GM incentive: A gas price cap
General Motors on Tuesday announced a promotion that caps gas at US$1.99 a gallon for one year for buyers of certain full-size sport-utility vehicles and midsize cars in California and Florida. Consumers will receive a monthly credit to a pre-paid fuel card for the difference between $1.99 and the average price of premium gas in their state. The amount they receive will be based on the number of miles they drive, as recorded in the OnStar communications system in all vehicles, and the EPA city fuel-economy estimate for their vehicle. "Consumers are uncertain about gas prices, and this gives them some certainty about what they're going to pay," said GM's market analyst, Paul Ballew. Dan Becker, director of global warming and energy programs for the Sierra Club, blasted GM's promotion for supporting America's reliance on foreign oil. The gas promotion is the latest example of how GM is shifting from national rebates and interest-rate offers to regional, targeted incentives. On May 2, GM offered buyers in the Chicago, Rockford and Minneapolis-St. Paul areas $1,000 of free fuel on vehicles that burn E85, a blend of gasoline and ethanol. Ford and Chrysler have not matched the E85 offer. Both indicated Tuesday they would not respond to GM's latest promotion either. "Our feeling is that customers can see through gimmicky things like that," Chrysler spokesman Kevin McCormick said. Chrysler is offering zero-percent financing for 60 months on several models, and McCormick said that was "a clean, clear message they can understand."
(Chicago Tribune 060524)
These soul-sucking devils are about as respectable as the cigarette manufacturers. Anything to sell product, common good be damned! Ah -- capitalism at its finest.
Ford to pay its highest-ever bond yields
If you want to know what American investors think of Ford, take a look at the Ford Motor Credit 9.75% notes due in 2010: The world's third-largest auto maker is so enfeebled that it will wind up paying the highest interest rate - and accept the lowest price - on any Ford bond sold in the US in the last century. Ford, which invented assembly-line manufacturing in 1913, is offering investors US$2.5-billion of bonds coming due in 2010 and 2011 that pay annual interest of as much as 10.6%, plus $1.3B in cash, in exchange for bonds that start maturing in October and have coupons as low as 4.95%. Companies that Standard & Poor's says are near default get lower rates, Merrill Lynch index figures show. “You wouldn't have imagined that Ford would ever have to pay more than 10%,” said Thomas Flaherty, who will swap some Ford Credit bonds in the $25B of fixed-income assets he handles at Aberdeen Asset Management. Ford is at the mercy of bondholders, who are due $57B over the next five years, after a drop in its share of the US car market and the costs of firing workers and closing plants led to the biggest quarterly loss since 2001. By exchanging bonds, Ford can hold on to some of its $21.2B in cash while designing new cars to win sales from Japanese rivals Toyota and Nissan. “This is a very expensive way to do it,” Flaherty said earlier this month. The bond exchange will increase Ford's interest costs by about $90-million a year. Ford lost its investment-grade credit rating a year ago and now has $121B of junk-rated debt. Eight years of sliding market share, combined with mounting health-care costs and retirement payments, caused S&P to cut the ratings on Ford and Ford Credit to double-B minus, while Moody's Investors Service reduced its ranking on Ford to Ba3 and on Ford Credit to Ba2. The ratings reflect “concerns about Ford's ability to turn around the performance of its North American automotive operations - a process that will require, at best, a number of years,” S&P analyst Robert Schulz said in a May 1 report.
(Globe and Mail 060524)
Scary. Who would've thunk Ford would ever be scrambling to secure more funding?
2 comments:
interesting article (as always)
Re. Ford promotions:
Sounds way too complicated. They are doing the same thing out here for Hydro - going door to door to get ppl. to sign up for a fixed rate for future fluctuations which they expect to happen soon. Sounds too fishy to me so I've been avoiding them like the plague. I just don't think there's any reason to raise prices higher and higher in such little time...i understand they are screaming scarcity, but charging the consumers for corp's problems is not the answer! i stand corrected - it is the capitalist's answer - make as much coin as you can on the energies and resources that are dwindling away, and the faster they dwindle, the more you charge...or lie about the dwindle effect and encite fear-mongering tactics to make ppl. lock in at fixed rates/prices. i just don't know...but i am uneasy at any idea that tells me i have very little or no choice. i have a problem with authority :-p
Re. Scrambling for funds:
Interesting. guess this is why the markets have been equity-driven for so long - companies no longer care about retaining ownership (bonds) cuz it's too expensive, so instead they raise money by divesting ownership on the market via public offerings / income trusts / other new equity vehicles rather than pay out interest on debt. i dunno, i only work with the fat cats doing these deals, and am watching everyone (but me) make money hand over fist in the equity capital markets. Should we be uneasy?? anyway, back to ford - wonder if they'll buy, sell or merge with anyone or try a new tactic to raise money to cover this interest payout...
i do know that they are dumping vans and adding at least 2 new SUV lines to the Ford family cuz no one wants to drive vans anymore. i dunno if this is a local or national strategy. So SUV's look cooler than mini vans - but why keep pumping those gas guzzlers out?! argh
I think you've hit the point a couple of times here. Seems like GM is intentionally finding ways to get itself into insolvency more quickly. Maybe they're anticipating a bailout from the governments again - which they probably would get. They're too valuable to the N.A. economy. It's all fucking retarded. I don't want my government supporting these incompetent nincompoops.
At for the equity markets, our entire financial system is built (and grows) on virtual money. Always developing new vehicles to make more money on money. It's all a big house of cards. At least bond issues are more tangible than the stocks (but not much). The over-extension of the entire system over the past ten years is about to go through a major, painful correction very soon. Greed always gets a big slap in the ass in the end.
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