DETROIT - The week we've all been waiting for is coming up. Chrysler either will complete a deal with Fiat Auto, or will implode and take probably everything but American Motors survivor Jeep with it. Metro Detroit has been waiting for this moment for at least a quarter-century.
Will the wealthy suburbs finally join the city of Detroit's decay as the economy irreversibly leaves the U.S. auto industry for dead? Will Chrysler LLC and General Motors get new leases on life, holding themselves afloat until we can get a new, greener, more efficient kind of economy going in the next couple of years? Will Chevy Volts and Dodge Circuits quietly cruise rebuilt Woodward and Jefferson Avenues by the end of the current administration?
This past week began with an insider telling me Chrysler had no better than a 50-percent chance of making it past the end of the month and ending with a voicemail recording at the number of a veteran GM PR executive that informed us that the automaker no longer employs that person. GM laid off 1600 white-collar workers, from public relations managers to designers to engineers in the week just ended. These are the harsh realities of an auto industry on the skids, and a GM and Chrysler early in their latest rebuilding schemes having been caught some $24-billion short of Ford Motor Company's line of credit. Ford's Alan Mulally planned early for a possible downturn, and still, the healthiest automaker in intensive care lost $14.6 billion in the first quarter of the year. If GM and Chrysler go down and take the supplier base with it, Ford will be next.
Then there's the rumor about Pontiac, first reported Friday on NPR. It's gone, NPR says. No, we haven't "announced any changes to (our) long-term viability plan or to the future status of any of (our) brands," a Pontiac spokesman said in a short release. Never mind rumors that GM will announce new changes to its plans as early as Monday. The government's Automotive Task Force has told GM it needs to speed up marketing cuts, and while CEO Fritz Henderson has officially taken that to mean, "cut your number of dealerships more quickly," ending the fading Pontiac division is an easy bargaining chip for the automaker.
Despite what any of you think of the Pontiac G8 (which is a very good car for the money), the division is having trouble ridding itself of the overly cladded image of the early '00s. The main character in AMC's excellent "Breaking Bad" drives an Aztek on the show every week, not a G8 or even a G5. This is the bouffant or mullet hair, kitch division, some still believe. Fake hood scoops on the Holden-supplied G8 and the body kit on the G6 GXP don't help. And GM doesn't sell any Pontiacs in China (Canada is another matter). It would be too easy a decision.
Meanwhile, GM has taken another $2-billion draw on its federal loan guarantees, bringing the total to $15.4 billion and has scheduled nine-week shutdowns (encompassing the traditional two-week summer vacation shutdowns) at 13 North American assembly plants. The shutdowns cut calendar year production by 190,000 units. Still, keep in mind that even with larger sales losses than the competition, GM is holding on to nearly 20-percent market share of a pitiful market. When it settles down to 18 percent, it will be in-line with Volkswagen AG's share in Western Europe.
Over in Auburn Hills, Chrysler has negotiated with bondholders to cut key secured debt from $6.9 billion down to $3.75 billion, in return for 40 percent of the reorganized company. And it has reached a tentative agreement for a more favorable labor contract with the Canadian Auto Workers (it produces the Chrysler 300, Dodge Charger and Challenger, and other models in Canada) in lieu of the government-mandated restructuring.
While I figure Chrysler's future, even under Fiat management to be similar to what Chrysler did with the pickings of American Motors in the late '80s, this is some good news for a town that desperately needs it. Wish us luck.