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Dan Coats’ Hypocritical Lobbying: Floorplans, Not Cars

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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.

[snip]

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). Read more →

Bob Lutz Hangs Up On Ed Whitacre’s GM

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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 Read more →

Bush Punted on GM and Chrysler … But Not Cerberus

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As you’ve no doubt heard, Cheney confessed yesterday that Bush punted the auto crisis into Obama’s lap.

CHENEY: Well, I thought that, eventually, the right outcome was going to be bankruptcy. … And the president decided that he did not want to be the one who pulled the plug just before he left office.

VAN SUSTEREN: Why?

CHENEY: Well, I think he felt, you know, these are big issues and he wouldn’t be there through the process of managing it, but in effect, would have sort of pulled the plug on GM and that was one of the first crises the new administration would have to deal with. So he put together a package that tided GM over until the new administration had a chance to look at it, decide what they wanted to do.

VAN SUSTEREN: But it’s cost us billions to get — I mean, you know —

CHENEY: It has. … And now the government owns a big chunk of General Motors. That bothers me. I don’t like having government own those kinds of major financial enterprises. I think it’s — it does damage to our long-term economic prospects when we get government involved in making those kinds of decisions.

Now, that was pretty clear at the time. That was sort of the subtext of what Bush said at the time:

… there’s too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies. My economic advisors believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession. And it would leave the next President to confront the demise of a major American industry in his first days of office.

Bush gave the car companies three months of funding (he claimed), so they would go bankrupt on the 100th day of Obama’s Administration, rather than the first.

But that doesn’t mean Bush was willing to leave all of this mess for his successor. He made damn sure, you see, that he took care of Cerberus before he left office.

He did so in two ways. First, in Christmas week negotiations that no one followed, Bush allowed Cerberus–and not Chrysler–to negotiate the terms of the December loan to Chrysler. And then Bush gave Chrysler just $4 Read more →

Obama: They Said We Couldn’t Fast-Track Chrysler, Now I’m Doubling Down

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Since I’m in town anyway, I decided to go hear the President announce the government taking a 60% stake in GM at the White House today (and they let me in!).

Given the finalization of the Chrysler sale today, the announcement had the distinct tone of an "I told you so:"

And keep in mind — many experts said that a quick, surgical bankruptcy was impossible. They were wrong. Others predicted that Chrysler’s decision to enter bankruptcy would lead to an immediate collapse in consumer confidence that would send car sales over a cliff. They were wrong, as well. In fact, Chrysler sold more cars in May than it did in April, in part because consumers were comforted by our extraordinary commitment to stand behind a quick bankruptcy process. All in all, it’s a dramatic — an outcome dramatically better than what appeared likely when this process began.

And I will confess, I was one of those who–in January–doubted that the Chrysler bailout could have ended as well as it did (though I regard it more as a "least worst solution"). So kudos to Obama’s auto task force team, thus far, they’ve pulled this off.

Of course, with GM’s additional size and complexity, Obama’s announcement of the GM restructuring was basically a bold doubling down. They admit that BK will take three times as long, and I’m sure it’ll be every bit three times as difficult.

In all likelihood, this process will take more time for GM than it did for Chrysler because GM is a bigger, more complex company. But Chrysler’s extraordinary success reaffirms my confidence that GM will emerge from its bankruptcy process quickly, and as a stronger and more competitive company.

There was one piece of news–or news to me–that I hope to check the math on. Obama claimed that this BK process will result in GM "building a larger share of its cars here at home."

As this plan takes effect, GM will start building a larger share of its cars here at home, including fuel-efficient cars. In fact, if all goes according to plan, the share of GM cars sold in the United States that are made here will actually grow for the first time in three decades.

Given the sharp decline in production they’re forecasting, this may just be a matter of math. But it does suggest they’re going to close down some Mexican production (or something) in an effort to keep factories open here. Read more →

JP MorganThe Banks Forces Chrysler into Bankruptcy

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the end of Chrysler

photo courtesy of S and C

The UAW was willing to negotiate, but the banksters weren’t. So Chrysler will now enter bankruptcy.

The Obama administration will announce at noon today that it will take Chrysler LLC into a historic bankruptcy to force a cut in debt key to a partnership with Fiat S.p.A. after three firms refused a sweetened offer.

With the UAW late Wednesday ratifying cost cuts in its contract and cuts in the money due its retiree health-care trust fund, President Barack Obama will announce a Chrysler-Fiat deal and the government’s “surgical” bankruptcy plan later today.

The administration "was willing to give the holdout creditors a final opportunity to do the right thing," an administration official said. But "the agreement of all other key stakeholders ensured that no hedge fund could have a veto over Chrysler’s future success."

The lack of an agreement will not "impede the new opportunity Chrysler now has to restructure and emerge stronger going forward," the official said.

The Administration claims they’ll be able to pull off a surgical bankruptcy and still pull off the Fiat deal on the other side, leaving Chrysler with some lease on life. But meanwhile, the banksters get to collect on their bets against Chrysler and get rich rich rich! All while sucking at the Federal teat. 

Update: JPMorgan Chase may have been willing to deal. It was a couple of hedge funds that were the final holdouts.

The holdouts are no longer the big four banks (and TARP recipients) that together own 70 percent of Chrysler’s debt. Both the Journal and the Washington Post have fingered three hedge funds — Oppenheimer Funds, Perella Weinberg Partners’ Xerion Capital Fund and Stairway Cap Management — as the sticklers. The government is faced with the unenviable prospect of getting unanimous consent from all the bondholders to make a deal, which gives the hedge funds extraordinary leverage. In the parlance of Wall Street, taking a hit on what you are owed is known as a "haircut." The hedge funds seem to be allergic to the barbershop.

From Obama’s statements.

He starts by saying they get a new lease on life. 

Talks about its role in US history, and in building the middle class. 

It’s been a pillar of our economy, but a pillar that’s been weakening. Designing cars that were less reliable and less fuel efficient than competitors. As I’ve said from the start, we cannot keep this Read more →

Debt Negotiations: JP Morgan Chase and Friends Claim They Found a Pony!

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I’ll say this for the Administration. They’re driving a harder bargain on behalf of Chrysler and GM than Hank and Timmeh bargained with AIG (a cynic might say that’s to push both companies towards bankruptcy).

But I’m fascinated by the claims the creditors are making in the case of Chrysler. Where Chrysler estimated its secured creditors could get 25 cents on the dollar (around $1.7 billion; it picked the 25 cents out of the 11 to 43 cent range), and the Administration is offering them the 15 cents on the dollar they can currently get in the market (around $1 billion), the creditors claim they believe they can get 70 cents on the dollar (around $4.75 billion).

Some senior lenders believe they would get more than 70 cents for each dollar of their secured loans if Chrysler is broken up and sold, said people familiar with the talks. Other lenders don’t have an exact number nailed down and are awaiting detailed figures from the auto maker on its assets.

All of the 40-plus lenders and investors are nonetheless incensed by the last Treasury offer: that they accept about 15 cents per dollar of face value of their loans, or roughly $1 billion of the $6.9 billion owed them.

[snip]

But some of the senior secured lenders think that is a low-ball estimate and say recoveries could reach 70 cents on the dollar in liquidation, said another person familiar with the talks.

Gosh. Cerberus has been trying for two years to sell Chrysler, much of that time before the crash drove down the value of Chrysler and wiped out the ability of many potential buyers to do so. Yet these banksters think they’re going to get $4.75 billion off Chrysler’s remains now that the market is really abysmal?

Who knew Chrysler has secretly been a shiny pony all this time?

Or perhaps the creditors are using the 70 cent number for a different reason, and not just to drive an equally hard bargain in response to the Administration. Perhaps that’s what at least some of the creditors know they’ll get in bankruptcy, once you take what they’ll get to sell Chrysler’s pieces parts and get the payoffs of the credit default swaps and other hedges they’ve got on Chrysler. 

Are JP Morgan Chase and friends suggesting they’ve placed a $3 billion bet against American industry?

Will Alabama Join Michigan in Boycotting Chase?

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Turns out Michiganders aren’t the only ones fed up with JP Morgan Chase. JP Morgan Chase is even preying on Richard Shelby’s constituents. [h/t scribe]

The Alabama state school construction authority has declined to make a payment due to JP Morgan under a derivatives deal until a federal court rules on a state lawsuit seeking to have the contract thrown out. Alabama finance director has said he won’t make or accept any payment under the swap deal: the first contractual payment is due May 1.

[snip]

In October a lawsuit was filed in Montgomery, AL district court saying that a sale of a swaption (option on an interest-rate swap) wasn’t allowed under state law. The deal had been executed in connection with bonds sold by the Alabama Public School and College Authority.

As Zero Hedge asks, "what the hell are Alabama residents doing trading swaptions?"

How about it, Richard Shelby? Ready to close your Chase account in solidarity? Want to sign our petition? Join our Facebook group?

How JP Morgan Chase Plans to Profit Off the 300,000 People It’s Forcing to Lose Their Jobs

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picture-96.thumbnail.pngAs I pointed out Saturday and yesterday, JP Morgan Chase is reportedly pushing Chrysler into bankruptcy. And as I explained yesterday, that will mean 300,000 people will lose their jobs.

So who will be left to bank with Chase in Michigan, you might ask, after JP Morgan Chase forces so many people out of work?

Well, as klynn pointed out, JP Morgan Chase has figured out a way to profit off all the unemployed people it is creating in Michigan. Chase, you see, provides Michigan’s unemployment insurance debit cards. 

And the services can end up being pretty expensive for beneficiaries. Here’s what Chase charges (and will be able to charge those that it causes to lose their job) for use of their debit card.

More than two withdrawals in a 2-week pay period: $1.50 each

Non-Chase withdrawals: $1.50 each

More than one bank teller withdrawal in a pay period:  $4.00 each

Transaction denied for insufficient funds at POS, ATM, or teller: $1.50 each

More than one ATM balance inquiry in a pay period: $1.00 for each

Statement delivered by regular mail: 95¢ per statement

Granted, if an unemployed person manages their meager finances well and has Internet access (those inquiries are free), they probably can get by on one weekly withdrawal. But if someone loses track of their spending or doesn’t have Internet access or likes dealing with human beings, these fees are going to start to take a huge bite out of what little they get.

Though debit card users can spend all they want in stores. As with Chase customers normally, Chase loves when you use your debit card at stores, because they get a bigger fee from merchants (back in the day when we still banked at Chase, that’s what the Chase guy told me) than if you use a credit card.  They’re profiting coming and going.

Now granted, for a company that already has gotten $25 billion from taxpayers (or $83 dollars from every man, woman, and child in this country), even $5 a month in fees from the 300,000 people JP Morgan Chase is pushing into unemployment is chump change–a mere $18 million a year. 

But don’t imagine for a minute that JP Morgan Chase hasn’t already lined up a way to profit from the unemployment it is causing in Michigan. 

Save American Jobs: Close Your Chase Account

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It’s time we started pressuring the banksters in the only language they understand: their pocket-books. If they begin to lose customers who refuse to let their money be used to gamble away American jobs and taxpayer money, then they might start thinking about the good of the country for a change.

So mr. emptywheel and I took that step today. We closed our Chase accounts (which, because mr. ew recently took a buy-out, was a not-insignificant amount) and put that money into a credit union that’s supporting Michigan, not trying to bankrupt it. 

Here’s how I explained to the Chase people why we were closing our accounts.

I’m closing my Chase accounts because JP Morgan Chase has placed its corporate interests above the jobs and health care of the people of my community, unlike other banks that continue to invest in rebuilding Michigan.

JP Morgan Chase insists on putting Chrysler into bankruptcy

On Saturday, the Wall Street Journal reported that JP Morgan is “resisting government pressure to swap” its Chrysler debt for equity in a restructured Chrysler. But if JP Morgan refuses this swap, then Chrysler will be forced into bankruptcy within a month.

According to the Wall Street Journal, JP Morgan prefers bankruptcy because, “billions of dollars of government debt and the UAW retiree health-care obligation [would] be wiped out before the secured lenders [JP Morgan and other big banks] lose anything.” In other words, JP Morgan wants to force Chrysler into bankruptcy so it would get repaid before all other creditors—including Chrysler retirees and US taxpayers.

JP Morgan Chase has already gotten billions from US taxpayers

Such cynical economic considerations might be understandable coming from other banks.  But JP Morgan Chase has already received $25 billion in TARP funds from American taxpayers. And the taxpayer bailout of AIG ensured JP Morgan Chase got $1.2 .4 billion [corrected] in its AIG deals paid off at full value.

With all that taxpayers have already given to JP Morgan Chase, isn’t it time JP Morgan Chase started to give back to the communities it serves?

JP Morgan Chase’s actions will mean hundreds of thousands lose their jobs and healthcare

Instead, JP Morgan Chase’s corporate single-mindedness threatens to put 40,000 Chrysler workers in Michigan out of a job, along with 150,000 Chrysler dealer employees and tens of thousand workers at Chrysler’s suppliers.

Read more →

Chrysler’s Two Options: What JP Morgan’s Insistence on Bankruptcy Will Mean

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Yesterday, I pointed to a WSJ report that JP Morgan wants to force Chrysler into bankruptcy rather than make the concessions necessary for a Fiat merger.

There was some uncertainty about what those two different scenarios really mean–and therefore what the impact of JP Morgan’s intransigence might be. So this is an attempt to lay out what those scenarios are. Details on these two scenarios come from the viability plan Chrysler submitted on February 17, though some of its assumptions are optimistic and both the VEBA numbers and the secured debt numbers are out-of-date. 

The bottom line, though, is this: If Chrysler goes into bankruptcy, it will likely mean 210,000 extra lost jobs and the loss of healthcare for up to 700,000 UAW retirees.

Fiat-Chrysler

Before it will provide $6 billion additional funding to support the Fiat-Chrysler merger, the Obama Administration has demanded:

  • Cerberus and Daimler to write off their stake in Chrysler
  • Fiat to take a 20% stake in the company
  • UAW to accept half of the VEBA payment Chrysler owes–$4.4 billion dollars–to come in the form of equity in the new Fiat-Chrysler (along with some additional concessions)
  • Chrysler’s secured creditors (JP Morgan, Citibank, Morgan Stanley, Goldman Sachs, and others) to accept equity in exchange for over $5 billion in debt
  • Additional $6 billion in government funding

Now, Chrysler doesn’t describe in detail what would happen If the Fiat deal were to go through, so the following is a guesstimate on my part. 

The quickest change would be that Chrysler dealers throughout North America would have Fiats to sell–primarily the small A and B platform cars with which it is competitive in Europe (including its 500, which just won car of the year in Europe).  It would take at least a year and a half to do this, though, and Fiat will face some trouble assembling them cheaply in the US (in Europe 500s are assembled in Poland). Still, if it were able to pull almost inhumanly quick adjustments to the North American market in the next 2.5 years, Fiat (and with it, Chrysler), might be instantly competitive in the A and B segments and with that, dealers might be much more viable. But it remains to be seen whether that would be profitable.

The single biggest problem with the Fiat deal, IMO, is that gas prices are going to be volatile for the foreseeable future, which means being competitive in the A and B segments could either be a godsend (if gas goes up to $5/gallon again) or a blip on the radar (if gas remains cheap).

Read more →