Archive for April 23rd, 2010

General Motors CEO, Ed Whitacre announced on Wednesday that the automaker had successfully repaid its $5.8 billion bailout loans, “in full, with interest, years ahead of schedule.”

Considering that the industrial giant was in bankruptcy mere months ago, you might be wondering: where in the world did GM get the money to repay its loans five years ahead of schedule?

In short, the $5.8 billion came from a $16.4 billion escrow fund set up by the federal government during GM’s bankruptcy proceedings.  Although it that may sound like GM simply moved taxpayer bailout money from one pocket to another, the answer is somewhat more complicated.

The escrow fund was created last year by President Obama’s automotive task force to safeguard the government’s $50 billion total investment in GM.  The team estimated how much money the company would need to continue operating profitably and alloted an additional $16.4 billion of operating capital in case the economy unexpectedly worsened.  An escrow account was used so that the government could keep strings attached to the money.

One string required that the Treasury had to be consulted before any funds were withdrawn.  Another required that any funds remaining after June 30 2010, had to be used to pay off the initial loan.

Before Whitacre’s announcement on Wednesday, the escrow fund still had $11.3 billion remaining.  $2.4 billion had been used for a prior loan payment and $2.7 billion had been used in the bankruptcy proceedings for automotive supplier and former GM spinoff, Delphi.

Investors see the early payoff as a sign that GM has confidence in its restructuring and in the improving automobile market.

The automaker had $22.8 billion in cash on hand at the close of 2009.  Even with $10 billion allocated to new product and threats posed by its under-performing Opel division in Europe, GM appears to be in good shape to weather the last of the economic storm.

What remains to be seen, however, is whether or not GM’s recovery and eventual IPO will be sufficient to pay back the government’s remaining investment, which resulted in a 60.8% equity stake in the reborn company.

At the very least, the General is $5.8 billion closer to shedding the “Government Motors” moniker.

Jaguar is eager to shed the “bad kitty” reputation it earned after years of lackluster quality and reliability.  To do so, the luxury carmaker is launching a new complimentary maintenance program for all 2011 models.

The Platinum Coverage program includes free scheduled maintenance and no-cost replacement for common wearable items, like windshield wiper blades and brake pads.  Coverage lasts for 5 years or 50,000 miles, whichever comes first.  Roadside assistance is also included.

BMW offers a similar Ultimate Service program, which has been credited with boosting sales after it’s launch several years ago.  Carlo Poccino, a BMW sales consultant in Irvine, California notes, “We’d be selling a lot fewer cars if it weren’t for Ultimate Service.”

It’s clear that Jaguar needs the boost.  The British marque has been hit particularly hard by the global economic recession.  Sales in the first quarter of 2010 were down 14% compared to the prior year, at a time when the industry as a whole was up 16%.

Unlike other luxury manufacturers, Jaguar lacks an entry level model that can attract buyers who are either on their way up into the luxury ranks or who are downsizing as a result of tightening household budgets.  The lowest priced vehicle in the Jag lineup is the stylish XF sedan, which starts at $52,000.  For comparison, the Mercedes C-Class starts at $33,600 and the BMW 1-Series at $29,150.

With the new Platinum Coverage program and a striking new XJ flagship sedan on the way, Jaguar is hoping for a strong rebound in the latter half of 2010.  In an interview with Automotive News, the company’s vice president for sales and marketing, Richard Beattie, said that the new program is, “game changing for Jaguar.”  He expects the program to increase traffic and help to close deals at dealerships.

“This will dramatically improve people’s perception of the brand,” he added. “Getting customers into our cars is a real goal. If they don’t want to shop for Jaguar because they feel servicing is too expensive, we have wiped that concern out completely.”

Chevrolet took a huge swing at the 2010 Beijing Auto Show with the introduction of its new Volt MPV5 concept.  Based on the Volt platform, the SUV is roughly seven inches wider and taller than the Volt sedan.  It production model will likely carry the same Voltec system – engine generated electrical power.  The added weight of the vehicle will be interesting to see how this affects range and performance.

The look is extremely consistent with the Volt – a good thing – and shows the promise of great things from GM.  One striking thing you can see from the concept car is its extremely low rocker cladding, making this crossover more wagon-ish than SUV-ish.  The lithium ion battery packs certainly have a lot do do with the lower floor.

While it doesn’t take a trend forecaster to know this vehicle was coming, it is comforting to know that GM is spending our government funds wisely.  They have built another smart package and they are clearly addressing the growing needs of the consumer.  I for one, don’t really see myself in one of the plenty smallish EVs on the road.  It will take a product like this to get me over the hump to buying electric.  Yes, I did money down on a Nissan Leaf, but that’s because another better opportunity is not in front of me yet.  The world hopefully changes in the next 6 months.

I’m not a hug fan of the rear, but I get why the designers needed to make it so vertical, almost van-like.  To make it truly a cargo carrying crossover, they needed to create as much cargo space as they could.  Without much flexibility in the wheelbase, all they could do is maximize rear height.  It’s doesn’t kill the car for me, but i do wish they had the ability to get a few more inches out of the wheelbase and give the designers more flexibility in shaping the rear.

The introduction of this vehicle at the Beijing Auto Show is a sign of the times for GM.  As it has spent considerable energy in China the past 15 years, it is clearly showing the world the importance of the region by showcasing a vehicle that has very American proportions.  But if they’re going to win in China, they’ve learned that they must give it’s premier show the respect by launching a future core product there.  I like the thinking as it also shows they are going to get out of their current crisis by being a world brand.  And their press release accentuates this point:

“Rapidly growing demand for personal transportation across China is creating new environmental and energy security challenges,” said Kevin Wale, President and Managing Director of the GM China Group. “GM is committed to finding and adopting solutions, which include the electrification of the automobile. The world premiere of the Volt MPV5 concept in Beijing demonstrates GM’s desire to make China a global focus of its advanced technology strategy.”

To see the full press release, go here.  You can also view all car reviews of various GM vehicles at Honk.