GM Announces U.S. Small Car Plant

It looks like the UAW (and Obama) took GM out behind the shed for a little talk... GM is announcing that the will re-tool on of their U.S. plants (not "North America") to produce a small car (maybe the Spark).

Actually, it was not just coercion, but negotiation. According to news reports, the UAW gave GM further concessions, such as broader job classifications, to allow a small car plant to be profitable.

GM was looking at a public relations mess, with Ford previously announcing that the European Focus would be built in a re-fitted Michigan Truck plant, and the UAW howling that taxpayers should not fund more off-shoring of vehicles. By bringing a b-car line to the U.S., GM leapfrogs Ford, which is going to build its Fiesta in Mexico.

The whole thing makes me wonder, though. Was GM's plan to import Chinese cars a business plan, or was it a bargaining stick?

Digging Into "Dealergate", Part II

Doug Ross continues to assert that the Obama administration chose to close Chrysler dealers based on their political donations, but he relies on some one-sided data, hanging a lot on the closing list.

For my second look at the issue, I thought I'd look locally. What I did was tabulate the Chrysler dealers in the greater Metro Detroit area which are on the closing list, and also the ones on the stay-open list and take note of their political donations. Here are the results:

Closing:
Dealer, Donations

FORTINBERRY R

MCDONALD R

MONICATTI R

PENSKE R

RUSSO R

TAMAROFF R

VIVIANO R

Remaining:

Dealer, Donations

DEEBY R

FISCHER R

MCINERNEY R+D

MEADE AFIT PAC

MILOSCH R

MOORE NADA PAC

PENSKE R

RIEHL NADA PAC

ROBBINS R

SCOTT R

SNETHKAMP R

VIVIANO R

Metro Detroit Chrysler dealers who donated did so overwhelmingly to the Republicans.

The only example of a Metro Detroit Chrysler dealer who gave money to Democrats was "Hoot" McInerny, who gave large amounts to both sides. It would also be very bad press for Chrysler to try to axe McInerny's dealership, because he is a well known local personality and a big philanthropist.

I don't think you can argue any political bias in Metro Detroit, based on the data.

No Obvious Political Bias In Chrysler Dealership Closings

Update: Blogger Marla Singer at Zero Hedge did some actual statistcs on the entire dealer open and closing list, and found a small correlation between open dealers and donations to Hillary Clinton's campaign, but not a very significant difference between Democrat and Republican giving overall (0.93 vs 1.05 odds ratio of being closed, D vs R).

The blogger Doug Ross did some digging, and discovered that very few of the Chrysler dealers on the closing list gave political contributions to the Democrats in the last election cycle, and most of the ones that did give gave to Republicans.

In his original post (here), Ross found that out of a collection of 39 dealers he checked, 4 gave half or more of their contributions to Democrats (10%)

As much as I would like to believe it to be true, I don't think it is. There is a major flaw with his analysis: he didn't bother to check the dealers that are staying open to see how their political contributions broke down.

My hypothesis is that Chrysler dealers, being small businessmen, are more likely to donate to Republicans than Democrats, for predictable reasons. Like any small businessmen, car dealers want lower taxes, a lower minimum wage, fewer regulations, etc.

The list of Chrysler dealers that are staying open is here. This is a list of the dealers whose contracts will be assumed by the new Chrysler-Fiat.

What I did was go down the list and copy names into the search box at OpenSecrets.org until I got a clean hit. I did this until I got 25 dealers with donation records for the 2008 election cycle. The results can be considered randomized, since we don't expect a correlation in the alphabetical name of the dealership with their political affiliation (or geographic location).

Result: 23 dealer principals donated to Republicans, 2 donated to Democrats, or about 10%.

If you run these numbers through a binomial distribution, you get a 2-tailed P-value of 1! That means that the hypothesis that the two distributions are identical is correct. Chrysler dealers (and probably all auto dealers) who donated for the 2008 election cycle overwhelmingly supported the Republicans.

Here is my "raw data", if you want to spot check me.

DEEBY	R
AKINS	R
SMITH	R
MELLOY	R
SANZI	R
MCKAY	R
SIX	R
UDD	R
ANCIRA	R
ANDERSON	R
NOKES	R
HOSSLER	R
MAROONE	R
MORELAND	R
HADDAD	R
ALBRO	R
THOMASON	D
WYANT	R
BAUMANN	R
LANPHERE	R
SPITZER	D
BENSON	R
BERGERON	R
BERGSTROM	R
GERBAZ	R

CAFE vs. EPA

Edmunds is making a big deal about the difference in EPA "window sticker" vs CAFE fuel economy standards. Read about it here. They're reminding us that the window sticker fuel economy is a (downward) adjusted number which takes into account more typical customer usage (like A/C). The CAFE city FE test (FTP75) is run on a chassis dynamometer, at 72F, with a cold engine, with A/C off, and various other standard conditions.

The "two standards" aren't really two standards, the legal standard is CAFE FE (unadjusted). The fuel economy labels for consumers are required by law, but cars are not regulated to that number.

Edmunds does provide a handy list of vehicles that might meet the 2016 standards today, and not surprisingly, they are all sub-compact and compact cars, and hybrids.

This is instructive. In 2016, affordable cars which meet the new CAFE standards will be compact cars. Anything larger will be much more expensive, as carmakers will have play tricks such as reduce weight (aluminum, carbon fiber), add hybrid drives, add gasoline engine technology (turbo direct injection), or perhaps clean diesel.

Today, the average car is a "midsize" vehicle, somewhere between a Toyota Camry and a Honda Civic. In 2016, I suspect the average car will be a compact, about the size of a Civic.

Clarkson's Fiesta Movement

Very entertaining segment from BBC's Top Gear, where Jeremy Clarkson reviews the European Ford Fiesta. He takes his Fiesta movement on a game of tag with a Chevrolet Corvette inside a shopping mall.

Chrysler Dealer Collateral Damage

These photo show the Celtic Pipes and Drums, marching in the Birmingham parade. They are a Scottish style band based in the Troy area.

They are sponsored by Birmingham Chrysler Jeep, which was told by Chrysler that its franchise was being terminated last Thursday. If BCJ goes out of business, the band loses its sponsor.

I Love A Parade

This morning I went down and saw the annual Celebrate Birmingham parade. This is an annual affair with a small-town feel, where two marching bands, the shriners, local politicians, and lots of interesting cars make a slow circuit around downtown Birmingham before retiring to the central park for a day of kiddie fun. Here is a selection of the more interesting vehicles from the parade.

A classic Ford

The Oakland Country DARE Truck (our tax dollars at work...)

Oakland County dive rescue

A cool antique fire engine

A Chrysler wagon


Eastern Bloc army truck?

Ford convertible

Another classif Ford

The Celtic Pipes and Drums


The Shriner's wheelie wagon, based on an old Ford truck I think

Shriners on little scooters

Now come the old-west Shriners


Not very P.C. but he was funny.

Another old car converted for clown duty


This tree service truck looks like a recycled old ladder fire truck.

The Falun Gong were out in force. No one felt threatened. The state was not destabilized.

Interesting taste in women.

Cool spring-stilt walkers


The tail end of the parade was a huge mass of bassett hounds.

Chrysler's Dealer Destruction Hits Home

One of the Chrysler dealers on the dealer closing list that Chrysler filed with the bankruptcy court today is Birmingham Chrysler Jeep, known for its odd jingle, "Birmingham's In Troy!". This dealership is not far from my house. It is a corner store in the sprawling Troy Motor Mall, a huge collection of different car dealerships.

Sunset In Troy

BCJ was, according to this news article, in the top 20 dealerships in the country. It has been owned by the Mealey family since 1966, and employs 90 people. BCJ is known in the area for its fun, corny advertising, such as this spot where the owner snow blows his lot and rides around on a lawn tractor.

I wasn't expecting Birmingham Chrysler Jeep to close. I thought Chrysler/Fiat would want a slot in the Troy Motor Mall, where they could compete directly against the other brands, just yards away. But the massive Golling dealership in nearby Bloomfield Hills, which was chosen to stay open, sells all three Chrysler brands from one huge lot.

I know people who work at this dealership. This morning, when they got the news that they were expected to close, 40 employees were laid off all at once. All around the country, the same scene was repeated today. All around the country, people are tasting the salty, metallic flavor of failure.

GM Plans To Import Chinese Cars

According to the Automotive News, which obtained a copy of a product plan document which GM submitted to Obama's auto task force, GM is planning to ramp up production of cars in China for importation to the U.S.  Starting with about 17,000 cars in 2011, the number would increase to about 51,000 by 2014.  

GM already imports Chinese made engines (the 3.4L pushrod iron block V6 in the Equinox/Torrent), and I won't buy one.

If GM imports Chinese cars, I won't even consider one of those, either.

The UAW and the Democrats are going to tear GM a new one for this.  If you are relying on a UAW-friendly Democrat-controlled congress to save you, maybe plans for Chinese importation aren't smart, when Ford is re-tooling Michigan Truck to use UAW labor to build small cars.  

More here.

Here Piggy

Heh.

(Encyclopedia Dramatica)

Bottomfishing The Best Of The Dying Brands

It isn't quite time for bottom fishing, but it is getting close. Depending on what your needs are, you should soon be able to pick up a decent car from a dying brand at a very good price.

If I was in the market, here are some cars I would consider:

GM:

• Pontiac Vibe -- Decent small hatch, though a rental fleet favorite. Nice, practical package. Weird rear window.
• Pontiac G8 -- Probably the best car Pontiac is selling now. I'm not a fan of the nostrils, but otherwise a very sharp car. Good engines.
• Pontiac G6 -- Decent midsize sedan/coupe. Also a rental fleet favorite.
• Pontiac G5 -- Great if you wanted a Cobalt to begin with, or a functional compact car.
• Pontiac Torrent -- Decent, practical small SUV, saddled with a crummy Chinese built engine.
• Saturn Aura -- Won the 2007 Car Of The Year award. The precurser to the new Malibu. Sharp looking.
• Saturn Astra -- Great small car, if a little underpowered. Tight European style and handling.
• Saturn Vue -- Decent small SUV, if a bit heavy.

Chrysler:

• Chrysler 300C -- Long in the tooth but still a nice design. If you don't mind gun-slit windows and so-so fuel economy, this is a nice rear wheel drive choice.
• Chrysler Town & Country -- Competent. If you need a minivan, you may be willing to trade Honda dynamics and residual values for the discount on one of these.
• Dodge Ram -- Newly refreshed, the Ram is hlghly rated and is winning comparisons against other full sized pickups in the press.
• Dodge Journey -- New crossover SUV from Dodge. Looks like a decent package, reviews are mixed.
• Dodge Challenger -- Chrysler's Mustang fighter.
• Dodge Charger -- Sportier, meaner version of the 300c. Rear wheel drive, aggressive styling.

In my opinion, these vehicles are good enough that someone could buy one without massive compromises, and reap the benefits of the desperate pricing environment. I think it is unlikely that you would be stuck with an unfixable car if something did break, even if GM and Chrysler are broken up in bankrupcy court. Even if the companies collapse, the market for replacement parts and service will ensure that someone will be able to repair them. With the government warranty backing there isn't much warranty cost risk, either.

DOE Cutting Hydrodgen Car Funding

Obama's Department Of Energy Secretray Stephen Chu announced that the DOE is cutting funds for research into hydrogen powered cars.  From the budget rollout presentatio (here)

FY 2010 budget cuts less effective programs so we can invest in our economic future.  For example:

Cutting funding for deep-water and unconventional oil and gas research that industry can and does fund on its own. 

Moving away from funding vehicular hydrogen fuel cells to technologies with more immediate promise

I think, on this one, Chu (and Obama) are correct.  H2 is very far away from being practical, mostly because of the massive task that a hydrogen fuelling infrastructure would be.  There would be much greater short term benefits from research into better batteries.

Republicans and Hybrids

Over at the WSJ, the question is asked, "Where are the Republican hybrid buyers?".

The answer, is that most people (not just Republicans) won't buy a hybrid until the economics work out, and until the cars available will be a minimal sacrifice in handling, room, and performance.

For example, the closest to a no-compromises mid-size hybrid that I have seen to date from a Detroit automaker is a Ford Fusion hybrid. But it costs around $30,000! An I4 Fusion can be bought for much closer to $20,000.

The author makes the argument that some conservatives will be attracted to the national security aspects of hybrids. I agree with this personally, and if hybrids become affordable, I would consider one even at a modest premium to a gasoline vehicle.

Without a clear cost advantage, hybrid sales have to rely primarily on the segment willing to pay more for green -- a segment that has been hard-hit by the financial crisis yet still seems to be growing. But if we really want to expand the number of buyers, we should develop new arguments that appeal to the Republicans who have been holding back. To look at it another way, every hybrid car reduces not just greenhouse gases but reduces our dependence on foreign oil -- especially the new plug-in hybrids under development. And that means that buying a hybrid is not just good for the environment, but good for our energy independence and national security.

Obama is doing his part to promote hybrids in many ways. One way that isn't as frequently mentioned is that his administration is not as friendly to oil drilling as Bush's was. Obama's policy will restrict the supply of new oil, which will drive the price up (and, of course profits to OPEC). This will cause people to consider hybrids, as gas goes back to $3/gal over the long term.

Even Republicans understand $3 gas.

GM Mega-Dilution

GM has filed a paper (here) with the SEC, "PRE 14C" which lays out a plan to dilute its common stock, by issuing new shares to the U.S. Treasury in exchange for debt.

GM will issue enough new shares so that the total number outstanding will be 62 billion.  There are currently about 610 million shares outstanding.  This is a dilution of 100:1.  This will reduce the "par value" of $1.66 to $0.01/share.  They will then do a reverse split of 1:100, reducing the outstanding shares back to 620 million.  

The effect of this is that current common stock holders will be wiped out.  

Example: you own 1000 shares which are currently worth around $1600.  Your 1000 shares will become 10 shares, worth about $16. total. That's a loss of 99%.

Cash For Clunkers Compromise

The House Energy Committee has released a compromise "Cash For Clunkers" plan, which is quite different than the two previous competing bills.

You can read the whole thing here.

One big change is that the plan is only good for one year, not the 3 years of HR1550.

The quick summary:

Passenger cars
$3,500 for a new vehicle of at least 22mpg, if old one was at most 18mpg; 4mpg improvement
$4,500 for a new vehicle of at least a 10mpg improvement

Light Trucks & SUVs
$3,500 for a new vehicle of at least 18mpg, if 2mpg improvement
$4,500 for a new vehicle of at least a 5 mpg improvement

Large Light Duty Truck (6,000-8,500 lbs)
$3,500 for a new vehicle of at least 15mpg, if 1mpg improvement
$4,500 for a new vehicle of at least 2mpg improvement

Work Truck (8,500-10,000lbs)
$3,500 for any new vehicle if old vehicles pre-2002

The one page summary did not mention scrappage details, so I assume the rules will be simlar to HR520 and 1550.

There is no domestic or NAFTA favoritism here--any vehicle make qualifies. The mileage requirements are modest. It will be easy for people to use the credit, which is good. But the duration is short, so many people won't be ready to take advantage of the credit.

I think this will be a good shot in the arm to the automotive industry, with modest fuel economy benefits.

John Kerry Introduces Quiet Car Ban

John Kerry and Arlen Spector have introduced Senate bill S.841, the "Pedestrian Safety Enhancement Act of 2009". This legislation, if signed into law, would require the U.S. Department of Transportation to take up to 90 days to study the dangers that near-silent cars pose to blind pedestrians. Then, 90 days later, the DOT would be required to issue regulations:

(b) Requirements- The standard required under this section shall provide that every motor vehicle be equipped with a method--

(1) to provide blind and other pedestrians with a non-visual alert regarding the location, motion, speed, and direction of travel of a motor vehicle that provides substantially the same protection of such pedestrians as that provided by a motor vehicle with an internal combustion engine; and

(2) that will permit a blind or other pedestrian to determine the location, motion, speed, and direction of travel of a motor vehicle with substantially the same degree of certainty as such pedestrians are able to determine the location, motion, speed, and direction of travel of a motor vehicle with an internal combustion engine.

You can read the whole thing here.

So here's an idea: let's add external speakers to our future electric cars which make them all sound like this:

Lutz Smacks Letterman

In a blog post titled "Stupid Human Tricks", Bob Lutz smacks down David Letterman for being uninformed about the Chevrolet Volt, when hosting Tesla's CEO. Along they way, Lutz sideswiped Drew Barrymore, made fun of Letterman's "pallatial estate", and claimed to have a pet swan that can do tricks. Read the whole thing here.

Now, if he is that uninformed, I must point out that it’s not his fault, it’s ours. We should do a better job of making sure that Dave and everyone else who is in position to comment on national TV about our products has the right information, whether they use that information or not. Perhaps if we’d hired Drew Barrymore to be the spokesperson for the vehicle we’d have commanded more of his attention. Regardless, we’d like to rectify the situation.

I would like to personally invite Dave to come learn more about the Volt, including the hugely important but unmentioned-by-him fact that its range is 40 purely electric miles plus several hundred more miles thanks to its range-extender. Dave may drive more than 40 miles a day on his commute from the palatial Connecticut estate, but about 80 percent of Americans don’t. And those people could conceivably drive the Volt every day and never use a drop of gasoline.

The Chrysler Filing

You can read the actual text of Chrysler's bankruptcy filing on the WSJ web site, here. There's also a long (117p) affidavit here. It's fascinating, in a macabre look-a-dead-body sort of way.

One interesting part is how much Chrysler owes the top unsecured (no collateral) creditors:

#1 Ohio Module Manufacturing Co.: $70.3 million (chassis assembly)
#2 BBDO: $58 million (marketing)
#3 Johnson Controls: $50.3 million (parts)
#4 Continental Automotive: $47 million (parts)
also #29 Continental-Teves: $7.4 million,
Continental Automotive Guadalajara: $5.5 million
#5 Cummins: $44 million (engines)
#6 Germersheim Spare Parts: $36 million (Daimler spare parts?)
#7 Comau: $32 million (robots and automation)
#8 Visteon: $25.6 million (parts)
#9 New Process Gear: $20 million (transfer cases)
#10 Denso: $18.7 million (parts)
#11 Yazaki: $18.3 million (parts)
#13 U.S. Steel: $16 million (steel)
#18 Tata America: $11.3 million (IT outsourcing)
#24 Magna Powertrain: $8 million (parts)
#26 Shell Oil: $7.8 million (petrochemicals)
#41 Wackenhut: $7 million (security)
#40 Borg Warner: $5.5 million (parts)
#47 Robert Bosch: $5.1 million (parts)
#50 TRW Chassis: $5 million (parts)

There are a few companies on here which are a little surprising. You expect parts suppliers and steel companies, but a German spare parts distributor? Wackenhut? Tata?

Top secured creditors:

U.S. Treasure: $4.5 billion
JP Morgan: $1.6 billion
Chase: $1 billion
Morgan Stanley: $980 million
Citibank: $919 million

Chryslers assets: $39.3 billion

Current assets: $11.1 billion (only $1.9 billion in cash)
Property and equipment: $21 billion
Other: $7.2 billion (including $3.5 billion in "intangible")

Liabilities: $55 billion ($30.6 billion current liabilities, $24.5 long term)

Operating loss, previous 12 months: $17 billion (!).

Fiat ecoDrive

Fiat has an interesting gadget called ecoDrive. This is a free software program which analyzes your driving habits and makes suggestions how you can change them to save more fuel. What is cool is how it does it--the car will write vehicle data (likely signals: throttle position, engine speed, vehicle speed) as you drive to a USB stick you plug into the car's USB port. The PC program will then analyze this data.

More here.

Waiting For The Aftershocks...

Now, we wait to see what happens to the supplier base. With GM and Chrysler both shutting down for at least two months, if not longer, analysts are predicting wholesale carnage in the auto supplier business. From CNN Money:

"The aftershocks are going to be huge. We just haven't seen it yet," said Laurie Harbour-Felax, president of the Harbour-Felax Group, an auto research firm. She said she expects a couple of major suppliers with annual sales of over $1 billion to file for bankruptcy within the next week.

There is high risk of collateral damage to the automakers which are still building cars in this country, such as Honda, Toyota, and Ford. These companies may have to prop up failing suppliers with many millions of dollars of extra support to keep parts coming, which will weaken these companies even further. Ford is particularly vulnerable, because it is running on a cushion of borrowed cash, and has no easy way to borrow more, short of going to Obama.