http://www.google.com/hostednews/ap/article/ALeqM5gTbzGj-FRO_vOw4xVy1tOG6DBn_wD9A0THOO0
GM says new Volt could get 230 mpg in city driving
By KIMBERLY S. JOHNSON (AP)
8-11-9
WARREN, Mich. — General Motors said Tuesday its Chevrolet Volt electric car could get 230 mpg in city driving, making it the first American vehicle to achieve triple-digit fuel economy if that figure is confirmed by federal regulators.
But when the four-door family sedan hits showrooms late next year, its efficiency will come with a steep sticker price: $40,000.
Still, the Volt's fuel efficiency would be four times more than the popular Toyota Prius hybrid, the most efficient car now sold in the U.S.
Most automakers are working on similar designs, but GM would offer the first mainstream plug-in with the Volt, which seats four and was introduced at the 2007 Detroit auto show.
The Volt will join a growing fleet of cars and trucks powered by systems other than internal combustion engines.
Unlike the Prius and other traditional hybrids, the Volt is powered by an electric motor and a battery pack with a 40-mile range. After that, a small internal combustion engine kicks in to generate electricity for a total range of 300 miles. The battery pack can be recharged from a standard home outlet.
Hybrids use a small internal combustion engine combined with a high-powered battery to boost fuel efficiency. Toyota's Prius — which starts at about $22,000 — gets 51 mpg in the city and 48 mpg on the highway.
The number of all-electric vehicles available to U.S. consumers remains limited. The Tesla Roadster, a high-end sports car with a range of 224 miles, is perhaps the best known. But its $100,000-plus price tag keeps it out of reach of all but the wealthiest drivers.
The company is working on an electric family sedan that will be priced considerably less.
Nissan Motor Co. unveiled its first electric car, the Leaf, earlier this month. Nissan said the vehicle will go on sale in Japan, the U.S. and Europe next year.
General Motors Co. is touting the 230 mpg figure following early tests that used draft guidelines from the Environmental Protection Agency for calculating the mileage of extended-range electric vehicles.
The EPA guidelines, developed with help from automakers, figure that cars such as the Volt will travel more on straight electricity in the city than on the highway. If drivers operate the Volt for less than 40 miles, in theory they could do so without using a drop of gasoline.
Highway mileage estimates for the Volt based on the EPA's methodology have yet to be released.
"We are confident the highway (mileage) will be a triple-digit," GM CEO Fritz Henderson said.
The EPA conducts testing to determine the mileage posted on new car stickers. The agency said in a statement Tuesday that it has not tested a Volt "and therefore cannot confirm the fuel economy values claimed by GM."
The EPA is working with the Society of Automotive Engineers and state and federal officials to develop testing procedures to measure the fuel efficiency of advanced vehicles, according to a draft outline of the proposal obtained by The Associated Press.
The plan could be released later this year.
It was not immediately clear how GM reached the 230 mpg in city driving, but industry officials estimated the automaker's calculation took into consideration the Volt traveling 40 miles on the electric battery and then achieving about 50 mpg when the engine kicked in.
Although Henderson would not give details on pricing, the first-generation Volt is expected to cost nearly $40,000, making it cost-prohibitive to many people even if gasoline returns to $4 per gallon.
The price of the sporty-looking sedan is expected to drop with future generations of the Volt, but GM has said government tax credits of up to $7,500 and the savings on fuel could make it more affordable, especially at 230 mpg.
"We get a little cautious about trying to forecast what fuel prices will do," said Tony Posawatz, GM's vehicle line director for the Volt. "We achieved this number, and if fuel prices go up, it certainly does get more attractive even in the near-term generation."
The mileage figure could vary as the guidelines are refined and the Volt gets further along in the manufacturing process, Posawatz said.
Chrysler Group, Ford Motor Co. and Daimler AG are all developing plug-ins and electric cars, and Toyota Motor Corp. is working on a plug-in version of its gas-electric hybrid system.
GM has produced about 30 Volts so far and is making 10 a week, Henderson said during a presentation at the company's technical center in the Detroit suburb of Warren.
Henderson said charging the Volt will cost about 40 cents a day, at about 5 cents per kilowatt hour.
GM is nearly halfway through building about 80 Volts that will look and behave like the production model, and testing is running on schedule, Posawatz said.
Two critical areas — battery life and the electronic switching between battery and engine power — are still being refined, but the car is on schedule to reach showrooms late in 2010, he said.
GM is simulating tests to make sure the new lithium-ion batteries last 10 years, Posawatz said, as well as testing battery performance in extremely hot and cold climates.
"We're further along, but we're still quite a ways from home," he said. "We're developing quite a knowledge base on all this stuff. Our confidence is growing."
The other area of new technology, switching between battery and engine power, is proceeding well, he said, with engineers just fine-tuning the operations.
"We're very pleased with the transition from when it's driving EV (electric vehicle) to when the engine and generator kick in," he said.
GM also is finishing work on the power cord, which will be durable enough that it can survive being run over by the car. The Volt, he said, will have software on board so it can be programmed to begin and end charging during off-peak electrical use hours.
It will be easy for future Volt owners living in rural and suburban areas to plug in their cars at night, but even Henderson recognized the challenge urban, apartment dwellers, or those who park their cars on the street might have recharging the Volt. There could eventually be charging stations set up by a third-party to meet such a demand, Henderson said.
Showing posts with label Chrysler. Show all posts
Showing posts with label Chrysler. Show all posts
Friday, August 14, 2009
Wednesday, August 5, 2009
Citigroup’s $100 million banker
http://wsws.org/articles/2009/jul2009/pers-j29.shtml
Citigroup’s $100 million banker
29 July 2009
The Wall Street Journal reported Saturday that a top Citigroup trader is demanding that the bank follow through on a 2009 pay package estimated at $100 million. Andrew J. Hall, who runs Citigroup’s energy trading division, has threatened to quit should the bank fail to honor his pay deal in full.
According to the Journal, Hall, an energy speculator and top money-maker for the bank, received more than $100 million last year. Such nine-digit salaries exemplify the plundering of social resources that has become a hallmark of American capitalism and the American financial elite.
The crash of 2008 and Great Recession of 2009 have had no impact on the obscene levels of wealth that flow to a parasitic elite at the top of the economic ladder. On the contrary, the power of the aristocracy has, if anything, been enhanced as a result of the policies of the Obama administration, which has made the bailout of Wall Street at public expense its number one priority.
It would take a minimum wage worker, working full-time without vacations, 6,269 years to earn $100 million. Hall’s yearly pay is roughly equivalent to the annual wage of 2,000 workers in the US. He makes in an hour about the same amount most American workers earn in a year.
Hall’s two-year take of $200 million will be greater than the budget deficits confronting a large number of US cities and their public school systems.
Hall heads Citigroup’s energy-trading unit, Phibro LLC, which the Journal describes as “a secretive operation, run from the site of a former Connecticut dairy farm [that] occasionally accounts for a disproportionate chunk of Citigroup’s income.”
The federal government has plowed $45 billion in cash into Citigroup and guaranteed over $300 billion of the bank’s assets. It will soon own 34 percent of the bank’s common stock, making it Citigroup’s largest shareholder.
Yet the Obama administration is tied up in knots over the demands of a single Citigroup energy speculator. Nothing could more clearly demonstrate the complete subordination of the government and the entire political system to the financial mafia.
The Journal writes that the payout would set “the stage for a potential showdown between Citigroup and the government’s new pay czar,” Kenneth Feinberg. President Obama recently appointed Feinberg to the Treasury Department to oversee executive compensation at seven corporations holding outstanding TARP (Trouble Asset Relief Program) funds—Citigroup, Bank of America, American International Group, General Motors, Chrysler, and the two automakers’ finance arms.
Far from a “showdown,” a chummy discussion among Wall Street insiders is underway over how to pay Hall. The Journal reports that Citigroup officials have been lobbying Feinberg to approve Hall’s pay package, especially Citigroup Vice Chairman Lewis Kaden, “who has been handling most of the discussions with the pay czar, trying to capitalize on the two men’s longtime friendship.” The newspaper indicates that Citigroup might finesse the TARP pay limits by formally spinning off Phibro.
In a statement on the controversy over Hall’s pay, Citigroup declared, “Retaining and attracting the best talent is very important to the success of Citigroup and all its stakeholders.”
The type of talent so prized on Wall Street is indicated in a separate Journal article, “Traders Blamed for Oil Spike,” published on Tuesday. The article points to the socially destructive nature of Hall’s line of work. It states that the Commodity Futures Trading Commission will issue a report next month attributing the wild swings in oil prices from 2007 to the present largely to the role of energy traders.
Hall’s enormous personal income is bound up with the manipulation of energy markets, which has contributed to the broken finances of millions of American households through higher gas and home heating bills and a run-up in food prices that has dramatically increased hunger in many parts of the world. The volatility on energy markets has played a significant role in the global economic crisis, driving up unemployment to levels not seen since the Great Depression.
Hall’s case only highlights Wall Street’s resumption of multimillion-dollar salaries and bonuses for executives and traders. In recent weeks, other major bailed-out banks, including Goldman Sachs, JPMorgan Chase and Morgan Stanley, have set aside sharply higher—in the case of Goldman Sachs, record—sums for bonuses and salaries. Last week, Morgan Stanley issued its second quarter financial results, revealing that it set aside 72 percent of revenues for salaries and bonuses, even though it reported a loss for the period.
The Obama administration has worked to block any real restrictions on Wall Street pay. Treasury Secretary Timothy Geithner and top economic adviser Lawrence Summers publicly opposed modest limits on executive pay at firms receiving TARP funds that were included in the $787 billion economic stimulus bill passed last February.
The following month, Obama intervened to block executive pay limits passed by the House of Representatives and set for a vote in the Senate following public outrage over reports that the bailed-out insurance giant American International Group (AIG) was about to dispense hundreds of millions of dollars in bonuses.
Obama’s July 22 prime time press conference provided a graphic demonstration of the utter servility of the president and the entire government to the barons of Wall Street. Asked by a reporter if new revelations about bank profits did not indicate that the White House should take “a harder line with Wall Street,” Obama acknowledged that the banks’ reckless speculation and profiteering had precipitated the global economic crisis.
“Wall Street,” he said, “took extraordinary risks with other people’s money, they were peddling loans that they knew could never be paid back, they were flipping those loans and leveraging those loans and higher and higher mountains of debt were being built on loans that were fundamentally unsound. And all of us now are paying the price.”
Far from suggesting that there should be any consequences for such crimes against society, Obama hastened to declare that “it’s a good thing that they’re profitable again, because if they’re profitable that means that they have reserves in place and they can lend.” (In fact, the banks have refused to significantly expand their lending to businesses and consumers). Obama added, “And this is America, so if you’re profitable in the free market system, then you benefit.”
As for the bankers’ use of taxpayer money to reward themselves with colossal salaries and bonuses, the president could do no more than make a lame appeal for greater restraint. “With respect to compensation, I’d like to think that people would feel a little remorse and feel embarrassed and would not get million-dollar or multimillion-dollar bonuses,” Obama said.
The same White House that dictates wage cuts, layoffs and poverty for auto workers dares not infringe on the wealth or prerogatives of the financial aristocracy. Such are the class realities of America and the dictatorial power exerted by the financial elite behind the trappings of American democracy.
Tom Eley and Barry Grey
Citigroup’s $100 million banker
29 July 2009
The Wall Street Journal reported Saturday that a top Citigroup trader is demanding that the bank follow through on a 2009 pay package estimated at $100 million. Andrew J. Hall, who runs Citigroup’s energy trading division, has threatened to quit should the bank fail to honor his pay deal in full.
According to the Journal, Hall, an energy speculator and top money-maker for the bank, received more than $100 million last year. Such nine-digit salaries exemplify the plundering of social resources that has become a hallmark of American capitalism and the American financial elite.
The crash of 2008 and Great Recession of 2009 have had no impact on the obscene levels of wealth that flow to a parasitic elite at the top of the economic ladder. On the contrary, the power of the aristocracy has, if anything, been enhanced as a result of the policies of the Obama administration, which has made the bailout of Wall Street at public expense its number one priority.
It would take a minimum wage worker, working full-time without vacations, 6,269 years to earn $100 million. Hall’s yearly pay is roughly equivalent to the annual wage of 2,000 workers in the US. He makes in an hour about the same amount most American workers earn in a year.
Hall’s two-year take of $200 million will be greater than the budget deficits confronting a large number of US cities and their public school systems.
Hall heads Citigroup’s energy-trading unit, Phibro LLC, which the Journal describes as “a secretive operation, run from the site of a former Connecticut dairy farm [that] occasionally accounts for a disproportionate chunk of Citigroup’s income.”
The federal government has plowed $45 billion in cash into Citigroup and guaranteed over $300 billion of the bank’s assets. It will soon own 34 percent of the bank’s common stock, making it Citigroup’s largest shareholder.
Yet the Obama administration is tied up in knots over the demands of a single Citigroup energy speculator. Nothing could more clearly demonstrate the complete subordination of the government and the entire political system to the financial mafia.
The Journal writes that the payout would set “the stage for a potential showdown between Citigroup and the government’s new pay czar,” Kenneth Feinberg. President Obama recently appointed Feinberg to the Treasury Department to oversee executive compensation at seven corporations holding outstanding TARP (Trouble Asset Relief Program) funds—Citigroup, Bank of America, American International Group, General Motors, Chrysler, and the two automakers’ finance arms.
Far from a “showdown,” a chummy discussion among Wall Street insiders is underway over how to pay Hall. The Journal reports that Citigroup officials have been lobbying Feinberg to approve Hall’s pay package, especially Citigroup Vice Chairman Lewis Kaden, “who has been handling most of the discussions with the pay czar, trying to capitalize on the two men’s longtime friendship.” The newspaper indicates that Citigroup might finesse the TARP pay limits by formally spinning off Phibro.
In a statement on the controversy over Hall’s pay, Citigroup declared, “Retaining and attracting the best talent is very important to the success of Citigroup and all its stakeholders.”
The type of talent so prized on Wall Street is indicated in a separate Journal article, “Traders Blamed for Oil Spike,” published on Tuesday. The article points to the socially destructive nature of Hall’s line of work. It states that the Commodity Futures Trading Commission will issue a report next month attributing the wild swings in oil prices from 2007 to the present largely to the role of energy traders.
Hall’s enormous personal income is bound up with the manipulation of energy markets, which has contributed to the broken finances of millions of American households through higher gas and home heating bills and a run-up in food prices that has dramatically increased hunger in many parts of the world. The volatility on energy markets has played a significant role in the global economic crisis, driving up unemployment to levels not seen since the Great Depression.
Hall’s case only highlights Wall Street’s resumption of multimillion-dollar salaries and bonuses for executives and traders. In recent weeks, other major bailed-out banks, including Goldman Sachs, JPMorgan Chase and Morgan Stanley, have set aside sharply higher—in the case of Goldman Sachs, record—sums for bonuses and salaries. Last week, Morgan Stanley issued its second quarter financial results, revealing that it set aside 72 percent of revenues for salaries and bonuses, even though it reported a loss for the period.
The Obama administration has worked to block any real restrictions on Wall Street pay. Treasury Secretary Timothy Geithner and top economic adviser Lawrence Summers publicly opposed modest limits on executive pay at firms receiving TARP funds that were included in the $787 billion economic stimulus bill passed last February.
The following month, Obama intervened to block executive pay limits passed by the House of Representatives and set for a vote in the Senate following public outrage over reports that the bailed-out insurance giant American International Group (AIG) was about to dispense hundreds of millions of dollars in bonuses.
Obama’s July 22 prime time press conference provided a graphic demonstration of the utter servility of the president and the entire government to the barons of Wall Street. Asked by a reporter if new revelations about bank profits did not indicate that the White House should take “a harder line with Wall Street,” Obama acknowledged that the banks’ reckless speculation and profiteering had precipitated the global economic crisis.
“Wall Street,” he said, “took extraordinary risks with other people’s money, they were peddling loans that they knew could never be paid back, they were flipping those loans and leveraging those loans and higher and higher mountains of debt were being built on loans that were fundamentally unsound. And all of us now are paying the price.”
Far from suggesting that there should be any consequences for such crimes against society, Obama hastened to declare that “it’s a good thing that they’re profitable again, because if they’re profitable that means that they have reserves in place and they can lend.” (In fact, the banks have refused to significantly expand their lending to businesses and consumers). Obama added, “And this is America, so if you’re profitable in the free market system, then you benefit.”
As for the bankers’ use of taxpayer money to reward themselves with colossal salaries and bonuses, the president could do no more than make a lame appeal for greater restraint. “With respect to compensation, I’d like to think that people would feel a little remorse and feel embarrassed and would not get million-dollar or multimillion-dollar bonuses,” Obama said.
The same White House that dictates wage cuts, layoffs and poverty for auto workers dares not infringe on the wealth or prerogatives of the financial aristocracy. Such are the class realities of America and the dictatorial power exerted by the financial elite behind the trappings of American democracy.
Tom Eley and Barry Grey
Tuesday, May 12, 2009
Chrysler's Plan?
http://www.blackagendareport.com/?q=content/chryslers-plan-send-pay-retirement-benefits-and-standards-down-drain
Mon, 05/04/2009
The same fearless, insightful news media that misrepresents Wall Street's raid on the U.S. Treasury as somehow necessary to save the economy has a story to tell about how the harm to hundreds of thousands of current and retired auto workers will be minimized by incorruptible public officials and knowledgable bankruptcy judges. Only it's not true. The wages of auto workers will be permanently cut, their hours lengthened, their benefits cut. And those who worked 25 or 30 years on the line, counting on lifetime medical care and a dignified retirement have already been sold out.
Chrysler's Plan? Send Pay, Retirement Benefits and Standards Down the Drain
originally published in Labor Notes
by Larry Christensen
The media consensus is that union auto workers escaped the government-imposed restructuring of their industry basically unharmed, exchanging a few dings for control of the companies. Nothing could be further from the truth.
Chrysler retirees—like me—were assured in 2007 that our retiree health care benefits, funded through the Voluntary Employee Beneficiary Association trust, would last 80 years.
Now we lose all dental and vision coverage as of July 1, and an independent analyst says the VEBA, our entire health coverage, will last only six years.
We are supposed to be reassured by the fact that the VEBA will own 55 percent of the equity in Chrysler. But what good is owning a company after the value has been taken out? Chrysler’s former owner Daimler has already written its 20 percent stake in Chrysler down to zero on its own books.
PUNISHING WORK
The turnaround plan will bring union auto workers much closer to the level of non-union workers. It will widen the two-tier wage structure introduced in the 2007 contract, guaranteeing that auto plants will fill up with second-class, disposable jobs. All workers hired for the next six years will start at $14 an hour and remain there at least until 2015. If that wasn’t bad enough, the rules limiting use of temporary part-time workers are relaxed.
The company will keep pushing out higher-wage workers, and those with less than 20 years’ seniority will receive lesser and lesser amounts of supplemental unemployment pay. It will become harder to refuse reassignment to a distant plant.
The deal will make life on the assembly line worse. Active workers, already working at punishing speeds, will see their relief time cut back. After two hours of work they will get 13 minutes break instead of 16; after another 1.5 hours another 13 minutes rather than 16. Their attendance procedure will be more strict. Their seniority right to bid on individual jobs is canceled, replaced by only the right to change work teams.
The dates of two of their vacation weeks will be dictated by the company. No overtime premiums will be paid until the 41st hour worked in a week—in other words, 12-hour days at straight time will soon prevail, especially for skilled-trades workers.
It gets worse. The deal includes a wage freeze through 2015 and the loss of all supplemental pay such as cost-of-living adjustments, Christmas bonuses, and productivity bonuses. All of these were substitutes for what used to be, in the dim distant past, yearly 3 percent base pay raises.
Chrysler also achieved its long-sought goal of completely collapsing skilled-trades classifications into electrical and mechanical only.
FAREWELL TO THE BALLOT
But the most hateful item in the deal cancels workers’ right to decide on their own contracts until September 2015.
The 2011 contract will be decided by top-level negotiations and then, if necessary, by binding arbitration—where the arbitrator is directed to take into account the labor costs of the non-union transplant car companies in the U.S., such as Toyota.
It is an awesome thing to watch a Democratic president enforce such terms on us, while having unconditionally bailed out undeserving banks with hundreds of billions of dollars.
As Canadian Chrysler workers have said, the active workers must vote with “a cannon to their heads” thanks to the collusion of the government, companies, and banks—and a UAW leadership that leads us ever farther from the militant attitudes of those who built our union under far more difficult circumstances.
Mon, 05/04/2009
The same fearless, insightful news media that misrepresents Wall Street's raid on the U.S. Treasury as somehow necessary to save the economy has a story to tell about how the harm to hundreds of thousands of current and retired auto workers will be minimized by incorruptible public officials and knowledgable bankruptcy judges. Only it's not true. The wages of auto workers will be permanently cut, their hours lengthened, their benefits cut. And those who worked 25 or 30 years on the line, counting on lifetime medical care and a dignified retirement have already been sold out.
Chrysler's Plan? Send Pay, Retirement Benefits and Standards Down the Drain
originally published in Labor Notes
by Larry Christensen
The media consensus is that union auto workers escaped the government-imposed restructuring of their industry basically unharmed, exchanging a few dings for control of the companies. Nothing could be further from the truth.
Chrysler retirees—like me—were assured in 2007 that our retiree health care benefits, funded through the Voluntary Employee Beneficiary Association trust, would last 80 years.
Now we lose all dental and vision coverage as of July 1, and an independent analyst says the VEBA, our entire health coverage, will last only six years.
We are supposed to be reassured by the fact that the VEBA will own 55 percent of the equity in Chrysler. But what good is owning a company after the value has been taken out? Chrysler’s former owner Daimler has already written its 20 percent stake in Chrysler down to zero on its own books.
PUNISHING WORK
The turnaround plan will bring union auto workers much closer to the level of non-union workers. It will widen the two-tier wage structure introduced in the 2007 contract, guaranteeing that auto plants will fill up with second-class, disposable jobs. All workers hired for the next six years will start at $14 an hour and remain there at least until 2015. If that wasn’t bad enough, the rules limiting use of temporary part-time workers are relaxed.
The company will keep pushing out higher-wage workers, and those with less than 20 years’ seniority will receive lesser and lesser amounts of supplemental unemployment pay. It will become harder to refuse reassignment to a distant plant.
The deal will make life on the assembly line worse. Active workers, already working at punishing speeds, will see their relief time cut back. After two hours of work they will get 13 minutes break instead of 16; after another 1.5 hours another 13 minutes rather than 16. Their attendance procedure will be more strict. Their seniority right to bid on individual jobs is canceled, replaced by only the right to change work teams.
The dates of two of their vacation weeks will be dictated by the company. No overtime premiums will be paid until the 41st hour worked in a week—in other words, 12-hour days at straight time will soon prevail, especially for skilled-trades workers.
It gets worse. The deal includes a wage freeze through 2015 and the loss of all supplemental pay such as cost-of-living adjustments, Christmas bonuses, and productivity bonuses. All of these were substitutes for what used to be, in the dim distant past, yearly 3 percent base pay raises.
Chrysler also achieved its long-sought goal of completely collapsing skilled-trades classifications into electrical and mechanical only.
FAREWELL TO THE BALLOT
But the most hateful item in the deal cancels workers’ right to decide on their own contracts until September 2015.
The 2011 contract will be decided by top-level negotiations and then, if necessary, by binding arbitration—where the arbitrator is directed to take into account the labor costs of the non-union transplant car companies in the U.S., such as Toyota.
It is an awesome thing to watch a Democratic president enforce such terms on us, while having unconditionally bailed out undeserving banks with hundreds of billions of dollars.
As Canadian Chrysler workers have said, the active workers must vote with “a cannon to their heads” thanks to the collusion of the government, companies, and banks—and a UAW leadership that leads us ever farther from the militant attitudes of those who built our union under far more difficult circumstances.
Thursday, April 23, 2009
Obama Pushes Vision for High-Speed Rail
Robalini's Note: Why isn't Obama using this plan as a way to keep workers of GM, Chrysler & Ford still employed rather than the massive layoffs and pay cuts he's pushing for?http://voices.washingtonpost.com/44/2009/04/16/by_michael_d_shear_declaring.html
44 The Obama Presidency
Obama Pushes Vision for High-Speed Rail
By Michael D. Shear
Apr 16, 2009
Declaring that America should "make no little plans," President Obama declared his intention to build a nationwide system of high-speed rail lines in some of the country's most populated corridors.
Speaking at the Old Executive Office Building before a trip to Mexico and Trinidad this morning, Obama said there is no reason why the most modern transportation systems should be built in other countries.
"A major new high-speed rail line will generate many thousands of construction jobs over several years, as well as permanent jobs for rail employees and increased economic activity in the destinations these trains serve," Obama said in prepared remarks. "High-speed rail is long-overdue, and this plan lets American travelers know that they are not doomed to a future of long lines at the airports or jammed cars on the highways."
The declaration of support for rail did not include any new proposals or money. Rather, it was a restatement of the initiative he launched in the past several months.
The stimulus package that Obama pushed through Congress includes $8 billion that the president said will be doled out to the most deserving projects. He has requested another $5 billion in his budget.
Obama said that the money would be used for two things: to improve existing rail lines so that trains on them could go 100 mph or faster; and to identify and construct new rail lines in major corridors.
Among those, according to a fact sheet put out by the White House are the following:
-- California Corridor (Bay Area, Sacramento, Los Angeles, San Diego)
-- Pacific Northwest Corridor (Eugene, Portland, Tacoma, Seattle, Vancouver BC)
-- South Central Corridor (Tulsa, Oklahoma City, Dallas/Fort Worth, Austin, San Antonio, Little Rock)
-- Gulf Coast Corridor (Houston, New Orleans, Mobile, Birmingham, Atlanta)
-- Chicago Hub Network (Chicago, Milwaukee, Twin Cities, St. Louis, Kansas City, Detroit, Toledo, Cleveland, Columbus, Cincinnati, Indianapolis, Louisville)
-- Florida Corridor (Orlando, Tampa, Miami)
-- Southeast Corridor (Washington, Richmond, Raleigh, Charlotte, Atlanta, Macon, Columbia, Savannah, Jacksonville)
-- Keystone Corridor (Philadelphia, Harrisburg, Pittsburgh)
-- Empire Corridor (New York City, Albany, Buffalo)
--Northern New England Corridor (Boston, Montreal, Portland, Springfield, New Haven, Albany)
The fact sheet also suggests that upgrades and improvements are needed in the Northeast Corridor, including "Washington, Baltimore, Wilmington, Philadelphia, Newark, New York City, New Haven, Providence, Boston."
In his remarks this morning, Obama confronted critics who say the plans are too expensive, don't go far enough, or will shift resources away from the roads and airports.
He dismissed all those concerns. He said the money is needed now to put people to work and will serve as an investment for later years. He acknowledged that more money will be needed but said the billions committed now are a downpayment to get the program started. And he noted that there are billions more in the stimulus package for road and airport improvement.
Saturday, April 11, 2009
Obama's Gordon Gekko Targets Union Workers
http://www.ourfuture.org/blog-entry/2009031431/obamas-gordon-gekko-targets-union-workers-0
Obama's Gordon Gekko Targets Union Workers
By David Sirota
March 31st, 2009
Remember Gordon Gekko from Wall Street? Specifically, remember how Gekko's entire scheme for the airline industry was based on crushing the blue-collar union that Bud Fox's dad (Martin Sheen) was part of? Welcome to a real life version of that story, starring corporate raider Steve Rattner, who President Obama appointed to head the White House team now overseeing the auto industry (and don't say you weren't warned).
As the Wall Street Journal reports, Rattner's strategy is to use the government's leverage to try to specifically crush auto workers and force them to accept even more contract concessions than they've already agreed to:
DETROIT -- President Barack Obama's recovery plan for General Motors Corp. and Chrysler LLC appears to take aim at union retirees, a usually reliable Democratic constituency. After studying the plight of the companies, the president's auto task force concluded GM and Chrysler's survival is dependent on greater concessions from the United Auto Workers union.
The White House has total leverage over the situation because the UAW knows that if the industry doesn't get the loans it needs, it will be forced into bankruptcy court, where judges will shred labor contracts (somehow, AIG bonus contracts are sacrosanct, but union worker contracts can be shredded in a heartbeat). Indeed, many analysts believe this is the administration's ultimate goal.
IMHO, The most immoral part of this is the specific targeting of retirees.
As opposed to younger workers, retirees often can't get another job or go back to work because of obvious physical limitations. As one retiree said, "What 85-year-old can go out and get another job?"
I'm not saying that the auto industry's legacy costs are sustainable - not at all. But I am saying that when you put Gordon Gekko in control of government policy overseeing an industry, you are inevitably going to get a policy that assumes workers are the big problem. If you had a different kind of team, you may have a policy that says, for instance, we have to create a robust universal health care system before throwing retirees off their existing health care.
Last I checked, we have enough money to create that system just lying around ready to be handed out to Rattner's Wall Street friends. Hell, $8 trillion will get us a damn good universal health care system, won't it? Yes, it will - but it will also buy a lot of yachts for AIG execs, and when you have Gordon Gekko making public policy yachts come before health care.
Obama's Gordon Gekko Targets Union Workers
By David Sirota
March 31st, 2009
Remember Gordon Gekko from Wall Street? Specifically, remember how Gekko's entire scheme for the airline industry was based on crushing the blue-collar union that Bud Fox's dad (Martin Sheen) was part of? Welcome to a real life version of that story, starring corporate raider Steve Rattner, who President Obama appointed to head the White House team now overseeing the auto industry (and don't say you weren't warned).
As the Wall Street Journal reports, Rattner's strategy is to use the government's leverage to try to specifically crush auto workers and force them to accept even more contract concessions than they've already agreed to:
DETROIT -- President Barack Obama's recovery plan for General Motors Corp. and Chrysler LLC appears to take aim at union retirees, a usually reliable Democratic constituency. After studying the plight of the companies, the president's auto task force concluded GM and Chrysler's survival is dependent on greater concessions from the United Auto Workers union.
The White House has total leverage over the situation because the UAW knows that if the industry doesn't get the loans it needs, it will be forced into bankruptcy court, where judges will shred labor contracts (somehow, AIG bonus contracts are sacrosanct, but union worker contracts can be shredded in a heartbeat). Indeed, many analysts believe this is the administration's ultimate goal.
IMHO, The most immoral part of this is the specific targeting of retirees.
As opposed to younger workers, retirees often can't get another job or go back to work because of obvious physical limitations. As one retiree said, "What 85-year-old can go out and get another job?"
I'm not saying that the auto industry's legacy costs are sustainable - not at all. But I am saying that when you put Gordon Gekko in control of government policy overseeing an industry, you are inevitably going to get a policy that assumes workers are the big problem. If you had a different kind of team, you may have a policy that says, for instance, we have to create a robust universal health care system before throwing retirees off their existing health care.
Last I checked, we have enough money to create that system just lying around ready to be handed out to Rattner's Wall Street friends. Hell, $8 trillion will get us a damn good universal health care system, won't it? Yes, it will - but it will also buy a lot of yachts for AIG execs, and when you have Gordon Gekko making public policy yachts come before health care.
Obama treated autos worse than Wall St
http://finance.yahoo.com/news/Workers-say-Obama-treated-apf-14789941.html
Workers say Obama treated autos worse than Wall St
Autoworkers say Obama's 'tough love' more tough than love, they get worse treatment than banks
Jeff Karoub, AP Business Writer
Monday March 30, 2009
DETROIT (AP) -- Many assembly line autoworkers reacted with skepticism and anger Monday to the Obama administration's tough tactics, which stoked long-simmering feelings that the people who put the country on wheels get treated differently than the wizards of Wall Street.
"It's the age-old Wall Street vs. Main Street smackdown again," said Brian Fredline, president of UAW Local 602 at a plant near Lansing. "You have all kinds of funding available to banks that are apparently too big to fail, but they're also too big to be responsible."
"But when it comes to auto manufacturing and middle-class jobs and people that don't matter on Wall Street, there are certainly different standards that we have to meet -- higher standards -- than the financials. That is a double standard that exists and it's unfair," Fredline said.
Many workers -- not generally known for their affection toward executives -- even sympathized with Rick Wagoner, who was forced to step down as chief executive of General Motors Corp. He was by turns called a "sacrificial lamb," "scapegoat" and "fall guy."
"We knew someone was going to have to take the proverbial `bullet,' and it would have made it a lot easier to accept that had the CEOs of the banks also been required to give up their jobs," said Jim Graham, president of a union local in Lordstown, Ohio, where GM produces the Cobalt and Pontiac G5 fuel-efficient cars.
While CEO oustings haven't been widespread among the banking industry, the government did in September reserve the right to remove senior management at American International Group Inc. as part of its agreement to give the insurer $85 billion in emergency aid. AIG Chief Executive Robert Willumstad stepped down as part of that company's bailout package, and the government hand-picked his successor.
Also, banks don't have the union and legacy costs that the automakers do, which make their products more costly versus foreign rivals.
President Barack Obama said he was "absolutely committed" to the survival of a domestic auto industry that can compete internationally. He raised the possibility of controlled bankruptcy for one or both of the troubled automakers.
Obama said the administration will offer GM "adequate working capital" during the next 60 days to produce an acceptable reorganization plan. The government gave Chrysler LLC 30 days to overcome hurdles to a merger with Fiat SpA, the Italian automaker.
Many workers say the government hasn't dictated such terms to insurance giant AIG or the banks in which it's taken an ownership stake. Obama's actions come amid public outrage over bonuses paid to business leaders and AIG executives.
"To see the very people that drove this economy into the ground be rewarded through bonuses while receiving tax dollars is just galling," said Dan Maloney, a machine repairman at auto supplier Delphi Corp.'s plant in Rochester, N.Y., and a union local president. "In light of that, the administration is taking it out, I believe, on the automotive sector."
Michigan Gov. Jennifer Granholm called Obama's moves "a bit of tough love," yet recognized a disconnect between the financial and auto industries.
"Yes, I do think that there has been a different look at those who manufacture than those who make money by flipping paper and I'm hopeful that the financial industry gets as tough a scrutiny as the auto industry has," she told reporters after an event Monday in Macomb Township, about 20 miles northeast of Detroit.
Despite Granholm's criticism and what many workers saw as the president's unduly harsh treatment, Obama's actions might not have a lasting effect on voters.
"It will be accepted, grudgingly perhaps, but accepted by anybody and everybody with a brain in their heads," said Bill Ballenger, editor of a Michigan political newsletter and a former Republican state lawmaker.
Still, Bill Rustem of Public Sector Consultants, a Lansing-based nonpartisan think tank, said Obama's actions carry some risk.
"I think this could have some impact four years from now if the state's economy doesn't begin to turn around," he said. Michigan's unemployment rate rose to 12 percent in February, marking the eighth straight monthly increase.
Workers watched Obama on large-screen TVs in the lobby bar of a hotel in Detroit's Renaissance Center, home to GM's headquarters. Several wearing GM badges declined to comment afterward, but one man whose fortunes are nearly as tied to GM as its employees expressed hope for the future of the company and industry.
"It's definitely a move in the right direction," said Tony Keros, who owns a restaurant and real estate development firm in the building. "Something has to happen."
In Ohio, Graham agreed that Washington just might get it right -- if only because the stakes are too high to fail.
"They understand that there are literally millions of people who depend on the auto industry -- whether directly or indirectly -- and a ripple effect of eliminating a General Motors, Chrysler or Ford would be devastating to an economy that's already been devastated over the past eight years," he said.
Associated Press writers Ben Leubsdorf in Clinton Township, Tim Martin in Delta Township, Ben Dobbin in Rochester, N.Y., and Thomas J. Sheeran in Cleveland contributed to this report.
Workers say Obama treated autos worse than Wall St
Autoworkers say Obama's 'tough love' more tough than love, they get worse treatment than banks
Jeff Karoub, AP Business Writer
Monday March 30, 2009
DETROIT (AP) -- Many assembly line autoworkers reacted with skepticism and anger Monday to the Obama administration's tough tactics, which stoked long-simmering feelings that the people who put the country on wheels get treated differently than the wizards of Wall Street.
"It's the age-old Wall Street vs. Main Street smackdown again," said Brian Fredline, president of UAW Local 602 at a plant near Lansing. "You have all kinds of funding available to banks that are apparently too big to fail, but they're also too big to be responsible."
"But when it comes to auto manufacturing and middle-class jobs and people that don't matter on Wall Street, there are certainly different standards that we have to meet -- higher standards -- than the financials. That is a double standard that exists and it's unfair," Fredline said.
Many workers -- not generally known for their affection toward executives -- even sympathized with Rick Wagoner, who was forced to step down as chief executive of General Motors Corp. He was by turns called a "sacrificial lamb," "scapegoat" and "fall guy."
"We knew someone was going to have to take the proverbial `bullet,' and it would have made it a lot easier to accept that had the CEOs of the banks also been required to give up their jobs," said Jim Graham, president of a union local in Lordstown, Ohio, where GM produces the Cobalt and Pontiac G5 fuel-efficient cars.
While CEO oustings haven't been widespread among the banking industry, the government did in September reserve the right to remove senior management at American International Group Inc. as part of its agreement to give the insurer $85 billion in emergency aid. AIG Chief Executive Robert Willumstad stepped down as part of that company's bailout package, and the government hand-picked his successor.
Also, banks don't have the union and legacy costs that the automakers do, which make their products more costly versus foreign rivals.
President Barack Obama said he was "absolutely committed" to the survival of a domestic auto industry that can compete internationally. He raised the possibility of controlled bankruptcy for one or both of the troubled automakers.
Obama said the administration will offer GM "adequate working capital" during the next 60 days to produce an acceptable reorganization plan. The government gave Chrysler LLC 30 days to overcome hurdles to a merger with Fiat SpA, the Italian automaker.
Many workers say the government hasn't dictated such terms to insurance giant AIG or the banks in which it's taken an ownership stake. Obama's actions come amid public outrage over bonuses paid to business leaders and AIG executives.
"To see the very people that drove this economy into the ground be rewarded through bonuses while receiving tax dollars is just galling," said Dan Maloney, a machine repairman at auto supplier Delphi Corp.'s plant in Rochester, N.Y., and a union local president. "In light of that, the administration is taking it out, I believe, on the automotive sector."
Michigan Gov. Jennifer Granholm called Obama's moves "a bit of tough love," yet recognized a disconnect between the financial and auto industries.
"Yes, I do think that there has been a different look at those who manufacture than those who make money by flipping paper and I'm hopeful that the financial industry gets as tough a scrutiny as the auto industry has," she told reporters after an event Monday in Macomb Township, about 20 miles northeast of Detroit.
Despite Granholm's criticism and what many workers saw as the president's unduly harsh treatment, Obama's actions might not have a lasting effect on voters.
"It will be accepted, grudgingly perhaps, but accepted by anybody and everybody with a brain in their heads," said Bill Ballenger, editor of a Michigan political newsletter and a former Republican state lawmaker.
Still, Bill Rustem of Public Sector Consultants, a Lansing-based nonpartisan think tank, said Obama's actions carry some risk.
"I think this could have some impact four years from now if the state's economy doesn't begin to turn around," he said. Michigan's unemployment rate rose to 12 percent in February, marking the eighth straight monthly increase.
Workers watched Obama on large-screen TVs in the lobby bar of a hotel in Detroit's Renaissance Center, home to GM's headquarters. Several wearing GM badges declined to comment afterward, but one man whose fortunes are nearly as tied to GM as its employees expressed hope for the future of the company and industry.
"It's definitely a move in the right direction," said Tony Keros, who owns a restaurant and real estate development firm in the building. "Something has to happen."
In Ohio, Graham agreed that Washington just might get it right -- if only because the stakes are too high to fail.
"They understand that there are literally millions of people who depend on the auto industry -- whether directly or indirectly -- and a ripple effect of eliminating a General Motors, Chrysler or Ford would be devastating to an economy that's already been devastated over the past eight years," he said.
Associated Press writers Ben Leubsdorf in Clinton Township, Tim Martin in Delta Township, Ben Dobbin in Rochester, N.Y., and Thomas J. Sheeran in Cleveland contributed to this report.
10 Cars That Sank Detroit
http://autos.yahoo.com/articles/autos_content_landing_pages/923/10-Cars-That-Sank-Detroit;_ylc=X3oDMTE4aGI2MDhuBF9TAzI3MTYxNDkEc2VjA2ZwLXRvZGF5BHNsawNzYW5rLWRldHJvaXQ
10 Cars That Sank Detroit
By Rick Newman
The global financial crisis is suffocating the Detroit automakers, but the problems at General Motors, Ford, and Chrysler have been festering for years—even when the mighty "Big Three" were earning billions. Aging factories, inflexible unions, arrogant executives and shoddy quality have all damaged Detroit. Now, with panicky consumers fleeing showrooms, catastrophe looms:
There will be plenty of business-school case studies analyzing all the automakers' wrong turns. But, as they say in the industry, it all comes down to product. So here are 10 cars that help explain the demise of Detroit: GM and Chrysler need a multibillion-dollar government bailout to survive, and both could be in bankruptcy by summer if they don't meet tough government demands. Ford hasn't asked for a bailout—yet—but it's bleeding cash and racing the clock to turn itself around.
Ford Pinto. This ill-fated subcompact came to epitomize the arrogance of Big Auto. Ford hurried the Pinto to market in the early 1970s to battle cheap imports like the Volkswagen Beetle that were selling for less than $2,000. Initial sales were strong, but quality problems emerged. Then came the infamous safety problems with exploding fuel tanks, which Ford refused to acknowledge. Message: The customer comes last. "The problems for the domestics really started in the '70s when they were offering cars like the Pinto up against higher-tech, better-built Toyota Corollas and Honda Civics," says Jack Nerad of Kelley Blue Book.
Chevrolet Cavalier. GM sold millions of Cavaliers in the 1980s—and decided the thrifty car was so successful the company didn't need to update it for more than a decade. To milk the model, GM even added some lipstick and high heels and tried to peddle the upgrade as the Cadillac Cimarron—a legendary flop. Honda and Toyota, meanwhile, were updating their competing models every four or five years, and grabbing market share with each quality improvement. A new Cavalier came out in the mid 1990s—then languished for another decade, while GM put most of its money into big trucks and SUVs. GM has since improved its small cars. "But they have to be miles better than the imports for Americans to forget how bad their small cars used to be," says Jamie Page Deaton of U.S. News's Rankings and Reviews car-ranking site. Even if they are better, many Americans wonder why they should give Detroit a second—or third—chance.
Chevrolet Astro. While Chrysler, Toyota, and Honda were refining their minivans in the 1990s and coming up with innovations like hideaway seats and electric sliding doors, GM was offering an old, truck-based van gussied up with carpeting and cupholders. "It showed GM's repeated failure to market competitive products based on styling and packaging," says Tom Libby of J. D. Power & Associates. The Astro drove like a bread truck, and consumers noticed. It also earned the worst safety ratings in its class. Before long, GM was effectively out of the minivan segment. No biggie—those were just mainstream American families the automaker decided to ignore.
Ford Taurus. Try to explain this logic: After its 1986 debut, the Taurus became a perennial bestseller. So for the next 20 years, Ford let quality decline and neglected the family sedan, while pouring love and money into trucks and SUVs. By early this decade, the Taurus had become a dowdy, rental-lot staple. So Ford simply retired the Taurus in 2006 and replaced it with the 500 sedan—which went on to set records as one of the most short-lived models ever. A year later, Ford revived the Taurus name and applied it to a bastardized 500. But by then, the damage was done.
Ford Explorer. This breakout vehicle helped launch SUVs and drove record profits at Ford in the 1990s, as Americans flocked to big utilities that could take them off-road if they ever got adventurous. It also blinded Ford to the future. "Executives could not see beyond the green piling up at their feet," says David Magee, author of How Toyota Became No. 1. "The Explorer helped create an addiction that lasted 15 years." GM and Chrysler followed right behind, with SUVs like the Chevy Trailblazer and the Dodge Durango—lockstep moves that reveal how the Detroit automakers focused on each other rather than the broader marketplace.
Jaguar X-Type. Ford bought the British luxury brand Jaguar in 1990, when all three Detroit automakers were seeking ways to expand their global reach. Eventually, Ford decided to build an entry-level Jaguar starting at around $30,000 for people looking to move up from, say, a Mercury Marquis. The down-market move "represented everything that Jaguar is not," says Libby of J. D. Power. The X-Type was built on an ordinary sedan platform from elsewhere in Ford's lineup, and the front-wheel-drive system underwhelmed enthusiasts used to rear-drive European makes. Jag purists were horrified, and aspiring luxury buyers shunned the X-Type in favor of BMWs, Lexuses, and Acuras. After fumbling the luxury brand for nearly two decades, Ford sold Jaguar to an Indian conglomerate in 2008.
Hummer H2. It sure seemed cool back in 2003, when gas was less than $2 per gallon. And it sure seems gaudy now. This supersized SUV clearly had a heyday, but it also helped paint parent company GM as an enviro-hostile corporation that sold only gas guzzlers. Sales collapsed as gas prices rose toward $4 a gallon in mid-2008, and GM has been trying to sell the division for six months—with no takers, so far. "GM wanted to make Hummer a signature company brand," says Magee. "Instead, it showed the company was out of touch with the needs of the 21st century."
Toyota Prius. While GM was spending $1 billion to build up the Hummer franchise, Toyota was spending $1 billion to develop a high-mileage hybrid—even though gas prices were still low. After the Prius debuted in the United States in 2000, GM execs seized yet another opportunity to display their intimate knowledge of American consumers, arguing that hybrids didn't make economic sense and that only environmentalists would buy them. Today, Toyota can barely keep up with demand for the Prius, and it has plans to start building them in the United States. GM, meanwhile, is scrambling to rush hybrids and other high-mileage cars into dealerships—far too late.
Chrysler Sebring. Did Chrysler engineers set out to build the world's most boring car? Of course not. Yet Chrysler still produces this blandmobile to keep assembly lines running and maintain a presence, however weak, in the sedan market. In the new Darwinian auto industry, this model seems destined for extinction, since the only way to sell marginal cars is with steep discounts, which money-losing automakers can no longer afford. In fact, if Chrysler ends up being carved into pieces and sold to competitors, as many analysts expect, most of its passenger-car lineup could get the axe, since there's little to distinguish it. Besides—what's a sebring, anyway?
Jeep Compass. Quick, what's the difference between the Jeep Compass, the Jeep Liberty, and the Jeep Patriot? The bosses at Chrysler, which owns Jeep, could explain, but the real answer is that Chrysler has oversaturated its strongest brand lineup in a desperate attempt to boost sales. "The Compass is not needed," says James Bell of Intellichoice.com. "Just the Liberty, please." The Compass has the same mechanical underpinnings as the Dodge Caliber, which helps illustrate one of Detroit's favorite tricks: Create multiple versions of every product under a bunch of different brand names, hoping that if buyers shun one, they'll take a more favorable view of another. Message to Detroit: Consumers aren't that stupid. Give them a bit more credit, and you might have a future.
10 Cars That Sank Detroit
By Rick Newman
The global financial crisis is suffocating the Detroit automakers, but the problems at General Motors, Ford, and Chrysler have been festering for years—even when the mighty "Big Three" were earning billions. Aging factories, inflexible unions, arrogant executives and shoddy quality have all damaged Detroit. Now, with panicky consumers fleeing showrooms, catastrophe looms:
There will be plenty of business-school case studies analyzing all the automakers' wrong turns. But, as they say in the industry, it all comes down to product. So here are 10 cars that help explain the demise of Detroit: GM and Chrysler need a multibillion-dollar government bailout to survive, and both could be in bankruptcy by summer if they don't meet tough government demands. Ford hasn't asked for a bailout—yet—but it's bleeding cash and racing the clock to turn itself around.
Ford Pinto. This ill-fated subcompact came to epitomize the arrogance of Big Auto. Ford hurried the Pinto to market in the early 1970s to battle cheap imports like the Volkswagen Beetle that were selling for less than $2,000. Initial sales were strong, but quality problems emerged. Then came the infamous safety problems with exploding fuel tanks, which Ford refused to acknowledge. Message: The customer comes last. "The problems for the domestics really started in the '70s when they were offering cars like the Pinto up against higher-tech, better-built Toyota Corollas and Honda Civics," says Jack Nerad of Kelley Blue Book.
Chevrolet Cavalier. GM sold millions of Cavaliers in the 1980s—and decided the thrifty car was so successful the company didn't need to update it for more than a decade. To milk the model, GM even added some lipstick and high heels and tried to peddle the upgrade as the Cadillac Cimarron—a legendary flop. Honda and Toyota, meanwhile, were updating their competing models every four or five years, and grabbing market share with each quality improvement. A new Cavalier came out in the mid 1990s—then languished for another decade, while GM put most of its money into big trucks and SUVs. GM has since improved its small cars. "But they have to be miles better than the imports for Americans to forget how bad their small cars used to be," says Jamie Page Deaton of U.S. News's Rankings and Reviews car-ranking site. Even if they are better, many Americans wonder why they should give Detroit a second—or third—chance.
Chevrolet Astro. While Chrysler, Toyota, and Honda were refining their minivans in the 1990s and coming up with innovations like hideaway seats and electric sliding doors, GM was offering an old, truck-based van gussied up with carpeting and cupholders. "It showed GM's repeated failure to market competitive products based on styling and packaging," says Tom Libby of J. D. Power & Associates. The Astro drove like a bread truck, and consumers noticed. It also earned the worst safety ratings in its class. Before long, GM was effectively out of the minivan segment. No biggie—those were just mainstream American families the automaker decided to ignore.
Ford Taurus. Try to explain this logic: After its 1986 debut, the Taurus became a perennial bestseller. So for the next 20 years, Ford let quality decline and neglected the family sedan, while pouring love and money into trucks and SUVs. By early this decade, the Taurus had become a dowdy, rental-lot staple. So Ford simply retired the Taurus in 2006 and replaced it with the 500 sedan—which went on to set records as one of the most short-lived models ever. A year later, Ford revived the Taurus name and applied it to a bastardized 500. But by then, the damage was done.
Ford Explorer. This breakout vehicle helped launch SUVs and drove record profits at Ford in the 1990s, as Americans flocked to big utilities that could take them off-road if they ever got adventurous. It also blinded Ford to the future. "Executives could not see beyond the green piling up at their feet," says David Magee, author of How Toyota Became No. 1. "The Explorer helped create an addiction that lasted 15 years." GM and Chrysler followed right behind, with SUVs like the Chevy Trailblazer and the Dodge Durango—lockstep moves that reveal how the Detroit automakers focused on each other rather than the broader marketplace.
Jaguar X-Type. Ford bought the British luxury brand Jaguar in 1990, when all three Detroit automakers were seeking ways to expand their global reach. Eventually, Ford decided to build an entry-level Jaguar starting at around $30,000 for people looking to move up from, say, a Mercury Marquis. The down-market move "represented everything that Jaguar is not," says Libby of J. D. Power. The X-Type was built on an ordinary sedan platform from elsewhere in Ford's lineup, and the front-wheel-drive system underwhelmed enthusiasts used to rear-drive European makes. Jag purists were horrified, and aspiring luxury buyers shunned the X-Type in favor of BMWs, Lexuses, and Acuras. After fumbling the luxury brand for nearly two decades, Ford sold Jaguar to an Indian conglomerate in 2008.
Hummer H2. It sure seemed cool back in 2003, when gas was less than $2 per gallon. And it sure seems gaudy now. This supersized SUV clearly had a heyday, but it also helped paint parent company GM as an enviro-hostile corporation that sold only gas guzzlers. Sales collapsed as gas prices rose toward $4 a gallon in mid-2008, and GM has been trying to sell the division for six months—with no takers, so far. "GM wanted to make Hummer a signature company brand," says Magee. "Instead, it showed the company was out of touch with the needs of the 21st century."
Toyota Prius. While GM was spending $1 billion to build up the Hummer franchise, Toyota was spending $1 billion to develop a high-mileage hybrid—even though gas prices were still low. After the Prius debuted in the United States in 2000, GM execs seized yet another opportunity to display their intimate knowledge of American consumers, arguing that hybrids didn't make economic sense and that only environmentalists would buy them. Today, Toyota can barely keep up with demand for the Prius, and it has plans to start building them in the United States. GM, meanwhile, is scrambling to rush hybrids and other high-mileage cars into dealerships—far too late.
Chrysler Sebring. Did Chrysler engineers set out to build the world's most boring car? Of course not. Yet Chrysler still produces this blandmobile to keep assembly lines running and maintain a presence, however weak, in the sedan market. In the new Darwinian auto industry, this model seems destined for extinction, since the only way to sell marginal cars is with steep discounts, which money-losing automakers can no longer afford. In fact, if Chrysler ends up being carved into pieces and sold to competitors, as many analysts expect, most of its passenger-car lineup could get the axe, since there's little to distinguish it. Besides—what's a sebring, anyway?
Jeep Compass. Quick, what's the difference between the Jeep Compass, the Jeep Liberty, and the Jeep Patriot? The bosses at Chrysler, which owns Jeep, could explain, but the real answer is that Chrysler has oversaturated its strongest brand lineup in a desperate attempt to boost sales. "The Compass is not needed," says James Bell of Intellichoice.com. "Just the Liberty, please." The Compass has the same mechanical underpinnings as the Dodge Caliber, which helps illustrate one of Detroit's favorite tricks: Create multiple versions of every product under a bunch of different brand names, hoping that if buyers shun one, they'll take a more favorable view of another. Message to Detroit: Consumers aren't that stupid. Give them a bit more credit, and you might have a future.
Saturday, April 4, 2009
Automaker Aid Hinges on Restructuring
Robalini's Note: This past week Obama has really shown his hand. After handing Wall Street bankers a massive looting opportunity with the toxic asset program, he demands yet more layoffs for auto workers at the Big Three...
http://online.wsj.com/article/SB123834886343966829.html
MARCH 29, 2009
Automaker Aid Hinges on Restructuring, Obama Says
By NEIL KING JR.
WASHINGTON -- President Barack Obama is prepared to give struggling U.S. automakers billions more in aid, but only if all sides show that they are ready to make sacrifices to assure the companies have a viable future.
Speaking the day before he announces his first assessment of the fates of General Motors Corp. and Chrysler LLC, Mr. Obama said on CBS's "Face the Nation" Sunday that he intends to lay out "a set of sacrifices from all parties involved -- management, labor, shareholders, creditors, suppliers, dealers."
The industry, he said, must "take serious restructuring steps now in order to preserve a brighter future down the road." The two companies "are not there yet," he added.
The president's auto task force has spent more than a month digging into the restructuring plans of GM and Chrysler while trying to assess when the steep plunge in car sales might end. The two companies received a total of $17.4 billion in government loans in December, and have requested another $22 billion to keep them going through this year. Of that, GM is seeking $16.6 billion more, while Chrysler has asked for $5 billion more.
On Monday, President Obama will lay out the administration's interim conclusions on the companies' viability and the many steps that need to be taken to return the companies to health. The president is likely to hold off on granting new loans to preserve leverage in ongoing negotiations, particularly with the thousands of bondholders who hold a total of about $28 billion in GM debt.
The government is pressuring the bondholders to agree to an equity swap that would reduce GM's debt load by two-thirds.
Analysts said GM likely has enough cash on hand to weather at least another month before its need for more government aid becomes urgent. Chrysler, which is owned by Cerberus Capital Management, may need another infusion of cash sooner. Ford Motor Co. has not sought federal assistance.
Both GM and Chrysler are negotiating with the United Autoworkers union to accept a range of cost-cutting measures, including a greatly reduced workforce, lower wages, and a revamped health-care fund for retirees.
The U.S. auto industry, hardly robust to start with, has been reeling from a plunge in car sales over the last six months. Sales in February were down about 40% over the same month last year. The drop has sent shock waves through the hundreds of smaller parts companies that supply the big auto makers. To keep the sector afloat, the administration recently announced a $5 billion financing facility to help suppliers cover their expenses.
`We think we can have a successful U.S. auto industry," President Obama said on Sunday. "But it's got to be one that's realistically designed to weather this storm and to emerge—at the other end—much more lean, mean, and competitive than it currently is.''
Treasury Secretary Timothy Geithner, who is nominally in charge of overseeing the auto bailout, on Sunday said the government was prepared to lend more money "if we believe it's going to provide the basis for a stronger industry in the future that's not going to rely on government support."
The administration is not expected on Monday to deliver a comprehensive blueprint for where the industry needs to go in the months and years ahead. Instead, administration officials said, the announcement will lay out the parameters of an overall deal, including some firm deadlines. The administration is expected to hold out the threat of having the companies enter into Chapter 11 bankruptcy restructuring if certain tough compromises are not made over the next month.
The original December loans were given under the agreement that all sides would strike a compromise deal by March 31, but the administration is taking advantage of a clause allowing all sides another month to negotiate.
"It was unrealistic to renegotiate a new labor agreement and the unsecured debt in so short a time," said Sean McAlinden, chief economist with the Ann Arbor, Mich.-based Center for Automotive Research. "That has never happened before."
GM and Chrysler are meant to submit by Tuesday assessments of where their restructuring efforts are heading. In February, both companies put forward plans for paring back their operations, reducing their workforces and eliminating vehicle models. Chrysler is mulling a potential alliance with Italy's Fiat SpA.
Write to Neil King Jr. at neil.king@wsj.com
http://online.wsj.com/article/SB123834886343966829.html
MARCH 29, 2009
Automaker Aid Hinges on Restructuring, Obama Says
By NEIL KING JR.
WASHINGTON -- President Barack Obama is prepared to give struggling U.S. automakers billions more in aid, but only if all sides show that they are ready to make sacrifices to assure the companies have a viable future.
Speaking the day before he announces his first assessment of the fates of General Motors Corp. and Chrysler LLC, Mr. Obama said on CBS's "Face the Nation" Sunday that he intends to lay out "a set of sacrifices from all parties involved -- management, labor, shareholders, creditors, suppliers, dealers."
The industry, he said, must "take serious restructuring steps now in order to preserve a brighter future down the road." The two companies "are not there yet," he added.
The president's auto task force has spent more than a month digging into the restructuring plans of GM and Chrysler while trying to assess when the steep plunge in car sales might end. The two companies received a total of $17.4 billion in government loans in December, and have requested another $22 billion to keep them going through this year. Of that, GM is seeking $16.6 billion more, while Chrysler has asked for $5 billion more.
On Monday, President Obama will lay out the administration's interim conclusions on the companies' viability and the many steps that need to be taken to return the companies to health. The president is likely to hold off on granting new loans to preserve leverage in ongoing negotiations, particularly with the thousands of bondholders who hold a total of about $28 billion in GM debt.
The government is pressuring the bondholders to agree to an equity swap that would reduce GM's debt load by two-thirds.
Analysts said GM likely has enough cash on hand to weather at least another month before its need for more government aid becomes urgent. Chrysler, which is owned by Cerberus Capital Management, may need another infusion of cash sooner. Ford Motor Co. has not sought federal assistance.
Both GM and Chrysler are negotiating with the United Autoworkers union to accept a range of cost-cutting measures, including a greatly reduced workforce, lower wages, and a revamped health-care fund for retirees.
The U.S. auto industry, hardly robust to start with, has been reeling from a plunge in car sales over the last six months. Sales in February were down about 40% over the same month last year. The drop has sent shock waves through the hundreds of smaller parts companies that supply the big auto makers. To keep the sector afloat, the administration recently announced a $5 billion financing facility to help suppliers cover their expenses.
`We think we can have a successful U.S. auto industry," President Obama said on Sunday. "But it's got to be one that's realistically designed to weather this storm and to emerge—at the other end—much more lean, mean, and competitive than it currently is.''
Treasury Secretary Timothy Geithner, who is nominally in charge of overseeing the auto bailout, on Sunday said the government was prepared to lend more money "if we believe it's going to provide the basis for a stronger industry in the future that's not going to rely on government support."
The administration is not expected on Monday to deliver a comprehensive blueprint for where the industry needs to go in the months and years ahead. Instead, administration officials said, the announcement will lay out the parameters of an overall deal, including some firm deadlines. The administration is expected to hold out the threat of having the companies enter into Chapter 11 bankruptcy restructuring if certain tough compromises are not made over the next month.
The original December loans were given under the agreement that all sides would strike a compromise deal by March 31, but the administration is taking advantage of a clause allowing all sides another month to negotiate.
"It was unrealistic to renegotiate a new labor agreement and the unsecured debt in so short a time," said Sean McAlinden, chief economist with the Ann Arbor, Mich.-based Center for Automotive Research. "That has never happened before."
GM and Chrysler are meant to submit by Tuesday assessments of where their restructuring efforts are heading. In February, both companies put forward plans for paring back their operations, reducing their workforces and eliminating vehicle models. Chrysler is mulling a potential alliance with Italy's Fiat SpA.
Write to Neil King Jr. at neil.king@wsj.com
Friday, March 6, 2009
Beast of the Month - January 2009
Beast of the Month - January 2009
Rick Wagoner
CEO, General Motors
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
For Americans living outside of Detroit worried about the USA falling into a major depression, be thankful at least you aren't a resident of the Motor City: it's already one there. It's bad enough for the city's rep that LA and New York hip-hop passed Motown as ground zero for African-American music. Michigan's great metropolis is now the poorest city in the nation. Unemployment has hit 21 percent and is still rising, while the average price of a home is down to $18,513. Indeed, the economic downturn is so bad, the notoriously violent city is no longer the nation's most dangerous, having been passed by New Orleans and Camden, New Jersey in 2008 thanks to the lack of worthwhile targets for crime. And to top it all off, the Lions went 0-16.
We bring this all up because naming the city's most powerful korporate executive, General Motors CEO and Chairman Rick Wagoner, The Konformist Beast of the Month seems almost like an excessive piling on overkill. After all, yes, Wagoner and his cohorts at Ford and Chrysler, Alan Mulally and Bob Nardelli, may have come off as clueless and arrogant after coming to Congress asking first for $25 billion and then $34 billion. (You gotta admire their balls, though: usually when you flub your first request for a loan, you ask for less the second time, not $9 billion more.) And yes, maybe it does seem appalling after the Wall Street bailout swindle to have another well-connected industry coming to DC begging for a handout while the working class hasn't received a dime in help from the financial crisis. And yes, for all their whining and moaning about needing help, none of the auto execs could give a convincing mea culpa and admit they have no one to blame for their crisis besides themselves.
(And yes, maybe it would have been at least symbolically wiser for the auto executives to have driven to Washington in good old fashion cars made by their companies rather than fly their in private company jets.)
But, on the other hand, the auto industry is a labor-intensive business that does actual manufacturing, unlike the parasitic, leeching deadweight at the core of Wall Street banks. That means if GM, Ford and Chrysler go down, estimates ranging from 3 to 5 million jobs will disappear with them, good quality jobs at that. And that's before any likely domino effect causes even more jobs to vanish. And while the vast majority of Americans are rightfully disgusted at the idea of another bailout after the Wall Street con, even $34 billion for up to 5 million jobs centered in the manufacturing sector is pretty damn cost-effective, and certainly not comparable to the $700 billion bankster black hole. Maybe Wagoner, Mulally and Nardelli are a bunch of incompetents creeps, but American auto workers shouldn't be left holding the bag for their screw-ups.
This is why The Konformist is awarding the prestigious BOTM prize to Wagoner after all. If workers shouldn't receive the punishment for the failures of Wagoner and his pals, neither should he receive a free pass for the plight of the people of Detroit.
And unfortunately, the auto worker ARE receiving the punishment for the auto executive failures, just as they have over the last 30 years. The framing of the debate was staged when right-wing propagandists repeatedly claimed the average worker gets paid $70-80 in wages and benefits. In fact, the average wage is $28: the grossly inflated figure is based on adding payments to retirees to current benefits and dividing the total by the current work force. But the damage has been done: the blame for the automobile industry crisis was laid at least partially on the feet of overpaid union auto workers, and the remedy was massive cuts in pay and benefits along with layoffs. These talking point barely challenged by the so-called Democratic Party. As Michael Moore rightfully put it with his usual share of deserved outrage: "After giving BILLIONS to Wall Street hucksters and criminal investment bankers -- billions with no strings attached and, as we have since learned, no oversight whatsoever -- the Senate decided it is more important to break a union, more important to throw middle class wage earners into the ranks of the working poor than to prevent the total collapse of industrial America."
Okay, so the auto workers are the predictable scapegoat here, but what is the real cause of the auto market crisis? In some ways, it's just a symptom of the bad economy. After all, Toyota announced in December that it would have an operating loss in 2008, the first time it has failed to make a profit since 1938. Meanwhile, Toyota, Honda and Nissan all had drops in sales last year, all averaging over an astounding 30 percent drop in US sales during December alone.
The problem with this explanation is that while the Japanese car companies are indeed slumping, they still are doing way better relative to Detroit. While the Japanese fell from 8 to 15 percent in US sales in 2008, Ford went down 20%, GM 23%, and Chrysler 30%. All told, the Big Three's US market share fell below 50 percent last year. As far as Toyota goes, it finally overtook GM as the world's largest automaker, and solidified its lead over Ford as number two in the US market. Honda nearly overtook Chrysler as number four in the US market as well, a ranking it should decidedly own in 2009. Meanwhile, GM saw its shares fall to their lowest level since 1950, and warned it could run out of cash the first half of 2009 without help. The Detroit auto companies have become so desperate, there have been talks of merging all three into one company, or possibly all three being taken over by Chinese auto firms (something which would have major national security implications.)
So if isn't evil unions or the economy, stupid, what is the real problem with the US auto companies? The Konformist diagnosis isn't an original one, and one we (and others) have been repeating for quite awhile: the Big Three are victims of their own lack of creative thinking. Since the nineties, the US auto companies have had their focus almost solely on the SUV fad as their meal ticket. It wasn't a bad idea: over half their profits have come from light trucks and SUVs, thanks to the vehicle's wider profit margins. "But now," as The Konformist warned five years ago when we gave the BOTM prize to the Hummer, "the US auto industry seems to be falling back in a lazy, self-satisfied pattern. By hiding behind the short-term lack in economy of scales in hybrid technology to justify the non-creation of economy of scales, the Big Three may have made one of the worst decisions in business history. Meantime, GM keeps pumping out those Hummers, which in the short term is indeed profitable. But somehow we suspect that the Hummer will soon resemble another Titanic, as a symbol of the great economic disaster that may soon fall the entire American auto industry if they don't rise to the challenge of the Prius and Insight."
You would think, at this point, we would get some sort of smug satisfaction out of being once again vindicated by history. But frankly, The Konformist doesn't really enjoy having to say "I told you so" repeatedly like we're Jose Canseco discussing steroids, especially in this case where the victims are hard-working American union members. Unfortunately, the numbers pretty much confirm our prediction: SUV sales peaked in 1999, back when the price of oil was $16 a barrel. With the cost of oil passing $140 last summer (and over $4 a gallon at the gas pump) after the 2000-2008 oil price spike, even the most vain of yuppies and soccer moms had enough of the gas-guzzling behemoths. Here are some of the most noted drops in 2008 US sales: at Ford, the SUVs Explorer and Expedition fell 43% and 39%; at Chrysler, the Jeep Grand Cherokee 39% and the Dodge Dakota pickup 48%; and, perhaps most telling, GM's Hummer brand sank at 51%. Even with the recent stunning drop in oil prices, US consumers are decidedly too gun-shy to drink the SUV Kool-Aid anymore.
"How will the economics of hybrids ever match that of the internal combustion engine? We can't afford to subsidize them." This was Wagoner in a 2002 quote from Business Week, a quote that symbolized the view of Detroit executives. The Japanese took another viewpoint, and the results are now in. Put it all together, and there's a reason why Japan is replacing Detroit as the center of the automobile universe. In retrospect, Motown's double down on SUVs is a "IBM letting Microsoft own MS-DOS" kind of business blunder, rivaling as this decade's worst biz decision the AOL-Time Warner merger, Vince McMahon's XFL and Wall Street's plunge into subprime mortgage loans.
Of course, even as Detroit abandon's the SUV craze faster than you could say "Disco sucks!" in 1979, they still have an extremely difficult road ahead. Simply put, US autos are deemed decidedly inferior in quality and reliability compared to those made in Japan by consumers. The difference is highlighted by the view of Japan making more hi-tech, fuel-efficient cars. This is what happens when Japan markets the Prius and other hybrids as the symbol of their creativity. Had GM not squashed the electric EV1 (covered meticulously in the 2006 documentary Who Killed the Electric Car?) they would have something besides the Hummer to showcase as their vision.
The punch line is Detroit is actually making some excellent cars. GM hit a home run with the 2008 Chevy Malibu (named the North American Car of the Year) and the Corvette is still dollar for dollar the best sports car on the planet. The ultra-economical Ford Focus gets 35 MPG. Even the most clueless of US auto companies, Chrysler, has in the PT Cruiser wheels with a cult following usually associated with Apple Computers and The Big Lebowski. (Not to let a good thing be used wisely, Chrysler has decided to kill the Cruiser off.) But these exceptions almost seem to prove the rule, and are deemed too little too late by most American car buyers.
What could change Detroit's image quickly? As usual, Konformist ally Michael Moore presented a pretty good plan last month: making any government bailout of Motown conditional on them producing hybrid and electric cars, as well as mass transit such as trains, buses, subways and light rail. The kind of moves that also would help cure America from its oil addiction while creating millions of blue-collar construction jobs. It's also the kind of move that would be a great change of pace for the Big Three, who long have battled increasing MPG standards and any new environmental laws. (Earlier this year, GM Vice Chairman Bob Lutz dismissed global warming as a “total crock of shit" while speaking to reporters.)
Naturally, the establishment ignored Moore's idea, and instead embraced a different modest proposal: massive layoffs and wage cuts for auto workers, of course. There should be no surprise in this prescription, as it has been the game plan since the 1970s. And no surprise Cerebus, the geniuses who took over Chrysler in 2007, would embrace such a plan, as they already slashed jobs by 24K their first year. (The private equity firm has long been a champion of the "strip and flip" profit strategy: handing out pink slips to "right-size" a korporation for a turnaround sale.) And there should be little surprise GM plans to dump 31,500 jobs (nearly a third of its workforce) and Ford has already eliminated 57,000 North American jobs over the last three years. (GM laid off over 3000 workers on December 23 alone. Merry Christmas.) And little surprise that already UAW contracts cut new worker wages to $14 an hour, or half of what they currently make. (As Business Week remarked, "for the first time since World War I we will have people building automobiles in America who won't be able to afford the vehicles they build.") And none should be surprised that opposition to bailing out Detroit in Congress came not from Democrats protesting the attack on American workers, but Republicans (such as the rabidly anti-union Bob Corker) who felt that workers weren't getting the shaft enough.
How will this all end up? Well, Detroit got its money, but with the expectation they screw the autoworkers yet again. Perversely, the huge number of job cuts, combined with the same fixed cost of retirement benefits to former workers, will only increase the "wage and benefits" costs per labor hour, thus giving right-wing propagandist even more bogus ammo to justify future cuts in jobs in wages. It seems the downward spiral will only continue, unless the working class finally responds in a mass rebellion. Of course, considering the economic crisis Team USA is currently in, anything is possible...
In any case, we salute Rick Wagoner as Beast of the Month. Congratulations, and keep up the great work, Ricky!!!
Sources:
Special thanks to the World Socialist Web Site ( WSWS.org ) for help in this article as a research resource.
Boehlert, Eric. "The Media Myth: Detroit's $70-an-hour Autoworker." Media Matters 25 November 2008 <http://mediamatters.org/columns/200811250012>.
City Crime Rankings 2008-2009. CQ Press 2008 <http://os.cqpress.com/citycrime2008/citycrime2008.htm>.
"Depression Hits Detroit." Prison Planet 23 December 2008 <http://www.prisonplanet.com/depression-hits-detroit-average-home-price-18513-unemployment-rate-21.html>.
"GM Shares Fall to Lowest Level Since 1950." Yahoo Finance 9 October 2008 <http://biz.yahoo.com/rb/081009/business_us_gm_shares.html>.
"GM Warns It Could Run Out Of Cash By 1st Half '09." CNNMoney.com 7 November 2008 <http://money.cnn.com/news/newsfeeds/articles/djf500/200811071240DOWJONESDJONLINE000633_FORTUNE5.htm>.
Goodman, David N. "Motor City Named Nation's Most Dangerous." Yahoo News 19 November 2007 <http://news.yahoo.com/s/ap/20071119/ap_on_re_us/dangerous_cities>.
Hamsher, Jane. "Chinese Want To Buy the Big 3 Automakers." Huffington Post 20 November 2008 <http://www.huffingtonpost.com/jane-hamsher/chinese-want-to-buy-the-b_b_144920.html>.
Krebs, Michelle and Visnic, Bill. "2008 U.S. Auto Sales Are Worst Since 1992." Auto Observer 5 January 2009 <http://www.autoobserver.com/2009/01/2008-us-auto-sales-are-worst-since-1992.html>.
Krolicki, Kevin. "GM Exec Stands by Calling Global Warming a 'Total Crock of Shit.'" Common Dreams 23 February 2008 <http://www.commondreams.org/archive/2008/02/23/7251/>.
Moore, Michael. "Senate to Middle Class: Drop Dead." MichaelMoore.com 12 December 2008 <http://www.michaelmoore.com/words/message/index.php?id=243>.
Moore, Michael. "Saving the Big 3 for You and Me..." MichaelMoore.com 3 December 2008 <http://www.michaelmoore.com/words/message/index.php?id=242>.
Neiwert, David. "Republicans to Detroit: Drop Dead." Crooks and Liars 20 November 2008 <http://crooksandliars.com/david-neiwert/republicans-detroit-drop-dead>.
Ohnsman, Alan and Ramsey, Mike. "Honda Passes Chrysler as Asia Brands Widen U.S. Share." Bloomberg 4 September 2008 <http://www.bloomberg.com/apps/news?pid=20601087&sid=agUdhAPT2KEY>.
Parks, James. "If Auto Industry Goes Bankrupt, Millions of U.S. Jobs Will Be Lost." AFL-CIO 4 December 2008 <http://blog.aflcio.org/2008/12/04/if-auto-industry-goes-bankrupt-millions-of-us-jobs-will-be-lost/>.
"Rainbow PUSH Mobilizes to Save 4 Million Jobs." Rainbow PUSH Coalition 16 December 2008 <http://www.rainbowpush.org/FMPro?-db=rpodata.fp5&-format=rainbowpush%2Fdata06%2Fdetailpress.htm&-lay=main&-sortfield=date&-sortorder=descend&category=press&year=2008&-max=20&-recid=34007&-find>.
"Reports: Chrysler, GM Discuss Merger, Acquisition." Associated Press 11 October 2008 <http://ap.google.com/article/ALeqM5ha9rjtSaQvjt-5p8ej6DXKECN4AQD93O40F00>.
Riechmann, Deb. "Bush Orders Emergency Bailout of the Auto Industry." Yahoo News 20 December 2008 <http://news.yahoo.com/s/ap/20081220/ap_on_go_pr_wh/meltdown_autos>.
Roberts, Paul Craig. "The Crisis Has Hardly Begun." Online Journal 18 November 2008 <http://onlinejournal.com/artman/publish/article_4021.shtml>.
Salmon, Felix. "Chrysler Follows the Strip-and-Flip Playbook." Portfolio.com 1 November 2007 <http://www.portfolio.com/views/blogs/market-movers/2007/11/01/chrysler-follows-the-strip-and-flip-playbook?addComment=true>.
Sorkin, Andrew Ross. "Chrysler and the Fallibility of Private Equity." New York Times 1 November 2007 <http://dealbook.blogs.nytimes.com/2007/11/01/chrysler-and-the-fallibility-of-private-equity/>.
Vlasic, Bill and Fackler, Martin. "Car Slump Jolts Toyota, Halting 70 Years of Gain." New York Times 23 December 2008.
Rick Wagoner
CEO, General Motors
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
For Americans living outside of Detroit worried about the USA falling into a major depression, be thankful at least you aren't a resident of the Motor City: it's already one there. It's bad enough for the city's rep that LA and New York hip-hop passed Motown as ground zero for African-American music. Michigan's great metropolis is now the poorest city in the nation. Unemployment has hit 21 percent and is still rising, while the average price of a home is down to $18,513. Indeed, the economic downturn is so bad, the notoriously violent city is no longer the nation's most dangerous, having been passed by New Orleans and Camden, New Jersey in 2008 thanks to the lack of worthwhile targets for crime. And to top it all off, the Lions went 0-16.
We bring this all up because naming the city's most powerful korporate executive, General Motors CEO and Chairman Rick Wagoner, The Konformist Beast of the Month seems almost like an excessive piling on overkill. After all, yes, Wagoner and his cohorts at Ford and Chrysler, Alan Mulally and Bob Nardelli, may have come off as clueless and arrogant after coming to Congress asking first for $25 billion and then $34 billion. (You gotta admire their balls, though: usually when you flub your first request for a loan, you ask for less the second time, not $9 billion more.) And yes, maybe it does seem appalling after the Wall Street bailout swindle to have another well-connected industry coming to DC begging for a handout while the working class hasn't received a dime in help from the financial crisis. And yes, for all their whining and moaning about needing help, none of the auto execs could give a convincing mea culpa and admit they have no one to blame for their crisis besides themselves.
(And yes, maybe it would have been at least symbolically wiser for the auto executives to have driven to Washington in good old fashion cars made by their companies rather than fly their in private company jets.)
But, on the other hand, the auto industry is a labor-intensive business that does actual manufacturing, unlike the parasitic, leeching deadweight at the core of Wall Street banks. That means if GM, Ford and Chrysler go down, estimates ranging from 3 to 5 million jobs will disappear with them, good quality jobs at that. And that's before any likely domino effect causes even more jobs to vanish. And while the vast majority of Americans are rightfully disgusted at the idea of another bailout after the Wall Street con, even $34 billion for up to 5 million jobs centered in the manufacturing sector is pretty damn cost-effective, and certainly not comparable to the $700 billion bankster black hole. Maybe Wagoner, Mulally and Nardelli are a bunch of incompetents creeps, but American auto workers shouldn't be left holding the bag for their screw-ups.
This is why The Konformist is awarding the prestigious BOTM prize to Wagoner after all. If workers shouldn't receive the punishment for the failures of Wagoner and his pals, neither should he receive a free pass for the plight of the people of Detroit.
And unfortunately, the auto worker ARE receiving the punishment for the auto executive failures, just as they have over the last 30 years. The framing of the debate was staged when right-wing propagandists repeatedly claimed the average worker gets paid $70-80 in wages and benefits. In fact, the average wage is $28: the grossly inflated figure is based on adding payments to retirees to current benefits and dividing the total by the current work force. But the damage has been done: the blame for the automobile industry crisis was laid at least partially on the feet of overpaid union auto workers, and the remedy was massive cuts in pay and benefits along with layoffs. These talking point barely challenged by the so-called Democratic Party. As Michael Moore rightfully put it with his usual share of deserved outrage: "After giving BILLIONS to Wall Street hucksters and criminal investment bankers -- billions with no strings attached and, as we have since learned, no oversight whatsoever -- the Senate decided it is more important to break a union, more important to throw middle class wage earners into the ranks of the working poor than to prevent the total collapse of industrial America."
Okay, so the auto workers are the predictable scapegoat here, but what is the real cause of the auto market crisis? In some ways, it's just a symptom of the bad economy. After all, Toyota announced in December that it would have an operating loss in 2008, the first time it has failed to make a profit since 1938. Meanwhile, Toyota, Honda and Nissan all had drops in sales last year, all averaging over an astounding 30 percent drop in US sales during December alone.
The problem with this explanation is that while the Japanese car companies are indeed slumping, they still are doing way better relative to Detroit. While the Japanese fell from 8 to 15 percent in US sales in 2008, Ford went down 20%, GM 23%, and Chrysler 30%. All told, the Big Three's US market share fell below 50 percent last year. As far as Toyota goes, it finally overtook GM as the world's largest automaker, and solidified its lead over Ford as number two in the US market. Honda nearly overtook Chrysler as number four in the US market as well, a ranking it should decidedly own in 2009. Meanwhile, GM saw its shares fall to their lowest level since 1950, and warned it could run out of cash the first half of 2009 without help. The Detroit auto companies have become so desperate, there have been talks of merging all three into one company, or possibly all three being taken over by Chinese auto firms (something which would have major national security implications.)
So if isn't evil unions or the economy, stupid, what is the real problem with the US auto companies? The Konformist diagnosis isn't an original one, and one we (and others) have been repeating for quite awhile: the Big Three are victims of their own lack of creative thinking. Since the nineties, the US auto companies have had their focus almost solely on the SUV fad as their meal ticket. It wasn't a bad idea: over half their profits have come from light trucks and SUVs, thanks to the vehicle's wider profit margins. "But now," as The Konformist warned five years ago when we gave the BOTM prize to the Hummer, "the US auto industry seems to be falling back in a lazy, self-satisfied pattern. By hiding behind the short-term lack in economy of scales in hybrid technology to justify the non-creation of economy of scales, the Big Three may have made one of the worst decisions in business history. Meantime, GM keeps pumping out those Hummers, which in the short term is indeed profitable. But somehow we suspect that the Hummer will soon resemble another Titanic, as a symbol of the great economic disaster that may soon fall the entire American auto industry if they don't rise to the challenge of the Prius and Insight."
You would think, at this point, we would get some sort of smug satisfaction out of being once again vindicated by history. But frankly, The Konformist doesn't really enjoy having to say "I told you so" repeatedly like we're Jose Canseco discussing steroids, especially in this case where the victims are hard-working American union members. Unfortunately, the numbers pretty much confirm our prediction: SUV sales peaked in 1999, back when the price of oil was $16 a barrel. With the cost of oil passing $140 last summer (and over $4 a gallon at the gas pump) after the 2000-2008 oil price spike, even the most vain of yuppies and soccer moms had enough of the gas-guzzling behemoths. Here are some of the most noted drops in 2008 US sales: at Ford, the SUVs Explorer and Expedition fell 43% and 39%; at Chrysler, the Jeep Grand Cherokee 39% and the Dodge Dakota pickup 48%; and, perhaps most telling, GM's Hummer brand sank at 51%. Even with the recent stunning drop in oil prices, US consumers are decidedly too gun-shy to drink the SUV Kool-Aid anymore.
"How will the economics of hybrids ever match that of the internal combustion engine? We can't afford to subsidize them." This was Wagoner in a 2002 quote from Business Week, a quote that symbolized the view of Detroit executives. The Japanese took another viewpoint, and the results are now in. Put it all together, and there's a reason why Japan is replacing Detroit as the center of the automobile universe. In retrospect, Motown's double down on SUVs is a "IBM letting Microsoft own MS-DOS" kind of business blunder, rivaling as this decade's worst biz decision the AOL-Time Warner merger, Vince McMahon's XFL and Wall Street's plunge into subprime mortgage loans.
Of course, even as Detroit abandon's the SUV craze faster than you could say "Disco sucks!" in 1979, they still have an extremely difficult road ahead. Simply put, US autos are deemed decidedly inferior in quality and reliability compared to those made in Japan by consumers. The difference is highlighted by the view of Japan making more hi-tech, fuel-efficient cars. This is what happens when Japan markets the Prius and other hybrids as the symbol of their creativity. Had GM not squashed the electric EV1 (covered meticulously in the 2006 documentary Who Killed the Electric Car?) they would have something besides the Hummer to showcase as their vision.
The punch line is Detroit is actually making some excellent cars. GM hit a home run with the 2008 Chevy Malibu (named the North American Car of the Year) and the Corvette is still dollar for dollar the best sports car on the planet. The ultra-economical Ford Focus gets 35 MPG. Even the most clueless of US auto companies, Chrysler, has in the PT Cruiser wheels with a cult following usually associated with Apple Computers and The Big Lebowski. (Not to let a good thing be used wisely, Chrysler has decided to kill the Cruiser off.) But these exceptions almost seem to prove the rule, and are deemed too little too late by most American car buyers.
What could change Detroit's image quickly? As usual, Konformist ally Michael Moore presented a pretty good plan last month: making any government bailout of Motown conditional on them producing hybrid and electric cars, as well as mass transit such as trains, buses, subways and light rail. The kind of moves that also would help cure America from its oil addiction while creating millions of blue-collar construction jobs. It's also the kind of move that would be a great change of pace for the Big Three, who long have battled increasing MPG standards and any new environmental laws. (Earlier this year, GM Vice Chairman Bob Lutz dismissed global warming as a “total crock of shit" while speaking to reporters.)
Naturally, the establishment ignored Moore's idea, and instead embraced a different modest proposal: massive layoffs and wage cuts for auto workers, of course. There should be no surprise in this prescription, as it has been the game plan since the 1970s. And no surprise Cerebus, the geniuses who took over Chrysler in 2007, would embrace such a plan, as they already slashed jobs by 24K their first year. (The private equity firm has long been a champion of the "strip and flip" profit strategy: handing out pink slips to "right-size" a korporation for a turnaround sale.) And there should be little surprise GM plans to dump 31,500 jobs (nearly a third of its workforce) and Ford has already eliminated 57,000 North American jobs over the last three years. (GM laid off over 3000 workers on December 23 alone. Merry Christmas.) And little surprise that already UAW contracts cut new worker wages to $14 an hour, or half of what they currently make. (As Business Week remarked, "for the first time since World War I we will have people building automobiles in America who won't be able to afford the vehicles they build.") And none should be surprised that opposition to bailing out Detroit in Congress came not from Democrats protesting the attack on American workers, but Republicans (such as the rabidly anti-union Bob Corker) who felt that workers weren't getting the shaft enough.
How will this all end up? Well, Detroit got its money, but with the expectation they screw the autoworkers yet again. Perversely, the huge number of job cuts, combined with the same fixed cost of retirement benefits to former workers, will only increase the "wage and benefits" costs per labor hour, thus giving right-wing propagandist even more bogus ammo to justify future cuts in jobs in wages. It seems the downward spiral will only continue, unless the working class finally responds in a mass rebellion. Of course, considering the economic crisis Team USA is currently in, anything is possible...
In any case, we salute Rick Wagoner as Beast of the Month. Congratulations, and keep up the great work, Ricky!!!
Sources:
Special thanks to the World Socialist Web Site ( WSWS.org ) for help in this article as a research resource.
Boehlert, Eric. "The Media Myth: Detroit's $70-an-hour Autoworker." Media Matters 25 November 2008 <http://mediamatters.org/columns/200811250012>.
City Crime Rankings 2008-2009. CQ Press 2008 <http://os.cqpress.com/citycrime2008/citycrime2008.htm>.
"Depression Hits Detroit." Prison Planet 23 December 2008 <http://www.prisonplanet.com/depression-hits-detroit-average-home-price-18513-unemployment-rate-21.html>.
"GM Shares Fall to Lowest Level Since 1950." Yahoo Finance 9 October 2008 <http://biz.yahoo.com/rb/081009/business_us_gm_shares.html>.
"GM Warns It Could Run Out Of Cash By 1st Half '09." CNNMoney.com 7 November 2008 <http://money.cnn.com/news/newsfeeds/articles/djf500/200811071240DOWJONESDJONLINE000633_FORTUNE5.htm>.
Goodman, David N. "Motor City Named Nation's Most Dangerous." Yahoo News 19 November 2007 <http://news.yahoo.com/s/ap/20071119/ap_on_re_us/dangerous_cities>.
Hamsher, Jane. "Chinese Want To Buy the Big 3 Automakers." Huffington Post 20 November 2008 <http://www.huffingtonpost.com/jane-hamsher/chinese-want-to-buy-the-b_b_144920.html>.
Krebs, Michelle and Visnic, Bill. "2008 U.S. Auto Sales Are Worst Since 1992." Auto Observer 5 January 2009 <http://www.autoobserver.com/2009/01/2008-us-auto-sales-are-worst-since-1992.html>.
Krolicki, Kevin. "GM Exec Stands by Calling Global Warming a 'Total Crock of Shit.'" Common Dreams 23 February 2008 <http://www.commondreams.org/archive/2008/02/23/7251/>.
Moore, Michael. "Senate to Middle Class: Drop Dead." MichaelMoore.com 12 December 2008 <http://www.michaelmoore.com/words/message/index.php?id=243>.
Moore, Michael. "Saving the Big 3 for You and Me..." MichaelMoore.com 3 December 2008 <http://www.michaelmoore.com/words/message/index.php?id=242>.
Neiwert, David. "Republicans to Detroit: Drop Dead." Crooks and Liars 20 November 2008 <http://crooksandliars.com/david-neiwert/republicans-detroit-drop-dead>.
Ohnsman, Alan and Ramsey, Mike. "Honda Passes Chrysler as Asia Brands Widen U.S. Share." Bloomberg 4 September 2008 <http://www.bloomberg.com/apps/news?pid=20601087&sid=agUdhAPT2KEY>.
Parks, James. "If Auto Industry Goes Bankrupt, Millions of U.S. Jobs Will Be Lost." AFL-CIO 4 December 2008 <http://blog.aflcio.org/2008/12/04/if-auto-industry-goes-bankrupt-millions-of-us-jobs-will-be-lost/>.
"Rainbow PUSH Mobilizes to Save 4 Million Jobs." Rainbow PUSH Coalition 16 December 2008 <http://www.rainbowpush.org/FMPro?-db=rpodata.fp5&-format=rainbowpush%2Fdata06%2Fdetailpress.htm&-lay=main&-sortfield=date&-sortorder=descend&category=press&year=2008&-max=20&-recid=34007&-find>.
"Reports: Chrysler, GM Discuss Merger, Acquisition." Associated Press 11 October 2008 <http://ap.google.com/article/ALeqM5ha9rjtSaQvjt-5p8ej6DXKECN4AQD93O40F00>.
Riechmann, Deb. "Bush Orders Emergency Bailout of the Auto Industry." Yahoo News 20 December 2008 <http://news.yahoo.com/s/ap/20081220/ap_on_go_pr_wh/meltdown_autos>.
Roberts, Paul Craig. "The Crisis Has Hardly Begun." Online Journal 18 November 2008 <http://onlinejournal.com/artman/publish/article_4021.shtml>.
Salmon, Felix. "Chrysler Follows the Strip-and-Flip Playbook." Portfolio.com 1 November 2007 <http://www.portfolio.com/views/blogs/market-movers/2007/11/01/chrysler-follows-the-strip-and-flip-playbook?addComment=true>.
Sorkin, Andrew Ross. "Chrysler and the Fallibility of Private Equity." New York Times 1 November 2007 <http://dealbook.blogs.nytimes.com/2007/11/01/chrysler-and-the-fallibility-of-private-equity/>.
Vlasic, Bill and Fackler, Martin. "Car Slump Jolts Toyota, Halting 70 Years of Gain." New York Times 23 December 2008.
Friday, February 20, 2009
Obama Is Said to Drop Plan for ‘Car Czar’
http://www.nytimes.com/2009/02/16/business/economy/16auto.html
To Fix Detroit, Obama Is Said to Drop Plan for ‘Car Czar’
By BILL VLASIC
February 15, 2009
DETROIT — President Obama has dropped the idea of appointing a single, powerful “car czar” to oversee the revamping of General Motors and Chrysler and will instead keep the politically delicate task in the hands of his most senior economic advisers, a top administration official said Sunday night.
Mr. Obama is designating the Treasury secretary, Timothy F. Geithner, and the chairman of the National Economic Council, Lawrence H. Summers, to oversee a presidential panel on the auto industry. Mr. Geithner will also supervise the $17.4 billion in loan agreements already in place with G.M. and Chrysler, said the official, who insisted on anonymity.
The official also said that Ron Bloom, a restructuring expert who has advised the labor unions in the troubled steel and airline industries, would be named a senior adviser to Treasury on the auto crisis.
The unexpected shift comes as G.M. and Chrysler race to complete broad restructuring plans they must file with the Treasury by Tuesday. The companies’ plans are required to show progress in cutting long-term costs as a condition for keeping their loans.
The administration official said the president was reserving for himself any decision on the viability of G.M. and Chrysler, both of which came close to bankruptcy before receiving federal aid two months ago.
One of President Obama’s top advisers said Sunday that the administration had not ruled out a government-backed bankruptcy as a means to overhaul the automakers.
“We’re going to need a restructuring of these companies,” the adviser, David Axelrod, said on “Meet the Press” on NBC. He added that a turnaround of the companies would “require sacrifice not just from the auto workers but also from creditors, from shareholders and the executives who run the company.”
The automakers had been expecting the appointment of a car czar to break the logjam of negotiations with the United Auto Workers over the finances of a retiree health care trust, and with bondholders about reducing the companies’ debt.
Mr. Bloom is known for bringing his Wall Street experience as an investment banker to an advisory role as the “in-house” banker for the steel workers’ union. With the auto union locking horns with bondholders in the G.M. revamping deliberations, Mr. Bloom appears to bring credibility with both the union and the debtors. Mr. Bloom could not be reached for comment Sunday night.
Another senior administration official said that Mr. Obama had considered appointing a car czar, and among those considered for the job was the private equity executive Steven Rattner. It was not clear why the administration changed course or whether Mr. Rattner would have a role on the task force.
The panel, called the Presidential Task Force on Autos, will draw officials from several agencies including the departments of Treasury, labor, transportation, commerce and energy, according to the administration official.
Many members of the task force have already been working closely with G.M. and Chrysler on the viability plans they are preparing for the government.
G.M. and Chrysler are both expected to request more loans to stay solvent during what is shaping up as another miserable year for auto sales.
Chrysler’s chairman, Robert L. Nardelli, has said his company needs another $3 billion in addition to the $4 billion loan it received in January.
G.M. originally asked for $18 billion in aid in December. G.M. has borrowed $9.4 billion so far and is scheduled to receive another $4 billion, if the Treasury is satisfied with its revamping plan.
G.M. said in a statement that it welcomed the new task force and that it looked forward to sharing its plan “to restore our company to viability and to meet the requirements of its loan agreements.”
Representatives of Chrysler could not be reached for comment on Sunday night.
The administration official who disclosed the change in Mr. Obama’s plans for oversight of the auto industry said the group would review the companies’ submissions for a week or two before responding publicly. Until then, the auto makers are expected to continue talks with the union and other stakeholders.
On Sunday afternoon, G.M. and the U.A.W. resumed discussions in Detroit about reducing the company’s labor costs, a person with direct knowledge of the talks said. This person, who spoke on condition of anonymity because the discussions are private, characterized the talks Sunday evening as “intense” but did not indicate that an agreement was imminent.
The U.A.W. had walked away from the bargaining table late Friday as the two sides clashed over how to cover retiree health care costs.
U.A.W. leaders in December agreed to help the automakers by delaying when the companies are required to make multibillion-dollar payments into a new trust fund designed to pay for retiree health coverage.
The Ford Motor Company is not taking federal aid, and therefore does not need to submit plans for approval. But Ford, which lost $14.6 billion in 2008, the most in its history, is expected to ask the U.A.W. for whatever concessions are granted to G.M. and Chrysler.
Both G.M. and Chrysler are likely to outline deep cuts in jobs, plants and models in their restructuring plans. One G.M. executive said the automaker is proposing a much smaller company with fewer brands and far fewer people.
G.M. and Chrysler recently extended buyout and early retirement offers to nearly all of their 90,600 hourly workers as they try to eliminate factory jobs and replace older workers making about $28 an hour with new hires who can be paid half as much.
G.M. announced plans last week to cut 10,000 white-collar jobs worldwide, including 3,400 in the United States. It said that salaries for those who remain on staff would be cut by as much as 10 percent through at least the end of 2009.
Over all, automakers are expected to sell between 10 million and 11 million vehicles in the United States this year, far below the 16.2 million they sold in 2007. G.M. said last week that the two-year drop is roughly equal to the capacity of 24 assembly plants.
Jackie Calmes contributed reporting from Washington, and Nick Bunkley from Detroit.
A version of this article appeared in print on February 16, 2009, on page A1 of the New York edition.
To Fix Detroit, Obama Is Said to Drop Plan for ‘Car Czar’
By BILL VLASIC
February 15, 2009
DETROIT — President Obama has dropped the idea of appointing a single, powerful “car czar” to oversee the revamping of General Motors and Chrysler and will instead keep the politically delicate task in the hands of his most senior economic advisers, a top administration official said Sunday night.
Mr. Obama is designating the Treasury secretary, Timothy F. Geithner, and the chairman of the National Economic Council, Lawrence H. Summers, to oversee a presidential panel on the auto industry. Mr. Geithner will also supervise the $17.4 billion in loan agreements already in place with G.M. and Chrysler, said the official, who insisted on anonymity.
The official also said that Ron Bloom, a restructuring expert who has advised the labor unions in the troubled steel and airline industries, would be named a senior adviser to Treasury on the auto crisis.
The unexpected shift comes as G.M. and Chrysler race to complete broad restructuring plans they must file with the Treasury by Tuesday. The companies’ plans are required to show progress in cutting long-term costs as a condition for keeping their loans.
The administration official said the president was reserving for himself any decision on the viability of G.M. and Chrysler, both of which came close to bankruptcy before receiving federal aid two months ago.
One of President Obama’s top advisers said Sunday that the administration had not ruled out a government-backed bankruptcy as a means to overhaul the automakers.
“We’re going to need a restructuring of these companies,” the adviser, David Axelrod, said on “Meet the Press” on NBC. He added that a turnaround of the companies would “require sacrifice not just from the auto workers but also from creditors, from shareholders and the executives who run the company.”
The automakers had been expecting the appointment of a car czar to break the logjam of negotiations with the United Auto Workers over the finances of a retiree health care trust, and with bondholders about reducing the companies’ debt.
Mr. Bloom is known for bringing his Wall Street experience as an investment banker to an advisory role as the “in-house” banker for the steel workers’ union. With the auto union locking horns with bondholders in the G.M. revamping deliberations, Mr. Bloom appears to bring credibility with both the union and the debtors. Mr. Bloom could not be reached for comment Sunday night.
Another senior administration official said that Mr. Obama had considered appointing a car czar, and among those considered for the job was the private equity executive Steven Rattner. It was not clear why the administration changed course or whether Mr. Rattner would have a role on the task force.
The panel, called the Presidential Task Force on Autos, will draw officials from several agencies including the departments of Treasury, labor, transportation, commerce and energy, according to the administration official.
Many members of the task force have already been working closely with G.M. and Chrysler on the viability plans they are preparing for the government.
G.M. and Chrysler are both expected to request more loans to stay solvent during what is shaping up as another miserable year for auto sales.
Chrysler’s chairman, Robert L. Nardelli, has said his company needs another $3 billion in addition to the $4 billion loan it received in January.
G.M. originally asked for $18 billion in aid in December. G.M. has borrowed $9.4 billion so far and is scheduled to receive another $4 billion, if the Treasury is satisfied with its revamping plan.
G.M. said in a statement that it welcomed the new task force and that it looked forward to sharing its plan “to restore our company to viability and to meet the requirements of its loan agreements.”
Representatives of Chrysler could not be reached for comment on Sunday night.
The administration official who disclosed the change in Mr. Obama’s plans for oversight of the auto industry said the group would review the companies’ submissions for a week or two before responding publicly. Until then, the auto makers are expected to continue talks with the union and other stakeholders.
On Sunday afternoon, G.M. and the U.A.W. resumed discussions in Detroit about reducing the company’s labor costs, a person with direct knowledge of the talks said. This person, who spoke on condition of anonymity because the discussions are private, characterized the talks Sunday evening as “intense” but did not indicate that an agreement was imminent.
The U.A.W. had walked away from the bargaining table late Friday as the two sides clashed over how to cover retiree health care costs.
U.A.W. leaders in December agreed to help the automakers by delaying when the companies are required to make multibillion-dollar payments into a new trust fund designed to pay for retiree health coverage.
The Ford Motor Company is not taking federal aid, and therefore does not need to submit plans for approval. But Ford, which lost $14.6 billion in 2008, the most in its history, is expected to ask the U.A.W. for whatever concessions are granted to G.M. and Chrysler.
Both G.M. and Chrysler are likely to outline deep cuts in jobs, plants and models in their restructuring plans. One G.M. executive said the automaker is proposing a much smaller company with fewer brands and far fewer people.
G.M. and Chrysler recently extended buyout and early retirement offers to nearly all of their 90,600 hourly workers as they try to eliminate factory jobs and replace older workers making about $28 an hour with new hires who can be paid half as much.
G.M. announced plans last week to cut 10,000 white-collar jobs worldwide, including 3,400 in the United States. It said that salaries for those who remain on staff would be cut by as much as 10 percent through at least the end of 2009.
Over all, automakers are expected to sell between 10 million and 11 million vehicles in the United States this year, far below the 16.2 million they sold in 2007. G.M. said last week that the two-year drop is roughly equal to the capacity of 24 assembly plants.
Jackie Calmes contributed reporting from Washington, and Nick Bunkley from Detroit.
A version of this article appeared in print on February 16, 2009, on page A1 of the New York edition.
Sunday, January 25, 2009
Chrysler's Italian job
http://money.cnn.com/2009/01/20/autos/chrysler_fiat/
Chrysler's Italian job
Italian automaker Fiat, which has recently come through a makeover of its own, could be a good fit for the struggling Chrysler.
Peter Valdes-Dapena
January 20, 2009
NEW YORK (CNNMoney.com) -- For Chrysler, the big benefit from its new alliance with Fiat might be public perception: The automaker, under pressure by the U.S. government to restructure, is taking action to help itself.
An alliance with Fiat holds the promise of more attractive small, fuel-efficient cars for Chrysler down the road as well as better access to important global markets. Up to now, Chrysler hasn't been competitive in either area.
In the short term, with a Feb. 17 deadline looming for Chrysler to submit a workable turnaround plan, this plan may be key to helping the carmaker hold on to $4 billion in federal loan money.
"It makes their chances for viability much better," said George Magliano, an auto industry analyst with consultants IHS Global Insight. "And it might get the government to fund more cash into Chrysler."
That short-term benefit is probably the first thing on Chrysler executives' minds, said Jim Hossack of industry consultancy AutoPacific.
"Your first goal when you come in each day is to survive the day," he said.
Neither Chrysler nor Fiat responded to requests for comment beyond written corporate statements.
On Tuesday, the companies announced the basic terms of a tentative "global strategic alliance": Fiat, Italy's largest automaker, will provide no cash of its own to the struggling American automaker. Instead, in exchange for a 35% equity stake, Fiat will provide Chrysler with "technology," including the engineering underlying some of Fiat's small cars, which have proven popular in Europe.
"They've got some beautiful stuff over there," said Magliano, "and a lot of these things can be sold in the U.S."
Unlike Chrysler, Fiat is known to specialize in small, fuel-efficient cars that are popular in Europe. But the sort of "platform sharing" envisioned for Chrysler and Fiat takes years to bear fruit, so don't expect to see a Dodge version of the Fiat Punto at your Chrysler dealer anytime soon, said Magliano.
"It's difficult to have cross-cultural alliances like this," Magliano said, adding that language and cultural differences, as much as anything else, can hamper progress.
Besides products, Chrysler will also get the attention of Fiat executives, individuals who have themselves just pushed through an impressive turnaround over the past few years.
In 2004, Fiat lost more than $1 billion, according to a 2007 Fortune magazine report. The year after that, General Motors (GM, Fortune 500) spent $2 billion just to get out of an alliance it had formed with Fiat in 2000.
Despite a global downturn, Fiat earned $4 million more this year than last, according to Reuters, including results from the company's tractor and truck units. Fiat is now considered a relatively strong automaker partly on the basis of improved product designs and quality, analysts said.
A taste of Italy
For its part, Chrysler has promised to assist Fiat with bringing its brands to the U.S. market. Only Ferrari and Maserati are currently sold here and Fiat has long wanted to bring the luxury Alfa Romeo name back to the U.S.
In addition to those brands and the mass-market Fiat brand, the Italian carmaker also makes and sells the Lancia brand.
In order to move Fiat small cars more quickly into its dealerships, Chrysler could forgo restyling them as Chrysler or Dodge products, said David Soya, editorial director for auto industry news site WardsAuto.com.
In the short term, Magliano suggested that Chrysler and Fiat could make minor changes to Fiat products - just enough to meet U.S. crash safety and emissions standards - and simply sell them through the Chrysler, Dodge and Jeep dealer network under the original Fiat name.
Fiat's 500 subcompact "city car" has been a hit in Europe. Taking a cue from BMW's success with the retro-styled Mini Cooper, the current Fiat 500 is clearly an updated remake of the 1960s classic. (The classic 500 is probably best known to Americans in the role of Luigi the tire salesman in the 2006 Pixar movie "Cars.")
But Hossack thinks the 500 is probably too small for American tastes. "A relatively large car for Fiat may be appropriate for Chrysler here," he said, suggesting that something like the mid-sized Bravo or the mid-sized Grand Punto might stand a better chance here.
Fiat could also use some of Chrysler's under-utilized manufacturing facilities to build its products here. That would help Fiat by avoiding monetary exchange-rate problems that have hampered other European automakers that sell cars in the United States but don't manufacture them here.
Quid pro quo
For its part, Fiat could help Chrysler move more strongly into overseas markets. Chrysler relies much more heavily on the U.S. market than do its domestic rivals Ford and GM. That has meant that Chrysler has suffered even more as the domestic auto market has shrunk and shifted away from high-profit trucks and SUVs recently.
Fiat's greatest benefit to Chrysler, in terms of overseas growth, will be in emerging markets like South America and Asia, said Soya. That's really where a car like the tiny 500 could help.
"Chrysler has expressed interest in having a car that size for emerging markets," he said.
Deals like this will become more common in the years ahead, said Paul McCarthy, head of PriceWaterhouseCoopers automotive practice. Merger and alliance activity in the auto industry is cyclical he said, and surges whenever there's a contraction.
"After that, we have a period of dis-integration," he said. That's the sort of thing that led to Chrysler's split-off from Daimler and GM giving up its share of Fiat.
Both Fiat and Chrysler will likely proceed with caution this time, said Magliano.
"Both of these guys have been burned in the past with relationships," said Hossack.
Chrysler's Italian job
Italian automaker Fiat, which has recently come through a makeover of its own, could be a good fit for the struggling Chrysler.
Peter Valdes-Dapena
January 20, 2009
NEW YORK (CNNMoney.com) -- For Chrysler, the big benefit from its new alliance with Fiat might be public perception: The automaker, under pressure by the U.S. government to restructure, is taking action to help itself.
An alliance with Fiat holds the promise of more attractive small, fuel-efficient cars for Chrysler down the road as well as better access to important global markets. Up to now, Chrysler hasn't been competitive in either area.
In the short term, with a Feb. 17 deadline looming for Chrysler to submit a workable turnaround plan, this plan may be key to helping the carmaker hold on to $4 billion in federal loan money.
"It makes their chances for viability much better," said George Magliano, an auto industry analyst with consultants IHS Global Insight. "And it might get the government to fund more cash into Chrysler."
That short-term benefit is probably the first thing on Chrysler executives' minds, said Jim Hossack of industry consultancy AutoPacific.
"Your first goal when you come in each day is to survive the day," he said.
Neither Chrysler nor Fiat responded to requests for comment beyond written corporate statements.
On Tuesday, the companies announced the basic terms of a tentative "global strategic alliance": Fiat, Italy's largest automaker, will provide no cash of its own to the struggling American automaker. Instead, in exchange for a 35% equity stake, Fiat will provide Chrysler with "technology," including the engineering underlying some of Fiat's small cars, which have proven popular in Europe.
"They've got some beautiful stuff over there," said Magliano, "and a lot of these things can be sold in the U.S."
Unlike Chrysler, Fiat is known to specialize in small, fuel-efficient cars that are popular in Europe. But the sort of "platform sharing" envisioned for Chrysler and Fiat takes years to bear fruit, so don't expect to see a Dodge version of the Fiat Punto at your Chrysler dealer anytime soon, said Magliano.
"It's difficult to have cross-cultural alliances like this," Magliano said, adding that language and cultural differences, as much as anything else, can hamper progress.
Besides products, Chrysler will also get the attention of Fiat executives, individuals who have themselves just pushed through an impressive turnaround over the past few years.
In 2004, Fiat lost more than $1 billion, according to a 2007 Fortune magazine report. The year after that, General Motors (GM, Fortune 500) spent $2 billion just to get out of an alliance it had formed with Fiat in 2000.
Despite a global downturn, Fiat earned $4 million more this year than last, according to Reuters, including results from the company's tractor and truck units. Fiat is now considered a relatively strong automaker partly on the basis of improved product designs and quality, analysts said.
A taste of Italy
For its part, Chrysler has promised to assist Fiat with bringing its brands to the U.S. market. Only Ferrari and Maserati are currently sold here and Fiat has long wanted to bring the luxury Alfa Romeo name back to the U.S.
In addition to those brands and the mass-market Fiat brand, the Italian carmaker also makes and sells the Lancia brand.
In order to move Fiat small cars more quickly into its dealerships, Chrysler could forgo restyling them as Chrysler or Dodge products, said David Soya, editorial director for auto industry news site WardsAuto.com.
In the short term, Magliano suggested that Chrysler and Fiat could make minor changes to Fiat products - just enough to meet U.S. crash safety and emissions standards - and simply sell them through the Chrysler, Dodge and Jeep dealer network under the original Fiat name.
Fiat's 500 subcompact "city car" has been a hit in Europe. Taking a cue from BMW's success with the retro-styled Mini Cooper, the current Fiat 500 is clearly an updated remake of the 1960s classic. (The classic 500 is probably best known to Americans in the role of Luigi the tire salesman in the 2006 Pixar movie "Cars.")
But Hossack thinks the 500 is probably too small for American tastes. "A relatively large car for Fiat may be appropriate for Chrysler here," he said, suggesting that something like the mid-sized Bravo or the mid-sized Grand Punto might stand a better chance here.
Fiat could also use some of Chrysler's under-utilized manufacturing facilities to build its products here. That would help Fiat by avoiding monetary exchange-rate problems that have hampered other European automakers that sell cars in the United States but don't manufacture them here.
Quid pro quo
For its part, Fiat could help Chrysler move more strongly into overseas markets. Chrysler relies much more heavily on the U.S. market than do its domestic rivals Ford and GM. That has meant that Chrysler has suffered even more as the domestic auto market has shrunk and shifted away from high-profit trucks and SUVs recently.
Fiat's greatest benefit to Chrysler, in terms of overseas growth, will be in emerging markets like South America and Asia, said Soya. That's really where a car like the tiny 500 could help.
"Chrysler has expressed interest in having a car that size for emerging markets," he said.
Deals like this will become more common in the years ahead, said Paul McCarthy, head of PriceWaterhouseCoopers automotive practice. Merger and alliance activity in the auto industry is cyclical he said, and surges whenever there's a contraction.
"After that, we have a period of dis-integration," he said. That's the sort of thing that led to Chrysler's split-off from Daimler and GM giving up its share of Fiat.
Both Fiat and Chrysler will likely proceed with caution this time, said Magliano.
"Both of these guys have been burned in the past with relationships," said Hossack.
Saturday, January 10, 2009
2008 Job Losses Probably Worst Since 1945
http://www.bloomberg.com/apps/news?pid=20601087&sid=aboQfkK5Tu_U
2008 Job Losses Probably Worst Since 1945: U.S. Economy Preview
By Shobhana Chandra
Jan. 4 (Bloomberg) -- The U.S. economy probably lost more jobs in 2008 than in any year since the end of World War II as firings rippled from homebuilders and automakers to banks and retailers, a government report may show this week.
Payrolls fell 500,000 in December, bringing last year’s decline to 2.4 million, the most since 1945, according to the median estimate of economists surveyed by Bloomberg News ahead of Labor Department figures due Jan. 9. The unemployment rate likely jumped to the highest level since 1993.
The figures will underscore the urgency behind President- elect Barack Obama’s plan to pass a stimulus package that will create jobs and mitigate the recession, already the longest in a quarter century. Other reports may show slumps in housing, manufacturing and service industries deepened at the end of last year, setting the stage for more weakness in 2009.
“We’re continuing to lose massive amounts of jobs,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. “The negative momentum carrying over into the first half of 2009 will hold down the economy regardless of policy.”
The jobless rate probably climbed to 7 percent in December from 6.7 percent the prior month, according to the survey median.
Manufacturers probably cut 103,000 workers from payrolls, the report may also show. Factories, which make up 12 percent of the economy, shrank in December at the fastest pace in 28 years as new orders for products from cars to furniture reached the lowest level since records began in 1948, the Institute for Supply Management reported last week.
Auto Bailout
The Bush administration agreed last month to give General Motors Corp. and Chrysler LLC $13.4 billion in federal loans to avert bankruptcy. GM, whose shares slid 87 percent in 2008 -- the most among the 30 companies in the Dow Jones Industrial Average - - and Chrysler probably led a drop in December U.S. auto sales that capped the industry’s worst year since 1992, according to the average forecast of analysts surveyed.
The Tempe, Arizona-based ISM’s report on services, covering the rest of the economy, is due Jan. 6. That index likely dropped in December to the lowest level since records began in 1997, the survey showed, as Americans cut back during what may have been the worst holiday shopping season in four decades of record keeping.
Electronic Arts Inc., the second-biggest video-game publisher, last month boosted planned job cuts to 1,000, or 10 percent of its workforce, and said it will consolidate or close at least nine studio and publishing locations.
“Labor-market conditions have deteriorated,” Federal Reserve policy makers said last month when they cut the benchmark interest-rate target to as low as zero. The central bank also has said it will buy debt as the next step in combating the recession, now in its 13th month. Minutes of the Fed’s Dec. 16 meeting will be released on Jan. 6.
Obama’s Plan
Obama has pledged to invest in roads, schools and the U.S. energy network, something akin to the 1950s-era interstate highway construction boom. The package, aiming to create or save 3 million jobs, may be worth as much as $850 billion.
The economy is still weighed down by housing, which is sliding into a fourth year of decline as foreclosures mount, prices drop and some buyers have trouble getting financing.
Fewer Americans signed contracts to buy previously owned homes in November, a report from the National Association of Realtors on Jan. 6 may show. A decline would be the fourth in the past five months.
Tomorrow, a Commerce Department report may show construction spending fell 1.3 percent in November after dropping 1.2 percent the prior month, according to the median forecast.
Another Commerce report the following day may show orders placed with American factories fell 2.3 percent in November after a 5.1 percent October drop that was the biggest in eight years, the survey showed.
2008 Job Losses Probably Worst Since 1945: U.S. Economy Preview
By Shobhana Chandra
Jan. 4 (Bloomberg) -- The U.S. economy probably lost more jobs in 2008 than in any year since the end of World War II as firings rippled from homebuilders and automakers to banks and retailers, a government report may show this week.
Payrolls fell 500,000 in December, bringing last year’s decline to 2.4 million, the most since 1945, according to the median estimate of economists surveyed by Bloomberg News ahead of Labor Department figures due Jan. 9. The unemployment rate likely jumped to the highest level since 1993.
The figures will underscore the urgency behind President- elect Barack Obama’s plan to pass a stimulus package that will create jobs and mitigate the recession, already the longest in a quarter century. Other reports may show slumps in housing, manufacturing and service industries deepened at the end of last year, setting the stage for more weakness in 2009.
“We’re continuing to lose massive amounts of jobs,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. “The negative momentum carrying over into the first half of 2009 will hold down the economy regardless of policy.”
The jobless rate probably climbed to 7 percent in December from 6.7 percent the prior month, according to the survey median.
Manufacturers probably cut 103,000 workers from payrolls, the report may also show. Factories, which make up 12 percent of the economy, shrank in December at the fastest pace in 28 years as new orders for products from cars to furniture reached the lowest level since records began in 1948, the Institute for Supply Management reported last week.
Auto Bailout
The Bush administration agreed last month to give General Motors Corp. and Chrysler LLC $13.4 billion in federal loans to avert bankruptcy. GM, whose shares slid 87 percent in 2008 -- the most among the 30 companies in the Dow Jones Industrial Average - - and Chrysler probably led a drop in December U.S. auto sales that capped the industry’s worst year since 1992, according to the average forecast of analysts surveyed.
The Tempe, Arizona-based ISM’s report on services, covering the rest of the economy, is due Jan. 6. That index likely dropped in December to the lowest level since records began in 1997, the survey showed, as Americans cut back during what may have been the worst holiday shopping season in four decades of record keeping.
Electronic Arts Inc., the second-biggest video-game publisher, last month boosted planned job cuts to 1,000, or 10 percent of its workforce, and said it will consolidate or close at least nine studio and publishing locations.
“Labor-market conditions have deteriorated,” Federal Reserve policy makers said last month when they cut the benchmark interest-rate target to as low as zero. The central bank also has said it will buy debt as the next step in combating the recession, now in its 13th month. Minutes of the Fed’s Dec. 16 meeting will be released on Jan. 6.
Obama’s Plan
Obama has pledged to invest in roads, schools and the U.S. energy network, something akin to the 1950s-era interstate highway construction boom. The package, aiming to create or save 3 million jobs, may be worth as much as $850 billion.
The economy is still weighed down by housing, which is sliding into a fourth year of decline as foreclosures mount, prices drop and some buyers have trouble getting financing.
Fewer Americans signed contracts to buy previously owned homes in November, a report from the National Association of Realtors on Jan. 6 may show. A decline would be the fourth in the past five months.
Tomorrow, a Commerce Department report may show construction spending fell 1.3 percent in November after dropping 1.2 percent the prior month, according to the median forecast.
Another Commerce report the following day may show orders placed with American factories fell 2.3 percent in November after a 5.1 percent October drop that was the biggest in eight years, the survey showed.
Friday, December 26, 2008
Bush orders emergency bailout of the auto industry
http://news.yahoo.com/s/ap/20081220/ap_on_go_pr_wh/meltdown_autos
Bush orders emergency bailout of the auto industry
Deb Riechmann, Associated Press Writer
12-20-8
WASHINGTON – Citing imminent danger to the national economy, President Bush ordered an emergency bailout of the U.S. auto industry Friday, offering $17.4 billion in rescue loans and demanding tough concessions from the deeply troubled carmakers and their workers. Detroit's Big Three cheered the action and vowed to rebuild their once-mighty industry, though they acknowledged the road would be anything but smooth as they fight their way back from the brink of bankruptcy.
The autoworkers union complained the deal was too harsh on its members, while Bush's fellow Republicans in Congress said it was simply bad business to bail out yet another big industry.
Bush, who signed the massive $700 billion rescue for financial institutions only this fall, said he was reluctant to approve yet another government bailout of private business. But he said that allowing the massive auto industry to collapse in the middle of what is already a severe downturn "could send our suffering economy into a deeper and longer recession."
Speaking at the White House, he also said he didn't want to "leave the next president to confront the demise of a major American industry in his first days of office."
President-elect Barack Obama, who takes office a month from Saturday, praised the administration action but warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it."
Obama will be free to reopen the arrangement from the government's side if he chooses, and the head of the United Auto Workers said the union would be appealing to the new president and the strongly Democratic new Congress on that subject.
Obama, commenting in Chicago as he named more economic Cabinet members, was noncommittal on possible changes. But he said he would "make sure that when we see a final restructuring package that it's not just workers who are bearing the brunt."
Stock prices rallied on Wall Street after Bush's announcement but faded late in the day, and the Dow Jones industrials declined 25.88 points. GM shares, however, jumped 22.7 percent and Ford shares 3.9 percent. Chrysler is not publicly traded.
Some $13.4 billion of the rescue money will be available this month and next — $9.4 billion of it for General Motors Corp. and $4 billion for Chrysler LLC, the two auto giants that have said they could be facing bankruptcy soon without government help. GM is slated to receive the remaining $4 billion in loans after more money is released from the financial rescue account. Ford Motor Co. says it doesn't need federal cash now but would be badly damaged if one or both of the other two went under.
Under terms of the loans, the government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.
And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers can receive about 95 percent of their pay and benefits for years. Early this month, the UAW agreed to suspend the program.
Underscoring the automakers' peril — and how close the bailout is cutting to the edge — GM Chief Financial Officer Ray Young said the company expects to have the first money from the government by Dec. 29, just in time to pay suppliers.
CEO Rick Wagoner said, "The timing was specifically aligned with the timing we said we needed in order to make our payments on a timely basis, so we're right on schedule there."
The deal also calls for two-thirds of the automakers' debts to be converted to stock in the companies.
Also, Chrysler, GM and Ford were to pay billions into UAW-administered trust funds that will take over paying health care bills for hundreds of thousands of retirees on Jan. 1, 2010. The trusts, called Voluntary Employees Beneficiary Associations, were to last at least 80 years.
But if half the cash is swapped for stock, the trusts might not last that long if the value of the shares declines. Swapping stock for cash payments helps the cash-starved companies, though, because they have more money to spend on operations.
Bondholders may be left with a take-it-or-leave it proposition with the government requiring them to exchange two-thirds of their holdings for stock. But they, too, could try to negotiate with the Obama administration, said Pete Hastings, an auto industry corporate bonds analyst with Morgan Keegan & Co. in Memphis, Tenn.
If they don't take the deal, GM could wind up in bankruptcy and the bondholders would get little or nothing, Hastings said.
Though auto stocks rose on Friday, the companies' stockholders aren't out of the woods.
Provisions in the bailout agreement will force GM to produce more shares, diluting the value of its stock several times over, said Efraim Levy, a senior auto industry analyst with Standard & Poor's.
There's no way the automakers will be profitable next year, said Levy. Things could be different in 2010 if the market rebounds and cost cuts kick in, he said.
Meanwhile, Treasury Secretary Henry Paulson said Friday that Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total.
If the carmakers fail to prove viability by March 31, they will be required to repay the loans, which they would find all but impossible. A firm will be deemed viable only if it can show positive cash flow and can fully repay the government loans.
Friday's rescue plan retains the idea of a "car czar" to make sure the companies are keeping their promises and moving toward long-term viability.
The short-term overseer will be Paulson. But the White House deputy chief of staff, Joel Kaplan, said that if the Obama team wants someone else installed to bridge the administrations, Bush is open to that.
The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for their vehicles.
The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories — many for the entire month of January — to cut vehicle production.
Chrysler CEO Bob Nardelli said the initial injection of capital would help the company get through its cash crisis and give it a push toward eventually returning to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.
Though Ford didn't seek short-term aid, company President and CEO Alan Mulally said, "The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy."
House Republican leader John Boehner called the plan "regrettable." He said that granting loans for automakers was never the intention when Congress passed the $700 billion plan to rescue financial institutions and that the new plan "has failed both autoworkers and taxpayers."
Rep. Jeb Hensarling, R-Texas, chairman of the congressional oversight panel for the Wall Street rescue program, said a Chapter 11 bankruptcy reorganization, not loans rewarding decades of mismanagement, would have been a better decision.
Grover Norquist, president of the Americans for Tax Reform, sent a one-word letter to Bush that said in huge letters: "No."
___
AP Auto Writer Tom Krisher reported from Detroit. AP Writer Kimberly S. Johnson contributed from Detroit.
Bush orders emergency bailout of the auto industry
Deb Riechmann, Associated Press Writer
12-20-8
WASHINGTON – Citing imminent danger to the national economy, President Bush ordered an emergency bailout of the U.S. auto industry Friday, offering $17.4 billion in rescue loans and demanding tough concessions from the deeply troubled carmakers and their workers. Detroit's Big Three cheered the action and vowed to rebuild their once-mighty industry, though they acknowledged the road would be anything but smooth as they fight their way back from the brink of bankruptcy.
The autoworkers union complained the deal was too harsh on its members, while Bush's fellow Republicans in Congress said it was simply bad business to bail out yet another big industry.
Bush, who signed the massive $700 billion rescue for financial institutions only this fall, said he was reluctant to approve yet another government bailout of private business. But he said that allowing the massive auto industry to collapse in the middle of what is already a severe downturn "could send our suffering economy into a deeper and longer recession."
Speaking at the White House, he also said he didn't want to "leave the next president to confront the demise of a major American industry in his first days of office."
President-elect Barack Obama, who takes office a month from Saturday, praised the administration action but warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it."
Obama will be free to reopen the arrangement from the government's side if he chooses, and the head of the United Auto Workers said the union would be appealing to the new president and the strongly Democratic new Congress on that subject.
Obama, commenting in Chicago as he named more economic Cabinet members, was noncommittal on possible changes. But he said he would "make sure that when we see a final restructuring package that it's not just workers who are bearing the brunt."
Stock prices rallied on Wall Street after Bush's announcement but faded late in the day, and the Dow Jones industrials declined 25.88 points. GM shares, however, jumped 22.7 percent and Ford shares 3.9 percent. Chrysler is not publicly traded.
Some $13.4 billion of the rescue money will be available this month and next — $9.4 billion of it for General Motors Corp. and $4 billion for Chrysler LLC, the two auto giants that have said they could be facing bankruptcy soon without government help. GM is slated to receive the remaining $4 billion in loans after more money is released from the financial rescue account. Ford Motor Co. says it doesn't need federal cash now but would be badly damaged if one or both of the other two went under.
Under terms of the loans, the government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.
And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers can receive about 95 percent of their pay and benefits for years. Early this month, the UAW agreed to suspend the program.
Underscoring the automakers' peril — and how close the bailout is cutting to the edge — GM Chief Financial Officer Ray Young said the company expects to have the first money from the government by Dec. 29, just in time to pay suppliers.
CEO Rick Wagoner said, "The timing was specifically aligned with the timing we said we needed in order to make our payments on a timely basis, so we're right on schedule there."
The deal also calls for two-thirds of the automakers' debts to be converted to stock in the companies.
Also, Chrysler, GM and Ford were to pay billions into UAW-administered trust funds that will take over paying health care bills for hundreds of thousands of retirees on Jan. 1, 2010. The trusts, called Voluntary Employees Beneficiary Associations, were to last at least 80 years.
But if half the cash is swapped for stock, the trusts might not last that long if the value of the shares declines. Swapping stock for cash payments helps the cash-starved companies, though, because they have more money to spend on operations.
Bondholders may be left with a take-it-or-leave it proposition with the government requiring them to exchange two-thirds of their holdings for stock. But they, too, could try to negotiate with the Obama administration, said Pete Hastings, an auto industry corporate bonds analyst with Morgan Keegan & Co. in Memphis, Tenn.
If they don't take the deal, GM could wind up in bankruptcy and the bondholders would get little or nothing, Hastings said.
Though auto stocks rose on Friday, the companies' stockholders aren't out of the woods.
Provisions in the bailout agreement will force GM to produce more shares, diluting the value of its stock several times over, said Efraim Levy, a senior auto industry analyst with Standard & Poor's.
There's no way the automakers will be profitable next year, said Levy. Things could be different in 2010 if the market rebounds and cost cuts kick in, he said.
Meanwhile, Treasury Secretary Henry Paulson said Friday that Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total.
If the carmakers fail to prove viability by March 31, they will be required to repay the loans, which they would find all but impossible. A firm will be deemed viable only if it can show positive cash flow and can fully repay the government loans.
Friday's rescue plan retains the idea of a "car czar" to make sure the companies are keeping their promises and moving toward long-term viability.
The short-term overseer will be Paulson. But the White House deputy chief of staff, Joel Kaplan, said that if the Obama team wants someone else installed to bridge the administrations, Bush is open to that.
The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for their vehicles.
The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories — many for the entire month of January — to cut vehicle production.
Chrysler CEO Bob Nardelli said the initial injection of capital would help the company get through its cash crisis and give it a push toward eventually returning to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.
Though Ford didn't seek short-term aid, company President and CEO Alan Mulally said, "The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy."
House Republican leader John Boehner called the plan "regrettable." He said that granting loans for automakers was never the intention when Congress passed the $700 billion plan to rescue financial institutions and that the new plan "has failed both autoworkers and taxpayers."
Rep. Jeb Hensarling, R-Texas, chairman of the congressional oversight panel for the Wall Street rescue program, said a Chapter 11 bankruptcy reorganization, not loans rewarding decades of mismanagement, would have been a better decision.
Grover Norquist, president of the Americans for Tax Reform, sent a one-word letter to Bush that said in huge letters: "No."
___
AP Auto Writer Tom Krisher reported from Detroit. AP Writer Kimberly S. Johnson contributed from Detroit.
Tuesday, December 16, 2008
Saving the Big 3 for You and Me...
http://www.michaelmoore.com/words/message/index.php?id=242
Wednesday, December 3rd, 2008
Saving the Big 3 for You and Me...
a message from Michael Moore
Friends,
I drive an American car. It's a Chrysler. That's not an endorsement. It's more like a cry for pity. And now for a decades-old story, retold ad infinitum by tens of millions of Americans, a third of whom have had to desert their country to simply find a damn way to get to work in something that won't break down:
My Chrysler is four years old. I bought it because of its smooth and comfortable ride. Daimler-Benz owned the company then and had the good grace to place the Chrysler chassis on a Mercedes axle and, man, was that a sweet ride!
When it would start.
More than a dozen times in these years, the car has simply died. Batteries have been replaced, but that wasn't the problem. My dad drives the same model. His car has died many times, too. Just won't start, for no reason at all.
A few weeks ago, I took my Chrysler in to the Chrysler dealer here in northern Michigan -- and the latest fixes cost me $1,400. The next day, the vehicle wouldn't start. When I got it going, the brake warning light came on. And on and on.
You might assume from this that I couldn't give a rat's ass about these miserably inept crapmobile makers down the road in Detroit city. But I do care. I care about the millions whose lives and livelihoods depend on these car companies. I care about the security and defense of this country because the world is running out of oil -- and when it runs out, the calamity and collapse that will take place will make the current recession/depression look like a Tommy Tune musical.
And I care about what happens with the Big 3 because they are more responsible than almost anyone for the destruction of our fragile atmosphere and the daily melting of our polar ice caps.
Congress must save the industrial infrastructure that these companies control and the jobs they create. And it must save the world from the internal combustion engine. This great, vast manufacturing network can redeem itself by building mass transit and electric/hybrid cars, and the kind of transportation we need for the 21st century.
And Congress must do all this by NOT giving GM, Ford and Chrysler the $34 billion they are asking for in "loans" (a few days ago they only wanted $25 billion; that's how stupid they are -- they don't even know how much they really need to make this month's payroll. If you or I tried to get a loan from the bank this way, not only would we be thrown out on our ear, the bank would place us on some sort of credit rating blacklist).
Two weeks ago, the CEOs of the Big 3 were tarred and feathered before a Congressional committee who sneered at them in a way far different than when the heads of the financial industry showed up two months earlier. At that time, the politicians tripped over each other in their swoon for Wall Street and its Ponzi schemers who had concocted Byzantine ways to bet other people's money on unregulated credit default swaps, known in the common vernacular as unicorns and fairies.
But the Detroit boys were from the Midwest, the Rust (yuk!) Belt, where they made real things that consumers needed and could touch and buy, and that continually recycled money into the economy (shocking!), produced unions that created the middle class, and fixed my teeth for free when I was ten.
For all of that, the auto heads had to sit there in November and be ridiculed about how they traveled to D.C. Yes, they flew on their corporate jets, just like the bankers and Wall Street thieves did in October. But, hey, THAT was OK! They're the Masters of the Universe! Nothing but the best chariots for Big Finance as they set about to loot our nation's treasury.
Of course, the auto magnates used to be the Masters who ruled the world. They were the pulsating hub that all other industries -- steel, oil, cement contractors -- served. Fifty-five years ago, the president of GM sat on that same Capitol Hill and bluntly told Congress, what's good for General Motors is good for the country. Because, you see, in their minds, GM WAS the country.
What a long, sad fall from grace we witnessed on November 19th when the three blind mice had their knuckles slapped and then were sent back home to write an essay called, "Why You Should Give Me Billions of Dollars of Free Cash." They were also asked if they would work for a dollar a year. Take that! What a big, brave Congress they are! Requesting indentured servitude from (still) three of the most powerful men in the world. This from a spineless body that won't dare stand up to a disgraced president nor turn down a single funding request for a war that neither they nor the American public support. Amazing.
Let me just state the obvious: Every single dollar Congress gives these three companies will be flushed right down the toilet. There is nothing the management teams of the Big 3 are going to do to convince people to go out during a recession and buy their big, gas-guzzling, inferior products. Just forget it. And, as sure as I am that the Ford family-owned Detroit Lions are not going to the Super Bowl -- ever -- I can guarantee you, after they burn through this $34 billion, they'll be back for another $34 billion next summer.
So what to do? Members of Congress, here's what I propose:
1. Transporting Americans is and should be one of the most important functions our government must address. And because we are facing a massive economic, energy and environmental crisis, the new president and Congress must do what Franklin Roosevelt did when he was faced with a crisis (and ordered the auto industry to stop building cars and instead build tanks and planes): The Big 3 are, from this point forward, to build only cars that are not primarily dependent on oil and, more importantly to build trains, buses, subways and light rail (a corresponding public works project across the country will build the rail lines and tracks). This will not only save jobs, but create millions of new ones.
2. You could buy ALL the common shares of stock in General Motors for less than $3 billion. Why should we give GM $18 billion or $25 billion or anything? Take the money and buy the company! (You're going to demand collateral anyway if you give them the "loan," and because we know they will default on that loan, you're going to own the company in the end as it is. So why wait? Just buy them out now.)
3. None of us want government officials running a car company, but there are some very smart transportation geniuses who could be hired to do this. We need a Marshall Plan to switch us off oil-dependent vehicles and get us into the 21st century.
This proposal is not radical or rocket science. It just takes one of the smartest people ever to run for the presidency to pull it off. What I'm proposing has worked before. The national rail system was in shambles in the '70s. The government took it over. A decade later it was turning a profit, so the government returned it to private/public hands, and got a couple billion dollars put back in the treasury.
This proposal will save our industrial infrastructure -- and millions of jobs. More importantly, it will create millions more. It literally could pull us out of this recession.
In contrast, yesterday General Motors presented its restructuring proposal to Congress. They promised, if Congress gave them $18 billion now, they would, in turn, eliminate around 20,000 jobs. You read that right. We give them billions so they can throw more Americans out of work. That's been their Big Idea for the last 30 years -- layoff thousands in order to protect profits. But no one ever stopped to ask this question: If you throw everyone out of work, who's going to have the money to go out and buy a car?
These idiots don't deserve a dime. Fire all of them, and take over the industry for the good of the workers, the country and the planet.
What's good for General Motors IS good for the country. Once the country is calling the shots.
Yours,
Michael Moore
MMFlint@aol.com
MichaelMoore.com
Wednesday, December 3rd, 2008
Saving the Big 3 for You and Me...
a message from Michael Moore
Friends,
I drive an American car. It's a Chrysler. That's not an endorsement. It's more like a cry for pity. And now for a decades-old story, retold ad infinitum by tens of millions of Americans, a third of whom have had to desert their country to simply find a damn way to get to work in something that won't break down:
My Chrysler is four years old. I bought it because of its smooth and comfortable ride. Daimler-Benz owned the company then and had the good grace to place the Chrysler chassis on a Mercedes axle and, man, was that a sweet ride!
When it would start.
More than a dozen times in these years, the car has simply died. Batteries have been replaced, but that wasn't the problem. My dad drives the same model. His car has died many times, too. Just won't start, for no reason at all.
A few weeks ago, I took my Chrysler in to the Chrysler dealer here in northern Michigan -- and the latest fixes cost me $1,400. The next day, the vehicle wouldn't start. When I got it going, the brake warning light came on. And on and on.
You might assume from this that I couldn't give a rat's ass about these miserably inept crapmobile makers down the road in Detroit city. But I do care. I care about the millions whose lives and livelihoods depend on these car companies. I care about the security and defense of this country because the world is running out of oil -- and when it runs out, the calamity and collapse that will take place will make the current recession/depression look like a Tommy Tune musical.
And I care about what happens with the Big 3 because they are more responsible than almost anyone for the destruction of our fragile atmosphere and the daily melting of our polar ice caps.
Congress must save the industrial infrastructure that these companies control and the jobs they create. And it must save the world from the internal combustion engine. This great, vast manufacturing network can redeem itself by building mass transit and electric/hybrid cars, and the kind of transportation we need for the 21st century.
And Congress must do all this by NOT giving GM, Ford and Chrysler the $34 billion they are asking for in "loans" (a few days ago they only wanted $25 billion; that's how stupid they are -- they don't even know how much they really need to make this month's payroll. If you or I tried to get a loan from the bank this way, not only would we be thrown out on our ear, the bank would place us on some sort of credit rating blacklist).
Two weeks ago, the CEOs of the Big 3 were tarred and feathered before a Congressional committee who sneered at them in a way far different than when the heads of the financial industry showed up two months earlier. At that time, the politicians tripped over each other in their swoon for Wall Street and its Ponzi schemers who had concocted Byzantine ways to bet other people's money on unregulated credit default swaps, known in the common vernacular as unicorns and fairies.
But the Detroit boys were from the Midwest, the Rust (yuk!) Belt, where they made real things that consumers needed and could touch and buy, and that continually recycled money into the economy (shocking!), produced unions that created the middle class, and fixed my teeth for free when I was ten.
For all of that, the auto heads had to sit there in November and be ridiculed about how they traveled to D.C. Yes, they flew on their corporate jets, just like the bankers and Wall Street thieves did in October. But, hey, THAT was OK! They're the Masters of the Universe! Nothing but the best chariots for Big Finance as they set about to loot our nation's treasury.
Of course, the auto magnates used to be the Masters who ruled the world. They were the pulsating hub that all other industries -- steel, oil, cement contractors -- served. Fifty-five years ago, the president of GM sat on that same Capitol Hill and bluntly told Congress, what's good for General Motors is good for the country. Because, you see, in their minds, GM WAS the country.
What a long, sad fall from grace we witnessed on November 19th when the three blind mice had their knuckles slapped and then were sent back home to write an essay called, "Why You Should Give Me Billions of Dollars of Free Cash." They were also asked if they would work for a dollar a year. Take that! What a big, brave Congress they are! Requesting indentured servitude from (still) three of the most powerful men in the world. This from a spineless body that won't dare stand up to a disgraced president nor turn down a single funding request for a war that neither they nor the American public support. Amazing.
Let me just state the obvious: Every single dollar Congress gives these three companies will be flushed right down the toilet. There is nothing the management teams of the Big 3 are going to do to convince people to go out during a recession and buy their big, gas-guzzling, inferior products. Just forget it. And, as sure as I am that the Ford family-owned Detroit Lions are not going to the Super Bowl -- ever -- I can guarantee you, after they burn through this $34 billion, they'll be back for another $34 billion next summer.
So what to do? Members of Congress, here's what I propose:
1. Transporting Americans is and should be one of the most important functions our government must address. And because we are facing a massive economic, energy and environmental crisis, the new president and Congress must do what Franklin Roosevelt did when he was faced with a crisis (and ordered the auto industry to stop building cars and instead build tanks and planes): The Big 3 are, from this point forward, to build only cars that are not primarily dependent on oil and, more importantly to build trains, buses, subways and light rail (a corresponding public works project across the country will build the rail lines and tracks). This will not only save jobs, but create millions of new ones.
2. You could buy ALL the common shares of stock in General Motors for less than $3 billion. Why should we give GM $18 billion or $25 billion or anything? Take the money and buy the company! (You're going to demand collateral anyway if you give them the "loan," and because we know they will default on that loan, you're going to own the company in the end as it is. So why wait? Just buy them out now.)
3. None of us want government officials running a car company, but there are some very smart transportation geniuses who could be hired to do this. We need a Marshall Plan to switch us off oil-dependent vehicles and get us into the 21st century.
This proposal is not radical or rocket science. It just takes one of the smartest people ever to run for the presidency to pull it off. What I'm proposing has worked before. The national rail system was in shambles in the '70s. The government took it over. A decade later it was turning a profit, so the government returned it to private/public hands, and got a couple billion dollars put back in the treasury.
This proposal will save our industrial infrastructure -- and millions of jobs. More importantly, it will create millions more. It literally could pull us out of this recession.
In contrast, yesterday General Motors presented its restructuring proposal to Congress. They promised, if Congress gave them $18 billion now, they would, in turn, eliminate around 20,000 jobs. You read that right. We give them billions so they can throw more Americans out of work. That's been their Big Idea for the last 30 years -- layoff thousands in order to protect profits. But no one ever stopped to ask this question: If you throw everyone out of work, who's going to have the money to go out and buy a car?
These idiots don't deserve a dime. Fire all of them, and take over the industry for the good of the workers, the country and the planet.
What's good for General Motors IS good for the country. Once the country is calling the shots.
Yours,
Michael Moore
MMFlint@aol.com
MichaelMoore.com
Subscribe to:
Posts (Atom)
Posts
