No. 976
December 12, 2018

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On The Surface


On The Surface #467

October 15, 2008

David Welch, BusinessWeek. If you want to know the latest on the GM-Chrysler-Cerberus deal, and get an inside look as to how this deal might actually be structured, read David Welch's excellent piece . Welch has got the details of the structured deal nailed, according to inside sources.

Tesla. You remember Tesla, right? The chip-head geniuses who were going to teach Detroit a thing or three about making cars and the car business? Oops. Looks like all is not shiny and happy for the Tesla gang. Automotive News reported late today that a story in the San Jose Mercury News has Tesla running low on cash and that as many as half of its 200 workers would be laid off. For the record less than 50 of the $109,000 Tesla Roadsters have been delivered. Tesla chief investor Elon Musk is replacing Ze'ev Drori as CEO, while Drori will become vice chairman, according to the Mercury News. Gee, that will make a huge difference. Not. Musk also said Tesla would delay its next model and close its suburban Detroit operations (the operations they had to set-up when they realized they didn't have a frickin' clue as to what they were doing). Musk had this to say on the company's website: "Our goal as a company is to be cash-flow positive within six to nine months. To do so, we must continue to ramp up our production rate, improve Roadster contribution margin and reduce operating expenses. At the same time, we must maintain high production quality and excellent customer service." Hmm, sounds like car making 101 too us. Too bad you guys thought you could shortcut your way to success. And too bad you had to lead your employees down the primrose path of promises that you didn't have a snowball's chance in Hell of keeping. F---ing brilliant.

GM. From the "Holy Shit!" File comes word that Jim Taylor has been broomed from his position as general manager of GM's Cadillac brand and assigned to become CEO of Hummer, the brand that GM is openly shopping around. Taylor will report to Mark McNabb, North America vice president, Cadillac/Premium Channel. McNabb, 46, joined GM in 2008 after stints at Nissan, Infiniti and Mercedes-Benz to assume leadership of GM's premium brands, Cadillac, Hummer and Saab USA. A puzzling move? Yes and no. Taylor, though handed the best product portfolio in the corporation, was smart enough to not screw it up. What this move really smacks of is that GM is preparing to take a significant layer of executives out of its marketing operations. And soon.

GMAC. How crazy is this business getting? GM is paying dealer sales people bonus money for sending consumer financing deals to non-GMAC lenders. GM owns 49 percent of GMAC, but they're clearly livid over GMAC's highly restrictive new loan policies.

GM, Chrysler, et al. The latest rumor from the "Developing Situation" File is that there's talk of a three-way deal between GM, Nissan-Renault and Chrysler. We'll see what happens when the music stops...

The Detroit Three. Publisher's Note: In a dire time when the Detroit Three are desperately conserving cash and hanging by a thread, Toyota is going for the jugular in the U.S. market this month by launching an unprecedented sales push similar to GM's "Keep America Rolling" campaign back in late 2001. The "Saved by Zero" ad campaign began Oct. 2 and touts a 0 percent financing program on 11 vehicles. The word is that Toyota will shell out as much as $300 million on the campaign to cover the cost of the subsidized loans, the associated media blitz and additional dealer support. This could be "The Big One" that Detroit Three marketers have feared ever since Toyota started packing away those gigantic profits over the last ten years. Toyota has more than enough cash on hand to bury Detroit once and for all, and if they open the financing spigot in these times of ultra-tight credit and make the American consumer-buying public believe that they're the only car company making loans, then this could be simply disastrous for the Detroit Three. And the real scary part about it? Toyota could do it all over again in January if they wanted to. This is a heaping, steaming bowl of Not Good for the Detroit Three, make no mistake. - PMD

Chrysler. The flailing automaker stunned Getrag - its advanced transmission partner - by suing it over conditions of a deal for a $530 million joint-venture transmission plant in Indiana, according to Automotive News. Chrysler took the action after Getrag arranged for financing of the project with a group of German banks consisting of low-interest loans guaranteed by the German government. The bone of contention was a provision that required Chrysler to immediately escrow $300 million (its share of the project's costs) to ensure repayment, even though the automaker would have been required to pay the $300 million by 2009 anyway. The $300 million was for the equipment and tooling needed to build advanced fuel-saving dual-clutch transmissions for future Chrysler North American vehicles. Does Chrysler's legal action sound like a company that allegedly has $11.7 billion in cash sitting around? Or a company that's going to be around long enough to put those transmissions in cars? Uh, nope.

Auto shopping consumers. GMAC Financial Services will lend you money to buy a car, but only if you're a prime borrower with a credit score of 700 or above. The new policy could eliminate one out of four car loans at GMAC. For the record, Cerberus owns 51 percent of GMAC.

Ron Gettelfinger. The UAW President told a local radio station here on Tuesday that he would oppose a merger between GM and Chrysler because it would cost workers their jobs. Do ya' think, Ron? Is that the best you can come up with in the midst of the biggest crisis in history for the domestic automobile business? Incredible. Then again, it won't matter, Ron, once the Detroit Three contracts down to the Detroit 1.75, the UAW's involvement in the whole enterprise will be reduced by another 2/3 from where it is right now. Next step for the UAW? Oblivion.

October. After month after month of grim news when it comes to new vehicle sales here in the U.S. market, it appears that October is shaping up to be even worse. Much worse. People have gone beyond the shaking their head stage around here, and moved on to the blank stare stage.

Cheap oil. The prospect of cheaper oil prices has some so-called analysts waxing that Detroit has overreacted with their future product plans by making a calculated shift to smaller and more fuel efficient cars, which is flat-out ridiculous, especially given the fact that the cheaper oil prices are merely a blip on the Big Picture radar screen. We're not going back, folks. And the next spike will be more severe than the last one, you can count on it.

Chevy Camaro. For those still in the market for a new set of wheels, Chevrolet has released pricing for its new 2010 Camaro (six months before it's available at dealers). $22,995 MSRP for the V-6-powered LS model, and $30,995 for the V-8-powered Camaro SS (all prices include $750 destination charge). Camaro LS and LT use GM's 3.6L V-6 engine with variable valve timing rated at an estimated 300 horsepower (224 kW) and 273 lb.-ft. of torque (370 Nm). A six-speed manual transmission is standard with the 3.6L engine; a Hydra-Matic 6L50 electronically controlled six-speed automatic, with TAPshift control, is available. LS and LT models deliver an estimated 27 mpg in highway driving. The high-performance Camaro SS comes with a 6.2L V-8, with a choice of a six-speed manual or six-speed automatic transmission. Manual transmission-equipped models receive the LS3 engine, estimated at 422 horsepower (315 kW) and 408 lb.-ft. of torque (553 Nm), with the TR6060 six-speed transmission. A new, L99 V-8 engine is used on automatic transmission-equipped SS models. It is also based on the LS3, but includes GM’s fuel-saving Active Fuel Management feature. It is estimated at 400 horsepower (299 kW) and 395 lb.-ft. of torque (535 Nm). It is matched with a Hydra-Matic 6L80 six-speed transmission and delivers an estimated 23 mpg on the highway. GM began taking orders on Monday, with production scheduled to start in February.

(All photos courtesy of Ford Motor Company)
One of our favorite things from the Paris Auto Show was the 2009 Ford Ka, the company's diminutive mainstream European car. Crisply rendered and executed, the Ka is a very attractive machine. No, there are no plans to bring it to the U.S. as of now, but as Dr. Bud says, you just never know.