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[Due to the increasing size of the archives, each topic page now contains only the prior 365 days of content. Access to older stories is now solely through the Monthly Archive pages or the site search function.]
The Business of Plugging In: Building the Full Ecosystem for a Successful Plug-in Vehicle Industry in the US
October 23, 2009
The Business of Plugging In conference in Detroit this week marked a serious effort by utilities; automakers and suppliers; academia; government agencies; and financiers to instigate the necessary granular discussions required to lay an integrated foundation to develop a full ecosystem—products, services, policies, supply chain and consumer demand—for the successful deployment and growth of plug-in vehicles in the US.
Viewed another way, the conference was seeking to connect the different contributors or stakeholders that will be required to deliver and to support—on a large scale, to mainstream consumers—plug-in, electric drive vehicles that can compete in terms of cost, convenience, performance, and lifestyle appeal with combustion-engined cars that have had the benefit of more than 100 years of an ever-evolving value chain.
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U of Michigan Study Finds Costs of Plug-in Cars Primary Key to Broad Consumer Acceptance
October 21, 2009
| Probabilities at different price points for at lest some chance of purchase. Source: Curtin et al. (2009) Click to enlarge. |
A newly released University of Michigan study found widespread consumer interest in buying plug-in hybrid electric vehicles; however, the cost of the cars is much more influential than environmental and other non-economic factors as a predictor of purchase probabilities.
The survey of a nationally representative sample of 2,513 adults age 18 and over was conducted between July and November 2008 by the U-M Institute for Social Research as part of the Reuters/University of Michigan Surveys of Consumers. The findings were released at The Business of Plugging In conference in Detroit today.
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Forecast: 17M Natural Gas Vehicles Worldwide by 2015
October 19, 2009
Cleantech research firm Pike Research forecasts growth in natural gas vehicles (NGV) on the road worldwide to 17 million units by 2015, up from 9.7 million in 2008. Pike Research forecasts that the NGV market will grow globally at a CAGR of 5.5% to reach just over 3 million vehicles (including conversions) by 2015.
The top five markets for NGVs are currently Pakistan, Argentina, Brazil, Iran, and India. Pike Research anticipates India will be the fastest-growing NGV market with a CAGR of 18.4% between 2008 and 2015. This rapid expansion will largely be due to the availability of refueling stations and the growth of government emissions rules in large cities in India.
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Toyota Concerned About Market Viability of Plug-ins, Sees Clear Path to Commercialization of Fuel Cell Technology in 2015
September 23, 2009
Based on its 15 years of experience with advanced battery technology and the now-mainstream Prius, Toyota has key unanswered questions regarding market acceptance of plug-in hybrid and electric vehicles and who the target buyers—in numbers sufficient to meet California ZEV mandates—might be, according to Michael O’Brien, Toyota’s US corporate manager for advanced technology vehicle planning. O’Brien was speaking at the California Air Resources Board’s ZEV Technology Symposium in Sacramento, California.
As Toyota learned with the introduction of the Prius and its efforts on the 2002 RAV4 EV, O’Brien said, it is difficult to force technology adoption by consumers. The current state of market readiness of plug-in hybrid and electric vehicles presents serious challenges, particularly in mass production, given issues including range; cost; a charging time still longer than a conventional gasoline refueling; a broad variation in battery pack life, and the lack of infrastructure. “Creating consumer demand for mandated advanced technology vehicles will require substantial government engagement at all levels.”
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Volkswagen Group to Invest €4B by 2011 to Expand Activities in China
September 12, 2009
The Volkswagen Group is set to continue its growth in China over the next few years. Between 2009 and 2011, the Group is to invest a total of €4 billion (US$5.8 billion) in new products and the expansion of production capacities in China.
The investments are to be financed from the cash flow of the Chinese joint venture companies. At the Nanjing and Chengdu plants, production is to be boosted to between 300,000 and 350,000 units in each case by 2012. These investment plans were approved on Friday by the Supervisory Board of Volkswagen Aktiengesellschaft.
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GM Board Recommends Selling Majority Stake in Opel/Vauxhall to Magna International/Sberbank; Opel/Vauxhall to Remain Part of GM Global Product Development
September 10, 2009
Ending what had extended into a longer-than-expected process of deliberation and negotiations, the Board of General Motors announced its support for a bid from the consortium of Magna International Inc. and Sberbank to buy a majority stake in its European Opel/Vauxhall operations.
Several key issues will be finalized over the next few weeks to secure the binding agreements, including the written support of the labor unions to support the deal with the necessary cost restructuring for viability and the finalization of a definitive financing package from the German government. The definitive agreements should be ready to sign within a few weeks, with closing to follow within the next few months. Under the deal, Magna/Sberbank will purchase a 55% stake in New Opel; GM will hold a 35% stake and employees will be provided a 10% stake.
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PPIC Survey Finds Californians’s Support for Policies to Curb Warming Slips With Economy and Budget Crisis; Partisan Split Widens
August 14, 2009
Solid majorities of Californians favor state policies to curb global warming, according to a survey by the Public Policy Institute of California (PPIC) with support from The William and Flora Hewlett Foundation. But in a year that has seen both a worsening recession and state budget crisis, residents’ support for urgent action on climate change has slipped and a partisan divide on the issue has widened.
Most residents (66%) support the 2006 California law (AB 32) that requires greenhouse gas emissions to be reduced to 1990 levels by 2020. Support has declined 7 points from July 2008 (73%) and 12 points from 2007 (78%). The decline is sharpest among Republicans (57% 2008, 43% today). However, Californians across party lines favor the requirement that automakers reduce emissions from new cars (90% Democrats, 81% independents, 55% Republicans).
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Study Finds Both Unemployment Rate and Fuel Price Influence Buyers’ Decisions on Fuel Economy of Vehicles Purchased
July 22, 2009
From October 2007 to April 2009, the average fuel economy of purchased new light-duty vehicles improved from 20.2 mpg US (11.6 L/100km) in October 2007 to 21.3 mpg (11 L/100km) in April 2009. A new study by a two researchers at the University of Michigan’s Transportation Research Institute (UMTRI) found that during this period both the unemployment rate and the cost of gasoline influenced buyers’ decisions concerning the fuel economy of vehicles purchased.
During the same period, the volume of sales plummeted. Michael Sivak and Brandon Schoettle also found that while there was a significant negative relationship between the unemployment rate and the number of vehicles purchased, the price of gasoline did not have a major impact.
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Report from the REFF-Wall Street; Themes in Renewable Energy Finance
by Bill Cooke
Green Car Congress attended the Renewable Energy Finance Forum - Wall Street (REFF-Wall Street) conference (23-24 June) sponsored by Euromoney Energy Events and the American Council on Renewable Energy (ACORE). ACORE is an organization of member companies and institutions that are dedicated to moving renewable energy into the mainstream of America’s economy.
Ed Feo is a partner with the law firm of Milbank, Tweed, Hadley & McCloy and was voted one of the “Five Most Influential People in Renewable Energy” in 2008 by Euromoney / Institutional Investor. He identified three major themes in 2009 for renewable energy: “Energy markets are undergoing their most fundamental changes since the 1930s; cap and trade is the most complex issue outside of health care; and schisms exist within the energy community that will grow stronger over time.” Although not part of the conferences formal structure, the themes were addressed in the presentations and panel discussions.
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Euro Auto Production Down 35% in First Quarter 2009; Second Half Production May be Down 25%; Small Cars Hit New Record Share
July 15, 2009
| The small car segment has increased its share. Source: ACEA. Click to enlarge. |
In the first quarter of 2009, automotive production in Europe fell by 35% to 3.4 million vehicles, according to the latest Economic Report from the European Automobile Manufacturers Association (ACEA). While fleet renewal schemes (vehicle scrappage) have helped segments of the passenger car market in some countries, overall vehicle demand in Europe went further down as well.
Van (-57%) and truck production (-56%) dropped even more than the manufacture of passenger cars (-31%). With a drop of 57.4%, the UK was the worst affected of the five largest European producers, followed by France (-46.0%), Spain (-40.2%), Italy (-38.6%) and Germany (-32.3%). In Austria, production went down by 69.2%.
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The New General Motors Launches; Lutz “Unretiring”
July 10, 2009
The new, downsized General Motors Company emerged from bankruptcy Friday morning. Created from the old GM’s strongest operations in an asset sale approved by the Federal bankruptcy court on 5 July (earlier post), the new GM is built on four core brands: Chevrolet, Cadillac, Buick and GMC. The four brands will offer a total of 34 nameplates by 2010, compared to old GM’s total of 48 in 2008 and 63 in 2004.
The new General Motors Company is primarily owned by the governments of the United States, Canada and Ontario, and by a trust fund providing medical benefits to UAW retirees. Specifically, common stock will be owned by:
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Proposed Federal CEDA Designed to Help Risky Breakthrough Technologies Cross the “Valley of Death”; Working with $10+ Billion Fund
July 07, 2009
by Bill Cooke
Green Car Congress recently attended the Renewable Energy Finance Forum - Wall Street (REFF- Wall Street) conference sponsored by Euromoney Energy Events and the American Council on Renewable Energy (ACORE). One of the highlights to the conference was an overview of a potential new government organization called the Clean Energy Deployment Administration (CEDA), which is designed to help promising, although risky, breakthrough technologies with commercial appeal cross the “valley of death”.
In March of 2009, Chris Van Hollen (Democrat-Maryland) introduced legislation for the Green Bank which shared many characteristics with CEDA. CEDA was proposed in two parallel bills: H.R. 2212 in the House, and S.B. 949 in the Senate. The House version was combined with the Green Bank legislation and ended up in the giant Waxman-Markey energy and cap-and-trade bill (Sec. 186 of H.R. 2454, the American Clean Energy and Security Act of 2009), which passed the House on 29 June and is now under consideration by the Senate. (Earlier post.) S.B. 949 was referred to the Senate Committee on Energy and Natural Resources 30 April 2009.
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Federal Bankruptcy Court Approves GM Asset Sale to New GM
July 06, 2009
Judge Robert Gerber of the US Bankruptcy Court for the Southern District of New York approved the sale of substantially all of General Motors Corporation’s assets to NGMCO, Inc., an entity funded by the US Department of the Treasury. The approval marks a necessary step toward the emergence of GM from bankruptcy; the US Treasury has said it would halt funding to GM if the asset sale was not concluded by 10 July.
In connection with the closing of the sale transaction, NGMCO, Inc. will change its name to General Motors Company and continue to operate under GM’s historic corporate and sub brands. The current General Motors Corporation will change its name to Motors Liquidation Company. Retained assets will be wound down or sold. A new board of directors will oversee that process and the liquidation of the company under the supervision of the Bankruptcy Court.
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JAMA Survey Attempts to Identify Shifting Attitudes of Younger Japanese Potential Car Buyers
June 16, 2009
A survey by the Japan Automobile Manufacturers Association (JAMA) focused on the “entry generation” of vehicle buyers found that while there has not been any definitive major shift in terms of the basic appeal of cars, fewer young people today have strong feelings towards car ownership. Meanwhile, a more cautious stance prevails with regard to the timing of a vehicle purchase.
This survey was conducted against the backdrop of indications that young Japanese adults are increasingly moving away from cars and car use. A key objective of the study was to track how young people’s perceptions of cars could be expected to change over the coming years.
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New Chrysler Group LLC and Fiat Finalize Global Strategic Alliance; New Global Brand-Focused Structure
June 10, 2009
With the US Supreme Court yesterday clearing the final potential obstacle, Chrysler Group LLC and Fiat Group finalized their previously announced global strategic alliance, forming the “new" Chrysler. The “old” Chrysler had entered bankruptcy on 30 April 2009. The new Chrysler will begin operations immediately.
Under the terms approved by the US Bankruptcy Court in New York and various regulatory and antitrust regulators, the company formerly known as Chrysler LLC today formally sold substantially all of its assets, without certain debts and liabilities, to a new company that will operate as Chrysler Group LLC.
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GM Files Voluntary Chapter 11; Agreements with US Treasury and Canada; “New GM” Expected in 60-90 Days
June 01, 2009
General Motors Corp. reached agreements with the US Treasury and the governments of Canada and Ontario for the creation of a smaller, self-sustaining “New GM”. Pending approvals, the New GM is expected to launch in about 60 to 90 days as a separate and independent company from the current GM.
The New GM will incorporate only the “best brands” and operations, and benefit from shedding much of the older debt burden and operating cost structure. The New GM will incorporate the terms of GM’s recent agreements with the United Auto Workers (UAW) and Canadian Auto Workers (CAW) unions and will be led by GM’s current management team.
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US EIA Projects World Energy Use to Grow 44% Between 2006 and 2030, CO2 Emissions Up by 39%
May 27, 2009
| Projected growth in world carbon dioxide emissions. Source: IEO2009. Click to enlarge. |
World marketed energy consumption is projected to grow by 44% between 2006 and 2030, driven by strong long-term economic growth in the developing nations of the world, according to the reference case projection from the International Energy Outlook 2009 (IEO2009) released today by the US Energy Information Administration (EIA).
World carbon dioxide emissions are projected to rise from 29.0 billion metric tons in 2006 to 33.1 billion metric tons in 2015 and 40.4 billion metric tons in 2030—an increase of 39% over the projection period. The IEO2009 reference case does not include specific policies to limit greenhouse gas emissions
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Automotive Market Research Perspectives on Selling “Green” in a Try-to-Survive Market
May 02, 2009
by Bill Cooke
In a panel session entitled “Does Green Matter in a Try-to-Survive Market?” at the ATX-Consulting4Drive Executive Business Theater at the SAE 2009 World Congress, executives from two global automotive market research groups—Alexander Edwards, President of Strategic Vision’s Automotive Division and Scott Miller, CEO, Synovate Motoresearch—shared their data and resultant views on green consumers and green autos.
How big is the green market? Strategic Vision shared data that only a small portion of consumers in the US are “truly green”, which means the customer is willing to pay significantly more for a green vehicle. Even globally the number is relatively small:
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Chrysler Files for Bankruptcy; Reaches Agreement with Fiat for New Company; Fiat Percentage Ownership Tied to Fuel-Efficiency Targets
April 30, 2009
Chrysler LLC has been unable to obtain the necessary concessions from all of its lenders which would have avoided the need for a bankruptcy proceeding. As a result, under the direction of the US Treasury, Chrysler LLC and 24 of its wholly-owned US subsidiaries today filed voluntary petitions under Chapter 11 of the US Bankruptcy Code in US Bankruptcy Court for the Southern District of New York.
Chrysler has also reached an agreement in principle to establish a global strategic alliance with Fiat SpA to form a new company. It would allow Chrysler and Fiat to fully optimize their respective manufacturing footprints and the global supplier base, while providing each with access to additional markets. Fiat powertrains and components would also be produced at Chrysler manufacturing sites.
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GM Releases New Viability Plan, Launches Bond Exchange; Phasing Out Pontiac
April 27, 2009
General Motors presented an updated Viability Plan that accelerates and deepens the cuts in US brands and nameplates, dealers, manufacturing operations and employees intended to enable GM North America to breakeven (on an adjusted EBIT basis) at a US total industry sales volume of approximately 10 million vehicles. As part of the new plan, GM will accelerate the wind-down or sale of HUMMER, Saturn and Saab to the end of 2009, and phase out Pontiac by the end of 2010.
The new plan is included in the prospectus for bond exchange offer in which GM is offering certain bondholders 225 shares of GM common stock for each $1,000 principal amount of GM notes and a cash payment for all accrued but unpaid interest to the settlement date. The bond exchange is a critical step; failure will result in GM’s entering the bankruptcy process. If the exchange succeeds, GM shares will be 89% owned by a combination of the US Treasury and the UAW Voluntary Employee Benefit Association (VEBA); the US Treasury will own at least 50%.
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EEA Report: Trends in European Transport Are Heading in the Wrong Direction
April 05, 2009
| Indexed European transport sector greenhouse gas emissions, 1990-2006. Source: EEA. Click to enlarge. |
Transport continues to contribute disproportionally to Europe’s greenhouse gas (GHG) emissions, poor air quality and noise, and still uses the least efficient modes to move people and goods according to a new report from the European Environmental Agency (EEA).
Emissions of GHG have increased by 26% (EU-15) or 180 million tonnes between 1990 and 2006, excluding international aviation and marine transport—an amount larger than the entire annual national emissions for 2006 from Belgium (132 million tonnes) or Romania (157 million tonnes).
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Obama Outlines Next Steps for GM and Chrysler
March 30, 2009
In a statement livecast on the Internet by the White House, President Barack Obama said that neither of the restructuring plans submitted by GM and Chrysler “goes far enough to warrant substantial new investment.”
In his short address, the President confirmed details that had emerged over the weekend about the next steps for the two auto makers. The government will provide GM with “adequate working capital” for 60 more days to “produce a better business plan”. Chrysler, which the government has determined requires a partner to survive, will have 30 days of working capital to conclude a deal with Fiat.
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European Parliament Adopts Resolution Calling for Measures to Support Job Creation in the Auto Industry and “Green Technologies”
March 26, 2009
A cross-party resolution adopted by the European Parliament (EP) calls for measures to support job creation in the European automotive industry, and to encourage the development of “green technologies”, with which there is “significant potential for job creation...in the automotive sector”. The resolution was adopted by 413 votes to 44 with 13 abstentions.
The European automotive industry is key to the EU economy, employing 12 million workers directly and indirectly—6% of the employed population in the European Union. The industry has been badly hit by the global economic crisis, and has seen a significant drop in demand during the last quarter of 2008 and the first of 2009.
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Hitachi Restructures, Spinning Off Automotive Systems Business; to Launch Group-Wide Strategies for Li-ion Battery and Renewables Businesses
March 16, 2009
As part of a major restructuring in announced in Tokyo on Monday, Hitachi Ltd. will spin off its Automotive Systems Business into a wholly-owned subsidiary on 1 July. The new automotive business will have a special focus on hybrid and electric drive system components, as well as technologies for enhancing the efficiency of internal combustion engines.
In addition, on 1 April, the company will introduce organizations to plan and propose R&D and business strategies for the whole Hitachi Group regarding lithium-ion battery and renewable energy-related businesses. Hitachi says that it will “take steps to quickly launch businesses in these areas.”
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Grant Thornton LLP Warns of Potential Collapse of Automotive Supply Chain
March 14, 2009
The economic impact of a General Motors or Chrysler bankruptcy is being debated across the country. But the most immediate and pervasive risk to the economy is a wholesale collapse of the automotive supply base, Grant Thornton LLP partner Laura Marcero told the Automotive Press Association in Detroit. Grant Thornton LLP is the US member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations.
According to Marcero, who is part of the firm’s Corporate Advisory and Restructuring Services team based in Southfield, Mich., some 500 suppliers may be at high risk due to the cascading effect of reduced volumes and uncertainty around government support in the near term. But she said the damage can be mitigated if key suppliers take the initiative and form a coalition with automakers, banks and the government to drive an orderly consolidation of the supply base.
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EPA Study Finds Residential Construction Trends in US Metropolitan Regions Showing Substantial Shift, But Falling Short of Reshaping Sprawl
February 27, 2009
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| Central city share of residential construction. Click to enlarge. |
A new report from the US Environmental Protection Agency (EPA) suggests that the distribution of residential construction has significantly changed over time in many regions. In more than half of the largest metropolitan areas, urban core communities have significantly increased their share of new residential building permits.
For the report, Dr. John Thomas of the EPA examined residential building permits in the 50 largest metropolitan regions to clarify 1) if there has been a shift toward redevelopment; and 2) in which regions the shift has been most significant. Thomas found that the central city has more than doubled its share in 15 regions, and the increases has been particularly dramatic over the past 5 years.
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GM Europe/OPEL to Submit Plan for Viability
GM Europe and the Opel Supervisory Board have approved a confidential long-term plan for viability that will be submitted to government representatives in the coming days.
The confidential document includes a funding request for €3.3 billion (US$4.2 billion) in government support (German and other governments), €3 billion (US$3.8 billion) in support from GM and $1.2 billion (€0.95 billion) in structural cost reductions as outlined in GM’s latest version of its viability plan submitted to the US Congress.
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Saab to Separate from GM and Create Independent Business in Sweden
February 20, 2009
As a result of GM’s strategic review of the global Saab business, the Saab Board announced today that it will file for reorganization under a self-managed Swedish court process to create a fully-independent business entity that would be sustainable and suitable for investment.
The reorganization is a self-managed, Swedish legal process headed by an independent administrator appointed by the court who will work closely with the Saab management team. As part of the process, Saab will formulate its proposal for reorganization, which will include the concentration of design, engineering and manufacturing in Sweden.
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Mixed Outlook for Mainstream Consumer Adoption of PHEVs
February 14, 2009
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| Bubble chart of plausible mainstream PHEV buyers’ battery requirements (light and dark gray circles) and experts’s requirements overlaid on a Ragone plot of NiMH and Li-ion batteries. Source: Ken Kurani. Click to enlarge. |
A series of presentations at the SAE 2009 Hybrid Vehicle Technology Symposium held in San Diego (11-12 February) sketched a mixed outlook for mainstream consumer—i.e., not enthusiast or pioneer—adoption of coming plug-in hybrid electric vehicles (PHEVs), given current market conditions and consumer awareness and attitudes.
The findings from the studies suggest that manufacturers will need to be careful in balancing the design of all-electric range capability against a number of other factors; that competition from alternative solutions will be stiff; and that mainstream consumers still do not place the highest values on fuel economy or low emissions when purchasing a new car.
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Fiat Group and Chrysler Plan New Global Strategic Alliance; Fiat to Have 35% Stake in Chrysler
January 20, 2009
Fiat S.p.A., Chrysler LLC (Chrysler) and Cerberus Capital Management L.P., the private investment majority owner of Chrysler LLC, have signed a non-binding term sheet to establish a global strategic alliance that will result in Fiat having a 35% stake in the Detroit-based automaker.
As a consideration for Fiat Group’s contribution to the alliance of strategic assets, to include: product and platform sharing, including city and compact segment vehicles, to expand Chrysler’s current product portfolio; technology sharing, including fuel-efficient and environmentally friendly powertrain technologies; and access to additional markets, including distribution for Chrysler vehicles in markets outside of North America, Fiat would receive an initial 35% equity interest in Chrysler. The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.
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KPMG Global Auto Executive Survey Highlights Impact of Downturn on Industry; Increasing Importance of Hybrid, Electric and Battery Technologies
January 10, 2009
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| Concerns about the global economy and environmental issues have grown steadily in importance to the industry, according to the latest survey findings. Source: KPMG. Click to enlarge. |
The just-released tenth consecutive annual survey of senior global auto executives carried out by KPMG firms—The KPMG Global Auto Executive Survey 2009—highlights the impact of the economic crisis on the global automotive industry. The survey found that sales and profitability expectations are down sharply; that more bankruptcies are expected, along with intensive restructuring; that costs must be cut, meaning process innovation will have to intensify; and that auto execs expect that customers will become more discriminating, and more concerned with total cost of ownership.
However, the industry also sees great opportunities in new technologies, particularly alternative fuel and fuel efficiency technologies. Despite the fall in oil prices during late 2008, companies have increased their sales expectations for hybrid and alternative propulsion vehicles.
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Japan Vehicle Production and Exports Down 20.4% and 18.1% Respectively in November
December 26, 2008
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| Vehicle production in Japan dropped 20.4% in November year-on-year. Cars of more than 2.0L displacement suffered the largest drop. Click to enlarge. Data: JAMA |
Total production of cars, trucks and buses in Japan for domestic sales as well as for export dropped 20.4% in November year-on-year to 854,171 units, according to figures released by the Japan Automobile Manufacturers Association (JAMA). This marked the second consecutive month of year-on-year production decreases, and is the largest monthly on-year decline since JAMA began compiling data in 1967.
Vehicle exports from Japan in November 2008 were 491,990 units, down 18.1% compared with the units total recorded for the same month of the previous year. This marks an export decrease on the same month of the previous year for two consecutive months.
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Brookings Report Concludes US Drop in VMT Signals a Permanent Shift Away from Cars; Implications for Transportation Policy
December 17, 2008
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| US VMT per capita, annualized and real gasoline pump prices, Jan 1991–Sep 2008. Click to enlarge. Source: Puentes and Tomer |
The US is experiencing its longest and steepest drop in driving, signaling a permanent shift away from reliance on the car to other modes of transportation, according to a new Brookings Institution report. This shift will have far reaching implications for transportation, environmental, energy, and land-use planning, the authors said.
The report—The Road…Less Traveled: An Analysis of Vehicle Miles Traveled Trends in the US—shows that national vehicle miles traveled (VMT), began to plateau as far back as 2004 and dropped in 2007 for the first time since 1980. Per capita driving followed a similar pattern, with flat-lining growth after 2000 and falling rates since 2005. These recent declines in driving predated the steady hikes in gas prices during 2007 and 2008.
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Analysis Concludes Automaker Bankruptcy Could Cost US Taxpayers US$65.9 Billion
December 08, 2008
The bankruptcy (first Chapter 11 reorganization, then proceeding to Chapter 7 liquidation) of two of the Detroit automakers would cost US taxpayers US$65.9 billion over two years, compared to a taxpayer cost of US$16.4 billion for partially repaid bridge loans, according to a joint analysis by Anderson Economic Group (AEG) and BBK, an international business advisory firm with extensive experience in the automotive industry.
The study estimated direct taxpayer costs of two scenarios—bridge loan and bankruptcy. The bridge-loan scenario involved an outlay of $30 billion, for which the US government received interest payments and gains on warrants, but only half of which was repaid within two years. The analysis found that the losses of employment, income, and tax revenue in a bankruptcy scenario are higher than the losses from company restructuring with the help of federal bridge loans.
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Moody’s Chief Economist Says US Automakers Would Likely Need Up to $125B; Recommends the Requested Government Aid Now
December 05, 2008
In testimony before the US Senate Committee on Banking, Housing and Urban Affairs on 4 December, Mark Zandi, Chief Economist and co-Founder of Moody’s Economy.com, said that under the most likely outlook for the economy and auto industry, the Detroit 3 will need between $75-$125 billion to avoid bankruptcy at some point in the next two years.
The three recently presented restructuring plans by the three automakers totaled up to a possible $34 billion (GM, $12 billion in loans and $6 billion in a line of credit; Ford, $9 billion in a line of credit; Chrysler, $7 billion in loans). Despite the potential quadrupling of that amount, Zandi said that the Federal government should provide the financial help that the automakers need.
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European Commission Proposes €200B Economic Recovery Plan; €5B Green Cars Initiative
November 26, 2008
The European Commission presented a €200 billion (US$257 billion) Recovery Plan—equivalent to 1.5% of European GDP—to pull Europe’s economy out of its current crisis. One of the elements of the plan is a €5 billion (US$6.4 billion) “European green cars initiative”.
The plan will use a wide range of policies and instruments. The co-ordinated fiscal stimulus of around €200 billion comprises around €170 billion (1.2% of GDP) from Member States, and around €30 billion (0.3% of GDP) as EU level action within the EU budget and from the European Investment Bank (EIB). The stimulus will stay within the Stability and Growth Pact, while making use of the full flexibility offered by the Pact.
