A Fruitless $80 Billion Investment for Taxpayers

A recently released report by the Government Accountability Office (GAO) is not a reassuring sight for taxpayers who are looking for reparations for their $80 billion investment in the auto industry. One major problem highlighted in the report is that the Treasury has conflicting interests due to its significant stake in the automakers. To make matters worse, the GAO raised concerns that the Treasury does not have the necessary expertise to navigate these complicated trade-offs:

“Because of the particular needs of the auto companies and the unprecedented nature of providing such assistance, Treasury hired or contracted with a number of individuals with expertise in the auto industry, equity investment, and relevant areas of law...Since those agreements have been finalized and the workload has declined, two-thirds of the original professional staff has left...given the wind-down of the auto team—and the associated loss of dedicated staff with industry- and company-specific knowledge and expertise—we are concerned that the Treasury may not have sufficient expertise to actively oversee and protect the government's ownership interests, including determining when and how to divest these interests.”

As the report points out, the Treasury has a few options for divesting the government's interests in the automakers, including public sales and private negotiated sales. But no matter what the Treasury decides to do, the GAO predicts that taxpayers will end up on the losing end:

“Regardless of the sales strategies used, the companies will have to grow substantially in order to reach values at which the Treasury would recover the entirety of its equity investment upon sale of its equity, which the Treasury and others consider to be unlikely.”

I believe that the Treasury needs to find a way to sufficiently explain to Congress and taxpayers how and why a decision was made to sell off the government’s interests. However, I can see this being a significant challenge for an agency that has been less than forthright in explaining the strategy behind its other bailout programs.

http://www.gao.gov/new.items/d10151.pdf

Morgan Duff

MPG, EPA and SUV

New EPA data released yesterday demonstrates how a recession can affect buying habits of consumers and overall mileage ratings. Also, the Obama administration has been working on increasing average MPG numbers for years to come.

New 2009 models have been reported to be 7% more efficient than the vehicles sold in 2008, on average. It has been reported to be the largest increase in average fuel efficiently in the last three decades. All major automakers had increased their average fuel efficiency of their model lineup, except for Chrysler which sold more SUVs and pickups in 2009 than smaller cars. Automakers with the highest increase in mileage numbers include Japanese companies like Toyota and Nissan.

On average 2009 cars and trucks are lighter too, with average car weight decreasing by 4% and truck weight shedding an average of 100 pounds.

At the same time, the White House is making plans for sweeping new standards starting in 2017. They currently have in place a goal of 35.5 mpg (on average) for 2016. However, many wonder if these numbers would have looked so good to environmentalist if there wasn’t a recession. Projections for 2010 show no real improvement as gas prices are going down, the economy is recovering and people feel more comfortable buying bigger cars.

What I find surprising, and somewhat baffling, is why these numbers are such improved. Most people who know anything about the industry realize it takes many years to totally revamp a model lineup. Essentially making most of the models available for 2008 the same that were in the showroom in 2009. Clearly these numbers are driven by what kinds of vehicles are popular in a given year. High fuel prices and an uncertain economy made 2009 the year people bought small but it doesn’t seem this trend will continue.

I really don’t believe in fuel economy standards and I think they blind automakers to doing what they really need to do—improve the overall automobile. As the last few years have shown, gas prices are the biggest driving force in more fuel efficient cars sales. It is at these times when consumers demand better mileage ratings and new fuel technologies. If automakers must follow government guidelines, showrooms will be full of small cars no one wants just to keep average mileage numbers down to satsidy government standards. The result is freakish products like the Aston Martin Cygnet which is designed to balance out averages with Aston Martin’s gas-guzzling super cars. Simply put, if government really wants to get more fuel efficient cars on the road, they should increase gas prices through taxation. It would be effective but not welcomed by anyone.



http://www.nytimes.com/2010/11/18/business/energy-environment/18fuel.html?src=busln

GM IPO: It's Kind of a Big Deal

On Wednesday (the 17th), GM announced its IPO, priced at $33 a share, a bit higher than expected. It will turn the US government into a minority shareholder (as opposed to holding 61%), paying back billions of dollars to American taxpayers. Here's a rundown of the IPO from the WSJ:

After the market closed Wednesday, Wall Street underwriters set the price on 478 million common shares, with another 71.7 million expected to be sold if bankers exercise an overallotment option known as the green shoe.

The underwriters also boosted the size of a planned preferred stock offering to $4.4 billion, which could also be increased in the green shoe by another $650 million. If the decision is made in the next few days to exercise both overallotments, the deal could raise a total of $23.1 billion.

The deal grew in size over the past few weeks, driven by better-than-expected demand from U.S. mutual funds, according one person familiar with the deal.

Proceeds from the sale largely will go to the U.S. government, which owns 61% of GM after restructuring the car maker last year in bankruptcy court.

The auto maker has returned $9.5 billion of the $49.5 billion the U.S. spent to rescue GM last year. The Obama administration will seek to recoup the rest through the sale of stock over the next couple of years.

Dennis Berman and Simon Constable discuss how GM's underwriters achieved a high opening price for GM's IPO, an effort that will help to return billions of dollars of taxpayer bailout money to the U.S. Treasury.

The U.S. Treasury, which has kept close tabs GM's operations since bailing out the auto maker last year, will reduce its oversight role after initial public offering on Thursday, people familiar with the matter said.

This is great news for everyone involved in my view. After the IPO, the US taxpayers will have about 2/5ths of their bailout money repayed. GM will have an infusion of capital, in conjunction with the federal government's role in oversight reduced.

How about the investors? What does GM going public again mean for them?

James B Stewart, writing for Smart Money, has this to day:

Along with other automakers, GM should benefit from cyclical trends in its favor. After the recent financial crisis and severe recession, there’s tremendous pent-up demand. An improving economy, higher employment and rising consumer confidence should translate into solid growth in North America, and GM should fare even better in emerging markets (in which it has the largest market share).

So let’s concede this is a good time to be buying auto company shares, and that GM in particular seems an attractive candidate for further market share gains. How do the numbers look?

Price-to-earnings math gets tricky, because quarterly earnings have been erratic for car makers over the past year. If we assume the most recent quarter is representative of quarters to come, GM trades at 5.1 times earnings compared with 8.5 for Ford at 8.5, 26.8 for Toyota and 10.2 for Honda. In other words, GM still looks cheap.

This may in part reflect the political and business reality that this is an initial public offering that can’t afford to flop. A successful offering is essential to GM’s campaign to shed its old stodgy, loser image and shed the taint of government ownership. And the government (which doesn’t seem to be meddling in day-to-day management but remains the largest shareholder) needs a successful offering to enhance its prospects of recouping the massive taxpayer investment.

Of course there are risks, as in all IPOs. There’s a list of them in the GM registration statement. While I’m encouraged by GM’s progress, I believe it still has a long way to go before it achieves its vision of building the world’s best cars. Based on my last visit to the auto show, I’d say its new product line up doesn’t yet match Ford’s. But it has plenty of new vehicles in the pipeline, including the much-anticipated Volt.

So my advice is, call your broker and ask if you can get some shares. (Thirty-five underwriters are participating in the offering.) I intend to. Demand seems to be running high, and if my analysis is any indication, it’s no wonder: Within the stated offering range, GM shares are a great deal.

Another writer for Smart Money, Alyssa Abkowitz, adds more to the case for buying GM:

Does GM really deserve the flashy IPO parade? On paper, the reengineered automaker boasts a phenomenal balance sheet, with strong cash flow, and a conservative price-to-earnings valuation, even after the pre-IPO bump. In the third quarter, the company posted earnings of $2 billion on sales of $34 billion – its biggest profit in more than a decade. Analysts note that better pricing has helped the company’s profits; the new Buick LaCrosse, for example, sells for about $7,800 more per unit compared to last year. “Simply put, GM makes products that consumers are willing to pay more for than they once did,” notes David Whiston, an auto analyst at Morningstar. GM also has a strong presence in China and other emerging markets where auto demand is growing. That’s one reason, says Schuster, that “there’s good reason to believe the company will outperform.”

If results from its primary rival, Ford (F: 16.68, +0.17, +1.02%), are any indication, GM’s shares could thrive. Ford is on track to post its first consecutive annual profit increases since 1993 – all while being celebrated in the media for avoiding bankruptcy and a bailout. “Ford is trading really well,” says Matt Therian, an analyst at IPO research firm Renaissance Capital; its shares are up by 60% since mid-summer. But by some measures, GM is actually performing better than Ford: in the third quarter, for example, Ford earned about $2,700 in profits per vehicle it sold in North America, while GM earned around $3,000 for each vehicle.

Of course, there are still plenty of reasons for investors to be skeptical. For one, GM’s common stock investors won’t see dividends for a long time. That’s because the government has to get more of its $49 billion investment back from GM before any penny goes elsewhere. While the company has crept into the black, its sales are still far below their pre-wipeout peaks. There’s also the question of how long the “Government Motors” stigma will hang over the company and whether the auto giant’s financial restructuring has addressed all its issues, including its continuing obligations to retirees. “Investors will remember the problems of the old GM,” Therian says, and that could weigh down the stock price.

It seems to me that the benefits outway the costs. Anyone who wants to invest in the auto industry MUST give GM a long look. Auto sales are starting to rebound, so now is a great time to buy.

For more on auto industry investing, here's a great piece by Jonathan Hoenig:

http://www.smartmoney.com/investing/stocks/fords-a-great-story-but-hondas-the-better-stock/

GM's Initial Public Offering

GM has declared it will price its IPO( Initial Public Offering) at $33 dollars a share, in what could be one of the largest U.S. stock offerings in history. The Price of $33 reflects a better-than-expected demand for GM shares. The deal could generate a total of $23.1 billion, with much of the proceeds going to the U.S Government, which currently owns 61% of GM.

The high profile GM's deal comes after solid months of increased profits by the company. The IPO will not only bring money to GM, but it will also reduce government's influence in the company, as the treasury department is expected to sell 412 million of its shares, raising $13 billion.

The event, in my opinion, is mostly positive. The Government will gain more than previously expected, helping for the repay of the 49 billion spent in GM's bailout. GM will be more autonomous as the government begins to sell its share of the company, and investor will fell more confident to invest in GM.

Right Management, who cares?

Who is to blame for the downfall of GM. When the economic crisis hit our country, we were left with a medley of issues to contend with. There was the housing bubble that popped, the insurance companies that needed bailing out and most importantly, the American auto companies, which were struggling to stay afloat. Should we blame management in this case or should we blame the economy?

According to the Wall Street Journal, it is management's fault to blame. This is especially the case for the head C.E.O at General Motors Company Holman Jenkins. Holman Jenkins' track record at the GM company was not as exemplary as he would have wanted it. It's even more embarrassing for Holman Jenkins since George W. Bush blames Holman Jenkins for a "decade of poor management" (wallstreetjournal.com). The tirade continues in the paper as he is berated for the drop in stock value. Although most C.E.O.'s would take the heat and generously accept any insults thrown their way, Jenkins goes ahead to dispel any bad word about him. He even goes to say that the numeric decrease in value of stock is not a valid measurement of a company's C.E.O's capability. It's believed that he is responsible for the downtrodden state of GM, and by the way he is dealing with the many criticisms, I can't believe anything but that fact. Generally, C.E.O.'s deal with criticism respectfully, declining to comment on the issue of their company. It all seems too defensive coming from a champion of capitalism.

There are too many issues to contend with when talking about G.M. Its C.E.O. being one major aspect. However, even as the C.E.O. is being berated by the media and criticized by his own words, it is hard for me to deny the fact that G.M. is doing better this quarter than the last. This quarter's performance although not as golden as the peak performance of 2007, shows that the C.E.O. is contributing his part into the company. I am to believe that he is not great at communicating with the media, but I believe that he is taking the company in the right direction and step by step rebuilding it to its former grandeur.

http://proquest.umi.com/pqdweb?index=2&did=2186586941&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1289934516&clientId=31806

Mr. Goodwrench Gone

Starting in February, the Goodwrench brand will be phased out by General Motors. The Goodwrench brand, also known as Mr. Goodwrench, is GM’s service sector image which was first used in 1974. The Goodwrench name can be found on dealership lots and signs throughout the country.

It was once thought to be a symbol of quality parts and service but GM now believes its image is too closely connected to the General and not connected enough to the core brands.

With fewer brands to manage, GM is hoping to individualize the service experience by having separate service brands for each of the remaining GM manicures.

I am not surprised by this move at all. GM does not want their logo or name near any of their products at this point. Consumers no longer see the GM brand as a sign of quality like they did when Mr. Goodwrench was first introduced. This follows a trend of differenciating and distancing the GM name from brands like Cadillac and GMC which are more respected. Several years ago, GM used to put a small badge on every car, no matter the brand, displaying the squared-off General Motors logo. They have gotten rid of these too now.

I support this move. With fewer brands to manage GM doesn’t need huge umbrella like dealerships or programs to service all products. Cadillac, Buick, Chevrolet and GMC can have their own programs and, more importantly, can distance their products from the GM name.


http://money.cnn.com/2010/11/09/autos/gm_goodwrench/index.htm

Used Cars Trending Upwards

With many customers still having trouble getting loans for new cars, lower-priced used cars are increasingly popular. For dealers, that means used-car revenue is up. And, in many cases, so are profits.

CarMax Inc., the nation’s largest seller of used cars with 103 superstores, said it’s hiring for 1,200 store positions across the country. While part of that is for seasonal staffing, it’s also part of a broader expansion. The news comes days after AutoNation, the largest seller of new cars with 251 new vehicle franchises, said it’s moving more aggressively into the used car business. AutoNation has opened 16 Value Vehicle outlets, and six more are expected to open by next spring. These stores stock reconditioned used cars that it previously would have sold at auctions.

AutoNation’s recent third-quarter results show why: Used car revenue this year is up 26%. For new cars, sales are up a comparable 18%. Take a look at the latest quarterly profit comparisons, too: CarMax reported a gross profit per used car of $2,205 this year, while AutoNation reported a gross profit per new vehicle of only $1,994.

I believe new car manufacturers should definitely take note: The business case for used cars is looking more attractive to customers and dealers these days. Overall, this can be a positive and a negative for the automotive industry and might influence manufacturers to consider selling many of their vehicles to large business for fleet use as they will be worth more when sold as used later on down the road.


Morgan Duff

http://www.freep.com/article/20101103/BLOG40/101103033/1210/BUSINESS01/Automakers-beware-Used-cars-are-showing-their-value

Tata Motors' Nano isn't Very Safe

The car industry is one of the more globalized industries. GM and Toyota, among others, build cars on every continent (minus Antarctica, obviously). Automakers are always trying to gain the upper hand in the Chinese market, which is basically the biggest market for car sales since the U.S. has slowed its appetite for autos because of the recession.

India, you would think, might be pretty big too, since it is the second most populous nation on earth. However, you would be wrong. Unlike China, there aren't a whole lot of middle-class or upper-class citizens and poverty is widespread. So while a Buick might sell well in Beijing, this is not the case in India.

India's own Tata Motors began selling the Nano throughout its domestic market in March of 2009. Now, they are having safety issues:

Tata Motors Ltd. (TTM), maker of the Nano, said Wednesday it will offer buyers of the world's cheapest car additional safety equipment free of cost and clarified it won't recall any of the units.

The Press Trust of India earlier in the day reported that the company, India's largest auto maker by sales, will recall some units of the minicar to add safety features, citing Tata Motors' managing director for India operations, P. M. Telang.

"We have decided to make the car even more robust. We will do this by providing additional protection in the exhaust system and the electrical system," the auto maker said.

"These actions don't constitute a recall."

Some customers in India have reported incidences of the minicar catching fire. But after investigating in May, Tata Motors said that there aren't any manufacturing defects and that such episodes have been because of the installation of additional electrical equipment or due to some material on the exhaust system.

Why does this matter?

This incident illustrates are very important fact about the world auto industry. Standard in Western Europe, North American, and Australia are much more strict than those in China, India, Russia, and Africa. This poses a very serious challenge for auto makers as they attempt to expand their global reach. For companies used to strict safety standards, they must adapt their vehicles to sell in poorer markets. Safety features are expensive, so U.S. and European automakers must adapt to compete in poorer parts of the world were safety isn't a big concern.

Automakers in less-developed countries must spend a lot of money on safety feature research to compete in areas with stricter controls.

Other than the quote from the article, this has been my opinion based on what I have read and learned about the auto industry throughout the world.

Obsessed? So is America. But where's our customer service??

It is commonly known that people and automobiles eventually become attached to each other. The purchased car begins to grow on the owner and it is inevitable that the owner has sentimental feelings for a piece of metal and plastic. However, is it that strange? Like our homes, cars are expensive. Cars are chosen with great thought before a decision is made because owners realize that much like a home, the majority of their income will be devoted to payments for the car. It is not always the case that owners make the smartest decisions as to which car they choose. This inconsistency is further supported by the hundreds of jobs available for car reposessers in Washington, DC alone (http://www.careerjet.com/repo-jobs.html). Nevertheless, the saying "home sweet home" has a strong correlation in terms of the veneration and importance that a car means to its owner. Some call it love while others call it insanity, but the incredible amount of devotion owners invest into their cars supports the statement that America is a nation of car enthusiasts. After all in 2007, there were over 254.4 million registered vehicles in the U.S., according to a depart of transportaion study. Considering there are currently an estimated 310,673,613 million people in America, that means over 50% of the United States population owns vehicles and that is just 60 million shy of the population (http://www.census.gov/main/www/popclock.html).

While reading the Wall Street Journal, I came upon a question and answer section regarding car problems that an ordinary person might have. Problems consisted of a dying battery, the decision to purchase a new car for a new baby and advice as to whether the owner should dump his beloved Jaguar. These are normal problems, at least in America, but the logic to the solutions some of these owners created were anything but conventional. The owner with battery problems reasoned, " I just unscrew the dial to disconnect the battery at night and it no longer discharges" (Welsh, "Cars: Me & My Car"). The owner had figured out that if he disconnected his 12 volt battery during the night, the battery would not end up being "dead" in the morning. The solution was certainly creative, and I was more than impressed by the ingenuity. Nonetheless, I am left wondering what I would have personally done in that situation. Would I have risked every night opening my car hood and then delicately proceed to disconnect the wires from the battery with the knowledge that one slip up could send my whole entire to body into electrical shock? Probably not. Americans have for decades been inventing novel methods to sustain the life of their beloved automobile. I remember watching the movie Matilda where the father proceeded to circulate saw dust through the engine manifold to reduce the amount of miles on the odometer. Media and exposure to cars then produces this perception and almost reality that everywhere an American turns their head, there is a conversation or commercial about cars. It is almost seems compulsory to our behavior and adds to the notion that Americans are not only defined by an inherent desire to gourge their faces with food and develop diabetes, but also incorporate cars and the automobile into their daily lives. The final question in the article for the Q&A was whether an owner should dump his Jaguar for a new vehicle. This particular owner purchased his Jaguar in '98 and the odometer reads over 160,000 (Welsh, "Cars: Me & My Car"). Most cars usually require an increasing amount of attention and service after 100,000 miles, but the owner in question here has kept his vehicle for over a decade and has outrageously surpassed the 100,000 mile life span of a car. Now, you might be wondering why this is such an important topic and that is because every car that my family has owned no matter how well it is taken car of has not lasted more than 120,000 miles. The figures clearly indicate this owner is taking great care of vehicle and may even be obsessed. However, be it obsession or love, the important fact about both cases of owners is the attention auto makers in the U.S. should heed to this trend. As a prospective car buyer, besides speed, technological innovations and safety features, I would like to know whether the car company cares about me, the owner. Our capitalistic society dictates the companies care more about profit than people, but I would rather purchase a vehicle that has been desgined for the car buyers in mind. This leads to the greatest and personally what I think of as the most important facet of car companies, customer service. No matter how much auto makers innovate and update their factories to reduce the number of employees that work their, the increasing number of machines and computers that take over the work force directly correlates to the increasing number of customers the company inevitably garners from sales. It is a contradictory relation since auto makers are trying to reduce the human factor in their factories to stream line operation while increasing their customer base. So I am finally left with one thought and that is since factories are bringing about the extinction of car factory workers, shouldn't they begin focusing on customer satisfaction and service more than developing a new seat to reduce back strain? Tell me what you think.

http://proquest.umi.com/pqdweb?index=1&did=2175009941&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1289403375&clientId=31806
http://www.careerjet.com/repo-jobs.html
http://www.census.gov/main/www/popclock.html

Interesting Video

Germany Does Well In China

BMW announced surprising third-quarter profits which has been attributed to strong sales in China. In fact, all German luxury brands are doing well in the country. Audi seems to be first and attracts the older, government official crowd while BMW is capturing the hearts of young people in the country.

BMW, Audi and Mercedes-Benz have been heavily investing in the Chinese market. To avoid import taxes, the have built their own factories within the country. The three have also designed specific models for the Chinese market. Apparently, Chinese businesspeople like to be chauffeured around and have been demanding cars with more legroom in the back. Special versions of cars like the 5 series and E class have been lengthened for more room in the back. These only-to-China models look slightly odd with their rear doors considerably longer than the forward doors. This type of lengthening is known as “long wheelbase” within the industry.

However, the German luxury giants have a long way to go to win the Chinese market. So far this year BMW sold 102,916 units in China but sold 176,736 units in the US. Don’t forget that the US is still in bad economic times and has a lot more luxury options than in the Chinese market. While sales in China are not bad for these luxury cars, I don’t think they should be an indicator in the Chinese market. I would place my bet on mainstream cars selling the best in China. China’s wealthy may be buying a few 5 series but the real money is to be made with the growing middle class. The people who are moving up from a motorbike or even a bicycle to a car are the consumers guiding the industry.


http://blogs.wsj.com/scene/2010/11/03/bmw-in-china-its-paid-in-full-in-cash/

http://www.bloomberg.com/news/2010-11-03/toyota-s-lexus-widens-u-s-luxury-sales-lead-over-mercedes-bmw.html

GM (Government Motors)

Since the company's bailout in 2008, GM has quietly been referred to as "Government Motors". However comical, this nickname actually has serious implications regarding not only how GM has operated for the past two years, but also how GM will be taken public with an Initial Public Offering taking place on November 17. One of the most controversial aspects is the ability of sovereign wealth funds, like in the Middle East and China, to purchase extensive holdings in GM. The Obama administration and its financial advisers understand the political sensitivity of the situation, but in the end decided to allow access to large foreign investors.

However, I believe it may not be so much the question of whether foreign wealth funds should have the ability to buy GM stock, but whether these entities should be given what could be large and immediate profits when U.S. citizens, those who theoretically provided the billions in taxes to keep GM afloat, will not enjoy such access.

This sensitive situation involving one of our nation's oldest and most iconic companies further illustrates the importance of the midterm elections that have just finished up. With a conservative and economically concerned congress, the likelihood of gridlock between Obama's plans and theirs is certainly increased. Who knows what lies in the fate of one of our nation's icons.

Morgan Duff
http://www.reuters.com/article/idUSTRE6A04RG20101101?pageNumber=1

Two Big GM Stories

This week I stumbled on two big stories about GM. First, GM has decided for sure how many dealers to keep. At one point they were gutting much of their dealer network, but they have now settled on 4,500 dealers. From Fox Business:

General Motors will move forward with 4,500 dealers after the automaker, under pressure from Congress angry with j

ob losses, reversed planned closures of more than 800 franchises, the company said Monday.

GM finalized dealership closures and franchise reinstatements over the weekend, one of the final pieces of business to be checked off before beginning its presentation to investors this week on its proposed share sale.

The public offering is designed to return GM to public markets and shake off the government's controlling ownership.

The U.S. Treasury obtained a nearly 61% stake in GM in return for $50 billion in taxpayer Bailout and bankruptcy financing in 2009.

The automaker said it intended to stick with the decision to terminate 1,233 dealerships as of Sunday following months of arbitration and despite continued pressure from lawmakers, including an Ohio delegation that includes House Republican Leader John Boehner, to keep more small businesses open in a struggling economy.

I think that, while it is good for GM to be saving jobs, this move is financially bad for them long-term. No company should be pressured by Congress on how to act, except in instances with already existing regulations. This is one of the big pitfalls of the governments 61% stake in GM. Un-American things start to happen.

However, GM will look good for saving jobs, yet I expect them to further shave down the dealer network once they are free of the federal government's coercive control.

As the Fox Business piece mentions, GM is going to be issuing an IPO very soon. Here's a story from the WSJ:

The U.S. will cut its ownership stake in General Motors Co. below the symbolically important 50% to about 35% when the car maker relists its stock later this month, according to new figures the company plans to disclose Tuesday, but it will be tough for the government to break even on its investment.

Neal Boudette discusses GM's IPO plans, which will raise up to $10 billion and cut the government's stake to below 50%.

The new projections by GM say the company could have a stock-market value at the start of trading of $50 billion—about the same as the solidly profitable Ford Motor Co.—and that it could be as high as $60 billion, said people familiar with the plan.

But for the U.S. to break even through sales of the rest of its stake, the share price may need to rise more than 60% from its initial level, to about $50.

The initial public offering plan envisions the shares would be priced at $26 to $29 each, these people said. The actual price of the stock to be sold in the IPO would be set about Nov. 17, and the sale would take place the following day.

Through the IPO, GM plans to sell 24% of its total shares, or about $10 billion worth, based on the midrange of the share-price estimate.

Ultimately, this IPO will be very good for all parties, in my opinion, because it will pay back the government and will loosen the government's grasp on GM. GM will also be a great investment because they are still in the top three globally for car sales, but now they have much less debt and dead weight since going through bankruptcy. Moving forward, GM is a company to keep a close eye on. Lots of great new products will be coming out soon, so I expect sales, profits, and the stock price to increase in the near future.

Do I care more about my size or more about my hardware? (The Battle Between Size, Safety and Fuel Efficiency)

Do American's really want to embrace the idea of fuel efficiency and green energy when it means sacrificing our all American Chevy Tahoes? Personally, every time I walk out on to the streets around my home in Northern New Jersey, left and right gleams of sun light hit my eye as the sun's beams reflect off the shiny silver body work of  Lincoln Mkxs and Cadillac Escalades. I'm not afraid to admit that I admire this sight, as much as these prestigious planet killers represent the degradation of the ozone layer and mother nature. However, I'm not the only one in America who values rubber and gasoline more than spring and summer. A recent article in the Wall Street Journal posted that the demand for hybrid and "green vehicles" had in fact decreased, "Hybrid sales continue to fall, from about 315,000 vehicles sold in the U.S. two years ago to 290,000 last year... That number is projected to fall by 12% this year" (Bennett, WSJ). 12% is huge, that's 34,800 cars less than the previous year. The confusing issue is that commercials for green vehicles has only increased since 2009. If anything the number of green vehicles being sold should increase. I remember watching Audi's commercial for their clean diesel TT this past Superbowl and when the previous 5 Series BMW was released, a diesel model was offered as well.There are more consumer vehicles geared towards a green conscious than there has been in the history of the U.S. car industry.
The issue remains that Americans are not interested in small vehicles. The Toyota Prius, the Audi TT, the Tesla sports car, the Smart Car especially, the list can go on and on but the fact holds that fuel efficient vehicles especially hybrids are just visually small and unappealing to Americans. When has it ever been the case in American history when a father and his son set out excitedly to buy a Smart Car. America was raised on the notion on being gigantic and unstoppable. This idea or belief is present all around us when we go to New York and stare in awe at the domineering Empire State Building or St. Louis and try and comprehend the size of the Ead's bridge. Living right next to New York, I would stare into the city and gaze into its grandeur. The bright lights and city heights were intoxicating and most of all they were contagious. I wanted to get out of my small town and move over and join the russle and bussle of the living breathing New York City. I would imagine myself being driven down 42nd street in a Rolls Royce Phantom, enjoying myself in the plushiest leather seats hands could make. The American belief is to follow big and great and so far U.S. automakers have unsuccessfully integrated this concept into green vehicles.
 However on a serious note, big vehicles in the U.S. don't just offer drivers presence but also safety. Just last year in December I was in the middle of a snow shower when my SUV lost control. Spinning out into the the center of the roadway, my car hit two incoming sedans, one being a Toyota Camry and the other a Mercedes Benz CL350. The other drivers along with myself came out of the accident without a scratch, but upon further inspection of their vehicles I had dented in the Camry's front bumper by a full 7 inches and the CL 350s hood was cracked in half. Amazingly, my SUV came out with just a dent on the side panel and a scratch on the front fender where I had hit the two cars. It is as Mr. Tonkins, the Chairman of the National Automobile Dealers Association says, "The fact is, manufacturers have struggled for years to make money on small cars... consumers remain skeptical that small cars are safe" (Tonkins, WSJ).

Personally, I like hybrid vehicles. They're fuel efficient, which means I can worry less about searching for the lowest gas price. Having money to spend on snacks and knick knacks rather than fuel is an uplifiting thought. But, the resonating question remains, can American automakers produce vehicles that offer the fuel efficiency our oil dependent nation desperately needs without compromising safety and the American myth of grandeur and gigantism?

http://proquest.umi.com/pqdweb?index=0&did=2169407111&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1288241723&clientId=31806

GM Stacks Advertising Money on Chevy

Since emerging from bankruptcy last year, GM's advertising has been somewhat weak and poorly thought out. However, GM just unveiled a new Americana-themed ad campaign for Chevy that hopes to build on the success of previous ad campaigns with similar themes. You may recall some of Chevy's most famous slogans; for instance "See the U.S.A. in Your Chevrolet", "Like a Rock", or "An American Revolution". Well, GM is once again barking up the same tree in hopes of finding more fruit, and they're doing it more "American" than ever with their new commercials, which feature Chevy cars and trucks over the years in scenes that evoke nostalgia for America's past, all with voice-overs by actor Tim Allen. Honestly, what good American doesn't love Tim Allen? GM doesn't believe that these ads will be too patriotic however. The newly hired marketing chief executive Joel Ewanick, the former Hyundai Motor Co. ad executive known for helping Hyundai bolster its U.S. sales, said of the campaign: "Are we going to wrap ourselves in the American flag? No, We are going to wrap ourselves in the character of this country".

GM executives estimate that around 70% of their advertising funds will be poured into this Chevy campaign, and they're going to need every penny of it is they have taken the initiative to advertise during some of the highest-rated and most costly events on TV such as the World Series and the Super Bowl.

Personally, I think this is a good idea by the Chevy marketing executives, but they have to be careful in that their ads must differentiate their products from their competitors. Every single US automaker has employed this sort of ad strategy at some point or another, and Chrysler happens to be using the same sort of patriotic appeal strategy right now. Through our discussions of successful marketing in class I see how important it is for GM to strike a different chord with the potential customers to get them to chose their product over their competitors. Hopefully this campaign will work out well for GM and the company can make progress back toward normalcy.

Morgan Duff
http://online.wsj.com/article/SB10001424052702304173704575578073119960604.html?mod=WSJ_auto_IndustryCollection

GM Creating Jobs

As it turns out, GM's restructuring may actually be very good for autoworkers. After just recently striking a deal with the UAW to staff a new compact-car plant, GM is about to announce the creation of 600 jobs at a plant in Lansing, Michigan, according to The Detroit News:

General Motors Co. plans to announce Thursday that it will build a compact-sized Cadillac at its Grand River Assembly plant in Lansing, a $190 million investment that will put 600 people to work, officials briefed on the announcement said.

GM CEO Daniel Akerson will make the announcement at the plant, joined by Michigan Gov. Jennifer Granholm, United Auto Workers President Bob King and three Michigan members of Congress.

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The automaker is expected to call its new Cadillac the ATS. It will be smaller than the Cadillac CTS and similar in size to Cadillac BLS sold in Europe, according to a source familiar with the project.

GM spokeswoman Kimberly Carpenter declined comment Tuesday night.

The Cadillac announcement is the latest in a series of new products and investments by the Detroit automaker, which emerged from bankruptcy last year and is expected to launch its initial public stock offering in mid-November.

With the Grand River investment, GM will have pumped more than $3 billion in 20 U.S. plants, creating or preserving about 7,350 jobs since emerging from bankruptcy 14 months ago.

"This is a huge boost to our manufacturing sector, that they have chosen to build a new small Cadillac here, and it's clearly great for Lansing. It's great for General Motors and it's great for Michigan," U.S. Rep. Mike Rogers, R-Brighton, told The Detroit News.

Akerson, who became CEO Sept. 1, will get a 45-minute tour of the Grand River plant before Thursday's announcement. He will be accompanied by Diana Tremblay, who is GM's vice president for manufacturing and labor relations.

The $707 million, 2.5 million-square-foot Grand River factory, on 111 acres, was built in 2001 and employs 1,133 workers who already build Cadillacs, including the CTS, CTS-V, SRX and CTS Wagon. It started production on Cadillac CTS Coupe and CTS Coupe V in June.

It was unclear Tuesday whether GM and the UAW are seeking a labor agreement for the Grand River plant similar to one at the Orion Township assembly plant.

Under that pact, specific to Orion Assembly, about 60 percent of hourly workers recalled to the idled plant to build two new small cars will get the traditional tier-one wage of $28 an hour with benefits. The remaining 40 percent will get a second-tier wage of about $14 an hour; the split will be based on seniority.

The Orion plant deal was struck to help GM make a profit on small-car production, and was key to its decision to add the Verano to the Buick lineup. GM plans to recall 1,550 salaried and hourly workers to the Orion plant, which was closed for retooling in November.

In my opinion, this is great news for the U.S. auto industry, especially for auto workers. This investment in American manufacturing is exactly what the economy needs.

This shows that GM is committed to manufacturing vehicles in the United States and especially committed to investing in new product lines. The Cadillac ATS, if as successful as the CTS, will be a big money-maker for GM. Investing in the luxury auto market is a great sign that GM is committed to making a profit, just in time for their IPO. If the IPO is successful, GM will be able to create even more jobs.

GM has a lot of great products in the pipeline, meaning that new offerings over the next five years will greatly improve the company's image and bottom-line.

Reliability: Who's at the Bottom?

Reliability is one of the more mundane reasons to buy a car but in hard economic times many buyers are planning to keep cars longer, thus placing a greater importance on reliability. Good reliability has one major advantage within the industry—they can charge more. If consumers believe a company’s cars are reliable they will be willing to pay a little more and manufacturers will not need as many rebates to get cars off dealership lots.

Consumer Reports recently released their latest new-car reliability survey. 1.3 million car owners were surveyed with vehicles from the past three years.

Firstly, the recalls that haunt every Toyota executive at night have not made a significant effect on Japanese cars. Toyota owners still seem happy with their vehicles and the Toyota brand Scion ranked No. 1 in the survey. However, the Prius’ reliability ranking was downgraded to “average” in light of the recalls. Honda and its luxury brand, Acura, still impress with top stops in five segments.

Secondly, Ford and GM show improvement as they discontinue the older models which were dragging down their scores. Ford ranked No. 10 among the 27 brands and Chevrolet ranked 17th in the survey. Ford’s Fusion even beat the Camry as being the most reliable car in the family sedan segment. This increased credibility allowed Ford to earn an additional $400 million to income because they did not have to rebate as much.

Thirdly, and most damaging, luxury German brands did not do well. BMW ranked 23rd out of 27 in reliability. There seems to be a price paid for putting more modern and advanced technology in cars.


Reliability surveys are very important to the industry but I have been told, from a former employee in the car survey business, that they should be taken with a grain of salt. Owners tend to have different expectations and different brands are owned by different people. A busy businessperson driving an Audi might find a minor recall annoying while a Buick owner, who is probably retired, may find a recall a nice opportunity to get out of the house and take a drive to the dealership. Most likely, there will be other Buick owners, who are also retired, at the dealership and they can talk the afternoon away. I also feel as if Mr. White is unfair to Ford and GM. The author of the article, Mr. White, barely applauds GM and Ford for bringing up their rankings from past years but calls Hyundai a company to be “reckoned with” with a score of No.12. Remember, Ford received the 10th spot in this survey but that doesn’t seem to be that important to Mr. White. I believe the days of giving slack to the Koreans should end.



http://online.wsj.com/article/SB10001424052702303891804575576403299442246.html?mod=WSJ_Autos_LS_Autos_2

U.S. automakers, get ready for your Godzilla!!

A car company that I've grown up with my whole life, Volkswagen, is taking a drastic turn. It was always known to be the "chick" car with alien like dome shape that only a hippie could love, and the car that only a hippie would buy. However, recently every high school parking lot I drive by, I see loads and loads of Volkswagen cars. What is happening?
Well, Volkswagen first hired Tim Ellis as Vice President of Marketing.Tim Ellis is a dangerous adversary and a veteran of the marketing industry. Originally from Volvo Car Corporation in Gothenburg, Sweden the veteran brings experience from his past advertising agency account management roles in the United States and Sweden. Tim Ellis's first priority was to offer Americans a new beetle, a "convincing comeback based on the needs and wants of U.S. customers". Tim Ellis demands were counter-intuitive at first, he demanded a new beetle but at the same time wanted to maintain the image and the identity of the beetle. Reading this, I could understand where Tim Ellis was coming from. As a product of the 90s, I see Volkswagen beetles as symbols of "punch-buggies" and my childhood. Beetles have become an icon of America just like McDonalds and Ford. The new beetle, as you have probably seen on the road, retain the same shape of the original. Differences between the new and the old are in superficial body layouts, such as more accentuated side panels and hip rims with an option of either 16" or 17". The striking component of Volkwswagen's marketing strategy relies on the fact of producing an American icon. While writing this blog, I visited the site multiple times, and time and time while I waited for the Volkswagen homepage to load, the quote "A blast from the past? Or ahead of the time?" and "People want a true icon" would appear".

Tim Ellis's marketing strategy clearly is working because every colleague I speak with would always list Volkswagen as a strong candidate for their future car. The direct results, however are Volkswagen taking over Audi, Lamborghini and just recently are in the process of taking over Porsche. This once mini German automaker is now out-manufacturing the regal Mercedes Benz, and competing with BMW. If you had asked me ten years ago if Volkswagen were to compete with any luxury car brand I would have laughed. I'm not certain if Volkswagen's performance is revealing a trend of the decline in the luxury automobiles, but it certainly is telling me that I should invest in Volkswagen.

Just in December last year, Volkswagen initiated the takeover of Porsche, buying 49.9% of the sports car operation for 3.9 billions euros, equivalent to $5.46 U.S. billion dollars. Volkswagen has swallowed automotive supercar giant Lamborghini and put aside German automaker Audi in its pocket. Porsche is next to be placed in Volkswagen's trophy case. If in the position of a U.S. automaker I would be scared. The only thing that is holding back Volkswagen from inundating the U.S. car market are two issues. "One lawsuit filed by a group of U.S. hedge funds seeking more than $2 billions from Porsche", the other involves Porsche's tax liabilities". Once these two humps are flattened by Volkswagen I fear that GM and Ford, (my father's American icons) may have an identity crisis to deal with. Who will be the true American icon because my father tells me that its' Ford but my little brother tells me that it's Volkswagen. As U.S. automakers are slowly pulling their trousers up from the recession and placing ointment on their behinds from a tumultuous period, new threats arise each day that will potentially harm their comeback. As a consumer I encourage the competition and the direct results of such like lower prices and more options in my car. As an American, I believe GM and Ford must contend with Germany's automotive giant. But one question that I'm left with is, should we pride ourselves in being Americans and push Volkswagen aside, or should GM and Ford accept the inevitability of a foreign automaker taking over the U.S. auto-market and join forces?

Electric-Car Offshoots Pick Up Momentum

There is definitely a new trend in the automotive industry. This new trend is the switch from oil dependency to renewable ectricity dependence. Just this year, Coulomb Technologies Inc. tripled in value. Coulomb technologies offers large automotive companies like General Motors Inc., Ford Motor Co., with viable means of producing electric motors and efficient batteries. Coulomb's greatest contribution is a software that is "designed to among other things, make it easier for station owners to bill drivers for the electricity they use" (WSJ). A big issue automotive companies have to deal with is how to provide electricity (fuel) to consumers and drivers. Electricity distribution should be easy for drivers to use and practical for companies to rake in profits. Coulomb's software is such a big leap forward in helping to distribute electricity that it expects its sales to rise to $9 million this year from $1 million last year. Their valuation increase can also be attributed to participation in a Department of Energy program to deploy charging station sin nine U.S. cities.

In addition to Coulomb's recent developments, "battery developer Sakti3 Inc. received $3.2 million is Series B funding from General Motors' new venture-capital arm" (WSJ) in hopes that GM will help commercialize Sakti3's business. Currently, they are working on developing a lithium-ion battery designed to extend the range, lifetime and power of batteries both in electric vehicles and consumer electronics. General Motors is planning to test Sakti3's batteries once they are ready. General Motor's investment in Sakti3 reveals a developing trend within automotive industries: the push for alternative fuels. Not just GM but companies like Ford are joining the energy race. Competition is beginning to heat up.

With the recent increased interest in alternative energies, NuvoSun Inc., a maker of thin-film solar cells, has raised $29 million in two founds of financing this year from Dow Chemical Co.. The company based in Palo Alto Calif., says it will use the capital to open its first commercial size factory, in Milpitas, Calif. Mr. Pearce says NuvoSun will be able to make solar modules for less than $1 watt by 2012. At 70 to 75 cents a watt, CIGS would be able to compete with Chinese manufacturers of the more prevalent solar modules based on cyrstalline silicon, he says.

Electric and oil companies alike are all jumping on the energy band wagon as soon as possible. They realize that an early investment now will lead to great returns in the future. The automotive industry is going through a new and exciting trend. No one is really sure what the outcome will look like, but I know for sure that we're taking the right path. Renewable energy will relieve our dependency on Middle Eastern fuel. For companies like GM and Ford, the time to invest and develop is now. For GM this could be particularly be a great time for their comeback. The automotive industry was hit hard during the recession and U.S. automakers did not make out so well, with the exception of Ford. Considering the recession, I feel that GM is planning to lead the electric revolution. GM's investments only indicate their electric intentions. As a consumer, I would invest in the electric market much like the big auto companies of America.

http://proquest.umi.com/pqdweb?index=0&did=2164833481&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287366261&clientId=31806

One of the new and emerging technologies in the automotive landscape is electric cars. Tesla is a new and popular company which has become the poster child for the new generation of electric cars. Additionally, Nissan is making headlines with their new Leaf car. A recent Wall Street Journal article by Joseph White sheds light on some of the problems facing this new segment of the market.

Firstly, the range numbers reported and advertised by companies such as Tesla and Nissan come purely from their own engineers and EPA standards for gasoline powered cars. Tesla reports that their Roadster gets 245 miles on a charge and Nissan reports 100 miles per charge, but these companies like to use phrases such as “up to” when reporting these numbers. The EPA is beginning to develop new formulas for standardized electric car mileages but they will most likely force manufactures to reduce their claims by 30%. White argues that these companies must accept new EPA standards because they are much better than the public seeing electric car owners stranded on the side of the road.

The second major hurdle for electric cars to overcome is infrastructure to support electric charging. Currently there is little of this infrastructure in place but companies like Better Place are attracted massive contracts and government backing. Better Place already has charging stations in Israel and Denmark and has plans for a system in Hawaii. The problem, however, is that investors would rather put their money into developing electric infrastructure in countries with very high fuel prices. The United States has simply too cheap of gas to motivate investment.

I have to disagree with Mr. White. These limitations will not be a big problem for electric cars. Just like hybrid owners, the people who buy first generation electric cars are doing so more as a statement than a purely economic decision. Secondly, I doubt the lack of charging stations will be as big of a problem as the articles makes it out to be. Most people will charge their cars at night and not go on long road trips with these vehicles. The average commuter travels much less than most assume and could easily go to and from work with one battery charge. While owners of electric cars will face several challenges, the industry has to remember that many of these first generation buyers understand these limitations and are not buying these vehicles for economic reasons.

http://online.wsj.com/article/SB10001424052748703834604575365244247963772.html?mod=WSJ_Autos_LS_Autos_5

Chevy Volt: What is it?

Since GM's announcement of the Chevy Volt, people have been wondering what type of vehicle it is. Hybrid? Electric Vehicle (EV)? What?

First, let's get some context from Media Post, a marketing blog:

Chevrolet unveiled its new Volt to the press last week, but revelations about the intricacies of the electric motor and small gas engine under the hood have some arguing that the company has a launch problem on its hands: they say the car is not a pure electric vehicle and Chevrolet should have made that clear at the outset. The car is, in fact, powered an electric motor, with a small gasoline engine that comes on when the battery approaches depletion after about 60 or so miles of electric-only driving.

What has some observers riled is that on its extended-range mode the car's gasoline engine sometimes helps turn the wheels as well. Thus, semantically, the car's a hybrid, not an electric, they argue.

A site called Green Car Advisor reportedly noted this in June, but with the weekend event, where the company's technical explication included news about the car's extended range capabilities -- and the fact that under those circumstances the gas engines helps turn the wheels -- the web started the echo machine, with terms like "Volt Gate" banging from site to site like a Ping-Pong ball.

Edmunds.com's InsideLine said General Motors had duped the press: "Even conceding that all engineering projects involve compromise and chalking that phrase up to marketing hyperbole, the Chevy Volt isn't as electric as GM pretends it is," said the column. "And it isn't as electric as GM has been saying for the past three years." The article went on to say the Chevy Volt is a plug-in hybrid with more in common with Toyota Prius "than the marketing hype led us to believe."

GM argues that "electric vehicle" still fits because the drive train doesn't involve direct mechanical connection between the engine and the drive wheels. "In extended-range driving, the engine generates power that is fed through the drive unit and is balanced by the generator and traction motor. The resulting power flow provides a 10 to 15% improvement in highway fuel economy."

Pamela Fletcher, GM's global chief of global engineering for Volt and plug-in hybrids, tells Marketing Daily that the gist of the technology is that there are two ways to direct power flow through the Volt's drive unit in range-extending mode.

"First, we pull energy through the battery to the wheels. At the same time we have internal combustion engine connected to the generator motor replenishing the battery." She says that method is fine at lower speeds but becomes terribly inefficient at high speed, where that configuration becomes like rowing a boat with an oar that, rather than dipping in the water, connects to another oar that pulls through the water.

"It's just very inefficient," she says, explaining that power must take a circuitous route to get to the wheels. "Instead, when we get to higher speeds, we have clever solution where we put the combined power to the wheels on a planetary gear set." Jeremy Anwyl, CEO of Edmunds.com, says all of that definitely makes for a better vehicle. However, it also makes for a hybrid, at least under certain circumstances. "I think the confusion is an exercise in semantics," he says. "And it flubbed the launch of the Volt. GM has made a point of coming in here over and over, selling us story that the Volt is not a hybrid, not another version of Prius, but that it's an electric vehicle that only charges the battery. I think part of the reason our editors are wound up about it is we bought it. And repeated it."

Okay, that's a lot of information, but I think it is necessary to have some context before delving into a substantive discussion.

Clearly the Volt has certain attributes of an electric vehicle, mainly, the ability to travel 25-50 miles on electric power only. You plug it in, charge it for ten hours, then take it for a short spin. Nissan's Leaf is a recently revealed electric car, and it too is charged from a wall outlet and able to take a short spin (although more than double the distance of the Volt).

But what the Leaf lacks is an on-board internal combustion engine to increase the driving range. With the Leaf, once you run out of juice you're stranded. The Volt, on the other hand, has a gas engine that increases the potential driving distance. In this way it is like the Prius, except the Prius operates in an entirely different way. It can never run on electric power alone: From o-20 mph is runs on electric, beyond that the gas engine kicks in. With the Volt, you can cruise at highway speeds on solely electric power.

The guys at edmunds.com need to stop whining. The Volt now appears to have more in common with the Prius than originally thought, but that's probably a good thing. The longer range makes the car a more reasonable replacement for gas-only vehicles. Unlike the Prius, the Volt can run solely on electric, making it a lot more technically advanced.

These recent developments, rather than anger me like the people at edmunds.com, make me more enthusiastic about the Volt's success. With just the electric motor to power the wheels, with a gas-engine to recharge it for backup, the car seemed less real-world realistic. The gas-engine, under that configuration, would never directly power the wheels, making the system less efficient. The news that the Volt's drive-train is more complicated than expected, allowing for combined electric-gas engine operation, means that it is even cooler than originally thought.

Call it what you want, but the Volt is the most innovative car to be released since the Prius. This is a new type of hybrid-electric vehicle hybrid. A double hybrid.

E15: a good idea?

The Environmental Protection Agency, under the Clear Air Act, announced it has approved an increase in the levels of ethanol in gasoline for model-year 2007 cars and newer. The increase of 50% in the amount of ethanol, from 10% to 15%, was criticized by auto makers, off-road equipment makers and the petroleum industry. They argue the EPA made a premature decision and more tests should be done before the measure is put into effect. The EPA, in turn, said it relied on solid testing to reach its conclusion.

The highly controversial EPA decision will ultimately reach its objective of reducing the pollution created by burning gasoline, but at the same time, I feel the general public will be concerned and cautious about the impact of ethanol on car's engines, even though the EPA claimed it relied on solid testing to make the changes. The fact that adding ethanol to gasoline reduces car's fuel efficiency, at a time when the government plans to drastically increase it, is particularly odd. The changes could result in new costs to gas stations which would have to buy new equipments to accommodate with the new regulations. Since the increase in ethanol levels is limited to relatively new vehicles, owners of old cars could have difficulties finding gasoline containing today's levels of ethanol once the measure is put into effect.

The EPA decision ought to be thoroughly analyzed before it is put into action. Although making our air cleaner should be a priority, the decision have the potential of negatively impacting a wide range of businesses and consumers.

Sources:

1- http://online.wsj.com/article/SB10001424052748703673604575550261503126190.html?mod=WSJ_auto_IndustryCollection

2- http://wheels.blogs.nytimes.com/2010/10/13/an-e15-quandary-for-service-station-owners/

Alan Mulally: Ford's Savior and CEO

Alan Mulally began his career with The Boeing Company working as an engineer in the development of all major airplane development projects until being named CEO of Boeing's Commercial Airplanes division in 2001. After being passed over for the CEO position of the entire company once in 2003 and for a second time in 2005, he left Boeing and was named President and CEO of Ford Motor Company in 2006.

Mulally was forced into a difficult position as soon as he was named CEO of Ford, and one of his first initiatives as the company's leader was to take over their "The Way Forward" restructuring plan. This plan was designed to turn around Ford's massive losses and declining market share, and was made possible by Mulally's effort to borrow $23.6 billion by mortgaging all of Ford's assests. At the time the loan was viewed as a sign of desperation, but now many believe it is responsible for stabilizing Ford's financial situation and saving the company from bankruptcy. Ford is the only one of the Detroit Three (Chrysler, Ford, GM) that has not asked for a government loan, and while Chrysler and GM have majorly downsized as a result of bankruptcy, Ford has emerged as the largest US automaker after the industry crisis in 2008-2009. Because of Mulally's decisions, Ford had its first profitable quarter in two years, and his predecessor and current chairman, William Clay Ford, said of Mulally: "[he] was the right choice [to be CEO], and it gets more right every day".

In addition to his brilliant efforts to save the company through the industry crisis, Mulally is often praised for his hands on management style and company-first attitude. For example, during hearings for government loans to Ford, he and other industry leaders were criticized for flying to Washington, D.C. in corporate jets. During a subsequent meeting, he traveled from Detroit to Washington by a Ford-built hybrid vehicle, and sold all but one of the company's corporate jets. He also lives very close to Ford's global headquarters in Michigan and arrives to work at 5:15 AM and works for 12 hours every day.

His achievements at Ford earned him a spot in the 2009 Time 100 List, and I believe this recognition is very well deserved. Mulally truly understands the concepts of corporate management and business in general, and this allowed him to make the right decisions to save his company from collapse in the midst of an industry crisis and have it emerge at the top only a few years later. Alan Mulally is a truly influential figure in the automotive industry and the world of business as a whole.

Morgan Duff
http://investing.businessweek.com/businessweek/research/stocks/people/person.asp?personId=370889&ticker=F:US
http://media.ford.com/article_display.cfm?article_id=24203
http://en.wikipedia.org/wiki/Alan_Mulally#Ford_Motor_Company