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Car sales are in the toilet, Ford thinks it has a plan for all of this, and one of the biggest car dealership purchases in history is off. All that and more in The Morning Shift for March 26, 2020.

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1st Gear: New Car Sales Are Bad And Getting Worse

It’s been interesting watching J.D. Power’s sales projections amid the coronavirus as they get worse and worse and worse. Just three days ago, J.D. Power was projecting that new car sales in March would drop 41 percent compared to a year ago.

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Yesterday, the company said an 80 percent sales drop could be in the offing for states with coronavirus related lockdowns.

Via Reuters:

Auto retail sales through the week of March 22 declined 22% nationwide on a yearly basis and as much as 40% in some cities on the U.S. West Coast, according to an analysis by research firm J.D. Power, based on data from dealership stores around the country.

Last week’s data did not yet fully account for various U.S. states passing shelter-in-place orders at the end of last week.

“We expect to see a much broader and wider impact from these restrictions next week with sales declining 80% or more,” said Tyson Jominy, the firm’s vice president of data and analytics.

This all tracks with reality, since who is doing much of anything right now, much less buying a new car? That doesn’t make it any less astonishing. Eighty percent!

2nd Gear: $2 Trillion Stimulus Bill Moves More Forward

Potentially billions could end up in the hands of automakers in the form of loans. But don’t call this a bailout! No, automakers definitely don’t need the help again just over a decade after the 2009 bailout. No, they’ll be just fine! No, they’ve got this. General Motors doesn’t know who needs to hear this but they are not Government Motors thank you very much.

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From Reuters:

Republican Senator Pat Toomey said Wednesday the deal, which he called “the biggest government intervention in the economy in the history of the world,” sets aside $454 billion to make loans or loan guarantees for companies across all sectors, as well as states.

It was more likely the money will be used to leverage even more funds in loans from the Federal Reserve, said Toomey, who told reporters on a conference call that the Treasury would then be able to make loans, purchase loans or purchase corporate debt, which could be a major boost for automakers.

Industry officials, especially at General Motors Co, were eager to avoid the appearance of a federal bailout. Sales suffered and the No. 1 U.S. automaker was nicknamed “Government Motors” after its $50 billion bailout in 2009.

The United Auto Workers union and the Detroit Three automakers recently discussed sending a letter to Capitol Hill explaining why the industry needed a source of liquidity, but GM ultimately declined to sign the letter and it was not sent, people familiar with the matter said.

The final package contained no benefits targeted specifically at automakers.

In my mind, GM’s biggest marketing challenge isn’t whether it accepts government help or not, but making a single car outside of the Corvette and (possibly) Camaro that is remotely desirable.

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3rd Gear: Ford Thinks It Has A Plan For All Of This

Ford executives said Thursday that 300 of the company’s top executives will defer up to 50 percent of their salary until $7 billion of its debt is paid off. Executive chairman Bill Ford will defer 100 percent of his salary, according to Automotive News.

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All of which is a nice gesture, but these are deferments, not giving up their salary altogether. And people like Ford CEO Jim Hackett, who is deferring half of his salary, will still rake in dough. Hackett had a base salary of $1.8 million in 2018, according to Automotive News.

Meanwhile, the company also said Thursday that it planned to reopen a Mexico stamping plant on April 6, and five American plants on April 14.

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Via Automotive News:

Ford did not offer restart dates for Chicago Assembly, Flat Rock Assembly, Michigan Assembly, Louisville Assembly, Cuautitlan Assembly in Mexico or Oakville Assembly in Canada.

“We will continue to assess public health conditions as well as supplier readiness and will adjust plans if necessary,” Kumar Galhotra, Ford’s president of North America, said in a statement.

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I remain deeply skeptical that everything will come back to normal anytime soon, and there’s reason to think in Ford even agrees, saying in its own press release that it isn’t so sure either, merely saying that it is “aiming” for the plants to come back on these dates, not that it would be for sure. I guess we’ll see!

4th Gear: Ford’s Credit Rating Is Junk

Ford’s problems, of course, started way before coronavirus, most recently with the failed launch of the new Explorer. Skeptics have also raised many a question about its $11 billion plan to turn around its business, part of which was discontinuing all of its cars save Mustang.

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Coronavirus was just the latest setback, and credit rating agencies aren’t impressed.

Via Bloomberg:

S&P downgraded Ford’s credit rating one notch to BB+ and may cut it further, according to a statement. The move follows Moody’s Investors Service, which dropped its rating for the second time in six months earlier Wednesday. The automaker’s two high-yield ratings will remove its $35.8 billion of debt from the Bloomberg Barclays investment-grade index at the end of the month.

[...]

Moody’s estimated in its downgrade of Ford that the company could burn through $8 billion in the coming 12 months due to the coronavirus-related downturn in demand, putting a significant dent in the $37.7 billion the company compiled by drawing down its credit lines last week. Moody’s praised Ford for taking the “constructive” step of also suspending its dividend.

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No wonder Ford is so eager to get the plants up and running again.

5th Gear: A Dealer Backed Out Of The $1 Billion Purchase Of Another Dealer

Asbury Automotive Group, which owns and operates 80 dealerships in the U.S., said in December it was going to buy over a dozen dealerships from Park Place Dealerships for $1 billion. But it was revealed Wednesday that the deal was now off. The company did not give a reason but I’m guessing that tanking car sales have something to do with it.

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Via Bloomberg:

The Duluth, Georgia-based retailer has delivered notice to Park Place Dealerships that it’s terminating the $1 billion, all-cash purchase pact they reached in December, according to a regulatory filing. Asbury will pay Park Place $10 million in damages.

Closely held Park Place owns 17 franchises mainly selling European luxury-brand vehicles including the Mercedes-Benz, Jaguar, Land Rover and Porsche brands. When Asbury announced plans for the acquisition late last year, Chief Executive Officer David Hult called Park Place “one of the best and most efficient operators of luxury stores in the industry.”

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Reverse: Manned Torpedo

Via History in 1941:

Italy attacks the British fleet at Souda Bay, Crete, using detachable warheads to sink a British cruiser. This was the first time manned torpedoes had been employed in naval warfare, adding a new weapon to the world’s navies’ arsenals.

The manned torpedo, also known as the “Chariot,” was unique. Primarily used to attack enemy ships still in harbor, the Chariots needed “pilots” to “drive” them to their targets. Sitting astride the torpedo on a vehicle that would transport them both, the pilot would guide the missile as close to the target as possible, then ride the vehicle back, usually to a submarine. The Chariot was an enormous advantage; before its development, the closest weapon to the Chariot was the Japanese Kaiten–a human torpedo, or suicide bomb, which had obvious drawbacks.

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Neutral: When Will You Next Be Buying A Car?

New or used! What economic factors will go into your decision? It’s possible I’m overcorrecting for living three long blocks away from the epicenter of the epicenter of the pandemic in America. And no I am not currently stuffing wads of bills beneath my mattress, why do you ask?

News Editor at Jalopnik. 2008 Honda Fit Sport.

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