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President Articulates, Once Again, His Auto Policy

Latest speech on auto industry defends strategy but avoids the very questions of industrial policy his key points raise.

by on Jun.01, 2009

Presidnet Obama on stabilizing the auto industry

"And when that happens, we can truly say that what is good for General Motors and all who work there is good for the United States of America."

While the President was due to address the General Motors bankruptcy shortly before noon in the Grand Foyer of the White House today, he began his remarks by reviewing the situation at Chrysler. It was a skilful way to lead from the strength of a politician’s promises fulfilled, before making another very expensive set of promises, which were already under attack.

This was the second time in two months that the President devoted a significant amount of time to the auto industry, and it’s time that the president has said – more than once — he would rather be using doing other things.

He reminded an international audience that “These companies were facing a crisis decades in the making, and having relied on loans from the previous administration, were asking for more.”

“From the beginning, I made it clear that I would not put any more tax dollars on the line if it meant perpetuating the bad business decisions that had led these companies to seek help in the first place. I refused to let these companies become permanent wards of the state, kept afloat on an endless supply of taxpayer money. In other words, I refused to kick the can down the road,” he said.

It is precisely the criticism that once failed companies are put on taxpayer life support, there is no way to pull the plug, leading to endless spending during a prolonged deathwatch. For once President Obama resisted the opportunity to point out that the economic crisis was inherited after eights years of Republican leadership or that current Republicans have no plans to save jobs or strengthen the economy. He stayed with a message dear to his constituents:

Secretary of Defense Charles E. Wilson, aka Engine Charlie, at his desk in the Pentagon

Secretary of Defense Charles E. Wilson, aka Engine Charlie, at his desk in the Pentagon

“But I also recognized the importance of a viable auto industry to the well-being of families and communities across our industrial Midwest and across the United States. In the midst of a deep recession and financial crisis, the collapse of these companies would have been devastating for countless Americans, and done enormous damage to our economy — beyond the auto industry,” he said.

Change the President Can Believe in

Obama reiterated that the previous viability plans were rejected because they were fundamentally unsound, and that for government support to continue the companies would have convince him that they were making sweeping changes that he could believe in, a nice reversal on his successful Presidential campaign theme of last fall.

GM’s deadline to do so was today, but before addressing GM, Obama turned to Chrysler:

“When my administration took office and began going over Chrysler’s books, the future of this great American car company was uncertain. In fact, it was not clear whether it had any future at all. But after consulting with my Auto Task Force, industry experts, and financial advisors, and after asking many tough questions, I became convinced that if Chrysler were willing to undergo a restructuring, and if it were able to form a partnership with a viable global car company, then Chrysler could get a new lease on life,” he said.    (more…)

Fiat “Prepared to Walk” on Chrysler

UAW key to saving deal, says Fiat CEO.

by on Apr.15, 2009

CEO Sergio Marchionne says Fiat is "prepared to walk" away from alliance talks with Chrysler unless unions grant significant new concessions.

CEO Sergio Marchionne says Fiat is "prepared to walk" away from alliance talks with Chrysler unless unions grant significant new concessions.

Chrysler’s white knight is ready to gallop off into the sunset.  Fiat Group SpA will walk away from alliance talks with the floundering U.S. automaker unless Chrysler’s unions agree to make significant concessions, Fiat CEO Sergio Marchionne says.

Pulling together a deal with the Italian automaker is critical to Chrysler’s survival.  Late last month, President Barack Obama rejected the maker’s request for additional aid, giving it only until April 30th to either line up something with Fiat or another potential partner.  Barring such a deal, industry observers believe the White House will allow Chrysler to sink into bankruptcy, very likely to be broken up.

“Absolutely, we are prepared to walk.  There is no doubt in my mind,” Marchionne told the Toronto Globe and Mail, in an interview published today.  “We cannot commit to this organization unless we see light at the end of the tunnel.”

Subscribe to TheDetroitBureau.comThe light Marchionne apparently wants to see would be a signal from the United Auto Workers Union and Chrysler’s other labor groups that they are willing to accept further concessions that would sharply drive down manufacturing costs.  The American automaker also reportedly still needs to strike a deal with reluctant bondholders.  They’ve been dragging their feet on concessions of their own – in part because there’s hope that in a bankruptcy, they might actually be able to recoup a higher return than is currently being offered by Chrysler.

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Chrysler Can Survive Worst Down-Market, says Jim Press

Automaker preparing to ride through the worst, even without Fiat alliance.

by on Feb.03, 2009

Chrysler still viable, says V. Ch. Jim Press

Chrysler still viable, says V. Ch. Jim Press

Despite the doom and gloom sounded by ratings agencies and Southern Senators, Chrysler is preparing to ride out the worst the economy can throw at it, and will be able turn a reasonable profit even in a long recession, the automaker’s vice chairman told reporters during a Tuesday “roundtable.”

The sharp cuts Chrysler has made since it was taken over by Cerberus Capital Management, in 2007 have repositioned the automaker to survive even an extended downturn in the U.S. market, asserted Jim Press, the troubled automaker’s second-in-command.

“We feel we’re on a firm footing, financially,” proclaimed Press, prior to beginning the last of eight meetings Chrysler has held with dealers from across the U.S.

According to the plan Chrysler submitted to the federal government to justify a bailout, the U.S. market will slip by as much as 2 million units, this year, to a total sales volume of just 11.1 million, and could hold at that dismal level “for a couple years, and maybe as much as four years, going up to 13 million”,” when the market finally starts to recover. And, if anything, added Press, a worst-case scenario could see sales slip as low as 10 million.

Even at that level, Chrysler claimed, “We were still viable. We were still okay,” according to Press.

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Federal Money Off-Limits for Fiat, Says Nardelli

Another sweeping buying underway at Chrysler.

by on Feb.02, 2009

Chrysler CEO Bob Nardelli: "Hands off, Fiat"

Chrysler CEO Bob Nardelli: "Hands off, Fiat"

Fiat won’t be able to touch any of the “bailout” loan money provided by the U.S. government if it decides to move forward with its alliance with Chrysler LLC, says Chrysler Chairman Robert Nardelli.

In addition, Chrysler also said it is going ahead with a sweeping buyout of hourly workers at the company’s throughout its manufacturing system, which now has about 34,000 employees.

“Given the difficult economic and market conditions in the U.S., Chrysler LLC determined in December 2008 that it would offer another phase of its ‘Special Programs,’” said a company spokeswoman, adding that, “The original window to offer the programs was slated to begin in December and run into January, per an agreement with the UAW. Due to the fact that many of the company’s facilities had suspended production for extended periods in December and January, the program offerings are being rolled out now.”

Workers have until Feb. 25 to decided whether to accept the buyouts, which would provide up to $75,000 in cash and $25,000 to buy a vehicle to those who leave the company without retiring. The incentive for early retirement is $50,000 cash and a $25,000 voucher.

The latest program follows another buyout, in November, that saw some 5,000 salaried employees – or 25 percent of Chrysler’s white-collar workforce – agree to leave the company.

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