Chevy Beats Toyota
. . . but CR's Top 10 is an American 1

Consumer Reports' annual April Auto Issue should be hitting shelves and mailboxes as you read this. Consumer Reports is stingy with free online content, but its top picks in 10 categories is linked here. The good news for the traditional American automakers is that Consumer Reports ranks the newish Chevrolet Silverado ahead of the also newish Toyota Tundra, largely because of reliability problems with the Toyota V-8. Congratulations Chevrolet. The bad news is that none of the rest of the top ten picks is from any of the formerly Big 3 automakers, and none of the rest of the top ten are UAW-made.

"They're Lying Bastards"
Lenders are still not fulfilling Mortgage Workout Promises

Here's a link to a Reuters article that confirms what I've been seeing and hearing about concerning the alleged workout deals for problem mortgages. The writer, Nick Carey cites several sources in support of the conclusion that most consumers are not getting helped by foreclosure avoidance programs. On February 5, I called the loans that were being promised by the President's "Hope now" program Luna Loans. I call them Luna Loans because Harry Potter's pal, Luna Lovegood, is the only one who has ever seen them. Maybe we could call them "Great Pumpkin" loans, because you can see them if you are very, very, very sincere. No, I like the term "luna loan".

Youtube Video of the Day
The Chimp Channel Star Wars

Usually I try to find some relevance to the videos that I post. This time, I'm not going to bother. Here's The Chimp Channel Star Wars. The name completely explains it. Thanks to Ariana for the link.

Dodge Journey: The First Review - and Maybe the Last Hurrah

One of my favorite auto reviews, Michael Karesh at thetruthaboutcars.com, has posted his review of the brand new Dodge Journey. It's linked here. Quite frankly, William Hung has received better reviews. The Dodge Journey replaces one of Chrysler's bread and butter vehicle lines, the short-wheelbase minivans. In this case, it appears that bread and butter has been replaced with government cheese.

I can actually save you some time in reading Michael Karesh's review. He thought the Journey handled alright, but he didn't like anything else about it. Note: if you follow Karesh's reviews at epinions.com, you'll find that he has scoured the car lots to find a three-row vehicle that is practical, but fun to drive. He didn't find it here. As far as quality control is concerned, here's a quote:

And then there's quality control…The V6 had a quarter-inch of water in the front
passenger floorboard (promptly extracted via shop vac). The source was soon
revealed, as a gurgle could periodically be heard from the perimeter of the
sunroof and water rained down from the overhead console throughout the test
drive. Get this: it wasn't raining outside the car at the time; it had rained the previous
day.

The Journey is actually the stretched-wheelbase, station wagon version of the Dodge Avenger. The Avenger has the dubious achievement of being the lowest scoring family sedan in Consumer Reports' current rankings, trailing even its loathsome stablemate, the Chrysler Sebring. In other words, I didn't have high expectations for the Journey.

Striking out with a new product is especially problematic for Chrysler, a company whose new product pipeline is not exactly filled to the brim. Now, let's say I'm a struggling auto maker, and I'm introducing an important new model at a very difficult time. I would say that it would generally be a bad idea to ship one to a reviewer that leaks like a sieve. It seems like Chrysler would do well to restart a production line with the old style (paid for) minivan, and plan on updating the powertrain as soon as possible. The Journey doesn't improve on price, space, performance, fuel efficiency or (probably) quality. In my opinion, it doesn't even improve on looks.

In the spirit of fairness, if I see a review of the Journey that contradicts what Mr. Karesh has to say, I'll mention it in the blog. If I get the chance to test one, I'll publish that as well.

By the way, the UAW is not responsible for the mess that Chrysler made of the Journey, the Journey is built in Mexico.

26.3 MPG in a Chevy Tahoe? No Way
Yes, Way - Per Mark Phelan

Mark Phelan, the auto reviewer for the Detroit Free Press has posted his (glowing) review of the 2009 Chevrolet Tahoe Hybrid. During his test period, he reports an average MPG of 26.3 in all around driving, handily beating the EPA figures of 21-22. The Tahoe hybrid is a full hybrid (ala the Toyota Prius) unlike the GM hybrid cars currently marketed. Phelan's test vehicle, a fully-equipped 2-wheel-drive model, has a sticker price of $50,885. That's a big chunk of change, and much more than I have spent or plan to spend on a vehicle. On the other hand, there are some full-sized SUVs that cost more.

One can argue that once you get to this price level, the price of fuel even for a guzzler is a small portion of the cost of ownership. That's true. On the other hand, as Phelan points out, the annual savings in fuel costs (he calculates at $1330) between the hybrid Yukon and a comparable non-hybrid SUV is higher than the difference between, say, a Chevrolet Malibu and a Toyota Prius.

As a practical matter, innovations tend to originate on higher priced models, and as the experience curve results in refinements and cost savings, they trickle down to less expensive models. Viewed in that light, as a dollars and cents proposition, the hybrid option on the Tahoe might not make sense today, but as a harbinger for what's possible in the future, it's a positive development.

Chrysler Plastered by Judge's Plastech Decision
Tools must stay put.

Federal Bankruptcy Judge Phillip Shefferly ruled that Chrysler can't just pick up its ball and bat and go back home. He ruled against Chrysler in its bankruptcy dispute with Plastech. The story in the Detroit News is here. The judge said that even though Chrysler owns the tools that it wants to recover from the Plastech facility, possession by Plastech is enough for Plastech to retain the tools while it tries to restructure in chapter 11 bankruptcy. To allow Chrysler to recover the tools would be to doom the plan to failure.

Interestingly, Chrysler's position was supported by many of Plastech's other customers, including General Motors and Toyota, even though those customers' could be delayed or jeopardized should Chrysler's tool recovery force plant shut downs. The saga continues. . .

UAW Approved Vehicle Website

Last week there was controversy over whether the Toyota Matrix was an approved vehicle by the UAW. I checked the UAW-made website. It lists some Corollas as being approved, but the Matrix is NOT listed. Apparently Toyota has shifted its production mix, moving the Matrix out of the NUMMI plant and the Corolla in. The Corolla is produced at numerous plants though, so don't assume that any Corolla that you see on a lot will receive the UAW stamp of approval. More to the point, don't assume that if you drive even your UAW-built Corolla to a pre-retirement seminar at a UAW hall that you'll receive a warm welcome.

Youtube Video of the Day
IF

I have some serious stuff backed up, waiting for me to write about. I can't see doing that though, when I can post a video of Telly Savalas singing (?) the Bread hit If instead.




What do you think, better or worse than Shatner?

The "Hope Now" Program is Hopeless

Criticism of the President's "Hope Now" program for mortgage foreclosure assistance is mounting. Susan Keating, President and CEO of the National Foundation for Credit Counseling has put forth a scalding public letter to Faith Schwartz, the Executive Director of Hope Now. Ms. Keating so elequently describes some of the failings of the Hope Now program that I am republishing her letter in its entirety below. In case you don't want to read it, the gist of the letter is that the program seems to have been designed to create an appearance of help while at the same time actually helping nobody.

February 6, 2008
Ms. Faith Schwartz
Executive Director of HOPE NOW
1001 Pennsylvania Avenue, NW
Suite 500 South
Washington, DC 20004
Dear Faith:
The National Foundation for Credit Counseling (“NFCC”) strongly objects to the
extortionist tactics being utilized by the Homeownership Preservation Foundation
(“HPF”) to limit the options and opportunities of American consumers at risk of losing
their homes.
At issue is the ability of qualified HUD-approved counseling agencies to provide services
under the National Foreclosure Mitigation Counseling Program (“NFMCP”) using a tollfree
number that has been heavily promoted by the highest levels of the United States
Government, and the concerted efforts of the HPF to use that number as a monopoly for a
select few counseling agencies to the detriment of hundreds of thousands of homeowners
seeking to avoid foreclosure.
By direction of President Bush, and under the leadership of Treasury Secretary Paulson
and HUD Secretary Jackson, the HOPE NOW Alliance was formed. One of the basic
tenets of the Alliance was characterized as an aggressive plan to reach the greatest
number of troubled borrowers in an effort to prevent foreclosure wherever possible by
expanding the availability of mortgage counseling. In addition, with the encouragement
of Secretary Paulson and Secretary Jackson, mortgage lenders, servicers and investors
have collectively contributed funding to support mortgage foreclosure prevention
counseling services.
To further the objective, the resources of the HPF were utilized. Specifically, an HPF
toll-free number was designated as the “Homeowner HOPE Hotline” and was used to
connect troubled homeowners to one of only five counseling agencies invited to
participate by the HPF. The process and criteria used by the HPF to select those agencies
was apparently totally subjective. From its inception, the demand for services through
the Hotline have out-paced the ability of the HPF network to provide them. As President
Bush, Secretary Paulson, Secretary Jackson and other government officials heavily
promoted the toll-free number of the Hotline, the HPF increasingly struggled to handle
the volume of calls and to provide services. At one point, with mortgage concerns on the
rise, 26% of the calls to the HPF Hotline went unanswered and were abandoned. To put
that in human terms, more than one out of every four homeowners seeking help to save
2
their homes were unable to connect with a counselor. This failure may also have
discouraged an untold number of homeowners from seeking assistance from other HUDapproved
and qualified counseling agencies that were ready and able to provide the
services that they desperately needed.
Although the HPF has been able to improve their service level, they still struggle and
many consumers are not well served. A major participant in the HPF Hotline was
recently quoted on CNNMoney.com as saying that because of the high volume of calls,
“it had to limit its services only to customers who were delinquent on their mortgage
payments, referring other customers who were not delinquent to their own lenders.” In
other words, callers to the HPF Hotline were being told that unless they were already in
default, they were not going to be provided with the assistance and counseling they were
seeking. In addition, anecdotally, it has been reported that for some of those who did
manage to get through on the HPF Hotline, “counseling” consisted of little more than a
call center in-take process followed by a referral to their mortgage lender.
The NFCC has been and remains deeply concerned by harm being done to consumers
seeking to save their homes due to this artificial and indefensible limitation on the
number of agencies and counselors available to provide the quality mortgage foreclosure
prevention counseling and services that are needed. Repeatedly, the NFCC, as the
nation’s largest HUD-approved Housing Counseling Intermediary, has offered the
resources of more than 70 HUD-approved counseling agencies and more than 750
certified credit and housing counselors to provide services through the Hotline.
However, the HPF has to date rejected the NFCC’s offer, telling the NFCC that the
utilization of its resources “did not fit HPF’s business model.” The NFCC does not
understand a “business model” that fails to provide homeowners with the assistance that
they need to avoid foreclosure and to enable consumers to take strides toward personal
financial stability. Nevertheless, primarily due to the efforts of the President, Cabinet
Secretaries and other high government officials, the HPF Hotline has increasingly been
identified as the official U.S. Government-sanctioned means by which a troubled
homeowner should be connected with a qualified counselor of a HUD-approved
counseling agency.
This de facto government endorsement carries with it a reasonable expectation that all
qualified agencies should be eligible to participate in the Hotline and eligible to receive
funding for counseling services raised through the efforts and encouragement of federal
and other government officials.
Because of the escalating nature of the mortgage foreclosure crisis, Congress took
decisive action by including $180 million for the National Foreclosure Mitigation
Counseling Program in the Omnibus Appropriations Bill enacted in December. It should
be noted that the legislation does not provide funding for the HOPE NOW Alliance or the
HPF Hotline, but instead makes funding available to the broader range of HUD-approved
housing counseling intermediaries and state housing finance authorities. The legislation
is designed to make quality mortgage counseling services available to as many
homeowners, especially in areas of greatest need, as rapidly as possible. Nonprofit credit
3
and housing counseling agencies may apply for grant funds through HUD-approved
intermediaries. Agencies must select one intermediary, and if they seek funding through
multiple intermediaries, “they must justify why this is critical in order to meet the
demand for foreclosure prevention counseling in their service area.” The amount of
funding that an agency receives will be contingent on the number of sessions and the
level of services they provide. Level 1 services are those around in-take and basic
counseling services; Level 2 services are more comprehensive counseling services, and
are designed to meet the full needs of troubled homeowners.
Clearly, the intention of Congress was to expand the availability of mortgage foreclosure
prevention and to utilize all the tools created through the efforts of the federal
government.
Individually, several NFCC agencies have been invited by the HPF to participate in and
receive calls through the Hotline. Recognizing that extensive government resources have
been used to promote it, those agencies view participation in the Hotline as an essential
opportunity to provide much-needed housing counseling services to the consumers they
serve, especially as federal grant funds through the NFMCP become available to support
their operations. However, those agencies see no reason to bind themselves to the HPF
intermediary for those funds as there is nothing in the statutory language or legislative
history to even remotely suggest that Congress intended to require that funding for
services be tied to the means by which consumers are connected to counseling agencies.
Nevertheless, the HPF has been extremely aggressive in their efforts to force agencies to
join their NFMCP intermediary. The HPF has blatantly threatened NFCC agencies that
unless they agree to be part of the HPF intermediary, no calls via the Hotline will be
directed to their agencies. In addition, the HPF is insisting that agencies may only
provide the limited Level 1 services under the HPF intermediary, regardless of the needs
of the troubled homeowner. These actions are completely at odds with the announced
goals of the HOPE NOW Alliance and the intentions of Congress, and are extremely
detrimental to consumers seeking mortgage foreclosure prevention counseling.
Further, the HPF’s egregious actions are inconsistent with the efforts of the
Administration and federal officials in their promotion of the Hotline and the use of
federal funds to pay for counseling services. With federal support, the Hotline should be
utilized to link homeowners facing the loss of their homes to the next available HUDqualified
counselor without regard to whether that agency happens to be part of the
HPF’s attempted monopoly.
Qualified agencies should have the option to choose the HUD-approved intermediary that
best aligns with their values and commitment to the provision of comprehensive high
quality mortgage foreclosure prevention counseling and financial education services. It is
appalling that the HPF is attempting to coerce agency participation in the HPF NFMCP
intermediary as a condition of having access to consumers using a federally sanctioned
and endorsed toll-free number. Nor is it right that number is being monopolized by a
single entity, the HPF.
4
The NFCC calls on the HOPE NOW Alliance to act immediately to curtail these
unconscionable efforts on the part of the HPF. If that fails, the NFCC will actively seek
Congressional oversight hearings on the utilization of federal government resources to
establish and promote a virtual monopoly around the provision of desperately needed
housing counseling and mortgage foreclosure mitigation services at the expense of
consumers across the country seeking to save their homes.
Sincerely,
Susan C. Keating
President and CEO
National Foundation for Credit Counseling
CC: Secretary Henry M. Paulson
Secretary Alphonso R. Jackson
Senator Harry Reid
Senator Mitch McConnell
Speaker Nancy Pelosi
Representative John Boehner
Senator Christopher J. Dodd
Senator Richard C. Shelby
Representative Barney Frank
Representative Spencer Bachus
Senator Carl Levin
Senator Debbie Stabenow
Kenneth D. Wade

Who is Mark Cardenas, and For Whom Does He Work?

In the field of foreclosure of subprime mortgages, a single name seems to come up repeatedly, that's Mark Cardenas. Who is this person? A Google name search yields over 700 hits, and a perusal of the names seems to suggest that there's more than one person with the name. The one that I was looking for claims status as vice-president of several corporations relating to mortgages. You'd think that a person that important would have accomplishments, honors, etc. reflected by a Google search. Nope. Not there.

It looks like we'll have to hire Austin Powers to find out who Mark Cardenas is and who he works for. Austin's had experience with such things before. (Yes, another cheap excuse to post an otherwise irrelevant Youtube video.)

GM Posts Record $39 Billion Quarterly loss
GM Offers Buyouts to All UAW Members

How can you lose more money than you have and not go bankrupt? I don't have time for a big post now because I've got work to do. As I write this, (after the announcement of the loss) Yahoo quotes GM stock at $27.20 per share. According to the Detroit Free Press, my main source for this post, the loss in the 4th quarter of 2007 amounts to $68.45 per share. Despite this, GM's stock so far is only down $.27 per share.

Why is that? According to the Free Press, "excluding special items", GM's net loss was only $22 million -- that's statistical break even for GM. Here's what Freep said about the $38 Billion figure:

Despite the historic decline, the loss is almost entirely attributable to a non-cash special accounting charge of $38.3 billion that GM announced in the third quarter.

The charge relates to the valuation allowance against deferred tax assets.

If tax accounting can make a $39 billion difference, it's probably more of an indictment of our tax system than it is of General Motors.

The other big news is that Chevrolet intends to offer buyouts and early retirement to all its UAW members. It has sweetened offers already on the table. Finally GM has gotten smart and offered an annual payment option. (In the last round, workers got killed on taxes by taking the lump sum. Others blew the money all at once or had the money attached by creditors.)

On the product side of things, there's no question that General Motors has been going in the right direction. Overall car sales increased 3% last year, and 60% of sales were outside North America. The Cadillac CTS is a critical and market hit. The Chevrolet Malibu is a hit with the critics. It would probably be a hit with buyers if they could find one. (I visited a Chevy dealer last week, and I passed a row of about 15 beautiful new Corvettes to look at the one Malibu on the lot. That car was already sold.) Chevrolet's flex platform looks well placed to deliver competitive vehicles that are gas/electric hybrids, plug-in electric and fuel-cell powered.

The bottom line is that you can look at this as the glass 1/4 full or 3/4 empty, your choice, but actually, that's really no change to the way things were before, so its no surprise. As press coverage continues regarding General Motors' financial condition, don't look so much at the income statement, look at the balance sheet. The balance sheet should give you a better idea of whether GM will have what it takes to ride out the rough patch and push through until the next generation of vehicles.

BY THE WAY The Blogger spell checker hasn't been working as of late. If I mispell, misspell, whatever, any words, I'm sory.

See What You Can Do When You Focus?

Here's a video of an ensemble in England playing instruments they made out of parts from a brand new Ford Focus. The cynic would say - "Yeah, but that was the European Focus. The American one would sound sucky."

2009 Pontiac Vibe
Don't quibble - We can drive it to work


With the consolidation of UAW Legal Services Offices and resulting transfers, many of us are finding that we have to drive a lot farther to go to work each day. The automobile that was sensible for the purpose a year ago, is now unaffordable. The 2009 Pontiac Vibe should be arriving at your local dealer any day now. The introduction of the revised Vibe is notable because the Vibe is one of the few UAW-built small cars that we are allowed to drive to work under our collective bargaining agreement. (The Vibe's sister under the skin, the Toyota Matrix is another. Other than that, it's just the Ford Focus and the Chevrolet Cobalt/Pontiac G5.) Is the Vibe worth buying?

The Pontiac Vibe and the Toyota Matrix are both built on a Toyota Corrolla platform in the UAW-staffed Nummi plant in Fremont California. While historically, Toyota is known for its persnickity attention to quality, the NUMMI plant has had its share of quality control lapses in the past, so the reliability scores of the Matrix and the Vibe have generally run about average overall. Most of the information below about the Vibe also applies to the Toyota Matrix as well. [CORRECTION 2/12/2008 A UAW REPRESENTAIVE PASSED WORD TO ME THAT THE TOYOTA MATRIX IS NOT BEING BUILT AT FREMONT. UNTIL I HEAR OTHERWISE, YOU SHOULD PRESUME THAT THE MATRIX IS NOT AN "APPROVED" CAR. SH]

The 2009 Vibe is the first major update to the nameplate, which debuted in 2002. Even so, this isn't a ground-up redo. The underlying mechanicals were touched up, and the body was restyled with a little more swoop and less Aztek. As a side effect, the Vibe makes do with a wee bit less room this year than last. The interior was modernized with the requisite chrome-ish metal trim and iPod jack. There's a cool cargo divider in the hatch that should come in handy when you are shopping for groceries.

If there's any element of the Vibe that's disappointing, it's in the powertrain department. The base-model vibe's engine received a mild horsepower boost, from 126 to 132 horsepower, but torque is only up 2 lb./ft from 126 to 128. The added power lines up against an extra 150 lbs of weight (mostly added safety equipment such as airbags all-around), so this car is perhaps not as sprightly as the car it replaces. It doesn't help things that the Vibe may be one of the last new cars to be introduced with a 4-speed automatic transmission. The GT model and AWD model of the Vibe receive a 158 horsepower version of the 2.4 liter engine from the Toyota Camry. None of the Vibe models are class-leaders in fuel economy. The 1.8 liter manual transmission base model is rated at 26/32 MPG. The 158 horsepower AWD is truly disappointing at 19 and 25. It is likely that a Vibe/matrix will have worse fuel economy and performance than the larger Pontiac G6 or Toyota Camry parked next to it on the dealer lot. This will be especially true for the 2009 model year when the G6 is slated to receive a 6-speed automatic transmission for its Ecotech 4-cylinder engine. IMHO, the Vibe probably would have been better off with a GM powertrain.

Still, if you are looking for a handy, small-ish hatchback, and it has to be UAW-made, you might as well start and end your search with the Vibe or Matrix. Ford no longer markets a hatchback Focus in the US. The hatchback versions of the Cobalt/G5 are more sporty than functional, and the Dodge Caliber, despite a few interesting features, doesn't really come off as a quality piece of work.

For more information check out the
Autoblog coverage
carofthefuture blog coverage
Official Pontiac Site (Turn down your speakers, the distorted rap music is very annoying.)
Picture: Pontiac Underground Blog
Edmunds coverage

So, What's the Deal with Plastech?

http://www.blogger.com/img/gl.link.gif
This week's big auto news, overshadowing the Chicago Auto Show, has been Chrysler'http://www.blogger.com/img/gl.link.gifs near brush with the possibility of meltdown thanks to a company named Plastech Engineered Products. The obscurity of the company suggested a trip to Wikipedia would be in order.

that Plastech Engineered Products is the largest women -owned business in the state of Michigan. It has 7,600 employees in 36 manufacturing facilities and two corporate offices in North America. Plastech started with a single plant in Caro, Michigan in 1988. Obviously, it has grown quickly since then to its current (until recently) annual sales level of $1.7 billion. This figure was helped in no small part four plants aquired from (or pawned off by) Johnson Controls in 2007 with a combined sales level of $700 million per year.

, Chrysler CEO Robert (aka "Dean Bob") Nardelli told reporters at the Chicago Auto Show that Chrysler was ending its relationship with Plastech because Plastech tried to raise its prices. What? A plastics company raising its prices the cost of oil skyrockets?

Right now there is an interim deal between Plastech and Chrysler to keep the supply of key components up until February 15th. One would assume that Chrysler would not have attempted to recover its tooling without a substitute supplier lined up. It would be easy to paint Plastech CEO Julie Brown as the villian, threatening the stability of Chrysler and its thousands of jobs. On the other hand, you could think of her as being a champion of American manufacturing, fighting a rear-guard action, defending 7,600 jobs (many unionized) against the forces of globalization.

Plastech CEO Julie Brown has certainly led a very diverse life. Not only does she have an undergraduate degree in Computer Science, and a Masters in Engineering, and run a maor corporation, since the 1980's she's maintained separate identities in the entertainment industry. As "West Coast" Julie Brown, she was the comic genius behind Earth Girls are Easy and Everybody Run, the Homecoming Queen's Got a Gun. As "Downtown" Julie Brown, she was an MTV VJ, and has popped up in countless cameos and hosting roles. Here's an excuse to post a link to the Homecoming Queen's Got a Gun

Voluntary Foreclosure Avoidance Programs Not Working
Should "Hope Now" loans be replaced by "Luna" loans?

It seems like just yesterday that George W. Bush came on TV, introducing the "Hope Now" program, and talking about a hotline that you could call to get help with your subprime adjustable mortgage. In George's world, that works really well. The problem is that the world that George Bush lives in and the real world rarely intersect. He might as well have appointed Luna Lovegood the head of his Hope mortgage refinancing program. Perhaps she could see these mythical remedial loan offers. The rest of us can't. Perhaps the "Hope Now" loans should be retitled "Luna" loans. (Perhaps Luna should replace Aphonso Jackson as Head of the Department of Housing and Urban Development.)

According to a study by the Center for Responsible Lending, only 3% of homeowners with adjustable rate subprime loans are likley to receive a streamlined loan modification. Lenders were 13 times more likely to foreclose than modify a problem loan.

Of all the subprime toxic loans that I've seen at UAW-LSP, I've never seen a lender come forward with a modification that we didn't cram down their throat by either suing under TILA or HOEPA, or threatening to sue. There have been occasions where the lenders let the consumers stay in a house for years without making payments for reasons that I don't 100% understand. I believe it's because the loans are securitized and they can't clear up the ownership well enough to sue to get them out.

Drink Responsibly
- Buckle Up Your Beer

Tina Williams understands how important it is to use safety belts. She had her case of beer snugly protected by the safety belt in the front passenger seat when she was pulled over by the cops. Her one year old child? Not so much. I wonder if this incident will be made into a Super Bowl commercial.

Britney, we've found somebody for you to hang with.

Chrysler and Plastech Reach Interim Agreement
Shutdown of all Chrysler Plants avoided - for now

Breaking news from the Automotive News website, Chrysler and supplier, PLastech have reached an interim agreement for Plastech to ship parts to Chrysler through February 15.

Today's Wall Street Journal included more information on the problem with supplier Plastech that shut down four Chrysler plants and threatened to shut down more. In fact, according to the WSJ, every Chrysler plant could ultimately be affected.

Apparently, Plastech has been on the verge of bankruptcy for some time. Last year it negotiated an assistance agreement with its customers that included a substantial cash payment to Plastech. That wasn't enough, so when Plastech went to Chrysler last week with hat in hand, begging for more assistance, Chrysler said enough is enough, and demanded that Plastech return the Chrysler-owned molds and tooling used by Plastech. Instead of returning the equipment, Plastech filed bankruptcy.

Until the interim deal was struck today, Chrysler was scheduled to go to bankruptcy court tomorrow to get the molds returned on an emergency basis. Presumably that court date is off the table. I would guess that neither Chrysler nor Plastech was as prepared as they would prefer to be for a court proceeding upon which the future of each company could depend.

So, 10 days from now we could be back where we are now, facing a big shutdown of all Chrysler facilities. Given Chrysler's already shakey foundation, and given Cerberus's limited desire and ability to sink new money into the company, it wouldn't take a long shut down to give Cerberus the cover to shut down operations and sell off the company piecemeal. Memo to Plastech: This ain't General Motors you're dealing with. Don't f*** with Cerberus.

The Logic of the Illogical: Your Credit Score

Only on the Bizzaro planet would you expect a system as strange as the FICO credit scoring model established by the Fair Issacs Corporation, the system used by almost all the consumer finance industry. Closing an unused account is simple prudence, right? No, not on the Bizzaro planet, and not with FICO. It makes sense to consolidate high interest rate debt into a single lower interest account, right? Nope - FICO Bizzaro again. Here's a link to an MSN Money article with more on the irrationalities of FICO.

Speaking of credit scores. Starting this year, Fair Issac will be offering a different model to establish your score. Under the new model, you will no longer be rewarded for "piggybacking" as an authorized user on an account of a person with A+ credit. ON the other hand, you will not be punished quite as much for a single major delinquency. You will be punished more for seeking credit, but rewarded for handling a diverse mix of credit. The FICO 08 model will be phased in as market demand allows. The truth be told, Fair Issac has always tailored its scoring systems to the demands of its customers, to the point where it would be largely inaccurate to say that anyone actually had a truly standardized credit score. For more information on FICO 08 see this link to MSN Money.

Thanks to PAD for the link.

Supplier Bankruptcy Shuts Down 4 Chrysler Plants

Multiple sources report that automoative supplier Plastech, Engineered Products Inc. has filed Chapter 11 bankruptcy, and has cut off supply to Chrysler Corporation. Supplies continue to Ford and General Motors. Plastech provides key interior bits for most of Chrysler's recent models. By strange coincidence, the cars affected the ones that I consider to be the worst in Chrysler's line up: the Sebring, Avenger, Nitro, Liberty, Caliber, Compass, Patriot, Durango and Aspen, collectively Chrysler's greatist [S]hits. (Actually, the Jeep Liberty is a big seller and big money-maker for the company -- why, I couldn't tell you.) Four factories producing these vehicles are currently shut down, including the Belvidere, Illinois plant that I like to call "Brocktoon". Other closed plants include Sterling Heights, Newark, and Toledo. No word yet on when the plants will reopen.

I'm wondering if Chrysler's contract with the UAW contains an escape clause for shut-downs caused by suppliers? In that case, it would be an act of brilliance to identify an expendible supplier that supplies only plants that you want to close, stop paying the supplier, and play victim when you have to shut down the plants that you wanted to shut down anyway.

See Detroit Free Press (freep.com)