We are anticipating an announcement soon from the Administration regarding the restructuring of the U.S. auto industry. We continue to work closely with members of the Task Force and it would not be appropriate for us to speculate on the content of any announcement.
So now you know.
From the moment Chrysler announced a deal with Getrag to build paddle shift transmissions in Indiana, TTAC flagged it as a disaster in the making. That was back in late ’07. By then, ChryCo sales were tanking. The idea that the ailing American automaker needed—or could afford—700K new transmissions per year was incredible. And so it didn’t come to pass, taking taxpayer credits and grants with it. And now IBJ.com (no really) reports that Indiana Rep. Dan Burton met with U.S. Treasury Secretary Tim Geithner and demanded that ChryCo refund Tipon County $10M before they get their next round of bailout bucks.
County officials told Chrysler they want the company to honor an agreement to cover all the county’s cost if the plant is not completed. In addition to the $5.5 million in bonds sold to Chrysler, Tipton County wants the company to provide $4.2 million for other bonds and $300,000 in county economic development funds used for infrastructure improvements.
Unbelievable. And yet, there it is, in The Detroit News‘ unsigned editorial: “President Barack Obama’s promise of aid to the auto industry is welcome, but it would also be helpful to the Detroit automakers if he stopped badmouthing them. The president late last week said he expected to provide additional assistance to the struggling manufacturers, but he added that they couldn’t expect to rely on building more sport utility vehicles and depend on continued low gasoline prices.” Yeah, we pointed out the fallacy of President Obama’s pandering to the “Detroit’s comeuppance is due to the fact they were (are?) greedy bastards who forced Americans into SUVs” shibboleth. But we (and by that I mean and I) don’t support the Motown bailouts. Never have. Never will. And, as far as I know, I don’t live on Planet Claire. “While Obama acknowledged the huge slump in auto sales that is hampering the recovery of the auto firms, he still implied that they’re not making vehicles the public wants. That’s just not true.” A genuine WTF moment, n’est-ce pas?
I know, huh? Anyone who spent five minutes thinking about Motown’s $42.4 billion (and counting) feast at the federal bailout buffet would figure out that the beneficiaries are using tax money to discount their products—to support an unsustainable small market share. OK, that last bit’s a bit technical. But the bailout = discount = unfairness media meme is just gaining traction in the MSM. And it’s no small point. As I’ve pointed out here before, those federally-sponsored new car discounts effectively punish automakers who didn’t run their companies into the ground and threaten their products, profits and jobs. The Detroit News wakes-up to the story this morning. Chrysler, you are the weakest link.
The news that the Presidential Task Force on Autos (PTFOA) has decided to “loan” Chrysler and GM more money arrived well ahead of the March 31 (Tuesday) deadline. No less a personage than the president confirmed that Uncle Sam would turn a deaf ear to the 60 percent plus of America voters who oppose Motown Bailout III (Don’t forget the DOE tour). The announcement removed any possibility that GM bondholders and/or the unions would satisfy the previous loan’s conditions for a major debt for equity swap, or that GM would get its brands sorted out. To counter-spin this wholesale lack of “progress,” Bailout III will claim that new, piano-wire like “strings” are attached. Such as?
Remember when the press/GM shareholders were after Car Czar Bob Lutz to take a haircut on his salary given that The General was well on its way to the bailout buffet. “I gave at the office,” Maxium Bob didn’t joke. And then they took away his corporate jet and he quit. Just like that. NSFW this. I’m outta here. Obviously, Detroit News columnist Daniel Howes doesn’t enjoy Lutz-like perks. But today’s column echoes the Czar’s imperious indignation. Danny’s mad as hell at president Obama for suggesting that Motown should make [more] concessions after its next bailout bonanza. What’s the biggie? Did Daniel forget to notice the word “after”? Yup. That and the fact that Detroit’s woes are entirely self-inflicted.
Sacrifice? What, exactly, has this town and its investors been experiencing the past three-plus years? Spring break? This notion, aired during the congressional inquisitions late last year, picked up by Team Obama and wielded by whoever’s trying to score points, that Detroit Auto hasn’t yet “sacrificed” in a (losing?) effort to fix itself is absurd.
So what, you ask, has Detroit done to qualify for this cry of basta? Jump!
Now that the Presidential Task Force on Automobiles (PTFOA) has pre-capitulated on re-upping Chrysler and GM’s bailout bucks, an obvious concern arises: now what? Chrysler offers a tri-branded line of non-competitive products whose sales have been propped-up by federally-funded discounts plus plus plus. GM is still in over-branded, over-dealered, over capacity hell. So, if both companies score big bailout bucks ($22B), what will they spend it on? Building cars? Inventories are already swelled and, here’s the kicker, sales are still declining. As we approach the end of the month, Automotive News [sub] is using the “T” word: “The sales numbers for March, due next week, are likely to reveal another tumultuous month. New-car sales could be down as much as 40 percent, according to J.D. Power and Associates. And the monthly sales rate will continue to flirt with lows not seen in 27 years.” Interesting choice of words; who’s about to get NSFWed here?
“Some help” equals $22 billion of additional federal “loans” for Chrysler and GM. The Detroit News reports that President Obama has joined his Presidential Task Force on Autos (PTFOA) in signaling that his administration ain’t gonna enforce the “get your NSFW together by March 31” conditions for Motown’s second seating at the federal bailout buffet. Apparently, those conditions are so last year. The Chief Executive and his minions are more concerned (i.e., only concerned) with the NEW conditions. “If they’re not willing to make the changes and the restructurings that are necessary, then I’m not willing to have taxpayer money chase after bad money. And so a lot of it’s going to depend on their willingness to make some pretty drastic changes.” That’s because “there’s been a lot of mismanagement of the auto industry over the last several years. But they’ve all been replaced now.” Just kidding. About the replacement bit. “Everybody is going to have to recognize that the current model, economic model of the U.S. auto industry is unsustainable.” How about we start with somebody and work our way forward from there?
Bloomberg reports that Citigroup (bailout bill to date: $45 billion) could team up with GM and Chrysler ($17.4 billion so far not including aid to finance units) to distribute the $5 billion recently allocated to the dead-alive auto supplier sector. This irony-free revalation comes courtesy of an Original Equipment Supplier Association document leaked to Bloomberg. Citi would act as the “third-party servicer” for the program, which guarantees suppliers’ accounts receivable “no matter what happens” to the automaker that promised to pay for the parts. Suppliers will have to pony up two percent of the receivable to qualify, three percent for expedited delivery. A number of zombie suppliers are expected to miss even this low bar. Meanwhile, we’re wondering how AIG didn’t manage to get a piece of this action.
The pitchforks are out for bailout-funded Wall Street bonuses, and today’s NPR Morning Report highlights GM’s longstanding perk: free company cars with free gasoline. The Product Evaluation Program entitles 8000 white-collar employees to a new GM vehicle every six months. Drivers are to report problems back to the mother ship ASAP, and currently pay a $250/month administration fee. Current morale at the Tubes likely isn’t all that great, so any benefit is nice. However, it’s now at taxpayer expense, so what’s this fuss all about?
President Obama wasn’t indulging in hyperbole last Sunday when he told 60 Minutes that “the only thing less popular than putting money into banks is putting money into the auto industry.” The Freep reports that a new Polk survey shows that 61 percent of Americans now oppose giving GM and Chrysler more money. More tellingly, support for a continued bailout of the auto industry peaks at only 16 percent in the manufacturing-heavy Great Lakes region and drops to as low as 4 percent in favor in New England. And there’s little room to argue that lack of support is based on ignorance or misperception. About the same percentage of people who opposed more loans also recognized that denying them would have dire economic consequences. One Polk analyst describes the emerging consensus on Detroit’s predicament as “it’s a problem, but it’s not a problem for taxpayers.” Cold.
With what one hopes is feigned incredulity, the Freep‘s Sarah Webster marvels at how political the issue of GM’s bankruptcy has become. “I must confess,” writes Walker with a conveniently wide-eyed naiveté, “I was quite surprised when the issue of whether General Motors Corp. or Chrysler LLC should file for bankruptcy took a turn to the political when the automakers first approached the federal government for a rescue package last fall.” Yeah, it’s a shocker alright. But why is Walker so surprised?
Automotive News [sub] provides “tantalizing hints” (source?) about which six vehicles “could be” built in Chrysler factories and sold in Chrysler dealerships under their Italian brand names. At the U.S. taxpayer’s expense. [NB: Count the above Panda Jeep twice for two different engine permutations (1.2 and 1.4-liter) in the new Chrysler tradition.]
• Fiat 500 minicar: Big hit, retro hatch, possible Mini [ED: MINI] fighter
• Alfa Romeo MiTo: Stylish 3-door hatchback
• Alfa Romeo Milano: Compact sedan, will replace current Alfa 147
• Alfa Romeo Giulia: Sleek mid-size sedan, will replace current Alfa Romeo 159
• Alfa Romeo compact SUV: Compact utility vehicle hinges on Alfa Romeo’s re-entry into U.S.
We’ve been hearing a lot recently about GM bondholders’ unwillingness to take the haircut offered by The General—a precondition for federal loans. Ha! Got you! It was supposed to be a precondition. Uncle Sam blew through the first deadline as if that check box didn’t even exist. As the The Presidential Task Force on Automobiles (PTFOA) prepares to dish-up a second helping from the bailout buffet, GM bondholders are tooling-up for next week’s PR war. The “unofficial committee’s” letter to the PTFOA [full text via Reuters] kicks off with the Cerberus defense: ” . . . many of these bonds are owned by average citizens, who purchased them to support their own retirement and college expenses and other critical needs.” As we said when Chrysler’s owners assumed this position, bullshit. As the letter acknowledges, 80 percent of this debt is held by institutions. Meanwhile . . .
From: Harry Wilson
Sent: Friday, March 13, 2009 12:52 PM
Friends — I’m sorry for the mass email — as some of you know, I recently joined Steve Rattner and Ron Bloom on the President’s Auto Task Force. While the work before us constitutes an extraordinary challenge, Eva and I are excited to be able to give back in this way at this time.
I’m writing because our primary challenge right now is that the work is complicated and massive, and our team is quite small. We are looking to add people with the following sets of experience:
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