It’s something of a long-running joke among local editorial writers that everyone cribs from either the New York Times or the Wall Street Journal‘s editorial boards. The two papers tend to lead opinion on either side of the spectrum, with the mainstream left taking its cues from the Grey Lady and free-market business types following the WSJ. If this theory still holds true in these ideologically confused times, the worm has certainly turned on the bailout. Both papers are running prominent and well-reasoned editorials against the bailout, from Thomas Friedman on the left and Paul Ingrassia on the right. Taken with the recent bad news from DC, this editorial one-two punch may just mark the high-water point for pro-bailout momentum. (Read More…)
Posts By: Edward Niedermeyer
Obama is doing what he can to avoid getting overly involved in the unfolding government-industry debacle, but as we noted earlier, that’s a luxury he can only avoid for so long (not that we blame him for trying). Nothing illustrates the tough choices that The One will face in a few short months like Chevy’s moon-shot-mobile: the Volt. Accordingly, Holman W. Jenkins Jr has a column in today’s Wall Street Journal about “the car of the Age of Obama — or at least the Honeymoon of Obama, before the reality principle kicks in.” Jenkins devotes a good deal of the column to rehashing the many, many problems with the whole Volt project, a topic we have covered extensively in our Volt Birth Watch series. His logical conclusion? “It’s a car that will be unsalable without multiple handouts from government.” And he doesn’t go easy on Obama either…
Detroit is out in the rain again, as Treasury Secretary Hank Paulson has ruled out using his $700b TARP fund to bail automakers out, according to the Freep. “I know that automakers are important to the U.S. economy. We care about our automakers,” Paulson said at today’s “TARP progress report”. But, says Paulson, “the intent of the TARP was to deal with the financial industry.” But Treasury recalcitrance isn’t just a question of principle. Paulson seems to have got the crazy idea into his head that the Detroit Three need more than the Treasury can offer right now. Aid to the industry “has to lead to long-term viability,” according to Paulson, implying that somehow a TARP-based band-aid might not do the trick. His solution? Expediting the retooling loans that congress has already approved. “We have a viewpoint that that legislation could be modified,” said Paulson. Of course, in practice this would mean stripping away everything resembling the original intent of the $25b retooling loan program. Like the requirements that it be used for retooling, that qualifying firms prove economic viability, and that it be used solely to build fuel-efficient vehicles. In other words, turning retooling loans into the short-term “bridge loan” that Paulson won’t fork over. Can it be done? Theoretically, yes. Can it be done in time? Not so likely.
When we reported on the Bush-Obama meeting yesterday, we told you that the meeting was “friendly,” but ultimately unproductive. Well, we were right about half of that, and no prizes for guessing which half. The New York Times cited unidentified sources in its coverage as saying that Bush was ready to support accelerated support for the Detroit Three on the condition that Obama convince Senate Democrats to support passage of the Columbian Free Trade Agreement which they are currently blocking. Needless to say this was a non-starter. Obama has openly opposed the Columbian FTA throughout his campaign, not only to curry favor with the unions protect US jobs, but also because in his words “the violence against unions in Colombia would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements.” Having made this human rights argument in no less public a venue than the presidential debates, was there ever any chance that he would accept Bush’s compromise? Of course not. But now Bush is steamed that this detail slipped out, blaming Obama aides for leaking the smoke-filled-room compromise to the press. Obama’s transition team now says that “there was no quid pro quo in the conversation,” but as the US News And World Report Political Bulletin reports (in exhaustive detail) this is turning into the first major rift between the outgoing and incoming presidents. As well as proving that even a bad compromise leaves everyone unhappy.
This is a big one. GM’s world-car ambitions over the last decade or so have been based on its former Daewoo plants in South Korea, which turned out 2m global-market econoboxes last year alone. Now the Financial Times reports that all five GM-DAT plants will be temporarily shut down in December, putting one of GM’s best-performing units on ice. Unfortunately for GM, this is not simply another symptom of its cash incineration and tightened credit. According to company officials, the shutdown stems from “slowing demand and GM’s need to manage production and rising inventories.” “The economic crisis is truly global,” Jay Cooney, GM Daewoo’s vice-president, said. “What we’re beginning to see here in Asia is no different from what is going on in Europe and what has already happened in the US.” Slowing markets across the Asia Pacific Rim mean the five GM-DAT factories will go from operating at 110 percent capacity to a full stop, as GM tries to sell off its remaining inventories of Korean-made Chevrolet, GM, Daewoo, Holden, Buick and Pontiac models. GM also announced that its entire Asian arm lost $6m in Q3 of this year, the first such loss in years for the usually profitable division. This also means that Asia will now be waiting (just like us) to even have a shot at buying a new Cruze which hit the streets as the Daewoo Lacetti last month.
These are indeed turbulent times in the automotive industry. With every new day comes a flood of bad news, and a fresh sense of ominous momentum. As we continue to serve up hefty sides of bailout beef, we thought we’d offer up a quick, palate-cleansing taste of the non-bailout, non-industry-implosion gossip going ’round the net. And you’ll never believe what insiders have to say about the Toyobaru coupe pregnancy scare! (Read More…)
Dear Secretary Paulson:
We are writing to urge you in the strongest possible terms to use your authority under the Emergency Economic Stabilization Act (EESA) or other statutes to immediately address a significant and systemic threat to the U.S. economy and provide emergency assistance to the domestic automobile industry.
With Gullinkambi crowing the end of time and fate for a once-proud industry, the heroes of Detroit and DC are gathering to fight the future. But one hero is turning a deaf ear to the sounding of the Gjallarhorn… at least until his fate drags him inexorably back to the fray. Bloomberg reports that today’s meeting between President-elect Barack Obama and President George W. Bush was “friendly” while they discussed “the broad health of the auto industry.” But, as the battle for a short-term federal bailout joins in Washington over coming days and weeks, Obama will be conspicuously absent. Before leaving town, The One told reporters he won’t be “spending too much time in Washington over the next several weeks.” “It’s important to bear in mind that Congress was wrestling with issues like an economic recovery program prior to the election and didn’t come to a conclusion,” said Obama. And if Congress can not come to a decision before January 20? “It will be the first priority,” Obama swears. Until then, Obama will sing praises of the Democrat’s planned short-term stimulus package, which may or may not be DOA. From a comfortable distance. In Norse mythology, the Ragnarok is merely the final fate of the Aesir, not the end of times. As a fierce battle brews in DC, Obama will wait and watch while he still can. His hour in Valhalla will come soon enough. The battle will go on.
If GM wants to have a chance of celebrating the New Year as a (somewhat) solvent company, it needs find $5b in cuts by the end of December. We’ve heard about the layoffs, forced vacations and executive pay cuts (wait, scratch that last one). But what’s going on with product development? After all, if the taxpayers are going to buy into GM big-style, we should know what we’re funding, right? CNN Money went through the GM product pipeline. (Keep in mind that things are changing fast.) The Volt and Cruze are said to be on-schedule, set to debut in 2010, the year that seems to get farther and farther away with every passing day. CNN says GM has given these two projects “protected status;” they’ll remain on schedule “no matter what crisis materializes.” Y’know, out of the clear blue sky. Of course, the fact that GM hasn’t announced a Volt battery supplier might lead you to question whether the Volt will make it in time, and anonymous information from one of the competing firms suggests a widespread pessimism on this point. So, two new products by 2010 (should the General survive till then). Anything else? Anyone? Bueller? (Read More…)
When we read over at Automotive News [sub] that GM is asking employees at the Vehicle Engineering Center in suburban Detroit, the proving ground in Milford, Mich., and the desert proving ground near Mesa, Ariz to take December 22nd and 23rd off, we wanted some answers. After all, GM spokesman Dan Flores’ claim that “it’ll give us significant savings in utilities and facility expenses,” is hardly credible. Sure, GM is trying to make $5b in cuts by the new year celebrations, but cutting two days of salaried work surely isn’t a cost-effective solution, is it? Well, we reached for the big red phone and were lucky enough to be connected directly to Rick Wagoner himself. What follows is a transcript of our conversation.
TTAC: At this festive time of year, Mr. Scrooge Wagoner, it is more than usually desirable that we should make some slight provision for the poor and destitute, who suffer greatly at the present time, is it not?
Wagoner: Why? Are there no prisons? Are there no workhouses?
TTAC: Many can’t go there; and many would rather die.
Wagoner: If they would rather die, they had better do it, and decrease the surplus population. Besides, If I could work my will, every idiot who goes about with ‘Merry Christmas’ on his lips, should be boiled with his own pudding, and buried with a stake of holly through his heart. He should!
TTAC: You… you’re not serious, right? Surely you’re better than that?
Wagoner: I’m too old and beyond hope! Go and redeem some younger, more promising creature, and leave me to keep Christmas in my own way!
TTAC: Men’s courses will foreshadow certain ends, to which, if persevered in, they must lead. But if the courses be departed from, the ends will change.
Wagoner: Bah, Humbug.
Poor Mark LaNeve. It’s bad enough that he’s gonna be fired soon for having overseen some of the worst sales declines in GM history, including a 45 percent plummet last month. Now, those twisted bastards over at Toyota won’t even let him enjoy a freaking football game without publicly humiliating and annoying him with those damned “saved by zero” ads. Luckily, LaNeve always has a sympathetic ear over at the Detroit News. Or six. No fewer than three scribes get credit for giving voice to LaNeve’s tortured soul in a terse paragraph that tugs at the funnybone heartstrings. “I’m a football fan,” LaNeve told DetN during the weekly GM sales call. “I saw (“saved by zero” ads) 52,000 times,” he reportedly “moaned” of his Sunday otherwise well spent. Well, I guess you gotta say something during those sales calls. Y’know, once you get past the “we’re down 45 percent” bit. (Warning, Video NSFS (Not Safe For Sanity))
Nobody should be too surprised that Avengers aren’t selling particular well in Britain. Relaunching the Dodge brand a year ago hasn’t exactly paid off for Chrysler. But at least now they’re getting some media play from it… although not the good kind. Autosavant reports that Dodge is rapidly becoming a joke famous in Old Blighty for offering its butched-up Sebring sibling at literally half of its MSRP. In all fairness, the deal was offered at retailer website Broadspeed.com, and apparently Chrysler is actually unhappy about the development. After all, the the British list price for a fully-loaded Avenger 2.4 SXT was already low for its class at $28,700. Broadspeed’s $14,200 deal on the same car did work, however (if only at the expense of Chrysler’s little remaining dignity), as the entire inventory sold out. Autosavant does note that “rumours suggest the dealers who supplied the cars did so without the consent of an angry Chrysler UK, which is currently expensively promoting another Dodge, the Journey, in prime-time TV commercials.” On the other hand, at least the Avengers are gone now, rapidly depreciating in the hands of British bargain-seekers who will likely be derided in the thoroughfare for their choice in vehicles. And we’re left to guess at just how low Chrysler (or their dealers) will stoop next.
Co-dependent relationships are never pretty, and they usually end only when one half ends up in prison, the poorhouse or the morgue. With GM seemingly headed towards all three at once, its once-captive credit arm, GMAC, swears it will no longer play Tina to the General’s Ike. Automotive News [sub] quotes GMAC CFO Robert Hull as saying his firm plans to “shift GMAC from its captive roots to an independent deposit-funded lender and servicer.” As we reported earlier, changing GMAC’s status to a “Bank holding corporation” will give it access to the $700b TARP fund, but it also means that GM will have to exit the building. As in sell off its remaining 49 percent so that GMAC can rejoin society as a full-service bank, complete with FDIC insurance, credit cards, and a little dish of Werthers Originals by each teller. So GMAC will get taxpayer-funded security, and GM might even get a little cash out of the deal… but who loses? Why, the dealers, of course!
Recently-increased emissions standards (along with CAFE requirements) have received quite a bit of attention from Detroit’s blame-everyone-but-us squad. But bailout-begging agendas aside, just how hard are the new(ish) EPA standards to meet? Not that hard at all, according to an EPA report covered by Green Car Congress. The Office Of Transportation and Air Quality’s Report on Engine and Vehicle Compliance (pdf) for 2007 shows that the overwhelming majority of vehicles on the market actually meet or pass the EPA’s Tier Two Bin Five standard in current form. In fact, most US-market cars and light trucks currently boast a 46 to 90 percent compliance margin, meaning the amount by which they actually exceed EPA requirements. Under the EPA regime, models which “over-comply” with standards earn their makers credits which can be applied to under-conforming models. Of the 40-odd manufacturers on the market, five (Ford, Honda, Hyundai, Kia, and Toyota) had a positive Tier Two emission limit credit balance for 2007, while only Aston Martin carried a net-negative credit balance. The credit-positive firms tended to certify most of their vehicles at Bin Five levels, while adding a few sub-Bin Five (higher standard) vehicles to gain credits. Those which merely met the standard certified at a mix of Bin levels which added up to an average of Bin Five. That wasn’t so hard, was it?
Dig through the dire news about GM floating around this morning’s autoblogosphere, and you just might notice a story that doesn’t quite jive with all the doom and gloom. Bloomberg reports that GM is “in talks with a local partners” to increase its 34 percent stake in GM-SAIC-Wuling, a Chinese light-truck and van maker. As our man in Beijing reports, China is aggressively stimulating its car market (which has bottomed out, by Chinese standards, at 11 percent growth) and GM wants in on the action. Of course there are just a few issues with the move– beyond the fact that GM has no cash with which to make such a deal. SAIC currently owns 50.1 percent of the consortium, and its Chairman Hu Maoyuan tells Bloomberg that it won’t be giving up its majority. “GM and our partner in Guangxi (Wuling) are still discussing how to settle the share transfer,” says Hu. So GM wants to spend cash it doesn’t have to increase a non-majority stake in an overseas joint venture. Non-starter, right? Not according to Ricon Xia, an analyst with Daiwa Associate Holdings…
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