Crunch watch - Week 50: the economic crisis and the auto industry

Here is this week's follow up of the economic crisis in the auto industry by CAR:

Saturday 13 December 2008
• Bush administration looks to tap the $700 billion Troubled Asset Relief Programme (Tarp) to provide a bridging loan to see the American car makers alive over Christmas. 'The Treasury will probably follow the model it used in the Fannie Mae and Freddie Mac rescue, imposing conditions in the form of a contract with the companies receiving government aid. There is no limit to how sweeping these conditions could be.'
• UK Government poised to announce measures to help Britain's car makers; Vauxhall offers Ellesmere Port workers a nine-month sabbatical on 30% pay
• Republican senator John Dingell on the Senate vote: 'Last night, some Southern senators kicked American workers in the gut. Senators from states where the international automakers do considerable business unpatriotically blocked the bill.'

Friday 12 December 2008
• US Senate vetoes auto industry bail-out. GM and Chrysler now facing bankruptcy. Shares in auto makers fall sharply around the globe; Nissan, Honda and Toyota dip by 10% as Japan’s Nikkei index opens
• Major stumbling block is the UAW who are refusing to agree to lower wages in 2009 to match non-unionised workers in foreign-owned implant factories in the South
• GM and Chrylser now desperate for the combined $11 billion they need to stay solvent until 2009
• 43 Democrats, 10 Republicans back the bail-out bill – seven short of the required number
• GM issued a statement last night: ‘We are deeply disappointed that agreement could not be reached tonight in the Senate despite the best bipartisan efforts. We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis’

Thursday 11 December 2008
• Sweden announces a $3.4 billion support package for its car makers, including credit guarantees, emergency loans and research funds. But the government rules out state ownership of Saab or Volvo, both of which are for sale
• US House of Representatives finally votes and approves an aid package worth $14 billion to the American auto industry. The House passed the bill by 237-170
• Details of bill are as previously reported: money is to be made available to GM and Chrysler and – potentially if their funding becomes rockier – Ford. Independent, Bush-appointed car tsar to oversee fund distribution and assist with restructuring. Government to become major shareholder in the Big Three. However, the bail-out could be delayed as it faces opposition in the Senate
• Strict conditions imposed on aid package: turnaround plans must prove they can repay debt, meet tough emissions targets, plan 'advanced technology vehicles', hit 'a positive net present value', and 'rationalise costs, capitalisation, and capacity with respect to the manufacturing workforce, suppliers and dealerships'. Plan to be finalised by end of March 2009
• 'Approval of an auto industry loan package will not save the domestic automakers, but it will give the Detroit Three a chance to save themselves'
• Carlos Ghosn to become chairman of Renault in May 2009. Many believe he is already spread too thin, but it's common in French companies to have joint CEO/chairmen
• Ferrari categorically denies reports on a UK website that it's cutting 300 jobs.

Wednesday 10 December 2008
• The White House and Congressional Democrats have agreed a $15 billion aid package, which will provide short-term loans to GM and Chrysler to stave off bankruptcy until March. The proposal will force the car makers to answer to a presidentially appointed car tsar (who will have powers to withhold further loans if the pace of change is unsatisfactory) and make the government their biggest shareholder. Although agreed in principle, the bill still has to be fully ratified
• Electric car maker Tesla is asking for $350 million government loan; four-door Tesla will be delayed without it
• Chrysler's deal with Chery to build small car is off

Tuesday 9 December 2008
• 'The $15 billion lifeline the Bush administration [will give] GM and Chrsler will do no more than buy the two car makers a little time'
• Ford discusses Volvo sale to China Changan, Chinese newspaper reports
• Volkswagen is first German maker to ask government for banking guarantees
• Draft bill is leaked: exact sum of initial bail-out estimated at $15 billion, car tsar to be appointed, Big Three must drop their lobbying against Californian emissions regs, final and full rescue details must be prepared by 31 March 2009
• The White House has given a 'cool' reaction to the Democrats' plan for a $15 billion bail-out package
• Pressure mounts on GM chief exec since 2000, Rick Wagoner, to step down – even though he has stripped $9 billion of costs from The General under his watch

Monday 8 December 2008
• Interim measures to save GM and Chrysler expected today; car tsar to be appointed
• UK government refuses to bail out UK car makers, Lord Mandelson says
• President-elect Barack Obama tells NBC: 'Millions of people, directly or indirectly, are reliant on that industry, and so I don't think it's an option to simply allow it to collapse'
• Component supplier Wagon Automotive has plunged into administration, putting 500 UK jobs at risk
• Ferrari sales crash to just 92 in November; Maranello will announce 300 job cuts this week
• US Congress bail-out would mean strict government control – including rewriting contracts and possible mergers
• Although November was bleak (every single manufacturer posted a year-on-year drop), there are some bright spots in year-to-date sales. Audi, Chevrolet, Dodge, Hummer, Jaguar, Kia, Nissan, Smart and Volvo are all up

Source: Car magazine UK