To all General Motors Dealers:
On Tuesday, Feb. 17, GM will submit an updated viability plan to the U.S. Treasury. The document will outline a significant restructuring of the company, along with demonstrating that we have a detailed plan for long-term, sustainable success as a viable, global enterprise.
Because this plan submission is of vital interest to you, I wanted to make you aware of some key activities regarding the plan submission:
The fix is in. Even before GM pressed “send” on their viability plan to Congress—justifying their additional call on the public purse—the Obama administration has decided to offer the ailing automaker the second tranche of a Bush-initiated $17.4B federal loan. That’s $4B to you and me. Literally. Reuters reports that “an aide” signaled the pre-approval approval. The Houston Chronicle carries a Bloomberg story that repeats the claim, citing “a person familiar with the plan.” If this story checks out, it’s a slap in the face of accountability; for both GM AND our elected representatives. Yes, the second check was scheduled for payment, but the timing and the disconnect is still startling. Here’s some more money, now let’s have a look at that plan for profitability by 2011. Oh and if we don’t like it, we’ll call the loan and down you go. In truth, no matter which way this goes, we’ll never see that money again. Nor the money after that.
The United Auto Workers (UAW) contracts are facing unprecedented public scrutiny. It could have something to with the fact that it’s now OUR money the automakers are pissing away—sorry, “lavishing upon” union members. Or it could be that the normally passive—sorry, “pro middle class” MSM’s smells blood in the union boss’ water. In any event, here’s one for working class heroes: free legal advice. The Freep: “Established in 1978, the UAW Legal Services Plan provides ‘personal legal services,’ to about 725k workers, spouses and retirees from several companies, according to the program’s Web site. It is the largest pre-paid legal services program in the country. Before I give the jumpers the inside dope (in a non Michael Phelps kinda way), you wanna guess how much 290 attorneys cost the Big 2.8 et al.? Seriously, you gotta guess. ‘Cause the Freep doesn’t even estimate the cost. Blood boiling? Ready for the jump then . . .
After swimmer Michael Phelps won a drawer full of Olympic gold, he signed a deal with Kellogg’s to promote Frosted Flakes. Stupid move. Tens of millions of parents know that Frosted Flakes make their kids bounce off the friggin’ walls. Part of this healthy breakfast, my ass. All Phelps had to do was align himself with brands selling healthy living and he could have smoked the finest Maui Wowee, in Maui, for the rest of his life. Anyway, Phelps got caught doing bong hits. A smart handler would have used the opportunity to strengthen the Phelps brand. “Michael is obsessed with fitness. He doesn’t drink alcohol or smoke cigarettes. He regrets using an illegal herbal drug for relaxation. He is now exploring yoga and other alternatives. He encourages his millions of fans to learn from his mistake, as he has.” Let the Mary Jane debate begin! Anyway, Phelps signed a million dollar deal with Mazda to promote the brand in China. (Huh?) When the swimmer got busted, they somehow convinced him to make this entirely bogus, po-faced apology. It manages to make both Phelps AND Mazda look stupid. Yes?
That’s TTAC Ken Elias earlier today in Bailout Watch 394. And lo, it did come to pass. Just hours later, Automotive News reported: “General Motors is expected to identify more than $1 billion in savings from additional plant closings and factory work-rule changes when it files a viability plan with the US Treasury on Tuesday, said a source familiar with ongoing stakeholder negotiations.” And no, it wasn’t Ken. Of course, Elias goes on to say big whoop. “[It’s] not enough to right a ship that’s losing $2B+ a month in cash flow.” Somehow that perspective didn’t make it into the AN piece. Still, the article’s well worth a read—if only for a laugh. Ladies and gentlemen, we have a new (yet old) straw man to set alight: True North.
One of our Best and Brightest wrote an insightful comment on how NOT to buy a car in another thread. I asked flashpoint to expand on his advice for your edification.
If you purchase a car using your Home Equity Line of Credit (HELOC), it only makes sense to do so if:
#1 you are in excellent financial standing with excellent credit standing;
#2 you have a steady occupation with little risk of being laid off; and
#3 the entirety of the car price can be paid off with the HELOC.
Now that GM’s Car Czar is slinking off into the sunset before his bankruptcy-proof pension becomes a bone of contention (“I’ll have to check with my accountant about that”), the man of Maximum is shooting off his mouth in the great Lutzian style. “My personal favorite would be to see Saturn survive and prosper,” GM’s vice chairman told Automotive News [sub], “But frankly, the reality is that that is probably not going to be the outcome.” Does this sound a bit like finding out you were dumped via a batch e-mail? AN somehow managed to find a doomed Saturn dealer (as they all are, now) who didn’t use expletives when hearing of the multimillion-dollars-per-year executive’s casual execution of the Rethink brand. “That really seals our fate,” said Lasser, owner of Saturn of Denville, Saturn of Mount Olive and Saturn of Livingston. “I think they knew this fact months ago, and they never shared it with us.” So who killed the non-electrifying cars?
Word and music by John Rich. (Lyrics after the jump) The same singer-songwriter who delighted crowds with the deliciously, unintentionally ironic Raisin’ McCain. You know, for background.
Well, they would say that, wouldn’t they. I mean, you can’t very well say “no matter what kind of business plan Chrysler and GM present us, we’re not throwing these companies into Chapter 11,” not if you’re trying to appear tough on bailouts and the causes of bailouts. And The Detroit News is talking about politics, which is all about appearances.
“We’re going to need a restructuring of these companies. How that restructuring comes about is going to have to be determined,” said David Axelrod, a senior adviser to President Obama, said on NBC’s “Meet the Press.”
Axelrod’s comments came in response to questions about a Wall Street Journal report on Saturday that GM will offer two options when it files its federal restructuring plan on Tuesday: A continued infusion of federal aid to keep the company in business, or a government-financed bankruptcy . . .
“We need an auto industry in this country,” Axelrod said Sunday. “We have an interest in seeing the auto industry survive. But it’s going to take a real restructuring.”
Back when TTAC spied with our little editorial eye GM’s slide into bankruptcy, we never imagined that it would be such a convoluted process. On one hand, GM’s slow-mo train wreck has provided plenty of grist for our mill. On the other, there’s only so much Firesign Theater a carmudgeon can take before he or she wants to play the Eagles “How Long” at top volume and be done with it. Still, ours is to question why. So why are reporters covering the GM bondholders debt for equity swap—or lack thereof—resorting to double negatives? “General Motors Corp. bondholders are working with the automaker to craft a debt exchange that discourages investors from not participating, according to a person with direct knowledge of the discussions.” I’m gonna take a flyer here: is that the same as forcing them to participate? So what stick has Bloomberg unearthed/used to suggest common sense?
If you recall, President Bush gave GM some money ($9.4b) and told them to come back later for more ($4b). The second tranche (as gourmands would say) depending on sorting out the United Auto Workers (UAW), convincing bondholders to swap debt for equity and rationalizing their brand portfolio. Anybody familiar with the UAW, rapacious capitalists (are there any other kind?) and General Motors knew that the chances of ANY of that happening were somewhere between none and the situation going in reverse. And so it hasn’t come to pass. After we learned that GM bondholders aren’t playing ball, Automotive News reports that the UAW has walked away from the ballpark. It seems the union isn’t happy with GM’s insistence that the union accept stock in lieu of cash for the GM-funded Mother of All Health Care Funds (a.k.a. VEBA). Did I say GM-funded? We’re on the hook now. Anyway, why would the UAW step up to the plate? The union would have to accept the idea that GM has a future when they, of all people, know it doesn’t.
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