Following months of debate, Congress has approved a bill that will pave the way for three-wheeled vehicle manufacturers like Aptera to qualify for funding from the Department of Energy. Next step: President Obama's desk, and the Commander-in-Chief is reportedly expected to sign the bill into law in short order. Rep. Brian Bilbray, a Republican from California who co-sponsored the bill, says:
This is a huge win for scientific innovation and the environment. We need more innovation and less regulation when it comes to promoting new ways to save energy while saving money at the pump.Indeed, three-wheeled vehicle platforms sometimes have the potential to use less energy to operate than their four-wheeled siblings, though some still question the inherent safety of such designs. Assuming the bill passes the President's desk, any manufacturer of enclosed three-wheeled vehicles that can carry at least two adults while returning at least 75 miles per gallon will be eligible for funding, though the DOE will still approve applications on a case-by-case basis.
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...
A study by Comerica Bank shows that the average purchase price of a new vehicle went up $300 in the second quarter versus the Q1, bringing the average transaction price to $26,300. The upward swing in prices came at a time when the average household income remained stagnant. The average family needs 22.1 weeks of median family income to pay for their new vehicle purchase, up .3 weeks from Q1. According to the study, higher transaction prices were slightly offset by lower financing rates, down to a very low average of 3.45%; the lowest rate in five years.
Comerica says that the reason the average purchase price rose in Q2 is that customers were buying more expensive cars. That's a bit odd in such a down economy, although lower overall sales could mean that customers who would normally purchase lower priced vehicles stayed out of dealerships altogether. The lower interest rates and higher transaction rates tells us that automakers are likely offering more 0% financing offers, which typically replaces heavy rebates in return for a lower monthly payment. Comerica Chief Economist Dana Johnson feels the average vehicle transaction price will ultimately come back down in Q3, due in part to the success of Cash for Clunkers.
Delinquent auto loans, those more than 60 days past due, are on the rise. According to credit reporting agency TransUnion, they ballooned 8.9 percent in the fourth quarter of 2008 when compared with the same period a year earlier. While glancing at the Detroit News headline would lead most to think delinquencies are now in double-digits nationwide, the actual default rate has risen to just .86 percent (up from .79 percent) – yeah, less than 1 percent (as optimists at Autoblog, we like to applaud the more than 99 percent of customers who are able to pay on time). The states with the highest delinquencies are Mississippi (1.62 percent), California (1.46 percent), and Louisiana (1.37 percent). On the other end, those with low delinquencies – and most likely to be paying on time – are found in Alaska (.19 percent), North Dakota (.34 percent), and Wyoming (.41 percent). If there is good news to be found in the report from TransUnion, it is that the average outstanding auto debt fell from the prior year – a direct reflection of owners holding their cars longer and credit tightening on new purchases.
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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Toyota has already stepped up and asked the Japanese government for a $2 billion loan to shore up its U.S. lending arm, Toyota Motor Credit Corp. We've also heard that Honda may do the same. Add Nissan and Mazda to the list now. The four biggest Japanese automakers will now all likely ask for government loans to help ensure that sufficient credit is available for U.S. customers to purchase their cars and trucks. While all four have seen sales fall less sharply than General Motors, Ford and Chrysler, each is still experiencing historically low sales in their biggest market: the U.S. Fortunately, the Japanese government has a lot of cash lying around, around $1 trillion in a foreign currency stockpile. About $5 billion has been earmarked and can be funneled through the nation's state-backed bank, the Japan Bank for International Cooperation. Only Toyota has officially requested loans, but Nissan, Honda and Mazda have all confirmed they will apply if the money's available.
General Motors and Chrysler have been in meetings with the U.S. Treasury this week to discuss how and when the Detroit automakers can again become viable. Both companies are asking for additional billions to fund their perspective turnarounds, but Chrysler is also defending a proposed partnership with Fiat. Fiat's pending 35% ownership stake would provide Chrysler with small and mid-size cars and more fuel efficient powertrains, but no cash. Some in Congress have questioned whether or not to give money to a company that would have such a large foreign ownership stake. Fiat CEO Sergio Marchionne gave the government task force a great reason to welcome the Italian automaker's stake: Fiat can help Chrysler repay loans. Does that mean Fiat will use its own cash on hand to help Chrysler keep the lights on? We don't know, but a Fiat partnership could give Chrysler far more than a sugar daddy in the Mediterranean. Giving Chrysler small and medium platforms that the company doesn't already have and likely can't afford to develop on its own will save billions of dollars in development costs, which will ultimately help Chrysler become more competitive on the cheap. Without high quality, fuel-efficient vehicles, Chrysler doesn't have much of a chance of ever repaying the U.S. government.
Toyota Financial Services has reportedly applied for loans equaling $2 billion (200 billion yen) from the state-backed Japan Bank for International Cooperation. Much of these funds would presumably be used to lend money to new car buyers in the United States, Toyota's largest and most profitable market. If granted, Toyota would join American automakers General Motors and Chrysler on the bailout bandwagon. Last month, Toyota sold roughly $2 billion (200 billion yen) worth of 10-year bonds at rates much less favorable than what the automaker had previously been accustomed to. That and the aforementioned loan request are actions likely taken to shore up Toyota's falling cash reserves, which some have estimated to be as low as $18.5 billion at the end of January.
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During his state of the economy speech on Capitol Hill, President Obama was passionate in stating his commitment to saving the domestic auto industry. While domestic automakers have the President's support, the general public may be less receptive to more government loans. A recent USA Today poll taken in the days before President Obama's speech shows that only 25% of the 1,013 Americans polled are now in favor of additional assistance. That's down from 61% in December just before the government agreed to $17.4 billion in loans to General Motors and Chrysler.
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General Motors may have put a merger with Chrysler in its rear view mirror, but the Pentastar apparently thinks a tie-up might still be a good idea. Chrysler called a potential pairing with the General the "best option" for the Auburn Hills, MI-based automaker, saying that it would reap five times the benefit of a Fiat merger. Chrysler pointed out in its viability report to the U.S. government that the two companies would have more purchasing power, the deal would generate $36 billion in cash and another $40 billion in operating earnings. Barclays analyst Brian Johnson points out that Chrysler is pushing for industry consolidation, saying that Chrysler feels a GM merger "would create more value than a standalone Chrysler or Fiat alliance." That has to make Fiat feel all warm and fuzzy inside. Tennessee Senator and domestic automaker critic Bob Corker agrees that a merger is in Chrysler's best interests, but questions whether a partnership is in the best interests of GM.
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