Private-equity firm Cerberus Capital Management that owns Chrysler plans to hand over equity in the company's automotive operations to labor and creditors as part of its loan agreement with the U.S. government, Bloomberg News reports.

"Cerberus believes that concessions by all relevant constituencies will be required to facilitate a full restructuring and recapitalization of Chrysler," the New York-based firm said in an e-mailed statement Friday. The Chrysler investment is the largest in the firm's history.

 

Cerberus' announcement came after President George W. Bush announced General Motors and Chrysler will receive $17.4 billion in loans to keep operating in exchange for substantially restructuring their businesses.

Cerberus said Friday the global economic crisis had a "swift, unexpected, unprecedented and catastrophic effect on the American economy."

The Chrysler investment in 2007 accounted for about 7.5 percent of Cerberus's roughly $27 billion in assets under management, according to the statement.

Source: www.autoobserver.com

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By Bill Visnic

Japan's financial sector is buzzing with the prospect Toyota Motor Corp., one of the nation's most successful and powerful corporate entities, is likely to record it's first-ever full-year operating loss, reports Japan's Nikkei English-language business newspaper.

Toyota has not recorded an annual operating loss since it began publicly reporting its earnings in 1940, and the Nikkei says fallout from World War II led to Toyota's only pre-tax loss — in 1949.

The vaunted Japanese company's heady profit-making run appears over, thanks to cratering vehicle sales in many global regions, but most seriously in the U.S. market, where the company has been absorbing double-digit sales declines for months. The currency-exchange effects of a rising yen also have chopped into Toyota's revenues.

Toyota has been cutting production in many of its U.S. assembly plants, and last week conceded it will be in no hurry to complete its new plant in Blue Springs, Mississippi, that was originally slated to produce the Highlander crossover. Toyota then shifted gears to say it would build the next generation of its preeminent hybrid-electric vehicle, the Prius, at the Greenfield, Mississippi, site. But with Prius sales nosediving in the U.S.– down a titanic 48.3 percent last month and 9.9 percent for the first 11 months — Toyota said completion of the Blue Springs plant is not a priority.

Even Toyota's blue-chip credit rating may be in for a bit of tarnish. Standard & Poor's signaled earlier this week it may consider a downgrade for the company.

 

 

Source: www.autoobserver.com

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By Michelle Krebs

General Motors Rick Wagoner is staying on the job.

"Do you think I would have gone through what I did the last two months if I were thinking of leaving," Wagoner asked a reporter during Friday's news conference on GM and Chrysler receiving government loans.

Indeed, numerous people from various quarters, including U.S. Congress, had called for the resignation of Wagoner, who has led GM for the past eight years when it racked up billions in losses.

"I'm absolutely not leaving," Wagoner said adamantly. "We're more energized than ever now that we have funding."

And how do he and GM win the confidence of the American people, he was asked. "Test drive a Chevy Malibu," Wagoner said in forceful salesmanlike talk that he should have used during Congressional hearings.

"It's the best midsize car in America, and we're doing that kind of product time and time again," he said.

He said he's frustrated that GM's progress in product, technology and the competitiveness of its workforce has not been fully appreciated. "We're on the right track and we'll have to re-double our efforts."

Wagoner admitted the situation has caused everyone at GM to focus on how business has been done and how it should change in the future. "I'd never wish this kind of crisis on our country, our industry, our company or our people," he said. "But it has led us to look at everything we've done historically and consider what to change to make GM viable for the future. We're asking what else can we do?

"It's difficult," he said, "But we have an opportunity once and for all to eliminate the negative side of 100 years of history and look forward to the next 100 years without burden of history."

Source: www.autoobserver.com

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By Michelle Krebs

DETROIT — General Motors will provide an update on the future of Hummer sometime in the first quarter, a company executive said Friday.

"We've been in discussions [regarding Hummer] with interested parties. Those talks are moving along quickly and we'll have something to say about Hummer in the first quarter of next year," said GM President Fritz Henderson in a conference call with media regarding the government's rescue package for GM and Chrysler.

Henderson said that announcement would be either "a deal to be had or a different path" that Hummer would take.

At the same time, GM is evaluating what it should do with Saab, with an option being its sale. Henderson gave no indication on Saab's future. He said the evaluation of the Swedish marque is being done in Europe where Saab sells nearly 75 percent of its vehicles.

As for Saturn, GM is in discussions with its Saturn dealers as to the future of the brand, Henderson said. Rumors regarding the future of Saturn have ranged from being sold to GM's Chinese partner, SAIC, to the Saturn dealers themselves running the business.

 

Source: www.autoobserver.com

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By Michelle Krebs

Two of the highest profile hires made by Chrysler following its purchase by private equity firm Cerberus Capital Management are leaving the company.

Philip F. Murtaugh, who headed Chrysler's Asia-Pacific operations, and Deborah Meyer, Chrysler's chief marketing officer, are gone, Chrysler announced just moments after President George W. Bush said Chrysler and General Motors would receive $17.4 billion in government loans.

The hiring of Murtaugh and Meyer, along with Vice Chairman Jim Press, were hailed as coups by Chrysler when they occurred just 18 months ago.

Murtaugh built General Motors' phenomenally successful operations in China. He left GM when the automaker reorganized its Asia-Pacific operations and went to GM's Chinese partner, SAIC. Chrysler then stole him away. The automaker said he is leaving by year-end to pursue other opportunities.

Chrysler lured Meyer away from Toyota where she had headed Lexus marketing. She joined Toyota after working for Ford. The post of chief marketing officer is being eliminated and her departure is immediate as she also pursues other opportunities, Chrysler said.

The Murtaugh and Meyer departures come within a couple of weeks of two other top-level executive exits. The automaker announced on December 12 that Purchasing Chief John Campi resigned because of health reasons. On December 15, Chrysler said Simon Boag, vice president in charge of the automaker's Mopar parts division, was leaving for other opportunities.

But clearly line workers to executives are seeing little future for the ailing auto company, despite the federal loans. Thousands, beyond what Chrysler had hoped for, have accepted buyouts to leave the company.

Still, putting the positive spin on the moves as only Chrysler has been able to do of late, Chrysler Vice Chairman and President James E. Press said in a statement Friday morning that  "this consolidation provides even greater alignment for the Company to focus on its customers, dealers, regional operations and global product planning."

As part of Meyer's departure, Chrysler said it is realigning its global sales and marketing organization, pulling more operations under Steven J. Landry, executive vice president of North American Sales, Marketing and Mopar Parts and Service.

In response to Murtaugh's departure, Chrysler said Michael Manley, executive vice president of International Sales and Global Product Planning Operations, will also add to his responsibilities. Chrysler will also refocus its efforts in Asia, redirecting the sales and marketing function for the Asia-Pacific Region, particularly in China, which will continue to report to Manley.

Chrysler said it "will continue its global partnership and alliance strategy, including seeking new opportunities in China." However, those functions will be centralized in Chrysler's Auburn Hills, Michigan, headquarters under L. John Cataldo, vice president of Business Development and Alliances.

 

Source: www.autoobserver.com

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By Michelle Krebs

The Bush administration announced Friday morning that it will provide $13.4 billion in short-term loans to General Motors and Chrysler; the automakers will receive another $4 billion in February.

President George Bush admitted reluctance about providing government loans to the Detroit automakers but noted the beleagured U.S. economy would suffer a harsh blow if one or more of Detroit's automakers collapsed into a "disorderly bankruptcy" at this time.

"These are not ordinary circumstances," Bush said. "In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action." 

The money will come from the $700 billion Troubled Asset Relief Program (TARP). Automakers will get $13.4 billion immediately and another $4 billion from the fund in February to keep them operating through March.

The much discussed strings attached to the loans require:

- pay back of loans to the government ahead of all other debt payments; 

- demonstration of progress toward financial viability and restructuring by March 31 or the loans will be called back and the automakers would be forced into bankruptcy;  

- reduction of debt by two-thirds by, in part, making half of the payments to the union retirement fund in equity;

- concessions by unions to make pay and work rules competitive with foreign automakers doing business in the U.S. by year-end 2009. The concessions include elimination of paying workers when they aren't working;

- concessions from management, debtholders, suppliers and dealers;

- issuance of warrants for non-voting stock to the government;

- limits on executive pay and perks, including travel by corporate jets;

- the government authority to block transactions larger than $100 million;

- government access to financial records;

- no payment of dividends until debt is repaid.

Obama Gives Plan His Blessing

President-elect Barack Obama, who will inherit the automakers' calamity and could make changes in the game plan, endorsed the loans Friday, calling them a "necessary step" to avoid a major blow to the economy. 

"The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry," Obama said in a statement.

GM, Chrysler — and Ford — Respond Quickly

GM and Chrysler — as well as Ford, which is not part of the loan package — responded quickly. GM management will hold a press conference at 11 a.m. Friday to discuss the loan package.

In the meantime, GM said the government's financial bridge was much appreciated "at this most critical time for the U.S. auto industry and our nation's economy." The automaker, in its statement said, the government's action will help preserve jobs and support the continued operation of GM and the many suppliers, dealers and small businesses across the country that depend on GM.

"This will allow us to accelerate the completion of our aggressive restructuring plan for long-term, sustainable success. It will lead to a leaner, stronger General Motors," the automaker said.

Chrysler Chairman and CEO Bob Nardelli thanked the administration and U.S. Treasury "on behalf of the men and women of Chrysler and its extended enterprise…for for their confidence" in Chrysler.

Ford is not part of the loan package but instead has asked the federal government for access to a $9 billion line of credit if the economy worsens. Still, Ford, in expressing its appreciation for the GM and Chrysler loans, noted again the interdependency between auto companies and their suppliers and dealers.

Source: www.autoobserver.com

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By Bill Visnic

A day after Chrysler LLC announced it is suspending operations for at least a month at all of its North American assembly plants, General Motors Corp. is denying a Wall Street Journal report saying the two companies resumed merger talks.

Chrysler and GM are awaiting word from the Bush Administration regarding promised emergency funding to carry the automakers into early 2009. Without a loan of billions, both companies have said they may not have sufficient liquidity to continue funding daily operations.

Separate from Chrysler's drastic move to curtail all manufacturing, GM already had announced a major production cutback for the first quarter of 2009 and is delaying other manufacturing spending, including the construction of a plant to build the engine for the high-profile Volt extended-range electric vehicle.

Ford Motor Co., while continuing to say it does not anticipate immediately requiring federal loan assistance, also is cutting cost by extending the length of planned holiday shutdowns at nine North American assembly plants.

The moves all symbolize the varying degrees of desperation gripping the Detroit Three, and Wall Street took note, on Thursday sending GM and Ford shares diving yet again. By mid-afternoon, GM stock was down 17 percent to around $3.60 after enjoying a bailout-expectant rise in the past weeks.

Ford stock was down 12 percent as investors now seem jittery about the latest signs of desperation from GM and Chrysler, in particular, and whether the expected White House-arranged loan might incorporate untenable conditions - or potentially include attributes of bankruptcy.

Former Ford CEO Bill Ford Jr. said earlier this week his company still believes a bankruptcy by any of the Detroit Three will severely affect the surviving automakers and have a detrimental effect on the supplier industry.

But the White House continues to vacillate, with President Bush saying on Wednesday that he still is pondering the appropriate response. Although it was believed the White House would announce its action plan by the end of the week, some media reports suggest a Bush Admin. response may not come until at least this weekend.

PHOTOS:

1. Even GM's high-profile Volt is no longer untouched by the company's deepening financial trouble — GM announced this week it is delaying construction of a plant slated to build the Volt's small gasoline engine that also will be shared with the Chevrolet Cruze compact car.

Source: www.autoobserver.com

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Chrysler will close all 30 of its plants for at least a month beginning at the end of the work day Friday, in an effort to keep inventories of unsold vehicles from building due to slumping sales and to conserve cash. The automaker said workers will be called back January 19 at the earliest.

The company said it is closing plants for an extended holiday to keep inventories from building due to poor sales. "The continued lack of consumer credit for the American car buyer and the resulting dramatic impact it has had on overall industry sales" forced the action, Chrysler said in a statement.

 

 

Two factories in Toledo, Ohio, that make the Jeep Liberty, Dodge Nitro and Jeep Wrangler will be closed until January 26. The Windsor, Ontario, plant that builds the Chrysler Town & Country and Dodge Grand Caravan minivans as well as a Detroit plant that makes the Dodge Viper will shut until February 2.

The automaker's sales plummeted 47 percent in November compared with a year ago. The company is nearly broke and is seeking a federal loan to stay afloat. The Bush administration is expected to announce Friday it is providing Chrysler as well as General Motors with loans.

Chrysler dealers told the automaker at a recent meeting at its headquarters that they have many willing buyers but they can't close the deals, due to lack of financing. The dealers have stated that they have lost an estimated 20 to 25 percent of their volume because of this credit situation.

Photo by Chrysler

Chrysler's plant in Toledo that makes Jeeps will be on an extended holiday. The plant closes Friday and doesn't re-open until February 2.

 

Source: www.autoobserver.com

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DETROIT - Finalists for the 2009 North American Car and Truck of the Year awards were announced Thursday at the Detroit Economic Club's annual auto show luncheon.

  The finalists for the 2009 North American Car of the Year honors are the Ford Flex, Hyundai Genesis and Volkswagen Jetta TDI. Finalists for the 2009 North American Truck of the Year award are the Dodge Ram, Ford F-150 and the Mercedes-Benz ML320 BlueTEC.

 Between now and the opening of NAIAS 2009, the 50 journalists who serve as jurors will vote again ranking the finalists. Winners will be announced at the show's first press conference on Sunday, Jan. 11.

Vehicles are honored for setting new standards and new benchmarks in their class. Top criteria in the competition are value for the dollar and affordability. Vehicles also are judged on general design, safety, fuel economy, handling and general roadworthiness, performance, comfort, assembly quality, functionality, technical innovation, driver satisfaction and price.

 

2009 North American Car of the Year Candidates

Audi A4		Jaguar XF
BMW 1 Series		Lincoln MKS
Cadillac CTS-V		Mazda6
Dodge Challenger		Nissan GT-R
Ford Flex		Pontiac G8
Honda Fit		Toyota Venza
Hyundai Genesis		Volkswagen Jetta TDI

 

 2009 North American Truck of the Year Candidates  

BMW X6		Kia Borrego
Chevrolet Traverse		Mercedes-Benz ML320 BlueTec
Dodge Ram		Nissan Murano
Ford F-150		Subaru Forester
Honda Pilot		Volkswagen Tiguan
Infiniti FX35/50   * bold indicates finalists

 

PHOTOS:

1. Ford Flex

2. Hyundai Genesis

3. Volkswagen Jetta TDI

4. Dodge Ram 1500

5. Ford F-150

6. Mercedes-Benz ML320 Bluetec

Source: www.autoobserver.com