Automotive News - December 1, 2008 - (Page 54) 54 • DECEMBER 1, 2008 final assembly comment Follow Lee’s lead in D.C.: Yuk it up BAILOUT >> Get the latest coverage of the auto industry bailout from Washington at www.autonews.com Saab’s almost there — heard that before? I n these unsettling times, when giant automakers face bankruptcy and the automotive world seems to be turned inside out, it’s nice to have at least one benchmark that doesn’t move. That’s why it’s reassuring when Saab Managing Director Jan-Ake Jonsson proclaims that the Swedish automaker is on the verge of profitability. Heck, it seems as if at least the last half-dozen Saab managing directors have EDWARD LAPHAM made the same prediction. IS EXECUTIVE It’s a ritual EDITOR OF AUTOMOTIVE dating back to NEWS. 1990, when General Motors bought 50 percent of Saab Automobile AB. It became a full-fledged liturgy 10 years later when GM acquired the rest of Saab. The road to sustainable profitability has been long, winding and tricky to negotiate. At first it was thought that all Saab needed to do was lower its costs by leveraging GM’s European vehicle architectures. That led to the 9-5 and a new 9-3. Saab tried to keep the brand’s innate quirkiness with unique design cues and features such as a floor-mounted ignition key, but everyone knew the cars were Opels — even if they were assembled by trolls somewhere near the Arctic Circle. The next thing Saab needed was an SUV. So GM gave Saab a version of the GMC Envoy and called it the 9-7x. Ta-da! But somehow Saab still couldn’t get enough traction. Then came what was sure to be the game-changer: Since GM had an alliance with Subaru, Saab ought to have a version of the Subaru Impreza WRX. And sure enough, the 9-2x was created. But still no miracle. It made me wonder what the Swedish translation is for “The more things change, the more they remain the same.’’ Oh, well. One thing is certain: If Saab ever finds the road to sustainable profitability, it will be a sure sign of the automotive apocalypse. And I’m not ready for that. At least not yet. etroiters have been wistful of late, recalling how Lee Iacocca charmed Congress three decades ago and won approval for Chrysler’s federal loan guarantee. But things didn’t start out well for Chrysler then. The first guy it sent to Washington to argue for the loans, John Riccardo, got the same rough treatment as Rick Wagoner, Bob Nardelli and Alan Mulally did last month. Riccardo was Chrysler’s chairman, and in Washington he acted like a Detroit fat cat right out of central casting — a cranky auto exec who blamed all of his problems on federal regulation. He was a lightning rod for the anti-loan forces. Iacocca joined the company in 1978 as Riccardo’s second-in-command — after being JOE WILSSENS Lee Iacocca, shown in 1992, used humor and bluster to close the deal with a skeptical Congress. bounced from Ford When Iacocca replaced Riccardo as chairman on Sept. 18, 1979, congressmen expected another Riccardo. Instead, Iacocca used humor to disarm D.C. Rep. Stewart McKinney told Iacocca: “If you do what you did for Ford with Chrysler, you’re going to be a man that needs a big bronze statue put somewhere.” Iacocca, evoking the image of a lynching, cracked, “I hope it’s not a live statue.” The room erupted in laughter. At a hearing, Iacocca once noted that the Washington subway system was getting a federal loan guarantee bigger than Chrysler’s. “It’s a transportation system,” answered one congressman. Iacocca replied: “What the hell do you think Chrysler is?” Daimler, Cerberus brawl over Chrysler Economic Rx: A huge government plug-in Y s Chrysler approaches the bottom of its cash drawer, its two owners have started brawling publicly. Last week Daimler and Cerberus sent out dueling press releases accusing each other, in murky legalese, of nasty behavior. This summer, Cerberus had asked Daimler if Cerberus could buy the final 19.9 percent of Chrysler that Daimler kept when it sold Chrysler to Cerberus in the summer of 2007. That new deal apparently has gone bad, very bad. Daimler accuses Cerberus of making “exaggerated demands.” In August 2007, Cerberus bought 80.1 percent of Chrysler for $7.2 billion, most of which was to go into Chrysler. A couple of hours after Daimler’s press release, Cerberus shot back, accusing Daimler of “serious breaches” in the terms of the 2007 deal. As Chrysler CEO Bob Nardelli prepares to go back to Congress asking for cash to keep the lights on, here’s a question for the lawyers to chew on: If Chrysler has to file for bankruptcy, what would Daimler’s liabilities be? ou’ve got an auto company that needs sales. You’ve got a government that wants to stimulate the economy. You’ve got a nation that needs an energy policy. To Lyle Dennis, it’s a no-brainer: The government ought to buy tens of thousands of Chevrolet Volts. Dennis, whose gm-volt.com Web site cares about all things Volt, says government fleets can give the plugin hybrid the needed jolt to get out of the gate strong and kick off the U.S. electric-car industry in fine style. The Englewood, N.J., neurologist wants legislation ordering the General Services Administration to One fan thinks a gigantic government purchase of the Chevrolet Volt, left, would get the U.S. electricvehicle market off to a roaring start. © GM CORP. buy squadrons of Volts “at a premium” to replace the federal government fleet when Volt production starts. Right now General Motors says that’ll be in late 2010. But Dennis hopes that the combination of guaranteed high volume and premium prices could get things moving a little faster. Auto collapse? How about the whole country? O K, it was the “Drudge Report.” Quoting Izvestia. Still, the headline “Russian analyst predicts decline and breakup of USA” suggests an interesting worst-case scenario for the current difficulties in the auto industry and overall economy. The Drudge story focused on an interview in the Russian daily newspaper in which political analyst Igor Panarin predicted that the auto industry meltdown will be part of a larger economic collapse that will break the United States into six parts. “General Motors and Ford on the verge of collapse, and this means whole cities will be left without work,” Panarin said. He predicted the United States will break up into the Pacific coast; Texas; the Atlantic coast; the South; the Northern states, “where the influence of Canada is strong”; and the “poorer central states, with their large Native American populations.” Panarin closes with this suggestion: “We could claim Alaska — it was only granted by lease, after all.” NEWSCOM Remember Soviet Premier Nikita (“We will bury you!”) Khrushchev? Was he right? The great debate: Bailout vs. bankruptcy Bankruptcy is better “Either a company is competitive, or it is not — either it accomplishes the cost structure enjoyed by Toyota and Honda, operating in the United States, or it will continually cede market share and run into financial difficulties. “By assisting the Detroit 3, Congress can delay one or all of them going through Chapter 11 reorganization, but sooner or later one or all will face reorganization. The communities and suppliers dependent on these companies would be better off going through that process now than by delaying it with assistance from the federal government.” — Peter Morici, University of Maryland economist “Far too many valid contractual claims remain on the car companies’ revenue streams from dealers, employees, retirees and others for these companies to survive — even if we get a modest economic recovery soon. The companies remain saddled with cumbersome contracts with the UAW that make work rules and plant procedures a constant challenge. A bankruptcy trustee or receiver could cut through all this quickly and give the companies a fresh start.” — Paul Ingrassia, The Wall Street Journal would also be a severe contraction in the availability of trade credit from suppliers, which amounts to tens of billions of dollars. And as surely as day leads to night, bankruptcy proceedings would be followed by liquidation. In a flash, the American carmaking business, representing about 10 percent of the nation’s retail sales, would begin to disappear.” — Spencer Abraham, former U.S. senator and secretary of energy, in The New York Times “Michigan’s three car manufacturers have said that they would go bankrupt this year without an infusion of taxpayers’ money. Failing to provide it would be a truly irresponsible act that could obliterate one or more companies, potentially causing other bankruptcies and costing many hundreds of thousands of jobs.” — New York Times editorial, Nov. 22 Federal help is a must “A bankruptcy filing by even one of the Big 3 would probably set in motion a cascade of smaller bankruptcies by suppliers of car parts, as the money the company owed them [which would be classified as an unsecured claim] could not be paid until it exited bankruptcy. And this loss of suppliers would almost certainly overwhelm the other two carmakers. There Edward Lapham writes commentaries each week for autonews.com. Read them at autonews.com/edwardlapham. http://www.autonews.com http://www.gm-volt.com http://www.autonews.com http://www.autonews.com/edwardlapham
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