August 25th, 2009
03:26 PM GMT
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LONDON, England –It's obvious General Motors is having second thoughts about parting with its European silver. For sure, it may still go through with selling a (large) stake of Opel to Canadian car parts maker Magna and Russian interests - but not on the terms that up to now have been reported in the press.

GM Motors has emerged from bankruptcy –- but what should it do about Opel?
GM Motors has emerged from bankruptcy –- but what should it do about Opel?

GM Europe is really only Opel (and its much smaller re-badged Vauxhall brand.) Opel could have a bright future when economies recover, moreso now that GM has the power to close plants, move production and do all the things a car manufacturer does to cut costs following its emergence from bankruptcy.

If Opel starts to let in other major shareholders, then GM losses the ability to make those decisions on its own, missing all the potential ("potential" mind you) profits if it calls the market right.

GM would also lose some of its intellectual property, which would end up in the hands of a Russian car maker. Why would GM contemplate that?

Having said all this, GM no longer has the final word on what happens to Opel. Remember, Opel is run by a trust with two GM appointees, two German government appointees (German taxpayers put in billions of dollars to keep Opel operating while GM went through U.S. bankruptcy protection) and one independent member of the trust panel.

GM must be, and is, getting much smaller. But it's now out of bankruptcy, it's temporarily restored a few suspended factory shifts at North America plants (thanks to Cash for Clunkers) and now it's having second thoughts about Europe.

What do you think? Should GM sell a majority stake of Opel/Vauxhall? Or stick with it?

August 21st, 2009
06:03 PM GMT
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Last Friday, when it was announced that Volkswagen had agreed a takeover of Porsche, with a little help of money from Qatar, it seemed that this saga was nearing the end. No so.

After German prosecutors raided to Porsche offices in Stuttgart on Thursday looking for evidence of “market manipulation” and a violation of “disclosure rules” the whole thing now looks set to run and run.

So, what are they looking for? You may recall Volkswagen shares soared last October when the much smaller Porsche announced it had bought a majority stake, catching everyone off guard.

Many people in the markets had “shorted” the stock (basically a bet the shares would fall) and had to quickly try to buy shares, even as the price took off, in order to cover their exposure. Then, almost as quickly, the shares fell hard.

German stock market rules stipulate how many shares an entity can purchase (percentage wise) of another company before having to disclose that position to regulators. But apparently the same rule does not apply when it comes to share options (an option to buy shares at a certain price).

Porsche had built up a huge number of options, to the surprise of the market, and apparently to regulators.

No matter how this investigation plays out, some in Germany hope there will be a change in the law to cover options, to limit the chances of this happening again.

Of course, the Porsche position did not work. Volkswagen is going to gobble up the premium car maker.

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Filed under: Auto industry

July 24th, 2009
08:04 AM GMT
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BERLIN, Germany – The takeover war between Volkswagen and Porsche is playing out almost like a Shakespearean Drama. At the heart are two of Germany’s most well known and yet most reclusive industrial families - the Porsches and the Piechs, who incidentally belong to the same family line.

It began with Ferdinand Porsche, the German engineering genius who constructed the first Volkswagen, known at first as the KdF car, and then later as the VW Beetle. Porsche had several children, but two would come to define the family rift we are all now seeing.

Ferry Porsche would go on to manage the Porsche Engineer Bureau and oversee the construction of Porsche’s first own sports car, while Louise Porsche went on to marry Anton Piech and keep a high stake in the then fledgling Volkswagen Auto Company.

Fast forward to today and the main players are cousins Wolfgang Porsche, Ferry' son, who heads the supervisory board of Porsche SE, and Ferdinand Piech, Louise's son, who is at the helm of the Volkswagen board. Both men are involved in both companies, but Piech has been busy building the VW Empire while Wolfgang Porsche oversaw the rise of the tiny sports car maker to one of the most efficient car manufacturers in the world.

Then came Wendelin Wiediking, CEO of Porsche, who had the idea of attempting a hostile takeover. The tiny Porsche would try to take a majority stake in Volkswagen, the largest car company in Europe. Just to put this in perspective, Volkswagen turns out more vehicles a week than Porsche does in a whole year.

The deal failed and Porsche was left with massive debt of more than $10 billion, and now is when Ferdinand Piech saw his chance.

Piech gathered his friends in German politics and applied pressure on his cousin Wolfgang Porsche. After a long battle, Wolfgang conceded defeat. Porsche will probably merge with VW, thus losing much of its famed independence.

There is however some consolation in all this for Wolfgang Porsche. While he lost his top manager Wendelin Wiedeking and has allowed his company to fall into the fangs of Volkswagen, under the new management structure the Porsche and Piech families would hold more than 50 per cent of Volkswagen AG - and thus become more powerful and richer than ever before. Making this possibly one of the most profitable family feuds of all time.

July 23rd, 2009
06:02 PM GMT
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For the past 12 years, some 50 of Europe’s top corporate leaders have been under special surveillance.

Wendelin Wiedeking's time at the head of Porsche has come to an end.
Wendelin Wiedeking's time at the head of Porsche has come to an end.

This has nothing to do with this week’s revelation that Frankfurt state prosecutors are deciding whether to bring criminal charges as they investigate allegations of illegal tactics by private detectives on contract to Deutsche Bank – though that mighty bank’s former CEO and Chairman, Rolf Breuer, is among the names being watched.

In 1997 and 1998 I was part of a CNN team that made some 50 programmes about individual company bosses in a series called “Pinnacle Europe.” We spent at least a day with each one, talking to them about how they’d got to the top, what they’d done for their companies, how they planned to stay ahead and what they did outside the office.

The series producer, Jeff Nathenson, and I still regularly exchange banter about what has happened to each of the CEOs we profiled; he maintains there is a “curse of Pinnacle” that gradually topples them, one by one. So we continue our casual surveillance of all 50 – by the boringly legal method of watching the headlines, I should add.

The fact is, though, that many are now ex-bosses. Many crashed and burned; they fell victim to boardroom knife attacks and are spending more time with their families. Some, like Jorma Ollila of Nokia, completed their distinguished careers and moved on to even higher things. Others sold their companies.

A handful have survived. Sir Richard Branson is still running Virgin in his unique way and is even wealthier than he was in 1997; Daniel Vasella is still atop the Swiss pharmaceuticals company Novartis; and Klaus Schwab is still head of the World Economic Forum.

But today one name did fall victim to Jeff Nathenson’s putative “curse of Pinnacle.” Germany woke up this morning to learn that one of its corporate titans, Wendelin Wiedeking, had been ousted as boss of Porsche, the role in which I had interviewed him for our CNN profile early in 1998, and which he had held for a very successful five years before that. With Wiedeking and his impressive collection of model cars evicted from the Porsche headquarters, talks are now underway to bring about a merger of the sports car maker and Volkswagen.

Dr Wiedeking had sought exactly the same thing, but in a different format. Having rescued Porsche from the weak dollar of the early 1990s (US sales are crucial to the company), he launched new models, shifted some production out of Germany and made the Stuttgart-based icon one of the jewels of its sector: prestigious and profitable.

Money piled up at the bank – and in the CEO’s personal wallet. His contract awarded him 0.9% of Porsche’s pre-tax earnings, a bonus reported at some 77 million euros in 2007-08. Confident in his ability to run any car company, even Europe’s largest, Wiedeking set his sights on a takeover of Volkswagen.

That proved his undoing. Like the Icarus of myth, this high-flier had ventured too close to the sun. True, Porsche amassed more than half of VW’s shares and had options on a further 20 percent. But it had also run up $14.2 billion in debt, and as the credit crunch bore down on big corporate borrowers, that burden crushed the life out of his ambitions.

Family politics also played a part. Porsche and Volkswagen have always been intertwined. Before World War II, Ferdinand Porsche designed the original Volkswagen or “People’s Car” – the evergreen Beetle. When the War was over he built his first Porsche model in a shed up an Austrian mountain, shifting production to Stuttgart when his sports cars started selling in big numbers.

Ferdinand Porsche’s descendants still control the company he founded – but one of his grandsons is the redoubtable Ferdinand Piëch, the Austrian former Volkswagen CEO, now its chairman. Wiedeking’s designs on VW split the extended family, and made an enemy of Piëch, a man not to be crossed.

History will shake its head at the ill-fated ambitions of Wendelin Wiedeking, while admiring the way he rescued Porsche, and that neat clause in his contract which rewarded him so handsomely for genuine, measurable success.

But why am I writing him off? He still has some interesting directorships – Novartis, for example. He has no need of money, even giving half his $70 million pay-off to charity, but driven people like that don’t just retire to the golf course. They waste no time in passing out their telephone numbers to the head-hunters.

There aren’t that many executives who can say they’ve rescued a major car company once before and left it wonderfully profitable, and these days those qualifications are badly needed. Like, who’s going to run Opel once it’s been sold off by GM?

July 2nd, 2009
10:15 AM GMT
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LONDON, England - When I was offered the chance to drive a Tesla Roadster electric car around the streets of London, my first thought was why would I enjoy a souped-up golf cart? It was nothing like that.

The Tesla Roadster is an electric sports car with good handling and acceleration.
The Tesla Roadster is an electric sports car with good handling and acceleration.

I am not an auto enthusiast (I drive a Vauxhall Zafira after all) but in this job I have the great privilege of driving (or being driven in) some great cars.

Last year, I took a Rolls Royce Phantom around the grounds of the company’s plant; Charlie Morgan took me for a spin through the Malvern Hills in one of his family-built cars; and now I have taken a trip in both seats of a Tesla Roadster.

There was no golf cart in site. This little sports car can move, and while we could not test the claim of zero to 60 miles an hour in under six seconds (the newest model claims under four seconds) on London’s back streets, it did handle well (I had to keep avoiding a Aston Martin and a Lamborghini parked on two of the corners) and the acceleration was smooth.

It can apparently go for more than 200 miles before having to be plugged in, though others who have taken it for a test drive say that drops if it’s aggressively driven.

Of course, it’s an electric car, so you lose some of the pleasures of a sports car. There are no gears, so no clutch, and of course you can't gun the engine at a red light.

I also realized quickly that I gauge my driving by the whine of the engine, so you have to lose that habit quickly. Finally, and maybe most crucially, people don’t know you’re there!

I saw a lady with a pram walking in the road, and she had no idea there was a little red sports car coming up on her. My Tesla minder said he hoped regulators did not mandate that electric cars add an artificial noise; drivers just had to re educate themselves. I begged to differ. Watch Jim Boulden's test drive

It is the first non-subsidized commercially sold electric car approved for driving on all roads (some little electric cars can’t go on motor ways for instance, others are just demonstration vehicles, built in collaboration with governments).

Tesla’s current CEO and principal owner, the young internet millionaire Elon Musk, said the California-based firm had delivered around 550 Roadsters, mostly to customers there.

He was on hand at the London showroom when the first two cars arrived for the European launch party.

Musk said the company decided that the first electric car launched had to be the $100,000 sports car, to dispel any thoughts that an electric car couldn’t compete with a petrol engine.

He insisted that the company would already be profitable but for investing in his much bigger ambition. A just-announced near half billion dollar loan from the U.S. government would largely be used to build the next car – a sedan (currently called the Model S).

It’s expected to cost half the price of the Roadster and travel up to 300 miles on a full charge (it can be plugged in for a top up that takes only 45 minutes, says Tesla).

Musk said this next generation would be the world’s first mass-produced electric car.

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Filed under: Auto industryBusiness

June 9th, 2009
01:36 AM GMT
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FARIDABAD, India — Power goes off as we drive into Harjit Singh's factory in this dusty industrial zone on the outskirts of India's capital New Delhi.
Singh, who makes fasteners and nuts for automobiles, turns to a heavy-duty generator lying in one corner of the factory floor as his workers struggles to switch it on. An elderly employee surrounded by idle machines continues his work with a handheld metal file.
In energy-deficit India, factory-owners like Singh – classified as micro and small enterprises – suffer routine power droughts like this. Still, these small companies manage to account for 39 percent of the manufacturing output and one-third of the country's total export.
The Indian government says this sector, spread over 12.8 million enterprises, employs an estimated 31 million people – a labor intensity four times higher than large enterprises.
But Singh says it is in a crisis now. "We are facing a business crunch, a major business crunch due to the economic slowdown," he laments as his machines rumble to life as power is restored.
He tells me that manufacturing activity has dropped considerably because of falling orders. Singh is caught in what he calls a "debt-trap" because costly banks loans to keep the business running.
His biggest worry is a permanent shutdown caused not by shoddy power, but by the financial crisis. In the past year he laid off 20 of the 38 workers. His sales are only one-fifth his 2007 volume. "I can’t help it, I can’t survive. I have to survive on the bare minimum," he remarks.
The trouble on Singh’s factory floor belies rosy headlines in the Indian press. "Get, set, grow," read a headline for the Hindustan Times. "Good news: At 6.7%, GDP grows more than expected," said a Times of India headline the same day.
But for Singh, it's unclear what lies ahead. He hopes the government will promote more bank loans for his ailing automobile sector, tax concessions and a curb on Chinese imports to keep his business from closure.

 "Something has to be done immediately; otherwise we’ve had it," he says.

May 27th, 2009
06:58 PM GMT
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NEW YORK - General Motors announced Wednesday that investors who had lent the company money over the years, through purchases of bonds, overwhelmingly rejected the company's offer to swap out that debt for stock.

It now seems certain the company is headed toward a bankruptcy filing.

Whatever the outcome, this event will surely be a critical turning point for the U.S. economy.

Analysts say if the bankruptcy is quick and surgical it could help give another boost to fragile confidence.

But, if the long list of creditors engage in a drawn out legal battle it raises the risk that GM may not survive at all.

It reminds me of a scene from a racing movie where there is a horrendous crash on the track and all the drivers in the back are racing for this big cloud of smoke. Most hit the brakes. But the leading man grips the wheel and hits the gas.

The driver is either going to crash into another vehicle in that smoke or avoid the crowd and come out in the lead. In Hollywood the hero comes out in the lead, having conquered both the competition and his fear.

But this is real life and things tend to be messier in real life.

The automotive industry is not as central as it once was, but its economic footprint extends to suppliers, dealers, restaurants and entire towns. Industry experts say GM only has about 3 or 4 weeks to prove it can emerge from bankruptcy quickly.

Many believe GM is too big and too complicated to achieve that.

But Chrysler’s journey through bankruptcy has defied the skeptics. The troubled company looks set to emerge from Chapter 11 next week. With the government’s heavy hand in the game, GM could also surprise.

What do you think? Will GM be able to come out stronger or is this the end of the road? Any optimists buying a GM car right now?

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Filed under: Auto industryBusiness

May 4th, 2009
05:47 PM GMT
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LONDON, England – Before we get excited about the auto industry transforming under the Fiat flag, remember that the Italian automaker hasn't bought anything yet.

Its "alliance" with Chrysler is now before a bankruptcy judge and involves sharing technology. Fiat is not buying its proposed 20 per cent stake in Chrysler and will still have to deal with the unions, which will have the biggest stake in the U.S. automaker.

Still, one day it may mean small fuel efficient Fiat cars being sold as a re-badged Chrysler or Dodge car. Maybe.

One day, Jeeps and Dodge trucks may be sold through the Fiat supply chain to countries where it has strong links. Maybe.

Before that, Chrysler has to survive its bankruptcy protection process. Now Fiat's CEO Sergio Marchionne wants to negotiate with General Motors to potentially buy a majority stake in GM Europe - read Germany's Opel. But Fiat is billions of dollars in debt and Opel will need a cash infusion ($6 to $9 billion) probably from the German government as a short term loan. That has yet to happen.

Then there are the unions, the factories, political interference... It's all a massive task for Marchionne. On Monday he met with the German government. It's far from clear Berlin will back a deal with Fiat while there are other suitors out there. In fact, GM says it's in talks with a number of parties and it's clear GM wants to keep a foot in Europe for when things turn around.

So while Fiat may be the only automaker willing to take all this on, it is all talk for now.

Fiat has been transformed by Marchionne, that's for sure. Whether he can take all this on is certainly not a given. Some analysts believe his Plan B is to take on Chrysler or GM Europe. Until one or both of them is sewn up, a combination of the two leads to speculation that Fiat will transform the auto landscape.

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