After Tennessee and Alabama Refuse, Canada Agrees to Help US Automakers

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ambassador_bridge.thumbnail.jpgTurns out I mistook which signature Michigan bridge would serve as a symbol for the loan the US automakers will get to hold them over until a saner Administration takes over: that bridge is not the Mackinaw bridge, connecting the two peninsulas of Michigan, but the Ambassador bridge, connecting Detroit to Canada.

The Canadians, you see, are coming to Detroit’s rescue.

 U.S. and Canadian governments say they will ride to the rescue of the beleaguered Detroit auto makers, hoping to head off a catastrophic collapse of Chrysler LLC or General Motors Corp. that would cascade throughout the North American economy.

Ottawa and Ontario will provide an estimated $3.4-billion to the Canadian units of the Detroit Three, while U.S. President George W. Bush will throw a $14-billion (U.S.) lifeline to their parent companies.

[snip]

[Canadian Industry Minister Tony] Clement would not provide a specific figure, but he said the amount of money in the Canadian bailout represents this country’s one-fifth share of the Detroit Three’s North American vehicle production and on Canada maintaining that percentage.

“Clearly, this amount of money is meant to be, as the U.S. is finding out, a way to keep the doors open for the domestic auto sector while they continue their long-term planning,” he said.

The move is not all that surprising. Ontario probably has more Big 2.5 workers than either Indiana or Ohio, and it has assembly plants that are at risk of being closed down, as well as a chunk of suppliers hoping to get paid.

Still, I wonder if it embarrasses Senators Corker and Shelby and McConnell that the Canucks care more about the American auto industry than the plantation caucus does? 

Though I guess it’s not surprising. For all his shortcomings, Prime Minister Stephen Harper probably realizes–as members of the plantation caucus apparently don’t–that it’s a stupid idea for politicians to actively pursue the impoverishment of a country’s workers.

In any case, skdadl, Petrocelli, the rest of you lovely Canucks? Thanks for the help! I’ll have to buy you all a bridge loan beer when we have that meet-up in Toronto, I guess.

It’s Your Local Car Dealer’s Fault that a Congressional Auto Bill Failed

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The NYT, never an institution to quit when it’s behind, continues its crappy reporting on the auto crisis. In today’s installment, Micheline Maynard uncritically regurgitates GOP spin on why the auto bill failed last night, buying the GOP claim that it’s the UAW’s fault that Congress couldn’t give the auto companies a loan.

Opponents of a Congressional bailout for Detroit auto companies laid blame for its defeat Friday on the United Automobile workers union, which refused to agree to grant wage concessions in 2009 as a condition of the deal.

The entire article continues by totally misrepresenting the reason the UAW refused the GOP "deal."

Representatives for the union, which had already accepted a series of cuts in its current contract, sought instead to push any more concessions back to 2011, when the U.A.W.’s contract with Detroit auto companies expires.

Um, no. As the quotes included in the article make clear, the problem wasn’t starting concessions now. The problem was completing them by an arbitrary date within the next year. 

In a statement Thursday night, the union said it was “prepared to agree that any restructuring plan should ensure that the wages and benefits of workers at the domestic automakers should be competitive with those paid by the foreign transplants. But we also recognized that this would take time to work out and implement” using programs like buyouts and early retirement offers to bring in new workers at lower rates.

“Unfortunately, Senate Republicans insisted that this had to be accomplished by an arbitrary deadline,” the statement said.

[snip]

Mr. Corker said he proposed that wages and benefits of U.A.W. members be competitive with lower rates at American plants run by foreign rivals — Toyota, Honda, Nissan and B.M.W. — during 2009, and offered the union the opportunity to pick the date next year when the changes, which would be certified by the Labor Department, could be put in place.

See?!?! A deadline–and end point, not a beginning point. (And never mind that you could get mired in the question of what "competitive" means for that entire year.)

Maynard’s big problem, though, is in ignoring the underlying point: the UAW was the only stake-holder being asked to accept such a deadline.

Read more →

Who Killed the Combustion Car?

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I have to admit, it’s pretty gloomy in MI right now. Suppliers are doing quarterly plans–but putting a giant asterisk on the plan saying "If GM fails, we don’t know WTF happens." Ford is trying to anticipate how they can chase down and reclaim the tools from dying suppliers in time to keep their own supply chain alive. And a local environmentally-focused pol and I started plotting yesterday to turn MI into the beacon of new agriculture–not just because we’ve got the foundation to do so, not just because we need to think about what to do when our economy dies completely, but out of spite at the Californians who seem ready to jettison the Midwest and its jobs of late (soon their dying way of irrigation-dependent industrial Ag will be begging MI for a bailout!).

So it’s tough getting back on the automobile beat, when I can just blithely read tea leaves in the Blago mess. That said, readers are rightly kicking me in the ass for avoiding this very important subject. So I’m watching an empty Senate on CSPAN 2 and making a list: a list of all those who, either out of self-interest or because they are salivating to bust the union, have decided to let the American auto industry–and with it, the economy more generally–die. 

That list starts, of course, with the self-interested union-busters: Richard Shelby, Bob Corker, Jeff Sessions. Mitch McConnell has officially jumped onto the union-busting Japanese SUV, though it goes against the interest of a goodly number of his constituents. And Jim DeMint seems anxious to jump to the head of this class, with his call to free car companies from the "barnacles of unionism wrapped around their necks."

Fuck you, Jim DeMint.

But I am taking a perverse kind of solace out of the discovery that the guy who’s on top of all my other shit lists is on top of this one too.

Dick Cheney.

You see, Dick went to Congress to try to get them on board with the idea of saving the auto industry. And that made it worse.

Yesterday, [in spite of Cheney’s similar failure at rallying support for the financial bailout in September] White House nevertheless dispatched Bolten and Cheney to meet with Senate Republicans about the auto bailout plan, where they “heard a barrage of criticism — and offered few satisfying answers.” Read more →

Hysteria over a $15 Billion Loan, But Not $285 Billion in Takeovers?

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Man, the NYT’s pathetically bad reporting on the auto bridge loan continues.

David Sanger writes a story purporting to be news that presents a loan to the auto industry–with conditions–as a crisis of capitalism of epic proportions.

But what Mr. Obama went on to describe was a long-term bailout that would be conditioned on federal oversight. It could mean that the government would mandate, or at least heavily influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make — to recreate an industry that Mr. Obama said “actually works, that actually functions.”

It all sounds perilously close to a word that no one in Mr. Obama’s camp wants to be caught uttering: nationalization.

Not since Harry Truman seized America’s steel mills in 1952 rather than allow a strike to imperil the conduct of the Korean War has Washington toyed with nationalization, or its functional equivalent, on this kind of scale. Mr. Obama may be thinking what Mr. Truman told his staff: “The president has the power to keep the country from going to hell.” (The Supreme Court thought differently and forced Mr. Truman to relinquish control.)

The fact that there is so little protest in the air now — certainly less than Mr. Truman heard — reflects the desperation of the moment. But it is a strategy fraught with risks.

The first, of course, is the one the president-elect himself highlighted. Government’s record as a corporate manager is miserable, which is why the world has been on a three-decade-long privatization kick, turning national railroads, national airlines and national defense industries into private companies.

The second risk is that if the effort fails, and the American car companies collapse or are auctioned off in pieces to foreign competitors, taxpayers may lose the billions about to be spent.

And the third risk — one barely discussed so far — is that in trying to save the nation’s carmakers, the United States is violating at least the spirit of what it has preached around the world for two decades. The United States has demanded that nations treat American companies on their soil the same way they treat their home-grown industries, a concept called “national treatment.” [my emphasis]

"Not since Truman," Sanger writes, "has Washington toyed with nationalization."

"Not since Truman," that is, so long as you ignore the very recent nationalizations of AIG, Fannie, and Freddie.

Read more →

Drowning Duck Begs for Life Preserver

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The WSJ reveals that–faced with the likely prospect that only five Republican Senators (presumably) would support giving Paulson the second half of the bailout funds–BushCo is trying to get Obama’s help to get to the funds.

A request for more TARP money now would come amid growing lawmaker criticism of Treasury’s implementation of its rescue program — including Treasury Secretary Henry Paulson’s decisions to forgo buying bad loans from distressed banks in favor of making equity injections in those institutions, and to not place stronger conditions on banks that receive government funds.

The existing bailout legislation does fast-track release of the next $350 billion of TARP money; Congress would have to pass new legislation to block the funding after a request is made. The president could then veto the blocking bill and force opponents to muster a two-thirds majority to override that veto.

But officials with the Treasury and the transition agree that the spectacle of even a failed effort to block the money could send financial markets into an uproar. One transition official said he was told Mr. Bush could expect only a handful of Republican votes — perhaps five — in his favor.

Can you say lame duck?

I understand Obama’s desire to avoid any affiliation with Bush’s failures. But I’m curious about the strategy behind the refusal to engage.

BushCo appears to be pitching for Obama’s help by claiming it will use the funds for foreclosure relief. Though the Bush team seems willing to consider only their crappy plans, and not Sheila Bair’s peg of new mortgages at 30% of an owners income.

Treasury and Fed staff outlined the three main ideas under discussion: A modification of the proposal being pushed by Federal Deposit Insurance Corp. Chairman Sheila Bair; a plan to help bring down interest rates; and a proposal championed by the Fed to buy distressed mortgages. 

If it’s true that they still refuse to adopt the most practical response, then I would conclude they were still not acting in good faith. In fact, given that they blew off Dodd’s hearing the other day, I’d say it’s a good sign they’re still not acting in good faith.

At the same time, Democrats in Congress are screaming for foreclosure relief.

Of course, 50 Democrats + 5 Republicans only equals 55, so there’s no real reason for Obama to invest his own political will now. Read more →

Dan Quayle and Cerberus Holding American Economy Hostage

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(Graphic by twolf)

Chris Dodd has signaled that he will let Dan Quayle’s Cerberus hold GM–and the American economy– hostage to get out of its crappy gambling bets.

Senate Banking Committee Chairman Chris Dodd said General Motors Corp. Chief Executive Richard Wagoner should be replaced as a condition of federal aid and Chrysler LLC may have to merge to survive.

[snip]

“Chrysler, is, I think, basically gone, probably ought to be merged,” Dodd said. Ford Motor Co. is the healthiest domestic automaker, he said.

Chris Dodd is right: Chrysler undoubtedly has to merge to survive. That’s partly because it does not have the global reach of GM and Ford. Because GM and Ford have significant sales in China and India and other quickly growing markets (which have been netting much higher profits), they can offset lower profits or even losses here in the States. But Chrysler doesn’t have that, so it can’t become profitable–across all its operations–as quickly as GM or Ford can. 

Chrysler also doesn’t have the product development pipeline its domestic competitors do. Ford has had increasing success of late offering either new US models on Mazda or Volvo chassis (like the Fusion, which competes well in quality and safety with the Accord and Camry), or bringing successful European models to the US (Focus in the past, and Fiesta and Mondeo in the near future). GM has the new Malibu (which is also gaining market share in the sedan segment), with the Cruze and Volt in the works (as well as any Opel models it decides to bring to the US, though the threats to shut down Saturn don’t bode well on that front). Chrysler’s got nothing equivalent. 

But understand: GM acquiring Chrysler–which is the most discussed option–offers little benefit to GM. Sure, the merged company would get to sell either the Renaissance Center in downtown Detroit or Chrysler’s fairly new digs up north; you could find efficiencies in headquarter structure (if you were a healthy company to begin with). But everyone agrees that two of GM’s most urgent problems are that it has too many brands and too many dealerships. And you want to fix that by making it take on 3,300 more dealers and three more brands? This is Congress’ idea of a really smart restructuring?

Making a Chrysler bailout contingent on GM’s acquisition of it is two things. First, a refusal to do the most logical thing with it, nationalization. Read more →

Three Auto State Senators “Said in a Statement”

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For an example of just how crappy the reporting on a potential auto bridge is, check out this NYT article. Its title announces "Republicans Divided on Aid to Automakers." Yet the part of the article that purportedly tells that story consists solely of statements of the four most invested Republican Senators on the issue.

Kit Bond (who co-sponsored past efforts with Carl Levin):

“I’m glad the Democratic leadership has embraced the principles of the Bond-Levin bill to hold auto companies accountable, protect taxpayers and save millions of American jobs as we head into the holiday season,” Mr. Bond said in a statement.

Bob Corker: 

“Based on the outline we’ve seen so far, we are disappointed,” Mr. Corker said in a statement. He reiterated his demands that the automakers make aggressive efforts to cut labor costs and reduce their overall debt obligations before receiving any aid.

“These are the same types of conditions a bankruptcy judge might require to ensure that these companies become viable and sustainable into the future,” Mr. Corker said. “And if they will agree to these terms, then we have something to talk about.”

Mitch McConnell:

“I look forward to reviewing the legislation being drafted to address the difficulties in our auto markets,” Mr. McConnell said in a statement. “As we consider this legislation, our first priority must be to protect the hard-earned money of the American taxpayer.”

And a gratuitous inclusion of Richard Shelby, though he apparently hasn’t issued any new statement, but somehow gets included, based on no apparently new reporting:

The senior Republican on the banking committee, Senator Richard C. Shelby of Alabama, has said he will oppose any taxpayer-financed bailout for the auto industry, and other fiscal hawks are likely to join him in opposing the measure.

This is what counts as reporting these days for the NYT. Three official statements probably gleaned from press releases, thereby letting those most invested in this debate stand in for those who will determine its outcome.

In spite of the fact that every single Republican listed (along with Carl Levin) is an auto state Senator of one sort or another, David Herszenhorn doesn’t apparently consider that information to be noteworthy (indeed, he attributes Shelby’s opposition to any bailout to fiscal conservatism, not anti-union ideology and home state self-interest). Read more →

The Giant Pissing Contest over the Auto Bridge

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mackinaw-bridge-cc.jpg

(Mackinaw Bridge photo from Three if by Bike) 

Ian and Jane described the solution Dems are crafting on the auto bailout: Roughly $15 billion from the DOE funds (originally intended to help automakers retool to make more efficient cars) would be repurposed into providing bridge loans for Chrysler and GM. After President Obama and the new Congress come in, that money will be replaced with TARP money, and a longer term plan will be developed to see the companies through this crisis.

Keep in mind though: this is just one battle in a giant pissing contest that is far from resolved. There have been three original positions in this pissing contest:

  • Pelosi, Dodd, and Frank (and, presumably, Obama): Give the aid from TARP; save the environment and the domestic auto industry
  • Bush, Paulson, and McConnell: Give the aid from the DOE funds after asking for the first born of every union worker
  • Shelby and Corker: Bust the union and to hell with Toyota’s domestic competition and the Democratic voters it employs

A couple of events set the background to hearings in the last two days. Hank Paulson has begun calling for the second half of the TARP funds, as he has blown through most of the first $350 billion. Yet Democrats want to force Paulson to start bailing out homeowners struggling to avoid foreclosure, rather than just bailing out Paulson’s friends on Wall Street.  And since Paulson wanted to avoid spending any TARP funds on the auto industry, he wanted to avoid discussing TARP before the auto crisis was resolved.

In fact, in a stunning bit of arrogance that no one besides Jane really reported, Dodd had asked Paulson and Bernanke to attend Thursday’s Senate hearing on the auto crisis–and they refused! These assholes, who are preparing to ask Dodd for another $350 billion of our money, refused to show up before Congress, presumably because they simply didn’t want to talk about using TARP funds for bridge loans to the auto industry (note: at the hearing GAO agreed with Dodd that the auto loan request would qualify under TARP guidelines). I suppose because they simply believe the auto industry doesn’t fall under their mandate to keep the economy healthy?!?!

And then, of course, yesterday’s jobs report came in, with the news that our economy is hemorrhaging jobs. Which is reportedly when Pelosi blinked, and agreed to use the DOE funds.

Read more →

Hold Lifted on Barofsky Nomination

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Two updates from the hold placed on the TARP Inspector General’s nomination.

First, POGO reports the hold has been lifted.

Sources tell us that the secret hold blocking Neil Barofsky’s nomination as the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) has been lifted!  Stay tuned for more…

Second, during the Senate Banking hearing on the auto industry, Jon Tester just said that someone "in this body" had a hold on Barofsky’s nomination. Which supports the widely-held suspicions that Jim Bunning was the guy who put the hold on. (Note, he hasn’t shown up yet, either.)

RIP Tanta

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Tanta was an example of what is best about the blogosphere: someone with real expertise–expertise (on mortgage finance) that at one point seemed obscure, until it became utterly critical to all of our lives–who contributed pseudonymously and humorously to the great enlightening conversation we conduct in the blogosphere.

Tanta passed away this morning of ovarian cancer.

Calculated Risk has a long post reflecting on her contributions. Here’s my favorite paragraph:

Tanta liked to ferret out the details. She was inquisitive and had a passion for getting the story right. Sometimes she wouldn’t post for a few days, not because she wasn’t feeling well, but because she was reading through volumes of court rulings, or industry data, to get the facts correct. She respected her readers, and people noticed.

I never met Tanta in person, though I remember the joy I had one day when I mentioned her in a post and she emailed me and I discovered she was reading me and I was reading her. It so happens that that exchange came about because she was kicking the NYT’s ass on their inadequate coverage of the mortgage crisis. 

Today, the NYT honored her with an obituary.

My condolences to her family and loved ones. I am thankful that she shared her expertise at a time when we were all so frantically trying to learn about it.

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