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Posts Tagged ‘federal bailout’

Former Delphi CEO Miller Reappears On Wall Street

Aiming to work miracles for tarnished insurance giant AIG.

by on Jul.15, 2010

Steve Miller led a turnaround team at Delphi. He has now landed at troubled insurance giant AIG.

Robert “Steve” Miller, the former chairman and chief executive officer of the bankrupt Delphi Corp., has reappeared on Wall Street, signing on as chairman of AIG, the badly tarnished insurance giant, which was at the center of the financial panic of 2008.

Miller succeeds Harvey Golub as chairman of the AIG Board of Directors, who quit after a row with AIG’s current chief executive officer, Bob Benmosche.

“At this point, I view asking the Board to choose between us would be an abdication of my responsibility to lead. Consequently, I’m resigning for the simple reason I believe it is easier to replace a chairman than a CEO – particularly a company in the midst of two major activities: (1) a major corporate restructuring, and (2) development of an exit plan from government control, both of which involve executing a long list of difficult tasks,” Golub said in his resignation letter

Miller said in a statement he believed AIG has established strong momentum over the last year, “and we remain fully committed to delivering on AIG’s core priorities: repaying taxpayers, meeting all of the company’s obligations to its various stakeholders, and restructuring the company so that it emerges as a smaller, more focused enterprise worthy of investor confidence.”

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AIG was the largest single recipient of bailout funds from the federal government’s controversial Troubled Asset Relief Program, or TARP – the same source of rescue money used to save General Motors and Chrysler. The insurance company’s business and trading practices, executive compensation, and ethics have all come under intense scrutiny since it was bailed out by the U.S. Treasury.


Bailout Critics Decry New GM Guarantees

GM can’t win for losing in latest rant?

by on Sep.15, 2009


"General Motors' new 60-day money back guarantee campaign seems to offer something for everyone, except taxpayers."

General Motors Company’s new money-back guarantee has come under fire from the National Taxpayers Union, which charges that GM is using the money from the $49 billion Federal bailout to campaign to finance it.

“General Motors’ new 60-day money back guarantee campaign seems to offer something for everyone — except taxpayers, said Vice President for Policy and Communications Pete Sepp of the 362,000-member National Taxpayers Union

The negative comments followed the rollout of the new advertising campaign featuring GM’s new chairman Ed Whitacre, strolling through the GM Design Center in Warren, Michigan and drawling in an English-like dialect.

The conservative NTU was an opponent of the original bailout and — as a proponent of the “Let GM Fail” school of thought — it not surprising that it criticized the new plan, which is unusual in the automobile business where the value of a vehicle drops dramatically once it leaves the dealer’s lot.

“Normally a strategy like this would be a bold move to compete in the marketplace, one that consumers and shareholders ultimately decide to reward or punish. Unfortunately, with this 60% government-owned company, taxpayers don’t have the option of ‘pulling out’ of GM and putting their investments elsewhere; unless, of course, they’d like to be prosecuted by the IRS and spend a few years in jail,” Sepp incoherently noted.

Sepp also referred to a recent Congressional Study that says that it’s doubtful the Federal loans to GM and to Chrysler will ever be repaid. Of course, under his illogical way of thinking, if GM fails, then taxpayers will incur a huge loss and their taxes will have to increase to cover the unpaid debt.


Opinion: Is GM Turning Things Around?

Was decision to skip $2 billion in aid more than PR ploy?

by on Mar.16, 2009

Is GM's economic pulse showing signs of revival?

Is GM's economic pulse showing signs of revival?

In a stunning, surprise move, General Motors announced, last week, that it would not need a $2 billion infusion of cash from the federal government.  Ever since then, my phone has been ringing off the hook, with friends, industry contacts and talk show hosts alike asking me what this news signifies.

In today’s 24/7 news cycle, the issue is proving to have plenty of “legs,” and when I was asked to comment on NPR, this evening, I thought it time to stop giving glib opinions and think more deeply about the meaning of impact of GM’s decision.

The most common question is why did GM decide to skip this tranche of aid?  According to the automaker, it has made far more progress than it originally anticipated slashing its costs and rebuilding its under-funded war chest.  Certainly, if the company has enough cash on hand to meet its obligations, it would seem logical to avoid borrowing still more money and running its huge debt load even higher.

But Is GM really that much ahead of where it expected to be right now? (more…)

GM asks U.S., Canadian and European Governments for Billions More in Loans

Saab, Saturn and Hummer brands not in GM’s future.

by on Feb.17, 2009

Rick Wagoner: Seeking bigger bailout

Rick Wagoner: Seeking bigger bailout

General Motors’ updated plan to the United States Department of Treasury not only asks for another $4.5 billion above the $18 billion it requested in December, but it expects billions more from Canadian and European governments. It is assuming that U.S. banks will renew its $4.5 billion line of credit in 2011, otherwise more funding will be needed. The company also wants another $7.5 billion in loans that year if sales don’t improve.

Partial repayment of U.S. funding by GM is now due to begin in 2012, a year later than previously, when it says it will achieve competitive labor costs with transplants, but GM admits that the current plan does not achieve them. GM also says that it has not resolved bondholder debt conversion to equity or how to fund healthcare commitments for its workers. Still, GM promised that U.S. taxpayers would eventually be paid in full and that this is a good investment since it directly and indirectly supports 1.3 million U.S. jobs. Even so, the latest plan would lead to significant job cuts.

“Today’s plan is significantly more aggressive because it has to be,” said Rick Wagoner, Chairman and CEO, “In the 11 weeks since our initial plan was filed with Congress the condition of the U.S. and global economies, as well as the auto industry, has significantly deteriorated.”


Book Excerpt: Why GM Matters

Veteran writer argues in favor of saving the troubled giant.

by on Feb.10, 2009

New book argues in favor of Big Three bailout

New book argues in favor of Big Three bailout

For three-quarters of a century, it was king-of-the-hill, not only the world’s largest automaker, but arguably the most powerful and influential. But the steady decline of General Motors was capped, last year, when the automaker not only was dethroned by Japanese rival Toyota Motor Co., but as it was forced to go to Washington, begging for the cash it needed to survive.

In the weeks to come, GM will need to complete a far-reaching plan to ensure the company’s viability, a strategy that must then be approved by overseers still to be appointed by the Obama Administration. A go-ahead will generate the additional loans the automaker claims it still needs. Getting the thumbs-down, however…well, GM officials insist that won’t happen.

Yet there are plenty of folks, in Washington and elsewhere, who believe the game is already over, and that GM and its cross-town rival, Chrysler, should simply be allowed to fail. Veteran business journalist William Holstein is not one of them. And in his new book, WHY GM MATTERS: Inside the Race to Transform an American Icon, Holstein paints a very different picture of GM than has been portrayed on Capitol Hill and in most of the media. Here’s an excerpt from his new book, published by Bloomsbury USA…

In 1953, General Motors President Charles E. Wilson testified before Congress and spoke the words that for decades defined his company’s place at the center of American commerce and, indeed, defined its national identity. It was a time of unparalleled optimism in America. World War II was over, thanks in part to GM’s contribution to America’s superior war manufacturing effort (and to Wilson’s leadership of the War Production Board, which put him in charge of procuring all matériel for the military). Cadillacs sported tail fins like those of rocket ships. The American love affair with cars was exploding in movies and music, but was also being woven into the very fabric of society. With the new mobility afforded by autos, suburbs started sprouting up and an interstate highway system was born. Americans were literally building their lives around the automobile.


Can Congress Spur Car Demand?

Maybe, but only sound economic basics can sustain a healthy industry.

by on Feb.06, 2009

uncle-sam-saysAuto sales are one way we take the economy’s temperature. Hot sales mean hot activity overall while an economic chill sends the sales-volume mercury plunging. But is putting a flame to the thermometer — subsidizing car sales in particular — a good way to re-heat the economy as a whole? Many policymakers hope so.

This week the U.S. Senate passed a measure, co-sponsored by Senators Barbara Mikulski (D-MD) and Sam Brownback (R-KS), to make interest payments on new car loans and state new car sales taxes deductible through the end of 2009. Offering her proposal, Sen. Mikulski said, “no matter how much government aid we give to the Big 3 auto makers, they can’t survive if consumers don’t start buying cars. That’s where my amendment helps.”

The sales crash was dramatic and it doesn’t look like things will pick up soon on their own. 2008 was the worst year since 1992, with a 13 million unit tally well down from the 16 million or more cars and light trucks that had been moving annually. Analysts project even worse sales in 2009.

The collapse is hitting all automakers as well as the nationwide matrix of suppliers and other firms whose fortunes are tied directly or indirectly to the car market. And with the run-up in fuel prices that peaked just as the financial crisis hit, the impact shattered the truck-dependent Detroit 3 worst of all.


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.


Global Meltdown Drives Ford $5.9 billion into Red

Automaker still aiming for 2011 breakeven

by on Jan.29, 2009

Shouldn't that be the Ford "Red Oval" these days?

Shouldn't that be the Ford "Red Oval" these days?

Ford Motor Co. lost $5.9 billion, or $2.46 per share in the fourth quarter of 2007 as the company was swamped by losses in key markets around the world including Europe and Asia and revenue dropped 36 percent.

Ford is the only one of the Detroit Big Three not to have sought federal assistance, last month. Alan Mulally, Ford’s chief executive officer, stressed that despite the automaker’s dismal numbers, it has not intention to ask the federal government for a bailout – with one exception. “The bankruptcy of a major competitor” that disrupted suppliers might require the company to seek a bailout, he said.

Ford, however, does expect to tap funds from a separate fund set up by the Department of Energy to promote the development of high-mileage vehicles, and from the European Union to help pay for development of more efficient products. And the automaker does plan to use the company’s $10 billion line of bank credit, said Mulally, who noted Ford now expects sales around the world to drop by a record 10 percent this year.

“Business conditions have deteriorated around the world more rapidly than expected,” Mulally said.