He was supposed to show up and sign bats and balls, but the owner of the show after the Republican Senator from Kentucky voted against the auto bailout.
Heh.
Category: Auto Industry
Auto Industry Update
GM is planning to GM to cut production by 250,000 by closing about 1/3 of its plants, and most of its assembly plants at some point in the firs quarter.
One wonders what this will do to the supply chain.
Also, it looks like GMAC is perilously close to defaulting. They are still trying to become a bank holding company, and if they fail, it is likely that thousands of dealerships will have no access to credit.
When You Get Blasted as Know Nothing Ideologues by Dick Cheney…
It’s official we are bizarro world:
Bush personally lobbied recalcitrant Senate Republicans after Vice President Dick Cheney failed to round up support Wednesday during a contentious two-hour meeting.
“If we don’t do this, we will be known as the party of Herbert Hoover forever,” Cheney told them, according to a Senate Republican aide, evoking the president whose inaction is widely blamed for helping trigger the Great Depression in the early 1930s.
Dick Cheney was right…I can’t believe that I said that.
Did the Dems Punk Bush and the Republicans?
Because, after the failure of the filibuster fight over the bridge loans to the auto makers, Bush and His Evil Minions™ are saying that they will take steps to ensure that the Big 3 (Big 2½) continue to function until the next Congress.
In fact, they are pretty much flat out saying that they will use TARP money for the loans.
When you look at the sequence of events:
- Dems suggest that the TARP be used, and Bush says no, so they fold like overcooked broccoli.
- They want Senate approval for the “Car Czar”, and Bush says no, so they fold like overcooked broccoli.
- They want improved fuel economy standards, and Bush says no, so they fold like overcooked broccoli.
- They want automakers to drop lawsuits against California-Type emission standards, and Bush says no, so they fold like overcooked broccoli.
- The Republicans kill the bill that gave Bush everything that he asked for.
- Bush is forced to use the TARP money to keep the automakers going.
It could be that the Dems screwed up in reverse, and that this is all an accident, but it looks to me like that Bush and Paulson (and for that matter, Bernanke) were punk’d.
Additionally, now that this has gone down in defeat, it appears that constituencies for the Big 3 (Big 2½) are coming out of the woodwork.
It turns out that auto dealers, for example, are absolutely incensed at this, and these folks give lots of political money:
“I have never been as disappointed as I am today,” said Versailles [Kentucky] Ford dealer Jack Kain, who was chairman of the National Association of Automobile Dealers Association in 2005.
Just in Case You are Wondering….
The best estimate is that if GMAC defaults, and it just failed to become a bank holding company, 40% of the showrooms would likely shut down, because they have no other source of credit.
If GM goes Chapter 11, GMAC would necessarily default. There have to be counter party agreements on its debt that would force it to.
Meanwhile, in the Land of the Pale Giants
Sweden is offering support to carmakers SAAB and Volvo (the aircraft firms and the truck manufacturer being different), in the form of loans, guarantees, and research funding.
Note that Ford owns Volvo auto, and GM owns SAAB auto, but the Swedes still are working out deals to support them.
As compared to the human putrescence that is US Senate Republicans.
This is Going to Get Ugly
Well, it appears that the Republicans have successfully filibustered the auto bailout, with the aid of Max Baucus (DINO-MT), though to be fair to Baucus, his objection was to a particularly egregious tax loophole, the SILO (Sale-In Lease-Out), which basically allowed municipal transit agencies to sell their rolling stock, and lease it back, so that companies could get undeserved tax breaks for a cash payments to said agencies.
As to the Republicans, it comes down to two things, they have transplants in their states, and they want to break the UAW.
I expect to see the Big e (Big 2½) and the transplants to start having problems with their suppliers withing a week, because if I were supplying parts to an automaker right now, I’d be demanding cash on delivery, not 90 or 120 days net.
This will get ugly, and if Harry Reid had any balls, he would make the Republicans actually stand up and talk, and not just throw up his hands when he loses the vote.
Could Auto Bailout Trigger CDS Apocalypse?
Because it appears that many of the credit default swaps (CDS) were written so that this might be the case
It’s this appointment of a government administrator to oversee automakers’ large expenditures and asset sales that has raised the possibility of a bankruptcy event for credit-default swaps, said Banc of America Securities analyst Glen Taksler.
He noted that the International Swaps and Derivatives Association, the trade group that acts as a standard-setter for credit-derivatives trading, says one trigger for a bankruptcy credit event is the appointment of an administrator, trustee or similar official to oversee all or most of an entity’s assets.
Once again, we see how financial “innovation” has created phony money at the cost of the real economy.
Is Cerberus Pulling a Scam on the Congress With Chrysler?
I think that the most detailed analysis of this is by Dan Gerstein, who is a a political communications consultant, and was, “Communications director to Sen. Joe Lieberman (D-Conn.) and as a senior adviser on his vice presidential and presidential campaigns,” so we know that he’s a professional liar (that’s what a political communications consultant is), and that he associates with people with no sense of decency (Lieberman), so it should be read with that caveat, but his explanation of just how Cerberus is taking the taxpayer to the cleaners is the clearest and most concise explanation. (I’ll have alternate links below)
The issues:
- Cerberus is chock full of Republican Party apparachicks, including Former Bush Secretary of the Treasury John Snow, who personally lobbied Hank Paulson to, “Salvage Cerberus’s investments in Detroit,” additional politically connected lobbyiests and corporate officers include:
- Bush I VP Dan Quayle
- Former Sen. John Breaux (a Dem, but very much a DINO)
- Former Bush legislative liaison David Hobbs
- Uber-Lobbyist Billy J. Cooper
- Arnold I. Havens, a former general counsel of the Treasury Department
- Christopher A. Smith, former chief of staff in the Treasury
- Conservative estimates are the Cerberus manages somewhere around $30 billion, so they have the wherewithal to float a loan to Chrysler.
- I think that the likely truth is that they don’t want to back Chrysler. They bought it from Mercedes Benz in the hopes of a quick sale to GM, classic flip and flee. Certainly the reports that they are trying for a quick sale to a Chinese auto manufacturer supports this.
- A number of Congressmen, most notably Senator Grassley of Iowa, are demanding detailed information on the financial status of Cerberus, equity warrants being sort of like stock, but are not stock, since Chrysler is private.
- They also have 51% ownership of GMAC, the auto lending firm spun off from GM, which means that they are getting taxpayer money twice.
On the bright side, what just passed requires Cerberus to put up equity warrants in exchange for the loans, equity warrants are kind of like stocks, but only for private firms, which have no stock.
Stephen Colbert is a Genius
So, he shows Stephen Hayes from CNN, and says that for the economy, losing the auto industry would just be like losing a foot, but then he continues:
Right…it’s just a foot. If we had let the banking industry fail we would have lost our assholes.
2:50 on this vid
House Approves Auto Bailout
The $14 billion package still has to make it through the Senate, where a filibuster has been strongly implied, if not directly threatened.
Someone from Toyota, Honda, Hyundai, etc. should call the Senators in their states and tell them that if the big 3 go down, that their supply chain gets fracked too.
Too Funny
I support the auto bailout, because the consequences would be too dire, but I also agree with this, and it’s funny enough to suspend my usual #@$ing of swear words:
Because the Banks are More Important than People
Ben Bernanke has said that he will not use the fed lending facility, already bailing out banks to the tune of trillions of dollars to provide liquidity to the auto makers.
It’s true that Obama can’t get rid of him until the end of his term, but how about asking him to resign?
In Addition to Firing Him, Give Him a Really Bad Haircut
So the WSJ is reporting that people are starting to suggest that GM fire Rick Wagoner.
Not just the man on the street either. Senator Dodd has explicitly called for his head, as have representatives of investor, and former GM board member, Kirk Kerkorian.
Barack Obama has also implied that there need to be management changes.
This is a no brainer. Mullaly was brought in about a year ago to turn Ford around, and Nardelli’s tenure at Chrysler (full disclosure, I worked for him, though I never met him, at GE Transportation Systems in the 1990s)* is even shorter, so they do not bear full responsibility for the mess that their companies are in, but Wagoner has been CEO of GM for 10 years, and in charge of North American Operations for 4 years before that, so this is his baby that has come crying to Congress.
*Yes, I have worked everywhere. Maybe I can’t hold down a job, but more likely this has been my role as “technical hit man”, where you are parachuted in to take care of a specific need.
Deal Near on Auto Bailout
So, it looks a deal for a bailout of the Big 3 (Big 2½) auto makers is near, and once again, the Democrats have folded like a bunch of overcooked broccoli, agreeing to take the money from the fuel economy program that Congress had passed earlier.
Yeah, like you have to go and make nice to the lamest duck in the White House in my lifetime.
This is stupid, standing up to Bush and His Evil Minions™ is not only the right thing morally, but it is a win politically.
The UAW is involved in all this too, but they are showing more backbone than the Dems, demanding a significant equity stake, and possibly a seat on the board of directors, for any concessions.
Automaker Updates
Chrysler has opened an account with the law firm Jones Day, which is a very high profile firm with a specialization in bankruptcies.
Even Now, Putting Politics Ahead of Country
So, Bush is wondering if the Big 3 (Big 2½) are a prudent taxpayer investment:
President Bush on Friday said he is worried about giving taxpayer money to car companies that “may not survive.”
After giving, what, 5 times that amount to an just one insurance insurance company, and engineering something on the order of 200 times that amount for wall street in exchange for stock that has already lost a third of its value.
Big finance is a political ally, so they must be saved.
The UAW is the enemy, and so must be crushed, even if it means that there will be a 6 month period where no cars at all are assembled in the US, by either surviving members of the Big 3 (Big 2½) or by the transplants like Toyota, Honda, etc. because of suppliers going into bankruptcy like dominoes.
Additionally, you would start seeing shortages on spare parts for the cars, adversely effecting the auto repair business.
Seriously, when you see this level of disregard of the basic well being of the country because of political expediency, there is only one thing to day, “The Hague, bitches.”
Automaker Updates
Well, let’s be clear here, the problem is not just that people are not buying cars from the Big 3 (Big 2½), it’s that they are not buying cars from anyone.
Year over year, we have domestic sales filling by: GM ↓41%, Ford ↓30%, Chyrsler ↓47%, Toyota ↓34%, Honda ↓32%, Nissan ↓42%, and Hyundai ↓40%.
That is simply not sustainable, and with its lack of a foreign presence, Chrysler is clearly in the worst shape of the lot.
So, we now have the CEOS of the Big 3 (Big 2½) going before Congress and abasing themselves for operating cash, along with the obligatory promise to pay themselves $1/year.
The investment bankers did not do this, and they are still getting multimillion dollar bonuses.
Chrysler and GM are still saying that they need the money to function, though Ford is still saying that they just need a loan guarantee to in case one of the others goes belly up, and it sets up a cascade of bankruptcies among the parts suppliers.
Also, the amount of money has increased, from $25 billion to 34 billion…Which is still a lot less than the $7 trillion promised in one form or another to the Wall Street set.
What Michael Moore Said
Short version buy the big 3 (big 2½) with the money that they are asking for, screw the shareholders, and tell them what to do, just like the US government did in WWII.
Go read it.
Will the Last one in Detroit Please Turn Out the Light?
Well, we are now hearing that Ford is putting Volvo on the auction block, and that GM is looking to do the same with SAAB.
In truth Ford-Volvo is a bigger deal than GM-SAAB, as Volvo automobile has a much larger reach (the commercial vehicles/trucks are still owned by Volvo Group).