We’ve been keeping tabs on all the divisive, emotionally-charged wedges being driven through the the bailout debate, and frankly we’re beginning to wonder where it will end. Luckily we may be seeing the light at the end of the tunnel, and as usual with these things, it’s some good old reductio ad absurdum. Randi Payton of On Wheels Inc, which publishes magazines and produces Web sites about the auto industry for ethnic minorities, wonders aloud in Automotive News [sub] whether we are “turning our backs on diversity.” After all, as Payton puts it, “we cannot overlook the more important fact that the Detroit automakers are also some of the most socially responsible corporations in the world.” And the key to his argument is the claim that the Detroit 3 “led the embracing of diversity, employing more minorities than any other entity, next to the federal government.” Now I certainly wouldn’t dispute Payton’s point that “Ford Motor Co. was the first corporation in America to pay fair wages to blacks, essentially creating an African-American middle class,” but to do justice to the term “diversity” we will have to take a closer look at Ford’s history than that. While Henry Ford opened groundbreaking opportunities for African-Americans, his anti-Semitism pretty much knew no bounds. Time for a definition check on the term “diversity?” Better yet, let’s not justify the bailout of failing businesses on ancient history. Or the most divisive issues we can possibly think up.

The phone lines are running hot between Detroit and Shanghai. Ford is in talks with SAIC, China’s biggest car-maker, in what UK’s Times calls a “desperate attempt to sell its prestigious Volvo brand.” Ford has already tried before, and had been turned down by the Chinese. The Times quotes “a source close to the American motor giant” who says that earlier talks, which took place in summer, broke down over price. Ford had bought Volvo for $6.5b in 1999, and wanted to clear $5.9b. “Mei xi” (no dice) said the Chinese. The Detroit source that’s leaking to the Times (probably with a nod from higher up) says: “Now that Ford is in dire straits this would be a good opportunity for SAIC to snap up Volvo on the cheap. The price has dropped considerably since seeking a sale in the summer.”

According to Aaron Bragman, a car industry analyst with economic forecaster IHS Global Insight, “the sale of Volvo has become part of the conditions of Government assistance.” Ford is being advised by the investment bank JPMorgan Chase.

A spokesman for Ford confirmed that the company is in talks “with a Chinese car-maker,” but declined to name SAIC. SAIC likewise declined to comment. There are other suitors, just to keep SAIC from thinking they are the only game in town …

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In his selfless campaign to save Detroit from, uh, Detroit, Senator Christopher Dodd launched a failure-seeking missile at GM. Needless to say, it had GM CEO Rick Wagoner’s name on it. “You’ve got to consider new leadership,” Dodd told “Face the Nation,” referring to GM not CBS (one presumes). Dodd said Red Ink Rick “has to move on.” Now get this: “GM spokesman Steve Harris said he didn’t interpret Dodd’s comments as making Wagoner’s exit a condition for aid, adding that the company management, employees and dealers ‘all feel like Rick is the right guy to lead us at difficult time.'” Is “difficult time” the opposite of “playtime?” And how else would you interpret Dodd’s remark? When the Senator said, “piss off Wagoner” he actually meant “please continue running GM into the ground so we can blow $15b+ of our taxpayers’ money on this doomed enterprise?” And if Harris really didn’t get the message– a completely fantastic proposition, but there you go– President elect Barack Obama offered NBC dark hints about Wagoner’s curtain call…

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Automotive News [sub] reports that the exit of 5,000 salaried employees in the past week has created “chaos” within Chrysler, and bankruptcy rumors have suppliers considering cash-on-delivery demands. According to Chrysler spokeswoman MaryBeth Halprin, “the claim of chaos is unwarranted. There is certainly in this first week without 5,000 employees a transition taking place,” she said in an e-mail to Automotive News. “This is an opportunity to continue the transformation of our company, rethink work processes and focus on core function.” Right. For more on ChryCo’s “transformation,” check out this story from the NYT.

From GM’s ad in Automotive News (Dec 8 edition):

“While we’re still the U.S. sales leader, we acknowledge we have disappointed you. At times we violated your trust by letting our quality fall below industry standards and our designs become lackluster. We have proliferated our brands and dealer network to the point where we lost adequate focus on our core U.S. market. We also biased our product mix toward pick-up trucks and SUVs. And, we made commitments to compensation plans that have proven to be unsustainable in today’s globally competitive industry. We have paid dearly for these decisions, learned from them and are working hard to correct them by restructuring our U.S. business to be viable for the long term.”

General Motors and Chrysler have both retained “hot shot” law firms to advise them on bankruptcy matters. Want to know what their legal bills will look like?

GM has retained a firm named Weil, Gotshal & Manges, a huge organization that specializes in pretty much everything big business, including bankruptcy law. They represented Enron, WorldCom, and Lehman Brothers in all of their bankruptcy proceedings. The Lehman proceeding was just this past October, so the rates are current. As far as I know, Weil’s rates are standard for the market – expect Chrysler’s firm Jones Day to be very similar. For the Lehman matter, Weil billed at:

$650-$950/hour for partners and counsel
$355-$595/hour for associates (keep in mind that $355 gets you a fresh out of law school kid)
$155-$295/hour for paralegals

Bloomberg estimated that Weil’s total bill for the Lehman Bankruptcy could be as high as $906 million. While Lehman was worth a lot more than GM, there was also much less work to do. I’d guess that a GM bankruptcy could cost $1 billion just in legal fees. And that’s not counting the collateral damage – suppliers, contractors, dealers.

British Leyland 2.0? Nope. But that’s what the London Times might like us to think, at least based on the headline: “Vauxhall in Secret Cash Plea to Save 5000 Jobs.” Oh, well that’s pretty dispositive, isn’t it? Until the next paragraph, which actually tells us “last week along with other carmakers, to urge the Government to give guarantees offering financial comfort to its car-part suppliers and dealerships.” And then later on, we learn that Ford and Honda attended the meeting too, as they also manufacture cars in the UK. Why wasn’t that in the headline? Right. Meanwhile, the British government is already paranoid about a British Leyland repeat, and has had enough of a headache with the recent nationalization of the Northern Rock bank. The concern raised by the Times could, eventually, have some merit. Vauxhall and Opel (which are distinguished only by a brand name and steering wheel placement) are totally screwed as GM accelerates its disintegration. The US Congress isn’t going to bail them out, and if I were betting I’d say GM Europe and Saab will be spun off in the next six-to-twelve months.

TTAC’s Edward Niedermeyer called it in yesterday’s round-up: Congress will fork-out bailout bucks to “tide” Chrysler, Ford and GM over until… later. Reuters dots a few i’s and crosses a few t’s: “Congressional Democrats and the White House have reached agreement on emergency aid for U.S. automakers of between $15 billion and $17 billion, two senior congressional aides said on Friday.” How Congress will apportion the money between the three supplicants is something of a mystery. But look for GM to get the lion’s share, Chrysler to get some and Ford to get a token amount (“token” as in more money than its workforce earned in the last ten years). Congressfolk are working through the weekend to attach strings to the money– likely to include an oversight board and a deadline for Round Three (March?). So from whence cometh this largesse? From your taxes obviously. More specifically…

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Dear oh dear. Now that The Big 2.8 have slashed their advertising budgets, now that the Congress has their CEOs in their sights, the MSM news nets have grown a pair. In today’s House action (Eddy’s on the bridge), a few pols have poked and prodded Detroit’s opposition to state emissions laws and federal corporate average fuel economy (CAFE) standards. But it’s nothing compared to this slam at Motown’s lobbying efforts. “Nobody is placing bets on whether Congress will end up giving the car companies a bailout. But if investments in Washington politicians count as leverage, then the auto industry has plenty of clout.” Iron fist in a velvet glove? The times they are a changin’.

Couric You came from Home Depot to run Chrysler. You had to be a quick study, but from what you’ve learned, what was the U.S. auto industry’s biggest mistake?

Nardelli: Well I think, look, we’ve all made mistakes. I’ve been in business for 38 years, and whether I was at GE or Home Depot or Chrysler, I think the important thing now is to look at this crisis. How do we make sure that we are repositioning ourselves that we break from some of those old paradigms to make sure that we are making new products that we are delivering service to customers, the kinds of cars and trucks they want to drive, have the conficence to drive and will tell their friends about it, Katie.

The truth is out: as Chrysler CEO Bob Nardelli drove a Chrysler Aspen Hybrid to today’s Senate Banking Committee hearings. Confirmation comes from Jet-Gate Media Inc, formerly known as ABC News, which dedicates no fewer than four pages to the symbolism of CEO transportation choices. Of course Nardelli gets a good hosing for choosing a ride that will be canceled within less than a year of its introduction. ABC contrasts the high cost and marginal returns of hybrid vehicles with the currently low cost of gas, and concludes that (in the words of Kelly Blue Book’s Jack Nerad) “a hybrid alone will not save Detroit.” In short, the parade of Volt/Cruze mules, Chrysler vapoware and assorted hybrid and flex-fuel vehicles are a PR show to gain environmentalist support for a bailout. Shocking stuff, I know, but the disconnect between self-image and reality is key to this entire situation. Slate’s Daniel Gross explores this “Detroit Delusion,” arguing that “the markets are treating the auto companies as if they’re already in bankruptcy,” and “the federal funding they’re requesting is necessary to help manage failure, not to stave it off.” Luckily Senators seem to be focusing on these financial issues rather than taking the eco-future bait.

In the course of tearing the D2.8 CEOs a new NSFW, Senator Corker (R-TN) told the auto execs that Sam Bodman, Energy Sec, has rejected– so far– all the 136 requests for access to the $25b “retooling” loan fund. We have no other information at this time. But Holy frijoles, Corker is after Motown CEOs’ collective Nardelli. “There is not a person alive who thinks Chrysler can make it as a standalone automaker,” Corker asserted. Although the Senator raised the central issue for Chrysler– why the Hell should the U.S. government bail out the ailing automaker if deep-pocketed owner Cerberus won’t do it– Senator Dodd threw the deer-in-the-headlights ChyrCo honcho a lifeline. He changed the subject. Now Corker is sticking it to UAW boss Gettelfinger by trying to get him to agree to swap health care VEBA payments to equity, relieving GM of a big pile of debt. Another squirm. And Corker’s time is up. NSFWs are unpuckering.

Sadly C-Span‘s coverage of today’s Senate Banking Committee didn’t kick off with a red carpet arrival of America’s automotive future. Similarly, a longish hearing with only the GAO General Comptroller didn’t do much to raise the pulse. It seems that TARP funds are still rhetorically on the table, and some form of oversight board will go along with any bailout. In fact, the seventies were back in a big way, as the 1979 Chrysler bailout is referenced as a model on numerous occasions. As if Chrysler’s CEO weren’t sitting there asking for more money. MarketWatch reports that Comptroller Dodaro said the Federal Reserve also has authority under current law to lend money to the Big Three, if the Fed board of governors determined that the need is urgent and that the loans would be repaid. However, the Fed has determined that it cannot lend to the companies because the loans cannot be collateralized as required.

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Eddy and I are watching the live-stream of the Senate Banking Committee hearings on the bailout. We’ll provide updates as and when. Meanwhile, Automotive News [AN] gets tense. AN reports that GM CEO Rick Wagoner said (read: is going to say) oops, sorry, yeah, I know, we fucked-up [paraphrasing]. “We made mistakes,” Wagoner said in testimony prepared for delivery to the Senate Banking Committee today. GM made many decisions that were ‘right for the times,’ Wagoner said. But the company failed to build enough flexibility into its operations and did not move fast enough to invest in smaller, more fuel-efficient vehicles for the United States, he conceded. Wagoner said the Detroit 3 learned a lot from last month’s “difficult” congressional hearings on their aid requests. For GM, he said, that process accelerated ‘a healthy internal review.'” I’m not going to say it. I’m not going to say it…