auto bailout

Our brilliant auto czars

It's sorta common knowledge that our President, a native of urban Chicago, is not a fan of the SUV.

One prominent auto magazine had this take on his mandate to massively increase the fuel economy of the American motor fleet.

Obama's CAFE Fuel Economy Standards to Create Fleet of Tiny, Expensive Vehicles - Car News

But we "know" "everyone loves the environment" and "everyone hates SUVs". So the car buying public is reacting positively to how the auto industry is being changed?

Maybe not..

If you've got your eye on a new SUV, don't blink.

It might be gone. Even with the auto industry mired in depression – sales are down nationally 36.5 percent – big vehicles such as the Ford Expedition and Chevy Tahoe are in tight supply because of drastic production cuts that automakers imposed last year as sales began to plummet.

Now, a year after $4-a-gallon gas nearly killed SUVs, some dealers in this market are selling them for window-sticker prices. Moreover, most late-model used pickups and SUVs have regained all of the thousands of dollars in trade-in value they lost last summer, dealers say.

O.K. , this is Texas, the biggest , reddest and right now most prosperous part of the country. But don't think this is likely to be an aberration. And it is going to be a big problem in trying to recover much of our $100 Billion or so investment in Detroit.

The competitors to GM and Chrysler have to follow CAFE too, but are under less intense pressure to be "green". Look for Ford and Toyota to maximise production of Explorers and Highlanders if GM and Chrysler are pressured to hold down production. And look for SUV prices and profits to rise further due to regulatory scarcity.

One huge problem Obama Motors has is the market share for domestic brands are disproportionately based in Red States, in rural/exurban areas, and among older and non college educated drivers.  Yep, people who mostly voted for John McCain. 

The Obama brain trust will force the two government owned car manufacturers to develop a product line that appeals to young urban sophisticates. ---not the traditional market of "apple pie and Chevrolet". Few of these folks are going to be pried loose from buying foreign brand automobiles. They've just become too accustomed to doing this.   Sounds like Ford is going to gain lots of market share as the last "real American car company" if it can avoid running out of cash.  

I'm certainly not arguing that the previous management of Detroit were a bunch of wise men. But Detroit made SUV's because they were profitable. The Chevy Volt will not be. So the new crew running the car business might lose even more money than the old crew did.

And make the SUV back into a huge status symbol due to its scarcity. 

 

Another little reminder

Remember before Christmas when you were told what a piece of dreck the auto bailout was after Chris Dodd got his hands on it...

well, the results are starting to come home to roost

We are now the sole source of capital for Chrysler...who's business plan as blessed by political wheeler-dealer Steven Rattner is going to be as follows:

A struggling Italian automaker will run a company largely owned by the UAW to make new models of fuel efficient cars that will be better than Toyotas and Hondas. All this from the #5 or # 6 auto maker in US passenger car sales (hello, Dodge trucks and Jeeps are what they really have left)

Really, you think the point is not to shut the joint down before MI certifies its 2012 election results?  No matter how much taxpayer cash they burn through?

Or am I too cynical?

Too bad Bob Corker wasn;t calling these shots. But when it comes to Dodd, this is what we ought to expect

 

   

Another day, another sleazy Chris Dodd donor

A group of seemingly unrelated stories are actually linked. And once again it is bad news for Senator Chris Dodd (D- Countrywide)

See, he really IS the "Countrywide Senator" since he attracted a grand total of FIVE contributors this year from the state he claims to represent in the Senate.

Five donors. From a state with five congressional districts. There's a groundswell of local support if I ever saw one. Makes the 3,000 at the Hartford Tea Party look large now.

By way of comparison, Dodd had fewer local donors this quarter than UConn woman's basketball coach Geno Auriemma has national titles.  

Dodd did raise a million; but most likely from people who can't vote for him and he may wish he didn;t raise money from.

Remember the auto bailout that Dodd's done such a wonderful job with?

The new Obama "auto czar" is Wall Street financier Stephen Rattner.

Mr. Rattner made the news today as the Wall Street Journal links him to a "pay for play" scandal involving the NY State pension fund. where it is alleged Rattner's firm made improper payments in exchange for receiving state investment funds.  This scandal is related to the demise of the former NY State Comptroller, Democrat Alan Hevesi.

So the man responsible for saving GM and Chrysler and protecting their pension funds played games with the NY State pension fund? Boy, that's encouraging. NOT.

But who is yet another "Friend of Chris Dodd"?

Stephen Rattner.  

Yep, he contributed the legal maximum to Dodd's 2004 re-election race.

====UPDATE====

Rattner's firm is now implicated in ANOTHER "pay to play" pension scam, this involving the New Mexico pension fund and Governor Bill Richardson

Another day, another sleazy Dodd contributor. (Downe, Madoff, Stanford, Cassano....) I ought to do a macro for these posts.

It looks like Dodd has "friends" on Wall Street; back here in CT, well, there's a different reaction.

 

Now that Rick Wagoner has been fired at GM

Could someone mind explaining why Chris Dodd still has his job running the Senate Banking Commitee.

Wagoner's departure under durress proves one thing:  Dodd had the chance to write a real auto recovery package before Christmas

And once again,  he "pulled a Plaxico"

Reposted from 12/15/08.

I suggest nothing has changed except we've wasted 90 days and about $25 billion. Nice job, Chairman Dodd.

 

Talking Head Chris Dodd appeared on Face the Nation this morning.  His statements will be remembered  for their breathtaking chutzpah

 A key senator says the nation's car companies should have to replace top executives in exchange for a long-term bailout package from Congress.

Sen. Chris Dodd heads the Senate Banking Committee. He says he is hopeful Congress will pass a short-term $15 billion aid package for the automakers in the next several days. But the Connecticut Democrat says the companies should have to restructure if they want a more significant bailout from Congress next year.

Dodd says the companies need quick cash to avoid collapse in the next several weeks. But over the long-term, Dodd says Chrysler probably ought to merge with another company and General Motors should be required to replace chief executive Rick Wagoner.

http://biz.yahoo.com/ap/081207/congress_autos.html

Now, Chris, I'm with you on Wagoner walking the plank. After all, GM is hemorraging money and Wagoner failed to prevent this from happening.

But, shouldn't you be held to the same standard as Rick Wagoner? 

You've admitted the Wall Street bailout that you principally drafted largely failed http://thenextright.com/ironman/chris-dodd-on-the-bank-bailout-yep-i-pulled-a-plaxico

You spent the critical month of August 2008 at your vacation home in Ireland instead of working to prevent the financial meltdown http://www.thenextright.com/ironman/oh-doddy-boy-the-banks-the-banks-are-failing 

You were the number one recipient of campaign funds from Fannie Mae and Freddie Mac  and your all time top contributor, Citigroup http://www.opensecrets.org/politicians/contrib.php?cycle=Career&cid=N00000581 just got an early $20 Billion Christmas present from the Treasury, just like all the other friends you have on Wall Street going hat in hand http://thenextright.com/ironman/the-best-senate-banking-chairman-money-can-buy    (Funny, I don't recall the heads of Citigroup or Bank of America being asked to tender their resignation prior to getting taxpayer bailout money?)Then again, you've always been a "reliable friend' the banking industry http://www.washingtonpost.com/wp-dyn/content/article/2007/02/15/AR2007021501555.html

Your "reliable friends" at Countrywide Mortgage are being investigated by the G-Men http://deepbackground.msnbc.msn.com/archive/2008/10/30/1613877.aspx 

You tried to enrich ACORN at the expense of the taxpayers when you drafted the Wall Street Bailout http://thenextright.com/ozarkguru/major-earmark-in-democrat-bailout-agreement

Now, I'm sure you are going to say that Rick Wagoner lacked vision since he failed to foresee the collapse of his industry. Well, how aren't you equally culpable?

You said your bill in July 2008 was the answer to the housing crisis http://blogs.courant.com/on_background/2008/07/housing-bill-finally-heads-to.html

This was after in March of 2007, you said legislation on foreclosures was unnecessary http://query.nytimes.com/gst/fullpage.html?res=9E01EEDE1530F930A15750C0A9619C8B63

And before the complete meltdown of the global financial system you said you did not expect "many more banks to fail" http://thehill.com/leading-the-news/dodd-does-not-expect-many-more-banks-to-fail-2008-07-14.html and told people not to "panic" http://www.usnews.com/usnews/politics/bulletin/bulletin_080715.htm

Rick Wagoner has gone through tens of billions of shareholder equity. What is the present estimate of the various financial bailouts out there? (I' ve seen $7 Trillion!) http://money.cnn.com/2008/11/26/news/economy/where_bailout_stands/index.htm?postversion=2008112615

Maybe had Dodd not lived in Iowa in 2007 this could have been avoided http://www.gwu.edu/~action/2008/ia08/doddiavisits07.html

On September 23 I called for Dodd to step down as Banking Committee Chairman

Does anyone think Chris Dodd's performance since September 23 as Banking Committtee Chairman has done anything worthy of his retention?

How has he proven to be any less incompetent than Rick Wagoner?

I await the Senator's response.

Chris Dodd is no Lee Iacocca

Uber-auto expert Chris Dodd (D-Countrywide) on why Chrysler may not survive 2009.

You could make a car that could run on air or could fly and people wouldn't buy it," said Senate Banking Chairman Christopher Dodd, D-Conn. "I'm hoping that we may see some of that investor consumer confidence come back."

Jeez, with the likes of you running the nation's financial system, mind explaining why the "investor consumer" ought to have any confidence. Senator, weren't you the guy who said Fannie Mae and Freddie Mac were "fundamentally strong",[46] said they were in "sound situation" and "in good shape" and to "suggest they are in major trouble is not accurate"

Chrysler may be a "lost cause", but Senator Dodd's credibility most certaintly is.  

Lee Iacocca saved Chrysler with the slogan "If you can find a better car, buy it.". His latest book is Where Have All the Leaders Gone?

They are not running the Senate or House Banking Committees, that's for sure. In 2010 Connecticut voters will have the opportunity to find a better Senator, and I expect they will buy it. 

 

Chris Dodd's empty stocking

Early this year Senator Dodd thought he had the answer to the foreclosure crisis. Right after he returned from his miserable failure of a presidential campaign, Banking Chairman Dodd proposed the "Hope for Homeowners" plan.

  http://dodd.senate.gov/index.php?q=node/4324

Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, today announced his intention to introduce legislation that will create a new program within the Federal Housing Administration (FHA) to provide aid to distressed borrowers currently trapped in mortgages they cannot afford.  Under the “HOPE for Homeowners Act of 2008," new mortgages that are offered by FHA-approved lenders will refinance abusive loans at a significant discount for homeowners facing difficulty meeting their mortgage payments

My problem at the time this was introduced was to promised to relieve imprudent lenders of much of the loss they should have eaten for bad lending decisions. Well, we've gotten way beyond that , having thrown a TARP over the whole blinkin banking sector. The new problem with Dodd's masterpiece----it isn;t helping homeowners.

Secretary of Housing and Urban Development Steve Preston said the centerpiece of the federal government's effort to help struggling homeowners has been a failure and he's blaming Congress....

The three-year program was supposed to help 400,000 borrowers avoid foreclosure. But it has attracted only 312 applications since its October launch because it is too expensive and onerous for lenders and borrowers alike, Preston said in an interview.

"What most people don't understand is that this program was designed to the detail by Congress," Preston said. "Congress dotted the i's and crossed the t's for us, and unfortunately it has made this program tough to use."

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/16/AR2008121603177.html?hpid=topnews

Nice job Chairman Dodd. The Wall Street bankers all are keeping their multiple houses and your expensive rescue plan for ordinary folks over their head is dysfunctional.

Well, maybe the new HUD secretary will throw enough money at this problem to make it look like someone is getting helped.    He went to the "right school"  but I'm not sure a background in NYC is all that relevant http://www.latimes.com/business/la-na-hud-obama14-2008dec14,0,5865966.story .  There's hardly any owner-occupied housing in the city, which suffers from a chronic housing shortage   http://www.nysun.com/real-estate/shortage-of-housing-threatens-city-institutions/73748/ and  the debiltating effect of decades of rent control. http://en.wikipedia.org/wiki/Rent_control_in_New_York. Not exactly the background to deal with plummeting single family home values, in my book.

But it's certainly better credentials than Dodd's credentials to fix the auto business, as he felt compelled to kibitz http://dodd.senate.gov/index.php?q=node/4685  after the President jumped in to clean up the mess Dodd made of the bailout bill  http://thenextright.com/ironman/step-away-from-the-vehicle-senator-dodd    Dodd is now upset about worker concessions; well, given the stock price of GM the investors already took their hit.  http://finance.yahoo.com/echarts?s=GM#symbol=GM;range=1y Everyone who has looked at this knows the Corker plan is the only way to create a viable business model, but no doubt the Obama team will try and create "American Leyland" http://thenextright.com/ironman/can-hope-change-a-spark-plug to appease the Greens and UAW. 

Just so you know Santa knows who is naughty and nice, the Q poll came out and Dodd did rather poorly for a long time Democratic incumbent in the era of Obama ascendancy in the Blue States . Artful Doddger did a rather thorough write -up on the impact of the Q Poll in his blog   http://theartfuldoddger.blogspot.com/2008/12/new-poll-shows-dodds-vulnerability-in.html highlighting Dodd's vulnerability.

Let me add a couple of points here as to Dodd's winter of discontent.

a) He has an empty war chest at the moment and many of his old benefactors have entered a new chapter of their financial life. He may not be able to replenish at will like prior campaigns.

b) the "hard" opposition vote is larger than ever. Only 13% of CT voters will defintely re-elect Dodd, 27% will defintely vote to remove him.  We've seen what happened when there's an intensity deficit for a candidate. Dodd has this in spades; and unlike the war driven 2006 election or the Obamania of 2008, it's hard to see Democratic turnout in CT being quite as high in 2010.

If anything drives 2010 turnout it will be anger over the economy. Bad time to be chairman of the Senate Banking Committee, eh? 

Well, Chris, just remember your gift from Angelo Mozilo came early. Enjoy what you have.

 

 

 

 

Step away from the vehicle, Senator Dodd

I've allowed the dust to clear after last week's late night auto bailout debacle. In the passage of time, Senator Dodd's performance looks sorta like this

Go to fullsize image 

Several weeks ago, Senator Dodd was appointed the Senate's point person on the auto bailout. http://www.telegraph.co.uk/motoring/manufacturers/3711734/US-Senate-close-to-14bn-auto-bailout-deal.html The evening of the critical vote he claimed there were just "some issues that remain outstanding"

Hmm...like not having enough people in your own caucus behind the deal.   http://www.weeklystandard.com/weblogs/TWSFP/2008/12/senate_democrats_had_enough_re_1.asp

Not really addressing the issue of competitive employee compensation http://news.yahoo.com/s/ap/20081212/ap_on_go_co/congress_autos this year...not 2011..when GM is losing money at a titanic pace http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/13/BU5KV10HF.DTL 

and allowing the Republicans to control the final negotiations  http://news.yahoo.com/s/ap/20081213/ap_on_go_co/autos_corker

Indeed, one wonders why Dodd bothered at all, since he seemed to not care what sort of dreck the federal government generated on an issue of rather pressing concern...saying of Bob Corker

"If perfection was supposed to be his goal, he was sent on a mission he could never complete,"

Well, Chris, we know never to expect perfection from your efforts in the Senate. But we have learned to expect petulance and finger pointing after your failures http://www.courant.com/news/politics/hcu-autobailout-1212,0,6886086.story

An effective chairman would have rounded up his votes and forced some form of temporary compromise between the GOP and the UAW to pass a bill that offerred some meaningful relief. But after the TARP disaster, http://www.thenextright.com/ironman/chris-dodd-on-the-bank-bailout-yep-i-pulled-a-plaxico  Chris Dodd's delivery skills might be better employed at Domino's   

It's not just that Dodd is a liberal, or as my CT compadre Artful Doddger points out, his act back home is wearing very thin http://theartfuldoddger.blogspot.com/2008/12/this-was-not-good-weekend-for-publicity.html. It's that he just isn;t very effective at what he does anymore. And after almost 30 years in the Senate, there's little reason to expect improvement.

The irony, of course is much as the Bush adminstration does not want a GM bankruptcy on the record, they also do not want to be directly blamed for creating "American Leyland" . http://en.wikipedia.org/wiki/British_Leyland Hence,  while they may permit the use of TARP cash to tide over GM and Chrysler, they may not be a whole lot more lenient than Bob Corker was http://www.ft.com/cms/s/0/ac2c623a-cafe-11dd-87d7-000077b07658.html?referrer_id=yahoofinance&ft_ref=yahoo1&segid=03058

This will kick the can down the road a piece. Upon further reflection, I would suggest that the DC wizards think about a few other issues than whether GM ought to replace its CEO http://www.thenextright.com/ironman/message-to-senator-dodd-you-first

The always inquisitive Michael Barone suggests that beyond pay packages, union work rules have to be redone for the domestic firms to become competitive http://www.usnews.com/blogs/barone/2008/12/15/who-is-at-fault-for-the-decline-of-the-big-three.html

I would also suggest to the "save the planet" people out there that the market is indicating that in the immediate term, a massive retooling to electric cars is going to be an exercise in fiscal insanity. If Toyota doesn;t see that much of a market for the Prius until maybe 2011,  http://www.courant.com/business/nationworld/wire/sns-ap-toyota-plant,0,7578590.story, perhaps a more prudent short to mid term strategy for Detroit  might be to maximise revenue selling conventional vehicles? 

Sure it's unplesant and dull, but I've yet to see anyone explain how this works even for the purposes of postponing a bankruptcy until better economic times unless the Detroit 3 cut costs and sell profitable cars http://thenextright.com/ironman/can-hope-change-a-spark-plug

(as an aside, I figured out why the image is a) Detroit only sells big SUV's and b) no one buys their cars. I was in lower Fairfield County this morning. That's the deal down there--the only GM products I saw were Escalades and Tahoes--yuppies assume that's how it works for the whole country)  

I might also suggest much as the auto industry is a big picture, it isn't the biggest picture. Since the election of Obama, we have seen the Dow plummet and recover, but as the zeroes on the proposed stimulus package get larger, the value of American currency gets smaller.

 http://finance.yahoo.com/echarts?s=USDEUR=X#symbol=USDEUR=X;range=3m

http://finance.yahoo.com/echarts?s=USDJPY=X#symbol=USDJPY=X;range=3m

Maybe its time to ask Senator Dodd who gets to bail out Uncle Sam?

Sen. Christopher Dodd, D-Conn., Chairman of the Senate Committee on Banking, Housing and Urban Affairs, makes a phone call following the Senate's rejection of an emergency $14 billion loan bailout for US auto companies, Thursday, Dec. 11, 2008, on Capitol Hill in Washington.

No Bailout Please - Part 3

Reports indicate that there is less confidence that the auto indusrty bailout will be passed. Many Republicans and some Democrats question whether the bailout bill will use taxpayer's dollars effectively. The Bloomberg article Democrats Back Off Prediction of Automaker Bailout Approval describes the latest version of the bill.

The Democratic proposal would let the president appoint a so-called car czar to oversee industry restructuring, and give taxpayers stock warrants equal to 20 percent of the loans. It would prohibit the automakers from paying dividends and owning or leasing corporate jets, and pay and bonuses would be limited.

This, however, does not address the inherent problems with these businesses. Preventing the "paying dividends and owning or leasing corporate jets, and pay and bonuses" addresses none of the major problems. A limit on excesses misses the basic fact that these are failed companies, who can't garner loans from anyone other than Congress. The only check or change that this bill implements is 'a car czar'; the powers of which Chairman Barney Frank tried to explain...

‘Head-Knocking’

Frank told reporters today the bill would give the car czar “a great deal of head-knocking ability” with “a lot of the powers that you would get in bankruptcy.”

The official would have the power to veto participating automakers’ plans to invest abroad, Frank said. Lawmakers want to ensure the companies don’t “take American taxpayer dollars and expand in other countries rather than here, or shut down a plant in America while expanding a plant elsewhere,” he said.

Because Bush and President-elect Barack Obama are unlikely to agree on a czar, Obama will likely replace Bush’s pick as soon as he takes office, Frank said. The Bush administration has said the official should come from the Commerce Department.

So this 'car czar' a likely member of the Commerce Department will be apparently appointed by President Bush then replaced by the future President Obama, and he shall be granted 'head knocking abilities'.

Chairman Frank went on to state that the auto industry will likely need to be granted more money in the future, something Speaker Pelosi has also stated. This does not instill confidence that this bailout will be anything but a waste of money.

A few basic questions for lawmakers...

How will this money fix the failed business policies of the auto industry?

How many bailouts and/or how much money will be paid to the automakers total?

What's wrong with bankruptcy?

What are the requirements for being granted a government bailout?

This is still not an rational soution. Ask your representatives not to support this bailout bill, and make them at least answer the basic question, 'how will this money fix the problems that the auto industry faces?'

Contact Your Senator

Contact Your Congressman


Continued Problems with the Automaker Bailout

1958 vs 2008 Stimulus

Crossposted at The Rockefeller Republican

500 billion. That is the number being bandied about by the Obama transition team for a new stimulus package. That is a lot of money. And to his credit, President-Elect Obama is not planning on writing a blank check either; he has some plans for all this money. The plan is for a massive infrastructure project- the biggest since Eisenhower’s interstate highway system. Specifically, Obama wants to spend 500 billion dollars to build roads, modernize schools, expand Internet access, improve buildings' energy efficiency, and put better technology in hospitals. Unfortunately, this plan is hopelessly stuck in 1958, not 2008.

This proposed stimulus plan lacks any real social vision for the country’s future- in fact it could actually slow growth rather than foster it. Take one example: roads. While Eisenhower was being revolutionary in imagining an interlocking highway system that would allow drivers access all over the country, can the same be said today? Wouldn’t an investment in maglev technology for public transit be a more forward-looking idea? Or what about completely re-envisioning the metro system to better accommodate today’s population clusters that no longer depend on the large cities the original public transit system was created for? Spending billions of dollars to prop up old infrastructures will do little for us in the short term and even less in the long term.

Innovation is not only required when it comes to old infrastructure but old companies as well. So we come to the auto bailout. It looks as though a temporary fix will be in place and it will be up to the new administration to decide on a long-term plan. Instead of spending another $50-100 billion dollars to hold together 20th century companies, why not force real change. With that amount of investment Detroit could be mandated to create incredibly fuel-efficient hybrids. Bold thinking is going to be required of Americans as they embrace the next century.

One of the biggest challenges facing the world is energy production. We send 300 billion of our dollars into foreign coffers every year. What if part of the stimulus package were to work towards a solution to the energy crisis? We already have a plan that seems to make sense: the Pickens’s Plan. The government could fund the installation of thousands of wind turbines in the Great Plains, the potential wind corridor of the United States due to favorable wind resources and geographic location. It is estimated that these turbines could generate enough power to provide 20 percent or more of the country's electricity supply. With wind energy providing a large portion of the nation's electricity, the natural gas that is currently used to fuel power plants could be used instead as a fuel for thousands of vehicles. This investment in the future could cost as much as $1 trillion, but could be offset by private investment. Regardless, if taxpayers are being asked to foot the bill for billions in stimulus, they should be able to look forward to a real substantial benefit in the long term, and $300 billion kept in-country annually sounds pretty good, not to mention the environmental benefits it would create.

Obama promised real change, a new day in America. It is time to prove it.

 

If we are going to have a Car Czar, why not Mitt?

Evdently everyone has agreed to a "Car Czar" to dole out the $15 billion Big Three Bailout 

http://biz.yahoo.com/ap/081209/congress_autos.html

Well, one man is going to play a huge role on whether America has an effective manufacturing economy in 10-15 years time.

I do not think someone who ran the labor union that contributed to the mess  , or the lawyer who doled out checks to 9/11 widows is the optimal choice here.

We need someone with a proven record of rescuing (albeit painfully) troubled businesseshttp://en.wikipedia.org/wiki/Mitt_Romney#Business_career .and who has the political chops to maneuver through the minefield out there http://en.wikipedia.org/wiki/Mitt_Romney#Turning_around_the_2002_Winter_Olympics.

Being able to deal with lots of Democrats is a plus http://en.wikipedia.org/wiki/Governorship_of_Mitt_Romney particularly on thorny health care issues. and this man should be deeply tied to the sucess of the state of Michigan http://en.wikipedia.org/wiki/Mitt_Romney#Early_life_and_education

Mitt Romney should be the Car Czar

Far fetched for Team Obama to accept this--any more than having Hillary as Secretary of State?

 

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