California Lemon Law blog « A Blog by the Law Offices of Barry L. Edzant

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.

Two motorcycle manufacturers and three automobile manufacturers have announced safety recalls this month. The recalls were issued by the National Highway Safety Administration (NHTSA) and include Harley-Davidson which is recalling 11,000 of its motorcycles, and Ducati which is recalling 730 of its motorcycles. The automobile manufacturers include Volvo which is recalling 17,500 models, Kia which is recalling 35,000 of its Optima model, and Hyundai which is recalling 175,000 vehicles. The recalls require that the defects in these motorcycles and vehicles be repaired with no expense to the consumer.

If you own one of these vehicles and think yours may be a lemon, please call us at 888-395-3666 (888-Ex-Lemon) to discuss. The Law Offices of Delsack and Associates has over 21 years experience.

Although 8.5 million cars and light trucks were assembled in the United States last year, the traditional Big Three automakers, Ford, Chrysler, and General Motors, only accounted for about 5 million of those. The remaining 3 million were built in the United States in American plants for manufacturers such as Toyota, Mercedes-Benz, Hyundai, Honda, and BMW. Making it more confusing is that the Big Three also have assembly plants in Canada and Mexico. Thus, American car buyers are faced with the question of whether a car manufactured by a company with its headquarters in Japan, but which has been built in Ohio, as is the Honda Accord, is more American than is a car from an American company headquartered in Michigan selling cars manufactured in Mexico, as is, for example, the Ford Fusion.

Toyota is the leading producer of vehicles built in the United States beating out Chrysler last year by a slight margin. In fact, Honda has been building its vehicles in the United States since as early as 1982 in its plant in Marysville Ohio. And in the 80s and 90s Canadian and Mexican plants were already turning out cars for the Big Three American manufacturers.

Therefore, what is euphemistically called “domestic content,” may not be domestic at all. Domestic content may include parts made in Canada and Mexico. However, while American auto workers are assembling vehicles in American plants for foreign manufacturers, labor is excluded from the determination of what is American-built. Thus, foreign auto manufacturers with assembly plants in the United States cannot factor in the value of American labor, nor be credited for it.

To further confuse matters while, for example, Honda builds its engines in its plant in Ohio for the Acura RTX, the country of origin is still listed as Japan. The reason is that one expensive part, the turbocharger, is actually manufactured and imported from Japan although installed by workers in the Ohio plant.

Clearly, determining whether a car is American-built is confusing and oftentimes misleading.

According to the Los Angeles Times, GM will stop producing the Pontiac Vibe in September of this year. This is part of General Motors plan to eliminate the Pontiac brand completely. They have been producing the Vibe at NUMMI, a plant owned jointly by General Motors and Toyota Motor Corp. in Fremont, California.

According to the latest findings from Consumer Reports the Toyota Prius, Smart car, Toyota Camry Hybrid, Nissan Altima Hybrid, and the Honda Civic Hybrid are the cars that deliver in best city MPG. These cars use the least amount of gas in stop and go driving.

According to Consumer Reports the best cars to buy under $20,000.00 are the Honda Fit, Hyundai Elantra SE, Mazda3 i Sport, Pontiac Vibe 2.4L, Scion tC, Scion xB, Scion xD, Ford Focus SES and Toyota Corolla LE. All models earned very good or better scores in Consumer Report’s tests.

GM’s secured lenders are likely to be paid off in full. This is different than their counterparts at Chrysler where senior creditors were required to accept less than the full face value of their loans. GM’s reorganization plan will provide approximately $6 billion to pay off secured creditors. Subordinated lenders, however, typically GM’s bond holders, will likely recover only 12.5 cents on the dollar. While this may seem unfair the logic behind it is that the senior secured creditors were willing to accept a lower return in exchange for having a priority position in the event of the firm filing for Chapter 11 protection. Bondholders, and other subordinated lenders, had agreed to accept a higher return but along with that took the risk that they could sustain significant losses in the event that General Motors had to file for bankruptcy protection.

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