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Friday, May 15, 2009
Happy If You Buy a New Car, You're Crazy Month
Perhaps I'm slow, but I just realized that we are now officially halfway through with If You Buy a New Car, You're Crazy month. You're crazy if you buy a new car in May 2009 because, chances are, you can get a deal in June that's enough better than May that you can pay to rent a car the entire month with the difference.
There are many reasons why. Chrysler is in Chapter 11. GM is just a couple weeks away. Between GM and Chrysler, almost 2,000 dealers with 120 days of inventory apiece will be losing their franchises and dumping their cars on the market. If the average car dealer sells 785 cars per year, let's say these "underperforming" dealers sell 500. Math time: 120/365 * 500 * 2000 = 328,767 extra cars stuffing the channels, and that's just the new cars. Many of these dealers will be liquidating their used cars also, so you can double this figure.
The economic malaise continues, foreclosures are still going up. Money is still tight. Buyer resistance due to bankruptcies and lack of local dealer support thanks to dealer reductions should reduce demand for Chrysler and GM products to the point where even more incentives are necessary to drive enough demand to support minimal operations.
Add to this uncertainty over the cash for clunkers law. If you are looking to upgrade your old car, you have every reason to wait until Congress passes a cash for clunkers law, otherwise you are throwing away $3,500 to $4,500.
All of these factors suggest that May sales could be shockingly low, significantly below the 9-10 million annual rate that has prevailed the past few months.
I hope I'm wrong, but I can imagine sales over the next couple months at an annual rate of 7-8 million units/year. If this ends up being true, then summer plant shutdowns will last well into fall. I don't have all the answers, but I have one suggestion: decouple the cash for clunkers bill. You need to separate the distinct policy goals of stimulating the auto market and that of getting inefficient polluting cars off the street. Give buyers a tax-credit that is based upon the EPA rating of the car, regardless of whether you buy it before or after the credit is in place, and have a separate program that rewards vehicle owners if they scrap a clunker. By making it clear that the incentives will be paid whenever the vehicle is bought/scrapped this year regardless of the enactment date of the new legislation, you will reduce the number of fence-sitters.
Perhaps I'm slow, but I just realized that we are now officially halfway through with If You Buy a New Car, You're Crazy month. You're crazy if you buy a new car in May 2009 because, chances are, you can get a deal in June that's enough better than May that you can pay to rent a car the entire month with the difference.
There are many reasons why. Chrysler is in Chapter 11. GM is just a couple weeks away. Between GM and Chrysler, almost 2,000 dealers with 120 days of inventory apiece will be losing their franchises and dumping their cars on the market. If the average car dealer sells 785 cars per year, let's say these "underperforming" dealers sell 500. Math time: 120/365 * 500 * 2000 = 328,767 extra cars stuffing the channels, and that's just the new cars. Many of these dealers will be liquidating their used cars also, so you can double this figure.
The economic malaise continues, foreclosures are still going up. Money is still tight. Buyer resistance due to bankruptcies and lack of local dealer support thanks to dealer reductions should reduce demand for Chrysler and GM products to the point where even more incentives are necessary to drive enough demand to support minimal operations.
Add to this uncertainty over the cash for clunkers law. If you are looking to upgrade your old car, you have every reason to wait until Congress passes a cash for clunkers law, otherwise you are throwing away $3,500 to $4,500.
All of these factors suggest that May sales could be shockingly low, significantly below the 9-10 million annual rate that has prevailed the past few months.
I hope I'm wrong, but I can imagine sales over the next couple months at an annual rate of 7-8 million units/year. If this ends up being true, then summer plant shutdowns will last well into fall. I don't have all the answers, but I have one suggestion: decouple the cash for clunkers bill. You need to separate the distinct policy goals of stimulating the auto market and that of getting inefficient polluting cars off the street. Give buyers a tax-credit that is based upon the EPA rating of the car, regardless of whether you buy it before or after the credit is in place, and have a separate program that rewards vehicle owners if they scrap a clunker. By making it clear that the incentives will be paid whenever the vehicle is bought/scrapped this year regardless of the enactment date of the new legislation, you will reduce the number of fence-sitters.
Thursday, May 14, 2009
Chrysler Axes 789 Dealers
(GM to cut 1,000 Dealers by Friday)
Chrysler published a list of 789 dealers whose franchises are being terminated effective June 9. The list is posted here at Autonews.com. Among the excised dealers will be Palmer Dodge Chrysler Jeep, the Dodge dealer closest to my office. In other words, I know don't have a bat's chance in hell at getting my car into the shop and getting to the office in a reasonable time. I don't understand the logic of thinking that you can sell more cars with fewer dealers. Granted too many dealers is a problem, but it's not nearly as bad as not having ENOUGH dealers.
I can understand the argument that if a company is going to go in and out of bankrutpcy within a short period of time (2 months), it has to act decisively in cutting dealer ranks down to a sustainable level. After all, bankruptcy may be the only way to cut dealers without paying them huge compensation. This rationale is less compelling when the bankrupcy process is not going to be quick. Yesterday it was disclosed that Chrysler's 2 month bankruptcy plan is looking more like a 2 year plan.
This Chrysler bankruptcy seems to be turning into a fiasco of major league proportions, Saving the company in name isn't saving jobs at the dealer level, isn't keeping suppliers from filing bankruptcy and laying off employees, and isn't saving employees from being financially ruined as their plants close temporarily and permanently. Chrysler is using our taxpayer money to advertise vehicles that don't exist and to try to preserve sales channels for imported Fiats. In the meantime, huge Chrysler discounts are contributing to an incentive war where 25% of the vehicles are being sold below dealer cost. Although it's good for current buyers, this kind of discounting is unsustainable.
(GM to cut 1,000 Dealers by Friday)
Chrysler published a list of 789 dealers whose franchises are being terminated effective June 9. The list is posted here at Autonews.com. Among the excised dealers will be Palmer Dodge Chrysler Jeep, the Dodge dealer closest to my office. In other words, I know don't have a bat's chance in hell at getting my car into the shop and getting to the office in a reasonable time. I don't understand the logic of thinking that you can sell more cars with fewer dealers. Granted too many dealers is a problem, but it's not nearly as bad as not having ENOUGH dealers.
I can understand the argument that if a company is going to go in and out of bankrutpcy within a short period of time (2 months), it has to act decisively in cutting dealer ranks down to a sustainable level. After all, bankruptcy may be the only way to cut dealers without paying them huge compensation. This rationale is less compelling when the bankrupcy process is not going to be quick. Yesterday it was disclosed that Chrysler's 2 month bankruptcy plan is looking more like a 2 year plan.
This Chrysler bankruptcy seems to be turning into a fiasco of major league proportions, Saving the company in name isn't saving jobs at the dealer level, isn't keeping suppliers from filing bankruptcy and laying off employees, and isn't saving employees from being financially ruined as their plants close temporarily and permanently. Chrysler is using our taxpayer money to advertise vehicles that don't exist and to try to preserve sales channels for imported Fiats. In the meantime, huge Chrysler discounts are contributing to an incentive war where 25% of the vehicles are being sold below dealer cost. Although it's good for current buyers, this kind of discounting is unsustainable.
Wednesday, May 13, 2009
Office Fridge Sends 7 to the Hospital
Is your office fridge a toxic waste zone? USA Today reports on an office in San Jose, California that can do you one better. Seven people went to the hospital due to noxious fumes when a coworker finally decided to clean the office fridge.
Take it, Weird Al
Is your office fridge a toxic waste zone? USA Today reports on an office in San Jose, California that can do you one better. Seven people went to the hospital due to noxious fumes when a coworker finally decided to clean the office fridge.
Take it, Weird Al
Lull in the Action
We are in a lull period regarding auto industry news. Even so, here are some quickees. Links when I have the time. GM is going to import cars from China. Ford is riding a "dead cat bounce", at least its stock is, so Ford did a quicky public stock offering to generate some cash. Chrysler's bankruptcy could take 2 years to complete. Delphi could face liquidation due to plummeting orders of its parts. Visteon is facing a "going concern" report from its accountants, despite a small quarterly profit. Nissan reported its first loss in a long time.
We are in a lull period regarding auto industry news. Even so, here are some quickees. Links when I have the time. GM is going to import cars from China. Ford is riding a "dead cat bounce", at least its stock is, so Ford did a quicky public stock offering to generate some cash. Chrysler's bankruptcy could take 2 years to complete. Delphi could face liquidation due to plummeting orders of its parts. Visteon is facing a "going concern" report from its accountants, despite a small quarterly profit. Nissan reported its first loss in a long time.
Monday, May 04, 2009
Chrysler's Lawyers' Sneak Attack Fails
According to ttac.com, Chrysler's lawyers tried to pull a fast one on the secured creditors with a Tora Tora Tora sneak attack on the non-TARP secured lenders. Chrysler filed a motion to have all of Chrysler's valuable assets transferred into a new company. They filed the motion at 7:30 Sunday evening and asked for a hearing Monday morning at 10:00 AM. Talking about SOB litigators! Can you imagine if one of us tried the same stunt? The secured creditors were ready and filed a reply, making sure the important stuff won't be heard on the rocket docket.
The non-TARPees came out swinging with some pretty interesting arguments as to why Chrysler's (and the government's) plan is illegal and prejudicial to the secured creditors.
This one promises to be a real slugging match.
According to ttac.com, Chrysler's lawyers tried to pull a fast one on the secured creditors with a Tora Tora Tora sneak attack on the non-TARP secured lenders. Chrysler filed a motion to have all of Chrysler's valuable assets transferred into a new company. They filed the motion at 7:30 Sunday evening and asked for a hearing Monday morning at 10:00 AM. Talking about SOB litigators! Can you imagine if one of us tried the same stunt? The secured creditors were ready and filed a reply, making sure the important stuff won't be heard on the rocket docket.
The non-TARPees came out swinging with some pretty interesting arguments as to why Chrysler's (and the government's) plan is illegal and prejudicial to the secured creditors.
This one promises to be a real slugging match.
Sunday, May 03, 2009
Why There Aren't More Consumer Lawyers -
Michigan Supreme Court Guts State Consumer Protection Act
You'd think that a consumer that when you go to a car dealer and buy a certified used car described as a "demo" that it wouldn't be made of the front and back ends of two different wrecked cars welded together. According to this Detroit Free Press article, that was too much for Paulette Day to expect when she paid $20,350 for a 2004 Chevrolet Monte Carlo at Rowan Pontiac GMC. You'd think that if you get such a Frankenstein mobile, you might have a remedy at law against the folks that sell it to you.
Nay, Nay says the Michigan Supreme court. The Michigan Supreme Court has gutted the 1976 Consumer Protection Act by ruling that any company regulated by state or federal law is exempt from the Act. Now new and used car dealers, mortgage brokers, debt collectors can engage in outrageous practices free from liability under the Consumer Protection Act. The practical effect of this is that private attorneys are robbed of the principal tool they could use to get attorney fees payed by the deceptive business. Without a general consumer protection act, an attorney might be able to sue for breach of contract or a common law tort, but any business can successfully ward off such suits by wasting the plaintiff attorney's time and thereby making it uneconomical to pursue the suit.
You'd think that Michigan Governor Jennifer Granholm, a former Attorney General with eyes on higher political office, would be able to lead an effort to get the law strengthened. You'd think.
Michigan lawyers and consumers, you have my sympathy. Indiana's law isn't much better. Indiana's Deceptive Consumer Sales Act has a one year statute of limitations and lots of loopholes.
I found a link to a report compiling a summary of the consumer protection laws of all 50 states. This report, by Carolyn Carter of the National Consumer Law Center is an excellent resource. As it turns out, there are a lot of state laws that have severe flaws. Check out the report to see about your state.
Michigan Supreme Court Guts State Consumer Protection Act
You'd think that a consumer that when you go to a car dealer and buy a certified used car described as a "demo" that it wouldn't be made of the front and back ends of two different wrecked cars welded together. According to this Detroit Free Press article, that was too much for Paulette Day to expect when she paid $20,350 for a 2004 Chevrolet Monte Carlo at Rowan Pontiac GMC. You'd think that if you get such a Frankenstein mobile, you might have a remedy at law against the folks that sell it to you.
Nay, Nay says the Michigan Supreme court. The Michigan Supreme Court has gutted the 1976 Consumer Protection Act by ruling that any company regulated by state or federal law is exempt from the Act. Now new and used car dealers, mortgage brokers, debt collectors can engage in outrageous practices free from liability under the Consumer Protection Act. The practical effect of this is that private attorneys are robbed of the principal tool they could use to get attorney fees payed by the deceptive business. Without a general consumer protection act, an attorney might be able to sue for breach of contract or a common law tort, but any business can successfully ward off such suits by wasting the plaintiff attorney's time and thereby making it uneconomical to pursue the suit.
You'd think that Michigan Governor Jennifer Granholm, a former Attorney General with eyes on higher political office, would be able to lead an effort to get the law strengthened. You'd think.
Michigan lawyers and consumers, you have my sympathy. Indiana's law isn't much better. Indiana's Deceptive Consumer Sales Act has a one year statute of limitations and lots of loopholes.
I found a link to a report compiling a summary of the consumer protection laws of all 50 states. This report, by Carolyn Carter of the National Consumer Law Center is an excellent resource. As it turns out, there are a lot of state laws that have severe flaws. Check out the report to see about your state.
Saturday, May 02, 2009
Chrysler to Close 8 Plants -
But NOT Reduce the Workforce?
Chrysler's bankruptcy plan outlines that it plans to close 8 plants in the United States before the end of 2010. Two of those plants are already idle, St. Louis South and Newark, Delaware.
The other plants are
Altogether these plants employ about 5,000 workers. By my reckoning, the closed plants account for half or so of Chrysler's (USA-based) final assembly capacity. Two assembly plants in Canada and two assembly plants in Mexico are not set for closure.
Despite the efforts of the PTFOA to ferret the bullshit out of Chrysler plans, there seems to still be quite a bit of fantasy in Chrysler's bankruptcy plan.
Don't be surprised if this plan gets more scrutiny in the bankruptcy court than Chrysler and The PTFOA are anticipating. You can't ignore the April sales figures, with car sales down more than 60% compared to last year. For example, the Sebring & the Avenger only sold 16,875 units combined through April. That's a third of a year. That puts them on a yearly pace of 50,000 units, or roughly a fourth of a two shift modern assembly plant capacity. They only reached that level with Employee Pricing Plus Plus. In other words, each car is apparently being sold at a loss. Why wait until 2010 to put these cars out of their misery? There's not much difference between having a gaping hole in the middle of your lineup and having a couple cardboard cutouts trying to hide the gaping hole in your lineup.
Chrysler is maintaining that almost no more jobs will be lost with this diminished plant capacity. I find this hard to believe. Even if it's technically true, the workers won't be relying much on Chrysler for their daily bread.. The workers making cars that aren't selling will be surviving on unemployment and sub-pay for 8 months a year at the current rate of sales. The pay coming from Chrysler will basically be coming from Uncle Sam's bankruptcy financing. When their plants close in a year or so, there will be about 5,000 people that will have to find work in another town, mostly another state, making Chrysler's new generation of cars (mostly Fiats) that will have no track record of reliability or dependability, and that's assuming the jobs don't go to Mexico and Canada.
But NOT Reduce the Workforce?
Chrysler's bankruptcy plan outlines that it plans to close 8 plants in the United States before the end of 2010. Two of those plants are already idle, St. Louis South and Newark, Delaware.
The other plants are
Sterling Heights, MI. (Sebring & Avenger)
Detroit Axle
Conner Avenue Assembly (home of the Viper)
St. Louis North (Ram)
Kenosha, WI (engines)
Twinsburg OH (stamping)
Altogether these plants employ about 5,000 workers. By my reckoning, the closed plants account for half or so of Chrysler's (USA-based) final assembly capacity. Two assembly plants in Canada and two assembly plants in Mexico are not set for closure.
Despite the efforts of the PTFOA to ferret the bullshit out of Chrysler plans, there seems to still be quite a bit of fantasy in Chrysler's bankruptcy plan.
Don't be surprised if this plan gets more scrutiny in the bankruptcy court than Chrysler and The PTFOA are anticipating. You can't ignore the April sales figures, with car sales down more than 60% compared to last year. For example, the Sebring & the Avenger only sold 16,875 units combined through April. That's a third of a year. That puts them on a yearly pace of 50,000 units, or roughly a fourth of a two shift modern assembly plant capacity. They only reached that level with Employee Pricing Plus Plus. In other words, each car is apparently being sold at a loss. Why wait until 2010 to put these cars out of their misery? There's not much difference between having a gaping hole in the middle of your lineup and having a couple cardboard cutouts trying to hide the gaping hole in your lineup.
Chrysler is maintaining that almost no more jobs will be lost with this diminished plant capacity. I find this hard to believe. Even if it's technically true, the workers won't be relying much on Chrysler for their daily bread.. The workers making cars that aren't selling will be surviving on unemployment and sub-pay for 8 months a year at the current rate of sales. The pay coming from Chrysler will basically be coming from Uncle Sam's bankruptcy financing. When their plants close in a year or so, there will be about 5,000 people that will have to find work in another town, mostly another state, making Chrysler's new generation of cars (mostly Fiats) that will have no track record of reliability or dependability, and that's assuming the jobs don't go to Mexico and Canada.
Friday, May 01, 2009
April 2009 Sales Numbers - Industry Down 1/3
Ford & GM Better than Expected - Chrysler Sales Plummet
Ford sales were down 31% from last year, but for the first time this year, Ford outsold Toyota, because Toyota was down 42%. Ford continues to gain market share by having its sales go down by a lower percentage than the sales of rival makes.
GM sales were down 34%, roughly even with the industry average. Given all the negative publicity over GM's finances, average is probably a win.
Chrysler sales were shockingly bad. Chrysler cars were down 61% compared to last year, and Chrysler trucks were down 44%. (Remember, this is with Employee Plus Plus pricing, that is, the employee price, cash back and 0% financing.) Total Chrysler sales were 48% below last year. Last year was no great shakes. Sales in April 2008 were 28% below 2007. In other words, prior to filing bankruptcy, Chrysler's sales were only 37% what they were two years ago, and two years ago Chrysler was already in bad enough shape that Daimler was bailing out and effectively paying Cerberus to take over the company.
Ford & GM Better than Expected - Chrysler Sales Plummet
Ford sales were down 31% from last year, but for the first time this year, Ford outsold Toyota, because Toyota was down 42%. Ford continues to gain market share by having its sales go down by a lower percentage than the sales of rival makes.
GM sales were down 34%, roughly even with the industry average. Given all the negative publicity over GM's finances, average is probably a win.
Chrysler sales were shockingly bad. Chrysler cars were down 61% compared to last year, and Chrysler trucks were down 44%. (Remember, this is with Employee Plus Plus pricing, that is, the employee price, cash back and 0% financing.) Total Chrysler sales were 48% below last year. Last year was no great shakes. Sales in April 2008 were 28% below 2007. In other words, prior to filing bankruptcy, Chrysler's sales were only 37% what they were two years ago, and two years ago Chrysler was already in bad enough shape that Daimler was bailing out and effectively paying Cerberus to take over the company.
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