David Kirkpatrick

October 23, 2009

TARP recipients to get White House mandated pay cut

I’m no fan of the government telling a business how much it’s going to pay executives, but you have to say the major TARP recipients brought this on themselves. After the forced bailout (most of these players had no choice but to go along with the bailout) the situation became no longer business as usual. Somehow that point was lost on the C-level at Citigroup, BoA, GM, Chrysler, GMAC, Chrysler Financial, and especially AIG. The end result? The pay packages of 175 top executives are going to start seeing much lighter pay checks.

Cue an entire chorus of nanoscale violins.

From the link:

The Obama administration will soon order the nation’s biggest bailed-out companies to drastically cut the pay packages of 175 top executives, a senior administration official confirmed to CNN Wednesday.

Kenneth Feinberg, who was named the White House’s pay czar in June, will demand that each of the seven largest bailout recipients lower the total compensation for their top 25 highest paid employees by 50%, on average, the official told CNN.

And here’s the big number:

Under the plan, which is expected to be officially released by the Treasury Department next week, annual salaries for executives at those seven firms are expected to fall 90%, on average, the official said.

May 26, 2009

GM’s bankruptcy …

Filed under: Business — Tags: , , , — David Kirkpatrick @ 3:47 pm

is immanent.

From the link:

General Motors Corp has failed to persuade enough bondholders to accept a debt-for-equity swap, setting the stage for the largest-ever U.S. industrial bankruptcy within days.The event marks a critical disappointment for GM, the largest U.S. automaker and once considered the bellwether of U.S. manufacturing. A popular ad for the automaker once stated that “What’s good for General Motors, is good for the USA.”

“I would say this is a sound rejection of an unsuitable offer,” said Pete Hastings, a credit analyst at Morgan Keegan who has followed GM. “I have been saying for some time that this thing was dead on arrival and we were just waiting for the doctor to pronounce it dead. Now that’s happened.”

The largest U.S. automaker had so far failed to gain anywhere near the 90 percent of bondholder support desired to stave off bankruptcy, two sources familiar with the discussions told Reuters on Tuesday. Bondholders have until midnight to make their final decision on the tender.

May 15, 2009

Car companies dumping dealerships

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 11:49 am

In a very necessary move from both General Motors and Chrysler — they each have many, many more dealerships than the Japanese manufacturers — the number of dealerships out there is being cut. The exact numbers differ depending on the source, but in the near future there will be fewer GM and Chrysler lots out there.

From the link:

The next auto businesses on the chopping block will be 2,600 General Motors dealerships.GM Chief Executive Fritz Henderson said Monday that the company would by the end of the week start notifying dealerships it wants to eliminate over the course of the next year. The company said last month that it planned to eventually eliminate 42% of its 6,250 dealer locations, which employ more than 300,000 workers among them.

On Thursday, Chrysler LLC’s announced that it is dropping nearly 800 Chrysler, Dodge and Jeep dealers, or about a quarter of its network, as part of its bankruptcy restructuring.

GM (GM, Fortune 500) is not yet in bankruptcy court, although Henderson has said such a filing is “probable.” The company has until the end of the month to win agreement from creditors, unions and dealerships on a turnaround plan or the Treasury Department, which has been bankrolling GM’s ongoing losses, has said it will force the company to file for bankruptcy.

May 11, 2009

GM closer to Chapter 11

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 3:06 pm

Looks like General Motors will be declaring bankruptcy at some point. Despite all the noise to the contrary, this is — and has been for a while — the only real solution to what is going on in the Rust Belt. If done correctly GM will reemerge much leaner and ready to do business in today’s world. It’s been playing by its own unsustainable rules since the 80s.

From the link:

To remake itself outside of court, GM must persuade bondholders to swap $27 billion in debt for 10 percent of its risky stock. On top of that, the automaker must work out deals with its union, announce factory closures, cut or sell brands and force hundreds of dealers out of business — all in three weeks.

“I just don’t see how it’s possible, given all of the pieces,” said Stephen J. Lubben, a professor at Seton Hall University School of Law who specializes in bankruptcy.

GM, which is living on $15.4 billion in federal aid, faces a June 1 government deadline to complete its restructuring plan. If it can’t finish in time, the company will follow Detroit competitor Chrysler LLC into bankruptcy protection.

Although company executives said last week they would still prefer to restructure out of court, experts say all GM is doing now is lining up majorities of stakeholders to make its court-supervised reorganization move more quickly.

“If we need to pursue bankruptcy, we will make sure that we do it in an expeditious fashion. The exact strategies I’m not getting into today, but we’ll be ready to go if that’s required,” CEO Fritz Henderson said last week.

April 2, 2009

GM sales way down

Filed under: Business — Tags: , , , — David Kirkpatrick @ 1:38 pm

I really don’t see how General Motors can be considered a viable company right now. The bailout money that is basically already gone went solely toward paying bills and keeping the doors open. The very definition of a company running in the red.

From the link:

General Motors Corp. led the slide with a 45 percent U.S. sales plunge compared with a year earlier, while Ford Motor Co. reported a 41 percent drop. Sales at Toyota Motor Co. and Chrysler LLC both dropped 39 percent, while Honda Motor Co. reported a 36 percent decline.

Detroit-based GM sold a total of 155,334 light vehicles, while Ford sold a total of 131,102. Ford’s total came in slightly below that of Toyota, which reported U.S. sales of 132,802 units.

April 1, 2009

Peeking into the looming GM bankruptcy

Filed under: Business — Tags: , , , — David Kirkpatrick @ 2:04 pm

It ain’t over ’til it’s over, but it looks more and more likely that Genernal Motors and Chrysler will both do some flavor of bankruptcy protection in the coming months. Particularly since it seems that’s the preferred outcome at the White House.

Here’s some tea leaf reading on the GM version:

A possible bankruptcy plan being discussed for General Motors (GM.N) includes quickly forming a new company of the automaker’s most profitable parts, while a group of other units would remain under bankruptcy protection for a longer period, a source familiar with the plans told Reuters on Tuesday.

GM also would seek to have a new deal in place with the United Auto Workers union prior to any bankruptcy filing, the source said.

GM warned earlier on Tuesday that there is a rising chance it could file for bankruptcy by June, as the company has 60 days to reach deeper concessions with bondholders and unions after its previous restructuring plan was rejected by the U.S. government as insufficient.

While the automakers would still prefer to avoid bankruptcy, advisers to both GM and Chrysler LLC have been working to prepare for potential bankruptcy filings that would aim to preserve, or sell off, the best parts of the companies.

Under the plans being considered, GM would seek to quickly move its most profitable units into a new company separate from its other units in the early days of the bankruptcy filing, said the source who asked to remain anonymous because the person was not authorized to speak to the media.

The aim would be to show consumers, taxpayers, and the government that the new GM can survive and compete in the autos sector as a viable company, the source said.

March 30, 2009

GM and Citi out of Global Dow

Filed under: Business — Tags: , , — David Kirkpatrick @ 12:31 pm

Ouch.

March 29, 2009

GM CEO is out

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 8:42 pm

Rick Wagoner steps down the day before Obama announces a new auto industry bailout plan.

From the link:

Mr. Wagoner, who has served as G.M.’s top executive since 2000, agreed to step down after it was requested by the president’s auto task force, these people said.

March 6, 2009

GM, pull your begging hands back …

Filed under: Business — Tags: , , , — David Kirkpatrick @ 12:29 pm

… and accept the inevitable bankruptcy. Embracing Chapter 11 right now is much better than Chapter 7 down the road. No amount of taxpayer’s money will save your ass right now.

From the link:

Well, since the first government loan was written, car sales have dropped faster than just about anybody predicted. GM sales plunged 53% in February from a year ago. And the share price has continued to fall — down 41% since New Year’s and 93% over the past 12 months.

Shrinking sales and market cap put massive pressure on GM, whose survival now hinges quite literally on checks from Uncle Sam.

Wagoner has repeatedly raised the specter of bankruptcy, arguing potential customers would shun the company for fear it might no longer back warrantees or provide replacement parts.

But some of that fear is mitigated by the fact that people are buying fewer cars from all auto manufacturers, even those seen as financially healthy.

This means that no matter how much effort GM puts into restructuring, demand for new cars is now too weak to sustain a recovery. So, if Chapter 11 is inevitable, this might be the most opportune time to undertake the kind of top-to-bottom overhaul it needs. At least the company won’t be sitting out a booming market. And it could fend off Chapter 7 liquidation.

March 5, 2009

GM’s books look bad

Very bad according to its auditors. General Motors may fail after all. I can’t see any argument for propping up a firm weaker than wet tissue. Too big to fail? Maybe more like too screwed up to save.

From the link:

General Motors Corp.’s auditors have raised “substantial doubt” about the troubled automaker’s ability to continue operations.

The company revealed the concerns, raised by the accounting firm Deloitte & Touche LLP, in its annual report filed on Thursday.

GM has received $13.4 billion in federal loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30 billion from the government. During the past three years it has piled up $82 billion in losses, including $30.9 billion in 2008.

GM says in its report that its auditors cited recurring losses from operations, stockholders’ deficit and an inability to generate enough cash to meet its obligations in raising substantial doubts about its ability to continue as a going concern.

The company said in its filing that its future depends on successfully executing the viability plan submitted to the government in February to justify the loans.

“If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code,” GM said in the annual report, filed with the U.S. Securities and Exchange Commission.

March 3, 2009

Auto sales way down

Filed under: Business — Tags: , , , , , , , — David Kirkpatrick @ 4:43 pm

The Ru, st Belt just keeps taking body blows and crushing shots to the jaw. It’s hard to see how these companies can remain afloat without the government simply stepping in and taking over for the time being. Is GM too big to fail? Ford? Is the auto part supply chain so weak that if any of the onetime “big three” collapse, the whole system breaks down?

We may find out before long. Talking to a group of businessmen last night, the general consensus on the unemployment aspect of this financial crisis is the rate will slow, but rising unemployment will likely continue unabated through the end of 2010 if not longer.

From the link:

The three largest automakers, including Toyota, each said their sales declined at least 40 percent from February 2008.

Sales were down 53 percent at General Motors, 48 percent at the Ford Motor Company and 40 percent at Toyota. Chrysler sales fell 44 percent.

Honda reported a 38 percent drop, while Nissan said its sales fell 37 percent.

“The February numbers are clearly a step down from where we’d been running the last four months,” said Michael C. DiGiovanni, G.M.’s chief sales analyst. “It’s unsettling to our business. These are obviously unsustainable levels which are causing almost every auto manufacturer across the world to look for government aid.”

G.M., of course, has gotten $13.4 billion from the federal government to help it avoid seeking bankruptcy protection, while Chrysler, which will report its sales later Tuesday, has received $4 billion.

February 16, 2009

GM and the UAW

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 5:26 pm

I’ve been hard on General Motor’s hands-out, crocodile tears method of hoping to stay afloat, but now the ball is firmly in the court of the auto unions. If the UAW balks and refuses to play ball in these negotiations GM has the absolute right to blame the last straw on the unions.

From the link:

With its access to a government lifeline in the balance, General Motors was locked in intense negotiations on Monday with the United Automobile Workers over ways to cut its bills for retiree health care.

Both G.M. and its rival, Chrysler, are racing to file restructuring plans with the Treasury Department by Tuesday’s deadline. The companies must show progress in cutting long-term costs as a condition for keeping loans they have received from the federal government.

For G.M., the restructuring will be the largest in its 100-year history, the next step in justifying its $13.4-billion loan package from the federal government.

The plan will outline in great detail, as much as 900 pages, how G.M. will cut its work force, downsize its North American factories and reduce its brand lineup to four from eight.

But G.M.’s plan to shrink will not mean much without an agreement with the U.A.W.

On Monday, G.M. pressed union leaders in a meeting in Detroit for a deal on financing what was the centerpiece of the 2007 U.A.W. contract — a perpetual, G.M.-financed trust to cover health care for hundreds of thousands of retired hourly workers and their spouses.

February 4, 2009

January auto sales down almost 40%

Filed under: Business — Tags: , , , , , , — David Kirkpatrick @ 1:43 pm

Couldn’t have anything to do with the fact banks aren’t giving out auto loans for the most part could it?

From the link:

Auto sales tumbled 38% in January, plunging even more than expected to their worst levels since 1982 as a pullback in purchases by rental car companies became the latest problem for the troubled industry.General Motors (GM, Fortune 500) reported that its sales plunged 49% from a year ago. Ford Motor (F, Fortune 500) said sales fell 39% at its Ford, Lincoln and Mercury brands, and 40% overall when including sales at Volvo, which Ford is trying to sell. Chrysler LLC reported a 55% drop in sales.

But it wasn’t just the U.S. automakers reporting sharply lower sales. Toyota Motor (TM) reported a 32% decrease in its U.S. sales, while sales at Honda Motor (HMC) tumbled 28%. Nissan (NSANY) sales fell 30%.

February 3, 2009

GM keeps hand out, sheds a tear

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 3:01 pm

It never stops with these guys.

Unbelievable.

From the link:

General Motors, which is borrowing $13.4 billion from the federal government to remain solvent, is pressing Congress to waive a tax liability of as much as $7 billion related to the overhaul plan that it is completing this month, people with knowledge of the discussions said on Sunday.

The tax bill, which could be enough to force the company into bankruptcy, would be a consequence of the terms that the Treasury Department required as part of the rescue package approved last month by the Bush administration. In accepting the loans, G.M. pledged to persuade its creditors to swap a large chunk of the automaker’s debt for equity in the company.

 

The equity-for-debt exchange is aimed at ensuring G.M.’s viability in the future, but under corporate tax law, the swap would amount to debt forgiveness and count as income for G.M. The resulting tax bill could take G.M.’s cash level below the minimum needed for daily operations.

G.M. is lobbying Congress to reduce or eliminate the tax liability, said people with knowledge of the effort, who spoke on the condition of anonymity because the discussions were private. The Detroit News first revealed the lobbying effort on Friday.

January 6, 2009

Toyota turns the lights off for 11 days

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 2:00 pm

GM and Chrysler may have shut factories down this month to save money and prep for an uncertain future. Toyota has followed-suit because of slumping sales.

The credit crunch hit automakers hard, and now that hard times are settling in it’s an easy bet the market for new cars will become very soft. Not many people are going to trade-in a working car, and less likely still, a paid-off car under this economic climate.

From the link:

Toyota Motor Corp (7203.T) is to halt production at its Japanese plants for 11 days in February and March as a sharp slide in U.S. sales has left dealers’ lots full of unsold cars.

A 37 percent slump in December sales in Toyota’s biggest market was its sharpest fall in more than a quarter of a century and worse than declines at struggling U.S. rivals General Motors (GM.N) and Ford Motor (F.N).

“I never expected the crisis to spread this fast and leave this deep a scar,” Toyota President Katsuaki Watanabe told reporters at a Tokyo event hosted by Japan‘s top business lobbies.

Toyota had already announced a three-day production halt for this month at its 12 directly operated Japanese plants — four car assembly plants and eight for engines, transmissions and other components.

A sweeping suspension of domestic production is almost unprecedented. In 1993, Toyota halted output for one day as a strong yen hammered sales.

Japanese-built cars make up around 40 percent of Toyota’s sales in the United States, where foreign-made cars and trucks have been piling up at ports and dealers’ yards.

December 31, 2008

Back to 2002

So to speak. I don’t want to be all doom and gloom here on the last day of the year, but this is some sobering news — 2008 saw the loss of six years of market gains. They’ll eventually come back, but the shocking part of this loss is the speed it happened and how it happened across the board.

Petroleum is way down despite the efforts of OPEC. Hedge funds? Investment banking?  Commodities? The only happy folks are those who shorted everything under the sun for the last half of the year.

From the link:

When the New York Stock Exchange closes later this afternoon, virtually anyone with money in stocks will have felt the punishing drop in the market.

The markets were headed for a higher close Wednesday, but overall, it was a very bad year to own stocks, any stocks — indeed, one of the worst ever. The Dow Jones industrial average will end the year down more than 34 percent, the worst year for the index since 1931, and the broader Standard & Poor’s 500-stock index more than 38 percent. Blue-chips like General Motors, Citigroup and Alcoa lost more than 70 percent of their value.

All told, about $7 trillion of shareholders’ wealth — the gains of the last six years — will be wiped out in a year marked by violent market swings.

But what is striking is not just the magnitude of the declines, staggering as they are, but also their breadth. All but 2 of the 30 Dow industrials, Wal-Martand McDonalds, fell by more than 11 percent. Almost no industry was spared as the crisis that emerged in the subprime mortgage market metastasized and the economy sank into what could be a long, gray recession.

December 23, 2008

Happy holidays, your retirement plan is now gutted

God bless us everyone.

From the link:

Companies eager to conserve cash are trimming their contributions to their workers’ 401(k) retirement plans, putting a new strain on America’s tattered safety net at the very moment when many workers are watching their accounts plummet along with the stock market.

When the FedEx Corporation slimmed down its pension plan last year, it softened the blow by offering workers enriched 401(k) contributions to make up for the pension benefits some would lose. But last week, with Americans sending fewer parcels and FedEx’s revenue growth at a standstill, the company said it would suspend all of its contributions for at least a year.

 

”We will have to work more years and retire with less money,” said Lee Higham, a 44-year-old senior aircraft mechanic at FedEx, who has worked there for 20 years. ”That’s what we are up against now.”

FedEx is not the only one. Eastman Kodak, Motorola, General Motors and Resorts International are among the companies that have cut matching contributions to their plans since September, when the credit markets froze and companies began looking urgently for cash. More companies are expected to suspend their matching contributions in 2009, according to Watson Wyatt, a benefits consulting firm.

For workers, the loss of a matching contribution heightens the pain of a retirement account balance shriveling away because of the plunging stocks markets.

If the UAW won’t deal let the Puny Two crater

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 2:55 pm

The US auto industry has a lot of problems and the UAW is right up there.

A line in the sand? More like an unemployment line.

From the link:

If General Motors (GM) and Chrysler executives want federal loans beyond the initial $17.4 billion provided by President Bush and the Treasury Dept. on Dec. 19, they will need to wring concessions from the United Auto Workers. And that means dealing with Ron Gettelfinger.

As became clear in mid-December, Gettelfinger, the 64-year-old union president, is no pushover. With the fate of an industry hanging in the balance, he refused to back down when Senator Bob Corker (R-Tenn.) demanded that the UAW commit to cutting wages to secure a bailout of Detroit’s Big Three. Gettelfinger’s stance—critics call it intransigence—pushed a government rescue to the brink until the Bush Administration stepped in.

But even after the Administration released funds for GM and Chrysler, Gettelfinger bristled at the labor concessions that Treasury is insisting on. In response to the Administration’s demands for wage and benefits cuts, he said: “We are disappointed that he [Bush] has added unfair conditions singling out workers.” Gettlefinger even said he would go to the Obama Administration—which promises to be more labor-friendly—to work out a deal.

December 22, 2008

Is the auto bailout throwing good money after bad?

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 1:29 pm

Probably.

From the link:

General Motors and Chrysler LLC are finally getting the money they need to avoid an imminent collapse. But will the bailout actually get them back on the road to profits?

The $13.4 billion in federal loans announced by President Bush Friday morning should be enough to get the automakers through the next few months. Then the fate of Detroit will become a problem for President-elect Obama and the newly-elected, much more Democratic Congress to tackle.

But this lifeline won’t solve the immediate problems dogging the entire U.S. auto industry. Tight credit and a weakening U.S. economy have left industrywide auto sales at their weakest point in 26 years.

Chrysler’s North American production is essentially shutting down for at least a month at the end of the day Friday due to weak demand for its vehicles. The North American assembly lines at GM (GM, Fortune 500) will be closed for the entire month of January.

Ford Motor (F, Fortune 500), which benefits from having more cash on hand than its U.S. rivals, only looks good by comparison. It is keeping 10 of its 15 assembly lines idle one week longer than the normal holiday shutdown.

December 19, 2008

Bush bails automakers

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 11:06 am

For now Chrysler and General Motors stave off bankruptcy. Their alms come from the $700 billion set aside for the financial bailout.

From the link:

President Bush announced a rescue plan for General Motors and Chrysler LLC Friday morning that will make $13.4 billion in federal loans available almost immediately.

A senior administration official briefing reporters said he expects that GM (GM, Fortune 500) and Chrysler LLC will be signing the loan papers to access the cash later Friday morning.

December 18, 2008

Chrysler stops all production

Filed under: Business — Tags: , , , , , , — David Kirkpatrick @ 1:19 pm

Hot on the heels of GM’s decision to “temporarily” shut down 20 plants, Chrysler announces a similar plan. Of course not to be outdone by GM, the automaker is going to stop all production for at least an entire month starting this week.

If these Puny Two are playing chicken with legislators who have yet to vote in an auto industry bailout package, I’d say that game might be deadly. Congress wants to bail the auto makers out, but the public is sick of this corporate socialism. The votes may just not be there because incumbents fear retaliation at the ballot box for a “yea” bailout vote.

From the link:

Chrysler is the third of the Big Three automakers to suspend operations for January. Last week, General Motors announced it was idling 30% of its North American manufacturing capacity during the first quarter of 2009 in response to deteriorating market conditions. That move will take 250,000 vehicles out of production. On Wednesday, a Ford spokeswoman confirmed for CNN that the automaker is adding a week to its normal two-week seasonal shutdown at a number of its plants.

Chrysler would not say how many fewer vehicles would be produced because of this shutdown. A total of 46,000 employees will be affected. They will be paid during the time off through a combination of state unemployment benefits and Chrysler contributions, but they will not receive the full amount of their working pay, a Chrysler spokesman said.

December 15, 2008

General Motors plans short-term plant shuttering

Filed under: Business — Tags: , , — David Kirkpatrick @ 3:36 pm

I guess we’ll see just how temporary this move ends up being.

From the link:

General Motors Corp. said Friday it will temporarily close 20 factories across North America and make sweeping cuts to its vehicle production as it tries to adjust to dramatically weaker automobile demand.

GM said it will cut 250,000 vehicles from its production schedule for the first quarter of 2009, which includes a cut of 60,000 vehicles announced last week. Normal production would be around 750,000 cars and trucks for the quarter, spokesman Tony Sapienza said.

Many plants will be shut down for the whole month of January, he said, and all told, the factories will be closed for 30 percent of the quarter.

“We’re adjusting pretty dramatically,” spokesman Chris Lee said.

The move affects most of GM’s plants in the U.S., Canada and Mexico. During the shutdowns, employees will be temporarily laid off and receive a portion of their normal pay from the company. They can also apply for state unemployment benefits, Lee said.

December 12, 2008

Is Ford the Big One?

Filed under: Business, Politics — Tags: , , , , , , — David Kirkpatrick @ 1:26 pm

The Rust Belt bailout failed in the Senate. Looks like the union scuttled the deal. General Motors and Chrysler are prepping for bankruptcy.

From the link:

Last-ditch efforts to forge an agreement to rescue the U.S. automakers fell apart late Thursday, Dec. 11, when union officials refused fast and deep cuts in worker pay. The collapse created the real possibility that General Motors (GM) and Chrysler will face bankruptcy in a matter of weeks, unless the Treasury Dept. acts to prevent it.

Senate Minority Leader Mitch McConnell (R-Ky.) said on the Senate floor Thursday night that a refusal of the United Auto Workers, headed by Ron Gettelfinger, to agree to lower wages and benefits at parity with workers at Toyota (TM) and Honda (HMC) in the U.S. by a date certain in 2009 was the last sticking point preventing Republicans from supporting the bill.

December 10, 2008

Auto bailout looming

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 10:24 am

Looks like a legislative deal is getting close. I know there’s good reasons to help automakers out — namely all the makers are tied via suppliers, etc., and if say GM eats it some suppliers that Toyota, Honda, et.al. depend on will go under as well thusly undermining otherwise healthy manufacturers.

Doesn’t make me feel any better about this entire process — starting with the financial sector — though.

From the link:

Congress and White House negotiators reached an agreement in principle late Tuesday for $15 billion in loans to keep General Motors (GM) and Chrysler afloat into the first quarter.

“We are making progress and are optimistic that we will have a reasonable compromise that will protect taxpayers and ensure the long-term viability of the American auto companies,” said Brendan Daly, spokesman for House Speaker Nancy Pelosi.

Update — Maybe not so fast there on this bailout.

From the link:

Congressional Republicans, left out of negotiations on the package, blasted it. Their opposition reflected the tricky task of enacting yet another federal rescue in a bailout-weary Congress, with Bush’s influence on the wane.

“People realize that this bill is an incredibly weak bill, (and) is the product of an administration that wants to kick the can down the road and let somebody else deal with it,” said Sen. Bob Corker, R-Tenn. “I think it has minimal—very little support in our caucus.”

November 24, 2008

GM contemplates bankruptcy

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 5:27 pm

After the beg-a-thon failed — in no small part because of the idiotic use of private corporate jets to get to DC — it looks like General Motors may be about to face the music.

From the link:

The board of directors of embattled U.S. automaker General Motors Corp is considering “all options” including bankruptcy, according to a report on the Wall Street Journal‘s website late on Friday.

The paper, citing people familiar with the board’s thinking, said the stance puts it in conflict with chief executive Rick Wagoner, who told lawmakers this week bankruptcy is not a viable alternative for the company.

GM, in a statement to the newspaper, said the board has discussed bankruptcy, but said the board did not view it as a “viable solution to the company’s liquidity problems.”

A GM spokesman told the paper that management is doing everything it can to avoid a bankruptcy filing.

November 21, 2008

Dems want to bail out the Big Three

I guess the threat of a Chinese takeover of the US auto industry is going to drive more corporate socialism. Looks like elected Democrats want to fork over cash to the failing businesses.

Isn’t it time someone pointed out no one — no one — has any clue what is happening financially right now? Our treasure is being spilled and spent in the Middle East and now on Wall Street and the Rust(ed out) Belt. Main Street will eventually turn to garbage can fires and gunplay if this keeps up.

From the second link:

Democratic congressional leaders, seeking to salvage a bailout of the Big Three automakers, demanded executives provide a business survival plan in exchange for their support of up to $25 billion in loans.

The ultimatum came on Thursday after the Democratic leaders failed to persuade the White House and congressional Republicans to use part of a $700 billion financial rescue fund to prop up the auto industry.

Hanging in the balance is the future of General Motors, Ford Motor and Chrysler LLC, whose losses have mounted during a severe economic downturn that has prompted Americans to largely stop buying cars.

Shares of GM and Ford rebounded from multi-decade lows as the developments in Washington kept bailout hopes alive.

While many lawmakers are anxious to see the companies survive, Republicans have been more wary of whether the money would really help, and Democrats have been more inclined to be generous to the huge employers of unionized labor.

Democratic leaders acknowledged on Thursday a growing public resentment over government bailouts of U.S. business in slowing the automakers’ demands, saying they will take a look after the auto industry provides a roadmap to its survival.

November 20, 2008

Big Three about to be Big Red?

Maybe so. Well at least two of the three.

From the link:

Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports today. [A National Enquirer the paper is not. It is one of China’s leading business newspapers, with a daily readership over three million.] The paper cites a senior official of China’s Ministry of Industry and Information Technology– the state regulator of China’s auto industry– who dropped the hint that “the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.” These hints are very often followed with quick action in the Middle Kingdom. The hints were dropped just a few days after the same Chinese government gave its auto makers the go-ahead to invest abroad. And why would they do that?

 

A take-over of a large  overseas auto maker would fit perfectly into China’s plans. As reported before, China has realized that its export chances are slim without unfettered access to foreign technology. The brand cachet of Chinese cars abroad is, shall we say, challenged. The Chinese could easily export Made-in-China VWs, Toyotas, Buicks. If their joint venture partner would let them. The solution: Buy the joint venture partner. Especially, when he’s in deep trouble.

At current market valuations (GM is worth less than Mattel) the Chinese government can afford to buy GM with petty cash. Even a hundred billion $ would barely dent China’s more than $2t in currency reserves. For nobody in the world would buying GM and (while they are at it) Chrysler make more sense than for the Chinese. Overlap? What overlap? They would gain instant access to the world’s markets with accepted brands, and proven technology.

November 12, 2008

Amex hoping for the dole, GM sinking and oil back in fifties

Here’s a little buffet of economic news —

The latest hopeful for corporate socialism? American Express after reorganizing as a bank holding company.

From the link:

American Express Co. is seeking $3.5 billion in funds under the government’s plan to directly invest in financial firms, according to a Wednesday report in The Wall Street Journal citing unnamed sources.

Earlier this week, American Express received approval from the Federal Reserve to become a bank holding company, which is a similar structure to traditional commercial banks. The credit card company now has access to financing from the Fed and the ability to grow a large deposit base.

The increased funding opportunities through government programs, including the potential $3.5 billion investment, could be a huge boost to American Express as one of its primary sources of funding has nearly disappeared amid the ongoing credit crisis.

Crude has dropped below $56 a barrel.

From the link:

The Energy Department said it expects U.S. consumption of petroleum to drop more severely than any time since 1980 next year, with gasoline use dropping by another 3 percent. Its Energy Information Administration on Wednesday said 2009 petroleum consumption is projected to sink by a further 250,000 barrels per day, or 1.3 percent, more twice that projected in its previous outlook.

Also on Wednesday, the International Energy Agency said more than a trillion dollars in annual investments to find new fossil fuels will be needed for the next two decades to avoid an energy crisis that could choke the global economy.

Light, sweet crude for December delivery fell nearly 6 percent, or $3.50 to settle $56.16 a barrel on the New York Mercantile Exchange, the lowest closing price since January 2007. Oil prices have plunged more than 60 percent in four months from record highs near $150 in July.

And last, but certainly not least, among debate on whether to bail out the Big Three US automakers, General Motors stock closed at its lowest point since 1946 — yes, that’s not a typo nineteen FORTY six.

From that link:

Shares of General Motors plunged another 13% on Tuesday to a 65-year low, closing below the $3 mark for the first time since 1946.

The stock closed Tuesday down 44 cents to $2.92, its lowest close since April 1943.

The Dow Jones industrial average component has lost nearly 40% of its value since Thursday. Shares began their slide on Friday when GM warned that it could run out of cash and posted a $4.2 billion loss.

On Tuesday, the battered automaker unveiled plans to idle nearly 2,000 hourly workers who build engines, transmission systems and body panels, during the first quarter of 2009, according to company spokesman Tony Sapienza. That reduction follows the news, disclosed Friday, that GM will idle another 3,600 hourly workers.

Making matters more complicated, GM will have to keep most of these hourly workers on the payroll during the current labor contract, which runs through September 2011.

October 24, 2008

I don’t like all the corporate handouts …

… going around, and I certainly don’t like the fact automakers are right there on hands-and-knees, but the issue of auto loans to consumers is a real problem (I blogged on that issue here) so this proposal might not be all that bad.

From the second link:

Michigan’s Congressional delegation is urging the Treasury secretary and the Federal Reserve chairman to use their authority as part of the $700 billion bailout package to help more consumers obtain car loans, warning that the tightened credit markets were endangering millions of jobs.

The effort, led by Representatives John D. Dingell, a Democrat, and Fred Upton, a Republican, comes amid plunging vehicle sales as auto lenders struggle to find financing.

 

In addition, two of Detroit’s automakers, General Motors and Chrysler, are considering a merger to combine their cash reserves and cut costs.

”In this current economic environment, it is imperative that the government ensures that liquidity is restored so that the U.S. auto industry is able to function until normalcy is restored to credit markets,” the lawmakers say in a draft of a letter to the Treasury secretary, Henry M. Paulson Jr., and the Fed chairman, Ben S. Bernanke, that was obtained by The New York Times.

Automakers say that a lack of financing has compounded a weakened economy and kept consumers out of showrooms. The industry says that more than 90 percent of new-vehicle purchases are financed.

As of late Wednesday, all but three of Michigan’s 17-member delegation had signed the letter, and the others are expected to join as well, according to a person involved in the effort, who spoke on the condition of anonymity because the letter was not intended to become public until Thursday.

October 15, 2008

General Motors ramps up plant closings

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:44 pm

No respite for an ailing Rust Belt.

From the link:

General Motors Corp. announced Monday that it will close its Grand Rapids stamping plant in December 2009 and accelerate the closing of its Janesville, Wis., assembly plant by more than a year to Dec. 23 of this year.

The plant closing announcements come just a little more than a week after the automaker said it would advance the closure of its Moraine, Ohio, assembly plant.

All three plants make parts for or assemble large and midsize trucks, which have seen particularly large drop-offs in sales this year with the worsening economy and high gas prices.

Monday’s announcements are part of GM’s plans to accelerate plant actions to save money in the face of the worst auto market in more than a decade.

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