While Detroit News columnist Daniel Howes gently chides Motown’s hometown heroes– even as they continue to bleed to death all over his carpet– The Washington Post’s Dana Milbank kicks the Big 2.8’s CEO while they’re down. But good. The WaPo scribe warms-up with a few gentle toe jabs, simply repeating the Big 2.8’s testimony regarding their recent travel arrangements. “There’s a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands,’ Rep. Gary L. Ackerman (D-N.Y.) advised the pampered executives at a hearing yesterday. ‘It’s almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo. . . . I mean, couldn’t you all have downgraded to first class or jet-pooled or something to get here?” Fortress Detroit please note: no one mentioned the rejuvenating possibilities of a “convenient plane crash.” Oops.

“I’m going to ask the three executives here to raise their hand if they flew here commercial,’ he [Ackerman] said. All still at the witness table. ‘Second,’ he continued, ‘I’m going ask you to raise your hand if you’re planning to sell your jet . . . and fly back commercial.’ More stillness. ‘Let the record show no hands went up,’ Sherman grandstanded.” After this extended session of petard-related self-hoisting, Milbank really puts the boot in…

“It was a display of stone-cold tone-deafness by the automaker chiefs. In their telling, they have no responsibility for the auto industry’s current mess. Threatening the nation with economic Armageddon if they are not given government aid, they spent much of the session declaring what a fine job they’ve been doing in Detroit.”

Ay, there’s the rub. As the old Jewish expression goes, if you’re so smart, how come you’re not rich?

TTAC identified this dilemma from the git-go. Our Ken Elias exhorted the execs to “man-up” and tell the truth. But how could they do that? Admitting failure publicly would be like admitting failure publicly. In the “pay no attention to that man behind the curtain” culture of Detroit, admitting weakness is like cutting open an artery in shark-infested waters. Or allowing Dorothy to douse you in a bucket of water. Or letting yourself get hit by a freight train. If you catch my drift.

Back to Daniel Howes for a moment, for it’s clear that even Detroit cheerleaders understand that there’s a disconnect between the CEO’s Pumba-like prevarications (“you gotta put your behind in your past”) and their abject inability to sell a brighter future to their intended public benefactors.

“Added Rep. Gary Ackerman, D-N.Y.: ‘When my wife has a problem with the foreign car she drives, they bend over backwards for her. You all aren’t responsive to your customers. You don’t want to put your last tourniquet to a dead guy. Tell me what’s going to be different in three months.'”

The fact that Howes doesn’t even bother to list their reply, or answer the question on the CEOs behalf is, perhaps, the most telling part of his commentary. In this Howes mirrors Motown’s progress through the stages of grief. They’re out of denial, asking the right questions of themselves. But they’re just now entering the bargaining phase. Acceptance and hope is a long, long way off.

Meanwhile, that bridge loan to a brighter day is about to collapse. If it hasn’t already.

As in any great tragedy, the fundamental flaw that’s assured Detroit’s doom is hubris. Right from the the beginning of this do-or-die bailout campaign, GM’s Rick Wagoner decided to be the smartest guy in the room. His newly developed eye twitch betrayed his suprise that his machine gun bullet point assault failed to find its mark. Not to mention his accountant’s inability to grasp the bigger political picture.

“When Rep. Paul Kanjorski (D-Pa.) tried to find out when GM would run out of cash, Wagoner hemmed and hawed until the lawmaker protested that “I don’t quite understand what the hell you just told me.” When Rep. Ed Perlmutter (D-Colo.) asked about GM’s outlook for the quarter, Wagoner informed him that “we don’t provide financial guidance in earnings.” Would Rick talk that way to a “normal” banker, as opposed to, say, the United State taxpayer? The sad part: yes, he would. The even sadder part: they listened. Well, right until they didn’t.

And them Milbank absolutely buries the troika of bailout beggars.

“So it was hard to feel sorry for the executives when Rep. Peter Roskam (R-Ill.), late in the hearing, reminded them again that “the symbolism of the private jet is difficult,” and mischievously asked the witnesses whether, in another symbolic gesture, they would be willing to work for $1 a year, as Nardelli has offered to do.

‘I don’t have a position on that today,’ demurred Wagoner (2007 total compensation: $15.7 million).

‘I understand the intent, but I think where we are is okay,’ said Mulally ($21.7 million).

‘I’m asking about you,’ Roskam pressed.

‘I think I’m okay where I am,’ Mulally said.”

Think again, boys. Think again.

Auto shows are intended to be recipes for excess. Take one excessively large convention hall, fill it to capacity with excessive quantities of costly chrome and metal, mix in a few brigades of excessively attractive women, and cap it off with a cadre of excessively awkward journalists (present company excepted, er, we hope) to glorify the results with excessively vapid superlatives. But that was before Carmeggedon and the Great Credit Crunch of ’08 came to town, raining on the parade with an excessively nasty vengeance. Cars are a serious business, and 2008 is looking to be about as serious as it gets.

This year’s extravaganza is most noteworthy for what isn’t happening. For starters, General Motors is a non-starter. GM has canceled both of its planned new vehicle debuts. Neither the new Buick Lacrosse nor the Cadillac CTS Coupe made the trip. Car Czar Bob Lutz, who was previously scheduled to make an appearance, is also staying home. Maximum Bob isn’t having lunch at the RenCen by himself; every other spokesperson within the GM public relations squadron, i.e. anyone who might have been required to field skeptical questions from a editorially-liberated pack of hacks, is likewise giving this show a wide berth.

Not to be outdone by its erstwhile merger partner, the Cerberus-Chrysler team was apparently too preoccupied by the Mervyns bankruptcy liquidation to dispatch anyone here, either. Aside from a few electric concepts, Chrysler has no product launches and provided no PR staff to manage and dazzle the press corps. It gets worse – according to the Los Angeles Times, the Three Headed Dog is offloading much of the cost of this year’s fete onto its Southern California dealers. The Auburn Hill Boyz have been establishing a now-familiar pattern of cramming down their problems onto their retail network, and the LA show is proving to be no exception.

Renault-NIssan head Carlos Ghosn established the weary-although-optimistic tone in his keynote speech, which opened the event. Ghosn is probably the closest thing to a rock star that you’ll find in the auto industry, and his talents for salesmanship and managing a room are top notch. Le Cost Killer fired on all cylinders, masterfully packaging the greenbacks-for-green-tech message that has been offered far less convincingly by Detroit’s troika of CEO’s.

Few seemed to notice the irony of Ghosn touting his vision of an emissions-free future on the very same day that Nissan was launching its 370Z sports coupe and Infiniti revealed its convertible, abundantly-pistoned G37.

Other subtle signs of the industry implosion are evident throughout the floor. A deathly quiet hovers across GM’s vast acreage, which occupies what should be a high-traffic area in the middle of the Convention Center’s South Hall. Much of the obligatory well-dressed eye candy seems to have been given the day off. Most painful for a hungry, coffee-powered observer such as yours truly, the customary sponsored sit-down luncheon was quietly nixed, replaced by a haphazard buffet of small stale sandwiches that made Quizno’s seem like Spago in comparison.

In keeping with the theme of tough times, many an automaker press conference made at least a passing mention of the stumbling economy, even as they proudly touted their new models. Despite the pall, everyone claims to be confident that the current tumble in auto sales is a manageable bump in the road.

The Dearborn side of the hall was considerably more cheerful. Undaunted by bailouts, the brink of bankruptcy and Congressional hearings, FoMoCo debuted the new Fusion and its badge engineered Mercury Milan sedan twin, as well as the Mustang pony car and Lincoln MKZ sedan. During their upbeat presentation of the new Fusion, Ford EVP Mark Fields and Marketing VP Jim Farley seemed not to notice the faltering car market. Crisis? What crisis?

This year’s show includes new world debuts from Bentley (Azure T Convertible), Infiniti (a convertible version of the G37), Lexus (RX 350 and RX 450h Hybrid), a brace of Porsches (Boxster and Cayman) and Nissans (370Z and Cube), as well as the new Mazda 3, an electric Mini and a VW (the TDi version of the Touareg.). Four concept cars make their premiere show appearances here: a Honda FC Sport fuel cell sport concept, Hyundai Sonata Hybrid, a Kia Borrego fuel cell vehicle, and a Toyota CNG Camry Hybrid. Tomorrow’s events will include the presentation of the Green Car of the Year award, which promises to be less controversial than last year’s Tahoe Hybrid.

Not that this will matter much.  Anyone who is paying attention knows that the country’s most important auto show is not being held in Los Angeles or Detroit or Chicago or New York, but in Washington, under the DC big top, where big bailout bucks are the order of the day. It can’t help but make one wonder whether next year’s show will be considerably smaller than this one.

At today’s LA Auto Show, Ford revealed its refreshed Fusion. In large part, the midsize sedan’s in synch with one of TTAC’s core philosophies: evolution before revolution. Manufacturers should continue to improve existing decent products rather than swing for the fences– especially when it’s the bottom of the seventh. That said, plenty of pistonheads reckon the Fusion isn’t a patch (or is) on the Euro-Mondeo. In Fantasyland, that’s the Blue Oval mid-sizer on dealer lots. And if there’s still a Ford America in 2013, we’ll have our Mondeo and drive it too. In the meantime, good is good enough. Or is it?

The Fusion we’ve got now is a decent car. It’s not perfect. The turning circle is poor. The quality of interior plastics ranges from impressive to horrendous, especially in the cheaper models. The existing engines trail Japanese competitors a bit in horsepower and fuel economy. The back seat is missing headrests. Little things, that add up to a car that wasn’t totally there.

So what has Ford done here? They redid most of the dashboard, installing a better center stack of controls and display. It’s still not an Audi, and you’d be hard pressed to call it inspired design. From the photos, it looks like a significant improvement. Cost? Probably fairly low. Ford’s also dishing-up some low-cost, high profit options for the interior. SYNC is the best audio and/or nav interface on the market, in terms of ease of use, and a Sony-branded stereo means added profits merely because Ford is using a system from an established name brand.

As for the engine upgrades, well, much respect. The 2.3-liter 4-cylinder is bounced for a 2.5-liter 4, and it’ll still offer a manual transmission– now up to six gears. The automatic is also a six-speed. Incremental improvements; way to go, Ford.

Ford’s PR sheets claim mileage will be up a few MPGs, but honestly, even if it’s better than the Camry’s, that’s not Ford’s image. The 3.0-liter 6 is up to 240 horsepower, which is less than the V6 engines from Honda and Toyota, but so what? It’s a great amount of power for the Fusion and for a front wheel-drive  vehicle. The top engine– only offered in the Fusion Sport– is Ford’s 3.5-liter V6. It has the more class-competitive horsepower rating of 263. I’ve never warmed up to this engine in the Edge, Flex, and Taurus; perhaps it’s the transmission tuning, but it always feels lazy and dumpy.

The Fusion hybrid is a separate debate– and the topic of Robert’s other post– but hey, at least Ford is in the game.

The biggest issue for these cars, aside from some moderate flaws, is that Ford has zero image right now. Other than seeing one on the street and saying “I like the look of that,” I don’t know why someone would be attracted to the Fusion instead of the dozen other competitors.

Ford’s marketing to journalists tends to argue that they have the best “thought out” vehicles. This usually means creature comforts, as well as some ergonomic improvements. For instance: SYNC, capless fuel fillers (cleaner hands), clever doors on the Flex (cleaner pant legs), power moving pedals (saves from short people sitting on top of the airbag). But so what? Can you really sell cars on nebulously defined “technology?” Well, no. That’s what Acura has been trying to do for years, and it doesn’t work for them.

Ford probably doesn’t have the money or resources to develop a clear brand image. So they’ll do what Toyota does: incrementally improve cars that are pretty good. It’s a good long-term strategy, but not a great one. And tough to do when you’re playing against the clock. We’ll bring you a review of the upgraded Fusion as soon as possible.

The table of Motown’s CEOs facing Senator Christopher Dodd at today’s Senate Banking, Housing and Urban Affairs Committee Hearing looked more than a little like The Last Supper. If only. When Senator Bob Corker (R, TN) pressed Ford, Chrysler and GM’s top suits for a pledge that they won’t be back for more money– should they be granted $25b in taxpayer-backed loans– only GM CEO Rick Wagoner answered. And then Red Ink Rick waffled, pegging his promise to an economic upturn that no one believes imminent. It was the moment when Motown’s begging bowl brigade went seriously south, in that oh-so-public C-Span sort of way.

Which means, of course, that here in the realpolitik world, that the $25b “bridging loan” lives. To die another day? Given the weak support doled-out by Senator’s Dodd’s ostensibly rubber-stamp-equipped committee, yes. I mean, most of the Senators peering over their granny glasses at the captains of the automotive industry were Democrats. If the blue staters are questioning their union supporters’ right to suck on the federal teat, clearly there are political potholes the size of Manhattan ready to swallow-up Detroit’s last, best hope for survival. However temporary.

At some point in this televised debacle, Senator Corker asked United Auto Workers boss Ron Gettelfinger to rate the three domestic automakers in terms of likelihood of survival. With omerta-dismissing insouciance, displaying none of the political skills for which politicians are famous, Big Ron put the The Big 2.8 in their place. Surprise! Ford, Chrysler and then GM. Which was the exact opposite order in terms of who wants what from this $25b honeypot. Chrysler’s Bob Nardelli put his hand up (our hands up?) for $7b, Ford’s Alan Mulally saw Boot ’em Bob’s seven and raised it a bil (ish) and GM went all-in at $10b – $12b.

Oh, did the overpayment of CEOs man-up. as suggested by TTAC Ken Elias? When offered the chance by Senator Jon Tester (D-Mont) to pull a Lee Iaccoca (i.e. work for a $1 until the public “investment” in The D2.8 is paid back), only ChyCo’s Nardelli agreed. Woo-hoo! The failed exec who pocketed $210m for NOT working at Home Depot knows the value of PR. [Note to Tester: get it in writing.]

Yes, well, this is the same automotive CEO who’s finally been forced to reveal his employer’s financial health, and flat-lining just about describes it. Nardelli admitted that the ailing American automaker is on track to burn through $5b to $7b in cash in 2009. Or not. Deduct the $5b in readies that ChryCo’s consumed in the first three quarters of 2008, including $3b in the third quarter, and the company’s already below “keep the lights on” minimum liquidity.

More precisely, Nardelli said that Chrysler ended the third quarter with about $6.1b in cash. In other words, Cerberus’ automotive venture looks set to join GM in the “DOA by New Year’s” club. Nardelli almost winced when Corker suggested ChryCo didn’t have a pulse. But not quite.

Also in the doghouse: the D2.8’s new BFF Ron Gettelfinger. In his opening remarks, Big Ron made a big mistake: raising the issue of the “money for nothing and your checks for free” UAW jobs bank. The union boss said his brothers and sisters had sacrificed hundreds of goats 50 percent of their pay (not strictly true, it’s now a two-tier pay deal) and “virtually eliminated” (ipso facto not strictly true) institutionalized feather-bedding.

When Senator Corker asked Ronny G how much his members would be paid for not working at a closed factory, the union guy feigned ignorance (95 percent of full pay, BTW). “That’s incredible,” Corker said, providing a pregnant pause in which his outraged incredulity could mature.

After the committee called it a day, Senator Dodd met the not-so-adoring throngs called the Washington Press Corps. His words must’ve sent a chill up Detroit’s collective spine. “My sense is that between inaction and writing a (blank) check, there is a ground I think you can build a majority for. We’re not there yet. Trying to jam something through, I think, would be a mistake.” Or, as Chrysler and GM call it, “a life-saver.”

The bottom line: despite (because of?) its desperation, the Detroit “bridge” is still under construction. Republicans have enough votes to torpedo the legislation, and their constituents are plenty pissed-off at the rush to judgement on the $700b Wall Street bailout. So where’s Barack Obama stand on the bailout? After all, the president-elect is still a– no, wait. He resigned. So although he’s officially pro-bailout, Obama’s not stupid enough committed enough to waste waste his political capital rescuing Detroit from itself. What about the union votes that sealed the election? As another blogger put it, if you want a friend, buy a dog. Not, apparently, a president.

[Click here to read a copy of the Senate “Direct Bridge Loan” bill]

GM’s at the cliff’s edge looking deep into the chasm and sees…nothing. How pathetic. Here’s a company with $150b in annual revenues and all they can say is “give us the money or else.” How lame is that? Frankly, it speaks to the complete lack of leadership and direction at this company. GM has not advanced one shred of evidence that it knows what to do if it goes onto the government welfare roles. In fact, all we’ve heard is “more of the same” restructuring and downsizing that’s been completely ineffective to date in stemming the tide. That dog just won’t hunt. But if GM’s Board of Directors and executive managers had a clue, this is what they would do heading into the showdown with Congress…

First, outline a demonstrable plan for the road to recovery. Something akin to the plan laid out by Ford. A strategy whereby we have an idea of what products we can expect, realizable market share goals, and a stated return to profitability. To date, all we’ve heard from GM is nothing more than downsizing, the Chevy Volt and better products are on the way. If you think about it, GM’s been playing this tune (sans Volt) for more than thirty years.

The plan has to address all of the shortcomings found in the company today. Let’s look at these by major area of interest:

Brands – GM’s trying to field a roster of brands that have little meaning to the public. Eight brands for a 15 percent retail market share doesn’t compute. GM needs to pick two or three brands and then develop, foster and love them with unique vehicles. It’s too costly to support GM’s minor brands, even if they’re commingled in “sales channels.”

Dealers – If GM cuts brands, it also loses those dealers. So what? Franchise laws protect franchisees from many actions of the franchisors, but they don’t guarantee future outcomes. Nothing stops GM from outlining a five-year or even ten-year termination play. The dealers will sue. Let them. Let them join a class action suit; GM will just drag it out forever in court. By that time, either GM will be a stronger company with the ability to make some payoff to these franchisees or it won’t. That’s a risk that needs to be taken, now.

Financial Creditors – Cram-down! Put it out there now. Make them take a whole bunch of newly issued stock now in return for an 80 percent cut in debt obligations. They can’t count on government money to pay them off, and they’ll be lucky to recover 20 percent in a bankruptcy anyways. And there’s zero chance they’ll ever get ahead of the government in standing if GM does get a bailout; the government always collects ahead of everyone else.

UAW – United Auto Workers boss Ron G. needs a wake-up call. Big style. He’s hoping his Democratic pals in Congress will come to his aid and protect his flock. Too bad he’s barking up a very small tree. He forgets that big swaths of this country are anti-union, and those Southern Senators would like nothing more for the UAW to go down in flames and stop trying to organize their foreign-brand assembly plants.

GM should scrap the Mother of All Health Care Funds (a.k.a. VEBA) now; it can’t afford the big upfront payment required. Instead, GM should unilaterally reduce hourly retiree health care payments. Make these retirees suffer with the same crappy HMO care the rest of us get. Let’s keep in mind that salaried retirees get nothing now for health care (except a modest boost in pension payouts as an offset).

Rick Wagoner – Gone. He hasn’t done the job. Stop pretending that Red Ink Rick knows what to do – because he doesn’t. In fact, it’s not clear the guy has ever done anything that set a new direction for GM besides his “foresight” with regard to its China JVs. It’s always been more of the same: praying that the next “new” rig from GM would be the spark that lights the fire of American consumers. Find an outsider as CEO with strong industrial experience, a person appointed to be czar who can break down GM’s muddled and stifling bureaucracy.

Board of Directors – Toast. They should resign too before they get dumped. Better to die with your head attached than sacrificed in shame on the altar of bankruptcy. They’ve allowed this charade to go on way too long. Since the current shareholders are going to get massively diluted anyways, they won’t be able to control Rick’s puppet board any longer. Instead, the financial creditors should pick nominees for the Board using their newly-issued stock as leverage.

Bailout –  Stop whining. Stop blaming everyone and anything but yourselves for your current predicament. You look stupid as a company. GM should stand up and tell the truth we’ve all known for years: their problems are entirely of their own making. Man up!

There’s an old adage told by aviators all over the world. When your airplane is in trouble, do something, anything, to change the outcome. Doing nothing and you’re sure to hit the dirt. Right now, GM’s doing nothing besides begging– and not getting much sympathy. Maybe it is time to roll the crash trucks?

In the legend of Faust, the protagonist sells his soul to the Devil in exchange for knowledge and power. Needless to say, things end badly for one member of the transaction (hint: it’s not the guy with the horns on his head). A “Faustian bargain” has come to mean a deal where you surrender what’s truly important to achieve an ultimately worthless goal. Yes, I’m talking about GM. If the artist once known as the world’s largest automaker avoids Chapter 11 via a bailout deal with Washington (a.k.a. Mephistopheles), the contract will ensure its final, irretrievable doom.

In this case, as in so many others, the road to Hell is paved with good intentions. Ostensibly, bailout supporters want to “protect” Uncle Sam’s “investment” in GM– otherwise known as fighting a rearguard action against those who see a GM bailout as GMAB (Good Money After Bad). To that end, lawmakers crafting the $25b-plus suckle are talking-up the “strings” attached to the cash.

Speaking on yesterday’s Face the Nation, Barney Frank laid out his prophylactic proposals. The Massachusetts representative tasked with writing and proposing the bailout bill says the feds will only tender taxypayers’ money to Motown mismanagers if the beneficiaries agree to end to shareholder dividends, ban bonuses for employees who earn more than $200k a year, and submit to a government oversight board with power to veto corporate decisions.

First, the idea that GM would pay out shareholder dividends when it’s nose-up in the North Atlantic makes no sense at all. Oh wait. They already did that, didn’t they? For years. OK, well, what difference does a dividend payment make when GM is burning through one— make that two billion dollars per month? More to the point, since when does the U.S. federal government have the right to decide if and when a publicly-held company should or should not set a dividend? Frankly, Frank, it’s none of your goddamn business. At least it SHOULDN’T be.

As even a casual reader of this series will know, I consider GM CEO Rick Wagoner’s tenure at the top an utter failure. The GM Board of Bystanders that elevated and supported Red Ink Rick in his Reign of Torpor is criminally liable. In fact, there is but one group of people on planet Earth who could make more of a mess of GM than its current administration: politicians. To wit…

For better or worse (worse), politicians are paid a flat fee. Here in the real world, executives work for a salary and an annual bonus. In the ideal real world, the bonus is tied to something called “performance,” sometimes involving a personal target, sometimes company-wide. Many times, the system works (hence its existence). Other times (i.e. Rick Wagoner), it doesn’t (hence GM’s destruction). Normally, the free market cleans up the mess.

Removing the executive bonus system to satisfy a politician’s idea of class warfare is patently ridiculous. If GM is to recover, it needs [NEW] top executive talent. To attract same, it can either pay-out bonuses for top performance or… what? Inflate the base salary and benefits to skirt the issue? Maybe so. But again, is anyone more uniquely unqualified to make that decision than Washington politicians?

This brings us to the third leg of this inherently unstable federal stool: an oversight committee. With veto powers, no less.

The Wall Street Journal reports that the bailout bill will require the automakers and their unions to draw up plans on “how the companies would return to financial health in the longer term.” Congress will then appoint “guardians” who will tell GM how to implement the Congress-approved plans. Oh, and there could also be a Car Czar to tell the oversight committee what to tell GM executives.

Yeah, I want to buy a car from THAT company.

In truth, I’d rather the feds just GIVE GM the $25b, no strings attached. At least GM would have to come back with their begging bowl after they’ve pissed the cash away, rather than simply slipping an item into next year’s appropriations bill. I mean, when was the last time a federal organization said, right, we’re done. Disband us, close the office and fire the secretaries so we can all go home?

The federal proposal to “save” GM et al. is not a bailout. Not anymore. Now it’s a Faustian bargain between a failed company and a power-mad government. If approved, it will allow your duly elected representatives to gain control of an American carmaker to manipulate it for their own ends. Anyone who thinks those ends will be determined by a desire to create product and customer service excellence is seriously, dangerously deluded.

As the domestic auto companies appear to be circling the drain, there’s been debate about the extent of the impact of their failure on their supplier base, the impact on the industrial manufacturing base of the United States, even possible negative implications for Toyota and Honda. One party in all this that has rarely been mentioned are the consumers. While a few automotive analysts, pundits and bloggers have touched on how an implosion of the Detroit based car companies will affect consumers, almost all of the discussion has centered on whether or not people will buy a car from a bankrupt manufacturer, and the related issue of how product warrantees will be covered if their manufacturers go belly-up. A more basic consumer issue: how the loss of GM, Ford and Chrysler from the US auto market would affect the prices, features and technology of new cars.

While some critics of the domestics would have us believe that nobody is interested in cars built by the domestics, the fact remains that The Big 2.8 still sell millions of new cars a year in the North American market. October was a sales disaster for the domestics, with GM’s year to year sales falling 45 percent, Ford 33 percent and Chrysler seeing a decline of 37 percent. Foreign brands also saw declining sales but the decline was not as steep. With consumer confidence at the lowest level since just after the 9/11 attacks by Al-Qaeda, sales will not likely pick up anytime soon. The overall industry is on pace for a 10.6 million unit year, down from 16 million in 2007, and down over 40 percent from the record year of 2000. Still, between them the domestics sold just about 400k cars in October, good for 55 percent of the total US car & light truck market.

It’s a simple fact of business that competition puts downward pressure on prices. Critics of any bailout for the domestics like to say how their customers won’t go away; they’ll just buy Toyotas, Hondas, Nissans and Hyundais. What they don’t say is how much more expensive Toyondisssandais will be without competition from GM, Ford & Chrysler. You simply cannot remove competitors with a 55 percent share of a market without seeing the remaining vendors raise prices. Without competition from domestic competitors, the foreign brands have much less of an incentive to keep their prices down. Also, the structural costs of the domestics (at least until the cost reductions due to renegotiated UAW contracts kick in in  2010) create a price ceiling foreign brands can undercut. Take away that ceiling and watch Toyota raise its prices.

Conversely, take away that structural cost disadvantage for the domestics and you’d see lower prices right now on all brands, foreign and domestic, because of real price competition. Look at India. That market is very price sensitive. Just about all the global manufacturers are active in India, but the growing indigenous Indian auto industry led by Tata and Mahindra creates price competition for the transplants. Since Tata announced the sub $3000 Nano, Renault-Nissan, which already produces the low cost Dacia Logan, has announced a joint venture with Bajaj, maker of scooters and three-wheelers, to compete with the Nano at the new entry level price point.

A Detroit meltdown would affect more than just new car pricing. Say what you will about the domestics, but their presence in the market forces the other manufacturers to compete on features and technology as well as price. I’m not saying that a disappearance of The Big 2.8 would return the days of “radio and heater optional,” but there’d be less incentive for remaining companies to keep content level high. The Honda Accord’s initial market success in the late 1970s was partly attributable to a higher level of standard equipment than the domestics offered.

Regarding technology, the list of innovations introduced to the market by the domestics and their suppliers is almost endless: electric starters, seat belts, catalytic converters, modern refrigerants, car audio, defoggers (forced hot air and electrically heated), turbochargers, magnetically controlled dampers/shocks, and on and on. Without the billions the domestics spend on R&D ($15.6b for Ford & GM in 2007, not counting Chrysler which is privately held and doesn’t publish proprietary data or the moneys spent on R&D by domestic auto suppliers) the pace of technological improvements will slow significantly.

The domestic car companies’ disregard of their foreign competitors in the 1970s and their poor quality in the 1980s have so alienated consumers (and their now adult children) that it’s easy to see why so many people either don’t care if the domestics disappear or actively wish for their demise. If they think, however, that such a disappearance will be good for consumers, in terms of price, features and technology, they’re sadly mistaken.

Time for the United Auto Workers (UAW) to collect second-hand songbooks and ship ‘em over to their comrades– make that “union brothers” in China. Chinese taking our jobs? Wake up guys! Solidarity forever! The Chinese worker is taking it on the chin just like the working stiff in God’s Own Country. And let’s ignore the fact for a while that FICA, SECA, COBRA, and VEBA are not part of the Chinese language. PSA Peugeot Citroën, an affiliate of Dongfeng Motor in China, has “decided not to renew the contracts” (translation: has fired) 1000 workers on their Wuhan site, Gasgoo reports. Volkswagen, which depends on China for 15 percent of its worldwide auto sales, gave the Chinese equivalent of pink slips to 700 people at their Changchun factory. According to Chinese media reports, Ford, BMW, Chery, and untold more are busy. Busy thinning out their working masses, that is. Where did all the thousand flowers go?

Renault delayed their entry as a Chinese producer until kingdom come, or a turnaround of the world economy, whatever comes last. Even grimmer news from Chinese car dealers: 40 percent are losing money, and in a third of China’s car dealers everybody will lose their jobs, because they will close. Less jobs are yet to come.

The good new times are over in China. According to reports published by J.D. Power, the increase in auto sales has slowed down to 6.7 percent this year, as opposed to 22 percent in 2007 and 26 percent in 2006. An analyst at the usually well-informed Nomura bank in Japan sees China’s auto sales growth slowing to 3.8 percent next year, and 6.4 percent in 2010.

China’s car industry, which wanted to crank out 10m units by year’s end, recently slashed its 2008 sales targets to eight million, said Thomas Callarman, an operations management professor at the China Europe International Business School. This comes after a huge ramp-up of production in anticipation of unbridled demand. Callarman is chiding his Chinese children. “Two years ago, some of the same manufacturers were complaining they were already having over-capacity, and then they were building more capacity.”

Take that smile off your face, folks, this is serious. A concerned International Monetary Fund said that last year, China accounted for 27 percent of global economic growth. That’s more than any other nation. Hu Jintao, China’s Paramount Leader, agrees. “Steady and relatively fast growth in China is in itself an important contribution to international financial stability and world economic growth,” Hu said at the G20 meeting, pointing to China’s recent stimulus package. Even the grand Chinese stimulus package may not be so grand. Rumors of re-packaging of previously announced plans are all over the press.

The dire news even reached Europe. “We will see much, much slower growth in China,” said Ivan Hodac, himself Secretary General of the European Automobile Manufacturers Association (ACEA). In a rare case of economic insight, Hodac then prognosticated: “In an economic slowdown, automakers are typically the second sector to be hit after the construction industry, because, next to housing, cars are consumers’ most expensive purchases.” Never thought of that.

Not to be left out, Barron’s also weighs in on the issue. For some unfathomable reason, Barron’s is more concerned with ad sales of China’s internet portal Sina.com. Who’s to blame? “Autos, real estate and financial, the companies three biggest categories of advertisers, have all been hit hard in the slowdown. (If you thought China was immune, think again.)” OK, OK, we’re sinking. I mean, thinking.

As a sign that things must be as bad as can be in the Middling Kingdom, even Aljazeera finds the issue worthy of a closer look. Usually Aljazeera is an outlet for videos by bearded people living in caves in inhospitable areas of Afghanistan, and who employ pilots who can start, but not land. Now Aljazeera writes: “China’s industrial output has slipped to a seven year low as the global economic slowdown continues to batter the world’s fourth largest economy, eroding demand for Chinese exports and causing manufacturers to throttle back on production.” Their favorite video producer hasn’t claimed responsibility for that one– yet.

Even in the most poisonous flower is a little bit of honey, a possibly Chinese proverb says. After two months of decline, sales recovered slightly in October, rising 8.4 percent on-year. This only after Toyota, Volkswagen and others put piles of Yuan on the hoods of new models.

Long-term growth potential in China remains rosy. Only 20 people for every 1,000 own a car in China, compared with more than 500 per 1,000 in Europe and way more than 700 per 1,000 in the United States.  Once the Chinese can afford a ride again, they will buy. Some scholars of Milton Friedman and Darwin even think that the current “slow down now is to some extent beneficial to the industry because we’ll be taking out a lot of the inefficient capacity.” Roger that says Raymond Tsang, a partner at the consulting firm Oliver Wyman. He’s not alone in foretelling a consolidation amongst the 100 or so auto makers in China. Keep those songbooks coming!

This weekend’s G20 meeting was pretty much a non-event. A Bretton Wood it was not.  While German Chancellor Angela Merkel and her Finance Minister Peer Steinbrueck were still in DC, an urgent e-mail was sent to Carl-Peter Foster, chief of GM Europe. Also on the To: line: Hans Demant, head of GM’s German Opel subsidiary. They were ordered to get their glutei maximi to Berlin. They were furthermore told to bring Opel’s workers council chief Klaus Franz along. Bloomberg reports that the sit down’s set for the Kanzleramt, right after mammy comes home and emerges from her Airbus 310 (named “Konrad Adenauer,” after Germany’s first chancellor, who’s busy rotating in his grave).

Anywhere between €1b and €2b in governmental loan guarantees will be on the table. Before any money is doled out, Foster and Demant will be in for a serious upbraiding. Economy Minister Glos already dropped the ominous remark. “When tax money is on the line to save international auto makers, there will be demands and conditions.” After Angela is through with Carl-Peter, Hans, and Klaus, and class is dismissed for some serious homework, Merkel’s Finance Minister Steinbrueck and Economy Minister Glos will hammer-out details with the federal states the next day. Berlin will underwrite €1b, the states underwrite another €1b. Or somesuch. And then …

And then, there is the A-word. Not “A ” as in Arschloch (although that word may have come up in discussions). That’s “A” as in assets. Only fools with think the Germans will give without taking.

Germany’s mass publication Bild am Sonntag says that GM will have to fork over €1b worth of assets, which Opel could use as guarantees for €1b of loans. Again, bet your sweet assets that when the loan guarantees go to €2b, concomitant GM-owned assets will have to be put in hock. Far from saying “we told you so.” But didn’t we tell you so?

Also assume that Opel’s books will receive an intensive colonoscopy. Anything GM may remotely owe Opel will come up. Assuming GM’s unwillingness (or inability) to pay, the debts will go to the appropriate collection agencies.

At first glance, GM owing Opel €2b and Germany getting ready to pony-up €2b in guarantees is way above coincidental. Then there is the always sticky matter of “unzulässige Gewinnentnahme,” or siphoning-off profits by a parent before they are properly-declared as profits and taxed to the gills. A lowly tax auditor can create havoc at the stroke of his red pen. Rest assured, with the books open to scrutiny, something along these lines may come up. Unless given to a good cause, such as supporting Germany’s farmers, or dotting the landscape with windmills, Germany rarely gives out free lunches. Especially not to Ausländer (foreigners.)

Like BS has a tendency towards walking, money has an inkling towards talking. Things will be different once Opel hangs on the financial drip, shoved up its vein by the German government, and their states that have Opel plants and therefore a political interest (as in “jobs, jobs, jobs”, also as in “taxes, taxes, taxes”) in keeping Opel operative.

As Opel’s dependency on the Government-administered money-methadone grows, GM’s adopted daughter may slowly be brought back to her German parents. Or rather be given to a dark knight who may already be lurking in the hedges.

As the B&B rightly opined, the German government(s) have no interest in running Opel. They have a big interest in keeping Opel alive and its profits back in Germany. The usually well informed German newspaper Welt says today, loan guarantees may not be the only topic discussed with Frau Merkel: “Government support, or a disentanglement of GM’s European activities from the parent will be on the table.” Wowie: “Disentanglement.” And not just Opel. “GM’s European activities.”

In related news,  Opel’s captive financing arm GMAC now finally received the memo from back home, outlining the sortof-bank’s dire straits. GMAC Germany finally expressed interest in Germany’s government money as well, Autohaus reports. That money, earmarked for banks, is there for the taking.

In a departure from reality, all too common at GM, GMAC Germany had said last Monday that there’s no need, we have a rich aunt in America. TTAC receives hundreds of hits per day from a network called “General Motors Corporation,” and at least one of them must have picked up the phone and yelled in the direction of Rüsselsheim:”WTF are you doing? It’s free money! Get as much as you can!” It will be most welcome.

As per November 1, GMAC Europe already stopped loaning money for cars to customers in the Czech Republic,Finland, Greece, Norway, Portugal, Slovakia, and Spain. “We won’t stop lending in Germany,” said a speakstress in Rüsselheim. Of course not, no money to customers, no money from Berlin. And then they are Weissbrot. Or make that toast.

PS: Just in case you are wondering where Angela Merkel’s automotive heart lies, on the job, she’s being chauffeured in either a Mercedes S Class, a 7-Series Beemer or an Audi A8 (all Germans are equal under the law).  At home, she drives a Golf.

Leave it to the B&B to really transcend the as-good-as-defeated General’s Battle of the Deficit-Bulge, aimed right at the German taxpayer’s money,  a.k.a. Government loan guarantees for Opel. Tireguy typed: “The imminent bankruptcy of GM could endanger seriously Opel, although Opel is still profitable.” Deutschland appears to agree. As we shall soon see, some may have a slightly less philanthropic angle. Let’s get right to the point: Opel, Heim ins Reich, anyone? Indeed, some in Germany seem to be itching for a re-match of the Ardennenoffensive. Opel is GM’s heavy artillery in the bastion Europe. Some 75 percent of GM’s European business comes from Opel. If the not-so-secret plan survives, the offensive against General “Nuts” Wagoner will be fought partially in Brussels, coincidentally not far from Bastogne. The broken record called history repeats, again and again. Executive summary of the order of battle follows. Right this way, please!

At the home front, the General begs for money, as amply chronicled in 190-and-growing episodes of the bailout watch. The General’s attack on the federal reserve troops gets bogged-down in the swamplands of Washington. If there is a chance of success, the EU shouts: “Incoming! Unfair trade practices!” With a cruise missile en-route via the WTO. Further hand wrangling ensues. That’ll keep ‘em busy. Meanwhile, back in Germany, Opel falls into the honey-trap of government money, loaded with caveats. GM goes bust, Germany forecloses Opel to keep Opel open.  A white knight. Dankeschön. What did Willy Brandt say? “Jetzt wächst zusammen, was zusammen gehört.” Germany and Opel, together again. Re-united, 80 years after Opel had sold out to GM, also coincidentally, during a prior Great Depression of 1929. Sound far-fetched? You think, Porsche’s financial engineering was/is easy? Compared to that, a grab of Opel would be child’s play.

Quick summary of what happened after “Bailout Watch, German Edition, Zwei: “Angela, I’m Sorry. Opel Deserves Less:” Silence from Berlin. What do you expect, everybody who’s somehow related to money was already on their way to Washington, to attend the G20 gabfest widely misnomed as Bretton Woods II. (Some leaders of state call it a Bretton Woodshed, because they want to take America behind it.) Berlin signaled they’ll take up the Opel matter once back from DC.

Amongst the German states, Demant’s plea caused considerable chatter, especially emanating from states where Opel has factories, and voting workers. General consensus: “Loan guarantees? A definite maybe. Let’s think about it.”  Most hectic is Opel’s home Hesse.  On Monday, their cabinet shall clear the draft of a law that is being typed up over this week-end. Come Wednesday, the state of Hesse will convene its parliament to hopefully approve loan guarantees to the tune of €500m for Opel, but, mind the fine-print, “also for the parts suppliers,” Autohaus reports.

There are 1600 parts suppliers in Hesse alone, already buying hats to have them ready in their hands. Rhineland-Palatinate, where 3350 workers assemble components for Opel (and, as we shall soon see, all of GM, which hasn’t paid their bills) has signaled that they might sign-on also, “in the interest of our workers,” quoth Palatinate’s Premier Kurt Beck. In Eisenach, Thuringia, where 1728 workers assemble the diminutive Corsa, help is not being ruled out. But it comes loaded with blasting agents. Again, if Opel gets help, scores of parts suppliers won’t be left out either.

Then, Mike Mohring, head of the ruling CDU faction in Thuringia, proposed a “car summit,” chaired by Berlin, with all German auto makers and representatives of the parts suppliers around the table. That according to the Handelsblatt. Imagine your competitors and creditors having a sit-down, deliberating your fate. No good for Opel can come from that one. North Rhine-Westphalia, where 5000 workers make the Kadett and the Zafira in Bochum (they also make axles and transmissions for all of GM, which as we shall soon see, is in arrears) was last to at least “show willingness”  to underwrite the loan guarantees, their paper WAZ reports today. That’s the good news.

Now, let’s serve up a little something to cleanse the palate for the Euros on the collection plate circulating amongst Deutschland’s Länder. The Sueddeutsche Zeitung, based in Munich, home of BMW, dropped the bombshell that Opel is in tatters, because they are waiting and waiting and waiting on €2b of unpaid bills from Opel to GM. The unpaid bills are sitting on the desk of “Red Ink” Rick. The check isn’t even in the mail. The paper has the info from “sources amongst the states.” Looks like someone at Opel spilled the unaccounted-for beans to their Premier, he told it to another Premier, the driver of the state BMW overheard it, and it landed in the Munich paper.

Opel needs loan guarantees, because GM can’t pay? That’s no grounds for amusement, especially not in states where GM doesn’t have plants, but Volkswagen, BMW, Daimler, et al have. Just to make matters more interesting, those other companies also make EU-like noises along the lines of unfair trade practices. They say it might be against the law if Opel gets its exclusive snout in the German trough. “All, or nothing!” is their war cry.

Interesting also the latest utterings from Opel-Chief Hans Demant. After wagging his tail at Wagoner, Demant suddenly seeks a little distance from the sinking mother ship. He says, the guarantees are a precaution for the “theoretical case that the financial streams with GM in the USA  go dry.” (Translation: When GM gets blown up with a compound commonly known as C7.)  If that is the case, then “Opel will need the cash to continue.”

A-ha! Dermant, no fool, already pandering to interested third parties? If you ask Europe’s auto makers, they all think Opel is doing just fine. Their cars are respected competition. Opel’s numbers are generally regarded as black. If there is any recent red, then it’s caused by GM who sucked Opel dry. Soon, they’ll be black again. Opel is contemplating a rigorous austerity package. Even travel expenses and bonuses for managers aren’t sacrosanct. At Opel. Not in Detroit.

Anyway, remember Demant’s hint that GM shouldered him with €1b of losses? It takes experts versed in the arcane arts of transfer pricing between arms-length parties to get to the murky bottom of this, but rest assured, they will. Before Opel will see even a single governmental cent, they will have to open their books as wide as the coat of a dirty old man in Central Park. Germany’s Minister of Economics, Michael Glos, says “solid numbers must be put on the table so that we can analyze the situation.” Ouch, the auditors.

Next thumb-screw to come: Opel will have to prove that “the money won’t flow back through the Atlantic and vanish in a big hole in Detroit,” as one industry wag said it to the nods of all not associated with Opel. Demant was surprisingly prepared for this: “Any monies will only be used for investments into R&D and tooling in our European plants. Under no circumstances would the money go abroad.”

“And where is the re-match of the Ardennes?” some will undoubtedly question. Glad you did ask. Eins: Rest assured that if the loan guarantees come, there will be language to get the German assets into the hands of the German guarantors in case of a default.  If needed, a default can be assured via WTO action.  Zwei:

Whenever matters automotive are being discussed in Germany, no story is complete without a quote from Prof. Dr. Ferdinand Dudenhöffer, automotive wag extraordinaire, who once was suspected by Spiegel magazine that he was in Daimler’s deep pockets (Dudenhöffer sued, Spiegel retracted.) Handelsblatt printed a long interview with the Professor: “Opel has only two chances left. One chance is that they get sold to an interested party with money. The other chance is that GM gets bailed out by the US government.”

Note: Dudenhöffer is on the side of the 60% of the Americans who predict bankruptcy for GM, heck, all of Detroit.  Note: A sale is first of Dudenhöffer’s short list of chances. Yet he cautions: “To find a buyer, in the midst of a crisis, will be tough.” Someone hatching (or hedging) plans to get Opel on the cheap? We haven’t heard the last of it….

In December of last year, a certain Peter Hart wrote an opinion column for Fairness And Accuracy In Reporting (FAIR). Hart decried the prevalence of polling in political coverage. Not only did he cast aspersions on the accuracy and reliability of polls, he identified them as a sinister threat to no less than “American Democracy.” “The more fundamental problem for the press — and for American democracy —” wrote Hart, “is that the media’s overreliance on polls encourages a kind of political conversation that prioritizes strategic consideration and tactics over substance.” He didn’t know how right he was. Today, Peter Hart Associates released the results of a poll of their own, gauging support for an auto industry bailout. Read the results in the Detroit News and you might be surprised. Read the poll itself and the Hart Associates client list, and that surprise should evaporate faster than Mr Hart’s ideals regarding polls and their cynical abusers.

Let’s start with the substance of the poll, which would probably send Karl Rove into an ecstasy of nostalgia. After the usual demographic and exclusionary (no media, no auto workers) questions, the first substantive query shows where things are headed.

How important do you feel the American automobile industry is to the American economy–extremely important, very important, somewhat important, not important, or not at all important?

Needless to say there’s no satisfactory way to answer this question, let alone any metric provided to measure “importance.” Anyone who knows nothing about cars or the car business knows there’s only one answer here: somewhere between “extremely important” and “very important.”

As the questions go on, they make it clear that this poll isn’t about ascertaining public opinion. It’s about communicating and legitimizing pro-bailout arguments. In Hart’s words, “the prioritization of strategic consideration and tactics over substance.”

You know the pro-bailout arguments; we’ve sliced them and diced them all over this blog. Presented in their most misleading forms as questions, is it any surprise that they poll… decently? Actually, the poll result’s relative ambivalence is surprising, considering how questions’ inherent bias.

“The federal government has recently provided financial aid to the insurance and banking industries to make sure that these industries do not fail. Do you feel that providing financial aid to ensure that the U.S. auto industry does not fail is more important, just as important, or less important?” Only 14 percent answered “more.” Just 55 percent picked the obvious “correct” answer: “just as important.”

The scaremongering picks-up as the poll goes on, with subsequent questions asking respondents to rate the “importance” of a host of possible dire consequences of industry failure. Not that there are any guarantees that a bailout would prevent or solve any of these sinister symptoms. Just “which ones scare you the most?” Of course, when these questions meet with even the tiniest amount of context, the Hart poll’s results begin to look like the PR stunt they are.

Alternatively, a Rasmussen poll which asks the respondent to examine the entire economy and base priorities from there finds that 45 percent of Americans oppose a GM bailout, with 20 percent undecided. The same poll shows that the automotive industry has actually fallen eleven points as a priority since March 2007. Oh yeah, and 80 percent were “concerned the government is getting too involved in the private economy.”

Again, this is in the context of the larger economic picture. Only by looking at the auto industry through the wrong end of a telescope could Hart achieve the results his clients paid for.

Bias is evident enough in the substance of the post (have a look for yourself). But a quick peek at Hart Associates’ online client list is the final piece of the puzzle. Politically, it’s all Democrats, many from automaker states (with their party affiliation left unstated). On the corporate front, Hart’s benefactors include “DaimlerChrysler,” as well as notorious federal teat-sucklers Boeing and Fannie Mae. Then there’s the United Auto Workers, the AFL-CIO, Teamsters, SEIU and other unions, large and small.

In short, Hart works for this country’s biggest bailout backers, from the worlds of industry, politics and labor. Including of course, the big Kahuna: GM. As the Detroit News puts it, “General Motors Corp. paid for the poll but had no input or review of the design, methodology, content or interpretation.” Then again, why would they handsomely reward Hart if he wasn’t pro enough to give them exactly what they wanted, without them asking?

In any case, opinion polling, as Hart himself lamented, is a dark art. He correctly identified its significant shortcomings a long year ago– only to appropriate the very tactics he denounced in aid of a multi-billion dollar giveaway to failing companies.

And they say the master’s tools will never tear down his house.

I can’t remember the last time Automotive News [sub] unleashed an email alert for an editorial. Hell, I can’t remember the first time they did it. As in this is it: the first time. You see how stunned I am? Well, no prizes for guessing which side of the bailout issue Crain’s boys fall. They unleash the argument that’s become the de facto Detroit defense: a bailout sucks, but not bailing out Motown sucks even more. They fucked-up but YOU will suffer. So YOU should pay. NOW. BEFORE IT’S TOO LATE! Hysteria and hyperbole? You don’t know the half of it. Well, not yet anyway…

“If Congress thinks a bailout of General Motors is expensive, it should consider the cost of a GM failure. Let’s be clear. The alternative to government cash for GM is not a dreamy Chapter 11 filing, a reorganization that puts dealers and the UAW in their place, ensuring future success. No, even if GM could get debtor-in-possession [DIP] financing to keep the lights on (which it can’t), Chapter 11 means a collapse of sales and a spiral into a Chapter 7 liquidation.”

Dreamy? Like “Oooh. Danny Zuko is so dreamy?” Find me anyone who argues that a GM Chapter 11 wouldn’t be a painful process for all concerned. And who says GM can’t get DIP financing? Shouldn’t we explore the possibilities of government assistance after a GM Chapter 11? Painting the bailout issue in black and white terms is the worst kind of yellow journalism, and does the automaker’s chances of long-term survival no service.

Especially when there is no plan on the table. No goals. No time lines. No strategic outline. Nothing. In that sense, “this” GM turnaround has about as much chance as the last (existing?) one, which was also bereft of publicly declared targets. As far as AN’s concerned, never mind. Pay no attention to that man behind his $15.5m curtain. It’s time to piss or get off the pot. Do or die.

“GM’s 100,000 American jobs will die. Health care for a million Americans will be lost or at risk. Hundreds of GM’s 1,300 suppliers will die. Their collapse could take down Ford Motor Co. and Chrysler LLC, perhaps even North American transplants. Dealers in every county of America will close. Frogs will fall from the sky. Boils shall fester on the skin of small children. And lo the Earth shall be cleaved in two and swallow the city on the river as the whale swallowed Jonah.”

Only the whale didn’t swallow Jonah. (And I made-up those last three sentences.) GM filing for Chapter 11 isn’t necessarily what professional courtesans call a “hard stop.” Even if GM loses half its market share, that’s still a Hell of a lot of cars and trucks. Someone will build them. Why not a post-C11 GM (i.e. Chevrolet)?

“Criticize Detroit 3 executives all you want. But the issue today is not whether GM should have closed Buick years ago, been tougher with the UAW or supported higher fuel economy standards.”

So what IS the issue? Like the automakers AN seeks to suckle, their unnamed writer just can’t seem to focus.

“The $25 billion in loans that Congress approved to partially fund improvements in fuel economy? Irrelevant. Dead automakers do not invest in technology.”

The switch in logic reflects Detroit’s inability to stay on message (hint: jobs, jobs, jobs). You bastards wanted us to build clean, fuel-efficient cars and liberate American from its oil addiction and save the God damn polar bears? Well we can’t do that if we’re DEAD, can we?

AN is also surprisingly conflicted on who’s in and who’s out on the death-defying bailout.

“Each of the Detroit 3 is in crisis. But Ford, which borrowed big two years ago and thus has more cash today, may skip a bailout and the strings attached. Cerberus, which bought Chrysler last year, doesn’t deserve money. Government cash might help sell Chrysler to a strategic owner.”

Yeah, that’s a thorny one. Does Ford really need the dough? And why stuff government money into Chrysler when its owner is Mr. Moneybags himself? Anyway, AN is looking out for you!

“The taxpayer needs protection and an upside. GM’s top management may need to go. Government-as-shareholder deserves a big voice. Those details can be worked out.”

May? You see that mangled piece of charred rotting flesh hanging off your shoulder? We may have to amputate. “Details?” We don’t need your stinking details! Just give us the money before we die all over you. After all, no matter what you i-dotters and t-crossers say…

“…the stark fact remains: Absent a bailout, GM dies, and with it much of manufacturing in America. Congress needs to do the right thing — now.”

Call me crazy, but handing $25b to the same people who got GM into this mess– without knowing exactly what we’re getting ourselves into– is not the “right thing.”

And now it’s time to send our email alert. Just as we have for the last five years.

The question presumes that A) Detroit’s ailing automakers ARE America’s automobile industry and B) using our tax money to protect Ford, GM and Chrysler from their own incompetence would benefit the U.S. car industry. Not true, on both counts. And by ignoring the flawed assumptions underpinning the argument for raiding the average American’s wallet, bailout proponents are misleading what they condescendingly call “Main Street.” To which I say no, no, and Hell no.

Clearly, unequivocally, the American auto industry does not consist of Ford, GM and Chrysler. In fact, these three Detroit-based companies COMBINED no longer control the lion’s share of the American automotive market. Foreign-owned manufacturers– the so-called transplants– account for over 50 percent of all new vehicle sales within the U.S. For better or worse, they constitute the core of the American automobile industry.

Feel free to debate amongst yourselves whether or not the fact that the transplants’ profits return to their home country is a crucial difference— just as long as you understand that Ford and GM’s North American divisions have been living off of their foreign ops’ profits for at least the last two years. And that this financial flow inwards is decades old.

And don’t forget another, equally salient detail: Detroit-based car companies are, right now, importing hundreds of thousands of cars and millions of parts from outside U.S. borders. For more than a decade, Ford, GM and Chrysler have been Hell bent on “saving” the American automobile industry by destroying it, sending U.S. manufacturing jobs to Canada, Mexico, South Korea, China and elsewhere.

Anyway, if we accept the idea that BMW, Mercedes, Toyota, Honda, Hyundai and Nissan’s American production facilities are a vital and yes, equal part of the American automotive scene, it raises an interesting and completely ignored question: is the federal bailout for Detroit good for the REST of the American automobile industry? Does it “save” them?

The surprising answer is yes. By supporting Detroit’s inefficiencies, a bailout would help maintain a suitably high “floor” for new car prices. So your tax subsidy to Detroit would protect the transplants’ profits, and by extension, their American workers.

On the downside, a federal bailout screws the consumer. It would help prop-up new car prices, stifling the kind of competition that leads to innovation, and increased value-for-money. As far as the non-Detroit-related taxpayer’s personal pocketbook is concerned, letting American-owned automakers fail is the best possible course of action. The American consumer would get a better product at a lower price, for no extra charge.

Sorry. I know: it’s about jobs, jobs, jobs. Inherent in the idea of “saving” the [strictly defined] American automobile industry is “saving” American automotive jobs, upon which the entire U.S. economy supposedly rests.

Again, you can discuss the “ripple effect” of a combined Ford, GM and Chrysler C11 on the wider U.S. economy without my interference. But however great the impact, it doesn’t alter the truth: the word “save” here means “subsidize,” to no appreciable end. I mean, is there any one amongst you who truly believes that injecting $25b of federal capital into Ford, GM and Chrysler will put them back on their feet, so that their workers and products can compete with non-Detroit automakers? If so, you simply haven’t been paying attention.

And once we’re doing a reality check, if saving the American automobile industry is a euphemism for “giving The Big 2.8 a bridging loan so they can get healthy and competitive at some point in the not to distant future,” we need to face facts: Ford, GM and Chrysler will have to shed jobs anyway. Bailout or no bailout, they’re too damn big for the U.S. car market, now that the new car “bubble” (which they created) has burst.

Enough of this misdirection. Let’s get down to brass tacks. The real question is this: is Detroit worth saving?

No, it’s not. Not in its current form. In this I refer you to General Motors Death Watch 1, wherein I proposed that GM should be parted out. I asserted that its current management should take a hike and its constituent brands reconstituted as independent car companies. (Or not.) In the last three years, I’ve seen nothing to dissuade me from this opinion. As for Ford, it too needs to shed brands and reinvent itself. Chrysler, well, Chrysler’s a basket case. Only Jeep may live on.

So yes, the American automobile industry is worth saving. Only it’s not in any real danger. The only part of the U.S. car biz that’s on the ropes is the Detroit contingent. And the only way to save that bit is to let it fail, so that it may be reborn. But no matter how you slice it, and sliced it will be, “bailing it out” is against the interests of the American taxpayer AND the American consumer who, after all, must foot the bill.

At the end of the proverbial day, a federal bailout for Ford, GM and Chrysler would simply prolong the automakers’– and their workers’– agony. Yes, there will be pain. Lots and lots of pain. But sometimes the more painful the mistake, the more important the lesson. This is one of those times. Detroit can not be saved from the reality that they’ve studiously, callously, stubbornly ignored. Nor should they be.

Do we need an American automobile industry? And by American, I mean those manufacturers, suppliers, and associated vendors owned and operated by US citizens – red blooded, football-loving, meat and potato types. (Ok, that’s a stereotype, but you know who I’m talking about.) I submit that it’s in our national interest to keep it alive and moving forward. Farago disagrees completely (editorial to follow).

For now, we’re going to ignore the mechanics of rescuing Detroit. Or discussions about saving two of the companies and letting the third one go (back) to the dog(s). And we won’t even raise the question of how silly it might be to let Nancy Pelosi-– from San Francisco– to lead the charge to shovel your money to Detroit. So don’t go there; TTAC’s got that discussion covered already. Nope, this is a purely philosophical discussion about the merits of a home grown auto industry. So here goes…

Transportation provides the arterial network of moving people and goods around this country. It’s a darn big country, and most of it has been developed and organized around personal vehicles. Not trains, planes, or buses. The Unites States has more vehicles per capita than any other country in the world: 765 units per 1,000 population (from the United Nations Statistical Yearbook). England, by comparison, has only 426 per 1,000 pops. More new vehicles are sold in the United States than in any other country by millions. (China is the closest at 10 million units – but they’ve got four times the population of the USA.)

By any yardstick, the Unites States is the biggest and most prolific user of automobiles of any country in the world today.

It’s also the richest vehicle market in the world. American’s buy more “vehicles” (in terms of size, content, power, and fuel consumption) than anywhere else, too. While Europeans pay more for cars, they generally get less too: smaller cars, smaller engines, and in many countries, devoid of air conditioning or automatic transmissions. The developing world gets vehicles lacking most safety innovations and creature comforts. We get the best vehicles, with the highest level of safety, amenities, and power. And big, powerful, personal trucks to do our hauling.

So not having a home-grown automotive industry to sell to this market just seems insanely stupid. Everyone else (mostly) seems to make money selling new cars. Toyota and Honda make more profits here than anywhere else. New car sales represent a $400b per year market here. Selling a fraction of this market means big revenues and a Gulfstream jet or three for the executives. Just think of the waterfall of those dollars trickling through the economy with every car sold. Do we really want to ship a big chunk of those dollars overseas to foreign companies, governments and their owners so they can live the high-life?

Sure, we do buy a lot of goods from overseas. But it’s mostly stuff we can’t manufacture here at the same cost as over there. When a seamstresses cost $8/day in China, with few benefits paid and no OSHA regulations, we benefit from the savings as consumers. It makes little sense to produce Walmart’s clothes here.

But guess what? The costs to manufacture a new vehicle in the United States are about as cheap as it gets for the level of car sold as anywhere in the world. The direct labor component of a car represents roughly $1,800 of its total cost. Believe it or not, the direct production cost differences among all US-based assembly facilities from any manufacturer are nominal.

What’s different: the profits of foreign-brand cars assembled or imported in the United States go back to their home countries. That means their countries benefit from reinvestment of those profit dollars into the next generation of vehicles. Better motors, advanced electronics and safety equipment, and even new propulsion systems come from over there– not from US ingenuity and skills. Do we really want to depend on Japan, Korea, and Germany (and soon China) for the future of our cars and related technology or do we want it grown here in the USA?

What’s most promising is that the future of personal vehicles lies not with traditional gasoline ICE, but with variants thereof such as HCCI, diesel, and hybrids and/or all-electric vehicles. Getting there requires a huge investment of dollars. New tech also delivers collateral benefits: software for engine management, ride control, transmissions, heat recovery systems, emissions, and improvements in safety systems. Investments in new technologies come directly from the profits generated from selling vehicles today. And they’re mostly made by suppliers looking for an edge. We simply can’t abandon our future to others.

We need an American auto industry. One that runs the table on the entire production and sales chain. There’s no cost basis reason not to produce vehicles here. We just need better run companies with forward thinking managements. You can argue how we get there, but not where we need to be.

David Cole is the man whose industry and union-funded Center for Automotive Research carried-out a study of the economic implications of Detroit’s meltdown. The result has become the de facto standard for “this is the serious shit that will happen if we don’t bailout Motown’s mismanagers with federal tax money” argument. So much so that the mainstream media uses the figures without attribution. TTAC has exposed Cole’s blantant self-interest in this matter. Our Best and Brightest have examined CAR’s study and exposed its deep methodological flaws. While there is no doubt that a GM, Ford and/or Chrysler bankruptcy filing would create an economic catastrophe for tens of thousands of workers and hundreds of communities, exaggerating the impact for political gain is deeply immoral. And just plain wrong. Giving Cole an uncontested platform to promulgate his propaganda is, if anything, worse. And yet that’s exactly what The Detroit News has done…

The DetN is so happy to let Cole mislead the general public that the headline AND strapline say the same damn thing: “Letting automaker fail costs more than price of loan automaker” is immediately followed by “fail costs more than price of loan.” You know, just in case you can’t be bothered to read Cole’s dietribe [sic]. Which begins by blaming the same government his people seek to suckle.

“The popular complaint is that the domestic auto industry got itself into this mess, and it should suffer the consequences. But the reality is the Detroit Three wouldn’t have cash flow problems if the federal government hadn’t caused the financial crisis, in part, by ensuring that Americans who couldn’t afford a home suddenly could buy one. The resulting subprime mortgage crisis helped lead to the credit crunch, which has caused a dramatic decline in auto sales.”

The meme is clear: the financial crisis is the cause of Detroit’s disaster. The fact that all the other automakers doing business in the United States who aren’t HQ’ed in Motown are in no danger of going belly-up is, apparently, irrelevant. The inconvenient truth that GM’s former captive finance unit GMAC is up to its eyeballs in the subprime mess doesn’t get a look in. Or the American automakers’ obvious willingness to lend money to car buyers whose credit scores mirror a minor league baseball player’s batting average. But wait! There’s more! More federal complicity in Detroit’s dilemma!

“The federal government also contributed to the auto industry’s problems with its lack of a realistic energy policy. The price of this hit home this summer, when the price of gasoline spiked to $4 a gallon and caused a massive shift in the types of vehicles consumers would buy. Now that the price of gas is below $2 in some areas of the country, there will be far less demand in the short run for the fuel-efficient vehicles that the government wants the automakers to sell in greater quantities.”

How fucked-up can one argument be? Seriously, I’m sitting here at the keyboard, schnauzer at my side, lost in the maze of Cole’s rhetorical obfuscation. Are the feds to blame for not having an energy policy that kept gas prices low? Or for having one that did, then didn’t, then did? Did the federal Corporate Average Fuel Economy regs force automakers to make the fuel-efficient cars that would have saved their ass if they’d hadn’t gorged on SUV and pickup truck profits (assuming they could make competitive small cars if they really wanted to) a good idea then, but wrong now? Or wrong then AND now?

Cole’s willingness to blame CAFE for Motown’s misery shows where his sympathies lie– if such evidence were needed. It also shows that Motown’s propagandist-in-chief is no strategist. Criticizing the Dems’ legislative darling child will not win Detroit any friends in Washington. No siree Bob.

“If GM, Ford and Chrysler had to shut their doors, according to our center’s calculations, the economy would lose nearly 3 million jobs in the first year. That is because the auto industry has the highest jobs spinoff of any manufacturing enterprise. For example, for every auto assembly factory job, there are another eight to 10 jobs outside of the plant.”

This rhetorical technique is called reductio ad absurdum. You make a claim, show how it leads to an absurd or ridiculous outcome, and then conclude that the original claim must have been wrong– as it led to an absurd or ridiculous result. If Detroit’s automakers file for Chapter 11, there is no way on God’s green earth that they will simply shutter their doors and be done with it; they will continue making and selling vehicles. It may be a fraction of previous production, but it will not be zero. To suggest so is the dictionary definition of disingenuous. Of course, Cole’s got that one covered.

“Critics have said it would be better to let the automakers file for bankruptcy and get their financial houses in order. The problem with this approach is that industry experts know that consumers won’t buy expensive products from a bankrupt company. That still leads to serious decline in sales and to 2 million lost jobs very quickly.”

Don’t you hate it when an industry expert quotes unnamed industry experts to prove that he, an industry expert, is right? Perhaps Mr. Cole should conduct a study on consumer attitudes towards buying from a bankrupt GM, Ford and or (yeah right) Chrysler, focusing on price. Because at some price, ANYTHING will sell. And he might want to ask “If the your car warranty was backed by the federal government…” Nope. Checks cashed. Blinkers on. Two million jobs? Where’s the data? And define “very quickly.” Fuzzy logic uber alles.

“In addition, the very low level of current sales and surprisingly low inventory of vehicles are creating a pent-up demand for new vehicles once the credit crunch subsides and the economy improves. The market promises to shift from the buyers’ market of the past decade to a sellers’ market where fewer financial incentives or discounts will be needed to sell a vehicle with the industry’s reduced manufacturing capacity.”

Baseless conjecture. Dataless drivel. Crap. In fact, you could say that the domestic automakers’ build ’em fast, pile ’em high, sell ’em cheap strategy over the last ten years created an automotive “bubble.” That burst. TTAC may not be a credible source of industry expertise in Mr. Cole’s eyes, but we called the sales meltdown (sub 12m units). And plenty of us hereabout don’t see a recovery until the tail end of 2010. And even then, vicious competition from the transplants guarantees that America will ALWAYS be a buyer’s market.

“…the government needs to give the Detroit Three a bridge to this brighter future. A bridge loan now would be far less expensive than letting one or more of the domestic automakers fail.”

Or not. In fact, funding the automakers without letting them pass through Chapter 11 would be a bridge to nowhere. And a complete waste of money. Our money.