5L engines with >200 hp. Plenty of power to please your right foot when you want to, while miserly sipping fuel for 80% of the time it's running.
These engines will sport completely variable valve trains, variable intake tracts, variable output turbo chargers and other features that will make you think you are running a large V6 or even a V8, while only having 2.0L and 4 cylinders under the hood.
--
Anthony

You can't 'idiot proof' anything....every time you try, they just make
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Yeah, Audi (?) has been racimg a single rail diesel for a while now. Pretty inpressive.

You left out something Anthony. These things cost an arm and a leg and when they break you can't afford to have them fixed. It makes more sense to scrap them out. I'll bet the only thing imported will be $70,000 roadsters from Porsche/Audi and Mercedes. The warranty costs alone on these vehicles will have to start at $10K per vehicle if the warranty lasts any meaningful length of time.
This is one of the other difficulties I see with the model that North American builders and others are running for this market. When I was a kid, a new Corvette cost about what a journeman tool and die maker made in 520 hours. The new, at that time, Nova SS was 500 hours of what two year apprentices were making. Auto loans were limited to three year terms. Either car was lucky to last more than 100K miles without serious mechanical surgery and they were showing significant signs of wear at 60K.
Today, those same vehicles, the Vette anyway, costs about 3390 hours for a ZR1 or 2000 hours for the base model. This is an extreme example. You can buy a Camry for 700 hours (220 for the apprentice) and it will last 250K miles without breaking the bank but the costs of keeping a roof over ones head have skyrocketed from 400 hours of labor per year all the way to about 800 or more.
The future of the Auto industry will follow what the markets dictate. The largest market today, and the ones that will be growing both sustainably and significantly, are in India and China, not North America. The Chinese have a 40 percent sales tax on passenger vehicles that they are waving if you buy either a hybrid or all electric. Autogas is as dead as a post. The other advantage of getting the hell away from oil and on to renewable resource energy is price stability. The last 40 years of oil prices have been a real roller coaster that has impacted every aspect of life in America and around the world. What sane person would want to continue to subject their economy or livfe to that going forward when there is a viable and affordable alternative? This might well be the biggest driver.
I'm hearing about real changes to Americas auto safety standards in the works. You can't bring small cars into the US or even build them here today because the can't be made to meet current safety test standards affordably, or in some cases, at all. Our regulations are dictated by 3000 lb vehicles with enough air space to crush. We need to look at a 1500 lb model and I believe we will.
Should domestic builders not be able to bring an all electric 1500 lb four passenger vehicle to market for under $15K they will be run out of business on a rail by the manufacturers that can, and are, doing so in their own domestic markets today.
I'm sure somebody is out there making pistons and valve trains for the vehicles you described. They won't amount to more than a flash in the pan and a large investment with a pretty meager and short lived payoff. Ten years from now somebody is going to look back and wish all of that engineering had been invested elsewhere. In the time it takes for the worlds economies to recover this technology will have become obsolete, never having fulfilled its promise.
JC
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GDI engines are on the road today. Moreso in Europe and Australia than the US, but many models are imported to the US now. All of the US automakers either are now or are almost in production with GDI engines. Many of the Japanese have them already, or are about to. This engine technology will be the dominant force for the next 10 years or so. There are too many problems with electric vehicles right now, although the investment is being made, the technology isn't there yet. It will be at a minimum 10 years before electric or other alternative vehicles will be mainstream.
--
Anthony

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