The Presidential Task Force On Automobiles (PTFOA) came, they saw, they laughed. Well, maybe not laughed. But there’s a kind of humor in the fact that the PTFOA shot holes in every single one of the company’s assumptions, save the idea that a FIAT merger will save Chrysler. The federal quango’s “Determination of Viability Study; Chrysler, LLC” is, to say the least, not kind to the automaker’s assertions. It slates ChryCo’s scale (too big), quality (sucks), product mix (sucks), manufacturing (outdated), and geographic concentration (U.S.-centric). And then concludes. without any credible justification “A partnership with another automotive company, such as Fiat or another prospective partner, which addresses many of these issues could lead to a path to viability for Chrysler.”
The Presidential Task Force On Automobiles (PTFOA) came, they saw, they laughed. Well, maybe not laughed. But there’s a kind of humor in the fact that the PTFOA shot holes in every single one of the company’s assumptions. The quango’s “Determination of Viability Study; General Motors Corporation” is, to say the least, not kind to the automaker’s assertions. Looking forward, some of GM’s stakeholders have a lot to worry about. Dealers: “These underperforming dealers create a drag on the overall brand equity of GM and hurt the prospects of the many stronger dealers who could help GM drive incremental sales.” European ops: “The European business is seeking additional capital beyond the funds requested from the Treasury. These funds have not been allocated and thus represent a risk to the viability of GM’s current plan.” Strangely missing from this report: any mention whatsoever of labor costs. Nothing, save “legacy liabilities.” Huh.
I had the privilege of driving a Pagani Zonda. Nice car, especially for a guy who used to design Argentinean trailers. The Zonda’s interior periscopes (vents) were a bit much, but the engine and handling made up for it. The R looks a bit extreme for my tastes. Still, it might be a bit of fun.
Click here for the Presidential Task Force on Automobiles’ “Restructuring Fact Sheet.” Perhaps the most relevant statement: “The new GM will have a significant focus on developing high fuel-efficiency cars that have broad consumer appeal because they are cost-effective, have good performance and are reliable, durable and safe.” I guess branding isn’t the PTFOA’s forte, as that’s about as generic a description of a car as you can get. Hey guys, pick one. Of course, they can’t say that. So we have to assume that the first on the list is considered the most important; it certainly fits in with the ruling party’s political priorities. And, as TTAC’s Best and Brightest point out below, it would be easy enough for the feds to make fuel efficiency THE key sales determinant: just hoik the gas tax. See how that works?
The Presidential Task Force on Automobiles (PTFOA) has seized control of Chrysler and GM, the latter more completely than the former. As part of their Monday manifesto, the PTFOA has laid the groundwork for Chrysler’s liquidation and GM’s entry into Chapter 11. They’ve created a new Warrantee Commitment Program that will guarantee Chrysler and GM vehicle purchases, even if (when) the automakers go belly-up. TTAC’s Ken Elias calls ChryCo’s final approach. “To do the Chrysler–Fiat deal, the secured bank lenders need to write off their loans. Why would they? They get more in a Chrysler liquidation. And even if they make a ‘deal’ with Fiat, so what? How does it solve the problems for the next several years before any Italian technology (small cars, small engines) shows up in Chrysler products? So Chrysler goes to liquidation.” As for GM, even the neophytes at the PTFOA know it can’t do what it needs to do outside of bankruptcy. Given that the automaker will now have the full backing of the federal government, controlling everything from car “warrantees” (warranty?) to the Board of Directors, why not? Who wouldn’t trust American Leyland?
Students of history may recall the Works Progress Administration (WPA). Born in the heart of the Depression, 1935, the agency created some three million federal jobs, sucked-up $11 billion worth of taxpayer money (back when $11 billion was a lot of money) and built hundreds of roads, bridges and buildings That said, the WPA did sweet FA to decrease unemployment figures. And its inefficiency was legendary (nicknamed the “Whistle, Piss and Argue”). But the WPA was an integral part of a sea change in federal government power and scope. And now, it’s back! The Detroit News mentions, almost in passing, that Presidential Task Force on Automobiles (PTFOA) is creating a “Director of Auto Recovery for Auto Workers and Communities.” The man tipped to spread the love: Edward Montgomery, a “top labor economist” and former deputy labor secretary. Eddy’s tasked with “working to leverage all resources of government to support the workers, communities and regions that rely on the American auto industry.” His official PTFOA remit after the jump.
The New York Times reports that GM CEO Rick Wagoner has resigned his position with the ailing American automaker. Wagoner will tender his resignation ahead of President Obama’s statement at 11 a.m. today regarding the next round of bailout bucks for the zombie automaker. “As recently as March 18, Mr. Wagoner said in an interview that he had no indication that his job was in jeopardy because of the task force.” The PTFOA has directed that Wagoner’s hand-picked successor and current COO Fritz Henderson assume the top slot—temporarily. Word has it that Steve Rattner, the head of the Presidential Task Force on Autos, initiated Wagoner’s long-overdue defenestration. [General Motors Death Watch below.]
The Presidential Task Force on Automobiles (PTFOA) has given Chrysler 30 days to tie-up with Fiat or it will recall federal loans and throw the company into bankruptcy. If they DO do the deal, they get a $6 billion “loan.” I’m no corporate negotiator, but the move seems to give all the power to Fiat, an automaker with its own share of troubles. Well, not ALL the power, according to The Detroit News:
“Chrysler’s deal with Fiat has been restructured, a government official said, to reduce its initial ownership stake down from 35 percent. Fiat wouldn’t be able to obtain a majority of Chrysler until the new $6 billion in government loans were repaid, the official said. The fact sheet also notes that there are guarantees of U.S.employment in the plan. “After extensive consultation with the administration, (Fiat) has committed to building new fuel efficient cars and engines in U.S. factories,” the fact sheet said.
Press reports confirm that GM CEO Rick Wagoner’s hand-picked successor Fritz Henderson will succeed him—temporarily. According to The Wall Street Journal, the Presidential Task Force on Automobiles (PTFOA) sent GM a memo mandating that the company replace Wagoner with Henderson as interim CEO and elevate Board Member Kent Kresa as interim chairman of the board. The clear implication: the PTFOA is now in control of GM at its highest levels and fully intends on restructuring the automaker according to its own strategy. To justify this wholesale assault on free market capitalism, the PTFOA ripped GM’s viability plan to shreds. The Journal reports the ultimate condemnation: “While the Company has made meaningful progress in its turnaround plan over the last few years, the progress has been far too slow, allowing the Company to continue to lag the best-in-class competitors.”
Reuters reports that the Presidential Task Force on Automobiles (PTFOA) is taking a “hard line” on the next round of federal bailout bucks for Chrysler and GM. As we’re in the political realm, “hard line” means taxpayers will fund the automakers for the next 60 days while the PTFOA rolls up its sleeves and takes greater control of Chrysler and GM’s business. The implication: they’ll force the unions and bondholders to take a buzz cut and accept a government mandated debt-for-equity swap. Oh, and re-org GM’s Board of Directors to better suit their, uh, tastes.
“We have unfortunately concluded that neither plan submitted by either company represents viability and therefore does not warrant the substantial additional investments that they requested,” said a senior administration official, who asked not to be named. (Read More…)
On hearing that Rick Wagoner is outta here, Asia-Pacific shares nosedived on Monday, which wiped out most of the gains they had made last week. It’s not that anyone is missing Red Ink Rick. Traders at the Asian exchanges see the departure as a sign that “the US government might allow one of the world’s biggest car makers, General Motors, to go bust,” writes the Financial Times [sub].
As Wagoner’s defenestration hit the wires, the Nikkei in Japan dropped 4.5 percent to record its worst day for two and a half months. Hong Kong’s Hang Seng lost 4.7 percent—its biggest fall in three weeks. Taiwan shares were down 3.4 percent and in South Korea the market dropped 3.2 percent.
A person close to General Motorstold the Financial Times said that the resignation of Rick Wagoner at the weekend made it likely the company would file for bankruptcy protection sometime in the next few weeks.
It’s been the weekend of the long knives for auto execs the world around. Rick Wagoner “did the right thing” and “resigned.” Meanwhile, across the frog pond, the board of French carmaker PSA had to unceremoniously fire Chief Executive, Christian Streiff, on Sunday. They replaced him with Philippe Varin, who will take up the position on June 1, Reuters writes.
The French board definitely has less of a stomach for losses than their American colleagues. Streiff was let go “after Peugeot last month posted a €343m ($460m) net loss and said it expected to stay in the red until 2010,” says Reuters. A measly three digit million number would barely register on a Detroit Richter scale. Not so in France. They want rolling heads:
We are anticipating an announcement soon from the Administration regarding the restructuring of the U.S. auto industry. We continue to work closely with members of the Task Force and it would not be appropriate for us to speculate on the content of any announcement.
General Motors CEO Rick Wagoner is set to resign his position tomorrow. The timing of Wagoner’s departure is clearly symbolic. It’s meant to signal the nation that it’s OK throw bailout billions GM’s way because it’s a new day. Well, there’s a new guy at the top, anyway. Which may or may not be true, depending on whether or not Wagoner’s hand-picked successor and virtual clone Fritz Henderson inherits the job. If Henderson gets the nod, the symbolism of Wagoner’s defenestration will be far richer than its architects intended. For it will confirm the growing suspicion that the president’s mantra of hope and change is heavy on the hope and light on the change. And while that plays out, Wagoner’s resignation will eventually be seen as a way point on a journey of self-destruction, rather than a turning point on a bridge to… nowhere.
From the moment Chrysler announced a deal with Getrag to build paddle shift transmissions in Indiana, TTAC flagged it as a disaster in the making. That was back in late ’07. By then, ChryCo sales were tanking. The idea that the ailing American automaker needed—or could afford—700K new transmissions per year was incredible. And so it didn’t come to pass, taking taxpayer credits and grants with it. And now IBJ.com (no really) reports that Indiana Rep. Dan Burton met with U.S. Treasury Secretary Tim Geithner and demanded that ChryCo refund Tipon County $10M before they get their next round of bailout bucks.
County officials told Chrysler they want the company to honor an agreement to cover all the county’s cost if the plant is not completed. In addition to the $5.5 million in bonds sold to Chrysler, Tipton County wants the company to provide $4.2 million for other bonds and $300,000 in county economic development funds used for infrastructure improvements.
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