Well, we still don’t have that list of doomed GM dealers. Senator Rockefeller’s office has failed to return eight phone calls asking for the information: the list he requested from GM CEO Fritz Henderson, who promised, under oath to provide. Meanwhile, here, finally, is the supporting documentation for GM’s dealer cull. The bankrupt automaker submitted the document [link here] to Friday’s Stupak hearing on dealer closing. Bottom line: GM’s dealernetworkreductionsenableanestimated $415 millionin “grossstructuralcostsavingspotential.” What is it with these guys? There are lots of good reasons to shrink GM’s dealer network. In the face of a total industry bailout that’s topped $100 billion, Henderson’s “rooftop” cost saving ain’t it.
GM has bowed to political pressure, deciding that it won’t use taxpayer money to import compact vehicles from China. Instead, Aveo II (a.k.a. the Chevy Viva) will be built at one of three existing GM plants. (Hello, DOE retooling loans!) Up for the contract are Michigan’s Orion Township, Tennessee’s Spring Hill and Wisconsin’s Janesville assembly plants, and GM’s Troy Clarke is meeting with workers and unions from the three locales in order to determine the best site for Viva production. Oh, did I say workers and unions? I meant congressional delegations. Because, in the post Barney Frank-gate environment, “(GM’s choice is) going to be based on pure business decision,” according to Rep. Gary Peters (D-MI). Would Rep. Sander Levin (D-MI) like to clarify? “We’ve been in the front line of pain and we very much believe that one of the factors that should be taken into account is the impact of other decisions,” Levin tells the DetN. Gosh, that sounds almost . . . political. Hit the jump to find out which congressional delegation is most likely to build the new generation of GM compacts.
The sale of Chrysler’s assets to Fiat is complete, reports the New York Times. Paperwork (and the transfer of $6.6 billion in Treasury money) was completed at about 9 a.m. Eastern, after news came yesterday that the Supreme Court would not hear the Indiana pension fund challenge. News reports refer to the speed of the Chrysler bankruptcy as “an important victory” for the Obama auto industry restructuring effort. Perhaps to avoid talking about the substance of the bankruptcy. Either way, she’s a done deal. Chrysler is dead, long live Chrysler!
The House of Representatives has passed Rep Betty Sutton’s $4 billion scrappage scheme [download full text here], reports CNN Money. The bill now goes to the Senate. Under Sutton’s bill, clunkers with a combined 18 miles per gallon rating or worse would be eligible for a scrappage rebate. Purchasing new vehicle which exceeds its replacement’s rating by four miles per gallon would earn a $3,500 rebate. Improve the combined EPA average by 10 mpg and snag $4,500. Offer good for one year. Or until we tear through $4 billion in a wholesome, American display of redemptive consumption. I’m sorry, I mean “shore up millions of jobs and stimulate local economies . . . improve our environment and reduce our dependence on foreign oil. The [Consumer Assistance to Recycle and Save] act demonstrates that we can free ourselves from the false argument of either you are for the environment or you are for jobs. You can do both, you must do both.” As the bill’s author modestly puts it.
Not thrilled meaning, I suppose, that they’re not in favor of it. Using that definition, AutoPacific’s summation of their survey of 900 Americans is an example of English understatement. According to their poll, “Fifty-four percent of respondents believe that General Motors should have been allowed to fail, while 58% believe that Chrysler should have been allowed to fail.” Not too bad you say, the words “simple majority” springing to your lips. Anyway. It’s a done deal. Yes, well, “Eighty-one percent of the respondents agree that the faster the government gets out of the auto business, the better.” The government’s counter-argument? We agree with your agreement! Meanwhile, don’t worry: good things are going to happen! The voters aren’t quite so happy-clappy at the prospect . . .
After a short, suspense filled couple of laps under the yellow, the US Supreme Court has dropped the green flag on the Chrysler-Fiat deal. The New York Times sums up the court’s view that “the Indiana funds ‘have not carried the burden’ of proving that the Supreme Court needed to intervene.” Also, earlier today, the Chrysler dealer slaughter was also given the go ahead when Judge Gonzalez approved that aspect of the deal. So, that pretty much closes this chapter of the saga. The deal is going down as planned by Fiat and the US Treasury. Now the really hard part begins.
That’s the question motivating an alternative plan for the government’s “investment” in GM drafted by Sen. Lamar Alexander. Under Alexander’s plan, the Treasury secretary would be required to distribute the government’s GM and Chrysler stock to the 120m or so Americans who submitted tax returns for 2008. “This is the fastest way to get the stock out of the hands of Washington and back into the hands of the American people who paid for it,” said Alexander. The proposal, which Alexander plans on attaching to the current tobacco regulation bill would:
• Prohibit the Treasury from using any more TARP funds to bailout GM or Chrysler.
• So long as the government holds stock in these companies, require that the Secretary of the Treasury and his designee have a fiduciary responsibility to the American taxpayer to maximize the return on that investment.
• Not later than one year after each company emerges from bankruptcy, require that the Treasury distribute its common stock holdings in that company evenly to every American who paid taxes on April 15.
Thanks to my free market-based, anti-bailout stance, some of TTAC’s Best and Brightest view me as an autoblogospherical arch-conservative. Which often leads to comparisons to or, at least, invocations of Rush Limbaugh. This despite the fact that I’ve pointed out that the liberal’s largest (in all senses of the word) bogeyman has been sucking on GM’s adver-teat for years, artfully slipping references to “wonderful GM products” and “this great American company” into his rants. Until, that is, Ralph Nader filed a complaint with the FCC. At which point Rush continued to accept GM payola for his personal imprimatur, only with a disclaimer. During this “transition,” I’ve highlighted Limbaugh’s (and Hannity’s) resulting philosophical discomfort (i.e., hypocrisy) on the Motown meltdown. Blame it on unions, congress, anyone but the people signing their paychecks. OK, so, the Detroit News reports that el-Rushbo is now calling for a GM boycott. Ish.
In addition to arguing against Indiana’s pension fund challenge, the Obama administration is sending PTFOA members Ron Bloom and Ed Montgomery to formally defend its handling of the GM and Chrysler bankruptcies to the Senate Banking Committee on Wednesday. This is the first such testimony from the PTFOA, and it comes (as the Freep puts it) “a torrent of criticism from Republicans about the government’s decision to take a 60 percent majority stake in GM.” Even Autoblog smells the political smoke in the breeze, fretting that the “far right wing” stands ready to boycott a newly federalized GM. Dudes, people have been silently boycotting GM for decades. But if GM gets worse, it will be nice to have that excuse ready to go.
Supreme Court Justice Ruth Bader Ginsburg has ordered that the sale of Chrysler to Fiat is “stayed pending further order,” reports the AP. “Was TARP money used illegally?” asks the WSJ Deal Journal. It won’t be easy to prove, is the professorial opinion. Oh, and did we mention that the Obama administration has filed a brief (PDF via the excellent scotusblog) against the initial plea, arguing that TARP issues are out of bounds for the courts? Meanwhile, Fiat’s walk-away deadline of the 15th draws closer every minute. Hit the jump for Bader-Ginsburg’s inscrutable order (and more! Thanks for the tips!).
Don’t worry Detroit: you’re not being singled out for “special” federal supervision (perish the thought). The New York Times reports that Congress is taking control of the pay and compensation for all beneficiaries of federal largesse who’ve double-dipped into the taxpayer’s purse. “The Obama administration plans to require banks and corporations that have received two rounds of federal bailouts to submit any major executive pay changes for approval by a new federal official who will monitor compensation, according to two government officials.” A Pay Czar! Heads-up, bosses, meet the new boss of bosses: Kenneth Feinberg. You may remember Mr. Feinberg as the 9/11 victims’ compensating lawyer originally tipped to be Obama’s Car Czar—a job so big the Prez eventually gave it to Wall Street insider Steve Rattner and 24 of his closest friends. Anyway, there’s an important (if not exactly auto-oriented) dynamic in play here . . .
Regular readers will know that we’ve taken Washington Post carmudgeon Warren Brown to task for his shameless Motown cheerleading up to and through the federal bailout. You may have also noticed a huge disconnect between Warren’s blind bailout boosterism and his paper’s entirely skeptical stance on federal intervention in the U.S. automotive industry. In an ironic twist of fate, Warren’s decided to take the WaPo’s latest buyout offer—and do so with all of the grace displayed by his bailout boosting pals in The Motor City. He leaves the paper spilling vitriol all over his colleague’s rejection of Uncle Sam’s “investment” in Government Motors.
Not much info here, but the story’s major thread is clear enough. After discovering that Massachusetts Congressional Representative Barney Frank won a reprieve for a local GM operation, Michigan Reps are looking for some of the same non-action for their constituents. The Detroit Free Press is uncharacteristically tight-lipped (uninformed?) about the who, when and where—although we know the what and why (staying elected). “Michigan members of Congress summoned the chief executive of General Motors Corp. to a meeting next week after the company bowed to pressure from U.S. Rep. Barney Frank and delayed the closing of a parts warehouse in his district.” The Detroit News is more forthcoming, indicating that it’s the entire Michigan congressional delegation asking for various stays. This after Dingell’s open letter to Fritz on the first . . .
According to a recent Rasmussen poll, 26 percent of those surveyed support the GM bailout. Yes, but 53 percent describe the bailout as a “bad idea,” and of that majority of respondents, 30 percent of those support a boycott. The idea of boycotting a government-owned GM was most popular among men and middle-income respondents. Also, 51 percent responded that they are “more likely” to purchase a Ford because the automaker has not received government funding. If popular sentiment is so set against GM and the bailout now, imagine what it will be like after a few years of government ownership. Especially if this anti-bailout attitude is affecting sales along the way. Fills one with hope, doesn’t it?
Bloomberg reports that Argentina will loan $70 million to GM out of its $24 billion recently-nationalized social security fund. In return, GM has promised to use the money to complete the Brazil-based development of the forthcoming Chevy Viva. And according to Argentinian president Cristina Fernandez DeKirchner, “one of the conditions we demanded to provide this loan is that all the auto parts used in this project have to be locally made.” As we reported earlier, GM claims it will produce the Viva in the US. With no apparent guarantees about parts sourcing.
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