Automotive News - October 20, 2008 - (Page 4) 4 • OCTOBER 20, 2008 GM/Chrysler? Anything’s possible In cash crunch, unthinkable becomes common Amy Wilson awilson@crain.com Rating the deals How likely are rumored automaker deals? ★★★ GM-Chrysler Bank money lacking for ungainly merger GM-Chrysler-Ford Some talk, but Ford has veto Less than ★ GM/Chrysler deal? Talks between General Motors and Cerberus Capital Management LP over Chrysler LLC’s future remain in flux. A source says that banks that could finance the deal now lack the capital. Consider these conflicting reports late last week: The Wall Street Journal said GM executives want to get a deal done to buy all of Chrysler by the end of October and have identified about $10 billion in potential cost savings. They especially covet approximately $11 billion in cash on Chrysler’s books. But the GM board is split. Reuters said Cerberus may break up Chrysler, selling some parts to GM and others to Renault SA. It might sell off the Mopar parts unit, spin off Chrysler’s engineering operations as a separate company and merge Chrysler Financial with GMAC Financial Services, already owned 51 percent by Cerberus. c DETROIT — With a roiling economy, cash flow woes and a credit crisis, the Detroit 3 are entertaining possible alliances that once would have been considered fanciful. General Motors and Chrysler LLC are talking about a merger, and Chrysler CEO Bob Nardelli told Automotive News that either Renault-Nissan or a Chinese aunews A N A L Y S I S tomaker could plausibly make a bid for Chrysler. It’s the kind of environment in which many possible combinations are being discussed. Will any of these proposals bear fruit? Here’s our take on six possible scenarios. Companies’ pension plans may need cash Jim Henry autonews@crain.com ★★★★★ Ford sells Mazda Expect Ford to cash out, at least partially ★★½ Renault-Nissan-Chrysler Current ties, but Renault-Nissan is wary Renault-Nissan-GM Still a 1-way romance ★½ ★ Chrysler-China Chinese makers aren’t ready — and know it Rating system: ★ = very unlikely; ★★ = unlikely; ★★★ = 50-50; ★★★★ = likely; ★★★★★ = very likely 1. GM-Chrysler The two companies have had conversations about cooperation that could go all the way up to an outright merger. The Wall Street Journal reported that Cerberus Capital Management LP wants to swap Chrysler for the 49 percent of GMAC Financial Services that is still held by GM. Cerberus owns see TIE-UPS, Page 33 Chrysler’s uphill road in China U.S. pioneer became an also-ran — and Daimler didn’t help Steven Ribet sribet@crain.com Steven Xu: Chrysler 300C sales at his suburban Shanghai dealership are “not so good.” STEVEN RIBET SHANGHAI — Steven Xu didn’t sell a single Chrysler 300C last month. But by local standards, he’s an optimist, just because he kept the doors open at Yueye Chrysler during the October National Day long weekend. “Not so good,” the business manager of the suburban Shanghai dealership says of sales of the 300C, the larger of two Chrysler cars now made in China. Nearby Shanghai Syncar — a Chrysler store across the Huangpu River in a rundown suburban neighborhood — didn’t even bother trying. Unlike most area car dealerships, which stayed open during the fall break in an effort to make up for a lackluster month during the Olympics, Shanghai Syncar kept the doors closed. A sun-faded advertisement for the 300C is peeling off the glass at the front of the Shanghai Syncar showroom. On the rain-streaked shop sign above the main entrance, the colors inside the Chrysler logo have washed out completely. Like its Syncar showroom in Pudong, Chrysler has seen better days in China. In the world’s secondbiggest auto market, the American automaker lags far behind U.S. rivals General Motors and Ford Motor Co. Chrysler’s Asia CEO, Phil Murtaugh, is trying to rebuild momentum. But sales are small, he lacks a Chinese production partner, Chrysler’s vehicle lineup is poorly suited for China, and help from headquarters is slight because of Chrysler LLC’s plummeting sales in North America. Chrysler’s most immediate problem is that it lacks a joint venture with a Chinese carmaker. Those partnerships are crucial for building sales and production. Chrysler sold only 8,207 cars in China in the first six months of this year. Over the same period, General Motors China sold 261,443 and Ford Motor China sold 89,117. Murtaugh declined to be interviewed for this report. Stifled by Daimler Chrysler’s weakness in China is a dramatic reversal. In 1987 it was the only U.S. automaker with a Chinese joint venture, after its purchase that year of American Motors. In 1983, AMC had signed a deal with Beijing Automotive Industry Holding Co. establishing Beijing Jeep Corp. to produce SUVs in China. Chrysler transferred its stake in that valuable venture — then called Beijing Benz-DaimlerChrysler Automotive Co. — to DaimlerChrysler in 2005. When Daimler and Chrysler split up in 2007, Chrysler was left out in the cold. Beijing Benz now makes two sedans each for Mercedes and Chrysler. Chrysler’s two models, the 300C and the smaller Sebring, are produced under license. An insider at Chrysler says the decision to end Chrysler’s only China see CHINA, Page 33 NEW YORK — Federal pension law could force automotive companies with plans heavily invested in stocks to pony up more money over the next few years to keep their plans fully funded. If the stunning drop in stock prices puts pension plans below funding requirements, auto companies will have to replenish the plans. At a time when automakers such as General Motors and Ford Motor Co. are carefully hoarding cash, that could be difficult, experts say. “All companies are going to take a hit this year due to the hit in equities,” Mark Oline, a Chicago-based analyst who follows the auto industry for Fitch Ratings, said last week in an interview. The impact on automakers won’t be known until annual reports are issued after Dec. 31. At that point, pension plans recalculate the “fair value” of their investments: stocks, bonds, real estate and other diversified assets. For some companies — such as GM, whose pension plan largely bailed out of stocks after 2006 — the year-end reckoning might not be as bad as it sounds. According to a study of the top 100 U.S. pension funds by Seattle-based Milliman Inc., GM had only 30.1 percent of its pension assets in stocks at the end of 2007, vs. 52.6 percent for Ford and 52.5 percent for TRW Automotive Holdings. The study was conducted for Financial Week, a sister publication of Automotive News. GM, Ford and TRW greatly reduced the proportion of pension assets invested in stocks since 2005. None would comment on their pension plans. In its 2007 annual report, GM said it changed its asset mix away from stocks to avoid volatility. In its 2007 annual report, Ford said it had a target of 30 percent equity assets within the next five years. But at the start of 2007, the automaker’s exposure to stocks was much higher than GM’s. Robert Schulz, a managing director for Standard & Poor’s in New York, said that despite the poor stock market performance this year, he still expects GM’s pension fund to remain overfunded. Ford said only that as of the start of 2008, it did not expect to be legally obliged to make contributions to its pensions. c Stock exposure Percentage of auto pension plans invested in stocks COMPANY PLAN ASSETS % IN STOCKS GM $117.4 billion TRW $8.5 billion Ford $68.2 billion PPG $3.4 billion Delphi $11.9 billion 30.1% 52.5% 52.6% 60% 62.8% Source: Company reports, Milliman Inc. All data as of Dec. 31, 2007
Table of Contents Feed for the Digital Edition of Automotive News - October 20, 2008 Automotive News - October 20, 2008 Amazingly, vehicle inventories are low An upside of the big slide: Raw material prices dip â for now With GMAC out, banks trickle in Get your daily Automotive News - in video form, starting Nov. 3 Honda's Fukui favors fed loans, confirms V-8 To move the metal, Mike Kahn moves the store Hyundai airbag flaw tied to drink spills Texas promo: Buy a GM vehicle, get GM stock Chrysler's uphill road in China GM/Chrysler? Anything's possible GM/Chrysler deal? Companies' pension plans may need cash Acura dealers: A V-8 engine is on the way Buyers pursue former Heard stores Honda: We're still lending Gilles, Ligocki will speak at congress Fed list promotes high-mileage cars Party time: Saturn turns to grass-roots marketing Online inventory service aims to cut dealer costs Document fees must not become a dirty little secret Just put up a 'For Sale' sign Cash for clunkers? Scrap the idea Arbitration can work for everyone It's time we control our own destiny GM missed boat on Cheyenne, Volt Sept. truck sales fall 7.4% Microheat seeks Chapter 11 At Bosch, r&d spending remains strong GM's new diesel opens up, loses weight Urea must flow or new diesels won't go Hankook plans to bring fuel-saving tire to North America Odell: I can help Volvo tap more potential So far, BMW cruises above the credit crisis Jatco builds China plant to meet expanding CVT demand 10 appointed at American Axle Personnel Milestones Obituaries Supplier Personnel Biking buddies Ford targets fleets with parental control key European sales fall; VW group bucks the trend 11 innovators win honorable mention 25 finalists selected for 2009 PACE awards Suppliers to the 2009 BMW X6 GMAC's loan cutbacks cost GM thousands of auto sales Credit tops agenda for NADA chief 'Flash' draws modest cash at theaters Booth's new berth sparks CEO speculation at Ford Economy's skid sends ritzy toys to eBay Report: Mazda scraps plan for U.S. plant GM's quandary: Finding loans for the imperfect Taylor to Hummer - and then ... ? Tough times at Tesla Automotive News - October 20, 2008 Automotive News - October 20, 2008 - (Page Intro) Automotive News - October 20, 2008 - With GMAC out, banks trickle in (Page 1) Automotive News - October 20, 2008 - With GMAC out, banks trickle in (Page 2) Automotive News - October 20, 2008 - Texas promo: Buy a GM vehicle, get GM stock (Page 3) Automotive News - October 20, 2008 - Companies' pension plans may need cash (Page 4) Automotive News - October 20, 2008 - Companies' pension plans may need cash (Page 5) Automotive News - October 20, 2008 - Gilles, Ligocki will speak at congress (Page 6) Automotive News - October 20, 2008 - Gilles, Ligocki will speak at congress (Page 7) Automotive News - October 20, 2008 - Online inventory service aims to cut dealer costs (Page 8) Automotive News - October 20, 2008 - Online inventory service aims to cut dealer costs (Page 9) Automotive News - October 20, 2008 - Online inventory service aims to cut dealer costs (Page 10) Automotive News - October 20, 2008 - Online inventory service aims to cut dealer costs (Page 11) Automotive News - October 20, 2008 - Arbitration can work for everyone (Page 12) Automotive News - October 20, 2008 - Arbitration can work for everyone (Page 13) Automotive News - October 20, 2008 - GM missed boat on Cheyenne, Volt (Page 14) Automotive News - October 20, 2008 - GM missed boat on Cheyenne, Volt (Page 15) Automotive News - October 20, 2008 - Microheat seeks Chapter 11 (Page 16) Automotive News - October 20, 2008 - Microheat seeks Chapter 11 (Page 16A) Automotive News - October 20, 2008 - Microheat seeks Chapter 11 (Page 16B) Automotive News - October 20, 2008 - Microheat seeks Chapter 11 (Page 16C) Automotive News - October 20, 2008 - Microheat seeks Chapter 11 (Page 16D) Automotive News - October 20, 2008 - Microheat seeks Chapter 11 (Page 17) Automotive News - October 20, 2008 - Hankook plans to bring fuel-saving tire to North America (Page 18) Automotive News - October 20, 2008 - Hankook plans to bring fuel-saving tire to North America (Page 19) Automotive News - October 20, 2008 - Hankook plans to bring fuel-saving tire to North America (Page 20) Automotive News - October 20, 2008 - Hankook plans to bring fuel-saving tire to North America (Page 21) Automotive News - October 20, 2008 - Odell: I can help Volvo tap more potential (Page 22) Automotive News - October 20, 2008 - Odell: I can help Volvo tap more potential (Page 23) Automotive News - October 20, 2008 - So far, BMW cruises above the credit crisis (Page 24) Automotive News - October 20, 2008 - So far, BMW cruises above the credit crisis (Page 24A) Automotive News - October 20, 2008 - So far, BMW cruises above the credit crisis (Page 24B) Automotive News - October 20, 2008 - So far, BMW cruises above the credit crisis (Page 24C) Automotive News - October 20, 2008 - So far, BMW cruises above the credit crisis (Page 24D) Automotive News - October 20, 2008 - So far, BMW cruises above the credit crisis (Page 25) Automotive News - October 20, 2008 - Obituaries (Page 26) Automotive News - October 20, 2008 - Biking buddies (Page 27) Automotive News - October 20, 2008 - Biking buddies (Page 28) Automotive News - October 20, 2008 - Biking buddies (Page 29) Automotive News - October 20, 2008 - Biking buddies (Page 30) Automotive News - October 20, 2008 - Biking buddies (Page 31) Automotive News - October 20, 2008 - European sales fall; VW group bucks the trend (Page 32) Automotive News - October 20, 2008 - European sales fall; VW group bucks the trend (Page 33) Automotive News - October 20, 2008 - Suppliers to the 2009 BMW X6 (Page 34) Automotive News - October 20, 2008 - GMAC's loan cutbacks cost GM thousands of auto sales (Page 35) Automotive News - October 20, 2008 - Credit tops agenda for NADA chief (Page 36) Automotive News - October 20, 2008 - Credit tops agenda for NADA chief (Page 37) Automotive News - October 20, 2008 - Tough times at Tesla (Page 38) Automotive News - October 20, 2008 - Tough times at Tesla (Page 39) Automotive News - October 20, 2008 - Tough times at Tesla (Page 40)
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