GM's Union Making Out Much Better than US Taxpayers on GM Stock Sale

No surprise here. It really pays to have their best friend at the White House.

From The Washington Times on November 25, 2010 [Emphasis is mine]:

General Motors Co.'s recent stock offering was staged to start paying back the government for its $50 billion bailout, but one group made out much better than the taxpayers or other investors: the company's union.

Thanks to a generous share of GM stock obtained in the company's 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing.

The boon for the union fits the pattern established when the White House pushed GM into bankruptcy and steered it through the courts in a way that consistently put the interests of the union ahead of many suppliers, dealers and investors — stakeholders that ordinarily would have fared as well or better under the bankruptcy laws.

"Priority one was serving the interests of the UAW" when the White House's auto task force engineered the bankruptcy, said Glenn Reynolds, an analyst at CreditSights. The stock offering served to show once again how the White House has handsomely rewarded its political allies, he said.

The union's health care and pension trust fund earned $3.4 billion through the sale of one-third of its shares in GM last week. Analysts estimate that it would break even if it sells the remaining two-thirds of its shares at an average price of $36 — close to where the stock traded shortly after the offering hit the market. GM shares closed at $33.45 on Wednesday.

For taxpayers to break even, by contrast, the stock would have to rise to at least $52 and by some estimates as high as $103 — levels that would take years to achieve.

In any event, after selling one-third of its shares last week, the U.S. Treasury has agreed not to sell any more of its GM stock for another six months, while the union fund is free to keep selling its shares.

For the full article, follow the link.

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China's SAIC Motor to Be GM IPO Investor

After the US taxpayers were made to pay to "save" GM and "save US auto jobs" (which by the way Prez Obama admitted would be gone forever), US Government Motors is likely to sell equity to its Chinese-government-owned partner, SAIC Motor Corp, in the upcoming IPO.

Reuters reports:

Nov 10 (Reuters) - General Motors Co [GM.UL] is in the final stage of talks to sell equity to long-time Chinese partner SAIC Motor Corp (600104.SS) in conjunction with its landmark initial public offering, two people familiar with the matter said.

The two government-funded automakers are currently finalizing how much of a stake SAIC would buy in the top U.S. automaker after discussions involving technology sharing and SAIC's ambitions to move beyond the China market, the sources said.

On the side note, guess who's been suddenly popping up in the financial news media: ex-Car Czar and Wall Street hedge fund manager Steven Rattner. Mr. Rat is back, to shine the light upon his fine leadership in turning around GM on the eve of the IPO, no doubt.

Chutzpah. These people cannot help themselves.

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US Toyota Workers Stand Behind Their Man, Their Company

The Congressional hearing on Toyota's recall problems (aka "kangaroo court", aka "witch hunt" in the name of public safety, my foot) will have Toyota's CEO Akio Toyoda tomorrow.

Japan's Nikkei Shinbun reports that Toyota's US factory workers are in Washington D.C. to show their support for their CEO and for their company.

"The Congressional hearing on February 23 on Toyota's recall problems was an unusually popular event. The line of people wanting to attend the hearing was 50 meters long. 300 people showed up for 150 slots.

"Among them, there were people wearing shirts with Toyota logo. They were men and women who work in Toyota factories around the country. One of them, from a Toyota factory in Indiana, said to the reporter, "We are only a small portion of the Toyota employees. We want everyone to know that there are tens of thousands of Toyota employees supporting the company throughout the United States."

"Referring to Toyota's CEO Akio Toyoda, who is going to testify on February 24, she said, "I trust him to make the right decision. I want him to correct the wrong impression that Americans have gotten about Toyota over the recall problems."

"There are already people forming a line to attend the February 24 hearing."

CNN also reports that Toyota's US dealers staged a rally on Capitol Hill in support of the company and their brands which have exemplified quality worldwide.

Toyota dealers rally in defense of brand (2/23/2010 CNN International)

"Washington (CNN) -- More than 100 Toyota dealership owners and staff rallied on Capitol Hill Tuesday to defend their businesses and Toyota as Congress opened high-profile hearings into recent large-scale vehicle recalls.

""We take great pride in the fact that as of last night, together we've done over 690,000 recalls already and are pacing at 50,000 a day throughout the United States," Paul Atkinson, chairman of the Toyota National Dealer Council, said to the crowd. "My question for you is: How did we suddenly overnight become the villain?"

"... Tamara Darvish of Darcars Automotive was quick to point out more bad news for Toyota could mean more bad news for their network of 172,000 employees in the United States.

"Atkinson noted that, in the wake of last year's bailout of General Motors and Chrysler, they're now in competition with government-backed automakers for market share."

"... But a message of optimism also was a recurring theme at Tuesday's rally. AutoNation President and CEO Mike Jackson said he believes the drop in sales was largely due to the fact that many vehicles were taken off the market until they were repaired. He does not expect the brand to suffer in the long term.

""What's fascinating about the American people is that if they see a company that's done it right for decades, but has a bad moment and makes a mistake and owns up to it and commits to change and does everything possible to make it right, the American people will understand and forgive," he said."

That's the spirit.

Now, can you imagine GM (or Chrysler or Ford) factory workers and dealers coming to Washington D.C. to show support for the CEO and the company, defending their brand and quality? I can't.

Good for them, these Toyota US workers and dealers. I just don't buy the allegation that Toyota short-changed safety for the profit. That's not how they have made cars anywhere in the world, from what I once observed in a Toyota plant in Japan. Local Craigslist has a listing for night shift auto technicians at a Toyota dealership to fix the pedals.

Transportation Secretary LaHood today "testified that ... NHTSA's investigations of complaints about unintended acceleration have produced no evidence that electronic throttle systems are affected by electromagnetic interference, as some have speculated." (Wall Street Journal, 2/23/2010)

In other words, no one knows what causes unintended acceleration, but let's gang up on Toyota because it sells more vehicles than Government Motors and people actually like them, and we the government won't allow that.

My next car will be a Toyota.

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Connection Between Toyota's Sticking Pedal Problem and US Military

It's two-fold.

Lewrockwell.com has an article on Toyota recalls that says, among others, President Obama and his Chief of Staff Rahm Emanuel decided to blow up Toyota's sticking pedal problem in order to pressure the new Japanese administration who wants U.S. military bases out of Okinawa.

It also says something very curious and interesting: Toyota's accelerator assembly made by an American company CTS, who also supplies to GM, Ford and to the U.S. military, is susceptible to "non-civilian" (i.e. "military") frequencies.

Here's the original article that Lewrockwell.com linked:

Obama waging economic warfare on several fronts, including Japan
(Wayne Madsen, 2/12/2010 Online Journal)

"(WMR) -- The Obama administration has expanded its economic warfare against other countries, first reported on January 18 by WMR in the case of an authorized financial campaign against Venezuela. The Obama administration, according to WMR’s Asian sources, is waging an economic warfare campaign, coupled with industrial sabotage, against Japan through a pre-planned operation directed against the Japanese automobile manufacturer, Toyota.

"WMR has learned that the Obama administration authorized the anti-Toyota campaign as a warning shot to Japan over its reformist government’s insistence that the U.S. pull its military troops out of Okinawa. WMR has learned that Obama and his chief of staff, Rahm Emanuel, have decided to turn the screws on Japan, not only for auto market leverage, but also to punish Japan over the insistence by Prime Minister Yukio Hatoyama and the newly-elected anti-U.S. military mayor of Nago on Okinawa to move the U.S. military off of Okinawa."

The article continues, and this is the part where he discusses CTS's accelerator assembly:

"Ironically, Toyota does not make the sensor-equipped accelerator pedal for its recalled vehicles. Elkhart, Indiana-based CTS (formerly known as Chicago Telephone Supply) manufactures the pedals for Toyota, as well as for Ford and GM. China’s Jiangling Motors has complained about sticking gas pedals from CTS and the firm has developed a reputation for faulty accelerator pedals and their associated sensors. CTS’s president and CEO is India-born Vinod Khilnani. Curiously, the Obama administration, which is flush with Indian-Americans at high levels, has not criticized CTS, especially since it supplied the very same accelerator pedals it manufactures for Toyota and GM to the U.S. military."

and

"The CTS-manufactured accelerator pedal used in Toyotas relies on an electronic pressure sensor. WMR has been informed by knowledgeable sources that the sensors are vulnerable to non-civilian frequencies. The Obama administration, fearful that military transmissions may be responsible for accelerator accidents, may have sought to jump the gun by blaming Toyota for the accelerator problems." [emphasis is mine]

I have no idea whether Mr. Madsen's sources are reliable or telling the truth. I wouldn't have noticed the article if it hadn't been featured at Lewrockwell.com.

By the way, that Obama administration's intent is political is evident by the fact that the US government is demanding the data for Toyota's European recalls. Since when has the National Highway Traffic Safety Administration started regulating internationally?

Is the agency demanding the international recall data from GM and Ford, too? Honda? I haven't heard about it. Have you? How about demanding the data from CTS?

Toyota will be fined if it doesn't submit the data within 30 to 60 days.

And the problem may have been caused by the U.S. military frequencies.

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Toyota May Be Slapped A Civil Fine Over SUA

SUA: Sudden, Unintended Acceleration

More on my previous post on Toyota's recall, production halt, and Congressional hearing.

The National Highway Traffic Safety Administration is considering a civil fine against Toyota Motors, according to AFP report today.

Hmmm. Am I alone in smelling a rat?

Roger Hedgecock, a popular radio talk show host at KOGO San Diego, CA, suspects Toyota is being targeted by the Obama administration because Toyota produces cars and trucks that people want to buy, with its non-union labor force.

Obama attacks Toyota (Roger Hedgecock, 2/1/2010 World Net Daily)

"Toyota owners stormed dealerships all over the country last week demanding "fixes" for "defects" described in wildly inflammatory press reports.

"Toyota apologized for "defects" that to date are still being investigated. Before whatever problems might exist had been determined and before any "fix" has been found, the government ordered Toyota to begin the largest recall of vehicles in automotive history. Toyota then shut down its U.S. plants and stopped selling eight of its popular models, including Camry and Corolla.

"The sales suspension affects about 56 percent of all Toyota and Lexus vehicles sold last year. The nation's Toyota dealers estimate they stand to lose $2.5 billion each month that sales of these popular models are suspended.

"...Toyota faces a perfect storm from SUA. But is government "greed" a factor here? As a co-owner of Toyota rivals GM and Chrysler, is the Obama administration and its jihad against Toyota "consumer protection" or revenge against a successful, non-union, red state based rival? Given what Rahm Emanuel said about crisis as an opportunity to "advance the agenda," this question deserves closer attention.

"A year ago, Toyota was riding high. With non-union manufacturing plants in Georgia, Texas, Mississippi, Kentucky and Indiana, Toyota made the most popular and most highly regarded vehicles in the U.S. Rivals GM and Chrysler were imploding, and the president stepped in with massive taxpayer cash infusions and took over these companies as joint ventures between the federal government and the UAW.

"Why is Toyota singled out for SUA? A Consumer Reports study indicated that, for the model year 2008, there were 52 complaints filed with the National Highway Traffic Safety Administration against Toyota for SUA, representing 41 percent of all such complaints even though Toyota had just 18 percent of the U.S. market.

"However, the same Consumer Reports study relates that GM and Chrysler also were the subject of SUA complaints to the NHTSA, but none of their plants were shut and the affected models were not recalled nor banned from sale. One of the vehicles named in these complaints is GM's Pontiac Vibe but the NHTSA has not ordered its recall nor banned its sale.

"The American Company (CTS of Elkhart, Ind.) that supplies some Toyota models with the gas pedal in question also supplies the same gas pedal to Honda, Ford, GM and Chrysler.
Worth noting, too, is the fact that SUA complaints increased after 2002 when Toyota replaced mechanical throttle linkages with electronic ones. It's just easier to find and fix mechanical defects than software glitches. Even the NHTSA could not find the electronic defect that some "experts" allege must be causing the SUA in these complaints.

"All of this is a field day for the Plaintiff's Bar, another Obama ally. Attorneys made fortunes in the "unsafe at any speed" Corvair, exploding Pinto and rollover Ford Explorer cases. These could pale in significance compared to SUA and the scale of Toyota's recall. The publicity over 52 complaints out of 1.8 million Toyota/Lexus vehicles sold in the U.S. in 2008 has made every owner concerned about the safety of their Toyota vehicle.

"This panic could fuel lawsuits big enough to put Toyota out of business in the U.S. What a boon for Government Motors! Indeed, last Friday, GM, Chrysler and Ford all announced ad campaigns aimed at worried Toyota owners.

"Toyota will announce a "fix" for the gas pedal this week. What's at stake here is not just the safety of the individual Toyota vehicle, nor even the financial health of that company – but the very existence of a free competitive vehicle market in the U.S."

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Toyota Recall, Production Halt Were Ordered by Obama Administration

There's something funny going on regarding Toyota Motors recalling the cars and trucks and stopping sales and production.

Toyota announced it was recalling 2.3 million cars and trucks it had sold in the U.S. because of sticking accelerator pedals.

Then, the company announced it was stopping the sales of the affected 8 brands, and stopping the production of these cars and trucks in the U.S. while they figure out the cause.

The pedal assembly is manufactured by an American subcontractor (CTS), who says it is Toyota's problem not theirs, as the company also supplies Honda and Nissan.

It turns out that CTS also supplies GM and Ford. Ford today suspended the production of commercial vans in China, which use the pedals supplied by CTS.

Then, it turns out that Toyota's recall and sales/production suspension was ordered by the Obama administration, specifically by U.S. Transportation Secretary Ray LaHood.

Government Motors, also known as General Motors, is offering $1,000 or zero financing to Toyota owners to switch brands. Nice job, Auto Czar. Ford has decided to join.

Now, Congress has joined the frey. House Energy and Commerce Committee (chairman Henry Waxman, D-CA) will hold a hearing on February 25 "to examine the persistent consumer complaints of sudden unintended acceleration in vehicles manufactured by the Toyota Motor Corporation".

A Congressional hearing??

Toyota today announced additional 1.09 million recall due to floor mat concerns.

Brands recalled:
2009-2010 RAV4
2009-2010 Corolla
2007-2010 Camry
2009-2010 Matrix
2005-2010 Avalon
2010 Highlander
2007-2010 Tundra
2008-2010 Highlander
2009-2010 Venza
2008-2010 Sequoia

Lexus, Scion, Prius are not affected.

Toyota's share price, which was at $91.97 on January 19 before the announcement of recall, plummeted $14 dollars (or 15%) since, and ended today at $77.67.

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October Auto Sales: The Winner Is...?

So far, the following auto companies announced their October auto sales figures.

Porsche (POAHF): up 15%. Third consecutive Y/Y increases

Ford (F): up 2.6%.

Daimler (DAI): up 9.4%. Heavy decline on Smart (-70%).

Nissan (NSANY): up 5.6%.

Chrysler (FIATY): down -30%. Across the board decline.

(Ouch.)

Government Motors (aka General Motors): up 4.1%

Toyota (TM): down -3.5%

(Toyota was a surprise to me. Wonder what kind of counting was done at GM.)

KIA: up 45.3%

Honda: down -4%

(I suspected KIA to be a big winner. Toyota and Honda taking a breather from cash for clunkers sales, I suppose.)

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House Committee Wants Auto Task Force Info

Maybe this is why Mr. Steve Rattner decided to quit the car czar post...

House committee wants GM, Chrysler documents
(7/17/09 AP via Yahoo Finance)

"A House committee asked the Obama administration Friday to release documents on the federal bailouts of General Motors Co. and Chrysler Group LLC, seeking more details on decisions that led to the auto industry bankruptcies.

""They negotiated, they reviewed and they approved every aspect of the Chrysler and General Motors reorganization," Rep. Spencer Bachus, R-Ala., said of the White House. "We don't know how the president's auto task force reached its conclusion."

"The resolution, proposed by House Republican Leader John Boehner, R-Ohio, underscored lingering resentment in Congress over the government's work to push GM and Chrysler into bankruptcy. The House approved legislation Thursday pressing GM and Chrysler to restore closed dealerships. Auto task force head Ron Bloom was scheduled to testify before a House panel next week as part of a two-day hearing.

"Committee chairman Barney Frank, D-Mass., said the resolution "does suffer from a certain selective memory approach," noting that the Bush administration provided the initial funding in late December to the companies. But he supported the request."

The House Committee the article mentions is the House Committee on Financial Services chaired by Barney Frank.

The lawmakers did nothing while Chrysler and GM were being dismantled and sold off, and now that's all done they want information. Better late than never, I suppose, although the resolution doesn't compel the White House to hand over the information. The White House could simply ignore, or tell the Congress it's none of their business just like the White House Press Secretary did a while ago:

"So, look, Congress certainly is involved in auto decisions obviously as it relates to setting fuel mileage standards that the President worked on last week, as well as proposals to create tax incentives to trade in older cars that aren’t doing as well on fuel mileage, to both increase auto sales and reduce our dependence on foreign oil. " (from the White House Press Briefings on 5/27/09)

So for the White House, the job for the Congress is to setting mileage standard that the President works over one weekend and approve cash for clunkers bill and climate bill. For more of Mr. Press Secretary's comment, see my post.

I'll keep an open mind to see if anything comes out of this, but I'm not holding my breath either.

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Rattner Leaves Auto Task Force

So, after bankrupting the two of the three U.S. auto makers, bankrupting part of their dealerships and subcontractors and suppliers, and selling off the best assets of the companies to foreign entities on the cheap, the investment banker leaves the post of the Car Czar. His boss, the President, now says "some" of the auto jobs will never return. (What was the point of using the taxpayers' money on these companies? The last I remember is the babble about "saving jobs". Ha!)

Rattner Departs as Head of U.S. Panel Overseeing GM, Chrysler (7/14/09 Bloomberg)

"Steven Rattner stepped down as head of the U.S. panel that forced General Motors Co. and Chrysler Group LLC into bankruptcy, signaling the government was easing into a new role as a passive investor in the automakers.

"His departure leaves Ron Bloom, a former union adviser and Lazard Ltd. vice president, to oversee remaining Obama administration carmaker decisions, including when to sell stakes in the two companies it bailed out with more than $75 billion in taxpayer money.

"“The administration definitely wants the perception to be out there that they’re not going to have their fingerprints in every decision,” said Clint Currie, an analyst with Concept Capital’s Washington Research Group."

Now, do you see the key word in this statement? It is "perception"; as long as the administration is "perceived" as not making every decision. It's more like some ad campaign for branded goods. Perception to make you feel good.

"“Job one for Ron Bloom is to get the government out of these equity positions in GM and Chrysler, preferably before the next election,” said auto analyst Michael Robinet of CSM Worldwide, a Northville, Michigan, consulting firm that did research for the task force. “The American public does not want to be long term owners of car companies.”"

I hope Mr. Robinet is talking about the mid-term election. The American public didn't want to be short-term owners of car companies either, but did they have a choice?

The article says Mr. Rattner has no plans to go back to his firm Quadrangle, which has been investigated by New York Attorney General for New York public pension bribery scandal.

One banker leaves (Rattner, Quadrangle), another banker steps in, albeit with a labor slant (Bloom, Lazard). Change we can believe in. (As if all we need to do is close our eyes and believe - oh look, I do see some green shoots...)

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GM Out Of Bankruptcy in 40 Days

It took only 40 days, 2 days less than it took for Chrysler. Now the government-owned (61%) General Motors can "compete" with the likes of Toyota and Honda on alternative energy cars - Toyota's Prius sells for just above $20,000, new GM's Volt will probably sell above $40,000. (Who in the rational mind would pick the latter, unless at a gun point - Oh I see, that's why the U.S. keeps military bases all around the world.)

GM Out Of Bankruptcy (7/10/09 Business Insider)

By the way, the rumor that GM will change the color of its logo from blue to green is probably false. For now at least. (Remember it was impossible for GM or Chrysler to go into bankruptcy, until they did. Fannie Mae and Freddie Mac were sound, until suddenly they weren't.)

I still want to know what happened to the GM's secured bond holders, and what happened to the holders of CDS on GM's debt (here's a notable one).

Now that both Chrysler and GM are "successfully" out of bankruptcy, will the Presidential Auto Task Force disband? Or will it transformed into a politburo-like governmental committee to manage the companies? Will Mr. Steve Rattner the Car Czar descend on GM as CEO, as the reward for his "hard" work?

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GM Reminds Holders That Common Stock Has No Value

Another bit stock, GMGMQ, General Motors' pinksheet, has been trading rather well since bankruptcy, as it shouldn't. The value of common stock will be zero in all likelihood. So the company put out the warning today.

GM Statement re: GM stock price and volume (7/1/09 GM)

"GM management has noticed the continuing high trading volume in GM's common stock at prices in excess of $1. GM management continues to remind investors of its strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios. Stockholders of a company in chapter 11 generally receive value only if all claims of the company's secured and unsecured creditors are fully satisfied. In this case, GM management strongly believes all such claims will not be fully satisfied, leading to its conclusion that GM common stock will have no value. "

That seems to have done the trick. GMGMQ is trading at 85 cents, down 23 cents or 21% from yesterday's close. (The chart to the right is an intraday chart of GMGMQ.)

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Penkse To Buy Saturn from GM, Wants to Build in US

Now this is more to my liking. The first decent piece of news that I've heard about the sorry saga of bankrupted Chrysler and GM, where private entrepreneurship saves the day. Penske Automotive Group Inc. (stock symbol PAG), the second largest auto retailer in the United States, signed a memorandum of understanding with General Motors to acquire GM's Saturn brand.

According to this article Penske buying Saturn, dealerships; GM to build vehicles for 2 years (6/5/09 Detroit News),

"Penske has signed a memo of understanding to acquire Saturn and its dealer network and the due diligence period will take 60-90 days. The deal will preserve 13,000 jobs and could close in the late third quarter, Penske told reporters this morning. Terms of the deal were not disclosed.

"The deal includes the Saturn brand, the service and parts operation based in Spring Hill, Tenn., and a network of about 350 dealerships.

"Penske said GM will supply the Saturn Aura sedan and Vue and Outlook SUVs on a contract basis for at least two years, after which he envisions importing vehicles."

""Our ultimate goal is to have those vehicles built in the U.S.," he said."

Why Saturn?

Here's the announcement from the company. [emphasis is mine]

""We have agreed upon a framework that we believe will build momentum for the Saturn brand," said Penske Automotive Group Chairman Roger Penske. "Saturn has a passionate customer base and outstanding dealer network. For nearly 20 years Saturn has focused on treating the customer right. We share that philosophy, and we want to build on those strengths."

Mr. Penske and his company want to buy Saturn because Saturn focused on treating the customer right. How about that, coming from an American company?

"Saturn began selling cars in 1990 and has sold more than 4 million vehicles. More than 80 percent of those vehicles are still in operation, according to data from R.L. Polk. Saturn has regularly scored among the industry leaders for non-luxury brands in customer satisfaction surveys. Commenting on the proposed deal, Saturn general manager Jill Lajdziak said, "This is the combination of two iconic teams: Saturn and Penske. GM had the vision to create Saturn and has the desire to see it succeed in the future.""

Saturn's customers are happy because the car is built well and it lasts! What a concept. Saturn, at one point, even dethroned Lexus in J.D. Power and Associates 2002 Customer Service Index (CSI) Study. (By the way, the link goes to a blog set up by a Saturn enthusiast, called Saturnfans.com. The front page pleads "Save Saturn. Sign the Petition to Help Save Saturn!")

Ms. Jill Lajdziak, Saturn's general manager, will be offered a role in a Penske's new company, according to the Detroit News article. She joined GM in 1980, and has been with Saturn since its inception.

GM indeed had the vision, when it founded Saturn Corporation in 1985 in response to ever-increasing competition from small cars made by Japanese and German auto makers. But the vision hasn't quite turned into a viable business at GM. Now that the administration is pushing for small, fuel-efficient car, GM has to sell Saturn.

Saturn has its own assembly plant in Spring Hill, Tennessee. Why wouldn't Mr. Penske simply by the whole operation and run it? He and Penske Automotive Group would know what kind of car the customer want. As the 2nd largest auto retailer, they would know GM and Saturn that no outsider (like Fiat, for example) could know. They could possibly clean up the manufacturing operation.

I'll refrain from being overly optimistic until the deal is done and more details known. I hope the Auto Task Force and Mr. Rattner the car czar (for cacophony of czars, see my post here) stay out of the deal. (Oh no...don't tell me this is the deal brokered by them... )

As I wrote several posts ago, Toyota is increasing production, both in the US and back in Japan. GM and Chrysler may have been bankrupted at the bottom of the market. Pity. And shame.

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Toyota Will Increase N.America Production, Says Market Bottoming

Now here's a "green shoot" I can give slightly more credence to.

Toyota Motors will increase production in North America over the next 3 month (6/4/09 Yomiuri News, Japan; the article is in Japanese)

"Toyota announced on June 3 that it will increase North American production by 65,000 units more than originally planned.

"Toyota has cut back its production since last summer, but now believes the market is bottoming out. It will increase output of Camry, Corolla, Siena, RAV4, Tacoma, and Tundra.

"Toyota's year-over-year monthly auto sales in North America has been decreasing by over 30%. Toyota's 7 US factories have reduced hours and introduced work-sharing scheme to cope with the declining sales.

"In Japanese market, Toyota already started to normalize production in May. "

Toyota's layoffs in North America was minimal despite the steep decline in sales. In addition to work-sharing, they also used the idle time to train idle workers on new skills, quality improvement, and maintenance. (Hear that, UAW?)

Now, if Toyota is right, Chrysler and GM driven to bankruptcy start to look like Gordon Brown selling gold at the gold market bottom, don't they?

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GM and Chrysler on Capitol Hill

GM's Chief Executive Fritz Henderson and Chrysler's President Jim Press were hauled in front of the Senate Commerce Committee today to defend the closure of their dealerships. GM now says it will close nearly 1,600 dealerships in the next 18 months, and by the end of 2010 wants to reduce the number of dealerships from the current 6,300 to 3,800 or less (40% or more reduction). Chrysler wants to shut down 789 dealerships by June 9 (25% of total Chrysler dealerships, in 5 days) and wants to end up with 2,392 dealerships.

The chairman of the committee, Democratic Senator John Rockefeller of New York, said in his opening statement:

"I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave it to local dealers and their customers to fend for themselves with no real plan, no real notice and no real help, that is just plain wrong, you don't do that."

The dealers slated to be eliminated as well as chairman of the National Automobile Dealers Association were also at the hearing.

So what would be the solution to right this wrong? More government help?

Curiously absent from today's hearing were the Presidential Auto Task Force - members, official designees, or the staff (one of whose influential voice is a 31-year old ex-campaign aide) - who crafted these two bankruptcies. At least they were not at the table with the automaker CEOs and dealers, being grilled by the Senators. Both GM's Henderson and Chrysler's Press seemed to be doing their best to present the case on behalf of the Auto Task Force. Mr. Henderson seemed to have rehearsed better than Mr. Press, who at times seemed lost for words.

You can watch the entire 3-hour hearing yourself, here.

Some Senators in the Committee were grumbling that there had been hardly any Congressional oversight. According to a largely ignored piece of news ("Lawmakers Blast GM Restructuring:
Obama's Auto Task Force Is Accused Of Treating Investors, Dealers Unfairly", 5/23/09 Washington Post), there was a last-ditch effort by some members of Congress (both Republican and Democrat) to take the role of restructuring back to Congress from the ad hoc Task Force set up by the President.

Belatedly, the Senate Banking Committee (chaired by Chris Dodd) said on Wednesday that it will hold a hearing on June 10 to examine the role of the Presidential Auto Task Force (see Reuters update). Better late than never. But will it be just a rubber-stamping and rolling-over exercise? Don't hold your breath, as the White House Press Secretary has already delineated the role of Congress (not much) in the matter of auto bailout (read it in my post here).

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GM Incentive Package We'll All Get to Pay

GM reveals incentive package as it tries to shed workers
(6/1/09 Kansascity.com)

US taxpayers will be paying for it eventually.

• $20,000 cash and a $25,000 car voucher to production workers who decide to retire with their benefits;
• For skilled-trades workers, $45,000 cash with the same car voucher.

If the worker is not eligible to retire yet, he/she can still get one of these, with severing all ties to GM (i.e. no benefits):

• Employees with less than 10 years could get $45,000 cash and $25,000 car voucher;
• Those with at least 10 years but less than 20, $80,000 cash and the same car voucher;
• Those with 20 years or more, $115,000 cash and the car voucher.

If the worker is close to retirement (28-29 years at GM), GM will provide:

• A bridge to retirement, with the company providing a monthly gross wage of $2,850 or $2,900 until qualifying for retirement.

(Is it too late to join the company, in order to quit with $45,000 and put the car voucher on eBay auction?)

In the meantime, GM is selling the Hummer brand to a Chinese company that makes heavy construction equipment and industrial materials (plastics, resins). This will be the Chinese company's first forey into automobile manufacturing. Good luck with that. And good luck with the Hummer dealers who will get to sell this Chinese-made Hummer, and even better luck for the customers who will buy it.

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GM Bankruptcy and Plant Closures

General Motors is now Government Motors, as many say. GM filed for bankruptcy as expected, and as part of restructuring it plans to close 9 more plants and idle 3 plants in the US. The story is everywhere, and here's one of them. Here's the announcement from "New GM".

This is just as expected; all GM has done since the CEO was changed from Rick Wagoner to Fritz Henderson is to prepare for bankruptcy under the "guidance" from the Presidential Auto Task Force.

So how many plants does GM have in the US? As the number was not readily available in the news, I went to the GM website, found the information about GM's plants, and counted the number.

There are still 41 GM plants in the US. The one in Massena, New York was closed already on May 1. Here's the list of plants and number of employees (as GM lists them) affected:

• Wilmington, DE: 1875
• Indianapolis, IN: 819
• Flint North, MI: 1012
• Livonia, MI: 164
• Orion, MI: 3800 (idle)
• Pontiac, MI (stamping): 1481 (idle)
• Pontiac, MI (truck): 1362
• Ypsilanti Township (Willow Run), MI: 1285
• Parma, OH: 2120
• Mansfield, OH: 1754
• Spring Hill, TX: 3425 (idle)
• Fredericksburg, VA: 102
• (Grand Rapids, MI plant previously slated to close. About 800 employees)

12,931 jobs will be eliminated, 6,268 made idle. Total number of jobs affected: 19,199.

According to GM's 10-Q for the 1st quarter of 2009, GM employs 112,000 people in North America, and 235,000 worldwide. The total jobs affected amount to 17% of all GM North American employees.

I don't know whether the number is considered large or not enough. This could be simply a first wave of plant closures. Job losses at GM's dealers that are being forced to close will be definitely bigger.

The stock market is cheering the "less bad" news, as usual these days: ISM manufacturing number contracted less than feared, April consumer spending dropped less than expected. I think the market is also cheering GM's bankruptcy, that there will be no more uncertainty; thinking here must be "it cannot go any worse, can it?"

As of 9:38 am Pacific Standard Time, Dow is up 219 points (2.5%) to 8,719, S&P500 up 25 points (2.7%) to 944, and Nasdaq up 55 points (3.1%) to 1829. GM's stock is up 13 cents (18%) to 88 cents. (Common is going to be worthless. So what's the deal here?)

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By the way, according to the above New GM's announcement, it is a DIP (Debtor In Possession) financing from the government. Why then didn't the Congress have extensive hearing over GM's restructuring? They did, before they gave the DIP financing to Chrysler back in 1979.

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Goodbye, GM

GM to file bankruptcy, with the government taking 60% stake (AP news).
...goaded into BK by punks...

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GM Bankruptcy - Where Is Congress?

This article on Wall Street Journal questioning the authority of the Auto Task Force was written by a person whom I didn't imagine writing anything to question the wisdom of bankrupting GM: Ralph Nader, of Corvair fame. Mr. Nader wrote the article with Robert Weissman (editor of Multinational Monitor magazine).

Obama's GM Plan Looks Like a Raw Deal, Congress, not a secret task force, should decide the company's fate (Wall Street Journal, May 29, 2009)

Messrs. Nader and Weissman's contention is very well summarized in the article's subtitle.

[emphasis is mine]
"Millions of people in communities across the country depend on the government getting the GM rescue right. That's why it is startling -- and mistaken -- for the future of GM to rest with a small, largely unaccountable, ad hoc task force made up of a handful of Wall Street expats."

I'm not sure at all about why the government has to be in the so-called rescue to begin with, but I totally agree with the second sentence.

"A congressional abdication of authority of historic proportions has left the executive branch with nearly complete discretion over how to handle GM and Chrysler's restructuring. President Barack Obama has further delegated authority, giving effective control to this task force, which operates under the titular authority of a top-level interagency group headed by National Economic Council Director Larry Summers and Treasury Secretary Tim Geithner."

Titular is such an appropriate word here. Please take a look at my previous post below ("Who Is In This Auto Task Force?"). This "titular" authority of interagency heads is further delegated to "official designees" of the "members", who in turn depend on "the staff" who do the real job. The leader of the staff is Mr. Steven Rattner, who reports to Messrs. Geithner and Summers (and who defaulted on the debt owed to Cerberus, soon-to-be-kicked-out owner of Chrysler). The staff include whiz kids on finance, economist, ex-Obama campain advisors.

"In the days before an avoidable June 1 bankruptcy filing, it is imperative that Congress honor its constitutional duties and demand that the GM restructuring deal be sent to it for deliberative review -- before any irreversible measures, such as a voluntary bankruptcy declaration, are taken. This means delaying any precipitous decisions until after Congress returns from its Memorial Day recess.

"The case for congressional involvement would be solid enough on constitutional and procedural grounds alone. But the secretive task force's plan raises red flags and requires Congressional examination in open hearings. With the government set to take a 70% ownership stake in GM, there are too many unanswered, troubling questions to proceed with a risky bankruptcy declaration."

Messrs. Nader and Weissman go on to list their 10 reasons for objection. But missing from these reason is the biggest one, I think.

Who gave the authority to the president of the United States to form this Task Force that's been dictating the two auto companies how they should go bankrupt and how they should reorganize?

The money that Chrysler and GM have received comes from the Treasury, not some spare change from the White House. Where is the Congress, indeed, as Mr. Nader asks? Why should Chrysler and GM even listen to the Task Force?

It's the authority by default.

It all seems too late now. Despite the righteous protests from some members of Congress (here's one from Alabama Senator Shelby), it's too late. Fait accompli. Chrysler is kaput, GM is dutifully preparing the bankruptcy statement. GM's European operation is already sold to a Canadian entity with Russian money (see my post). Dealerships will be forced to close, the American consumers can expect a flood of GM cars made in China. So much for saving American jobs.

In case you haven't noticed, it's been a "shock and awe" ever since September 2008, economic version. And it's been accelerating, in case you're shell-shocked.

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Who Is In This Auto Task Force?

The White House Auto Task Force (formally "The Presidential Task Force on the Auto Industry") has already guided Chrysler into bankruptcy, and is about to do the same to General Motors. Who is in this Task Force? Curious minds want to know.

Most of the names below came from Wikipedia page (which in turn must have come from the White House announcement), though that page doesn't list Mr. Steven Rattner. Names of people who are not members but work closely (i.e. staff) were gleaned from various news sources available on the net.

Members:

• Tim Geithner
• Lawrence Summers
• (and 8 other cabinet members and official title holders)

Senior Advisor:

• Ron Bloom: 53-year-old working for United Steelworkers Union. Before that, he worked in Wall Street as an investment banker.

Official Designees (I take it to mean these are the people who do the work for the Members):

• Diana Farrell: Deputy Director of National Economic Council. She came from McKinsey (consulting firm), and before that, she worked for Goldman Sachs.
• Gene Sperling: economist. Currently a Counselor to Treasury Secretary.
• Jared Bernstein: economist, advising Vice President Joe Biden
• Edward Montgomery: economist. Currently Director of Recovery for Auto Communities and Workers
• Austan Dean Goolsbee: University of Chicago economist
• (and 5 other aides, advisors to various department)

Not a member but said to be working closely (I take it to mean "staff", who do the "real" work):

• Brian Deese: 31-year-old former Obama campaign aide
• Alan Krueger: economist at Princeton
• Matthew Feldman: partner at Willkie Farr & Gallagher LLP (bankruptcy and restructuring)
• Harry J. Wilson: 37-year old former hedge fund star. Before that, he worked for Blackstone and Goldman Sachs.
• Clay Calhoon: recently completed a two-year internship as a Walt Disney Co. analyst

Where does Mr. Rattner fit? He is the so-called "car czar", isn't he?

• Steven Rattner: investment banker, reports to Geithner and Summers (more of his colorful background, see my post here)

Economists and bankers, mostly, and activists. Oh sorry these days it's "social entrepreneurs", according to my old b-school.

Speaking of b-school, reading this article published in March on Wall Street Journal, the whole thing looks just like a business school case study write-up exercise to me, albeit writ large, very large and real-time, affecting real people and real money.

Chrysler and GM should have decided on their own fate long, long time ago, rather than suffer this ignominy.

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Opel Goes to Magna, Not Fiat

The plot thickens and gets twisted yet again in the ever-evolving saga of GM-Chrysler-(plug whoever you like) auto triage operation. The last I heard, it was Fiat who was pursuing Opel with the intent of combining it with Chrysler to create a super auto company.

Fiat pulled out on Friday over GM's short-term financing needs (300 million Euros), and in comes a consortium led by Magna International Inc., Canada's largest auto parts maker who already has a major presence in Europe.

Deal reached for Magna International to rescue GM's Opel unit: (AP)

"BERLIN - Germany's finance minister announced a high-level meeting in Berlin has approved a plan for Canadian auto parts maker Magna International Inc. to move ahead with a rescue of General Motor Corp's Opel unit.

"Peer Steinbrueck says the agreement was reached early Saturday morning. The agreement will see Opel put under the care of a trustee Saturday.

"The German government will provide a euro1.5 billion (US$2.1 billion) bridge loan which will be available immediately.

"Germany was looking for an agreement that will shield Opel - which employs 25,000 people in Germany, nearly half GM Europe's work force - from a looming GM bankruptcy court filing in the U.S. and extensive restructuring.

"The government wants to make it legally independent under a trustee so that any taxpayer assistance does not go to the U.S., then would provide bridge financing while Opel looks for a new, permanent owner.

"The consortium bid led by Aurora, Ont.-based Magna International includes Russian lender Sberbank."

The reason for the German government to support the Magna deal seems to be job preservation.

"...German Foreign Minister Frank-Walter Steinmeier called it a "responsible solution" that would preserve the highest number of jobs."

Opel employs 25,000 people in Germany, about half of GM's total employees in Europe. Also,

So what exactly is this deal?

German government backs Opel rescue deal (CNN):

Under the deal,

• Magna will own 20% stake in GM Europe that owns Opel brand.
• Russia's Sberbank will own 35% stake.
• GM will retain 35% stake.
• Opel employees will own 10% stake.

What's with the Russian bank? Then I remembered that GM opened a brand-new factory in Russia, one of the fastest growing market for automobiles, just last year. (Read it here.) Magna has been pursuing the Russian market, so far unsuccessfully. The deal will perhaps change that. (Read more about it here.)

Sberbank looks like it represents Russia the country, with a quarter of the Russian banking assets and a third of banking capital (see here).

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