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Episode 45 – Buying From a Bankrupt Auto, Hertz Takes On Zip Car, Waiting On the White House

December 17th, 2008 at 12:00pm

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The Bush Administration says it hasn’t made up its mind on what to do about financial aid for GM and Chrysler. Two polls show customers are open to buying cars from a bankrupt automaker. Hertz will compete with Zipcar by renting cars out by the hour rather than daily or weekly. All that and more, plus John answers questions about the bailout in the “You Said It!” segment.

Transcript and Story Links after the jump . . .

Here are today’s top headlines. Still no bailout from the White House. Maybe customers will buy cars from a bankrupt automaker. And Hertz will compete with Zip Car.

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

This is Autoline Daily for Wednesday, December 17, 2008. And now, the news.

Another day and still no bailout. The Bush Administration says it’s exploring all options and hasn’t made up its mind on what to do about financial aid to GM and Chrysler. Now the word is that it will come on Friday. But meanwhile the stress is killing domestic automakers and their suppliers….and the rest of us who follow this so closely.

Uh-oh. More bad news for the Big Three. The Wall Street Journal cites two polls that contradict what the Big Three say about going into bankruptcy…..that no one would buy their cars. A survey by Merrill Lynch says 90 percent of car buyers would buy a car from a bankrupt company if it was backed up with government help. CNW Research says 48 percent would. So why is that bad news for the car companies? Here’s a rhetorical question: would GM chairman Rick Wagoner be able to retain that position if he took the company into bankruptcy? I’m sure he doesn’t want to test that issue.

In a sign of desperation Chrysler Financial says it may stop loaning money to dealers for wholesale financing. Chrysler Financial is running out of cash to provide those loans, but of course, it gets cash when dealers sell cars. So if they can’t get financing to sell cars, Chrysler financial can’t make money off them. Talk a bout a Catch 22 situation.

Dacia is introducing two Light Commercial Vehicle versions of the low cost Logan. Pricing for the van starts at 6,500 Euros and for our American audience that’s just over $9,000. And the pick-up starts just below 7,000 Euros. Dacia is the low cost brand for Renault and they are obviously expanding the line-up for the Logan.

The World Trade Organization denied China’s appeal of a ruling that said the country broke agreements imposing tariffs on foreign automotive parts (subscription required). WardsAuto.com says the tariffs are levied on foreign-owned assembly plants that don’t use enough parts manufactured in China. The WTO says if China doesn’t stop this, the affected nations can levy duties against Chinese goods.

Last night Detroit got hit by the first big snow storm of the season. We got about four inches of powder. The roads were a mess this morning and I was stuck driving a Mitsubishi EVO from the press fleet. Even with all-wheel-drive I was sliding everywhere because of the summer tires. But there’s one product that could have really helped me out.

Autosocks slip over your car’s drive wheels and supposedly provide better traction in snow and ice. They were designed in Norway and are made out of a special synthetic fiber. Unlike tire chains, Autosocks are easy to install, won’t tear up the roads and fit in your trunk for easy storage. They’re available online and cost between $80 and $100. Boy, I wish I had these things this morning.

The Wall Street Journal reports that Hertz will compete against Zip Car. Connect by Hertz rents cars out by the hour rather than daily or weekly. Users pay a $50-per-year membership fee and can rent cars for about $10 per hour, including fuel. Connect by Hertz should be available in about two dozen locations around the world.

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.

Pedro Fernandez writes in to ask “John, in all this bailout talk, all I hear is UAW givebacks and sacrifices, but what of the honchos on top, why aren’t they offering to cut their huge salaries and bonuses?”

Pedro, actually they are going to sacrifice. Each of the Big Three CEOs indicated they’ll work for a $1 a year as long as they’re operating with taxpayer money. GM’s board of directors would also work for a buck a year. Bob Lutz, Fritz Henderson, Tom Stephens and Ray Young, all executive vice presidents at GM would see all their cash compensation cut by 50 percent. On top of that Henderson would cut his salary by 30 percent and the other three by 20 percent. So the union people are not the only ones making sacrifices. But you raise a good issue. In times of crisis it’s critical for leaders to show equality of sacrifice. That’s why there was such a stink raised over the CEOs flying to Washington in their corporate jets. But they obviously learned their lesson and are going to be smarter about this going forward.

And Ed Kemmerer writes in to ask, what about the rest of the white-collar salaried workers. I know that they pay next to nothing for their health care coverage.

Ed, that used to be true, but their co-pays are a lot higher these days. Also, the salaried workforce makes roughly the same as their counterparts at the transplants, which is not the case for the union workers and top management.

Thanks for your letters and don’t forget that all this week you can win cool Autoline gear by answering our trivia question. All you have to do is sign-up for our free e-mail newsletter to receive the trivia question. I’ll be picking the winner Friday on “Autoline Daily” so sign-up today!

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

8 Comments to “Episode 45 – Buying From a Bankrupt Auto, Hertz Takes On Zip Car, Waiting On the White House”

  1. jesse M. Says:

    Hi John.It’s been stated time and time again by the politicians that matter that there will be some kind of bailout.So it’s not if,but when- how much -and ,most importantly to the politicians- who gets to take credit for it.The bottom line however is that they are delaying the inevitable,Bankruptcy for GM and Chrysler.The latter being a privately owned company now,I don’t even know why they qualify for the bailout.These guy created the quicksand they are now standing in,and the UAW is right there pouring in more mud!14 BILLION,30 BILLION..won’t matter!The UAW will bring the ship down at any cost!

  2. Chuck Vergetis Says:

    Not sure what Jesse M. is suggesting. The Big three is not at fault for the economy and for those that are at fault are receiving “Bailout” money. Not only are they receiving it, but they are not using it or making it available to those that need it. With the Auto bail out, it should have a postitive trickle down affect. I maybe wrong, but i don’t think their are many people, when times are good and the companies are making profits, that can’t use a raise or have most or all of their Medical paid for. My dad worked for American Motors for 42 years and the last ten years, half of his raises went back to the Company. Unfortunetly, that was never spoken about by the Company and or the Newspapers when contact talks came around.To even think that the UAW or any Union at this time is not open to concessions is absurded.

    Chuck V.

  3. pedro Fernandez Says:

    John: thanks for you explanation of the big 3 executives giving up salaries and bonuses, I don’t think the average American is aware of this. They have done a poor job, either their publicists or the media of giving the facts on who is sacrificing and what they’re giving up.

  4. JFD Hamilton Says:

    John,
    It is hardly surprising that if Washington chose in the past to do whatever it took to attract the off shore auto manufacturers to your shores, whatever the detriment to your domestic auto industry; that they are now dragging their feet with the bridge loans ?

    And, of course the Southern politicians have no vested interest in allowing the domestics to fail, its called GREED ! How much did that cost the Japanese and Germans ? They are finally winning WWII (with American help). Makes Pearl Harbour look like a “teaparty”

    And meanwhile what are we doing in the “Great White North” ? Why our PM just closes Parliament to save his political skin; leaving the Canadian Auto Industry hanging until January…
    Tell me again, aren’t these guys we elect supposed to be on OUR side ? !!

  5. Rick F. Says:

    John: The poll you quoted “A survey by Merrill Lynch says 90 percent of car buyers would buy a car from a bankrupt company if it was backed up with government help.” to me is a bit misleading. This is the first time I’ve heard “if it was backed up with government help” mentioned in the same sentence as would you buy from a bankrupt company. That’s a huge difference when asking that type of question. For me, if a company is going out of business, I would not buy even though I’ve been a loyal customer for 40 years. If it has financial support to continue, I would absolutely buy again. This poll should also ask would they buy if the company was “NOT” backed up with government help. Thanks for your great work.

  6. JIm Thykeson Says:

    John: Waiting on the White House is nothing new. Over Bush’s tenure the one thing that was always obvious in all his branches was big talk, but no funding. From Interior to
    Commerce, to Treasury, he was always late or never there with promised funding. So the ‘Big-3′ shouldn’t hold their breath too long. This is just Bush as usual.

  7. Craig Judge Says:

    John,
    As a GMC Business Choice dealer, I have been pleading with GM to bring European commercial product here to the U.S. Specifically the Renault line of vans GM already sells in Europe. While they admit they are “focus group testing” the product here, there is concern about what it would do to domestic production of their current U.S. built commercial vans. That’s a prime example of a domestic manufacturer not being able to introduce potentially profitable product because of existing UAW contracts. Until our manufacturers are on a level labor playing field with the transplants, no amount of “loans” will work. It’s like bailing out the Titanic with a turkey baster.

  8. Salvador G. Says:

    Wait a min. John, if the CEO are taking only a dollar a year… How exactly are they going to pay their bills and taxes, are they planning on selling their mansions or luxury cars, etc.???

    So they must be making money in some other way to pay for all this.