Yesterday, US banckruptcy judge Robert Gerber approved General Motors’ plan to sell the bulk of its assets to NGMCO Inc., or ‘New GM’,  in order to potentially clear the way for the company to emerge from bankruptcy protection. The new company will acquire GM’s strongest operations and benefit from lower operating costs.

General Motors South Africa (GMSA) will be incorporated into the ‘New GM’ and will continue with business as usual. The latest vehicle sale statistics from the National Association of Automobile Manufacturers of South Africa (NAAMSA) indicate that GMSA has infact strengthened its market position in June with the sale of 4374 units.

Steve Koch, president and MD of GM's African operations.

Steve Koch, president and MD of GM’s African operations says “We are confident that we are taking the necessary steps to position GM South Africa for the future and are particularly gratified by the June NAAMSA sales results, which was our strongest sales month for the year and which resulted in our market share growing to 14.55%”.

GMSA will also continue with construction of its R250 million Pan African Parts Distribution Centre (PAPDC), which begins next week at the Coega Industrial Development Zone (IDZ). The new 38 000 square metre facility will replace various existing parts and accessories operations in Port Elizabeth and will service GMSA’s existing dealer network, as well as numerous Africa export customers.

Still in its protective sheeting, the first unit of Chevrolet's Cruze family car has arrived in SA for testing and homologation.

In addition, plans remain on track for the launch of the all new Chevrolet Cruze later this year. The Cruze is the first of a new family of Chevrolet ‘global’ cars and will set the style for future Chev’s in South Africa.

A bankruptcy judge has ruled that General Motors Corp. can sell the bulk of its assets to a new company, potentially clearing the way for the automaker to quickly emerge from bankruptcy protection.

U.S. Judge Robert Gerber said in his 95-page ruling late Sunday that the sale was in the best interests of both GM and its creditors, whom he said would otherwise get nothing.

“As nobody can seriously dispute, the only alternative to an immediate sale is liquidation — a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates,” Gerber wrote in his ruling.

An appeal is expected. A Chicago law firm representing people who have sued GM in several auto accident cases filed paperwork Monday saying it would appeal to U.S. District Court in New York. The deadline to appeal is noon Thursday, after which point Gerber’s order takes effect and the sale is free to close.

Attorneys for some of GM’s bondholders, unions, consumer groups and individuals with lawsuits against the company have said their needs have been pushed aside in favor of the interests of GM and the government.

GM’s government-backed plan for a quick exit from Chapter 11 hinges on the sale, which will allow the automaker to leave behind many of its costs and liabilities. The Treasury Department has vowed to cut off funding to GM if the sale doesn’t go through by July 10.

Steve Rattner, a top aide to Treasury Secretary Timothy Geithner and the head of the Obama administration’s auto task force, said the government was “confident that his decision will stand and the sale of GM’s assets to new GM will proceed expeditiously.”

The ruling comes after a three-day hearing that wrapped up Thursday, during which GM and government officials urged a quick approval of the sale, saying it was needed to keep the automaker from selling itself off piece by piece.

“Now it’s our responsibility to fix this business and place the company on a clear path to success without delay,” GM CEO Fritz Henderson said in a statement early Monday.

Last month, a group of bondholders and others took their objections to Chrysler LLC’s sale to Fiat Group SpA all the way to the Supreme Court, which declined to rule on them. Still, the proceedings delayed the Auburn Hills, Mich.-based automaker’s exit from bankruptcy protection.

Consumer groups have cautioned that people injured by a defective GM product before June 1, when the automaker filed for bankruptcy, would have to seek compensation from the “old GM,” the collection of assets leftover from the sale, where they would be less likely to receive compensation.

Joanne Doroshow of the Center for Justice & Democracy said in a statement the issue “is far from over.”

“It is morally reprehensible that GM will pay for injuries and deaths that occur after the bankruptcy process, but not for the hundreds of victims who have already been hurt by defective GM cars,” Doroshow said.

The “old GM,” which will be known as Motors Liquidation Co., will include a smattering of properties, several of which are facilities already slated to be closed. They will be sold to the highest bidder under court supervision.

Other assets to be filed under the old GM include brands like Hummer, Saturn and Saab, for which GM has lined up buyers. They also include all current GM common stock, which — despite its active trading on over-the-counter markets — will soon be worthless.

The Detroit car maker’s Chapter 11 filing was the fourth-largest in U.S. history.

Even with less debt, fewer liabilities and a reduced number of dealerships and brands, GM will operate in an environment where fewer American are buying cars. At the current pace, automakers will sell around 9.7 million vehicles this year. That’s a reduction from sales of more than 16 million vehicles as recently as 2007.

In June, the automaker captured 20.3 percent of the U.S. market. GM has estimated that it can maintain a market share between 15 and 17 percent, reflecting its plan to sell off three brands and end its Pontiac line.

GM has several new cars coming to market next year, including the Chevrolet Volt, a plug-in hybrid electric car. The Volt might be a promising vehicle, but with an expected $40,000 price tag it might only be a niche player, said James E. Schrager, clinical professor of entrepreneurship and strategy at the University of Chicago Graduate School of Business.

Upcoming small-car models such as the Chevy Cruze and Spark may fare well, but will face heavy competition from foreign automakers already in that segment of the market and from Ford Motor Co.’s new Fiesta, which the company has already started advertising.

Overall, GM’s major challenge will be winning back customers who have migrated to foreign competitors. Some newer GM models have received good reviews for quality and performance, but that hasn’t persuaded enough consumers to buy GM cars.

“The problem is the status of General Motors’ brands,” Schrager said. “They have to have some really breakthrough products that work and resonate with consumers. And they may have to slowly, over time, turn the image around.”

The company is expected to receive $50 billion in taxpayer funds. GM received nearly $20 billion in taxpayer funds before its bankruptcy and Rattner said the government has provided between $10 billion to $11 billion to finance the bankruptcy. He said an additional $19 billion in financing would be provided to GM by the end of the year.

In exchange for those funds, the government will own about 61 percent of the “new GM.” The Obama administration has said it does not plan to interfere with the day-to-day running of the company, though government has been involved in the selection of the new company’s 13-member board of directors and change of control transactions.

The United Auto Workers union gets a 17.5 percent stake through its health care trust for retirees and has selected Stephen Girsky, a former GM adviser and Morgan Stanley analyst, to serve on the board. The Canadian government, which will control an 11.7 percent share, also will pick one member.

Henderson, who succeeded former CEO Rick Wagoner in March when the Obama administration forced Wagoner to resign, has said he expects to remain at the helm of the automaker as it comes out of bankruptcy.

Rattner, in a conference call with reporters, said he expected the new GM board members to be seated “over the next few weeks.”

“We are not going to operate as a parallel board — we are not going to micromanage or get involved in day to day decisions,” Rattner said of the government’s role in the auto company.

The old GM will remain an entity until all of the facilities are sold off, a process that could take months or years to complete. The government has said it plans to provide about $1.18 billion to fund the wind-down process.

Source: The Associated Press

Despite the on-going financial doom and gloom Mazda Australia have bucked the trend recording its best sales month ever this June retailing a bumper 8 406 units.

The impressive result shattered the company’s previous best of 7 565 set back in March of 2008.

The key to Mazda’s success rests largely with the all-new Mazda3 which sold some 3741 units across Australia in June.

Mazda’s BT-50 utility and Mazda2 small car have also had a good month with 1 327 and 1 202 model sales recorded respectively.

“This truly is a wonderful result for Mazda and our world-class dealer network, with very solid sales across all of our line-up,” said Mazda Australia managing director Doug Dickson. “It clearly demonstrates that the New Generation Mazda3 will build on the success of the original model. The New Generation Mazda3’s combination of style, Zoom-Zoom performance, features and outstanding value builds on Mazda’s brand DNA. This recipe clearly satisfies the expectations and desires of a growing number of Australian new car buyers.”

Adapted from CarAdvice

While Chrysler and Fiat negotiate an alliance deal that will meet with the needs of both manufacturers, the US Treasury is, according to The New York Times (NYT), already preparing the paperwork for the embattled American carmaker’s bankruptcy.

The NYT report says that the Chapter 11 documents being prepared will allow for a Fiat and Chrysler alliance to go ahead even after Chrysler is declared bankrupt.

It is also believed to contain an “agreement in principle” that would see the benefits packages – including pension and retiree health care – of United Auto Workers protected in the deal.

The main question that remains is what is to become of Chrysler’s debts. With the company’s debt holders previously unwilling to bend on the US$7 billion owing, the looming shadow of bankruptcy is likely to motivate more enthusiastic discussion.

This week, the US Treasury offered Chrysler’s lenders a figure that amounts to about 22 cents in the dollar per share, or a total of US$1.5 billion. A counter-offer is expected later today (Friday).

Adapted from TheMotorReport

Volkswagen is considering an audacious reverse-takeover bid for its majority shareholder, Porsche, in a twist in the drawn-out struggle for control between the two German carmakers.

The Volkswagen Group’s supervisory board is said to be weighing the possibility of purchasing Porsche AG, in a move that would relieve its holding company, Porsche SE, of massive debt that industry analysts suggest the company may not be able to fund should the world’s financial crisis drag on well into 2010–a scenario put forward this week by the International Monetary Fund.

The secret plan emerged as shareholders were set to convene at Volkswagen’s annual meeting on Thursday, and it comes after Porsche revealed that it is carrying some 9 billion euros in debt, most of it owing to interest on loans taken out to purchase its 50.8 percent stake in VW.

Porsche on Thursday said that the 280 million euros it would receive in dividends from Volkswagen and its own operating profits would be sufficient to service interest payments for 2009. However, questions still hang over Porsche’s ability to meet ongoing budgetary concerns, most notably its traditionally large spending on research and development.

Porsche has raked in massive profits in recent years on controversial option trades for Volkswagen. It recently reported a windfall of 6.8 billion euros – or more than double its own revenue – from its takeover of Volkswagen. However, the gains are mainly related to an increase in the Volkswagen share price, which the banking sector describes as paper gains that are not easily converted to cash.

The revealing of the Volkswagen plan to consider a bid for Porsche has cast a shadow over the long-term future of Wendelin Wiedeking. The straight-taking Porsche chairman originally was hailed in financial circles for his daring takeover of Volkswagen, a company more than 10 times Porsche’s size. But with the world’s financial crisis hitting Porsche’s earning potential and its ability to service loans, there have been suggestions that he could be ousted by the Porsche and Piech families, which together hold a majority stake in Porsche.

For some time now, German automotive-industry analysts have suggested that General Motors Europe boss Carl-Peter Foster could take the helm at Porsche should its bid to wrest control of Volkswagen fail.

Adapted from Autoweek

Ford Motor Company is planning to reduce its debt by more than US$10.4 billion in the near future. The plan will see the swapping of company stock and cash for existing debt.

The blue oval’s debt-reduction plans are in line with the US government’s contractual agreement with General Motors and Chrysler to hand out the already approved $17.4 billion in loans.

However unlike GM and Chrysler, Ford has so far not asked for loans from the US government. Ford has suggested that it can benefit from a $9 billion line of credit just in case US car sales continue in the same downward manner as they have in January and February.

“Ford is an enormously leveraged company today, so a debt reduction of this size would significantly improve the company’s risk profile and reduce its losses by slashing interest expense,” said John Casesa, principal of Casesa Shapiro Group LLC and a former Wall Street analyst.

At the end of last year, Ford had almost $40 billion in debt, so a $16 billion reduction is a significant step in the right direction.

Even though the company has failed to post a profit since 2005, it will make up to $2.2 billion cash available for the debt restructuring.

If you’re thinking Ford has done rather well given the fact that GM and Chrysler are in serious financial trouble, it’s worth noting that in late 2006 Ford borrowed $23.4 billion – this cash reserve is part of the reason the company currently needs no further aid.

It’s not all good news for Ford however, the American giant posted a massive 49.5% drop in US sales for February – marking the company’s 25th sales decline in the past 26 months.

Adapted from CarAdvice

GM’s financial crisis is spreading like wildfire and according to a report from Automotive News, Opel could collapse in just a matter of weeks if the company doesn’t get a massive infusion of cash in the near future.

According to a source, “If (the) money does not materialize, the company is facing the prospect of insolvency,” he went on to say that “The situation is very serious, Opel needs funding in a matter of weeks.”

GM is currently asking several European nations to supply them with emergency funding to prevent mass layoffs and plant shut downs, but it appears the delay has only made matters worse as the company is facing a €3.3 billion liquidity shortage. In the meantime, GM’s European operations are trying to cut their budget by $1.2 billion (about €942 million) on top of the $750 million (about €596 million) they have already reduced. In the past, the company has said that these cuts would be “unconventional and aggressive” which means they could include anything from plant closures to a possible sale or spinoff of Opel.

One of the key sticking points to getting government funding in Europe, is the fact that GM is an American company and European governments want to ensure that any money given to GM stays in Europe. To deal with this issue, GM is supposedly looking into restructuring Opel and Vauxhall in such a way that they would become separate European legal entities.

The company is also reportedly considering selling a stake in Opel as a way to reduce future losses in Europe. GM Europe’s head of communications, Chris Preuss, said the company remains “…open to any plans of partnerships, equity stakes or alignments that can make Opel and General Motors Europe stronger.”

Source: Autonews

Although General Motors (GM) and Chrysler garnered early support from the U.S. population for their federally funded bailout plans, support is starting to drop off as the situation is proving more of a bottomless pit rather than a hopeful turnaround.

When the notion of a publicly funded bailout plan was being thrown around for the two Michigan automakers back in December, 61 percent of the U.S. supported such a plan. However, as more light has been shed on automakers’ precarious positions – and $13.4 billion has already been dished out — only 25 percent of Americans now support throwing additional tax dollars at GM and Chrysler, according to the latest USA TODAY/Gallup Poll.

“The more people understand what’s wrong with General Motors, the less willing they are to support it,” Porter Stansberry, head of Stansberry & Associates Investment Research, told USA Today.

In addition, only 51 percent of Americans think all three U.S. automakers will survive, down from 57 percent in December and after GM’s recent announcement of their US$30 billion loss in 2008,  there is good reason to think those figures could sink even lower.

Yesterday, General Motors published their preliminary Q4 and 2008 year-end financial results, posting one of the biggest losses in company history. During the fourth quarter alone, GM managed to burn through US$9.6 billion (net) and suffer a $15.71 loss per diluted share. GM reported a 2008 adjusted net loss of $16.8 billion and a net loss of $30.9 billion, in total for the year. Globally, GM reported an adjusted pre-tax loss of $10.4 billion and an 8.35 million-vehicle slump in worldwide sales. Fortunately, despite the beating taken on their home turf, GM fared much better abroad, ending 2008 with sales in their Asia Pacific and Latin America regions accounting for 64% of their global total. Individually, both GMAP (GM Asia Pacific) and GMLAAM (GM Latin America, Africa and Middle East) each grew in sales volume by nearly 3 percent, while GM Europe managed to post another 2 million-vehicle growth spurt for the third year in a row.

“2008 was an extremely difficult year for the U.S. and global auto markets, especially the second half,” said GM CEO Rick Wagoner. “These conditions created a very challenging environment for GM and other automakers, and led us to take further aggressive and difficult measures to restructure our business.” Wagoner continued, “We expect these challenging conditions will continue through 2009, and so we are accelerating our restructuring actions. At the same time, we are continuing our commitment to exciting, fuel-efficient cars and trucks, and the leadership in advanced propulsion technology.”

Adapted from RideLust

GM asked the federal government on Tuesday for as much as $16.6 billion in additional federal aid to help it survive. Without the new funding, the automaker could run out of money sometime in March.

Under the plan submitted to the U.S. Treasury Department, GM loans and lines of credit would total $30 billion.

GM would also cut 47,000 jobs globally by year end and close five U.S. plants by 2012. It raised the possibility of killing the Saturn brand when production of its current models ends in 2012.
GM received the last installment of a previously approved $13.4 billion loan on Tuesday, but is requesting another $4.6 billion to meet its Dec. 2 request of $18 billion. It then will ask for $4.5 billion to help it repay a revolving line of credit coming due in the fall of 2011.

GM also is seeking a $7.5 billion revolving line of credit to help it if auto sales worsen later this year or next year. GM plans to start repaying the loans in 2012.

The proposals are contained in a restructuring plan made public by GM on Tuesday. Both GM and Chrysler LLC were required to deliver plans to the Treasury Department on Tuesday. Chrysler is asking for an additional $2 billion in loans.

GM, Chrysler and Ford Motor Co. on Tuesday also said they reached new tentative labor agreements with the UAW. The deals, still subject to worker ratification, are expected to lower labor costs further from the 2007 contract agreement.

Projections deteriorate

GM said that it was seeking increased bailout aid because the automotive market has deteriorated more severely than it anticipated. On Dec. 2, when it submitted its initial restructuring plan, GM projected that it would have a 20.5 percent share of U.S. industry sales ranging from 10.5 million to 12 million units this year.

In the new plan, GM’s downside volume for 2009 in the Dec. 2 plan-–10.5 million units-–is now its baseline assumption. The downside now is 9.5 million units. GM has also reduced its 2009 U.S. share projection to 20.0 percent.

GM’s January U.S. sales gave little cause for optimism. The automaker was down 48.9 percent year-over-year, with a 19.5 percent market share. The industry-wide light vehicle annualized selling rate in January was 9.8 million vehicles, the lowest since August 1982.

Debt-for-equity negotiations continue

The plans fall short of the government’s original requirements in some regards. Although the UAW announced late on Tuesday that it had reached agreement on concessions with the Detroit 3, GM still is negotiating with bondholders.

Under terms of loan agreements approved by the Bush administration in December, the plans must show how the companies will become viable for the long-term and be able to repay federal loans.

GM CEO Rick Wagoner said additional government support might be required in 2013 or 2014 if the automaker has to make further contributions to its pension fund, which is now underfunded.

He also said GM continues to “believe bankruptcy would be a highly risky and highly costly process” and the “best bet remains to restructure outside of bankruptcy court.”

GM’s plan outlines how the company proposes to achieve a “sustainable return to profitability” within the next 24 months, sources familiar with the plan say.

Saturn could phase out

GM plans to continue to supply current product to Saturn through 2012. But absent an alternative to fix the brand, GM expects to phase it out.

Hummer, which GM has had for sale since June, has attracted several interested parties. GM expects to make a decision on what to do with Hummer by the end of the first quarter, the sources say.

GM is in talks with the Swedish government and several other parties about Saab’s future. Without funding help from the Swedish government, Saab would have to file for reorganization, the sources say.

Of the 47,000 jobs to be cut this year, 37,000 will be hourly positions.

Among other things, GM was told to get bondholders to accept stock in exchange for debt, and the companies were advised to trim worker compensation to the level of the U.S. plants of import brands, or explain how comparable savings would be achieved.

The new agreements with the UAW are meant to address those concerns.

The Obama administration has yet to indicate whether it is sticking with the terms and conditions set by the Bush administration or planning to change them.

The automakers’ loan agreements with the government provide that a presidential designee will certify by March 31 if the companies have met the restructuring criteria. If not, the loans are to be recalled immediately.

That deadline can be pushed back a month.

President Barack Obama had indicated he would name a so-called car czar to serve as designee, but the administration said over the weekend that it had changed course.

Obama forms task force

Instead, Treasury Secretary Timothy Geithner will serve as the designee. He also will co-chair with Obama’s chief economics adviser, Larry Summers, a task force that will evaluate the plans.

One relatively new name in the mix is Ron Bloom, an official of the United Steelworkers Union and former investment banker, known for brokering turnaround deals for struggling companies.

He will be an adviser to the Treasury Department on overhauling the auto industry.

Ford Motor Co. has said it may need loans if the economy grows significantly worse. Ford said today the new UAW agreement could help it avoid asking for federal aid.

Suppliers, facing a possible wave in bankruptcies stemming from the auto sales collapse, have requested $18.5 billion in aid.

Source: AutoWeek