Let them fail!

[Michael OLeary]

CAW, GM told to go back to bargaining table

The president of the Canadian Auto Workers said the union and General Motors Canada are being ordered back to the negotiating table by the Canadian and Ontario governments.

Ken Lewenza said the two governments have given the union and the company until May 15 to reach a new deal on concessions to help GM save money.

Lewenza said the governments want the union to make concessions similar to those they gave Chrysler. Without a new deal, he said, GM Canada won't be eligible for aid from the federal and provincial governments.

"If we don't get a deal, the governments will provide no financial support and GM Canada will be liquidated," Lewenza said at a news conference in Toronto.

The CAW and GM Canada initially worked out a new labour deal back in March, but Industry Minister Tony Clement hinted at that point that the agreement might not be acceptable.

And the sympathy from the public is summarized in this response:

I will try to be brief. The money offered in any bail-out package comes out of all Canadian workers pockets. Many of whom are not fortunate enough to have auto sector jobs located in their provinces. as such the vast majority of them do not enjoy super high wages and benefit packages that allow for retirees to receive a pension increase whenever a working group of people obtain one just because they used to be a union member. take a look at the country outside of your bubbles. you are asking the people of Canada to save your jobs when most of us are struggling to make it ourselves. then the union wonders why people see them as having an atitude of entitlement. Make the cuts tell retirees to sell the 200,000+ cottage at the lake and return to the world of today. Most of all be reasonable it is your children who will pay the rest of their lives for the greed of their auto worker parents. step back I can only imagine your anxiety, your whole lifestyle is being threatened. Yet you seem to feel you are owed something from those of us who can only dream of the oportunity the unions need for power gave you and now is powerless to secure for you. I feel foe you but many times you have been told YOU HITCHED YOUR HORSE TO THE WRONG WAGON. Now unfortunately the truth is out.

I'm Just Say'in

 

[a_majoor]

There is only one reason to do these bailouts; pay off the union supporters of the Democratic party:

http://meganmcardle.theatlantic.com/archives/2009/05/how_do_i_know_that_the_chrysle.php

Megan McArdle

How Do I Know That the Chrysler Bailouts are About the Unions?

06 May 2009 03:39 pm

This question was asked recently by a seasoned political reporter of my acquaintance.  Frankly, I hadn't realized that anyone else seriously believed there was any other reason to bail out Chrysler.  But let's go through a couple of the other stated rationales, to see why I find them so implausible:

  1. Chrysler is a good company caught in a bad situation.  Chrysler has been a bad headache for years.  Daimler bought it for $36 billion in 1998, and actually paid $650 million to have Cerebrus take the company off their hands in 2007.  Robert Bruner said in 2007 that

          The alternative to a private-equity restructuring would be a government bailout. We as an investing public need to decide whether we want the public sector to step in to support these ailing manufacturers or would we rather have these turnarounds privatized."  Chrysler's major problems were not born out of the financial crisis.

  2. The hedge funds benefited from the government money, so they're getting more than they would have otherwise.  As far as I know, Chrysler has burned basically all the cash they got from the government, which is why they're in bankruptcy. They haven't bought exciting new assets the secureds can liquidate; they've just produced more cars that can't be sold at a profit, put more wear and tear on machinery, etc.  The deal they made with Fiat doesn't put any cash into the company.  It's possible the government money somehow improved Chrysler's current financial hopes, but I don't see it.

  3. The administration isn't kowtowing to the unions; it's trying to prevent massive job loss.  Chrysler employs about 60,000 people.  This is a rounding error in the number of jobs that have been lost since this recession began.

      To put it another way, we could have taken the $8 billion or so we gave to Chrysler and given every one of the company's employees $133,000 to start their own War on Poverty, while still providing much of their pensions through the PBGC.  Of course, the new Chrysler is going to cut many of those jobs, so the cost of actual jobs saved will probably top $200K per.  For as long as the company lasts.  Which most analysts do not expect to be long, given that their super secret surprise scheme for turning everything around is to have Chrysler sell retooled Fiats to a country with one-seventh the population density and almost twice the birthrate of Italy.

  4. They're bailing out Chrysler because the company is systemically important.  Really?  When Lehman failed, huge other portions of the financial system quite unexpectedly quit working. Yet when I look out on the streets, I see no noticeable dimunition of the number of cars there.  When I turn the ignition key in my car, it still starts.

      Whether or not you agree with the actions the government has taken in the banking system, there is evidence that financial crises have real, nasty, systemic effects that even large industrial failures don't--particularly in a well-diversified economy like the United States.  (If Nokia went belly up, Finland would be in trouble.  But if Nokia went belly-up, Finland probably wouldn't have the scratch to bail it out, either).  I am unaware of any evidence that a single industrial failure has ever precipitated the kind of massive, widespread hardship that followed, say, the failure of Jay Cooke & Co.  Intervening to prop up a company that has been struggling for a decade is almost textbook bad economic policy.

 

[Larkvall]

I have an idea. If the automakers need to sell more cars to be profitable then we should start using assembly plant parking lots for obstacle courses for Leopard 2s. Autoworkers can afford to buy new cars.......... :2c:

 

[Michael OLeary]

GM draws closer to bankruptcy in first quarter

Article link

DETROIT (AP) -- General Motors drew closer to bankruptcy Thursday, acknowledging that its revenue fell by nearly half as car buyers worldwide steered away from showrooms for fear that the auto giant would not be around to honor its warranties.

.....

"I think bankruptcy is highly likely, not because the losses are so bad, but because everyone has realized that this company needs fundamental restructuring," said Douglas Baird, a University of Chicago law professor who specializes in bankruptcy cases.

More at link.

 

[Kirkhill]

GM draws closer to bankruptcy in first quarter

Article link

More at link.

What's not to like about a bankruptcy when the government lets you stiff your creditors, keep your job and ponies up for re-training?

Why wouldn't GM tread water and wait?  They're not incentivized (Caution-MBA Buzz Word) to do anything else.

 

[Brad Sallows]

Lewenza whines about being ordered back to the bargaining table and how unfair it is to revisit recent bargains.

He is correct.  No gift of an extraordinary opportunity to seek a less painful result than bankruptcy should be forced on/granted to the CAW.  Proceed straight to bankruptcy; let the contracts be revisited there.

 

[a_majoor]

The ultimate result of leaving GM and Chrysler as zombie corporations will be to cripple everyone:

http://www.professorbainbridge.com/professorbainbridgecom/2009/05/you-dont-need-banks-and-bondholders-to-make-cars.html

"You don't need banks and bondholders to make cars"?

The WSJ’s "USA Inc" series continues today with detail on how the US got secured lenders to abandon their fight to get paid more than 30% of their claims, as against giving more than half the company to unsecured workers. Which prompts this zinger from Larry Ribstein:

    As the government takes over more of the economy, these pressures on formerly free markets will intensify.  The problem for government is that it is running out taxpayer money for buying the economy.  The sources of private money will long remember what happened to Chrysler's lenders.

The Journal report quotes one anonymous -- but asinine -- Obama administration official as opining that:

    "You don't need banks and bondholders to make cars," said one administration official.

As Larry's observation suggests, that official -- who's probably never run any business more complicated than a lemonade stand -- will soon discover just how wrong s/he was. It's called CAPITALism for a reason, after all.

In fact, we know from experience that over the last 2 decades, firms are more likely to use debt than equity when relying on external financing. If creditors get tired of getting screwed, the Chrysler debacle and the looming repeat at GM may mark a major shift in the ability of American business to finance operations and growth.

Indeed, this particular chicken may come home to roost almost immediately. the Business Law Prof observes:

    ... when the government got tough it did so by threatening to bring nasty public pressure on the creditors.  Creditors that were already on the government dole with TARP money caved immediately; hedge funds held out a bit longer - took incredible public heat - and eventually caved as well.  The hedge funds, by the way, are the players the government needs to get into it public/private partnership program and its TALF program for either to succeed.  So the government ended up ripping players it needs to play in the future for the success of its programs.

Like most bullies, the Obamabots seem unable to realize that their conduct may have long-term consequences.

Pondering all this, it occurs to me that the single most patriotic thing one could do right now, if one is in the market for a new car, is to buy a Ford. In today's Journal, Paul Ingrassia writes that:

    While General Motors and Chrysler will emerge from the government restructuring wringer with significantly reduced debt, Ford will still likely be obliged to repay its lenders. This could put Ford at a competitive disadvantage -- an unfortunate irony for the one Detroit car company that has gotten the decisions mostly right in the last few years. ...

    Ford has about $26 billion in automotive debt -- about the same as GM's $27 billion. Ford's debt is secured by its assets. And secured lenders must be repaid -- unless they happen to be Chrysler lenders and get clipped by a company bankruptcy plan that's backed by President Obama.

    So Ford is like a homeowner who planned prudently and can pay his mortgage, while his spendthrift neighbors get their mortgage reduced by some new federal program.

All of which creates a potential win-win. Ford is finally producing some cars that even a gearhead like me might want to buy. The Fusion hybrid gets better gas mileage than the Toyota Camry hybrid. The Focus has gotten a ton of positive reviews. The new Taurus is impressive and the 2010 Taurus SHO should give sports sedan enthusiasts soemthing to seriously consider. In sum, if I were in the market for a car, I'd probably get a Ford. It'd be a good car for me, it'd reward Ford for staying out of Obama's clutches, and it'd spank everybody associated with the CM and Chrysler debacles.

 

[a_majoor]

Government Motors believes this will be the vehicle that saves it's corporate bacon. I suspect that Toyota or Honda might whip out a serial electric vehicle in 2010 just to rub their technological and marketing superiority in the faces of Government Motors and their sponsors.

As Glenn Reynolds says,

I was pretty interested in the Volt, but now that it’ll be a government product I’m not so interested any more. Maybe an Aptera, though . . . .

http://www.popularmechanics.com/blogs/automotive_news/4319235.html

2011 Chevrolet Volt Prototype Test Drive: Smooth-Driving EV Good Enough to Save GM?
Chevy Cruze Volt

WARREN, Mich.—It's been a long road. But with 18 months to go before the 2011 Chevrolet Volt heads into production, GM has allowed us a chance to experience its innovative Voltec drivetrain technology from behind the wheel of a test mule based on the Chevy Cruze. The Volt and Cruze share GM's global Delta architecture so the mule is representative of the Volt's basic chassis. But these mules are already old news. They will soon be retired and replaced by "production-intent" prototypes that use the Volt's actual body, interior and the model-specific floor pan that accommodates the battery pack, rather than the modified Cruze version found under the mule.

For the purposes of our drive, GM disabled the car's internal-combustion engine and charging system. This highlights the company's contention that the Volt isn't a hybrid—the car moves entirely on electric power at all times, with the engine/generator only present to extend the driving range. The engineers told us that development of the charging system is still in a cruder stage than is the electric drive, so experience with that element will come soon. This fall, we're promised an opportunity to drive one of the fully functional Volt prototypes. All this assumes that both GM and the program survive and stay on schedule. Let's hope so. —Kevin A. Wilson

The Specs
The Voltec drivetrain uses a three-phase AC induction electric motor rated at 120 kilowatts (the equivalent of 160 hp) driving the front wheels, with a stout 236 lb-ft of torque available—as in all electric motors—from 0 rpm. It should get the production Volt to 60 mph in about 8 seconds. It draws power from a 16-kilowatt-hour pack of more than 200 lithium-ion cells. Range is pegged at "up to" 40 miles on a full charge, dependent on temperature, driving style and use of the electric accessories such as climate control, audio and lights.

The battery is recharged by plugging into a standard outlet. The charger is onboard and can restore the battery to full charge in 3 hours if using a 220/240-volt input, or 8 hours using standard 110/120-volt circuits. The range-extending 53-kw generator is powered by a 1.4-liter four-cylinder gasoline engine that will hold 6 to 10 gallons. The system was disabled on the mule we drove, but we know that it operates in what is called a "charge sustaining" mode, which is to say that it only replaces the electrical energy as you use it to maintain the battery's state of charge—it won't restore the pack to 100 percent. So the driver who travels more than 40 miles (range in extended mode is 360 miles) will still have to plug the car in afterward to restore full charge.

It would take a bigger generator and bigger engine to recharge the batteries completely while the car's in motion. GM contends that the 40-mile range is a "sweet spot" that covers 80 percent of the daily travel by American drivers. Vehicle line executive Frank Weber told PM that improvements in second- and third-generation batteries and electric drive systems—which are already in development—will not translate into a longer pure-electric range, but instead will either improve performance or use smaller batteries (which would reduce cost and weight) while maintaining this 40-mile target.

If the battery pack is discharged and the gas tank is empty, the system will continue to operate with reduced performance in "limp-home" mode, drawing on the battery reserve. This, however, is for emergencies only. Using this mode routinely may degrade battery life, which is projected at 10 years.

Regenerative braking (essentially turning the motor into a generator under deceleration) is used to feed energy to the battery pack, and the transmission lever offers the driver two modes of operation. Select the ordinary D position and the car coasts when you lift your foot off the accelerator pedal, unless you depress the brake pedal. There's also low, or city, mode, in which lifting off the accelerator induces an immediate regenerative braking effect that slows the car dramatically. Voltec has no conventional transmission, since electric motors operate over a much wider range of rpm than gas engines. There is step-down gearing incorporated into the differential.

The Volt will achieve its 40-mile range while using only half the energy contained in its battery pack, or 8 kwh, the equivalent of the energy contained in about 1 quart of gasoline, which speaks to the efficiency of electric-drive technology. GM expects that competitive advantage in the electric-car arena will derive from a combination of battery technology and the control systems that manage the way in which batteries discharge, recharge and perform. GM has opted to produce its battery packs internally, using cells made in Korea by LG Chem. That company's U.S. subsidiary, Compact Power, won out in competition with A123 based largely on Compact Power's chemistry and safety technology.

These large-scale battery packs pose problems never encountered by the small units found in laptops and phones. As the battery discharges and recharges, the state of charge in each of its 200-plus cells varies. But there's little tolerance for variation because both the charging and discharging efficiency is limited by any cell that's underperforming—the pack is only as strong as its weakest link. It's not possible, however, to recharge an individual cell. Instead, the surrounding cells in the module must be discharged down to the level of the weakest one, then the entire module recharged together. Add in the complication of doing this dynamically, with wide variation induced by driver demand on the system. There's a lot of electronic wizardry going on under the plastic cover, and GM has so far declined to lift the veil on itst latest technology. LG Chem has developed a separator within each cell with a safer failure mode, it says, than those from other manufacturers. If a pinhole develops in the separator, or in the less likely event of a puncture through the battery, the failure is limited to that area. In most li-ion cells, penetration of the separator results in rapid disintegration of the separator and in extreme instances can result in fire.

The Drive
For all the radical departure from traditional automotive engineering that's going on here, driving the test mule proved remarkably unremarkable. It drove like any common car. It accelerated, steered and braked in ways that wouldn't disturb any driver who was unaware of the underlying technology. The big differences: it was all but utterly silent, devoid of even the whirring and gear-whining sounds we're accustomed to hearing from EVs. Since there's no disruption by gear-changing, it's even more liquid-smooth than the latest luxury sedans with their seven- and eight-speed automatic transmissions. Unlike a Think, or several other prototypes we've driven, there was no golf-cart sensation at all, no sense of driving around in a science fair project or lab experiment—just solid, predictable, linear response to accelerator-pedal inputs.

Our drive was within the confines of GM's Warren Technical Center, where we found room to make a couple of foot-to-the-floor runs up to an indicated 100 kilometers an hour (62.1 mph) on the vehicle's metric speedometer. The car felt heavy for its size—the electric drive system adds about 700 pounds to the mass, and we had four full-size adults aboard and some of GM's test gear—but the center of gravity, thanks to that floor-mounted battery pack, is very low, which aids handling.

The ride quality was good, as was the steering, and the integration of regenerative and normal friction braking (using hydraulic brakes with electric-power assist) was better than is the case in many hybrids now on the market. When using the D setting on the transmission lever, there was a slight sensation resembling sponginess in the brake pedal, but engineers told us this has already been tuned out of the newer prototypes. Using the L or city setting, the car decelerated sharply when lifting off the accelerator. This would be useful when driving down a steep grade and tolerable in a stop/go city-driving situation, but it's too aggressive to be used on the highway.

We focused on the electric-car portion of the experience, but we must note that for a test mule, the Voltec one was exceptionally buttoned down and not at all crude. Which suggests good things in store for the Cruze on which it was based.

Bottom Line
The Voltec mule was so quiet and smooth that we were left thinking that it didn't belong in a Chevy-branded compact so much as in a luxury sedan, where the projected price of near $40,000 would be a relative bargain. Speaking of pricing, that widely quoted $40,000 mark isn't the final word. Much depends on the state of the economy and the price of gasoline when the Volt comes to market in November 2010, but even if the price gets that high, there's a $7500 tax rebate from the federal government to offset it.

Whatever future is in store for General Motors, the Volt technology holds great promise. If one of the new green startup auto companies had it, that company could march straight off to Wall Street, float an IPO and likely get more financing than GM's current market capitalization.

If you have any issues or complaints, please write to the head of Government Motors at The White House, 1600 Pennsylvania Avenue NW, Washington, DC 20500.

 

[tomahawk6]

They wont be able to sell any cars but perhaps the government will just give away whatever GM makes ?

 

[Colin Parkinson]

You can bet the list of authorized vehicles for the government of both Canada and the US will lean heavily towards GM products, having a hybrid will mean the Prius will get booted from the list.

 

[a_majoor]

Laying it all out. The Obama Administration cannot let them fail since this is the payoff for political support: how much support will the UAW give the Administration and the Democrat Party if they are handed a poisioned chalice or nothing at all?

http://volokh.com/archives/archive_2009_05_31-2009_06_06.shtml#1244077649

Chrysler Bankruptcy Case to Be Heard by Second Circuit Friday:

Bankruptcy judge Arthur Gonzalez has permitted an appeal by Indiana pension funds to the Second Circuit on his ruling allowing a sale of the company to Fiat. According to the NYT:

    The judge, Arthur J. Gonzalez, said that an appeal that sought to block the sale to Fiat could be heard directly by the United States Court of Appeals for the Second Circuit, a move that the American carmaker had wanted. Normally, appeals to bankruptcy court decisions are heard in federal district court, which sits directly above bankruptcy court in the judicial hierarchy. But cases may be moved directly to the appeals court if a judge finds it necessary.

    “This case involves a matter of public importance, and an immediate appeal may materially advance the progress of this case,” Judge Gonzalez wrote in his order.

    The appeal was filed by lawyers for a group of Indiana pension funds, which objected to the sale because they were seeking more compensation for the Chrysler secured debt they hold.

The WSJ reports today that the Second Circuit will apparently hear the appeal on Friday:

    Chrysler LLC's exit from bankruptcy could hit a speed bump Friday when a federal appeals court is scheduled to hear from a group of Indiana state pension and investment funds objecting to the auto maker's reorganization.

    The funds are trying to block the sales of most of Chrysler's assets to Fiat SpA, contending the deal's terms regarding secured lenders are unconstitutional.

    The sale was approved on Sunday by the U.S. Bankruptcy Court in Manhattan, but the funds filed an appeal. The U.S. Court of Appeals for the Second Circuit will hear the case on Friday.

Perhaps Co-Blogger Zywicki can explain what all this means for bankruptcy proceedings and likely outcomes. It seems to me unlikely, but I defer to bankruptcy experts, that lenders will win the appeal. The WSJ article talks with a bankruptcy expert:

    A lot is riding on the outcome. The Obama administration is hoping a speedy restructuring of Chrysler through bankruptcy will signal the road ahead will be smooth for General Motors Corp., which the Treasury ushered into bankruptcy protection on Monday. Moreover, Fiat can back out of the deal if bankruptcy proceedings go beyond June 15.

    "You can't take away from the fact that this is a huge case. There's a huge amount of public interest," said Earle Erman, a bankruptcy attorney with Erman, Teicher, Miller, Zucker & Freedman, a Southfield, MI based firm. "This is obviously an unusually large case."

    A ruling in the lenders favor appears unlikely given the bankruptcy code primarily requires they get a fair repayment on their investment, Mr. Erman said. He declined to speculate on a separate argument they are making challenging the legality of providing a manufacturer like Chrysler money from TARP, which was designed for financial institutions.

    People close to the case say that if the pension funds lose their appeal, their chief lawyer, Thomas Lauria of White & Case, may try to take the matter to the Supreme Court, a move that could impose a significant delay on Chrysler's reorganization.

I wanted to note, further to an earlier post, that at issue are rights of the secured/senior creditors. They argue that the effect of the reorganization plan is to benefit the junior creditors, and the union especially, at the expense of the seniors:

    The Indiana pension funds — the Indiana State Teachers Retirement Fund, the Indiana State Pension Trust and the Indiana Major Moves Construction Fund — own just $42 million of Chrysler's $6.9 billion in secured debt, and the other secured lenders have already agreed to accept a settlement paying them about 29 cents on the dollar.

    The Indiana funds bought Chrysler's debt a year ago for 43 cents on the dollar, and are arguing the restructuring plan is unfair because U.S. law normally puts secured lenders at the front of the line for repayment. They say junior creditors are being put ahead of senior secured lenders in the plan.

There are two questions here. One is whether it is in fact true that the reorganization plan (the same basic issue arises for the GM bankruptcy) benefits junior creditors, starting with the UAW, at the expense of the senior creditors. The second is whether the senior creditors have in fact been dealt with unfairly, given that they could, in principle, go to court — and as the Indiana pension funds have done. Although I would welcome hearing anything that Todd might want to say, the answers seems to me pretty clearly, yes and yes.

In both Chrysler and GM, the junior creditor UAW wound up with far more equity — that is, whatever it is, however, speculative, that the parties thought might be of value in the future — than the senior creditors did. It doesn't really help to say that absent the government bailout, they would have done even worse. Bankruptcy, as I understand it on this matter, is about the relative claims of the parties, relative to each other, seniors and juniors. In fact, although a number of commenters raised it in a post of mine yesterday, I don't see many financial commentators disputing that at all (although, to be sure, I won't rule out confirmation bias!).

This leads directly to the second question — why, consistent among other things with fiduciary duty, didn't the senior creditors, or more of them, contest this reorganization and assert their rights? I said yesterday that they were "strong-armed" by the administration which, after all, has extended financing to many of them and so altered their incentives with regards to asserting legal rights. Mirabile dictu, today's Washington Post editorial on the GM bankruptcy says (emphasis added):

    Also worrisome was the strong-arming of the company's bondholders, who got far less equity in return for their money than the UAW, the president's political ally. The administration wants to spin GM back to the private sector as soon as possible. But private investors may have been durably scared by the union's display of clout. Indeed, the UAW boasted to its members that it blocked a plan to build GM cars in China and "negotiated new opportunities for UAW involvement in future business decisions."

The retort says, look, the seniors could have exercised their rights and gone to court, but they didn't. If it's because they received government money and so have to dance to the government's tune, that is in the interests of the taxpayers, who are otherwise going to lose as value is transferred first to the creditors in bailing them out, and then to creditors when they take money that would otherwise go to fixing Detroit.

The counter-response is that the problem is not so much one of junior and senior creditors, it is, as David Skeel has noted, a problem of politically favored insiders and politically disfavored outsiders. It is highly unlikely to be efficient, either in the allocation of credit in the economy or in the making of cars, for the government to be naming winners and losers not even on the basis of its (likely dubious) estimations of efficiency, but instead on the basis of the UAW insiders and creditor-fiduciary outsiders.

My experience negotiating lending deals in the developing world suggests that the most important characteristic is not creditor-debtor, but insider-outsider when it comes to efficiency when a government is somehow involved. In the areas I am familiar with, independent media, government involvement comes in the form of broadcast licenses, newsprint monopolies, government agency advertising, all sorts of ways. Crony capitalism in one way or another, rent-seeking, as Megan McArdle explains:

    Bankruptcy is often portrayed as a question of creditors v. debtors, and of course that's not a ridiculous frame. But just as important is the tension between insiders and outsiders. This conflict has existed for as long as we've had insolvency, and it doesn't match up to the creditor/debtor divide .... I suspect Obama views his administration's actions as moving along the X axis towards a more debtor-friendly system. But in fact, Chrysler, not the UAW, is the debtor, and it's not likely the company would have ended up in liquidation. The administration's actions weren't debtor-friendly, they were insider friendly. This was classic collusion among creditors, and it's why the parts of the bankruptcy law that deal with Section 363 sales spend so much time talking about the importance of avoiding sham transactions. Cutting back on that sort of abuse was at least as important an achievement as giving debtors a fresh start.

It is far from mad to point out, as McArdle does, that the current Detroit policies are far less about the rights of creditors than they are about the privileges of political insiders. Yet the frame against which the Second Circuit will consider this will be one of creditors versus creditors versus debtors, in the context of something approved by a bankruptcy judge who notes that 90% plus of the senior/secured creditors have approved. The "strong-arming" that caused them not to enforce their legal rights — the frame of favored insiders and disfavored outsiders — will not be on the table. In my estimation, that's to be regretted because, yes and with all due respect to everyone, it does remind me slightly too much of deals in Skopje and Belgrade.

 

[a_majoor]

GM will slide into the twilight because they no longer have products that will appeal to their consumer base. Note the true effect of the Prius for Toyota:

http://thesecretsofvancouver.com/wordpress/meet-bob-lutz-the-man-that-could-have-saved-gm/economy

Meet Bob Lutz - The Man That Could Have Saved GM
June 8th, 2009 Posted in Economy

The only Ford I would ever consider buying is the Mustang. This is because Ford has yet to build a rival to the best car they ever built. Here’s an excerpt of a great article from the Washington Post on how the Volt (a car that can only go 40 miles and will cost $40K) came to be. And why it spells the end for GM.

Bob Lutz , an executive who probably is not long for Government Motors, gets it.

Bob was forced to introduce the Volt - not because he believes it’s what we want, but because it’s what the government and the environmentalists want. (Note that hybrid sales have plummeted.)
GM is ready with the 2010 Chevrolet Camaro SS with a V-8 engine.

With an estimated 25 miles per gallon on the highway, the 400-plus-horsepower Camaro SS is another Bob Lutz car, a monument to Lutz’s and GM’s enduring hope that even as the company struggles to escape bankruptcy as a smaller, leaner producer of fuel-efficient vehicles, the glory days can somehow be resurrected.

“Sexy with charisma,” is how Lutz recently described the Camaro. “Some people don’t care for those kinds of descriptions today — it’s a different time,” says Lutz, who drives a gas-thirsty 2009 Corvette, a dream car of muscle lovers. “But we have new vehicles, too. We have the Volt. We are committed to the electrification of the automobile. We know this is the time.” (Sure.. job security.)
“In time, the government is going to legislate out of existence cars like the Camaro, the Corvette, the Cadillac CTS — all these acclaimed vehicles that have lately gotten rave reviews from the automotive press around the world,” he predicts. “So, ultimately, we are driven by legislation into the kind of excitement provided by the Volt.”

If you were to believe that Lutz commissioned the Volt because he thinks the environment needs to be saved from carbon dioxide emissions, or that the United States has a moral obligation to lead a greening of the planet, you would be wrong. “If you look at most of the mainstream media, you get the impression that 95 percent of Americans today want a vehicle like the Chevrolet Volt or a [hybrid such as the] Toyota Prius,” says Lutz. “And that, by God, the reason General Motors is in trouble, is that we have not offered a vehicle like that. But when you look at the reality, at today’s fuel prices, most Americans still want a conventional car.”

Why the Volt then? “Because it is an important symbol. We need it. It has a chance to change our image,” he says. (And Congress made them do it.)

As GM’s situation has become increasingly dire, and interested parties from President Obama to shareholders have demanded that the company start making more fuel-efficient cars, GM has pointed to the Volt as evidence of its changing ways. But the values that have long shaped this iconic company are deeply held, especially the passion for pushing the envelope of automobile performance and power. In many ways, the Volt, and GM’s subtle shift from old design priorities, represent a contradiction of those values.

“I just think GM is focusing on the wrong thing,” says Daniel Roos, an engineering professor at the Massachusetts Institute of Technology who studies the automobile industry. “The quality of its cars was horrible in the ’70s and ’80s, but it’s much better now. It has world-class vehicles: the Malibu and the Cadillac CTS. They should be [promoting] those and capitalizing on their strengths.”
A car is not an appliance, he says. A car is not a washing machine — the proof of which is that people do not lust after their washing machines. They lust after a beautiful car, he says. If you want reliable, go get yourself a refrigerator. A gorgeous car, he says, is an expression of power and yearning, especially for owners who hope the vehicles will inject excitement and romance into their otherwise mundane lives. “Show me a washing machine that can do that,” he says.

Lutz saw that driving a Prius constituted nothing less than a values statement for many of its owners, a means to bask in the perception of their own enlightenment. Even more alarming, thought Lutz, was that some consumers not enamored of the Prius itself nonetheless saw its existence as proof of Toyota’s wisdom. The Prius’s presence alone was drawing people to Toyota lots, where the curious bought everything from bigger sedans to sport-utility vehicles and trucks with about the same gas mileage as their GM counterparts, groused Lutz. Part of what he called the “halo effect.”
No matter how we twist the numbers, we were going to lose a couple of hundred million dollars a year,” Lutz recalls. “And Rick Wagoner quite rightly, along with the finance people, said, ‘We can’t do that. We can’t go to the board of directors and come up with a program [for hybrids] costing the bigger portion of a billion dollars and when the board of directors [asks] why are we doing this, we say, ‘Well, we’re going to lose money on it, but, well, we’re doing it to show that General Motors is technologically advanced and environmentally aware.‘ You know, back then, that wasn’t going to receive a very warm welcome.”

Which brings us to today…

Nutball environmentalists are dead-serious about their silly global warming theories and feel a primal need to assuage their guilt and show others how self-righteous they are. It is all about pushing buyers’ buttons. His buttons, and those of a majority of Americans, are pushed by big, powerful cars and trucks, the essence of America on four wheels. But ignoring the nutballs cost them their company.
Capitalists don’t have the luxury of ignoring part of their potential customer base, because in a Capitalist society, you can be sure your competition will embrace them.
Too bad they didn’t get the Camero out earlier - it could have been the mini-van for GM.
What would you rather buy - The Camero or the instantly obsolete 40-mile Volt?

Not that it matters: The latest Rasmussen Reports national telephone survey shows that 43% of current GM owners are not likely to buy another GM car, while 16% are not sure.
Democrats who own GM cars are somewhat more likely than others to buy their next car from GM…

 

[a_majoor]

Changing the narrative. By the end of this administration you wil need a huge index file to keep track of what's what:

http://www.slate.com/blogs/blogs/kausfiles/archive/2009/06/15/steve-rattner-saves-detroit.aspx

Steve Rattner Saves Detroit!

Embarrassing suck-up post by Henry Blodget crediting "Barack Obama and Steve Rattner" with more-or-less saving General Motors, which "now plans to be profitable ... at a 10-million-unit US annual rate of sales, versus the 15 million previously" and which "has a new car that some people actually want to buy--the Camaro--which apparently gets 29 miles per gallon with 300 horsepower." ... Blodget's analysis: "Exciting!" ... a) "Barack Obama and Steve Rattner." I wonder how poor Ron Bloom feels. Bloom may have more power on the Obama auto task force than Rattner but he doesn't have the media connections. b) If General Motors doesn't "turnaround," will we be allowed to blame Rattner? ['Even Steve Rattner couldn't save GM'--ed Sigh] c) Rattner shows up and, boom, suddenly GM has "a new car that some people actually want to buy"!  It's amazing Rattner had time to design and produce the new Camaro so quickly with all his other financial and filmmaking activities. d) The 300-hp. Camaro gets 22 mpg overall--not bad, but it's deceptive for Blodget to use the higher "highway" estimate. e) The Camaro, with projected sales of around 100,000, isn't nearly a big enough deal in itself to save GM. And do you really think the Camaro's "halo" is going to get people to buy this? ...

Blodget seems like a journalistic marshmallow. Whatever news outfit helped rehabilitate this once-tarnished figure has a lot to answer for. ... Oh, wait. Never mind. ...

Update: A better-informed take from Robert Farago, who's perhaps too committed to the Bail/FAIL! thesis. Still ... On holdover GM bureaucrats:

If anything, Chapter 11 means they’re even LESS motivated than before. Think of it this way: if GM’s overlords screw the pooch (again), what are the feds going to do? Declare bankruptcy?

On the Presidential task force (PTFOA):

“Hands-off” or not, the 25-member PTFOA adds another level of bureaucracy above the existing GM bureaucracy. If each PTFOA member fires off fifty emails a day, that’s 1,250 more internal comms per day. The PTFOA also has a staff. Meetings. Agendas. Targets. Reports. Memos. The federal quango is a shadow governing body for a company that needs less management, not more.

True story: New GM is inherently worse than old GM. And it’s going to get worse from here.

Plus: But by 2012, GM will be 82% of the way toward saving 29% on engineering costs! Even Automotive News is laughing at them, apparently. ... 12:27 P.M.

 

[a_majoor]

The burning of the heritics begins!:

http://www.slate.com/blogs/blogs/kausfiles/archive/2009/06/26/the-uaw-has-a-long-memory.aspx

The UAW Has A Long Memory

The U.A.W., now a major GM shareholder, has delivered its final punishment to those auto workers who dared move to Spring Hill, Tennessee and show up the rest of the union by building reliable car without Wagner-style work rules.  GM's new small car will be made in Michigan, and the Spring Hill plant will close. .... P.S.: Nikke Finke has a better chance of making money producing this car than GM does. ... 3:52 P.M.

 

[a_majoor]

So the government spent all those billions to ensure customers could replay the Monty Python  Cheese shop skit:

WaPo blogger wants to buy Camaro, gets dealer runaround instead
by Alex Nunez on Jul 21st 2009 at 6:01PM

For many, car-buying is an experience that rates somewhere between pouring a basket of scorpions into your underwear and a visit to the dentist from Marathon Man. Some dealerships feel like hives of villainy more wretched than even the Star Wars Cantina, though being held at gunpoint by Greedo is likely preferable to enduring the overall auto-buying process at one of those retailers. After all, as Han Solo demonstrated, one can actually "deal" with Greedo in a satisfactory manner.

Dealing with anyone in a satisfactory manner was, unfortunately, not in the cards for Washington Post blogger Vijay Ravindran, who probably would have had better luck negotiating a peace treaty with the Rancor monster in Jabba's palace. Ravindran, guest-posting at WaPo's Achenblog, reports that with his nine-year-old Bimmer beginning to feel a little tired, he was ready to make the move to a new car. Now, Ravindran is one of these people who admits that "domestic sports coupe" is not a thought that had ever tickled his synapses before, but the 2010 Chevrolet Camaro's drop-dead looks changed all that. Ravindran started with a nearby dealer that advertised Camaros in the newspaper, and things pretty much tanked from there. He called the dealer, left a voicemail requesting a test drive, and promptly never heard back. Good thing the auto market is so strong right now that dealers can turn away prospective customers so easily.

Ravindran's efforts were similarly futile as he expanded his search to other area Chevy dealers, each of whom appeared to have an aversion to the general concept of getting him into a car. Or responding to his queries at all. The dealer that did finally engage him excelled only at giving him a slimy runaround. Granted, we understand Camaros are hot commodities right now and that they may be hard to get, but Ravindran's story flies directly in the face of GM's post-bankruptcy spin about great dealers, great service, etc. You can read Ravindran's whole tale at Achenblog. As for Vijay Ravindran himself, he's no dummy: he's pretty much given up on his Camaro quest.

 

[muskrat89]

A co-worker has a leased vehicle and the lease is almost up so she's looking at buying new, buying out her lease, leasing a different vehicle, etc.

She's getting frustrated because the "dealers don't need to negotiate these days. Since the bailout stuff, they don't need the business"

 

[tomahawk6]

With the $4500 cash for clunkers bill there are alot of good deals out there. Some dealers are matching the government money so its like having a $9000 down payment.

 

[a_majoor]

Cash for Clunkers failed for the same reason Medicare/Medicaid is failing now and Obamacare will fail if ever implimented; perverse incentives upset market equilibrium (and clueless bureaucrats are running it).

Since most clunkers are worth (at most) a few hundred to a thousand dollars, the $4500 incentive brought an overwhelming number of applicants who were getting 4 or more times the market value of the clunker. Given the dealers pay the $4500 out of their own pockets and have to wait for rebates, many are now hanging on a thread as they wait for the Government to refund their payout (which is happening at a glacial pace).

In other news, Government motors claims for the Chevy Volt's economy are wildly overstated:

http://green.autoblog.com/2009/08/21/auto-x-prize-throws-water-on-gms-230-mpg-claim-offers-mpge-cal/

Auto X Prize throws water on GM's 230 mpg claim, offers mpge calculator
by Sebastian Blanco (RSS feed) on Aug 21st 2009 at 11:56AM

With all of the attention being paid to the 230 mpg number that the Chevy Volt will apparently be granted by the EPA, the Automotive X Prize thought it was time to weigh in on the subject of calculating fuel efficiency for vehicles that use energy sources other than gasoline. They don't like it. Instead, the AXP prefers MPGe, a "rigorous and more neutral measure" of fuel efficiency. The AXP's John Shore walked us through how the long-running competition thinks about MPGe. They've been at it for a while.

First, let's define MPGe. MPGe stands for miles per gallon equivalent, and measures fuel economy based on the energy content of a gallon of petroleum-based gasoline. For those who like formulas, the AXP defines MPGe as (miles driven) / [(total energy of all fuels consumed)/(energy of one gallon of gasoline)]). Understanding and using MPGe is important, now more than ever, Shore said, because MPG is no longer particularly useful from the consumer's point of view. "It is obsolete," he said. Shore gave three reasons for moving away from MPG:

The growing popularity of gasoline alternatives. When everyone was using gas (or diesel), MPG offered a decent way to compare the efficiency of different vehicles, especially if one drove prudently and understood how the ratings were calculated. But putting, for example, E85 into the tank changes the whole equation.

We are now seeing vehicles that can use two power sources, most obviously plug-in hybrids that use electricity and a liquid fuel. MPG really loses its meaning when there is more than one fuel and only looking at the liquid fuel allows PHEV advocates to claim they get 100 or 150 mpg, which is kind of true but also deceptive, Shore said.

Lastly, as soon as we introduce plug-in vehicles, the efficiency of the vehicle – no matter how you measure it – becomes a very strong function of how far you drive. This issue is not addressed by MPGe, but should be considered by people who want to understand fuel efficiency better. MPG is MPG no matter how long you drive it for. But a plug in hybrid changes depending how long it's been since the last charge.

Since MPGe is the "figure of merit" that the AXP is using for the competition, they're confident that it's the best way to compare apples to pineapples. Shore noted that the natural gas industry faced a similar problem when they introduced CNG cars, and also chose to use MPGe (then called GGE, gallon of gas equivalent).

Shore and the AXP realized that most customers don't have any intuition about what kilowatt hours mean, so he added a simple calculation to the spreadsheet they use to calculate MPGe that includes the number of hours you plug in your vehicle and which type of outlet you're plugging into. This allows users to see how long it takes to get a set amount of equilavent energy from a gallon of gasoline. For example, a vehicle plugged into a 110 V circuit for eight hours gets about the same energy as what is in a third of a gallon of gasoline. Shore was surprised by this, and said that, "This shows why gasoline has remained king. in five minutes, you can put a sh*tload of energy into a car."

Shore added that, while the AXP thinks that MPGe is part of the answer, consumers will need to know three things about fuel efficiency numbers in the future: the MPGe, what sort of driving was done to achieve those numbers and, if the vehicle has a plug, how far the vehicle was driven. Armed with this information, Shore said, consumers will be able to accurately compare how efficient different vehicles, no matter what type of powertrains they have.

 

[tomahawk6]

I heard an interview with the Director of the Volt program - his last name rhymn's with kilowatt Tony Posawatz. As he desribed the Volt it did sound interesting. Battery life of 10 years. The battery is built in modules so you could replace only the bad part. The Volt has an onboard generator to replenish the battery as it is driven. It takes 6-8 hours to charge plugged into your standrad outlet. It still has a gas engine for conventional driving. It seems they are selling the car as an electric commuter car for drives of 40 miles. While the car may be green it still will rely on fussil fuel driven electric plants. He hopes this will encourage electric power plants to transition to green energy - definitely on the same page with Obama.

 

[a_majoor]

We better seize the assets and auction them off right now if we ever want to see any of that tax money back....

http://www.slate.com/blogs/blogs/kausfiles/archive/2009/10/02/rattner-s-legacy-the-chooch-is-at-the-door.aspx

Rattner's Legacy: The Chooch Is At the Door

GM's sales are down 45% from last September (when sales were already bad enough to drive the company into banrkuptcy). Chrysler is down 42%. Ford is only down 5%. Car buyers are clearly punishing the two bailout recipients brutally. Robert Farago of Truth About Cars predicts that GM and Chrysler will both "go down by the end of next year" without a second, new federal bailout. The only question, he says, is whether the two bailed out manufacturers will need the cash before the 2010 midterm elections. He adds:

    For those of you who say the Obama’s army never really intended to rescue either automaker, that they were simply subsidizing the companies to facilitate a soft landing, I say bullsh[xx]. Washington’s big swinging dicks, led by private equity money men with a similar anatomical affliction, honestly thought they could “fix” Detroit.

Maybe they could have. But it looks like they didn't. ... Most obviously, they seem to have grossly misperceived consumers' reaction to the equities of the bailout itself.  And that 45% can't be all Republicans. ... 1:53 A.M.