But I don’t know how anyone thought a bankster–and particularly this bankster–could say this and still wield any credibility.
From Washington’s point of view, divesting its remaining shares will end an uncomfortable and distinctly un-American period of government ownership in a major industrial company.
Sure. Rattner places this sentiment in “Washington’s point of view.” Still, consider the messenger.
After all, he barely mentions here–as he did in his book–that this was not just a bailout of some industrial companies. It was also a bailout of two finance companies, Chrysler Finance and GMAC (he mentions that the government still owns Ally/GMAC, but still calls the scorecard, “nearly complete”). As such, it was also the bailout of the Private Equity firm, Cerberus, that had spent the previous years stripping Chrysler in the hopes of retaining just the finance arms.
He also neglects to mention that the government still pursues the un-American policy of treating banks according to a different set of rules, not only providing them free money, but seemingly exempting them from all laws.
I’m not saying the government should hold onto its GM stake forever (though unlike Rattner, executive compensation is the last reason I’d cite to applaud this sale). But having someone like Rattner call government intervention in purportedly capitalist companies un-American only perpetuates the idea that industrial companies should have to abide by so-called rules of capitalism that the titans of capitalism, the banksters, have all but discarded.
Barack Obama says he saved the auto industry. But for who? Ohio, or China? Under President Obama, GM cut 15,000 American jobs. But they are planning to double the number of cars built in China — which means 15,000 more jobs for China.
And now comes word that Chrysler plans to start making jeeps in — you guessed it — China. What happened to the promises made to autoworkers in Toledo and throughout Ohio — the same hard-working men and women who were told that Obama’s auto bailout would help them?
The ad continues Mitt’s deceptive insinuation that GM and Chrysler aren’t also adding jobs in the US, which they are doing.
But it does something else. It takes a decidedly anti-profit stance.
You see, there are two reasons car companies are so gung-ho to enter (or re-enter, in the case of Jeep) the Chinese market. First, because it’s growing; when I was working in China, auto people considered the rising Chinese middle class to be 300 million–almost an entire US full of population. And most of them were just aspiring to buy their first car. That’s a whole lot of first time car buyers to sell to, as compared to US consumers, who are driving less and replacing their cars at a slower pace given more durable cars.
The other reason to go to China? Profit margins are bigger there than here. When I was in Shanghai in the mid-2000s, the profit margin on Buick Regals was about $2,000, as compared to the roughly $200 profit margin on a similar car here. The margins are closer now (because manufacturing in the US has gotten cheaper and in China has gotten more expensive), but China still offers good profit margins. Selling Buick Regals or Jeeps in China allows GM and Chrysler to accept lower margins on cars here.
By selling high margin cars in China, US companies can be more competitive here, meaning they will be able to expand sales and therefore production here, too.
Together, we are working to establish a global enterprise and previously announced our intent to return Jeep production to China, the world’s largest auto market, in order to satisfy local market demand, which would not otherwise be accessible. Chrysler Group is interested in expanding the customer base for our award-winning Jeep vehicles, which can only be done by establishing local production. This will ultimately help bolster the Jeep brand,and solidify the resilience of U.S. jobs.
Marchionne notes 1) you can’t sell in China unless you build in China, 2) selling in China makes the Jeep brand stronger, 3) making the Jeep brand (and its profit margins) stronger makes it easier to keep up US production.
Marchionne’s implicit point should be where this discussion is heading: free trade hasn’t worked out to be fair trade. China–and Japan and Korea–still protect their markets, meaning if you want to sell there, you’ve got to make cars there.
Mitt has promised to get tough on China. But his series of auto ads have made no mention–not a peep!–of how he’ll reverse this practice and make it possible for Jeep to export cars made in Toledo. Indeed, when Obama launched a trade dispute over auto parts in September, Mitt scoffed at the effort (and ignored Obama’s decent and sustained effort launching trade disputes, one of which pertaining to specialty steel recently won at the WTO).
“The president may think that announcing new trade lawsuits less than two months before the election will distract from his record, but American businesses and workers struggling on an uneven playing field know better,” Mr. Romney said in a speech to the Hispanic Chamber of Commerce in Los Angeles.
Mitt Romney wants to attack American companies for going where profits are. And he’s doing so without discussing why that’s necessary.
That makes him neither a tough guy nor a good businessman.
When Mitt Romney is president, he will reduce our nation’s corporate tax rate to 25 percent from 35 percent – currently the highest combined tax rate in the industrial world – so that American car companies can compete on a level playing field at home and abroad. He will also stop the extra tax automakers are forced to pay when they want to bring home their profits to reinvest in the United States. President Obama could have done this the day he took office since his party controlled both houses of Congress, but he chose not to. [my emphasis]
Obama, of course, has a tax credit specifically for manufacturing companies, meaning under Obama the auto companies would pay less than under Mitt.
But the other part–particularly against Mitt’s egregious claims that the auto bailout has helped Chrysler and GM move production overseas–is even more ridiculous.
Iacocca says Mitt would be better for the auto companies because he’d allow the auto companies to repatriate profits from overseas without paying taxes.
But that assumes, of course, they’re making profits overseas. It would mean they were doing precisely the thing Mitt is attacking–moving into new markets, like China.
So on the same day Mitt attacks Chrysler and GM for making and selling cars in China, generating greater profit it can use to support workers here, his campaign sends out a post boasting that Mitt would require Chrysler and GM to contribute less domestically on the profits they made by making and selling cars in China.
I’ve been a bit tardy in responding to Mitt’s latest cynical ploy, to pretend that rather than expanding production and jobs in both OH and MI, Chrysler is outsourcing production to China.
The Detroit News’ David Shepardson has a good fact check on Mitt’s latest ad here. Greg Sargent rounds of OH papers mocking Mitt’s claims here.
But there’s an angle on Mitt’s claims that has been missed. His ad says,
Obama … sold Chrysler to Italians who are going to build Jeeps, in China.
As Shepardson notes, Chrysler used to build Jeeps in China for the Chinese market. Ford builds cars in China for the Chinese market. GM builds cars in China for the Chinese market (GM also exports Chinese-built subcompacts to Latin America). Chrysler’s return to the world’s largest car market is smart business, something any viable global brand needs to do.
If it’s a moral failing for Presidents to preside over private car companies trying to compete in China, then Mitt has a problem with St. Reagan, during whose Administration Jeep first made groundbreaking entries into the Chinese market.
And if Mitt has a problem with Chrysler (or Ford or GM) building cars in China to sell in China, then he had better prepare to get far tougher with China than he has threatened to do so far. China still slaps huge tariffs on cars made outside of the country, so to be viable in the world’s largest automotive market, you have to build in China. That is the crux of the argument American car companies (and Midwestern politicians) have been making for decades: while the US allows imports from all countries, Japan and Korea and now China make it very difficult to export to those countries. This is not fair trade.
But I’m most offended by Mitt’s insinuation that selling Chrysler to an Italian company–he doesn’t mention Fiat by name–was disloyal.
Recall Chrysler’s recent history. Chrysler’s most recent strong point was the early 2000s, when it succeeded in developing nifty (albeit gimmicky) cars with shortened development cycles (think PT Cruiser). But as Daimler took more control over Chrysler, it invested less in the brand. GOP Private Equity firm Cerberus bought its first 80% of the company in 2007 and picked up the rest in 2009.
Cerberus had no intention of bringing Chrysler back to its former strength. Rather, it wanted to strip out the finance side of the company (it was investing in GMAC at the same time) and sell off the rest. But with the impending financial crisis, it never managed to pull off the trick (though it did get a bank bailout in the very last days of the Bush Administration). Meanwhile, it virtually put the Chrysler model development on autopilot while it tried to find a way to cut its losses.
Thus, when it came time for bailouts, there didn’t seem much to bail out at Chrysler. Unlike GM, which really had started making a turnaround, Chrysler had no product in the pipeline to suggest it would be worth bailing out (though it did have a few super efficient factories in the US).
Choosing to bailout Chrysler was the most difficult decision Obama made during the auto bailout. I’m not even sure I would have chosen to bail it out. And it was difficult precisely because a bunch of Republican vulture capitalist types–people like former VP Dan Quayle and former Treasury Secretary John Snow–had stripped the company.
Someone gave Mitt Romney a shovel just in time to dig shit snow in MI for the next two weeks. There’s a lot that is fact-impaired in this op-ed doubling down on the “let GM go bankrupt” (starting with the lack of funding for a bankruptcy, meaning a managed bankruptcy was impossible).
By the spring of 2009, instead of the free market doing what it does best, we got a major taste of crony capitalism, Obama-style.
Thus, the outcome of the managed bankruptcy proceedings was dictated by the terms of the bailout. Chrysler’s “secured creditors,” who in the normal course of affairs should have been first in line for compensation, were given short shrift, while at the same time, the UAWs’ union-boss-controlled trust fund received a 55 percent stake in the firm.
He’s complaining, of course, that VEBA (the trust fund run by professionals that allowed the auto companies to spin off contractual obligations–retiree healthcare–to the unions) got a stake in Chrysler while Chrysler’s secured creditors took a haircut.
So, in part, he’s basically complaining that the bailout preserved the healthcare a bunch of 55+ year old blue collar workers were promised. He’s pissed they got to keep their healthcare.
He’s also complaining that banks took a haircut, as would happen in any managed bankruptcy.
But it’s more than that. He’s complaining that a bunch of banks that themselves had been bailed out had to take a haircut. He’s complaining, for example, that JP Morgan Chase, Chrysler’s largest creditor at the time and the recipient, itself, of $68.6B in bailout loans, had to take a haircut on $2B in loans to Chrysler.
Once again, Chrysler had one of the best ads in yesterday’s Super Bowl, once again using the aesthetic of Detroit disaster porn to offer gritty inspiration. And while it’s not as good as the Eminem version last year, it might appeal to Chrysler’s target market even more, as it generalizes the uncertainty so many people feel.
I was struck by an irony at the core of the ad, though. Eminem really does embody Detroit. Clint Eastwood, in contrast, has no such personal tie to the city. And while his gritty voice works great for the ad. His delivery of, “This country can’t be knocked out with one punch” perfectly caught his performed toughness (it reminded me of his Million Dollar Baby, which I loved).
The one other reason to choose Eastwood for this ad, it seems to me, is the role he played as Walt Kowalski in his Gran Torino. That guy, an old Korean war vet struggling with the increasing diversity of his lifetime neighborhood, did embody Detroit, as much as Eminem does.
Yet, as written, Kowalski was not a lifetime Detroiter. Rather, screenwriter Nick Schenk based him on a bunch of veterans he met while working in a liquor store in his native Twin Cities. (h/t Wizardkitten)
“And in all of those jobs, especially in the liquor store, I would meet a lot of guys who were vets,” he said.
Schenk recalls asking customers with military tattoos about where and when they served.
“Little by little, as they came in every day for their bottle of ‘medicine,’ they’d tell you a little bit more,” he said.
“If you were respectful — I think everyone wants to get stuff off their chest, and they’re not going to tell their wives, they’re not going to tell their kids — and so if they can find an outlet to dump it out off on, that was me. I had a lot of guys telling me stories for years,” he said.
Those experiences helped him shape the character of Walt Kowalski, a Korean War veteran played by Clint Eastwood.
And the Hmong community was based on the Twin Cities’ sizable Hmong community.
Gran Torino, that tale of troubled old America coming into conflict with, and learning to love, the future of America, was shot in Detroit rather than the Twin Cities because of government intervention. The film was shot during the period when film credits offered under Jennifer Granholm and cut under Rick Snyder brought lots of new, creative jobs to MI; it was one of the first big films to be shot using the credits. Walt Kowalski was a native Detroiter only because MI invested in making him one.
And so Clint Eastwood, that Bay Area native who told a story about the Twin Cities but set it in Detroit, generalized the Detroit-specific ad about resilience from last year. But both the invocation of the Chrysler bailout and the use of Eastwood remind that rebounds work best when governments invest.
One more detail: this story–as told by Chrysler–leaves out a key part of the story. As John Nichols reported this morning, Chrysler specifically edited unions out of this story.
The images from Madison appear to have been taken from a historic video by Matt Wisniewski, a Madison photographer whose chronicling of the protests drew international attention and praise. Wisniewski’s work went viral, and was even featured in a video by rocker Tom Morello.
Wisniewski’s original video, from an evening rally at the King Street entrance to the Wisconsin Capitol, features images (at the two-minute, seventeen-second mark) of signs raised by members of Madison Teachers Inc. (MTI), the local education union that played a pivotal role in the protests. One sign features the MTI logo, another reads: “Care About Educators Like They Care for Your Child.”
In the Chrysler ad, the MTI logo is missing and the “Care About Educators…” sign is replaced with one featuring an image of an alarm clock. Several other union signs are simply whited out.
It’s an incomplete picture, because government support is not enough to bring on America’s second half. But it is a key part of it.
The Obama Administration was gung ho to brag about the GM IPO last year. But if I’m not mistaken, this is the first time the White House has bragged nationally about jobs created thanks to the auto bailout (Ron Bloom, who got promoted into an official Assistant to the President role at the beginning of the year, wrote this).
Today brings word of more good news for the American auto industry. GM announced that it would hire 4,200 workers at seventeen of its plants around the country.
President Obama took office amidst the worst recession in a generation and nowhere was this devastion [sic] felt harder than in the American auto industry and the communities it has supported for decades. In the year before GM and Chrysler filed for bankruptcy, the auto industry shed over 400,000 jobs.
Facing this situation head on, the President made a bold and, at the time, politically unpopular choice: Despite calls from critics to simply let these companies – and the entire American auto industry – crumble, he refused to allow these companies to fail. Had the Administration failed to intervene, conservative estimates suggest that it would have cost at least an additional one million jobs and devastated vast parts of our nation’s industrial heartland.
But at the same time, the President did not provide unconditional support. He insisted that the companies and their stakeholders make tough choices and undertake massive restructurings requiring huge sacrifices from all of their stakeholders.
Because of this “tough love,” the American auto industry is now positioned to grow and prosper as the economy recovers. Since GM and Chrysler emerged from bankruptcy in June 2009 the auto industry has added 115,000 jobs – the fastest pace of job growth in the auto industry since 1998. Last year, for the first time in 16 years, the Detroit Three actually gained market share compared to their foreign counterparts.
And these companies are not just making cars and trucks – they’re making the kind of fuel efficient cars and trucks that will power us to energy independence, protect consumers against rising gas prices, and ensure America wins the future.
Some of the workers GM is hiring and re-hiring in today’s announcement will be at work producing larger-than-initially-planned quantities of the widely acclaimed Chevy Volt. And just last month, Ford – which didn’t receive government assistance but which supported our aid to GM and Chrysler and has said publicly that it would not have survived if the rest of the American auto industry had been allowed to collapse – reported its best first-quarter profit in more than a decade thanks in large part to its new fuel-efficient vehicles.
In the wake of an historic recession, there is no doubt that much work remains. And we will not rest until every American who is looking for work can find a job. But today’s announcement is another positive sign – including more than 2 million private sector jobs created over the past 14 months – that we’re seeing across the country.
The comparative silence about the success of the bailout in the terms that really matter to actual people–jobs–not only confirms Main Street suspicions about the White House viewing the economy solely through the lens of the banksters, but it also leads beltway folks like John Dickerson to wonder out loud whether there is anything a President can do to fix the economy (Dickerson must have skipped those weeks when his American history class covered the New Deal).
The effects of the too-small stimulus, though real, are a lot harder to see. But aside from the decade-long Military Industrial Complex stimulus the DC area has enjoyed, the auto bailout and related energy investments was the biggest concentrated stimulus the Administration championed. And it has had an effect, both in hiring at GM and Chrysler, but also in hiring in MI more generally.
It’d be nice if the Administration not only bragged about that, but replicated it for places like Nevada.
Update: John Dickerson corrects me; this July 2010 briefing (a presser leading up to an Obama trip to visit several plants in the MidWest, bragged about jobs created). Thanks to Dickerson for the correction.
I wanted to return to a detail I mentioned in yesterday’s book salon. As I noted, in his book on the auto bailout, Steven Rattner described Citi as being worried during the Chrysler negotiations that retail customers would retaliate if Citi played hard ball.
Bankers for Goldman and Citi had advised [JP Morgan Chase VP and the Chrysler bondholder's lead negotiator] Jimmy Lee to make the best of a bad situation. Privately they felt his brinksmanship was embarrassing and potentially costly. Citi especially wanted to avoid a liquidation. Its analysis showed it would recover no more than 20 cents on the dollar in that instance. Citi also feared losing business in its branches in states like Michigan and Ohio where consumers might blame it for Chrysler’s demise. (173)
That didn’t make sense to me given that Citi doesn’t have branches in MI and OH; the closest actual branches are in Chicago. Compare that to Chase, which just took over from Comerica as the biggest bank in MI by deposits and was presumably second at the time of the bailout negotiations. Citi should only fear retaliation from consumers elsewhere, in those urban areas that actually have Citi branches, or they should fear retaliation some other way, presumably through their credit card business. I asked Rattner why Citi was worried, but JP Morgan Chase was not, given its much greater involvement in the auto states. He responded, “Yes, they were definitely worried.”
Frankly, I don’t know what to make of this. Given the context of the claim–in which Goldman and Citi are portrayed as talking Jimmy Lee down from a hardass negotiating position–JPMC appears not to have been sufficiently worried to change its behavior. And the Citi claim doesn’t make sense on its face. Perhaps Citi was worried about something else. Perhaps they were just more worried because they were insolvent? There are a few details he pretty clearly got wrong in his book (such as his claim that Nissan’s consideration of a deal with Chrysler was secret), but this seems instead like one of the abundant examples of where Rattner is an unreliable narrator. Rattner chose to portray Citi as worried (and quickly agree the hard-bargaining JPMC was, too), but it’s unclear whether that was really true or just nice spin on the banks.
What Rattner probably didn’t know was that FDL was trying to increase this worry at the time by encouraging people to take their money out of Chase. That was a mostly unsuccessful effort (let me tell you, Chrysler is no more popular in this country than the big banks) to target the banksters for actions that hurt the communities they’re in.
As unsuccessful as our effort was in terms of numbers, if Rattner-the-unreliable-narrator’s claim has any basis in fact, then our effort to pressure JPMC to behave better worked. Sort of.
Since then, Arianna’s Move Your Money campaign has more successfully advocated for people and institutions to move their money out of the big banks. By April, they claimed $5 billion had been moved. And it does seem like some of the banks are losing market share to smaller banks.
The largest banks in Michigan are losing market share and Chase Bank now has the most deposits in the state, according to new data released Thursday by the Federal Deposit Insurance Corp.
As of June 30, the five biggest banks in Michigan — Chase Bank, Comerica Bank, PNC Bank, Bank of America and Fifth Third Bank — accounted for 55% of all deposits in the state. That’s down from 57.3% on June 30, 2009.
I raise all this because of another interesting discussion about whether consumer action might more effectively target the banks. Via Yves Smith, I found this Playboy article on Edmundo Braverman’s WallStreetOasis.com’s proposal on How to Destroy a Bank (Yup, it appears you have to have a pierced navel and no pubic hair to be a Playboy model these days).
This article set forth a plan for how consumers could destroy one of America’s four largest banks. Customers would deliver a series of escalating threats against Wells Fargo, Bank of America, JPMorgan Chase and Citibank, demanding policy changes. The threats would culminate in a series of flash-mob bank runs that targeted one of the banks.
In a comment in Yves thread, Braverman acknowledged his idea was a thought exercise to take Move Your Money the next step.
The whole thing was inspired by Arianna Huffington’s “Move Your Money” idea. I thought it was a good idea, but not one that would be dramatic enough to produce any changes in the way the banks did business. So I asked myself, “What would have an impact on the banks?” and that’s when I came up with the Tank-A-Bank plan.
It was always just a thought exercise, and never something I advocated.
Yves seems to be thinking more about this; what can consumers do that won’t get them jailed as terrorists but will get us to a point where the finance industry isn’t dragging our country down even while stealing our money in the process?
Eric Kleefield uncovers a heap of hypocrisy in IN Senate candidate Dan Coats’ lobbying record, but he misunderstands what it means.
Former Sen. Dan Coats (R-IN) is running for his old Senate seat, apparently on a platform of opposing government takeover of the private sector. But as it turns out, in 2008 he lobbied the Senate on the TARP bill, on behalf of none other than Chrysler’s parent company.
The NBC affiliate in South Bend quoted Coats early this week, explaining why he was returning to politics. “Well, nobody anticipated that government’s going to try to run auto companies, bank insurance companies, take over the private sector,” said Coats.
However, according to a federal lobbying report for the third quarter of 2008, Coats served as a lobbyist on behalf of Cerberus Capital Management, the firm that owned a majority share in Chrysler.
Coats’s campaign press secretary Pete Seat says that despite what the lobbying filings show, Coats did not seek bailout help for Chrysler. “Dan Coats never lobbied on behalf of Chrysler in pursuing federal assistance. Anything to the contrary is false and pure politics,” Seat told us.
Instead, Seat says, Coats was lobbying for “small business” loan guarantees. Seat says: “Dan’s only related work was on behalf of small businesses – the very lifeblood of our economy – to ensure they could raise the capital needed to increase production, inventory and add jobs. Dan Coats did more for job growth in the third quarter of 2008 than Democrats did in all of 2009.”
Kleefield spends some time talking about Cerberus’ stake in Chrysler, the car company. But he seems unaware of what Cerberus’ big interest was: Chrysler Financial and GMAC–and of what the phrase “small business loan guarantees” means in the auto business.
Cerberus, after all, was really never that interested in the car business, notwithstanding that little Chrysler millstone it had around its neck. Rather, in the years leading up to 2008′s crash, Cerberus was making a big play for finance companies–Chrysler Financial and GMAC. And certainly in 2008, when the auto business was going south, it hoped that it would be able to become the big auto finance company.
And the GOP-wired company in fact did manage to get into the TARP world by managing to turn GMAC into a bank holding company (though it had to give up much of its 51% stake in the company to do so). Continue reading →
The inevitable has been announced; Bob Lutz is leaving Ed Whitacre’s new General Motors. From the New York Times:
Vice Chairman Bob Lutz will retire from the automaker effective May 1, people briefed on the plans said on Wednesday.
Lutz, 78, had been serving as a senior adviser to GM Chairman and Chief Executive Ed Whitacre after shelving retirement plans to take charge of the automaker’s marketing after it emerged from bankruptcy in July 2009.
The announcement comes a day after GM shook up its sales and marketing operations in its home market for the third time in five months.
Lutz was charged with overhauling GM’s marketing efforts under former CEO Fritz Henderson, but he appeared to have been sidelined by Whitacre, a former AT&T executive brought in by the Obama administration.
In late February, Whitacre named Stephen Girsky, a former investment banker, as special adviser and vice chairman in charge of corporate strategy, a move that raised questions about the tenure and role of Lutz.
And it really was inevitable. Last December when Fritz Henderson was unceremoniously dumped in a midnight putsch by Ed Whitacre, the former corporate phone boy from AT&T, we had some things to say here. Marcy, noting Whitacre’s professed desire to ram products to market quicker – to do everything quicker – observed:
Now maybe it would be possible to bring out new products more quickly. Maybe there is merit to disrupting the very complex model year and product cycle schedules that every car company relies on to manage new product introductions.
But I worry that this push to introduce products more quickly will come at a price–the price of doing it right, both from an engineering perspective (you don’t want the Cruze to come out with all sorts of recalls, after all) and from a marketing perspective (if you introduce a product but don’t have the marketing budget to support it, it’s not going to do much good).
And I commented that the Whitacre putsch had other consequences too:
There is one other consideration. With Fritz gone, the only marketable face GM has left to the actual auto people is Bob Lutz, and he will bolt in a heartbeat if he thinks the wrong car decisions are being made. Lutz is very comfortable with the big money wheeler dealers, but he is, first and foremost, a car guy all the way. And he does not need the money or grief. If they were to lose Lutz in any short order in addition to Henderson, they will have a potential real mess.
Well it turns out the thoughts may have been prescient. And make no mistake, Lutz is in fine health and as active and ornery as ever; he is leaving because Continue reading →