15 Disastrous Product Launches That Were Quickly Killed

Aimee Groth and Jay Yarow of the Business Insider
10-11-11
http://finance.yahoo.com/blogs/daily-ticker/15-disastrous-product-launches-were-quickly-killed-150326494.html

Monday morning, Netflix CEO Reed Hastings announced that Qwikster is no longer.

Hastings decided to listen to shareholders and consumers and kill Qwikster before even giving it a chance.

Was it the right move?

Netflix shares plunged around 7% Monday while the rest of the market rallied. Investors clearly aren't impressed, but they may just be responding to the company's acknowledgement that Qwikster was a failure. Long term abandoning a bad idea could help the stock.

Plenty of other big companies have abandoned products after disastrous launches. We picked out some of the most quickly cancelled products in history.

Ford Edsel: 3 years

The name "Edsel" is synonymous with "marketing failure." Ford invested $400 million into the car, which it introduced in 1957. But Americans literally weren't buying it, because they wanted "smaller, more economic vehicles," according to Associated Content:

Other pundits have blamed its failure on Ford Motors execs never really defining the model's niche in the car market. The pricing and market aim of most Edsel models was somewhere between the highest-end Ford and the lowest-end Mercury.

It was taken off the market in 1960.

Joost: 2+ years

Joost, originally known as "The Venice Project," was supposed to be a peer-to-peer TV network for the future, invented by the European geniuses behind Skype. The company recruited a rising star -- Mike Volpi -- away from Cisco to become its CEO. It got a deal with CBS. Joost was supposed to reinvent the way we consumed professional video.

Instead, Hulu, a joint venture between News Corp., NBC and Disney became the go-to site for TV episodes-on-the-web.

Meanwhile, Joost had all sorts of problems with its P2P architecture, its bulky software player, its content library, etc. After launching in Sept. 2007, it never took off, with its scraps selling in late 2009.

Coors Rocky Mountain Spring Water: 2 years

This was an interesting experiment in brand extension. Coors Rocky Mountain Spring Water launched in 1990, and didn't fare well. Turns out beer drinkers only want one thing from their favorite label: beer.

HD DVD: 2 years

Sponsored mostly by Toshiba, HD DVD was supposed to become the hi-def successor to the DVD when it launched in March 2006.

But the Sony-led Blu-ray faction ended up winning the format war when Warner Bros. announced it was dumping HD DVD for Blu-ray on Jan. 4, 2008.

About a month later, Toshiba said it would shut down its HD DVD efforts.

Cosmopolitan Yogurt: 18 months

Cosmopolitan made an interesting decision to launch a brand of yogurt in 1999. Needless to say, the yogurt market was already saturated, and Cosmo's readers were content enough reading the magazine.

Pepsi A.M. and Crystal: Both 1 year

In 1989, Pepsi tried to target the "breakfast cola drinker" with Pepsi a.m. It only lasted a year.

In 1992, Pepsi tried again, this time with a clear cola, "Crystal Pepsi." No dice -- it died in 1993.

McDonald's Arch Deluxe: 1 year

In 1996, McDonald's introduced the Arch Deluxe. It was intended to appeal to "urban sophisticates" -- outside of its target demographic. To reach this group McDonald's spent $100 million, which makes it one of the most expensive product flops in history.

Microsoft Bob: 1 year

Microsoft Bob was supposed to be a user-friendly interface for Windows, a project that was at one point managed by Bill Gates' now wife. Microsoft killed it one year after launching it in 1995.

Why?

"Unfortunately, the software demanded more performance than typical computer hardware could deliver at the time and there wasn't an adequately large market," Bill Gates later wrote. "Bob died."

Orbitz soda: 1 year

Although the soda, which looks like a lava lamp, appealed to young kids, it was not tasty (people compared it to cough syrup). It disappeared off shelves within a year of debuting in 1997.

However, Orbitz is still sold on eBay for a premium.

JooJoo: 11 months

In the era of a $499 Apple iPad, an inferior tablet computer that also costs $499 doesn't work. (You may remember this device from its previous title, the CrunchPad.) It came out in 2009 and was gone by 2010.

But JooJoo backer Fusion Garage continues to tinker and it's coming out with another tablet, which will also flop.

Mobile ESPN: 8 months

Mobile ESPN, introduced in January 2006, was one of the biggest flame-outs of "mobile virtual network operators," or MVNOs, last decade, which also included Amp'd Mobile, Helio, Disney Mobile, and others.

The idea was that ESPN would exclusively sell a phone that offered exclusive ESPN content and video, leasing network access from Verizon Wireless. But ESPN only had one phone at launch, a Sanyo device selling for $400.

No one bought it, and ESPN quickly shut down the service, instead providing content to Verizon's mobile Internet service.

Google Lively: 4 months

For some reason, Google thought it had to compete with Second Life in mid-2008, with a virtual world called "Lively," which came out in July 2008. (Except unlike Second Life, Lively was supposed to be sex-free.)

When the economy went down the toilet, those dreams faded fast, and Google quickly pulled the plug by November 2008.

RJ Reynold's smokeless cigarettes: 4 months

In the 1980s, just as all the anti-smoking campaigns were heating up, RJ Reynold's put $325 million into a new product: smokeless cigarettes.

They didn't work, and people weren't buying them -- so 4 months later, they were gone.

New Coke: 77 Days

In the early 1980s, Coke was losing ground to Pepsi. So it tried to create a product that would taste more like Pepsi.

While New Coke fared OK in nationwide taste tests before launching in 1985, it turned out those were misleading.

Coke abandoned the product after a few weeks, and went back to its old formula. It also gave its product a new name: Coca-Cola Classic.

HP Touchpad: 49 Days

After just a month and a half on the market, HP gave up the TouchPad and its mobile OS, WebOS in August.

The tablet was no iPad killer, selling just 25,000 units for Best Buy over the 49 days it was on their shelves.

Where does this put the TouchPad in the pantheon of tech flops? Well, it lasted one day longer than the Microsoft Kin phones, another recent flop.

So it's not the worst flop ever.

And, in fairness to HP, the TouchPad wasn't that bad. It was rough around the edges, but those could have been smoothed in the coming months. It just didn't really do anything better than the iPad, which means it's just like every other tablet out there.

Qwikster: 23 days

In September, Reed Hastings announced that Netflix would spin off Qwikster as a DVD rental business. This move met tons of criticism, and Hastings backtracked on his statement 23 days later.

20,000 Sacrificed In Annual Blood Offering To Corporate America

http://www.theonion.com/articles/20000-sacrificed-in-annual-blood-offering-to-corpo,18542

20,000 Sacrificed In Annual Blood Offering To Corporate America
November 29, 2010 | ISSUE 46•48
The High Priest appeases Corporate America with another fresh sacrifice.

WILMINGTON, DE — The nation looked on in reverence Friday as 20,000 citizens were decapitated, dismembered, and burned alive in the name of Corporate America, continuing the age-old annual rite to ensure bounteous profits in the coming fiscal year.

"Corporate America has always provided us with plenty," said High Priest James N. Cahill, who opened the ceremony by plunging the horn of a bull into a fair-haired child's abdomen and using the freshly spilled blood to write the current value of the Dow Jones Industrial Average upon sacred parchment. "JPMorgan Chase, General Electric, and all in the great pantheon of publicly traded entities will continue to watch over us so long as we appease them each year with human lives."

"The prophecies are clear," Cahill continued. "As we utter the hallowed incantations and make our humble sacrifices of flesh, so shall the shelves of retailers overflow with the most desirable consumer products."

The blood offering follows last week's Feast of Increasing Market Values, a yearly celebration during which Americans gather with their families under the second Q4 full moon to give thanks to corporations and to pray for cash dividends during the holiday shopping season.

The grand foyer of one of the nation's great corporate overlords, to whom tribute was bountifully paid this week.

In accordance with tradition, Friday's ritual—hosted this year by the Greater Wilmington Convention Center—included stonings in honor of Monsanto, the drowning of elders on behalf of Ford, and live flayings in the name of Whole Foods.

"A joyful noise filled the hall as the priest pulled the first virgin's heart from her chest and recited the ancient, mystical section 102(a)(3) of the Delaware General Corporation Law," said 44-year-old disciple David Infantes, recalling the blasts from plastic horns donated by Wells Fargo that accompanied a young girl's lifeless body rolling down the altar steps. "In that moment, I pledged my soul anew to our blessed Corporate Overlords, increasing profits be upon them."

By many accounts, the highlight of the evening took place when the 500 Shareholder Guardians, wearing robes adorned with logos of the nation's top-ranked businesses and chanting optimistic revenue projections, used their companies' balance sheets to ignite the alcohol-soaked vestments of the "cursèd and damnable" children born the day Lehman Brothers collapsed.

"To quick profits on high-risk, short-term investments of other people's money!" the assembled masses shouted in unison. "Quick and easy profits for all eternity!"

The ceremony drew to a close as the High Priest bathed in the accumulated blood on the altar and cleansed himself in the Font of Gross Receipts, symbolically rinsing the corporate world of undesirable red ink and granting it immunity from disclosure of negative earnings.

Though the ceremony's origins are shrouded in mystery, most scholars agree on its historical success, noting that the yearly killings have coincided with an exponential growth in corporate earnings over the past two centuries. Recently, however, some high-profile academics have suggested the practice is flawed, citing the recent economic malaise as evidence.

"We're stuck in the Dark Ages if we still believe some elaborately choreographed, archaic ritual has any impact on today's dynamic multinational corporations," New York University professor Nouriel Roubini said on CNBC this week. "If we really want Corporate America to restore our prosperity, then we have to own up to the facts, face reality, and kill every last one of our firstborn sons with our own bare hands."

"It was a great honor for my daughter to be chosen by a company as esteemed as Best Buy," said ceremony attendee Mark Granaldi, who, as a family member of one of the sacrificed, received a complimentary gift bag that included Crest whitening strips, a $25 Hess gas card, Old Navy board shorts, and a tote bag bearing the trademark of Merck. "Just as the flames rose from her body toward heaven, so too shall Best Buy's stock price climb ever higher."

At press time, Corporate America had conferred upon its devout followers the blessings of several new Doritos flavors and a sacred promise to release a deluxe unrated edition of Salt, starring Angelina Jolie, on Blu-ray.

A Wee Taste of Europe: Will Americans Bite?

http://www.nytimes.com/2010/09/12/automobiles/autoreviews/12fiesta.html

September 10, 2010
A Wee Taste of Europe: Will Americans Bite?
EZRA DYER

THERE are two types of small cars in America. First, there are the bare-bones, price-is-the-entire-object ennui-boxes. These are the cars you end up driving when you stubbornly resist the $2-a-day upgrade at the rental counter.

A few years back, Chevrolet of Canada caught flak for running an ad for the Cavalier that basically said, “Hey, it’s better than taking the bus.” The pitch offended bus riders and public transportation advocates, but I admire that honesty. Cars that duke it out at the very bottom of the market — like the basest Nissan Versa or Hyundai Accent, each priced around $10,000 — promise mobility, and that’s about it.

It took a long time for car companies to realize that drivers in the United States might consider a small vehicle that wasn’t ruthlessly built to a price. The modern Mini Cooper was the trailblazer, proving that Americans might buy a diminutive hatchback on its own merits, even when they could afford something bigger. Cars like the Mini and the Honda Fit offer a more upscale driving experience than the frill-free automotive flounders that scour the bottom of the market for rental sales, college students and frugal commuters.

The Ford Fiesta is a subcompact in the ambitious Fit idiom. It’s not the least expensive small car you can buy (or even, perhaps, the least expensive Ford). But the 2011 Fiesta hews to the European hatchback ideal, and Europeans hold the bizarre expectation that small vehicles should act like real cars.

First, a bit of history on the nameplate: in the late 1970s and early ’80s, Ford sold a hatchback called the Fiesta. In the late ’80s, it introduced a hatchback named the Festiva. Now we’re back to the Fiesta. I asked Ford what the rationale was behind the Fiesta-to-Festiva-to-Fiesta name change, and the response was, “The Festiva was a different car.”

Right. One which happened to be the smallest Ford hatchback, just like the car it replaced. It’s as if Ford canceled the Mustang, replaced it with a V-8 muscle car named the Mutsvang, and then declared that the two vehicles had nothing to do with each other. And I’m afraid that’s the best answer I have for you on that. This Fiesta is a far cry from the bygone Korean-built Festiva, which came with 12-inch steel wheels suggesting that somewhere, a lawn tractor was up on blocks.

Ford’s new baby is available as a sedan or five-door hatchback and offers upmarket equipment like a 6-speed dual-clutch sequential transmission, heated leather seats and the excellent Sync multimedia system.

There are still a few obvious cost-cutting measures. For instance, the rear brakes are drums, not discs. But then again, so are they on a Maybach — the 1932 Maybach Zeppelin, to be exact.

Rear drums aside, the Fiesta is about as safe as it gets in this class. The Insurance Institute for Highway Safety named the Fiesta the first minicar to earn the designation of Top Safety Pick. (The distinction applies to Fiestas built after July, when Ford strengthened the door handles.)

Regardless of the build date, the Fiesta interior has enough air bags to raise the Edmund Fitzgerald. And electronic stability control is standard.

There is one engine, a 1.6-liter 4-cylinder that squeezes out an indifferent 120 horsepower. So the Fiesta is slow. Then again, so are its competitors. But you should not drive alongside rivers near college campuses, because you might get passed by varsity crew teams.

The Fiesta’s best talent is making you forget its size once you’re actually moving down the road. The body is so stiff and quiet that I kept finding myself speeding, despite the modest power.

The suspension quietly soaks up impacts while maintaining a controlled ride — there’s none of the Clydesdale clop you hear when the engineers try to dial a soft ride into an overly flexible chassis. You get a sense that the limits are low but that the car doesn’t mind frolicking on an on-ramp now and then.

Mainly, though, the Fiesta seems optimized for the role it will probably fill for most people: commuting. There’s very little wind noise, you have Sync to handle your smartphone and play podcasts, and the fuel economy is excellent — 40 miles per gallon on the highway, according to the Environmental Protection Agency. When you do need to gas up, Ford’s capless filler is one of those small delights that makes life a little easier.

If you had to spend a couple of hours a day in a Fiesta, my sense is that it would endear itself rather than instill resentment. Hey, you don’t like the color of the cupholder lighting? You can change it, boss. It aims to please, the Fiesta.

The Fiesta is really the exemplar of the domestic hatchback’s newfound respectability. But the main challenge for small cars in America is that there’s not much financial incentive to buy them.

In Europe and Japan, driving a smaller car brings tax advantages. Then there’s the cost of fuel, which is currently more than $6 a gallon in most of Europe. When every mile per gallon and gram of carbon dioxide counts on the bottom line, it makes sense to buy the smallest car that will get you to work on time.

And to that end, the Fiesta is a hit. It’s Ford’s No. 1 seller in Europe, with half a million sold in the last year.

But in the United States, unless your car is subject to the gas-guzzler penalty, the taxman doesn’t care whether you have a 1.6-liter 4 or a 550-horsepower V-8. So the financial rationale for entry-level cars mostly amounts to what you save on the purchase price, relative to the next car up the ladder. And for Ford, there’s precious little breathing room between the Fiesta and its bigger sibling, the Focus.

The Fiesta starts at $13,995 for a basic sedan with a 5-speed manual transmission and can cost more than $21,000 for a loaded five-door SES. A couple of months ago, I grabbed a Ford dealership flier that advertised the 2011 Fiesta SE for $16,895. The same dealership was hawking the 2010 Focus SEL, with a leather interior, for $15,495.

The Focus concedes a few m.p.g. — its highway mileage is in the mid-30s — but it offers more passenger room and 20 extra horsepower. The Fiesta is technologically superior, but will buyers care about a dual-clutch gearbox when they can get more car for less money in the same dealership? I know I’m comparing leftover Focuses with 2011 Fiestas, but even once the Focus is redesigned, there will never be much daylight between these two cars.

At current gas prices, the E.P.A. estimates that fueling up a Focus instead of a Fiesta would cost an extra $219 a year (assuming 15,000 miles of driving). Somehow, I doubt that the prospect of saving 60 cents a day will be the deciding factor in many new-car purchases.

However, it was barely more than two years ago that gasoline passed $4 a gallon and the Honda Civic started outselling the Ford F-150. I’ll wager that gas prices will eventually pass $4 again. And when they do, the Fiesta will be the life of the party.

Nissan Gets $1.4 Billion Loan from Feds

http://www.popsci.com/technology/article/2010-01/nissan-gets-15-billion-loan-feds-build-electric-cars

Nissan Gets $1.4 Billion Loan from Feds to Build Electric Cars
A retooled Nissan factory is expected to create up to 1,300 jobs in the U.S.
By Jeremy Hsu
01.29.2010

Nissan can officially start its engines for its all-electric car, Leaf. The U.S. Department of Energy (DOE) has finalized a $1.4 billion loan to the car manufacturer that should help it retool a Smyrna, Tennessee factory to build electric cars, and also revamp an advanced battery manufacturing center. Nissan's projects are expected to create up to 1,300 American jobs.

The 2011 Nissan Leaf won one of PopSci's "Best of What's New" awards last year, and for good reason. Nissan's vehicle may is the first truly mass-market electric car aimed at commuters, with a 100-mile range on its lithium-ion batteries and a price tag supposedly under $30,000. A PopSci test drive showed that the small car is surprisingly highway-worthy. And Nissan plans to eventually ramp up production to 150,000 electric vehicles annually.

Nissan represents the third vehicle manufacturer to sign a DOE loan agreement -- Ford and Tesla Motors each received $5.9 billion and $465 million, respectively. Ford has its electric Focus lined up for next year, and Tesla has also been working on its Model S electric sedan for a 2011 debut.

The DOE also throws in the fun fact that Nissan's loan-backed efforts should save 65.4 million gallons of gas per year, or about six times the oil spilled by the Exxon Valdez back in 1989. But somehow that leaves us just feeling mildly angrier about the oil spill rather than inspired by the fuel savings ... at least until we can ditch the hybrids.

Ford Fusion Named Motor Trend Car of the Year

http://autos.yahoo.com/articles/autos_content_landing_pages/1167/ford-fusion-named-motor-trend-car-of-the-year/

Ford Fusion Named Motor Trend Car of the Year
Dee-Ann Durbin, AP Auto Writer

DETROIT (AP) -- The 2010 Ford Fusion was named Motor Trend magazine's car of the year Tuesday, beating out the Toyota Prius, BMW 7-Series, Chevrolet Camaro and others in the closely watched competition.

It was yet another accolade for Ford Motor Co.'s midsize sedan, which got high reliability scores in the most recent rankings from Consumer Reports and was the top-selling car made by a Detroit automaker through October. U.S. Fusion sales were up 15 percent in the first 10 months of this year, to 148,045, despite a 25 percent drop in overall car sales.

Still, the mid-size Fusion continues to lag behind the Toyota Camry and Honda Accord -- perennial leaders in the competitive U.S. mid-size market.

Motor Trend said the Fusion can compete with the Camry and Accord in performance, comfort and fuel efficiency. It praised Ford for offering several versions of the Fusion, including a fuel-efficient gas-electric hybrid and a sporty version with a V-6 engine.

"Ford has proven its resilience in these tough times by delivering to market a car with broad appeal to a broad range of consumers," Motor Trend Editor in Chief Angus MacKenzie said in a statement.

Motor Trend considered 23 new or significantly refreshed vehicles. The Fusion, introduced in the 2006 model year, was redesigned for 2010 with a new lineup of engines and transmissions, new exterior and interior and new options, including the Sync entertainment system and a blind-spot warning system.

Derrick Kuzak, Ford's group vice president of global product development, said the 2010 Fusion has a sportier look and better fuel economy than previous versions. It gets 34 miles per gallon on the highway when equipped with a four-cylinder engine and six-speed automatic transmission. The gas-electric hybrid version gets 41 miles per gallon in the city.

The Mercedes-Benz E-Class sedan, Buick LaCrosse, Lexus HS 250h and Hyundai Genesis coupe were among the cars Motor Trend considered. The Fusion also beat out other Ford models, including the Mustang sports car and Taurus sedan.

It was the first time a Ford car had won since 2003, when the Ford Thunderbird got the honor, Kuzak said. Ford's 2009 F-150 was Motor Trend's truck of the year last fall. The Nissan GT-R was the car of the year for 2009.

"It reinforces the progress that we've made, particularly on the car side of the business," Kuzak told The Associated Press. "When people think of trucks they think Ford, but we needed to put Ford cars and crossovers in people's consideration."

Motor Trend conducts road tests on each vehicle and judges vehicles in six categories: design advancement, engineering excellence, intended function, efficiency, safety and value.

GM says new Volt could get 230 mpg in city driving

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.

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.

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.

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.

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.


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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.

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.

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

The truth behind the Citigroup nationalization

http://onlinejournal.com/artman/publish/article_4062.shtml

The truth behind the Citigroup nationalization
By F. William Engdahl
Online Journal Contributing Writer
Nov 27, 2008

On Friday, November 21, the world came within a hair’s breadth of the most colossal financial collapse in history, according to bankers on the inside of events with whom we have contact.

The trigger was the bank which only two years ago was America’s largest, Citigroup. The size of the US government de facto nationalization of the $2 trillion banking institution is an indication of shocks yet to come in other major US and perhaps European banks thought to be ‘too big to fail.’

The clumsy way in which US Treasury Secretary Henry Paulson, himself not a banker but a Wall Street ‘investment banker,’ whose experience has been in the quite different world of buying and selling stocks or bonds or underwriting and selling same, has handled the unfolding crisis has been worse than incompetent. It has made a grave situation into a globally alarming one.

‘Spitting into the wind’

A case in point is the secretive manner in which Paulson has used the $700 billion in taxpayer funds voted him by a pliable Congress in September. Early on, Paulson put $125 billion into the nine largest banks, including $10 billion for his old firm, Goldman Sachs. However, if we compare the value of the equity share that $125 billion bought with the market price of those banks’ stock, US taxpayers have paid $125 billion for bank stock that a private investor could have bought for $62.5 billion, according to a detailed analysis from Ron W. Bloom, economist with the United Steelworkers union, whose members as well as pension fund face devastating losses were GM to fail.

That means half of the public’s money was a gift to Paulson’s Wall Street cronies. Now, only weeks later, the Treasury is forced to intervene to de facto nationalize Citigroup. It won’t be the last.

Paulson demanded, and got from a pliable US Congress, Democrats as well as Republicans, sole discretion over how and where he can invest the $700 billion, to date with no effective oversight. It amounts to the Treasury secretary in effect ‘spitting into the wind’ in terms of resolving the fundamental crisis.

It should be clear to any serious analyst by now that the September decision by Paulson to defer to rigid financial ideology and let the fourth largest US investment bank, Lehman Brothers fail, was the proximate trigger for the present global crisis. Lehman Brothers’ surprise collapse triggered the current global crisis of confidence. It was simply not clear to the rest of the banking world which US financial institution bank might be saved and which not, after the government had earlier saved the far smaller Bear Stearns, while letting the larger, far more strategic Lehman Brothers fail.

Some Citigroup details

The most alarming aspect of the crisis is the fact that we are in an inter-regnum period when the next president has been elected but cannot act on the situation until after January 20, 2009, when he is sworn in.

Consider the details of the latest Citigroup government de facto nationalization (for ideological reasons Paulson and the Bush administration hysterically avoid admitting they are in the process of nationalizing key banks). Citigroup has more than $2 trillion of assets, dwarfing companies such as American International Group Inc. that got some $150 billion in US taxpayer funds in the past two months. Ironically, only eight weeks before, the government had designated Citigroup to take over the failing Wachovia Bank. Normally, authorities have an ailing bank absorbed by a stronger one. In this instance the opposite seems to have been the case. Now it is clear that the Citigroup was in deeper trouble than Wachovia. In a matter of hours in the week before the US government nationalization was announced, the stock value of Citibank plunged to $3.77 in New York, giving the company a market value of about $21 billion. The market value of Citigroup stock in December 2006 had been $247 billion. Two days before the bank’s nationalization, the CEO, Vikram Pandit, had announced a huge 52,000 job slashing plan. It did nothing to stop the slide.

The scale of the hidden losses of perhaps the 20 largest US banks is so enormous that if not before, the first presidential decree of President Barack Obama will likely have to be declaration of a US ‘Bank Holiday’ and the full nationalization of the major banks, taking on the toxic assets and losses until the economy can again function with credit flowing to industry once more.

Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses. After that, remaining losses will be split between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The US Treasury Department will use its $700 billion TARP or Troubled Asset Recovery Program bailout fund, to assume up to $5 billion of losses. If necessary, the government’s Federal Deposit Insurance Corporation (FDIC) will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses. The measures are without precedent in US financial history. It’s by no means certain they will salvage the dollar system.

The situation is so intertwined, with six US major banks holding the vast bulk of worldwide financial derivatives exposure, that the failure of a single major US financial institution could result in losses to the OTC derivatives market of $300-$400 billion, a new IMF working paper finds. What’s more, since such a failure would likely cause cascading failures of other institutions. total global financial system losses could exceed another $1,500 billion according to an IMF study by Singh and Segoviano.

The madness over a Detroit GM rescue deal

The health of Citigroup is not the only gripping crisis that must be dealt with. At this point, political and ideological bickering in the US Congress has so far prevented a simple emergency $25 billion loan extension to General Motors and others of the US Big Three automakers -- Ford and Chrysler. The absurd spectacle of US congressmen attacking the chairmen of the Big Three for flying to the emergency congressional hearings on a rescue loan in their private company jets, while largely ignoring the issue of consequences to the economy of a GM failure underscores the utter lack of touch with reality that has overwhelmed Washington in recent years.

For GM to go into bankruptcy risks a disaster of colossal proportions. Although Lehman Brothers, the biggest bankruptcy in US history, appears to have had an orderly settlement of its credit defaults swaps, the disruption occurred beforehand, as protection writers had to post additional collateral prior to settlement. That was a major factor in the dramatic global market selloff in October. GM is bigger by far, meaning bigger collateral damage, and this would take place when the financial system is even weaker than when Lehman failed.

In addition, a second, and potentially far more damaging issue, has been largely ignored. The advocates of letting GM go bankrupt argue that it can go into Chapter 11 just like other big companies that get themselves in trouble. That may not happen however, and a Chapter 7 or liquidation of GM that would then result would be a tectonic event.

The problem is that under Chapter 11, it takes time for the company to get the protection of a bankruptcy court. Until that time, which may be weeks or months, the company would need urgently ‘bridge financing’ to continue operating. This is known as ‘Debtor-in-Possession’ or DIP financing. DIP is essential for most Chapter 11 bankruptcies, as it takes time to get the plan of reorganization approved by creditors and the courts. Most companies, like GM today, go to bankruptcy court when they are at the end of their liquidity.

DIP is specifically for companies in, or on the verge of bankruptcy, and the debt is generally senior to other outstanding creditor claims. So it is actually very low risk, as the amount spent is usually not large, relatively speaking. But DIP lending is being severely curtailed right now, just when it is most needed, as healthier banks drastically curtail loans in the severe credit crunch situation.

Without access to DIP bridge financing, GM would be forced into a partial, or even a full liquidation. The ramifications are horrendous. Aside from loss of 125,000 US jobs at GM itself, GM is critical to keeping many US auto suppliers in business. If GM failed, soon most, possibly even all, of the US and even foreign auto suppliers will go under. Those parts suppliers are important to other automakers. Many foreign car factories would be forced to close due to loss of suppliers. Some analysts put 2009 job losses from a GM failure as high as 2.5 million jobs due to the follow-on effects. If the impact of that 2.5 million job loss is seen in terms of the overall losses to the economy of non-auto jobs such as services, home foreclosures caused and such, some estimate total impact would be more than 15 million jobs.

So far in the face of this staggering prospect, the members of the US Congress have chosen to focus on the fact the GM chief, Rick Wagoner, flew in his private company jet to Washington. The congressional charade conjures up the image of Nero playing his fiddle as Rome goes up in flames. It should not be surprising that at the recent EU-Asian Summit in Beijing, Chinese officials floated the idea of trading between the EU and Asian nations such as China in euros, renminbi, yen or other national currencies other than the dollar. The Citigroup bailout and GM debacle has confirmed the death of the post-1944 Bretton Woods Dollar System.

The truth behind Citigroup bailout

What neither Paulson nor anyone in Washington is willing to reveal is the truth behind the Citigroup bailout. By his and the Republican Bush administration’s adamant earlier refusal to take an initial resolute action to immediately nationalize the nine or so largest troubled banks, he has created the present debacle. By refusing, on ideological grounds, to instead reorganize the banks’ assets into some form of ‘good bank’ and ‘bad bank,’ similar to what the government of Sweden did with what it called Securum, during its banking crisis in the early 1990s, Paulson and company have created a global financial structure on the brink.

A Securum or similar temporary nationalization would have allowed the healthy banks to continue lending to the real economy so the economy could continue operating, while the state merely sat on the undervalued real estate assets of the Swedish banks for some months until the recovering economy made the assets again marketable to the private sector. Instead, Paulson and his ‘crony capitalists’ in Washington have turned a bad situation into a globally catastrophic one.

His apparent realization of the error of his initial refusal to nationalize came too late. When Paulson reversed policy on September 19 and presented the nine largest banks with an ultimatum to accept partial government equity ownership, abandoning his original bizarre plan to merely buy up the toxic waste asset-backed securities of the banks with his $700 billion TARP taxpayer money, he never revealed why.

Under the original Paulson Plan, as Dimitri B. Papadimitriou and L. Randall Wray of the Jerome Levy Institute at Bard College in New York point out, Paulson sought to create a situation in which the US ‘Treasury would become an owner of troubled financial institutions in exchange for a capital injection -- but without exercising any ownership rights, such as replacing the management that created the mess. The bailout would be used as an opportunity to consolidate control of the nation’s financial system in the hands of a few large [Wall Street] banks, with government funds subsidizing purchases of troubled banks by “healthy” ones.’

Paulson soon realized the scale of crisis, largely triggered by his inept handling of the Lehman Brothers case, had created an impossible situation. Were Paulson to use the $700 billion to buy up toxic waste ABS from the select banks at today’s market price, the $700 billion would be far too little to take an estimated $2 trillion ($2,000 billion) in Asset Backed Securities off the books of the banks.

The Levy Economics Institute economists state, ‘It is probable that many and perhaps most financial institutions are insolvent today -- with a black hole of negative net worth that would swallow Paulson’s entire $700 billion in one gulp.’

That reality is the real reason Paulson was forced to abandon his original ‘crony bailout’ TARP plan and opt to use some of his money to buy equity shares in the nine largest banks.

That scheme as well is ‘dead on arrival,’ as the latest Citigroup nationalization scheme underscores. The dilemma Paulson has created with his inept handling of the crisis is simple: If the US government paid the true value for these nearly worthless assets, the banks would have to write down huge losses, and, as Levy economists put it, ‘announce to the world that they are insolvent.’ On the other hand, if Paulson raised the toxic waste purchase price high enough to protect the banks from losses, $700 billion ‘will buy only a tiny fraction of the ‘troubled’ assets.’ That is what the latest nationalization of Citigroup is about.

It is only the beginning. The 2009 year will be one of titanic shocks and changes to the global order of a scale perhaps not experienced in the past five centuries. This is why we should speak of the end of the American Century and its Dollar System.

How destructive that process will be to the citizens of the United States who are the prime victims of Paulson’s crony capitalists, as well as to the rest of the world, depends now on the urgency and resoluteness with which heads of national governments in Germany, the EU, China, Russia and the rest of the non-US world react. It is no time for ideological sentimentality and nostalgia of the postwar old order. That collapsed this past September along with Lehman Brothers and the Republican presidency. Waiting for a ‘miracle’ from an Obama presidency is no longer an option for the rest of the world.

F. William Engdahl is author of the book, ‘A Century of War: Anglo-American Oil Politics and the New World Order.’ He is completing work on a new book, ‘Power of Money: The Rise and Decline of the American Century’ due to be released in late Spring 2009. He may be contacted through his website, www.engdahl.oilgeopolitics.net.