Original Story: NYTimes.com
WARREN, Mich. — In December, the sprawling, four million-square-foot factory here where workers assemble Ram pickup trucks, along conveyors that weave for more than 30 miles, suddenly went quiet.
Thousands of workers looked on where a makeshift stage, draped in black, had been assembled. Sergio Marchionne, Chrysler Group’s chairman and chief executive, stepped up to address the crowd.
In the dark days of Chrysler’s bankruptcy — when the company barely escaped extinction thanks to a taxpayer bailout and the purchase by Mr. Marchionne’s Fiat of a major stake, which later turned into ownership — such a staged display and work stoppage could have meant trouble. But not this time.
Mr. Marchionne was there to acknowledge an industry award for the truck, but, more important, to convey a simple message to the workers: well done.
“Today I wanted to come to Warren to personally thank all of you,” he said, and in his signature style joked about the criticism that followed his decision in 2009 to create the stand-alone Ram division. “The skeptics, who were already predicting our company was going down the tubes, thought for sure that we’d been smoking something funny.”
In 2009, when Ram was carved out from Dodge into a stand-alone division, it was a big gamble — and far from a sure thing. Some industry critics scoffed at the idea of a brand dedicated to pickup trucks. Others were puzzled: After the bailouts, the trend was to consolidate brands to streamline automakers’ offerings, but Chrysler was adding a new one.
Five years later, the verdict is in: The gamble paid off. Ram trucks have captured an ever-greater share of the full-size pickup market dominated in the past by General Motors and Ford, and are on track to seize even more. By adding innovative features not found in other pickups, and aggressive pricing to lure truck buyers, who are among the most loyal in the automotive business, Chrysler’s Ram has managed to go from also-ran to a threat in only a few years.
Here in Warren, the plant is now churning out Ram pickups 20 hours a day, six days a week, with occasional Sundays — barely able to keep up with demand.
In the fourth quarter of 2009, when the new Ram division’s trucks were hitting the streets, the company eked out a paltry 11 percent of the market share for full-size trucks. The two other Detroit automakers were lapping Chrysler around the track, with shares of 42 percent for G.M. and 37 percent for Ford. Since then Ram has conquered more and more of the market every year. In August, when sales surged 33 percent over a year earlier, Ram commanded 21 percent of full-size pickup purchases in the United States.
Most of that success has come at the expense of G.M.’s Chevrolet Silverado pickup, which despite its own recent redesign has lost market share this year. Ford’s F-Series pickups remain the overall market leader, but their sales have also dipped this summer as the automaker prepares to introduce a new generation of trucks made with an aluminum body.
Reid Bigland, Chrysler’s head of United States sales and head of the Ram division from April 2013 to last month, said that what made the new division different was an intense focus on pickups, which under the Dodge umbrella and its muscle-car heritage had never quite received their due.
“Selling trucks is just a different business than cars,” Mr. Bigland said, “and we had a group of people who could come to work and do nothing but think about pickup trucks.”
One result was features competitors did not have, like air suspensions, cargo cameras, eight-speed transmissions and, last year, a diesel engine that gets 28 miles a gallon on the highway.
On the factory floor itself, new, lean manufacturing methods transplanted from Fiat began revolutionizing the Warren plant’s operations — not only creating more efficient ways of building vehicles and increasing quality but also giving workers a stake in decision-making.
“The floor has a voice now,” said Tracie Fern, a Warren worker who helps find ways to make jobs on the assembly line more efficient. “When someone has a suggestion, they listen to us.”
Go back to the 1980s, and the Dodge Ram was not even an also-ran. “It was just a blip on the radar back then,” said Karl Brauer, senior analyst with Kelley Blue Book. “Ford and Chevy didn’t think about, or care about, what Ram was doing.”
The first real attention-grabber was the 1994 Ram, which featured the aggressive, curved “big rig” look the Ram still incorporates today. But while the muscular design change drew attention and increased sales, the truck languished in a distant third.
When the stand-alone experiment began in 2009, the near-death experience of the bankruptcy and taxpayer bailout had left its mark on Chrysler. Ram executives said they knew they would have to deliver results, and quickly.
“You either come out swinging or you roll over,” said Robert Hegbloom, a Ram executive who last month became head of the brand. (Mr. Bigland was tapped to lead Fiat’s Alfa Romeo unit in North America.)
A conference room in the basement of Chrysler’s headquarters was turned into a makeshift “Ram war room.” The new team members gathered regularly to brainstorm ideas, figure out ways for the trucks to distinguish themselves, and perhaps most important, zero in on what truck buyers wanted.
Mr. Marchionne, well known for his blunt style and attention to detail, held monthly meetings with the Ram executives, where he expected updates.
For light-duty pickups, the team decided to hone in on a priority they were hearing from truck customers. “It was all about fuel economy,” Mr. Hegbloom said, explaining that buyers used to willingly sacrifice gas mileage for hauling capability. Now they wanted both.
Ram engineers went to work, and by adding a host of features — shutters that close the front grille at high speeds to reduce drag, an eight-speed transmission and ultimately a new turbodiesel engine — they managed to increase the trucks’ hauling performance while also topping the charts on fuel economy.
Designers also focused on upgrading the interiors. That was because the nature of pickup trucks was changing. A pickup used to be a bare-bones affair: Bench seats were common, back seats generally nonexistent. Now, so-called crew cabs are ubiquitous, and the comfort and technology match those of any sport utility vehicle.
“They’re really a lot like luxury vehicles these days,” said Jessica Caldwell, senior analyst with Edmunds.com.
Jeff Jagoda, a fourth-generation autoworker, now at the Ram factory in Warren, has seen the evolution firsthand. He bought his first truck in 1975, and with its crank windows, bench seat and exposed steel inside, he said the last word to describe it would be luxury. “When I brought it home my mother said: ‘What are you doing with this thing? You’re not a farmer,’ ” he said. “But that’s what trucks used to be, something people bought to get work done, nothing more. Today, they’re something else entirely; you’ve got all the comforts of home if you want.”
Sean Kilmain, who lives on Cape Cod in Massachusetts, bought his new Ram 1500 in July after test-driving Ford and G.M. trucks. He said he wanted something that could be comfortable for family skiing trips to Vermont but also capable of towing his boat or hauling gear.
“When you’re looking to take two dogs and your nephews along for the ride, space becomes an issue,” Mr. Kilmain said. “This will be the truck that we take places.” What sold him on the Ram, he said, was that he felt the truck offered more features for less money than the competition, and that the fuel economy was also impressive.
“I didn’t want to get a gas guzzler, but also wanted something that could do pretty much anything I wanted,” he said. “Haul some stuff, carry some people.”
Mr. Brauer, the Kelley Blue Book analyst, predicted that Ram might give G.M. a run for its money, and could possibly seize the No. 2 spot in coming years — something that would have been unthinkable a decade ago.
“Ford is just a monster in the pickup category, and always will be. But what we could see is a Ford main show, with G.M. and Ram left to fight it out,” he said. “If that’s the case, then Ram is winning.”
Showing posts with label Chrysler. Show all posts
Showing posts with label Chrysler. Show all posts
19 September 2014
01 August 2012
GM, Ford Sales Fall, Chrysler is Up
Story first reported from USA Today
General Motors kicked off the second half of the sales year with a whimper, reporting a 6% decline in sales in July compared to a year ago. GM blamed lower sales to rental fleets.
But there was some good news. GM says its Cadillac unit saw 21% higher sales due to the popularity of its CTS, Escalade, SRX and the new XTS.
"Cadillac hit a home run and our newest Chevrolets and Buicks are performing very well," said Kurt McNeil, vice president in charge of U.S. sales in a statement. "Signs of a housing recovery and good news on consumer confidence and household income should help keep the light vehicle selling rate in the 14-million range and drive seasonally higher truck sales as we move toward fall."
GM says that it's sales of 201,237 vehicles reflected a 3% decline in sales to individual customers in showrooms and a 41% dropoff in sales to rental car fleets. Automakers generally frown upon rental-car fleet sales as low-profit arrangements.
GM touted other bright spots, too. Buick Verano sales have increased every month since the compact was launched in December. Sales of the small Chevrolet Sonic were strongest since its introduction, no small feat given lower gas prices. The even smaller Spark just went on sale.
Ford Motor
Ford's sales slumped 4% in July and like GM, it blames lower sales to rental and corporate fleets.
But there was good news in the showrooms: Ford's U.S. retail sales increased 2% in July versus year-ago levels, driven by strong retail customer demand for fuel-efficient vehicles.
Ford's Fusion midsize sedan, which is due to be replaced soon by an updated model, exceeded its best-ever July sales record last month. Just in time for summer fun, Mustang sales rose 8%.
The Explorer crossover SUV had its best sales month since 2006. And the big F-Series pickups had their 12th straight month of sales increases.
Turbocharged EcoBoost-equipped F-150s made up 42% of retail sales mix in July.
Chrysler Group
Chrysler Group sales rose 13% in July compared to the same month in the previous year, which the automaker says was its best performance for the month since 2007.
Rebounding Chrysler says it saw gains in each of its divisions --Chrysler, Jeep, Dodge, Ram Truck, and Fiat. It was the 28th straight month of gains.
"We again demonstrated our disciplined and methodical approach to growing sales and profits," said Reid Bigland, CEO of the Dodge brand and head of U.S. sales.
The gain was driven in part by two models that set sales records July: the Chrysler 200 mid-size sedan and the Dodge Journey full-size crossover. Sales of the award-winning Journey were up 69%. In a good sign for the U.S. economy, Ram pickup sales gained 17%. Pickup-truck sales are often a sign that construction is rebounding.
General Motors kicked off the second half of the sales year with a whimper, reporting a 6% decline in sales in July compared to a year ago. GM blamed lower sales to rental fleets.
But there was some good news. GM says its Cadillac unit saw 21% higher sales due to the popularity of its CTS, Escalade, SRX and the new XTS.
"Cadillac hit a home run and our newest Chevrolets and Buicks are performing very well," said Kurt McNeil, vice president in charge of U.S. sales in a statement. "Signs of a housing recovery and good news on consumer confidence and household income should help keep the light vehicle selling rate in the 14-million range and drive seasonally higher truck sales as we move toward fall."
GM says that it's sales of 201,237 vehicles reflected a 3% decline in sales to individual customers in showrooms and a 41% dropoff in sales to rental car fleets. Automakers generally frown upon rental-car fleet sales as low-profit arrangements.
GM touted other bright spots, too. Buick Verano sales have increased every month since the compact was launched in December. Sales of the small Chevrolet Sonic were strongest since its introduction, no small feat given lower gas prices. The even smaller Spark just went on sale.
Ford Motor
Ford's sales slumped 4% in July and like GM, it blames lower sales to rental and corporate fleets.
But there was good news in the showrooms: Ford's U.S. retail sales increased 2% in July versus year-ago levels, driven by strong retail customer demand for fuel-efficient vehicles.
Ford's Fusion midsize sedan, which is due to be replaced soon by an updated model, exceeded its best-ever July sales record last month. Just in time for summer fun, Mustang sales rose 8%.
The Explorer crossover SUV had its best sales month since 2006. And the big F-Series pickups had their 12th straight month of sales increases.
Turbocharged EcoBoost-equipped F-150s made up 42% of retail sales mix in July.
Chrysler Group
Chrysler Group sales rose 13% in July compared to the same month in the previous year, which the automaker says was its best performance for the month since 2007.
Rebounding Chrysler says it saw gains in each of its divisions --Chrysler, Jeep, Dodge, Ram Truck, and Fiat. It was the 28th straight month of gains.
"We again demonstrated our disciplined and methodical approach to growing sales and profits," said Reid Bigland, CEO of the Dodge brand and head of U.S. sales.
The gain was driven in part by two models that set sales records July: the Chrysler 200 mid-size sedan and the Dodge Journey full-size crossover. Sales of the award-winning Journey were up 69%. In a good sign for the U.S. economy, Ram pickup sales gained 17%. Pickup-truck sales are often a sign that construction is rebounding.
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14 May 2012
Michigan Gov. Supports Immigration and Chrysler/Fiat
Story first appeared in The Detroit Free Press.
The Michigan Governor said Monday that he considers talent to be the state’s most valuable resource and said his goal is to keep people in the state who have valuable skills, including foreigners who study at the state’s colleges. He told a group of about 40 recently hired Chrysler employees that he is probably the most pro-immigration governor in the United States.
The United States became economically strong in part because immigrants who came to America seeking a better life became entrepreneurs and sought degrees in higher education.
There are now immigration laws set up in the U.S. that say we’re going to educate these really bright people, and then basically tell them to get out.
Snyder’s comments came in response to a question about the promotion of diversity in Michigan from a Chrysler employee. The governor spoke to employees for about 10 minutes before fielding questions about tourism, the state’s unemployment outlook and the quality of available jobs in the state.
Michigan’s unemployment rate has dropped from a high of 14.2% in August 2009 to 8.5% in March as the automotive industry has begun to recover and hire more workers. But the Michigan governor feels that the rate is still too high.
Chrysler’s progress under majority owner Fiat is a model that the state should follow as the state works to reinvent itself.
Under majority owner Fiat, Chrysler reported its first profit in years in 2011 and its first quarter earnings of $473 million were nearly four times its earnings for the same period last year. As Fiat and Chrysler get closer to a full merger it is hoped that the state’s available talent and proposal to reform the state’s personal property taxes will encourage the company to pick Auburn Hills as its global headquarters.
They are an industrial company that is dong fabulous work, that reform would actually make Michigan a much more competitive place and really encourage them to be here.
The governor declined to provide any specific updates to his efforts to reach an agreement to build a new international bridge across the Detroit River.
Snyder met in Windsor Thursday with the Canadian Transport Minister to work on a plan with Canadian officials, despite a lack of support from the Michigan Legislature.
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The Michigan Governor said Monday that he considers talent to be the state’s most valuable resource and said his goal is to keep people in the state who have valuable skills, including foreigners who study at the state’s colleges. He told a group of about 40 recently hired Chrysler employees that he is probably the most pro-immigration governor in the United States.
The United States became economically strong in part because immigrants who came to America seeking a better life became entrepreneurs and sought degrees in higher education.
There are now immigration laws set up in the U.S. that say we’re going to educate these really bright people, and then basically tell them to get out.
Snyder’s comments came in response to a question about the promotion of diversity in Michigan from a Chrysler employee. The governor spoke to employees for about 10 minutes before fielding questions about tourism, the state’s unemployment outlook and the quality of available jobs in the state.
Michigan’s unemployment rate has dropped from a high of 14.2% in August 2009 to 8.5% in March as the automotive industry has begun to recover and hire more workers. But the Michigan governor feels that the rate is still too high.
Chrysler’s progress under majority owner Fiat is a model that the state should follow as the state works to reinvent itself.
Under majority owner Fiat, Chrysler reported its first profit in years in 2011 and its first quarter earnings of $473 million were nearly four times its earnings for the same period last year. As Fiat and Chrysler get closer to a full merger it is hoped that the state’s available talent and proposal to reform the state’s personal property taxes will encourage the company to pick Auburn Hills as its global headquarters.
They are an industrial company that is dong fabulous work, that reform would actually make Michigan a much more competitive place and really encourage them to be here.
The governor declined to provide any specific updates to his efforts to reach an agreement to build a new international bridge across the Detroit River.
Snyder met in Windsor Thursday with the Canadian Transport Minister to work on a plan with Canadian officials, despite a lack of support from the Michigan Legislature.
For more local and Michigan business related news, visit the Michigan Business News blog.
For national and worldwide related business news, visit the Peak News Room blog.
For healthcare and medical related news, visit the Healthcare and Medical blog.
For law related news, visit the Nation of Law blog.
For real estate and home related news, visit the Commercial and Residential Real Estate blog.
For technology and electronics related news, visit the Electronics America blog.
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04 October 2011
Fiat Credit Rating Goes Down Because Of Chrysler Group
Story first appeared in USA TODAY.
Ratings agency Moody's downgraded the credit rating of Fiat today, saying it did it primarily because of risks associated with Fiats closer combination with Chrysler Group.
Fiat holds a 53.5% of Chrysler and has said it will get 5% more by year-end -- a chunk due from the U.S. government when it meets the final bankruptcy deal goal of building a high-mileage small car in the U.S.
Moody's said increased integration of the companies likely means they'd have to prop each other up if things go south, even though Fiat, under the terms of the takeover, is not on the hook for Chrysler's debts. Moody's expects "that the creditworthiness of Fiat and Chrysler will become more closely aligned over time as the strategy and operations of the two groups becomes progressively more intertwined," including sharing vehicle platforms and powertrains, Moody's lead Fiat analyst Falk Frey told the Associated Press.
In the arcane heirarchy of debt ratings, Moody's cut Fiat from Ba2 to Ba1. The real-world impact is that Fiat will have to pay more for loans. Chrysler already is lower, at B2.
While the rating reflects the risks still inherent in Chrysler's comeback, it also seems to reflect caution about Fiat's financial muscle to handle adverse events at one or both operations.
Fiat has lost money in Europe, where the financial mess, especially as it affects Fiat's home market in Italy, has hurt sales. And Moody's says that Fiat's loss in Europe share is due in part to a slower pace of new models than rivals, a pace CEO Sergio Marchionne said at the Frankfurt show last week may slow further because of Europe's woes. Moody's also cites increased competition in Brazil, Fiat's most profitable market.
Marchionne also at Frankfurt that for now, an IPO for Chrysler is not possible because of market conditions.
Ratings agency Moody's downgraded the credit rating of Fiat today, saying it did it primarily because of risks associated with Fiats closer combination with Chrysler Group.
Fiat holds a 53.5% of Chrysler and has said it will get 5% more by year-end -- a chunk due from the U.S. government when it meets the final bankruptcy deal goal of building a high-mileage small car in the U.S.
Moody's said increased integration of the companies likely means they'd have to prop each other up if things go south, even though Fiat, under the terms of the takeover, is not on the hook for Chrysler's debts. Moody's expects "that the creditworthiness of Fiat and Chrysler will become more closely aligned over time as the strategy and operations of the two groups becomes progressively more intertwined," including sharing vehicle platforms and powertrains, Moody's lead Fiat analyst Falk Frey told the Associated Press.
In the arcane heirarchy of debt ratings, Moody's cut Fiat from Ba2 to Ba1. The real-world impact is that Fiat will have to pay more for loans. Chrysler already is lower, at B2.
While the rating reflects the risks still inherent in Chrysler's comeback, it also seems to reflect caution about Fiat's financial muscle to handle adverse events at one or both operations.
Fiat has lost money in Europe, where the financial mess, especially as it affects Fiat's home market in Italy, has hurt sales. And Moody's says that Fiat's loss in Europe share is due in part to a slower pace of new models than rivals, a pace CEO Sergio Marchionne said at the Frankfurt show last week may slow further because of Europe's woes. Moody's also cites increased competition in Brazil, Fiat's most profitable market.
Marchionne also at Frankfurt that for now, an IPO for Chrysler is not possible because of market conditions.
11 November 2010
Chrysler CEO Says ‘Successful Transformation’ Is Under Way
Bloomberg
Chrysler Group LLC, the U.S. automaker operated by Fiat SpA, has laid the “groundwork for a successful transformation,” the companies’ chief executive officer said today.
Sergio Marchionne, CEO of both Chrysler and Fiat, addressed workers in a message obtained by Bloomberg on the day the U.S. automaker raised its operating profit forecast for the year and said its net loss narrowed to $84 million in the third quarter.
“The changes we are bringing about are beginning to enter into the DNA of the company,” Marchionne said in the message. “You can tell by how the language and tone of conversations have changed, by the long hours people are working, and by the way teams form and function.”
Shawn Morgan, a Chrysler spokeswoman, confirmed the memo was sent.
“We knew when we began this reconstruction process that the road back would be a long one,” Marchionne said. “We’ve hit some key milestone and we’ve made progress in important areas. We have laid the groundwork for a successful transformation. I ask you to continue to have faith in your leadership.”
Sergio Marchionne, CEO of both Chrysler and Fiat, addressed workers in a message obtained by Bloomberg on the day the U.S. automaker raised its operating profit forecast for the year and said its net loss narrowed to $84 million in the third quarter.
“The changes we are bringing about are beginning to enter into the DNA of the company,” Marchionne said in the message. “You can tell by how the language and tone of conversations have changed, by the long hours people are working, and by the way teams form and function.”
Shawn Morgan, a Chrysler spokeswoman, confirmed the memo was sent.
“We knew when we began this reconstruction process that the road back would be a long one,” Marchionne said. “We’ve hit some key milestone and we’ve made progress in important areas. We have laid the groundwork for a successful transformation. I ask you to continue to have faith in your leadership.”
25 September 2010
Jalopnik: Obsessed with the Cult of Cars
Workers from a Detroit Chrysler plant visited by President Obama two months ago were busted today for drinking and smoking pot on their lunch break. Although they're now suspended, a former employee tells us it won't change a thing.The Jefferson North Assembly Plant is Chrysler's flagship manufacturing facility. The plant, home to production of the all-new 2011 Jeep Grand Cherokee, was visited by President Obama in July — just five days before an investigation by Fox 2 Detroit began that unveiled auto worker's engaging in the blue collar equivalent of the three martini lunch. When President Obama visited this plant that's supposed to represent the "new" Chrysler, he told America
"I believed that if each of us were willing to work and sacrifice in the short term — workers, management, creditors, shareholders, retirees, communities — it could mark a new beginning for a great American industry. And if we could summon that sense of teamwork and common purpose, we could once again see the best cars in the world designed, engineered, forged, and built right here in Detroit, right here in the Midwest, right here in the United States of America."
Unfortunately, a few of their employees look to still be stuck in old school stereotypes about organized labor.
The investigative report found a dozen employees were taking the 30-minute shift break they have at 11:00 am to drive to a public park and pound 40-oz beers, smoke weed, or do both at the same time. They then get in their cars, drive back to the plant presumably under the influence, and continue manufacturing cars.
Chrysler's Senior VP of Manufacturing, Scott Garberding, told Fox 2 saying they've suspended workers without pay pending the outcome of an investigation:
I want to make it clear that we at Chrysler take it very seriously. For us this behavior is totally unacceptable and will be dealt with swiftly. In fact, we've already identified a few of the people involved in this incident. Each of them has been suspended indefinitely, without pay, pending further investigation.
Unfortunately, this may not do much to change the culture of auto workers, says one longtime auto worker who spoke to us about the video.
"The problem is not really the drinking per se. The problem is when it happens the UAW turns a blind eye," says the Detroit resident who used to work in automobile manufacturing but wished to not be identified because of his close family ties to the United Auto Workers and friends still in the industry.
"My first week on the job I was teaching some classes at this plant, and the breaktime bell goes off to wake up the guys so they can take a break," he explains. "The trailer [I was in] was parked up right next to the plant window and I see this head go by, and it was this guy snorting coke back there. That was my first experience."
Like many Detroit residents, his two uncles and father were all UAW members and auto workers. But whereas his dad and older uncle were well respected, his younger uncle would constantly show up to work intoxicated or not show up at all. Because of the respect other workers had for his dad and uncle he was never seriously punished or even sent to drug rehab for his own protection.
"Once my uncle passed away, my youngest uncle said 'I better retire' because he knew his older brother wouldn't be there to stick up for him."
"I remember seeing people get fired and would be shocked, and be like 'Oh my God' and some of the people who have been there longer are like 'don't worry, they'll be back,'" He told us. "Usually it was a few day suspension to put on a dog and pony show. They just turn a blind eye after a while.What some of these guys need is alcohol treatment programs."
The UAW, to its credit, issued a statement disapproving of the activity. Unfortunately, it also didn't offer to do anything about it or seem in any way regretful for the worker behavior:
The UAW strongly opposes the use of controlled substances or alcohol use on the job. This type of behavior jeopardizes the health and safety of all employees. We also recognize that, unfortunately, these behaviors exist in our society.
The UAW and the Chrysler Corporation work together to keep our workplaces drug and alcohol free, and to encourage employees with substance abuse problems to get the treatment they need. The employees involved in this situation do not represent the vast majority of workers at Chrysler who do a great job making high quality vehicles in some of the most productive manufacturing facilities in the United States.
Sure, yeah, it does represent a danger to the other workers, but what about the people driving Jeeps built by drunk/high workers?
Like a lot of people in the industry, the former employee who spoke to us said he supports the UAW and the Big 3 but recognizes there's a major problem.
"I love the auto inudstry, i love everything about it... I grew up eating/sleeping breathing cars. I really just would like to see things change."
Just as the three-martini lunch is sadly no longer accepted in white collar America, so too, the pot-and-beer lunch is no longer accepted for blue collar America.
09 August 2010
Chrysler Net Loss Narrows to $172 Million on Lower Costs, Increasing Sales
Bloomberg
Chrysler Group LLC, the U.S. automaker run by Fiat SpA, reported a second-quarter net loss that narrowed to $172 million, benefiting from lower costs and higher U.S. demand, while operating profits widened.
Revenue rose 8.2 percent to $10.5 billion (7.9 billion euros) compared with the first three months of the year, the Auburn Hills, Michigan-based automaker said today in a statement. The net loss narrowed from $197 million in the first quarter. Operating income rose 28 percent from the first quarter to $183 million.
Chief Executive Officer Sergio Marchionne is benefiting from lower costs after last year’s bankruptcy, while carrying higher customer discounts and expenses related to the production of the redesigned Jeep Grand Cherokee. Marchionne has said the company, which has earned $326 million in first-half operating profit, may sell shares to the public next year.
“It’s a solid step on the way toward going public and validating going public,” Joe Magyer, a senior analyst at The Motley Fool in Alexandria, Virginia, said in a telephone interview before the release.
Worldwide vehicle sales rose to 407,000 cars and trucks during the second quarter, from 334,000 in the first three months of the year, Chrysler said.
U.S. sales in the period rose 31 percent from a year earlier, when the company was restructuring in bankruptcy, while the overall industry increased 18 percent, according to Autodata Corp., a research company based in Woodcliff Lake, New Jersey. Chrysler’s U.S. deliveries have gained 11.9 percent in the first half, trailing the industry’s 16.7 percent increase.
Cash Increases
“The second quarter operating profit confirms that Chrysler Group is on track to achieve its goals, yet an extraordinary amount of work still lies ahead,” Marchionne said in a statement.
Chrysler said its cash increased to $7.84 billion at the end of June from $7.37 billion on March 31. The company said it can draw on $2.3 billion in credit from U.S. and Canadian governments.
The company needs to keep a minimum cash balance of about $3 billion to pay for intra-month working capital requirements, Bruce Clark, senior vice president at Moody’s Investors Service, said in a November 2009 note.
Chrysler owes $5.8 billion to the U.S. Treasury, which holds a 10 percent stake in the company. Canada owns 2.5 percent, and a UAW trust for retiree medical costs holds 68 percent.
Increasing Stake
Fiat, which owns 20 percent of Chrysler, can increase its stake by meeting certain milestones. Marchionne, who also is Fiat’s CEO, has said he expects to increase the stake by 5 percent this year by introducing the Fiat 500 in the U.S.
Marchionne on July 30 told reporters in Detroit that Chrysler could be profitable on a net basis if it wasn’t making interest payments to the U.S. government.
“We have enough cash to pay it all off but you can’t run a business without cash,” he said.
Revenue rose 8.2 percent to $10.5 billion (7.9 billion euros) compared with the first three months of the year, the Auburn Hills, Michigan-based automaker said today in a statement. The net loss narrowed from $197 million in the first quarter. Operating income rose 28 percent from the first quarter to $183 million.
Chief Executive Officer Sergio Marchionne is benefiting from lower costs after last year’s bankruptcy, while carrying higher customer discounts and expenses related to the production of the redesigned Jeep Grand Cherokee. Marchionne has said the company, which has earned $326 million in first-half operating profit, may sell shares to the public next year.
“It’s a solid step on the way toward going public and validating going public,” Joe Magyer, a senior analyst at The Motley Fool in Alexandria, Virginia, said in a telephone interview before the release.
Worldwide vehicle sales rose to 407,000 cars and trucks during the second quarter, from 334,000 in the first three months of the year, Chrysler said.
U.S. sales in the period rose 31 percent from a year earlier, when the company was restructuring in bankruptcy, while the overall industry increased 18 percent, according to Autodata Corp., a research company based in Woodcliff Lake, New Jersey. Chrysler’s U.S. deliveries have gained 11.9 percent in the first half, trailing the industry’s 16.7 percent increase.
Cash Increases
“The second quarter operating profit confirms that Chrysler Group is on track to achieve its goals, yet an extraordinary amount of work still lies ahead,” Marchionne said in a statement.
Chrysler said its cash increased to $7.84 billion at the end of June from $7.37 billion on March 31. The company said it can draw on $2.3 billion in credit from U.S. and Canadian governments.
The company needs to keep a minimum cash balance of about $3 billion to pay for intra-month working capital requirements, Bruce Clark, senior vice president at Moody’s Investors Service, said in a November 2009 note.
Chrysler owes $5.8 billion to the U.S. Treasury, which holds a 10 percent stake in the company. Canada owns 2.5 percent, and a UAW trust for retiree medical costs holds 68 percent.
Increasing Stake
Fiat, which owns 20 percent of Chrysler, can increase its stake by meeting certain milestones. Marchionne, who also is Fiat’s CEO, has said he expects to increase the stake by 5 percent this year by introducing the Fiat 500 in the U.S.
Marchionne on July 30 told reporters in Detroit that Chrysler could be profitable on a net basis if it wasn’t making interest payments to the U.S. government.
“We have enough cash to pay it all off but you can’t run a business without cash,” he said.
09 July 2010
Chrysler Adds 2 Car Payments to Incentives
USA Today
Chrysler is expanding an incentive program previously limited to its minivans that allows buyers of most models to return the vehicle within 60 days if they are not happy with it. The program also covers the first two monthly payments up to $1,000.
"With this pledge, consumers will have the confidence to know they made the right purchase or they can return the vehicle no questions asked," said Fred Diaz, CEO of the Ram truck brand and also Chrysler Group's top U.S. sales executive.
The program includes most 2010 Chrysler, Jeep, Dodge and Ram models.
The automaker's newest models, such as the 2011 Jeep Grand Cherokee, are not in the program.
Most automakers try to clear out current model year vehicles from July through Labor Day to make room for 2011 models, most of which are introduced in the fall. Chrysler dealers had 59 days of supply on their lots at the end of June, down from 71 days a year earlier, according to Ward's Automotive Reports.
Chrysler's sales have recovered more slowly than those at Ford or General Motors, but in each of the last two months, Chrysler has reported increases of more than 30% over the year-earlier month.
A big portion of those higher sales are going to rental agencies, government and corporate fleets.
This pledge, which is similar to an offer Hyundai made in the depths of the economic downturn in early 2009, could be aimed at boosting retail sales.
"It certainly couldn't hurt. It doesn't really cost any more than plunking down a big incentive on the hood," said Aaron Bragman, an analyst at IHS Automotive in Northville, Mich. "The actual incidence of returning a vehicle is fairly low, if past programs are anything to go by."
In addition, Chrysler is offering what it calls the "National Tent Event" through Aug. 2. Dealers will offer a choice of:
•The two-month payment offer.
•Interest-free financing up to 60 months on most 2010 models if buyers finance through GMAC Financial Services (1.9% for 72 months).
•Direct cash rebates that range from $1,000 to $4,000 on various models.
"With this pledge, consumers will have the confidence to know they made the right purchase or they can return the vehicle no questions asked," said Fred Diaz, CEO of the Ram truck brand and also Chrysler Group's top U.S. sales executive.
The program includes most 2010 Chrysler, Jeep, Dodge and Ram models.
The automaker's newest models, such as the 2011 Jeep Grand Cherokee, are not in the program.
Most automakers try to clear out current model year vehicles from July through Labor Day to make room for 2011 models, most of which are introduced in the fall. Chrysler dealers had 59 days of supply on their lots at the end of June, down from 71 days a year earlier, according to Ward's Automotive Reports.
Chrysler's sales have recovered more slowly than those at Ford or General Motors, but in each of the last two months, Chrysler has reported increases of more than 30% over the year-earlier month.
A big portion of those higher sales are going to rental agencies, government and corporate fleets.
This pledge, which is similar to an offer Hyundai made in the depths of the economic downturn in early 2009, could be aimed at boosting retail sales.
"It certainly couldn't hurt. It doesn't really cost any more than plunking down a big incentive on the hood," said Aaron Bragman, an analyst at IHS Automotive in Northville, Mich. "The actual incidence of returning a vehicle is fairly low, if past programs are anything to go by."
In addition, Chrysler is offering what it calls the "National Tent Event" through Aug. 2. Dealers will offer a choice of:
•The two-month payment offer.
•Interest-free financing up to 60 months on most 2010 models if buyers finance through GMAC Financial Services (1.9% for 72 months).
•Direct cash rebates that range from $1,000 to $4,000 on various models.
25 April 2010
Chrysler's Losses Down Dramatically in First Quarter
USA Today
Chrysler Group still is bleeding, but says it got a whole lot healthier in the first quarter. The company today made its first report on its finances since it was created out of bankruptcy court last June 10. The company lost a staggering $3.8 billion from then through the end of the year, but reported it cut its net loss to $197 million from January through March -- and actually made money from selling cars and trucks, before interest and taxes.
The company, now run by Fiat, said it had an operating profit of $143 million in the quarter, helped particularly by truck sales. It also generated $1.5 billion in cash, padding its reserves to $7.4 billion and raising odds it can stay afloat as it replenishes the product pipeline. It predicted its operations would at least break even this year.
Chrysler made its report this morning in Michigan as Fiat began unveiling its five-year business plan in Turin, Italy. Drive On will bring you details, which should include products coming to Chrysler showrooms and plants, as they unfold. Sergio Marchionne, CEO of both, issued this statement on Chrysler: "This positive operating result in the first quarter is a concrete indication to our customers, dealers and suppliers that the 2010 targets we have set for ourselves are achievable."
Still, there was plenty in the report to depress those of you rooting for Chrysler to make it:
Chrysler's U.S. market share grew from 8.1% in 2009 to 9.1%, but U.S. sales grew just 5% vs. growth overall in the market of 15.5%. And about 40% of Chrysler sales were lower-profit sales to rental agencies and other fleets.
Naysayers remain skeptical that the company will survive until it can replenish its aging lineup. Max Warburton, an industry analyst at Sanford C. Bernstein in England, wrote that the positive cash flow is "almost irrelevant" and "being driven by dealer restocking and stretching payables. We remain unconvinced Chrysler will survive in its current form despite Marchionne's blood, sweat and tears."
While Marchionne's cost cuts have been impressive, Warburton wrote that the company's capital investments have been minimal, and it has been arguing with parts suppliers about payments for machinery to build future products.
Marchionne took a shot at such gloom-mongers as he began his presentation in Turin today on Fiat's five-year financial plans in Turin. He compared analyst reports putting down Chrysler's operating profits to the "Boulevard press," meaning the tabloids. "As we all know, in business it is ultimately only facts that prevail," he said.
For those of you keeping score at home: Chrysler's last annual profit was in 2005, when it made $1.8 billion, and the last quarter with a profit was the second quarter of 2006, when it earned $65 million.
The company, now run by Fiat, said it had an operating profit of $143 million in the quarter, helped particularly by truck sales. It also generated $1.5 billion in cash, padding its reserves to $7.4 billion and raising odds it can stay afloat as it replenishes the product pipeline. It predicted its operations would at least break even this year.
Chrysler made its report this morning in Michigan as Fiat began unveiling its five-year business plan in Turin, Italy. Drive On will bring you details, which should include products coming to Chrysler showrooms and plants, as they unfold. Sergio Marchionne, CEO of both, issued this statement on Chrysler: "This positive operating result in the first quarter is a concrete indication to our customers, dealers and suppliers that the 2010 targets we have set for ourselves are achievable."
Still, there was plenty in the report to depress those of you rooting for Chrysler to make it:
Chrysler's U.S. market share grew from 8.1% in 2009 to 9.1%, but U.S. sales grew just 5% vs. growth overall in the market of 15.5%. And about 40% of Chrysler sales were lower-profit sales to rental agencies and other fleets.
Naysayers remain skeptical that the company will survive until it can replenish its aging lineup. Max Warburton, an industry analyst at Sanford C. Bernstein in England, wrote that the positive cash flow is "almost irrelevant" and "being driven by dealer restocking and stretching payables. We remain unconvinced Chrysler will survive in its current form despite Marchionne's blood, sweat and tears."
While Marchionne's cost cuts have been impressive, Warburton wrote that the company's capital investments have been minimal, and it has been arguing with parts suppliers about payments for machinery to build future products.
Marchionne took a shot at such gloom-mongers as he began his presentation in Turin today on Fiat's five-year financial plans in Turin. He compared analyst reports putting down Chrysler's operating profits to the "Boulevard press," meaning the tabloids. "As we all know, in business it is ultimately only facts that prevail," he said.
For those of you keeping score at home: Chrysler's last annual profit was in 2005, when it made $1.8 billion, and the last quarter with a profit was the second quarter of 2006, when it earned $65 million.
16 April 2010
Senator Urges Government not to Assume GM Pension Plans
The Detroit News
Detroit -- Two Ohio members of Congress urged the Obama administration today to ensure that General Motors Co. meets its pension obligations.
In a letter to Treasury Secretary Timothy Geithner, Sens. Sherrod Brown and Tim Ryan -- both Ohio Democrats -- urged the administration not to assume GM's underfunded pension plans.
"As a majority owner in General Motors, the U.S. government must not put itself in the pension," the pair said in the letter. "It also would be a poor outcome for the U.S. taxpayer to sell our interests in the auto sector, only to have the U.S. government to assume the unfunded liabilities in their pension plans."
The Treasury swapped about $42 billion of its $50 billion bailout of GM for a 61 percent majority stake in the automaker.
Last week, GM disclosed under new accounting rules, the company's worldwide unfunded pension liabilities are $27 billion as of Dec. 31.
GM's U.S. obligations grew by $3.5 billion to $17.1 billion as of the end of 2009, while it owes $10.3 billion for pension obligations elsewhere.
Treasury spokeswoman Meg Reilly said the department didn't have an immediate comment.
The Obama auto task force warned last year that GM's future pension costs -- which include $6 billion in payments due in 2013 and 2014 -- are "unsustainable" and would require GM to sell 900,000 additional cars each year to meet the obligation.
The fate of GM and Chrysler's underfunded pension plans has drawn more interest after the Government Accountability Office released a report on the status of the pensions.
The report said auto sector participants could lose as much as $35 billion if suppliers and automakers terminated pension plans and were assumed by the Pension Benefit Guaranty Corp.
The GAO report "raised a number of alarming concerns about the conflicting roles and responsibilities of the Treasury Department and the potential impact on retirement security in the auto sector."
Delphi Corp. terminated its pension plans in July, saddling the PBGC with a $6.2 billion liability for plans covering 70,000 people. Retirees and employees stand to lose $1.2 billion in pension benefits because of maximum benefit levels covered by the PBGC.
In a letter to Treasury Secretary Timothy Geithner, Sens. Sherrod Brown and Tim Ryan -- both Ohio Democrats -- urged the administration not to assume GM's underfunded pension plans.
"As a majority owner in General Motors, the U.S. government must not put itself in the pension," the pair said in the letter. "It also would be a poor outcome for the U.S. taxpayer to sell our interests in the auto sector, only to have the U.S. government to assume the unfunded liabilities in their pension plans."
The Treasury swapped about $42 billion of its $50 billion bailout of GM for a 61 percent majority stake in the automaker.
Last week, GM disclosed under new accounting rules, the company's worldwide unfunded pension liabilities are $27 billion as of Dec. 31.
GM's U.S. obligations grew by $3.5 billion to $17.1 billion as of the end of 2009, while it owes $10.3 billion for pension obligations elsewhere.
Treasury spokeswoman Meg Reilly said the department didn't have an immediate comment.
The Obama auto task force warned last year that GM's future pension costs -- which include $6 billion in payments due in 2013 and 2014 -- are "unsustainable" and would require GM to sell 900,000 additional cars each year to meet the obligation.
The fate of GM and Chrysler's underfunded pension plans has drawn more interest after the Government Accountability Office released a report on the status of the pensions.
The report said auto sector participants could lose as much as $35 billion if suppliers and automakers terminated pension plans and were assumed by the Pension Benefit Guaranty Corp.
The GAO report "raised a number of alarming concerns about the conflicting roles and responsibilities of the Treasury Department and the potential impact on retirement security in the auto sector."
Delphi Corp. terminated its pension plans in July, saddling the PBGC with a $6.2 billion liability for plans covering 70,000 people. Retirees and employees stand to lose $1.2 billion in pension benefits because of maximum benefit levels covered by the PBGC.
12 April 2010
Chrysler's on the Mend, Marchionne Tells Dealers
The Detroit Free Press
NEW YORK – Neither rain nor ice nor Teamsters protests nor hotel fire alarms kept Chrysler CEO Sergio Marchionne from spreading the word that Chrysler is on the mend – whether an audience of auto dealers believed it or not.
The rumpled Italian executive said this morning he was more confident than ever in Chrysler’s plan, adding that the automaker had just under $5 billion in cash at the end of 2009 and would break even this year.
Worries about whether Chrysler could meet its plan “was a song we had heard before and we were not fazed,” Marchionne said.
Marchionne, speaking to a forum sponsored by the National Automobile Dealers Association and IHS Global Insight ahead of the New York auto show, also offered some tempered praise for dealers. He pledged that Chrysler would spend $500 million on its dealer network this year and noted it had reinstated about 25% of the dealers it cut following last year’s bankruptcy.
But he also said the arbitration for cut dealers pushed through Congress by NADA had created uncertainty that was blocking progress in other areas.
“All the time taken up with this is unhelpful,” he said. “There’s an inequitable impact on Chrysler.”
And he noted that today was the one-year anniversary from the announcement by President Barack Obama that Chrysler had 30 days to complete a partnership with Fiat or close. Marchionne said he keeps a poster with some of Obama’s remarks on his wall as a reminder.
He also gave some insight into how he works, namely almost around the clock, with 78 executives around the globe reporting directly to him.
“I feel a lot more comfortable today than I did 12 months ago,” Marchionne said.
Marchionne’s remarks were delayed by troubles with his flight out of Detroit, then interrupted when six protesters representing union carhaulers briefly tried to push into the meeting room. The protesters wore white jump suits labeled “Fiat Chrysler Crash Dummy,” and were forcibly ejected from the hotel.
About 20 minutes later, the hotel announced it was testing its fire alarms. Marchionne shook his head, and kept reading.
Chrysler has been struggling while it rushes to refill what had been an empty backlog of new models, with sales barely keeping pace with the market. The automaker has also stayed on the sidelines of an increasingly aggressive price war launched by Toyota to regain market share following its recalls.
Marchionne said the Jeep Grand Cherokee would launch May 3, and would be on sale in June or July. And he vowed to give more insight into Chrysler’s financials on April 21, when Fiat is scheduled to review its finances.
The rumpled Italian executive said this morning he was more confident than ever in Chrysler’s plan, adding that the automaker had just under $5 billion in cash at the end of 2009 and would break even this year.
Worries about whether Chrysler could meet its plan “was a song we had heard before and we were not fazed,” Marchionne said.
Marchionne, speaking to a forum sponsored by the National Automobile Dealers Association and IHS Global Insight ahead of the New York auto show, also offered some tempered praise for dealers. He pledged that Chrysler would spend $500 million on its dealer network this year and noted it had reinstated about 25% of the dealers it cut following last year’s bankruptcy.
But he also said the arbitration for cut dealers pushed through Congress by NADA had created uncertainty that was blocking progress in other areas.
“All the time taken up with this is unhelpful,” he said. “There’s an inequitable impact on Chrysler.”
And he noted that today was the one-year anniversary from the announcement by President Barack Obama that Chrysler had 30 days to complete a partnership with Fiat or close. Marchionne said he keeps a poster with some of Obama’s remarks on his wall as a reminder.
He also gave some insight into how he works, namely almost around the clock, with 78 executives around the globe reporting directly to him.
“I feel a lot more comfortable today than I did 12 months ago,” Marchionne said.
Marchionne’s remarks were delayed by troubles with his flight out of Detroit, then interrupted when six protesters representing union carhaulers briefly tried to push into the meeting room. The protesters wore white jump suits labeled “Fiat Chrysler Crash Dummy,” and were forcibly ejected from the hotel.
About 20 minutes later, the hotel announced it was testing its fire alarms. Marchionne shook his head, and kept reading.
Chrysler has been struggling while it rushes to refill what had been an empty backlog of new models, with sales barely keeping pace with the market. The automaker has also stayed on the sidelines of an increasingly aggressive price war launched by Toyota to regain market share following its recalls.
Marchionne said the Jeep Grand Cherokee would launch May 3, and would be on sale in June or July. And he vowed to give more insight into Chrysler’s financials on April 21, when Fiat is scheduled to review its finances.
02 April 2010
Dealers Call Chrysler's Reinstatement Offers 'Ridiculous'
The Detroit News
Chrysler Group LLC's letters of intent to reinstate franchises -- sent to 50 dealers -- include conditions that dealers described Wednesday as onerous and ridiculous.
A copy of the letter, obtained by The Detroit News, is a laundry list of conditions and means for Chrysler to terminate any reinstatement offers.
"These so-called 'letters of intent' are absolutely ridiculous. This is the same nonsense they pulled throughout months of our negotiations to find a non-legislative solution to restoring dealers," said Tammy Darvish, owner of Chrysler and other brand dealerships in Silver Spring, Md.
A company spokeswoman described it as a standard letter of intent.
"Chrysler Group is speaking with the dealers involved; we have not released any additional information at this point in time," the automaker said in a statement.
Chrysler terminated 789 dealers last June, and since then 36 have been reinstated. An additional 50 started receiving letters this week that would allow them to pursue reopening their franchises.
Among Chrysler's stipulations outlined in the letter: Should "anyone file a protest or lawsuit, demand arbitration or otherwise challenge" the proposed reinstatement, or if the matter is not dismissed or resolved within 30 days, Chrysler can unilaterally stop the reinstatement.
If there is no challenge, the dealer to be reinstated will be notified and has 90 days to submit architectural plans that meet specifications that include arches as part of the exterior, and use specified materials.
The dealership also must also have customer lounges consistent with the vehicle brand, plus covered service drive-in areas, a children's play area, refreshment section, Mopar accessory display area and specific signs.
Once the plans are deemed acceptable, the dealer has 90 days to begin construction.
There are financial requirements to cover inventory as well as working capital, and reinstated dealers must enter into a minimum five-year lease.
During those five years, the dealer cannot protest or challenge any Chrysler decisions to put another dealer in the vicinity.
Dealer responses must be completed and returned within 10 days, and those who accept must withdraw their arbitration demand they have filed with the American Arbitration Association. In December, Congress mandated arbitration for Chrysler and General Motors Co. dealers who were terminated by the automakers as part of their respective bankruptcy restructuring.
Chrysler dealers have 60 days to file a site proposal. If Chrysler doesn't approve it within 30 days, it is deemed automatically rejected.
The letter of intent expires in 90 days if the facility the dealer plans to use meets Chrysler's conditions; it expires in eight months if renovations are necessary and in 18 months if the dealer is building a new facility.
Failure to meet any deadlines can result in termination of the offer in the letter.
"They have zero intention of being decent about this," Darvish said.
Jack Fitzgerald, who has dealerships in Maryland and Pennsylvania and is a leader of the lobby group Committee to Restore Dealer Rights, agreed.
"Chrysler is not dealing in good faith," he said.
Neither Darvish nor Fitzgerald has received a reinstatement offer.
GM sent letters of reinstatement to about 660 of its 2,000 terminated dealers. The GM letters were standard and reasonable in their terms, said Mike Charapp, a partner with Charapp & Weiss LLP in McLean, Wash., who represents dealers who have been terminated by both automakers.
"I have not seen that detail in a letter of intent before," Fitzgerald said of the Chrysler terms.
Chrysler said last week it also is seeking to resolve disputes with other dealers -- those who aren't being offered reinstatement -- outside of arbitration.
About 400 disenfranchised Chrysler dealers filed for arbitration, a process that must be wrapped up in June.
A copy of the letter, obtained by The Detroit News, is a laundry list of conditions and means for Chrysler to terminate any reinstatement offers.
"These so-called 'letters of intent' are absolutely ridiculous. This is the same nonsense they pulled throughout months of our negotiations to find a non-legislative solution to restoring dealers," said Tammy Darvish, owner of Chrysler and other brand dealerships in Silver Spring, Md.
A company spokeswoman described it as a standard letter of intent.
"Chrysler Group is speaking with the dealers involved; we have not released any additional information at this point in time," the automaker said in a statement.
Chrysler terminated 789 dealers last June, and since then 36 have been reinstated. An additional 50 started receiving letters this week that would allow them to pursue reopening their franchises.
Among Chrysler's stipulations outlined in the letter: Should "anyone file a protest or lawsuit, demand arbitration or otherwise challenge" the proposed reinstatement, or if the matter is not dismissed or resolved within 30 days, Chrysler can unilaterally stop the reinstatement.
If there is no challenge, the dealer to be reinstated will be notified and has 90 days to submit architectural plans that meet specifications that include arches as part of the exterior, and use specified materials.
The dealership also must also have customer lounges consistent with the vehicle brand, plus covered service drive-in areas, a children's play area, refreshment section, Mopar accessory display area and specific signs.
Once the plans are deemed acceptable, the dealer has 90 days to begin construction.
There are financial requirements to cover inventory as well as working capital, and reinstated dealers must enter into a minimum five-year lease.
During those five years, the dealer cannot protest or challenge any Chrysler decisions to put another dealer in the vicinity.
Dealer responses must be completed and returned within 10 days, and those who accept must withdraw their arbitration demand they have filed with the American Arbitration Association. In December, Congress mandated arbitration for Chrysler and General Motors Co. dealers who were terminated by the automakers as part of their respective bankruptcy restructuring.
Chrysler dealers have 60 days to file a site proposal. If Chrysler doesn't approve it within 30 days, it is deemed automatically rejected.
The letter of intent expires in 90 days if the facility the dealer plans to use meets Chrysler's conditions; it expires in eight months if renovations are necessary and in 18 months if the dealer is building a new facility.
Failure to meet any deadlines can result in termination of the offer in the letter.
"They have zero intention of being decent about this," Darvish said.
Jack Fitzgerald, who has dealerships in Maryland and Pennsylvania and is a leader of the lobby group Committee to Restore Dealer Rights, agreed.
"Chrysler is not dealing in good faith," he said.
Neither Darvish nor Fitzgerald has received a reinstatement offer.
GM sent letters of reinstatement to about 660 of its 2,000 terminated dealers. The GM letters were standard and reasonable in their terms, said Mike Charapp, a partner with Charapp & Weiss LLP in McLean, Wash., who represents dealers who have been terminated by both automakers.
"I have not seen that detail in a letter of intent before," Fitzgerald said of the Chrysler terms.
Chrysler said last week it also is seeking to resolve disputes with other dealers -- those who aren't being offered reinstatement -- outside of arbitration.
About 400 disenfranchised Chrysler dealers filed for arbitration, a process that must be wrapped up in June.
01 April 2010
Mastering Italian Fails to Impress Marchionne
The Detroit News
National Automobile Dealers Association Chairman Ed Tonkin sought to impress Sergio Marchionne with his mastery of Eye-talian when he introduced the Chrysler-Fiat CEO on Tuesday at the NADA/IHS Global Insight Conference in New York.
"I've been practicing my pronunciation," he boasted.
"It's Mar-chee-ohhhhh-nay," he said. "I also know how to say Fair-rahrrr-rhee."
Marchionne was unimpressed. "There's an easy American pronunciation of my name: Marchionne," he said. "And let's just stick with Ferrari."
Yearning for a sole mate
At Tuesday's "Learn, Meet, Succeed" seminar hosted by the Engineering Society of Detroit, arrivals to the society's Southfield headquarters were baffled by the sight of a lone lady's black high-heeled shoe on the sidewalk. It didn't seem like traditional engineering attire -- until the Insider realized the errant shoe was indeed in the right place to be reunited with its owner. Obviously, she was a hydraulic engineer.
"And how did you know that?" a co-worker asked.
"Because," Insider replied, "it was a pump."
Find a tiki, win a Wrangler
At Chrysler Group LLC, the spirit appears to be strong even if the pace of new product launches remains weak.
The Auburn Hills automaker is filling the gap until this summer's launch of the new Jeep Grand Cherokee with some wacky Jeep Wrangler giveaway contests. They harken back to the days of the prankster Chrysler that liked to have Jeeps slam through huge windows or corral bulls in downtown Detroit at auto shows -- before stern new owners and dwindling resources extinguished the carefree spirit.
A feistier Chrysler is scheduled to kick off a Jeep promotion today by inviting five trivia winners, including a man from Wixom, to the New York auto show to dig through a giant sandbox to find a hidden tiki and win a Wrangler Islander. Three more tikis will be hidden across the country, and the first treasure hunter to find each tiki and call the attached phone number wins another Islander.
Would-be winners must go to Jeep Tiki Web sites, Twitter and Facebook pages for clues about the tikis' whereabouts. The stunts may not add directly to the goal of breaking even this year, but they promise to turn Wranglers into the 21st century's version of buried treasures.
"I've been practicing my pronunciation," he boasted.
"It's Mar-chee-ohhhhh-nay," he said. "I also know how to say Fair-rahrrr-rhee."
Marchionne was unimpressed. "There's an easy American pronunciation of my name: Marchionne," he said. "And let's just stick with Ferrari."
Yearning for a sole mate
At Tuesday's "Learn, Meet, Succeed" seminar hosted by the Engineering Society of Detroit, arrivals to the society's Southfield headquarters were baffled by the sight of a lone lady's black high-heeled shoe on the sidewalk. It didn't seem like traditional engineering attire -- until the Insider realized the errant shoe was indeed in the right place to be reunited with its owner. Obviously, she was a hydraulic engineer.
"And how did you know that?" a co-worker asked.
"Because," Insider replied, "it was a pump."
Find a tiki, win a Wrangler
At Chrysler Group LLC, the spirit appears to be strong even if the pace of new product launches remains weak.
The Auburn Hills automaker is filling the gap until this summer's launch of the new Jeep Grand Cherokee with some wacky Jeep Wrangler giveaway contests. They harken back to the days of the prankster Chrysler that liked to have Jeeps slam through huge windows or corral bulls in downtown Detroit at auto shows -- before stern new owners and dwindling resources extinguished the carefree spirit.
A feistier Chrysler is scheduled to kick off a Jeep promotion today by inviting five trivia winners, including a man from Wixom, to the New York auto show to dig through a giant sandbox to find a hidden tiki and win a Wrangler Islander. Three more tikis will be hidden across the country, and the first treasure hunter to find each tiki and call the attached phone number wins another Islander.
Would-be winners must go to Jeep Tiki Web sites, Twitter and Facebook pages for clues about the tikis' whereabouts. The stunts may not add directly to the goal of breaking even this year, but they promise to turn Wranglers into the 21st century's version of buried treasures.
16 February 2010
Business Briefs
AP
Former head of GM's European division joins Tata Motors
Tata Motors Ltd . hired Carl-Peter Forster, the former head of General Motors Co.'s European division, as chief executive officer to help the Indian company manage global operations after purchasing Jaguar Land Rover. Forster, 55, will be responsible for the two British luxury brands as well as Tata's truck, bus and car operations.
Forster left GM in November after opposing the automaker's decision to back out of an agreement to sell a majority stake in the German Opel unit to a group led by Magna International Inc.
Metro area's housing inventory drops sharply
Monthly data by Realcomp II Ltd ., a Farmington Hills-based real estate data service, showed the bloated inventory of homes and condos dropped sharply in Metro Detroit last month: by 27 percent in Oakland, 28 percent in Macomb and 33 percent in Wayne, compared to January 2009.
Chrysler asks Sterling Heights for more time
Chrysler Group LLC is asking the Sterling Heights City Council for an extension to negotiate the transfer of ownership of an assembly plant to continue to receive $8.2 billion in annual tax abatements.
Mayor Richard Notte said the council will likely agree tonight to give the automaker as much as 30 more days to complete negotiations to transfer ownership from the bankrupt estate to Chrysler Group.
Forster left GM in November after opposing the automaker's decision to back out of an agreement to sell a majority stake in the German Opel unit to a group led by Magna International Inc.
Metro area's housing inventory drops sharply
Monthly data by Realcomp II Ltd ., a Farmington Hills-based real estate data service, showed the bloated inventory of homes and condos dropped sharply in Metro Detroit last month: by 27 percent in Oakland, 28 percent in Macomb and 33 percent in Wayne, compared to January 2009.
Chrysler asks Sterling Heights for more time
Chrysler Group LLC is asking the Sterling Heights City Council for an extension to negotiate the transfer of ownership of an assembly plant to continue to receive $8.2 billion in annual tax abatements.
Mayor Richard Notte said the council will likely agree tonight to give the automaker as much as 30 more days to complete negotiations to transfer ownership from the bankrupt estate to Chrysler Group.
22 January 2010
About 600 Car Dealers Try to Get Businesses Back
mLive
About 21 percent of the General Motors and Chrysler dealers whose businesses are being shut down by the automakers have filed paperwork appealing the decisions.
Around 600 dealers out of the roughly 2,800 whose franchises were revoked last year have asked for arbitration hearings in an effort to get their franchises back. Dealers have until midnight Monday to file for arbitration.
The appeals mean that many neighborhood showrooms that were shut down or scheduled for closure could return to business. GM Chairman and CEO Ed Whitacre Jr. has said he expects hundreds of dealers to win their franchises back during the process, which must be wrapped up by June 14.
GM and Chrysler decided to shed dealerships during severe financial problems that plunged them into bankruptcy protection last summer. While GM has told about 2,000 Chevrolet, GMC, Buick and Cadillac dealers that they will be phased out by October, about 700 will stay open because the automaker has not taken away all of their brands. Chrysler already has revoked 789 Chrysler, Dodge and Jeep franchises. Both companies said the doomed dealerships weren't profitable, were too close to other dealers or were in areas where buyers no longer live or shop.
The dealer appeals are being filed under a federal law passed in December that appointed the American Arbitration Association to handle the claims. Arbitrators will consider a dealership's profitability, the manufacturer's business plan, the dealership's economic viability, and whether the dealer met objectives outlined by the automaker.
Congress passed the law after dealers complained that businesses run by their families for generations were taken away unfairly.
India Johnson, an association senior vice president who is in charge of the hearings, said she expects 700 to 800 dealers to seek binding arbitration.
But not all will get hearings, she said. Some filed paperwork to preserve their right to appeal but may not proceed, while other dealers may settle with the automakers before arbitration hearings, she said.
The arbitration hearings, which must be conducted in the dealership's home state, are likely to cost both sides a lot of money. Some dealers may lack money to pursue arbitration because they've closed their businesses or aren't making as much as they once did.
Mike Wolf, who is appealing Chrysler's decision to cut his family's Chrysler-Jeep dealership in Plymouth, Wis., near Green Bay, says the state dealership association told him to expect legal costs of $25,000 to $75,000.
It's a gamble for dealers whose franchise agreements alone are worth anywhere from $500,000 to more than $2 million, Wolf said.
Dealers and automakers also have to split the cost of the arbitrator, meeting rooms and fees. Both GM and Chrysler have received government aid, part of which could be spent on the appeals.
The nonprofit arbitration association will do all it can to keep costs down, Johnson said. In some cases, dealers may represent themselves without an attorney, and others may request arbitrators that will cut their hourly rates, she said.
Chrysler CEO Sergio Marchionne has said the automaker may challenge the constitutionality of the arbitration law in federal court. Spokeswoman Kathy Graham said Thursday that the company has not decided whether to go to court.
Graham said Chrysler already has had to hire people to handle the paperwork, and it likely will need teams of lawyers and company officials to attend multiple hearings on the same day in different states.
Several dealers also are challenging the closures in court under state franchise laws that make it difficult for automakers to cut franchises.
GM plans to have about 4,100 Buick, Chevrolet, GMC and Cadillac dealers in the future. Chrysler had 2,352 dealerships remaining at the end of December.
The appeals mean that many neighborhood showrooms that were shut down or scheduled for closure could return to business. GM Chairman and CEO Ed Whitacre Jr. has said he expects hundreds of dealers to win their franchises back during the process, which must be wrapped up by June 14.
GM and Chrysler decided to shed dealerships during severe financial problems that plunged them into bankruptcy protection last summer. While GM has told about 2,000 Chevrolet, GMC, Buick and Cadillac dealers that they will be phased out by October, about 700 will stay open because the automaker has not taken away all of their brands. Chrysler already has revoked 789 Chrysler, Dodge and Jeep franchises. Both companies said the doomed dealerships weren't profitable, were too close to other dealers or were in areas where buyers no longer live or shop.
The dealer appeals are being filed under a federal law passed in December that appointed the American Arbitration Association to handle the claims. Arbitrators will consider a dealership's profitability, the manufacturer's business plan, the dealership's economic viability, and whether the dealer met objectives outlined by the automaker.
Congress passed the law after dealers complained that businesses run by their families for generations were taken away unfairly.
India Johnson, an association senior vice president who is in charge of the hearings, said she expects 700 to 800 dealers to seek binding arbitration.
But not all will get hearings, she said. Some filed paperwork to preserve their right to appeal but may not proceed, while other dealers may settle with the automakers before arbitration hearings, she said.
The arbitration hearings, which must be conducted in the dealership's home state, are likely to cost both sides a lot of money. Some dealers may lack money to pursue arbitration because they've closed their businesses or aren't making as much as they once did.
Mike Wolf, who is appealing Chrysler's decision to cut his family's Chrysler-Jeep dealership in Plymouth, Wis., near Green Bay, says the state dealership association told him to expect legal costs of $25,000 to $75,000.
It's a gamble for dealers whose franchise agreements alone are worth anywhere from $500,000 to more than $2 million, Wolf said.
Dealers and automakers also have to split the cost of the arbitrator, meeting rooms and fees. Both GM and Chrysler have received government aid, part of which could be spent on the appeals.
The nonprofit arbitration association will do all it can to keep costs down, Johnson said. In some cases, dealers may represent themselves without an attorney, and others may request arbitrators that will cut their hourly rates, she said.
Chrysler CEO Sergio Marchionne has said the automaker may challenge the constitutionality of the arbitration law in federal court. Spokeswoman Kathy Graham said Thursday that the company has not decided whether to go to court.
Graham said Chrysler already has had to hire people to handle the paperwork, and it likely will need teams of lawyers and company officials to attend multiple hearings on the same day in different states.
Several dealers also are challenging the closures in court under state franchise laws that make it difficult for automakers to cut franchises.
GM plans to have about 4,100 Buick, Chevrolet, GMC and Cadillac dealers in the future. Chrysler had 2,352 dealerships remaining at the end of December.
06 January 2010
December Auto Sales: Up For Ford, Down For GM, Chrysler
The Washington Post
The U.S. auto market continued its slow crawl out of the recession in December as more consumers bought cars, but shoppers' enthusiasm remained well below pre-crisis days.
In December, the annualized rate of auto sales in the United States climbed to 11.2 million, according to Edmunds.com. That's up from 9.1 million at the nadir earlier last year but far from the halcyon days when auto sales ran over 16 million annually.
"The recession shook the foundations of consumer confidence," said Ken Czubay, Ford's vice president of U.S. sales and marketing.
"Everything is improving, but the recovery is really slow," said Jessica Caldwell, senior analyst at Edmunds.com. "It's not even growth, really -- it's more like stabilization." While nearly every major automaker is struggling in the United States, General Motors and Chrysler, the two U.S. automakers bailed out with billions of dollars in government funds, remain particularly troubled.
Chrysler's December sales fell to 86,523, down 4 percent from December 2008, according to Autodata. Sales were down 36 percent for the full year.
General Motors, which is now largely owned by the U.S. government, saw sales drop to 207,538 in December, a 6 percent decrease. Its sales were down 30 percent in 2009, compared with 2008.
Susan Docherty, GM's vice president of U.S. sales, attributed the sales drop to a reduction in fleet sales, a drop in spending for consumer incentives, and the decision to close the Pontiac and Saturn brands.
One bright spot for the U.S. industry was Ford, which experienced a drop in annual sales but outperformed December 2008's sales by 33 percent last month.
The economy's recessionary plunge put the auto industry under intense pressure in 2009, one of the most transformative years ever for the industry.
After the bailouts of GM and Chrysler, the government initiated a $3 billion "cash for clunkers" program to revive sales with government-backed rebates; eventually, 700,000 cars were traded in under the program.
As the U.S. market collapsed, meanwhile, China's surged, and it has begun to rival the United States as the largest auto market.
Many in the industry see the wreckage as pure catastrophe. But some environmentalists think the drop in the market reflects not just economic forces but changing consumer tastes.
Lester Brown, founder and president of the Earth Policy Institute, projects that there were more cars scrapped last year in the United States than sold.
"America's century-old love affair with the automobile may be coming to an end," he said.
"That's pretty preposterous," said John DeCicco, a University of Michigan lecturer and former senior fellow at the Environmental Defense Fund. "We're far from that."
In December, the annualized rate of auto sales in the United States climbed to 11.2 million, according to Edmunds.com. That's up from 9.1 million at the nadir earlier last year but far from the halcyon days when auto sales ran over 16 million annually.
"The recession shook the foundations of consumer confidence," said Ken Czubay, Ford's vice president of U.S. sales and marketing.
"Everything is improving, but the recovery is really slow," said Jessica Caldwell, senior analyst at Edmunds.com. "It's not even growth, really -- it's more like stabilization." While nearly every major automaker is struggling in the United States, General Motors and Chrysler, the two U.S. automakers bailed out with billions of dollars in government funds, remain particularly troubled.
Chrysler's December sales fell to 86,523, down 4 percent from December 2008, according to Autodata. Sales were down 36 percent for the full year.
General Motors, which is now largely owned by the U.S. government, saw sales drop to 207,538 in December, a 6 percent decrease. Its sales were down 30 percent in 2009, compared with 2008.
Susan Docherty, GM's vice president of U.S. sales, attributed the sales drop to a reduction in fleet sales, a drop in spending for consumer incentives, and the decision to close the Pontiac and Saturn brands.
One bright spot for the U.S. industry was Ford, which experienced a drop in annual sales but outperformed December 2008's sales by 33 percent last month.
The economy's recessionary plunge put the auto industry under intense pressure in 2009, one of the most transformative years ever for the industry.
After the bailouts of GM and Chrysler, the government initiated a $3 billion "cash for clunkers" program to revive sales with government-backed rebates; eventually, 700,000 cars were traded in under the program.
As the U.S. market collapsed, meanwhile, China's surged, and it has begun to rival the United States as the largest auto market.
Many in the industry see the wreckage as pure catastrophe. But some environmentalists think the drop in the market reflects not just economic forces but changing consumer tastes.
Lester Brown, founder and president of the Earth Policy Institute, projects that there were more cars scrapped last year in the United States than sold.
"America's century-old love affair with the automobile may be coming to an end," he said.
"That's pretty preposterous," said John DeCicco, a University of Michigan lecturer and former senior fellow at the Environmental Defense Fund. "We're far from that."
05 January 2010
In Detroit -- It's Showtime
Wall Street Journal
Detroit in January isn't an exotic destination, with wind chills in the teens and snowplows scraping streets in their annual battle with winter. But more than 5,000 journalists, many from overseas, will flock there next week for the preview of the 103rd annual auto show.
When the North American International Auto Show opens Jan. 16 an expected 700,000 visitors will see more than 700 new cars on display, including more than 30 global debuts. They'll also see an industry transformed. The stakes at this year's auto show are enormous because the focus won't be only on the cars but also on the companies themselves.
Since last year's show, General Motors and Chrysler have gone in and out of bankruptcy. GM is mostly owned by the government, and Chrysler is being run by Fiat. Toyota has announced its first loss in nearly 60 years and the largest car recall ever.
GM's once-venerable Pontiac, Saturn and Saab brands will be absent from this year's show. Pontiac and Saturn are dead, victims of downsizing that has slashed GM to four brands from eight. Only a flicker of hope remains for Saab. The efforts of two tiny European car companies to buy it have fallen through, although GM says it's open to further negotiations. China's Beijing Automotive, meanwhile, has bought engineering rights to a couple Saab models. Will they live on as Sino-Saabs?
In the wake of last year's upheaval, auto makers will be trying to show that they have not just new cars but also promising futures. It's a critical message because the next chapters in automotive history will be radically different from the past.
Car companies are getting hit with multiple simultaneous revolutions, the fallout from the GM and Chrysler bankruptcies being just one. Others include the fragile economic recoveries in major economies worldwide and the endemic weakness of the U.S. dollar, which makes all imported goods, including cars, more expensive. Excess global auto-manufacturing capacity remains an issue. New technologies are changing the vocabulary of automotive engineers from "pound feet of torque" to "lithium-ion battery" and "plug-in hybrid." Pass the tofu, please.
On top of all this comes new competition from auto makers in emerging countries, with China leading the way. Besides Beijing Automotive's deal for Saab assets, China's Geely Automobile is the leading candidate to buy Volvo from Ford.
Still another Chinese company, BYD Auto, will display its plug-in hybrid vehicles in Detroit. BYD has attracted investment from a guy named Warren Buffet. Meanwhile, India's Tata has purchased Jaguar and Land Rover, the unofficial brands of Britain's landed gentry.
As the aftershocks continue it's clear GM, Chrysler and Ford—the only Detroit car company to avoid bankruptcy—will be America's Big Three no more. America instead will have a Medium Six: GM, Ford, Toyota, Honda, Nissan and one more, perhaps Fiat-Chrysler or Volkswagen or Hyundai. Each of the six will have between 8% and 20% of the U.S. market. It's an industry structure that will mirror what Europe has had for decades.
For car buyers, this means more competition on everything from styling to technology. In the "Big Three" world, one company would have set the trend for others to follow. But in the "Medium Six" world, GM and Toyota are pushing hybrids while Nissan is taking a different road: developing all-electric cars that won't use gasoline at all.
Ford, meanwhile, is marketing its electronic technology, ranging from its "Sync" system that allows voice-activated audio controls to forward-looking radar that keeps your car a preset distance from the car in front. Gentlemen, start your iPhones.
The Tata Nano, being sold in India for $2,000, doesn't meet U.S safety regulations. But some car company could well launch a U.S. model that will sell for $10,000, half the average price of cars today—or even less.
It might be Korea's Hyundai, which has tapped the back-to-basics move in recession-wracked America and become the hottest car company on earth. Hyundai's offer a year ago to let buyers hand back their cars if they lost their jobs was a marketing coup, even though fewer than 100 cars were returned. The company's U.S. sales rose 7% last year while most others posted double-digit declines.
A decade ago Hyundai was a near disaster. Its unlikely success since then shows that improved quality and nifty new models can improve a company's fortunes quickly. GM should take note.
For all the hype heaped on the Chevy Volt plug-in hybrid, GM's critical car at this year's show will be the new Chevrolet Cruze. It's powered by a conventional gasoline engine (rated up to 40 miles a gallon) and billed as a five-passenger compact, a segment led by the Honda Civic and Toyota Corolla. GM has had ho-hum compacts for years, most recently the harsh and noisy Chevy Cobalt. If the Cruze can boost GM's credibility in small cars, the company will take a giant step toward recovery.
Chrysler must halt a frightening sales plunge, down 38% last year. The company is pushing discounts, its only realistic short-term strategy because most of its cars are lackluster or dated. Chrysler's survival will depend on cars derived from Fiat models such as the 500, a cute high-mileage subcompact. While a prototype electric version might debut at the Detroit show, Chrysler's new Fiat-derived models actually won't be launched until 2011 and 2012. They'll be make-or-break cars.
Ford now has quality equal to Honda and Toyota, according to Consumer Reports. Ford's new subcompact Fiesta, engineered in Europe, will be displayed at the Detroit show, offering lines more stylish than the competing Toyota Yaris and Honda Fit. To promote the Fiesta, Ford gave early prototypes to people active on social networking sites such as Facebook, and asked them to chronicle their experiences.
Toyota, meanwhile, has inherited the mantle of "world's largest car company" from GM, along with that title's seemingly attendant ills. Besides last year's $4 billion loss, Toyota recently recalled 4 million cars to fix gas pedals that stick to the floor mats and send the cars accelerating out of control. Toyota's image, clearly, has taken a hit.
Now the company is reversing its recent breakneck expansion pace and refocusing on basics. Its leaders are worried (which is a good sign), but when the auto industry's tectonic plates settle Toyota likely will emerge a winner. So will Honda, which has come through the crisis with minimal damage. Honda's opening of a new assembly plant in Indiana in late 2008 had seemed ill-timed, but the recent rout of the U.S. dollar makes it look smart.
The most remarkable aspect of last year's bailouts and bankruptcies is how auto-industry neophytes cut through craziness that had existed for decades. GM didn't know its cash balance within half a billion dollars on any given day.
What's more, senior auto workers regularly invoked a practice called "inverse layoffs" to volunteer for the Jobs Bank, an industry program that paid laid-off workers 95% of their wages indefinitely. The Jobs Bank proved so attractive, for obvious reasons, that it upended the traditional practice of junior workers getting laid off first.
Dealing with inverse layoffs and other perversities fell to the 15 or so members of President Barack Obama's automotive task force, mostly young Wall Street types. They used "diligence" as a verb, as in: "We've got to diligence that business plan." (Translation: evaluate the plan and its assumptions.) Their work came to a climax on June 1, 2009, when General Motors filed for bankruptcy.
At 6 a.m. that day 36-year-old David Markowitz, a junior task-force member, boarded an Amtrak train in New York for Washington. Over the prior two months Mr. Markowitz and his colleagues had been "diligencing" thousands of GM documents. On June 1 he hadn't slept in three days and was exhausted. But he was invited to attend Mr. Obama's speech that day, and wasn't about to miss meeting the president.
At 6:03 a.m., a small army of lawyers began hauling documents into U.S. Bankruptcy Court in lower Manhattan. The main filing, at 7:57 a.m., stated that GM's $172 billion of liabilities overwhelmed its $82 billion of assets. And that the company's $59.5 billion in stock-market value in April 2000 had been wiped out.
"There are no realistic alternatives" to bankruptcy, the filing added. "There are no merger partners, acquirers or investors willing and able to acquire GM's business...The transaction [bankruptcy] is the only realistic alternative for the company to avoid liquidation..."
At 11:30, Mr. Markowitz was walking into the White House when he suddenly felt faint, his legs started to wobble and he realized he wasn't going to make it. His boss propped him up and walked him over to the White House doctor's office. It looked like he wouldn't meet the president after all.
Nine minutes before noon Mr. Obama began his speech with some good news. In the wee hours of the morning the bankruptcy court had approved Chrysler's restructuring plan; Chrysler had sped through bankruptcy court like a hot rod. "Keep in mind," Mr. Obama said, "many experts said that a quick, surgical bankruptcy was impossible. They were wrong."
He went on: "Earlier today, GM did what Chrysler has successfully done and filed for Chapter 11 bankruptcy with the support of its key stakeholders and the United States government.... Chrysler's extraordinary success reaffirms my confidence that GM will emerge from its bankruptcy process quickly, and as a stronger and more competitive company."
After he finished, Mr. Obama happened to walk down to his doctor's office to get a couple of Tylenol pills. Young Mr. Markowitz, still in a blur, sensed a sudden commotion around him, but he wasn't sure what was happening. A couple minutes later he found himself shaking hands, groggily, with the president of the United States. The handshake, though happenstance, was well deserved.
Shortly after Mr. Obama spoke, Fritz Henderson, then GM's CEO, convened a press conference in New York with contrition that would have shocked his predecessors from GM's glory years. "Give us another chance," he implored. "The GM that many of you knew, the GM that in fact had let too many of you down, is history."
General Motors had virtually invented the modern corporation—with professional managers, as opposed to family founders, presiding over decentralized operations that were governed by central financial control. It had pioneered modern marketing, public relations and the hierarchy of brands that made automobiles vehicles for social mobility as well as physical mobility. It had set standards for everything from style and design to corporate health-care plans.
Many Americans bristled at the bailout. It signaled an "America poised to transform into Euro-Flop Social-Marxism, as we juggle open-ended bankruptcy," said one letter-writer to the Patriot Ledger in Quincy, Mass.
Such sentiments were understandable from a bailout-weary nation, especially because of the contrast with Ford. After careening from one disastrous decision to another between 1999 and 2006, Ford had come to grips with its fundamental need to change. The company changed CEOs and is now shedding debt, dealers and brands without federal funding. Ford isn't home free, but its progress provides proof that GM and Chrysler could have avoided bankruptcy too with better leadership, and the willingness to act decisively before it was too late.
Right after entering bankruptcy, GM started airing a television commercial that pretty much said it all. "Let's be completely honest, no company wants to go through this," the commercial began. "There was a time when eight different brands made sense. Not any more. There was a time when our cost structure could compete world-wide. Not any more. Reinvention is the only way we can fix this." Those were the very same arguments that GM's critics had been making, and that the company had been denying, for years.
When the North American International Auto Show opens Jan. 16 an expected 700,000 visitors will see more than 700 new cars on display, including more than 30 global debuts. They'll also see an industry transformed. The stakes at this year's auto show are enormous because the focus won't be only on the cars but also on the companies themselves.
Since last year's show, General Motors and Chrysler have gone in and out of bankruptcy. GM is mostly owned by the government, and Chrysler is being run by Fiat. Toyota has announced its first loss in nearly 60 years and the largest car recall ever.
GM's once-venerable Pontiac, Saturn and Saab brands will be absent from this year's show. Pontiac and Saturn are dead, victims of downsizing that has slashed GM to four brands from eight. Only a flicker of hope remains for Saab. The efforts of two tiny European car companies to buy it have fallen through, although GM says it's open to further negotiations. China's Beijing Automotive, meanwhile, has bought engineering rights to a couple Saab models. Will they live on as Sino-Saabs?
In the wake of last year's upheaval, auto makers will be trying to show that they have not just new cars but also promising futures. It's a critical message because the next chapters in automotive history will be radically different from the past.
Car companies are getting hit with multiple simultaneous revolutions, the fallout from the GM and Chrysler bankruptcies being just one. Others include the fragile economic recoveries in major economies worldwide and the endemic weakness of the U.S. dollar, which makes all imported goods, including cars, more expensive. Excess global auto-manufacturing capacity remains an issue. New technologies are changing the vocabulary of automotive engineers from "pound feet of torque" to "lithium-ion battery" and "plug-in hybrid." Pass the tofu, please.
On top of all this comes new competition from auto makers in emerging countries, with China leading the way. Besides Beijing Automotive's deal for Saab assets, China's Geely Automobile is the leading candidate to buy Volvo from Ford.
Still another Chinese company, BYD Auto, will display its plug-in hybrid vehicles in Detroit. BYD has attracted investment from a guy named Warren Buffet. Meanwhile, India's Tata has purchased Jaguar and Land Rover, the unofficial brands of Britain's landed gentry.
As the aftershocks continue it's clear GM, Chrysler and Ford—the only Detroit car company to avoid bankruptcy—will be America's Big Three no more. America instead will have a Medium Six: GM, Ford, Toyota, Honda, Nissan and one more, perhaps Fiat-Chrysler or Volkswagen or Hyundai. Each of the six will have between 8% and 20% of the U.S. market. It's an industry structure that will mirror what Europe has had for decades.
For car buyers, this means more competition on everything from styling to technology. In the "Big Three" world, one company would have set the trend for others to follow. But in the "Medium Six" world, GM and Toyota are pushing hybrids while Nissan is taking a different road: developing all-electric cars that won't use gasoline at all.
Ford, meanwhile, is marketing its electronic technology, ranging from its "Sync" system that allows voice-activated audio controls to forward-looking radar that keeps your car a preset distance from the car in front. Gentlemen, start your iPhones.
The Tata Nano, being sold in India for $2,000, doesn't meet U.S safety regulations. But some car company could well launch a U.S. model that will sell for $10,000, half the average price of cars today—or even less.
It might be Korea's Hyundai, which has tapped the back-to-basics move in recession-wracked America and become the hottest car company on earth. Hyundai's offer a year ago to let buyers hand back their cars if they lost their jobs was a marketing coup, even though fewer than 100 cars were returned. The company's U.S. sales rose 7% last year while most others posted double-digit declines.
A decade ago Hyundai was a near disaster. Its unlikely success since then shows that improved quality and nifty new models can improve a company's fortunes quickly. GM should take note.
For all the hype heaped on the Chevy Volt plug-in hybrid, GM's critical car at this year's show will be the new Chevrolet Cruze. It's powered by a conventional gasoline engine (rated up to 40 miles a gallon) and billed as a five-passenger compact, a segment led by the Honda Civic and Toyota Corolla. GM has had ho-hum compacts for years, most recently the harsh and noisy Chevy Cobalt. If the Cruze can boost GM's credibility in small cars, the company will take a giant step toward recovery.
Chrysler must halt a frightening sales plunge, down 38% last year. The company is pushing discounts, its only realistic short-term strategy because most of its cars are lackluster or dated. Chrysler's survival will depend on cars derived from Fiat models such as the 500, a cute high-mileage subcompact. While a prototype electric version might debut at the Detroit show, Chrysler's new Fiat-derived models actually won't be launched until 2011 and 2012. They'll be make-or-break cars.
Ford now has quality equal to Honda and Toyota, according to Consumer Reports. Ford's new subcompact Fiesta, engineered in Europe, will be displayed at the Detroit show, offering lines more stylish than the competing Toyota Yaris and Honda Fit. To promote the Fiesta, Ford gave early prototypes to people active on social networking sites such as Facebook, and asked them to chronicle their experiences.
Toyota, meanwhile, has inherited the mantle of "world's largest car company" from GM, along with that title's seemingly attendant ills. Besides last year's $4 billion loss, Toyota recently recalled 4 million cars to fix gas pedals that stick to the floor mats and send the cars accelerating out of control. Toyota's image, clearly, has taken a hit.
Now the company is reversing its recent breakneck expansion pace and refocusing on basics. Its leaders are worried (which is a good sign), but when the auto industry's tectonic plates settle Toyota likely will emerge a winner. So will Honda, which has come through the crisis with minimal damage. Honda's opening of a new assembly plant in Indiana in late 2008 had seemed ill-timed, but the recent rout of the U.S. dollar makes it look smart.
The most remarkable aspect of last year's bailouts and bankruptcies is how auto-industry neophytes cut through craziness that had existed for decades. GM didn't know its cash balance within half a billion dollars on any given day.
What's more, senior auto workers regularly invoked a practice called "inverse layoffs" to volunteer for the Jobs Bank, an industry program that paid laid-off workers 95% of their wages indefinitely. The Jobs Bank proved so attractive, for obvious reasons, that it upended the traditional practice of junior workers getting laid off first.
Dealing with inverse layoffs and other perversities fell to the 15 or so members of President Barack Obama's automotive task force, mostly young Wall Street types. They used "diligence" as a verb, as in: "We've got to diligence that business plan." (Translation: evaluate the plan and its assumptions.) Their work came to a climax on June 1, 2009, when General Motors filed for bankruptcy.
At 6 a.m. that day 36-year-old David Markowitz, a junior task-force member, boarded an Amtrak train in New York for Washington. Over the prior two months Mr. Markowitz and his colleagues had been "diligencing" thousands of GM documents. On June 1 he hadn't slept in three days and was exhausted. But he was invited to attend Mr. Obama's speech that day, and wasn't about to miss meeting the president.
At 6:03 a.m., a small army of lawyers began hauling documents into U.S. Bankruptcy Court in lower Manhattan. The main filing, at 7:57 a.m., stated that GM's $172 billion of liabilities overwhelmed its $82 billion of assets. And that the company's $59.5 billion in stock-market value in April 2000 had been wiped out.
"There are no realistic alternatives" to bankruptcy, the filing added. "There are no merger partners, acquirers or investors willing and able to acquire GM's business...The transaction [bankruptcy] is the only realistic alternative for the company to avoid liquidation..."
At 11:30, Mr. Markowitz was walking into the White House when he suddenly felt faint, his legs started to wobble and he realized he wasn't going to make it. His boss propped him up and walked him over to the White House doctor's office. It looked like he wouldn't meet the president after all.
Nine minutes before noon Mr. Obama began his speech with some good news. In the wee hours of the morning the bankruptcy court had approved Chrysler's restructuring plan; Chrysler had sped through bankruptcy court like a hot rod. "Keep in mind," Mr. Obama said, "many experts said that a quick, surgical bankruptcy was impossible. They were wrong."
He went on: "Earlier today, GM did what Chrysler has successfully done and filed for Chapter 11 bankruptcy with the support of its key stakeholders and the United States government.... Chrysler's extraordinary success reaffirms my confidence that GM will emerge from its bankruptcy process quickly, and as a stronger and more competitive company."
After he finished, Mr. Obama happened to walk down to his doctor's office to get a couple of Tylenol pills. Young Mr. Markowitz, still in a blur, sensed a sudden commotion around him, but he wasn't sure what was happening. A couple minutes later he found himself shaking hands, groggily, with the president of the United States. The handshake, though happenstance, was well deserved.
Shortly after Mr. Obama spoke, Fritz Henderson, then GM's CEO, convened a press conference in New York with contrition that would have shocked his predecessors from GM's glory years. "Give us another chance," he implored. "The GM that many of you knew, the GM that in fact had let too many of you down, is history."
General Motors had virtually invented the modern corporation—with professional managers, as opposed to family founders, presiding over decentralized operations that were governed by central financial control. It had pioneered modern marketing, public relations and the hierarchy of brands that made automobiles vehicles for social mobility as well as physical mobility. It had set standards for everything from style and design to corporate health-care plans.
Many Americans bristled at the bailout. It signaled an "America poised to transform into Euro-Flop Social-Marxism, as we juggle open-ended bankruptcy," said one letter-writer to the Patriot Ledger in Quincy, Mass.
Such sentiments were understandable from a bailout-weary nation, especially because of the contrast with Ford. After careening from one disastrous decision to another between 1999 and 2006, Ford had come to grips with its fundamental need to change. The company changed CEOs and is now shedding debt, dealers and brands without federal funding. Ford isn't home free, but its progress provides proof that GM and Chrysler could have avoided bankruptcy too with better leadership, and the willingness to act decisively before it was too late.
Right after entering bankruptcy, GM started airing a television commercial that pretty much said it all. "Let's be completely honest, no company wants to go through this," the commercial began. "There was a time when eight different brands made sense. Not any more. There was a time when our cost structure could compete world-wide. Not any more. Reinvention is the only way we can fix this." Those were the very same arguments that GM's critics had been making, and that the company had been denying, for years.
03 January 2010
How To Keep Business In Michigan
The Detroit Blog
TIME / CNN
While Michigan is in the throes of its upside-down economy, it has been scrambling to find creative solutions. Gov. Jennifer Granholm has been (smartly) promoting green jobs. Meanwhile, we offer generous tax breaks to the film industry, which arguably provides some economic help and boosts local morale.
Meanwhile, community leaders have come up with their own smart solutions, including one that, as someone who works in advertising, I see as having a lot of value. A team led by Campbell-Ludwig CEO-designate, Bill Ludwig, has been pushing to extend those film industry incentives to commercial production. This sense since auto companies put over a billion dollars a year into the filming and editing of car ads, and the lion's share of that money winds up in the pockets of production companies in New York and California. Given the right incentives, a greater portion of that work could stay here in Michigan. I don't know the current status of this particular legislation, but it would add jobs to our economy and deserves serious support in Lansing.
Still, despite these best efforts, things keep slipping downhill. Next month, as everyone in the industry knows, Detroit's BBDO office will close. An estimated 485 employees will lose their jobs. This is an incredibly sad thing. Over many decades, BBDO has done good, great, and even world-famous work for the Chrysler's brands, most notably the ads they did for Jeep, but in the end they were too reliant on one big car client, and when that client looked elsewhere, they were out of luck.
So clearly, just as with the rest of Michigan's economy, one thing that would help local advertising agencies here is greater diversification. Yes, to a large degree, it's up to the agencies themselves. Doner Advertising has thrived for years without a domestic auto account. Campbell Ewald has done an admirable job of attracting a range of clients outside the industry, including award-winning work for the U.S. Postal Service and the Navy. My own agency, Team Detroit, has also recently added Scott's Miracle Grow, Ohio Art and Warrior Sports to its roster.
But in extreme times like these, extra efforts are perhaps necessary and there is additional leverage that a smart, proactive state government could provide if it decided to act. It occurs to me that a notion similar to Ludwig's could bring additional help to the region. Despite its myriad of woes, Michigan is still home to many large, thriving, successful businesses, including Kellogg's, Whirlpool, Domino's, and Herman Miller. These are multi-million dollar brands whose collective advertising budgets add up to billions of dollars. But Kellogg's advertising agency is based in Illinois, Domino's is based in Colorado.
If Granholm and the state government could find a way to entice these companies - through tax incentives and other means - to hire advertising agencies located within their own home state, it would immediately put millions of dollars annually back into the state's economy. Now, perhaps these companies are perfectly happy with their current advertising, though it would be hard for them to argue that these ad agencies are serving them in a demonstrably better way than what they could get right here at home (I, for one, cannot remember seeing one single great Kellogg's ad nor one memorable Domino's ad in the past three years. Can you?) But obviously this isn't about coercion; the companies would still be perfectly free to choose. This is all about the carrot, not the stick. Perhaps they will say that Michigan agencies can't sell as well as agencies elsewhere, though, given the chance, I'm sure we could convince them otherwise (we are in the art of persuasion after all.)
All the state would do is develop and promote incentives to encourage these large, global companies to begin a conversation with some of these agencies. Even if just one of these giants moves their marketing here, the incomes generated will end up supporting local economies (the restaurants, the dry cleaners, etc), while the additional tax base would support education and local infrastructure.
So the companies would win, and not only because they would get equal - and probably superior - service from local agencies, but also because their standard of living would be positively impacted as well. Their own schools would be stronger, their own roads would have fewer potholes, their neighbors would be happier, and life would be better. Who knows, maybe their homes would even be worth more.
There would be at least one added benefit. After firing BBDO, Chrysler has split the account, hiring new agencies in Texas and Minneapolis. Meanwhile, GM is considering agencies for Cadillac that are based in New York. By creating the right sort of incentives, Michigan could even encourage the auto manufacturers to keep their marketing dollars—and jobs—here in Michigan too. That wouldn't be a bad thing, would it? After all, we do still love our car companies.
Meanwhile, community leaders have come up with their own smart solutions, including one that, as someone who works in advertising, I see as having a lot of value. A team led by Campbell-Ludwig CEO-designate, Bill Ludwig, has been pushing to extend those film industry incentives to commercial production. This sense since auto companies put over a billion dollars a year into the filming and editing of car ads, and the lion's share of that money winds up in the pockets of production companies in New York and California. Given the right incentives, a greater portion of that work could stay here in Michigan. I don't know the current status of this particular legislation, but it would add jobs to our economy and deserves serious support in Lansing.
Still, despite these best efforts, things keep slipping downhill. Next month, as everyone in the industry knows, Detroit's BBDO office will close. An estimated 485 employees will lose their jobs. This is an incredibly sad thing. Over many decades, BBDO has done good, great, and even world-famous work for the Chrysler's brands, most notably the ads they did for Jeep, but in the end they were too reliant on one big car client, and when that client looked elsewhere, they were out of luck.
So clearly, just as with the rest of Michigan's economy, one thing that would help local advertising agencies here is greater diversification. Yes, to a large degree, it's up to the agencies themselves. Doner Advertising has thrived for years without a domestic auto account. Campbell Ewald has done an admirable job of attracting a range of clients outside the industry, including award-winning work for the U.S. Postal Service and the Navy. My own agency, Team Detroit, has also recently added Scott's Miracle Grow, Ohio Art and Warrior Sports to its roster.
But in extreme times like these, extra efforts are perhaps necessary and there is additional leverage that a smart, proactive state government could provide if it decided to act. It occurs to me that a notion similar to Ludwig's could bring additional help to the region. Despite its myriad of woes, Michigan is still home to many large, thriving, successful businesses, including Kellogg's, Whirlpool, Domino's, and Herman Miller. These are multi-million dollar brands whose collective advertising budgets add up to billions of dollars. But Kellogg's advertising agency is based in Illinois, Domino's is based in Colorado.
If Granholm and the state government could find a way to entice these companies - through tax incentives and other means - to hire advertising agencies located within their own home state, it would immediately put millions of dollars annually back into the state's economy. Now, perhaps these companies are perfectly happy with their current advertising, though it would be hard for them to argue that these ad agencies are serving them in a demonstrably better way than what they could get right here at home (I, for one, cannot remember seeing one single great Kellogg's ad nor one memorable Domino's ad in the past three years. Can you?) But obviously this isn't about coercion; the companies would still be perfectly free to choose. This is all about the carrot, not the stick. Perhaps they will say that Michigan agencies can't sell as well as agencies elsewhere, though, given the chance, I'm sure we could convince them otherwise (we are in the art of persuasion after all.)
All the state would do is develop and promote incentives to encourage these large, global companies to begin a conversation with some of these agencies. Even if just one of these giants moves their marketing here, the incomes generated will end up supporting local economies (the restaurants, the dry cleaners, etc), while the additional tax base would support education and local infrastructure.
So the companies would win, and not only because they would get equal - and probably superior - service from local agencies, but also because their standard of living would be positively impacted as well. Their own schools would be stronger, their own roads would have fewer potholes, their neighbors would be happier, and life would be better. Who knows, maybe their homes would even be worth more.
There would be at least one added benefit. After firing BBDO, Chrysler has split the account, hiring new agencies in Texas and Minneapolis. Meanwhile, GM is considering agencies for Cadillac that are based in New York. By creating the right sort of incentives, Michigan could even encourage the auto manufacturers to keep their marketing dollars—and jobs—here in Michigan too. That wouldn't be a bad thing, would it? After all, we do still love our car companies.
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