David A. Skeel Jr. is the S. Samuel Arsht Professor of Corporate Law at the University of Pennsylvania Law School and author of Icarus in the Boardroom (Oxford University Press, 2005) and Debt’s Dominion: A History of Bankruptcy Law in America (Princeton University Press, 2001). In an article in the free market American Enterprise Institute’s house organ, ” The American,” Skeel says that while the Obama administration avowedly patterns itself after FDR’s New Deal, the deal that the President’s task force on autos has cooked up for Chrysler would actually “make a true New Dealer turn over in his grave.”
Prof. Skeel points out that a major aspect of the New Deal was reform of bankruptcy laws that permitted sham sales called “equity receiverships” to bondholders and other creditors.

Chrysler’s stiffed a member of our Best and Brightest:

When I purchased my ’09 300C I traded in an ’05 that had a Chrysler extended service contract with time and mileage remaining. I called Chrysler and they gave me all of the information for obtaining a pro-rata refund as per the contract. I faxed it over and got very quick service. I had a check from Chrysler in the amount of $363.62 in under two weeks. I cashed it at my bank and today my bank mailed it back to me: Insufficient Funds! The check was drawn on a JP Morgan Chase account. I guess the bankruptcy is going to strike close to home.

In an interview with Autoweek, GM CEO Fritz Henderson finally stepped out from under Rick Wagoner’s shadow and stated his firmly held belief that the new Cruze and Spark will spark Chevy’s renaissance. Or, if you prefer, they’ll “fortify Chevrolet as a competitive, top-quality brand in the next two years.” True story?

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The Detroit News has obtained a confidential memo from GM to federal legislators. The smoking gun reveals that the soon-to-be-taxpayer-owned (officially) automaker plans to boost US sales of vehicles built in China, Mexico, South Korea and Japan by 98 percent (to 365k units). In the face of union criticism of the plans, GM claims that the percentage of its imports will remain at 33 percent. By 2014. When its sales recover to 3.1 million vehicles per year. Providing it maintains its current market share. All things being equal. With the wind in the right direction.

At the same time, The General aims to shrink production in Canada, Australia and European countries by about 130k. For a sneak peak at the less tortuous justification for this outsourcing on Uncle Sam’s dime, we turn to veteran Detroit apologist and Washington Post car critic, Warren Brown . . .

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There are x+1 reasons GM is where it is today, with x being a very large number. Those reasons have been hacked and stacked here and elsewhere: a chief executive so hesitant it’s a wonder he didn’t daily swaddle himself in Cottonelle; a Board of Directors so frightened of change that they never swapped out the pine paneling and shag carpet in the board room; a union stuck so far in the past that Bakelite seems to them unspeakably futuristic. To paraphrase JFK, while success may have a thousand fathers, GM’s defeat also has a thousand fathers – and a network of 6,200 dealers.

200km/h ticked by on the digital speedo and I was still pressed into the sports seats. 230km/h flashed by, and the scenery of autobahn, cars, and trees started to blur. 260km/h rolled by and I started to think “Holy hell!”. At 303km/h I became a laser-guided Autobahn Cruise Missile. I swear I heard sonic booms echo off the Opels I passed. The Porsche and I were melded at this point, a human-machine interface so cohesive it would take three g’s of braking force from the vented discs to separate us. I thought I had found driving Nirvana at this point, but I was wrong.

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Police in Wisconsin need no warrant to electronically track the moves of motorists not suspected of any crime, according to a ruling handed down yesterday by the state court of appeals. The decision came as a three-judge panel unanimously declined to overturn the stalking conviction of Michael A. Sveum that had been based largely on evidence provided by a Global Positioning System (GPS) tracking device secretly installed on Sveum’s car while it was parked on his private driveway.

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Captainzerocool writes:

Sajeev, I’ve recently acquired a 1969 Ford F100. It is a solid truck with the 360FE and three on the tree. It does, however, have an electrical problem that I can’t nail down. Apparently, the key or the ignition switch isn’t needed to get the motor to attempt to turn over. Once I attach the positive terminal, the starter motor begins to rotate and will not quit until the battery is disconnected. The starter and starter solenoid have been replaced. Is there some random wire that isn’t/needs to be grounded? Any and all help is appreciated.

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A TTAC source signs in with an interesting question:

I have one on “anonymous background.” Did you know members of the board of bystanders at Chrysler get new cars for life? I’d have thought Cerberus would have gotten rid of that stuff, but no. There is someone I know who was a director who got his new car this year. You think the gov’t is going to change that policy now that we own it? I wonder how many other “traditional” perks that were waaaay too common in Detroit and not the rest of the world are still being given to retired execs and board members?

When life gives you lemons, you make lemonade (or glazed strawberry lemon streusel muffins). When Chrysler gives you lemons, you’re SOL. Since April 30, Judge Arthur Gonzales has to approve payment on claims against Chrysler incurred before C11. That includes “lemon law” settlement checks to customers who bought defective Dodge, Chrysler or Jeep products. Not happening. “San Diego attorney Ellen Turnage represents a client who reached a settlement with Chrysler over a 2006 Dodge Magnum with a bad suspension. The car has been returned to Chrysler, but the automaker’s check bounced. ‘Now he’s got no car and no money, so he can’t go buy a new one,’ Turnage said of her client. ‘He’s stuck. We’re hanging on to a glimmer of hope that at some point this will all be resolved.'” As the LA Times reports, Turnage’s pessimism is well-justified. Instead of saying, sorry, we’ll expedite this, the new Chrysler is telling aggrieved customers to FO&D.

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The US Treasury Secretary had a little chin wag with Reuters re: GM. It seem that Mr. Geithner is as pleased as punch with his minions’ work with Chrysler’s bankruptcy. So pleased, in fact, he sees ChryCo’s dissolution solution as a template for GM’s C11. You know “if”. “There is a range of ways to achieve [GM’s restructuring]. You saw what we did in the Chrysler context as one way to do it and if that proves necessary in the GM context, we’ll do that.” And then the aforementioned “if”. “But we’re not at the point where we need to make that judgment yet.” Sure. They’ve got 28 days to convince GM’s bondholders—a motley crew of “investors” looking at differing payout and maturity dates—to take a flyer on a company that hasn’t made a profit for . . . sorry, debt for equity swap. And here’s some fuel for those who see the government’s role in the US auto industry as reprehensible.

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A TTAC source has pinged us: “‘I’ve just heard 2nd hand that the Delphi OnStar team has had all their GM contracts canceled. It seems that GM may be getting rid of OnStar completely, but it isn’t clear when that would happen. This sounds like a pretty good business decision to me since cell phones have become so widely adopted, and navigation systems are getting cheaper.” This tip flies in the face of a recent Reuters report, in which the head of said OnStar claimed the service was wildly profitable. OK, “highly.” Which is the same as “wildly,” given GM’s current slide into C11. Anyway, “GM does not break out its revenue or profits from OnStar, but had said the division had turned profitable in 2003 and has been steadily and more profitable since. The division receives part of its revenues from consumer subscription fees.” One possible explanation (just in): GM is simply “de-sourcing” Delphi as OnStar supplier, as it prepares to deep-six the bankrupt parts-maker’s contracts. Or something. But wait! More tipster action from an ex-OnStar employee after the jump.

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Commentator David Dennis asks…

I hope I’m not changing the subject too much, but there’s one thing that’s really bugged me about TTAC: your dislike of “Maximum Bob” Lutz. I may have read too many buff books, but I’ve always instinctively liked the guy.

I can’t help but notice that Chrysler had a pretty good car lineup when Bob jumped ship for GM. Once Bob was gone, their new car lineup disintegrated into the awfulness that has them in their current pathetic condition.

And likewise, once Bob started at GM, GM cars started getting a lot better, to the point where TTAC and other reviewers noticed.

Is Bob Lutz a great man or an out of touch domestic automaker drone? It seems to me that he’s pretty good at product development, or at least at convincing companies to approve better and more adventurous ideas already percolating.

I know he makes some outrageous comments but sometimes there’s a lot of truth to them, too.

Thoughts?

D

To once again paraphrase an old Soviet joke, there are two ways Detroit can be turned around: the natural and the miraculous. The natural way is that the Archangel Michael and his bands of angels descend to earth and work 24 hours a day to save the city’s economy. The miraculous way is that the automakers do it themselves.