BACK SEAT DRIVING - JUNE 2009

For hot and tender news wires on the car culture, see LA Car's Hot Wires Supercar Maker Koenigsegg Slated to Buy Saab GM to Sell Saturn Brand to Penske GM Wants to Sell Hummer Brand to Tengzhong John DeLorean on General Motors Kelly Blue Book on the GM Bankruptcy Filing Ford Motor Company on GM's Bankruptcy Filing White House Press Secretary Robert Gibbs on GM's Restructuring An Open Letter from GM's CEO It's Official: GM Files Chapter 11 Bankruptcy  

 

Is this the face of the new Saab? (the 806 hp Koenigsegg CCX)

NAKANO: BACK SEAT DRIVING GM and Koenigsegg Group AB Reach Tentative Accord on Saab Sale Zurich. General Motors Corp. and Koenigsegg Group AB, a consortium led by Koenigsegg Automotive AB, today confirmed the details of a memorandum of understanding for the purchase of Saab Automobile AB that secures Saab's future. The sale, expected to close by the end of the third quarter of this year, includes an expected $600 million funding commitment from the European Investment Bank (EIB) guaranteed by the Swedish government. Additional support is to be provided by GM and Koenigsegg Group AB to fund Saab's operations and product program investments. This includes plans to launch several new products that are in the final stages of development. Saab had filed for reorganization under Swedish Law on Feb. 20, 2009. This tentative agreement is a key milestone for Saab to successfully emerge from its reorganization process. "This is yet another significant step in the reinvention of GM and its European operations" said GM Europe President, Carl-Peter Forster. "Saab is a highly respected automotive brand with great potential. Closing this deal represents the best chance for Saab to emerge a stronger company. Koenigsegg Group's unique combination of innovation, entrepreneurial spirit and financial strength, combined with Koenigsegg's proven ability to create world-class Swedish performance cars in a highly efficient manner, made it the right choice for Saab as well as for General Motors." As part of the proposed transaction, GM will continue to provide Saab with architecture and powertrain technology during a defined time period. Additionally, Saab plans to produce its next generation 9-5 models in the Saab production facility in Trollhättan, Sweden. "The proposed agreement will enable us to maximize the brand's potential through an exciting new product line-up with a distinctly Swedish character. Today's announcement is great news for Saab's current and future customers, dealers, suppliers and employees around the globe, said Jan Ã...ke Jonsson, Managing Director of Saab Automobile AB. The sale will be subject to customary closing conditions, including receipt of applicable regulatory, governmental and court approvals. Other terms and conditions specific to the sale are not being disclosed at this time. Deutsche Bank acted as financial advisor to General Motors Corporation. Koenigsegg Group AB is a consortium of private investors led by Koenigsegg Automotive AB. Koenigsegg Automotive AB manufactures supercars. It has representatives in Africa, Asia, Europe, the Middle East, North America, and the Oceania. The company was founded in 1994 and is based in Ängelholm, Sweden.    

 

 

 

NAKANO: BACK SEAT DRIVING Deal is Expected to Secure Over 13,000 US Jobs Detroit -- General Motors Corp. and Penske Automotive Group confirmed details of a proposed transaction under which Penske would acquire the Saturn brand. If completed, the deal would save more than 350 dealerships and 13,000 jobs at Saturn and its retailers in the United States, and would preserve the customer-focused Saturn brand. The proposed transaction is part of GM's rebuilding efforts outlined in the viability plan that was submitted to the U.S. government earlier this year. Under the terms in the memorandum of understanding, Penske would obtain the rights to the brand as well as certain other Saturn assets. GM would continue production, on a contract basis, of the Saturn Aura, Vue and Outlook. "This is the combination of two iconic teams: Saturn and Penske" said Saturn general manager Jill Lajdziak. "GM had the vision to create Saturn and has the desire to see it succeed in the future." "Saturn has a passionate customer base and outstanding dealer network" said Roger Penske, chairman of Penske Automotive Group. "For nearly 20 years Saturn has focused on treating the customer right. We share that philosophy, and we want to build on those strengths." Saturn began selling cars in 1990 and has sold more than 4 million vehicles. More than 80 percent of those vehicles are still in operation, according to data from R.L. Polk. Saturn has regularly scored among the industry leaders for non-luxury brands in customer satisfaction surveys. "There has been a groundswell of support for Saturn, with our retailers and owners urging us to save the brand" said Lajdziak. "We heard their call loud and clear, and it inspired us as we worked to secure Saturn's future." The transaction is expected to close in the third quarter of this year and is subject to customary closing conditions and regulatory approvals. Financial terms of the agreement will not be disclosed at this time.    

 

 

 

NAKANO: BACK SEAT DRIVING GM WANTS TO SELL HUMMER BRAND TO TENGZHONG Deal is Expected to Secure Over 3,000 US Jobs Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd (Tengzhong) and General Motors Corporation confirmed details of their proposed transaction, pursuant to which, Tengzhong, a major industrial machinery group, will acquire the rights to the premium off-road HUMMER brand, along with a senior management and operational team. It will also assume existing dealer agreements relating to HUMMER's dealership network. It is contemplated that Tengzhong will, as part of the transaction, enter into a long-term contract assembly and key component and material supply agreement with GM. In an earlier statement, GM said it expects the deal if successful to secure more than 3,000 US jobs. The final terms of the deal are subject to final negotiations. Based in the Chinese province of Sichuan, Tengzhong is a privately-owned company and a leading domestic manufacturer of road, construction and energy industry equipment. It will expand into the premium off-road vehicle segment through what will be a strategic acquisition for Tengzhong and a catalyst for HUMMER's growth in the U.S. and around the world. "The HUMMER brand is synonymous with adventure, freedom and exhilaration, and we plan to continue that heritage by investing in the business, allowing HUMMER to innovate and grow in exciting new ways under the leadership and continuity of its current management team," said Yang Yi, CEO of Tengzhong. Mr. Yang continued, "We will be investing in the HUMMER brand and its research and development capabilities, which will allow HUMMER to better meet demand for new products such as more fuel-efficient vehicles in the U.S." HUMMER will continue to maintain its headquarters and operations in the U.S., and will continue to be managed by its existing leadership team. The team intends to expand HUMMER's dealer network worldwide, particularly into new and underserved markets such as China. "Today HUMMER is a globally recognized brand with excellent growth prospects, both in terms of new markets and new products for our existing markets," said James Taylor, HUMMER chief executive officer. "With Tengzhong's investment and strong support, we will be able to make our visions a reality. This transaction, if successful, will secure more than 3,000 U.S. jobs, and allow us to embark on a more aggressive global expansion, ensuring a successful future with our new partners." The transaction is expected to close in the third quarter of this year and is subject to customary closing conditions and regulatory approvals. Financial terms of the agreement will not be disclosed at this time. Credit Suisse is acting as exclusive financial advisor and Shearman & Stearling is acting as international legal counsel to Tengzhong on this transaction. Citi is acting as financial advisor to GM. About Tengzhong Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd. ("Tengzhong") is one of China's major privately owned engineering companies. Tengzhong is a manufacturer of heavy machinery equipment with a presence in special-use vehicles, road and bridge construction equipment and construction and energy industry equipment. Since its establishment, Tengzhong has become a major manufacturer of machinery and construction components through a series of successful acquisitions. Tengzhong prides itself on its automated manufacturing equipment, its processing systems, significant research and development initiatives and commitment to innovation.    

 

 

 

JOHN Z. DELOREAN: BACK SEAT DRIVING REFLECTING ON GENERAL MOTORS A fault that GM has had for a long time is its feeling that, since it sells more cars and trucks than anyone else in the world and makes far more money than any other automotive company, the GM way is the only way. We seem to forget that a cloistered executive, whose only social contacts are with similar executives who make $500,000 a year and who has not really bought a car the way a customer has in years, has no basis to judge public taste. The system and management are stifling initiative. Leadership and innovation are impossible. - John Z. DeLorean, 1975 as told to J. Patrick Wright, author of "On a Clear Day You Can See General Motors"    

 

 

 

 

JACK NERAD: BACK SEAT DRIVING GM BANKRUPTCY FILING In what has been one of the most eventful weeks in all of automotive history, the Chapter 11 bankruptcy filing of General Motors marks the end of one era and the beginning of another. Of importance now is not how GM found itself in this predicament but what it - and the U.S. government - does in the days and weeks to come to return the corporation to a prosperous, profitable state. To the typical consumer, the General Motors bankruptcy will be largely transparent. In most instances, their local GM-affiliated dealerships will continue to operate, selling new and used vehicles and dispensing service and parts. But for the workers idled by the closing of 14 plants, the effect will be far different - a sudden change in the way of life of many communities that have relied on the strength of the American auto industry. Perhaps paradoxically, we at Kelley Blue Book expect traffic at GM dealerships to pick up in the next few days and weeks. But though this is still a decidedly buyers' market, those looking for once-in-a-lifetime fire-sale-type deals may be disappointed. The federally orchestrated move into bankruptcy indicates that the U.S. government is invested, literally and figuratively, in GM's ongoing existence and eventual health. The consumer seems quick to have grasped that concept, and now might be considering GM models as 'found bargains.' While consumers might expect the resale value of GM brands to fall like a stone with the news of bankruptcy, we at Kelley Blue Book don't believe that will be the case. GM brands like Saab and Saturn have taken a hit in residual value, but current used-vehicle demand has helped buoy the values of many used GM vehicles, and we have noted recovery in segments like full-size sport-utility vehicles. The General Motors bankruptcy coupled with the Chrysler bankruptcy signal that the once-dominant position of the North American automakers in the global auto market is officially at an end. Over the past three decades, Asian manufacturers have asserted themselves as the auto markets of most nations have become more and more cosmopolitan with a mix of local and import brands. The only exceptions to that rule are the very few countries where protectionist laws and/or customs have supported indigenous products. Jack Nerad, Executive Market Analyst Kelley Blue Book    

 

 

 

 

MARK TRUBY: BACK SEAT DRIVING FORD STATEMENT ON GM BANKRUPTCY FILING DEARBORN, Mich., June 1, 2009 - Today's announcement that GM is filing for Chapter 11 bankruptcy is another important development during this unprecedented period for the auto industry and the global economy. The Ford team continues to monitor the industry environment and plan for all contingencies to ensure our transformation plan remains on track. At this time, we do not expect any major disruptions to our operations as a result of today's news. We share President Obama's hope that GM's bankruptcy will be controlled and orderly, and we continue to believe it is important that our governmental leaders and the U.S. Automotive Task Force remain focused on the stability of the supply chain and on ensuring that a healthy U.S. auto industry emerges from this difficult economic period. We look forward to working with the Obama administration to ensure that the government's majority ownership of GM will not change the industry's competitive dynamics and that a level playing field will be maintained. Ford remains absolutely committed to continuing to make progress on our transformation plan without accessing emergency taxpayer assistance from the U.S. government. - Mark Truby, Ford Motor Company    

 

 

 

Obama announces GM restructuring (Samantha Appleton)

ROBERT GIBBS: BACK SEAT DRIVING White House Press Secretary Robert Gibbs on General Motors' restructuring plan: On March 30, 2009, President Obama laid out a framework for General Motors to achieve viability that required the Company to rework its business plan, accelerate its operational restructuring and make far greater reductions in its outstanding liabilities.After two months of significant management engagement, General Motors has developed such a plan and has already begun to make progress toward its achievement. The Company has also secured commitments of meaningful sacrifice from all of its major stakeholder groups , sacrifices sufficient for this plan to proceed forward. As a result, the President has deemed GM's plan viable and will be making available about $30 billion of additional federal assistance to support GM's restructuring plan . To effectuate its plan, General Motors will use Section 363 of the bankruptcy code to clear away the remaining impediments to its successful re-launch. For the better part of a century, The General Motors Corporation has been one of the most recognizable and largest businesses in the world. Today will rank as another historic day for the company - the end of an old General Motors, and the beginning of a new one. General Motors Restructuring - Shared Sacrifice The President made clear throughout this process that every one of the Company's stakeholder would be expected to sacrifice, and that none would receive special treatment because of the involvement of the government. The resulting agreement is tough but fair , and has garnered broad support from GM's major stakeholders: · Operational restructuring: GM is undertaking a significant operational restructuring that will address past failures, dramatically improve its overall cost structure, and allow the company to move toward profitability even if the auto market recovers slowly. As a result of this restructuring, GM will lower its breakeven point to a 10 million annual car sales environment. Before the restructuring, GM's breakeven point was in excess of 16 million annual car sales. · The UAW has made important concessions on compensation and retiree health care that, while difficult, will help save jobs for active employees, pensions and health care for retirees, and make GM more competitive. In virtually every respect, the concessions that the UAW agreed to are more aggressive than what the Bush Administration originally demanded in its loan agreement with GM. Among other things, the UAW's existing VEBA - to which GM has a $20bn obligation - will be replaced by a new VEBA as described below. · The Steering Committee to a portion of GM bondholders has confirmed that bondholders representing at least 54% of GM's unsecured bonds have agreed to exchange their portion of the Company's $27.1 billion unsecured debt for their pro-rata share of 10% of the equity of new GM, plus warrants for an additional 15% of the new Company. The Steering Committee confirms that the number of individual and institutional bondholders that support this deal is now over 1,000. The bankruptcy court process will be used to confirm this treatment for those bondholders and other unsecured creditors that failed to accept or did not participate in the offer that was accepted by the aforementioned majority. · Painful but necessary restructuring steps will also be implemented. In order to size GM's footprint to its current share but also allow for volume growth when the economy and the automotive market rebound, GM has planned to reduce its plant operations. Today GM is announcing its intention to close 11 facilities and idle another 3 facilities. Details on the Creation of New GM: The newly organized GM will purchase substantially all of the assets of the old GM needed to implement its business plan out of a chapter 11 in exchange for the U.S. Government relinquishing the majority of its loans to GM. · This new GM will establish an independent trust (VEBA) that will provide health care benefits for GM's retirees. The VEBA will be funded by a note of $2.5 billion payable in three installments ending in 2017 and $6.5 billion in 9% perpetual preferred stock. The VEBA will also receive 17.5% of the equity of New GM and warrants to purchase an additional 2.5% of the company. The VEBA will have the right to select one independent director and will have no right to vote its shares or ther governance rights. · The GM qualified pension plans for both hourly and salaried employees will be transferred to the New GM as part of the purchase process. · The U.S. Treasury is prepared to provide approximately $30.1 billion of financing to support GM through an expedited chapter 11 proceeding and transition the new GM through its restructuring plan. The U.S. Treasury does not anticipate providing any additional assistance to GM beyond this commitment. In exchange for funds already committed by the U.S. Treasury and the new injection of $30.1 billion, the U.S. government will receive approximately $8.8 billion in debt and preferred stock in the new GM and approximately 60% of the equity of the new GM. The U.S. Treasury will also have the right to appoint the initial directors other than those that will be selected by the VEBA and the Canadian government. · The Governments of Canada and Ontario will participate alongside the U.S. Treasury by lending $9.5 billion to GM and New GM. The Canadian and Ontario governments will receive approximately $1.7 billion in debt and preferred stock, and approximately 12% of the equity of the new GM. Based on its substantial financial contribution, the Canadian government will also have the right to select one initial director. · Based on these steps, the new GM will have far less debt and a world class balance sheet. This will allow the company the financial stability to weather future market downturns and generate significant excess free cash flow to invest in the business. · The new GM will also pursue a commitment to build a new small car in an idled UAW factory, which when in place will increase the share of U.S. production for U.S. sale from its current level of about 66% to over 70%. Principles for Managing Ownership Stake Consistent with the goal of clearly limiting the government's role as a reluctant equity owner but careful steward of taxpayer resources, the Obama Administration has established four core principles that will guide the government's management of ownership interests in private firms. These principles will apply to the U.S. government's equity stake in GM: · The government has no desire to own equity stakes in companies any longer than necessary, and will seek to dispose of its ownership interests as soon as practicable. Our goal is to promote strong and viable companies that can quickly be profitable and contribute to economic growth and jobs without government involvement. · In exceptional cases where the U.S. government feels it is necessary to respond to a company's request for substantial assistance, the government will reserve the right to set upfront conditions to protect taxpayers, promote financial stability and encourage growth. When necessary, these conditions may include restructurings similar to that now underway at GM as well as changes to ensure a strong board of directors that selects management with a sound long-term vision to restore their companies to profitability and to end the need for government support as quickly as is practically feasible. · After any up-front conditions are in place, the government will protect the taxpayers' investment by managing its ownership stake in a hands-off, commercial manner. The government will not interfere with or exert control over day-to-day company operations. No government employees will serve on the boards or be employed by these companies. · As a common shareholder, the government will only vote on core governance issues, including the selection of a company's board of directors and major corporate events or transactions. While protecting taxpayer resources, the government intends to be extremely disciplined as to how it intends to use even these limited rights. Warrantees: · GM will continue to honor consumer warranties. This past week, the U.S. Treasury made available the Warranty Support Program to GM and $361 million was funded to a special vehicle available to provide a backstop on the orderly payment of warranties for cars sold during this restructuring period. The Bankruptcy Process During this process, GM will continue operating in the ordinary course. From an operating perspective, the day after the filing will not be materially different from the day before the filing. The following parties will be treated as described below: · Employees: Employees will get paid in the ordinary course, including salary, wages and ordinary benefits. Assuming the sale moves forward as expected, Pension Plan and VEBA funding will be transferred to New GM. · Suppliers: GM will seek authority at its "first day" hearing to continue to pay suppliers in the ordinary course. In addition, the U.S. Treasury's Supplier Support Program will continue to operate, and GM suppliers benefiting from the program will continue to receive that support. · Dealers: GM will seek authority at its "first day" hearing to honor its customer warranties in the ordinary course. Moreover, GM will seek to continue to honor its dealer incentives for those dealers who are expected to continue to be part of GM's distribution network going forward. There are some dealers that GM has identified that will not continue with GM. It is expected that the terminated dealers will be offered an agreement to orderly wind down their operations over the next 18 months · UAW: The modified labor agreement reached between the UAW and GM will be operative and will be assumed by the New GM. - Robert Gibbs, White House Press Secretary    

 

 

 

FRITZ HENDERSON: BACK SEAT DRIVING Today marks a defining moment in the reinvention of GM. In the face of an economic crisis that has caused enormous disruption in the auto industry, we have reached ground-breaking agreements with the U.S. Treasury, the Canadian and Ontario governments, and the UAW and CAW unions, and we have the support of a substantial portion of GM's bondholders. These agreements allow us to launch a leaner, quicker, more customer-focused and cost-competitive New GM. The court-supervised process we are pursuing to launch the New GM provides us with powerful tools to accelerate and complete our reinvention, as well as strong safeguards for our customers and our business. Worldwide, GM dealers are open for business, offering competitive financing options on our award-winning vehicles, continuing to honor our industry leading warranty coverage, and providing outstanding service. Furthermore, the U.S. and Canadian governments have issued their own strong votes of confidence by backing GM's vehicle warranties. Further, customers and dealers have access to financing from a stronger GMAC. The New GM will have a dramatically stronger balance sheet, with far less debt, which will allow us to better invest in our business and our future. It will have fully competitive labor costs and the ability to generate sustained and positive bottom-line performance. From day one, the New GM will be well-positioned to capitalize on the award-winning vehicles we have developed and launched during the past few years, and on our investments in exciting new technologies like the extended range electric Chevy Volt, so that we can build and return value to our customers and to the millions who will have a stake in our success. As a long-term global leader in the development of fuel-efficient and advanced-technology vehicles, the New GM will contribute to the development of advanced engineering and manufacturing capabilities in the United States and Canada, which are critical to the future of our economies. We recognize the sacrifices that so many have been asked to make as we have worked to reinvent GM and the automobile. GM deeply appreciates the support and the demonstration of confidence in our future by President Obama, the Presidential Task Force on Autos, the Canadian and Ontario governments, American and Canadian taxpayers, a substantial portion of our bondholders, the UAW and CAW and their leadership and the men and women of GM, including our retirees. You have enabled us to carry out this vital transformation for the good of GM, our customers and the economy, and we are working to justify your trust each day. Our products are our future, and our lineup of new cars and crossovers are a great foundation for success. We are focused on the job at hand, for the benefit of our customers, employees, dealers, suppliers, retirees, taxpayers, investors and other stakeholders. The New GM is here to stay. - Frederick A. Henderson, President & Chief Executive Officer, General Motors    

 

 

 

 

Workers at GM's Lansing plant

KENT KRESA: BACK SEAT DRIVING GM Board of Directors Statement on Filing Chapter 11 June 1, 2009 - The General Motors Board of Directors authorized the filing of a chapter 11 case with regret that this path proved necessary despite the best efforts of so many. Today marks a new beginning for General Motors. A court-supervised process and transfer of assets will enable a New GM to emerge as a stronger, healthier, more focused and nimbler company with a determination not to just survive but to excel. The Board concluded that the proposed transformation will maximize the value of the enterprise, and the return to the many stakeholders who have been involved with GM over the years. We are appreciative of the support from the U.S. Treasury, the President's Task Force on Autos, the UAW and its members, salaried employees and retirees, concurring bondholders, and very importantly, the American taxpayers. The Board is confident that this New GM can operate successfully in the intensely competitive U.S. market and around the world. The Board stands behind the people of GM in embracing this unique opportunity to create value and a new company that will design, engineer, build and market the best cars and trucks in world." - Kent Kresa, Chairman of the Board    

 

 

 

A JOURNAL OF LOS ANGELES & ITS CAR CULTURE

That was LA Car's subtitle when it started back in 1997. It's original website address was about five times the size of lacar.com. Since then, La Car became LA Car. Its subtitle became Reporting From Car Culture Ground Zero, then From The Heart of Car Culture, to today's The Cars and Culture of Southern California. At all times, however, we aimed to chronicle the Southland's automotive spirit - much like one's own journal or diary. LA Car has always been a great source to come back to from week-to-week, to see what articles and reviews have been added to our rather staggering database. With Back Seat Driving, a.k.a. BSD (note the similarity to two well-worn abbreviations, BS and BFD) and Hot Wires - Hot & Tender News From the Car Culture (co-located with Back Seat Driving, and updated at least daily), we give you some reasons to come back more often (all opinions, by the way, are those of the respective author). So, go ahead and bookmark www.lacar.com. We'll be sure to always provide a link to Hot Wires and the latest Back Seat Driving blog entry. In the meantime, welcome to the journal and journey from the heart of the car culture. - Roy Nakano 

For past Blog entries, click the following: May 2009 April 2009 March 2009 February 2009 January 2009 December 2008 November 2008 October 2008 September 2008 August 2008 July 2008 June 2008 May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 September 2007 August 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 2006 May 2006 April 2006 March 2006 February 2006 January 2006 December 2005 November 2005 October 2005 September 2005 August 2005 July 2005 June 2005 May 2005 April 2005 March 2005 February 2005 January 2005 December 2004 November 2004 October 2004 September 2004 August 2004 July 2004 June 2004 May 2004 April 2004