Jim Kenzie's The Driver's Seat

Tough news coming?

I am up uncharacteristically early, taking some pics for this weekend's Wheels section.

I have CNN on, and it is reporting that Chrysler will file for bankruptcy in the United States by noon today.

This may be brinksmanship, trying to force some of the company's recalcitrant creditors to make a deal - some of them refused by last evening's deadline.

It may be that Fiat, seen by many as the White Knight in this scenario, would prefer to acquire Chrysler through the bankruptcy process, figuring it would get a better deal. Time - three hours - will tell.

One way or another, everyone involved is hoping that some sort of viable enterprise will emerge from this mess - bankruptcy does not always mean liquidation.

And owners of Chrysler products apparently will have their warranties guaranteed by various levels of government.

Stay tuned.

The beginning of the end or the end of the beginning?

I don't know how many shoes have yet to drop for General Motors.

But the changes announced yesterday - massive cuts in jobs, more plant closings, the elimination of dealerships and the dropping of the Pontiac brand - are all necessary if not sufficient responses to the New Reality.

As much as the domestic car makers complain that the main reason for their plight was
(and remains) short-sighted government policies which penalize older companies by saddling them with the legacy costs of pension and medical benefits - to which I largely subscribe - it's that old "up to your assets in alligators" thing.

Yes, your original objective was to drain the swamp.

But first, you gotta survive.

So now GM, Chrysler, and, to a lesser extent, Ford, have to do whatever they can to keep the alligators at bay.

Pontiac was doomed. From its heyday with the GTO in the 1960s, it really hasn't established much of a presence.

Other GM brands are also heading to dinosaur-land.

SAAB and Hummer are for sale, but nobody wants them.

GMC as a stand-alone truck brand never did make a lot of sense to me although their marketing people claim their sales are at least partially incremental over what they could do with Chevy badges on otherwise identical vehicles.

Buick would be a target too, except for a massive presence in China (the old emperors used to drive Buicks, and the cachet has survived six decades of Communist rule).

Saturn started off as a bold idea, but had morphed into a domestic name for GM's foreign cars. But Chevrolet can do and is doing the same thing- Malibu = Aura - so there seems little need for Saturn any more.

That leaves Chevrolet at the bottom, Buick in the middle, and Cadillac at the top, which is probably all GM really needs.

Toyota does just fine with three brands (Toyota, Lexus, Scion). BMW does just fine with two (BMW and Mini). Why does GM need seven or eight?

As for dealer networks, Canada has shown the way for decades, by combining (for example) Pontiac and Buick and, in the old days, Chevrolet and Oldsmobile.

The dealer network simply has to be consolidated further, and that will continue.

None of this is going to easy.

The US government could also do a lot more by setting an energy policy with closer-to-world fuel pricing so car makers could plan to build fuel-efficient cars in response to real demand, instead of being forced to build cars nobody wants - which, as long as gasoline is free, they don't.

I'm not holding my breath.

Takin' it to the Streets...

Seems there's been quite the street fight in Santa Monica California between Audi and BMW dealers.

Audi posted a billboard showing their new A4, which challenged BMW to make its next move.

Well, why don't I just send you to the site that explains it all?

Once again, if this darned blogging software doesn't convert this into a hyperlink like it's supposed to, you may have to cut-and-paste this: << http://digg.com/d1ogij >> into your browser.

I bet you have never heard of OLEC.

That's because, as far as I know, the "Organization of Lithium-Exporting Countries" does not exist.

Yet.

But if the hopes and dreams of electric car advocates are to come true, we're going to need several million boatloads of lithium to make all the lithium-ion batteries those battery engineers keep telling us will power our cars of the future.

And let's never forget, there are three kinds of liars in the world: liars, damned liars, and battery engineers.

It would appear that, as with petroleum, most lithium is located in countries not exactly sympatico with our socio-economic way of life.

Over half of the world's known supply is located in the planet's largest salt flat, in a remote desert in Bolivia. That land-locked South American country's president, Eva Morales, has long been a critic of "western" (generally) and American (specifically) economic policies, and has already nationalized various energy resources. Among other things, back in 2006 he sent soldiers to occupy facilities owned by British Petroleum.

I bet he has Venezuelan president Hugo Chavez's number on his speed dial.

The manager of Bolivia's lithium extraction and refining operation was recently quoted as saying, "We must raise the revolutionary consciousness of our people, starting on the floor of this very factory."

I'm not liking the sound of that.

What's with the North American car industry?

I have been hesitant to comment much on the on-going shenanigans concerning the North American car industry, because the second I file something, everything changes.

As I type, the US Congress has passed a $14 billion (US) aid package, but the US Senate is still thinking about it. Hilarious to listen to certain senators say they'd never give private enterprise welfare payments. Check their voting records though and you'll often see they're the same guys who voted to give hundreds of millions of dollars in subsidies to foreign-owned companies to set up shop - coincidentally in THEIR states.

I was the States for the past few days, and it is interesting to see the local commentary. One editorial cartoon - might have been in the Las Vegas paper; can't remember, and I forgot to clip'n'save - basically said that it's too bad the domestic car industry didn't create lousy financial products, instead of building lousy cars. Because companies like AIG, CitiBank and other financial institutions lost billions of dollars - not by creating any products, not by actually making anything, and hardly employing anyone - but just by shoving bits of paper and computer data around, dishing out mortgages to home owners at 125 percent of the value of the house so they could buy (among other things) a new car. And those companies were given billions by that same US Congress.

David Cole, chair of the Center for Automotive Research in Ann Arbor Michigan, an industry consulting firm, said the other day that the domestic car industry was "being penalized for being old", echoing what I had written in the print edition of Wheels a couple of weeks ago. You can't expect workers to screw fenders onto Chevvies for 30 years and never get a raise. But if you're just off the farm in Georgia or Tennessee and somebody offers you $15 an hour to screw fenders onto Hyundais or Volkswagens, you're going to jump at the chance - and not worry about whether you will get titanium hips when you turn 65.

(Incidentally, you may not know that David Cole's father, Ed Cole, was the engineer who developed the famed small-block Chevrolet V8 in the '50s, and rose to become president of General Motors in 1967.)

Until the US stops being the only industrialized country in the world to tie pensions and medical benefits to the company you work for, instead of making such things a responsibility of the society as a whole, there is always going to be a built-in disadvantage to any company that has been in business for more than 35 - 40 years.

It's new companies, not necessarily foreign companies, that benefit, as Southwest Airlines proves.

Anything President-elect Obama might accomplish with respect to health care (pensions aren't even on the radar screen) will come far too late to help the car industry.

If the Senate doesn't get off its high horse and dish out some support, Chrysler (for sure), GM (probably), and Ford (possibly) will go bankrupt. While this may in fact be the only way out, and lots of companies have taken advantage of that route to restructure and come back and prosper, it will deal a devastating blow not just to the companies themselves, but also to the supplier industry - which of course also supports the foreign-owned companies.

Canada will have to play its part too, although it is very hard to negotiate when the opening gambit (as is Chrysler's ) is: pay or we move all our production back to the US.

I hope cool heads will prevail, and that at least two of the three companies survive.

How?

I wish I knew.