To hear Ford tell the story, the Dearborn (Mich.) company is the smart one that is getting its house in order and doesn’t need government loans like more troubled rivals General Motors and Chrysler. That’s mostly true. Ford borrowed enough in the open market before the credit markets froze up. But to say that Ford isn’t seeking a big chunk of Federal funds is a bit misleading.
Right now, Ford has says its future product programs qualify the company for up to $11 billion of the DOE’s $25 billion program. The company figures it may only get about $5 billion, though. GM wants $8 billion from the DOE loan program, which extends credit for projects resulting in better fuel economy. It can be advanced vehicles like the Chevrolet Volt electric car or to tool up plants for more prosaic fuel sippers like the Chevy Cruze compact. Others are seeking funds, too. Even tiny Tesla Motors wants $450 million from the DOE.
Adding in the $13.4 billion or more that GM needs from the Treasury Department to stay afloat and its borrowings are much more. The company will eventually be heavily indebted to the federal government. But Ford clearly needs a boost, too. And it’s no wonder. Not only are the new fuel economy regulations forcing automakers to retool many of their models, Ford has plenty of cash problems. In the third quarter, Ford burned $7.7 billion in cash while GM burned $6.9 billion. For the first three quarters of last year, Ford burned through $15.7 billion while GM went though $14.1 billion.
Developing new models and technology is a massive expense for carmakers. If the DOE agrees that many of Ford's future models qualify for the program, it could end up borrowing more from the DOE than GM under the program. Bottom line: Ford's problems are less urgent than GM's issues. But let’s curb our enthusiasm a bit.
It looks like the worst-case scenario for 2009 auto sales are catching on. General Motors, which last month predicted sales of about 12 million vehicles this year, with a low-end estimate of 10.5 million, today said its most pessimistic forecast is likely.
GM said it was adopting the lower estimate in its planning because of continued uncertainty over when the market for new cars might recover. "What we're trying to do here is be very conservative about our assumptions," GM President and Chief Operating Officer Fritz Henderson said at a Deutsche Bank analyst conference in Detroit that was webcast.
U.S auto sales fell to 13.2 million in 2008, down 18% from 16.1 million in 2007. It was the biggest year-over-year sales decline since the oil embargo crushed auto sales in 1974. The fourth quarter 2008 sales for the industry, when analyzed for sales per licensed drivers, was the lowest rate of sales since World War Two.
Several factors are contributing to the low forecasts: rising unemployment, lack of credit, declining house values and financial markets that are way down from a year ago. All that is combining to crush consumer confidence, especially as it relates to buying big-ticket purchases.
The Obama Administration’s nearly $1 trillion stimulus package will have some effect on the economy, credit markets and unemployment rates. But few analysts and economists are willing to be pinned down on how much it will help.
While asking lawmakers for $18 billion in loans, the Detroit automaker said it expected industry-wide sales of about 12 million for 2009, with 10.5 million seen as a worst-case scenario. The Treasury Department allocated $13.4 billion in loans to GM last month, and the company must submit a plan to show the feds that it is cutting enough costs to become financially viable, or the government can call back the loans March 31.
Research firm Global Insight has projected sales as low as 10.3 million units this year. Ford projects U.S. vehicle sales of at least 12 million, 13 percent more than GM’s latest outlook.
If GM or Global Insight is correct, it is likely that GM and Chrysler will have to go back to the Treasury for more loans, and that Ford will have to tap the $9 billion credit line it has requested. Sales “anywhere near 10 million will be a disaster for the industry,” said John Casesa, managing partner at consulting firm Casesa Shapiro Group in New York. “It will make an already dire situation even worse…It’s a level of demand that is far below Detroit’s break-even point.”
President-elect Obama traded his Chrysler 300C for a Ford Escape Hybrid during the campaign as his personal ride, though he was most often seen in a protective Secret Service SUV.
Now, he is a Caddy man.
Obama's Presidential Cadillac limo has a new design, one that GM calls "assertive, modern and elegant."
While it's hard for a limo to avoid being long and black, "one thing about limos is they do reflect the era in which they serve, so we used elements that have an influence from our regular cars," says Cadillac spokesman David Caldwell.
Obama's limo has a dual-textured grille, like the ones on the CTS sport sedan and Escalade. And major parts of the cabin are cut and sewn by hand -- just as they are in the CTS.
The rear passenger area includes a large executive compartment with extra seating and office features. The car underwent an extreme testing regime, features several presidential seals and has confidential security provisions.
The glass is tinted so that occupants see out, but outsiders can't see in, so unless the Obamas get out and walk despite the predicted frosty temperatures on his swearing-in day, the millions gathered along the inauguration parade route probably won't see the new President.
There is another reason for the Feds to keep the Detroit automakers afloat. I'd hate to see the American President driving down Pennsylvania Ave. in a Toyota or Honda.
VW's U.S. chief Stefan Jacoby says the German automaker has no interest in acquiring Chrysler's minivan business.
Chrysler manufactures the Volkswagen Routan minivan in one of its Canadian plants. The van is a thinly disguised version of the Chrysler Town & Country. Former VW chief Wolfgang Bernhard, who was also former COO of Chrysler, struck the deal.
Sales of the Routan got off to a slow start in 2008 because of the fast downturn in auto sales and the heavy discounting of minivans.
It is said by many analysts that the two most valuable assets Chrysler has, if the company is broken up or sold, is the Jeep business and its minivan business.
But VW, which is in the midst of a product offensive to grow sales to 800,000 by 2018 and is bulding a new plant in Tennessee, is not interested. "The technology of the vehicle and the plant is not connected to anything else we do in the [Volkswagen] Group [which includes Audi, Seat, Skoda, Bentley and Lamborghini]," said Jacoby at this week's North American International Auto show.
VW sold just 3387 Routans last year depite heavy ad spending on a campaign featuring actress Brooke Shields.
Chrysler sold 232,000 minivans last year, though the vans received some of the heaviest discounting in the industry with loaded Chrysler vans going out dealer's doors for about $25,000, according to some dealers and customers.
Chrysler LLC says it has ruled out selling an individual plant or brand, but said it would look to sell equipment and could license production of some of its current models to other automakers as it works to shore up its cash position.
Chrysler Vice Chairman Tom LaSorda said he could not address the question of whether Chrysler's owner, private-equity firm Cerberus Capital Management, was shopping the company to potential buyers in its entirety.
"Those things are all dealt with at the Cerberus level, and at this point in time I just can't speak to that," he said.
LaSorda, speaking to reporters on a conference call, was responding to a Reuters report from Tuesday that said Chrysler had been in talks to sell assets to Renault-Nissan and auto parts supplier Magna International.
"This company is going to be around," LaSorda said. "We are not going under."
A couple of things:
1. What Chrysler sells and doesn't sell is no longer really in its control. Soon, the Feds will appoint a "car czar" to determine if and how Chrysler becomes "financially viable" to justify the government loans it has begun recieving.
2. It has already been in talks with GM to acquire assets like Jeep and the minivan business. True, technically GM may have had to take the whole thing, but if you think GM was going to run the Dodge passenger car business for very long, you are mistaken. A lot of what is going on is semantics.
3. License production? I gather this means more deals like the one to supply Ram pickups to Nissan and Dakotas to Mitsubishi. First, the Mitsubishi truck project is a fiasco. Nobody is buying Mitsu Raiders. Second, I'll be stunned if Nissan ever actually winds up selling Dodge trucks as Nissans.
4. Yes, VW is selling repackaged Chrysler minivans as Routans, but I'll also be shocked if that deal gets renewed when it runs its course based on the chilly reaction when I bring it up to VW executives. That deal was hatched by former Chrysler COO Wolfgang Bernhard when he was head of the VW division a few years ago.
5. If I am a CEO of a car companay, do I really want to contract with Chrysler to build me anything right now given the state of the company's finances and abysmal quality ratings?
It’s hard to find a company in America that took a bigger public beating than General Motors did over the past three months. But with all eyes on the...
I’ll dispense with the pleasantries first. Chrysler’s 200C electric vehicle concept is one hot car. It’s exactly what the company needs to do with its Chrysler Sebring family car....
Tesla Motors founder Elon Musk said Tuesday morning that the company, which makes expensive electric roadster vehicles, has been working with German carmaker Daimler-Benz for the last 18 months, and...
Ford CEO Alan Mulally says he still likes the tiny European Ka for the U.S. portfolio. His senior staff isn't so sure. Global product chief Derrick Kuzak and chief...
Don't tell BMW's U.S. Chief James O'Donnell that 2009 is going to be as bad as the 4th quarter of 2008. The Scottish-born optimist says that President Obama's stimulus package...
Within the next three years, Ford said this week at the North American International Auto Show, the automaker is planning to release two electric-vehicle projects, along with its next...
Want the straight scoop on the auto industry? Detroit bureau chief David Welch and auto beat veterans David Kiley, Dexter Roberts and Ian Rowley bring daily scoop, keen observations and provocative perspective on the auto business from around the globe. Read their take on such weighty issues as Detroit’s attempt at a comeback, Toyota’s quest for dominance and the search for an efficient car.
