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New Manufacturing Plant
Boeing broke ground today for a new $750 million plant for the 787 Dreamliner in North Charleston, South Carolina. The location was chosen both because of financial incentives offered, as well as the availability of a non-union workforce. In September, a small Boeing plant already operating in SC voted to decertify the American Machinists and Aerospace Worker union. The plant construction will involve about 2000 jobs, and about 3800 jobs will result from operation of the plant.
City Tax
If GM moves someone from RenCen to Warren, isn't that a salary increase for that person? Isn't the situation that Detroit has a city income tax, and Warren does not? If GM wants to further reduce it's own taxes, and the taxes on it's employees, I would suggest moving it's headquarters to Florida or Nevada.
GMAC
It looks like GMAC is putting on a show of rattling the executive ranks to try to show the feds that it is getting tough on operating like a business instead of a charity. This will be justification for the next round of bailout billions it needs.
Visteon
FYI, on Friday, the bankruptcy judge for Visteon (which has been in bankruptcy since May) accepted a bid by Nissan for four parts plants. The bid was $11 million up front, plus $20 million more if milestones are met. Appears to be a fire-sale price. The plants are in Tennessee, Mississippi, and Alabama.
GM Domestic/International
It's hard to judge GM financials right this minute because it's accounting is dominated by large one-time expenses (closing out it's involvement with Delphi's bankruptcy, loan/bailout paybacks to Canada, Ontario, Germany, etc). That is going to end in another month or so. The good news is that GM is in better shape now that it has shed a lot of liabilities in bankruptcy. The bad news is that it is still struggling in the US: the international operations generated profits, the US/domestic operations are still losing money. If GM can clean up it's domestic business, it will survive.
Sugar/Ethanol
The US government provides huge subsidies that artificially inflate the price of sugar domestically. The world price for sugar is about $0.22 per pound, but the US price is about $0.35 per pound (i.e. about a 50% markup). It makes the production of sugar-ethanol here financially uncompetitive with production done elsewhere in the world. This is also why Coke here uses corn syrup sweetner, and beverage stores here in California sell "specialty" Coke from Mexico made with cane sugar.
GM/UAW
A copy of the latest (May 2009) changes to the UAW/GM contract is at:
http://www.scribd.com/doc/15833752/UAW-Summary-of-GM-Concessions
GM/UAW Future Finances
There is stock, and there is stock. A reminder that the UAW GM VEBA contains both GM common stock and GM preferred stock. The preferred is worth $6.5 billion and pays a 9% dividend (putting over half a billion of GM's [taxpayers?] cash into the UAW every year). Preferred stock dividends have priority over common stock dividends, so if/when GM goes IPO, it won't be paying any dividends on it's common stock unless it can first pay the UAW their higher-priorty piece of the GM pie.
Pay Back
GM will make a symbolic payment to the feds in October 2010 as a "thank you" to the Democrats before the November 2010 election. This will be used by everyone in the administration as justification for the auto bailouts.
BBDO Detroit Closing
There was an all-staff meeting today at BBDO (the ad agency that Chrysler has used since 2000). It was announced that the Detroit office (actually in Troy) is closing due to the new-Chrysler taking the position that all advertising is up for grabs by all agencies (no long term relationships anymore). BBDO's contract with Chrysler ends in January, and the 485 jobs will likely be eliminated.
Electric Motorcycle Race
The first US race for electric motorcycles will be next year in Northern California. The Time Trial eXtreme Grand Prix will be part of Infineon Raceway's AMA Motorcycle Sonoma Showdown weekend, May 14-16. The bikes are expected to race for about 30 minutes, reaching 100 mph.
Sarcasm: Promoters will ask that spectators turn off their cellphones so the race can be heard.
The Race
Chrysler/Fiat needs to do two things to survive and succeed. 1) Get the line of small Fiats to the dealers ASAP. New cars always bring in attention and dealer traffic. This shouldn't require huge amounts of engineering. They fill out the lineup when paired with the domestic SUVs/trucks. 2) Make a competitive ultra-high gasoline mileage car. The Prius is what all "green" cars are compared to. Neither GM or Ford can do 50 mpg, so being the first domestic to get there would be a truly distinguishing accomplishment.
Loans
Don't confuse bailouts/loans/loan guarantees. The pre-bankruptcy taxpayer "bailout" money that went to GM and Chrysler is gone. In bankruptcy, the feds gave GM and Chrysler money that is a "loan", which was backed by equity in the companies. The value of the shares is TBD, and won't be known until the companies go public/IPO. The prediction is that about half of that money is gone (when the feds are able to sell their shares, they will likely get half of what the feds gave the auto companies while they were in bankruptcy). The nuclear industry gets "loan guarantees". The taxpayer does not give utilities money to build power plants. Because the regulatory environment is so unpredictable, normal sources of money won't loan utilities money for any power plants unless the government offers a guarantee that some government entity (federal, state, local, etc) won't shutdown the plant construction and strand their investment. BTW, the Cape Wind windmill construction project in Massachusetts now exceeds the average nuclear plant in regulatory delays (when a family named Kennedy says you are going to hurt their views and sailing, and when the Native Americans say you are going to ruin their ritual of greeting the rising sun over the water, your project will likely experience trouble).
Government Money
It was just announced that CIT filed for bankruptcy (the fifth largest in US history). The US government gave CIT $2.3 billion, which is likely gone, along with all the stockholder equity. The Big 3 and it's supplier base had best be afraid that this might be the final straw for taxpayers about bailouts, which are more and more looking like giving cash to a crack addict and expecting it to be used responsibly.
The Competition
For the quarter ending Sept 30, Honda has reported a profit of $587 million, on quarterly revenue of $22 billion.
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