GM’s government-installed Chairman/CEO Ed Whitacre hasn’t been wildly popular with Detroit insiders, earning dismissive raspberries from more than a few corners of the industry’s peanut gallery. But now that his reign of executive terror is over, Detroit seems to be learning how to stop worrying and love the former AT&T man. As Whitacre prepares for his first visit to Washington DC as head of GM, the local media and other members of “Team Detroit” are making their peace with Whitacre. So what lies beneath the new united front?

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It’s a line of attack that Ford has been careful to avoid in the US, but Ford Europe is lashing out at GM’s request that European governments help finance the restructuring of its Opel division. Businessweek reports that Ford of Europe’s vice president of government affairs Wolfgang Schneider laid into GM’s request for $2b, saying:

Restructuring your business is your own job and you should pay for it yourself and you should not use taxpayer money. We are definitely against any support for Opel. The Europeans have made the choice that they would use their tax money to sustain companies and business and to sustain capacity levels that from an economical point of view are not sustainable. We do not believe that governments will be able to continue that policy forever. Governments run out of money, as well.

Smackdown! Now, why hasn’t Mulally been saying the same thing for the last two years?

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According to the latest Rasmussen telephone polling [via The Financial], 48 percent of Americans believe that the government’s ownership stake in GM and Chrysler means it has a conflict of interest in regulating competing automakers. 25 percent disagree, saying that the government’s bailout doesn’t affect regulation, and another 26 percent aren’t sure. When it comes to recent criticism of Toyota by administration officials like Transportation Secretary Ray LaHood, only 25 percent believe the criticism stems from a desire to help GM, while 38 percent disagree and 37 percent aren’t sure. But the polls most interesting results have nothing to do with politics, and everything to do with perception:

Despite Toyota’s major safety recalls, owners of its cars are still more loyal than those who drive cars made by the bailed-out GM. Sixty-four percent (64%) of Americans who currently own a Toyota say they are at least somewhat likely to buy their next car from the troubled automaker, compared to 57% of GM drivers who say they are at least somewhat likely to buy their next car from GM.

If there’s a single phrase dominating the imaginations of auto executives right now, it’s the infamous neologism of “too big to fail.” Whether executives justify their obsession with consolidation with their fear of a Chinese planet, efficiency-standard ramp-ups, or mere groupthink, there’s no doubt that consolidation is currently the name of the game. And it should be, not only for these reasons, but also because the last several years have proven that the car game is no industry for small companies. Nothing illustrates this quite like the US government’s “bailout” of auto industry supplier firms, which ended on April Fools Day.
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My first day back at the helm of TTAC has been accompanied by an embarrassment of riches, in the form of both a GAO report on GM and Chrysler’s pension obligations, and the release of GM’s first post-bankruptcy, GAAP-approved financial results. We will continue to mine these documents for the most revealing quotes and statistics, but for now let’s take a moment to consider the political tensions caused by the auto industry bailout. TTAC has long held that political conflicts over the government’s stewardship of GM and Chrysler is a pressing concern, nearly on par with the financial ramifications of the auto bailout, and today’s GAO report confirms our concerns. As the following quote reveals, Treasury is under constant pressure to accommodate political concerns over the management of its stakes in GM and Chrysler, and has received no fewer than 300 official letters from congressional representatives, eager to subordinate the long-term health of the bailed-out automakers to their local concerns.

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The UAW’s VEBA health care trust fund currently owns 17.5 percent of GM and 55 percent of Chrysler, but with IPO plans still nebulous at both, the fund is short on options for improving cash flow. Remember, the union doesn’t want to own these companies… it would have preferred cash, thanks. But since bailout negotiations allowed the automakers to fund their VEBA obligations with stock and warrants, VEBA has little choice but to monetize them. And while GM and Chrysler limp towards an eventual IPO, VEBA’s 362.4m Ford stock warrants are actually doing pretty well relative to their $9.20 exercise price. So it’s no huge surprise to hear [via Automotive News [sub]] that VEBA is planning on dumping its entire allotment of Ford warrants, in a move that could be worth “at least” $1.27b. And it’s no coincidence that this news comes on the same day that Ford is announcing a $3b debt prepayment, and the day after its sold Volvo to Geely for $1.8b.

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With a mere $9b awarded so far, the Department of Energy’s Advanced Technology Vehicle Manufacturing Loan program is a long way from fulfilling its $25b promise to fund a turnaround in America’s green auto sector. So far, Ford has received $5.9b for a wide range of retooling projects (not a bailout, per Ford PR), Nissan has received $1.6b for Leaf production in Smyrna, TN, while startups Tesla and Fisker have received $465m and $529m respectively. According to the Detroit News, the rest of the 100-odd applicants for the $25b pool are stuck waiting, and with about $42b in total pending requests, not everyone is going to get a rose from the Feds. Predictably, the whining has begun.

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After three separate bailouts totaling over $17b, Congress is beginning to wonder if keeping auto-finance giant GMAC alive was worth it. Forbes reports that the Congressional Oversight Panel reckons at least $6.3b of that money could be gone forever, as GMAC flounders towards barely breaking even. And like the rest of the bailouts, the fundamental problem is that the influx of federal cash has allowed GMAC to pretend like it’s not struggling for survival. The panel report [full document in PDF format here] notes [via Automotive News [sub]]

Treasury’s previous and current support is not underpinned by a mature business plan. Although GMAC and Treasury are working to produce a business plan, Treasury has already been supporting GMAC for over a year despite the plan’s absence. Given industry skepticism about GMAC’s path to profitability and the newness of the non-captive financing company model, it is critical that Treasury be given an opportunity to review concrete plans from GMAC as soon as possible.

Sound familiar?

In a conversation with The WSJ [sub]’s Paul Ingrassia, former Car Czar Steve “Chooch” Rattner did some “back-of-the-envelope calculation” to show why he believes the US taxpayers will see their $50b “investment” in GM recouped when The General goes public sometime in the next year.

Here’s how Rattner gets to his latest calculation: Bonds of GM’s bankruptcy estate – known as Motors Liquidation – are currently trading around 30 cents on the dollar, according to Thomson Reuters. Those bondholders were owed $27 billion.

As part of GM’s restructuring, those bondholders were promised a 10% stake in GM when it goes public. In very rough calculations, those bonds are currently valued at about $9 billion (because they currently trade at around 30 cents and were originally worth $27 billion).

Assuming that $9 billion represented 10% of GM if it went public now that would imply GM had a value of around $90 billion. The taxpayer’s stake: 60% of that $90 billion, or $54 billion — Rattner’s magic number.

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As an American citizen, it is tough on my part to pay tax dollars to an entity that can turn around and use those tax dollars to get my fellow American citizens to not do business with me. The government owns 60% of General Motors, and these American tax dollars are funding business activity for one company, with the express goal of negatively impacting another company

Paul Atkinson, President of Toyota’s National Dealer Council, manages to capture the central problem with government intervention in industry without resorting to the hyperbole that so often accompanies such lines of criticism [via Radio WAOI]. Examples?

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We reported yesterday that GM’s recent dealer cull flip-flop was motivated by Chariman/CEO Ed Whitacre’s desire for increased sales volume. Though that may have been the main reason GM took over 600 dealers back into the fold, there was clearly another, more sinister reason for the move: making an example of dissident, activist dealers. Automotive News [sub] reports that GM has contacted all 661 reinstated dealers, and believe it or not, none of the 7 dealer members of the Committee to Restore Dealer Rights have been contacted. Founding member Tammy Darvish tells AN [sub],

The only thing I’m confident of is that I’m sure it’s not a coincidence

So, how do you spin the bankruptcy of the world’s largest automaker? Former GM spinmeister Steve Harris recently took an hour to help prepare future generations for the day when they too will have to soft-pedal the inevitable collapse of their very own lumbering giant employer. Bonus revelation:

[the presidential task force was] very interested in what we were doing from a communications standpoint, but I can not say that they really exerted much control at all. Once or twice they said “we would really like it if you add this message or this communication into your plans,” but it was really minimal. It was not overbearing at all.

Details?

Vladimir Putin has announced that his government will spend $19.6b (584 billion rubles) on auto-sector stimulus, with spending planned on technology development, employee re-training, direct subsidies, and cash-for-clunker-style consumer stimulus. Another $20b of investment is expected from foreign automakers. These measures are aimed at a host of of ills besetting the Russian auto industry and market, ranging from what the government describes as a 4-7 year technological deficit, and a 50 percent drop in sales last year.

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Chrysler’s troubled relations with its dealers took another turn for the nasty this week, as culled dealers teamed up with lawmakers to criticize Chrysler’s decision to open new dealerships near the sites of several culled dealers. As with GM’s dealer struggles, this latest controversy centers around Colorado, where culled dealers are protesting Chrysler’s behavior in the Denver Post. Culled dealers have seen franchises in their former areas awarded to chains like AutoNation before congressionally-mandated arbitration had even given them the opportunity to contest their culling during last year’s bankruptcy proceedings. “This is not right,” said one dealer. “We specifically asked (Chrysler) not to redistribute the franchise before our arbitration.”

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Every evening and every morning, and times in-between, Nick Reilly wonders why he exchanged his cushy job as Shanghai-based chief of GM’s international operations with the purgatory of heading Opel in Rüsselsheim. This Tuesday morning, he woke up to more news from hell:

An unholy alliance of the center-right German government and the supposedly left-leaning unions told him that his turn-around plan for Opel is rotten, and if GM doesn’t cough up €1.65b, there won’t be a cent in government money. (Read More…)