Thursday Morning: Burning Bright

Tyger Tyger, burning bright,
In the forests of the night;
What immortal hand or eye,
Could frame thy fearful symmetry?

In what distant deeps or skies.
Burnt the fire of thine eyes?
On what wings dare he aspire?
What the hand, dare seize the fire?

— excerpt, The Tyger by William Blake

Props to Fort McMurray, Alberta, Canada, for evacuating a city under immediate threat of fire without any casualties directly attributable to the blaze. There was one death reported due to a vehicle accident, but it’s not clear the accident was caused by the fire or the evacuation process. I don’t know that an American city could have responded as quickly with the same results, but then Fort McMurray’s folks remember the Slave Lake wildfire five years ago in May 2011. Slave Lake, located roughly 250 miles southwest of Fort McMurray, was similarly forced to evacuate its 7,000 residents after 60 mph winds fanned a forest fire out of control and into the town.

In addition to expanded evacuation south of Fort McMurray, another wildfire in northern Alberta approximately 500 miles northwest of Fort McMurray forced evacuation of the town of High Level last evening. Fortunately, cooler weather will help battling this and Fort McMurray’s blaze; temperatures are expected to be 20 degrees cooler than the 88F degree high reached yesterday in Fort McMurray. There’s no rain in the forecast for nearly a week, though.

If you look at a satellite map of Alberta, you’ll note the areas surrounding these two municipalities actually had quite a bit of forest near them to their west (Fort McMurray is south of the Athabasca tar sands production site by a 30-minute drive). I’d like to know how much of this is boreal forest, which was once aggressively protected by Canada — before Alberta’s Stephen Harper became PM, that is. Despite the efforts of NGOs, expansion of the tar sands escalated dramatically from 2006 on. Now that oil prices have plummeted, production at Athabasca may drop, but too late to prevent damage to a wide swath of forest, not to mention the clearing done to support oil and gas development in northwestern Alberta. With the likelihood of wildfires throughout the rest of the summer running high, let’s hope the current Trudeau administration invests heavily in forest restoration efforts to replace growth lost to both fossil fuel production and to fire.

Reforestation is only a start, thought; additional protections going forward are needed as boreal forest is the largest carbon sink on earth, bigger than rain forests. We Americans don’t pay as much attention to Canadian deforestation because the country’s population is much smaller than Brazil. But Canada’s forests are critically important to reducing CO2, locking it up in trees and preserving it in bogs. We’re Canada’s largest trading partner and its largest consumer of wood products. We should be more aware and more responsible for our role in protecting Canada’s boreal forest.

Bits and pieces

  • Ford sinks cash into software company Pivotal (Detroit Free Press) — One of the many recent investment/partnerships with technology firms to augment vehicles’ features. Ford said it would have difficulty doing what Pivotal does. Let’s hope Pivotal is more conscious of cybersecurity than its automotive partners.
  • Former Apple employees to release new AI bot, VIV next week (Apple Insider) — Description sounds like Siri let out of the iPhone, or Amazon’s Alexa on Echo bot. Whatever it is, stay away from me with this stuff.
  • Nearly 300 million email account credentials floated in criminal underground (Reuters) — A massive collection including tens of millions of accounts on Yahoo, Microsoft, and Gmail email services was offered up in exchange for favorable comments in hacker forums. Something about this scenario sounds fishy, especially since the hacker first asked for 50 rubles (about one dollar) in exchange for all the compromised email accounts’ credentials. Some of the accounts belonged to banking, manufacturing, and retail personnel.
  • Has the revolution begun? Shareholders protest Reckitt Benckiser’s CEO compensation (Bloomberg) — Is this the beginning of a trend?

Your assignment today: check your area for wildfire or bushfire risk, and develop a personal evacuation strategy. Fortunately in my area we have standing water after nearly 24 hours of rain. Out of here, gang.

UPDATE — 2:00 P.M. EDT —
Fire’s still spreading across portions of Fort McMurray. Reporter vince McDermott believes he just lost his home this morning while he was at work. Must be just awful to cover a story affecting your community so dramatically and find yourself experiencing loss, too.

UAW: A Seat at the Table

There’s always a lot of tut-tutting when the White House releases the list of people who attend a state dinner. While a lot of that, for the dinner honoring Hu Jintao tonight, has to do with which members of Congress have blown off invites (John Boehner, Harry Reid, and Mitch McConnell, though McConnell’s wife Elaine Chao will attend with her father), I’m rather interested in who will attend from the auto industry.

Not Ford’s CEO Alan Mullaly, who has been working with manufacturers that export to China for years. Not Dan Akerson, who is CEO of that auto company that American taxpayers own that does a great deal of business in China (our investment in GM might be incredibly well-served to give GM this kind of access).

But Bob King, the head of the UAW.

Now, maybe I should be happy that UAW’s head gets a seat at the table with the leader of the country his union has lost so many jobs to.

But I can’t help but remember the transactional language King used to talk about his support for the Administration’s KORUS deal.

King countered that the deal was not perfect; there were many things he objected to about the agreement. However, King added that, “It was important to endorse in order to reward the administration for its good behavior of including labor in negotiations.”


When I asked King why the UAW decided to endorse the treaty without consulting others unions he said, “We were on a tight deadline to endorse. If we wanted to be relevant, we needed to weigh in right away with an endorsement.”

Back then, it sure sounded like King was happy to sell out workers in exchange for 800 jobs and a seat at the table. But now I’m wondering whether King got a literal seat at the table.

Bob Lutz Hangs Up On Ed Whitacre’s GM

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

Honda, Toyota, Fail More in December than Two of Three "Failed" US Carmakers

Car sales in December were–as expected–still way down as compared to last year. But as with November, there were some interesting numbers last month. Remember–these are year on year declines (which suggests the total market is down slightly less than it was in November):

Make      Decline

Chrysler   53%
Hyundai   48%
Toyota      37%
Honda      35%
Ford          32%
Nissan      31%
GM            31%
Daimler    25%
VW            14%
Subaru      7.7%

I’m still looking for Hyundai’s US numbers, and Chrysler (which I suspect really tanked) won’t announce until later in the day.

While GM and Ford still lost more sales across the year than Toyota and Honda (because they also tanked during the gas price crash of the summer), their performance against Toyota and Honda more recently demonstrates the degree to which recent sales are a credit driven issue, and not what Richard Shelby likes to claim is a failed business model. 

Moreover, there is better news for Ford in the numbers, as its market share is beginning to rise for the first time since 2001.

Ford took an optimistic view of December’s results, noting that its December market share rose to 14.6%, up 0.7 percentage point from a year ago — the first time since 1997 it had achieved a market share increase for three straight months.

"This is a strong ending to…a very challenging year," said marketing chief Jim Farley. Ford projected a fourth-quarter 15% market share for Ford, Lincoln and Mercury — beating the year-ago figure for the first time since 2001, it said.

I keep looking at these relative numbers because we’re basically looking at two questions in the auto market right now. First, who can survive in the next two years, as the market for cars remains at these contracted levels? Because of the debt the American companies have, the answer to that question is undoubtedly the Japanese car companies. But the other question is who can survive best over the next two years? The rules of the game have changed, and surviving best will be as much about managing inventories on a month to month basis as anything else. And Ford, at least, (which outperformed Toyota and Honda last month as well), looks like it is winning that game in the short term.

Particularly as more people realize that Ford is somehow "different" than GM and Chrysler (because it didn’t need a bailout), Ford has the opportunity to really turn its brand image around. Read more

Bill Ford v. Larry King: Village Idiocy about the Auto Industry

John Cole is right, this Larry King interview of Bill Ford deserves more attention.

Here’s what Cole pointed to: Ford insisting that (contrary to what the plantation caucus believes) the UAW is not the problem.

KING: What about the UAW in all of this?

FORD: Well, the UAW obviously has been our partner through all of this. Have they made mistakes and have we made mistakes? Of course. The UAW has come a long way. I think their leader, Ron Gettelfinger, is an excellent leader and he really understands our business. In this last contract, he gave up a lot. He’s also indicated they’re willing to come to the table to do more. And so for anybody to blame the UAW as the sole reason for this is frankly wrong.

Hey, David Sanger? Your assertion that the problem is distrust between the UAW and the manufacturers? You think maybe Mr. Ford knows something you don’t?

Just as interesting to me are the number of times that Ford had to instruct Larry King on things that–had he been paying attention at all–he would have known.

There are the 3 times that King suggested Ford was in the same boat as GM and Chrysler.

KING: How much danger, frankly, are you in? Can you give us the picture without being too technical?

FORD: Actually, Ford, we were profitable in the first quarter. Our plan is working. Our market share is picking up. I believe we’re headed exactly where the country wants us to go.


KING: What was the key turning point for you that sent this downward?

FORD: As I said, we made money in the first quarter, and we were well on our way.


KING: Is that a good point, Bill, that your products were behind the times and now you want a bailout through your fault?

FORD: Actually, Larry, we’re not asking for a bailout. Our competitors are.

Here’s Larry King completely missing the fact that most developed nations are backing their auto industries–and so it’s no big surprise that any American car companies might need credit.

KING: Why do you need the line of credit?

FORD: We’re saying we don’t need it now, but we’re saying, if the global economy does not pick up, you know, Read more

The (Draft) Auto Bridge Loan Plan

Here’s a copy of the draft plan. It closely resembles what we’ve been hearing: the designation of an "auto czar" (AC–though it is called a President’s Designee) who will dispense funds to those auto companies that need it, with the requirement that by March 31, the companies restructure with the oversight of the AC. The AC is empowered to assist in negotiations with retirees, unions, dealers, and creditors right now, but can come back to Congress and ask for more authority if need be (presumably, in case this person had to make bankruptcy court type decisions). The taxpayers get warrants and or a piece of Cerberus in exchange for their trouble.

Note, the AC must be picked by the first of the year. In other words, George Bush, not Barack Obama, will get to choose the AC.

Here are the other interesting details:

There’s one clause which I’ve dubbed the "Nancy Pelosi clause" requiring the car companies to drop their suits against increased emissions standards in CA and other states:

(g) WITHDRAWAL FROM CERTAIN ACTIONS.—The terms of any financial assistance under this Act shall prohibit the eligible automobile manufacturer from participating in, pursuing, funding, or supporting in any way, any legal challenge (existing or contemplated) to State laws concerning greenhouse gas emission standards.

And there’s a clause which I’ve dubbed the "Atrios clause" requiring car companies to consider moving some of their SUV capacity into producing transit vehicles:

(a) IN GENERAL.—Each eligible automobile manufacturer which receives financial assistance under this Act shall conduct an analysis of potential uses of any excess production capacity (especially those of former sport utility vehicle producers) to make vehicles for sale to public transit agencies, including—

(1) the current and projected demand for bus and rail cars by American public transit agencies;

(2) the potential growth for both sales and supplies to such agencies in the short, medium, and long term;

(3) a description of existing ”Buy America” provisions, and data provided by the Federal Transit Administration regarding the use or request of waivers from such provisions; and

And there’s a provision I’ll call the "Delta/Northwest clause" which requires the car makers to get rid of their corporate planes:

Read more

Senate Auto Hearing: “Russian Roulette with the Economy”

The auto execs are before Senate Banking today–go here for the hearing.

Dodd is up, arguing that not helping the Big Two and a Half is like playing Russian Roulette with the American economy. He’s also beating up on Paulson for his irresponsibility with our TARP funds.

In my view of we’re going to insist on reforms from the auto industry, we ought to also require reforms from the finance industry.

Also note, they’ve got representatives from both the suppliers (the head of Johnson Controls) and the dealers (the President of CT’s auto dealers). The House hearing last time had such representatives, and it really made the hearings more valuable for the executives.

Shelby up. Took him 2.6 seconds to talk about labor.

Gene Dadaro, from the GAO, up. He’s talking about what past bailouts have involved. I’m curious whether he was consulted on TARP? He’s also demanding a board with real oversight. Again. Was he consulted on TARP?

Dick Shelby seems to believe he’s an expert on the auto industry. Still pressing for bankruptcy.

Dadaro states clearly that he believes Treasury has the ability to intervene. Shelby’s pushing to get Treasury to do this.

Bob Bennett has an interesting idea: you give TARP money to the auto companies’ creditors, in exchange for equity in the auto companies. That would change the cash shortage of the auto companies, while watering down stock.

Jack Reed, clarifies that we should expect concessions from suppliers and dealers as well as the UAW. Finally! Someone who notices that the Big 2.5 have contracts with more than just the UAW!

Schumer: UAW made concessions yesterday, but where are the dealers? Where are the bondholders? 

Menendez suggests requiring a dollar for dollar concession from stake-holders in any bailout. Also raising the possibility that a bailout includes prohibitions on a foreign maker buyout of Chrysler.

Evan Bayh, as the first auto state Senator up: Isn’t it true that there’s too much uncertainty to allow these companies to go bankrupt right now?

Sherrod Brown, on differences between 1979 and now: UAW already made concessions, the Big 2.5 have already restructured significantly. 

James Fleming: The ripple on effect is a tsunami on the dealers who employ people in your home states. If you do not pass this bill, the effect on your consitutents will be enormous. Consider the human side on what’s going on–go into those dealerships. It’s tough work, they’re writing the paychecks out, they do not have massive staffs. Read more