Archives for 2013

Wednesday morning car news roundup, December 18, 2013

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Report from China: If the propaganda war with Japan turns real, GM and Volkswagen will lose

70 percent of all Chinese TV drama

70 percent of all Chinese TV drama

I have lived in China off&on since 2004. I haven’t quite seen it all, but I have seen a lot. This time, I saw a lot of Chinese TV, and for the first time, I was scared. I ended my recent three weeks in China seriously worried. Most of all about the exposure of the auto industry to a huge, but increasingly volatile market where the population is being prepped for war.

Turn on the TV in China, and you think the war has already started. Armed columns march across your flat screen, bayonet poised. Residuals on marching music must go through the roof – assuming they get paid in China.  According to Zhu Dake, a professor at Shanghai’s Tongji University, 70 percent of drama on Chinese television is about war with Japan. Flipping through the channels, I decided this number is conservative. [ There is more … ]

Tuesday morning car news roundup, December 17, 2013

Tuesday - Picture courtesy blogspot.com

After a few weeks of my absence in China, we are back to our regular morning round-up.

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General Motors Ushers Australia Into The Post-Industrial Age

You just keep me Holden on...

You just keep me Holden on…

Amidst the copious news General Motors has made over the last week, one fully-formed and profoundly important story is doggedly evading the notice of the press. Overshadowed by the end of US Treasury ownership and the promotion of GM’s first female CEO, the demise of The General’s Australian unit Holden should not be overlooked. Not because the phenomenon it demonstrates is new… in fact it’s nothing more than the latest example of the GM standard operating procedure that has helped devastate local governments across America. Rather, the tragic turn of events in Australia sends a sharp warning, every bit as poignant as the recent bankruptcy of Detroit, to the American taxpayers about the company they rescued.

The Government Motors endgame is only just beginning…

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Reader Mail

readermail

Dear Ed and Bertel, I have noticed that The Daily Kanban (TDK) has no space for comments on it at all. Knowing this is a WP-based site, I would like to know why TDK doesn’t have room for readers/commenters to share their opinions about your articles and provide insights into a situation you two might be writing about. If possible, please amend this situation. Thanks, Edward Mann

I understand your frustration, but we have decided against having a comment section at TDK for now. My experience tells me that tending to a comment section rapidly becomes as much work as writing and research, and both Bertel and I would rather keep focused on our work than chase spam or slay trolls.

The good news is that we will regularly be posting reader feedback from our contact form, so please feel free to send us your thoughts on anything you read here. Hopefully this way we will have something more akin to a curated conversation, where the best comments become the jumping-off point for further research or debate. Please clearly identify any confidential feedback, and the name you wish to be identified with.

You can also share your thoughts with Bertel and myself on Twitter: our handles are @BertelTTAC and @Tweetermeyer respectively.

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US Car Sales On Fire… But Who Is Doing The Buying?

Bought... but not paid-for.

Bought… but not paid-for.

With America’s Seasonally Adjusted Annual Selling Rate (SAAR) creeping  above 16 million units in November, driving the market to new post-bailout highs, the usual cheerleaders are out in force to celebrate the strength of the US auto sales. But in the rush to spread the good news, few are looking at the troubling data underlying these frothy sales numbers. In the US, automakers count sales upon delivery to dealers rather than consumers. When times get tough and demand shrinks, OEMs often force dealers to take on more inventory in order to temporarily improve sales numbers. We saw both GM and Chrysler dump huge amounts of inventory on dealers in the leadup to their 2008 collapses, and we’ve reported on a similar dynamic at play in the current European downturn.

We won’t know the extent to which dealers are stacking up inventory until we see a full December 1 report from Automotive News, but initial signs are not promising. Already in October, Wards Auto saw an uncomfortable build-up in inventories across the industry that has apparently only grown among the worst offenders. At the time Wards predicted that “the excess will be alleviated in November, when most of the lost sales are recouped,” but although pricing discipline has remained high the inventories are continuing to build as we head into December.

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Iran Auto industry Conference: France Goes Back Alone?

China goes where others fear to tread...

China goes where others fear to tread…

In the leadup to last weekend’s Auto Industry International Conference in Tehran, organizers boasted that nearly every nation would be represented, including “France, Japan, Germany, Italy, Turkey, Britain, China, India, Czech Republic, South Korea, Spain, Egypt, Switzerland and Denmark.” In the extended [sic] of one recent official press release, “US automakers are better not to miss the opportunity.”

But miss it they apparently have, along with all the non-French global majors.

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The Auto Bailout As Redistribution Of Wealth

So we let them pay back the loans and post losses on equity... then that cash is just sitting there...

So we let them pay back the loans and post losses on equity… then that cash is just sitting there…

At the risk of insulting the considerable intelligence of The Daily Kanban‘s readership by overstating the obvious, the bailout of General Motors was fait accompli a number of years ago, and the apparent linear nature of time makes debate over whether the bailout was “worth it” largely academic at this point. If nothing else, the political outcome of the bailout speaks for itself: President Obama argued for extending federal aid to GM in both of his presidential campaigns, and he won both times.

Unfortunately, the crude national partisan discourse has not done much to help taxpayers truly appreciate the intricacies of the bailout policy itself, its context and alternatives. Like other major policy decisions made in times of great fear, long-term and structural concerns about the policy were dismissed in the rush to do something. Holding the rhetorical high ground, “it could have been worse,” required only that politicians play to their most reliably effective emotion: fear. Everything else could be obscured through sheer complexity. Only now, when there is nothing to be gained from examining the auto bailout other than an opportunity not to repeat history, is the reality of the auto bailout starting to reveal itself in easier-to-understand forms.

With the official Treasury loss on GM’s shares certain to be “close enough for government work” to $10 billion, GM faces the unique opportunity in American automotive history of going to market with a clear unmet financial obligation to the taxpaying public. And yet, GM does have enough cash to now be the likely target of “activist investors” according to multiple news wire reports. One source of these concerns: auto task force member Harry J. Wilson:

The exit makes GM a possible target for activist investors, who may push the company to pay out some of its $26.8 billion in cash through a dividend or stock buyback, said Harry J. Wilson, a member of the U.S. auto task force that helped rebuild the automaker in a 2009 bankruptcy.

“Any company that isn’t efficient about capital allocation is a target for activists,” said Wilson, who is now a restructuring adviser at Maeva Group LLC in Westchester, N.Y. “GM has a huge cash hoard and they are generating lots more cash each year, so they need to be thoughtful about that.”

There you have it: a guy who helped pump GM with cash and structured the deal so the taxpayer loss showed up as equity loss rather than an unpaid loan, is now in the private sector selling the company as cash pile to be raided. Not that GM needs new leadership, or a new strategy to better allocate its generous helping of tax money, but that the public’s loss on GM is a shining opportunity for any billionaire or hedge fund that wants to punk GM for its lunch money. That the task force he served on, ostensibly operating in the name of the public good, gave GM more of the public’s cash than it needed and that he is now available for consultation on how YOU can pocket some of it.

And why not? After all, as GM’s PR boss Selim Bingol recently observed in a Politico piece on GM’s ramped-up lobbying effort

“I think people in general have accepted that the rescue of the company and the industry is the right thing to do. We find ourselves now being able to be a little more forward-looking. I think we are in a position to really partner with policymakers in Washington.”

If Mr Wilson does well enough promoting GM’s cash pile to Wall Street raiders, I can imagine a number of policymakers would be anxious to “really partner” with GM going forward.

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