Episode 525 – Bailouts Saved A Million Jobs, VW Invests Big to Become #1, GM Open-House Events

November 19th, 2010 at 12:30pm

Runtime 8:30

A new study says the U.S. government bailouts of GM and Chrysler saved over a million jobs the past two years. Volkswagen plans to invest more than $70 billion in its automotive business over the next five years. General Motors will host open house events at all 54 of its U.S. manufacturing facilities and Aftersales parts warehouses by the end of next year. All that and more, plus a preview of this week’s Autoline Detroit with Laura Soave, the President and CEO of Fiat North America.

youtube-logo-3

»Subscribe to Podcast | iTunes | Zune | RSS | Listen on Phone Stitcher

Hey now, don’t sneak up on people like that! You nearly scared the soil out of me. Jim Hall here of 2953 Analytics bringing you another enlightening and entertaining episode of Autoline Daily for Friday, the 19th of November, 2010. TGIF! Here’s all the news that fit to broadcast.

GM’s IPO PERFORMANCE (subscription required)
As a few of you may be aware, a new automotive stock that debuted on the NYSE yesterday had a pretty good first day of trading with well over 610 million shares finding new homes. The stock closed with its price up a tick more than 3.6 percent over an initial sales price of $35.00 per certificate. Of course, the stock is General Motors. According to the Wall Street Journal, retail pricing for the shares opened at $35. The stock climbed to an inter-day high of $35.99 before closing at $34.19.

This is a pretty good performance for a company that many said was dead and cold as yesterday’s oatmeal less than two years ago. Even with a massive influx of capital from the company’s IPO, the General is not out of the woods yet. There are still issues with fully funding the company’s pension, some still-fuzzy math coming from the financial guys and getting the perception of its remaining four core-brands polished up. That said, the company is in the right place to take advantage of a slowly strengthening economy. And this brings us to one of the core issues of the General Motors IPO, the valuation of GM’s stock. After its first day of trading since entering bankruptcy, GM stock closed at $34.19 a share . . . and the price is puzzling . . . to me at least.

GM VS. TESLA
Compare GM’s price to that of the last automaker to have an IPO, Tesla Motors. Yesterday Tesla closed the day at $29.89 a share. Only $4.30 less than GM. Yet Tesla has yet to fully engineer and manufacturer a single car. Yes, I know about the Roadster, but it’s a case of assembling a car from a series of commodities. I don’t want to sound like I’m ragging on Tesla, but something is seriously wrong on the street when the two companies are valued so closely.

Using market capitalization, the value of the issued stock, at the close of trading yesterday, Tesla had a value of $2.76 Billion. By comparison, GM’s market cap was $51.3 Billion. For the third quarter of 2010, GM was able to turn a profit of $2 Billion. Tesla posted a $34.9 Million loss for the same period. Look, either GM is grossly undervalued or Tesla stick is selling for waaaay more than it should. And don’t get me started on Ford’s stock price. I just don’t get it. If GM turns a fourth-quarter profit of say, half what it did for the previous period it should just buy Tesla and be done with it.

But enough of my coffee-fueled rant. Now it’s time for news . . .

BAILOUTS SAVED OVER A MILLION JOBS (pdf)
While the bailout of General Motors and Chrysler created a lot of controversy, a new study from the Center for Automotive Research shows just how important it was to help these companies out. Researchers modeled the impact of the $80 billion in U.S. aid to GM, Chrysler, GMAC and Chrysler Financial using actual economic performance for 2009 and 2010. In 2009 alone, over 1.1 million jobs were saved and more than 300,000 were saved this year. To date, $13.4 billion has been repaid to the government. The study shows that $28.6 billion in net losses to the U.S. Treasury were averted by providing assistance to General Motors and Chrysler. So, that means the government, i.e. us taxpayers, only need to recoup $38 billion at this point to break even. A mere bagatelle. The study was conducted before GM’s IPO.

TOYOTA LAWYER BLAMES DRIVERS (subscription required)
Could Toyota finally be growing a pair? The company’s been lambasted for a year or so from all sides for its alleged unintended acceleration problem. Its CEO apologized and appeared before congress; it put out a slew of print and television advertisements promoting how hard it’s working to keep customers safe; and it comprehensively reviewed its vehicles . . . but it’s all for nothing. Its found no problems that point to an electronic cause of unintended acceleration. Now, according to the Wall Street Journal, one of its lawyers is blaming drivers for crashes. Finally! He said most of the 48 deaths a safety expert blamed on sudden acceleration involved drivers who were elderly, had medical issues and were distracted or navigating slippery roads. The company probably won’t fall as hard as Audi did in 1989, but still, expect this to drag out in the courts for years to come. If only Americans took responsibility for their actions.

VOLT RAKES IN AWARDS
It looks like GM’s got a hit on its hands, at least with the motoring press. A couple days ago the Chevy Volt was awarded Motor Trend Magazine’s golden calipers, winning its annual car-of-the-year competition. Yesterday, at the Los Angeles Auto Show, the extended-range electric took home another victory, that being the 2011 Green Car of the Year award from the folks at Green Car Journal. The Volt’s on a roll and I’d say watch it rake in a few more wins like these in the future. You can put me on the record for this; I predict it will win North American Car of the Year award as well. It’s a great EV that’s actually a REAL car you can live with everyday. As one of the Motor Trend Car of the Year judges put it, “I expected a science fair experiment.  But this is a moon shot.”

VW INVESTS BILLIONS TO BECOME #1
Be careful Volkswagen; don’t let your reach exceed your grasp. Bloomberg reports the German automaker is investing nearly 52 billion euros – yes, that’s BILLION with a “B” – in its automotive business over the next five years. In U.S. funds for our ‘Merican audience, that’s nearly $71 billion! You don’t need me to tell you, that’s A LOT OF MONEY! The push is to help fund a product offensive from the company’s nine brands, with the singular goal of surpassing Toyota in sales and profitability. VW is aiming to sell more than 8 million cars by 2012 and 10 million as early as 2015.

GM HOSTS OPEN HOUSE EVENTS
We car enthusiasts know how big a role the auto industry plays in local economies and the world at large. But some people view the business as an obsolete dinosaur of the rustbelt. Perhaps in an effort to silence these critics, GM will host open house events at all 54 of its U.S. manufacturing facilities and Aftersales parts warehouses by the end of 2011. The idea is to give the American public an opportunity to learn about its products and its plants. This is kind of cool! I’m not aware of any other automaker that’s tried something like this before. It’ll be interesting to see how the public reacts to the plan.

You know the routine. After the break we’ll preview this week’s episode of Autoline Detroit, so don’t go anywhere . . . hey, get that cursor away from your browser’s back button! I mean it!

This week on Autoline Detroit John is joined in studio by Alisa Priddle of The Detroit News and by Tim Higgins from Bloomberg. His special guest is Laura Soave, the President and CEO of Fiat North America. In the following clip he asks her about one of the BIG changes the company had to make to the Fiat 500 in order to sell it in the U.S.

For more about Fiat’s plans in the U.S. market, swing by our website, AutolineDetroit.tv where you can watch this week’s entire episode immediately, as in RIGHT NOW.

And sadly like all good things, today’s installment of Autoline Daily must also come to an end. Once more, I’m Jim Hall of 2953 Analytics. Thanks for watching and I’ll see you ‘round!

Thanks to our Partners for embedding Autoline Daily on their websites: Autoblog, WardsAuto.com and WWJ Newsradio 950

25 Comments to “Episode 525 – Bailouts Saved A Million Jobs, VW Invests Big to Become #1, GM Open-House Events”

  1. tj Martin Says:

    Rag on TESLA all you want . The cars they’ve promised ( like Fisker ) have yet to see the light of day . The ones they’re assembling from bits and pieces are morphing into Flame Throwers ( and have yet to complete a road test without at least two cars breaking down in the process )

    All on our Dime .

    So rag away . I’ll happily join right in .

  2. Chuck Grenci Says:

    Nice job Jim (in John’s absence); tell it like it is. Good show.

  3. Jon M Says:

    Watch out for Volkswagens. Anytime an auto manufacturer shoots for number 1 it seems to result in decreased quality and customer service. That was my fear with Toyota when they tried for that otherwise meaningless title. I also believe that was part and parcel to GMs problem for so long–among so many other things. Volkswagen isn’t exactly known for quality as it is, but boy will it get really bad when they go for broke to achieve that glorious title.

  4. tj Martin Says:

    VW is already well on their way with diminished quality and reliability . Have a good look at VW and Audi’s stats in the EU/UK and the US . Abysmal . The new Jetta we’re getting . Cheaper interior , lower BHP motor , cheaper brakes etc. VW also seems to be going out of its way to kill off Porsche with some of their stupid plans for the company starting with the new Cayman R designation Fraud .

    So hang on to it John M. VW is well and good heading rapidly towards implosion .

  5. tj Martin Says:

    VW Part Two ;

    Also meant to add that having been reading some of the German Business Journals VW is in debt up to their ears what with the Porsche purchase , Bugatti and Lamborghini bleeding off money like water etc.

  6. Roy P (Firebird248) Says:

    Excellent Presence Jim! I appreciate the enthusiasm and also professionalism.

    The only way you can improve is start or end with a little “helium” expression.

    Maybe a munchken expression for the little Fiat 500!

    Thanks,

  7. FormerCFbailee Says:

    The bail out did little to help Chrysler Financial after the Obama Administration mandated in April 2009 all Chrysler LLC financing will be handled by GMAC/Ally. What was once a company of over 3000 people today employs a little over 300 and does very little financing.

  8. pedro fernandez Says:

    These morons at VW refuse to learn from history. GM, Toyota both aimed to be number one at what cost? Gm almost went under and Toyota has had a severe blow to their reputation for reliability and quality, VW already lags in reliability surveys and it will only get worse as they try to keep their prices low to compete with the likes of Hyundai.

  9. pedro fernandez Says:

    Wow! the Volt is winning all these awards, I’m skipping lunch so I can get down to my local Chevy dealer, put down a deposit and let them screw me for every single penny of dealer markup they can get from me. I just gotta have a car that is getting all these accolades! By the way that announcement from Fiat to include an optional 6 speed tranny for the 500, has me thinking: lemon, recalls, even more than usual. 6 speed trans are very complicated and I don’t believe the Fiat engineers can do it right.

  10. pedro fernandez Says:

    Instead of Fix It Again Tony, it’ll be Can You Fix It Tony?

  11. tj Martin Says:

    pedro fernadez ;

    I don’t think FIAT will need any additional help , six speed , what ever to live up to our lowest expectations of the car . It’ll break . And no he can’t . Even Tony aint that good . Thats why i’ve switched to F*ing Italian Automotive Trash . Fits the ” New ” FIAT that no one here will be able to pronounce a bit better

    But Gee Whizz , do let me know what a wonderful car the VOLT is once you get yours delivered . I’m just dying to get a hold of one myself . Maybe two ! With at least 4 of those magic chargers . At an additional $3000 a pop installed !

    Hey with any luck they’ve got a case of Snake Oil I can buy as well . I’ll remember to bring the wheelbarrow so’s to collect my fair share of the BS to fertilize the garden while I’m at it .

    Do let me know …. Urp !

  12. tj Martin Says:

    Pedro ;

    VW ? Learn anything ? NEVER ! Check out the Audi interview in todays NYTimes online Auto page . The damn cretin they interview from Audi all but says its the companies objective to squeeze as much $ out of it consumers pockets , regardless of the consequences . Says he can’t understand why ConsumerReport has Audi ( and VW ) rated so poorly and that their warranty repair records don’t agree . Well thats because Audi and its Dealers avoid and/or put off repairs as much as they can until the warranty wears out . Believe me when I had mine I heard those horror stories over and over from other owners .

    Seriously read the article . The Audi guys attitude is beyond belief .

  13. tj Martin Says:

    I still want to know how the heck Lotus expects anyone to take them seriously as an engine supplier when they don’t supply engines for their own cars .

    Yes the other day someone said its Cosworth that’ll be building the motors . But seriously .

    Lotus ? Engines ?

  14. pedro fernandez Says:

    I like how some of these car companies think that CR has it in for them when they get bad reviews. Yet I’m sure if and when they start getting good ratings from CR they’ll be gloating about it. Like Ford and GM with the latest results. Poor Chrysler is still showing up third in the domestics. ps.

  15. C-tech Says:

    Considering the Motor Trend Car of the year (COTY) was given to the Chevy Citation, Ford Mustang II, and the Renault Alliance, the Volt getting COTY is not a big deal to me.

  16. FrankCanada Says:

    I think Fiat has done a good job, with Ferrari & Maserati in North America. And the way they turned around Case-New Holland shows they understand North America & will turn around Chrysler no problem. Do you not think, given that Fiat, Renault, VW, & even Peoguet are the most technologicaly advance mass production auto makers in the world, that their failure in the past, is more to do with American/Canadian ignorance then poor build quality. Europe wants cars that challange, Americans want cars that compliment. But there is nothing to complement. Go drive a hyundai, & watch with glee as your infastucture collapses. Yes I’ve been to Detroit.

  17. HyundaiSmoke Says:

    That Chevy runs deep commercial is sweet. I have faith in GM. I think they are on the right track now, and with Ewanick over there it’s will be quite nice for you guys.

    tj, well you VDub Audi guys are in pretty big trouble. Big ass trouble. Your death march with Hyundai/KIAs emergence; as lets be real the Koreans are the New Germans. Premium performance product on the cheap. The iconic old school German cars are coming out soon- BUT IT’S FROM KOREA!!! Hyundais are those little Aspirational 60-80s BMWs and Audis, while KIAs are those sporty little VWs from the 70s and 80s.

  18. dcars Says:

    I thought Indy was opening up the spec for their motors? Is it just that Cosworth is also providing engines along with Honda, GM, VW and Fiat? No mater how much marketing VW does it won’t mean a thing if the cars do match the hype.

  19. CMA Accountant Says:

    Hello,

    Stock prices doesn’t mean anything really.. Other than how the company is divided.

    Market Cap is based on the the current financial position of the company and also based on future expectations. Also the price is based on the demand of the stock…

  20. pedro fernandez Says:

    Good article in US News and World Reports on why EV’s won’t amount to a hill of beans in US while in EU Japan and China,they have a better chance of success.

  21. tj Martin Says:

    HynudaiSmoke ;

    You really are an idiot aren’t you sonny ? What part of I HATE VW and AUDI do you NOT UNDERSTAND ?

    Could I be any clearer ?

    Go light up whatever that cheap Korean stuff is you’re smoking and blow away would you ?

  22. HyundaiSmoke Says:

    LMAO@ tj, yeah, yeah, yeah.

    Pedro, because many in the age demographic who really wants EVs cant afford new cars- ANY NEW CARS (Unless they are from CHINA AND INDIA), and probably wont until they are 40.

    You cant blame the car companies on that one. Blame the employers who like to pay young people with 2 college degrees $27K a year. If I were the car companies Id lobby the government to make a standard College Grad Minimum wage of $30-35K for college/trade school grads. These employers with their low ass wages are hurting your business.

    Call me a Socialist, a Commie, or whatever. Who cares about Outdated Baby Boomer Lingo and fears about Duck and Cover, terorists hiding under the bed etc…

    THE REAL TERRORISTS WHO ARE DESTROYING THIS COUNTRY FROM THE INSIDE OUT ARE= AMERICA’S BUSINESSMEN, EXECUTIVE DIRECTORS, ETC… WHO PAY COLLEGE GRADS AND OTHERS LESS THAN THEIR PARENTS MADE 20 YEARS AGO AND MANY OF OUR PARENTS DIDNT HAVE DEGREES, AND FANCY EXPERIENCE LIKE WE DO.

    BIN LADEN, MAO, STALIN THAT SHIT!!!

    It’s not Communism to force businesses to pay people what they are worth- IT’S COMMON SENSE AND GOOD FOR BUSINESS!!!

    BUT YOU CANT TELL THAT TO THE STUBBORN!!

  23. HyundaiSmoke Says:

    Yeah I said it, the Minimum Wage laws in this country are outdated and suited for Factory Workers who hopped into their Ford Flathead V8s, and went down to the drive in with their hunnies to do a little pickle tickle.

    Minimum wage should be based on the level of educational attainment, as educational attainment is what the Modern Labor Market is REALLY based upon as a standard of gauging worker costs.

  24. sam zuech Says:

    Jim Hall is great!! Entertaining, informative and a sense of humor, John you are hard to replace, but Jim does a great job, he’s a keeper.

  25. pedro Says:

    just read that the new Audi A8 is only about 150 lbs heavier than the Cruze, how can this be? I know the A8 has an aluminum frame but holly cow!!Why is the Chevy so heavy? smaller engine. transmission, etc. I’m sure they could have saved weight somehow.