In the first unique Chrysler brand spot since bankruptcy, America is referred to as ChryCo’s “traveling companion.” Which is a bit rich, considering the American people were generous enough to spend billions pulling the wreck that was Chrysler out of a ditch less than a year ago. Who knows, maybe the term “unwilling investors” didn’t play so well in the workshops, a possibility that might also explain why only a single modern Chrysler vehicle (the 300) is allowed to punctuate the ad’s gauzy nostalgia. In any case, notch up another Chrysler Group ad that says nothing about anything that might give one hope for the firm’s future. Ironically enough…
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Tag: Bailout
The underlying cause of GMAC’s failure was no different than so many other American financial institutions: giant bets on risky mortgages at the height of a real estate bubble. And though that error alone would have qualified GMAC for a bailout rescue along with the other failed banks, The WSJ reports that the ongoing support for GMAC is “reflects the troubled company’s importance to the revival of the auto industry.” And man, it had better be important. The GMAC bailout has been one of our least-favorite of the season, rewarding poor practices in auto and mortgage lending, and exposing taxpayers to inordinate risk. But, as TTAC warned back in the pre-bailout days, once the camel gets a nose into the tent, good luck getting it out. And so, GMAC will be receiving another $3.8b in TARP support, on top of the $12.5b it has already received. As a result, the US taxpayer’s stake in GMAC is expected to rise above the current 35 percent stake, just in time for more write-downs planned for the next week. The cash injection is said to prime GMAC for a profitable Q1 2010, erasing some giant losses in the bank’s ResCap mortgage unit. And of course the move will help GMAC continue to underwrite the leases that Chrysler and GM so desperately need, but can’t afford due to plummeting resales. GMAC’s bailout often doesn’t get marked up in the auto industry bailout tally, but at over $16b so far, it’s one of the crucial pieces keeping the zombie automakers shambling along. Now, about repayment…
The Washington Examiner reports that, having previously moved its lobbying efforts to an exclusively in-house arrangement, GM is now hiring outside lobbyists again [UPDATE: GM’s chief in-house lobbyist just retired]. GM has rehired its old lobbying firms the Duberstein Group and Greenberg Traurig, and has added GrayLoeffler to its K-Street roster. GM is also keeping the “well connected” Washington Tax Group on its lobbying payroll, having picked up the firm’s representation in 2007. From these firms, some 18 lobbyists have registered as GM representatives, including a list of what the Wasington Examiner calls “well-connected revolving-door players from both parties.”
Former Reps. William Gray III, D-Pa., and Jim Bacchus, R-Fla., are both on GM retainer, as are fabled Republican and Democratic operatives Ken Duberstein (White House chief of staff under Ronald Reagan) and Michael Berman (counsel to Vice President Walter Mondale and campaign aide to every Democratic presidential nominee since LBJ).
Heading GM’s lobbying push for expanded R&D tax credits is the Washington Tax Group’s Gregory Nickerson, formerly the top lawyer at the tax-writing House Ways and Means Committee and the staff director of the Subcommittee on Select Revenue Measures. Nickerson’s partner is Mary Ellen McCarthy, formerly the top lawyer at the Senate’s tax-writing Finance Committee.
We’ve always said the Fiat-Chrysler alliance was positive. The headquarters of an increasingly global company are here. But I wouldn’t like to see new auto products being developed in the United States and not here in our own research-and-development facilities.
Andrea Bairati, commissioner for innovation for Italy’s Piedmont region in a WSJ piece on Fiat’s annual meeting in Turin. Maybe if Piedmont had kicked a few billion in on the Chrysler-Fiat alliance, Mr Bairati wouldn’t feel quite so slighted.
It’s been a while since we’ve heard the word “buyout” echoing out of Detroit, as 2008 marked the year in which auto industry employees finally started to be fired like everyone else: without a hefty severance kiss-off. Ford, on the other hand, did not get a shot at free house-cleaning in bankruptcy court, so it’s bringing back buyouts. According to Market Watch, the Blue Oval is offering blue-collar employees a $50,000 lump sum payment and a $25,000 voucher for a new vehicle or another $20,000 lump sum, as well as six months of health insurance coverage. There’s even an extra $40k for workers of “a certain age.” But this being Detroit, employee benefits are either feast or famine. While Ford’s workers are being offered cash for their jobs, the former Ford parts division Visteon announced today that it is seeking to dump pensions for 21,000 retirees in bankruptcy, following Delphi into yet another stealthy yet popular form of indirect automaker bailout.
In a NY Times Op-Ed a few weeks back, I laid into the Obama administration for allowing GM to pretend that its $6.7b planned payback is even in the ballpark of what it owes the taxpayers. “If tens of billions in lost tax dollars is simply the inescapable price of preventing a systemic economic collapse, the White House should tell us so,” I wrote. Well, it appears that the White House agrees. Sort of. In an interview with the Detroit News, Gene Sperling, the senior counsel to Treasury Secretary Tim Geithner admitted
The real news is the projected loss [from the $82b+ auto sector bailout] came down to $30 billion from $44 billion
Well, halle-frickin-lujah. Now show us how we’re really going to get $50b out of GM and Chrysler.
In a lengthy, wide-ranging interview with Automotive News [sub], Fiat/Chrysler CEO Sergio Marchionne got an awkward question from AN’s Luca Ciferri.
Your five-year plan forecasts that Chrysler’s operating margin will peak at 7 to 7.7 percent of revenues in 2014. In November 2006, you predicted that Fiat Group Automobiles’ operating margin would peak at 4.5 to 5.3 percent in 2010. How could Chrysler’s post-global recession peak profitability be 50 percent higher than Fiat Group’s pre-global recession assumptions?
Well, Sergio?
According to Jalopnik, this license plate belongs to Morgan Stanley Vice-Chairman Rob Kindler, who apparently thought this kind of joke is funny. Too bad he missed bonus points by failing to put the plate on an Escalade.
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?
North of your border (not mine), GM dealers are slightly annoyed. In fact, they’re fuming. Topnews.us reports that Bob Slessor, owner of a dealership for GM has sued the firm after he was informed that his dealership would be closed before the end of 2009. And don’t think he’s the only one, 12 dealers are submitting multi million dollar lawsuits against the automotive arm of the U.S government. The lawsuits hinge on the way GM approached these dealer closures. Bob Slessor claim that GM used “high handed and oppressive” tactics. The plaintiffs are looking for a permanent injunction against their terminations and $1.5 million in punitive damages. The report didn’t state whether that figure was in U.S or Canadian dollars.
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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.
As congress nears the end of the 2009 legislative session, culled GM and Chrysler dealers are pushing hard for the rapid passage of the Automobile Dealer Economic Rights Restoration Act. Meanwhile, nearly two dozen members of the Senate Commerce Committee from both parties are calling on GM and Chrysler to resolve outstanding disputes with culled dealers in hopes of defusing the situation by non-legislative means.
Given the federal government’s ownership stake in Chrysler and GM, it is our shared obligation to ensure all impacted dealers are treated as fairly as possible. We continue to urge you to take all actions necessary to uphold the assurances you provided earlier, as well as to achieve a mutually agreeable and timely outcome to the negotiations between Chrysler, GM and the dealers. Chrysler and GM’s unprecedented bankruptcy has greatly impacted dealers, consumers, employees, small businesses, and communities across the country. It is crucial that outstanding issues be resolved as expeditiously and efficiently as possible to provide the least amount of hardship to Chrysler, GM and the dealers.
GM’s response to the senatorial call out? “Those discussions are still underway,” according to spokespeople, who refused to characterize the discussions for Reuters. Meanwhile, two examples of possible mitigating action by GM and Chrysler are not off to good starts.
General Motors made one point very clear, 100 percent clear, the restructuring plan could only be achieved when European member states with Opel plants give some financial help. So the plan works only with state aid. The idea that General Motors can finance this on its own was not shared by General Motors, this possibility does unfortunately not exist
EU Industry Minister Guenter Verheugen reveals to Automotive News [sub] that GM does indeed seem to be trying to limit the amount of US taxpayer money spent on its $4.9b rescue of Opel. GM’s Opel fixer Nick Reilly explains “we have indicated that we will inject some GM funds into that requirement too. That is quite difficult because we are also going through a restructuring of our U.S. operations and other parts of the world.” We’ve already seen loans for jobs floated in the UK, where Reilly came up just short of offering to save Vauxhall jobs for government restructuring loans on a quid-pro-quo basis. And GM will have to continue walking that fine line, as EU competition rules forbid member states from offering financial support in exchange for jobs, especially if the saved jobs come at the expense of jobs in another EU member state. But Germany’s leadership was humiliated by GM’s decision to drop the sale of Opel to Magna, and has already ruled out funding an Opel restructuring that would keep the automaker under GM control. Will Belgium, Spain and the UK be able to come up with enough money to make the restructuring happen? Or will GM simply be forced to dip deeper into its taxpayer-funded escrow account? GM’s plan will be announced this week, and we’ll be watching.
No, General Motors is not paying back the taxpayers, nor will it ever fully… it’s more like a partial refund. That’s not exactly fresh news around here, but the Grey Lady called wanting the breakdown. So here it is. Just don’t ask how they misspelled the byline.
Automotive News [sub] reports that GM will rush out its $4.9b restructuring plan for Opel in December, as it seeks to ease worries on the continent about the fate of the troubled division. “Our plan is very similar to Magna’s. I don’t think it’s worse,” GM’s Nick Reilly told reporters near Opel’s largest plant in Zaragoza, Spain. Reily has said that as many as 10,000 jobs and 20 to 25 percent of Opel’s production capacity could be cut in the restructuring. Though Reilly refused to indicate where cuts could take place, he did say that GM would not transfer production from Zaragoza to Eisenach in eastern Germany, as Magna had planned to do. He also previously implied that British government loans could prevent or mitigate a planned 800-job cut at Opel’s Vauxhall operations in Britain.
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