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Posts Tagged ‘Auto Bailouts’

National Taxpayers Union Assails GM over Opel

The "illogic" is flawless and could cost you more money.

by on Nov.10, 2009

A successful Opel in Europe, a successful Buick in China, and a natural to come ot the U.S. So why are we against an Opel reorganization?

A successful Opel in Europe, a successful Buick in China, and a natural for the U.S. So why are we against an Opel reorganization?

The National Taxpayers Union (NTU) is urging European governments to reject GM’s request for funding its reorganization of Opel.

This presumably will hasten GM’s demise and increase the chance that taxpayers will loose their entire investment in GM. The latest criticism comes at a time when GM is showing some signs, albeit small ones, of regaining momentum.

The conservative NTU was also an opponent of the original auto bailout plans, and — as a vocal proponent of the “Let GM Fail” ideology,  NTU then went on to excoriate GM’s 60-day money back guarantee program, which is actually increasing consideration, sales and contributing positively to the bottom line.

Now NTU Vice President for Policy and Communications Pete Sepp is offering the following comments regarding GM’s Opel restructuring decision. GM’s latest plan has GM retaining Opel instead of selling it off and losing control of vital engineering and design resources.

“In order to do that, GM has requested $4.43 billion in taxpayer bailouts from European governments, including Germany, Poland, the U.K., and Spain. Incredibly, Opel already has $2.23 billion in loans from the German government to keep it afloat,” Sepp claimed.

Well, not quite, Sepp. First off, these are all loans. Back in late May, the German government provided a bridge loan to Opel, which at the time was within days of running out of operating cash. Opel still owes the government about €900 million of €1.5 billion advanced but improvements in its operations and an increase in sales have allowed GM to pay some back already.

Secondly, GM has not publicly revealed its revised plan, which is being discussed with European governments this week and next, but it will likely involve more loan guarantees.

Global Outlook!

Global Outlook!

In other areas, Sepp mirrors rigid conservative ideology, which would rather see GM fail, than succeed.

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Teamsters Step up Criticism of Auto Bailouts and the Ongoing Attack on Middle Class Jobs

While Chrysler holds briefing, union pickets Italian Embassy.

by on Nov.09, 2009

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Customer paying $800- $1,000 for delivery are charged much more than the average delivery cost of about $120 per vehicle.

While Chrysler CEO Sergio Marchionne was briefing reporters on his plans for turning around the ailing automaker last week, members of the Teamsters union were protesting at the Italian embassy in Washington D.C.

Shouting “Hey, hey, ho, ho, bailout bandits got to go” and other slogans, more than 200 people protested what the union says is Chrysler’s attempt to destroy professional carhaul jobs.

Teamsters Carhaul Division Director Fred Zuckerman delivered a report to embassy staff, who told him it would be forwarded to the Italian ambassador to the United States.

“Damaged When Delivered? How Bailed-Out Auto Giants are Ripping Off American Consumers,” is said by the militant union to look at the risks to vehicles and consumers when car companies use “cut-rate and inexperienced carhaul drivers” to transport new automobiles.

“We are today at the Italian Embassy because we are standing up to the Bailout Bandits,” Zuckerman said.

“Fiat Chrysler got $14 billion in American taxpayer money and we’re here to say we won’t allow them to use that money to restructure an industry in a way that destroys American jobs, increases the danger of driving on our highways, and hurts the American Consumer,” Zuckerman charged.

The delegation also delivered a letter from Teamsters General President Jim Hoffa to Prime Minister Silvio Berlusconi, the president of the Council of Ministers and the presidents of the Italian Senate and Chamber of Deputies.

Strike Now!

Strike Now!

In the letter, Hoffa claims that billions in taxpayer dollars on both sides of the Atlantic are not being used to establish a sustainable recovery at Fiat-Chrysler. Hoffa called on the Italian government to hold Fiat Chrysler and its chief executive, Sergio Marchionne, accountable for the company’s actions, which are “harming consumer interests, and destroying thousands of good paying jobs in the U.S. carhaul industry.”

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Reflections on Our Auto Restructurings

Former head of the Obama’s Auto Task Force speaks out.

by on Oct.21, 2009

Presidnet Obama speech on stabilizing the auto industry

Chrysler and GM survived because of the President’s willingness to let them go bankrupt.

In a speech today at the National Press Club, Steven Rattner defended the Administration’s decision to intervene in the auto industry and was harshly critical of the insular culture at General Motors, and years of mismanagement and leveraged debt at Chrysler.

Failure to act, however, was not an option in the Task Force’s view since it would mean the immediate loss or elimination of more than two-thirds of American-owned auto manufacturing capability, cost more than a million jobs in the short run, dramatically deepen and prolong the nationwide recession, and push unemployment rates in several states above 20%.

The question was how to act effectively, and not just buy time for the failed companies.

The Auto Task Force, of which Rattner was a key member, was just being formed when both Chrysler Corporation and General Motors Corporation submitted mandated “viability plans” on February 17. These plans were required when Congress declined to act on behalf of the failing companies before Christmas, and President Bush decided in late December to provide $17.4 billion of TARP funding to GM and Chrysler and kick the problem down the road to the incoming administration.

“Those plans evinced a state of denial as to the magnitude of their problems, the necessary changes and the conditions under which the Administration might provide further assistance,” Rattner said, in a speech sponsored by the Brookings Institute.

It was clear to him that both companies needed massive reductions in their costs and liabilities, including their legacy health care obligations, their labor costs, and their manufacturing footprints.

The government as piggy bank

“The President and his senior advisers were of one mind: No more money except in the context of shared sacrifice and restructurings to become truly viable.”

The next set of surprises came as the Task Force began meeting with various stakeholders at the failing companies. Rattner said the Task Force was startled when bondholders, labor unions, and senior management presented “asks” from the government.

“We had foolishly assumed that stakeholders eager to help would come with gives,” he said.

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Budget Review Shows Deficits Growing $2 Trillion!

Government to sell auto companies “as soon as practicable.”

by on Aug.25, 2009

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The fiscal situation continues to worsen. Now economic growth isn't predicted until 2010.

Today the White House Office of Management and Budget (OMB) released the mid-session review to the House of Representatives. The latest update to  the Administration’s economic forecast, last done in February, and its budget projections going out until 2019 shows a somewhat smaller federal 2009 deficit, but much larger subsequent deficits than previously projected.

It also shows two more years of 10% unemployment rates, and a -2.8% drop in the nation’s economy this year instead of  the previously forecast growth.

Executive summary devoid of spin: the economy is in bad shape with no immediate relief in sight. This is bad news for the nation’s shrinking middle class, for the automobile business and our whole consumer-spending based economy.

“Overall, it underscores the dire fiscal situation that we inherited and the need for serious steps to put our nation back on a sustainable fiscal path,” said Peter R. Orszag, Director of the OMB.

The report is certain to be attacked by the Republican party whose popularity along with the Democrats continues to decrease as economic woes continue and jobs are being lost.

The Obama Administration now predicts that taxpayer expenses for financial system bailouts will be less than anticipated. In addition, an open item for a possible further financial stabilization program has been removed. The cost of the FDIC bank rescues have also been lowered.

The bottom — red-ink — line is a slight $262 billion improvement in the 2009 deficit, now projected to be whopping $1.58 trillion – or 11.2% of Gross Domestic Product – down from a previously projected $1.84 trillion or 12.9% of GDP.

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House Hearing, Once Again, Questions Auto Bailouts and Dealership Closings

Rearview mirror look continues the debate on actions long taken and congressionally approved.

by on Jul.24, 2009

U.S. Capital WADC

The rulings, by the two different judges who handled the cases, cited Bankruptcy law precedents that ultimately went back to the 19th century.

Politicians are not known for their memories or consistent application of laws they have passed, as the latest hearings on the bankruptcy reorganizations of Chrysler and General Motors demonstrate. The decisions by two different judges, who handled the cases with surprisinging speed, cited U.S. Bankruptcy law precedents that went back to the 19th century.

The Bankruptcy code was established as law and subsequently modified by the U.S. Congress, the same institution that is now raising questions about its validity. Some members seemed shocked that the Auto Task Force used a well-tested legal strategy that at its core is consistent with the purpose of bankruptcy law, which is the preservation of the maximum value of the corporation, or “estate” in legal terms.

At least two areas of the proceedings continue to evoke concern in Congress. One is the closing of dealerships; the other is the use of the so-called Section 363 sale under Chapter 11 of the code, which allowed Chrysler and GM to survive by preserving some assets and contracts in newly formed corporations while liquidating other assets and voiding contracts that threatened the survival of the new entities.

Both of these broad issues were raised this week at hearings by the Subcommittee on Commercial and Administrative Law in the House of Representatives. One clear danger of government ownership of large stakes in the new auto companies is the possibility of political meddling in what should be straightforward business decisions. And although the Obama Administration at the executive branch level appears to have handed over the running of the Chrysler Group and General Motors Company to seasoned business and industry professionals, the same cannot be said about the legislative branch, which continues meddling by way of hearings and proposed new laws.

Section 363 Sale

Objections to the 363 sale are easily dealt with in my view. There was no other way to preserve as much of the companies as was saved by using this method. Liquidation where everybody looses, except the lawyers, was the other choice. Taxpayer financing during the bankruptcies was made available since the private credit markets were not interested in advancing money to either ailing company, a fact proven by the complete absence of other bidders under the sale procedures.

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Auto Company Bailouts Bad Idea Consumers Say

Latest opinion study mirrors earlier ones showing a clear public distaste for taxpayer-financed loans.

by on Jun.10, 2009

President George W. Bush meeting with his advisers in the Oval Office.

This is a bad place for an automotive assembly line.

Americans might love President Obama, as his high popularity ratings show, but they don’t think much of government intervention in the auto business that began under the extremely unpopular Bush administration, which Obama continued and expanded. This comes from a new study by auto consultancy AutoPacific that says more than half of consumers think auto company bailouts were a bad idea. Whether the current administration suffers the same precipitous decline in popularity that saw Bush leave office with the lowest ratings in history remains to be seen.

Fully 81% of respondents agreed that the faster the government gets out of the auto business, the better.

The online survey of more than 900 U.S. consumers was conducted last week following the filing by General Motors for protection under Chapter 11 of the U.S. Bankruptcy Code.

Highlights include:

  • 48% disagree that having the government in charge of General Motors and Chrysler will result in more fuel-efficient cars and trucks.
  • 54% disagree that having the government in charge of General Motors and Chrysler will result in much cleaner cars and trucks.
  • 66% disagree that having the government in charge of General Motors and Chrysler will result in cars and trucks Americans want to buy.
  • 54% of respondents believe that General Motors should have been allowed to fail, while 58% believe that Chrysler should have been allowed to fail. (more…)