The Penske File

Roger Penske's auto parts company looks to a be a big winner in the shakeup affecting the American automotive industry. Penske's namesake transportation services company, which already sells Daimler's Smart car in the United States, has acquired GM's Saturn brand.

Why is this good? Well, it will keep Saturn dealers in business and save jobs. And, despite the brand's loss of direction in this past decade, it continues to have a good reputation for quality service and no-haggling deals. Penske will continue to sell GM-made cars for a couple of years - sorry, no Astras - and after 2011, the firm will sell cars from other manufacturers.

The sad irony is that Saturn started out as an effort by GM to win buyers back from imports, and it succeeded at first. But as subsequent product became more generic and efforts at carving out a new image for the division failed, the General has had to give up on the venture and concentrate on its more mainstream brands. Penske will have to find another source for Saturn vehicles, and there's no other domestic manufacturing base he can turn to, unless he wants to sell Fiskers or Texas-made DeLoreans. What's left? You got it.

Saturns for the 2012 model year might come from Renault or possibly even from a Chinese company.

Meanwhile. . . . After years of a huge German and Japanese presence in the U.S. automobile market, the pending sale of Chrysler's assets to Fiat of Italy seemed to complete the domination of the American highway by the old members of the Rome-Berlin-Tokyo Axis. Not so fast. Chrysler's stiffed bondholders, whose intransigence put the automaker in bankruptcy in the first place, petitioned the Supreme Court to block the sale approved by a New York bankruptcy judge, and Justice Ruth Bader Ginsburg - who must have had a bad experience with a Dodge - temporarily delayed the sale pending a review by her and her colleagues. If the delay goes on long enough, the Fiat-Chrysler deal could be scuttled and the company liquidated. Fiat CEO Sergio Marchionne, Il Duce, would not be pleased.

And if that happens, how would Marchionne get Fiat back into the U.S. market?

Hmm, maybe he should call Roger Penske . . .

Fumes

It's done. General Motors, once the greatest industrial colossus on the planet, is filing for Chapter 11 bankruptcy tomorrow. When the smoke clears, Pontiac will have been shuttered, several plants will be closed, and Opel - the Old World jewel in GM's crown - will be sold to a Russo-Canadian consortium (??????????) involving the Russian automaker GAZ and the Canadian auto parts manufacturer Magna.

Although it's sad to see a company that has made such wonderful cars end up like this, I can't help but feel a little glee in GM's predicament. The company has behaved like a bully for so long, using its influence to bend laws and federal policy to its own advantage, from buying streetcar lines and tearing them up to make people buy their products to opposing various safety and emissions regulations. The General could only rig the game for so long, but when they unexpectedly got competition from German and then Japanese automakers who knew how to reset the rules of the market on their terms, GM first failed to respond, then fought back with product that turned out to be inferior, and proved to be ineffective in reforming its business practices.

I obviously feel sorry for the workers who will be affected, but I don't really pity the top brass that allowed this to happen.

GM On the Brink

General Motors is going to declare bankruptcy. There's no way around it. They're in such dire straits, they may even lose Opel in Europe. Pontiac is as good as gone here. And the Chevrolet Volt is too damn expensive to produce.

Oh yeah, and bond holders won't forgive General Motors's $27 billion debt.

Many mass transit and environmental advocates have long lamented that, after GM tore up the streetcar lines, backed the construction of expressways, and fought various pollution standards, no one was ever able to find a way to rein the company in.

I believe someone has done that.

Fallen Pentastar

Chrysler declared bankruptcy today. This is the biggest blow to the American auto industry since Tuesday.

The nation's third-largest (read smallest) major automaker almost avoided this fate. Chrysler managed to negotiate respectable deals with its banks and with the American and Canadian autoworkers' unions to stay in business, but a consortium of forty hedge funds refused to renegotiate their loans with the company and so Chrysler entered Chapter 11. What David Riccardo, Dieter Zetsche, Cerebrus, products like the Dodge Daytona and the Chrysler LeBaron GTS, the Eagle brand, and a series of other missteps and disasters over the past thirty years couldn't do, a bunch of greedy investors managed to do in one fell swoop.

Needless to say, President Obama was not happy with the hedge fund investors. But he does hope to help shepherd Chrysler through the even more difficult period it's now entering. Bankruptcy does not mean going out if business; rather, it means a restructuring of operations, a reworking of debts, and a fresh start once it's through. And with Fiat guaranteed a 35 percent stake in the company, along with the workers owning 50 percent, the federal government will take an eight percent share (with the Canadian federal government getting the remaining two percent) with $8 billion of aid from Washington. And of course, there will be new product, like the upcoming new Jeep Grand Cherokee, as well as small cars from the Fiat connection.

But who will by cars from a bankrupt company? The Chrysler reorganization sounds promising, but will consumers have any faith in it?

Chrysler already has new product creating a buzz, like the newly revived Dodge Challenger, but that may not be enough. After all, Studebaker impressed everyone with the Avanti in 1963 and was gone in five years.

Government Motors

President Obama pretty much had the government take charge of what's left of the American automobile industry, dismissing GM and Chrysler's survival strategies as insufficient and having them go back to the drawing board . . . and giving Chrysler only a month to finalize a partnership deal with Fiat that has only a slight chance of being completed in that time. The government will now back warranties for GM and Chrysler products, and GM chairman Rick Wagoner has been forced out of a job, with a severance package of $23 million. That's pretty good for someone leading an industry whose remaining employees are asked to make the kind of sacrifices the bankers don't have to worry about.

It seems weird to many that the automakers are being punished so severely for their bad business practices while the banks get even more money on top of the bailout funds they've already received for their bad business practices. But Obama has gotten caught in the devil's bargain. The banks are too big to fail, and money has to be pumped into the system to get credit flowing again. This is what most consumers need to buy a car.

Some of the government's policies in helping out Detroit make sense. GM and Chrysler are overrepresented by too many dealerships meant to cater to a market share that was once much larger than it is now, so dealerships have to be sacrificed. Also, many of GM's brands, which once dominated American highways,have become irrelevant and redundant. Pontiac, after trying to produce a distinctive high performance image for their cars, are once again becoming nothing more than Chevrolets with split radiator grilles; its "newest" model, the G3, is actually a rebadged Chevrolet Aveo. I used to insist that Dodges were Plymouths and Plymouths were Dodges and Chryslers were Dodges and Plymouths with upright grilles, plushly upholstered seats, and more chrome, but even with the Plymouth brand name long gone, Dodges and Chryslers are still rather redundant, and even the distinction of Jeep trucks and SUVs (made by Chrysler since 1987) is getting blurred as some Dodge trucks (like the Nitro SUV) derive much of their styling and engineering from the Jeep lineup.

GM should survive; even though new chairman Fritz Henderson (do you really want a guy whose nickname is slang for something that's broken?) has indicated that bankruptcy is "probable," its new product should help. Many of GM's latest models are more competitive with their Asian counterparts; my own cursory, unscientific census suggests that the all-new Chevrolet Malibu is selling well among the few Americans still buying cars. Chrysler is a question mark; even though some question the logic of its deal with Fiat, due to the fact that Chrysler's 1998 merger with Daimler-Benz was a fiasco, it's worth noting that Fiat makes more cars for the average buyer; its legendary 500 was and the retrograde 500 is the Italian equivalent of the Volkswagen Beetle. This deal will allow Chrysler to make and sell European-engineered cars prices for more of a mass market.

Ironically, despite Obama's call for Detroit to make greener cars, his administration has declared that the coming Chevrolet Volt hybrid is too expensive to turn things around for GM. Its sophisticated components are too costly to produce. And here's another dirty little secret; hybrids are only a small part of the car market. Most people in this country buy cars that use gasoline, and, as long as gas is cheap, prefer bigger cars that use more of it. Unless gas prices go up again and stay up - or unless gasoline subsidies in this country are eliminated and more punitive federal taxes for gas guzzlers are imposed - you won't see many more Aveos or G3s on the road, much less Volts. Which works out fine, since the Aveo/G3 twins are made in Korea anyway.

Obama hopes to save the American auto industry, and I hope he does a better job than the guys who actually ran the industry. But that industry could just as easily disappear, or be reduced to total irrelevance even in the best of circumstances. I'm somewhat skeptical myself. In fact, I saw something really eerie today. On the road, driving home from work, I saw a Model T going the other way. Okay, it was a collector's car, being driven by its eccentric owner. But even though Ford is doing relatively better than GM or Chrysler, the sight of a Model T Ford was still rather symbolic. The Model T is a ghostly symbol of Detroit's glory days, and the sight of one was like a premonition of the industry's death.

After all, Model Ts are black.

(Whew! I certainly didn't go out like a lamb tonight! It's March 31, 2009, and that's the end of the first quarter!:-D)