If it’s high, Now is a Good Time to Borrow

In this crazy lending market, interest rates have remained at historic lows but all the banks have gotten so picky that most requests for loans go unanswered.  There is an old saying that goes, “If you don’t need the money, you can borrow all you want”.

Well, a year after the global freeze in the credit markets that caused massive government intervention (aka interference) interest rates continue to remain at historic lows.

That’s great for people with good credit.  If not, it seems like you could be wasting your time.  Credit has gotten to be so tight that if you are willing to be interrogated for several days, and can document your entire life story, (video and pictures help) along with signed letters from every institution that you have done business with, you might be considered for a loan.  And from all we can see, it’s going to be around for a while.

Bank and financial institutions are on the defensive posturing stage.  After many completely blew lending on the mortgage side, it has had a ripple effect in all other areas of lending from home purchase, to auto, to personal loans, and any other mode of credit issuance that was common in the past.  Not now.  No segment of borrowers has been spared. During the housing boom five years ago, 7 of 10 applications were approved.  Today is 5 in 10.  With credit card companies getting tighter with credit, consumer credit carddebt declined by $6.1 billion in July.

For perspective, big banks are not risk averse.  That’s common sense, right?  Rather, their reluctance to lend has to reflect the fact that they must conserve cash to absorb billions in losses that are still expected to occur from bad loans that were made before our financial meltdown last September of 08. FDIC-insured banks lost a total of $3.7 billion in the second quarter, dragged down by growing number of bad loans.  They set aside nearly $67 billion in the second quarter in anticipation of future losses from all those wonderful decisions that they made for years leading up to the crash.

Oh, there are a lot of other reasons, such as the lack of ability to pool loans into securities, (ABS = auto back securities) for sale to investors, or securitization. Lehman brothers collapse pretty much dried up this market outlet but there are signs of opportunity that crop up from time to time.  With consumers ratcheting back their borrowing and banks getting tougher with their lending criteria, rates will remain low for those who have good credit.  If you can stand the pain, you will benefit from the gain.

What has been your experience?  We would love to hear what you are seeing from your point of view.

Here’s to getting this economy back on track.

I’m really not trying to be judgmental but as they say, you do the math.  Let me summarize.

Point 1
A vehicle getting 15 mpg and averages 12,000 miles per year uses 800 gallons a year of gasoline.  A vehicle getting 25 mpg and averages 12,000 miles per year uses 480 gallons a year.  So, the average Clunker transaction will reduce US gasoline consumption by 320 gallons per year

Point 2
Cash for Clunkers DOT officials reported 690,000 vehicles sold during the program – so that’s 220.8 million gallons per year.

That equates to saving close to 5 million barrels of oil per year. I repeat—per YEAR.  5 million barrels of oil is about ¼ (25%) of one day’s US consumption.  And, 5 million barrels of oil costs about $350 million dollars at $70/bbl.

Point 3
Our Government “gave” each Clunker Trader approximately $4,500 per car for 690,000 transactions which cost US Taxpayers $2,877,000,000–not including Washington’s astounding Administrative costs.

President Obama said in his speech to auto workers in Ohio recently, “One of the other efforts we undertook was the Cash for Clunkers program. Folks said that wouldn’t work either. That program was good for automakers, it was good for consumers, and, by the way, it was good for our environment.”   What I did not read in that speech was that it was good for taxpayers, and here’s why.

We all invested and paid (through our taxes) more than $3 billion+ $150,000,000 to administer, to save $350 million.

And the return on investment is….Priceless

Getting a new car loan? Now is the time to also check on insurance rates for your new car. Get a very competitive quote for car insurance available, as you do your research for auto financing, at BestCarInsurance.com.

myAutoloan.com’s used car loan rate for cars purchased at a franchise dealer is currently being advertised at 6.74 percent for car loans up to 36 months and the auto loan rate is 6.94 percent for loans between 37 months and 60 months.

Used car loans for purchasing an auto from a private party loan is a lot higher than purchasing from a franchised dealer. The current rate of loans up to 36 months is 7.19 percent and 7.79 percent for auto loans between 37 months and 60 months.

Rates for doing an auto refinance are at 4.75 percent for auto loans up to 36 months and 5.64 percent for car loans between 37 months and 60 months.  Leased buyout loans, buying your leased auto and financing the purchase, are at 8.08 percent for car loans up to 36 months and 8.45 percent for car loans between 37 months and 60 months.

See all the rates available by going to myAutoloan.com’s home page – rate chart is there.

In the second quarter, 0.80 percent of car loans were 60 to 89 days past due, up from 0.66 percent during the same period in 2008.  Thirty-day delinquencies rose 14.6 percent in the second quarter to 3.06 percent, up from 2.67 percent the previous year.   Combined, 30- and 60-day delinquencies amount to $25.5 billion in loans at risk. 

Why is this significant?  That’s because it prompts lenders to tighten their lending criteria.  The result is that it pushes many consumers out of the market altogether.  Sure some buy used but many just drop the purchase to wait out the strict requirements being applied.
 
Michigan was among only three states to show a reduction in 30-day delinquencies, according to the study’s findings. The other two were Alaska and Nebraska.
 
At some point the lending markets has to turn so that pent-up demand eases.  However, for right now, it’s a tough market and consumers are not getting much of a break on the cost of financing, that is unless you’ve got a high credit score.  In the meantime, we all wait. 

For the balance of the year SAAR (Seasonally Adjusted Annual Rate) figures will probably close the year out at just under 10 million per month annualized.  Next year by February, we should see things starting to break free.  Let’s hope that prediction holds!

So what are some of the discrepancies? Edmunds pointed out what it sees as inconsistencies with the government’s Clunkers statistics. One of the reasons the company delved into these figures is because it says there was an unprecedented wide range in analysts’ sales forecasts, with analysts’ forecasts for the month annualized sales rate at an unprecedented 4 million range. Stands to reason that someone would want to true up the numbers, right?

One of the “mysteries,” as the company calls it, is that the government release said the program took 690,114 clunkers off the road. However, apparently Edmund’s experts tracking the program found that clunker trade-ins never accounted for more than 33.4% of weekly sales. “It is mathematically impossible for there to have been nearly 700,000 new-car sales during the course of the program, given the actual sales numbers announced by automakers who should have no motive to under-report,” said Zhenwei Zhou, Edmunds.com senior statistician.

But now that the numbers are in some of the numbers do not add up.  Apparently, one of the difficulties in forecasting the sales number was due to the midstream change in the Clunkes program, or the fact that the program’s administrators changed the rules allowing dealers to take clunker trades on vehicles that were in transit or on order. “As a result, we’re still seeing clunker deals trickle in and are yet to be counted as sales,” noted David Tompkins, Edmunds.com senior analyst. “We expect that to continue for a few weeks. We expect about 50,000 vehicles will be delivered and counted as clunker sales in September’s sales reports.”

Michelle Krebs, Edmond’s senior analyst noted that the Department of Transportation reported on Aug. 26 that it had received 690,114 Cash for Clunker voucher applications for either $3,500 or $4,500.  As of Sept. 2, she said DOT had not changed that figure.  However, the governments own data doesn’t add up. In its Aug. 26 press release giving the supposed final tally for the program, the DOT gives the total application voucher as well as a breakout of the number of vehicles purchased by category and the number of vehicles traded in by category.

None of these numbers are the same. The overall application number of 690,114 is different from the number of clunkers the government said were turned in under the program — 685,201 — which, in turn, is different form the number of vehicles purchased — 684,941. While the differences are not huge or enough to impact forecasting, they should match. Presumably, the number of clunkers turned in and the number of vehicles purchased should be identical, which should add up to the number of applications.

So why does the clunkers number matter? From an economic standpoint, how many of the clunker trades resulted in sales that wouldn’t have occurred otherwise? Or did it merely pull from behind and pull from future naturally occurring sales. If it did produce incrementally higher sales, what was the cost per vehicle to shareholders? Even more important, sorting Cash for Clunkers data is important for forecasting going forward. Analysts, including those at Edmunds.com, auto companies and other forecasting firms, are trying to determine, what is the true underlying demand for vehicles by retail customers, excluding the clunkers program, and what is the trajectory of vehicles going forward.

What do you think are the government’s data  Credible or not?  How can you believe in anything we are being told?  Too many questions and not any answers.  Tell us what you think.

“American consumers and workers were the clear winners thanks to Cash for Clunkers program,” said Ray LaHood, U.S. transportation secretary. “Manufacturing plants have added shifts and recalled workers. Moribund (or bare) showrooms were brought back to life and consumers bought fuel-efficient cars that will save them money and improve the environment.”

Overall, rebate applications worth $2.877 billion were submitted by the Tuesday deadline. This covered 690,114 applications.
 
Top 10 Most Purchased Autos
Of the top 10 most purchased vehicles under the Cash for Clunkers program, only five automakers made the cut. This includes Toyota, Honda, Ford, Hyundai and Nissan. Toyota and Honda each had three models make the most purchased list, while Ford was close behind with two. Nissan and Hyundai meanwhile each had one model making the most popular Cash for Clunkers purchases.

Top Most Traded In Autos
The Ford Explorer 4WD and the Ford F-150 Pickup 2WD were the significant leaders in what was traded in.  Of the vehicles traded-in, 84 percent were trucks with 59 percent of customers purchasing passenger cars. The average trade-in mileage was 15.8 mpg, which leads to an overall increase of 9.2 mpg, or 58 percent climb, as the average new vehicle purchased receives 24.9 mpg.
 
Offering preliminary insight into the impact of the Clunkers program will have on the economy, the White House Council of Economic Advisers predicted the program will ramp up economic growth in the third quarter by about 0.3 to 0.4 percent at an annual rate due to the sales. The gross domestic product will be sustained thanks to increased vehicle production and to fulfill inventory requirements, the group indicated. Furthermore, an excepted 42,000 jobs will be created or saved.

New-Vehicle Manufacturer Percentages:
Toyota: 19.4 percent
General Motors: 17.6 percent
Ford: 14.4 percent
Honda: 13 percent
Nissan: 8.7 percent
Hyundai: 7.2 percent
Chrysler: 6.6 percent

There is, as we’ve mentioned many times, a large gap in opinions of just how successful the program was.  However, what it did do is create an artificial spike in consumer spending.  If you think about it, the conclusion that was most promoted by the non-objective major newscasters who thought of this as a good idea, was to proclaim its success. 

With the direct lending markets still in mourning from the failed practices of many banks mortgage fiasco, a huge market still exists for auto loans and refinancing for everyone who does not have a 720+ FICO score.  In the meantime, and still a “nightmare” is the fact that dealerships are still waiting for their money, and most have stopped junking the trade-ins in fear of Uncle Sam failing to reimburse them under the program.  Time will tell.  What do you think?  Good or bad, let us know.

It sill looks like consumers benefited, and the Government benefited by the “look what we’ve done to spark the economy” sound bits spewed all over the media, and finally, the dealerships got rid of a lot of autos sitting on their lots.

The problem is that they seem to be the ones floating the Federal Government, while they try to figure out how to make the payment processing work. That’s funny! From what I’m seeing, most dealerships are going on a wish and a prayer about getting paid.

I’m talking some major cash per dealership that is hung up in government regulations of 150 pages and some 14 different forms that need to be completed. Does that sound like efficiency to you? I think it’s totally blind faith at this point that the dealerships are going to get the money that is owed to them. Citi call centers have been awarded outsourced work, and the National Transportation and Highway and FAA employees have been brought in to process paperwork, in addition to part-time employees having been hired.

It kinda sounds like a cluster — I mean ‘Clunker’ to me. They are all working on trying to input stuff and they can’t get in because there is soooo much of it and the documentation to process just one sale with a qualified rebate takes hours to complete. The computers are overwhelmed. It’s a great program for the manufacturers, a great program for the consumers. For dealers, it’s been an administrative nightmare.

Think about this for a minute – The Obama administration and its allies in Congress propose to overhaul (and potentially run) health care for more than 300 million Americans?

I think we can say cash-for-clunkers doesn’t inspire much confidence in Washington’s bureaucratic acumen. Or its speed! Or its feel for a functioning market, the demands and expectations – - OK I’ll stop.

Will the dealers get paid? Yes, because failure to do so would be a PR disaster of epic proportions for the democrats and the administration. Will the program prove to be the jumpstart languishing auto sales need? Debatable, but probably not, though depleted inventories already are forcing increased production schedules across the industry. Those announcements were made about a week ago.

The more important question, it seems to me, is what the obvious administrative failures of cash for clunkers say about the federal government’s capability to manage programs more typically run by the private sector. And, secondly, why is there a clamor for more of the same? What is it about this poorly run program that the American people or even congress wants more of? Tell me, what am I missing? Why did the public not see or hear about the issues in the media? Clearly journalism has seen better days and major networks appear to be agencies for the Obama administration.

Sad day for the USA.

Auto dealers are in business to make money selling cars and trucks, not to serve as conduits for federal transfer payments. If nothing else, cash for clunkers proved Americans still love good deals — and that their government cannot process them.

It is interesting that no media analysis has ever told the tale of the “unintended consequences” of the destruction of more than a quarter million used cars, especially older models that would have gone to charity or been sold on the private party market.   It’s an obvious benefit to the new dealers, that’s for sure.  This creates the supply shortage, especially for lower prices cars resulting in the remaining cars left on dealer lots to increase the sales price.  Since demand has remained strong, at least for the first few days and possibly weeks, it would have forced the average prices to increase because the least expensive cars and trucks were being removed from the overall inventory available.

Owners of vehicles that didn’t qualify for the clunker program reverted to their original intent and sold the cars and trucks private party, according to Art Spinella, president of CNW Research.   Specifically, private used-vehicle sales are expected to total 1.214 million in August, a 1.5-percent improvement from a year ago. Meanwhile, franchised dealers are expected to move 1.417 million used units, a 0.5-percent decline, and independents are likely to sell 1.246 million used cars, a 0.4-percent upswing.

Cash for Clunkers affected the new side of the market. According to his analysis, at the mid-point of July, new-vehicle sales were on pace to have a 22.2-percent year-over-year decline.  However, the heavy promotion and coverage of CARS helped to lift new-vehicle sales to 997,572 units for the month, which was down less than 13 percent from July 2008.   The “bounce” in floor traffic at the end of July continued through the first two weeks of August, and this helped multiple areas of the industry, according to Spinella.  First, it drew more ‘lookers’ who weren’t even planning to buy a car or truck. It’s been more than two years since analysts have seen any appreciable increase share of floor traffic consisting of long-term shoppers (those who don’t expect to buy a vehicle for at least a year,) and second, it exposed Cash for Clunker buyers and general consumers to other models, which had a positive overall effect in sales.  There were many benefits for dealerships’ F&I, parts and service operations, as well as for salespeople in general.  I suppose all those who got a subsidy are pleased.

So now what?  Frankly, as it has been observed by others, that dealers have been taking early sales from 2010 expected revenues.  This has driven up prices, while the big 3 have increased production.  What should we expect next?  In my opinion, expect a spiraling drop in sales through the balance of the year, picking up some first quarter 2010.  Shoppers will clearly delay purchases until more signs of a stable economy are seen and their jobs are not threatened.  At some point the auto loan marketplace is going to rebound.  I am looking forward to lenders getting back into the game and providing some service again.

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Why are TV and media so blind and non-objective anymore?  That’s probably because so many reporters fail to heed the journalistic rules that have been a foundation of our press, and that is to note the unseen as well as the seen—to consider all the effects of a policy on society as a whole, not just the immediately obvious benefits for a select group. I’ve not really seen anything published or on TV that has put any type of high level of questioning of the program before us and tried to explain what the unseen consequences of the ‘Clunkers’ program might be.  That’s why I ask if anyone is paying attention.

The first benefit of this revised clunkers program, which was approved last night by the senate and is off to the President today, is to increase the sales price of the car.  What this $3 billion subsidy is doing is boosting sales prices and lowering trade-in payments.  It’s not as if dealers simply charge $4,500 less than they would have and pass the entire subsidy onto the buyer — dealers still charge as much as they can for a new car and pay as little for a trade-in as their customers will allow. The subsidy is split between dealers and customers.  No one has ever come out and said that.

And who are the customers? Not poor people, or the needy — they don’t shell out five figures for new cars. No, this is a middle-class to upper-middle-class subsidy, which is probably why politicians love it so much.  I continue to hear that the average FICO score of the buyers within the ‘Clunkers’ program has a 720 score.  That’s clearly not the poor but I doubt if that kind of information ever comes available to the public or gets reported.

The real benefit to business — and harm to the economy — comes after the car sale is concluded. The law requires the dealers destroy the “clunker” engine (which, to be eligible, was drivable upon trade-in), scrap the car and shred almost all its parts. This government-required waste reduces the supply of used cars on the road.  All those poor and needy, who would have benefited from having access to these autos, will be completely denied.  Reduce the supply of drivable used cars, and you drive up the price of all cars.

This supply reduction is the real stimulus for automakers and new-car dealers, and it comes at the expense of every consumer who didn’t take advantage of Cash for Clunkers — especially those who can’t afford a new car. This $3B program taxes used-car buyers to subsidize new-car buyers.  Have we all just gone nuts in the country?  So tell me, how’s that “cash for clunkers” program working out for you?

 I’d love to hear your comments.

The study examined five key factors to contribute to satisfaction within the prime retail credit, subprime retail credit and retail leasing segments: provider offerings, credit personnel, application/approval process, termination policy/service and sales representative relationship. Three factors were measured in the floor-planning segment: provider offering; floor-plan support personnel and process/service.

The study was based on responses from more than 2,000 dealer principals who were surveyed between April and May of this year.  

On a 1,000-point scale J.D. Power found:

Prime Retail Credit (down 46 points)
2008: 835
2009: 789

Subprime Retail Credit (down 76 points)
2008: 793
2009: 717

Retail Leasing  (down 79 points)

Floor Planning  (down 90 points)

The retail financing experience account for more than two-thirds of dealer satisfaction. Meanwhile, offerings such as rates account for less than one-third of overall satisfaction.  While recognizing that the past year has been tough for dealers, J.D. Power executives advised, “This indicates an opportunity for lenders to differentiate themselves through service, even though external market forces are driving a more conservative lending approach.”   I just love the “more conservative lending approach,” don’t you?

David Lo, director of financial services as J.D. Power, explained it this way, “Current economic conditions have created something of a ‘perfect storm’ as declines in new-vehicle sales, tightened lending and reduced inventory funds have combined to put extreme stress on dealer business.”

“However, the fundamental principles of service are unchanged. Lenders that focus on prompt application and funding turnaround times, have credit buyers that demonstrate willingness to worth with their clients and have sales representatives who are skilled in relationship management may position themselves to be a lender of choice,” he continued.   This is actually pretty significant.  One of these days lenders will clamor around the dealerships, if not the buying consumers, and be happy to lend money again.  LOL, that sure sounds so funny to me.

This is interesting as well; Basically, the study discovered that higher levels of satisfaction may positively impact the amount of a business a lender receives from a dealer.  For instance, for the lenders in the prime retail segment whose satisfaction scores averaged 712 on a 1,000-point scale, 22 percent of dealers say they “definitely will” increase their business with this organization.

However, of the lenders whose satisfaction scores averaged 886, 46 percent of dealers said they “definitely will” increase business with that lender.  Lo noted, “High-performing lenders tend to close a higher proportion of deals. This is critical right now, and almost more importantly, may serve as a foundation for growth one the market stabilizes.”

Prime Retail Credit

Taking the top spot in the prime retail credit segment was Mercedes-Benz Financial with an index score of 918. Officials said this company performed particularly well in two areas, provider offerings and credit personnel.  The prime retail credit company averages of a few sample lenders are as follows:

Mercedes-Benz Financial: 918
BMW Financial Services: 898
Toyota Financial Services: 873
Audi Financial Services: 838
Honda Financial Services: 831
Wachovia Dealer Services: 814
Ford Credit: 802
Bank of America: 787
Chase Auto Finance: 772
US Bank: 744
Capital One Auto Finance: 732
GMAC: 711
Chrysler Financial: 665

Subprime Retail Credit

Interestingly enough, J.D. Power said that no awards were presented in the subprime retail credit segment due to insufficient market representation.  

The rest of the detail is not that interesting so I won’t go into it.  I don’t know about you but let’s hope that this ‘Perfect Storm’ ends soon.  I’d like to see the supply of financing start to meet the demand of the applicants.  No doubt it will take time but I speak for myself when I say I’m getting a little impatient!

The Transportation Department is preparing to suspend its $1 billion “Cash for Clunkers” program by the end of Friday, after it had all but run out of money, but said it would still honor the vouchers until midnight.  What’s going to happen now is that Congress will be approving another $1 billion dollars for the program so that they can leave for vacation and talk about how successful the ‘Clunkers’ program is. 

My math may not be the best but at a 10,000,000 sales rate for the year, with 6 sales days per week, that is about 32,000+ cars/day sold in the US. The CARS program will support a maximum of 285,000+ cars if everyone only gets $3500, and 222,000+ if everyone gets $4500 (The actual number lies somewhere in between). At around 32,000+ cars/day, that translates into 7-9 days of sales if every car purchased qualified for CARS. If only half qualified, then that would be 14-18 days.

It sure looks to me like someone didn’t bother to check their math to see how much of a difference this would make, or how long it would likely take to burn through the money.

The surprise revelation came FOUR DAYS after the program started and prompted an urgent series of meetings on Capitol Hill and at the Transportation Department to figure out if and how it would replenish the funding.

Transportation Secretary Ray LaHood made a round of calls to members of Congress notifying them that the program was out of money, talking to Sen. Carl Levin, D-Detroit, among others. He was making a push to try to find funding to keep the program alive.

It’s not clear what will happen if dealers submit more requests for vouchers beyond the $950 million in the program but I’m hearing that all the vouchers will be honored if submitted by midnight today. The remaining $50 million is set aside to cover administrative costs.  You know, for another $50 million plus $950 million more, we can do it all over again.

The White House said late Thursday it was considering its options.  I just can’t imagine what those would be, can you?

“This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn,” said U.S. Rep. Candice Miller, R-Harrison Township. “The federal government must come up with more money, immediately, to keep this program going.But action must be taken fast, as the House was set to adjourn today for its August recess and not return until after Labor Day.  I’m still betting that they will approve more money before they leave for vacation to listen to their constituency.

In an article posted by Michelle Krebs of Edmonds, she noted that dealers think the CARS.gov gauge is in reality on empty. Dealers and dealer organizations have expressed their concern to government officials as the program began, 4 days ago, that they had far more transactions in the works for consumers to trade their clunkers for more fuel-efficient vehicles than the program had in funds. Dealers have always feared they would be left holding the bag for the vouchers of up to $4,500 if the government funds ran out.

On Wednesday night, sources said the National Automobile Dealers Association surveyed its dealers to gauge how many Cash for Clunker transactions they had in the works. The average number of working deals for the 1,900 dealers who responded amounted to nearly 14 transactions, with more deals qualifying for the top $4,500 voucher than the $3,500 voucher.

The program offered consumers up to a $4,500 voucher for turning in vehicles that in the case of passenger cars got no more than a combined city/highway 18 miles per gallon. To qualify for the full $4,500 the new vehicle purchased must have a 10 mpg improvement. To get a $3,500 voucher, it needed a 4-mpg to 9-mpg boost. The program is limited to vehicles no more than 25 years old, which the owner must have owned and insured for the previous year.

Well Time will tell – what will congress do?  What pressure will the White House put on Congress?  Will the American People support it or blow it off? I’m still saying they will approve another Billion or two dollars of your tax money to keep it alive.  Stay tuned ………

“The lower receivables primarily reflected lower North America and Europe receivables, mainly due to lower industry volumes, lower dealer stocks and the transition of Jaguar, Land Rover and Mazda financing to other finance providers,” officials indicated. On June 30, the company had a managed leverage of 8.4 to 1. Also, executives said that during the second quarter, Ford Credit completed a cash tender offer, purchasing $3.4 billion principal amount of its unsecured, nonconvertible debt securities for an aggregate cost of $1.1 billion, including transaction costs.

Second, Ford Motor Co.’s unexpected $2.3 billion second-quarter profit could signal the end of the worst downturn in recent automotive history for at least one of Detroit’s automakers, but Ford’s recovery still depends on the broader economy.  Though Ford’s profit was due largely to one-time gains, consistent improvements in its underlying financials are sparking optimism among investors, analysts and union leaders that has not been seen for some time.  It was nice to see that Ford shares gained 60 cents Thursday on the results, closing up 9.4 percent at $6.98. 

According to the Detroit News, the company also said it has reached a new agreement with the United Auto Workers that will allow Ford to cover billions in retiree health care obligations with company stock priced at current market values — previously, the UAW said the shares had to be valued no lower than about $2.  That’s a vote of confidence in Ford’s future, said Sean McAlinden, chief economist at the Center for Automotive Research.  “This is a stock that, when this economy recovers, is going to $20,” he said. “I’d say we’ve got a hot auto company here in Michigan again.”

The numbers offered a sharp contrast to the staggering $8.7 billion loss Ford posted in the same quarter a year ago. Excluding one-time items, Ford still surprised analysts with a loss from continuing operations of $424 million, about half what Wall Street expected and a $609 million improvement over 2008.
Talk about good news for the automaker. Ford cut its cash burn rate by more than two-thirds, from $3.7 billion in the first quarter to $1 billion. It also saw the amount it makes on each product increase in key markets such the United States, and gained 2 percentage points in U.S. market share over the same period last year despite lower incentives.  It’s just great to see that the only auto company that did NOT take the government bailout and the only auto company that is not being run by the government, is showing signs that capitalism is not dead.

“Those are real proof points that the plan is working,” CEO Alan Mulally told The Detroit News. “We’re moving into a different phase now. We’re starting to grow.”  He attributed the gains to aggressive cost-cutting, new products and better use of the company’s global assets.  “Mulally has recognized what was right at Ford and leveraged it, putting Ford in a strong position relative to its competition,” said analyst John Murphy of Merrill Lynch. “A good second quarter, and liquidity appears solid.”

If Ford’s stock remains high, some analysts expect the company to pursue another debt-for-equity swap. In May, Ford issued 345 million new shares of common stock, raising $1.6 billion, and helping it trim $10.1 billion in debt from its balance sheet since the beginning of the year.  Ford ended the second quarter with $21 billion in available cash, but still needs to improve its balance sheet to address lingering concerns that GM’s bankruptcy put the Detroit automaker on a stronger financial footing.

Again, it’s good to see Ford prosper and we can all hope that the success continues for the Non-Government owned automaker.  The free market is alive and well!

The new Government owned GM emerged from the remains of bankrupt General Motors Corp. last Friday, aiming for 18.5 percent of U.S. auto sales with four car lines, down from eight.  According to Autodata Corp, the four surviving brands, Chevrolet, Cadillac, Buick and GMC, accounted for 16.5 percent of the market in June, and Ford’s share was 17.2 percent, excluding Volvo, which it is selling.
 
An industry analyst with IHS Global Insight of Lexington, Massachusetts, John Wolkonowicz said that surpassing GM would validate Ford’s strategy to go it alone and spurn government aid. While GM and Chrysler LLC seek to change themselves through bankruptcy, Ford benefits from its status as the only independent major U.S. automaker as it builds momentum.

Well, it sure looks like Ford is on a hot streak right now but will it last so that Ford overtakes GM?  It’s going to mean that our Government owned GM must keep some customer loyalty with Pontiac customers, which it is discontinuing to create the “NEW” GM.  That is clearly going to be a major challenge.  A lot of Pontiac buyers, young, blue-collar women, really do not like the rest of the GM lineup and they are certainly not going to buy a Buick anytime soon.

As the story goes, GM first overtook Ford in 1927 as Henry Ford halted production to switch from building the Model T to the Model A. Ford recaptured the lead in 1929-30. GM pulled ahead in 1931 and never looked back, until now.  Why did they over take Ford? No ‘Natural Reason’.  As for DM, defending its 78-year-old U.S. sales supremacy will be challenging, even after Volvo is sold.  They will have four brand and Ford will have three and thus, there will be a parsing out of who the winner will be between the two. 

It’s interesting that Ford has already overtaken Toyota Motor Corp. in U.S. sales by selling 773,242 cars and trucks while the Japanese automaker sold 770,449 vehicles in the six months through June, according to Woodcliff Lake, New Jersey-based Autodata, a research firm that compiles automotive sales data. Toyota has outsold Ford in the U.S. the past two years. Ford continues to trail Toyota this year by 26,953 vehicles when Volvo is excluded.  GM’s four surviving brands sold 804,371 cars and trucks in the first half of this year, according to Autodata, down 38 percent from the same period in 2008. Ford’s U.S. sales, excluding Volvo, are off 33 percent.

What, if anything, did GM learn from discontinuing Oldsmobile?  GM failed with customer loyalty when they dropped Oldsmobile and did not hold on to many Oldsmobile buyers after it killed that brand in 2004. So now it’s all going to be about sophisticated electronic marketing techniques to target Pontiac owners and GM is expanding its other model lineups to offer alternatives.

Ford gained U.S. market share among individual car buyers in seven of the past eight months, according to George Pipas, the automaker’s sales analyst. The Michigan-based automaker’s 17.2 percent U.S. market share in June excluding Volvo was up from 14 percent in the same month last year.  Basically, the key benefit of Ford Not Taking Aid, (that is avoiding bankruptcy and staying off federal aid,) is helping Ford win new customers. 

GM, which had filed for Chapter 11 on June 1, is receiving about $65 billion in federal aid. Chrysler, which filed for bankruptcy April 30, has taken $12 billion in U.S. assistance.  Ford won almost three times as much support as  the Government owned GM and more than six times as much as Chrysler among U.S. consumers asked about their preferences for a new auto, according to researcher AutoPacific Inc. of Tustin, California.

In an online survey of 900 people in June, 43 percent said they were likely to buy or lease a Ford, compared with 15 percent for GM and 7 percent for Chrysler. Ford matched Toyota’s score and beat Honda Motor Co.’s.  Ford will gain more market share on its domestic rivals when it launches two small cars next year. The automaker is estimating that it will sell 310,000 Fiesta subcompacts and redesigned Focus compacts annually by 2012, Global Insight estimates.
 
It’s certainly going to be an interesting battle and with free enterprise going against Government and Union owned GM, Ford should be a clear winner when it’s all said and done.  One thing that continues to confuse me is with the billions of dollars going into this restructure and government ownership, how will it succeed if the financial markets do not loosen up credit and let car buyers purchase transportation with auto loans?  Hey Mr. President, how about kicking some of these “cautious” banks into helping out the American people!  What do you think?

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Dealers have been pushing bills in Congress that would undo any changes made by Chrysler or GM in their dealer agreements during their bankruptcies.  One version now has 221 sponsors in the House, more than the 218 it needs to pass, and dealers who back the proposal plan to push the issue with House and Senate members during a lobbying blitz Tuesday, with a House vote possible Wednesday.

“By a unanimous vote, a U.S. House committee has approved a measure that would restore 2,100 dealers either cut or scheduled to be closed by General Motors Corp. and Chrysler Group LLC.  The vote comes amid growing support in the House for the proposal, with more than 200 cosponsors signed on to a similar bill.  Dealers will hold a lobbying event next Tuesday to press for the plan in the House and Senate.  The bill would turn back the clock to before the companies filed for bankruptcy, restoring the 789 dealers cut by Chrysler and 1,300 dealers GM chose to wind down.”

Mark LaNeve, GM’s sales chief, and GM North America head Troy Clarke spent the day criss-crossing Capitol Hill, as did Chrysler Deputy CEO Jim Press.  “In terms of creating a viable, competitive GM on taxpayer dollars, you can’t look in the mirror and say we didn’t have to restructure the dealer body,” LaNeve said. “Everybody acknowledges, even dealers acknowledge, we had too many dealers.”

In addition to reversing the dealer cuts, the bills would throw out the changes GM negotiated with the 4,100 dealers it chose to keep. LaNeve said about half of those dealers had sent letters to lawmakers opposing the dealer bill.  Chrysler said in a statement that the House version of the dealer bill “would jeopardize the viability of the new company.”  The proposal by Michigan Rep. Gary Peters, which was still being circulated among lawmakers, suggested using money returned by banks under the $700-billion financial industry bailout.

I know it’s horrible that people are losing jobs at these dealers but I don’t understand this vote. First, GM/Chrysler are told to “become competitive” but then Congress tries to stop them from taking the steps they feel are necessary to be competitive.

It makes no sense to me, but how about you?  What needs to happen is that our government, who now controls the banking system and the major banks, had better start getting these Taxpayer Owned entities to loan money again.  Is this crazy or what?