Domestics Slide While Germans Ride

November 7, 2008
The story just keeps getting worse for the domestic auto industry. According to Automotive News, Detroit's Big Three are now asking for total Federal assistance exceeding $50 billion. GM's Wagoner, Ford's Mulally, and Chrysler's Nardelli met in closed-door meetings with Congressional leaders to beseech for more assistance above and beyond the $25 billion in Fed assistance that President Bush signed off on in September.

So clandestine was the meeting, reports Automotive News, that all three auto execs "left the meetings through a hidden exit from the office suite of Senate Majority Leader Harry Reid sometime around 6:30 p.m." yesterday evening. Was it shame or fear that led to their furtive comings and goings? Much like dealings with a certain vice-presidential hopeful, reporters were kept safely at bay by security while the three execs moved undercover.

Just how bad is it for the domestics? Well, Chrysler's huge reserves (estimated at $11.7 billion not so long ago) are being burned at an alarming rate: "Without new funding or a wrenching restructuring, executives have raised concern about the automaker's ability to finance its operations from existing cash beyond the first half of 2009," according to Automotive News' sources not authorized to discuss the automaker's performance. Automotive News speculates that Chrysler LLC must prepare for a possible break-up if it can't make the merger with GM go through or at least obtain enough Fed funding in order to ride out the current economic crisis.

Over at the Blue Oval, Ford announced a $3.0 billion after-tax operating loss for the third quarter of '08, according to Automotive News. They are on a massive cost-cutting program as consumer confidence and credit availability continue to plummet.  Compared to last year third quarter, Ford profits are off some $9.0 billion, bringing the automaker to abandon plans of returning to profitability in 2009. Additionally, Ford plans to slash production of some 40,000 vehicles in the fourth quarter of '08.

Later today, GM is slated to announce its third-quarter earnings right alongside massive cuts throughout the company in attempts to stay future losses. Says Detroit News, "the company is spending billions more than it's making amid the worst economic crisis in decades and struggling to obtain financing because of its sub-investment grade, or junk, bond status." Along with canceling plans for its new CXX full-size SUV platform that was to underpin its next-gen behemoths, GM will also be closing its Moraine, Ohio, plant that builds the GMT360 SUVs on December 23. Just how much more can they trim is anyone's guess, but Detroit News thinks we'll hear of measures such as more factory closures, eliminating shifts, banning overtime, and more delays of models and engines. What this could mean to vital programs like the 2011 Chevy Volt, which GM has pinned many of its hopes on, is unknown. But it can't be too good.

Meanwhile, Audi announces that its "aggressive growth strategy has paid off in increased market share." The brand with the four rings reached an 8.6 market share in the U.S. luxury segment, up from 6.2 percent one year ago. Looking only at Audi cars (no SUVs) showed an increase from 3.6 percent market share to a significant 11.1 percent for October '08 compared to that month one year prior. Finally, the brand's new A5, A8, R8, and A4 helped push it its highest ever sales for the month of October "despite the worst sales climate in nearly 25 years" in the United States.

Another German player, Mercedes Benz, while surely disappointed with a 5.3 decrease in year-to-date U.S. sales, enjoyed a 2 percent rise in sales of passenger vehicles in Western Europe, Japan, and the U.S. during the first 10 months of 2008 for a total of 1,073,700 units sold. Sales of the Smart fortwo rose by 7 percent in October to reach 11,300 units compared to that month one year ago. Worldwide, Smart sales have risen a staggering 47 percent since the beginning of 2008, reaching 113,200 altogether.

VW's story isn't as bright as brother Audi, reporting U.S. October sales down 7.9 percent compared to the same month in '07. However, year-to-date, the brand's '08 sales are nearly identical to the first 10 months of 2007, only off 0.6 percent. Growth would be nice, but holding steady in this market is something the domestics can only dream of right now.--Colin Mathews

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