As U.S. Auto Sales Slide Further, GM Looks for Double Dip Bailout at EU, Honda, Toyota Look for Loans

GM Goes Begging From EU: Financial Times

General Motors said on Tuesday that its European arm could run out of money by as early as next month, putting up to 300,000 jobs on the continent at risk.

Fritz Henderson, the struggling Detroit carmaker’s chief operating officer, said that GM would face a liquidity crunch “early in the second quarter” if emergency funds from European countries did not materialise.

Honda may be looking for Japanese government loans: Bloomberg

Honda Motor Co., suffering from a 38 percent plunge in U.S. auto sales in February, may ask to borrow money from Japan’s government to lend to U.S. car buyers.

The amount of the loans and timing of the request to the state-owned Japan Bank for International Cooperation haven’t yet been determined, spokeswoman Akemi Ando said by phone today.

Toyota Wants a Govt Loan. Let the Outrage Begin: BusinessWeek

In yet another sign that Toyota Motor Corp. is run by human beings, the company’s finance unit is asking the Japanese government for a $2 billion loan, writes my colleague, Ian Rowley. Toyota blames tight credit in the U.S. for its newfound borrowing needs. For all its strength, Toyota is not immune.

But here’s my question: Will we see outrage among Japanese voters and some media as a company hoarding $20 billion in cash asks for government money? My guess is no. The Japanese government and Central Bank have a long history of intervening on behalf of their home companies. The Central Bank has kept the yen weak for years to boost exports of cars, electronic goods and other items to the U.S. So loaning a few billion bob to Toyota won’t raise a hackle in Japan.

Auto sales still in the tank in February: New York Times

Sales for the month were down 53 percent at General Motors, 48 percent at the Ford Motor Company, 44 percent at Chrysler, 40 percent at Toyota and 38 percent at Honda.

G.M. and Ford both said the steep declines would force even more production cuts at their plants. The companies expect their second-quarter production schedules to be at least one-third lower than in the same period in 2008.

Strickland Makes Right Call on Importance of Auto Industry Supply Chain

Yesterday, Gov. Ted Strickland looked great and sounded all the right themes on CBS’ Face the Nation.  Of all the governors on the panel, he was the only one to say anything remotely newsworthy.  In Ohio and Michigan we understand the U.S. auto manufacturing is not only the Big Three, it’s the quarter of a million Americans working making parts and supplies for GM, Ford and Chrysler.  In Ohio, the number of people employed in the auto parts industry alone is over 97,000. (MEMA)

In answering questions regarding what are the largest problems in Ohio, Strickland told CBS’ Bob Schieffer that unemployment and foreclosures were huge issues, and continued about the importance of the auto industry – domestically and foreign-owned:

SCHIEFFER: What if one of the auto companies goes under?  How will that impact out in your state?

STRICKLAND: Hugely — hugely. And it will not only impact the Big Three; it will impact all auto
companies, including Honda and Toyota and all the others, because they have the same supply network.
And this supply chain is very fragile, and if it starts to collapse, it could have a cascading effect that could, quite frankly, cripple an industry that has been so vital to the economy of our entire nation for so long. So it’s very important that the auto industry get the help it needs to survive.

And I’ve had officials from the Honda corporation come to me, say to me, Governor, we’re not usually in
the business of advocating for our competitors, but it is so important that the auto industry and the Big
Three be preserved.

Otherwise, the economy of this country will suffer perhaps irreparable harm, and we just cannot let that
happen.

Governor Strickland’s fears are also dealt with by the Economist in the Feb. 19th edition.  In an article with the subhead, GM and Chrysler Say the Need Help, So Do Their Suppliers, the author says there are three large problems facing President Obama’s new U.S. Auto Industry Task Force, including, “The third is what help should be given to the car-parts industry, which receives far less attention than its famous customers, but which is facing acute problems of its own.”

One of the hallmarks of our current economic crisis is the constant unwinding of problem after problem.  Too many foreclosures turned into failed mortgage backed securities turned into uncapitalized credit default swaps.  In the case of the auto industry, failure of one or more of the Big Three turns into parts suppliers belly up turns into problems for the foreign-owned U.S. car plants.

Ohio Sunday Papers – It’s the Economy and Education with a smattering of Fisher, Brunner

• Editorial: Lawmakers must stop Strickland from killing charter schools – The Plain Dealer
• Editorial: Governor needs to tweek how he pays for education reform – Akron Beacon Journal
• Editorial: No Stimulus for Teardown – Toledo Blade
• Op-Ed, William Hershey: Ohio Dems Face Likely ‘Family Fued’ – Dayton Daily News
• Op-Ed, Thomas Suddes: Will Ohio House Dems Hold Together on Budget? – The Plain Dealer
• Op-Ed, Joe Hallett: Governor Sinned a Bit in Securing Manna from Washington – Columbus Dispatch
• Welfare rolls soaring in Ohio – Columbus Dispatch
• Toledo aid agencies fear what’s over horizon – Toledo Blade
• Late bill payments cost state – Columbus Dispatch
• Big repairs needed for U.S. automakers – Toledo Blade
• How would you spend $500 million taxpayer dollars? – The Plain Dealer
• Dems’ fight a cost of success – Cincinnati Enquirer
• Op-Ed, Dennis Willard: Race crucial for Fisher, Brunner – Akron Beacon Journal
• Brunner: Senate bid not a conflict – Columubus Dispatch
• Ohio tries to clean up payday lending one more time – The Plain Dealer
• Op-Ed, Jonathan Riskind: Obama’s economic plans leave some edgy, angry – Columbus Dispatch
• Development board’s City Center planning only quasi-public – Columbus Dispatch
• Farmland disappearing – Columbus Dispatch
• Preservationists hope to see some stimulus – Columbus Dispatch
• Ohio businesses must file sales taxes electronically for first time this year – The Plain Dealer
• Ohio officials OK new workers compensation program – Dayton Daily News\
• KELLY PAVLIK COVERAGE – The Youngstown Vindicator

BusinessWeek: You Won’t Fix the U.S. Auto Industry on the Back of the UAW

2. Some southern Republicans think this is all the UAW’s fault. Not so. Wages are pretty competitive. The JOBS bank (that paid layoff clause that everyone hates) is on its way out. The union does need to give on its rigid work rules and its gold-plated healthcare deal. But you don’t save Detroit solely on the UAW’s back.

That quote is number two on a six-item list of things for our two new Car Czars, Timothy Geithner and Larry Summers, to consider as they set up a task force to help the U.S. auto industry help itself.  The article is online at BusinessWeek.

Does anyone else feel that Messrs. Geithner’s and Summers’ plates are already too full?  The Big Three Automakers are the industrial driver in most aspects of the once mighty, now pathetic U.S. manufacturing market.  In terms of GDP, what do you think has supplanted industry – which creates real, three dimensional value?  My armchair economist’s view is that is has been financial services, health care and government.

Now ask yourself, what is the root cause of or at the very least, one of the two or three root causes of our current economic predicament? Financial Services …  Who in the Administration are the two most in the tank and a part of that financial services, unregulated slop bucket for the investment class?  Messrs. Geithner and Summers.

The auto industry – and American workers all the way down the supply chain – are either going to be royally screwed by these two, or, perhaps we’ll finally see some of the economic and public policy brilliance we’ve heard so much about but hasn’t been on display yet for President Barack Obama.

Numbers of the Day: U.S. Auto Sales Dismal December, Down Overall in 2008

Word of the Year 2008: Gotta Be Bailout!

In six days when the American Dialect Society chooses its 2008 ‘Word of the Year,’ I’ve no doubt it’ll be “bailout.”  Bailout has become the word the government cannot kill.

Bailout has been used and overused.  It’s been in every newspaper or on every news-oriented website since September.  The largest economy in the world is now in a constant state of “bailout.”  The government hates this.  They would prefer euphemisms.  Bailout just sounds so messy.

Read more

U.S. Sunday Papers | December 21

Los Angeles Times

• ‘Lethal Warriors’ in Iraq, linked to string of crimes back home
• Obama ups the ante on economic stimulus
• Op-Ed, Doyle McManus: Obama must spend wisely

New York Times

• Obama expands recovery plans
• Economy tests Obama’s vision of energy efficient auto industry
• White House philosophy stoked mortgage bonfire
• Russian push on treason raises fears
• Canada agrees to its own auto bailout
• Ambush raises unsettling questions in Afghanistan
• Op-Ed, Alan Blinder: Missing the Mark with $700 Billion
• Op-Ed, Tom Friedman: China to the Rescue? Not!
• Op-Ed, Olivier Roy & Justin Vaisse: Winning Islam Over

Washington Post

• Obama expands stimulus goals
• Extradition of terror suspects founders
• Tiny state, huge pain
• U.S. might double Afghanistan force
• Will executive pay packages get slashed?
• Op-Ed, Leonard Downie Jr.: Could we uncover Watergate today?
• Op-Ed, George Will: Executive powerplay makes Congress moot
  

Text: President Bush Statement on Whitehouse Bailout Deal with U.S. Automakers | December 19, 2008

(Source: White House Press Office)

 

9:01 A.M. EST

THE PRESIDENT: Good morning. For years, America’s automakers have faced serious challenges — burdensome costs, a shrinking share of the market, and declining profits. In recent months, the global financial crisis has made these challenges even more severe. Now some U.S. auto executives say that their companies are nearing collapse — and that the only way they can buy time to restructure is with help from the federal government.

 

This is a difficult situation that involves fundamental questions about the proper role of government. On the one hand, government has a responsibility not to undermine the private enterprise system. On the other hand, government has a responsibility to safeguard the broader health and stability of our economy. Read more

Fact Sheet: White House Auto Bailout Plan, December 19

(Source: White House Press Office)
 

Fact Sheet: Plan To Stabilize Financial System Is Limited In Size, Scope, And Duration

The Federal Government Is Acting Swiftly To Preserve Our System Of Free Market Capitalism And Return Our Nation To A Path Of Prosperity, Job Creation, And Long-Term Economic Growth

On October 17, 2008, President Bush visited the United States Chamber of Commerce and discussed the actions that the Federal Government has taken in response to the financial crisis. The President explained that the government took swift action to protect the financial security of the American people. One important element, the equity purchase program, is designed with strong protections to ensure the government’s involvement is limited in size, limited in scope, and limited in duration:

• The government’s involvement is limited in size. The government’s investment is capped for any individual firm that chooses to participate in this voluntary program, so that private investors retain control.
• The government’s involvement is limited in scope. The government will not exercise control over any private firm. The shares owned by the government will have voting rights that can be used only to protect the taxpayer’s investment – not to direct the firm’s operations.
• The government’s involvement is limited in duration. This program includes provisions to encourage banks to buy back their shares from the government when the markets stabilize and they can raise money from private investors. Read more

WSJ: Automakers Get $17.4 Billion from White House

Finally.

Wall Street Journal Article sketches in some detail.  GM and Chrysler will have to prove financial viability in March or the loans will be “called.”

Transcript: President George W. Bush at American Enterprise Institute, Includes Q&A | December 18, 2008

(Source: White House Press Office)

10:44 A.M. EST

MR. DeMUTH: Mr. President, what’s on your mind this morning?

THE PRESIDENT: First, thanking you for being the leader that you’ve been, and thanking AEI for generating good thought. People in the public arena need to have support for philosophy — and that’s what you provide, so I appreciate all your hard work.

I thought I’d share some thoughts about the presidency — you could call it “reflections by a guy who’s headed out of town.” (Laughter.) And then I’d be glad to answer questions — and foreign policy, if you want to. Read more

White House Considering “Orderly Bankruptcy” for U.S. Automakers

From AP:

President George W. Bush answers a question during a meeting of the American Enterprise Institute, a conservative think tank, in Washington, Thursday, Dec. 18, 2008. “Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring,” Bush said of the U.S. auto industry at AEI. “These aren’t normal circumstances. That’s the problem.”

From White House Press Secretary Dana Perino Today:

… I will tell you this: The President is not going to allow a disorderly collapse of the companies. That is not an option. Some people have assumed that that’s one of things that we would decide. That is not going to be the case. When the President says we’re going to take all of this into account he means that we’re going to do something. And we’re nearing a conclusion, we’re narrowing options. I just don’t have anything for you today.

Q Let me just ask two things quickly. Do you think the week will end without a decision? And, two — this may have been asked before, so forgive me if it’s a repeat — but when you say “disorderly collapse,” can you explain what that means? Does that mean that there’s some kind of collapse that’s okay, but a certain other kind of one is not?

MS. PERINO: By that I mean a disorderly collapse would be something very chaotic that is a shock to the system. There’s an orderly way to do bankruptcies that provides for more of a soft landing — I think that’s what we would be talking about. That would be one of the options. I’m not saying that that is necessarily what would be announced.

Chrysler, GM Up Ante on White House with Plant Closures

Two Toledo Factories Among Those Idled

General Motors and Chrysler announced today that they would idle some auto production plants and halt work in GM’s case on a new $370 million engine plant.

The suspension of work on the engine plant in Michigan could have some bearing on GM’s Lordstown facility as the Michigan plant will make the engines for the Chevrolet Volt.  Chrysler is temporarily closing two plants in Toledo that produce vehicles such as the Jeep Liberty and Dodge Nitro.

A story from Bloomberg quotes White House Press Secretary Dana Perino as glib and uninformed as usual:

White House spokeswoman Dana Perino said in an e-mail that “there’s nothing new on the auto front” as officials reviewed plans for a GM and Chrysler bailout. Today had been the earliest that the administration would finish a rescue proposal, a government official said yesterday, speaking on condition of anonymity.

Yep, “nothing new” she said with cutesy smile.

Whether or not the current $14-15 billion Chrysler and GM bailout deal was done, these plants might be temporarily closing.  All of the Big Three U.S. automakers and their foreign-based rivals are in the midst of severe sales slumps.  Cars are stacking up unsold at dealerships.  The idling of plants is expected to last until to mid to late January.

Ford announced earlier this month that they would idle some plants to reduce inventories.

What Happened to the Automakers Bailout?

Remember when the U.S. financial services sector was in its darkest hour?  My Lord, Congress, the President, Hank Paulson, Ben Bernanke and candidates for county commissioner all called for a bailout – nearly a trillion dollars worth.  Inside of a week Barney Frank and Chris Dodd marshalled the troops on Capitol Hill and we had ourselves a big bill.  Even being defeated in the House on its first go-round couldn’t stop the $700 billion love offering to the likes of Bank of America, JP Morgan Chase, Goldman Sachs and Wells Fargo.

Our government – Democrats, Republicans – executive and legislative branch – fell over themselves to deliver for Wall Street.  John McCain even suspended his presidential campaign for about 12 hours.

The Wall Street/Main Street construct has been used so much as to become trite.  Well, here goes another one.  Washington, Main Street needs some help now.  It’s called keeping the Big Three U.S. automakers solvent in the worst economy since the 1930s. 

Forget about the entitled UAW-represented autoworker for a moment and think about that machine shop you drive by on your way to work every day.  Think for a moment about the truck driver living next door.  Ask yourself what’s going to happen to your cousin Bob who works at the Chevy dealership and his 75 co-workers. Read more

Saturday Morning Clips – Auto Industry, Blagojevich Dominates the News

Automobile Industry Update

• Automakers, workers, Michigan pin hopes on White House – Detroit Free Press
• Chrysler’s supplier issues expand – Detroit Free Press
• GM to slash production – Detroit Free Press
• GM moves closer to bailout; Wagoner in talks with Bolten – Bloomberg
• White House ready to aid auto industry - New York Times

Blagojevich Not Bleeping Going Bleeping Anywhere

• Blago could decide future by Monday – Chicago Sun-Times
• Rahm Emanuel talked to Blago’s office about senate seat – Chicago Tribune
• IL AG: Blago unfit to serve, goes to court – Chicago Tribune
• IL AG: Petitions court to remove Blago – New York Times

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