Episode 256 – Henderson Gets Pay Cut, Chrysler Financial To Close, Kia Posts Profit
October 23rd, 2009 at 12:02pm
Runtime 7:05
GM CEO Fritz Henderson gets a salary cut, but gets a compensation raise at the same time. The U.S. Treasury Department says Chrysler Financial will be liquidated by the end of 2011. Kia posted a third-quarter profit thanks to tax breaks and new car models. All that and more, plus a preview of this week’s episode of Autoline Detroit about how we need to keep advancing alternative fuels.
Transcript and Story Links after the jump . . .
Here are today’s top headlines. GM CEO Fritz Henderson gets a pay cut, or does he? Chrysler financial may be on death row. And Kia turns a profit.
Up next, we’ll be back with the news behind the headlines.
This is Autoline Daily for Friday, October 23, 2009. I’m Murray Feldman, Fox 2 News Detroit, taking yet another turn in the Autoline Daily anchor chair. No worries though, McElroy will be back next week. Here’s the news.
We told you about the President’s Pay Czar yesterday and how he planned to wrangle-in executives’ salaries. Well today, word has leaked out, according to Bloomberg News, that Fritz Henderson will be taking a salary cut, but not really a pay cut. Here’s what they’ve done. Mr. Henderson’s GM salary is cut by 25 percent, down to around 950,000. But he’ll also get over $4 million annually in company stock so in fact, if the corporation starts heading up, he is really getting a raise. But all that’s tied to performance so we’ll have to see how GM fares. By the way, in case you’re wondering, Chrysler’s Sergio Marchionne will not be affected because he is paid by the European parent, Fiat, however, other executives at the Auburn Hills automaker will take a hit but no word on that just yet.
Meanwhile, speaking of hits, Chrysler Financial, the once mighty lender to both wholesale and retail arms of its namesake automaker, is going out of business. Since GMAC replaced the group, the Detroit Free Press tells us, as the preferred financial arm of Chrysler LLC, the writing has been on the wall. The announcement, which came from the Treasury Department, said that it will be liquidated by the end of 2011.
Yesterday we reported that Hyundai posted a third quarter profit and now its South Korean partner is following suit. According to the Wall Street Journal, Kia posted a third quarter profit (subscription required) thanks to tax breaks and strong sales of new car models. The company earned a profit of 337 million dollars for the third quarter. However, if the dollar continues to weaken, it could impact Kia’s profits.
Earlier this week we reported that Opel employees in Spain were protesting Magna’s proposed job cuts. Now, according to the AFP, the two sides have reached a deal. Magna originally planned to cut 1,300 jobs but will now cut only 900. The company also agreed to keep production of some models in Spain and keep the plant open for at least 10 more years.
Ward’s reports that Infiniti’s sales have dropped 33 percent this year, BUT surprisingly its average transaction prices are up $1,000 per unit (subscription required). Ben Poore, the brand’s Vice President, says part of the reason for the decline is because of low inventory, which is probably also the reason prices are up. At some points they’ve only had a 25-day supply of vehicles.
In an interview with Automotive News, Carlos Ghosn, the CEO of Nissan said his company is not going to build dedicated hybrids like the Toyota Prius (subscription required). Instead, Japan’s number-three automaker will only offer the technology on existing models, like the Altima or the redesigned Infiniti M, which was just revealed at the Tokyo Motor Show. Instead, Nissan will focus on electric-only vehicles – and it has some big plans for its upcoming EVs.
Nissan wants to be a real pioneer in the EV field, and it hopes to make a big splash with the LEAF. The zero-emission hatchback will kick off a North American tour on November 13 when it debuts in Los Angeles. After that it will stop in 22 cities in 11 states across the U.S., plus Vancouver, Canada. The cross-country road show wraps up next February in New York City.
Coming up, a preview of this week’s episode of Autoline Detroit, we’ll be back right after this.
This week on Autoline John is joined in the studio by Bruce Dale, Ph.D, a professor of bio-based technologies at Michigan State University. Also on his panel are Tim Higgins of the Detroit Free Press and James Amend of Ward’s Auto. In the following clip, Dr. Dale talks about how we need to keep advancing alternative fuels to end our dependence on oil and how difficult the switch will be.
You can catch the rest of this episode of Autoline on our website right now.
Ok, it’s the end of the week and that means it’s time to announce the winner of our trivia contest. We asked you to identify what kind of car this is. We thought it’d be a real challenge, but there’s no outsmarting you guys. As most of you correctly responded it’s a Chrysler Airflow. And some of you who really know your stuff were able to tell us it’s a 1934 model. And today’s lucky winner is Anne Steele of Belmont, California. Congratulations Anne, you’ve just won an Autoline coffee mug. You have to supply the coffee — there is an recession going on, ya know.
And that’s it for today’s top news in the global automotive industry. I’m Murray Feldman, Fox 2 News, Detroit. Thanks for watching, John will be sitting in for me on Monday – no, not really, it’s still his show…sometimes.
Thanks to our Partners for embedding Autoline Daily on their websites: Autoblog, The Auto Channel, vLane, WardsAuto.com and WWJ Newsradio 950
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Comments (29)
October 23rd, 2009 at 1:22 pm
Nissan currently buys it’s Hybrid Tech from Toyota; thus, they are so far behind, them why bother. It appears that Honda’s Insight and GM’s Volt are the only ones capable of battling the Prius. I’m guessing with the volt and the Insight is not a good car. Goshen may have the right idea.
October 23rd, 2009 at 1:33 pm
When Nissan says they are going to sell 10% electric, my translator says that a lot of that is going to be fleet sales.
October 23rd, 2009 at 1:35 pm
So Zero emissions vehicles are that ? ! !
Well just where do you think the electricity to charge them comes from ,,,, Magic ? ? ?
Making electricity makes emissions PERIOD !
That is unless it is from Nuclear power or water power.
I am against the use of Ethanol in motor
fuel , it costs more to make ,transport and distribute , it has a higher carbon footprint than gasoline and raises food prices !
If the government raises the ethanol content of gasoline WHO is going to pay for the damage this will cause to my cars ? Congress HA HA
HA !!!
I DO like the idea of the compensation of the chief executives being stock . Hopefully it will force them to look at the big picture .
Car manufacturers are in the business of making and selling cars , correct ? So why is profit more important than product ? You need product the public wants to have a profitable business , so why is GM closing Pontiac when it sell TWICE as many cars as Buick ? Why are both Chevrolet and GMC selling the same
product ?
Edward Lipman
October 23rd, 2009 at 2:04 pm
My daddy had a 35 Airflow coupe, a real hiway cruiser. So far ahead of its time the public just wouldn,t buy.Freewheeling & manual overdrive were a hoot!
October 23rd, 2009 at 2:58 pm
How about these big shots working on commission just like the salesmen who try to push their inferior products? Then maybe they’ll try a little harder to come up with better products.
October 23rd, 2009 at 3:26 pm
If the U.S. doesn’t impose equal obligations on the imports Ford, GM, and Chrysler will fail. You can’t expect them to compete with manufactuers that don’t provide retirement packages, or good healthcare, plus get workers who make much less per hr. If these importers aren’t forced to this table of equality, then say goodby to your domestic automobile business.
October 23rd, 2009 at 4:10 pm
I agree Jim … also the small percentage we are allowed in Asian countries ! & Pedro the American sales team is NOT trying to sell inferior products…give them a chance…I for one am tired of all the business’s leaving this country, I live in Michigan .. where good jobs are few & far to find…in Michigan we try to buy all USA products….which are excellent ! check out JD Powers & other surveys
October 23rd, 2009 at 4:23 pm
The new domestic offerings may be as good as the imports, but they still have to prove their long-term reliability. Unfortunately, only time will tell, and they may just run out of time. It’s not easy to recover from years of mediocrity. The domestics are also offering incentives again, and that cuts into their profits.
October 23rd, 2009 at 4:46 pm
Jim T, I think it is fair to say that the domestics did fail. Rattner’s article in Fortune makes it clear that only Obama’s decision to protect the midwest saved Chrysler. Ford faced it’s own end a couple of years before ’08, and was able to access capital markets for loans and credit(guess who supports the credit line today). Plus, states like Alabama, South Carolina, Ohio, Texas assemble cars for foreign makers. Can you count senators and congressmen Jim?
October 23rd, 2009 at 6:04 pm
GM failed on its own. Daimler (and Bob Eaton) and Cerberus failed Chrysler (why didn’t they just put into production the concept cars?). Regardless of the pay cuts or caps I hope upper management keeps in mind there will be NO million dollar salary if the “new” GM and Chrysler/Fiat fail. By the way, what is the unemployment payment for a laid-off GM exec.?
October 23rd, 2009 at 8:25 pm
GM’s Management was not the only reason it failed. It seamed like a lot people in the GM organization treated it like the golden goose.
October 23rd, 2009 at 9:29 pm
After these past 10 months… so much has happened, I can’t look at the industry the same. It’s kind of like when you sleep with a co-worker, the awkardness that occures the next day when you pass them in the hall… except on the complete other end of the spectrum and totally not in a positive way.
Even my interest for classic cars has wained…
October 23rd, 2009 at 9:50 pm
Management is responsible for everything, management signed off on everything. If employees were not carrying their weight or were being wasteful it was management’s responsibility to stop them or fire them.
While I am no fan of labor unions; every perk, benefit, protection, and excessive wage in every contract was signed off by management. If you are in charge, you are RESPONSIBLE. In 2007 there were excessive inventories at the big three before the contract negotiations. Management could have said “go ahead and strike” and had product for the next 6 months while they negotiated a real good deal, but they did not.
The boards of directors and the top operating managers are responsible for all of the misery.
The bailouts were strictly a means of giving the US economy a softer landing by letting GM and Chrysler have one more chance to succeed or to fail more slowly. Ford looks better, but they still have a lot of debt to pay.
I agree with others in this forum that it may no longer be possible in the long run for the US big three to compete with the imports and transplants due to structural cost issues. The market has become so fragmented (so many choices), relying on economies of scale to make a profit may not be possible without some real changes.
October 24th, 2009 at 10:20 am
Todds absolutely right. Its ‘fragmented market; too many mouths at the feed-trough, and structural cost issues; i.e. read non-level playing field. Outside of Boeing, this auto industry is the last of our Dow-Jones industrials. Should we really throw it away, or should we fight to save it.
October 24th, 2009 at 11:15 am
“# Pedro Fernandez Says:
October 23rd, 2009 at 2:58 pm
How about these big shots working on commission just like the salesmen who try to push their inferior products? Then maybe they’ll try a little harder to come up with better products.”
CEO compensation in the US is outrageously, obsecnely high, whether they succeed or they fail. I have NO problem if they make 100 million or even one billion a year, as long as they also make $100 billion for the OWNERS of these companies, their Shareholders, who should be the CEO’s BOSSES.
I have a HUGE problem with this egg-headed Walrus clown Henderson making 900K++ even if he utterly fails. He should accept a salary of ONE DOLLAR a year, like Lee Iacocca and others did in the past, and get the $4 million in options ONLY if he makes significant and measurable progress, which should not be difficult, since how can anybody imagine GM doing any WORSE than it is now?
October 24th, 2009 at 11:17 am
CEO compensation in the US is outrageously, obscenely high, whether they succeed or they fail, I wrote.
And the Reason for the above is the shameless and utterly unethical practice of the CEOs being allowed to… appoint their OWN compensation boards!!!
WHich is 100% the same as when our impotent, incompetent US COngress awards itself a pay raise. (Only 10-100 times greater!)
October 24th, 2009 at 11:31 am
The reality of losing the once big 3 to foreign competition is upon us.Gross mismanagement by Chrysler and GM have taken a global toll.How do we save them? We can’t,unless we start buying their products,it’s that simple.
However,only Ford has,(imho)taken positive steps to build quality and reliability into their products.GM and Chrysler are to busy running around like chickens with their heads cut off.Absolutly no direction at all.
But ultimately it comes down to us,the consumers.Will you buy american,or lament the loss of the big three? My wife and I have done our bit with a 09 Focus,and a 08 Wrangler.Who else is gonna step up to the plate? Anybody??
October 24th, 2009 at 11:37 am
Just a thought on what is indeed a very gloomy auto industry, 90% of the folks I know of who purchased a vehicle this year, bought a used one, this same people could and would have gotten a new one just 2 or 3 years ago, but now they have little trust in any economic recovery, but they still need wheels, so here comes the used car. Funny thing is even mechanics are struggling, so I guess folks are only doing repairs when they really need it and putting off things like brakes, tuneups and even tires as long as poosible.
October 24th, 2009 at 12:46 pm
“Who else is gonna step up to the plate? Anybody??”
1. There is NO reason for the RIPPED OFF US consumers, that ALREADY are subsidizing the failed, bankrupt welfare queens GM and Chrysaler to the tune of $50 BILLION of their hard-easrned dollars to do ANYTHING else.
2. ESpecially when the UAW members whose Jobs they are asked to subsidize, THEMSELVES have their households FULL of every conceivable IMPORTED good, from Plasma TVs to Clothes to Sneakers to laptops and desktops and lawn mowers and EVERYTHING ELSE!
Speaking for myself in particular, the only car I bought for myself NEW was a GM small Pontiac, so I fully paid my dues. TOday, NONE of the Big 3, not even Ford, makes a car that is even remotely equivalent with what I drive, so it is not even an option, but even if it were, I would make a POINT NOT to buy a GM or Chrysler but only a FORD product.
October 24th, 2009 at 12:50 pm
“Pedro Fernandez Says:
October 24th, 2009 at 11:37 am
Just a thought on what is indeed a very gloomy auto industry, 90% of the folks I know of who purchased a vehicle this year, bought a used one, this same people could and would have gotten a new one just 2 or 3 years ago,”
That is true, and the detailed sales stats from the cash for clunkers program show also that even new car buyers do not have as much $ to spend, and even if they do, they feel it is unwise to get another very expensive v8 SUV and most of them went for tiny 4 cylinder Focuses, Civics, Corollas and Camrys.
October 24th, 2009 at 12:51 pm
And this is why the MPG of the new cars in the CFC was over 25 MPG average! WHile the cars crucjed had an MPG of 15 average!
October 24th, 2009 at 2:05 pm
Due to the ever increasing cost of new wheels, a lot of folks have been priced out of buying a new car, let’s say you’re willing to spend $15k, you cannot buy anything new, but a bare-bones economy car. I did a quick search in Autotrader.com, put in max of $14,000. for A 6 CYL sedan and got over 400 cars available, a lot of them with low miles and in excellent condition.. That new-car smell is just not worth it. ps. you can also buy extended warranties for peace of mind.
October 24th, 2009 at 3:26 pm
“That new-car smell is just not worth it. ps. you can also buy extended warranties for peace of mind.”
Another reason not to want to buy a new car is if you only do a few 1,000s miles a year. I always fit that category for commuting and shopping, short distances, and only via a few 1,000 mile road trips do I reach 5,000 miles a year in each of my vehicles. So it makes a lot of sense to me to buy a used car of recent vintage, but with a ton of miles, sicne that means that they are largely highway, easy miles, and benefit from a far lower price.
And the most expensive the car, the more ridiculously high is the first-years depreciation. a $100,000 German top-class luxury car will probably worth $70,000-$75,000 next year, a $25,000 drop just to drive it around the block a few miles!
Even if you have a ton of $, why throw them out the window? The fact that you are well off in the first place implies that you are not amused to throw your hard-earned $ down the drain.
October 24th, 2009 at 4:32 pm
Points taken.This is why at least 2 of the 3 will fade away.Even if say GM would actually build something economical/reliable/with quality materials and quality interior,who would buy it now? The die is cast and not many people will give them another try.Same same with Ford,and that is sad.The quality is really very good indeed,and they do have some very nice vehicles.I will however try to hold onto whats left of the american car maker.I’m wearing nomex so flame away.
October 24th, 2009 at 6:19 pm
Even at the other extreme (driving a lot) it makes sense to get a used car. In my case I drive approx. 18k to 20k miles per year so a new car will be out of warranty after 2 years and it will depreciate even faster than one that drives half as much. So a good reliable used car is a good idea regardless of your mileage. Real estate is an investment, a new car is not.
October 25th, 2009 at 12:13 pm
When you do 20k miles a year, your risk of being in an accident is several times higher than if you do 5k miles, other things equal. In addition, you probably spend a large % of your wakign hours, ie your life, inside that car, so it has to be both very safe and comfortable, have bells and whitles, a good stereo etc. This disqualifies most econoboxes.
But if you buy used, you have some excellent choices. A colleague leased a Jag XJ8 in the late 90s, while his wife leased a lexus LS400. He told me that he returned the jag to the dealer after 3 years, and that it lived up to its reputation for gross unreliability, while the wife, who drove 70 miles to her job each way, in another town, kept it. Eventually she put 250,000 trouble-free miles, and today’s non-hybrid LS460 has an 8-speed auto that makes the huge, very luxurious car also very fuel efficient.
You can buy a 1999 or so LS400 with 100,000 miles at probably less than 10k today, and you can put another 150k miles easily on the car, ie, at 20k a year, 7-8 years. And most people really can afford it. (no payments, no insurance-just get basic, no collision). How much are our lives worth? and why not experience the best, if the Gods of Depreciation make it so cheap for us? I only wised up a few years ago and got my ueber-sedan, (a top-class, long, luxurious german v8) after 25 years of driving econoboxes.
October 25th, 2009 at 12:18 pm
Last week I had two plane trips on business, so I had a second chance (really a fourth chance) to look at the NEW LAcrosse in the display at the airport. It is not only a SPECTACULARLY good looking front and back car,
it is FAR better looking than the PREVIOUS Lacrosse, who had some rather idiotic creases in its butt that had no place and no function and only gave the impression that it was rearended and dented!
I believe the credit should go to Lutz, who SCRAPPED the good old boys designs at Buick a few years ago, told them they were lame and unacceptable, and sent them back to their drawign boards, literally!
I will be curious to see how successful it is (At the right price, many will want this car. Even tho it still has all the Buick logos and characteristics)
October 25th, 2009 at 1:54 pm
It’s a real shame that past screw-ups at GM and even Ford is hurting them now,even though they have some really nice products. Even Consumer Reports that has always been critical of the domestics, has given both Fusion and Malibu good reliability scores, and in both cases, drivers seem to prefer their handling better than Camry’s overly soft, old style-type handling characteristics. In the next couple of years, they have to have similar success with their smaller cars.
October 25th, 2009 at 2:20 pm
The japanese are cheapskates, or they do not realize their designs do not look that good, esp. recent Accords and Camrys.
The Koreans, on the other hand, go to Italy and hire the best designers in the world. They pay them a few millions, but when a car sells more than a million copies in its 4-7 model year life, it amounts to only a couple bucks per car produced, while the good design allows the maker to charge several hundred $ for it!
I saw a Kia Rio last friday on the street. It is the smallest, cheapest Kia, and maybe the cheapest new car on sale in the USA!
but its exterior design was flawless! Not a single error or offensive twist or turn of the smooth, strong lines.