The GM-Chrysler bailout article in today’s New York Times (written by Edmund Andrews and our friend Bill Vlasic) just recaps yesterday’s bailout news. But it raises an interesting point. The argument thus far has been that auto manufacturers (namely Chrysler and GM) would be entitled to the Treasury Department’s bad loan buy ups (TARP) because they have large credit arms. Except for one glitch: General Motors only owns 49% of GMAC (the NY Times article oddly reports the reverse “General Motors … spun off 49 percent of its financing unit, the General Motors Acceptance Corporation.”) As a result, even if GMAC qualifies as a financial institution, General Motors would not. This isn’t the same as Ford, which wholly owns Ford Credit. Fortunately for GM, as Vlasic notes, the government will find a way, one way or the other, to put cash in GM’s coffers. Until GM blows through that, too.

TTAC called this the moment we heard that Uncle Sam was allocating your taxes– I mean your children’s children’s children’s taxes– to bail out the banker boyz from the sub-prime mess they created. Still, it’s strange to hear GMAC– the lender that poured tens of billions of dollars into GM’s coffers– admit they need to suckle on the federal teat suckle on the federal teat. “GMAC has been in discussions with the government on a multidimensional level,” said GMAC spokeswoman Toni Simonetti. “We are interested in exploring options that are available to us through the federal government’s tool kit that was implemented under the new legislation.” To its credit, Automotive News [sub] asked GM’s Dr. Who fan what form this “assistance” might take. “Simonetti declined to say whether GMAC wants to sell troubled assets to the government or to sell a stake in the company to taxpayers.” Oh yeah, I want a piece of GMAC. But then I like lighting Franklins on fire. Meanwhile, “Last week, Ford Motor Credit Co. said it had registered with the Federal Reserve to participate in a new program aimed at easing the sale of commercial paper, which companies use to raise money for day-to-day operations. Ford Credit has not decided if it will take part in the program.” That’s news to me. Or, you know, not.

According to Karey Wutkowski at Reuters, the “The Treasury Department is considering aid of at least $5 billion, which could include direct capital injections and government purchases of auto loans.” The usual anonymous source claimed the decision could be made this week. Wutkowski reports that GM and presumably Chrysler have been lobbying the Bush administration for the money, no doubt made easier because Cerberus’s chairman, John Snow, is the former Bush-appointed Secretary of the Treasury. Purchase of bad auto loans is likely to anger many, but the “direct capital injection”– a suitcase full of freshly-minted money– is something else altogether. Will you, the new shareholders get any stock in GM-Chrysler? Of course not. Nor is there likely to be any accountability to the government beyond a nebulous promise by Rick Wagoner that “he’s working hard.” The kicker? The $5b is only the beginning. “People briefed on the merger discussions have previously said GM would need a minimum of $5 billion to start restructuring Chrysler’s operations. The total amount needed could reach $10 billion.”

The Detroit News reports that the White House wants the feds to cover GM, Ford and Chrysler’s bad paper. “White House spokeswoman Dana Perino said that GMAC, Ford Motor Credit and Chrysler Financial could be part of the Trouble Asset Relief Program — the $750 billion Wall Street rescue package approved by Congress. ‘It’s possible that some of those financing arms could be a part of the rescue package — the TARP, as they call it at the Treasury Department. So that’s why — that’s one of the reasons Treasury has been in contact with them.'” (The other: to buy 5k Trailblazers on the cheap.) Meanwhile, The Energy Department named a senior career U.S. Treasury Official named Lachlan W. Seward to oversee the Department of Energy’s $25b low-interest-for-20-year-old-or-more-auto-plant-retooling loan program. (Either that or buy Siberia from the Russians.) Parenthetical asides aside, it looks like TTAC’s Ken Elias was on to something. Something that smells BAD. “People familiar with the matter said General Motors Corp. chairman and CEO Rick Wagoner was in Washington last week for meetings with U.S. Treasury officials. GM spokesman Greg Martin declined to confirm or deny the visit. Bloomberg News reported that GM had offered to swap an equity stake in the company in exchange for federal help.” Looks like I was right about the race against bailout fatigue, as well.

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As Ken Elias points out in his latest General Motors Death Watch, GM is asking the feds for money to fund their merger (now buyout?) plans for Chrysler. The Wall Street Journal [sub] tells the tale, highlight analyst Ron Lache’s “come to Jesus” moment re: the automakers’ cash conflagration. “”Without external intervention, from consolidation or government assistance, we expect GM to reach its minimum cash position in under 12 months,” Deutsche Bank auto analyst Rod Lache wrote last week. In an interview, Mr. Lache added that Chrysler is also running dangerously low on funds. “We believe Chrysler is in the same position. It’s either August 2009 or December 2009 they run out. Both have a limited runway.” OK, so, now, bring on the anonymous source! “GM and Chrysler ‘are basically waiting on the government,’ said one person involved in the merger talks. ‘The three choices are bankruptcy, a big intervention from the government or some big deal like this that has massive cost-cutting possibilities,’ this person said. ‘That’s it. And even the big deal may require government help.'” Or… the feds could do nothing. You know, theoretically. But wait! It gets worse!

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Interesting strategy: tell Michigan voters you support the bailout (small “b”) but not THE BAILOUT (big ass “B”). Well, not yet. The position is a nuanced modification of Senator McCain’s previous flip-flop. Regular readers will recall that the presidential candidate was against any bailout to American automakers– before he decided to sacrifice his principles (whatever love is) to appeal to voters inside Motown’s battleground state. The AP [via The Detroit News] reports on Senator McCain’s Detroit dirty dancing on Meet The Press. “Republican presidential nominee John McCain declined Sunday to support an additional $15 billion in funding to help U.S. automakers weather a difficult economic climate but did not rule it out… ‘Let’s get the first $25 billion to them first,’ said McCain, adding that the government could ‘see how that works before we say we’re going to give you some more.'” Right. $25b in no to low-interest loans for “retooling” will save Ford, GM and Chrysler’s bacon. Yes Chrysler. Remember Chrysler? Anway, a refresher: “Obama has also said the loan program should to be doubled to provide $50 billion.” And get this: “The Ann Arbor, Mich.-based Center for Automotive Research has estimated that General Motors Corp., Ford Motor Co. and Chrysler LLC may need a $15 billion bailout to survive the nation’s financial crisis, which has led to sluggish sales and limited the availability of credit for auto loans.” I am astounded that the AP AND The Detroit News would let such an absurd statement go unchallenged. As they BOTH well know, GM is burning through $1b per month. Shame on them.

File this one under TTAC called it. Yes, even before the The Big 2.8 can tap the Department of Energy’s $25b low to no-interest loans, even before the feds “rescue” GMAC/Chrysler Financial’s bad paper (under the Troubled Asset Relief Program), the automaker/UAW’s duly elected representatives are petitioning The Honorable Henry Paulson (Treasury Department) and Ben Bernanke (Federal Reserve) to use the Emergency Economic Stabilization Act (EESA) to bail the domestics’ asses out. Automotive News [sub] reports on Carl Levin’s group love telephone press conference, wherein the Senator and his pals “opened the door to the federal government acquiring rights to ownership stakes in troubled automakers and suppliers.” We’re talking stock warrants– the same play Chrysler made for its survival back in ’70. “We are after all servants of the broad public interest, and if warrants are of value, or other steps to assist or protect taxpayers, we would have no choice but to be supportive,” House Energy and Commerce Chairman John Dingell, D-Mich. opined. Don’t you hate it when that happens?

[full letter after the jump]

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Former NADA president and prolific car dealer Ron Tonkin has gone public with a new plan to fix the mess we call Detroit. And you’ll never guess what it isn’t. You see, Tonkin believes that government loan programs written with Detroit in mind are just not enough of a non-bailout. The federal shore-up of domestic auto lenders? Also insufficient. Tonkin thinks the country needs a non-bailout that’s easy to understand and, most importantly, one that doesn’t cut the dealers out of the non-bailout loop. So he’s written a letter to the D2.8’s executives calling on them to lobby President Bush for a $2,500 consumer tax credit towards the purchase of any new GM, Ford or Chrysler product. “I don’t know what I expect to hear from them,” Tonkin tells KATU TV. “I just hope that it triggers a response of some sort. And I think that if they really sit down and think about it, maybe this is a key that will unlock some progress.” Our friends at KATU are quick to point out that as well as not being a bailout, Mr Tonkin’s proposal isn’t motivated by self interest. After all, “if you think this is Tonkin’s way of drumming up business for himself, think again.  Of his 18 dealerships, only two are domestic.” Read Tonkin’s credibility gulf after the jump.

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Jesus, can I stop blogging now? Apparently not. Bloomberg reports that “Michigan lawmakers are asking Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to use their authority to ‘promote liquidity in the U.S. auto industry,’ according to a draft letter they plan to send tomorrow. The letter will ask the Fed and Treasury chiefs to use their authority under the Emergency Economic Stabilization Act [EESA] to help the ailing U.S. automakers.” Question: how do you define sensible? “The auto industry is facing unprecedented struggles, and it deserves a partnership from Washington,” Representative Joseph Knollenberg, a Michigan Republican, said in a statement. “I’ve fought for this kind of sensible assistance for years, and I hope we can make it a reality now.” In all likelihood, immediate “relief” will probably take the form of a federal buyout bad car loans. “Treasury Assistant Secretary Kevin Fromer, in a letter to Knollenberg earlier this month, confirmed that the EESA money could be used to buy car loans and mortgages held by auto-finance companies such as GMAC, Chrysler Financial and Ford Motor Credit.”

Automotive News [AN, sub] reports that “Growing political interest in another federal spending package to stimulate the U.S. economy is opening the door to more government aid to the auto industry.” Excellent! I recommend Uncle Sam buy as much Toyota stock as possible. And while we await more details on this, the real bailout, it’s nice to see AN join the journalistic march towards quoting anonymous sources as much as humanly possible. “Automakers and perhaps suppliers would have more flexibility in using the new money than they do with retooling loans that have been approved but not issued, industry officials say.” Who? Anyway, we all know where the United Auto Workers (UAW) stands on federal teat sucking– although they seem to want us to believe that their enthusiasm is a recent development. “Now we’re looking at the effect of a recession and depressing sales overall and what that does to the industry,” said Alan Reuther, the UAW’s legislative director. The next round of funding, rather than being tied to fuel economy, ‘would just be flat out in order to survive an extended recession,’ Reuther told Automotive News this week.” This week? What’s the hurry with revealing the info? So guess what Ford (a.k.a. the last domestic standing in waiting) thinks of the idea…

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The Financial Times (FT) reports that car manufacturers’ finance arms are eligible for huge French and German bank loans approved in the past two weeks. While this isn’t a bailout per se, it does give the manufacturers’ credit operations access to some €40b worth of cash to make loans to shoppers. The FT claims that as much as 15 percent of European car manufacturer profits come from the financing divisions. Car sales in the UK and Spain are taking an old world battering, and while the loans are unlikely to affect lending in the U.S. (i.e. Mercedes will not be using the money to make loans to American buyers); this will be a major component affecting European sales and manufacturer profitability. The most frustrating part? You just know they’re going to make the money available overnight, while we’re still sitting and waiting to see what, if anything, companies like GMAC can actually get from the $700B bailout passed weeks ago. Question: is that a good thing or a bad thing?

Autoincar.com reports that Honda CEO Takeo Fukui is down with the U.S. Department of Energy’s $25b loan program. You know the boondoggle that provides no-to-low interest loans to automakers for retooling 20-year-old-or-more factories to build more fuel efficient vehicles than previous. Which could include a Honda factory, but won’t, ’cause Honda isn’t hemorrhaging cash. And there’s a reason for that relative success vis a vis The Big 2.8. “The times have changed,” Fukui said. “Their response was too slow.” Fukui also claimed Honda avoided disaster by not expanding into the pickup truck sector. “We didn’t dabble in that, and that worked out well for us,” he said at a Tokyo hotel. Anyway, never mind. No harm, no foul. And U.S. federal aid to the truck-heavy domestics is no biggie. “It is totally proper for the U.S. government to help out U.S. automakers.”

Fresh off his recent membership in TTAC’s Cassandra club, Daniel Howes of the Detroit News has gone back to spinning bad news into industry gameplans. His latest column extolls the virtues of a GM-Chrysler merger, while admitting that such a move would be disasterous for everyone except GM and Chrysler. “Seen from the viewpoint of blue-collar labor, white-collar employees, local governments, dealers, the state of Michigan and the industrial Midwest, just about anyone whose livelihood depends on the dubious survival of Chrysler would pay a dear price,” writes Howes of a possible GM absorption of Chrysler. But, from the narrow perspective of an industry suit, these myriad viewpoints are just so much firewood to be burnt at the altar of survival. And Howes is conveniently on hand to stack it up and pass the matches.

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Does anyone edit Jerry Flint’s columns? And yes that’s a trick question. If I were the editor in question, I would sit in awe of any curmudgeon brave enough to argue that GM deserves an extra long root in the federal taxpayers’ trough by admonishing readers that “we should remember Percy Bysshe Shelley’s poem.” Ozymandias? That particular poem is about hubris and inevitably of death and decay. And yet our man Flint’s uses the work to suggest that U.S. taxpayers should bail out General Motors because we don’t want a great empire to, uh, decay and die. Here’s the deal: we owe them. “I have a long memory,” Flint opines, synapses firing like mad. “I remember World War II, when the president of GM– his name was William Knudsen– headed the successful effort to build our great war production machine. GM helped save America then.” That would be the same GM that aided and abetted the Nazi war machine. “I remember the great GM pay, pensions, health care and dividends that made life good for millions of Americans.” And the union corruption, intransigence and feather-bedding that made GM a sitting duck for transplant attack. But wait ’til you hear what Flint has to say about GM’s current management. You’re not going to want to miss this. Right after the break.

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And we’re back! Our ongoing coverage of GM’s attempts to squeeze yet more money from your elected officials continues apace. We’ve got two stories on a potential “stopgap bailout” designed to keep GM afloat while funds from the already-approved bailout clear regulations. The first story from Automotive News [sub] indicates that while GM is flailing around for a merger partner, it is seeking access to the fed’s discount lending window, which is already pumping some $420b a day into distressed financial firms. Such access would allow GM to borrow at a 1.75 percent rate, a far better deal than the already-sweet 4.5 percent it will get when the $25b bailout becomes available. With its stock at 60-year lows, GM will likely need this access to put any kind of merger together. The feds won’t comment on this plan, and Automotive News [sub] reports that GM has not yet sought the funds. However…

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