Automakers woes

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Ford slashes output as economy worsens...

Ford cuts production, moves back profit goal
22 May,`08 - Citing high gas prices, weak sales forecast, automaker will cut production for rest of the year.

Ford Motor Co. no longer expects to return to profitability by 2009 and is cutting North American production of pickups and SUVs for the rest of this year as high gas prices and the weak economy hurt sales, the company announced Thursday. The Dearborn-based automaker also cut back its projections for total U.S. sales in 2008 to between 15 million and 15.4 million vehicles. That’s down from 17 million vehicles as recently as 2005.

“Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American Automotive profitability goal,” Ford President and Chief Executive Alan Mulally said in a statement. Ford said it will cut production by 15 percent in the second quarter, 15 to 20 percent in the third quarter and 2 to 8 percent in the fourth quarter. The cuts will primarily affect pickups and sport utility vehicles, which have seen sales plummet in recent months.

Ford plans to increase its production of cars and crossovers through additional shifts and overtime. But the company’s mix of vehicles remains heavily tilted to trucks and SUVs. Ford had said in March it planned to cut second-quarter production by 10 percent and confirmed additional cuts at factories in Michigan and Kentucky earlier this week. But it revealed the full extent of the cuts Thursday.

Production cuts hurt revenues, because automakers book vehicles as sold once they leave the factory. Consumers have been shifting to smaller, more fuel efficient cars in the last few months at a pace that stunned the industry. Through April, U.S. sales of subcompact cars shot up 33 percent, while sales of large SUVs were down 29 percent, according to Autodata Inc. Overall U.S. sales were down 8 percent in that period.

Ford cuts production, moves back profit goal - Autos - MSNBC.com

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Things gettin' worse...

Indicators: Economy continues to contract
Leading index has slipped for six months ending June, rate of drop improves
Mon., July. 21, 2008

Factories laying off workers, stocks tumbling and shoppers ditching their credit cards forced the economy to contract in June, a trend likely to continue in the second half of 2008, a private business group said Monday. The New York-based Conference Board's forecast of future economic activity fell 0.1 percent last month, in line with forecasts by Wall Street economists surveyed by Thomson Financial/IFR. The group on Monday also revised May's number downward to a 0.2 percent decrease, from a 0.1 percent increase.

The financial crisis, high gas and food prices, and the weak dollar "are all combining to produce unrelenting downward pressure on economic activity," said Ken Goldstein, labor economist with the Conference Board. "This is also why it wouldn't take much to push the economy so it's even weaker in the second half of 2008." The index has slipped 0.9 percent for the six months ending in June, but the rate of decline has improved since the first quarter. The index is designed to forecast where the economy is heading in the next three to six months based on 10 economic components, including stock prices, building permits and initial claims for unemployment benefits.

Downturns in the auto and housing industries have been devastating for the manufacturers that produce everything from spark plugs to vinyl siding. And more job cuts are almost certain: General Motors Corp. said Friday more factories likely will close as it slashes production of trucks and sport utility vehicles by 300,000 by the end of the year. Manufacturers that make anything related to cars and trucks have been laying off workers, cutting their hours, selling the companies or shutting their doors, said Ralph Hardt, president of Feintool Inc., a Cincinnati component maker. "The number of auction flyers that come across my desk is back where it was in 2000, 2001, the last recession we had," he said.

More Indicators: Economy continues to contract - Stocks & economy - MSNBC.com

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Moving away from gas guzzler SUV's...

Ford speeds up move to small cars
July 25, 2008 - FORD has announced plans to accelerate its vast restructuring plan after the auto giant posted its worst quarterly loss in history.

The carmaker has now lost nearly $US24 billion ($25bn) since 2006 and recently backed off plans to return to profitability by 2009 as high fuel prices and a weak US economy have substantially cut demand in its home market. This latest revision to Ford's restructuring plan includes a small-car and fuel-efficiency offensive in reaction to what the carmaker considers a permanent shift away from petrol-guzzling pick-up trucks and large sport utility vehicles (SUVs).

Ford would also accelerate plans to streamline its global operations and will reduce the number of vehicle platforms it offered to nine from 25, Ford president and chief executive Alan Mulally said. "We continue to take fast and decisive action implementing our plan and responding to the rapidly changing business environment,'' he said.

"Our European and South American operations are robust and profitable. We have momentum in Asia. And we are uniquely positioned to leverage our global assets and the global strength of the Ford brand to quickly bring more small, fuel-efficient vehicles to North America.'' Ford said it was speeding up its reorganisation in North America "because of deteriorating economic conditions'' that have hurt demand for cars and due to "a significant shift'' away from large pickup trucks and traditional SUVs.

More Ford speeds up move to small cars | Business Breaking News | News.com.au

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GM cuttin' production...

GM slashes another 117,000 vehicles
July 28, 2008: Latest production cuts bring General Motors' total reductions to just below the 300,000 units officials had hoped for this year.

General Motors Corp. said Monday it will cut production by another 117,000 vehicles, citing continued weakness in consumer demand for pickup trucks and sport utility vehicles. GM spokesman Tony Sapienza said the Detroit-based automaker will achieve the cuts by eliminating one shift each at its Moraine, Ohio, and Shreveport, La., plants. Most of the cuts will affect production of trucks and sport utility vehicles. The Moraine plant makes the Chevrolet TrailBlazer, GMC Envoy, Buick Ranier, Isuzu Ascender, Saab 9-7x midsize SUVs, while the Shreveport plant currently produces the GMC Canyon, Chevrolet Colorado and Hummer H3.

The cuts bring GM's total production cuts to just under the 300,000 units company officials had hoped to cut this year, Sapienza said. GM also is looking at the possibility of idling production at other truck and SUV plants later this year to further align its offerings with consumer demand, he said. Record-high gas prices and a weak overall economy have led to a steep drop in U.S. sales of trucks and SUVs this year, as consumers have opted for small, more fuel-efficient passenger cars or put off buying new vehicles all together. GM's U.S. sales were down about 16% for the first half of this year, largely as a result of a plunge in truck sales, and it's not the only automaker facing lower demand.

Japanese rival Toyota Motor Corp., which outsold GM by 277,532 vehicles worldwide in the first six months of this year, cut its global sales forecast earlier Monday by 350,000 vehicles to 9.5 million, blaming sluggish North American sales. Toyota also is shifting production from SUVs and trucks to smaller models. It said earlier this month that it plans to shut down truck and SUV production at its U.S. plants for three months starting in August, and it will start building the Prius hybrid in the U.S. for the first time in 2010. GM shares fell 42 cents, or 3.5%, to $11.48 in midday trading.

Source

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What's bad for GM is bad for America...

GM posts $15.5 billion loss
August 1, 2008: Even excluding charges, automaker loses far more than expected as vehicle sales tumble.

General Motors reported a huge second-quarter net loss Friday of $15.5 billion after restructuring and other charges. The automaker lost $27.33 per share in the quarter, compared to a profit of $784 million, or $1.37 per share, a year ago. Even factoring out those charges, GM posted a stunning $6.3 billion loss on operations. That works out to $11.21 per share, far above the $2.62-a-share loss projected by Thomson Reuters.

Last year, the company earned $1.3 billion on that basis, or $2.29 per share, as it attempted to turn around years of losses. GM stock fell 7.5% in pre-market trading. The automaker posted revenue of $37.7 billion from auto operations, down from $45.8 billion a year ago. Analysts polled by Thomson Reuters were expecting revenue of $44.6 billion.

The lost revenue was likely due to a significant decline in vehicle sales. GM sold nearly 5% fewer vehicles this quarter than it did over the same time last year. U.S. sales took the biggest hit, falling 21%, although foreign sales rose 7%. In a press release, GM said its results were impacted by $9.1 billion of predominantly non-cash special items.

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Wall Street spooked by GM loss
August 1, 2008: Futures turn lower after automaker books $15.5 billion loss. Investors await July jobs report.

U.S. stock futures plunged into the red Friday following a whopping loss by automaker General Motors, while investors braced for the government's monthly reading on employment. Less than two hours before the open, Nasdaq and S&P futures were narrowly lower, pointing to a negative open..

Further reaction was expected after the Labor Department released its July jobs report at 8:30 a.m. ET. GM: Sending futures lower was a hefty second-quarter net loss of $15.5 billion, or $27.33 per share, for GM. However the automaker said the loss was affected by $9.1 billion of predominantly non-cash special items.

GM shares fell nearly 9% in premarket trading on the news. GM, Ford and other automakers were also on tap to report their U.S. sales for July. Auto sales tracker Edmunds.com predicted a 3.3% drop in auto sales compared to a year ago.

More CNNMoney.com Pre-Market Report - Aug. 1, 2008

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Noticed Ford offering employee discounts to buyers...

U.S. Vehicle Sales Fall 13.2% Amid High Gas Prices and Tight Credit
August 2, 2008 - Vehicle sales in the United States fell last month to their lowest level in 16 years, as consumers continued to shun large trucks because of high gas prices, and tight credit kept less creditworthy customers off lots.

Sales were down 13.2 percent, at a time when the companies had expected to begin seeing an improvement. Instead, the five largest automakers each reported sales declines on Friday. Sales fell 26.1 percent at General Motors, the largest car company, while Chrysler, which used to be the third-largest, reported a 28.8 percent decline and came within a few thousand sales of falling to sixth place. The Ford Motor Company posted a 14.7 percent decline.

Together, the three Detroit automakers accounted for just 42.7 percent of the vehicle market last month, selling about 150,000 fewer vehicles than they had a year earlier. The declines in the United States market affected foreign automakers too. Toyota Motor reported an 11.9 percent decline, while Honda, which builds fewer trucks than its rivals and was the only large automaker to report a sales increase for the first half of the year, said its July sales decreased 1.6 percent. Nissan’s sales rose 8.5 percent on strong demand for its small cars.

As recently as this spring, executives in Detroit forecast that auto sales would rebound in the second half of 2008, as consumers spent their federal rebate checks and overcame difficulties in the housing market. But the July sales figures suggest that will not be the case. In fact, the industry’s annualized sales rate of 12.55 million was its lowest since April 1992, showing that the market is continuing to deteriorate.

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Maybe they could all three merge?...

Big Three face bankruptcy fears
August 6, 2008: After huge losses and plunging sales, experts aren't ruling out the possibility that GM, Ford or Chrysler might eventually be forced to declare bankruptcy.

It's been a bumpy road for Detroit's Big Three automakers for the past few years. But it may get worse. Some experts fear that GM, Ford and Chrysler - their sales plunging as fewer consumers buy gas-guzzling pickups and SUVs - could be forced to head for bankruptcy.

Last week, General Motors reported a $15.5 billion second quarter net loss. While its operating loss was only $6.3 billion, that's still more than the market value of the company. GM's loss followed an $8.7 billion loss at Ford Motor and came on the same day that the industry reported a 13% drop in sales, its worst month in 16 years.

Chrysler LLC, which was bought by private equity group Cerberus Capital a year ago and does not report financial results, relies even more heavily on sales of light trucks, such as pickups and SUVs, than do GM and Ford. Chrysler also has virtually no overseas sales to fall back upon. As such, the credit markets have expressed doubts about Chrysler's prospects, as its finance arm was recently able to raise only $24 billion of the $30 billion it sought. The company has stopped offering leases to its customers due to credit market concerns and the declining value its used vehicles.

'Clock is ticking'

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Buyers not satisfied with quality...

Car buyers' satisfaction with US brands stumbles
Aug 19, `08 - U.S. car buyers are growing less satisfied with their purchases from domestic automakers while their Asian and European competitors continue to improve, according to a recent survey.

Consumer satisfaction with U.S. auto brands slipped as Lexus and BMW tied for first place, followed by Toyota and Honda, according to the University of Michigan's American Customer Satisfaction Index released Tuesday. General Motors Corp. (GM) (GM)'s Buick and Cadillac brands, and Ford Motor Co. (F) (F)'s Lincoln and Mercury lines, fell from their No. 2 perch at a time when U.S. companies are struggling to outshine their competitors and reverse their shrinking sales and market share.

That's an unsettling sign for domestic automakers, said Claes Fornell, the University of Michigan business professor who heads the annual survey. Traditionally, U.S. brands improve their customer satisfaction scores each year, just not as much as their overseas counterparts. Now, the domestic companies' ratings are declining while their competitors' scores continue to climb. "This is somewhat of a double whammy here," Fornell said. "The struggling companies are getting an even tougher road in the near future. The question also is do they really have the resources, the cash here" to adapt.

The auto industry's customer satisfaction has increased steadily over time and its overall score of 82 - unchanged from the high set a year ago - is higher than many other industries the index tracks. In addition, just 11 points separate the best-scoring brand from the worst, but domestic automakers are having the hardest time adapting to high gas prices and a shift in demand toward more fuel efficient vehicles, and that is manifesting itself in weaker customer satisfaction, Fornell said.

More My Way News - Car buyers' satisfaction with US brands stumbles

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Now they pitchin' to get bailed out...

Auto industry seeks $50B in loans from Congress
WASHINGTON (AP) -- August 23, 2008: Low interest loans would be used to help them modernize the industry's assembly plants and develop next-generation fuel-efficient vehicles.

Automakers plan to urge Congress to support funding up to $50 billion in low-interest loans over three years to help them modernize their assembly plants and develop next-generation fuel-efficient vehicles. Industry officials said the loans, which are twice the amount authorized in last year's energy bill, are a top priority when Congress returns next month because of the declining fortunes of Detroit's automakers and tightening credit markets.

"The amount of concern and urgency from the Detroit companies has increased in the last month and significantly ratcheted up what they're communicating what their funding needs are," said Alan Reuther, legislative director for the United Auto Workers union.

Congress authorized $25 billion in low-interest loans in last year's energy bill, but the auto industry's allies in Congress have been unable to get funding for the plan. The loans would provide low-interest credit for up to 30 percent of the cost of retooling facilities to build hybrids, plug-in hybrids, electric cars and other alternatives.

Massive losses

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Big Three automakers linin' up at the trough...

Big Three bailout may be around corner
September 4, 2008: Automakers seek $50 billion in low-interest loans to convert plants from trucks to fuel efficient cars; presidential election could help their chances.

Plunging auto sales, high gas prices and election year politics could help convince Congress to approve a $50 billion loan package to embattled U.S. automakers that Detroit's Big Three claim is key to their future success. On Wednesday, General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC reported monthly sales declines of at least 20% from a year ago, as American car buyers continued to turn away from SUVs and pickups and towards more fuel efficient car models. The Big Three are now in the process of closing truck assembly lines and rushing to catch up with hybrid and other fuel efficient offerings from Toyota Motor (TM) and Honda Motor (HMC).

But with GM and Ford saddled with junk bond debt ratings and privately-held Chrysler with the thinnest capital cushion of the three, Detroit is caught in a credit squeeze that will make such investment difficult if not impossible. "Funding such a shift is a tough lift even under optimum circumstances," said GM spokesman Greg Martin. "The credit markets are suffering. You had this seismic inversion of the market where no one wants to buy a full-size truck." Thus, the automakers have deployed what one industry official describes as a "surge" of lobbyists and executives at both the Democratic and Republican Party's political conventions. The Big Three's hope is that if they can win speedy passage of the loan package, they can move more quickly to retool their plants to produce more smaller cars.

The $50 billion loan package, first proposed by the auto industry last month, has won the support of presidential candidates Barack Obama and John McCain as their campaigns eye key votes in Michigan and Ohio. On Tuesday, White House Press Secretary Dana Perino signaled the outgoing Bush administration was open to approving the loans. "It's something we're aware of and we're talking to the members of Congress and also the people in the industry, and thinking about what they might think would be required from their perspective," she said. But as much support as the idea has, the automakers say they can't let up until the loan package is not only signed into law but also funded by Congress. Last year's energy bill included up to $25 billion in loans to the Big Three, but lacked the necessary funding to actually make the money available.

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