One of the more admirable qualities of the blogging culture is a relentless underdog streak. Anyone who mans the ramparts of a decent blog is forever scouring the worlds of business, media and opinion for an opportunity to attack the most prominent voices of the day. And TTAC is no exception: we certainly came up by attacking the apologists and Polyannas who are still massively overrepresented in the world of automotive commentary. But what a difference a bailout makes. While the mainstream automotive media spent much of the leadup to the auto bailout making apologies and excuses for Detroit’s decline, TTAC told the unpleasant truth, gaining us new readers and credibility every step of the way. Now that I find myself being asked to contribute to one of the most prestigious opinion outlets in the world (the NY Times op-ed page) on a regular basis, TTAC is no longer the underdog, and other blogs have stepped into the breach to attack us as the new status quo. Fair enough… let’s do this thing.

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Ed Niedermeyer is too humble to say it, so it’s left to me: Ed just had his second third op-ed piece in the New York Times. Required reading.  Two core sentences: (Read More…)

ABC reports that GM has purchased $2.1b worth of its stock from the Treasury Department, bring the government’s stake in the bailed-out automaker to 33 percent. GM’s stock price must now reach $53/share in order for the government to recoup its remaining $16.88b investment in The General. GM’s stock currently trades at around $33.70, and recent analysis from UBS shows that the company faces significant short-term challenges as an investment.

GM CEO Dan Akerson may believe that

There’s more to life than money,

but he tells the Freep that GM is running the risk of losing top managers to the competition, and must seek more flexibility on pay rules from the Treasury. Akerson wouldn’t clarify what kind of concessions he’s asking for from Treasury, but says that the risk of losing employees in the short term is very real. Meanwhile, even though the government isn’t the majority stakeholder in GM any longer, it will have to OK executive compensation packages until the bailout is paid back. Which prompts The Atlantic‘s Daniel Indiviglio to suggest

there may also be ways to structure pay to minimize cash in compensation packages. For example, if a large portion of compensation is awarded in GM stock that does not vest until the company has paid back the bailout, then this would provide additional incentive to these executives and limit their immediate cash compensation. Unfortunately, there’s no perfect solution to this problem, because the government shouldn’t be involved in the business of bailouts in the first place.

The bailout of GM and Chrysler was nothing compared to the giant TARP thrown to bankers and brokerages, or so the argument goes. A panel of constitutional experts, convened at a Stanford Law School conference about the constitution and bailouts, has a totally different opinion: Bank rescue o.k., car rescue not o.k. (Read More…)

As of last December, GM’s pension accounts faced a $17b shortfall, raising a real concern about the long-term viability of the bailed-out automaker. With its IPO put to bed, GM is now announcing that it will pay $4b into its salaried and hourly pension accounts, and plans on adding another $2b in stock to the accounts by year’s end. That roughly approximates the $5.9b that GM will have to pay by 2013, which still leaves a $6b minimum payment due by 2014. Add that to the billions likely required by its Opel and Daewoo divisions, as well as the billions needed to pay back taxpayers, and it’s clear that GM’s dwindling cash pile still faces considerable demands. But at least the firm isn’t pretending like its pension shortfalls don’t exist.

Both Toyota and the remains of its joint venture known as NUMMI have sued the remains of “Old GM” for breach of contract according to two separate reports in the Wall Street Journal [sub]. NUMMI is seeking $365m, claiming GM caused the collapse of the joint venture by unilaterally pulling out as it collapsed into bankruptcy,  sticking Toyota and NUMMI with the bill.

Those decisions breached … commitments to Nummi and sounded its death knell,” said the lawsuit, filed last week. And unlike Toyota, GM’s bankruptcy estate “has refused to contribute to Nummi’s deficit during the wind down”

Toyota, meanwhile, is suing for some $73m in development costs for the Pontiac Vibe, a vehicle that GM was supposed to sell for another two years.

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GM’s stock may be hovering near its IPO price of $3/share, but the UAW doesn’t need much more growth to cash out with every penny it wanted from GM. The UAW’s VEBA account has banked $3.4b in stock sales so far, and Forbes reports

The VEBA will break even on its investment if it can sell the remaining 206 million shares at an average price of $36.96.

Taxpayers, meanwhile, need GM’s stock to top at least $52/share in order to break even on the bailout that it funded. Because it’s just not a bailout unless the least deserving benefit the most. Meanwhile, with its accounts once again flush with cash, the UAW is turning South in hopes of accomplishing what it has never accomplished before: unionizing at ransplant auto factory in a right-to-work, Southern state.

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Don’t thank us GM… thank George W. Bush. Also, do we remember what happened when Chrysler tried this? History seems to indicate that paying back every penny is the best “thank you” of all.

General Motors went public at $33/share today, generated huge trading volume (452m shares traded) and ended the day at $34.19. Automotive News [sub] reports that the government stake in GM “could” be as low as 33 percent post-IPO. Only five percent went to “large foreign investors,” including one percent to the Chinese bête noir SIAC, which hinted at future cooperation with The General on “exploration of overseas markets.” The only bad news? Had the Treasury sold its entire stake at the closing price today, it would have been down $9b. Now GM’s stock price needs to hit $48.58 before taxpayers make good on their investment. But with a market capitalization of about $63b, GM is at least worth more than the taxpayers put into it. Which, using a variation of Project Car Hell logic, is a real accomplishment.

If you read one thing today, read “Ghosts Of The Old GM” by Paul Clemens in today’s NY Times. At a time of increasing triumphalism over the “success” of the Auto Bailout, Clemens unflinchingly reminds us of the terrible price we’ve paid to bring America’s auto industry back to halting life. From deserted plants, to the world of “surplus industry service providers” (yes, taking apart industry is an industry), Clemens chases down the the truth with tenacity:

For General Motors, divided into its “Old” and “New” halves, there’s an inescapable paradox: the only possible route to future profitability is to create, through plant closings, monuments to past unprofitability. Old G.M. may have gone away for the purposes of the stock offering, but it didn’t go away in what might rightfully be called actuality.

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Let me say this as clear as I can, I do not think there will be any concessions in 2011. People want to reward our members and it will be a key component of the 2011 bargaining. When the industry comes back, just like we’re sharing in the downside we’re going to share in the upside. That’s a key foundation of what we’re doing in 2011.

UAW President Bob King gives his best “we will fight them on the beaches” impression, telling Reuters that his union has sacrificed enough, thanks. And though the people who want to reward UAW members are notably absent from public debate, that assertion wasn’t nearly as double-take-worthy as King’s opinion that

There’s no competitive gap between Ford, GM and Chrysler right now

Huh?

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As an automaker and union-funded think tank, the Center For Automotive Research often run afoul of TTAC during the bailout debates of 2008-2009. CAR is to Detroit’s apologists what CAR has long maintained that a failure to bail out GM and Chrysler would have resulted in the total destruction of America’s entire industry, and based on that questionable assumption, it’s latest report [PDF] is claiming that the auto bailout saved the federal government $28.6b over two years. The study is an update of a report CAR issued in May which

produced estimates for two scenarios, as well: a quick, orderly Section 363 bankruptcy (which is what happened), and a drawn-out, disorderly bankruptcy proceeding leading to liquidation of the automakers.

Because those were the choices. A messy, marginally-successful intervention (with demand for GM’s IPO “through the roof”, the firm will still be worth only about what taxpayers put into it) or utter complete annihilation of the industrial Midwest. But if, as CAR takes as gospel, a halfway “normal” restructuring weren’t an option, it was only because the managers of both GM and Chrysler refused to even contemplate the possibility of a bankruptcy filing until it was far too late. And here’s where the long-term impacts get scary: by taking GM and Chrysler under the taxpayer wing, the Government may have saved some money in the short term, but it created a dangerous precedent for the future. Given the events of the auto bailout, why would the leaders of any other failing industry take the difficult path through restructuring when, with the help of think tank apologists, they could simply collapse into a publicly-funded do-over?

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We’ve heard a lot of arguments on all sides of the bailout, but we had yet to hear anyone call for prolonged government ownership and involvement in General Motors… until now. What follows is a letter from Ralph Nader, former NHTSA boss Joan Claybrook, Center for Auto Safety honcho Clarence Ditlow and Public Citizen president Robert Weissman, urging the Obama administration to suspend GM’s IPO and take firmer control of the government-owned automaker’s decisions on a number of issues including lobbying, employment and the environment. Because, despite appearing to be stuck in the 70s, Nader and company have never heard of British Leyland. Taste the madness below.

Dear President Obama,

The U.S. government bailout of, and acquisition of a majority share in, General Motors was anexceptional action, taken in response to exceptional circumstances. The U.S. stake in GM obviously poses novel managerial challenges to the government. The appropriate response to those challenges, however, is not to run from the responsibility through passive ownership and premature sale at a loss to taxpayers.

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Er, not here… you have to go over to retailroadshow.com for the non-embeddable presentation pitching investors on the new General Motors. But since retailroadshow doesn’t have a comments section, make sure to surf back to TTAC when you’re done taking in the pitch. Meanwhile, consider this: Saudi Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud, a major investor in Citi, EuroDisney, The Four Seasons, AOL, Apple, News Corp, and more has said his investment firm would look “very seriously” at buying into GM’s IPO. Oh yes, and the White House has reiterated its confidence that all the money it invested in GM’s bailout would be repaid. Even though GM pushed against the higher IPO price ($30/share) requested by Treasury, which would have slowed future appreciation of the stock, but would have given the government a higher initial payback. Also, it seems that UBS has been dropped as an underwriter of the IPO after one of its large-cap, non-automotive analysts sent an email that disclosed information restricted by the SEC.