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

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February 17, though some of its assumptions are optimistic and both the VEBA numbers and the secured debt numbers are out-of-date.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).

In the longer term (4 years), Chrysler would have vehicles of its own developed with Fiat technology, maybe something to revitalize the PT Cruiser or something, manufactured on the same line as the partner Fiat car. This would give Fiat and Chrysler a global platform that would allow them to minimize development costs. And if, at that point, Chrysler and Fiat had the money to do a real product intro, it might start producing viable products again. 

The problem, as you can see, is the benefits of a Fiat-Chrysler deal are a ways away. So while Chrysler claims that this deal would allow it to use idled capacity (and Fiat claims it would save US jobs), that’s not going to happen for a year at least. And Chrysler has said that 22% of its suppliers and 27% of its dealers are in trouble, which means a number of Chrysler stakeholders probably couldn’t hold out that long.

So I’m going to make a wildarsed guess that the following would happen:

  • Chrysler sheds another 10,000 blue collar jobs and 2,000 white collar workers
  • 990 dealers would close and 45,000 jobs are lost
  • 35,000 supplier jobs are lost

Still, this is much better than what might happen in a bankruptcy.

Chrysler Bankruptcy

Chrysler has said Chapter 11 would be the beginning of an ordered wind-down of its business. But it expects it would need $24 billion in Debtor-in-Possession funds to proceed through Chapter 11, and the Administration has said, "If the Chrysler/Fiat partnership has not been successfully concluded within 30 days, and in the absence of another viable partnership, the government will not invest any additional money in the company," which suggests the government is not willing to provide DIP for Chrysler. 

Chrysler expects its creditors would get the following (this is based off an assumption of getting $2.3 to $3.8 billion for its assets, which I think ridiculously optimistic):

  • Cerberus and Daimler: nothing
  • UAW: nothing
  • Chrysler’s secured debtors: 25% return on their debt ($1.7 billion, of which JP Morgan would get $629 million)
  • US government: 5% ($200 million)

There are two other factors, though, that no one is really talking about. First, Chrysler’s creditors may go after pension funds. Rayne found this paragraph in a WSJ article on a Chrysler pension fund that has been in trouble. 

Chrysler’s precarious financial situation exacerbated investors’ problems with the stable-value fund. The Chrysler Salaried Employees’ Income Deferral Plan, which offered the fund, isn’t subject to Erisa, the law governing many pension and benefit plans. One key distinction: The fund’s assets must be made available to creditors in the event of Chrysler’s bankruptcy.

Now, from what I could see with Chrysler’s plan, it doesn’t seem to account for that, and a Chrysler retiree told me all the regular 401(k) funds are protected under ERISA, but it may be that in addition to budging in line ahead of Chrysler’s UAW employees to get money, JP Morgan may try to pick the pockets of Chrysler’s white collar retirees.

And then there’s the issue of the hedges. Chrysler’s creditors–and likely a great many other players–are likely to have hedged their exposure to Chrysler. So those companies may well make money if Chrysler fails. And who knows who will be taking money from whom at that point. (Masaccio wrote about this in the context of GM.)

In any case, according to its statement, Chrysler anticipates that if it unwound in orderly fashion over the course of 24 to 30 months, the following will happen:

  • 29 manufacturing facilities and 22 parts depots closed immediately
  • 40,000 Chrysler employees lose their job
  • 3,300 dealers with 150,000 employees go out of business
  • $7 billion in outstanding supplier invoices go unpaid
  • 31 million vehicle owners lose ongoing support (though the Obama Administration has promised to honor warranties)
  • 300,000 jobs total lost (presumably 40,000 Chrysler jobs, 150,000 dealer jobs, and 110,000 supplier jobs)

Now, I think this estimate leaves out the possibility that someone would buy pieces parts of Chrysler and keep them running in the short term. For example, if Dongfeng were to buy just Jeep, it might keep some of the white collar engineers and factory workers on for a period, and try to transition engineering and assembly to China over a decade (though China would have no reason to honor UAW contracts). Chrysler has a few factories that are fairly modern and I could see Nissan picking up one as a way to bring more production to the US to shield it from currency exchange woes. VW might want to pick up a Chrysler minivan factory to retain the capacity Chrysler had been providing it.

But the thing is, almost no one has the money to invest right now, so even though some of these moves might make sense from a long-term capacity perspective, they are unlikely to happen in this climate. At least not quickly and not with the factory workers included in the deal. 

A Chrysler bankruptcy might also doom the VEBA fund that was supposed to provide for 700,000 UAW retirees and their dependents’ health care.

If any of the Detroit Three automakers that owe payments to the VEBA — an amount totaling nearly $60 billion — declare or are otherwise forced into bankruptcy, the trust that was established to fund health-care costs for UAW retirees could be shattered, says one bankruptcy expert.

In particular, some had speculated that if General Motors Corp. or Chrysler LLC, the two Detroit automakers that have accepted billions in "bridge" loans from the U.S. Department of Treasury, were to declare bankruptcy, the VEBA obligation might legally be shifted to the Pension Benefit Guaranty Corp., the federal corporation that assumes payments for legally terminated corporate pension plans.

But the PBGC is not specifically or legally bound to take over the UAW’s VEBA if any of the Detroit Three declare bankruptcy, said Doug Bernstein, practice group leader for banking, bankruptcy and creditors’ rights at legal firm Plunkett Clooney.

Pension plans are the province of the government’s PBGC — and the UAW’s VEBA technically is not a pension plan, Bernstein told AutoObserver.

The VEBA funds of the three companies have not yet been combined (that happens next year), so this may or may not affect all 700,000 VEBA beneficiaries. But it will basically mean the benefits workers were promised some thirty years ago would be lost and many of those people might well do without healthcare.

So 210,000 jobs and 700,000 retirees’ healthcare, promised thirty years ago. And JP Morgan, the recipient of tens of billions (if not more than a hundred billion) in benefits through various recovery schemes, will push that outcome rather than give up its debt. 

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71 replies
  1. bobschacht says:

    So, have we become a Bankocracy? Has our government become one that is of banksters, by banksters and for banksters?

    Democrats had better wake up. Voters are not happy.

    Bob in HI

  2. Rayne says:

    And there’s a shadow number not mentioned in this post which EW focuses on Chrysler; it’s the supplier and other support jobs which will be lost should Chrysler fold.

    There’s a ratio of supplier-support to direct automaker jobs which varies, depending on the location and type of automotive facility. For the most intensive manufacturing sites, the ratio of supplier-support jobs in the surrounding community can be as high as 10-to-1. In communities with a less-intensive site, the ratio may be closer to 3-to-1.

    So when Marcy points to a region dense with Chrysler manufacturing jobs — let’s say there are 15,000 in one state alone as a ballpark swag — there will be at least 45,000 other jobs threatened by the loss of business.

    The toll will be deeper than just the near-term job losses, since every job loss represents a loss to federal, state and local tax revenue, and a likely decrease in property values as more homes flood the market and some of them will certainly go into foreclosure.

    • klynn says:

      To back up Rayne…

      I posted this last week…here we go again:

      Just in first tier supply chain, the state of Ohio will loose almost 1 million (950,000) jobs should GM or Chrysler fail. That number does not include second tier, all auto production plants (like Honda) or third tier suppliers like the Compressed Gas/Chemical/Polymer industries. Or the research chains at the Universities.

      To give an idea, Columbus, Ohio proper has a population of 750,000+ – add in Greater Columbus (Franklin County) suburbs, and you have 1.68 million.

      The job loss in the state just from first tier suppliers only, would be like loosing a whole major city (Columbus is the 15 largest city in the nation).

      I cannot begin to wonder what the failure of Chrysler would do to MI or Ontario (about 500,000 jobs in Canada just in auto production).

      The state of Ohio’s unemployment is at 9.4% currently. Loosing the first tier auto suppliers would be about 10% of the total population of Ohio. Knowing second and third tier industry suppliers would also tank I think it is fair to say Ohio’s unemployment would fly up over 20% easy.

      Michigan’s state unemployment rate is at 12% currently (the top in the nation).

      And just an FYI to the Corker crowd, South Carolina is at 11%, North Carolina 10.7,Florida 9.4, Georgia 9.3, Kentucky 9.2, Tennessee 9.1… Their foreign shops will take a big hit too, so we can see those unemployment numbers going up as well.

      I have yet to read what the impact will be on the defense industry, our national defense or our logistics industry.

      A big hit to the logistics industry would be a national nightmare.

      And we have yet to discuss what all this could do to the value of the currently crumbling dollar.

      This is the beginning of the spiral of financial violence.(Yes it started a while ago, this will just cause a warp speed of the spiral)

      JP Morgan is stupid, criminal and shameful. Audit them NOW.

      Obama, not saving Chrysler in this economic environment, but saving banks like JP Morgan? Priceless, (and not in a good way).

      Note: I am aware that the defense industry has over the years wiggled out of the auto production impact…However, they have not fully wiggled themselves out of the downline supplier impact. There are crossovers at that level.

        • MarkH says:

          Forgot to add:

          Detroit is the 11th largest city in the US.

          It also votes Democratic overwhelmingly. So, why would Republicans raise a hand to vote to save it? New York, Washington D.C., New Orleans, Cleveland, they’re killing them all.

    • emptywheel says:

      That’s in there–though I don’t know that it’s accurate.

      Chrysler gave the number for 300,000 lost jobs in case of BK. But only accounted for 190,000 lost jobs (40,000 Chrysler jobs, and 150,000 dealer jobs). So I assumed the remaining 110,000 were suppliers.

      Not all of Chrysler’s suppliers will go under (my hubby’s former company, for example, have bsaically done the Chrysler layoffs already, so they’ll only lay off LARGE numbers again if GM goes, and they had 1/6 of their staff, at least, that worked Chrysler side).

      A couple of other things it doesn’t include: lost advertising revenue (in local communities, auto dealers often account for 16% of the ad spending)–so you’ll see more local newspapers go under.

      And none of this includes the multiplier jobs–the restaurants and dry clearners and so on in communities with Chrysler employees/dealers.

      • Rayne says:

        It’s those peripheral jobs — dry cleaners, restaurants, retail stores — which are the most difficult to document.

        I had been working on research, interviewing the Center for Automotive Research and local municipal planners about the county I live in north of Detroit; the town has a major parts supplier and a number of small businesses which sell to Chrysler or its subsidiaries. If Chrysler goes under, even two hours north, our unemployment rate will shoot up an estimated 5 to 8% in this county, and that’s just the direct supplier business, does not include many of the peripheral businesses which support them.

        That’s where the difference between 3-to-1 and 10-to-1 comes into play. I think your numbers reflect the 3-to-1 figure, don’t they, closer to [Chrysler + subsidiaries + Tier 1]? It’s the numbers above that, including Tier 2 and 3 which a lot of folks are not aware of.

  3. Professor Foland says:

    # 40,000 Chrysler employees lose their job
    # 3,300 dealers with 150,000 employees go out of business

    Am I the only one startled by the apparent implication that it takes more people to sell a car than it does to build one?

    I suppose once you add in the suppliers it’s even, but even surprises me, too.

      • emptywheel says:

        Thus far, people still want to do test drives (unless it’s a specialty car–I was at a dealer that was shipping Mustang Shelby GT500s that had been bought online to Australia) . So while you may find the best bargain on the internet when you buy a car, chances are you’ve gone to dealers and looked at the car in person.

        And once you buy the car, the paperwork/service/warranty/incentives are still all the same, so require the same amount of paperwork.

        THe biggest effect that internet selling is having is making dealers cannibalize each other on prices. With the internet you SHOULD be able to decrease the number of dealers in a geographic space, which is why I’ve been saying that GM needs to eliminate 1/3 of its dealers, at least.

        • BayStateLibrul says:

          Thanks. That makes sense…
          Maybe businesses should de-conglomeratize (is that a word?).
          Witness the NY Times fucking with the Boston Globe.
          The NYT paid $1B for the Globe (in retro, a bad business decision) since they are saddled with debt and want to bust the Unions…
          I’d rather have a “little efficiency” and keep jobs… in the end we have a
          more civilized society… heresy, I know for the Mitt Romney’s of the world.
          Maybe I’m a socialist…
          Teddy throws out the first ball at the Fens today (weather permitting)

    • emptywheel says:

      You have to add the suppliers. My hubby’s former company, for example, had basically become Chrysler’s wire harness group. In all the car companies, a lot of company employees have basically become purchasing agents working with contractors to provide suppliers/make parts etc.

      But on the dealer side, 45 (which looks to be their average) is not that high. THat’d be a President, sales manager, service manager, parts person, office manager and/or a finance manager, about 12 sales guys, about 8 service guys, about 2 more in parts, about 15 people in the back office managing finance, warranty claims, inventory,accounts receivable, and so on. Plus janitorial staff and often someone to drive cars to other dealers for exchanges.

      Yes, Toyota can do that with fewer people. Though the only place they’re working with fewer people (as opposed to just making their people more efficient) is on the paperwork side.

    • gryphon says:

      Cars are built in one place (I think it’s in MI, but EW will know for sure ;]). Cars are sold EVERYWHERE and it takes more than a salesman for every 20 cars: There’s the guy that manages the sales floor, his secretary, the repair staff in back, the guy that sweeps up at night, the local advertising team … every dealership employs between 20 and 200 people (depending on market size) and all those jobs in YOUR TOWN are GONE if JPM keeps being butt-heads about their debt.

  4. crowinghen says:

    Sorry if someone has already posted this, but an article by a former economist with the IMF comparing our situation to countries that have come to the IMF for assistance:

    http://www.theatlantic.com/doc/200905/imf-advice

    Until I read this article, I didn’t realize that Jamie Dimon was on the board of the NY Fed when JPMorgan/Chase bought Bear Stearns at the fire sale. At that time, of course, Geithner headed up the NY Fed.

    I worked for over 20 years at a regional bank that was bought by Bank One (headed by Dimon). As soon as they they took over, they started restructuring the commercial loan process, and declared that if our commercial loan customers were only interested in loans and deposit accounts, and were not interested in treasury or investment products, we needed to usher them out. Commercial loans had become in effect a loss-leader….

    I was an SVP when they bought our bank, and they pushed me down the ladder, out of any decision-making role, out of underwriting, and into a quasi-clerical role that was much less responsible than the one I had held when I was recruited to the bank 22 years earlier. They segmented the entire loan process horizontally, and each segment reported to out of state management…..and if you questioned the process, you were not treated kindly. (I speak from experience.) I hung on only because I felt that I’d earned a severance package, and because I felt certain they would eventually eliminate my job. Looking back, I’m not sure it was worth the hell I went through.

    IMHO, the only answer is to reinstate Glass Steagall, and break up the big banks. Sell them off branch by branch to the community banks that are still providing individuals and businesses with good service, and are still making good loans. Many of my former colleagues from the regional bank moved to those banks, and the banks are sound banking institutions who stuck to doing what banks do. It is worth noting that many, if not most, of those bankers are from the era when they started out working for th OCC, the national bank regulatory agency, in the 1960’s and 1970’s, where they were trained in good banking practices. Then they moved into the banking world, and became good lenders.

    Beginning with the 1980’s, there were less and less former regulators coming into banks as commercial lenders, and more and more hot dogs fresh out of MBA school. Putting those people in charge and taking away Glass-Steagall was a recipe for disaster.

    • klynn says:

      You should turn this into an Oxdown diary. Well done. I am so sorry you went through all you went through. My Mom was in banking management in the 50’s and 60’s and then became an accountant.

      When she looks at what has been going on, she is beyond words.

    • readerOfTeaLeaves says:

      I’m going to ’second’ klynn’s request that you turn this into an Oxdown Diary.

      I was just over at TPM and a post by Robert Reich got me thinking about the structural, fundamental problems with allowing companies (which, as Reich has written are simply ‘collections of contracts’) the same legal rights as the ‘citizens’ they are laying off in such droves.

      Not off topic, but digging deeper than this post is a philosophical question: how is it that we allowed ‘legal entities’ like JP Morgan to create such inhumane, powerful demands and pressures on people’s lives?

      It’s as if these vast corporations have become so mighty that we have ‘economic Katrina’s’ on a weekly basis, economic anxieties, social instabilities, and the experience and decsion-making of competent, knowledgeable humans — as ‘crowinghen’ appears to be — is less valued than a derivative swap?

      This is insanity.
      It’s currently playing out in the auto industry, but fundamentally, political campaign contributions by JP Morgan, hedgies, investment firms, law firms, and assorted other players have basically captured, or ‘bought’ Congress. So we end up with laws that privilege megabanks, and the skills, knowledge, ethics, and lives of employees be damned.

      This auto mess is a symptom of a much deeper problem with the a society that is extremely complicated, but this system allows elites to concentrate ‘capital’ and then move it around the globe with zero accountability or regulatory control.

      When ‘capital’ in all its ruthless avarice makes the rules, this is what we get: hedgies who bet against the failure of companies that they may well have leveraged in order to buy, skilled employees laid off because their lives don’t matter in the calculus of ‘capital’ concentration.

      At this point, I don’t see how any company — auto, or otherwise — can be ‘fixed’ until the underlying laws that grant far too much power to ‘capital creators’ (megabanks, finance, hedge funds) are pruned severely and completely revised.

      The fact that JP Morgan has this kind of clout is simply looney tunes.

  5. oldtree says:

    This is funny. The “banks”, and or “holding company” that are their creditors, are all now owned by our government, correct? We, the people, own these insolvent companies now. And we are going to allow thousands of jobs to go away because none of the owners or executives know enough to run a business. None know what is worth investing in, or how to keep a balance book. It leaves me with no confidence remaining in our government or their ability to understand the basics. They give money away where it will never come back, and do not offer up anything to help the citizens of our country rebound. Criminal behavior again?
    The absurdity of this will become legend. In the present it is only criminally insane. In the future it may be one of the things that was fixed by pitchfork.

  6. crowinghen says:

    klynn at 15 and ROTL at 16:

    Thanks. I had planned to write my first Oxdown about my house situation. My house is on the verge of collapse because of a large cavity under the basement. The cavity is around a city sewer line that I was unaware of when I bought the house 24 years ago. (They never filed an easement so the legal opinion I got at that time indicated there were no easements.) The city denied my request to move the sewer line and repair my home, so I’m trying to find an attorney to file a lawsuit. (Insurance has exclusions for damage caused by movement of dirt or water, so if I don’t get a settlement from the city, I will be stuck with no house, but still have to pay the mortgage. Each time it rains, more cracks appear throughout the house, and the structural engineer said the basement walls could collapse in a heavy rain event. (This all started in a heavy rain last summer that flooded the intersection in front of my house, and the intersection is full of cracks. My theory is that the rain drained thru the cracks and flowed along cavities created by old cracks and breaks in the sewer lines. The city, rather than digging up cracked pipes and repairing them and filling in the cavities created when dirt was sucked into the pipes thru the cracks, just lines the cracked pipes and ignores the cavities. But rainwater draining into the street thru cracks created by the dirt shifting underground, now travels along the old pipes, washing out more dirt. That’s my theory, which I have an expert getting ready determine if I’m right.)

    If the house collapses, it will likely break the city sewer main and the sewage of at least 200 homes will flow forth into the neighborhood.

    The last 9 years have caused me to lose faith in the people in charge in DC, and this situation has made me realize that it happens locally as well. Always the focus on the short term, ignore the risks, and leave it for someone else to clean up the mess.

    But maybe I’ll start with the BankOne story. By the way, my first impression of Jamie Dimon when they took over our bank was: Arrogance. I was shocked a few years later that when JPMorgan/Chase bought Bank One that he was named CEO. However, after all that has happened since, I do believe that his arrogance was a feature, not a bug.

    • readerOfTeaLeaves says:

      Start with the BankOne, please – the sooner, the better!

      When you write your tale of woe about the house problem, I’ll ’see you and I’ll raise you’ with my own tale of woe.

      Fundamentally, I could have purchased two or three GM autos for what I’ve paid as a result of a sewer fuckup by my local government that affected my home.

      GM can only do so much; like all of us, it’s being asked to pay far too much for other people’s greed, stupidity, and feckless failure to make tough decisions.

      • crowinghen says:

        I’m eager to hear your story. I want to start a blog about it, with a goal of collecting stories from people in other cities that have related problems, and turn it into a book, relating private problems (like ours) to the larger public issue of poorly maintained and crumbling city infrastructure. I’m waiting on starting the blog until I find an attorney; I want to make sure that going public (even if I don’t name the city) could endanger my lawsuit. If so, I’ll do the blog and the book after that is settled.

        You’re right, the banking issue is more urgent and I’ll start on the Oxdown diary about it.

  7. klynn says:

    Not that this says anything new from what has been discussed here…but it is well worth the read.

    What Geithner does not want the public to understand, his “dirty little secret”, is that the repeal of Glass-Steagall and the passage of the Commodity Futures Modernization Act in 2000 allowed the creation of a tiny handful of banks that would virtually monopolize key parts of the global “off-balance sheet” or OTC derivatives issuance.

    Today, five US banks, according to data in the just-released Federal Office of Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activity, hold 96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default.

    The top three are, in declining order of importance: JPMorgan Chase, which holds a staggering $88 trillion in derivatives; Bank of America with $38 trillion, and Citibank with $32 trillion. Number four in the derivatives sweepstakes is Goldman Sachs, with a mere $30 trillion in derivatives; number five, the merged Wells Fargo-Wachovia Bank, drops dramatically in size to $5 trillion. Number six, Britain’s HSBC Bank USA, has $3.7 trillion.

    After that the size of US bank exposure to these explosive off-balance-sheet unregulated derivative obligations falls off dramatically. Continuing to pour taxpayer money into these five banks without changing their operating system, is tantamount to treating an alcoholic with unlimited free booze.

    (my bold)

    Now overlay AIG on this picture. (I “accidentally” typed pisstour before correcting to picture.)

    • bobschacht says:

      Thanks for this, and for drawing our attention to the deep do-do that JP Morgan is into. 88 Trillion $$$???!!! These guys need a federal take-over, shake-up and break-up. It needs to be broken up, have a bunch of top brass turned out to pasture, and investigated for fraud.

      Bob in HI

      • klynn says:

        No problem. And I agree with you on how to handle JPM.

        BTW, great Oxdown.

        As for the link @ 23, you might also enjoy the link @ 18.

  8. freepatriot says:

    I’d hate to go all “Cassandra” on this conversation, but …

    the auto industry of yesteryear isn’t coming back. It’s best days are behind it. In the future, society will not be able to afford the luxury of nearly every individual owning an oversized personal transportation device

    does anybody ever think of how many 4 to 8 passenger boxes are used to transport a single person over hundreds of miles ??? every day, 5 days a week. I live about 75 miles from the Bay Area (SF-Oakland) Thousands of my neighbors are driving 750 miles a week. that’s a lot of wasted energy, folks

    the whole historic concept of automobiles is something the future can’t afford

    Detroit better look into personalized transportation pods, or something

    cuz the times, they are a changin

    and it sure looks like we ain’t gettin those rocket pack thingys they promised us anytime soon, what’s up with that ???

    • klynn says:

      I think on some level, no one disagrees with you about the need for change. The fact remains that this time is different, in terms of the economic disaster we are in. A slow change and/or death by funding auto manufacturing until they (auto) change/fix their manufacturing focus during the time frame of the kick-in of new green industries and infrastructure spending projects that are green, would be the best way to go. A flat out kill in this economic environment is the dumbest approach since Hoover.

      Hate to go all “Cassandra” back on you. Your view is short sighted as far as stabilizing the national economy.

      • readerOfTeaLeaves says:

        Pffffttttt, sorry klynn.

        But if GM were building minivans that cities were paying people at least a minimal wage + benefits to use (like little mini-buses that only pick up 3 or 4 people at their homes), then drive elders to their medical appointments, that in itself would be a godsend. As it is, there aren’t enough of those resources for any elder who isn’t financially situated (and that is also a problem, with tanking markets, because they’re not as ’situated’ as they planned to be for 60+ years of saving, plus with fraud and other problems they’re investments are at risk — and their in their 70s and 80s).

        Or if GM were building mini-buses for church groups, city rec employees, and carpools or van pools — there’s a HUGE demand for those services.

        The word ‘car’ needs to be rethought.
        A small group of people who vanpool, or a small van that is fuel efficient and has a lowering ramp to pick up elders or disabled still surely has a huge market.

        Maybe ‘fleet’ needs to be reduced to ‘10′. Or even ‘5′, for United Way or YMCA or for church groups or elder care programs and schools.

        I’m with freep.

        • klynn says:

          ROTL,

          I am not going to disagree with your anger. You are, however, directing it towards someone who, along with her husband, abandoned careers to located back close to aging parents to take care of them and work in fields not in their years of expertise, taking on salary cuts and threat of job longevity in what was success in our original career fields. It has been a change worth doing and we would do it again. Did we need a larger car to take the grandparents to appointments while taking the kids along too? Yes, unfortunately. That story aside, do we need to rethink the products coming out of Chrysler and GM as well as public transportation? Of course!

          I am not going to disagree with your complaints. Again, we cannot just cut everything off over night. It will create an economic spiral like we have never seen. Should they be producing crap? No. Should we tank our economy? No.

          This is not a pretty situation.

          JohnLopresti:

          Thanks for the link and post as well as sharing your idea. You are acknowledging the double edge: we cannot afford to dump the auto industry now but we also cannot afford for them to continue to produce junk.

          ROTL, we’ll just have to agree to disagree. I cannot consider the tanking of the auto industry at this moment in our poor economic history. But I do not disagree that we need to have better products out of companies we are saving. On that line of thinking, we need better product out of the banking industry we are evidently, “saving”.

          • readerOfTeaLeaves says:

            Oh dear, didn’t mean to sound rude.
            Meant that pffftttt in a bit of a kid-like way.

            I don’t think that individuals are the entire market.
            I think that smaller organizations are a potential market.

            I once did a small study for a municipality looking at the potential benefits of offering a ‘rider service’ for their seniors (and some low income). People didn’t like big buses, and worried for their safety.

            The advantages of the ‘rider program’ with a small mini bus picking up a max of 10 – 12 people, on a set schedule at 10, 12, and 2 each day was significant; seniors (and disabled) used it and what was probably most stunning to me — and that government entity — was the strong social connections that developed between the drivers and the riders.

            Drivers in big buses have to stay on schedule and are, in cities, often treated rudely. But in the small buses that deliberately went on local streets, and would stop immediately in front of the homes of elderly residents who’d called ahead, then that was a huge benefit. Drivers waited to leave people after dropping them off, ensuring that no one was left entering a house without someone keeping an eye on them.

            In addition, the bus drivers loved it — who doesn’t want to help little old ladies get their groceries from the bus to the door? Who doesn’t want to help a nice disabled guy make sure his packages are stowed before the bus moves, while the riders all chat?

            The thing is, the sizes of buses are made for large scale moving people on commutes, which is okay — except that there is a huge need for smaller buses that are able to have a 2 hour schedule so that they can spend that extra 3 or 4 minutes walking someone’s groceries to their door and make sure they’re safely in their house before the bus drives off.

            What we don’t have in this country is much between the ‘personal’ and the ‘impersonal’.

            The rider program was cut by funding, which was a shame. One more gap in the safety net.

            But while it worked, the social benefits were enormous, for really very little money. Plus, it’s amazing how bus drivers keep an eye on neighborhoods if they have a chance, they’re kind of like ‘extra cops’.

            Sorry to go on so long — didn’t mean to insult, but I’d already left too many comments on this thread and was already ‘blog whoring’. Now, I’ve really gone and done it!

            For personal cars, I’m with bmaz, people like to pay for things they like. That involves markets and marketing.

            I just think there’s a huge gap — involving a nexis of transportation, public safety, social safety net, and social support — that a mid-sized van or bus could fill. But then, to do that we’d need to leave behind all the vapid insanity about ‘privatizing’ the costs of every ride. The costs are easy to count; the benefits, much harder to put value on — but they are really huge.

            However, it’s an issue of scale.
            You do not get the same benefits for drivers, nor for passengers, if you go above 12 passengers. Below that number, the drivers were really protective and kind and took a real pride in the SERVICE that they provided those riders.

            GM should get a piece of that.
            But it would require PUBLIC money, better spent that sending to down the TARP endless rat hole.

          • readerOfTeaLeaves says:

            Well, not meaning to twist your meaning, but I’d simply like to point out that it suggests to me that the Big 2.5 are doing their part for public transportation; relish the irony.

            But I’d argue that bailing out banksters and fraudsters is not nearly the return for the public dime that putting money into city and transit agency budgets for smaller buses that enable local streets to be served by transit, would be a far better return for the money than pouring it into Hank Paulson’s VIP/Profiteer_TARP_Chasm.

            Many city streets aren’t actually built to carry the weight of large buses, but they can certainly carry smaller buses and vans. But those kinds of vehicle purchases aren’t made at dealerships by individuals — they’re made by municipal governments (which sell bonds) and transit agencies (which also sell bonds) and companies like Boeing and other very large employers.

            So while everyone frets about the problems in the individual, private purchaser market, there is another layer not even being addressed — the less money local governments have, the less they can purchase buses, vans, and they have to cut back on bus drivers.

            If that TARP money was handed over to cities and some employers for the specific purpose of purchasing vans for carpools, as well as small buses for elder care and public needs, then the cities could buy from GM and a whole lot of people would be passing money around in one big, fast flowing circle. No one would be making $20 million, but the money would keep moving around.

            And even more than that, more people would have a shot at work that they find personally rewarding even if it didn’t mean they were going to be filthy rich.

            If a ‘market’ matches needs with resources, our market is a disaster.
            A functioning market would get vans and drivers out in local neighborhoods proving small scale, neighborhood-level support for ‘ordinary folks’. But finance has only a very limited role in that scenario.
            So I doubt it would get very far in D.C.

    • readerOfTeaLeaves says:

      I totally agree with you. And as the weather improves in my area, I’m strongly considering a Vespa/small motorbike, at least for short, easy trips. But cities are still not building streets for good bicycle routes — no doubt it would shock most ‘lefties’ to learn that Boise, Idaho has some of the finer city bike routes (in its central area, which includes Boise State) of probably most large US cities.

      Meanwhile, TPM popped up news from WSJ that former head of GMAC is indicted for fraud; looks like he funneled billions to Madoff.

      I’m with Bob S. The Dems really need to get a clue.
      Start with offshore banking, go to compensation mechanisms, and rethink the role of ‘capital’ above all other economic activities, for starters:
      http://online.wsj.com/article/…..93099.html

      New York Attorney General Andrew Cuomo charged J. Ezra Merkin with civil fraud Monday, alleging he “betrayed hundreds of investors” by funneling $2.4 billion of clients’ money into Bernard Madoff’s multibillion dollar Ponzi scheme without their knowledge.

      Mr. Merkin, a New York financier, philanthropic leader, and the former chairman of finance company GMAC, raised billions of dollars from charities, universities, funds and individual investors, lied about putting the bulk of it with Mr. Madoff, failed to disclose conflicts of interest, and collected over $470 million in fees for his three hedge funds, according to the complaint.

    • emptywheel says:

      Uh, freep?

      Any idea what a Fiat 500 looks like?

      Because if you want personal transport, you ought to support a Chrysler merger with Fiat.

      But this is not whether or not you should support Chrysler. It’s about whether you endorse a big bank that has sucked at the federal teat to get to unilaterally decide to eliminate 300,000 jobs in this country.

  9. JohnLopresti says:

    @20 maybe there is a firm locally that understands toxic regulations.

    re Fiat500 Abarth version in UK, ample photos; ?miniChrysler?

    Somehow, in Brazil, government has helped car sales during 1Q09 by lowering interest on car loans.

  10. bmaz says:

    Problem is most people don’t want to drive or think about driving little mini boxes of junk. So forcing GM and Chrysler to make junk that the public definitively does not want, and is not ready for, is a horrid idea. That is a move that MUST come from demand not oppressively forced supply. The way to go about this is to create the demand by getting gas back up to $4 a gallon or more. Without that, forcing the mass manufacture of products the populous virulently does not want is defined insanity.

    • freepatriot says:

      most people don’t want to drive or think about driving little mini boxes of junk.

      so forget the whole concept of driving, and the problem is solved

      I said “Pod”, not “car”

      the whole idea of personal autos is costing us energy we can’t afford to waste

      people wouldn’t mind riding in small personal vehicles, even remote or computer driven vehicles, if ya didn’t have to worry about being mowed down an run over by some drunk dickwad in a fookin Hummer

      what we need is a group of people who are willing to design and build a model 21st century community that doesn’t cater to cars. we’re gonna have to return to some form of mass transportation soon anyway

      Atrios posts about this idea all the time, and IIRC, bmaz has commented on modern developments along light rail lines

      we need to get somebody wealthy, like Bill Gates maybe, to fund the development of a modern “carless community”

      we need stuff like grocery carts that deliver your groceries to your house, so you don’t need a car to go to the store. we could do this using current GPS technology. But nobody is willing to build a model (or maybe nobody thought of it {Patent Pending, how do you make that little “r” thingy ???})

      we also need to POPULARIZE the idea of using smaller, personal sized, electric vehicles (ie, golf carts, maybe it will result in less drive-by shootings, and more more drive-by clubbings “looks like a “5 iron” wound to me …”)

      I went to disneyland when I was 10, and they told us the monorail was the wave of the future (and some stuff about how in the future our presidents would be anamatronic robots, or something). It was bullshit, but we believed it (where’s my fuckin jet pack walt, you bastard)

      we need somebody with vision like walt (cept, you know, not a NAZI sympathizer an all) who could fund and build a community where the drunk dickwads don’t get to drive hummers

      If you build it, they will come

      and your groceries will follow you home

      it worked for walt

      thas how I see it

      sorry folks, right now, my crystal bong is getting a little hazy, so my vision of the future will be cloudy for a while …

    • oregondave says:

      create the demand by getting gas back up to $4 a gallon or more. Without that, forcing the mass manufacture of products the populous virulently does not want is defined insanity.

      And that is done by a federal tax, levied such that it fluctuates along with market fluctuations in the price at the pump, keeping the price very predictable. Stability – what a concept.

      Does wonders for the federal budget, as well.

  11. JohnLopresti says:

    I like the idea @29, though whiff of ‘centrally planned’ economy. Democratic party apply new tax to R+D next generation, and restores confidence for labor which, typically in the wake of a Republican administration, still is balancing the economy on the backs of the underemployed and under-remunerated.

    Excerpt from AP’s economics writer: actual unemployment rate 15% already:

    “April 3, 2009, Friday. Jeannine Aversa. Associated Press. The nation’s unemployment rate jumped to 8.5 percent in March, the highest since late 1983…If part-time and discouraged workers are factored in, the unemployment rate would have been 15.6 percent in March, the highest on records dating to 1994, according to Labor Department data released Friday…The average work week in March dropped to 33.2 hours, a new record low…The deterioration in the jobs market and a worse-than-expected reading of the strength of the services sector in March come despite a few hopeful signs recently that the recession — now matching the longest since World War II — could be easing…Orders placed with U.S. factories actually rose in February, ending a six straight months of declines, the government reported Thursday. Earlier in the week, there was better-than-expected reports on construction spending and pending home sales. And last week a report showed that consumer spending — an engine of the economy — rose in February for the second month in a row — after a half-year of declines…The job market traditionally doesn’t rebound until well after a recovery starts. But the stock market generally bottoms out before the economy, and stocks have been rising for three weeks…Federal Reserve Chairman Ben Bernanke said the recession could end later this year, setting the stage for a recovery next year, if the government is successful in bolstering the banking system. Banks have been clobbered by the worst housing, credit and financial crises to hit the country since the 1930s…Even if the recession ends this year, the economy will remain frail, analysts said. Companies will have little appetite to ramp up hiring until they feel the economy is truly out of the woods and any recovery has staying power…Given that, many economists predict the unemployment rate will hit 10 percent at the end of this year. The Fed says unemployment will remain elevated into 2011…Economists say the job market may not get back to normal — meaning a 5 percent unemployment rate — until 2013.”

  12. freepatriot says:

    Your view is short sighted as far as stabilizing the national economy.

    my view has no goal or objective

    I only foretell

    and then nobody believes me …

    it gets pretty complicated after that. The Greeks give us a horse. Some other stuff happens. It’s all very tragic.

    (wink)

    • solerso says:

      The problem thats being discussed has to do with the power of banks to crush any segemnt of the economy they wish, out of self interest. And a govt this is unwilling to stop them. It has nothing to do with your vague prediction, something about the demise of cars and a storm on the horizon. If there is trojan horse analogy, its the present administration, with “the greeks” being the financial sector.
      wink

      • freepatriot says:

        the power of banks THE WEALTHY to crush any segment of the economy they wish, out of self interest. And a govt this is unwilling to stop them.

        so what’s new ???

        reviving the auto industry just plays back into the same system that supports the wealthy

        the auto industry is only one failed part of a whole system

        and that whole system is failing before our eyes

        from the dot-com bubble, to the sub-prime bubble, to the credit default swaps that are gonna crash soon, it’s all part of the petro-chemical society

        our houses, our streets, our stores, our cities, our highways, and our whole fookin NATION functions around automobiles

        it’s an unsustainable model, and it will keep “failing” until we hit rock bottom

        we need to find a new way out, so we don’t just keep repeating the same pattern, and ending up in the same hole

  13. runfastandwin says:

    Please god save us from Fiat. I don’t understand why Chrysler and GM can’t merge, shed Saturn Pontiac Hummer Dodge GMC and keep Chrysler Jeep Chevy Cadillac and Buick. Hummer can probably be sold to a foreign buyer. The rest, probably not. Of those, Saturn is probably the most viable and makes great cars but still cannibalizes the other brands. Also, GMAC gets out of the mortgage business completely and is only allowed to make car loans, and only through the dealers, that way the used car business is helped as well. Cerebrus and Daimler get nothing, secured creditors get equity or nothing, all parts suppliers and UAW get paid with bailout money, for which the government gets equity as well.

    At least that’s what I would do were I the head of GM.

    • emptywheel says:

      Because they’re not complementary.

      You’d have Jeep competing with Chevy and you’d still have no good small cars, so in 4 years we’d be in this shape again.

  14. sdrDusty says:

    Only thing I could say is that if it fucks Nardelli over it’s got a lot to be said for it.
    Sadly I’m sure he (unlike laborers) has an iron clad, etched in stone contract that (unlike labor), is a moral imperative to honor.
    Fuckers.

  15. james says:

    700,000 retired workers losing their health care?
    This must be so much more fun for the capitalists than just watching Pinkertons and police cracking skulls of workers.

    God forbid there should be any talk of class warfare in this country.

    And the GOP is threatening to filibuster all of Obama’s justice nominees if the torture documents are released? How about directing Holder to initiate an obstruction of justice investigation into every single GOP Nazi who follows through on this threat? We’re supposed to roll over again for these bastards?

  16. JohnLopresti says:

    On the style performance issues, somewhere in the spectrum between paratransit, McLaren Ford, Fiat Abarth with trumpet exhaust, and street hemis, will be a range of choices of still other designs; I read a half uninformed commentary at Detroit News Blog already blaming liberals for mandating the vitiation of style and muscle from the American driving machine: for some reason I managed to endure that diary in its entirety, which, besides unsheikness of progressivism, managed to critique both Levin and the honorable Rep. Dingell on the car bailout; a few countervailing arguments against the superficial but visceral remarks in that other blog, with respect to seaboard states as perpetrators of the disindustrialization of transport in the current crisis, would be the strength of the computer technology sector fostered in the progressive states, or, rah, the marvelous educational institutions situated in coastal states. However, it is a criticism waiting to happen; though, ew and other principals hereabouts have many worthwhile insights on the current duality of choices for Chrysler.

  17. james says:

    It’s unfortunate for the workers who are employed by the automakers but I can’t feel too bad about the car companies per se. It was their interference and sabotage which precluded a serviceable national transportation system from being developed in this country and they actively killed all mass transit systems within cities so that they could sell more product.

  18. orionATL says:

    another dog that didn’t bark?

    anybody heard any serious barking on these matters coming from congressional democrats? i don’t mean just one or two congresspeople, but the entire democratic pack in congress?

    why not, i wonder?

    the weakness of the obama presidency is the weakness of the democratic party in congress.

    and by “weakness” i don’t mean numbers, obviously, but rather willingness to in fight for principles that democrats traditionally fight for.

    • bobschacht says:

      and by “weakness” i don’t mean numbers, obviously, but rather willingness to in fight for principles that democrats traditionally fight for.

      When the Republicans claim that Democrats have no principles, this is what they’re talking about. Democrats don’t talk enough about what our principles and values are. We say we have a “big tent,” which basically means we don’t talk much about those things.

      I don’t think we should copy the Republicans in this regard, but I do wish that we had a better and more vigorous discussion of Democratic values and principles.

      Speaking of which, Obama, referring to North Korea, lambasted them for not following the rules, and said that violating the rules must have consequences, and other nice tough talk. Hoo Boy, would someone talk that back to him about the 8 years of rule breaking under Preznit Bush, and the lack of consequences, so far??? Anyone got a linky on that quote?

      Bob in HI

  19. Mary says:

    55 – bmaz & Denny Craig

    17/54 – I was kind of looking for somwhere that might have something on this, didn’t think of here – until now. Glenn’s post spells out that this is all post-Bush workproduct. The fact that Obama and Holder haven’t even tried to change their crew on these cases accounts for the similarity in language and tone Glenn mentions, but the Sovereign Immunity issue as the spawn of “Patriot Act” is all Obama, not even a retread.

    I still remember all the discussions and people saying, at the FISA vote (prior and after) that Obama was really “against” the amnesty, he just couldn’t do anything about Reid’s maneuvering.

  20. orionATL says:

    with respect to AG holder and the latest very strange doj pleadings,

    it occurrs to me that it is at least possible that AG holder :

    – has privately promised, as a conditon of his approval, not to oppose matters where “state secrets” claims were employed by the bush doj

    and

    – that, as a consequence of that promise, holder is trying to provoke the courts into joining in the game of “who will protect the american people and their constitution”. (something federal judges have proved loath to do in the last couple of decades.)

    as an aside, it’s time to quite appointing lawyers only to the supreme court. that court is more, and chiefly, a political body, rather than a legal body – something present occupants (excepting judge souter) seem not to understand.

    unless of course one considers “political” in the sense of justice scalia’s “bush v gore” campaign or the catholic-five’s decision on late term abortions.

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