Edward Whitacre, Jr., former chairman and CEO of AT&T Inc., has been named chairman of the General Motors. Whitacre will replace current interim chairman Kent Kresa when GM emerges from restructuring later this year.

Whitacre, four other board members, and a slew of new directors will act as the “nucleus” of the New GM, the automaker said Tuesday in a press release. The six other board members are expected to resign as soon as the company’s assets are turned over to the New General Motors.

WASHINGTON – Top executives of Chrysler LLC took pleas for billions in new loans to members of the Obama administration’s auto task force Wednesday.

Chrysler Chairman and CEO Bob Nardelli, Vice Chairman Tom LaSorda and Chief Financial Officer Ron Kolka huddled behind closed doors with the administration panel, said a Chrysler official, who spoke on condition of anonymity because of the private nature of the talks.

Struggling to survive, Chrysler and General Motors Corp. have received $17.4 billion in federal loans. They are seeking an additional $21.6 billion to keep operating during a difficult recession and a major plunge in auto sales.

Auburn Hills, Mich.-based Chrysler has received $4 billion in loans and wants another $5 billion in federal aid and the approval of an alliance with Italian automaker Fiat SpA.

The company said in a Feb. 17 progress report that it needed the loans to stave off a liquidation of the company. The automaker lost $8 billion last year.

President Barack Obama’s auto task force is trying to restructure GM and Chrysler by March 31. If GM and Chrysler fail to make a convincing case, the administration could pull the loans and essentially force the companies into bankruptcy protection.

Obama, in his speech to Congress on Tuesday, said, “Years of bad decision-making and a global recession have pushed our automakers to the brink” and the U.S. should not “protect them from their own bad practices.”

But he said the administration was “committed to the goal of a retooled, re-imagined auto industry that can compete and win. Millions of jobs depend on it. Scores of communities depend on it. And I believe the nation that invented the automobile cannot walk away from it.”

Members of the task force, led by Treasury Department advisers Steven Rattner and Ron Bloom, met with lawmakers and suppliers earlier in the week and are scheduled to meet with GM executives on Thursday.

General Motors has said it could run out of money by the end of March and needs $2 billion in March and another $2.6 billion in April to stay in business.

GM spokesman Tom Wilkinson said the executives will travel to Washington by commercial airline. After being skewered by lawmakers for flying in corporate jets to seek government loans last year, GM announced it would return its five leased jets to their leasing companies and disband its aviation operations.

Source: Associated Press

Everyone knows that many dealerships have closed nationwide but have you ever really sat down and thought about what that number REALLY amounted to? Brace yourself… ‘cause this could get ugly… Reuters reports that 881 dealers shut their doors in the magical year of 2008. With a decline in sales equaling 18% in 2008 alone, the title for most dealer closing won’t be held long by 2008. Analysts predict that 2009 could be worse for the American market as the “Big Three” hold only 50% of the US retail market, but over 75% of the overall dealership number. Talk about market saturation? We definitely think so…

The automotive industry has been the backbone of U.S. manufacturing and a leading
investor in research and development for nearly a century.  It is a significant factor in the

U.S. economy, employing 1 in 10 workers and a major purchaser of U.S.-made steel,
aluminum, iron, glass, plastics and electronics.  It is an industry undergoing massive
change, and one that can be key to both transforming the U.S. economy and creating
high-tech, ―green‖ jobs that support a healthy and growing middle class.  Appendix A
presents key facts about the role of the automotive industry on the U.S. economy.

For most of this decade, General Motors has been pursuing a major transformation of its
business, working to improve the consumer appeal, quality, safety, and fuel efficiency of
its cars and trucks; to achieve cost competitiveness or advantage in labor, manufacturing,
product development, procurement and staff functions; and to address the Company‘s
huge legacy cost burden.

As noted in the December 2 submission, the Company has
made significant progress in all of these areas and, even after rising oil prices and a
slowing economy in mid-2008 cut automotive volumes by more than 20%, GM was
confident in its ability to self-fund its continuing transformation.

In the last six months of 2008, housing price declines accelerated, foreclosures rose,
credit markets froze, job losses skyrocketed, and consumer confidence tumbled.  As the
economic crisis intensified, automotive sales fell to their lowest per-capita levels in half a
century, putting automakers under enormous financial stress.  All automotive
manufacturers have been severely affected, with most reporting significant losses in the
recent quarter.  Under these extraordinary conditions, GM‘s liquidity fell rapidly to levels
below those needed to operate the Company, and GM was compelled to turn to the U.S.
Government for assistance.

Since December 2, economic conditions have continued to deteriorate globally.  This,
combined with public speculation about GM‘s future, has further reduced the Company‘s
volumes, revenues, and cash flows. In addition, the weakening financial markets have
significantly reduced the value of GM‘s large pension fund assets.

The Company has responded aggressively to these worsening economic and industry
circumstances, accelerating, and adding to, the restructuring elements contained in the
Company‘s December 2 Plan (Chart 2 below presents key Plan changes).  The revised
Plan comprehensively addresses GM‘s revenues, costs, and balance sheet for its U.S. and
foreign operations, and is based on conservative assumptions.  It also results in a business
that will contribute materially to the national interest by developing and commercializing
advanced technologies and vehicles that will reduce petroleum dependency and
greenhouse gas emissions, and drive national technological and manufacturing
competitiveness.

Courtesy of AP Photo

It is incredible how a government that has been so very challenged by this whole auto industry situation could come to terms so quickly but here is goes. The Bush Administration and the rest of the government have released a fact sheet for federal aide to the auto industry.

Fact Sheet: Financing Assistance to Facilitate the Restructuring of Automobile Manufacturers to Attain Financial Viability

Purpose: The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing.

Amount: Auto manufacturers will be provided with $13.4 B in short-term financing from the TARP, with an additional $4 B available in February, contingent upon drawing down the second tranche of TARP funds.

Viability Requirement: The firms must use these funds to become financially viable. Taxpayers will not be asked to provide financing for firms that do not become viable. If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury.

Definition of Viability: A firm will only be deemed viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan.
Binding Terms and Conditions: The binding terms and conditions established by the Treasury will mirror those that were voted favorably by a majority of both Houses of Congress, including:

• Firms must provide warrants for non-voting stock.
• Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
• Debt owed to the government would be senior to other debts, to the extent permitted by law.
• Firms must allow the government to examine their books and records.
• Firms must report and the government has the power to block any large transactions greater than $100 million.
• Firms must comply with applicable Federal fuel efficiency and emissions requirements.
• Firms must not issue new dividends while they owe government debt.

Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

• Reduce debts by 2/3 via a debt for equity exchange.
• Make one-half of VEBA payments in the form of stock.
• Eliminate the jobs bank.
• Work rules that are competitive with transplant auto manufacturers by 12/31/09.
• Wages that are competitive with those of transplant auto manufacturers by 12/31/09.

These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case to achieve long-term viability in spite of the deviations.
In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009.

There is of course the business of the left over $4B and depends on accessing the second half of the TARP fund. Bush says this position was pushed when he saw validity in the automakers statement that consumers would not buy from establishments in bankruptcy. Approving these funds has exhausted the initial $350B that congress approved and now the Administration will have to seek concession to assess the second half of the TARP fund. Only after the second half of the funds have been approved could the left over $4B come in affect. Chrysler has also announced additional cuts in budgets and has let go their head of marketing Deborah Wahl Meyer and Asia Chief Phil Murtaugh there will surely be more layoffs to follow. As usual Tuned will keep you updated.

Since there are quite a few things going on in the industry today inside and outside of the U.S. we figured we would give you guys a quick read;

Toyota is looking at reporting their first parent company loss since they came to be over 70 years ago. They will be issuing a statement on at their year end conference on Monday releasing revisions for its parent forecasts. They have been effected heavy by their souring yen and lack luster sales which is not so far from what is going on in the U.S. Toyota saw their first half operating profits his 140 billion yen only after incurring a currency loss a 300 billion yen. It is unclear if they will post a loss however due to their group operating profits and it is not clear if losses will clear all profits. More to come on this.

After the OK was given this morning stocks showed some growth although nothing to write home about. GM saw a little more than a $1.00 rise but settled back down to $4.14. The Dow Jones, Ford, and many markets saw brief spikes and settled at small gains. Suppliers also saw a bump today from the morning news anywhere from 8% to about 11%. It was also noted today that $13.4B of the $17.4B approved out of the TARP fund will be served before the end of the month.

The GMAC bank deal looks to be seeing some rough reactions from the Pacific Investment Management fund that turned down their debt-exchange which should affect eligibility for TARP funds. Without this deal GMAC would most likely fall short of the capital injection they need to qualify.

Canada has jumped into the automaker assist saying they will make funds available to the automakers in their country. Although not as sizeable as the U.S. package this will certainly impact the situation. The package to be proposed is said to be 20% the size of the U.S. matching the automakers presence in Canada. These companies will have to offer restructuring plans and revisions to their company strategies by March although Canada has stated that they do not know what may be in store for Chrysler where they have simply stated GM will need to make changes.

More to come…..

Washington – This morning at 9AM President Bush announced federal aide for GM and Chrysler who have insisted they may not make it through the next few weeks without aide. GM and Chrysler originally approached congress for $14B in federal aide but were shut down by the Senate.  However, the three combined (Ford, GM, Chrysler) are looking for a total of $34B in aide. Ford has noted that they are not in the same state as the other automakers and would simply (?) like a line of credit if the downturn worsens. The Administration insisted that normally they would advise these companies to reform under federal bankruptcy law but apparently we are not in a normal economy.

Numbers for the automotive industry sales have dropped significantly and have not been this low since the 1980s.  Automakers will be shutting down for the holidays and extending those days as well. Porsche has decided to add one day to their holiday season while others including Chrysler have added additional days. In an effort to save money we will see a very slow holiday in the industry, however, concerns have risen about suppliers to these automakers, like Chrysler, and what kind of effects the extended closures will have on these business. These funds have been given the “go” out of the TARP fund and it looks like Chrysler and GM will be going for $17.4B in federal aide. Ford has said they do not need the support at the moment and is not included in the package. These funds will come in the form of low interest bridge loans, however these companies will have to be deemed “viable” by the government although terms of such are unclear. Updates will follow.

Today Bush said that having a “disorderly” bankruptcy of GM and Chrysler would be too damaging a shock for the economy. He insists that if these two companies are to continue down their path it would send a violent shock through the economy. The solution, Bush says the Administration is considering some form of help for the two companies perhaps only to last the next several months and then revisit the situation. This would basically be giving GM and Chrysler the money they approached congress for after which they would then have an organized Chapter 11 aided by the government when funds run dry. There is no confirmation on the time frame of this package and details are still up in the air.

The save here would come in the form of banks offering debtor-in-possession financing with back up from federal funds. Bush says that this is also to avoid handing President-Elect Obama from taking his office in disaster. There are also concessions to be had for the UAW, suppliers, bondholders, stock holders, and others if this is going to work. If this package does go through there will also be a close eye from the “car czar” kept on these companies with the power to require immediate enforcement of policies drawn. This could cause some issues for the publicly traded GM as they try to strike any deals outside of the bankruptcy filing do to federal foreclosure policies. Chrysler, however, would not be subjected to this as it is a private company so the filing is foreseen to go smoother. Both companies have hired law firms; GM has gone with Harvey R. Miller and William Repko to consult them in this process, while Chrysler has secured the firm of Jones, Day to assist them with their restructuring, but this does not mean filings are imminent. Filing for these companies would take some time as an agreement on standards with the government could take three months or longer. This time frame however could lend to the consumer being more comfortable being involved with a company under court protection. The government is saying their will be assurances for consumers of any company getting federal assistance even if they go into bankruptcy protection. We will keep you updated with the status of the automaker industry as they come.

Washington – Yesterday the House agreed on a bailout plan for the Automotive Industry in a sum of $14 Billion in aide. Many were relieved yesterday only to be let down today when the Senate put this plan down. Now the Treasury has said they may step in with the TARP fund. Again we find ourselves using this TARP fund exactly for what we did not intend. This policy was rewritten to not help these companies that got themselves into a financial crisis. Credit companies have opted to become banks in order to have access to the TARP fund and now the Treasury is changing the rules. GM and Chrysler have both employed the help of bankruptcy agencies for a plan. The sad news comes when GM and Chrysler both state that even with the aide of a taxpayer bailout they still may not last this crisis. It has now been said that the entire situation could be a ploy set in motion months ago to have the bailout plan dismissed by the Senate so the TARP fund could be used and the current Administration would not lose face. This theory will be tested as the day progresses but I would not put it past Republicans. Updates will follow…

WASHINGTON D.C. – After long and criticized talks, Democrats and Motor City executives have come to terms on a $14 billion federal aid package to deflect this slump into the right direction. However, many Republicans oppose the deal stating that “structure needs to be established prior to liquidating funds”. This division between parties has prompted President George W. Bush to lobby for Republican support due to the fact that implementation of the aid package could come as early as Friday, giving Ford, GM and Chrysler cash in hand by the weekend.

White House Chief of Staff John Bolten has also been dispatched to Capitol Hill to make the case to skeptical Republicans.

Although $14 billion seems like an astonishing figure, it only covers 70% of what “the Big Three” necessitate to counter act the economic crisis and will push the afore mentioned to pursue options and loans from Canada to cover the rest.

Source: MSNBC

UPDATE: By a vote of 237-170, the U.S. House has decided to pass the bill to enact federal funding in the form of $14 billion. The high number of nay-sayers sets stringent legislation onto the expectations of Chrysler and General Motors as they will need to abide to close monitoring by the White House directly.

GM executives were quoted saying “We thank the House and its leadership for their bipartisan vote to support America’s domestic automakers at this most crucial time for the nation’s economy”. GM spokesman Greg Martin also stated that “The House vote brings us closer to saving jobs and to create a more competitive U.S. auto industry in order to maintain America’s economic vitality. We encourage the Senate to act soon so that we can continue at full speed on the restructuring and advanced technologies plans that will form a stronger, more viable GM”.

Whether or not the restructuring works within the next year is highly unlikely but enough money has been poured into these companies to keep them afloat for time to take its turn, let’s wait and see what the future unfolds then shall we?

Source: Reuters