More than a few TTAC commentators pooh-poohed the risk to the capital markets by Obama giving the UAW cuts ahead of senior creditors. Now the chickens are coming home to roost. There was that thing I sent you yesterday about Indiana, burned in the Chrysler bankruptcy, announcing the state won’t invest in bailout companies. Legislators giving tax incentives and other state aid to business is one thing, the state treasurer managing pension funds and state investments has a higher level of fiduciary (and legal) responsibility, and he’s not going to risk getting sued or worse. Today, Bloomberg reports that a bunch of hedge fund managers say they won’t invest in unionized businesses. Also, Jack Welch described the governments actions as “The creditors’ rights were trashed and the unions got 55 percent of the company.” People may not always be rational actors, but when you have everyone from economics professors to mom & pop investors asking “who will buy bonds if the terms are rewritten by the gov’t?”, it shouldn’t be any surprise that institutional investors act accordingly.

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.

GM’s investors and bondholders have taken their lumps. The value of their investments have plummeted and they’ve been blamed for enabling GM’s mismanagement. Hedge fund managers and institutional investors are not the most popular people in the wake of the financial meltdown so it’s easy to forget that many investors are not Wall Street wheeler dealers, but regular folks with investments.

Charles “Chuck” Hurley is the head of Mothers Against Drunk Driving (MADD). He’s also a totalitarian nanny-stater who wants arbitrary check lanes and a 55 mph national speed limit. Hurley also hearts a .04% Blood Alcohol Content limit, which would make you DUI after one drink. Oh, and he has ties to the red light camera industry. The news arrives via a Washington Times editorial so it’s written from the right. But the facts are facts. Way too busy with an embroidery job for a motorcycle club to write on this but wanted to give you a heads up. It’s been missed by the autoblogosphere.

Ultra luxury cars are cheap. Not for folks like you and me, obviously, but the Maybach’s target market, for example, consider their wheels one of their lesser expenses. Especially when you compare the cost of a car—any car—to, say, a Gulfstream IV (which is such a guilty pleasure these days). Not to mention (please!) divorce. For players at this level, a Quattroporte is still small beer. Even so, I reckon Joe Walsh nailed it when he sang, “My Maserati does 185; I lost my license, now I don’t drive.” For those wealthy people legally obliged to sit in the back of the bus, or simply prefer to be driven, LCW Automotive presents a little personal Obama-mania. Tacky? Yes. And?

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My brother fixes industrial machinery for a living. The range of skills he needs– mechanical, electronic, hardware, software, CNC stuff, as well as troubleshooting abilities– makes that kind of work as technically demanding as just about any job there is. You can’t learn to do what he does in a university. So for-profit ventures like ITT Technical Institute, Universal Technical Institute, New Horizons computer training centers and others fill a needed role. It’s understandable also that during difficult economic times those schools would market themselves aggressively to people looking for new career opportunities. There’s a fine line, of course, between providing educational opportunity and exploiting people’s desperation about the economy.

What to do with all of GM’s brands? That’s one of the big questions that will vex the Presidential Task Force on Automobiles, as it makes its final determination on Chrysler and GM’s fate. Robert Farago’s branding guru Al Ries thinks The General should give Buick, Saab, Saturn, Hummer and Pontiac their discharge papers. Keep Saturn for entry level cars, Chevy for the mass market, Cadillac for luxury cars and GMC for trucks. Coincidentally, while RF was talking to his marketing maven, I was exchanging emails with Paul Earle, president and founder of River West Brands. Earle specializes in revitalizing distressed, orphaned and ghost consumer brands.

With all that the domestic automakers have done wrong, it’s important to remember the things they’ve done– and continue to do– well. In his post about dumb moves behind the wheel, Jonny Lieberman highlighted one of these engineering accomplishments: Heating Ventilation and Air Conditioning (HAVC). As JL pointed out, even when Detroit was making malaise-era cars that barely ran, their HVAC systems were the “envy of the world.” Sure, Volvos and Saabs had good interior heating and defrosting systems, not to mention heated seats. But Detroit led the world in keeping drivers physically comfortable. In this, geographic happenstance played a critical role.

American taxpayers have loaned Chrysler $4b. The Auburn Hills automaker has their hand out for an additional $3b. And what do the taxpayers get? A full newspaper page ad thanking them and a bunch of IOUs. Meanwhile Fiat is looking to pick up a third of Chrysler from Cerberus for little more than blue sky and a business plan. Political and economic ideologies aside, it doesn’t seem fair. Senator Jeff Bingaman (D-NM) agrees. During the confirmation hearings for the incoming administration’s Treasury Secretary, Sen. Bingaman asked Timothy Geithner what’s up with that. “It’s hard to explain why the American taxpayer shouldn’t own Chrysler,” the Senator asserted. True dat. When Daimler bought Chrysler, they didn’t ask U.S. taxpayers to finance the deal. When the Germans off-loaded ChryCo on Cerberus, no taxpayer subsidy was involved. If Fiat isn’t anteing up any cash– which it isn’t– somebody’s got to pay for adapting the Fiat platforms for the American market and retooling the plants. (At least in theory.) Cerberus, Chrysler and Fiat are hoping that the Italian job is compelling enough to obscure what’s really happening here: U.S. taxpayers are being fleeced. Again. Still.

Even before the debate over federal loans to the domestic automakers, a number of TTAC editorials pointed out that a bankruptcy by one of the The Big Three would lead to a C11 by the remaining two. Bankruptcy allows the abrogation of labor contracts; an automaker in Ch. 11 proceedings would be able to lower labor costs significantly, putting the other car makers at a competitive disadvantage. [ED: one of Ford’s SEC filing made that very point.] Parts provider Checker (no cabs since 1982) tried to negotiate wage concessions from its employees’ labor union. But even with bankruptcy hanging over their heads, the union wouldn’t make the needed concessions. And so Checker has become the eighth major US auto supplier that’s filed for bankruptcy in the past year.

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When I go to the North American International Auto Show (NAIAS), I like to get downtown early, around 7 AM. That way I don’t have to wait in any lines for credentials and I can get my favorite free parking spot about a block from Cobo Hall. While waiting for the press conferences to begin today, I stopped at the Tesla booth to say hi to Rachel Konrad, head of communications. Tesla first appearance at NAIAS consists of a small booth next to the Lotus display. Tesla’s displayed a naked Roadster chassis, which laid the car’s Lotus roots bare. But Konrad was emphatic: only a small percentage of components are shared with the Elise. She said that 150 not-Elise Roadsters have been delivered. They’re completing 15 vehicles a week, with 1100 people on a waiting list. Their facility has an ultimate capacity of 40 cars a week. With production proceeding, albeit at a relatively slow pace, Tesla has grown their company beyond Tucker stage (50 units built). It remains to be seen if they surpass Bricklin (2854 SV1s) and DeLorean (~9000 DMC-12s). In the meantime, they’re building real cars. I know because I got to drive one…

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There are all sorts of end of the year automotive lists. The ten best this and the ten worst that. My favorite list is not a car gong per se. The Darwin Awards are given to those who improve the gene pool by removing themselves from it. As you might imagine, automobiles figure prominently in this roll call of death by stupidity. To wit: Ivece Plattner of Italy. Plattner was driving a Porsche Cayenne (which is already a bit of a red flag), stuck in traffic on a railroad crossing, waiting for the light to turn green. When the crossing barriers came down, they trapped the Cayenne.

Oregon governor Ted Kulongoski’s recently released transportation plan brags of creating jobs to build roads and bridges. But its main focus: making sure those roads won’t be used. The plan talks about “congestion,” “bottlenecks,” “greenhouse gas,” “carbon,” “green standards,” “non highway programs” and “incentive programs designed to reduce the number of cars on our roads.” To realize this vision, Kulongski and his supporters have to reinvent the wheel, or, more precisely, the tax on those wheels.

Last Friday was a good news day for Detroit. No, I’m not talking about President Bush’s loan package. That wasn’t so much good news as a stay of execution, with a case on appeal. And it wasn’t shadenfreude. What joy can anyone in the auto biz take from the reports that previously invincible Honda is losing money and cutting production? Or that Prius sales are down 50 percent, Toyota has suspended work on their proposed Prius plant in Mississippi, and the company will have a loss this fiscal year, the first in 71 years? No, the good news came, from all places, The Michigan legislature.

In the House Financial Services Committee hearings on loans to the auto industry, Rep. Maxine Waters hectored the CEOs of Chrysler, Ford and GM. The California democrat attacked the execs on behalf of “small” independent auto dealers on “Main Street.” “Is there a commitment by any of you to give support to these small independent dealerships that include a lot of minority dealerships that are going to close down?” Never mind how they replied. Implied but not stated: The Big Three are guilty of, at best, racial insensitivity. At worst, racism. It’s untrue, unfair and outrageous.