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.

Full Text: GM & Chrysler Restructuring Plans as Submitted to U.S. Treasury Dept. Feb. 17

The following two documents were required by GM and Chrysler under terms of federal government loans totaling $18 billion made in December.  With these plans, the two automakers are asking for an additional $30 billion in loans to avoid bankruptcy.  Decisions on further federal assistance will be made by a federal task force led by Secretary of the Treasury Timothy Geithner and Chairman of the President’s National Economic Council Larry Summers.

General Motors Restructuring Plan Submitted to U.S. Dept. of the Treasury (Click for PDF)

Chrysler LLC Restructuring Plan Submitted to U.S. Dept. of the Treasury (Click for PDF)

Statement of Treasury Secretary Timothy Geithner:

“I have received restructuring reports from both General Motors and Chrysler, and they have been posted on the Treasury website. NEC Director Summers and I will be convening the President’s Task Force on Autos later this week to analyze the companies’ plans and to solicit the full range of input from across the Administration on the restructuring necessary for these companies to achieve viability.”

GM, Chrysler To Ask Treasury for More Money Today

Unknown how much more above the government’s previous commitment GM will ask for, but Bloomberg is reporting Chrysler will ask for an additional $3 billion.

• GM, Chrysler push for more U.S. aid after mistakes – Bloomberg

Bailouts, Stimulus, Etc. – What Has The Rush Gotten Us?

Drudge Report has been trying mightily since Saturday to “sell” this story: If there was such a hot rush to pass the stimulus bill, why was President Barack Obama taking the weekend off in Chicago?

What Drudge does is show he’s in the tank for the Republicans when he runs a picture like the one to the left “above the fold” all weekend with the following headline: What’s the rush? ‘Urgent’ stimulus on hold for Obama’s weekend off …

First of all, no president of the U.S. has a “weekend off.” Not even George W. Bush, although some may say he took years off.

This is a potshot – Drudge urging the producers over at Fox News to beat up on the president.

But, despite Drudge’s partisanship, he points out a real problem with Republican and now Democrat management of the U.S. economic crisis.  Our politicians are scaring us silly and ramming TARPs, assorted bailouts and stimulii through the government machine with very little transparency and even less accountability.

Back in the Fall when the Troubled Asset Relief Program, aka $700 billion bailout, was rammed through Congress there was lots of scary talk about meltdowns and companies so big and far-reaching that we couldn’t possibly let them fail.  $350 billion of that bailout went out to the banks and Wall Street.  We still have barely working credit markets.  They’ve loosened up a bit, but nothing much has changed in the past several months.  We also know that a lot of our tax dollars were wasted on bonuses, exorbitant compensation for failing management teams, mergers and acquisitions.

Read more

Ohio Sunday Papers – February 15

• Celeste, (Chris), exploring U.S. Senate run – The Plain Dealer
• Part of Strickland’s school funding formula involves judgement calls – Columbus Dispatch
• Plan calls for judging teachers on results – Columbus Dispatch
• Editorial: School Funding – Evidence of Confusion – Akron Beacon Journal
• State’s use of stimulus: Plodding or on Pace? – Columbus Dispatch

• Economists: This recession deeper than ‘83 – Dayton Daily News
• Op-Ed, Thomas Suddes: Ohio Legislature = Boys Town - The Plain Dealer
• GM, Chrysler labor talks slow – The Plain Dealer
• Steamed about heating bills – Toledo Blade
• Surprise: Pryce becoming a lobbyist – Columbus Dispatch
• Ohio Turnpike toll plan takes from other states – Toledo Blade
• Food inspection complex, has holes – Columbus Dispatch
• Payday lenders use loophole to continue high interest rates – The Plain Dealer
• Health agencies brace for cuts – Columbus Dispatch
• Editorial: Improve Democracy – Columbus Dispatch
• Op-Ed, Roger Geiger: Secret ballots must remain in union elections – Toledo Blade
• Op-Ed, Joe Hallett: High School buddies solve economic mess – Columbus Dispatch

Mary Jo Kilroy’s Committee Assignment Puts Her in Center of Economic Recovery Efforts

Freshman U.S. Rep. Mary Jo Kilroy has gotten a seat on the high profile House Committee on Financial Services chaired by Massachussetts Rep. Barney Frank.

Frank’s committee has taken center stage in combating the U.S. financial crisis.  The much and rightfully maligned Troubled Assets Relief Program, aka, $700 billion bailout, originated in Financial Services.  Frank also pushed for a bailout of the U.S. auto industry, but Senate Republicans killed that effort until the Bush Administration stepped in with $17 billion for GM and Chrysler late last month.

Kilroy and her fellow Congressional Democrats will be in a unique position very soon after President-elect Barack Obama takes office in a couple of weeks.  The original bailout bill called for $350 billion of the $700 billion total to be disbursed by the U.S. Department of the Treasury, led by Treasury Secretary Henry Paulson.  Paulson has been roundly criticized for the money not serving the purpose for which Congress intended – unlocking frozen capital markets.  The Government Accountability Office and an oversight arm of the committee which Kilroy now serves found several problems with how the money has been disbursed, chief among them accountability.  Bailout dollars have been used to pay out executive bonuses, sit as cash holdings and used by some banks to acquire others.

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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.

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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

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

Auto Industry Bailout Update: All Eyes on Bush

5:15 p.m.

• Bush changes mind, may bail out auto industry – Politico
• White House readies new auto industry rescue - Associated Press
• GM, Chrysler may win reprieve with access to TARP – Bloomberg
• White House considers other funds for Big Three – Washington Post
• Dodd: GOP tried to create a “wreck” - Washington Post
• UAW at center of dispute over bailout – New York Times

Bad Time to Retool an Industry

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