Last week, it was reported that General Motors had signed a definitive agreement to sell Hummer to Chinese machinery manufacturer Tengzhong. The Chinese company and its partner in the deal, Lumena Resources Corp., would pay $150 million and receive Hummer and its intellectual property, ownership of U.S. franchise agreements, and manufacturing, business, and component assistance during a four- or five-year transition period.
The questions being raised now concern what is happening on the other side of the Pacific. The Chinese Commerce Ministry reportedly hasn't received Tengzhong's application to officially bring Hummer home, which has led observers to wonder if there will be a holdup or reversal of the deal. According to a Hummer representative, however, Tengzhong had to finalize the deal with GM before it could present it for approval to the Chinese authorities:
The closing of the transaction is subject to customary closing conditions and regulatory approvals andor review by agencies in China and the U.S. Tengzhong has started communicating with the relevant regulatory bodies and will continue to support the application process in accordance with the requirements. Formal engagement was only able to begin with the signing of the definitive agreement.
A major hurdle in Saab's transfer to the homegrown hands of Sweden's Koenigsegg has been surmounted: the Swedish government has agreed to guarantee a 4.3 billion kroner ($615M U.S.) loan from the European Investment Bank to the Koenigsegg consortium. That represents the final funding the maker of the CCX needs in order to compete the financing of the deal.
The next hurdle is for the European Investment Bank to consent to give Koenigsegg the money. A Swedish government representative said he hoped the EIB would decide before the end of the month. If that happens and things goes favorably, Koenigsegg may still get the deal done on its original timeline, the end of the year
The aggrieved parties are: the United Steelworkers and the U.S. government on one side, Chinese tire companies and the Chinese government on the other. The issues are, as always, jobs and money. The Steelworkers brought a case against Chinese tire companies for dumping tires on the U.S. market over the past few years and in the process putting more than 5,000 people out of work and closing seven domestic tire factories. The case was ruled on by the U.S. International Trade Commission, which found in favor of the Steelworkers. In response, the current administration plastered a 35% tax on Chinese passenger car and light truck tires.
Naturally, the Chinese are miffed, to say the least. They feel the tariff is contrary to World Trade Organization rules and President Obama's rhetoric on current tariff levels, as well as being a tactic of undue protectionism. When China entered the WTO, the U.S. specifically negotiated the right to protect itself against a sudden wave of Chinese goods, and the ITC feels that China's share of the tire market having grown 14% in four years, with 31 million more tires entering, is just such an occasion.
Politics could be the decider in this one, however. China can complain to the WTO, attempt to impose its own countermeasures, or at the upcoming G-20 meeting it can simply whisper in Obama's ear, "You know that $1.56-trillion-and-counting deficit you guys need floated..." Nobody wins in the case of escalation, but we have a feeling the fight isn't yet finished.
When GM decided to hand 55% of Opel to Magna, you didn't think the Belgians were just going to have some waffles and call it quits, did you? Oh no. Belgium's prime minister made a call to the EU president about the deal, and the EU Competition Commissioner Neelie Kroes told a Belgian newspaper, "If something happens against the rules, I will take action."
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While General Motors was going through its 42 day bankruptcy period, one of the stories that didn't receive much play was the sale of GM's Opel brand. The major players in the Opel sale appear to be the German government, Canadian supplier Magna and Belgian private investor RHJ International.
The German government was reportedly willing to front 3.4 billion euros toward the deal, as long as Magna was the buyer. Magna has said that it wouldn't close any German factories if it purchased, making the supplier attractive to the German government. But Magna is tied to a Russian company that would receive GM's intellectual property if the sale is made final.
The Daily Mail in the UK is reporting that the General would rather push Opel into insolvency than sell to Magna. When GM went into Chapter 11, Opel was placed in a trust. Now that GM is free of bankruptcy and sales have picked up (slightly) in Europe, the Detroit-based automaker could possibly again own Opel by working through German insolvency laws. To make matters a bit more complicated, Opel's unions are threatening to demand pay raises and bonuses if the company isn't sold to Magna.
The sale of Opel looks like it's becoming more of a mess than originally anticipated. The status of Opel could become clearer by the end of this week, with a Opel on the agenda during a major board meeting at GM today and tomorrow.
Before there was a Motors Liquidation Co, post-bankruptcy GM's hived-off shelter for useless assets, there was Old Carco LLC. That's the company Chrysler built to house its useless assets, and unsurprisingly, it doesn't have good news for unsecured creditors. Old Carco was left with liabilities of $20.5 billion, but has less than half of that to pay off everyone it owes.
The latest accounting says there is $2.345 billion to pay things off. With a shortfall that drastic, even the U.S. Treasury and the Canadian governments are waiting for their money, with a $3.34 billion loan and $29 million in interest going not being repaid. The Treasury sent Old Carco a notice of default last month, which strikes us as a waste of a stamp and paper.
And since Old Carco isn't allowed to borrow any more money, there is almost no chance that creditors will be made whole. At this point, as the company tries to unload leftover factories and property, it looks like the best anyone's going to get is pennies on the dollar -- or just fractions of that -- and that could be for the folks first in line. Old Carco is dead, long live Chrysler...
China joined the World Trade Organization in 2001, at which point it was given five years to adjust to the rules of open trade before any complaints were lodged against it. On schedule, in 2006, the complaints began, lodged by the U.S., Europe, and Canada.
In one example of open trade prohibitive practices, Automotive News reports that if a car built in China uses a percentage of imported auto parts above a specific threshold, China taxes each imported part an additional 25%. In such a price-competitive atmosphere, such a policy all but proscribes the use of imported parts, a move that has lead to complaints from all three continents.
The original complaint was decided at the end of last year in a ruling against China. Beijing appealed, to no avail. In response, China has rescinded the tax, which is an initial step to truly opening the market up for foreign parts- and automakers. The U.S. trade in auto parts to China is not even 113th what it is to Mexico, a statistic that a host of companies would clearly like to change.
If you're a car dealer, chances are that you're not visiting Autoblog this morning to see what's going on. No, your head and the head of every single one of your employees is buried in a keyboard right now, frantically refreshing the government's website that handles Cash for Clunkers submissions. The website has been down since yesterday morning, and the Transportation Department has officially extended the deadline for dealers to file their reimbursement requests twice now – once yesterday to noon today and again late last night. The second extension is open ended until the site comes back online and is able to handle the influx of dealer submissions.
The government website went down at some point before noon on Monday morning, presumably when dealers nationwide began submitting their final reimbursement requests from last weekend's bonanza sell-a-thon. All the government is saying right now is that dealers will have any time lost while the site was down to submit their final paperwork. The deadline to actually sell cars through the Cash for Clunkers program came and went last night at 8PM, but if dealers are prohibited from submitting paperwork for those final sales, they may be out the cost of the C4C rebate for each car.
Now that the crime is over, the verdict issued and the sentencing issued, we can look forward to a few months years of the CSI treatment applied to what really happened at Chrysler. The first exhibit is a New York Times piece with Cerberus co-founder Stephen Feinberg, coming off almost as The Man Would Would Be Iacocca. The first quote – "I don't know what we could have done differently. From the day we bought it, we worked hard to improve it" -- is the kind of statement that, no matter how true it is, would likely elicit numerous objections. Yet the issue of whether Cerberus should have bought Chrysler or whether it knew what is was doing is only the second most compelling theme of the Times piece. The real hook is the competing justifications of why Cerberus bought Chrysler. On the one hand, many feel that it was a play to get Chrysler Financial and marry it with GMAC. The other hand, as Feinberg notes more than once, was supposedly holding an American flag – that is, the Cerberus deal was about patriotism and doing what's right for the country. That's a narrative we had never even considered – private equity and The Good of America don't often dine together in our world – but have a read and decide for yourself.
General Motors announced today that it's taking a pass on $2 billion in loans that were previously requested last year for the month of March. The automaker cites "company-wide cost reduction efforts as well as pro-active deferrals of spending previously anticipated in January and February" as the reasons for why it's withdrawing the request for money. GM advised the President's Task Force on the Auto Industry of the development this week and revealed the news today at the bottom of a press release containing its statement on the Canadian Auto Workers union ratifying a new contract with concessions. The low key announcement is strange considering the good light in which the automaker will likely be cast for not taking money from the government that isn't needed. Ford, which was the only domestic automaker not to request government aid, has been enjoying that spot light for months.
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