The Blind Leading the Blind

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The WaPo is scouring the business world looking for the perfect talent to lead the failing company. Today, they announced they’ve hired the guy who drovem GM into the ditch to its board.

Rick Wagoner, who was fired as chief executive of General Motors by the White House, has been elected to The Washington Post Co.’s board of directors, increasing the board to 11 members, the education and media company said today.

The Post Co.’s release says that Wagoner “retired from General Motors Corporation in August 2009,” but the White House acknowledged that it forced Wagoner to step down two months before the struggling automaker was forced to declare bankruptcy, following a $51 billion government bailout. As part of the bankruptcy, the federal government took a 61 percent stake in GM, which it still holds. GM plans an IPO in coming months to pay back the taxpayer money.

Because just about the only people with more expertise in dying industries than news executives are automotive ones.

Teddy wants to know, though, whether this makes Newsweek Pontiac.

Dan Coats’ Hypocritical Lobbying: Floorplans, Not Cars

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Eric Kleefield uncovers a heap of hypocrisy in IN Senate candidate Dan Coats’ lobbying record, but he misunderstands what it means.

Former Sen. Dan Coats (R-IN) is running for his old Senate seat, apparently on a platform of opposing government takeover of the private sector. But as it turns out, in 2008 he lobbied the Senate on the TARP bill, on behalf of none other than Chrysler’s parent company.

The NBC affiliate in South Bend quoted Coats early this week, explaining why he was returning to politics. “Well, nobody anticipated that government’s going to try to run auto companies, bank insurance companies, take over the private sector,” said Coats.

However, according to a federal lobbying report for the third quarter of 2008, Coats served as a lobbyist on behalf of Cerberus Capital Management, the firm that owned a majority share in Chrysler.

[snip]

Coats’s campaign press secretary Pete Seat says that despite what the lobbying filings show, Coats did not seek bailout help for Chrysler. “Dan Coats never lobbied on behalf of Chrysler in pursuing federal assistance. Anything to the contrary is false and pure politics,” Seat told us.

Instead, Seat says, Coats was lobbying for “small business” loan guarantees. Seat says: “Dan’s only related work was on behalf of small businesses – the very lifeblood of our economy – to ensure they could raise the capital needed to increase production, inventory and add jobs. Dan Coats did more for job growth in the third quarter of 2008 than Democrats did in all of 2009.”

Kleefield spends some time talking about Cerberus’ stake in Chrysler, the car company. But he seems unaware of what Cerberus’ big interest was: Chrysler Financial and GMAC–and of what the phrase “small business loan guarantees” means in the auto business.

Cerberus, after all, was really never that interested in the car business, notwithstanding that little Chrysler millstone it had around its neck. Rather, in the years leading up to 2008’s crash, Cerberus was making a big play for finance companies–Chrysler Financial and GMAC. And certainly in 2008, when the auto business was going south, it hoped that it would be able to become the big auto finance company.

And the GOP-wired company in fact did manage to get into the TARP world by managing to turn GMAC into a bank holding company (though it had to give up much of its 51% stake in the company to do so). Read more →

Bob Lutz Hangs Up On Ed Whitacre’s GM

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The inevitable has been announced; Bob Lutz is leaving Ed Whitacre’s new General Motors. From the New York Times:

Vice Chairman Bob Lutz will retire from the automaker effective May 1, people briefed on the plans said on Wednesday.

Lutz, 78, had been serving as a senior adviser to GM Chairman and Chief Executive Ed Whitacre after shelving retirement plans to take charge of the automaker’s marketing after it emerged from bankruptcy in July 2009.
….
The announcement comes a day after GM shook up its sales and marketing operations in its home market for the third time in five months.

Lutz was charged with overhauling GM’s marketing efforts under former CEO Fritz Henderson, but he appeared to have been sidelined by Whitacre, a former AT&T executive brought in by the Obama administration.

In late February, Whitacre named Stephen Girsky, a former investment banker, as special adviser and vice chairman in charge of corporate strategy, a move that raised questions about the tenure and role of Lutz.

And it really was inevitable. Last December when Fritz Henderson was unceremoniously dumped in a midnight putsch by Ed Whitacre, the former corporate phone boy from AT&T, we had some things to say here. Marcy, noting Whitacre’s professed desire to ram products to market quicker – to do everything quicker – observed:

Now maybe it would be possible to bring out new products more quickly. Maybe there is merit to disrupting the very complex model year and product cycle schedules that every car company relies on to manage new product introductions.

But I worry that this push to introduce products more quickly will come at a price–the price of doing it right, both from an engineering perspective (you don’t want the Cruze to come out with all sorts of recalls, after all) and from a marketing perspective (if you introduce a product but don’t have the marketing budget to support it, it’s not going to do much good).

And I commented that the Whitacre putsch had other consequences too:

There is one other consideration. With Fritz gone, the only marketable face GM has left to the actual auto people is Bob Lutz, and he will bolt in a heartbeat if he thinks the wrong car decisions are being made. Lutz is very comfortable with the big money wheeler dealers, but he is, first and foremost, a car guy all the way. And he does not need the money or grief. If they were to lose Lutz in any short order in addition to Henderson, they will have a potential real mess.

Well it turns out the thoughts may have been prescient. And make no mistake, Lutz is in fine health and as active and ornery as ever; he is leaving because Read more →

GM’s Turn for a Big Recall

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Because so many people like to accuse me of beating up on Toyota:

General Motors has recalled 1.3 million Chevrolet and Pontiac models in North America for power steering failures that are tied to 14 crashes and one injury in the United States, the company said Tuesday.

The recall affects 2005-2010 Chevrolet Cobalt and 2007-2010 Pontiac G5 models sold in the United States, 2005-2006 Pontiac Pursuit vehicles sold in Canada, and 2005-2006 Pontiac G4 models sold in Mexico.

Detroit-based GM told the National Highway Traffic Safety Administration about the recall Monday after concluding its own investigation first launched in January 2009.[my emphasis]

The news that this happens after the cars’ warranty expires is bad. But note the difference here with Toyota: GM did their own investigation. Toyota, on the other hand, didn’t even start one until NHTSA made them do so. And even then, they did so with a firm designed to produce a whitewash.

GM will likely find reason to be embarrassed over this. (And I hope the things they said about the Cruze’s quality, which launches this year, are true.) But there is still a lesson here in stonewalling versus a real effort to solve the problem.

Henry Waxman Agrees w/Me; Toyota Study Is Horrible Whitewash

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Last week I promised I would come back and explain why the report Toyota had produced, purportedly claiming that they had shown they don’t have a software/electronic problem with their electronic throttle controls, did no such thing.

I never got around to doing that, but I was going to show that the report only tested the connection between the accelerator and the Engine Control Module, but never looked at what was going on in the black box of the ECM, where plenty can go wrong–and precisely the kinds of things that Toyota has been denying. I was also going to point out that the tests Exponent had done were all very basic QC tests, none of the kinds of tests that would reproduce likely causes of the throttle failure. I would have also noted that the Exponent team had pointedly excluded any software engineers–they didn’t even try to look at the software involved (or even hardware like chips).

Well, Henry Waxman has just released the letter he sent to Jim Lentz, Toyota North America President of Sales, in preparation for tomorrow’s hearing. And, after consulting with experts with 30 years of experience in this stuff, it basically lays out the case I would have made.

Second, the one report that Toyota has produced that purports to test and analyze potential electronic causes of sudden unintended acceleration was initiated just two months ago and appears to have serious flaws. This report was prepared for Toyota by the consulting firm Exponent, Inc. at the request of Toyota’s defense counsel, Bowman and Brooke, LLP. Michael Pecht, a professor of mechanical engineering at the University of Maryland, and director of the University’s Center for Advanced Life Cycle Engineering (CALCE), told the Committee that Exponent “did not conduct a fault tree analysis, a failure modes and effects analysis . . . or provide any other scientific or rigorous study to describe all the various potential ways in which a sudden acceleration event could be triggered”; “only to have focused on some simple and obvious failure causes”; used “extremely small sample sizes”; and as a result produced a report that “I would not consider . . . of value . . . in getting to the root causes of sudden acceleration in Toyota vehicles.”

Another expert consulted by the Committee, Neil Hanneman, an engineer with over 30 years experience in automotive manufacturing, product design, and product development, reached a similar conclusion, informing the Committee that the report “does not follow a scientific method” and fails to test “major categories” of potential causes of sudden unintended acceleration, including “electromagnetic interference/Radio frequency interference,” “environmental conditions,” the electronic control module (ECM), and “the software algorithms in the ECM. [my emphasis]

And let me emphasize, again, this stuff–the software, possible chip failure, interference–are all the things people have been saying probably do cause the Toyota car failures. But for some reason Toyota deliberately did not look at these issues. Read more →

Toyota's "Wins for Toyota-Safety": $100 Million by Avoiding Finding the Acceleration Problem

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The Toyota hearings this week–particularly Wednedsay’s hearing featuring Akio Toyoda–are looking more and more devastating. The Detroit News reports that the House Oversight Committee has an internal Toyota presentation from last July boasting that it had saved $100 million by doing its bullshit floor mat recall in 2007, rather than isolating the real source of the acceleration problem.

Toyota Motor Corp. officials bragged in July about avoiding a costly wholesale recall related to sudden acceleration complaints, a document turned over to congressional investigators shows.A limited recall saved the Japanese automaker, whose executives will be grilled by congressional committees starting Tuesday, more than $100 million, according to the presentation obtained by The Detroit News on Sunday

[snip]

The document acknowledges Toyota was still studying the issue of “sudden acceleration on ES/Camry, Tacoma, LS, etc.,” but notes that Toyota’s safety officials had saved the company significant expense by limiting the recall to 55,000 floor mats in 2007.

“Negotiated ‘equipment’ recall on Camry/ES re SA (Sudden Acceleration); saved $100M+, w/ no defect found,” the document said.

The $100 million plus in savings was listed in a section titled “Wins for Toyota-Safety Group.”

Note that the briefing was for Yoshimi Inaba, who had just started as head of Toyota North America. Inaba will still be testifying Wednesday, along with Akio Toyoda.

And this is damning for two reasons. First, boasting about the recall while admitting they hadn’t really found the solution–while pushing the floormat recall everyone knew to be totally bullshit–really speaks to the arrogance of the company. Moreover, in light of the really obvious whitewash that Toyota is still conducting–a study that by design will never find the source of the problem–it makes it clear that Toyota is still pursuing this strategy: cheap fixes rather than trying to actually find and solve the problem.

Update: And now the feds are getting into the action. (h/t scribe)

The Japanese automaker said it received a subpoena from a federal grand jury in New York seeking documents related to unintended acceleration in its vehicles and the braking system of its Prius hybrid.

Toyota also said it received a subpoena and a voluntary document request from the Los Angeles office of the U.S. Securities and Exchange Commission. The SEC is seeking documents related to unintended acceleration as well as to its disclosure policies and practices, Toyota said.

[snip]

Toyota said it received the grand jury request from the Southern District of New York on Feb. 8. It received the SEC requests on Friday. It disclosed the latest requests in a filing with the SEC on Monday and said it intends to comply with the requests.

Toyota Pays Whitewash Firm to Produce UNBELIEVABLY Bad Whitewash

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To get an idea of just how ridiculously bad the Toyota-funded study of its “sticky accelerator” problem is, you need only compare the 6 vehicles the contractor in question purchased to study, with the years and makes of vehicles Toyota has recalled.

Here are the 6 cars the contractor has studied:

  • 2002 Camry (North American VIN)
  • 2007 Camry (Japanese VIN)
  • 2007 FJ Cruiser (Japanese VIN)
  • 2008 Sienna (North American VIN)
  • 2006 Lexus IS 250 (Japanese VIN)
  • 2006 Lexus IS 350 (Japanese VIN)

And here are the vehicles recalled on January 21, 2010 for the “sticky accelerator” problem:

  • 2009-2010 RAV4  (except Japanese VINs)
  • 2009-2010 Corolla  (except Japanese VINs)
  • 2009-2010 Matrix
  • 2005-2010 Avalon
  • 2007-2010 Camry (except Japanese VINs)
  • 2010 Highlander (except Japanese VINs)
  • 2007-2010 Tundra
  • 2008-2010 Sequoia

Further, Toyota makes it clear that no Lexuses have been recalled, nor any of the following models: Prius, Tacoma, Sienna, Venza, Solara, Yaris, 4Runner, FJ Cruiser, Land Cruiser and Highlander hybrids, and Camry hybrids.

And just to be over-cautious, here are the vehicles recalled for the “floor mat problem” on September 29, 2009:

  • 2007 – 2010 Camry
  • 2005 – 2010 Avalon
  • 2004 – 2009 Prius
  • 2005 – 2010 Tacoma
  • 2007 – 2010 Tundra

In other words, not a single car the contractor has been studying for the past two months is suspected of having this problem!! It has limited its testing primarily to cars with Japanese VINS. One exception–the Sienna–was not included in either of the recalls. And the other–the 2002 Camry–is an older model than the recalled Camrys.

There is a lot more glaringly, embarrassingly wrong with this study (starting with the fact that the contractor in question only pulled 6 Toyota cars in the first place) as well as the fact that the contractor is a known whitewash specialist. (h/t PJEvans) I’ll get to those once I’ve reviewed the study more closely.

But for now, know that Toyota paid a contractor to try to replicate this problem in a group of cars–just 6 cars–that Toyota doesn’t apparently suspect of having the problem.

Toyota's Revolving Door and Failing Brakes

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I’ve made a concerted effort to avoid piling on the Toyota recall story. But this excellent Bloomberg story–describing how two former National Highway Traffic Safety Administration officials helped Toyota avoid more comprehensive responses to its brake failures on four different occasions–deserves a lot of attention.

Former regulators hired by Toyota Motor Corp. helped end at least four U.S. investigations of unintended acceleration by company vehicles in the last decade, warding off possible recalls, court and government records show.Christopher Tinto, vice president of regulatory affairs in Toyota’s Washington office, and Christopher Santucci, who works for Tinto, helped persuade the National Highway Traffic Safety Administration to end probes including those of 2002-2003 Toyota Camrys and Solaras, court documents show. Both men joined Toyota directly from NHTSA, Tinto in 1994 and Santucci in 2003.

[snip]

NHTSA opened eight investigations of unintended acceleration of Toyota vehicles from 2003 to 2010, according to Safety Research & Strategies Inc., a Rehoboth, Massachusetts, group that gathers data from NHTSA and other sources for plaintiff’s attorneys and consumers. Three of the probes resulted in recalls for floor mats. Five were closed, meaning NHTSA found no evidence of a defect.

In four of the five cases that were closed, Tinto and Santucci worked with NHTSA on Toyota’s responses to the consumer complaints the agency was investigating, agency documents show.

Here are the four known investigations that were limited or squelched:

March 2004: NHTSA limits investigation of throttle control system to unintended acceleration events lasting less than a minute, seemingly dismissing longer unintended acceleration problems because driver may have used the wrong pedal. (114 similar cases found)

2005: NHTSA ends investigation after Toyota tells it there was “no evidence of a system or component failure was found and the vehicles were operating as designed” (100 cases found; 59 investigated)

August 2006: Toyota says it finds “no abnormality in the throttle actuator, or controller, which the petitioner blamed,” but does find “evidence that returned actuators had corroded due to water intrusion caused by circumstances ‘such as driving through a flooded road, in the heavy rain or a hurricane’ and a drain hose was modified to prevent future water intrusion” (3,546 cases addressed under warranty)

2008: Toyota says it “couldn’t find enough evidence to support allegations of unintended acceleration in 2006-2007 Toyota Tacoma pickup trucks” (478 incidents reported)

One things that becomes clear from this is that there have been a significant (though not huge) number of complaints on these issues. While I can’t be sure, it seems that at least one of these was only addressed at the dealer level, which would not be able to determine a bigger electronic issue.

Now, as the article makes clear, there’s no evidence that the two former NHTSA employees did anything improper in their work with Toyota. But it does appear these former NHTSA knew how to game the system to make sure NHTSA decided it wasn’t worth its time to investigate as each new complaint surfaced.

GM's Dick Cheney and TARP Loans and Chinese Cars

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Yesterday, GM announced that Ed Whitacre would stay on as CEO, meaning Whitacre had pulled off the same stunt Dick Cheney pulled in 2000 when Cheney searched and searched and searched only to discover he was the best man for the job.

“I certainly didn’t come into this with that intention,” Whitacre, 68, told reporters yesterday in Detroit. “You sort of get pulled in. I didn’t know this was going to happen to me. In fact, I planned for it not to happen.”

[snip]

“The longer Whitacre was in that role, the more comfortable he became,” said Maryann N. Keller, senior adviser with Casesa Shapiro Group LLC in New York. “Circumstances propelled this decision. No one else would take that job with Whitacre in that role as an aggressive chairman and with a new CFO already in place.”

Directors reviewed the progress of the CEO search at the Jan. 13 meeting in Detroit, their regular monthly gathering, two people familiar with the matter said.

Initial efforts by GM’s search firm, Spencer Stuart, didn’t turn up any top prospects with manufacturing experience whom the automaker wanted to hire over Whitacre, said the person familiar with those deliberations. The board also concluded that Whitacre had taken critical steps for GM’s recovery and that more change would be disruptive, the people said.

Directors held a special meeting last week by telephone during which Whitacre’s hiring was made official, the people said. Whitacre said the search for a permanent chief had gone on for a “pretty good while” before being called off.

Michael Millican, a spokesman for Spencer Stuart, said the firm “never comments on a search.” Ron Bloom, the chief adviser for the U.S. Treasury’s auto task force, told reporters the government wasn’t involved in Whitacre’s hiring as CEO. Chris Preuss, a GM spokesman, declined to comment on the process.

Which I guess makes it high time for me to share my sinking suspicions from the North American International Auto Show.

The (crappy) video above is the Chevrolet Press Conference–which introduced the new Chevrolet Aveo. Though no one much commented on the visuals, it was the story many Americans want GM to tell: there they were with four viable small cars, all with the styling that has long been missing from GM’s smaller cars. When the Cruze is introduced later this year, it will even lead the segment in gas mileage until the new Civic, with the same mileage, comes out a few months later.

Sounds great, doesn’t it? Just what people have been demanding from GM.

But then, just after the press conference, I asked Margaret Brooks, who is in charge of Chevy’s small cars, how the Aveo and the Spark would be differentiated, when they would be introduced into the US market, and where the Spark would be made (in the announcement, GM boasted that the Aveo will be built in Orion Township here in MI), I got no answers. (In a follow-up, they later said that Aveo would be introduced in late 2011, which is pretty aggressive for something that is at concept right now). So I asked Brooks, straight out: “But the Spark won’t be made in China, will it?” Brooks: “We haven’t decided yet.” “But not China?” “We haven’t decided yet.”

As you might recall, the Spark was introduced in the US in early 2009. At the time, GM told its federal overlords that it would be importing 51,000 Sparks into the US starting in 2011. But once UAW balked, they negotiated a promise to build subcompacts here in the US.

General Motors Corp. agreed not to import Chinese-made subcompact cars to the U.S. as part of its concession deal with the United Auto Workers, union President Ron Gettelfinger said Thursday.

Instead, the company will build up to 160,000 of the cars per year at an existing U.S. factory and sell them in the U.S., Gettelfinger said in a telephone interview with The Associated Press.

GM had said in documents submitted to Congress that it planned to produce up to 51,000 subcompacts per year in China and ship them to the U.S. starting in 2011.

But now they say they don’t know–which is not at all credible if they really plan on importing the Chevy Spark by 2011, which is what they initially announced. If they don’t have the factory picked (as they have for the Aveo), then they’ll be building it in one of their existing factories.

Read more →

Marcy Wheeler TeeVee – Jonathan Gruber and the Cadillac Plan

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There has been a fair amount of misinformation and disinformation about what has been said by Marcy Wheeler on this blog about Jonathan Gruber, his modeling work on healthcare and relationship with the Obama Administration. One instance in this regard, quite unfortunately, was notably made by Paul Krugman. Mr. Krugman, who is a solid liberal voice and worthy of respect, nevertheless very unfairly tarred Marcy with complaints he had, or perceived, with others and he owes better.

First off, I would like to point out the matter of Gruber started primarily about the duty and obligation of disclosure, and there was, unequivocally, a failure in full disclosure by both Mr. Gruber and the White House, both relying on his work (inferring that it was independent), and simultaneously funding it, whether directly or indirectly. For Mr. Krugman to extrapolate that out to being “just like the right-wingers with their endless supply of fake scandals” was startling and beyond the pale. There was also no foundation for it from Marcy’s words and statements on this blog.

The foregoing is something that I, bmaz, felt compelled to say; if you disagree, then your beef is with me, not Marcy, not Firedoglake, nor anybody else. Now, with that said, I wish to present Marcy Wheeler and let her speak for herself about exactly what the Gruber matter is about, and what it means. The attached video clip is from a MSNBC interview of Marcy conducted by David Shuster Tuesday morning.

It should be noted that Marcy was covering the North American International Auto show in Detroit when MSNBC interviewed her, as David Shuster notes. What David didn’t catch was that, the whole time he was discussing the infamous “Cadillac tax” Mr. Gruber’s work is central to, Marcy was standing in front of the Cadillac display. Now that is product placement!

Interestingly enough, in discussing the Cadillac tax, Paul Krugman has flat out admitted the claims of insurance premium reductions leading to wage increases are “exaggerated” and that “Cadillac plans aren’t really luxurious — they reflect genuinely high costs.” Mr. Krugman might want to take a look at the most recent work by Larry Mishel, an economist Mr. Krugman has cited before; in fact the exact economist Paul cited as support for the fact that the wage growth claims were “exaggerated”. Mr. Mishel’s new article seems to undercut the entire Cadillac tax thesis as to wage movement.

UPDATE: Economist Larry Mishel, who was linked to in the main post and referred to with seeming approval by Paul Krugman as well (link to that also in main post) put the following in a comment to his FDL Seminal Post yesterday:

I do think Gruber’s claim about the wage impact of lower health care inflation in the 1990s (and the reverse trends in the 200s) was wrong: The simple tale seemed to support his policy desire to curtail health care costs via the excise tax but digging into the details shows that health care costs have not driven wage trends. This does not mean that lower health care costs might not lead to better wages, just that the scale of the impact won’t move wages appreciably.

I may differ with many of you on the site though in that I don’t impugn Gruber’s motives. I don’t think there’s much of a scandal regarding his contract with HHS. I think his error in the case I’m criticizing is that he’s a health care economist and doesn’t know the details about wage trends. I, on the other hand, have been studying wages for thirty years or more. Gruber clearly over-reached with the argument about health care driving wage trends and has acknowledged that to me privately (yesterday).

So, I think he’s wrong on this issue and I also disagree with him on the overall merits of the health excise tax. But I think he’s a pretty smart, reasonable and straightforward economist. I’ve had to debate some pretty scummy economists and he’s not one of them. (emphasis added)

I agree with Mr. Mishel about the absence of malice by Mr. Gruber. But malice was never ascribed by Marcy Wheeler, she merely pointed out that there was a simple failure to fully disclose potential conflict information, that others had an interest in knowing, and that the assumptions Mr. Gruber’s model was based on may not be correct. These points have been borne out by others, indeed effectively by Paul Krugman himself and other experts he relies on. The tarring that occurred from Paul should be retracted.