Tuesday, November 10, 2009

General Motors NATIONALIZED - Free-Market Going, Going, Gone

December 1, 2009, or a few days before to the surprise of everyone except me "Fritz" Henderson, Obama's selection as CEO of GM was tossed under the GM bus and replaced on an "interim" basis that will last years ("I can't find an adequate CEO" Edward E. Whitacre, Jr. will plead time and time again.)  But truthfully this buddy of Obama handler, Rahm Emanuel, connived to get this top job the minute Emanuel appointed him as "outside", "independent" Chairman of the Board of General Motors.  He's been undermining Henderson with the Obama-appointed board from the beginning.  Now, like the war in Afghanistan, General Motors is Obama's property.  There is no way either Obama, Emanuel or Whitacre can lose.  They have the treasury of the United States to finance this corporation forever, into green, electric, small, whatever he wants it to be.  He has nationalized once the largest corporation in America.

The Obama Administration is afraid American consumers won't buy its electric cars (duh!) so he's bribing companies to make them, no matter if anyone wants them.  The method is as complicated as the federal tax code and Medicare regulations (150,000+ pages).  (Government does NOT want its citizens to understand its laws.)  But essentially the arbitrary new emissions standards can be gamed by producing electric cars which don't count as emitting carbon because Obama says so.  (That nearly half of the electricity in America comes from dirty carbon-emitting coal, and another 22% from fuel oil and natural gas doesn't count according to President Obama, who apparently can't count.)  This will bring a glut of electric cars: more than a dozen car makers are rushing to take advantage of Obama's bribes.  Including Al Gore, politician extraordinaire taking financial advantage of the "green politics" he helped create and popularize.  He has backed one.  And Mr. Gore is reported to be reaching a billion dollars of net worth in "green" politics.  Back to the electric cars: oversupply with low demand, will bring...yes, more government purchases and tax credits, rebates anything to prove Obama was not wrong.  Obama is wrong. 

The following article ("Politicians Butt In at Bailed-Out GM" Wall Street Journal, October 29, 2009, front page[http://online.wsj.com/article/SB125677552001414699.html#articleTabs=article]) explains why government should butt out of the private sector.  In additon he is "lending" $8.5 billion for car makers to retool plants and "innovate" green stuff.  President Obama and I'd guess well ober 75% of Congress do not understand, have not experienced and dislike the private sector/free enterprise/and capitalism. Please read, and cry for America.

Jerry Flint, Forbes columnist on cars (November 2, 2009 page 38) writes that America will lose in trying to build "midget cars", being we're a country of tall and large people.  (3.8 million of us are 300 pounds or more and  400,000 over 400 pounds.)  Japan has always been a better builder of small cars, and India and China are looking at our markets.  Obama's obsession with tiny, "green" cars is ludicrous and dangerous.  Peer group popularity is for what he's searching while killing jobs and America.  Goodbye Michigan, Indiana, Ohio, Iowa and Missouri. And for what?  Global warming isn't.  And cars are 25% of the greenhouse gas emissions, less than power plants, but so what anyway?  Build big cars for Americans and win.  Prosperity, jobs, wealth and an increased standard of living.  All seemingly anathema to President Obama.  Sad for America.

GM plans to dip into another $2,500,000,000 to reinvest in bankrupt Delphi Automotive LLP. GM's market share crept up by it spending $4,000 to bribe customers to buy cars. Looks good President Obama. GMAC -- financier to GM and Italy's Fiat subsidiary Chrysler -- borrowed another $2,900,000,000 in debt guaranteed by the U. S. and in addition has its hands out to Obama for an obscene $2,800,000,000 to $5,600,000,000 more directly from the government in equity, which won't be paid back. Its in hock to us (the taxpayers of the U. S. government) $12,500,000,000 already and lost $3,900,000,00. Nice investment to protect your unions, Obama. And at the same time Ford Motor Co. is close to selling Volvo to China's Geely Holding Group Co. creating another fierce competitor to GM and, for that matter, Ford itself.

Fisker Automotive Inc. will use government funds, "loans" it likely won't be able to pay back as a start-up, to purchase a closed General Motors plant in Wilmington, Delaware, just coincidently Vice President Joe Biden's home state -- it pays to know a Democrat.  The half-a-billion taxpayer dollars is planned to reopen a 62 (sixty-two) year old plant to make a "plug-in electric" car.  If opened successfully it could employ 1,500 employees.  The United Auto Workers has been closely involved in the talks.  Huh?  If all the $528,000,000 is spend for those 1,500 jobs that's $352,000,000 per job.  Ditto start-upTesla Motor's $465,000,000 Quite a coup for ObamaEconomics...well I am pretty sure much of it will end up in the coffers of the Democratic Party and United Auto Workers, one way or antother.  Competition by who you know and your ideology!  And it'll ONLY be a couple billion dollars write-offs of taxpayer money.  Or three.  Or four, all depending on 1) when Obama admits the mistake or 2) when he is out of office.

I have written posts about Chinese automobile makers.  It's difficult to place them in this post or in the "China eats the United States for Lunch" post.  Mostly it'll go there, but first, China is overtaking the United States of America as the world's biggest car maker, and is expanding from there.  While General Motors -- once the largest auto manufacturer in the country which was the world's biggest car maker, the U. S., of course.  With weak leadership afraid of its union bosses and lousy products, the U. S. has committed automobile industry suicide.  Next up?  The upcoming suicide of the United States of America itself!

But wait.  Cash for Clunkers was such a success that car and light truck sales for September for the United States' two major industrial holdings, General Motors and Chrysler, absolutely bombed.  GM off 45% (to a 20.9% market share down markedly from 29.3% a year earlier) to 155,679 and Chrysler off 42% to 62,197 (40% of which went to rental car companies)!  The U. S. total sales were off 23%.  Non-U.S. Ford only dropped 5% to 114,241 vehicles (with a market share of 15.3% up from 13.5% a year earlier) and Toyota, off 13%.  Some people think Cash for Clunkers only stole sales from September, and possibly October, at a cost to U. S. taxpayers of $3,000,000,000 and the wanton destruction of 700,000 operable vehicles that poor people could have purchased and driven.  President Obama get us out of the auto business and the "stimulus" industry,  you don't know what you are doing. 

And intelligent private market businessman Roger Penske said "no? to buying GM's Saturn brand, which now will be wound down "quickly".  The Saturn born in 1985 as an innovative approach to auto making with the United Auto Workers union bosses and General Motors executives on the same page.  Workers were 'technicians' and were paid 80% of UAW with the rest from a sharing of Saturn's profits.  Key decisions were shared by an exec and union boss.  Vision, passion and collaboration courtesy of the UAW's GM guy, Donald Ephlin.  There were broad dealer market areas and 'no haggle' prices.  Even now-green VP Al Gore touted the concept.  But it was not to be.  Union bosses feared collaboration would spread, and make them useless, so then-ew UAM militant, Stephen Yokich underminesd it.  And its GM-executive-promoter, CEO, Roger Smith retired in 1989.  Saturns were boring, underfunded and 'joined' the GM family in 2003 woth its dysfunctional relations with the UAW.  When Obama finally killed it, Roger Penske thought he could re-innovate, but no., once again it was not to be.  And not to be are collaborative relations of industry and its union bosses, who exist to create conflict.

So much for GM's brilliant new management, and super-CEO, Barack Obama..  Seven weeks ago amid pomp and circumstance, GM announced it was going to sell its cars on eBay.  Today the last day of September, it's a bust and being discontinued.

U. S. Government- and union-owned General Motors is trying to sell its Opel unit to Magna International.  But here is the matter with central control and planning.  The deal with magna seems to be unwinding because the Spanish government, the German government, the English government, the Belgium government...all don't care a whit about the financial success of Opel, they are only interested in getting reelected for which they need their union bosses.  So these governments only really care about holding onto union jobs.  Opel has factories in each of these countries.  A deal might not get done, shackling GM with the huge Opel losses.  Stay tuned!

This is a series of comments about President Obama's takeover of GM and Chrysler for the primary benefit of his major supporters, labor union bosses. And other auto-industry stuff.

More Washington DC manufacturing.  For the three-wheeled Aptera 2e, Aptera Motors Inc.,Vista, CA, like everyone else, wants some government money.  Only $75,000,000 though from the Energy Department, but Congress then (2007) said three wheelers don't qualify.  So what to do?  Get the Democrat Congress to change the rules.  Especially when Aptera's investors are long-time and large contributors to the Democratic Party; in 2008 just a few accounted for $1,000,000. So obviously it's not the free-market vetting start-ups, it's money for re-election.  (Tesla Motors another California start-up along with Ford and Nissan has already received $8,000,000,000 in "loans" from Democrats with taxpayer money.)
I don't know whether this should go into some post about central command and control of government or the end of the free enterprise system, or here.  So here it is.

Fisker Automotive will be lent -- and how does a start-up repay? -- $528,000,000 to develop two plug-in electric cars including Karma a $87,900 sports car certainly targeted toward Obama's middle class sweet spot.  The money will go toward engineering since the car will be manufactured in Finland, but with bribes to buy Karma, it will ONLY cost $80,000.  The Obama People's Car. 

Update as of September 15, Chrysler's sales in September are expected to fall 30% year to year, double the decline for the U. S. in general.  Yes, Mr. President, you put in cash for a clunker and gave it to an Italian.  Good move.

So the future of the American taxpayers' investments in the auto industry it would seem is based on President Obama's decision to "go green" and that even given U. S.-made cars' much higher price, perceived lower quality, and mediocre technology and what is shaping up to be fierce competition not only to sell cars but to get U. S. government largesse, GM and Chrysler, among other auto-realted companies, must sell many, many more cars. In a market which so far has not bought a lot of "green cars" why will Americans suddenly want small, slow and difficult cars? I doubt they will. And a really funny irony is that the new green Obamamobiles run not on electricity -- electricity is a middle-man -- but on coal (48.5% of U. S. electricity production), natural-carbon gas (21.3%) and petroleum (1.1%), and nuclear (19.6). Other than hydroelectric (6%), so-called alternative energy accounts for 3% of U. S. electricity production. So exactly what's green Mr. President?

Even though Chrysler is planning to produce the Fiat 500 in Mexico (so far) thus opposing the United Auto Workers Union (so far) Obama will not do the same to trial lawyers, major supporters of the Democratic Party. Chrysler will allow and  finance future tort lawsuits against it even though they could have been legally abrogated in bankruptcy court. A major financial victory for trial lawyers and the Democratic Party. Not so great for the U. S. however, or for the UAW for that matter.

So American Axle & Manufacturing Holdings Inc. has reached agreement to get $210,000,000 from GM whose dough comes from the U. S. Government, its major owner; well actually not the government, from taxpayers, well not actually from taxpayers, from lenders like China. Is this like a Ponzi scheme?

Buick the upper-end brand for old folks from GM is jumping into the crowd. It will stake some of its future on a...Duh!...hybrid, thanks to its owner, the U. S. Government and the Democrats. Buick will apply for a $500,000,000 loan (and who will pay it back?) from the $25,000,000,000 program to fund production of more fuel-efficient cars. And GM's battery supplier will apply for another $400,000,000 (and who will pay it back?) Just a cautionary question from a businessman. If all car companies take the U. S. government's money and build millions of (so-far unproven) hybrid's just who will buy all of them. The industry will be flooded with these cars, which are also unproven in the marketplace. That's one of the great things about having one czar run the czars: he makes the decisions, the messy market doesn't. And if it all fails? Mr. Obama'll retire a very rich man.

August 17: Chrysler made an announcement that it is planning to produce its Fiat 500 subcompact in Mexico. Take that, Obama. Take that, UAW. I am betting that the decision will be changed and the car will be made in America by the UAW, owner of 55% of Chrysler to the U. S. Government's 8%.

Trade restrictions caused the Great Depression, among the three major causes. With the U. S. government owning most of GM and some of Chrysler is there any doubt that policies will favor those "investments"? And thus will come counterbalancing restrictions by other countries possibly Japan, South Korea, Germany, India, China? I guess the only thing that would weigh against that is the humiliating fiasco of Obama's Cash for Clunkers that sold 1) Toyota Corolla 2) Honda Civic 3) Toyota Camry 4) finally an American brand, Ford Focus FWD 5) Hyundai Elantra 6) Nissan Versa 7) Toyota Prius 8) Honda Accord 9) Honda Fit and finally number 10) another American brand, Ford Escape FWD. Where were the U.S.-owned brands, GM and Chrysler?

GM's new strategy in part driven by AT&T's former chairman, now Obama's pick (actually Rahm Immanuel's pick as he recently did a deal with Whittaker) for chairman of GM is to culitvate a "green image". Sure to sell a lot of cars in the United States where horsepower can be compared to the size of a man, so to speak. That Chevvy Volt with a range of 40 miles should certainly be a big seller. I can hear the former Corvette owner saying, "Dude, I can get 40 miles to one charging and go from zero to, hmmm,35, Dude." Even with the government's $7,500 bribe it'll be markedly more expensive at $40,000 than Toyota's Prius at $22,000. GM's chief executive Henderson is on the Fritz. And Obama and his czars must be back on cocaine.

Today (August 25, 2009) GM reconsiders selling its Opel and Vauxhall -- a strategic reversal. GM prexy Fritzy Henderson thinks maybe he'll put together a $4.3 billion financing at the direction of the Obama Board of Directors, and maybe will keep the company which has lost money since 2000. The former near-sale to Canadian Magna International and a Russian-state-controlled bank, OAO Sberbank and OAO Gaz car company with the support of the German Government. (Much of Opel's parts are made in Germany by highly espensive union plants.)

But a couple days later, GM is pummeled by Germany politicians and union leaders for its turnabout. "What are they thinking", Germany must think, a broke GM would need $4,300,000,000 to try to turn around Opel (money it doesn't have and that its superCEO, Barack Obama, stated it wouldn't get) and which might not EVEN count $2,100,000,000 the German government made to Opel to keep it breathing during this sale process. STAY TUNED!

Managed like Katrina, but praised by the liberal media for causing more cars to be sold because it was conceived and (mis-)managed by Obama, Cash for Clunkers ("CARS") will terminate over this weekend. If Bush would have run it, it would have been a highly-publicized fiasco when neither car wreckers(owners)nor auto dealers were getting paid by the government bureaucracy, but not now. Complaints aside, the fact that cars were crushed and new Japanese and Korean cars, and a few Americans, were ordered but not paid for, it was deemed a smooth success. Yeah, sure. And, of course, auto sales will fall off a cliff soon because of its end.

Here in Seattle, the federal government is throwing around "millions of dollars" (according to the Seattle TImes, August 6, 2009, page B 1) to equip streets and homes with charging stations for the electric cars of the future. 2, 550 stations for an unknown amount of cash spread "around the Seattle metropolitan area, including the eastside". And what's great it'll only take four to six hours to charge at home, shorter for the fifty "fast commercial chargers" which will charge a fee.

They will be established by Ecotality, parent of Electric Transportation Engineering Corporation (eTec). eTec is Caymen Islands-registered penny stock traded in the "pink sheets" typically inhabited by speculative, money-losing and many times ethically-challenged companies. The Company recorded a net loss for the quarter ended June 30, 2009 of $3,600,845 million, compared to a $909,602 net loss for the quarter ended June 30, 2008. ECOtality recorded a loss per share of $.02 for the period ended June 30, 2009, compared to the loss per share of $.01 for the same period in 2008. For the quarter ended June 30, 2009, ECOtality achieved revenue of $1,747,085 compared to revenue of $2,936,150 for the quarter ended June 30, 2008. August 19, 2009: it closed at 24 cents per 206,900,000 shares with a high of 46 cents and a low of 2 (two) cents and is traded on the so-called "pink sheets' And looking at the "management" team and one sees a group of what seems like hustlers, who obviously know someone in government. I have seen similar companies tout their stock prices, and unload when the time is right. I am not accusing eTec or its management team of anything. Yet. More to come. Oh, here's a government connection:
Colin Read, Vice President of Corporate Development, ECOtality, with the responsibility of overseeing the marketing, public relations, strategic initiatives and business development. Read has significant experience in politics, public relations and traditional media. Before coming to ECOtality, Read was the Assistant Finance Director on a successful congressional campaign for an Arizona Democratic in the 2006 national mid-term election.

Ford Motor Co. is launching a "Smart" charging technology for recharging the planned electric cars that are upcoming in months or years ahead. This unproven technology is supposed to curtail recharging of these non-existing cars during high-cost peak grid-use times. There are over 3,000 different utility companies all of which will provide electricity differently. And, oh yes, wind and sun will provide some electricity too, somehow. Apparently Ford cars (GM has it too, it said) will communicate with utilities through some magic. GM's magic is OnStar, a wireless thing? Whatever. But you and I -- we -- are providing $5,900,000,000 to Ford from the Obama Department of Energy to retool some of its plants. And to make get this 5,000 - 10,000 electric cars in 2011. $5,900,000,000 divided by 10,000 is $90,000 per. I hope they simply give them to Congress and the Administration. This "Smart" technology seem pretty "Dumb". Not to mention expensive.

An article in today's Seattle Times (August 11, 2009, page A8) [http://seattletimes.nwsource.com/html/businesstechnology/2009635915_autoupstarts11.html] discusses entrepreneurs in the automotive manufacturing business. Enterpreneurs are the basis for the wealth of America and from little 41-employee Coda Automotive in Santa Monica to hugely successful Penske Group (shopping for cars to sell through the Saturn dealership network it agreed to acquire from GM) they are taking aim at innovation in the industry in order to gain wealth. Actually Chinese and Indian companies are looking here, too. But the Obama administration's insane support of union labor bosses in throwing taxpayer's money at Chrysler and GM will make success by non-government entities difficult but not impossible because competing against and bettering government "companies" which don't have monopolies is pretty easy. The $100,00,000,000 into GM and Chrysler might be deemed a monopoly by any rational person. But Obama is going after Microsoft and Yahoo, brilliant successful innovators, instead.

WASTE NOT, WANT NOT. NOT. (Not if it might a mean re-election cash giveaway.)
Obama crushes cars and gives away $3,000,000,000 of taxpayers' money (well, borrowed from China). His "Car Allowance Rebate System" ("CARS"), throws away billions of dollars worth of privately-owned, generally perfectly good and running automobiles to keep the union workers working. (Just some calculation: $3 billion divided by $4,500 equals 666,666 cars thrown away. If each is worth, say, $10,000 -- I'd guess a low figure -- that's $6.7 billion of assets thrown away. Thrown away. Disposed of. Torn up. Burned. (In a recession purposely destroying $6.7 billion is insanity.) And targets $2,400,000,000 to jump start votes in upcoming elections in the midwest (which is hidden as electric car manufacturing.) Venture capital? Nahhhhh. Democrats pick which companies -- 48 different ones -- to back. And the government would buy thousands of electric cars from GM, Chrysler and Ford. Toyota in the meantime is struggling to sell its highly-publicized Scion-brand "green" cars (sales crashed 58% so far in 2009). So take billions of taxpayers' dollars from them (money THEY could use to choose cars they want to buy), destroy thousands of used cars they could buy, offer electric cars they don't want to buy, and have the government buy those unwanted electric cars. Free-enterprise? With no wealth creation we will be bankrupt in 5 years. The wonderment of enterprise by power-mad people using others' wealth. ANGRY? YOU BETCHA.

Top ten destroyed cars: 1. Ford Explorer 2. Ford F150 Pickup 2WD 3. Jeep Grand Cherokee 4 WD 4. Jeep Cherokee 4 WD 5. Dodge Caravan/Grand Caravan 6. Chevrolet Blazer 4 WD 7. Ford Explorer 2 WD 8. Ford F150 Pickup 4 WD 9. Chevrolet C1500 Pickup 2 WD 10. Ford Windstar FWD Van.

Top Ten New Car Purchases: Cash for Clunkers 1. Toyota Corolla 2. Ford Focus FWD 3. Honda Civic 4. Toyota Prius 5. Toyota Camry 6. Ford Escape FWD 7. Hyndai Elantra 8. Dodge Caliber 9. Honda Fit 10. Chevrolet Cobalt. Americans want Japanese cars.

Oh, by the way, where will all these government employees charge their government-purchased and -owned electrics? No where. There is no infrastructure to do it. So certainly the government will put wires and plugs all over the place for billions more. But to do so will take huge and highly-dangerous 240-volt charging stations (Only 110-volt current is widely available in homes and offices). What are these royal idiots thinking?

"Cash for Clunkers" $1,000,000,000 blown in a week starting July 24. Good planning Obama. Katrina-like. So now go to Congress and get a couple more. What did it cost to write regulations? To keep dealers honest, I imagine. They need to exactly adhere to Obama's 136-page manual for dealers including how to kill the Clunkers engines with sodium silicate. 136 pages! But wait, the Environmental Protection Agency developed a list after reviewing 30,000 different car models of acceptable cars. But wait! It changed its mind and revised mileage ratings eighty-sixing 80 models and adding 50. This week. (At what cost?)Clearly, all this will cause more sales of new cars, but 1) will it simply steal from the future? 2) steal from the past, with new buyers having waited for it, after its announcement? 3) do anything for the future jobs and the economy? $1 billion down and $2 billion more apparently coming. The plan is expected to result in 250,000 new sales, or 110,00, or 40,000. No one knows and there'll be no way to prove anything other than $1,000,000,000 or $3,000,000,000 will be borrowed from China to pay for it. (I wonder if my children or grand-children will have to pay this back.)

Just read that our wise administration loves BMWs, Mercedes, and, I suppose, Indian Jaguar, not to mention Suzuki and other Japanese car companies that compete bitterly with Obama's own GM and Fiat/Chrysler. Heck these guys won't have to curb greenhouse emissions if they sell under 400,000 cars in the U. S. each year. What is this CEO of America thinking? Obviously he doesn't have a clue about competition and free enterprise. GM and the American taxpayer will be the big losers. And as for Obama's GM initial public offering next year? What a sad, sad laugh.

GM sales off 32% for the second quarter from the year before, in North America and off 15% globally. Keep up the good work, Mr. Obama.

Private-market Ford Motor Co., however without government largesse returned to profitability in the second quarter

As of July 23 the U. S. Government will be into its auto industry another $6.2 billion by taking on the retirement plans of 70,000 retired Delphi Corp. employees.

Conflict in management. Bob Lutz, car-guy at GM (and architect of its new hot-selling Camaro) said GM would keep its high-horsepower Pontiac G8 by turning it into a Chevvy. But finance guy and CEO Fritzy Henderson said no. It has too much horsepower and Obama wants slow cars with high gas mileage. None of this macho stuff for our urban president, even though the G8 sales are up 57% this year. But as it will continue to play out, sales prospects (which might bring those hated profits, have little to do with Obama's automobile agenda.

Politics as expected is rearing its non-profit head with GM's selection of a new plant to build its new compact car. The most selection criteria were 1) community impact and 2) carbon footprints. Michigan -- a key election state for Democrats next year -- was chosen over mainly non-union Tennessee and Wisconsin. Originally, of course, a business-like GM wanted to import the compact from China. NO WAY, said politicians who actually do run GM. It is expected that the U. S. build car will lose money upwards of $1,000 to $2,000 on each sale. Rep. Barney Frank (D-Mass.) is one of them guiding GM's plant closing strategy.

Chrysler appointed 5 new directors. A hedge fund manager, George F.J. Gosbee; Douglas Steenland former Northwest Airlines CEO; Scott Stuart, another hedge fund manager; Ronald L. Thompson, Chairman of Teachers Insurance and Annuity Association; and Stephen Wolf, chairman of R. R. Donnelley & Sons, Inc., a media company. Continuing Obama's course, none of these people have automobile industry experience and are supposed to put together a long-term plan to include small cars that Obama demands. Its sales were off 42% in June from a year ago. The government owns 8%, Fiat initially 20% and the United Auto Workers, represented by former Michigan governor James Blanchard, represents its 55% ownership. In all likelihood, Fiat will be running Chrysler as its CEO, Sergio Marchionne, is CEO of Chrysler also.

July 7, Fiat SpA which was given Chrysler for free by President Obama (and to the United Auto Workers Union also) is setting up a joint venture with Guangzhou Automobile Group to produce 140,000 cars and 220,000 engines in China when it gets running after May 2011. The total investment -- in money, unlike with Obama and Chrysler, will be about $559,00,000. Remember, China is General Motors largest market. So Obama's GM will be competing there not only with Chrysler, after its being given away by Obama, but possibly with itself in the form of Opel, which GM is selling.

Obama has had a new board of directors appointed to run GM. None seem to have automobile industry experience. Like his Auto Czar, Steven Rattner, they are major Democratic Party funders and fundraisers. (Actually Rattner resigned July 13, 2009. Leaving one to wonder if something about his hedge fund's, Quadrangle Group, fund raising might have been illegal.) Obama's GM Chairman, Edward E. Whitacre, Jr., turned AT&T into the largest U. S. wireless telecommunications company which is now being investigated by Obama's Department of Justice for antitrust. Oh, yes, Whitacre has zero auto industry experience.


Chinese-government backed company wants to buy GM's affiliate Opel which has extensive sales in China to grab GM's technology as described in my post, "China Eats the U. S. For Lunch" below. If Obama allows it (GM wants the sale), his company, GM will compete in essence with itself in what is becoming the the largest market for autos and trucks in the world, China, against a Chinese-backed company. And Obama needs to continue to guarantee GM's survival to keep those United Autoworkers working. Dichotomy for a man who does not understand nor support business. China is on track for more than 11 million autos in 2009 up more than 15% while the U. S. market is expected to drop to well under 10 million, off over 30%. GM's China sales are up 38% for the first half of 2009, to over 800,000.

June 29, GM agrees to take on future unknown potentail liability claims from car-accident victims. Under the original bankruptcy plan these liabilities were to stay with the unwanted, virtually-valueless "Old GM". My guess is that the pressure of Democratic Party-co-owner the trial or tort lawyers wanting their cut of such future claims settlements, a portion of which flows into the bank accounts of Democrats, forced this "settlement" which also obligates the U. S. Government.

Interesting article, June 26 described GM's arm GMAC LLC curtailing financing for dealers of arch-competitor, Chrysler (given to Italy's Fiat -- a foreign company -- and the United Auto Workers with U. S. taxpayers' billions of dollars.) On the surface this seems somehow illegal or certainly immoral: using government money to hurt a competitor. But America you haven't seen anything yet. Also same date, GM announces plans to close a plant in Louisana -- possible 2012 presidental contender Bobby Jindal's state.

Old headline: "That's Obama Tough! Obama drives General Motors, unions get their wish"

Interesting car article in the Wall Street Journal, Wednesday, June 17, 2009 page D 3. ["Muscle Car's Test Drive Turns Heads" http://online.wsj.com/article/SB124518581645820381.html]. Apparently ObamaMotors' division General Motors' division Chevrolet ("Chevy") has a sellout. A sellout! In a car designed by Obama? Not quite. It's a 304 hp V-6 or 426 hp V-8 muscle car, the new Camaro. And it's outselling an Obama clone, the new Honda hybrid, the Insight, two-to- one. Meanwhile Chevy is killing another slow-selling Obama clone, the hybrid Malibu. But CEO Obama, you should stop the Camaro, and other fast-selling muscle cars, the Ford Mustang and Chrysler's 500 and Dodge Challenger before it's too late.

Fiat is coming back to the United States, courtesy of President Obama virtually giving Chrysler to it and the UAW free of charge. Its first entry here was a flop. Why? In the early '80's Fiat's quality reputation was so bad it was nicknamed, "Fix It Again, Tony" and couldn't sell enough cars to stay in the U. S. Hopefully President Obama will be on the line to check the quality of his cars.

But after giving Chrysler to a foreign company, note that Saab Automobile AB might be bought by an entrepreneurial boutique sports car company, Koenigsegg Automotive AB, from GM/Obama Motors for money. Christian von Koeniggsegg's company now makes very limited edition supersportscars for the supersportsrich. About $1,000,000,000 will be invested.

Auto bailout-management news in this continuing blog will be newest news on top.

Bad News for U. S. Auto Industry President Obama: Mitsubishi Motors Corp. expects only 2,ooo electric cars to be produced for 2010 (because of the high cost of its newly-launched i-MiEV, $46,500) and less than 20% of its production by 2020!

Here is an absolute outrage (June 5, 2009): General Motors, now "flush" with $30 billion of U. S. Government cash has agreed to invest some of it -- $2.5 billion, or 70% of the price -- to finance Tom Gores' Platinum Equity firm's buyout of bankrupt auto-parts company Delphi Corporation. WHAT? Obama is providing our cash for a highly-speculative investment, the rewards of which success will NOT accrue to the U.S. but to an individual. You can bet Mr. Gores or his friends and family have made significant campaign contributions to the Democratic Party in general and the Obama election specifically. I'll research this issue in the future. Update of June 11, U. S. Bankruptcy Judge Robert Drain blew off Obama's hand-picked winner of Delphi to sell the auto parts maker at an auction. At least one judge believes in the rule of law.

(And non-political-non-running-GM President Obama called the mayor of Detroit and reassured him that GM would stay there in the Renaissance Center. And more phone calls were made from the Administration or so sayeth the Detroit News.)

And there will a huge Obama expansion of Ethanol, proven to increase food prices by 10% - 15% and, according to the EPA's Office of Transportation and Air Quality, the new land (from slashing forests) to grow grain for Ethanol will increase greenhouse gases. In other words, Ethanol will bring an increase in greenhouses gases vs. simply using gasoline. And it only costs the taxpayers and consumers roughly $10 billion. But it buys the votes Congressmen want. That's what is important.

On the Web tonight (6/9/2009):
"EYES ON THE ROAD, by Joseph B. White
from The Wall Street Journal.
A new survey shows the economy has damped consumer interest in new auto features and gadgets, including hybrid technology and onboard navigation systems.
(http://online.wsj.com/article/SB124450736037596339.html?mod=djemroad)" But customers will certainly spend upwards of $2,500 more for Obama's Little Green Lemmingmobile that gets 27 Miles for Each Gallon consumed, that's certainly an attractive attraction, especially if the government pays the entire cost of the "car".

The Obama administration's less-favored auto company Ford Motor Company, because it didn't take his strings-attached monies, raised some 5-year money to finance customers. Price 8% interest. GMAC/Obama raised some money too, backed by us the U. S. Government. Price? under 2%. Competitive differential. Could be life and death. This, ladies and gentlemen, is the result of governmental industrial policy. President Barack Obama decides between life or death for the largest American companies.

The Obama administration pushed an "alliance" AKA give-away of much of Chrysler to Fiat SpA. In the mad rush, Chrysler executives were dissuaded by the government from getting key due diligence materials describing the fiscal health of Fiat and information about its true willingness to share required technical information. No matter, Obama seemed to say, we simply know this deal is good. For someone, how about the union and a foreign company. Fiat can walk if the deal isn't closed by June 15, hurting the United Auto Workers union. Why would Fiat walk? It gets for nothing an initial 35% stake potentially rising to 50%. And make no doubt. The Unites States Treasury, not Chrysler, in the form of former UAW boss, Ron Bloom, is managing the transaction and Chrysler's figurehead, Robert Nardelli defers to him.

June 1, 2009: General Motors is renamed ObamaUAW Motors, except the UAW didn't want common stock, it got preferred stock paying about $600 million a year and few economic changes to its contract, but can't strike until 2015. And its unfunded pension funds covering roughly a half million former workers and dependents is underfunded by around $13 billion, which ultimately could become the obligation of the U. S. Government. New car warranties, an uncertain amount of money, are already guaranteed by the U. S. "We" the U. S. taxpayer -- and, of course those citizens who don't pay taxes -- will own 60% for around $50 billion; The United Auto Workers Union get 18% for nothing; the Canadian government 12% (for $9.5 billion); former bondholders, 10% for $27 billion; common stockholders zero, nada, nothing. Essentially the Obama administration doled out ownership of once the world's largest company according to favoritism and political strength. The Obama administration will have GM and Chrysler to prove its green agenda is sound by making the car companies manufacture "little green cars" in UAW-manned domestic plants. No imports will be allowed, courtesy of Congressional meddling. And as for micro-managing and meddling the CEO will have two multi-headed bosses: the Obama administration, including personnel of the departments of energy, labor, treasury as well as the nearly 400 members of Congress and a few thousand of its staff. Stay tuned for the biggest spin in history. "The success of Barack Obama as chairman of the chairman of General Motors, and, well, Chrysler a little bit."


May 26, 2009: The United Auto Workers told union officials that it has agreed to a deal with General Motors that will lead to the union owning 17.5% of the company once it restructures as part of GM’s obligation to fund future retiree health-care obligations; GM will place $10 billion of assets into a Voluntary Employee Beneficiary Association, or VEBA, on Jan. 1, 2010. The UAW will also receive a new note, payable in cash, for $2.5 billion. That note will be paid out in three installments taking place in 2013, 2015, and 2017. The UAW told their president that it didn't trust the future prospects of GM, so it wanted more security. Notes and cash, less stock. And he responded, "yessir, yessir, whatever you say.' And the United States taxpayer via its government will own

May 23, 2009. One step on the road to wherever, General Motors revised its agreement with the United Auto Workers. Huge burden for the union. No raises. What! Yes, can it be believed, the company is facing extinction...[well, it asked for $2.6 billion more and Obama gave it $4 billion, so much for...extinction, with the President of the United States propping it up with taxpayers' money...anyway back to the UAW's "suffering"]. No raises. While the country's non-governmental citizens are losing their jobs left and right, the UAW workers won't get raises. That's no concession that's a slap in the face to ALL AMERICANS. Or at least the 93% who aren't unionized (private sector). And no pension increases, oh, the employees might have to pay a little more for their healthcare. There are job losses, though, maybe 20,000 a third. And no strikes until 2015. I guess you can't strike a non-existent company. Finally, the UAW will own much of the playing field: 39% of GM. And yes, the chief "negotiator" for the government is a former union boss!

May 21, 2001. President Obama once again bails out GMACLLC with a $7 billion "down payment" on top of Treasury's $5 billion, I guess, pre-down-payment in December 2008. And another $7 billion "payment" could end up with the U. S. Government owning GMAC (as well as GM) within a few months. And with its (job-killing) dictate of new fuel economy standards of 35.5 miles per gallon by 2016, is it anyone's doubt that GMAC and the government will continue to burn dollars in the gas tanks of United States-manufactured automobiles that few citizens want. We will have lost our freedom to buy what we want.

This blog began months ago with the following:
"Child don't you do that...Or I'll...I'll...I warn you...I'll...I warn you...Time out!...I mean it...Oh, well...I'm sorry...Oh, OK do what you want, have fun!" Threaten, threaten, but don't follow up.

Or: "In for a penny, in for a pound".

Or: "If you're gonna play the game, boy, ya gotta learn to play it right.You got to know when to hold 'em, know when to fold 'em,Know when to walk away and know when to run.You never count your money when you're sittin' at the table.There'll be time enough for countin' when the dealin's done.

Or was President Bush smart by a half to put in some dough to GM and stick Obama with the it? Well, no, he's not that cunning or smart.

Basically I knew Obama does not have the grit to say "enough" once government got entwined in the auto business. He is not a strong, self-confident personality. We are in and it will not stop...with car companies, suppliers, financiers, warranty-guarantees, ONE HUNDRED MILLION DOLLARS here we come. Fictitious quote of Obama: "Who cares, it's only the stupid taxpayer's money. And we need to get it to the UAW."

Updated news April 30, 2009. A new offer by holders of about 20% of the $27 billion unsecured GM debt outstanding asks for a 51% ownership of the company, the same valuation being offered the United Auto Workers union by the U. S. Treasury. This would leave 41% in UAW hands and 1% to present equity owners. The $15.4 billion debt to the U. S. Treasury would remain. It seems obvious the Obama Administration wants to own GM in conjunction with the UAW...its proposal would give 39% (and $10 billion cash) to the union and leave 51% to the government for $7.7 billion in debt forgiveness. The remaining 10% would go to bondholders for their $27 billion. Do the math. It's a monumental theft of bondholders' money and rights.

Yes, President Obama today (March 31, 2009) took control of General Motors by firing its CEO, the hapless fall-guy, Rick Wagoner (who leaves apparently with only $21 million comp), to "prove" he's tough. And he, Obama, once again threatened bankruptcy for GM and Chrysler, but this time he really, really means it. The first time GM was loaned $17.4 billion and the government really meant to get tough. But no money this time unless GM could get GM bondholder approval to cut the debt, the United Auto Workets to agree to alter contracts and draft a recovery plan or something on paper...well, "just kidding about that": the two "requirements" were waived and the paper deemed not worthy enough. But today he's really, really going to get tough! Oh, today he also guaranteed new-car warranties, and made provisions for the government to quickly purchase a bunch of cars and to perform some weird scheme to buy back old, gas-guzzling cars and give a tax break for new car purchases. And buyers can deduct, excise, state and local sales taxes they pay to buy new cars. That's Obama Tough. As for Chrysler, which only got $4 billion in December, the government gives it 30 days and $6 billion if Fiat buys some of it...While Fiat wanted up to 55%, Obama, being tough, would only allow 20% to show them forineers (Chrysler and Fiat negotiated 35%, but that doesn't count, it's what Obama demands); and the government will give it working capital until then. But a serioius threat is to the poor holders of the auto companies' debt. GM has $29 billion unsecured and Chrysler, $8 billion, secured. Obama means it this time that it must be slashed. He also toughly stated that the companies couldn't depend on "unending" (my emphasis) taxpayer loans, but what is the meaning of "unending"?

Have no doubt, the Obama Administration, Congress and Labor Union Bosses ("Government") know better how to run companies. Just look at California, Amtrak and the U. S. Postal Service. (Not to mention TARP.) It's simple, design cars Congress wants: small, low-powered with high MPG, or pedal; and maybe always black because that's cheaper, (and diverse). And all the same. It worked for Henry Ford. But, of course, he made cars for the consuming public, who bought. Congress has mandated cars that the public doesn't want: small, low-powered with high MPG. Congress can mandate that the public buy, and it will pay for, the cars. Keep those union bosses in power at all costs. Newly anointed-by-Obama CEO, Frederick "Fritz" Henderson immediately played down the need for an entirely new labor contract!

Speaking of which there is a rule passed in Congress' 1975 fuel economy law (1975 Energy Policy and Conservation Act Public Law 94-163) nicknamed the "two fleets rule" which I have read but fell asleep at the circumvention, circumloquation and maze-ness of it.

(Fleet fuel economy is calculated using a harmonic mean, not a simple arithmetic mean (average). The harmonic mean is the reciprocal of the average of the reciprocals of the fuel economies of the vehicles in the fleet. For a fleet composed of four different kinds of vehicles A, B, C, and D, produced in numbers nA, nB, nC, nD with fuel economies fA, fB, fC, fD the CAFE would be:
For example, a fleet of 4 vehicles getting 15, 13, 17, and 100 mpg has a CAFE of slightly less than 19 mpg:
While the arithmetic mean fuel economy of the fleet is 36.25 mpg:

[the formula is too funny to reproduce]

One feature of the above law is that these these cheap-small-dangerous cars must only be made in domestic UAW plants, which guarantees losses on each car. But the Obama Administration will make it up on volume. But no matter what, the UAW will retain its monopoly, even if it has to cut retirees off and drop new hires' wages a penny or two. Keep those dues flowing, Mr. President from 140,000 UAW workers the Democrats need it to keep in office. I don't know what part of their wages (which are double the non-union and successful "foreign" U. S. manufacturers in the South, Nissan, Honda and their ilk) go to Democrats, but it's sizeable.

Poor Ford Motor Co.; it will be penalized for being successful and not taking the government's money. Ford -- all by itself -- is achieving some success in paring down the monopoly-UAW's huge wage and retiree healthcare costs and some of its lenders' debt. Ford now will have to compete not only with domestic and domestic/foreign and foreign manufactures, it'll have to compete with the U. S. Government. This scenario continues the democrats' punishment of the smaller numbers of successful companies and people for rewarding the greater number of voters who are not successful.

And today, April 15, 2009, in a Wall Street Journal article, "U.S. May Take Stake in GM To Pay Off Loans" (http://online.wsj.com/article/SB123972054506117179.html), the government cannot find private investors for a "revamped" -- split-apart, or Good guy-Bad guy -- General Motors to which the U. S. Government has loaned $13.4 billion. The recourse, of course, trade worthless debt for even more worthless "equity" in laughably "stripped down" company hoping, against hope, that the United Autoworkers (owner of the Democratic Party) will accept some concessions and some bond holders who are owed some $29 billion, including over $5 billion to individual "widows and orphans" who bought the security of GM bonds.

Today, Friday, April 17, 2009, Obama presses GM to rid the GMC truck brand which started up in 1912. Wall Street Journal (http://online.wsj.com/article/SB123989177238225323.html). GM also might shutter Pontiac and sell Hummer, Saturn and Saab. While GM is rushing to meet Obama's "deadline" of June 1 to transform itself, the United Auto Workers put its GM negotiations on hold while it concentrates on talking to Chrysler. Extraordinary how someone who's never run anything is remaking one of the largest corporations in the world in 60 days. (Around the World in 180 Days has nothing on the Obama Administration!) And apparently CEO Fritz is mentioned a need for more cash.

And an update, Thursday, April 23, 2009. "GM Plants to take Extended Break page B1. (http://online.wsj.com/article/SB124041946006244177.html) GM plants are planned to be idle two months this summer, but the United Auto Workers will still get paid, as the Obama Treasury Department is finalizing another $5 billion in aid (aka "loans") to it. While the unions skate, Treasury is trying to get GM lenders to throw away $28 billion in their loans to GM in exchange for, yes, GM STOCK. Hey, guys, what a great deal! And GM will not make the required $1 billion debt service payment due June 1. And on to Chrysler, "Banks Get New Offer for Debt in Chrysler" page B1 (http://online.wsj.com/article/SB124044878863646087.html). The bid by Treasury is 22% back of $6.9 billion SECURED debt and 5% equity in the new Chrysler. The ask by lenders is 65% and 40% plus a board seat. The lenders, led by U.S. subsidiaries, Citigroup and J. P. Morgan Chase, essentially are negotiating with their owners, or soon-to-be owners, us the U. S. Taxpayers represented by our Treasury Department. A tangled web we weave. At the same time, Treasury is offering United Auto Workers 28% of the $10.6 billion it's owed for retiree healthcare costs plus some stake (steak?) in the restructured Chrysler.

Tuesday, April 28, 2009.
General Motors, controlled by the Obama Administration, offers the United States of America, represented by the Obama Adminstration a majority stake. We the taxpayers "invest" another $11.6 billion on top of the $15.4 billion already in, $27 billion total, and get "at least half" ownership. (GM's market capitalization is $1.3 billion.) The United Autoworkers Union would get 39% of GM in exchange for $10.2 billion owed the UAW by GM (half of the obligation), And for at least 90% of the $27 billion in unsecured debt, bondholders would get 10%. GM would slash U. S. dealers to 3605 down 42% by 2011 and kill Pontiac. What a deal for Obama Administration which owes its election to unions! Guaranteed support in 2010 and 2012.

Chrysler would give the UAW 55% of its stock plus notes for $4.6 billion owed for retiree health funding, Fiat SpA up to 35% (for some small car production, creating 4,000 new union jobs, use of Fiat engines and some cash) and for exchange of $6.9 billion of secured debt, present holders would get a 10% interest in Chrysler. The UAW would give up cost-of-living increases, put limits on overtime pay (payble only after 40 hours a week), and lose Easter Monday in 2010 and 2011! Seems the union gives little and gets immensely.

At issue on another front: Chrysler and GM dealerships -- now about 10,000 owe "flooring' of around $25 billion which could be called in the event of any bankruptcy. There are 1.1 million unsold cars in dealer inventories. Only 660,000 were sold the first quarter of 2009.

In the meantime, bills to provide government-funded discounts of $1,500 to $5,500 for people to trade in old cars for new ones. Congress feels it is desperately needed to lift slumping car sales. "Cash-for-Clunkers". This is an interesting contradiction to the probably increase in new car prices from Obama's MPH mandate of in excess of $2,300 ("only" $1,300 projected by the White House and upwards of $3,778 and $5,877 for light trucks, according to Sierra Research for the National Highway Traffic Safety Administration). And apparently Obama's 35 MPH will settle at 28 after adjustment by Environmental Protection Agency! But in order to meet Obama's mileage restrictions, cars will have to be lighter. And lighter cars kill. The only statistics available indicates that in 1993 between 1,300 and 2,600 more people were killed in collisions of the then-lighter cars than the heavier ones of 1976. But these deaths will reduce Obama's cost of healthcare "reform".

And there is a tax credit subsidy possibly available to retired auto workers, those very same people who will be paid out of any auto company bailout or bankruptcy filing. It was just made more generous by Congress to cover 80% of an eligible retiree's healthcare cost, up from the recent 65% and made it easier to capture.

But today, April 30, 2009, Chrysler might declare bankruptcy, with the secured debt holders resisting huge and oppressive government pressure.

Obama's Mantra: Fail, to Win.

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