While sales in June fell by 33% for General Motors, and 42% for Chrysler, Ford Motor Company announced that its sales were only down 11% from June, 2008. Ford also outsold Toyota and is regaining market share for the third consecutive month, and is discounting its vehicles less than General Motors and Chrysler. Ford also stated that slow demand in the West and Southwest where the housing market has taken the worst beating, has dragged down the company’s overall sales, while sales in more than half of the remaining states were on a par or slightly greater than last year’s. Further adding to General Motors and Chrysler’s woes were that plant closings sharply reduced sales to car rental companies and other business customers. On the bright side, however, their bankruptcies have not deterred sales to consumers as much as was expected

Asian automakers have also felt the impact of the economic slowdown with declines in sales of 32% for Toyota and 23% for Nissan. Overall automotive sales in the United States fell by 28% compared to June 2008, which though still a decline is the smallest decline since September of last year. Average annual sales throughout the United States for the last decade were about 17 million units but took a nosedive starting the second half of 2008. Thus far in 2009 slightly under 5 million vehicles have been sold, a decrease of approximately 37%.

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After 25 years General Motors has ended its joint with Toyota at its plant in Fremont, California. The project, known as the New United Motor Manufacturing Inc., or Nummi, has manufactured more than 6 million vehicles, including the Corolla sedan and Tacoma pickup truck for Toyota, and the Pontiac Vibe for GM. GM will no longer be producing Pontiacs next year and intends to discontinue the Vibe in August. GM also announced that it did not intend to continue utilizing the Fremont facility after it emerges from bankruptcy, which is expected to occur in late summer, 2009. The venture allowed Toyota to apply its system in the United States and enabled GM to learn from the Toyota manufacturing process. The plant, which has over 4,700 employees, and has more than 5,000,000 square feet of assembly space is the last auto plant operating in California. Toyota has not yet decided whether it will continue to operate in the Fremont facility, and has rejected reports that it was considering building the Prius in Fremont. Both the Corolla and the Tacoma are being assembled and other facilities, the Corolla in Canada and the Tacoma in Mexico.

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Under a plan proposed by General Motors and the federal government GM will assume responsibility for future product liability claims filed after the new GM company emerges from bankruptcy. More than a dozen state attorneys general have voiced objections to GM’s plan to sell off its desirable assets to a new corporate entity. These could have upset GM’s plan for rapid completion of the bankruptcy process.

This decision will resolve the potential problem of whether customers who have claims regarding their existing GM products, but who have not yet filed lawsuits, can sue GM in state courts. Bankruptcy case law is unclear on this issue, therefore GM and the government’s auto task force chose to assume the liability rather than risk a possible delay in emerging as a new company.

Previously filed product liability lawsuits may be left behind to be handled by the old GM thereby allowing the new GM to emerge with a clean legal slate. Because of its large size, however, GM has instead chosen to assume the legal liability. Last year GM had budgeted more than $900 million for product lawsuits. A committee representing numerous consumer plaintiffs claims to represent $1.25 billion in potential personal injury claims and has objected to GM’s plan to leave such cases with the old GM.

In the meantime, GM has continued to process lemon law claims from California consumers, and presumably those of other states, and honor its obligations to such consumers under existing state lemon law statutes.

President Obama has signed into law the Car Allowance Rebate System (CARS) aimed and getting rid of older gas guzzling vehicles by giving consumers $3,500 or $4,500 towards the purchase of a new truck or car. The amount of the credit depends on the fuel efficiency rating of the vehicle being purchased. (See: cars.gov to get the EPA’s fuel efficiency ratings.)

A similar program has been highly successful in Europe where hundreds of thousands of car owners have traded in old vehicles under similar government subsidies. In Germany, for example, car sales are up by about 40% over a year ago. The German program is, however, more liberal than its American counterpart. Germany initially provided €1.5 billion to get 600,000 old cars traded in. The program has turned out to be so popular that the German government has now raised that budget to €5 billion to provide for 2 million cars and has extended the deadline to the end of 2009. Although the requirements under the dozen European programs vary from country to country, they generally require only that the vehicle being traded in is old. Germany requires only that the vehicle be at least nine years old and sets no limits on the kind of new car regardless of size and fuel efficiency.

The American program, on the other hand, is more narrow. The vehicle can be no more than 25 years old and have a combined city and highway fuel economy rating of no more than 18 miles per gallon as determined by the EPA. (See fueleconomy.gov). Further, the vehicle to be traded in must be drivable, be insured, and have been registered to the same person for at least one year, so us prevent shoppers from buying an older car solely for the purpose of getting the higher discount. Additionally, the credit cannot be applied towards the purchase of a used vehicle nor to vehicles that cost more than $45,000.

Consumers will get either at a $3,500 or $4,500 credit. To get the $4,500 credit it must be for a new truck or SUV rated at least 5 miles per gallon better than the scrapped vehicle, or a car rated at least 10 miles per gallon better than the scrapped vehicle. The credit will be given instead of the regular trade-in, not in addition to it, although it is possible that some dealers might add some trade-in allowance for the scrap value of the gold vehicle. To get the $3,500 credit the new car need only get at least 4 miles more per gallon than the traded vehicle, and new trucks need only be 2 miles per gallon better.

Energy Secretary, Stephen Chu, announced during a visit to Ford’s headquarters that it will receive a loan of $8 billion, out of the $25 billion intended for loans to automakers to speed up development of more fuel-efficient vehicles. Ford will initially borrow $5.9 billion to be disbursed through 2011 for retooling 11 plants in Illinois, Kentucky, Michigan, Missouri and Ohio. The loans will help in employing about 35,000 engineering and factory personnel. Ford intends to begin repaying the loans in 2012.

Ford says that the loans will help it make 13 Ford models more fuel-efficient and intends to start selling four electric vehicle models by 2012.

Nissan will receive $1.6 billion in loans to be used in overhauling its factory in Tennessee where it will start building electric vehicles which it hopes will eventually build 150,000 electric cars annually. It estimates that the project will create 1,300 new jobs.

Tesla Motors, a California company, will get $465 million in loans to make electric vehicles. Tesla is only a six-year-old company which has been concentrating on producing electric vehicles. It intends to build two plants in California one to assemble its Model S, a battery-powered sedan it intends to start selling in 2011 for about $57,000. The second plant will be used to build battery packs and electric drive trains for both its own cars and those made by other manufacturers. The two plants could create as many as 1,650 new jobs.

The bankruptcies by General Motors and Chrysler made them ineligible for this first round of loans. It is expected, however, that similar loans will be approved at a later time.

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On Wednesday, June 10, 2009, Fiat management assumed control of Chrysler after the company had emerged from 42 days under bankruptcy protection. The new company is restarting operations under the name Chrysler Group L.L.C. and will be under the management control of Fiat which initially will hold 20% and whose eventual holding may increase to 35%. The remainder of the ownership is divided between a health-care trust for retirees of the United Automobile Workers union which holds 55%, and the American and Canadian governments which hold 8% and 2% respectively. Fiat cannot take majority control of Chrysler until it repays the federal government the monies which had been borrowed by Chrysler.

Chrysler’s new board of directors will consists of nine members, with three to be appointed by Fiat, four from the US Treasury, one by the Canadian government, and one by the UAW health care trust. It is not yet clear whether Chrysler will be selling shares to the public but the UAW president, Ron Gettelfinger, had recently stated that he wanted to sell the health care trust holdings as soon as possible.

The new company announced it would restart production soon but in the meantime was re-distributing vehicles, which it has an ample supply of, from its closed dealerships to the remaining dealers. Chrysler closed approximately 800 dealers as part of its bankruptcy. Remaining dealerships will operate normally.

While the federal government had backed Chrysler warranties of new vehicles sold while the company was in bankruptcy, Chrysler Group will now assume that responsibility. Likewise, warranties on Chrysler products which were purchased before Chrysler filed for bankruptcy will also be honored until they expire. Warranty work for vehicles which were sold by the now closed dealerships can be done at any of the remaining open Chrysler dealers.

Fiat management announced last week that it would soon begin transferring technology, engines, transmissions and other components to the Chrysler plants to enable them to start building small and medium-sized cars for sale in North America. As one of the first steps Chrysler Group will be offering the Fiat 500 to US consumers.

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Several of GM’s labor unions and a group of General Motors bondholders filed objections on Friday, June 19, 2009 to GM’s plan to sell its assets to a new company. Under GM’s restructuring plan it had intended to sell the majority of its assets to a new company in which the federal government would own a 60% share, the Canadian government 12.5%, and the UAW 17.5% with the remaining unsecured bondholders to receive 10%. The owners of present GM shares would receive nothing.

These objections together with others filed by a few states and cities, other consumer groups, individual retirees, and other bondholders and shareholders may delay GM’s rapid emergence from the Chapter 11 process. The objecting bondholders group calls itself the Unofficial Committee of Family and Dissident GM Bondholders. It stated in Its objection that it was being treated unfairly compared to the interests of other stakeholders and that it deserved greater than a 10% share in the new company which had been proposed if the sale of GM’s assets went through. The group compared itself to the United Automobile Workers union which was scheduled to receive a 17.5% stake in the new company. The bondholders group claims it represents approximately 1,500 bondholders with interests exceeding $400 million. In its objection it also asked the bankruptcy court to allow it to create a committee that could negotiate with GM’s separately from the larger bank and investment firm bondholders. A hearing on the matter was scheduled for June 23, 2009.

Earlier this month General Motors started a new advertising campaign to acquire a larger share of the California market. Californians tend to buy more hybrids and those in other states and are more environmentally conscious. Chrysler, too, wants to grab a share of California’s penchant for small, fuel-efficient car sales which it hopes to fulfill with its partner Italian automaker Fiat. GM has already gotten rid of its high fuel consumption lines of vehicles, in particular Hummer and instead will now focus on more fuel-efficient Buick, Chevrolet, Cadillac, and GMC vehicles. Chevrolet, Cadillac, and GMC already have gas-electric hybrids in their current 2009 product lines, which include the Chevrolet Malibu, Chevrolet Silverado, Cadillac Escalade, and GMC Yukon.

The main focus of GM’s green strategy will be the Chevrolet Volt, an electric hybrid designed to travel 40 miles on one charge, and thereafter have a three cylinder gas engine take over to recharge its lithium-Ion battery pack. The car will be offered for sale in the 2010 model year.

California, in 2008, represented 24.2% of America’s hybrid market which is more than two times the state’s historical share of new vehicle sales in this past decade. Although GM has been steadily losing ground to Toyota and Honda it was still ahead of Ford and Chrysler. In 2008 GM had a 14.2% share of new car sales whereas Ford had an 11.4%, and Chrysler’s was 7.5%. These were significantly less than Toyota’s 25.6% share and Honda’s 13.4% share.