No matter how you slice it, a proposed $25 billion loan from the Feds is a bailout, and that's exactly what Detroit's Big Three automakers are after, according to a report by the Wall Street Journal. Lobbyists for General Motors, Chrysler and Ford have met with White House officials, Rep. John Dingell and a smattering of Michigan Democrats to discuss the loan, with plans to unveil the proposal after Labor Day. The plan includes lending $25 billion to automakers in its first year at an interest rate of 4.5 percent (about one-third of what the companies are currently paying), with the government having the option to defer any payment for up to five years. Details are scarce, and naturally, GM, Ford and Chrysler reps aren't saying much, but if the automakers and the Feds are serious, expect more information to leak out before the proposal is officially announced.
After two years of combining celebrities, fashion and music with the best of its vehicle lineup, General Motors has decided that the 2009 GM Style Event just isn't worth the expense. The cancellation of GM Style is part of the General's goal to free up $15 billion in cuts and asset sales by 2009. Considering the automaker pays B- and C-list celebrities and sports figures to attend, there's some money on the table here. The event has actually been a big hit the past two years with attendees like Kid Rock and Jay-Z, Carmen Electra, Jeff Gordon and the some well known fashion designers from around the world. GM also used the bright lights and catwalk to show the Camaro Convertible Concept and Corvette ZR1 for the first time. The death of GM Style comes right after the automaker decided to pull its advertising at the Emmy Awards and next year's Academy Awards broadcast. GM has been the largest advertiser of the Academy Awards over the past 10 years, with $97.1 million spent on the awards show since 1998. GM will still advertise at the Golden Globes, Grammys, and Country Music Awards in 2009.
For the past several years General Motors has been using the Athens Coney Island Restaurant on Woodward Ave. as a base of operations for the Dream Cruise. The parking lot this year is again filled with classic, wannabe classic, and future classic GM machinery, much of it brought out from the GM Heritage Center in nearby Sterling Heights. For those who haven't yet seen the new Camaro in production form, the red RS we saw a few weeks ago is on display here in the parking lot along with a ZR1 in police markings and what must be one of the most yellow first generation Camaros anywhere. The powertrain tent at the back of the lot is filled with past present and future powertrains from the Z11 427 to the two-mode hybrid and even a fuel cell stack. The parking lot area is open to the public all day, so come on down.
Remember earlier in the year when Chevy quietly added the 36-mpg XFE model to its Cobalt lineup? XFE stands for "Xtra Fuel Economy" (should we tell them they spelled "Extra" wrong?) and means these vehicles have been equipped with some easy fuel-saving technologies to eek out as many miles per gallon as possible. GM announced today that the Cobalt XFE will be joined by XFE versions of the Chevy Silverado, GMC Sierra, Chevy Tahoe and GMC Yukon for the 2009 model year.
The General already offers hybrid versions of its full-size SUVs, which are also joined by hybrid versions of its half-ton trucks for 2009, but the XFE models will continue to be powered by a flex-fuel version of the company's 5.3L gasser V8. It produces 320 hp/340lb-ft in the Tahoe and Yukon, and 315 hp/338 lb-ft in the Tahoe and Yukon. All are rear-wheel-drive only and mated to GM's 6L80 six-speed auto with a fuel-saving 3.08 ratio rear axle. In order to maximize fuel economy, all four of these new XFE models get low rolling resistance tires, aluminum wheels, an aluminum spare wheel, aluminum lower control arms and a lowered suspension with revised tuning. In addition, the Silverado and Sierra also get a new front lower air dam and soft tonneau cover that improve their aerodynamics.
What does it all add up to? 1 mpg. All four standard vehicles were rated at 14 mpg city/20 mpg highway, while their XFE counterparts bump those numbers to 15 city/21 highway. The gains are certainly minimal and we're not sure yet what sort of price premium XFE models will demand, but we give GM credit for at least reacting to the current shift in consumer tastes so quickly. We would have preferred, however, that it had just made these fuel-saving changes standard equipment rather than a separate model.
According to the Center of Automotive Research (CAR), General Motors is the trauma patient with doctors gathered around the gurney giving their all to save it -- and just outside the ER doors, nurses are holding back concerned parties and shouting "It's better that you don't see!" CAR Chairman Dave Cole says it comes down to revenue, and with GM's $15.5 billion Q2 loss, revenue is down by $10 billion vs. Q2 of 2007.
Cole says "Revenue is a measure of the business going forward." We think that's a bit overstated, and that revenue is more accurately a measure of business just transacted. True, multi-billion dollar losses and revenue decreases don't make the best stories, but did anyone really expect it to be cotton candy canes as the world's -- possibly -- largest automaker transfers nearly its entire product lineup from trucks to cars and crossovers?
Admittedly, GM has nothing but an indefinitely long fight-to-the-death cage match ahead of it. The product turnaround probably won't be completed in Q3. And, as GM's CFO said, it's "going to have to grow the business" in addition to making cost cutting moves like shuttering four truck plants by 2010. But we figure there's probably quite a bit more life left in little boy blue than some give it credit for.
In a move that will help both ailing automakers, General Motors and Ford are holding discussions about sharing engine and powertrain technologies. Although neither company will officially acknowledge the liaisons, the meetings have been going on for more than a month, according to sources. Engine and powertrain development costs are significant -- an entirely new engine could cost $1 billion, while a transmission could cost upwards of $800 million -- so splitting those costs offers substantial savings to both companies. In addition to the financial incentives, technology sharing would open doors that otherwise would have remained shut (e.g., GM sharing Volt technology with Ford). This wouldn't be the first time the two competitors have climbed in the sack together... years ago, they successfully partnered on a six-speed automatic transmission that is widely used by both companies today.
This rumor definitely makes for a fun what-if game. If these discussions bear fruit, what engines would you like shared across the aisle? A Vortech V8-powered F-150 or an LS9 Mustang GT500? How about a Malibu powered by a twin-turbo DI Ecoboost V6?
General Motors reported its second quarter earnings this morning, and the news was predictably grim. The General lost $15.5B in the quarter, as the Detroit Automaker continues to struggle with brutal market conditions and the costs associated with strikes and downsizing. Among the losses is a $4B hit from automotive operations, as stymied truck sales resulted in an 18% drop in revenue to $38B. GM's credit arm lost another $2.5B from high loan default rates and huge losses from truck and SUV lease residuals.
Another $9.1B came from one-time charges associated with GM's massive restructuring and the American Axle strike. Among the charges was a $3.3B write-down to pay for buyouts to the 19,000 UAW members that left by July. Overall, GM lost a staggering $27.33 per share in the quarter, which is even more amazing considering the General's stock is trading at about $10 per share. Among the actions GM took this week to help stem its bleeding balance sheet was ending all leasing in Canada, raising lease costs here in the States, and the announcement of 5,000 white-collar job cuts.
We're no industry analysts and we don't have any insights into the General's balance sheet, but a $15.5B Q2 loss and four straight quarters of red ink doesn't sound good at all. New fuel efficient products like the Chevy Cruze and Volt can't come soon enough, though it will be an even bigger challenge trying to make money off these small and ultra-fuel efficient cars.
General Motors is looking to reduce its salaried (read: non-unionized) workforce by 5,000 employees by the end of the year, leaving the beleaguered automaker with 27,000 white-collar jobs in total. This 15% head-count reduction is part of an ongoing effort to trim costs as the automaker continues to hemorrhage cash.
Also on the docket are early retirement plans offered to a select group of workers close to retirement age, while employees who choose to stay won't be getting raises until 2010 at the earliest. If GM reaches its reduction goals, the automaker will have shed its salaried workforce by 17,000 people in the last decade alone.
"We're ready. When (customers) want it (the option of smaller engines) - we'll do it." That's a (somewhat mangled) quote from Thomas G. Stephens, GM's executive veep for global powertrain and quality, speaking at the inauguration of the General's Powertrain Engineering Development Center last Friday. What Stephens is referring to is the possibility of equipping Cadillacs with smaller, turbocharged engines – specifically fitting the 260-hp (or more) 2.0-liter, turbocharged four in the CTS sedan.
Sounds like a Hell of an idea, but how – exactly – is GM going to determine when consumers are ready for it? How about now?
Prices at the pump may have peaked (for now), but consumers are still craving fuel-efficient rides that don't skimp on power and poise. GM is already making V8 levels of output with its direct-injected 3.6-liter V6 (see: Camaro) and that, coupled with Stephens' quote, means that GM isn't totally oblivious to the idea of offering smaller engines that balance fuel economy and thrust in packages that might benefit from them. But again, how will the market tell GM when it's open to the idea of fewer cylinders making just as much power? Ford is already ramping up to release its line of direct injected, turbocharged EcoBoost engines, BMW has proven that turbocharged sixes are the bee's knees and practically every other automaker is looking into forced induction as a means to a lighter, more powerful, more fuel efficient end. So why is GM stalling? If the General has the capabilities, it needs to step up and let the market embrace it. It will. If GM doesn't, it risks its own extinction.
As if selling a quirky Swedish brand wasn't hard enough, Saab dealers will now have to do it with a smaller powertrain warranty. Effective immediately for 2009 models, all powertrain warranties on Saab vehicles will be reduced to four-years or 50,000 miles. Most media outlets, including Automotive News, are reporting that Saab's current warranty is seven-years and 100,000 miles for its powertrains, but that's inaccurate. Saab's powertrain warranty has the been the same as the rest of GM's brands since they were all increased in September, 2006 to five-years or 100,000 miles. So the new Saab powertrain warranty lops one year and 50,000 miles off the old one. The brand will keep its free scheduled maintenance offer for three-years or 36,000 miles, however, to remain somewhat competitive with other entry-level luxury marques. GM noted that no other brands are reducing their warranties, just Saab, so you better hope your brand new 9-3 was built on a Wednesday.
