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Preacher
02-16-2009, 05:27 AM
http://www.breitbart.com/article.php?id=D96CC1880&show_article=1
The Obama administration faces difficult choices on the fate of the U.S. auto industry, weighing the cost of pouring billions more into struggling companies against possible bankruptcies that could undermine plans to jump-start the economy. General Motors Corp. and Chrysler LLC are racing against a Tuesday deadline to submit plans to the government to show how they can repay billions in government loans and return to viability despite a sharp decline in auto sales.
The terms of the federal loans set "targets" for concessions, largely from debt-holders and the United Auto Workers union, but concession talks have made little progress with just a couple days left before the initial deadline.
Negotiations between GM and the UAW broke off Friday night but resumed Sunday, still focusing on exchanging the company's cash payments into a union-run retiree health care trust for GM stock, according to a person briefed on the talks who didn't want to be identified because the bargaining is private.
GM and UAW officials declined comment.
GM and Chrysler don't need to have everything nailed down for Tuesday's progress reports, but the companies are expected to detail concessions along with plant closures, the potential elimination of brands and thousands of job cuts.
After Tuesday there will be several weeks of intense negotiations ahead of a March 31 deadline for the final versions of the plans.
Detroit-based GM and Auburn Hills, Mich.-based Chrysler are living off a combined $13.4 billion in government loans. If they don't receive concessions by March 31, they face the prospect of having the loans pulled, followed by bankruptcy proceedings.
Any bankruptcy would be particularly painful with some economists predicting the country could lose 2 million to 3 million jobs this year and the unemployment rate, now 7.6 percent, could swell past 9 percent by the spring of 2010.
In network interviews Sunday, White House senior adviser David Axelrod didn't respond directly when asked if the U.S. economy could withstand a GM bankruptcy. Nor did he directly address a question about whether the Obama administration would let GM go into bankruptcy.
"I'm not going to prejudge anything. I think that there is going to have to be a restructuring of those companies. I'm not going to get into the mode of how that happens. We'll wait and see what they have to say on Tuesday," he told "Fox News Sunday."
Executives at the two automakers have said bankruptcy is not an option because consumers would not buy cars from a company that might go out of business.
"How that restructuring comes is something that has to be determined," Axelrod said. "But it's going to be something that's going to require sacrifice not just from the auto workers but also from creditors, from shareholders and the executives who run the company. And everyone's going to have to get together here to build companies that can compete in the future."
Harley Shaiken, a University of California-Berkeley labor economist who has studied the automakers, doesn't think the Obama administration would run the risk of bankruptcies given its efforts to create jobs.
"We're clearly on the edge of that abyss right now. Going over it would do irreparable damage not simply to the auto industry but to the manufacturing base in this country," Shaiken said.
Under the GM and Chrysler loan terms, both companies have "targets" to reduce debt and labor costs. One target says the automakers need to convert half of their payments into a health care trust fund for retirees in stock rather than cash, reducing their debt. Another requires the companies to reduce their unsecured debt by two-thirds by persuading investors to swap the debt for equity in the companies.
In 2007 contract talks, the union agreed to take on retiree health care to help the companies remove billions in liabilities from their books. But the contracts only require the company to pay the union 60 percent of the liability, Shaiken said. If half those payments come in risky stock, the trust fund may not have enough money, he said.
According to others briefed on the talks, bargaining has shifted to Ford Motor Co., the healthiest of the Detroit Three and the only one not receiving government loans. Ford is seeking the same concessions as GM and Chrysler so it's not placed at a disadvantage.
Another complication is that Obama has not yet appointed an overseer of the plans—a so-called "auto czar"—and many industry officials have said the lack of an administration point-person has slowed the discussions. Steven Rattner, a private equity investor, and Stephen Girsky, a veteran auto industry analyst, have been mentioned as leading contenders to be part of an Obama auto team.
Sen. Carl Levin, D-Mich., said Thursday that he did not expect the reports Tuesday to provide "very specific information because there's no car czar. I do think there will be an outline of directions."
Axelrod wouldn't say whether the administration would offer the auto industry more bailout money. GM already has borrowed $9.4 billion to stay in business, and it would receive an addition $4 billion if the Treasury Department approves its viability plan. Chrysler wants $3 billion more on top of the $4 billion it has already borrowed.
"We need to see what it is that they come up with this week," he said.


Over the next 3 years, if the auto corps fail, history will probably lay it at the feet of President Obama.

However, the seeds of this failure were sown decades ago. Detroit has ALWAYS been behind the curve, too big, too slow, and too deaf.

Unions, management, their all at fault, and neither Reagan, nor Clinton, could pull this one out of a hat.

So very simple . . Should president Obama step aside and allow these automakers to fail?

Should he lead the govt. and intervene with loans,

Or should the automakers be taken over by the govt.?

Is there another option?

I am interested in what people have to say. . . and no, I am not interested in politics as much as I am how you think the president (regardless of who the PERSON is) should be involved.

(and yes, the president has my sympathies on this one. . . it has been a sandbag waiting to fall for a number of years. . . just so happens it hit during his time in office... It very well could be thought of as a financial 9-11 in terms of directing and controlling a presidency).

xfl2001fan
02-16-2009, 06:34 AM
We are a capitalistic country. Let them fail. That's the beauty of capitalism...you pay the price for your own mistakes. You are held accountable for your failings.

The more we try to "help" the more damage we do in the long run.

revefsreleets
02-16-2009, 10:06 AM
I have an idea. We merge GM and Chrysler, nationalize them BUT the stock is held by Americans. Each American gets X amount of stock in the new US Car Company.

We own the company. Same with the banks.

If we insist on nationalizing (which it seems like we are headed towards), at least let the average ham-n-egger see something tangible from it.

It's obviously 1000X mnore complex than this, but wrap your head around the idea and it's no so awful.

devilsdancefloor
02-16-2009, 10:26 AM
Let'em fail! Maybe they will learn something from it!

MACH1
02-16-2009, 10:39 AM
I have an idea. We merge GM and Chrysler, nationalize them BUT the stock is held by Americans. Each American gets X amount of stock in the new US Car Company.

We own the company. Same with the banks.

If we insist on nationalizing (which it seems like we are headed towards), at least let the average ham-n-egger see something tangible from it.

It's obviously 1000X mnore complex than this, but wrap your head around the idea and it's no so awful.

And it shall be named GMC. :rolleyes:

The only problem I see with that is the gov will try to wipe out the competition. If they fail, possibly a new company could start up with better idea's and better car's. and(or) maybe a green car company also that can build better green cars.

revefsreleets
02-16-2009, 10:45 AM
It looks to me like we will end up with two choices: The government owns everything and we have NO share in it, or we can at least attempt to wrest some control from the bureacrats. Kristof had an interesting piece on this...

http://www.ohio.com/editorial/commentary/39541582.html

Go ahead, 'nationalize' the banks
By Nicholas D. Kristof
New York Times


Published on Friday, Feb 13, 2009

NEW YORK: In a moment, we'll come to a two-step solution to the banking mess: First, tar and feather America's 100 leading bankers; second, take over insolvent banks and distribute shares to members of the public (without ever using the term ''nat . . . . '' — oh, never mind).

But first, let's look at the problem. President Barack Obama and Treasury Secretary Tim Geithner stumbled badly in introducing the bank bailout. But the larger conundrum is that a bailout is both: a) urgent and essential; and b) unfair and unpopular.

I was the New York Times' Tokyo bureau chief during much of Japan's ''lost decade'' of the 1990s, and one of the lessons of that debacle was the need to attack a major downturn with Colin Powell's doctrine of ''overwhelming force.'' The neo-Hoovers criticizing today's stimulus package make perfectly valid points about this or that flaw in the stimulus package. But the alternative is perhaps 3 million fewer jobs and the national economy looking like a balloon losing air.

Another thing: Those railing against the stimulus are often the same folks who inherited an economy producing budget surpluses and transformed it into today's fiscal catastrophe. In rural Oregon where I grew up, we were taught that if you've made a huge mess in someone else's living room, it's not polite to denounce the cleanup.

Japan also showed that you can't fix an economy without fixing the banks. The term ''zombie banks'' was popularized then, referring to banks that were half dead but always allowed to stagger on. They must be put out of their misery.

Yet Japan also underscored that you can't resolve a crisis when the public is more interested in punishing banks than rescuing them. That's why I suggested tarring and feathering a group of prominent bankers. Populist rage then would be satisfied, and we could get on with reviving the banks.

Not feasible, you say?

A more plausible approach might be the one that some White House aides unsuccessfully argued for: tougher curbs on executive compensation. The Obama administration in theory limits certain compensation for top executives in companies receiving taxpayer dollars to $500,000, but the plan has loopholes big enough to drive a Mercedes through.

Yes, troubled banks might lose good people to hedge funds that can pay more because they're not bound by these curbs. But that upsets me less than the idea of single mothers working multiple jobs so that their tax dollars can underwrite million-dollar bonuses at companies getting taxpayer assistance.


Tom Peters, a management expert, suggests capping the pay of CEOs receiving bailouts at that of a four-star general. As for the concern that the executives would quit, who cares? Peters writes that if all the top executives of the Fortune 500 companies were exiled to Elba, ''performance of their companies would not on average deteriorate.''

As Rep. Barney Frank asked the bankers testifying on the Capitol Hill dunk-tank on Wednesday about their bonuses: ''Why do you need to be bribed to have your interests aligned with the people who are paying your salary?''

Sen. Claire McCaskill, D-Mo., had it right in her recent legislative proposal: Cap compensation for all employees at companies receiving bailouts at the salary of the American president, which is $400,000 a year.


The administration should also uproot subsidies in the tax code for excessive executive compensation. Stratospheric compensation is unhealthy enough — why subsidize it? The Institute for Policy Studies estimates that these subsidies cost taxpayers $20 billion annually.

A tough stand on these issues might help give Obama the political space to bail out the banks; otherwise, it's hard to see why the public would support a bailout of the size necessary.

As for the nature of the bailout, Obama pointed to Sweden's resolution of its bank crisis as a solution. ''They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again,'' he told ABC News on Tuesday. ''So you'd think looking at it, Sweden looks like a good model.''


Obama then suggested that it wouldn't work in the United States, partly for cultural reasons. But a broad range of experts believe that some variation of nationalization is the only way to revive the banks quickly without squandering vast amounts of taxpayer dollars. Even the managing director of the International Monetary Fund suggested that Washington think of the Swedish model.

America's horror of ''nationalization'' could be defused by handing out shares to all American households. President George W. Bush used to talk about building an ''ownership society.'' Well, giving shares in big banks to all American households would be a terrific way to do that.

For many Americans, it would be the first time they directly owned stock — and, finally, something good could come from the banking Bust Bowl of 2009.



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Kristof is a New York Times columnist.