GM Mega-Dilution

GM has filed a paper (here) with the SEC, "PRE 14C" which lays out a plan to dilute its common stock, by issuing new shares to the U.S. Treasury in exchange for debt.

GM will issue enough new shares so that the total number outstanding will be 62 billion.  There are currently about 610 million shares outstanding.  This is a dilution of 100:1.  This will reduce the "par value" of $1.66 to $0.01/share.  They will then do a reverse split of 1:100, reducing the outstanding shares back to 620 million.  

The effect of this is that current common stock holders will be wiped out.  

Example: you own 1000 shares which are currently worth around $1600.  Your 1000 shares will become 10 shares, worth about $16. total. That's a loss of 99%.

Cash For Clunkers Compromise

The House Energy Committee has released a compromise "Cash For Clunkers" plan, which is quite different than the two previous competing bills.

You can read the whole thing here.

One big change is that the plan is only good for one year, not the 3 years of HR1550.

The quick summary:

Passenger cars
$3,500 for a new vehicle of at least 22mpg, if old one was at most 18mpg; 4mpg improvement
$4,500 for a new vehicle of at least a 10mpg improvement

Light Trucks & SUVs
$3,500 for a new vehicle of at least 18mpg, if 2mpg improvement
$4,500 for a new vehicle of at least a 5 mpg improvement

Large Light Duty Truck (6,000-8,500 lbs)
$3,500 for a new vehicle of at least 15mpg, if 1mpg improvement
$4,500 for a new vehicle of at least 2mpg improvement

Work Truck (8,500-10,000lbs)
$3,500 for any new vehicle if old vehicles pre-2002

The one page summary did not mention scrappage details, so I assume the rules will be simlar to HR520 and 1550.

There is no domestic or NAFTA favoritism here--any vehicle make qualifies. The mileage requirements are modest. It will be easy for people to use the credit, which is good. But the duration is short, so many people won't be ready to take advantage of the credit.

I think this will be a good shot in the arm to the automotive industry, with modest fuel economy benefits.

John Kerry Introduces Quiet Car Ban

John Kerry and Arlen Spector have introduced Senate bill S.841, the "Pedestrian Safety Enhancement Act of 2009". This legislation, if signed into law, would require the U.S. Department of Transportation to take up to 90 days to study the dangers that near-silent cars pose to blind pedestrians. Then, 90 days later, the DOT would be required to issue regulations:

(b) Requirements- The standard required under this section shall provide that every motor vehicle be equipped with a method--

(1) to provide blind and other pedestrians with a non-visual alert regarding the location, motion, speed, and direction of travel of a motor vehicle that provides substantially the same protection of such pedestrians as that provided by a motor vehicle with an internal combustion engine; and

(2) that will permit a blind or other pedestrian to determine the location, motion, speed, and direction of travel of a motor vehicle with substantially the same degree of certainty as such pedestrians are able to determine the location, motion, speed, and direction of travel of a motor vehicle with an internal combustion engine.

You can read the whole thing here.

So here's an idea: let's add external speakers to our future electric cars which make them all sound like this:

Lutz Smacks Letterman

In a blog post titled "Stupid Human Tricks", Bob Lutz smacks down David Letterman for being uninformed about the Chevrolet Volt, when hosting Tesla's CEO. Along they way, Lutz sideswiped Drew Barrymore, made fun of Letterman's "pallatial estate", and claimed to have a pet swan that can do tricks. Read the whole thing here.

Now, if he is that uninformed, I must point out that it’s not his fault, it’s ours. We should do a better job of making sure that Dave and everyone else who is in position to comment on national TV about our products has the right information, whether they use that information or not. Perhaps if we’d hired Drew Barrymore to be the spokesperson for the vehicle we’d have commanded more of his attention. Regardless, we’d like to rectify the situation.

I would like to personally invite Dave to come learn more about the Volt, including the hugely important but unmentioned-by-him fact that its range is 40 purely electric miles plus several hundred more miles thanks to its range-extender. Dave may drive more than 40 miles a day on his commute from the palatial Connecticut estate, but about 80 percent of Americans don’t. And those people could conceivably drive the Volt every day and never use a drop of gasoline.

The Chrysler Filing

You can read the actual text of Chrysler's bankruptcy filing on the WSJ web site, here. There's also a long (117p) affidavit here. It's fascinating, in a macabre look-a-dead-body sort of way.

One interesting part is how much Chrysler owes the top unsecured (no collateral) creditors:

#1 Ohio Module Manufacturing Co.: $70.3 million (chassis assembly)
#2 BBDO: $58 million (marketing)
#3 Johnson Controls: $50.3 million (parts)
#4 Continental Automotive: $47 million (parts)
also #29 Continental-Teves: $7.4 million,
Continental Automotive Guadalajara: $5.5 million
#5 Cummins: $44 million (engines)
#6 Germersheim Spare Parts: $36 million (Daimler spare parts?)
#7 Comau: $32 million (robots and automation)
#8 Visteon: $25.6 million (parts)
#9 New Process Gear: $20 million (transfer cases)
#10 Denso: $18.7 million (parts)
#11 Yazaki: $18.3 million (parts)
#13 U.S. Steel: $16 million (steel)
#18 Tata America: $11.3 million (IT outsourcing)
#24 Magna Powertrain: $8 million (parts)
#26 Shell Oil: $7.8 million (petrochemicals)
#41 Wackenhut: $7 million (security)
#40 Borg Warner: $5.5 million (parts)
#47 Robert Bosch: $5.1 million (parts)
#50 TRW Chassis: $5 million (parts)

There are a few companies on here which are a little surprising. You expect parts suppliers and steel companies, but a German spare parts distributor? Wackenhut? Tata?

Top secured creditors:

U.S. Treasure: $4.5 billion
JP Morgan: $1.6 billion
Chase: $1 billion
Morgan Stanley: $980 million
Citibank: $919 million

Chryslers assets: $39.3 billion

Current assets: $11.1 billion (only $1.9 billion in cash)
Property and equipment: $21 billion
Other: $7.2 billion (including $3.5 billion in "intangible")

Liabilities: $55 billion ($30.6 billion current liabilities, $24.5 long term)

Operating loss, previous 12 months: $17 billion (!).

Fiat ecoDrive

Fiat has an interesting gadget called ecoDrive. This is a free software program which analyzes your driving habits and makes suggestions how you can change them to save more fuel. What is cool is how it does it--the car will write vehicle data (likely signals: throttle position, engine speed, vehicle speed) as you drive to a USB stick you plug into the car's USB port. The PC program will then analyze this data.

More here.

Waiting For The Aftershocks...

Now, we wait to see what happens to the supplier base. With GM and Chrysler both shutting down for at least two months, if not longer, analysts are predicting wholesale carnage in the auto supplier business. From CNN Money:

"The aftershocks are going to be huge. We just haven't seen it yet," said Laurie Harbour-Felax, president of the Harbour-Felax Group, an auto research firm. She said she expects a couple of major suppliers with annual sales of over $1 billion to file for bankruptcy within the next week.

There is high risk of collateral damage to the automakers which are still building cars in this country, such as Honda, Toyota, and Ford. These companies may have to prop up failing suppliers with many millions of dollars of extra support to keep parts coming, which will weaken these companies even further. Ford is particularly vulnerable, because it is running on a cushion of borrowed cash, and has no easy way to borrow more, short of going to Obama.