It’s something of a long-running joke among local editorial writers that everyone cribs from either the New York Times or the Wall Street Journal‘s editorial boards. The two papers tend to lead opinion on either side of the spectrum, with the mainstream left taking its cues from the Grey Lady and free-market business types following the WSJ. If this theory still holds true in these ideologically confused times, the worm has certainly turned on the bailout. Both papers are running prominent and well-reasoned editorials against the bailout, from Thomas Friedman on the left and Paul Ingrassia on the right. Taken with the recent bad news from DC, this editorial one-two punch may just mark the high-water point for pro-bailout momentum. Read More >
Category: Bailout Watch
• The U.S. auto industry has been hard hit by the credit crisis.
o Carmakers can’t get credit to complete their restructurings and put new advanced technology vehicles into production.
o Customers can’t get credit for new cars and other purchases, and consumer confidence has fallen to an all-time low.
o Suppliers are losing business and can’t get credit to keep them afloat until the industry recovers.
o Dealers can’t get credit to finance inventory and other routine business needs.
Dear GM Dealer:
Earlier today, during a GM Dealer IDL broadcast, I provided you with a GM Business update and significant information about the vital role the U.S. automotive industry plays in the health of the country in terms of employment, annual economic output, exports, R&D investment and retail business. As we’re in the midst of the deepest crisis our industry has ever faced, GM’s priority is on seeking support from various U.S. government agencies and congressional leaders. We need your help now to ask government officials to approve an additional loan package to help us deal with our current liquidity crisis.
Automotive News [sub] reports that Georgetown University law professor Daniel Tarullo may be president-elect Barack Obama’s choice for U.S. Car Czar– should such a thing be deemed nceessary. You may remember Tarullo as a world-renowned expert in the design, manufacturer and marketing of automobiles worker bee for the Antitrust Division of the Justice Department. No? Special Assistant to the Undersecretary of Commerce. No? Chief Counsel for Employment Policy for Senator Edward M. Kennedy. No? Assistant Secretary of State for Economic and Business Affairs. No? Deputy Assistant to the President for Economic Policy. No? Assistant to the President for International Economic Policy. No? Jeez, you really should get clued-in here! Tell you what, read Tarullo’s testimony to The Subcommitee on Security and International Trade Finance, Committee on Banking, Housing and Urban Affair’s hearing on Reforming Key International Financial Institutions for the 21st Century. And then tell me Tarullo isn’t a car guy, if you’re still conscious. Meanwhile, I want to have a little rant about the dangers of creating a Car Czar…
When we reported on the Bush-Obama meeting yesterday, we told you that the meeting was “friendly,” but ultimately unproductive. Well, we were right about half of that, and no prizes for guessing which half. The New York Times cited unidentified sources in its coverage as saying that Bush was ready to support accelerated support for the Detroit Three on the condition that Obama convince Senate Democrats to support passage of the Columbian Free Trade Agreement which they are currently blocking. Needless to say this was a non-starter. Obama has openly opposed the Columbian FTA throughout his campaign, not only to curry favor with the unions protect US jobs, but also because in his words “the violence against unions in Colombia would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements.” Having made this human rights argument in no less public a venue than the presidential debates, was there ever any chance that he would accept Bush’s compromise? Of course not. But now Bush is steamed that this detail slipped out, blaming Obama aides for leaking the smoke-filled-room compromise to the press. Obama’s transition team now says that “there was no quid pro quo in the conversation,” but as the US News And World Report Political Bulletin reports (in exhaustive detail) this is turning into the first major rift between the outgoing and incoming presidents. As well as proving that even a bad compromise leaves everyone unhappy.
Treasury Secretary Henry Paulson has announced that the $700b government rescue program will not be used to purchase troubled assets as originally planned. Just like that. I swear. MSNBC reports that turnabout is fair play. “The administration decided that using billions of dollars to buy troubled assets of financial institutions at the current time was ‘not the most effective way’ to use the $700 billion bailout package.” That said, the TS isn’t totally shit-canning the previous plan: “Paulson said the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.” So, that leaves $450b, right? Where’s that going to go now? “He announced a new goal for the program to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans.” Good news for the domestics? Not overmuch. Any recovery in the auto loan biz will still be chasing diminishing demand. To wit: Toyota’s been hawking the Hell out of its zero percent financing and its October sales dropped 25 percent.
Let’s get one thing straight: Bob Lutz is the Car Czar. The GM Veep’s claim on the title is as absolute as his inability to revamp GM’s product lineup to avoid bankruptcy. TTAC’s respect for Maximum Bob is such that we created the Bob Lutz Award, given to the automotive executive who’s made the most outrageous, politically incorrect or just plain dumb public pronouncements of the year. OK, that piece of business done, Politico reports that president-elect Barack Obama is considering appointing a car czar to oversee the U.S. government’s widely anticipated “investment” in Detroit’s failed automakers. “Specifics about the proposal remain unclear. But the transition team says Obama suggested to President Bush on Monday that aid to the auto industry could be coupled with the appointment of ‘someone in charge of the auto issue who would have the authority’ to push for reforms. The details came from a more extended readout of the White House meeting provided Tuesday. The person would assist in efforts to create an ‘economically viable auto industry,’ a transition aide said – a move that could alleviate concerns about protecting taxpayer interests if more money is directed to assist automakers.” Combine this with Nancy Pelosi and Harry Reid’s call for an equity stake in exchange for bailout billions and you have a perfect recipe for The Mother of All Automotive Failures. [thanks to KixStart for the link]
“Gotta ask for the bail – I mean sale, ha-ha,” Red-Ink Rick Wagoner told his man in Germany. That would be Hans H. Demant, VP Developent of GM Europe and Managing Director of Opel Germany. Wagoner instructed Demant to ask the German government for €40b, or make that a cool $50b. “What should happen, Hans? The worst thing Angela can say is no.” Demant didn’t want to go eye-to-eye with Chancellor Angela Merkel. Instead, he wrote a letter, to be co-signed by Klaus Franz, the head of Opel’s Workers Council. Usually, Demant avoids signing any paper that has Franz’s signature on it, but the situation was dire, and the message to be sent was “jobs, jobs, jobs.” In the letter, GM Germany’s unlikely duo applied for loan via the European Investment Bank, as soft as marshmallows. While they were at it, they also suggested cheap credit to buy new Opels cars, and cash into the hand of each upstanding German citizen who feeds his Opel car older than 10 years into the shredder, along with a tax credit to reward the purchase of a new car. “That should do it” said Demant. Both signed, and the urgent enquiry for Euros was expressed to Berlin.
With Gullinkambi crowing the end of time and fate for a once-proud industry, the heroes of Detroit and DC are gathering to fight the future. But one hero is turning a deaf ear to the sounding of the Gjallarhorn… at least until his fate drags him inexorably back to the fray. Bloomberg reports that today’s meeting between President-elect Barack Obama and President George W. Bush was “friendly” while they discussed “the broad health of the auto industry.” But, as the battle for a short-term federal bailout joins in Washington over coming days and weeks, Obama will be conspicuously absent. Before leaving town, The One told reporters he won’t be “spending too much time in Washington over the next several weeks.” “It’s important to bear in mind that Congress was wrestling with issues like an economic recovery program prior to the election and didn’t come to a conclusion,” said Obama. And if Congress can not come to a decision before January 20? “It will be the first priority,” Obama swears. Until then, Obama will sing praises of the Democrat’s planned short-term stimulus package, which may or may not be DOA. From a comfortable distance. In Norse mythology, the Ragnarok is merely the final fate of the Aesir, not the end of times. As a fierce battle brews in DC, Obama will wait and watch while he still can. His hour in Valhalla will come soon enough. The battle will go on.
Buried in this morning’s Detroit News article on White House support (maybe) for additional bailout bucks for Detroit: news that Chrysler has filed an application with the Department of Energy (DOE) to secure a share of the $25b federal no to low-interest retooling loan program. Showing the reportorial sympathies for which his paper is justifiably known (at least in these parts), the News’ David Shepardson wrote that “it was not clear how much the automaker requested.” In fact, Chrysler is refusing to release this information. I just got off the blower with Shawn Morgan. The ChryCo spinmeister said her employer has “no plans to release the information.” In fact, Chrysler has specifically asked the DOE to keep the information confidential. When quizzed for an explanation, you know, being that it’s taxpayer money involved an all, Morgan claimed the amount of money requested constitutes “competitive information.” Chrysler’s secrecy is hardly a surprise, given that the ailing American automaker’s owned by the Kremlin-like Cerberus private equity group. Still, it IS our money (for now). Needless to say, TTAC’s putting in a call to the DOE.
Whether you agree with the Iraq War II or not, whether you view America’s military presence in country as a burgeoning success or an endless quagmire, the Bush administration has created what we’ll call an “ongoing situation.” The question now facing George W: does he want to be the president who initiated direct(ish) federal participation in the American automobile industry? The answer came on Monday: maybe. Our pals at The Detroit News report that The White House has signaled its willingness to support new legislation to aid Detroit. BUT– keep your God damn hands off the previously-enacted $700b Wall Street bailout package. “Congress is going to come back into town next week,” Presidential Spokesfolk Dana Perino said. “If they decide to try to do something more on the auto industry, we would listen.” Meanwhile… “Michigan lawmakers and the automakers are moving aggressively to try to shift public opinion in favor of more federal aid for the Big Three.” Yup. “GM posted a link on a company Web site for its dealers to send letters to Congress, and will be posting similar letters for retirees and consumers. The effort is called ‘Mobilize Our Auto Nation.'”
Detroit News columnist Daniel Howes is just coming around to the idea that Detroit’s automakers are about to collapse, bringing about the reckoning that any open-minded journalist could (and did) see twenty years ago. And Danny’s pissed. At us. “It’s easy, sitting behind a keyboard, to type, ‘no one’s too big to fail’ or ‘let ’em file Chapter 11′ or ‘serves ’em right.’ It’s especially easy if you and yours don’t have to endure directly the jobs lost, tax revenue gone, pensions halved, health care benefits denied, dealerships closed, supplier lines shut down.” Is this how Detroit thinks of its current predicament? Fortress Detroit? That they’re somehow blameless victims in all this, and America actively WANTS them to fail? Apparently so. “But autoworkers, salaried employees, retirees, even executives, are people, too. The nasty Schadenfreude heaped on this dismal situation says more about those doing the heaping than those who go to work each day, do their jobs and play by the rules.” Danny goes for an “if… then” close…
The Motley Fool says satellite radio is too big too fail. Kidding! But point taken. “In reality, there’s no good reason for the government to step in and save satellite radio. It’s a terrible business that’s done nothing but pile up losses and disappoint shareholders. It can’t compete with the Internet, podcasts, or MP3s. The business destroys value. If the government were to loan it money, it would never see that money again. Bailing out satellite radio is a ridiculous notion. No one — not even the politicians in Washington (let’s hope) — is considering it. Yet Washington is considering a hefty bailout for U.S. automakers — an industry with much more in common with satellite radio than anyone would like to believe.” The rest of the piece argues against a Detroit bailout. It should give the American automakers’ political supporters pause’ it ends with an increasingly familiar call to readers to contact their reps to oppose the bailout. Take it from someone who surfs for a living (Jesus, is that what I do?): there’s a growing groundswell of public opinion against throwing money at Motown.
Unbelievable, The Wall Street Journal has an editorial that positions the paper four-square against a federal bailout for Detroit’s beleaguered automakers– and then wimps out. First, the “not with our money you don’t” bit. “A bailout might avoid any near-term bankruptcy filing, but it won’t address Detroit’s fundamental problems of making cars that Americans won’t buy and labor contracts that are too rich and inflexible to make them competitive… In fact, the main point of any taxpayer rescue seems to be to postpone a day of reckoning on those contracts. That includes even the notorious UAW Jobs Bank that continues to pay workers not to work. A Detroit bailout would also be unfair to other companies that make cars in the U.S. Yes, those are “foreign” companies in the narrow sense that they are headquartered overseas. But then so was Chrysler before Daimler sold most of the car maker to Cerberus, the private equity fund. Honda, Toyota and the rest employ about 113,000 American auto workers who make nearly four million cars a year in states like Alabama and Tennessee. Unlike Michigan, these states didn’t vote for Mr. Obama.” Hey! Place nice! Anyway, you get the picture– if only because we’ve been painting it for the last three years. But there’s a sting in the tail…
As we’ve just reported, Senate majority Leader Harry Reid has pretty much written-off the possibility of passing another bailout economic stimulus package before President-elect Barack Obama moves into the White House. Which leaves Motown SOL, in terms of their planned mega-suckle. And now that GM has publicly admitted that they can’t make it past December without some kind of public funds, Senator Reid and House Majority Leader Nancy Pelosi have changed tack. Automotive News [sub] reports that the dynamic duo have sent a letter to Treasury Secretary Henry Paulson asking for $25b worth of “emergency loans” for GM, Ford and Chrysler. “We must safeguard the interests of American taxpayers [!], protect the hundreds of thousands of automobile workers and retirees, stop the erosion of our manufacturing base, and bolster our economy,” the letter, uh, suggested. As TTAC predicted, “The letter… recommended ‘strong conditions’ [for the loan] possibly equity stakes and limits on executive compensation, in return for any help. The government is requiring similar steps in its rescue of banks.” Equity stake? Nationalization by any other name would still smell like an old cadaver.
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