Big Three face Lawmakers in House

Today, the leaders of the three major US automakers returned to the halls of Congress to meet before the House committee. I haven't seen any groundbreaking news today so it appears that little was accomplished. I feel that Chrysler, Ford and GM have done their part to justify their position and cannot understand why our politicians won't agree to a deal. They eagerly throw 700 billion to unworthy financial institutions but cannot find the resolve to spend 34 billion on companies that produce our cars.

Rep. Barney Frank is doing his part but cannot seem to rally the rest of the troops. From Automotive News:

"A senior U.S. congressional leader warned today of an "unmitigated disaster" if a major U.S. automaker were allowed to collapse at a time when the economy is already losing jobs at an alarming pace....With new data showing employers axed more than 533,000 jobs in November -- the highest monthly job-loss in 34 years -- Rep. Barney Frank urged the Bush administration to use money from a $700 billion bank bailout program to assist Detroit....Broad consensus exists between Congress and the Bush administration that the automakers need help, but officials are refusing to budge from their views on how to do it, with some lawmakers opposed to doing anything at all."

The killer is the last part of the quote. No one can agree on how to fund a bailout. Congressional Democrats want to use monies from the 700 billion TARP package and the White House wants to use the 25 billion dollar "re-tooling" fund. Why not just authorize another 34 billion specifically for the Detroit 3? After spending 700 billion on the evil banks, what is 34 billion more for these major companies?

There is not much time left, so hopefully clearer heads will prevail and a solution agreed upon. Let's hope for a quick plan so we can just get back to enjoying the Holidays!

What should the Big Three do for their "loans"?

First of all, Happy Thanksgiving to y'all! Hope you enjoy the day and enjoy the family, friends and food.

Have you thought about what the Big Three Automakers should agree to as they pitch their proposals to Congress next week? What are they going to propose as their solutions for the current crisis? It has already been leaked that GM is considering getting rid of some of their brands, like Saab, Saturn and Pontiac and Robert Nardelli of Chrysler has agreed to a salary of one dollar per annum. So what else should they agree to? Let's list some suggestions:

- CEO salary of $1.00.
- Trim or eliminate unprofitable brands.
- Commit to higher MPG standards.
- Commit to produce EV or PHEV autos, IN SIGNIFICANT NUMBERS.
- Discontinue bonuses or other perks.
- Discontinue the use of company jets.
- Force the UAW to make concessions, like the jobs bank.

These are just a few, I am sure you can think of more.

NOTE / RANT: I would like to point out that our Congress has the unmitigated audacity to harass the CEO's of the Big Three for flying to Washington in their corporate jets when every one of the 535 congressmen all do WORSE. They take bribes, are afforded favors on top of favors, work about 6 months out of the year, get golden pension plans and golden health care. All for LIFE. Please, there has never been a bigger bunch of hypocrits than those who "serve" in Congress. Believe me, I write my congressmen all the time to let then know their sins.

News from the Day

A couple of interesting developments for today's news are worth noting. First, Tim Leuliette, CEO of suburban Detroit supplier Dura Automotive Systems Inc., has proposed a caravan of vehicles from the Big Three be dispatched to Washington. Apparently, this would be a show of support for what the US automakers are capable of producing. They would showcase hybrids, diesels, low-emission four-cylinders and possibly electric vehicles. Not a bad idea, in my opinion but the coup de grace would be Rick Wagoner making the entire trip in a Chevy Volt mule. The mule is basically a Chevy Cruze with all the innards of the upcoming Volt. Of course, they would have to make pit stops along the way to recharge the battery pack.

In other news, major automakers are pulling out of upcoming auto shows. I actually think this is prudent, considering the state of the global economy and the incredibly sagging sales of new vehicles.

From Automotive News:

"Nissan North America has canceled plans to participate in the annual Detroit and Chicago auto shows, citing depressed economic conditions. The decision puts Nissan and Infiniti brands onto a growing list of automakers that are skipping out on the major Detroit international marketing event in 2009. Also withdrawing from the January show are Mitsubishi, Suzuki, Land Rover, Rolls-Royce and Ferrari. The Chicago auto show is scheduled for February. Both shows draw media attention to new products from all over the world, in addition to displaying the product line-ups to local consumers. Nissan corporate spokesman Alan Buddendeck said the decision reflects the current state of the industry and not the Detroit and Chicago shows themselves."

What do you think? Should the automakers continue to parade around their concept vehicles and gas guzzlers during these trying times?

What's Next for the Big 3

Well, let's take a look at the highlights of the bill that Congress is dangling for the US automakers. The main stipulation is that the Big Three must submit their plans for using the money and what they will do in the future. Here are the highlights, bulleted from Green Car Congress:

• The Secretary of Commerce is to establish a program to provide up to $25 billion in direct loans to automobile manufacturers and component suppliers whose failure would have a systemic adverse effect on the overall economy.

• Any costs of the loans would be covered by funds previously appropriated for auto industry retooling loans under Section 136 of the Energy Independence and Security Act of 2007 (P.L. 110-140).

• Loan repayments and proceeds from the sale of company stock will be used to replenish funding for Section 136.

• Loan recipients must detail how they would use the funds to ensure their long-term financial viability and improve their ability to produce energy-efficient, advanced technology vehicles. Requires cost control measures and performance goals and milestones.

• Establishes an Oversight Board comprising the Secretary of Commerce, Secretary of Energy, Secretary of Transportation, Secretary of Treasury, Secretary of Labor and the Administrator of the Environmental Protection Agency. The Board will review and provide advice, and recommend changes, as necessary, for meeting the goals and milestones under the Financial Viability Plan. The Board also has authority to review significant company transactions (e.g., asset sales or investments valued at more than $25 million) and to give direction to the company with respect to such transactions.

• The government gets an equity stake in firms that get loans.

• Prohibits firms who receive loans from paying dividends to common stockholders for the duration of the loan.

• The companies will be charged 5% interest for the first 5 years and then 9% interest after that.

• Requires companies that receive the loans to place limits on executive compensation, including prohibiting golden parachutes. In addition to all of the limits placed on EESA beneficiaries, prohibits bonuses to executives whose base pay exceeds $250,000 annually.

The so-called Detroit 3 have until December 2nd to return with their plans. If you are interested, this is formally called the Auto Industry Emergency Bridge Loan Act.

In other news, Nancy Pelosi said that Congress' tough stance against the automakers was "good news". Apparently, she thought their performance this week in front of the House and Senate was not nearly enough and this now gives them another opportunity to prove themselves. Whatever Nancy.

Stock Market reaction

Did you notice the stock market tanked again yesterday? Apparently part of the sell off was a result of the snubbing that Congress gave to the Big Three. There is a bill with parameters that have been given to the automakers so they can submit their plans and thus receive "bridge loans". Of course, these are not real bridge loans as they are used when people are selling one house and wanting to buy another. These are just basic interest loans.

Later on today, I will try to post a summary of the bill and stipulations.

Nancy Pelosi and Harry Reid block US Automaker bailout

In a sickening twist, the two Congressional leaders blocked any bailout efforts until the Big Three submit their plans for the future and outline how they will use the money. You wanna talk about grandstanding, Pelosi is acting like she is the queen bee who is gonna force the automakers into submission. I feel like she is treating the Big Three like they are little children who need to write sentences until they learn their lesson. Here is a quote from Pelosi (whom I dislike more each day):

"Until they show us a plan, we can't show them the money."

This from the person who just pushed through the unprecedented 700 billion dollar banking bailout. So our government will not LOAN 25 billion to our auto companies but will readily SPEND 700 billion on evil, reckless banking institutions? It reminds me of a bible verse that describes hypocrites who can swallow a camel but strain at a gnat.

I am afraid if I were the CEO of GM, Ford or Chrysler, I would tell Nancy Pelosi and Harry Reid to stick it where the sun don't shine. This, of course, explains why I am not!

Senate compromise reached on US Auto bailout

There is breaking news out of Washington that an agreement/compromise has been reached by US Senators to fund a rescue package for the Big Three.

From Automotive News:

"Key members of the U.S. Senate have reached a bipartisan deal to fund a rescue package for the Detroit 3, according to a spokesman for U.S. Sen. Carl Levin.

It remains unclear whether the senators have enough votes or when the matter will be taken up. It's also unclear if Senate Majority Leader Harry Reid, D-Nev., has signed on to the compromise.

A draft of the compromise was being worked on by Levin, D-Mich., and Sen. Christopher Bond, R-Mo., among others."

Good news indeed, I believe. There is a press conference at 2:30 and I will report later what is announced. Stay tuned!

Wednesday's House festivities with the Big Three

Today's hearings in front of the House of Representatives committee for the Big 3 CEO's was an instant replay of yesterday. GM and Chrysler both reiterated that without Government assistance they would likely wind up in bankruptcy. GM, however, has made absolutely no provision for a bankruptcy so they seem to be completely relying on a loan.

There is a new development as Senators Christopher "Kit" Bond (R., Mo.) and George Voinovich (R., Ohio), began work on a plan to speed release of $25 billion in already approved loans. These are the ones intended to help the industry meet higher fuel-economy standards. I have no idea if they can get this on the floor for a vote this week, which seems to be the bigger issue. There simply is not enough sentiment in Congress to undertake the heroic effort needed to to get a bill over to President Bush by Friday.

If nothing happens this week, which I suspect will be the case, then I suppose the lame duck session could reconvene after Thanksgiving, which really cramps the lifestyles of our rich and famous representatives in Washington!

News from Washington

Well, the Big Three automakers got their chance to pitch their cause before the Senate today in hearings concerning the bailout. Rick Wagoner, GM, Alan Mulally, Ford and Robert Nardelli, Chrysler all took their turn at the plate to stake their claims. Basically, it was the same ole' song and dance about 3 million citizens losing their jobs, national crisis, military crisis, ad nauseum. Here are a few nuggets for you:

"Our industry ... needs a bridge to span the financial chasm that has opened up before us," General Motors Corp. CEO Rick Wagoner told the Senate Banking Committee.

Robert Nardelli, CEO of Chrysler, told the panel the bailout would be "the least costly alternative" when compared with damage from bankruptcy. "We just cannot be confident that we will be able to successfully emerge from bankruptcy," Nardelli said.

Alan Mulally, Ford CEO, told senators the auto industry was "a pillar of our economy. We look forward to working with you to be part of the solution" to the financial crisis. "We at Ford are well on our way to transforming our country and building a new Ford," he said.

At least Mulally was upbeat and not as rhetorical as the other two. Also speaking today was Ron Getelfinger, representing the UAW, but he did not mention anything worth quoting. Several Senators expressed their concerns about giving money to the automakers, which did not seem like a sensible decision for their long term success.

Most Senate Republicans are opposed to the bill, almost ensuring its death while in infancy.

Big Three head to Congress to beg

Well, today is the day of groveling for the Big Three automakers. Today the three leaders will appear before our representatives to plead their miserable cause and try to extract more monies for their cause. Nothing much has changed recently and the Senate is trying to craft a bill for an extra 25 billion dollars that can be "lent" to the automakers and auto suppliers.

Here is an update from Yahoo:

"Detroit's Big Three automakers are begging Congress for a $25 billion government rescue, while the legislation clings to life support on Capitol Hill and top lawmakers and the White House suffer from bailout fatigue.

Democratic congressional leaders want to tap the $700 billion Wall Street rescue package for new loans to U.S. auto manufacturers and suppliers, but the White House and GOP lawmakers say the beleaguered industry shouldn't get any new funds.

President George W. Bush and GOP lawmakers instead propose diverting $25 billion in loans approved by Congress in September — designed to help auto manufacturers retool their factories so they can make more fuel-efficient vehicles — to cover the firms' immediate financial woes.

But auto executives, backed by leading Democrats, insist they need another $25 billion in emergency loans to avert a collapse of one or more of their companies before year's end. That would bring the total federal help for the industry to $50 billion this year."

Sorry for the long quote but it sums up the events to data. What we see is that this extra 25 billion is the bone that will apparently keep the US automakers afloat. However, if GM is burning through 2.5 billion every month, then 8.3 billion dollars (1/3 of the 25 billion) would not last them long, do you think?

Most reports are saying that the bill for the extra 25 billion does not have much chance. What happens if they do not get any bailout funds? It looks like GM would have to declare bankruptcy by the time Obama takes office in January. Tell me what you think will happen this week!

Barney Frank writes legislation for US bailout

Don't you love this picture of US Rep. Barney Frank? He seems to be a college professor mulling over one of his student's attempts at placating him.

These are truly historic times we are living in and the incessant barrage of news stories about the economy (US and global), stock markets, bankruptcies and bailouts testify accordingly. Something I have been watching closely is the US automaker death spiral. The Big Three are anything but and if they do not receive a gratuitous cash injection, they may all be belly up before Barack Obama can get sworn in and work his magic. At least for GM, bankruptcy is as real as death and taxes at this point. Even though Rick Wagoner swears that this is not an option, we all know without government assistance, it will become reality.

The latest manuverings are being perpetrated by the current US "lame duck" session of Congress as it tries to force the Treasurer's hand in doling out some of the 700 billion dollars that was recently authorized. Congress is expected to convene this coming Monday, November 17th.

From Automotive News:

"The government's stake in U.S. car companies would be determined by the Treasury Department, under a House proposal to rescue the Detroit 3.

Taxpayers also would be paid back first when the automakers recover, Steve Adamske, a spokesman for Rep. Barney Frank, D-Mass., said in an interview today. Frank chairs the House Financial Services Committee.

The terms outlined by Adamske are among the details beginning to emerge as Congress prepares legislation to provide emergency low-interest loans to General Motors, Ford Motor Co. and Chrysler LLC. Frank is scheduled to introduce his bill Monday."

Hmmm. So we are supposed to believe that taxpayers are going to be paid back first AND that this would be a loan? I am highly skeptical, at best.

Do you think this will really be a "loan" or will it be monies thrown at the Big Three in a desperate attempt at staving off bankruptcy, only to be lost later when these companies are beyond salvation?

China's automotive crisis

Apparently, US automakers are not alone in their dire straits.

From China Daily:

Chinese automakers are facing their toughest challenge in three years as demand is falling and profitability is plunging amid rising costs. The country’s auto sales fell in August and September as a 64 percent stock-market slump and the economic slowdown curbed demand.

The government held a meeting in Beijing on Saturday of more than 10 automakers to gather industry suggestions, Chen said. “It is possible the government may announce policies" to help revive the industry, he added.

The government is also urging automakers to take advantage of a reshuffle in the global automobile industry and speed up development of vehicles using alternative energies, Chen said. China’s government will help automakers with technology and financial support to make progress in the area of electric cars, Chen added.

It seems that Chinese automakers are trying to rally around their government's assistance, pull out of their slump AND beat the competition to market with alternative energy vehicles. Notice that the quote claims the Chinese would like to take advantage of a "global" automobile industry re-shuffle, which means to me they want to win this race.

So...where is the equivalent US resolve? Why isn't the US government encouraging the Big Three likewise? Why are the Big Three only interested in free handouts and pity? Something rotten in Denmark is the only answer I can find.

Now, how quickly can China produce the goods? This could be the only question that matters, because US automakers may not make it to February '09.

My hope is that they (the Chinese) can get them for sale in the US market! I would love to buy a reasonably priced plug in hybrid electric vehicle soon. Living Oil Free Now! means that citizens actually have a choice when purchasing vehicles that do not burn gasoline.

US Lawmakers at it again!

From the Wall Street Journal online:

"House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid sent a letter to Treasury Secretary Henry Paulson urging him to assist the Big Three auto makers by considering broadening the $700 billion Troubled Asset Relief Program to help the troubled (auto) industry."

Hmmm. I didn't know the Treasury Secretary had such broad powers, did you? The more I learn of Nancy Pelosi's legislative prowess (or glaring lack thereof), the less I like her. This is yet another bone-headed initiative spearheaded by Pelosi. Lest I digress further into oblivion, let's shift gears.

Where do the handout's end? Exacty how many billions of dollars is enough to assuage the greedy, insatiable executives of the Big Three US automakers? The recent 25 billion dollar "loan" is apparently not even enough to qualify as a tiny Band-aid. I have heard rumours of a 50 billion dollar package recently and now this announcement of unknown proportions gives me tremendous pause. Does NASA even get this much money?

Apparently, we are going to bail out these worthless companies, who squandered big profits when times were good and the SUV's and trucks rolled off the production line, but why can't we attach some strings to these handouts? Here are three ideas I have:

1. All upper management is relieved of duties within 30 days.
2. Fleet mpg AVERAGES must be 35 or greater.
3. Alternative fuel vehicles must be offered and each automaker must have a CNG, PHEV AND EV model for sale.

I realize that we are in some financial hard times at the moment, but I truly believe that foreign oil dependency is killing us. We must turn this ship around and stop the madness of driving around in gas guzzling vehicles while importing foreign oil.