More bad news for the US car industry

With what seems to be a never-ending tale of woe, auto parts supplier Delphi filed for bankruptcy in New York after attempting to stave off what was to become inevitable.

Delphi, hurt by high wage and benefit costs inherited from former parent General Motors, put its U.S. operations into Chapter 11 bankruptcy, now becoming the largest ever in the history of the auto industry in the US. The company employs 185,000 people worldwide.

Delphi, the largest American auto supplier and the world’s second-largest, filed for Chapter 11 bankruptcy protection for itself and 38 US units. Non-US subsidiaries were not included in the filing, so the lads at Delphi here must have breathed a sigh of relief. But for how long?

Delphi has struggled since GM spun it off in 1999, posting net losses of $741 million in the first half of 2005 alone. The parts maker’s petition listed total assets of $17.1 billion as of Aug. 31 and debts totalling $22.17 billion. It had sought financing from GM (who are not really in the position to prop it up, or they would have hung on to the company) and sharp cuts in wages and benefits from the UAW (United Auto Workers) to restructure unprofitable U.S. operations.

Delphi’s hourly wage of $65 an hour including benefits is uncompetitive, and a jobs bank that pays idled workers 95 percent of their wages is costing the Michigan supplier about $400 million this year. That is more than half the shortfall in the first six months of this year. No company in tight economic times can absorb that kind of debt.

Delphi had been seeking substantial relief from GM and the UAW. With the Chapter 11 filing, those two parties have lost their power to control events. The bankruptcy judge is now empowered to strip union benefits and force parts price increases on Delphi customers.

Current shares of Delphi will most certainly be worthless, since companies almost always cancel stock in a Chapter 11. That affects employees and retirees who were granted or invested in Delphi shares.

But there are further knock-on problems. Delphi’s 2,000 US suppliers also would be hurt if the court initially freezes about $1.9 billion that Delphi owes them for parts already delivered. With 25 percent or more of the North American supply base already stressed financially, the inability to get paid what Delphi owes them could cause a flow-on of bankruptcies and failures.

Now is probably not the time to invest in the US auto industry. Making pasta sounds a lot more profitable.

Autotrivia Quiz

Last week I mentioned that a French car company decided to expand beyond its national boundaries and opened up a new factory in 1906. This venture was not successful and three years later it was taken over, and started producing cars using foreign designs and a line of credit from several banks. This was again not successful, so the principal creditor called in a railway engineer to run the manufacturing business. He turned out some very creditable designs (nothing like a railway engine), and although still somewhat financially shaky, the company still exists today. The question is – what was the name of the railway engineer? It was Nicola Romeo who gave the world Alfa Romeo.

So to this week. The first Monaco Grand Prix was won by a Williams. True or false?

For the Automania FREE beer this week, be the first correct answer to email au [email protected]

Good luck!

What did we learn from the Chinese GP?

Well, it was a fittingly dull end to a dreadfully dull year. Forget the media hype about the “young guns” on their way up, “Schumi’s reign ended” and “an exciting finish, all the way through to the last race of the year before the manufacturer’s championship was decided.” At best the manufacturer’s championship is second prize in the beauty contest. Who cares? Only the manufacturers themselves. I certainly do not.

Paul Stoddart

What else? Schumi and Albers come together on the way to the grid. The concept is unbelievable. That’s like Paradorn hitting Agassi on the head as they come down the steps on the way to the tennis court! The only thing you can draw from that effort is that both teams managed to get their drivers out in new cars by the time the lights went out. Fine efforts under pressure, by the crews.

The Chinese GP will also be remembered for 26 minutes under the safety car. Any more and it would have had to come in for refuelling! The ground crews seemed totally inept as far as clearing debris in a hurry was concerned. One quarter of the world’s population is Chinese, and here they were, standing in a line, kicking at the debris with their imitation Dunlop sandshoes! Spare me! Don’t they have brooms over there? And the guy who picked up the drain cover and sprinted away with it looked more like a scrap metal merchant on a mission than a marshal. Or perhaps there’s a new entry in eBay – “as abused by Juan Pablo Montoya”.

Passing? What’s that? Other than Rooby Baby being pressured into mistakes by just about everyone, I can’t really remember any, but that might indicate that I spent the race nodding off with excitement.

The Chinese GP was also the swansong for Minardi, but I do not think there is anyone in pit lane who will be mourning the non-attendance of the Johnny-come-lately abrasive Aussie, Paul Stoddart, giving farewell speeches as if he had started Minardi and kept it afloat. He will not have lost money. His type never do. Minardi now becomes Squadro Toro Rosso or something similar. Final place on the grid is already reserved.

Peter Sauber retires and Sauber becomes BMW, who will only stay in motorsport until they win a championship, or the board of directors look at the balance sheet and pull the pin. It is difficult to justify involvement in F1 to bean-counters.

And Jordan becomes Midland F1, bankrolled by roubles from Russia and headed up by the Kremlin’s answer to Paul Stoddart. Or am I becoming cynical in my old age?

Petrol-electric Camry on the way?

The news from down-under, where many of the Toyota products come from, is that there could be a petrol-electric hybrid coming mid year 2006 in the new Camry line-up. Considering that Toyota is selling as many hybrids as they can manufacture, this is probably a very positive sign as to where the motoring world is heading. Apparently the Japanese production has gone from 10,000 a month to 15,000. The proposed diesel-powered Camry does not look as if it is going to see the light of day.

Prius II

The original hybrid vehicle that Toyota promoted in Australia was the Prius. Listen to these interesting figures. Originally, the market penetration for private buyers was around 4 percent, the rest of the quota being taken by “green” government departments. Prius II now enjoys a 38 percent private market penetration.

Toyota Motor Corporation also says it will send the hybrid Camry to America. The next generation of “limousines” at Suvarnabhumi Airport look like being clean and green!

Three robotic vehicles finish $2 million Mojave Desert race

Not generally reported in the popular press was the result of a two million dollar challenge in the US for driverless vehicles. These were not small radio-controlled toys, but full-sized vehicles such as a Hummer, a Volkswagen and a HumVee.

According to Alicia Chang, AP’s Science Writer, 23 robotic vehicles left the starting line to race to the finish across the Mojave Dessert 132 miles away, with eight making it through to the end.

It was not a straight line course either; the unmanned vehicles had to use their computer brains and sensing devices to follow a programmed route and avoid hitting obstacles.

Teams were given a CD-ROM with GPS coordinates that charted the exact route, which included rough, winding desert roads and dry lake beds filled with overhanging brush and man-made obstacles. The machines had also to traverse a narrow 1.3 mile mountain pass with a steep drop-off and go through three tunnels designed to knock out their GPS signals.

The vehicles were tricked out with the latest sensors, lasers, cameras and radar that fed information to several onboard computers. This, in turn, helped vehicles make intelligent decisions such as distinguishing a dangerous boulder from a tumbleweed and calculating whether a chasm was too deep to cross.

The Grand Challenge race was part of the Pentagon’s effort to cut the risk of casualties by fulfilling a congressional mandate to have a third of all military ground vehicles unmanned by 2015. The military currently has a small fleet of autonomous ground vehicles stationed in Iraq and Afghanistan, but the machines are remotely controlled by a soldier who usually rides in the same convoy. The Pentagon wants to eliminate the human factor and use self-thinking robotic vehicles to ferry supplies in war zones.