Just because Toyota is still spending on Formula 1 and the Lexus LF-A doesn't mean its not cinching up the fiscal belts -- scaling back at the Detroit Auto Show, killing Australia's TRD division, and delaying a highly anticipated sports car. And now you can add stopping construction on new factories to that list. Toyota has a Camry assembly plant in St. Petersburg, Russia where it expected to build 20,000 cars in its first year. The plant didn't make its quota, so a proposed expansion of the facility to begin in 2010 has been put on hold. In Thailand, Toyota intended to build a diesel engine plant this summer. The $155 million factory would have gone online in 2010 and made powerplants for Toyota pickups. That plan has also been scrapped for the time being.

GMAC, General Motors' finance arm, was granted bank holding status, but there is still no word on whether the bond buyback was successful. The deadline for GMAC to have converted enough of its bonds - said to be 75 percent - into $28 billion in liquidity was on Friday, December 26, at 11:59 p.m. In return for bondholders converting their bonds to those of lesser value, they would receive a higher dividend. Two weeks ago, GMAC said it found a slew of new bondholders, but didn't say whether the new participants would put it above the threshold. Now more than two days past the deadline, GMAC has only said "We have not yet issued final results but intend to in the near term." This kind of silence usually means that things didn't go as planned, but other plans are afoot. While it's not impossible, we'd be shocked if GM had fulfilled The Fed's requirements by the deadline and chose to remain quiet about it.
After all, success for GMAC means success for GM. But bankruptcy for GMAC - which could happen without access to TARP funds - could mean something very close to doom for a lot of dealers and for GM. Our guess is that GMAC and The Fed are trying to figure out the best way forward, because it is certain that the government doesn't want to see its $17.4 billion dollar investment go bust because GM lost on a side bet less than a month later.
GMAC – and ergo General Motors – just got another Christmas present: the Federal Reserve has granted GMAC bank holding status. GMAC has billions of dollars of bonds coming due over the next 12 months, but doesn't have the liquidity to cover the obligations. As of last week, the financing company was in the midst of a bond buyback effort in order to raise enough money to qualify for bank holding status. Now that it's been granted, GMAC can tap the Troubled Asset Relief Fund intended for financial institutions, pay its debts and (probably) avoid bankruptcy.
It isn't clear, however, whether or not GMAC actually raised enough money through the bond buyback. The Fed said "emergency conditions" justified its actions, which makes us think the Fed just said "Here, take it." Looked at from a dealer perspective, it makes sense: if GMAC had gone under, one dealer estimated that it would have taken 30-40% of GM dealers down with it, and that could imperil GM itself. It wouldn't make much sense to let that happen when the government just loaned GM a bunch of money to stay in business.
And while GM is still a long, long way from getting the kind of money that any number of banks have, it's still beginning to add up. As a result of the new status, both GM and Cerberus are required to lower their stakes in GMAC. Cerberus has been told to lower its share to 33%, down from 51%; GM has said it will go below 10%. As for Cerberus' other headache, Chrysler Financial, it has said that if dealers don't stop making a run on its funds, it will cease financing for dealer inventories.
Whenever we drive from Los Angeles to Phoenix, we always stop at the Flying J in Blythe, California to refuel - and that might mean "refueling" on coffee, trail mix and a rented audiobook instead of gasoline. As it turns out, though, our favorite truck stop chain's production, refining, and pipeline business has been KO'ed by the recent drop in oil prices and the credit crunch. As a result, the Flying J has nosedived into Chapter 11 bankruptcy protection. According to company president J. Phillip Adams, the filing is the result of a liquidity shortage. Says Adams, "With this sudden and unanticipated inability to meet our liquidity needs, we regret that we had no other choice than a Chapter 11 filing to enable us to stabilize our financial base." The company's liabilities are estimated to be anywhere between $100 million and $500 million, but according to court documents, FJ has assets worth upwards of $1 billion. The bankruptcy proceedings are not expected to affect supplies on the West Coast, and no layoffs are as a result of the filing. Flying J, we pray for your speedy return to health.




It's up and down, but nowhere near out for Chrysler, LLC. The Big Three's smallest sibling says that it's ahead of internal estimates and has posted earnings in excess of one billion for the first half of '08. True, the company also posted a $510 million loss in Q1 according to minority shareholder Daimler. And since Chrysler is privately held, it doesn't need to tell anyone whether these earnings put it in the red or black.
But whatever's on the books was good enough to convince lenders to grant Chrysler's financial arm a $24 billion line of credit. Said a Chrysler spokesman, the money will be used to "support our dealers and their retail customers." The pentastar just got out of the leasing business, so the influx of credit will keep the financial arm doing what it needs to do as all those remaining lease vehicles come back with empty tanks and bottomed-out residuals. And believe it or not, those are all good things.
