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Shrinking GM, Part 2 (Jul 2)

GM is shrinking again. And this time, I?m not talking about its sales, market share or payrolls. The stock price dropped 15% to under $10 a share today, a 54-year low. It closed at $9.98 a share, which is off 72% over the past 12 months.

The reason: In addition to its sales falling 18% in June, Merrill Lynch analyst John Murphy suggested in a research note that bankruptcy isn?t out of the question. GM had $24 billion in cash and a credit line to borrow another $8 billion at the end of the first quarter. With truck sales in a freefall, GM is burning cash quickly. A Chapter 11 filing may not be around the corner--and GM will do anything to avoid it--but it?s not out of the question.

With its stock under $10 a share, there?s another worry. GM?s market cap is now down to a paltry $5.7 billion. Some corporate raider could swoop in and buy control of the company for less than $3 billion. Billionaire investor Kirk Kerkorian could come up with that money, since he tabled a $4.5 bill...

Chrysler's Image Problem is a Reality for Cerberus (Jul 2)

http://www.mahindra.comChrysler is in a bad way. Sure, there are the basic metrics that don?t bode well for the automaker. Sales were down around 36% in June, the biggest decline in the industry. It just made use of a line of credit from minority owner Daimler (yes, it?s true it had to use it or lose it). It?s lineup is way way out of line with the current trend toward smaller, more fuel efficient vehicles.

But what really dogs Chrysler is the widely held, and much combated (by Chrysler executives and those at majority owner Cerberus Capital LLC) that the company is merely being run for the time being for an eventual break-up and sell off.

Merrill Lynch?s new Car Wars report says, ?We believe ?that this is an active decision by new owners [Cerberus] to rationalize the product portfolio in advance of a break-up/sale.?

Not that Merrill is always right. But when you have a firm as stealthy, private and dark as Cerberus, the ?Dick Cheney? of private equity firms, running a company a...

More Toyota hybrids for China (Jul 1)

For all Toyota's recent success in China, it's fair to say the Prius isn't one of them. While Americans can't get enough of the gas-electric hybrid, Chinese sales, stymied by high import taxes, have disappointed. Launched in 2005, last year Toyota's China Prius sales were just 1,000--one third of what had been hoped. At around $36,000--around $15,000 more than the U.S.--it's easy to spot the cause.

Still, there are fresh signs that Toyota's plans to ramp up hybrid sales to over one million a year globally by the early 2010s include China. According to reports in Japan today, Toyota will start making hybrid Camrys in China in 2010. Initially, Toyota will make 10,000 of the cars a year at Guangzhou Toyota, its joint venture with Guangzhou Automobile Group in Guangdong, notes today's Nikkei. That echoes recent announcements that Toyota will start producing Camry hybrids in Australia and Thailand. Toyota expects to benefit as gas prices rise in China and plans by Chinese authorities t...

Chinese Volvos Could Be Coming To A Showroom Near You (Jun 25)

Ford Motor, it has been reported by Swedish newspaper Dagens, is in negotiations to sell its Volvo car division to a Chinese automaker believed to be Shanghai Automotive Industries.

Ford shopped Volvo last year, but didn't find anyone willing to step up with the $5-$8 billion it was looking for. BMW and Renault-Nissan are both believed to have looked at acquiring Volvo, which lost money for Ford last year.

A Ford spokesman said: "We have been consistently saying since the end of last year that Volvo is not for sale. We are focused on improving Volvo's business results."

Ford has already sold Aston Martin, Jaguar and Land Rover to raise cash and better focus the company on rebuilding the Ford brand. But Ford, facing greater cash needs than it thought because of the softening U.S. economy and weakening auto sales, is looking for more. The price Ford is willing to take for Volvo is believed to have come down in the last six months.

GM in the Barrel, Again (Jun 24)

Here we go again. With truck sales in an out-and-out freefall, we once again have talk that General Motors will lose another sales crown. This one would be trailing Toyota not just in the global markets, but here at home in the US of A. Some media reports have hinted that GM?s 0% finance offers are targeted toward keeping Toyota off GM?s tail.

I don?t buy it. And hopefully, GM Chairman and CEO Rick Wagoner and President and COO Fritz Henderson aren?t thinking that way, either. I doubt they are. Sales crowns mean nothing when a company is fighting for survival. More likely, GM is trying to squeeze every last sale in this weakest of car markets to keep cash rolling in the door. When I wrote about GM?s cash problems several weeks ago, Wall Street analysts variously estimated that GM would run down to?or close to--its bare minimum of cash of about $10 billion by the end of next year. And that was before June sales started sinking like a Hummer dropped in the Detroit River. It was a...

The Ugly Road Ahead (Jun 23)

A week after Ford said it would slow down truck production, General Motors followed with a similar move. This time, GM is slowing down production at seven truck and suv plants. That pretty much says that the gas-guzzlin? suv business is wheezing its last breath. With it goes Detroit's profit center. The only thing that mitigates the damage from the loss in suv sales is that GM said that the company is adding shifts at some passenger car plants to meet growing demand as consumers trade down to smaller vehicles. GM also said it would slap 0% financing on most 2008 models to spark sales. That?s sure to hit profits.

Wall Street is holding its collective nose. GM's stock dropped 6% to a close of $12.91 a share today. At that price, GM is worth $7.3 billion, or, a little more than Toyota makes in six months. Ford?s stock dropped to $5.28 a share, giving the company a market cap of $11.8 billion. Only the the courageous value players are in at this point.

That makes sense. These ...

Ford Prospects Worsen (Jun 20)

Prospects are worsening for Ford.

The automaker said today that 2008 results will be worse than previously forecasted, and that it will have trouble breaking even next year. It is further reducing factory shifts to reduce the supply of vehicles to dealers. And it is taking the extraordinary step of delaying its F150 pickup truck launch this Fall by two months in order to let dealers sell off as much of the old inventory, at discount prices, as possible.

Even Ford Credit, always a reliable profit generator, will incur a pre-tax loss this year, said Ford.

Delaying the F 150 pickup launch is akin to a farmer announcing he is going to plow under his crop rather than sell it at a loss. The F-Series pickup is still Ford?s biggest profit generator. It is Ford?s most important franchise. Two years ago, if an auto company was to come along and bought Ford, it is the truck business alone that would have been worth the purchase. But the economics of the pickup business is going sideways ...

Kerkorian's Ford Interest Becomes Clearer (Jun 19)

Billionaire investor Kirk Kerkorian raised his stake in Ford Motor Co. to 6.5 percent and said he may be interested in investing additional capital in Ford.

The 91 year old Kerkorian has spent about $1 billion in Ford so far. Should Ford, which is concerned about having enough cash to see it through the economnic downturn, need a fat wallet to bolster its balance sheet, Kerkorian could be there.

Ford projected it would have cash burn of $12-$14b between 2007 and 2009. That figure is now $14b-$16b to cope with more headcount reduction than anticipated, as well as profit shortfalls because of a decline in higher-end SUVs.

Ford has $29b in gross cash on hand, and $12 billion in credit lines. It's total liquidity is $41 billion, and it is carrying $27 billion in debt.

Analysts believe that Ford iw well positioned to weather the storm. But no one is sure just how long the storm will last.

Tracinda could be an alternative to forging an alliance with an automaker such as Renault-Nissa...

Ari Gold's Lament (Jun 18)

Even if you?ve never been to Los Angeles, it?s not hard to picture an endless line of Californians queued up in their cars on Interstate 405 or California 101. They driving five miles an hour while yacking on their cell phones. If you can?t conjure up that image, watch obnoxious workaholic talent agent Ari Gold, played by actor Jeremy Piven, on HBO?s series ?Entourage? berating someone via his mobile and speeding in his Lexus. It?s a California scene. But only for a couple more weeks.

On July 1, California will enact a law that prohibits cell phone use while driving. The first offense will warrant a $76 fine and the second one will cost $190. What?s a body to do? Buy stock in makers of blue tooth technology. Terry Miller, the general sales manager of Galpin Motors, the nation?s largest Ford dealer, says his dealership has ramped up sales of blue tooth aftermarket devices and other hands-free talking technology so Californians can keep on gabbing at the wheel. They range from ...

GM Oil Ad A Non-Controversy Run Amok (Jun 18)

Talk about a non story. Both Automotive News [see story below in the extended blog space] and some of the auto blogs have reported that General Motors was ?breaking? with Big Oil by way of a TV ad that was to say,? "Dear Oil," a new TV commercial begins. "We've had this great relationship for many years. We think we will both be a lot happier and healthier if we see less of each other." The commercial from McCann-Erickson was to debut on NBC's "Meet the Press" June 22, Benoit said.

The ad was talked up by GM marketing exec Katherine Benoit at the meeting of the American Advertising Federation.

And the controversy was?? Um....uh....hmmmmm.

The point of the ad was to say that GM?s cars increasingly have to use less oil?electrics, smaller engines, gas cars that get much better fuel economy, hybrids, plug-ins.

But the story was conflated into this whole other thing; That GM was going to war with the oil companies, or something. The auto companies and oil companies do not exactly lob...