General Motors CEO Asked to Step Down

General Motors CEO Rick Wagoner has been asked to step down by President Obama.  Wagoner has been the CEO of GM for nearly 8 years now.  However, he has come under close scrutiny recently due to the fact that GM is surviving solely on $13 billion in US aid, and is asking for nearly $16 billion more.

While I find it a bit unorthodox to have the President ask a CEO to step down, this was a needed step towards fixing GM.  The believed next in the line is GM's COO Fritz Henderson, although the position may be filled by someone from outside the company.

I believe that the best bet would be to hire from outside the company.  Usually, I am not a big fan of hiring from outside a company, as I am a strong believer that the people who work their way up through a company deserve the first look when a promotion becomes available.  However, in this instance, GM has made too many mistakes to rely on someone within.  The risk is that the new CEO would possibly continue the previous policies or have loyalties to parties that may not result in the best interest of the company.

According to the Bloomberg story, the government will be responsible for determining a replacement.  They also report that Obama plans to give a speech tomorrow about the future of the automotive industry.  Check in tomorrow for my take on Obama's plan.

Toyota Share Now Dropping

Toyota, one of the strongest automakers in the world, is now feeling the impact of the recession.  On March 23, Bloomberg reported that the Toyoda family, who owns the majority of Toyota stock, is going to lose $429 million because of stock instability.  Stock price has dropped, and Toyota is expected to lessen the dividends paid to their investors.  This is going to hurt many of the US investors in Toyota, but even the founding family is being hit.

Obviously, no car company is immune to the recession.  When the economy suffers, people become more careful with their money.  This results in fewer new car purchases.  As consumers shy away from the new car lots, investors move their money into different areas.  Unfortunately, this makes the problem worse.  

Since Toyota is not a US based company, the government has not offered any aid.  However, until this report, Toyota was viewed as the strongest car company and was believed to emerge the strongest.  While this still may be the case, we can see that even the mighty Toyota Motor Corp. is being hurt.  

If we are to learn anything from this story, we must realize that no matter how strong a company may look on the outside, there is still the possibility of weakness.  We see this everywhere from AIG, Lehman Brothers, and the major automakers.  And while the automakers are merely victims of the recession and are not in this situation due to unethical practices like AIG or Lehman, they are still being hit hard economically.

Ford Motor Company Avoiding US Help

Over the past months, Ford has taken steps to avoid taking money from the Government, which its rivals GM and Chrysler chose to do.  Ford has committed itself to buying back its debt and has put forth plans to further reduce or eliminate its debt.  

I have always been a fan of Ford (my dad owned a Mustang when I was younger, so I formed a loyalty), and they are supporting that belief now.  Seeing a company work to survive on its own, without relying on the government to save it, makes me happy.  GM jumped at government intervention very quickly, which caused me to lose confidence in their company and their management.  

Some may view Ford's moves as stubborn, but I think they are a model by which the other companies should act.  GM and Chrysler got themselves into their current situations, and should have to face the consequences of those actions.  Instead, they were rewarded for their reliance on debt by getting billions in tax dollars.  

After seeing how AIG handled their bailout funds, I am skeptical of GM and how they are using our money.  Ford, by avoiding involvement in the government bailouts, you have gained my respect and my trust.  Thank you for showing the world that a company can take responsibility for its actions.  I wish you the best.

To read the full description of Ford's plan, visit Bloomberg.com.

Hyundai Assurance... A Scam?

I was watching TV recently and saw a very interesting commercial.  It turns out, that Hyundai has implemented a new program they call "Assurance Plus".  Basically, they are offering ways to help their customers deal with the tough economic times.  Here is one of the many commercial spots they have made for it:

Hyundai has offered to pay three of your payments if you lose your job, and even take the car back from you so as not to hurt your credit.  The idea is that if you need a few months to get your affairs in order, you'll be able to keep your car.  And if you end up not being able to afford it at all, they won't ruin your chances of getting other loans for things you might need.

  

This all sounds great when first hearing it.  A car company that wants to help and seems to understand what you are going through? Great, right?  If you look a little deeper you'll find some less obvious conditions to the program.  First, in order to be eligible for this program, you have to lose your job.  So if you are just having trouble making ends meet, but have a job, you are on your own.  Also, each dealership is allowed to tailor the conditions a bit more (the website tells you to check with your local dealer for full conditions).  Finally, this program only applies on new cars.  So if you've already bought your Hyundai (before they created this program) and start having troubles, you won't be protected either.

This is essentially a sales scam hidden under the idea that they are going to help you.  You first have to buy the car.  Obviously sales are down during this recession, and Hyundai is attempting to make car buying seem safer and more attainable to those hit hardest.  But if you do decide to buy the car and have to take it back, you no longer have a car.  How is this helping?  Sure your credit won't be hurt, but if you are in such an unstable position that you may not be able to handle taking on a car payment, you don't need to be buying a car, despite what the company is willing to do for you.

I am all for companies trying to help the little guy, but I don't like seeing it turn into a marketing ploy.  Hyundai is making much better cars than they have in the past.  They provide a great deal for the money, and their cars last quite a long time.  Had they extended this offer to their current loyal customers, this would be a commendable action.  Instead, they turned it into fake concern.  "We are all in this together" Hyundai says.  I think it will take more than "Assurance Plus" to prove it.

The World's Cheapest Car

Cars haven't been $2,000 dollars for many years, but that is about to change.  Tata Motors, one of the largest companies in India, is now offering a car called the Nano for $100,000 rupees.  This converts to about $2,000 US dollars.  In addition to the world's cheapest car, Tata recently purchased Land Rover and Jaguar from Ford Motor Company last year.  Unfortunately, there have been many setbacks that are making Tata's survival very difficult.

Tata recently built a new manufacturing plant for their Nano model, but it was delayed and caused too few cars to be built.  This resulted in a loss for the company, since it needs to build nearly 350,000 vehicles to make a profit on the Nano.  By not being able to sell enough cars, they have run into problems paying off their loans for the purchase of Land Rover and Jaguar.

Once they fix these problems though, the company should be all set in India.  Car sales have not been a large portion of spending in India, but that is looking to change.  In fact, many other car companies are looking to build models aimed at the middle class in the country.  While much of the developed and powerful nations are suffering, emerging markets show great potential for sales.

We may not see Tata bring its models to our shores any time soon, but their use of smaller and cheaper cars sets a precedent for our automakers that may help our country recover.

To read more about Tata and its recent economic troubles, CLICK HERE.

New Hybrid Planned for Market

Though Nissan has been very limited with the details, Business Week reports that a new hybrid is in the works for 2010.  This would be a major step for Nissan, especially considering Toyota and Honda have already produced successful hybrids in the market. 

Currently, Nissan has the hybrid Altima, which still uses hybrid components from Toyota.  However, for this planned hybrid, Nissan is working to develop their own hybrid system that they expect to provide better power and response than their opponents.  The system will then be used in all of their hybrid applications, but the primary recipient will be a luxury model in 2010.  Nissan's luxury division, Infiniti, is expected to bring the car to American markets.  

This new hybrid engine will most likely be used in other applications for Nissan.  These applications include luxury cars, standard models, sports cars, and even their SUVs.  With the growing demand for hybrids and fuel efficiency, this is likely a wise decision for Nissan.

To read the full Business Week article, CLICK HERE.

Re-inventing the Car

There is a change coming in how we will soon see our cars.  While most companies are working to provide a more fuel efficient version of the standard car we have come accustomed to, one unique company is attempting to completely reinvent the way we see the car.

The Times Online, a british publication, recently published an article depicting a flying car.  You read that correctly, a flying car.  A Massachusetts based company called Terrafugia is currently designing a flying car, called the Transition, and recently conducted a test flight to see how the design was working out.  Though promoted as a "roadable aircraft", the Transition may very well be the first major step towards a true flying car.

The goal for the vehicle is to be able to transform between car and plane settings, and be capable of traveling at 115 mph for short flights.  Essentially, you would be able to fly between New York and Washington, D.C. and then drive your vehicle to your home or office once you arrived.

While still in somewhat of a prototype stage, the Terrefugia Transition has already received around 40 pre-orders and may potentially be ready for sale next year, setting you back about $150,000.