Episode 151 – GM Bondholders Say No, GM Takes Back Delphi Plants, Opel to Get New Owner Today

May 27th, 2009 at 12:00pm

Runtime 6:12

GM was not able to get enough bond holders to agree to swap their bonds for stock. General Motors plans to take back five Delphi plants. The German government will decide today which bidder it prefers Opel to partner with. All that and more, plus John answers viewer questions in the “You Said It!” segment.

Transcript and Story Links after the jump . . .

Here are today’s top headlines. GM fails to bring bondholders on board. It is also going to take back five Delphi plants. And Opel learns today who its new owner will be.

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

This is Autoline Daily for Wednesday, May 27, 2009. And now, the news.

GM was not able to get enough bond holders to agree to swap their bonds for stock. The U.S. Treasury had told GM that if it could get 90 percent of debt holders to agree to that swap, it would NOT force the company into bankruptcy. But we know that many bondholders bought insurance on their bonds and would get all of their investment back if GM went into bankruptcy. And so that looks like exactly what is going to happen.

Meanwhile, the AP reports that the UAW will now only get 17.5 percent of GM’s common stock, down from the 30 percent it was originally supposed to get. But it sounds like a lot of horse trading went on. The union will get a warrant that could give it another 2.5 percent. It will also get $6.5 billion in preferred shares that pay a 9 percent return, and a $2.5 billion note, and a seat on GM’s board of directors.

As part of a tentative deal with the UAW, General Motors plans to take back five Delphi plants. According to the Detroit Free Press, the plants would operate under Delphi union rules but would be considered part of GM. GM would take back a steering, a thermal systems, an electronics and safety and two powertrain facilities. Delphi has been trying to emerge from bankruptcy since 2005 and has a bankruptcy hearing this Friday regarding changes to the plan.

The German government will decide today which bidder it prefers Opel to partner up with. According to Reuters, the government is considering bids from Fiat, Magna, RHJ International and Chinese company Beijing Auto also emerged as a late bidder. GM will make the final decision but German aid for Opel hinges on who GM picks. There is a proposal to give 1.5 billion euros or $2.1 billion in aid but it depends on the investor’s proposal and whether or not Opel can be separated from GM, which is what the German government prefers.

Reuters reports that yesterday three Chinese companies announced they were merging to form an auto parts supplier. The new organization would have a target sales level of 100 billion Yuan or about $15 billion by 2012. Recently China has been encouraging its steel and automotive industries to consolidate so they can better compete with foreign companies.

Yesterday Taiwan announced that it launched a new electric car research consortium. Gasgoo.com reports that the organization aims to leverage the country’s IT industry to capture a 3-percent share of the global electric vehicle market.

Who would have guessed it would become so popular when it was introduced three decades ago? Soon, the Little Tykes Cozy Coupe will take its place in automotive history. TheNewsLeader.com reports that on June 6, the red and yellow toy car is being inducted into the Crawford Auto and Aviation Museum in Cleveland. Over the years, the Cozy Coupe gave countless kids their first experience behind the wheel while its interior gave new meaning to the term plasticky. Here’s to another 30 years!

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!” where I get a chance to respond to some of your questions and comments here on the show, and of course, I try to answer some of them on the website.

Ron Paris
“Do you think these electronic fuel economy readouts are any more accurate than they used to be? I’m skeptical.”

Ron, when you measure the old way of dividing the gallons you used into the miles you drove, remember that most odometers are not perfectly accurate. And how much gas did you really use? That can be difficult to measure accurately, too. So I think the electronic readouts are reasonably reliable.

Duke T
Could you enlighten us as to the “corporate” structure that will be adhered to under the new CAFE regs? Will it be necessary to be under one corporate roof, such as the GM divisions (Chevy, Cadillac, Buick, GMC), or will it be allowed to be based on ownership of stock as in VW, Audi, Porsche?”

Duke, it’s done by the corporate group. So all of GM’s divisions are averaged together. Same goes for VW, Audi, Bentley and Lamborghini. They all get lumped together, too.

“What kind of shape are the rest of the European car companies in? We’ve all heard a lot about GM, Chrysler, Toyota, Honda, Ford, but what about BMW, Mercedes, VW, and Fiat?”

Frank, so far this year, all the major automakers are losing money, except VW. In fact, in the first quarter Toyota lost more money than General Motors and Honda lost more money than Ford.

That’s it for today’s top news in the global automotive industry. But don’t forget to tune in for Autoline After Hours tomorrow night at 7 p.m.  Joining us for that show is Csaba Csere, the former editor of Car And Driver. Thanks for watching, we’ll see you tomorrow.

15 Comments to “Episode 151 – GM Bondholders Say No, GM Takes Back Delphi Plants, Opel to Get New Owner Today”

  1. Len Simpson Says:

    Don,t give UAW just a board seat, give them the whole mess!& see what happens to getting paid for not working.

  2. jerry flint Says:

    what is 70% of nothing. i forget.

  3. Don MacConnel Says:

    Seems to me that shooting at the UAW doesn’t do much to help us compete on a global basis. Civil wars aren’t usually healthy.

    If we have to blame someone, blame Nixon who opened what became lop-sided trade agreements with China.

    Now China eats our lunch in manufacturing and is taking away our nation’s great source of generating wealth.

  4. Dave E. Says:

    I would like the UAW made to keep their stock in Chyrsler and GM. This will make them responsible in their demands made of the companies, yet share in the profits.

  5. John V Says:

    I worked on Fuel Economy displays for a US OEM earlier this decade. We had a lot of issues modeling the fuel delivery by the injectors (using injector on time) until we started using manifold air pressure in the calculation with newer engine controllers. We could then “dial in” the accuracy to about +/-0.5 mpg in trucks getting between 12 and 22 mpg.
    Later we started getting hammered for poor fuel economy by the press as fuel prices started to rise several years ago. We learned that all of the domestic and foreign competitors were “skewing” displays so they would rarely report less fuel economy than actual. Now most displays report 0.5 to 2 mpg better than actual on average. The press apparently never questioned the displays.
    Odometers are designed to never report less mileage than you are getting.
    If you want to compare your display to actual, use most of the tank of fuel (this makes variation in fill shut off by the pump less significant and use the same pump for the refill (fuel used). Keep in mind that fuel pumps are not perfectly accurate either.
    If you keep a log of many fills, a lot of the variation will average out and you will get an idea of your actual economy.

  6. Watt D Fark Says:

    Best outcome for Opel would be Magna, IMO. Fiat makes ZERO sense, and the Chinese would take the name, the R&D, and make the cars in China, leaving the Euro plants closed

    Hell of a recovery plan: first get rid of as many US jobs as possible, Then sit back and watch the recovery take off!!

    And WTF was the deal about Delphi anyway? GM spins them off so they could get other OEM business (!), first thing they do is build a shiny pretty expensive building. Now GM is holding the bag as they get stuck with the Delphi remnants.

    Check out the Andy Kroll article on The Nation if you haven’t already re:bank bailouts.

  7. Thor Says:

    John V above gave a very comprehensive reply to the fuel economy Q than John McElroy had the time (and knowledge?) to do on the show.

    For almost two decades I drove cars with no trip computers etc and since 1985 or so, at the strong suggestion of our computer person, who was also a good mechanic, I started filling my tank to the “click” sound every time I put gas in it, and record the trip odometer number, then zero the trip odometer and start again. I put these numbers on a spreadsheet, and I developed all kinds of other columns with trip and cumulative MPG, MP$, lt/100km, etc. My colleague used these numbers as a diagnostic to see if there was anything wrong or unusual in the engine and operation of the car.

    And Even if the trip numbers are not 100.00% accurate, the cumulative ones sure are!

    I then bought my BMW 740iL that has all kinds of MPG readouts. It has this “instantaneous” BS MPG needle I never look at any more, it is too volatile. The digital readout for MPG is also too short-term and volatile. I still keep manual records, and my spreadsheet, since it is no trouble at all, just three numbers to record each fillup (which in my case is usually once a month, unless if I have a long trip)

    PS Buy, am I eager to listen to Czaba Czere tomorrow at Autoline After hours! He really knows what he is talking about. A good brain plus an MIT education help. Too bad he retired from C&D… I hope he returns to Auto Reviews and shares his insights with us again.

  8. Thor Says:

    If China continues as it has the last 30 years, when it understood that Marxism is a pile of CRAP and converted to CAPITALISM and ENterpreneurship, then its future will be BRIGHT, and it will also help all the rest of the world, exactly as the USA helped the world after WW II by being its LOCOMOTIVE.

    China has 1.4 billion consumers. That’s 4-5 times the size of the US. This is similar to the USA vs the UK in early 20th century. Then the UK was the largest economy, but everybody knew that the US inevitably would rise and become far bigger.

    we can TAKE ADVANTAGE of the progress of the CHinese instead of beaching about them, calling them commies and all that worthless, semi-racist garbage, that, in the detroit area, is 100% hurled against the japanese and never against the GERMAN imports (interesting, don’t you think?).

  9. C-Tech Says:

    When GM closes all of those dealers next year, how will that flood of cars effect the new car market? Looking at Chrysler, among the remaining dealers, their sales and profits are down in many markets.

  10. Thor Says:

    Dealer inventory will be a one-time blow, it will be absorbed by either selling it at bargain prices, or bought by the surviving dealers at even lower prices.

    Production in 2009 so far is running at barely 50% of 2008 levels (which were not all time highs either), so the current bloated inventory will also come down as few new cars are produced.

    This of course will have devastating effects on jobs of all kinds in the neighborhoods of the underproducing or even downright closed (such as currently all Chrysler ones) plants.

  11. pedro Fernandez Says:

    John: AS you know, Chrysler lost a lot of good people during the 1980′s debacle. Have you seen any indication of the same happening now to the domestics as far as losing top talent?

  12. Thor Says:

    There IS Justice! Congress’ perverted “cash for clunkers” version is dead.How come John did not tell us this story yesterday?

    I bet he may today. His stories are always a few hours late after we have read them in emails and on the web.

    “May 27, 2009: The “cash for clunkers” legislation being considered as part of the energy bill making its way to the House floor is getting panned … and for good reason. The plan would give up to a $4,500 subsidy to potential car and truck buyers who trade in their old vehicles and buy new wheels. As a Watertown Daily Times editorial points out: “A car owner only has to purchase a new car that gets at least 4 mpg more than their old car or as little as 22 MPG to receive $3,500. For large trucks, the new truck only has to exceed the fuel efficiency of the trade-in by 1 MPG to qualify for a $3,500 voucher. Trade-ins would have to be scrapped to make sure they did not find their way back onto the highway. The mileage goals fall short of current fuel-economy standards. Vehicle owners who could afford to will be able to trade in their car or truck for a new one that does not get much better mileage with the help of taxpayers.” The weak plan would also use U.S. taxpayer dollars to subsidize the auto industry when the national debt is already $11 trillion ..”

  13. Jim Terruso Says:

    Gm goes through bankruptsy,quick and easy and
    we are going forward. What changes the corperate
    executive culture? Are they not responsable for
    the whole debacle ?

  14. Thor Says:

    *Editor’s Note: fraudulent comment has been removed from this post.*

    “# Thor Says:
    May 27th, 2009 at 3:31 pm

    I love CHina and I’m going to move there.THey Are nOt COmmiEs,You ARe.”

    SOme Ignorant Jerk-CRIMINAL posted this PRETENDING he or she is Me. They even took pains to insert a few typing errors (caps etc)

    The truth is that, unlike the average, savage redneck hater in these forums, I have been to China for more than a month, and not as a dumb tourist that does not have a clue, but as somebody who had studied their history in detail for 5,000 years and NOT just the last 50 or so, but as a distinguished Academic and taught them highly math- and tech-intensive courses at one of their very, very TOP universities.

    I want to go back and teach again and see more of it on weekends, but I would not live there permanently, I got other options with far better climate and far less pollution for my retirement home, which I finished back in the mid-80s. IF I ever retire.. LOL (got Permanent Job since the 80s, with no retirement age limit!)

    Eat your heart out, you FRAUD that tried to imitate me. John has ways to find who you are, since you obviously did NOT input the same email that I do, you worthless punk!

  15. Thor Says:

    Thanks a lot, Editor.

    Looking forward to tonight’s AL After Hours with Czaba Czere

    if you miss it, you can always listen to it later, even just the audio is worth it.