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New Film Reveals the Reality of the Auto Bailout

“Live Another Day” – but at what cost?

by on Sep.12, 2016

Storm clouds over Detroit. At the depth of the recession, two of the three US makers went bankrupt.

The economy was collapsing more rapidly than during the Great Depression, and nowhere was that more apparent than in Detroit, where the Big Three automakers faced the very real prospect of going out of business – destroying a million or more jobs in the process.

Ford Motor Co. was able to survive by mortgaging everything; not only its factories, but even its Blue Oval logo. General Motors and Chrysler didn’t move fast enough to secure equity lines. They had to be salvaged with the help of the largest federally funded bailout in history. It broke precedent and, many would argue, broke the law. The rescue effort may also have saved the economy, according to its proponents.

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Was it good or bad? “It was something in-between,” contends Bill Burke, suggests Bill Burke. He’s a media industry veteran and co-producer of the new documentary, “Live Another Day,” which has received strong praise on the film festival circuit and which will open at theaters nationwide on September 16th.

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Romney: I Saved Auto Industry by Opposing Bailout

GOP presidential candidate wants some credit for Detroit turnaround.

by on May.08, 2012

GOP presidential contender Mitt Romney has tried to benefit from opposition to the auto bailout - but now wants credit for its success.

Despite his strong opposition to the federally funded bailouts of General Motors and Chrysler, presumptive Republican presidential nominee Mitt Romney insists he also deserves some of the credit for saving the domestic auto industry.

During a Rust Belt campaign swing, the Michigan native told interviewers he should get “a lot of credit” because he pushed the idea of a managed bankruptcy, the route the Obama Administration used to held shed the crushing debt that drove GM and Chrysler into seeking Chapter 11 protection.

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“I pushed the idea of a managed bankruptcy, and finally when that was done, and help was given, the companies got back on their feet,” Romney said in an interview with a Cleveland TV station during a visit to an auto parts manufacturer. “So, I’ll take a lot of credit for the fact that this industry has come back.”

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“No Silver Bullet” to Solve Gas Crisis, Says Obama

But new, high-mileage vehicles will help, insists president.

by on Mar.05, 2012

The President checks out a Chevrolet Volt at this year's Washington Auto Show.

There’s “no silver bullet” for bringing down fuel prices that have now topped $4 a gallon in some parts of the country, warned Pres. Barack Obama during his weekly radio address – though he insisted that the new, higher-mileage models being built by a resurgent U.S. auto industry will ultimately save consumers money at the pump.

While signs of an improving economy may be playing to the President’s advantage in recent weeks, political observers warn that fuel prices could be a critical factor in determining the outcome of the 2012 election – especially if, as some now forecast, gas hits $5 a gallon.

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Obama’s GOP opponents have already picked up the cry.  Before dropping out of the presidential race last year, Cong. Michelle Bachmann insisted she’d bring gas prices down to $2 a gallon if elected.  Former House Speaker Newt Gingrich has made a similar claim in recent weeks – though, like Bachmann, he hasn’t discussed how.

Nonetheless, it is clear the Administration is concerned about the gas price issue – especially as it is facing the possibility that the cost of petroleum could surge if the war of words with Iran over that country’s nuclear program turns into a shooting war.

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Obama Claims New Korean Trade Deal Will Create 70,000 New U.S. Jobs

President also says Detroit bailouts “worth it.”

by on Oct.14, 2011

South Korean President Lee Myung-bak reacts as U.S. President Barak Obama addressed workers at a GM plant in Michigan.

President Barack Obama outlined the promised benefits of the nation’s new trade pact with Korea during a trip to a suburban Detroit assembly plant, suggesting the agreement will generate 70,000 new U.S. jobs – but he drew an especially enthusiastic response from workers when he proclaimed the controversial federal bailout of General Motors and Chrysler “worth it.”

The president journeyed to the Lake Orion assembly plant where he was joined by both South Korean President Lee Myung-bak – who wore a Detroit Tigers baseball cap for the occasion — and United Auto Workers Union President Bob King.  King broke with other national labor leaders this week by lending his support to the trade agreement.

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“The investment was worth it,” Obama said of the $85 billion spent on the domestic auto industry.  Speaking to a cheering throng of workers, the president added that, “This is a city where a great American industry is coming back — and a city where people are dreaming up ways to prove all the skeptics wrong and write the next proud chapter in the Motor City’s history.”

The decision to take his message to the Orion plant was a significant one considering that the factory is producing a small car – the Chevrolet Sonic – that was previously built in South Korea.  GM credits the labor cost reductions it was granted by the UAW in recent years for helping move that production back to the States.  Still, a worker advised the president during his half-hour tour, 27% of what was previously known as the Chevy Aveo still comes from Korea.

President Obama shakes hands with General Motors workers after touting a U.S. trade agreement with South Korea.

The president stressed, during his speech, that the new Korean trade pact – one of an assortment of similar agreements approved by Congress this week – will pay off in many ways.  Most significantly, however, the administration claims it will open up the long-restricted Korean market to U.S. automotive imports.

Late changes to the Korean trade agreement were designed to bolster exports to the Asian nation while preventing a flood of Korean vehicles into the U.S.  The so-called “chicken tax” on foreign-made light trucks, for example, will take 8 years to phase out and should prevent makers Hyundai and Kia from moving ahead with long-discussed plans to start building pickup trucks that could establish one of the most profitable market segments for Detroit’s Big Three.

Until now, automotive trade has been extremely lopsided.  Koreans bought just 7,500 American-made automobiles in 2010 while Korea shipped 562,000 vehicles to the States – a figure that does not include the rapidly-increasing number of vehicles produced at two Korean-owned assembly plants based in the U.S.

The opportunity to level that imbalance in trade helped convince UAW President King to give the agreement his backing, even as other American labor leaders sharply criticized its passage.  (Click Here for that full story.)

Speaking through an interpreter, the blue-and-white Tigers cap on his head, Lee told the GM workers, “I want to give this promise to you, and that is that the (trade pact) will not take away any of your jobs. Rather, it will create more jobs for you and your family, and it is going to protect your job. And that is the pledge that I give you today,”

Ironically, GM could benefit from any expansion in business for Korean automakers as it is that nation’s third-largest carmaker after having purchased the bankrupt Daewoo a decade ago.  A full 20% of the vehicles sold worldwide under the Chevrolet nameplate are produced by GM in Korea.

GM To Give Hourly Workers $4,000 Bonuses

Falls short of Ford’s profit-sharing package.

by on Feb.14, 2011

GM CEO Akerson sending a kiss - and more than $4,000 in cash - to hourly workers.

General Motors CEO Dan Akerson has a big Valentine’s Day card coming in the mail for 45,000 workers.

Though they’ll still have to wait a bit for delivery, they can anticipate a profit-sharing bonus of at least $4,000 apiece, the executive announced today.  That’s more than double the previous record $1,775 profit-sharing payment workers received from GM – and that was back in 1999.

But the maker’s bonus still falls short of the $5,000 Ford Motor Co.’s hourly workers will be getting.  Ford decided to pay out significantly more than it was required to, in fact, under its agreement with the United Auto Workers Union.

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That reflects concerns Detroit automakers have about how workers will respond to the domestic industry’s fast-improvement health.  UAW members granted billions of dollars in concessions, first as part of their 2007 contracts with the U.S. Big Three, and then again to help the makers hobble through the economic downturn that saw auto sales plunge to their lowest levels in decades.

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Ford Slashes Debt Another $2.9 Billion

Move could help it get out of "junk" territory.

by on Feb.11, 2011

CEO Alan Mulally continues chipping away at debt.

Ford Motor Co.’s heavy debt load has become a significant drag on the company competitiveness in the minds of many pundits and Wall  Street analysts, tarnishing Ford’s market share gains, quality gains and the success of its new product offensive.

Thus, it wasn’t exactly a surprise Ford elected to dip into its cash reserves this week and announce plans to pay off another $3 billion worth of debt. The move followed similar steps, late in 2010 that let the maker close the year with more cash than debt for the first time in a number of years.

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The latest reduction in debt, scheduled for March 15th, will see Ford redeem for cash trust preferred securities held by Ford Motor Company Capital Trust II, company officials said.

The redemption will result in a $60 million charge against Ford’s first quarter earnings but it will save $190 million in interest expense annually, the maker stressed.

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U.S. Automakers’ Recovery “Ahead of Plans,” Says Obama’s Car Czar

Administration wants to sell off remaining auto stock “as soon as practicable, says Ron Bloom.

by on Jan.12, 2011

U.S. "Car Czar" Ron Bloom, second from left, at the Detroit Auto Show.

Investors aren’t the only ones pleased by the apparent improvements made by General Motors.  Less than two months after the carmaker’s record IPO was completed, U.S. “car czar” Ron Bloom could be found touring the GM exhibit at the Detroit Auto Show, where he declared the efforts to revive the maker – and cross-town rival Chrysler – “ahead of plans.”

What’s all the more surprising, said Bloom, the Obama Administration’s top manufacturing adviser, is that the two domestic makers are doing so well in a still-depressed economy, with the auto market itself only barely showing signs of a true turnaround.

“If there’s a positive surprise, I think it’s in the companies’ ability to execute their plans in this environment,” said Bloom.

That echoes comments made by GM CEO Dan Akerson, yesterday, during and after a speech to the Automotive News World Congress.  The former telecomm executive noted that prior to its bankruptcy-led reorganization, GM could barely make money even in the best years the U.S. auto industry ever experienced.  It is now positioned to make money in some of the worst markets ever – as it did in 2010.

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Ex Auto Czar Rattner Pulls No Punches in “Overhaul”

Few spared in tell-out about GM, Chrysler bailouts.

by on Sep.03, 2010

Few escape criticism from former auto czar Steve Rattner in his tell-all about the GM and Chrysler bailouts.

Steve Rattner isn’t known for being soft-spoken, and he proves it in his new book, “Overhaul,” an insider’s look at the desperate – and highly controversial — effort to save General Motors and Chrysler with more than $60 billion in federal bailout money.

While Rattner downplays the legal problems he’s run into since leaving the White House auto task force, he dishes on virtually everyone he dealt with during his six-month stint, from President Barack Obama to the man who just this week took over as GM’s fourth CEO in less than two years, Dan Akerson.

The bailout of the two Detroit makers actually began during the waning days of the Bush Administration.  But once Congress made it clear it wouldn’t authorize the money needed to keep GM and Chrysler afloat, the politically-charged football was tossed into the lap of the new president.

It landed there only a week after the November 2008 election, and at the first sit-down with his advisors where the topic was broached, Barack Obama wasn’t exactly in Detroit’s court.  “Why can’t they make a Corolla,” the President-elect asked.

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If anything, Obama is portrayed as a calm and level-headed boss by “Overhaul,” Rattner writing that the president “had the air of a man in the business of calmly executing.”  One of the more colorful descriptions the one-time auto czar offers up is the image of the “T-shirts and jeans worn by unshaven, sockless men,” debating what to do next during weekend meetings at the Oval Office.

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The Top Ten Auto Stories of 2009

Bankruptcies, bailouts, recalls, oh what a bad year it was!

by on Dec.30, 2009

Brother, can you spare a dime? The jet-setting Detroit Three at hearings: left, fired GM CEO Rick Wagoner, ex Chrysler CEO Bob Nardelli, middle, Ford's surviving CEO Alan Mulally, right.

Every December, a group of auto scribes gathers together to share some good cheer and see how we did at predicting the events of the unfolding year. To be honest, even the best of the group failed to come close to calling the big stories of 2009.

No surprise, really, when you consider the strange twists and turns the auto industry has taken during the last 12 months.  Even the best fiction writers would have had trouble scripting this plot.

Sure, there were signs that the auto industry was slumping, and that the Detroit’s Three were in trouble, but having both General Motors and Chrysler go bankrupt?  And the U.S. government become majority owner of GM, with Italian automaker Fiat controlling Chrysler?  And what about Toyota?  Twelve months ago, most of us were writing about the fact that the giant Japanese automaker seemed certain to become the world’s largest automaker, finally overtaking troubled GM.  So, who could have begun to suspect all the problems that would follow for Toyota in 2009?  And what about the unexpected rise of the Chinese?

Top Ten!

But I’m getting ahead of myself.  The fact is, there were so many big stories in 2009 it may be impossible to come up with a fair, accurate and complete list of the 10 Top Auto Stories that everyone will agree on.  But I’ll try.

And TheDetroitBureau.com would like to encourage readers to come up with the stories they would add to the list.  Just go to the Comments section at the end of this story.

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Ford Debt Rating Raised, But Still Junk

More good news for Dearborn maker.

by on Sep.08, 2009

Ford's turnaround program has won the endorsement of Moody's, which has increased its ratings on the automaker's still substantial debt.

Ford's turnaround program has won the endorsement of Moody's, which has increased its ratings on the automaker's still substantial debt.

Ford Motor Co. got some good news last week as Moody’s Investor Service raised its rating of the company’s corporate debt for the first time in 14 years.

However, Moody’s continues to rate Ford as junk, or below investment grade, but changed the “Corporate Family Rating of Ford to Caa1 from Caa3. Moody’s also raised the company’s Speculative Grade Liquidity (SGL) rating to SGL-3 from SGL-4.

Moreover, Ford’s rating outlook was changed to stable from negative. In a related action, Moody’s placed the Caa1 senior unsecured rating of Ford Motor Credit Company LLC on review for a possible upgrade.

It was of course the rating agencies that said mortgage backed securities and other derivatives were AAA rated or virtually risk free, which was at the heart of the collapse of the global financial markets that led to the Great Recession, which is ongoing. With U.S. unemployment growing to almost 10% in August, the economy continues to shed workers, as businesses return to profitability by eliminating middle class jobs or moving them offshore.

“The rating actions reflect Moody’s belief that after a period of intensive restructuring of its operations and balance sheet, Ford’s business viability has significantly improved. The positioning of the CFR rating at Caa1 balances the substantial achievements the company has made in restructuring its operations and rebuilding competitiveness against the expectation that even with these improvements meaningful earnings and cash flow generation will not be evident before 2011,” said Moodys in a statement.

Translation: more red ink until two years from now.

It's Debt Free!

It's Debt Free!

“Moody’s believes that Ford has adequate liquidity to bridge itself until 2011 as reflected in the upgrade of the SGL rating to SGL-3.”

Ford has been receiving some good news, lately, but there had been some concern about the fact that the company, by not going into bankruptcy, like General Motors and Chrysler, remained saddled with a significant amount of debt.  But while Ford does continues to carry substantial debt on its balance sheet, the upgrade reduces the automaker’s borrowing costs, freeing up cash for other uses such as product development.

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