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Episode 22 – Big 3 Bailout Hits $75B, GM Cuts Salaried Workers, BMW & Hyundai Bullish on Diesels

November 12th, 2008 at 12:00pm

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Three separate $25 billion packages are proposed to bailout the Big Three. GM wants to cut 3,500 salaried employees in the next couple of months. BMW and Hyundai are bullish on diesels. All that and more, plus John answers viewer questions about the natural gas-powered Honda Civic and the Big Three in the “You Said It!” segment.

Transcript and Story Links after the jump . . .

Here are today’s top headlines. Big Three bailout grows to $75 billion. GM wants more headcount reduction. And BMW and Hyundai are bullish on diesels.

Up next, we’ll be back with the news behind the headlines.

This is Autoline Daily for Wednesday, November 12, 2008. And now, the news.

The bailout for the Big 3 has grown to $75 billion. Even though most news reports refer to a $25 billion package, there are actually three packages that are being discussed. The first is a $25 billion package to help General Motors, Ford and Chrysler retool their plants for more fuel-efficient vehicles. The second $25 billion is a bridge loan to get them through the current economic downturn. And the third $25 billion is to pay for health care costs for retirees, and is something the UAW is really pushing for. Put it all together and the bailout now comes to $75 billion.

And as it approaches a desperate situation, the Detroit Free Press reports that GM will have to cut an additional 3,500 salaried employees in the next couple of months. Only 6 years ago GM had 46,000 salaried employees, but this new round of cuts will take that down to only 25,000.

While the Detroit area is reeling from all these layoffs, here’s one company that’s hiring. Fisker Automotive, the specialty coachworks company, is opening a new Engineering Center in Pontiac, MI (subscription required). According to Ward’s, the auto maker says the new facility will develop its plug-in hybrid car, the Karma, which Fisker claims will get 100 mpg.

A lot of diesels in the news today. BMW announced it’s going to charge a big premium for clean diesel engines that meet stringent U.S. emission standards. The new 335d sedan and diesel-powered X5 will cost about $5,000 than comparably equipped vehicles with gasoline engines. BMW also said it will cost $10 a gallon to refill the urea tank in those vehicles, adding another $50 or so to every service charge. And when you consider that diesel fuel costs roughly 50 percent more than gasoline in the U.S. right now, you’ve got to wonder if the diesel is dead on arrival in the American market.

Well, Hyundai is bullish on diesels elsewhere in the world. It’s coming out with an all-new 4-cyl. diesel engine available in 2.0 and 2.2 liter versions (subscription required), for the 2010 Sonata and Tucson. Wards reports that that diesel will not make it to the American market because it would add a 5 to 6 thousand dollars to the cost of those vehicles.

And boy are we reporting a lot on the Russian market. Now Fiat and Russian automaker OAO Sollers are adding more models to their partnership. Ward’s reports that the joint venture will begin producing the Fiat Linea early next year (subscription required) and may expand to the B and C segments, possibly with the Fiat Bravo and Grande Punto.

Coming up next, it’s time for You Said It! And now it’s time for some of your feedback.

This is “You Said It!” Every day we get dozens of comments and questions from you, our viewers. “You Said It!” gives me a chance to respond.

And today I’m pleased to say we have our first video comment that came in from William Slate in New Haven, Connecticut. Will’s comment is a response to our piece on the natural gas-powered Honda Civic. He took issue with some of my opinions on the technology. His comment is very comprehensive; it’s actually too long to play in its entirety. But here’s a snippet of what he had to say.

Link to Will Slate’s Comment

You can watch the rest of Will’s comment on AutolineDaily.tv. You’ll find a link along with today’s transcript. But, I think the gist of what he was saying is that using compressed natural gas for cars doesn’t make sense on several levels. For use in vehicles, he says it only makes sense for fleet owners who operate trucks or busses. Great comment Will.

Here’s an email question from Chris who asks, “What do you think of receivership for the Big Three?”

Well Chris, if any of the Big Three went into receivership, meaning bankruptcy, it would be an ugly day, indeed. The whole question revolves on whether people would continue buying cars from a company that is in bankruptcy. If they got the idea the company would ultimately emerge from bankruptcy I think they would buy. But it sure would hurt the company’s image and instantly make them the butt of jokes of every comedian on every late night show.

And finally, today’s last question is from Pedro. “If the union laws are changed, does this mean that the UAW will be able to set up shop in the non-union plants like Toyota and Honda? If that’s the case, I guess they’ll move those plants to Mexico.”

Pedro, the Employee Free Choice Act, which is likely to be enacted next year, will make it far easier for the UAW to organize the transplants. But that doesn’t mean the Japanese, Korean and European automakers will move their production to Mexico. Remember, those plants typically cost around $1 billion each, and you just don’t walk away from that kind of investment.

Anyway, that’s it for “You Said It!” Remember, keep feeding us your questions and comments, and keep posting your videos to YouTube. Just remember, include your name, location, and try to keep them to around 30 seconds long. Do this, and you just might be on our next installment of You Said It!

And that’s it for today’s top news in the global automotive industry. Thanks for watching, we’ll see you again tomorrow.

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Full Comments from Will Slate, New Haven, Connecticut
Referencing Autoline Daily 16 – Honda Civic GX

4 Comments to “Episode 22 – Big 3 Bailout Hits $75B, GM Cuts Salaried Workers, BMW & Hyundai Bullish on Diesels”

  1. Julius Lambert Says:

    Using the efficiency of gasoline as a bench mark,natural gas is 30%less efficuent and diesel is 30% more efficient.Do the math and determine which is right for you and the environment.Just remember everybody likes plastic.To get it you have to refine many barrels of crude oil.Of the 42 gallon barrel 75%is gasoline,15%is diesel,5%asphalt,5%light ends for plastics and other chemicals.So as long as you want plastics,WHAT you gonna dowith all that gasoline?

  2. James Says:

    re: The Employee Free Choice Act

    Honda, in particular, has been building cars in the Rust Belt –Ohio– for over 20 years now. If workers were really unhappy with things, the UAW would have organized those plants by now. For good reasons they have been unsuccessful in doing so. That’s not going to change.

    Also, there’s no guarantee that the UAW will be able to easily organize these plants, especially since the foreign automakers have deliberately chosen southern states where unions aren’t as dominant or as influential. There’s no legacy of success the UAW can point to in these areas.

    If workers in these foreign plants have been paying attention, they should be seeing how, little by little, the UAW is being gutted “up north” and all the so-called benefits of solidarity are being whittled away.

    Bottom line: even if the law is changed to benefit the unions –and it’s a dumb change, btw– I don’t think it’s a slam dunk by any means.

  3. Sparrow Says:

    Has anyone heard if Holden will attempt to seperate from GM in this current enviroment if it is possable or if GM may look at selling?

  4. adam hartung Says:

    If America bails out GM and/or Ford we should demand a change in the leadership and management teams. Until someone Disrupts these companies and changes their management approach these companies will not be viable competitors. Read more at http://www.thephoenixprinciple.com