Episode 32 – McCotter’s Inside Look at Bailout, Porsche Delays Takeover, BMW Catching Lexus

November 26th, 2008 at 12:00pm

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Michigan Congressman Thaddeus McCotter gives us an insider’s look on next week’s bailout testimony. Porsche postpones its takeover of VW due to low cash flow and the high price of VW stock. BMW could outsell Lexus to become the top luxury brand in the American market. All that and more, plus John answers viewers questions in the “You Said It!” segment.

Transcript and Story Links after the jump . . .

Here are today’s top headlines the day before Thanksgiving. Congressman McCotter gives us an insider’s look on next week’s bailout testimony. Porsche postpones its takeover of VW. And BMW could outsell Lexus.

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

This is Autoline Daily for Wednesday, November 26, 2008. And now, the news.

Are the Big Three going to get their bridge loan? For a true insider’s perspective we had Michigan Congressman Thaddeus McCotter in our Autoline studios this morning, and here’s his take on what will happen. You can hear my full interview with Congressman McCotter at www.AutolineDetroit.tv.

On top of all the headcount and spending cuts at Chrysler, CEO Bob Nardelli informed employees, more changes are on the way. The Detroit Free Press says Nardelli also said Chrysler is not in the financial position to participate in a caravan of cars going to Washington DC next week when the CEOs of the Big Three return there to testify for their bridge loan.

In a sign that the automotive slowdown isn’t only hurting Detroit’s automakers, Fitch Ratings lowered Toyota’s credit rating to AA from AAA. And the AP reports that Fitch lowered that rating with a negative outlook, which means it may lower it again next year.

Indeed, showing just how global this downturn is, Taiwan is preparing a bailout package for its struggling auto industry (subscription required), with subsidies and tax cuts. According to Ward’s, new-car sales in Taiwan fell to a 22-year low in October.

The downturn is even hitting the richest car company on the planet. The AFP reports that Porsche’s takeover of Volkswagen will probably not happen this year. That’s due to two things: the extremely high price of VW stock, and the fact that the downturn means Porsche’s cash flow isn’t quite what it was.

For the last 8 years Lexus has been the top luxury brand in the American market. But Wardsauto.com reports that BMW is catching up to Lexus (subscription required). Both marques have seen their numbers decline but Lexus’ sales fell almost 38 percent in October while BMW’s only tumbled eight and a half percent. Only 5,000 sales now separate the brands.

Coming up next it’s time for You Said It!

It’s time for “You Said It” where I answer some of the many questions that have come in from our viewers this week.

Sean Walsh writes in to ask:
“What’s the reaction in Detroit and the auto industry to the replacement of John Dingell with Henry Waxman as a committee chair?”

It’s a double whammy, Sean. Not only did the auto industry lose a great supporter in John Dingell, his replacement Henry Waxman is openly antagonistic to the auto industry.

Philip Sparrow asks:
“If GM files for chapter 11 what happens to Holden?”

I doubt that GM will go Chapter 11, Philip. But Holden is a gem of an operation and in the worst case scenario, some other car company would likely come in and buy it.

Remember; keep sending us your questions and comments. But we’d really like to see you submit a video comment. Just post it to YouTube and send us the link at viewermail@autolinedetroit.tv. 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!

Well, it’s the moment you’ve all been waiting for. If you signed up for our e-mail newsletter in the last week, you’re eligible to win some awesome SWAG. To celebrate Thanksgiving, we’re giving away an extra-special prize, this in-car power inverter. My crack team chose the lucky person at random from our list of new subscribers. Pookie, the envelope please. And the winner of this week’s prize is Darryl Zimmer! Congratulations Darryl Zimmer.

Don’t forget, if you haven’t signed up for our e-mail newsletter yet, it’s not too late! You can still get every episode of Autoline Daily delivered right to your inbox. Just click on the newsletter link on our website, autolinedaily.com, and join now!

Anyway, that’s it for today’s show. Thanks for watching…Pookie, what do you know about this?! Anyway, have a wonderful Thanksgiving and we’ll see you next week.

8 Comments to “Episode 32 – McCotter’s Inside Look at Bailout, Porsche Delays Takeover, BMW Catching Lexus”

  1. Alex Kajdi Says:

    John,

    I received this e-mail today from a collegue. This parable summaries what is wrong today with the American Automobile Industry.
    ————————————————
    This isn’t a parable, it is a work of non-fiction.

    Take the time to read this one – it hits home a little too hard.

    A MODERN PARABLE . . .

    A Japanese company ( Toyota ) and an American company (Ford) decided to have a canoe race on the Missouri River. Both teams practiced long and hard to reach their peak performance before the race.

    On the big day, the Japanese won by a mile.

    The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.

    Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing.

    Feeling a deeper study was in order, American management hired a consulting company and paid them a large amount of money for a second opinion.

    They advised, of course, that too many people were steering the boat, while not enough people were rowing.

    Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team’s management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents, and 1 assistant superintendent steering manager.

    They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the ‘Rowing Team Quality First Program,’ with meetings, dinners, and free pens for the rower. There was discussion of getting a new paddle , canoes, and other equipment, extra vacation days for practices and bonuses.

    The next year the Japanese won by two miles.
    Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddle, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses and the next year’s racing team was out-sourced to India.

    Sadly, The End.

    Here’s something else to think about:

    Ford has spent the last thirty years moving all its factories out of the US, claiming they can’t make money paying American wages.

    TOYOTA has spent the last thirty years building more than a dozen plants inside the US. The last quarter’s results:

    TOYOTA makes 4 billion in profits while Ford racked up 9 billion in losses.

    Ford folks are still scratching their heads,and are now applying for a “BAIL OUT”!

    IF THIS WEREN’T SO TRUE, IT MIGHT JUST BE FUNNY!!!

    In my Opinion:

    The Executives of the Big Three Auto Markers (The Steering Managers)have been making poor business decisions and only enriching themselves on the backs of the UAW and the common shareholders (The Rowers).

    The Steering Managers need to roll-up their sleeves and work side by side with the Rowers if they want to survive and maybe even win this race.

  2. Howard Remeta Says:

    GM had 400,000 workers in 1970. They have 72,000 now. They have 239,000 employees. They have 800,000 retirees. Big disparity. When they get their $25 billion bailout and burn it out in 6 months, what will happen then? Will they go back to congress for another $25 billion? They may have ramped up for more fuel efficient cars but that will not help them in the short term. What will happen next June?

  3. Tom Martin Says:

    What angers me is that since at least 1970 we have known that we need to reduce pollution and our dependance on foreign oil.

    The U.S. auto companies are still spending millions in court and elsewhere to resist pollution and mileage standards, rather than leading than leading in the development of a solution.

    Finally, a Federal Judge ruled that the automakers can’t continue filing suits that they have already lost in other states.

    http://www.latimes.com/news/nationworld/nation/wire/sns-ap-auto-emissions-ri,1,3381876.story

  4. Doug Says:

    Why isnt GM bringing the Opel Diesels to the US and retrofitting them with US pollution recommendations……Have you heard about VWs stock and Diesel fuel economy. A family member is getting into the high 40smpg with a Jetta manual.

  5. Andrew Charles Says:

    Alex, your “parable” and following assertions perpetuate a number of misconceptions and outright lies about the American industry. Let me start with the assertion that Ford has been “moving” all its factories out of the US. Completely untrue. Ford has not moved any factories outside of the US to serve the American market. Factories in Canada, Mexico and the US, most of which have been producing cars for 30-40 years or more still produce every single Ford, Mercury and Lincoln sold in the US, and even some Mazdas. The same is true of Chrysler and every GM model except the Aveo/G3, G8 and Swedish-built Saabs, and the Aveo and G3 are now being built in Mexico as well, and it was assumed that a Gamma-based sedan for Lordstown mentioned in UAW contract documents was the next-gen Aveo. In contrast to the new US factories of Toyota, Honda, Nissan etc., by far the majority of components are also sourced within the NAFTA region, the majority of those in the US. What the Detroit automakers have done is expand production overseas to serve overseas markets, just as Toyota, Honda and Nissan have done. No overseas plants have been built to replace US production. Ever.

    Reductions in salaried worker numbers have continued at as great a pace as reductions in assembly workers, and with far less trouble. That includes senior and middle management, who have also suffered cuts in benefits without the protection of union contracts. Senior management have also taken salary reductions and forgone bonuses, in contrast to assertions of your “parable”. They are likely to take more in future. Given the massive budget deficit, perhaps they should offer to match congressional salaries, pensions and health benefits.

  6. Andrew Charles Says:

    I must make a correction before someone else does: the Astra is also imported in low numbers. It may surprise many people to learn that Toyota still imports large numbers of Corollas and Camrys from Japan, both to meet US demand and to keep domestic production nearer capacity in a declining market.

  7. Reno Says:

    John, have a great Thanksgiving
    Thanks, for doin’ what you & your team do!

  8. Ian Jones Says:

    Given the current auto industry fetish for downsizing engine displacment across the board do you think this is just a simple repeat of the last energy crisis?…… auto marketing department!

    Shouldn’t the big bangers stay as they are and auto companies just work on better entry level to mid range products?

    (this is in responce to Merc possably dropping their V12s (personally not a fan) and other observations over the last 18 months)