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OBAMANATION CHRONICLESAUTO BAILOUTThis is the insanity that Obama is creating a national debt that is greater that the world's GDP. OBAMA MUST BE STOPPED BEFORE HE DESTROYS THE FUTURE OF AMERICA!!!  November 2008Automaker Bailout for $50 Billion (Nov 2008) President-elect Barack Obama is pushing Congress this year to approve as much as $50 billion to save cash-starved U.S. automakers and appoint a czar or board to oversee the companies, a move that would require President George W. Bush's support, people familiar with the matter said.Obama's economic advisers are now convinced that if General Motors Corp. doesn't get a financial lifeline soon, it will have to file for bankruptcy by the end of January. And if the companies don't get almost $50 billion, Obama will be dealing with the issue again by next summer. (SITE NOTE: Obama claims that the auto industry is the "backbone of American industry," critics scoff at this remark. They argue that the auto industry got itself into the state it is in because of poor management choices. Though 250, 000 jobs are at risk, the problem comes to when do we stop. The logical answer is when we run out of money. For this reason, there are moral objections from conservatives for the bailout action. Bailing out the auto industry to many conservatives and progressives is a truly bad idea. They resent paying for 20 years of short-sighted and poor business decisions made by incompetent executives at General Motors, Chrysler and Ford who have enriched themselves on the descent. Where does it stop? How many jobs need to be lost before the government steps in to guarantee solvency? What industries qualify? Who set the criteria and on what basis? The spending of $1 trillion with no guiding policies and no overarching philosophy.  Any czar or board would be patterned after the bailout of Chrysler in 1979 and New York City in 1975. Advisers such as former Federal Reserve Chairman Paul Volcker and former Treasury Secretary Lawrence Summers are said to be telling Obama that the cash is urgently needed now. Congress would have to act in a lame-duck session that begins next week. Obama would need Bush's backing to pass such a sweeping and costly measure in part because Democrats don't have enough votes to force a floor vote or override a veto. Obama also would need strong support from auto-producing states such as Michigan, Ohio, Indiana, Illinois and Wisconsin to pass such a sweeping and costly measure. Yet to be determined is whether most of the money would be drawn from the $700 billion financial rescue package Congress passed last month or from newly allocated funds. Obama's Exception By injecting himself into the talks about how to save General Motors, Obama is making an exception to his decision to steer clear of policy-making until he takes office. The president-elect also wants the Federal Reserve to extend emergency loans to General Motors, Ford Motor Co. and Chrysler LLC, according to Obama aides who spoke on condition of anonymity. The failure of those companies would likely bring down parts-makers, dealerships and suppliers in addition to inflicting a deep psychological blow. If the plan were to offer no strong guarantees against layoffs it would likely draw fire from unions. But Obama advisers have been persuaded that the impact on current workers and retirees would be staggering if the companies went into bankruptcy. Any auto czar or committee would presumably have the job of overseeing a restructuring of the auto industry. `Too Big to Fail' ``The auto industry is too big to fail,'' said Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts. ``While the Obama administration can wait until Jan. 20 to address other matters, on this one they need to move quickly.'' Obama, 47, has repeatedly insisted there can only be ``one president at a time.'' He is sending two representatives, former Iowa Republican Rep. Jim Leach and former secretary of state Madeleine Albright to this weekend's economic summit of leaders of the Group of 20 nations in Washington rather than attend himself. GM risks going bust before year-end without help from Washington. Shares of the biggest U.S. automaker reached a more than six-decade low this week. The company said last week it may run out of operating cash by the end of this year. ``We've not being prescriptive in what would be acceptable in terms of the loans,'' said GM spokesman Tony Cervone, who said he's not aware of the government's plans. Chrysler spokesman Shawn Morgan said the company is in discussions with the Obama transition team and members of Congress. ``We look forward to a discussion addressing the immediate liquidity crisis facing the industry, as well as the competitiveness of the auto industry,'' Morgan said. ``We need to wait and see what comes from Congress,'' said Ford spokesman Mike Moran.  Bankruptcy Risk Ford and Chrysler both likely would be forced into bankruptcy eventually if GM were to fail, Mark Oline, a Fitch Inc. credit analyst, said in an interview. Enthusiasm among Obama's economic advisers for a concerted rescue for the auto industry was sparked at a Nov. 7 meeting in Chicago, according to person familiar with the meeting. Michigan Governor Jennifer Granholm also pressed for additional aid. A GM bankruptcy could send the U.S. jobless rate as high as 9.5 percent, up from a 14-year high of 6.5 percent in October, and produce a recession comparable in length to that of 1980-82, according to Behravesh. ``If it does collapse, it could make the recession deeper and longer,'' he said. Pressed Bush Obama, an Illinois senator, pressed Bush on the urgency of an assistance package during their Nov. 10 meeting at the White House, Obama spokesman Robert Gibbs told reporters this week. Still, the Bush administration so far has opposed bailing out the carmakers, and continues to resist the idea of using the Troubled Asset Relief Program, the bank rescue which Congress passed in early October, for any companies other than banks. ``The intent of the TARP was to deal with the financial industry,'' Treasury Secretary Henry Paulson, who is administering the program, said yesterday in a press conference. ``My focus is on the financial sector, getting credit going, getting lending going.'' Congressional Democrats, meanwhile, are pushing for legislation to help the automakers. House Speaker Nancy Pelosi called for congressional action, saying failure by one or more of the big U.S. automakers would have a ``devastating impact'' on the U.S. economy. Assistance must be conditioned on ``rigorous independent oversight'' of carmakers and restrictions on executive compensation, she said in a statement. ``A collapse of the American automobile industry would be the worst possible thing that could happen at a time when we are already weakened,'' Frank, a Massachusetts Democrat, said in an interview on Bloomberg Television. (Source: Bloomberg.) (SITE NOTE: As of 13 Nov General Motors shares remained weak as the nation's automakers wait for President-elect Obama to push Congress to approve a bailout of the struggling industry. There are also reports that Obama will move to appoint a czar or board to oversee the companies. GM dropped 13 cents, or 4.2 percent, to $2.95. Ford shares rose 6 cents, or 3.3 percent, to $1.90. Stocks sold off early after the Labor Department said the number of newly laid-off individuals seeking unemployment benefits jumped last week to the highest level since right after the Sept. 11, 2001 terrorist attacks. There was also more evidence of a severe pullback in consumer spending _ a worsening trend that had pummeled stocks earlier in the week. Wal-Mart Stores Inc. trimmed expectations for full-year earnings, and Intel Corp. late Wednesday cut more than $1 billion from its sales forecast. (Source: Huffington Post.)On 13 Nov it was announced that England, Germany and the US -- along with Japan -- were officially in recession. This will only complicate the formulas on how to bailout the troubled economy. At the same time, $290 billion into his bailout plan, Hank Paulson is calling for a do-over on 12 Nov. Paulson's midstream direction change shows just how uncertain Washington is about how to keep the economy from imploding. In the meantime, oversight of the massive bailout plan remains a mirage, undermined by White House inaction and Congressional turf wars. Unfortunately, the economy continues to burn with 516,000 American filing new unemployment claims last week and 84,868 homes lost to foreclosure in October. "It's a mess," said Eric Thorson, the Treasury Department's inspector general. (Source: Huffington Post.)) Not Everyone Happy About Bailout (Nov 2008) The market has revealed the soft white underbelly of a bloated industry making inferior products relying on outdated technology, employing a workforce no longer competitive in a global economy and clinging to primitive environmental controls. We should not rescue companies that have so badly managed their markets for so long. In fact, no industry is less deserving of a government handout. Since the Clean Air Act was passed in 1970 in the face of fierce auto industry opposition, auto executives have stridently resisted all calls for modernizing the American fleet. Detroit rallied against every effort to institute reasonable Corporate Average Fuel Economy (CAFE) regulations, kicking and screaming every inch of the way. The United States consequently boasts the dubious distinction of having the lowest standards and highest greenhouse gas emissions from cars and trucks compared to Canada, Europe, Australia, Japan and China. That is true even after the 2007 energy bill boosted fuel-economy standards. Even the strictest regulations proposed by California, being fought vigorously today by the auto industry with help from the Bush Administration, would only meet China's current standards in 2016. This is the sad legacy of the industry we now want to bail out. Foreign companies that embraced green technologies rather than fight them are now the global leaders. In stark contrast, Detroit's arrogant disdain for environmental concerns about fuel efficiency and pollution controls ultimately doomed the industry to second-class status, and now we all pay the price. If the political winds are too strong to resist an ill advised bailout, Obama should use his enormous clout to extract maximum concessions from Detroit. Now is the time. Obama certainly has a good foundation on which to build. In a speech to automaker executives last year, Obama criticized the industry for doing almost nothing to lessen the country's dependence on foreign oil by improving fuel economy. His plan called for raising standards for both cars and trucks to 40 mpg by 2022, over current standards of 27.5 mp for cars and 24 mpg for light trucks. That proposal, while tough and gutsy in an election year, particularly in light of the Democratic base, does not go far enough. The bailout is the opportunity to demand more as a quid pro quo for government assistance. The money must come with strings attached, so that funds are used to: 1) Meet world standards for fuel efficiency, with no reason to set a goal below Japan's current level of 45 mpg. Until alternative powerplants become commonplace, this must include efforts to improve the efficiency of internal combustion engines. Cylinder deactivation to match power to demand, flywheels and idle-off operations are some examples of methods for improving the old-style engines. 2) Lead the world in reducing greenhouse gas emissions from cars and trucks. Fuel efficiency is only one part of that equation. Automakers must further reduce emissions from internal combustion engines using advanced pollution control technologies. 3) Commit to the commercialization of advanced electric cars, gas-electric hybrids and fuel cell vehicles. The United States is woefully behind Japan. Toyota set the standard with the first kid on the block, the Prius. Detroit is so far behind the curve that Ford is using Toyota's hybrid technology rather than home-grown ingenuity. How embarrassing. Honda is already producing the FCX Clarity, a zero-emission hydrogen-powered fuel cell sedan. In 2009, Mitsubishi will begin selling the iMiev, with a top speed of 80 mph and a range of 100 miles. A full charge will take only seven hours. We are getting our behinds seriously kicked. Environmental transportation technologies are the forward wedge of the global green economy of the future, and we are being pushed aside as an economic lightweight because Detroit failed to see the green light. Care will need to be taken to ensure we do not run afoul of unfair trade practice laws as bailout money is used to advance powerplant technology and retool new factories capable of producing the next generation of automobiles. That is a surmountable barrier. Obama is not yet president, but now is the time to get brutally tough with an industry that has failed the American people. If they want our money, they will need to meet our demands (Source: Huffington Post: Jeff Schweitzer.) Senate Majority Leader Harry Reid of Nevada still plans to move forward next week. "Senator Reid still believes it is important to address this crisis plaguing our auto industry," said Reid spokesman Jim Manley, adding that bipartisan cooperation will be needed. "We cannot do it without the support of Senate Republicans, who I hope will join us to pass a bill that saves the jobs and protects the livelihoods of millions of hard-working Americans." On the auto measure, House Financial Services Chairman Barney Frank is leading efforts to ready a consensus bill. In an interview, Mr. Frank said the legislation would extend $25 billion in aid, on top of $25 billion in taxpayer-backed loans already approved for the industry. Mr. Frank, a Massachusetts Democrat who was a key author of the financial-market rescue, said a top priority is providing "maximum protections for taxpayers." A fresh sign of the auto industry's troubles came Thursday (13 Nov) as Standard & Poor's Ratings Service lowered the credit ratings of two big auto suppliers, and put 13 others on watch for possible reductions, because of their ties to car makers. General Motors Corp., Ford Motor Co. and Chrysler LLC have argued that a collapse by any one of them could spark a chain reaction among parts suppliers and dealers that would hurt a wide swath of the U.S. economy. Even if the car companies get financial help, they are unlikely to avoid restructuring and downsizing, which would also affect suppliers. Some Republicans, mostly from the industrial Midwest, have backed the auto industry's appeal for aid. Among them is Sen. George Voinovich of Ohio. "The senator believes helping the auto makers remain viable is truly putting Main Street over Wall Street," said a Voinovich spokesman. But for the most part, supporters of the industry have remained in the shadows on Capitol Hill. (Source: Wall Street Journal.) Republicans Not Happy with Auto Bailout (Nov 2008) "The financial situation facing the Big Three [auto makers] is not a national problem, but their problem," said Alabama Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee. In the House, Minority Leader John Boehner, the Ohio Republican, assailed the proposed aid to Detroit as "neither fair to taxpayers nor sound fiscal policy." Obama said he believes aid is needed but that it should be provided as part of a long-term plan for a "sustainable U.S. auto industry" — not simply as a blank check. "For the auto industry to completely collapse would be a disaster in this kind of environment," Obama said in a "60 Minutes" interview airing Sunday night on CBS. "So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan — what does a sustainable U.S. auto industry look like?" (Fox News.) Lawmakers opposed to the bailout say Chapter 11 might be a better option than government loans and they cite the experience of airlines that have gone through the process of reorganization. But GM CEO Rick Wagoner, also appearing on Detroit's WDIV, said: "This idea that you just go into Chapter 11 and hang around for three months ... this is a fantasy. This is not going to work. Most important to what is going to happen is most people will stop buying the cars of a bankrupt company." Shelby and Levin were interviewed on NBC's "Meet the Press" and Shelby also appeared with Frank on CBS' "Face the Nation." Kyl spoke on "Fox News Sunday" and Gutierrez was on "Late Edition" on CNN. Bailout Stalled (Nov 2008) Top Senate Democrats suggested that a bill to rescue Detroit's Big Three automakers was stalled and challenged the Bush administration to take steps to save the industry if congressional efforts falter. The White House quickly rebuffed the suggestion. The Democrats want to use part of the $700B financial rescue package to bailout the auto companies -- but the President and treasury are against that idea. The White House wants Congress to draw the $25 billion from an Energy Department program established to encourage production of fuel-efficient cars. "The purpose of the $700 billion was clearly intended for financial institutions, and we wanted to keep that whole," White House press secretary Dana Perino said. . It was up to Congress to act. Banking Committee Chairman Chris Dodd, D-Conn., was even more downbeat, calling the possibility of reaching agreement "remote." "I don't see how in the next few days this is going to move forward," Dodd told reporters. The difficulties of striking a deal on the package before a new president and a new Congress with expanded Democratic majorities take office appeared to be too great to overcome. The deadlock persisted even as the heads of General Motors, Ford and Chrysler pleaded for relief and as their congressional backers urged colleagues not to punish them for past mistakes. A Senate vote on an automotive bailout plan clearly lacked the necessary support to advance. General Motors Corp. CEO Rick Wagoner told the House Financial Services Committee that collapse of the U.S. auto industry could lead to a loss of 3 million jobs within the first year and ripple throughout communities around the nation. In sometimes contentious testimony, Wagoner was pressed on when GM would run out of money if the loans weren't extended. He said he couldn't say precisely, but that the company now was burning through "$5 billion each month." Still, with the $25 billion emergency package, "We think we have a good shot to make it through this," Wagoner said. He said he anticipated that, if the package is approved, GM would qualify for about $10 billion to $12 billion of the money. (Source: Associated Press.) As far as GM is concerned, filling for bankruptcy is still off-the-table. The unions position remains to still make no concessions on wages to save their jobs. To conservative Republicans, this bailout looks to be a handout with the automakers showing up for a free lunch. Despite all the bluff and bluster, the Demoratically-controlled Congress just couldn't pull it off. A Democratic Congress, unwilling or unable to approve a $25 billion bailout for Detroit's Big Three, appeared ready to punt the automakers' fate to Bush -- who is against the bailout. Caught in the middle of a who-blinks-first standoff are legions of manufacturing firms and auto dealers -- and millions of Americans' jobs -- after Senate Democrats canceled a showdown vote that had been expected 20 Nov. Democrats Backoff -- New Plan in Dec (Nov 2008) Democratic leaders in Congress spelled out the terms for Detroit's auto makers to be considered for government aid, calling on chief executives of the companies to provide a "credible restructuring plan" for their foundering businesses. U.S. House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., said the companies must provide a "forthright, documented assessment" of their companies' finances, including the amount of money they need to return to "long-term viability." The letter sets a Dec. 2 deadline for the plans to be submitted to Democratic Congressional leaders. If the plans pass muster, Congress would convene the second week of December to consider an aid package for General Motors Corp. (GM) , Ford Motor Co. (F) and Chrysler LLC, the letter states. The letter was sent to GM's Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli a day after the Democratic leaders concluded that there wasn't enough support in Congress for a $25 billion bailout of the auto makers. The Democratic leaders said the auto makers hadn't convinced lawmakers that they had a coherent strategy to return their companies to financial footing. Any taxpayer-funded loans provided to companies would have to be granted " senior status," meaning they would be paid off before any other debt held by the companies, according to the letters. The government would also be given warrants to buy company stock at reduced prices. (Source: CNN Money.) U.S. auto companies employ nearly a quarter-million workers, and more than 730,000 other people have jobs producing the materials and parts that go into cars. About 1 million on top of that work in dealerships nationwide. If just one of the auto giants were to go belly up, some estimates put U.S. job losses next year as high as 2.5 million. THIS WAS THE FIRST OBAMA DEFEAT IN TESTING HIS "MANDATE" -- TO THE REPUBLICANS, BANKRUPTCY FOR THE CAR MAKERS IS AN OPTION -- OBAMA NOW STATED WITHOUT PLAN FOR RESCUE AND RECOVERY, NO BAILOUT.. As a result, Congress rebuffed appeals for help from executives from GM, Chrysler and Ford. Congressional leaders urged them to return in December with a specific reorganization plan that spelled out how much money they need and how they intended to remain financially viable. Obama's Transition Team head Axelrod said "the signal sent by Congress was the right one." The auto executives did not make a strong impression during congressional hearings last week _ appearances that were further undermined upon news that they had flown to Washington in corporate jets. Axelrod couldn't resist taking a jab at the executives. "I hope that they will come back to Washington in early December _ on commercial flights _ with a plan," he said. Two factors may make [the Big 3 auto bailout] an especially hard sell: Not only do six in 10 Republicans oppose the loan, so do six in 10 independents; and exactly twice as many Americans "strongly" oppose it (36 percent) as strongly support it. Forty-eight percent of Republicans and 38 percent of independents are "strongly" opposed, well more than the 22 percent of Democrats who strongly support it. (Source: Daily KOS.)  December 2008Big Three Seek $34 Billion (Dec 2008) Detroit's Big Three auto makers presented turnaround plans to Congress on 2 Dec that indicate both General Motors Corp. and Chrysler LLC could collapse by the end of the month unless they get billions of dollars in emergency government loans. As part of a renewed bid for a bailout, GM said it needs an immediate injection of $4 billion to stay afloat until the end of the year, a fact it hadn't before disclosed. In total, the company said it needs $18 billion in loans -- $6 billion more than it said it would need just two weeks ago.Chrysler's 14-page summary of its presentation to Congress requests $7 billion, and it said it needs the funds by Dec. 31. Chrysler also wants $6 billion from a Department of Energy program aimed at promoting fuel-efficient vehicles. Ford Motor Co. seeks a $9 billion line of credit from the government, though it adds it may not need to tap it. In addition, Ford wants $5 billion from the Energy Department program. All three makers said they will consolidate operations and accelerate production of higher-mileage vehicles. In addition, GM and Ford plan to trim their brands. The urgent call for help comes as lawmakers have begun reaching out to Wall Street experts to explore how the government could help the companies prepare bankruptcy filings that would take them in and out of Chapter 11 protection quickly, with much of the financing and other restructuring measures worked out with creditors in advance, people familiar with the matter said.  In the past several days, congressional representatives have met with bankers and bankruptcy experts to discuss the possibility of a so-called prearranged bankruptcy for either GM or Chrysler, these people said. One idea that emerged from the talks would have the U.S. government put up as much as $40 billion to fund reorganizations under bankruptcy for GM and Chrysler, these people said. Both companies have said they don't see bankruptcy as a viable option for any auto maker. They believe customers would stop buying cars and the company would be forced to liquidate. But bankers and other financial experts are telling lawmakers that bankruptcy is the best option for creating smaller but viable U.S. car companies. "I think GM is eminently re-organizable," said Durc Savini, managing director at Miller Buckfire & Co., a New York investment banking firm that advised on the bankruptcies at auto suppliers Dana Corp. and Dura Automotive Inc. He said he recently talked with staff members for three House and Senate members to discuss a bankruptcy at one or all of the Detroit makers. Mr. Savini said he told the staffers a bankruptcy could work, but would likely require government money and concessions from workers, vendors, management and debtholders. In a conference call with reporters, GM President Frederick "Fritz" Henderson said bankruptcy is not a viable option and the company is focusing solely on securing help from Washington. "There is not a Plan B," he said. The United Auto Workers union is expressing a different view. At a meeting on 2 Dec in Detroit, top UAW officials told worker representatives that GM could be forced into a Chapter 11 filing before Christmas if the company fails to get government funding in coming days, people familiar with the matter said. The three companies presented their requests for help as they were hit by another batch of bad news. U.S. new-vehicle sales fell 37% in November to 746,789, according to Autodata Inc. It was the first time in decades that monthly sales fell below 800,000. The closely watched seasonally adjusted annualized sales rate was 10.18 million vehicles, a worse-than-expected drop from October's 10.8 million GM's sales fell 41%, Ford's 30% and Chrysler's 47%. Foreign auto makers were hit hard, too. Toyota Motor Corp.'s U.S. sales fell 34% and Honda Motor Co.'s 31%. The Big Three last month appealed to Congress for $25 billion in low-cost loans to carry them through the downturn in the economy and one of the worst auto sales slumps in decades. But lawmakers were unconvinced that the three had clear restructuring plans to return to profitability and told them to come back by Dec. 2 with more details on how they would use taxpayer funds to "become viable." House Speaker Nancy Pelosi (D., Calif.) said Tuesday she hoped to help the industry, but suggested much will depend on the assessments made of the industry plans. "We want to see a commitment to the future," she said. "We want to see a restructuring of their approach, that they have a new business model, a new business plan." In what could be a boost to Detroit's hopes, Ms. Pelosi said bankruptcy isn't an option for the companies because such reorganization would take too long. Senate Majority Leader Harry Reid (D., Nev.) said that if Democrats decided to proceed with a bailout, legislation could come as soon as Monday. In its 33-page presentation, Ford said it doesn't need federal funds immediately but asked for the $9 billion credit line in case the recession is longer and deeper than expected. It estimated it will break even or return to profitability by 2011 and added it would accelerate the development of hybrid and battery-powered vehicles, cut the number of dealers selling its products, and retool plants to make small cars in the U.S. it can sell profitably. In a phone interview while riding in a Ford Escape hybrid to Washington, where the chief executives of the Big Three will testify starting Thursday, Ford CEO Alan Mulally suggested the UAW may have to make concessions to help the companies recover and persuade Congress to approve aid. "All of the elements" of the UAW labor contract should be re-examined to keep the U.S. auto industry competitive, he said. Ford appears to be in better shape than GM and Chrysler, in large part because it mortgaged almost all of its assets in 2006 to raise $24.5 billion. In the document it submitted to Congress, Chrysler, controlled by private-equity firm Cerberus Capital Management LP, said it is on track to end the year with just $2.5 billion in cash, and that it is due to pay out $11.6 billion for parts, wages, and other costs between Jan. 1 and March 31. It seeks a "bridge loan" of $7 billion to "ensure the long-term viability of the company." In a concession to receive the loan, Cerberus will tell Congress it is willing to convert its debt in Chrysler to equity, said an executive familiar with its thinking. In his testimony this week, Chrysler CEO Robert Nardelli plans to call on the auto makers and federal government to create "an independent joint venture" to develop improved energy technology, such as batteries for electric and hybrid vehicles, a Chrysler executive said. In GM's conference call Tuesday, Mr. Henderson said GM is seeking $12 billion in loans and an additional credit line of $6 billion. In return, GM would be open to giving taxpayers warrants for company stock, a senior position among its creditors, and a promise to pay the money back around 2012. Mr. Henderson said GM believes its North American operations can break even by that year. GM plans to begin discussions this week with bondholders and the UAW in an attempt to cut its debt by $30 billion, or by about half. It will ask investors to swap debt for equity, and aim to restructure GM's obligations to a UAW health-care trust set to begin paying retiree benefits in 2010. GM told Congress it is considering selling its Saab and Saturn divisions, and may trim its lineup to about 40 models from 60. (Source: Wall Street Journal: John Stoll, Matthew Dolan, Jeffrey McCracken and Josh Mitchell.) UAW Makes Concessions -- but not enough (Dec 2008) The big news was that the United Auto Workers (UAW) was willing to make concessions. The president of the United Auto Workers said the union was willing to revamp its contract to pressure Congress on a $34 billion federal bailout loan for the crippled industry, as Big Three executives prepared to resume their case in Washington on 4 Dec. But the appeal faces massive customer resistance in Congress, where many lawmakers are finding little public support for the bailout of General Motors Corp., Ford Motor Co. and Chrysler LLC. Hoping to sway public sentiment, UAW leaders from across the country held an emergency meeting 3 Dec. UAW President Ron Gettelfinger emerged from the meeting to say the union would rework a retiree health care trust fund, eliminate the union's maligned jobs bank program - which Mr. Gettelfinger dubbed a "lightning rod" for criticism - and cut additional measures that would loosen the union's trademark job-security protections. "We're going to make modifications; we're not opening the contract, if you will," Mr. Gettelfinger said at a news conference at Detroit's Renaissance Center, the corporate home of GM. However, "The public mood, which I saw when I traveled the state recently, is very much against bailouts," said Sen. Arlen Specter, Pennsylvania Republican. Nevertheless, he said in an interview on Fox, the notion of a partial failure of such a large industry would be too serious to allow public sentiment to solely decide. In Washington, Rep. Tom Price, Georgia Republican, said he has not budged from his opposition to an auto industry bailout and his constituents are backing him. "All they see is the government printing money and obligating their children and grandchildren to a greater debt," Mr. Price said. A CNN/Opinion Research Corp. poll released Wednesday found that 61 percent of those surveyed opposed federal aid to the car companies. Even in the companies' industrial Midwestern base, 53 percent said they did not support a government aid package. (Source: Washington Times.) However, the UAW concessions was not enough for some Republicans who at the last minute revolted against the White House negotiated bailout. The anti-union sentiment rose to the surface in the final desperate hours of negotiations. Republicans insisted that the UAW agree to cut its wages to be competitive with foreign companies such as Honda, Toyota and BMW by a set date. UAW officials and their Democratic allies balked, saying the autoworkers were being told to make sacrifices that had not been demanded of other industries receiving government bailouts. "We could not accept the effort by the Senate GOP caucus to single out workers and retirees for different treatment and to make them shoulder the entire burden of any restructuring," UAW President Ron Gettelfinger said, arguing the union had gone further than any other stakeholder in making concessions to help the companies avoid bankruptcy. But Sen. Jim DeMint (R-S.C.), argued that the unions had helped create Detroit's plight. "It is no coincidence that the healthy automakers in the United States are located in 'right-to-work' states and are not unionized by the UAW," he said. "Right-to-work" states bar agreements between trade unions and employers making membership or payment of union dues or "fees" a condition of employment, either before or after hiring. Rep. John D. Dingell (D-Mich.), a labor ally, said on 12 Dec that Republican senators who opposed the bailout might have "wanted to crush a longtime political rival, the United Auto Workers," without concern for the economic consequences. Democrats lauded the UAW as a hero in the bailout process for agreeing to new concessions on top of major ones given in 2005 and 2007. House Speaker Nancy Pelosi (D-San Francisco) called the union "courageous" just before the House approved the bailout Wednesday. But some Republicans framed the UAW as the villain, criticizing what they called lavish wages and benefits that they said had driven General Motors, Chrysler and, to a lesser extent, Ford to their knees. "I'm sure that I'm going to be asked, 'Congressman, I work at Honda' or 'I work at Mercedes. I get $40 an hour. Why are you going to take my tax dollars and pay it to a company that's paying their employees $75 an hour?' " Rep. Spencer Bachus (R-Ala.) said last month. That wage figure -- widely used by opponents of the auto industry bailout -- is not in fact the wage paid to current workers. It is an approximation of the costs of salaries and benefits for current and retired workers. After wage concessions in recent contracts, the UAW says its workers at GM, Ford and Chrysler plants range from $33 an hour for skilled trades to $14 an hour for new hires. Precise wages and extrapolated benefits costs for U.S. workers at nonunionized foreign companies, such as Honda and Toyota, are difficult to ascertain, but Michigan State University professor Richard Block, a labor relations expert, estimated salaries for current workers are approximately the same. The Big Three automakers have higher labor costs primarily because they have operated factories in the U.S. much longer than their foreign counterparts, so have many more retirees receiving pension and healthcare payments, Block said. Even if UAW workers at GM took a 20% pay cut, it would only save the company about $1.1 billion annually because the company's unionized workforce in the United States has decreased dramatically in recent years, to 55,000, he said. When Congress convenes in January, the expanded Democratic majorities are expected to push for an Employee Free Choice Act, also known as the "card check," under which companies would recognize unions if a majority of workers signed cards saying they favored a union. That would replace the traditional method of a secret ballot among workers. Block and other analysts believe the looming fight added to the political maneuvering over the bailout. "If the public could be convinced the problem with the auto industry is the UAW . . . then it will be easier than otherwise to marshal public support against unions and their legislative agenda." (Source: LA Times.) Senate Republicans Revolt Against Bailout -- White House Steps in (Dec 2008) When top Democrats and the White House agreed on a compromise, a revolt broke out. The House approved the plan on 10 Dec, but the package faltered in the Senate on 11 Dec amid strong objections lodged by Republicans. They used the opportunity to demand deep concessions from labor unions, including a commitment to bring wages in line with those at U.S. operations for foreign-based producers such as Toyota Motor Corp. and Nissan Motor Co. The dispute broke apart the talks and spilled onto the Senate floor, where leaders of both parties declared the effort dead on 11 Dec. Senate Republicans' dramatic revolt against a White House-backed auto industry rescue plan is fraught with political risk. While the high-stakes gambit places them squarely within the mainstream of anti-bailout public sentiment, at the same time it exposes the party to potentially devastating criticism that its failure to compromise doomed the Big Three automakers and deepened the economic recession. Republicans argue that their rejection on 11 Dec of a $14 billion loan package came in response to the concerns of angry taxpayers who are unwilling to pay for an auto industry bailout on the heels of October's $700-billion financial bailout package. But that sentiment betrays the deep rifts the issue has revealed within the party, pitting Rust Belt and auto-state senators who joined Democrats in a plea for federal aid against their Southern colleagues who represent states where foreign-owned automakers constitute a significant economic presence. All of this takes place against the backdrop of an intraparty debate over whether the GOP has lost its core value of limited government. By opposing the automaker bailout, Republicans now find themselves vulnerable to charges that they are insensitive to ailing American auto companies and the millions of workers reliant on the domestic auto industry, a problem compounded by their inability to rally around a clear alternative to the $14 billion package of loans that had been backed by Democrats and the White House. Republicans furious at the government's intervention to prop up the economy say the vote against the bailout marks the beginning of the party's return to its small government roots. But even those members acknowledged the downside risk. Republicans will now have to convince the public that they sought a middle ground, but ultimately decided to side with the taxpayer. (Source: Politico.) Either way, GOP aides are already plotting their strategy to deal with any blowback on the bailout vote. They'll portray the UAW as intransigent; hammer away at the theme that unions don't effectively represent mainstream workers; and play up the involvement of labor officials in the corruption scandal revolving around the Democratic governor of Illinois. The hope: By making Big Labor the bogeyman, Republicans will escape blame for whatever happens with the automakers and set themselves up well for the card check debate expected to hit Capitol Hill after the first of the year. (Source: Politico.) Some see this Republican revolt as a move against the UAW. Handing a defeat to labor and its Democratic allies in Congress was also seen as a preemptive strike in what is expected to be a major battle for the new Congress in January: the unions' bid for a so-called card check law that would make it easier for them to organize workers, potentially reversing decades of declining power. The measure is strongly opposed by business groups. "This is the Democrats' first opportunity to pay off organized labor after the election," read an e-mail circulated Wednesday among Senate Republicans. "This is a precursor to card check and other items. Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it." One of the leading opponents of the auto bailout, Sen. Jim DeMint (R-S.C.), said: "Year after year, union bosses have put their interests ahead of the workers they claim to represent. Congress never should have given these unions this much power, and now is the time to fix it." Of course, for Democrats' part, they were fighting for one of their most loyal supporters in backing the $14-billion bailout. The UAW, which represents about 150,000 employees of the Big Three, delivered campaign contributions and foot soldiers to help elect Barack Obama president, especially in crucial states such as Michigan and Ohio. (Source: LA Times.) Administration officials had been warning for weeks that failure to pass the bill could lead to an even deeper recession. The White House use of its authority under the financial bailout law known as the Troubled Assets Relief Program to provide aid to the industry was strongly resisted by the Bush administration. The Bush administration's resistance to release the money has put the onus on Congress. But Senate Republicans stayed away from negotiating a bailout, allowing the White House to broker a deal with Democrats, which the House approved on 10 Dec with 32 Republicans, mostly from auto-producing states, joining 205 Democrats in voting for the measure. However, the majority of Republicans rejected the deal. Throwing a lifeline to Detroit's ailing automakers, the White House reversed course on 12 Dec and said it would consider using the $700 billion financial-rescue plan to avert a bankruptcy of the Big Three that could deepen the U.S. recession. The announcement came hours after negotiations collapsed in Congress over a compromise bailout plan fiercely opposed by Senate Republicans. That package would have set up $14 billion in loans to the companies and a government-run restructuring process. The loans to be offered could be more limited than the $14 billion that Congress was contemplating -- perhaps closer to $8 billion, one person familiar with the situation said. General Motors Corp. would be a recipient, this person said. GM is hoping President George W. Bush will come through with about $10 billion to keep the company going. It warned Congress it needed at least $4 billion by the end of the month. It wasn't clear whether loans would be made available to Chrysler LLC, which is controlled by private equity firm Cerberus Capital Management. Cerberus came in for heavy criticism during the recent debate for not bailing out its own company. Ford Motor Co. has said all along it doesn't need a short-term lifeline, but could need help if one of its peers keeled over. For now, the biggest question for the White House is whether it will be able to extract any of the cost-saving concessions it had been seeking from the car companies, their unions and other interested parties. The Bush administration is beginning the process of examining the companies' books to figure out how much money is needed and intends to obtain protections for taxpayers. The Big Three directly employ almost 250,000, according to an administration estimate, and also support about one million retirees and their spouses, not counting the vast network of suppliers and dealers whose businesses are intertwined. In all, administration officials estimate that the failure of the U.S. auto makers would cost the economy more than one million jobs and would reduce economic output by more than 1%, significantly prolonging the downturn. (Source: Wall Street Journal.) Treasury antes up in auto bailout (Dec 2008) Stepping into deeper waters to help the auto industry, Treasury Monday night added $6 billion to the $17.4 billion bailout announced Dec. 19, chiefly to help the financial arm of General Motors Corp. Using financial markets rescue funds, Treasury will purchase $5 billion in senior preferred equity from GMAC LLC, and up to $1 billion more will be lent to GM itself so the automaker can participate in a rights offering at GMAC, which has wanted to reorganize itself as a bank holding company. GMAC won approval from the Federal Reserve last week to become a bank holding company, but that was contingent on the auto and home loan provider raising at least $30 billion in capital. Treasury's announcement would appear to move GMAC closer to that goal, and a GM spokeswoman was optimistic Monday night. From Treasury's standpoint, the new commitment raises again the pressure on the White House, Congress and the incoming Obama administration to come together on some plan for releasing the second half of the $700 billion financial rescue fund enacted in October. Even before Monday night, Treasury would need this to happen soon to implement its aid package for the auto industry. And the added $6 billion only makes it more important. There is some leeway in terms of actual cash flow, since some prior commitments to the banking industry have yet to be fully implemented. But a Treasury official said Secretary Henry Paulson would be meeting "soon" with congressional leaders and the Obama transition team on how to proceed. "This will restore liquidity in the auto market and help Americans purchase a car," said Steve Bartlett, President and CEO of the Washington-based Financial Services Roundtable. "This, combined with the deal announced with automakers, will strengthen the entire auto market from manufacturing all the way to the consumer's driveway." (Source: Politico.) February 2009More Money for Auto Makers (Feb 2009) Feb 17 is the deadline for the plan is supposed to describe how GM will return to profitability and compete with Japanese rivals such as Toyota Motor Corp. GM is scrambling. General Motors Corp. said on 10 Feb that it will cut 10,000 white-collar jobs world-wide this year, a move that could help prod the company's main union and bondholders into making concessions as required by GM's $13.4 billion federal loan package. GM announced the cuts, amounting to 14% of its salaried workers globally, as it rushes to pull together a plan it must submit to the Treasury Department by Feb. 17. (Source: WSJ.)The plan pumped $13.4 billion by mid-January into the companies from the fund that Congress authorized to rescue the financial industry. But the two companies had until March 31 to produce a plan for long-term profitability, including concessions from unions, creditors, suppliers and dealers. The deadline for submitting the plan was 17 Feb. In February, another $4 billion will be available for G.M. if the rest of the $700 billion bailout package has been released. Pigs Return to the Trough -- GM wants $30 billion more (Feb 2009) General Motors Corp., presenting a dire outlook for the future, said Tuesday it may need $30 billion in total government financing to weather the economic downturn and would cut 47,000 jobs worldwide and shutter five more U.S. factories in a massive restructuring plan. The job cuts, which would take place by the end of this year, include 10,000 salaried and 37,000 blue-collar positions, amounting to 19 percent of the company's current global work force. GM is already surviving on $13.4 billion in federal loans and said in a 117-page plan submitted to the Treasury Department that it would seek an additional $16.6 billion if economic conditions worsen, but it could achieve profitability in two years and fully repay its loans by 2017. The U.S. automaker presented its turnaround plan as it worked to win concessions from the United Auto Workers union and bondholders to dramatically resize the company. The UAW said it reached a tentative deal with GM, Chrysler LLC and Ford Motor Co. on contract changes, but discussions were still under way about how the companies would fund union-run trust funds that will take over the companies' retiree health care obligations starting next year. GM said it was making progress but had not yet achieved all the concessions from union workers, lenders, dealers and suppliers that the Bush administration sought in the loan terms provided last December. (SITE NOTE: The UAW won't budge on their fat-cat retirement fund. Of course, my logic is to let GM go bankrupt and then the UAW won't have any retirement fund.) Chief Financial Officer Ray Young said the company hopes to exchange two-thirds of its roughly $28 billion in unsecured bond debt by the end of March in order to meet the loan terms. Bondholders, he said, signed a letter saying that they were making progress with the company. The UAW also signed a similar letter saying progress had been made on the health care trust fund. The terms of the loan suggest that GM make half of the required $20 billion in payments to the fund as company stock instead of cash. Young said the talks have reached a critical stage. "At this juncture we feel we can make progress" and meet requirements to finalize the deals by March 31, he said. President Barack Obama's administration will review the plans from GM and Chrysler LLC but could pull the loans if they don't approve the turnaround plans by then. The review could be extended into April, but if the government demands the money back it would force the companies into bankruptcy. Chairman and CEO Rick Wagoner said the plan submitted on 17 Feb is more aggressive than the one presented to the government in December because besides U.S. sales plummeting to a 26-year low, the global economy and auto sales worldwide have deteriorated since then. In December, GM said it might need a total of $18 billion in government financing but only got a commitment of $13.4 billion, including $4 billion that the automaker received on 17 Feb. GM predicted it could run out of money next month and said it wants to receive an additional $2 billion in March and an additional $2.6 billion in April. The company has a $4.5 billion revolving line of credit that must be refinanced in 2011 but now believes that private funding won't be available, so the automaker is asking the government to lend the money. If market conditions deteriorate, GM says it may also need an additional $7.5 billion revolving line of credit to stay afloat, for a total potential request of $30 billion. Chief Operating Officer Fritz Henderson said the company explored three bankruptcy scenarios, all of which would cost the government more than $30 billion. The government, he said, is the only place the company could get financing for a Chapter 11 reorganization, because the credit markets are frozen. The worst-case bankruptcy scenario would cost the government $100 billion, Henderson said, because revenue would severely drop. GM's plan details extensive cuts. Of the 47,000 jobs to be slashed, 26,000 will be outside the U.S. The new plan has the U.S. work force declining from about 92,000 hourly and salaried employees at the end 2008 to 72,000 by 2012. In its Dec. 2 plan to the Bush administration, GM said it would cut the number of plants from 47 in 2008 to 38 by 2012. But the new blueprint goes further, cutting an additional five plants by 2012 to a total of 33 facilities. GM didn't identify which plants will be closed. GM would further reduce the number of vehicle models. The plan envisions a reduction in nameplates from 48 in 2008 to 36 by 2012. That's four fewer models than in the December plan. GM said all of its major U.S. vehicle launches from 2009 to 2014 would be high-mileage cars and crossovers. GM's eight brands would be reduced to four core lines -- Chevrolet, Buick, Cadillac and GMC -- as the automaker said in December. But the company said Pontiac also would remain as "a highly focused niche brand." GM, which has been reviewing the Saab brand and offered it for sale, said the Swedish unit could file for bankruptcy later this month. GM said it is requesting support from the Swedish government prior to any sale, and the company has developed a proposal that would cap GM's financial support with Saab's operations becoming an independent business by January 2010. Wagoner said the company is still talking to potential buyers for the Hummer brand. The Saturn brand, meanwhile, will remain in operation through the end of 2011. GM said it's open to the possibility of a plan from retailers or investors that would allow a spin-off or sale of Saturn. GM would significantly accelerate the number of gas-electric hybrids and plug-in hybrid cars. It plans to offer 14 hybrids and plug-ins by 2012 and 26 by 2014, when alternative-fuel vehicles are expected to account for 65 percent of sales. Included in the projection is the plug-in Chevrolet Volt, due in showrooms by late 2010, and two additional vehicles sharing the Volt's extended-range electric vehicle technology. GM, however, is scaling back its anticipated fuel economy gains, a metric closely watched by environmentalists in Congress. GM said it will meet federal fuel efficiency standards through the 2015 model years, but the progress will be slower. The Dec. 2 plan said its car fleet average would reach 37.3 miles per gallon by 2012 compared with 31.6 in 2008. But GM now predicts its car fleet will reach 33.7 mpg by 2012 and not surpass 38 mpg until 2014. (Source: Huffington Post: AP.) Pigs Return to the Trough Part II -- Chrysler wants $5 billion more (Feb 2009) said it needs $9 billion of total government financing and it plans to cut 3,000 jobs and eliminate three vehicle models as part of its restructuring plan submitted to the Treasury Department on 17 Feb. Chrysler, which has been kept alive by the $4 billion in government loans it already has received, said it has implemented or reached fundamental agreements on concessions with unions, dealers, suppliers and lenders to comply with the requirements of its government loans and make its labor costs competitive with those at foreign automakers' U.S. plants. The privately held automaker also revealed that it lost $8 billion in 2008. When Chrysler originally asked for government aid in December it said it would need a total of $7 billion. But the Auburn Hills, Mich., company said Tuesday that the economy and the market for new cars has deteriorated significantly since its initial request. Chrysler said it now projects that automakers will sell 10.1 million vehicles in the U.S. this year, the lowest level in four decades. Previously, the company had predicted yearly sales of 11.1 million. Chrysler Vice Chairman and President Jim Press said in the conference call that the company will eliminate the Chrysler Aspen, Dodge Durango and Chrysler PT Cruiser models. The Aspen and Durango, both large sport utility vehicles, recently have been among the worst-selling vehicles in the company's lineup. The PT Cruiser, which was released to much fanfare in 2000 due to its funky styling, has also seen its sales slump. Nardelli said Chrysler management will comply with restrictions on executive compensation. He also said the company has eliminated company matching to employee 401(k) plans, has ended merit pay increases and has made other white-collar cost cuts. The company also said that as part of its restructuring plan, it will reduce production capacity by 100,000 units and cut fixed costs by $700 million in 2009. The company said it will sell $300 million in "non-earning assets" in 2009 and plans to start paying back its government loans in 2012. Chrysler said it still plans 24 vehicle launches in the next 48 months and reiterated its intention to put an electric vehicle on the road by 2010. The 199 pages that Chrysler submitted to the Treasury Department included the alternative of bankruptcy, should the government not come through with additional aid. Nardelli said a Chapter 11 bankruptcy filing would require some $20 billion to $25 billion in debtor-in-possession financing, or else the company would have to liquidate. In its filing, Chrysler also allowed a rare and detailed peak at its books. Chrysler has not reported detailed financial results since it went private in 2007, when private-equity firm Cerberus Capital Management LP bought an 80.1-percent stake in the automaker. Besides booking a net loss of $8 billion in 2008, Chrysler said it had a cash balance of $1.9 billion at the end of the year, compared with $9.5 billion at the end of 2007. The company reported $47.6 billion in revenue for the year. Last month, Chrysler announced a nonbinding alliance with Italian automaker Fiat SpA, under which Fiat would take a 35 percent stake in Chrysler and share its small-car technology. Chrysler has been hobbled by a vehicle lineup that is heavily reliant on trucks and sport utility vehicles. That tie-up was contingent on Chrysler getting additional government aid. Chrysler stood by that alliance Tuesday, saying it would enhance its viability plan and improve its product lineup. ... Chrysler said it had studied three potential partnerships over the past 18 months. Besides the tie-up with Fiat, the company explored a partnership with General Motors Corp., but GM "took it off the table." Chrysler also said it looked into a partnership with the Japanese automaker Nissan Motor Co., but was unable to pursue it. However, the company said it still plans to build full-size pickup trucks for Nissan under a previously announced agreement. During 2008 Chrysler said it cut fixed costs by $3.1 billion, slashed its work force by 32,000, or 37 percent, and discontinued four models, among other cost-saving measures. The company has been plagued by the downturn in sales and has experienced the most severe sales drop among the Detroit Three. Chrysler's U.S. sales fell 55 percent in January, compared with a 37 percent drop across the entire industry. General Motors Corp. also outlined its restructuring proposal to the U.S. government Tuesday. GM's restructuring plan said it may need up to $30 billion in government loans as it implements a survival plan that includes cutting 47,000 jobs and closing five more U.S. factories. (Source: Huffington Post.) March 2009Auto Sales: Worst February in 40 Years (Mar 2009) February was another dismal month for carmakers as every major producer saw sales drop from 35% to 53%. The sales rate of 9.1 million cars sold was the worst February performance in 40 years as a dismal economy warded nervous consumers away from showrooms. Car sales fell 41% for the month; General Motors (GM) was the biggest loser, with sales falling 53%. Ford Motor (F) also took a big fall, as sales dropped 48%. Toyota's (TM) U.S. sales fell 40% and the company has asked the Japanese government for $2 billion to help its finance arm write car loans.The news was bad for other Japanese automakers, too. Honda (HMC) sales fell 38% for the month, and Nissan (NSANY) was down 37%. (SITE NOTE: Latest news is Toyota's financial unit has asked for an emergency loan from a state-backed lender, with reports putting the figure at more than $3 billion. The world's biggest car maker says the international financial situation is squeezing its business, forcing it to ask for an emergency loan from the Japan Bank for International Cooperation. It is the first time the state-backed bank has been asked to lend to a Japanese car buyer. It is being reported that Toyota is asking for 200 billion yen. The world's biggest auto manufacturer is expecting to report a $7 billion operating loss later this month. -- THE WTO IS DEAD!!! Protectionism which the US is practicing is being adopted by other auto-maker countries as well including Germany, England and France.) "Americans are pulling in their horns because they are worried about lost income," said Michael DiGiovanni, executive director of global market analysis for GM. DiGiovanni said that between Americans who are laid off and those who say in a recent Gallup poll that they fear losing their jobs, about 36 million consumers are shying away from the market. Tight Credit at GMAC GM's sales drop was the biggest. Even though a big chunk of that was due to falling sales to rental and corporate fleets, which command thin if any profit, GM's retail sales still dropped faster than the market. GM still suffers from the credit crunch and the fact that its chief lender, GMAC, has lacked funds to make new-car loans. Its former captive finance company, GMAC Commercial Credit, which is now owned more by Cerberus Capital Management and the federal government than by GM, has tightened credit standards and pulled back on leasing. Rival Ford owns Ford Motor Credit and can use the lending arm to cut financing deals and write leases to help move inventory. GM can't. But there are small signs of relief for GM. Mark LaNeve, vice-president for sales and marketing at GM North America, said GMAC took part in 35% of GM's retail sales. At its peak, GMAC's lending supported nearly 40% of GM's retail sales, and at times when Americans bought twice the number of cars. The company's total market share fell to 18.2% from 22.7% a year ago. The lender got a $6 billion infusion from the Treasury Dept. in December and has access to funds from the Federal Reserve. LaNeve said GMAC's new liquidity is helping, but it hasn't been a big boost yet. Battling It Out on Incentives GM isn't the only company hurting. The market is so bleak that Ford lowered its worst-case scenario for auto sales this year to 10.5 million. That weaker outlook came just before Ford reported a 45% drop in retail sales and a 53% shortfall in fleet sales. Ford had been holding up better than GM and Chrysler. A surge in sales of pickup trucks in the fourth quarter helped Ford score four straight months of retail market-share gains. But higher incentives, especially from Chrysler, halted Ford's streak. Automakers on the whole jacked up incentive spending by about $400 last month, according to auto sales information Web site Edmunds.com, while Ford actually reduced its spending by about $800 per vehicle, according to George Pipas, Ford's chief of sales analysis. "At a certain point, just piling on more incentives doesn't bring in more buyers and hurts the vehicles' residual values too much," Pipas says. Ford continues to reduce head count and pursue other cost-cutting moves to cope with the dramatic fall in demand. It is trying to conserve cash this year in the hopes of not needing to tap a $13 billion U.S. government line of credit. GM and Chrysler are cutting costs and selling assets in order to qualify for billions more in government credit. Wary Shoppers Stick to Used Cars Ford is also keeping its production of new cars and trucks at very conservative levels, even though it is predicting a rebound of demand for new vehicles in the second half of the year. Ford's chief economist, Emily Kolinski Morris, says that continuing poor economic data makes it difficult to predict where the bottom of the auto market will be and for how long it will remain. "There's no anchor on the economic horizon to make that call." Chrysler sales fell 44%, which wasn't bad if GM and Ford are the barometer. But Chrysler was laying plenty of money on the hood with employee pricing plus thousands in rebates and 0% financing all available as a package. Still, says Edmunds.com analyst Jesse Toprak, "Chrysler's incentives certainly helped." But it appears that incentives are having less effect on the market. Despite bigger rebates and sweeter deals being offered all month, 27% of shoppers ended up buying used cars, Toprak says. The good news is that this means consumers haven't given up on cars. The bad: "Carmakers are spending money to sell new cars, but consumers are buying used," he says. Given the fear among consumers, dealers will be wrangling with bargain hunters for quite a while. (Source: Business Week: David Welch and David Kiley.) GM CEO Wagoner resigns at Obama's behest (Mar 2009) GM, which has shed thousands of workers since the downturn began, must devise a leaner business plan that likely will cut the company workforce and product lines even more than officials had contemplated. It has 60 days to come up with a new approach. Moreover, GM must move forward without its chairman and chief executive G. Richard Wagoner Jr., who met with administration officials on Friday and has agreed to step down. (SITE NOTE: THIS IS A SAD DAY FOR AMERICA!!! This is the same as if I loaned a family some money for food and the husband spent it on booze. I then go back to the family and tell them the husband needs to get out because he wasted the money...and it is my RIGHT because I loaned the family the money. Any reasonable person would say, "Who gave you the right to do such a thing?" The same question we raise is since when does loaning money become the criteria for taking over the management of a company. Who gave Obama the right? Now if GM did sign documents giving Obama the right, then it is legal. But then where did Obama get the right to buy a private company without the consent of the taxpayers? This is completely WRONG!!! On a secondary note, Wagoner is whistling all the way to the bank as he has a golden parachute clause with multi-million dollar options...and the taxpayers just got the bill.) In a document released at midnight last night, the White House set out its key findings on the two companies after more than a month of intensive talks between the President's auto taskforce, GM and Chrysler's managements and other stakeholders. GM last December received a $13.4 billion bailout and had asked for a further $16.4 billion, while Chrysler got $4 billion and wanted up to $6 billion more. SITE NOTE: Although there have been some incidents of government exercising minor control over industry during wartime, this aggressive assault on American capitalism is unprecedented and should give all Americans who care about freedom pause.Instead, the Government will provide GM with funding for 60 days to give it time to develop a more aggressive plan and a strategy to implement the plan. In return, the White House demanded that Rick Wagoner, the chief executive and chairman who has led the company since 2000 and overseen an $82 billion loss over the past five years, step down. Mr Wagoner was replaced by Fritz Henderson, its current president and chief operating officer. Long-time board member Kent Kresa will step in as interim chairman. The Government also said that the majority of the board would be replaced over the coming months. (Source: Times Online UK.) "The Administration does believe that there is a path to a viable GM and is confident that the company can emerge from this crisis as a strong, competitive business," the Government said. But it took a swipe at Mr Wagoner, saying in a more detailed document on GM that the automaker's turnaround over the past few years had been far too slow, which allowed it to "lag the best-in-class competitors. It also slammed GM's current restructuring plan as too optimistic on its assumptions of market share, pricing, brands and other issues. The White House had previously told GM to cut its unsecured debt of about $28 billion by two-thirds but some bondholders have held out against a deal. The White House threatened last night to put GM into a "court-supervised process to extinguish unsustainable liabilities" if the company cannot get agreement from its creditors. However, the President refused to grant the full loans based on the companies' current restructuring plans, which the White House document said were insufficient to justify a substantial new investment by taxpayers. The Obama administration asked Rick Wagoner, the chairman and CEO of General Motors, to step down and he agreed, a White House official said. On Monday (30 Mar), President Barack Obama is to unveil his plans for the auto industry, including a response to a request for additional funds by GM and Chrysler. The plan is based on recommendations from the Presidential Task Force on the Auto Industry, headed by the Treasury Department. The White House confirmed Wagoner was leaving at the government's behest after The Associated Press reported his immediate departure, without giving a reason. General Motors issued a vague statement Sunday night that did not officially confirm Wagoner's departure. "We are anticipating an announcement soon from the Administration regarding the restructuring of the U.S. auto industry. We continue to work closely with members of the Task Force and it would not be appropriate for us to speculate on the content of any announcement," the company said. (SITE NOTE: The White House's insistence that Wagoner step down is an extraordinary intervention of the federal government into the management of a private company. A senior administration official said Wagoner's resignation was required because the company needs a "clean sheet." "We felt that having a change of leadership would be consistent with the clean-sheet approach," said the official, who spoke on condition of anonymity because of the sensitivity of the matter. ... Wagoner's resignation also reflects the fact that the president and his auto task force have been skeptical of the company's plan to slim down, which was submitted last month in order to meet the terms of the $13.4 billion federal loan it has already received. Chrysler got $4 billion at that time. A "surgical" bankruptcy could be used to force the companies and their stakeholders to make concessions, administration officials said. (Source: Washington Post.))The surprise announcement about the classically iconic American corporation is perhaps the most vivid sign yet of the tectonic change in the relationship between business and government in this era of subsidies and bailouts. Wagoner has been CEO for 8 years and at GM for more than 30. It is not yet clear who would replace him, or what role the administration would play in that process. Industry sources had said the White House planned very tough medicine in Monday's announcement, which turned out to be an understatement. And it went to the very top. The measures to be imposed by the government will have a dramatic effect on workers, unions, suppliers, bondholders, shareholders, retirees and the communities where plants are located, the sources said. GM and Chrysler first requested billions in federal aid in November, warning that they could run out of cash in a matter of months if they didn't receive it. In December, President Bush agreed to loan $9.4 billion to GM and $4 billion to Chrysler. Last month, GM asked for $16.6 billion more and Chrysler requested an additional $5 billion. Earlier this month, Obama agreed to loan $5 billion to American auto parts manufacturers to help them weather the steep drop in new vehicle orders and the financial uncertainty at the Big Three. Obama and his aides may have honed in on Wagoner for two reasons. First, his company is asking for the most in total federal aid: $26 billion, a figure administration officials fear could grow even larger. Second, the GM chief was tied more directly to the ill-fated decisions that that brought much of the American auto industry to the brink of collapse. Wagoner joined GM in 1977, has had a senior role in GM management since 1992, and became CEO of the company in 2000. He is considered responsible for increasing GM's focus on trucks and SUVs—at the expense of the hybrids and fuel efficient cars that have become more popular in the last couple of years. (SITE NOTE: We are not sure that the SUV and pickup trucks were really such a bad decision. The hybrid technology is still in its infancy -- and expensive. But again that was a management decision. But the real problem all along for the automakers is NOT the car choices -- it is the UAW. Their bloated retirement and pay has caused a nightmare for American automakers. This is why the Brazilian model for car manufacturing is the wave of the future. Unfortunately, it is going to mean shipping jobs overseas as the UAW is NOT going to go away -- and they refuse to budge on giving up their benefits. Of course, Obama is NOT going to touch them as they are his "homeboys." It should be noted that this is also why the Union is not all that keen on Wagoner. Wagoner revised contracts allow automakers to pay new hires much lower wages and permit the company to shift billions in retiree health-care costs to a union-run trust.)By contrast, Chrysler CEO Robert Nardelli, whose resignation does not seem to have been demanded as a price of further federal aid, was a newcomer to the auto industry when he was lured to that company to help turn it around. Nardelli had previously headed Home Depot. Government officials have little reason to tilt at Ford CEO Alan Mulally since his firm has not actually taken bailout funds from the government. Ford asked for a $9 billion line of credit from the feds, but the firm has said it has no plans to tap the credit facility. Obama's move against Wagoner hearkens back to September 2008 when President Bush's Treasury Secretary, Hank Paulson, insisted that AIG CEO Robert Willumstad step down as part of an $85 billion bailout of the insurance giant. Paulson installed in his place Edward Liddy, a former Allstate executive. The AIG bailout has since grown to about $170 billion and Liddy has faced calls for his resignation in the wake of reports about hundreds of millions of dollars-worth of bonuses the firm agreed to pay to employees. (SITE NOTE: All politics aside, the executives had CONTRACTS signed before the bailout. Congress turned it upside down by penalizing the bonuses -- as morally wrong as they were -- they were legally correct. Now watch the government squirm as Wagoner has a multi-million dollar pension that Obama doesn't want to pay. If he goes, here comes his pension. Upon his departure, Wagoner becomes eligible for both a "Salaried Retirement Plan" and an "Executive Retirement Plan" with General Motors. The combined value of the plans at the end of last year was $20.2 million, a GM spokesperson confirmed. "ost of that will be paid out as an annuity over five years, the remainder is a small lifetime annuity," said GM spokeswoman Julie M. Gibson. Wagoner is currently serving in his position for a $1/year.)Obama said Friday in an interview with CBS's "Face the Nation," broadcast Sunday, that the carmakers were going to have to do more. "There's been some serious efforts to deal with a combination of long-standing problems in the auto industry," the president told host Bob Schieffer. "What we're trying to let them know is that we want to have a successful auto industry, U.S. auto industry. We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is. "And that's gonna mean a set of sacrifices from all parties involved — management, labor, shareholders, creditors, suppliers, dealers. Everybody's gonna have to come to the table and say it's important for us to take serious restructuring steps now in order to preserve a brighter future down the road." Schieffer followed up: "But they're not there yet." Obama added: "They're not there yet." The Obama administration calls its task force "a cabinet-level group that includes the secretaries of Transportation, Commerce, Labor and Energy. It will also include the chairman of the President's Council of Economic Advisers, the director of the Office of Management and Budget, the EPA administrator, and the director of the White House Office of Energy and Climate Change. The Task Force will be led by Treasury Secretary [Tim] Geithner and [National Economic Council] Director Larry Summers." The panel's chief adviser is Steven Rattner, a well-known investment banker and former New York Times reporter. (Source: Politico.) (SITE NOTE: For those who fear big government, Obama is the antithesis of all they believe in. For America businesses who bellied up to the trough to feed on bailout money, they are now going to learn that the Obama version of bailouts come with strings. It is how GOVERNMENT CONTROLS BUSINESSES. Now big government has reached its hands into the operations of a business conglomerate. The frightening aspects hopefully will cause others to wake up. If Obama can fire a CEO, maybe a minor paper-pushing bureaucrat can fire YOU if your company took bailout money -- and who didn't. The ramifications are frightening -- but this is the true Obama. STAY TUNED...IT'S JUST BEGINNING. The Washington Post stated, "In recognition of the damage that the declining U.S. auto industry is having on many of the nation's communities, Obama will announce tomorrow that he is creating a new initiative to revive them. It will be led by Ed Montgomery, a dean at the University of Maryland and a former deputy labor secretary.")The amount that GM may borrow from the government will depend upon the government's ongoing review of the company, administration officials said. Wagoner's resignation does not mean that he will leave the company immediately. He will continue to draw his $1 annual salary, because if he leaves the company he is entitled to a multimillion-dollar pension that the government does not want to pay, a source familiar with the matter said. On an interim basis, Kent Kresa, a board member will serve as GM's chairman; current company president Fritz Henderson will serve as chief executive. A GM spokesman declined to comment on Wagoner's departure. Wagoner's defenders, however, have noted that during Wagoner's reign GM has led the industry in renegotiating key contracts with the United Auto Workers. Those revised contracts allow automakers to pay new hires much lower wages and permit the company to shift billions in retiree health-care costs to a union-run trust. Both of those moves put the company in far better financial position for the future. But then came the economic downturn and a 40 percent plunge in U.S. auto sales, which left the icon of American industry reeling. "He was restructuring the company and he got caught by the economy," said Jeremy Anwyl, chief executive of Edmunds.com, a consumer-focused automotive Web site. Anwyl credited Wagoner with reorganizing the company's finances and their product lines. Anwyl discounted criticism that GM failed to build fuel-efficient cars because so few people wanted to buy them. "It's kind of perverse to criticize him for building cars that Americans want to buy," he said. As GM's woes progressed at the end of last year, Wagoner was compelled to seek federal aid. During his first visit to request aid, in November, Wagoner and the chief executives of Ford and Chrysler, were lambasted for flying to Washington in private jets. For his next trip, Wagoner drove from Michigan in a Chevrolet Malibu hybrid sedan. Still, some members of Congress remained angry and called for his resignation. As early as December, Obama seemed sympathetic to that position, saying management should be replaced if the "team that's currently in place doesn't understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances." In February, GM and Chrysler, requested as much as $21.6 billion in additional federal assistance. Both companies submitted business plans to the government that promise to shrink their workforces and product lines in response U.S. auto sales. Ultimately, however, what led to Wagoner's ouster may be that his proposal to restructure GM did not pass muster with the Obama administration. "They're not there yet," Obama said yesterday. Their plan has "got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean, and competitive than it currently is," he said. He may have been alluding to the fact that the companies have yet to win required concessions from their creditors. Under the terms of the original $17.4 billion in federal loans, GM General Motors bondholders and the companies' retiree health plans were supposed to give up their claims to billions in debt in exchange for an equity stake in the companies. But those concessions, which are due tomorrow tues, have not been announced. yet. But Obama may also have been alluding to a disagreement over how much smaller GM General Motors and Chrysler should shrink. One of the key points of contention between the companies and the Obama administration is just how large the U.S. auto market will be in the future. General Motors has offered a more optimistic scenario and shaped its business plan accordingly. Members of the president's autos task force have questioned those projections, however, and some industry analysts argue that the companies may need to downsize their operations even more than planned. (Source: Washington Post.) Chrysler on the Block (Mar 2009) The administration effectively rejected as untenable the business plans that GM and Chrysler had submitted to restructure their companies, saying that neither had fulfilled the terms of the federal loans the companies received in December. The president is expected to announce today that both companies may still win additional federal aid but under stricter terms. Chrysler had proposed a partnership with Italy's Fiat, in which the US company would manufacture fuel-efficient vehicles using Fiat's technology. But the original deal would have handed Fiat a 35 per cent stake in Chrysler, which the Government complained gave the Italians first dibs on the benefit from a turnaround at the company. The White House made clear that Chrysler cannot stand alone, criticising its current restructuring plan as containing a "number of assumptions that are unrealistic or overly optimistic. "The Administration does not believe that on its own Chrysler can achieve the scale or debt of product mix necessary to compete in the twenty-first century global auto market," last night's findings read. Instead, the Government will give Chrysler 30 days worth of capital in which to strike a deal with Fiat and other stakeholders. The Italian and US companies have already agreed with the Government to protect taxpayers' investment in the venture. Chrysler must also hit a number of other targets – getting rid of all of its unsecurity debt and most of its outstanding secured debt, agree greater concessions with auto workers' unions, come up with better financing options for its dealers and customers and with Fiat put together an operating plan that shows meaningful profits. Failure to meet these demands will end in almost certain collapse for the company. Chrysler, which the administration believes cannot survive as a stand-alone company, must reach an agreement to partner with the Italian automaker, Fiat, in the next 30 days to become eligible for as much as $6 billion in additional federal loans. (Source: Times Online UK.) Before the federal government extends more financial aid to the U.S. automakers, the industry must offer a plan that makes it "much more lean, mean and competitive than it currently is," Obama said yesterday on CBS's "Face the Nation." Overall, the task force has concluded that saving the nation's automakers will require more from the companies, their workers and their creditors. The new requirements will be tougher than those in the first federal aid package offered by the Bush administration, officials said. "Even greater sacrifice will be required of all stakeholders," the senior administration official said. "This doesn't make any of us happy, but we are the custodians of taxpayer dollars." (SITE NOTE: The assholes have the gall to say they are the "custodians of the taxpayer dollars" after the Stimulus Package and the Omnibus bill and the GIVE Act and the... May they rot in hell!!!)The administration is also seeking to address the fear that the news of the companies' woes will scare away car buyers. Obama plans to announce today that the administration is creating a program to guarantee the warranties of new vehicles issued by participating manufacturers. Exactly how much more money the government will lend to the automakers is unknown. The government is willing to pump more working capital into Chrysler over the 30 days during which it is supposed to reach an agreement with Fiat. It will lend another $6 billion to Chrysler if that agreement is reached. Under the terms of the ongoing negotiations between the two companies, Fiat would take a minority stake in Chrysler that is less than 35 percent, but which could grow to as much as 49 percent. The administration is not calling for Chrysler chief executive Robert L. Nardelli to resign, in part because he is negotiating the Fiat deal. (Source: Washington Post.) Stock Market Dives after Obama Intervention (Mar 2009) Global stock markets dived today after the White House denied General Motors (GM) and Chrysler multi-billion dollar bailouts and threatened to push the ailing carmakers into bankruptcy if they do not implement aggressive restructuring plans. The Obama Administration effectively seized control of the companies – ousting General Motors' chairman and chief executive and pushed Chrysler toward a merger – after finding that the carmakers' own restructuring plans "did not establish a credible path to viability". The Dow Jones industrial average tumbled 215.37 points to 7,560.81 within minutes of opening while in London, the FTSE 100 index of leading companies fell 104.59 points to 3,794.26. In Germany, the DAX declined 145.88 points and in France, the CAC fell 89 points to 4,057.67. (Source: Times Online UK.) April 2009Obama takes step over the line that separates government from private industry (Apr 2009) President Obama's plan to save failing U.S. automakers -- and make them the instruments for creating a cleaner, greener transportation system -- marked a major step across the line that traditionally separates government from private industry. His announcement Monday (30 Mar) of a new position on bailing out Detroit went beyond a desire to be sure tax dollars were not wasted in bailing out struggling companies. It put the Obama administration squarely in the position of adopting a so-called industrial policy, in which government officials, not business executives or the free market, decided what kinds of products a company would make and how it would chart its future.His automotive task force concluded, for example, that the Chevy Volt, the electric car being developed by General Motors Corp., would be too expensive to survive in the marketplace. It declared that GM was still relying too much on high-margin trucks and SUVs, and that Chrysler's best hope was to merge with a foreign automaker, Fiat. Judgments like those are usually rendered in corporate boardrooms or announced in quarterly reports. But this time they were coming directly from the White House. The notion that it was the president, not car company executives, who would pick such a course drew immediate criticism, especially from conservatives. "When did the president become an expert in strategic corporate management?" said Rep. Tom Price (R-Ga.), chairman of the conservative Republican Study Committee. "The federal government is famous for its mismanagement, yet this administration continues to demonstrate its certainty that Washington always knows best." Sen. Bob Corker, a Tennessee Republican, called it a "power grab" that "should send a chill through those who believe in free enterprise." And Rush Limbaugh declared in his daily radio broadcast, "There's always been a line, ladies and gentlemen, over which no president would cross with respect to the distinction between the public and private sectors. Obama has now crossed that line where there is no limit to government's destruction of private activity or control over it." (SITE NOTE: The conservative view is that this is a power grab -- and an onerous one at that that foretells the government involvement in dictating EVERYTHING in private industry -- simply because the people took the money.) Rep. Jane Harman (D-Venice) defended the administration, suggesting that Detroit had had its chance. "My feeling is that we were too tolerant for too long and this is the tough medicine the taxpayer wants. And we have to reinvent our auto industry, or it will die." Other Obama defenders pointed to historic precedents for intervening in the auto industry. Obama's actions are "consistent with the pattern of presidents acting during economic crises," said Allan Lichtman, a professor at American University and an expert on the presidency. "And it's absolutely consistent with patterns of presidents intervening to make sure major components of the economy don't fail." With farmers crippled by the Depression, for example, Franklin D. Roosevelt put in place limitations on agricultural production in a bid to boost farm prices. In 1971 Richard Nixon sought to roll back inflation by imposing a freeze on wages and prices. During the Reagan administration, bank regulators ousted 10 members of the board of Continental Illinois Bank of Chicago, the nation's eighth-largest bank and recipient of a federal bailout. Nevertheless, the White House was admittedly wading into politically challenging waters Monday (30 Mar). Administration officials sought to downplay the notion of an Obama-led takeover of the auto industry. "We inherited a really difficult situation, and so in that context are focused on the best options consistent with the president's goal of supporting the auto industry and being good stewards of taxpayer resources," said one senior administration official, who spoke on the condition of anonymity despite conveying official White House talking points. The official sought to distance the auto industry assessments from the administration's environmental agenda, adding that the carmakers were "positioned to lead in helping manufacture the next generation of clean vehicles." "The government doesn't have any interest or capacity to re-engineer these companies," the official said. (SITE NOTE: THIS IS BULLSHIT!!! THE GOVERNMENT TAKEOVER OF PRIVATE INDUSTRY HAS STARTED!!! OBAMA HAS STEPPED OVER THE LINE!!! HE MUST STOPPED IN ORDER TO SAVE AMERICA!!! The stance that they "inherited" the problem is a nonsense defense for actions that are in my opinion illegal. Where is industry in slapping the government with lawsuits just on the general principle. Where are all the high-priced lawyers that all the industries hired? Why is the American business community sitting meekly by while Obama commits acts of "piracy" in dictating the actions of private businesses. HE MUST BE STOPPED!!!) Beyond such denials, the administration's aim of reshaping the industry in what it considers a better form could be seen in documents released Monday by the White House. They summarized the conclusions of Obama's auto task force, which has spent weeks consulting with outside analysts and experts assessing the viability of plans submitted last month by GM and Chrysler. The task force noted, for instance, that GM earns a "disproportionate share of its profits from high-margin trucks and SUVs and is thus vulnerable to energy cost-driven shifts in consumer demand." Moreover, according to the summary, "absent the successful introduction of a number of new-generation nameplates," GM is "more vulnerable" to heightened fuel-efficiency standards. Such heightened mileage standards are being pushed by the Obama administration. Some participants in the deliberations, speaking on the condition of anonymity because of White House restrictions on allowing people to speak freely, said the task force operated from an underlying belief that consumers would ultimately be attracted to more fuel-efficient cars despite current data showing many such cars languishing on dealer lots. "Philosophically they blame these companies for not having produced enough responsible small vehicles," said Dan Luria, research director at the Michigan Manufacturing Technology Center, a consulting firm for automaker suppliers. "But they don't deal with the fact that the companies would have been insolvent years earlier if they had done that. "As bad as the management of these companies has been, it's dwarfed by the complete lack of courage in U.S. energy policy, which is what created the problem in the first place." (Source: LA Times.) May 200936 Congressmen Ask Obama to Return Authority Over Auto Bailout to Congress--But White House Says Its Not Over-Reaching Its Power (May 2009) White House (CNSNews.com) - A bipartisan coalition of 36 members of the House of Representatives--including 30 Republicans and 6 Democrats--has sent a letter to President Obama asking him to return to Congress its constitutional legislative authority to oversee the bailout of the auto industry.,br> In December, Congress failed to pass a bill authorizing a bailout of Chrysler and General Motors. President Bush and now President Obama, however, proceeded with a bailout process even without legislative autority. That process has cost the taxpayers billions of dollars and given the Executive Branch unilitaral and unprecedented authority to control what happens to the two major auto companies. “While we are mindful that time is of the essence, we are respectfully requesting that you return the Auto Task Force to its important advisory role to you and your Administration, but also return the Congress’ Constitutional legislative prerogatives before it further disrupts the lives of people who work at Chrysler or live in communities that depend on it,” says the letter. The White House is defending the work of the President’s Auto Task Force and is insisting that the president has not seized unconstitutional authority over the matter. The bipartisan coalition of congressmen who signed the letter to Obama are worried about the practicial economic consequences of the steps he has taken in the auto bailout as well as the constitutional implications for the role of Congress. “We are grateful to you and your administration for the leadership demonstrated. However, decisions being made by the Auto Task Force, and in the bankruptcy proceedings in New York, are more than troubling,” the letter said, referring to the Chrysler bankruptcy proceedings. On Thursday (28 May), General Motors reportedly reached a deal with bond holders and the Treasury Department to go into bankruptcy. Because of decisions made by the task force, the letter says, 9,000 workers at Chrysler plants will lose their jobs and 789 Chyrsler dealers have been slated to shut down. Rep. Steven LaTourette (R-Ohio) who wrote the letter, said the GM bankruptcy could lead to 100,000 dealership-related jobs nationwide and the closing of 14 GM plants. “The president is being ill served by the auto task force. They’re making decisions that I think are making a tough situation much worse,” LaTourette told CNSNews.com. “Now the president has off-loaded it and delegated it to this unelected and inexperienced – at least as far as the car business is concerned – automobile task force.” “For a bunch of folks who say they don’t want to be in the day-to-day operation and don’t want to manage the old Chrysler and the new Chrysler into bankruptcy, they sure seem to be doing that – telling them how much they can spend on advertising, rejecting opportunities to avoid bankruptcy for both Chrysler and GM,” he said. White House Press Secretary Robert Gibbs responded that the task force is not making direct decisions on employment, and said that 75 percent of auto dealerships remained open. “These are decisions that are made by companies about what it is they believe is the best path toward renewed viability for their company,” Gibbs told reporters Wednesday. “If it weren’t for the task force on autos, and if it weren’t for the president's intervention, a hundred percent of those dealerships would be gone, a hundred percent of those plants would be closed.” The letter states, “While we are mindful that time is of the essence, we are respectfully requesting that you return the Auto Task Force to its important advisory role to you and your administration, but also return the Congress’ constitutional legislative prerogatives before it further disrupts the lives of people who work at Chrysler or live in communities that depend on it.” The Bush administration initiated the federal bailout of the auto industry with $17.4 billion in bridge loans going to Chrysler and GM in late 2008. Congress had rejected an auto bailout, so the Bush administration tapped the $700 billion Troubled Assets Relief Program (TARP), even though Congress had only authorized those funds to be used for financial institutions such as banks and credit unions. Earlier this year, President Barack Obama expanded the program to include at least $1.1 billion toward covering the cost of Chrysler and GM warranties during the restructuring. But members of Congress are concerned because the task force sets viability standards, allowing it to dictate terms to the auto industry. Rep. Thad McCotter (R-Mich.) said shutting Congress out leaves a worse deal for the taxpayers. “In the 70s, we had the Chrysler bailout where the taxpayers were paid with interest because at the legislative level you had people representing all these interests bringing them together and forging a workable plan,” McCotter, who signed the letter, told CNSNews.com. “What you’re seeing with the Auto Task Force is what was once an advisory group is now in the process of driving the entire process, deadlines, and bankruptcies for Chrysler and with GM the increasingly likely bankruptcy. Who do they answer to? They do not directly answer to the citizens.” McCotter is also displeased that the auto restructuring is being supervised through TARP, but said the law is so wide, he sees no legal conflict in using the TARP money. “It was wide as the Grand Canyon to allow the executive branch to do what it’s doing,” he said. Gibbs said that the administration does have “a major role to play.” “I think we are playing it in a way that is preserving and protecting as many jobs as possible, protecting as many communities as possible, and hopefully restructuring -- working to restructure an auto industry that has fallen on vastly hard times, and that we're doing all that we can to move that in a different direction,” Gibbs said. Still, members of Congress faulted the president for saying that the Chrysler bankruptcy would “not disrupt the lives of people who work at Chrysler or live in communities that depend on it.” “The White House auto task force seems to be pursuing policies that export the manufacturing base of the American economy,” Rep. Dennis Kucinich (D-Ohio) said. “Our economic strength and our national security are dependent on the automobile, steel, aerospace and shipping industries. We must protect and strengthen these vital industries.” Further, the letter stated that employees made concessions across the country without knowing their plant would be closed. Gibbs said Congress clearly has input in helping to revive the auto industry. “Congress certainly is involved in auto decisions, obviously as it relates to setting fuel mileage standards that the President worked on last week, as well as proposals to create tax incentives to trade in older cars that aren’t doing as well on fuel mileage, to both increase auto sales and reduce our dependence on foreign oil,” Gibbs said. “But I think the vast majority of members I think are appreciative of the efforts of the task force each and every day in order to keep as much as we possibly can in a viable auto industry here in America." (Source: CNS News.) June 2009Administration blames Bush for GM crisis (Jun 2009) The Obama administration has a familiar response to criticism of the General Motors bailout – they inherited this mess from George W. Bush. Austan Goolsbee, a senior economic adviser to President Obama, said the administration's options were sharply limited by President Bush's handling of the auto industry, and accused the prior administration of running out the clock.They shook up the can. They opened the can and handed [it] to us in our laps," Goolsbee said on Fox News Sunday. "When George Bush put money into General Motors, almost explicitly with the purpose -- how many dollars do they need to stay alive until January 20th, 2009, there was no commitment to restructuring, to making these viable enterprises of any kind," said Goolsbee, who serves as staff director and chief economist of the Obama's Economic Recovery Advisory Board. In his first five months in office, Obama has often said that some of the politically difficult decisions he's made are the fault of his predecessor, most notably the $1.3 trillion budget deficit. The Obama administration has steered the two troubled companies into bankruptcy and recently announced $30 billion in aid to General Motors, giving the government about 60 percent ownership of the company. Chrysler has been cleared to merge with Italian automaker Fiat. Republicans have derided the takeover as creating "Government Motors." On Fox News Sunday, Sen. Richard Shelby (R-Ala.), criticized the administration's handling of the takeover, saying it had favored labor – a key Democratic constituency – over bondholders. "The bondholders have been sacrificed. The unions have carried the day," said Shelby, the ranking Republican on the Senate Banking Committee. The Bush administration provided $17.4 billion loans to GM and Chrysler after Congress failed to approve legislation that would have given the two automakers access to the $700 billlion rescue package. (Source: The Hill.) Interesting Idea: Impeachable Offense: The 5th Amendment and 'Government Motors' (Jun 2009) The 5th Amendment to the U.S. Constitution says the following: No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. Note the final phrase, 'nor shall private property be taken for public use, without just compensation.'According to the terms dictated to the automakers, GM and Chrysler, concerning their government-supervised bankruptcy, bond holders and investors who had pumped multi-millions into those companies were told by Obama and the federal courts that they would receive only .28 cents on the dollar for their investments--all in violation of due process of law, which is also mandated in the 5th Amendment...'nor be deprived of life, liberty, or property, without due process of law.' But the UAW was told it would receive .68 cents on the dollar from the taxpayers, not because they had invested a dime in the companies, but because Barack Obama owed them a favor for their support of his Presidential bid. Thus, according to the terms of the bankruptcy as set by the Obama administration, .68 cents per dollar of what would normally belong to investors is going to an entity that essentially invested ZERO, a clear violation of the terms of the 5th Amendment, under the due process clause as well as the just compensation clause. The the money the investors placed in GM and Chrysler is THEIR money. It does not belong to the government or to the UAW. Under normal circumstances, top creditors in a bankruptcy proceeding are given top priority when a company goes under. In this case, however, Obama and the Feds did the exact opposite. Private property, the investments, were taken for public use and placed in the hands of the government and the UAW, and .28 cents on the dollar is far from a just compensation when an entity (the UAW) is getting .68 cents on the dollar although they have absolutely no financial investment in the companies. It is almost as if the UAW has committed robbery by getting the Executive Branch and the Judicial Branch to wink at their stealing investment money from the original investors. These violations of the law by at least 2 branches of government (and we can assume the silent consent of the Legislative Branch since they have done nothing to stop it) are very serious. Bill Clinton was impeached for lying to a court about an affair. Richard Nixon resigned from office under the threat of impeachment due to his knowledge about and cover up of a politically-motivated break-in. In this case, however, we are talking about the top officials in all 3 branches of the government violating the 5th Amendment to the Constitution and allowing a labor union to steal money that others invested. If this single act isn't the very epitome of corruption and 'high crimes and misdemeanors,' then what is? Had the citizens been wise enough to deny single-party 'rule' by placing Congress in the hands of those who would hold the Executive Branch to some accountability, then there would be a move underway as we speak to hold impeachment hearings against Barack Hussein Obama and several federal judges. Hearings would also ensue concerning corruption among at least 3 dozen others in the Congress and within the administration. If the Congress had one ounce of integrity left, then it would proceed in this fashion anyway, regardless of Party affiliation. This is not a Republican or a Democrat issue. This is an American issue. But sadly, we can be quite certain that the Partisans who run Congress will not lift one finger to stop the rampant corruption and the blatant violations of the Constitution being committed by this President and his supporters. (Source: Examiner.) (SITE NOTE: The big problem with this impeachment offense is INTENT. Even if this case was provable, how could anyone prove that Obama intended to violate the 5th Amendment. The case would involve Bush as well as he started off the $17.4 billion bailout. The notion that a judge would accept the notion that Obama was giving away .68 cents on the dollar to the UAW to pay off a political debt would be almost impossible to prove. )  GOP wants U.S. out of auto, bank business (Jun 2009) As the federal government settles in as the new majority owner of major U.S. companies, Republicans are positioning themselves as activist shareholders. While they may not be able to pull off a shareholder coup, Senate Republicans on Thursday will launch their most aggressive proxy battle to date against expanded federal control of corporations, introducing legislation that would force the Treasury Department to divest its ownership stakes in banks, financial institutions and auto companies by July 2010. The proposal, Republicans say, will put a big bump in the road Democrats are navigating as majority shareholders in General Motors and financial services companies. If the companies sputter, the government rescues may become a politically toxic asset for Democrats, who realize they must strike a delicate balance between guiding the companies back to economic health without appearing overly involved in private markets. “I don’t think that we should be seeing Congress getting more involved in managing the situation around the auto industry,” said Sen. Debbie Stabenow (D-Mich.). “I don’t want to tie people’s hands, because in the end this has got to be about both protecting taxpayers and also creating successful companies.” Even as they try to keep meddling to a minimum, lawmakers are using their new clout to try to blunt the economic pain in their own districts. Democrats are pushing back hard against GM and Chrysler’s decision to shutter nearly 3,500 auto dealerships, introducing legislation in the House that would essentially halt the closures. But while Democrats try to figure out a sweet spot over the bailouts, Republicans see opportunity to tap into the populist outrage. Sen. John Thune (R-S.D.), the chief sponsor of the divestment legislation, will introduce his bill on Thursday. Under his proposal, the federal government would have to divest its shares by July 1, 2010, and would be prohibited from taking new ownership stakes in private industry, forbidden from influencing management decisions and required to submit a plan on how it plans to end its interest in Fannie Mae and Freddie Mac. The bill, co-sponsored by the Senate Republicans’ top campaign strategist, John Cornyn, also would give the Treasury Department some flexibility in holding assets until July 1, 2011, if the assets are undervalued and there is a “reasonable expectation” that they will increase to their original purchase value, according to a copy of the summary provided to POLITICO. The Obama administration and a fair number of Democrats are likely to oppose such a hard deadline. Steven Rattner, a member of the White House Auto Task Force, told reporters last week that market conditions, economic health and company performance will guide the government’s decision on when to start selling its shares. “I think we need to keep the pressure on to make sure that the auto industry gets back not only to profitability but gets the government out of their business,” said Sen. Mark Warner (D-Va.). “But you can’t make necessarily hard deadlines.” Thune believes his bill is both good policy and good politics and said he has been lobbying conservative and centrist Democrats to back the measure and he expected “a lot” of GOP support. “Obviously, this is a tough issue for [Democrats] because the administration is probably not going to support this,” Thune said. “They all would like to have some cover. They see this as a bill that obviously Republicans would be for. But there are some of them who I think would also recognize that it is good politics for them. So they are all interested in it [and] reviewing it.” Thune said he would look to attach the measure to a bill on the floor but wasn’t sure what his vehicle would be yet. Some conservative Democrats seem to be looking for a limit on government ownership as well. Sen. Ben Nelson (D-Neb.), who pressed Treasury Secretary Timothy Geithner about the matter at a Tuesday hearing, says he now wants the Government Accountability Office to study the matter and set a date on when the country should divest from these big firms. Nelson says he has drafted a resolution that would put the Senate on record stating that the country’s ownership interest of the auto companies is “temporary” and that “our goal is to protect the interest of the taxpayer and begin the process of the divestiture at the earliest practical time.” Nelson has some competition from his Nebraska colleague, freshman Republican Sen. Mike Johanns, who filed a separate amendment requiring Congress to vote on any use of Troubled Asset Relief Program money that results in the government holding an ownership stake in a company. (Source: Politico.) July 2009GM and Chrysler: The End of Bankruptcy as We Know It? (Jul 2009) Almost every bankruptcy expert The Am Law Daily talks to agrees that the super-fast General Motors and Chrysler bankruptcies diverted from traditional bankruptcy law because of the government's huge role in each case and the danger that liquidation might have posed to the broader economy. What they don't agree on is whether the cases set a meaningful precedent for future judges. "What happened in GM and Chrysler is so outrageous and so illegal that until March of this year, nobody even conceptualized it," says Lynn LoPucki, a bankruptcy expert at UCLA Law School. "Wouldn't almost every company like to get out [of bankruptcy] in 30 or 60 days? Is there any reason they cannot all propose to do what GM and Chrysler have now done?"Others are less worried: "These cases are huge outliers," says Kenneth Klee, name partner at the bankruptcy boutique Klee, Tuchin, Bogdanoff & Stern and LoPucki's colleague at UCLA. "They involve such major political elements and companies of such importance to the economy that the legal principles involved will not carry over to other cases." Several other experts and Am Law 100 partners echoed LoPucki's concerns, though no one else directly labeled the sale illegal. But their basic views are the same: The courts stretched section 363 of the bankruptcy code--which allows a company to sell its best assets to a new buyer rather than go through a complete reorganization--beyond the code's intentions. The section, they say, was not originally intended for companies to sell essentially their entire business to a new buyer, though the U.S. Court of Appeals for the Second Circuit has upheld such a sale in a handful of cases, says Howard Seife, head of the bankruptcy and restructuring practice at Chadbourne & Parke. What General Motors and Chrysler did, experts tell us, is more akin to a restructuring of the business, a process that normally unfolds in a longer Chapter 11 case and not a section 363 sale. In the former, creditors have more powerful rights, including the right to vote on the reorganization plan. They can object to a section 363 sale--and hundreds did in both Chrysler and GM--but those objections are not enough to hold up the sale. Bondholders in both cases claimed that the sales gave some unsecured creditors better return for their bonds than others. A section 363 sale normally nets a pile of cash for the bankrupt estate, which then distributes the cash to creditors according to the order of their claims, says Klee. That's not exactly happening in these cases, court records show. In the GM case, for instance, the U.S. Treasury Department, which will own a 60 percent stake in "new GM," is leaving about $1.125 billion behind in the bankrupt GM estate. That money is intended to pay administrative claims and wind down the GM estate, says Michael Richman, a Patton Boggs partner who represented small bondholders opposed to the GM sale. Bondholders will get a 10 percent equity stake in the new GM in lieu of cash, Richman says. That might amount to pennies on the dollar, while another unsecured creditor, the United Auto Workers union, is getting a larger equity stake in the new company plus ownership of other debt. "What I find troubling is the distribution to creditors that isn't consistent with priorities established under bankruptcy laws," Seife says. "Clearly, shortcuts are being taken here. The argument is that these are special cases." The judges who handled the cases (Arthur Gonzalez for Chrysler and Robert Gerber for GM) essentially ruled that there was no other alternative, short of liquidation, than the government-brokered sales to new consortiums, court records show. That argument--made first by Chrysler's lawyers at Jones Day and GM's legal team at Weil, Gotshal & Manges--is intended to undercut the notion that bondholders could receive more cash in a straight liquidation, experts say. "The judges put the burden on the objectors," says Thomas Cullen, who headed the Jones Day litigation team in the Chrysler matter. "The judges were saying: 'What other deal have you got?'" The pressure was especially high in the GM case, with the government threatening to pull its financing by July 10 if the court had not approved the sale by then, Richman says. He urged Judge Gerber to call the government's "bluff" and force GM to ditch the 363 sale and undergo a full reorganization plan. Finding another buyer might have yielded more money in the end, says LoPucki, who co-authored a major 2007 study which concluded that 363 sales yield about half the proceeds for creditors compared with a traditional reorganization. James White, a professor at the University of Michigan Law School, wrote a response to LoPucki's work challenging those conclusions, and says he doesn't have any major objections to the interpretation of section 363 in the Chrysler and GM cases. "I don't think it's bad," White says. "Lynn would probably disagree."Indeed, LoPucki obviously does. But both acknowledge that we have just witnessed something historic in bankruptcy law. Whether the cases have any long-term impact is another question, and most agree any impact will be limited. "What bankruptcy courts will have to be very careful of in the future is the use of Chrysler and GM as precedent," Seife says. "These are very special cases." (Source: AM Law Daily.)  Obama's Chief Auto Adviser Steps Down (Jul 2009) Steven Rattner is quitting his post as President Obama’s chief adviser on the troubled automobile industry at a time when an investigation into his former Wall Street firm’s role in a scandal involving public pension funds has intensified. Mr. Rattner, who has won plaudits for directing the rapid restructuring of General Motors and Chrysler, has been under a cloud since shortly after arriving in Washington in late February after it was disclosed that his firm, the Quadrangle Group, made payments to middlemen that helped it win state pension business. (SITE NOTE: The word "plaudits" depends on whose side you were on. The Obama crowd appointed a man with no experience in the car industry -- followed the vision of government taking over private industry, came up with a crap deal that paid back the unions with a sweet-heart deal and stiffed the tax payers of billions of dollars that they won't recoup. If so, he did a good job of screwing America.) It is unclear whether Mr. Rattner’s departure is directly connected to the inquiry, or whether he felt that it was time to leave because Chrysler and G.M. effectively had emerged from bankruptcy. A person who has worked with him in Washington said he understood that Mr. Rattner had decided to leave because his role on the task force had come to its natural end. Mr. Rattner could not be reached for comment. A spokesman for Quadrangle declined to comment. An investigation by New York Attorney General Andrew M. Cuomo has picked up in recent weeks, according to people briefed on the matter who did not want to be identified for fear of jeopardizing the inquiry. Quadrangle faces potential civil charges and is said to be eager to resolve the matter, according to these people, who said that Mr. Rattner has separate counsel from Quadrangle, and that discussions have accelerated among the various parties recently. Several other firms, including the Carlyle Group, a prominent private equity firm, have already paid fines and agreed to change their business practices as a result of payments they made to get pension business. A fine against Quadrangle could make it difficult for Mr. Rattner to remain in a position of authority in Washington, given his role in the matter. Mr. Rattner, according to people close to the investigation, arranged for his investment firm to pay $1.1 million to an agent who helped Quadrangle obtain New York pension business. The agent who received most of that money has been indicted and accused of selling access to the pension fund, but neither Mr. Rattner nor Quadrangle is expected to face criminal charges, according to people close to the matter. The Securities and Exchange Commission is also investigating pension fund abuses. The investigations in Quadrangle have raised questions about the political ambitions of Mr. Rattner. A major Democratic Party contributor, he backed Senator Hillary Rodham Clinton’s presidential campaign, and some speculated that he would have been interested in a major position in a Clinton administration, possibly as Treasury secretary. His wife, Maureen White, was Mrs. Clinton’s finance co-chairwoman. For years, Mr. Rattner has cultivated a reputation as a major player in New York’s financial, political and charity circles. After working as a reporter for The New York Times, he became an investment banker, doing deals in the media and communications businesses for the likes of Lehman Brothers, Morgan Stanley and Lazard before co-founding Quadrangle in 2000. Mr. Cuomo has been conducting a broad investigation of pension fund “pay-to-play” practices — allegations that investment firms had to pay politically connected middlemen to get pension funds to manage. Fees for managing pension funds can be very lucrative. While occupying a legal gray area, payments to intermediaries can be illegal if they amount to bribes or kickbacks made under the guise of being legitimate payments. In cases described in court filings, people who received payments for acting as intermediaries did no actual work, instead appearing simply to be collecting payoffs. The attorney general’s stated goal is to change industry practices to prevent futures abuses, and win fines for past violations. Carlyle, which is among the biggest and most politically connected private equity firms and paid a $20 million fine, has agreed to stop using intermediaries, known as placement agents, to win investment business from public pension funds. It also agreed to halt campaign contributions to public officials who oversee pension funds. Riverstone Holdings, another firm caught up in the case, paid a $30 million settlement last month. In a statement announcing Mr. Rattner’s departure, the Obama administration made no mention of the pension scandal probe. In the past, the president has said he has full confidence in Mr. Rattner. Treasury Secretary Timothy F. Geithner praised his work turning around G.M. and Chrysler. The two carmakers completed their restructuring plans well ahead of schedule, taking little more than a month each. “We are extremely grateful to Steve for his efforts in helping to strengthen G.M. and Chrysler, recapitalize GMAC, and support the American auto industry,” Mr. Geithner said. “I hope that he takes another opportunity to bring his unique skills to government service in the future.” Investigators have been particularly focused on investment executives who arranged for payments to be made to further the production of “Chooch,” a low-budget movie produced by the brother of David J. Loglisci, who was the chief investment officer of the New York State pension fund under Alan G. Hevesi, the former state comptroller. Investigators believe a number of executives, including Mr. Rattner, gave assistance to “Chooch” to win pension fund business. (Source: NY Times.) GM And Chrysler Dealerships Could Be Restored By Washington (Jul 2009) A spending bill passed by the U.S. House would force General Motors and Chrysler to restore franchise agreements with approximately 3,000 dealerships. Dealers across the country were cut loose as part of restructuring plans approved by bankruptcy courts. Meanwhile, the House Financial Services committee is seeking documents from the Obama administration on the "bailouts of General Motors and Chrysler.” Lawmakers have questions about how the President's auto task force reached its decisions to send the auto companies into bankruptcy, saying it hurt dealerships, workers and retirees. (Source: Indiana News Center.) White House slams auto provision in House funding bill (Jul 2009) The White House on Wednesday slammed legislation in the U.S. House of Representatives that would try to help Chrysler and General Motors dealerships facing closure stay in business. The House is expected to vote this week on a must-pass annual spending bill that includes a provision aimed at restoring the rights of the hundreds of dealerships affected by the two U.S. automakers' historic bankruptcies. The White House criticized the provision as setting a "dangerous precedent, potentially raising legal concerns, to intervene into a closed judicial bankruptcy proceeding on behalf of one particular group at this point." However, the White House statement stopped short of including a veto threat. Chrysler yanked franchises from almost 800 dealerships and GM is trying to winnow its dealerships to 3,600 by the end of 2010, from nearly 6,000 in May. The House provision would restore the economic rights of the dealers before the bankruptcies, ensure they have the right to recourse under state law and require the two automakers to reinstate franchise agreements before the bankruptcies. It also states that the legislation is not intended to affect the transfer of assets to the new auto companies formed out of the bankruptcy proceedings. The provisions were attached to the annual funding bill for the U.S. Treasury, which has overseen the bankruptcies and loaned the automakers money. While the legislation appeared to have significant support in the House, it was unclear if there were similar feelings in the Senate. On Tuesday, Senate Majority Leader Harry Reid offered little solace to the shuttered dealers, noting that "when you have a bankruptcy, there are winners and losers, that's what happened and there were some losers. "We'll be happy to take a look at it but it is nothing that's certainly on the top of the agenda in the Senate at this time," Reid said of the House effort. (Source: Reuters.) House committee wants GM, Chrysler documents (Jul 2009) A House committee asked the Obama administration Friday to release documents on the federal bailouts of General Motors Co. and Chrysler Group LLC, seeking more details on decisions that led to the auto industry bankruptcies. "They negotiated, they reviewed and they approved every aspect of the Chrysler and General Motors reorganization," Rep. Spencer Bachus, R-Ala., said of the White House. "We don't know how the president's auto task force reached its conclusion." The resolution, proposed by House Republican Leader John Boehner, R-Ohio, underscored the lingering resentment in Congress over the government's work to push GM and Chrysler into bankruptcy. The House approved legislation Thursday pressing GM and Chrysler to restore closed dealerships while a House panel planned a two-day hearing on the bankruptcies next week. The request to the White House, approved by the House Financial Services Committee on a voice vote, seeks information about the work of the Obama administration's auto task force, the billions in federal aid to GM and Chrysler and reductions in benefits to Delphi Corp. workers and retirees. Committee chairman Barney Frank, D-Mass., said the resolution "does suffer from a certain selective memory approach," noting that the Bush administration provided the initial funding in late December to the companies. But he supported the request. The resolution does NOT compel the White House to turn over the documents. It moves next to the full House for consideration. The White House declined comment. Lawmakers said many questions remained about how the president's auto task force reached its decisions on GM and Chrysler. They said it hurt many dealerships, workers and retirees. "These decisions were implemented without the auto manufacturers or the task force presenting evidence publicly that these (dealer) closings would actually benefit the auto companies financially," said Rep. Dan Maffei, D-N.Y., who has pushed GM and Chrysler to restore shuttered dealerships. Chrysler emerged from bankruptcy in June and GM exited bankruptcy on July 10, helped by billions in federal aid. The government now owns nearly 61 percent of GM and 8 percent of Chrysler. The bankruptcies required concessions from union workers, retirees, dealers and bondholders. The moves have brought loud protests from dealers, who have sought help in Congress to restore the companies' dealer networks. GM is reducing its 6,000-dealer network by more than 2,000 by not renewing franchise agreements next year and winding down stores with outgoing brands such as Pontiac, Saturn, Saab and Hummer. Chrysler cut 789 of its dealers as part of its restructuring plan, reducing its dealer count to about 2,400. (Source: AP.) Auto Czar Bloom tells Congress not to meddle in autos (Jul 2009) The Obama administration's auto czar on Tuesday said political interference by Congress could jeopardize the bailouts of General Motors and Chrysler. Ron Bloom, a senior adviser at the Treasury Department heading the administration's efforts on autos, warned members of a House Judiciary sub-panel that an intervention by Congress on behalf of auto dealers would set a "dangerous precedent" that could raise enormous legal concerns. Bloom and the rest of the administration are worried about efforts in Congress to thwart plans by the two companies to close thousands of dealerships across the country. The House last week approved legislation to stop the closures, and a bill in the Senate is gaining sponsors after a heavy lobbying campaign by dealers, who are influential players in local communities across the country. Members of Congress don't understand why seemingly successful dealerships in their districts, which sometimes are also seen as local community pillars, are being targeted for closure. Rep. Steve Cohen (D-Tenn.), who chaired Tuesday's hearing, wonders why John Roy's Chrysler dealership in his district was terminated. Roy was the only African-American Chrysler dealer within a 300-mile radius around Memphis, and won business from four states. He was No. 1 in sales in the Memphis metropolitan area, but was still terminated. "To me, it is unconscionable that Chrysler would treat a successful and loyal dealer in such a manner," Cohen said in an opening statement. In testimony on Wednesday, GM and Chrysler will say they have too many dealerships and that this cuts into their costs. GM had roughly 6,000 dealerships in the U.S. compared to 1,240 for Toyota before its bankruptcy filing. It will still have more dealerships when it emerges, according to testimony to be offered on Wednesday. Bloom said the actions by Congress could make if more difficult for the two troubled companies to emerge from their bankruptcies, specifically by making capital markets wary of offering them money for fear Congress might overturn "judicially approved business decisions any time that it disagrees with the judgments of the companies." (Source: The Hill.) OK Attorney Sues Obama for GM Takeover (Jul 2009) An Oklahoma attorney is said to be suing the President, alleging that Mr. Obama has acted unconstitutionally by allowing governmental control over public and private companies (via TulsaWorld.com): A longtime Oklahoma City attorney is suing President Barack Obama. U.S. 'eager' to divest itself of GM, Chrysler (Jul 2009) Ron Bloom, who recently took over as the top adviser to the Obama administration's auto task force told a congressional oversight panel here today that the government is "very eager to dispose of them as soon as possible," adding that GM has announced it wants to have an initial public offering in 2010. Bloom was in Detroit testifying at the request of the panel, which is charged with reviewing how the TARP funds were spent in relation to GM and Chrysler. About $80 billion has been spent on the automakers and their finance companies. He was joined by GM and Chrysler executives and others, but not by anyone from the United Auto Workers, which was invited but did not attend. The UAW's absence was a significant issue for Rep. Jeb Hensarling, R-Texas, who sits on the TARP oversight panel. Hensarling expressed concern that the decision to put the interests of the union-run retiree health care trust funds ahead of those companies' secured lenders could have "chilling and far-reaching consequences" for commercial lending. The lone member of Congress on the panel chastised UAW chief Ron Gettelfinger for ignoring the panel's invitation to testify. Hensarling leveled similar criticism at the CEOs of GM and Chrysler, saying they had no difficulty getting to Washington when they needed money. "Now that it's time to account for the money, we don't see them," he said. Both automakers sent their treasurers to testify, but the UAW did not send a witness. Its participation was voluntary. The hearing has been in the works since early June. Hensarling wrote to the chair of the panel, Harvard Law Professor Elizabeth Warren, urging her to hold a hearing on the decision to loan GM and Chrysler and their finance arms about $80 billion. In Monday morning's testimony, Warren asked Bloom for a timeline for GM to emerge from government control. "The best way to get out as quickly as possible is not to commit to a defined schedule," Bloom said, adding that this would make it harder for the government to sell its shares. (Source: Detroit News.) September 2009Taxpayers face heavy losses on auto bailout (Sep 2009) The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid. "I think they drove a very hard bargain," said Elizabeth Warren, the panel's chairwoman and a law professor at Harvard University, referring to the Obama administration's Treasury Department. "But it may not be enough."The prospect of recovering the government's assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM's case by next year. The shares "will have to appreciate sharply" for taxpayers to get their money back, the report said. For example, GM's market value would have to reach $67.6 billion, the report said, a "highly optimistic" estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is "highly unlikely" to ever be repaid, the panel said. Treasury Department officials have acknowledged that most of the $23 billion provided by the Bush administration is likely to be lost. But Meg Reilly, a department spokeswoman, said there is a "reasonably high probability of the return of most or all of the government funding" that was provided to assist GM and Chrysler with their restructurings. Administration officials have previously said they want to maximize taxpayers' return on the investment but want to dispose of the government's ownership interests as soon as practicable. "We are not trying to be Warren Buffett here. We are not trying to squeeze every last dollar out," Steve Rattner, who led the administration's auto task force, said before his departure in July. "We do want to do well for the taxpayers but the most important thing is to get the government out of the car business." Greg Martin, a spokesman for the new GM, said the company is "confident that we will repay our nation's support because we are a company with less debt, a stronger balance sheet, a winning product portfolio and the right size to match today's market realities." The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office. The panel's report recommends that the Treasury Department consider placing its auto company holdings into an independent trust, to avoid any "conflicts of interest." The report also recommends the department perform a legal analysis of its decision to provide TARP funds to GM and Chrysler, their financing arms and many auto parts suppliers. Some critics say the law creating TARP didn't allow for such funding. The panel's members include Rep. Jeb Hensarling, a Texas Republican, who dissented from the report. Hensarling said the auto companies should never have received funding and criticized the government for picking "winners and losers." Other agencies have also projected large losses on the loans and investments provided to the industry. The Congressional Budget Office estimated in June that taxpayers would lose about $40 billion of the first $55 billion in aid. (Source: SF Gate.) Congressional Report Questions Legality of GM and Chrysler Bailouts (Sep 2009) A report issued by the Congressional Oversight Panel (COP) tasked with overseeing the implementation of the 2008 Troubled Asset Relief Program (TARP) questions whether the Bush and Obama administrations had the legal authority to use TARP funds to bail out General Motors and Chrysler. The report, issued Wednesday, confirmed what CNSNews.com had previously reported: that the law which created TARP--the Emergency Economic Stabilization Act (EESA)--did not grant the government specific authority to use taxpayers’ funds to rescue the auto industry. “EESA does not explicitly state that the TARP is available to provide assistance to the automotive industry (or to any specific industry except arguably the financial and banking industry),” the report finds. What the law did authorize was the purchase of distressed, mortgage-backed securities and other financial assets based on those securities, from American financial institutions. “The Secretary [of Treasury] is authorized to… purchase, and to make and fund commitments to purchase, troubled assets from any financial institution,” EESA states. The report notes that in the law Congress defined what a “troubled asset” and “financial institution” meant--definitions that did not seem to include car manufacturers. “It defines a ‘troubled asset’ as ‘residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages…the purchase of which the [Treasury] Secretary determines promotes financial market stability,” the report states. “A ‘financial institution’ is defined as: [a]ny institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company, established and regulated under the laws of the United States or any State, territory, or possession of the United States…and having significant operations in the United States, but excluding any central bank of, or institution owned by, a foreign government.” The report found that buying large amounts of auto company stocks or bonds might qualify as appropriate assets since then Treasury Secretary Henry Paulson determined that doing so was vital to financial markets, the auto company bailouts still might not be legally authorized under TARP because the automakers are not financial institutions. “The next question is whether GM or Chrysler can be called a ‘financial institution’ under EESA. The language of the statute itself does not provide a clear answer,” says the report. The Bush administration argued that a car company could qualify for TARP funds because of wording in the EESA that mentioned corporations “established and regulated under the laws of the United States or any State, territory, or possession of the United States…and having significant operations in the United States.” The report notes that this view seems to contradict the law’s actual language, saying that Congress must have “had a purpose” in limiting the executive branch’s authority. “Based on this interpretation, the term ‘financial institution’ means any institution organized under U.S. law with operations in the United States,” the report says. “This interpretation does not, however, seem to account for the phrase ‘including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company.’ It also would seem to lend little weight to Congress’s selection of the term ‘financial institution.’ “Congress must be presumed to have had a purpose in listing institutions that might typically be considered ‘financial’ institutions--banks, credit unions, broker dealers, and insurance companies.” The report also questions whether the administration’s interpretation of EESA is worthy of judicial deference, a principle whereby courts give the executive branch the benefit of the doubt when interpreting ambiguous legal language. “Whether Treasury would be due such deference in this case is not clear. Later Supreme Court opinions have suggested that an agency must use some authority that has been, either explicitly or implicitly, delegated to that agency by Congress and that the authority has been used under ‘circumstances that Congress would expect the agency to be able to speak with the force of law when it addresses ambiguity in the statue or fills a space in the enacted law’.” Congress’ rejection of a bill specifically designed to bail out the auto industry brings that principle into doubt, the report said, because it showed Congress had decided not to bail out automakers. “Congress’s explicit consideration of legislation that ultimately failed to pass creates a troubling question regarding the Bush Administration’s decision to ‘step in’ and rescue the automotive industry.” Both Congress and the public have been “kept in the dark” by the Treasury Department, the report concluded, and Treasury must provide the panel with detailed, legal reasoning supporting its use of TARP funds. “Congress, and ultimately the American taxpayer, have been ‘left in the dark’ concerning the details of Treasury’s review process and its methodology and metrics at a time when Treasury committed additional TARP funds to these companies,” it says. “The Panel recommends that Treasury provide a legal opinion justifying the use of TARP funds for the automotive bailouts.” (Source: CNSNews.)  October 2009Auto task force shocked by state of GM, Chrysler (Oct 2009) Shockingly poor financial management at General Motors and Chrysler weakened their case for a federal bailout, but officials feared letting them collapse, the former head of a government auto task force said Wednesday.In a first-person account posted on Fortune magazine's Web site and in a Brookings Institution speech, Steven Rattner said he was alarmed by the "stunningly poor management" at the Detroit companies and said GM had "perhaps the weakest finance operation any of us had ever seen in a major company." GM's board of directors was "utterly docile in the face of mounting evidence of a looming disaster" and former GM chairman and chief executive Rick Wagoner set a tone of "friendly arrogance" that permeated the company, Rattner wrote. "Certainly Rick and his team seemed to believe that virtually all of their problems could be laid at the feet of some combination of the financial crisis, oil prices, the yen-dollar exchange rate and the UAW," Rattner wrote. Rattner described his six-month stint leading the Obama administration's auto task force, which pushed GM and Chrysler into quick bankruptcies last summer with the help of billions of dollars in federal aid. The task force won concessions from the union, suppliers, bondholders and dealers, and the U.S. government now owns nearly 61 percent of GM and 8 percent of Chrysler. Rattner said at the National Press Club that he, along with Treasury Secretary Tim Geithner and White House economic adviser Larry Summers, "hated the idea of the U.S. government owning equity in these companies" but they concluded the government needed to protect taxpayers. "It was frustrating that many commentators were suggesting that the government stay on the sidelines and let the companies fend for themselves," Rattner said. "With financial markets still frozen, both would have unquestionably run out of cash quickly, slid into bankruptcy, closed their doors and liquidated." (SITE NOTE: Justification AFTER THE FACT does not alleviate the fact that Rattner engaged in the takeover of private businesses. His actions were AGAINST THE PRINCIPLES OF FREE MARKET ENTERPRISE. Nothing can justify his actions of the Obamanations of private industry takeovers.) Rattner said the loss of the companies could have severely harmed the economy, costing "more than a million jobs in the short run." He said their failure also would have dramatically deepened and prolonged the recession and would have pushed unemployment rates in several states "above 20 percent." GM said in a statement that it was "a new company with a strong balance sheet, less debt and a fresh product lineup that is making consumers take notice. ... Looking back doesn't help us with the important work we have in front of us. We are grateful for the second chance our nation's support has given us, and we are confident we will succeed." (SITE NOTE: We heard this same thing when Lee Iococa stepped in and was "bailed out" by the government. Only difference is that the government did NOT take over private industry but granted loans that were repaid as FORD recovered. Ford did NOT accept the bailout and is still in good shape...while GM and Chrysler are heading for the scrap heap unless a miracle happens. Rattner is trying to blame it on his predecessors -- like the Obama blame it on Bush strategy. Unfortunately, it is NOT going to work.) Rattner said the task force was divided on whether to save Chrysler. The automaker was poorly run during its alignment with Daimler AG, and "larded up with debt, hollowed out by years of mismanagement, Chrysler under (private equity firm) Cerberus never had a chance," he added. The task force determined that Chrysler could not survive without a corporate partner and turned to Italy's Fiat Group SpA. Fiat took control of Chrysler after it emerged from bankruptcy protection in June and received a 20 percent stake in the company, with the opportunity to take on 35 percent. As for GM, Rattner said Wagoner told him in mid-March that he wanted to remain at the company but was willing to step down to help GM. Rattner said that Fritz Henderson, who succeeded Wagoner as chief executive, "conveyed more energy and openness to change." Rattner asked Wagoner to step aside on March 27 and Wagoner agreed, supporting their plan to make Henderson the new CEO. In an "awkward conversation," Rattner said that Wagoner had asked whether the administration planned to fire UAW President Ron Gettelfinger. "I'm not in charge of firing Ron Gettelfinger," Rattner replied. Rattner has faced his own scrutiny. His former investment firm, Quadrangle Group, paid more than $1 million to a New York political consultant indicted in a public corruption probe in New York. Rattner wrote that he grappled with "the New York attorney general's investigation of my former firm, Quadrangle Group, and me about our actions in connection with an investment from the state pension fund." He did not elaborate. (Source: Breitbart.) (SITE NOTE: This whole article is about "cover my ass" and "setting up the denials" and "blame it on the predecessors" business. Rattner is permanently stained and he smells Obama's sinking fortunes and wants to distance himself from the coming witch hunts IF Obama falls from power. His partner in crime, Tim Geithner, is looking shakier by the minute as the Treasury IG starts laying the blame for the TARP failures entirely on Tim Geithner's doorstep.) Government widens control over paychecks (Oct 2009) The Federal Reserve joined the Treasury Department on Thursday in imposing new limits on executive pay, extending the government's control over compensation at taxpayer-owned companies to institutions that are merely government regulated. The restrictions were the latest in more than a year's worth of government intervention in matters once considered inviolable aspects of the country's free-market economy and represent a signal moment in the history of the American economic experiment. After years of setting minimum wages, the government is now telling some companies how they should structure pay for those who run them. The actions Thursday put the United States more in line with European governments. France and Germany, in particular, have pressed for international standards to limit executive pay, a move that the United States and Britain have resisted. At Treasury, President Obama's pay czar, Kenneth Feinberg, announced sharp cuts in pay for 175 top executives at seven big banks and automakers that received hundreds of billions of dollars in federal bailout money during the financial crisis. The new structures reduced the cash salary paid to some executives by 90 percent and tied more compensation to long-term stock awards. "There is entirely too much reliance on cash, and there's got to be a better way to tie corporate performance to long-term growth," Feinberg said at a media briefing. "I'm hoping that the methodology we developed to determine compensation for these individuals might be voluntarily adopted elsewhere." At the Federal Reserve, Chairman Ben S. Bernanke proposed a broader but less proscribed plan to restrict pay at banks. The aim is to prevent them from rewarding employees for actions that could endanger the firms' long-term financial health. Unlike Feinberg's more limited plan, the Fed's guidance would cover all banks it regulates -- even those that never received a bailout -- as well as U.S. subsidiaries of foreign companies. However, the Fed's proposed rules have wiggle room: The guidelines would let banks set their own compensation but give the Fed veto power over pay practices that it determines could threaten the safety and soundness of a bank. They would extends the regulators' reach into pay practices affecting tens of thousands of bank employees, from senior executives to traders of complex securities. "I've always believed that our system of free enterprise works best when it rewards hard work," Obama said at the White House on Thursday. "But it does offend our values when executives of big financial firms -- firms that are struggling -- pay themselves huge bonuses even as they continue to rely on taxpayer assistance to stay afloat." Since the crisis began, the federal government has used taxpayer money to inject capital into financial firms in exchange for ownership stakes. Failing Fannie Mae and Freddie Mac were taken over by Washington. American International Group, the world's largest insurance company, is 80 percent owned by U.S. taxpayers. The government has picked winners (Bear Stearns) and losers (Lehman Brothers). And a sitting chief executive -- General Motors' Rick Wagoner -- was effectively fired by the White House. Executive compensation has long been linked to company performance -- the higher profits and stock prices go, the bigger the payday for top executives. But Bernanke, other regulators and many on Capitol Hill say that compensation packages were so high that they led executives to put their companies and shareholders at risk solely for the benefit of multimillion-dollar bonuses. "The Federal Reserve is working to ensure that compensation packages appropriately tie rewards to longer-term performance and do not create undue risk for the firm or the financial system," Bernanke said. The banking industry viewed the Fed's guidelines with ambivalence. Many banks already are moving to revise compensation practices for top executives and other employees who could expose the bank to bet-the-company risks. But industry representatives are wary of the regulations, concerned that they could ensnare even relatively low-level employees of smaller banks. "If it focuses on those who really put institutions at risk, that's fine," said Ed Yingling, chief executive of the American Bankers Association. "But if you get down to the point where you have regulators looking over the shoulders of branch managers, it really does not make sense." Long-simmering resentment over executive compensation boiled over in March when it was revealed that AIG, the recipient of a taxpayer-fueled bailout package worth up to $180 billion, was paying hundreds of millions of dollars in bonuses to a trading division that nearly brought the company and the global financial system to their knees. The seven companies included in the Feinberg's cash crackdown are AIG, Citigroup, Bank of America, General Motors, Chrysler, GMAC and Chrysler Financial. The new pay ceilings are low by Wall Street standards, and they are by no means watertight. They still allow for hefty compensation. For instance: Feinberg reduced the cash salary of 13 top Bank of America executives by $89 million for 2009. But the total compensation for each of the 12 executives beneath outgoing chief executive Kenneth D. Lewis still averages $6.5 million this year. Feinberg's actions do nothing to stop Lewis's $70 million retirement compensation. And the companies escape the pay curbs if they pay back all of the bailout money they have received. Still, Feinberg managed to slash about $879 million in total 2009 compensation at the seven companies, compared with 2008 levels. Sen. Charles E. Schumer (D-N.Y.) said Feinberg did not go far enough. He urged Feinberg to push the government deeper into corporate boardrooms via a number of proposals, such as forcing companies to split the jobs of chief executive and chairman. Daniel J. Mitchell, senior fellow at the libertarian Cato Institute, says he worries about the slippery slope. "I fear as politicians get a taste for interfering with executive pay for one little subset of companies where you actually could have sympathy for the approach, what's going to stop them from saying, 'Hey, this was popular. Let's do a little demagoguery before the next election and go after all the CEOs.' " (Source: Washington Post.) (SITE NOTE: The pay caps are disclaimed by the White House as their idea -- leaving it all to Kenneth Feinberg's policy.)  Audit: Taxpayers lose $61B on AIG, auto bailouts (Dec 2009) The Treasury Department is acknowledging for the first time that it lost $61 billion on two key programs designed to stabilize the economy after the largest financial crisis in decades. The government is losing more than $30 billion on lifelines extended to insurance giant American International Group Inc., according to Treasury data released Wednesday in an audit by the Government Accountability Office. It also is losing more than $30 billion on rescues of struggling automakers Chrysler and General Motors. Treasury says the losses are offset in part by profits earned from bank bailouts. It says the bank bailouts will net taxpayers $19.5 billion. Over all, the bailouts are projected to cost taxpayers $41.5 billion. (Source: AP.) Automakers, banks slapped with pay limits -- Pay czar curbs execs' cash pay to $500,000 at bailed-out firms, companies (Dec 2009) The Obama administration's pay czar is limiting the cash compensation for executives at companies that received the largest taxpayer bailouts to $500,000. The 25th through the 100th top earners at Citigroup, GMAC, American International Group and General Motors also must take more than half their compensation in stock, and at least half must be delayed for three or more years, said Kenneth Feinberg, the Treasury Department's Special Master for Executive Compensation. About 12 executives were granted exemptions to the $500,000 cash cap because they were necessary for the companies to "thrive, be able to compete, and not lose key people," he said Friday. The new rules will only apply to the second half of December, and will not affect what the employees already have been paid this year. The rules will affect many workers' year-end bonuses and stock grants, Feinberg said. They also will serve as a starting point for negotiations next year over pay packages for 2010. Feinberg already announced specific pay packages for the top 25 earners at firms he oversees. His rulings don't apply to Bank of America because its bailouts were repaid this week. Chrysler and Chrysler Financial also were exempt because executives there made less than $500,000. Under the new rules, cash can make up only 45 percent of a person's pay. At least half of total compensation must be "long-term," and cannot be redeemed for at least three years. And all incentive pay must come from a pool whose size is based on earnings or another performance measure. Fringe benefits like the use of private jets will be limited to a value of $25,000 per year. Unlike the pay packages for the top 25 earners, Friday's rules mostly will be implemented by the companies. But Feinberg said he did review all the requests for cash salaries in excess of $500,000 per year. He reviewed dozens of requests but only granted about 12. Of those, all but one will earn between $500,000 and $950,000. The remaining person will earn about $1.5 million. He did not identify the individuals or say what companies they work for. Feinberg did say that some of the exemptions were granted for AIG, which received government support worth up to $182 billion. Large bonuses at the firm sparked outrage earlier this year. "It was not only AIG" that wanted the employees to earn more than the $500,000 cap, Feinberg said. "It was the Federal Reserve, it was the Treasury Department." Going forward, the independent directors on the companies' compensation committees will have to approve such exemptions. Feinberg will continue to oversee them. (Source: MSNBC.) GENERAL MOTORS (APR 2009 -- ) April 2009U.S. Plans Key Role In Naming GM Board (Apr 2009) The Obama administration will play a key role in reshaping General Motors' board of directors over the next six months, potentially giving it even greater control in the management of the storied American manufacturer. The president's auto task force plans to consult with the company as it replaces a majority of its board, a White House official said. The board today largely consists of the current and former chiefs of major U.S. corporations such as Coca-Cola, Ernst & Young, Pfizer and Eastman Kodak. It is not known which of the 12 board members will leave.The president said Monday (30 Mar) that "the United States government has no interest in running GM." But in practice it is already exerting tremendous influence over it, a situation that has triggered fierce debate over how much power the government should wield over the companies that it aids. (SITE NOTE: THIS IS BULLSHIT. IF IT HAD NO INTEREST, IT WOULD NOT BE TRYING TO REPLACE THE BOARD MEMBERS. The replacement of board members is a right of the shareholders. When did the US government become the majority shareholder in GM? Where in the fine print of his bailout loans did Obama gain the right to fire the CEO and replace the Board of Directors? If it is because he loaned money -- albeit billions -- did the government accept shares in the company? THIS MUST CEASE!!! As a general principle -- now that the Stimulus Package monies are being "forced" down the states throats (i.e., threats to Gov Sanford that he either accepts the ALL the funds or gets nothing). When the money is taken, the Obama administration view it as their opening to dictate to the states on HOW the money is spent. The actions with GM are just the start!!!) Kent Kresa, 71, GM's new chairman, said yesterday that company officials will seek to replace a majority on the board by August, as the automaker moves to restructure operations. "There will be continuing coordination as decisions about the leadership of the company are made," a White House official said yesterday. "Folks from the autos task force will be involved in those decisions." Kresa, a former Northrop Grumman chief executive who has been a GM director since 2003, was selected to be chairman by the Obama administration after it ousted chairman and chief executive G. Richard Wagoner Jr. on Sunday. Fritz Henderson was named chief executive. Some critics characterize the White House's removal of Wagoner as a move toward European socialism. In addition to forcing leadership changes at GM, President Obama on Monday said that Chrysler must strike a partnership with Italian automaker Fiat, and that GM must further cut its already shrunken workforce and product lines. "They have opened Pandora's box -- the U.S. government has decided they know better than the private company," said Sen. Bob Corker (R-Tenn.) "There is no question that this country is moving down a very different and foreign path. We have crossed this threshold: We own this company and we are telling it what to do." But defenders say the government must make changes at the ailing companies to safeguard the billions of dollars being invested by taxpayers. "There's a new CEO and new chairman of the board," said Rep. Sander M. Levin (D-Mich.). "The government will play an active role as with Fannie Mae, Freddie Mac and other institutions with a major investment from taxpayers." Levin turned aside the possibility that the government will run the company. "It's clear they want this restructuring accelerated with the corporation taking a leading role," Levin said. (SITE NOTE: THIS IS HORSE MANURE!!! This is the camel's nose into the tent. This is only the beginning. Disclaiming that the Obama government doesn't want to be involved in the business is ridiculous. When Obama fired Wagoner, he crossed the line and IS INVOLVED. Obama basically claimed that he is CEO and Kent Kresa is his puppet. ALL THE DEMOCRATS AND ANY REPUBLICANS WHO SUPPORT THIS MOVE MUST GO!!! Suddenly the US government has crossed the line into Economic Facism (government and industry are one).) Even before Wagoner's ouster and the nomination of Kresa, the government has been taking steps, large and small, to shape the operation of General Motors. The December loan agreement, under which the company received $13.4 billion in loans, required among other things that the company establish new limits on expense reporting, executive privileges and compensation. But the coordination with the government affects what appear to be smaller matters as well. (SITE NOTE: The point is the government got its nose in the tent and is simply GRABBING POWER. It was NOT granted in the contract.) For example, yesterday GM announced a new "Total Confidence" program for consumers that offers a warranty, an OnStar traveler's assistance system and a promise to pick up as much as $500 a month of car payments for buyers who lose their jobs. "The government is aware of it, completely supports it," Mark LaNeve, head of GM's U.S. field marketing, said yesterday in announcing the program. Meeting with reporters, GM's new chief executive Henderson said the company would work diligently over the next 60 days to win the concessions needed to return the company to viability. He said the restructuring plans must "go deep, go harder and go faster" in order to comply with the demands of the Obama administration. The company is willing to use bankruptcy proceedings if necessary to shed its overwhelming debts, he said. He said the company and stakeholders prefer to stay out of court, which "does involve risk" and could hurt the company. But a team is working on that strategy in case it becomes necessary, he said. "I do think we are capable of doing it out of court," he said. But in court or out of court, "we're going to get the job done." (SITE NOTE: STUPID!!! Obama will dictate the terms and if you go into bankruptcy. Obama will not work the bankruptcy to the advantage of the company but for HIS political gain.) Currently, its massive debt is a key burden for General Motors. It owes the United Auto Workers health plan $20 billion and has another $27 billion in outstanding bonds. Under the government's proposed reorganization for General Motors, the union health plan and the company's bondholders would give up much or most of those claims in exchange for an equity stake in the reformed GM. Given the magnitude of the swap, many analysts think those two entities could wind up with a majority of company stock. "The board has recognized for some time that the company's restructuring will likely cause a significant change in the stockholders of the company" chairman Kresa said in a statement. This would "create the need for new directors with additional skills and experience." Another key stakeholder in the company, of course, would be the government, which has lent the company money but does not own any shares. And many analysts believe that whoever the shareholders may be, the government's interest will matter most. "Obviously, the government has a voice as an investor," said Charles Elson, head of the Weinberg Center for Corporate Governance at the University of Delaware. "But it's not like the government speaks as one voice among many. It becomes the overwhelming voice." (SITE NOTE: The point is whether government should invade the line of becoming a partner of a conglomerate. Obama has stepped over the line. Just because the government bailed GM out, does NOT mean that it OWNS the company. It was simply a STUPID INVESTOR who got bilked out of his money. Blame Bush and Obama as stupid investors. However, Obama sees the investment as ownership rights. THAT IS WHERE HE IS WRONG!!! Where are all the corporate lawyers from the other industries who have received money from the government now??? The handwriting is on the wall. This is just the start.) The government, bondholders and the union will all be competing for influence, said Ronald J. Gilson, a law professor at Stanford and Columbia, who is a corporate governance expert. "It's going to be a very fractious place," Gilson said. "There will be large shareholders who have specific interests." Board members currently come up for review every five years and generally are allowed to serve until age 72. The company's shareholders would likely have to approve any board nominees. GM is scheduled to hold a shareholder meeting in August. Noting that he will report to the Treasury and to the company's board, Henderson said yesterday: "We have two boards of directors." (SITE NOTE: THIS IS THE POINT...the government cannot claim that they are not "interested" in running GM when they in effect are a defacto Board of Directors. However, we state that the government is the Board of Directors only if GM allows the government to do so. There is a much greater principle involved here than simply GM. The Ford Motor company who has not taken any money from the government should take the lead and file a court suit to challenge the government interference in private industry. The shareholders of GM should rise up and protect their shares -- because if they don't Obama will dictate how the bankruptcy (and lose of their earnings) will be handled. Remember that Obama gives a rats about GM -- only the political power that he gains from it. GM is only the first of many corporations targets -- along with state governments. Like in Faust, Obama is the Devil who promises great riches in exchange for your soul.) (Source: Washington Post.)  May 2009Under Restructuring, GM To Build More Cars Overseas (May 2009) (SITE NOTE: HEY, OBAMA -- WHAT HAPPENED TO "THIS IS ALL ABOUT JOBS" BULL THAT YOU WERE HANDING OUT? GM NOW PLANS TO IMPORT GM CARS BUILT IN CHINA.)The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company's new jobs will be filled by workers overseas. According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double. (SITE NOTE: SEE CO2 Scam section for article on how GM Brazil plant is making eco-friendly cars but theirs is based on sugar cane ethanol. The plant is cost-efficient with suppliers operating in the plant with timed deliveries to save on warehousing...a Japanese concept perfected in-house. It just makes sense -- and they don't have to deal with the disastrous UAW pension funds.) The proportion of GM cars sold domestically and manufactured in those low-wage countries will rise from 15 percent to 23 percent over the next five years, according to the figures contained in a 12-page presentation offered to lawmakers in response to their questions about overseas production. (SITE NOTE: In Korea, GM-Daewoo partnership is reducing production as well as overhead.) As a result, the long-simmering argument over U.S. manufacturers expanding production overseas -- normally arising between unions and private companies -- is about to engage the Obama administration. Essentially in control of the company, the president's autos task force faces an awkward choice: It can either require General Motors to keep more jobs at home, potentially raising labor costs at a company already beset with financial woes, or it can risk political fury by allowing the automaker to expand operations at lower-cost manufacturing locations. "It's an almost impossible dilemma," said former labor secretary Robert B. Reich, now a professor at the University of California-Berkeley. "GM is a global company -- so for that matter is AIG and the biggest Wall Street banks. That means that bailing them out doesn't necessarily redound to the benefit of the U.S. or American workers. "More significantly, it raises fundamental questions about the purpose of bailing out these big companies. If GM is going to do more of its production overseas, then why exactly are we saving GM?" The administration has aroused similar complaints by shepherding a merger between Chrysler and Italian automaker Fiat. But it has extracted a promise from Fiat that it will build small cars in the United States. The complaints about GM's operations portend a potentially larger argument, a political dispute led in part by the United Auto Workers. "The bottom line is GM would rather pay $2 an hour -- and it's a slippery slope downward," said Alan Reuther, the UAW's legislative director. "If GM is going to be getting government assistance, they ought to be maintaining their manufacturing footprint in the U.S. rather than going off to China, Mexico and South Korea." Labor costs in those countries are far lower. While paying a U.S. autoworker with benefits costs about $54 an hour, a South Korean worker earns about $22 an hour, a Mexican worker earns less than $10 an hour and some Chinese workers can earn as little as $3 an hour, industry sources said. On Tuesday and Wednesday, GM chief executive Fritz Henderson met with legislators and sought to ease their concerns over the overseas operations. He emphasized that the company, which is shuttering factories at home, is also canceling projects in Mexico, Russia and India. He also assured legislators that none of the figures are final, and that negotiations with the union are ongoing. "We continue to work closely with GM, UAW, and all the stakeholders to further refine and develop GM's plan," a Treasury spokesman said. The U.S. government has loaned GM $15.4 billion. But billions more are expected to be invested, and under the current plan, it will be the majority owner of the company. The company forecasts that between 2010 and 2014, as the recession recedes, its U.S. sales will rise from 2.4 million to 3.1 million. Most of that growth -- about two-thirds of it -- will occur in the United States. But about one-third of that growth will come from other countries, mostly Mexico and South Korea. Those proportions roughly reflect how GM builds the cars it sells in the United States today -- about two-thirds come from the United States and one-third from other countries. According to the figures shared with lawmakers, the percentage of GM's U.S. sales of cars built in the United States dips from 67 percent in 2009 to 61 percent in 2012. Yet the company projects that by 2014 the percentage will rebound to 66 percent. Under the viability plan, "the U.S. percentage stays roughly the same," Henderson said in an interview last week. But the union and some legislators object that the company's U.S.-funded revival should not help pay for expanding foreign operations. Moreover, they believe that planned cuts in Canadian production -- down 23 percent -- will have direct effects on U.S. jobs because the U.S. and Canadian auto industries are so intertwined. "If you are shutting down plants in this country, U.S. tax dollars should not go for building plants in other countries," said Sen. Sherrod Brown (D-Ohio), who was among those who met with Henderson. But company officials and industry analysts have long argued that, even putting aside the issue of labor costs, it makes logistical sense to build some cars in other countries, even if they are destined for sale in the United States. Take, for example, the Chevrolet Spark, a tiny car that GM sells in South Korea and elsewhere in Asia. In the next few years, the company plans to send some of those cars -- which are built in Changwon -- to the United States for sale. But since only about 5 percent of the car's market will be in the United States, the manufacturing will remain in South Korea. Analysts who study the auto companies and their global operation warn against allowing political passions to obstruct GM's efficiency. "If we start making political decisions with the auto industry, we're going to be in tremendous trouble," said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide. (Source: Washington Post.) Geithner: U.S. to give GMAC substantial support (May 2009) U.S. Treasury Secretary Timothy Geithner said on Friday the Obama administration will provide substantial support to troubled lender GMAC, a vital provider of financing for buyers of U.S.-made cars. "It's likely, again, that GMAC will need to take additional capital from the government and we'll be prepared to provide that," Geithner said in an interview with Reuters Television. The Treasury and U.S. banking regulators said on Thursday that GMAC needs to raise $11.5 billion to fill a capital hole it could face if the economy were to deteriorate further. (SITE NOTE: With the latest news that GM plans to ship jobs overseas and projections that the US share of cars will be dropping as foreign auto manufacturers take more of the American market share, giving GMAC more money is in fact supporting the GM move overseas -- even if it is supposedly "a vital provider of financing for buyers of U.S. made cars.") After "stress tests" were performed on the 19 largest U.S. banks, the Treasury and the Federal Reserve concluded that 10 of them need to raise a combined $74.6 billion to build a capital buffer to ensure they could keep lending even if faced with unexpectedly high losses. Banks can seek private infusions of capital to try to avoid having to seek government help, but those unable to do so have a taxpayer-funded rescue as a last resort. 'LONG WAY TO GO' Geithner said there were some signs that credit conditions were easing and fears of a catastrophic financial meltdown were waning. However, there was still "a long way to go" before the shaken financial system returns to full health. GMAC, the former financing arm of General Motors Corp, has taken $5 billion from the government already. In addition, the Treasury has lent GM $884 million to support GMAC's lending activities. Under the restructuring of Chrysler Corp, GMAC is assuming the business of Chrysler Financial.Chrysler has entered bankruptcy proceedings and GM has until June 1 to show it can come up with a workable restructuring plan, underlining the importance of GMAC to the struggling U.S. auto industry. Many analysts think GM is likely to enter bankruptcy as well. Geithner said that just because Chrysler filed for bankruptcy protection, did not mean that GM necessarily would. When the Obama administration announced on April 30 that Chrysler would file for bankruptcy protection, it said it would offer support to GMAC, including necessary capital, to allow it to finance Chrysler's sales. GMAC spokeswoman Toni Simonetti said the company was expecting the government to provide new capital soon to allow it to take on the Chrysler business, and said this was separate from any capital-raising it would need to do to raise the $11.5 billion in capital regulators have told it to raise. Geithner made clear the government was willing to put a large amount of capital on the line. "Financing is critical to this (restructuring) process, and that requires that GMAC have the ability to provide loans that Americans need to buy cars," Geithner said. An implosion of the U.S. housing market and plummeting consumer demand for autos and other products have plunged the economy into a deep recession that has cost 5.7 million jobs. (SITE NOTE: We're getting tired of the blame Bush for MY mistakes routine coming from the Obama administration.) (Source: Reuters.) Your Auto Bailout Tab: $83 Billion And Counting (GM) (May 2009) Bailing out our foundering auto industry will cost at least $83 billion, Time magazine reports. Here's how they get there:
Like any good bailout, we're probably just getting warmed up, says Time. The bankruptcy of GM could cost $100 billion. (Source: Business Insider.) (UPDATE: 11 May 2009: Chrysler says it will "fire" 800 of its 3,200 dealerships and renegotiate deals with the remaining 2,400 as part of its Bankruptcy plan. The Obama administration cut Chrysler advertising in half -- reasoning: production lines idle for nine weeks, why do you need advertising? GM states that as soon as 2011, Chinese made GM cars may be flowing into the marketplace -- so much for bailouts=jobs.) GM Gets $4 Billion in New U.S. Funds (May 2009) General Motors Corp. on Friday said it received $4 billion in U.S. aid, $1.4 billion more than it had originally requested, as part of its plan to pay suppliers and dealers before a June deadline.The auto maker, already subsisting on $15.4 billion in government loans, previously had asked the Treasury for an additional $2.6 billion before June 1 and $9 billion after that date for working-capital needs. Separately, GM reached a tentative cost-cutting deal with the Canadian Auto Workers union Friday (21 May) that, along with a similar agreement from GM's major U.S. union, paves the way for an expected bankruptcy filing as soon as next week. The union deals, which must be ratified by workers, came amid signs of progress Friday on a sale of the auto maker's European operations. GM is unlikely to consider a Chinese auto maker's interest in its Opel unit because talks with others are well along, said a person familiar with the matter. The auto maker is eager to wrap up cost cuts that would allow it to execute a quick bankruptcy restructuring. GM, in a statement, said the request reflects "updated timing of when certain expenses would be incurred" and not additional funding. The company's shares fell 26% in heavy volume Friday to $1.43 in 4 p.m. composite trading on the New York Stock Exchange. The labor agreements leave unsecured bondholders as the major impediment to any fast exit from bankruptcy. Bondholders have opposed a plan to pay them 10% of GM's equity. In Friday's deal the CAW agreed to freeze wages, increase employees' share of medical costs and bar pension rises until 2015. Thursday, the United Auto Workers union agreed to similar concessions for GM's U.S. workers. CAW President Ken Lewenza said Friday that a bankruptcy filing by GM is now "very likely." GM still hopes for an out-of-court restructuring but wouldn't try to void the deal in bankruptcy court, Mr. Lewenza said. The Canadian government followed President Barack Obama in shooting down an earlier round of concessions and demanding deeper cuts as a condition of its support. Mr. Lewenza said the government agreed to the deal late Thursday. "The consequences of saying no would have been disastrous," Mr. Lewenza said. "Government support comes with a price. And, for us, that price is a growing list of demands." General Motors is completing labor cost-cutting and brand sales efforts as a June deadline looms. Above, Detroit headquarters last month. Workers are expected to vote on the contract Sunday and Monday. Mr. Lewenza said the deal will save GM $8,600 Canadian dollars (US$7,555) per member over the life of the contract. In another development, Ford Motor Co. said it would extend to June 26 the deadline for its hourly workers to accept buyouts. The deadline was Friday. The extension could be a sign Ford hasn't achieved a desired level of acceptances. Separately, GM signaled it was unlikely to consider a Chinese auto maker's interest in Opel, according to a person familiar with the matter. A letter expressing interest in the operation was received Thursday. It didn't include a specific offer, that person said. He declined to identify the auto maker. GM has bids from three parties and considers the process too far along to reopen, the person said. Italy's Fiat SpA submitted a formal offer for Opel and Vauxhall. It plans to integrate GM's European, Latin American and South African operations into a global alliance with its own auto unit and Chrysler. (Source: WSJ.) (SITE NOTE: Lawmakers appealed to the Obama administration on Friday to slow down the restructuring of General Motors and Chrysler, wary of shuttered car dealerships, job losses and the big unknown of a GM bankruptcy. "We are asking President Obama to call 'time-out' on his automobile task force," said Rep. Steve LaTourette, R-Ohio. Members of Congress urged the White House to re-examine its work to stabilize the U.S. auto industry, prompted by sweeping plans outlined last week by Chrysler LLC and General Motors Corp. to shutter hundreds of car dealerships. (Source: Breitbart.) There has also been local media responses throughout the nation as the GM bankruptcy will impact local dealerships.) Obama Administration Continues to Waste 100's of Billions In US Taxpayer Funds (May 2009) Time Magazine recently pointed out that the new "GM" or "Government Motors" will employ approximately 40,000 individuals, down from the historical high of 600,000 workers it employed less than a generation ago. Through mismanagement, unreasonable unions and improper Government intervention, 14 out of every 15 jobs at GM have been lost. (Time.) So, where does the waste come in? The Government continues to spend taxpayer dollars recklessly. Universally, the "price tag" for the Government's purchase of GM has been estimated (best case scenario) at 100's of billions of dollars. You might ask, "What is the current market value of GM"? Clearly, the Obama Administration has not asked this question. Today, May 28, 2009, GM has a "market cap" or "market value" of something less than $700 Million dollars. GM is not worth even $1 Billion Dollars, let alone the $100's of billions being committed to this "political folly". With this type of business acumen the entire endeavor is doomed to failure. A "Market Cap" is the "total value" of all of a Companies outstanding stock. At the close of business on May 28, 2009, the total value or "Market Cap" of all GM stock was $683 Million dollars, something just over 1/2 a Billion Dollars. So why, exactly, is the Obama Administration paying 200% of GM's current value to take over the failing company? I have no idea and Congress hasn't bothered to ask. I can tell you this, no business consortium, no group of private investors would ever embark on such a course of action. No investor group would pay that amount for GM. To do so would result in a Bernie Madoff type "perp walk". GM's stock is currently trading at $1.12 per share, yet the Obama Administration is "investing" upwards of $150 a share in taxpayer money in this boondoggle. Only a politician woudl refer to paying 130 times the true value of anything an "investment". You may have heard of Toyota Motor Car Company, a major rival of GM and the most successful car company in the world. Toyota's "Market Cap" at the close of business on May 28th, 2009, was $137 Billion Dollars. (AOL.) The Obama Administration is having American Taxpayers pay a "Toyota Price" for a "GM value". This is beyond the ridicuolus, it is criminal. The Obama Administration is paying for Toyota and getting GM in return. No wonder the Country is in such a mess. (Source: McCaulley's World.) Government Motors: Can a Reinvention Really Save GM? (May 2009)General Motors is in the process of axing 1,100 of its 6,000 dealers. When the march of time, the sins of management and the scythe of a bad economy conspire to bankrupt once great companies, who pays? Better to break hearts locally than shatter the greater economy — and that's what the collapse of GM and Chrysler threatens to do, according to the White House auto task force that is undertaking the monumental rescue mission. In the deal being cobbled, GM's stockholders will be wiped out, replaced as equity owners by the Treasury Department, with 70%, and the United Auto Workers (UAW), with 17.5%. GM's business in Europe, Opel, will be sold. As many as 14 U.S. factories are marked to close. The iconic Pontiac brand is probably finished. Under a new labor agreement with the UAW, GM's hourly domestic workforce, which numbered 600,000 at its peak, will drop to 40,000. In other words, 14 of every 15 GM jobs have vanished in roughly a generation. Holders of $27 billion in GM bonds have refused the company's debt-for-equity swap, making bankruptcy all but inevitable. For purist capitalists, the lasting significance of GM's pending Chapter 11 (and Chrysler's bankruptcy, filed a month ago) is the overwhelming intrusion into the private sector by Barack Obama and his auto task force at Treasury. "The day they fired the CEO of General Motors" — Rick Wagoner was dismissed by task-force co-chairman Steve Rattner in late March — "is a day we will look back on with great regret," predicts Senator Bob Corker, Tennessee. Critics of the government's involvement maintain that bondholders have been punished, union workers coddled and laws flouted in the process. And they worry that should GM emerge from Chapter 11 with the U.S. Treasury as majority shareholder — Government Motors — we will have crossed a frontier separating capitalism from socialism, even though the company will be run by existing management. Which brings up another sore point among skeptics of the Administration's actions. Is it feasible now for GM and Chrysler, which made money on pickups, SUVs and minivans, to small-car their way to prosperity? U.S. carmakers have not earned a dime selling automobiles in a decade. "There's no question it's a challenge," a task-force official allowed. "It's something the domestic car companies haven't done successfully in the past." Whether it will work in the future is "a fundamentally significant question." These hopes float on the audacity of deficit spending. By the time taxpayers are done cleaning up the books of the two companies and refilling their tanks with enough cash to keep them going — along with their finance arm, GMAC, and their key suppliers — the public price tag will exceed $100 billion. Add billions more in subsidies for researching and developing green technology and still more billions in tax credits to motivate buyers to go green. If someday GM and Chrysler become consistently profitable, the government loans will be repaid and both companies restored to total private control. The operative word being if. (Source: Time Magazine.) Obama's GM Plan Looks Like a Raw Deal (May 2009) Millions of people in communities across the country depend on the government getting the GM rescue right. That's why it is startling -- and mistaken -- for the future of GM to rest with a small, largely unaccountable, ad hoc task force made up of a handful of Wall Street expats. A congressional abdication of authority of historic proportions has left the executive branch with nearly complete discretion over how to handle GM and Chrysler's restructuring. President Barack Obama has further delegated authority, giving effective control to this task force, which operates under the titular authority of a top-level interagency group headed by National Economic Council Director Larry Summers and Treasury Secretary Tim Geithner. In the days before an avoidable June 1 bankruptcy filing, it is imperative that Congress honor its constitutional duties and demand that the GM restructuring deal be sent to it for deliberative review -- before any irreversible measures, such as a voluntary bankruptcy declaration, are taken. This means delaying any precipitous decisions until after Congress returns from its Memorial Day recess. The case for congressional involvement would be solid enough on constitutional and procedural grounds alone. But the secretive task force's plan raises red flags and requires Congressional examination in open hearings. With the government set to take a 70% ownership stake in GM, there are too many unanswered, troubling questions to proceed with a risky bankruptcy declaration. Here are 10 pressing issues among many:
Many in Congress have been eager to disassociate themselves from the perceived mess of the GM reorganization, believing it too complicated. This is a stark contrast to 1979, when Congress held extensive hearings and passed enacting legislation on the Chrysler bailout and later with the complex Conrail restructuring. If not motivated by their constitutional duty, members of Congress might perhaps listen to political arguments to assert their rightful authority. If GM and the task force take the company into bankruptcy, more than displaced workers will be demanding that Congress answer: "Why are we bailing out the auto companies and then facilitating their moving production overseas? Why aren't we leveraging the public investment to protect jobs and manufacturing capacity, as well as facilitate investments in environmentally appropriate technologies?" It need not be so. The congressional leadership still has a few days to stop the reckless rush to bankruptcy court and to assert its responsibilities. (Source: WSJ: Ralph Nader - Robert Weisman.) GM To Announce 14 Plant Closures (May 2009) The news no one wants to hear is coming Monday morning to General Motors Corp. factories across the U.S. The troubled auto giant will identify 14 factories it will close by the end of 2010 as part of its restructuring plan, according to a person briefed on the plans.The announcement could coincide with GM's all-but-inevitable bankruptcy protection filing, expected to come by Monday (1 Jun). Factory-level union leaders have not yet been told which plants will be shuttered, but four vehicle assembly plants will be among those to be closed, along with parts stamping, engine and transmission factories, said the person, who asked not to be identified because the plans have not been made public. GM has said it plans to close 16 more U.S. factories by the end of next year, shedding 21,000 jobs. Two have already have been announced — an engine plant in Massena, N.Y., and a parts stamping plant near Grand Rapids, Mich. United Auto Workers union officials in Detroit have been telling plant-level officials that the company will make the announcement rather than the union, according to the person. GM spokeswoman Sherri Childers Arb would not comment on Thursday. (Source: AP.) (SITE NOTE: HEY OBAMA!!! TELL ME AGAIN HOW THE BAILOUT WILL SAVE JOBS!!! ( *&) RE@! OBAMA...) As bankruptcy nears, new GM begins to emerge (May 2009) With an almost certain bankruptcy filing days away, General Motors is beginning its reinvention, planning to retool one factory to make its smallest vehicles ever in the U.S. and rid itself of the biggest. As GM’s board began two days of meetings Friday to make a final decision on the company’s fate, GM was also closing in on a sale of its European Opel unit, and its main union overwhelmingly approved dramatic labor cost cuts. A deal to sell its rugged but inefficient Hummer brand also appeared on the horizon. The moves provided more clues about what a restructured GM might look like ahead of the expected Chapter 11 filing Monday (1 Jun). Taxpayers will eventually own nearly three-quarters of a leaner GM, with a total government commitment of nearly $50 billion. GM has yet to confirm it will seek bankruptcy protection but scheduled a news conference for Monday (1 Jun) in New York. With the government’s backing and nearly $20 billion in U.S. loans so far, the company has made more dramatic changes in just a few days than it has in decades. “It’s been coming to a head for a very long time,” said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. “But in just the past few months we’ve really seen steps being taken to completely and dramatically change the face of American auto manufacturing.” GM said it plans to reopen a shuttered U.S. factory to build subcompact cars. The retooled factory would be able to build 160,000 cars a year and create 1,200 jobs, offsetting some of the 21,000 that will be lost when GM closes 14 factories by the end of next year. GM’s stock tumbled to the lowest price in the company’s 100-year history, closing at just 75 cents after trading as low as 74 cents. The government plan for GM revealed Thursday would make the shares virtually worthless. The United Auto Workers’ reluctant but overwhelming ratification of concessions will save GM $1.3 billion per year and bring its labor costs down to those of its Japanese competitors. The new UAW deal freezes wages, ends bonuses and eliminates some noncompetitive work rules. The changes, plus others that will be worked out in court, will shrink GM and position it to be among the world’s most competitive automakers if it can emerge from bankruptcy protection and survive the global auto sales slump, Bragman said. (SITE NOTE: But this doesn't mean that the UAW will again force their wages up in the future -- just as they've done in the past...over and over again. This is why the foreign car manufacturers in America work hard to keep the unions out of their plants.) “They’ve eliminated their legacy costs. They’ve already invested in new product that’s coming. They have the ear of the government unlike any time in their history, and the government has said basically ’we are going to help you survive and thrive,”’ Bragman said. GM is banking on more demand for smaller cars previously shunned by Americans. The government decided earlier this month to raise fuel economy standards for the entire U.S. fleet by 2016. (SITE NOTE: Ford on the other hand is retaining the big trucks betting on the standard for America. With the 35mpg emission standard, the Ford outlook may be different as pickups become only used for hauling -- but we don't think so. We think Obama is wrong -- and we think GM's ORIGINAL instincts were correct. The small car move is Obama's fist -- firing the CEO, replacing the board members, etc. If the small cars fail, it is OBAMA'S FAULT.) The new standards were one of the biggest factors in GM’s announcement to build subcompacts in the U.S. rather than in China, said a person familiar with GM’s plans who spoke on condition of anonymity because of the sensitive nature of the plans. Chrysler LLC, already in bankruptcy protection, is banking on the same thing. It wants to sell all its assets to Fiat Group SpA so the Italian automaker can start building its sophisticated small cars on this side of the ocean. The strategy is still a big gamble. Americans have opted for bigger cars and trucks, with the exception of last summer, when gas topped $4 per gallon. GM and Chrysler hope people will spend more for better-equipped subcompacts with more luxurious interiors and performance that rivals the best luxury sedans. Smaller costs after bankruptcy should help the companies make money even though compact cars carry far smaller profit margins than pricey SUVs. But there remains a risk that gas prices will remain low and the cars won’t sell, blowing up the automakers’ new business models. The UAW deal moves billions in retiree health care costs off GM’s books, giving a union-run retiree health care trust 17.5 percent ownership of a post-bankruptcy GM. The trust will take on health care costs for retirees next year. Higher health care costs alone account for a $1,500-per-car cost gap between GM and Japanese vehicles. But just cutting labor costs won’t be enough to save the company. It also has been working to streamline its engineering and design, as well as standardize many parts so they can go into multiple models. “They’ve already made huge progress,” said Laurie Harbour-Felax, president of a consulting company that studies competitive cost differences between automakers. “The problem is you can’t see that because revenue died, because nobody’s buying cars.” (Source: MSNBC.) UPDATE: 28 May 2009 General Motors Corp. said Thursday (28 May) that a committee of its bondholders has agreed to a sweetened deal proposed by the U.S. government to erase of the automaker's unsecured debt in exchange for company stock. A person familiar with the deal said that it is probable GM will file for bankruptcy protection. The person asked not to be identified by name because discussions are still under way with the U.S. and Canadian governments and there is a small chance that the company could avoid a Chapter 11 filing. Deal with GM's Opel moves bankruptcy closer -- Agreement with Canadian auto parts maker Magna reached (May 2009) Germany's finance minister said after a high-level meeting in Berlin that a plan was approved for Canadian auto parts maker Magna International Inc. to move ahead with a rescue of General Motor Corp's Opel unit. Peer Steinbrueck said the agreement was reached early Saturday (30 May) after the second round of high-level talks in as many days. "A solution has been found to keep Opel running," Steinbrueck told reporters after more than six hours of talks. The agreement will see Adam Opel GmbH put under the care of a trustee later Saturday (16 May), shielding the German automaker from GM's likely filing for bankruptcy protection early next week. The German government will provide a $2.1 billion bridge loan, part of which will be available immediately. Germany had sought an agreement that would shield Opel — which employs 25,000 people in Germany, nearly half of GM Europe's work force — from a looming GM bankruptcy court filing in the U.S. and extensive restructuring. The government stressed the need to make Opel legally independent under a trustee so that any German taxpayer assistance would not go to the U.S. Earlier in the day, GM reached an agreement with United Auto Workers to cut labor costs. Both deals greased the skids for the troubled automaker's eventual bankruptcy, which is expected to be announced on Monday. Beginning its reinvention With the almost certain filing approaching, GM is beginning its reinvention, planning to retool one factory to make its smallest vehicles ever in the U.S. and rid itself of the biggest. As GM’s board began two days of meetings Friday to make a final decision on the company’s fate, GM was finalizing its sale of Opel, and its main union overwhelmingly approved dramatic labor cost cuts. A deal to sell its rugged but inefficient Hummer brand also appeared on the horizon. The moves provided more clues about what a restructured GM might look like ahead of the expected Chapter 11 filing Monday. Taxpayers will eventually own nearly three-quarters of a leaner GM, with a total government commitment of nearly $50 billion. GM has yet to confirm it will seek bankruptcy protection but scheduled a news conference for Monday in New York. With the government’s backing and nearly $20 billion in U.S. loans so far, the company has made more dramatic changes in just a few days than it has in decades. “It’s been coming to a head for a very long time,” said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. “But in just the past few months we’ve really seen steps being taken to completely and dramatically change the face of American auto manufacturing.” Factory to build subcompact cars GM said it plans to reopen a shuttered U.S. factory to build subcompact cars. The retooled factory would be able to build 160,000 cars a year and create 1,200 jobs, offsetting some of the 21,000 that will be lost when GM closes 14 factories by the end of next year. GM’s stock tumbled to the lowest price in the company’s 100-year history, closing at just 75 cents after trading as low as 74 cents. The government plan for GM revealed Thursday would make the shares virtually worthless. (SITE NOTE: A complaint is how do the taxpayers get their money back when the company is worthless. The taxpayers just got shafted by Obama.) The UAW's reluctant but overwhelming ratification of concessions will save GM $1.3 billion per year and bring its labor costs down to those of its Japanese competitors. The new UAW deal freezes wages, ends bonuses and eliminates some noncompetitive work rules. The changes, plus others that will be worked out in court, will shrink GM and position it to be among the world’s most competitive automakers if it can emerge from bankruptcy protection and survive the global auto sales slump, Bragman said. “They’ve eliminated their legacy costs. They’ve already invested in new product that’s coming. They have the ear of the government unlike any time in their history, and the government has said basically ’we are going to help you survive and thrive,”’ Bragman said. GM is banking on more demand for smaller cars previously shunned by Americans. The government decided earlier this month to raise fuel economy standards for the entire U.S. fleet by 2016. The new standards were one of the biggest factors in GM’s announcement to build subcompacts in the U.S. rather than in China, said a person familiar with GM’s plans who spoke on condition of anonymity because of the sensitive nature of the plans. Strategy is still a big gamble Chrysler LLC, already in bankruptcy protection, is banking on the same thing. It wants to sell all its assets to Fiat Group SpA so the Italian automaker can start building its sophisticated small cars on this side of the ocean. The strategy is still a big gamble. Americans have opted for bigger cars and trucks, with the exception of last summer, when gas topped $4 per gallon. GM and Chrysler hope people will spend more for better-equipped subcompacts with more luxurious interiors and performance that rivals the best luxury sedans. Smaller costs after bankruptcy should help the companies make money even though compact cars carry far smaller profit margins than pricey SUVs. But there remains a risk that gas prices will remain low and the cars won’t sell, blowing up the automakers’ new business models. The UAW deal moves billions in retiree health care costs off GM’s books, giving a union-run retiree health care trust 17.5 percent ownership of a post-bankruptcy GM. The trust will take on health care costs for retirees next year. Higher health care costs alone account for a $1,500-per-car cost gap between GM and Japanese vehicles. But just cutting labor costs won’t be enough to save the company. It also has been working to streamline its engineering and design, as well as standardize many parts so they can go into multiple models. “They’ve already made huge progress,” said Laurie Harbour-Felax, president of a consulting company that studies competitive cost differences between automakers. “The problem is you can’t see that because revenue died, because nobody’s buying cars.” (Source: MSNBC.)  D.C.’s bet on General Motors not a sure thing -- Bankruptcy filing looms, government could end up with 70 percent stake (May 2009) Government Motors. A new name for Detroit's weakened auto giant GM is making the rounds, sometimes with irony, sometimes with dread, suggested by the deepest Washington industrial intervention in a half-century. The Obama administration is planting itself at the wheel of General Motors with a major ownership stake — and all that goes with it for the U.S. taxpayer. The company appeared closer than ever to filing for bankruptcy protection on Wednesday after its bondholders turned their backs on a federally ordered offer to swap their debt for GM stock. If GM does file, the governments of the United States and Canada could end up with as much as 70 percent of a reconstituted GM when the court dust settles — with the biggest share by far held by the U.S. Treasury. Administration officials portray themselves as reluctant players in this industrial drama, their hands forced by an economic and financial crisis so severe that inaction would have terrible and far-flung consequences. And they insist they have no intention of managing the day-to-day operations of GM or Chrysler, which is already moving through a swift reorganization in bankruptcy court. (SITE NOTE: HOGWASH...Obama and his ilk wanted their hands on an automotive giant to force their environmental agenda -- and the 35mpg emission standard will be applied to GM. It used the bailout money to get its hands on control of the giant. Once in control, it fired CEO Wagoner, replaced the board members, selected a secretive commission that guides the takeover -- and came out with "Government Motors." Obama was guaranteeing GM sales with taxpayer money. In retrospect, it will become much clearer as more and more details come out after the mainstream media get over their love affair with Obama.) But with its huge financial stake, the government has hardly been a passive observer. On March 31, President Barack Obama — a day after firing GM CEO Rick Wagoner — gave the company until June 1 to make aggressive cuts. It was the Treasury Department that instructed GM not to offer bondholders any more than 10 percent of company equity. And no corporate owner has as direct a line to Congress as the Treasury Department. Lawmakers last week were already pressuring Secretary Timothy Geithner to intervene in the planned closure of auto dealerships and complained about GM plans to import cars made in the company's Chinese plants. Obama's auto task force has been working with General Motors, its union, bondholders and dealers to win concessions since February. The panel has been led by Steven Rattner, a former Wall Street financier and a top Democratic fundraiser, and Ron Bloom, a Wall Street turnaround specialist who has advised the United Steelworkers union. When Obama decided to oust Wagoner, it was Rattner who informed the GM executive."We've tried to be true to the president's basic principle that we should not be in the business of running the company," Bloom told The Associated Press. "We are the president's line people, making recommendations to the decision-makers on large amounts of taxpayer dollars. So we have a tremendous responsibility to be thoughtful about our recommendations on how those dollars get used. On the other hand, we are not the management of the company." (SITE NOTE: Horse puckey...) A bankruptcy court filing this week is unlikely. GM and the administration will probably wait until the June 1 deadline to announce a next move. The federal government has already injected nearly $20 billion into GM. Helping it through bankruptcy court reorganization would require billions more — exactly how much would depend on the length of the proceedings. By positioning itself to own a sizable majority of the company, the Obama administration is also assuming a greater stake than the 8 percent share it obtained in Chrysler's bailout. Chrysler could emerge from bankruptcy court as early as next week. (SITE NOTE: GM stocks are at the lowest point in 100 years -- and will soon be worthless. How much does the taxpayer get back from 70 percent of nothing? Then the Obama government will forgive the debt and everyone is happy -- except the taxpayer who got screwed.) While even a speedy bankruptcy reorganization for GM would be a blow to the company's pride as an industrial giant, that step could be the best available. The company would emerge from court with a fraction of its current debt and so-called legacy costs for retirees, and with a more manageable dealer network. At issue is whether the proceeding itself would taint the company and damage its sales. So far, Chrysler's trip to bankruptcy court has not driven customers away. Despite the relatively smooth experience with Chrysler, however, GM is a larger company that is more difficult to restructure. Chrysler has Fiat prepared to assume a portion of the company. No similar deal awaits GM. As a result, participants in the negotiations expect a GM reorganization to last longer. What's more, any government involvement as broad as Treasury's in GM presents a number of nettlesome issues, not the least of which is whether the administration can resist congressional entreaties to influence management decisions. "The task force role in looking at GM is as a private equity model," Sen. Bob Corker, R-Tenn., a member of the Senate Banking Committee who stays in frequent touch with Geithner and Rattner, said in an interview. "It's most unusual. The government is highly involved and it's a threshold we should have never crossed." Auto industry analysts say GM would need a firm line between its ownership and the people actually running the company's operations. "Politicians and pressure groups and the like are not good business people and could very well lead the company in an unproductive direction — maybe a lethal one," said Gerald Meyers, a University of Michigan business professor and former chief executive of American Motors Corp. (SITE NOTE: Hooray -- get Obama out of big business. But as he's already wrecked his damage, he will gladly leave -- letting others to clean up his mess.) The auto industry has economic tentacles that reach across the country. The Center for Automotive Research, in a study released this week, concluded that drawn-out, disruptive reorganizations for GM and Chrysler would result in 1.3 million job losses by the end of 2009. In contrast, successful reorganizations — those that conclude within three months — would cost an estimated 63,200 jobs this year and more than 179,000 in 2010. "The intervention is necessary and appropriate," said Mark Zandi of Moody's Economy.com., an economist who frequently advises Washington policymakers. "Without it, GM would go into bankruptcy and not come out. There would be wide-ranging negative impacts across the economy. Just when the fiscal stimulus is kicking in, this would derail it." Governments have played roles propping up auto companies in the past with mixed results. When the Carter administration provided a $1.2 billion loan guarantee for Chrysler in 1980, the government received broad oversight of the company and an ownership stake. Chrysler was able to avoid bankruptcy, developed fuel-efficient K-cars and repaid the loans in 1983, seven years ahead of schedule. (SITE NOTE: Oh, where are you now Lee Iococa? It was a group different in the circumstances. Then the government simply made a loan. Now Obama took over GM.) But in Great Britain, the bailout of British Leyland in the 1970s and 1980s was largely a failure. The British automaker, which built the MG and Jaguar, suffered through declining market share, poor labor relations and foreign competition before it became MG Rover, which filed bankruptcy in 2005. Some see the same in store for GM. "This is a company that has had its up and downs," said Clifford Winston, an economist who has studied the auto industry at the Brookings Institution. "Why do we think the government is going to do a better job to turn things around?" Sen. Debbie Stabenow, D-Mich., said the Chrysler intervention proved that the consequences of inaction are too great to ignore. "The only reason that pensions and health care and the jobs have been protected is because the Obama administration was willing to come in with significant financing," she said. "Assuming GM goes into bankruptcy, the same will be true." (Source: MSNBC.) GM bankruptcy plan clears bondholder hurdle (May 2009) General Motors’ bondholders finished voting Saturday on the company’s plan to exchange their debt for an ownership stake as high as 25 percent in G.M., the final obstacle to an orderly bankruptcy for the ailing carmaker. Bondholders with slightly more than 50 percent of G.M.’s $27.2 billion in bond debt agreed to support the plan by the deadline of 5 p.m., according to people briefed on the matter. Among the backers was a committee of large investors holding about 20 percent of G.M.’s outstanding bonds. G.M. offered the bondholders the opportunity to take a larger stake in the company after they had overwhelmingly rejected a previous exchange offer. Having at least half of them agree to support the swap would allow G.M. to file for bankruptcy protection on Monday and expect an easier restructuring. Under the restructuring plan, the United Automobile Workers union, through its retiree health care fund, would receive a 17.5 percent stake in the new G.M. and warrants to buy an additional 2.5 percent. Bondholders would initially get a 10 percent stake, along with warrants for 15 percent. The Treasury Department, which has lent G.M. about $20 billion since December, required the company to make deals with the union and bondholders to cut debt and expenses by June 1. But the deals are not seen as enough to prevent a bankruptcy. After the restructuring, the federal government could own as much as 70 percent of the company. G.M. has scheduled a news conference with its chief executive, Fritz Henderson, on Monday in New York, where it is expected to make its bankruptcy filing. Its rival Chrysler filed for Chapter 11 protection there April 30. (Source: NY Times.) June 2009AP sources: General Motors to file bankruptcy (Jun 2009) A congressional official says General Motors Corp. will file for bankruptcy protection Monday and the federal government plans to take a 60 percent ownership stake in the company.The official familiar with the plan says President Barack Obama plans to tell the nation that the government will provide an additional $30 billion in aid to help the automaker emerge from bankruptcy but is committed to staying out of the automaker's business decisions. The plan was confirmed by a second person familiar with the details. (Source: AP.) Only 21% of voters nationwide support a plan for the government to bail out General Motors as part of a structured bankruptcy plan to keep the troubled auto giant in business. The latest Rasmussen Reports national telephone survey finds that 67% are opposed to a plan that would provide GM with $50 billion in funding and give the government a 70% ownership interest in the company. We totally agree with the comments from McAuley's World: With 14 Out Of 15 GM Jobs Gone Why Is The Government Spending $100’s Of Billions Of Taxpayor Dollars On A Company That Will Employ Less Than 40,000 Workers.  White House Says Bank Bailout Law Gives it the Power to Take Ownership of General Motors (Jun 2009) The $700-billion financial industry bailout legislation approved by Congress last fall gave the Obama administration all the authority it needed to take ownership of General Motors this week, White House Press Secretary Robert Gibbs told CNSNews.com. On Monday, President Barack Obama announced the federal government was granting another $30.1 billion in aid to GM and taking ownership of 60 percent of the automaker as it enters bankruptcy. When asked by CNSNews.com to explain “why specifically the government should be able” to take “control of 60 percent of a company” and put $30 billion in it “without direct congressional authorization,” Gibbs said the following: “Well, I think the money is based on the Troubled Asset Relief [Program], and is related to money that was approved in the prior administration through that program to deal with, as they had in the past administration, they were dealing with loans to cover--basically to bridge the operating costs,” he said.Congress approved and President Bush signed the law creating the $700 billion Troubled Assets Relief Program (TARP) last fall. The legislation specifically said the money could be used only for financial institutions such as banks, insurance firms and credit unions. In December, the Bush administration provided a $13.4 billion bridge loan to GM and a $4 billion loan to Chrysler after Congress rejected auto bailout legislation. The Bush administration used money from the TARP funds to make the loans to GM and Chrysler. In March, President Obama expanded the bailout to also include a government guarantee on the warranties for new cars sold by the two companies. He also forced the removal of GM CEO Rick Wagoner. Legal critics from both the right and left have questioned whether it was lawful to apply TARP money to the auto companies because Congress had authorized that the $700 billion be spent specifically on financial institutions. Former Clinton Labor Secretary Robert Reich also had said it would be unconstitutional for the Bush administration to spend money bailing out the auto makers when Congress had not appropriated money for that purpose. (Source: CNS News.) Reports question Chinese Hummer acquisition (Jun 2009) General Motors Corp.'s planned sale of its Hummer brand to a little-known Chinese truck maker could be blocked by regulators who have not approved the deal and are questioning its wisdom. Sichuan Tengzhong Heavy Industrial Machinery Co. and GM have given no financial details about the planned purchase of the American maker of gas-guzzling, military-style SUVs. However, any such deal would require Chinese Commerce Ministry approval at the provincial level at least. Reports in the Shanghai Securities News and other state-run newspapers Friday said Sichuan Tengzhong had not yet obtained such an approval. They also raised questions over whether the deal will be allowed to go through, with one report likening Tengzhong's plan to acquire Hummer to a "snake trying to swallow an elephant." The surprise announcement of the acquisition by Sichuan Tengzhong, a maker of heavy industrial vehicles such as cement mixers, has raised questions about the privately owned company, which has disclosed scant information about its ownership or finances. Reports in the financial magazine Caijing and state-run newspapers said a mining tycoon, Suolang Duoji, who is also known by the Chinese name Li Yan, was behind the deal. Suolang Duoji indirectly owns a big stake in Sichuan Tengzhong through an investment company called Sichuan Huatong Investment Holding Co., the reports said. He also is the controlling shareholder and chairman of Lumena Resources Corp., a mining company that is preparing to list shares on the Hong Kong Stock Exchange. Both Tengzhong and Lumena are based in China's mountainous southwest. However, in the prospectus for Lumena's IPO, Suolang Duoji lists his residential address as a luxury serviced apartment in Hong Kong. Staff at Tengzhong's public relations firm refused comment. Staff at Tengzhong's headquarters in Chengdu, Sichuan, referred inquiries to the PR agency.A woman who said she was a human resources manager at Sichuan Huatong refused to transfer calls to any other numbers, saying company policy was to keep such numbers secret. Lumena is the world's second largest producer of thenardite, a form of sodium sulfate that is used to make detergents and in textile and glass production. The company prospectus reports 1.9 billion yuan ($278.6 million) in assets and net profit of 442.1 million yuan ($65 million) in 2008. The exact relationship between Lumena and Tengzhong is unclear, as is Tengzhong's own financial status.Tengzhong is likely benefitting from heavy stimulus spending on construction projects and from rebuilding from last year's earthquake in Sichuan, given its specialization in construction equipment and heavy trucks. The company earlier said it broke ground on a 3.5 billion yuan ($500 million) factory to make oil field equipment. Tengzhong's CEO, Yang Yi, has said the company will keep Hummer's headquarters and operations in the U.S., while investing more in research and development of more fuel-efficient vehicles: the Hummer now gets 15 mpg. (Source: AP.) (SITE NOTE: It appears that the Chinese interest in the Hummer is to upgrade their military vehicles with the Hummer technology.) (Jun 2009) Perhaps the true death knell of the road hog Hummer has come when it’s even too embarrassing for the Chinese to manufacture. The once-popular gas guzzler had a certain amount of contrarian panache when enviros used it to paint America as an Earth-hating group of Moneybags. When gas prices shot out of sight, the Hummer suddenly became a white elephant for its owners — and its manufacturer: A Chinese firm’s bid to buy the gas-guzzling Hummer car brand will be blocked on environmental grounds, according to Chinese state radio. Sichuan Tengzhong Heavy Industrial Machinery emerged as the surprise buyer for the brand earlier this year. But China National Radio said Hummer is at odds with the country’s planning agency’s attempts to decrease pollution from Chinese manufacturers.The acquisition from General Motors would need Chinese regulatory approval.The irony, of course, is that China just got done snubbing Hillary Clinton and Barack Obama on climate-change cooperation. They told the US in no uncertain terms that they would not limit their ability to produce energy for the questionable tradeoff of adopting a scientific hypothesis that has lost ground in the last couple of years. Now they get a chance for a coup de grace by blocking this transaction on environmental grounds, leaving Obama holding the bag. How much does GM stand to lose from the aborted sale? The BBC says $100 million, which at this point looks like a darned good deal. Certainly they will find few buyers in this market, when car sales have plummeted anyway and people have to prepare for years of stagflation as energy prices go up while the economy declines. With the 1970s fast approaching in the rear-view mirror, buyers won’t be looking for Hummers — even if Government Motors was allowed to produce them with Barack Obama as the not-so-silent partner to GM management. The question for Obama and the rest of the auto industry task force is whether they can afford to let Hummer die outright, politically if not financially. With GM already closing plants and dealerships, even a weak-selling line would keep jobs in place for a transitional period. Without the cash infusion from the sale, GM will have to make even more cuts if it just shutters the line as it did with Pontiac. Would anyone else buy the Hummer line? (Source: Hot Air.) GM Said to Be Close to Agreement on Sale of Hummer to Chinese (Aug 2009) General Motors Co. may sign an agreement for the sale of the Hummer sport-utility vehicle business to a Chinese machinery maker this week, said two people familiar with negotiations. Executives from prospective buyer Sichuan Tengzhong Heavy Industrial Machinery Co. based in Chengdu, China, are expected to arrive in Detroit early this week for more negotiations with GM, said the people, who asked not to be named because the talks aren’t public. An agreement could be signed and announced during the trip, one of the people said. It will be subject to U.S. and Chinese regulatory approval before it will take effect. (SITE NOTE: Same company as before -- but what's changed?) GM Chief Executive Officer Fritz Henderson is working to dispose of half of the automaker’s U.S. brands so the carmaker can focus on the four that remain. The company is eliminating the Pontiac brand, and deals are pending to sell its Saab brand to Swedish sports car maker Koenigsegg Automotive AB and Saturn to Penske Automotive Group Inc. Regulators have not indicated any problems with the deal, the people said. The BBC reported in June, citing China National Radio, that the National Development and Reform Commission would block the sale on environmental grounds and because Tengzhong lacks expertise in passenger-car production. The Ministry of Commerce has reached a consensus internally to approve the deal, the National Business Daily reported citing an unidentified ministry officer. GM has said it is working with both governments to make sure they understand the deal and the benefits to all parties. (SITE NOTE: The Chinese want the Hummer not for transportation, but for military applications to upgrade their military vehicles with US technology.) The Hummer division will remain based in the U.S., and is considering several U.S. locations for a headquarters, including the Detroit or Nashville areas, Taylor, 52, said in a June interview. Separating from Detroit-based GM means Hummer must create corporate offices as it prepares to start building SUVs under Tengzhong’s ownership. Tengzhong would take on Hummer’s dealer accords and senior management. Hummer will have 100 or fewer corporate employees and contract with GM for manufacturing, Taylor said. The sale will protect more than 3,000 U.S. jobs, the companies have said. (Source: Bloomberg.) GM bailout triggers calls for boycott -- Conservative commentators stoke anger against 'Government Motors' (Jun 2009) Barring an unexpected setback, a "new" General Motors will emerge soon from bankruptcy after eliminating most of its debt, hundreds of dealers and a fair share of its work force — saved by up to $50 billion in federal bailout funds. But while the once-dominant automaker certainly wouldn’t have been able to survive without that federal largesse, the question is whether it can survive its unlikely alliance with Washington — which will hold a 60 percent stake in the company that emerges from the Chapter 11 process. A sizable share of Americans, recent surveys show, are reluctant to buy from a bankrupt automaker. Complicating matters, the bailout is triggering a harsh reaction from the conservative end of the political spectrum, with some high-profile pundits calling for an outright boycott of what many are calling “Government Motors.” Among the most vocal is Hugh Hewitt, who has frequently called for a boycott to protest the “Obamaization of the American car business,” both on his syndicated radio show and on his blog. Hewitt insists that “individual Americans” must resist buying the automaker’s products because, as he wrote in one blog entry, “every dollar spent with GM is a dollar spent against free enterprise.” Powerful radio talk show host Rush Limbaugh also has been associated with the movement but said he has not encouraged any boycott. "I think it is media childishness when people start urging boycotts," he said on his show this month, according to a transcript posted on his Web site. He did say he has heard from listeners who do not intend to buy another GM or Chrysler car. "The reasons I got from people who just sent me e-mails was they don't want to support Obama's socialism," Limbaugh said. "They don't want to support the notion of government running the car companies, and they don't want to patronize companies that have been bailed out." How much of an impact the call for a boycott is having is unclear. GM fared a bit better than some had expected in the May sales sweepstakes, although that reflected activity prior to its June 1 bankruptcy filing. Some studies suggest that U.S. car buyers may be ready to accept the idea that the automaker, like its crosstown rival, Chrysler, will come through its financial woes. (June sales figures will be released next week.) It helps that the Obama administration has created a publicly funded program to ensure that GM and Chrysler warranties are honored, no matter what happens to the companies, said Art Spinella of Oregon’s CNW Marketing. A study conducted by CNW, just as GM went into Chapter 11, found that 37 percent of potential U.S. car buyers were planning to steer clear of the company’s products, whether for practical or political reasons. But that was an improvement over previous surveys, Spinella said. In July 2008, when CNW first asked potential buyers the question, about 90 percent said they would not consider buying a vehicle from a bankrupt automaker, he said. Other surveys have not been so kind to GM, however, and it will likely take several more months to see whether the issue of bankruptcy was a short-term concern or a long-term problem. But it’s clear that the company’s conservative opponents won’t be letting up. For his part GM Chief Executive Officer Frederick “Fritz” Henderson says he is "concerned" about a backlash against GM, whatever the reason, although he tries to downplay the boycott threat. “I’m going to bet that U.S. customers will make their own choices," Henderson said in an interview. "Our job is to do the best we can” to encourage buyers to look past both the bankruptcy and the bailout. The automaker is counting on a speedy path through the courts to allay fears about its future and the wisdom of the bailout — and also to get the bad news off the front page. But it’s harder to deal with the Internet. Numerous anti-GM sites, such as GMRetardation.com, have popped up across the Web, some hosting petitions calling for the government to get out of the auto industry, others asking buyers to pledge they will not buy from the Detroit maker. Intriguingly, there has been somewhat less public opposition to the Chrysler bailout. Why? Analysts suggest that may be because there’s less public money involved, or that the Treasury Department didn’t become the controlling force once the smaller maker emerged from bankruptcy, as it will at GM. Instead, Chrysler is now being run by the Italian auto manufacturer Fiat. This isn’t the first, nor will it likely be the last, time an automaker has been threatened by those who see it as a political foe. Ford took heat from the outspoken Rev. James Dobson, founder of Focus on the Family, several years ago, for advertising in a number of gay and lesbian publications. Initially, the automaker backed down, then quickly reversed course, saying it would maintain the advertising. There was little, if any, indication that Dobson’s threats actually cost Ford sales. So, while radio host Hewitt insists his callers overwhelmingly support his call for a boycott, it’s not clear they’re actually in the car market — and steering their dollars over to GM’s competition. But the carmaker is nonetheless pressing its own case with an aggressive marketing campaign that tackles head-on questions about its bankruptcy, federal bailout and future prospects. (Source: MSNBC.) July 2009GM Investing $1B in Brazil for New Cars (Jul 2009) Brazilian Car Market Showing Strong Demand, Company Official Says; Two New Models Being Developed -- General Motors announced plans to invest $1 billion to develop two new car models in Brazil. The president of GM's operations in Brazil and the Mercosur countries said it is GM's biggest investment since the onset of the global financial crisis. Jaime Ardila says about 50 percent of the money will come directly from GM Brazil while the rest will be borrowed. One new small car and one medium-sized car will be developed at the Gravatai plant in southern Brazil and are expected to be in production by 2012.Ardila says Wednesday GM Brazil has avoided the problems of its parent unit in the U.S. because of strong demand in Latin America's largest economy. GM sold 580,000 vehicles in Brazil in 2008 - its most ever. GM emerged from bankruptcy protection last week, with CEO Fritz Henderson announcing the "business as usual was over" for the automaker. But GM, whose 40 days under court supervision was far shorter than anyone predicted, faces the worst auto sales slump in a quarter-century. The company plans to cut 20 percent of its salaried U.S. workforce by the end of the year, including around 35 percent of it's executive employees. The revamped carmaker will focus on improving customer relations. The company is launching a "Tell Fritz" Web site to allow owners and the public to share their concerns with senior management, and Henderson plans to go out on the road every month. Henderson also said GM will partner with eBay in California to allow consumers to bid on vehicles just as they would in a typical eBay auction. They could also choose a "Buy it Now" option in an experiment to make car shopping easier. Dealers would still distribute the cars. "As a culture, General Motors needs to be prepared to experiment and adjust," he said. (Source: CBS.) (SITE NOTE: HEY, OBAMA. WHERE'S THE FREAKING AMERICAN JOBS??? OBAMA YOU SAID THE BAILOUT WAS ALL ABOUT JOBS -- BUT WE DIDN'T MEAN BRAZILIAN JOBS!!!) GM agrees terms for sale of Saab to Koenigsegg (Aug 2009) General Motors has agreed the terms of a sale of its loss-making Saab division to Koenigsegg, a Swedish manufacturer of sports cars based near Malmö, employing only 45 people. Augie Fabela, Koenigsegg’s chairman, said that the American carmaker would remain a minority owner in Saab until it became profitable, but added that some finance for the deal had yet to be secured. Koenigsegg is hoping for a SwKr4.3 billion ($778 million) loan to Saab from the European Investment Bank. Koenigsegg also needs to raise a further SwKr3 billion. Carl-Peter Forster, the head of GM Europe, said: “This contract is an important step in the journey to a potential deal. The closure of the deal is contingent on the funding commitment from the European Investment Bank, guaranteed by the Swedish Government.” (Source: Times Online UK.) October 2009Another bailout for GM? (Oct 2009)Maybe three’s the charm? After two bailouts and a politicized bankruptcy that ended up being a big payoff to the United Auto Workers, the credit arm of General Motors wants even more taxpayer money. Why? Because, silly geese, GMAC is just too big to fail:It might seem like a lot of cash for one supersize clunker, a good-money-after-bad attempt to jump-start a broken-down giant of Detroit. But as the Obama administration contemplates a third rescue of GMAC, the onetime finance arm of General Motors, federal officials, automotive executives and analysts all say the company is — just like the biggest Wall Street firms — too big to fail. Despite two taxpayer-financed bailouts, GMAC is still struggling, even as its two biggest customers, General Motors and Chrysler, have put bankruptcy behind them.How much more does GM want to rescue its loan business? Another $5.6 billion, on top of the $12.5 billion it has already sucked out of the Treasury in its other welfare checks. GM apparently wants to sell the government even more of its business in exchange for the cash. At the moment, the government holds 35% of GM; after this “sale”, it would own a majority stake in the automaker. At least there’s one piece of good news — the UAW won’t need Card Check after all. If the federal government owns a majority stake, then every negotiation will be federally arbitrated, right? Why would the government even consider a third bailout for GM? In part, the thinking is that they have to rescue the funds already committed: Why rescue GMAC again? The federal government has committed more than $60 billion to prop up G.M. and Chrysler, and letting GMAC fail, the thinking goes, would threaten a recovery in the broader car industry.This is the kind of thinking most often seen at craps tables and bookie joints. Betting on the Tennessee Titans will eventually pay off, and besides, bettors have gotten in too deep to stop now. The Titans have to win sometime, don’t they? The only real difference is that one gets better odds on craps, and for that matter, even the Tennessee Titans. The best policy would be to let GM fail, which is what the government should have done in the bankruptcy. Instead, it put a wet-behind-the-ears campaign worker in charge of interfering with senior creditor rights to hand the UAW a sweetheart deal. Now we’re just throwing nonexistent money after crushing debt, all in the service of a company that hasn’t performed well in years. This is what happens when government puts its money on bad teams in a sport they have no business playing in the first place. (Source: Hot Air.) GM reports $1.2 billion third-quarter loss -- Bailed-out automotive giant says it will begin to pay back U.S. loans (Nov 2009) General Motors, its river of red ink stemmed by a trip through bankruptcy court, reported a narrower quarterly loss and said it would start repaying billions of dollars in government loans that helped keep it alive. GM lost $1.2 billion for the third quarter — far less than the $6 billion it lost in the first three months of the year, before GM was transformed by a stay in bankruptcy protection. The company credited a sharp reduction in debt and sales of new models. In what it called a sign of progress, GM also pledged to start paying back $6.7 billion in U.S. loans. But the money will come from a contingency account full of government cash, leading critics to question just how healthy the automaker really is. In one sign GM is indeed on firmer footing, it took in $3.3 billion more in cash than it spent in the third quarter. In the first quarter, the last one for which it reported results, GM burned through $10 billion in cash. GM warned it will face other costs that will bring down earnings in the coming months, including restructuring in Europe and as much as $700 million to shutter dealerships. And there are still questions about the strength of the auto market and the economy. "We're seeing signs of, I won't call it a recovery, but certainly stability," CEO Fritz Henderson said. The repayment of government loans will begin with a $1.2 billion installment in December. GM said it plans to repay the debt over the next two years and possibly as early as next year. That money will come from a $16.4 billion contingency fund set up by the U.S. government in case sales worsened or other problems cropped up. The seemingly circular payment plan was already stirring controversy in Congress. "What is the logic in repaying government loans with taxpayer dollars?" asked Brooke Buchanan, a spokeswoman for Republican Sen. John McCain. Brad Coulter, director of O'Keefe and Associates, a financial consulting firm near Detroit, said using government money to pay off the government debt is partly a public relations move. But it also indicates rising confidence at GM, which may feel it won't need all the contingency money, he said. And GM did hedge its bets, opting not to repay the whole amount in December so it still has cash if conditions change. Henderson said GM felt it was prudent not to repay the whole amount in one shot. The government owns 61 percent of the company and has given GM a total of $52 billion in aid, $45.3 billion of which could be repaid when the new GM makes a public stock offering, perhaps as early as next year. The General Accounting Office, which serves as Congress' auditors, said last week it was doubtful the government would get all its money back. Henderson said that depends on the price of GM stock, which he intends to make valuable by managing the company well. "It is my mission to disprove the GAO," Henderson said. GM said its improved performance was fueled by new products, including the Chevrolet Camaro muscle car and the Chevy Equinox and GMC Terrain midsize crossover vehicles. The company's top sellers through October were the Chevrolet Silverado pickup truck and the Impala, a full-size car. The automaker was also helped by having been stripped of many of its debt obligations in bankruptcy court. Before bankruptcy, GM was weighed down by a huge debt of almost $95 billion. That has since been cut to $17 billion. GM paid $250 million in interest for the third quarter, far lower than the $1.1 billion it paid in the first quarter. GM's global presence also helped — particularly in China, where the emerging middle class is hungry for cars. GM earned $429 million before taxes and interest at its Asia Pacific unit, and $245 million in Latin America. It had lost $651 million before taxes in North America and $437 million in Europe. Coulter cautioned that losing money in North America is one of the biggest threats to GM's turnaround. "North America has to get back to being profitable for this plan to succeed," he said. Henderson wouldn't predict when GM as a whole would become profitable. GM's shares are no longer listed on the New York Stock Exchange. But the automaker's bonds, which mature in 2033 and will be converted into equity in the new company, jumped $3.75 to $21.25. That was the highest closing price since January. Third-quarter profits were generally weak across the auto industry, although sales were helped in Europe, China and elsewhere by programs similar to the U.S. government's Cash for Clunkers rebates. GM's crosstown rival, Ford Motor Co., by far the strongest of the Big Three automakers, reported a $1 billion profit for the quarter. The new CEO of Chrysler said its operations broke even in September, although the company did not release numbers. Volkswagen AG and Toyota Motor Corp. both reported quarterly profits of around $250 million, while Honda Motor Co. made a $587 million profit. GM's results can't yet be compared with previous quarters because its accountants are still setting values for its assets and liabilities. Besides unloading all that debt, GM left behind several old factories and some burdensome contracts. (Source: MSNBC.) December 2009Sure as hell smells like a POLITICAL hatchet job General Motors CEO Fritz Henderson Resigns (Dec 2009) General Motors Co. CEO Frederick "Fritz" Henderson stepped down Tuesday after the board determined that the company wasn't changing quickly enough. Chairman Ed Whitacre Jr. said at a hastily called news conference that he will serve as interim CEO, and an international search for a new CEO and president is planned. Whitacre thanked Henderson for his work during a period of challenge and change, but said it is time to accelerate the pace of rebuilding the largest U.S. automaker.The resignation comes just eight months after Henderson, 51, replaced former chairman and CEO Rick Wagoner, who was ousted March 29 by the Obama administration's government's auto task force. Henderson has been with GM his entire career and was the government's choice to run the beleaguered company after Wagoner left. Whitacre, picked by the government in June to be chairman of the new GM, is considered an industry outsider, having run AT&T Inc. for 17 years. Whitacre and the board have become increasingly active in the company's decisions, at times challenging some of Henderson's decisions. In November, the board voted to abandon plans to sell GM's European Opel unit. That reversed an earlier option favored by Henderson to sell it to a consortium led by Canadian auto parts supplier Magna International Inc. "Based on the determination of the board and the pace of the change in the company, it was determined that it was best to initiate a change in direction," spokesman Chris Preuss said. An Obama administration official said in a statement that "this decision was made by the Board of Directors alone. The Administration was not involved in the decision." Henderson replaced Wagoner a few months before GM entered bankruptcy protection and led the company through a painful government-led and court-supervised reorganization. With the government's help, the company emerged from court protection in just 40 days cleansed of massive debt and burdensome contracts that would have sunk it without federal loans. Henderson continued to downsize the automaker after its emergence from bankruptcy. He sought to scale down GM to just four core brands: Chevrolet, Cadillac, Buick and GMC. While he has largely succeeded in that goal, attempts to sell the company's other brands have hit obstacles. Earlier this week, Swedish luxury sports car maker Koenigsegg Group AB backed out of a deal to buy GM's Saab brand. GM said Tuesday it has some interested bidders but will wind down Saab if nothing materializes by the end of the year. GM also is winding down Pontiac and was successful in winning a tentative sale of Hummer to a Chinese construction machinery maker. However, Henderson's bid to sell Saturn to race car mogul Roger Penske fell through and the brand is now liquidating. Henderson was scheduled to be the keynote speaker at the Los Angeles Auto Show on Wednesday. GM Vice Chairman Bob Lutz will now deliver the address. (Source: Fox news.) Government Motors -- Henderson firing political (Dec 2009) Commerce: Amid creepy assurances that the firing of GM's CEO Fritz Henderson was just business, evidence is piling high it wasn't. It was politics, and another reason why government must get out of the private sector. The surprise "resignation" of General Motors Chief Executive Henderson Tuesday, coming on the back of silky assurances three weeks ago that he had the support of the board, and just hours before he was to keynote a trade show in Los Angeles, had all the earmarks of one of those government operations World War II GI's used to joke about for incompetence and absurdity: Close enough for government work. Catch-22. Snafu. Not only did the GM board make a U-turn in its choice to lead the company on short notice, it didn't even try to spin its ham-fisted move, blandly calling it a desire to find a new "change agent." Leaving the company headless, the board didn't think of having anyone else lined up to take the reins. In the great rush for "change," its chairman said without irony that GM would take a year to find a new CEO. Sounds like government work to us. It points to an overbearing government presence in a distressed industry that's only making matters worse. Government can be arbitrary, driven by politics and addicted to power. This move against Henderson is like one Venezuela's dictator Hugo Chavez would make — and will have similar results. It also echoes the barbaric treatment of Bank of America CEO Ken Lewis, who was denied a salary after a year's work and is now quitting without a replacement, and the near-resignation of Robert Benmosche at AIG, all because both firms have been subject to government takeover and meddling. Henderson, 51, had been handpicked for the job by the board just eight months ago after it arbitrarily fired then-CEO Rick Wagoner. Henderson was a GM lifer who "didn't fit in" with the GM board's political appointees. Unlike them, he knew the car business. He pared the product line, stabilized GM's market share at 20% and turned a profit on some units. But he couldn't transform the company with a political board looking over his shoulder, cutting his salary to $950,000 and second-guessing his every move. Surprise. The White House knows this and tried to conceal its hand. "This decision was made by the board of directors alone. The administration was not involved in the decision," a Treasury Department spokesman said. That's rich, given that the government owns 60% of GM after sinking $52 billion in bailout cash into the company. You can bet it owns the board. So after all of those irrational moves, the hunt is on for a first-rate new CEO. Good luck getting one. (Source: Investors.com.) G.M. Plans to Close Saab After Sales Talks Collapse (Dec 2009) Bigger car companies, which have been struggling with steep losses of their own, showed no interest because Saab was too small even though the brand is well regarded. The last hope for Saab, which General Motors took control of in 1990, had been Spyker Cars, a tiny Dutch maker of high-end sports cars. But some G.M. officials said that Spyker’s reliance on Russian financing for the Saab deal was a major factor in its decision to walk away. “We discovered this week that there were issues that couldn’t be resolved and no additional time would overcome that,” said John F. Smith, a General Motors executive vice president. He added that G.M. would still be willing to consider selling Saab if a new buyer were to emerge. If that does not occur, the process of winding down Saab will begin in January. “I can’t rule it out, but the clock starts now,” he added. Saab, which filed for bankruptcy protection in Sweden in February, has been a perennial money-loser. It is among G.M.’s smallest brands, with sales of 93,000 vehicles worldwide last year, with just under 22,000 in the United States. G.M. also closed its Pontiac and Saturn brands this year. Besides throwing the fate of some 3,500 Saab workers in Trollhattan, Sweden, into doubt, Saab’s expected closing also was more troubling news for Sweden’s industrial base. Another famous Swedish automaker, Volvo, is being sold by Ford to Zhejiang Geely Holding of China. Both Volvo and Saab are based in the west of Sweden, and the region has a deep network of suppliers and contractors that will also be affected. “This is of course a major blow to Sweden, though it wasn’t unexpected,” said Cecilia Werner, communications director for the Swedish Agency for Economic and Regional Growth. She said there were nearly as many Swedes whose jobs were indirectly dependent on Saab as there were Saab employees. Moreover, she said, the company’s long history and distinctive automobile designs have made it part of the Swedish identity, especially overseas. “They say ‘Ikea, Abba, Volvo and Saab,’ ” Ms. Werner said. “This company has been a part of Swedish pride, along with Volvo.” In the auto world, as in Sweden, the announcement Friday was greeted more with sadness than with surprise. Besides losing money for years, Saab was always on the periphery of G.M.’s empire. In the last year, management in Detroit had made it clear it wanted to dispose of the company. In a conference call, Mr. Smith repeatedly declined to specify what problems came up during the due diligence process at Spyker. An earlier deal to sell Saab to Koenigsegg, a Swedish maker of specialty sports cars, collapsed last month. According to people close to the negotiations, G.M. was concerned about Spyker’s Russian financial backers as well as the fate of G.M.’s technology and other intellectual property under Spyker. The people declined to be identified because they were not authorized to speak publicly about the talks. The main investor in Spyker is the Russian bank Convers Group, which is controlled by Alexander Antonov, a Russian tycoon. His son Vladimir, a 34-year-old banker who is a top executive at Convers, is chairman of Spyker. Last month, G.M. pulled out of a deal to sell its European Opel and Vauxhall operations to a consortium led by Magna International, a Canadian maker of auto parts. The consortium was backed by the Russian state-controlled bank Sberbank. “They’d been down the road with Russian investors before and that gave them reason for caution,” said one official, who insisted on anonymity because he was not authorized to speak publicly. “There was no visibility on when that might have been resolved.” Another snag was the question of whether Spyker could qualify for a 400 million euro ($573 million) loan from the European Investment Bank that was part of the earlier deal to sell Saab to Koenigsegg. A spokesman for Spyker declined to comment on the question of the company’s Russian ties, as did a spokesman for G.M. In a statement, the chief executive of Spyker, Victor Muller, seemed to put the blame on G.M. for dragging its feet. “We sincerely regret that we are not able to complete this transaction with G.M.,” Mr. Muller said. “We worked 24/7 for three weeks, but the complexity of the transaction in combination with the strict deadline simply did not allow us to complete the transaction.” Saab will continue to honor warranties, while providing service and spare parts to current Saab owners around the world. Nick Reilly, the president of G.M.’s European operations, said that the move was not a bankruptcy or forced liquidation, so he expected Saab to pay its debts, including those of suppliers. In all, 1,100 dealerships worldwide will be affected, including about 200 in the United States. G.M. is taking other steps to further clean up its balance sheet. On Friday, it said it began repaying the money it owes to the American and Canadian governments. It paid $1 billion to the United States Treasury, toward a balance of $6.7 billion, and $192 million to Canada, which is owed $1.4 billion. G.M.’s chief executive, Edward E. Whitacre Jr., said the company would continue making installments through June, when it would repay the entire balance, “assuming no downturn in the economy or business.” Most of the $50 billion that G.M. borrowed from the Treasury’s Troubled Asset Relief Program was converted to a 60 percent ownership stake, which the government plans to sell in a public stock offering as soon as next year. G.M. initially bought half of Saab in 1990 for $600 million, acquiring the rest in 2000 for $125 million. Under G.M.’s stewardship, Saab lost a large part of its Swedish identity as well as the technical prowess that earned it a loyal following in the 1980s. “People will say they’re sad to see it go, but what they’re lamenting is the Saabs from the ’70s and ’80s,” said James Bell, executive market analyst for Kelley Blue Book. “Since the mid-’90s it’s been a pretty irrelevant brand,” Mr. Bell said. “The only reason people would be excited about buying a Saab would be if someone was an enthusiast of the brand. And I think Saab was even pushing their patience.” (Source: NY Times.) WTF??? First GM won't have to repay 3 billion because Gov't Owns 60 percent of stock and then Obama allows PAY RAISE FOR CFO so Gov't Can SELL ITS STOCK. New GM CFO’s pay exceeds government limits -- GM says exception worked out; Liddell expected to take company public (Dec 2009) The new chief financial officer at General Motors Co. will receive a salary of $750,000 next year, but he'll get up to another $5.45 million worth of stock starting in 2012 if GM successfully sells shares to the public. Chris Liddell's pay package exceeds the limits imposed on companies that have received U.S. government aid, but an exemption was worked out with the government pay czar Kenneth Feinberg, GM said in a government filing Wednesday. Liddell's compensation package will exceed that at Microsoft Corp. when accounting for his stock awards. His pay package at the software giant was about $2.4 million. Liddell, 51, will leave his job as Microsoft Corp.'s CFO on Dec. 31 and join GM next year. He is seen as a possible candidate for GM's next CEO. (Msnbc.com is a joint venture of Microsoft and NBC Universal.) GM's current CEO Ed Whitacre Jr. is not earning a salary, but he receives a $350,000 annual stipend as a board member. His predecessor Frederick "Fritz" Henderson, who was ousted earlier this month, was receiving a compensation package of nearly $5.5 million, including a cash salary of $950,000, under Feinberg's pay rules. In addition to a base salary of $750,000, Liddell will receive $3.45 million in company stock over three years starting in 2012. He will receive another stock grant of $2 million that vests in three years and is payable in 25 percent installments for every 25 percent repayment of GM's $6.7 billion in government loans. GM has received $52 billion in taxpayer assistance, but most of that has been converted into equity that gives the U.S. government a 60 percent stake in the company. Last week, GM repaid $1 billion, its first payment to the government. Under new pay rules for companies that received substantial government aid set in October, the base pay of General Motors' top executives is capped at $500,000. Much of the compensation for GM officials will be paid in company stock that cannot be redeemed until beginning in 2011 or after GM starts repaying its government loans. However, a small number of exemptions to pay limits have been granted in the case of other major recipients of government money, including boosting the pay package of an American International Group Inc. employee to better align it with other executives at the insurer. (Source: MSNBC.) WTF??? Another Geithner TAKE OVER...Lying Sack of S... U.S. taking majority ownership of GMAC (Dec 2009) The federal government said Wednesday it will take a majority ownership stake in the troubled auto lender GMAC, providing another $3.8 billion in aid to the company, which has been unable to raise from private investors the money it needs to stanch its losses. The new aid package for GMAC, coming as most large banks are repaying the government, underscores both the problems afflicting the company and its importance to the Obama administration's efforts to revive the auto industry. GMAC, which already has taken $12.5 billion in direct federal aid along with other forms of government support, is the largest lender to General Motors and Chrysler dealerships and to their auto-buying customers. The Treasury Department said it will increase its stake in GMAC to 56 percent from 35 percent. It also will hold about $14 billion in what amount to loans that GMAC may eventually be required to repay. The government plans to appoint four of the company's nine directors. GMAC becomes the sixth company taken over by the federal government in the last two years, joining mortgage financiers Fannie Mae and Freddie Mac, automakers General Motors and Chrysler, and the insurance company American International Group. The government also owns a large stake in Citigroup. Wednesday's announcement is a coda to the stress test of 19 large banks earlier this year. GMAC, which was required to add $9.1 billion to its capital reserves against unexpected losses, was the only bank unable to satisfy regulators by finding private investors. The company has now been forced to accept more aid from the government instead. "We said if you do not go raise capital from the private markets, if you are unable to, we will put capital into you because it is important to the stability of the system," Treasury Secretary Timothy Geithner told the Congressional Oversight Panel earlier this month. "It was never going to be possible for GMAC. They are in a unique and difficult situation." (Source: Washington Post.) Treasury to dole out $3.8 billion to GMAC, raise stake (Dec 2009) The U.S. is injecting another $3.8 billion into GMAC Financial Services to help cover mortgage losses, in a bailout that makes the government the majority owner of the auto and home finance company. GMAC said after the capital infusion it does not expect to record more major losses from its mortgage lending unit, which should help stabilize results. The company is one of the largest car loan makers in the United States, and earning profit will give it more capacity to make loans and eventually pay back the government. Many analysts see GMAC's mortgage assets, which make up about a third of the company's $178.2 billion balance sheet, as the main obstacle to the lender reaching profitability. Those assets have already forced GMAC to seek new funds. Before Wednesday's capital infusion, GMAC had already received $12.5 billion of aid from the United States. A government test of the company's capital in May, known as the stress test, found that GMAC needed $11.5 billion of equity. About $9.1 billion of that equity had to be new capital, while the rest could come from converting existing capital into new instruments such as common equity. GMAC has raised about $7.3 billion of that $9.1 billion of new capital from the United States. The government decided that the company has raised enough because the bankruptcy of General Motors , which once owned all of GMAC, had less of an impact on the finance company than previously expected. NOT OUT OF THE WOODS YET Questions still remain for GMAC, though. The extent of future losses from its mortgage assets is not yet clear, a bondholder said. He added that the best route for GMAC to follow now would be to sell off GMAC's mortgage servicing business, which collects payments from borrowers and is worth more than $3 billion on the company's books. The bondholder, who requested anonymity because he is not authorized to speak to the media, said the company could continue to make new home loans through its Ally Bank unit. GMAC's remaining mortgage loans could be used to pay off coming debt obligations linked to its Residential Capital unit, the investor added. If the assets don't perform well enough, that unit could go into bankruptcy, he added. GMAC said in its statement that its board of directors reviewed Residential Capital's options and decided unanimously to take the steps announced on Wednesday. GM sold a 51 percent stake in GMAC to private equity firm Cerberus in 2006, but held onto 49 percent of the company. Over time, GM's stake has been whittled down to 16.6 percent, including a trust managed for GM's benefit. Cerberus' stake is now 14.9 percent. The U.S. now holds 56.3 percent, with the rest of the company being held by Cerberus investors. The government previously held about 35 percent of the company's common stock. GMAC's mortgage business lost nearly $600 million in the third quarter, but its auto finance operations were profitable, earning about $164 million after taxes. In November, GMAC Chief Executive Al de Molina resigned and was replaced by Michael Carpenter, a board member and former Citigroup executive. On news reports of the planned capital infusion, the cost to insure GMAC's debt against default in the credit derivatives market fell to around 4.4 percentage points, or $440,000 a year for five years, from 4.66 percentage points at Tuesday's close, according to market data company Markit. (Source: Reuters.) January 2010GM: Hundreds of dealerships could be restored (Jan 2010) Hundreds of the 1,350 General Motors Co. dealers who lost their franchises last year could see them restored in a congressionally mandated arbitration process that begins later this month, the company's interim CEO said Wednesday. CEO and Chairman Ed Whitacre Jr. also said that new Chief Financial Officer Chris Liddell is a candidate for the CEO post. And Whitacre said he's not confident about selling the Swedish Saab brand.In a wide-ranging talk with reporters at GM's Detroit headquarters, Whitacre also predicted that GM would be profitable this year, although he said that was dependent on the economy and other factors. The 1,350 dealerships, which were allowed to stay open until October 2010, were targeted as part of an effort to dump poor performers and better align its dealer base with much lower consumer demand for autos. In many cases, GM had dealerships too close to one another and competing on price, the company said. Congress passed legislation late last year that forces GM and Chrysler Group LLC, which shed 789 dealers last year, to give dealers a chance to appeal closure decisions. Both companies went through bankruptcy protection earlier this year and are receiving government aid. When pressed, he said "hundreds of dealers" may be closer to 100 than a thousand, but it's a "substantial number." Restoring some dealerships could be good for the company because they would sell more cars for GM. But it also could be bad if a "lousy dealer" with a poor storefront got a franchise back, he said. When the franchises were revoked last summer, GM officials said dealers were judged on whether they met sales goals, customer service scores, the condition of their buildings and other criteria. They were allowed to stay open through October of this year to sell their inventories. Under pressure from dealer groups and lawmakers, GM and Chrysler put out proposals that would have allowed dealers to challenge closures in arbitration. But a bill passed by Congress allows them to bring a much wider range of proof that they are profitable. Dealers have until Jan. 25 to tell the automakers if they will appeal. Whitacre also told reporters that he would consider Chris Liddell, the CFO hired from the same post at Microsoft Corp. in the search for a new CEO. Liddell, 51, announced before GM hired him that he would leave Microsoft to pursue a higher-ranking position. Liddell was hired late last month as CFO, the first permanent top manager hired from outside the traditionally insular GM since the company left bankruptcy protection in July. He replaced Ray Young, who transferred to GM's China operations. At Microsoft, Liddell developed a reputation for holding down costs while building up cash. He instituted a plan to cut $3 billion from the technology company last year that included its first mass layoff, wage freezes and cuts in travel and other expenses. GM has hired a search committee to find candidates, but it has not presented any yet, Whitacre said. GM is majority owned by the federal government and Liddell was granted an exemption from government imposed pay caps to take his post. He will be paid $750,000 this year, but will get up to another $5.45 million in stock starting in 2012 if GM successfully sells its shares to the public. Such a sale, Whitacre said, would come late this year if it happens in 2010. He said it's possible he could still be CEO at that time. GM received $52 billion in U.S. government aid and has begun repaying $6.7 billion of that as a loan. The rest would be repaid through the stock sale. Whitacre also said he is not optimistic for a deal to sell its Swedish Saab brand, but he expects the sale of Hummer to a Chinese heavy equipment maker to close on Jan. 31. GM is phasing out Saab and expects to start closing plants this week. GM has been in talks to sell Saab during the past month with Dutch exotic car maker Spyker Cars. It has also heard from other suitors after an attempt to sell the brand to a consortium led by Swedish sports car manufacturer by Koenigsegg Automotive AB fell apart in November. But Whitacre said he is not confident a deal can be reached. "It's real easy. Just show up with the money and you can have it," he said. "Nobody's come with the money, so were in the wind down deal here." (Source: Forbes.)   GM will repay bailout loans by end of June (Jan 2010) General Motors will pay back its bailout funds in full to the United States government by the end of June, the Department of the Treasury announced Monday. GM will repay the $6.7 billion in loans it received in 2009 from the Troubled Asset Relief Program (TARP) after having said late last year that it would accelerate its repayment. "We're glad to see GM being able to pay back the debt portion of our investment faster than expected," the Obama administration's "auto czar" Ron Bloom said Monday in a conference call. GM and Treasury amended their loan agreement to require that the automaker, which underwent an organized bankruptcy and reorganization last year, make the loan repayment by June 30, 2010. In essence, the new agreement forces GM to repay its loans by June, and not have until the original 2015 deadline to repay the loan. Bloom characterized the new agreement as a "mutual" decision between the government, which maintains a controlling stake in the automaker, and GM. "We have regular dialogue with General Motors regarding issues facing the company," he said. "I think both of us thought this was a good idea; I can't tell you who the initiator was. So I would tell you it's a mutual thing." The repaid loans will hardly end the U.S. government's involvement in the company, however. The government invested almost $50 billion in GM over the course of the last year, debt which was converted to equity in the automaker. The federal government maintains a 61 percent stake in the company. Bloom said that the government aims to scale back its ownership in the company during the second half of 2010, when they expect the new GM to make an initial public offering. "At that stage we would expect to sell some of our ownership," Bloom said, before cautioning: "We don't think it would be a good idea to sell all of our 60.8 stake in one fell swoop." Bloom said the length of time it would take the government to extricate itself from the automaker would depend on "market factors." The announcement also comes on the heels of GM's decision to make interim CEO Ed Whitacre its permanent chief executive, the third corporate chief the company has had in a year. Bloom stressed that the decision to install Whitacre permanently was without any influence by the government. "That was a decision by the board of directors of the company," he said. "We certainly wish Mr. Whitacre well in this very challenging endeavor he's taking on." The auto czar also said the government's "pay czar" for firms on Treasury support would remain in charge indefinitely for setting top GM officials' compensation. "The precise determination of the period under which Mr. Feinberg will be supervising GM is still being worked out," Bloom said. (Source: The Hill.) CHRYSLER (APR 2009 -- ) April 2009 U.S. to give Chrysler, GM new aid (Apr 2009) The Obama administration will make about $500 million available to Chrysler LLC through the end of this month as it seeks to reach an alliance with Fiat, and up to $5 billion through May to help General Motors Corp restructure outside of bankruptcy, an independent oversight report on the Treasury Department's corporate rescue fund said on Tuesday (28 Apr). Separately, the United Auto Workers (UAW) union urged its members to lobby the White House by phone or email to ensure that workers and retirees are treated fairly in negotiations at both companies on new concessions, which are considered vital for the automakers' to survive. "We need President (Barack) Obama and his auto task force to stand up for the interests of workers and retirees in these restructuring negotiations," the union said in an appeal on its Web site to members. The UAW represents about 26,000 workers at Chrysler and 62,000 at GM. The union is under pressure along with bondholders and banks to help Chrysler and GM slash debt so they can restructure. The central issue for the UAW and the car companies is reaching an accord on restructuring the finances of a multi-billion-dollar retiree health care trust. The administration's task force does not believe Chrysler can stand alone and is brokering meetings this week in Washington and Detroit to see if a deal with Fiat is possible. The administration has offered up to $6 billion to help finance the alliance that would give Chrysler access to Fiat's small car technology and the Italian automaker a platform for building light trucks and a robust network for selling its vehicles in the United States. Analysts and consultants have questioned whether the companies can close the deal and avert what most believe would be a certain Chrysler bankruptcy. At the White House on Monday, Obama's chief spokesman, Robert Gibbs, would not forecast where the talks were headed but said the administration was working "with all of the stakeholders involved" and was hopeful a solution would be found to "continue the Chrysler brand" and strengthen the industry overall. "The President continues to be involved in this issue and understanding the tremendous economic importance both for the overall industry and for the dozens of communities throughout the country that are dependent upon Chrysler and auto parts suppliers that supply Chrysler for good-paying jobs," Gibbs said. The administration in March set aside up to $500 million to help Chrysler get through April, according to a report on oversight of corporate bailout funds prepared by the Treasury Department inspector general. GM was slated to receive up to $5 billion through May. GM said on Monday it would cut another 1,600 salaried jobs by May 1. The reductions are part of GM's plan to slash its global salaried work force this year by about 10,000, or 14 percent. GM also aims to cut 37,000 hourly jobs worldwide by the end of the year. GM and Chrysler, controlled by Cerberus Capital Management, received a $17.4 billion government bailout in December. Ford Motor Co is also struggling but opted against seeking rescue funds. (Source: Reuters.) Obama Vows Swift Overhaul As Chrysler Enters Bankruptcy (Apr 2009) Chrysler, the nation's third-largest automaker, filed for bankruptcy protection yesterday, with President Obama promising that court relief would give the company a "new lease on life." The administration's efforts to avert a bankruptcy filing were frustrated by some hedge funds, which Obama referred to as "a small group of speculators," that rejected the government's final offer to settle their claims against Chrysler out of court. (SITE NOTE: The reason Chrysler went into bankruptcy is that the STOCKHOLDERS refused the government offer of 33 cents on the dollar. This is the "small group of speculators." The second point is that Obama is full of bullshit when he thinks this will be swift. His group thinks that they can cower and intimidate others to bend to their will. We hope that the investors stand firm and allow the process to work as it should in the bankruptcy courts. The Obama attack on business needs to be slowed.) Now largely under government control, Chrysler will seek in court to strip itself of its overwhelming debts. Then, according to the administration plan, the company will get roughly $10 billion in new government aid and be merged with Italian automaker Fiat. It is an ambitious corporate rehab project for any management team: Cerberus, the secretive private-equity firm, failed in recent years to revive the company after its ill-fated marriage to Germany's Daimler. The Obama administration's attempt similarly runs a number of risks. While Obama promised a "quick" and "efficient" bankruptcy, and administration officials said they hoped it could be done in 30 to 60 days, many in the field warned that it could take much longer because of the size and complexity of the case. Each passing day could weaken the company's prospects if customers and suppliers shun the brand. Chrysler announced yesterday that it is stopping production across the country for 30 to 60 days to reduce inventories. Because the United Auto Workers renegotiated its contract, cutting supplemental unemployment benefits, workers affected by the shutdown will receive a portion of their regular pay. Moreover, there is no guarantee that a slimmed-down, Fiat-managed company would fare significantly better than Chrysler has in the past against foreign competition such as Toyota and Honda, which essentially dethroned the American automakers years ago. "For too long, Chrysler moved too slowly to adapt to the future, designing and building cars that were less popular, less reliable, and less fuel efficient than foreign competitors," Obama said. "That's part of what has brought us to a point where they sought taxpayer assistance." The administration's efforts on behalf of Chrysler foreshadow what may be a vastly larger effort later this month, when it is scheduled to complete the makeover of American corporate icon General Motors. Like Chrysler, GM has been weakened by massive debt and propelled by the economic crisis to the brink of bankruptcy. The dual rescues within the auto industry have placed Obama in the odd position of salesman-in-chief. "If you are considering buying a car, I hope it will be an American car," Obama told a television audience yesterday (30 Apr). He also noted, as showroom salesmen now do, that the government has guaranteed the warranties of both companies, so consumers can get full coverage even if one of them goes bust. The government is also arranging a deal under which GMAC, the automaker's financing company, would provide loans for Chrysler dealers and car buyers, replacing Chrysler Financial, which will be shuttered. Both the Treasury Department and GMAC are trying to persuade two other federal agencies, the Federal Deposit Insurance Corp. and the Federal Reserve, to provide support to the company. So far neither has agreed. (SITE NOTE: It is interesting to note that Chrysler Financial is one to the first to refuse TARP funds because of the strings attached to executive bonuses. Like with the states, Obama's plan is that businesses/states/organizations will be FORCED to take government money -- and once in the door, the takeover begins.) For now, however, much of the administration's efforts have gone into reshaping Chrysler into a newly competitive corporate entity. The automaker's current majority owner, Cerberus Capital Management, is relinquishing its entire stake in the company. The new majority owner will be Chrysler's union retiree health fund, which would receive a 55 percent stake in the new company. Fiat would get a 20 percent stake, with its share potentially rising to 35 percent over time based on performance. The United States would take 8 percent, while the Canadian government, which is also providing financing, would receive 2 percent. Chief executive Robert L. Nardelli, who was installed by former owner Cerberus, is stepping down, and Fiat's leadership will take over. Chrysler's board will include four representatives named by the U.S. government, three by Fiat, one by the union's health trust fund, and one by Canada. Nardelli, who will return to Cerberus Capital Management as an adviser, said he has "no golden parachute." "We did a heck of a lot to try to salvage this company," Nardelli said in a conference call with reporters yesterday. Though Obama administration officials emphasized time and again that bankruptcy was not their preferred option, they said the filing was essentially provoked by a small group of Chrysler's creditors who refused to accept the government's out-of-court offers. The president yesterday praised Chrysler's management, union workers and the majority of the company's lenders, led by J.P. Morgan, for their "unprecedented sacrifices." Those groups were willing to make concessions out of court, he said. But a number of hedge funds and other investment firms, who had invested in loans to Chrysler, refused to accept the government's final offer of 33 cents in lieu of every dollar owed. Their rejection precipitated the bankruptcy filing, administration officials said. Calling them a "small group of speculators," Obama said they "were hoping that everybody else would make sacrifices and they would have to make none. Some demanded twice the return that other lenders were getting." "I don't stand with them. I stand with Chrysler's employees, and their families and communities." A group of about 20 investment firms that declined to go along with the deal released a statement yesterday rejecting the government's characterization and criticizing the negotiating process. The group did not identify its members, but sources said it includes Perella Weinberg, Stairway Capital and OppenheimerFunds. The group said its members had been "systematically precluded" from engaging in direct negotiations with the government. Those negotiations had been dominated by four large banks that own 70 percent of Chrysler's debt -- Goldman Sachs, Citigroup, J.P. Morgan and Morgan Stanley. Each has received government bailout loans through the Treasury's Troubled Assets Relief Program. "We have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds," the lenders said in a statement. "In its earnest effort to ensure the survival of Chrysler and the well-being of the company's employees, the government has risked overturning the rule of law." (SITE NOTE: Doesn't anyone hear any alarm bells? Government takes over banks, then moves on businesses. Simpletons like me are left awe-struck. Impotence is the better word to describe my inability to do a thing about this national takeover.) One of the key aspects of the bankruptcy will be its duration, many analysts said, and administration officials promised a relatively quick one. They noted that most parties involved have already agreed to concessions. But some bankruptcy specialists warned that the court process can be unpredictable and difficult to manage in the case of a company as vast as Chrysler. Fearing the worst, for example, the National Automobile Dealers Association, which represents Chrysler dealers, has hired law firm Arnold & Porter to protect dealer investments. The administration's assertion that the bankruptcy could wrap up within 60 days "is something I would expect someone who has never been involved in a bankruptcy would say," said Jean Robertson, chair of business restructuring at Calfee, Halter & Griswold. "There is nothing typical about this case. It's like Frankenstein, and Frankenstein isn't pretty." Richard C. Breeden, the former Securities and Exchange Commission chairman and court-appointed monitor of WorldCom during its massive bankruptcy, said the time spent under court protection may be less important than the quality of the results."One of the most devastating situations is when companies go into bankruptcy and don't cut deeply enough," he said, citing the example of US Airways. "That would be truly devastating here. If you don't use the tools of bankruptcy to cut enough cost and fail again, then your customer impact is vastly greater and you put yourself on a path to liquidation." Jim Arrigo, owner of two Florida Chrysler dealerships and chairman of the national Chrysler dealer council, said that despite the bankruptcy filing, he remained "very optimistic." "Unfortunately some people out there in the banking industry have not come to table," Arrigo said. "They alone are responsible for us going into this. But as long as we come out the other side, that's all that matters." (Source: Washington Post.) Statement From Non-Tarp Lenders of Chrysler (Apr 2009) The Obama administration on Wednesday failed to convince all of Chrysler's lenders to agree to a debt-reduction deal. The administration's auto task force tried to get all 46 of Chrysler's secured lenders onboard, but a number of funds voted no. Now President Obama is expected to announce that Chrysler is going to seek reorganization in bankruptcy court. Here's the letter from the from non-TARP lenders to Chrysler explaining their decision to vote no. (SITE NOTE: Those negotiations had been dominated by four large banks that own 70 percent of Chrysler's debt -- Goldman Sachs, Citigroup, J.P. Morgan and Morgan Stanley.) April 30, 2009 — As of last night's deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country's teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.UPDATE: 30 Apr 2009 President Barack Obama announced Thursday (30 Apr) a merger between Italy's Fiat and stricken US auto giant Chrysler, which is filing for Chapter 11 bankruptcy after debt-restructuring talks collapsed. UPDATE: 1 May 2009 Tom Lauria stated in an interview that a client was threatened by the lawyer for the White House that if it did not drop out, the full weight of the White House would descend on it. It withdrew. Tom Lauria stated: ""One of my clients was directly threatened by the White House….that the full force of the White House press corps would destroy its reputation" (Source: VIDEO: Instapundit Radio broadcast.) However, ABC's Political Punch reports that the administration is denying making threats. Uh-huh, Tom Lauria just made it up. (ABC NEWS.) (SITE NOTE: Later Lauria's statements of Obama administration threats were corroborated and the White House suddenly refused any comment on 6 May 2009. The spin on why the group "withdrew" is that the group became too small and decided it did not have enough force to effect change. Atleast at the end of May, that was the story in the media.) UPDATE: 14 May 2009 Libya owns 2 Percent of Fiat. There are questions whether there is a Ghaddafi-Obama link as Ghaddafi supported Obama contributions from the Arab World. Unsubstantiated allegation that Obama might be "paying back" the political favor. Article claims that Obama "forced" Chrysler to accept the Fiat partnership -- or else face the loss of monies which would have led to its collapse. (Source: Newsmax.) May 2009Senior creditors: Chrysler deal violates 5th Amendment (May 2009) If the Obama administration expected the senior creditors of Chrysler to fold their tents under political pressure, they may have gotten a rude shock today. Thomas Lauria, who accused the White House of threatening the creditors withn humiliation at the hands of the White House press corps, has filed a motion to halt the administration's machinations on behalf of the UAW in the Chrysler bankruptcy. Lauria and his allies claim that the Obama administration has violated the Constitution in their bid to devalue the senior creditors' holdings on behalf of junior creditors, and have some precedent to support the allegation. The heart of the argument starts on page 8:III. The Taking of Collateral through a Direct or Indirect Use of TARP Authority is Unconstitutional.One might think that a Constitutional scholar like Barack Obama would have already known that, but either this precedent escaped him or he doesn't care about it at all. Brandeis acted to uphold contract law, especially in the face of a government interest in paying off politically-connected unsecured creditors ahead of the senior creditors. There is no other reason for Brandeis to make that decision, as only government could insert itself into the contractual relationship during a bankruptcy proceeding — just as Obama has done with Chrysler. Lauria's argument seems very compelling here, especially given Brandeis' rather clear assertion that bankruptcy proceedings have to fall within the 5th Amendment — and that government can't implement a taking to satisfy its own arbitrary aims by ignoring the relationship of the creditors to the default. We'll see whether the court rebukes Obama. (Source: Hot Air.) New Allegations Of White House Threats Over Chrysler (May 2009)Creditors to Chrysler describe negotiations with the company and the Obama administration as "a farce," saying the administration was bent on forcing their hands using hardball tactics and threats. Conversations with administration officials left them expecting that they would be politically targeted, two participants in the negotiations said. Although the focus has so been on allegations that the White House threatened Perella Weinberg, sources familiar with the matter say that other firms felt they were threatened as well. None of the sources would agree to speak except on the condition of anonymity, citing fear of political repercussions. The sources, who represent creditors to Chrysler, say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking "end justifies the means" group they have ever encountered. Another characterized Obama was "the most dangerous smooth talker on the planet- and I knew Kissinger." Both were voters for Obama in the last election. One participant in negotiations said that the administration's tactic was to present what one described as a "madman theory of the presidency" in which the President is someone to be feared because he was willing to do anything to get his way. The person said this threat was taken very seriously by his firm. The White House has denied the allegation that it threatened Perella Weinberg. Last week Obama singled out the firms that continue to oppose his plan for Chrysler, saying he would not stand with them. Perella Weinberg says it was convinced to support the plan by this stark drawing of a line between firms that have the president's backing and those that did not. They didn't want to be on the wrong side of Obama. Privately, administration officials have expressed confidence that other firms will switch sides for this reason. These allegations add to the picture of an administration willing to use intimidation to win over support for its Chrysler plans--and then categorically deny it. (Source: Business Insider.) Robert Tracinski, TIA DAILY, stated: "These allegations add to the picture of an administration willing to use intimidation to win over support for its Chrysler plans—and then categorically deny it. Carney also links to another financial blog which provides a hedge fund manager's account of what "car czar" Steven Rattner told him to assure his fund's acquiescence in the Chrysler deal:Who the ---- do you think you're dealing with? We'll have the IRS audit your fund. Every one of your employees. Your investors. Then we will have the Securities and Exchange Commission rip through your books looking for anything and everything and nothing we find to destroy you with."The blogger continues:[T]he fund whose tale I am privy to is allegedly not the only entity that was subject to such inducements. There are, according to my source, two others. Of course, in the present climate it would take a rather courageous witness to come forward and confirm these allegations. Let's hope that comes to pass. No, scratch that. Let's hope that the entire thing turns out to be a fabrication. While I doubt this, it would be much easier to sleep if it were.Yet as a blogger at the Wall Street Journal points out, the intrepid investigative reporters in the mainstream media have yet to touch any of these stories. No wonder the newspapers are going bankrupt. (Source: The Madman Theory of the Presidency Robert Tracinski, TIA DAILY and Atlas Shrugs.) Hedge Fund Manager Speaks Out Against Obama (May 2009) Non-TARP lenders objected to the UAW-pandering Chrysler deal. AQR Capital Management LLC hedge fund manager Cliff Asness issued a striking manifesto responding to the president's self-serving demagoguery and flagrant disregard for the rule of law at Stumbling on Truth.
Hedge Fund Manager Speaks Out Against Obama (May 2009) Non-TARP lenders objected to the UAW-pandering Chrysler deal. AQR Capital Management LLC hedge fund manager Cliff Asness issued a striking manifesto responding to the president's self-serving demagoguery and flagrant disregard for the rule of law at Stumbling on Truth.
THE HUMAN COST: For Car Dealers, Shock Turning To Anger (May 2009) The Wykoff Chrysler dealership has been selling Chryslers and Jeeps in New Jersey since the Reagan Administration. Cars are part of Rob Engel's DNA. "My brother and I have been in this business since we were 11 and 13 years old," Engel said. "It's all we've known. Engel's father began repairing cars across the street right after fleeing Austria just ahead of the Nazis. Fixing cars morphed into selling them. The business is now owned by Rob and his brother, Rick. A successful mid-size dealership - at least the Engels thought so - until two days ago. That's when the call came from Chrysler, reports CBS News correspondent Tony Guida. "This was a sucker punch for my brother and I," Engel said. This shop and another the Engels own half-an-hour away - terminated. "I'm making the transition from shock to anger," Engel said. Anger may be an understatement. Chrysler's deadline means Engel has less than a month to sell the 100 cars left on his lot. In this economy, that's impossible. With the money Engel stands to lose, Chrysler's bankruptcy could result in personal bankruptcy for him. Jim Anderer says it's nothing short of grand theft auto that Chrysler is forcing his Long Island Jeep dealership to close - he's been there for 22 years. Forty eight jobs and millions of dollars of inventory are on the line. Anderer is not going quietly. "There's been a gun put to my head," Anderer said. "I have no choice. I'm going to sue." The Chrysler axe fell on Geoff Pohanka in Maryland, too. Pohanka is also a GM dealer; he sells Chevys, Cadillacs and Saturns. GM plans to dump Saturn, leaving Pohanka wondering what will happen to this business. "We really do not know specifically our future," Pohanka said. "If we will have a future." But unlike Chrysler's ultimatum to shut down next month, GM is telling dealers the bad news 18 months in advance. "General Motors at least is giving dealers time to make plans," Pohanka said. Geoff Pohanka, Jim Anderer, and Rob Engel - three men in free fall from careers they spent their lives nurturing. They know countless others are falling, too. But that doesn't make the descent any less frightening. (Source: CBS.) The following letter appeared on American Thinker: Letter from a Dodge dealer letter to the editor Indiana State Pension Funds move to halt Chrysler restructuring (May 2009) Three of Chrysler's secured creditors are mounting a fresh attempt to thwart the carmaker's Chapter 11 reorganisation on the grounds that it violates their legal rights and the US government's authority under the Troubled asset relief programme.The three – all Indiana state pension funds – are among a group of 46 creditors that had appeared to back away this month from efforts to derail the process under which a "new" Chrysler would emerge from bankruptcy protection by July 1. The new entity would be owned by a union healthcare trust, the US government and Italy's Fiat. Chrysler, with backing from the US Treasury, had offered its secured creditors just under 30 cents on the dollar to settle claims totalling $6.9bn. Four big banks, holding the bulk of the claims, accepted the offer following political pressure from Washington. However, the Indiana State Teachers' Retirement Fund said on Wednesday that it had a fiduciary responsibility to its members to continue the fight. The fund stands to lose $4.6m under the current settlement proposal and has teamed up with Richard Mourdock, Indiana state treasurer, to try to recover those losses. The latest objections could galvanise other lenders to renew their challenge. "I fully support their motion and believe a number of lenders (including us) will ultimately join their group," said George Schultze of Schultze Asset Management, one of the creditors that had abandoned an earlier legal fight. In a court filing on Wednesday (20 May), the Indiana funds accused the government of adopting a strategy of "the ends justify the means". They also said the Treasury "has taken constructive possession of Chrysler and is requiring it to adopt a sale plan in bankruptcy that violates the most fundamental principles of creditor rights – that first-tier secured creditors have absolute priority". The Indiana funds say the current plan will strip their collateral into the new company, benefiting more junior creditors. The funds also allege that Tarp funds were meant to be funnelled only to financial institutions. "Whatever powers the Treasury department may have under Tarp," the funds said, "it does not have the power to control the entire restructuring of a company to the detriment of the company's secured creditors and for the benefit of other interest groups so that certain broader policy and political objectives may be achieved." A US bankruptcy judge on Wednesday denied their attempt to halt proceedings in bankruptcy court, but a district court needs to rule on the funds' request for the case to be heard in district court instead. The group also can oppose the final sale agreement, which under the current timeline must be approved by May 27. (SITE NOTE: In effect, the bankruptcy judge stated that the bankruptcy will move forward as they had not made their case. The bankruptcy is essential for the government to release funds that Chrysler needs for restructuring. However, the legality of the sale to Fiat needs to be decided in District Court.) (Source: Financial Times.) Indiana State to No Longer Invest in Federal Bailout Recipients (May 2009) Indiana will no longer invest in bonds issued by banks and automakers who receive federal bailout money. Bondholders are supposed to be at the head of the line for repayment if a company goes bankrupt. But State Treasurer Richard Mourdock says the government rewrote the rulebook for the Chrysler bankruptcy, leaving investors with 29 cents on the dollar. Mourdock says that cost state investment funds $5.6 million. Mourdock has lodged an objection to Chrysler's restructuring with the bankruptcy judge hearing the case, making Indiana the only one of the automaker's creditors to do so. Mourdock says the state won't sell bonds it already holds -- he says that would lock in losses. But he's ordering fund managers not to buy any more bonds from Chrysler, GM, or banks covered by the bailout. Mourdock says the Obama Administration's handling of Chrysler's debt wiped out $896,000 in value from the state's investment of the proceeds from the 2006 lease of the Indiana Toll Road, and $147,400 from the Indiana State Police Pension Fund. Mourdock oversees both portfolios. Mourdock says the Teachers Retirement Fund, which is administered separately, lost $4.6 million. (Source: WIBC.) Chrysler Dealerships Closure Politically Motivated??? (May 2009) There is a growing blog investigation of why the majority of closed Chrysler dealerships were mostly REPUBLICAN donators. Undeniably some of the dealerships were owned by shady characters, but the question is whether the closures were politically inspired. The mainstream media thus far has not touched the story though Michelle Malkin did discuss it in a televised interview. As of this date, it is unknown if the information will show that the closures were political -- but if it were, many bloggers would not be surprised because of Obama's tendency to "thug tactics" in dealing with the auto issues. According to Washington Examiner: Beltway, Evidence appears to be mounting that the Obama administration has systematically targeted for closing Chrysler dealers who contributed to Repubicans. What started earlier this week as mainly a rumbling on the Right side of the Blogosphere has gathered some steam today with revelations that among the dealers being shut down are a GOP congressman and closing of competitors to a dealership chain partly owned by former Clinton White House chief of staff Mack McLarty. Chrysler pushes for judge to OK Fiat deal (May 2009) Chrysler on Thursday (28 May) launched into its second day of testimony in its bid to convince a bankruptcy judge that a deal with Italian automaker Fiat is the best way to save itself from liquidation. The automaker needs U.S. Judge Arthur Gonzalez to approve the sale despite protests from a group of Indiana state pension and construction funds that hold less than 1 percent of Chrysler's secured debt. If Gonzalez OKs the sale, the automaker could emerge from bankruptcy protection within weeks. On Wednesday (27 May), Gonzalez heard nine hours of testimony from Chrysler LLC and Fiat Group SpA officials that lasted into the evening. Testimony resumed Thursday morning (28 May), with James Chapman, an independent member of Chrysler's board, taking the stand. Thursday's testimony, which also was to include that of Chrysler Chief Executive Robert Nardelli, was set to be followed by arguments from Chrysler and the various dissenters. Gonzalez said he was prepared to continue the hearing into Friday if needed. Attorneys for Chrysler say unloading the company's assets to a group led by Fiat is its only hope to avoid selling itself off piece-by-piece. They say a leaner Chrysler could shift more easily to building smaller, more fuel-efficient cars. But many Chrysler dealers, bondholders and former employees say they are being steamrolled by the exceptionally speedy bankruptcy court proceedings. Fiat could back out if the deal doesn't close by June 15. (SITE NOTE: The hedge funds say that this would leave them with the remainder of the less choice garbage that is then to be liquidated to pay them off. Their position is that this would reduce their return.) Approval of the sale would put Chrysler on track for a quick exit from bankruptcy protection, defying skeptics who insisted such a filing would leave the automaker mired in court for many months. Both Auburn Hills, Mich.-based Chrysler and Detroit-based GM have been hobbled by the health and pension costs of tens of thousands of unionized retirees, in addition to slumping sales. (SITE NOTE: Obama wants the fast-track bankruptcy and has been accused of "strong arm tactics" to get his way. If the deal drags on, it could turn messy and in the worst case scenario -- Fiat could pull out of the deal. This whole deal bears the stamp of the Obama "HURRY UP -- THE SKY IS FALLING" seal. As Ralph Nader stated, the whole deal is being made by a select group chosen by Obama in back rooms without any transparency.) The government has poured billions into the two companies, fearing the ripple effects of catastrophic job losses might push the economy into a depression. The pair employ more than 126,000 people in the U.S., and hundreds of thousands of others rely on the companies working for parts suppliers, dealerships and other related businesses. (SITE NOTE: Obama lied -- the jobs are going overseas and GM is closing its plants. GM has said it plans to close 16 more U.S. factories by the end of next year, shedding 21,000 jobs. Two have already have been announced — an engine plant in Massena, N.Y., and a parts stamping plant near Grand Rapids, Mich. Chrysler gave short notice to its dealerships that it was axing with a loss of up to 100,000 jobs -- and there is a lot of noise that it might be politically motivated in the selection of those to close.) Bringing Chrysler and Fiat together would dramatically change the face of the country's third-largest automaker. The current plan calls for Fiat to bring a handful of its small cars to the U.S. in the coming years, filling one of Chrysler's biggest product gaps and pleasing a White House intent on making the nation's fleet of automobiles greener. Chrysler itself entered bankruptcy protection with a handful of new vehicles in the works. It plans to begin selling an electric car next and have six electric vehicles on the road by 2014. Even if Chrysler comes out of bankruptcy protection, its challenges are just beginning. Until the Fiat vehicles arrive, it will have to rely on a product lineup that lost billions of dollars last year. Alfredo Altavilla, Fiat's chief executive for powertrain technologies and head of business development, testified Wednesday that he expects it to take about 18 months to begin producing Fiat vehicles at Chrysler facilities and about 24 months to start producing powertrains for those vehicles in North America. Even then, there is no guarantee Fiats will sell in this country, where they will compete against small cars from established automakers like Hyundai and Kia. (SITE NOTE: This is a major point. Fiat wants to be a global leader with tendrils around the globe. The big worry is that its "vision" may also foretell its overextension -- and then followed by contraction meaning the dumping of Chrysler.) Some of the strongest opposition to Chrysler's asset sale has come from lawyers representing a pair of Indiana state pension funds and a state construction fund that bought Chrysler debt last year. The Indiana state funds bought Chrysler debt last year and hold a combined $42.5 million of the company's total $6.9 billion in secured debt. The funds have said they oppose the sale because it puts the interests of unsecured creditors, such as the United Auto Workers union, ahead of theirs and those of other secured debtholders. In the days leading up to its Chapter 11 filing, Chrysler reached an agreement with most of its bondholders in which they would receive a combined $2 billion in a deal worth 29 cents on the dollar, but some bondholders refused to support it, saying that as secured lenders they deserved more. That failure to reach full agreement tipped the company into bankruptcy court. (Source: MSNBC.) June 2009Interview With Richard Mourdock (Jun 2009) Moments before I went into the White House briefing on Friday (May 29) and listened to Press Secretary Robert Gibbs field questions about the future of Chrysler, I spoke to the man who is behind the lone intervention in the Administration-orchestrated bankruptcy deal for the auto giant: Indiana State Treasurer Richard Mourdock, who has filed suit in a New York’s federal court against the arrangement.“The Chrysler deal is a clear violation of the Fifth Amendment to the Constitution and more than 150 years of bankruptcy law,” Mourdock told me. Under the Fifth Amendment, he noted, private property cannot “be taken without due process of law. That clearly has not happened in this case. There has been no process of law consistent with long-standing precedent whatsoever.” Under the terms of the bankruptcy arrangement, the treasurer explained, “the secured creditors in Chrysler will get only 29 cents on the dollars for what they invested in the company. There was $6.9 billion worth of secured credit in Chrysler at the time of the deal. $6.6 billion was owned by banks and the remaining $300 million was owned by private pension funds, which covered thousands of retired state police officers and teachers. “Twenty-nine cents on the dollar for people like that is not ‘just compensation’ at all, but the government says they have to abide by it,” said Mourdock, spelling out the basis for Indiana’s lawsuit, “This is the first time in the history of American bankruptcy law when secured creditors received less than unsecured creditors. And that ain’t right!” Special Treatment for Fiat Indiana’s treasurer contrasted the portion of the Chrysler bankruptcy deal that impacts harshly on retired state employees with that portion in which the Italian-based Fiat Corporation will get 20% of the reorganized Chrysler. “How do President Obama and Secretary [of the Treasury Timothy] Geitner justify pensioners taking losses, while a foreign-owned business gets 20% of the new corporation without investing a single penny in the deal?” Mourdock asked. In charging that the Administration is “throwing away the rights of secured creditors,” Mourdock also took after the President for labeling such creditors who opposed the Chrysler deal as “greedy speculators” and “unpatriotic.” “That’s precisely what he said at his news conference,” said the Indiana treasurer, “Indiana taxpayers, retired Hoosier state policemen and teachers are neither greedy speculators nor unpatriotic. They are, however, secured creditors of Chrysler. They deserve to have their funds protected under the full auspices of the law.” The Chrysler bankruptcy is a particularly sensitive issue in Indiana. Kokomo, Indiana and its suburbs are home to more than 7,000 Chrysler employees. Mourdock estimates that, under the bankruptcy arrangement, there will be losses of $22 million to the state’s pension funds for the money invested in Chrysler. The essence of Indiana’s lawsuit, Mourdock went on to say, is “that the TARP bill was, as it says in the text Congress passed, ‘to aid ailing financial institutions’--banks, credit unions, insurance companies, and the like. An automaker is not a financial institution. After TARP was passed, Congress tried to pass a separate auto bailout bill and it failed. That's when the Obama Administration said: ‘To heck with that. We will just say they qualify under TARP.’ If that was Congress' intention, I ask, why did they try to pass a specific bailout bill for automakers? Henry Paulson, the secretary of the treasury when TARP was enacted, specifically said it was not for auto companies...This stuff is egregious.” The Indiana lawsuit is nothing short of historic, something that may stop the Obama Administration’s reorganization of one of the “Big Three” automakers and lead to a fresh judicial restatement of “just compensation.” Although the judge in the case denied the suit’s request to halt the bankruptcy deal, Mourdock noted, “he left the door open for an appeal [to the U.S. Circuit Court of Appeals]. We fully expect this will go all the way to the Supreme Court.” A two-time U.S. House hopeful and two-term local government official, the energetic Mourdock is known among his fellow Hoosier GOPers as “the hardest working man in show-biz.” No other Republican, I was told when I was last in Indianapolis, makes more Lincoln Day dinners or other speaking dates than Mourdock. When we spoke on Friday, Mourdock was again on the road, but this time hawking his challenge to the Obama Administration over the Chrysler bankruptcy and the Fifth Amendment. As he told me, “I certainly never imagined I’d be the sole guy to stand up for free market capitalism against a federal administration. But if that’s my destiny, I’ll fulfill it.” Parting Shot: It goes without saying that, after finishing with Mourdock, I was anxious to ask Robert Gibbs about the White House’s reaction to the lawsuit over Chrysler. The President’s top spokesman didn’t call on me but he did address the issue of creditors in Chrysler, GM, and other auto companies that require a federal rescue. As Gibbs told one of my colleagues, they will be part of “a restructured company in the future. Again, if you've got somebody who's making an investment in a company, we think that those are people that can decide they want to be part of something that's restructured and hopefully viable; that gives them the ability in some of these instances to do that.” Two days after Gibbs’ briefing, Mourdock described his comment as “fascinating.” But the truth is, he said, “is that the secured creditors of GM are being given the opportunity to participate in the "new company"... not the Chrysler secured creditors. That why he carefully parsed his statement to say, ‘that gives them the ability in some [emphasis added] of these instances to do that...’ This too shows how they're making up the rules as they go.” (Source: Human Events: John Gizzi.) Judge OKs sale of most Chrysler assets to Fiat (Jun 2009) A federal bankruptcy judge approved the sale of most of Chrysler LLC's assets to Italy's Fiat, moving the American automaker a step closer to its goal of a quick exit from court protection. Judge Arthur Gonzalez said in his ruling late Sunday that a speedy sale — the centerpiece of a restructuring plan backed by President Barack Obama's automotive task force — was needed to keep the value of Chrysler from deteriorating and would provide a better return for the company's stakeholders than if it had chosen to liquidate. "Any material delay would result in substantial costs in several areas, including the amounts required to restart the operations, loss of skilled workers, loss of suppliers and dealers who could be forced to go out of business in the interim, and the erosion of consumer confidence," Gonzalez wrote in his opinion. "In addition, delay may vitiate several vital agreements negotiated amongst the debtors and various constituents." As a result, the proposed sale must be approved in order to preserve the value of Auburn Hills, Michigan-based Chrysler's business and what is ultimately left for its stakeholders, Gonzalez said. "With this approval, the new Chrysler Group is created and can prepare to launch as a vibrant new company formed with Fiat," Robert Nardelli, Chrysler's outgoing chairman and chief executive, said in a statement. Nardelli is slated to leave Chrysler once the sale is final. "While this has been an extremely difficult chapter in Chrysler's history for all involved, the new company and its customers, employees and suppliers can now begin on a fresh page," Nardelli said. President Barack Obama released a statement Monday saying that Gonzalez's decision "paves the way for the new Chrysler to successfully emerge from bankruptcy as a new, stronger, more competitive company for the future." Obama noted the significant sacrifices made by all of the company's stakeholders. "We said this process would be completed quickly and efficiently, and that's exactly what has been accomplished today," he said. Gonzalez's ruling came after three marathon days of testimony last week, during which everyone from the automaker's outgoing chief executive to dealers slated to lose their franchises took the stand. Chrysler has maintained that selling the bulk of its assets to Fiat Group SpA is the only way it can avoid selling itself off piece by piece. In exchange for a stake in the new Chrysler, Fiat has agreed to share with it the technology it needs to create the smaller, more fuel-efficient vehicles now craved by U.S. drivers. (SITE NOTE: Who said the US drivers crave the smaller, more fuel-efficient vehicles? Only Obama and his eco-friendly group. Americans are shying away from power cars because it is not "politically correct" to have a gas-guzzler in hard times -- but we believe Obama made a mistake in trying to kill the pickup truck. Too many lovers in this country -- and he is in for a hard row to hoe.) With the approval of the sale, Chrysler could emerge from Chapter 11 bankruptcy protection within weeks, defying observers who said that the company could linger under court oversight for years. (Under Chapter 11 reorganization, a company can stay in operation under court protection while sheds debts and unprofitable assets to emerge in a stronger financial position). But a trio of Indiana state pension and constructions funds, which own $42.5 million of Chrysler's $6.9 billion in secured debt, aggressively objected to the sale, saying that it does not provide a big enough return for secured debt holders, while paying off unsecured stakeholders. The Indiana funds bought their debt in July 2008 for 43 cents on the dollar. Their attorneys have said they would appeal to U.S. District Court if Gonzalez approved the sale. But Chrysler has said that any delay could cause the deal with Fiat to crumble. The Italian automaker has the option of pulling out if the sale does not close by June 15. A spokesman for the Indiana treasurer said early Monday that a statement would be released soon regarding the state's plans for a possible appeal. As part of Chrysler's restructuring plan, a UAW retiree health care trust will receive a 55 percent stake in the new company, while Fiat will get a 20 percent stake that can increase to 35 percent. The remaining 10 percent of the company will be owned by the U.S. and Canadian governments. In the days leading up to Chrysler's Chapter 11 filing, the automaker struck a deal with the majority of secured lenders to give them $2 billion in cash, or 29 cents on the dollar, to erase the $6.9 billion in debt. But some of the debtholders balked and the automaker was forced to file for bankruptcy protection on April 30. Attorneys for the funds also questioned the constitutionality of the Treasury's use of Troubled Asset Relief Program, or TARP, funds to supply Chrysler's bankruptcy protection financing. In a separate ruling Monday, Gonzalez said that the funds do not have standing for that challenge because they will receive their fair share of the $2 billion set aside for secured debtholders, which is more than they would have received if Chrysler had liquidated. Besides the Indiana funds, a group of over 300 Chrysler dealers slated to lose their franchises under the company's restructuring also objected to the sale. A separate hearing to address Chrysler's motion to terminate 789 franchises is scheduled for Wednesday. Objections were also filed by the automaker's suppliers, former employees and people with product-related claims against the company. (Source: MSNBC.) Court approves Chrysler sale to Fiat (Jun 2009) A U.S. appeals court said Friday it would conditionally approve Chrysler’s sale to Fiat but is keeping the deal on hold until Monday to allow an appeal. The 2nd U.S. Circuit Court of Appeals said it will block the sale until 4 p.m. EDT Monday unless the U.S. Supreme Court declines to hear appeals from objectors. The appeals court heard arguments Friday from attorneys representing Chrysler LLC, Fiat Group SpA and a trio of Indiana state pension and construction funds, the latter of which say the deal approved by a bankruptcy judge unfairly favors the interests of the company’s unsecured stakeholders ahead of those of secured debtholders such as themselves. (SITE NOTE: The funds filed emergency papers at the high court early Sunday (7 May). An appeals court in New York approved the sale Friday, but gave objectors until Monday afternoon to try to get the Supreme Court to intervene. Chrysler LLC wants to sell the bulk of its assets to a group led by Italy's Fiat Group SpA as part of its plan to emerge from bankruptcy protection.The emergency request went first to Justice Ruth Bader Ginsburg, who handles such matters from New York. She can act on her own or refer it to the entire court. The funds also challenged the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program (TARP) to supply Chrysler's bankruptcy protection financing. They say the government did so without congressional authority. The government-sponsored reorganization of the U.S. auto industry, including the Chrysler bankruptcy proceedings, "is a matter of incredibly high profile and importance," the funds said in their request to the high court. "The public is watching and needs to see that, particularly when the system is under stress, the rule of law will be honored and an independent judiciary will properly scrutinize the actions of the massively powerful executive branch." (Source: AP.)The 3-judge panel of the appeals court asked Glenn Kurtz, another attorney for the Indiana pensions, if his colleagues were preparing to file paperwork with the U.S. Supreme Court. “You would presume correctly,” Kurtz said, prompted laugher in the court room. Late Tuesday, the appeals court halted the sale pending the Indiana state funds’ appeal. Chrysler had hoped to close the sale by the end of this week. Lawyers for the Indiana funds said the proposed sale to Fiat would unfairly wipe out all of Chrysler’s past liabilities. But Chrysler lawyer Thomas Cullen said the deal is the only way to keep Chrysler operating and the objectors would still get a recovery that’s the best they could hope for. He said Chrysler’s former vice chairman and president, Tom LaSorda, spent 18 months looking for someone willing to enter a more favorable deal to buy or finance the automaker. Auburn Hills, Mich.-based Chrysler has maintained that the sale must be completed quickly to save the automaker from complete collapse. If the deal doesn’t close by June 15, Fiat has the option of pulling out of the deal. In addition, production at Chrysler’s manufacturing plants remains halted pending the closing of the sale. The funds, which include the Indiana State Police Pension Fund, the Indiana Teacher’s Retirement Fund, and the state’s Major Moves Construction Fund, also are challenging the constitutionality of the Treasury Department’s use of Troubled Asset Relief Program, or TARP, funds to supply Chrysler’s bankruptcy protection financing. They say the Treasury did so without congressional authority. In a brief filed with the court Thursday, the funds said Chrysler can be saved “without trampling the law and the rights of the first lien lenders.” “The fact that others did not believe they could take on the government is no basis for setting aside the rule of law and the rules of priority that are fundamental to the workings of our capital markets,” the attorneys wrote. The investment firm OppenheimerFunds, which previously was part of a group of dissident Chrysler debtholders opposing the sale, filed its own brief supporting the Indiana funds. In its brief, Chrysler called the Indiana funds’ argument about use of TARP money “flawed.” “The bankruptcy court properly rejected that argument, finding that the funds do not have standing to even raise the TARP and (Emergency Economic Stabilization Act) issues, as they have suffered no injury as a result of the alleged violation,” attorneys for Chrysler wrote. U.S. Judge Arthur Gonzalez, the bankruptcy judge overseeing Chrysler’s case, approved the sale on Sunday. He ruled that the funds do not have the standing to challenge the use of TARP money because they will receive their fair share of the $2 billion set aside for secured debtholders, which is more than they would receive if Chrysler is liquidated. (SITE NOTE: Isn't it so refreshing how the Government again uses the "lack of standing" argument on every plaintiff that disagrees with their approach...and what is sad is that the courts are agreeing whether it be Obama's eligibility or Chrysler bailout.) On Wednesday, a parade of Chrysler dealers slated to lose their franchises as part of the automaker’s restructuring testified in the automaker’s bankruptcy case, one choking back tears. Many touted their sales and service records and questioned how they were chosen for termination. Arguments on Chrysler’s motion to cancel the dealerships’ franchise agreements are scheduled for Tuesday. It was unclear when Gonzalez will rule, or how this will affect Chrysler’s plans to sever ties with the dealerships effective Tuesday. Chrysler claims that it needs to reduce its dealer base by 789 dealers, or about 25 percent, to a leaner network of about 2,400 dealers in order to emerge from Chapter 11 bankruptcy protection as a stronger company. But the dealers argue that they don’t cost the automaker anything. They say that if Gonzalez approves Chrysler’s motion, hundreds of dealerships will be shuttered, and thousands of workers will lose their jobs. A group representing about 300 of the dealers have filed an objection. They also earlier opposed Chrysler’s sale to Fiat, saying it was tied to the plan to eliminate the dealerships. Several attorneys for individual dealers also have filed objections. Before Thursday’s testimony began, Gonzalez noted that Chrysler has a good case to terminate the dealer franchises. Gonzalez said that under Chrysler’s plan, the rejected dealers will remain with “Old Chrysler,” a collection of assets that aren’t slated to be sold to the Fiat group. And since those leftover assets won’t be making vehicles, there would be little use for the dealers that would go with them, he said. (Source: MSNBC.) Shotgun Wedding: Court Docs Reveal Govt. Likely Forced Chrysler Deal With Minimal Knowledge of Fiat (Jun 2009) Even if they ultimately lose their last-minute court battle, the Indiana pension funds defending their rights as secured first-lien creditors of Chrysler have done a valuable deed. We have learned, among many other things, how at least one government lawyer characterized the funds' lawyer, Thomas Lauria. A $10,000 Democratic Party donor, Lauria, despite clear evidence of intimidation of his originally larger pool of clients by Barack Obama himself (in his April 30 speech announcing the company's bankruptcy filing) and his car guys, has nonetheless bravely pursued the important contract law and fiduciary duty issues involved in the shortchanging of his clients for several weeks. As a result of Lauria's legal efforts, we have also learned of e-mails showing that the government drove the Chrysler-Fiat deal over Chrysler management concerns, and did so despite more than likely knowing very little about shotgun marriage partner Fiat. All of this and more is in a report published last night in the Wall Street Journal by Neil King Jr. and Jeffrey McCracken. Here are key paragraphs revealing containing items I expect most of the rest of the establishment media to ignore (bolds after title are mine): U.S. Pushed Fiat Deal on ChryslerHow did "Treasury/Chrysler" get from "lacking basic information" about Fiat's finances to completing sufficient due diligence to support making the deal with a very complex company in eight days? Additionally, Fiat's "off-balance-sheet investments" seem to have a whiff of Enron-like potential. The two WSJ reporters also reveal how the government, despite the urgings of Chrysler management, refused to explore the viability of combining it with deeply troubled but at least financially transparent General Motors. The funds are appealing to the Supreme Court. Bloomberg reports that "A creditor bid for Supreme Court intervention would likely go first to Justice Ruth Bader Ginsburg, who handles emergency matters from the New York-based federal appeals court that ruled yesterday. She could act on her own or refer the request to the full nine-member court." Justice Ginsurg's gatekeeper function would appear to indicate that the Indiana pension funds will see not see justice served. (Source: Newsbusters: Tom Blumer.) (SITE NOTE: WOW!!! Straight out of the Saul Alinsky play book. Throw all the crap in the world into the mix to confuse the issue -- as long as YOU concentrate on your goal and never lose focus on it. The goal? Only Obama's handlers know -- Selling to Libya's stakes in Fiat? Selling out America? Who knows?) Obama's man Steve Ratner called shots on bankruptcy -- Proceedings show he planned Chapter 11 for autos in advance (Jun 2009) By the evening of April 29, with their historic bankruptcy filing hours away, Chrysler Chairman Bob Nardelli and other company leaders were left with no doubt that Steven Rattner was calling the shots. Chrysler executives still hoped to avoid bankruptcy. The UAW had ratified a second round of concessions that froze wages, cut retiree health care benefits and agreed not to strike the company for more than six years. All but a handful of lenders had signed off on the U.S. Treasury's offer of $2 billion to write off $6.9 billion in Chrysler loans. Reluctantly, however, the leaders were recognizing the harsh decision Rattner made weeks earlier: Chrysler was filing for Chapter 11, no matter what. Rattner had met with Ron Kolka, Chrysler's chief financial officer, and told him how it would go. "We need a deal with Fiat today. We were told to pretty much take it," Kolka wrote in an e-mail to Nardelli, Vice Chairman Tom LaSorda and Robert Manzo, a financial consultant Chrysler hired in November. Rattner and his colleague Ron Bloom "will call the union in and tell them what will happen. Then they'll tell the banks, 'Here's the deal: take it or liquidate it.' " As details emerge in bankruptcy proceedings, it is clear Rattner has both the president's absolute trust and a go-for-the-jugular instinct. He was not interested in a mundane, outpatient treatment for suffering Chrysler. The president wants major surgery on Detroit's auto industry, and Rattner is running the operating room. Details emerge on White House role in Chrysler bankruptcy Not since President Harry S. Truman seized the American steel industry in 1952 has America seen such a bold exercise of federal power over a vital organ of the U.S. economy. More than 30 hours of testimony and dozens of e-mails in the court of U.S. Bankruptcy Judge Arthur Gonzalez lift the curtain on how forcefully President Barack Obama's automotive task force pushed Chrysler LLC into bankruptcy and into the arms of Fiat SpA of Italy. In less than two months, Steven Rattner, who was appointed Feb. 23 as the head of the task force, fired General Motors Corp. Chief Executive Officer Rick Wagoner and forced Chrysler and GM to make radical changes the companies had struggled to address for years. Rattner, a reporter-turned-investment-banker who is described as relentlessly ambitious, has become -- with Obama's blessing -- the chief architect of U.S. industrial policy. The jury will remain out for some time on whether Rattner and the auto task force created a profitable and sustainable company at either Chrysler or GM. That's because severe job losses, compounded by troubles in the credit and housing markets, could delay a sustainable recovery. But while Rattner has clearly been in charge, the savvy negotiator has kept a relatively low profile. Unlike his key auto task force deputies, Ron Bloom and Matthew Feldman, Rattner rarely used e-mail. Chrysler's fate was not its own Rattner was unfazed by his lack of experience in the auto industry and, after a short period of research, began quickly making decisions and demanding results. High-ranking power brokers like Chrysler Chairman Bob Nardelli and Vice Chairman Tom LaSorda seemed caught off-guard. Chrysler executives preferred to keep Chrysler as a stand-alone enterprise -- even after Rattner declared March 30 that their turnaround plan was not viable. But their fate was not completely in their own hands, and Rattner & Co. was already committed to a deal with Fiat. The four banks that held about $4.8 billion of Chrysler's $6.9 billion in secured loans -- J.P. Morgan Chase, Goldman Sachs, Morgan Stanley and Citicorp -- were negotiating with Rattner and his team. Chrysler executives, meanwhile, were given the tough task of getting labor costs down to the same level as Japanese competitors in the United States and Canada. A plan to consolidate Chrysler's dealer network was also a collective effort, with Fiat approving the criteria by which 789 dealerships were selected to have their franchise contracts terminated. The alternative to a Chrysler-Fiat deal was to liquidate the entire company -- wiping out 55,000 Chrysler jobs worldwide, 3,200 dealerships and their 140,000 employees, and mortally wounding hundreds of suppliers already in dire straits. "Unfortunately, it was a real possibility," Nardelli testified in bankruptcy court. "We felt, and the board of directors agreed, that we needed to maintain a level of cash that would permit an orderly liquidation. We were targeting about $750 million." It's Fiat or bust Despite the government's commitment to Fiat, in the final days before the April bankruptcy filing, the Chrysler team resurrected the idea of a merger with GM that was initially proposed last fall. Robert Manzo -- a financial consultant whose Capstone Advisory Group will be paid $17 million when the Fiat sale closes -- was the main supporter of resurrecting the GM deal. He pushed the idea in an April 14 e-mail to LaSorda. "He even, in his documents, asked that we look at three specific platforms: the truck, the Jeep and the minivan," LaSorda said in court. Questioned by Glenn Kurtz, representing three Indiana pension funds, about why he suggested that Nardelli and LaSorda revisit the GM option, Manzo said: "I do believe the valuations of an alliance with GM were higher than those of a deal with Fiat." But Rattner and the Treasury team had already made clear on March 30 that the task force would put taxpayer money only into a partnership with Fiat. Between March 30 and April 14, Fiat's top executives, Sergio Marchionne and Alfredo Altavilla, met at least 30 times, and had at least 100 calls, with Rattner and his colleagues, Altavilla testified. No second chances In the waning hours of April 29, with bankruptcy approaching, tempers frayed and at least one of Rattner's team, lawyer Matthew Feldman, showed frustration with certain Chrysler players. The four major banks and all but four or five investment funds had accepted the Treasury's $2-billion (29 cents on the dollar) offer to retire $6.9 billion of secured loans. The holdouts were represented by Thomas Lauria and Glenn Kurtz -- the same lawyers now pleading the case of three Indiana pension funds that are protesting the way the Chrysler case has been handled. Lauria, an aggressive negotiator and a free-market advocate, wanted his clients to be paid in full. Nardelli, LaSorda, Chrysler Chief Financial Officer Ron Kolka and Manzo were hoping that a sweetened last-minute offer of $2.25 billion would satisfy the holdout investors and maybe -- just maybe -- avert a Chapter 11 filing. Manzo told Feldman by e-mail that he and the Chrysler team supported the higher offer. "We can easily find $250 million of savings," Manzo said. "It was always the company's hope we could accomplish it outside Chapter 11." But with the clock ticking toward midnight on April 29, Rattner, Bloom and Feldman were not about to turn back from their Chapter 11 strategy. "I am now not talking to you," Feldman replied to Manzo. "You went where you shouldn't." Manzo apologized, but Feldman was still upset. "It's over. The president doesn't negotiate second rounds," Feldman said. "We've given and lent billions of dollars to your team, so your team could manage this properly. I've protected your management and board, and now you're going to put me in a position to have to bend to a terrorist like Lauria. That's BS." (SITE NOTE: Other blogs and columnists zeroed in on the "terrorist" comment about Lauria.) Finagling with Fiat While Rattner, Bloom and Feldman played hardball with the banks and won, they had limited leverage with Fiat. Fiat, the task force's chosen partner, brought no cash to the table. The Italian automaker wanted to offer only the underpinnings of future vehicles, engines and other technology that Fiat and Chrysler initially said was worth $8 billion to $10 billion. However, in bankruptcy court, Altavilla, who is chief executive of Fiat Powertrain Technologies, said Fiat's contribution was worth considerably less: $3 billion. Nardelli testified that Rattner and Bloom told him they wanted Fiat to pay some cash "due to the optics, not the economics, of the deal." Marchionne repeatedly said Fiat would not offer cash, and the idea died. Unlike Wagoner, who did not accept Rattner's premise that GM must file for Chapter 11, Nardelli never defied the broader task force strategy, nor did he resist any conditions Rattner set on future government investment. "They were the only investors out there willing to save this iconic brand," Nardelli said in bankruptcy court. "I've been in business 38 years and some of their requests were nothing abnormal." There were moments, however, when Rattner and Bloom were micro-managers. In late April, before the Chapter 11 filing, Nardelli asked LaSorda to negotiate with Daimler AG over its decision to surrender its 19.9% equity stake and a $500-million loan. Bloom weighed in quickly: "I'm more than a little surprised that you would consider settling without approval," Bloom e-mailed LaSorda. Nardelli asked him how he and LaSorda should proceed. "First, by discussing things before you settle," Bloom said. The e-mail chain ends with LaSorda thanking Nardelli for his support, and this final sentence: "I guess UST is running it," referring to the U.S. Treasury. (Source: Free Press.) Chrysler sale on hold, but for how long? Supreme Court Justice Ginsburg grants delay in controversial Fiat deal (Jun 2009) Chrysler’s five weeks of breakneck-speed bankruptcy proceedings came to a screeching — but possibly temporary — halt Monday, when a Supreme Court justice delayed its sale of assets to Italy’s Fiat. The move could derail the government’s ambitious plan for the U.S. automaker to blaze a path to profitability without the burden of many of its debts. Justice Ruth Bader Ginsburg issued a stay just a week before Chrysler says the government-backed sale must go through. After June 15, Fiat could walk away from the deal and leave the struggling U.S. automaker with little option but to liquidate. It was unclear late Monday just how long the stay would last, or if the high court planned to take up the case. Chrysler said it had no comment until it receives further information from the court. Ginsburg said in her one-sentence order that the sale is “stayed pending further order,” indicating that the delay may only be temporary. Ginsburg could decide on her own whether to end the delay, or she could ask the full court to decide. Chrysler’s ability to speed through the process has partially been a result of the involvement of the Obama administration’s auto task force, which provided $4.5 billion in bankruptcy financing and helped negotiate a deal between the company’s stakeholders. Under a deal brokered in the days leading up to Chrysler’s April 30 Chapter 11 filing, Fiat will receive up to a 35 percent stake in the new company created by the sale, in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles. The funds also are challenging the constitutionality of the Treasury Department’s use of money from the Troubled Asset Relief Program to supply Chrysler’s bankruptcy protection financing. They say the government did so without congressional authority. (Source: MSNBC.) Fiat commits to Chrysler deal despite court delay (Jun 2009) Italian automaker Fiat said Tuesday it will not turn its back on a deal to acquire a controlling stake in Chrysler despite a U.S. Supreme Court stay on the sale. Under terms of the agreement, Fiat has the option to abandon the deal if it is not completed by June 15. "Fiat won't walk away from Chrysler," Fiat spokesman Gualberto Ranieri said. If Fiat were to walk away, Chrysler would have little option but to liquidate. The trio of funds, which hold a small part of Chrysler's debt, have been fighting the sale, claiming that it unfairly favors Chrysler's unsecured stakeholders ahead of secured debtholders like themselves. Chrysler claims the agreement with Fiat is the best deal it can get for its assets and is critical to the company's plan to emerge from bankruptcy protection. Fiat has offered its small car and environmentally friendly engine technology, as well as management expertise, in exchange for an initial 20 percent stake in Chrysler, which will grow to 35 percent in 5 percent increments. Fiat CEO Sergio Marchionne, who was in Detroit on Tuesday laying the groundwork for the transition, will also become Chrysler's chief executive when the deal is complete. Marchionne, who is responsible for Fiat's turnaround from a loss-making company with a string of failed models, also is expected to bring fundamental changes to the Chrysler management structure -- doing away with hierarchy and making a quicker decision-making process. Fiat plans to launch its hugely popular Fiat 500 (Cinquecento in Italian) in the United States, as well as the Alfa Romeo brand. Marchionne also remains interested in Germany's Opel, part of General Motors Corp.'s European operations, in case negotiations fail with the leading bidder, Canadian auto parts supplier Magna International Inc. (Source: AP.) (SITE NOTE: Why should Fiat back out? It's a sweetheart deal brokered by Obama. They don't have to put up any cash and there has been no due diligence audit performed and its books haven't been scrutenized. As long as the sweetheart deal stands, it of course will hold off and wait. However, if the Supreme Court says something to the effect that an audit of Fiat be performed to protect GOVERNMENT investment, then things might become a different story.) High court clears way for Chrysler's sale to Fiat (Jun 2009) The Supreme Court on Tuesday cleared the way for Chrysler's partnership with Italy's Fiat, rejecting an appeal by a trio of Indiana pension and contruction funds, consumer groups and others to block the automaker's sale. The sale of Chrysler LLC's assets to Fiat Group SpA had been expected to close more than a week ago, but Supreme Court Justice Ruth Bader Ginsburg's Monday decision to delay the sale while studying an appeal by the Indiana state funds threatened to derail Chrysler's restructuring plans. Justice Ginsburg ordered a temporary delay just before a 4 p.m. deadline on Monday. Chrysler, Fiat and the Obama administration warned that the high court's intervention could scuttle the sale, which faced a June 15 deadline after which Fiat could exit the arrangement. Early Tuesday, the pension plans seized on comments from Fiat officials that they would not walk away from the deal even if June 15 were to pass without completing the sale. The plans tried to persuade the justices that there was no reason to rush to meet that deadline. But Chrysler, Fiat and the Obama administration stressed in response that Chrysler was losing $100 million every day its plants remain closed and that the deal would automatically terminate in less than a week, with no guarantee that a new agreement would be reached. If the closing is delayed by more than 10 days, the government will need to "either to increase its overall funding to the detriment of taxpayers, or abandon its role in the transaction," the administration said. Late Tuesday, the Supreme Court turned down the opponents' last-ditch bid. The court issued a brief, unsigned opinion explaining its action. To obtain a delay, or stay, someone must show that at least four of the nine justices find that the issue raised is serious enough to warrant hearing a full appeal and that a majority of the court will conclude the lower court decision was wrong. "The applicants have not carried that burden," the court said. The court did not consider the merits of the opponents' arguments, only whether to hear their full-blown appeal. Indiana Treasurer Richard Mourdock expressed disappointment with the decision and said options seem limited for opponents of the sale. "Obviously the supreme court of the land is the supreme court of the land," Mourdock said. "The United States government has, I continue to believe, acted egregiously by taking away the traditional rights held by secured creditors." The White House issued a statement applauding the decision: "The Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker." Also Tuesday, a bankruptcy judge approved Chrysler's plan to terminate 789 of its dealer franchises. U.S. Judge Arthur Gonzalez's order says the franchises, which represent about 25 percent of the company's dealer base, can no longer act as authorized Chrysler, Dodge and Jeep dealers, effective immediately. A written ruling explaining the decision was expected to be filed later. Earlier in the day, more than 25 attorneys representing hundreds of dealers from across the country argued in court that little would be gained by terminating the franchises, while Chrysler maintained that the move is a necessary part of its plan to cut costs and quickly emerge from Chapter 11. Many of the dealers were trying to sell the last cars on their lots and preparing to shut their doors for good at the end of the day, while others planned to sell used cars or other brands after severing ties with Chrysler. At Tuesday's hearing, Chrysler attorneys also said the automaker would extend until Monday its program to help the affected dealers send any unsold vehicles to other dealers. Auburn Hills, Mich.-based Chrysler has passed swiftly through about five weeks of bankruptcy proceedings and now appears to be able complete the sale of its assets to Fiat by June 15 and emerge from bankruptcy protection shortly thereafter. Chrysler's ability to speed through the bankruptcy process has partially been a result of the involvement of the Obama administration's auto task force, which provided $4.5 billion in financing and helped negotiate a deal with the company's stakeholders. Under the agreement brokered in the days leading up to Chrysler's April 30 Chapter 11 filing, Fiat will receive up to a 35 percent stake in the automaker, in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles. The United Auto Workers union will get a 55 percent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will receive a combined 10 percent stake. Meanwhile, the automaker's secured debtholders would get $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt. Some of the debtholders balked at the deal, saying as secured lenders they deserved more. The Indiana funds involved in the Supreme Court appeal hold about $42.5 million, or less than 1 percent, of Chrysler's $6.9 billion in secured debt. They bought it in 2008 for 43 cents on the dollar. The funds have also challenged the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program to supply Chrysler's bankruptcy protection financing. They say the government did so without congressional authority. Consumer groups and individuals with product-related lawsuits also contested a condition of the Chrysler sale that would release the company from product liability claims related to vehicles it sold before the asset sale to Fiat. Compensation for such claims would have to come from the parts of the company not being sold to Fiat. But those assets have limited value and it's unlikely there will be anything to pay out. Congress continues to scrutinize the Obama administration's restructuring of Chrysler and GM. The Senate Banking Committee said it planned to call Ron Bloom, a senior adviser to the auto task force, and Edward Montgomery, who serves as the Obama administration's director of recovery for auto communities and workers, to a hearing Wednesday. (Source: AP.) Dealers Say They Were Led Astray in Chrysler's Final Days (Jun 2009) Jim Press, Chrysler's charismatic deputy chief executive, went to Capitol Hill last week and spoke solemnly about the "very difficult decision" of terminating 789 of the automaker's dealers across the country. He assured members of a House committee that the company's executives had "taken every step to make this a soft landing for the dealers involved" and promised to help them as much as possible. But many jilted dealers have described it more as a crash landing. After all, they still remember the Call. It came on Thursday, Feb. 5. Thousands of Chrysler dealers across the country dialed in to hear another in a string of pitches from Press and Steven Landry, Chrysler's executive vice president. With the passion of a street preacher, Press implored the dealers to order as many cars as possible to help the company as a deadline loomed to prove its viability to the U.S. government. "You have two choices," Press told the group, according to reports. "You can either help us or burn us all down." Many dealers would long remember the warning that followed to those who refused to order their whole allotment of cars: "If you decide not to do that, we've got a good memory." "Our jaws dropped," said Alan Spitzer, who appeared before Congress on Friday and until last week owned eight Chrysler-brand franchises in Ohio. "It was clearly a threat. There was no other way to take it." Chrysler officials dispute that view, saying executives were simply working to save the company and had no plans to go into bankruptcy at the time. But the Call has become part symbol, part rallying cry for the hundreds of Chrysler dealers who say they have endured a litany of indignities at the hands of the struggling automaker. Referenced by dealers in numerous interviews and during Chrysler's recent bankruptcy proceedings, it offers a window into the carmaker's increasingly frantic final months, as it sought to bolster its bottom line by pressuring dealers to buy more inventory, even as their showrooms overflowed with cars they couldn't sell. More important, it highlights how the best-laid plans of government -- a quick, "surgical" bankruptcy of an American company -- can unfold slowly and messily on the ground. Shunned dealers have continued to air their frustrations, including during Friday's hearing on Capitol Hill alongside top executives at GM and Chrysler. In addition, Sen. Bob Corker (R-Tenn.) has introduced legislation to allow rejected dealers more time to unwind their businesses and force the carmakers to reimburse them for leftover inventory. The dealers say that having to surrender their franchises and lay off employees has been painful enough. But many feel even deeper resentment when they survey the cars languishing on their lots, even after last-minute liquidation sales. "It's just a feeling of betrayal," said Jonathan Darner, whose family had owned a Chrysler dealership in Mesa, Ariz., for more than 55 years until this week. They must find a place for dozens of leftover Chryslers and Jeeps. "You'd think there would be some sense of loyalty since we've been loyal to them for so long." Some observers see Chrysler's frenzied push to unload inventory on its dealers during the company's final months as a classic case of "channel stuffing" -- a practice in which a seller forces as much product as possible into its distribution channels, typically to boost sales and profit. Companies from Coca-Cola to Sunbeam have been accused of the practice. It was particularly prevalent among technology companies during the dot-com boom in the late 1990s. Lynn Turner, chief accountant at the Securities and Exchange Commission from 1998 to 2001, said the practice isn't illegal as long as a company is upfront about what it is doing. But he said channel stuffing comes with its own consequences. "It's going to leave a really sour taste in the mind of a lot of the dealers, which is never really good for business," Turner said. "That almost always seems to come back and bite you in the butt." He added that Chrysler's behavior also "raises an interesting question if you're a retail consumer: Is this the kind of company you want to do business with?" And yet, Turner said the dealers also bear a measure of responsibility. They could have banded together and pushed back against taking on too much inventory. Instead, many complied and ordered their allotment, putting themselves on the hook for more cars than they could sell. Some dealers complained about Chrysler as it sought to unload extra cars in its last months. "Chrysler is attempting to get dealers to order vehicles they don't need or be placed at a competitive disadvantage," Little Rock dealer Larry Crain wrote in a February e-mail to the Arkansas Motor Vehicle Commission. Several others also complained about an incentive program that provided discounts only if dealers ordered a certain number of cars. "It was effectively creating a two-tier pricing program for each individual dealer," said Greg Kirkpatrick, the agency's executive director. The allocation program was pressuring dealers to order more cars to get the best prices, he said, and "their lots were stacking up with units." Nothing came of the complaints. Within weeks of Crain's e-mail, Chrysler was headed toward bankruptcy. These days, dealers from Connecticut to California are unloading much of the inventory that they reluctantly took on months ago. Many sold their stock at well below cost before their franchises were officially terminated last week. Chrysler has vowed to find surviving dealerships to take the thousands of cars that remain on the lots of rejected franchises. In his testimony Friday, Press told lawmakers that "you will find out soon that all of the vehicles in the discontinued dealers have been redistributed, along with most of the parts and almost the equipment. . . . We've committed that we would redistribute every single vehicle and every part." Carrie McElwee, a Chrysler spokeswoman, said the company redistribution effort was an act of good faith to help the terminated dealers. "We're not leaving them with vehicle inventory unless they choose to do it on their own," she said. "If they wanted our assistance, we definitely gave them our assistance. We're pretty much guaranteeing we can find buyers for their inventory." Some dealers say that help has yet to come. They added that the offer came with strings attached, such as a $350 destination fee for each car. "We're losing money, very much so," on the extra inventory, said Crain, the Arkansas dealer. Back in Arizona, Jonathan Darner, his brothers and his parents at Darner Motor Sales are trying to figure out what a Chrysler-less future holds for them. "It's pretty much the only business our family has known," he said. "We were selling Chryslers before I was born, before my dad was born." For the moment, he said, they plan to sell and service used cars and hope that pays the bills. (Source: Washington Post.)  August 2009Chrysler to make Fiat in Mexico: report (Aug 2009) OBAMA WHERE'S THE FREAKING U.S. JOBS YOU PROMISED???Chrysler Group is planning to produce Fiat SpA's (FIA.MI) Fiat 500 subcompact at a Chrysler plant in Mexico, the Wall Street Journal reported, citing people familiar with the matter. Chrysler is also considering what other Fiat models to introduce to the U.S. market, under directions from its Italian partner, the paper reported on its website on Sunday. Plans also include making a small Fiat engine for the 500 at a Chrysler plant in Trenton, Michigan, and building a Fiat-derived compact car slightly larger than the 500 in the United States, a source told the paper. The Toluca, Mexico plant, which currently makes the Dodge Journey crossover and PT Cruiser, is an attractive home for the 500 because cars could be exported to South and Central America where the Fiat brand is popular, the Journal reported. Fiat acquired a 20 percent stake in Chrysler and entered into agreements to give it access to Fiat technology and platforms. Chrysler filed for bankruptcy in April. Chrysler representatives were not immediately available for comment. (Source: Reuters.)  September 2009Fiat CEO: Chrysler worse than we thought (Sep 2009) The situation at recently rescued Chrysler Group is even more dire than first thought, the CEO of Italy's Fiat -- which came to the aid of the U.S. automaker -- said Wednesday. "We were surprised by how little had been done in the past 24 months," Sergio Marchionne told reporters in Frankfurt, Germany. Chrysler will present a revised business plan in November, Marchionne told reporters. "We have to be absolutely clear about what we want to do with Chrysler and, as a management team, where the organization is going to be in five years," Marchionne said, according to the industry newspaper Automotive News. (SITE NOTE: We may be seeing the preparations for another request to the government for a handout to get the company on its feet.)Unlike General Motors, which has continued to roll out new and redesigned products even as it entered and exited bankruptcy, Chrysler has had little to tout. Its most recent new market entries are the Dodge Challenger muscle car -- essentially a re-bodied Dodge Charger sedan -- and the Ram pick-up. The only new product Chrysler has entering the market this year is an industrial-duty version of the Ram truck. After that, a new version of the Jeep Grand Cherokee mid-sized SUV isn't expected until the middle of next year. Even if the Grand Cherokee is a terrific product, its timing is unfortunate, said Michelle Krebs, senior analyst with Edmunds.com. "The 2011 Grand Cherokee is an SUV being launched into a market that doesn't favor SUVs," she said. In terms of smaller cars and more fuel-efficient crossover SUVs, nothing is expected from Chrysler in the near future. Industry analyst Todd Turner of Car Concepts Automotive Research, speaking from the floor of the Frankfurt Motor Show, found it difficult to believe Marchionne's assertion that he didn't know how little work had been going on at Chrysler. "I'm a little surprised that he was surprised," he said. More likely, Turner said, Marchionne is laying the groundwork for drastic actions that will be announced in November but may have been planned all along. "That is that Chrysler is over, basically," he said of Chrysler's flagship car brand. "Within five years, you're going to see nothing." Chrysler also makes Dodge and Jeep vehicles. Even if the Chrysler name survives, Turner predicted, the vehicles marketed under that name will be Fiat products. On the other hand, Marchionne may simply be enjoying his freedom to be more honest now that the Chrysler deal is completed and laying the groundwork to make himself and Fiat seem all the more like saviors. suggested James Bell, market analyst for the auto Web site KBB.com. "If they didn't come in as the proverbial white knight, Chrysler would be going through liquidation right now," he said. Chrysler had no comment about Marchionne's statement to the press. In its deal to rescue Chrysler, Fiat took a 20% stake in the struggling automaker in exchange for partnering with Chrysler on new products, especially small and mid-sized cars . Fiat did not invest any cash into Chrysler and, Marchionne told reporters, does not plan to do so now. He said he hopes no outside investment will be needed as part of the new restructuring, according to Automotive News. Marchionne said he expects U.S. auto sales, industrywide, to total about 11 million vehicles next year. If demand doesn't go up to that level, from the current level of roughly 10 million units, Chrysler may have to close more factories, he said, according to the newspaper. (Source: Money: CNN.) November 2009After Bailout to Save Electric Car, Chrysler Ends ENVI Electric Car Program (Nov 2009) In late 2007, Chrysler took a serious stand and decided it had to star research for building electric vehicles. Cerberus Capital Management set up a special division called "Envi" - derived from Environment - to spearhead development of hybrid technology. As a response to the increasing pressure to improve fuel efficiency, Chrysler announced in September last year that it was developing three electric vehicles and would sell the first of the models by 2010. This was followed by the statement in January at the Detroit Auto Show, when Chrysler upped the ante on its electric car bet by pledging to have 500,000 battery-powered vehicles on the road by 2013, including sports cars and trucks. This strategy was also a part of the presentation that got Chrysler a $12.5 billion.But now everything changed, as Chrysler and Fiat decided to give up this strategy. Chrysler spokesman announced that a team of electric car development engineers has been disbanded in favor of a more traditional organization. Which means that Chrysler finally decided to cut funds "until the battery storage gets resolved, I think electric vehicles are going to struggle," said Cappa. “Envi is absorbed into the normal vehicle development program,” he said. Fiat and Chrysler CEO Marchionne told reporters and analysts that electric cars would only represent "1 to 2 percent" of Chrysler's sales by 2014, equivalent to less than 60,000 vehicles. The Obama administration wants 1 million electric cars by 2015, so it gave Fiat 20 percent stake in Chrysler in exchange for bringing EVs and fuel-efficient engines to Chrysler, (Source: Auto Evolution.) December 2009Now the Tea Party Crowd Joins the Fight Donofrio confirms Chrysler-Dealers’ lawsuit -- WITH ATTORNEY STEVEN PIDGEON, FILES QUO WARRANTO ACTION IN DISTRICT OF COLUMBIA (Dec 2009) The Post & Email can confirm this afternoon, that Attorneys Leo Donofrio and Steven Pidgeon are representing a group of Chrysler Automotive dealers in seeking legal redress to their loss of their franchises following the direct and unconstitutional involvement of Barack Hussein Obama in the Chrysler reorganization. It is speculated that the action will involve a writ of quo warranto, where by Obama will be legally forced to prove that he legitimately holds office as President of the United States in accord with the requirements of Article II, section 1, paragraph 5 of the United States Constitution. That paragraph reads,No person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President; neither shall any Person be eligible to that Office who shall not have attained to the Age of thirty-five Years, and been fourteen Years a Resident within the United States.The Supreme Court of the United States has on several occasions confirmed that the phrase “natural born citizen” indicates a U.S. citizen, who was born in the U.S.A. of two U.S. citizen parents. Obama, on account of having a father who was a British subject at the time of his own birth, was not, is not, and can never be a natural born citizen. He is thus unqualified to hold the office of president. Regarding the pending action in the courts of the District of Columbia, Donofrio says that the goal of Steve Pidgeon and himself is to see the owners of the dealerships, whom they represent, “reinstated to their businesses.” The District of Columbia is unique in the nation, for having a section of its legal code devoted to the writ of quo warranto, when employed against federal office-holders who exercise their office within the District. Attorney Donofrio is famous for his advocacy of the use of the quo warranto provisions of the D.C. Code and holds that the D.C. courts are the only proper venue for such actions against federal officers. (Source: Post Email.) Sad Truth: Bankruptcy Did NOT Say Pay back TARP Loan -- Treasury SCREWUP Chrysler won’t repay $3.7 billion TARP loan -- Plan filed with bankruptcy court has no provision to return money (Dec 2009) The U.S. Treasury will not recover any portion of the $3.7 billion still outstanding in loans it made to automaker Chrysler under the Troubled Asset Relief Program, according to the terms of a plan filed with bankruptcy court on Tuesday. The U.S. government has filed proofs of claim for unpaid principal, interest, fees and expenses, but "will receive no recovery on account of such claim," according to court documents filed on behalf of Old Carco LLC, the units of Chrysler that remain under bankruptcy protection while they are liquidated. The proposal was laid out in a disclosure statement filed with the New York bankruptcy court in Manhattan. A disclosure statement is a comprehensive document sent to creditors before they vote on a plan of reorganization. The Old Carco plan also proposed repaying Class 1 priority claims in full. The case is In re Old Carco LLC, US Bankruptcy Court, Southern District of New York, No. 09-50002. (Source: MSNBC.) Donofrio on IPPT v. Chrysler: TARP and Dealers (Dec 2009) While attorney Leo Donofrio had posted further commentary on the reaction to IPPT v. Chrysler based on a rebuttal by Bankruptcy Expert Lawrence D. Loeb, today he posted the following YouTube video where lead Plaintiff James Anderer spoke about upcoming litigation I’ve been covering here at The Right Side of Life (skip to 2:25 and especially 4:10 for the money quote): In a previous posting, I had pointed out that IPPT v. Chrysler could be a harbinger of things to come with Messrs. Donofrio and Pidgeon now representing numerous Chrysler dealers in to-be-filed petitions, including for quo warranto. Today, with the Supreme Court’s decision to grant a writ of certiorari on the Indiana Pension Fund (docket) — thereby allowing the high Court to issue a summary judgment order both vacating (to render void and not precedent-setting) and remanding (sent back) the case back to the US Court of Appeals, 2nd Circuit and dismissing as moot — Mr. Leo Donofrio posted the following commentary, clarifying that the Chrysler dealers would still push forward with litigation: ANALYSIS OF US SUPREME COURT’S RULING in POLICE PENSION TRUST, ET AL. V. CHRYSLER LLC, ET AL by Leo Donofrio, Esq.The SCOTUSblog had a similar legal analysis on the IPPT v. Chrysler case, per se: In the Chrysler bankruptcy case (Indiana State Police Pension Trust, et al., v. Chrysler LLC, et al., 09-285), the Court vacated a Second Circuit Court ruling that had endorsed the use of a reorganization-bypass method — a quick sale of assets — in order to save a failing company. Three investment trusts for workers in Indiana contended that the lower court ruling enabled Chrysler to make an end-run around the requirements of a Chapter 11 reorganization.(Source: Right Side of Life.) About 600 Car Dealers Try to Get Their Businesses Back (Jan 2010) Michael Wolf is taking a big gamble that he can convince an arbitrator to give him back his Chrysler-Jeep dealership. He's among about 600 car dealers nationwide who have signed up to appeal decisions by General Motors Co. or Chrysler Group LLC to revoke their franchise agreements and shut them down. Wolf and his wife have owned Wolf Motor Car Co. for 22 years in Plymouth, Wis., halfway between Milwaukee and Green Bay. But inexplicably to him, his business was one of 789 nationwide that Chrysler forced to close last June while it was going through bankruptcy protection. GM wants to close 2,000 dealers by October of this year, but 700 of those will remain open because the automaker allowed them to keep selling some of the company's brands while taking away others. Both companies say the closed dealers weren't performing well, and they need to make the cuts to keep the remaining ones healthy so they can invest in better showrooms and more advertising to boost sales. Many dealers were in locations away from where customers now shop, work or live. But the politically connected dealers said the companies unfairly took businesses that were in their families for generations, and they convinced Congress to pass a law requiring binding arbitration. The American Arbitration Association, which will handle the hearings, says 21 percent of the closed dealers filed appeal paperwork this week. The rest have until midnight Monday to file. When Chrysler took Wolf's franchises in June, his family kept the dealership open by selling used cars and with its repair service. They joined a group of Wisconsin dealers who took Chrysler to federal court, saying that state law protected them from being severed from the company. The appeal is pending in New York. Now, Wolf will spend anywhere from $25,000 to $75,000 on legal fees in an effort to get the franchises back. He's not sure if he meets every criteria to win, but he says Wolf Motor Cars has been profitable mainly from repairs and selling used cars, and it invested heavily in a building 10 years ago to upgrade its facilities for customers. The arbitration association says its people will consider a dealership's profitability, the manufacturer's business plan, the dealership's economic viability, and whether the dealer met objectives outlined by the automaker. Wolf concedes his new car sales had dropped, but says that's because Chrysler's sales were down nationwide. Last year, U.S. sales dropped 36 percent. "The last couple of years haven't been terrific," he said. "We're in an area where there have been a number of businesses shut down. There's job losses. These affect business." But he says he exceeded Chrysler's metrics in other areas including customer service satisfaction, which at times was the highest in Wisconsin or the nation. "It wasn't because of a poor rapport with our customers or anything like that," he said. Automakers know that some dealers like Wolf will win, meaning many neighborhood car lots could reopen. GM Chairman and CEO Ed Whitacre Jr. has said he expects hundreds of dealers to get their franchises back during the process, which must be wrapped up by June 14. India Johnson, an arbitration association senior vice president who is in charge of the hearings, said she expects 700 to 800 dealers to seek binding arbitration before the deadline. Not all will get hearings, she said. Some filed paperwork to preserve their appeal but may not proceed, while others may settle with the automakers before hearings, she said. The hearings, which must be held in the dealership's home state, are likely to cost both sides a lot of money. Some dealers may lack cash to pursue them because they've closed their businesses or aren't making as much as they once did. Wolf said dealers who appeal are gambling the legal fees in an effort to keep franchise agreements that alone are worth $500,000 to more than $2 million. The nonprofit arbitration association will do all it can to keep costs down, Johnson said. In some cases, dealers may represent themselves without an attorney, and arbitrators in some cases may cut their hourly rates, she said. Chrysler CEO Sergio Marchionne has said the automaker may challenge the constitutionality of the arbitration law in federal court, but spokeswoman Kathy Graham said Thursday that no decision has been made. Graham said Chrysler already has had to hire people to handle the paperwork, and it likely will need teams of lawyers and company officials to attend multiple hearings on the same day in different states. GM plans to have about 4,100 Buick, Chevrolet, GMC and Cadillac dealers in the future. Chrysler had 2,352 dealerships remaining at the end of December. Although he's pursuing arbitration, Wolf is worried about what he'll get if he wins. Chrysler, he said, has used names from his service database to direct customers to other dealerships. The automaker also will give him a new franchise agreement with a new set of rules and perhaps tougher goals to meet in the future. "They can rewrite the whole book," he said. But he's got a good location on a main highway, and he'd like to keep making a living selling Chryslers and Jeeps. (Source: CNS News.) February 2010Chrysler Dealers and Leo Donofrio motion denied (Feb 2010) Judge Gonzalez's 25 page opinion denying Quo Warranto motion. Donofrio’s Motion to Reconsider the Bankruptcy ruling was denied. Donofrio will appeal and/or file quo warranto having exhausted (pre-appeal) that remedy for the Chrysler dealers. This case charged “unintentional fraud by the Court.” The ultimate goal was to restore the franchises to the plaintiffs or obtain a settlement. Here’s a link to an overview with additional links to the filings. Bloggers noted that the Judge didn’t deny he was wrong, he said the claim was out of time. (Source: Blog pdf.)February 2010Judge Gonzalez Now Guilty Of Intentional Fraud In Chrysler Case. (Feb 2010) The entire case against the rejected Chrysler dealers revolved on one simple answer given by Fiat Executive, Alfredo Altavilla, when he was cross-examined by Dealer Counsel during the hearing to decide the fate of Chrysler. Every other witness testified that neither the US Government nor Fiat requested that Old Chrysler reject the 789 Dealer franchise contracts.Without a request by the lender (the US Government) or the purchaser (Fiat), there was no sound business judgment in Old Chrysler killing off 789 franchises. This is because when a contract is rejected in bankruptcy, Section 365(g) of the Bankruptcy Code kicks in and gives those rejected dealers an unsecured creditor claim against the estate. In this case, it was undisputed that the claim would potentially reach one billion dollars. Old Chrysler had a fiduciary duty to its other creditors not to burden the estate with this mammoth claim. However, had a key party sought rejection of those franchise agreements as a condition precedent to the deal closing then the Court might have been justified to approve the rejections. But no party ever testified that the dealer restructuring was a necessary condition precedent to the sale closing. The New Chrysler management were free to trim the dealership network once they took over. After they owned the company, they could deal with the dealers as they liked and as would have been governed by State franchise laws which protected the dealers. And all of the evidence shows that Fiat was happy to take on the entire dealership network in the sale. The decision to kill off 789 dealerships was entirely the brain collapse of Old Chrysler’s management. Therefore, the issue to be decided by the Court was whether this decision was made in sound business judgment. The entire dealer rejection issue then turned on whether the rejections were a condition precedent to the sale closing. If it was not a material issue to Fiat, and if Fiat’s executive testified that they were happy to trim the dealership network after the sale closed, then Old Chrysler should not have been allowed to reject the dealer contracts. The Bankruptcy Court – under Section 365(a) of the Bankruptcy Code – must approve the rejections for them to become effective. Here is the exact testimony by Alfredo Altavilla of Fiat which the case turned on: Q. If this transaction closes without an absolute requirement of a particular number of dealers that are being terminated, would Chrysler still go through with this deal — I mean, rather, would Fiat still go through with this deal? A. The answer is that a restructure needs to occur. Whether it occurs before or after the closing of the deal is not a material difference. (See May 27, 2009 Hearing Transcript at 352.) It’s a very straightforward answer. Altavilla clearly testified that whether the dealer restructuring took place after the sale closed made no material difference to Fiat. Clearly, this man and his foreign company were not going to walk away from a deal where the American people paid the ENTIRE 20 plus billion dollar purchase costs just to hand it over to Fiat for free. Zippo nada zilch was paid by Fiat who were therefore in no position to demand 40,000 American jobs be lost and 789 dealerships be gutted. Fiat didn’t make that insane demand and the testimony above clearly shows this to be true. But Judge Gonzalez decided he was going to usher in a new era of judicial ventriloquism by taking on a new role for his soiled robe. Gonzalez understood that the testimony needed for him to approve the rejection of 789 dealers (and loss of some 40,000 jobs) was nowhere to be found in the record of the case. So Judge Gonzalez – through the use of creative footnoting – made up his own testimony and stuffed it into the mouth of Altavilla alla Edger Bergen and his dummy Charlie McCarthy. Seriously folks – the metaphor is so very appropriate. Please compare and contrast Alatvilla’s testimony with Judge Gonzalez at Footnote 21 of the Gonzalez Rejection Opinion: ALTAVILLA’S TESTIMONY Q. If this transaction closes without an absolute requirement of a particular number of dealers that are being terminated, would Chrysler still go through with this deal — I mean, rather, would Fiat still go through with this deal? A. The answer is that a restructure needs to occur. Whether it occurs before or after the closing of the deal is not a material difference. THE JUDGE GONZALEZ OPINION AT FOOTNOTE 21 21 …Altavilla also responded affirmatively to a question regarding whether a dealership network needed to be restructured for the Fiat Transaction to close, stating that a “restructuring needs to occur.” Altavilla never responded to any such question in the affirmative. Never, damn it. This is a fraud on the Court, on the nation and on truth. Any grammar school child can easily grasp that the witness clearly indicated restructuring was not a material difference to Fiat. And if it was not a material difference to Fiat, 789 dealers and 40,000 jobs could have been saved while your Government gifted this American auto institution to a foreign national conglomerate with your own taxes. That’s it in a nutshell, people. In our original Motion memorandum we gave Judge Gonzalez the benefit of the doubt and refrained from calling this fraud intentional – opting instead to allege only that the Court’s judicial ventriloquism exhibited a reckless disregard for the truth. But on Friday Feb. 5, 2010 Judge Gonzalez denied our Motion by issuing a 25 page Opinion (docket no. 6341 – public docket appears down today) which condoned intentional fraud on the part of Chrysler’s attorneys – Jones Day – who repeated multiple falsehoods in their Response Brief which we thoroughly dismantled in our Reply. Furthermore, in not correcting the error of Footnote 21, Judge Gonzalez is now also guilty of intentional fraud as well. He’s chosen to defend Footnote 21 and in doing so he is simply lying to the American People which is obvious to any impartial observer of the facts. Footnote 21 is simply a lie by a partial Judge. It’s fraud plain and simple. The Law Office of Pidgeon & Donofrio (site will soon be updated to include Leo Donofrio’s info) will be appealing to the Southern District of New York and we will be making multiple complaints to the New York Bar asking for sanctions against Jones Day and Judge Gonzalez. Our lead client, James Anderer has been on Fox Business News about 40 times now and we are hoping to increase public awareness through the media of this fraud. The Chrysler story is only now truly being understood for the fraud against the American way that it is. Please stand with us as this battle is sure to intensify. The disease we are fighting is at the core of the intended destruction of this nation’s natural sovereignty. Understand that this battle is as important a fight as this nation will ever see. It will define whether we are going to allow the judicial branch to openly lie to our faces. If no court will overturn Gonzalez here, it’s the end of truth, justice and the American way forever. This judicial fraud will become the template for a new tomorrow where your children will have no protection of law. Leo Donofrio and Steve Pidgeon represent 76 former Chrysler dealers.(Source: Natural Born Citizen.) FORDOctober 2009Ford workers reject contract changes -- UAW had agreed to them, but vote shows overwhelming (Oct 2009) Ford Motor Co. workers have overwhelmingly rejected contract changes that would have allowed the automaker to cut labor costs, leaving Ford at a disadvantage to its Detroit rivals as it continues its struggle to return to profitability. The United Auto Workers union had given local unions until Monday to complete voting. But a person briefed on the voting said Saturday that the contract changes have been rejected by large margins. The person asked not to be named because the UAW hasn't announced the results yet. The UAW and Ford agreed to the contract changes several weeks ago, but Ford workers needed to ratify them. Ford has 41,000 UAW-represented workers.Two large union locals in Kentucky and Ford's home city of Dearborn, Michigan, rejected the contract Friday, sealing its fate. Those unions together represent 13,000 Ford workers. Exact tallies weren't available, but at least 12 UAW locals representing about 27,500 workers so far have vetoed the deal, many overwhelmingly. Only about four locals with a total of 7,000 members favored the pact. Ford sought the deal to bring its labor costs in line with Detroit rivals Chrysler Group LLC and General Motors Co., both of which won concessions from the union as they headed into bankruptcy protection earlier this year. Under pattern bargaining, the three automakers usually match pay, benefits and other contract provisions. But workers weren't convinced they should make more concessions, since Ford avoided bankruptcy and is considered healthier than its rivals. At least two Wall Street analysts are predicting that Ford could report a profit Monday when it announces third-quarter earnings. Rocky Comito, president of UAW Local 862 in Louisville, Kentucky, said Friday that workers felt they were being asked to sacrifice more than the company's executives. Ford CEO Alan Mulally made $17.7 million last year, although that was down 22 percent from the year before. "Some want to see management give more at the upper level," Comito said. Ford was offering workers a $1,000 bonus if they ratified the contract. But the contract also would have frozen entry-level pay, changed some work rules and limited workers' ability to strike. A message seeking comment was left Saturday for the UAW. UAW President Ron Gettelfinger said Friday that there wouldn't be a revote if the contract changes failed. "If it fails, there would be no reason to go back to the bargaining table," Gettelfinger said at a community event in Detroit. "We have a democratic process in place. People have a right to express themselves. We recognize there's a lot of misinformation about it out there, but that is what it is." Factory-level union leaders have known for several days that the deal would be defeated, said one Detroit-area official who asked not to be identified because the voting is not completed. The union did a poor job of explaining the need to preserve jobs and keep Ford competitive with GM and Chrysler, the official said. He doesn't believe members will approve any more changes until the 2011 contract, which will leave Ford at a disadvantage and has the potential to knock the company from its position as the strongest financially of the Detroit Three. "Our goal should be to keep Ford Motor Co. going in the right direction," he said. Gary Chaison, a professor of labor relations at Clark University in Worcester, Massachusetts, said the vote was a slap to UAW leadership. It's extremely rare for union members to oppose the union's recommended vote. Chaison said Ford asked for too much too soon after workers already agreed to concessions earlier this year. He also said Ford lacked credibility because its financial situation wasn't as dire as GM's or Chrysler's. "They made such a strong case about not going to bankruptcy court and turning the corner, so they couldn't go to the workers and say, 'We need this to turn the corner,'" he said.The no votes came even as Ford reached a similar cost-cutting agreement with the Canadian Auto Workers union Friday. The CAW has agreed to cuts in benefits in exchange for product guarantees, but that agreement must be ratified by Canadian workers. (Source: MSNBC: AP.) November 2009Ford posts a profit in Q3 (Nov 2009) Analysts expected Ford to take a 20-cent per share loss in the third quarter. Instead, the automaker beat that by 46 cents, posting its first quarterly profit in over a year, and making believers on Wall Street:Ford Motor Co., the only major U.S. automaker to avoid bankruptcy, posted a $997 million net income in the third quarter and its first operating profit since early 2008. It expects to be “solidly profitable” in 2011.While GM and Chrysler struggle, Ford has built a new reputation for independence and competence. The efforts of its management to steer a course away from taxpayer bailouts has generated a lot of goodwill — perhaps not in Detroit itself or with the unions, but with consumers angry at the corporate welfare policies of this administration and its predecessor. That goodwill will translate to better sales, assuming that Ford can overcome its competitive disadvantage on labor costs, an effort that will officially fail this week on their first attempt. However, Ford has to wonder whether they face a disadvantage at all. For the first time in 80 years, they bested GM in market share, and GM has had to pare back its offerings significantly as a result of their collapse. GM’s credit group GMAC needs another big bailout, which may or may not be forthcoming — and without it, they’re going to sell fewer cars. Chrysler hardly even exists at the moment, with or without the bailouts, and looks as though it may fade away at any moment. Ford has found a formula for success: self-sufficiency, or at least enough of it to differentiate themselves from their domestic competition. (Source: Hot Air.)  January 2010Ford sales surge; GM, Chrysler lag -- Ford posts 33 percent gain for December, beating most expectations (Jan 2010) Automakers in the U.S. ended their worst year in almost three decades with hints of a recovery in December. Many, especially those selling small or inexpensive vehicles, reported improvements last month and expressed hope for a mildly better 2010. It was a positive finish to one of the toughest years on record for the industry, with U.S. sales of cars and light trucks down 21 percent to 10.4 million as drivers blew past showrooms due to a shaky economy.For the year, General Motors Co. and Chrysler Group LLC were the big losers. Both took government aid and spent time in bankruptcy court early in the year when sales fell to near-record lows as credit froze, unemployment rose and consumer confidence plunged. Big winners were Hyundai Motor Co. and its low-cost Kia brand, as well as Subaru, which specializes in all-wheel-drive small cars and sport utility vehicles. Ford Motor Co., Honda, Toyota and Nissan all reported drops for the year but big gains last month. "It's not a disaster anymore," said Aaron Bragman, an industry analyst for the consulting firm IHS Global Insight in Michigan. Ford, the only U.S.-based automaker to avoid bankruptcy protection, fared better than its two Detroit rivals, with overall sales down 15 percent last year compared with 36 percent fewer for Chrysler and 30 percent for GM. In fact, Chrysler sold just 931,000 cars and trucks in 2009, its worst performance since 1962 as it struggled with a lack of new products and a reputation for poor quality. It had a better December, however, down only 4 percent from the same month last year. GM sales fell 5.7 percent last month as it tried to find traction with fewer brands after shedding Saturn, Saab and Pontiac and Hummer. Ford's final month of the year was strong, with a 33-percent increase in sales thanks to strong demand for midsize cars. Last year, it gained U.S. market share for the first time since 1995, helped by critical raves for its fuel-efficient cars, like the midsize Fusion. It's compact Focus and popular Escape crossover also boosted sales.  The automaker's restructuring plan and new products helped its performance, despite a difficult business environment, said Ken Czubay, vice president of U.S. sales. Overall, 2009 U.S. sales dropped to a level not seen since recession-wracked 1982, when just over 10.3 million cars and trucks were sold, according to Ward's AutoInfoBank. Yet even though U.S. sales fell for the year, Hyundai continued its surge with an 8-percent yearly gain, while Kia reported an annual gain of nearly 10 percent and a 44-percent gain in December. Both automakers specialize in smaller, lower-priced cars that were popular during a tough economic year when job security and gas prices worried drivers. Automakers said dealerships saw the usual post-Christmas rush as buyers sought year-end bargains. Czubay said local dealer advertising was strong, but automakers held the line on incentive spending. Companies spent an average of $2,542 per vehicle on incentives in December, down 11 percent from the same month a year ago. Czubay said it's difficult to predict whether the momentum will continue in January, but he's optimistic. "There's actually a tremendous amount of pent-up demand out there," he said. "We believe that people are just saying, 'I can go out and be a little bit more aggressive.'" Toyota, which saw sales dive 20 percent for the year but rise 32 percent in December, expects that overall U.S. auto sales will slowly improve this year. Its strong December was fueled by huge sales increases for its Camry midsize sedan, Corolla small car and Prius gas-electric hybrid. The company was encouraged by last month's results and improved consumer confidence. "We feel great momentum heading into 2010," said Don Esmond, senior vice president of automotive operations at Toyota's U.S. division. GM said its sales were down for the month partly because it reduced sales to rental car companies and other fleet buyers. Susan Docherty, vice president of sales, said 23 percent of GM's December sales went to fleets, compared to 20 percent at Toyota, 35 percent at Ford and 50 percent at Chrysler. Docherty said GM is continuing to pull away from fleet sales, which are less profitable and can hurt brands' resale values. Despite a whiff of hope in December, automakers and analysts said it's too early to predict just how this year will go, mainly because of uncertainty over employment. "It's still a low market, still a depressed market and it's too early to declare there's a trend upward," said Bragman. "It's not going to be a gangbuster year. It's going to be very much a healing year." (Source: MSNBC.)  Cash for ClunkersJune 2009Cash for Clunkers -- Stupidest Bill of all time (Jun 2009) Cash for Clunkers (CFC) is perhaps the stupidest spending bill of all-time, and that's saying something. By attempting to create artificial demand for a product wrapped in the cloak of greenness in this economy is the height of stupidity. Leave it up to the government to come up with another scheme whose unintended consequences don't match their Utopian motives -- again! Here, in graphic form, is basically how Cash for Clunkers would work:Summary of Cash for Clunkers Voucher QualificationsLeaching itself to a military spending bill to fund the troops in Iraq and Afghanistan, the Senate approved a $1 billion program (money the government doesn't have, mind you=new debt) Thursday to give vouchers to auto buyers who trade in their only slightly more gas-guzzling clunkers for only slightly more fuel-efficient models. This bill is so bad that it couldn't stand on it's own merits, but had to be attached to a bill to fund the military which, politically, no one could vote against. And notice, the relatively small incremental increase in gas mileage required to qualify for a "gas guzzler." Only one mile per gallon for a work truck ($3,500 voucher)? Is that one mile per gallon even significant? What a waste of one billion dollars of future taxpayer's hard earned money. The spending bill passed by a 91 to 5 vote, but some Republican lawmakers had previously, unsuccessfully sought to strip the measure from the military funding bill. "Let's not add a billion dollars of unnecessary debt," said Sen. Judd Gregg (R-N.H.) during the Senate floor debate. We shouldn't have a system where non-relevant pork-spending, like CFC (Cash for Clunkers) gets thrown on top knowing it would never pass based upon its own mustard. (Source: My Freedom Post.) August 2009'Cash for Clunker' sales nearing quarter-million; what now? (Aug 2009) The White House warned Monday that the "cash for clunkers" program, already zooming toward a quarter-million trade-ins with the initial $1 billion in rebates, could sputter to a stop by Friday unless the Senate quickly approves $2 billion more.While Republican lawmakers complained about another government giveaway, the Obama administration pointed to environmental gains made during the first week of the program that gives rebates of as much as $4,500 to motorists who trade in gas guzzlers for more fuel-efficient vehicles. The White House also highlighted recovery news from Ford Motor Co., which reported its first U.S. sales increase in nearly two years. (SITE NOTE: How dare Obama claim the success of Ford in his plans. Ford REFUSED Obama's takeover money -- and now deserve to survive -- no thanks to Obama.) That won over some Democrats who had grumbled the program wasn't wringing out enough fuel efficiency. They complained that smaller rebates of $3,500 were going to people buying new cars that get as little as 4 more miles per gallon than the gas-guzzling clunkers they traded in. But many Republicans remained skeptical, and Democratic leaders were uncertain they could get a favorable vote on a House-passed $2 billion extension by week's end, when the Senate begins a four-week recess. "If it doesn't happen this week, it's unlikely that we'll make it to the weekend with a program that can continue," President Barack Obama's spokesman, Robert Gibbs, told reporters. He estimated the additional $2 billion would allow consumers to take advantage of the incentives through September. "I hope we can get it done," said assistant Senate Majority Leader Dick Durbin, D-Ill. New figures showing that vehicles purchased so far with the rebates are averaging nearly 10 mpg better in fuel efficiency than their scrap heap-bound trade-ins won over some Democrats who wanted even tougher mileage requirements. "The best solution is to continue and extend the program as it is," said Sen. Dianne Feinstein, D-Calif. "The program appears to be running very well." (SITE NOTE: Others are saying that one can use the "clunker program" to purchase gas-guzzler models as well. Used car folks are grumbling saying that the "clunker program" is destroying completely serviceable older cars as part of the deal.) Although the House approved the funding by a nearly 3-to-1 margin last Friday, conservatives who have criticized it as another taxpayer bailout for the auto industry have much more leverage to block it in the Senate. "This is just mass chaos, so to extend it with 2 more billion dollars without stopping and seeing what we've done would be crazy," said Sen. Jim DeMint, R-S.C. Despite the assurances from the White House, many dealers said they were concerned they could be on the hook for some of the money if the Senate fails to approve the $2 billion. John McEleney, chairman of the National Automobile Dealers Association, said his organization was warning dealers there were no guarantees they would be reimbursed for sales they make under the program this week. McEleney said he has stopped offering cash-for-clunkers deals at his own Iowa dealerships. Transportation Secretary Ray LaHood said the average mileage of new vehicles purchased through the program is 9.6 miles per gallon higher than for the vehicles traded in for scrap. Buyers of new cars and trucks that get 10 mpg better than their trade-ins get the $4,500 rebate. People whose cars get between 4 mpg and 10 mpg better fuel efficiency qualify for a smaller $3,500 rebate. LaHood said some 80 percent of the traded-in vehicles are pickups or SUVs, meaning many gas-guzzlers are being taken off the road. The Ford Focus is a leading replacement vehicle. General Motors Co., Chrysler Group LLC and Ford Motor Co. accounted for 47 percent of the new vehicles purchased. Ford said its sales rose 2.4 percent in July from the same month last year, its first year-over-year increase since November 2007, while Chrysler Group LLC posted a smaller year-over-year sales drop compared with recent months, helped by "clunkers" deals. Other automakers showed gains, giving ammunition to supporters of the car rebate program. Senate Republicans appeared to be in no hurry. "We were told this program would last for several months," GOP leader Mitch McConnell of Kentucky said. "It ran out of money in a week, prompting the House to rush a $2 billion extension before anybody even had time to figure out what happened to the first billion." McConnell said, "It's not a bad idea to look for a second opinion. All the more so if they say they're in a hurry." Sen. Jon Kyl of Arizona, the Senate's second-ranking Republican, suggested lawmakers "take a time-out" so they could receive more details about the program before providing more money. "I'm concerned that somebody's going to have to pay for this, and $4,500 for everybody that wants to take advantage of this program is a lot of money." Making its case for more funding, the administration collected information on 80,500 vehicle transactions logged into the government's operating system through Saturday afternoon. Gibbs said the fuel efficiency improvements would save a typical customer $700 to $1,000 a year in fuel costs. The new vehicles were getting 25.4 miles per gallon on average, a 61 percent increase over the models traded in. The data helped appease lawmakers such as Sens. Susan Collins, R-Maine, Chuck Schumer, D-N.Y., and Feinstein, who had questioned whether the program's environmental benefits go far enough. The lawmakers said administration officials told them that 120,000 new vehicle sales had been processed through the program and an additional 100,000 to 130,000 were expected to be processed to reach the $1 billion set aside. LaHood said on MSNBC, "We're encouraging senators to listen to their car dealers and the people they represent. If they do that, it will pass the Senate." The administration has been coy about just how long dealers would be reimbursed for rebates, after saying Sunday that the program would have to be suspended if the Senate failed to act. Fierce lobbying for the program came from other quarters: The National Automobile Dealers Association and the American International Automobile Dealers contacted thousands of dealerships, telling them to bombard the Senate with phone calls and e-mails. "This is the one true stimulus that seems to be working out of all the things that have been tried in the last few months," said Cody Lusk, president of the international group. The Senate narrowly approved the initial money in June. But some lawmakers who voted for the plan, including Feinstein and Collins, have said the additional dollars should push consumers to buy even more fuel-efficient vehicles and to allow people to buy fuel-efficient used vehicles. Sen. Jeff Bingaman, D-N.M., has said he was concerned with the way the House paid for the extension, shifting $2 billion from a renewable energy loan program. (Source: AP.) The Obama administration is refusing to release government records on its "cash-for-clunkers" rebate program that would substantiate - or undercut - White House claims of the program's success, even as the president presses the Senate for a quick vote for $2 billion to boost car sales. Transportation Secretary Ray LaHood said Sunday the government would release electronic records about the program, and President Barack Obama has pledged greater transparency for his administration. But the Transportation Department, which has collected details about 157,000 rebate requests, won't release sales data that dealers provided showing how much U.S. car manufacturers are benefiting from the $1 billion initially pumped into the program. (Source: CBS.) (SITE NOTE: Perhaps the reason the Obama administration does NOT want to talk about the "Cash for Clunker" stats is that Obama's program has resulted in the four top car models sold under the "Cash for Clunkers" program were FOREIGN CARS!!! LaHood also said this week that even if buyers aren't choosing cars made by U.S. automobile manufacturers, many of the Honda, Toyota and Hyundai cars sold were made in those companies' American plants. The operative word was "many" -- meaning Obama was supporting "some" FOREIGN car imports with American taxpayer monies. This is $4 billion gone -- and now Obama wants more.)  CBS Finally Acknowledges Problems With 'Cash for Clunkers' (Aug 2009) After touting the 'Cash for Clunkers' program as a "runaway success" and "great for the environment," Friday's CBS Early Show finally reported on problems with the plan as co-host Maggie Rodriguez declared: "And find out why the 'Cash for Clunkers' program could actually end up costing you long term." While previous Early Show segments on the plan gave only passing attention to its critics, Rodriguez began Friday's story by explaining: "Congress has passed a $2 billion extension for the popular 'Cash for Clunkers' program, but some critics are being vocal this morning, saying it may not be such a good idea after all." Correspondent Terrell Brown reported: "'Cash for Clunkers' is said to be environmentally friendly, but some are trashing the new government program....Recyclers say some salvaged car engines are still valuable. Instead, they're being needlessly destroyed." One wonders why CBS did not highlight this criticism before the government spent another $2 billion on the program. Brown went on to describe the car-destroying process: "Dealers are told to destroy the engine by replacing oil with sodium silicate and then running it....With the engine destroyed, many cars bypass the part recyclers and go straight to the salvage yards." The report featured the vice president of the Automotive Recylers Association, Michael Wilson: "We think a much more efficient program would have been to encourage recycled parts usage....All those parts that could have been reused will go right to a scrap processor." (Source: Newsbusters.) (SITE NOTE: More news on the Cash for Clunkers. The most popular car is NOT small green cars, they are the gas-guzzling SUVs. Obama's program sucks -- but at least this money is getting into the hands of the public instead of the cronies of the Obama machine.) Auto Dealers Paid for Just 2 Percent of 'Clunkers' Claims, Congressman Says (Aug 2009) The federal government has only reimbursed auto dealers for 2 percent of the claims they've submitted through the popular "cash for clunkers" program, a Pennsylvania congressman said, calling on the Obama administration to help speed up the process. Rep. Joe Sestak, D-Pa., called for "immediate action" to address the problem in a statement Sunday, after writing a letter to President Obama Saturday expressing his concerns. In the letter, Sestak said only 2 percent of claims have been paid and that four of every five applications have been "rejected for minor oversight." In recent days, auto dealers across the country have been complaining that the reimbursement payments are slow to process. And they said some of their applications were being rejected because of apparent procedural issues. The statistics Sestak cited suggest those complaints are not based on isolated incidents. Staffing could be one problem. According to sales data summarized by Transportation Department officials, dealers have submitted requests for rebates on 338,659 vehicles sold. But while Congress just expanded the $1 billion program by $2 billion, the Department of Transportation says a staff of just 225 people is reviewing those claims. Sestak wrote that he thinks 1,000 processors should be assigned to handle the claims. Sestak, who is challenging Sen. Arlen Specter in his state's Senate primary, wrote that auto dealers have contacted him to express their concern and ask for help. "Failure to address delays with the cash for clunkers program will adversely harm auto dealers in the commonwealth of Pennsylvania and around the country -- undoubtedly forcing many out of business," he said in a statement. Under the clunkers program, passenger car owners are eligible for a voucher worth between $3,500 and $4,500 if they trade in their gas guzzlers for new, fuel-efficient vehicles. (Source: Fox News.) 200+ NY Dealers Pull Out of Clunkers Program (Aug 2009) Hundreds of auto dealers in the New York area have withdrawn from the government's Cash for Clunkers program, citing delays in getting reimbursed by the government, a dealership group said Wednesday. The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said about half its 425 members have left the program because they cannot afford to offer more rebates. They're also worried about getting repaid. "(The government) needs to move the system forward and they need to start paying these dealers," said Mark Schienberg, the group's president. "This is a cash-dependent business." The program offers up to $4,500 to shoppers who trade in vehicles getting 18 mpg or less for a more fuel-efficient car or truck. Dealers pay the rebates out of pocket, then must wait to be reimbursed by the government. But administrative snags and heavy paperwork have created a backlog of unpaid claims. Schienberg said the group's dealers have been repaid for only about 2 percent of the clunkers deals they've made so far. Many dealers have said they are worried they won't get repaid at all, while others have waited so long to get reimbursed they don't have the cash to fund any more rebates, Schienberg said. (Source: CNBC.) 'Cash for clunkers' won't be running much longer, government says (Aug 2009) The government will announce a plan as soon as today for winding down its popular but problem-plagued "cash for clunkers" program. The announcement by Transportation Secretary Ray LaHood came as a New York dealership group said that hundreds of its members had stopped doing clunker transactions because of delays in getting reimbursed by the federal government. Dealers worry that the $3-billion program will run out of money before they are reimbursed for discounts given to car buyers on clunker transactions. The National Automobile Dealers Assn. said "it is difficult, if not impossible, to accurately project the 'burn rate' of available funds" for the promotion, which provides discounts of $3,500 or $4,500 to consumers who trade in an older car for a more fuel-efficient new car. That could leave dealers holding the bag, the group said, because the rules stipulate that the government doesn't have to pay dealers who submit claims for reimbursement after the clunkers program runs out of money. LaHood said at a news conference Wednesday that a wind-down plan would be announced in the next couple of days. "I know dealers are frustrated, but they're going to get paid," he said. As of Wednesday morning, dealers had submitted 435,102 clunker transactions to the Transportation Department and requested $1.8 billion in reimbursements. In California, which tops the list of states in terms of clunker transactions, most dealerships appear to be sticking with the program. The frenzy of buyer interest that greeted the program when it kicked off July 24 has dropped considerably, partly because of shortages of popular cars such as the Toyota Corolla, Honda Civic and Ford Focus. "The gold rush is over," said Eric Choi, fleet manager at Hollywood Ford. "We're still getting some business from it, but like every other dealer, we're pretty much out of cars." Fritz Hitchcock, who owns Toyota dealerships in City of Industry, Santa Barbara and Northridge, said his inventory had plummeted since the program began. His Santa Barbara dealership, for instance, normally has about 120 vehicles on the lot. Wednesday it had 12. Hitchcock said he had submitted claims for about $1.3 million in clunker reimbursements but had yet to receive a dime from the government. "I agree with the guy who said this is the most successful, worst-run program ever," he said. (Source: LA Times.) U.S. to shut down cash for clunkers at 8 p.m. 24 Aug (Aug 2009) The decision announced today (21 Aug) means that the program originally expected to generate 250,000 vehicle sales over three months will have likely triggered more than 700,000 in less than one month. While accomplishing goals of destroying gas guzzlers and spurring the U.S. auto industry to boost production, the larger effects of the plan on the economy and environment will be debated for years to come. "This program has been a lifeline to the automobile industry, jump-starting a major sector of the economy and putting people back to work," said U.S. Transportation Secretary Ray LaHood. "At the same time, we've been able to take old, polluting cars off the road and help consumers purchase fuel efficient vehicles." But the program has also triggered increasing friction between dealers who say the government has been reimbursing them at a snail's pace and federal officials claiming much of the delay comes from faulty paperwork by dealers. A senior White House official said today that of the $1.9 billion claimed through today, just $145 million had been paid out by the government -- or about 8%. General Motors Co. and Chrysler said today they would advance cash to dealers while they waited for clunker payments. The program has proven so popular that the Obama administration has struggled to keep its growth in check, pushing an emergency $2-billion extension through Congress earlier this month when the plan burned through its original $1 billion in about a week. Backers of the plan previously said they would not seek any additional money, and the White House reiterated that stance today. (SITE NOTE: YEP, THE TAXPAYER GETS SHAFTED AGAIN. WHERE DID GM AND CHRYSLER GET THE $$$? YEP, THE TAXPAYER.) "We're confident that with this window, we'll be bringing the program in within the range allocated to it," the official said. The typical cash-for-clunkers deal involved an older model SUV or truck from a Detroit automaker traded in for a car that was more likely to come from a foreign automaker than a domestic one. The federal government said the new vehicles typically improved on the fuel economy of the clunker by more than 9 m.p.g. The U.S. Department of Transportation said $1.9 billion has been claimed so far through 457,476 transactions, but estimated dealers are likely sitting on an additional $400 million in deals that have yet to be submitted. With the costs of overseeing the program likely close to $100 million, that would leave about $600 million available. The National Automobile Dealers Association had warned dealers Wednesday of a rising chance that the program could run out of money unexpectedly, leaving dealers on the hook for vouchers of $3,500 or $4,500 per sale. Federal officials said the Monday deadline included some buffer to absorb any surge of last-minute deals this weekend. The deadline applies only to generating new deals; the government will continue processing the deals turned in for some time, and dealers will have chances to correct any transaction kicked back by the government. In recent days the U.S. Department of Transportation had boosted the number of people processing clunker deals to 1,200. Of the 457,476 deals submitted, the administration said about 170,000 had been reviewed, with a "large number" rejected for incomplete or inaccurate paperwork. Under the law, customers had to meet several requirements such as having the clunker registered and insured continuously for the past year, proof of which dealers have to submit to get reimbursed. Given the average clunker voucher of about $4,200, the government's figures suggest less than 35,000 deals have been approved so far. GM, Ford Motor Co. and other automakers have boosted production for the remainder of the year mostly in response to the clunkers program. GM sales chief Mark LaNeve said today that the company's sales have run 60,000 vehicles ahead of its plan over the last two months, mostly due to clunkers. As of last Friday, GM was the second-largest beneficiary of the clunkers plan among automakers, claiming 17.6% of sales to Toyota Motor Co.'s 18.9%. Detroit automakers had started to run so short of some car models that the government allowed dealers to turn in pre-orders of new vehicles that would be delivered later. (Source: Freep ' Whoops! Cash For Clunkers Payments Are Taxable! (Aug 2009) Some of the drivers that bought new cars through cash for clunkers are learning that it wasn't quite the deal they hoped for. Keloland Television: But many of those cashing in on the clunkers program are surprised when they get to the treasurer's office windows. That's because the government's rebate of up to $4500 dollars for every clunker is taxable.We imagine that MOST people didn't know the rebates were taxable. We certainly didn't. Karl Denninger calls this hilarious, and explains the mix up: The amusement here is how most (if not all) states compute sales tax (charged when you register the vehicle.) When you buy a new car you pay tax on the difference between the new car's purchase price and the trade-in you present to the dealer. This is an intentional distortion in the law that is intended to favor dealers over private-party used car sales; if you sell your used car privately the new buyer pays sales tax but you do not get the offset on the purchase of your replacement vehicle - the only way to get that is to trade the car. |
