As I noted yesterday, the intersection of automobiles and politics is a difficult area of analysis. In the United States, where motorists don’t face the daily challenges they do in Russia, discussions of politics in an automotive forum too often gets overwhelmed by larger political battles. Before you know it, a conversation about the future of electric cars can turn into a debate on military and foreign policy, and an auto-industry bailout can be justified by virtue of its small size relative to the bank bailout. In short, everything happens within a context, and politics is all about context. TTAC has always waded into political issues based on their relevance to cars, motorists, consumers and the industry, and we’ve held some fascinating explorations of political topics ranging from red-light and speed cameras and foreign oil dependence to anthropogenic climate change, bailouts and pay-per-mile tax schemes. In the interest of providing the right balance of big-picture and street-level issues in our coverage, we’re curious: what car-related political issues fascinate, concern or perplex you most?
Category: Government
The left-wing activist group known as ACORN, the Association of Community Organizations for Reform Now, is behind a nationwide effort to hinder motorists with speed bumps, speed traps and other forms of “traffic calming.” According to a strategy memo obtained by Andrew Breitbart’s BigGovernment.Com, the group took up smaller community issues such as traffic as a “quick hit campaign” to harass local government until it conceded to the group’s demands.
When cars and politics collide, the results are rarely pretty. No wonder the political discussions here at TTAC so often rate amongst our most heated and community standards-challenging. Modern cars are machines of great power, facilitating a great deal of freedom but also carrying undeniable consequences, and their position in modern society demands a constant re-evaluation of their terms of use. Some of TTAC’s gripes on car-related policy may lead some to believe that we harbor ulterior political motivations for our coverage, but the truth of the matter is that our principles are simple and directly car-related. If our political coverage sometimes seems petty, it’s because American motorists have relatively little to complain about. In Russia, however, motorists find themselves under assault by import bans, draconian tax increases and corrupt traffic police. And as the New York Times documents, it takes a lot to push motorists into political awareness, but once pushed their eloquent defense of their automotive rights is nothing short of inspirational.
Read More >
On October 13th of last year, when TTAC’s Bailout Watch clocked in at a mere 115 entries, GM’s then-CEO Rick Wagoner and board members Erskine Bowles and John Bryan approached the Treasury for a “temporary” bailout. Not that we knew it at the time. “In this period of continued uncertainty in the markets, you really can’t rule out anything,” said GM spokesfolks at the time. “Stand by for another big public investment in a failing firm,” warned TTAC. As subsequent events proved, the rush to bailout had already begun. Funny then, that we’re only now learning some of the most crucial details of the chaotic maneuvering of late 2008, thanks to a Detroit News investigation. Though the industry’s disastrous hearings before congress nearly derailed the deal, the initial strategy of approaching the White House would prove to be the key to the eventual bailout. In fact, President Bush was ready to provide $25b to GM, Chrysler, GMAC and Chry-Fi on December 19, only to have talks with the two finance firms break down. Instead, GM and Chrysler were given $9.4b and $4b respectively, with GMAC getting $7b 10 days later and Chrysler receiving $1.5b in January.
“U.S. encouraged by Fiat plan for Chrysler,” runs Reuters‘ headline, attributed to car czarlet Ron Bloom. After commenting extensively about GM, in which Bloom controls a 60 percent taxpayer stake, he had only this to say about the eight percent government owned Chrysler and its recent plans:
We see management with a huge sense of urgency. We see a huge dedication and commitment, working extremely hard. It’s an ambitious plan.
But did Bloom see the 7 hours of Powerpoint presentations? “Encouraged” wasn’t exactly the description being flung around at the line for porta-potties. Hell, even Detroit’s cheerleader-in-chief and Automotive News [sub] publisher Keith Crain beats Bloom’s take hollow with his headline “This Year The Math Adds Up To 110%.”
The Freep is reporting that GM’s Renaissance Center headquarters could be at risk if so-called “retention tax credits” aren’t amended. GM is consolidating more of its workforce at its Warren Technology Center, and 1,500 of the RenCen’s 4,000 GM workers are reportedly making the move out of downtown. The remaining 2,500 workers would stay only if a Michigan Economic Growth Authority “retention” tax credit makes it worthwhile. The necessary amendments to this tax credit have been made, but MEGA still has to approve the package. A memo to the Growth Authority reveals the stakes:
2,500 is the maximum that they can also take for this portion of the credit. General Motors has submitted an application stating that the headquarters is at risk without this credit.
We liked Fritz. We felt that Fritz had more energy and more drive and got the message that things had to change and was being groomed to be CEO and deserved a chance… He’s shown that he can manage. Whether he can fundamentally change the culture of the company is another matter.
Bloomberg’s fresh sound bite from former car czarlet Steve Rattner. Well, considering you left him in charge, Steve, he’d damn well better change the culture of the company. Otherwise it reflects just as badly on the restructuring task force as it does on GM, doesn’t it? Come to think of it, picking Fritz because he had “more drive” than Rick Wagoner wasn’t really a good setup for fundamental culture change, was it? You don’t hire Larry to move your piano because he’s “higher energy” than Moe. But it’s not Rattner’s fault: GM’s inability to change its culture comes from its inability to hire the professionals. Which means Ken “the pay czar” Feinberg and his ridiculous pay limits are really to blame.
Though New York’s new “Empire Gold” license plates aren’t opening the same constitutional can of worms as South Carolina’s recently-rejected “I Believe” plates, they’re still generating some feisty political opposition. By next April, every licensed vehicle in the state will have to switch to the new plates, at $25 a pop. That’s ten bucks more per plate than the previous models, and keeping your previous number or vanity plate will cost an additional $20. The switch is estimated to raise $129m for the state, which is currently facing a $5b budget shortfall. But according to Newsday, some 57,000 New Yorkers have signed a petition at nonewplates.com, expressing their displeasure with the new plates and their fees. Best of all, the new plates will mean new jobs for 120 inmates in New York’s penal system. The inmates will be paid 42 cents per hour to produce the plates.
Welcome the wacky world of nuclear bomb detection, as practiced by U.S. border guards protecting The Land of the Free from terrorist infiltration via our neighbors to the north. The Vancouver Sun reports the reassuring news that “every car, truck and passenger entering the United States by land from Canada is now searched for nuclear weapons.”
And how do they do that? Not so well, it seems. The feds have installed polyvinyl toluene or PVT monitors alongside the car lane approaches to customs’ booth inspections, with larger monitors for transport trucks in cargo inspection areas. “Each detects certain types of energy within a limited area but not the exact radioactive source. For that a suspect vehicle is sent for a secondary inspection that includes a scan with a hand-held detection device to identify the source and whether it constitutes a threat. Benign emissions from lingering medical isotopes in people’s bodies, scrap metal, natural sources of radiation and even Kitty Litter trigger frequent false alarms . . .
Next up in today’s series “Selections from the GAO report on the auto bailout which closely resemble TTAC editorials of a year ago” we have the report’s discussion of a possible exit strategy. Or rather, the report’s disclosure that there’s so not an exit strategy it hurts. From the report’s conclusions:
While Treasury has stated that it plans to review all possible options for divesting itself of its ownership interest in Chrysler and GM, Treasury officials have focused primarily on an IPO for GM, both in our discussions with them and in their public statements. However, given the complexity of the economy and the financial markets, considering all of the options in the context of the companies’ financial progress and current financial conditions will be important for Treasury. The past year has indicated the extent to which a company’s financial situation can change within a period as short as a few months. Given the fluidity of conditions and the number of factors that will need to be considered when determining how and when to divest, it is important that Treasury identify the criteria it will use to evaluate the optimal method and timing for selling the government’s ownership stake. Determining when and how to divest the government’s ownership stake will be one of the most important decisions Treasury will have to make regarding the federal assistance provided to the domestic automakers, as this decision will affect the overall return on investment that taxpayers will realize from aiding these companies
Notice the use of future tense to describe these decisions? Not only is there no plan, there’s also no timeline and precious few staff to implement it. More importantly, there’s not much of a chance of a divestiture plan succeeding under any circumstances. Oh, and plenty of potential for unintended consequences. Hurray!
It is unfortunate that Edmunds.com has had nothing but negative things to say about a wildly successful program that sold nearly 250,000 cars in its first four days alone. There can be no doubt that CARS drummed up more business for car dealers at a time when they needed help the most.
The Department of Transportation’s Bill Adams lays into recent Edmunds.com analysis showing Cash For Clunkers could have cost as much as $24,000 per vehicle sale [via CNN]. But one man’s negativity is another man’s constructive criticism. After all, Adams doesn’t touch the heart of the matter: the program’s cost per vehicle, and Edmund’s analysis (like all analysis) was educated guesswork. Luckily, CNN was able to shed a little more light on how Edmunds came up with their numbers.
The WSJ reports that GM will draw “north of $2.5b” from its government escrow account to fund its own bailout of its major supplier, Delphi. Considering GM has committed $1b in debt assumption, $2b in forgiven claims and $1.75b in investments, we can assume the amount will be well north of $2.5b. But how much is left in that escrow account anyway? Estimates at the time of GM’s exit from bankruptcy were that some $20b was left to draw upon. And we’ll know exactly how much is left when GM discloses its government-money expenditures to the SEC by the end of this week. GM sources claim the money has not been used to cover operating shortfalls, and CEO Fritz Henderson has even gone on the record to say GM will not need further government assistance. Considering GM’s cash burn over the last four years was in the $10b/year range, let’s hope that claim isn’t entirely based on the assumption that a planned IPO next summer will be a rousing success.
Edmunds‘ analysis shows that only 125k of the nearly 690k vehicles sold during Cash For Clunkers were incremental. Divide the three billion the government spent by that number, and you’re left with a $24k per-vehicle subsidy of additional sales. Which Edmunds admits were largely pull-forward anyway. Edmunds’ research also shows that fewer consumers would have traded in gas guzzlers had the stimulus not existed. As a result, “that may give some credence to the environmental claims, but unfortunately the economic claims have been rendered quite weak,” according to Edmunds analysts. All hail the Potemkin Economy!
After a dismal PR year for Detroit (if only because lobbying efforts were successful enough to secure an unpopular bailout), the American Automotive Policy Council has been launched to represent the very special interests of Ford, GM and Chrysler. As Politico unironically puts it, “(Debbie) Dingell, the wife of Rep. John Dingell (D-Mich.) and longtime auto industry lobbyist Stephen Collins are leading the new American Automotive Policy Council.” Because former GM lobbyist Dingell, who was moved to an administrative position when she married Rep John Dingell (D-MI) is somehow not a longtime industry lobbyist? Marrying the then-Chairman of the Energy and Commerce Committee is like winning the gold medal for Detroit lobbyists… Dingell just had her number retired. Anyway, the new lobbying council is an offshoot of Automotive Trade Policy Council, a group known for such truth-telling efforts as Driving The Future: The New American Auto Industry [PDF], published in the heady optimism of June 2008. Which is a good indication of what we can expect from the AAPC. First up, a “manufacturing initiative” intended to “develop credible and reliable information for policymakers.” This is gonna be good.
Former head of the Presidential Task Force on the Auto Industry, Steve Rattner has penned a retrospective for Fortune on his time guiding the auto industry bailout. He covers everything from how he assembled his team and developed a strategy to the decision to fire Rick Wagoner and the showdown with Chrysler’s creditors. There are no real surprises if you’ve followed TTAC for the last year or so, but it’s fascinating stuff to read coming from the horses mouth. Take Rattner’s initial impressions of the GM “culture thing”:
Everyone knew Detroit’s reputation for insular, slow-moving cultures. Even by that low standard, I was shocked by the stunningly poor management that we found, particularly at GM, where we encountered, among other things, perhaps the weakest finance operation any of us had ever seen in a major company.
For example, under the previous administration’s loan agreements, Treasury was to approve every GM transaction of more than $100 million that was outside of the normal course. From my first day at Treasury, PowerPoint decks would arrive from GM (we quickly concluded that no decision seemed to be made at GM without one) requesting approvals. We were appalled by the absence of sound analysis provided to justify these expenditures.
Recent Comments