The following Q&A was published on Chrysler's Firehouse media blog. TTAC republishes it here in its entirety, without editing, to provide insight into Chrysler's call on the public purse, and the ailing automaker's plans for the future. Such as they are… "The campaign season is in full swing, with the Democrats holding their convention in Denver this week, and the Republicans meeting in Minneapolis-St. Paul next week. John Bozzella, Vice President of External Affairs and Public Policy, will be at both conventions, hoping to win over Congressional support for funding the auto industry’s technology transformation to build a new fleet of fuel-efficient vehicles. We talked to Bozzella from Democratic Convention in Denver about the effort.
Q – Why are you in Denver this week and what are you hoping to accomplish?
Bozzella – We’re in Denver for a number of reasons, most importantly, to work on funding this important technology partnership between the auto industry and government. This partnership will drive forward advanced and alternative propulsion systems at a time when it’s particularly important to deliver improved fuel economy in our vehicles, while reducing greenhouse gases. We have an opportunity this week with the Democrats in Denver, and we’ll be going to Minneapolis next week to meet with Republicans and make our case. We hope to build some momentum to get this technology partnership funded before next year.
Q – Why would something like that be important to both the country and consumers?
Bozzella – The auto industry is an important contributor to the U.S. economy. Not just regionally, but nationally, through dealerships, parts suppliers, etcetera. Millions of jobs depend on a healthy U.S. auto industry.
At the end of the day, the ability to develop and produce this technology ourselves, and here in the U.S., will produce value across the economy. A home grown solution for batteries and other advanced technologies will impact far more than automotive manufacturers. It could also provide a much needed financial shot in the arm to the millions of others who are involved in the development and marketing of the technologies. That means jobs and a boost to our economy.
Also, let’s go back to last year. Chrysler supported a broad energy bill last year that included significant increases in fuel economy standards over the next 10 years. We were pleased to support that initiative. The bill also included a partnership to transform technology and to support the industry during its retooling to produce more fuel-efficient vehicles. We supported the whole bill which includes both of those provisions. If we go back to last year when that bill was signed, it was recognized by us and by the Administration that that was an important initiative and a critical partnership.
This partnership provides loan support to allow us to continue to make these multi-billion dollar investments, to continue to transform Chrysler and the industry at a time when the capital isn’t available to do so. That’s why it’s important to Chrysler because it gives us the access to capital to drive ENVI, to drive our hybrid strategy and to continue to make progress across the fleet on fuel economy. It’s important to the country because we can’t make progress on energy security and reducing greenhouse gases without a significant contribution from the auto industry.
I would add that there’s also a national security component to this. What would happen if the United States completely gives up its manufacturing sector? What would happen? We have as a nation, especially in the last century, called on the auto manufacturers to be the arsenal of democracy and to really provide huge military support during times of crises. That’s another element to this, to retain this manufacturing capacity, and we’re going to develop an advanced manufacturing capacity at the same time.
Q – Some call this a bailout. Is that right?
Bozzella – What we’re talking about is this is a partnership for technology transformation. By partnership, what the government is doing is providing loan support. This is not a blank check. This is not a Freddie Mac and Fannie Mae exercise. This is a partnership and providing loan support at a critical time to improve the country’s fuel economy. The notion that this would be considered anything other than a partnership seems beside the point to me. Last year, when Congress enacted this bill and the President signed it, nobody called it a bailout then. Back in December of 2007, I never once heard that word. Never once heard it. If it wasn’t bailout then, how is it a bailout now?
We have set a course to dramatically increase fuel economy in this country through increases in CAFE standards. What we have said in response to that is we are all in – we are going to deliver it, we are going to do it, and we are going to move forward. What Congress also said is let’s form a partnership to ensure that we in the United States have the capacity to have this technology leadership here. That’s what we talked about last year, and that is what we’re trying to finish this year. We’re finishing that business, and it is nothing more or nothing less than completing the lap on what was established last year.
Q – It sounds like you’re getting some political support this.
Bozzella – We’re seeing momentum to get this done. The support for this was bipartisan when it was enacted last year and remains bipartisan today. And also, we see support in both Houses. We are hopeful that we can complete the funding of the program this year.
Q – You’re also seeing some support in the press for this. One example is a blog by CNBC reporter Phil LeBeau. You can access LeBeau's blog "The Big 3 DO Need Federal Help" by clicking this link)
Bozzella – I think he framed it in a very appropriate way. What he’s essentially saying is, let’s not call this a bailout, let’s call this what it is, which is a significant and robust partnership to make sure we make progress as a nation. I can’t think of a more appropriate role for government – in contrast to bailing out the industry, provide support for the industry as it transforms itself. That’s the point we’re making. You can make a fairly strong contrast between a blank check-type bailout, which we’ve seen in recent months in some sectors of the economy, and a program that helps the industry transform itself."
I said it once, and I’ll say it again. If Chrysler sells the Dodge Viper marque as is suggested, then I’ll be rooting for them to go under. Besides, the new Viper ACR is the new King of the Ring, why would they want to ditch that?
http://blog.wired.com/cars/2008/08/viper-sets-new.html
“What we’re talking about is this is a partnership for technology transformation.”
Shoot, I wish I had lines this good in my single days.
Besides, the new Viper ACR is the new King of the Ring, why would they want to ditch that?
Well, obviously, because they care so much about America conserving fuel.
This Q&A’s message would seem a lot more genuine if this week Dodge wasn’t filling orders for new 20MPG V8 Challengers.
“What we’re talking about is this is a partnership for technology transformation. By partnership, what the government is doing is providing loan support. This is not a blank check. This is not a Freddie Mac and Fannie Mae exercise.”
In fairness to your man there, if mortgages were as interesting as cars, we’d all be posting with righteous indignation on the TTAM(ortgages) and there’d be a Freddie & Fannie Deathwatches on the site.
Bozzella uses “partnership” instead of “subsidy” and “funding” instead of “spending” because he wants to camouflage what is being proposed. George Orwell explained this in his splendid essay “Politics and the English Language.”
In my own experience, so-called “public-private partnerships” boil down to “public” puts up the money; “private” gets the profit.
Moreover, what is not being camouflaged is being studiously ignored. Exactly what will be accomplished by the desired “funding”? How? When? Do plans exist to show how the money will be spent? And since we’re talking about “technology transformation” [exactly what does that mean?], wouldn’t R&D outfits like, say, Battelle Memorial Institute or Sandia National Laboratories be more worthy recipients than three auto companies that have historically been technology laggards?
So Chrysler is looking for another bailout like they got in 1979?
http://www.time.com/time/magazine/article/0,9171,947356,00.html
Open question: If the US Auto Industry fails, what happens to our economy? Do we become a nation of consumers? (meaning we but but don’t sell? How long will/can that last?
In my opinion, we are in some a sh*tstorm right now. What happens next?
It’s only a partnership when all parties contribute equal resources. Providing loan support equals co-signing a loan. Now, if Chrysler was my brother-in-law and asked me to co-sign a loan, what would be my answer? ‘Hell no.’
Last year, when Congress enacted this bill and the President signed it, nobody called it a bailout then.
Because if the B-word had been mentioned, it wouldn’t have seen the light of day.
Cerberus—with their stakes in hundreds of companies—could easily self-fund Chrysler’s “efficiency initiative”. However, starting with the Durango and Aspen is an inauspicious start.
I would add that there’s also a national security component to this. What would happen if the United States completely gives up its manufacturing sector?
Ah, yes, from the GWB school of playing the scare card. Note to Chrysler: we still make planes, tanks, ships, buses, microprocessors, etc. Not propping up broken companies is not akin to “giving up on manufacturing.” Nice try.
A home grown solution for batteries and other advanced technologies will impact far more than automotive manufacturers.
I agree but only if its developed at the likes of MIT, so that my tax dollars aren’t given to three different companies who will develop three proprietary systems. A123 Systems technology was developed based on research from MIT and has found its way into cordless tools, remote control hobby cars and planes, and military apps.
Another thought….perhaps the big three should approach the oil companies. They have record profits and clearly benefit the most from the position at the moment? Are the Detroiters barking up the wrong tree? Is this even an issue the candidates can handle (in all reality)?
My wife is fond of saying, “shit in one hand and wish in the other then see which fills up first”.
rtz: Now THAT was a good article. Thanks for the time capsule. I like what the then GM czar said about said bailout. That’s a real laugher now. Also, the numbers are so small!
I’ve heard a lot of arguments for giving Detroit a bailout partnership for technology transformation. I would like to provide a rebuttal to them.
1: “We need an automotive sector for military and security purposes”
Erm…why? American defence has been up for sale to the lowest bidder for ages! Why should the automotive sector be any different? On August the 14th, 2008, BAE (British company) won an $85.6 million contract to supply howitizers to the US military. On the 4th of January 2008, BAE won another contract worth $29 million to test missile capabilities on aircraft. On the 23rd of July, 2008, EADS (Pan-European company) was awarded a $150 million contract to supply helicopters to the department of homeland security. On the 16th of August, 2007, Rolls Royce (UK company) was awarded a $296 million contract to supply propulsion systems (i.e engines) to the U.S Air Force.
There are many more examples of foreign companies (strangely, UK ones) getting American money to supply the US military with services or products. So don’t think the automotive sector collasping is going to make ANY difference!
2: “When the Detroit are consigned to the history books, you watch all the transplants pack up their factories and leave the United States!”
This argument has to be one of the stupidest. Since people seem obssessed about comparing the US car industry to the UK car industry, lets run with this comparision to its logical conclusion.
The UK car industry collasped (Yes, I know we still have Aston Martin, Morgan and Noble) and by everyones’ logic all the foreign competition would have packed up and gone since the UK companies were defeated, right? Wrong! If that was the case, then, GM would have left (They haven’t. In fact, they’ve assured the Ellesmere Port plant until 2016), Toyota would have left (They haven’t. In fact, Toyota have invested £88 million in the Deeside engine plant), Honda would have left (They haven’t. Though, admittedly, it’s looking shaky due to the UK being outside of the Euro) and Nissan would have left (Guess what? They haven’t! In fact, they’ve announced that their latest CUV will be built at Sunderland).
So, I think that the demise of the US auto industry is a little overstated. The US has plenty of manufacturing left and the economy is big enough to weather it (but, my sympathies do go to the people who will lose their jobs through no fault of their own).
The real question is:
The taxpayers funded PNGV and resulted in nothing from Detroit entering production. How will this time be any different?
Oh how I wish I could gain the attention of all of our ‘elected’ overlords and tell them what I think about them printing even yet more money, backed by lies (not gold) and buring it by giving it to companies which didn’t mind being intrenched, intractable, irresponsible and idiotic – so they can continue down the same road.
And if you don’t think we ‘elect’ overlords and are rapidly going down a very slippery slope in the United States, then you won’t have any interest in this little story.
A preview of our future life in Amerika.
http://www.wnd.com/index.php?fa=PAGE.view&pageId=73679
Of course, where freedom of religion and speech goes, so goes all the rest of our rights, soon after.
The question of the day should be – will the American Public wake up, or will we elect an Adolph, as the Germans did in 1933? And to be honest, I’m not even just talking about the Obamanation, but McPain, too.
Two sides of the same coin.
http://www.cnn.com/video/#/video/politics/2008/08/28/ron.paul.dnc.unity.cnn
I’m not really a free marketer, opposed to government aid, especially with strings attached; however, the problem here is that they waited too long to get serious about it. (Like they waited too long to get serious about everything.)
It’s Labor Day weekend, election year. Candidates make promises what they’ll do after they get elected. We will have a new president January 20, 2009. Until then, we have an inept lame duck who’s just trying to keep his head down and not do anything stupid between now and then. (Oh, that and bring peace to the Middle East. Good luck with that.) The new Congress that gets elected in November, mostly the same as the old one, will be in holiday mode until the beginning of the year. Come late January, there will be a lot of other issues that are festering for attention. In the meantime, Delphi will run out of financing leaving GM with an additional $8 billion in pension liabilities and a whole bunch of parts issues; GM will be burning other cash at a billion dollars a month or more, Chrysler’s products will be that much older and moldier; and Ford’s great new products will either start coming in or slipping further behind schedule.
If you were in Congress, would you want to shoot at this moving target, or dodge responsibility for the problem entirely?
Choose well in November, otherwise cars will be the last thing we need to worry about enjoying or talking about. No cars in gulags.
http://www.lewrockwell.com/rockwell/longing-for-dictatorship.html
So the D2.8 wasted their profits on ridiculous contracts with the UAW, buying industries and companies they are now selling at a loss, and poured millions into the bank accounts of horrible executives. Meanwhile Toyota invested heavily in hybrid technology and building plants in this country to hire American workers.
Who do you think deserves our support? We are supposed to give these idiots billions to waste? I’d rather pay for another Katrina.
Been there, done that.
The 1993 Partnership for a New Generation of Vehicles was a government funded research program aimed at establishing U.S. leadership in the development of 80 mpg marketable and affordable 5-passenger family vehicles.
GM created the 80 mpg Precept, Ford the 72 mpg Prodigy, and Chrysler the 72 mpg ESX-3 working concepts. The automakers retained the property rights for the advanced concepts the research developed.
The research is done and paid. Just manufacture and market the cars fellas.
http://tinyurl.com/5r4xkm
Menno,
That’s an interesting opinion piece for sure – I think he misses that the Republicans no longer favor small government, and haven’t for quite a long time. They’ve proven over the last 20 years or so that they are the big spenders, big government growers, and like to pass on money to their buddies as favors. I also think he confuses the Democrats with what the current administration has put in place.
And he fairly points out both have their issues when it comes to a free country.
I do however like his thoughts and how he wraps it up.
I’d love to see how the big three would operate if there were more than two viable political parties – could they afford to keep pandering to all of them?
Gardiner, I also have written on these pages many a time about the fiasco of our spending God-only-knows-how-much-taxpayer money on these vaporware mobiles by GM, Ford and Chrysler (“thanks, Bill… for giving us someone else’s money…, Love, GM, Ford and Chrysler”) and NOTHING came out of it.
Idiots in Washington didn’t write a clause mandating that the companies actually had to MANUFACTURE the damn things once they developed them, did they?
Cliff notes version of his answers.
We are begging for a bailout b/c the way we run our companies is no longer sustainable and we are too big too fail during an election year. We figure if we pass off R&D onto the taxpayers (instead of being responsible and spending it wisely from the billions in profits we made – just like our competitors) for our short sightedness it’ll help us pay our Executives millions of dollars in salary and keep the union workers supplied with endless amounts of Viagra and Prozac.
So, Orian, are you going to look into the only “3rd party” out of multiple ones, that has anything resembling a chance, assuming 17% of the public actually wakes up and gets behind them?
(1/2 of people vote, so we only need 34% while the two “major” parties take 33% each – look at the last two elections to see how close the contest is between these two parties).
It’s the Libertarian Party. I’m not a member any more (having moved on the the Constitution Party) but I may have to go ahead and vote Libertarian again this year, and once the 2 major parties are dead & buried (along with dictatorial dreams of the elites in power), we can then divvy up into two camps – or more – again. Hopefully, with civil discourse between the factions.
George Washington felt that political parties would be the end of the United States. I fear his prediction is coming true.
THIS IS NOT A BAILOUT! The term “bailout” implies an endpoint. The situation that has been conveniently ignored or yet to be considered is this-technical refinement will be an ongoing process. They just can’t get their fleet up to 35 mpg and then go back to business as usual. After 35, it will go up to 40. Maybe not because of CAFE legislation but because more talented companies will push their competitive advantages. D3 has not shown the aptitude to get far enough ahead to support themselves.
I’ve always wondered what ever happened to the PNGV cars, but SUVs are likely what happened. Even 10 years later, they still look fairly modern, and the fuel economy numbers are still extremely impressive. These companies make me sick asking for money because they’ve blown all their truck/SUV profits.
I don’t see Toyota or Honda asking Barry or Johnny for money. Maybe it’s because their managment actually manages the company and has long term plans. Whereas GM and Chrysler’s management apparently spends the day watching their stories and writing management speak PR releases that talk in circles about nothing. Ford’s management might do some actual management work, but I’m going to lump them in with GM and Chrysler if they’re asking for money too.
Just watched the movie “Traffic” again – great line from that film that makes the point:
“What’s Washington like? Well its like Calcutta, surrounded by beggars. The only difference is the beggars in Washington wear 1500 dollar suits and they don’t say please or thank you.”
I was wondering if this was a “partnership for technology transformation in the automotive sector”, why some of that “funding” shouldn’t go to other manufacturers of fine automobiles in the USA, other than the 3 involved. Manufacturers that actually have a plan to produce more fuel efficient cars should get the bulk of the “funding”. Otherwise, it is a bailout.
Also, if the technology required is so bleeding edge, what is being discovered in the nation’s universities? Why haven’t the manufacturers leveraged their products on discoveries made by other aspects of America’s research? There’s a lot of stuff out there that could benefit the automobile industry, and it probably wouldn’t need a $25B and counting (you can be sure) to do it.
Right now I am in US, and I am very unpleasantly surprised by what I see. Of course, people are lovely( never mind their genetic health), polite and diverse. But what is mindboggling, is consumerism. I have problems of finding products that would be manufactured by US based companies. I don`t mean that they necessarrily need to be made in USA, but I have problems finding US based companies that would sell electronics, etc. All I see is ABSOLUTE japanese victory in consumer electronics, where every single item with added value is either japanese or korean. All you have is gazillion of stores where people idle their lives away selling what japanese have sweated out of their hands and brains. Mindboggling. Factories closing, and replaced by low paid sales people, whose parity will never allow them to either raise a kid to college or buy a house. The same in car industry, japanese are shredding your market in pieces, ripping out chunk by chunk, while all you do is rely on credits, pretending that it makes economy growing. And you are right credits increase GDP numbers, but GDP is bullshit, for it doesn`t reflect added value to economy it only reflects amount of money rolled around economy. But money itself has no value, what has value is purchasing power. Should Chrysler be bailed? Have you ever experienced any single US based company that after a bailout would prosper and crank out quality and diverity driven product range? Ever? If one company fails, you blame CEOs, if all of them fail, you blame yourselves.Why work? You have a god– Bernanke, just worship him and his magic sceptre will order to print out some more dollars so you can go and buy those 60 inch Mitsubishi lcd screens and transfer some cash even more to Japan.Just teach your kids communicative approach in schools and playing games and goffballing, why study math, it ain`t fun. Let those stupid japanese do natural sciences, we can have fun, isn`t that what schools are for?It is democracy, no punishment, just free choices, and your kid will be a movie star or reality tv moderator. Why choose stupid professions like engineering? Let`s do bailout and do a performance in aShakespearean manner!
There are 2 ways to look at this loan guarantee.
First: IF our congress had been raising fuel economy requirements faster, IF our congress had not been subsidizing the purchase of SUVs and PU, and IF our congress had been raising taxes on gasoline at the pump then our auto industry would have had to meet these challenges over the past 20 years and would not be in the desperate straits they are now in.
Our engineers are just as capable as any in the world and they would have been able to meet the challenges that European and Asian engineers have had all along.
Second: Because our congress failed the American people by not doing any of the above and failed our auto industry by not constantly providing challenges our auto executives took the easy way and now when outside forces have presented challenges the auto execs are in a panic.
So should we have been paying higher gas taxes for the past 20 years and have better roads and a healthy auto industry or should we now risk billions on loan guarantees?
Our congress is made up of very weak people. They have been easily frightened by the un-American nincompoops who call themselves conservatives (they have absolutely no idea what a real political/financial conservative is) who only know how to chant, “low taxes”.
Yes, there are times to chant “low taxes” like when our congress people add earmarks to spending bills. But there have also been times when we should have been paying for something in the past to save money and panic now. Thinking ahead would require true financial conservative thinking.
So because our congress failed us and our auto industry do we try to correct their mistakes now? We obviously can’t go back to correct their mistakes.
If Detroit wants a partnership and we have decided the country cannot afford to have Detroit fail then I say we give them a partnership. We should give them a standard partnership where what each side gets out is proportional to what each side puts in. GM is worth about $6B and needs about $24B, so this is what we should do:
1) GM stock is stopped from trading.
2) Five times the current amount of current outstanding stock is issued and given to the taxpayers (held by the government).
3) The stock is reverse split 6 to 1 so the number of shares stays reasonable.
4) The taxpayers give GM $24B.
5) Since the taxpayers now hold 80% of the stock, the board is replaced, and the new board hires an executive team that actually know how to run a business.
6) The new executives go through the management ranks with a hatchet and fire enough people to change the culture of failure. Also any employee who is heard, publicly or privately, to blame GMs problem on anything other than GM is summarily sacked.
7) The stock does not trade again for five years, at which point we can see whether the partnership has succeeded or failed.