Editore"s Note
Tilting at Windmills

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March 30, 2009
By: dday

JUST ONE MORE FILL-UP FOR THE AUTO INDUSTRY?... The government had until March 31 to assess the restructuring plans for GM and Chrysler and decide whether or not to give them more loans until they can sustain themselves. Obviously, the Obama Administration didn't much like what they saw.

President Barack Obama is sending a blunt message to Detroit automakers: To survive - and win more government help - they must remake themselves top to bottom. Driving home the point, the White House ousted the General Motors chairman as it rejected GM and Chrysler's restructuring plans.

Obama is set to elaborate on that message Monday when he announces what his White House told reporters over the weekend: Neither GM nor Chrysler submitted acceptable plans to receive additional federal bailout money [...]

Frustrated administration officials, speaking on condition of anonymity ahead of Obama's announcement, said Chrysler has been given a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA. The government will offer up to $6 billion to the companies if they can negotiate a deal before time runs out. If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off [...]

For GM, the administration offered 60 days of operating money to restructure. Officials say they believe GM can put together a plan that will keep production lines moving in the coming years.

There's a lot to unpack here.

First of all, the most high-profile fallout is that GM CEO Rick Wagoner was forced out. Michigan Gov. Jennifer Granholm described Wagoner, who was with GM for 31 years, as a "sacrificial lamb." He admittedly was at the helm when American automakers failed to adjust over the last decade, making SUVs and losing market share to Toyota and Honda. The company has lost $82 billion over the past 4 years.

And obviously, bailouts of any kind are unpopular at this point, and must be met with major concessions. However, one must be struck by the dichotomy of the President and bank CEOs making nice-nice on Friday, and forcing Wagoner out today. As Atrios put it, "apparently the real economy is less important than the paper one." Josh Marshall digs a bit deeper:

Citi does not have the same CEO it did at the start of the crisis. And the government installed a new CEO at AIG after the initial bailout. Another rejoinder might be that the automakers' plight is of a much more longstanding vintage than that of the finance barons, though I suspect, as we learn more, we'll be revisiting those assumptions. And even after getting substantial government aid, I think Wagoner's the first auto industry CEO to get the boot. So perhaps we should be asking why it is that something like this hasn't happened sooner.

All that said, though, after that meeting of the major bank CEOs at the White House last week, it's hard for me not to think that, for all that has happened, their clout in Washington is just on a scale where they are accepted as peers of the realm. And simply immune to certain sorts of treatment.

The White House may believe that anger over the initial auto bailout, and bailouts in general, force them to be tough. And certainly the government should not throw good money after bad if there's no hope of viability. But with millions of jobs at stake, certainly a good bit of people are going to notice that the auto industry is being forced into concessions that practically no bank has had to make.

...President Obama will announce the government's plan later this morning.

dday 10:09 AM Permalink | Trackbacks | Comments (15)

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But with millions of jobs at stake, certainly a good bit of people are going to notice that the auto industry is being forced into concessions that practically no bank has had to make.

Ya think? It's outrageous that Summers claims the finance contracts are sacrosanct yet the admin continues to ask for more concessions fromt the auto workers. With democrats like these we don't need republicans. If this administration forces GM into bankruptcy I'm done with the democrat party.

Posted by: bobbyk on March 30, 2009 at 10:33 AM | PERMALINK

Well, the point could not be more obvious. The administration tried to help the banks without a very heavy hand and it blew up in their face. They would have to be pretty stupid to let the autos do the same. I would hate to be the NEXT banker to go to the president for some money. They have earned themselves a very short leash.

Either that, or the American economy is a wholly-owned subsidiary of Goldman-Sachs. I guess we will find out.

Posted by: ZB McFate on March 30, 2009 at 10:51 AM | PERMALINK

Any firm that has received billions of bucks from the feds should be held to a specifically SAME standard.

Yes, GM and Chrysler have some work to do, but so do the free-loading financials.

The message should be the same.

Oh yeah, I forgot, Lehman went down.

Consistency is not a center-piece of Wealthcare (bailouts and TARP).

Posted by: Tom Nicholson on March 30, 2009 at 10:53 AM | PERMALINK

Restrictions only apply to those firms which employ Northern based Democratic voting unions. Have yet to walk past pickets of cashiers or loan boiler room officers out on strike at banks.

Posted by: berttheclock on March 30, 2009 at 11:02 AM | PERMALINK

"I'm done with the democrat party." -bobbyk

Oh, come off it troll, you give yourself away.

Posted by: Capt Kirk on March 30, 2009 at 11:02 AM | PERMALINK

Well boobbyk you kind of exposed yourself as a limbot when you referred to the democratic party as the democrat party.

Posted by: gandalf on March 30, 2009 at 11:03 AM | PERMALINK

"...apparently the real economy is less important than the paper one."

I have the opposite impression. This signals to me that the Obama administration believes that the real economy is as important, if not more, than the paper one.

Posted by: CJ on March 30, 2009 at 11:14 AM | PERMALINK

Chrysler doesn't have "work to do", it's a dead man walking (and lately, more like crawling) that for many years now has had little excuse to exist. Any real possibility of maintaining its jobs for the long run vanished long ago, it was just a question of how long it would take to finish expiring. As for GM, demanding a really radical restructuring isn't being mean; that's the ONLY way it has a chance in hell of surviving as some kind of going concern than having its assets sold off piecemeal. This has been obvious to anybody paying attention for many years now, and the board and successive managements saw fit to ignore the many warning signs and pretend it was still 1950. That's hardly Obama's fault, and he has no choice but to deal with reality.

And yes, I wish the love for the financial industry were also a lot tougher.

Posted by: Steve LaBonne on March 30, 2009 at 11:22 AM | PERMALINK

I am thinking that this is not altogether good news for the financial guys. This will tend to create plenty of sentiment of exactly the sort expressed here, that the financial guys are getting a sweet deal. Enough of that, and it creates pressure to do what needs to be done for them, too. And please, though the auto execs did not cause this catastrophe, they have not exactly shown themselves to be brilliant strategic planners.

Posted by: dr2chase on March 30, 2009 at 11:35 AM | PERMALINK

Which of these is a dinosaur?

New GM CEO Frederick A. Henderson:

Like Mr. Wagoner, Mr. Henderson is a graduate of the Harvard Business School and a lifer at G.M. He started in the finance division in 1984 and later spent nine years in executive positions in South America, Asia and Europe. The Detroit-born son of a G.M. sales manager, Mr. Henderson, 50, became chief financial officer in 2006 and was named president and chief operating officer a year ago.


Elon Musk CEO of Tesla Motors who is asking the US for a paltry 350 million to build a plant to produce the Model S:

[Elon Musk] wanted to move to the US, saying: "It is where great things are possible. I am nauseatingly pro-American." He emigrated from South Africa and traveled to Kingston, Ontario where he enrolled at Queen's University, scraping by on as little as $1 a day with part-time and summer jobs. He then was given financial aid to attend the Wharton School of the University of Pennsylvania. "Tuition costs are outrageous ... Fortunately, they gave me a scholarship ... so I only had to cover living expenses, books, etc., by working." From Wharton he received an undergraduate degree in economics and stayed on another year to finish a second bachelor's degree in physics. His undergraduate degrees behind him, Musk then considered three areas he wanted to get into that were "important problems," as he said later. "One was the Internet, one was clean energy, and one was space."

I know Harvard and Yale run our government... but can we at least give some chump change to some real entrepreneurs please?

Posted by: koreyel on March 30, 2009 at 11:37 AM | PERMALINK

if i were a financial wunderkin, i wouldn't be resting too easy. sometimes its just a matter of timing and time.

who knows, i could be wrong. 400 years of history told me obama couldn't be elected. glad to be wrong on that one though

Posted by: dee on March 30, 2009 at 12:09 PM | PERMALINK

I noticed that Obama mentioned bankruptcy may be necessary in his remarks this morning. I think that's his way of telling GM and Chrysler that this is the last installment of the bailout. If they don't work things out in 30/60 days that's it.

It seems like the restrictions we are putting on the Chrysler/Fiat deal are not that great for Fiat. Maybe I'm not reading it right though.

Posted by: ArkPanda on March 30, 2009 at 12:11 PM | PERMALINK

Re Elon Musk - he has only been in the car industry a year or two and he is already running one car company into the ground. Call me skeptical, but a history of software developement demonstrates next to nothing about the ability to develope and build complicated mechanical products.

Posted by: J Frank Parnell on March 30, 2009 at 1:08 PM | PERMALINK


Posted by: DF on March 30, 2009 at 1:27 PM | PERMALINK
"...certainly a good bit of people are going to notice that the auto industry is being forced into concessions that practically no bank has had to make."

Yep. Screw people that make real things. If THEY screw up, f___ 'em. But if they manipulate money or symbols, why THAT is worth saving.

When Chrysler's demise take down GM and Ford, and then takes down the economies of MI, IL, OH and MO, what do we do then?

It isn't just the 58,000 people on the Chrysler payroll. It is the 500,000 that work for the suppliers that feed parts into Chrysler plants.

And when Chrysler proves to be the Lehman Brothers of our industrial society, how much stimulus will it take, just to bring us back up to where we are now (which sure isn't where the stimulus is supposed to put us)?

Watch Wall Street implode when Chrysler shuts its doors.

Why is everybody blaming the Big Three for making SUVs? SUVs were popular because of the expanding bubble. This is ONE area where I agree that WE THE PEOPLE were to blame:

WE demanded SUVs.

And the Big Three followed US - OUR DEMANDS - and gave us what we wanted. There weren't a whole lot of SUV owners who told the car companies, "No, sell me a 40-mph sedan instead. We don't need that big monster."

IF WE BOUGHT THEM, WHO IS AT FAULT? American automakers, who DID have fuel efficient cars available. Why didn't WE choose differently?

But you know what? Even if we had, the Big Three would STILL BE IN THIS MESS. EVEN IF THEY PRODUCED 75-MPG CARS, THEY WOULD STILL BE IN THIS MESS!

Everyone is pointing at the Big Three, like they screwed up.

And everyone is acting like the Japanese and German automakers are in good shape, BECAUSE THEY MADE FUEL EFFICIENT CARS. NOT EVEN CLOSE!

The Big Three are victims of the financial institutions' greed, just like Joe Main Street is.

Get a clue, people! The German and Japanese automakers are in EVERY BIT AS BAD A SHAPE AS THE BIG THREE. Anybody that doesn't know this has been getting their news from the MSM.

- The German companies have been shut down every bit as much as the Big Three.


And what are their governments doing about it?

Bailing them out.

Gee, what a novel freaking idea!


Don't they know that, once the industry is gone, it will never return?


Just watch for the Lehman Effect to kick in.

Coming soon, to a Depression near you.


Posted by: SteveGinIL on March 30, 2009 at 9:05 PM | PERMALINK



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