This week’s Steven Rattner-Paul Ingrassia on-stage chat at a Dow Jones conference was lots of fun – if you’ve been around the car industry for a while, there’s no such thing as too much automotive inside baseball and gossip. At the end of the day, however, what has stayed with me is that we really don’t know how much money got pumped into General Motors and Ford during the crisis of 2008-09. Rattner, explaining and defending his stint as President Obama’s auto czar, maintains American taxpayers would get most of their money back if GM were to IPO today. But he himself admitted this doesn’t include the billions pumped into GMAC, GM’s erstwhile financing arm. And it wouldn’t seem to include the billions poured into GM and Chrysler in the months between November 2008 and the creation of the federal auto task force in February 2009 – a period during which the government scrambled to simply stabilize the companies prior to a radical restructuring. Until someone forensically analyzes ALL of the costs of salvaging GM and Chrysler, Rattner and others will continue to portray the automotive bailouts as less costly than they really were. Check out Deal Journal’s take on this issue.
Paul Ingrassia
For auto industry geeks, a sad bit of history was made today as General Motors Corp. said it’s walking away from its 25-year-old joint venture with Toyota Motor Corp. Known as NUMMI (New United Motor Manufacturing Inc.), the JV was in Fremont, Calif. There, in 1984, a stodgy GM signed up to learn how to make profitable, desirable fuel-efficient cars. For Toyota, NUMMI was a way to demonstrate goodwill to an American political and business establishment wary (to say the least) of Japan Inc.’s lean-manufacturing prowess. The plant wasn’t hugely important to Toyota’s American ambitions, especially as it began dotting the southern landscape with factories employing a non-union workforce. Somewhat ironically, however, GM’s decision to end the JV creates a burden for Toyota, which has to figure out what to do about the Corolla car and Tacoma pickup capacity it will retain at Fremont. GM is killing its Pontiac brand (part of the bankruptcy diet it’s on) and so no longer needs to make the Vibe car at the NUMMI facility. As DJN colleague Sharon Terlep reports, Toyota is scrambling to right-size its American operations as part of a broader turn-around program; the end of the JV complicates matters. For NUMMI’s official history, check out the official website here: http://www.nummi.com/co_info.php
Also today comes news that GM is advising Roger Penske’s company on how to market the Saturn brand it now owns. GM is worried that tying Saturn to the Penske name will distract or turn off consumers. My advice to Penske Automotive Group Inc.: The last company you should take advice from is GM, which single-handledly turned Saturn into a stale commodity from the fresh-faced upstart it had been. Here’s the WSJ story:http://online.wsj.com/article/SB124623102240666083.html#mod=testMod.
Back to NUMMI: Auto industry expert and former colleague Paul Ingrassia once wrote that the creation of NUMMI “rocked the auto industry: For the first time, an American and a Japanese auto maker would build cars together on American soil.” As Paul recounted in a 1992 WSJ piece, the JV talks kicked off in 1982 when GM was the No. 1 U.S. auto maker and Toyota, No. 1 in Japan. Leading GM’s effort was an up-and-coming executive called John F. “Jack” Smith; a decade later, he became GM’s CEO and Chairman. As Paul wrote, “the NUMMI talks were a crucial lesson in the power of the rival GM faced. Mr. Smith got a close look at Toyota’s efficient methods of product development, manufacturing and purchasing management. Those methods, often called ‘lean production,’ propelled Toyota ahead of GM in profitability, quality and product success in the 1980s.”
Ford Motor is complaining about Germany’s scramble to help GM’s Opel unit, according to the FT - and with good reason. Its competitors are getting government help while arguably better-managed auto makers are left to fend for themselves. As the FT reports, Ford’s John Fleming contends government aid will help Opel compete more fiercely against Ford’s own European business. http://www.ft.com/cms/s/0/4ab6cc5a-4639-11de-803f-00144feabdc0.html Fleming, who runs Ford in Europe, is also “very concerned” about France’s state aid to PSA Peugeot Citroen and Renault, the FT quotes him as saying. Fleming calls on the European Union to keep an eye on government bailouts. Good luck with that! The FT story includes this remark from Fleming: “Ford believes it is vital that a level playing field is enforced to ensure a fair and equitable distibution of any assistance being offered, and that competition is not distorted.” The FT goes on to say that in the U.S., Ford has taken a different tack, welcoming bailout loans for rivals GM and Chrysler, and notes Ford itself obtained an emergency credit line. I wonder if in fact Ford is reading the politics differently in the U.S. versus Europe, and feels it has to go along with what’s happening in America.
Paul Ingrassia’s recent WSJ piece about Ford was the final push our family needed to jump aboard the hybrid car bandwagon. http://online.wsj.com/article/SB124199912671905001.htmlWe’re buying a Ford Fusion hybrid midsize sedan when we get back to the U.S. after nine years abroad. It’s more expensive than a non-hybrid Fusion, and pricier than most of the other plain-vanilla cars we’d probably have bought (Hyundai Sonata, Ford Taurus et al.) The approximately $1700 “green” tax credit we’ll hopefully get won’t help much in closing the price gap. But it’s time to pump less gas, and we’ll just deal with the extra cost. No vacations for us this year. Here’s a link to a You Tube video of the Fusion hybrid’s project manager at Ford: http://www.youtube.com/watch?v=w20T_7IhHo0 Continue reading…
Check out Paul Ingrassia’s column in today’s WSJ and on DJN: http://online.wsj.com/article/SB124199912671905001.html?mod=article-outset-box
It summarizes how the one U.S. auto maker, Ford Motor, did things right – developing hip new vehicles and avoiding the government dole, to name a couple gold-star feats – only to see its hapless rivals Chrysler and GM rewarded for poor behavior in the form of the Washington bailout’s special debt-reducing dispensations. Continue reading…
If you are one of the people who sees a lack of fairness in foreclosure-prevention aid to all the people who pay their mortgages on time and in full whatever their personal circumstances, you will sympathize with the predicament of Ford Motor Co.
As pointed out by car expert, Pulitzer Prize winner, former Wall Street Journal Detroit bureau chief and our former boss, Paul Ingrassia, Ford could fit into the category of no good deed goes unpunished. Speaking this morning on Fox Business Network, Ingrassia noted Ford hasn’t taken government assistance and has met all its debt obligations. Rival Chrysler is in bankruptcy proceedings and General Motors might follow in a month or so if it can’t sell a major restructuring to all stakeholders.
The two would emerge from the proceedings with much debt erased and release from some burdensome contracts, therefore making them stronger competitors for follow-the-rules Ford.
In news reported today, Ford suffered a 32% decline in sales in April, but still picked up market share.
