Friday, June 12, 2009
Used Car Market Analysis: The scrappage scheme
It was campaigned for by a popular tabloid newspaper and two automotive magazine publishers among others.
However, on closer inspection the programme would appear to be a confidence trick in which any measure of success would actually benefit the Treasury, particularly looking at cars costing £8,000 or more.
We all know the industry is in an unprecedented slump and needs something to help arrest the decline in sales.
The German ‘cash for clunkers’ scheme has resulted in impressive registration figures during the first few months of 2009.
Many brands reorganised production and market
allocation of small cars to keep up with demand in Germany, where manufacturer incentives have been added to the €2,500 handout on each car.
But the British scheme seems a little more complicated.
The Government is only funding £1,000 of the £2,000 discount on each car sold. The manufacturers will have to find the other £1,000.
It means for some manufacturers funding £1,000 on some small cars results in them making a loss.
Manufacturers were told they can’t be selective about the products it’s applied to: it’s all or nothing.
Let’s take for example the Honda Jazz 1.2S. On the road price is £9,990. Honda puts in £1,000 (which means it makes a loss on this particular sale), and the Government puts in its £1,000.
However, VAT on that model is £1180.70. VAT on delivery charges is £81.52. The vehicle is subject to the £55 first registration fee, and annual road tax is £120.
It means for the £1,000 subsidy it puts in, it takes out £1,455.22 – or a 45% return on its investment.
Something Arthur Daley might call a ‘nice little earner’. And he has the same initials as Alistair Darling . . .
Chrysler and Fiat complete deal
Fiat and Chrysler have completed the strategic alliance that will put Chrysler's good assets into a new firm.
Fiat chief executive Sergio Marchionne will take control of the new company, which will begin operating immediately.
Fiat is not paying any money for its 20% of the new firm but will contribute technology to make smaller Chryslers.
The deal was completed on Wednesday after the US Supreme Court dismissed an appeal against it from three Indiana state pension and construction funds.
"This is a very significant day, not only for Chrysler and its dedicated employees, who have persevered through a great deal of uncertainty during the past year, but for the global automotive industry as a whole," said Mr Marchionne.
The deal paves the way for Chrysler to emerge from bankruptcy protection.
Debt problems
Fiat's shareholding will expand to 35% if certain targets are met.
The United Auto Workers union gets 55% of the new company, while the US and Canadian governments will take stakes of 8% and 2% respectively.
The pension funds, which hold about $42m (£26.3m) of Chrysler's $6.9bn in secured loans, were opposed to the sale, saying it inverted usual bankruptcy practice by paying unsecured creditors, such as the union, ahead of secured lenders.
Chrysler filed for bankruptcy protection on 30 April, suffering from depleted sales, huge debts and crippling labour, pension and healthcare costs.
Closed dealerships
The new Chrysler will still have its headquarters in the US state of Michigan and will produce Chrysler, Jeep and Dodge branded vehicles and Mopar spare parts.
As part of the creation of the new Chrysler, 789 franchised dealers have either closed down or stopped selling new Chrysler vehicles.
The factories that have been temporarily closed during the bankruptcy process should be resuming production shortly.
"Those Chrysler operations assumed by the new company that were idled during this process will soon be back up and running, and work is already underway on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler's hallmark going forward," Mr Marchionne said.
The Obama administration backed the tie-up with Fiat, arguing that Chrysler had been unable to operate independently since it was spun off by the German carmaker Daimler.
Mandelson meets with Magna and German officials
Business Secretary Lord Mandelson is having a series of meetings in the UK and Germany this week to discuss Vauxhall and its future as part of GM Europe following the decision of parent company General Motors to offload a stake in the business to Canadian firm Magna International.
Lord Mandelson has met a number of senior representatives from the Unite union and local MPs of the Luton plant yesterday (Wednesday, June 10). He then travelled to Germany where he will be meeting with senior Chancellery officials and Economics Minister Karl-Theodor zu Guttenberg. He is also due to hold talks with Magna, the preferred bidder for GM Europe.
The UK Government says it has been working closely with all the parties involved for months to set up a long term capital structure for GM Europe including the UK operations in Ellesmere Port and Luton.
Lord Mandelson said: "The Government is continuing to do all it can to secure the future of production at the Luton and Ellesmere Port plants."
"The UK Government is at the heart of the discussions on securing a commercial solution for GM Europe. I continue to fight for the best interests of all Vauxhall's workforce in the UK."
Wednesday, June 10, 2009
Court opens way for Chrysler sale
The US Supreme Court has rejected a plea to block the sale of assets of the bankrupt carmaker Chrysler to the Italian firm Fiat.
On Monday, the court granted a request to delay the sale while three Indiana state pension and construction funds pursued an appeal against it.
But it has now ruled that a full appeal against the plan is not justified.
The US government, which strongly backed the sale, issued a statement applauding the decision.
"The Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker," the statement said.
"We are gratified that not a single court that reviewed this matter, including the US Supreme Court, found any fault whatsoever with the handling of this matter by either Chrysler or the US government."
Fiat can legally walk away from the deal if it is not completed by 15 June.
Chrysler entered bankruptcy protection in April, following a massive slump in sales brought on by the financial crisis.
'Grave consequences'
The sale to the Fiat-led consortium would allow it to emerge from bankruptcy.
Fiat would control 20% of Chrysler, while 68% would be owned by a union trust, and the Canadian and US governments would share 12%.
However, the pension funds, which hold about $42m (£26.3m) of Chrysler's $6.9bn in secured loans, are opposed to the sale.
They say it inverts usual bankruptcy practice and unlawfully rewards unsecured creditors, such as the union, ahead of secured lenders.
Indiana's Republican state treasurer, Richard Mourdock, who has campaigned against the sale, said he was disappointed with the court's decision.
"The United States government has, I continue to believe, acted egregiously by taking away the traditional rights held by secured creditors," he said.
Earlier, the Obama administration said that blocking the deal would have "grave consequences".
Solicitor General Elena Kagan said that blocking the sale could force Chrysler into liquidation.
Burden 'not carried'
A federal appeals court in New York had earlier approved Chrysler's sale - but gave opponents until Monday to persuade the Supreme Court to intervene.
Those objecting had to persuade at least four of the nine justices that the issue raised was serious enough to warrant hearing a full appeal.
"The applicants have not carried that burden," the court said in its ruling.
Analysts say the sale is now likely to go ahead within the next few days.
Chrysler had filed for bankruptcy protection on 30 April and had aimed to complete the sale and alliance with Fiat within 60 days.
The Chrysler case could also set a precedent for General Motors, which entered bankruptcy protection on 1 June.
Shell sells straw-based biofuel
Royal Dutch Shell is selling a biofuel made from straw at one of their service stations in Canada.
The station in Ottawa will sell a blend of cellulosic ethanol and petrol.
Biofuels have been hailed as a way to fight climate change, but have also been criticised for their potential impact on food stocks and prices.
This biofuel, however, is made from a non-food portions of crops, such as corn stalks and corn cobs, which are renewable, according to Shell.
Such so-called "second-generation" biofuels do not compete with food sources for land - unlike some current biofuels, which are made from the edible parts of crops such as corn or sugar cane.
Biofuel emissions
In principle, biofuels are a way of reducing greenhouse gas emissions compared with conventional transport fuels such as petrol and diesel.
Burning the fuels releases CO2; but growing the plants absorbs a comparable amount of the gas from the atmosphere.
Shell claims that the straw biofuel can offer 90% less carbon dioxide (CO2) emissions as compared to petrol.
However, the method of production is also important. Farming and processing the crops can make biofuels as polluting as petroleum-based fuels, depending on what is grown and how it is treated.
The UK Government has said that by 2010 5% all fuel should come from biofuels.
The European Union has gone further, setting a target of 10% by 2020.
LDV in warranty warning
Fleets operating LDV vans have been warned that they are unlikely to have warranty work honoured by dealers.
An LDV spokesman said: "We are no longer in a position to honour warranty payments - we can no longer pay our dealers - but our dealer network is working to support us on this."
There have been no Maxus vans produced by the company since December 2008. However, existing stocks of the Maxus light commercial van have still been selling adding to the number of LDV vans and minibuses (based on the Maxus) being run by fleets.
All of the vans have been sold with a four-year/120,000-mile warranty. This was reduced from a five-year warranty in 2007.
There are no accurate figures on how many LDV vans are still out with fleets but with yearly sales running at an estimated 6,000 a year, there could be as many as 30,000 vans now on the road without warranty cover.
Now, with the manufacturer in administration, LDV's 132 dealers are facing the prospect of meeting the cost of any new warranty work themselves or charging for work that should be free.
David Lewis chairman of the LDV dealer committee, said: "In these circumstances the advice to dealers is that they are not obliged to end-users to carry out repairs and replacements under the manufacturer's warranty given by LDV."
In an earlier statement, the manufacturer said that the build quality of its Maxus van has been 'continually improved' which should keep warranty costs down.
Three groups bid for Saab
Three groups have entered bids for Saab, General Motors' up-for-sale Swedish car brand, and a preferred bidder will be chosen by the end of this week.
Koenigsegg, the Swedish supercar maker, Renco, a private holding that bought and turned round the make of Humvee military vehicles, and a third group of investors from the US state of Wyoming have all expressed interest in Saab.
GM has invited the three groups to meet for talks this week, ahead of the planned signing of a memorandum of understanding.
GM will contribute assets and cash worth $500 million to finance Saab's spin-off as a separate company.
GM will either sell 100% of Saab or retain a minority stake worth less than 10%.
Weststar to make another bid for LDV
Weststar, the Malaysian company which couldn’t raise the money to buy LDV last week, is now launching another potential bid on the van maker now it has entered into administration.
LDV administrators PricewaterhouseCoopers (PwC) has said its main priority is to sell the business as a whole rather than selling off parts of the business.
PwC said it did not expect to be able to announce details on the negotiations until the end of June.
A small staff of 40 will continue to be employed to maintain the LDV factory site in Birmingham, but the remaining 810 have been made redundant.
According to a report on Bloomberg Syed Azman Syed Ibrahim, Weststar’s managing director, said by phone today: “We’d rather buy out of the administrators. This will save money.”
Syed Azman said Weststar pulled out of the original LDV bid after due diligence showed it would take at least four months to start production, costing the company more money than it could afford.
With the challenges we’re facing as an industry, Barclays Partner Finance is always looking for different ways to help. We recognise that it’s all a
With the challenges we’re facing as an industry, Barclays Partner Finance is always looking for different ways to help.
We recognise that it’s all about profit and maximising opportunities and with our Top Up Loan we can help you do just that.
Add Top Up Loan to your finance toolkit and it can help you sell more add-on products, while at the same time increase your profit. But don’t just take my word for it. Here’s how it works.
We have partnered with a number of dealers who offer their own in-house protection proposition which tends to include Gap or VRI, service plans, warranty and paint protection.
These dealers are successfully using our Top Up Loan to offer customers a manageable monthly payment to spread the cost.
What makes this product even more attractive to dealers is that a Top Up Loan can be offered to both finance and cash customers, opening up more opportunities for increased sales penetration which converts to higher profit.
And what’s more, we’re not only seeing success within sales departments, aftersales teams are also enjoying the benefits of offering the Barclays Partner Finance Top Up Loan facility to their database of customers.
Top Up Loans are being used to cover larger than expected service and repair bills and to offer accessories on a monthly payment option.
Barclays Partner Finance is about to carry out extensive research with its motor dealers to get their views on what else can be done to support them.
This is not just looking at the short term. Barclays wants to ensure it has propositions and service for tomorrow’s new world. It is investing today for our combined futures.
DATED: 10.06.09
FEED: AM
Rymco UK will sell Infiniti in the UK
Infiniti Europe has revealed that its first UK partner to sell its models in the UK will be Rymco UK, a wholly owned subsidiary of Rasamny Younis Motor Co and Infiniti’s partner in the Lebanon.
Rymco UK has appointed Paul Atkinson as its managing director. He has previously worked as franchise director with premium and luxury brands in the UK at Inchcape Retail and Jardine Motors Group.
The first UK Infiniti centre is under construction and on schedule to open its doors on the outskirts of Reading, close to Junction 11 of the M4, during September.
There will be two more sites due to be built for London. It’s expected that another UK partner will be announced to hold centre in the north of England.
Infiniti is aiming for a network of around 12 centres in the UK, although the Japanese brand believes this coverage will extend to almost the entire country due to its VIP Service which offers customers collection and delivery of their vehicle for annual maintenance up to 150 miles from the Infiniti showroom (beyond this is also available at customer contribution).
The full Infiniti range of cars including the G37 Saloon, G37 Coupé, G37 Convertible, EX37 coupé crossover and the FX line of crossovers will be available from launch. This line-up will be expanded to include a larger saloon model and a performance V6 diesel during 2010.
DATED: 10.06.09
FEED: AM
Tuesday, June 09, 2009
'Vast majority' of LDV jobs to go
The "vast majority" of vanmaker LDV's 850 employees will be made redundant, administrators have said.
A court placed the Birmingham-based firm into administration earlier, after its Russian owners said they had run out of options to rescue company.
There are a further 1,200 people employed at the chain's dealerships, with some 4,000 people supplying parts.
Administrators said they were talking to "interested parties" who may be able to take on part of the business.
These included Weststar, the Malaysian firm with which talks broke down at the last minute a week ago.
"Sadly we do not have the funding necessary to keep employees on, so it is with great regret that we place ourselves in a position where we will have to make redundant later today the vast majority of the workforce," a representative of administrators PriceWaterhouseCoopers said.
LDV's Washwood Heath plant has been at a near-standstill since before the end of 2008 during the search for a new owner.
Since 2006 the firm - formerly Leyland DAF Vans - has been owned by Russia's Gaz Group, controlled by Oleg Deripaska.
A Gaz spokesman said it was "a sad day for the LDV workforce, suppliers and British manufacturing".
'Potential'
LDV managers and workers were angered last week when they were forced to cancel a planned lobby of Parliament because of Prime Minister Gordon Brown's cabinet reshuffle.
Directors had hoped to persuade the government to agree to a £60m loan to secure the firm, but no ministers were available to meet them.
The firm claimed the loan would have cost the state much less than the collapse of the business will.
"The management team have worked exceptionally hard over the past few weeks and months but, despite every effort made around the globe, they've been unable to obtain the required funding from the banking system," said the firm's marketing manager, Guy Jones.
"Like much of industry, its access to this working capital remains an issue, which will go on to cause further job losses if not addressed."
He added he hoped that potential buyers would recognise "potential" in the firm and insisted there was the opportunity for "a bright future".
Administration benefits
Weststar had agreed a deal to acquire the company from its Russian owners, with the aim of restarting production in July.
The government pledged a £5m four-week loan until the deal was sealed, after the firm said it intended to maintain production at the Birmingham plant and expand manufacturing in Malaysia.
However, Weststar pulled out of the takeover last week.
It has not commented on reports that it planned to swoop for LDV once it was in administration - a move which would mean it took on the firm with fewer debts.
"The benefit of buying a company out of administration is that the buyer is not taking on any liabilities and is able to only take the 'good bits'," said Alan Tomlinson, partner of licensed insolvency practitioner Tomlinsons.
Vanmaker LDV faces administration
Vanmaker LDV is expected to be placed in administration by a court later, threatening up to 850 jobs and thousands more in the supply chain.
Attempts to sell Birmingham-based LDV as a going concern have failed.
Talks with one potential buyer, the Malaysian firm Weststar, broke down at the last minute last weekend, leading LDV to apply for administration.
Administrators could liquidate LDV's assets and it is feared any buyer would take machinery abroad.
Such a move would end decades of production at the Washwood Heath site.
LDV managers and workers were angered last week when they were forced to cancel a planned lobby of Parliament because of Prime Minister Gordon Brown's cabinet reshuffle.
Directors had hoped to persuade the government to agree to a £60m loan to secure the firm, but no ministers were available to meet them.
Near-standstill
The firm claimed the loan would have cost the state much less than the collapse of the business will.
In addition to the workforce, LDV employs 1,200 people in dealerships and is a major customer for local suppliers.
The Washwood Heath plant has been at a near-standstill since before the end of 2008 during the search for a new owner.
Weststar had agreed a deal to acquire the company from its Russian owners, with the aim of restarting production in July.
The government pledged a £5m four-week loan until the deal was sealed, after the firm said it intended to maintain production at the Birmingham plant and expand manufacturing in Malaysia.
However, Weststar pulled out at the last minute.
BBC business reporter John Moylan said: "This signalled the end of the road for the company which was once part of British Leyland."
Court asked to stop Chrysler sale
Pension funds opposed to Chrysler's sale to Fiat have asked the US Supreme Court to block the deal immediately.
Three Indiana state pension and construction funds filed papers at the court on Sunday calling for the sale to be halted so they can pursue an appeal.
It comes after a US appeals court approved Chrysler's sale to a group led by Fiat, a union-aligned trust and the US and Canadian governments.
Chrysler entered bankruptcy protection in April after falling vehicle sales.
US carmakers have suffered from a massive slump in sales during the recession.
Fund assets
The US government has backed its sale to the Fiat-led consortium, which would see it emerge from bankruptcy.
Fiat would control 20% of Chrysler, while 68% would be owned by a union trust, and the two governments would share 12%.
However, the pension funds, which hold about $42m (£26.3m) of Chrysler's $6.9bn in secured loans, are opposed to the sale.
They say it inverts usual bankruptcy practice and unlawfully rewards unsecured creditors, such as the union, ahead of secured lenders.
'Critical issues'
The emergency legal request from the Indiana State Police Pension Fund, the Indiana Teacher's Retirement Fund and the state's Major Moves Construction Fund goes before Justice Ruth Bader Ginsburg.
It calls for a block on the sale until 1600 local time in New York (2100 BST) on Monday.
The judge can act on her own or refer the matter to the full court, when a vote from five of the nine Supreme Court members would be needed to put the Chrysler sale on hold.
The legal filings call on the court to "decide critical, nationally significant legal issues relating to management of the economy by the United States government".
"The public is watching and needs to see that, particularly, when the system is under stress, the rule of law will be honoured and an independent judiciary will properly scrutinise the actions of the massively powerful executive branch," lawyers for the funds and the Indiana attorney general wrote in their filing.
"The issues presented by this case are of immediate, and enduring, national significance."
If the sale is put on hold by the court, the Indiana funds would then pursue a full appeal.
If the deal is not completed by 15 June then Fiat, which is not paying anything for its 20% stake, has the option of pulling out.
Sunday, June 07, 2009
Application fraud accounts for 40% of cases
Motor fraud cases have caused losses of £3.8m in the first quarter of 2009, with application fraud accounting for 40% of all cases.
But motor lenders prevented £36.5m of fraud in the first three months of this year, said the Finance and Leasing Association (FLA).
There were 207 fraud cases reported in quarter one despite 3,500 cases of attempted or suspected finance fraud over the same period.
The vast majority of fraud occurs in large towns and cities, said FLA. There is a regional split with 20% of fraud reported in Greater London and 10% in Greater Manchester.
DATED: 07.06.09
FEED: AM
Reality Check in Finance POS market
Dealers are being urged to accept a dose of realism in the point of sale finance market.
Black Horse managing director Chris Sutton said the market conditions were unsustainable before the recession and now the market was working in a more realistic way.
He told AM: “Over the last two or three years the returns in this business have not been sufficient and because of the constraints of capital and its high costs there now needs to be a dose of realism in terms of the price the customer pays for credit.
“There has to be a lower share of the profit pool that dealers can make. The margins expected by all finance providers is more than it was 12 months ago. Dealers must be confident to pass on the rise in credit prices to the customer.”
Sutton said Black Horse will be supportive of dealers who sell
finance at the right price and in a “true partnership”.
He said: “There is no alternative because if there isn’t agreement we would not continue to be a significant player in the market.”
The point of sale market is now more competitive in terms of the charge rate to the customer.
The competition from direct lenders online has dissipated, Sutton said.
This has led to a much more realistic market. “I’ve changed my attitude in the last 12 months where now I’m a lot less concerned with volume of business and more concerned with returns and a sustainable relationship with dealers who aren’t just interested in getting the best deal from you this week.”
Interest Rate Announcements
Bank of England Maintains Bank Rate at 0.5% and continues with £125 Billion Asset Purchase Programme
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to continue with its programme of asset purchases totalling £125 billion financed by the issuance of central bank reserves.
Bank of England Maintains Bank Rate at 0.5% and continues with £125 Billion Asset Purchase Programme
DATED: 07.06.09
FEED: BoE
LDV future uncertain as buyout fails
LDV's dealer network and factory staff face an uncertain future following the collapse of Weststar's acquisition plan after the Malaysian vanmaker failed to win sufficient financial backing for its bid.
This is a major setback for the troubled Birmingham-based vanmaker which had pinned its long term hopes on the deal. LDV employs 850 workers at its plant and its dealer network employs around 1,200 staff across 72 sales points and 132 servicing outlets.
LDV confirmed if has reapplied for administration to protect the assets of the business.
"The essential funds required to maintain the business and workforce as a going concern are not being made available," said a company statement.
Weststar, which manufacturers Maxus vans in Malaysia under licence, said it had pulled out of the purchase after failing to attract sufficient financial backing, thought to be mostly in Malaysia, although it also singled out the British government despite a £5m bridging loan at the beginning of April.
"Despite substantial efforts and a significant planned investment of its own funds, it has been unable to secure the remaining investment required to refinance the business due to the global financial crisis, compounded by the recent adverse developments in the UK motor manufacturing industry," said a company statement.
"Weststar has explored all known avenues to access this funding, including assistance from the UK government, but without this in place, it is not be possible to deliver the plan to secure jobs in the UK," it said.
One dealer on the brand's website said his business continued to trade profitably despite the problems which have engulfed LDV since its Russian owner, Gaz International, suspended production in December and sought a buyer for the business.
"LDV is a still a very viable and decent company. Even through this harsh period we have continued to sell, service and repair the vans and still turn a profit. The customers are happy to support a British product of good value with great service back-up. It is a pleasure to work with LDV and the people within it and the rest of the network," he said.
"Let's just hope that something can still be done, none of us deserve to have the rug pulled from under us, especially at the eleventh hour."
DATED: 07.06.09
FEED: MT
RMIF Acts to protect Vauxhall Dealer Staff
RMIF chairman Paul Williams has written to business secretary Lord Mandelson, emphasising the size and economic significance of the Vauxhall dealer network in the UK.
He called on him to ensure the network is considered during discussions about the future of the manufacturer.
Williams said 25,000 people are directly employed by dealers that carry the Vauxhall franchise and its associate brands.
The RMIF represents 8,000 businesses that sell, service, and repair new and used cars.
The future shape of Vauxhall in the UK and the fate of its 5,000 employees remains in doubt following the sale of Vauxhall-parent GM Europe to Canadian car parts giant Magna International.
Commitment to Vauxhall
Lord Mandelson has spoken with senior executives of General Motors in Europe and they had reiterated their commitment to Vauxhall production continuing in the UK.
But he warned: "We've got now to pin down specific plans and specific implications for jobs," adding that Magna had been short on detail on its plans for the business and the implication for UK jobs.
DATED: 07.06.09
FEED: MT
