Automotive News [AN} reports that the U.S. House of Representatives has passed H.R. 7321 by a margin of 237-170. Thirty-two Republicans and 205 Democrats approved the measure. The bailout bill authorizes the Department of Energy to loan General Motors and Chrysler $14b (in total) at a rate of five percent for the first five years and nine percent thereafter (until?). The car czar is a go! Under the terms of the legislation, the de facto bankruptcy judge can “compel automakers, their creditors, workers, suppliers and dealers to agree on restructuring for long-term viability– or emergency loans would have to be returned.” Collateral? An equity stake for taxpayers and “go to the head of the line” debtor repayment positioning. Prohibition against payment of stock dividends, no corporate jets, limits on executive compensation, yada yada yada. If they are to return to the Hill to say the magic words (please sir, can I have some more?), General Motors and ChryCo must bend to the will of the car czar by March 31. Or April 30, depending on… the car czar. So where does this leave the bailout bill?
The Canadian Press reports that the fat lady is still doing scales, as Republican senators gird themselves for battle. Or not. Senator Richard Shelby of Alabama and Senator Bob Corker of Tennessee have threatened– but not promised– to lead an open revolt against the bill and G.O.P.’s lame-duck president, who sent in his shock troops to rally Republican support for the compromise bailout bill.
As Bloomberg reports, that particular part of the plan didn’t go so well. “Vice President Dick Cheney and White House Chief of Staff Josh Bolten attended a lunch meeting of Republican senators today. Tennessee Republican Bob Corker said the two officials left the meeting ‘with less support than they came with.'”
As for the controversial requirement that GM and Chrysler drop their participation in a lawsuit against California emissions standards, a provision the White House opposed, the House of Reps sleazed it. H.R. 7321 requires automakers sucking on Uncle Sugar’s teat “to comply with applicable fuel efficiency and emissions requirements.” Does that mean CA’s as well as federal regs? As the Afrikaners say, Ja nee.
Just in case senate Repubilcans get to thinking about messing with the bill’s language, the House Speaker offered a quick reminder how things are done in the nation’s capital. “Nancy Pelosi said that chamber’s members could return although ‘unless there is a real necessity we will not.’ She said any Senate amendments to the plan may prompt another round of negotiations. ‘If they change it, then we may change it,’ the speaker said.”
This is a replica – a shining example how communism worked. (failed)
A sovjiet style “polit bureau” gets hold of a whole industry, nationalized it and places a iron fisted “Politkommissar” in charge of productions central command.
Following not market realities but a 5 year plan.
A car tzar is installed- how telling…
The outcome is easy predictable even for a slightly retarded toddler.
Time to get into red canvas and hammer & sickle emblem business – just in case the US banner may be slightly altered.
And have your purse ready – the’ll be back.
The golden bowl beggars will fly in with their corporate lear jets soon for more.
“You did not buy our lousy cars – you where a very bad boy – now we take your money anyway. Without burden you with taking delivery of a DOD car – he is so shitty, with so high on consumption, he would anyhow give you only headaches.”
I wonder why Toyota, Mazda, Honda, BMW e.g., the one according to a US car CEO
– quote: who do not get it unquote (producing mainly within the US and providing US jobs) are not kneeing for a bailout but the big 3 (producing mostly in Mexico) are…
Good Night and Good Luck
Nastrovie Sovjiets adé!
Damn their eyes.
Can’t help but wonder how historians 75 years from now will write about this era.
Likely will have been dead for at least 550 or 60 years (maybe more) so as the grunts in the ‘Nam used to say….
“It don’t mean nuthin’.”
Who is surprised by this? I’m sure not. D3 depends on DC, just as much as DC depends on D3.
DC gets money from campaign contributions and voter support through UAW and D3. They have for so long. Many Assemblymen and Senators probably have gotten millions and millions of dollars over the years.
D3 now gets some money back in the form of loans. So what?
Why the big fuss? Republicans are only “against” the bailout for show. It’s all a big play.
Money is king. It’s capitalism (and elite politics), not socialism, that is the cause of this bailout.
Every time I see the word “Czar” I just have to laugh. Another Washington politician, in other words. Let’s appoint a real Czar, Russian style. Let him execute underperforming auto industry execs. Now that would be a worthwhile alternative to a bailout.
Robert, don’t forget the bailout includes free admission to the NAIAS. See you there, comrades!
Now that this is done, can TTAC go back to covering cars instead of politics?
I can only think that while all this is going on between Detroit & Washington, the foreign car crowd is continuing to build their lead with new product development.
Only, Ford has said, they are changing nothing of their renewal plans and will go forward with no emergency measures.
As for Chrysler and GM they might as well be bankrupt, because who among us is going to buy their damaged brand cars? Let’s see should I not buy a: Hummer, Pontiac, Saturn. The elimination derby keeps changing, but why would you want to invest your $20 some thousand into a brand that may be slashed like Oldsmobile?
Now, there is Chrysler, little product in the pipeline, poor quality issues, an owner who regretted the purchase the minute the ink dried. Mercedes gets the blame for spending 9 years with Chrysler, what do we say about Cerberus who wants out in two?
I know, we give them a taxpayer loan.
We cannot let these job loss threats continue to drive a (dead) horse onward. I do agree, with chapter 11, GM can dump all of their problems at one time and just maybe start over with a clean slate. If they have to go on with their present debt and labor contracts including the health care albatross, they are done and 10 billion is about 6 months worth of chump change to keep the beast breathing. Who speaks for all of the other workers who have been laid off in other less “critical industries”?
The answer is they are the victims of capitalism’s axiom that only the fittest survive. I don’t like this, but we either try and help the excess individual workers get retrained or we Nationalize the car business.
There are no good choices.
From now on GM stands for Government Motors.
Hope it works. Good luck to everybody.
@Ed:
Only in my dreams.
The success of the bill is far from assured. Because this is a last-minute session, a lot of the retiring senators (or those that lost their seats) won’t be heading to Washington to vote for it. What that means is that failure is more likely than success is.
I found it funny that P. Delorenzo was complaining about Nancy Pelosi and the terms of the bailout bill today. He was championing the idea of a bailout just last week, but now apparently has buyers remorse. What did he expect? How could anyone have thought our government would come up with a reasonable solution?
Ed: You’re kidding, right? You think covering this stuff is fun?
For the record, this ain’t socialism. Romanjetfighter is right. On the other hand, public opinion is dead against this, and more importantly Detroit doesn’t have much to offer DC. I’m not giving up on a Senate fight. Nobody likes an unnecessary bailout, let alone one that has no exit strategy. Hint hint.
I have two words for the Southern senators who want a do-over for the Civil War now that they have [foreign owned] factories this time.
Snowbirds.
Boycott.
The rum is very good in Puerto Rico and the women are beautiful. Tourists’ money stays in the United States, the music is way better than the second rate rock with pedal steel guitars that passes for country these days, and the folks in PR probably even speak English better than ‘ol crooked mouth hisself, big Dick Shelby, D. Mercedes/Hyundai, and his constituents.
Another great warm weather destination is the US Virgin Islands. Your money stays in the US there too. Great, uncrowded resorts, amazing beaches and people who don’t call my neighbors lazy, greedy, incompetent dinosaurs.
Since the South is already sucking up my tax dollars, I figure that I should spend my discretionary income someplace else.
Frankly, I’d sooner vacation in Jamaica, Bermuda or the Bahamas before I’d spend a penny in any of the states who’d rather see GM, Ford & Chrysler die.
Wm Tecumseh Sherman, what a guy!
@Edward
Public opinion is pretty much split. There was the poll with the 61% number, but newer polls have shown that its pretty much split 50/50.
@Ronnie
Oh quit the BS political posturing. These same men opposed the $700 billion bailout, and have opposed any more bailouts since then. It has nothing to do with what’s going on in their states, and everything to do with them not wanting to waste taxpayer money on a dead-end proposition. I’ll have you also kindly take notice that two rust-belt senators vociferously oppose the bail-out as is because it doesn’t go far enough in forcing GM and Chrysler to reform. As usual, the proposal has been watered down with pork in order to get it to pass, and the proposal for the automakers themselves is half-assed.
Finally the question burns down to the paradigm of
capitalism versus communism e.g. very existence:
Capitalism is based on the same rule the evolution also works with very successfully, since begin of time =
“the survival of the fittest”
If history is any guide, that rule worked since stone age till today well, no matter the difficulties or circumstances.
No matter how much (other folks)
money government throw on a lame unattractive horse with tons of dead weight;
it will never make it through Steeplechase.
Thats not a discussion of foreign or local horse or if the jockey losing his job is
Finn, German, Jap or a US one – its a discussion who
has attractive products & services and makes it on the market – and who has not.
And who has not has to get lost.
Thats how in my understanding capitalism works and the reason why communism failed.
That many are here now on the losing end does not change the basic facts
Please
Face fact
Please
Let the loser go and dont support a Congress in throwing money on a grave
Otherwise consider moving over and join Kim Jong Il.
He heads as tzar a decent car & military industry which is 100% state run.
The products the government controlled industries putting out (on a not real free market like some contributors here wish for in the US too) are not much worse then from the big D3.
Kim can even produce nuclear reactors – the D3 cant even come up with a decent hinge on a Hummer door.
All workers in NorthCorea are employed with near to 0 salary.
AND THE MOST IMPORTANT benefit you enjoy in Kims paradise:
No mean lean, elegant foreign competitor (many on this blog are fighting against) disturbing his socialistic paradise
Only food, water & heat is in short supply and the odeur a little off track…
“Towards the end of the Age of Automania, which reached its nadir in the early 21st Century, various irrational attempts were made to keep the industry going as usual. Enormous transfers of public funds were made, in many nations, upending the healthy competition required to ensure that consumers had access to topical cars and relevant mobility solutions.
This artificial bolstering of the auto industry dinosaurs was to result in little good and much harm. Paradoxically, members of the Democratic party in Congress were lured into thinking they were helping their voters when supporting the Detroit bailout – when, in fact, they were simply delaying the inevitable. The Detroit auto industry had lost the confidence of consumers, and was unable to return to profitability.
Years of reorganization of resources followed the C11 filings of 2009, which were begun after several hundred billion dollars in public funds had been used to try to save the dinosaurs.”
I’m kind of sitting on the fence on an auto bailout.I think I could support something that would get them to the end of the year (but not to Jan 19th) just to keep the collapse from destroying the Christmas season. However, I would insist on the following before they got dollar one:
(1)Executive pay cuts so that no executive was making more than a million/year in total pay and benefits (2) Suspension of interest payments to bond holders through the end of the year, with interest being swapped for equity (3) The UAW immediately reopen the contracts. (4) Temporary federal override of state franchise laws, with a GM commitment to close down the most ailing divisions. When they do those four things, GM gets the first of three installments of equal size. Chrysler gets diddly. They aren’t savable or worth saving.
Step two: Before the second installment (1)The UAW must have come to an agreement that pares substantial money from labor costs (2) Agreement by bond holders to a substantial ‘haircut’, again swapping debt for equity (3) White collar head count cuts of some substantial percent.
I wouldn’t consider the parts of this cast in stone, but the basic principles should be (1) The industry stake holders give up something, (2)Enough money flows their way to give them time to make the next move, and (3) At any stage they only get a portion of the money.
Does anyone else notice the inconsistency in the Bill regarding GM being a Global Co.?
Currently what is holding GM afloat is the overseas operations profits!
– But the Bill is specifically for USA jobs.
What politician is going to allow GM to invest in a new product line in Europe, Korea, China, Canada, South America etc!
If they take the money (& the bill) GM are have to starve the profitable divisions (Ok not SAAB), so in the long term their going to trap themselves in another long term losing strategy, this time of no new product for OS operations.
So bye bye Cruze & Aveo replacement from Korea, No more G8, Camaro upgrade (Canada) forget it.
I have talked to about a dozen people in the past few weeks who are in the hunt for a new car. They all say the same thing (and they are in different parts of the country): won’t buy a GM or Chrysler vehicle because they are getting a bailout. A few will look at Ford, but most are looking at Honda and Toyota and BMW (for the Mini), in that order. Even though they are not in chapter 11/7, people still won’t buy their cars. They all say that since they are in financial trouble, they are not in consideration. There are those that won’t look at Ford because they showed up with the other two and are looked upon as the next to go under if either of the other two goes down.
All the talk about not buying a car in chapter 11 applies to those getting a bailout, based on my unofficial poll of friends and family.
“…must bend to the will of the car czar by March 31. Or April 31, depending on… the car czar. So where does this leave the bailout bill?”
Is 2009 a leap year too, or did I miss something?
I can understand the anger about the bailout — especially from this crew — there isn’t any passion in American cars anymore.
But with all the sound and fury there has been little insight. What I still want to know:
1. Why save Chrysler?
2. How is ANY car company (including Toyota/Honda) going to make it through 2009 with this level of demand?
3. What the hell is GM planning on selling for the next two years?
How big of you Mr. Schreiber.
While the senators in question have valid questions and arguments against bailouts (of any kind), all you can do is hate.
Shermans March? You equate a scorched earth policy for the south with a bailout of auto companies that may not make it regardless of the amount of money tossed their way. Incredible.
You want the destruction and confiscation of peoples property because your wants and needs may not be met. The people in question have no link to the people you seem to despise other than possibly voting for them or just happening to
live in the same state. But, you want everything they have taken away from them.
Don’t say that this isn’t what you mean. You wrote it.
What get’s lost in this bailout is the law of un-intended consequences. When you think you are helping over here you are distorting and hurting over there. YOU CAN’T HAVE 90% of the country running on capitalism and 10% on socialism. We have to choose the future. Every industry and city and state in financial trouble is watching this bailout to state their case for socializing their problems which are not “their fault”. It is noble that the Federal government wants to mitigate the woes of this recession and prevent a depression. But, can they? Will the resources be far outstripped by the problems and people in trouble? Finally, if they print all of this money for bailouts that they don’t have, will all of us have to share the pain when our dollar drops in half?
It’s great that Rick has Bob Lutz believing he (Rick) is the best corporate CEO since sliced bread, but what happens in the next 110 days (start counting them down) will be telling.
Here is Reality for Rick
The Market A viable profitability plan based on U.S. car consumption of 9 million for 2009 and 9.25M in 2010. Of your cut of that, a dramatic increase in the percent of your production runs being sold at arm’s-length transactions at dealerships with a corresponding decrease in “captive sales” such as internal use and deep-discount employee and fleet sales.
Debt You just went from $66B to $77B in interest-bearing loans. That needs to be slashed to $32.5B or less, not by deferrals, but debt forgiveness and conversion to equity.
Dealerships Under 6 thousand. Do it gently as you’ve mauled these guys for years; it’s time for some compassion.
Overall Product Line Buick, Pontiac, and GMC fold into Chevy in a way these products are still recognizable. For example, when I look at a Malibu Classic, I want to see the Buick luxury. A Pontiac SS (find a name) with better power-to-weight ratio and massive brakes superior to a Chevy SS. Hummer goes to Chrysler with some engineering money. Saab is a non-issue.
Chevy Product Line With the Avalance, Aveo, Colbalt, Colorado, Corvette, Equinox, Express, HHR, Impala, Malibu, Silverado, Suburban, Tahoe, TrailBlazer, and Traverse, it’s tough suggesting absorbing Buick, Pontiac, and GMC to this plethora of models without suggesting 3 (you pick) get dropped. Move Corvette to Cadillac.
General Management Cadillac and Saturn brand management has been horrid. The desirability of these products has been mauled by some of the most boneheaded design decisions ever made. To have a viable GM corporate plan, both of these nameplates need a revitalization plan with a marked departure from the recent past.
United Auto Workers A reasonable cut in pay and current and retirement benefits must be in the plan. The money that once flowed so freely in the past is now gone. General Motors fancies themselves as assemblers, not manufacturers, and outsourced most parts production to non-union shops years ago, which promptly found offshore sources or assisted in their development.
CAFE The plan must have a strong plank to get the U.S. Government to the table to talk about CAFE. No survival plan can be viable with this witchcraft and voodoo math. Alternatives are available to achieve the same results faster with greater benefits causing dramatically less damage to the U.S. auto industry. Without a change of direction here, it’s just re-arranging the deck chairs on the Titanic.
New Emissions Standards Rather than GM battling it out state-by-state, the government has to step up and put an end to this madness. The U.S. auto industry is guaranteed to fail as long as this jackboot is on their throat.
“Can’t help but wonder how historians 75 years from now will write about this era.”
What they are told to write, I suppose.
The entitlement mentality that goes with this argument reminds me of the issues confronted with drug addicts and alcoholics.
The addict wants your money. He is willing to do just about anything to get it.
If you refuse to give the money, you will become the object of his resentment. He feels entitled to your money, and will be angry and haughty if you do not provide it.
If you provide the money, he will never stop asking you for more. You will end up on a virtual sucker’s list and more will be expected later.
The addict takes no responsibility for his behavior or misfortune. It is always someone else’s fault when things go wrong.
What the addict never sees is that the problem lies with him, and the solution begins by breaking the addiction. His misfortunes are a symptom of the problem of addiction, and the problems won’t go away until the addiction is confronted.
Detroit could use some rehab, but until they see their need for treatment, nothing will help.
If they are to get a bailout, we need to understand that we would be doing it in order to avoid consequences to us (the taxpayer and the economy), and not because it is going to help them.
The only good argument for the bailout is its use as a stall tactic that we use to manage our broader economic and political issues. Effectively, they are pointing a gun at our heads and threatening to kill us — that’s what junkies do, after all — and we have to respond to the threat, whether or not we like it.
The money in a vacuum is not going to fix the business problems, any more than money in a vacuum cures alcoholism or drug addiction. As long as we all understand that going into this, we can discuss it rationally. But if we are going to pretend that this cash is a magic elixir that will make everything better, we cannot analyze this intelligently, because the basic premise will be all wrong.
Let’s not forget this one:
Vehicle Liability Exposure Trial lawyers are addicted to multimillion dollar awards.
EVERY VEHICLE rolling out the door exposes the manufacturer to tens of millions of dollars in awards, often times when the driver was 100% reckless and negligent.
You cannot run a business with this business model.
Money being paid out for the resulting legal and insurance costs is money taken from new product and R&D budgets.
The survival plan must include a discussion with the federal government bringing this nonsense back down to earth.
With the American brands now going socialist with committees, plans, Czars and Commissars, when does Chevy start stamping out Trabants? Has the date been set?
CarPerson – “It’s great that Rick has Bob Lutz believing he (Rick) is the best corporate CEO since sliced bread”
Actually, sliced bread is at least useful….
It is not a bailout, it is a payoff to the UAW.
Bankruptcy is a better option for the Big 3 but terrible for the UAW.
@Pch101 :
December 11th, 2008 at 9:54 am
Chapeau!
The best analysis I read since a long time