'Deals' Archive
The answer appears to be “no.” The marriage in question is the 25-year partnership between General Motors and Toyota Motor in a joint venture, New United Motor Manufacturing, Inc. — widely known as NUMMI.
GM this week gave out a brief statement that it could not agree on future product plans with Toyota. The NUMMI plant makes the Pontiac Vibe sport wagon for GM, and production of the Vibe is set to end later this summer — well ahead of the scheduled phase-out of the Pontiac brand.
GM said its 50% interest in NUMMI would stay with “Old GM” — the bankrupt carcass of bad assets and debt that will be left behind when the company emerges from Chapter 11, which could be next week, if the Obama administration’s auto task force can muscle the company’s case through bankruptcy court. “New GM” may be out of bankruptcy reorganization in 40 or fewer days, which would top Chrysler Group’s record of 42 days.
At the NUMMI plant, which is hailed as a highly efficient American implementation of the vaunted Toyota Production System, the UAW-represented workforce makes Tacoma pickups and Corolla sedans for Toyota to sell in North America. What happens to the NUMMI plant now is a big question for Toyota and its new president, Akio Toyoda, the grandson of the automotive manufacturer’s founder.
As the global downturn in the automotive industry took hold last year, Toyota called a halt on completing its new plant in Mississippi, which was going to build the Prius hybrid. Rumors abounded that Toyota would convert NUMMI to Prius production in light of high demand for the third-generation Prius, one of the few car models in the world that’s garnering pronounced popularity. Toyota officially quashed those rumors, however.
Akio Toyoda has a thorny problem in pondering the fate of NUMMI. The factory has long outlived its purpose and value as an experiment in cooperative production. It’s not the traditional practice of the giant Japanese automotive manufacturer to shutter a factory, lock the doors, and throw away the key, as Chrysler and GM did with so many North American plants. (The sprawling NUMMI factory was a GM plant until it was closed in 1982.) Toyota doesn’t do big layoffs. NUMMI is the last car plant in California, it has a unionized workforce of some 4,700 employees, and it’s a highly visible employer in the San Francisco Bay Area. Pulling the plug on NUMMI would be a public-image nightmare for Toyota. Not that it would slow down sales of Toyota vehicles in the US any more than the recession already has, but it would be an international liability to the corporation’s image.
BTW, the NUMMI plant is a few miles north on the Nimitz Freeway from the Great Mall of the Bay Area — a facility that was a Ford Motor plant from 1955 to 1983 and which was redeveloped as a giant shopping mall in 1994. Maybe that could be the future of the NUMMI factory, as well, although the mall business isn’t what it used to be, either.
British bank Barclays wants to put its name on a New York City subway station. The city’s Metropolitan Transporation Authority announced this week that it is selling the rights to rename a busy downtown Brooklyn station for about $4 million. It’s the first time MTA has successfully entered such a deal (something it has been trying to do for years as a way of bringing in more revenue).
Banks put their names on all types of things — sports stadiums, music festival stages, and race cars, so why not a subway station? But while it may be good for MTA’s coffers, subway riders and some critics of the plan wonder if commercialization of public places or services is crossing the line.
Sponsorships and naming rights have traditionally been a big boon for both sides for years now. It usually is great advertising for companies and it is big source of revenue for colleges, non-profit organizations, or other people in need of some extra cash flow.
But the current economic mess we are in has created a shake up of corporate sponsorships. And some people are angry about bailed-out banks that are spending cash on naming rights and other advertisements. In response to some of that hub bub Bank of America has yanked its naming rights and sponsorship deals with the New York Yankees and USA Olympic Team this year. But other corporations and banks (namely Citigroup, AIG, and PNC Bank) continue to honor deals and make new ones.
Sponsorships are too valuable to go the way of Lehman Brothers, but both sides should weigh the benefits and the potential backlash before sealing the deal. Because who really wants to hop aboard Taco Bell Transit or fly a kite at Pepsi Park.
The fate of a storied German carmaker lies in the balance. No, we’re not talking about Adam Opel and the ongoing drama of GM Europe. The carmaker in question is Volkswagen.
For all the attention Fiat and GM Europe received in recent months, it should be noted that VW is Europe’s largest carmaker. With some 364,000 employees and annual sales of $160 billion, VW easily outpaces General Motors and Ford, and it is setting its sights on Toyota Motor in the quest for global automotive industry domination.
Porsche Automobil Holding emerged as VW’s controlling shareholder in this decade, and therein lies a tale of more family intrigue than Jon & Kate Plus 8. The families that control the two carmakers are descendants of Ferdinand Porsche, the creator of the original Volkswagen (”people’s car”) Beetle in the 1930s. The two clans have long disliked and distrusted each other. Until recently, the Porsche family appeared to have the upper hand over their Piëch family cousins, as Porsche Automobil took majority ownership in the much larger VW AG. Headlines on the theme of “David Defeats Goliath” abounded.
Since 2005 Porsche piled up VW shares and options for VW shares, and went to court to challenge Germany’s “Volkswagen Law,” which limited private ownership of the giant carmaker, a company that the German government regarded as a strategic industrial enterprise. Once the European Court of Justice struck down the law in 2007, Porsche really went to town on acquiring VW’s shares.
Last fall, Porsche executed some financial maneuvers that squeezed short sellers in VW’s stock, driving up the price of VW’s shares so high that VW briefly became the most valuable public company in the world. The Wall Street Journal proclaimed in a front-page headline: “As Giant Rivals Stall, Porsche Engineers a Financial Windfall.”
The downside of buying those VW options and shares was that Porsche basically tripled its corporate debt, from €3 billion to €9 billion (about $12.5 billion), just as the worldwide credit markets were collapsing. The result was that Porsche this spring had to go, hat in hand, to VW for an emergency loan of €700 million, then apply to the German government for a loan of €1.75 billion. Porsche currently is negotiating a capital infusion with the Qatar Investment Authority.
The way things are going at the debt-ridden Porsche, it looks like Goliath will best David in this match.
No matter what industry, the dreaded word of “consolidation” always lingers during a recession, and it has now reared its ugly head in Hollywood. Last month, century-old William Morris Agency and relative newcomer Endeavour (founded in 1995) combined to form talent agency William Morris Endeavor Entertainment (WME Entertainment).
The new super-agency has around 300 agents and is expected to haul in about $300 million in revenue. More importantly, the combined agencies’ strengths help it to better compete with rivals Creative Artists, International Creative Management, United Talent, and Paradigm.
William Morris certainly benefits from obtaining Endeavor’s abundance of talent (Matt Damon, Adam Sandler, Tina Fey) while Endeavour gets a jump-start to its music and corporate representation abilities. (Before the deal, William Morris already represented musical heavyweights Kanye West, Pearl Jam, Taylor Swift, and the Eagles.)
The fact that the deal was completed at all is somewhat surprising since most potential mergers in Hollywood are thwarted by ego, internal politics, and clashes in ownership. Plus, both agencies had been in on-again, off-again talks all year. Does the newly formed WME Entertainment signal a trend in the industry?
I would expect to see more of it,” Thomas P. Pollock, a partner in the Montecito Picture Company, said of the merger and other signs of entertainment industry consolidation.
But what of the independent boutique agencies? They’ll still do what they do best: promise their clients more personal attention coupled with the prospect of a more micromanaged career path.
And let’s not forget, back in 1995, the smaller agency Endeavor was formed by a group of disgruntled agents who left International Creative Management. One of the founders, Ari Emanuel, was the inspiration behind charismatic super agent Ari Gold in the HBO television series Entourage.
That’s got to count for something.
That’s how many days Chrysler (now rechristened Chrysler Group) spent in Chapter 11 bankruptcy reorganization — 42 days, or six weeks. The “quick” and “efficient” reorganization promised by President Obama came to an end this week, albeit with a quick run through the Supreme Court. (I know it’s not officially summer yet, but it’s already hot and dry in Texas.)
Fiat is running the show at Chrysler now, although the Italian carmaker owns just 20% of the restructured company. The UAW’s retiree health care trust now holds 55% of Chrysler. Ciao, Cerberus Capital Management!
Sergio Marchionne, the CEO of Fiat, sent a letter to all Chrysler employees in his new role as the CEO of Chrysler. (How can one man run two car companies? Hey, Carlos Ghosn’s been running both Nissan Motor and Renault for years.)
Hundreds of Chrysler dealers closed this week, as the US Bankruptcy Court approved the company’s petition to terminate immediately its dealership agreements with about one-quarter of its retail outlets.
Meanwhile, General Motors is marking its 10th day in Chapter 11, and they’ve been busy in the Ren Center, too. The company last week struck deals to sell the HUMMER brand to an obscure Chinese manufacturer of heavy construction equipment and to divest the Saturn brand to Penske Automotive Group. A deal to unload Saab Automobile may be close at hand, although Fiat is reportedly out of the running in that auction. The GM bankruptcy is going to take more than six weeks to complete; Labor Day weekend might be a realistic and somewhat ironic deadline.