Steve Parker Motoring / The Car Nut

OBAMA ON THE AUTO INDUSTRY IN TUESDAY'S JOINT SESSION OF CONGRESS SPEECH

(Cadillac displayed this concept called "Converj" at January's Detroit Auto Show; GM said it uses the same plug-in hybrid drivetrain which will be found on the Chevrolet Volt. Chances of being produced? None).

He was shallow, patronizing, hitting old worn-out themes and appeared visibly nervous.

But enough about Louisiana Gov. Bobby Jindal and his Republican "response" to President Barack Obama's enthusiastic, encouraging address to a joint session of Congress, and the nation, Tuesday night.

Mr. Obama took time during the speech to address one of the great concerns of all Americans and the world, the state of our domestic auto industry.

About midway through his near one hour presentation (which seemed like about 15 minutes to me), Pres. Obama said, "As for our auto industry, everyone recognizes that years of bad decision-making and a global recession have pushed our automakers to the brink. We should not, and will not, protect them from their own bad practices.
(President Barack Obama tries his Sarah Palin impression on a young child).

"But we are committed to the goal of a re-tooled, re-imagined auto industry that can compete and win. Millions of jobs depend on it. Scores of communities depend on it. And I believe the nation that invented the automobile cannot walk away from it."

He also said, "We know the country that harnesses the power of clean, renewable energy will lead the 21st century. And yet, it is China that has launched the largest effort in history to make their economy energy efficient. We invented solar technology, but we've fallen behind countries like Germany and Japan in producing it. New plug-in hybrids roll off our assembly lines, but they will run on batteries made in Korea."

Didn't like his approach on that one too much; seemed a bit too jingoistic. And where can I buy one of our "plug-in hybrids?"

Maybe no one had told President Obama that General Motors has just founded, in Ann Arbor, MI, the future-research Advanced Battery Coalition for Drivetrains, along with the University of Michigan. We'll give him a pass, though; it was really his first big speech as president,.
(Is this Chevrolet Volt one of the plug-in hybrids which Mr. Obama referred to in his address to Congress? Hate to bring this up, but this car ain't rollin' off any American assembly lines anytime soon).

Americans need to know that every car maker outside the US is suffering and already scared to death, not only of what's happening to sales in their own home markets, but of the depression which has gripped the largest car and truck market in the world, the US.

GM SHUTTERS HIGH-PERFORMANCE SHOP, AND SOME MUSCLE CAR AND RACING HISTORY

(Chevy's 2009 Corvette ZR1 makes 638-horsepower from its supercharged LS-9 V8).

In yet another sign of these perilous automotive times, General Motors has closed its High Performance Vehicle Operations unit (HPVO), which created such products as the V-Series Cadillacs, the Chevrolet Cobalt SS and the HHR SS small panel truck.

Now, I don't mind these kinds of high-po street cars; relatively few are sold and their environmental impact is negligible.

Ferrari, for instance, sold just over 5,300 cars in 2008, and sister make Maserati, which I insultingly refer to as "the poor man's Ferrari" (insulting mostly to people who work for Maserati; they're helluva cars in their own right) moved 8,286 of their street-legal luxury performance cars in 2008. BMW's Rolls-Royce sold 1,212 models in 2008; VW's Bentley shipped 7,604 units out the door last year.

Domestically, just under 27,000 Corvettes were sold last year, Dodge moved 1,272 Vipers and 91,000 Mustangs were sold - George Pipas, Ford's long-time and near-legendary Manager of Sales Analysis and Reporting (every business and auto writer in the world has for many years participated in the Gospel According to Pipas, aka, his monthly sales report teleconferences), told me the Mustang mix is usually 60%/30%, with V6 sales the larger number (this post originally had some errant figures; I updated them today, 2-24).

All the hot cars in the world just don't add up to a hill of beans when it comes to global warming and pollution, but their mpg figures are uniformly bad. Not very politically-correct, or smart, these days. And in fact, performance and race cars are the way they are because they are efficient; but that's another posting entirely, having to do with "improving the breed" and developing appropriate muffling, catalytic converters and engine emissions controls for those engines to make them right for the street.

According to the EPA, Lamborghini has held the world's worst-mpg rating for several years.

But maybe not all these cool GM cars are going away.
(This Cadillac CTS concept car, rolled-out at the 2008 Detroit Auto Show, gives a glimpse of GM's future design direction - If they can remain in business).

"The Cadillac CTS-V is a regular part of the CTS lineup, and that will stay for the foreseeable future," says GM spokes-squid Vince Muniga, according to Inside Line.

"The CTS-V will continue through the life cycle of the product. If they are regular production cars, they will continue through the model run, whether it's an SS Cobalt or an SS HHR."

He would not give a timetable for when such vehicles would be eliminated or when the regular production run is scheduled to end.

HPVO was made up of approximately 60 engineers working out of GM's Warren (MI) Tech Center, a place with security rivaling CIA headquarters. Muniga said none of them have been laid off. Instead, they have been placed "in other areas of the organization."

That's not great news. In the mid-1970s, Detroit was hit by a double-whammy. First was the creation of the Environmental Protection Administration, when for the first time in history car makers were being told what mileage and emissions figures their cars and trucks must achieve. Second was the first of the oil embargoes, which killed new car sales. In answer to all this, many of the best tech people in Detroit were pulled-off all sorts of future projects and put to work developing the computers we now find in every car.
(Top, a 1964 Pontiac GTO, the car which inspired the two other Detroit car makers to build their own muscle cars, like Ford using Carroll Shelby's name on high-performance versions of the Mustang and Chrysler coming up with cars like Dodge's Barracuda and Plymouth's Road Runner; below, a V8 displacing 389 cubic inches and three two-barrel carburetors in a '64 GTO's engine bay - John Z. DeLorean, who headed Pontiac at the time, and his right-hand man at Pontiac's ad agency, Jim Wangers, dubbed the engine "Tri-Power").

PRESIDENT'S AUTO TASK FORCE MEMBERS; SAAB BEGINS BANKRUPTCY

(Opel started building cars in 1899, and this is one of their first; now, like so many others, this GM division is in danger of failing).

Before we get into what's become the expected bad news from the worldwide auto industry, newsweekly Automotive News lets us in on who is actually on Pres. Obama's new auto industry restructuring task force.

The task force held its first meeting today, Friday, behind closed doors, without any auto industry representatives or President Obama, and Treasury says the task force may make its initial recommendations by next week.

The White House said Pres. Obama is likely to participate in future task force sessions.

As we've reported, the co-chairs are Treasury Secretary Tim Geithner and chief White House economics adviser Lawrence Summers. Can Geithner and Summers handle everything now on their plates?
(President Obama in Canada Thursday, his first international trip).

Another task force member is being singled out by Treasury. Ron Bloom is a former investment banker who walked away from Wall Street and became a union official, known for brokering turnaround plans for struggling companies; like Bloom, other outside advisers are said to be involved.

The Treasury Department listed these automotive task force members:

• Secretary of Transportation Ray LaHood, a former Republican member of Congress

• Secretary of Commerce, not yet appointed (maybe Bill Richardson can still be sneaked in there ...)

• Chair, Council of Economic Advisers Christina Romer

• Secretary of Labor Hilda Solis, secretary designate

• Secretary of Energy Steven Chu (an actual scientist in the president's Cabinet!)

• Director of the Office of Management and Budget Peter Orszag

• Environmental Protection Agency Administrator Lisa Jackson

• Director of the White House Office of Energy and Climate Change Carol Browner

Listed as designees of the task force members:

• Diana Farrell, Deputy Director, National Economic Council

• Gene Sperling, Counselor to the Secretary of Treasury

• Jared Bernstein, Chief Economist to Vice President Joe Biden

• Edward Montgomery, Senior Adviser, Department of Labor

• Lisa Heinzerling, Senior Climate Policy Counsel to the EPA Administrator

• Justan Goolsbee, Chief Economist of the Economic Recovery Advisory Board

• Dan Utech, Senior Adviser to the Secretary of Energy

• Heather Zichal, Deputy Director, White House Office of Energy and Climate Change

• Joan DeBoer, Chief of Staff, Department of Transportation

• Rick Wade, Senior Adviser, Department of Commerce
(Tim Geithner).

GM, CHRYSLER WANT BILLIONS MORE!

(Sure, Daimler paying $36 billion for Chrysler then swearing "there will never be any Mercedes-Benz parts on a Chrysler product!" must have forgot when they turned the SLK into a cheaper version of itself, the Chrysler Crossfire; What does Vince, the ShamWow guy say? "You know the Germans always make good stuff...").

Most of this happened yesterday:

General Motors and Chrysler FAX'd and emailed their viability plans to the White House and Congress late Tuesday afternoon (nice title for a Moody Blues song, no? Don't mind my references; I'm old).

GM says its Saturn division, Roger Smith's $10 billion (minimum) tribute to automotive mediocrity, will be killed, Pontiac as a division is probably history, though the name may remain on one or two models sold in other dealerships, Saab will probably be reorganized in some sort of bankruptcy (it's already being spun-off as a separate company), Hummer may be bought by a Chinese company (as we predicted here months ago) and Chevrolet, Buick Cadillac and GMC will be the company's core sales channels;

GM told the government Tuesday they'll need another $16.6 billion in loans, thank you, while Chrysler is asking for another $5 billion;

Auto industry suppliers in the US are asking for $18.5 billion in taxpayer loans;

Penske Auto Group reported its first quarterly loss in a decade (and where were GM, Ford and Chrysler when Roger Penske convinced Daimler to allow America to buy Smart cars only at his stores? Wouldn't Smart have been a nifty little profit center at, say, Chevrolet or Dodge dealers?);
(Smart Fortwo at the 2005 Tokyo Motor Show; I took this shot and didn't realize I had the date/time stamp in the 'on' mode - sorry).

GM AND CHRYSLER - "YOUR TIME IS UP" AS FORD WAITS IN THE WINGS

(Italian fascist dictator Benito Mussolini in his custom-made Alfa Romeo 2300 6C; not the car he and his mistress were finally caught in as WWII ended by a po'd Italian public which dragged them out of the car, shot them and strung them up - upside down. But it's still a nice looking car neverthess; Fiat now owns Alfa Romeo and wants their cars, along with Lancia and possibly Ferraris and Maseratis sold in US Chrysler dealerships -  Fiat is trying to take-over Chrysler without spending even one dime or lira).

Tomorrow, Tuesday, General Motors and Chrysler must turn-in their homework, uh, "viability plans," to the Obama Administration and Congress The plans are supposed to detail how the companies will slash-and-burn worker numbers and their pay and benefits, shut down factories, minimize use of suppliers, cut back their dealerships and - at the same time - plan, create, build, market, advertise and sell the safe, clean and high-mileage cars and trucks American needs. Also, not incidentally, how the firms plan on paying back the over $13 billion in loans they've already received from taxpayers.

And just two more things: help the country develop the fuels of the future and we feds might be asking you folks to build high-speed and light rail systems and cars, too.

On a technical note, the plans are expected to be filed electronically, with no public appearances for the Detroit Three's top executives planned, following their disastrous performances during Congressional hearings held in December.

In Washington, a lot has been happening on the domestic auto front.

(Ford's popular European high-mileage near-$25,000 Fiesta ECOnetic model, top, seen here at last summer's Paris Auto Show, has a 1.6 liter turbodiesel engine which achieves 65 miles per gallon; a version of the car, probably with a gasoline engine, will be sold in the US starting perhaps late in 2010; their gas/electric Fusion hybrid - just-announced base price at $27,270 - and upscale twin Mercury Milan hybrid - $27,500 base price - seems like a good buy - displayed for the first time at last year's Los Angeles Auto Show, are rated near 41mpg average and will be in dealers later this year - Cars and plans for cars like these are one reason the future looks perhaps survivable by Ford in the American market).

Last week, the administration hired two international law firms and the Rothschild Investment Bank, all with experience with large corporate bankruptcies. Their charge: to prepare strategies for the possible "forced bankruptcies" of one or both of the car makers.

STIMULUS? REPUBLICANS SCREW CAR MAKERS AND BUYERS

(Toyota's FT-HS hybrid concept at the 2007 Tokyo Motor Show; this potential future Supra could see its trip to production slowed or canceled because of the Bush Depression).

Well, there they go again.

Republicans took aim at two parts of the now-passed stimulus and recovery bill which would have helped the entire US auto industry, new car buyers and our nation's air quality, while lowering our reliance on foreign oil.

The bill passed by Congress yesterday throws a one-two punch at our auto industry and consumers.

It's the first important bill we can remember with conference changes in two separate rules which will result in harm for the industry which makes cars and trucks and the consumers who buy them.

First, President Barack Obama's desire to upgrade and modernize the federal government's huge fleet of cars and trucks was chopped in half somewhere between the Congress and Senate.
(Cars like this 2008 Ford Taurus may rank as "boring" with many people, but they and similar cars make up a big part of government fleets; newer, cleaner and higher-mileage vehicles must replace older ones, but House Republicans cut that effort in half).

And Maryland's Democratic Senator Barbara Mikulski's amendment to help the auto industry and car buyers, which easily passed the Senate just a few days ago, has become so watered-down in conference that new car buyers, who stood to benefit from $11 billion in savings, will now enjoy barely $2 billion of relief.

Obama requested $600 million for the purchase of new, clean and high-mileage cars and trucks to replace the oldest and dirtiest ones in the federal government's aging fleet. That amount would pay for about 20,000 new cars and trucks, not a huge number but certainly enough to improve and make a real difference in the fleet's emissions and fuel mileage and keep some assembly lines running.

Senate and Congressional Republicans attacked the plan, to paraphrase, as "nothing more than just a way for government employees to drive new cars."

"How does this make or keep jobs?" they asked. To which I'd reply, "How does making and selling new cars and trucks not?"

MOTOR RACING PREVIEW 2009 - THE ECONOMY'S IMPACT

(Formula 1 World Driving Champion Lewis Hamilton in his McLaren Mercedes race car; F1 is by far the world's most-expensive motorsport).

We all could use a break right about now, so let's go to the races. But you might not recognize racing in its 2009 version.

Motor racing of all types became a huge draw during the First Great Depression, from 1929 until the start of WWII.

Today, though, in this Second Great Depression, motor racing is being hit hard, not just in the US, but worldwide.

Every major racing series, from the quintessentially American series like NHRA drag racing, IndyCar and NASCAR to world events like Formula 1, the exciting and interesting new A1 Grand Prix series to World Rally, European Touring Cars and all the motorcycle sports, too, are trying to cut costs through new rules including canceling or shortening on-track test sessions and cutting-back on other expensive development costs, like testing a vehicle's aerodynamics in a wind tunnel.

A year ago, a lot of NASCAR fans started showing up at races dressed as empty seats, while attendance at most all other series dropped, too. This year, there's little if any hope for improvement at the gates of America's race tracks; there were even plenty of empty seats at last year's Indy 500, something unthinkable throughout much of that track's 100-year history.
(This JC Agajanian-owned Indy race car won the event in 1963 with Parnelli Jones in the cockpit; costs for racing were just starting their meteoric rise; that's Agajanian in his trademark Stetson and Parnelli Jones is to the right).

NASCAR has just finished a decade-long run of phenomenal growth which included sell-outs at many, if not most races and a current TV contract on a high-dollar par with the National Football League. Those big-money days are now officially over, at least through this year and probably next.

If attendance at racing was so strong during the First Great Depression, then why not now?

The answer: costs. For example, tickets for popular racing series can cost over $150 per person per day, with food, drink, parking and souvenirs adding another $1,000 or more throughout a typical three-day race weekend for a family of four. Sure, we make more money than in the 1930s, but costs for entertainment like racing have far out-stripped inflation on a dollar-per-dollar basis.
(Toyota's recent entry into NASCAR's three professional series upped the ante for every team in the sport; engine development and other R&D costs have since skyrocketed, as Dodge, Chevrolet and Ford teams try to keep up with the Japanese giant ).

URGENT - BOB LUTZ LEAVES GM

(Bob Lutz oversaw creation of the Cadillac Converj concept for the 2009 Detroit Auto Show; chances of production are zero and none).

The last "car guy" is gone.

Bob Lutz, the charismatic, fiery and egomaniacal automotive genius behind creation and development of the Chevrolet Volt extended range plug-in hybrid, due for sale in 2010, is leaving General Motors, the corporation announced yesterday. Since 2001, the 76-year old Lutz served as GM vice-chairman and product czar, answerable only to company CEO Rick Wagoner.

The announcement came not from Lutz's office, but in a press release from GM corporate, leading many to wonder if he's really retiring or was pushed-out by the company's board of directors. A noted car and fighter plane collector and pilot, Lutz turns 77 Wednesday this week, and will become a senior adviser to GM chairman Rick Wagoner on April 1, focusing on product design.

As soon as this kind of retirement announcement is made, the retiree becomes an instant lame duck and thus irrelevant. Making Lutz an adviser to Wagoner seems the American equivalent of what Japanese companies call giving outgoing top executives "an office with a window," which often gives those executives tacit control of a smaller company within the carmaker's corporation. But there's no such company-running in Lutz's future, though he'll no doubt receive a big monthly check for his "adviser" services.
(Bob Lutz introduces the Chevrolet Volt concept to the media at the 2007 Detroit Auto Show).

Lutz will be replaced by Tom Stephens, who has been in charge of GM's global powertrain and product quality efforts. Stephens, 60, adds Lutz's product duties to his portfolio on April 1.

According to Autoweek magazine's website, Lutz was hired by Wagoner in 2001 to inject passion and style into GM's product lineup. The automaker had been widely criticized for building vehicles with bland exterior styling and interiors covered in cheap-looking plastic.

BULLETIN: GM, CHRYSLER BANKRUPTCY SCENARIOS BEING DEVELOPED

According to Reuters, the U.S. government has retained two law firms with extensive bankruptcy experience and the investment bank Rothschild to advise officials on the taxpayer-backed restructuring of General Motors and Chrysler, a person with direct knowledge of the work said.

New York law firm Cadwalader, Wickersham & Taft was hired by the U.S. Treasury last month and will consider a range of possibilities for the struggling automakers including the prospect of a bankruptcy funded by the U.S. government, the person said.

Cadwalader is joined by Chicago-based law firm Sonnenschein, Nath & Rosenthal and Rothschild in working with U.S. officials as they prepare to review turnaround plans being readied by the two automakers, the person said.

A spokeswoman for Sonnenschein in Los Angeles confirmed that the firm had been engaged to advise Treasury on "ongoing matters related to the 2008-2009 developments within the U.S. automobile industry."

More to come.

REPUBLICANS TO AUTO INDUSTRY: "DROP DEAD!"

(Ford's Rouge River Works was the first car plant in the world where coal, iron, steel and wood were poured in one end, and completed cars drove out the other - Today, the Mustang is built at the plant, and it's one of the industry's more environmentally-friendly car factories).

According to the Detroit News, Senate Minority Leader Mitch McConnell, R-KY, is attacking the allocation of money from the proposed $900 billion stimulus bill to allow the federal government to replace older and less efficient vehicles with newer, cleaner cars and trucks as "wasteful spending," and further deriding the plan as "$600 million to buy new cars for government workers."

And the newspaper reports that, privately, auto industry lobbyists have said they expect the section to be pulled from the bill.

As President Barack Obama finally went on the offensive yesterday in the realpolitik world of Washington, DC, News Corp, Fox News, the Wall Street Journal and hate radio, Republican legislators continue to demonstrate that Rush Limbaugh is their party's leader, snarky labels and talking points repeated ad nauseum are the key to all victories and some of the world's largest, most important corporations - and their workers; especially the workers - can go to hell.
(President Obama spoke at the Department of Energy yesterday in support of $600 million to buy new, fuel-efficient cars and trucks for the government; it's called "priming the pump" for an important industry, and it works).

"Critics of this plan ridiculed our notion that we should use part of the money to modernize the entire fleet of federal vehicles to take advantage of state of the art fuel efficiency. This is what they call pork," Obama said at a speech at the US Energy Department in Washington, the paper reported. "You know the truth. It will not only save the government significant money over time, it will not only create manufacturing jobs for folks who are making these cars, it will set a standard for private industry to match.

"When you hear these attacks deriding something of such obvious importance as this, you have to ask yourself -- are these folks serious? Is it any wonder that we haven't had a real energy policy in this country?" Obama said.

McConnell's office, the Detroit News said, "didn't immediately return a request for comment."

The fleet, leasing and daily rental industries buy about 20% of all the cars and trucks sold in America. That's down from 33% 25 years ago, when I was editor of that industry's magazine, Automotive Fleet. And it's important to know that, especially now, these numbers include vehicles made by the Detroit Three and at the foreign-owned manufacturers, the so-called "captive imports," doing business in the US.

JANUARY CAR SALES - THE FINAL RECKONING BEGINS?

(Nissan's Altima coupe is one of the best-looking cars on the road today; the company's January sales droppped 30% over last January).

 

Last month, and for the first time, car sales in China were better than those in America, an estimated 790,000 Chinese sales versus 657,000 in the US. The US market was down last month 37.1% over January, 2008, and the big question is: When will -- and can -- the sales drought end?

January's US car sales were the worst in more than a generation, in fact, since 1982, which was the height of the sales repercussions from the first gas shortages and the then-terrible quality of too many American-made cars and trucks.

Our recession could morph into the Second Depression, easily and quickly, if the US auto industry continues to suffer losses like those experienced last month.

There are over 3 million people in the US who depend directly on the car-making business for their paychecks, and each and every one of them is now in real danger of losing their job.

And US auto parts suppliers are asking for up to $20.5 billion in federal aid to survive this worst industry downturn in decades.

Suppliers are requesting $10 billion in direct loans from the Treasury Department, said Neil De Koker, president of the Original Equipment Suppliers Association in suburban Detroit. They also are asking for an additional $10.5 billion that will flow through the Detroit Three so that suppliers can be paid in 10 days for parts delivered instead of the traditional 45.
(Ford's Edge was all the rage just 2 or 3 years back; today, the company, with a slew of gas-thirsty vehicles but a highly-anticipated 41mpg Fusion hybrid which doesn't go on-sale until later this year, may - once again, as it was for a few years in the 1970s and '80s - be in danger of failure in the US).

One piece of good car industry news yesterday came from Maryland's democratic Senator Barbara Mikulski and her Auto Assistance Ownership Amendment, passed by the Senate and now part of the stimulus package. The rule makes interest payments on car loans tax-deductible for new cars purchased between November 12, 2008 and December 31, 2009, which, according to the Senator's office, "will help more Americans afford cars during these tough economic times and spur investment in America's ailing automobile industry." For more information, click here.

January's US sales losses for almost all carmakers were simply remarkable and unprecedented this century, and for much of the last. In Detroit, Ford's January sales were down 41.6%, General Motors' losses amounted to a 48.9% loss and Chrysler - poor, now Euro-owned-again Chrysler, which had the chairman of their new 35% owner Fiat marching through their headquarters and factories last week - saw their January sales drop 54.8% over the first month of 2008. Fiat and Chrysler have some good ideas for working together -- But who's going to pay to retool the US Chrysler factories to build small, efficient Fiat cars and engines? And who's going to prepare Chrysler's "viability report" for Washington, and then pay back the loans? Chrysler's (now) minority owner Cerberus Capital says: Let Fiat do it.