Saab Story

What happens when costs exceed revenue? Here you have it. The Saab Story of a niche carmaker with unsustainable operations. However, does the unfavorable flow of costs and revenue mean the company is at the end of the line? Maybe not. What does the interest from China mean? It means that like many other products sold around the world today, the next generation of Saabs may come from China.

Saab, Denied Court Protection, Faces Bankruptcy

On Thursday, a Swedish district court rejected Saab’s bid for protection from its creditors, leaving the automaker with few options other than filing for bankruptcy. The company reportedly owes its suppliers 150 million euros ($210 million).

“The situation is fairly grim,” said Jack Nerad, an executive market analyst at Kelley Blue Book, in a telephone interview Thursday. “I don’t think we’re going to see an 11th-hour rescue. When Saab was orphaned by General Motors and no other car company came in to scoop it up, a lot of us became concerned about its future.”

Saab was previously controlled by G.M.

Victor Muller, the automaker’s chairman and chief executive, announced on Thursday that it would appeal the Vanersborg District Court ruling. In the interim, however, the two largest unions representing the company’s workers would probably file petitions demanding that the company enter bankruptcy.

Saab, with production essentially idled at its primary plant in Trollhattan, Sweden, since April, has 3,700 employees, and unpaid August salaries may be the issue that finally forces the company into bankruptcy.

“If the company itself does not find another solution or seek to put itself into bankruptcy, we could be forced to do so in the next few days,” said Stefan Lofven, head of the IF Metall North Alvsborg union, which representing 1,500 Saab employees, in a statement reported by Reuters. The union will decide within a few days whether to ask that Saab be declared bankrupt, added Leif Hakansson, a spokesman for the union.

Saab had said that a voluntary reorganization would not include its overseas affiliates, including Saab Cars North America, but bankruptcy would impact the ability of those divisions to do business.

Saab had hoped for a lifeline from Chinese automakers Pang Da Automobile Trade Company and Zhejiang Youngman Lotus Automobile, which together would have invested 245 million euros and taken majority ownership, but that option had not been approved by Chinese regulators. The Swedish court expressed skepticism that the deal could move ahead in a timely fashion.

“We regret that Saab Automobile is not going to get the time it needs until the funding from Pang Da and Youngman arrives,” Mr. Hakansson said in a statement.

Reacting to the court ruling, Mr. Muller said on Thursday that the company was now “completely unprotected” and asked stakeholders to “hold their horses.”

“We are not dead yet,” Mr. Muller had told a news conference on Wednesday after the submission of the application to the court. The same phrase was used by Timothy Colbeck, the chief operating officer of Saab Cars North America, at an owners convention last month in New Jersey. On Thursday, however, it was not clear what would keep the company alive.

GM -- Wants employees to become owners

These days management and the US Treasury want GM employees to show some good will and buy stock in the restructured car company. Other than buying a token amount, why would employees stick their necks out now, when the company has unfunded pension liabilities of $27 billion? Is $27 billion of company IOUs supposed to mark an improvement?

Is this new company willing and able to fund those debts? Or is the company more or less back to where it was?

Is there any reason to believe the new GM is a venture with good long-term prospects?

GM workers get chance to buy stock in public sale

General Motors gives workers, retirees and dealers chance to buy GM stock in public stock sale

October 12, 2010, 5:35 pm

DETROIT (AP) -- General Motors' employees, retirees and car dealers will get a chance to invest in their company when the automaker's stock is sold to the public.

GM sent letters to workers and dealers in the U.S. and Canada on Oct. 5 giving them the opportunity to buy shares when the initial public offering takes place. The deadline to register for the sale is Oct. 22.

Employees and dealers will be able to buy the stock at its offering price, which has not been set. A government watchdog's estimate is $133 per share, although the stock will most likely be split and offered at a cheaper price. Workers, retirees and dealers must invest more than $1,000 to buy stock, but the minimum and maximum number of shares a person can buy is still being determined, the letter said.

Like other investors, employees and retirees can sell their shares at any time after GM's stock starts trading in markets. GM has about 600,000 employees and retirees in the U.S and Canada.

The automaker is planning to hold the IPO in mid-November, but no firm date has been set.

News of GM's letter became public on Tuesday, the same day that new GM CEO Dan Akerson met in New York with Treasury Secretary Timothy Geithner. Both men emerged from the meeting in the afternoon without talking to reporters.

The U.S. government is GM's largest owner. It holds a 61 percent equity stake in the company, which it got in return for giving GM $50 billion to get through bankruptcy last year. The government hopes to get its money back by selling shares in the IPO and through several follow-up offerings. GM has repaid the government $6.7 billion, but it may take several years for the government to recoup its remaining $43 billion investment.

GM's other shareholders -- the Canadian and Ontario governments, a union health care trust fund and GM's old bondholders -- also can sell stock in the initial stock sale. Just how many shares each owner intends to sell has not been made public.

The automaker's letter to employees says no shares can be bought or sold until U.S. and Canadian regulators sign off on the stock sale plan, which is under review. Once regulators accept it, GM will go on a two-week worldwide "road show" to officially start wooing larger investors such as mutual, hedge and pension funds.

GM needs to get a strong showing of interest from employees, retirees and dealers to help sell its IPO to big investors as well as individual investors, said Scott Sweet, managing partner of IPO Boutique, a stock offering research firm.

"They can parlay that into a very strong statement that (GM) employees believe in management and the product, and through all that they've gone through, they're still with (the company)," Sweet said.

GM employees will probably have to pay the entire amount of their IPO investment about the time of the sale, Sweet said.

The government likely will sell a small portion of its shares at first, hoping that GM will keep making money and the stock price will rise ahead of subsequent sales.

In New York on Tuesday, Geithner and Akerson left their meeting at the Federal Reserve Bank of New York just before 3 p.m., steering clear of reporters assembled outside.

Ron Bloom, the Obama administration's senior counselor for manufacturing policy, also left the building around the same time.

The Treasury Department said Akerson and Geithner met for the first time at GM's request. Both Treasury and GM said there would be no comment after the meeting.

It's likely the men discussed the size of the initial public offering and how much common stock the government wants to sell in November.

Ed Whitacre, GM's chairman and former CEO, has said the company needs to shed government ownership quickly. The bailout and derogatory "Government Motors" moniker are hurting the company's sales and image, he has said.

Akerson, who took over leadership of the company from Whitacre on Sept. 1, has said it could take a couple of years to sell all the stock. A relatively small initial sale is likely, $10 billion or less.

GM will not sell common shares, but it plans to offer preferred stock to raise money for pension payments and to retire debt. Preferred shares behave like bonds because they pay a set dividend. They will be converted to common shares in 2013.

GM's old shareholders were wiped out when it went through bankruptcy protection last year after piling up billions in losses. The automaker has shed much of its debt and old factories. The new GM earned $2.2 billion in the first half of the year and is expected to have a profitable third quarter.

Still, problems remain. GM's pension plans currently are $27 billion short of their obligations.

GM Stock Offering -- No Longer a Big Deal. Now a Compact

Does the government really believe the market value of a Large Cap stock is as easy to manipulate as the shares of a Micro-Cap issue in the hands of a Pump-and-Dump brokerage? Or has it dawned on the Obama team that GM is miles away from producing the metrics that are needed to push the stock to the $134-per-share breakeven price the government is sweating for?

U.S. Is Said to Rein in G.M. Stock Offering

By NICK BUNKLEY and MICHAEL J. de la MERCED

September 23, 2010

DETROIT — The initial public stock offering by General Motors will be smaller than previously suggested, and the federal government will most likely sell a relatively small portion of its 61 percent stake in the company, according to people with knowledge of the preparations.

To fetch the highest possible price for the government, G.M. is planning an overall offering of stock valued at $8 billion to $10 billion, which is lower than previous internal targets, according to the people, who spoke on the condition of anonymity because of restrictions on public comments before an offering.

Earlier, there were suggestions the stock offering could rival the largest in United States history, when the credit card giant Visa raised more than $19 billion in 2008. G.M. and its bankers had been pushing for the largest possible offering because that would mean higher fees for the bankers and a larger pool of investors for G.M.

But the Treasury Department has made it clear to G.M. and its underwriters that the government is more interested in setting the highest price possible for the stock rather than maximizing the size of the offering. While both G.M. and the Treasury still hope to reduce the government’s stake in the company to less than 50 percent and rid the company of its Government Motors nickname, that goal may not be met, one of the people said.

The market for initial public offerings has been weak this year, causing concern by Treasury officials that the G.M. stock sale would struggle if it were too large.

Auto analysts are increasingly projecting that G.M. shares could be priced high enough for the government eventually to get back most or all of its remaining $43 billion investment in the automaker. But everyone agrees that will take years.

The offering, which is expected as early as November, will set a benchmark for the stock’s value.

In order to recover all of the government’s investment, the Treasury would have to sell its 304 million shares at an average price of $133.78 a share, before any splits, according to Neil M. Barofsky, the special inspector general for the Troubled Assets Relief Program of the Treasury.

Mr. Barofsky cited that figure in a letter last month to Senator Charles E. Grassley, Republican of Iowa, who asked Mr. Barofsky to audit the stock sale.

In the letter, Mr. Barofsky pledged to review G.M.’s stock offering after its approval by federal regulators to ensure that it produced “the highest return for the American taxpayers.”

The price cited by Mr. Barofsky might not be unrealistic, said David Whiston, an automotive equity analyst with Morningstar in Chicago. Mr. Whiston said on Thursday that a G.M. share could be worth $134, though he believed it would sell for less than that.

He said that G.M., after last year’s government-sponsored bankruptcy, had made changes that would help it thrive as demand for new vehicles recovers from today’s levels, which most industry experts consider to be unsustainably low.

“It really is a new G.M.,” Mr. Whiston said. “The cynics of this deal, I don’t think they really understand the billions of cost savings that G.M. has made.”

G.M.’s stock peaked in April 2000 at $94.63 a share.

Although President Obama has said he wants the government to divest as quickly as practical, the Treasury is expected to sell off its interest over at least two to three years. That would allow it to take advantage of increases in the value of its shares, assuming G.M. operates profitably.

“If G.M. continues to improve and the industry continues to improve, they have a shot at getting it all back,” said Michael Ward, an analyst with Soleil Securities.

There is considerable interest about the G.M. offering among potential investors, and the sale is likely to do well, Mr. Ward told members of the Society of Automotive Analysts on Thursday in Southfield, Mich.

“Wall Street is going to be in love with General Motors,” he said.

The size and the price of the stock offering have not yet been decided, the people with knowledge of the preparations said. But the Treasury intends to reserve a large portion of the stock for retail investors.

As part of that push, G.M. intends to split the stock so that it is priced about $20 to $25 a share, these people said.

The Treasury has also declined to set specific limits on where the stock will be sold and to whom. In a statement last week, the Treasury said it expected the bulk of the stock to be sold in North America.

The government would not expressly restrict sales to foreign buyers, these people said, but they added that acquisitions by foreign investors would be limited.

In a related matter, G.M. filed an amended version of the registration paperwork for its offering with the Securities and Exchange Commission on Thursday, but it did not reveal details.

The filing included a letter to the Treasury in which company executives committed to using “commercially reasonable best efforts” to manufacture at least 1.6 million vehicles in the United States this year and an increased number in each of the next four years.

The figures are 90 percent of what G.M. had previously agreed to produce under its loan agreements with the Treasury.

The letter also says that AmeriCredit, a subprime financing company that G.M. is buying, plans to sell its private plane in accordance with restrictions placed on companies that received aid from the Treasury’s bailout program.

The New GM -- Made in China, Owned by China

Whe GM brings its stock to market, will the shares be hot? No. The company has got a lot of work to do before investors have something to get excited about.

Government could seek foreign investors for GM

DETROIT – Investment bankers handling the upcoming General Motors Co. stock sale are expected to court foreign investors as well as those in North America, according to a U.S. Treasury Department statement.

GM and the Treasury Department would not comment Sunday on reports that the automaker is in talks with its current partner in China, SAIC, about buying a stake in the Detroit company. SAIC is owned by the Chinese government.

The Treasury Department, in a statement issued late Friday, said investors in GM would be sought across "multiple geographies," with a focus on North America.

The U.S. Treasury loaned GM about $50 billion to help it through bankruptcy protection last year. GM has repaid $6.7 billion. The rest of the bailout money was converted to a 61 percent government stake in the company.

The government hopes to get the remaining $43 billion back with stock sales that could start in mid-November.

Foreign investment in U.S. automakers and other companies is common. Before the stock sale, GM will put on a two-week "road show" of presentations for investors, and several stops are expected to be in cities outside the U.S.

The Treasury statement also said banks underwriting the GM stock sale will be expected to balance getting the maximum price per share and return for taxpayers with having a stable base of shareholders and keeping up interest in several sales that will occur after the initial public offering.

Individual investors will get "ample opportunity" to buy GM shares, but institutional investors such as mutual funds, hedge funds and pension funds will be sought out, the statement said.

"We expect that a large and diverse group of institutional investors will be offered an opportunity to participate, with no single investor or group of investors receiving a disproportionate share or unusual treatment," the statement said.

The government will make ensure general guidelines are followed in the sale "but will not involve itself in decisions regarding allocation of shares to specific buyers," the statement said.

Last week, new GM CEO Daniel Akerson said it will take a couple years for the government to get its money back, but GM has a goal of returning the cash.

Akerson, a former telecommunications industry executive who took over from Ed Whitacre Sept. 1, said the government bailout saved a lot of jobs at GM and helped to preserve the U.S. manufacturing base.

The bailout has bred resentment with some car buyers and hurt GM's sales, however. The automaker hopes the stock sale will end its government ownership and raise money for investment and to reduce debt.

GM filed paperwork in August starting the process to sell stock to the public.

Akerson indicated that it would take consistent earnings from GM and several stock sales before the money is returned.

President Obama also has said all taxpayer money will be returned, but spokesmen later said he meant the money his administration pumped into GM, not bailouts made by the Bush Administration.

GM made $2.2 billion in the first half of the year, a strong sign to investors that it is much leaner and healthier than it was before bankruptcy, when it was losing billions.

The company will not sell any shares of common stock, leaving that to the government and its three other shareholders. But it plans to sell preferred stock, which pays a dividend and will be converted to common shares in 2013.

Chrysler's top executive, CEO Sergio Marchionne, said last week he expects Chrysler's IPO to take place in the second half of next year. Chrysler got $12.5 billion in bailout money from the government in exchange for $7.1 billion in loans and a 9.9 percent ownership stake.

GM Cruze -- Built to Lose

GM is "testing" another electric vehicle. This time, in South Korea. In other words, a place far from US automotive journalists who will rarely get near this vehicle. The Cruze will serve as a useful PR tool until it's no longer necessary to pretend that electric cars are about to arrive.

The Cruze experiment will continue until its safe for GM to say that electric-car batteries are still years from commercial viability.Then, the Cruze experiment can shift to the back burner where it will stay until our next Einstein has the flash of insight that leads to the development of a battery that packs the energy density and recharge speed to make it a winner.

General Motors to test battery-powered models of its Cruze in South Korea

September 18, 2010

NEW YORK (AP) -- General Motors says it will launch a test fleet of electric cars in South Korea as it continues to develop battery-powered models of its Chevrolet Cruze.

The automaker will begin the project at the end of October. It is working with LG Electronics on the project.

The Cruze EV demo fleet will be GM's first compact sedan electric vehicles to hit the road and will be powered by batteries from LG Chemical and propulsion systems from LG Electronics.

The demo fleet in South Korea will consist of Chevrolet Cruzes and GM Daewoo Lacetti Premieres. GM currently markets the vehicle under the local brand in South Korea. The project is aimed at providing data on customer acceptance and battery range.

GM says there's no plan to sell an electric Cruze in the U.S.

By testing an all-electric Cruze that has no gas engine, it's clear that GM is developing a fully electric compact.

"There's no plan to put an electric Cruze in the U.S. market," spokesman Rob Peterson said. "As battery technology matures and that (charging) infrastructure increases as well, battery-electric vehicles could hold a great deal of potential."

GM executives have said repeatedly that the power system from the rechargeable electric Chevrolet Volt will be used in more models.

The Volt can go about 40 miles on battery power, and after that, a small gas engine kicks in to generate power for the car.

GM Opens Newest Showroom at the White House

GM's bankruptcy plan has been accepted and the old GM, now known as Motors Liquidation Co., can complete all pending sales of assets. Deals to sell Hummer, Saab and Saturn have been made.

Why is Motors Liquidation unloading these three lines? If there's no market for gas-chugging Hummers, what organization would want to own the Hummer operations and attempt to sell these vehicles, which, if a reader believes the noise, is equivalent to marketing unfiltered Camel cigarettes to school kids?

On the other hand, why would Motors Liquidation sell the Saturn division, which builds cars that travel more than 30 miles per gallon? Aren't vehicles like those the sort of vehicles right-thinking Americans are expected to drive?

Saab? It seems to fall somewhere in the middle. Quirky designs, Decent gas mileage. Niche market. Okay. The growth potential of Saab is probably close to zero. But Saturn? Seems like Saturn is on the right road. Hummer? Currently out of favor. But that will change when the price of oil shows signs of remaining low.

However, the most troubling part of this transaction is the position of the government -- us. The taxpayers are stuck with 61% of the company. That's more than a mere controlling interest. That's total dominance.

What can we expect from government ownership? The Obama version? The new GM will build cars like those from the Saturn division. Smaller high-mileage vehicles. It will build the Chevy Volt, an electric vehicle with a $40,000 price tag. It's designed to sit in showrooms forever. A few Hollywood liberals will buy them and praise them while virtually all other car buyers choose vehicles that travel a couple of hundred miles after each refueling. Refuelings that take less than five minutes.

How will the government react to poor sales of its products? Will it offer special financing to those who buy vehicles from its 61%-owned subsidiary? Will it offer other incentives to crowd out competitors lacking government muscle?

If the new GM fails to sell enough vehicles to pay its bills, what will the government do with its 61% stake? Sell it to the public? Or make it into the next Amtrak?

Here's my view: Expect the government to turn the White House lawn into a car lot. Expect Government Motors to pay buyers for bringing in old cars -- towing them, pushing them, or bringing them to the White House in parts -- then leaving in new cars bought with 100% borrowed money. Those borrowed funds offered with a negative interest rate. In other words, the balance of the loan will decline even though the buyer NEVER makes a monthly payment. That oughta give Government Motors the edge it will need.

Bankruptcy judge OKs GM sale plan

Judge approves General Motors plan to sell assets, automaker could emerge from bankruptcy soon

Monday July 6, 2009, 7:16 am

NEW YORK (AP) -- A bankruptcy judge has ruled that General Motors Corp. can sell the bulk of its assets to a new company, potentially clearing the way for the automaker to quickly emerge from bankruptcy protection.

U.S. Judge Robert Gerber said in his 95-page ruling late Sunday that the sale was in the best interests of both GM and its creditors, whom he said would otherwise get nothing.

GM's government-backed plan for a quick exit from Chapter 11 hinges on the sale, which will allow the automaker to leave behind many of its costs and liabilities. The Treasury Department has vowed to cut off funding to GM if the sale doesn't go through by July 10.

The Detroit car maker's Chapter 11 filing on June 1 was the fourth-largest in U.S. history.

GM will leave bankruptcy court with significantly reduced debt and labor costs, as well as fewer dealerships and brands. But it's still operating in an environment where fewer American are buying cars. At the current pace, automakers will sell around 9.7 million vehicles this year. That's a reduction from sales of more than 16 million vehicles as recently as 2007.

In June, the automaker captured 20.3 percent of the U.S. market. GM has estimated that it can maintain a market share between 15 and 17 percent, reflecting its plan to sell off three brands and end its Pontiac line.

GM has several new cars coming to market next year, including the Chevrolet Volt, a plug-in hybrid electric car. The Volt might be a promising vehicle, but with an expected $40,000 price tag it might only be a niche player, said James E. Schrager, clinical professor of entrepreneurship and strategy at the University of Chicago Graduate School of Business.

Upcoming small-car models such as the Chevy Cruze and Spark may fare well, but will face heavy competition from foreign automakers already in that segment of the market and from Ford Motor Co.'s new Fiesta, which the company has already started advertising.

The company has received $50 billion in taxpayer funds. In exchange for those funds, the government will own about 61 percent of the "new GM."

The Obama administration has said it does not plan to interfere with the day-to-day running of the company, though government has been involved in the selection of the new company's 13-member board of directors and change of control transactions.

The United Auto Workers union, which gets a 17.5 percent stake through its health care trust for retirees, has selected Stephen Girsky, a former GM adviser and Morgan Stanley analyst, to serve on the board.

The Canadian government, which will control an 11.7 percent share, also will pick one member.

Assets that GM does not sell to the new company will become part of the separate "old GM," which the company said Monday will be known as Motors Liquidation Co., and will be sold to the highest bidder under court supervision.

Other assets to be filed under the old GM include brands like Hummer, Saturn and Saab, for which GM has lined up buyers. They also include all current GM common stock, which -- despite its active trading on over-the-counter markets -- will soon be worthless.

The old GM will remain an entity until all of the facilities are sold off, a process that could take months or years to complete.

Dead Batteries

Electric-carmakers need cash today, tax credits to spur sales next year and every year thereafter and battery technology that makes electric cars perform like gasoline-powered vehicles.

Obama says he wants to hit taxpayers on this issue. Tax credits and other subsidies are part of his plan. Immediate cash is another matter. If GM, Ford and Chrysler are to get little from the Economic Stimulus plans whipped around these days, it's tough to cut makers of electric cars a slice of the pie.

Then there is the chief question: Why would someone buy a $40,000 Chevy Volt when a a dozen cars with internal-combustion engines sell for less than half the price?

Electric cars are not simple alternatives to gasoline-powered cars. If equivalent electric and internal-combustion models were available for roughly the same price, a real market would develop. But we are years from that point. Today, electric vehicles offer only a psychological advantage that matters to some people. But most car buyers do not care.

Who would pay $40,000 for a car with limited operating capabilities when lots of great all-around gasoline-powered vehicles are available for half as much? Furthermore, if the government pushes the public to accept electric vehicles, the prices of gasoline-powered cars will ease down, making them a better deal for anyone who considers the long-term cost of ownership.

There are 250 million internal-combustion vehicles registered in the US today. Consumers love their cars and they are not ready to switch to vehicles offering less for more money. Would more than a handful spend larger sums than they've ever spent on a car if the new high-priced model requires a lot of behavior modification to accomodate its limitations? No.

Personal computers stayed mainly in the hands of hobbyists, engineers, scientists and technology lovers until better software made them useful to millions of buyers. The Graphical User Interface did the trick. But the biggest accelerant was the Internet, a thing apart from the computers themselves.

Is there a similar advance ahead for electric vehicles? No. But if there were, it would appear as a battery that held a charge equal to the energy found in a tank of gas.

Or, perhaps, like gasoline, a universal battery pack might emerge. Every car can accept gas from any gas station in the country. Possibly the electric carmakers can create a universal battery pack that can be stocked at Recharging Stations and switched in minutes. Pull out the discharged pack, and drop in a fresh one. An operation that can be completed in a minute or two. But that means pricing the service for more than the cost of plugging in the car at home.

On the other hand, for anyone who barbeques on a gas grill, the consumer behavior is already in place. When the propane tank on the grill is empty, the barbeque chef takes the empty tank to Home Depot and exchanges it for a full one. Unfortunately, I doubt this idea will fly. That means we need batteries that hold a lot of energy. But those batteries are decades away from reality. In fact, given our understanding of chemistry and physics, we may never see batteries capable of powering electric vehicles like their internal-combustion alternatives.


Electric-Car Makers Struggle

Companies Face Similar Problems as Detroit Auto Makers -- And Some Others

The heads of the struggling Detroit auto makers aren't the only car makers looking for help from Washington. The electric vehicle industry has its hands out, too.

If anything, representatives of the electric and electrified vehicle business jumped ahead of the "legacy" auto industry in the transportation bailout queue that formed in the nation's capital last week.

The Future of Electric Vehicles

The electric-vehicle industry positions itself as the future of personal transportation. President-elect Barack Obama is now the industry's highest ranking advocate. He's said he wants to see one million plug-in vehicles by 2015, as part of his broader goal to end U.S. dependence on Mideast oil.


The credit crunch and the economic slump are slamming the crop of electric-vehicle companies that sprung up in recent years, fueled in part by Silicon Valley venture-capital money.

Tesla Motors LLC, once the darling of the green car movement, is now scrambling to stay afloat and is asking for a $400 million loan from the same $25 billion federal Energy Department program that Detroit's car makers are looking to tap in their own fight for survival.

Tesla is now taking some flak for seeking handouts from taxpayers, most of whom could never afford its current product, a racy electric sports car that starts at more than $100,000. Detroit's chiefs might say: Welcome to our world.

The electric-vehicle industry's need for government assistance doesn't stop with subsidized loans. Mr. Wynne says the government's existing tax credits for purchases of electrified vehicles – meaning all-electric and gas-electric hybrids – should be expanded. Currently the credits, which range from $2,500 for a plug-in hybrid vehicle with a four kilowatt per hour battery pack to as much as $7,500 for an electric vehicle weighing under 10,000 pounds.

The U.S. should also do more to promote development of advanced vehicle batteries. After access to capital, batteries are one of the biggest anxieties among U.S.-based electric and hybrid vehicle manufacturers – from the Detroit Three down to the smallest Silicon Valley EV upstart. Right now, there's no company producing advanced automotive batteries suitable for electric vehicles or hybrids in the U.S.

To the extent that such batteries are made in volume anywhere, it's in Japan, Korea or elsewhere in Asia.

Finally, U.S. electric-vehicle makers are hoping that the government can be not just the financier of last resort, but also a customer. "The federal government owns 600,000 vehicles," Mr. Wynne says. The government should be a buyer for electric vehicles – not just cars, but commercial vehicles.


Established auto makers, including Toyota, GM, Chrysler, Nissan Motor Co., all are talking about plans to field significant numbers of partially electric or fully electric vehicles over the next several years.

Not so long ago, the electric-vehicle industry's moment seemed to have arrived, after nearly a century of frustration and failure. Soaring oil prices, technology advances and the enthusiasm of deep pocketed investors appeared to be coming together to overcome the obstacles that have relegated electric vehicles to the auto market's sidelines since the days of Thomas Edison.

Now, oil prices have crashed, clouding the economic case for switching to expensive battery-boosted cars.

Detroit Mafia -- Driving the Getaway Car

Give us the money -- Or Else!! The Big Three Detroit Families have learned something mobsters have known for a long time. Threats work.

For the last few months, Detroit car executives have demanded money from taxpayers. Lots of it. But Americans have been reluctant to hand over the billions the leaders of the Three Families have sought. Even though the offers they have made have been refused, so far, the lack of cooperation has not discouraged the heads of the Three Detroit Families. Today, a leader from one of three realized it was time to deliver a big threat that might get action, finally. The Offer They Can't Refuse.

The executive from the Chysler family threatened to take down the whole US economy if the taxpayers refuse to cough up the money within weeks. Smash it, burn it down, wreck the joint. Or. All it will take to save the nation, he suggests, is $20 or $30 or $40 or $50 Billion. Or more, if those initial sums fail to restore the health of the Three Detroit Families. He was backed by an executive from the GM Family.

Chrysler exec: Failure could spark Depression

Chrysler exec warns of depression as auto officials intensify fierce lobbying push

WASHINGTON (AP) -- A top executive of Chrysler LLC cautioned Wednesday that a carmaker collapse could send the economy spiraling into a depression, as the United Auto Workers union braced for contract concessions.

Jim Press, Chrysler's vice chairman, said the U.S. automakers were "down to months left," as industry officials ratcheted up a fierce lobbying push to persuade Congress to approve as much as $34 billion in emergency aid.

"We're on the brink with the U.S. auto manufacturing industry," Press told The Associated Press in an interview. "If we have a catastrophic failure of one of these car companies, in this tender environment for the economy, it's a huge blow. It could trigger a depression."

Fritz Henderson, president and chief operating officer of General Motors Corp., took to the TV airwaves to stress that bankruptcy isn't a viable option on the eve of a new set of congressional hearings on the auto bailout. At the same time, UAW leaders were immersed in intense discussions on possible givebacks for the companies at an emergency meeting in Detroit.

Under consideration were the possibility of scrapping a much-maligned jobs bank in which laid-off workers keep receiving most of their pay and postponing the automakers' payments into a multibillion-dollar union-administered health care fund.

In blueprints delivered to Capitol Hill on Tuesday, GM and Chrysler said they needed an immediate infusion of government cash to last until New Year's, and both said they could drag the entire industry down if they fail. Ford is requesting a $9 billion "standby line of credit" that it says it doesn't expect to use unless one of the other Big Three goes belly up.

But Chrysler said it needed $7 billion by year's end just to keep running. And GM asked for an immediate $4 billion as the first installment of a $12 billion loan, plus a $6 billion line of credit it might need if economic conditions worsen. The two painted the direst portraits to date -- including the prospects of shuttered factories and massive job losses -- of what could happen if Congress doesn't quickly step in.

All three plans envision the government getting a stake in the auto companies that would allow taxpayers to share in future gains if they recover.

UAW President Ron Gettelfinger = Roadblock

It is sad and depressing that Ron Gettelfinger believes the American public owes something to the UAW workers who make cars for the Big Three. Perhaps UAW members deserve sympathy for the straits in which they have found themselves. But financial support from taxpayers? Not a chance.

How did we get here? Through the combined efforts of Management and Labor. The two combatants in the auto industry have been going at it since 1935. Unfortunately, the UAW and its leadership have never fully grasped the notion of foreign competition. It seems the Union has fooled itself into thinking that its only goal was to extract as much as possible from management. The UAW seems to have ignored or denied the impact of its efforts on the auto market itself.

Why have the Big Three lost market share? Many reasons. But changing consumer tastes head the list. Thus, Detroit's problem boils down to intertia. It can't move fast enough to meet the demands of consumers. Sure, Detroit makes some popular vehicles. It makes enough of them to stay in the lead. But the lead continues to shrink and Detroit's losses are growing.

What has slowed Detroit's capacity for change? Union wages & benefits; Government mileage standards; laws relating to dealerships; insufficient foresight in Top Management.

Ron Gettelfinger has pointed the finger at Management for his entire career as UAW President. Okay. And now he's in a position to do something about it. But, he won't. Why? Because he's a moron.

If Ron Gettelfinger and the UAW believe management has been an impediment to the health of the domestic auto industry and the UAW, then it's up to the union members to do something about it. Now they can. They can buy General Motors -- for a song.

A couple of weeks ago General Motors stock was trading around $3 a share. There are six-hundred million GM shares. Hence, the UAW could have bought the company for $1.8 billion. Easily affordable. Of course no move to buy the company was made. Why? Because a Chapter 11 bankruptcy would wipe out their stock-market investment, as bankruptcy filings always do.

Recent panhandling in Washington by the CEOs of the Big Three injected some hope into auto company stock prices. General Motors stock is now about $5 a share, pushing the buyout price to $3 billion.

Gettelfinger seems ignorant of all aspects of finance and economics. He clearly knows nothing about the value of buying the debt of General Motors.

If the UAW were to buy the debt of General Motors, it would have the power to cancel it. At its current prices, GM debt is as much a bargain as its stock -- for the right buyers. GM's debt totals $45 billion. As a result of the company's vast problems and subsequent reductions of its credit ratings to junk status, the debt is selling for a fraction of its face value.

He who owns the debt controls the company. Thus, the UAW, if it wants to make the smart move, can buy GM stock as well as its debt. If the Union buys the debt with the aim of extinguishing it, the stock will rise. If it takes a more moderate path of exchanging the old debt for new debt or equity, the company will get extra breating room.

Bottom line: The Union can own the company. That means full control of the company the UAW claims has been mismanaged by Rick Wagoner and his predecessors. The Union can then negotiate with itself on all issues that continue to put profits out of reach. Seems simple enough. For a small investment the UAW can eliminate the segment of the company that UAW members blame for the problems. What are they waiting for?


GM board reviews new turnaround plan for bailout
Sun Nov 30, 2008 6:32pm EST


DETROIT (Reuters) - The board of General Motors Corp met on Sunday to review a restructuring plan intended to cut costs and win support for up to $12 billion in emergency funding from the U.S. government, a person familiar with the deliberations said.

The GM board meeting came on the same day that United Auto Workers president Ron Gettelfinger signaled his union was prepared to offer further concessions in order to win support for the bailout provided management shared in the sacrifice.

"They need to establish that executive compensation is something that they're willing to curtail," Gettelfinger said in an interview on CNN. "They can also give the government an equity stake in the business.

House and Senate Democratic leaders, in a letter to GM, Ford and Chrysler executives, said the companies demanded that each submit a "credible restructuring plan" by Tuesday.

That is the same day that major automakers are expected to report bleak November sales results that show an only limited bounce from October when the consumer uncertainty and tight credit combined to send sales to 25-year lows.

NOVEMBER SALES SEEN BLEAK

November sales are expected to show the auto industry running at a U.S. sales rate of about 11 million vehicles on an annual basis, down by almost a third from 2007's tally.

Analysts see a chance for GM to stop burning cash if the industry recovers back above a sales rate of about 13 million vehicles and it succeeds with a stepped-up restructuring backed by federal funding in a deal that would involve steep concessions from creditors, executives and the UAW.

The union is under pressure to surrender protections that allow laid-off factory workers at the Detroit automakers to collect over 90 percent of their pay by shifting to a jobs bank. The union agreed to restrictions on the program

A potentially more important concession would be winning new terms for payments by GM and other automakers into a $48 billion trust fund scheduled to take over funding health care benefits for retired autoworkers from 2010.

The revised plan GM is set to submit to Congress is also expected to show cuts to executive pay. The automaker paid its top executives more than $40 million in 2007, even as its stock dropped 19 percent and it posted a loss of $39 billion.

In addition, the GM plan is expected to indicate that the company will ask some bond holders to accept equity and a limited cash payout to redeem the debt they hold.

That proposed debt swap is seen as crucial because GM has more than $44 billion in debt on its balance sheet, analysts have said.

The automaker burned through $6.9 billion in the past quarter and ended September with $16.2 billion. It needs a minimum of between $11 billion and $14 billion to operate and pay suppliers and has warned it could fall short of cash early next year without government help.

The revised plans from all three Detroit automakers are expected to focus on their investment in fuel-saving technology and alternatives like GM's battery-powered Chevrolet Volt.

Analysts expect the automakers to detail confidential product plans that show they have a game plan for meeting federal requirements for a 40-percent improvement in fleet-wide average fuel economy to 35 miles per gallon by 2020.