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Obama asserts gov't control over the auto industry
Obama asserts gov't control over the auto industry
Quote:
Originally Posted by http://news.yahoo.com/s/ap/20090330/ap_on_go_pr_wh/obama_autos
By DAVID ESPO, AP Special Correspondent David Espo, Ap Special Correspondent – Mon Mar 30, 7:51 pm ET
WASHINGTON – President Barack Obama asserted unprecedented government control over the auto industry Monday, bluntly rejecting turnaround plans by General Motors Corp. and Chrysler LLC, demanding fresh concessions for long-term federal aid and raising the possibility of quick bankruptcy for either ailing auto giant.
Obama took the extraordinary step of announcing the government will back new car warranties issued by both GM and Chrysler, an attempt to reassure consumers their U.S.-made purchases will be protected even if the companies don't survive.
"I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars," Obama said in his first extended remarks on the industry since taking office nearly 10 weeks ago. And yet, he added, "our auto industry is not moving in the right direction fast enough to succeed."
Obama, flanked by several administration officials at the White House, announced a short-term infusion of cash for the firms, and said it could be the last for one or both.
Chrysler, judged by the administration as too small to survive, got 30 days' worth of funds to complete a partnership with Fiat SpA, the Italian manufacturer, or some other automaker.
GM got assurances of 60 days' worth of federal financing to try and revise its turnaround plan under new management with heavy government participation. That would involve concessions from its union workers and bondholders. The administration engineered the ouster of longtime CEO Rick Wagoner over the weekend, an indication of its deep involvement in an industry that once stood as a symbol of American capitalism.
Obama's announcement underscored the extent to which automakers have been added to the list of large corporations now operating under a level of government control that seemed unthinkable less than a year ago. Since last fall, the Bush and Obama administrations, often acting in concert with the Federal Reserve, have engineered the takeover of housing titans Fannie Mae and Freddie Mac, seized a large stake in several banks and installed a new CEO at bailed-out insurance giant American International Group.
Other presidents have forced showdowns with major industries, with mixed results. Harry Truman's decision to nationalize the steel industry on the eve of a strike in 1952 was ruled unconstitutional by the Supreme Court. But Ronald Reagan succeeded in busting the air traffic controllers' union three decades later.
The latest addition to the list, the once-proud auto industry, has struggled with foreign competition for more than a generation, then was further battered by the recession and credit crisis gripping the economy. Obama said 400,000 industry jobs have been lost in the past year alone, many in Michigan.
Under Fritz Henderson, newly named as CEO, General Motors issued a statement saying it hopes to avoid bankruptcy, but will "take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process."
Chrysler Chairman Bob Nardelli sought to assure customers, dealers, suppliers and employees that the automaker "will operate 'business as usual' over the next 30 days" while working closely with the government and Fiat to secure the support of stakeholders.
Sergio Marchionne, CEO of Fiat, issued a statement calling the Obama administration's involvement "tough but fair, and we believe we will arrive at a result that will establish a credible future for this crucial industrial sector and that assigns the right priority to the repayment of U.S. taxpayers' funds."
Fiat executives have talked to administration officials about a proposal to acquire a 35 percent stake in Chrysler in exchange for small car technology, transmissions and other items that Chrysler has valued at $8-$10 billion.
There was no immediate response from the United AutoWorkers Union. One worker, Don Thompson, 56, of Chesterfield Township in Michigan, said automakers were being punished because of public anger over the banking bailout. "They're using us for the mistakes they've made in Washington," he said.
Other workers alleged a double standard in how Washington dealt with Wagoner, as opposed to CEOs of bailed-out banks. "They're using him as a fall guy," said Frank Rowser, financial secretary for UAW Local 909.
When Wagoner leaves the automaker, he will take a financial package worth an estimated $23 million.
Ford Motor Co., the third member of the Big Three, has not requested federal bailout funds.
Obama said bankruptcy would be a way for either GM or Chrysler to "quickly clear away old debts that are weighing them down so they can get back on their feet," and stressed that either firm would remain open.
"What I am not talking about is a process where a company is broken up, sold off and no longer exists. And what I am not talking about is having a company stuck in court for years, unable to get out," he said.
Still, fears about the industry's future sent stocks plummeting, with the Dow Jones industrial average losing about 254 points. GM plunged 92 cents, or 25.4 percent, to $2.70. Chrysler is not publicly traded.
Obama's remarks were prompted by the expiration of a temporary bailout approved by the Bush administration last winter, with $17 billion in federal funds to help GM and Chrysler survive. Under its terms, the two automakers had until March 31 to submit restructuring plans as it searched for additional federal funds.
At the time, it appeared Bush had avoided an industry collapse on his watch yet had deferred the most difficult decisions for his successor.
By his comments, Obama bought himself a little more time, but made it clear it was fast running out. "Now is the time to confront our problems head-on and do what's necessary to solve them," he said.
The administration issued papers detailing the prospects for survival of both GM and Chrysler, credited them with making difficult choices, yet also stressing the difficulties that remain.
It said that while GM's new car of the future, the Volt, "holds promise, it will likely be too expensive to be commercially successful in the short run."
The government has said it's willing to provide another $6 billion in financing for Chrysler if it is able to finalize an alliance with Italy's Fiat Group SpA. But to get the money, Chrysler must rid its balance sheet of most of its debt, including any investment by its private owners.
That means Chrysler's majority owner, Cerberus Capital Management LP, would have to give up the $1 billion interest it has in the automaker, according to a person briefed on the deal. The person asked not to be identified because terms are still being negotiated.
Cerberus would retain ownership in Chrysler's financial arm, but it has pledged to the government the first $2 billion in profits to repay a federal cash infusion, the person said.
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Associated Press writers Jim Kuhnhenn and Ken Thomas in Washington and Ben Leubsdorf in Warren, Mich., contributed to this report.
OK since this is a Mopar board, and this involves politics -- this is the one exception thread where you can comment and cross the line of discussing politics. I see it impossible to comment without involving politics. Don't confuse this exception to the rule with the rule that all politics is discussed in the Premium Member's Political forum.
Quote: "The administration engineered the ouster of longtime CEO Rick Wagoner over the weekend, an indication of its deep involvement in an industry that once stood as a symbol of American capitalism."
The automobile industry has been the lifeblood of the American economy for over 100 years! I am afraid the end is near, folks! What has the government EVER run that has operated at a profit??? Example: The US Postal Service had a virtual monopoly on all mail and parcel delivery.....and they are losing BILLIONS!
The government should not be involved in any bailout of any type. If they wanted to help the auto industry, they should have federally backed the warranties and then allowed them to use bankruptcy court to break the Union contracts, and make a deal with their creditors. The government could loan capitol after that occurs for the restructuring to be completed.
I do agree however that wagoner is a casualty of the government control so it looks like they have done something about it. The real problem with this deal is that they are taking a huge fall in detroit when they'll just keep pumping money into AIG...when they might as well burn it. The big three (especially GM) has a lot of tangible assets and makes a product, where if their costs are under control they make money.
And the goberment wants to shut down a bunch more dealers. I'm sure there's too many but if they ain't careful, customers will shy away because they will not want to be caught up in a shuttered dealership. That happened to a neighbor down the street. He bought a new pickup in January and still hasn't been able to get the paperwork so he can register it. That means once the 21 day temp tag has expired, you park it. He bought it the first week of January and who the hey wants a new vehicle sitting in the driveway for 2 months!? Pay cash you say to avoid that? He did pay cash. Guess who took the money? The dealer! Guess who still holds the paper to the truck? Well, it's not the dealer....
FIAT = Fix It Again Tony. What in the Hell does that company have that is worth GIVING (no money) them Chrysler? So my tax dollars now go to an Italian company? Didn't we learn from the Germans destroying Chrysler earlier in the decade?
Obama doesn't want to be in the car business. Horse Dip! In three months he's Nationalize the banks and an insurance company -- and is looking towards health care and utilities. His grandparents were communists. His mother went to Mercer Island -- a Communist school. The man really suspected of being his father "Uncle Frank" was a Communist. The three biggest Communist recruitment centers were Occidental, Columbia, and Harvard -- all the Chairman's colleges. The man honestly believes (as do most Liberals with Communist leanings) that business/capitalism is evil and that government can do a better job because they're smarter than people. But they aren't. Look at AMTRACK, the Post Office, AIG, Fannie Mae and Freddie Mac -- all run by the politicians. They're so corrupt -- both the businesses and the politicians that pander to them. Not only can government not run business well -- but of the 545 people (both Democrat and Republican) in the White House, Congress and Senate -- few have ever had a lemonade stand. Most every Democrat is an Attorney that never worked in the public sector. Name one successful business run by an attorney! They think it is a great idea to have the World's second highest Corporate tax rate -- which drives business out of the US. They think it is great to submit a 10-year budget (spending more in Obama's first year than the sum of all Presidents since George Washington) that will give us a $17 Trillion dollar deficit. These are not businessmen folks. Obama doesn't want to be in the car business (so he says) -- but he fires the CEO of GM, tells Chrysler to have the Italians run them, throws money at them -- and is going to guarantee our warranties. He's appointed a Car Czar! Sounds like he's in the car business to me.
Was our country founded on guaranteeing car warranties and having a Car Czar as a Cabinet position? Was that what taxes are suppose to be collected for? He is also mandating GM (Chrysler is dead so he isn't worrying about it) stop building pick ups and SUVs and build little green death traps. Maybe up in Chicago little death traps sell well -- but down here in Texas -- we don't buy that crap, well at least the straight men don't. Does anyone else feel like it is strange that people who never operated a candy store are now over riding sane market research and dictating that a company already losing their shorts needs to build little green POS that no one wants to buy?
The American car industry is in the trouble it is in because of a few reasons. Anti-business/Pro-Socialist Liberals will tell you it is because of those running the business. While that's true to a certain extent -- it is at least bumped to the third reason why.
The number one reason are the Unions. They are inefficient. The workers work at a snail's pace to get more overtime and they stifle any automation that replaces a union worker. That may be good for those who work in the Union -- but not for the person wanting to buy a car or the company that wants build them and be able to compete with others building cars.
The UAW worker makes more money than any other Union's member. They extorted the legacy insurance and pensions by shutting down the automakers with strikes -- mostly in the 70s. The automakers agreed rather than close their doors then -- but now that those people have retired -- they can't afford to pay it and survive. The UAW won't budge an inch -- and leadership would just assume see the auto manufacturers shut down -- because they're convinced that Obama will pay them from the public treasury.
They have all of the reason in the world to believe that. In Obama's speech yesterday -- he blamed everyone in the world (vendors, management, bond holders, Bush, American Consumers, dealers...) for not cooperating with giving a little towards GM's survival (again -- Mopar is toast) -- yet praised the workers for their sacrifice. Let's face it -- after blacks (91% are said to vote Obama), the Union (86% were said to vote for him) was his second most loyal voters -- and next to trial attorneys, the Unions were the second largest contributors to his campaign. This great stimulus package stipulates Unions for all of the shovel ready projects. He knows what side to butter his bread on -- and the Unions know they have him by the short and curleys.
Next problem to go a long way toward killing the American Automakers -- are the unreasonable mileage, emissions, and crash requirements -- which cost billions to research. Worst yet -- they're a moving target. The auto makers almost meet one set of standards -- and the Feds (or a state) will change horses mid-stream on them with more rules and a short time to achieve them.
Nope -- if you let the government build the car it will be too worthless and ugly for anyone to want -- and too expensive (after greasing the politicians with their hands out) to own without government subsidies. Obama, Pelosi, and Reid know this -- and they plan on subsidies as part of the wealth redistribution plan. The Soviet Union once determined the apartment you were entitled to live in and the car you drove based on your importance to the party.
My question to those reading this is -- all of these rights and decisions that we are allowing to be taken away from the people and public -- will we ever get them back?
For the first time in history -- we've had China, France, Sweden, Germany, and the Czec Republic all in the same week warn the US that they're going too far Left. The damn Commies and Socialists (and the ex commies and Socialists) see this -- yet we don't.
One by one the government will nationalize the businesses that can't *run -- like utilities (you want your Internet run by the government?), health care, and anything else that can get their hooks into. It is time to Throw The Bums Out -- all of them Democrat and Republican (currently they're all crooks), create term limitations so that we stop having career politicians, and make them have the same health and retirement as the rest of us. When they have to live like us -- them maybe they'll think of us.
*Run -- businesses are leaving the US in droves. Under the new tax proposal, businesses headquartered in the US would now have to pay the 35% corporate tax for their foreign subsidies. For instance, Microsoft in Ireland pays the Irish tax of 15% on the profits it earns in Ireland. Now they'll have to also pay the difference (and additional 20%) to the IRS. Not just them -- but GE, IBM, Dell, AT&T, GM, Ford, and everyone else listed on America's stock Exchanges. These businesses, like many who have recently moved their headquarters to Bahrain and the Bahamas will leave (as will most of America's wealth fearing redistribution). During Carter -- the US had 25% of the world's ships registered here. When they did a tax similar to this -- the shippers all moved to Liberia, Montenegro, and the Bahamas. We now have less than 1% of the world's shipping fleet registered in the US. I personally divested myself of my three largest businesses in October -- seeing this coming. The IRS is being used as a weapon for both income extortion (which would have made John Ghotti proud) -- and to come after the government's enemies (also would have made John proud).
Being apathetic because you don't like politics is doing exactly what the Germans did in 1932 -- and they got a guy with a little mustache doing whatever he wanted -- taking more and more of their rights daily -- until it was too late to do anything.
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The above was my opinion. Most likely yours differs. Again, we normally reserve all of the politics for the Premium Members Political forum -- but since this is about a topic near and dear to us (The Fall of Mopar -- as Fiat will strip and kill) this is the exception.
Post you view ON THE SUBJECT regardless of what it is -- but keep the tone professional and not personal to/against another posting. Those posts will have to be removed.
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Obama asserts gov't control over the auto industry
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