Hello, Detroit! The filing for Chapter 11 bankruptcy protection by General Motors on June 1 was no surprise to most industry analysts. GM calls it a “re: Invention,” but what the bankruptcy will do is help relieve massive debt, shrink the dealer base, close GM plants, eliminate about 20,000 employees, and alleviate brands such as Saturn, Pontiac, Saab, and Hummer (Saturn appears to be going to the Penske Automotive Group and Hummer has been sold to a private Chinese industrial firm).
American taxpayers will own 60 percent of GM, with the remaining ownership split between the United Auto Workers union, GM bond holders, and the federal and provincial governments of Canada and Ontario.
While the bankruptcy only affects the United States, once the Chapter 11 process is complete, GM will most likely become a leaner and more innovative company globally. GM’s May sales (the latest available at press time) were the best this year at 191,875, up 11 percent over April.
Chrysler LLC, which filed for Chapter 11 protection on April 30, was granted an approval for asset sale just a month later, a fast-track decision by federal Judge Arthur Gonzales.
Officially announced June 10, Chrysler has formed a strategic global alliance with Fiat SpA which will initially own 20 percent of the company to be known as Chrysler Group (Fiat could own 51 percent over time). A board of nine people will oversee the operations of the company, and as noted in this column last month, Fiat’s Sergio Marchionne will head the Chrysler Group. Chrysler is back in the production process and will operate about 3,000 dealers nationwide. Watch for Fiat models to appear at Chrysler dealers in about 18 months.
VW insights from its leader. Stefan Jacoby, president and CEO of Volkswagen of America Inc., lunched with a group of automotive journalists in Seattle recently and reaffirmed the company’s commitment to the U.S. market.
“We have made a bold investment of $1 billion in this market with a U.S. dedicated plant in Chattanooga,” Jacoby said.
The Tennessee plant will employ 2,000 people and produce about 150,000 vehicles, he said, adding that production begins in 2011, with the first vehicle rollout of a new-style Passat in the spring of 2012.
“We’re gaining market share in the U.S., and it will grow more when the economy comes back,” Jacoby said. He said that the dealer organization has 580 VW and 200 Audi franchises in operation in the country. “It is a robust dealer organization, and they remain profitable.”
Jacoby said VW will have a biofuel vehicle in the future and will offer more fuel-efficient diesel engines. He also said the company is working on an electric vehicle, but noted that the company needs to fully understand the electric vehicle market in North America and where it is headed in coming years.
Gas prices up and diesel down. Retail gasoline prices in June were steadily increasing across the country, with California closing in on $3 per gallon for regular fuel.
Though down from prices a year ago, each week retail prices in every region of the country have risen as expected by many petroleum industry analysts. As of press time, the average cost of gasoline nationally was about $2.62 per gallon with the Gulf Coast having the lowest prices, followed by the Rocky Mountain, East Coast and Atlantic regions.
The highest gas prices were in the California, followed by the West Coast (not including California) and Midwest regions.
Diesel fuel prices, which had generally been higher in most regions over the past two years, have fallen below gas prices at the pump in every region with California having the highest costs.
Prices on fuel differ dramatically by region, and even within a specific region, prices can vary up to 12 cents a gallon depending on brand. AAA’s highest recorded retail prices nationally were posted on July 17, 2008, when gasoline had an average U.S. price of $4.114 per gallon and diesel was at $4.845.
